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 September 30, 1998
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 November 12, 1998: 13,349,528
<PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BANYAN STRATEGIC REALTY TRUST
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
<S> <C> <C>
ASSETS
Investment in Real Estate, at cost:
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 38,746 $ 26,143
Building . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172,409 125,459
Building Improvements. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,466 4,418
-------- --------
219,621 156,020
Less: Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . (10,048) (6,634)
-------- --------
209,573 149,386
-------- --------
Cash and Cash Equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . 2,842 4,429
Restricted Cash - Capital Improvements . . . . . . . . . . . . . . . . . . . . 1,325 763
Restricted Cash - Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,777 831
Interest and Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . 1,247 862
Deferred Financing Costs (Net of Accumulated Amortization
of $1,181 and $1,112, respectively). . . . . . . . . . . . . . . . . . . . . 1,935 1,269
Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,227 2,094
-------- --------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $221,926 $159,634
======== ========
<PAGE>
BANYAN STRATEGIC REALTY TRUST
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1998 AND DECEMBER 31, 1997 (CONTINUED)
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Mortgage Loans Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . $121,302 $ 70,503
Bonds Payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,489 21,615
Note Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,400 --
Accounts Payable and Accrued Expenses. . . . . . . . . . . . . . . . . . . . . 2,453 1,858
Accrued Real Estate Taxes Payable. . . . . . . . . . . . . . . . . . . . . . . 1,926 796
Accrued Interest Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . 806 296
Unearned Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 624 276
Security Deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,360 711
-------- --------
Total Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157,360 96,055
-------- --------
Minority Interest in Consolidated Partnerships . . . . . . . . . . . . . . . . 2,104 1,264
Shareholders' Equity
Shares of Beneficial Interest, No Par Value,
Unlimited Authorization; 14,871,480 and 14,761,850 Shares
Issued, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . 119,684 119,013
Accumulated Deficit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (49,856) (49,332)
Treasury Shares at Cost, 1,522,649 Shares. . . . . . . . . . . . . . . . . . . (7,366) (7,366)
-------- --------
Total Shareholders' Equity . . . . . . . . . . . . . . . . . . . . . . . . . . 62,462 62,315
-------- --------
Total Liabilities and Shareholders' Equity . . . . . . . . . . . . . . . . . . $221,926 $159,634
======== ========
Book Value Per Share of Beneficial Interest
(13,348,831 and 13,239,201 Shares Outstanding, respectively) . . . . . . . . $ 4.68 $ 4.71
======== ========
<FN>
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
BANYAN STRATEGIC REALTY TRUST
CONSOLIDATED STATEMENTS OF INCOME AND EXPENSES
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
1998 1997
--------- --------
<S> <C> <C>
REVENUE
Rental Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 25,093 $ 17,986
Operating Cost Reimbursement . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,605 1,815
Miscellaneous Tenant Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . 889 554
Income on Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186 161
-------- --------
Total Revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,773 20,516
-------- --------
EXPENSES
Property Operating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,223 3,914
Repairs and Maintenance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,985 1,816
Real Estate Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,037 1,480
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,879 4,649
Ground Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 699 670
Depreciation and Amortization. . . . . . . . . . . . . . . . . . . . . . . . . . . 3,706 2,501
General and Administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,456 3,031
Amortization of Deferred Financing Costs . . . . . . . . . . . . . . . . . . . . . 207 527
-------- --------
Total Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,192 18,588
Income Before Minority Interest, Income from Operations of Real Estate
Venture, Net Gains and Extraordinary Item. . . . . . . . . . . . . . . . . . . . . 4,581 1,928
Minority Interest in Consolidated Partnerships . . . . . . . . . . . . . . . . . . . (449) (463)
Income from Operations of Real Estate Venture. . . . . . . . . . . . . . . . . . . . -- 37
Net Gain on Disposition of Investments in Real Estate. . . . . . . . . . . . . . . . -- 1,076
-------- --------
Income Before Extraordinary Item . . . . . . . . . . . . . . . . . . . . . . . . . . 4,132 2,578
Extraordinary Item, Net of Minority Interest of $25. . . . . . . . . . . . . . . . . (141) --
-------- --------
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,991 $ 2,578
======== ========
<PAGE>
BANYAN STRATEGIC REALTY TRUST
CONSOLIDATED STATEMENTS OF INCOME AND EXPENSES
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 - CONTINUED
(UNAUDITED)
1998 1997
--------- --------
Earnings Per Share of Beneficial Interest - Basic:
Income Before Net Gains and Extraordinary Item . . . . . . . . . . . . . . . . . . $ 0.31 $ 0.14
======== ========
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.30 $ 0.24
======== ========
Earnings Per Share of Beneficial Interest - Assuming Dilution:
Income Before Net Gains and Extraordinary Item . . . . . . . . . . . . . . . . . . $ 0.30 $ 0.14
======== ========
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.29 $ 0.24
======== ========
<FN>
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
BANYAN STRATEGIC REALTY TRUST
CONSOLIDATED STATEMENTS OF INCOME AND EXPENSES
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
1998 1997
--------- --------
<S> <C> <C>
REVENUE
Rental Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,090 $ 6,860
Operating Cost Reimbursement . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,035 635
Miscellaneous Tenant Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . 356 330
Income on Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 50
-------- -------
Total Revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,552 7,875
-------- -------
EXPENSES
Property Operating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,512 1,599
Repairs and Maintenance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,109 646
Real Estate Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 798 531
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,649 1,878
Ground Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 229 229
Depreciation and Amortization. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,401 946
General and Administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,280 1,023
Amortization of Deferred Financing Costs . . . . . . . . . . . . . . . . . . . . . 66 199
-------- -------
Total Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,044 7,051
Income Before Minority Interest, Income from Operations of Real Estate
Venture and Net Gains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,508 824
Minority Interest in Consolidated Partnerships . . . . . . . . . . . . . . . . . . . (151) (152)
Loss from Operations of Real Estate Venture. . . . . . . . . . . . . . . . . . . . . -- (14)
Net Gain on Disposition of Investments in Real Estate. . . . . . . . . . . . . . . . -- 1,072
-------- -------
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,357 $ 1,730
======== =======
<PAGE>
BANYAN STRATEGIC REALTY TRUST
CONSOLIDATED STATEMENTS OF INCOME AND EXPENSES
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 - CONTINUED
(UNAUDITED)
1998 1997
--------- --------
Earnings Per Share of Beneficial Interest - Basic:
Income Before Net Gains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.10 $ 0.06
======== ========
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.10 $ 0.16
======== ========
Earnings Per Share of Beneficial Interest - Assuming Dilution:
Income Before Net Gains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.10 $ 0.06
======== ========
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.10 $ 0.16
======== ========
<FN>
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
BANYAN STRATEGIC REALTY TRUST
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<CAPTION>
Shares of
Beneficial Interest
---------------------------- Accumulated Treasury
Shares Amount Deficit Shares Total
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Shareholders' Equity,
January 1, 1998. . . . . . . 14,761,850 $ 119,013 $ (49,332) $ (7,366) $ 62,315
Net Income . . . . . . . . . -- -- 3,991 -- 3,991
Issuance of Shares . . . . . 109,630 671 -- -- 671
Distributions. . . . . . . . -- -- (4,515) -- (4,515)
----------- ---------- --------- ---------- --------
Shareholders' Equity,
September 30, 1998 . . . . . 14,871,480 $ 119,684 $ (49,856) $ (7,366) $ 62,462
=========== ========== ========= ========== ========
<FN>
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
BANYAN STRATEGIC REALTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<CAPTION>
1998 1997
--------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,991 $ 2,578
Adjustments to Reconcile Net Income to Net Cash
Provided By Operating Activities:
Extraordinary Items, Net of Minority Interest. . . . . . . . . . . . . . . . . . . 141 --
Net Gain on Disposition of Investments in Real Estate. . . . . . . . . . . . . . . -- (1,076)
Depreciation and Amortization. . . . . . . . . . . . . . . . . . . . . . . . . . . 3,913 3,028
Net (Income) From Operation of Real Estate Ventures. . . . . . . . . . . . . . . . -- (37)
Minority Interest in Consolidated Partnerships . . . . . . . . . . . . . . . . . . 449 463
Incentive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 913
Net Change In:
Restricted Cash - Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (946) 120
Interest and Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . (385) (81)
Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,350) (611)
Accounts Payable and Accrued Expenses. . . . . . . . . . . . . . . . . . . . . . . 595 (3)
Accrued Interest Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 510 63
Accrued Real Estate Taxes Payable. . . . . . . . . . . . . . . . . . . . . . . . . 1,130 458
Unearned Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 348 28
Security Deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 649 128
-------- --------
Net Cash Provided By Operating Activities. . . . . . . . . . . . . . . . . . . . . . 9,045 5,971
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Real Estate Assets. . . . . . . . . . . . . . . . . . . . . . . . . (55,878) (34,296)
Investment In Real Estate Ventures, Net. . . . . . . . . . . . . . . . . . . . . . -- 28
Additions to Investment in Real Estate . . . . . . . . . . . . . . . . . . . . . . (4,048) (1,844)
Proceeds From Sale of Investments in Real Estate . . . . . . . . . . . . . . . . . -- 12,484
Payment of Liabilities Assumed at Acquisition of Real Estate Assets. . . . . . . . -- 101
Earnest Money Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (75) 300
Restricted Cash - Capital Improvements . . . . . . . . . . . . . . . . . . . . . . (562) (414)
-------- --------
Net Cash (Used In) Investing Activities . . . . . . . . . . . . . . . . . . . . . . (60,563) (23,641)
-------- --------
<PAGE>
BANYAN STRATEGIC REALTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 (CONTINUED)
(UNAUDITED)
(DOLLARS IN THOUSANDS)
1998 1997
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds From Bonds and Mortgage Loans Payable . . . . . . . . . . . . . . . . . . $106,550 $ 43,770
Invested By (Distributions to) Minority Partners . . . . . . . . . . . . . . . . . 416 (417)
Deferred Financing Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (903) (577)
Principal Payments on Bonds and Mortgage Loans Payable . . . . . . . . . . . . . . (52,152) (21,604)
Prepayment Penalties on Early Extinguishment of Debt . . . . . . . . . . . . . . . (136) --
Distributions Paid to Shareholders . . . . . . . . . . . . . . . . . . . . . . . . (4,515) (3,163)
Shares Issued. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 671 199
-------- --------
Net Cash Provided By Financing Activities . . . . . . . . . . . . . . . . . . . . 49,931 18,208
--------- --------
Net (Decrease) Increase In Cash and Cash Equivalents . . . . . . . . . . . . . . . (1,587) 538
Cash and Cash Equivalents at Beginning of Period . . . . . . . . . . . . . . . . . 4,429 3,805
-------- --------
Cash and Cash Equivalents at End of Period . . . . . . . . . . . . . . . . . . . . $ 2,842 $ 4,343
======== ========
Supplemental Disclosure of Cash Flow Information:
Interest Paid During the Period. . . . . . . . . . . . . . . . . . . . . . . . . $ 6,369 $ 4,586
======== ========
Supplemental Disclosure of Non-Cash Financing Activity:
Financing Assumed Upon Acquisition of Real Estate. . . . . . . . . . . . . . . . $ 3,675 $ 21,616
======== ========
<FN>
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<PAGE>
BANYAN STRATEGIC REALTY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(UNAUDITED)
1. FINANCIAL STATEMENT PRESENTATION
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, 1997 which are included in the Trust's 1997
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.
Certain reclassifications have been made to the previously reported
1997 consolidated financial statements in order to provide comparability
with the 1998 consolidated financial statements. These reclassifications
have not changed the 1997 results. In the opinion of management, all
adjustments necessary for a fair presentation have been made to the
accompanying consolidated financial statements as of September 30, 1998.
All adjustments made to the financial statements, as presented, are of a
normal recurring nature to the Trust.
2. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share for the nine months ended September 30, 1998 and 1997:
Nine Months Ended
--------------------------
9/30/98 9/30/97
--------- ----------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA)
Numerator:
Income before Net Gains and
Extraordinary Item. . . . . . . . . . $ 4,132 $ 1,502
Net Gains (a). . . . . . . . . . . . . -- 1,076
Extraordinary Item, Net of
Minority Interest . . . . . . . . . . (141) --
----------- -----------
Net Income. . . . . . . . . . . $ 3,991 $ 2,578
=========== ===========
Denominator:
Denominator for basic earnings per
weighted-average shares . . . . . . . 13,287,537 10,555,616
Effect of dilutive securities:
Employee stock options . . . . . . . 35,727 1,740
Convertible debt . . . . . . . . . . 604,423 --
----------- ----------
Dilutive potential common shares . . . 640,150 1,740
Denominator for diluted earnings
per share-adjusted weighted-
average shares and assumed
conversions. . . . . . . . . . . . 13,927,687 10,557,356
=========== ===========
<PAGE>
Nine Months Ended
--------------------------
9/30/98 9/30/97
--------- ----------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA)
Earnings Per Share of Beneficial
Interest - Basic:
Income before Net Gains and
Extraordinary Item . . . . . . . . . $ 0.31 $ 0.14
Net Gains. . . . . . . . . . . . . . . -- 0.10
Extraordinary Item, Net of
Minority Interest . . . . . . . . . . (0.01) --
----------- -----------
Net Income. . . . . . . . . . . $ 0.30 $ 0.24
=========== ===========
Earnings Per Share of Beneficial
Interest - Assuming Dilution:
Income Before Net Gains and
Extraordinary Item. . . . . . . . . . $ 0.30 $ 0.14
Net Gains. . . . . . . . . . . . . . . -- 0.10
Extraordinary Item, Net of
Minority Interest . . . . . . . . . . (0.01) --
----------- -----------
Net Income. . . . . . . . . . . $ 0.29 $ 0.24
=========== ===========
(a) Net gains include gain on disposition of investments in real
estate.
The following table sets forth the computation of basic and diluted
earnings per share for the three months ended September 30, 1998 and 1997:
Three Months Ended
-------------------------
9/30/98 9/30/97
--------- ----------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA)
Numerator:
Income before Net Gains. . . . . . . . $ 1,357 $ 658
Net Gains. . . . . . . . . . . . . . . -- 1,072
----------- -----------
Net Income. . . . . . . . . . . $ 1,357 $ 1,730
=========== ===========
Denominator:
Denominator for basic earnings per
weighted-average shares . . . . . . . 13,327,166 10,706,379
Effect of dilutive securities:
Employee stock options . . . . . . . 39,683 5,220
Convertible debt . . . . . . . . . . 596,145 --
----------- ----------
Dilutive potential common shares . . . 635,828 5,220
Denominator for diluted earnings
per share-adjusted weighted-
average shares and assumed
conversions. . . . . . . . . . . . 13,962,994 10,711,599
=========== ===========
<PAGE>
Three Months Ended
--------------------------
9/30/98 9/30/97
--------- ----------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA)
Earnings Per Share of Beneficial
Interest - Basic:
Income Before Net Gains. . . . . . . . $ 0.10 $ 0.06
Net Gains. . . . . . . . . . . . . . . -- 0.10
----------- -----------
Net Income. . . . . . . . . . . $ 0.10 $ 0.16
=========== ===========
Earnings Per Share of Beneficial
Interest - Assuming Dilution:
Income Before Net Gains. . . . . . . . $ 0.10 $ 0.06
Net Gains. . . . . . . . . . . . . . . -- 0.10
----------- -----------
Net Income. . . . . . . . . . . $ 0.10 $ 0.16
=========== ===========
3. MORTGAGE LOANS PAYABLE AND UNSECURED NOTE PAYABLE
On April 30, 1998, the Trust entered into a $25 million line of credit
agreement (the "CCA Line") with Nomura Asset Capital Corporation
("Nomura"). Nomura subsequently assigned its interest to its subsidiary -
The Capital Company of America ("CCA"). The CCA Line has an initial term
of 24 months. Draws bear interest at a rate equal to LIBOR plus 2.00%
adjusted monthly. The Trust has the option to extend the line for one
additional year for a fee of $125,000. As of September 30, 1998, $10.7
million was outstanding on the CCA Line.
On June 22, 1998 and May 22, 1998 the Trust entered into three
permanent loan agreements with Nomura, which also were assigned to CCA.
The first, the Pool A Loan, was in the amount of $38.3 million and was
funded on June 5, 1998. The second, the Pool B Loan, was in the amount of
$7.7 million and was funded on June 5, 1998. The third, the Pool C Loan,
was in the amount of $7.65 million and was funded on June 30, 1998. The
Pool A, B and C Loans are all collaterized by various parcels of real
estate with an aggregate carrying value of approximately $77.4 million at
September 30, 1998.
The Pool A Loan matures on June 11, 2028 and the Pool C Loan matures
on July 11, 2028. Both loans require payment of interest and principal on
a monthly basis with principal being amortized on a 315-month amortization
schedule. Each loan bears interest at a rate effectively equal to 6.95%
for the first ten years of each loan. The Trust has an option to prepay
both loans during the ninety days preceding June 11, 2008.
The Pool B Loan matures on June 11, 2029. The loan bears interest at
a rate equal to 7.07% for the first 11 years of the loan. The Trust pays
interest only on a monthly basis through July 11, 1999. At that date, CCA
may restate the loan amount based on the property's projected net operating
income for one year following that date. If the ratio of principal and
interest to Net Operating Income is less than 1.65:1.00 based on the
Lexington Business Center's net operating income, CCA can require the Trust
either to repay a portion of the loan or add additional collateral to the
pool. Subsequent to July 11, 1999, the Trust will make principal and
interest payments on a monthly basis with principal being amortized based
on a 315-month amortization schedule. The Trust has an option to repay the
loan on June 11, 2009.
<PAGE>
From the proceeds of the Pool C Loan, the Trust repaid the loans
secured by the Milwaukee Industrial Portfolio and the Elmhurst Metro Court
in the amounts of $3.5 million and $3.8 million, respectively. These
repayments resulted in prepayment penalties of approximately $136,000 and
the write off of deferred financing costs of approximately $30,000, which
are reflected in the Consolidated Statements of Income and Expenses as an
Extraordinary Item, Net of Minority Interest of $25,000. From the proceeds
of the Pool A and Pool B Loans, the Trust repaid the amounts then
outstanding under the CCA Line and the line of credit provided by American
National Bank of $23.25 million and $20.65 million, respectively.
During the third quarter of 1998, the Trust borrowed $7.4 million from
a group of Lenders for whom Morgens, Waterfall, Vintiadis & Company is
serving as agent pursuant to the October 10, 1997 convertible term loan
agreement, the "Unsecured Loan", for the acquisition of Johns Creek Office
and Industrial Park and Technology Park. The Loan matures on September 30,
2002 and bears interest at an annual interest rate of 12% payable
quarterly. In addition, on October 14 of each year, the Trust is required
to pay an annual fee equal to 2% of the amount outstanding as of that date.
The amounts outstanding on the Unsecured Loan are convertible at the
Lenders' option into Series A convertible preferred shares at a conversion
price of $100 per share or into common shares at a conversion price of
$5.15 per share.
4. INVESTMENT IN REAL ESTATE
During the nine months ended September 30, 1998, the Trust acquired
interests in ten properties. All of these properties were acquired from
unaffiliated third parties. The table below presents summary of 1998
acquisitions.
Date Purchase
of Price
Property's Name Acquisi- (in
and Location Sq. Ft. tion millions) Description
- --------------- -------- --------- --------- ----------------
Peachtree Pointe 71,700 01/20/98 $4.6 Five one-story
Office Park office buildings;
Norcross, Georgia Twenty-three
tenants at the
time of acqui-
sition
Avalon Center 53,300 03/20/98 4.4 Two one-story
Office Park office buildings;
Norcross, Georgia Three tenants at
the time of
acquisition
Avalon Ridge 57,400 04/24/98 3.9 Two one-story
Business Park flex/industrial
Norcross, Georgia buildings;
Two tenants at
the time of
acquisition
Tower Lane 95,900 04/27/98 5.2 Two one-story
Business Park (1) flex/industrial
Bensenville, buildings;
Illinois Seventeen tenants
at the time
of acquisition
University 127,800 04/30/98 10.2 Seven one-story
Corporate Center flex/industrial
Winter Park, buildings;
Florida Twenty-six tenants
at the time
acquisition
<PAGE>
4. INVESTMENT IN REAL ESTATE (continued)
Date Purchase
of Price
Property's Name Acquisi- (in
and Location Sq. Ft. tion millions) Description
- --------------- -------- --------- --------- ----------------
Metric Plaza 32,000 04/30/98 2.6 Two one-story
Winter Park, flex/industrial
Florida buildings;
Two tenants at
the time of
acquisition
Park Center 47,400 04/30/98 $ 3.7 Two one-story
Orlando, Florida flex/industrial
buildings;
Sixteen tenants
at the time
of acquisition
Sand Lake 84,100 04/30/98 6.8 Five one-story
Tech Center office buildings;
Orlando, Florida Three tenants
at the time
of acquisition
Johns Creek 119,300 08/14/98 5.8 Two flex/indus-
Office and trial buildings;
Industrial Park Two tenants
Duluth and Suwanne, at the time
Georgia of acquisition
Technology 145,700 08/14/98 12.4 Three office
Park ----- buildings;
Norcross, Twelve tenants
Georgia at the time
of acquisition
Total $59.6
=====
(1) Upon the acquisition of Tower Lane, the Trust assumed a permanent
mortgage loan in the amount of approximately $3.7 million. The loan
matures in November, 2001, bears an interest rate of 8.35% and is payable
in monthly installments of interest and principal with principal being
amortized based on a 264-month amortization schedule.
5. PRO FORMA INFORMATION
The following unaudited Pro Forma Condensed Summary information
presents the results of operations of the Trust as if the Trust acquired
all of the properties that the Trust acquired in 1998 on January 1, 1998
and 1997.
The unaudited Pro Forma Condensed Summary information is not
necessarily indicative of what the actual results of operations would have
been for the nine months ended September 30, 1998 and 1997 assuming the
purchase of these properties had been consummated at the beginning of each
period presented, nor does it purport to represent the future operations of
the Trust.
<PAGE>
Nine Months Ended
September 30,
(Unaudited)
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA)
-------------------------
1998 1997
-------- --------
Revenues . . . . . . . . . . . . . . $ 31,618 $ 25,644
Net Income . . . . . . . . . . . . . $ 3,802 $ 1,620
Earnings Per Share of Beneficial
Interest - Basic . . . . . . . . . $ 0.29 $ 0.15
6. SUBSEQUENT EVENTS
DIVIDEND AND DISTRIBUTIONS PAID
On October 6, 1998, the Trust declared a cash distribution for the
quarter ended September 30, 1998 of $0.12 per share payable November 20,
1998 to shareholders of record on October 20, 1998.
On November 13, 1998, Morgens, Waterfall, Vintiadis & Company Inc. as
agent for a group of "Lenders" pursuant to a convertible loan agreement
dated October 10, 1997, among the Trust and such Lenders, notified the
Trust of the Lenders election not to exercise an option to purchase up to
approximately $12.6 million in preferred or common shares of the Trust
pursuant to the convertible loan agreement. The option expired on
November 13, 1998.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The Registrant, Banyan Strategic Realty Trust, is a Massachusetts
business trust. The Trust is a self-administered real estate investment
trust that owns and acquires primarily office and flex/industrial
properties throughout the country, where management sees strong local
economies and investment opportunities. As of September 30, 1998, the
Trust's portfolio contained thirty-two properties, which are located
primarily in the Midwestern and the Southeastern United States. The Trust
operates principally through BSRT UPREIT Partnership and its subsidiaries
(the "Operating Partnerships") and BSRT UPREIT Corp., the General Partner
of the Operating Partnership both of which are 100% owned by the Trust as
of September 30, 1998. The Trust's goal is to maximize the value of its
shareholders' investment through continued growth in Funds from Operations
and Funds Available for Distribution (as defined below). It seeks to
accomplish this goal through a combination of external growth achieved by
making attractive acquisitions and internal growth achieved by carefully
and aggressively managing its assets. In executing its business plan, the
Trust intends to utilize proceeds from its secured credit facility and to
invest its cash and cash equivalents in excess of operating reserves in
additional real estate assets, to reinvest the proceeds from the sale or
refinancing of its existing properties and to raise new capital (debt,
equity or both).
Certain statements in this quarterly report that are not historical in
fact constitute "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Without limiting the
foregoing, words such as "believes," "intends," "anticipates," "expects,"
and similar expressions are intended to identify forward-looking statements
which are subject to a number of risks and uncertainties, including, among
other things, general real estate investment risks, lack of operating
history associated with recent acquisitions, ability to raise capital
either equity or debt, potential inability to repay or finance indebtedness
at maturity, increases in interest rates, competition for property
acquisitions, adverse consequences of failure to qualify as a REIT, and
possible environmental liabilities. Actual results could differ materially
from those projected in these forward-looking statements. Reference is
made to the annual report on Form 10-K for the year ended December 31,
1998, filed by the Trust, specifically under the heading "Managements's
Discussion and Analysis of Financial Condition and Results of Operations -
Factors Affecting the Trust's Business Plan" for a more complete discussion
of these risk factors.
RESULTS OF OPERATIONS
At September 30, 1998, the Trust owned thirteen flex/industrial
properties aggregating 1,841,000 square feet of gross rentable area,
fourteen office properties consisting of 1,545,600 square feet of gross
rentable area, four apartment complexes consisting of 864 residential units
and one retail center which contains 321,600 square feet of gross rentable
area. During the nine months ended September 30, 1998, the Trust acquired
an ownership interest in four office properties with a total of 354,800
rentable square feet and six flex/industrial properties with a total of
479,800 rentable square feet. Since the Trust has acquired a large number
of properties during each of the periods discussed below, the period to
period results are not entirely comparable. For further details regarding
the assets purchased during the first nine months of 1998, see Liquidity
and Capital Resources below.
<PAGE>
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1998 TO NINE MONTHS
ENDED SEPTEMBER 30, 1997
During the nine months ended September 30, 1998, net income totaled
approximately $4.0 million ($0.30 per basic common share) compared to
approximately $2.6 million ($0.24 per basic common share) for the nine
months ended September 30, 1997. This increase resulted primarily from
revenue growth of approximately $8.3 million reduced by expense growth of
approximately $5.6 million and net gains of approximately $1.1 million
recognized in 1997. In particular, total revenues increased by
approximately $8.3 million or 40.5% to approximately $28.8 million from
approximately $20.5 million, due primarily to an increase in the number of
properties owned. The properties that were acquired and the properties
that were sold since January 1, 1997 in the aggregate accounted for
approximately $7.4 million or 89.2% of this increase. On a "same-store"
basis (comparing the results of operations of the properties owned during
the entire nine months ended September 30, 1998, with the results of
operations of the same properties owned during the entire nine months ended
September 30, 1997), total property revenues increased by approximately
$0.9 million or 6.0% to approximately $15.8 million from approximately
$14.9 million due to an increase in rental rates at these properties and
recognition of lease termination fees at certain properties.
For the nine months ended September 30, 1998, the Trust's office,
retail and residential properties have maintained a consistently high
weighted average occupancy levels of ninety-four percent (94%), ninety-five
percent (95%) and ninety-nine percent (99%), respectively. The strength of
the Trust's office properties and their respective markets is highlighted
by the fact that many of the lease renewals during the nine months ending
September 30, 1998 have included terms providing for fixed increases in
base rent over the term of the leases or annually calculated CPI increases.
The weighted average occupancy for the Trust's flex/industrial properties,
which was approximately ninety-one percent (91%) for the nine months, has
decreased slightly from historical levels. During the fourth quarter of
1998, the Trust has disclosed significant scheduled lease expirations at
its Lexington Business Center and Newtown Business Center which may impact
the overall occupancy of the Trust's flex/industrial properties at December
31, 1998. To date, the Trust has released one hundred percent of the space
at Newtown Business Center and continues to market the space at Lexington
Business Center. For the nine months ended September 30, 1998, overall,
base rent for new leases at the Trust's office, flex/industrial and retail
properties increased, on the average, by 6.5% compared to base rents of
expiring leases.
Total operating expenses, which include property operating expense,
repair and maintenance expense, real estate taxes, and ground lease
expense, increased by approximately $2.0 million to approximately $9.9
million from approximately $7.9 million primarily due to an increase in the
number of properties owned, which accounted for approximately $1.6 million
or 80.0% of this increase. On a "same-store" basis total operating
expenses increased by approximately $0.4 million or 8.5% to approximately
$5.1 million from approximately $4.7 million. In addition, interest
expense increased by approximately $2.2 million primarily due to an
increase in total indebtedness which was used to pay for the newly acquired
properties. Depreciation and amortization expense also increased by
approximately $1.2 million. Most of the increase resulted from an increase
in the number of properties owned. Total general and administrative
expenses increased by approximately $0.4 million due to costs incurred in
connection with due diligence for transactions that were not completed in
1998 and to higher professional fees and payroll costs due to an increase
in administrative and professional staff.
<PAGE>
COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 1998 TO THREE MONTHS
ENDED SEPTEMBER 30, 1997
During the three months ended September 30, 1998, net income totaled
approximately $1.4 million ($0.10 per basic common share) compared to
approximately $1.7 million ($0.16 per basic common share) for the three
months ended September 30, 1997. This decrease resulted primarily from net
gains of approximately $1.1 million recognized in 1997 and expense growth
of approximately $2.0 million reduced by revenue growth of approximately
$2.7 million. In particular, total revenues increased by approximately
$2.7 million or 34.2% to approximately $10.6 million from approximately
$7.9 million, due primarily to an increase in the number of properties
owned. The properties that were acquired and the properties that were sold
since January 1, 1997 in the aggregate accounted for approximately $2.2
million or 81.5% of this increase. On a "same-store" basis (comparing the
results of operations of the properties owned during the entire three
months ended September 30, 1998, with the results of operations of the same
properties owned during the entire three months ended September 30, 1997),
total property revenues increased by approximately $0.5 million or 7.0% to
approximately $7.6 million from approximately $7.1 million due to an
increase in rental rates for these properties and recognition of lease
termination fees at certain properties.
Total operating expenses, which include property operating expense,
repair and maintenance expense, real estate taxes, and ground lease
expense, increased by approximately $0.6 million to approximately $3.6
million from approximately $3.0 million primarily due to an increase in the
number of properties owned, which accounted for approximately $0.4 million
or 66.7% of this increase. On a "same-store" basis, total operating
expenses increased by approximately $0.2 million or 8.0% to approximately
$2.7 million from approximately $2.5 million. In addition, interest
expense increased by approximately $0.8 million primarily due to an
increase in total indebtedness which was used to pay for the newly acquired
properties. Depreciation and amortization expense also increased by
approximately $0.5 million. Most of the increase resulted from an increase
in the number of properties owned. Total general and administrative
expenses increased by approximately $0.3 million due to costs incurred in
connection with due diligence for transactions that were not completed in
1998 and to higher professional fees and payroll costs due to an increase
in administrative and professional staff.
LIQUIDITY AND CAPITAL RESOURCES
The Trust expects to fund its short-term liquidity needs, including
recurring capital expenditures, from its working capital (including the
Trust's restricted cash which is available for capital expenditures, real
estate taxes and insurance), and from income derived primarily from
property operations. The Trust anticipates using these monies to fund
periodic tenant-related capital expenditures and other capital
improvements. The Trust believes that its Funds Available for Distribution
(as defined below) will be sufficient for the twelve months after the date
of this report to pay quarterly distributions of $0.12 per common share.
The Trust expects to fund its long-term liquidity needs, including
monies required to acquire and develop property and funds to pay for other
non-recurring capital improvements, from long-term secured and unsecured
indebtedness and through future issuance of debt or equity securities,
including issuing units in the Operating Partnership in exchange for
properties. The Trust expects that it will fund a portion of the cost of
buying and developing properties in the future by borrowing under its
credit facilities or by mortgaging properties the Trust acquires.
<PAGE>
Cash and cash equivalents consist of cash and short-term investments.
The Trust's cash and cash equivalents balance at September 30, 1998 and
December 31, 1997 was approximately $2.8 million and approximately $4.4
million, respectively. The decrease in total cash and cash equivalents of
approximately $1.6 million is due to approximately $60.5 million of cash
used by investing activities which exceeded approximately $49.9 million of
cash provided by financing activities and approximately $9.0 million of
cash provided by operating activities.
Cash Flows From Operating Activities: Net cash provided by operating
activities increased by approximately $3.0 million for the nine months
ended September 30, 1998 to approximately $9.0 million from approximately
$6.0 million for the same period in 1997 due primarily to an increase in
net income generated by properties acquired by the Trust in 1997 and 1998.
Due to certain unique operating characteristics of real estate
companies, the National Association of Real Estate Investment Trusts
("NAREIT"), an industry trade group, has promulgated a standard known as
"Funds from Operations", or "FFO" for short, which it believes more
accurately reflects the operating property performance of a REIT such as
the Trust. As defined by NAREIT, FFO means net income computed in
accordance with generally accepted accounting principles ("GAAP"), less
extraordinary, unusual and nonrecurring items, excluding gains (or losses)
from debt restructuring and sales of property plus depreciation and
amortization and after adjustments for unconsolidated partnerships and
joint ventures in which the REIT holds an interest. The Trust has adopted
the NAREIT definition for computing FFO because management believes that,
subject to the following limitations, FFO provides a basis for evaluating
the performance and operations of a REIT such as the Trust. The
calculation of FFO may vary from entity to entity since capitalization and
expense policies may vary from entity to entity. Items which are
capitalized do not decrease FFO whereas items that are expensed decrease
FFO. As such, the presentation of FFO by the Trust may not be comparable
to other similarly titled measures presented by other REITs. FFO is not
intended to be an alternative to "Net Income" as an indication of the
Trust's performance nor to "Cash Flows from Operating Activities" (as
calculated in accordance with GAAP) as a measure of the Trust's capacity to
pay distributions.
For the nine months ended September 30, 1998 and 1997, the Trust's
operations generated FFO of approximately $7.6 million and approximately
$3.8 million, respectively. FFO increased for the nine months ended
September 30, 1998 primarily from the effect of the Trust's property
acquisitions in 1997 and 1998. For the three months ended September 30,
1998 and 1997, the Trust's operations generated FFO of approximately $2.7
million and approximately $1.5 million, respectively.
<PAGE>
FFO for the nine months ended September 30, 1998 and 1997 is
calculated as follows:
1998 1997
-------- --------
(Dollars in thousands)
Net Income . . . . . . . . . . . . . . . . $ 3,991 $ 2,578
Plus:
Depreciation expense . . . . . . . . . . 3,399 2,361
Depreciation included in
Operations of Real Estate
Ventures . . . . . . . . . . . . . . . -- 15
Lease Commission Amortization. . . . . . 284 140
Less:
Minority Interest Share of
Depreciation Expense . . . . . . . . . (204) (197)
Minority Interest Share of
Lease Commission
Amortization . . . . . . . . . . . . . (21) (15)
Gain on Disposition of
Investment in Real Estate. . . . . . . . -- (1,076)
Extraordinary Item, Net of
Minority Interest. . . . . . . . . . . . 141 --
-------- --------
Funds From Operations. . . . . . . . . . . $ 7,590 $ 3,806
======== ========
Cash Flow Provided By (Used In):
Operating Activities . . . . . . . . . . $ 9,045 $ 5,971
Investing Activities . . . . . . . . . . $(60,563) $(23,641)
Financing Activities . . . . . . . . . . $ 49,931 $ 18,208
The Trust calculates Funds Available for Distribution ("FAD") by
increasing or decreasing FFO to give effect to items such as the impact of
straight-lining rents, lease commissions paid and normalized reserves for
capital improvements. The capital reserve is $0.075 per square foot for
flex/industrial properties, $0.10 per square foot for office properties,
$0.15 per square foot for retail property and $200 per residential unit.
1998 1997
-------- --------
(Dollars in thousands)
Funds from operations. . . . . . . . . . . $ 7,590 $ 3,806
Straight-line Rents. . . . . . . . . . . . (367) (95)
Lease Commissions. . . . . . . . . . . . . (536) (495)
Capital Reserve. . . . . . . . . . . . . . (365) (271)
-------- --------
Funds available for distribution . . . . . $ 6,322 $ 2,945
======== ========
Cash Flows From Investing Activities: During the nine months ended
September 30, 1998, the Trust utilized approximately $60.5 million in
investing activities compared to approximately $23.6 million in the same
period in 1997. Cash flow was primarily utilized during the nine months
ended September 30, 1998 to acquire four office and six flex/industrial
properties aggregating approximately $55.9 million and to make capital
improvements at the Trust's various properties in the amount of
approximately $4.0 million. In comparison, during the same period in 1997,
<PAGE>
the Trust sold its interest in the Hallmark Village property for
approximately $6.1 million, sold the H Street Assemblage Parcel and the
Victor building for approximately $5.5 million, sold its partnership
interest in the Colonial Courts Apartments for approximately $0.9 million,
acquired five office and four apartment properties for an aggregate use of
cash of approximately $34.3 million and made capital improvements in the
amount of approximately $1.8 million.
ACQUISITIONS ACTIVITIES:
Since January 1, 1998, the Trust has purchased a total of 10 office
and flex/industrial properties with a total of 834,600 rentable square
feet. These properties were purchased at prices that equate to a weighted
average yield of 10.5% based on projected annualized net operating income
(for the 12 months after the date of the acquisition of each property)
generated by leases in place at closing and leases on space under
construction, while capitalizing all costs associated with purchasing the
property. Due to recent turmoil in the equity markets and commercial
mortgage backed securities market which has resulted in a decrease in
capital available to potential buyer of real estate, the Trust believes
that the competition for available properties has declined. As a result,
the Trust believes that capitalization rates for properties being offered
for sale appear to have increased by one hundred to one hundred and fifty
basis points, creating opportunities for buyers with acquisition capital to
improve the return on their investments. The Trust may avail itself of
these opportunities to the extent that it has the necessary equity and debt
capital available to it in the future. The table below presents summary of
1998 acquisitions.
Purchase
Name and Date of Price
Location Acquisi- (in
of Property Sq. Ft. tion millions) Description
- --------------- -------- --------- --------- ----------------
Peachtree Pointe 71,700 01/20/98 $4.6 Five one-story
Office Park office buildings;
Norcross, Georgia Twenty-three
tenants at the
time of acqui-
sition
Avalon Center 53,300 03/20/98 4.4 Two one-story
Office Park office buildings;
Norcross, Georgia Three tenants at
the time of
acquisition
Avalon Ridge 57,400 04/24/98 3.9 Two one-story
Business Park flex/industrial
Norcross, Georgia buildings;
Two tenants at
the time of
acquisition
Tower Lane 95,900 04/27/98 5.2 Two one-story
Business Park (1) flex/industrial
Bensenville, buildings;
Illinois Seventeen tenants
at the time
of acquisition
University 127,800 04/30/98 10.2 Seven one-story
Corporate Center flex/industrial
Winter Park, buildings;
Florida Twenty-six tenants
at the time
of acquisition
<PAGE>
Purchase
Name and Date of Price
Location Acquisi- (in
of Property Sq. Ft. tion millions) Description
- --------------- -------- --------- --------- ----------------
Metric Plaza 32,000 04/30/98 2.6 Two one-story
Winter Park, flex/industrial
Florida buildings;
Two tenants at
the time of
acquisition
Park Center 47,400 04/30/98 3.7 Two one-story
Orlando, Florida flex/industrial
buildings;
Sixteen tenants at
the time of
acquisition
Sand Lake 84,100 04/30/98 6.8 Five one-story
Tech Center office buildings;
Orlando, Florida Three tenants at
the time of
acquisition
Johns Creek 119,300 08/14/98 5.8 Two flex/indus-
Office and trial buildings;
Industrial Park Two tenants
Duluth and Suwanne, at the time
Georgia of acquisition
Technology 145,700 08/14/98 12.4 Three office
Park ----- buildings;
Norcross, Twelve tenants
Georgia at the time
of acquisition
Total $59.6
=====
(1) In April 1998, the Trust formed a new joint venture, Butterfield
O'Hare L.P., in which the Trust has an 89.1% limited partnership interest
and .9% general partnership interest. The portfolio owned by the venture
consists of two properties, Butterfield Office Plaza, a property formerly
owned solely by the Trust, and Tower Lane Business Park ("Tower Lane"),
which was purchased on April 27, 1998. Upon formation of the venture and
acquisition of Tower Lane, the venture assumed a permanent mortgage loan
encumbering the Tower Lane property in the amount of approximately $3.7
million. The loan matures in November, 2001, bears an interest rate of
8.35% and is payable in monthly installments of interest and principal with
principal being amortized based on a 264-month amortization schedule. The
financing secured by the Butterfield property in the amount of
approximately $9.9 million was assumed by the venture as a result of this
transaction.
Cash Flows From Financing Activities: During the nine months ended
September 30, 1998 and 1997, the Trust generated approximately $49.9
million and approximately $18.2 million, respectively, from financing
activities. The cash flows provided by financing activities for the nine
months ended September 30, 1998 resulted primarily from approximately $54.4
million of net proceeds from bonds and mortgage loans reduced by
distributions paid to shareholders of approximately $4.5 million. The cash
flows provided by financing activities for the nine months ended
September 30, 1997 resulted primarily from approximately $22.2 million of
net proceeds from bonds and mortgage loans reduced by distributions paid to
shareholders of approximately $3.2 million.
<PAGE>
FINANCINGS:
On April 30, 1998, the Trust entered into a $25 million line of credit
agreement (the "CCA Line") with Nomura Asset Capital Corporation
("Nomura"). Nomura subsequently assigned its interest to its subsidiary -
The Capital Company of America LLC ("CCA"). The CCA Line has an initial
term of twenty-four months. Draws on the line bear interest at a rate
equal to LIBOR plus 2.00%. The Trust has the option to extend the line for
one additional year for a fee of $125,000. The agreement with CCA requires
the Trust to satisfy certain financial covenants, including maintaining a
consolidated tangible net worth of at least $52.5 million and a leverage
ratio of indebtedness to consolidated net worth equal to or less than 3:1.
As of September 30, 1998 there was $10.7 million outstanding on the line
leaving $14.3 million available for future borrowing. The Trust is
presently in the process of evaluating the adequacy of the amount of this
available credit and is exploring options to expand the debt capital
available to it on an interim and long-term basis for purposes of providing
financing for future acquisitions. At September 30, 1998, the Trust's debt
to total market capitalization ratio was 63.6% based on the closing share
price on that date of $6.437. The Trust's long-term goal is a balanced and
flexible capital structure that limits the amount borrowed to acquire
properties and for general corporate purposes to approximately 50% of total
market capitalization.
On June 22, 1998 and May 22, 1998 the Trust entered into three
permanent loan agreements with Nomura, which also were assigned to CCA.
The first loan known as the "Pool A Loan", was in the amount of $38.3
million and was funded on June 5, 1998. The second loan known as the "Pool
B Loan", in the amount of $7.7 million, was funded June 5, 1998. The third
loan known as the "Pool C Loan", was in the amount of $7.65 million and was
funded on June 30, 1998.
The Pool A Loan matures on June 11, 2028 and the Pool C Loan matures
on July 11, 2028. The Trust may prepay either loan during the 90 days
preceding July 11, 2008. The interest rate is effectively equal to 6.95%
for the first ten years of each loan. With respect to either loan, if the
Trust has not repaid the loan by July 11, 2008, the interest rate will be
reset and will be equal to the sum of 5% per year plus the rate per annum
which is the greater of: (i) 8.38%; or (ii) a rate based on the rate of
U.S. Treasury obligation with a maturity date closest to that of the loan,
plus 1.20% per year. The Pool B Loan matures on June 11, 2029, and the
Trust may prepay the loan during the 90 days preceding June 11, 2009. The
interest rate on the Pool B Loan is effectively equal to 7.07% for the
first eleven years of the loan. If the Trust has not repaid the loan by
June 11, 2009, the interest rate will be reset and will be equal to the sum
of 5% per year plus the rate per annum which is the greater of: (i) 8.38%;
or (ii) a rate based on the rate of U.S. Treasury obligation with a
maturity date closest to that of the loan, plus 1.35% per year.
In addition to the prepayment options in 2008 and 2009 for these
loans, the Trust may prepay all or part of the Pool A or Pool C Loans, on
the applicable Release Dates, by depositing with an escrow agent sufficient
funds to purchase U.S. Treasury obligations to repay the principal and
interest on the loans as if the loans had been held to maturity. The
"Release Dates" occur in June 2001 for the Pool A and Pool C Loans, and in
June 2002 for the Pool B Loan or, if earlier, two years after the date the
lender includes the applicable facility in a mortgage-backed securitization
program. In addition, if the ratio of principal and interest to net
operating income is more than 1.65:1.00 based on the net operating income
of the property securing the Pool B Loan, CCA can require the Trust to
repay a portion of the Pool B Loan or to add additional collateral to the
pool.
<PAGE>
Restrictions in the loan documents effectively prevent the Trust from
selling any of the properties securing the loans until the Release Dates
occur in 2001 and 2002. For example, the lender is not required to Release
the mortgages on any of the properties securing the loans until the Release
Date. After the Release Date, the Trust may cause the lender to release
the mortgage on a particular property by making certain payments and
satisfying other conditions. In addition, after the Release Date but
before the optional prepayment dates of July 11, 2008 (the Pool A and Pool
C Loans) or June 11, 2009 (the Pool B Loan), the Trust may substitute
different properties as collateral under each loan as long as the loan
amount collateralized by all properties replaced does not exceed fifty
percent of the total loan amount and certain other conditions are
satisfied.
The Pool B Loan is secured by a first mortgage on Lexington Business
Center. The Pool C Loan is secured by cross-collateralized first mortgages
on the Milwaukee Industrial Portfolio and Elmhurst Metro Court. The Pool
A Loan is secured by cross-collateralized first mortgages on: Colonial
Penn Building, Phoenix Business Park, Newtown Business Center, Southlake
Corporate Center, Technology Center, Airways Plaza Office Center, Peachtree
Pointe Office Park, Avalon Center Office Park, Sand Lake Technology Center,
Metric Plaza, Park Center, and University Corporate Center.
The Trust used the proceeds of the CCA loans to repay the amounts
outstanding under the CCA Line and the line of credit provided by American
National Bank of $23.25 million and $20.65 million, respectively. The
Trust also repaid the first mortgage loans secured by the Milwaukee
Industrial Portfolio and the Elmhurst Metro Court in the amounts of
approximately $3.5 million and approximately $3.8 million, respectively.
The balance of the CCA loan proceeds was utilized to pay transaction
related costs and for general operating reserves.
During the third quarter of 1998, the Trust borrowed $7.4 million from
a group of lenders for whom Morgens, Waterfall, Vintiadis & Company is
serving as agent pursuant to the October 10, 1997 convertible term loan
agreement. The proceeds were used to acquire Johns Creek Office and
Industrial Park and Technology Park. The loan matures on September 30,
2002 and bears interest at an annual interest rate of 12% payable
quarterly. In addition, on October 14 of each year, the Trust is required
to pay an annual fee equal to 2% of the amount outstanding as of that date.
The amounts outstanding on the loan are convertible at the Lenders' option
into Series A convertible preferred shares at a conversion price of $100
per share or into common shares at a conversion price of $5.15 per share.
IMPACT OF YEAR 2000
The Year 2000 issue or Y2K for short is the result of computer
programs utilizing two digits rather than four digits to define the
applicable year. Any of the Trust's computer programs or hardware that
have date-sensitive software or embedded chips may therefore recognize a
date using "00" as the year 1900 rather than the year 2000. This could
result in a system failure or miscalculations causing disruptions of real
estate operations, such as the functioning of property mechanical systems,
and other activities, such as a temporary inability to process
transactions, generate invoices or reports, manage the Trust's portfolio,
comply with regulatory requirements or engage in similar normal business
activities.
The Trust has established a plan for assessing and mitigating its
exposure to Y2K matters. The plan consists of several elements including a
complete upgrade of its computer software programs; an assessment of Y2K
compliance programs at each property and each property's reliance on
computer programs in operations; and an inquiry and dialogue with the
Trust's significant suppliers, vendors and tenants as to their current Y2K
compliance initiatives.
<PAGE>
The Trust has upgraded its networking and financial analysis software
programs. During the first quarter of 1999, the Trust expects to complete
the upgrade of its remaining software programs including its general ledger
and accounts payable software programs in order to minimize the impact of
Y2K at its headquarters. In addition, the Trust expects to complete
testing procedures that will ensure that all upgraded systems will operate
subsequent to December 31, 1999. These testing procedures will include
simulating operating all systems at a date after December 31, 1999. The
cost associated with these upgrades is expected to be less than $50,000
which will be capitalized and should not have a material impact on the
Trust's operations or cash flows.
The Trust is also assessing the operations at each property in an
effort to diagnose the impact that Y2K may have on property operations,
particularly mechanical systems. The Trust anticipates completing this
assessment by late 1998 or early 1999. At this time, the Trust does not
possess sufficient information to evaluate what, if any, remedial action
will be necessary and the potential costs associated with the action.
The Trust relies on various third parties to provide property level
and other administrative functions. The Trust has sent a questionnaire to
each of its property managers inquiring about their ability to address the
effect of the Y2K issue on their operations. To date, the Trust has
received responses from seven of its ten property managers. Of the
responding managers, four have systems that in their view are Y2K compliant
and three expect to become compliant by the second quarter of 1999. The
Trust is currently in the process of determining whether or not the other
property managers have addressed the Y2K issue and anticipates that the
process will be completed by December 31, 1998. The Trust intends to
further verify and test each property manager's compliance by the second
quarter of 1999. The computerized aspect of the relationship between the
Trust and its property managers is most prevalent in the accounting and
reporting functions from the property level to the Trust's headquarters.
The Trust believes that the potential impact of a non-compliant property
manager is minimized because the Trust has the right to cancel its property
management contracts generally on 30-day notice at no cost to the Trust.
Therefore, any property managers who may not be Y2K compliant can be
replaced with managers that have systems that are Y2K compliant. In spite
of the above steps to verify Y2K compliance, if any of the property
managers is unable to perform accounting functions after December 31, 1999,
the Trust expects to have the capability to process all accounting
transactions and to produce financial statements needed to manage the
properties and comply with its reporting requirements.
The Trust has also received reports from its payroll processing
service provider, its transfer agent and its principal bank. Its payroll
service provider has represented that it processes the Trust's payroll
using Y2K compliant software. The Trust's principal bank has represented
that its systems will be Y2K compliant by December 31, 1998 and will
proceed with testing of its updated systems throughout 1999. The Trust's
transfer agent has represented that its systems for proxy, stock transfer,
check clearance, billing and invoicing, direct registration and stock
issuances, all of which impact the Trust, have been certified as Y2K
compliant. The Trust's transfer agent expects to complete the upgrade and
certification of its dividend reinvestment and customer service programs,
which also impact the Trust, prior to November 30, 1998. Furthermore, the
Trust's transfer agent is developing contingency plans and testing programs
for all of its "mission critical" systems which are described above.
The Trust is also in the process of contacting other service providers
and vendors to ascertain their ability to continue to provide goods and
services to the Trust, in light of the Y2K issue, and the status of their
compliance initiatives. The Trust is also developing a mechanism to
continue the review and assessment of service providers and vendors on a
continuing basis until circumstances no longer warrant monitoring. The
future success of the Trust's operations is not closely tied to any one
third party vendor, supplier or service provider. As such, if any of these
<PAGE>
third parties fails to conduct business due to Y2K related problems, the
Trust expects to be able to contract with alternate third parties without
experiencing any material disruption of the Trust's operations or financial
condition. The Trust cannot quantify the potential costs and uncertainties
associated with potential Y2K program flaws at this time as they may relate
to other organizations that the Trust relies upon but the Trust does not
anticipate that the effect of this potential computer program flaw upon the
operations of the Trust will be significant.
As of September 30, 1998, the Trust had over 500 tenants. Its ten
(10) largest tenants will contribute approximately twenty percent (20%) of
its total projected revenues for 1999 based on its properties owned as of
September 30, 1998. Because of its broad tenant base, the Trust's future
operations, particularly its ability to collect rent, is not closely tied
to the ability of any one particular tenant. The Trust currently believes
that there will not be a material adverse effect on its operations or
financial condition if any one tenant ceases to conduct business (and pay
rent) due to Y2K issues. However, if a large number of tenants
particularly, several of the ten largest tenants, fail to pay rent for an
extended period of time, the Trust's cash flow may be adversely effected.
The Trust is currently formulating a plan to contact its 100 largest
tenants to survey their plans to address Y2K related issues which it
expects to initiate and complete by the end of the first quarter of 1999.
The Trust believes it has formulated an effective program to identify
and address the Y2K issue in a timely manner. As noted above, the Trust
has not yet completed all aspects of this program. The most likely worst
case scenario for the Trust regarding the Y2K issue is the possibility that
the Trust may be unable to provide an adequate working environment for its
tenants due to the failure of building mechanical, life safety or security
systems. Furthermore, the worst case scenario would include a Y2K problems
inhibiting the Trust's ability to collect rent or its tenants from paying
rent caused by Y2K issues unrelated to property operations. In addition,
disruptions in the economy generally resulting from the Y2K issues could
also materially and adversely affect the Trust. The Trust could be subject
to litigation for failing to provide an adequate working environment for
its tenants as a result of Y2K computer system disruptions. More
immediately, the tenants may cease paying rent which could impact the
Trust's liquidity. The amount of potential liability and lost revenue
cannot be reasonably estimated at this time.
The Trust is currently formulating a contingency plan in the event it
does not complete all aspects of the Y2K program or if the program in place
do not work. The Trust expects to complete the plan by March 1999.
OTHER INFORMATION
The following supplemental information has been provided by the Trust
to furnish the reader of this report an expanded understanding of the
properties owned as of September 30, 1998.
<PAGE>
<TABLE>
SUPPLEMENTAL INFORMATION BANYAN STRATEGIC REALTY TRUST
PORTFOLIO SUMMARY AS OF
September 30, 1998
<CAPTION>
Scheduled Lease
Expirations
--------------------------
Occu- 10/1-
Square pancy 12/31/ After
Location Footage % 1998 1999 2000 2000
------------- -------- ----- ------ ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
FLEX/INDUSTRIAL
Milwaukee Industrial
Portfolio. . . . . . . . . . . . Milwaukee, WI 235,800 86% 13% 11% 15% 47%
Elmhurst Metro Court . . . . . . . Elmhurst, IL 140,800 66% 12% 34% 3% 17%
Willowbrook Court. . . . . . . . . Willowbrook, IL 84,300 100% 17% 40% 11% 32%
Quantum Business Centre. . . . . . Louisville, KY 182,300 81% 12% 15% 22% 32%
6901 Riverport Drive . . . . . . . Louisville, KY 322,100 100% 0% 0% 100% 0%
Lexington Business Center. . . . . Lexington, KY 308,800 95% 55% 3% 15% 22%
Newtown Business Center. . . . . . Lexington, KY 87,100 100% 40% 33% 4% 23%
Avalon Ridge Business Park . . . . Norcross, GA 57,400 100% 0% 0% 0% 100%
Metric Plaza . . . . . . . . . . . Winter Park, FL 32,000 100% 0% 0% 0% 100%
Park Center. . . . . . . . . . . . Orlando, FL 47,400 85% 14% 6% 7% 58%
University Corporate
Center . . . . . . . . . . . . . Winter Park, FL 127,800 98% 0% 28% 46% 24%
Tower Lane Business Park . . . . . Bensenville, IL 95,900 90% 0% 34% 26% 30%
Johns Creek Office and
Industrial Park. . . . . . . . . Duluth and
Suwanne, GA 119,300 100% 0% 0% 0% 100%
--------- ---- ---- ---- ---- ----
Sub-Total. . . . . . . . . 1,841,000 92% 16% 13% 30% 33%
--------- ---- ---- ---- ---- ----
OFFICE
Colonial Penn Insurance. . . . . . Tampa, FL 79,200 100% 0% 0% 100% 0%
Florida Power & Light. . . . . . . Sarasota, FL 81,100 100% 0% 0% 0% 100%
Woodcrest Office Park. . . . . . . Tallahassee, FL 264,900 81% 3% 16% 21% 41%
Midwest Office Center. . . . . . . Oakbrook Terrace, IL 77,000 100% 12% 20% 32% 36%
Phoenix Business Park. . . . . . . Atlanta, GA 110,600 94% 0% 11% 26% 57%
Butterfield Office Plaza . . . . . Oak Brook, IL 200,800 95% 4% 16% 27% 48%
Southlake Corporate
Center . . . . . . . . . . . . . Morrow, GA 56,200 95% 2% 4% 13% 76%
University Square Business
Center. . . . . . . . . . . . . . Huntsville, AL 184,700 92% 16% 25% 12% 39%
Technology Center. . . . . . . . . Huntsville, AL 48,500 100% 0% 0% 100% 0%
Airways Plaza
Office Center. . . . . . . . . . Memphis, TN 87,800 97% 3% 93% 0% 1%
<PAGE>
Scheduled Lease
Expirations
--------------------------
Occu- 10/1-
Square pancy 12/31/ After
Location Footage % 1998 1999 2000 2000
------------- -------- ----- ------ ---- ---- -----
Peachtree Pointe Office
Park. . . . . . . . . . . . . . . Norcross, GA 71,700 92% 5% 33% 18% 36%
Avalon Center Office Park. . . . . Norcross, GA 53,300 96% 0% 0% 0% 96%
Sand Lake Tech Center. . . . . . . Orlando, FL 84,100 97% 23% 0% 0% 74%
Technology Park. . . . . . . . . . Norcross, GA 145,700 100% 1% 26% 9% 64%
--------- ---- ---- ---- ---- ----
Sub-Total. . . . . . . . . 1,545,600 94% 5% 19% 22% 48%
--------- ---- ---- ---- ---- ----
RETAIL
Northlake Tower Festival
Shopping Center. . . . . . . . . Atlanta, GA 321,600 99% 0% 5% 15% 26%
--------- ---- ---- ---- ---- ----
Total/Weighted Average . . 3,708,200 93% 10% 15% 26% 42%
========= ==== ==== ==== ==== ====
</TABLE>
<PAGE>
BANYAN STRATEGIC REALTY TRUST
PORTFOLIO SUMMARY AS OF September 30, 1998 - CONTINUED
Residen- Occu-
tial pancy
Location Units %
-------- -------- -----
RESIDENTIAL
- -----------
Country Creek. . . . . . . . Oklahoma City, OK 320 95%
Willowpark . . . . . . . . . Lawton, OK 160 94%
Winchester Run . . . . . . . Oklahoma City, OK 192 96%
Woodrun Village. . . . . . . Yukon, OK 192 97%
----- ---
Total/Weighted
Average. . . . . . 864 95%
===== ---
Portfolio Total. . . 94%
===
<PAGE>
BANYAN STRATEGIC REALTY TRUST
COMPARISON OF AVERAGE "IN PLACE" AND MARKET RENTS
AS OF September 30, 1998
AVERAGE AVERAGE
SQUARE "IN PLACE" MARKET
FOOTAGE BASE BASE
(NOTE 1) RENTS RENTS
--------- ---------- --------
Flex/Industrial. . . . . . . . 1,841,000 $ 5.29 $ 5.37
Office . . . . . . . . . . . . 1,466,400 8.82 9.97
Retail . . . . . . . . . . . . 321,600 8.73 9.98
--------- ------ ------
Total/
Weighted Average . . . . 3,632,100 $ 7.02 $ 7.64
========= ====== ======
AVERAGE AVERAGE
"IN PLACE" MARKET
RENTS RENTS
--------- --------
RESIDEN-
TIAL PER UNIT
PROPERTY TYPE UNITS (NOTE 2) PER UNIT
- ------------- --------- --------- --------
Residential. . . . . . . . . . 864 $ 378 $ 423
- -------
Note 1 - The "In Place" Rents for approximately 79,200 square feet of
the portfolio have been excluded from the above calculation because the
lease terms are of a short-term nature and therefore relative to that space
are higher compared to the market. It is the Trust's view that inclusion
of these rents in the above computation would make the analysis less
meaningful.
Note 2 - A portion of the difference between the above "In Place"
Rents and Market Rents per unit is attributable to the difference in the
size of the Trust's rental units compared to the size of other similar
units in the market place. The Trust's "In Place" Rents adjusted for the
size differential are 5% to 7% below Market Rent.
SUBSEQUENT EVENT
On November 13, 1998, Morgens, Waterfall, Vintiadis & Company Inc. as
agent for a group of "Lenders" pursuant to a convertible loan agreement
dated October 10, 1997, among the Trust and such Lenders, notified the
Trust of the Lenders election not to exercise an option to purchase up to
approximately $12.6 million in preferred or common shares of the Trust
pursuant to the convertible loan agreement. The option expired on
November 13, 1998.
ITEM 3(a). QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Trust does not engage in any hedge transactions or in the
ownership of any derivative financial instruments.
As of September 30, 1998, the Trust had approximately $150.2 million
of outstanding mortgage debt, $15.8 million of which bears interest at
variable rates. As of September 30, 1998, the weighted-average interest
rate on this debt was 6.7%. If interest rates on this variable rate debt
increased by the one percentage point (1%), interest expense would increase
by an additional $158,000 on an annual basis.
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed as part of this report:
Exhibit Number Description
Exhibit (27) Financial Data Schedule
Exhibit (99.17) Press release dated October 6, 1998
Exhibit (99.18) Press release dated November 10, 1998
The following exhibits are incorporated by reference:
Exhibit (3)(b) By-Laws dated March 13, 1986. (1)
(3)(c)
and (3)(d) Second Amended and Restated Declaration of
Trust dated as of August 8, 1986, as amended on March 8, 1991, May 4, 1993
and August 12, 1998, including Certificate of designations, preferences and
rights of Series A convertible preferred shares. (6)
(10) Material Contracts
(i) Employment Agreement of Leonard G.
Levine dated March 11, 1998. (7)
(ii) 1997 Omnibus Stock and Incentive
Plan dated July 9, 1997. (8)
(iii) Convertible Term Loan Agreement
dated as of October 10, 1997 among Banyan Strategic Realty Trust, as
Borrower, and the Entities listed therein, as Lenders. (3)
First Amendment to Convertible Term
Loan Agreement dated as of March 30, 1998 made by and among Banyan
Strategic Realty Trust and the Entities listed therein, as Lenders. (2)
Second Amendment to Convertible Term
Loan Agreement dated as of June 26, 1998 made by and among Banyan Strategic
Realty Trust and the Entities listed therein, as Lenders. (4)
(iv) Share Purchase Agreement by and
among Banyan Strategic Realty Trust and the Purchasers listed on the
signature page attached thereto dated as of October 10, 1997. (3)
(v) Registration Rights Agreement dated
as of October 10, 1997 between Banyan Strategic Realty Trust and the
Purchasers listed on the Signature Page attached thereto. (3)
<PAGE>
(vi) Revolving Credit Agreement dated
April 30, 1998 among Banyan Strategic Realty Trust, as Borrower and the
Capital Company of America, as Lender. (5)
(vii) Loan Agreement dated May 22, 1998
among
BSRT Fountain Square L.L.C.,
BSRT Phoenix Business Park L.L.C.,
BSRT Newtown Trust,
BSRT Southlake L.L.C.,
BSRT Technology Center L.L.C.,
BSRT Airways Plaza L.L.C.,
BSRT Peachtree Pointe L.L.C.,
BSRT Avalon Center L.L.C.,
BSRT Sand Lake Tech Center L.L.C.,
BSRT Park Center L.L.C.,
BSRT Metric Plaza L.L.C., and
BSRT University Corporate Center
L.L.C., as Borrower, and the Capital Company of America, as Lender. (4)
First Amendment to Loan Agreement
dated September 11, 1998 among BSRT Fountain Square L.L.C., BSRT Phoenix
Business Park L.L.C., BSRT Newtown Trust, BSRT Southlake L.L.C., BSRT
Technology Center L.L.C., BSRT Airways Plaza L.L.C., BSRT Peachtree Pointe
L.L.C., BSRT Avalon Center L.L.C., BSRT Sand Lake Tech Center L.L.C., BSRT
Park Center L.L.C., BSRT Metric Park L.L.C., and BSRT University Corporate
Center L.L.C., as Borrower, and the Capital Company of America LLC, as
Lender. (6)
(viii) Loan Agreement dated May 22, 1998
between BSRT Lexington B Corp. and BSRT Lexington Trust, as Borrower and
the Capital Company of America, as Lender. (4)
First Amendment to Loan Agreement
dated September 11, 1998 between BSRT Lexington B Corp., and BSRT Lexington
Trust, as Borrower and the Capital Company of America LLC, as Lender. (6)
(ix) Loan Agreement dated June 22, 1998
between Banyan/Morgan Wisconsin L.L.C., and Banyan/Morgan Elmhurst L.L.C.,
as Borrower and the Capital Company of America, as Lender. (4)
First Amendment to Loan Agreement
dated September 11, 1998 between Banyan/Morgan Wisconsin L.L.C., as
Borrower, and Banyan/Morgan Elmhurst L.L.C., as Lender and the Capital
Company of America LLC, as Borrower. (6)
Exhibit (21) Subsidiaries of the Trust (2)
<PAGE>
(1) Incorporated by reference from the Trust's Registration
Statement on Form S-11 (file number 33-4169).
(2) Incorporated by reference from the Trust's Form 10-K/A
for the year ended December 31, 1997.
(3) Incorporated by reference from the Trust's Form 8-K dated
October 14, 1997.
(4) Incorporated by reference from the Trust's Form 8-K dated
May 22, 1998.
(5) Incorporated by reference from the Trust's Form 10-Q
dated March 31, 1998.
(6) Incorporated by reference from the Trust's Form 8-K/A-1
dated August 14, 1998.
(7) Incorporated by reference from the Trust's Form 10-K
dated December 31, 1997.
(8) Incorporated by reference from the Trust's Form 10-Q for
the quarter ended June 30, 1997.
(b) The following reports on Form 8-K were filed during the quarter
ended September 30, 1998:
A report on Form 8-K/A - Number 2 dated April 30, 1998 was
filed on July 2, 1998 wherein Item 7 disclosed the Financial Statements of
Peachtree Pointe Office Park.
A report on Form 8-K dated May 22, 1998 was filed on July 6,
1998 wherein Item 5 disclosed terms of loan agreements with the Capital
Company of America and the second amendment to the Convertible Term Loan
Agreement.
A report on Form 8-K dated July 23, 1998 was filed on
August 19, 1998 wherein Item 5 disclosed shareholders approval to remove a
limitation on the life of the Trust, disclosed the Registrants second
quarter performance, disclosed the shareholders approval of a proposal to
authorize the Trust to issue preferred shares and disclosed receipt of
consents of independent auditors to the incorporation by reference in the
Trust's Registration Statement (Form S-3 and Form S-8) of certain auditors
reports.
A report on Form 8-K dated August 14, 1998 was filed on
August 31, 1998 wherein Item 2 disclosed the Registrants acquisition of
Technology Park and Johns Creek Office and Industrial Park located in
Norcross, Duluth and Suwanne, Georgia.
<PAGE>
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: November 13, 1998
Leonard G. Levine, President
By: /s/ Joel L. Teglia Date: November 13, 1998
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's Form 10-Q for the nine months ended September 30,
1998 and is qualified in its entirety by reference to such Form 10-Q.
(Dollars are in thousands, except per share data)"
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 2,842
<SECURITIES> 0
<RECEIVABLES> 1,247
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,089
<PP&E> 219,621
<DEPRECIATION> (10,048)
<TOTAL-ASSETS> 221,926
<CURRENT-LIABILITIES> 5,809
<BONDS> 21,489
<COMMON> 62,462
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 221,926
<SALES> 0
<TOTAL-REVENUES> 28,773
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 17,313
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,879
<INCOME-PRETAX> 4,132
<INCOME-TAX> 0
<INCOME-CONTINUING> 4,132
<DISCONTINUED> 0
<EXTRAORDINARY> (141)
<CHANGES> 0
<NET-INCOME> 3,991
<EPS-PRIMARY> 0.30
<EPS-DILUTED> 0.29
</TABLE>
EXHIBIT (99.17)
- ---------------
AT THE TRUST: AT THE FINANCIAL RELATIONS BOARD:
Karen Dickelman Tony Ebersole Laura Kuhlmann Georganne Palffy
Director - General Info. Media Inquiries Analyst Inquiries
Investor
Relations
312 683-5671 312 640-6727 312 640-6727 312 640-6768
FOR IMMEDIATE RELEASE
TUESDAY, OCTOBER 6, 1998
BANYAN STRATEGIC REALTY TRUST DECLARES THIRD QUARTER 1998
CASH DISTRIBUTION
CHICAGO, OCTOBER 6, 1998 -- Banyan Strategic Realty Trust (Nasdaq: BSRTS)
today declared a quarterly cash distribution of $0.12 per share for the
third quarter ended September 30, 1998. The distribution is payable
November 20, 1998 to shareholders of record as of October 20, 1998.
Banyan Strategic Realty Trust is an equity real estate investment trust
(REIT) with a portfolio that includes primarily flex/industrial and
suburban office buildings, as well as retail and residential properties.
The Trust's current portfolio includes 32 properties totaling 3.7 million
net rentable square feet and 864 apartment units. The Trust currently has
13,348,831 shares of beneficial interest outstanding.
See Banyan's website at http://banyanreit.com
for complete company information.
For further information regarding Banyan free of charge via fax,
dial 1-800-PRO-INFO and enter "BSRTS".
-- END --
EXHIBIT (99.18)
- ---------------
AT THE TRUST: AT THE FINANCIAL RELATIONS BOARD:
Karen Dickelman Tony Ebersole Laura Kuhlmann Georganne Palffy
Director - General Info. Media Inquiries Analyst Inquiries
Investor
Relations
312 683-3671 312 640-6728 312 640-6727 312 640-6768
FOR IMMEDIATE RELEASE
TUESDAY, NOVEMBER 10, 1998
BANYAN STRATEGIC REALTY TRUST REPORTS $0.19 FFO PER SHARE ON
REVENUES OF $10.6 MILLION FOR THIRD QUARTER 1998
On Target for Record FFO for Full Year 1998
Estimates 1999 FFO
BANYAN STRATEGIC REALTY TRUST HIGHLIGHTS*
. Third Quarter Funds From Operations (FFO) of $2.7 million, or $0.19
per share, up more than 74 percent from same period last year
. Revenues of $10.6 million, an increase of 34 percent from year
earlier period
. EBITDA of $5.6 million, up 46 percent from a year ago
. $18 million in new acquisitions during quarter, increases portfolio
nine percent
. Average occupancy of portfolio 94 percent at September 30, 1998
. Quarterly cash distribution of $0.12 per share declared
. On target for 1998 FFO of $0.75 to $0.76 per share
. Estimates 1999 FFO of $0.82 to $0.83 per share
* per share data presented on diluted basis
CHICAGO, NOVEMBER 10, 1998 -- BANYAN STRATEGIC REALTY TRUST (Nasdaq: BSRTS)
a real estate investment trust, today announced third quarter 1998 funds
from operations (FFO) of $2.7 million, or $0.19 per share, a more than 74
percent increase in total FFO from the previous year's third quarter.
Income before net gain on disposition of investments in real estate was
$1.4 million, compared to $0.7 million in the previous year's third
quarter. Earnings per share before net gains were $0.10 per share in the
recent third quarter, compared with $0.06 per share in the third quarter
last year. Banyan also reported significantly improved earnings and EBITDA
for both the third quarter and first nine months period, reflecting its
portfolio growth since 1996 and the ongoing strong portfolio performance of
its office and flex/industrial properties in the mid-west and southeastern
areas of the U.S. Weighted average occupancy rates at the Trust's 32
properties as of September 30, 1998 was 94 percent.
During the third quarter, Banyan acquired one office property and one
flex/industrial property, bringing the total amount invested in new
acquisitions in 1998 to approximately $60 million, or 834,600 net rentable
square feet, representing a 29 percent increase in square footage from
year-end 1997.
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CONSOLIDATED FINANCIAL RESULTS
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For the third quarter, total revenue grew 34 percent to $10.6 million,
compared with $7.9 million during the 1997 third quarter. FFO of $2.7
million, or $0.19 per share, increased more than 74 percent from FFO of
$1.5 million, or $0.145 per share a year ago.
For the first nine months of 1998, the Trust reported a 40 percent increase
in revenues to $28.8 million, compared with revenues of $20.5 million
during the same period the previous year. Total FFO doubled in the first
nine months period to $7.6 million, or $0.55 per share, from FFO of $3.8
million, or $0.37 per share during the same period a year ago. Net income
for the first nine months was $4.0 million, or $0.29 per share compared to
net income of $2.6 million or $0.24 per share for the first same period of
1997.
"We are very pleased with the Trust's continued growth in FFO, driven by
our acquisitions since 1996 and the overall improved financial and
operating results from a year ago, and consistently high occupancy rates
throughout our portfolio," said Leonard G. Levine, President of Banyan.
"Our same store net operating income grew 4.1 percent during the last nine
months compared with the same period last year. Rental increases for lease
expirations in the first nine months of this year averaged 6.5 percent,
indicative of the strong economies in which we operate."
"Our acquisitions in the quarter bring our total acquisitions for the year
to approximately $60 million based on purchase price. With our current
portfolio, we are confident in delivering on our targets for the year of
FFO between $0.75 and $0.76 share. Meanwhile, as opportunities present
themselves, we will continue to seek value-added, accretive acquisitions in
the niche markets Banyan has carved out in the office and flex/industrial
sectors located in economically strong mid-size cities and metropolitan
suburban areas," he added.
TWO NEW ACQUISITIONS ANNOUNCED IN THIRD QUARTER
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During the third quarter, Banyan further increased its presence in two
submarkets of Atlanta with the acquisition of one office and one
flex/industrial property, for a total consideration of $18.2 million,
including closing costs and other related expenses. The properties, known
as TECHNOLOGY PARK AND JOHN'S CREEK AND INDUSTRIAL PARK consist of five
buildings located in the Northeast suburbs of Atlanta in an area known as
Peachtree Corners - a favored location for high technology companies.
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PORTFOLIO PERFORMANCE -- THIRD QUARTER RENTAL INCOME UP 32 PERCENT
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Rental income from the Trust's portfolio increased 32 percent to $9.1
million, compared with $6.9 million during the same period a year ago,
reflecting the addition of eleven properties acquired since the end of last
year's third quarter. Total property operating expenses as a percent of
total revenue decreased to 35 percent in the third quarter of 1998 from 38
percent for the same period the previous year. Total net operating income
increased 41.8 percent to $6.9 million compared to the same period last
year.
BALANCE SHEET
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At September 30, 1998, total assets at net book value were approximately
$222 million. The debt to total market capitalization ratio was 63.6
percent, based on a total market capitalization of $236.1 million based on
a September 30, 1998 share price of $6.437. EBITDA (earnings before
interest, tax, depreciation and amortization) was $5.6 million, up 46.2
percent from the previous year's third quarter. EBITDA coverage ratio
through September 30, 1998 was 2.12. The Trust had $150.2 million of total
debt outstanding as of September 30, 1998.
QUARTERLY CASH DISTRIBUTION AND FUNDS AVAILABLE FOR DISTRIBUTION (FAD)
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On October 6, Banyan declared a quarterly cash distribution of $0.12 per
share for the third quarter ended September 30, 1998. The distribution is
payable November 20, 1998 to shareholders of record as of October 20, 1998.
In the first quarter of 1998, the distribution was increased from the
previous quarterly distributions of $0.10 per share, based on the Trust's
increased levels of FFO.
Funds Available for Distribution (FAD) totaled $2.2 million for the three
months ended September 30, 1998, or $0.16 per share. FAD is calculated by
adjusting FFO for straight-line rents, lease commissions paid and
normalized reserves for capital improvements. The capital reserve is
$0.075 per square foot for flex/industrial properties, $0.10 per square
foot for office properties, $0.15 per square foot for retail property and
$200 per residential unit.
OUTLOOK
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Mr. Levine added, "With the strength we have experienced in terms of
portfolio growth, we believe we are well on target to meet our FFO goal for
this year. As we move ahead, we are initially targeting 1999 FFO of
between $0.82 and $0.83 per share. We feel comfortable in meeting these
expectations as we continue to focus on internal growth via favorable
leasing transactions and we remain optimistic regarding value-added
acquisitions. Additionally, during the third quarter we completed our
conversion to an UPREIT format, giving us added flexibility in structuring
capital alternatives in the future."
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BANYAN STRATEGIC REALTY TRUST
ADD 3
Banyan Strategic Realty Trust is an equity Real Estate Investment Trust
(REIT) that owns and acquires primarily office and flex/industrial
properties. The properties are located in certain major metropolitan areas
of Atlanta, Georgia and Chicago, Illinois and smaller markets such as
Huntsville, Alabama; Louisville, Kentucky; Memphis, Tennessee; and Orlando,
Florida located in the Midwestern and Southeastern United States. The
Trust's current portfolio consists of 32 properties totaling 3.7 million
rentable square feet and 864 apartment units. As of this date, the Trust
has 13,349,528 shares of beneficial interest outstanding.
Some of the statements contained in the foregoing are forward-looking
statements. Words such as "believes," "intends," "anticipates," "expects,"
and similar expressions are intended to identify forward-looking statements
which are subject to a number of risks and uncertainties, including, among
other things, general real estate investment risks, lack of operating
history associated with recent acquisitions, ability to raise capital
either equity or debt, potential inability to repay or finance indebtedness
at maturity, increases in interest rates, competition for property
acquisitions, adverse consequences of failure to qualify as a REIT, and
possible environmental liabilities. Actual results could differ materially
from those projected in these forward-looking statements. Reference is
made to the annual report on Form 10-K filed by the Trust, specifically
under the heading "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Factors Affecting the Trust's
Business Plan" for a more complete discussion of these risk factors. The
Trust undertakes no obligation to publicly release the result of any
revisions to these forward-looking statements that may be made to reflect
any future events or circumstances.
See Banyan's Website at http://www.banyanreit.com.
For further information regarding Banyan free of charge via fax,
dial 1-800-PRO-INFO and enter "BSRTS."
Financial Tables to Follow
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BANYAN STRATEGIC REALTY TRUST
ADD 4
BANYAN STRATEGIC REALTY TRUST
SELECTED FINANCIAL DATA
(Dollars in Thousands, except per share data)
THREE MONTHS ENDED YEAR ENDED
9/30/98 9/30/97 12/31/97
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Total revenue. . . . . . . . . . . $ 10,552 $ 7,875 $ 28,785
Recovery of losses on loans,
notes and interest receivable. . -- -- 161
Operating expenses . . . . . . . . (9,044) (7,051) (25,664)
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Operating income . . . . . . . . . 1,508 824 3,282
Minority interest in
consolidated partnerships. . . . (151) (152) (590)
Income (loss) of real estate
ventures . . . . . . . . . . . . -- (14) 37
Net gain on disposition
of investments in real estate. . -- 1,072 881
Extraordinary item, net of
minority interest. . . . . . . . -- -- (64)
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Net income . . . . . . . . . . . . $ 1,357 $ 1,730 $ 3,546
Earnings per share of
Beneficial Interest --
Basic and Diluted:
Income before Net Gains
and Extraordinary Item . . . . $ 0.10 $ 0.06 $ 0.24
Net Income . . . . . . . . . . . $ 0.10 $ 0.16 $ 0.32
======== ======== ========
FUNDS FROM OPERATIONS
Net income . . . . . . . . . . . . $ 1,357 $ 1,730 $ 3,546
Plus:
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Depreciation expense . . . . . . . 1,271 897 3,277
Depreciation included in
operations of real
estate ventures. . . . . . . . . -- -- 15
Lease commission amortization. . . 122 49 208
LESS:
- ----
Minority interest share
of depreciation expense. . . . . (75) (68) (254)
Minority interest share of lease
commission amortization. . . . . (7) (5) (21)
Recovery of losses on loans,
notes and interest receivable. . -- -- (161)
Net gain on disposition of
investments in real estate . . . -- (1,072) (881)
Extraordinary item,
net of minority interest . . . . -- -- 64
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Funds from operations. . . . . . . $ 2,668 $ 1,531 $ 5,793
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<TABLE>
BANYAN STRATEGIC REALTY TRUST
ADD 5
BANYAN STRATEGIC REALTY TRUST
PORTFOLIO SUMMARY
<CAPTION>
Scheduled Lease
Expirations
-----------------------------------
Occu- 10/1-
Square pancy 12/31/ After
Location Footage % 1998 1999 2000 2000
------------- -------- ----- ------ ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
FLEX/INDUSTRIAL
Milwaukee Industrial
Portfolio. . . . . . . . . . . . Milwaukee, WI 235,800 86% 13% 11% 15% 47%
Elmhurst Metro Court . . . . . . . Elmhurst, IL 140,800 66% 12% 34% 3% 17%
Willowbrook Court. . . . . . . . . Willowbrook, IL 84,300 100% 17% 40% 11% 32%
Quantum Business Centre. . . . . . Louisville, KY 182,300 81% 12% 15% 22% 32%
6901 Riverport Drive . . . . . . . Louisville, KY 322,100 100% 0% 0% 100% 0%
Lexington Business Center. . . . . Lexington, KY 308,800 95% 55% 3% 15% 22%
Newtown Business Center. . . . . . Lexington, KY 87,100 100% 40% 33% 4% 23%
Avalon Ridge Business Park . . . . Norcross, GA 57,400 100% 0% 0% 0% 100%
Metric Plaza . . . . . . . . . . . Winter Park, FL 32,000 100% 0% 0% 0% 100%
Park Center. . . . . . . . . . . . Orlando, FL 47,400 85% 14% 6% 7% 58%
University Corporate
Center . . . . . . . . . . . . . Winter Park, FL 127,800 98% 0% 28% 46% 24%
Tower Lane Business Park . . . . . Bensenville, IL 95,900 90% 0% 34% 26% 30%
Johns Creek Office and
Industrial Park. . . . . . . . . Duluth and
Suwanne, GA 119,300 100% 0% 0% 0% 100%
--------- ---- ---- ---- ---- ----
Sub-Total. . . . . . . . . 1,841,000 92% 16% 13% 30% 33%
--------- ---- ---- ---- ---- ----
OFFICE
Colonial Penn Insurance. . . . . . Tampa, FL 79,200 100% 0% 0% 100% 0%
Florida Power & Light. . . . . . . Sarasota, FL 81,100 100% 0% 0% 0% 100%
Woodcrest Office Park. . . . . . . Tallahassee, FL 264,900 81% 3% 16% 21% 41%
Midwest Office Center. . . . . . . Oakbrook Terrace, IL 77,000 100% 12% 20% 32% 36%
Phoenix Business Park. . . . . . . Atlanta, GA 110,600 94% 0% 11% 26% 57%
Butterfield Office Plaza . . . . . Oak Brook, IL 200,800 95% 4% 16% 27% 48%
Southlake Corporate
Center . . . . . . . . . . . . . Morrow, GA 56,200 95% 2% 4% 13% 76%
University Square Business
Center. . . . . . . . . . . . . . Huntsville, AL 184,700 92% 16% 25% 12% 39%
Technology Center. . . . . . . . . Huntsville, AL 48,500 100% 0% 0% 100% 0%
Airways Plaza
Office Center. . . . . . . . . . Memphis, TN 87,800 97% 3% 93% 0% 1%
<PAGE>
Scheduled Lease
Expirations
-----------------------------------
Occu- 10/1-
Square pancy 12/31/ After
Location Footage % 1998 1999 2000 2000
------------- -------- ----- ------ ---- ---- -----
Peachtree Pointe Office
Park. . . . . . . . . . . . . . . Norcross, GA 71,700 92% 5% 33% 18% 36%
Avalon Center Office Park. . . . . Norcross, GA 53,300 96% 0% 0% 0% 96%
Sand Lake Tech Center. . . . . . . Orlando, FL 84,100 97% 23% 0% 0% 74%
Technology Park. . . . . . . . . . Norcross, GA 145,700 100% 1% 26% 9% 64%
--------- ---- ---- ---- ---- ----
Sub-Total. . . . . . . . . 1,545,600 94% 5% 19% 22% 48%
--------- ---- ---- ---- ---- ----
RETAIL
Northlake Tower Festival
Shopping Center. . . . . . . . . Atlanta, GA 321,600 99% 0% 5% 18% 76%
--------- ---- ---- ---- ---- ----
Total/Weighted Average . . 3,708,200 93% 10% 15% 26% 42%
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</TABLE>
<PAGE>
Residen- Occu-
tial pancy
Location Units %
-------- -------- -----
RESIDENTIAL
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Country Creek. . . . . . . . Oklahoma City, OK 320 95%
Willowpark . . . . . . . . . Lawton, OK 160 94%
Winchester Run . . . . . . . Oklahoma City, OK 192 96%
Woodrun Village. . . . . . . Oklahoma, OK 192 97%
----- ---
Total. . . . . . . . 864 95%
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Portfolio Total. . . 94%
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