UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
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
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 .
Shares of beneficial interest outstanding as of August 14, 1996: 10,478,971
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BANYAN STRATEGIC REALTY TRUST
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996 AND DECEMBER 31, 1995
(UNAUDITED)
ASSETS 1996 1995
Cash and Cash Equivalents $ 5,020,020 $ 5,500,215
Interest Receivable on
Investments 38,199 70,352
Interest Receivable on Mortgage
Loans --- 60,780
Accounts Receivable 933,203 528,029
------------ ------------
5,991,422 6,159,376
------------ ------------
Mortgage Loans Receivable (Net
of Unamortized Discount) 4,695,079 5,433,094
Investment in Real Estate, at
cost:
Land 15,206,094 12,809,994
Building 76,962,273 74,343,233
Building Improvements 3,835,185 3,046,838
------------ ------------
96,003,552 90,200,065
Less: Accumulated Depreciation (3,450,085) (2,337,095)
------------ ------------
92,553,467 87,862,970
------------ ------------
Investment in Real Estate
Venture 8,815,533 8,895,678
Deferred Financing Costs (Net of
Accumulated Amortization of
$433,228 and $224,020,
respectively) 1,558,504 1,188,174
Other Assets 1,300,810 1,225,480
------------ ------------
Total Assets $114,914,815 $110,764,772
============ ============
LIABILITIES AND SHAREHOLDERS'
EQUITY
Liabilities
Accounts Payable and Accrued
Expenses $ 1,517,707 $1,346,708
Accrued Real Estate Taxes 1,348,326 703,919
Mortgage Loans Payable 47,656,424 43,522,181
Bond Payable 5,500,000 5,500,000
Accrued Interest Payable 46,817 93,325
Unearned Revenue 95,112 94,002
Security Deposit Liabilities 466,300 439,135
------------ ------------
Total Liabilities 56,630,686 51,699,270
------------ ------------
Minority Interest in
Consolidated Partnerships 2,227,483 2,190,098
Shareholders' Equity
Shares of Beneficial Interest,
No Par Value, Unlimited
Authorization; 12,001,620
and 11,999,787 Shares
Issued, respectively 106,694,912 106,687,212
Accumulated Deficit (43,272,317) (42,445,859)
Treasury Shares at Cost,
1,522,649 Shares (7,365,949) (7,365,949)
------------ ------------
Total Shareholders' Equity 56,056,646 56,875,404
------------ ------------
Total Liabilities and Share-
holders' Equity $114,914,815 $110,764,772
============ ============
Book Value Per Share of Bene-
ficial Interest (10,478,971
and 10,477,138 Shares Number
of Outstanding, respectively) $ 5.35 $ 5.43
============ ============
The accompanying notes are an integral part of the consolidated financial
statements.
BANYAN STRATEGIC REALTY TRUST
CONSOLIDATED STATEMENTS OF INCOME AND EXPENSES
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
1996 1995
INCOME
Income From Property Operating
Activities:
Industrial $ 3,037,340 $ 1,195,056
Residential 1,715,667 1,639,134
Commercial 3,254,501 1,416,068
Retail 2,189,384 ---
----------- -----------
Total Income From Property
Operating Activities 10,196,892 4,250,258
----------- -----------
Income From Lending and
Investing Activities:
Interest and Amortized
Discount on Mortgage Loans 355,901 501,077
Income on Investments 64,637 416,237
----------- -----------
Total Income From Lending
and Investing Activities 420,538 917,314
----------- -----------
Total Income 10,617,430 5,167,572
----------- -----------
EXPENSES
Expenses from Property Operating
Activities:
Operating Property Expenses 546,444 527,976
Repairs and Maintenance 1,052,478 489,478
Real Estate Taxes 895,012 456,427
Interest Expense 1,979,505 457,843
Ground Lease Expense 429,739 ---
Property Management Fees 346,927 174,837
Payroll Expense 393,775 200,280
Utilities Expense 722,087 319,677
Depreciation and
Amortization 1,146,383 507,484
----------- -----------
Total Expenses From Property
Operating Activities 7,512,350 3,134,002
----------- -----------
Other Expenses:
Shareholder Expenses 113,836 115,904
Trustees' Fees, Expenses
and Insurance 163,432 217,945
Other Professional Fees 150,258 101,472
General and Administrative 868,920 556,863
Amortization of Deferred Loan
Fees and Financing Costs 221,980 112,796
Recovery of Losses on Loans,
Notes and Interest Receivable --- (155,834)
----------- -----------
Total Other Expenses 1,518,426 949,146
----------- -----------
Total Expenses 9,030,776 4,083,148
----------- -----------
Income Before Minority
Interest and Income (Loss)
from Operations of Real
Estate Ventures 1,586,654 1,084,424
Minority Interest in
Consolidated Partnerships (220,487) (24,463)
Income (Loss) from Operations of
Real Estate Ventures (97,014) 392,600
----------- -----------
Net Income $ 1,269,153 $ 1,452,561
=========== ===========
Earnings Per Share of
Beneficial Interest (10,477,847
and 10,471,102 Weighted Average
Number of Shares Outstanding,
respectively) $ 0.12 $ 0.14
=========== ===========
The accompanying notes are an integral part of the consolidated financial
statements.
BANYAN STRATEGIC REALTY TRUST
CONSOLIDATED STATEMENTS OF INCOME AND EXPENSES
FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
1996 1995
INCOME
Income From Property Operating
Activities:
Industrial $ 1,600,526 $ 608,659
Residential 852,959 848,911
Commercial 1,714,925 729,940
Retail 1,067,776 ---
----------- -----------
Total Income From Property
Operating Activities 5,236,186 2,187,510
----------- -----------
Income From Lending and
Investing Activities:
Interest and Amortized
Discount on Mortgage Loans 177,405 254,257
Income on Investments 27,186 216,330
----------- -----------
Total Income From Lending
and Investing Activities 204,591 470,587
----------- -----------
Total Income 5,440,777 2,658,097
----------- -----------
EXPENSES
Expenses from Property Operating
Activities:
Operating Property Expenses 296,994 288,145
Repairs and Maintenance 555,461 318,819
Real Estate Taxes 435,426 244,444
Interest Expense 1,029,616 218,907
Ground Lease Expense 215,865 ---
Property Management Fees 182,272 82,468
Payroll Expense 186,939 92,679
Utilities Expense 342,397 153,469
Depreciation and
Amortization 587,606 256,125
----------- -----------
Total Expenses From Property
Operating Activities 3,832,576 1,655,056
----------- -----------
Other Expenses:
Shareholder Expenses 80,394 72,356
Trustees' Fees, Expenses
and Insurance 83,278 108,376
Other Professional Fees 73,839 42,949
General and Administrative 451,752 292,439
Amortization of Deferred Loan
Fees and Financing Costs 99,185 56,995
Recovery of Losses on Loans,
Notes and Interest Receivable --- ---
----------- -----------
Total Other Expenses 788,448 573,115
----------- -----------
Total Expenses 4,621,024 2,228,171
----------- -----------
Income Before Minority
Interest and Income (Loss)
from Operations of Real
Estate Ventures 819,753 429,926
Minority Interest in Consolidated
Partnerships (117,934) (7,521)
Income (Loss) from Operations of
Real Estate Ventures (58,707) 365,977
----------- -----------
Net Income $ 643,112 $ 788,382
=========== ===========
Earnings Per Share of Beneficial
Interest (10,478,548 and
10,471,102 Weighted Average
Number of Shares Outstanding, $ 0.06 $ 0.08
respectively) =========== ===========
The accompanying notes are an integral part of the consolidated financial
statements.
<TABLE>
BANYAN STRATEGIC REALTY TRUST
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
<CAPTION>
Shares of
Beneficial Interest Accumulated Treasury
Shares Amount Deficit Shares Total
<S> <C> <C> <C> <C> <C>
Shareholders'
Equity,
December 31, 1995
11,999,787 $106,687,212 $(42,445,859) $(7,365,949) $56,875,404
Award Shares
Issued 1,833 7,700 --- --- 7,700
Net Income --- --- 1,269,153 --- 1,269,153
Dividends
Paid --- --- (2,095,611) --- (2,095,611)
----------- ------------ ------------ ----------- -----------
Shareholders'
Equity,
June 30,
1996 12,001,620 $106,694,912 $(43,272,317) $(7,365,949) $56,056,646
=========== ============ ============ =========== ===========
<FN> The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
BANYAN STRATEGIC REALTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
1996 1995
CASH FLOWS FROM OPERATING
ACTIVITIES:
NET INCOME $1,269,153 $ 1,452,561
Adjustments to Reconcile Net
Income to Net Cash
Provided By Operating
Activities:
Amortization of Premium
(Discount) on Investment
Securities --- 10,596
Recovery of Losses on Loans, Notes
and Interest Receivable --- (155,834)
Depreciation and Amortization 1,368,363 620,280
Amortization of Discount on
Mortgage Loans Receivable --- (177,512)
Net Loss (Income) From
Operation of Real Estate
Ventures 97,014 (392,600)
Minority Interest Participation
in Consolidated Partnerships 220,487 24,463
Incentive Compensation Expense 29,452 ---
Net Change In:
Interest Receivable on Mortgage
Loans and Investments 92,933 (229,228)
Accounts Receivable (405,174) (53,914)
Other Assets (55,073) (220,062)
Accounts Payable and Accrued
Expenses 413,634 260,985
Accrued Interest Payable (46,508) (26,005)
Accrued Real Estate Tax Payable 588,747 (25,509)
Unearned Revenue 4,674 (20,149)
Security Deposit Liability (8,930) 11,050
----------- -----------
Net Cash Provided By
Operating Activities 3,568,772 1,079,122
----------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Acquisition of Real Estate
Assets (5,015,140) (3,917,930)
Investment In Real Estate
Ventures, Net (16,869) (54,482)
Proceeds From Sale of
Investment in Real Estate
Venture --- 1,940,039
Proceeds From Sale of
Mortgage Loans Receivable 745,047 ---
Additions to Investment in
Real Estate (788,347) (207,774)
Payment of Liabilities Assumed
at Acquisition of Real Estate
Assets (264,392) 94,964
Recovery of Losses on Loans,
Notes and Interest Receivable --- 155,834
Purchase of Investment
Securities (839,679) (1,493,360)
Proceeds From Sale and
Maturities of Investment
Securities 817,314 2,500,000
Principal Payments on
Investment Securities 22,365 ---
Principal Collections on
Mortgage Loans Receivable 14,742 22,041
Due from Affiliates --- 730,229
----------- -----------
Net Cash Used In Investing
Activities (5,324,959) (230,439)
----------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds From Mortgage
Loans Payable 4,295,000 2,650,000
Minority Interest Share of
Real Estate Investments (183,102) 339,839
Deferred Financing Costs (579,538) (98,271)
Principal Payments on Mortgage
Loans Payable (160,757) (75,655)
Dividends Paid to Shareholders (2,095,611) (2,094,824)
----------- -----------
Net Cash Provided By
Financing Activities 1,275,992 721,089
----------- -----------
Net (Decrease) Increase In
Cash and Cash Equivalents (480,195) 1,569,772
Cash and Cash Equivalents at
Beginning of Period 5,500,215 14,769,170
----------- -----------
Cash and Cash Equivalents at
End of Period $ 5,020,020 $16,338,942
=========== ===========
The accompanying notes are an integral part of the consolidated financial
statements.
BANYAN STRATEGIC REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(UNAUDITED)
Readers of this quarterly report should refer to Banyan Strategic Realty
Trust's (the "Trust") audited consolidated financial statements for the year
ended December 31, 1995 which are included in the Trust's 1995 Annual Report and
Form 10-K, as certain footnote disclosures which would substantially duplicate
those contained in such audited statements have been omitted from this report.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
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.
FINANCIAL STATEMENT PRESENTATION
Certain reclassifications have been made to the previously reported 1995
consolidated financial statements in order to provide comparability with the
1996 consolidated financial statements. In the opinion of management, all
adjustments necessary for a fair presentation have been made to the accompanying
consolidated financial statements as of June 30, 1996 and for the six and three
months ended June 30, 1996 and 1995. All adjustments made to the financial
statements, as presented, are of a normal recurring nature to the Trust. Net
income for the six and three months ended June 30, 1995 has been reduced by
$83,951 and $20,216, respectively, from amounts originally reported to reflect
adjusted allocation of administration costs from Banyan Management Corp. This
allocation adjustment had no effect on net income for the year ended December
31, 1995. No other allocation adjustments have been made to the 1995 operating
results.
2. MORTGAGE LOANS PAYABLE
FLORIDA POWER AND LIGHT
On March 13, 1996, the Trust executed a nonrecourse first mortgage loan
collateralized by the Florida Power and Light office building. The loan in the
amount of $6,200,000 bears interest at a fixed rate of 7.21% per annum, matures
on April 1, 2003 and requires monthly payments of principal based upon a twenty-
three year amortization schedule with a balloon payment of approximately
$5,255,000 upon maturity. The loan proceeds were utilized to reduce borrowings
under the Trust's revolving line of credit with American National Bank in the
amount of $6,200,000 as discussed below.
WOODCREST OFFICE PARK
On July 15, 1996, 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, as a limited partner, executed a
nonrecourse first mortgage loan collateralized by the Woodcrest Office Park
property. The loan, in the amount of $7,250,000, bears interest at a fixed rate
of 8.25% per annum, matures on August 1, 2003 and requires monthly payments of
principal based upon a twenty-five year amortization schedule with a balloon
payment of approximately $6,435,000 upon maturity. The loan proceeds were
utilized to reduce borrowings under the Trust's revolving line of credit with
American National Bank in the amount of $7,000,000 as discussed below. The loan
contains a prepayment penalty of 7% of the outstanding principal balance in year
one, decreasing by 1% thereafter through the loan's maturity date of August 1,
2003.
LINE OF CREDIT
On December 13, 1994, the Trust executed a Revolving Line of Credit (the
"Original Line") with American National Bank of Chicago ("ANB") in the amount of
$15,000,000. On December 15, 1995, the Trust modified the Original Line
increasing the amount the Trust can borrow from $15,000,000 to $30,000,000 (the
"Modified Line"). As of December 31, 1995, the Trust had utilized approximately
$25,725,000 of the $30,000,000 available under the line of credit. On March 13
and July 15, 1996, in conjunction with obtaining mortgage loans collateralized
by the Florida Power and Light and Woodcrest Office Park properties as discussed
above, the Trust paid down the revolving line of credit in the amounts of
$6,200,000 and $7,000,000, respectively. In addition, on April 15, 1996, the
Trust replaced a $5,624,315 letter of credit with ANB which had been
collateralized by the Modified Line with an irrevocable letter of credit in the
like amount by Citizen's National Bank of Evansville (See Note 6, Letter of
Credit, for details). The Trust borrowed $1,000,000 under the Modified Line for
the acquisition of the Midwest Office Park property in April 1996. (See Note 4,
Investment in Real Estate, for further details.) On June 28 and July 31, 1996,
the Trust sold its interest in the Karfad loan portfolio (See Note 5, Mortgage
Loans Receivable, for further details). On August 1, 1996, the Trust used a
portion of the Karfad loan portfolio net sales proceeds to pay down $3,900,000
of the Modified Line. As a result of the above transactions, as of August 1,
1996, the Trust had drawn $4,000,000 of the $30,000,000 available under the
Modified Line.
3. 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 in relation to the total
number of BMC personnel hours. The Trust's allocable share of costs for the six
months ended June 30, 1996 and 1995 aggregated $703,274 and $601,114,
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 June 30, 1996, the Trust had a net payable due to BMC of $113,212. The net
payable is included in accounts payable and accrued expenses in the Trust's
Consolidated Balance Sheet.
4. INVESTMENT IN REAL ESTATE
On April 18, 1996, Banyan/Morgan Milwaukee Limited Partnership ("BMMLP"),
a joint venture between a subsidiary of the Trust, which is a general partner of
BMMLP, and an affiliate of Morgan Realty Partners ("Morgan"), a general partner
of BMMLP, acquired the Midwest Office Center property (the "Midwest Property"),
a single-story office building which consists of approximately 77,000 square
feet of gross leasable area located in Oakbrook Terrace, Illinois (metropolitan
Chicago) for a purchase price, including liabilities assumed at acquisition, of
approximately $4,983,000. The Trust and Morgan own an 85% and 15% ownership
interest in BMMLP, respectively. The Trust contributed capital in BMMLP upon
acquisition of the property of approximately $1,688,000 of which the Trust
borrowed $1,000,000 under its line of credit as discussed above. The Trust will
contribute an additional $142,000 for cash reserves to be held by BMMLP for
improvements and lease-up at the property. The acquisition was made subject to
a nonrecourse first mortgage loan collateralized by the property in the
principal amount of $3,295,000 which bears interest at a fixed rate of 7.13% per
annum, matures on May 1, 2003, and requires monthly payments of principal based
upon a twenty-two year amortization schedule. The loan requires a balloon
payment for the remaining unpaid principal balance of approximately $2,733,000
at maturity.
5. MORTGAGE LOANS RECEIVABLE
Karfad Associates (the "Borrower"), which was indebted to the Trust
pursuant to its Karfad loan in the original principal amount of $5,849,266 (the
"Loan"), failed to make the required interest payments due on the first of each
month from January through May of 1996. On May 17, 1996, the Trust entered into
a Settlement Agreement (the "Agreement") and two loan sale agreements with the
Borrower and a party affiliated with the Borrower whereby the Karfad Loan, as
well as the related four loans to parties affiliated with Karfad Associates
(collectively the "Loan Portfolio"), were sold at an amount equal to the Trust's
December 31, 1995 carrying values totalling approximately $5,440,000. On June
28 and July 31, 1996, the Trust completed the sale of the four loans as well as
the Karfad loan, respectively, pursuant to the terms of the agreement. In
addition, the Agreement required the Borrowers to make all interest payments due
pursuant to the terms of the original remaining four loans in the Loan Portfolio
and the Karfad Loan from January 1, 1996 through the date of sale in the amount
of approximately $409,000. As a result of the Agreement, the Trust has
terminated the recognition of income from the amortization of the Loan's
purchase discount effective January 1, 1996. As of July 31, 1996, the Trust has
no further interest in the Loan Portfolio.
6. LETTER OF CREDIT
On April 15, 1996, the Trust replaced a letter of credit from American
National Bank and Trust Company in the face amount of $5,624,315 which served as
collateral for the multi-family housing bonds issued by the County of Franklin,
Ohio in the amount of $5,500,000 with an irrevocable letter of credit in the
amount of $5,624,315 from Citizens National Bank of Evansville ("Replacement
LOC"). The bonds are also secured by a first mortgage on the Colonial Courts
Apartments property. The Replacement LOC is confirmed by an irrevocable direct
pay letter of credit in the amount of $5,624,315 provided by the Federal Home
Loan Bank of Indianapolis ("FHLB"). The Replacement LOC and the FHLB letter of
credit have a term of five years with an option for an additional five year
term. The annual fee for the Replacement LOC is equal to one percent (1%) of
the letter of credit amount or $56,243. The annual fee for the FHLB letter of
credit is approximately $2,800. In consideration of its assistance in obtaining
the Replacement LOC and in accordance with its obligations under the partnership
agreement, the Trust increased the limited partnership interest of PHC General
Partnership in the BSRT Colonial Courts Limited Partnership from 10% to 25%.
7. 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 by Mr. Levine subsequent to
January 1, 1993 are paid 80% in cash in the year following the period for which
the incentive is earned and 20% in shares of beneficial interest of the Trust
("Award Shares"). During the six months ended June 30, 1996, Mr. Levine was
paid $66,985 representing 80% of the incentive earned for the fiscal year ended
December 31, 1995. In addition, on April 22, 1996, the Trust issued 1,833 Award
Shares to Mr. Levine, valued at $4.20 per share or $7,700, representing 20% of
Mr. Levine's 1995 incentive compensation. 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 restricted as to transfer and held in
escrow 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 issue price of any Award
Shares is based upon the average closing price of the Trust's shares for the
five business days ended prior to December 31 of the year in question. All Award
Shares issued to Mr. Levine 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 issued to Mr.
Levine will 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. Mr. Levine is entitled to receive
his share (represented by the Award Shares) of any cash distributions paid by
the Trust.
8. SUBSEQUENT EVENTS
DIVIDEND AND DISTRIBUTIONS PAID
On July 9, 1996, the Trust declared a cash distribution for the quarter
ended June 30, 1996 of $0.10 per share payable August 20, 1996 to shareholders
of record on July 23, 1996.
ITEM 2. 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, through various subsidiaries or partnerships which it
controls, interests in industrial, residential, commercial and retail real
estate assets located throughout the Midwestern and Southeastern portion of the
United States. In particular, the Trust's real estate interests as of August 1,
1996 include six industrial complexes aggregating 1,046,400 square feet of gross
leasable area, two apartment complexes consisting of a total of 822 units, five
commercial office sites consisting of 561,100 square feet of gross leasable
area and one retail center which contains 321,800 square feet of gross
leasable area. 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,
to 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 June 30, 1996 and December 31, 1995
was $5,020,020 and $5,500,215, respectively. The decrease in total cash and
cash equivalents of approximately $480,000 is due to $3,568,772 cash provided
from operating activities, less $5,324,959 cash used in investing activities and
plus $1,275,992 cash provided by financing activities.
Cash Flows From Operating Activities: Net cash provided by operating
activities increased by approximately $2.5 million for the six months ended June
30, 1996 to approximately $3.6 million from approximately $1.1 million for the
same period in 1995. Primarily contributing to this increase was the net
operating income provided by the property acquisition in 1996 and the six
properties acquired in the final seven months of 1995.
Cash Flow From Investing Activities: During the six months ended June 30,
1996, the Trust utilized approximately $5.3 million in investing activities
compared to approximately $230,000 for the same period in 1995. The cash flow
utilized in investing activities for the six months ended June 30, 1996 was due
to the acquisition of the Midwest Office Center property for approximately $5
million (the "Midwest Property") (see below for further detail) and capital
improvements at its various properties in the amount of approximately $788,000
offset by proceeds from the sale of mortgage loans receivable in the amount of
approximately $745,000. (See below for further discussion regarding the 1996
sale of the Trust's interest in the Karfad Loan Portfolio). During the same
period in 1995, the Trust paid approximately $3.9 million pursuant to its
acquisition of its Willowbrook property and approximately $208,000 for capital
improvements at its properties offset by approximately $1.9 million of proceeds
from the sale of the Plaza at Westminster property (proceeds from the sale of
investment in real estate venture), approximately $1 million in net proceeds
from the sale of investment securities, $730,229 in repayment of amounts due
from affiliates and $155,834 received in respect of its interest in a liquidity
trust.
Cash Flow From Financing Activities: For the six months ended June 30,
1996, the Trust generated cash flow from financing activities of approximately
$1.3 million compared to $721,089 for the same period in 1995. The cash flow
provided by financing activities for the six months ended June 30, 1996 was due
primarily to the receipt of approximately $4.3 million of proceeds from mortgage
loans payable, approximately $3.3 million of which was proceeds from a first
mortgage loan on the Midwest property and the balance was drawn on the Trust's
line of credit (see below). During the period, the Trust also executed a first
mortgage loan collateralized by the Florida Power and Light building in the
amount of $6.2 million and utilized these proceeds to reduce its borrowing on
its line of credit. (See below for details). Offsetting these sources, the
Trust paid $579,538 of deferred financing costs, paid dividends to shareholders
of approximately $2.1 million and made principal payments on mortgage loans of
$160,757. For the six months ended June 30, 1995, the Trust received $2.65
million of proceeds from mortgage loans payable which were utilized for the
acquisition of the Willowbrook property. Primarily offsetting these proceeds
were dividends paid to shareholders in the amount of approximately $2.1 million.
On April 18, 1996, Banyan/Morgan Milwaukee Limited Partnership ("BMMLP"),
a joint venture between a subsidiary of the Trust, which is a general partner of
BMMLP, and an affiliate of Morgan Realty Partners ("Morgan"), a general partner
of BMMLP, acquired the Midwest Property, a single-story office building which
consists of approximately 77,000 square feet of gross leasable area located in
Oakbrook Terrace, Illinois (metropolitan Chicago) for a purchase price,
including liabilities assumed at acquisition, of approximately $4,983,000. The
Trust and Morgan own an 85% and 15% ownership interest in BMMLP, respectively,
consistent with the terms of the existing BMMLP partnership agreement as amended
during 1995. The Trust contributed capital in BMMLP upon acquisition of the
property of approximately $1,688,000, of which the Trust borrowed $1,000,000
under its line of credit. The Trust will contribute an additional $142,000 for
cash reserves to be held by BMMLP for improvements and lease-up at the
property. The acquisition was made subject to a nonrecourse first mortgage loan
collateralized by the property in the principal amount of $3,295,000 which bears
interest at a fixed rate of 7.13% per annum, matures on May 1, 2003, and
requires monthly payments of principal based upon a twenty-two year amortization
schedule. The loan requires a balloon payment for the remaining unpaid
principal balance of approximately $2,733,000 at maturity.
As of June 30, 1996 and December 31, 1995, the Trust's mortgage loan
portfolio consisted of one and five mortgage loans receivable, respectively,
with aggregate carrying values totaling $4,695,079 and $5,433,094,
respectively. During the six months ended June 30, 1996, the Trust
received principal and interest payments totalling $14,742 and
$416,681, respectively. During the six months ended June 30, 1995,
the Trust received principal and interest payments totalling
$22,041 and $323,598, respectively. Karfad Associates (the "Borrower"),
which was indebted to the Trust pursuant to its Karfad loan in the
original principal amount of $5,849,266 (the "Loan"), failed to make the
required interest payments due on the first of each month from January through
May of 1996. On May 17, 1996, the Trust entered into a Settlement Agreement
(the "Agreement") and two loan sale agreements with the Borrower and a party
affiliated with the Borrower whereby the Karfad Loan, as well as the related
four loans to parties affiliated with Karfad Associates (collectively the "Loan
Portfolio"), were sold at an amount equal to the Trust's December 31, 1995
carrying values totalling approximately $5,440,000. On June 28 and July 31,
1996, the Trust completed the sale of the four loans as well as the Karfad loan,
respectively, pursuant to the terms of the agreements. In addition, the
Agreement required the Borrowers to make all interest payments due pursuant to
the terms of the original remaining four loans in the Loan Portfolio and the
Karfad Loan from January 1, 1996 through the date of sale in the amount of
approximately $409,000. As a result of the Agreement, the Trust has terminated
the recognition of income from the amortization of the Loan's purchase discount
effective January 1, 1996. As of July 31, 1996, the Trust has no further
interest in the Loan Portfolio.
On March 13, 1996, the Trust executed a nonrecourse first mortgage loan
collateralized by the Florida Power and Light office building. The loan in the
amount of $6,200,000 bears interest at a fixed rate of 7.21% per annum, matures
on April 1, 2003 and requires monthly payments of principal based upon a twenty-
three year amortization schedule with a balloon payment of approximately
$5,255,000 upon maturity. The loan proceeds were utilized to reduce borrowings
under the Trust's Revolving Line of Credit with American National Bank in the
amount of $6,200,000.
On July 15, 1996, 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, as a limited partner, executed a
nonrecourse first mortgage loan collateralized by the Woodcrest Office Park
property. The loan, in the amount of $7,250,000, bears interest at a fixed rate
of 8.25% per annum, matures on August 1, 2003 and requires monthly payments of
principal based upon a twenty-five year amortization schedule with a balloon
payment of approximately $6,435,000 upon maturity. The loan proceeds were
utilized to reduce borrowings under the Trust's revolving line of credit with
American National Bank in the amount of $7,000,000 as discussed below. The loan
contains a prepayment penalty of 7% of the outstanding principal balance in year
one, decreasing by 1% thereafter through the loan's maturity date of August 1,
2003.
On December 13, 1994, the Trust executed a Revolving Line of Credit (the
"Original Line") with American National Bank of Chicago ("ANB") in the amount of
$15,000,000. On December 15, 1995, the Trust modified the Original Line
increasing the amount the Trust can borrow from $15,000,000 to $30,000,000 (the
"Modified Line"). As of December 31, 1995, the Trust had utilized approximately
$25,725,000 of the $30,000,000 available under the line of credit. On March 13,
1996, the Trust reduced its borrowing under the Modified Line in the amount of
$6,200,000. In addition, on April 15, 1996, the Trust replaced a $5,624,315
letter of credit with ANB which had been collateralized by the Modified Line
with an irrevocable letter of credit in the like amount by Citizen's National
Bank of Evansville. The Trust borrowed $1,000,000 under the Modified Line for
the acquisition of the Midwest Office Park property in April 1996. As of June
30, 1996, the Trust has utilized approximately $14,900,000 of the $30,000,000
available under the Line. On July 15, 1996, the Trust reduced its borrowing
under the Modified Line in the amount of $7,000,000. On August 1, 1996, the
Trust used a portion of the Karfad loan portfolio net sales proceeds to pay down
$3,900,000 of the Modified Line. As a result of the above transactions, as of
August 1, 1996, the Trust had drawn $4,000,000 under the Modified Line.
The Trust's future liquidity needs are expected to be funded from
operating cash flow from its operating properties, cash proceeds derived from
the mortgage financing of its certain property interests, the sale or
refinancing of the H Street Assemblage property, borrowings pursuant to its
Modified Line with American National Bank and interest earned on the Trust's
short-term investments. 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 to provide cash 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. Based on its current business plan, the Trust
hopes to utilize proceeds to be generated from its property financings to enable
it to acquire approximately $25,000,000 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.
The Trust's ability to make distributions to its shareholders is dependent
upon, among other things: (i) the improvement in operating performance of its
existing real estate investments through scheduled increases in base rents under
existing leases and through general improvement in the real estate markets where
the Trust's properties are located reflected in changes in base rents
attributable to new or replacement leases; (ii) the operating performance of
future acquisitions funded by the redeployment financing and cash proceeds
derived from the sale of its interest in the H Street Venture; and (iii) the
Trust's ability to control its operating expenses.
RESULTS OF OPERATIONS
Total income for the six months ended June 30, 1996 increased to
$10,617,430 from $5,167,572 for the six months ended June 30, 1995. The
increase for the six months ended June 30, 1996 as compared to the same period
in 1995 is due to increases in property operating revenue of approximately
$5,947,000 (as discussed below) partially offset by a decrease in total income
from lending and investing activities of approximately $497,000. Interest and
amortized discount on mortgage loans decreased for the six months ended June 30,
1996 when compared to the same period in 1995 due to the Trust's termination of
the amortization of the purchase discount on the Karfad Associates Loan to
parties affiliated with Karfad Associates as discussed above. Interest income
on investments for the six months ended June 30, 1996 decreased by $351,600 when
compared to the prior year's period due to the decrease in cash available for
investment due primarily to the investment of cash in the Willowbrook,
Northlake, Bluegrass, Lexington, Newtown and Woodcrest properties during the
last seven months of 1995 and the Midwest Office Center property in 1996. See
Liquidity and Capital Resources for further discussion regarding the Trust's
April 1996 acquisition of the Midwest Office Center property.
Industrial property operating income increased by approximately $1,842,000
resulting from the acquisitions of the Willowbrook Industrial Court
("Willowbrook"), Quantum Business Center ("Quantum," formerly known as the
Bluegrass Corporate Center), Lexington Business Center ("Lexington") and Newtown
Distribution Center ("Newtown") properties during 1995. The acquisitions of the
Willowbrook, Quantum, Lexington and Newtown properties contributed to an
increase in income of approximately $272,000, $448,000, $687,000 and $328,000,
respectively. The income at the Milwaukee Industrial Properties increased by
approximately $79,000 due partially to an increase in occupancy to 100% at June
30, 1996 as compared to 98% at June 30, 1995 which contributed to approximately
$38,000 of this increase. Further contributing to this increase in income at
the Milwaukee property was an approximately $41,000 increase in tenant expense
chargebacks for the six months ended June 30, 1996 as compared to the six months
ended June 30, 1995. The income of approximately $609,000 at the Elmhurst Metro
Court property remained relatively stable for the six months ended June 30, 1996
when compared to income of approximately $581,000 for the same period in 1995.
The occupancy level at June 30, 1996 and 1995 for the Elmhurst property was 92%
and 95%, respectively. The occupancy levels for the Willowbrook, Quantum,
Lexington and Newtown properties as of June 30, 1996 were 100%, 93%, 80% and
97%, respectively, as compared to 76%, 93%, 79% and 97%, respectively, at
December 31, 1995. Rental income at the Lexington property is expected to
increase during 1996 as the Trust continues to implement the business plan for
the property which includes reconfiguring and leasing of vacant space thereby
increasing the occupancy level. The occupancy level will increase by 16% to 96%
as of August 15, 1996 for the Lexington property as the Trust finalized a lease
for 46,000 square feet of gross leasable area to a single tenant. The occupancy
level increased by 24% at June 30, 1996 for the Willowbrook property when
compared to the occupancy level at December 31, 1995. This increase in
occupancy is due to the signing of five tenant leases aggregating approximately
20,000 square feet of gross leasable area during the first six months of 1996
which is also anticipated to generate an increase in rental income during the
third and fourth quarters of 1996.
Residential property operating revenue increased by approximately $77,000
due to an increase in rental income at the Colonial Courts of Westland
Apartments ("Colonial Courts") property. Income at the Colonial Courts property
increased by approximately $83,000 due primarily to an increase in occupancy to
94% at June 30, 1996 as compared to 87% at June 30, 1995. The occupancy level
at the Hallmark Village Apartments ("Hallmark") property at June 30, 1996 and
1995 was 82% and 92%, respectively. However, total income for the Hallmark
property remained relatively stable for the six months ended June 30, 1996 when
compared to the same period in 1995 due to a reduction in rental delinquencies
when compared to 1995.
Commercial property operating revenue increased by approximately
$1,838,000 which is primarily attributable to the acquisitions of the Woodcrest
Office Park ("Woodcrest") property in December 1995 and the Midwest Office
Center ("Midwest") property in April 1996 which resulted in an increase in total
income of approximately $1,737,000 for the six months ended June 30, 1996 when
compared to the same period in 1995. In addition, annual rent adjustments and
occupancy increases at the Colonial Penn and Florida Power and Light Office
buildings contributed to an increase in commercial property operating revenue.
The occupancy level for the Woodcrest property was 94% at June 30, 1996 as
compared to 95% at December 31, 1995. The occupancy level for the Midwest
property was 96% at June 30, 1996. The occupancy level at the Colonial Penn
property remained unchanged at 100% at June 30, 1996 when compared to the same
period in 1995. The occupancy level for the Florida Power and Light property
increased to 93% at June 30, 1996 as compared to 90% at June 30, 1995.
Retail property operating revenue of approximately $2,189,000 for the six
months ended June 30, 1996 represents income generated by the Northlake Tower
Shopping Center property ("Northlake") acquired in July 1995. The occupancy
level for the Northlake property remained unchanged with occupancy at 98% for
June 30, 1996 and December 31, 1995.
Total expenses for the six months ended June 30, 1996 increased to
$9,030,776 from $4,083,148 for the six months ended June 30, 1995. This
increase is primarily due to increases in expenses from property operating
activities of approximately $4,378,000 and an increase in total other expenses
of approximately $569,000. The increase in property operating expenses for the
six months ended June 30, 1996 is primarily attributable to the 1996 acquisition
of the Midwest property (See Liquidity and Capital Resources for further
details) and the acquisition of the Willowbrook, Northlake, Quantum, Lexington,
Newtown and Woodcrest properties during the last seven months of 1995 which
accounted for approximately $4,055,000 of this increase. Excluding the Trust's
acquisitions during 1996 and 1995, total expenses from property operating
activities for the six months ended June 30, 1996 increased approximately
$323,000 of which approximately $135,000 is attributable to an increase in
interest expense on a mortgage loan in the amount of $6,200,000 collateralized
by the Florida Power and Light property in March 1996. In addition,
approximately $117,000 is attributable to increases in repairs and maintenance
expense at the Colonial Courts, Hallmark and Milwaukee properties. The
remaining $71,000 increase in property operating expenses is the result of an
increase in depreciation expense and other miscellaneous property expenses.
Total other expenses increased due primarily to increases in other
professional fees, general and administrative expenses and amortization of
deferred loan fees and financing costs partially offset by a decrease in
trustees' fees, expenses and insurance costs. Other professional fees increased
due primarily to the newly acquired assets pursuant to the Trust's investment
efforts. The increase in general and administrative expenses is attributable to
an increase in expenses incurred on the Trust's behalf by Banyan Management Corp
in connection with supervising the newly acquired assets and an increase in
incentive compensation payable to Mr. Levine and earned on the performance of
the Trust's investment activities. Amortization of deferred loan fees and
financing costs increased primarily due to costs associated with modifying the
Trust's line of credit during the fourth quarter of 1995 and with the
replacement of a letter of credit associated with the Colonial Courts property
in April 1996. Further contributing to the increase in total other expenses for
the six months ended June 30, 1996 was a charge against recovery of losses on
loans, notes, and interest receivable of $155,834 for the six months ended June
30, 1995 in respect of the Trust's interest in the liquidating trust. The
decrease in trustees' fees, expenses and insurance resulted from a decrease in
the premium for insurance coverage for 1996 as compared to the same period in
1995.
Net loss from operations of real estate ventures for the six months ended
June 30, 1996 of $97,014 includes the losses incurred from the Trust's 53%
interest in the real estate venture known as the H Street Venture. The H Street
Venture owns an approximately 55,900 square foot office building (the "Victor
Building") and an adjacent land parcel consisting of 17,000 square feet (the "H
Street Assemblage") located in Washington, D.C. Net income from operations of
real estate ventures of $392,600 for the six months ended June 30, 1995 resulted
from the income from operations and gain on the sale of the Plaza at Westminster
property of $460,184 which was offset by a loss from operations of $67,584 on
the H Street Assemblage. The Plaza at Westminster property was sold in June
1995 to an unaffiliated third party. The net loss at the H Street Assemblage
for the six months ended June 30, 1996 as compared to the same period in 1995
increased slightly due to an increase of approximately $74,000 in real estate
tax expense resulting from a property reassessment during 1996 of the H Street
Assemblage. The Venture is currently appealing this reassessment. 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 Assemblage. The H Street Venture has not made any
significant capital expenditures on the H Street Assemblage 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 may desire to vacate the Victor Building
before its redevelopment. The H Street Venture is currently marketing the H
Street Assemblage for sale. The Venture will continue to try to find ways to
limit holding costs at the H Street Assemblage while attempting to sell the
property. 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 three months ended June 30, 1996, the Trust
realized a net loss from operations of real estate ventures of $58,707 as
compared to net income of $365,977 for the same period in 1995. The above
comparison and description of the operations of the H Street Venture for the six
months ended June 30, 1996 compared to the same period in 1995 applies to the
three month periods ended June 30, 1995 and June 30, 1996.
The factors discussed above resulted in consolidated net income of
$1,269,153 ($0.12 per share) for the six months ended June 30, 1996 as compared
to consolidated net income of $1,452,561 ($0.14 per share) for the six months
ended June 30, 1995.
Total income for the three months ended June 30, 1996 increased to
$5,440,777 from $2,658,097 for the three months ended June 30, 1995. The
increase for the three months ended June 30, 1996 when compared to the same
period in 1995 is due to increases in property operating revenue of
approximately $3,049,000 (as discussed below) partially offset by a decrease in
total income from lending and investing activities of approximately $266,000.
Interest and amortized discount on mortgage loans decreased for the three months
ended June 30, 1996 when compared to the same period in 1995 due to the Trust's
termination of the amortization of the purchase discount on the Karfad
Associates Loan to parties affiliated with Karfad Associates as
discussed above. Interest income on investments for the quarter ended
June 30, 1996 decreased when compared to the prior year's period as a
result of a decrease in cash available for investment due primarily to
the investment of cash pursuant to the acquisitions of the
Willowbrook, Northlake, Bluegrass, Lexington, Newtown, and
Woodcrest properties during 1995 and the Midwest property in 1996 (See
Liquidating and Capital Resources above for further details regarding the 1996
acquisition of the Midwest property.)
Industrial property operating income increased by approximately $992,000
as a result of the acquisitions of the Willowbrook, Quantum, Lexington and
Newtown properties during 1995 which contributed to an increase in income of
approximately $136,000, $253,000, $346,000 and $167,000, respectively. In
addition, the income at the Milwaukee Industrial properties increased by
approximately $80,000 for the quarter ended June 30, 1996 when compared to the
same period in 1995 due to an increase in occupancy and tenant expense
chargebacks in 1996 as discussed above.
Residential property operating revenue remained relatively stable for the
three months ended June 30, 1996 as compared to the same period in 1995.
Commercial property operating revenue increased by approximately $985,000
which is attributable to the acquisitions of the Woodcrest and Midwest
properties. The acquisition of the Woodcrest and Midwest properties in December
1995 and April 1996, respectively, resulted in increases in total income for the
three months ended June 30, 1996 of approximately $780,000 and $175,000,
respectively, when compared to the same period in 1995. The remaining increase
in total income of approximately $30,000 resulted from annual rent adjustments
and occupancy increases at the Colonial Penn and Florida Power and Light
properties as mentioned above.
Retail property operating revenue of approximately $1,068,000 for the
three months ended June 30, 1996 represents income generated by the Northlake
Tower Shopping Center property acquired in July 1995.
Total expenses for the three months ended June 30, 1996 increased to
$4,621,024 from $2,228,171 for the three months ended June 30, 1995. This
increase is due to increases in expenses from property operating activities of
approximately $2,178,000 and an increase in total other expenses of
approximately $215,000. The increase in property operating expenses for the
three months ended June 30, 1996 is primarily attributable to the 1996 and 1995
acquisitions, as discussed above, which accounted for approximately $2,054,000
of this increase. Excluding the Trust's acquisitions during 1996 and 1995,
total expenses from property operating activities for the three months ended
June 30, 1996 increased approximately $124,000 of which $112,000 is attributable
to an increase in interest expense relating to the mortgage loan collateralized
by the Florida Power and Light property as discussed above. Total other
expenses increased due to increases in shareholder expenses, other professional
fees, general and administrative expenses and amortization of deferred loan fees
and financing costs partially offset by a decrease in trustees' fees, expenses
and insurance costs. Other professional fees increased due primarily to the
newly acquired assets pursuant to the Trust's investment efforts. The increase
in general and administrative expenses is attributable to an increase in
expenses incurred on the Trust's behalf by Banyan Management Corp. in connection
with supervising the newly acquired assets and an increase in incentive
compensation earned on the performance of the Trust's investment activities.
Amortization of deferred loan fees and financing costs increased primarily due
to costs associated with modifying the Trust's line of credit and replacing the
Colonial Courts letter of credit as discussed earlier. The decrease in
trustees' fees, expenses and insurance resulted from a decrease in the premium
for insurance coverage for 1996 as compared to the same period in 1995.
The factors discussed above resulted in consolidated net income of
$643,112 ($0.06 per share) for the three months ended June 30, 1996 as compared
to consolidated net income of $788,382 ($0.08 per share) for the three months
ended June 30, 1995.
An objective of the Trust is to provide cash distributions to the share-
holders from cash generated from the Trust's 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 which it
believes better reflects operating property performance. Funds From Operations
("FFO") is defined by the National Association of Real Estate Investment Trusts
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.
For the six months ended June 30, 1996 and 1995, the Trust's operations,
including interest on the Karfad Loan Portfolio, generated FFO of $2,323,507
($0.22 per share) and $1,389,649 ($0.13 per share), respectively. For the
quarter ended June 30, 1996 and 1995, the Trust's operations, including interest
on the Karfad Loan Portfolio, generated FFO of $1,180,369 ($0.11 per share) and
$627,955 ($0.06 per share), respectively. FFO increased for the six and three
months ended June 30, 1996 as a result of the Trust's 1995 and 1996 investment
activities and property acquisitions.
FFO for the six months ended June 30, 1996 and 1995 is calculated as follows:
1996 1995
Net Income $1,269,153 $1,452,561
Plus:
Depreciation expense 1,112,990 492,225
Depreciation included
in Operations of
Real Estate Ventures 15,238 35,145
Lease Commission
Amortization 33,393 15,259
Less:
Minority Interest
Share of Depre-
ciation Expense (102,824) (29,609)
Minority Interest
Share of Lease
Commission
Amortization (4,443) (1,526)
Recovery of Losses
on Loans, Notes
and Interest
Receivable --- (155,834)
Gain on Disposition
of Investment in
Real Estate Venture --- (418,572)
---------- ----------
Funds From Operations $2,323,507 $1,389,649
========== ==========
The Trust paid distributions equal to $0.10 per share on May 22, 1996 and
May 20, 1995 for the first quarter of 1996 and 1995, respectively. On July 9,
1996, the Trust declared a cash distribution for the second quarter of 1996 of
$0.10 per share payable August 20, 1996 to shareholders of record on July 23,
1996.
SUPPLEMENTAL INFORMATION
Effective January 1, 1993, the Trust began providing 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 into new
real estate opportunities (the "Investment Activities"). The Investment
Activities exclude the operations of the Trust's interest in the H Street
Venture, income generated on the allocated portion of cash and cash equivalents
considered sufficient for costs associated with the ongoing operations of the H
Street Venture and expenses required with maintaining the Trust which are not
allocated to Investment Activities.
Investment Activities assets include (1) interest in real estate assets
comprised of six industrial buildings, two apartment complexes, five commercial
office buildings, a retail center and a portfolio of mortgage loans, (2) the
Trust's investment securities and (3) a portion of the Trust's cash and cash
equivalents.
Due to the increasing significance of the Trust's property acquisitions
and Investment Activities, effective January 1, 1996 the Trust has elected not
to provide detailed supplemental financial information in the accompanying
consolidated balance sheets, statements of income and expenses and cash flows.
The Trust has determined that the supplemental information representing the
operating results of the Trust will be equally meaningful on a summarized basis
as the information previously provided on a detailed basis in the financial
statements. Other expenses allocated to Investment Activities represent the
incremental costs of managing the related assets. Summarized supplemental
operating results of the Trust's Investment Activities for the six months ended
June 30, 1996 and 1995 has been provided below.
FOR THE SIX MONTHS ENDED
JUNE 30,
1996 1995
Income from Property
Operating Activities $10,196,892 $4,250,258
Income on Mortgage
Loans Receivable 355,901 501,077
Income on Investments 34,383 317,250
---------- ----------
Total Income 10,587,176 5,068,585
---------- ----------
Expenses from Property
Operating Activities 7,512,350 3,134,002
Other Expenses 1,043,665 537,497
---------- ----------
Total Expenses 8,556,015 3,671,499
---------- ----------
Income Before Minority
Interest 2,031,161 1,397,086
Minority Interest in
Consolidated
Partnerships (220,487) (24,463)
---------- ----------
Net Income $1,810,674 $1,372,623
========== ==========
Net Income Per Share $ 0.17 $ 0.13
========== ==========
FUNDS FROM OPERATIONS
Net Income $1,810,674 $1,372,623
Plus:
Depreciation and
Amortization 1,146,383 507,484
Less:
Minority Interest
Share of Depre-
ciation and Amor-
tization (107,267) (31,135)
---------- ----------
Investment Funds From
Operations $2,849,790 $1,848,972
========== ==========
Investment Funds From
Operations Per Share $ 0.27 $ 0.18
========== ==========
FOR THE THREE MONTHS ENDED
JUNE 30,
1996 1995
Income from Property
Operating Activities $ 5,236,186 $2,187,510
Income on Mortgage
Loans Receivable 177,405 254,257
Income on Investments 13,655 199,536
---------- ----------
Total Income 5,427,246 2,641,303
---------- ----------
Expenses from Property
Operating Activities 3,832,576 1,655,056
Other Expenses 567,166 303,342
---------- ----------
Total Expenses 4,399,742 1,958,398
---------- ----------
Income Before Minority
Interest 1,027,504 682,905
Minority Interest in
Consolidated Part-
nerships (117,934) (7,521)
---------- ----------
Net Income $ 909,570 $ 675,384
========== ==========
Net Income Per Share $ 0.09 $ 0.06
========== ==========
FUNDS FROM OPERATIONS
Net Income $ 909,570 $ 675,384
Plus:
Depreciation and
Amortization 587,606 256,125
Less:
Minority Interest
Share of Depreciation
and Amortization (52,838) (15,689)
---------- ----------
Investment Funds From
Operations $1,444,338 $ 915,820
========== ==========
Investment Funds From
Operations Per Share $ 0.14 $ 0.09
========== ==========
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Trust held its 1995 Annual Meeting of Shareholders on June 27, 1996.
There were two proposals considered at the Meeting.
Proposal #1 was to elect three Class A Trustees to hold office for one
year or otherwise as provided in the Trust's amended and restated Declaration of
Trust.
Proposal #2 was to concur in the selection of Ernst & Young LLP as the
Trust's independent public accountants for the fiscal year ended December 31,
1996.
The following votes were cast or abstained from voting in connection with
the proposals in the manner as set forth:
PROPOSAL #1
SLATE OF TRUSTEES ELECTED FOR WITHHELD
Walter E. Auch, Sr. 5,379,253 1,626,494
Norman M. Gold 5,390,227 1,615,520
Marvin A. Sotoloff 5,388,027 1,617,720
PROPOSAL #2
FOR AGAINST ABSTAIN
6,856,036 46,806 102,905
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are incorporated by reference from the Trust's
Annual Report on Form 10K for the year ended December 31, 1995:
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
(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.
(21) Subsidiaries of the Trust
(b) No current reports on Form 8-K were filed during the quarter ended June
30, 1996.
SIGNATURES
PURSUANT to the requirements 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: August 14, 1996
Leonard G. Levine, President
By: /s/ Joel L. Teglia Date: August 14, 1996
Joel L. Teglia, Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
"This schedule contains summary financial information extracted from Banyan
Strategic Realty Trust Form 10-Q for the period ended June 30, 1996 and
is qualified in its entirety by reference to such 10-Q."
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 5,020,020
<SECURITIES> 0
<RECEIVABLES> 971,402
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,991,422
<PP&E> 96,003,552
<DEPRECIATION> 3,450,085
<TOTAL-ASSETS> 114,914,815
<CURRENT-LIABILITIES> 3,007,962
<BONDS> 5,500,000
0
0
<COMMON> 56,056,646
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 114,914,815
<SALES> 0
<TOTAL-REVENUES> 10,617,430
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 7,051,271
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,979,505
<INCOME-PRETAX> 1,269,153
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,269,153
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,269,153
<EPS-PRIMARY> 0.12
<EPS-DILUTED> 0.12
</TABLE>
