SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED OCTOBER 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM to
COMMISSION FILE NUMBER: 1-7003
PROPERTY CAPITAL TRUST
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-2452367
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
ONE POST OFFICE SQUARE, BOSTON, MASSACHUSETTS 02109
(Address of principal executive offices)
(zip code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(617) 451-2400
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for at least the past 90 days.
Yes X No .
NUMBER OF SHARES OF COMMON SHARES OUTSTANDING AS OF OCTOBER 31, 1995:
9,053,881
<PAGE>
Page 1
PROPERTY CAPITAL TRUST
INDEX
Page
PART I. FINANCIAL INFORMATION
Number
Consolidated Balance Sheet - October 31, 1995
and July 31, 1995 (unaudited) 2
Consolidated Statement of Income -
Three Months Ended October 31, 1995 and 1994 (unaudited) 3
Consolidated Statement of Cash Flows -
Three Months Ended October 31, 1995 and 1994 (unaudited) 4
Consolidated Statement of Shareholders' Equity -
Three Months Ended October 31, 1995 and 1994 (unaudited) 5
Notes to Consolidated Financial Statements (unaudited) 6-7
Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-11
PART II. OTHER INFORMATION
Item 2. Legal Proceedings 12
Item 4. Submission of Matters to a vote of Security Holders 12
Item 6. Exhibits and Reports on Form 8-K 12
<PAGE>
Page 2
PART I. FINANCIAL INFORMATION
PROPERTY CAPITAL TRUST
CONSOLIDATED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
October 31, July 31,
1995 1995
<S> <C> <C>
Assets
Real Estate Investments
Owned Properties held directly by the Trust
(net of accumulated depreciation of $11,440,000
and $10,522,000, respectively) $ 83,305,000 $ 83,985,000
Structured Transactions held directly by the Trust 32,569,000 32,571,000
Investment Partnerships 41,308,000 48,299,000
157,182,000 164,855,000
Allowance for possible investment losses (12,540,000) (14,077,000)
144,642,000 150,778,000
Asset Held for Sale directly by the Trust 10,319,000 10,185,000
154,961,000 160,963,000
Cash and cash equivalents 11,982,000 5,209,000
Interest and rents receivable
Owned Properties held directly by the Trust 1,834,000 1,958,000
Structured Transactions held directly by the Trust 280,000 221,000
Other assets 556,000 1,088,000
$169,613,000 $169,439,000
Liabilities and Shareholders' Equity
Liabilities
Accounts payable and accrued expenses $ 3,489,000 $ 3,207,000
Accrued interest 1,459,000 707,000
Mortgage notes payable 40,103,000 40,145,000
9 3/4% Convertible Subordinated Debentures 2,546,000 2,546,000
10% Convertible Subordinated Debentures 25,125,000 29,125,000
72,722,000 75,730,000
Shareholders' Equity
Common Shares (without par value, unlimited shares
authorized, 9,053,881 issued and outstanding) 106,190,000 106,190,000
Accumulated deficit (9,299,000) (12,481,000)
Total Shareholders' Equity 96,891,000 93,709,000
$169,613,000 $169,439,000
See accompanying notes
</TABLE>
<PAGE>
Page 3
PROPERTY CAPITAL TRUST
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
October 31,
1995 1994
<S> <C> <C>
Revenues
Rents from Owned Properties held directly by the Trust $3,320,000 $4,498,000
Structured Transactions held directly by the Trust
Base income 695,000 663,000
Overage income 495,000 428,000
Income from unconsolidated Investment Partnerships 1,070,000 280,000
5,580,000 5,869,000
Advisory fee income 159,000 82,000
Interest income 89,000 -
5,828,000 5,951,000
Expenses
Expenses on Owned Properties held directly by the Trust 1,492,000 1,742,000
Interest 1,529,000 1,871,000
Depreciation 918,000 1,021,000
General and administrative expenses 866,000 513,000
Professional fees 158,000 51,000
Trustees' fees and expenses 35,000 45,000
4,998,000 5,243,000
Income before Gain on Sale of Real Estate Investments
and Extraordinary Item 830,000 708,000
Gain on Sale of Real Estate Investments 3,501,000 -
Income before Extraordinary Item 4,331,000 708,000
Extraordinary Loss from Extinguishment of Debt (63,000) -
Net Income $4,268,000 $ 708,000
Net Income per Share
Income before Gain on Sale of Real Estate Investments
and Extraordinary Item $0.09 $0.08
Gain on Sale of Real Estate Investments 0.39 -
Income before Extraordinary Item 0.48 0.08
Extraordinary Loss from Extinguishment of Debt (0.01) -
Net Income per Share $0.47 $0.08
Average Shares Outstanding 9,054,000 9,031,000
See accompanying notes
</TABLE>
<PAGE>
Page 4
PROPERTY CAPITAL TRUST
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
October 31,
1995 1994
<S> <C> <C>
Operating Activities
Net Income $ 4,268,000 $ 708,000
Adjustments to Net Income
Gain on sale of real estate investments (3,501,000) -
Depreciation and amortization 1,033,000 1,069,000
Income from unconsolidated Investment Partnerships (1,070,000) (280,000)
Distributions of income from Investment Partnerships 4,520,000 375,000
Changes in assets and liabilities
Decrease in interest and rents receivable 65,000 213,000
Decrease (increase) in other assets, net 417,000 (253,000)
Increase (decrease) in accounts payable and
accrued expenses and accrued interest 1,034,000 (186,000)
Net Cash Provided by Operating Activities 6,766,000 1,646,000
Investing Activities
Owned Properties held directly by the Trust
Additions (372,000) (3,140,000)
Structured Transactions held directly by the Trust
Repayments 2,000 2,000
Investment Partnerships
Distributions in excess of income 5,505,000 -
Net Cash Provided by (Used in) Investing Activities 5,135,000 (3,138,000)
Financing Activities
Redemption of 10% Convertible Subordinated Debentures (4,000,000) -
Proceeds from bank note payable, net - 2,700,000
Cash dividends paid (1,086,000) (813,000)
Scheduled amortization of mortgage notes payable (42,000) (121,000)
Net Cash (Used in) Provided by Financing Activities (5,128,000) 1,766,000
Net Increase in Cash and Cash Equivalents 6,773,000 274,000
Cash and Cash Equivalents at Beginning of Period 5,209,000 720,000
Cash and Cash Equivalents at End of Period $11,982,000 $994,000
</TABLE>
See accompanying notes
<PAGE>
Page 5
PROPERTY CAPITAL TRUST
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
October 31,
1995 1994
<S> <C> <C>
Common Shares
Balance at beginning and end of period $106,190,000 $106,060,000
Accumulated Deficit
Balance at beginning of period (12,481,000) (14,357,000)
Net income 4,268,000 708,000
Cash dividends paid (1,086,000) 813,000)
Balance at end of period (9,299,000) (14,462,000)
Total Shareholders' Equity $ 96,891,000 $ 91,598,000
Number of Common Shares
Common Shares issued and outstanding
at beginning and end of period 9,053,881 9,030,585
</TABLE>
See accompanying notes
<PAGE>
Page 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
1.BASIS OF PRESENTATION
In the opinion of management of Property Capital Trust (the "Trust"), the
accompanying unaudited consolidated financial statements contain all
adjustments, consisting of normal and recurring adjustments, necessary to
present fairly the Trust's financial position as of October 31, 1995 and the
results of its operations and its cash flows for the periods ended October 31,
1995 and 1994.
Operating results for the three months ended October 31, 1995 are not
necessarily indicative of the results that may be expected for the remainder of
fiscal 1996. The information contained in these financial statements should be
read in conjunction with the Trust's 1995 Annual Report on Form 10-K filed with
the Securities and Exchange Commission on October 30, 1995.
2. INVESTMENT PARTNERSHIPS
Certain of the Trust's investments have been made through partnerships, or a
participation agreement, in which the Trust is the general partner or lead
lender and other institutional investors are limited partners or participants
(the "Investment Partnerships"). Based upon generally accepted accounting
principles the Trust uses the equity method to account for its Investment
Partnerships.
During the quarter ended October 31, 1995, three of the Trust's Investment
Partnerships disposed of investments. PCA Southwest Associates Limited
Partnership ("Southwest"), an Investment Partnership which owned 2,848
apartments in Houston, Texas, sold the Chimney Rock project (714 units) to an
unrelated party resulting in a gain to the Trust of $1,000. The Trust has a
45.45% general partner interest in Southwest. PCA Crossroads Associates, Ltd.
("Crossroads"), an Investment Partnership which owned the land underlying the
Crossroads Mall in Boulder, Colorado, sold its investment to its lessee
resulting in a gain to the Trust of $3,500,000. The Trust has a 25.0% general
partner interest in Crossroads. In August 1995, PCA Canyon View Associates
Limited Partnership ("Canyon View"), an Investment Partnership which held
Structured Transactions in Phases I and II of the Canyon View apartments in San
Ramon, California, settled certain litigation. The Investment Partnership, of
which the Trust owns a 23.8% general partner 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. At that time, the Trust
wrote down its investment in this Investment Partnership by $1,537,000. This
write-down was charged against the Trust's previously established allowance for
possible investment losses.
<PAGE>
Page 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
A Condensed Combined Summary of Operations for the unconsolidated Investment
Partnerships for the periods indicated follows:
THREE MONTHS ENDED
<TABLE>
<CAPTION>
Three Months Ended
October 31,
1995 1994
<S> <C> <C>
REVENUES
Rents from Owned Properties $ 5,984,000 $ 5,055,000
Structured Transactions
Base income 1,179,000 672,000
Overage income 115,000 108,000
Other income 41,000 17,000
7,319,000 5,852,000
EXPENSES
Owned Properties expenses 3,446,000 3,486,000
Depreciation 379,000 1,006,000
Interest 529,000 321,000
Other 392,000 371,000
4,746,000 5,184,000
INCOME BEFORE GAIN ON SALE OF REAL
ESTATE INVESTMENTS 2,573,000 668,000
GAIN ON SALE OF REAL ESTATE INVESTMENTS 14,002,000 -
NET INCOME $16,575,000 $668,000
INCOME BEFORE GAIN ON SALE OF REAL
ESTATE INVESTMENTS
Trust's share of income before gain
on sale of real estate investments $1,070,000 $280,000
Limited partners' share of income
before gain on sale of real
estate investments 1,503,000 388,000
GAIN ON SALE OF REAL ESTATE INVESTMENTS
Trust's share of gain on
sale of real estate investments 3,501,000 -
Limited partners' share of
gain on sale of real estate investments 10,501,000 -
NET INCOME $16,575,000 $ 668,000
</TABLE>
3. INDEBTEDNESS
During the quarter ended October 31, 1995, the Trust redeemed $4,000,000
principal amount of 10% Convertible Subordinated Debentures at their face
amount.. The Trust recognized an extraordinary loss from the extinguishment of
debt of $63,000 due to the write-off of the debentures issue costs.
<PAGE>
Page 8
ITEM 1. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF
OPERATIONS
REVISED BUSINESS PLAN
For the past several years, the Trust's business plan had focused on maximizing
shareholder values 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 was 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 concluded that the best
means to maximize shareholder values is to provide for an orderly disposition
of the Trust's investments (the "revised business plan"). 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 Trust's stock price is not reflective of the value of the
Trust's assets. The Trustees anticipate that the revised business plan will
involve dispositions of Owned Properties and Structured Transactions on a
property-by-property basis, although the Trust will consider bulk sales and
other opportunities that may arise which expedite the disposition process. At
the Trust's Annual Meeting of Shareholders held on December 15, 1995, the
Trust's shareholders ratified the new business plan and approved certain
amendments to the Trust's Declaration of Trust necessary for the implementation
of the plan.
To the extent the Trust receives net proceeds from sales of its properties, the
Trust intends to utilize such net proceeds to retire debt and/or make
distributions to shareholders. No assurances can be given as to the time
required to carry out the plan (although the Trustees currently anticipate that
the plan can be fully implemented within three to five years) or the prices at
which the properties can be sold.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The Trust's debt at October 31, 1995 was $67,774,000 as compared to $71,816,000
at July 31, 1995. The Trust's debt to equity ratio decreased to .70x at
October 31, 1995 from .77x at July 31, 1995. The decrease in the Trust's debt
was primarily due to the redemption of $4,000,000 aggregate principal amount of
the Trust's 10% Convertible Subordinated Debentures on September 1, 1995 at
their face amount. The improvement in the debt to equity ratio is due to the
redemption of the 10% debentures and an increase in shareholders' equity as a
result of a $3,500,000 gain on the sale of Crossroads Mall.
The Trust's bank note payable, which has no outstanding balance, is a revolving
bank line that provided available credit of $10,000,000 at October 31, 1995,
an amount which the Trust believes is adequate to meet its working capital
requirements for the foreseeable future.
Subsequent to the end of the quarter, on December 1, 1995, the Trust redeemed
another $8,000,000 of its 10% Convertible Subordinated Debentures from the
proceeds of the sale of certain real estate investments. Additionally, the
Trust has called for the redemption of another $3,000,000 of the 10%
Convertible Subordinated Debentures on January 5, 1996 at their face amount.
Management believes that with cash provided by operating activities retained
after dividends and the Trust's borrowing capacity under its existing bank
line, the Trust will be able to meet its fiscal 1996 cash requirements for
anticipated capital expenditures on Owned Properties held directly by the Trust
and a $300,000 funding requirement on a Structured Transaction held directly by
the Trust. The Trust currently expects that these cash requirements will total
approximately $1,700,000 during the remainder of fiscal 1996. Further, the
Trust believes that these same sources will be sufficient to fund its capital
expenditure requirements and anticipated long-term liquidity requirements for
the foreseeable future. As discussed above, the Trust intends to use the
proceeds received from the sale of its real estate investments to retire debt
and/or make distributions to shareholders.
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, sales of properties and extraordinary 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 as presented in the Trust's unaudited financial
statements. Funds from Operations does not represent cash provided by
operating activities in accordance with generally accepted accounting
principles and should not be considered as a substitute for net income as a
measure of results of operations or for cash provided by operating activities
as a measure of liquidity. Funds from Operations was calculated by the Trust
as follows:
<PAGE>
Page 9
ITEM 1. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF
OPERATIONS (continued)
<TABLE>
<CAPTION>
Three Months Ended
OCTOBER 31,
1995 1994
<S> <C> <C>
Income before Gain on Sale of
Real Estate Investments and
Extraordinary Item $830,000 $708,000
Depreciation on Owned Properties
held directly by the Trust 918,000 1,021,000
Trust's share of depreciation
on unconsolidated Investment
Partnerships 161,000 505,000
Non-recurring item - (404,000)(1)
$1,909,000 $1,830,000
</TABLE>
(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.
REVIEW OF SIGNIFICANT REAL ESTATE ACTIVITY FOR THE QUARTER
APARTMENTS
At July 31, 1995 the Trust had a $3,277,000 investment in PCA Canyon View
Associates Limited Partnership, 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 subordinate
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 of
Phase I. In August 1995, 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 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 resulting from these transactions was $1,537,000 which had been previously
provided for in the Trust's allowance for possible investment losses. At this
time management is evaluating potential strategies for Phase II, which is now
wholly owned by the Investment Partnership.
In September 1995, PCA Southwest Associates Limited Partnership, an Investment
Partnership in which the Trust owns a 45.45% general partner interest, sold the
Chimney Rock apartments, a 714 unit complex, to an unrelated third party. In
July 1995 the Trust reclassified this asset to assets held for sale, and wrote
the property down by $54,000. A $1,000 gain was realized by the Trust on the
sale. As previously reported,PCA Southwest Associates Limited Partnership was
in default under the terms of the first mortgage on Telegraph Hill - Phase B, a
259 unit complex, due to nonpayment of principal and interest. Management was
unable to restructure this $2,487,000 mortgage loan and therefore transferred
title of this asset to the first mortgagee in December 1995. Additionally,
subsequent to the end of the quarter, PCA Southwest Associates Limited
Partnership prepaid in full the $2,925,000 first mortgage on St. Charles -
Phase A, at a $154,000 discount.
<PAGE>
Page 10
ITEM 1. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF
OPERATIONS (continued)
Subsequent to the end of the quarter the Trust granted its lessee an option to
repurchase the land underlying the Bluffs II apartments for $2,150,000. The
option expires May 31, 1996. The Trust's investment in this Structured
Transaction was $825,000 at October 31, 1995. For the year ended July 31, 1995
the Trust earned $215,400 on this investment. At this time the Trust is unable
to predict whether this option will be exercised.
OFFICE BUILDINGS
The Trust currently has three office properties classified as assets held for
sale. Citibank Office Plaza - Oak Brook was reclassified to Asset Held for
Sale directly by the Trust at July 31, 1995 and was written down to its
expected sales proceeds. The Trust has executed a letter of intent with an
institution for the sale of this property, which sale is still subject to
negotiation of an acceptable sales contract and the completion of the
purchaser's due diligence. No further loss on this investment is anticipated.
The other two office buildings held for sale, Financial Plaza and College Hills
8, located in Overland Park, Kansas, are held in an Investment Partnership and
are currently being marketed.
SHOPPING CENTERS
The Investment Partnership which owned the land under the Crossroads Mall in
Boulder, Colorado, sold its investment back to its lessee. The Trust received
approximately $5,500,000 of sales proceeds on its $2,000,000 investment.
Loehmann's Fashion Island, in Aventura, Florida, an Owned Property held
directly by the Trust, suffered a decrease in the leased rate from 90% at July
31, 1995 to 87% at October 31, 1995. As previously reported, the Trust has
retained a new property management and leasing firm. In the spring of 1996
management intends to reevaluate its strategy for this property based upon
leasing performance and expectations at that time.
Plaza West Retail Center, in Overland Park, Kansas, which was reclassified to
assets held for sale at July 31, 1995, is currently being marketed for sale.
HOTELS
As previously reported, the Trust had 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 quarter this sale closed. The Trust
had previously restructured this transaction to provide for a reduced annual
return of $160,000. The loss on sale has been fully provided for in the
Trust's allowance for possible investment losses.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED OCTOBER 31, 1995 VERSUS THE
THREE MONTHS ENDED OCTOBER 31, 1994
REVENUES
Rents from Owned Properties held directly by the Trust (base rent plus expense
reimbursements) decreased 26% for the three months ended October 31, 1995 as
compared to the same period in the prior year, primarily due to the Trust's
sale of the 6110 Executive Boulevard office building in January 1995, and the
receipt by the Trust in the comparable period of the prior year of $404,000 of
non-recurring income related to the settlement of a bankruptcy claim filed by
the Trust against a former tenant at Loehmann's Fashion Island. Rents from
Owned Properties held directly by the Trust includes rents from Citibank Office
Plaza -Oak Brook which was reclassified to Asset Held for Sale directly by the
Trust at July 31, 1995.
Base income from Structured Transactions held directly by the Trust (land rent
and mortgage interest) increased 5% for the three months ended October 31, 1995
as compared to the same period in the prior year, primarily due to increased
income from the Grosvenor Airport Inn while under option for repurchase by its
lessee.
Overage income from Structured Transactions held directly by the Trust
increased 16% for the three months ended October 31, 1995 as compared to the
same period in the prior year, primarily due increased overage income from the
Sandpiper Cove apartments and the City Centre Holiday Inn investments.
<PAGE>
Page 11
ITEM 1. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF
OPERATIONS (continued)
The Trust's share of income from unconsolidated Investment Partnerships
increased 282% for the three months ended October 31, 1995 as compared to the
same period in the prior year, primarily due to the increased net income
recorded by the Trust from Property Capital Midwest Associates, L.P. When the
assets were reclassified to assets held for sale they were written down to
their expected sales proceeds; therefore, deprecation is no longer taken on
these properties. The increase is also due to improved performance of certain
properties in PCA Southwest Associates Limited Partnership's portfolio.
Additionally, as previously reported, PCA Canyon View Associates Limited
Partnership settled pending litigation and the partnership received certain
income which had been previously written off by the Trust.
Advisory fee income increased 94% for the three months ended October 31, 1995
as compared to the same period in the prior year primarily due to increased
distributions paid by Property Capital Midwest Associates, L.P., one of the
Trust's Investment Partnerships. Interest income was earned by the Trust in
the amount of $89,000 for the three months ended October 31, 1995 primarily due
to the short-term investment by the Trust of sales proceeds during the period
of time before debentures were redeemed.
EXPENSES
Expenses on Owned Properties held directly by the Trust decreased 14% for the
three months ended October 31, 1995 as compared to the same period in the prior
year due to the sale of 6110 Executive Boulevard. Expenses on Owned Properties
held directly by the Trust includes expenses from Citibank Office Plaza - Oak
Brook which was reclassified to Asset Held for Sale directly by the Trust at
July 31, 1995.
Interest expense decreased 18% for the three months ended October 31, 1995 as
compared to the same period in the prior year due to the sale of 6110 Executive
Boulevard and the redemption of 10% Convertible Subordinated Debentures, offset
by an increase in interest expense related to Loehmann's Fashion Island.
Depreciation expense decreased 10% for the three months ended October 31, 1995
as compared to the same periods in the prior year, primarily due to sale of
6110 Executive Boulevard in January 1995, the elimination of depreciation on
Citibank Office Plaza - Oak Brook, due to the reclassification of this asset to
Asset Held for Sale directly by the Trust, offset in part by the write-off of
certain tenant improvements at Loehmann's Fashion Island due to tenant
moveouts.
General and administrative expenses increased 69% due to the accrual of
severance arrangements for the Trust's employees provided as part of the new
business plan. Professional fees increased to 210% for the three months ended
October 31, 1995 due to the legal fees associated with the Trust's adoption of
its new business plan.
GAIN ON SALE OF REAL ESTATE INVESTMENTS
Net income for the first quarter of fiscal 1996 included a gain of $3,500,000
($.39 per share) on the sale of the land underlying Crossroads Mall located in
Boulder, Colorado and a gain of $1,000 on the sale of the Chimney Rock
apartments. In the comparable quarter last year there were no gains or losses
on the sale of real estate investments.
EXTRAORDINARY LOSS FROM EXTINGUISHMENT OF DEBT
The Trust redeemed $4,000,000 of its 10% Convertible Subordinated Debentures at
face value during the quarter and wrote off the related issuance costs to incur
an Extraordinary Loss on the Extinguishment of Debt in the amount of $63,000
($.01 per share).
NET INCOME
Net Income for the three months ended October 31, 1995 was $4,268,000 ($.47 per
share) as compared to $708,000 ($.08 per share) for the same period in the
prior year.
DIVIDENDS
The dividend declared for the first quarter of fiscal 1996 was $.12 per share
versus $.09 per share for the same period in the prior year. The Trust pays
dividends approximately 55 days following the end of each fiscal quarter.
<PAGE>
Page 12
PART II. OTHER INFORMATION
ITEM 2. LEGAL PROCEEDINGS
In November 1994, a tenant that occupies approximately 28,000 square feet of
College Hills 3, a 37,700 square foot office building located in Overland Park,
Kansas, 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 claimed that the Trust and the Investment Partnership
violated the terms of the tenant's space leases. The tenant has alleged that
it had an oral agreement with the Investment Partnership's predecessor-in-title
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 in a pleading filed by the tenant the tenant has also asserted that it is
entitled to damages in excess of $1,000,000. This 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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None.
<PAGE>
Page 13
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Trust
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
PROPERTY CAPITAL TRUST
REGISTRANT
Robert M. Melzer
President and Chief Executive Officer
Date (Principal Financial Officer)
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<Period Start> Aug-01-1995
<Period End> Oct-31-1995
<Period Type> YEAR
<Exchange Rate> 1
<CASH> 11,982,000
<SECURITIES> -0-
<RECEIVABLES> 2,114,000
<ALLOWANCES> -0-
<INVENTORY> -0-
<Current Assets> 556,000
<PP&E> 166,401,000
<DEPRECIATION> (11,440,000)
<Total Assets> 169,613,000
<Current Liabilities> 4,948,000
<BONDS> 67,774,000
-0-
-0-
<COMMON> 106,190,000
<Other SE> (9,299,000)
<Total Liability & Equity> 169,613,000
<SALES> 9,081,000
<Total Revenues> 9,329,000
<CGS> 2,410,000
<Total Costs> 3,434,000
<Other Expenses> 35,000
<Loss Provision> -0-
<Interest Expense> 1,529,000
<Income Pretax> 4,331,000
<Income Tax> -0-
<Income Continuing> -0-
<DISCONTINUED> -0-
<EXTRAORDINARY> (63,000)
<CHANGES> -0-
<Net Income> 4,268,000
<EPS-PRIMARY> $.47
<EPS-DILUTED> $.47
</TABLE>
