<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission File Number 0-15465
Banyan Strategic Realty Trust
(Exact name of Registrant as specified in its charter)
Massachusetts 36-3375345
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
150 South Wacker Drive, Chicago, IL 60606
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code (312) 553-9800
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Shares of Beneficial Interest
(Title of Class)
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 .
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not 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-K or any amendment to
this Form 10-K. [ X ]
Shares of beneficial interest outstanding as of March 18, 1996: 10,477,138 The
aggregate market value of the Registrant's shares of beneficial interest held
by non-affiliates on such date was approximately $42,476,399.
DOCUMENTS INCORPORATED BY REFERENCE
Exhibit index located on page 34 of sequentially numbered pages.
<PAGE> 2
TABLE OF CONTENTS
PART I
<TABLE>
<S> <C> <C>
ITEM 1. BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ITEM 2. PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ITEM 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S SHARES AND
RELATED SHAREHOLDER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . 7
ITEM 6. SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . 11
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . . . . . . . . . . . . 26
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE . . . . . . . . . . . . . . . . . . . . 26
PART III
ITEM 10. TRUSTEES AND EXECUTIVE OFFICERS OF THE
REGISTRANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ITEM 11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
</TABLE>
<PAGE> 3
PART I
ITEM 1. BUSINESS
GENERAL
The Registrant, Banyan Strategic Realty Trust (the "Trust"), is a
Massachusetts business trust, organized pursuant to a Declaration of Trust
filed March 14, 1986 under the name VMS Strategic Land Trust. The Trust
amended its Declaration of Trust to change its name to Banyan Strategic Realty
Trust during 1993. The Trust was originally established to invest primarily in
short-term, junior and pre-construction mortgage loans to borrowers which
planned to acquire and develop strategically located properties not then at
their highest and best use. In early 1990, the Trust, in response to the
majority of its borrowers' decision to cease making payments on their mortgage
loans due to their liquidity problems, ceased funding such mortgage loans. The
trustees established the Principal Recovery Plan and implemented its initial
steps to preserve and protect the Trust's assets. Subsequently, the
independent trustees authorized management to begin reinvestment of the cash
generated by the Principal Recovery Plan.
As of December 31, 1995, the Trust owns interests in various
industrial, residential, commercial and retail real estate assets throughout
the Midwestern and Southeastern portion of the United States. In particular,
the Trust's real estate interests include six industrial complexes aggregating
1,046,400 square feet of gross leaseable area, two apartment complexes
comprised of a total of 822 units, four commercial office sites consisting of
484,100 square feet of gross leaseable area, one retail center which contains
321,800 square feet of gross leaseable area and a portfolio of five mortgage
loans in the aggregate principal amount of approximately $6,900,000. The Trust
has elected to be taxed as a real estate investment trust ("REIT") under
Internal Revenue Code Sections 856-860 and therefore, does not generally incur
a Trust level tax liability so long as 95% of its taxable income is distributed
to shareholders and it meets certain asset and income tests as well as other
requirements. The Trust has made distributions equal to $0.10 per share for
the last nineteen consecutive quarters as of December 31, 1995.
BUSINESS
The Trust's current business plan is to invest its remaining cash and
cash equivalents and cash proceeds generated from the financing of certain of
its current property interests into additional real estate assets and to manage
these real estate assets in a manner which will increase the Trust's cash flow
over time. During the year ended December 31, 1995, the Trust acquired
ownership interests in the Willowbrook Industrial Court, Northlake Tower
Shopping Center, Bluegrass Corporate Center, Lexington Business Center, Newtown
Distribution Center and Woodcrest Office Park. See Item 7, "Management's
Discussion and Analysis" for further details regarding these acquisitions.
From 1993 through 1995, the Trust acquired its thirteen property interests and
mortgage loan portfolio, as described above, obtained a $30,000,000 line of
credit and completed other mortgage and bond financing on its various property
interests. See Item 2, "Properties," for a detailed listing of the Trust's
property
1
<PAGE> 4
ITEM 1. BUSINESS (CONTINUED)
interests. The cash proceeds generated pursuant to these financing
transactions, financing of the Trust's remaining unencumbered properties,
financing of future acquisitions and cash flow generated from the Trust's
various property interests, provide the Trust with cash proceeds necessary for
the continued acquisition of income producing properties, to provide quarterly
cash dividends to its shareholders, meet its operating expenses and for other
general corporate needs. Based on the Trust's current business plan, proceeds
to be generated from its property financings are anticipated to enable the
Trust to acquire approximately $30,000,000 in additional real estate
investments. The additional property financings are expected to be at terms
and rates consistent with existing market conditions. In the event additional
financings are not obtained, the Trust's ability to make future real estate
acquisitions would be impaired. As of December 31, 1995, the Trust's carrying
value in its thirteen operating properties, net of accumulated deprecation,
totals $96,758,648. The Trust's current mortgage loan portfolio consists of
five mortgage loans receivable with an aggregate carrying value of $5,433,094,
net of a $1,436,587 unamortized discount. In addition, the Trust holds a 7%
ownership interest in a liquidating trust, established for the benefit of a
group of unsecured creditors of a previous borrower of the Trust, which holds
interests in various real estate assets. During the year ended December 31,
1995, the Trust received cash distributions from the liquidating trust
aggregating $562,337. See Item 7, "Management's Discussion and Analysis," for
further details regarding the Trust's investment in the liquidating trust.
OTHER INFORMATION
The Trust's real property investments are subject to competition
regarding rental rates and building construction of similar types of properties
in the vicinities in which they are located. Approximate occupancy levels for
the properties are set forth on a quarterly basis in the table in Item 2 to
which reference is hereby made. The Trust has no real property investments
located outside the United States. The Trust does not segregate revenue or
assets by geographic region, and such a presentation is not applicable and
would not be significant to an understanding of the Trust's business taken as a
whole.
The Trust has five employees who serve as executive officers.
The Trust reviews and monitors compliance with federal, state and
local provisions which have been enacted or adopted regulating the discharge of
material into the environment, or otherwise relating to the protection of the
environment. For the year ended December 31, 1995, the Trust did not incur any
material capital expenditures for environmental control facilities nor does it
anticipate making any such expenditures for the year ended December 31, 1996.
2
<PAGE> 5
ITEM 2. PROPERTIES
As of December 31, 1995, the Trust owned interests, directly or
indirectly through its wholly owned subsidiaries, in the properties as set
forth in the table below:
<TABLE>
<CAPTION>
Name and
Location Date Property
of Property Size Acquired Description Type
<S> <C> <C> <C> <C>
H Street
Assemblage,
Washington
D.C.
- Land 17,000 06/05/92 Fee ownership of Land Parcel
parcel sq. ft. land (through a 53%
interest in a
partnership which has
equitable title to this
property (a)
- Victor 55,900 Fee ownership of Commercial
Building sq. ft. land and improve-
g.l.a. ments (subject to a
partnership
agreement)(a)
Milwaukee 235,800 04/30/93 Fee ownership of Industrial
Industrial sq. ft. land and improve-
Properties g.l.a. ments (through a
Metropolitan joint venture
Milwaukee, WI partnership)(b)
Colonial Courts 350 06/17/93 Fee ownership of Residential
of Westland Units land and improve-
Apartments ments (through a
Columbus, OH joint venture
partnership)(b)
Hallmark Village 472 09/28/93 Fee ownership of Residential
Apartments Units land and improve-
Clarksville, IN ments (through a
joint venture
partnership) (b)
Elmhurst Metro 140,800 11/30/93 Fee ownership of Industrial
Court sq. ft. land and improve-
Elmhurst, IL g.l.a. ments (through a
joint venture
partnership) (b)
Colonial Penn 79,200 03/22/94 Fee ownership of Commercial
Buildings sq. ft. land and improve-
Tampa Bay, FL g.l.a. ments (b)
</TABLE>
3
<PAGE> 6
ITEM 2. PROPERTIES (CONTINUED)
<TABLE>
<CAPTION>
Name and
Location Date Property
of Property Size Acquired Description Type
<S> <C> <C> <C> <C>
Florida Power and 83,100 03/22/94 Fee ownership of Commercial
Light Building sq. ft. land and improve-
Sarasota, FL g.l.a. ments (b)
Willowbrook 84,300 06/16/95 Fee ownership of Industrial
Industrial sq. ft. land and improvements
Court g.l.a. (through a joint
Willowbrook, IL venture partnership)
(b)
Northlake Tower 321,800 07/28/95 Leasehold interest Retail
Shopping Center sq. ft. pursuant to a ground
Atlanta, GA g.l.a. lease and ownership of
improvements (through a
joint venture
partnership) (b)
Bluegrass 182,200 09/26/95 Fee ownership of land Industrial
Corporate Center sq. ft. and improvements (b)
Louisville, KY g.l.a.
Lexington 316,200 12/05/95 Fee ownership of land Industrial
Business Center sq. ft. and improvements (b)
Lexington, KY g.l.a.
Newtown 87,100 12/05/95 Fee ownership of land Industrial
Distribution sq. ft. and improvements (b)
Center g.l.a.
Lexington, KY
Woodcrest 265,900 sq. 12/19/95 Fee ownership of land Commercial
Office Park ft. g.l.a. and improvements
Tallahassee, FL (through a joint
venture partnership)
(b)
</TABLE>
(a) Reference is made to Note 7, "Investment in Joint Ventures", of Notes
to Consolidated Financial Statements filed with this annual report for
a description of the joint venture partnership through which the Trust
has acquired this real property.
(b) Reference is made to Note 5, "Investment in Real Estate", of Notes to
Consolidated Financial Statements filed with this annual report for
additional description of these real property investments.
4
<PAGE> 7
ITEM 2. PROPERTIES (CONTINUED)
The following is a list of occupancy levels at the end of each quarter
for 1995 and 1994 at each of the Trust's operating properties:
<TABLE>
<CAPTION>
1995 1994
at at at at at at at at
3/31 6/30 9/30 12/31 3/31 6/30 9/30 12/31
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Victor Building, 50% 56% 55% 55% 40% 42% 41% 45%
Office Building
Washington, D.C.
Milwaukee Industrial 98% 98% 95% 100% 100% 98% 95% 97%
Properties,
Metro Milwaukee, WI
Colonial Courts of 89% 87% 91% 94% 93% 88% 90% 87%
Westland Apartments
Columbus, OH
Hallmark Village 85% 92% 96% 88% 93% 91% 88% 80%
Apartments
Clarksville, IN
Elmhurst Metro Court 94% 95% 91% 92% 75% 87% 96% 90%
Elmhurst, IL
Colonial Penn Bldg. 100% 100% 100% 100% 100% 100% 100% 100%
Tampa Bay, FL
Florida Power & Light 90% 90% 90% 93% 90% 90% 90% 90%
Building
Sarasota, FL
Willowbrook Industrial Court N/A 93% 83% 76% N/A N/A N/A N/A
Willowbrook, IL
Northlake Tower N/A N/A 98% 98% N/A N/A N/A N/A
Shopping Center
Atlanta, GA
Bluegrass Corporate N/A N/A 91% 93% N/A N/A N/A N/A
Center
Louisville, KY
Lexington Business Center N/A N/A N/A 79% N/A N/A N/A N/A
Lexington, KY
Newtown Distribution Center N/A N/A N/A 97% N/A N/A N/A N/A
Lexington, KY
Woodcrest Office Park N/A N/A N/A 95% N/A N/A N/A N/A
Tallahassee, FL
</TABLE>
An "N/A" indicates that the property was not owned by the Trust at the
end of the quarter.
The occupancy levels are based on the total number of units for the
apartment complexes and the gross leasable area occupied at each commercial,
industrial and retail property space as of the end of each quarter.
Historically, occupancy levels generally do not fluctuate significantly during
the quarter.
5
<PAGE> 8
ITEM 3. LEGAL PROCEEDINGS
Subsequent to December 31, 1995, Karfad Associates (the "Borrower"),
which is indebted to the Trust pursuant to Karfad's loan in the original face
value amount of $5,849,266 (the "Loan"), failed to make the required interest
payment due on January 1, 1996. The Trust has provided proper notice to the
Borrower and all grace and cure periods regarding the Loan have subsequently
lapsed. In an effort to assert its rights and protect its interest, the Trust
declared the Loan in default on January 30, 1996, and the repayment of the
principal balance has been accelerated. A notice of foreclosure sale was
published, and the sale was set for February 28, 1996. In addition, a separate
action has been initiated against the Borrower's general partners who are
guarantors of the Loan. On February 26, 1996, the Borrower was placed in
involuntary bankruptcy which forced a cancellation of the foreclosure sale.
The Trust's lawsuit against the guarantor partners is not affected by the
bankruptcy. The guarantors are required to answer or otherwise plead on or
before April 5, 1996. Management expects to fully recover all monetary
obligations due under the Loan from either repayment by the Borrower and/or its
guarantors or a sale of the underlying collateral. The Trust purchased the
Loan for approximately $4,000,000 in 1993. The Loan has a current face value,
including accrued interest, of approximately $5,900,000.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Trust did not submit any matter to a vote of its shareholders
during the fourth quarter of 1995.
6
<PAGE> 9
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S SHARES AND RELATED SHAREHOLDER
MATTERS
The Trust's shares are included for quotation on the NASDAQ National
Market (symbol - VLANS). The table below shows the quarterly high and low bid
prices reported by NASDAQ and the amount of cash distributions paid per share
for the years ended December 31, 1995 and 1994:
1995
<TABLE>
<CAPTION>
Per Share Declaration
Share Distri- Date
Quarter Price butions
<S> <C> <C> <C> <C>
3/31 High $4.500 $0.10 4/6/95
Low $4.125
6/30 High $4.625 $0.10 7/7/95
Low $4.125
9/30 High $5.000 $0.10 10/5/95
Low $4.125
12/31 High $4.625 $0.10 1/5/96
Low $4.000
</TABLE>
1994
<TABLE>
<CAPTION>
Per Share Decla-
Share Distri- ration
Quarter Price butions Date
<S> <C> <C> <C> <C>
3/31 High $5.125 $0.10 4/06/94
Low $4.000
6/30 High $4.750 $0.10 7/08/94
Low $3.875
9/30 High $5.063 $0.10 10/13/94
Low $4.125
12/31 High $5.000 $0.10 1/11/95
Low $4.125
</TABLE>
The Trust anticipates continuing the $0.10 per share quarterly
distribution at this time. During 1995 and 1994, $0.28 and $0.23,
respectively, of the distributions declared represented a return of capital.
The Trust's ability to make distributions to its shareholders is
dependent upon, among other things: (i) the operating performance of the
existing and future real estate investments; (ii) the ability to redeploy cash
proceeds derived from the sale of its interest in the H Street property into
new investments; (iii) increases in the underlying value realized upon the sale
of the Trust's properties; (iv) the potential receipt of cash distributions
from the liquidating trust; (v) the Trust's ability to control its operating
expenses and (vi) the general improvement of conditions in the real estate
markets where the Trust's properties are located.
As of March 18, 1995, there were 4,430 record holders of shares of
beneficial interest.
7
<PAGE> 10
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
For the Year Ended December 31,(1)
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Cash and Cash
Equivalents $ 5,500,215 $14,769,170 $13,505,944 $14,824,476 $ 2,043,452
============ =========== =========== =========== ===========
Investment
Securities $ --- $ 1,017,236 $14,430,123 $39,656,854 $63,765,759
============ =========== =========== ============ ===========
Mortgage Loans
Receivable, Net (2) $ 5,433,094 $ 5,136,229 $ 4,891,462 $ --- $ ---
============ =========== =========== =========== ===========
Number of Loans
Outstanding 5 5 5 --- ---
============ =========== =========== =========== ===========
Investment in Real
Estate, Net $ 87,862,970 $40,161,412 $21,769,471 $ --- $11,440,104
============ =========== =========== =========== ===========
Number of Property
Interests Owned 13 8 6 2 2
============ =========== =========== =========== ===========
Investment in Real
Estate Ventures $ 8,895,678 $10,697,791 $13,668,332 $14,920,215 $ 1,837,455
============ =========== =========== =========== ===========
Total Assets $110,764,772 $74,084,351 $69,360,043 $69,934,583 $80,495,801
============ =========== =========== =========== ===========
Mortgage Loans and
Bond Payable $ 49,022,181 $13,400,695 $ 3,986,373 $ --- $ ---
============ =========== =========== =========== ===========
Total Income From
Property
Operating
Activities $ 11,231,858 $ 7,493,075 $ 2,000,264 $ 138,954 $ 416,987
============ =========== =========== =========== ===========
Total Income From
Lending and
Investing
Activities $ 1,670,511 $ 1,340,726 $ 2,126,885 $ 3,825,379 $5,456,556
============ =========== =========== =========== ===========
Total Income $ 12,902,369 $ 8,833,801 $ 4,127,149 $ 3,964,333 $ 5,873,543
============ =========== =========== =========== ===========
Total Expenses
From Property
Operating
Activities $ 7,823,972 $ 4,431,956 $ 1,184,964 $ 526,481 $ 743,500
============ =========== =========== =========== ===========
Total Other
Expenses $ 2,772,241 $ 2,310,366 $ 1,903,913 $ 1,466,073 $ 686,713
============ =========== =========== =========== ===========
</TABLE>
8
<PAGE> 11
ITEM 6. SELECTED FINANCIAL DATA (CONTINUED)
<TABLE>
<CAPTION>
For the Year Ended December 31,(1)
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Total Expenses $ 10,596,213 $ 6,742,322 $ 3,088,877 $ 1,992,554 $ 1,430,213
============ =========== =========== =========== ===========
Net Income
(Loss) $ 2,600,045 $ (912,492) $ (617,272) $ 1,517,453 $ 4,638,992
============ =========== =========== =========== ===========
Net Income (Loss)
Per Share of
Beneficial
Interest (3) $ 0.25 $ (0.09) $ (0.06) $ 0.13 $ 0.39
============ =========== =========== =========== ===========
Cash Distributions
Declared $ 4,190,252 $ 4,188,441 $ 4,221,927 $ 4,708,030 $ 3,598,125
============ =========== =========== =========== ===========
Cash Distributions
Declared Per
Share of
Beneficial
Interest (3) $ 0.40 $ 0.40 $ 0.40 $ 0.40 $ 0.30
============ =========== =========== =========== ===========
</TABLE>
(1) The above selected financial data should be read in conjunction with
the consolidated financial statements and the related notes appearing
elsewhere in this annual report.
(2) Represents the carrying amount of the mortgage loans, which is equal
to the face amount of the loan less unamortized loan fees, net of loan
discounts of $1,436,587, $1,808,716 and $2,116,636 for 1995, 1994 and
1993, respectively. See Note 2, Mortgage Loans Receivable, of Notes
to Consolidated Financial Statements for further details.
(3) Based on 10,474,079 weighted average shares outstanding for 1995,
10,471,102 weighted average shares outstanding for 1994, 10,518,047
weighted average shares outstanding for 1993, 11,537,364 shares
outstanding for 1992 and 11,993,751 shares outstanding for 1991.
9
<PAGE> 12
ITEM 6. SELECTED FINANCIAL DATA (CONTINUED)
QUARTERLY RESULTS OF OPERATIONS
The following is a summary of the quarterly results of operations for the
years ended December 31, 1995 and 1994.
<TABLE>
<CAPTION>
1995
For the three months ended:
March 31 June 30 September 30 December 31
<S> <C> <C> <C> <C>
Total Income $ 2,509,475 $ 2,658,097 $ 3,453,623 $ 4,281,174
Recovery of Losses on Loans, Notes,
Interest Receivable and Class Action
Settlement Costs and Expenses 155,834 --- ---
9,124
Operating Expenses (2,010,811) (2,228,171) (2,801,724) (3,720,465)
---------- ---------- ----------- -----------
Operating Income 654,498 429,926 651,899 569,833
Minority Interest in Consolidated
Partnerships (16,942) (7,521) (55,896) (97,755)
Income (Loss) of Real
Estate Ventures 26,623 365,977 256,674 (177,271)
---------- ----------- ----------- -----------
Net Income $ 664,179 $ 788,382 $ 852,677 $ 294,807
========== =========== =========== ===========
Earnings Per Share
of Beneficial Interest $ 0.06 $ 0.08 $ 0.08 $ 0.03
========== =========== =========== ===========
</TABLE>
Net income for the three months ended March 31, June 30 and September
30, 1995 has been reduced by $20,216, $83,951 and $104,425, respectively,
from amounts originally reported to reflect adjusted allocation of
administration costs from Banyan Management Corp.
<TABLE>
<CAPTION>
1994
For the three months ended:
March 31 June 30 September 30 December 31
<S> <C> <C> <C> <C>
Total Income $1,672,934 $ 2,339,258 $ 2,380,376 $ 2,441,233
Recovery of Losses on Loans,
Notes, Interest Receivable and Class
Action Settlement Costs and Expenses 134,986 --- --- 57,226
Operating Expenses (1,484,387) (1,633,331) (1,780,811) (2,036,005)
---------- ---------- ----------- -----------
Operating Income 323,533 705,927 599,565 462,454
Minority Interest in Consolidated
Partnerships (4,924) (13,722) (9,368) (27,704)
Income (Loss) of Real
Estate Ventures 772 (25,923) (20,913) (2,948,297)
Gain on Disposition of Property --- --- --- 46,108
---------- ----------- ----------- -----------
Net Income (Loss) $ 319,381 $ 666,282 $ 569,284 $(2,467,439)
========== =========== =========== ===========
Earnings (Loss) Per Share
of Beneficial Interest $ 0.03 $ 0.06 $ 0.05 $ (0.23)
========== =========== =========== ===========
</TABLE>
10
<PAGE> 13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
Banyan Strategic Realty Trust (the "Trust") is a Massachusetts
business trust which owns interests in various industrial, residential,
commercial and retail real estate assets throughout the Midwestern and
Southeastern portion of the United States. In particular, the Trust's real
estate interests include six industrial complexes aggregating 1,046,400 square
feet of gross leaseable area, two apartment complexes comprised of a total of
822 units, four commercial office sites consisting of 484,100 square feet of
gross leaseable area, one retail center which contains 321,800 square feet of
gross leaseable area and a portfolio of five mortgage loans. See Results of
Operations below for further details regarding 1995 acquisitions made by the
Trust. The current business plan of the Trust is to invest its remaining cash
and cash equivalents and cash proceeds generated from the financing of certain
of its current property interests into additional real estate assets and to
manage these real estate assets in a manner which will increase the Trust's
cash flow over time. The cash proceeds generated pursuant to these financing
transactions, as well as cash flow generated from the Trust's various property
interests, provide the Trust with cash proceeds necessary for the continued
acquisition of income producing properties, to provide quarterly cash
distributions to its shareholders, meet its operating expenses and for other
general corporate needs.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents consist of cash and short-term investments.
The Trust's cash and cash equivalents balance at December 31, 1995 and 1994 was
$5,500,215 and $14,769,170, respectively. In addition, the Trust, at December
31, 1994, owned $1,017,236 in investment securities which were immediately
convertible to cash. The decrease in total cash, cash equivalents and
investment securities of approximately $10,286,000 is primarily attributable to
the use of approximately $10,200,000 to acquire the Willowbrook, Northlake,
Bluegrass, Lexington, Newtown and Woodcrest properties (See Property
Acquisitions and Other Information below for further details); payment of
distributions to shareholders of $4,190,252; additions to investment in real
estate of $1,183,619 relating to investment activities; principal payments on
mortgage loans payable of $185,321; payment of $680,058 of other liabilities
(see below); payment of $597,134 of deferred financing costs primarily related
to the Trust's line of credit and financing of the Willowbrook and Northlake
properties (see Property Acquisitions and Other Information below for further
details); and the payment of the Trust's operating expenses, excluding
depreciation and amortization, totalling approximately $9,192,000. Partially
offsetting these cash outflows was the Trust's receipt of approximately
$2,218,000 in cash proceeds from the sale of its interest in the Westminster
property (see Property Acquisitions and Other Information below for further
details), a total of $562,337 in cash distributions in respect of the Trust's
interest in the liquidating trust, a $730,229 repayment from
11
<PAGE> 14
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
Banyan Strategic Land Fund II ("BSLFII") for advances made on behalf of BSLFII
for H Street Assemblage expenditures, net income from operations of real estate
ventures of approximately $63,000, the receipt of interest income from lending
and investing activities of approximately $1,298,000 and cash receipts from
property operations totalling approximately $11,232,000. See Property
Acquisitions and Other Information for further details regarding the Trust's
acquisitions and financings completed during the year ended December 31, 1995.
On December 15, 1995, the Trust modified its line of credit (the
"Modified Line") with American National Bank (the "Bank"). The line of credit
was originally established on December 13, 1994 (the "Original Line"). Under
the Modified Line the Trust may borrow up to $30,000,000, an increase of
$15,000,000 when compared to the Original Line. The Modified Line continues to
provide for a one year extension subsequent to the initial two year term with a
balloon payment of principal required upon maturity, December 14, 1997. In
order to increase the cash available for borrowing pursuant to the Modified
Line, the Trust provided the Bank, as additional collateral, mortgages on its
Florida Power and Light Building, Newtown Distribution Center and Lexington
Business Center as well as pledges of the stock or partnership interest of the
Trust's subsidiary owning these properties. The Trust had previously pledged
its ownership interest in the entities owning the Colonial Penn Office
Building, Colonial Courts Apartments, Hallmark Village Apartments and Karfad
Loan Portfolio as well as providing mortgage liens against these properties as
collateral per the terms of the Original Line. The Trust also paid a loan fee
upon execution of the Modified Line in the amount of $75,000, or .5% of the
increase in the Original Line. All other terms, as provided for under the
Original Line, remain unchanged. The Modified Line remains subject to review
for renewal on an annual basis. The purpose of the Modified Line is to provide
the Trust with an additional source of cash for the acquisition of income
producing properties, capital expenditures for its existing properties and
general and corporate needs. Payment of interest pursuant to the terms of the
Modified Line is the obligation of the Trust. The Trust's ability to pay debt
service on the line is partially dependent on the performance of the Trust's
properties which serve as collateral under the Modified Line; however, there is
no preferred obligation or senior loan on the properties which would preclude
the Trust from first receiving any cash proceeds generated by the properties
operations. As of December 31, 1995, the Trust had utilized approximately
$25,725,000 of the $30,000,000 available under the Modified Line. As of
December 31, 1995, the Trust had approximately $4,275,000 remaining available
under the Modified Line. Of the $25,725,000, approximately $5,625,000 serves
as collateral in the form of a letter of credit issued by the Bank for the
tax-exempt bond financing sponsored by Franklin County, Ohio in the amount of
$5,500,000 on its Colonial Courts Apartments property. Of the remaining
$20,100,000 in cash proceeds drawn under the Modified Line by the Trust,
$8,900,000 and $11,200,000 were drawn on November 30, 1995 and December 18,
1995, respectively, and have been utilized by the Trust for its acquisitions of
the Lexington Business
12
<PAGE> 15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
Center/Newtown Distribution Center and the Woodcrest Office Park, respectively.
Draws under the Modified Line require monthly payment of interest only until
maturity and currently bear interest at a blend of thirty, sixty and one
hundred and twenty-day Libor rates plus 2.25% or approximately 7.5% to 8.5% per
annum as of December 31, 1995. The Trust is required to pay the Bank an unused
facility fee of .5% per annum multiplied by the average portion of the Modified
Line that is undrawn from time-to-time. The facility fee is required to be
determined and payable monthly on a non-cumulative basis. The Trust is working
to obtain permanent long-term third party financing within the next 12 months
for its various property interests and utilizing these financing proceeds to
repay amounts drawn under the Modified Line. In the event that the Trust is
not successful in the completion of its individual property financing in the
near term as discussed above, the Trust will continue to utilize its Modified
Line through December 31, 1997. The Trust currently engaged in conversation
with several lenders on providing individual property financing which will be
used to repay its line of credit, discussed above, as well as providing
additional capital for continued property acquisitions.
As of December 31, 1995 and 1994, the Trust's mortgage loan portfolio
consisted of five mortgage loans receivable with aggregate carrying values
totaling $5,433,094 and $5,136,229, respectively, net of $1,436,587 and
$1,808,716 of unamortized discounts, respectively. During the year ended
December 31, 1995, the Trust received principal and interest payments totalling
$43,817 and $658,249, respectively. During the year ended December 31, 1994,
the Trust received principal and interest payments totalling $36,742 and
$651,939, respectively. Subsequent to December 31, 1995, Karfad Associates
(the "Borrower"), which is indebted to the Trust pursuant to Karfad's loan in
the original face value amount of $5,849,266 (the "Loan"), failed to make the
required interest payment due on January 1, 1996. The Trust has provided
proper notice to the Borrower and all grace and cure periods regarding the Loan
have subsequently lapsed. In an effort to assert its rights and protect its
interest, the Trust declared the Loan in default on January 30, 1996, and the
repayment of the principal balance has been accelerated. A notice of
foreclosure sale was published, and the sale was set for February 28, 1996. In
addition, a separate action has been initiated against the Borrower's general
partners who are guarantors of the Loan. On February 26, 1996, the Borrower
was placed in involuntary bankruptcy which forced a cancellation of the
foreclosure sale. The Trust's lawsuit against the guarantor partners is not
affected by the bankruptcy. The guarantors are required to answer or otherwise
plead on or before April 5, 1996. Management expects to fully recover all
monetary obligations due under the Loan from either repayment by the Borrower
and/or its guarantors or a sale of the underlying collateral. The Trust
purchased the Loan for approximately $4,000,000 in 1993. The Loan has a
current face value, including accrued interest, of approximately $5,900,000.
13
<PAGE> 16
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
On February 9 and December 21, 1995, the Trust received cash
distributions of $551,672 and $10,665, respectively, with respect to its
interest in a liquidating trust established for the benefit of the unsecured
creditors of VMS Realty Partners and its affiliates ("VMS"). For the year
ended December 31, 1995, the Trust treated $164,958 of these distributions as a
recovery of losses on mortgage loans, notes and interest receivable on its
consolidated statement of income and expenses. The $164,958 net recovery
recorded in 1995 represents the total distributions received of $562,337 net of
an estimated $397,379 due to the Class Action Settlement Fund representing the
Trust's share of amounts due per the terms of the previously settled VMS
securities litigation. During 1994 and 1993, the Trust recorded $57,226 and
$57,072, respectively, on its Statement of Income and Expenses as a recovery of
losses on mortgage loans, notes and interest receivable related to the
distributions received from the liquidating trust. The $57,226 net recovery
recorded in 1994 includes the recognition of a $347,557 distribution received
net of the estimated $290,331 due to the Class Action Settlement Fund. On
December 28, 1995, the Trust made a payment of $680,058 against the total
outstanding liability to the Class Action Settlement Fund. As of December 31,
1995, the Trust has recorded $7,652 as other liabilities representing the total
estimated amount remaining due to the Class Action Settlement Fund per the
terms of the settlement.
During 1994, the Trust received net proceeds of $134,986 as a recovery
of payments previously made into an escrow established as part of the 1992
Class Action Settlement of the VMS securities litigation.
The Trust has entered into a partnership agreement with BSLFII
regarding the ownership and operation of the H Street Assemblage (the "H Street
Venture"). Under the terms of this agreement, the Trust has the right, but is
not obligated, to advance expenditures on behalf of BSLFII. During 1994 and
1993, the Trust advanced to the H Street Venture all funds expended on the H
Street Assemblage, including BSLFII's portion. As provided in the H Street
partnership agreement, all advances made by the Trust for BSLFII's share of the
H Street Venture's advances bore interest at a rate of prime plus 2% per annum
until repaid. As of December 31, 1994, the Trust's total receivable from
BSLFII was approximately $730,000. On March 24, 1995, BSLFII repaid the
December 31, 1994 outstanding balance. As of December 31, 1995, the H Street
advances, and all interest thereon, made by the Trust have been repaid in full
by BSLFII.
The Trust's future liquidity needs are expected to be funded from
operating cash flow from investment activities, the sale or refinancing of the
remaining asset acquired through foreclosure, interest earned on the Trust's
short-term investments and to a lesser extent the potential receipt of
distributions from the liquidating trust. Cash will be expended to maintain,
operate and dispose of the Trust's interest in the H Street property. The
Trust's cash and cash equivalents, as well as cash flow from its operating
properties, are expected to be sufficient to meet its reasonably anticipated
needs for liquidity and capital resources in the near future and provide cash
14
<PAGE> 17
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
proceeds for distributions to shareholders. The cash flow of the Trust could
be negatively impacted by factors and risks commonly associated with the
ownership of real estate investments such as changes in interest rates, market
conditions, rental rates where the Trust's properties are located, leasing and
occupancy risks, capital expenditures, and general economic conditions in the
real estate markets. During 1996, the Trust anticipates that it will likely
continue making additional investments in operating properties as a result of
cash proceeds to be provided from its continued efforts to complete additional
property level financing of its existing properties as well as its future
property acquisitions. It is anticipated by the Trust that its continued
financing and investment in additional operating properties will have a
positive effect on future liquidity and earnings of the Trust. Based on the
Trust's current business plan, proceeds to be generated from its property
financings are anticipated to enable the Trust to acquire approximately
$30,000,000 in additional real estate investments. The additional property
financings are expected to be at terms and rates consistent with existing
market conditions. In the event additional financings are not obtained, the
Trust's ability to make future real estate acquisitions would be impaired. The
Trust anticipates continuing the $0.10 per share quarterly distribution during
1996.
RESULTS OF OPERATIONS
GENERAL
Effective January 1, 1993, the Trust decided to provide supplemental
financial information in a format that presents the financial condition,
results of operations and cash flows from the investment of the Trust's cash
and short term investments into new real estate opportunities (the "Investment
Activities") and the management of the real estate assets acquired in
connection with the work-out through foreclosure of loans originally made by
the Trust (the "Foreclosed Activities"). Returns on Investment Activities
include the new real estate assets acquired during 1995, 1994 and 1993 (see
below for further details regarding the assets acquired during 1995) and the
interest earned on cash and investment securities offset by the incremental
costs associated with the investment efforts. Returns on Foreclosed Activities
include the results of managing the foreclosed real estate offset by the costs
associated with maintaining the Trust. Effective January 1, 1996, the Trust
will no longer provide detailed supplemental financial results segregating
foreclosed activities from investment activities. The elimination of the
supplemental disclosure is the result of the Trust's significant reinvestment
activities which have been achieved through December 31, 1995.
Total income for the years ended December 31, 1995, 1994 and 1993 was
$12,902,369, $8,833,801 and $4,127,149, respectively. The increases in total
income are due primarily to increases in property operating revenue (see
below). Interest income on investments at December 31, 1995 increased when
compared to 1994 due to the increase in cash available for investment derived
from the proceeds received
15
<PAGE> 18
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
on financing of the Elmhurst and Colonial Courts properties which were held as
cash reserves until the 1995 acquisitions by the Trust of the Willowbrook,
Northlake, Bluegrass, Lexington, Newtown and Woodcrest properties. The Trust
anticipates that interest income from cash, cash equivalents and investment
securities will decrease in the future as it continues to utilize excess cash
reserves for the continued investment in operating properties. A further
increase in cash available for investment resulted from the Trust's receipt of
net proceeds from its share of the Westminster sale in June 1995. (See below
for further details of the 1995 acquisitions and sale of the Westminster
property). The increase in total income for 1994 as compared to 1993 is
partially offset by a decrease in interest income on investments due to
decreases in cash available for investment. The decrease in cash available for
investment is attributable to the acquisition of the Milwaukee Industrial
properties, the Colonial Courts of Westland Apartments, the Hallmark Village
Apartments and the Elmhurst Metro Court in 1993 and the acquisition of Colonial
Penn and Florida Power and Light office buildings in March 1994. Interest
income on mortgage loans represents interest income earned relating to the
Karfad Loan Portfolio acquisition during September 1993 which also contributed
to a decrease in cash available for investment for 1994 as compared to 1993.
Industrial property operating income increased by approximately
$842,000 for 1995 as compared to 1994 and approximately $1,250,000 for 1994 as
compared to 1993. The 1995 increase as compared to 1994 is primarily the
result from the acquisitions of the Willowbrook Industrial Court
("Willowbrook"), Bluegrass Corporate Center ("Bluegrass"), Lexington Business
Center ("Lexington") and Newtown Distribution Center ("Newtown") properties
during 1995 and an increase in income at the Trust's Elmhurst Metro Court
("Elmhurst") property. Income at Elmhurst increased by approximately $181,000
due primarily to nonrecurring rental abatements of approximately $36,000 with
the remainder attributable to annual rent adjustments in 1995 made pursuant to
tenant lease agreements. The acquisitions of the Willowbrook, Bluegrass,
Lexington and Newtown properties during 1995 contributed to an increase in
income of approximately $319,000, $205,000, $105,000 and $53,000, respectively.
See below for further details regarding these transactions. Income at the
Milwaukee Industrial properties remained relatively stable for 1995 when
compared to 1994. The increase in income from industrial properties for 1994
as compared to 1993 is attributable to including a full year of operating
results of the Milwaukee Industrial and Elmhurst properties which were acquired
in April 1993 and November 1993, respectively. Subsequent to the acquisition
of the Willowbrook property, its occupancy decreased from 93% upon acquisition
to 76% as of December 31, 1995. The decrease in occupancy at Willowbrook was
anticipated pursuant to the plan of acquisition for the property. Upon
acquisition, the Trust anticipated that leases occupying approximately 27,300
square feet of space would be vacated during the last six months of 1995. It
is the Trust's intent to reconfigure, renovate and re-lease the vacated space
at increased rental rates.
16
<PAGE> 19
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
Residential property income increased by approximately $186,000 for
1995 as compared to 1994 and approximately $2,043,000 for 1994 as compared to
1993. The 1995 increase as compared to 1994 is primarily the result of an
increase in income at the Hallmark Village Apartments ("Hallmark") property.
Income at Hallmark increased by approximately $150,000 due primarily to the
Trust's aggressive collection efforts in 1995 which reduced delinquent rental
payments and an increase in occupancy to 88% at December 31, 1995 as compared
to 80% for the same period in 1994. In addition, income at the Colonial Courts
of Westland Apartments ("Colonial Courts") property increased by approximately
$36,000 due primarily to an increase in occupancy to 94% at December 31, 1995
as compared to 87% for the same period in 1994. The increase in residential
property operating revenue for 1994 as compared to 1993 is primarily
attributable to including a full year of operating results of the Colonial
Courts and Hallmark properties which were acquired in June 1993 and September
1993, respectively.
Commercial property operating income increased by approximately
$872,000 for 1995 as compared to 1994 which is primarily attributable to the
fact that 1995 included a full year of operating results of the Colonial Penn
and Florida Power and Light office buildings which were acquired in late March
of 1994 and the acquisition of the Woodcrest Office Park ("Woodcrest") property
in December 1995. The acquisition of the Woodcrest property on December 19,
1995 contributed to an increase in total income of approximately $121,000.
Retail property operating income represents income generated by the
Northlake Tower Shopping Center ("Northlake") from July 28, 1995, the
acquisition date, through December 31, 1995.
The Trust anticipates further increases in property operating income
during 1996 due to i) continued acquisitions of real estate investments and ii)
continued operating performance at certain of its existing properties. During
1996, the Trust will continue its efforts to aggressively lease vacant space or
units at the Hallmark, Willowbrook and Lexington properties which would have a
positive impact on rental income. Also anticipated to enhance operating
revenues projected for 1996 will be the effect of a full year of operations of
the Trust's 1995 acquisitions. See Property Acquisitions below for a detailed
list of assets acquired. It is currently anticipated that rental rates and
occupancy at the Trust's remaining properties will remain consistent during
1996 when compared to 1995.
The Trust's business and real estate property operations are not
seasonal and are subject to competition regarding rental rates and property
operations of similar types of properties in the vicinities in which they are
located. See Item 2, "Properties", for approximate occupancy levels for the
properties which are set forth on a quarterly basis.
Total expenses for the year ended December 31, 1995 increased to
$10,596,213 from $6,742,322 and $3,088,877 for the years ended December 31,
1994 and 1993, respectively. The increases in total
17
<PAGE> 20
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
expenses are due primarily to increases in expenses from property operating
activities and other expenses. Total expenses from property operating
activities increased by approximately $3,392,000 for 1995 as compared to 1994
and approximately $3,247,000 from 1994 to 1993. The increase in total expenses
from property operating activities for 1995 is primarily attributable to the
acquisitions of the Trust's properties during 1994 (as discussed above) and the
acquisitions in 1995 of the Willowbrook, Northlake, Bluegrass, Lexington,
Newtown and Woodcrest properties (as discussed below) which accounted for
approximately $2,304,000 of this change. In addition, total expenses from
property operating activities, excluding the effect of the 1994 and 1995
acquisitions, increased in 1995 due to an increase in interest expense of
approximately $551,000 relating primarily to mortgage loans collateralized by
the Elmhurst and Colonial Courts properties in December 1994. Total expenses
from property operating activities increased further for 1995 from 1994 as a
result of an increase of approximately $125,000 in operating property expenses
and an increase of approximately $221,000 in repairs and maintenance expense.
Property operating expenses and repair and maintenance costs increased due to
an increase in general and administrative costs and higher unit turnover costs
at the Hallmark and Colonial Courts properties. The remaining $191,000
increase in property operating expenses for 1995 from 1994 resulted from an
increase in real estate tax expense and other miscellaneous property expenses.
The increase in property operating activities for 1994 compared to 1993 is
attributable to the acquisition of the Trust's properties during 1993 and 1994
as discussed above.
Total other expenses increased by approximately $462,000 for 1995 as
compared to 1994 and approximately $406,000 from 1994 to 1993. Total other
expenses increased during 1995 due primarily to an increase in general and
administrative expenses and an increase in amortization of deferred loan fees
and financing costs. The change in general and administrative expenses is
attributable to additional expenses associated with the Trust's acquisition and
financing activity in 1995 (as discussed below). Amortization of deferred loan
fees and financing costs increased primarily as a result of the financing of
the Elmhurst and Colonial Courts properties as discussed above and costs
associated with obtaining the Trust's line of credit which occurred during the
fourth quarter of 1994. Further contributing to the increase in total other
expenses is a decrease in recovery of losses on loans, notes, interest
receivable and class action settlement costs and expenses of $164,958 in 1995
as compared to $192,212 recorded in 1994. See Liquidity and Capital Resources
for additional information regarding the Trust's recoveries.
Total other expenses increased during 1994 as compared to 1993 due
primarily to an increase in general and administrative expenses which was
attributable to an increase in the amount of expenses incurred on the Trust's
behalf by BMC in connection with purchasing and supervising the newly acquired
assets. Partially offsetting this increase in general and administrative
expenses is a decrease in other professional fees and the elimination of
mortgage loan commitment settlement costs resulting from a nonrecurring payment
made in 1993
18
<PAGE> 21
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
in connection with the VMS/MCL Dearborn Park II Venture litigation settled by
the Trust during the third quarter of 1993. In addition, during 1994, $192,212
was recorded by the Trust as a recovery of losses on loans, notes, interest
receivable and class action settlement costs and expenses as compared to
$57,072 recorded in 1993. See Liquidity and Capital Resources for details
regarding the Trust's recoveries.
For the year ended December 31, 1995, the Trust recorded net income
from operations of real estate ventures (included in foreclosed activities) of
$472,003 as compared to a net loss of $2,994,361 for the same period in 1994.
The increase in net income from the results of operations for the year ended
December 31, 1995 is the result of income from the Plaza at Westminster and H
Street Assemblage properties of $434,240 and $37,763, respectively. The net
loss for the year ended December 31, 1994 is the result of a loss on the H
Street Assemblage of $3,184,938 which was partially offset by income from
operations of $190,577 on the Plaza at Westminster property. Property
operations for the year ended December 31, 1995 are not comparable to the same
period in 1994 for the Westminster property because the property was sold on
June 22, 1995 which resulted in a net gain to the Trust of approximately
$409,000. The Trust's share of income generated from the operations of
Westminster for the year ended December 31, 1995 was $24,950 prior to sale.
Net income from operations of real estate ventures include the Trust's
53% interest in the real estate venture known as the H Street Assemblage
located in Washington, D.C. The H Street Assemblage consists of an
approximately 55,900 square foot office building (the "Victor Building") and an
adjacent land parcel consisting of 17,000 square feet. The Trust's share of
the net income from the H Street property for 1995 compared to 1994 increased
by $3,222,701 due primarily to a write-down in the value of the H Street
Assemblage during 1994 in the amount of $5,500,000 of which $2,915,000 is the
Trust's share. This write-down was due to the Venture revising its strategy
from holding the property in anticipation of potential development to marketing
the property for immediate sale. This increase in net income for the H Street
property for 1995 as compared to 1994 is due further to a reduction in legal
costs compared to 1994 relating to the completion of a real estate tax appeal
which reduced the property's assessed taxable value. During 1995, the Venture
recorded approximately $433,000 in real estate tax refunds and interest,
thereon, relating to taxes paid in 1992 and 1993, resulting in a decrease in
real estate tax expense of approximately $457,000 for the year ended December
31, 1995 when compared to the same period in 1994. In addition, legal and
entitlement costs for 1995 decreased when compared to 1994 since the costs
incurred during 1994 included nonrecurring payments for professional services
associated with obtaining the historic preservation rights.
During 1994, the H Street Venture completed and obtained the zoning,
entitlement and historic preservation rights for the development of an
approximately 330,000 square foot commercial building on the H Street site.
The H Street Venture has not made any
19
<PAGE> 22
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
significant capital expenditures on the H Street property and is allowing
occupancy to decline by selectively retenanting the Victor Building at the H
Street Assemblage with short term leases so that the building will be more
marketable to a potential buyer which would need to vacate the Victor Building
before its redevelopment. The H Street Venture is currently marketing the H
Street Assemblage for sale based upon its current assessment of the Washington
D.C. office market. The current market for the sale of undeveloped land where
the H Street Assemblage is located is currently limited because of the decline
in demand for commercial development sites in the Washington, D.C. market
resulting from the recent government decision to downsize various departments
and agencies and place a freeze on leasing of any additional office space.
Therefore, the H Street Venture currently anticipates its marketing efforts
could proceed slower than originally anticipated. The Venture will continue to
try to find ways to limit holding costs at the H Street Assemblage while
attempting to find a buyer. Upon the sale of the H Street Assemblage, it is
the Trust's intent to redeploy its portion of all cash proceeds derived from
its sale into new real estate investments.
For the year ended December 31, 1993, operations of real estate
ventures resulted in a loss on the H Street Assemblage of $1,809,167 which was
partially offset by income from operations on the Plaza at Westminster property
of $195,785. The H Street Assemblage generated losses in 1993 due primarily to
the H Street Venture write off of a $2,300,000 nonrefundable deposit on the
option parcels in the second quarter of 1993. The Trust's share of this write
off was $1,219,000. This increase in net loss for 1994 as compared to 1993 was
offset by a reduction in real estate tax expense. Real estate tax expense
decreased as the H Street Venture was no longer required to pay real estate
taxes on the option parcels due to the termination of the option in the second
quarter of 1993. In addition, real estate tax expense decreased resulting from
a successful real estate tax appeal which reduced the property's assessed value
when compared to the same period in 1993.
Management reviews the properties owned by the Trust on a quarterly
basis and, when it has been determined that a permanent impairment in the value
of a given property has occurred, the property's carrying value is then written
down to its fair market value. During the year ended December 31, 1994, the
Trust recorded a $2,915,000 valuation allowance relating to the H Street
Assemblage, pursuant to its decision to liquidate its interest rather than to
pursue the redevelopment of the property. The Trust did not record any
valuation allowances regarding its mortgage loans or operating properties for
the year ended December 31, 1995.
These changes, as discussed above, for the year ended December 31,
1995 resulted in net income of $2,600,045 ($0.25 per share) as compared to net
losses of $912,492 ($0.09 per share) and $617,272 ($0.06 per share) in 1994 and
1993, respectively.
An objective of the Trust is to provide cash distributions to the
shareholders from cash generated from the Trust's consolidated
20
<PAGE> 23
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
operations as discussed above. Cash generated from operations is not
equivalent to the Trust's net operating income as determined under generally
accepted accounting principles. Due to certain unique operating
characteristics of real estate companies, the real estate investment trust
"REIT" industry has adopted a standard for reflecting operating property
performance and comparing operating performance within the industry. Funds
from operations ("FFO") is defined by the National Association of Real Estate
Investment Trust as net income computed in accordance with generally accepted
accounting principles, excluding extraordinary, unusual and nonrecurring items,
excluding gains (or losses) from debt restructuring and sales of property plus
depreciation and amortization from real property and after adjustments for
unconsolidated partnerships and joint ventures in which the REIT holds an
interest. FFO is not intended to be a measure of the cash generated by a REIT
nor its distribution paying capacity. However, a REIT's distribution can be
analyzed in comparison to FFO in a similar manner as a company that is not a
REIT would compare its distribution to net operating income.
The Trust provides supplemental information on the results from the
Investment Activities as well as on the consolidated results. For the year
ended December 31, 1995 and 1994, the Trust's Investment Activities, including
interest received on the Karfad Loan Portfolio, generated FFO of $4,032,754
($0.39 per share) and $3,568,601 ($0.34 per share), respectively. For the year
ended December 31, 1995 and 1994, the Trust's consolidated activities generated
FFO of $3,066,490 ($0.29 per share) and $2,711,544 ($0.26 per share),
respectively. Excluding the effect of the 1994 and 1995 property acquisitions,
FFO related to Investment Activities decreased by approximately $920,000 for
the year ended December 31, 1995 as compared to the same period in 1994. This
decrease in FFO is primarily due to the increase in interest expense and
amortization of deferred loan fees and financing costs for the year ended
December 31, 1995 of approximately $731,000 as a result of the December 1994
financing of the Elmhurst and Colonial Courts properties and obtaining the
Trust's line of credit. Excluding the effect of interest expense, amortization
of deferred loan fees and financing costs and the 1994 and 1995 acquisitions,
FFO relating to reinvestment activities decreased by approximately $189,000 for
the year ended December 31, 1995 as compared to the same period in 1994.
21
<PAGE> 24
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
FFO for the year ended December 31, 1995 is calculated as follows:
<TABLE>
<CAPTION>
Reinvestment Consolidated
<S> <C> <C>
Net Income $2,812,993 $2,600,045
Plus:
Depreciation expense 1,300,205 1,300,205
Depreciation inclu-
ded in Operations
of Real Estate
Ventures --- 50,382
Lease Commission
Amortization 34,787 34,787
Less:
Minority Interest
Share of Depre-
ciation Expense (110,813) (110,813)
Minority Interest
Share of Lease
Commission
Amortization (4,418) (4,418)
Recovery of Losses on
Mortgage Loans,
Notes and Interest
Receivable and Class
Action Settlement
Costs and Expenses --- (164,958)
Gain on Disposition of
Investment in Real
Estate Venture --- (409,290)
Real Estate Tax
Rebates from
Operations of Real
Estate Venture --- (229,450)
---------- ----------
Funds From Operations $4,032,754 $3,066,490
========== ==========
</TABLE>
22
<PAGE> 25
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
The Trust paid regular quarterly distributions during 1995 and 1994 as
follows:
<TABLE>
<CAPTION>
1995 1994
Per Share Per Share
Quarter Distribution Date Paid Distribution Date Paid
<S> <C> <C> <C> <C>
4 $ 0.10 02/24/95 $ 0.10 02/25/94
1 $ 0.10 05/20/95 $ 0.10 05/20/94
2 $ 0.10 08/18/95 $ 0.10 08/15/94
3 $ 0.10 11/17/95 $ 0.10 11/15/94
</TABLE>
On January 5, 1996, the Trust declared a cash distribution for the
quarter ended December 31, 1995 of $0.10 per share payable February 20, 1996 to
shareholders of record on January 15, 1996.
PROPERTY ACQUISITIONS AND OTHER INFORMATION
On June 16, 1995, Banyan/Morgan Milwaukee Limited Partnership
("BMMLP"), a joint venture between a subsidiary of the Trust and Morgan Realty
Partners ("Morgan"), acquired the Willowbrook Industrial Court property (the
"Willowbrook Property") which consists of a three-building office/warehouse
complex with a total of approximately 84,300 square feet of gross leasable area
located in the metropolitan Chicago area for a purchase price, including
liabilities assumed at acquisition, of approximately $3,924,000. The Trust and
Morgan contributed additional capital of approximately $1,030,000 and $370,000
to BMMLP for their 85% and 15% ownership interest in BMMLP, respectively. The
total of the contributions made by the Trust and Morgan in the amount of
$1,400,000 included $200,000 in reserves held by BMMLP for property
improvements and lease-up. The acquisition was made subject to a nonrecourse
first mortgage loan collateralized by the property in the original principal
amount of $2,650,000 which bears interest at a fixed rate of 8.5%, matures on
July 1, 2002, and requires monthly payments based upon a twenty-two and a half
year amortization schedule. The loan requires a balloon payment for the
remaining unpaid principal balance at maturity. Upon acquisition, the
Willowbrook Property was 93% leased.
The terms of the BMMLP partnership agreement, as established at the
time of its acquisitions of the Milwaukee Industrial and Elmhurst Metro Court
properties, was amended effective July 1, 1995 upon the acquisition of the
Willowbrook Property by BMMLP. Pursuant to the amended BMMLP partnership
agreement, any excess cash flow from operations, after each of the Trust and
Morgan receives its 12% and 11% preferred return, respectively, on contributed
equity, will be allocated 85% to the Trust and 15% to Morgan. The amendment
was adopted as a result of the increase in additional equity contributed
23
<PAGE> 26
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
by Morgan of $370,000. The BMMLP partnership agreement had provided for BSRT
and Morgan to be allocated cash flow after satisfaction of the above preferred
returns 90% and 10%, respectively, before the July 1, 1995 amendment.
On July 28, 1995, BSRT/M&J Northlake Limited Partnership ("BMJNLP"), a
joint venture between a subsidiary of the Trust and M&J Wilkow Retail Ltd.
("Wilkow"), acquired a leasehold interest in a regional shopping center known
as the Northlake Tower Shopping Center ("Northlake Property") located in
northeast suburban Atlanta, Georgia for a purchase price, including liabilities
assumed at acquisition, of approximately $17,144,000. The Northlake Property
consists of six structures containing approximately 321,800 gross leasable area
built in 1983-1984. The Trust is to contribute in total $6,000,000 to BMJNLP
for an approximate 80% interest, while Wilkow is to contribute in total
approximately $1,500,000 for the remaining 20% interest. In addition to equity
for the acquisition of the property of the combined $7,500,000, capital
contributions included approximately $550,000 in reserves held by BMJNLP for
property improvements, lease-up and other closing prorations. The Northlake
Property was acquired pursuant to a ground lease with a remaining term of
sixty-two years. The ground lease requires annual lease payments of $600,000
through October 4, 2007 plus 7% of total annual gross rental income commencing
once gross rental income exceeds $2,000,000 from the operations of the
Northlake Property. For the year ended December 31, 1996, the Trust estimates
7% of the total annual gross rental income due under the ground lease will be
approximately $280,000. The ground lease also requires that BMJNLP pay for
expenses incurred on the Northlake site, including real estate taxes. The
Northlake Property was financed by BMJNLP utilizing a non-recourse leasehold
mortgage loan from the seller in the amount of $10,350,000. The mortgage loan
requires monthly payments of interest only at a fixed rate of 8.5% per annum.
The leasehold mortgage loan matures on August 1, 2005. Upon acquisition, the
property was 97% leased with sixteen national and regional credit tenants
leasing 84% of the leased space.
Pursuant to the terms of the BMJNLP partnership agreement, cash flow
from operations will be distributed first to the Trust until it has received a
12% cumulative return on its capital contribution and then to Wilkow until it
has received a 12% cumulative return on its capital contribution. Any excess
cash flow will be allocated pro-rata to the Trust and Wilkow based on their
respective capital contributions. Proceeds from the sale or refinancing of the
Northlake Property, after the payment of any debt or expense associated with
the sale or refinancing, will be distributed first to the Trust to the extent
that the 12% annual preferred return has not been received. Next,
distributions will be made to the Trust and Wilkow on a pro-rata basis in an
amount equal to their respective equity contributions. Thereafter,
distributions will be made to Wilkow to the extent that its 12% annual
preferred return has not been received. In the event there are any remaining
proceeds to be distributed and the average annual return to the Trust during
the period that BMJNLP owned the Northlake Property is equal to or greater than
15%, Wilkow will receive 30% of any remaining proceeds.
24
<PAGE> 27
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
On September 26, 1995, a subsidiary of the Trust acquired a 100%
ownership interest in a seven building office/industrial complex known as the
Bluegrass Corporate Center (the "Bluegrass Property") located in Jefferson
County, Kentucky (suburban Louisville), for a purchase price, including
liabilities assumed at acquisition, of approximately $5,067,000. The seven
buildings contain approximately 182,200 gross leasable area. The Bluegrass
Property was built during 1976-77 and 1979-80 and was 91% leased with 43
tenants upon acquisition. The acquisition was made subject to a nonrecourse
first mortgage loan collateralized by the property in the original principal
amount of approximately $2,707,000. The loan bears interest at a fixed rate of
8%, matures on April 25, 2001, and requires monthly payments based upon a
twenty year amortization schedule with a balloon payment of approximately
$2,320,000 upon maturity.
On December 5, 1995, a subsidiary of the Trust acquired a 100%
ownership interest in the Lexington Business Center (the "Lexington Property")
located in southeastern Lexington, Kentucky for a purchase price, including
liabilities assumed at acquisition, of approximately $7,080,000. The Lexington
Property was built in 1985 and consists of three office buildings and one
distribution facility containing approximately 316,200 gross leasable area
situated on 21.4 acres of land. The Trust utilized approximately $1,170,000 of
cash reserves for the acquisition with the remaining balance of the acquisition
price being provided for by the Trust's $30,000,000 line of credit. See
Liquidity and Capital Resources for details regarding the Trust's line of
credit. Management is working to obtain permanent long term third party
financing during 1996 or early 1997 to repay the amount drawn under the line of
credit. Upon acquisition, the Lexington Property had fourteen tenants which
leased approximately 74% of the gross leasable area.
On December 5, 1995, a subsidiary of the Trust acquired a 100%
ownership interest in the Newtown Distribution Center (the "Newtown Property")
located in northern Lexington, Kentucky for a purchase price, including
liabilities assumed at acquisition, of approximately $3,586,000. The Newtown
Property was built in 1981 - 1982 and consists of three office buildings and
one warehouse/distribution facility containing approximately 87,100 gross
leasable area situated on 6.6 acres of land. The Trust utilized approximately
$596,000 of cash reserves for the acquisition with the remaining balance of the
acquisition price being provided for by a draw of cash proceeds pursuant to the
Trust's $30,000,000 line of credit. See Liquidity and Capital Resources for
details regarding the Trust's line of credit. Management is working to obtain
permanent long term third party financing during 1996 or early 1997 to repay
the amount drawn under the line of credit. Upon acquisition, the Newtown
Property had eighteen tenants which occupied approximately 97% of the gross
leaseable area.
On December 19, 1995, BSRT Woodcrest Office Park Limited Partnership
("BWOPLP"), a joint venture between a subsidiary of the Trust, which is the
general partner, and Mr. Daniel Smith ("Smith"), as limited partner, acquired
the Woodcrest Office Park (the "Woodcrest
25
<PAGE> 28
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
Property") located in Tallahassee, Florida for a purchase price, including
liabilities assumed at acquisition, of approximately $11,017,000. The
Woodcrest Property consists of eighteen buildings containing approximately
265,900 gross leasable area covering 25.1 acres, of which 20.6 acres are
developed. The remaining 4.5 acres the Trust believes are suitable for
development of up to an additional 96,000 square feet of commercial office
space. The property was built over a twenty-two year period between 1967 and
1989. Upon acquisition, the aggregate occupancy of the property was 95%. The
Trust contributed approximately $3,750,000 in equity to the partnership for its
85% interest, while Mr. Smith contributed $250,000 for his 15% interest.
Pursuant to the terms of the BWOPLP partnership agreement, cash flow
from operations will be first distributed to the Trust in an amount equal to a
cumulative preferred return of 12% compounded annually on its total capital
contribution and then Mr. Smith is entitled to a cumulative compounded 12%
preferred return on his capital contribution. Any excess cash proceeds from
the property's operation after payment of the required preferred returns is
then distributed 85% to the Trust and 15% to Mr. Smith in accordance with the
partners' ownership interests in the partnership. Upon the sale or refinancing
of the property, cash proceeds shall be distributed as follows: a) repayment
of debt and any expenses associated with the sale or refinancing of the
property; b) to the Trust for any unpaid cumulative preferred return; c)
repayment of the Trust's total equity contribution to the partnership; d) to
the Trust in the amount that cumulative distributions of cash flow from
operations of the property are less than the equivalent of a 15% per annum
return on its contributed equity on a non-compounded basis; e) to Mr. Smith for
any unpaid cumulative preferred return; f) repayment of Mr. Smith's total net
equity contribution; and g) any remaining proceeds are to be distributed
pro-rata, 85% to the Trust and 15% to Mr. Smith. The Trust funded its equity
contribution pursuant to a draw of cash proceeds under the Trust's line of
credit. See Liquidity and Capital Resources for further details on the Trust's
line of credit.
Effective February 27, 1995, Lincoln Properties Co. ("Lincoln"), an
unaffiliated third party, took over the management of the day to day operations
and leasing of the Colonial Courts and Hallmark properties. Lincoln receives
4% of gross rental receipts on the Colonial Courts property as a management
fee. The management fee on the Hallmark property was 4.5% through August 31,
1995 and 4% thereafter of gross rental receipts. The former management
company, Lake Realty Management Co. ("Lake Realty"), owns a 10% limited
partnership interest in both of these properties. The termination of Lake
Realty as the management company did not affect Lake Realty's rights as a
partner in either property.
On June 22, 1995, the Plaza at Westminster property was sold to an
unaffiliated third party for $7,525,000 which resulted in a net gain of
approximately $1,333,000 after prorations for closing costs of approximately
$300,000. The Trust's share of the cash proceeds was
26
<PAGE> 29
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
approximately $2,218,000 which resulted in the Trust's share of the net gain of
approximately $409,000.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Consolidated Financial Statements on Page F-1 of this Report.
See Item 6, Selected Financial Data, for the supplemental financial
information specified by Item 302 of Regulation S-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no changes in, or disagreements with, the accountants on
any matter of accounting principles, practices or financial statement
disclosure.
27
<PAGE> 30
PART III
ITEM 10. TRUSTEES AND EXECUTIVE OFFICERS OF THE REGISTRANT
The trustees and executive officers of the Trust are as follows:
Walter E. Auch, Sr. Trustee
Norman M. Gold Trustee
Marvin A. Sotoloff Trustee
Leonard G. Levine President
Neil D. Hansen First Vice President
Robert G. Higgins Vice President and Secretary/
General Counsel
Joel L. Teglia Vice President/Chief Financial
Officer
Jay E. Schmidt Vice President/Acquisitions
WALTER E. AUCH, SR., age 74, was the chairman and chief executive
officer of the Chicago Board Options Exchange. Prior to that time, he was
executive vice president, director and a member of the executive committee of
PaineWeber. Mr. Auch is a director of Pimco L.P., Geotek Industries, Smith
Barney Concert Series Funds, Smith Barney Trak Fund, Nicholas Applegate Funds
and Fort Dearborn Fund, and a trustee of Hillsdale College and the Arizona
Heart Institute. Mr. Auch has been a trustee of the Trust since 1986. Mr.
Auch is also a director of Banyan Strategic Land Fund II, Banyan Mortgage
Investment Fund and Banyan Management Corp.
NORMAN M. GOLD, age 65, is a senior partner in the law firm of
Altheimer & Gray and has actively practiced law for over 40 years, specializing
in taxation, corporate and real estate law. Mr. Gold is also a trustee of
Banyan Short Term Income Trust and director of Banyan Management Corp. and a
trustee of New Plan Realty Trust. Mr. Gold has been a trustee of the Trust
since 1986. Mr. Gold is a certified public accountant and a member of the
Chicago and American Bar Associations.
MARVIN A. SOTOLOFF, age 52, is regional vice president of Premisys
Marketing Services, Inc., effective July 1993, a division of Premisys Real
Estate Services, Inc.. Prior to joining Premisys Marketing Services, Inc., Mr.
Sotoloff was executive vice president of The Palmer Group Ltd., a company
involved in real estate brokerage, development and property management,
concentrating on commercial real estate. He is a past president of the Chicago
Office Leasing Brokers Association, a licensed real estate broker and a member
of the Illinois and Pennsylvania Bar Associations. Mr. Sotoloff has been a
trustee of the Trust since 1986. Mr. Sotoloff is also a trustee of Banyan
Short Term Income Trust and a director of Banyan Management Corp.
28
<PAGE> 31
ITEM 10. TRUSTEES AND EXECUTIVE OFFICERS OF THE REGISTRANT (CONTINUED)
LEONARD G. LEVINE, age 49, has been president of the Trust as well as
Banyan Management Corp., Banyan Short Term Income Trust, Banyan Strategic Land
Fund II and Banyan Mortgage Investment Fund since 1990. He received a
B.S./B.A. Degree in Accounting from Roosevelt University and a Masters Degree
in Taxation from DePaul University. His areas of specialization include real
estate syndications, estate planning and taxation of closely-held corporations.
Mr. Levine is also a certified public accountant and a licensed real estate
broker.
NEIL D. HANSEN, age 49, has been first vice president of the Trust as
well as Banyan Management Corp., Banyan Mortgage Investment Fund, Banyan Short
Term Income Trust and Banyan Strategic Land Fund II since 1991. He received a
B.S. Degree in Finance from the University of Illinois and a Master of
Management Degree from Northwestern University. He is a certified public
accountant.
ROBERT G. HIGGINS, age 44, has been vice president and general counsel
of the Trust as well as Banyan Management Corp., Banyan Mortgage Investment
Fund, Banyan Short Term Income Trust and Banyan Strategic Land Fund II since
1992, and secretary of these entities since 1995. From 1990 to 1992, Mr.
Higgins was a contract partner at the law firm of Chapman and Cutler. Mr.
Higgins' legal experience has concentrated in the areas of real estate
development, finance, acquisition, land use, sales, lending, syndications,
general corporate and business practice. Mr. Higgins is admitted to the bar
in the States of Illinois, Minnesota and Texas. He received a B.A. Degree in
Government from the University of Notre Dame and a J.D. from Loyola University
of Chicago.
JOEL L. TEGLIA, age 34, has been vice president and chief financial
officer of the Trust, as well as Banyan Management Corp., Banyan Mortgage
Investment Fund, Banyan Short Term Income Trust and Banyan Strategic Land Fund
II since 1994. Prior to assuming the responsibilities of his current position,
Mr. Teglia held the position of Controller for Banyan Management Corp. from
1991 to 1994. He received a B.B.A. Degree in Accounting from the University of
Notre Dame. Mr. Teglia is a certified public accountant.
JAY E. SCHMIDT, age 44, became vice president of the Trust in 1995.
Prior to being appointed as a vice president of the Trust, Mr. Schmidt served
as vice president of acquisitions for Banyan Management since 1992 as an
acquisition executive on behalf of the Trust. Prior to 1992, Mr. Schmidt had
been an independent real estate consultant and broker. He received a B.A.
degree in Government from Franklin & Marshall College and a J.D. from the
University of Wisconsin. Mr. Schmidt is admitted to the bar in the State of
Wisconsin and is a licensed real estate broker.
29
<PAGE> 32
ITEM 11. EXECUTIVE COMPENSATION
A. TRUSTEE COMPENSATION
The Trustees are paid an annual fee of $15,000, payable quarterly,
plus $875 for each board meeting, including meetings of the audit committee,
attended in person and $250 an hour for each board meeting, including meetings
of the audit committee, attended via telephonic conference call. In addition,
each Trustee is reimbursed for out-of-pocket expenses incurred in attending
meetings of the board.
B. EXECUTIVE COMPENSATION
Compensation paid to executive officers of the Trust for the years
ended December 31, 1995, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
Annual Compensation(1)
Other
Annual
Compen-
Year Salary Bonus sation
<S> <C> <C> <C> <C>
Leonard G. Levine, 1995 $184,812 $111,739 n/a
President and Chief 1994 $179,900 $ --- n/a
Executive Officer 1993 $175,000 $ --- n/a
(2)
Jay E. Schmidt, 1995 $148,136 $ 27,000 n/a
Vice President/ 1994 n/a n/a n/a
Acquisitions (3) 1993 n/a n/a n/a
</TABLE>
<TABLE>
<CAPTION>
Long-Term Compensation(1)
Awards Payouts
Restricted All Other
Stock Options/ LTIP Compen-
Year Award(s) SARs (#) Payouts sation
<S> <C> <C> <C> <C> <C>
Leonard G. Levine, 1995 $24,899 n/a n/a n/a
President and Chief 1994 n/a n/a n/a n/a
Executive Officer 1993 n/a n/a n/a n/a
(2)
Jay E. Schmidt, 1995 n/a n/a n/a n/a
Vice President/ 1994 n/a n/a n/a n/a
Acquisitions (3) 1993 n/a n/a n/a n/a
</TABLE>
(1) Compensation for all other executives of the Trust for 1995, 1994 and
1993 was less than $100,000 per individual.
(2) See incentive compensation program disclosure below.
(3) Mr. Schmidt's 1995 bonus was discretionary and based upon job
performance pursuant to an annual review by Mr. Levine and the Board
of Trustees. Mr. Schmidt is not awarded any other compensation by the
Trust or Banyan Management Corp.
30
<PAGE> 33
ITEM 11. EXECUTIVE COMPENSATION (CONTINUED)
Mr. Levine serves as Chief Executive Officer of the Trust pursuant to
an employment agreement entered into with the Trust by Mr. Levine on January 1,
1990. The Agreement expires on December 31, 1997. Under the contract, Mr.
Levine is paid a salary equal to $184,812 per year. His base salary is
adjusted on January 1 of each year based on increases in the "consumer price
index".
Mr. Levine is eligible to receive compensation under an incentive
program included in his contract. Effective January 1, 1993, Mr. Levine earns
incentive compensation based on the recovery on foreclosed real estate assets
owned by the Trust as of December 31, 1992 and on the performance of the
Trust's reinvestment activities. See Item 7, Management's Discussion and
Analysis, for further details regarding the Trust's foreclosed and reinvestment
activities. In particular, Mr. Levine will earn incentive compensation on
foreclosed real estate assets equal to: (i) 1% of the amount of the Trust's
collateralized claims which are converted to cash, and (ii) 3% of the Trust's
unsecured claims which are converted to cash. Mr. Levine is paid incentive
compensation earned on the Trust's foreclosed activities as soon as practical
after the end of each calendar year without regard to whether he is employed by
the Trust on the date of payment. Mr. Levine's annual incentive compensation
earnings from reinvestment activities are based on reinvestment returns,
adjusted for unrealized losses, to the Trust in excess of a set index, based on
the annual yield of five-year Treasury Rate plus 100 basis points as of January
1 of each year, according to the following: (i) $500 for each basis point by
which the Trust's rate of return from reinvestment activities exceeds the above
index up to 500 basis points, and (ii) $250 per each basis point by which the
rate of return from reinvestment activities exceeds the above index plus 500
basis points. The index for the year ended December 31, 1995 was 8.88%.
Incentive compensation earned on reinvestment activities is paid 80%
in cash and 20% in shares ("Award Shares") of the Trust on March 15 of the year
following the period for which the incentive was earned. The Award Shares are
subject to forfeiture and certificates representing the Award Shares are held
by the Trust pending satisfaction of the vesting requirements, for the benefit
of Mr. Levine until the earlier of (i) December 31, 1997; (ii) the termination
of Mr. Levine's employment by the Trust without just cause; or (iii) the
permanent disability or death of Mr. Levine. For the year ended December 31,
1995, Mr. Levine's incentive compensation earned on recovery of foreclosed
activities and returns on reinvestment activities was $36,185 and $38,500,
respectively. The $36,185 in incentive compensation earned by Mr. Levine
during 1995 on recovery of foreclosed assets is broken down as follows:
$19,315 pursuant to item (i) and $16,870 pursuant to item (ii) as discussed
above. In 1996, Mr. Levine will be paid $66,985 representing 80% of his 1995
incentive in cash and 1,833 Award Shares valued at $4.20 per share or $7,700
representing 20% in Award Shares of the Trust. As of December 31, 1994, Mr.
Levine's incentive compensation earned on recovery of foreclosed activities and
return on reinvestment activities was $12,139 and $124,500, respectively. The
$12,139 incentive compensation earned by Mr. Levine during 1994 on recovery of
foreclosed assets is pursuant to item (ii) as discussed above. Payment of Mr.
Levine's 1994 incentive compensation occurred during the second quarter of 1995
with the payment of $111,740 representing
31
<PAGE> 34
ITEM 11. EXECUTIVE COMPENSATION (CONTINUED)
80% of his incentive in cash and 6,036 Award Shares valued at $4.125 per share
or $24,899 representing 20% in Award Shares of the Trust pursuant to his
employment contract. For the year ended December 31, 1993, Mr. Levine did not
earn any incentive compensation from foreclosed activities or reinvestment
activities.
Either Mr. Levine or the Trust can terminate the employment agreement
at any time upon 90 days written notice. If the Trust terminates the agreement
for cause, or Mr. Levine voluntarily terminates, the Trust will pay all salary
and incentive compensation earned through the date of termination. In the
event of Mr. Levine's death or permanent disability, he is entitled to all
incentive compensation earned through the date of his disability or death plus
any disability or life insurance proceeds in the amount of two times his annual
salary which is consistent with standard insurance benefits of all Banyan
Management Corp. personnel, but he is not entitled to any other severance
payments. If his employment is terminated without cause following a change of
control (as defined in the employment agreement) the Trust is obligated to pay
Mr. Levine's salary during the remainder of the employment period and must pay
him all incentive compensation which he would have earned if all the Trust's
assets had been converted into cash and all proceeds were distributed. If Mr.
Levine is terminated without cause but no change of control has occurred, he
will receive a severance payment equal to one year's salary plus all incentive
compensation earned through the date of his termination (including incentive
compensation based upon assets converted into cash within one year following
his termination of the Trust had he received an "expression of interest" prior
to Mr. Levine's termination), plus an amount equal to the full cost of
continuing Mr. Levine's health benefits for one year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following entities are known by the Trust to be the beneficial owners
of more than 5% of the outstanding shares of beneficial interest as of March
18, 1996.
<TABLE>
<CAPTION>
Amount of
Title of Class Name and Address of Beneficial Percentage
Beneficial Owners Ownership of Shares
<S> <C> <C> <C>
Shares of Fidelity Management & 1,150,550 10.98%
Beneficial Research Corp.
Interest 82 Devonshire Street
Boston, MA 02109
Shares of Magten Asset Management Corp. 1,232,000 11.76%
Beneficial 350 East 21st Street
Interest New York, NY 10010
</TABLE>
32
<PAGE> 35
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(CONTINUED)
The following table sets forth the ownership of shares owned directly
and indirectly by the trustees and officers of the Trust as of March 18, 1996:
<TABLE>
<CAPTION>
Amount of
Title of Beneficial Percentage
Class Beneficial Owner Ownership of Interest
<S> <C> <C> <C>
Shares of Leonard G. Levine, 15,036 Shares Less than 1%
Beneficial President
Interest
Shares of Neil D. Hansen, 4,373 Shares Less than 1%
Beneficial First Vice President
Interest
Shares of Jay E. Schmidt 2,000 Shares Less than 1%
Beneficial Vice President
Interest
Shares of All Trustees and 21,409 Shares Less than 1%
Beneficial Officers of the Trust,
Interest as a group (8 persons)
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Administrative costs, primarily salaries and general and
administrative expenses, are reimbursed by the Trust to Banyan Management Corp.
("BMC"). BMC is owned by the Trust, Banyan Strategic Land Fund II, Banyan
Mortgage Investment Fund and Banyan Short Term Income Trust (the "Banyan
Funds"). Mr. Levine is the president of BMC for which he receives no
compensation. Messrs. Teglia, Hansen, Higgins and Schmidt are employees of the
Trust but are actually paid by BMC. The portion of their time which is
allocable to the Trust is included in the administrative costs for which BMC is
reimbursed by the Trust. The directors/trustees of all Banyan Funds serve as
directors of BMC but receive no additional compensation. All costs incurred on
behalf of BMC for the Trust are allocable to the Trust and other Banyan Funds
to which BMC provides administrative services based upon the actual number of
hours spent by BMC personnel on matters related to that particular entity. The
Trust's allocated share of costs for the years ended December 31, 1995, 1994
and 1993, aggregated $1,443,434, $1,185,409 and $783,922, respectively. As one
of its administrative services, BMC serves as the paying agent for general and
administrative costs of the Trust. As part of providing this payment service,
BMC maintains a bank account on behalf of the Trust. As of December 31, 1995,
the Trust had a net payable due to BMC of $176,527.
Reference is made to Note 10, "Transactions with Affiliates," of Notes
to the Consolidated Financial Statements for the amount of administrative costs
paid to, and a description of various transactions with, BMC.
33
<PAGE> 36
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K
(a) The following documents are filed as part of this Report:
(1)(2) The financial statements indicated in Part II, Item 8,
Financial Statements and Supplementary Data.
(3) Exhibits
The following exhibits are incorporated by reference from the
Trust's Registration Statement on Form S-11 (file number 33-
4169), referencing the exhibit number used in such
Registration Statement.
Exhibit Number Description
(3)(b) By-Laws
(3)(c) Amended and Restated Declaration of
Trust
Exhibit Number Description
Exhibit (10) Material Contracts
(i) Second Amendment of Leonard G.
Levine's Employment Contract dated
December 31, 1992.
(ii) Amendment to Loan Agreement
dated December 1, 1994; Second
Amendment to Loan Agreement dated
December 21, 1994; and Third
Amendment to Loan Agreement dated
December 18, 1995 regarding the
Registrant's $30,000,000 Revolving
Line of Credit with American
National Bank of Chicago.
(iii) First Amendment to Note dated
December 18, 1995 regarding the
Registrant's $30,000,000 Revolving
Line of Credit with American
National Bank of Chicago.
Exhibit (21) Subsidiaries of the Trust
34
<PAGE> 37
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K (CONTINUED)
(b) The following report on Form 8-K was filed during the quarter ended
December 31, 1995:
A current report on Form 8-K was filed on December 20, 1995 wherein
Item 2 disclosed the Registrant's acquisition of the Newtown
Distribution Center and Lexington Business Center property.
(c) See Item 14(a)(3) above.
(d) None.
An annual report will be sent to the shareholders subsequent to this
filing and the Trust will furnish copies of such reports to the Commission at
that time.
35
<PAGE> 38
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.
BANYAN STRATEGIC REALTY TRUST
By: /s/ Leonard G. Levine Date: April 4, 1996
Leonard G. Levine, President
PURSUANT to the requirements of the Securities Exchange Act of 1934, this
Annual Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
By: /s/ Leonard G. Levine Date: April 4, 1996
Leonard G. Levine, President
By: /s/ Joel L. Teglia Date: April 4, 1996
Joel L. Teglia, Vice President
of Finance and Administration,
Chief Financial and Accounting Officer
By: /s/ Norman M. Gold Date: April 4, 1996
Norman M. Gold, Trustee
By: /s/ Walter E. Auch, Sr. Date: April 4, 1996
Walter E. Auch, Sr., Trustee
By: /s/ Marvin A. Sotoloff Date: April 4, 1996
Marvin A. Sotoloff, Trustee
36
<PAGE> 39
BANYAN STRATEGIC REALTY TRUST
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Pages
Report of Independent Auditors F-2
Consolidated Balance Sheets, December 31, 1995 and 1994 F-3 to F-8
Consolidated Statements of Income and Expenses For
the Years Ended December 31, 1995, 1994 and 1993 F-9 to F-14
Consolidated Statements of Shareholders' Equity For
the Years Ended December 31, 1995, 1994 and 1993 F-15
Consolidated Statements of Cash Flows For the Years
Ended December 31, 1995, 1994 and 1993 F-16 to F-24
Notes to Consolidated Financial Statements F-25 to F-44
All schedules are omitted since the required information is not present or is
not present in amounts sufficient to require submission of the schedule or
because the information required is included in the consolidated financial
statements and notes thereto.
F-1
<PAGE> 40
REPORT OF INDEPENDENT AUDITORS
TO THE SHAREHOLDERS OF BANYAN STRATEGIC REALTY TRUST
We have audited the accompanying consolidated balance sheets of Banyan
Strategic Realty Trust as of December 31, 1995 and 1994, and the related
consolidated statements of income and expenses, shareholders' equity and cash
flows for each of the three years in the period ended December 31, 1995. 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 consolidated financial position of Banyan
Strategic Realty Trust at December 31, 1995 and 1994, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1995, in conformity with generally accepted
accounting principles.
Our audits were conducted for the purpose of forming an opinion on the
consolidated financial statements taken as a whole. The supplemental
information segregating the Trust's investment and foreclosed activities
appearing in conjunction with the consolidated financial statements is
presented for purposes of additional analysis and is not a required part of the
consolidated financial statements. Such information has been subjected to the
auditing procedures applied in our audits of the consolidated financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the consolidated financial statements taken as a whole.
ERNST & YOUNG LLP
Chicago, Illinois
February 15, 1996
F-2
<PAGE> 41
BANYAN STRATEGIC REALTY TRUST
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
Consolidated Consolidated
1995 1994
<S> <C> <C>
ASSETS
Cash and Cash Equivalents $ 5,500,215 $ 14,769,170
Interest Receivable on
Investments 70,352 82,180
Interest Receivable on Mortgage
Loans 60,780 55,106
Accounts Receivable 528,029 107,672
Due from Affiliates --- 730,229
Investment Securities --- 1,017,236
------------ ------------
6,159,376 16,761,593
------------ ------------
Mortgage Loans Receivable (Net
of Unamortized Discount of
$1,436,587 and $1,808,716,
Respectively) 5,433,094 5,136,229
Investment in Real Estate, at
cost:
Land 12,809,994 6,182,494
Building 74,343,233 33,152,589
Building Improvements 3,046,838 1,863,219
------------ ------------
90,200,065 41,198,302
Less: Accumulated Depreciation (2,337,095) (1,036,890)
------------ ------------
87,862,970 40,161,412
------------ ------------
Investment in Real Estate
Ventures 8,895,678 10,697,791
Deferred Financing Costs (Net of
Accumulated Amortization of
$224,020 and $21,411,
Respectively) 1,188,174 793,649
Other Assets 1,225,480 533,677
------------ ------------
Total Assets $110,764,772 $ 74,084,351
============ ============
</TABLE>
F-3
<PAGE> 42
BANYAN STRATEGIC REALTY TRUST
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
(Continued)
<TABLE>
<CAPTION>
Consolidated Consolidated
1995 1994
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS'
EQUITY
Liabilities
Accounts Payable and Accrued
Expenses $ 1,339,056 $ 821,804
Accrued Real Estate Taxes 703,919 666,567
Mortgage Loans Payable 43,522,181 7,900,695
Bond Payable 5,500,000 5,500,000
Accrued Interest Payable 93,325 26,005
Unearned Revenue 94,002 19,729
Security Deposit Liabilities 439,135 203,659
Other Liabilities 7,652 290,331
------------ ------------
Total Liabilities 51,699,270 15,428,790
------------ ------------
Minority Interest in
Consolidated Partnerships 2,190,098 214,849
Shareholders' Equity
Shares of Beneficial Interest,
No Par Value, Unlimited
Authorization; 11,999,787 and
11,993,751 Shares Issued,
Respectively 106,687,212 106,662,313
Accumulated Deficit (42,445,859) (40,855,652)
Treasury Shares at Cost,
1,522,649 Shares (7,365,949) (7,365,949)
------------ ------------
Total Shareholders' Equity 56,875,404 58,440,712
------------ ------------
Total Liabilities and Share-
holders' Equity $110,764,772 $ 74,084,351
============ ============
Book Value Per Share of Bene-
ficial Interest (10,477,138
and 10,471,102 Shares
Outstanding, respectively) $ 5.43 $ 5.58
============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE> 43
BANYAN STRATEGIC REALTY TRUST
CONSOLIDATED BALANCE SHEETS (SUPPLEMENTAL INFORMATION)
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
Supplemental Information
Investment Investment
Activities Activities
1995 1994
<S> <C> <C>
ASSETS
Cash and Cash Equivalents $ 4,052,692 $ 13,077,182
Interest Receivable on
Investments 30,080 58,422
Interest Receivable on Mortgage
Loans 60,780 55,106
Accounts Receivable 528,029 107,672
Due from Affiliates --- ---
Investment Securities --- 1,017,236
------------ ------------
4,671,581 14,315,618
------------ ------------
Mortgage Loans Receivable (Net
of Unamortized Discount of
$1,436,587 and $1,808,716,
Respectively) 5,433,094 5,136,229
Investment in Real Estate, at
cost:
Land 12,809,994 6,182,494
Building 74,343,233 33,152,589
Building Improvements 3,046,838 1,863,219
------------- ------------
90,200,065 41,198,302
Less: Accumulated Depreciation (2,337,095) (1,036,890)
------------- ------------
87,862,970 40,161,412
-------------- ------------
Investment in Real Estate
Ventures --- ---
Deferred Financing Costs (Net of
Accumulated Amortization of
$224,020 and $21,411
Respectively) 1,188,174 793,649
Other Assets 737,593 408,353
------------ ------------
Total Assets $ 99,893,412 $ 60,815,261
============ ============
</TABLE>
F-5
<PAGE> 44
BANYAN STRATEGIC REALTY TRUST
CONSOLIDATED BALANCE SHEETS (SUPPLEMENTAL INFORMATION)
DECEMBER 31, 1995 AND 1994
(Continued)
<TABLE>
<CAPTION>
Supplemental Information
Investment Investment
Activities Activities
1995 1994
<S> <C> <C>
LIABILITIES
Liabilities
Accounts Payable and Accrued
Expenses $ 1,120,751 $ 641,435
Accrued Real Estate Taxes 703,919 666,567
Mortgage Loans Payable 43,522,181 7,900,695
Bond Payable 5,500,000 5,500,000
Accrued Interest Payable 93,325 26,005
Unearned Revenue 94,002 19,729
Security Deposit Liabilities 439,135 203,659
Other Liabilities --- ---
------------ ------------
Total Liabilities 51,473,313 14,958,090
------------ ------------
Minority Interest in
Consolidated Partnerships 2,190,098 214,849
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE> 45
BANYAN STRATEGIC REALTY TRUST
CONSOLIDATED BALANCE SHEETS (SUPPLEMENTAL INFORMATION)
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
Supplemental Information
Foreclosed Foreclosed
Activities Activities
1995 1994
<S> <C> <C>
ASSETS
Cash and Cash Equivalents $ 1,447,523 $ 1,691,988
Interest Receivable on
Investments 40,272 23,758
Interest Receivable on Mortgage
Loans --- ---
Accounts Receivable --- ---
Due from Affiliates --- 730,229
Investment Securities --- ---
------------ ------------
1,487,795 2,445,975
------------ ------------
Mortgage Loans Receivable --- ---
Investment in Real Estate, at
cost:
Land --- ---
Building --- ---
Building Improvements --- ---
------------ ------------
--- ---
Less: Accumulated Depreciation --- ---
------------ ------------
--- ---
------------ ------------
Investment in Real Estate
Ventures 8,895,678 10,697,791
Deferred Financing Costs --- ---
Other Assets 487,887 125,324
------------ ------------
Total Assets $ 10,871,360 $ 13,269,090
============ ============
</TABLE>
F-7
<PAGE> 46
BANYAN STRATEGIC REALTY TRUST
CONSOLIDATED BALANCE SHEETS (SUPPLEMENTAL INFORMATION)
DECEMBER 31, 1995 AND 1994
(Continued)
<TABLE>
<CAPTION>
Supplemental Information
Foreclosed Foreclosed
Activities Activities
1995 1994
<S> <C> <C>
LIABILITIES
Liabilities
Accounts Payable and Accrued
Expenses $ 218,305 $ 180,369
Accrued Real Estate Taxes --- ---
Mortgage Loans Payable --- ---
Bond Payable --- ---
Accrued Interest Payable --- ---
Unearned Revenue --- ---
Security Deposit Liabilities --- ---
Other Liabilities 7,652 290,331
------------ ------------
Total Liabilities 225,957 470,700
------------ ------------
Minority Interest in Consolidated
Partnerships --- ---
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-8
<PAGE> 47
BANYAN STRATEGIC REALTY TRUST
CONSOLIDATED STATEMENTS OF INCOME AND EXPENSES
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
Consolidated Consolidated Consolidated
1995 1994 1993
<S> <C> <C> <C>
INCOME
Income From Property
Operating Activities:
Industrial $ 3,009,068 $ 2,166,804 $ 916,543
Residential 3,312,687 3,126,833 1,083,721
Commercial 3,071,831 2,199,438 ---
Retail 1,838,272 --- ---
------------ ------------ ------------
Total Income From
Property Operating
Activities 11,231,858 7,493,075 2,000,264
------------ ----------- -----------
Income From Lending and
Investing Activities:
Interest and Amortized
Discount on Mortgage
Loans 1,036,052 959,565 229,167
Income on Investments 634,459 381,161 1,897,718
------------ ----------- -----------
Total Income From
Lending and Investing
Activities 1,670,511 1,340,726 2,126,885
------------ ----------- -----------
Total Income 12,902,369 8,833,801 4,127,149
------------ ----------- -----------
EXPENSES
Expenses From Property
Operating Activities:
Operating Property
Expenses 680,912 339,291 94,305
Repairs and Maintenance 1,256,444 823,669 137,675
Real Estate Taxes 1,153,797 723,857 299,862
Interest Expense 1,535,787 342,700 80,753
Ground Lease Expense 256,452 --- ---
Property Management Fees 414,139 277,300 67,814
Payroll Expense 469,083 497,547 202,993
Utilities Expense 722,366 551,643 114,109
Depreciation and
Amortization 1,334,992 875,949 187,453
------------ ----------- -----------
Total Expenses From
Property Operating
Activities 7,823,972 4,431,956 1,184,964
------------ ----------- -----------
</TABLE>
F-9
<PAGE> 48
BANYAN STRATEGIC REALTY TRUST
CONSOLIDATED STATEMENTS OF INCOME AND EXPENSES
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(Continued)
<TABLE>
<CAPTION>
Consolidated Consolidated Consolidated
1995 1994 1993
<S> <C> <C> <C>
Other Expenses:
Shareholder Expenses 184,292 174,668 160,956
Trustees' Fees, Expenses
and Insurance 397,245 425,467 438,304
Other Professional Fees 229,551 207,402 351,028
General and Administrative 1,892,055 1,645,680 779,258
Amortization of Deferred
Loan Fees and Financing
Costs 234,056 49,361 11,439
Mortgage Loan Commitment
Settlement Costs --- --- 220,000
Recovery of Losses on
Loans, Notes, Interest
Receivable and Class
Action Settlement Costs
and Expenses (164,958) (192,212) (57,072)
------------ ----------- -----------
Total Other Expenses 2,772,241 2,310,366 1,903,913
------------ ----------- -----------
Total Expenses 10,596,213 6,742,322 3,088,877
------------ ----------- -----------
Income (Loss) Before Minority
Interest, Income (Loss)
from Real Estate Ventures
and Gain on Disposition of
Property 2,306,156 2,091,479 1,038,272
Minority Interest in Con-
solidated Partnerships (178,114) (55,718) (42,162)
Income (Loss) from
Real Estate Ventures 472,003 (2,994,361) (1,613,382)
Gain on Disposition of
Property --- 46,108 ---
------------ ----------- -----------
Net Income (Loss) $ 2,600,045 $ (912,492) $ (617,272)
============ =========== ===========
Earnings (Loss) Per Share
of Beneficial Interest
(10,474,079, 10,471,102
and 10,518,047 Weighted
Average Shares Out-
standing, respectively) $ 0.25 $ (0.09) $ (0.06)
============ =========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-10
<PAGE> 49
BANYAN STRATEGIC REALTY TRUST
CONSOLIDATED STATEMENTS OF INCOME AND EXPENSES
(SUPPLEMENTAL INFORMATION)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
Supplemental Information
Investment Investment Investment
Activities Activities Activities
1995 1994 1993
<S> <C> <C> <C>
INCOME
Income From Property
Operating Activities:
Industrial $ 3,009,068 $ 2,166,804 $ 916,543
Residential 3,312,687 3,126,833 1,083,721
Commercial 3,071,831 2,199,438 ---
Retail 1,838,272 --- ---
------------ ------------ ------------
Total Income From
Property Operating
Activities 11,231,858 7,493,075 2,000,264
------------ ------------ ------------
Income From Lending and
Investing Activities:
Interest and Amortized
Discount on Mortgage
Loans 1,036,052 959,565 229,167
Income on Investments 495,368 235,738 1,782,450
------------ ----------- -----------
Total Income From
Lending and Investing
Activities 1,531,420 1,195,303 2,011,617
------------ ----------- -----------
Total Income 12,763,278 8,688,378 4,011,881
------------ ----------- -----------
EXPENSES
Expenses From Property
Operating Activities:
Operating Property
Expenses 680,912 339,291 94,305
Repairs and Maintenance 1,256,444 823,669 137,675
Real Estate Taxes 1,153,797 723,857 299,862
Interest Expense 1,535,787 342,700 80,753
Ground Lease Expense 256,452 --- ---
Property Management Fees 414,139 277,300 67,814
Payroll Expense 469,083 497,547 202,993
Utilities Expense 722,366 551,643 114,109
Depreciation and
Amortization 1,334,992 875,949 187,453
------------ ----------- -----------
Total Expenses From
Property Operating
Activities 7,823,972 4,431,956 1,184,964
------------ ----------- -----------
</TABLE>
F-11
<PAGE> 50
BANYAN STRATEGIC REALTY TRUST
CONSOLIDATED STATEMENTS OF INCOME AND EXPENSES
(SUPPLEMENTAL INFORMATION)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(Continued)
<TABLE>
<CAPTION>
Supplemental Information
Investment Investment Investment
Activities Activities Activities
1995 1994 1993
<S> <C> <C> <C>
Other Expenses:
Shareholder Expenses 55,805 26,559 14,782
Trustees' Fees, Expenses
and Insurance 28,664 24,813 3,250
Other Professional Fees 168,886 116,519 62,743
General and Administrative 1,460,788 1,292,464 523,254
Amortization of Deferred
Loan Fees and Financing
Costs 234,056 49,361 11,439
Mortgage Loan Commitment
Settlement Costs --- --- ---
Recovery of Losses on
Loans, Notes, Interest
Receivable and Class
Action Settlement
Costs and Expenses --- --- ---
------------ ----------- -----------
Total Other Expenses 1,948,199 1,509,716 615,468
------------ ----------- -----------
Total Expenses 9,772,171 5,941,672 1,800,432
------------ ----------- -----------
Income (Loss) Before
Minority Interest, Income
(Loss) from Real Estate
Ventures and Gain on
Disposition of Property 2,991,107 2,746,706 2,211,449
Minority Interest in Conso-
lidated Partnerships (178,114) (55,718) (42,162)
Income (Loss) from Real
Estate Ventures --- --- ---
Gain on Disposition of
Property --- 46,108 ---
------------ ----------- -----------
Net Income (Loss) $ 2,812,993 $ 2,737,096 $ 2,169,287
============ ============ ============
Earnings (Loss) Per Share
of Beneficial Interest
(10,474,079, 10,471,102 and
10,518,047 Weighted Average
Shares Outstanding,
respectively) $ 0.27 $ 0.26 $ 0.21
============ ============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-12
<PAGE> 51
BANYAN STRATEGIC REALTY TRUST
CONSOLIDATED STATEMENTS OF INCOME AND EXPENSES
(SUPPLEMENTAL INFORMATION)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
Supplemental Information
Foreclosed Foreclosed Foreclosed
Activities Activities Activities
1995 1994 1993
<S> <C> <C> <C>
INCOME
Income From Property
Operating Activities:
Industrial $ --- $ --- $ ---
Residential --- --- ---
Commercial --- --- ---
Retail --- --- ---
------------ ------------ ------------
Total Income From Property
Operating Activities --- --- ---
------------ ------------ ------------
Income From Lending and
Investing Activities:
Interest and Amortized
Discount on Mortgage --- --- ---
Loans
Income on Investments 139,091 145,423 115,268
------------ ------------ ------------
Total Income From Lending
and Investing Activities 139,091 145,423 115,268
------------ ------------ ------------
Total Income 139,091 145,423 115,268
------------ ------------ ------------
EXPENSES
Expenses From Property
Operating Activities:
Operating Property Expenses --- --- ---
Repairs and Maintenance --- --- ---
Real Estate Taxes --- --- ---
Interest Expense --- --- ---
Ground Lease Expense --- --- ---
Property Management Fees --- --- ---
Payroll Expense --- --- ---
Utilities Expense --- --- ---
Depreciation and
Amortization --- --- ---
------------ ------------ ------------
Total Expenses From
Property Operating
Activities --- --- ---
------------ ------------ ------------
</TABLE>
F-13
<PAGE> 52
BANYAN STRATEGIC REALTY TRUST
CONSOLIDATED STATEMENTS OF INCOME AND EXPENSES
(SUPPLEMENTAL INFORMATION)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(Continued)
<TABLE>
<CAPTION>
Supplemental Information
Foreclosed Foreclosed Foreclosed
Activities Activities Activities
1995 1994 1993
<S> <C> <C> <C>
Other Expenses:
Shareholder Expenses 128,487 148,109 146,174
Trustees' Fees, Expenses
and Insurance 368,581 400,654 435,054
Other Professional Fees 60,665 90,883 288,285
General and Administrative 431,267 353,216 256,004
Amortization of Deferred
Loan Fees and Financing
Costs --- --- 220,000
Mortgage Loan Commitment
Settlement Costs --- --- ---
Recovery of Losses on
Loans, Notes, Interest
receivable and Class
Action Settlement Costs
and Expenses (164,958) (192,212) (57,072)
-------------- ------------- ------------
Total Other Expenses 824,042 800,650 1,288,445
------------- ------------ ------------
Total Expenses 824,042 800,650 1,288,445
------------- ----------- -----------
Income (Loss) Before Minority
Interest, Income (Loss)
from Real Estate Ventures
and Gain on Disposition of
Property (684,951) (655,227) (1,173,177)
Minority Interest in
Consolidated Partnerships --- --- ---
Income (Loss) from Real
Estate Ventures 472,003 (2,994,361) (1,613,382)
Gain on Disposition of
Property --- --- ---
------------ ------------ ------------
Net Income (Loss) $ (212,948) $ (3,649,588) $ (2,786,559)
============ ============ ============
Earnings (Loss) Per Share of
Beneficial Interest
(10,474,079, 10,471,102 and
10,518,047 Weighted Average
Shares Outstanding,
respectively) $ (0.02) $ (0.35) $ (0.26)
============ ============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-14
<PAGE> 53
BANYAN STRATEGIC REALTY TRUST
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
Shares of
Beneficial Interest Accumulated Treasury
Shares Amount Deficit Shares Total
<S> <C> <C> <C> <C> <C>
Shareholders'
Equity, December
31, 1992 11,993,751 $106,662,313 $(30,915,520) $(6,156,368) $ 69,590,425
Acquisition of
258,265 Shares
of Treasury
Shares, at cost --- --- --- (1,209,581) (1,209,581)
Net Loss --- --- (617,272) --- (617,272)
Dividends
Declared --- --- (4,221,927) --- (4,221,927)
----------- ----------- ------------ ----------- ------------
Shareholders'
Equity, December
31, 1993 11,993,751 106,662,313 (35,754,719) (7,365,949) 63,541,645
Net Loss --- --- (912,492) --- (912,492)
Dividends
Declared --- --- (4,188,441) --- (4,188,441)
---------- ------------ ------------ ----------- ------------
Shareholders'
Equity, December
31, 1994 11,993,751 106,662,313 (40,855,652) (7,365,949) 58,440,712
Award Shares
Issued 6,036 24,899 --- --- 24,899
Net Income --- --- 2,600,045 --- 2,600,045
Dividends
Declared --- --- (4,190,252) --- (4,190,252)
----------- ------------ ------------ ----------- ------------
Shareholders'
Equity, December
31, 1995 11,999,787 $106,687,212 $(42,445,859) $(7,365,949) $ 56,875,404
=========== ============ ============ =========== ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-15
<PAGE> 54
BANYAN STRATEGIC REALTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
Consolidated Consolidated Consolidated
1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
NET INCOME (LOSS) $ 2,600,045 $ (912,492) $ (617,272)
Adjustments to Reconcile
Net Income (Loss) to Net
Cash Provided by (Used
In) Operating Activities:
Recovery of Losses on
Loans, Notes, Interest
Receivable and Class
Action Settlement
Costs and Expenses (164,958) (57,226) (57,072)
Gain on Disposition of
Property --- (46,108) ---
Amortization of Premium
on Investment
Securities 10,596 66,474 432,193
Depreciation and
Amortization 1,569,048 925,310 198,892
Amortization of Discount
on Mortgage Loans
Receivable (372,129) (307,920) (65,914)
Net (Income) Loss From
Real Estate Ventures (472,003) 2,994,361 1,613,382
Minority Interest
Participation in
Consolidated
Partnerships 178,114 55,718 42,162
Incentive Compensation
Expense 3,500 28,300 ---
Net Change In:
Interest Receivable on
Mortgage Loans and
Investments 6,154 88,074 130,901
Accounts Receivable (420,357) 91,281 (197,184)
Other Assets (213,082) (323,072) (58,819)
Accounts Payable and
Accrued Expenses 239,718 93,961 413,265
Accrued Interest Payable 67,320 (571) 26,576
Accrued Real Estate Tax
Payable 10,753 368,469 299,029
Unearned Revenue 70,709 2,271 12,935
Security Deposit
Liabilities 16,479 16,361 20,981
----------- ----------- -----------
Net Cash Provided By (Used
In) Operating Activities 3,129,907 3,083,191 2,194,055
----------- ----------- -----------
</TABLE>
F-16
<PAGE> 55
BANYAN STRATEGIC REALTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(Continued)
<TABLE>
Consolidated Consolidated Consolidated
1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM INVESTING
ACTIVITIES:
Acquisition of Real
Estate Assets (47,818,144) (18,650,295) (20,738,967)
Proceeds From Sale of
Investment in Real
Estate Venture 2,217,558 --- ---
Distributions From
(Investment In) Real
Estate Ventures, Net 56,558 (23,820) (361,499)
Additions to Investment
in Real Estate (1,183,619) (647,367) (1,215,852)
Payment of Liabilities
Assumed at Acquisition
of Real Estate Assets 34,585 (374,519) 573,345
Other Liabilities (282,679) 290,331 ---
Proceeds From Sale of
Real Estate --- 97,435 ---
Recovery of Losses on
Loans, Notes, Interest
Receivable and Class
Action Settlement
Costs and Expenses 164,958 114,298 ---
Principal Payments of
Investment Securities --- 12,991,276 49,289,961
Proceeds from Sale and
Maturities of Invest-
ment Securities 2,500,000 --- ---
Purchase of Investment
Securities (1,493,360) (1,017,236) (24,495,423)
Investment Securities
Sold to Affiliates --- 1,372,373 ---
Principal Collections on
Mortgage Loans
Receivable 43,817 36,742 6,907
Investment in Mortgage
Loans Receivable --- (4,771) (4,840,662)
Due from Affiliates 730,229 (442,354) (287,875)
----------- ----------- -----------
Net Cash (Used In) Provided
By Investing Activities (45,030,097) (6,257,907) (2,070,065)
----------- ----------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from Bond and
Mortgage Loans Payable 35,806,807 9,500,000 4,000,000
</TABLE>
F-17
<PAGE> 56
BANYAN STRATEGIC REALTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(Continued)
<TABLE>
<CAPTION>
Consolidated Consolidated Consolidated
1995 1994 1993
<S> <C> <C> <C>
Minority Interest Share
of Real Estate
Investments 1,797,135 (69,840) 186,809
Deferred Financing Costs (597,134) (718,099) (96,961)
Principal Payments on
Mortgage Loans Payable (185,321) (85,678) (13,627)
Acquisition of Treasury
Shares --- --- (1,296,816)
Dividends Paid to
Shareholders (4,190,252) (4,188,441) (4,221,927)
----------- ----------- -----------
Net Cash Provided By (Used
In) Financing Activities 32,631,235 4,437,942 (1,442,522)
----------- ----------- -----------
Net (Decrease) Increase In
Cash and Cash Equivalents (9,268,955) 1,263,226 (1,318,532)
Cash and Cash Equivalents
at Beginning of Year 14,769,170 13,505,944 14,824,476
----------- ----------- -----------
Cash and Cash Equivalents
at End of Year $ 5,500,215 $14,769,170 $13,505,944
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-18
<PAGE> 57
BANYAN STRATEGIC REALTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(SUPPLEMENTAL INFORMATION)
DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
Investment Investment Investment
Activities Activities Activities
1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
NET INCOME (LOSS) $ 2,812,993 $ 2,737,096 $ 2,169,287
Adjustments to Reconcile Net
Income (Loss) to Net Cash
Provided by (Used In)
Operating Activities:
Recovery of Losses on
Loans, Notes, Interest
Receivable and Class
Action Settlement
Costs and Expenses --- --- ---
Gain on Disposition of
Property --- (46,108) ---
Amortization of Premium
on Investment
Securities 10,596 66,474 432,193
Depreciation and
Amortization 1,569,048 925,310 198,892
Amortization of Discount on
Mortgage Loans Receivable (372,129) (307,920) (65,914)
Net (Income) Loss From
Real Estate Ventures --- --- ---
Minority Interest Partici-
pation in Consolidated
Partnerships 178,114 55,718 42,162
Incentive Compensation
Expense 3,500 28,300 ---
Net Change In:
Interest Receivable on
Mortgage Loans and
Investments 22,668 78,898 163,835
Accounts Receivable (420,357) 91,281 (197,184)
Other Assets 149,481 (285,300) (146,786)
Accounts Payable and
Accrued Expenses 201,782 134,741 449,039
Accrued Interest Payable 67,320 (571) 26,576
Accrued Real Estate Tax
Payable 10,753 368,469 299,029
Unearned Revenue 70,709 2,271 12,935
Security Deposit
Liabilities 16,479 16,361 20,981
----------- ----------- -----------
Net Cash Provided By (Used
In) Operating Activities 4,320,957 3,865,020 3,405,045
----------- ----------- -----------
</TABLE>
F-19
<PAGE> 58
BANYAN STRATEGIC REALTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(SUPPLEMENTAL INFORMATION)
DECEMBER 31, 1995, 1994 AND 1993
(Continued)
<TABLE>
<CAPTION>
Investment Investment Investment
Activities Activities Activities
1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM INVESTING
ACTIVITIES:
Acquisition of Real
Estate Assets (47,818,144) (18,650,295) (20,738,967)
Proceeds from Sale of
Investment in Real
Estate Venture --- --- ---
Distributions From
(Investment In) Real
Estate Ventures, Net --- --- ---
Additions to Investment
in Real Estate (1,183,619) (647,367) (1,215,852)
Payment of Liabilities
Assumed at Acquisition
of Real Estate Assets 34,585 (374,519) 573,345
Other Liabilities --- --- ---
Proceeds From Sale of
Real Estate --- 97,435 ---
Recovery of Losses on
Loans, Notes, Interest
Receivable and Class
Action Settlement
Costs and Expenses --- --- ---
Principal Payments of
Investment Securities --- 12,991,276 49,289,961
Proceeds from Sale and
Maturities of
Investment Securities 2,500,000 --- ---
Purchase of Investment
Securities (1,493,360) (1,017,236) (24,495,423)
Investment Securities
Sold to Affiliates --- 1,372,373 ---
Principal Collections on
Mortgage Loans
Receivable 43,817 36,742 6,907
Investment in Mortgage
Loans Receivable --- (4,771) (4,840,662)
Due from Affiliates --- --- ---
Transfer of Cash From
Foreclosed Activities to
Investment Activities 1,940,039 --- ---
----------- ----------- -----------
Net Cash (Used In) Provided
By Investing Activities (45,976,682) (6,196,362) (1,420,691)
----------- ----------- -----------
</TABLE>
F-20
<PAGE> 59
BANYAN STRATEGIC REALTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(SUPPLEMENTAL INFORMATION)
DECEMBER 31, 1995, 1994 AND 1993
(Continued)
<TABLE>
<CAPTION>
Investment Investment Investment
Activities Activities Activities
1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds From Bond and
Mortgage Loans Payable 35,806,807 9,500,000 4,000,000
Minority Interest Share
of Real Estate
Investments 1,797,135 (69,840) 186,809
Deferred Financing Costs (597,134) (718,099) (96,961)
Principal Payments on
Mortgage Loans Payable (185,321) (85,678) (13,627)
Acquisition of Treasury
Shares --- --- (1,296,816)
Dividends Paid to
Shareholders (4,190,252) (3,434,167) (4,221,927)
----------- ----------- -----------
Net Cash Provided By (Used
In) Financing Activities 32,631,235 5,192,216 (1,442,522)
----------- ----------- -----------
Net (Decrease) Increase In
Cash and Cash Equivalents (9,024,490) 2,860,874 541,832
Cash and Cash Equivalents
at Beginning of Year 13,077,182 10,216,308 9,674,476
----------- ----------- -----------
Cash and Cash Equivalents
at End of Year $ 4,052,692 $13,077,182 $10,216,308
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-21
<PAGE> 60
BANYAN STRATEGIC REALTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(SUPPLEMENTAL INFORMATION)
DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
Foreclosed Foreclosed Foreclosed
Activities Activities Activities
1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
NET INCOME (LOSS) $ (212,948) $(3,649,588) $(2,786,559)
Adjustments to Reconcile
Net Income (Loss) to Net
Cash Provided by (Used
In) Operating Activities:
Recovery of Losses on
Loans, Notes, Interest
Receivable and Class
Action Settlement
Costs and Expenses (164,958) (57,226) (57,072)
Gain on Disposition of
Property --- --- ---
Amortization of Premium
on Investment
Securities --- --- ---
Depreciation and
Amortization --- --- ---
Amortization of Discount
on Mortgage Loans
Receivable --- --- ---
Net (Income) Loss From
Real Estate Ventures (472,003) 2,994,361 1,613,382
Minority Interest
Participation in
Consolidated
Partnerships --- --- ---
Incentive Compensation
Expense --- --- ---
Net Change In:
Interest Receivable on
Mortgage Loans and
Investments (16,514) 9,176 (32,934)
Accounts Receivable --- --- ---
Other Assets (362,563) (37,772) 87,967
Accounts Payable and
Accrued Expenses 37,936 (40,780) (35,774)
Accrued Interest Payable --- --- ---
Accrued Real Estate Tax
Payable --- --- ---
Unearned Revenue --- --- ---
Security Deposit
Liabilities --- --- ---
----------- ----------- -----------
Net Cash Provided By (Used
In) Operating Activities (1,191,050) (781,829) (1,210,990)
----------- ----------- -----------
</TABLE>
F-22
<PAGE> 61
BANYAN STRATEGIC REALTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(SUPPLEMENTAL INFORMATION)
DECEMBER 31, 1995, 1994 AND 1993
(Continued)
<TABLE>
<CAPTION>
Foreclosed Foreclosed Foreclosed
Activities Activities Activities
1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM INVESTING
ACTIVITIES:
Acquisition of Real
Estate Assets --- --- ---
Proceeds From Sale of
Investment in Real
Estate Venture 2,217,558 --- ---
Distributions From
(Investment In) Real
Estate Ventures, Net 56,558 (23,820) (361,499)
Additions to Investment
in Real Estate --- --- ---
Payment of Liabilities
Assumed at Acquisition
of Real Estate Assets --- --- ---
Other Liabilities (282,679) 290,331 ---
Proceeds From Sale of
Real Estate --- --- ---
Recovery of Losses on
Loans, Notes, Interest
Receivable and Class
Action Settlement
Costs and Expenses 164,958 114,298 ---
Principal Payments of
Investment Securities --- --- ---
Proceeds from Sale and
Maturities of
Investment Securities --- --- ---
Purchase of Investment
Securities --- --- ---
Investment Securities
Sold to Affiliates --- --- ---
Principal Collections on
Mortgage Loans
Receivable --- --- ---
Investment in Mortgage
Loans Receivable --- --- ---
Due from Affiliates 730,229 (442,354) (287,875)
Transfer of Cash From
Foreclosed Activities
to Investment
Activities (1,940,039) --- ---
---------- ------- --------
Net Cash (Used In) Provided
By Investing Activities 946,585 (61,545) (649,374)
---------- ------- --------
</TABLE>
F-23
<PAGE> 62
BANYAN STRATEGIC REALTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(SUPPLEMENTAL INFORMATION)
DECEMBER 31, 1995, 1994 AND 1993
(Continued)
<TABLE>
<CAPTION>
Foreclosed Foreclosed Foreclosed
Activities Activities Activities
1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds From Bond and
Mortgage Loans Payable --- --- ---
Minority Interest Share
of Real Estate
Investments --- --- ---
Deferred Financing Costs --- --- ---
Principal Payments on
Mortgage Loans Payable --- --- ---
Acquisition of Treasury
Shares --- --- ---
Dividends Paid to
Shareholders --- (754,274) ---
----------- ----------- -----------
Net Cash Provided By (Used
In) Financing Activities --- (754,274) ---
----------- ----------- -----------
Net (Decrease) Increase In
Cash and Cash Equivalents (244,465) (1,597,648) (1,860,364)
Cash and Cash Equivalents
at Beginning of Year 1,691,988 3,289,636 5,150,000
----------- ----------- -----------
Cash and Cash Equivalents
at End of Year $ 1,447,523 $ 1,691,988 $ 3,289,636
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-24
<PAGE> 63
BANYAN STRATEGIC REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. BASIS OF PRESENTATION
Banyan Strategic Realty Trust (the "Trust") was organized as a
business trust under the laws of the Commonwealth of Massachusetts, pursuant to
a Declaration of Trust filed March 14, 1986 under the name VMS Strategic Land
Trust.
The accompanying consolidated financial statements include the
accounts of the Trust, its wholly-owned subsidiaries and its controlled
Partnerships. All intercompany balances and transactions have been eliminated
in consolidation. Investment in Real Estate Ventures are accounted for on the
equity method.
Effective January 1, 1993, the Trust elected to provide supplemental
financial information in a format that segregates financial condition, results
of operations and cash flows between the Trust's new investments in real estate
assets (the "Investment Activities") and the real estate assets acquired in
prior years through foreclosure (the "Foreclosed Activities").
Investment Activities assets include (1) interests in real estate
assets comprised of six industrial buildings, two apartment complexes, four
commercial office buildings, a retail center and a portfolio of mortgage loans,
(2) the Trust's investment securities and (3) the portion of the Trust's cash
and cash equivalents not allocated to Foreclosed Activities as described below.
Foreclosed Activities assets include (1) the Trust's investments in
real estate joint ventures comprised of the 53 percent interest in the H Street
Assemblage and the 30.7 percent interest in the Plaza at Westminster (sold in
June 1995) and (2) an allocated portion of the Trust's cash and cash
equivalents considered sufficient for costs associated with the ongoing
operation of the real estate joint ventures as well as costs and expenses
associated with maintaining the Trust.
The supplemental information on the accompanying consolidated
statements of income and expenses reflects the specifically identifiable income
and expenses of each activity and an allocation of the Trust's other expenses.
Other expenses allocated to Investment Activities represent the incremental
costs of managing the related assets. Other expenses allocated to Foreclosed
Activities represent all such expenses not allocated to Investment Activities.
The Trust accounts for the Investment Activities of real estate by including
100% of the assets, liabilities, revenues and expenses of each property and
reflects the limited partners share of such items as a Minority Interest in
Consolidated Partnerships on the balance sheet and income statement.
F-25
<PAGE> 64
BANYAN STRATEGIC REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
B. DEFERRED FINANCING COSTS
Deferred financing costs are amortized over the term of the related
loans using the level yield method.
C. INVESTMENT SECURITIES
Investment securities are classified as available for sale and carried
at fair value, as determined by quoted market prices, with unrealized gains and
losses reflected in the Statement of Shareholders' Equity. Realized gains and
losses are determined on a specific identification basis. The basis of
investment securities is adjusted for amortization of premiums and discounts
using the level yield method.
D. INVESTMENT IN REAL ESTATE
In March 1995, the Financial Accounting Standards Board has issued
Statement of Financial Accounting Standard No. 121, "Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of" ("FAS
121"), under which the Trust would be required to recognize impairment losses
for its properties when indicators of impairment are present and a property's
expected undiscounted cash flows are not sufficient to recover the property's
carrying amount. The Trust adopted FAS 121 in the fourth quarter effective
January 1, 1995 with no effect on the accompanying financial statements.
E. REVENUE RECOGNITION
Interest income is accrued when earned. The accrual of interest is
discontinued when the borrower acknowledges its inability to make payments or
when payments become contractually delinquent ninety days or more, unless the
loan is in the process of collection. Once a loan has been placed in a
non-accrual status, all cash received is applied against the outstanding loan
balance until such time as the borrower has demonstrated an ability to make
payments under the terms of the then current loan agreement. That portion of
accrued interest income which the Trust considers to be unlikely of collection
is reflected in the accompanying consolidated statements of income and expenses
in the provision for losses on loans, notes and interest receivable. However,
the Trust intends to pursue collection of all amounts contractually due from
the borrowers.
F. MORTGAGE LOANS RECEIVABLE
Mortgage loans receivable in the accompanying consolidated balance
sheets are presented at net carrying value, which represents the outstanding
principal less unamortized purchased mortgage loan discounts plus any
associated unamortized deferred loan costs. Unamortized purchased mortgage
loan discounts and associated deferred loan costs are amortized over the term
of the loan using the level yield method.
F-26
<PAGE> 65
BANYAN STRATEGIC REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Financial Accounting Standards Board has issued Statements of
Financial Accounting Standards Nos. 114 and 118 ("FAS 114/118"), "Accounting by
Creditors for Impairment of a Loan". The adoption of FAS 114/118 by the Trust
effective January 1, 1995 has not had any impact on the carrying value of the
Trust's mortgage loans or financial statements as of December 31, 1995.
G. MARKET VALUE ADJUSTMENT OF FINANCIAL INSTRUMENTS
The Trust adopted in 1995 Statement of Financial Accounting Standards
No. 107 ("FAS 107"), "Disclosures about Fair Value of Financial Instruments,"
which requires entities to disclose the fair value of all financial assets and
liabilities for which it is practicable to estimate. Value is defined in FAS
107 as the amount at which the instrument could be exchanged in a current
transaction between willing parties, other than in a forced or liquidation
sale. The Trust believes the carrying amount of its financial instruments
approximates fair value at December 31, 1995, based upon (i) fixed rates on
mortgage loans payable and receivable are comparable to rates currently offered
in the market, (ii) the mortgage loan receivable in default at January 1, 1996
is recorded at fair value of the underlying collateral, (iii) the variable
rates on the line of credit and bond payable and (iv) the relatively short
maturity of the Trust's cash equivalents. The Trust has no other financial
instruments.
H. INCOME TAXES
For the years ended December 31, 1995, 1994 and 1993, the Trust
continued to be treated as a real estate investment trust ("REIT") under
Internal Revenue Code Sections 856-860. In order to qualify, the Trust was
required to distribute at least 95% of its taxable income to shareholders and
meet asset and income tests as well as certain other requirements.
As of December 31, 1995, Mortgage Loans Receivable, Investment in Real
Estate and Investment in Real Estate Ventures has a basis of $4,757,794,
$87,900,893 and $12,318,688, respectively, for income tax purposes.
Additionally, investment in liquidating trust with a tax basis of $856,669 has
not been accorded any value for financial reporting purposes.
As of December 31, 1995, the Trust has a net operating loss
carry-forward of approximately $11,500,000 which will expire in 2005, 2006 and
2008.
F-27
<PAGE> 66
BANYAN STRATEGIC REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
I. CASH EQUIVALENTS
The Trust considers all highly liquid debt instruments purchased with
a maturity of three months or less to be cash and cash equivalents.
J. USE OF ESTIMATES
The preparation 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.
K. RECLASSIFICATIONS
Certain reclassifications have been made to the previously reported
1994 and 1993 consolidated financial statements in order to provide
comparability with the 1995 consolidated financial statements. These
reclassifications have not changed the 1994 or 1993 results.
F-28
<PAGE> 67
BANYAN STRATEGIC REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. MORTGAGE LOANS RECEIVABLE
The Trust's mortgage loan portfolio at December 31, 1995 consists of the
following mortgage loans:
<TABLE>
<CAPTION>
Borrower/Property Pledged
as Collateral/
Interest Rate/ Face Carrying Interest
Maturity Date Amount Amount Receivable
<S> <C> <C> <C>
Wateld Associates I $ 55,566 $ 38,803 $ 509
office condominium unit
Interest Rate: 11% (a)
Maturity Date: 06/01/97
Wateld Associates II 95,422 75,189 875
office condominium unit
Interest Rate: 11% (b)
Maturity Date: 06/01/98
Wateld Associates III 417,235 330,564 2,938
office condominium unit
Interest Rate: 8.45% (c)
Maturity Date: 03/20/15
RAW, Ltd. 366,323 293,459 3,470
vacant land parcel
Interest Rate: 11% (d)
Maturity Date: 09/15/98
Karfad Associates 5,849,266 4,695,079 52,988
six contiguous parcels
of land
Interest Rate: 10.52% (e)
Maturity Date: 11/01/98
----------- ----------- -----------
Total Investment in Mortgage Loans
Receivable $ 6,783,812 $ 5,433,094 $ 60,780
=========== =========== ===========
</TABLE>
(a) The loan has an interest rate of 11% with principal and
interest payments due monthly over a thirty year amortization
period and a balloon payment on June 1, 1997. The loan is
collateralized by a Deed of Trust and Security Agreement
secured by an office condominium unit located in Fairfax,
Virginia. The loan is jointly and severally guaranteed by the
individual general partners of the borrower, Wateld
Associates. The loan allows for prepayment with no penalty at
any time during the loan period. During 1995, the Trust
received payments of principal and interest on the loan of
$32,285 and $8,068, respectively.
F-29
<PAGE> 68
BANYAN STRATEGIC REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. MORTGAGE LOANS RECEIVABLE (Continued)
(b) The loan has an interest rate of 11% with principal and
interest payments due monthly over a thirty year amortization
period and a balloon payment on June 1, 1998. The loan is
collateralized by a Deed of Trust and Security Agreement
secured by an office condominium unit located in Fairfax,
Virginia. The loan is jointly and severally guaranteed by the
individual general partners of the borrower, Wateld
Associates. The loan allows for prepayment with no penalty at
any time during the loan period. During 1995, the Trust
received payments of principal and interest on the loan of
$2,605 and $10,654, respectively.
(c) During the term of the loan, every April 1 interest shall be
adjusted to accrue on the unpaid principal balance at a rate
equal to the one year U.S. Treasury Securities rate plus 2%,
rounded to the nearest 0.125%. A decrease or increase in such
rate is limited to 2% over the prior annual interest rate.
The current interest rate for the loan as of December 31, 1995
is 8.45%. Principal and interest payments are due monthly
over a thirty year amortization period. The loan is
collateralized by a Deed of Trust and Security Agreement
secured by an office condominium development located in
Fairfax County, Virginia. The loan is jointly and severally
guaranteed by two of the general partners of the borrower,
Wateld Associates. The loan allows for prepayment with no
penalty at any time during the loan period. During 1995, the
Trust received payments of principal and interest on the loan
of $8,927 and $33,242, respectively.
(d) The loan requires payment of interest only at an initial rate
of 10% through September 15, 1995, and increases to 11%, 11.5%
and 12% in years three, four and five, respectively. The
borrower had the right to prepay the loan without penalty in
increments of $10,000 on a quarterly basis. The loan is
jointly and severally guaranteed by the partners of RAW, Ltd.
The loan is collateralized by a Deed of Trust secured by a
vacant land parcel located in Falls Church, Virginia. During
1995, the Trust received payments of interest of $37,915.
(e) From November 1, 1993 through October 31, 1995 the interest
rate on the loan was prime plus 1.25%, or 9.5%. Effective
November 1, 1995 through October 31, 1998 the interest rate
was adjusted to the greater of 9.5% or 4.9% over the
three-year U.S. Treasury Securities rate at November 1, 1995.
The interest rate for the loan as of December 31, 1995 is
10.52%. The loan currently requires payment of interest only;
however, the loan will begin amortizing over a 25 year period
beginning November 1, 1996. The loan is collateralized by a
Deed of Trust secured by six contiguous parcels of land
located in Fairfax County, Virginia. The loan is jointly and
severally guaranteed by the individual general partners of the
borrower, Karfad Associates. Prepayment of principal is
permitted without premium or penalty provided that principal
payments are paid quarterly in minimum increments of $100,000.
During 1995, the Trust received payments of interest on the
loan of $568,370.
F-30
<PAGE> 69
BANYAN STRATEGIC REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. MORTGAGE LOANS RECEIVABLE (Continued)
(e)
(continued) Karfad Associates failed to make the required interest payment
due on January 1, 1996. The Trust has provided proper notice
to the Borrower and all grace and cure periods regarding the
loan have subsequently lapsed. In an effort to assert its
rights and protect its interest, the Trust declared the loan
in default on January 30, 1996. The repayment of the
principal balance has been accelerated and the Trust has
initiated foreclosure proceedings. Management expects to
fully recover all monetary obligations due under the loan from
either repayment by the Borrower and/or its guarantors or a
sale of the underlying collateral.
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Reconciliation of Net
Investment in Mortgage
Loans Receivable:
Balance at Beginning
of Year $ 5,136,229 $ 4,891,462 $ ---
Additions During Year:
New Mortgage Loans --- --- 6,871,278
Deferred Loan Costs --- 4,771 151,934
Discount on Mortgage
Loans Receivable --- --- (2,182,550)
Amortization of Dis-
count on Mortgage
Loans Receivable 372,129 307,920 65,914
----------- ----------- -----------
372,129 312,691 4,906,576
----------- ----------- -----------
Deductions During Year:
Principal Collections
on Mortgage Loans (43,817) (36,742) (6,907)
Amortization of De-
ferred Loan Costs (31,447) (31,182) (8,207)
----------- ----------- -----------
(75,264) (67,924) (15,114)
----------- ----------- -----------
Balance at End of Year $ 5,433,094 $ 5,136,229 $ 4,891,462
=========== =========== ===========
</TABLE>
F-31
<PAGE> 70
BANYAN STRATEGIC REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. MORTGAGE LOANS AND BOND PAYABLE
The properties of the Trust as described below are subject to mortgage
loans and bond payable at December 31, 1995 and 1994 as follows:
<TABLE>
<CAPTION>
Mortgage Mortgage
Loans and Loans and Cash Basis
Bond Payable Bond Payable Annual Final Estimated Interest
Property Pledged Balance Balance as Interest Maturity Periodic Balloon Paid in
as Collateral as of of Rate Date Payment Payment 1995
12/31/95 12/31/94
<S> <C> <C> <C> <C> <C> <C> <C>
FIRST MORTGAGES:
Milwaukee Indust- $ 3,799,835 $ 3,900,695 8% 10/01/98 $ 33,458 $3,511,074 $334,088
rial Portfolio,
Metropolitan
Milwaukee,
Wisconsin
Elmhurst Metro 3,954,132 4,000,000 8.83% 01/01/00 $ 33,103 3,730,074 350,628
Court, Elmhurst,
Illinois
Colonial Courts 5,500,000 5,500,000 (a) 12/01/24 (a) 5,500,000 227,299
of Westland Apts.,
Columbus, Ohio (a)
Willowbrook Industrial 2,629,974 --- 8.5% 07/01/02 $22,050 2,281,280 121,658
Court,
Willowbrook, Illinois
Northlake Tower Shopping 10,350,000 --- 8.5% 08/01/05 $73,313 10,350,000 376,338
Center, Atlanta, Georgia
Bluegrass Corporate 2,688,240 --- 8% 04/25/01 $22,641 2,320,254 57,711
Center, Jefferson County,
Kentucky
FIRST MORTGAGE LINE OF
CREDIT:
Collateralized by the 20,100,000 --- (b) 12/14/97 (b) 20,100,000 ---
Trust's various property
interests (b)
----------- -----------
$49,022,181 $13,400,695
----------- -----------
</TABLE>
F-32
<PAGE> 71
BANYAN STRATEGIC REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. MORTGAGE LOANS AND BOND PAYABLE (CONTINUED)
The principal balance of the Trust's mortgage loans and bond are scheduled
to be repaid as follows:
<TABLE>
<S> <C>
1996 $ 252,688
1997 20,374,341
1998 3,768,320
1999 194,883
2000 3,865,146
Thereafter 20,566,803
-----------
Total $49,022,181
-----------
</TABLE>
(a) On December 14, 1994, the Trust's subsidiary which acquired
title to the Colonial Courts property, completed a $5,500,000
tax-exempt bond financing in connection with the Colonial
Courts property. The bond is collateralized by a $5,624,315
letter of credit as a draw against the Trust's line of credit
(see Note 3(b) below, for further details). The Trust is
required to pay a fee of 1% annually of the face amount of the
letter of credit. Pursuant to the bond financing, the Trust
was required to deposit approximately $388,000 into a
restricted cash account held by the bond holder for future
renovations to the property. Subsequent to December 31, 1995,
all property renovations were completed and the $388,000 was
released to the Trust. The bond has a thirty year term and
requires monthly payments of interest only based upon the
weekly low floater tax-exempt bond rate. The weekly low
floater bond rate as of December 31, 1995 equaled 5.3%.
(b) On December 13, 1994, the Trust executed a Mortgage Loan
Commitment (the "Original Line") with a Bank in the amount of
$15,000,000. The Original Line was a revolving line of credit
with an initial term of two years. The Original Line also
provided for a one year extension subsequent to the initial
two year term with a balloon payment of principal required
upon maturity, December 14, 1997. During the initial term and
any extension, the Trust was required to pay interest only at
the rate of LIBOR plus 2.25% or Prime plus .25% at the
election of the Trust. The Trust paid the Bank a one-time
non-refundable commitment fee of $75,000 or one half of one
percent of the $15,000,000 Original Line upon its closing. A
letter of credit fee of one percent of the amount of the then
outstanding Letter of Credit balance was required to be paid
quarterly. Mortgages on certain of the Trust's properties and
its mortgage loans receivable served as collateral for the
Original Line. No amounts were outstanding under the Original
Line as of December 31, 1994.
On December 15, 1995, the Trust modified its Original Line
(the "Modified Line") with the Bank. Under the Modified Line
the Trust may borrow up to $30,000,000. In addition, the
availability of the line was extended from December 14, 1996
to December 14, 1997. The Trust provided the Bank additional
collateral consisting of mortgages on certain properties as
well as pledges of the Trust's subsidiaries stock or
partnership interest in the entities owning said properties.
The Trust also paid a loan fee upon execution of the Modified
Line in the amount of $75,000, or .5% of the increase in the
Original Line. All other terms, as provided for under the
Original Line, remain unchanged. In addition, the Trust is
required to pay the Bank an unused facility fee of.5% per
annum multiplied by the average portion
F-33
<PAGE> 72
BANYAN STRATEGIC REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. MORTGAGE LOANS AND BOND PAYABLE (CONTINUED)
(b) (continued)
of the Modified Line that is undrawn from time-to-time.
As of December 31, 1995, the Trust had utilized approximately
$25,725,000 of the $30,000,000 available under the Modified
Line. Of the $25,725,000, approximately $5,625,000 has been
utilized in conjunction with the Bank's issuance of a letter of
credit which serves as collateral for the Trust's tax-exempt
bond financing in the amount of $5,500,000 (see above). The
remaining $20,100,000 has been utilized by the Trust for its
acquisitions of properties. Draws under the Modified Line
require monthly payment of interest only until maturity and
currently bear interest at a blend of thirty, sixty and one
hundred and twenty-day LIBOR rates plus 2.25% or approximately
7.5% to 8.5% per annum.
4. GROUND LEASE
On July 28, 1995, BSRT/M&J Northlake Limited Partnership, a joint
venture between a subsidiary of the Trust and M&J Wilkow Retail Ltd., acquired
a leasehold interest in a shopping center in Atlanta, Georgia pursuant to a
ground lease with a remaining term of sixty-two years. The ground lease
requires annual lease payments of $600,000 or $50,000 per month through October
4, 2007 plus 7% of total annual gross rental income commencing when gross
rental income exceeds $2,000,000 from the operations of the Northlake Property.
The ground lease also requires that the Trust pay property operating expenses,
including real estate taxes.
F-34
<PAGE> 73
BANYAN STRATEGIC REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. INVESTMENT IN REAL ESTATE
As of December 31, 1995, the Trust's investment in real estate consisted of the
following:
<TABLE>
<CAPTION>
Initial Cost Capitalized
Property & Location/ Cost to Subsequent to
Date of Construction/ the Trust Acquisition
Date Acquired/ Buildings & Buildings &
Method of Depreciation Land Improvements Land Improvements
<S> <C> <C> <C> <C>
Milwaukee Industrial $ 532,800 $ 5,242,243 $ --- $ 485,502
Portfolio
Milwaukee, WI (c)
1973-1980
4/30/93
Colonial Courts of 697,034 2,947,186 --- 1,699,780
Westland Apartments,
Columbus, OH (c) 1963
6/17/93
Hallmark Village Apartments 448,000 5,625,670 --- 470,606
Clarksville, IN (c)
1972
9/28/93
Elmhurst Metro Court 1,615,360 3,604,358 --- 216,323
Elmhurst, IL (c)
1982
11/30/93
Colonial Penn Office 1,189,300 7,366,210 --- ---
Building, Tampa Bay, FL (c)
1984
3/22/94
Florida Power & Light Office 1,700,000 8,366,922 --- 78,277
Building, Sarasota, FL (c)
1991
3/22/94
Willowbrook Industrial Court 962,500 2,961,039 --- 89,403
Willowbrook, IL (c)(d)
1979
6/16/95
Northlake Tower Shopping --- 17,143,993 --- 3,021
Center, Atlanta, GA (c)(e)
1983-1984
7/28/95
Bluegrass Corporate Center 900,000 4,167,185 --- 1,809
Louisville, KY (c)(f)
1976-1980
9/26/95
Lexington Business Center 1,330,000 5,750,243 --- ---
Lexington, KY (c)(f)
1985
12/05/95
</TABLE>
F-35
<PAGE> 74
BANYAN STRATEGIC REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. INVESTMENT IN REAL ESTATE (CONTINUED)
<TABLE>
<CAPTION>
Initial Cost Capitalized
Property & Location/ Cost to Subsequent to
Date of Construction/ the Trust Acquisition
Date Acquired/ Buildings & Buildings &
Method of Depreciation Land Improvements Land Improvements
<S> <C> <C> <C> <C>
Newtown Distribution Center 355,000 3,231,360 --- ---
Lexington, KY (c)(f)
1981-1982
12/05/95
Woodcrest Office Park
Tallahassee, FL (c)(f)
1967-1989
12/19/95 3,080,000 7,936,824 --- 2,117
----------- ----------- ---------- -----------
$12,809,994 $74,343,233 $ --- $ 3,046,838
=========== =========== ========== ===========
</TABLE>
F-36
<PAGE> 75
BANYAN STRATEGIC REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. INVESTMENT IN REAL ESTATE (CONTINUED)
<TABLE>
<CAPTION>
Gross Amount at which Carried
Property & Location/ at December 31, 1995 (a)(b)
Date of Construction/
Date Acquired/ Buildings & Accumulated
Method of Depreciation Land Improvements Total Depreciation
<S> <C> <C> <C> <C>
Milwaukee Industrial $ 532,800 $ 5,727,745 $ 6,260,545 $ 441,300
Portfolio
Milwaukee, WI (c)
1973-1980
4/30/93
Colonial Courts of 697,034 4,646,966 5,344,000 308,793
Westland Apartments,
Columbus, OH (c) 1963
6/17/93
Hallmark Village Apartments 448,000 6,096,276 6,544,276 387,929
Clarksville, IN (c)
1972
9/28/93
Elmhurst Metro Court 1,615,360 3,820,681 5,436,041 211,152
Elmhurst, IL (c)
1982
11/30/93
Colonial Penn Office 1,189,300 7,366,210 8,555,510 327,317
Building, Tampa Bay, FL (c)
1984
3/22/94
Florida Power & Light Office 1,700,000 8,445,199 10,145,199 377,149
Building, Sarasota, FL (c)
1991
3/22/94
Willowbrook Industrial Court 962,500 3,050,442 4,012,942 46,173
Willowbrook, IL (c)(d)
1979
6/16/95
Northlake Tower Shopping --- 17,147,014 17,147,014 183,184
Center, Atlanta, GA (c)(e)
1983-1984
7/28/95
Bluegrass Corporate Center 900,000 4,168,994 5,068,994 27,765
Louisville, KY (c)(f)
1976-1980
9/26/95
Lexington Business Center 1,330,000 5,750,243 7,080,243 11,976
Lexington, KY (c)(f)
1985
12/05/95
</TABLE>
F-37
<PAGE> 76
BANYAN STRATEGIC REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. INVESTMENT IN REAL ESTATE (CONTINUED)
<TABLE>
<CAPTION>
Gross Amount at which Carried
Property & Location/ at December 31, 1995 (a)(b)
Date of Construction/
Date Acquired/ Buildings & Accumulated
Method of Depreciation Land Improvements Total Depreciation
<S> <C> <C> <C> <C>
Newtown Distribution Center 355,000 3,231,360 3,586,360 6,730
Lexington, KY (c)(f)
1981-1982
12/05/95
Woodcrest Office Park
Tallahassee, FL (c)(g)
1967-1989
12/19/95 3,080,000 7,938,941 11,018,941 7,627
----------- ----------- ------------ -----------
$12,809,994 $77,390,071 $ 90,200,065 $ 2,337,095
=========== =========== ============ ===========
</TABLE>
(a) The aggregate cost of the above real estate at December 31, 1995 for
Federal income tax purposes is $90,200,065. For further details
regarding encumbrances on the Trust's properties see Note 3, Mortgage
Loans and Bond Payable.
(b) Reconciliation of real estate owned:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Balance at Beginning
of Year $41,198,302 $21,954,819 $ ---
Acquisitions During
Year 47,818,144 18,650,295 20,738,967
Sale of Property
--- (54,179) ---
Additions During
Year 1,183,619 647,367 1,215,852
----------- ----------- -----------
Balance at End of
Year $90,200,065 $41,198,302 $21,954,819
=========== =========== ===========
</TABLE>
(c) Depreciation expense is computed using the straight line method.
Rates used in the determination of depreciation are based upon the
estimated useful life of the asset, primarily 40 years.
Reconciliation of Accumulated Depreciation:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Beginning of Year $1,036,890 $ 185,348 $ ---
Depreciation Expense 1,300,205 853,063 185,348
Sale of Property --- (1,521) ---
---------- ---------- ---------
Balance at End of Year $2,337,095 $1,036,890 $ 185,348
========== ========== =========
</TABLE>
F-38
<PAGE> 77
BANYAN STRATEGIC REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. INVESTMENT IN REAL ESTATE (CONTINUED)
(d) On June 16, 1995, Banyan/Morgan Milwaukee Limited Partnership
("BMMLP"), a joint venture between a subsidiary of the Trust, which
is a general partner, and Morgan Realty Partners ("Morgan"), acquired
the Willowbrook Industrial Court property (the "Willowbrook
Property"). The Trust and Morgan contributed additional capital of
approximately $1,030,000 and $370,000 to BMMLP for their 85% and 15%
ownership interest in BMMLP, respectively, which included $200,000 in
reserves held by BMMLP for property improvements and lease-up.
The terms of the BMMLP partnership agreement, as originally
established at the time of the acquisitions of the Milwaukee
Industrial and the Elmhurst Metro Court properties, were amended
effective July 1, 1995 as a result of the Willowbrook Property
acquisition by BMMLP. Pursuant to the amended BMMLP partnership
agreement, any excess cash flow from operations, after each of the
Trust and Morgan receives its 12% and 11% preferred return,
respectively, on contributed equity, will be allocated 85% to the
Trust and 15% to Morgan. The amendment was adopted as a result of
the increase in additional equity contributed by Morgan of $370,000.
The BMMLP ownership percentage changes which occurred upon
acquisition of the Willowbrook Property, as mentioned above, became
effective July 1, 1995 for financial reporting purposes.
(e) On July 28, 1995, BSRT/M&J Northlake Limited Partnership ("BMJNLP"),
a joint venture between a subsidiary of the Trust and M&J Wilkow
Retail Ltd. ("Wilkow"), acquired a leasehold interest in a shopping
center known as the Northlake Tower Shopping Center ("Northlake
Property"). The Trust is to contribute in total $6,000,000 to BMJNLP
for an approximate 80% interest, while Wilkow is to contribute in
total approximately $1,500,000 for the remaining 20% interest which
included approximately $550,000 in reserves held by BMJNLP for
property improvements, lease-up and other closing prorations.
Pursuant to the terms of the BMJNLP partnership agreement, cash flow
from operations will be distributed first to the Trust until it has
received a 12% cumulative return on its capital contribution and then
to Wilkow until it has received a 12% cumulative return on its
capital contribution. Any excess cash flow will be allocated
pro-rata to the Trust and Wilkow based on their respective capital
contributions. Proceeds from the sale or refinancing of the
Northlake Property, after the payment of any debt or expense
associated with the sale or refinancing, will be distributed first to
the Trust to the extent that the 12% annual preferred return has not
been received. Next, distributions will be made to the Trust and
Wilkow on a pro-rata basis in an amount equal to their respective
equity contributions. Thereafter, distributions will be made to
Wilkow to the extent that its 12% annual preferred return has not
been received. In the event there are any remaining proceeds to be
distributed and the average annual return to the Trust during the
period that BMJNLP owned the Northlake Property is equal to or
greater than 15%, Wilkow will receive 30% of any remaining proceeds.
(f) A subsidiary of the Trust acquired a 100% ownership interest in the
property.
(g) On December 19, 1995, BSRT Woodcrest Office Park Limited Partnership
("BWOPLP"), a joint venture between a subsidiary of the Trust, which
is a general partner, and Mr. Daniel Smith ("Smith") acquired the
Woodcrest Office Park (the "Woodcrest Property"). The Trust
contributed approximately $3,750,000 in equity to the partnership for
its 85% interest, while Mr. Smith contributed $250,000 for his 15%
interest.
Pursuant to the terms of the BWOPLP partnership agreement, cash flow
from operations will be first distributed to the Trust in an amount
equal to a cumulative preferred return of 12% compounded annually on
its total capital contribution and then Mr. Smith is entitled to a
cumulative compounded 12% preferred return on his capital
contribution. Any excess cash proceeds from the property's operation
after payment of the required preferred returns is then distributed
85% to the Trust and 15% to Mr. Smith in accordance with the
partners' ownership interests in the partnership. Upon the sale or
refinancing of the property, cash proceeds shall be distributed as
follows: a) repayment of debt and any expenses associated with the
sale or refinancing of the property; b) to the Trust for any unpaid
cumulative
F-39
<PAGE> 78
BANYAN STRATEGIC REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. INVESTMENT IN REAL ESTATE (CONTINUED)
(g) (Continued)
preferred return; c) repayment of the Trust's total equity
contribution to the partnership; d) to the Trust in the amount that
cumulative distributions of cash flow from operations of the property
are less than the equivalent of a 15% per annum return on its
contributed equity on a non-compounded basis; e) to Mr. Smith for any
unpaid cumulative preferred return; f) repayment of Mr. Smith's total
net equity contribution; and g) any remaining proceeds are to be
distributed pro-rata, 85% to the Trust and 15% to Mr. Smith.
6. PRO FORMA INFORMATION
The following unaudited pro forma summary presents the results of
operations of the Trust as if the 1995 and 1994 property acquisitions had
occurred at the beginning of 1994, after giving effect to certain adjustments,
including increased depreciation and interest expense. The unaudited pro forma
summary information does not necessarily reflect the results of operations as
they would have been if the Trust acquired the properties on January 1, 1994.
<TABLE>
<CAPTION>
Year Ended December 31,
(Unaudited)
1995 1994
<S> <C> <C>
Revenues $21,529,656 $20,331,275
Net Income $ 4,690,738 $ 1,942,800
Earnings Per Share
of Beneficial
Interest $ 0.45 $ 0.19
</TABLE>
7. INVESTMENT IN JOINT VENTURES
H STREET ASSEMBLAGE
On December 11, 1990, the Trust acquired title to the property known
as the Victor Building located in Washington D.C. pursuant to an agreement with
Banyan Strategic Land Fund II ("BSLFII"). This property consists of 17,000
square feet of undeveloped land in downtown Washington, D.C. plus an
approximately 55,900 square foot office building. The entire property is zoned
for office development. On June 5, 1992, the Trust and BSLFII formed a joint
venture (the "Venture") to pursue its development rights. The Trust has a 53%
interest in the Venture while BSLFII has the remaining 47%. The Trust's
carrying value for the Venture at December 31, 1995 was $8,895,678.
In April 1993, the Venture terminated a Modified Option effective May
1, 1993. In conjunction with the termination, the
F-40
<PAGE> 79
BANYAN STRATEGIC REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. INVESTMENT IN JOINT VENTURES (CONTINUED)
option parcel owner is required to pay monthly rent of $12,002 for the use of a
portion of the H Street Assemblage property. The Venture recorded a write off
of a $2,300,000 non-refundable deposit on the option parcels on the termination
date, of which the Trust's share, $1,219,000, is included in the Loss from
Operations of Real Estate Ventures in the Trust's 1993 Statement of Income and
Expenses.
The Venture has completed and obtained the zoning, entitlement and
historic preservation for the development of an approximately 330,000 square
foot commercial building on the H Street Assemblage. In December 1994, the
Venture determined that it would be in its best interest to initiate marketing
efforts to sell the property rather than assume the risk associated with the
development of the property, thereby necessitating a $5,500,000 valuation
allowance. The Trust's share, $2,915,000, is included in the loss from
operations of real estate ventures in the Trust's 1994 Statement of Income and
Expenses.
Summary financial information (unaudited) for the H Street Assemblage
as of December 31, 1995, 1994 and 1993 is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Investment
Property Net $16,039,027 $16,096,527 $21,654,026
Other Assets 255,923 23,014 19,251
Other Liabilities (276,780) (206,131) (223,896)
Venture Partners'
Equity (7,122,492) (7,093,058) (9,694,964)
----------- ----------- -----------
Trust's Equity $ 8,895,678 $ 8,820,352 $11,754,417
=========== =========== ===========
Total Revenues $ 469,337 $ 406,315 $ 373,496
=========== =========== ===========
Net Income (Loss) $ 71,252 $(6,009,317) $(3,413,522)
=========== =========== ===========
</TABLE>
PLAZA AT WESTMINSTER
On August 7, 1991, THSP Limited Partnership II ("THSP") (formerly
known as Banyan Mortgage Investors L.P. III, a former affiliate), received a
deed to the property known as the Plaza at Westminster pursuant to a
foreclosure sale. The Trust owned a 30.7% participation interest in the
Westminster property. On June 22, 1995, the Westminster property was sold to
an unaffiliated third party for $7,525,000 which resulted in a net gain of
approximately $1,333,000 after prorations for closing costs of approximately
$300,000. The Trust's share of the cash proceeds was approximately $2,218,000
which resulted in the Trust's share of the net gain of approximately $409,000.
The Trust's share of income generated from the operations of Westminster for
the years ended December 31, 1995, 1994 and 1993 was $24,950 (prior to sale),
$190,577 and $195,785, respectively.
F-41
<PAGE> 80
BANYAN STRATEGIC REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. INVESTMENT SECURITIES
At December 31, 1994, the Trust held an investment security issued by
the Federal Farm Credit Bank which was acquired on December 1, 1994 and matured
on April 3, 1995. The security had a face amount of $1,020,000, an interest
rate of 4.43% and an amortized cost and estimated fair value at December 31,
1994 of $1,017,236. The Trust did not hold any investment securities at
December 31, 1995.
9. DUE FROM AFFILIATES
The Trust has entered into a partnership agreement with BSLFII
regarding the ownership and operation of the H Street Assemblage (the "H Street
Venture"). See Note 7, Investment in Joint Ventures, for further details.
Under the terms of this agreement, the Trust has the right, but is not
obligated, to advance expenditures on behalf of BSLFII. During 1994 and 1993,
the Trust advanced to the H Street Venture all funds expended on the H Street
Assemblage, including BSLFII's portion. As provided in the H Street
partnership agreement, all advances made by the Trust for BSLFII's share of the
H Street Venture's expenses bore interest at a rate of prime plus 2% per annum
until repaid. As of December 31, 1994, the Trust's total receivable from
BSLFII was approximately $730,000. On March 24, 1995, BSLFII repaid the
December 31, 1994 outstanding balance. As of December 31, 1995, the H Street
advances, and all interest thereon, made by the Trust have been repaid in full
by BSLFII.
10. TRANSACTIONS WITH AFFILIATES
Administrative costs, primarily salaries and general and
administrative expenses, are reimbursed by the Trust to Banyan Management Corp.
("BMC"). These costs are allocated to the Trust and other entities to which
BMC provides administrative services based upon the actual number of hours
spent by BMC personnel on matters related to that particular entity. The
Trust's allocable share of costs for the years ended December 31, 1995, 1994
and 1993 aggregated $1,443,434, $1,185,409 and $783,922, respectively. As one
of its administrative services, BMC serves as the paying agent for general and
administrative costs of the Trust. As part of providing this payment service,
BMC maintains a bank account on behalf of the Trust. At December 31, 1995 and
1994, the Trust had a net payable due to BMC of $176,527 and $253,250,
respectively. The net payable is included in accounts payable and accrued
expenses in the Trust's Consolidated Balance Sheet.
The Trust's allocated costs related to Investment Activities and
Foreclosed Activities for the year ended December 31, 1995 were $1,119,311 and
$324,123, respectively. The Trust's allocated costs related to Investment
Activities and Foreclosed Activities for the year ended December 31, 1994 were
$890,809 and $294,600, respectively. The Trust's allocated costs related to
Investment Activities and Foreclosed Activities for the year ended December 31,
1993 were $597,904 and $186,018, respectively.
During 1994, the Trust sold an investment security to affiliates in
the aggregate amount of $1,372,373 which approximated market value at the date
of sale.
F-42
<PAGE> 81
BANYAN STRATEGIC REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
11. DIVIDENDS PAID AND PAYABLE
It has been the Trust's policy to distribute to its shareholders an
amount equal to at least 95% of taxable income. A portion of the dividends
paid during the subsequent year may be allocable to taxable income earned in
the prior year. Of the $4,190,252 of 1995 distribution paid, $1,221,232
represents ordinary income and $2,969,020 represents a return of capital. Of
the $4,188,441 of 1994 distribution paid, $1,773,545 represents ordinary income
and $2,414,896 represents a return of capital.
On January 5, 1996, the Trust declared a cash dividend for the fourth
quarter ended December 31, 1995, of $0.10 per share payable February 20, 1996
to shareholders of record on January 15, 1996.
12. MINIMUM RENTALS UNDER OPERATING LEASES
The Trust receives rental income from the rental of retail, commercial
and industrial space under operating leases. The following is minimum future
base rentals (excluding amounts representing executory costs such as taxes,
maintenance and insurance) on operating leases for the Trust's industrial,
commercial and retail projects held at December 31, 1995:
<TABLE>
<S> <C>
1996 $13,847,076
1997 11,871,677
1998 9,720,655
1999 8,102,929
2000 4,872,116
Thereafter 22,672,720
------------
$71,087,173
============
</TABLE>
Approximately 14% of total income from property operating activities
represents rental income earned relating to one tenant.
The Trust is subject to the usual business risks regarding the
collection of the above-mentioned rentals.
13. RECOVERY OF LOSSES ON LOANS, NOTES, INTEREST RECEIVABLE AND CLASS
ACTION SETTLEMENT COSTS AND EXPENSES
The Trust has received cash of $562,337, $347,557 and $57,072 during
1995, 1994 and 1993, respectively, related to its interest in a liquidating
trust established for the benefit of the unsecured creditors (including the
Trust) of VMS Realty Partners and its affiliates ("VMS"), former affiliates of
the Trust. The Trust has recorded $164,958, $57,226 and $57,072, respectively,
of these amounts as recovery of losses on mortgage loans, notes and interest
receivable in its consolidated statement of income and expenses. The remainder
of $687,710 was recorded as a liability to the Class Action Settlement
F-43
<PAGE> 82
BANYAN STRATEGIC REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13. RECOVERY OF LOSSES ON LOANS, NOTES, INTEREST RECEIVABLE AND CLASS
ACTION SETTLEMENT COSTS AND EXPENSES (CONTINUED)
Fund representing the Trust's share of amounts due under the terms of the
previously settled VMS securities litigation. Of this amount, $7,652 is
recorded in Other Liabilities at December 31, 1995, representing the total
estimated amount remaining due to the Class Action Settlement Fund per the
terms of the settlement.
On January 25, 1994, the Trust received net proceeds of $134,986 as a
recovery of payments previously made into an escrow established as part of the
1992 Class Action Settlement of the VMS securities litigation. The escrow was
established to provide trustees of the Trust with monies to fund the cost of
any litigation in which they might be named as defendants following settlement
of the class action. Subsequently, the trustees released the proceeds from the
escrow and the Trust purchased an insurance policy to cover the officers and
trustees.
14. AWARD SHARES AND WEIGHTED AVERAGE SHARES OUTSTANDING
Pursuant to the amended employment agreement of the Trust's president,
Leonard G. Levine, all incentive amounts earned subsequent to January 1, 1993
are to be paid 80% in cash in the year following the period for which the
incentive is earned and 20% in shares of beneficial interest ("Award Shares")
of the Trust. In 1996, Mr. Levine will be paid $66,985 representing 80% of his
1995 incentive in cash and 1,833 Award Shares valued at $4.20 per share or
$7,700 representing 20% in Award Shares of the Trust. Effective July 5, 1995,
the Trust issued 6,036 Award Shares to Mr. Levine, representing 20% of Mr.
Levine's 1994 incentive compensation earned on the performance of the
Investment Activities. The 6,036 Award Shares are valued at $4.125 per share
or $24,899. All incentive amounts are due Mr. Levine on or before March 15, of
the year following the period for which the incentive is earned. The Award
Shares are held by the Trust, pending satisfaction of the vesting requirements,
for the benefit of Mr. Levine until the earlier of (i) December 31, 1997; (ii)
the termination of Mr. Levine's employment by the Trust without just cause; or
(iii) the permanent disability or death of Mr. Levine. The Award Shares' price
of $4.20 and $4.125 was based upon the average closing price of the Trust's
shares for the five business days ended prior to December 31, 1995 and 1994,
respectively. The 1994 Award Shares are included in the total shares
outstanding of the Trust when calculating Net Income Per Share of Beneficial
Interest Based on Weighted Average Number of Shares Outstanding. All Award
Shares shall be forfeited by Mr. Levine if he fails to be employed by the Trust
on December 31, 1997, unless such failure is due to death or permanent
disability or termination without just cause. With respect to the Award
Shares, Mr. Levine is entitled to receive any cash distributions of the Trust
with respect to his share of beneficial interest between the date earned (March
15) and the date that any Award Shares are sold or forfeited by Mr. Levine.
F-44
<PAGE> 1
EXHIBIT 10(i)
SECOND AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
This AGREEMENT ("Agreement") is made and entered into as of December 31,
1992 by and between LEONARD G. LEVINE (the "Executive") and BANYAN STRATEGIC
LAND TRUST (the "Fund").
WHEREAS, the parties have previously entered into an Amended and Restated
Employment Agreement made as of January 1, 1990 by and between the parties
hereto and certain other parties (the "1990 Agreement");
WHEREAS, the parties desire to amend and restate the 1990 Agreement;
WHEREAS, the Fund desires to continue to employ the Executive and the
Executive desires to accept such continued employment on the terms set forth in
this Agreement;
NOW THEREFORE, in consideration of the promises, mutual covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Fund and the
Executive do hereby agree as follows:
1. Employment and Duties. On the terms and subject to the conditions set
forth in this Agreement, the Fund agrees to employ the Executive as the chief
executive officer of the Fund to perform such duties as are consistent with
such position as may be assigned, from time to time, by the Fund's Board of
Trustees ("Board of Trustees"). The Executive agrees to accept appointment as
President of the Fund.
2. Performance. The Executive accepts the employment described in Section
1 of this Agreement and agrees to faithfully and diligently perform the
services described therein.
3. Term. The term of employment under this Agreement shall remain in
effect until December 31, 1997, unless sooner terminated hereunder (the
"Employment Period"). The Employment Period thereafter shall be automatically
renewed for successive one (1) year periods unless this Agreement is terminated
by either the Executive or the Fund by giving written notice of termination on
or before the March 31 preceding the end of the then-current Employment Period.
Notwithstanding any renewal of the Employment Period under the preceding
sentence, the Additional Compensation described in Section 6 shall be
determined as of the date set forth in that section and shall not be part of
the Executive's Compensation after December 31, 1997 except by mutual agreement
of the parties.
4. Salary. For the services to be rendered by the Executive hereunder, the
Fund shall pay the Executive an annual base salary of $175,000 effective
October 1, 1992, subject to the CPI Adjustment described below ("Salary"). The
Salary shall be payable in the manner and frequency in which the payroll of
Banyan Management Corp. is customarily handled. The Salary shall be subject
to annual increases (but not decreases) due to cost of living ("CPI
Adjustment") as follows: the Salary shall be increased effective January 1 of
each year beginning 1994 by multiplying the Salary for the year just ended by a
fraction the numerator of which is the Index (as defined below) for November of
the year just ended and the denominator of which is the Index for November of
the immediately prior
1
<PAGE> 2
year. For purposes of this Agreement, the term "Index" shall mean the Chicago
All Items Consumer Price Index--All Urban Consumers (1982-84 base) as released
by the U.S. Bureau of Labor Statistics.
5. Incentive Compensation -- Foreclosed Assets. In addition to the
Executive's Salary, the Fund shall pay to the Executive additional compensation
("Incentive Compensation") calculated as follows:
(a) Liquification of Secured Claims. The Fund shall pay the Executive
an amount equal to one percent (1%) of all Secured Claims of the Fund which are
converted into cash on or after January 1, 1993 and prior to the end of the
Employment Period.
(b) Liquification of Unsecured Claims. The Fund shall pay the
Executive an amount equal to three percent (3%) of all Unsecured Claims of the
Fund which are converted into cash on or after January 1, 1993 and prior to the
end of the Employment Period.
(c) Payment of Incentive Compensation. Except as set forth in Section
13(d)(2), Incentive Compensation under Sections 5(a) and (b) shall be deemed
earned by the Executive upon the Fund's receipt of the cash payments
contemplated by those sections provided that such cash payments are received by
the Fund during the Employment Period. The Incentive Compensation shall be
paid to the Executive in cash as soon as practical after the end of each
calendar year without regard to whether the Executive is employed by the Fund
on the date of payment.
(d) Special Rules Where Board of Trustees Elects Not to Market
Property. If any asset of the Fund has not been converted into cash due to a
decision of the Board of Trustees to retain such asset, such asset shall be
deemed to have been converted into cash, at the fair market value of such
asset, on the date on which the Board of Trustees determines not to market such
asset. This Section 5(d) shall not apply to any asset retained by the Fund as
a result of the failure to receive a price which the Board of Trustees deems
acceptable.
(e) Definition of Secured Claim and Unsecured Claim. The term "Secured
Claim" shall include each loan made by the Fund to a VMS-related entity which
is secured by a mortgage on real property or by a partnership interest. The
term "Unsecured Claim" shall mean any debt owed to the Fund by a VMS-related
entity which is not a Secured Claim under the preceding sentence. The term
"Unsecured Claim" shall include, but not be limited to, any deficiency notes
issued by a VMS-related entity which are unsecured, notwithstanding the fact
that the original debt to which such notes relate may have been secured. The
determination of whether a recovery is of a Secured Claim or Unsecured Claim
shall be determined by the nature of the claim at January 1, 1990. For
example, if an Unsecured Claim is exchanged for a piece of property, any
recovery upon the sale of that property will be treated as liquidation of an
Unsecured Claim.
(f) Joint Venture. If the Fund enters into a joint venture agreement
with respect to any Secured Claim or Unsecured Claim, the Fund shall be deemed
to have liquified such claim at the time of the receipt of such joint venture
interest. The right to receive payments with respect to the liquification of
such claim shall be vested in the Executive at the time of the formation of the
joint venture but shall be paid out to the Executive as cash is received by
Fund over the life of the joint venture.
2
<PAGE> 3
The parties recognize that the payments of Incentive Compensation to the
Executive as determined in accordance with this Section 5(f) may survive the
termination of the Employment Period or this Agreement. Consequently, the Fund
shall give the Executive reasonable security for his continuing interest in the
receipt of payments from the joint venture at a time and in a form as the
Executive and the Fund may agree.
6. Incentive Compensation -- Reinvested Assets. In addition to the
Executive's salary, the Fund shall pay to the Executive, during the employment
period, additional compensation ("Additional Compensation") calculated as
follows:
(a) Definitions. As used in this Section 6, certain terms shall be
defined as follows:
"Adjusted Cash Flow" shall mean Net Income adjusted as follows:
(1) Increased by the following:
(A) The amount of any depreciation or amortization
taken in computing Net Income;
(B) The amount of any Gains not otherwise reflected
in Net Income; and
(C) The amount of any Additional Compensation paid to
the Executive (or substantially similar payments to
other employees of the Fund or the manager of the
Fund) during the period for which the calculation
is being made to the extent that such payments are
reflected in Net Income.
(2) Reduced by the amount of any Losses not otherwise
reflected in Net Income.
"Gains" shall mean all realized Gains generated by Reinvestment
Activities; provided that, solely in determining the amount of
Gain with respect to each particular investment for this Section
6, the book value of such investment shall be reduced by the
amount of all previous unrealized Losses since January 1, 1993
with respect to such investment and shall be increased by the
amount of any depreciation or amortization taken with respect to
such investment since January 1, 1993.
"Index Rate" in effect for each year shall mean the field on 5 year
Treasury Notes, plus 100 basis points as of January 1 of such year.
"Losses" shall mean the unrealized and realized losses generated
in connection with the Reinvestment Activities; provided that
solely in determining the amount of Loss with respect to each
particular investment for this
3
<PAGE> 4
Section 6, the book value of such investment shall be reduced
by the amount of all previous unrealized Losses since January 1,
1993 with respect to such investment and shall be increased by the
amount of any depreciation or amortization taken with respect to
such investment since January 1, 1993.
"Net Cash Available for Investment" shall mean $42,500,000, (1)
increased by the amount of (A) new capital raised by the Fund for
purposes of being available for investment; (B) cash retained for
investment upon the sale or liquidation of "Foreclosed Assets" (as
reflected on the Fund's financial statements); and (C) Net Income
of the Fund and (2) decreased by the amount of any dividends or
other distributions reflected as a decrease in Reinvestment Assets
on the Fund's financial statements.
"Net Income" shall mean the Fund's Net Income (Loss) before
income taxes, if any, (as reflected on the Fund's financial
statements) generated by the Reinvestment Activities during each
calendar year of the Fund.
"Reinvestment Activities" shall mean those activities reflected as
such on the Fund's financial statements.
"Rate of Return" shall mean the Adjusted Cash Flow divided by the
Net Cash Available for Investment, rounded to the nearest 100th
of 1%.
(b) Each calendar year beginning January 1, 1993, the Fund shall pay
the Executive $500 for each basis point by which the Rate of Return exceeds the
Index Rate for that year, up to 500 basis points ($250,000) and $250 for each
basis point by which the Rate of Return exceeds the sum of the Index Rate plus
500 basis points.
(c) Payment of the Additional Compensation computed under this Section
6 shall be made on March 15 of the year following the period for which the
award is made. Eighty (80%) percent of the award shall be paid in cash and
twenty (20%) percent shall be paid in shares of the Fund ("Award Shares"). The
Award Shares shall provide that they shall not be transferred prior to the date
which is seventy five (75) days after the Computation Date (as defined in
Section 6(d) (the "Vesting Date"). The Award Shares shall be subject to
forfeiture in accordance with the provisions of Section 6(d) and any
Certificate representing all or any portion of the Award Shares shall bear an
appropriate legend and shall be held by the Fund in trust for the Executive.
The number of Award Shares distributable to the Executive shall be based upon
the average closing price of the Fund's stock for the five business days ended
prior to December 31 of the calendar year for which the payments are made. The
Executive shall be entitled to receive and retain all dividends paid on the
Award Shares held by him. The Fund, at its sole cost, shall take all
reasonable steps necessary to cause the filing of a registration statement and
listing application, to be effective as soon after the Vesting Date as
practical, with respect to the Award Shares with the appropriate regulatory
bodies, except that if, (i) in the Board of Trustees' discretion, the time and
expense of registering and listing the Award Shares is unduly
4
<PAGE> 5
burdensome and costly, or (ii) in the opinion of the Fund's investment bankers,
it would interfere with a pending registration or offering of the Fund's
securities, the Board of Trustees may, in its discretion, purchase the Award
Shares from the Executive and pay the Executive the "cash value" of the Award
Shares on or before the Vesting Date. For purposes of this Section 6(c), "cash
value" shall mean the aggregate market value of the Award Shares based on the
average closing price of the Fund's shares for the five business days ended at
the Computation Date.
(d) As soon as practical after December 31, 1997, or, if earlier, upon
the termination of the Executive's employment ("Computation Date") the
computation provided in Section 6(b) will be computed on a cumulative basis
covering the period January 1, 1993 through the Computation Date; provided,
however, that for such computation the Adjusted Cash Flow shall also include
all unrealized profits and gains generated in connection with Reinvestment
Activities. In the event that the total cumulative Additional Compensation as
recomputed as determined at the Computation Date exceeds the aggregate
Additional Compensation paid to the Executive, the Fund shall pay the
Executive, no later than the Vesting Date an additional cash payment equal to
the difference. In the event that the cumulative Additional Compensation as
recomputed at the Computation Date is less than the aggregate amount of the
Additional Compensation paid to the Executive, all or a portion of the Award
Shares shall be forfeited and returned to the Fund. In determining the amount
of the Award Shares to be forfeited, each Award Share shall be valued at the
average price at which the shares were valued when issued to the Executive
under Section 6(c). For example, if the Executive holds 100,000 Award Shares
with an average value determined under Section 6(c) at the time of issue of
$3.00 and the cumulative Additional Compensation at the Computation Date is
determined to be $45,000 less than the amount actually paid to the Executive,
the Executive shall return 15,000 Award Shares to the Fund without regard to
the actual current value of those shares. Certificates representing the
balance of any Award Shares shall be delivered to the Executive promptly after
the Vesting Date.
(e) In determining the amount of unrealized profits or gains for
purposes of Section 6(d), the management of the Fund will provide the Board of
Trustees with management's estimate of the value of each investment. If the
Board of Trustees and the Executive fail to agree on the value of one or more
investments, the Fund shall, at its sole cost, cause the investment to be
appraised by an appraiser which is mutually acceptable to both. The valuation
of the investment by the appraiser shall be binding on both the Executive and
the Fund.
7. Bonus. During the Employment Period, the Board of Trustees may, in its
sole discretion, pay a bonus to the Executive in consideration of the
Executive's performance of his duties and the Fund's profitability. The Fund
shall not be obligated to pay any bonus unless and until such bonus is
declared by its Board of Trustees.
8. Life Insurance. During the Employment Period, the Fund shall apply for
and diligently attempt to procure in the Executive's name and for the
Executive's benefit, life insurance in the face amount of not less than twice
the Executive's Salary and the Executive shall submit to any medical or other
examination and execute and deliver any application or other instrument in
writing reasonably necessary to effectuate such insurance. If such insurance
is only available on a rated basis, the Fund shall
5
<PAGE> 6
acquire the amount of insurance available upon payment of the premium which
would have been payable if such insurance had been available on an unrated
basis.
9. Disability Benefit. If at any time during the Employment Period the
Executive is permanently unable to perform fully his duties hereunder by reason
of illness, accident, or other disability (as confirmed by competent medical
evidence), the Executive shall be entitled to receive periodic payments equal
to one hundred percent (100%) of his Salary for six (6) months following his
disability. Thereafter, the Executive shall be entitled to receive periodic
payments equal to sixty percent (60%) of his Salary as long as he is disabled
but in no event beyond the Executive's sixty-fifth (65th) birthday.
Notwithstanding the foregoing provision, the amounts payable to the Executive
pursuant to this Section 9 shall be reduced by any amounts received by the
Executive with respect to any such disability pursuant to any insurance policy,
plan, or other employee benefit provided to the Executive by the Fund and any
Social Security or similar government disability programs. The Fund's
obligation to make the payments beyond the first six (6) months of the
Executive's disability is subject to the ability of the Fund to obtain
disability insurance covering such payments after diligent attempts to procure
such insurance.
10. Other Benefits. Except as otherwise specifically provided herein,
during the Employment Period, the Executive shall be eligible for all non-wage
benefits the Fund or Banyan Management Corp. provide generally for their other
salaried employees.
11. Business Expenses. The Fund shall reimburse the Executive for the
reasonable, ordinary, and necessary business expenses incurred by him in
connection with the performance of his duties hereunder, including, but not
limited to, ordinary and necessary travel expenses and entertainment expenses
and car phone expenses. The Executive shall provide the Fund with an
accounting of his expenses, which accounting shall clearly reflect which
expenses are reimbursable by the Fund. The Executive shall provide the Fund
with such other supporting documentation and other substantiation of
reimbursable expenses as will conform to Internal Revenue Service or other
requirements. All such reimbursements shall be payable by the Fund to the
Executive within a reasonable time after receipt by the Fund of appropriate
documentation therefor.
12. Termination.
(a) Termination by the Executive. The Executive may terminate his
employment by the Fund at any time by written notice of termination given to
the Fund at least ninety (90) days in advance of the termination date stated in
such notice.
(b) Termination for Just Cause. The Fund may terminate the
Executive's employment, effective upon written notice of such termination to
the Executive, for Just Cause. For purposes of this Agreement, the term "Just
Cause" shall mean the occurrence of any one or more of the following events:
(1) the conviction of or the rendering of a civil judgment against the
Executive for theft or embezzlement of Fund property; (2) the conviction of the
Executive for a felony resulting in injury to the business, property or
reputation of the Fund or any affiliate of the Fund; or (3) a decision by an
Arbitrator (appointed pursuant to Section 15(a)) that the Executive, in the
performance of his duties under this Agreement,
6
<PAGE> 7
acted in a manner that constituted gross, willful, or wanton negligence. Any
acts or omissions or alleged acts or omissions of the Executive which relate to
the Executive's employment by VMS Realty Partners or any of its affiliates
prior to January 1, 1990 shall not be deemed "Just Cause" except to the extent
that the Executive admits, is adjudicated or is determined by an Arbitrator to
have committed fraud or a material violation of securities laws during his
employment by VMS Realty Partners or any of its affiliates prior to January 1,
1990. If the Board of Trustees of the Fund believes, in good faith, that facts
exist which, upon final resolution, will constitute Just Cause, the Fund may
suspend the Executive from his duties under this Agreement, with full Salary
and all other benefits until such final resolution.
(c) Termination without Just Cause. The Fund may terminate the
Executive's employment at any time by written notice of termination given to
the Executive at least ninety (90) days in advance of the termination date
stated in such notice.
(d) Constructive Termination. The Fund shall be deemed to have
terminated the Executive without Just Cause if any of the following events
occurs:
(1) The Fund materially reduces the authority of the Executive;
(2) Following a Change in Control (as defined in Section 13(c))
the Fund materially decreases the Net Cash Available for Investment (as defined
in Section 6(a);
(3) The Fund requires the Executive to relocate from the Chicago
area and the Executive refuses; or
(4) There is a material adverse change in working conditions for
the Executive.
(e) Termination Upon Death or Disability. The employment of the
Executive shall terminate upon the permanent disability (as defined in Section
9) or death of the Executive.
13. Severance Pay.
(a) In the event that the Executive's employment is terminated
voluntarily by the Executive or is terminated by the Fund for Just Cause, the
Executive shall be entitled to any Salary and Incentive Compensation earned
through the date of termination.
(b) In the event that the Executive's employment terminates due to the
permanent disability or death of the Executive, the Fund shall pay to the
Executive, or his personal representative, all Salary and Incentive
Compensation earned through the date of the Executive's permanent disability or
death. The Executive, his heirs, beneficiaries or personal representatives
shall also be entitled to any disability benefits or life insurance proceeds
provided under this Agreement.
(c) Upon any termination of the Executive's employment by the Fund
following a Change of Control (as defined below) except as set forth
7
<PAGE> 8
in Section 13(a) or (b), the Fund shall pay the Executive a severance pay
benefit determined as follows:
(1) The Fund shall continue to pay the Salary due to the Executive
until the end of the employment Period;
(2) The Fund shall immediately pay the Executive all amounts of
Incentive Compensation earned by the Executive through the date of termination
of the Executive's employment. For the purposes of this Section 13(c)(2), all
assets of the Fund shall be deemed to have been sold at book value (as
reflected on the Fund's most recent financial statements, adjusted to reflect
any events subsequent to the date of the most recent financial statements, up
to the date of payment) and all proceeds thereof shall be deemed to have been
distributed to the shareholders of the Fund as of the date of the termination
of the Executive's employment;
provided, however, that the total payments under this Section 12(c) shall not
exceed 2.99 times the Executive's "base amount" determined in accordance with
Section 280G of the Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder.
For the purposes of this Section 13(c), the term "Change of Control" shall mean
(i) that the members of the Board of Trustees of the Fund as of the date this
Agreement is executed fail to constitute a majority of the members of the Board
of Trustees of the Fund; provided, however, that if the Executive has consented
to the appointment or election of an individual who becomes a new member of the
Board of Trustees, for the purposes of this paragraph, that new member shall be
treated as if he were a member of the Board of Trustees as of the date this
Agreement is executed; or (ii) that the shareholders of the Fund adopt a plan
of liquidation or take other action having the effect of a plan of liquidation,
without the recommendation or approval of the Board of Trustees.
(d) Upon any termination of the Executive's employment by the Fund
except as set forth in Sections 13(a), (b), or (c), the Fund shall pay the
Executive a severance pay benefit computed as follows:
(1) The Fund shall pay the Executive an amount equal to one (1)
year's Salary.
(2) The Fund shall pay the Executive all Incentive Compensation
earned through the date of termination. For the purposes of this Section
13(d)(2), Incentive Compensation shall be deemed to have been earned under
Sections 5(a) or (b) if, prior to the termination to the Executive's
employment, the Fund has received an expression of interest with respect to
such underlying asset or claim and the party (or an affiliate thereof)
expressing such interest ultimately acquires the underlying asset or claim;
provided that the portion of the Incentive Compensation due with respect to
such claim shall be payable only upon the closing of the transaction involving
such claim and shall be payable only if the closing of the transaction occurs
within one (1) year of the date of termination of the Executive's employment.
(3) The Fund shall pay the Executive an amount equal to full cost
of the Executive's COBRA benefits for one (1) year.
8
<PAGE> 9
(4) Except as specifically provided under Section 13(d)(2) with
respect to transactions not closed prior to the Executive's termination, all
amounts payable under this Section 13(d) shall be payable in full, in cash
within ninety (90) days after the date of the termination of the Executive's
employment.
(e) In addition to the amounts set forth in Section 13(a), (b), (c) or
(d), the Fund shall pay the Executive all amounts of Additional Compensation,
if any, determined as of the date of the termination of the Executive's
employment to be due under Section 6(d).
14. Other Activities of the Executive.
(a) The Executive may engage in other activities undertaken for profit
without the consent of the Board of Trustees, including activities involving
the management of real estate and real estate investments, provided that these
activities do not compete, directly or indirectly, with the Fund's goals and
purposes, including but not limited to specific Fund investments, and do not
substantially interfere with the performance of the Executive's duties under
this Agreement. The Board of the Fund acknowledges that the Executive has a
proprietary interest in Oak Realty Group, Inc. ("Oak") and will devote a
portion of time to Oak's affairs so long as no actions taken on the part of Oak
or by Oak itself would cause the Executive to contravene this Agreement.
(b) The Executive shall not: (i) engage in any activity which may be
adverse to the Fund's business; (ii) appropriate or usurp Fund business
opportunities; or (iii) engage or invest in businesses or assets which compete
directly or indirectly with the Fund.
(c) The obligations and limitations imposed by this Section shall be
in addition to those provided by law. The Executive shall, on an annual basis,
provide the Board of Trustees with a signed statement warranting compliance
with this Section in the form of the attached Exhibit A.
(d) The Executive shall not engage in any business or investment
activity with individuals or entities who were or are associated with VMS
Realty Partners or its affiliates without prior disclosure to the Board.
15. Arbitration.
(a) Except as provided in Section 6(e), any dispute under this
Agreement shall be submitted to arbitration conducted in accordance with the
Commercial Arbitration Rules ("Rules") of the American Arbitration Association
("AAA") except as amplified or otherwise varied hereby. The parties shall
submit the dispute to the Chicago regional office of the AAA and the situs of
the arbitration shall be Chicago. The arbitration shall be conducted by a
single arbitrator. The parties shall appoint the single arbitrator to
arbitrate the dispute within ten (10) business days of the submission of the
dispute. In the absence of agreement as to the identity of the single
arbitrator to arbitrate the dispute with such time, the AAA is authorized to
appoint an arbitrator in accordance with the Rules, except that the arbitrator
shall have as his principal place of business the Chicago metropolitan area.
9
<PAGE> 10
(b) Anything in the Rules to the contrary notwithstanding, in any
dispute seeking a monetary award, the arbitration award shall be made in
accordance with the following procedure: Each party shall, at the commencement
of the arbitration hearing, submit an initial statement of the amount each
party proposes be selected by the arbitrator as the arbitration award
("Settlement Amount"). During the course of the arbitration, each party may
vary its proposed Settlement Amount. At the end of the arbitration hearing,
each party shall submit to the arbitrator its final Settlement Amount ("Final
Settlement Amount"), and the arbitrator shall be required to select either one
or the other Final Settlement Amounts as the arbitration award without
discretion to select any other amount as the award. The arbitration award
shall be paid within five (5) business days after the award has been made,
together with interest from the date the dispute was submitted to arbitration
at the rate of ten percent (10%) per annum. Judgment upon the award may be
entered in any federal or state court having jurisdiction over the parties.
16. Indemnification. The Fund shall indemnify and hold harmless the
Executive from liabilities, which he may incur resulting from or arising out of
any act undertaken in connection with his duties under this Agreement in the
same manner and to the same extent as the Fund indemnifies any director or any
other officer.
17. General Provisions.
(a) Notice. Any notice required or permitted hereunder shall be made
in writing (i) either by actual delivery of the notice into the hands of the
party thereunder entitled, or (ii) by the mailing of the notice in the United
States mail, certified or registered mail, return receipt requested, all
postage prepaid and addressed to the party to whom the notice is to be given at
the party's respective address set forth below, or such other address as the
parties may from time to time designate by written notice as herein provided.
As addressed to the Fund:
c/o Banyan Management Corp.
Suite 2900
150 South Wacker Drive
Chicago, Illinois 60606
With a copy to:
Shefsky & Froelich Ltd.
444 North Michigan Avenue
Suite 2500
Chicago, Illinois 60611
Attention: Cezar M. Froelich
As addressed to the Executive:
Mr. Leonard G. Levine
3142 East Kay Jay Drive
Northbrook, Illinois 60062
10
<PAGE> 11
The notice shall be deemed to be received in case (i) on the date of its actual
receipt by the party entitled thereto and in case (ii) on the date of its
mailing.
(b) Amendment and Waiver. No amendment or modification of this
Agreement shall be valid or binding upon the Fund unless made in writing and
signed by an officer of the Fund duly authorized by the Board of Trustees or
upon the Executive unless made in writing and signed by him. The waiver by the
Fund of the breach of any provision of this Agreement by the Executive shall
not operate or be construed as a waiver of any subsequent breach by him.
(c) Entire Agreement. This Agreement constitutes the entire Agreement
between the parties with respect to the Executive's duties and compensation as
an executive of the Fund on or after January 1, 1993, and there are no
representations, warranties, agreements or commitments between the parties
hereto with respect to his employment except as set forth herein. The 1990
Agreement shall continue to govern issues with respect to the Executive's
employment prior to January 1, 1993 except that all amounts of Incentive
Compensation owed to the Executive by the Fund and deferred under Section 5(f)
of the 1990 Agreement shall be payable on or before December 31, 1992,
notwithstanding anything in the 1990 Agreement to the contrary, and the
Executive's salary shall be as set forth in Section 4 as of October 1, 1992.
(d) Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws (and not the law of conflicts) of the
State of Illinois.
(e) Severability. If any provision of this Agreement shall, for any
reason, be held unenforceable, such provision shall be severed from this
Agreement unless, as a result of such severance, the Agreement fails to reflect
the basic intent of the parties. If the Agreement continues to reflect the
basic intent of the parties, then the invalidity of such specific provision
shall not affect the enforceability of any other provision herein, and the
remaining provisions shall remain in full force and effect.
(f) Assignment. The Executive may not under any circumstances
delegate any of his rights and obligations hereunder without first obtaining
the prior written consent of the Fund. This Agreement and all of the Fund's
rights and obligations hereunder may be assigned or transferred by it, in whole
or in part, to be binding upon and inure to the benefit of any subsidiary or
successor of the Fund.
(g) Costs of Enforcement. In the event of any suit or proceeding
seeking to enforce the terms, covenants, or conditions of this Agreement, the
prevailing party shall, in addition to all other remedies and relief that may
be available under this Agreement or applicable law, recover his or its
reasonable attorneys' fees and costs as shall be determined and awarded by the
court.
11
<PAGE> 12
IN WITNESS WHEREOF, this Agreement is entered into on the day and year first
above written.
BANYAN STRATEGIC LAND TRUST
By: /s/ William M. Karnes
------------------------------
William M. Karnes,
Senior Vice President -
Finance and Administration
Chief Financial and Accounting
Officer
EXECUTIVE:
/s/ Leonard G. Levine
------------------------------
Leonard G. Levine
12
<PAGE> 13
Exhibit A
DATE
Board of Trustees
Banyan Strategic Land Trust
Re: Statement of Other Activities
Gentlemen:
Pursuant to the provisions of Section 14(c) of my Second Amended and
Restated Employment Agreement, please be advised that I have not engaged in any
activities during the preceding year in contravention of the requirements set
forth in Section 14.
/s/ Leonard G. Levine
------------------------------
Leonard G. Levine
13
<PAGE> 14
Exhibit A
DATE
Board of Trustees
Banyan Short Term Income Trust
Re: Statement of Other Activities
Gentlemen:
Pursuant to the provisions of Section 13(c) of my Second Amended and
Restated Employment Agreement, please be advised that I have not engaged in any
activities during the preceding year in contravention of the requirements set
forth in Section 13.
/s/ Leonard G. Levine
------------------------------
Leonard G. Levine
14
<PAGE> 1
EXHIBIT 10(ii)
AMENDMENT TO LOAN AGREEMENT
This Amendment to Loan Agreement dated as of December 1, 1994 by and between
Banyan Strategic Realty Trust, a Massachusetts business trust ("Borrower") and
American National Bank and Trust Company of Chicago, a national banking
association ("Lender").
WHEREAS, Borrower and Lender entered into a Loan Agreement dated as of
December 1, 1994 (the "Loan Agreement"); and
WHEREAS, Borrower and Lender desire to amend the Loan Agreement as set forth
herein.
NOW, THEREFORE, for and in consideration of the mutual covenants herein
contained, Borrower and Lender do hereby agree as follows:
1. The Designated Properties, Designated Debt Properties and Property
Owners described on Exhibit A attached hereto and made a part hereof
which were included within the definitions thereof in the Loan Agreement
are hereby withdrawn and deleted from the Loan Agreement. If any of
them should subsequently be added to and included within the Loan
Agreement, they will be so added and included upon the terms originally
contemplated by the Loan Agreement being amended hereby. Except in
respect of the Karfad loan prior mortgages (O'Shaughnessy) shown in the
Permitted Exceptions to the Loan Agreement (prior to this Amendment) the
parties confirm that all Mortgages given to Lender on Designated Debt
Properties and pledged to Lender as to Designated Debt Properties will
be first and sole mortgage liens thereon.
2. In all other respects the Loan Agreement shall remain in full force and
effect.
IN WITNESS WHEREOF the parties have executed this Amendment To Loan
Agreement as of the day and year first above set forth.
LENDER BORROWER
- ------ --------
AMERICAN NATIONAL BANK AND BANYAN STRATEGIC REALTY TRUST,
TRUST COMPANY OF CHICAGO, a a Massachusetts business trust
national banking association
By: /s/ Peter C. Malecek By: /s/ Daniel J. Gumbiner
------------------------- -------------------------
Peter C. Malecek, Its: Authorized Signatory
Vice President
<PAGE> 2
EXHIBIT "A"
TO AMENDMENT TO LOAN AGREEMENT
DATED AS OF DECEMBER 1, 1994
The following are hereby withdrawn and deleted from the Loan Agreement:
Designated Property Designated Debt
Instruments Property Owner
1. Documents and BSLT Karfad Corp.
instruments
respecting the
Karfad (Virginia)
loan portfolio
2. Fountain Square BSRT Fountain Square
Office Building Corp.
(Colonial Penn
Building)
(Tampa, Florida)
3. Commerce BSRT Commerce Center
Center Corp.
Office
Building
(Sarasota,
Florida)
2
<PAGE> 3
SECOND AMENDMENT TO LOAN AGREEMENT
This Second Amendment To Loan Agreement ("Second Amendment") is dated as of
December 21, 1994 by and between Banyan Strategic Realty Trust, a Massachusetts
business trust ("Borrower") and American National Bank and Trust Company of
Chicago, a national banking association ("Lender").
WHEREAS, Borrower and Lender entered into a Loan Agreement dated as of
December 1, 1994 (the "Loan Agreement"); and
WHEREAS, Borrower and Lender entered into an Amendment to Loan Agreement
dated as of December 1, 1994 (the "First Amendment"), a copy of which is
attached hereto as Exhibit "A"; and
WHEREAS, Borrower and Lender desire to further amend the Loan Agreement as
set forth herein.
NOW, THEREFORE, for and in consideration of the mututal covenants herein
contained, Borrower and Lender do hereby agree as follows:
1. Exhibit "A" to the First Amendment is hereby deleted in its entirety,
and Exhibit "A-1" attached hereto and made a part hereof is substituted
therefor.
2. In all other respects the Loan Agreement, as amended by the First
Amendment, shall remain in full force and effect.
3. This document may be executed in two (2) or more counterparts, all of
which taken together shall constitute one (1) original.
IN WITNESS WHEREOF the parties have executed this Second Amendment as of the
day and year first above set forth.
LENDER BORROWER
- ------ --------
AMERICAN NATIONAL BANK AND BANYAN STRATEGIC REALTY TRUST,
TRUST COMPANY OF CHICAGO, a a Massachusetts business trust
national banking association
By: /s/ Peter C. Malecek By: Daniel J. Gumbiner
------------------------ -------------------------
Peter C. Malecek, Its: Authorized Signatory
Vice President
<PAGE> 4
EXHIBIT "A"
TO SECOND AMENDMENT TO LOAN AGREEMENT
DATED AS OF DECEMBER 21, 1994
FIRST AMENDMENT
<PAGE> 5
EXHIBIT "A-1"
TO SECOND AMENDMENT TO LOAN AGREEMENT
DATED AS OF DECEMBER 21, 1994
The following are hereby withdrawn and deleted from the Loan Agreement:
Designated Property Property Owner
- ------------------- --------------
1. Commerce BSRT Commerce Center
Center Office Corp.
Building
(Sarasota,
Florida)
<PAGE> 6
THIRD AMENDMENT TO LOAN AGREEMENT
This Third Amendment To Loan Agreement ("Third Amendment") is dated as of
December 18, 1995 by and between BANYAN STRATEGIC REALTY TRUST, a Massachusetts
business trust ("Borrower"), and AMERICAN NATIONAL BANK AND TRUST COMPANY OF
CHICAGO, a national banking association ("Lender").
WHEREAS, Borrower and Lender entered into a Loan Agreement dated as of
December 1, 1994 (the "Original Loan Agreement") relating to a loan made by
Lender to Borrower in the maximum principal amount outstanding at any time not
to exceed the lesser of (i) $15,000,000, and (ii) sixty percent (60%) of the
Collateral Value of all of the Designated Properties and Designated Debt
Instruments, as more fully set forth in the Original Loan Agreement; and
WHEREAS, Borrower and Lender entered into that certain Amendment to Loan
Agreement dated as of December 1, 1994 (the "First Amendment") pursuant to
which certain Designated Properties, Designated Debt Properties and Property
Owners were withdrawn from the Original Loan Agreement; and
WHEREAS, Borrower and Lender entered into that certain Second Amendment to
Loan Agreement dated as of December 21, 1994 (the "Second Amendment") pursuant
to which a Designated Property and Property Owner were withdrawn from the
Original Loan Agreement (the Original Loan Agreement, the First Amendment and
the Second Amendment are hereinafter collectively referred to as the "Loan
Agreement); and
WHEREAS, Borrower and Lender desire to increase the amount set forth in
subclause (i) of the first Recital paragraph herein from $15,000,000 to
$30,000,000 (the "Increase"), and further amend the Loan Agreement and enter
into the agreements as set forth herein.
NOW, THEREFORE, for and in consideration of the mutual covenants herein
contained, Borrower and Lender do hereby agree as follows:
1. Definitions. Capitalized terms used in this Third Amendment but not
otherwise defined herein shall have the meaning ascribed to them in the Loan
Agreement.
2. Other Documents. Concurrent herewith Borrower is amending or causing to be
amended the Note, the Mortgages, the Reimbursement Agreement and the
Additional Collateral Documents, for the purpose of reflecting the Increase
and the foregoing amendments and other agreements. All references in the
Loan Agreement to:
a. the "Note" are hereafter deemed to be references to the Note as amended
concurrent herewith, as the same may hereafter be renewed, restated,
replaced, extended or amended from time to time;
b. the "Mortgages" are hereafter deemed to be references to the Mortgages
as amended concurrent herewith, as the same hereafter may be amended
from time to time, and all Mortgages which are executed and delivered to
Lender concurrent herewith and which from time to time hereafter may be
executed and delivered to Lender as security for or relating to the
indebtedness and obligations
<PAGE> 7
as evidenced by any one or more of the Note, Loan Agreement and
Reimbursement Agreement, as same may be amended from time to time;
c. the "Reimbursement Agreement" are hereafter deemed to be references to
the Reimbursement Agreement as amended concurrent herewith, as the same
may hereafter be amended from time to time; and
d. the "Additional Collateral Documents" are hereafter deemed to be
references to the Additional Collateral Documents as amended concurrent
herewith, as the same may hereafter be amended from time to time, and
all other mortgages, documents and instruments (other than the Note,
Loan Agreement, Mortgages and Reimbursement Agreement) which are
executed and delivered to Lender concurrent herewith and which from time
to time hereafter may be executed and delivered to Lender as security
for or relating to the indebtedness and obligations evidenced by any one
or more of the Note, Loan Agreement and Reimbursement Agreement, as same
may be amended from time to time.
3. Additional Designated Properties; Additional Property Owners.
a. The properties listed on Exhibit "A" attached hereto and made a part
hereof shall be considered Designated Properties in addition to the
initial Designated Properties identified in the Loan Agreement. Without
limiting the generality of the foregoing, and except as specifically set
forth herein, all representations, warranties, covenants, agreements and
other provisions of the Loan Agreement relating to Designated Properties
shall be deemed to be made on and as of the date hereof with respect to
the Designated Properties identified on Exhibit "A" hereto, as if such
Designated Properties were initially included as Designated Properties
in the Loan Agreement.
b. The property owners listed on Exhibit "A" hereto shall be considered
Property Owners in addition to the initial Property Owners identified in
the Loan Agreement (and also, therefore, included within the term
Borrowing Entities). Without limiting the generality of the foregoing,
and except as specifically set forth herein, all representations,
warranties, covenants, agreements and other provisions of the Loan
Agreement relating to Property Owners shall be deemed to be made on and
as of the date hereof with respect to the Property Owners identified on
Exhibit "A" hereto, as if such Property Owners were initially included
as Property Owners in the Loan Agreement.
c. The Mortgages and Additional Collateral Documents executed pursuant
hereto shall be considered Mortgages and Additional Collateral
Documents, respectively, under the Loan Agreement, as amended hereby, in
addition to the initial Mortgages and Additional Collateral Documents.
Without limiting the generality, all representations, warranties,
covenants, agreements and other provisions in the Loan Agreement
relating to Mortgages and Additional Collateral Documents shall be
deemed to be made on and as of the date hereof with respect to the
Mortgages and Additional Collateral Documents being executed pursuant
hereto.
2
<PAGE> 8
d. After giving effect to the provisions of Section 3a and 3b hereof, the
Designated Properties, Designated Debt Properties and the Property
Owners shall be as set forth on Exhibit "B" attached hereto and made a
part hereof.
4. Loan Amount.
a. In Paragraph A of Article I of the Original Loan Agreement, the phrase
"Fifteen Million and no/100 Dollars ($15,000,000)" is hereby deleted and
the following substituted therefor: "Thirty Million and no/100 Dollars
($30,000,000)".
b. In Paragraphs A and D of Article I of the Original Loan Agreement, the
phrase "Sixty percent (60%)" is hereby changed, for the period between
the date hereof until March 31, 1996, to "Sixty-Five percent (65%)"; and
on and after March 31, 1996 said phrase shall automatically revert to
"Sixty percent (60%)."
c. All references in Paragraph F of Article I of the Loan Agreement to the
sum of "$15,000,000" shall be deemed to be references to the sum of
"$30,000,000."
5. Representations and Warranties. Without limitation of any representations
and warranties in the Loan Agreement, or of any of the provisions hereof,
Borrower hereby represents, warrants and covenants as follows:
a. All representations and warranties made by Borrower in the Loan
Agreement are true and correct on and as of the date hereof. All such
representations and warranties, together with all covenants and
agreements of Borrower set forth in the Loan Agreement, are hereby
remade on and as of the date hereof. Notwithstanding the foregoing, it
is understood and agreed by the parties that with respect to the
Designated Property known as Colonial Courts of Westland Apartments,
Columbus, Ohio, the following information is true and correct as of the
date hereof: BSRT Colonial Courts Limited Partnership, an Illinois
limited partnership, owns this Designated Property. BSRT Colonial Courts
Corp., an Illinois corporation, holds a one percent (1%) interest as the
general partner. The corporation is wholly owned by Borrower. The
limited partners and their respective percentages of interest are as
follows: (a) Borrower (89%); (b) PHC General Partnership, an Illinois
general partnership (10%).
b. Each of the Property Owners identified on Exhibit "A" hereto has good
and marketable fee simple title to the Designated Property it purports
to own, subject only to such exceptions as are shown on Exhibit "C"
attached hereto and made a part hereof. The partnership interest/shares
of stock of various entities as set forth on Exhibit "D" attached hereto
and made a part hereof are true and correct, and (except to the extent
shown on stock certificates of corporations owned by Borrower in respect
of customary and mandatory restrictions under federal securities laws)
all of such interests are owned by the entities so described thereon
free and clear of any liens, claims and encumbrances.
c. Borrower has delivered to Lender true and correct copies of the Tenant
Leases relating to the Designated Properties identified on Exhibit "A"
hereto. Attached hereto as Exhibit "E" and made a part hereof is a
true, correct and complete Rent Roll for each Designated Property
identified on Exhibit "A" hereto listing, with
3
<PAGE> 9
respect to each Tenant Lease, the security deposit, rent, expiration
date and, if applicable, any renewal options, purchase options, rights
of first offer or first refusal, termination rights and co-tenancy
provisions, other material conditions.
d. The ownership structures set forth in Exhibit "D" hereto are true and
correct.
e. The representations and warranties made in Paragraph A of Article II of
the Original Loan Agreement apply to this Third Amendment in the same
manner as applicable therein to the Original Loan Agreement, and also
apply to the documents being executed pursuant hereto in the same manner
as applicable therein to the Note, Reimbursement Agreement, Mortgages
and Additional Collateral Documents.
The representations and warranties contained in this Third Amendment are
true as of the date hereof and will be true and will be deemed remade at and
as of the date of any disbursement of the proceeds of the Loan, except for
the necessary effect of the transactions contemplated by the Loan Agreement
as amended by this Third Amendment.
6. Deliveries. In connection with the increase, Borrower will deliver or cause
to be delivered to Lender the following documents each in form, substance
and execution and showing solely matters satisfactory to Lender:
a. An amendment to the Note, executed by Borrower.
b. An amendment to any Guaranty previously delivered by each Property
Owner.
c. A Guaranty with respect to payments due under the Note, as amended
concurrent herewith, executed by each Property Owner identified on
Exhibit "A" hereto, and the general partner of each Property Owner
identified on Exhibit "A" hereto which is a partnership, with respect to
payments due under the Note, as amended concurrent herewith.
d. The Mortgages or amendments thereto, as applicable, executed by the
appropriate Property Owners, in favor of Lender, subject only to the
Permitted Title Exceptions applicable to each Designated Property.
e. UCC Financing Statements.
f. An Assignment of Leases and Rents, or an amendment thereto, as
applicable, with respect to each of the Designated Properties, executed
by the appropriate Property Owners, in favor of Lender.
g. An Assignment of Partnership Interest, or an amendment thereto, as
applicable, with respect to each Property Owner which is a partnership
executed by Borrower and any partner of such Property Owner affiliated
with Borrower, in
4
<PAGE> 10
favor of Lender, and an Assignment of Stock, or an amendment thereto, as
applicable, with respect to each Property Owner which is a corporation,
and consents of the other partners/shareholders to each of the
foregoing.
h. An Assignment of Licenses and Permits, or an amendment thereto, as
applicable, with respect to each of the Designated Properties executed
by the appropriate Property Owners, in favor of Lender and consents
thereto by all licensing and permitting authorities.
i. An Assignment of Management Contracts, or an amendment thereto, as
applicable, with respect to each of the Designated Properties, executed
by the appropriate Property Owners in favor of Lender and a consent
thereto by the managing agent.
j. An Environmental Indemnity or amendment thereto, as applicable, with
respect to each of the Designated Properties and Designated Debt
Properties executed by Borrower and the appropriate Property Owner.
k. An ADA Indemnity or amendment thereto, as applicable, with respect to
each of the Designated Properties and Designated Debt Properties
executed by Borrower and the appropriate Property Owner.
l. An amendment to the Reimbursement Agreement.
m. An assignment, in form and content reasonably acceptable to Lender, of
the obligations of New England Mutual Life Insurance Company with
respect to environmental remediation of the Designated Property
identified herein as Building B, Lexington Business Center, 1300 New
Circle Road, Lexington, Kentucky (the "Kentucky Building B Designated
Property"), together with the consent thereto of the obligor thereunder.
n. A copy of any and all Tenant Leases with the Occupancy Tenants at the
Designated Properties identified on Exhibit "A" hereto, certified to
Lender by Borrower to be true, correct and complete.
o. A copy of the Rent Roll for each Designated Property identified on
Exhibit "A" certified to Lender to be true, correct and complete.
p. The partnership agreement of each of the Property Owners identified on
Exhibit "A" hereto which is a partnership and all amendments thereto,
certified by Borrower as the sole general partner of such partnership,
to be true, correct and complete.
q. Certified resolutions of the Trustees of Borrower authorizing the
execution of this Third Amendment, the documents provided herein by
Borrower and the various Borrowing Entities and the rendering of full
performance therein.
5
<PAGE> 11
r. A certified copy of the Articles of Incorporation and By-Laws of each
Property Owner identified on Exhibit "A" hereto which is a corporation,
and certified corporate resolutions of the directors and shareholders
thereof of each Property Owner authorizing the execution of the
Mortgages, Additional Collateral Documents and/or amendments to any or
all of the foregoing.
s. Copies of all recorded documents affecting the Premises identified on
Exhibit "A" hereto.
t. Such estoppel certificates, subordination and attornment agreements and
other certificates, documents and assurances from and with respect to
the Occupancy Tenants at the Designated Properties identified on Exhibit
"A" hereto as Lender may require.
u. Such other papers, instructions and documents as the Title Insurer may
require for the issuance of title insurance commitments or interim
binders, for a mortgage title insurance policy or policies in such forms
and amounts, and with such endorsements as Lender reasonably may
require.
v. The $6,200,000 Note.
w. Such other documents and instruments as are required pursuant hereto
whether as conditions precedent to any of Lender's obligations, or
otherwise, or pursuant to any one or more of the Note, Mortgages, or any
of them, any one or more of the items of Additional Collateral Documents
or any amendment to any of the foregoing.
7. Available Cash. Until March 31, 1996, the reference in subparagraph 1 of
Article III, Paragraph Q of the Original Loan Agreement to "$3,000,000"
shall be "$2,000,000." Commencing as of April 1, 1996, the said amount shall
automatically revert to "$3,000,000".
8. Sarasota. Concurrent herewith there is being executed a note made by
Borrower and BSRT Commerce Center Corp., an Illinois corporation (the
"Corporation") payable to the order of Lender in the principal amount of
$6,200,000 (said $6,200,000 as same hereafter may be renewed, restated,
replaced, extended or amended from time to time is herein referred to as the
"$6,200,000 Note"), which is secured in part by a mortgage on the Florida
Power and Light Building, Sarasota Commerce Park, Sarasota, Florida (the
"Sarasota Designated Property"). At such time as Borrower may hereafter be
entitled to a release of the collateral respecting, solely, the Sarasota
Designated Property, as set forth in Paragraph E of Article I of the
Original Loan Agreement, and in Paragraph 10 hereof, Borrower shall have the
right to request instead that Lender (a) assign the $6,200,000 Note and the
collateral respecting, solely, the Sarasota Designated Property to a lender
designated by Borrower, or (b) cancel the $6,200,000 Note and so release the
collateral respecting, solely, the Sarasota Designated Property. Any such
assignment shall be without recourse and pursuant to documents reasonably
acceptable to Lender and shall be accompanied by such amendments to the
documents assigned and this Loan Agreement, the Note, Mortgages and
Additional Collateral Documents as Lender may require. Until the $6,200,000
Note is so assigned by Lender, or is so cancelled, and the collateral
respecting, solely, the Sarasota Designated Property, is assigned or
released, then (a) the Loan Amount, outstanding from time to time shall
include the amounts from time to time outstanding under the Note and the
$6,200,000 Note, together with the amounts from time to time drawn and
available to be drawn under the
6
<PAGE> 12
Letter of Credit, (b) the maximum amount of Lender's commitment under any
circumstances for the aggregate of the Note and the $6,200,000 Note shall
be $30,000,000 (subject to the limitations set forth in the Loan Agreement,
as amended hereby), (c) all references in the Note to $30,000,000 shall be
deemed to be references to $23,800,000, (d) in addition to the matters set
forth in the Original Loan Agreement as Events of Default, the occurrence of
a Default under and as defined in the $6,200,000 Note shall be an Event of
Default under the Loan Agreement, as amended hereby, (e) an Event of Default
under and as defined in the Loan Agreement, as amended hereby, shall be
deemed to be a default under the $6,200,000 Note, (f) the Mortgage and
Additional Collateral Documents securing, guarantee or granting indemnities
in respect of the $6,200,000 Note shall also be deemed to secure, guarantee
and grant indemnities in respect of the Note, (g) the Mortgage and
Additional Collateral Documents securing, guaranteeing or granting
indemnities in respect of the Note shall also be deemed to secure, guarantee
and grant indemnities in respect of the $6,200,000 Note, and (h) the Loan
availability of Borrower shall further be reduced by the amount outstanding
from time to time, on the subordinated third party mortgage as to the Ohio
Designated Property. After such assignment, release or cancellation and
release by Lender of the $6,200,000 Note, the said reference to $23,800,000
shall automatically be deemed to be a reference to $30,000,000, and this
Paragraph 8 shall be of no further force and effect.
9. Lexington, Kentucky. With respect to the Kentucky Building B Designated
Property, without limitation of any covenant, agreement or other provision
of the Loan Agreement or the Mortgage, Environmental Indemnity, any
Additional Collateral Document or other document executed and delivered to
Lender relating to the Kentucky Building B Designated Property, Borrower
hereby covenants and agrees that notwithstanding any assignment to Lender of
the obligations of New England Mutual Life Insurance Company to
environmentally remediate the Kentucky Building B Designated Property,
Borrower shall in all events and as requested by Lender:
a. To the fullest extent permitted by law, enforce (and cause the
enforcement by the Kentucky Building B Designated Property Owner of) the
obligations of New England Mutual Life Insurance Company to
environmentally remediate the Kentucky Building B Designated Property,
as set forth in the Purchase and Sale Agreement between New England
Mutual Life Insurance Company and Borrower in respect thereof; and
b. Perform (and cause the performance by the Kentucky Building B Designated
Property Owner of) all environmental requirements and obligations of
Borrower and/or the Kentucky Building B Designated Property Owner under
the Loan Agreement, as amended hereby, and under the Mortgages and
Additional Collateral Documents relating to the Kentucky Building B
Designated Property.
7
<PAGE> 13
10. Loan Fee. In addition to the Loan Fee set forth in the Original Loan
Agreement, Borrower shall pay to Lender a one time non-refundable fee of
Seventy Five Thousand and no/100 Dollars ($75,000), representing
one-half of one percent (0.5%) of the Increase (the "Loan Fee"). The
said additional Loan Fee shall be due and payable upon the execution of
this Third Amendment by Borrower. As of, on and after the date of this
Third Amendment, the unused facility fee set forth in Paragraph F of
Article I of the Loan Agreement shall be calculated by multiplying one
half of one percent (0.5%) per annum by the average portion of the
$30,000,000 Loan maximum that is undrawn from time to time, as more
fully set forth in said Paragraph F of Article I.
11. Releases. Without limiting the other requirements of Paragraph E of
Article I of the Original Loan Agreement, Borrower shall not have the
right to obtain from Lender a release or assignment of the collateral
respecting any one or more of the Designated Properties and/or
Designated Debt Instruments unless Borrower shall submit to Lender such
Financial Statements and other information and documents as Lender may
require and Lender shall determine based thereon that all
representations and warranties regarding the financial condition of
Borrower and/or of any one or more of the Property Owners who would
remain as such after giving effect to such release or assignment remain
true and correct ("Lender's Release Approval"). Any request by Borrower
for any such release or assignment shall include a statement expressly
referring to this Paragraph 10 of this Third Amendment and requesting
Lender to identify, within seven (7) days after receipt of such request,
those Financial Statements and other information and documents Lender
may so require. Within eight (8) days after Borrower submits to Lender
the Financial Statements and other documents and information so
identified, and any follow-up items reasonably requested by Lender
within said eight (8) day period, Lender shall notify Borrower whether
Lender is or is not rendering Lender's Release Approval. If Lender shall
fail to so respond to Borrower within such period, Lender shall be
deemed to have rendered its Lender's Release Approval. The rendering of
Lender's Release Approval pursuant to this Third Amendment shall not
limit the other requirements of Paragraph E of Article I of the Loan
Agreement, but is in addition thereto.
12. Counterparts. This document may be executed in two (2) or more
counterparts, all of which taken together shall constitute one (1)
original.
13. Headings. Section headings used herein are for reference and convenience
only and are not intended to be substantive and shall not be deemed to
limit or otherwise affect the interpretation of this Third Amendment.
14. Conflict; Inconsistency. Except as amended by this Third Amendment, the
Loan Agreement shall remain in full force and effect. In the event of
any conflict or inconsistency between the terms and provisions of the
Loan Agreement and the terms and provisions of this Third Amendment, the
terms and provisions of this Third Amendment shall control to the extent
necessary to resolve such conflict or inconsistency. Upon full execution
of this Third Amendment, any references herein or elsewhere to the Loan
Agreement shall be deemed to be references to the Loan Agreement as
amended by this Third Amendment.
8
<PAGE> 14
15. Successors; Assigns. The provisions hereof shall be binding upon and
inure to the benefit of the parties hereto and their respective legal
representatives, successors and assigns. This instrument has been made,
executed and delivered in the State of Illinois and shall be governed by
and construed in accordance with the laws of the State of Illinois.
IN WITNESS WHEREOF the parties have executed this Third Amendment as of
the day and year first above set forth.
LENDER BORROWER
- ------ --------
AMERICAN NATIONAL BANK AND BANYAN STRATEGIC REALTY TRUST,
TRUST COMPANY OF CHICAGO, a a Massachusetts business trust
national banking association
By: /s/ Peter C. Malecek, By: /s/ Robert G. Higgins
------------------------ ---------------------
Peter C. Malecek, Its: Vice President
Vice President
9
<PAGE> 15
EXHIBIT "A"
TO THIRD AMENDMENT TO LOAN AGREEMENT
DESIGNATED PROPERTY PROPERTY OWNER
Florida Power & Light Building, BSRT Commerce Center Corp.,
Sarasota Commerce Park, an Illinois corporation
Sarasota, Florida
Buildings A, C, D & F BSRT Lexington Corp.,
Lexington Business Center an Illinois corporation
Lexington, Kentucky
Building B BSRT Lexington B Corp.,
Lexington Business Center an Illinois corporation
1300 New Circle Road
Lexington, Kentucky
Newtown Distribution Center BSRT Newtown Corp.,
Lexington, Kentucky an Illinois corporation
<PAGE> 16
EXHIBIT "B"
TO THIRD AMENDMENT TO LOAN AGREEMENT
DESIGNATED PROPERTY PROPERTY OWNER
Colonial Courts of Westland Apartments, BSRT Colonial Courts Limited
Columbus, Ohio Partnership,
an Illinois limited partnership
Fountain Square Office Building BSRT Fountain Square Corporation,
(Colonial Penn Building) an Illinois corporation
(Tampa, Florida)
Florida Power & Light Building, Sarasota BSRT Commerce Center Corp., an
Commerce Park, Sarasota Florida Illinois corporation
Buildings A, C, D & F BSRT Lexington Corp.,
Lexington Business Center an Illinois corporation
Lexington, Kentucky
("Kentucky I Property")
Building B BSRT Lexington B Corp.,
Lexington Business Center an Illinois corporation
1300 New Circle Road
Lexington, Kentucky
("Kentucky II Property")
Newtown Distribution Center BSRT Newtown Corp.,
Lexington, Kentucky an Illinois corporation
("Newtown Property")
DESIGNATED DEBT PROPERTY PROPERTY OWNER
Hallmark Village Apartments, BSRT Hallmark Village Limited
Clarksville, Indiana Partnership, an Illinois limited
partnership
Karfad Associates Property, Skyline I, BSLT Karfad Corp., an Illinois
Skyline II and BuidAmerica, Virginia corporation
<PAGE> 17
EXHIBIT "C"
TO THIRD AMENDMENT TO LOAN AGREEMENT
1. SARASOTA PROPERTY
[ATTACHED BEHIND]
2. KENTUCKY I PROPERTY
[ATTACHED BEHIND]
3. KENTUCKY II PROPERTY
[ATTACHED BEHIND]
4. NEWTOWN PROPERTY
[ATTACHED BEHIND]
<PAGE> 18
EXHIBIT "D"
TO THIRD AMENDMENT TO LOAN AGREEMENT
1. Florida Power & Light Building (Sarasota, Florida). BSRT Commerce Center
Corp., an Illinois corporation, owns this Designated Property. The
corporation is wholly owned by Borrower.
2. Buildings A, C, D & F, Lexington Business Center (Lexington, Kentucky). BSRT
Lexington Corp., an Illinois corporation, owns this Designated Property. The
corporation is wholly owned by Borrower.
3. Building B, Lexington Business Center, 1300 New Circle Road (Lexington,
Kentucky). BSRT Lexington B Corp., an Illinois corporation, owns this
Designated Property. The corporation is wholly owned by Borrower.
4. Newtown Distribution Center (Lexington, Kentucky). BSRT Newtown Corp., an
Illinois corporation, owns this Designated Property. The corporation is
wholly owned by Borrower.
<PAGE> 19
EXHIBIT "E"
TO THIRD AMENDMENT TO LOAN AGREEMENT
RENT ROLLS
1. SARASOTA PROPERTY
2. KENTUCKY I PROPERTY
3. KENTUCKY II PROPERTY
4. NEWTOWN PROPERTY
<PAGE> 1
EXHIBIT 10(iii)
FIRST AMENDMENT TO NOTE
This First Amendment to Note dated as of December 18, 1995 ("First
Amendment") is made by and between Banyan Strategic Realty Trust, a
Massachusetts business trust ("BSRT") and American National Bank and Trust
Company of Chicago, a national banking association (hereinafter, together with
its legal representatives, successors and assigns, referred to as "ANB").
WHEREAS, BSRT has previously delivered to ANB that certain Note dated as of
December 1, 1994 in the maximum principal amount of Fifteen Million and no/100
Dollars ($15,000,000), subject to the limitations set forth therein (the
"Note"); and,
WHEREAS, BSRT desires to increase the maximum principal amount of the Note
from Fifteen Million and no/100 Dollars ($15,000,000) to Thirty Million and
no/100 Dollars ($30,000,000), subject to the limitations set forth therein;
NOW, THEREFORE, in consideration of the Note, the mutual covenants herein
contained and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
1. Other Documents. Capitalized terms used in this First Amendment but not
otherwise defined herein shall have the meaning ascribed to them in the Note.
Concurrently herewith, BSRT is amending or causing to be amended the Loan
Agreement, the Mortgages, the Reimbursement Agreement and the Additional
Collateral Documents. All references in the Note to:
a. the "Loan Agreement" are hereafter deemed to be references to the Loan
Agreement, as previously amended and as amended concurrent herewith, as
the same may hereafter be renewed, restated, replaced, extended or
amended from time to time;
b. the "Mortgages" are hereafter deemed to be references to the Mortgages
as amended concurrent herewith, as the same hereafter may be amended
from time to time, and all Mortgages which are executed and delivered to
Lender concurrent herewith and which from time to time hereafter may be
executed and delivered to Lender as security for or relating to the
indebtedness and obligations as evidenced by any one or more of the
Note, Loan Agreement and Reimbursement Agreement, as same may be amended
from time to time;
c. the "Reimbursement Agreement" are hereafter deemed to be references to
the Reimbursement Agreement as amended concurrent herewith, as the same
may hereafter be amended from time to time: and
d. the "Additional Collateral Documents" are hereafter deemed to be
references to the Additional Collateral Documents as amended concurrent
herewith, as the same may hereafter be amended from time to time, and
all other mortgages, documents and instruments (other than the Loan
Agreement, Mortgages and Reimbursement Agreement) which are executed and
delivered to Lender concurrent herewith and which from time to time
hereafter may be executed and delivered to Lender as security for or
relating to the indebtedness and obligations evidenced by any one or
more of the Note, Loan Agreement and Reimbursement Agreement, as same
may be amended from time to time.
<PAGE> 2
2. Loan Amount. All references in the Note to "Fifteen Million" or
"$15,000,000.00" are hereby amended to "Thirty Million" or "$30,000,000" as the
case may be.
3. Ratio. In paragraph 2A of the Note, the phrase "sixty percent" or "(60%)" is
hereby changed, for the period between the date hereof until March 31, 1996, to
"sixty-five percent" or "(65%)", as the case may be; and on and after March 31,
1996 said phrase shall automatically revert to "sixty percent" or "(60%)", as
the case may be.
4. Corrections.
(a) The word "Lender" appearing in Paragraph P of Section 1 of the Note is
hereby changed to the phrase "the Bank".
(b) The word "Borrower" appearing in Section 14 of the Note is hereby
changed to the word "Maker"; the word "Lender" appearing in Section 14 of the
Note is hereby changed to the phrase "the Bank".
5. Conflict; Inconsistency. Except as amended by this First Amendment, the
Note shall remain in full force and effect. In the event of any conflict or
inconsistency between the terms and provisions of the Note and the terms and
provisions of this First Amendment, the terms and provisions of this First
Amendment shall control to the extent necessary to resolve such conflict or
inconsistency.
6. Successors; Assigns. The provisions hereof shall be binding upon and inure
to the benefit of the parties hereto and their respective legal
representatives, successors and assigns. This instrument has been made,
executed and delivered in the State of Illinois and shall be governed by and
construed in accordance with the laws of the State of Illinois.
IN WITNESS WHEREOF, the parties have executed this First Amendment as of the
date and year first written above.
BSRT: ANB:
BANYAN STRATEGIC REALTY AMERICAN NATIONAL BANK AND
TRUST, a Massachusetts business TRUST COMPANY OF CHICAGO, a
trust national banking association
By: /s/ Robert G. Higgins By: /s/ Peter C. Malecek
------------------------ ------------------------
Its: Vice President Peter C. Malecek,
Vice President
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF BANYAN STRATEGIC REALTY TRUST
State of
Name of Subsidiary Organization
Banyan/Morgan Milwaukee Limited Partnership Illinois
Banyan/Morgan Willowbrook Limited Partnership Illinois
BSLT/BSLFII H Street Partnership Illinois
BSLT Milwaukee Corp. Illinois
BSLT Karfad Corp. Illinois
BSRT Colonial Courts Corp. Illinois
BSRT Colonial Courts Limited Partnership Illinois
BSRT Commerce Center Corp. Illinois
BSRT Fountain Square Corp. Illinois
BSRT Hallmark Village Corp. Illinois
BSRT Hallmark Village Limited Partnership Illinois
BSRT Lexington Corp. Illinois
BSRT Lexington B Corp. Illinois
BSRT/M&J Northlake Limited Partnership Illinois
BSRT Merger Corp. Illinois
BSRT Newtown Corp. Illinois
BSRT Northlake Festival Corp. Illinois
BSRT Seaway Corp. Illinois
BSRT/STM Business Center Corp. Illinois
BSRT Willburr Corp. Illinois
BSRT Woodcrest Office Corp. Illinois
BSRT Woodcrest Office Park Limited Partnership Illinois
VSLT Ninth Street Corp. Illinois
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
"THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BANYAN
STRATEGIC REALTY TRUST'S FORM 10K FOR THE YEAR ENDED DECEMBER 31, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10K."
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 5500215
<SECURITIES> 0
<RECEIVABLES> 659161
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6159376
<PP&E> 90200065
<DEPRECIATION> 2337095
<TOTAL-ASSETS> 110764772
<CURRENT-LIABILITIES> 2237954
<BONDS> 5500000
0
0
<COMMON> 56875404
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 110764772
<SALES> 0
<TOTAL-REVENUES> 12902369
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 9225384
<LOSS-PROVISION> (164958)
<INTEREST-EXPENSE> 1535787
<INCOME-PRETAX> 2600045
<INCOME-TAX> 0
<INCOME-CONTINUING> 2600045
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2600045
<EPS-PRIMARY> .25
<EPS-DILUTED> .25
</TABLE>
