UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1994
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 1-6613
MORTGAGE AND REALTY TRUST
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Maryland 23-1862664
------------------------------- --------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification)
incorporation or organization)
8380 Old York Road, Suite 300
Elkins Park, Pennsylvania 19027-1590
- --------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (215) 881-1525
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15 (d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes X No
----- -----
Number of Common Shares Outstanding at December 31, 1994:
11,226,215
<PAGE>
MORTGAGE AND REALTY TRUST
INDEX OF FINANCIAL INFORMATION
PART I
1. Unaudited Financial Statements for the periods ended
December 31, 1994 and 1993 include the following:
Balance Sheet at December 31, 1994 and
September 30, 1994
Statement of Operations for the three months
ended December 31, 1994 and 1993
Statement of Cash Flows for the three months
ended December 31, 1994 and 1993
Statement of Shareholders' Equity for the three
months ended December 31, 1994
Notes to the Financial Statements
2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II
3. Defaults Upon Senior Securities
6. Exhibits and Reports on Form 8-K
1
<PAGE>
MORTGAGE AND REALTY TRUST FORM 10Q
Item 1. Financial Statements:
- --------------------------------------------------------------------------------
BALANCE SHEET
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31, September 30,
1994 1994
------------ -------------
(Unaudited)
<S> <C> <C>
ASSETS:
Mortgage loans and investments:
Standing loans $ 64,251,000 $ 61,851,000
Long-term amortizing loans 2,794,000 2,908,000
Participating loans and investments 1,959,000 4,563,000
------------ ------------
69,004,000 69,322,000
------------ ------------
Notes receivable 715,000 760,000
In-substance foreclosures:
Earning 44,207,000 62,097,000
Non-earning 9,279,000 10,198,000
Real estate:
Investments in real estate equities 56,891,000 56,857,000
Properties acquired through foreclosure and
held for sale:
Earning 64,006,000 68,437,000
Non-earning 37,729,000 32,282,000
Investment in partnerships 26,564,000 9,524,000
------------ ------------
308,395,000 309,477,000
Less allowance for losses (10,796,000) (13,430,000)
------------ ------------
297,599,000 296,047,000
Cash and cash equivalents 62,452,000 60,332,000
Interest receivable and other assets 7,647,000 7,865,000
------------ ------------
$367,698,000 $364,244,000
============ ============
LIABILITIES:
Senior Secured Notes $290,000,000 $290,000,000
Loan on equity investment 17,593,000 17,593,000
Accounts payable and accrued expenses 3,819,000 4,050,000
Interest payable 41,707,000 32,568,000
------------ ------------
353,119,000 344,211,000
------------ ------------
SHAREHOLDERS' EQUITY:
Preferred shares, $1 par value: 3,500,000
shares authorized, none issued - -
Common shares, $1 par value: 20,000,000 shares
authorized, 11,226,000 shares issued and
outstanding 11,226,000 11,226,000
Additional paid-in capital 182,375,000 182,375,000
Accumulated deficit (179,022,000) (173,568,000)
------------ ------------
Total shareholders' equity 14,579,000 20,033,000
------------ ------------
$367,698,000 $364,244,000
============ ============
</TABLE>
See accompanying notes.
2
<PAGE>
MORTGAGE AND REALTY TRUST FORM 10Q
Item 1. Financial Statements (Continued)
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
Three Months Ended December 31, (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994 1993
------------ ------------
<S> <C> <C>
Income:
Interest and fee income on mortgage
loans $ 2,878,000 $ 4,005,000
Income of rental properties:
Rental income 5,692,000 4,302,000
Operating expense reimbursement 577,000 431,000
Interest on short-term investments 822,000 94,000
Other 33,000 14,000
----------- -----------
10,002,000 8,846,000
----------- -----------
EXPENSES:
Interest 9,559,000 7,799,000
Expenses of rental properties:
Depreciation and amortization 1,704,000 1,407,000
Operating 2,670,000 2,374,000
Other operating expenses 1,153,000 1,246,000
----------- -----------
15,086,000 12,826,000
----------- -----------
Loss before reorganization expenses (5,084,000) (3,980,000)
Reorganization expenses (370,000) (676,000)
----------- -----------
Net loss $(5,454,000) $(4,656,000)
=========== ===========
PER SHARE:
Net loss $(.49) $(.41)
===== =====
Weighted average number of common
shares outstanding 11,226,000 11,226,000
</TABLE>
See accompanying notes.
3
<PAGE>
MORTGAGE AND REALTY TRUST FORM 10Q
Item 1. Financial Statements (Continued)
- --------------------------------------------------------------------------------
STATEMENT OF CASH FLOWS
Three Months Ended December 31, (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(5,454,000) $(4,656,000)
----------- -----------
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization on real estate 1,704,000 1,407,000
Decrease in payables & accrued expenses (231,000) (877,000)
Increase in interest payable 9,139,000 8,259,000
Decrease (increase) in receivables and other assets 218,000 (720,000)
Net change in interest reserves, deferred income (233,000) (64,000)
----------- -----------
Total adjustments 10,597,000 8,005,000
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 5,143,000 3,349,000
----------- -----------
Cash flows from investing activities:
Investments in real estate:
Properties acquired through foreclosure (4,291,000) (1,110,000)
In-substance foreclosures (79,000) (671,000)
Real estate equities (645,000) (434,000)
Partnerships (1,749,000) -
Principal repayments on mortgage loans 505,000 227,000
Repayments on notes receivable 45,000 -
Sale of foreclosed property 2,334,000 5,511,000
Repayment of in-substance foreclosure 857,000 2,338,000
----------- -----------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (3,023,000) 5,861,000
----------- -----------
Net increase in cash and cash equivalents 2,120,000 9,210,000
Cash and cash equivalents at beginning of period 60,332,000 11,451,000
----------- -----------
Cash and cash equivalents at end of period $62,452,000 $20,661,000
=========== ===========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Charge-offs against allowance for losses $ 2,634,000 $ 215,000
=========== ===========
Transfer of in-substance foreclosures to
investment in partnerships $15,443,000 $ -
=========== ===========
Transfer of in-substance foreclosures to
mortgage loans $ 105,000 $ -
=========== ===========
</TABLE>
See accompanying notes.
4
<PAGE>
MORTGAGE AND REALTY TRUST FORM 10Q
Item 1. Financial Statements (Continued)
- --------------------------------------------------------------------------------
STATEMENT OF SHAREHOLDERS' EQUITY
For the Three Months Ended December 31, 1994 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Additional Total
Common Shares Paid-In Accumulated Shareholders'
Shares Amount Capital Deficit Equity
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, beginning of
period 11,226,000 $11,226,000 $182,375,000 $(173,568,000) $20,033,000
Net loss (5,454,000) (5,454,000)
---------- ----------- ------------ ------------- -----------
Balance, end of
period 11,226,000 $11,226,000 $182,375,000 $(179,022,000) $14,579,000
========== =========== ============ ============= ===========
</TABLE>
See accompanying notes.
5
<PAGE>
MORTGAGE AND REALTY TRUST FORM 10Q
Item 1. Financial Statements (Continued)
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1. BASIS OF FINANCIAL INFORMATION AND PLAN OF REORGANIZATION -
On November 17, 1994, the Trust announced that it had reached an
agreement in principle with a substantial number of holders of its
Senior Notes on the terms of a restructuring of the Senior Notes.
Pursuant to the agreement in principle, holders of the Senior Notes
in the aggregate principal amount of $290 million plus accrued
interest of $41.7 million through December 31, 1994 will receive
under a prepackaged plan of reorganization under chapter 11 of the
Bankruptcy Code, $110 million of new senior secured notes due 2002,
approximately $50 million in cash and 97% of the restructured equity
of the Trust (or substantially all the restructured equity if holders
of the Trust's outstanding common shares do not vote to accept the
prepackaged plan). If holders of the outstanding common shares vote
to accept the prepackaged plan, such holders will retain 3% of the
equity of the restructured Trust. The agreement in principle
anticipates that the new senior secured notes will mature in 2002
and bear interest at the rate of 11-1/8% per annum. It is also
anticipated that holders of unsecured claims will receive cash in the
allowed amount of their claims. It is contemplated that the Trust
will prepare a "shelf" registration statement for the new securities
issued pursuant to the prepackaged plan.
The agreement to pursue the restructuring proposal is subject to a
number of conditions and the Trust intends to effect the
restructuring through a prepackaged chapter 11 bankruptcy. At this
time there can be no assurance that the conditions to consummation of
the proposed restructuring will be satisfied.
Other details of the agreement, including the additional conditions
to commencement and consummation of the restructuring, have not been
finalized pending the filing of proxy solicitation materials with the
SEC and distribution of a disclosure statement for the solicitation
of votes for the prepackaged plan to holders of the Trust's
outstanding securities. The advisors to the Trust and the various
holders of Senior Notes are negotiating additional terms of the new
debt securities to be received by the Senior Note holders under the
prepackaged plan.
The financial statements have been prepared in accordance with
generally accepted accounting principles (GAAP) applicable to a
company on a "going concern" basis, which contemplates the
realization of assets and the liquidation of liabilities in the
ordinary course of business. These financial statements include
adjustments and reclassifications that have been made to reflect
indebtedness as extended under the 1991 Plan and the Senior Note
Indenture. These financial statements do not include any adjustments
that would be required should the Trust be unable to continue as a
going concern. The conditions noted above raise substantial doubt
about the Trust's ability to continue as a going concern. These
financial statements also do not include any adjustments that could
be required as a result of the November 17, 1994 agreement in
principle with certain holders of Senior Notes and related proposed
restructuring and prepackaged chapter 11 bankruptcy, including
adjustments required by The American Institute of Certified Public
Accountants Statement of Position 90-7 "Financial Reporting by
Entities in Reorganization Under the Bankruptcy Code," for fresh
start accounting. The Trust anticipates that any adjustments that
would be occasioned in the restructuring process by its financial
distress, by any inability of the Trust to continue as a going
concern or by any inability of the Trust to achieve a consensual
restructuring would be material and adverse.
6
<PAGE>
MORTGAGE AND REALTY TRUST FORM 10Q
Item 1. Financial Statements (Continued)
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1. BASIS OF FINANCIAL INFORMATION AND PLAN OF REORGANIZATION (Continued)
The following unaudited Pro Forma Balance Sheet is presented as if (1)
Mortgage and Realty Trust had emerged from bankruptcy on September 30,
1994 with a reorganization plan identical to the one proposed, and
(2) fresh start accounting had been adopted as of September 30, 1994.
This unaudited Pro Forma Balance Sheet should be read in conjunction
with the financial statements of Mortgage and Realty Trust and the
related notes thereto included elsewhere herein. In management's
opinion, all adjustments necessary to reflect the effects of the
proposed reorganization and "fresh start accounting" have been
included. This unaudited Pro Forma Balance Sheet is not necessarily
indicative of what the actual financial position would have been at
September 30, 1994, nor does it purport to represent the future
financial position of the Company.
<TABLE>
<CAPTION>
Pro Forma Balance Sheet
As of September 30, 1994
(Unaudited)
Pro Forma Adjustments
-------------------------------------------------------
Historical Proposed Fresh Pro Forma
9/30/94 Reorganization Start 9/30/94
---------- -------------- ---------- ---------
(in thousands)
<S> <C> <C> <C> <C>
ASSETS
Cash & marketable securities $ 60,332 $ (50,000)(A) $ 8,979
(1,353)(B)
Loans & owned real estate, net 296,047 $ (67,047)(E) 229,000
Interest receivable 4,638 (2,810)(F) 1,828
Other assets 3,227 (1,955)(F) 1,272
-------- --------- --------- --------
Total assets $364,244 $ (51,353) $ (71,812) $241,079
======== ========= ========= ========
LIABILITIES
Senior secured notes due 1995 $290,000 $(290,000)(C) $ -
Senior secured notes due 2002 - 110,000 (C) 110,000
Loan on REO - Imperial Bank 17,593 17,593
Interest payable 32,568 (32,568)(C) -
Accounts payable and other 4,050 (1,353)(B) (50)(F) 2,647
-------- --------- --------- --------
Total liabilities 344,211 (213,921) (50) 130,240
-------- --------- --------- --------
SHAREHOLDER'S EQUITY
Common stock at par 11,226 11,226
Additional paid in capital 182,375 162,568 (D) (245,330)(G) 99,613
Retained earnings (deficit) (173,568) 173,568 (G) -
-------- --------- --------- --------
Total shareholder's equity 20,033 162,568 (71,762) 110,839
-------- --------- --------- --------
Total liabilities & equity $364,244 $ (51,353) $ (71,812) $241,079
======== ========= ========= ========
</TABLE>
See Accompanying Notes
7
<PAGE>
MORTGAGE AND REALTY TRUST FORM 10Q
Item 1. Financial Statements (Continued)
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1. BASIS OF FINANCIAL INFORMATION AND PLAN OF REORGANIZATION (Continued)
ADJUSTMENTS TO REFLECT PROPOSED REORGANIZATION
(A) Reflects the $50.0 million minimum payment to creditors being made at
implementation of the proposed plan, provided that such minimum payment
may be increased based upon the amount of cash held by the Trust in
excess of its short-term obligations following confirmation of the
proposed plan. Note: Cash and marketable securities includes $1,375 of
restricted cash related to the Trust's termination pay plan and $1,600
relating to borrowers' deposits.
(B) Reflects cash payment to unsecured creditors totalling $1,353.
(C) Reflects the cancellation of the Senior Secured notes due 1995 in the
face amount of $290.0 million and the related interest payable on these
notes of $32.6 million and the recording of the new Senior Notes due
2002 in the face amount of $110.0 million.
(D) Reflects the conversion of amounts previously owed under the Senior
Secured Notes due 1995 converted to a 97% interest in the common shares
of the reorganized Trust as follows:
<TABLE>
<S> <C>
Face amount of Senior Notes due 1995 . . . . . . . . . . . . . $ 290,000
Interest payable at 9/30/94. . . . . . . . . . . . . . . . . . 32,568
---------
Total amount payable to creditors at 9/30/94 . . . . . . . . . 322,568
Less: New Senior Notes due 2002 . . . . . . . . . . . . . . . (110,000)
Less: Cash payment to creditors . . . . . . . . . . . . . . . (50,000)
---------
Amount previously due creditors converted to equity. . . . . . $ 162,568
=========
</TABLE>
ADJUSTMENTS TO REFLECT FRESH START ACCOUNTING
(E) Reflects adjustment made to carrying value of loans and owned real
estate to adjust to estimated reorganization values.
(F) Reflects adjustment made to carrying values of accounts receivable/
other assets and accounts payable to adjust to estimated reorganization
values of $3.1 million and $4.0 million, respectively.
(G) Reflects the adjustment of the retained earnings/deficit to zero as a
result of the restructure and the adjustment of additional paid in
capital as follows:
<TABLE>
<S> <C>
Adjust deficit to reset to zero. . . . . . . . . . . . . . . . $(173,568)
Adjustment to carrying value of invested assets. . . . . . . . (67,047)
Adjustment to carrying value of receivables. . . . . . . . . . (4,765)
Adjustment to carrying value of payables . . . . . . . . . . . 50
---------
$(245,330)
=========
</TABLE>
8
<PAGE>
MORTGAGE AND REALTY TRUST FORM 10Q
Item 1. Financial Statements (Continued)
NOTES TO THE FINANCIAL STATEMENTS
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
INCOME TAXES - The Trust is a real estate investment trust that has
elected to be taxed under Sections 856-860 of the Internal Revenue
Code of 1986, as amended. Accordingly, no provision has been made
for income taxes in the financial statements.
For the fiscal year ended September 30, 1994 and the quarter ended
December 31, 1994, there were significant differences between taxable
net loss and net loss as reported in the financial statements. The
differences were primarily temporary differences related to the
recognition of bad debt deductions and accounting for reorganization
costs. For financial accounting purposes, these items are expensed
currently, while for tax purposes some portion of these items may
be deferred to future periods.
The Trust incurred net operating losses of $38 million, $31 million
and $12 million for tax purposes in fiscal 1993, 1992 and 1991,
respectively. The Trust estimates a net operating loss for tax
purposes of approximately $35 million fiscal 1994. Each of these
net operating losses will be available for fifteen years as a loss
carryforward to future years' taxable income. If during the course
of the proposed restructuring, Cancellation of Indebtedness taxable
income results, the net operating losses available for use in future
years will be reduced by the amount of such Cancellation of
Indebtedness income. The Trust intends to preserve its net operating
losses, but the transfer of more than 50% of the ownership of the
Trust to its creditors in a reorganization (as was provided in the
November 1994 agreement in principle and as is likely in any
alternate restructuring) will limit the future per annum use of its
net operating losses (after the aforementioned reduction for
Cancellation of Indebtedness income) under Internal Revenue Code
Section 382.
INTEREST INCOME - Interest income on each loan is recorded as earned.
Interest income is not recognized if, in the opinion of the Trustees,
collection is doubtful. The Trust generally considers loans as
delinquent if payment of interest and/or principal, as required by
the terms of the note, is more than 60 days past due. Accrual of
interest income is generally terminated and foreclosure proceedings
are started if payment is more than 60 days past due.
LOAN FEE INCOME - Loan fees are recorded as income using the "interest
method". Accordingly, loan fees are deferred when received and are
recorded as income over the term of the loan in relation to
outstanding loan balances.
ALLOWANCE FOR LOSSES - The allowance for losses on mortgage loans and
related investments is determined in accordance with The American
Institute of Certified Public Accountants Statement of Position on
Accounting Practices of Real Estate Investment Trusts 75-2, as
amended. This statement requires adjustment of the carrying value of
mortgage loans to the lower of their carrying value or estimated net
realizable value. Estimated net realizable value is the estimated
selling price of a property offered for sale in the open market
allowing a reasonable time to find a buyer, reduced by the estimated
cost to complete and hold the property (including the estimated cost
of capital), net of estimated cash income. The cost of capital was
computed at 11.0% at December 31, 1994 and 10.5% at September 30,
1994.
9
<PAGE>
MORTGAGE AND REALTY TRUST FORM 10Q
Item 1. Financial Statements (Continued)
NOTES TO THE FINANCIAL STATEMENTS
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Additional provisions for losses on mortgage loans and related
investments may be necessary if the deterioration in real estate
markets continues, or there is a significant increase in the Trust's
cost of capital. See also Note 1, "Basis of Financial Statement
Presentation and Plan of Reorganization". Further adjustments may
also be necessary as a result of the restructuring negotiations. The
Trust anticipates that any adjustments that would be occasioned in
the restructuring process by its financial distress, by any inability
of the Trust to continue as a going concern or by any inability of
the Trust to achieve a consensual restructuring would be material and
adverse.
PROPERTIES ACQUIRED THROUGH FORECLOSURE AND HELD FOR SALE - Properties
acquired through foreclosure and held for sale are recorded at the
lower of cost or fair value at acquisition, which becomes the cost
basis for accounting purposes. The fair value of the asset acquired,
in accordance with Financial Accounting Standards Board Statement 15,
is the amount that the Trust could reasonably expect to receive in a
current sale between a willing buyer and a willing seller. Such
properties are thereafter accounted for in the same manner as any
similar asset acquired for investment as to depreciation and gain or
loss upon sale. Subsequent to foreclosure, the properties are carried
at the lower of cost or fair value less estimated costs to sell, as
set forth in The American Institute of Certified Public Accountants'
Statement of Position 92-3, "Accounting for Foreclosed Assets"
("SOP 92-3").
IN-SUBSTANCE FORECLOSURE - A loan is considered an in-substance fore-
closure if: (1) the debtor has little or no equity considering the
fair value of the collateral, (2) proceeds for repayment can be
expected to come only from operation or sale of the collateral, and
(3) the debtor has either formally or effectively abandoned control
of the collateral. Loans meeting the criteria for in-substance
foreclosure are reclassified and recorded at the lower of cost or
fair value of the collateral, which establishes a new cost basis in
the same manner as a legal foreclosure.
Properties acquired through foreclosure and held for sale and in-
substance foreclosures are reclassified from non-earning to earning
status if they produce and maintain for a minimum of two consecutive
quarters an annualized return of 5% or greater cash flow yield.
NET LOSS PER SHARE - Net loss per share is computed using the
weighted average common shares outstanding during each period. Fully
diluted net loss per share is not disclosed because such information
is not meaningful.
DEPRECIATION AND AMORTIZATION - Depreciation and amortization are
computed on the straight-line method over an estimated useful life of
40 years for buildings and three to five years for other property and
lease commissions.
CASH AND CASH EQUIVALENTS - Cash and cash equivalents include short-
term investments (high grade commercial paper carried at cost of
$60.8 million at December 31, 1994) with maturities ranging from 3 to
40 days.
Included in cash and cash equivalents is $1.4 million of restricted
cash which represents the funding of the employee retention plan (see
Note 8) and $1.5 million related to borrowers' deposits.
10
<PAGE>
MORTGAGE AND REALTY TRUST FORM 10Q
Item 1. Financial Statements (Continued)
NOTES TO THE FINANCIAL STATEMENTS
NOTE 3. MORTGAGE LOANS AND INVESTMENT IN REAL ESTATE
The following table summarizes the Trust's mortgage loan portfolio:
<TABLE>
<CAPTION>
December 31, 1994 September 30, 1994
---------------------- ----------------------
Number of Carrying Number of Carrying
Type of Underlying Security Investments Amount Investments Amount
- --------------------------- ----------- -------- ----------- --------
($ Amounts in Thousands)
<S> <C> <C> <C> <C>
Apartments 1 $ 243 1 $ 254
Residential/Condominium* 8 1,233 9 1,334
Office Buildings 2 1,609 2 1,699
Industrial Buildings 9 30,141 7 30,328
Research & Development 3 16,449 3 16,371
Retail Buildings 4 16,269 4 16,276
Hotel/Motels 1 3,060 1 3,060
-- ------- -- -------
Total 28 $69,004 27 $69,322
== ======= == ========
_____________
<FN>
* Includes 79 mortgage end loans on 8 investments at December 31, 1994 and 80
mortgage end loans on 9 investments at September 30, 1994.
</TABLE>
The Trust's mortgage loan portfolio consists of loans located
principally in California, 48% and Pennsylvania, 22%.
At December 31, 1994, the Trust had undisbursed commitments of
$727,000, all of which represents additional advances on partially
funded mortgage loans.
As of December 31, 1994, there were no earning loans delinquent (more
than 60 days past due) as to principal and/or interest.
At December 31, 1994 and 1993, loans totalling $28,163,000 and
$25,107,000, respectively, were extended beyond their original
contractual maturity dates. Loan terms are extended in the normal
course of business for various reasons, such as delays in
construction, slower leasing than originally anticipated or delay in
obtaining permanent financing.
No interest rate modifications were made on mortgage loans for the
quarter ended December 31, 1994.
11
<PAGE>
MORTGAGE AND REALTY TRUST FORM 10Q
Item 1. Financial Statements (Continued)
NOTES TO THE FINANCIAL STATEMENTS
NOTE 3. MORTGAGE LOANS AND INVESTMENT IN REAL ESTATE (Continued)
The following table summarizes the Trust's investment in in-substance
foreclosures:
<TABLE>
<CAPTION>
December 31, 1994 September 30, 1994
---------------------- ----------------------
Number of Carrying Number of Carrying
Type of Property Investments Amount Investments Amount
- ---------------- ----------- -------- ----------- --------
($ Amounts in Thousands)
<S> <C> <C> <C> <C>
EARNING:
Office Buildings 2 $12,856 2 $12,840
Retail Buildings 1 10,539 3 28,452
Apartments 1 6,698 1 6,695
Research & Development Bldgs. 2 14,114 2 14,110
-- ------- -- -------
Total Earning 6 44,207 8 62,097
-- ------- -- -------
NON-EARNING:
Industrial Buildings 2 9,279 2 10,198
-- ------- -- -------
Total Non-Earning 2 9,279 2 10,198
-- ------- -- -------
Total 8 $53,486 10 $72,295
== ======= == =======
</TABLE>
The following table summarizes the Trust's investment in real estate
equities, net of accumulated depreciation of $10,639,000 at December
31, 1994 and $10,023,000 at September 30, 1994:
<TABLE>
<CAPTION>
December 31, 1994 September 30, 1994
---------------------- ----------------------
Number of Carrying Number of Carrying
Type of Property Investments Amount Investments Amount
- ---------------- ----------- -------- ----------- --------
($ Amounts in Thousands)
<S> <C> <C> <C> <C>
Office Buildings 4 $26,353 4 $26,264
Industrial Buildings 1 6,480 1 6,510
Retail Buildings 1 24,058 1 24,083
-- ------- -- -------
Total 6 $56,891 6 $56,857
== ======= == =======
</TABLE>
12
<PAGE>
MORTGAGE AND REALTY TRUST FORM 10Q
Item 1. Financial Statements (Continued)
NOTES TO THE FINANCIAL STATEMENTS
NOTE 3. MORTGAGE LOANS AND INVESTMENT IN REAL ESTATE (Continued)
The following table summarizes the Trust's investment in properties
acquired through foreclosure and held for sale, net of accumulated
depreciation of $9,243,000 at December 31, 1994 and $8,329,000 at
September 30, 1994:
<TABLE>
<CAPTION>
December 31, 1994 September 30, 1994
---------------------- ----------------------
Number of Carrying Number of Carrying
Type of Property Investments Amount Investments Amount
- ---------------- ----------- -------- ----------- --------
($ Amounts in Thousands)
<S> <C> <C> <C> <C>
EARNING
Apartments 3 $ 21,058 3 $ 21,012
Office Buildings 3 12,044 4 13,942
Industrial Buildings 4 17,286 5 19,913
Retail Buildings 1 7,627 1 7,585
Research & Development Bldgs. 2 5,991 2 5,985
-- -------- -- --------
Total Earning 13 64,006 15 68,437
-- -------- -- --------
NON-EARNING
Office Buildings 6 18,197 5 16,449
Industrial Buildings 4 10,835 4 10,794
Retail Buildings 2 8,697 2 5,039
-- -------- -- --------
Total Non-Earning 12 37,729 11 32,282
-- -------- -- --------
Total 25 $101,735 26 $100,719
== ======== == ========
</TABLE>
The following table summarized the Trust's investment in partnerships,
net of accumulated depreciation of $465,000 at December 31, 1994 and
$313,628 at September 30, 1994:
<TABLE>
<CAPTION>
December 31, 1994 September 30, 1994
---------------------- ----------------------
Number of Carrying Number of Carrying
Type of Property Investments Amount Investments Amount
- ---------------- ----------- -------- ----------- --------
($ Amounts in Thousands)
<S> <C> <C> <C> <C>
Industrial Buildings 2 $ 9,464 2 $ 9,524
Retail Buildings 2 17,100 - -
-- ------- -- -------
Total 4 $26,564 2 $ 9,524
== ======= == =======
</TABLE>
13
<PAGE>
MORTGAGE AND REALTY TRUST FORM 10Q
Item 1. Financial Statements (Continued)
NOTES TO THE FINANCIAL STATEMENTS
NOTE 4. ALLOWANCE FOR LOSSES
The changes in the allowance for losses for the three months ended
December 31, 1994 and 1993 were as follows:
<TABLE>
<CAPTION>
12/31/94 12/31/93
-------- --------
(Amounts in Thousands)
<S> <C> <C>
Balance at beginning of period $13,430 $11,808
Provisions charged to expense - -
------- -------
13,430 11,808
Less charges against allowance, net of recoveries 2,634 215
------- -------
Balance at end of period $10,796 $11,593
======= =======
</TABLE>
Approximately $6,323,000 and $6,195,000 of the allowance at December
31, 1994 and 1993, respectively, are applicable to properties
acquired through foreclosure and held for sale.
NOTE 5. SENIOR NOTES
SENIOR SECURED NOTES - The lack of liquidity in many of the commercial
real estate markets continued during the past year. Although the
Trust was able to meet the required principal payment at December 31,
1992, reducing the principal balance of the Senior Notes to $290
million, it did not have sufficient funds to meet the $20 million
required principal payment due June 30, 1993 or the $33.8 million
required principal payment due December 31, 1993 or the $30 million
required principal payment due June 30, 1994 or the $18.8 million
required principal payment due December 31, 1994 (taking into account
permitted deferrals). The Trust also did not make the $6.6 million,
the $6.4 million, the $7.2 million, the $8.7 million and the $9.1
million interest payments due December 31, 1993, March 31, 1994,
June 30, 1994, September 30, 1994 and December 31, 1994,
respectively. The average borrowing rates for the quarters ended
December 31, 1994 and 1993, respectively, were 12.50% and 9.87%. At
December 31, 1994, the outstanding 12.87% interest rate on the Senior
Notes was composed of interest at 12.25% on $200 million of Senior
Notes (including default interest at 1%) and $14.25% on $90 million
of deferred amounts of Senior Notes (including default interest at
1%).
LOAN ON EQUITY INVESTMENT - In November 1991, the Trust acquired full
ownership of a retail center in which it had a partnership interest.
The Trust has a construction borrowing commitment of $18.7 million of
which $17.6 million was outstanding at December 31, 1994. The
contractual interest rate on this loan is 10% (Prime + 1-1/2%, floor
of 9%), and the loan matured in May 1994. The Trust negotiated an
extension of the loan to July 3, 1995.
The Trust can further extend the loan to April 22, 1996, but will
be required to make a $3.6 million payment in order to receive the
additional extension.
14
<PAGE>
MORTGAGE AND REALTY TRUST FORM 10Q
Item 1. Financial Statements (Continued)
NOTES TO THE FINANCIAL STATEMENTS
NOTE 6. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Financial Accounting Standards Board Statement No. 107 Disclosure
of Fair Value of Financial Statements ("SFAS" 107) requires
disclosure of fair value information about financial instruments,
whether or not recognized in the balance sheet, for which it is
practicable to estimate that value. In cases where quoted market
prices are not available, fair values are based on estimates using
present value or other valuation techniques. Those techniques are
significantly affected by the assumptions used, including the
discount rate and estimates of future cash flows. In that regard,
the derived fair value estimates cannot be substantiated by
comparison to independent markets and, in many cases, could not be
realized in immediate settlement of the instrument. SFAS 107
excludes certain financial instruments and all nonfinancial
instruments from its disclosure requirements. Accordingly, the
aggregate fair value amounts presented do not represent the
underlying value of the Trust.
The carrying value of cash and cash equivalents approximates that
fair value because of the liquidity and short-term maturities of
these instruments. The fair value of mortgage loans is estimated
by discounting cash flows at what is considered a market interest
rate for loans with similar terms to borrowers of similar credit
quality.
The measurement of the fair value of the Senior Notes at December 31,
1994 is not practical in the context of the proposed restructuring.
The loan on equity investment is a variable rate loan that reprices
frequently, thus fair value is based on the carrying amount of the
loan.
The estimated fair values of the Trust's financial instruments at
December 31, 1994 are as follows:
<TABLE>
<CAPTION>
Carrying Fair
Amount Value
-------- --------
(Amounts in Thousands)
<S> <C> <C>
FINANCIAL ASSETS:
Cash and cash equivalents $62,452 $62,452
Mortgage loans and notes receivable (net
of allowance for possible losses) 69,872 69,457
FINANCIAL LIABILITIES:
Loan on equity investment (17,593) (17,593)
Off-Balance Sheet Financial Instruments:
Unfunded loan commitments - (727)
</TABLE>
15
<PAGE>
MORTGAGE AND REALTY TRUST FORM 10Q
Item 1. Financial Statements (Continued)
NOTES TO THE FINANCIAL STATEMENTS
NOTE 7. SHARE OPTION PLAN
On August 14, 1994, the 1984 Share Option Plan terminated. As of
December 31, 1994, options to purchase 348,500 Common Shares were
outstanding under the 1984 Share Option Plan. The exercise price
per share varies from $2.50 to $4.15. Options granted, other than
those granted in fiscal 1991, expire five years from the date of
grant and may be exercised at any time six months after the date of
grant, subject to the limitation that the aggregate fair market
value (determined as of the time the Option is granted) of the
Shares with respect to which Incentive Stock Options are exercisable
for the first time by any participant during any calendar year shall
not exceed $100,000. Options granted during fiscal 1991, pursuant
to the Employee Retention Plan described in Note 8, expire five years
from the date of grant but do not vest until three years from the
date of grant. Options to purchase 77,500 Common Shares at a price
of $14.50 terminated during the quarter ended December 31, 1994.
In addition to cash, Options may be exercised by exchanging the
Trust's Common Shares valued at the market price on the date of
exercise of the Options. During the quarter ended December 31, 1994,
no Options were exercised.
NOTE 8. EMPLOYEE RETENTION PLAN
The Trust established an Employee Retention Plan, to be administered
by the Compensation and Nominating Committee (the "Committee"), in
order to assure the continuity and performance of employees of the
Trust. The Plan contains four categories of benefits: an incentive
program, stock options, termination pay and a retention bonus.
The Committee established an incentive program for calendar year
1991. The incentive pool was calculated based on the reduction of
the Trust's outstanding debt (the Senior Notes). During the quarters
ended December 31, 1994 and 1993, the Committee approved the payment
of discretionary bonuses totalling $128,500 and $123,000,
respectively, for certain officers and employees of the Trust.
On March 29, 1991, the Committee awarded stock options for the
purchase of 197,500 Common Shares at an option price of $4.15. The
options had a three-year vesting period from the date of grant and
vested on March 29, 1994.
A termination pay plan has been established to cover termination of
employment without cause during the period that the Senior Notes, as
defined, are outstanding. Employees will be entitled to compensation
ranging from a minimum of twelve weeks to a maximum of eighteen
months pay. In addition, certain health benefits will continue to be
paid by the Trust over a period of time equal to the period used in
calculating severance pay. The Trust estimates that the maximum cost
of the termination pay plan would be approximately $1.4 million and
the cost is charged to expense at date of termination (as defined in
the termination pay plan).
The retention bonus, which totalled $350,000, was paid on February 28,
1992 to certain employees who remained with the Trust one year after
the Effective Date of the 1991 Plan (February 27, 1991).
16
<PAGE>
MORTGAGE AND REALTY TRUST FORM 10Q
Item 1. Financial Statements (Continued)
NOTES TO THE FINANCIAL STATEMENTS
NOTE 9. ISSUANCE OF SHARES
Effective April 1, 1992, the Trust terminated its Dividend
Reinvestment and Share Purchase Plan.
The Trust is authorized to issue up to 3,500,000 Preferred Shares on
terms to be established by the Trustees. No preferred shares have
been issued to date.
The Trust contributed 150,000 Common Shares (1.4% of outstanding
shares) as part of the settlement of the consolidated class actions
and the Class 5 claims remaining in the chapter 11 proceeding. The
settlement and contribution of shares occurred on September 17, 1993.
17
<PAGE>
MORTGAGE AND REALTY TRUST FORM 10Q
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES - A Plan of Reorganization under Chapter 11 of
the Bankruptcy Code was confirmed at a hearing held in the Bankruptcy Court in
Los Angeles, California, on February 21, 1991, and an order was entered February
27, 1991, confirming the Plan. As a result of the liquidity problems in the
commercial real estate markets, the Trust was not able to meet the required
amortization at June 30, 1992 and the debt was restructured in July 1992 with
the unanimous consent of the creditors. The debt is now governed by an
indenture dated as of July 15, 1992. At December 31, 1992, debt outstanding
was reduced to $290 million, the maximum debt level permitted under the Plan on
that date.
Due to the lack of liquidity that has existed in the real estate marketplace,
the Trust has not been able to meet payment and other obligations on its
outstanding debt.
Under the financial covenants of the Indenture governing the Senior Notes, the
Trust was required to maintain a ratio of outstanding securities to its capital
base (as defined in the Indenture) of 515% at March 31, 1993. In addition,
under the Indenture the Trust was required to maintain a ratio of outstanding
securities to its capital base of 438% at June 30, 1993 and September 30, 1993,
358% at December 31, 1993 and March 31, 1994, and 313% at June 30, 1994 and
September 30, 1994, and 209% at December 31, 1994, and a ratio of earning assets
(as defined in the Indenture) to outstanding securities of 113% at June 30, 1993
and September 30, 1993, 116% at December 31, 1993 and March 31, 1994, 117% at
June 30, 1994 and September 30, 1994 and 120% at December 31, 1994. The Trust
failed to meet each of these ratios, constituting events of default under the
Indenture. However, on May 26, 1993, the Trust received from the holders of
more than 66-2/3% in principal amount of Senior Notes a waiver relating to the
March 31 default.
Management has continued discussions with the representatives of the creditors
to explore various alternatives for restructuring the outstanding debt
obligations. The Trust's present intention is to reach a consensual
restructuring agreement. If such an agreement cannot be reached with the
Trust's debt holders, the Trust will have to consider other alternatives,
including the filing of a voluntary bankruptcy petition under chapter 11 of the
Bankruptcy Code. Although the holders of more than 66-2/3% of the Trust's debt
securities had agreed with the Trust to temporarily forebear further creditor
action on the defaults for a defined standstill period, such standstill period
expired on December 3, 1993. The Company believes that no further extension of
the standstill will be granted. The Trust intends, therefore, to continue to
operate its business and seek Senior Note holder consent on an ad hoc basis as
such consent is required. Although the Trust believes that such consents, if
requested, would be in the best interest of the Trust, its shareholders and the
Senior Note holders, there can be no assurance that the Trust will obtain
sufficient consents as they are required. Currently, the Trust is in default
under the Indenture and has continued to suspend payments on the Senior Notes.
Consequently, there can be no assurance that the Indenture Trustee and the
Collateral Agents will not take remedial or enforcement action, including
acceleration of the Senior Notes and foreclosure. If it becomes impossible for
the Trust to continue operations under such circumstances, it may be necessary
for Mortgage and Realty Trust to explore other alternatives, including seeking
relief under chapter 11 of the Bankruptcy Code.
At December 31, 1994, the Trust had cash and cash equivalents of $60.8 million.
Included in cash and cash equivalents are $1.4 million of restricted cash which
represents the funding of the employee retention plan and $1.5 million related
to borrowers' deposits. The Trust's unfunded loan commitments totalled
$727,000 at December 31, 1994.
RESULTS OF OPERATIONS-QUARTER ENDED DECEMBER 31, 1994 VS. QUARTER ENDED DECEMBER
31, 1993 - Net loss for the quarter ended December 31, 1994 was $(5,454,000) or
$(.49) per share compared to a net loss of $(4,656,000) or $(.41) per share for
the quarter ended December 31, 1993.
18
<PAGE>
MORTGAGE AND REALTY TRUST FORM 10Q
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Interest and fee income on mortgage loans decreased $1,127,000 to $2,878,000
for the current quarter from $4,005,000 for the quarter ended December 31,
1993. The decrease was due primarily to a reduction in earning mortgage loans
(including earning in-substance foreclosures) which totalled $113.2 million at
December 31, 1994 compared to $170.1 million at December 31, 1993.
Rental income increased $1,390,000 to $5,692,000 in the quarter ended December
31, 1994 from $4,302,000 for the quarter ended December 31, 1993. In addition
to rental income, the Trust received reimbursement of certain operating expenses
totalling $577,000 and $431,000 for the quarters ended December 31, 1994 and
1993, respectively. Operating expenses and depreciation and amortization on
rental properties increased $593,000 to $4,374,000 for the quarter ended
December 31, 1994 from $3,781,000 for the quarter ended December 31, 1993,
primarily from continued growth in real estate equities and properties acquired
through foreclosure and held for sale.
Interest on short-term investments increased due to the continuing accumulation
of available cash. Available cash increased due to no payment of principal and
interest on the Secured Notes since September 30, 1993.
Interest expense increased $1,760,000 to $9,559,000 in the current quarter from
$7,799,000 for the quarter ended December 31, 1993. This was due primarily to
an increase in the average borrowing rate from 9.87% for the quarter ended
December 31, 1993 to 12.50% for the quarter ended December 31, 1994.
Reorganization expenses related to the Chapter 11 filing and debt restructuring
expenses were $370,000 for the quarter ended December 31, 1994 compared to
$676,000 for the quarter ended December 31, 1993. These expenses reflect
professional fees incurred by the representatives of the creditors,
shareholders and the Trust.
RESULTS OF OPERATIONS-QUARTER ENDED DECEMBER 31, 1994 VS. QUARTER ENDED
SEPTEMBER 30, 1994 - Net loss for the quarter ended December 31, 1994 was
$(5,454,000) or $(.49) per share compared to $(7,037,000) or $(.63) per share
for the quarter ended September 30, 1994. The quarter ended September 30, 1994
included a provision for losses of $2,000,000 or $.18 per share compared to no
provision for the quarter ended December 31, 1994.
Interest and fee income on mortgage loans decreased $454,000 to $2,878,000 for
the quarter ended December 31, 1994 from $3,332,000 for the quarter ended
September 30, 1994. The decrease was due to a reduction in earning mortgage
loans (including earning in-substance foreclosures) because of the transfer of
approximately $15.4 million of earning in-substance foreclosures to investment
in partnerships.
Rental income increased $562,000 to $5,692,000 in the quarter ended December
31, 1994 from $5,130,000 for the quarter ended September 30, 1994. In addition
to rental income, the Trust received reimbursement of certain operating expenses
totalling $577,000 and $348,000 for the quarters ended December 31, 1994 and
September 30, 1994, respectively. Operating expenses and depreciation and
amortization on rental properties increased $473,000 to $4,374,000 for the
quarter ended December 31, 1994 from $3,901,000 for the quarter ended September
30, 1994, primarily from continued growth in real estate equities and properties
acquired through foreclosure and held for sale.
Interest on short-term investments increased due to the continuing accumulation
of available cash.
19
<PAGE>
MORTGAGE AND REALTY TRUST FORM 10Q
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Interest expense increased $380,000 to $9,559,000 in the current quarter from
$9,179,000 for the quarter ended September 30, 1994. This was due primarily to
an increase in the average borrowing rate from 11.87% for the quarter ended
September 30, 1994 to 12.50% for the quarter ended December 31, 1994.
NON-EARNING LOANS AND INVESTMENTS - At December 31, 1994, the Trust's non-
earning loans, non-earning in-substance foreclosures and non-earning properties
acquired through foreclosure and held for sale were $47,008,000, representing
15.25% of invested assets compared to $42,480,000 (13.73%) and $41,822,000
(12.31%) at December 31, 1993.
20
<PAGE>
MORTGAGE AND REALTY TRUST FORM 10Q
PART II
Item 3. DEFAULTS UPON SENIOR SECURITIES
The Trust did not make its $18.75 million required principal payment
due December 31, 1994 on the Senior Notes. Also, payment of $9.1
million in interest due December 31, 1994 on the Senior Notes was not
made.
In addition, based on financial results at December 31, 1994 the
Trust was in violation of certain financial covenants in the
Indenture relating to the ratio of outstanding securities to the
Trust's capital base and the ratio of earning assets to outstanding
securities. Under the financial covenants of the Indenture, the
Trust was required to maintain a ratio of outstanding indenture
securities to its capital base (as defined in the Indenture) of 209%
at December 31, 1994 and a ratio of earning assets to outstanding
securities of 120% at December 31, 1994. Failure to satisfy these
covenants constitute additional events of default under the Indenture.
In addition, at December 31, 1994, the Trust's non-performing assets
(as defined in the Indenture) exceeded the limits prescribed in the
Indenture. In addition to constituting an event of default, the
Trust is obligated under the Indenture to pay to the holders of
Senior Notes a penalty equal to 1.5% of the excess of non-performing
assets, or a payment of approximately $183,000. The are also
outstanding certain other events of default under the Indenture.
Notwithstanding the uncured events of default, neither the Indenture
Trustee nor any holders of the Senior Notes have accelerated the
Senior Notes. On July 2, 1993 holders of approximately 81% of the
Senior Notes agreed, subject to certain conditions, not to accelerate
the Senior Notes or take any other remedial or enforcement action
during a defined standstill period (the "Standstill Period")
initially expiring July 31, 1993. The Standstill Period was extended
by holders of more than 66-2/3% of the Senior Notes on August 3,
August 20, September 23, October 5 and November 23, 1993. However,
the Standstill Period expired on December 3, 1993. At the present
time, it appears unlikely that any further extensions of the
Standstill Period will be granted. Subsequent to the expiration of
the Standstill Period, on or about December 8, 1993 the Indenture
Trustee (and the Collateral Agents) notified the Trust's bank of the
Indenture Trustee's security interest in the Trust's deposit accounts
and instructed the bank to freeze the Trust's cash until otherwise
instructed by the Indenture Trustee. Since that date, the Trust has
operated on an ad hoc basis with the Indenture Trustee in
administering its cash, with all cash use subject to review and
approval by the Indenture Trustee. On or about February 3, 1994, the
Trust and the Indenture Trustee and Collateral Agents reached further
understanding regarding the Trust's use of cash and administration of
its assets in the absence of a continued or extended Standstill
21
<PAGE>
MORTGAGE AND REALTY TRUST FORM 10Q
PART II
Item 3. DEFAULTS UPON SENIOR SECURITIES (Continued)
Period. Pursuant to the understanding, which is terminable at will
by the Indenture Trustee or Collateral Agents, the Trust will
continue to use its cash on an ad hoc basis, subject to Indenture
Trustee or Collateral Agent approval, and the Trust will administer
its assets as if no default had occurred and was continuing. There
can be no assurance that the Indenture Trustee will not terminate the
understanding or take further remedial or enforcement action with
respect to the Trust's bank accounts or other properties, including
acceleration of the Senior Notes and foreclosure. Such action, or
failure of the Indenture Trustee and the Collateral Agents to consent
to necessary use of cash or releases of collateral in the conduct of
the Trust's business, would have a material adverse effect on the
Trust's operations and could cause the Trust to seek relief under
Chapter 11 of the United States Bankruptcy Code.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Exhibits are as set forth in the "INDEX TO EXHIBITS" on page 24.
(b) REPORTS ON FORM 8-K
On November 28, 1994, the Trust filed a report on Form 8-K dated
November 17, 1994, reporting information under Item 5 - Other
Events.
22
<PAGE>
MORTGAGE AND REALTY TRUST FORM 10Q
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.
MORTGAGE AND REALTY TRUST
By /s/ Victor H. Schlesinger
-------------------------------
Victor H. Schlesinger
Chairman
By /s/ Daniel F. Hennessey
-------------------------------
Daniel F. Hennessey
Treasurer
DATE: February 13, 1995
23
<PAGE>
MORTGAGE AND REALTY TRUST FORM 10Q
INDEX TO EXHIBITS
EXHIBIT
NO. DESCRIPTION
- ------- -----------
11* Schedule of Net Income (Loss) Per Share - Assuming Full Dilution
- ------------------
* Exhibit filed with this Form 10-Q.
24
<PAGE>
Exhibit 11
MORTGAGE AND REALTY TRUST
SCHEDULE OF NET INCOME (LOSS) PER SHARE - ASSUMING FULL DILUTION
FOR THE QUARTERS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1994 1993
------------ ------------
<S> <C> <C>
BASIS:
Net (loss) $(5,454,000) $(4,656,000)
Average common shares outstanding 11,226,000 11,226,000
20% limitation on assumed repurchase 2,245,000 2,245,000
Market price at the end of the period $.125 $.50
Options outstanding 348,500 426,000
COMPUTATION:
Proceeds:
Options 348,500 426,000
Average exercise price X $3.35 X $5.37
----------- -----------
$ 1,167,000 $ 2,288,000
=========== ===========
Adjustment of proceeds:
Purchase of outstanding common shares
at market value $ 281,000 $ 1,123,000
Retirement of debt 886,000 1,165,000
----------- -----------
$ 1,167,000 $ 2,288,000
=========== ===========
Adjustment of net income (loss):
Net (loss) before gain on sales of
real estate $(5,454,000) $(4,656,000)
Interest reduction 29,000 29,000
----------- -----------
Adjusted net income (loss) $(5,425,000) $(4,627,000)
=========== ===========
Adjustment of shares outstanding:
Average shares outstanding 11,226,000 11,226,000
Net shares repurchased (1,897,000) (1,819,000)
----------- -----------
Adjusted shares outstanding (basis for
computation of net income per share -
assuming full dilution) 9,329,000 9,407,000
=========== ===========
Fully diluted earnings per share:
Net (loss) $(.58) $(.49)
===== =====
<FN>
NOTE - Primary earnings per share is based on the average number of shares
outstanding during the period.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 62,452
<SECURITIES> 0
<RECEIVABLES> 7,647
<ALLOWANCES> (10,796)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 367,698
<CURRENT-LIABILITIES> 0
<BONDS> 307,593
<COMMON> 11,226
0
0
<OTHER-SE> 3,353
<TOTAL-LIABILITY-AND-EQUITY> 367,698
<SALES> 0
<TOTAL-REVENUES> 10,002
<CGS> 0
<TOTAL-COSTS> 5,527
<OTHER-EXPENSES> 370
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,559
<INCOME-PRETAX> (5,454)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,454)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,454)
<EPS-PRIMARY> (.49)
<EPS-DILUTED> (.49)
