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, 2000.
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 (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 10, 2000: 14,245,649
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BANYAN STRATEGIC REALTY TRUST
Consolidated Balance Sheets
(Unaudited)
(Dollars in thousands)
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- -----------
ASSETS
------
Investment in Real Estate, at cost:
Land . . . . . . . . . . . . . . . $ 36,445 $ 36,445
Building . . . . . . . . . . . . . 148,608 148,608
Building Improvements. . . . . . . 18,632 14,211
---------- ----------
203,685 199,264
Less: Accumulated Depreciation . . (19,898) (15,420)
---------- ----------
183,787 183,844
---------- ----------
Cash and Cash Equivalents. . . . . . 3,209 13,097
Restricted Cash -
Capital Improvements . . . . . . . 1,101 1,497
Restricted Cash - Other. . . . . . . 1,757 1,171
Interest and Accounts Receivable . . 1,377 1,186
Deferred Financing Costs
(Net of Accumulated Amortization
of $1,554 and $1,512,
respectively). . . . . . . . . . . 1,285 1,568
Other Assets . . . . . . . . . . . . 4,523 4,284
---------- ----------
Total Assets . . . . . . . . . . . . $ 197,039 $ 206,647
========== ==========
<PAGE>
BANYAN STRATEGIC REALTY TRUST
Consolidated Balance Sheets - CONTINUED
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Liabilities
Mortgage Loans Payable . . . . . . . $ 113,841 $ 120,781
Bonds Payable. . . . . . . . . . . . 4,500 4,500
Unsecured Loan Payable . . . . . . . -- 7,400
Accounts Payable and
Accrued Expenses . . . . . . . . . 3,514 2,767
Accrued Real Estate Taxes Payable. . 1,726 908
Accrued Interest Payable . . . . . . 656 615
Unearned Revenue . . . . . . . . . . 923 922
Security Deposits. . . . . . . . . . 1,370 1,203
---------- ----------
Total Liabilities. . . . . . . . . . 126,530 139,096
---------- ----------
Minority Interest in
Consolidated Partnerships. . . . . 2,371 2,256
Shareholders' Equity
Series A Convertible Preferred
Shares, No Par Value,
200,000 Shares Authorized,
61,572 Shares Issued and
Outstanding. . . . . . . . . . . . 6,157 --
Shares of Beneficial Interest,
No Par Value, Unlimited
Authorization; 15,760,810
and 15,073,917 Shares Issued,
respectively . . . . . . . . . . . 124,332 120,707
Accumulated Deficit. . . . . . . . . (51,826) (48,046)
Employees' Notes . . . . . . . . . . (3,159) --
Treasury Shares at Cost,
1,522,649 Shares . . . . . . . . . (7,366) (7,366)
---------- ----------
Total Shareholders' Equity . . . . . 68,138 65,295
---------- ----------
Total Liabilities and
Shareholders' Equity . . . . . . . $ 197,039 $ 206,647
========== ==========
The accompanying notes are an integral part
of the consolidated financial statements.
<PAGE>
BANYAN STRATEGIC REALTY TRUST
Consolidated Statements of Operations
For the Nine Months Ended September 30, 2000 and 1999
(Unaudited)
(Dollars in thousands, except per share data)
2000 1999
-------- --------
REVENUE
Rental Income. . . . . . . . . . . . . . . . . . $ 24,438 $ 27,611
Operating Cost Reimbursement . . . . . . . . . . 2,849 2,831
Miscellaneous Tenant Income. . . . . . . . . . . 263 865
Income on Investments and Other Income . . . . . 545 113
-------- --------
Total Revenue. . . . . . . . . . . . . . . . . . . 28,095 31,420
-------- --------
EXPENSES
Property Operating . . . . . . . . . . . . . . . 3,400 4,043
Repairs and Maintenance. . . . . . . . . . . . . 2,762 3,327
Real Estate Taxes. . . . . . . . . . . . . . . . 2,087 2,237
Interest . . . . . . . . . . . . . . . . . . . . 6,889 8,719
Ground Lease . . . . . . . . . . . . . . . . . . 694 704
Depreciation and Amortization. . . . . . . . . . 5,092 4,916
General and Administrative . . . . . . . . . . . 3,193 3,229
Amortization of Deferred Financing Costs . . . . 226 196
Severance and Termination Costs. . . . . . . . . 1,557 --
-------- --------
Total Expenses . . . . . . . . . . . . . . . . . . 25,900 27,371
Income Before Minority Interest and
Extraordinary Item . . . . . . . . . . . . . . . 2,195 4,049
Minority Interest in Consolidated
Partnerships . . . . . . . . . . . . . . . . . . (403) (381)
-------- --------
Income Before Extraordinary Item . . . . . . . . . 1,792 3,668
Extraordinary Item . . . . . . . . . . . . . . . . (42) --
-------- -------
Net Income . . . . . . . . . . . . . . . . . . . . 1,750 3,668
Less Income Attributable to Preferred Shares . . . (431) --
-------- --------
Net Income Available to Common Shares. . . . . . . $ 1,319 $ 3,668
======== ========
Basic and Diluted Earnings Available to
Common Shares per weighted-average
Common Share:
Income Before Extraordinary Item . . . . . . . . $ 0.09 $ 0.27
======== ========
Net Income . . . . . . . . . . . . . . . . . . . $ 0.09 $ 0.27
======== ========
The accompanying notes are an integral part
of the consolidated financial statements.
<PAGE>
BANYAN STRATEGIC REALTY TRUST
Consolidated Statements of Operations
For the Three Months Ended September 30, 2000 and 1999
(Unaudited)
(Dollars in thousands, except per share data)
2000 1999
-------- --------
REVENUE
Rental Income. . . . . . . . . . . . . . . . . . $ 8,159 $ 9,277
Operating Cost Reimbursement . . . . . . . . . . 900 910
Miscellaneous Tenant Income. . . . . . . . . . . 99 295
Income on Investments and Other Income . . . . . 127 27
-------- --------
Total Revenue. . . . . . . . . . . . . . . . . . . 9,285 10,509
-------- --------
EXPENSES
Property Operating . . . . . . . . . . . . . . . 1,211 1,400
Repairs and Maintenance. . . . . . . . . . . . . 928 1,055
Real Estate Taxes. . . . . . . . . . . . . . . . 664 764
Interest . . . . . . . . . . . . . . . . . . . . 2,274 2,940
Ground Lease . . . . . . . . . . . . . . . . . . 232 239
Depreciation and Amortization. . . . . . . . . . 1,760 1,682
General and Administrative . . . . . . . . . . . 1,049 1,035
Amortization of Deferred Financing Costs . . . . 67 65
Severance and Termination Costs. . . . . . . . . 1,557 --
-------- --------
Total Expenses . . . . . . . . . . . . . . . . . . 9,742 9,180
Income (Loss) Before Minority Interest . . . . . . (457) 1,329
Minority Interest in Consolidated
Partnerships . . . . . . . . . . . . . . . . . . (130) (126)
-------- --------
Net Income (Loss). . . . . . . . . . . . . . . . . (587) 1,203
Less Income Attributable to Preferred Shares . . . (155) --
-------- --------
Net Income (Loss) Available to Common Shares . . . $ (742) $ 1,203
======== ========
Basic and Diluted Earnings Available to
Common Shares per weighted-average
Common Share:
Net Income (Loss). . . . . . . . . . . . . . . . $ (0.05) $ 0.09
======== ========
The accompanying notes are an integral part
of the consolidated financial statements.
<PAGE>
<TABLE>
BANYAN STRATEGIC REALTY TRUST
Consolidated Statement of Shareholders' Equity
For the Nine Months Ended September 30, 2000
(Unaudited)
(Dollars in thousands)
<CAPTION>
Series A Convertible Shares of
Preferred Shares Beneficial Interest Accumu-
--------------------- --------------------- lated Employees' Treasury
Shares Amount Shares Amount Deficit Notes Shares Total
---------- -------- ---------- --------- --------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shareholders'
Equity,
January 1,
2000. . . . . . . . -- $ -- 15,073,917 $120,707 $(48,046) $ -- $(7,366) $65,295
Issuance of
Shares,
net of issuance
costs . . . . . . . 61,572 6,157 686,893 3,625 -- -- -- 9,782
Employees' Notes,
net of repay-
ments . . . . . . . -- -- -- -- -- (3,159) -- (3,159)
Net Income . . . . . -- -- -- -- 1,750 -- -- 1,750
Common Distri-
butions Paid. . . . -- -- -- -- (5,099) -- -- (5,099)
Preferred Distri-
bution Paid . . . . -- -- -- -- (431) -- -- (431)
------ -------- ---------- -------- -------- -------- -------- --------
Shareholders'
Equity,
September 30,
2000. . . . . . . . 61,572 $ 6,157 15,760,810 $124,332 $(51,826) $(3,159) $ (7,366) $ 68,138
====== ======== ========== ======== ======== ======== ======== ========
<FN>
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<PAGE>
BANYAN STRATEGIC REALTY TRUST
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2000 and 1999
(Unaudited)
(Dollars in thousands)
2000 1999
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income . . . . . . . . . . . . . . . . . . . . $ 1,750 $ 3,668
Adjustments to Reconcile Net Income to
Net Cash Provided By Operating Activities:
Extraordinary Item . . . . . . . . . . . . . . . 42 --
Depreciation and Amortization. . . . . . . . . . 5,318 5,112
Minority Interest in Consolidated
Partnerships. . . . . . . . . . . . . . . . . . 403 381
Net Change In:
Restricted Cash - Other. . . . . . . . . . . . (586) (837)
Interest and Accounts Receivable . . . . . . . (191) 389
Other Assets . . . . . . . . . . . . . . . . . (853) (1,209)
Accounts Payable and Accrued Expenses. . . . . 747 (150)
Accrued Interest Payable . . . . . . . . . . . 41 106
Accrued Real Estate Taxes Payable. . . . . . . 818 1,033
Unearned Revenue . . . . . . . . . . . . . . . 1 289
Security Deposits. . . . . . . . . . . . . . . 167 19
-------- --------
Net Cash Provided By Operating Activities. . . . . 7,657 8,801
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Investment in Real Estate . . . . (4,421) (3,580)
Restricted Cash - Capital Improvements . . . . 396 (541)
-------- --------
Net Cash Used In Investing Activities . . . . . . (4,025) (4,121)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Loans Payable. . . . . . . . . . . 8,500 --
Distributions to Minority Partners . . . . . . . (288) (350)
Deferred Financing Costs . . . . . . . . . . . . (159) (7)
Payment of Preferred Shares Issuance Costs . . . (30) --
Repayment of Employees' Notes. . . . . . . . . . 79 --
Principal Payments on Mortgage Loans,
Bonds Payable and Unsecured Loan Payable . . . (16,683) (1,253)
Distributions Paid to Shareholders . . . . . . . (5,099) (4,839)
Payment of Preferred Distributions . . . . . . . (431) --
Prepayment Penalties on Early Extinguishment
of Debt. . . . . . . . . . . . . . . . . . . . (6) --
Shares Issued, Net of Issuance Costs . . . . . . 597 625
-------- --------
Net Cash Used In Financing Activities. . . . . . . (13,520) (5,824)
-------- --------
Net Decrease In Cash and Cash Equivalents. . . . . (9,888) (1,144)
Cash and Cash Equivalents at
Beginning of Period. . . . . . . . . . . . . . . 13,097 3,731
-------- --------
Cash and Cash Equivalents at End of Period . . . . $ 3,209 $ 2,587
======== ========
Supplemental Information:
Interest Paid During the Period. . . . . . . . . $ 6,848 $ 8,613
======== ========
Non-Cash Financing Activities:
Preferred Share Debt Conversion. . . . . . . . . $ 6,157 $ --
======== ========
Employees' Notes . . . . . . . . . . . . . . . . $ 3,238 $ --
======== ========
The accompanying notes are an integral part
of the consolidated financial statements.
<PAGE>
BANYAN STRATEGIC REALTY TRUST
Notes to Consolidated Financial Statements
September 30, 2000
(Unaudited)
(Dollars in thousands, except per share data)
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, 1999 which are included in the Trust's 1999
Form 10-K, as certain footnote disclosures which would substantially
duplicate those contained in such audited statements have been omitted from
this report. 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, 2000. All adjustments made to the financial
statements, as presented, are of a normal recurring nature to the Trust.
RECLASSIFICATIONS
Certain reclassifications have been made to the previously reported
1999 consolidated financial statements in order to provide comparability
with the 2000 consolidated financial statements. These reclassifications
have not changed the 1999 results.
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, 2000 and 1999:
Nine Months Ended
------------------------
9/30/00 9/30/99
---------- ----------
Numerator:
Income Available to Common
Shares Before Extraordinary
Item . . . . . . . . . . . . . . . . . . $ 1,361 $ 3,668
Extraordinary Item . . . . . . . . . . . . (42) --
---------- ----------
Net Income Available to
Common Shares . . . . . . . . . . . $ 1,319 $ 3,668
========== ==========
Denominator:
Denominator for basic earnings per
weighted-average shares. . . . . . . . . 14,157,824 13,448,713
Effect of dilutive securities -
Employee stock options . . . . . . . . . 7,370 6,769
---------- ----------
Denominator for diluted earnings
per share-adjusted weighted-average
shares and assumed conversions . . . . 14,165,194 13,455,482
========== ==========
Basic and Diluted Earnings Available
to Common Shares Per weighted-
average Common Share:
Income Before Extraordinary Item . . . . . $ 0.09 $ 0.27
Extraordinary Item . . . . . . . . . . . . -- --
---------- ----------
Net Income . . . . . . . . . . . . . . $ 0.09 $ 0.27
========== ==========
<PAGE>
The following table sets forth the computation of basic and diluted
earnings per share for the three months ended September 30, 2000 and 1999:
Three Months Ended
------------------------
9/30/00 9/30/99
---------- ----------
Numerator:
Net Income (Loss) Available to
Common Shares . . . . . . . . . . . $ (742) $ 1,203
========== ==========
Denominator:
Denominator for basic earnings per
weighted-average shares. . . . . . . . . 14,217,926 13,488,570
Effect of dilutive securities -
Employee stock options . . . . . . . . . 6,026 8,370
---------- ----------
Denominator for diluted earnings
per share-adjusted weighted-average
shares and assumed conversions . . . . 14,223,952 13,496,940
========== ==========
Basic and Diluted Earnings Available
to Common Shares Per weighted-
average Common Share:
Net Income (Loss). . . . . . . . . . . $ (0.05) $ 0.09
========== ==========
3. LONG-TERM DEBT
FINANCING
On May 1, 2000, the Trust entered into a loan agreement which provided
for a loan in the amount of $12,100, which can be drawn in four
installments. The amount of $8,500 was drawn on May 1, 2000. The loan,
which is collateralized by the Trust's Johns Creek Office and Industrial
Park and Technology Park properties, bears interest at a variable rate
equal to LIBOR plus 2.2% and is payable monthly. The loan principal is
pre-payable without penalty and matures in one year. The proceeds from the
first draw were utilized primarily to repay the amounts outstanding on a
line of credit which came due on May 1, 2000 and which was previously
collateralized by Johns Creek Office and Industrial Park and Technology
Park, and secondarily for transaction costs.
On October 8, 1999, the Trust entered into a loan agreement in the
amount of $7,800. The loan, which is collateralized by the Trust's
Lexington Business Center property, bears interest at a variable rate equal
to LIBOR plus 2% and is payable monthly. The loan principal is pre-payable
without penalty and had an initial maturity date of May 31, 2000. The
Trust had two options to extend the term of the loan for one year each at
the same interest rate by paying a fee of $19.5 for each extension. The
Trust exercised its first option to extend the term of the loan until
May 31, 2001.
CONVERSION OF UNSECURED LOAN
During 1998, the Trust borrowed $7,400 pursuant to its $20,000 1997
Convertible Term Loan Agreement for an unsecured convertible term loan (the
"Unsecured Loan"). The amounts outstanding on the Unsecured Loan were
convertible 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. On January 20, 2000, the Trust repaid $1,243 of the
Unsecured Loan and the remaining balance of $6,157 was converted into
61,572 Series A convertible preferred shares.
<PAGE>
4. BUSINESS SEGMENTS
The Trust owns and operates real estate properties located principally
in the Midwest and Southeast United States. The Trust has three operating
segments corresponding to the three property types comprising its real
estate assets: flex/industrial, office and retail. As of September 30,
2000, the flex/industrial segment was comprised of twelve complexes with
long-term leases to approximately 170 tenants; the office segment was
comprised of fourteen office sites with long-term leases to approximately
260 tenants; and the retail segment was comprised of one retail center with
long-term leases to approximately 50 tenants. As of September 30, 1999,
the flex/industrial segment was comprised of thirteen complexes, the office
segment was comprised of fourteen office sites and the retail segment was
comprised of one retail center. Prior to the sale of the Oklahoma
Apartment Portfolio in December 1999, a fourth segment - the residential
segment - was comprised of four apartment complexes with 864 units. The
Trust's long-term tenants are in a variety of businesses and no individual
tenant is significant to the Trust's business when considered as a whole.
Information by business segments is set forth below:
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- -------------------
2000 1999 2000 1999
-------- -------- -------- --------
Revenue
Flex/Industrial. . . . . . $ 2,769 $ 2,988 $ 8,461 $ 8,576
Office . . . . . . . . . . 5,224 5,241 15,683 15,937
Residential. . . . . . . . -- 1,116 -- 3,274
Retail . . . . . . . . . . 1,191 1,157 3,462 3,580
Corporate/Other. . . . . . 101 7 489 53
-------- -------- -------- --------
$ 9,285 $ 10,509 $ 28,095 $ 31,420
======== ======== ======== ========
Income (Loss) Before
Extraordinary Item
Flex/Industrial. . . . . . $ 759 $ 714 $ 2,318 $ 1,882
Office . . . . . . . . . . 1,040 1,217 3,384 3,913
Residential. . . . . . . . -- 213 -- 634
Retail . . . . . . . . . . 149 116 419 503
Corporate/Other. . . . . . (2,535) (1,057) (4,329) (3,264)
-------- -------- -------- --------
$ (587) $ 1,203 $ 1,792 $ 3,668
======== ======== ======== ========
As of As of
Septem- Decem-
ber 30, ber 31,
2000 1999
-------- --------
Total Assets
Flex/Industrial. . . . . . $ 68,803 $ 69,279
Office . . . . . . . . . . 107,844 105,756
Retail . . . . . . . . . . 17,536 18,125
Corporate/Other. . . . . . 2,856 13,487
-------- --------
$197,039 $206,647
======== ========
<PAGE>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- -------------------
2000 1999 2000 1999
-------- -------- -------- --------
Depreciation and
Amortization
Flex/Industrial. . . . . . $ 585 $ 576 $ 1,753 $ 1,669
Office . . . . . . . . . . 1,031 826 2,910 2,415
Residential. . . . . . . . -- 146 -- 430
Retail . . . . . . . . . . 144 134 429 402
-------- -------- -------- --------
$ 1,760 $ 1,682 $ 5,092 $ 4,916
======== ======== ======== ========
Interest Expense
Flex/Industrial. . . . . . $ 738 $ 931 $ 2,212 $ 2,705
Office . . . . . . . . . . 1,209 1,382 3,692 4,128
Residential. . . . . . . . -- 296 -- 890
Retail . . . . . . . . . . 327 331 985 996
-------- -------- -------- --------
$ 2,274 $ 2,940 $ 6,889 $ 8,719
======== ======== ======== ========
Additions to Investment
in Real Estate
Flex/Industrial. . . . . . $ 500 $ 473 $ 1,154 $ 1,399
Office . . . . . . . . . . 1,342 462 3,210 1,922
Residential. . . . . . . . -- 53 -- 220
Retail . . . . . . . . . . 26 -- 57 39
-------- -------- -------- --------
$ 1,868 $ 988 $ 4,421 $ 3,580
======== ======== ======== ========
5. SEVERANCE AND TERMINATION COSTS
In September 2000, in view of the Trust's strategic direction, the
Trust adopted an employee severance and retention program. The Trust has
since terminated certain employees and will continue to review its staffing
needs in the future. The accompanying consolidated financial statements
include a charge of approximately $1,600 related to the severance and
retention program. The severance and termination costs described above
include a charge of approximately $300 related to base compensation payable
to Mr. Leonard Levine through December 31, 2001 under the terms of his
employment agreement.
6. EMPLOYEE NOTES
On May 14, 1997, the Board of Trustees adopted and on July 8, 1997,
the shareholders of the Trust approved, the 1997 Omnibus Stock and
Incentive Plan (the "Plan") which allows the Trust to make stock-based
awards as part of its employee and trustee compensation program. Under the
Plan, the Trust is authorized to issue options to purchase up to one
million shares of beneficial interest in the form of incentive stock
options, non-statutory stock options, stock appreciation rights,
performance shares and units. On December 31, 1999, the outstanding
options issued under the Plan totaled 463,676. When the shareholders
elected three new trustees on December 13, 1999, the members of the board
of trustees as of October 1, 1997 no longer constituted a majority of the
members of the board. By definition, this reconstitution of the board was
a "Change of Control" within the meaning of the Employee Stock Option
Agreements. As a result, all outstanding employee options became
immediately exercisable in accordance with the terms of the option
agreements. At that time, the Board of Trustees offered all of the Trust's
<PAGE>
current employees and advisors who held options, the opportunity to
exercise all their vested but unexercised options with the proceeds of a
loan from the Trust. Each loan is non-recourse and bears interest at an
annual rate of 6.5%. Each person was required to pledge all shares
purchased with the proceeds of the loan to secure the payment of principal
and interest on the loan. The loan program was available until January 12,
2000. On that date, employees borrowed approximately $3.2 million to
purchase 575,337 shares. The loans were originally scheduled to mature on
the earlier of January 11, 2005 or one month after the date that an
individual's employment is terminated. At that time, the employee would be
required to repay the loan and all accrued interest, or forfeit the shares
held as security for the loan. Under the employee severance and retention
program, the Trust extended the maturity date of the loans for terminated
employees to the date the last of the notes becomes due.
7. SUBSEQUENT EVENTS
DISTRIBUTIONS
On October 16, 2000, the Trust declared a cash distribution for the
quarter ended September 30, 2000 of $0.12 per share payable November 28,
2000 to shareholders of record on October 27, 2000.
LITIGATION
On August 14, 2000, the Trust exercised its rights under the
employment agreement with Mr. Leonard Levine by suspending him and placing
him on leave from his position as president. The Trust also initiated an
arbitration proceeding in which it contends that certain actions taken by
Mr. Levine constitute "just cause" for terminating his employment
agreement. On or about October 5, 2000, Mr. Levine filed a lawsuit in the
Circuit Court of Cook County, Illinois. Mr. Levine's lawsuit seeks a
declaratory judgement which would halt the arbitration proceedings because
he alleges it is an improper forum. On October 18, 2000 the Trust filed a
lawsuit against Mr. Levine in the Circuit Court of Cook County, Illinois.
The Trust's complaint alleges violations of Mr. Levine's fiduciary duty of
loyalty owed to the Trust. Pending the final ruling by an arbitrator or a
court, the Trust intends to comply with the employment agreement, including
its compensation provisions. The maximum potential liability in connection
with Mr. Levine's contract (inclusive of incentives but exclusive of base
salary) is estimated to be $1,800.
OTHER
During the first quarter of 2000, the Trust's Board of Trustees formed
a Financial Advisory Committee, comprised entirely of its independent
trustees, to evaluate strategic alternatives. The committee retained CFC
Advisory Services Limited Partnership, an affiliate of Chicago-based Cohen
Financial ("Cohen") to value the Trust's real estate assets and assist the
Committee in identifying and executing strategies that the Trust believes
will maximize value while enhancing shareholder liquidity. On July 28,
2000, the Financial Advisory Committee announced that as part of its review
of the strategic alternatives, it had authorized Cohen to initiate a
marketing effort designed to solicit bids for the Trust or the Trust's
properties in whole, bulk sales or individually.
Cohen completed its strategic analysis of the portfolio and was
subsequently authorized by the Committee to market the Trust or the Trust's
real estate portfolio to persons or entities interested primarily in buying
the Trust or the Trust's properties in whole or in part. The Trust
received and evaluated a number of proposals from prospective purchasers.
After further discussions with Cohen, and upon Cohen's recommendation, the
Committee concluded that shareholder value and liquidity could be best
maximized and enhanced by selling all of the Trust's real estate assets in
a bulk transaction to a single buyer, rather than individually or in
discreet groups over an extended period of time.
<PAGE>
In late October of 2000, the Trust's Board of Trustees authorized the
negotiation of a contract for the purchase of all of the Trust's real
estate assets. If the Trust is successful in negotiating and completing a
sale of its real estate assets, the Trust expects to distribute the net
proceeds to its shareholders and to ultimately terminate the Trust pursuant
to a plan of liquidation. At that time, or sooner if appropriate, the
Trust also anticipates adopting liquidation accounting. Although the Trust
is in the process of negotiating a contract, there is no assurance that a
contract or a transaction will be concluded.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
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. These statements are
based on our current expectations, estimates and projections. These
statements are not a guaranty of future performance. 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;
. the status of negotiations to sell the real estate assets;
. potential inability to repay or refinance indebtedness at
maturity;
. increases in interest rates;
. adverse consequences of failure to qualify as a REIT;
. possible environmental liabilities; and
. the terms of a plan of liquidation, if adopted by the Board of
Trustees.
Actual results could differ materially from those projected in these
forward-looking statements. See "Managements's Discussion and Analysis of
Financial Condition and Results of Operations - Risk Factors" in the annual
report on Form 10-K for the year ended December 31, 1999 for a more
complete discussion.
We are a self-administered infinite life real estate investment trust
("REIT"), organized as a Massachusetts business trust, which owns and
operates primarily office and flex/industrial properties. We operate
principally through BSRT UPREIT Limited Partnership, referred to as the
Operating Partnership, and its subsidiaries. BSRT UPREIT Corp., a wholly-
owned subsidiary, is the General Partner of the Operating Partnership. As
of September 30, 2000, we were the sole limited partner of BSRT UPREIT
Limited Partnership.
During the first quarter of 2000, our Board of Trustees formed a
Financial Advisory Committee, comprised entirely of our independent
trustees, to evaluate strategic alternatives. The Committee retained CFC
Advisory Services Limited Partnership, an affiliate of Chicago-based Cohen
Financial ("Cohen") to value our real estate assets and assist the
Committee in identifying and executing strategies that the Trust believes
will maximize value while enhancing shareholder liquidity. Cohen completed
its strategic analysis of the portfolio and on July 28, 2000, the Financial
Advisory Committee announced that as part of its review of the strategic
alternatives, it had authorized Cohen to initiate a marketing effort
designed to solicit bids for the Trust's properties in whole, bulk sales or
individually. We received and evaluated a number of proposals from
prospective purchasers. After further discussions with Cohen, and upon
Cohen's recommendation, the Committee concluded that shareholder value and
liquidity could be best maximized and enhanced by selling all of our real
estate assets in a bulk transaction to a single buyer, rather than
individually or in discreet groups over an extended period of time.
Our Board of Trustees then authorized the negotiation of a contract
with a specific potential purchaser for the purchase and sale of all of our
real estate assets. If we are successful in negotiating and completing a
sale of our assets, which we hope to achieve by the end of the first
calendar quarter of 2001, we expect to distribute the net proceeds to the
shareholders and to ultimately terminate our business pursuant to a plan of
liquidation. The Committee estimates that based on the price indicated in
the proposal it has elected to pursue, and after paying or reserving for
all known liabilities and the projected costs of winding up our business,
the net proceeds available to shareholders would be approximately $6.20 per
<PAGE>
share. Although we are in the process of negotiating a contract, there is
no assurance that a contract or a transaction will be concluded or that we
will realize the net proceeds per share estimated above.
The Committee noted that a sale of our real estate assets in bulk
will, in its view, reflect a discount that it believes is reasonable from
that which may be achieved by selling the assets individually in a series
of transactions after taking into account the risks and costs inherent in
marketing the properties over an extended period of time.
The net proceeds that would be available for distribution to
shareholders after paying or providing for all of our liabilities,
including the cost of terminating the Trust, the tax treatment of these
distributions and our future financial statement presentation, will depend
on a number of factors. These factors include the gross selling price of
the assets, the timing of the adoption of a plan of liquidation, the time
it takes to close a sale and the costs associated with a sale and winding
up of the Trust. As a part of the process, we intend to evaluate and
determine the amount and frequency of shareholder distributions during the
coming months.
RESULTS OF OPERATIONS
As of September 30, 2000, we owned individually, or, in some cases
through joint ventures, twenty-seven properties consisting of:
. fourteen office properties totaling 1.5 million rentable square
feet;
. twelve flex/industrial properties totaling 1.7 million rentable
square feet;
. one retail property which contains 321,600 rentable square
feet.
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 2000 TO NINE MONTHS
ENDED SEPTEMBER 30, 1999
During the nine months ended September 30, 2000 and 1999 our income
before minority interest and extraordinary item totaled approximately $2.2
million and approximately $4.0 million, respectively. Our total revenue
decreased by approximately $3.3 million or 10.5% to approximately $28.1
million from approximately $31.4 million, due to a decrease in the number
of properties that we own and a decrease in total occupancy. This decrease
in total revenues was partially offset by a decrease in total operating
expenses, which include property operating, repairs and maintenance, real
estate taxes, and ground lease expenses. However, the decrease in total
operating expenses in 2000 was partially negated by severance and
termination costs in the amount of approximately $1.6 million related to an
employee severance and retention policy (see Severance and Termination
Costs below). On a "same-store" basis (comparing the results of operations
of the properties owned during the entire nine months ended September 30,
2000 with the results of the same properties owned during the entire nine
months ended September 30, 1999), total revenue increased by approximately
$0.1 million due to an increase in rental rates. As of September 30, 2000,
16% of our leasable square footage is vacant and during the final three
months of 2000, leases for approximately three percent (3%) of our leasable
square footage will expire. Although vacancy may increase temporarily, at
most of our properties we believe that this lease "roll-over" is routine
and the underlying space will be released at market rental rates to either
the existing or a new tenant. Our most significant lease expiration
occurred at 6901 Riverport Drive where a tenant occupying approximately
145,000 square feet vacated on July 31, 2000. We are in the process of
marketing this space but have not located a new tenant. Our total revenues
<PAGE>
may be adversely affected if the space remains vacant for an extended
period of time. Out of approximately 560,000 square feet that were vacant
at September 30, 2000, approximately 100,000 square feet are leased to
tenants that will take occupancy in the fourth quarter of 2000 or the first
quarter of 2001.
Our total expenses decreased by approximately $1.5 million to
approximately $25.9 million from approximately $27.4 million in 1999. This
decrease is due to a decrease in a number of properties that we own,
partially offset by approximately $1.6 million in severance and termination
costs that we incurred in 2000. Our total operating expenses decreased by
approximately $1.4 million to approximately $8.9 million from approximately
$10.3 million in 1999. On the "same-store" basis, our total operating
expenses increased by approximately $0.2 million. Interest expense
decreased by approximately $1.8 million to approximately $6.9 million from
approximately $8.7 million primarily due to a reduction in the amounts
borrowed as a result of the 1999 property dispositions and the conversion
of our unsecured loan to Series A convertible preferred shares in January
2000.
COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 2000 TO THREE MONTHS
ENDED SEPTEMBER 30, 1999
During the three months ended September 30, 2000 and 1999 our income
(loss) before minority interest decreased by approximately $1.8 million to
approximately $0.5 million loss from approximately $1.3 million income.
This decrease is primarily due to approximately $1.6 million of severance
and termination costs that we incurred in 2000. Our total revenue
decreased by approximately $1.2 million, or 11.4% to approximately $9.3
million from approximately $10.5 million due to a decrease in the number of
properties that we own. On a "same-store" basis (comparing the results of
operations of the properties owned during the entire three months ended
September 30, 2000 with the results of the same properties owned during the
entire three months ended September 30, 1999), total revenue remained
unchanged.
Our total operating expenses, which include property operating,
repairs and maintenance, real estate taxes, and ground lease decreased by
approximately $0.5 million to approximately $3.0 million from approximately
$3.5 million in 1999 due to a decrease in the number of properties that we
own. Interest expense decreased by approximately $0.6 million to
approximately $2.3 million from approximately $2.9 million primarily due to
a reduction in the amounts borrowed as a result of the 1999 property
dispositions and the conversion of our unsecured loan to Series A
convertible preferred shares in January 2000.
SEVERANCE AND TERMINATION COSTS
In September 2000, in view of our strategic direction, we adopted an
employee severance and retention program. We have since terminated certain
employees and will continue to review our staffing needs in the future.
The total expenses for the nine and three months ended September 30, 2000
include a charge of approximately $1.6 million related to the severance and
retention program. The severance and termination costs described above
include a charge of approximately $0.3 million related to base compensation
payable to Mr. Leonard G. Levine through December 31, 2001 under the terms
of his employment agreement. Subsequent to September 30, 2000, we have
entered into employment agreements with Messrs. Schafran, Higgins and
Teglia, and into separation agreements with Messrs. Hansen and Schmidt.
Pursuant to these separation agreements and Mr. Teglia's new employment
agreement, we paid the total of approximately $0.8 million in the fourth
quarter of 2000. These costs are included in the $1.6 million severance
and termination costs discussed above.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
We expect to fund our short-term liquidity needs, including recurring
capital expenditures, from our working capital (including the restricted
cash which is available for capital expenditures, real estate taxes and
insurance), and from income derived primarily from our property operations.
We anticipate using these monies to fund periodic tenant-related capital
expenditures and other capital improvements.
We expect to fund our long-term liquidity needs, including funds
necessary for non-recurring capital improvements and severance and
termination costs from long-term and short-term secured debt or the
proceeds from the sale of assets. If we require additional liquidity to
fund a portion of the cost of improving properties in the future, we expect
to borrow under our credit facility which is secured by our Johns Creek
Office and Industrial Park and Technology Park or to mortgage our Avalon
Ridge Business Park which is our only unencumbered property.
In pursuit of our strategic alternatives and in our attempt to enhance
shareholder value and liquidity, we have begun negotiating the sale of our
real estate assets to a single buyer in a bulk transaction, as discussed
above. If these negotiations are successful and a sale of our assets
becomes imminent, it will likely be appropriate for our Board to consider
the adoption of a formal plan of liquidation. The adoption of a plan of
liquidation affords the Trust and its shareholders certain tax benefits for
a limited period of time. At that time, we also anticipate adopting
liquidation accounting. We cannot predict if or when we will ultimately be
successful in consummating the aforementioned transaction or an alternative
transaction, should the current one terminate. Therefore, the timing of
these decisions related to the adoption of a formal plan of liquidation and
liquidation accounting cannot, in this instance, be certain.
Until we begin disposing of our assets, we believe the Funds Available
for Distributions will continue to support our quarterly distribution of
$0.12 per share. We intend to make this quarterly distribution as long as
our Funds Available for Distributions support it. If and when we begin to
sell assets and have adopted a plan of liquidation, in appreciation of the
fact that shareholders have come to rely upon our quarterly distributions,
we will endeavor to make quarterly distributions of sale proceeds. There
can be no assurance that these distributions can be made with regularity or
that, if made, they will equal or exceed the $0.12 per share that we
currently distribute.
At September 30, 2000, our assets totaled approximately $197.0
million, a decrease of approximately $9.6 million from total assets at
December 31, 1999 of approximately $206.6 million. Our liabilities totaled
approximately $126.5 million at September 30, 2000, a decrease of
approximately $12.6 million from a total of approximately $139.1 million at
December 31, 1999. Our shareholders equity increased by approximately $2.8
million to approximately $68.1 million at September 30, 2000 from
approximately $65.3 million at December 31, 1999.
Cash and cash equivalents consist of cash and short-term investments.
Our cash and cash equivalents balance was approximately $3.2 million at
September 30, 2000 and approximately $13.1 million at December 31, 1999.
The decrease in total cash and cash equivalents resulted from using
approximately $4.0 million in investing activities and approximately $13.5
million in financing activities, while receiving approximately $7.6 million
from operating activities.
Cash Flows From Operating Activities: Net cash provided by operating
activities decreased by approximately $1.2 million for the nine months
ended September 30, 2000 to approximately $7.6 million from approximately
$8.8 million in 1999. This decrease is primarily due to a reduction in the
number of properties that we own. See Results of Operations above for
further discussion of the operations of our real estate assets.
<PAGE>
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
our company. As defined by NAREIT, FFO means net income computed in
accordance with generally accepted accounting principles ("GAAP"), less
extraordinary 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. We have
adopted the NAREIT definition for computing FFO because we believe that,
subject to the following limitations, FFO provides a basis for comparing
the performance and operations of a REIT such as our company. The
calculation of FFO may vary from entity to entity in that 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, our presentation of FFO may not be comparable to other
similarly titled measures presented by other REIT's. We do not intend for
FFO to be an alternative to Net Income as an indication of our performance
nor an alternative to Cash Flows from Operating Activities (as calculated
in accordance with GAAP) as a measure of our capacity to pay distributions.
For the nine months ended September 30, 2000 and 1999, our properties
generated FFO of approximately $6.2 million and $8.4 million, respectively
and Funds Available for Distribution (see below) of approximately $4.9
million and $6.8 million, respectively. FFO and Funds Available for
Distribution decreased on a year to year basis due primarily to the
recognition of severance and termination costs in the amount of
approximately $1.6 million in the quarter ended September 30, 2000 and to a
decrease in the number of properties owned from period-to-period.
FFO for the nine months ended September 30, 2000 and 1999 is
calculated as follows:
2000 1999
------- -------
(Dollars in thousands)
Net Income Available to Common Shares. . . . $ 1,319 $ 3,668
Plus:
Depreciation and Amortization Expense . . . 5,092 4,916
Less:
Minority Interest Share of
Depreciation and Amortization
Expense . . . . . . . . . . . . . . . . . (265) (226)
Extraordinary Item . . . . . . . . . . . . 42 --
-------- -------
Funds From Operations. . . . . . . . . . . . $ 6,188 $ 8,358
======== =======
Cash Flows Provided By (Used For):
Operating Activities . . . . . . . . . . . $ 7,657 $ 8,801
Investing Activities . . . . . . . . . . . $ (4,025) $(4,121)
Financing Activities . . . . . . . . . . . $(13,520) $(5,824)
As discussed above, our decision and ability to pay any distribution
in the future, in part, will be influenced by the amount of money that we
have available to distribute known as Funds Available for Distribution or
"FAD" for short. FAD is calculated 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. We
reserve approximately $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 historically $200 per residential unit.
<PAGE>
FAD for the nine months ended September 30, 2000 and 1999 is
calculated as follows:
2000 1999
------- -------
(Dollars in thousands)
Funds From Operations. . . . . . . . . . . . $ 6,188 $ 8,358
Straight-line Rents. . . . . . . . . . . . . (74) (187)
Lease Commissions. . . . . . . . . . . . . . (927) (944)
Capital Reserve. . . . . . . . . . . . . . . (245) (386)
------- -------
Funds Available for Distribution . . . . . . $ 4,942 $ 6,841
======= =======
Cash Flows From Investing Activities: During the nine months ended
September 30, 2000, we used approximately $4.0 million in investing
activities compared to approximately $4.1 in the same period in 1999. Cash
flow was primarily used to make capital improvements at our various
properties in the amount of approximately $4.4 million during the nine
months ended September 30, 2000 and approximately $3.6 million during the
nine months ended September 30, 1999.
Cash Flows From Financing Activities: During the nine months ended
September 30, 2000 financing activities used approximately $13.5 million
compared to approximately $5.8 million in the same period in 1999. During
the nine months ended September 30, 2000, we used cash primarily to make
net payments on mortgage loans, and on an unsecured loan payable of
approximately $8.2 million and to pay distributions to shareholders of
approximately $5.5 million. The cash flows used by financing activities
for the nine months ended September 30, 1999 resulted primarily from
distributions paid to shareholders of approximately $4.8 million and
principal payments on mortgage loans and bonds payable of approximately
$1.3 million.
FINANCINGS:
On May 1, 2000, we entered into a loan agreement with LaSalle Bank
National Association which provided for a loan in the amount of $12.1
million, which we can draw in four installments. The amount of $8.5
million was drawn on May 1, 2000. The loan which is collateralized by the
Trust's Johns Creek Office and Industrial Park and Technology Park
properties, bears interest at a variable rate equal to LIBOR plus 2.2% and
is payable monthly. The loan principal is pre-payable without penalty and
matures in one year. We utilized the proceeds from the first draw
primarily to repay the amounts outstanding on a line of credit which was
due on May 1, 2000 and which was previously collateralized by Johns Creek
Office and Industrial Park and Technology Park, and secondarily for
transaction costs.
On October 8, 1999, we entered into a loan agreement in the amount of
$7.8 million. The loan, which is collateralized by our Lexington Business
Center property, bears interest at a variable rate equal to LIBOR plus 2%
and is payable monthly. The loan principal is pre-payable without penalty
and had an initial maturity date of May 31, 2000. We had two options to
extend the term of the loan for one year each at the same interest rate by
paying a fee of $19,500 for each extension. We exercised our first option
to extend the term of the loan until May 31, 2001.
OTHER INFORMATION
As of September 30, 2000, we owned interests, directly or indirectly
through our wholly owned subsidiaries, in the properties set forth in the
table below:
<PAGE>
<TABLE>
BANYAN STRATEGIC REALTY TRUST
Portfolio Summary
September 30, 2000
<CAPTION>
Scheduled Lease Expirations
Occu- -------------------------------
Date Square pancy After
Acquired Footage % 2000 2001 2002 2002
-------- ------- -------- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
FLEX/INDUSTRIAL
---------------
Milwaukee Industrial Properties
Milwaukee, WI. . . . . . . . . 4/30/93 235,800 90% 5% 16% 36% 33%
Elmhurst Metro Court
Elmhurst, IL . . . . . . . . . 11/30/93 140,800 76% 0% 39% 12% 25%
Willowbrook Industrial Court
Willowbrook, IL. . . . . . . . 6/16/95 84,300 99% 10% 26% 31% 32%
Lexington Business Center
Lexington, KY. . . . . . . . . 12/05/95 308,800 69% 0% 9% 5% 55%
Newtown Business Center
Lexington, KY. . . . . . . . . 12/05/95 87,100 99% 2% 39% 16% 42%
6901 Riverport Drive
Louisville, KY . . . . . . . . 11/19/96 322,100 55% 0% 0% 0% 55%
Avalon Ridge Business Park
Norcross, GA . . . . . . . . . 4/24/98 57,400 100% 0% 0% 0% 100%
Tower Lane Business Park
Bensenville, IL. . . . . . . . 4/27/98 95,900 84% 5% 21% 30% 28%
Metric Plaza
Winter Park, FL. . . . . . . . 4/30/98 32,000 100% 0% 0% 69% 31%
Park Center
Orlando, FL. . . . . . . . . . 4/30/98 47,400 90% 9% 25% 31% 25%
<PAGE>
Scheduled Lease Expirations
Occu- -------------------------------
Date Square pancy After
Acquired Footage % 2000 2001 2002 2002
-------- ------- -------- ---- ---- ---- -----
University Corporate Center
Winter Park, FL. . . . . . . . 4/30/98 127,800 76% 7% 33% 22% 14%
Johns Creek Office and
Industrial Park
Duluth and Suwanee, GA . . . . 8/14/98 119,300 100% 0% 0% 50% 50%
---------- ----- ----- ----- ----- -----
Sub-total. . . . . . . . . . 1,658,700 79% 2% 15% 19% 43%
---------- ----- ----- ----- ----- -----
OFFICE
------
Colonial Penn Building
Tampa, FL. . . . . . . . . . . 3/22/94 79,200 72% 0% 0% 0% 72%
Commerce Center
Sarasota, FL . . . . . . . . . 3/22/94 81,100 100% 0% 11% 5% 84%
Woodcrest Office Park
Tallahassee, FL. . . . . . . . 12/19/95 264,900 91% 6% 20% 20% 45%
Midwest Office Center
Oakbrook Terrace, IL . . . . . 4/18/96 77,000 97% 14% 23% 32% 28%
Phoenix Business Park
Atlanta, GA. . . . . . . . . . 1/15/97 110,600 100% 0% 4% 18% 78%
Butterfield Office Plaza
Oak Brook, IL. . . . . . . . . 4/30/97 200,800 89% 2% 21% 39% 27%
Southlake Corporate Center
Morrow, GA . . . . . . . . . . 7/30/97 56,200 97% 0% 32% 38% 27%
University Square Business Center
Huntsville, AL . . . . . . . . 8/26/97 184,700 89% 7% 26% 24% 32%
Technology Center
Huntsville, AL . . . . . . . . 8/26/97 48,500 100% 0% 0% 0% 100%
Airways Plaza Office Center
Memphis, TN. . . . . . . . . . 12/10/97 87,800 17% 0% 4% 3% 10%
<PAGE>
Scheduled Lease Expirations
Occu- -------------------------------
Date Square pancy After
Acquired Footage % 2000 2001 2001
-------- ------- -------- ---- ---- ---- -----
Peachtree Pointe Office Park
Norcross, GA . . . . . . . . . 1/20/98 71,700 77% 13% 13% 9% 42%
Avalon Center Office Park
Norcross, GA . . . . . . . . . 3/20/98 53,300 87% 0% 0% 0% 87%
Sand Lake Tech Center
Orlando, FL. . . . . . . . . . 4/30/98 84,100 100% 0% 0% 3% 97%
Technology Park
Norcross, GA . . . . . . . . . 8/14/98 145,700 100% 13% 28% 4% 55%
---------- ----- ----- ----- ----- -----
Sub-total. . . . . . . . . 1,545,600 88% 5% 16% 17% 50%
---------- ----- ----- ----- ----- -----
RETAIL
------
Northlake Tower Shopping Center
Atlanta, GA. . . . . . . . . . 7/28/95 321,600 97% 1% 2% 7% 87%
---------- ----- ----- ----- ----- -----
Total. . . . . . . . . . . . . 3,525,900 84% 3% 14% 17% 50%
---------- ----- ----- ----- ----- -----
</TABLE>
<PAGE>
BANYAN STRATEGIC REALTY TRUST
Comparison of Average Rents
Average Average
"In Place" Market
Square Net Rents Net Rents
Property Type Footage (1) (2)
------------- --------- ---------- ---------
Flex/Industrial. . . . . . 1,658,700 $5.55 $5.59
Office . . . . . . . . . . 1,545,600 9.18 10.27
Retail . . . . . . . . . . 321,600 11.81 12.00
---------- ------ ------
Total. . . . . . . . . 3,525,900 $ 7.71 $ 8.23
========== ====== ======
--------------------
(1) Average "In Place" Net Rents represent net operating income per
square foot.
(2) Average Market Net Rents represent our good faith estimate of current
market rents, assuming standard tenant improvements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
We do not engage in any hedge transactions nor in the ownership of any
derivative financial instruments. To mitigate the impact of fluctuations
in interest rates, we generally have maintained over 70% of our debt as
fixed rate in nature by borrowing on a long-term basis.
As of September 30, 2000, we had approximately $118.3 million of
outstanding long-term debt, of which $20.8 million bears interest at
variable rates that are adjusted on a monthly basis. As of September 30,
2000, the weighted-average interest rate on this variable rate debt was
8.14%. If interest rates on this variable rate debt increased by one
percentage point (1%), interest expense would increase by $208,000 on an
annual basis.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
LITIGATION
In the process of exploring and evaluating strategic alternatives
designed to maximize shareholder value, our Financial Advisory Committee
and Cohen held preliminary discussions with our president Leonard Levine in
response to inquiries made by Mr. Levine regarding a potential acquisition
of the Trust's assets by an entity controlled by Mr. Levine. The Financial
Advisory Committee later concluded that, in its view, Mr. Levine engaged in
conduct which constitutes a breach of his duty of loyalty to the Trust and
its shareholders and a breach of his employment contract.
On August 14, 2000, we exercised our rights under the employment
agreement with Mr. Levine, by suspending him and placing him on leave from
his position as president. On the same date, we also initiated an
arbitration proceeding in accordance with the provisions of the employment
agreement in which we contend that certain actions taken by Mr. Levine
constitute "just cause" for terminating his employment agreement. In
response to the arbitration, on or about October 5, 2000, Mr. Levine filed
a lawsuit in the Circuit Court of Cook County (Case #00CH14510). Mr.
Levine's lawsuit seeks a declaratory judgment which would halt the
arbitration proceedings because he alleges it is an improper forum. We
accepted service of this complaint on October 30, 2000 and have instructed
our counsel to attempt to resolve this issue of the correct forum with Mr.
Levine's counsel by stipulation, if possible, so that there will be no
further delay in the proceedings.
On October 18, 2000, we filed suit in the Circuit Court of Cook
County, Illinois (Case #00CH15154) against Mr. Levine. Our complaint
alleges violations of Mr. Levine's fiduciary duty of loyalty owed to us.
The lawsuit we have filed seeks a declaratory judgment that we have and had
"just cause" to terminate the employment agreement and/or Mr. Levine's
employment. The complaint also seeks an accounting and disgorgement of all
benefits received by Mr. Levine while in breach of his fiduciary
obligations to us, including salary, insurance and other benefits.
Pursuant to the terms of the employment agreement, we continue to pay
Mr. Levine all salary, benefits and reasonable, ordinary and necessary
business expenses during his suspension. We estimate our maximum potential
liability in connection with Mr. Levine's contract to be approximately $1.8
million, exclusive of base salary. We intend to vigorously contest Mr.
Levine's attempts to retain or collect all disputed amounts under this
contract.
We obtained service of our complaint on Mr. Levine on October 30,
2000. We have not received a response. Mr. Levine's response is currently
due in late November.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits (see Exhibit Index included elsewhere herein).
(b) None
<PAGE>
SIGNATURES
PURSUANT to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on our behalf
and in the capacities and on the dates indicated.
BANYAN STRATEGIC REALTY TRUST
By: /s/ L.G. Schafran Date: November 14, 2000
L.G. Schafran,
Interim President
By: /s/ Joel L. Teglia Date: November 14, 2000
Joel L. Teglia, Vice President
and Chief Financial Officer
<PAGE>
EXHIBIT
INDEX
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3.1 Third Amended and Restated Declaration of Trust dated as of
August 8, 1986, as amended on March 8, 1991, May 1, 1993, August 12, 1998
and December 13, 1999, including Certificate of designations, preferences
and rights of Series A convertible preferred shares. (1)
3.2 First Amendment of Third Amended and Restated Declaration of
Trust effective December 13, 1999. (2)
3.3 By-Laws dated March 13, 1996. (3)
3.4 BSRT UPREIT Limited Partnership Limited Partnership Agreement (4)
4.1 Convertible Term Loan Agreement dated as of October 10, 1997
among Banyan Strategic Realty Trust, as Borrower, and the Entities listed
therein, as Lenders. (5)
4.2 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. (6)
4.3 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. (7)
4.4 Revolving Credit Agreement dated April 30, 1998 among Banyan
Strategic Realty Trust, as Borrower and the Capital Company of America, as
Lender. (8)
4.5 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. (7)
4.6 First Amendment to Loan Agreement dated September 11, 1998 among
BSRT Fountain Square L.L.C., BSRT Phoenix Business Park L.L.C., BSRT Newton
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 LLC, as Lender. (9)
4.7 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. (7)
4.8 First Amendment to Loan Agreement dated September 11, 1998
between Banyan/Morgan Wisconsin L.L.C., and Banyan/Morgan Elmhurst L.L.C.,
as Borrower and the Capital Company of America LLC, as Lender. (9)
10.1 Employment Agreement of L.G. Schafran dated October 26, 2000. (*)
10.2 Employment Agreement of Leonard G. Levine as of December 14,
1999. (1)
10.3 Employment Agreement of Leonard G. Levine as of October 1, 1997.
(10)
<PAGE>
EXHIBIT
INDEX
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10.4 Employment Agreement of Joel L. Teglia dated November 1, 2000.
(*)
10.5 Employment Agreement of Joel L. Teglia dated December 31, 1998.
(4)
10.6 Employment Agreement of Robert G. Higgins dated September 1,
2000. (*)
10.7 Separation Agreement of Neil Hansen dated October 1, 2000. (*)
10.8 Employment Agreement of Neil Hansen dated December 31, 1998. (4)
10.9 Separation Agreement of Jay Schmidt dated October 1, 2000. (*)
10.10 Employment Agreement of Jay Schmidt dated December 31, 1998. (4)
10.11 1997 Omnibus Stock and Incentive Plan dated July 9, 1997. (11)
10.12 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. (5)
10.13 Registration Rights Agreement dated as of October 10, 1997
between Banyan Strategic Realty Trust and the Purchasers listed on the
Signature Pages attached thereto. (5)
10.14 Registration Rights Agreement dated as of October 1, 1997 between
Banyan Strategic Realty Trust and Leonard G. Levine. (4)
10.15 Consulting Agreement dated as of February 18, 2000 between CFC
Advisory Services Limited Partnership and Banyan Strategic Realty Trust.
(12)
10.16 Modification to Consulting Agreement dated as of May 31, 2000
between CFC Advisory Services Limited Partnership and Banyan Strategic
Realty Trust. (12)
21 Subsidiaries of Banyan Strategic Realty Trust (1)
27 Financial Data Schedule (*)
--------------------
(*) Filed herewith.
(1) Incorporated by reference from the Trust's Form 10-K for
the year ended December 31, 1999.
(2) Incorporated by reference from the Trust's Form 10-Q
dated March 31, 2000.
(3) Incorporated by reference from the Trust's Registration
Statement on Form S-11 (file number 33-4169).
(4) Incorporated by reference from the Trust's Form 10-K for
the year ended December 31, 1998.
(5) Incorporated by reference from the Trust's Form 8-K dated
October 14, 1997.
<PAGE>
(6) Incorporated by reference from the Trust's Form 10-K/A
for the year ended December 31, 1997.
(7) Incorporated by reference from the Trust's Form 8-K dated
May 22, 1998.
(8) Incorporated by reference from the Trust's Form 10-Q
dated March 31, 1998.
(9) Incorporated by reference from the Trust's Form 8-K/A-1
dated August 14, 1998.
(10) Incorporated by reference from the Trust's Form 10-K
dated December 31, 1997.
(11) Incorporated by reference from the Trust's Form 10-Q for
the quarter ended June 30, 1997.
(12) Incorporated by reference from the Trust's Form 10-Q for
the quarter ended June 30, 2000.
