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, 1999
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)
177 Milk Street, Boston, Massachusetts 02109
--------------------------------------------
(Address of principal executive offices)
(zip code)
Registrant's telephone number, including area code:
(617) 482-4081
--------------
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 1, 1999: 9,584,220
---------
<PAGE>
PROPERTY CAPITAL TRUST
INDEX
Page
PART I. FINANCIAL INFORMATION Number
----------------------------- ------
ITEM 1. FINANCIAL INFORMATION
Consolidated Balance Sheets - March 31, 1999 (unaudited)
and December 31, 1998 2
Consolidated Statements of Income -
Three Months Ended March 31, 1999 and 1998 (unaudited) 3
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1999 and 1998 (unaudited) 4
Consolidated Statements of Shareholders' Equity -
Three Months Ended March 31, 1999 and 1998 (unaudited) 5
Notes to Consolidated Financial Statements (unaudited) 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 7 - 8
PART II. OTHER INFORMATION
--------------------------
ITEM 5. OTHER INFORMATION 9
ITEM 6. EXHIBIT 9 - 10
1
<PAGE>
PART I. FINANCIAL INFORMATION
- ------------------------------
ITEM 1. FINANCIAL INFORMATION
PROPERTY CAPITAL TRUST
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
1999 1998
- --------------------------------------------------------------------------------
(Unaudited)
Assets
Cash and cash equivalents $ 3,357,000 $ 3,233,000
Other assets 100,000 52,000
-------------- ---------------
$ 3,457,000 $ 3,285,000
============== ===============
Liabilities and Shareholders' Equity
Liabilities
Accounts payable, accrued expenses and other
liabilities $ 759,000 $ 759,000
-------------- ---------------
Shareholders' Equity
Common Shares (without par value, unlimited
shares authorized, 9,584,220 issued and
outstanding) 108,568,000 108,568,000
Accumulated deficit (105,870,000) (106,042,000)
-------------- ---------------
Total Shareholders' Equity 2,698,000 2,526,000
-------------- ---------------
$ 3,457,000 $ 3,285,000
============== ===============
See accompanying notes
2
<PAGE>
PROPERTY CAPITAL TRUST
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------------
1999 1998
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Revenues
Rents from Owned Properties held directly by the Trust $ - $ 600,000
Structured Transactions held directly by the Trust
Base income - 137,000
Overage income - 78,000
-------------- ---------------
- 815,000
Other income 311,000 -
Interest income 34,000 54,000
-------------- ---------------
345,000 869,000
-------------- ---------------
Expenses
General and administrative expenses 107,000 365,000
Professional fees 47,000 98,000
Trustees' fees and expenses 19,000 32,000
Expenses on Owned Properties held directly by the Trust - 210,000
Interest - 10,000
-------------- ---------------
173,000 715,000
-------------- ---------------
Income before Gain on Sale of Real Estate Investments 172,000 154,000
Gain on Sale of Real Estate Investments - 3,067,000
-------------- ---------------
Net Income $ 172,000 $ 3,221,000
============== ===============
Net Income per Share
Income before Gain on Sale of Real Estate Investments $0.02 $0.02
Gain on Sale of Real Estate Investments - 0.32
-------------- ---------------
Basic and Diluted Net Income per Share $0.02 $0.34
============== ===============
Average Shares 9,584,220 9,584,220
============== ===============
</TABLE>
See accompanying notes
3
<PAGE>
PROPERTY CAPITAL TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------------
1999 1998
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Operating Activities
Net Income $ 172,000 $ 3,221,000
Adjustments to Net Income
Gain on sale of real estate investments - (3,067,000)
Changes in assets and liabilities
Decrease in interest and rents receivable - 228,000
(Increase) decrease in other assets, net (48,000) 2,413,000
Decrease in accounts payable, accrued
expenses and other liabilities and accrued interest - (3,748,000)
-------------- ---------------
Net Cash Provided by (Used in) Operating Activities 124,000 (953,000)
-------------- ---------------
Investing Activities
Owned Properties held directly by the Trust
Dispositions - 4,564,000
Additions - (65,000)
-------------- ---------------
Net Cash Provided by Investing Activities - 4,499,000
-------------- ---------------
Financing Activities
Cash dividends paid - (3,354,000)
-------------- ---------------
Net Cash Used in Financing Activities - (3,354,000)
-------------- ---------------
Net Increase in Cash and Cash Equivalents 124,000 192,000
Cash and Cash Equivalents at Beginning of Period 3,233,000 3,160,000
-------------- ---------------
Cash and Cash Equivalents at End of Period $ 3,357,000 $ 3,352,000
============== ===============
</TABLE>
See accompanying notes
4
<PAGE>
PROPERTY CAPITAL TRUST
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------------
1999 1998
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Common Shares
Balance at beginning of period $ 108,568,000 $ 108,568,000
-------------- ---------------
Balance at end of period 108,568,000 108,568,000
-------------- ---------------
Accumulated Deficit
Balance at beginning of period (106,042,000) (100,438,000)
Net income 172,000 3,221,000
Cash dividends paid - (3,354,000)
-------------- ---------------
Balance at end of period (105,870,000) (100,571,000)
-------------- ---------------
Treasury Shares
Balance at beginning of period - (1,316,000)
Distribution to Trustees of 186,851 Treasury Shares
included in Rabbi Trust for the benefit of Trustees - 1,316,000
-------------- ---------------
Balance at end of period - -
-------------- ---------------
Total Shareholders' Equity 2,698,000 7,997,000
============== ===============
Number of Common Shares issued
at beginning and end of period 9,584,220 9,584,220
============== ===============
</TABLE>
See accompanying notes
5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
1. Basis of Presentation and Significant Accounting Policies
In the opinion of the 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, 1999 and the
results of its operations and its cash flows for the periods ended March 31,
1999 and 1998.
The information contained in these financial statements should be read in
conjunction with the Trust's 1998 Annual Report on Form 10-K filed with the
Securities and Exchange Commission on March 29, 1999.
2. Real Estate Investments
At March 31, 1999 and December 31, 1998, the Trust had no real estate
investments.
During the quarter ended March 31, 1998, the Trust sold the Park Place office
building in Clayton, Missouri, to an unrelated party for $14,145,000, resulting
in a gain to the Trust of $3,067,000. Previously, in August 1996, the Trust had
allocated $1,239,000 of its former allowance for possible investment losses to
this investment. The property's $8,345,000 first mortgage was assumed by the
buyer.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Business Plan
In accordance with the Trust's business plan (the "Business Plan") which was
approved by the Trust's shareholders on December 15, 1995, all of the Trust's
investments have been disposed of in an orderly and timely manner. The Trust has
utilized net proceeds from the sales of its properties to retire debt, to make
distributions to the Trust's shareholders and to satisfy the Trust's cash needs.
As a result of the successful implementation of the Business Plan, the Trust has
already paid special dividends from the proceeds of investment dispositions
aggregating $13.65 per share. The payment dates and tax classification of these
special dividends are as follows:
Total Return
Payment Special Dividends Ordinary Capital of
Date Paid Per Share Income Gain Capital
---- -------------- ------ ---- -------
06/24/96 $ 1.75 $ 0.117 $ 0.269 $ 1.364
07/26/96 1.00 0.067 0.933
12/23/96 1.00 - - 1.000
02/24/97 2.00 - 1.940 0.060
05/23/97 0.20 - - 0.200
08/22/97 1.15 0.060 0.060 1.030
11/24/97 2.50 - 0.360 2.140
12/29/97 2.90 - - 2.900
02/27/98 0.35 - - 0.350
07/10/98 0.80 - - 0.800
------- -------- ------- -------
$ 13.65 $ 0.244 $ 2.629 $10.777
======= ======== ======= =======
As the final step in the Trust's Business Plan, Property Capital Trust intends
to merge with and into Maryland Property Capital Trust, Inc., a corporation
which was formed to effectuate the transaction in which affiliates of The Beal
Companies, LLP will take control of the Trust. The proxy statement/prospectus,
information supplement and proxy card related to the proposed merger were mailed
to each of the Trust's registered shareholders in late March 1999. On May 24,
1999, a Special Meeting of the Shareholders will be held to vote on the merger.
If it is approved, the Trust expects to declare a final distribution to the
Trust's then existing shareholders equal to substantially all of the Trust's net
worth, which is estimated to be between $.25 and $.26 per share. This is
inclusive of funds received by the Trust in 1999 from the settlement of the
litigation with the Florida Department of Transportation regarding certain land
that was condemned at Loehmann's Fashion Island, one of the Trust's former
properties. The distribution is also inclusive of the payment of $.01 per share
to be made to redeem the rights outstanding pursuant to the Trust's Shareholder
Rights Plan. While the Trust's existing shareholders will retain an interest in
the merged entity (for which they will have given up no value), it is believed
that such interest will be without value at the time of the merger and may not
have any value in the future.
If the shareholders do not approve the merger, the Trust will distribute a
portion of its assets to its shareholders and will transfer the remainder of its
assets to a liquidating trust to satisfy any known and contingent liabilities of
the Trust. Shareholders of the Trust at the time of this transfer will become
holders of beneficial interests in the liquidating trust. These beneficial
interests will not be transferable except by operation of law. The transfer of
assets into the liquidating trust is a taxable event to the beneficial owners.
If this alternative is utilized, the Trust believes that the liquidating trust
will make a final distribution of its assets within one year after its
establishment, net of expenses to maintain the liquidating trust (estimated at
$100,000) and any payments made to satisfy any liabilities, the amount of which
cannot be estimated at this time.
Financial Condition, Liquidity and Capital Resources
The Trust has reviewed its short-term liquidity needs in view of the completion
of its business plan. The Trust's liquidity needs are to fund normal operating
expenses and to satisfy any contingent liabilities. The Trust expects to fund
these liquidity needs from interest income and cash on hand. At March 31, 1999,
the Trust's principal asset was $3,357,000 of cash and cash equivalents.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (continued)
Results of Operations for the Three Months ended March 31, 1999 versus the Three
Months ended March 31, 1998
Revenues
Total revenues decreased by $524,000, or 60%, for the three months ended March
31, 1999, as compared to the same period in the prior year, primarily due to the
sale of all the Trust's real estate investments prior to calendar 1999 offset by
the receipt of short-term interest and non-recurring income. The non-recurring
income, classified as other income, resulted primarily from the receipt of
$292,000, in February 1999, from the settlement of the litigation with the
Florida Department of Transportation regarding certain land that was condemned
at Loehmann's Fashion Island, one of the Trust's former properties.
Expenses
Total expenses decreased by $542,000, or 76%, for the three months ended March
31, 1999, as compared to the same period in the prior year, primarily due to the
sale of all the Trust's real estate investments prior to calendar 1999, the
decrease in the Trust's general office activities and the reduction of the
Trust's management and support staff in accordance with the Trust's Business
Plan.
Gain on Sale of Real Estate Investments
Net income for the three months ended March 31, 1998 included a gain on the sale
of real estate investments of $3,067,000 from the sale of the Park Place office
building.
Special Note Regarding Forward-Looking Statements
Certain statements in this Quarterly Report 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 (financial, operating or otherwise) or achievements of the
Trust to be materially different from any future results, performance
(financial, operating or otherwise) or achievements expressed or implied by such
forward-looking statements. Such risks, uncertainties and other factors include,
among others, management's estimates of future dividends, the likelihood and
timing of the merger and other factors noted in this report. As a result, no
assurance can be given as to future results, performance (financial, operating
or otherwise) or achievements of the Trust.
8
<PAGE>
PART II. OTHER INFORMATION
- --------------------------
ITEM 5. OTHER INFORMATION
The company previously reported that Warren E. Buffett has informed the Trust
that, pursuant to Sections 13(d) of the Securities Exchange Act of 1934, as
amended, he is the beneficial owner of 815,100 shares or 8.5% of the outstanding
Common Shares of the Trust. In addition, the Trust has been informed that the
following individual is also the beneficial owner of more than 5% of the
outstanding Common Shares:
Percent of
Name and Address Number of Shares Owned Outstanding Shares
---------------- ---------------------- ------------------
Don C. Whitaker 551,814 5.8%
23 Beechwood
Irvine, CA 92604
ITEM 6. EXHIBIT
27.1 Financial Data Schedule
9
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the Trust
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
PROPERTY CAPITAL TRUST
----------------------
Registrant
/s/ Robert M. Melzer
--------------------
Robert M. Melzer
President, Chief Executive Officer and
Chief Financial Officer
Date: May 6, 1999
11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 3,357,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 100,000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,457,000
<CURRENT-LIABILITIES> 759,000
<BONDS> 0
0
0
<COMMON> 108,568,000
<OTHER-SE> (105,870,000)
<TOTAL-LIABILITY-AND-EQUITY> 3,457,000
<SALES> 0
<TOTAL-REVENUES> 345,000
<CGS> 0
<TOTAL-COSTS> 154,000
<OTHER-EXPENSES> 19,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 172,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 172,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 172,000
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
