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 MARCH 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD ____________
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)
101 FEDERAL STREET, BOSTON, MASSACHUSETTS 02110
-----------------------------------------------
(Address of principal executive offices)
(zip code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(617) 737-0100
--------------
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 MAY 7, 1997: 9,394,274
---------
<PAGE>
PROPERTY CAPITAL TRUST
INDEX
Page
PART I. FINANCIAL INFORMATION Number
------------------------------ ------
Consolidated Balance Sheet - March 31, 1997
and December 31, 1996 (unaudited) 2
Consolidated Statement of Income -
Three Months Ended March 31, 1997 and 1996 (unaudited) 3
Consolidated Statement of Cash Flows -
Three Months Ended March 31, 1997 and 1996 (unaudited) 4
Consolidated Statement of Shareholders' Equity -
Three Months Ended March 31, 1997 and 1996 (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 4. None 12
Item 6. Exhibits and Reports on Form 8-K 12
1
<PAGE>
PART I. FINANCIAL INFORMATION
PROPERTY CAPITAL TRUST
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
------------- -------------
ASSETS
<S> <C> <C>
Real Estate Investments
Owned Properties held directly by the Trust
(net of accumulated depreciation of $2,468,000
and $7,846,000, respectively) $ 9,994,000 $ 52,001,000
Structured Transactions held directly by the Trust 24,492,000 28,195,000
Investment Partnerships 1,501,000 1,528,000
------------- -------------
35,987,000 81,724,000
Assets Held for Sale directly by the Trust 60,573,000 16,984,000
------------- -------------
96,560,000 98,708,000
Cash and cash equivalents 4,553,000 1,648,000
Interest and rents receivable
Owned Properties held directly by the Trust 1,349,000 1,611,000
Structured Transactions held directly by the Trust 131,000 147,000
Other assets 1,250,000 1,180,000
------------- -------------
$ 103,843,000 $ 103,294,000
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Accounts payable and accrued expenses $ 5,925,000 $ 5,024,000
Accrued interest 352,000 248,000
Mortgage notes payable 36,602,000 36,650,000
------------- -------------
42,879,000 41,922,000
------------- -------------
Shareholders' Equity
Common Shares (without par value, unlimited shares
authorized, 9,568,220 and 9,400,860 issued and
9,378,274 and 9,206,933 outstanding, respectively) 108,518,000 108,053,000
Accumulated deficit (46,218,000) (45,319,000)
------------- -------------
62,300,000 62,734,000
Less cost of Treasury Shares (1,336,000) (1,362,000)
------------- -------------
Total Shareholders' Equity 60,964,000 61,372,000
------------- -------------
$ 103,843,000 $ 103,294,000
============= =============
</TABLE>
See accompanying notes
2
<PAGE>
PROPERTY CAPITAL TRUST
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------------
1997 1996
----------- -----------
REVENUES
<S> <C> <C>
Rents from Owned Properties held directly by the Trust $ 3,071,000 $ 2,809,000
Structured Transactions held directly by the Trust
Base income 616,000 624,000
Overage income 290,000 557,000
Income from unconsolidated Investment Partnerships 5,000 833,000
----------- -----------
3,982,000 4,823,000
Interest income 154,000 89,000
Advisory fee income 2,000 74,000
----------- -----------
4,138,000 4,986,000
----------- -----------
EXPENSES
Expenses on Owned Properties held directly by the Trust 1,382,000 1,423,000
Depreciation 931,000 1,143,000
General and administrative expenses 466,000 846,000
Interest 739,000 1,143,000
Professional fees 75,000 92,000
Trustees' fees and expenses 23,000 34,000
----------- -----------
3,616,000 4,681,000
----------- -----------
INCOME BEFORE GAIN ON SALE OF REAL ESTATE INVESTMENTS
AND EXTRAORDINARY ITEM 522,000 305,000
GAIN ON SALE OF REAL ESTATE INVESTMENTS 18,577,000 432,000
----------- -----------
INCOME BEFORE EXTRAORDINARY ITEM 19,099,000 737,000
EXTRAORDINARY LOSS FROM EXTINGUISHMENT OF DEBT -- (211,000)
----------- -----------
NET INCOME $19,099,000 $ 526,000
=========== ===========
NET INCOME PER SHARE
INCOME BEFORE GAIN ON SALE OF REAL ESTATE INVESTMENTS
AND EXTRAORDINARY ITEM $ 0.05 $ 0.03
GAIN ON SALE OF REAL ESTATE INVESTMENTS 1.95 0.05
----------- -----------
INCOME BEFORE EXTRAORDINARY ITEM 2.00 0.08
EXTRAORDINARY LOSS FROM EXTINGUISHMENT OF DEBT -- (0.02)
----------- -----------
NET INCOME PER SHARE $ 2.00 $ 0.06
=========== ===========
AVERAGE SHARES 9,520,000 9,085,000
=========== ===========
</TABLE>
See accompanying notes
3
<PAGE>
PROPERTY CAPITAL TRUST
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------------
1997 1996
------------ ------------
OPERATING ACTIVITIES
<S> <C> <C>
Net Income $ 19,099,000 $ 526,000
Adjustments to Net Income
Gain on sale of real estate investments (18,577,000) (432,000)
Extraordinary loss from extinguishment of debt -- 211,000
Depreciation and amortization 976,000 1,181,000
Income from unconsolidated Investment Partnerships (5,000) (833,000)
Distributions of income from Investment Partnerships 5,000 808,000
Changes in assets and liabilities
Decrease in interest and rents receivable 278,000 650,000
Increase in other assets, net (115,000) (16,000)
Increase in accounts payable and accrued
expenses and accrued interest 1,031,000 1,024,000
------------ ------------
Net Cash Provided by Operating Activities 2,692,000 3,119,000
------------ ------------
INVESTING ACTIVITIES
Owned Properties held directly by the Trust
Additions (813,000) (133,000)
Dispositions -- 10,828,000
Structured Transactions held directly by the Trust
Dispositions/repayments 20,580,000 3,000
Additions -- (600,000)
Investment Partnerships
Distributions in excess of income 27,000 219,000
------------ ------------
Net Cash Provided by Investing Activities 19,794,000 10,317,000
------------ ------------
FINANCING ACTIVITIES
Cash dividends paid (19,998,000) (1,091,000)
Scheduled amortization of mortgage notes payable (48,000) (43,000)
Proceeds from exercise of stock options 465,000 101,000
Redemption of 10% Convertible Subordinated Debentures -- (14,000,000)
------------ ------------
Net Cash Used in Financing Activities (19,581,000) (15,033,000)
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,905,000 (1,597,000)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,648,000 5,570,000
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4,553,000 $ 3,973,000
============ ============
</TABLE>
See accompanying notes
4
<PAGE>
PROPERTY CAPITAL TRUST
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------------
1997 1996
------------- -------------
COMMON SHARES
<S> <C> <C>
Balance at beginning of period $ 108,053,000 $ 106,201,000
Common Shares issued in payment of deferred
Trustees' compensation -- 78,000
Stock options exercised 465,000 101,000
------------- -------------
Balance at end of period 108,518,000 106,380,000
------------- -------------
ACCUMULATED DEFICIT
Balance at beginning of period (45,319,000) (9,497,000)
Net income 19,099,000 526,000
Cash dividends paid (19,998,000) (1,091,000)
------------- -------------
Balance at end of period (46,218,000) (10,062,000)
------------- -------------
TREASURY SHARES
Balance at beginning of period (1,362,000) --
Distribution to Trustees of Treasury Shares included in Rabbi
Trust for the benefit of Trustees (3,981 Treasury Shares) 26,000 --
------------- -------------
Balance at end of period (1,336,000) --
------------- -------------
TOTAL SHAREHOLDERS' EQUITY $ 60,964,000 $ 96,318,000
============= =============
NUMBER OF COMMON SHARES
Common Shares issued at beginning of period 9,400,860 9,055,795
Common Shares issued in payment of deferred
Trustees' compensation -- 12,989
Stock options exercised 167,360 21,000
------------- -------------
Common Shares Issued at End of Period 9,568,220 9,089,784
============= =============
</TABLE>
See accompanying notes
5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
On January 15, 1997, the Trust elected to change its fiscal year from a year
ended July 31 to the calendar year, effective January 1, 1997.
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 March 31, 1997 and the
results of its operations and its cash flows for the periods ended March 31,
1997 and 1996.
Operating results for the three months ended March 31, 1997 are not indicative
of the results that may be expected for the remainder of calendar 1997. The
information contained in these financial statements should be read in
conjunction with the Trust's 1996 Annual Report on Form 10-K filed with the SEC
on October 30, 1996, as amended by the Trust's Amendment No. 1 on Form 10-K/A
filed with the SEC on November 4, 1996.
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, Earnings per Share, which is required to be adopted on December 31, 1997.
At that time, the Trust will be required to change the method currently used to
compute earnings per share and to restate all prior periods. The impact of
Statement 128 on the calculation of earnings per share for these periods is not
expected to be material.
VALUATION OF REAL ESTATE INVESTMENTS
Real estate investments are carried at cost, net of accumulated depreciation and
any impairment losses. On August 1, 1996, the Trust adopted FASB 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
specific long-lived assets used in operations where indicators of impairment are
present and the undiscounted cash flows (net realizable value) estimated to be
generated by those assets are less than the assets' carrying amount. Prior to
August 1, 1996, the Trust's real estate investments were carried net of an
allowance for possible investment losses. The Trust's allowance for possible
investment losses was based upon management's estimate of the net realizable
value of each investment, and to the extent this was less than the carrying
value of an investment, an allowance for possible investment losses was
established. The adoption of Statement 121 did not have any effect on the
Trust's financial position or results of operations. However, the carrying
values of certain real estate assets were written down against available
reserves.
2. REAL ESTATE INVESTMENTS
STRUCTURED TRANSACTIONS HELD DIRECTLY BY THE TRUST
Investments in land leasebacks and/or mortgage loans are classified as
Structured Transactions.
In January 1997, the Trust sold its land investment in the Chicago City Centre
Holiday Inn to an unrelated third party for $20,577,000. The Trust's investment
in this property was $2,000,000, resulting in a gain to the Trust of
$18,577,000.
INVESTMENT PARTNERSHIPS
Certain of the Trust's investments have been made through partnerships in which
the Trust is the general partner and other institutional investors are limited
partners (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 March 31, 1996, Property Capital Midwest Associates,
L.P. ("Midwest"), an Investment Partnership which owned four investments in
Overland Park, Kansas, reclassified its investments in College Hills 3, College
Hills 8 and Financial Plaza to Assets Held for Sale. At that time, the Trust
further wrote down its investment in Financial Plaza by $1,255,000. This
write-down was charged against the Trust's previously established allowance for
possible investment losses. In March 1996, College Hills 3 was sold to an
unrelated third party. The Trust has a 53.3% general partner interest in
Midwest. In addition, during the quarter ended March 31, 1996, PCA Southwest
Associates Limited Partnership ("Southwest"), an Investment Partnership which
owned 1,875 apartments in Houston, Texas, reclassified its investments in St.
Charles and Boardwalk to Assets Held for Sale, resulting in a write-down by the
Trust of $710,000. This write-down was charged against the Trust's previously
established allowance for possible investment losses. The Trust, through a
wholly owned subsidiary, has a 45.5% general partner interest in Southwest.
6
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
A Condensed Combined Summary of Operations for the unconsolidated Investment
Partnerships for the periods indicated follows:
Investment Partnerships
CONDENSED COMBINED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------------
1997 1996
----------- -----------
REVENUES
<S> <C> <C>
Rents from Owned Properties $ 1,023,000 $ 4,904,000
Structured Transactions
Base income -- 465,000
Overage income -- 42,000
Other income 23,000 39,000
----------- -----------
1,046,000 5,450,000
----------- -----------
EXPENSES
Owned Properties expenses 692,000 2,771,000
Depreciation 114,000 264,000
Interest 207,000 392,000
Other 20,000 274,000
----------- -----------
1,033,000 3,701,000
----------- -----------
INCOME BEFORE LOSS ON REAL ESTATE INVESTMENTS 13,000 1,749,000
LOSS ON REAL ESTATE INVESTMENTS
Loss on sale of real estate investments -- (71,000)
Write-down of real estate investments -- (3,917,000)
----------- -----------
NET INCOME (LOSS) $ 13,000 ($2,239,000)
=========== ===========
INCOME BEFORE LOSS ON REAL ESTATE INVESTMENTS
Trust's share of income before loss on real
estate investments $ 5,000 $ 833,000
Limited partners' share of income before loss
on real estate investments 8,000 916,000
LOSS ON REAL ESTATE INVESTMENTS
Trust's share of loss on sale of real estate investments -- (38,000)
Limited partners' share of loss on sale of real estate
investments -- (33,000)
Trust's share of write-down of real estate investments
(previously recorded by the Trust) -- (1,965,000)
Limited Partners' share of write-down of real estate
investments -- (1,952,000)
----------- -----------
NET INCOME (LOSS) $ 13,000 ($2,239,000)
=========== ===========
</TABLE>
7
<PAGE>
ITEM 1. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
BUSINESS PLAN
The Trust currently operates under a business plan (the "Business Plan") which
provides for the orderly disposition of all of the Trust's investments. The
Business Plan contemplates the disposition 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 Business Plan and approved certain
amendments to the Trust's Declaration of Trust necessary for its implementation.
The Trust has utilized net proceeds from the sales of its properties to retire
debt, make distributions to the Trust's shareholders and to satisfy the Trust's
cash needs. The Trust intends to utilize future net sales proceeds to make
distributions to its shareholders and to satisfy its cash needs.
At March 31, 1997, the Trust had 11 investments remaining. Although no
assurances can be given as to the time required to sell all of the Trust's
investments or the amount of net proceeds that will be realized from the sale
thereof, management estimated on August 23, 1996, that the bulk of the Trust's
remaining investments will be sold by July 1998 and that the amount of
distributions its shareholders will receive after August 23, 1996 from the
disposition of the Trust's investments will be approximately $9.25 per share.
When added to the $2.75 per share of disposition proceeds distributed prior to
August 1996, this resulted in an increase in management's estimate of total
distributions to approximately $12.00 per share from the approximately $10.00
per share estimated to be distributed in the Trust's 1995 Proxy Statement. To
date the Trustees have declared $5.95 per share in special dividends (inclusive
of the $.20 per share payable May 23, 1997). The foregoing statements are
forward-looking statements and are estimates subject to a number of factors and
other uncertainties, certain of which are described below. See "Special Note
Regarding Forward-Looking Statements."
As a result of the implementation of the Business Plan, the disposition of
investments and the payment of special dividends from proceeds of the sale of
the Trust's investments, certain operating results which have historically been
utilized to judge the Trust's financial performance (such as Funds from
Operations and Net Income) have decreased and are expected to continue to
decrease. Shareholders are urged to read the following discussion of Results of
Operations with this fact in mind.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The Trust's debt at March 31, 1997 was $36,602,000 versus $36,650,000 at
December 31, 1996. The Trust's debt to equity ratio was .60x at March 31, 1997
and December 31, 1996. All of the Trust's debt consists of first mortgage debt
on its Owned Properties. The Trust has a revolving bank line which the Trust
believes is adequate to meet its working capital requirements for the
foreseeable future. At March 31, 1997 there were no outstanding borrowings under
the line. The bank line was reduced from $10,000,000 to $5,000,000 during the
quarter ended March 31, 1997.
Funds from Operations
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 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 as presented in
the Trust's unaudited consolidated 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.
8
<PAGE>
ITEM 1. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
As provided for in the Business Plan the Trust is disposing of all of its
assets. As a result, the Trust's funds from operations and net income are
expected to decline as assets are sold and the net proceeds are distributed to
shareholders. Funds from operations was calculated by the Trust as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------
1997 1996
---------- ----------
<S> <C> <C>
Income before Gain on Sale of Real Estate Investments
and Extraordinary Item $ 522,000 $ 305,000
Depreciation of Owned Properties held directly by the Trust 931,000 1,143,000
Trust's share of depreciation from unconsolidated Investment
Partnerships 52,000 101,000
---------- ----------
$1,505,000 $1,549,000
========== ==========
</TABLE>
REVIEW OF SIGNIFICANT REAL ESTATE ACTIVITY DURING THE QUARTER
At March 31, 1997, the Trust's principal asset was its $96,560,000 portfolio of
real estate investments. At March 31, 1997, the portfolio consisted of 11
properties, comprised of four apartment complexes, three office buildings, three
shopping centers and one hotel. Set forth below is a discussion of significant
changes in the portfolio during the quarter.
APARTMENTS
Telegraph Hill apartments, located in Houston Texas and held in an Investment
Partnership, was reclassified to an Asset Held for Sale at March 31, 1997.
Management is currently in negotiation with a prospective purchaser.
OFFICE BUILDINGS
One Park West, located in Chevy Chase, Maryland, was originally offered for sale
in the summer of 1996. At that time, the Trust was not satisfied with the prices
being offered by prospective purchasers and the offering was withdrawn.
Subsequently, the Trust leased a significant amount of space that was becoming
available. The property is currently being remarketed for sale and a higher
sales price is anticipated.
Citibank Office Plaza - Schaumburg, located in Schaumburg, Illinois, was
reclassified to an Asset Held for Sale directly by the Trust at March 31, 1997.
The Trust is currently negotiating with a prospective purchaser.
SHOPPING CENTERS
Loehmann's Fashion Island, located in Aventura, Florida, was reclassified to an
Asset Held for Sale directly by the Trust at March 31, 1997. The Trust is
currently negotiating with prospective purchasers.
The Trust is currently in discussions with the lessee of Lakeside Shopping
Center located in Burbank, California, regarding their repurchase of the Trust's
land investment. A sale is anticipated in the second quarter.
9
<PAGE>
ITEM 1. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
HOTELS
In January 1997, the Trust sold its land investment in City Centre Holiday Inn
located in Chicago, Illinois, for $20,577,000. The Trust's investment in this
project was $2,000,000 resulting in a gain to the Trust of $18,577.000. This
gain had been fully anticipated in the Trust's August 23, 1996 statement of the
aggregate amount of future special dividends it estimated would be distributed
to the Trust's shareholders.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1997 VERSUS THE
THREE MONTHS ENDED MARCH 31, 1996
REVENUES
Rents from Owned Properties held directly by the Trust (base rent plus expense
reimbursements) increased 9% for the three months ended March 31, 1997, as
compared to the same period in the prior year, due to the receipt of a lease
termination payment of $300,000 from a former tenant of Loehmann's Fashion
Island. Rents from Owned Properties held directly by the Trust include rents
from One Park West, Citibank Office Plaza - Schaumburg and Loehmann's Fashion
Island which are classified as Assets Held for Sale directly by the Trust.
Base income and overage income from Structured Transactions held directly by the
Trust decreased by 1% and 48%, respectively, primarily due to the sale of the
City Centre Holiday Inn investment in January 1997.
The Trust's share of income from unconsolidated Investment Partnerships
decreased 9% for the three months ended March 31, 1997, as compared to the same
period in the prior year, primarily due to the dispositions of the College Hills
3 investment in March 1996, the College Hills 8 and Financial Plaza investments
in April 1996, the St. Charles and Boardwalk apartments investments in June
1996, the Canyon View II apartments investment in August 1996 and the Plaza West
Retail Center in October 1996. In addition, the first mortgage investment in the
Lisle Hilton Inn was repaid in June 1996.
Advisory fee income decreased 97% for the three months ended March 31, 1997, as
compared to the same period in the prior year, due to the sale of investments
held by the Investment Partnerships noted above.
EXPENSES
Depreciation expense decreased 19% for the three months ended March 31, 1997, as
compared to the same period in the prior year, due to the elimination of
depreciation on One Park West upon its reclassification to an Asset Held for
Sale directly by Trust in July 1996 offset by the write-off of certain tenant
improvements due to early lease terminations at Loehmann's Fashion Island.
General and administrative expenses decreased 45% for the three months ended
March 31, 1997, as compared to the same period in the prior year, primarily due
to the accrual of severance arrangements for certain of the Trust's employees in
conjunction with the implementation of the Business Plan in the prior year.
Interest expense decreased 35% for the three months ended March 31, 1997, as
compared to the same period in the prior year, primarily due to the retirement
of all of the Trust's remaining outstanding 10% and 9 3/4% Convertible
Subordinated Debentures during the fiscal year ended July 31, 1996.
10
<PAGE>
ITEM 1. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
GAIN ON SALE OF REAL ESTATE INVESTMENTS
Net income for the three months ended March 31, 1997 included a gain on the sale
of real estate investments of $18,577,000 from the sale of City Center Holiday
Inn investment. For the three month period ended March 31, 1996, net income
included a gain on sale of real estate investments of $423,000 primarily from
the sale of Citibank Office Plaza - Oak Brook.
EXTRAORDINARY LOSS FROM EXTINGUISHMENT OF DEBT
Net income for the three months ended March 31, 1996, reflected an extraordinary
loss from extinguishment of debt of $211,000 related to the write-off of
original issuance costs when the Trust redeemed a portion of its 10% Convertible
Subordinated Debentures at face value.
DIVIDENDS
For the three months ended March 31, 1997, the Trustees declared a regular
quarterly dividend of $0.06 per share and a special dividend of $.20 per share,
each payable May 23, 1997 to shareholders of record on May 12, 1997. The Trust
pays regular dividends approximately 55 days following the end of each fiscal
quarter.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in Item 1 "Management's Discussion and Analysis of Financial
Condition and Results of Operations" constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995 (the
"Reform Act"). Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Trust, including the sales proceeds payable to the Trust
for its properties, to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements. Such factors include, among others, the following: general economic
and business conditions, adverse changes in the real estate market in the
regions of the country in which the Trust owns properties or has investments,
and other factors noted in this report.
11
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits: None
b) Reports on Form 8-K:
Current Report dated January 24, 1997 regarding change in Trust's
fiscal year.
12
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Trust
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
PROPERTY CAPITAL TRUST
----------------------
REGISTRANT
/S/ Robin W. Devereux
---------------------
Robin W. Devereux
Vice President and Chief Financial
Officer
Date: May 14, 1997
13
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 4,553,000
<SECURITIES> 0
<RECEIVABLES> 1,480,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,250,000
<PP&E> 99,028,000
<DEPRECIATION> (2,468,000)
<TOTAL-ASSETS> 103,843,000
<CURRENT-LIABILITIES> 6,277,000
<BONDS> 36,602,000
0
0
<COMMON> 108,518,000
<OTHER-SE> (47,554,000)
<TOTAL-LIABILITY-AND-EQUITY> 103,843,000
<SALES> 22,559,000
<TOTAL-REVENUES> 22,715,000
<CGS> 2,313,000
<TOTAL-COSTS> 2,854,000
<OTHER-EXPENSES> 23,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 739,000
<INCOME-PRETAX> 19,099,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,099,000
<EPS-PRIMARY> 2.00
<EPS-DILUTED> 2.00
</TABLE>
