<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIS
EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED JULY 31, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
--------- -----------
Commission File No. 1-7003
PROPERTY CAPITAL TRUST
---------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
MASSACHUSETTS 04-2452367
- ------------------------------------ ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ONE POST OFFICE SQUARE, 21ST FLOOR
BOSTON, MASSACHUSETTS 02109
- ------------------------------------ ------------------
(Address of principal executive (Zip Code)
offices)
</TABLE>
Registrant's telephone number, including area code: (617) 451-2400
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Name of exchange
Title of each Class on which registered
- ------------------------------------ ------------------------
<S> <C>
COMMON SHARES, WITHOUT PAR VALUE AMERICAN STOCK EXCHANGE
RIGHTS TO PURCHASE COMMON SHARES AMERICAN STOCK EXCHANGE
</TABLE>
Securities registered pursuant to Section 12(g) of the Act: NONE
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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. Yes X No .
--- ---
As of September 30, 1995, the aggregate market value of Common Shares held by
non-affiliates of the registrant was approximately $75,826,000.
As of September 30, 1995, there were 9,053,881 Common Shares outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive Proxy Statement to be filed for the
Annual Meeting of Shareholders to be held on December 15, 1995 are incorporated
by reference into Part III as set forth herein.
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<PAGE> 2
PART I
ITEM 1. BUSINESS
- --------------------------------------------------------------------------------
Property Capital Trust (the "Trust") is an unincorporated business trust
organized under the laws of the Commonwealth of Massachusetts pursuant to a
Declaration of Trust dated June 9, 1969, as amended. The Trust has qualified and
has elected to be taxed as a real estate investment trust ("REIT") under
Sections 856-860 of the Internal Revenue Code since 1969. It intends to continue
to qualify as a REIT. On May 24, 1995, the Board of Trustees of the Trust
adopted, subject to shareholder ratification, a new business plan, which
provides for the orderly disposition of the Trust's assets, on a
property-by-property basis, over a period estimated to be between three and five
years. See "New Business Plan."
REAL ESTATE INVESTMENTS
The Trust's real estate portfolio ("Real Estate Investments") is comprised
primarily of equity investments in office buildings, shopping centers, apartment
complexes and hotels located throughout the United States. The Trust's
investments are either made directly (including through wholly owned
subsidiaries) or through limited partnerships or a participation agreement
(classified as and referred to herein as "Investment Partnerships") in which the
Trust is general partner or lead lender and other institutional investors are
the limited partners or participating lenders.
For financial reporting purposes, the Trust categorizes its investments into
four groups, Owned Properties held directly by the Trust (which includes
investments held by wholly owned subsidiaries), Structured Transactions held
directly by the Trust, Asset Held for Sale directly by the Trust (which
currently consist only of one Owned Property), and interests in Investment
Partnerships (which hold Owned Properties, Structured Transactions and Assets
Held for Sale). Investments in land leasebacks and/or mortgage loans are
classified as Structured Transactions. Investments constituting ownership of
improved income producing properties are classified as Owned Properties. Owned
Properties involve operational and management responsibilities with on-site
property management delegated to independent contractors. Owned Properties which
have been approved for sale by the Trustees (and if applicable the limited
partners of an Investment Partnership) that are currently being marketed for
sale are classified as Assets Held for Sale.
At July 31, 1995, the Trust's portfolio of Real Estate Investments included
eight Owned Properties, consisting of four held directly by the Trust and four
held by Investment Partnerships; 14 Structured Transactions, consisting of ten
held directly by the Trust and four held by Investment Partnerships; and five
Assets Held for Sale, one of which is classified as an Asset Held for Sale
directly by the Trust (previously classified as an Owned Property held directly
by the Trust) and four of which are classified as Assets Held for Sale in
Investment Partnerships (previously classified as Owned Properties held by
Investment Partnerships).
For a description of the Trust's individual investments and developments
relating to such investments during the year, see Item 2, Item 7, Note 2 of the
Notes to Consolidated Financial Statements of the Trust, and Schedule III,
Schedule IV, Exhibit A and Exhibit B included in Item 14 hereof.
NEW BUSINESS PLAN
The Trust's business plan has focused on maximizing shareholder values through
asset, portfolio and liability management and the selective disposition of
investments. The business plan was in large part a response to the impact of the
recent recession on the real estate industry. During the time this plan was in
effect, the Trust retained much of its portfolio, disposing of four investments
in fiscal 1994 and two investments in fiscal 1995.
Following improvements in rental rates and occupancies throughout the Trust's
portfolio attributable to improving economic conditions and considerable
progress made by management in resolving problems affecting the portfolio, the
Trustees undertook a reevaluation of the Trust's business plan in the context of
developing a new long-term strategy that would seek to maximize shareholder
values. The Trustees initiated such a review of the Trust's long-term strategy
because of their belief that the Trust's stock price has not been reflective of
the true value of the Trust's assets. The result of this reevaluation was the
adoption by the Trustees on May 24, 1995, subject to shareholder ratification,
of a new business plan which provides for the orderly disposition of the Trust's
investments over an estimated period of three to five years.
In implementing the new business plan, the Trustees envision two different
approaches, one relating to the Structured Transactions and the other to the
Owned Properties.
With respect to the Structured Transactions, the Trust has commenced discussions
with many of its lessees/mortgagors regarding repurchasing or repaying the
Trust's investments. Since management is intent on realizing full value for the
2
<PAGE> 3
ITEM 1. BUSINESS (continued)
Structured Transactions, negotiations with these logical purchasers are likely
to extend over a considerable period of time. Management believes that this
period could last from three to five years.
With respect to the disposition of Owned Properties, the Trust will base its
decision with respect to timing of sales on such factors as the physical
condition of a property and the occupancy and cash flow status of a property.
The Trust anticipates using brokers to handle most sales of Owned Properties. It
is expected that once a decision to sell an Owned Property is made, the process
of broker selection, marketing contract negotiations and closing should normally
take between six and nine months.
It is not expected that any property will be sold to persons deemed to be
affiliates of the Trust. Each offer to purchase Trust assets must be acted upon
by the Board of Trustees, which Board is comprised of seven Trustees, five of
whom are unaffiliated with the Trust or its former investment advisor.
It is difficult to predict the exact timing of, or the amount of net proceeds
from, the sale of the Trust's assets. No prices have been established for the
portfolio. Accordingly, it is not possible to determine at this time the
aggregate net proceeds that may ultimately be available for distribution to the
Trust's shareholders. That amount will depend upon a variety of factors,
including the timing of and the net proceeds realized from the sale of the
Trust's assets, as well as the ultimate amount of expenses and other obligations
and liabilities that must be satisfied out of the Trust's assets.
Proceeds from dispositions may be used during the course of the implementation
of the new business plan to retire debt, repurchase outstanding Common Shares
and/or make distributions to shareholders. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations." Distributions to
shareholders will be made periodically at such times and upon such terms as
determined by the Trustees. Following the sale of all of the Trust's assets and
satisfaction by the Trust, through payment or establishment of reserves, of all
of its liabilities and obligations, the Trust will distribute to its
shareholders the balance of available proceeds. The Trustees may from time to
time fix a date in respect of any distribution for the determination of the
persons to be treated as shareholders of record entitled to receive such
distributions.
Before the final distributions of the Trust's remaining assets to the
shareholders, the Common Shares will continue to be transferable and the Trust's
shareholders will continue to have such rights as applicable law confers upon
shareholders. It is the intention of the Trustees to maintain the listing of the
Common Shares on the American Stock Exchange until such time as the American
Stock Exchange causes the Common Shares to be delisted. Once all of the Trust's
assets have been sold and the net proceeds are distributed to the Trust's
shareholders, legal formalities of terminating the Trust will be completed in
accordance with the Declaration of Trust and with Massachusetts law.
At the 1995 Annual Meeting of Shareholders the Trustees intend to seek
ratification of the new business plan and approval of certain amendments to the
Trust's Declaration of Trust that are necessary for the implementation of the
plan. In the event of the failure of the shareholders to ratify the new business
plan and to approve the proposed amendments, the Trust intends to continue to
transact business as a REIT and to consider alternative courses of action.
COMPETITION, REGULATION AND OTHER FACTORS
The success of the Trust depends, among other factors, upon general economic
conditions and trends, including real estate trends and population trends,
interest rates, government regulations and legislation, income tax laws and
zoning laws. The Trust does not consider its real estate business to be seasonal
in nature.
The Trust's real estate investments are located in markets in which they face
significant competition for the revenues they generate. Many of the Trust's
investments, particularly the office buildings and hotels, are located in
markets which have a substantial supply of available space, resulting in
significant competition on the basis of price and amenities.
TENANTS
Spaces in the Owned Properties are leased to 2,997 tenants, including 83 retail
tenants, 195 office tenants and 2,719 apartment tenants. The lease terms range
from tenancies-at-will to 20 years.
PROPERTY MANAGEMENT
All Owned Properties are managed by professional property management firms that
are independent of the Trust and report directly to the Trust's management.
Property management fees range from 2.5% to 5% of annual gross receipts from the
operations of the properties and each property management agreement may be
terminated upon 30 days' notice.
INSURANCE
The Owned Properties, which include properties that are owned directly by the
Trust (or its subsidiaries) and by the Investment Partnerships, have commercial
general liability coverage, with limits of $76,000,000 per occurrence and
$89,000,000 in the aggregate except for PCA Southwest Associates Limited
Partnership, which is subject to a $77,000,000 aggregate limit. This
3
<PAGE> 4
ITEM 1. BUSINESS (continued)
coverage protects the Trust and, where applicable, the Investment Partnerships
against liability claims as well as the costs of defense. Property insurance on
the Owned Properties is maintained on a replacement value basis covering both
the cost of direct physical damage and the loss of rental income, subject to a
limit of $50,000,000 at any one location except Loehmann's Fashion Island, which
is subject to a $21,000,000 limit, and the Houston apartments owned by PCA
Southwest Associates Limited Partnership, which are subject to a $79,005,600
limit. Separate flood and earthquake insurance is provided with an annual
aggregate limit of $10,000,000 for each peril, with the exception of the Houston
apartments which are subject to a $17,500,000 limit with a $500,000 per building
deductible (for flood coverage only). Liability and property insurance for
Structured Transactions is carried by the Trust's lessees/mortgagors.
As of the end of fiscal 1995, two Investment Partnerships - Property Capital
Midwest Associates, L.P. and PCA Southwest Associates Limited Partnership - held
Owned Properties. Subsequent to the fiscal year end, a third Investment
Partnership - PCA Canyon View Associates Limited Partnership - converted its
investments in Phase II to an Owned Property (see Item 3, "Legal Proceedings").
The Trust, as general partner, is liable for all obligations of and claims made
against Property Capital Midwest Associates, L.P. and PCA Canyon View Associates
Limited Partnership beyond the net worth of such partnerships and, in the case
of claims covered by the Investment Partnership's liability insurance, the
amount of such insurance. The Trust has sought to obviate such liability with
respect to PCA Southwest Associates Limited Partnership by transferring its
general partnership interest to a limited partnership of which a wholly owned
subsidiary of the Trust is the general partner and the Trust is the limited
partner.
THE ADVISOR; INTERNALIZATION OF MANAGEMENT
Effective August 1, 1992, the Trust internalized the investment and day-to-day
administrative services previously performed by its former investment advisor,
Property Capital Advisors, Inc. (the "Advisor"), under its advisory contract
with the Trust (the "Advisory Contract") which expired on July 31, 1992 and was
not renewed. No consideration was paid to the Advisor in connection with the
expiration and non-renewal of the Advisory Contract. For additional information
relating to the Advisory Contract and the internalization of management, see
Note 6 of the Notes to Consolidated Financial Statements of the Trust.
GOVERNMENT REGULATIONS
A number of jurisdictions have laws and regulations relating to the ownership of
real estate, such as local building and similar codes. From time to time,
capital expenditures on Owned Properties may be required to comply with changes
in these laws. No material expenditures are contemplated at this time in order
to comply with any such laws or regulations.
Under various Federal, state and local laws, ordinances and regulations, a
current or previous owner or operator of real estate may be liable for the costs
of removal or remediation of certain hazardous or toxic substances released on,
under or in its property. The costs of such removal or remediation can be
substantial. Such laws often impose such liability without regard to whether the
owner or operator knew of, or was responsible for, the release or presence of
such hazardous or toxic substances. The presence of such substances, or the
failure to remediate such substances properly, may adversely affect the owner's
ability to sell or lease such real estate or to borrow using such property as
collateral. Management is not aware of any material violation of applicable
environmental requirements with respect to any of its real estate investments,
nor does it contemplate having to make any material expenditures in order to
comply with any current environmental laws or regulations.
CUSTOMERS
As of July 31, 1995, the Trust's most significant relationship with any single
third-party owner of real estate was with National Housing Partnerships ("NHP")
which, through affiliates, is the lessee/mortgagor in two of the Trust's
apartment investments. The Trust's investments consist of a $5,400,000 land
leaseback in Sandpiper Cove Apartments and investments totaling $9,770,000 in
Elm Creek Apartments (a $2,230,000 land leaseback and a $7,540,000 leasehold
mortgage loan). These investments accounted for approximately 9% of the Trust's
real estate portfolio as of July 31, 1995 and approximately 6% of the Trust's
total revenues from its real estate portfolio during fiscal 1995. Neither NHP
nor any other lessee or borrower is affiliated with the Trust or its Trustees.
ANTICIPATED CAPITAL EXPENDITURES
In accordance with the Trust's new business plan, no new investments in
properties are anticipated. The Owned Properties, pending sale, will continue to
be managed aggressively to maximize performance and values. For fiscal 1996, the
aggregate amount of anticipated capital expenditures at Owned Properties held
directly by the Trust and Asset Held for Sale directly by the Trust is
$1,900,000, primarily for tenant improvements and leasing commissions. The funds
necessary for capital expenditures are anticipated to be available from cash
flow provided by operations, through borrowings under the Trust's line of credit
and from proceeds from the sale of properties.
4
<PAGE> 5
ITEM 1. BUSINESS (continued)
Additionally, the Trust's share of anticipated tenant improvements, leasing
commissions and other capital expenditures at Owned Properties held in
Investment Partnerships and Assets Held for Sale in Investment Partnerships is
approximately $900,000. These funds are anticipated to be available from the
Investment Partnerships' cash flows.
BORROWING
At July 31, 1995, the Trust had $71,816,000 of debt outstanding as follows:
<TABLE>
<CAPTION>
Principal
Interest Rate Amount
<S> <C> <C>
--------------------------------------------------------------------------------------------------
Mortgage notes payable 7.86% $40,145,000
Convertible Subordinated Debentures 9.75 2,546,000
Convertible Subordinated Debentures 10.00 29,125,000
-----------
Weighted Average 8.79% $71,816,000
===========
</TABLE>
For additional information, see Item 7 and Note 3 of the Notes to Consolidated
Financial Statements of the Trust.
ITEM 2. PROPERTIES
- --------------------------------------------------------------------------------
The Trust's Real Estate Investments (net of accumulated depreciation) consist of
the following:
<TABLE>
<CAPTION>
July 31,
----------------------------------------------
1995 1994 1993
<S> <C> <C> <C>
-------------------------------------------------------------------------------------------------
Owned Properties held directly by the Trust $ 83,985,000 $105,295,000 $101,160,000
Structured Transactions held directly by the
Trust
Land leasebacks 17,140,000 17,140,000 21,140,000
Mortgage loans 15,431,000 15,441,000 21,925,000
Investment Partnerships* 48,299,000 51,998,000 51,928,000
------------ ------------ ------------
164,855,000 189,874,000 196,153,000
Allowance for possible investment losses (14,077,000) (17,413,000) (20,129,000)
------------ ------------ ------------
150,778,000 172,461,000 176,024,000
Asset Held for Sale directly by the Trust 10,185,000 - -
------------ ------------ ------------
$160,963,000 $172,461,000 $176,024,000
============ ============ ============
</TABLE>
* Includes Assets Held for Sale in Investment Partnerships.
Many of the investments in the portfolio are subject to first mortgage
financing, which aggregated $182,686,000 as of July 31, 1995. Included in this
amount is $40,145,000 of debt on three of the Owned Properties held directly by
the Trust and $25,420,000 of debt on Owned Properties held in Investment
Partnerships. The balance represents mortgage debt on Structured Transactions,
which is not presented as a liability in the Trust's financial statements
because the obligation to pay such debt is that of the Trust's
lessees/mortgagors. All of the first mortgage financing, with the exception of
$15,000,000 of debt on Loehmann's Fashion Island, is non-recourse to the Trust.
For additional information, see Note 3 of the Notes to Consolidated Financial
Statements of the Trust and Schedule III and Exhibit A included in Item 14
hereof.
5
<PAGE> 6
ITEM 2. PROPERTIES (continued)
As of July 31, 1995, the Trust's Real Estate Investments (net of accumulated
depreciation and before the allowance for possible investment losses) were
diversified by type of property as follows:
<TABLE>
<CAPTION>
Number of Investment % of
Type of Property Properties Amount Total
<S> <C> <C> <C>
-------------------------------------------------------------------------------------------------
Office Buildings 7 $ 69,178,000 40%
Shopping Centers 5 56,480,000 32
Apartments 11 28,685,000 16
Hotels 4 20,697,000 12
--
------------ ---
27 $175,040,000 100%
== ============ ===
</TABLE>
As of July 31, 1995, the Trust's Real Estate Investments (net of accumulated
depreciation and before the allowance for possible investment losses) were
diversified by geographic region as follows:
<TABLE>
<CAPTION>
Number of Investment % of
Geographic Region Properties Amount Total
<S> <C> <C> <C>
-------------------------------------------------------------------------------------------------
Midwest 11 $ 83,487,000 48%
South 7 58,016,000 33
West 8 14,850,000 8
East 1 18,687,000 11
--
------------ ---
27 $175,040,000 100%
== ============ ===
</TABLE>
The Trust has investments in 27 properties (including those held in Investment
Partnerships) located throughout the United States. Four properties are owned by
the Trust (or wholly owned subsidiaries) and are classified as Owned Properties
held directly by the Trust. Ten properties are investments in which the Trust
owns and leases back land and/or holds a mortgage loan and are classified as
Structured Transactions held directly by the Trust. One property owned by the
Trust is classified as an Asset Held for Sale directly by the Trust, a property
which was previously classified as an Owned Property held directly by the Trust.
The Trust has investments in five Investment Partnerships. Two of such
Investment Partnerships own an aggregate of eight properties, four of which are
classified as Owned Properties held in Investment Partnerships and four of which
are classified as Assets Held for Sale in Investment Partnerships. The remaining
three Investment Partnerships hold an aggregate of four properties all of which
are classified as Structured Transactions held in Investment Partnerships.
6
<PAGE> 7
ITEM 2. PROPERTIES (continued)
The following is a schedule of the 27 properties in which the Trust has
investments.
INVESTMENTS HELD DIRECTLY BY THE TRUST
<TABLE>
<CAPTION>
Trust's Average
Year Built/ Carrying Third Party Rent per
Location Property Size Renovated Value Indebtedness Sq. Foot
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
OWNED PROPERTIES HELD DIRECTLY BY THE TRUST
OFFICE
One Park West Chevy Chase, MD 128,500 sq.ft. 1980 $18,687,000 $ 9,898,000 $25.76
Citibank Office Plaza Schaumburg, IL 105,400 sq.ft. 1978 10,263,000 - $17.89
Park Place Clayton, MO 72,000 sq.ft. 1984 11,432,000 8,515,000 $21.13
-------------- ----------- -----------
305,900 sq.ft. $40,382,000 $ 18,413,000
============== =========== ===========
RETAIL
Loehmann's Fashion Island Aventura, FL 282,000 sq.ft. 1980/1994 $43,603,000 $ 21,732,000 $15.57(1)
============== =========== ===========
<CAPTION>
Percent
Leased
7/31/95
<S> <C> <C>
- -------------------------------------------------
OWNED PROPERTIES HELD DIRECTLY BY THE TRUST
OFFICE
One Park West 98%
Citibank Office Plaza 90%
Park Place 99%
RETAIL
Loehmann's Fashion Island 90%
</TABLE>
<TABLE>
<CAPTION>
Trust's Percent
Year Built/ Carrying Third Party Leased
Location Property Size Renovated Value Indebtedness 7/31/95
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
STRUCTURED TRANSACTIONS HELD DIRECTLY BY THE TRUST
RETAIL
Roseburg Valley Mall Roseburg, OR 237,000 sq.ft. 1980 $3,975,000 $ 6,815,000 93%
Lakeside Center Burbank, CA 66,000 sq.ft. 1962/1986 350,000 204,000 100%
-------------- ----------- -----------
303,000 sq.ft. $4,325,000 $ 7,019,000
APARTMENTS ============== =========== ===========
Sandpiper Cove Boynton Beach, FL 416 units 1989 $ 5,400,000 $16,635,000 96%
Elm Creek Elmhurst, IL 372 units 1988 9,770,000 21,104,000 97%
Bluffs II San Diego, CA 224 units 1974 825,000 1,653,000 95%
Northbrook San Bernardino, CA 190 units 1972 400,000 - 83%
Yorkshire Midwest City, OK 111 units 1970 135,000 - 93%
----------- ----------- -----------
1,313 units $16,530,000 $39,392,000
=========== =========== ===========
HOTELS
City Centre Holiday Inn Chicago, IL 500 rooms 1976 $ 2,000,000 $10,140,000 67%(2)
Cincinnati Marriott Inn Cincinnati, OH 350 rooms 1968/1985 5,716,000 10,573,000 65%(2)
Grosvenor Airport Inn S. San Francisco, CA 206 rooms 1969 4,000,000 1,337,000 68%(2)
----------- ----------- -----------
1,056 rooms $11,716,000 $22,050,000
=========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Trust's Average Percent
Year Built/ Carrying Third Party Rent per Leased
Location Property Size Renovated Value Indebtedness Sq. Foot 7/31/95
<S> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
ASSET HELD FOR SALE DIRECTLY BY THE TRUST
OFFICE
Citibank Office
Plaza Oak Brook, IL 100,400 sq.ft. 1979 $10,185,000 - $18.58 100%
============== =========== ===
<FN>
(1) Net rent
(2) Average occupancy for fiscal 1995
</TABLE>
7
<PAGE> 8
ITEM 2. PROPERTIES (continued)
INVESTMENT PARTNERSHIPS
<TABLE>
<CAPTION>
Percent Percent
Year Built/ Partnership's Third Party Owned Leased
Location Property Size Renovated Equity Indebtedness by PCT 7/31/95
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
OWNED PROPERTIES HELD IN INVESTMENT PARTNERSHIPS
OFFICE
College Hills 3 Overland Park, KS 37,700 sq.ft. 1979 $2,277,000 - 53.3% 96%
============== ============ ===
APARTMENTS
Telegraph Hill Houston, TX 1,180 units 1978 $3,251,000 $ 13,039,000 45.5% 93%
St. Charles Houston, TX 780 units 1978 4,455,000 9,063,000 45.5% 95%
Boardwalk Houston, TX 174 units 1978 1,727,000 3,318,000 45.5% 99%
-------------- ------------ ------------
2,134 units $9,433,000 $ 25,420,000
STRUCTURED TRANSACTIONS HELD IN INVESTMENT PARTNERSHIPS
RETAIL
Crossroads Mall Boulder, CO 816,000 sq.ft. 1964/1983 $8,091,000 $ 36,660,000 25.0% 91%
APARTMENTS
Canyon View I San Ramon, CA 248 units 1987 $ 3,527,000 $ 12,000,000 23.8% 100%
Canyon View II San Ramon, CA 188 units 1988 10,238,000 - 23.8% 100%
-------------- ------------ ------------
436 units $13,765,000 $ 12,000,000
============== ============ ============
HOTEL
Lisle Hilton Inn Lisle, IL 313 rooms 1981/1993 $21,554,000 - 41.7% 73%(1)
============== ============ ===
ASSETS HELD FOR SALE IN INVESTMENT PARTNERSHIPS
OFFICE
Financial Plaza Overland Park, KS 300,600 sq.ft. 1984-87 $29,401,000 - 53.3% 97%
College Hills 8 Overland Park, KS 50,900 sq.ft. 1982 3,242,000 - 53.3% 98%
============== ============ ===
351,500 sq.ft. $32,643,000 -
============== ============ ===
RETAIL
Plaza West Retail
Center Overland Park, KS 98,000 sq.ft. 1988 $12,250,000 - 53.3% 100%
============== ============ ===
APARTMENTS
Chimney Rock Houston, TX 714 units 1965 $10,099,000 - 45.5% 99%
============== ============ ===
</TABLE>
(1) Average occupancy for fiscal 1995
The four Owned Properties held directly by the Trust total $83,985,000 at July
31, 1995 (48% of Real Estate Investments before the allowance for possible
investment losses). Three of the properties are office buildings located in
suburban markets and the remaining property is a retail center located in
Aventura, Florida. Each property accounts for more than 5% of either Real Estate
Investments (before the allowance for possible investment losses) or total
revenues, and is described below.
8
<PAGE> 9
ITEM 2. PROPERTIES (continued)
ONE PARK WEST - CHEVY CHASE, MARYLAND
One Park West is a 128,500 square foot, five story, multi-tenant office building
with underground parking, built in 1980. The property is located in suburban
Washington, D.C. At July 31, 1995, the property was encumbered by a $9,898,000
first mortgage which bears interest at 9.5%, due June 2000. The building is
tenanted by the federal government, a publisher and general and medical offices.
Four tenants each occupy more than 10% of the building, with space aggregating
34,883 square feet, 22,925 square feet, 15,901 square feet and 14,400 square
feet, and lease expiration dates of December 31, 1996, October 31, 2000, March
31, 1998 (with an early termination option at March 31, 1997) and March 31,
1996, respectively. At July 31, 1995, 1994 and 1993, the property was 98%, 100%
and 83% leased, respectively.
CITIBANK OFFICE PLAZA - SCHAUMBURG, ILLINOIS
Citibank Office Plaza - Schaumburg is a 105,400 square foot, five story,
multi-tenant office building, built in 1978. The property is located in suburban
Chicago, Illinois and is not encumbered by mortgage financing. The building is
tenanted by the headquarters of a regional hardware retailer, an accounting
firm, a stockbroker, a bank and general office tenants. Three tenants each
occupy more than 10% of the building, with space aggregating 29,421 square feet,
18,394 square feet and 11,909 square feet and lease expiration dates of October
31, 2001 (with an early termination option at October 31, 1998), August 18, 2001
and December 31, 2003 (with an early termination option at December 31, 1996),
respectively. In October 1995, an involuntary Chapter 11 proceeding was filed
against the building's second largest tenant, the hardware retailer. At this
time, it is unclear what action the tenant will take concerning its lease. At
July 31, 1995, 1994 and 1993, the property was 90%, 88% and 80% leased,
respectively.
PARK PLACE - CLAYTON, MISSOURI
Park Place is a 72,000 square foot, five story, multi-tenant office building
with a parking garage, built in 1984. The property is located in suburban St.
Louis, Missouri. At July 31, 1995, the property was encumbered by an $8,515,000
Industrial Revenue Bond mortgage with an average interest rate of 5.65%, due in
May 2008. The building is tenanted by insurance, banking and professional
service businesses. Three tenants each occupy more than 10% of the building,
with space aggregating 12,836 square feet, 11,876 square feet and 9,934 square
feet, and lease expiration dates of May 31, 2000, March 31, 1996 and October 31,
1997, respectively. At July 31, 1995, 1994 and 1993, the property was 99%, 100%
and 100% leased, respectively.
LOEHMANN'S FASHION ISLAND - AVENTURA, FLORIDA
Loehmann's Fashion Island is a 282,000 square foot open mall specialty shopping
center located in Aventura, Dade County, Florida, which underwent a major
redevelopment that was substantially completed in fiscal 1994. The property is
owned by a partnership whose partners are wholly owned subsidiaries of the
Trust. At July 31, 1995, the property was encumbered by a $21,732,000 mortgage,
which is due in July 1998. The loan bears interest at the lender's floating
prime rate plus 1/4%. The borrower, however, has the option, at no cost to it,
to fix the rate from time to time at 2.25% over comparable term LIBOR or U.S.
Treasury rates, for a specified number of times. The borrower made such an
election as to the then outstanding principal balance in July 1995, and through
December 1996 the interest rate is fixed at 7.97%. The shopping center is
tenanted by a 16 screen movie theatre, a super market, three restaurants and
other retailers. Two tenants each occupy more than 10% of the shopping center,
with space aggregating 47,813 square feet and 47,220 square feet and lease
expirations of May 3, 2013 and May 30, 2013, respectively. At July 31, 1995,
1994 and 1993, the property was 90%, 90% and 80% leased, respectively.
For additional information on the Trust's Owned Properties held directly by the
Trust, see Item 7, Note 2 of the Notes to Consolidated Financial Statements of
the Trust and Schedule III of Item 14.
The ten properties classified as Structured Transactions held directly by the
Trust total $32,571,000 at July 31, 1995 (19% of Real Estate Investments before
the allowance for possible investment losses). Two of the Structured
Transactions held directly by the Trust each account for more than 5% of either
Real Estate Investments (before the allowance for possible investment losses) or
total revenues, and are described below.
ELM CREEK APARTMENTS - ELMHURST, ILLINOIS
Elm Creek Apartments is a 372 unit luxury apartment complex built in 1988,
located in suburban Chicago, Illinois. The Trust's total investment in this
property is $9,770,000 and is comprised of a $2,230,000 land leaseback and a
$7,540,000 leasehold mortgage loan. The land lease, including renewal options,
expires in December 2063 and provides for fixed monthly rental payments to the
Trust aggregating $189,500 annually and overage rent of 40% of increases in
revenues (as defined) of the property over specified amounts. In fiscal 1995,
the Trust received overage rent (in excess of the fixed monthly payments) of
$93,400. The lessee has the right to sell the land and improvements to a third
party at any time (subject to the Trust's leasehold mortgage being repaid in
full at that time); if the lessee so elects, the purchase price shall be
determined at that time by a previously agreed upon formula based on the sales
price of the project, but not less than $2,230,000. The Trust's leasehold
9
<PAGE> 10
ITEM 2. PROPERTIES (continued)
mortgage bears interest at the rate of 8.5% per annum through March 31, 1996 and
10% per annum thereafter and matures in November 2018. No amortization payments
are required under this loan prior to maturity. The Trust's investments in this
property are subordinated to a third party first mortgage loan of $21,104,000,
bearing interest at 9.50% and due in 1997. At July 31, 1995, 1994 and 1993, the
property was 97%, 97% and 99% leased, respectively.
CITY CENTRE HOLIDAY INN - CHICAGO, ILLINOIS
City Centre Holiday Inn, located in downtown Chicago, is a 500 room hotel built
in 1976. The Trust holds a $2,000,000 land leaseback interest in this property.
The land lease, including renewal options, expires in December 2052 and provides
for fixed monthly rent payments of $220,000 per annum. In addition, the Trust is
entitled to receive overage rent annually equal to 1% of gross receipts and 15%
of gross room revenues over specified amounts. In fiscal 1995 the overage rent
earned by the Trust from this investment was $1,289,000. The lessee has an
option to repurchase the Trust's land in 1996 and every five years thereafter
for the sum of $2,000,000, plus the product of the average annual overage rent
earned by the Trust in the three years immediately preceding the repurchase
multiplied by 12.50. The Trust's investment is subordinated to a third-party
first mortgage loan of $10,140,000, bearing interest at 9.13% and due in 1997.
For fiscal 1995, 1994 and 1993, the average occupancy was 67%, 71% and 68%,
respectively.
No other Structured Transaction held directly by the Trust constitutes 5% or
more of either the Trust's Real Estate Investments (before the allowance for
possible investment losses) or represents more than 5% of total revenues. For
additional information on the Structured Transactions held directly by the Trust
see Item 7, Note 2 of the Notes to Consolidated Financial Statements of the
Trust and Schedules III and IV of Item 14.
The Trust's five Investment Partnerships own an aggregate of four Owned
Properties, four Structured Transactions and four Assets Held for Sale. The
Trust's equity investment in these five Investment Partnerships totals
$48,299,000 at July 31, 1995 (28% of Real Estate Investments before the
allowance for possible investment losses). The Trust's two most significant
partnership investments each account for more than 5% of either Real Estate
Investments (before allowance for possible investment losses) or total revenues,
and are discussed below.
PROPERTY CAPITAL MIDWEST ASSOCIATES, L.P.
Property Capital Midwest Associates, L.P. is the Investment Partnership in which
the Trust has its largest partnership investment. The Trust owns 53.3% of this
Investment Partnership which owns a complex of four office buildings totaling
300,600 square feet, built in 1984-1987, an office building totaling 50,900
square feet, built in 1982, and a 98,000 square foot shopping center building,
built in 1988, all of which are classified as Assets Held for Sale, and one
office building totaling 37,700 square feet, built in 1979, which is classified
as an Owned Property. The properties are located in Overland Park, Kansas, a
suburb of Kansas City, Missouri, and are owned free and clear of mortgage debt.
At July 31, 1995, the Trust's equity investment in this partnership was
$25,140,000. No single tenant occupies 10% or more of the 487,200 square feet
rentable space owned by this Investment Partnership. At July 31, 1995, the
Investment Partnership reclassified the complex of four office buildings, the
50,900 square foot office building and the shopping center to Assets Held For
Sale and wrote the properties down to net realizable value (the Trust's share of
the write-downs was $2,311,000, which had been previously provided for in the
Trust's allowance for possible investment losses). At July 31, 1995, 1994 and
1993, the office buildings were 97%, 95% and 93% leased, respectively. At July
31, 1995, 1994 and 1993, the shopping center was 100%, 93% and 63% leased,
respectively. The office buildings are tenanted by a large variety of businesses
including banking and financial services firms, regional sales offices, an
office furniture retailer and two restaurants. The shopping center is a mixed
use office and retail center tenanted by various retail tenants, a realtor and a
restaurant. For further information on this Investment Partnership, please see
the separate financial statements attached to this Form 10-K as part of Item 14.
PCA SOUTHWEST ASSOCIATES LIMITED PARTNERSHIP
The Trust's other significant partnership investment is a 45.45% interest in PCA
Southwest Associates Limited Partnership. This partnership owns four separate
apartment complexes consisting of 2,848 apartment units in Houston, Texas. The
apartments were built from 1965 through 1978. The properties were encumbered by
11 mortgage loans totaling $25,420,000 at July 31, 1995, at an average interest
rate of 8.27% and maturities ranging between October 1997 and October 1998. The
Investment Partnership assumed full title to these complexes by exercising an
option to terminate its land lease related to these properties and paying
$427,000 to its lessee, an affiliate of Harold Farb, the original owner of the
properties. At July 31, 1995, 1994 and 1993 the apartments were 95%, 85% and 93%
leased, respectively.
One phase of the complexes owned by this Investment Partnership is Telegraph
Hill Phase B, 259 units. The Investment Partnership ceased making payments to
the first mortgagee in November 1994. The Investment Partnership attempted to
restructure the loan without success. The principal amount due on the mortgage
is $2,487,000. Management anticipates that the title to the property will be
transferred to the first mortgagee by a deed in lieu of foreclosure.
At July 31, 1995 the Investment Partnership reclassified one of the complexes,
Chimney Rock, consisting of 714 units, to an Asset
10
<PAGE> 11
ITEM 2. PROPERTIES (continued)
Held for Sale and wrote the property down to net realizable value (the Trust's
share of the write down was $54,000, which had been previously provided for in
the Trust's allowance for possible investment losses). The property was sold on
September 29, 1995. No further loss was incurred.
For further information on all of the Investment Partnerships, see Item 7, Note
2 of the Notes to Consolidated Financial Statements of the Trust and Exhibits A
and B of Item 14.
The Trust has one property classified as an Asset Held for Sale directly by the
Trust at July 31, 1995, Citibank Office Plaza - Oakbrook, which is described
below.
CITIBANK OFFICE PLAZA - OAKBROOK
Citibank Office Plaza - Oakbrook (6% of Real Estate Investments before the
allowance for possible investment losses) is a 100,400 square foot, five story,
multi-tenant office building built in 1979. Previously this asset had been
classified as an Owned Property held directly by the Trust. The property is
located in suburban Chicago, Illinois and is not encumbered by mortgage
financing. At July 31, 1995, 1994 and 1993 the property was 100%, 99% and 93%
leased, respectively. The building is tenanted by an educational service firm
and other professional and banking service businesses. Three tenants each occupy
more than 10% of the building with spaces aggregating 29,202 square feet, 17,121
square feet and 10,352 square feet and lease expiration dates of January 31,
2001 (of which 7,943 square feet has an early termination option of July 31,
1996), August 31, 2002 (with an early termination option of September 1, 1998)
and November 30, 1998, respectively.
The Owned Properties, Structured Transactions and Investment Partnerships
described above constitute 80% of the Trust's Real Estate Investments (before
the allowance for possible investment losses) and 79% of the Trust's revenues
from real estate.
ITEM 3. LEGAL PROCEEDINGS
- --------------------------------------------------------------------------------
At July 31, 1995, two Structured Transactions held by PCA Canyon View Associates
Limited Partnership, an Investment Partnership, were in default. The properties
are known as Canyon View I and Canyon View II (248 and 188 units, respectively),
and the Investment Partnership's sublessee/mortgagor had failed to make the
required payments due to the Investment Partnership and the ground lessor since
July 1994. In addition, beginning in August 1994, the sublessee/mortgagor failed
to make the required mortgage payment to the first mortgagee of Phase I. The
Investment Partnership's Equity was $13,765,000 at July 31, 1995, of which the
Trust's share was $3,277,000, and the outstanding balance of the first mortgage
secured by Phase I was $12,000,000.
As a result of the defaults by the sublessee/mortgagor during August 1994,
litigation was commenced in Superior Court of the State of California, County of
Contra Costa. 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. Following the close of
Fiscal 1995, all such outstanding litigation was settled and the Chapter 11
proceedings were dismissed. As a result, the Investment Partnership now has full
ownership to Canyon View II and permitted Canyon View I to be foreclosed by the
first mortgagee. The Trust incurred a $530,000 loss on Canyon View I, which
amount had previously been provided for in the Trust's allowance for possible
investment losses. Additionally, the Trust wrote down by $961,000 its investment
in Canyon View II to its net realizable value, which amount had previously been
provided for in the Trust's allowance for possible investment losses.
In November 1994, a tenant that occupies approximately 19,315 square feet of
College Hills 3, a 37,700 square foot office building located in Overland Park,
Kansas, and owned by Property Capital Midwest Associates, L.P. (an Investment
Partnership), filed an action in the District Court of Johnson County, Kansas,
in which the tenant claims that the Trust and the Investment Partnership have
violated the terms of the tenant's space lease. The tenant has alleged that it
had an oral agreement with the Investment Partnership's predecessor-in-interest
to the building, the Trust and the Investment Partnership granting the tenant
the right to lease additional space that might become available in the building,
which allegation the Trust and Investment Partnership have denied. After the
filing of the action, negotiations for the possible sale of the building to the
tenant ensued, but were not finalized. In March 1995, a settlement agreement
granting the tenant the expansion rights it had requested in its original
pleading in the litigation was entered into with the tenant but the tenant is
currently arguing that the settlement agreement did not in fact constitute a
full and final settlement among the parties to the litigation. In a pleading
filed by the tenant, the tenant has also asserted that it is entitled to damages
in excess of $1,000,000, which assertion is denied by the Trust and the
Investment Partnership. Although it is not possible to predict with certainty
the outcome of the litigation, the Trust and the Investment Partnership do not
believe that they have any material liability to the tenant.
11
<PAGE> 12
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- --------------------------------------------------------------------------------
No matters were submitted to a vote of the Trust's security holders during the
last quarter of its fiscal year ended July 31, 1995.
ITEM 4A. EXECUTIVE OFFICERS OF THE TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Name Age Principal Occupations and Affiliations During the Past Five Years
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------
John A. Cervieri Jr. 64 Managing Trustee of the Trust since 1992. Prior to 1992, Managing
Trustee and Chief Executive Officer of the Trust; Chairman and
President of Property Capital Associates, Inc. and its affiliates (the
former investment advisor to the Trust); Director of BayBanks, Inc. and
BayBank Boston, N.A.; Chairman and Chief Executive Officer of Americana
Hotels and Realty Corporation.
Robert M. Melzer 54 Trustee and Chief Executive Officer and President of the Trust since
1992; prior to 1992, President of the Trust.
William A. Bonn 44 Senior Vice President, Counsel and Assistant Secretary of the Trust.
Robin W. Devereux 36 Vice President and Treasurer of the Trust since November 1993;
Treasurer and Controller of the Trust (August 1992 to November 1993);
Assistant Vice President and Controller of the Trust (June 1990 to July
1992).
Michael I. Sucoff 57 Vice President of the Trust since September 1992; Senior Vice President
of Capital Partners Inc. (1990-1992).
Randolph L. Kazazian III 34 Vice President of the Trust since November 1993; prior to that
Assistant Vice President of the Trust.
Walter F. Leinhardt 63 Secretary and Trustee of the Trust. Partner in the law firm of Paul,
Weiss, Rifkind, Wharton & Garrison, New York, NY.
</TABLE>
There is no family relationship among any of the officers listed above, nor any
arrangement or understanding between any such officers and any other person
pursuant to which he or she was selected as an officer. Each officer will hold
office until the next Annual Meeting of Trustees or until his or her successor
has been elected and has qualified.
12
<PAGE> 13
PART II
ITEM 5. MARKET FOR THE TRUST'S COMMON SHARES AND RELATED SECURITY HOLDER MATTERS
- --------------------------------------------------------------------------------
(A) PRICE RANGE OF COMMON SHARES
The Trust's Common Shares are traded on the American Stock Exchange
("ASE") - symbol PCT. The high and low prices on the ASE for each quarter
during the past two fiscal years and dividends declared for such quarters
are shown below:
<TABLE>
<CAPTION>
Fiscal 1995
-----------------------------------------
Dividends
Quarter High Low Declared
<S> <C> <C> <C>
--------------------------------------------------------------------------------------------------
First $6 1/2 $5 5/8 $.09
Second 6 1/4 5 5/8 .10
Third 6 3/4 6 .10
Fourth 8 1/4 6 5/8 .12
----
$.41
====
</TABLE>
<TABLE>
<CAPTION>
Fiscal 1994
-----------------------------------------
Dividends
Quarter High Low Declared
<S> <C> <C> <C>
--------------------------------------------------------------------------------------------------
First $6 1/4 $5 1/4 $.07
Second 7 1/8 5 7/8 .07
Third 6 5/8 5 1/4 .07
Fourth 6 1/4 5 1/8 .09
----
$.30
====
</TABLE>
(B) APPROXIMATE NUMBER OF EQUITY SECURITY HOLDERS
<TABLE>
<CAPTION>
Approximate Number of
Title of Class Holders as of September 30, 1995
<S> <C>
----------------------------------------------------------------------------------------------------
Common Shares 4,500
</TABLE>
The computation of the approximate number of holders includes record
holders and individual participation security listing positions.
(C) DIVIDENDS DECLARED ON COMMON SHARES
Cash dividends have usually been at least 100% of income (loss) before gain on
sale of real estate investments and extraordinary item and increases to the
Trust's allowance for possible investment losses. The Trust pays dividends
approximately 55 days following the end of each fiscal quarter. To maintain its
status as a REIT, the Trust is required each year to distribute to its
shareholders at least 95% of its taxable income (excluding net capital gains and
after certain other adjustments). In addition, the Trust will be subject to a 4%
nondeductible excise tax on the amount, if any, by which certain distributions
paid by it with respect to any calendar year are less than the sum of 85% of its
ordinary income for the calendar year, 95% of its capital gain income for the
calendar year, and any amount of such income that was not distributed in prior
years. The Trust did not incur any such excise tax liability with respect to
calendar 1994 or 1993. In fiscal 1995 and 1994, the Trust's net income per share
was $.59 and $.45, respectively and dividends declared were $.41 and $.30,
respectively. In connection with the implementation of the Trust's new business
plan, the Trust may make additional distributions to its shareholders
periodically as the Trust's assets are sold. The timing and amount of such
distributions will depend on a number of factors determined by the Board of
Trustees, see Item 1, "Business - New Business Plan."
13
<PAGE> 14
ITEM 6. SELECTED FINANCIAL DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended July 31,
-----------------------------------------------------------
(In thousands except per share data) 1995 1994 1993* 1992* 1991*
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
SUMMARY OF OPERATIONS
Revenues $22,619 $21,623 $16,535 $ 19,109 $ 24,060
Expenses 20,603 20,044 24,865 33,544 30,272
-------- -------- -------- -------- --------
Income (Loss) before Gain (Loss) on Sale of Real
Estate Investments and Extraordinary Item 2,016 1,579 (8,330) (14,435) (6,212)
Gain (Loss) on Sale of Real Estate Investments 3,209 2,510 7,700 (9,150) (5,090)
-------- -------- -------- -------- --------
Income (Loss) before Extraordinary Item 5,225 4,089 (630) (23,585) (11,302)
Extraordinary Gain from Extinguishment of Debt 88 - - 7,950 -
-------- -------- -------- -------- --------
Net Income (Loss) $ 5,313 $ 4,089 $ (630) $(15,635) $(11,302)
======== ======== ======== ======== ========
PER SHARE DATA
Primary Net Income (Loss)
Income (Loss) before Gain (Loss) on Sale of Real
Estate Investments and Extraordinary Item $0.23 $0.17 $(0.93) $(1.60) $(0.68)
Gain (Loss) on Sale of Real Estate Investments 0.35 0.28 0.85 (1.01) (0.55)
----- ----- ------ ------ ------
Income (Loss) before Extraordinary Item 0.58 0.45 (0.08) (2.61) (1.23)
Extraordinary Gain from Extinguishment of Debt 0.01 - - 0.88 -
----- ----- ------ ------ ------
Net Income (Loss) per Share $0.59 $0.45 $(0.08) $(1.73) $(1.23)
===== ===== ====== ====== ======
Fully Diluted Net Income (Loss) per Share $0.59 $0.45 $(0.08) $(1.73) $(1.23)
===== ===== ====== ====== ======
Dividends Declared per Share $0.41 $0.30 $0.28 $0.28 $0.50
===== ===== ===== ===== =====
Average Shares Outstanding 9,044 9,030 9,029 9,029 9,223
===== ===== ===== ===== =====
FINANCIAL POSITION AT YEAR-END
Total Assets $169,439 $176,833 $179,459 $173,748 $215,518
Net Real Estate Investments 160,963 172,461 176,024 168,403 195,743
Commitments - - - 616 6,250
Total Debt Outstanding 71,816 81,479 86,492 76,337 99,294
Shareholders' Equity 93,709 91,703 90,134 93,202 111,726
</TABLE>
* Restated for change in accounting method to the equity method for Investment
Partnerships. The change did not affect net income (loss) or shareholders'
equity. See Note 1 of the Notes to Consolidated Financial Statements of the
Trust which describes the Trust's previous method of accounting and the
reasons for the change.
14
<PAGE> 15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
On May 24, 1995, the Board of Trustees of the Trust adopted, subject to
shareholder ratification, a new business plan, which provides for the orderly
disposition of the Trust's assets, on a property-by-property basis, over a
period of time estimated to be three to five years. See Item 1 "Business - New
Business Plan." Proceeds from dispositions may be used during the course of
implementation of the new business plan to retire debt, repurchase outstanding
Common Shares and/or make distributions to shareholders. In accordance with its
new business plan, the Trust does not anticipate any new acquisitions and Owned
Properties, pending sale, will continue to be managed aggressively to maximize
performance and values.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The Trust has reviewed its short-term and long-term liquidity needs in view of
its new business plan and the adequacy of cash provided by operating activities
and other liquidity sources to meet these needs. The Trust's principal
short-term liquidity needs are normal operating expenses, debt service
requirements, capital expenditures at Owned Properties (including Assets Held
for Sale) and the minimum dividend distributions required to maintain the
Trust's REIT status under the Internal Revenue Code. The Trust expects to fund
these short-term liquidity needs from cash flows provided by operating
activities and, if needed, available borrowings under its existing demand line
of credit. The Trust expects to fund its longer-term liquidity requirements for
scheduled debt maturities from property sales and its existing demand line of
credit.
The Trust's debt to equity ratio was .77x at July 31, 1995, .89x at July 31,
1994, and .96x at July 31, 1993. The Trust's debt at July 31, 1995 was
$71,816,000, as compared to $81,479,000 at July 31, 1994 and, $86,492,000 at
July 31, 1993, and was composed of $31,671,000 in long-term fixed rate
Convertible Subordinated Debentures and $40,145,000 of mortgage notes payable.
The Trust's bank note payable had no outstanding balance at July 31, 1995.
The Trust's long-term 10% Convertible Subordinated Debentures decreased to
$29,125,000 at July 31, 1995 from $30,823,000 at July 31, 1994 due to the
Trust's repurchase of $1,698,000 aggregate principal amount of the debentures at
a discount. Additionally, subsequent to the end of the fiscal year, the Trust
called $4,000,000 of these debentures for redemption at par as of September 1,
1995 and $8,000,000 of these debentures for redemption at par as of December 1,
1995.
The Trust's mortgage notes payable of $40,145,000 at July 31, 1995 was comprised
of three mortgages on three Owned Properties held directly by the Trust. In
March 1993, the Trust acquired its lessee's interest in One Park West, an office
building in Chevy Chase, Maryland, subject to a non-recourse mortgage loan which
had a balance of $9,898,000 at July 31, 1995. The loan carries an annual
interest rate of 9 1/2%, requires monthly payments of principal and interest and
matures in June 2000.
In January 1991, the Trust acquired its lessee's interest in Park Place, an
office building located in Clayton, Missouri, subject to an $8,600,000
non-recourse mortgage loan. In November 1993, the Trust refinanced the first
mortgage, resulting in a reduction in the annual effective interest rate from
8.25% to 5.65%. Interest is payable semi-annually. The mortgage balance was
$8,515,000 at July 31, 1995 and amortizes $85,000 each year through May 2003,
and $430,000 annually in May 2004 through May 2007. The remaining balance of
$6,115,000 matures in May 2008.
The Loehmann's Fashion Island Shopping Center refinanced its then existing first
mortgage on June 30, 1994 with an initial advance of $18,000,000. The loan
commitment was for $30,000,000 with additional advances to be made through June
1996 based upon property performance. The first mortgage loan (of which
$15,000,000 is with recourse to the Trust) matures in July 1998 and bears
interest at the lender's floating prime rate plus 1/4% with the Trust having
the option to fix the interest rate from time to time at 2.25% above comparable
term LIBOR or U.S. Treasury rates for a specified number of times. This option
may be exercised at no cost or additional liability to the Trust. The loan also
required mandatory amortization payments. During fiscal 1995 the Trust borrowed
an additional $6,000,000, of which $2,000,000 was subsequently prepaid,
eliminating the required monthly amortization payments prior to maturity in July
1998. In July 1995, the Trust elected to fix the interest rate on the total
outstanding borrowings of $21,732,000 at 7.97% (2.25% over comparable term U.S.
Treasury notes) until December 1996.
The Trust's bank note payable, which as noted above has no outstanding balance,
is a revolving bank line of credit that provided available credit of $20,000,000
at July 31, 1994. In January 1995, when the Trust borrowed an additional
$4,000,000 under the first mortgage 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 reduce
further 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
for the foreseeable future.
For additional information regarding the Trust's indebtedness, see Note 3 of the
Notes to Consolidated Financial Statements of the Trust.
15
<PAGE> 16
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
<TABLE>
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 and nonrecurring
items, plus depreciation and amortization and after adjustment for
unconsolidated partnerships and joint ventures. Funds from Operations should be
considered in conjunction with net income (loss) as presented in the Trust's
audited 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:
<CAPTION>
Years Ended July 31,
-----------------------------------------
1995 1994 1993
<S> <C> <C> <C>
-------------------------------------------------------------------------------------------------
Income (loss) before gain on sale of Real Estate
Investments and Extraordinary Item $2,016,000 $1,579,000 $(8,330,000)
Depreciation on Owned Properties held directly by the
Trust 4,192,000 3,538,000 2,423,000
Trust's share of depreciation on unconsolidated
Investment Partnerships 2,086,000 1,445,000 1,145,000
Provision for possible investment losses - - 10,000,000
Non-recurring item (404,000)(1) - -
---------- ---------- ----------
Funds from Operations $7,890,000 $6,562,000 $ 5,238,000
========== ========== ==========
<FN>
(1) Non-recurring income resulting from the settlement of a bankruptcy claim filed by the Trust
against a former tenant at Loehmann's Fashion Island.
</TABLE>
Management believes that with its cash provided by operating activities retained
after dividend distributions, and borrowings under the existing bank line, it
will be able to meet its cash requirements for anticipated capital expenditures
at Owned Properties held directly by the Trust. The Trust currently expects that
these cash requirements will total approximately $1,900,000 during fiscal 1996.
REVIEW OF REAL ESTATE INVESTMENTS
The Trust's principal asset is its $160,963,000 portfolio of Real Estate
Investments, which is carried at cost, net of accumulated depreciation and the
allowance for possible investment losses, and includes Assets Held for Sale
(which are carried at the lower of cost or net realizable value). At July 31,
1995, the portfolio consisted of investments in 27 properties, comprised of
investments in 11 apartment complexes, seven office buildings, five shopping
centers and four hotels. Set forth below is a discussion of significant changes
in the portfolio during the year.
APARTMENTS
The Trust's real estate investments include 11 apartment investments, consisting
of five Structured Transactions held directly by the Trust, three Owned
Properties held in an Investment Partnership, one Asset Held for Sale in an
Investment Partnership and two Structured Transactions held in an Investment
Partnership.
On March 31, 1994, PCA Southwest Associates Limited Partnership, the Investment
Partnership which held mortgages on and the land under five Structured
Transactions, acquired its lessee's interest in the properties for $427,000. The
properties consisted of 3,000 apartment units in Houston, Texas. Braes Hill
apartments, a 152 unit complex, was sold in March 1995 at a gain, of which the
Trust's share was $110,000. At July 31, 1995, Chimney Rock apartments, (a 714
unit complex) was reclassified to an Asset Held for Sale and was written down to
its net realizable value. The Trust's share of the write-down ($54,000) was
charged against the Trust's previously established allowance for possible
investment losses. Subsequent to the end of the fiscal year, the property was
sold and no further loss was incurred. With regard to Telegraph Hill-Phase B, (a
259 unit complex) the Investment Partnership is in default under the terms of
the first mortgage loan on this phase. Since November 1994 the Investment
Partnership has not made the scheduled principal and interest payments.
Management attempted to restructure this $2,487,000 mortgage loan without
success, and anticipates transferring the title to the first mortgage lender by
a deed in lieu of foreclosure. Additionally, during the year the Investment
Partnership consolidated the property management and leasing agents
16
<PAGE> 17
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
for the portfolio to one firm. Since then a more aggressive leasing strategy has
been implemented and the apartments were 95% leased at July 31, 1995 versus 85%
leased at July 31, 1994 and 93% at July 31, 1993. On July 31, 1995, the Trust's
equity investment in this Investment Partnership was $8,878,000.
At July 31, 1995 the Trust had a $3,277,000 investment in an Investment
Partnership that held Structured Transactions in Phases I and II of the Canyon
View apartments in San Ramon, California. The Investment Partnership's Phase I
investments were subject to a $12,000,000 first mortgage which had a scheduled
maturity of August 1, 1993, but was extended to August 1, 1994 in anticipation
of a proposed sale. Both phases are also subject to non-subordinated land leases
held by a third party.
In August 1994, when it became apparent that a sale was unlikely to occur, the
first mortgagee initiated a court proceeding for the appointment of a receiver
for Phase I and commenced foreclosure proceedings. Shortly thereafter the
Investment Partnership initiated a court proceeding for the appointment of a
receiver for Phase II and commenced foreclosure proceedings on Phases I and II.
The Investment Partnership was successful in having a receiver appointed for
Phase II. In December 1994 the Investment Partnership filed for protection under
Chapter 11 of the U.S. Bankruptcy Code. Extensive negotiations then ensued with
the Investment Partnership's lessee and the first mortgagee on Phase I.
Subsequent to the end of the fiscal year the litigation was settled. The
Investment Partnership, of which the Trust owns a 23.8% interest, received
$300,000 from the first mortgagee of Phase I for permitting it to take full
title to Phase I and the Investment Partnership took title to Phase II and
received the proceeds from two letters of credit aggregating $1,750,000. The
Trust's share of the loss due to the settlement of the litigation ($1,491,000)
had been previously provided for in the Trust's allowance for possible
investment losses. The Trust's total investment in Phase I was $840,000 at July
31, 1995 and the property was 100% leased at July 31, 1995, 99% leased at July
31, 1994 and 97% leased at July 31, 1993. The Trust's total investment in Phase
II was $2,437,000 at July 31, 1995, and the property was 100% leased at July 31,
1995, 97% leased at July 31, 1994 and 96% leased at July 31, 1993. For a further
discussion see Item 3, "Legal Proceedings."
The remaining apartment investments are all current with respect to payments due
the Trust at September 30, 1995.
OFFICE BUILDINGS
The Trust currently has seven office building investments, consisting of three
Owned Properties held directly by the Trust, one Asset Held for Sale directly by
the Trust, one Owned Property held in an Investment Partnership and two Assets
Held for Sale in an Investment Partnership (previously classified as Owned
Properties held in an Investment Partnership). 6110 Executive Boulevard, an
Owned Property held directly by the Trust, was sold in January 1995 at a gain of
$3,099,000. In fiscal 1994, the Trust utilized a portion of its previously
established allowance for possible investment losses to write down this
investment by $2,000,000. Previously, in fiscal 1992, the Trust had written down
this investment by $4,000,000.
At July 31, 1995 Citibank Office Plaza - Oak Brook, located in suburban Chicago,
Illinois, previously classified as an Owned Property held directly by the Trust,
was reclassified to an Asset Held for Sale directly by the Trust and was written
down to its net realizable value of $10,185,000. The resulting loss of $971,000
was charged against the Trust's previously established allowance for possible
investment losses. The property has been listed for sale with a broker and no
further loss is anticipated. The property is not subject to first mortgage
financing and was 100% leased at July 31, 1995 versus 99% at July 31, 1994 and
93% at July 31, 1993.
At July 31, 1995, two office properties held in an Investment Partnership,
Financial Plaza and College Hills 8, were reclassified by the Investment
Partnership to Assets Held for Sale and were written down by the Investment
Partnership to their net realizable values. The Trust's share of the loss was
$1,320,000, which was charged against the Trust's previously established
allowance for possible investment losses. The properties are located in Overland
Park, Kansas, and are not encumbered by mortgage financing. At July 31, 1995 the
Trust's investments in Financial Plaza and College Hill 8 were $15,670,000 and
$1,728,000, respectively. Financial Plaza was 98% leased at July 31, 1995 versus
94% leased at July 31, 1994 and 92% at July 31, 1993. College Hills 8 was 98%
leased at July 31, 1995 versus 97% leased at July 31, 1994 and 90% at July 31,
1993.
SHOPPING CENTERS
The Trust has five shopping center investments, one Owned Property held directly
by the Trust, two Structured Transactions held directly by the Trust and two
held in Investment Partnerships (an Owned Property classified as an Asset Held
for Sale and a Structured Transaction).
Loehmann's Fashion Island in Aventura, Florida, an Owned Property held directly
by the Trust, is the Trust's largest investment. Its redevelopment, which
included the expansion and renovation of two existing anchor tenant spaces
(Loehmann's and AMC Theatres), the demolition of an existing building to permit
construction of a new 48,000 square foot Publix market and new facades,
walkways, signage, landscaping and tenant improvements for the entire center,
was substantially completed during fiscal 1994. In May 1995, the Trust hired a
new property management and leasing agent for the property. The Trust
17
<PAGE> 18
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
anticipates more aggressive leasing efforts and a reduction in the operating
costs of the property. Management has been disappointed with the leasing
performance of the center and in the spring of 1996 intends to reevaluate its
strategy based on leasing performance and expectations at that time. The Trust's
investment in the property (net of depreciation) was approximately $43,603,000
at July 31, 1995. The property was 90% leased at July 31, 1995 and 1994 and 80%
leased at July 31, 1993.
The Trust's other retail property, Plaza West Retail Center, is in Overland
Park, Kansas. The property is held in an Investment Partnership, Property
Capital Midwest Associates, L.P., which also owns three office properties in
Overland Park. All properties held by this partnership are owned free and clear
of debt. At July 31, 1995, Plaza West Retail Center, an Owned Property held in
an Investment Partnership, was reclassified to an Asset Held for Sale and the
property was written down to its net realizable value. The Trust's share of the
loss was $991,000, which was charged against the Trust's previously established
allowance for possible investment losses. The Trust's equity investment in this
property after the write-down was $6,529,000 at July 31, 1995. The property was
100% leased at July 31, 1995, as compared to 93% leased at July 31, 1994 and 63%
leased at July 31, 1993.
Subsequent to the end of the fiscal year the Investment Partnership which owned
the land under Crossroads Mall in Boulder, Colorado, sold its investment back to
its lessee. The Trust received approximately $5,500,000 from the sale of which
approximately $3,500,000 constitutes a gain to the Trust. The property was 91%
leased at July 31, 1995 as compared to 97% at July 31, 1994 and 94% at July 31,
1993.
The remaining two shopping center investments are all current with respect to
their payments due to the Trust at September 30, 1995.
HOTELS
The Trust has four hotel investments, three of which are Structured Transactions
held directly by the Trust and one of which is a Structured Transaction held in
an Investment Partnership. As previously reported, the Trust has granted its
lessee/mortgagor an option to purchase the Trust's $4,000,000 Structured
Transaction investments in Grosvenor Airport Inn, a 206 room hotel in South San
Francisco, California, for $2,500,000. Subsequent to the end of the fiscal year,
the Trust agreed to grant an extension of the option through November 1, 1995.
The lessee/mortgagor has given the Trust a non-refundable deposit of $350,000
and, commencing April 1, 1995, has been paying additional rent and interest of
$10,600 per month pursuant to the option. There can be no assurance 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 on sale has been provided for in
the Trust's allowance for possible investment losses. In the event this sale
does not close the Trust does not contemplate that it will seek another buyer in
the near future.
The Trust's three other hotel investments are current with respect to payments
due the Trust or the Investment Partnership at September 30, 1995.
ALLOWANCE FOR POSSIBLE INVESTMENT LOSSES
The Trust's $14,077,000 allowance for possible investment losses at July 31,
1995 was based upon management's estimate of net realizable value of each
investment and, to the extent such value is less than carrying value, an
allowance for possible investment losses for each investment was established. In
estimating net realizable value, consideration was given to many factors, such
as income to be earned from the investment, the cost to hold the property to a
hypothetical time of sale, the selling price the property would bring at such
time, the cost of improving the property to the condition contemplated in
determining the selling price, the cost of disposing of the property and
prevailing economic conditions, including availability of credit. In the opinion
of both the Trustees and Management, this allowance adequately reflects the
extent of the estimated impairment that existed at July 31, 1995 in the net
realizable value of each of the assets in the portfolio.
RESULTS OF OPERATION - 1995 VS. 1994
REVENUES
Rents from Owned Properties held directly by the Trust (base rent plus expense
reimbursement) increased 12% from fiscal 1994 primarily due to an increase in
rental revenues from the redeveloped Loehmann's Fashion Island and $404,000 of
nonrecurring revenues related to the settlement of a bankruptcy claim filed by
the Trust against a former tenant at Loehmann's Fashion Island. Additionally,
the increase is attributable to increased occupancy at One Park West. This
increase was offset in part by a decrease in rental revenue due to the sale of
Eagle apartments (March 1994). Rents from Owned Properties held directly by the
Trust includes rents from the Citibank Office Plaza - Oakbrook, which was
reclassified to an Asset Held for Sale directly by the Trust at July 31, 1995.
18
<PAGE> 19
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
Base income from Structured Transactions held directly by the Trust (land rent
and/or mortgage interest) decreased 12% from fiscal 1994, primarily due to the
conversion of 6110 Executive Boulevard and One Park West to Owned Properties
held directly by the Trust, the sale of the land underlying the Village Oaks
apartments (March 1994), the prepayment of the loan on and sale of the land
underlying the Brown County Inn (January 1994) and the prepayment of the
mortgage loan investment in Rapids Mall (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 decreased 3% from fiscal 1994 primarily due to the sale of the
Village Oaks and Brown County Inn investments. These decreases were offset in
part by the receipt of increased overage income in fiscal 1995 from two
apartment investments and one hotel investment.
The Trust's share of income from unconsolidated Investment Partnerships
decreased 18% from fiscal 1994 primarily due to depreciation expense recorded by
the Trust from PCA Southwest Associates Limited Partnership, the Partnership
which owns 2,848 apartment units in Texas. The apartments were converted to
Owned Properties in March 1994 and since that date the Trust's share of income
from this Investment Partnership is reported net of depreciation expense.
Previously, as a Structured Transaction held in an Investment Partnership, the
Partnership incurred no 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 3. "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 decreased by 1% from
fiscal 1994 primarily due to the sale of Eagle apartments (March 1994), offset
in part by an increase in operating expenses at the redeveloped Loehmann's
Fashion Island. Expenses on Owned Properties held directly by the Trust include
expenses from Citibank Office Plaza - Oakbrook, which was reclassified to Asset
Held for Sale directly by the Trust at July 31, 1995.
Interest expense decreased by 1% from fiscal 1994 primarily due to a reduction
in interest expense due to the sale of Eagle apartments which was encumbered by
a mortgage loan, the refinancing of Park Place at a lower interest rate and the
repurchase of 10% Convertible Subordinated Debentures. These decreases were
offset in part by the expensing of interest related to Loehmann's Fashion Island
(which had been capitalized during construction).
Depreciation expense increased 18% from fiscal 1994 primarily due to the
increase in depreciation on Loehmann's Fashion Island (portions of the
redeveloped center were in service for the entire fiscal 1995 as compared to
only a part of the prior year) and an increase in depreciation of the office
buildings due to capital expenditures made in conjunction with the lease-up of
these properties. These increases were offset in part by the elimination of
depreciation on Eagle apartments which was sold.
General and administrative expenses increased 5% as compared to fiscal 1994
primarily due to accrual of expenses related to employee severance plans
associated with the Trust's proposed new business plan.
Trustee fees decreased 15% due to reduction in the size of the Board of Trustees
from 9 Trustees to 7 Trustees.
INCOME (LOSS) BEFORE GAIN ON SALE OF REAL ESTATE INVESTMENTS AND EXTRAORDINARY
ITEM
Income (loss) before gain on sale of real estate investments and extraordinary
item increased to $2,016,000 ($.23 per share) from the prior year's $1,579,000
($.17 per share) for the reasons noted above.
GAIN ON SALE OF REAL ESTATE INVESTMENTS
The Trust sold two investments in fiscal 1995 resulting in a gain on real estate
investments of $3,209,000 ($.35 per share). The Trust's 6110 Executive Boulevard
office building was sold for $16,380,000, resulting in a gain of $3,099,000. The
Investment Partnership, PCA Southwest Associates Limited Partnership, sold its
investment in Braes Hill apartments at a gain, of which the Trust's share was
$110,000.
EXTRAORDINARY GAIN FROM EXTINGUISHMENT OF DEBT
The Trust purchased $1,698,000 of its 10% Convertible Subordinated Debentures at
less than the Trust's carrying value, producing an extraordinary gain of $88,000
($.01 per share).
DIVIDENDS
Dividends declared for fiscal 1995 were $.41 per share versus $.30 per share for
fiscal 1994. The Trust pays dividends approximately 55 days following the end of
each fiscal quarter.
19
<PAGE> 20
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
RESULTS OF OPERATIONS - 1994 VS. 1993
REVENUES
Rents from Owned Properties held directly by the Trust (base rent plus expense
reimbursement) increased 71% in fiscal 1994 from fiscal 1993, primarily as a
result of the Trust's acquisition of it's lessees' interests in 6110 Executive
Boulevard (February 1994) and One Park West (March 1993). When the Trust
acquires the interest of its lessee in a property, the Trust becomes the owner
and operator of that property. As such, the Trust receives all tenant rents and
expense reimbursements which are classified as Rents from Owned Properties held
directly by the Trust and no longer receives income classified as Base Income
from Structured Transactions held directly by the Trust (land rent and or
mortgage interest) as it did when the investment was a Structured Transaction.
Additionally, the increase is attributable to an increase in rental revenues
from the redeveloped Loehmann's Fashion Island as new tenants took occupancy.
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 29% in fiscal 1994 from fiscal 1993,
primarily due to the conversion of 6110 Executive Boulevard and One Park West to
Owned Properties held directly by the Trust, the prepayment of the loan on and
sale of the land underlying Brown County Inn (January 1994), the sale of the
land underlying Village Oaks apartments (March 1994) and the prepayment of the
mortgage loan investment in Rapids Mall (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 decreased 12% in fiscal 1994 from fiscal 1993 primarily due to
the recognition in the prior year of additional overage income from a certain
hotel investment as a result of an audit of the hotel's records and to the sale
of the Village Oaks and Brown County Inn investments. This decrease was offset
in part by the receipt of overage income in fiscal 1994 from two apartment
investments which did not pay overage income in the prior year.
The Trust's share of income from unconsolidated Investment Partnerships
increased 49% in fiscal 1994 from fiscal 1993 primarily due to improved
operating results of the Investment Partnership which owns the Overland Park,
Kansas, properties and the completion of the lessee's bankruptcy proceedings and
the resumption of earnings with regard to the Investment Partnership which owns
the Houston apartments.
EXPENSES
Expenses on Owned Properties held directly by the Trust increased 54% in fiscal
1994 from fiscal 1993 primarily due to the conversion of 6110 Executive
Boulevard and One Park West to Owned Properties held directly by the Trust and
an increase in operating expenses at the redeveloped Loehmann's Fashion Island.
Interest expense increased 29% in fiscal 1994 from fiscal 1993 primarily due to
the interest expense incurred on the first mortgages on 6110 Executive Boulevard
and One Park West and the expensing of interest related to Loehmann's Fashion
Island (which had been capitalized during construction). These increases were
offset in part by a reduction in interest expense due to the sale of Eagle
apartments and the refinancing of Park Place at a lower interest rate.
Depreciation expense increased 46% in fiscal 1994 as compared to fiscal 1993
primarily due to the additions to Owned Properties held directly by the Trust
noted above and the increase in depreciation on Loehmann's Fashion Island as
portions of the redeveloped center were placed in service, offset in part by the
elimination of depreciation on Eagle apartments which was sold.
General and administrative expenses increased 12% in fiscal 1994 as compared to
fiscal 1993 as the Trust incurred certain expenses that had previously been
shared with an affiliate of the former advisor to the Trust. Prior to August
1992, services related to investment matters and day-to-day administration were
provided by an independent advisor which shared certain expenses with the Trust
such as rent, errors & omissions insurance and computer maintenance. In August
1992, the Trust became self-managed and the Trust's contract with its
independent advisor was not renewed. In fiscal 1993, although the former advisor
did not provide services to the Trust, it shared offices with the Trust and
continued to share certain expenses. In fiscal 1994 the former advisor relocated
and these expenses could no longer be shared.
Professional fees decreased 23% in fiscal 1994 from fiscal 1993 due to reduced
legal fees related to litigation in respect to certain investments.
There was no addition to the Trust's allowance for possible investment losses in
fiscal 1994. During fiscal 1993 the Trust increased its allowance for possible
investment losses by $10,000,000 ($1.11 per share).
20
<PAGE> 21
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
INCOME (LOSS) BEFORE GAIN ON SALE OF REAL ESTATE INVESTMENTS
Income (loss) before gain on sale of real estate investments increased to
$1,579,000 ($.17 per share) in fiscal 1994 from fiscal 1993's ($8,330,000)
($(.93) per share) for the reasons noted above.
GAIN ON SALE OF REAL ESTATE INVESTMENTS
The Trust sold three investments in fiscal 1994 resulting in a gain on real
estate investments of $2,510,000 ($.28 per share). The Trust's Village Oaks
apartments investment was sold to the Trust's lessee for $3,500,000, producing a
gain of $2,500,000. The Trust's Eagle apartments were sold to an unrelated third
party for approximately $12,570,000, resulting in a net loss of $90,000. The
Trust's Brown County Inn land investment was sold to the Trust's lessee for
$600,000, producing a gain of $100,000. In fiscal 1993 the Trust sold its
investment in Lakeside apartments for $9,500,000, which produced a gain of
$7,700,000 ($.85 per share).
DIVIDENDS
Dividends declared for fiscal 1994 were $.30 as compared to $.28 for fiscal
1993. During fiscal 1994 the Trust paid dividends approximately 55 days
following each fiscal quarter.
INFLATIONARY AND ECONOMIC FACTORS
The effect of inflation upon the Trust's operations and real estate investments
has varied. For several years prior to fiscal 1995 rental rates did not increase
by the rate of inflation as competitive market conditions existed at most of the
Trust's properties. The Trust believes that many of the real estate markets in
which the Trust operates have improved. Though not applicable to all properties
in the Trust's portfolio, at many of these properties in fiscal 1995 rental
rates have increased by or in excess of inflation. Although operating expenses
are impacted by inflation, increases in operating expenses in the past year
caused by inflation have not been material.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
The consolidated financial statements and supplementary data of the Trust are
included under Item 14 of this Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
- --------------------------------------------------------------------------------
None.
21
<PAGE> 22
PART III
ITEM 10. TRUSTEES AND EXECUTIVE OFFICERS OF THE REGISTRANT
- --------------------------------------------------------------------------------
The information required to be furnished pursuant to this item with respect to
Trustees of the Trust is set forth under the caption "Election of Trustees" in
the Trust's proxy statement (the "Proxy Statement") to be furnished to
shareholders in connection with the solicitation of proxies by the Trust's Board
of Trustees for use at the 1995 Annual Meeting of Shareholders to be held on
December 15, 1995 and is incorporated herein by reference; the information with
respect to Executive Officers is set forth, pursuant to General Instruction G of
Form 10-K, under Part I of this Report.
ITEM 11. EXECUTIVE COMPENSATION
- --------------------------------------------------------------------------------
The information required to be furnished pursuant to this item is set forth
under the caption "Executive Compensation" in the Proxy Statement, other than
information set forth under the subcaptions "Compensation Committee's Report on
Compensation" and "Performance Graphs", and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- --------------------------------------------------------------------------------
The information required to be furnished pursuant to this item is set forth
under the captions "Voting Securities and Principal Shareholders" and "Election
of Trustees" in the Proxy Statement, and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------------------------------
The information required to be furnished pursuant to this item is set forth
under the caption "Certain Relationships and Related Transactions" in the Proxy
Statement, and is incorporated herein by reference.
22
<PAGE> 23
<TABLE>
(ITEM 14(A)) INDEX TO EXHIBITS
- --------------------------------------------------------------------------------
<CAPTION>
Exhibit
Number Description
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------
3.1 Declaration of Trust as currently in effect except for the four Amendments below is
incorporated herein by reference to Exhibit 4.1 of the May 13, 1983 Form S-2 Registration
Statement (Registration No. 2-83624). N/A
3.2 Amendment, dated October 1, 1987, to the Declaration of the Trust is incorporated herein by
reference to the exhibit to the Trust's Form 10-K Annual Report for the fiscal year ended
July 31, 1987. N/A
3.3 Amendment, dated August 21, 1992, to the Declaration of the Trust is incorporated herein by
reference to Exhibit 3.3 of the Trust's Form 10-K for the fiscal year ended July 31, 1992. N/A
3.4 Amendment, dated December 29, 1992, to the Declaration of Trust is incorporated by reference
to Exhibit 3.4 or the Trust's Form 10-K for the fiscal year ended July 31, 1993. N/A
3.5 Amendment, dated February 26, 1993, to the Declaration of Trust as to the number and identity
of Trustees is incorporated herein by reference to Exhibit 3.5 of the Trust's Form 10-K for
the fiscal year ended July 31, 1993. N/A
3.6 By-Laws of the Trust as currently in effect are incorporated herein by reference to Exhibit
3.3 of the Trust's Form 10-K for the fiscal year ended July 31, 1992. N/A
4.1 Indenture dated May 15, 1983 between the Trust and State Street Bank & Trust Company and the
form of 9 3/4% Convertible Subordinated Debentures due May 15, 2008 are incorporated herein
by reference to Exhibits 4.2 and 4.3 respectively of the May 13, 1983 Form S-2 Registration
Statement (Registration No. 2-83624). N/A
4.2 Indenture dated December 15, 1984 between the Trust and State Street Bank & Trust Company and
the form 10% Convertible Subordinated Debentures due December 15, 2009, are incorporated
herein by reference to Exhibits 4.3 and 4.4 respectively of the December 11, 1984 Form S-2
Registration Statement (Registration No. 2-94718). N/A
4.3 Form of Certificate representing shares of Beneficial Interest of the Trust incorporated
herein by reference to Exhibit 4 of the Trust's Annual Report on Form 10-K for the fiscal
year ended July 31, 1990. N/A
4.4 Shareholder Rights Plan, incorporated herein by reference to the Trust's Form 8-K report
dated October 12, 1990. N/A
10.1 Termination Agreement, dated as of October 19, 1992, between Robert M. Melzer and the Trust
is incorporated herein by reference to Exhibit 10.1 of the Trust's Form 10-K for the fiscal
year ended July 31, 1992. N/A
10.2 Amendment, dated as of August 25, 1995, to Termination Agreement, dated October 19, 1992
between Robert M. Melzer and the Trust. *
10.3 Termination Agreement, dated as of October 19, 1992, between William A. Bonn and the Trust is
incorporated herein by reference to Exhibit 10.2 of the Trust's Form 10-K for the fiscal year
ended July 31, 1992. N/A
10.4 Amendment, dated as of August 16, 1995, to Termination Agreement, dated October 19, 1992
between William A. Bonn and the Trust. *
10.5 Property Capital Trust 1992 Employee Stock Option Plan, as Amended (the "1992 Plan") is
incorporated herein by reference to Exhibit 10.3 of the Trust's Form 10-Q for the quarter
ended October 31, 1992. *
</TABLE>
23
<PAGE> 24
<TABLE>
(ITEM 14(A)) INDEX TO EXHIBITS (continued)
<CAPTION>
Exhibit
Number Description
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------
10.6 Subcontract and Option Agreement dated August 1, 1992 between Property Capital Trust and PCA
Institutional Advisors is incorporated herein by reference to Exhibit 10.4 of the Trust's
Form 10-Q for the quarter ended April 30, 1993. N/A
10.7 Property Capital Trust Amended and Restated Deferred Stock Plan for Non-Employee Trustees. *
10.8 Property Capital Trust 1994 Stock Option Plan for Non-Employee Trustees. *
10.9 Incentive Compensation Agreement, dated August 25, 1995, between Robert M. Melzer and the
Trust. *
21 List of the Trust's subsidiaries. *
23 Consent of Independent Auditors. *
<FN>
* Filed with the Securities and Exchange Commission.
</TABLE>
24
<PAGE> 25
PART IV
ITEM 14. EXHIBITS, CONSOLIDATED FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
- --------------------------------------------------------------------------------
(a) 1. CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements listed in the accompanying index to
financial statements on Page 28 are filed as part of this Annual Report.
2. CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
The consolidated financial statement schedules listed in the accompanying
index to financial statements on Page 28 are filed as part of this Annual
Report.
3. EXHIBITS
The exhibits listed in the accompanying index to exhibits on Pages 23 and
24 are filed as part of the Annual Report.
(b) REPORTS ON FORM 8-K
None.
25
<PAGE> 26
SIGNATURES
- --------------------------------------------------------------------------------
Pursuant to the requirements of Section 13 or 15(d) 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)
By /S/ ROBERT M. MELZER October 30, 1995
- ------------------------------------------------- ------------------------
Robert M. Melzer Date
Trustee, President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Trust and in the
capacities and on the dates indicated:
<TABLE>
<S> <C> <C>
/S/ JOHN A. CERVIERI, JR. Managing Trustee October 30, 1995
- ---------------------------------------------
John A. Cervieri Jr.
/S/ ROBERT M. MELZER Trustee, President and Chief Executive October 30, 1995
- --------------------------------------------- Officer (Principal Executive and Financial
Robert M. Melzer Officer)
/S/ WALTER M. CABOT Trustee October 30, 1995
- ---------------------------------------------
Walter M. Cabot
/S/ GRAHAM O. HARRISON Trustee October 30, 1995
- ---------------------------------------------
Graham O. Harrison
/S/ WALTER F. LEINHARDT Trustee October 30, 1995
- ---------------------------------------------
Walter F. Leinhardt
/S/ EDWARD H. LINDE Trustee October 30, 1995
- ---------------------------------------------
Edward H. Linde
/S/ GLENN P. STREHLE Trustee October 30, 1995
- ---------------------------------------------
Glenn P. Strehle
/S/ ROBIN W. DEVEREUX Vice President & Treasurer (Principal October 30, 1995
- --------------------------------------------- Accounting Officer)
Robin W. Devereux
</TABLE>
26
<PAGE> 27
Annual Report on Form 10-K
ITEM 8 AND ITEM 14(a) (1), (2) AND (d)
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
Year Ended July 31, 1995
PROPERTY CAPITAL TRUST
Boston, Massachusetts
27
<PAGE> 28
ITEM 14(a)(1), AND (2) INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
SCHEDULES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page
<S> <C>
- -----------------------------------------------------------------------------------------------------------
PROPERTY CAPITAL TRUST
The following consolidated financial statements of Property Capital Trust are included in Item 8:
Consolidated balance sheet at July 31, 1995 and 1994 30
Consolidated statement of operations for each of the three years in the period ended July 31,
1995 31
Consolidated statement of cash flows for each of the three years in the period ended July 31,
1995 32
Consolidated statement of shareholders' equity for each of the three years in the period ended
July 31, 1995 33
Notes to consolidated financial statements 34-48
Consolidated Quarterly Financial Data (unaudited) 49
The following consolidated financial statement schedules of Property Capital Trust are included in
Item 14(d):
II - Allowance for possible investment losses 50
III - Investments - Land Leasebacks held directly by the Trust, Owned Properties held directly
by the Trust and Asset Held for Sale directly by the Trust 52-59
IV - Investments - Mortgage Loans held directly by the Trust 60-62
Exhibit A - Investment Partnerships - Land Leasebacks, Owned Properties and Assets Held for
Sale 64-71
Exhibit B - Investment Partnerships - Mortgage Loans 72-74
The following separate financial statements are required pursuant to 3-09 of Regulation S-X:
PROPERTY CAPITAL MIDWEST ASSOCIATES, L.P.
The following financial statements of Property Capital Midwest Associates, L.P. are included in
Item 8:
Balance sheet at December 31, 1994 and 1993 77
Statement of operations for each of the three years in the period ended December 31, 1994 78
Statement of cash flows for each of the three years in the period ended December 31, 1994 79
Statement of changes in partners' equity for each of the three years in the period ended
December 31, 1994 80
Notes to financial statements 81-83
The following financial statement schedules of Property Capital Midwest Associates, L.P. are
included in Item 14(d):
III - Owned Properties 84-85
All other schedules for which provision is made in the applicable accounting regulation of the
Securities and Exchange Commission are not required under the instructions or are inapplicable
and therefore have been omitted.
</TABLE>
28
<PAGE> 29
REPORT OF INDEPENDENT AUDITORS
The Trustees and Shareholders
Property Capital Trust
We have audited the accompanying consolidated balance sheets of Property Capital
Trust (a real estate investment trust) as of July 31, 1995 and 1994, and the
related consolidated statements of operations, cash flows and shareholders'
equity for each of the three years in the period ended July 31, 1995. Our audits
also included the financial statement schedules listed in the Index at Item
14(a). These financial statements and schedules are the responsibility of the
Trust's management. Our responsibility is to express an opinion on these
financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Property Capital Trust at July 31, 1995 and 1994, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended July 31, 1995, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedules,
when considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
As discussed in Note 1 to the consolidated financial statements, in 1994 the
Trust changed its method of accounting for certain of its real estate
investments.
ERNST & YOUNG LLP
Boston, Massachusetts
August 25, 1995
29
<PAGE> 30
Property Capital Trust
<TABLE>
CONSOLIDATED BALANCE SHEET
<CAPTION>
July 31,
-----------------------------
1995 1994
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------
ASSETS
Real Estate Investments
Owned Properties held directly by the Trust
(net of accumulated depreciation of $10,522,000
and $10,362,000 in 1995 and 1994, respectively) $ 83,985,000 $105,295,000
Structured Transactions held directly by the Trust 32,571,000 32,581,000
Investment Partnerships 48,299,000 51,998,000
------------ ------------
164,855,000 189,874,000
Allowance for possible investment losses (14,077,000) (17,413,000)
------------ ------------
150,778,000 172,461,000
Asset Held for Sale directly by the Trust 10,185,000 -
------------ ------------
160,963,000 172,461,000
Cash and cash equivalents 5,209,000 720,000
Interest and rents receivable
Owned Properties held directly by the Trust 1,958,000 1,852,000
Structured Transactions held directly by the Trust 221,000 259,000
Other assets 1,088,000 1,541,000
------------ ------------
$169,439,000 $176,833,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Accounts payable and accrued expenses $ 3,207,000 $ 2,940,000
Accrued interest 707,000 711,000
Bank note payable - 5,000,000
Mortgage notes payable 40,145,000 43,110,000
9 3/4% Convertible Subordinated Debentures 2,546,000 2,546,000
10% Convertible Subordinated Debentures 29,125,000 30,823,000
------------ ------------
75,730,000 85,130,000
------------ ------------
Shareholders' Equity
Common Shares (without par value, unlimited shares
authorized, 9,053,881 and 9,030,585 issued and
outstanding in 1995 and 1994, respectively) 106,190,000 106,060,000
Accumulated deficit (12,481,000) (14,357,000)
------------ ------------
Total Shareholders' Equity 93,709,000 91,703,000
------------ ------------
$169,439,000 $176,833,000
============ ============
</TABLE>
See accompanying notes
30
<PAGE> 31
Property Capital Trust
<TABLE>
CONSOLIDATED STATEMENT OF OPERATIONS
<CAPTION>
Years Ended July 31,
-----------------------------------------
1995 1994 1993
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
REVENUES
Rents from Owned Properties held directly by the Trust $15,777,000 $14,083,000 $ 8,237,000
Structured Transactions held directly by the Trust
Base income 2,693,000 3,074,000 4,343,000
Overage income 1,858,000 1,911,000 2,165,000
Income from unconsolidated Investment Partnerships 1,858,000 2,264,000 1,519,000
----------- ----------- -----------
22,186,000 21,332,000 16,264,000
Advisory fee income 325,000 290,000 269,000
Interest income 108,000 1,000 2,000
----------- ----------- -----------
22,619,000 21,623,000 16,535,000
----------- ----------- -----------
EXPENSES
Expenses on Owned Properties held directly by the Trust 6,822,000 6,915,000 4,501,000
Interest 6,931,000 6,994,000 5,441,000
Depreciation 4,192,000 3,538,000 2,423,000
General and administrative expenses 2,138,000 2,034,000 1,817,000
Professional fees 362,000 377,000 490,000
Trustees' fees and expenses 158,000 186,000 193,000
Provision for possible investment losses - - 10,000,000
----------- ----------- -----------
20,603,000 20,044,000 24,865,000
----------- ----------- -----------
INCOME (LOSS) BEFORE GAIN ON SALE OF REAL ESTATE
INVESTMENTS AND EXTRAORDINARY ITEM 2,016,000 1,579,000 (8,330,000)
GAIN ON SALE OF REAL ESTATE INVESTMENTS 3,209,000 2,510,000 7,700,000
----------- ----------- -----------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM 5,225,000 4,089,000 (630,000)
EXTRAORDINARY GAIN FROM EXTINGUISHMENT OF DEBT 88,000 - -
----------- ----------- -----------
NET INCOME (LOSS) $ 5,313,000 $ 4,089,000 $ (630,000)
=========== =========== ===========
NET INCOME (LOSS) PER SHARE
INCOME (LOSS) BEFORE GAIN ON SALE OF REAL ESTATE
INVESTMENTS AND EXTRAORDINARY ITEM $0.23 $0.17 $(0.93)
GAIN ON SALE OF REAL ESTATE INVESTMENTS 0.35 0.28 0.85
----- ----- -----
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM 0.58 0.45 (0.08)
EXTRAORDINARY GAIN FROM EXTINGUISHMENT OF DEBT 0.01 - -
----- ----- -----
NET INCOME (LOSS) PER SHARE $0.59 $0.45 $(0.08)
===== ===== ======
AVERAGE SHARES OUTSTANDING 9,044,000 9,030,000 9,029,000
========= ========= =========
</TABLE>
See accompanying notes
31
<PAGE> 32
Property Capital Trust
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS
<CAPTION>
Years Ended July 31,
-----------------------------------------
1995 1994 1993
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
Net Income (Loss) $ 5,313,000 $ 4,089,000 $ (630,000)
Adjustments to Net Income (Loss)
Gain on sale of real estate investments (3,209,000) (2,510,000) (7,700,000)
Extraordinary gain from extinguishment of debt (88,000) - -
Increase in allowance for possible investment losses - - 10,000,000
Depreciation and amortization 4,398,000 3,611,000 2,473,000
Income from unconsolidated Investment Partnerships (1,858,000) (2,264,000) (1,519,000)
Distributions of income from Investment Partnerships 2,106,000 2,048,000 1,519,000
Changes in assets and liabilities
(Increase) decrease in interest and rents receivable (68,000) (115,000) 1,182,000
Decrease (increase) in other assets, net 247,000 (387,000) 795,000
Increase (decrease) in accounts payable and accrued
expenses, and accrued interest 380,000 818,000 (1,376,000)
----------- ----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 7,221,000 5,290,000 4,744,000
----------- ----------- -----------
INVESTING ACTIVITIES
Owned Properties held directly by the Trust
Dispositions 15,310,000 12,567,00 -
Additions (6,249,000) (9,030,000) (12,877,000)
Structured Transactions held directly by the Trust
Dispositions/repayments 10,000 5,434,000 10,859,000
Additions - - (587,000)
Investment Partnerships
Distributions in excess of income 1,196,000 146,000 488,000
----------- ----------- -----------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 10,267,000 9,117,000 (2,117,000)
----------- ----------- -----------
FINANCING ACTIVITIES
Repayment of bank note payable, net (5,000,000) (11,530,000) (5,770,000)
Cash dividends paid (3,437,000) (2,528,000) (2,438,000)
Prepayment of mortgage notes payable (8,440,000) (17,492,000) -
Proceeds from mortgage notes payable 6,000,000 18,000,000 6,000,000
Scheduled amortization of mortgage notes payable (525,000) (469,000) (302,000)
Repurchase of 10% Convertible Subordinated Debentures (1,610,000) - -
Proceeds from exercise of stock options 13,000 8,000 -
----------- ----------- -----------
NET CASH USED IN FINANCING ACTIVITIES (12,999,000) (14,011,000) (2,510,000)
----------- ----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 4,489,000 396,000 117,000
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 720,000 324,000 207,000
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 5,209,000 $ 720,000 $ 324,000
=========== =========== ===========
</TABLE>
See accompanying notes
32
<PAGE> 33
Property Capital Trust
<TABLE>
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
<CAPTION>
Years Ended July 31,
----------------------------------------------
1995 1994 1993
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
COMMON SHARES
Balance at beginning of year $106,060,000 $106,052,000 $106,052,000
Common Shares issued in payment of deferred Trustees'
compensation 117,000 - -
Stock options exercised 13,000 8,000 -
------------ ------------ ------------
Balance at end of year 106,190,000 106,060,000 106,052,000
------------ ------------ ------------
ACCUMULATED DEFICIT
Balance at beginning of year (14,357,000) (15,918,000) (12,850,000)
Net income (loss) 5,313,000 4,089,000 (630,000)
Cash dividends paid ($0.38, $0.28 and $0.27 per share in 1995,
1994 and 1993, respectively) (3,437,000) (2,528,000) (2,438,000)
------------ ------------ ------------
Balance at end of year (12,481,000) (14,357,000) (15,918,000)
------------ ------------ ------------
TOTAL SHAREHOLDERS' EQUITY $ 93,709,000 $ 91,703,000 $ 90,134,000
============ ============ ============
NUMBER OF COMMON SHARES
Common Shares issued and outstanding at beginning of year 9,030,585 9,028,585 9,028,585
Common Shares issued in payment of deferred Trustees'
compensation 20,296 - -
Stock options exercised 3,000 2,000 -
---------- ---------- ----------
COMMON SHARES ISSUED AND OUTSTANDING AT END OF YEAR 9,053,881 9,030,585 9,028,585
========= ========= =========
</TABLE>
See accompanying notes
33
<PAGE> 34
Property Capital Trust
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
The Trust is an owner of and investor in income producing real estate located
throughout the United States. For the past several fiscal years, the Trust's
business plan has focused on maximizing shareholder value through asset,
portfolio and liability management and the selective disposition of investments.
This business plan was in large part a response to the impact of the recent
recession on the real estate industry. During the time this plan has been in
effect, the Trust retained much of its portfolio. Following improvements in
rental rates and occupancies throughout the portfolio attributable to improving
economic conditions and considerable progress made by management in resolving
problems affecting the portfolio, the Trustees reevaluated the business plan.
The Trustees have concluded that the best means to maximize shareholder value is
to provide for an orderly disposition of the Trust's investments. The Trustees
also considered and rejected other strategies, such as a business combination or
expanding the Trust, as being unlikely to be consummated or inappropriate given
their belief that the stock price is not reflective of the value of the Trust's
assets. The Trustees anticipate that the new business plan will involve
dispositions of Owned Properties and Structured Transactions on a
property-by-property basis, over a period estimated to be between three and five
years, although the Trust will consider bulk sales and other opportunities that
may arise which expedite the disposition process. The new business plan is
subject to ratification by the shareholders of the Trust at the next Annual
Meeting of Shareholders.
CONSOLIDATION
The consolidated financial statements of the Trust include the accounts of its
wholly owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.
FEDERAL INCOME TAXES
The Trust has qualified and has elected to be taxed as a real estate investment
trust under Sections 856-860 of the Internal Revenue Code. The Trust intends to
continue to qualify as a real estate investment trust. Accordingly, no provision
has been made for Federal income taxes in the consolidated financial statements.
INVESTMENT PARTNERSHIPS
Certain of the Trust's investments have been made through partnerships or a
participation agreement in which the Trust or one of its subsidiaries is the
general partner or lead lender and other institutional investors are limited
partners or participants ("Investment Partnerships"). During the third quarter
of fiscal 1994, the Trust changed its method of accounting for its Investment
Partnerships to the equity method and prior period financial statements were
restated to reflect the change as if it had occurred at the beginning of the
period. Previously, the Trust consolidated its share of the Investment
Partnerships' results of operations and related assets and liabilities. Although
the change in accounting did not affect the Trust's net income (loss) or
shareholders' equity, the change is to a preferable method based upon generally
accepted accounting principles and is more consistent with current accounting
practices in the real estate industry.
VALUATION OF REAL ESTATE INVESTMENTS
Real estate investments are carried at cost, net of accumulated depreciation and
less an allowance for possible investment losses. When the Trust acquires a
property from its lessee/mortgagor it records the acquired property improvements
at the lesser of cost or net realizable value at the time of acquisition. The
Trust's allowance for possible investment losses is based upon management's
estimate of the net realizable value of each investment and to the extent this
is less than the carrying value of an investment, an allowance for possible
investment losses is established. In determining estimated net realizable value,
consideration is given to many factors, such as income to be earned from the
investment, the cost to hold the property to the hypothetical time of sale, the
selling price a property would bring at such time, the cost of improving the
property to the condition contemplated in determining the selling price, the
cost of disposing of the property and prevailing economic conditions including
availability of credit.
Depreciation and amortization have been calculated under the straight-line
method, based upon the estimated useful lives of the assets. Properties and
property improvements are depreciated over 25 to 39 years. Leasing commissions
and tenant improvements are amortized under the straight-line method over the
terms of the related leases. Expenditures for maintenance, repairs and
betterments which do not materially prolong the normal useful life of an asset
are charged to operations as incurred.
34
<PAGE> 35
Property Capital Trust
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (continued)
ASSETS HELD FOR SALE
The Trust defines an "Asset Held for Sale" as an asset that has been approved
for sale by the Trustees and, if applicable, the Investment Partnership and
either is being marketed for sale or is soon to be marketed by a broker who has
already been selected by the Trust. Assets Held for Sale are written down to the
lower of cost or net realizable value and, in the case of investments held
directly by the Trust, are reclassified to a separate line on the balance sheet.
Depreciation is no longer recorded on these assets. The revenues and expenses
from an Asset Held for Sale are not reclassified, and continue to be recorded as
they were prior to the reclassification.
REVENUE RECOGNITION
For financial reporting purposes, the Owned Properties held directly by the
Trust and the Investment Partnerships are accounted for on a one-month lag.
Certain space leases at the Owned Properties held directly by the Trust provide
for free rent periods and stepped minimum rents which are accounted for on a
straight-line basis over the terms of the leases. Rental income recognized under
the straight-line method was greater (less) than rent received or receivable by
the Trust for financial reporting purposes by $280,000, ($32,000) and ($67,000)
for the years ended July 31, 1995, 1994 and 1993, respectively.
NET INCOME (LOSS) PER SHARE
Net income (loss) per share is calculated by dividing net income (loss) by the
weighted average Common Shares outstanding during the year. Net income (loss)
per share on a quarterly basis may not total to the annual net income (loss) per
share due to rounding.
RECLASSIFICATION
Certain items in the 1994 and 1993 financial statements have been reclassified
to conform to the 1995 presentation.
NEW ACCOUNTING STANDARDS
FASB Statement No. 114, "Accounting by Creditors for Impairment of a Loan," as
amended by FASB Statement 118, was issued in May 1993. The statement requires
impairment losses to be recorded, when it is probable that a creditor will be
unable to collect all amounts due according to the contractual terms of the loan
agreement. The statement requires impaired loans to be measured based on the
present value of expected future cash flows discounted at the loan's effective
interest rate, or as a practical expedient at the loan's observable market price
or the fair value of the collateral if collateral dependent. The Trust will
adopt Statement 114 in the first quarter of fiscal 1996. Based on current
circumstances, including the availability of the previously established loss
allowance, the Trust does not believe the effect of adoption of this new
Standard will be material.
In March 1995, the FASB issued Statement No. 121, Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed of, which requires
impairment losses to be recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amount.
Statement 121 also addresses the accounting for long-lived assets that are
expected to be disposed of. The Trust will adopt Statement 121 in the first
quarter of fiscal 1997. Based on current circumstances, including uncertainties
regarding the effects of implementing the new business plan referred to above,
the financial statement impact of adoption of Statement 121 has not been
determined. The availability of the previously established loss allowance is
expected to mitigate any adverse impact.
NOTE 2. REAL ESTATE INVESTMENTS
The Trust's real estate investments consist primarily of equity investments in
completed, income-producing properties located throughout the United States.
Investments consisting of land leasebacks and/or mortgage loans are classified
as Structured Transactions. Operating properties are classified as Owned
Properties. Owned Properties which have been approved for sale and are being
marketed for sale are classified as Assets Held for Sale. Investments made
through partnerships or participation agreements in which the Trust or its
subsidiary is the general partner or lead lender and other institutional
investors are the limited partners or participating lenders are classified as
Investment Partnerships. Two of the Investment Partnerships hold Owned
Properties and Assets Held for Sale and three hold Structured Transactions. As
of July 31, 1995, the Trust had ten Structured Transactions held directly by the
Trust, four Owned Properties held directly by the Trust and one Asset Held for
Sale directly by the Trust. The Trust had investments in five Investment
Partnerships, three of which held four Structured Transactions and two of which
held eight investments of which four are Owned Properties and four are Assets
Held for Sale.
35
<PAGE> 36
Property Capital Trust
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. REAL ESTATE INVESTMENTS (continued)
<TABLE>
The Trust's Real Estate Investments (net of accumulated depreciation) are as
follows:
<CAPTION>
July 31,
---------------------------
1995 1994
<S> <C> <C>
-----------------------------------------------------------------------------------------------
Owned Properties held directly by the Trust $ 83,985,000 $105,295,000
Structured Transactions held directly by the Trust
Land leasebacks 17,140,000 17,140,000
Mortgage loans 15,431,000 15,441,000
Investment Partnerships 48,299,000 51,998,000
------------ ------------
164,855,000 189,874,000
Allowance for possible investment losses (14,077,000) (17,413,000)
------------ ------------
150,778,000 172,461,000
Asset Held for Sale directly by the Trust 10,185,000 -
------------ ------------
$160,963,000 $172,461,000
============ ============
</TABLE>
36
<PAGE> 37
Property Capital Trust
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. REAL ESTATE INVESTMENTS (continued)
<TABLE>
The Trust's Real Estate Investments (net of accumulated depreciation) including
Assets Held for Sale and before allowance for possible investment losses are
diversified by type of property as follows:
<CAPTION>
July 31,
-----------------------------
1995 1994
<S> <C> <C>
-----------------------------------------------------------------------------------------------
OWNED PROPERTIES HELD DIRECTLY BY THE TRUST
Office buildings $ 40,382,000 $ 64,042,000
Shopping centers 43,603,000 41,253,000
Apartments - -
Hotels - -
------------ ------------
83,985,000 105,295,000
------------ ------------
STRUCTURED TRANSACTIONS HELD DIRECTLY BY THE TRUST
Office buildings - -
Shopping centers 4,325,000 4,335,000
Apartments 16,530,000 16,530,000
Hotels 11,716,000 11,716,000
------------ ------------
32,571,000 32,581,000
------------ ------------
INVESTMENT PARTNERSHIPS
Office buildings(1) 18,611,000 20,125,000
Shopping centers(1) 8,552,000 9,550,000
Apartments(1) 12,155,000 13,299,000
Hotels 8,981,000 9,024,000
------------ ------------
48,299,000 51,998,000
------------ ------------
ASSET HELD FOR SALE DIRECTLY BY THE TRUST
Office Buildings 10,185,000 -
------------ ------------
TOTAL REAL ESTATE INVESTMENTS $175,040,000 $189,874,000
============ ============
REAL ESTATE INVESTMENTS BY TYPE OF PROPERTY
Office buildings $ 69,178,000 $ 84,167,000
Shopping centers 56,480,000 55,138,000
Apartments 28,685,000 29,829,000
Hotels 20,697,000 20,740,000
------------ ------------
Total Real Estate Investments $175,040,000 $189,874,000
============ ============
NUMBER OF PROPERTIES 27 29
<FN> == ==
(1) Inclusive of Assets Held for Sale in Investment Partnerships.
</TABLE>
37
<PAGE> 38
Property Capital Trust
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. REAL ESTATE INVESTMENTS (continued)
The Trust's Real Estate Investments (net of accumulated depreciation) including
Assets Held for Sale and before allowance for possible investment losses are
diversified, as of July 31, 1995, by geographic region as follows:
<TABLE>
<CAPTION>
Number of Investment % of
Geographic Region Properties Amount Total
<S> <C> <C> <C>
--------------------------------------------------------------------------------------------------
Midwest 11 $ 83,487,000 48%
South 7 58,016,000 33
East 1 18,687,000 11
West 8 14,850,000 8
-- ------------ ----
27 $175,040,000 100%
== ============ ====
</TABLE>
OWNED PROPERTIES HELD DIRECTLY BY THE TRUST
Owned Properties held directly by the Trust (which include those held in wholly
owned subsidiaries) include land, buildings, tenant improvements, construction
in progress, and other. Tenant improvements represent the cost of constructing
or finishing tenant space under the terms of a lease for that space. Material
disbursements that constitute new assets or improvements to existing assets that
extend their useful lives and/or substantially increase their value are
capitalized.
<TABLE>
Assets included as Owned Properties held directly by the Trust are as follows:
<CAPTION>
July 31,
-----------------------------
1995 1994
<S> <C> <C>
-----------------------------------------------------------------------------------------------
Land $ 17,485,000 $ 21,856,000
Buildings 65,700,000 81,540,000
Tenant improvements 9,206,000 7,583,000
Construction in progress - 2,427,000
Other 2,116,000 2,251,000
------------ ------------
94,507,000 115,657,000
Accumulated depreciation (10,522,000) (10,362,000)
------------ ------------
Owned Properties held directly by the Trust $ 83,985,000 $105,295,000
============ ============
</TABLE>
<TABLE>
The operating results of Owned Properties held directly by the Trust are
reflected in the consolidated statement of operations as Rents from Owned
Properties held directly by the Trust and Expenses on Owned Properties held
directly by the Trust. Rents from Owned Properties held directly by the Trust
represent base rents and expense reimbursements from tenants. Expenses on Owned
Properties held directly by the Trust are as follows:
<CAPTION>
Years Ended July 31,
----------------------------------------
1995 1994 1993
<S> <C> <C> <C>
-------------------------------------------------------------------------------------------------
Repairs and maintenance $2,175,000 $2,272,000 $1,357,000
Real estate taxes 1,333,000 1,585,000 1,045,000
Utilities 1,336,000 1,322,000 870,000
General and administrative 1,209,000 1,072,000 836,000
Management fees 570,000 487,000 308,000
Insurance 199,000 177,000 85,000
---------- ---------- ----------
Expenses on Owned Properties held directly by the Trust $6,822,000 $6,915,000 $4,501,000
========== ========== ==========
</TABLE>
38
<PAGE> 39
Property Capital Trust
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. REAL ESTATE INVESTMENTS (continued)
During fiscal 1995, the Trust sold the 6110 Executive Boulevard office building.
An unrelated party purchased the property for $16,380,000 resulting in a gain of
approximately $3,099,000.
During fiscal year 1994, the Trust sold Eagle apartments. The property was
purchased by an unrelated third party for approximately $12,570,000, resulting
in a loss of $90,000. Effective February 1, 1994, a wholly owned subsidiary of
the Trust acquired the equity interest of its lessee in 6110 Executive
Boulevard, an office building in Rockville, Maryland, subject to a non-recourse
first mortgage loan of $6,478,000. During the quarter ended January 31,1994, the
Trust wrote down its investment in 6110 Executive Boulevard by $2,000,000. This
write-down was charged against the Trust's allowance for possible investment
losses.
In fiscal year 1993, a wholly owned subsidiary of the Trust acquired the equity
interest of its lessee in One Park West, an office building in Chevy Chase,
Maryland, subject to a first mortgage loan of $10,227,000. Upon acquisition the
Trust utilized the applicable portion of its previously established allowance
for possible investment losses to write down this investment by $6,000,000.
ASSET HELD FOR SALE
At July 31, 1995 the Trust had one Asset Held for Sale directly by the Trust,
Citibank Office Plaza-Oakbrook. This investment, which had a net book value of
$11,156,000, had previously been classified as an Owned Property held directly
by the Trust. At July 31, 1995, the Trust wrote down its investment in this
property by $971,000 to $10,185,000. This loss was charged against the Trust's
previously established allowance for possible investment losses. In addition,
the Investment Partnerships reclassified certain of their real estate
investments to Assets Held for Sale and wrote down these assets to estimated net
realizable value, which the Trust then charged against its previously
established allowance for possible investment losses.
STRUCTURED TRANSACTIONS HELD DIRECTLY BY THE TRUST
Land leasebacks consist of land purchased under income-producing properties and
leased back under long-term net lease arrangements. These leases, which are
classified as operating leases, have remaining initial terms of 22 to 69 years,
with a weighted average term of 53 years. The leases require fixed monthly base
rental payments to the Trust and generally also provide for overage rental
payments, which are typically computed as a percentage of property gross
receipts in excess of base amounts.
Base rental income contractually due under land leasebacks existing at July 31,
1995 is approximately $1,541,000 per year for the next five years.
Certain land leasebacks contain options whereby the lessees may repurchase the
land at prices typically based on fair market value, but not less than the
Trust's cost, or may cause the land and improvements to be sold to third
parties. When a property is sold to a third party, the Trust typically receives
the greater of a percentage of total sales proceeds of the property or its cost.
During the next five years, repurchase or similar options covering $3,575,000 of
land leasebacks become exercisable.
The mortgage loan investments are generally long-term loans that require fixed
monthly base interest payments and, when not payable on a self-liquidating
basis, require principal payments at maturity. Mortgage loans are generally
owned in conjunction with land leaseback transactions and are subordinate to and
have cross-default provisions with the land leasebacks. The loans allow for
prepayment prior to maturity, and during the next five years all loans may be
prepaid.
Because the mortgage loans were made and continue to be held in conjunction with
land leaseback transactions and these loans were not originally structured to be
considered separately from the land leaseback transactions it is not practicable
to estimate the fair values of these mortgage loans. A determination of the fair
values of these mortgage loans as a separate component would be too subjective
and would not result in a meaningful estimate.
During fiscal year 1994 the Trust disposed of three Structured Transactions held
directly by the Trust. The Trust's $1,000,000 Village Oaks apartments investment
was purchased by the Trust's lessee for $3,500,000. The Trust's Brown County Inn
$500,000 land investment was purchased by the Trust's lessee for $600,000 and
its $973,000 leasehold mortgage was prepaid at par. The Trust's $500,000 Rapids
Mall mortgage loan was prepaid for $350,000, with the resulting loss of $150,000
being charged against the Trust's allowance for possible investment losses.
During fiscal 1993 the Trust disposed of three Structured Transactions held
directly by the Trust. The $1,800,000 Lakeside apartments investment was sold
for $9,500,000. The $4,000,000 Town and Country office investment was sold for
$70,000 and the $2,991,000 Stouffers Bedford Glen Hotel investment was sold for
$350,000. Losses incurred in connection with such sales were charged against the
Trust's allowance for possible investment losses. Additionally, during the year
the Trust reduced its
39
<PAGE> 40
Property Capital Trust
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. REAL ESTATE INVESTMENTS (continued)
allowance for possible investment losses by $2,300,000 due to a write-off of the
Trust's Sandpiper Cove mortgage loan, which was forgiven.
<TABLE>
INVESTMENTS IN UNCONSOLIDATED INVESTMENT PARTNERSHIPS
As of July 31, 1995, 1994 and 1993 the Trust or its subsidiary had investments
in five unconsolidated Investment Partnerships which are accounted for on the
equity method. The Investment Partnerships provide for the allocation of profits
and losses and cash distributions in proportion to ownership as shown below:
<CAPTION>
Investment Partnerships % Owned by the Trust
<S> <C>
------------------------------------------------------------------------------------------------
Property Capital Midwest Associates, L.P. 53.30%
PCA Southwest Associates Limited Partnership 45.45%
Lisle Hilton Inn Loan Participation 41.67%
PCA Canyon View Associates Limited Partnership 23.81%
PCA Crossroads Associates, Ltd. 25.00%
</TABLE>
<TABLE>
Condensed combined financial statements of the unconsolidated Investment
Partnerships are as follows:
CONDENSED COMBINED BALANCE SHEET
<CAPTION>
July 31,
-----------------------------
1995 1994
<S> <C> <C>
-----------------------------------------------------------------------------------------------
ASSETS
Current assets $ 2,686,000 $ 4,070,000
Owned Properties 37,258,000 99,058,000
Mortgage loans 34,675,000 34,778,000
Land leasebacks 9,084,000 9,084,000
Assets Held for Sale 55,549,000 -
Other assets 72,000 70,000
------------ ------------
$139,324,000 $147,060,000
============ ============
LIABILITIES AND CAPITAL
Current liabilities $ 3,330,000 $ 2,905,000
Other liabilities 462,000 530,000
Mortgage notes payable 25,420,000 25,904,000
Trust's share of combined capital 48,299,000 51,998,000
Limited partners' share of combined capital 61,813,000 65,723,000
------------ ------------
$139,324,000 $147,060,000
============ ============
</TABLE>
40
<PAGE> 41
Property Capital Trust
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. REAL ESTATE INVESTMENTS (continued)
<TABLE>
CONDENSED COMBINED STATEMENT OF OPERATIONS
<CAPTION>
Years Ended July 31,
-------------------------------------------
1995 1994 1993
<S> <C> <C> <C>
-------------------------------------------------------------------------------------------------
REVENUES
Rents from Owned Properties $21,042,000 $10,968,000 $ 7,194,000
Structured Transactions
Base income 2,664,000 4,225,000 3,674,000
Overage income 644,000 339,000 415,000
Other income 68,000 33,000 24,000
----------- ----------- -----------
24,418,000 15,565,000 11,307,000
----------- ----------- -----------
EXPENSES
Owned Properties expenses 12,651,000 5,538,000 3,577,000
Depreciation 4,144,000 2,787,000 2,149,000
Interest 1,915,000 732,000 -
Other 1,440,000 794,000 1,349,000
----------- ----------- -----------
20,150,000 9,851,000 7,075,000
----------- ----------- -----------
INCOME BEFORE GAIN (LOSS) ON REAL ESTATE INVESTMENTS 4,268,000 5,714,000 4,232,000
GAIN (LOSS) ON REAL ESTATE INVESTMENTS
Gain on sale of real estate investment 242,000 - -
Write-down of Assets Held for Sale (4,454,000) - -
----------- ----------- -----------
NET INCOME $ 56,000 $ 5,714,000 $ 4,232,000
=========== =========== ===========
INCOME BEFORE GAIN (LOSS) ON REAL ESTATE INVESTMENTS
Trust's share of income before gain (loss) on real
estate investments $ 1,858,000 $ 2,264,000 $ 1,519,000
Limited Partners' share of income before gain (loss)
on real estate investments 2,410,000 3,450,000 2,713,000
GAIN (LOSS) ON REAL ESTATE INVESTMENTS
Trust's share of gain on sale of real estate
investment 110,000 - -
Limited Partners share of gain on sale of real
estate investment 132,000 - -
Trust's share of write-down of Assets Held for Sale
(previously recorded by the Trust) (2,365,000) - -
Limited Partners share of write-down of Assets Held
for Sale (2,089,000) - -
----------- ----------- -----------
NET INCOME $ 56,000 $ 5,714,000 $ 4,232,000
=========== =========== ===========
</TABLE>
41
<PAGE> 42
Property Capital Trust
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. REAL ESTATE INVESTMENTS (continued)
<TABLE>
The Trust's equity in unconsolidated Investment Partnerships is as follows:
<CAPTION>
July 31,
---------------------------
1995 1994
-----------------------------------------------------------------------------------------------
<S> <C> <C>
Property Capital Midwest Associates, L.P. $25,140,000 $27,659,000
PCA Southwest Associates Limited Partnership 8,878,000 9,877,000
Lisle Hilton Inn Loan Participation 8,981,000 9,024,000
PCA Canyon View Associates Limited Partnership 3,277,000 3,422,000
PCA Crossroads Associates, Ltd. 2,023,000 2,016,000
----------- -----------
$48,299,000 $51,998,000
=========== ===========
</TABLE>
<TABLE>
The Trust's share of net income (loss) from unconsolidated Investment
Partnerships is as follows:
<CAPTION>
Years Ended July 31,
----------------------------------------
1995 1994 1993
<S> <C> <C> <C>
-------------------------------------------------------------------------------------------------
Property Capital Midwest Associates, L.P.(1) $ 987,000 $ 950,000 $ 646,000
PCA Southwest Associates Limited Partnership(2) 101,000 209,000 (220,000)
Lisle Hilton Inn Loan Participation 660,000 617,000 570,000
PCA Canyon View Associates Limited Partnership (145,000) 195,000 210,000
PCA Crossroads Associates, Ltd. 365,000 293,000 313,000
---------- ---------- ----------
$1,968,000 $2,264,000 $1,519,000
========== ========== ==========
<FN>
(1) Net of the Trust's share of depreciation of $1,373,000, $1,213,000
and $1,145,000 for years ended July 31, 1995, 1994 and 1993,
respectively.
(2) Net of the Trust's share of depreciation of $713,000 and $232,000 for
the years ended July 31, 1995 and 1994, respectively. These
properties converted from Structured Transactions to Owned Properties
on March 31, 1994.
</TABLE>
<TABLE>
Cash distributions received by the Trust from the unconsolidated Investment
Partnerships are as follows:
<CAPTION>
Years Ended July 31,
----------------------------------------
1995 1994 1993
<S> <C> <C> <C>
-------------------------------------------------------------------------------------------------
Property Capital Midwest Associates, L.P. $1,195,000 $1,054,000 $ 784,000
PCA Southwest Associates Limited Partnership 1,046,000 - 118,000
Lisle Hilton Inn Loan Participation 703,000 610,000 575,000
PCA Canyon View Associates Limited Partnership - 232,000 210,000
PCA Crossroads Associates, Ltd. 358,000 298,000 320,000
---------- ---------- ----------
$3,302,000 $2,194,000 $2,007,000
========== ========== ==========
</TABLE>
42
<PAGE> 43
Property Capital Trust
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. REAL ESTATE INVESTMENTS (continued)
<TABLE>
At July 31, 1995, the Trust's Investment Partnerships reclassified certain of
their real estate investments to Assets Held for Sale and wrote down these
assets to estimated net realizable value. The Trust then charged the amount of
the write-downs against its allowance for possible investment losses as follows:
<CAPTION>
July 31, 1995
-----------------------------------------------------------------------------------------------
<S> <C>
Property Capital Midwest Associates, L.P. $2,311,000
PCA Southwest Associates Limited Partnership 54,000
----------
$2,365,000
==========
</TABLE>
The Structured Transactions held in Investment Partnerships are similar to those
held directly by the Trust. The land leaseback leases have remaining initial
terms of 17 to 67 years, with a weighted average term of 62 years. The leases
require fixed monthly base rental payments to the Investment Partnerships and
also provide for overage rental payments. The Trust's share of base rental
income contractually due under existing land leasebacks held in Investment
Partnerships at July 31, 1995 is approximately $268,000 per year for the next
five years.
The mortgage loans held in Investment Partnerships are generally long-term loans
that require fixed monthly base interest payments and, when not payable on a
self-liquidating basis, require principal payments at maturity. Except for the
Lisle Hilton Inn loan participation, mortgage loans are owned in conjunction
with land leaseback transactions and are subordinate to and have cross-default
provisions with the land leasebacks. The Lisle Hilton Inn loan participation,
although not owned in conjunction with a land leaseback transaction, also
requires overage interest payments, similar to the land leasebacks. The loans
allow for prepayment prior to maturity and during the next five years all loans
may be prepaid.
During fiscal 1995, PCA Southwest Associates Limited Partnership ("Southwest"),
an Investment Partnership which owned 3,000 apartments in Houston, Texas, sold
the Braes Hill project (152 units) to an unrelated party resulting in a gain to
the Trust of $110,000. At July 31, 1995, Southwest reclassified its investment
in the Chimney Rock apartments to Assets Held for Sale resulting in a write down
by the Trust of $54,000, which was charged against the Trust's previously
established allowance for possible investment losses. The Trust's investment in
Southwest had a net book value of $8,932,000 prior to the Chimney Rock property
write-down. The Trust's wholly owned subsidiary has a 45.45% general partner's
interest in Southwest. At July 31, 1995, Property Capital Midwest Associates,
L.P. ("Midwest"), an Investment Partnership which owns seven buildings in
Overland Park, Kansas, reclassified its investments in Financial Plaza, Plaza
West Retail Center and College Hills 8 to Assets Held for Sale, resulting in a
write-down by the Trust of $2,311,000. The Trust's investment in Midwest had a
net book value of $27,451,000 prior to the Financial Plaza, College Hills 8 and
Plaza West Retail Center's write-downs. The Trust has a 53.30% general partner's
interest in Midwest and the Trust's share of the loss was charged against the
Trust's previously established allowance for possible investment losses.
Subsequent to the end of the fiscal year, PCA Canyon View Associates Limited
Partnership settled certain litigation. The Investment Partnership, of which the
Trust owns a 23.8% interest, received $300,000 from the first mortgagee of Phase
I for permitting it to take title to Phase I and the Investment Partnership took
title to Phase II and received the proceeds from two letters of credit
aggregating $1,750,000.
On March 31, 1994, Southwest acquired for $427,000 its lessee's interest in five
properties subject to first mortgages aggregating $25,989,000. During the
quarter ended July 31, 1994, the Trust wrote down its investment in this
partnership by $566,000. This write-down was charged against the Trust's
allowance for possible investment losses.
NOTE 3. INDEBTEDNESS
The Trust has available a total of $10,000,000 under a revolving line of credit
from a major New England bank. Borrowings under the line of credit are repayable
on demand by the lender. At July 31, 1995 there were no outstanding borrowings
under the line. Interest is at the bank's prime rate (8.75% at July 31, 1995)
plus 1/4%.
A majority of the real estate investments are subject to long-term first
mortgage financing which aggregated $182,686,000 at July 31, 1995 and
$188,080,000 at July 31, 1994. At July 31, 1995 long-term first mortgage
financing consisted of $40,145,000 of debt on Owned Properties held directly by
the Trust and $25,420,000 of debt on Owned Properties held in Investment
Partnerships. The balance of $117,121,000 represents debt on Structured
Transactions which is not reflected on the Trust's balance sheet because the
obligation to pay such debt is that of the Trust's lessees/mortgagors.
43
<PAGE> 44
Property Capital Trust
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3. INDEBTEDNESS (continued)
At July 31, 1995 three of the Trust's Owned Properties held directly by the
Trust were encumbered by first mortgages aggregating $40,145,000 and at July 31,
1994 four of the Trust's Owned Properties held directly by the Trust were
encumbered by first mortgages aggregating $43,110,000.
<TABLE>
<CAPTION>
Principal Balance
July 31,
Owned Properties held directly by the --------------------------- Interest
Trust 1995 1994 Rate Maturity
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Loehmann's Fashion Island $21,732,000 $18,000,000 7.97%* July 1998
One Park West 9,898,000 10,052,000 9.50% June 2000
Park Place 8,515,000 8,600,000 5.65% May 2008
6110 Executive Boulevard - 6,458,000 - Repaid
----------- -----------
$40,145,000 $43,110,000
=========== ===========
<FN>
* Rate is fixed until December 1996; see below for further information.
</TABLE>
<TABLE>
The book value of real estate pledged as collateral for these loans was
approximately $73,723,000. Scheduled principal payments on these loans at July
31, 1995 are as follows:
<CAPTION>
Year ending July 31,
---------------------------------------------------------------------------------------------
<S> <C>
1996 $ 256,000
1997 273,000
1998 22,024,000
1999 312,000
2000 8,090,000
2001 and thereafter 9,190,000
-----------
Total $40,145,000
===========
</TABLE>
The Loehmann's Fashion Island Shopping Center refinanced its then existing first
mortgage on June 30, 1994 with an initial advance of $18,000,000. The loan
commitment was for $30,000,000 with additional advances to be made through June
1996 based upon property performance. The first mortgage loan (of which
$15,000,000 is with recourse to the Trust) matures in July 1998 and bears
interest at the lender's prime rate plus 1/4% with the Trust having the option
to fix the interest rate from time to time at 2.25% above comparable term LIBOR
or U.S. Treasury rates for a specified number of times. This option may be
exercised at no cost or additional liability to the Trust. The loan also
required mandatory amortization payments. During fiscal 1995 the Trust borrowed
an additional $6,000,000 of which $2,000,000 was subsequently prepaid and
eliminated the required monthly amortization payments prior to maturity in July
1998. In July 1995 the Trust elected to fix the interest rate on the total
outstanding borrowings of $21,732,000 at 7.97% until December 1996 which, at
that time, was 2.25% over comparable term U.S. Treasury rates.
In November 1993, the Trust refinanced the $8,600,000 first mortgage on the Park
Place office building located in Clayton, Missouri, resulting in a reduction in
the annual effective interest rate from 8.25% to 5.65%.
The Trust issued $40,000,000 of 9 3/4% Convertible Subordinated Debentures in
May 1983, maturing May 15, 2008, and $40,000,000 of 10% Convertible Subordinated
Debentures in December 1984, maturing December 15, 2009. As of July 31, 1995,
$2,546,000 and $29,125,000 of the 9 3/4% and 10% Debentures, respectively, were
outstanding. During fiscal 1995 the Trust repurchased $1,698,000 principal
amount of the 10% Debentures at a discount. The 9 3/4% and 10% Debentures are
subordinated to all debt of the Trust and are convertible into Common Shares at
$19.00 and $21.70 per share, respectively. Conversion of all Debentures
outstanding at July 31, 1995 would add an additional 1,476,166 Common Shares.
Due to conversions in prior years, sinking fund payments on the 10% Debentures
will not commence until fiscal 2000, with a payment of $1,125,000. There are no
sinking fund requirements on the 9 3/4% Debentures due to conversions in prior
years.
44
<PAGE> 45
Property Capital Trust
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3. INDEBTEDNESS (continued)
For the years ended July 31, 1995, 1994 and 1993, cash paid for interest on all
of the Trust's debt was $6,818,000, $6,961,000, and $5,579,000, respectively,
net of capitalized interest of $0, $858,000 and $1,311,000, respectively.
The fair values of the Trust's mortgage notes payable and Convertible
Subordinated Debentures at July 31, 1995 are $40,256,000 and $30,783,000,
respectively. The fair values were estimated using discounted cash flow analyses
on the mortgage notes and quoted market prices on the convertible subordinated
debentures. The mortgage notes payable are assumed to be held to maturity.
NOTE 4. RENTS UNDER OPERATING LEASES
<TABLE>
All space leases at the Owned Properties held directly by the Trust are
classified as operating leases. Minimum future base rents to be received from
leases in effect at July 31, 1995 are as follows:
<CAPTION>
Year ending July 31,
<S> <C>
---------------------------------------------------------------------------------------------
1996 $10,367,000
1997 9,297,000
1998 8,008,000
1999 5,966,000
2000 4,879,000
2001 and thereafter 23,047,000
-----------
Total $61,564,000
===========
</TABLE>
The minimum future base rents do not include contingent rentals, such as tenant
reimbursements which are received under certain leases based upon property
operating costs, or percentage rents which are based on the level of a tenant's
sales.
NOTE 5. RENTAL EXPENSE
The Trust leases office space under an operating lease which expires on May 31,
1997, although the Trust and the landlord each have the option to cancel the
lease as of May 31, 1996 by giving six months' prior notice. Rental expense
under this lease was $132,000, $128,000 and $111,000 in fiscal years 1995, 1994
and 1993, respectively. Future minimum rental payments will be $147,000 and
$122,500 for fiscal years 1996 and 1997, respectively.
NOTE 6. ADVISORY SERVICES
Prior to August 1, 1992, services related to investment matters and day-to-day
administration of the Trust were provided by Property Capital Advisors, Inc.
(the "Advisor"). Effective August 1, 1992 the Trust commenced management of its
affairs through an internal staff. Services related to the day-to-day
administration of the Investment Partnerships were provided by PCA Institutional
Advisors ("PCAIA"), an affiliate of the Advisor. In connection with the
internalization of the Trust's management, the Trust entered into an agreement
with PCAIA pursuant to which the Trust assumed responsibility for rendering
services under advisory agreements (the "Advisory Agreements") between PCAIA and
the five Investment Partnerships.
The Trust receives annually the first $150,000 of amounts payable pursuant to
the Advisory Agreements as compensation for providing such services, which
amount generally corresponds to the additional expenses incurred by the Trust in
performance of such tasks, plus 50% of additional amounts payable pursuant to
the Advisory Agreements, which additional amounts aggregated $175,000, $140,000
and $119,000 in fiscal years 1995, 1994 and 1993, respectively. PCAIA receives
the remaining 50% of such payments in excess of $150,000. Excluded from the
foregoing arrangement is the termination fee provided for in the PCA Crossroads
Associates, Ltd. ("Crossroads") advisory agreement, which fee, was paid
subsequent to year-end, solely to PCAIA.
Commencing on August 1, 1997, the Trust may terminate the foregoing agreement
and thereafter receive 100% of all payments under the Advisory Agreements (other
than the termination fee payable pursuant to the Crossroads advisory agreement)
by paying PCAIA three times PCAIA's share of the average of the annual payments,
(the "Buy-Out Amount") that it received under such sharing arrangement during
the two prior fiscal years, calculated without reference to payments
attributable to properties sold or otherwise disposed of during such fiscal
years. The Buy-Out Amount is payable to PCAIA in three annual
45
<PAGE> 46
Property Capital Trust
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3. ADVISORY SERVICES (continued)
installments, in arrears, with interest accruing on the unpaid principal amount
of such payment at the prime rate of the Trust's primary bank lender. The
Buy-Out Amount is reduced in the event that properties are sold or otherwise
disposed of during the three years over which such amount is payable.
NOTE 7. RELATED PARTY TRANSACTIONS
During fiscal 1995, 1994 and 1993, the Trust incurred legal fees in the amount
of $224,000, $346,000 and $347,000, respectively (exclusive of additional
amounts paid by the Trust's lessees and borrowers, if any), from the law firm of
Paul, Weiss, Rifkind, Wharton & Garrison, of which Walter F. Leinhardt,
Secretary and Trustee of the Trust, is a partner. Not included in the above
amount is the Trust's share of legal fees incurred by the Investment
Partnerships in the amount of $17,000, $46,000, and $66,000 for fiscal 1995,
1994 and 1993, respectively.
During fiscal 1993, the Trust purchased for approximately $85,000 certain
personal property from the Trust's former Advisor used in the conduct of the
Trust's business. Also during fiscal 1993, an affiliate of the Trust paid
approximately $68,000 to Boston Properties, Inc. of which Edward H. Linde, a
Trustee of the Trust, is the President, for certain consulting services provided
by an employee of Boston Properties, Inc. in connection with the redevelopment
of one of the Trust's Owned Properties held directly by the Trust.
NOTE 8. ANTICIPATED CAPITAL EXPENDITURES
Amounts aggregating approximately $1,900,000 may be required during fiscal 1996
for capital expenditures on the Trust's Owned Properties held directly by the
Trust. Additionally, the Trust's share of capital expenditures which may be
required by the Investment Partnerships during 1996 is approximately $900,000.
NOTE 9. SHAREHOLDERS' EQUITY
1992 EMPLOYEE STOCK OPTION PLAN
The Property Capital Trust 1992 Employee Stock Option Plan (the "Plan") for key
employees of the Trust and its subsidiaries is a plan under which options for
400,000 shares may be granted to purchase Common Shares for a purchase price
equal to, at a minimum, the fair market value of the shares on the date of
grant, subject to certain adjustments. The Compensation Committee of the Board
of Trustees administers the Plan and is responsible for selecting the
individuals eligible to receive options and for determining the number of
options to be granted to such individuals and the purchase price of the shares.
Under the plan 20% of the options become exercisable on each anniversary of the
date of grant. The options are subject to termination under certain
circumstances.
<TABLE>
<S> <C>
Options outstanding August 1, 1992 -
Options granted on January 8, 1993 @ $3.75 per share 107,750
Options exercised -
Options canceled (4,000)
-------
Options outstanding July 31, 1993 103,750
Options granted on January 6, 1994 @ $6.375 per share 68,850
Options exercised (2,000)
-------
Options outstanding July 31, 1994 170,600
Options granted on November 30, 1994 @ $6.125 per share 77,500
Options granted on February 22, 1995 @ $6.375 per share 5,000
Options exercised (3,000)
-------
Options outstanding July 31, 1995 250,100
=======
Options exercisable July 31, 1995 50,270
=======
Options available for future grant 144,900
=======
</TABLE>
46
<PAGE> 47
Property Capital Trust
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9. SHAREHOLDERS' EQUITY (continued)
1994 STOCK OPTION PLAN FOR NON-EMPLOYEE TRUSTEES
The Property Capital Trust 1994 Stock Option Plan for Non-Employee Trustees,
approved by the shareholders of the Trust in November 1994, is a plan under
which options for 100,000 shares may be granted to purchase Common Shares for a
purchase price equal to the fair market value of such Common Shares at the time
the option is granted, subject to certain adjustments.
Each non-employee Trustee receives automatically upon election or re-election as
a Trustee at an Annual Meeting of Shareholders an option to purchase 4,000
Common Shares. The option vests on the day immediately preceding the Annual
Meeting of Shareholders next succeeding the date of grant of such option.
<TABLE>
<S> <C>
Options granted on November 30, 1994 24,000
======
Options outstanding at July 31, 1995 24,000
======
</TABLE>
AMENDED AND RESTATED DEFERRED STOCK PLAN FOR NON-EMPLOYEE TRUSTEES
In November 1994, the Amended and Restated Deferred Stock Plan for Non-Employee
Trustees was approved by the shareholders of the Trust. If a Trustee elects to
defer payment of Trustee fees, share units are allocated to such Trustee's
account based upon the closing price for the Common Shares on the date the fees
would have been earned. Share units are also allocated to reflect dividends that
would have been paid on such share units. Payments to a Trustee are made upon
death, disability or ceasing to serve as a Trustee. There are 250,000 Common
Shares available under this Plan.
This plan replaced a previous plan whose shares were transferred to this plan on
November 30, 1994.
<TABLE>
<S> <C>
Share units transferred November 30, 1994 118,385
Share units issued fiscal 1995 30,983
Share units exercised fiscal 1995 (20,296)
-------
Share units outstanding July 31, 1995 129,072
=======
</TABLE>
SHAREHOLDER RIGHTS PLAN
On September 28, 1990 (the "Declaration Date"), the Trustees adopted a
Shareholder Rights Plan (the "Plan") and, in connection therewith, declared a
dividend distribution of one right for each of the Trust's outstanding Common
Shares to shareholders of record at the close of business on October 12, 1990.
Each right entitles the holder thereof, upon the occurrence of certain events
making such rights exercisable, to exercise the right to buy one Common Share at
a purchase price of $27.00. The rights become exercisable (i) 10 business days
following the announcement that a person or group of persons has acquired or
obtained the right to acquire 9.8% or more of the Common Shares (with certain
exceptions for persons who were shareholders on the Declaration Date) or (ii)
upon the closing of a tender offer resulting in ownership of 9.8% or more of the
Common Shares (any person acquiring in excess of 9.8% of the Common Shares being
an "Acquiror"). On the twenty-first business day after the acquisition of 9.8%
or more of the Common Shares by an Acquiror, or upon the closing of a tender
offer for 9.8% or more of the Common Shares by an Acquiror, each right will
entitle its holder to purchase, at the right's exercise price, that number of
Common Shares having a market value at that time of twice the right's exercise
price. Each right will also become exercisable to purchase Common Shares at a
50% discount in the event that an Acquiror engages in self-dealing transactions
with the Trust. If, at any time after the rights become exercisable, the Trust
is involved in a merger or other business combination in which the Trust is not
the surviving entity, each right will entitle its holder to purchase, at the
right's exercise price, that number of shares of the acquiring company's common
stock having a market value at that time of twice the right's exercise price.
The rights will expire on the earlier of (i) September 28, 2000 or (ii) their
redemption by the Trustees at any time prior to the date that they become
exercisable, as described above, at a price of $.01 per right.
47
<PAGE> 48
Property Capital Trust
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10. DIVIDENDS
The Trust pays dividends approximately 55 days following each fiscal quarter,
normally equal to at least 100% of income before gains (losses) on real estate
investments.
<TABLE>
<CAPTION>
Years Ended July 31,
------------------------------------------
1995 1994 1993
<S> <C> <C> <C>
-------------------------------------------------------------------------------------------------
Dividends declared $.41 $.30 $.28
==== ==== ====
</TABLE>
On August 25, 1995, the Trustees declared a dividend of $.12 per share, payable
on September 22, 1995 to shareholders of record on September 11, 1995, which
dividend is included in the above table.
In order to qualify as a real estate investment trust, Property Capital Trust
must distribute substantially all of its taxable income to shareholders not
later than twelve months following the end of its fiscal year.
48
<PAGE> 49
Property Capital Trust
<TABLE>
CONSOLIDATED QUARTERLY FINANCIAL DATA (UNAUDITED)
<CAPTION>
Quarters Ended
-------------------------------------------------------
October 31, January 31, April 30, July 31,
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
FISCAL 1995
Revenues $5,951,000 $5,778,000 $5,415,000 $5,475,000
Expenses 5,243,000 5,405,000 4,958,000 4,997,000
---------- ---------- ---------- ----------
Income before Gain on Sale of Real Estate Investments
and Extraordinary Item 708,000 373,000 457,000 478,000
Gain on Sale of Real Estate Investments - 3,099,000 110,000 -
---------- ---------- ---------- ----------
Income before Extraordinary Item 708,000 3,472,000 567,000 478,000
Extraordinary Gain from Extinguishment of Debt - - 88,000 -
---------- ---------- ---------- ----------
Net Income $ 708,000 $3,472,000 $ 655,000 $ 478,000
========== ========== ========== ==========
Net Income per Share
Income before Gain on Sale of Real Estate Investments
and Extraordinary Item $0.08 $0.04 $0.05 $0.05
Gain on Sale of Real Estate Investments - 0.34 0.01 -
----- ----- ----- -----
Income before Extraordinary Item 0.08 0.38 0.06 0.05
Extraordinary Gain from Extinguishment of Debt - - 0.01 -
----- ----- ----- -----
Net Income per Share $0.08 $0.38 $0.07 $0.05
===== ===== ===== =====
Average Shares Outstanding 9,031,000 9,043,000 9,051,000 9,051,000
========== ========== ========== ==========
FISCAL 1994
Revenues $4,859,000 $4,981,000 $5,898,000 $5,885,000
Expenses 4,380,000 4,535,000 5,620,000 5,509,000
---------- ---------- ---------- ----------
Income before Gain on Sale of Real Estate Investments 479,000 446,000 278,000 376,000
Gain on Sale of Real Estate Investments - 100,000 2,410,000 -
---------- ---------- ---------- ----------
Net Income $ 479,000 $ 546,000 $2,688,000 $ 376,000
========== ========== ========== ==========
Net Income per Share
Income before Gain on Sale of Real Estate Investments $0.05 $0.05 $0.03 $0.04
Gain on Sale of Real Estate Investments - 0.01 0.27 -
----- ----- ----- -----
Net Income per Share $0.05 $0.06 $0.30 $0.04
===== ===== ===== =====
Average Shares Outstanding 9,029,000 9,029,000 9,031,000 9,031,000
========== ========== ========== ==========
<FN>
Note: During the third quarter of fiscal 1994, the Trust adopted a change in
accounting method to the equity method for Investment Partnerships and
accordingly all prior quarters in 1994 were restated.
</TABLE>
49
<PAGE> 50
Property Capital Trust
<TABLE>
SCHEDULE II
ALLOWANCE FOR POSSIBLE INVESTMENT LOSSES
<CAPTION>
Years Ended July 31,
--------------------------------------------
1995 1994 1993
<S> <C> <C> <C>
-------------------------------------------------------------------------------------------------
Balance at beginning of year $17,413,000 $20,129,000 $ 25,000,000
Additions during year - - 10,000,000
Property write-downs (3,336,000) (2,716,000) (14,871,000)
----------- ----------- ------------
Balance at end of year $14,077,000 $17,413,000 $ 20,129,000
=========== =========== ============
Allowance as a % of Real Estate Investments (before
allowance for possible investment losses and
Asset Held for Sale directly by the Trust) 8.5% 9.2% 10.3%
=== === ====
</TABLE>
The allowance for possible investment losses represents the excess of the
carrying value of individual real estate investments over their estimated net
realizable value. Based upon a review and evaluation of each real estate
investment in the Trust's portfolio, management believes the allowance was
adequate as of each date presented.
50
<PAGE> 51
[THIS PAGE INTENTIONALLY LEFT BLANK]
51
<PAGE> 52
Property Capital Trust
SCHEDULE III
July 31, 1995
(thousands of dollars)
LAND LEASEBACKS HELD DIRECTLY BY THE TRUST
<TABLE>
<CAPTION>
Rentable Date of
Type and Name of Property Location Space Investment
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
APARTMENTS
Sandpiper Cove Boynton Beach, FL 416 units Apr 89
Elm Creek Elmhurst, IL 372 units Nov 88
Bluffs II San Diego, CA 224 units Jun 73
Northbrook San Bernardino, CA 190 units May 74
Yorkshire Midwest City, OK 111 units Nov 71
--------------
1,313 units
==============
SHOPPING CENTERS
sq.
Roseburg Valley Mall Roseburg, OR 237,000 ft. Sep 82
sq.
Lakeside Center Burbank, CA 66,000 ft. Mar 73
--------------
sq.
303,000 ft.
==============
HOTELS
City Centre Holiday Inn Chicago, IL 500 rooms Mar 77
Cincinnati Marriott Inn Cincinnati, OH 350 rooms Feb 84
Grosvenor Airport Inn South San Francisco, CA 206 rooms Mar 82
--------------
1,056 rooms
==============
</TABLE>
For information on Land Leasebacks Held in Investment Partnerships see Exhibit A
52
<PAGE> 53
<TABLE>
<CAPTION>
Third Party Senior
Indebtedness
---------------------------- Amount of Rent and Base Overage
Interest Trust's Land Annual Overage Income Income
Balance Rate/ Investment Base Receivable Y/E Y/E
at 7/31/95 Maturity at 7/31/95(a) Land Rent at 7/31/95 7/31/95 7/31/95
<S> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
$ 16,635 9.25%/1999 $ 5,400 6.30%(c) $ - $ 340 $ 119
21,104 9.50%/1997 2,230(b) 8.50%(d) - 190 93
1,653 8.38%/2004 825 10.00% 40 83 132
- - 400 10.50% 2 42 58
- - 135 11.00% 2 14 28
--------- ---------- ---- ------ -------
39,392 8,990 44 669 430
--------- ---------- ---- ------ -------
6,815 9.25%/2015 1,800(b) 12.00% - 216 -
204 8.00%/1998 350 10.00% 3 35 139
--------- ---------- ---- ------ -------
7,019 2,150 3 251 139
--------- ---------- ---- ------ -------
10,140 9.13%/1997 2,000 11.00% 82 220 1,289
10,573 9.75%/1999 2,000(b) 12.00% - 240 -
1,337 10.00%/1995 2,000(b) 4.00%(e) - 120 -
--------- ---------- ---- ------ -------
22,050 6,000 82 580 1,289
--------- ---------- ---- ------ -------
$ 68,461 $17,140(f) $129 $1,500 $ 1,858
======== ========== ==== ====== =======
</TABLE>
53
<PAGE> 54
Property Capital Trust
SCHEDULE III (continued)
July 31, 1995
(thousands of dollars)
<TABLE>
OWNED PROPERTIES HELD DIRECTLY BY THE TRUST
<CAPTION>
Amount of Trust's
Investment
at Date of
Third Party Senior Acquisition
Indebtedness ---------------------
Type and --------------------------- Buildings
Name Rentable Date of Balance Interest Rate/ and
of Property Location Space Acquisition(g) at 7/31/95 Maturity Land Improvements
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
OFFICE BUILDINGS
One Park West Chevy Chase, MD 128,500 sq. ft. Mar 93 $ 9,898 9.50%/2000 $ 3,500 $ 14,942
Park Place Clayton, MO 72,000 sq. ft. Jan 91 8,515 5.65%/2008 3,000 9,194
Citibank Office Plaza Schaumburg, IL 105,400 sq. ft. Feb 89 - - 1,275 9,001
--------------- ---------- ------- --------
305,900 sq. ft. 18,413 7,775 33,137
=============== ---------- ------- --------
SHOPPING CENTERS
Loehmann's
Fashion
Island Aventura, FL 282,000 sq. ft. May 89 21,732 7.97%/1998 4,800 17,546
=============== -------- ------- --------
$ 40,145 $12,575 $ 50,683
======== ======= ==========
<FN>
For information on Owned Properties Held in Investment Partnerships see Exhibit A
</TABLE>
54
<PAGE> 55
<TABLE>
<CAPTION>
Rents from
Owned
Costs Gross Amount of Trust's Investment Properties
Capitalized ---------------------------------- held
Subsequent Buildings Net Rents directly
to and Accumulated Investment Receivable by the Trust
Acquisition Land(a) Improvements Total Depreciation at 7/31/95 at 7/31/95 Y/E 7/31/95
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
$ 1,321 $ 3,500 $ 16,263 $19,763 $ 1,076 $ 18,687 $ 206(h) $ 3,251
928 3,000 10,122 13,122 1,690 11,432 7 1,503
3,298 1,275 12,299 13,574 3,311 10,263 938(h) 1,694
------- ------- --------- ------- -------- -------- ------- --------
5,547 7,775 38,684 46,459 6,077 40,382 1,151 6,448
------- ------- --------- ------- -------- -------- ------- --------
25,702 9,706 38,342 48,048 4,445 43,603 493(h) 5,865
------- ------ -------- ------- ------- ------- ------ -------
$31,249 $17,481 $77,026 $94,507(i) $10,522 $83,985 $1,644 $12,313(j)
======= ======= ======== ======= ======= ======= ====== =======
<CAPTION>
Expenses on
Owned
Properties
held
directly Depreciation
by the Trust Expense
Y/E 7/31/95 Y/E 7/31/95
<S> <C> <C>
- ---------------------------------------------------------
$1,032 $ 501
653 425
1,087 676
-------- --------
2,772 1,602
-------- --------
2,522 1,753
-------- --------
$5,294(k) $3,355(1)
======== ========
</TABLE>
55
<PAGE> 56
Property Capital Trust
SCHEDULE III (continued)
July 31, 1995
(thousands of dollars)
<TABLE>
ASSET HELD FOR SALE DIRECTLY BY THE TRUST
<CAPTION>
Third Party Senior
Indebtedness
------------------------------
Type and Name Rentable Date of Balance Interest Rate/
of Property Location Space Acquisition(g) at 7/31/95 Maturity
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
OFFICE BUILDINGS
Citibank Office
Plaza Oak Brook, IL 100,400 sq. ft. Feb 89 $ - -
=============== ======
<CAPTION>
Amount of Trust's
Investment
at Date of Acquisition
- ----------------------
Land
<S> <C>
- -------------------------------
$1,875
======
</TABLE>
<TABLE>
<CAPTION>
Buildings Subsequent
Type and Name and to
of Property Improvement Acquisition
<S> <C> <C>
- -----------------------------------------------------------------------
OFFICE BUILDINGS
Citibank Office
Plaza $ 10,766 $ 2,292
======== =======
<FN>
For information on Assets Held for Sale in Investment Partnerships see Exhibit A
</TABLE>
56
<PAGE> 57
<TABLE>
<CAPTION>
Rents from
Owned
Properties
Gross Amount of Trust's Investment held directly
------------------------------------- Write-off of Write-down Net Rents by the Trust
Buildings and Accumulated of Investment Receivable Y/E
Land(a) Improvements Total Depreciation Investment at 7/31/95 at 7/31/95 7/31/95
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
$1,875 $13,058 $14,933(m) $3,777(m) $971(m) $10,185(m) $314(h) $1,868
====== ======= ======= ====== ==== ======= ==== ======
<CAPTION>
Expenses on
Owned
Properties
held directly
by the Trust Depreciation
Y/E Expense
7/31/95 Y/E 7/31/95
<S> <C>
- --------------------------------------------
$782 $694
==== ====
</TABLE>
57
<PAGE> 58
Property Capital Trust
NOTES TO SCHEDULE III
(a) This amount represents the cost of each land investment and the amount at
which each investment is carried on the balance sheet at July 31, 1995.
There are no differences between the cost of each land investment for
financial reporting purposes and the cost of each land investment for
federal income tax purposes, except as follows:
<TABLE>
<CAPTION>
Book
Name of Property Basis Tax Basis
<S> <C> <C>
---------------------------------------------------------------------------------------------
Cincinnati Marriott Inn $2,000,000 $1,419,000
Citibank Office Plaza - Oakbrook 1,875,000 781,000
Park Place 3,000,000 767,000
Loehmann's Fashion Island 9,706,000 5,535,000
Citibank Office Plaza - Schaumburg 1,275,000 531,000
</TABLE>
(b) The Trust also holds a leasehold mortgage on this property (see Schedule
IV).
(c) The base land rent rate was renegotiated, effective April 1, 1993, from a
base payment rate of 10% to a base payment rate of 6.3% until March 31,
1996, and 7.4% thereafter.
(d) The base land rent rate was renegotiated, effective April 1, 1993, from a
base payment rate of 10% to a base payment rate of 8.5% until March 31,
1996, and 10% thereafter.
(e) The base land rent rate was renegotiated, effective September 1, 1991, from
a base payment rate of 13% to a base payment rate of the greater of 4.0%
per annum or property cash flow. The unpaid amount, the difference between
13% and actual payments received, is payable at maturity but has not been
accrued for financial reporting purposes.
(f) Changes in the Trust's investment in land leasebacks held directly by the
Trust are summarized below (thousands of dollars).
<TABLE>
<CAPTION>
Years Ended July 31,
-------------------------------
1995 1994 1993
<S> <C> <C> <C>
-----------------------------------------------------------------------------------------------
Balance at beginning of year $17,140 $21,140 $32,940
Sales - (1,500) (1,800)
Conversions to Owned Properties held directly by the Trust - (2,500) (3,500)
Conveyances to first mortgage lender - - (6,500)
------- ------- -------
Balance at end of year $17,140 $17,140 $21,140
======= ======= =======
</TABLE>
(g) The Trust acquired the equity interests in these properties from its
lessees. The date of the acquisition reflects the date on which the Trust
converted its land leaseback investment to an Owned Property held directly
by the Trust.
(h) Rent receivable includes rents accrued but not yet due under leases with
stepped minimum rents which have been accounted for on a straight line
basis for financial reporting purposes in the amount of $308,000, $940,000,
$339,000 and $118,000 for Citibank Office Plaza - Oakbrook, Citibank Office
Plaza - Schaumburg, Loehmann's Fashion Island and One Park West,
respectively.
58
<PAGE> 59
Property Capital Trust
NOTES TO SCHEDULE III (continued)
(i) Changes in the Trust's investment in Owned Properties held directly by the
Trust are summarized below (thousands of dollars).
<TABLE>
<CAPTION>
Years Ended July 31,
----------------------------------
1995 1994 1993
<S> <C> <C> <C>
-----------------------------------------------------------------------------------------------
Balance at beginning of year $116,354 $109,372 $ 78,744
Acquisitions and additions 5,551 15,490 21,187
Sales to third parties (12,465) (14,008) -
Conversions from mortgage loans held directly by the
Trust - 3,000 11,941
Conversions from land leasebacks held directly by the
Trust - 2,500 3,500
Investments written down - - (6,000)(n)
Property reclassified to Asset Held for Sale directly by
the Trust (14,933) - -
-------- -------- --------
Balance at end of year $ 94,507 $116,354 $109,372
======== ======== ========
</TABLE>
(j) This total does not include rental income earned in fiscal 1995 of
$1,596,000 from 6110 Executive Boulevard which was sold during the year and
$1,868,000 from Citibank Office Plaza - Oakbrook which was reclassified to
Asset Held for Sale directly by the Trust at July 31, 1995.
(k) This total does not include operating expenses incurred in fiscal 1995 of
$746,000 from 6110 Executive Boulevard which was sold during the year and
$782,000 from Citibank Office Plaza - Oakbrook which was reclassified to
Asset Held for Sale directly by the Trust at July 31, 1995.
(l) This total does not include depreciation expense in fiscal 1995 of $143,000
from 6110 Executive Boulevard which was sold during the year and $694,000
from Citibank Office Plaza - Oakbrook which was reclassified to Asset Held
for Sale directly by the Trust at July 31, 1995.
(m) Changes in the Trust's investment in Asset Held for Sale directly by the
Trust is summarized below (thousands of dollars).
<TABLE>
<CAPTION>
Year Ended
July 31,
1995
<S> <C>
-------------------------------------------------------------------------------------------
Balance at beginning of year $ -
Property reclassified from Owned Property held directly by the Trust 14,933
Investment written down (971)
Write-off of accumulated depreciation (3,777)
------------
Balance at end of year $ 10,185
=============
</TABLE>
(n) In March 1993, the Trust acquired the equity interest of its lessee in One
Park West, a 128,500 square foot office building in Chevy Chase, Maryland.
Upon acquisition, the Trust utilized a portion of its allowance for
possible investment losses to write down this investment by $6,000,000.
59
<PAGE> 60
Property Capital Trust
SCHEDULE IV
July 31, 1995
(thousands of dollars)
<TABLE>
MORTGAGE LOANS HELD DIRECTLY BY THE TRUST
<CAPTION>
Type and Name of Interest
Property Location Type of Mortgage Rate Maturity
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------
APARTMENTS
Elm Creek Elmhurst, IL First leasehold 8.50%(b) 11/01/18
SHOPPING CENTERS
Roseburg Valley Mall Roseburg, OR First leasehold 12.00% 10/01/22
HOTELS
Cincinnati Marriott Inn Cincinnati, OH First leasehold 5.65%(e) 03/01/14
Grosvenor Airport Inn S. San Francisco, CA First leasehold 4.00%(g) 04/01/22
</TABLE>
For information on Mortgage Loans held in Investment Partnerships see Exhibit B.
60
<PAGE> 61
<TABLE>
<CAPTION>
Interest
Periodic Amount of Principal Principal Interest Income
Payment Trust's Loan Payment at Amount Receivable Y/E
Terms at 7/31/95(a) Maturity Delinquent at 7/31/95 7/31/95
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
(c) $ 7,540 $7,540 $ - $53 $ 641
-------- ------ ---- --- ------
(d) 2,175 - - 22 262
-------- ------ ---- --- ------
(f) 3,716 - - 17 210
(h) 2,000 - - - 80
-------- ------ ---- --- ------
5,716 - - 17 290
-------- ------ ---- --- ------
$15,431(i) $7,540 $ - $92 $1,193
======== ====== ==== === ======
</TABLE>
61
<PAGE> 62
Property Capital Trust
NOTES TO SCHEDULE IV
(a) The Trust also has land leaseback investments in these properties. First
mortgage indebtedness and rentable space are shown with those investments
(see Schedule III).
(b) The interest rate on this mortgage was renegotiated, effective April 1,
1993, from a payment rate of 10% to a payment rate of 8.5% until March 31,
1996, and 10% thereafter.
(c) Monthly payments of interest only, with the entire principal due at
maturity. Commencing July 1, 1996 the loan may be prepaid without penalty.
(d) Monthly payments of interest and principal amortizing over a 27-year
schedule. The loan may be prepaid at a premium of 104% through September
30, 1995. Thereafter the prepayment premium declines 1/2% annually.
(e) The interest rate on this mortgage was renegotiated, effective April 1,
1994, from a cash flow basis to 5.65% through March 31, 1997, 7% through
April 30, 1999 and 7% thereafter. Amortization commences in May 1999. The
loan may be prepaid at any time.
(f) Monthly payments of interest only until April 30, 1999. Commencing May 1,
1999 payments of principal and interest.
(g) The interest rate on this mortgage was renegotiated, effective September 1,
1991, from the stated interest rate of 13% to the greater of 4.0% per annum
or property cash flow. The unpaid amount (the difference between 13% and
actual payments) is payable at maturity.
(h) Monthly payments of interest and, to the extent there is sufficient cash
flow, principal. The loan is prepayable at any time without penalty.
(i) Changes in the Trust's investment in mortgage loans held directly by the
Trust are summarized below (thousands of dollars).
<TABLE>
<CAPTION>
Years Ended July 31,
-------------------------------
1995 1994 1993
<S> <C> <C> <C>
-----------------------------------------------------------------------------------------------
Balance at beginning of year $15,441 $21,925 $35,783
New mortgage loans - - 587
Repayments (10) (1,334) (204)
Mortgage loans written down - (2,150) (2,300)
Conversions to Owned Properties held directly by the Trust - (3,000) (11,941)
------- ------- -------
Balance at end of year $15,431 $15,441 $21,925
======= ======= =======
</TABLE>
62
<PAGE> 63
[THIS PAGE INTENTIONALLY LEFT BLANK]
63
<PAGE> 64
Property Capital Trust
EXHIBIT A
July 31, 1995
(thousands of dollars)
LAND LEASEBACKS HELD IN INVESTMENT PARTNERSHIPS
<TABLE>
<CAPTION>
Type and Name of Property Rentable Date of
Location Space Investment
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
APARTMENTS
Canyon View I San Ramon, CA (a) 248 units Jul 87
Canyon View II San Ramon, CA (a) 188 units Jul 88
---------
436 units
SHOPPING CENTERS =========
Crossroads Mall Boulder, CO (c) 816,000 sq. ft. (d) Jan 83
===============
</TABLE>
64
<PAGE> 65
<TABLE>
<CAPTION>
Investment Partnership's
Third Party Senior Amount of ----------------------------------
Indebtedness Investment Rent and Base Overage %
----------------------------- Partnership's Annual Overage Income Income Owned
Balance Interest Rate/ Investment Base Receivable Y/E Y/E by the
at 7/31/95 Maturity at 7/31/95 Land Rent at 7/31/95 7/31/95 7/31/95 Trust
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 12,000 9.07%/1994(b) $ 611 11.00% $ - $ - $ - 23.81%
- - 473 11.00% - - - 23.81%
-------- ------- --- ---- ----
12,000 1,084 - - -
-------- ------- --- ---- ----
36,660 9.25%/1996 8,000 12.00% 25 960 637 25.00%
-------- ------- --- ---- ----
$ 48,660 $ 9,084(e) $ 25 $ 960 $ 637
======== ======= ==== ===== =====
</TABLE>
65
<PAGE> 66
Property Capital Trust
EXHIBIT A (continued)
July 31, 1995
(thousands of dollars)
<TABLE>
OWNED PROPERTIES HELD IN INVESTMENT PARTNERSHIPS
<CAPTION>
Amount of
Investment Partnership's
Third Party Senior Investment
Indebtedness at Date of Acquisition
--------------------------- ------------------------
Type and Name Rentable Date of Balance Interest Rate/ Buildings and
of Property Location Space Acquisition(f) at 7/31/95 Maturity Land Improvements
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
OFFICE BUILDINGS
College Hills 3 Overland Park, KS 37,700 sq. ft.(g) May 89 $ - - $ 900 $ 1,217
===============
-------- ------ --------
APARTMENTS
Telegraph Hill Houston, TX 1,180 units (h) Mar 94 13,039 (i) 1,600 14,881
St. Charles Houston, TX 780 units (h) Mar 94 9,063 (i) 1,510 12,107
Boardwalk Houston, TX 174 units (h) Mar 94 3,318 9.00%/1998 510 4,192
--------------- -------- ------ --------
2,134 units 25,420 3,620 31,180
==============
-------- ------ --------
$ 25,420 $4,520 $ 32,397
======== ====== ========
<CAPTION>
Costs
Capitalized
Type and Name Subsequent
of Property to Acquisition
- -----------------------------------
<S> <C>
OFFICE BUILDINGS
College Hills 3 $ 616
------
APARTMENTS
Telegraph Hill 571
St. Charles 539
Boardwalk 580
------
1,690
------
$2,306
======
</TABLE>
66
<PAGE> 67
<TABLE>
<CAPTION>
Gross Amount of Investment Partnership's
Investment Partnership's Investment Investment ---------------------------------------------
----------------------------------- Partnership's Expenses
Buildings Net Rent Other than
and Accumulated Investment Receivable Rental Income Depreciation
Land Improvements Total Depreciation at 7/31/95 at 7/31/95 Y/E 7/31/95 Y/E 7/31/95
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
$ 900 $ 1,833 $ 2,733 $ 414 $ 2,319 $ 30 $ 505 $ 319
------ -------- ------- ------ ------- ---- ------- ------
1,600 15,452 17,052 733 16,319 - 4,312 3,112
1,510 12,646 14,156 598 13,558 3 3,052 2,200
510 4,772 5,282 220 5,062 - 1,118 596
------ -------- ------- ------ ------- ---- ------- ------
3,620 32,870 36,490 1,551 34,939 3 8,482 5,908
------ -------- ------- ------ ------- ---- ------- ------
$4,520 $ 34,703 $39,223(j) $1,965 $37,258 $ 33 $ 8,987(k) $6,227(l)
====== ======== ======= ====== ======= ==== ======= ======
<CAPTION>
%
Owned
Depreciation by
Expense the
Y/E 7/31/95 Trust
<S> <C> <C>
- ------------------------------------------
$ 85 53.3%
------
553 45.5%
451 45.5%
169 45.5%
------
1,173
------
$1,258(m)
======
</TABLE>
67
<PAGE> 68
Property Capital Trust
EXHIBIT A (continued)
July 31, 1995
(thousands of dollars)
<TABLE>
ASSETS HELD FOR SALE IN INVESTMENT PARTNERSHIPS
<CAPTION>
Amount of
Third Party Senior Investment Partnership's
Indebtedness Investment
----------------------- at Date of Acquisition
Interest ------------------------
Type and Name Rentable Date of Balance Rate/ Buildings and
of Property Location Space Acquisition(f) at 7/31/95 Maturity Land Improvements
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
OFFICE BUILDINGS
Financial Plaza Overland Park, KS 300,600 sq. ft. (g) May 89 $ - - $ 5,500 $ 24,879
College Hills 8 Overland Park, KS 50,900 sq. ft. (g) May 89 - - 500 3,254
--------------- ----- -------- --------
351,500 sq. ft. - - 6,000 28,133
===============
----- -------- --------
SHOPPING CENTERS
Plaza West Retail
Center Overland Park, KS 98,000 sq. ft. (g) May 89 - - 3,800 8,762
=============== ----- -------- --------
APARTMENTS
Chimney Rock Houston, TX 714 units (h) Mar 94 - - 1,030 9,191
=============== ----- -------- --------
$ - $ 10,830 $ 46,086
===== ======== ========
<CAPTION>
Costs
Capitalized
Type and Name Subsequent
of Property to Acquisition
<S> <C>
- -------------------------------------------------
OFFICE BUILDINGS
Financial Plaza $ 8,328
College Hills 8 1,572
--------
9,900
SHOPPING CENTERS
Plaza West Retail
Center 4,642
--------
APARTMENTS
Chimney Rock 545
--------
$ 15,087
========
</TABLE>
68
<PAGE> 69
<TABLE>
<CAPTION>
Investment
Partnership's
Gross Amount of Investment ----------
Investment Partnership's Investment Partnership's
-------------------------------------- Write-off of Write-down Net Rent
Buildings and Accumulated of Investment Receivable
Land Improvements Total Depreciation Investment at 7/31/95 at 7/31/95
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 5,500 $ 33,207 $38,707 $ 7,324 $1,464 $29,919 $ 38
500 4,826 5,326 1,297 1,012 3,017 (1)
------- -------- ------- -------- ------ ------- ----
6,000 38,033 44,033 8,621 2,476 32,936 3
------- -------- ------- -------- ------ ------- ----
3,800 13,404 17,204 2,921 1,859 12,424 43
------- -------- ------- -------- ------ ------- ----
1,030 9,736 10,766 458 119 10,189 1
------- -------- ------- -------- ------ ------- ----
$10,830 $ 61,173 $72,003(n) $ 12,000(n) $4,454(n) $55,549(n) $ 81
======= ======== ======= ======== ====== ======= ====
<CAPTION>
%
Rental Expenses Owned
Income Other than Depreciation by
Y/E Depreciation Expense the
7/31/95 Y/E 7/31/95 Y/E 7/31/95 Trust
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 5,122 $2,274 $1,496 53.3%
703 330 263 53.3%
------- ------ ------
5,825 2,604 1,759
------- ------ ------
2,063 851 731 53.3%
------- ------ ------
3,715 2,657 346 45.5%
------- ------ ------
$11,603 $6,112 $2,836
======= ====== ======
</TABLE>
69
<PAGE> 70
Property Capital Trust
NOTES TO EXHIBIT A
(a) These investments are held by PCA Canyon View Associates Limited
Partnership, a partnership in which the Trust participates as the sole
general partner with a 23.81% interest and other institutional investors as
the limited partners.The Partnership also has mortgage loan investments in
these properties (see Exhibit B).
(b) This third party first mortgage has matured but was not repaid. The first
mortgagee commenced foreclosure on this property. Subsequent to the end of
the year this property was transferred to the first mortgagee.
(c) This investment is held by PCA Crossroads Associates, L.P., a partnership in
which the Trust participates as the sole general partner with a 25%
interest and other institutional investors as the limited partners.
Subsequent to the end of the fiscal year, the Investment Partnership sold
its investment back to its lessee. The Trust received approximately
$5,500,000 from the sale of which approximately $3,500,000 constitutes a
gain to the Trust.
(d) Includes 231,000 square feet which are not part of the Partnership's
security.
(e) Changes in land leasebacks held in Investment Partnerships are summarized
below (thousands of dollars).
<TABLE>
<CAPTION>
Years Ended July 31,
------------------------------
1995 1994 1993
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of year $9,084 $13,984 $13,984
Conversions to Owned Properties held in Investment
Partnerships - (4,900) -
------ ------- -------
Balance at end of year $9,084 $ 9,084 $13,984
====== ======= =======
</TABLE>
(f) The Partnerships acquired the equity interests in these properties from
their lessees. The date of the acquisition reflects the date on which each
Partnership converted its land leaseback/mortgage loan investment to an
Owned Property held in an Investment Partnership.
(g) These investments are held by Property Capital Midwest Associates, L.P., a
partnership in which the Trust participates as the sole general partner
with a 53.3% interest and other institutional investors as the limited
partners.
(h) These investments are held by PCA Southwest Associates Limited Partnership,
a partnership in which an affiliate of the Trust participates as the sole
general partner with a 45.45% interest and other institutional investors as
the limited partners.
(i) Certain of the apartment complexes held by PCA Southwest Associates Limited
Partnership are encumbered by third party senior indebtedness as follows.
<TABLE>
<CAPTION>
Principal Interest
Balance Rate Maturity
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Telegraph Hill A $2,592,000 8.25% 1997
Telegraph Hill B 2,487,000* 8.50% 1998
Telegraph Hill C 1,950,000 7.50% 1998
Telegraph Hill D 1,963,000 7.50% 1998
Telegraph Hill E 1,921,000 8.75% 1998
Telegraph Hill F 1,921,000 8.75% 1998
Telegraph Hill E and F Note B 205,000 8.00% 1998
-----------
$13,039,000
===========
<FN>
* Mortgage is in default and the title to the property is expected to be
transferred to the first mortgage by a deed in lieu of foreclosure.
</TABLE>
70
<PAGE> 71
Property Capital Trust
NOTES TO EXHIBIT A (continued)
<TABLE>
<CAPTION>
Principal Interest
Balance Rate Maturity
<S> <C> <C> <C>
--------------------------------------------------------------------------------------------------
St. Charles A $2,952,000 8.25% 1997
St. Charles B 2,961,000 7.50% 1998
St. Charles C 3,150,000 8.50% 1998
----------
$9,063,000
==========
</TABLE>
(j) Changes in Owned Properties held in Investment Partnerships are summarized
below (thousands of dollars).
<TABLE>
<CAPTION>
Years Ended July 31,
---------------------------------
1995 1994 1993
<S> <C> <C> <C>
-----------------------------------------------------------------------------------------------
Balance at beginning of year $108,950 $ 59,148 $57,322
Acquisitions and additions 4,497 27,802 1,826
Sales to third parties (2,221) - -
Conversions from mortgage loans held in Investment
Partnerships - 17,100 -
Conversions from land leasebacks held in Investment
Partnerships - 4,900 -
Properties reclassified to Assets Held for Sale in
Investment Partnerships (72,003) - -
-------- -------- -------
Balance at end of year $ 39,223 $108,950 $59,148
======== ======== =======
</TABLE>
(k) This total does not include rental income earned in fiscal 1995 of $452,000
from PCA Southwest Associates Limited Partnership's Braes Hill apartments
investment which was sold during the year and $11,603,000 from Assets Held
for Sale in Investment Partnerships, see Exhibit A on pages 68 and 69.
(l) This total does not include expenses other than depreciation incurred in
fiscal 1995 of $312,000 from PCA Southwest Associates Limited Partnership's
Braes Hill apartments investment which was sold during the year and
$6,112,000 from Assets Held for Sale in Investment Partnerships, see
Exhibit A on pages 68 and 69.
(m) This total does not include depreciation expense in fiscal 1995 of $50,000
from PCA Southwest Associates Limited Partnership's Braes Hill apartments
investment which was sold during the year and $2,836,000 from Assets Held
for Sale in Investment Partnerships, see Exhibit A on pages 68 and 69.
(n) Changes in Assets Held for Sale in Investment Partnerships are summarized
below (thousands of dollars).
<TABLE>
<CAPTION>
Years Ended July 31,
---------------------------------
1995 1994 1993
<S> <C> <C> <C>
-----------------------------------------------------------------------------------------------
Balance at beginning of year $ - $ - $ -
Properties reclassified from Owned Properties held in
Investment Partnerships 72,003 - -
Investments written down (4,454) - -
Write-off of accumulated depreciation (12,000) - -
-------- -------- -------
Balance at end of year $ 55,549 $ - $ -
======== ======== =======
</TABLE>
71
<PAGE> 72
Property Capital Trust
EXHIBIT B
July 31, 1995
(thousands of dollars)
<TABLE>
MORTGAGE LOANS HELD IN INVESTMENT PARTNERSHIPS
<CAPTION>
Periodic
Type and Interest Payment
Name of Property Location Type of Mortgage Rate Maturity Terms
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
APARTMENTS
Canyon View I San Ramon, CA(a) Sub-leasehold 11.0% 07/01/20 (b)
Canyon View II San Ramon, CA(a) Sub-leasehold 11.0% 07/31/21 (c)
HOTELS
Lisle Hilton Inn Lisle, IL(e) First fee 8.0%(f) 03/31/97 (g)
</TABLE>
72
<PAGE> 73
<TABLE>
<CAPTION>
Investment Partnership's
Amount of -----------------------------------
Investment Interest and Interest Overage %
Third Party Partnership's Principal Principal Overage Income Income Owned
Senior Loan Payment at Amount Receivable Y/E Y/E by the
Indebtedness at 7/31/95 Maturity Delinquent at 7/31/95 7/31/95 7/31/95 Trust
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ -(j) $ 2,927(d) $ - $ 2,927 $ - $ (5) $ - 23.81%
- 10,275(d) - 10,275 - (14) - 23.81%
--
----------- ------- -------- -------- ------ ------
- 13,202 - 13,202 - (19) -
--
----------- ------- -------- -------- ------ ------
- 21,473(h) 21,473 - 143 1,723 7 41.67%
--
----------- ------- -------- -------- ------ ------
$ - $34,675(i) $ 21,473 $ 13,202 $143 $1,704 $ 7
=========== ======= ======== ======== ==== ====== ======
</TABLE>
73
<PAGE> 74
Property Capital Trust
NOTES TO EXHIBIT B
(a) The Partnership that holds this mortgage loan also has a land leaseback
investment in this property. The first mortgage indebtedness and rentable
space are shown with that investment (see Exhibit A).
(b) Amortizing on a 30-year schedule. The loan may be prepaid without penalty
commencing July 1, 1997. The loan is in default. Subsequent to the end of
the fiscal year this property was transferred to the first mortgagee.
(c) Amortizing on a 30-year schedule. Interest up to 2% may be deferred for any
year in which cash flow is insufficient to fully pay interest at 11% annum
($493,397 has been deferred and added to the investment as of July 31,
1995). The loan may be prepaid without penalty commending August 1, 1998.
The loan is in default. Subsequent to the end of the fiscal year this
investment was converted to an Owned Property held in Investment
Partnerships.
(d) These loans are held by PCA Canyon View Associates Limited Partnership a
partnership in which the Trust participates as the sole general partner
with a 23.81% interest and other institutional investors as the limited
partners.
(e) The hotel has 313 rooms.
(f) A modification of the loan terms was negotiated in May 1991 and was executed
in September 1991. This modification calls for interest to be paid,
commencing January 1, 1991, on the original principal plus all accrued and
unpaid interest through December 31, 1990, at a stated annual interest rate
of 7% through December 31, 1993; 8% through December 31, 1995; and 9%
through the extended maturity date of March 1997. In addition, the borrower
is required to pay participation interest to the extent room and food and
beverage revenues exceed base amounts.
(g) Monthly payments of interest only. In addition, an annual amortization
payment equal to 100% of the property's cash flow (as defined) is required.
Maturity has been extended from December 1993 to March 1997. The loan may
be prepaid without penalty at any time.
(h) This loan is held by the Trust and a group of institutional investors
through a loan participation agreement. The Trust is the lead participant
with a 41.67% interest.
(i) Changes in mortgage loans held in Investment Partnerships are summarized
below (thousands of dollars).
<TABLE>
<CAPTION>
Years Ended July 31,
--------------------------------
1995 1994 1993
<S> <C> <C> <C>
-----------------------------------------------------------------------------------------------
Balance at beginning of year $34,778 $ 51,952 $52,018
Repayments (103) (74) (66)
Conversions to Owned Properties held in Investment
Partnerships - (17,100) -
------- -------- -------
Balance at end of year $34,675 $ 34,778 $51,952
======= ======== =======
</TABLE>
(j) See Exhibit A for the information on the first mortgage indebtedness on this
property.
74
<PAGE> 75
Annual Report on Form 10-K
ITEM 8 AND ITEM 14(D)
FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
Year Ended December 31, 1994
PROPERTY CAPITAL MIDWEST ASSOCIATES, L.P.
Boston, Massachusetts
75
<PAGE> 76
REPORT OF INDEPENDENT AUDITORS
To the Partners
Property Capital Midwest Associates, L.P.
We have audited the accompanying balance sheets of Property Capital Midwest
Associates, L.P. as of December 31, 1994 and 1993, and the related statements of
operations, cash flows and partners' equity for each of the three years in the
period ended December 31, 1994. Our audits also included the financial statement
schedule listed in the Index at Item 14(a). These financial statements and the
financial statement schedule are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Property Capital Midwest
Associates, L.P. at December 31, 1994 and 1993, and the results of its
operations and its cash flows for each of three years in the period ended
December 31, 1994, in conformity with generally accepted accounting principles.
Also, in our opinion, the related financial statement schedule, when considered
in relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.
ERNST & YOUNG LLP
Boston, Massachusetts
February 23, 1995, except for Note 6,
as to which the date is August 25, 1995
76
<PAGE> 77
<TABLE>
Property Capital Midwest Associates, L.P.
BALANCE SHEET
<CAPTION>
December 31,
-------------------------
1994 1993
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Real estate investments (net of accumulated depreciation of $10,419,464
and $8,040,635 in 1994 and 1993, respectively) $52,897,128 $52,558,883
Cash and cash equivalents 452,625 604,707
Rent receivable (net of allowance for doubtful accounts of $58,800
and $138,000 in 1994 and 1993, respectively) 191,047 383,000
Prepaid insurance 32,491 26,086
Other assets 89,907 4,852
----------- -----------
$53,663,198 $53,577,528
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Real estate taxes payable $ 659,824 $ 620,375
Accounts payable and accrued expenses 137,182 216,776
Prepaid rent 162,222 192,826
Security deposits 218,286 184,851
----------- -----------
1,177,514 1,214,828
----------- -----------
Partners' Equity
Capital contributions 55,491,695 55,491,695
Accumulated deficit (3,006,011) (3,128,995)
----------- -----------
Total Partners' Equity 52,485,684 52,362,700
----------- -----------
$53,663,198 $53,577,528
=========== ===========
</TABLE>
See accompanying notes
77
<PAGE> 78
<TABLE>
Property Capital Midwest Associates, L.P.
STATEMENT OF INCOME
<CAPTION>
For the Years Ended December 31,
-------------------------------------
1994 1993 1992
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Rental income $8,158,180 $7,477,067 $7,138,460
Short-term interest income 21,878 19,008 15,427
---------- ---------- ----------
8,180,058 7,496,075 7,153,887
---------- ---------- ----------
PROPERTY EXPENSES
Depreciation 2,378,829 2,239,698 2,024,940
Real estate taxes 1,182,887 1,310,222 1,279,834
Utilities 1,074,710 973,469 978,747
Repairs and maintenance 458,169 408,216 440,859
Management 298,463 334,535 303,740
Cleaning 284,753 280,337 279,040
Roads and grounds 174,245 158,938 116,176
Other 115,034 131,598 20,759
Security 38,144 62,483 93,799
Insurance 64,357 44,468 41,983
---------- ---------- ----------
6,069,591 5,943,964 5,579,877
---------- ---------- ----------
PARTNERSHIP EXPENSES
Advisory fee 114,091 99,488 167,278
Administrative expense 45,743 53,801 59,827
---------- ---------- ----------
159,834 153,289 227,105
---------- ---------- ----------
NET INCOME $1,950,633 $1,398,822 $1,346,905
========== ========== ==========
</TABLE>
See accompanying notes
78
<PAGE> 79
<TABLE>
Property Capital Midwest Associates, L.P.
STATEMENT OF CASH FLOWS
<CAPTION>
For the Years Ended December 31,
-----------------------------------
1994 1993 1992
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net income $ 1,950,633 $ 1,398,822 $ 1,346,905
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation 2,378,829 2,239,698 2,024,940
Changes in assets and liabilities
Decrease in rent receivable 191,953 138,669 164,683
Increase in prepaid insurance (6,405) (4,009) (1,367)
(Increase) decrease in other assets (85,055) 15,430 (15,059)
Increase (decrease) in real estate taxes payable 39,449 (6,427) 17,683
(Decrease) increase in accounts payable and accrued expenses (79,594) (135,724) 94,444
(Decrease) increase in prepaid rent (30,604) 13,975 (42,686)
Increase (decrease) in security deposits 33,435 (15,088) 7,942
----------- ----------- -----------
Net Cash Provided by Operating Activities 4,392,641 3,645,346 3,597,485
----------- ----------- -----------
CASH FLOW FROM INVESTING ACTIVITIES
Capital expenditures (2,717,074) (2,267,410) (1,254,704)
----------- ----------- -----------
Net Cash Used in Investing Activities (2,717,074) (2,267,410) (1,254,704)
----------- ----------- -----------
CASH FLOW FROM FINANCING ACTIVITIES
Distributions to partners (1,827,649) (1,228,133) (2,554,886)
----------- ----------- -----------
Net Cash Used in Financing Activities (1,827,649) (1,228,133) (2,554,886)
----------- ----------- -----------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (152,082) 149,803 (212,105)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 604,707 454,904 667,009
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 452,625 $ 604,707 $ 454,904
=========== =========== ===========
</TABLE>
See accompanying notes
79
<PAGE> 80
<TABLE>
Property Capital Midwest Associates, L.P.
STATEMENT OF CHANGES IN PARTNERS' EQUITY
<CAPTION>
Beginning Operating Ending
Ownership Partners' Net Income Partners'
Percentage Equity Income Distribution Equity
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31, 1994
Property Capital Trust, General Partner 53.2967% $27,907,594 $1,039,623 $ ( 974,077) $27,973,140
Limited Partners 46.7033 24,455,106 911,010 (853,572) 24,512,544
-------- ----------- ---------- ----------- -----------
100.0000% $52,362,700 $1,950,633 $(1,827,649) $52,485,684
======== =========== ========== =========== ===========
FOR THE YEAR ENDED DECEMBER 31, 1993
Property Capital Trust, General Partner 53.2967% $27,816,622 $ 745,527 $ (654,555) $27,907,594
Limited Partners 46.7033 24,375,389 653,295 (573,578) 24,455,106
-------- ----------- ---------- ----------- -----------
100.0000% $52,192,011 $1,398,822 $(1,228,133) $52,362,700
======== =========== ========== =========== ===========
FOR THE YEAR ENDED DECEMBER 31, 1992
Property Capital Trust, General Partner 53.2967% $28,460,434 $ 717,856 $(1,361,668) $27,816,622
Limited Partners 46.7033 24,939,558 629,049 (1,193,218) 24,375,389
-------- ----------- ---------- ----------- -----------
100.0000% $53,399,992 $1,346,905 $(2,554,886) $52,192,011
======== =========== ========== =========== ===========
</TABLE>
See accompanying notes
80
<PAGE> 81
Property Capital Midwest Associates, L.P.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Property Capital Midwest Associates, L.P. (the "Partnership") was organized on
April 20, 1983 as a Delaware limited partnership (under the name PCA Executive
Hills Associates, L.P.) and is qualified to do business in the State of Kansas.
Property Capital Trust is the sole general partner (the "General Partner") of
the partnership and six institutional investors are limited partners. In
September 1991, the General Partner purchased a 5.4945% limited partnership
interest bringing the general partner interest to 53.2967%.
BASIS OF PRESENTATION
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles.
REAL ESTATE INVESTMENTS
Real estate investments are carried at cost, net of accumulated depreciation.
Depreciation has been calculated under the straight-line method, based upon the
estimated useful lives of the assets. Properties and property improvements are
depreciated over 25 to 39 years. Leasing commissions and tenant improvements are
amortized under the straight-line method over the term of the related leases.
Expenditures for maintenance, repairs and betterments which do not materially
prolong the normal useful life of an asset are charged to operations as
incurred.
CASH AND CASH EQUIVALENTS
For purposes of the Statement of Cash Flows, the Partnership considers all
highly liquid investments with a maturity of three months or less to be cash
equivalents.
REVENUE RECOGNITION
Certain space leases at the properties provide for stepped minimum rents which
are accounted for on a straight-line basis over the terms of the leases. The
difference between rental income accrued under the straight-line method and rent
received or receivable by the Partnership for financial reporting purposes was
$18,300, $54,000 and $108,500 for the years ended December 1994, 1993 and 1992,
respectively.
INCOME TAXES
The Partnership is not subject to Federal or state income taxes and,
accordingly, no provisions have been made for such taxes in the financial
statements.
RECLASSIFICATION
Certain items in the 1993 and 1992 financial statements have been reclassified
to conform to the 1994 presentation.
81
<PAGE> 82
Property Capital Midwest Associates, L.P.
NOTES TO FINANCIAL STATEMENTS (continued)
<TABLE>
NOTE 2. REAL ESTATE INVESTMENTS
As of December 31, 1994 and 1993 the Partnership's investments in the four
properties, which are all located in Overland Park, Kansas, were as follows:
<CAPTION>
Investment Investment Net Rentable
Property 12/31/94 12/31/93 Square Feet
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Financial Plaza $ 38,285,619 $37,192,596 300,600
Plaza West Retail Center 17,085,376 15,765,157 98,000
College Hills 8 5,213,275 5,055,503 50,900
College Hills 3 2,732,322 2,586,262 37,700
------------ ----------- ------
63,316,592 60,599,518
------------ -----------
Accumulated Depreciation (10,419,464) (8,040,635)
------------ -----------
$ 52,897,128 $52,558,883 487,200
============ =========== =======
</TABLE>
The Partnership acquired the equity interest in these properties from its lessee
in May 1989. The former owner is entitled to a deferred residual payment in an
amount equal to 5% of the cash flow from the properties over an 11% imputed
return on the Partnership's investment, at cost, plus 5% of the gain, as
defined, on each property sold by 1999. If any property is not sold by 1999, the
calculation of gain will be based upon an independent appraiser's estimate of
current market value for such property.
NOTE 3. MANAGEMENT AGREEMENT
Services related to investment matters and day-to-day administration have been
provided to the Partnership under a contract, dated May 24, 1989, with PCA
Institutional Advisors (the "Advisor"). The contract had an initial term of five
years and is extended automatically on a year-to-year basis unless terminated by
the Partnership or the Advisor. The contract provides for a base advisory fee
equal to 8% of the Partnership's cash flow (as defined) and for a disposition
fee equal to 8% of the gain from the sale of the Partnership's properties. The
Partnership paid PCA Institutional Advisors management fees aggregating
$114,091, $74,297 and $204,020 in 1994, 1993 and 1992, respectively. Management
fees payable are $13,213, $30,832 and $5,641 at December 31, 1994, 1993 and
1992, respectively.
Effective August 1, 1992, Property Capital Trust, the General Partner of the
Partnership, assumed responsibility for managing the affairs of the Partnership
pursuant to a subcontract and option agreement with PCA Institutional Advisors.
This change was approved by the Partners.
NOTE 4. DISTRIBUTIONS
The Partnership makes monthly cash distributions to its Partners equal to
approximately 100% of available cash flow from investments, including returns of
capital, if any. For the years ended December 31, 1994, 1993 and 1992, the
Partnership distributed $1,827,649, $1,228,133 and $2,554,886, respectively.
82
<PAGE> 83
Property Capital Midwest Associates, L.P.
NOTES TO FINANCIAL STATEMENTS (continued)
<TABLE>
NOTE 5. LEASES
Expected future minimum rents to be received from tenants under non-cancelable
operating leases in effect at December 31, 1994 are as follows:
<CAPTION>
Years ending December 31,
--------------------------------------------------------------------------------------------
<S> <C>
1995 $ 7,067,609
1996 5,825,562
1997 4,574,098
1998 3,396,917
1999 1,957,440
Thereafter 3,291,043
-----------
$26,112,669
===========
</TABLE>
<TABLE>
NOTE 6. SUBSEQUENT EVENT
At July 31, 1995 the Partnership reclassified three of its properties to Assets
Held for Sale and wrote the properties down to net realizable value.
<CAPTION>
Investment Write-downs
---------------------------------------------------------------------------------------------
<S> <C>
Financial Plaza $1,464,000
College Hills 8 1,012,000
Plaza West Retail Center 1,859,000
----------
$4,335,000
==========
</TABLE>
83
<PAGE> 84
Property Capital Midwest Associates, L.P.
SCHEDULE III
December 31, 1994
(thousands of dollars)
OWNED PROPERTIES
<TABLE>
<CAPTION>
Amount of
Partnership's Investment
at Date of Acquisition
--------------------------
Rentable Date of Buildings and
Type and Name of Property Location Space Acquisition(a) Land Improvements
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
OFFICE BUILDINGS
Financial Plaza Overland Park, KS 300,600 sq. ft. May 89 $ 5,500 $ 24,879
College Hills 3 Overland Park, KS 37,700 sq. ft. May 89 900 1,217
College Hills 8 Overland Park, KS 50,900 sq. ft. May 89 500 3,254
---------------- ------- --------
389,200 sq. ft. 6,900 29,350
================ ------- --------
SHOPPING CENTERS
Plaza West Retail Center Overland Park, KS 98,000 sq. ft. May 89 3,800 8,762
================ ------- --------
$10,700 $ 38,112
======= ========
<CAPTION>
Costs
Subsequent to
Type and Name of Property Acquisition
<S> <C>
- ---------------------------------------------
OFFICE BUILDINGS
Financial Plaza $ 7,907
College Hills 3 615
College Hills 8 1,459
--------
9,981
SHOPPING CENTERS
Plaza West Retail Center 4,524
--------
$ 14,505
========
<FN>
(a) The Partnership acquired the equity interests in these properties from its
lessee. The date of the acquisition reflects the date on which the
Partnership converted its land leaseback/mortgage loan investments to Owned
Properties.
(b) Changes in the Partnership investments in Owned Properties are summarized
below (thousands of dollars).
</TABLE>
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------
1994 1993 1992
<S> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------
Balance at beginning of year $60,600 $58,332 $57,077
Acquisitions and additions 2,717 2,268 1,255
------- ------- -------
Balance at end of year $63,317 $60,600 $58,332
======= ======= =======
</TABLE>
84
<PAGE> 85
<TABLE>
<CAPTION>
Gross Amount of
Partnership's Investment Property
------------------------------------ Net Expenses
Buildings Investment Rent Rental Other Than
and Accumulated at Receivable Income Depreciation
Land Improvements Total Depreciation 12/31/94 at 12/31/94 Y/E 12/31/94 Y/E 12/31/94
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
$ 5,500 $ 32,786 $38,286 $ 6,428 $ 31,858 $ 70 $5,059 $2,241
900 1,832 2,732 363 2,369 25 538 285
500 4,713 5,213 1,143 4,070 1 703 332
------- -------- ------- -------- -------- ----- ------ ------
6,900 39,331 46,231 7,934 38,297 96 6,300 2,858
------- -------- ------- -------- -------- ----- ------ ------
3,800 13,286 17,086 2,486 14,600 95 1,858 833
------- -------- ------- -------- -------- ----- ------ ------
$10,700 $ 52,617 $63,317(b) $ 10,420 $ 52,897 $ 191 $8,158 $3,691
======= ======== ======= ======== ========= ===== ====== ======
<CAPTION>
Depreciation
Expense
Y/E 12/31/94
<S> <C> <C>
- ------------------------------------------------------------
$1,435
70
247
------
1,752
------
627
------
$2,379
======
</TABLE>
85
<PAGE> 86
[LOGO] Printed on Recycled Paper
<PAGE> 1
Exhibit 10.2
FIRST AMENDMENT TO TERMINATION AGREEMENT
THIS FIRST AMENDMENT TO TERMINATION AGREEMENT ("First Amendment") is
made and entered into as of this 25th day of August, 1995, by and between
PROPERTY CAPITAL TRUST, a Massachusetts business trust ("PCT"), and ROBERT M.
MELZER (the "Officer"), with reference to the following facts:
A. PCT and the Officer entered into that certain Termination
Agreement dated as of October 19, 1992 (the "Termination Agreement")
concerning, among other things, the payment of a Termination Fee (as defined in
the Termination Agreement) to the Officer upon the occurrence of certain
events.
B. PCT recently adopted a new business plan (the "Business Plan")
that contemplates the sale of all of PCT's properties, which Business Plan may
take approximately three to five years fully to implement.
C. PCT wishes to retain the Officer in its employ in order to
assist in the implementation of the Business Plan, and therefore wishes to
modify the Termination Agreement as provided herein.
WHEREFORE, by reason of the foregoing facts, which constitute a part of
this First Amendment, PCT and the Officer hereby agree as follows:
<PAGE> 2
2
1. Paragraph 1.g. of the Termination Agreement is hereby deleted
in its entirety and the following is substituted therefor:
"g. A 'Qualified Termination of Employment' shall be deemed
to have occurred if the Officer's employment with PCT shall be
terminated prior to October 19, 2000 either (i) by PCT other than for
Cause or (ii) by the Officer for Good Reason."
2. Paragraph 1.h. of the Termination Agreement is hereby deleted
in its entirety and the following is substituted therefor:
"h. 'Termination Fee' shall mean prior to October 19, 1997
150% of the Applicable Compensation and on or after October 19, 1997 100%
of the Applicable Compensation."
3. Paragraph 2.a. of the Termination Agreement is hereby deleted
in its entirety and the following is substituted therefor:
"a. A Termination Fee shall be payable to the Officer (i) if
during the 6 months following a Change of Control the Officer elects to
terminate his own employment, provided he was an employee of PCT at the
time of the Change of Control (and such election occurs prior to October
19, 2000), or (ii) following a Qualified Termination of Employment.
Payment of the Termination Fee shall be made within 30 days of the
effective date of termination."
4. Capitalized terms not otherwise defined herein shall have the
same meanings given them in the Termination Agreement.
5. Except as modified herein, the Termination Agreement shall
remain in full force and effect in accordance with its terms.
<PAGE> 3
3
D. The obligations incurred by PCT under or with respect to this
First Amendment do not constitute personal obligations of the Trustees,
officers, employees or shareholders of PCT, or of any such Trustees, officers,
employees or shareholders, and shall not create or involve any claim against,
or personal liability on the part of, them or any of them. The Officer agrees
to look solely to the assets of PCT for satisfaction of any liability of PCT
under or with respect to this First Amendment and not to seek recourse against
such Trustees, officers, employees or shareholders, or any of them, or any of
their personal assets for such satisfaction.
NOW, THEREFORE, PCT and the Officer have executed this First Amendment
as of the date first above written.
PROPERTY CAPITAL TRUST
By: ________________________
Walter F. Leinhardt,
as Trustee and not
individually
____________________________
Robert M. Melzer
<PAGE> 1
Exhibit 10.4
FIRST AMENDMENT TO TERMINATION AGREEMENT
This First Amendment to Termination Agreement ("First Amendment") is
made and entered into as of this 16th day of August, 1995, by and between
Property Capital Trust, a Massachusetts business trust ("PCT"), and William A.
Bonn (the "Officer"), with reference to the following facts:
A. PCT and the Officer entered into that certain Termination
Agreement dated as of October 19, 1992 (the "Termination Agreement")
concerning, among other things,the payment of a Termination Fee (as defined in
the Termination Agreement) to the Officer upon the occurrence of certain
events.
B. PCT recently adopted a new business plan (the "Business Plan")
that contemplates the sale of all of PCT's properties, which Business Plan may
take approximately three to five years to fully implement.
C. PCT wishes to retain the Officer in its employ in order to
assist in the implementation of the Business Plan, and therefore wishes to
modify the Termination Agreement as provided herein.
<PAGE> 2
2
WHEREFORE, by reason of the foregoing facts, which constitute a part of
this First Amendment, PCT and the Officer hereby agree as follows:
1. Paragraph 1.g. of the Termination Agreement is hereby deleted
in its entirety and the following is substituted therefor:
"g. A. `Qualified Termination of Employment' shall be deemed to have
occurred if the Officer's employment with PCT shall be terminated prior to July
31, 2000 either (i) by PCT other than for cause or (ii) by the Officer for Good
Reason."
2. Paragraph 2.a. of the Termination Agreement is hereby deleted
in its entirety and the following is substituted therefor:
"a. A Termination Fee shall be payable to the Officer (i) if during the
6 months following a Change of Control the Officer elects to terminate his own
employment, provided he was an employee of PCT at the time of the Change of
Control (and such election occurs prior to July 31, 2000), or (ii)
<PAGE> 3
3
following a Qualified Termination of Employment. Payment of the Termination
Fee shall be made within 30 days of the effective date of termination."
3. Capitalized terms not otherwise defined herein shall have the
same meanings given them in the Termination Agreement.
4. Except as modified herein, the Termination Agreement shall
remain in full force and effect in accordance with its terms.
5. The obligations incurred by PCT under or with respect to this
First Amendment do not constitute personal obligations of the Trustees, or the
officers, employees or shareholders of PCT, or of any such Trustees, officers,
employees or shareholders, and shall not create or involve any claim against,
or personal liability on the part of, them or any of them. The Officer agrees
to look solely to the assets of PCT for satisfaction of any liability of PCT
under or with respect to this First Amendment and not to seek recourse against
any such Trustees, officers, employees or shareholders, or any of them or any
of their personal
<PAGE> 4
4
assets for such satisfaction.
NOW, THEREFORE, PCT and the Officer have executed this First Amendment
as of the date first above written.
PROPERTY CAPITAL TRUST
By:_______________________
Walter F. Leinhardt,
as Trustee and not
individually
__________________________
William A. Bonn
<PAGE> 1
Exhibit 10.5
PROPERTY CAPITAL TRUST
1992 EMPLOYEE STOCK OPTION PLAN
Property Capital Trust, a Massachusetts business trust (the "Trust"),
hereby formulates and adopts the following 1992 Employee Stock Option Plan (the
"Plan") for key EMPLOYEES of the Trust and its Subsidiaries (as defined in
Paragraph 5).
1. PURPOSE. The purpose of the Plan is to secure for the Trust the
benefits of the additional incentive inherent in the ownership of common
shares, no par value, of the Trust ("Common Shares") by selected key employees
of the Trust and its Subsidiaries who, in the judgment of the Committee (as
defined in Paragraph 2), are important to the success and the growth of the
business of the Trust and its Subsidiaries (as defined in Paragraph 5) and to
help the Trust and its Subsidiaries secure and retain the services of such
employees.
2. ADMINISTRATION. The Plan shall be administered in a manner
consistent with the requirements for exemptive relief under Rule 16b-3 or its
successor provision under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). The Plan shall be administered by a committee (the
"Committee") consisting solely of two or more members of the Board of Trustees
of the Trust (the "Board of Trustees"), each of whom shall be a "disinterested
person", within the meaning of Rule 16b-3 under the Exchange Act. The
Committee shall select one of its members as Chairman and shall make such rules
and regulations as it shall deem appropriate concerning the holding of its
meetings and transaction of its business. A majority of the whole Committee
shall constitute a quorum, and the act of a majority of the members of the
Committee present at a meeting at which a quorum is present shall be the act of
the Committee. Any member of the Committee may be removed at any time either
with or without cause by resolution adopted by the Board of Trustees, and any
vacancy on the Committee may at any time be filled by resolution adopted by the
Board of Trustees.
Subject to the express provisions of the Plan, the Committee shall have
plenary authority to interpret the Plan, to prescribe, amend and rescind the
rules and regulations relating to it and to make all other determinations
deemed necessary and advisable for the administration of the Plan. The
determinations of the Committee shall be conclusive.
<PAGE> 2
2
3. COMMON SHARES SUBJECT TO OPTIONS. Subject to the adjustment
provisions of Paragraph 13 below, a maximum of 400,000 shares of Common Shares
may be made subject to options granted under the Plan. If, and to the extent
that, options granted under the Plan shall terminate, expire or be canceled for
any reason without having been exercised, new options may be granted in respect
of the shares covered by such terminated, expired or canceled options. The
granting and terms of such new options shall comply in all respects with the
provisions of the Plan.
Shares sold upon the exercise of any option granted under the Plan may
be shares of authorized and unissued Common Shares, shares of issued Common
Shares held in the Trust's treasury, or both.
There shall be reserved at all times for sale under the Plan a number
of shares, of either authorized and unissued shares of Common Shares, shares of
Common Shares held in the Trust's treasury, or both, equal to the maximum
number of shares which may be purchased pursuant to options granted or that may
be granted under the Plan.
4. GRANT OF OPTIONS. The Committee shall have the authority and
responsibility, within the limitations of the Plan, to determine the employees
to whom options are to be granted, whether the options granted shall be
"incentive stock options" ("Incentive Options"), within the meaning of section
422(b) of the Internal Revenue Code of 1986, as amended (the "Code"), or
options which are not Incentive Options ("Nonqualified Options"), the number of
shares that may be purchased under each option and the option price. Subject
to paragraph 6, the option price may be a specified price, a price subject to
adjustment at or prior to exercise upon the occurrence of specified events or a
floating price. The Committee's determinations under the Plan (including,
without limitation, determinations of the persons to receive options, and the
form, term, provisions, amount and timing of the grant of such options) need
not be uniform and may be made selectively among persons who are eligible to
receive options under the Plan, whether or not such persons are similarly
situated. In determining the employees to whom options shall be granted and
the number of shares to be covered by each such option, the Committee shall
take into consideration the employee's present and potential contribution to
the success of the Trust and its Subsidiaries and such other factors as the
Committee may deem proper and relevant.
<PAGE> 3
3
5. INDIVIDUALS ELIGIBLE. Options may be granted to any key employee
of the Trust or any of its Subsidiaries.
For purposes of the Plan, a "Subsidiary" of the Trust shall mean any
"subsidiary corporation", as such term is defined in section 424(f) of the
Code. An entity shall be deemed a Subsidiary of the Trust only for such
periods as the requisite ownership relationship is maintained.
No person who would own, directly or indirectly, immediately after the
granting of an option to such person, more than 10% of the total combined
voting power of all classes of stock of the Trust or any of its Subsidiaries,
except as permitted by section 422(c)(5) of the Code, shall be eligible to
receive an Incentive Option under the Plan.
An employee receiving an option pursuant to the Plan is hereinafter
referred to as an "Optionee".
6. PRICE. The option price of each share of Common Shares
purchasable under any Incentive Option granted pursuant to the Plan shall not
be less than the Fair Market Value (as defined below) thereof at the time the
option is granted. The Committee is hereby given the authority to determine the
price at which any Nonqualified Option may be granted.
For the purposes of the Plan, the term "Fair Market Value" of the
Shares shall mean (i) if the Shares are listed on any securities exchange or
quoted in the NASDAQ System or the over-the-counter market on the day for which
the Market Value is being determined, the average of the last prices of the
sales of the Shares on all securities exchanges on which the Shares may at the
time be listed, or, if there have been no sales on any such exchange on such
day, the average of the highest bid and a lowest asked prices on all such
exchanges, or, if for any day on which the Market Value is being determined the
Shares are not so listed, the average of the representative bid and asked
prices quoted in the NASDAQ System, or, if for any day on which the Market
Value is being determined the Shares are not quoted in the NASDAQ System, the
average of the highest bid and lowest asked prices in the domestic
over-the-counter market as reported by the National Quotation Bureau,
Incorporated, or any similar successor organization; or (ii) if at any time the
Shares are not listed on any securities exchange or quoted in the NASDAQ System
or the over-the-counter market on the day for which the Market Value is being
determined, the fair market value of the Shares determined by the Committee in
its sole discretion.
<PAGE> 4
4
7. DURATION OF OPTIONS. Except as otherwise provided by the
Committee, in its sole discretion, each option granted hereunder shall become
exercisable, in whole or in part, over a period of time and in such percentages
to be determined by the Committee, but not longer than ten years; provided,
however, that if an Optionee's employment with the Trust or any Subsidiary
shall terminate by reason of death or "permanent and total disability", within
the meaning of section 422(e)(3) of the Code ("Disability"), each outstanding
option granted to such Optionee shall become exercisable in full in respect of
the aggregate number of shares covered thereby; provided further, upon the
occurrence of a Change of Control, each option which has not theretofore vested
and become exercisable shall immediately vest and become exercisable. For
purposes of this paragraph a "Change of Control" shall be deemed to have
occurred if:
(i) after the effective date of this Plan, any "person" (as such
term is used in Sections 13(d) and 14(d) of the Exchange Act (other than
the Trust or any employee benefit plan of the Trust)), becomes a beneficial
owner directly or indirectly of securities representing 25% or more of the
combined voting power of the then outstanding voting securities of the
Trust; or
(ii) a merger, consolidation, sale of all or substantially all of
the assets of the Trust or contested election of Trustees or directors, or
any combination of the foregoing occurs and within two years of the
occurrence of any of the foregoing, the individuals who were Trustees of
the Trust immediately prior thereto (other than any person employed by the
Trust) shall cease to constitute a majority of the Board of Trustees of the
Trust or of the Board of Trustees or Directors of its successor by a
merger, consolidation, sale of assets or similar event.
Notwithstanding any provision of the Plan to the contrary, the
unexercised portion of any option granted under the Plan shall automatically
and without notice terminate and become null and void at the time of the
earliest to occur of the following:
(a) The expiration of 10 years from the date on which such
option was granted;
(b) The expiration of one year from the date the Optionee's
employment with the Trust or any of its
<PAGE> 5
5
Subsidiaries shall terminate by reason of Disability; PROVIDED, HOWEVER,
that if the Optionee shall die during such one-year period, the provisions
of subparagraph (c) below shall apply;
(c) The expiration of one year from the date of the Optionee's
death, if such death occurs either during employment with the Trust or any
of its Subsidiaries or during the one-year period described in subparagraph
(b) above;
(d) The date the Optionee's employment with the Trust or any of
its Subsidiaries shall terminate by reason of "cause" (as hereafter
defined). Termination by reason of "cause" shall mean termination by
reason of participation in conduct during employment consisting of fraud,
commission of a felony, willful misconduct or commission of any act which
causes or may reasonably be expected to cause substantial damage to the
Trust or any of its Subsidiaries;
(e) The expiration of three months from the date the Optionee's
last employment with the Trust or any of its Subsidiaries shall terminate
other than by reason of death, Disability or termination for cause; and
(f) In whole or in part, at such earlier time or upon the
occurrence of such earlier event as the Committee in its discretion may
provide upon the granting of such option.
The Committee may determine whether any given leave of absence
constitutes a termination of employment. The options granted under the Plan
shall not be affected by any change of employment so long as the Optionee
continues to be an employee of the Trust or any of its Subsidiaries.
8. EXERCISE OF OPTIONS. An option granted under this Plan shall be
deemed exercised when the person entitled to exercise the option (a) delivers
written notice to the Trust at its principal business office, directed to the
attention of its Secretary, of the decision to exercise, (b) concurrently
tenders to the Trust full payment for the shares to be purchased pursuant to
such exercise, and (c) complies with such other reasonable requirements as the
Committee establishes pursuant to Paragraph 2 of the Plan. Payment for shares
with respect to which an option is exercised may be made in cash, check or
money order and,
<PAGE> 6
6
subject to the Committee's consent, by Common Shares previously owned.
9. NONTRANSFERABILITY OF OPTIONS. No option or any right evidenced
thereby shall be transferable in any manner other than by will or the laws of
descent and distribution, and, during the lifetime of an Optionee, only the
Optionee (or the Optionee's court-appointed legal representative) may exercise
an option. In the Committee's discretion, an option may be transferred
pursuant
to a "qualified domestic relations order", as defined in section 414(p) of the
Code.
10. RIGHTS OF OPTIONEE. Neither the Optionee nor the Optionee's
executor or administrator shall have any of the rights of a shareholder of the
Trust with respect to the shares subject to an option until certificates for
such shares shall actually have been issued upon the due exercise of such
option. No adjustment shall be made for any regular cash dividend for which
the record date is prior to the date of such due exercise and full payment for
such shares has been made therefor.
11. RIGHT TO TERMINATE EMPLOYMENT. Nothing in the Plan or in any
option shall confer upon any Optionee the right to continue in the employment
of the Trust or any of its Subsidiaries or affect the right of the Trust or any
of its Subsidiaries to terminate the Optionee's employment at any time,
subject, however, to the provisions of any agreement of employment between the
Trust or any of its Subsidiaries and the Optionee.
12. NONALIENATION OF BENEFITS. No right or benefit under the Plan
shall be subject to anticipation, alienation, sale, assignment, hypothecation,
pledge, exchange, transfer, encumbrance or charge, and any attempt to
anticipate, alienate, sell, assign, hypothecate, pledge, exchange, transfer,
encumber or charge the same shall be void. To the extent permitted by
applicable law, no right or benefit hereunder shall in any manner be liable for
or subject to the debts, contracts, liabilities or torts of the person entitled
to such benefits.
13. ADJUSTMENT UPON CHANGES IN CAPITALIZATION, etc. In the event of
any stock split, stock dividend, stock change, reclassification,
recapitalization or combination of shares which changes the character or amount
of Common Shares prior to exercise of any portion of an option theretofore
granted under the Plan, such option, to the extent that it shall not have been
exercised, shall entitle
<PAGE> 7
7
the Optionee (or the Optionee's executor or administrator) upon its exercise to
receive in substitution therefor such number and kind of shares as the
Optionee would have been entitled to receive if the Optionee had actually
owned the stock subject to such option at the time of the occurrence of such
change; PROVIDED, HOWEVER, that if the change is of such a nature that the
Optionee, upon exercise of the option, would receive property other than shares
of stock, the Committee shall make an appropriate adjustment in the option to
provide that the Optionee (or the Optionee's executor or administrator) shall
acquire upon exercise only shares of stock of such number and kind as the
Committee, in its sole judgment, shall deem equitable; and, provided further,
that any such adjustment shall be made so as to conform to the requirements of
section 424(a) of the Code.
In the event that any transaction (other than a change specified in the
preceding paragraph) described in section 424(a) of the Code affects the Common
Shares subject to any unexercised option, the Board of Trustees or Directors of
the surviving or acquiring entity shall make such similar adjustment as is
permissible and appropriate. If any such change or transaction shall occur,
the number and kind of shares for which options may thereafter be granted under
the Plan shall be adjusted to give effect thereto.
14. PURCHASE FOR INVESTMENT. Whether or not the options and shares
covered by the Plan have been registered under the Securities Act of 1933, as
amended, each person exercising an option under the Plan may be required by the
Trust to give a representation in writing that such person is acquiring such
shares for investment and not with a view to, or for sale in connection with,
the distribution of any part thereof. The Trust will endorse any necessary
legend referring to the foregoing restriction upon the certificate or
certificates representing any shares issued or transferred to the Optionee upon
the exercise of any option granted under the Plan.
15. FORM OF AGREEMENTS WITH OPTIONEES. Each option granted pursuant
to the Plan shall be in writing and shall have such form, terms and provisions,
not inconsistent with the provisions of the Plan, as the Committee shall
provide for such option. The effective date of the granting of an option shall
be the date determined by the Committee, in its sole discretion. Each Optionee
shall be notified promptly of such grant, and a written agreement shall be
promptly executed and delivered by the Trust and the Optionee.
<PAGE> 8
8
16. TERMINATION AND AMENDMENT OF PLAN AND OPTIONS. Unless the Plan
shall theretofore have been terminated as hereinafter provided, options may be
granted under the Plan at any time, and from time to time, prior to the tenth
anniversary of the Effective Date (as defined below), on which date the Plan
will expire, except as to options then outstanding under the Plan. Such
options shall remain in effect until they have been exercised, have expired or
have been canceled.
The Plan may be terminated or amended at any time by the Board of
Trustees; PROVIDED, HOWEVER, that any such amendment shall comply with all
applicable laws (including Code section 422), applicable stock exchange listing
requirements, and applicable requirements for exemption (to the extent
necessary) under Rule 16b-3 under the Exchange Act.
No termination, modification or amendment of the Plan, without the
consent of the Optionee, may adversely affect the rights of such person with
respect to such option. With the consent of the Optionee and subject to the
terms and conditions of the Plan, the Committee may amend outstanding option
agreements with any Optionee.
17. EFFECTIVE DATE OF PLAN. The Plan shall become effective upon its
adoption by the Board of Trustees (the "Effective Date"), subject, however, to
its approval by the Trust's shareholders within 12 months before or after the
date of such adoption.
18. GOVERNMENT AND OTHER REGULATIONS. The obligation of the Trust
with respect to options granted under the Plan shall be subject to all
applicable laws, rules and regulations and such approvals by any governmental
agency as may be required, including, without limitation, the effectiveness of
any registration statement required under the Securities Act of 1933, as
amended, and the rules and regulations of any securities exchange on which the
Common Shares may be listed.
19. WITHHOLDING. The Trust's obligation to deliver Common Shares in
respect of any option granted under the Plan shall be subject to all applicable
federal, state and local tax withholding requirements. Federal, state and
local withholding tax due upon the exercise of any option (or upon any
disqualifying disposition of Common Shares subject to an Incentive Option), in
the Committee's sole discretion, may be paid in Common Shares (including the
<PAGE> 9
9
withholding of shares subject to an option) upon such terms and conditions as
the Committee may determine.
20. SEPARABILITY. If any of the terms or provisions of the Plan
conflict with the requirements of Rule 16b-3 under the Exchange Act and/or
section 422 of the Code, then such terms or provisions shall be deemed
inoperative to the extent they so conflict with the requirements of Rule 16b-3
and/or section 422 of the Code. With respect to Incentive Options, if the Plan
does not contain any provision required to be included herein under section 422
of the Code, such provision shall be deemed to be incorporated herein with the
same force and effect as if such provision had been set out at length herein;
provided, further, that to the extent any option which is intended to qualify
as an Incentive Option cannot so qualify, such option, to that extent, shall be
deemed to be a Nonqualified Option for all purposes of the Plan.
21. NON-EXCLUSIVITY OF THE PLAN. Neither the adoption of the Plan by
the Board of Trustees nor the submission of the Plan to the shareholders of the
Trust for approval shall be construed as creating any limitation on the power
of the Board of Trustees to adopt such other incentive arrangements as it may
deem desirable, including, without limitation, the granting of stock options
and the awarding of stock and cash otherwise than under the Plan, and such
arrangements may be either generally applicable or applicable only in specific
cases.
22. EXCLUSION FROM PENSION AND PROFIT-SHARING COMPUTATION. By
acceptance of an option, each Optionee shall be deemed to have agreed that such
grant is special incentive compensation that will not be taken into account, in
any manner, as salary, compensation or bonus in determining the amount of any
payment under any pension, retirement or other employee benefit plan of the
Trust or any of its Subsidiaries. In addition, such option will not affect the
amount of any life insurance coverage, if any, provided by the Trust on the
life of the Optionee which is payable to such beneficiary under any life
insurance plan covering employees of the Trust or any of its Subsidiaries.
23. GOVERNING LAW. The Plan shall be governed by, and construed in
accordance with, the laws of the Commonwealth of Massachusetts.
24. EXCULPATION. It is understood that the obligations incurred by
the Trust under or with respect to
<PAGE> 10
10
this Plan do not constitute personal obligations of the Trustees, officers,
employees or shareholders of the Trust, or of any such Trustees, officers,
employees or shareholders, and shall not create or involve any claim against,
or personal liability on the part of, them or any of them. The Optionees agree
to look solely to the assets of the Trust for satisfaction of any liability of
the Trust under or with respect to the Plan and not to seek recourse against
any such Trustees, officers, employees or shareholders, or any of them or any
their personal assets for such satisfaction.
<PAGE> 1
Exhibit 10.7
PROPERTY CAPITAL TRUST
AMENDED AND RESTATED DEFERRED STOCK PLAN
FOR NON-EMPLOYEE TRUSTEES
1. Purpose
-------
Property Capital Trust, a Massachusetts business trust (the "Trust"),
hereby amends and restates its Deferred Compensation Plan for Trustees (the
"Deferred Compensation Plan") by adopting the Property Capital Trust Deferred
Stock Plan for Non-Employee Trustees (the Deferred Compensation Plan, as so
amended and restated, referred to herein as the "Plan"). The purpose of the
Plan is to promote the long-term growth and financial success of the Trust by
attracting and retaining non-employee Trustees of outstanding ability and
assisting the Trust in promoting a greater identity of interest between the
Trust's non-employee trustees and its stockholders.
The Plan is intended to allow the non-employee trustees participating
in the Plan to be treated as "disinterested persons" with respect to other
stock plans of the Trust, as defined in Rule 16b-3 ("Rule 16b-3"), adopted
under the Securities Exchange Act of 1934, as amended.
2. Plan Operation
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2.1. Administration.
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2.1.1 The Plan may be administered by a committee (the
"Committee") appointed by the Board of Trustees of the Trust (the "Board"),
which Committee shall consist solely of two or more trustees. The members of
the Committee shall be appointed by, and may be changed at any time and from
time to time in the discretion of, the Board.
2.1.2 The Committee shall have the authority (i) to exercise
all of the powers granted to it under the Plan, (ii) to construe, interpret and
implement the Plan and any Plan agreements executed pursuant to the Plan, (iii)
to prescribe, amend and rescind rules relating to the Plan, (iv) to make any
determination necessary or advisable in administering the Plan, and (v) to
correct any defect, supply any omission and reconcile any inconsistency in the
Plan.
2.1.3 The determination of the Committee on all matters
relating to the Plan or any Plan agreement shall be conclusive.
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2.1.4 No member of the Committee shall be liable for any
action or determination made in good faith with respect to the Plan or any
award hereunder.
2.1.5 Notwithstanding anything to the contrary contained
herein: (i) unless and until the Board shall appoint the members of the
Committee, the Plan shall be administered by the Board, and (ii) the Board may,
in its sole discretion, at any time and from time to time, resolve to
administer the Plan. In either of the foregoing events, the term Committee as
used herein shall be deemed to mean the Board.
3. Eligibility.
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Only trustees of the Trust who are not employees of the Trust or any
affiliate of the Trust ("Eligible Trustees") shall participate in the Plan.
4. Common Shares Subject to the Plan.
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4.1. STOCK. Awards under the Plan shall be in the form of common
shares, no par value, of the Trust and any other shares into which such common
shares shall thereafter be changed by reason of any merger, reorganization,
recapitalization, consolidation, split-up, combination of shares or similar
event as set forth in and in accordance with this Section 4 (the "Shares"). If
and to the extent that the Committee determines that it would be illegal,
impracticable or inadvisable to issue Shares under the Plan, or to the extent
Shares are unavailable, the Committee shall make any awards otherwise required
under the Plan in cash or such other property as it determines in its
reasonable discretion.
4.2. SHARES AVAILABLE FOR AWARDS. Subject to Section 4.3
(relating to adjustments upon changes in capitalization), as of any date, the
total number of Shares issuable under the Plan shall be 250,000. Shares that
shall be issuable pursuant to the awards granted under the Plan shall be
authorized and unissued Shares, treasury Shares or Shares purchased by, or on
behalf of, the Trust in open-market transactions.
4.3. ADJUSTMENTS. In the event of any merger, reorganization,
recapitalization, consolidation, sale or other distribution of all or
substantially all of the assets of the Trust, any stock dividend, split,
spin-off, split-up, split-off, distribution of securities or other property by
the Trust, or other change in the Trust's corporate structure affecting the
Shares, the number of Shares issuable under the Plan and the Share Units (as
defined in Section 5.2) then credited to Accounts (as
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defined in Section 5.2) shall be appropriately adjusted as determined by the
Committee in its sole discretion.
5. Elective Deferrals
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5.1. ELECTION. Commencing on the effective date of the Deferred
Compensation Plan, each Eligible Trustee may elect to defer all or part of (i)
the annual cash retainer payable to such Trustee for services as a member of
the Board and its committees (the "Retainer") and/or (ii) fees payable to such
Trustee for meetings of the Board or committees of the Board ("Meeting Fees").
An Eligible Trustee may make a deferral election by submitting an election form
(an "Election Form") to the Secretary or any Assistant Secretary of the Trust,
indicating: (i) the percentage of the Retainer and the percentage of Meeting
Fees that are to be deferred; (ii) the date on which the commencement of
payments of deferred amounts (the "Distribution Date") should begin, as
contemplated by Section 5.3.1; and (iii) whether distributions are to be made
in a lump sum, installments or a combination thereof. A deferral election
shall become effective with respect to the Eligible Trustee's Retainer accruing
on and after the first day of the calendar year following the date on which the
Election Form is submitted to the Secretary or any Assistant Secretary (the
"Election Date"), and with respect to the Eligible Trustee's Meeting Fees
accruing on and after the first day of the calendar year following the Election
Date. An election by an Eligible Trustee to defer all or part of the Retainer
and/or Meeting Fees shall continue in effect until revoked by notice in writing
to the Secretary or any Assistant Secretary of the Trust or unless no longer
permitted by law or regulation (including under Rule 16b-3). In addition, the
receipt of a new Election Form shall automatically revoke all previously filed
Election Forms, provided, however, that no revocation shall be effective to
make any change with respect to amounts deferred pursuant to previously filed
Election Forms. An Eligible Trustee may designate, in the Election Form, one
or more beneficiaries to receive any distributions under the Plan upon the
death of the Eligible Trustee, and such designation may be changed at any time
by submitting a new designation to the Secretary or any Assistant Secretary of
the Trust, which shall become effective immediately upon receipt by the
Secretary or such Assistant Secretary.
5.2. SHARE UNIT DEFERRAL. The Eligible Trustee's deferred
Retainer and Meeting Fees (the "Deferred Amount") shall be credited to an
account (an "Account") in units which are equivalent in value to Shares ("Share
Units"). The Deferred Amount allocated to the Account shall
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be credited to the Account as of the first business day of the month following
the month during which the Eligible Trustee otherwise would have become
entitled to payment of the Retainer or Meeting Fees, as the case may be, and
the number of Share Units credited to such Account shall be an amount equal to
the result obtained by dividing (i) the Deferred Amount allocated to the
Account by (ii) the Fair Market Value of a Share on the last business day of
the month in which the Eligible Trustee otherwise would have become entitled to
payment of such Retainer or Meeting Fees, as the case may be. If Share Units
exist in an Eligible Trustee's Account on a dividend record date for the
Trust's Shares, the Account shall be credited, on the dividend payment date,
with an additional number of Share Units equal to (i) the product of (A) the
cash dividend paid on one Share and (B) the number of Share Units in the
Account on the dividend record date, (ii) divided by the Fair Market Value of a
Share on the dividend payment date.
5.3. Distributions.
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5.3.1 DISTRIBUTION DATE. Each Eligible Trustee shall designate
on the Election Form one of the following dates as a Distribution Date with
respect to the Deferred Amount credited to the Eligible Trustee's Account
thereafter: (i) the first day of the calendar month following the date of the
Eligible Trustee's death; (ii) the first day of the calendar month following
the
date of termination of service or retirement of an Eligible Trustee as a member
of the Board of Trustees of the Trust; (iii) the first day of a calendar month
following an Eligible Trustee's Disability (as defined in Section 7); or (iv)
the earliest to occur of (i), (ii) or (iii).
5.3.2 DISTRIBUTION METHOD. Distributions shall be made from the
Eligible Trustee's Account in form of whole Shares and cash representing any
fractional interest in a Share in a lump sum or in annual installments not to
exceed ten, as elected by the Eligible Trustee. If an Eligible Trustee
receives
a distribution from his Account on an installment basis, amounts remaining in
such Account before payment shall continue to be subject to the last sentence
of
Section 5.2.
6. Fair Market Value
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"Fair Market Value" shall mean, with respect to each Share for any day:
6.1. if the Shares are listed for trading on the American Stock
Exchange, the closing price, regular way, of the Shares as reported on the
American Stock Exchange, or
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if no such reported sale of the Shares shall have occurred on such date, on the
next preceding date on which there was such a reported sale, or
6.2. if the Shares are not so listed, but are listed on another
national securities exchange or authorized for quotation on the National
Association of Securities Dealers Inc.'s NASDAQ National Market System
("NASDAQ/NMS"), the closing price, regular way, of the Shares on such exchange
or NASDAQ/NMS, as the case may be, on which the largest number of Shares have
been traded in the aggregate on the preceding twenty trading days, or, if no
such reported sale of the Shares shall have occurred on such date on such
exchange or NASDAQ/NMS, as the case may be, on the next preceding date on which
there was such a reported sale on such exchange or NASDAQ/NMS, as the case may
be, or
6.3. if the Shares are not listed for trading on a national
securities exchange or authorized for quotation on NASDAQ/NMS, the average of
the closing bid and asked prices as reported by the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") or, if no such prices
shall have been so reported for such date, on the next preceding date for which
such prices were so reported.
7. Definition of Disability
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"Disability" shall mean, with respect to any Eligible Trustee, any
condition which causes any Eligible Trustee to be unable to substantially
perform his services as a Trustee of the Trust for a period of three
consecutive
months or for an aggregate of five months within any 12 month period.
8. Issuance of Certificates
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8.1. RESTRICTIONS ON TRANSFERABILITY. All Shares delivered
under the Plan shall be subject to such stop-transfer orders and other
restrictions as the Trust may deem advisable or legally necessary under any
laws, statutes, rules, regulations and other legal requirements, including,
without limitation, those of any stock exchange upon which the Shares are then
listed and any applicable federal, state or foreign securities law.
8.2. COMPLIANCE WITH LAWS. Anything to the
contrary herein notwithstanding, the Trust shall not be required to issue any
Shares under the Plan if, in the opinion of legal counsel to the Trust, the
issuance and delivery of such Shares would constitute a violation by the
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Eligible Trustee or the Trust of any applicable law or regulation of any
governmental authority, including, without limitation, federal and state
securities laws, or the regulation of any stock exchange on which the Trust's
securities may then be listed. If and to the extent that the Committee
determines that it would be illegal, impracticable or inadvisable to issue
Shares under the Plan, or to the extent Shares are unavailable, the Committee
shall make any distributions otherwise required under the Plan in cash or such
other property as may be reasonably acceptable to the distributee.
9. Withholding Taxes
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The Trust shall require as a condition of delivery of any Shares to an
Eligible Trustee that such Trustee remit an amount sufficient to satisfy all
foreign, federal, state, local and other governmental withholding tax
requirements relating thereto (if any) and any or all indebtedness or other
obligation of the Eligible Trustees to the Trust.
10. Plan Amendments and Termination
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The Board of Trustees of the Trust may suspend or terminate the Plan at
any time and may amend it at any time and from time to time, in whole or in
part, provided that no amendment or termination may adversely affect any rights
of any Trustee that has accrued prior to the date of such amendment or
termination, and provided, further, that any amendment for which shareholder
approval is required by law or in order to maintain continued qualification of
the Plan under Rule 16b-3 shall not be effective until such approval has been
obtained. Upon termination of the Plan, the Board shall distribute to each
participant in the Plan the entire amount of such participant's Account in the
form of whole Shares and cash representing any fractional interest in a Share
in a lump sum.
11. Listing, Registration and Legal Compliance
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If the Committee shall at any time determine that any Consent (as
hereinafter defined) is necessary or desirable as a condition of, or in
connection with, the granting of any award under the Plan, the issuance of
Shares or other rights hereunder or the taking of any other action hereunder
(each such action being hereinafter referred to as a "Plan Action"), then such
Plan Action shall not be taken, in whole or in part, unless and until such
Consent shall have been effected or obtained. The term "Consent" as used
herein with respect to any Plan Action means (i) the listing, registration or
qualification of any Shares issued under the Plan on any securities exchange or
under any
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foreign, federal, state or local law, rule or regulation, (ii) any and all
consents, clearances and approvals in respect of a Plan Action by any
governmental or other regulatory bodies or (iii) any and all written agreements
and representations by an Eligible Trustee with respect to the disposition of
Shares or with respect to any other matter which the Committee shall deem
necessary or desirable in order to comply with the terms of any such listing,
registration or qualification or to obtain an exemption from the requirement
that any such listing, qualification or registration be made.
12. Right of Discharge Reserved
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Nothing in the Plan shall confer upon any Eligible Trustee the right to
continue in the service of the Trust or affect any right that the Trust may
have
to terminate the service of such Eligible Trustee.
13. Other Payments or Awards
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Nothing contained in the Plan shall be deemed in any way to limit or
restrict the Trust, any affiliate or the Board from making any award or payment
to any person under any other plan, arrangement or understanding, whether now
existing or hereafter in effect. Any awards and payments made under this Plan
shall constitute a special incentive payment to the Eligible Trustee and shall
not be taken into account in computing the amount of compensation of the
Eligible Trustee for the purposes of determining any pension, retirement,
profit sharing, bonus, life insurance or other benefit plan of the Trust or any
affiliate or (ii) any agreement between the Trust or any affiliate, on the one
hand, and the Eligible Trustee, on the other hand, except as such plan or
agreement may otherwise expressly provide.
14. Rights Not Subject to Alienation, Etc.
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An Eligible Trustee's rights to benefit payments under the Plan are not
subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, attachment or garnishment by the creditors of the Eligible
Trustee or his beneficiary.
15. Rights as a Shareholder
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An Eligible Trustee shall not, by reason of any rights under the Plan,
have any rights as a shareholder of the Trust with respect to the Shares until
such Shares have been delivered to such Eligible Trustee.
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16. Unfunded Plan
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The Plan shall be unfunded and shall not create (or be construed to
create) a trust or a separate fund or funds. The Plan shall not establish any
fiduciary relationship between the Trust and any Eligible Trustee or other
person and shall constitute a mere promise by the Trust to make benefit
payments in the future. The Trust may, in its sole discretion, establish a
separate trust to hold assets set aside to provide benefits under the Plan,
provided that no Eligible Trustee shall have any interest in the assets of any
such trust and the assets of such trust shall be available to pay claims of the
Trust's general creditors on such terms and conditions as such trust may
provide. To the extent any person holds any rights by virtue of a pending
grant or deferral under the Plan, such rights shall be no greater than the
rights of an unsecured general creditor of the Trust.
17. Governing Law
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The Plan is deemed adopted, made and delivered in Massachusetts and
shall be governed by the laws of the Commonwealth of Massachusetts applicable
to agreements made and to be performed entirely within such commonwealth.
18. Severability
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If any part of the Plan is declared by any court or governmental
authority to be unlawful or invalid, such unlawfulness or invalidity shall not
invalidate any portion of the Plan not declared to be unlawful or invalid. Any
Section or part of a Section so declared to be unlawful or invalid shall, if
possible, be construed in a manner which will give effect to the terms of such
Section or part of a Section to the fullest extent possible while remaining
lawful and valid.
19. Notices
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All notices and other communications hereunder shall be given in writing
and shall be personally delivered against receipt or sent by registered or
certified mail, return receipt requested or by reputable overnight delivery
service. Any notice shall be deemed given on the date of delivery or of
mailing, and if mailed, shall be addressed (a) to the Trust, at its principal
headquarters, and (b) to an Eligible Trustee, at the Eligible Trustee's
principal residential address last furnished to the Trust. Notices sent to the
Trust shall be sent to Property Capital Trust, One Post Office Square, 21st
Floor, Boston, Massachusetts
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02109, Attention: William A. Bonn, Senior Vice President and Counsel. Either
party may, by notice, change the address to which notice to such party is to be
given.
20. Section Headings
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The Section headings contained herein are for the purposes of
convenience only and are not intended to define or limit the contents of said
Sections.
21. Effective Date
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This amendment and restatement of the Plan shall become effective as of
April 15, 1994 upon approval by the Trust's shareholders (the "Effective
Date").
22. Exculpation
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It is understood that the obligations incurred by the Trust under or
with respect to this Plan do not constitute personal obligations of the
Trustees, officers, employees or shareholders of the Trust, or of any such
Trustees, officers, employees or shareholders, and shall not create or involve
any claim against, or personal liability on the part of, them or any of them.
The Eligible Trustees agree not to seek recourse against any such Trustees,
officers, employees or shareholders, or any of them or any their personal
assets for satisfaction of any liability under or with respect to the Plan.
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Exhibit 10.8
PROPERTY CAPITAL TRUST 1994
STOCK OPTION PLAN FOR NON-EMPLOYEE TRUSTEES
Property Capital Trust, a Massachusetts business trust (the "Trust"),
hereby formulates and adopts the following Stock Option Plan (the "Plan") for
Eligible Trustees of the Trust (as defined below).
1. PURPOSE. The purpose of the Plan is to secure for the Trust the
benefits of the additional incentive inherent in the ownership of common
shares,
no par value, of the Trust ("Common Shares") by Eligible Trustees of the Trust
and to help the Trust secure and retain the services of such Eligible Trustees.
2. ADMINISTRATION. The Plan is intended to allow the Eligible
Trustees receiving grants pursuant to it to be, with respect to other stock
plans of the Trust, "disinterested persons" as defined in Rule 16b-3 ("Rule
16b-3"), adopted under the Securities Exchange Act of 1934 (the "Exchange
Act"), and, accordingly, is intended to be self-governing to the extent
required by Rule 16b-3. To this end, the Plan requires no discretionary action
by any administrative body with regard to any transaction under the Plan. To
the extent, if any, that questions of administration arise, these shall be
resolved by the Board of Trustees of the Trust (the "Board of Trustees"). The
Board of Trustees may, in its discretion, delegate to the President of the
Trust all authority and responsibility to act pursuant to this Plan. All
references to the "Plan Administrators" in this Plan shall refer to either the
Board of Trustees or the President, depending upon whether the Board of
Trustees has delegated its authority pursuant to this Section 2.
Subject to the express provisions of the Plan, the Plan Administrators
shall have plenary authority to interpret the Plan, to prescribe, amend and
rescind the rules and regulations relating to it and to make all other
determinations deemed necessary and advisable for the administration of the
Plan. The determination of the Plan Administrators shall be conclusive.
3. COMMON SHARES SUBJECT TO OPTIONS. Subject to the adjustment
provisions of Paragraph 14 below, a maximum of 100,000 Common Shares may be
made subject to options granted under the Plan. If, and to the extent that,
options granted under the Plan shall terminate, expire or be canceled for any
reason without having been exercised, new options may be granted in respect of
the shares covered by
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such terminated, expired or canceled options. The granting and terms of such
new options shall comply in all respects with the provisions of the Plan.
Common Shares sold upon the exercise of any option granted under the
Plan may be authorized and unissued Common Shares, issued Common Shares held in
the Trust's treasury or both.
There shall be reserved at all times for sale under the Plan a number
of authorized and unissued Common Shares, Common Shares held in the Trust's
treasury, or both, equal to the maximum number of shares which may be purchased
pursuant to options granted or that may be granted under the Plan.
4. Grant of Options.
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(1) AWARDS. If a person is elected or re-elected as an Eligible
Trustee at an annual meeting of shareholders of the Trust, such person will
automatically receive on the date of such election or re-election an option
to purchase 4,000 Common Shares.
(2) TYPE OF OPTIONS. All options granted under the Plan shall be
"nonqualified" stock options subject to the provisions of section 83 of the
Internal Revenue Code of 1986, as amended (the "Code").
5. INDIVIDUALS ELIGIBLE. Only trustees of the Trust who are not
employees of the Trust or any subsidiary of the Trust ("Eligible Trustees")
shall participate in the Plan.
A trustee receiving an option pursuant to the Plan is hereinafter
referred to as an "Optionee."
6. PRICE. The option price of each Common Share purchasable under
any option granted pursuant to the Plan shall be the Fair Market Value (as
defined below) thereof at the time the option is granted.
For purposes of the Plan, "Fair Market Value" of a Common Share shall
mean the average of the last prices of the sales of Common Shares on all
securities exchanges on which the Common Shares may at the time be listed, or,
if there have been no sales on any such exchange on such day, the average of
the highest bid and lowest asked prices on all such exchanges, or, if for any
day on which the market value is being determined the Common Shares are not so
listed, the average of the representative bid and asked prices quoted in the
Nasdaq System, or, if for any day on
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which the market value is being determined the Common Shares are not quoted in
the Nasdaq System, the average of the highest bid and lowest asked prices in
the domestic over-the-counter market as reported by the National Quotation
Bureau, Incorporated, or any similar successor organization.
7. VESTING OF OPTIONS. Each option granted to an Optionee hereunder
shall become vested and exercisable on the day immediately preceding the annual
meeting of shareholders next succeeding the date of grant of such option.
Upon the death or "permanent and total disability" within the meaning
of section 22(e)(3) of the Code ("Disability") of an Eligible Trustee, each
option held by such Optionee which has not theretofore vested and become
exercisable shall immediately vest and become exercisable, and upon the
occurrence of a Change of Control, each option which has not theretofore vested
and become exercisable shall immediately vest and become exercisable. For
purposes of this paragraph a "Change of Control" shall be deemed to have
occurred if:
(i) after the effective date of this Plan, any "person" (as such
term is used in Sections 13(d) and 14(d) of the Exchange Act (other than
the Trust or any employee benefit plan of the Trust)), becomes a beneficial
owner directly or indirectly of securities representing 25% or more of the
combined voting power of the then outstanding voting securities of the
Trust; or
(ii) a merger, consolidation, sale of all or substantially all of
the assets of the Trust or contested election of Trustees or directors, or
any combination of the foregoing occurs and within two years of the
occurrence of any of the foregoing, the individuals who were Trustees of
the Trust immediately prior thereto (other than any person employed by the
Trust) shall cease to constitute a majority of the Board of Trustees of the
Trust or of the Board of Trustees or Directors of its successor by a
merger, consolidation, sale of assets or similar event.
All outstanding options, to the extent not vested in accordance with the
foregoing, shall be forfeited on the date of termination of a Trustee's service
as a Trustee of the Trust.
8. DURATION OF OPTIONS. Notwithstanding any provision of the Plan to
the contrary, the unexercised portion of any option granted under the Plan
shall
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automatically and without notice terminate and become null and void at the time
of the earliest to occur of the following:
a. The expiration of 15 years from the date on which such
option was granted;
b. The expiration of five years from the date the Optionee's
service with the Trust (including advisory services) terminates other than by
reason of a termination for cause, including termination by reason of death or
Disability; provided, however, that if the Optionee's service has terminated by
reason of Disability and the Trustee shall die during the five-year period
following termination, the expiration of five years from the date of the
Optionee's death; and
c. The date the Optionee's service with the Trust shall
terminate by reason of "cause" (as hereafter defined). Termination by reason
of "cause" shall mean termination by reason of participation and conduct during
the performance of services consisting of fraud, felony, willful misconduct or
commission of any act which causes or may reasonably be expected to cause
substantial damage to the Trust or any of its affiliates.
9. EXERCISE OF OPTIONS. An option granted under the Plan shall be
deemed exercised when the person entitled to exercise the option (i) delivers
written notice to the Trust at its principal business office, directed to the
attention of its Chief Financial Officer, of the decision to exercise and (ii)
concurrently tenders to the Trust full payment for the shares to be purchased
pursuant to such exercise. Payment for shares with respect to which an option
is exercised may be made in cash, check or money order or by Common Shares
owned by the Optionee for at least six months prior to exercise.
10. NONTRANSFERABILITY OF OPTIONS. No option or any right evidenced
thereby shall be transferable in any manner other than by will or the laws of
descent and distribution, and, during the lifetime of an Optionee, only the
Optionee (or the Optionee's court-appointed legal representative) may exercise
an option.
11. RIGHTS OF OPTIONEE. Neither the Optionee nor the Optionee's
executor or administrator shall have any of the rights of a shareholder of the
Trust with respect to the shares subject to an option until certificates for
such shares shall actually have been issued upon the due exercise of such
option. No adjustment shall be made for any regular cash dividend for which
the record date is prior to the date
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of such due exercise and full payment for such shares has been made therefor.
12. RIGHT TO TERMINATE SERVICE. Nothing in the Plan or in any option
shall confer upon any Optionee the right to continue in the services of the
Trust or affect the right of the shareholders of the Trust to terminate the
Optionee's service at any time, subject, however, to the provisions of any
agreement between the Trust and the Optionee.
13. NONALIENATION OF BENEFITS. No right or benefit under the Plan
shall be subject to anticipation, alienation, sale, assignment, hypothecation,
pledge, exchange, transfer, encumbrance or charge, and any attempt to
anticipate, alienate, sell, assign, hypothecate, pledge, exchange, transfer,
encumber or charge the same shall be void. To the extent permitted by
applicable law, no right or benefit hereunder shall in any manner be liable for
or subject to the debts, contracts, liabilities or torts of the person entitled
to such benefits.
14. ADJUSTMENT UPON CHANGES IN CAPITALIZATION, ETC. In the event of
any stock split, stock dividend, stock change, reclassification,
recapitalization or combination of shares which changes the character or amount
of the Common Shares, prior to exercise of any portion of an option theretofore
granted under the Plan, such option, to the extent that it shall not have been
exercised, shall entitle the Optionee (or the Optionee's executor or
administrator) upon its exercise to receive in substitution therefor such
number and kind of shares as the Optionee would have been entitled to receive
if the Optionee had actually owned the stock subject to such option at the time
of the occurrence of such change; provided, however, that if the change is of
such a nature that the Optionee, upon exercise of the option, would receive
property other than shares of stock, the Board of Trustees shall make an
appropriate adjustment in the option to provide that the Optionee (or the
Optionee's executor or administrator) shall acquire upon exercise only shares
of stock of such number and kind as the Board of Trustees, in its sole
judgment, shall deem equitable.
In the event that any transaction (other than a change specified in the
preceding paragraph) described in section 424(a) of the Code affects the Common
Shares subject surviving or acquiring corporation shall make such similar
adjustment as is permissible and appropriate.
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If any such change or transaction shall occur, the number and kind of
shares for which options may thereafter be granted under the Plan shall be
adjusted to give effect thereto.
In the event the Trust makes a distribution on the Common Shares in
respect of any given fiscal quarter which exceeds the sum of (i) "Income before
Gains (Losses) from Real Estate Investments and Extraordinary Item" and (ii)
"Depreciation", or the successor categories for such items, as shown on the
Trust's financial statements for such quarter, the exercise price of
outstanding options shall thereupon be reduced (dollar-for-dollar) by the
amount of any such excess distribution (calculated on a per share basis);
provided, however, that in no event shall the exercise price be reduced as a
result of the adjustments provided for in this Section 14 to less than $1.00
per share.
15. FORM OF AGREEMENTS WITH OPTIONEES. Each option granted pursuant
to the Plan shall be in writing and shall have such form, terms and provisions,
not inconsistent with the provisions of the Plan, as the Plan Administrators
shall provide for such option.
16. PURCHASE FOR INVESTMENT. Whether or not the options and shares
covered by the Plan have been registered under the Securities Act of 1933, as
amended, each person exercising an option under the Plan may be required by the
Trust to give a representation in writing that such person is acquiring such
shares for investment and not with a view to, or for sale in connection with,
the distribution of any part thereof. The Trust will endorse any necessary
legend referring to the foregoing restriction upon the certificate or
certificates representing any shares issued or transferred to the Optionee upon
the exercise of any option granted under the Plan.
17. TERMINATION AND AMENDMENT OF PLAN AND OPTIONS. Unless the Plan
shall theretofore have been terminated as hereinafter provided, options may be
granted under the Plan, as provided in Paragraph 4 hereof, prior to the tenth
anniversary of the Effective Date (as defined below) on which date the Plan
will expire, except as to options then outstanding under the Plan. Such
options shall remain in effect until they have been exercised, have expired or
have been canceled.
The Plan may be terminated or amended at any time by the Board of
Trustees; provided, however, that (i) any such amendment shall comply with all
applicable laws and applicable stock exchange listing requirements, (ii) the
<PAGE> 7
7
provisions of the Plan with respect to eligibility for participation or the
timing or amount of grants of awards and the option price shall not be amended
more than once every six months (other than to comport with changes in the Code
or the Employee Retirement Income Security Act of 1974, as amended, or the
regulations thereunder), and (iii) any amendment for which stockholder approval
is required by law or in order to maintain continued qualification of the Plan
under Rule 16b-3 shall not be effective until such approval has been obtained.
No termination, modification or amendment of the Plan, without the
consent of the Optionee, may adversely affect the rights of such person with
respect to such option.
18. EFFECTIVE DATE OF PLAN. The Plan shall become effective upon its
adoption by the Board of Trustees (the "Effective Date"), subject, however, to
its approval by the Trust's shareholders within 12 months after the date of
such adoption.
19. GOVERNMENT AND OTHER REGULATIONS. The obligation of the Trust
with respect to options granted under the Plan shall be subject to all
applicable laws, rules and regulations and such approvals by any governmental
agency as may be required, including, without limitation, the effectiveness of
any registration statement required under the Securities Act of 1933, as
amended, and the rules and regulations of any securities exchange on which the
Common Shares may be listed.
20. WITHHOLDING. The Trust's obligation to deliver Common Shares in
respect of any option granted under the Plan shall be subject to all applicable
federal, state and local tax withholding requirements. Federal, state and local
withholding tax due upon the exercise of any option, may be paid in Common
Shares (including the withholding of shares subject to an option).
21. SEPARABILITY. If any part of the Plan is declared by any court or
governmental authority to be unlawful or invalid, such unlawfulness or
invalidity shall not invalidate any portion of the Plan not declared to be
unlawful or invalid. Any Paragraph or part of a Paragraph so declared to be
unlawful or invalid shall, if possible, be construed in a manner which will
give effect to the terms of such Paragraph or part of a Paragraph to the
fullest extent possible while remaining lawful and valid.
22. NON-EXCLUSIVITY OF THE PLAN. Neither the adoption of the Plan by
the Board of Trustees nor the
<PAGE> 8
8
submission of the Plan to the shareholders of the Trust for approval shall be
construed as creating any limitation on the power of the Board of Trustees to
adopt such other incentive arrangements as it may deem desirable, including,
without limitation, the granting of stock options and the awarding of stock and
cash otherwise than under the Plan, and such arrangements may be either
generally applicable or applicable only in specific cases.
23. GOVERNING LAW. The Plan shall be governed by, and construed in
accordance with, the laws of the Commonwealth of Massachusetts.
24. EXCULPATION. It is understood that the obligations incurred by
the Trust under or with respect to this Plan do not constitute personal
obligations of the Trustees, officers, employees or shareholders of the Trust,
or of any such Trustees, officers, employees or shareholders, and shall not
create or involve any claim against, or personal liability on the part of, them
or any of them. The Optionees agree to look solely to the assets of the Trust
for satisfaction of any liability of the Trust under or with respect to the
Plan and not to seek recourse against any such Trustees, officers, employees or
shareholders, or any of them or any their personal assets for such
satisfaction.
<PAGE> 1
Exhibit 10.9
INCENTIVE COMPENSATION AGREEMENT
--------------------------------
THIS AGREEMENT is made as of the 25th day of August, 1995 by and
between PROPERTY CAPITAL TRUST, a Massachusetts business trust ("PCT"), and
ROBERT M. MELZER ("Melzer").
W I T N E S S E T H :
- - - - - - - - - -
Melzer is the President, Chief Executive Officer and Chief Financial
Officer of PCT, and is also a Trustee of PCT.
On May 24, 1995 the Trustees of PCT, subject to obtaining the requisite
approval of PCT's shareholders at the next annual meeting of PCT, adopted a new
business plan pursuant to which PCT will dispose of all of its investments over
a reasonable period of time, estimated to be between three and five years.
The independent Trustees of PCT believe that it is essential to the
success of the new business plan that Melzer remain with PCT in his present
positions and oversee the implementation of such plan. Such Trustees
recognize, however, that as the new business plan is implemented, PCT will
decrease in size and ultimately terminate and go out of business.
In the circumstances, the independent Trustees believe it in the best
interests of PCT to provide Melzer with incentive compensation which will both
motivate him to
<PAGE> 2
2
remain with PCT throughout the implementation of the new business plan and
reward him based on the amount he is able to realize for PCT and its
shareholders upon the disposition of PCT's investments.
The parties hereto desire to set forth in this Agreement the terms and
conditions of the incentive compensation which Melzer will be entitled to
receive, as recommended by the Compensation Committee to, and approved on
August 25, 1995 by, the independent Trustees.
NOW, THEREFORE, in consideration of the premises, the parties hereto
hereby agree as follows:
1. COMPENSATION. Melzer shall receive incentive compensation equal
to the amount he would realize if he had purchased on May 24, 1995 250,000
shares of PCT's common stock (the "Phantom Shares") at $6.75 per share, the
market price of a share of PCT's common stock on May 24, 1995, with the
proceeds of a loan made to him by PCT bearing interest at the rate of 10% per
annum, compounding monthly (the "Phantom Loan"). For purposes of calculating
amounts due to Melzer under this Agreement, each dividend and other
distribution paid on each share of common stock of PCT subsequent to May 24,
1995 shall also be deemed simultaneously to have been paid on each of the
Phantom Shares. If Melzer is an employee of PCT on the date on which PCT's
common stock trades or is otherwise valued on an ex-dividend basis with respect
to any publicly-announced dividend or other distribution to be paid on such
stock, and
<PAGE> 3
3
if prior to the payment date for such dividend or other distribution Melzer's
employment with PCT is terminated, then except in any of the circumstances
specified in clauses (i) and (ii) of paragraph B below such dividend or other
distribution shall be deemed to be paid on the Phantom Shares and shall be
applied or paid as provided in paragraph A below. If PCT hereafter institutes
a stock repurchase program, amounts paid by PCT to repurchase its own shares
shall not be deemed to be distributions paid on such shares. Such incentive
compensation shall be calculated and paid as follows:
A. An amount equal to all dividends and other distributions
which are deemed to have been paid on the Phantom Shares shall be deemed to be
applied first to pay accrued interest on, and then to repay the unpaid
principal balance of, the Phantom Loan until such loan has been paid in full.
Thereafter, PCT shall pay to Melzer in cash an amount equal to all dividends
and other distributions deemed paid on the Phantom Shares. Each such payment
shall be made by PCT to Melzer at the time the dividend or other distribution
is paid to PCT shareholders.
B. Upon the termination of Melzer's employment with PCT,
whether such termination results from Melzer's discharge by or his election to
leave PCT, Melzer's death or disability or a termination by reason of the
termination of PCT, PCT shall pay to Melzer, within 15 days after such
termination (or, if later, when the market value
<PAGE> 4
4
of the Phantom Shares is determined as hereinafter provided), an amount in cash
equal to the excess of the market value of the Phantom Shares over the amount,
if any, then due on account of accrued and unpaid interest on, and
principal of, the Phantom Loan. Notwithstanding the foregoing: (i) if Melzer
voluntarily terminates his employment with PCT at any time on or before August
31, 1996, he shall not be entitled to receive any incentive compensation
pursuant to this Agreement unless such termination was either for Good Reason
or occurs within six months following a Change of Control; and (ii) if Melzer
voluntarily terminates his employment with PCT under circumstances which would
require him to give PCT at least six months prior notice of such termination
pursuant to paragraph 3 of the Termination Agreement mentioned below and Melzer
fails to give such notice to PCT, or if PCT terminates Melzer's employment for
Cause, Melzer shall not be entitled to receive any incentive compensation
payment pursuant to this paragraph B or any further payments of incentive
compensation pursuant to paragraph A above. As used in this paragraph B, the
terms "Good Reason," "Change of Control" and "Cause" shall have the meanings
ascribed to those terms in the Termination Agreement dated as of October 19,
1992 between PCT and Melzer, as amended. The "market value" of the Phantom
Shares shall be the average of the daily market price of a share of PCT's
common stock for each of the ten consecutive trading days immediately preceding
<PAGE> 5
5
the date of termination of Melzer's employment, multiplied by 250,000;
provided, however, that if after the commencement of such ten-day period PCT's
common stock trades or is otherwise valued on an ex-dividend basis with respect
to any publicly-announced dividend or other distribution to be paid on said
stock, in lieu of the ten-day period specified above there shall be utilized
the ten-day period which commences on the first day on which PCT's common
stock so trades or is otherwise valued on an ex-dividend basis. If PCT's
common stock is traded on a securities exchange or the Nasdaq-National Market,
the market price for each such trading day shall be the closing price on such
day or, if no sales take place on such day, the average of the closing bid and
asked prices on such day. If PCT's common stock is not traded on a securities
exchange or the Nasdaq-National Market, the market price for each such trading
day shall be determined by agreement of PCT and Melzer or, in the absence of
such agreement within 15 days after the date of such termination, by a
reputable investment banker selected by PCT.
C. If prior to the termination of Melzer's employment with
PCT, PCT merges or consolidates into or with another entity and PCT is not the
survivor, the surviving entity shall pay to Melzer, within 30 days after the
effective date of such merger or consolidation, an amount in cash equal to the
excess of (i) the value placed on a share of PCT's common stock in connection
with such merger or
<PAGE> 6
6
consolidation multiplied by 250,000 over (ii) the amount, if any, then due on
account of accrued and unpaid interest on, and principal of, the Phantom Loan.
If in connection with any such merger or consolidation the consideration
received by PCT's shareholders is not cash but securities of another entity,
then: (a) if the merger or consolidation agreement fixes the dollar value of
such securities to be received by PCT's shareholders, such dollar value, on a
per PCT share basis, shall be utilized in calculating the amount to be paid to
Melzer pursuant to this paragraph C; or (b) if the merger or consolidation
agreement fixes the number, but not the dollar value, of such securities to be
received by PCT's shareholders, then the market value of such securities on the
effective date of such merger or consolidation, on a per PCT share basis, shall
be utilized in calculating the amount to be paid to Melzer pursuant to this
paragraph C, such market value to be determined in the same manner as the
market value of PCT's shares is to be determined pursuant to paragraph B above.
D. To the extent that incentive compensation payable to Melzer
pursuant to this Agreement (including incentive compensation deferred from a
prior taxable year) in any taxable year of PCT would exceed, when added to all
other remuneration (within the meaning of Section 162(m) of the Internal
Revenue Code of 1986, as amended) received by Melzer from PCT for or in respect
of such taxable year, the sum of $1 million and Melzer
<PAGE> 7
7
qualifies as a "covered employee" (as defined in such Section 162(m)), any such
excess shall be deferred to, and paid in the first quarter of, the next
succeeding taxable year of PCT. The provisions of this paragraph D shall cease
to apply effective with any taxable year in which PCT's existence is terminated
or in which PCT merges or consolidates into or with another entity and is not
the surviving entity.
E. Except as contemplated by paragraphs A, B and C above,
Melzer shall not be entitled to receive any payments in respect of the Phantom
Shares.
F. If PCT effects a stock split, combination or
reclassification of its common stock, the number of Phantom Shares shall be
adjusted accordingly to reflect such stock split, combination or
reclassification.
2. CONDITION. In the event that the requisite approval of
shareholders of PCT to amendments to PCT's declaration of trust that are
required for the implementation of PCT's new business plan is not obtained at
PCT's next annual meeting, currently scheduled for December 1995, or any
adjournment thereof, this Agreement shall be and become of no force or effect.
3. Miscellaneous
-------------
A. This Agreement and the benefits hereunder may not be
assigned by Melzer, but shall inure to the benefit of his heirs and legal
representatives. This
<PAGE> 8
8
Agreement shall be binding upon PCT and its successors and assigns.
B. In no event shall Melzer be entitled to receive any
shares of PCT's common stock pursuant to the terms of this Agreement, and
nothing contained herein shall confer on Melzer any rights as a record or
beneficial owner of PCT's common stock.
C. The law of the Commonwealth of Massachusetts shall govern
the construction and interpretation of this Agreement.
D. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
E. PCT may withhold from any amount payable under this
Agreement to Melzer any portion thereof which PCT may be obligated by law or
regulation to withhold from such amount.
F. The headings in this Agreement are for convenience only
and are not to be utilized in the interpretation or construction of this
Agreement.
G. Any amendments to this Agreement must be in writing and
executed by both parties hereto.
H. Any notices which one party may desire to send to the
other hereunder shall be in writing and shall be either personally delivered or
sent by reputable
<PAGE> 9
9
overnight delivery service to the applicable address set forth below:
If to PCT:
One Post Office Square
Boston, Massachusetts 02109
Attn: General Counsel
If to Melzer:
61 Monmouth Street
Brookline, Massachusetts 02146
Notice shall be deemed given upon receipt or upon refusal of the addressee to
accept delivery. Notice of change of address by either party may be given as
provided herein for other notices.
I. The obligations of PCT under or in respect of this
Agreement shall not constitute personal obligations of the Trustees, officers,
shareholders or employees of PCT, or any of them, and shall not create or
involve any personal liability on the part of them, or any of them, and Melzer
and anyone claiming by, through or under Melzer shall look solely to the assets
of PCT for satisfaction of any liability of PCT under or with respect to this
Agreement and shall not to seek recourse against such Trustees, officers,
shareholders or employees, or any of them, or any other personal assets for
such satisfaction.
<PAGE> 10
10
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
PROPERTY CAPITAL TRUST
By: /s/ Walter F. Leinhardt
---------------------------
Walter F. Leinhardt, as Trustee
and not individually
/s/ Robert M. Melzer
--------------------------
Robert M. Melzer
<PAGE> 1
EXHIBIT 21
LIST OF SUBSIDIARIES
July 31, 1995
PCT Office Company
PCT Shopping Center Company
PCT Biscayne Center, Inc.
PCT Clayton, Inc.
East Ridge Apartment Company, Inc.
Friendship Avenue Office Company, Inc.
Chicago Hotel Company, Inc.
San Francisco Hotel Company, Inc.
Cincinnati Hotel Company, Inc.
Houston Southwest Apartments, Inc.
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-8 No. 33-51839 and Form S-8 No. 33-56667) pertaining to the Property
Capital Trust 1992 Employee Stock Option Plan and the Registration Statement
(Form S-8 No. 33-56665) pertaining to the Property Capital Trust 1994 Stock
Option Plan for Non-Employee Trustees and the Property Capital Trust Amended and
Restated Deferred Stock Plan for Non-Employee Trustees of Property Capital Trust
of our report dated August 25, 1995, with respect to the consolidated financial
statements and schedules of Property Capital Trust and of our report dated
February 23, 1995, with respect to the financial statements and schedule of
Property Capital Midwest Associates, L.P. included in the Annual Report (Form
10-K) of Property Capital Trust for the year ended July 31, 1995.
ERNST & YOUNG LLP
Boston, Massachusetts
October 25, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS OF PROPERTY CAPITAL TRUST FOR THE
FISCAL YEAR ENDED JULY 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-START> AUG-01-1994
<PERIOD-END> JUL-31-1995
<EXCHANGE-RATE> 1
<CASH> 5,209,000
<SECURITIES> 0
<RECEIVABLES> 2,179,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,088,000
<PP&E> 171,485,000
<DEPRECIATION> (10,522,000)
<TOTAL-ASSETS> 169,439,000
<CURRENT-LIABILITIES> 3,914,000
<BONDS> 71,816,000
<COMMON> 106,190,000
0
0
<OTHER-SE> (12,481,000)
<TOTAL-LIABILITY-AND-EQUITY> 169,439,000
<SALES> 25,395,000
<TOTAL-REVENUES> 25,828,000
<CGS> 11,014,000
<TOTAL-COSTS> 2,500,000
<OTHER-EXPENSES> 158,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,931,000
<INCOME-PRETAX> 5,225,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 88,000
<CHANGES> 0
<NET-INCOME> 5,313,000
<EPS-PRIMARY> $.59
<EPS-DILUTED> $.59
</TABLE>
