SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
AMENDMENT NO. 1
(MARK ONE)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JANUARY 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM to
COMMISSION FILE NUMBER: 1-7003
PROPERTY CAPITAL TRUST
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-2452367
(State or other jurisdiction of (IRS Employer Identification
incorporation or organization) Number)
ONE POST OFFICE SQUARE, BOSTON, MASSACHUSETTS 02109
(Address of principal executive offices) (zip code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(617) 451-2400
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 at least the past 90 days.
Yes X No .
NUMBER OF SHARES OF COMMON SHARES OUTSTANDING AS OF JANUARY 31, 1995: 9,050,881
<PAGE>
Page 1
PROPERTY CAPITAL TRUST
INDEX
Page
PART I. FINANCIAL INFORMATION Number
Consolidated Balance Sheet - January 31, 1995
and July 31, 1994 (unaudited) 2
Consolidated Statement of Income -
Three and Six Months Ended January 31, 1995 and 1994 (unaudited) 3
Consolidated Statement of Cash Flows -
Six Months Ended January 31, 1995 and 1994 (unaudited) 4
Consolidated Statement of Shareholders' Equity -
Six Months Ended January 31, 1995 and 1994 (unaudited) 5
Notes to Consolidated Financial Statements (unaudited) 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-10
PART II. OTHER INFORMATION
Item 2. Legal Proceedings 10
Item 4. Submission of Matters to a vote of Security Holders 10
Item 6. Exhibits and Reports on Form 8-K 10
<PAGE>
Page 2
PART I. FINANCIAL INFORMATION
PROPERTY CAPITAL TRUST
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
JANUARY 31, JULY 31,
1995 1994
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Real Estate Investments
Owned Properties held directly by the Trust
(net of accumulated depreciation of $12,214,000
and $10,362,000 in 1995 and 1994, respectively) $ 96,073,000 $105,295,000
Structured Transactions held directly by the Trust 32,576,000 32,581,000
Investment Partnerships 51,911,000 51,998,000
------------ -------------
180,560,000 189,874,000
Allowance for possible investment losses (17,413,000) (17,413,000)
------------ -------------
163,147,000 172,461,000
Cash and cash equivalents 4,075,000 720,000
Interest and rents receivable
Owned Properties held directly by the Trust 1,779,000 1,852,000
Structured Transactions held directly by the Trust 110,000 259,000
Other assets 1,743,000 1,541,000
----------- -----------
$170,854,000 $176,833,000
============ ============
LIABILITIES AND SHAREHOLDER'S EQUITY
Liabilities
Accounts payable and accrued expenses $ 2,015,000 $ 2,940,000
Accrued interest 712,000 711,000
Bank note payable - 5,000,000
Mortgage notes payable 40,385,000 43,110,000
9 3/4% Convertible Subordinated Debentures 2,546,000 2,546,000
10% Convertible Subordinated Debentures 30,823,000 30,823,000
------------ -------------
76,481,000 85,130,000
------------ -------------
Shareholders' Equity
Common Shares (without par value, unlimited shares
authorized, 9,050,881 issued and outstanding at
January 31, 1995 and 9,030,585 at July 31, 1994) 106,177,000 106,060,000
Accumulated deficit (11,804,000) (14,357,000)
------------- ------------
Total Shareholders' Equity 94,373,000 91,703,000
------------ ------------
$170,854,000 $176,833,000
============ ============
</TABLE>
See accompanying notes
<PAGE>
Page 3
PROPERTY CAPITAL TRUST
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JANUARY 31, JANUARY 31,
----------------------------- ----------------------------
1995 1994 1995 1994
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES
Rents from Owned Properties held directly by the Trust $ 4,140,000 $ 2,861,000 $ 8,638,000 $ 5,608,000
Structured Transactions held directly by the Trust
Base income 663,000 801,000 1,326,000 1,821,000
Overage income 458,000 488,000 886,000 1,044,000
Income from unconsolidated Investment Partnerships 437,000 763,000 717,000 1,219,000
----------- ----------- ----------- -----------
5,698,000 4,913,000 11,567,000 9,692,000
Advisory fee income 78,000 67,000 160,000 147,000
Interest income 2,000 1,000 2,000 1,000
----------- ----------- ----------- -----------
5,778,000 4,981,000 11,729,000 9,840,000
----------- ----------- ----------- -----------
EXPENSES
Expenses on Owned Properties held directly by the Trust 1,815,000 1,407,000 3,557,000 2,807,000
Interest 1,869,000 1,568,000 3,740,000 3,135,000
Depreciation 1,086,000 824,000 2,107,000 1,564,000
General and administrative expenses 518,000 575,000 1,031,000 1,039,000
Professional fees 74,000 116,000 125,000 288,000
Trustees' fees and expenses 43,000 45,000 88,000 82,000
------------ ----------- ----------- -----------
5,405,000 4,535,000 10,648,000 8,915,000
------------ ----------- ----------- -----------
INCOME BEFORE GAIN ON SALE OF REAL ESTATE INVESTMENTS 373,000 446,000 1,081,000 925,000
GAIN ON SALE OF REAL ESTATE INVESTMENTS 3,099,000 100,000 3,099,000 100,000
------------ ----------- ----------- -----------
NET INCOME $ 3,472,000 $ 546,000 $ 4,180,000 $ 1,025,000
============ =========== =========== ===========
NET INCOME PER SHARE
INCOME BEFORE GAIN ON SALE OF REAL ESTATE INVESTMENTS $0.04 $0.05 $0.12 $0.10
GAIN ON SALE OF REAL ESTATE INVESTMENTS 0.34 0.01 0.34 0.01
---- ---- ---- ----
NET INCOME PER SHARE $0.38 $0.06 $0.46 $0.11
===== ===== ===== =====
AVERAGE SHARES OUTSTANDING 9,043,000 9,031,000 9,037,000 9,031,000
========= ========= ========= =========
</TABLE>
See accompanying notes
<PAGE>
Page 4
PROPERTY CAPITAL TRUST
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JANUARY 31,
----------------------------------------------
1995 1994
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $4,180,000 $1,025,000
Adjustments to Net Income
Gain on sale of real estate investments (3,099,000) (100,000)
Depreciation and amortization 2,203,000 1,599,000
Income from unconsolidated Investment Partnerships (717,000) (1,219,000)
Distributions of income from Investment Partnerships 804,000 911,000
Changes in assets and liabilities
Decrease in interest and rents receivable 222,000 194,000
Increase in other assets, net (298,000) (239,000)
Decrease in accounts payable, accrued expenses
and accrued interest (807,000) (73,000)
----------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,488,000 2,098,000
---------- ---------
INVESTING ACTIVITIES
Owned Properties held directly by the Trust
Additions (5,096,000) (6,149,000)
Disposition 15,310,000 -
Structured Transactions held directly by the Trust
Dispositions/repayments 5,000 1,580,000
Investment Partnerships
Distributions in excess of income - 9,000
----------- ---------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 10,219,000 (4,560,000)
----------- ----------
FINANCING ACTIVITIES
(Repayment of) proceeds from bank note payable, net (5,000,000) 4,070,000
Cash dividends paid (1,627,000) (1,264,000)
Prepayment of mortgage notes payable, net (2,440,000) -
Scheduled amortization of mortgage notes payable (285,000) (228,000)
Proceeds from exercise of stock options - 8,000
----------- ---------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (9,352,000) 2,586,000
----------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS 3,355,000 124,000
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 720,000 324,000
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $4,075,000 $ 448,000
========== ==========
</TABLE>
See accompanying notes
<PAGE>
Page 5
PROPERTY CAPITAL TRUST
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(UNAUDITED)
SIX MONTHS ENDED
JANUARY 31,
-----------------------------------------
1995 1994
- -------------------------------------------------------------------------------
COMMON SHARES
Balance at beginning of period $106,060,000 $106,052,000
Shares issued pursuant to Trustee
Deferred Stock Plan 117,000 -
Stock options exercised - 8,000
------------ ------------
Balance at end of period 106,177,000 106,060,000
------------ ------------
ACCUMULATED DEFICIT
Balance at beginning of period (14,357,000) (15,918,000)
Net income 4,180,000 1,025,000
Cash dividends paid (1,627,000) (1,264,000)
----------- ----------
Balance at end of period (11,804,000) (16,157,000)
----------- ----------
TOTAL SHAREHOLDERS' EQUITY $ 94,373,000 $ 89,903,000
============ ============
NUMBER OF COMMON SHARES
Common Shares issued and outstanding
at beginning of period 9,030,585 9,028,585
Shares issued pursuant to Trustee
Deferred Stock Plan 20,296 -
Stock options exercised - 2,000
--------- ---------
Common Shares issued and outstanding
at end of period 9,050,881 9,030,585
========= =========
See accompanying notes
<PAGE>
Page 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
1. BASIS OF PRESENTATION
In the opinion of management of Property Capital Trust (the "Trust"), the
accompanying unaudited consolidated financial statements contain all
adjustments, consisting of normal and recurring adjustments, necessary to
present fairly the Trust's financial position as of January 31, 1995 and the
results of its operations and its cash flows for the periods ended January 31,
1995 and 1994.
Operating results for the six months ended January 31, 1995 are not necessarily
indicative of the results that may be expected for the remainder of fiscal
1995. The information contained in these financial statements should be read
in conjunction with the Trust's 1994 Annual Report on Form 10-K filed with the
Securities and Exchange Commission on October 28, 1994.
2. INVESTMENT PARTNERSHIPS
Certain of the Trust's investments have been made through partnerships, or
participation agreement, in which the Trust is the general partner or lead
lender and other institutional investors are limited partners or participants
(the "Investment Partnerships"). During the third quarter of fiscal 1994, the
Trust changed its method of accounting for its Investment Partnerships to the
equity method. Previously, the Trust consolidated its share of the Investment
Partnerships' results of operations and related assets and liabilities.
Although the change did not affect the Trust's net income (loss) or
shareholders' equity, prior period financial statements have been restated to
reflect the change as if it had occurred at the beginning of the period. The
change in accounting is to a preferable method based upon generally accepted
accounting principles and is more consistent with current accounting practices
in the real estate industry.
A Condensed Combined Summary of Operations for the unconsolidated Investment
Partnerships for the periods indicated follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
January 31, January 31,
------------------------- --------------------------
1995 1994 1995 1994
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES
Rents from Owned
Properties $5,245,000 $1,984,000 $10,300,000 $3,795,000
Structured Transactions
Base income 672,000 1,292,000 1,344,000 2,333,000
Overage income 173,000 174,000 281,000 174,000
Other income 14,000 5,000 31,000 11,000
--------- --------- ---------- ----------
6,104,000 3,455,000 11,956,000 6,313,000
--------- --------- ---------- ----------
EXPENSES
Owned Properties expenses 3,234,000 868,000 6,720,000 1,869,000
Depreciation 1,037,000 567,000 2,043,000 1,127,000
Interest 485,000 - 806,000 -
Other 364,000 124,000 735,000 225,000
--------- --------- ---------- ---------
5,120,000 1,559,000 10,304,000 3,221,000
--------- --------- ---------- ---------
NET INCOME $ 984,000 $1,896,000 $ 1,652,000 $3,092,000
========== ========== =========== ==========
NET INCOME
Trust's share of
combined net income $ 437,000 $ 763,000 $ 717,000 $1,219,000
Limited partners' share of
combined net income 547,000 1,133,000 935,000 1,873,000
---------- ---------- ----------- ----------
$ 984,000 $1,896,000 $ 1,652,000 $3,092,000
========== ========== =========== ==========
<PAGE>
Page 7
ITEM 1. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The Trust's debt at January 31, 1995 was $73,754,000 as compared to $81,479,000
at July 31, 1994. The Trust's debt to equity ratio decreased to .78 at January
31, 1995 from .89 at July 31, 1994. The decrease in the Trust's debt was due
to the sale of 6110 Executive Boulevard, which was encumbered by a $6,440,000
first mortgage and repayment in full of the Trust's outstanding balance on its
bank note payable, offset in part by an additional $4,000,000 advance under the
loan secured by Loehmann's Fashion Island. The debt to equity ratio also
improved as a result of the sale of 6110 Executive Boulevard with a gain of
$3,099,000.
The Trust's bank note payable, which as noted above has no outstanding balance,
was a revolving bank line of credit of $20,000,000 at the end of the prior
quarter. In December 1994, when the Trust borrowed an additional $4,000,000
under the loan secured by Loehmann's Fashion Island, the amount available under
the bank line was reduced to $16,000,000. In February 1995, following the sale
of 6110 Executive Boulevard, the Trust agreed to further reduce its borrowing
capacity under its bank line to $10,000,000, an amount which the Trust believes
is adequate to meet its working capital requirements.
As mentioned above, during the quarter ended January 31, 1995, the Trust
borrowed an additional $4,000,000 (at prime plus 1/4%) under its $30,000,000
first mortgage commitment secured by Loehmann's Fashion Island, increasing the
aggregate amount advanced to $22,000,000. Subsequent to the end of the
quarter, a portion of the sales proceeds from the sale of 6110 Executive
Boulevard was used to make a $2,000,000 mortgage amortization payment on this
mortgage, which payment eliminated the requirement for monthly amortization
payments prior to maturity in June 1998. Due to the $2,000,000 amortization
payment, the first mortgage commitment was reduced to $28,000,000. However, it
is not the Trust's current intention to borrow any additional funds under this
loan.
Management believes that with its cash provided by operating activities
retained after dividends, borrowing capacity under the existing bank line and
proceeds from the sale of certain investments as described below, it will be
able to meet its fiscal 1995 cash requirements for anticipated capital
expenditures on Owned Properties held directly by the Trust. The Trust
currently expects that these cash requirements will total approximately
$2,000,000 during the remainder of fiscal 1995. Further, the Trust believes
that it will be able to fund anticipated long-term liquidity requirements with
cash provided by operating activities retained after dividends, existing credit
facilities and sales proceeds for the foreseeable future.
FUNDS FROM OPERATIONS
Funds from operations is considered by the REIT industry to be an appropriate
measure of performance of an equity REIT. Funds from operations is calculated
by the Trust consistent with the National Association of Real Estate Investment
Trusts' definition (funds from operations equals net income, excluding gains
(losses) from debt restructurings and sales of properties, plus depreciation
and amortization and after adjustment for unconsolidated partnerships and joint
ventures). Funds from operations should be considered in conjunction with net
income as presented in the Trust's unaudited financial statements. Funds from
operations does not represent cash provided by operating activities in
accordance with generally accepted accounting principles and should not be
considered as a substitute for net income as a measure of results of operations
or for cash provided by operating activities as a measure of liquidity. Funds
from operations was calculated by the Trust as follows:
<PAGE>
Page 8
ITEM 1. FINANCIAL CONDITION (continued)
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
January 31, January 31,
----------------------- -----------------------
1995 1994 1995 1994
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Income before Gain on Sale of
Real Estate Investments $ 373,000 $ 446,000 $1,081,000 $ 925,000
Depreciation on Owned Properties
held directly by the Trust 1,086,000 824,000 2,107,000 1,564,000
Trust's share of depreciation
on unconsolidated Investment
Partnerships 522,000 302,000 1,027,000 600,000
---------- ---------- ---------- ----------
$1,981,000 $1,572,000 $4,215,000 $3,089,000
========== ========== ========== ==========
</TABLE>
REVIEW OF SIGNIFICANT REAL ESTATE ACTIVITY FOR THE QUARTER
APARTMENTS
The Trust, as general partner of PCA Canyon View Associates Limited
Partnership, an Investment Partnership in which the Trust has invested
approximately $3,400,000, continues to negotiate with its sublessee/mortgagor
and the first mortgagee on Phase I of this two-phase apartment project. The
Investment Partnership has not been paid by its sublessee/mortgagor since June
1994. Management believes that adequate provision has been made in the Trust's
loss allowance for any loss that may be sustained on these investments. (See
"Item 2. Legal Proceedings.")
Subsequent to the end of the second quarter, PCA Southwest Associates Limited
Partnership, an Investment Partnership that owned 3,000 apartment units in
Houston, Texas, completed the sale of Braes Hill, a 152-unit complex. The
property was sold at a gain, of which the Trust's share is approximately
$100,000. Additionally, the Investment Partnership which also owns Telegraph
Hill, Phase B, a 259-unit complex, ceased making payments to the first
mortgagee and is attempting to restructure the terms of the mortgage, of which
$2,487,000 is outstanding. The amount of the unpaid debt service through
January 31, 1995 is $57,730.
OFFICE BUILDINGS
During the quarter, the Trust completed the sale of 6110 Executive Boulevard
located in Rockville, Maryland, for $16,380,000 resulting in a gain to the
Trust of approximately $3,099,000 after all closing costs. The Trust took
title to this property in February 1994 after writing down its investment by a
total of $6,000,000 in fiscal 1992 and 1994.
HOTELS
The lessee/mortgagor of the Grosvenor Airport Inn, a $4,000,000 Structured
Investment in a 206 room hotel in South San Francisco, California, has been
granted an option to purchase the Trust's Structured Investment for $2,500,000.
There can be no assurance, at this time, that the lessee/mortgagor of the
Grosvenor Airport Inn will exercise its option. The Trust had previously
restructured this transaction to provide for a reduced annual return of
$160,000. The anticipated loss has been provided for in the Trust's allowance
for possible investment losses.
<PAGE>
Page 9
ITEM 1. FINANCIAL CONDITION (continued)
RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JANUARY 31, 1995
VERSUS THE THREE AND SIX MONTHS ENDED JANUARY 31, 1994
NET INCOME
Net Income for the three and six months ended January 31, 1995 was $3,472,000
($.38 per share) and $4,180,000 ($.46 per share) as compared to $546,000 ($.06
per share) and $1,025,000 ($.11 per share) for the same periods in the prior
year.
REVENUES
Rents from Owned Properties held directly by the Trust (base rent plus expense
reimbursements) increased 45% and 54% for the three and six months ended
January 31, 1995 as compared to the same periods in the prior year, primarily
due to the Trust's acquisition of its lessee's interest in 6110 Executive
Boulevard (converting the investment from a Structured Transaction held
directly by the Trust to an Owned Property held directly by the Trust effective
February 1994), an increase in rental revenues from the redeveloped Loehmann's
Fashion Island as new tenants have taken occupancy and $404,000 of non-
recurring income related to the settlement of a bankruptcy claim filed by the
Trust against a former tenant at Loehmann's Fashion Island in the first quarter
of fiscal 1995. This increase was offset in part by a decrease in rental
revenue due to the sale of Eagle apartments (March 1994).
Base income from Structured Transactions held directly by the Trust (land rent
and/or mortgage interest) decreased 17% and 27% for the three and six months
ended January 31, 1995 as compared to the same periods in the prior year,
primarily due to the conversion of 6110 Executive Boulevard to an Owned
Property held directly by the Trust, the prepayment of the loan and sale of the
land underlying Brown County Inn (January 1994), the sale of the land
underlying Village Oaks apartments (March 1994) and the disposition of the
Rapids Mall's loan (June 1994). This decrease was offset in part by an
increase in base income from the restructured Cincinnati Marriott Inn
investment (April 1994).
Overage income from Structured Transactions held directly by the Trust
decreased 6% and 15% for the three and six months ended January 31, 1995 as
compared to the same periods in the prior year primarily due to reduced overage
income from two apartment investments and the sales of the Village Oaks and
Brown County Inn investments.
The Trust's share of income from unconsolidated Investment Partnerships
decreased 43% and 41% for the three and six months ended January 31, 1995 as
compared to the same periods in the prior year primarily due to the reduced net
income recorded by the Trust from PCA Southwest Associates Limited Partnership,
the Partnership which owns 3,000 apartment units in Texas. The apartments were
converted to Owned Properties in March 1994 and since that date the Trust's
share of net income is reported net of depreciation expense. The decrease in
income from unconsolidated Investment Partnerships was also due to the
cessation of rent and interest payments from the sublessee/mortgagor of the
Canyon View apartment investments and the associated legal and professional
fees incurred during negotiations. (See "Item 2. Legal Proceedings," for a
discussion of the bankruptcy filing of the Investment Partnership that holds
the Canyon View investments.)
EXPENSES
Expenses on Owned Properties held directly by the Trust increased 29% and 27%
for the three and six months ended January 31, 1995 as compared to the same
periods in the prior year primarily due to the acquisition of 6110 Executive
Boulevard and an increase in operating expenses at the redeveloped Loehmann's
Fashion Island.
Interest expense increased 19% for both the three and six months ended January
31, 1995 as compared to the same periods in the prior year due to the interest
expense incurred on the first mortgage on 6110 Executive Boulevard and an
increase in interest expense related to Loehmann's Fashion Island (a portion of
which had been capitalized during the first quarter of fiscal 1994). These
increases were offset in part by a reduction in interest expense due to the
sale of Eagle apartments.
Depreciation expense increased 32% and 35% for the three and six months ended
January 31, 1995 as compared to the same periods in the prior year primarily
due to the acquisition of 6110 Executive Boulevard and the increase in
depreciation on the redeveloped Loehmann's Fashion Island, offset in part by
the elimination of depreciation on Eagle apartments, which was sold.
<PAGE>
Page 10
ITEM 1. FINANCIAL CONDITION (continued)
GAIN ON SALE OF REAL ESTATE INVESTMENTS
Net income for the second quarter of fiscal 1995 included a gain of $3,099,000
($.34 per share) on the sale of the 6110 Executive Boulevard office building
located in Rockville, Maryland. In the comparable quarter last year net income
included a $100,000 ($.01 per share) gain on the sale of the Trust's land
investment in the Brown County Inn, located in Nashville, Indiana.
DIVIDENDS
The dividend declared for the second quarter of fiscal 1995 was $.10 per share
versus $.07 per share for the same period in the prior year. The Trust pays
dividends approximately 55 days following the end of each fiscal quarter.
PART II. OTHER INFORMATION
ITEM 2. LEGAL PROCEEDINGS
In July 1994, the sublessee/mortgagor of PCA Canyon View Associates Limited
Partnership (an Investment Partnership) in two apartment projects in San Ramon,
California (know as "Canyon View I" and "Canyon View II" and containing 248 and
188 units, respectively) failed to make the required payments due the
Investment Partnership and the ground lessor. In addition, in August 1994, the
sublessee/mortgagor failed to make the required mortgage payment due the first
mortgagee of Phase I. The outstanding balance of the first mortgage secured by
Phase I was $12,000,000. The Investment Partnership's carrying value of the
properties was $14,374,000 at January 31, 1995, of which the Trust's share was
$3,422,000.
As a result of the defaults by the sublessee/mortgagor, on August 3,1994 the
first mortgagee filed a foreclosure action in Superior Court of the State of
California, County of Contra Costa, seeking to take full title to Phase I, to
recover approximately $3,000,000 in insurance proceeds made available as a
result of certain construction defects in Phase I ($500,000 of which had
already been retained by the sublessee/mortgagor in part for attorneys' and
engineers' fees) and to have a receiver appointed to operate the property. On
August 26, 1994, the Court appointed a receiver for Phase I. In addition, on
August 8, 1994 the Investment Partnership filed a foreclosure action in
Superior Court of the State of California, Contra Costa County, seeking to
obtain full title to both Phase I and Phase II, to recover the construction
defects insurance proceeds, to force the bank that had issued $1,750,000 in
letters of credit as further security for the Investment Partnership's
investments to honor the Investment Partnership's draw requests under those
letters of credit and to have a receiver appointed to operate Phase II. On
August 31, 1994, the Court appointed a receiver for Phase II. The nonjudicial
foreclosure sale for Phase I had been set by the first mortgagee for December
5, 1994. On December 2, 1994 the Investment Partnership filed for protection
under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy
Court for the Northern District of California.
Negotiations with the first mortgagee and the sublessee/mortgagor continue. At
this time it is not possible to predict the outcome of these legal actions.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Trust
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
PROPERTY CAPITAL TRUST
REGISTRANT
/S/ ROBERT M. MELZER
----------------------------------
November 13, 1995 Robert M. Melzer
- ------------------ President and Chief Executive Officer
Date
