UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission File Number 1-9885
Banyan Mortgage Investment Fund
(Exact name of Registrant as specified in its charter)
Delaware 36-3465359
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
150 South Wacker Drive, Chicago, Illinois 60606
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (312) 553-9800
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 .
Shares of common stock outstanding as of August 11, 1995: 39,742,395.
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
BANYAN MORTGAGE INVESTMENT FUND
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1995 AND DECEMBER 31, 1994
(UNAUDITED)
1995 1994
ASSETS
Cash and Cash Equivalents $ 2,405,531 $ 8,040,629
Repair, Improvement and Real
Estate Tax Escrows 1,035,448 602,211
Accounts Receivable (Net of
Allowance for Doubtful Accounts
of $48,000 and $34,000 for
1995 and 1994, respectively) 25,505 18,509
Interest Receivable on Cash and
Cash Equivalents 67,551 84,272
------------ -------------
3,534,035 8,745,621
------------ -------------
Investment in Real Estate:
Land 79,286,137 79,400,569
Buildings and Improvements 2,111,713 1,986,851
------------ -------------
81,397,850 81,387,420
Less: Accumulated Depreciation (1,835,303) (1,645,927)
------------ -------------
79,562,547 79,741,493
Developments in Progress 34,323,322 30,752,252
------------ -------------
Net Investment in Real Estate 113,885,869 110,493,745
------------ -------------
Net Investment in Real Estate
Venture 1,172,037 1,325,401
Deferred Financing Costs (Net of
Accumulated Amortization of
$233,008 and $68,034
for 1995 and 1994,
respectively) 1,076,188 1,241,162
Other Assets 2,585,935 2,861,997
------------ -------------
Total Assets $122,254,064 $ 124,667,926
============ =============
LIABILITIES AND STOCKHOLDERS'
EQUITY
Liabilities
Accounts Payable and Accrued
Expenses $ 1,311,996 $ 1,255,286
Interest Payable 951,120 810,526
Real Estate Taxes Payable 196,564 ---
Mortgage Loans Payable 31,780,184 31,932,645
------------ ------------
Total Liabilities 34,239,864 33,998,457
------------ ------------
Stockholders' Equity
Shares of Common Stock, $0.01
Par Value, 100,000,000 Shares
Authorized, 39,762,495 Shares
Issued 348,162,496 348,162,496
Accumulated Deficit (260,136,980) (257,481,711)
Treasury Stock, at Cost, for
20,100 Shares of Common Stock (11,316) (11,316)
------------ ------------
Total Stockholders' Equity 88,014,200 90,669,469
------------ ------------
Total Liabilities and Stock-
holders' Equity $122,254,064 $124,667,926
============ ============
Book Value Per Share of Common
Stock (39,742,395 Shares
Outstanding) $ 2.21 $ 2.28
============ ============
The accompanying notes are an integral part of the consolidated
financial statements.
BANYAN MORTGAGE INVESTMENT FUND
CONSOLIDATED STATEMENTS OF INCOME AND EXPENSES
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994
(UNAUDITED)
1995 1994
INCOME
Income From Investing
Activities:
Interest on Cash and Cash
Equivalents $ 142,512 $ 37,831
Income From Property Operating
Activities:
Operating Property Revenue 800,033 2,148,460
------------ ------------
Total Income 942,545 2,186,291
------------ ------------
EXPENSES
Expenses From Property
Activities:
Operating Property Expenses 221,401 649,271
Development Property Expenses 767,133 252,799
Repairs and Maintenance 98,503 203,348
Real Estate Taxes 159,407 307,199
Depreciation 205,952 367,850
Bad Debt (Recovery) Expense (11,000) 9,425
------------ ------------
Total Expenses From Property
Activities 1,441,396 1,789,892
------------ ------------
Other Expenses:
Stockholder Expenses 236,679 238,213
Directors' Fees, Expenses
and Insurance 254,470 260,248
Other Professional Fees 127,443 420,342
General and Administrative 629,961 735,285
Recovery of Losses on Mortgage
Loans, Notes and Interest
Receivable and Class Action
Settlement Costs and Expenses (495,591) (796,985)
Interest Expense and Amorti-
zation of Deferred Loan
Costs 1,320,298 1,068,957
------------ ------------
Total Other Expenses 2,073,260 1,926,060
------------ ------------
Total Expenses 3,514,656 3,715,952
------------ ------------
Operating Loss (2,572,111) (1,529,661)
Net Loss From Operations of Real
Estate Venture (90,716) (213,798)
Arbitration Award --- (3,768,743)
Gain on Dispositions of
of Real Estate 7,558 2,828,660
------------ ------------
Net Loss $ (2,655,269) $ (2,683,542)
============ ============
Net Loss Per Share of Common
Stock (Based on Weight
Average Number of Shares
Outstanding of 39,742,395
and 39,707,306 during 1995
and 1994, respectively) $ (0.07) $ (0.07)
============ ============
The accompanying notes are an integral part of the consolidated
financial statements.
BANYAN MORTGAGE INVESTMENT FUND
CONSOLIDATED STATEMENTS OF INCOME AND EXPENSES
FOR THE THREE MONTHS ENDED JUNE 30, 1995 AND 1994
(UNAUDITED)
1995 1994
INCOME
Income From Investing
Activities:
Interest on Cash and Cash
Equivalents $ 56,401 $ 16,947
Income From Property Operating
Activities:
Operating Property Revenue 268,773 955,624
------------ ------------
Total Income 325,174 972,571
------------ ------------
EXPENSES
Expenses From Property
Activities:
Operating Property Expenses 104,746 340,142
Development Property Expenses 354,612 145,020
Repairs and Maintenance 50,661 79,491
Real Estate Taxes 70,498 124,062
Depreciation 102,976 171,235
Bad Debt Expense 2,000 ---
------------ ------------
Total Expenses From Property
Activities 685,493 859,950
------------ ------------
Other Expenses:
Stockholder Expenses 164,832 121,090
Directors' Fees, Expenses
and Insurance 124,722 131,648
Other Professional Fees 53,108 202,591
General and Administrative 328,162 336,995
Interest Expense and Amorti-
zation of Deferred Loan Costs 638,844 708,746
------------ ------------
Total Other Expenses 1,309,668 1,501,070
------------ ------------
Total Expenses 1,995,161 2,361,020
------------ ------------
Operating Loss (1,669,987) (1,388,449)
Net Loss From Operations
of Real Estate Venture (47,087) (163,596)
Arbitration Award --- (3,768,743)
Gain on Dispositions
of Real Estate 6,541 2,864,083
------------ ------------
Net Loss $ (1,710,533) $ (2,456,705)
============ ============
Net Loss Per Share of Common
Stock (Based on Weight
Average Number of Shares
Outstanding of 39,742,395
and 39,725,119 during 1995
and 1994, respectively) $ (0.04) $ (0.06)
============ ============
The accompanying notes are an integral part of the consolidated
financial statements.
<TABLE>
BANYAN MORTGAGE INVESTMENT FUND
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1995
(UNAUDITED)
<CAPTION>
Common Stock Accumulated Treasury
Shares Amount Deficit Stock Total
<S> <C> <C> <C> <C> <C>
Stockholders'
Equity,
December 31,
1994 39,762,495 $348,162,496 $(257,481,711) $ (11,316) $90,669,469
Net Loss --- --- (2,655,269) --- (2,655,269)
---------- ------------ ------------- --------- -----------
Stock-
holders'
Equity,
June 30, 1995 39,762,495 $348,162,496 $(260,136,980) $ (11,316) $88,014,200
========== ============ ============= ========= ===========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
BANYAN MORTGAGE INVESTMENT FUND
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994
(UNAUDITED)
1995 1994
CASH FLOWS FROM OPERATING
ACTIVITIES:
NET LOSS $ (2,655,269) $(2,683,542)
Adjustments to Reconcile Net
Loss to Net Cash Used In
Operating Activities:
Depreciation 205,952 367,850
Amortization of Deferred
Loan Costs 164,974 541,726
(Recovery) Provision for Bad
Debts (11,000) 9,425
Gain on Disposition of Real
Estate (7,558) (2,828,660)
Net Loss From Operations of Real
Estate Venture 90,716 213,798
Deferred Interest Payable on
Mortgage Loans 824,764 ---
Net Change In:
Interest Receivable on Cash and
Cash Equivalents 16,721 (61,776)
Real Estate Tax Escrow (177,100) 235,717
Accounts Receivable (20,996) 67,275
Other Assets 284,488 (398,511)
Accounts Payable and Accrued
Expenses 56,710 622,174
Real Estate Taxes Payable 196,564 (149,238)
Other Payable --- 3,768,743
Interest Payable 140,594 76,114
----------- -----------
Net Cash Used In Operating
Activities (890,440) (218,905)
----------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Proceeds From Sale of Real Estate 707,414 15,023,949
Increase in Developments in
Progress (4,101,398) (3,370,424)
Increase in Repair and
Improvement Escrow (256,137) (48,840)
Distributions From (Investment
In) Real Estate Venture 62,648 (158,562)
Purchases of Land and Property
Improvements (179,960) ---
----------- -----------
Net Cash (Used in) Provided
By Investing Activities (3,767,433) 11,446,123
----------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Issuance of Common Stock --- 59,667
Payment of Mortgage Loans Payable (977,225) (11,402,949)
----------- -----------
Net Cash Used In Financing
Activities (977,225) (11,343,282)
----------- -----------
Net Decrease in Cash and Cash
Equivalents (5,635,098) (116,064)
Cash and Cash Equivalents at
Beginning of Period 8,040,629 3,682,343
----------- -----------
Cash and Cash Equivalents at
End of Period $ 2,405,531 $ 3,566,279
=========== ===========
The accompanying notes are an integral part of the consolidated
financial statements.
BANYAN MORTGAGE INVESTMENT FUND
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
(UNAUDITED)
Readers of this quarterly report should refer to Banyan Mortgage
Investment Fund's (the "Fund") audited consolidated financial statements
for the year ended December 31, 1994, which are included in the Fund's
1994 Annual Report, as certain footnote disclosures which substantially
duplicate those contained in such audited statements have been omitted
from this report.
1. ACCOUNTING PRINCIPLES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements, as of June 30,
1995, include the accounts of the Fund, its wholly-owned subsidiaries
and Chapman's Landing, Southbridge, Wayside Village and Bishop Ranch
partnerships in which the Fund holds a controlling 50% general
partnership interest. Losses from these partnerships are allocated to
the minority interest partners to the extent of their respective
investments in the partnerships. Since such partners have made no
investment in the partnerships and are not obligated to fund losses in
excess of their investment, their minority interest currently has no
value, therefore the Fund has recorded all of the partnership's losses
as of June 30, 1995. Profits will be allocated pro rata to the minority
interest partners to the extent that net proceeds generated from the
projects exceed priority returns payable to the Fund. All intercompany
balances and transactions have been eliminated in consolidation. The
consolidated financial statements also include the Fund's 50% interest
in the VST/VMIF Oakridge Partnership accounted for on the equity method.
NON-CASH INVESTING AND FINANCING ACTIVITIES
Pursuant to the Morgens, Waterfall, Vintiadis & Co., Inc., Credit
Agreement executed October 17, 1994, the Fund has elected to defer
payment of $824,764 of accrued interest, which has been added to the
principal balance of the loan.
CASH AND CASH EQUIVALENTS
The Fund considers all investments purchased with a maturity of
three months or less to be cash and cash equivalents.
FINANCIAL STATEMENT PRESENTATION
Certain reclassifications have been made to the previously
reported 1994 financial statements in order to provide comparability
with the 1995 consolidated financial statements. The reclassifications
have not changed the 1994 operating results. In the opinion of
management, all adjustments necessary for a fair presentation have been
made to the accompanying consolidated financial statements as of June
30, 1995 and for the six months and quarter ended June 30, 1995 and
1994. These adjustments made to the financial statements, as presented,
are all of a normal recurring nature to the Fund, unless otherwise
indicated.
INCOME TAXES
On January 30, 1995, the Fund notified the Internal Revenue
Service of its intent to revoke its tax election to be treated as a real
estate investment trust ("REIT") under section 856(c)(1) of the Internal
Revenue Code of 1986, as amended, in order to enable it to develop its
large tracts of undeveloped land and to avoid the adverse tax effects of
being deemed a dealer of real property. For the year ended December 31,
1994 the Fund had elected to be treated as a REIT under the Internal
Revenue Code Sections 856-860. In order to qualify, the Fund was
required to distribute at least 95% of its taxable income to
shareholders and meet asset and income tests as well as certain other
requirements.
Income taxes are accounted for in accordance with SFAS No. 109
"Accounting for Income Taxes." Deferred income taxes are recorded to
reflect the tax consequences on future years of differences between the
basis of assets and liabilities for income tax and for financial
reporting purposes. In addition, the amounts of any future tax benefits
are reduced by a valuation allowance to the extent such benefits are not
expected to be fully realized.
2. TRANSACTIONS WITH AFFILIATES
Administrative costs, primarily salaries and general and
administrative expenses, are reimbursed by the Fund to Banyan Management
Corp. ("BMC"). These costs are allocated to the Fund and other entities
to which BMC provides administrative services based upon the actual
number of hours spent by BMC personnel on matters related to that fund.
The Fund's costs for the six months ended June 30, 1995 and 1994
aggregated $518,383 and $562,245, respectively. As one of its
administrative services, BMC serves as the paying agent for general and
administrative costs of the Fund. As part of providing this payment
service, BMC maintains a bank account on behalf of the Fund. As of June
30, 1995, the Fund had a net payable due to BMC of $93,436.
3. INVESTMENT IN REAL ESTATE VENTURE
On March 6, 1991, in satisfaction of their mortgage loans
receivable, the Fund and Banyan Short Term Income Trust ("BST") each
received a 50% interest in the VST/VMIF Oakridge Partnership pursuant to
a deed-in-lieu agreement with the borrower. The property is comprised
of 215 acres located in Hollywood and Dania, Florida. Of the 215 acres,
185 acres of the property are currently under contract for a gross sales
price of approximately $4,000,000. The Partnership is also working to
modify approximately 25 acres of the parcel's existing zoning to allow
for multifamily development and is in discussions with several potential
purchasers. The Partnership is also engaged in discussions with
potential purchasers of the 5-acre retail parcel at the Oakridge site.
Proceeds received from any future sale will first be applied to repay
the remaining principal balance of an outstanding first mortgage loan
holder of approximately $2,000,000 which is collateralized by the
Oakridge site. The Fund's 50% interest in the Partnership was initially
recorded at its estimated fair market value of $568,121 and is being
accounted for on the equity method. Under this method, the Fund has
recorded its 50% share of operating losses of $90,716 and $213,798 for
the six months ended June 30, 1995 and 1994, respectively.
4. RECOVERY OF LOSSES ON LOANS, NOTES AND INTEREST RECEIVABLE AND
CLASS ACTION SETTLEMENT COSTS AND EXPENSES
On February 9, 1995, the Fund received cash distributions of
$566,783 related to its interests in the liquidating trusts established
for the benefit of the unsecured creditors of VMS Realty Partners and
its affiliates ("VMS"). For the six months ended June 30, 1995, the
Fund has recorded a $495,591 recovery of losses on mortgage loans, notes
and interest receivable on its consolidated statement of income and
expenses related to the distributions received from the liquidating
trusts. The $495,591 net recovery recorded in 1995 represents the
$566,783 distributions received net of an estimated $71,192 due to the
Class Action Settlement Fund representing the Fund's share of amounts
due per the terms of the previously reported settlement of the VMS
securities litigation. As of June 30, 1995, the Fund has recorded
$123,339 in distributions received from the liquidating trusts as a
liability to the plaintiffs in accounts payable and accrued expenses on
its consolidated balance sheet per the terms of the Class Action
Settlement.
On January 25, 1994, the Fund received net proceeds of $796,985
relating to a recovery of payments previously made into an escrow
established as part of the class action settlement of the VMS securities
litigation. The escrow was established to provide the officers and
directors of the Fund with monies to fund the cost of any litigation in
which they may be named as defendants following settlement of the class
action. Subsequently, the directors have released the proceeds from the
escrow, and the Fund has purchased an insurance policy to cover the
officers and directors of the Fund.
5. DISPOSITION AND GAIN ON SALE OF REAL ESTATE
During the six months ended June 30, 1995, the Fund sold 12 single
family lots to a home developer at the Fund's Wayside Development. The
sale of these lots generated gross sales proceeds of $720,707. After
payment of closing costs of $877, real estate taxes of $1,531 and other
costs of $10,885 the Fund received net cash proceeds of $707,414 related
to the sales. The sale of these lots resulted in an aggregate net gain
on disposition of real estate of $7,558.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
Banyan Mortgage Investment Fund was formed to invest primarily in
construction, land, pre-development, short-term and junior mortgage
loans, and secondarily, in short-term notes to VMS Realty Partners and
its affiliates ("VMS"). VMS subsequently defaulted on these loans
causing the Fund to suspend the making of new mortgage loans (except for
advances of additional funds under circumstances in which it is deemed
necessary to preserve the value of existing collateral) and suspended
distributions to stockholders.
The Fund's real estate asset base consists of a combination of an
office building, four undeveloped or partially developed parcels of land
aggregating approximately 5,400 acres and a 50% interest in an
undeveloped parcel of land. The Fund believes that the value of these
assets can be enhanced through: (i) prudent management, (ii)
enhancement of the entitlements and zoning applicable to the undeveloped
land, (iii) holding the assets until the underlying values in the
various real estate markets returns to their historical levels and (iv)
completing infrastructure improvements and development of lots for sale
to builders. More than half of the carrying value of the Fund's real
estate assets, is comprised of undeveloped land which is located in
metropolitan Washington D.C. and Northern California and is in various
stages of the entitlement process. The current market for the sale of
undeveloped land is limited except at severely depressed prices.
Consequently, the Fund is attempting to enhance the value of these
parcels by modifying their zoning and entitlements. In addition, during
the quarter ended December 31, 1994, the Fund completed a corporate
level refinancing secured by many of its properties. This refinancing
will enable it to proceed with various infrastructure and improvements
and to finish the development of lots for sale to residential and
commercial builders. (See below for further information detailing the
Morgens, Waterfall, Vintiadis and Co., Inc., refinancing.) The Fund
believes that once entitlements and various infrastructure improvements
are completed, the land will be more marketable, as the demand for
residential lots improves, either in bulk or on a raw or finished lot
basis. During 1995, the Fund initiated marketing efforts to sell
smaller portions of its four undeveloped parcels of land on an as is
basis where the project's business plan does not call for site or
improvements or zoning enhancements. The sale of these smaller portions
of undeveloped land projects will further contribute to the Fund's
overall liquidity. As a result of the recent expiration of a lease for
two-thirds of the space at 120 S. Spalding, cost projections for the
redevelopment of the property, the revised projection of market leasing
rates and the 17.5% interest cost on the Morgens, Waterfall, Vintiadis &
Co., Inc., financing discussed below, the Fund determined that an
immediate sale of the property could generate a return to shareholders
that is comparable to the proceeds available after incurring the expense
of redeveloping and re-leasing the property. The Fund is currently
proceeding with marketing the property for sale while continuing with
its efforts to redevelop and re-lease the vacated space. In the event
the property is sold pursuant to an acceptable offer, the resulting
proceeds could be redirected to accelerate the completion of various
site improvements and infrastructure at the Fund's four development
projects and to reduce the Fund's long-term debt.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents consist of cash and short-term
investments. The Fund's cash and cash equivalents balance at June 30,
1995 and December 31, 1994 was $2,405,531 and $8,040,629, respectively.
This decrease in cash and cash equivalents is due primarily to the
payment of approximately $5,125,000 of expenses and capitalized items
related to the Chapman's Landing, Wayside Village and Bishop Ranch
properties, the payoff of approximately $977,000 of the Wayside Village
and Southbridge mortgage loan principal, the purchase of approximately
$180,000 of land and improvements and the payment of the Fund's
operating expenses. Partially offsetting the decreases in cash was the
receipt of $707,414 of net proceeds from the Wayside Village lot sales,
the receipt of a $566,783 distribution from the Fund's interest in the
liquidating trusts established for the benefit of the unsecured
creditors of VMS, income on cash and cash equivalents and income from
property operating activities.
Management has taken a number of steps to enhance the Fund's
working capital position. Over the past several years, the Fund's
liquidity has been provided by cash generated from the operations of the
Fund's existing operating properties which currently consists of 120 S.
Spalding, interest on short term investments, cash proceeds from
property sales, interim financing, and cash distributions received from
the liquidating trusts. Historically, these sources were not producing
the working capital necessary to meet the requirements for both
development and entitlement costs related to the Fund's development
properties and to meet the Fund's operating costs.
On October 17, 1994, the Fund executed a Credit Agreement with
Morgens, Waterfall, Vintiadis & Co. Inc. (the "Lenders' Agent") as agent
for several institutional investors (the "Lenders") in connection with a
loan in the amount of $20,500,000 (the "Morgens Loan"). Pursuant to the
Credit Agreement, the Fund has agreed to make quarterly interest
payments in arrears commencing January 1, 1995 at an annual rate of
17.5% and is also obligated to make certain payments, which will be
applied to repay loan principal, based on net cash flow generated by the
Fund's individual real estate assets as defined in the Credit Agreement.
At its option, the Fund may elect to defer interest due on the Morgens
Loan through September 30, 1995. All such deferred interest would then
be added to the outstanding principal of the loan. On January 1, 1995,
the Fund made the election to defer payment of accrued interest. As of
June 30, 1995 the Fund has deferred $824,764 of accrued interest. The
Fund has committed to reduce the unpaid principal balance of the loan to
$11,000,000 by October 1, 1997 and must repay any remaining outstanding
principal by September 30, 1998. The Morgens Loan is collateralized by
first mortgages on the Fund's 120 S. Spalding, Chapman's Landing, Bishop
Ranch and portions of its Southbridge properties, as well as pledges of
the common stock and partnership interests of the Fund's subsidiaries,
its accounts receivable, bank accounts and all other tangible and
intangible personal property. As part of the same transaction, the
Lenders also received warrants which entitle them to purchase up to
4,380,000 shares of the Fund's common stock at any time until October 1,
1998 at an exercise price of $0.70 per share. The Fund has agreed to
use its best efforts to cause the shares issuable upon exercise of the
warrants to be registered under the Securities Act of 1933, as amended.
Upon completion of the Morgens Loan closing, the Fund paid an
advisory fee to the advisor representing the Lenders' Agents of
$615,000, and paid accrued real estate taxes of $183,510, legal fees of
$363,000 and other fees and expenses totaling approximately $331,000
related to the transaction. In addition, the Fund utilized Morgens Loan
proceeds at closing to retire the balance of the outstanding loans
collateralized by first mortgages on its Chapman's Landing and Bishop
Ranch properties in the amount of $130,853 and $1,959,409, respectively.
The Fund also used a portion of the proceeds from the Morgens Loan to
pay a total of $3,250,000 pursuant to a final negotiated settlement of
the Buckeye arbitration.
Also on October 17, 1994, the Fund paid a total of $4,323,630 from
the above Morgens Loan proceeds to Chase Manhattan Bank N.A. ("Chase"),
in exchange for Chase's full release of its first mortgage lien on the
Fund's Wayside Village property and portions of the Fund's Southbridge
property which was pledged to secure a $14,069,462 outstanding loan from
Chase (the "Original Wayside Loan"). The payment to Chase consisted of
a partial principal payment of $4,220,839, which completely discharged
the principal portion of the Original Wayside Loan aggregating
$7,034,732 and accrued interest of $102,791. Simultaneously, the Fund
and Societe Generale ("SoGen") agreed to modify the terms of SoGen's
$7,034,731 principal portion of the Original Wayside Loan (the "Amended
Wayside Loan"). The terms of the loan modification agreement with SoGen
(the "Amended Agreement") extended the maturity date of the Amended
Wayside Loan to December 31, 1997 and provides for monthly interest
payments in arrears at an interest rate of prime + 2%. On August 1,
1995, the prime rate as established per the terms of the amended
agreement was 8.75%. At the option of the Fund, the maturity date of
the Amended Wayside Loan may be further extended for two one-year
periods in the event certain conditions defined in the Amended Agreement
are met. SoGen also agreed to provide an additional $2,000,000
revolving credit line (the "Wayside Revolving Loan") to fund development
costs specifically associated with lot sales contracts for the Wayside
Village property. The terms of the Wayside Revolving Loan require the
Fund to make monthly interest payments in arrears at an interest rate of
prime + 3%. The Amended and Revolving Wayside loans require principal
to be repaid as lots are sold, based on specified release prices, and
are cross-collateralized and cross-defaulted to each other. In
connection with the SoGen transactions, the Fund paid $34,731 to reduce
the outstanding Amended Wayside Loan principal to $7,000,000. The Fund
also paid accrued interest of $102,791, loan fees of $95,000 and other
fees and expenses totalling approximately $188,500 from the Morgens Loan
proceeds, including $126,500 escrowed for future real estate taxes on
Wayside Village. As of June 30, 1995, the outstanding balance of the
Amended Wayside Loan was $6,360,000. As of June 30, 1995, the Fund had
not made any draws on the Wayside Revolving Loan. On August 4, 1995,
the Fund requested a draw of approximately $465,000 on the Revolving
Loan.
Management of the Fund believes that the remaining proceeds from
the Morgens Loan, future draws on the Wayside Revolving Loan, net
proceeds from future lot and land parcel sales, and the eventual sale of
120 S. Spalding as is or redeveloped, will enable the Fund to execute
the business plans of its real estate assets and should provide
sufficient funds to meet its reasonably expected liquidity needs for the
foreseeable future. During 1995, the Fund will proceed with its efforts
to sell or redevelop the 120 S. Spalding property. In addition, the
Fund continues with its efforts to complete and sell finished lots to
third-party homebuilders at Wayside Village and Chapman's Landing while
continuing to work toward positioning these assets to maximize their
value in their respective markets through further zoning enhancements
and other infrastructure improvements. (See Results of Operations for
further details).
On February 9, 1995, the Fund received cash distributions of
$566,783 related to its interests in the liquidating trusts established
for the benefit of the unsecured creditors of VMS Realty Partners and
its affiliates ("VMS"). For the six months ended June 30, 1995, the
Fund has recorded a $495,591 recovery of losses on mortgage loans, notes
and interest receivable on its consolidated statement of income and
expenses related to the distributions received from the liquidating
trusts. The $495,591 net recovery recorded in 1995 represents the
$566,783 distributions received net of an estimated $71,192 due to the
Class Action Settlement Fund representing the Fund's share of amounts
due per the terms of the previously reported settlement of the VMS
securities litigation. As of June 30, 1995, the Fund has recorded
$123,339 in distributions received from the liquidating trusts as a
liability to the plaintiffs in accounts payable and accrued expenses on
its consolidated balance sheet per the terms of the Class Action
Settlement.
On January 25, 1994, the Fund received net proceeds of $796,985
relating to a recovery of payments previously made into an escrow
established as part of the class action settlement of the VMS securities
litigation. The escrow was established to provide the officers and
directors of the Fund with monies to fund the cost of any litigation in
which they may be named as defendants following settlement of the class
action. Subsequently, the directors have released the proceeds from the
escrow, and the Fund has purchased an insurance policy to cover the
officers and directors of the Fund.
Management reviews the properties held by the Fund on a quarterly
basis utilizing current market information, including appraisals, market
studies, financial projections and sales comparisons. When it has been
determined, in management's opinion, that a permanent impairment in the
value of a given property has occurred due to changes in market
conditions and/or business strategy, the carrying value of the property
is written down to its fair value.
The Fund's ability to make future distributions to its
stockholders is dependent upon, among other things: (i) the Fund's
ability to control operating/development expenses and consummate sales
of finished lots and land parcels as it implements its business plans
for its development assets utilizing the ultimate recovery of cash
proceeds from the sale of the 120 S. Spalding property; (ii) recovery
on and distribution of cash proceeds from the assets of the liquidating
trusts in which the Fund holds an interest; and (iii) the general
improvement of conditions in the real estate markets where the Fund's
properties are located.
RESULTS OF OPERATIONS
GENERAL
For the six months ended June 30, 1995 and 1994, the Fund recorded
total income of $942,545 and $2,186,291, respectively. For the quarters
ended June 30, 1995 and 1994 the Fund recorded total income of $325,174
and $972,571, respectively. The decreases for the six months and
quarter ended June 30, 1995 when compared to the same periods in 1994
are primarily due to a decrease in operating property revenue.
Operating property revenue decreased to $800,033 for the six months
ended June 30, 1995 from $2,148,460 for the same period in 1994. For
the quarters ended June 30, 1995 and 1994, operating property revenue
decreased to $268,773 from $955,624, respectively. The decrease in
operating property revenue is primarily attributable to the May 1994
sale of the Cascades Apartments and the 67% decrease in occupancy at the
120 S. Spalding property which occurred in March 1995. Partially
offsetting this decline was an increase in interest income from cash and
cash equivalents due to an increase in cash available for investment
upon the receipt of cash proceeds from the Morgens Loan when compared to
the same period one year ago.
Expenses from property activities totaled $1,441,396 and
$1,789,892 for the six months ended June 30, 1995 and 1994,
respectively. For the quarters ended June 30, 1995 and 1994, expenses
from property activities totaled $685,493 and $859,950, respectively.
The decrease in expenses from property activities for the six months and
quarter ended June 30, 1995 when compared to the same periods in 1994
are primarily attributable to the sale of the Cascades Apartments, the
sale of the 9025 Wilshire Blvd. building and the sale of the Rocky Point
property in the second and third quarters of 1994. Due to the property
sales, operating property expenses, repairs and maintenance, real estate
taxes and depreciation expense decreased by approximately $842,405 and
$386,049 for the six months and quarter ended June 30, 1995,
respectively, when compared to 1994. Bad debt expense also decreased
for the six months ended June 30, 1995 when compared to the same period
in 1994 due to the favorable settlement of certain outstanding
receivables in the amount of $13,000 at the 120 S. Spalding building
which occurred during the six months ended June 30, 1995. Partially
offsetting these decreases was an increase of approximately $514,000 and
$210,000 for the six months and quarter ended June 30, 1995,
respectively in development property expenditures due primarily to costs
associated with the sales and marketing of Wayside Village and Chapman's
Landing.
Total other expenses for the six months ended June 30, 1995 and
1994 were $2,073,260 and $1,926,060, respectively. This change
represents an increase of approximately $147,000 for the first six
months of 1995 when compared to the same period in 1994. The increase
is primarily attributable to the increases in interest expense and
amortization of deferred loan cost related to the Morgens Loan. In
addition, the decrease in the recovery of losses on mortgage loans,
notes and interest receivable and class action settlement costs and
expenses is attributable to the January 25, 1994 receipt of $796,985
representing net proceeds from a recovery of payments previously made
into an escrow established as part of the class action settlement of the
VMS securities litigation. The 1994 recovery of $796,985 exceeded the
$495,591 recovery of losses on mortgage loans, notes and interest
receivable recorded by the Fund during the first quarter of 1995 by
approximately $301,000. The 1995 recovery related to the distributions
received from the Fund's interests in the liquidating trusts as
discussed above in Liquidity and Capital Resources. Partially
offsetting the increase in expenses was a decrease in other professional
fees and general and administrative expenses. Other professional fees
decreased by $292,899 for the six months ended June 30, 1995 when
compared to the same period in 1994, as a result of the decreased
expenditures for legal costs attributable to the Buckeye arbitration
discussed below. For the six months ended June 30, 1995, general and
administrative expenses decreased by $105,324 primarily due to a
decrease in the number of hours spent by Banyan Management Corp.
personnel on Fund-related matters. During the same period in 1994, a
significant amount of time and resources were devoted to exploring
various sources of financing for the Fund, the Beverly Hills arbitration
and the negotiating of the sale of the Cascades and Rocky Point
properties. For the quarter ended June 30, 1995 total other expenses
decreased to $1,309,668 from $1,501,070 in 1994. This change represents
a decrease of approximately $191,000 for the quarter ended June 30, 1995
when compared to the same period in 1994. This decrease is primarily
attributable to the decrease in other professional costs and interest
expense and amortization of deferred loan costs. Other professional
fees decreased by $149,483 as a result of the decreased expenditures for
legal costs attributable to the Buckeye arbitration. Interest expense
and amortization of deferred loan costs decreased primarily due to the
Fund's write off of deferred loan costs during the second quarter of
1994 related to the repayment of the Fund's obligation under the Heller
loan. Partially offsetting these decreases was the $43,742 increase in
stockholder expenses due to the timing of payments for annual report and
proxy related costs.
The net loss from operations of real estate venture relates to the
Fund's interest in the Oakridge Partnership and decreased to $90,716
from $213,798 for the six months ended June 30, 1995 and 1994,
respectively. For the quarters ended June 30, 1995 and 1994, net loss
from operations of real estate decreased to $47,087 from $163,596 for
the same period in 1994. The decrease in the net loss from operations
of real estate venture for the six months and quarter ended June 30,
1995 and 1994 is primarily due to the completion of the zoning and
entitlement work for the Oakridge site during 1994.
Impacting the results for the six months and quarter ended June
30, 1994 is the accrual by the Fund of an arbitration award in the
amount of $3,768,743. The Fund and Banyan Mortgage Investors L.P. II
("BMLPII), acting for itself and on behalf of THSP Associates L.P. II
("THSP") (formerly Banyan Mortgage Investors L.P. III), had agreed to
resolve, by means of arbitration, the issue of the amount of
compensation, if any, owed by the Fund to BMLPII in consideration for
BMLPII's agreement to relinquish, and take no action with respect to its
interests in certain Beverly Hills, California properties commonly known
as the Buckeye properties when the Fund took control of certain of these
properties in 1990. On July 20, 1994, a majority of two members of a
panel of three arbitrators awarded BMLPII approximately $3,768,000 in
connection with this arbitration. Subsequently a negotiated settlement
was reached and on October 17, 1994, the Award was satisfied by the
Fund's payment of $3,250,000 in full settlement.
For the six months and quarters ended June 30, 1995, the Fund
recognized a gain on the disposition of real estate in the amount of
$7,558 and $6,541, respectively related to lot sales at the Wayside
Village property. During the six months and quarter ended June 30,
1994, the Fund recognized a gain on disposition of real estate of
$2,828,660 and $2,864,083, respectively, primarily related to May 1994
sale of the Cascades Apartment building. See Property Operations below
for additional details.
The combination of the above changes resulted in a net loss of
$2,655,269 ($0.07 per share) for the six months ended June 30, 1995
compared to a net loss of $2,683,542 ($0.07 per share) for the same
period in 1994. For the quarters ended June 30, 1995 and 1994, the Fund
recorded a net loss of $1,710,533 ($0.04 per share) and $2,456,705
($0.06 per share), respectively.
PROPERTY OPERATIONS
At June 30, 1995, the Fund owned an office building located at 120
S. Spalding Dr. in Beverly Hills, California which was 27% leased (100%
leased as of June 30, 1994). For the six months ended June 30, 1995,
the 120 S. Spalding property provided the Fund with cash flow from
rental income in excess of operating expenses of approximately $360,000
as compared to approximately $838,000 for 1994. The $478,000 decrease
in cash flow is due primarily to the expiration of the lease of the
building's largest tenant, City National Bank ("City National"), which
had occupied two-thirds of the building. For the quarter ended June 30,
1995, the 120 S. Spalding property provided the Fund with cash flow from
rental income in excess of operating expenses of approximately $86,000.
With notification from City National that it was relocating and after
completing the Morgens Loan, the Fund proceeded with the previously
announced plan to redevelop and re-lease the space vacated by City
National as medical office space along with marketing the property for
sale. For the six months ended June 30, 1995, the Fund has capitalized
approximately $125,000 of monies spent to retenant the building.
Pursuant to recent cost projections assembled late in 1994 as part of
the property's redevelopment plan, the revised projection of market
leasing rates and the 17.5% interest cost on its new financing, the Fund
determined that an immediate sale of the property could generate a
return to shareholders which is likely comparable to the return (on a
discounted present value basis) from redevelopment and subsequent sale.
In addition to the 120 S. Spalding property, the Fund also owns
four parcels of land. During the six months ended June 30, 1995, the
Fund disbursed a total of approximately $4,101,000, excluding mortgage
loan principal repayments, for capitalized development costs and
carrying costs which include approximately $958,000 on the Chapman's
Landing property, approximately $2,551,000 on Wayside Village and
approximately $592,000 on Bishop Ranch. The expenditures were primarily
for capitalized interest, real estate taxes, land planning, engineering
site improvements and entitlement work. (See discussion below for
further details).
The Fund's other large land parcel, the Southbridge project,
consists of 2,048 acres, of which, 278 acres were previously zoned. On
January 5, 1993, the Prince William County Board of Supervisors approved
the zoning and development plan for the remaining 1,770 acres of land in
the project. The total project is now included in the county's overall
comprehensive zoning plan and is currently zoned for 4,100 residential
units and 4,200,000 square feet of commercial space. The Fund believes
that inclusion of the project in the comprehensive zoning plan of the
County enhances the property's value and marketability.
The Fund will seek to implement its business plan for the
Southbridge project which contemplates continued land planning and
marketing efforts designed to achieve sales of certain portions of the
project beginning during the third quarter of 1995. The Fund
contemplates selling small outlying portions of the site and would
utilize 50% of any net sales proceeds to repay portions of the
outstanding Morgen's Loan in advance of the schedule outlined in the
business plan to facilitate this process.
The Wayside Village property was acquired by the Fund in May of
1991. The Fund is continuing to fund site-infrastructure work so that
additional finished lots can be sold to third party developers and
builders. The project was originally zoned for 2,224 residential units
and 280,000 square feet of commercial space. During the six months
ended June 30, 1995, the Fund sold 12 single family lots to a builder
which generated gross lot sales proceeds of $720,707. After payment of
closing costs of $877, real estate taxes of $1,531 and other costs of
$10,885, the Fund received net cash proceeds of $707,414. The sale of
the lots resulted in an aggregate net gain on disposition of real estate
of $7,558. It is the Fund's intention to fully implement its business
plan to finish infrastructure and site improvements at Wayside Village.
As of June 30, 1995, there were 1,123 unfinished residential units and
280,000 square feet of commercial space available for sale under the
Fund's business plan. The Fund's expenditures at Wayside Village have
primarily been utilized for completion of engineering, lot development,
capitalized interest, and real estate taxes. Once further improvements
are completed during 1995 at Wayside Village it is the Fund's belief
that negotiations of additional sales contracts with national and
regional builders and developers can be finalized and sales of finished
lots and/or sections can be increased.
In August 1992, the Chapman's Landing zoning and development plan
was approved by Charles County and the project is now included in the
overall comprehensive development plan for Charles County, Maryland.
During the first six months of 1995, the Fund has continued its efforts
to modify the zoning and entitlements for Chapman's Landing and has
completed engineering work on sections of Phase I of the project. Phase
I of the project consists of 330 acres and is planned for development of
404 single-family homes and 172 townhomes. On October 11, 1994 Charles
County preliminarily approved proposed zoning modifications increasing
the project's total density count to 4,600 residential units from 3,500
units and 2,000,000 square feet of commercial space from 1,000,000
square feet. It is the Fund's intention to fully implement its business
plan to begin infrastructure work on Phase I at Chapman's Landing in
late 1995. As of June 30, 1995, the Fund has executed sales contracts
with two home developers for approximately 230 residential units in
Phase I of the Chapman's Landing Development. The two contracts are
contingent upon the buyers completing their due diligence review of the
site and plans. Also, the Fund is currently in negotiations with
several other national and regional builders and developers regarding
additional sales contracts for finished lots and/or development sites in
Phase I of Chapman's Landing. The Fund anticipates that additional
sales contracts will be finalized sometime in the last half of 1995 with
sales of finished lots to builders beginning in 1996. The Fund's
expenditures at the Chapman's Landing have primarily been for completion
of zoning and planning, engineering, capitalized interest, and real
estate taxes.
The Fund's Southbridge, Wayside Village and Chapman's Landing
properties are located in the greater Washington D.C. metropolitan
region which is continuing its recovery with new business growth and
increasing employment. Boosted by rising consumer confidence, an
overall improvement in the economy continues even though the demand for
lots during the first six months of 1995 declined as a result of the
increases in interest rates on residential mortgage loans. As a result
of the most recent decline in residential mortgage rates, the Fund
anticipates the demand for residential lots to improve during the final
six months of 1995.
During the six months ended June 30, 1995, the Fund continued to
pursue modified entitlements on the Bishop Ranch property, located in
Monterey County, California. The Monterey peninsula's residential
market has been relatively stable. Due to the constraints on growth in
the area imposed by growth management plans and the public's concern
regarding the availability of water, management of the Fund believes
that the land value of the project has not suffered from the severe
declines in real estate values experienced in other areas of California.
In the future, the residential market should experience gradual growth
as the demand for housing increases and the overall economy improves.
There can, however, be no assurance of such growth.
The VST/VMIF Oakridge Partnership owns a 215-acre parcel of land
located in Hollywood and Dania, Florida. The Fund owns a 50% interest
in this partnership which is accounted for on the equity method. The
remaining 50% is owned by Banyan Short Term Income Trust. As of June
30, 1995, the Partnership carried its 50% interest at $1,172,037. Over
the past several years, the Fund has worked to complete entitlement of
the property and will be marketing it for sale. Of the 215 acres, 185
acres of the property are currently under contract for a gross sales
price of approximately $4,000,000. The Partnership is also working to
modify approximately 25 acres of the parcel's existing zoning to allow
for multifamily development and is in discussions with several potential
purchasers. The Partnership is also engaged in discussions with
potential purchasers of the 5-acre retail parcel at the Oakridge site.
950 L'Enfant Plaza is an office building in Washington D.C. with
232,000 square feet of rentable space. The building is an eight story
office building with two parking levels located in a four-building
complex called L'Enfant Plaza. The property is currently under a
renovation and retenanting program which is anticipated to be completed
in 1996. On November 19, 1991 the Fund entered into an agreement with
the senior lender on a loan collateralized by the 950 L'Enfant Plaza
Property. The Fund received $250,000 in cash upon signing this
agreement and is entitled to 2.5% of monthly cash flow from operation of
the property, which provided approximately $28,000 and $81,000 in cash
flow to the Fund for the six months ended 1995 and 1994, respectively.
The $53,000 decrease and current interruption in cash flow is due to the
termination of the lease with the building's tenant while retenanting of
the building is under way. The Fund is also entitled to receive 4% of
the gross sales proceeds of the property upon sale. The Fund has no
other ownership interest in this property and is not entitled to
participate in the decisions of management in respect to the property.
OTHER INFORMATION
On January 30, 1995, the Fund notified the Internal Revenue
Service of its intent to revoke its tax election to be treated as a real
estate investment trust ("REIT") under section 856(c)(1) of the Internal
Revenue Code of 1986, as amended, in order to enable it to develop its
large tracts of undeveloped land and to avoid the adverse tax effects of
being deemed a dealer of real property. For the year ended December 31,
1994, the Fund had elected to be treated as a REIT under the Internal
Revenue Code Sections 856-860. In order to qualify, the Fund was
required to distribute at least 95% of its taxable income to
shareholders and meet asset and income tests as well as certain other
requirements.
PART II
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Fund held its 1994 Annual Meeting of Stockholders on June 27,
1995.
There were three proposals considered at the Meeting.
Proposal #1 was to elect Robert M. Ungerleider to hold office for
three years or otherwise as provided in the Fund's by-laws.
Proposal #2 was to concur in the selection of Coopers & Lybrand
L.L.P. as independent public accountants of the Fund for the year 1995.
Proposal #3 was to authorize and ratify the prior issuance of
50,437 Award Shares to Mr. Leonard G. Levine pursuant to the terms of
his Employment Agreement and to authorize the future issuance of Award
Shares to Mr. Levine subject to satisfaction of conditions precedent to
the issuance contained in the Employment Agreement.
The following votes were cast in connection with the proposals in
the manner as set forth:
PROPOSAL #1
FOR AGAINST ABSTAIN
29,850,665 --- 1,661,792
PROPOSAL #2
FOR AGAINST ABSTAIN
30,258,848 681,000 572,609
PROPOSAL #3
FOR AGAINST ABSTAIN
24,629,763 5,424,004 1,458,600
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) No exhibits are included with this Report.
(b) No reports on Form 8-K were filed during the quarter ended
June 30, 1995 for which this report is filed.
SIGNATURES
PURSUANT to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Fund has duly caused this Report to
be signed on its behalf by the undersigned thereunto duly authorized.
BANYAN MORTGAGE INVESTMENT FUND
By: /s/ Leonard G. Levine Date: August 11, 1995
Leonard G. Levine, President
By: /s/ Joel L. Teglia Date: August 11, 1995
Joel L. Teglia, Vice President of
Finance and Administration and Chief
Financial and Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
"This schedule contains summary financial information extracted from
Banyan Mortgage Investment Fund's 10Q for the quarter ended June 30,
1995 and is qualified in its entirety by reference to such Form 10Q."
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 2,405,531
<SECURITIES> 0
<RECEIVABLES> 141,056
<ALLOWANCES> (48,000)
<INVENTORY> 0
<CURRENT-ASSETS> 3,534,035
<PP&E> 115,721,172
<DEPRECIATION> (1,835,303)
<TOTAL-ASSETS> 122,254,064
<CURRENT-LIABILITIES> 2,459,680
<BONDS> 0
<COMMON> 88,025,516
0
0
<OTHER-SE> (11,316)
<TOTAL-LIABILITY-AND-EQUITY> 122,254,064
<SALES> 0
<TOTAL-REVENUES> 942,545
<CGS> 0
<TOTAL-COSTS> 1,441,396
<OTHER-EXPENSES> 1,248,553
<LOSS-PROVISION> (495,591)
<INTEREST-EXPENSE> 1,320,298
<INCOME-PRETAX> (2,655,269)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,655,269)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,655,269)
<EPS-PRIMARY> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
