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 March 31, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission File Number 1-9885
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 require-
ments for the past 90 days. YES X . NO .
Shares of common stock outstanding as of May 11, 1995: 39,742,395.
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
BANYAN MORTGAGE INVESTMENT FUND
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1995 AND DECEMBER 31, 1994
(UNAUDITED)
1995 1994
ASSETS
Cash and Cash Equivalents $ 2,577,518 $ 8,040,629
Investment Securities 2,880,000 ---
Repair, Improvement and Real
Estate Tax Escrows 796,635 602,211
Accounts Receivable (Net of
Allowance for Doubtful
Accounts of $21,000 and
$34,000 for 1995 and
1994, respectively) 19,824 18,509
Interest Receivable on Cash and
Cash Equivalents 83,669 84,272
------------- -------------
6,357,646 8,745,621
------------- -------------
Investment in Real Estate:
Land 79,328,520 79,400,569
Buildings and Improvements 2,009,508 1,986,851
------------- -------------
81,338,028 81,387,420
Less: Accumulated Depreciation (1,740,615) (1,645,927)
------------- -------------
79,597,413 79,741,493
Developments in Progress 32,079,812 30,752,252
------------- -------------
Net Investment in Real Estate 111,677,225 110,493,745
------------- -------------
Net Investment in Real Estate
Venture 1,225,361 1,325,401
Deferred Financing Costs (Net of
Accumulated Amortization of
$150,503 and $68,034
for 1995 and 1994, respectively) 1,158,693 1,241,162
Other Assets 2,820,692 2,861,997
------------- -------------
Total Assets $ 123,239,617 $ 124,667,926
============= =============
LIABILITIES AND STOCKHOLDERS'
EQUITY
Liabilities
Accounts Payable and Accrued
Expenses $ 965,145 $ 1,255,286
Interest Payable 921,083 810,526
Real Estate Taxes Payable 127,376 ---
Mortgage Loans Payable 31,501,280 31,932,645
------------ ------------
Total Liabilities 33,514,884 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 (258,426,447) (257,481,711)
Treasury Stock, at Cost, for
20,100 Shares of Common Stock (11,316) (11,316)
------------ ------------
Total Stockholders' Equity 89,724,733 90,669,469
------------ ------------
Total Liabilities and Stock-
holders' Equity $123,239,617 $124,667,926
============ ============
Book Value Per Share of Common
Stock (39,742,395 Shares
Outstanding) $ 2.26 $ 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 THREE MONTHS ENDED MARCH 31, 1995 AND 1994
(UNAUDITED)
1995 1994
INCOME
Income From Investing
Activities:
Interest on Cash and Cash
Equivalents $ 86,111 $ 20,884
Income From Property Operating
Activities:
Operating Property Revenue 531,260 1,192,836
------------ ------------
Total Income 617,371 1,213,720
------------ ------------
EXPENSES
Expenses From Property
Operating Activities:
Operating Property Expenses 116,655 309,129
Development Property Expenses 412,521 107,779
Repairs and Maintenance 47,842 123,857
Real Estate Taxes 88,909 183,137
Depreciation 102,976 196,615
Bad Debt (Recovery) Expense (13,000) 9,425
------------ ------------
Total Expenses From Property
Operating Activities 755,903 929,942
------------ ------------
Other Expenses:
Stockholder Expenses 71,847 117,123
Directors' Fees, Expenses
and Insurance 129,748 128,600
Other Professional Fees 74,335 217,751
General and Administrative 301,799 398,290
Recovery of Losses on Mortgage
Loans, Notes and Interest
Receivable and Class Action
Settlement Costs and Expenses (495,591) (796,985)
Interest Expense and Amortization
of Deferred Loan Costs 681,454 360,211
------------ ------------
Total Other Expenses 763,592 424,990
------------ ------------
Total Expenses 1,519,495 1,354,932
------------ ------------
Operating Loss (902,124) (141,212)
Net Loss From Operations
of Real Estate Venture (43,629) (50,202)
Gain (Loss) on Dispositions
of Real Estate 1,017 (35,423)
------------ ------------
Net Loss $ (944,736) $ (226,837)
============ ============
Net Loss Per Share of Common
Stock (Based on Weight
Average Number of Shares
Outstanding of 39,742,395
and 39,689,294 during 1995
and 1994, respectively) $ (0.02) $ (0.01)
============ ============
The accompanying notes are an integral part of the consolidated
financial statements.
<TABLE> BANYAN MORTGAGE INVESTMENT FUND
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 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 Income
(Loss) --- --- (944,736) --- (944,736)
---------- ------------ ------------- --------- -----------
Stockholders'
Equity,
March 31,
1995 39,762,495 $348,162,496 $(258,426,447) $ (11,316) $89,724,733
========== ============ ============= ========= ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
BANYAN MORTGAGE INVESTMENT FUND
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994
(UNAUDITED)
1995 1994
CASH FLOWS FROM OPERATING
ACTIVITIES:
NET LOSS $ (944,736) $ (226,837)
Adjustments to Reconcile Net
Loss to Net Cash Used In
Operating Activities:
Depreciation 102,976 196,615
Amortization of Deferred
Loan Costs 82,469 35,773
(Recovery) Provision for Bad
Debts (13,000) 9,425
(Gain) Loss on Disposition of
Real Estate (1,017) 35,423
Net Loss From Operations of Real
Estate Venture 43,629 50,202
Net Change In:
Interest Receivable on Cash and
Cash Equivalents 603 (26,415)
Real Estate Tax Escrow (101,200) (142,451)
Accounts Receivable 11,685 107,586
Other Assets 33,017 (80,324)
Accounts Payable and Accrued
Expenses (290,141) 12,062
Real Estate Taxes Payable 127,376 (57,011)
Interest Payable 110,557 (138,025)
----------- -----------
Net Cash Used In Operating
Activities (837,782) (223,977)
----------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of Investment Securities (2,880,000) ---
Proceeds From Sale of Real Estate 538,719 333,742
Increase in Developments in
Progress (1,738,115) (1,534,509)
Increase in Repair and
Improvement Escrow (93,224) (55,005)
Distributions From (Investment
In) Real Estate Venture 56,411 (39,657)
Purchases of Land and Property
Improvements (77,755) ---
----------- -----------
Net Cash Used in Investing
Activities (4,193,964) (1,295,429)
----------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from Mortgage Loans
Payable 305,859 ---
Payment of Mortgage Loans Payable (737,224) (880,067)
----------- -----------
Net Cash Used In Financing
Activities (431,365) (880,067)
----------- -----------
Net Decrease in Cash and Cash
Equivalents (5,463,111) (2,399,473)
Cash and Cash Equivalents at
Beginning of Period 8,040,629 3,682,343
----------- -----------
Cash and Cash Equivalents at
End of Period $ 2,577,518 $ 1,282,870
=========== ===========
The accompanying notes are an integral part of the consolidated
financial statements.
BANYAN MORTGAGE INVESTMENT FUND
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1995
(UNAUDITED)
Readers of this quarterly report should refer to Banyan Mortgage
Investment Fund's (the "Fund's") 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 March 31,
1995, include the accounts of the Fund, its wholly-owned subsidiaries and
Chapman's Landing, Southbridge, Wayside Village and Bishop's 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. Profits may 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 Morgans, Waterfall, Vintiadis & Co., Inc., Credit
Agreement executed October 17, 1994, the Fund has elected to defer $305,859 of
1994 accrued interest which has been added to the principal balance of the
loan.
CASH AND CASH EQUIVALENTS
The Fund considers all highly liquid debt investments purchased with a
maturity of three months or less to be cash and cash equivalents.
INVESTMENT SECURITIES
Effective January 1, 1994, the Fund adopted the provisions of Financial
Accounting Statements No. 115, Accounting for Certain Investments in Debt and
Equity Securities. Accordingly, investment securities are classified as
available for sale and carried at fair value determined by quoted market
prices with unrealized gains and losses reflected in the statement of
shareholders' equity. Realized gains and losses are determined on a specific
identification basis. The basis of investment securities is adjusted for
amortization of premiums and discounts using a level yield method.
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 March 31, 1995 and for the three
months ended March 31, 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
For the year ended December 31, 1994 the Fund had elected to be treated
as a real estate investment trust ("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. 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.
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 three
months ended March 31, 1995 and 1994 aggregated $218,502 and $313,770,
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 March 31, 1995, the Fund had a net receivable due from BMC of $83,669.
3. INVESTMENT SECURITIES
The Fund considers all highly liquid investments purchased with a
maturity greater than three months to be Investment Securities. Investment
Securities at March 31, 1995 includes an obligation of the Federal National
Mortgage Association with a face amount of $2,880,000 bearing an interest rate
of 6.04% and maturing on April 25, 1995. The cost and approximate market
value of the investment at March 31, 1995 is $2,880,000. There were no
investment securities at December 31, 1994.
4. 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 241 acres located
in Hollywood and Dania, Florida. Currently 211 acres of the property located
in Hollywood, Florida is under contract for a proposed gross sales price of
approximately $4,000,000. The Partnership is also currently engaged in
negotiations with potential purchasers of the 30-acre retail parcel located in
Dania, Florida 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 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 $43,629 and $50,202
for the three months ended March 31, 1995 and 1994, respectively.
5. RECOVERY OF LOSSES ON LOANS, NOTES AND INTEREST RECEIVABLE AND CLASS
ACTION SETTLEMENT COSTS AND EXPENSES
For the quarter ended March 31, 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 quarter ended March 31, 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 March 31, 1995,
the Fund has recorded $123,339 in distributions received from the liquidating
trusts as a liability 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 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 directors of the Fund.
6. DISPOSITION AND GAIN ON SALE OF REAL ESTATE
During the quarter ended March 31, 1995, the Fund sold nine single
family lots to a home developer in the Fund's Wayside Development. The sale
of these lots generated gross proceeds of $538,719. After payment of closing
costs of $642, the Fund received net proceeds of $538,077, which were applied
to real estate taxes and the payment of principal and interest on the first
mortgage loan collateralized by the Wayside property. The sale of these lots
resulted in an aggregate net gain on disposition of real estate of $1,017.
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"). The Fund has been adversely affected as a result of the non-payment
of amounts due from borrowers on mortgage loans and notes receivable. As a
result of the defaults, the Fund suspended 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 parcels of land aggregating 5,349 acres and a 50%
interest in a real estate venture. 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 value and level of liquidity available to the
real estate markets returns to its historical levels and (iv) completing
infrastructure improvements and development of lots for sale to builders.
More than half of the Fund's real estate assets, based on book value, is
comprised of large tracts of undeveloped land in metropolitan Washington D.C.
and Northern California which are in various stages of the entitlement
process. The current market for the sale of large tracts of undeveloped land
is virtually non-existent 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 the refinancing of many of its properties which
will enable it to complete 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, either in bulk as the demand for residential lots
improves or on a raw or finished lot basis. 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 Morgans, 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 re-leasing
and redevelopment of the property. The Fund is currently proceeding with
marketing the property for sale and if the property is sold pursuant to an
acceptable offer, the resulting proceeds could be redirected to develop the
other assets of the Fund and 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 March 31, 1995 and December
31, 1994 was $2,577,518 and $8,040,629, respectively. This decrease in cash
and cash equivalents is due primarily to the purchase of $2,880,000 of short-
term investment securities, the payment of approximately $2,237,000 of
expenses and capitalized items related to the development properties, the
payoff of approximately $737,000 of mortgage loan principal, the purchase of
$77,754 of land and improvements and the payment of the Fund's operating
expenses. Partially offsetting the decreases in cash was the receipt of
$538,719 of net proceeds from Wayside Development lot sales, the receipt of a
$495,591 distribution from the Fund's liquidating trusts, 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, 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 investment 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 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
its wholly-owned subsidiaries 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 which 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 March 31, 1995 the Fund has deferred $305,859 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 to 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 Morgans
Loan to pay a total of $3,250,000 pursuant to a final negotiated settlement of
the Buckeye arbitration award litigation.
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
arising from the 50% interest of Chase in the $14,069,462 outstanding loan
secured by those properties (the "Original Wayside Loan"). The payment to
Chase consisted of a partial principal payment of $4,220,839, which completely
discharged Chase's $7,034,731 principal portion of the Original Wayside Loan,
reduced by a 40% discount, 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") extend the maturity date of the Amended Wayside Loan to
December 31, 1997 and provide for monthly interest payments in arrears at an
interest rate of prime + 2%. On May 11, 1995, the prime rate as published in
the "Wall Street Journal" was 9%. 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 provide for 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 March 31, 1995, the outstanding balance of the Amended Wayside Loan and
the Wayside Revolving Loan were $6,600,000 and $0, respectively.
Management of the Fund believes that the remaining proceeds from the
Morgens Loan proceeds, future proceeds from the Wayside Revolving Loan, net
proceeds from future lot sales and the eventual sale of 120 S. Spalding 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).
For the quarter ended March 31, 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 quarter ended March 31, 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 March 31, 1995,
the Fund has recorded $123,339 in distributions received from the liquidating
trusts as a liability 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 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 directors of the Fund.
Management reviews the investment properties held by the Fund on a
quarterly basis and, when it has been determined 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 as it
implements its business plans for its development assets; (ii) the ultimate
recovery of cash proceeds from the sale of the 120 S. Spalding property;
(iii) recovery on and distribution of cash proceeds from the assets of the
liquidating trusts in which the Fund holds an interest; and (iv) the general
improvement of conditions in the real estate markets where the Fund's
properties are located.
RESULTS OF OPERATIONS
GENERAL
Total income for the quarter ended March 31, 1995, and 1994 was $617,371
and $1,213,720, respectively. Total income for the quarter ended March 31,
1995 decreased when compared to the quarter ended March 31, 1994 due to a
decrease in operating property revenue. Operating property revenue decreased
to $531,260 during the quarter ended March 31, 1995 from $1,192,836 for the
same period in 1994. 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 and investment
securities upon the receipt of cash proceeds from the Morgens Loan.
Expenses from property operations for the quarter ended March 31, 1995
and 1994 were $755,903 and $929,942, respectively. The decrease in expenses
from property operations for the quarter ended March 31, 1995 when compared to
1994 was 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 decreased by $456,000 for the quarter ended March 31, 1995 when
compared to 1994. Bad debt expense also decreased for the quarter ended March
31, 1995 when compared to the same period in 1994 due to the settlement of
certain outstanding receivables at the 120 S. Spalding building which took
place during 1995. Partially offsetting these decreases was an increase of
approximately $305,000 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 quarter ended March 31, 1995 and 1994 were
$763,592 and $424,990, respectively. This change represents an increase of
approximately $339,000 for the first quarter of 1995 when compared to the same
period in 1994 and is primarily attributable to an increase in interest
expense and amortization of deferred loan costs which totalled $681,454 and
$360,211 for the quarters ended March 31, 1995 and 1994, respectively. The
approximately $321,000 increase for the quarter ended March 31, 1995 when
compared to 1994 is primarily attributable to an increase of approximately
$294,000 in interest expense recorded by the Fund due to the Morgens Loan as
discussed above. In addition, the increase in other 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 $300,000. 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 impact of
these recoveries are the decreases in first quarter 1995 stockholder expenses,
other professional fees and general and administrative expenses when compared
to the same period in 1994. Stockholder expenses decreased due to the timing
of payments for annual report and proxy related costs. Other professional
fees decreased as a result of decreased expenditures for legal and other
consulting costs attributable to the Beverly Hills arbitration which was
concluded in the fourth quarter of 1994. General and administrative expenses
decreased due primarily to a decrease in Banyan Management Corp ("BMC")
expenses which were allocated to the Fund due to a decrease in the hours spent
by BMC personnel on Fund-related matters. As a result of the Fund's sale of
the Cascades Apartments, Rocky Point and 9025 Wilshire properties in 1994, as
well as the completion of the refinancing of the Fund, less hours were
required by BMC personnel on Fund matters.
Net Loss from Operations of Real Estate Venture relates to the Fund's
interest in the Oakridge Partnership and was $43,629 and $50,202 for the
quarters ended March 31, 1995 and 1994, respectively. The decrease in the
loss between 1995 and 1994 is primarily due to the completion of the zoning
and entitlement work during 1994. For the quarter ended March 31, 1995, the
Fund recognized a gain on the disposition of real estate in the amount of
$1,017 related to lot sales at the Wayside Village property compared to a
$35,423 loss on disposition of real estate related to lot sales at the
property during the same period in 1994. See Property Operations below for
additional details.
The above changes for the quarters ended March 31, 1995 and 1994
resulted in a net loss of $944,736 ($0.02 per share) and $226,837 ($0.01 per
share), respectively.
PROPERTY OPERATIONS
At March 31, 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 March 31, 1994). For the quarter ended March 31, 1995, the 120 S. Spalding
property provided the Fund with cash flow from rental income in excess of
operating expenses of approximately $274,000 as compared to approximately
$430,000 for 1994. The $156,000 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 and is
additionally attributable to the timing of real estate tax payments. With
notification from City National that it was relocating and after completing
the $20,500,000 financing with Morgens, Waterfall, Vintiadis & Co., Inc., as
discussed above, the Fund proceeded with the previously announced plan to
redevelop and re-lease the space vacated by City National as medical office
space. 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 expected to be comparable to the receipts from redevelopment and
subsequent sale of the property given the proceeds available after incurring
the expense of re-leasing and redevelopment of the property. If the property
were sold pursuant to an acceptable offer, the resulting proceeds could be
redirected to develop the other assets of the Fund and reduce the Fund's long-
term debt.
In addition to the operating property discussed above, the Fund also
owns four parcels of land. During the quarter ended March 31, 1995, the Fund
disbursed a total of approximately $1,738,000, excluding mortgage loan
principal repayments, for capitalized development costs and carrying costs
which include approximately $383,000 on the Chapman's Landing property,
approximately $1,120,000 on Wayside and approximately $235,000 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 Project which
currently calls for continued engineering and land planning work on the site
together with marketing efforts designed to achieve sales of portions of the
Project beginning during the third quarter of 1995. The Fund contemplates
selling small outlying portions of the site and may elect to repay portions of
the outstanding mortgage loans 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 provide funding for site-infrastructure work so that
additional finished lots can be sold to third party developers and
homebuilders. The project is currently zoned for 2,224 residential units and
280,000 square feet of commercial space. During the first quarter ended March
31, 1995, the Fund sold 9 single family lots to home developers in the Fund's
Wayside Development. The lot sales generated gross sales proceeds of
$538,719. After payment of closing costs of $642, the Fund received net
proceeds of $538,077, which were applied to real estate taxes and the payment
of principal and interest on the loan collateralized by the Wayside Village
property. The sale of the lots resulted in an aggregate net gain on
disposition of real estate of $1,017. It is the Fund's intention to fully
implement its business plan to finish infrastructure and site improvements at
Wayside Village. The Fund's expenditures at Wayside Village have primarily
been utilized for completion of lot improvements, local planning, capitalized
interest, and real estate taxes. Once further improvements are made at
Wayside Village it is the Fund's belief that negotiation of additional sales
contracts with local homebuilders and developers can be finalized and sales of
finished lots and sections are expected to escalate.
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
quarter of 1995, the Fund has continued its efforts to modify the project's
zoning and entitlements and has undertaken some preliminary engineering work
on Phase I of the Development. Phase I of the Project consists of 330 acres
and is planned for development of 404 single-family home units and 172
multifamily residential units. On October 11, 1994 Charles County
preliminarily approved proposed zoning modifications whereby the project's
total density count was increased to 4,600 residential units and 2,000,000
square feet of commercial space. It is the Fund's intention to fully
implement its business plan to begin infrastructure work on Phase I at
Chapman's Landing during 1995. The Fund is currently in negotiations with
several local homebuilders and developers regarding sales contracts for
finished lots and development sites in Phase I of the Chapman's Landing
development. The Fund anticipates that the sales contracts will be finalized
sometime during 1995 with sales of finished lots to homebuilders beginning in
1996. The Fund's expenditures at the Chapman's Landing have primarily been
for completion of zoning, local planning, 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 has declined during the first
quarter of 1995 as a result of the increases in interest rates on residential
mortgage loans.
During the first quarter ended March 31, 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 mid-price-range product increases
and the overall economy improves. There can, however, be no assurance of such
growth.
The VST/VMIF Oakridge Partnership owns a 241-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 March 31, 1995, the Fund
carried its 50% interest at a gross value of $1,222,361. Over the past
several years, the Fund has worked to complete entitlement of the property and
will be marketing it for sale. Currently 211 acres of the property located in
Hollywood, Florida, are under contract for a proposed gross sale prices of
approximately $4,000,000. The partnership is currently engaged in
negotiations with potential purchasers of the 30-acre retail parcel located in
Dania, Florida, 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 of approximately $2,000,000 which is
collateralized by 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 $42,000 in
cash flow to the Fund in the first quarter of 1995 and 1994, respectively.
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
For the year ended December 31, 1994, the Fund had elected to be treated
as a real estate investment trust ("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. 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.
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) No exhibits are included with this Report.
(b) On January 23, 1995 a current report on Form 8-K was filed wherein
Item 5. Other Events, disclosed a bankruptcy court's confirmation
of the Fund's VMIF/Anden Southbridge Venture's reorganization.
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: May 11, 1995
Leonard G. Levine, President
By: /s/ Joel L. Teglia Date: May 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 March 31,
1995 and is qualified in its entirety by reference to such Form 10Q."
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 2,577,518
<SECURITIES> 2,880,000
<RECEIVABLES> 124,493
<ALLOWANCES> (21,000)
<INVENTORY> 0
<CURRENT-ASSETS> 6,357,646
<PP&E> 113,417,840
<DEPRECIATION> (1,740,615)
<TOTAL-ASSETS> 123,239,617
<CURRENT-LIABILITIES> 2,013,604
<BONDS> 0
<COMMON> 89,736,049
0
0
<OTHER-SE> (11,316)
<TOTAL-LIABILITY-AND-EQUITY> 123,239,617
<SALES> 0
<TOTAL-REVENUES> 617,371
<CGS> 0
<TOTAL-COSTS> 755,903
<OTHER-EXPENSES> 1,259,183
<LOSS-PROVISION> (495,591)
<INTEREST-EXPENSE> 681,454
<INCOME-PRETAX> (944,736)
<INCOME-TAX> 0
<INCOME-CONTINUING> (944,736)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (944,736)
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
