FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994
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 No. 1-9450
METROPOLITAN REALTY CORPORATION
(Exact name of registrant as specified in its charter)
Michigan 38-2724893
(State of incorporation) (I.R.S. Employer Identification No.)
Suite 748, 535 Griswold
Detroit, Michigan 48226
(Address of principal executive offices)
Registrant's Telephone Number, including area code:
(313) 961-5552
Securities registered pursuant to Section 12(b) of the Act:
Title of Class Name of each exchange on which registered
-------------- -----------------------------------------
Common Stock American Stock Exchange
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
Form 10-K.
YES _____ NO __X__
The aggregate market value of the Registrant's voting stock held by
non-affiliates as of March 22, 1995 was $10,087,956. The number of shares
outstanding of the Registrant's common stock as of March 22, 1995 was 4,532,169.
The following document (or portions thereof) has been incorporated by reference
in Part III of this Form 10-K: The Company's proxy statement, to be filed with
the Securities and Exchange Commission and to be distributed to the Company's
shareholders in connection with the Company's 1995 Annual Meeting of
Shareholders to be held on June 8, 1995.
<PAGE>
METROPOLITAN REALTY CORPORATION
INDEX TO ANNUAL REPORT ON FORM 10-K
(For the Fiscal Year Ended December 31, 1994)
Page
PART I
ITEM 1. BUSINESS................................................ 1
ITEM 2. PROPERTIES.............................................. 2
ITEM 3. LEGAL PROCEEDINGS....................................... 2
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..... 2
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS............................. 2
ITEM 6. SELECTED FINANCIAL DATA................................. 3
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS..................... 4
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA*<F1>........ 9
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE..................... 9
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT...... 9
ITEM 11. EXECUTIVE COMPENSATION.................................. 9
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT.......................................... 9
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.......... 9
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K............................................. 10
<F1>
* The Company's financial statements are set forth in the separate
financial section which follows page 13 of this Form 10-K and begins on
page F-1.
<PAGE>
PART I
ITEM 1. BUSINESS.
Metropolitan Realty Corporation (the "Company") is a real estate
investment trust ("REIT") under the Internal Revenue Code of 1986, as amended
(the "Tax Code"). The Company was incorporated under Michigan law on November
13, 1986. In November 1988, the Company issued 4,512,169 shares of common stock
in an initial public offering and received net proceeds of $43,200,851.
As a REIT, the Company is required to invest most of its assets in real
estate assets, cash and government securities. The Company intends to invest
substantially all of its assets in mortgage loans to real estate projects
located in southeastern Michigan in the counties of Wayne and Macomb. At
December 31, 1994, the Company's total mortgage loan portfolio is invested 74%
in projects located in the City of Detroit, 11% in projects located in the
County of Macomb, and 15% in projects located in the County of Wayne outside of
the City of Detroit.
The Company's mortgage loans include financing for industrial and
mixed-use facilities, office buildings, and retail and residential centers. The
Company has favored investments that will provide a competitive return and
permanent financing for projects which were constructed with union labor. All
mortgage loans to date are collateralized by a first lien on real property. At
December 31, 1994, the Company's largest loan approximates 10% of its total
assets and the carrying value of all mortgage loans approximates 62% of its
total assets.
Funds that have not yet been invested in mortgage loans are primarily
invested in marketable mortgage-backed securities until needed for the Company's
operations or investments in mortgage loans. As of December 31, 1994,
approximately 26% of the Company's net assets remained invested in marketable
mortgage-backed securities. The Company believes that its mortgage loans and
marketable mortgage-backed securities will provide a competitive economic
return to its shareholders while protecting their capital.
The Company continues to evaluate real estate projects and intends to
liquidate its remaining marketable securities to make additional mortgage loans
to qualified projects located in southeastern Michigan. Although the Company has
competed and is competing with financial institutions such as banks, insurance
companies, savings and loan associations, mortgage bankers, pension funds and
other real estate investment vehicles with investment objectives similar to
those of the Company, the Company believes it has targeted a market niche which
is underserved.
During 1994, the Company had one full-time administrative employee. The
day-to-day operations of the Company are administered by the Executive Vice
President who serves on a part- time basis under the direction of the President
and the Executive Committee. Members of the Board of Directors serve without pay
as officers and committee members and devote a considerable amount of time to
the administration and operations of the Company.
ITEM 2. PROPERTIES.
The Company's executive offices are located at Suite 748, 535 Griswold,
Detroit, Michigan 48226. The Company rents this office space under a
month-to-month lease which provides for a monthly rental of approximately
$1,426, which is comparable to prevailing rentals for similar facilities. The
Company's offices are suitable and adequate for the current operations of the
Company.
ITEM 3. LEGAL PROCEEDINGS.
There are no material legal proceedings pending or, to the knowledge of
the Company, threatened, to which the Company is a party or by which its
property may be bound.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of the Company's shareholders since
the Annual Meeting of Shareholders held June 10, 1994.
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
The Company's common stock is traded on the American Stock Exchange
(the "Exchange"). The Company is listed for trading on the Exchange under the
symbol "MET". The following table sets forth the high and low sales prices on
the Exchange and dividends paid per share during each quarter of the years ended
December 31, 1994 and 1993:
<TABLE>
<CAPTION>
1994 1993
------------------------------------- ---------------------------------------
Dividends Dividends
High Low Paid High Low Paid
----- ----- ------ ----- ----- ------
<S> <C> <C> <C> <C> <C> <C>
1st Quarter 6-3/8 5-1/8 $ .22 7 5 $.17
2nd Quarter 5-7/8 5-5/8 .12 6-3/8 5-5/8 .14
3rd Quarter 6 5-3/4 .05 6-3/8 5-3/4 .05
4th Quarter 5-3/4 5-5/8 .24 5-3/4 4-7/8 .18
----- -----
$.63 $.54
</TABLE>
As of March 15, 1995, 4,532,169 shares of common stock were issued and
outstanding and the number of shareholders of record was 53.
The Company intends to continue to pay cash dividends to shareholders
on a quarterly basis in aggregate amounts sufficient to distribute at least 95%
of its "real estate investment trust taxable income" in order to maintain its
status as a REIT under the Tax Code. The Company will continue to furnish
annually to each shareholder a statement setting forth distributions paid during
the preceding year and their characterization as ordinary income, return of
capital or capital gain.
ITEM 6. SELECTED FINANCIAL DATA.
The following table sets forth selected financial data as of December
31, 1994, 1993, 1992, 1991 and 1990 and for the years then ended:
<TABLE>
<CAPTION>
1994(1) 1993(2) 1992(3) 1991(4) 1990(4)
<S> <C> <C> <C> <C> <C>
Total income............................ $3,858,028 $3,715,985 $3,828,950 $4,135,186 $3,875,373
Net investment income .................. 2,587,550 2,700,898 2,112,662 1,934,853 2,900,490
Net investment income per share ........ .57 .60 .47 .43 .64
Total assets ........................... 41,025,168 41,626,490 41,235,710 42,189,033 43,759,910
Shareholders' equity ................... 40,479,424 41,104,089 40,850,562 41,910,418 43,465,335
Cash dividend per share ................ .63 .54 .70 .77 .685
Return on assets ....................... 6.31% 6.49% 5.12% 4.59% 6.63%
Return on equity ....................... 6.39% 6.57% 5.18% 4.64% 6.72%
Dividend payout ratio .................. 100% 100% 100% 97.98% 100%
Equity to assets ratio ................. 98.67% 98.75% 99.07% 99.34% 99.33%
<FN>
(1) Net investment income decreased by approximately 4% from
$2,700,898, or $.60 per share, for 1993 to $2,587,550, or $.57 per share, for
1994. The decrease in net investment income from 1993 to 1994 is due principally
to a $994,000 increase in the valuation provision for foreclosed property held
for sale offset by a $462,000 decrease in the allowance for loan losses, a
$278,000 decrease in other operating expenses and $114,000 of income from a
loan prepayment penalty. Of the cash dividend of $.63 per share paid in 1994,
$.08 was paid from taxable income earned in 1993 and $.55 was paid from taxable
income earned in 1994. All dividends paid have been ordinary income to
shareholders.
(2) Net investment income increased by approximately 28% from
$2,112,662, or $.47 per share, for 1992 to $2,700,898, or $.60 per share, for
1993. The increase in net investment income from 1992 to 1993 is due principally
to a $900,000 decrease in allowance for loan losses expense, offset by the net
loss from operations of foreclosed property held for sale of approximately
$338,000. Of the cash dividend of $.54 per share paid in 1993, $.03 was paid
from taxable income earned in 1992 and $.51 was paid from taxable income earned
in 1993.
(3) Net investment income increased by approximately 9% from
$1,934,853, or $.43 per share, for 1991 to $2,112,662, or $.47 per share, for
1992. The increase in net investment income from 1991 to 1992 is due principally
to a $440,500 decrease in allowance for loan losses expense, offset by an
approximately $306,000 decrease in total income. Of the cash dividend of $.70
per share paid in 1992, $.10 was paid from taxable income earned in 1991 and
$.60 was paid from taxable income earned in 1992.
(4) Taxable income resulting from undistributed earnings for the year
ended December 31, 1991 is $72,088. Net investment income decreased by
approximately 33% from $2,900,490 or $.64 share, for 1990, to $1,934,853, or
$.43 per share, for 1991. The decrease in net investment income from 1990 to
1991 is due principally to the establishment of a $1,340,500 allowance for loan
losses during 1991. Of the cash dividend of $.77 per share paid in 1991, $.10
was paid from taxable income earned in 1990 and $.67 was paid from taxable
income earned in 1991. Of the cash dividend of $.685 per share paid in 1990,
$.085 was paid from taxable income earned in 1989 and $.60 was paid from taxable
income earned in 1990.
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
Results of Operations
During fiscal year 1994, one of the Company's mortgage loans with an
outstanding principal balance of $3,300,000 matured and was repaid. In addition,
one of the Company's mortgage loans with an outstanding principal balance of
approximately $1,200,000 was prepaid with prepayment penalties approximating
$114,000. The Company's net investment in mortgage loans to real estate
projects represented 62% of its assets, or $25,393,979, at December 31,
1994 and 71% of its assets, or $29,587,662, at December 31, 1993. The yields on
the Company's outstanding mortgage loans range from 8% to 12.25%. The weighted
average yield of earning mortgage loans is 10.58% at December 31, 1994, as
compared to 10.33% at December 31, 1993. The weighted average term of
outstanding mortgage loans is 9.1 years. At December 31, 1994, the Company had
no outstanding loan commitments. The amount of foreclosed property held for
sale, net of valuation allowance, represents 2% of the Company's assets, or
$900,000, at December 31, 1994 and 5% of its assets, or $1,960,000, at December
31, 1993. The amount of marketable mortgage-backed (Federal National Mortgage
Association and Federal Home Loan Mortgage Corporation) securities held by the
Company during 1994 averaged $8,164,000 and earned an average yield of 4.6%, as
compared to average marketable mortgage-backed security holdings of $8,101,000
which earned an average yield of 5.1% during 1993. The average yield on all
performing interest earning assets was 8.9% for the year ended December 31,
1994 and 9.1% for the year ended December 31, 1993.
Investment income from marketable mortgage-backed securities decreased
$51,851 to $370,725 for the year ended December 31, 1994 from $422,576 for the
year ended December 31, 1993. Of the decrease, $9,508 was the result of a
decrease in the average amount invested in marketable securities and $42,343 was
the result of a decrease in the average yield earned.
Investment income from mortgage loans decreased $40,646 to $3,073,230
for the year ended December 31, 1994 from $3,113,876 for the year ended December
31, 1993. Of the decrease, $210,745 was the result of a decrease in average
mortgage loans offset by a $45,326 increase in the stated average yield on all
mortgage loans, and a $124,773 increase in interest income from loans which were
non-earning at December 31, 1993.
Operating expenses increased 25% to $1,270,478 for the year ended
December 31, 1994 from $1,015,087 for the year ended December 31, 1993. The
majority of this increase is due to a $957,717 increase in net loss from
foreclosed property held for sale, which was largely attributable to an
increase in the provision for valuation allowance, offset by a $461,500
decrease in the allowance for loan losses. Other operating expenses decreased
$240,826 to $436,562 for the year ended December 31, 1994 from $677,388 for
the year ended December 31, 1993. This decrease is due to a $147,363 reduction
in general and administrative expenses, primarily as a result of decreased
professional service fees, and a $93,463 reduction in amortization of
organization costs, which became fully amortized in 1993.
Two mortgage loans with net carrying values aggregating $3,709,891 at
December 31, 1994, collateralized by shopping centers in Detroit, Michigan and
personal guarantees aggregating approximately $498,000, were in default at
December 31, 1991 for nonpayment of principal, interest and late charges. The
mortgagors are affiliated through a common borrower. In 1991, the Company
established a loan loss reserve to reduce the carrying value of these loans
to their estimated net realizable value. During 1992, the Company entered
into loan modification agreements with these borrowers, pursuant to which
the borrowers agreed to bring the loans current by December 31, 1992 and
agreed to have the deeds to the properties placed in escrow. The Company also
exercised its right to receive rental payments directly from the tenants. All
events of default were cured on February 1, 1993 and the loans are now current.
The Company continues to exercise its right to receive assigned rents directly
from the tenants and the deeds to the properties remain in escrow. Both of these
notes are classified as earning at December 31, 1994. An allowance has been
provided to reduce the carrying value of these loans to their estimated net
realizable value.
A mortgage loan with a carrying amount of $1,369,349 at December 31,
1994, collateralized by an apartment building located in Detroit, Michigan, was
in default at December 31, 1992 for nonpayment of principal, interest and late
charges. During 1993, the Company entered into a loan modification agreement
with the borrower which cured the events of default. Pursuant to this agreement
the interest rate has been reduced, effective April 1, 1993, from 11.125% to 8%
through April 1, 1995 and to 9.5% thereafter until maturity. This agreement
also deferred payments until November 1993, when monthly installments of
interest only commenced and continued through April 1994. Commencing May 1994,
varying installments of principal and interest are due monthly until maturity,
at which time the remaining unpaid principal and accrued interest is due. This
agreement also includes personal guarantees aggregating approximately $570,000
at December 31, 1994. This loan is now current and is classified as earning at
December 31, 1994. An allowance has been provided to reduce the carrying
amount of the loan to its estimated net realizable value. The Company also has
three additional loans, which are carried at an aggregate value of
approximately $1.9 million at December 31, 1994, to entities affiliated with
this borrower through common ownership which are all current and are classified
as mortgage notes, earning at December 31, 1994.
Management reviews, on a regular basis, factors which may adversely
affect its mortgage loans, including occupancy levels, rental rates and property
values. It is possible that economic conditions in southeastern Michigan and the
nation in general may adversely affect certain of the Company's other loans. The
Company believes that the allowance for loan losses of $1,000,000 at December
31, 1994 is adequate to reflect mortgage loans at their estimated net realizable
value.
At December 23, 1992, the Company obtained an apartment building
located in Detroit, Michigan through a foreclosure sale. This property was the
collateral for a construction loan under which the borrower defaulted during
1992. Under Michigan law, title passed to the Company on June 23, 1993 at
the expiration of a six month redemption period. The carrying value of the
property was written down to its estimated fair value at the time of
foreclosure of $2,100,000, which resulted in a $639,000 writeoff against the
allowance for loan losses. The fair value was determined based upon a July
1992 independent appraisal of the property. A valuation allowance of $140,000
was also established at the time of foreclosure for the estimated costs to
sell the property. At December 31, 1994, the carrying value of the property
has been reduced to $900,000 to reflect an updated property valuation based on
the results of the Company's marketing efforts to locate a buyer for the
property. The Company intends to continue to actively market this property for
sale during 1995.
During 1994, the Company reached settlements with the guarantors of
the foreclosed loan aggregating $320,000. These settlements are payable over
four to eight years, with interest rates ranging from non-interest bearing to
7.5%. Income from settlements is recorded as miscellaneous income when
received and totalled $43,000 for the year ended December 31, 1994. The
property's operating income and expenses from the date of foreclosure are
reflected in the statement of operations as net loss from foreclosed property
held for sale and total $1,295,416 for the year ended December 31, 1994.
Net investment income decreased by 4% to $2,587,550, or $.57 per share,
for the year ended December 31, 1994 from $2,700,898, or $.60 per share, for the
year ended December 31, 1993. The decrease is attributable to a $957,717
increase in net loss from foreclosed property held for sale, offset by a
$461,500 reduction in the allowance for loan losses, a $147,363 reduction of
general and administrative costs, a $93,463 reduction in amortization of
organization costs, and a $142,043 increase in total income.
Investment income from FNMA marketable securities decreased $245,920 to
$422,576 for the year ended December 31, 1993 from $668,496 for the year ended
December 31, 1992. Of the decrease, $134,519 was the result of a decrease in the
average amount invested in marketable securities and $111,401 was the result of
a decrease in the average yield earned.
Investment income from mortgage loans increased $105,192 to $3,113,876
for the year ended December 31, 1993 from $3,008,684 for the year ended December
31, 1992. Of the increase, $354,411 was the result of an increase in average
mortgage loans offset by a $38,918 decrease in the stated average yield on all
mortgage loans, a $54,381 decrease in interest income due to property received
in foreclosure and a $155,920 decrease in interest income due to the Company's
decision to discontinue accruing interest on certain loans.
Operating expenses decreased 41% to $1,015,087 for the year ended
December 31, 1993 from $1,716,288 for the year ended December 31, 1992. The
majority of this decrease is due to a $900,000 decrease in the allowance for
loan losses offset by a $337,699 net loss from foreclosed property held for
sale. Other operating expenses, consisting primarily of general and
administrative expenses, decreased $138,900 as a result of decreased
professional fees.
Net investment income increased by approximately 28% to $2,700,898, or
$.60 per share, for the year ended December 31, 1993 from $2,112,662, or $.47
per share, for the year ended December 31, 1992. The increase in net investment
income from 1992 to 1993 is primarily attributable to a $900,000 decrease in the
allowance for loan losses expense offset by a $112,965 decline in total income.
Investment income from marketable securities decreased $480,229 to
$668,496 for the year ended December 31, 1992 from $1,148,725 for the year ended
December 31, 1991. Of the decrease, $275,932 was the result of a decrease in the
average amount invested in marketable securities and $204,297 was the result of
a decrease in the average yield earned.
Investment income from mortgage loans increased $341,369 to $3,008,684
for the year ended December 31, 1992 from $2,667,315 for the year ended December
31, 1991. Of the increase, $390,501 was the result of an increase in average
investment in mortgage loans and $50,074 was the result of an increase in
average yield offset by a $99,206 decrease in average yield due to the Company's
decision to discontinue accruing interest on loans in default.
During 1992, the Company increased its allowance for loan losses by
$900,000. Operating expenses other than the allowance for loan losses decreased
3.7% from $846,733 for the year ended December 31, 1991 to $816,288 for the year
ended December 31, 1992. Operating expenses other than the allowance for loan
losses during both 1992 and 1991 consisted primarily of general and
administrative expenses.
Net investment income increased by approximately 9% to $2,112,662, or
$.47 per share, for the year ended December 31, 1992 from $1,934,853, or $.43
per share, for the year ended December 31, 1991. The increase in net investment
income from 1991 to 1992 was primarily attributable to a $440,500 decrease in
the allowance for loan losses expense offset by a $306,236 decline in total
income.
The Company intends to continue to invest its available funds at
competitive market rates in mortgage loans to real estate projects located in
southeastern Michigan. Cycles in the local and national economy have affected
and could continue to affect the Company's ability to invest its remaining funds
in mortgage loans and the yields attainable on such investments. Decreases in
market interest rates may result in lower returns on future mortgage loans than
on the mortgage loans closed to date. The Company expects to have the balance of
its available assets fully invested in mortgage loans by the end of 1995.
Liquidity and Capital Resources
Funds that have not yet been invested in mortgage loans are primarily
invested in marketable mortgage-backed securities until needed for the Company's
operations or investments in mortgage loans. Income and principal received with
respect to the Company's investments in mortgage loans are also invested in
marketable mortgage backed securities pending distribution to shareholders in
the form of dividends or reinvestment in mortgage loans. At December 31, 1994,
the Company had $26,393,979 invested in mortgage loans, $2,034,134 invested in
real estate owned, $10,783,048 invested in marketable mortgage-backed securities
and approximately $3,298,886 invested in money market funds.
At December 31, 1994, the Company had no outstanding loan commitments.
The Company anticipates that its sources of cash are more than adequate to meet
its liquidity needs.
On March 14, 1995, the Company's Board of Directors announced its
preliminary approval for the private placement of asset-backed bonds through a
wholly owned subsidiary to be formed. The Company expects to generate
proceeds of approximately $50 million. At December 31, 1994, $131,000 of
professional fees have been incurred and deferred in connection with this
transaction.
Net cash generated by operating activities during 1994 aggregated
$2,957,011 including $3,087,188 in net investment income adjusted for noncash
depreciation and amortization expense, the valuation provisions for mortgage
loans and foreclosed property held for sale, and amortization of net loan
origination fees.
Net cash provided by investing activities during 1994 aggregated
$1,090,650 and consisted primarily of loan repayments and collections of
principal from marketable securities offset by loan disbursements and purchases
of marketable securities. The Company collected $4,876,191 of loan repayments
and net commitment fees and purchased $4,767,232 of marketable securities with
the proceeds. Collections of principal from marketable securities totalled
$1,093,691. Loan disbursements of $150,000 represent a final disbursement to a
current borrower.
Financing activities in 1994 consisted of dividend payments to
shareholders of $2,855,266 which represented $.63 per outstanding share.
The Company adopted Statement of Financial Accounting Standards
No. 115, "Accounting for Certain Debt and Equity Securities" (SFAS 115), on
January 1, 1994. Under SFAS No. 115, marketable securities available for sale
are carried at market value and unrealized gains and losses are included in a
separate component of shareholders' equity. At December 31, 1994, shareholders'
equity includes net unrealized holding losses on marketable securities of
$356,949. In accordance with SFAS No. 115, prior period financial statements
have not been restated to reflect the change in accounting principle.
The Financial Accounting Standards Board ("FASB") has issued
Statement of Financial Accounting Standards No. 107 ("SFAS 107"), "Disclosures
about Fair Value of Financial Instruments," and SFAS 114, "Accounting by
Creditors for Impairment of a Loan", which was amended by SFAS 118, "Accounting
by Creditors for Impairment of Loan Income Recognition and Disclosures". These
pronouncements require the disclosure of the fair value of financial
instruments along with the valuation method and significant assumptions used,
and the measurement of the impairment of a loan based on the present value of
expected future cash flows discounted at the loan's effective interest rate,
respectively. The FASB requires adoption of these pronouncements in 1995.
Based on current information available, management does not believe these
pronouncements will have a significant impact on the Company's financial
statements.
The Company's policy is to declare and pay cash dividends on a
quarterly basis. The Company declared and paid dividends aggregating $.63 per
share during the year ended December 31, 1994, compared to $.54 per share during
the year ended December 31, 1993 and $.70 per share during the year ended
December 31, 1992. The Company declared a dividend of $.13 per share of common
stock to its shareholders of record on March 21, 1995 which will be paid on
March 31, 1995 from the Company's money market funds.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements of the Company, consisting of balance sheet,
statement of operations, statement of shareholders' equity, statement of cash
flows and the notes to financial statements, are set forth in the separate
financial section which begins on page F-1 and is incorporated herein by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
There have been no changes in the Company's independent public
accountants during the past two fiscal years and the Company does not disagree
with such accountants on any matter of accounting principles, practices or
financial statement disclosure.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by this Item 10 has been omitted as the
Company intends to file with the Securities and Exchange Commission (the "SEC")
not later than 120 days after the Company's year ended December 31, 1994,
pursuant to Regulation 14A, a proxy statement which will relate to the election
of directors and other matters. The information which will be included in such
definitive proxy statement under the captions "Election of Directors" and
"Executive Officers and Executive Compensation" is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this Item 11 has been omitted as the
Company intends to file with the SEC not later than 120 days after the Company's
year ended December 31, 1994, pursuant to Regulation 14A, a proxy statement
which will relate to the election of directors and other matters. The
information which will be included in such definitive proxy statement under the
caption "Executive Officers and Executive Compensation" is incorporated herein
by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The information required by this Item 12 has been omitted as the
Company intends to file with the SEC not later than 120 days after the Company's
year ended December 31, 1994, pursuant to Regulation 14A, a proxy statement
which will relate to the election of directors and other matters. The
information which will be included in such definitive proxy statement under the
caption "Principal Shareholders" is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this Item 13 has been omitted as the
Company intends to file with the SEC not later than 120 days after the Company's
year ended December 31, 1994, pursuant to Regulation 14A, a proxy statement
which will relate to the election of directors and other matters. The
information which will be included in such definitive proxy statement under the
caption "Certain Relationships and Related Transactions" is incorporated herein
by reference.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
a. Documents Filed as part of Report. The following documents
are filed as part of this Report.
1. A list of the financial statements required to be
filed as part of this Form 10-K are shown in the
"Index to the Financial Statements and Schedule"
filed herewith.
2. The financial statement schedule required to be filed
as a part of this Form 10-K is shown in the "Index
to the Financial Statements and Schedule" filed
herewith.
3. A list of the exhibits required by Item 601 of the
Regulation S-K to be filed as a part of this Form
10-K are shown in the "Index to Exhibits" filed
herewith.
b. Reports on Form 8-K. The Company did not file any reports
on Form 8-K during the last quarter of 1994.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: March 25, 1995 METROPOLITAN REALTY CORPORATION
By: /s/ Jay B. Rising
----------------------------------
Jay B. Rising, President
(Principal Executive Officer and
Principal Financial Officer)
And By: /s/ Russell P. Flynn
----------------------------------
<PAGE>
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
registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Jay B. Rising Attorney-In-Fact March 25, 1995
--------------------------
*Jay B. Rising
* Director March 25, 1995
--------------------------
Daniel L. Boone
* Director March 25, 1995
--------------------------
David M. Diegel
* Director March 25, 1995
--------------------------
Wayne S. Doran
* Director March 25, 1995
--------------------------
Russell P. Flynn
* Director March 25, 1995
--------------------------
David B. Hanson
* Director March 25, 1995
--------------------------
Kenneth L. Hollowell
* Director March 25, 1995
--------------------------
Robert G. Jackson
* Director March 25, 1995
--------------------------
Richard P. Kughn
* Director March 25, 1995
--------------------------
F. Thomas Lewand
* Director March 25, 1995
--------------------------
Ernest Lofton
* Director March 25, 1995
--------------------------
Daniel F. McNamara
* Director March 25, 1995
--------------------------
Robert H. Naftaly
* Director March 25, 1995
--------------------------
Timothy L. Nichols
Director March 25, 1995
--------------------------
Joel A. Schwartz
* Director March 25, 1995
--------------------------
Oliver H. Smith
<PAGE>
Signature Title Date
--------- ----- ----
* Director March 25, 1995
--------------------------
Frank D. Stella
* Director March 25, 1995
--------------------------
Marc Stepp
Director March 25, 1995
--------------------------
James M. Tervo
* Director March 25, 1995
--------------------------
Samuel H. Thomas, Jr.
* Director March 25, 1995
--------------------------
R. Douglas Trezise
* Director March 25, 1995
--------------------------
Ronald C. Yee
<PAGE>
INDEX TO THE FINANCIAL STATEMENTS AND SCHEDULE
____________
PAGES
REPORT OF INDEPENDENT ACCOUNTANTS F-2
BALANCE SHEET, DECEMBER 31, 1994 AND 1993 F-3
STATEMENT OF OPERATIONS FOR THE YEARS ENDED
DECEMBER 31, 1994, 1993 AND 1992 F-4
STATEMENT OF SHAREHOLDERS' EQUITY FOR THE YEARS
ENDED DECEMBER 31, 1994, 1993 AND 1992 F-5
STATEMENT OF CASH FLOWS FOR THE YEARS ENDED
DECEMBER 31, 1994, 1993 AND 1992 F-6
NOTES TO FINANCIAL STATEMENTS F-7 - F-22
FINANCIAL STATEMENT SCHEDULE:
Schedule II - Valuation and Qualifying Accounts F-23
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
of Metropolitan Realty Corporation:
We have audited the financial statements and the financial statement
schedule of Metropolitan Realty Corporation listed on page F-1 of this Form
10-K. These financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and the financial
statement 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 Metropolitan Realty
Corporation as of December 31, 1994 and 1993, and the results of its
operations and its cash flows for each of the three years in the period
ended December 31, 1994 in conformity with generally accepted accounting
principles. In addition, in our opinion, the financial statement schedule
referred to above, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects, the
information required to be included therein.
Coopers & Lybrand L.L.P.
Detroit, Michigan
March 10, 1995
F-2
<PAGE>
<TABLE>
<CAPTION>
METROPOLITAN REALTY CORPORATION
BALANCE SHEET, December 31, 1994 and 1993
____________
ASSETS 1994 1993
<S> <C> <C>
Cash and cash equivalents ................................... $ 3,529,334 $ 2,336,939
Marketable securities ....................................... 10,783,048 7,483,013
Mortgage notes receivable:
Notes, earning ........................................... 26,393,979 28,077,026
Notes, non-earning ....................................... -- 2,972,136
26,393,979 31,049,162
Allowance for loan losses ................................ (1,000,000) (1,461,500)
25,393,979 29,587,662
Real estate owned:
Foreclosed property held for sale, net of accumulated
depreciation of $65,866 at December 31, 1994 ............ 2,034,134 2,100,000
Valuation allowance........................................ (1,134,134) (140,000)
900,000 1,960,000
Accrued interest and other receivables....................... 255,724 221,940
Other assets ................................................ 163,083 36,936
Total assets ...................................... $ 41,025,168 $ 41,626,490
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable:
Shareholder ............................................. $ 9,036 $ 3,857
Trade ................................................... 175,869 159,254
Deferred income ........................................... 129,552 147,389
Deposits from borrowers for property taxes ................ 163,452 120,805
Security deposits ......................................... 66,087 63,867
Other ..................................................... 1,748 27,229
Total liabilities ................................. 545,744 522,401
Shareholders' equity:
Preferred stock, $.01 par value; 5,000,000 shares
authorized; no shares issued and outstanding............. -- --
Common stock, $.01 par value; 25,000,000 shares
authorized; 4,532,169 shares issued and
outstanding ............................................. 45,322 45,322
Additional paid-in-capital ................................ 43,355,529 43,355,529
Unrealized holding losses on marketable securities
available for sale ..................................... (356,949) --
Distributions in excess of net investment income........... (2,564,478) (2,296,762)
Total shareholders' equity ........................ 40,479,424 41,104,089
Total liabilities and shareholders' equity .... $ 41,025,168 $ 41,626,490
<FN>
The accompanying notes are an integral part of the financial statements.
</TABLE>
F-3
<PAGE>
<TABLE>
<CAPTION>
METROPOLITAN REALTY CORPORATION
STATEMENT OF OPERATIONS
for the years ended December 31, 1994, 1993 and 1992
____________
Income: 1994 1993 1992
<S> <C> <C> <C>
Interest income from mortgage notes $3,073,230 $3,113,876 $3,008,684
Investment income 555,849 475,322 746,736
Miscellaneous income 228,949 126,787 73,530
Total income 3,858,028 3,715,985 3,828,950
Operating Expenses:
Allowance for loan losses (461,500) -- 900,000
Amortization of organization costs -- 93,463 106,815
General and administrative 436,562 583,925 709,473
Net loss from foreclosed
property held for sale 1,295,416 337,699 --
Total operating expenses 1,270,478 1,015,087 1,716,288
Net investment income $2,587,550 $2,700,898 $2,112,662
Net investment income per share $ .57 $ .60 $ .47
Weighted average shares of
common stock outstanding 4,532,169 4,532,169 4,532,169
<FN>
The accompanying notes are an integral part of the financial statements.
</TABLE>
F-4
<PAGE>
<TABLE>
<CAPTION>
METROPOLITAN REALTY CORPORATION
STATEMENT OF SHAREHOLDERS' EQUITY
for the years ended December 31, 1994, 1993 and 1992
____________
Common Stock Unrealized
--------------------- Holding Distributions
Gains (Losses) in Excess of
Additional on Net Total
Paid-In Marketable Investment Shareholders'
Shares Amount Capital Securities Income(1) Equity
--------- ------- ----------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balances at 4,532,169 $45,322 $43,355,529 $ (1,490,433) $ 41,910,418
January 1, 1992
Net investment 2,112,662 2,112,662
Income
Cash dividend of (3,172,518) (3,172,518)
$.70 per share --------- ------- ----------- ----------- ------------
Balances at 4,532,169 45,322 43,355,529 (2,550,289) 40,850,562
December 31, 1992
Net investment 2,700,898 2,700,898
income
Cash dividend of (2,447,371) (2,447,371)
$.54 per share --------- ------- ----------- ----------- ------------
Balances at 4,532,169 45,322 43,355,529 (2,296,762) 41,104,089
December 31, 1993
Net investment 2,587,550 2,587,550
income
Cash dividend of (2,855,266) (2,855,266)
$.63 per share
Adjustment to $ 3,624 3,624
beginning balance
for change in
accounting
principle (Note 2)
Change in (360,573) (360,573)
unrealized holding
gains (losses) on
marketable
securities
--------- ------- ----------- -------- ----------- ------------
Balance at
December 31, 1994 4,532,169 $45,322 $43,355,529 ($356,949) ($ 2,564,478) $ 40,479,424
========= ======= =========== ======== =========== ============
<FN>
(1) See Note 5 to the financial statements.
The accompanying notes are an integral part of the financial statements.
</TABLE>
F-5
<PAGE>
<TABLE>
<CAPTION>
METROPOLITAN REALTY CORPORATION
STATEMENT OF CASH FLOWS
for the years ended December 31, 1994, 1993 and 1992
____________
1994 1993 1992
<S> <C> <C> <C>
Cash flows from operating activities:
Net investment income.......................................... $2,587,550 $2,700,898 $2,112,662
Adjustments to reconcile net investment income to net
cash provided by operating activities:
Amortization of net loan origination fees
and discounts.......................................... (104,008) (83,832) (89,344)
Allowance for loan losses (recovery) expense.............. (461,500) -- 900,000
Valuation provision for foreclosed property............... 994,134 -- --
Depreciation and amortization expense..................... 71,012 98,641 111,962
Expiration of commitment fees............................. (22,838) (21,000) (14,687)
Other..................................................... 16,557 24,223 40,243
(Increase) decrease in assets:
Accounts receivable..................................... (33,784) 40,085 (32,224)
Other assets............................................ (131,293) 190 10,080
Increase (decrease) in liabilities:
Accounts payable........................................ 16,615 28,566 21,944
Federal income and excise taxes payable................. -- -- (13,100)
Other liabilities....................................... 24,566 57,050 4,253
Total adjustments.................... 369,461 143,923 939,127
Net cash provided by operating
activities.......................... 2,957,011 2,844,821 3,051,789
Cash flows from investing activities:
Purchases of marketable securities............................. (4,767,232) -- --
Collections of principal from marketable securities............ 1,093,691 1,874,708 2,739,028
Loan disbursements............................................. (150,000) (1,800,000) (4,605,582)
Loan repayments................................................ 4,876,191 211,043 145,608
Other receivable repayments.................................... -- 16,785 144,224
Commitment and loan extension fees received.................... 38,000 40,223 67,500
Loan origination expenses paid................................. -- (15,601) (22,500)
Capital expenditures........................................... -- -- (5,576)
Net cash provided by (used in)
investing activities................ 1,090,650 327,158 (1,537,298)
Cash flows used in financing activities,
dividends paid................................................. (2,855,266) (2,447,371) (3,172,518)
Net increase (decrease) in cash and cash
equivalents.................................................... 1,192,395 724,608 (1,658,027)
Cash and cash equivalents, beginning of year..................... 2,336,939 1,612,331 3,270,358
Cash and cash equivalents, end of year........................... $3,529,334 $2,336,939 $1,612,331
Supplemental disclosure of cash flow information:
Income taxes paid.............................................. -- -- $ 13,100
<FN>
The accompanying notes are an integral part of the financial statements.
</TABLE>
F-6
<PAGE>
METROPOLITAN REALTY CORPORATION
NOTES TO FINANCIAL STATEMENTS
____________
1. ORGANIZATION:
Metropolitan Realty Corporation (the "Company"), incorporated November 13,
1986, was organized to qualify as a real estate investment trust under the
provisions of the Internal Revenue Code.
2. ACCOUNTING POLICIES:
Cash Equivalents
The Company considers all highly liquid debt instruments purchased
with an original maturity of three months or less to be cash
equivalents.
Marketable Securities
The Company adopted Statement of Financial Accounting Standards
No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" (SFAS No. 115), effective January 1, 1994. Under SFAS No.
115, marketable securities available for sale are carried at market
value and unrealized gains and losses are included in a separate
component of shareholders' equity. Shareholders' equity at December
31, 1994 includes net unrealized holding losses on marketable
securities of $356,949. In accordance with the provisions of SFAS
No. 115, prior period financial statements have not been restated to
reflect the change in accounting principle. The cumulative effect of
adopting the provisions of SFAS No. 115 was not significant. Prior to
January 1, 1994, marketable securities were carried at the lower of
cost or market. Marketable securities at December 31, 1994 and 1993
consist of Federal National Mortgage Association and Federal Home
Loan Mortgage Corporation mortgage backed securities. Realized gains
or losses on sales of securities are determined based upon specific
identification. The realized net loss on marketable securities,
included in investment income in the accompanying statement of
operations, resulted from called securities and aggregated $16,557
for the year ended December 31, 1994 and $24,223 for the year ended
December 31, 1993. At December 31, 1994, all marketable securities
are considered available for sale.
Allowance for Loan Losses
The Company provides for possible losses on its portfolio of
mortgage notes receivable based on an evaluation of each mortgage
note. In determining the allowance for possible losses, the
Company has considered various indicators of value, including
market evaluations of the underlying collateral, the cost of money,
operating cash flow from the property during the projected holding
period and expected capitalization rates applied to the stabilized
net operating income of the specified property.
Continued
F-7
<PAGE>
METROPOLITAN REALTY CORPORATION
NOTES TO FINANCIAL STATEMENTS, Continued
2. ACCOUNTING POLICIES, continued:
The allowance is based upon management's estimates and ultimate
losses may vary from the current estimates. These estimates are
periodically reviewed, and as adjustments become necessary, they are
reported in the statement of operations in the period in which they
become known.
Foreclosed Property Held for Sale
Property acquired through loan foreclosure is initially recorded at
the lesser of mortgage loan balance or fair value at the date of
foreclosure. Losses, if any, attributable to the excess of the
recorded investment including accrued interest over fair value are
charged to the allowance for loan losses on mortgage loans at the
time of foreclosure. A valuation allowance is also established at the
time of foreclosure for the estimated costs to sell the property as
the Company is dependent on the liquidation of the property for the
recovery of its investment in foreclosed real estate. Subsequent to
foreclosure, the property is carried at the lower of cost or fair
value less estimated costs to sell. The property's operating income
and expenses from the date of foreclosure are reflected in the
statement of operations. Depreciation of the property commences one
year from the date of foreclosure. Income from guarantor settlements
is recognized when received.
Organization Costs
Certain costs related to the organization of the Company were
capitalized at cost and amortized on a straight-line basis over 60
months. Organization costs became fully amortized in fiscal 1993.
Income Taxes
The Company intends to operate at all times to qualify as a real
estate investment trust under the provisions of the Internal Revenue
Code. In general, each year qualification is met, income is not
subject to federal income tax at the Company level to the extent
distributed to shareholders.
Revenue Recognition
Loan origination fees received from the borrower, in excess of loan
origination costs paid, are amortized to interest income using the
effective interest method over the life of the mortgage loan.
Continued
F-8
<PAGE>
METROPOLITAN REALTY CORPORATION
NOTES TO FINANCIAL STATEMENTS, Continued
2. ACCOUNTING POLICIES, continued:
Interest income is accrued when earned. The Company discontinues the
accrual of interest income when circumstances exist which cause the
collection of interest to be doubtful. The determination to
discontinue accruing interest is made after a review by the Company's
management of all relevant facts, including delinquency of principal
and/or interest, and financial stability of the borrower. Loans
classified as nonearning are loans on which the accrual of interest
has been discontinued.
Other
Certain prior year accounts have been reclassified to conform with
current year presentations.
Continued
F-9
<PAGE>
METROPOLITAN REALTY CORPORATION
NOTES TO FINANCIAL STATEMENTS, Continued
3. MORTGAGE NOTES RECEIVABLE:
Mortgage notes receivable as of dates indicated are summarized as follows:
<TABLE>
<CAPTION>
====================================================================================================================================
Principal
Amount of
Loans
Subject
to
Carrying Amount of Delinquent
Final Face Mortgages at December 31,* Principal
Interest Maturity Periodic Prior Amount of ---------------------------------- and
Description Rate Date Payment Terms Liens Mortgage 1994 1993 1992 Interest
------------------------------------------------------------------------------------------------------------------------------------
First Mortgage Notes on Industrial and Mixed-Use Facilities
and Office Buildings:
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <S> <C> <C> <C> <C> <C> <C>
First 9.09% December Monthly payments of None $4,376,000 $4,238,157 $4,265,018 $4,289,481
mortgage 2000 principal and inter-
note on est of $35,494 until
parking maturity, at which
garage in time the remaining
Detroit, unpaid principal
Michigan balance of
approximately
$4,010,000 is due.
The note may be
prepaid in whole, but
not in part, for a
fee ranging from 1
percent to 1.5
percent of the
outstanding principal
balance at the time
of prepayment.
------------------------------------------------------------------------------------------------------------------------------------
First 10.25% April 2000 Monthly payments in None 1,900,000 1,836,190 1,703,506 1,716,148
mortgage on varying installments
rehabilitation of principal and
of historic interest until
office maturity, at which
building time the remaining
located in unpaid principal
Detroit, balance of
Michigan approximately
$1,858,000 is due.
The note may be
prepaid in whole, but
not in part, for a
set fee based upon
the rate by which the
annual yield on
certain U.S. Treasury
securities exceeds
the yield on the note
through April 1997,
after which time the
fee ranges from 1
percent to 3 percent
of the outstanding
principal balance at
the time of
prepayment.
------------------------------------------------------------------------------------------------------------------------------------
First 9.875% January Monthly payments in None 2,525,000 2,458,787 2,471,031 2,482,095
mortgage 1999 varying installments
permanent of principal and
loan on a interest until
light maturity, at which
industrial time the remaining
building unpaid principal
located in balance of
Plymouth approximately
Township, $2,402,000 is due.
Michigan The note may be
prepaid in whole, but
not in part, for a
fee based upon the
rate by which the
annual yield on
certain U.S. Treasury
securities exceeds
the yield on the note
at the time of
prepayment.
------------------------------------------------------------------------------------------------------------------------------------
<FN>
* The carrying amount is reduced for unamortized loan origination fees
received in excess of loan origination costs paid.
</TABLE>
Continued
F-10
<PAGE>
METROPOLITAN REALTY CORPORATION
NOTES TO FINANCIAL STATEMENTS, Continued
3. MORTGAGE NOTES RECEIVABLE, Continued:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Principal
Amount of
Loans
Subject
to
Carrying Amount of Delinquent
Final Face Mortgages at December 31,* Principal
Interest Maturity Periodic Prior Amount of ---------------------------------- and
Description Rate Date Payment Terms Liens Mortgage 1994 1993 1992 Interest
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <S> <C> <C> <C> <C> <C> <C>
First 10.50% December Monthly payments of None $960,000 $945,613 $950,070 $954,074
mortgage on 2000 interest only until
day care January 1993 when
center payments in varying
located in installments of
Plymouth, principal and inter-
Michigan est commence until
maturity, at which
time the remaining
unpaid principal
balance of
approximately
$908,000 is due. The
note may be prepaid
in whole, but not in
part, for a fee based
upon the rate by
which the annual
yield on certain U.S.
Treasury securities
exceeds the yield on
the note at the time
of prepayment.
------------------------------------------------------------------------------------------------------------------------------------
First 9.875% October Monthly payments in None 695,000 673,579 676,731 679,576
mortgage on 2000 varying installments
retail tire of principal and
center interest until
located in maturity, at which
Woodhaven, time the remaining
Michigan unpaid principal
balance of
approximately
$647,000 is due. The
note may be prepaid
in whole, but not in
part, for a fee of 1
percent of the
outstanding principal
balance or based upon
the rate by which the
annual yield on
certain U.S. Treasury
securities exceeds
the yield on the note
at the time of
prepayment.
------------------------------------------------------------------------------------------------------------------------------------
First 9.50% February Monthly payments in None 750,000 723,425 726,887 730,023
mortgage on 2001 varying installments
retail tire of principal and
center interest until
located in maturity, at which
Sterling time the remaining
Heights, unpaid principal
Michigan balance of
approximately
$693,000 is due. The
note may be prepaid
in whole, but not in
part, for a fee of 1
percent to 2 percent
of the outstanding
principal balance or
based upon the rate
by which the annual
yield on certain U.S.
Treasury securities
exceeds the yield on
the note at the time
of prepayment.
------------------------------------------------------------------------------------------------------------------------------------
<FN>
* The carrying amount is reduced for unamortized loan origination fees
received in excess of loan origination costs paid.
</TABLE>
Continued
F-11
<PAGE>
METROPOLITAN REALTY CORPORATION
NOTES TO FINANCIAL STATEMENTS, Continued
3. MORTGAGE NOTES RECEIVABLE, Continued:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Principal
Amount of
Loans
Subject
to
Carrying Amount of Delinquent
Final Face Mortgages at December 31,* Principal
Interest Maturity Periodic Prior Amount of ---------------------------------- and
Description Rate Date Payment Terms Liens Mortgage 1994 1993 1992 Interest
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <S> <C> <C> <C> <C> <C> <C>
First 10.50% July 1997** Monthly payments of None $1,250,000 -- $1,212,924 $1,218,737
mortgage on principal and inter-
Industrial est of $11,933 until
building maturity, at which
located in time the remaining
Van Buren unpaid principal
Township, balance of
Michigan approximately
$1,185,230 is due.
The note may be
prepaid in whole, but
not in part, for a
fee based upon the
rate by which the
annual yield on
certain U.S. Treasury
securities exceeds
the yield on the note
at the time of
prepayment.
------------------------------------------------------------------------------------------------------------------------------------
First 10.25% April 2003 Monthly payments of None 1,800,000 1,743,332 1,739,059
mortgage on interest only through
office April 1995 and
building varying installments
located in of principal and
Detroit, interest from May
Michigan 1995 until maturity,
at which time the
remaining unpaid
principal balance of
approximately,
$1,695,000 is due.
The note may be
prepaid in whole, but
not in part, at
varying prepayment
rates, based on the
date of prepayment.
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
First Mortgage Notes on Shopping Centers:
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <S> <C> <C> <C> <C> <C> <C>
Shopping 10.00% December Monthly payments in None 1,080,500 971,030 975,153 978,854
center and 1999 varying installments
located in 10.50% of principal and
Detroit, interest until
Michigan maturity, at which
time the remaining
unpaid principal
balance of
approximately
$941,000 is due. The
note may be prepaid
in whole, but not in
part, for a fee
ranging from 1
percent to 5 percent
of the outstanding
principal balance or
based upon the rate
by which the annual
yield on certain U.S.
Treasury securities
exceeds the yield on
the note at the time
of prepayment.
------------------------------------------------------------------------------------------------------------------------------------
<FN>
* The carrying amount is reduced for unamortized loan origination fees
received in excess of loan origination costs paid.
** On November 9, 1994, the outstanding principal balance of this mortgage
note was prepaid. The Company also received a prepayment penalty of
approximately $114,000.
</TABLE>
Continued
F-12
<PAGE>
METROPOLITAN REALTY CORPORATION
NOTES TO FINANCIAL STATEMENTS, Continued
3. MORTGAGE NOTES RECEIVABLE, Continued:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Principal
Amount of
Loans
Subject
to
Carrying Amount of Delinquent
Final Face Mortgages at December 31,* Principal
Interest Maturity Periodic Prior Amount of ---------------------------------- and
Description Rate Date Payment Terms Liens Mortgage 1994 1993 1992 Interest
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <S> <C> <C> <C> <C> <C> <C>
Shopping 9.3752% January Monthly payments of None $2,200,000 $2,127,504 $2,141,578 $2,154,216
center 2000 principal and inter-
located in est of $18,298 until
Sterling maturity, at which
Heights, time the remaining
Michigan unpaid principal
balance of
approximately
$2,028,000 is due.
The note may be
prepaid in whole, but
not in part, for a
fee based upon the
rate by which the
annual yield on
certain U.S. Treasury
securities at the
time of prepayment
exceeds the yield on
the note through
January 1997. After
such date, the note
may be prepaid
without a fee.
------------------------------------------------------------------------------------------------------------------------------------
Shopping 9.17% June 1994 Monthly payments of None 3,300,000 -- 3,300,000 3,271,614
center interest only of
located in $25,218 until
St. Clair maturity, at which
Shores, time the remaining
Michigan unpaid principal
balance of $3,300,000
is due.
------------------------------------------------------------------------------------------------------------------------------------
Rehabilitation 11.25% October Monthly payments of None 1,650,000 1,589,953 1,602,673 1,615,203
of shopping 2000 principal and inter-
center est of $16,471 until
located in maturity, at which
Detroit, time the remaining
Michigan unpaid principal
balance of
approximately
$1,477,000 is due.
The note may be
prepaid in whole, but
not in part, for a
fee based upon the
rate by which the
annual yield on
certain U.S. Treasury
securities exceeds
the yield on the note
at the time of
prepayment.
------------------------------------------------------------------------------------------------------------------------------------
Rehabilitation 11.25% October Monthly payments of None 2,200,000 2,119,938 2,136,897 2,153,604
of shopping 2000 principal and inter-
center est of $21,961 until
located in maturity, at which
Detroit, time the remaining
Michigan unpaid principal
balance of
approximately
$1,969,000 is due.
The loan may be
prepaid in whole, but
not in part, and may
require payment of a
fee based upon the
rate by which the
annual yield on
certain U.S. Treasury
securities exceeds
the yield on the note
at the time of
prepayment.
------------------------------------------------------------------------------------------------------------------------------------
<FN>
* The carrying amount is reduced for unamortized loan origination fees
received in excess of loan origination costs paid.
</TABLE>
Continued
F-13
<PAGE>
METROPOLITAN REALTY CORPORATION
NOTES TO FINANCIAL STATEMENTS, Continued
3. MORTGAGE NOTES RECEIVABLE, Continued:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Principal
Amount of
Loans
Subject
to
Carrying Amount of Delinquent
Final Face Mortgages at December 31,* Principal
Interest Maturity Periodic Prior Amount of ---------------------------------- and
Description Rate Date Payment Terms Liens Mortgage 1994 1993 1992 Interest
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <S> <C> <C> <C> <C> <C> <C>
Shopping April 1997 Monthly payments in None $2,500,000 $2,362,444 $2,392,384 $2,422,718
center 10.25% varying installments
located in and of principal and
Detroit, 9.75% interest until
Michigan maturity, at which
time the remaining
unpaid principal
balance of
approximately
$2,277,000 is due.
The note may be
prepaid in whole, but
not in part, for a
fee based upon the
rate by which the
annual yield on
certain U.S. Treasury
securities exceeds
the yield on the note
at the time of
prepayment.
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
First Mortgage Notes on Apartment Buildings:
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <S> <C> <C> <C> <C> <C> <C>
Renovation 8.0% August 2000 Monthly payments of None 1,260,000** 1,369,349 1,369,463 1,243,844
of 75- and interest only through
unit 9.5% April 1994 and
building varying installments
located in of principal and
Detroit, interest from May
Michigan 1994 until maturity,
at which time the
remaining unpaid
principal balance of
approximately
$1,284,000 is due.
The note may be
prepaid in whole, but
not in part, and may
require payment of a
fee based upon the
rate by which the
annual yield on
certain U.S. Treasury
securities exceeds
the yield on the note
at the time of
prepayment.
------------------------------------------------------------------------------------------------------------------------------------
<FN>
* The carrying amount is reduced for unamortized loan origination fees
received in excess of loan origination costs paid.
** During 1993, the Company modified the terms of this mortgage note,
pursuant to which approximately $125,000 of interest was added to the
principal balance of the mortgage.
</TABLE>
Continued
F-14
<PAGE>
METROPOLITAN REALTY CORPORATION
NOTES TO FINANCIAL STATEMENTS, Continued
3. MORTGAGE NOTES RECEIVABLE, Continued:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Principal
Amount of
Loans
Subject
to
Carrying Amount of Delinquent
Final Face Mortgages at December 31,* Principal
Interest Maturity Periodic Prior Amount of ---------------------------------- and
Description Rate Date Payment Terms Liens Mortgage 1994 1993 1992 Interest
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <S> <C> <C> <C> <C> <C> <C>
Renovation 9.25% September Monthly payments of None $728,000 $622,842 $703,403 $708,381
of 54-unit 2000 principal and inter-
building est of $5,800 until
located in maturity, at which
Detroit, time the remaining
Michigan unpaid principal
balance of
approximately
$557,000 is due. The
note may be prepaid
in whole, but not in
part, and may require
payment of a fee
based upon the rate
by which the annual
yield on certain U.S.
Treasury securities
exceeds the yield on
the note at the time
of prepayment.**
------------------------------------------------------------------------------------------------------------------------------------
24-unit 10.25% January Monthly payments in None 275,000 261,166 263,451 265,502
building 2001 varying installments
located in of principal and
Detroit, interest until
Michigan maturity, at which
time the remaining
unpaid principal
balance of
approximately
$241,000 is due. The
note may be prepaid
in whole, but not in
part, and may require
payment of a fee
based upon the rate
by which the annual
yield on certain U.S.
Treasury securities
exceeds the yield on
the note at the time
of prepayment.
------------------------------------------------------------------------------------------------------------------------------------
<FN>
* The carrying amount is reduced for unamortized loan origination fees
received in excess of loan origination costs paid.
** In December 1994, the company modified the terms of this loan pursuant to
which $75,000 of principal was prepaid and the interest rate was reduced
from 11% to 9.25%.
</TABLE>
Continued
F-15
<PAGE>
METROPOLITAN REALTY CORPORATION
NOTES TO FINANCIAL STATEMENTS, Continued
3. MORTGAGE NOTES RECEIVABLE, Continued:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Principal
Amount of
Loans
Subject
to
Carrying Amount of Delinquent
Final Face Mortgages at December 31,* Principal
Interest Maturity Periodic Prior Amount of ---------------------------------- and
Description Rate Date Payment Terms Liens Mortgage 1994 1993 1992 Interest
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <S> <C> <C> <C> <C> <C> <C>
Renovation 10.25% April 1997 Monthly payments in None $2,500,000 $2,350,670 $2,418,934 $2,444,288
of 167 unit and varying installments
building 12.25% of principal and
located in interest until
Detroit, maturity, at which
Michigan time the remaining
unpaid principal
balance of
approximately
$1,910,857 is due.
The note may be
prepaid in whole, but
not in part, for a
fee based upon the
rate by which the
annual yield on
certain U.S. Treasury
securities exceeds
the yield on the note
at the time of
prepayment.
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
31,949,500 26,393,979 31,049,162 29,328,358 --
------------------------------------------------------------------------------------------------------------------------------------
Allowance for loan losses (1,000,000) (1,461,500) (1,461,500)
------------------------------------------------------------------------------------------------------------------------------------
Mortgage notes receivable, net of allowance for loan losses $31,949,500 $25,393,979 $29,587,662 $27,866,858 --
====================================================================================================================================
<FN>
* The carrying amount is reduced for unamortized loan origination fees
received in excess of loan origination costs paid.
</TABLE>
Continued
F-16
<PAGE>
METROPOLITAN REALTY CORPORATION
NOTES TO FINANCIAL STATEMENTS, Continued
3. MORTGAGE NOTES RECEIVABLE, continued:
A reconciliation of the carrying value of mortgage notes receivable for
the years ended December 31, 1994, 1993 and 1992 is as follows:
<TABLE>
<CAPTION>
December 31,
------------------------------------------------------
1994 1993 1992
<S> <C> <C> <C>
Mortgage notes receivable:
Balance, beginning of year $ 31,049,162 $ 29,328,358 $ 27,551,319
-------------- -------------- --------------
Additions:
New mortgage loans 150,000 1,800,000 4,605,582
Amortization of loan discount -- 22,886 45,771
Amortization of net loan origination fees 104,008 60,946 43,573
Interest deferred until maturity
of mortgage loan -- 124,550 --
-------------- -------------- --------------
Total additions 254,008 2,008,382 4,694,926
-------------- -------------- --------------
Deductions:
Collections of principal (4,876,191) (211,043) (145,608)
Loan origination fees received (33,000) (76,535) (97,184)
Foreclosure -- -- (2,675,095)
-------------- -------------- --------------
Total deductions (4,909,191) (287,578) (2,917,887)
-------------- -------------- --------------
Balance, close of year 26,393,979 31,049,162 29,328,358
-------------- -------------- --------------
Allowance for loan losses:
Balance, beginning of year (1,461,500) (1,461,500) (1,340,500)
-------------- -------------- --------------
Recovery from (provisions to) operations 461,500 (900,000)
Mortgage loans foreclosed -- 639,000
Reclassified to valuation allowance -- 140,000
-------------- --------------
Balance, close of year (1,000,000) (1,461,500) (1,461,500)
-------------- -------------- --------------
Mortgage notes receivable, net
of allowance for loan losses $ 25,393,979 $ 29,587,662 $ 27,866,858
============== ============== ==============
</TABLE>
During the year ended December 31, 1994, the Company earned approximately
$395,000 or 10.2% of its total income on one mortgage note with a carrying value
of approximately $4,238,000.
Two mortgage notes carried at an aggregate carrying value of approximately
$3,700,000 and four mortgage notes carried at an aggregate carrying value of
approximately $3,200,000 at December 31, 1994 made with entities affiliated
through common ownership earned the Company $448,941 and $321,079, respectively,
during the year ended December 31, 1994.
Continued
F-17
<PAGE>
METROPOLITAN REALTY CORPORATION
NOTES TO FINANCIAL STATEMENTS, Continued
3. MORTGAGE NOTES RECEIVABLE, continued:
Two mortgage loans with net carrying values aggregating $3,709,891 at
December 31, 1994, collateralized by shopping centers in Detroit, Michigan
and personal guarantees aggregating approximately $498,000, were in
default at December 31, 1991 for nonpayment of principal, interest and
late charges. The mortgagors are affiliated through a common borrower. In
1991, the Company established a loan loss reserve to reduce the carrying
value of these loans to their estimated net realizable value. During 1992,
the Company entered into loan modification agreements with these
borrowers, pursuant to which the borrowers agreed to bring the loans
current by December 31, 1992 and agreed to have the deeds to the
properties placed in escrow. The Company also exercised its right to
receive rental payments directly from the tenants. All events of default
were cured on February 1, 1993 and the loans are now current. The Company
continues to exercise its right to receive assigned rents directly from
the tenants and the deeds to the properties remain in escrow. Both of
these notes are classified as earning at December 31, 1994. An allowance
has been provided to reduce the carrying value of these loans to their
estimated net realizable value.
A mortgage loan with a carrying amount of $1,369,349 at December 31, 1994,
collateralized by an apartment building located in Detroit, Michigan, was
in default at December 31, 1992 for nonpayment of principal, interest and
late charges. During 1993, the Company entered into a loan modification
agreement with the borrower which cured the events of default. Pursuant
to this agreement the interest rate has been reduced, effective April 1,
1993, from 11.125% to 8% through April 1, 1995 and to 9.5% thereafter
until maturity. This agreement also deferred payments until November
1993, when monthly installments of interest only commenced and continued
through April 1994. Commencing May 1994, varying installments of
principal and interest are due monthly until maturity, at which time the
remaining unpaid principal and accrued interest is due. This agreement
also includes personal guarantees aggregating approximately $570,000 at
December 31, 1994. This loan is now current and is classified as earning
at December 31, 1994. An allowance has been provided to reduce the
carrying amount of the loan to its estimated net realizable value. The
Company also has three additional loans, which are carried at an
aggregate value of approximately $1.9 million at December 31, 1994, to
entities affiliated with this borrower through common ownership which are
all current and are classified as mortgage notes, earning at December 31,
1994.
The Company evaluates its portfolio of mortgage loans on an individual
basis, comparing the amount at which the investment is carried to its
estimated net realizable value. In making its evaluations, the Company has
assumed that it will be able to acquire property collateralizing mortgage
loans by foreclosure, if deemed appropriate, and hold and dispose of such
assets and real estate currently owned in the ordinary course of business
to maximize the return to the Company. The evaluations and related
assumptions are dependent upon current estimates of future operations,
proceeds, costs, events and general market and economic conditions all of
which are influenced by many unpredictable factors. Accordingly, the
ultimate realizations of the Company's investments, including future
income, may differ from amounts presently estimated. The Company believes
that the allowance for loan losses of $1,000,000 at December 31, 1994 is
adequate to properly reflect the portfolio of mortgage loans at estimated
net realizable value.
Continued
F-18
<PAGE>
METROPOLITAN REALTY CORPORATION
NOTES TO FINANCIAL STATEMENTS, Continued
4. REAL ESTATE OWNED:
At December 23, 1992, the Company obtained an apartment building located
in Detroit, Michigan through a foreclosure sale. This property was the
collateral for a construction loan under which the borrower defaulted
during 1992. Under Michigan law, title passed to the Company on June 23,
1993, at the expiration of a six month redemption period. The carrying
value of the property was written down to its estimated fair value at the
time of foreclosure of $2,100,000, which resulted in a $639,000 writeoff
against the allowance for loan losses. The fair value was determined based
upon a July 1992 independent appraisal. A valuation allowance of $140,000
was also established at the time of foreclosure for the estimated costs to
sell the property. At December 31, 1994, the carrying value of the
property has been reduced to $900,000 to reflect an updated property
valuation based on the results of the Company's marketing efforts to
locate a buyer for the property.
During 1994, the Company reached settlements with the guarantors of the
foreclosed loan aggregating $320,000. These settlements are payable over
four to eight years, with interest rates ranging from non-interest
bearing to 7.5%. The settlements bear interest at an average rate of
6%. Income from the settlements is recognized by the Company when
received and is recorded as miscellaneous income on the statement of
operations. Settlement income totalled $43,000 for the year ended
December 31, 1994.
The property's operating income and expenses from the date of foreclosure
are reflected in the statement of operations. The net loss from
foreclosed property held for sale, totalling $1,295,416 for the year
ended December 31, 1994 and $337,699 for the year ended December 31, 1993,
consisted of the following:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Rental income $ 661,679 $553,668
--------- -------
Expenses:
Operating expenses 840,950 834,503
Valuation provision 994,134 --
Depreciation expense 65,866 --
Management fees 37,538 40,123
Professional fees 18,607 16,741
---------- --------
Total expenses 1,957,095 891,367
---------- --------
Net loss from foreclosed
property held for sale $1,295,416 $337,699
========== ========
</TABLE>
Continued
F-19
<PAGE>
METROPOLITAN REALTY CORPORATION
NOTES TO FINANCIAL STATEMENTS, Continued
5. FEDERAL INCOME TAX:
A real estate investment trust is not subject to federal income tax on
taxable income distributed to its shareholders during its fiscal year and
subsequent year, but prior to filing its federal tax return. If, however,
the real estate investment trust has retained income within the limits
allowed under the federal tax laws, it must pay tax at corporate rates on
its undistributed income. Furthermore, if the real estate investment trust
fails to distribute, during the fiscal year, an amount equal to 85% of its
taxable income for that year, it is subject to a 4% excise tax on the
shortfall. The excise tax is not deductible for federal income tax
purposes. Income for tax and financial reporting purposes is reconciled as
follows:
<TABLE>
<CAPTION>
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
Investment income before income $ 2,587,550 $ 2,700,898 $ 2,112,662
tax on undistributed earnings
Increase (decrease) in taxable
income resulting from:
Bad debt expense (312,000) -- (111,650)
Interest and late charges -- -- (37,678)
earned on nonearning loans
Loan origination and (88,845) (57,324) (8,261)
application fees, net
Provision for valuation allowance 532,634 -- --
Allowance for loan losses -- -- 900,000
Dividends declared on (2,764,623) (2,673,980) (2,855,266)
investment income
Other, net 45,284 30,406 193
Taxable investment income -- -- --
</TABLE>
Continued
F-20
<PAGE>
METROPOLITAN REALTY CORPORATION
NOTES TO FINANCIAL STATEMENTS, Continued
6. RELATED PARTY TRANSACTIONS:
The Company was involved in various transactions with affiliates as
follows:
o One of the Company's legal counselors is also a member of the
Company's Board of Directors. Fees for legal services provided
by the director's law firm amount to $153,296, of which $70,076
are deferred by the Company (see Note 8), $57,599 and $186,285 for
the years ended December 31, 1994, 1993 and 1992, respectively.
Accrued legal fees of $22,524 and $3,087 are included in accounts
payable in the accompanying balance sheet at December 31, 1994 and
1993, respectively.
o Fees aggregating $19,831, $19,261 and $23,176 for the years ended
December 31, 1994, 1993 and 1992, respectively, were earned by a
shareholder of the Company for providing various investment and
other services to the Company.
o Consulting fees under a contractual agreement aggregating $42,400,
$40,000 and $56,442 were earned by an officer of the Company in 1994,
1993 and 1992 respectively. Accrued consulting fees of $1,667 are
included in accounts payable in the accompanying balance sheet at
December 31, 1993.
7. DIVIDEND DECLARATION:
Under pertinent provisions of the Internal Revenue Code, a real estate
investment trust may consider a dividend declared in a subsequent year to
be a distribution of income of the immediately prior year and thus reduce
income subject to income tax. On March 10, 1995, the Board of Directors of
the Company declared a cash dividend of $.13 per share of common stock to
its shareholders of record on March 21, 1995, payable on March 31, 1995.
Of this dividend, $.06 will be paid from income earned by the Company in
1994. This dividend will be taxable to shareholders as ordinary income.
8. SUBSEQUENT EVENT:
On March 14, 1995, the Company's Board of Directors announced its
preliminary approval for the private placement of asset-backed bonds
through a wholly-owned subsidiary to be formed. The Company expects
to generate proceeds of approximately $50 million. At December 31,
1994 $131,000 of professional fees have been incurred and deferred in
connection with this transaction.
Continued
F-21
<PAGE>
METROPOLITAN REALTY CORPORATION
NOTES TO FINANCIAL STATEMENTS, Continued
9. INTERIM FINANCIAL INFORMATION (unaudited):
<TABLE>
<CAPTION>
Net
Net Investment
Total Investment Income
Quarters Ended Income Income Per Share
----------------------------------------------------------------
<S> <C> <C> <C>
Fiscal 1994
December 31 $ 1,052,728 $ 250,564 $ .05(1)
September 30 937,150 814,839 .18
June 30 929,888 809,875 .18
March 31 938,262 712,272 .16
----------- ----------- ----
$ 3,858,028 $ 2,587,550 $ .57
=========== =========== ====
Fiscal 1993
December 31 $ 880,491 $ 569,557 $ .13(2)
September 30 967,363 839,227 .18
June 30 931,989 576,526 .13
March 31 936,142 715,588 .16
----------- ----------- ----
$ 3,715,985 $ 2,700,898 $ .60
=========== =========== ====
<FN>
(1) The results of operations for the fourth quarter of fiscal year
1994 include a $994,000 increase in the valuation provision for foreclosed
property held for sale offset by a $462,000 decrease in the allowance
for loan losses and recognition of $114,000 in income from loan prepayment
penalties. See Notes 3 and 4 to the financial statements.
(2) The results of operations reflect the effect of expensing certain
rehabilitation costs incurred in connection with foreclosed property held for
sale.
</TABLE>
Continued
F-22
<PAGE>
<TABLE>
<CAPTION>
METROPOLITAN REALTY CORPORATION
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
for the years ended December 31, 1994, 1993 and 1992
Additions, Charged Balance
Charged (Credited) at
Balance at to Costs and to Other December
Description January 1 Expenses Accounts Deductions 31
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Allowance
for Loan
Losses:
1994 $ 1,461,500 $ (461,500) $ 1,000,000
1993 1,461,500 1,461,500
1992 1,340,500 $ 900,000 (140,000)(1) $(639,000)(2) 1,461,500
Valuation
Allowance:
1994 $ 140,000 $ 994,134 $ 1,134,134
1993 140,000 140,000
1992 -- $ 140,000(1) 140,000
<FN>
(1) Amount represents the estimated selling costs of foreclosed
property.
(2) Amount represents the loss on property acquired through loan
foreclosure.
</TABLE>
Continued
F-23
<PAGE>
INDEX TO EXHIBITS
Page
Exhibit Incorporated Herein Filed Number
No. Description by Reference to Herewith Herein
-------------------------------------------------------------------------------
3.1 Second Restated Exhibit 3.1 to the
Articles of Company's Form 10-K for
Incorporation the fiscal year ended
December 31, 1988
-------------------------------------------------------------------------------
3.2 Amendments to ByLaws Exhibit 3.2 to 1991 10-K
adopted May 17, 1991
-------------------------------------------------------------------------------
3.3 Restated ByLaws adopted Exhibit 3.3 to 1991 10-K
July 19, 1989, as amended
October 27, 1989, May 15,
1990 and May 17, 1991
-------------------------------------------------------------------------------
10.1 Investment Management Exhibit 10.2 to 1988
Service Agreement 10-K
dated February 15, 1989
between the Company and
NBD Bank, N.A. (formerly
National Bank of Detroit)
-------------------------------------------------------------------------------
10.2 Agency and Consulting Exhibit 10.2 to 1990
Agreement dated as of 10-K
November 15, 1989
between the Company and
Walters & Associates, Inc.
-------------------------------------------------------------------------------
10.3 Letter agreement dated Exhibit 10.1 to 1990
July 1990 between the 10-K
Company and Acquest
Capital Management, Inc.
-------------------------------------------------------------------------------
10.4 Buhl Building Lease Exhibit 10.4 to 1991
dated April 25, 1991 10-K
between the Company
and Buhl Realty Company
-------------------------------------------------------------------------------
10.5 Agency and Consulting Exhibit 10.5 to 1992
Agreement dated as of 10-K
February 4, 1993 between
the Company and Mattar
Consulting Services, Inc.
-------------------------------------------------------------------------------
10.6 First lease amendment Exhibit 10.6 to 1992
to Buhl Building Lease 10-K
dated May 14, 1992
between the Company
and Buhl Realty Company
-------------------------------------------------------------------------------
10.7 Letter agreement dated Exhibit 10.7 to 1993
March 8, 1994 between 10-K
the Company and Mattar
Consulting Services, Inc.
-------------------------------------------------------------------------------
10.8 Second lease amendment Exhibit 10.8 to 1993
to Buhl Building Lease 10-K
dated May 14, 1992
between the Company
and Buhl Realty Company
-------------------------------------------------------------------------------
10.9 Minutes of Executive
Committee of the Board of
Directors meeting dated X E-2
March 3, 1995 modifying
Agency and Consulting
Agreement dated as of
February 4, 1993 between
the Company and Mattar
Consulting Services, Inc.
-------------------------------------------------------------------------------
25 Powers of Attorney X E-3
-------------------------------------------------------------------------------
E-1
Minutes of the Special Meeting of
Executive Committee of Metropolitan Realty Corporation
March 3, 1995
Present: Wayne Doran, Robert Naftaly, Russell Flynn, Ron Yee, Tim Nichols,
and F. Thomas Lewand.
Following the regularly scheduled meeting of the Executive and Audit
Committees of Metropolitan Realty Corporation, the Executive Committee held
a special session to consider the renewal of the contract with Mattar
Consulting Services, Inc. and a pay raise for Sue Brooke.
After discussion, on motion of Mr. Naftaly, seconded by Mr. Lewand, and on
the unanimous vote of the Executive Committee, it was:
RESOLVED, that the contract of Mattar Consulting Services, Inc. be extended
for a period of twelve months from December 31, 1994, with an increase in
compensation of 5%, and that the salary of Sue Brooke be increased 5%,
effective February 15, 1995.
/s/ F. Thomas Lewand
-------------------------------------
F. Thomas Lewand, Assistant Secretary
POWER OF ATTORNEY
The undersigned Daniel L. Boone hereby designates, constitutes
and appoints Jay B. Rising, President, and Russell P. Flynn, Treasurer, and
each of them, the true and lawful attorney for the undersigned, with full
power of substitution, to sign for and on behalf of the undersigned an
annual report on Form 10-K with respect to the fiscal year ending December
31, 1994, all amendments thereto, and all instruments necessary or
incidental in connection therewith, and to file the same with the
Securities and Exchange Commission. Each of said attorneys shall have full
power and authority to do and perform in the name and on behalf of the
undersigned, in any and all capacities, every act whatever requisite or
necessary to be done in the premises as fully, and for all intents and
purposes, as the undersigned might or could do in person, the undersigned
hereby ratifying and approving the acts of said attorneys and each of them.
/s/ Daniel L. Boone
-----------------------------
Dated: February 21, 1995
<PAGE>
POWER OF ATTORNEY
The undersigned David M. Diegel hereby designates, constitutes
and appoints Jay B. Rising, President, and Russell P. Flynn, Treasurer, and
each of them, the true and lawful attorney for the undersigned, with full
power of substitution, to sign for and on behalf of the undersigned an
annual report on Form 10-K with respect to the fiscal year ending December
31, 1994, all amendments thereto, and all instruments necessary or
incidental in connection therewith, and to file the same with the
Securities and Exchange Commission. Each of said attorneys shall have full
power and authority to do and perform in the name and on behalf of the
undersigned, in any and all capacities, every act whatever requisite or
necessary to be done in the premises as fully, and for all intents and
purposes, as the undersigned might or could do in person, the undersigned
hereby ratifying and approving the acts of said attorneys and each of them.
/s/ David M. Diegel
-----------------------------
Dated: January 31, 1995
<PAGE>
POWER OF ATTORNEY
The undersigned Wayne S. Doran hereby designates, constitutes
and appoints Jay B. Rising, President, and Russell P. Flynn, Treasurer, and
each of them, the true and lawful attorney for the undersigned, with full
power of substitution, to sign for and on behalf of the undersigned an
annual report on Form 10-K with respect to the fiscal year ending December
31, 1994, all amendments thereto, and all instruments necessary or
incidental in connection therewith, and to file the same with the
Securities and Exchange Commission. Each of said attorneys shall have full
power and authority to do and perform in the name and on behalf of the
undersigned, in any and all capacities, every act whatever requisite or
necessary to be done in the premises as fully, and for all intents and
purposes, as the undersigned might or could do in person, the undersigned
hereby ratifying and approving the acts of said attorneys and each of them.
/s/ Wayne S. Doran
-----------------------------
Dated: February 6, 1995
<PAGE>
POWER OF ATTORNEY
The undersigned Russell P. Flynn hereby designates, constitutes
and appoints Jay B. Rising, President, and Russell P. Flynn, Treasurer, and
each of them, the true and lawful attorney for the undersigned, with full
power of substitution, to sign for and on behalf of the undersigned an
annual report on Form 10-K with respect to the fiscal year ending December
31, 1994, all amendments thereto, and all instruments necessary or
incidental in connection therewith, and to file the same with the
Securities and Exchange Commission. Each of said attorneys shall have full
power and authority to do and perform in the name and on behalf of the
undersigned, in any and all capacities, every act whatever requisite or
necessary to be done in the premises as fully, and for all intents and
purposes, as the undersigned might or could do in person, the undersigned
hereby ratifying and approving the acts of said attorneys and each of them.
/s/ Russell P. Flynn
-----------------------------
Dated: February 17, 1995
<PAGE>
POWER OF ATTORNEY
The undersigned David B. Hanson hereby designates, constitutes
and appoints Jay B. Rising, President, and Russell P. Flynn, Treasurer, and
each of them, the true and lawful attorney for the undersigned, with full
power of substitution, to sign for and on behalf of the undersigned an
annual report on Form 10-K with respect to the fiscal year ending December
31, 1994, all amendments thereto, and all instruments necessary or
incidental in connection therewith, and to file the same with the
Securities and Exchange Commission. Each of said attorneys shall have full
power and authority to do and perform in the name and on behalf of the
undersigned, in any and all capacities, every act whatever requisite or
necessary to be done in the premises as fully, and for all intents and
purposes, as the undersigned might or could do in person, the undersigned
hereby ratifying and approving the acts of said attorneys and each of them.
/s/ David B. Hanson
-----------------------------
Dated: January 26, 1995
<PAGE>
POWER OF ATTORNEY
The undersigned Kenneth L. Hollowell hereby designates, constitutes
and appoints Jay B. Rising, President, and Russell P. Flynn, Treasurer, and
each of them, the true and lawful attorney for the undersigned, with full
power of substitution, to sign for and on behalf of the undersigned an
annual report on Form 10-K with respect to the fiscal year ending December
31, 1994, all amendments thereto, and all instruments necessary or
incidental in connection therewith, and to file the same with the
Securities and Exchange Commission. Each of said attorneys shall have full
power and authority to do and perform in the name and on behalf of the
undersigned, in any and all capacities, every act whatever requisite or
necessary to be done in the premises as fully, and for all intents and
purposes, as the undersigned might or could do in person, the undersigned
hereby ratifying and approving the acts of said attorneys and each of them.
/s/ Kenneth L. Hollowell
-----------------------------
Dated: January 28, 1995
<PAGE>
POWER OF ATTORNEY
The undersigned Robert G. Jackson hereby designates, constitutes
and appoints Jay B. Rising, President, and Russell P. Flynn, Treasurer, and
each of them, the true and lawful attorney for the undersigned, with full
power of substitution, to sign for and on behalf of the undersigned an
annual report on Form 10-K with respect to the fiscal year ending December
31, 1994, all amendments thereto, and all instruments necessary or
incidental in connection therewith, and to file the same with the
Securities and Exchange Commission. Each of said attorneys shall have full
power and authority to do and perform in the name and on behalf of the
undersigned, in any and all capacities, every act whatever requisite or
necessary to be done in the premises as fully, and for all intents and
purposes, as the undersigned might or could do in person, the undersigned
hereby ratifying and approving the acts of said attorneys and each of them.
/s/ Robert G. Jackson
-----------------------------
Dated: February , 1995
<PAGE>
POWER OF ATTORNEY
The undersigned Richard P. Kughn hereby designates, constitutes
and appoints Jay B. Rising, President, and Russell P. Flynn, Treasurer, and
each of them, the true and lawful attorney for the undersigned, with full
power of substitution, to sign for and on behalf of the undersigned an
annual report on Form 10-K with respect to the fiscal year ending December
31, 1994, all amendments thereto, and all instruments necessary or
incidental in connection therewith, and to file the same with the
Securities and Exchange Commission. Each of said attorneys shall have full
power and authority to do and perform in the name and on behalf of the
undersigned, in any and all capacities, every act whatever requisite or
necessary to be done in the premises as fully, and for all intents and
purposes, as the undersigned might or could do in person, the undersigned
hereby ratifying and approving the acts of said attorneys and each of them.
/s/ Richard P. Kughn
-----------------------------
Dated: January 30, 1995
<PAGE>
POWER OF ATTORNEY
The undersigned F. Thomas Lewand hereby designates, constitutes
and appoints Jay B. Rising, President, and Russell P. Flynn, Treasurer, and
each of them, the true and lawful attorney for the undersigned, with full
power of substitution, to sign for and on behalf of the undersigned an
annual report on Form 10-K with respect to the fiscal year ending December
31, 1994, all amendments thereto, and all instruments necessary or
incidental in connection therewith, and to file the same with the
Securities and Exchange Commission. Each of said attorneys shall have full
power and authority to do and perform in the name and on behalf of the
undersigned, in any and all capacities, every act whatever requisite or
necessary to be done in the premises as fully, and for all intents and
purposes, as the undersigned might or could do in person, the undersigned
hereby ratifying and approving the acts of said attorneys and each of them.
/s/ F. Thomas Lewand
-----------------------------
Dated: January 25, 1995
<PAGE>
POWER OF ATTORNEY
The undersigned Ernest Lofton hereby designates, constitutes
and appoints Jay B. Rising, President, and Russell P. Flynn, Treasurer, and
each of them, the true and lawful attorney for the undersigned, with full
power of substitution, to sign for and on behalf of the undersigned an
annual report on Form 10-K with respect to the fiscal year ending December
31, 1994, all amendments thereto, and all instruments necessary or
incidental in connection therewith, and to file the same with the
Securities and Exchange Commission. Each of said attorneys shall have full
power and authority to do and perform in the name and on behalf of the
undersigned, in any and all capacities, every act whatever requisite or
necessary to be done in the premises as fully, and for all intents and
purposes, as the undersigned might or could do in person, the undersigned
hereby ratifying and approving the acts of said attorneys and each of them.
/s/ Ernest Lofton
-----------------------------
Dated: March 20, 1995
<PAGE>
POWER OF ATTORNEY
The undersigned Daniel F. McNamara hereby designates, constitutes
and appoints Jay B. Rising, President, and Russell P. Flynn, Treasurer, and
each of them, the true and lawful attorney for the undersigned, with full
power of substitution, to sign for and on behalf of the undersigned an
annual report on Form 10-K with respect to the fiscal year ending December
31, 1994, all amendments thereto, and all instruments necessary or
incidental in connection therewith, and to file the same with the
Securities and Exchange Commission. Each of said attorneys shall have full
power and authority to do and perform in the name and on behalf of the
undersigned, in any and all capacities, every act whatever requisite or
necessary to be done in the premises as fully, and for all intents and
purposes, as the undersigned might or could do in person, the undersigned
hereby ratifying and approving the acts of said attorneys and each of them.
/s/ Daniel F. McNamara
-----------------------------
Dated: January 26, 1995
<PAGE>
POWER OF ATTORNEY
The undersigned Robert H. Naftaly hereby designates, constitutes
and appoints Jay B. Rising, President, and Russell P. Flynn, Treasurer, and
each of them, the true and lawful attorney for the undersigned, with full
power of substitution, to sign for and on behalf of the undersigned an
annual report on Form 10-K with respect to the fiscal year ending December
31, 1994, all amendments thereto, and all instruments necessary or
incidental in connection therewith, and to file the same with the
Securities and Exchange Commission. Each of said attorneys shall have full
power and authority to do and perform in the name and on behalf of the
undersigned, in any and all capacities, every act whatever requisite or
necessary to be done in the premises as fully, and for all intents and
purposes, as the undersigned might or could do in person, the undersigned
hereby ratifying and approving the acts of said attorneys and each of them.
/s/ Robert H. Naftaly
-----------------------------
Dated: January 25, 1995
<PAGE>
POWER OF ATTORNEY
The undersigned Timothy L. Nichols hereby designates, constitutes
and appoints Jay B. Rising, President, and Russell P. Flynn, Treasurer, and
each of them, the true and lawful attorney for the undersigned, with full
power of substitution, to sign for and on behalf of the undersigned an
annual report on Form 10-K with respect to the fiscal year ending December
31, 1994, all amendments thereto, and all instruments necessary or
incidental in connection therewith, and to file the same with the
Securities and Exchange Commission. Each of said attorneys shall have full
power and authority to do and perform in the name and on behalf of the
undersigned, in any and all capacities, every act whatever requisite or
necessary to be done in the premises as fully, and for all intents and
purposes, as the undersigned might or could do in person, the undersigned
hereby ratifying and approving the acts of said attorneys and each of them.
/s/ Timothy L. Nichols
-----------------------------
Dated: January 25, 1995
<PAGE>
POWER OF ATTORNEY
The undersigned Oliver H. Smith hereby designates, constitutes
and appoints Jay B. Rising, President, and Russell P. Flynn, Treasurer, and
each of them, the true and lawful attorney for the undersigned, with full
power of substitution, to sign for and on behalf of the undersigned an
annual report on Form 10-K with respect to the fiscal year ending December
31, 1994, all amendments thereto, and all instruments necessary or
incidental in connection therewith, and to file the same with the
Securities and Exchange Commission. Each of said attorneys shall have full
power and authority to do and perform in the name and on behalf of the
undersigned, in any and all capacities, every act whatever requisite or
necessary to be done in the premises as fully, and for all intents and
purposes, as the undersigned might or could do in person, the undersigned
hereby ratifying and approving the acts of said attorneys and each of them.
/s/ Oliver H. Smith
-----------------------------
Dated: February 15, 1995
<PAGE>
POWER OF ATTORNEY
The undersigned Frank D. Stella hereby designates, constitutes
and appoints Jay B. Rising, President, and Russell P. Flynn, Treasurer, and
each of them, the true and lawful attorney for the undersigned, with full
power of substitution, to sign for and on behalf of the undersigned an
annual report on Form 10-K with respect to the fiscal year ending December
31, 1994, all amendments thereto, and all instruments necessary or
incidental in connection therewith, and to file the same with the
Securities and Exchange Commission. Each of said attorneys shall have full
power and authority to do and perform in the name and on behalf of the
undersigned, in any and all capacities, every act whatever requisite or
necessary to be done in the premises as fully, and for all intents and
purposes, as the undersigned might or could do in person, the undersigned
hereby ratifying and approving the acts of said attorneys and each of them.
/s/ Frank D. Stella
-----------------------------
Dated: January 25, 1995
<PAGE>
POWER OF ATTORNEY
The undersigned Marc Stepp hereby designates, constitutes
and appoints Jay B. Rising, President, and Russell P. Flynn, Treasurer, and
each of them, the true and lawful attorney for the undersigned, with full
power of substitution, to sign for and on behalf of the undersigned an
annual report on Form 10-K with respect to the fiscal year ending December
31, 1994, all amendments thereto, and all instruments necessary or
incidental in connection therewith, and to file the same with the
Securities and Exchange Commission. Each of said attorneys shall have full
power and authority to do and perform in the name and on behalf of the
undersigned, in any and all capacities, every act whatever requisite or
necessary to be done in the premises as fully, and for all intents and
purposes, as the undersigned might or could do in person, the undersigned
hereby ratifying and approving the acts of said attorneys and each of them.
/s/ Marc Stepp
-----------------------------
Dated: January 28, 1995
<PAGE>
POWER OF ATTORNEY
The undersigned Samuel Thomas hereby designates, constitutes
and appoints Jay B. Rising, President, and Russell P. Flynn, Treasurer, and
each of them, the true and lawful attorney for the undersigned, with full
power of substitution, to sign for and on behalf of the undersigned an
annual report on Form 10-K with respect to the fiscal year ending December
31, 1994, all amendments thereto, and all instruments necessary or
incidental in connection therewith, and to file the same with the
Securities and Exchange Commission. Each of said attorneys shall have full
power and authority to do and perform in the name and on behalf of the
undersigned, in any and all capacities, every act whatever requisite or
necessary to be done in the premises as fully, and for all intents and
purposes, as the undersigned might or could do in person, the undersigned
hereby ratifying and approving the acts of said attorneys and each of them.
/s/ Samuel Thomas
-----------------------------
Dated: February 1, 1995
<PAGE>
POWER OF ATTORNEY
The undersigned R. Douglas Trezise hereby designates, constitutes
and appoints Jay B. Rising, President, and Russell P. Flynn, Treasurer, and
each of them, the true and lawful attorney for the undersigned, with full
power of substitution, to sign for and on behalf of the undersigned an
annual report on Form 10-K with respect to the fiscal year ending December
31, 1994, all amendments thereto, and all instruments necessary or
incidental in connection therewith, and to file the same with the
Securities and Exchange Commission. Each of said attorneys shall have full
power and authority to do and perform in the name and on behalf of the
undersigned, in any and all capacities, every act whatever requisite or
necessary to be done in the premises as fully, and for all intents and
purposes, as the undersigned might or could do in person, the undersigned
hereby ratifying and approving the acts of said attorneys and each of them.
/s/ R. Douglas Trezise
-----------------------------
Dated: January 27, 1995
<PAGE>
POWER OF ATTORNEY
The undersigned Ronald C. Yee hereby designates, constitutes
and appoints Jay B. Rising, President, and Russell P. Flynn, Treasurer, and
each of them, the true and lawful attorney for the undersigned, with full
power of substitution, to sign for and on behalf of the undersigned an
annual report on Form 10-K with respect to the fiscal year ending December
31, 1994, all amendments thereto, and all instruments necessary or
incidental in connection therewith, and to file the same with the
Securities and Exchange Commission. Each of said attorneys shall have full
power and authority to do and perform in the name and on behalf of the
undersigned, in any and all capacities, every act whatever requisite or
necessary to be done in the premises as fully, and for all intents and
purposes, as the undersigned might or could do in person, the undersigned
hereby ratifying and approving the acts of said attorneys and each of them.
/s/ Ronald C. Yee
-----------------------------
Dated: January 25, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> $ 3,529,334
<SECURITIES> 10,783,048
<RECEIVABLES> 26,393,979
<ALLOWANCES> (1,000,000)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,968,268
<DEPRECIATION> 65,866
<TOTAL-ASSETS> 41,025,168
<CURRENT-LIABILITIES> 545,744
<BONDS> 0
<COMMON> 45,322
0
0
<OTHER-SE> 40,452,102
<TOTAL-LIABILITY-AND-EQUITY> 41,025,168
<SALES> 0
<TOTAL-REVENUES> 3,858,028
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,731,978
<LOSS-PROVISION> (461,500)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,587,550
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,587,550
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
