<PAGE> 1
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 April 30, 1995
[ ] Transition pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from _______________________ to
___________________
Commission File Number 1-7062
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REALTY ReFUND TRUST
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its chart)
Ohio 34-6647590
- --------------------------------------------------------------------------------
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1385 Eaton Center
1111 Superior Avenue
Cleveland, Ohio 44114
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (216) 771-7663
---------------------------
N/A
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Former name, former address and former fiscal year, if changed since last
report.
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 N/A
------- ------- -------
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes No N/A X
------- ------- -------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. 1,020,586
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REALTY ReFUND TRUST
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PART I. FINANCIAL INFORMATION
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<PAGE> 3
<TABLE>
REALTY ReFUND TRUST
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BALANCE SHEETS
--------------
APRIL 30 AND JANUARY 31, 1995
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ASSETS
------
<CAPTION>
April 30, January 31,
----------- -----------
(Unaudited) (Audited)
<S> <C>
INVESTMENTS:
Loans receivable $23,039,894 $24,476,670
Loan receivable from related party 10,867,656 11,033,109
CASH 15,127 39,073
INTEREST RECEIVABLE AND OTHER ASSETS 670,796 966,247
REAL ESTATE HELD FOR SALE, net of accumulated depreciation of $460,000
and $360,000 at April 30 and January 31, 1995, respectively 8,675,695 8,650,257
----------- -----------
$43,269,168 $45,165,356
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
LIABILITIES:
Loans payable underlying wrap-around mortgages $ 8,885,626 $10,264,669
Loan payable underlying wrap-around mortgage to related party 3,666,685 3,832,317
Note payable to bank 11,910,000 11,810,000
Note payable to related party 4,875,000 5,000,000
Deposits and accrued expenses 1,280,295 1,543,828
----------- -----------
Total liabilities 30,617,606 32,450,814
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SHAREHOLDERS' EQUITY:
Shares of beneficial interest without par value; unlimited authorization;
1,020,586 shares outstanding at April 30 and January 31, 1995 12,651,562 12,714,542
----------- -----------
$43,269,168 $45,165,356
=========== ===========
<FN>
The accompanying notes are an integral part of these balance sheets.
</TABLE>
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<PAGE> 4
<TABLE>
REALTY ReFUND TRUST
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UNAUDITED
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STATEMENTS OF INCOME
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FOR THE THREE MONTHS ENDED APRIL 30, 1995 AND 1994
--------------------------------------------------
<CAPTION>
1995 1994
----------- ----------
<S> <C> <C>
REVENUES:
Interest income from loans receivable $ 650,917 $1,068,623
Interest income from loan receivable from related party 234,311 304,045
Rental revenue from real estate held for sale 529,834 556,197
----------- ----------
1,415,062 1,928,865
----------- ----------
EXPENSES:
Interest on loans underlying wrap-around mortgages and other mortgage
loans 195,549 431,962
Interest on loan underlying wrap-around mortgage loan to related party 56,298 66,037
Interest on note payable to bank 222,664 233,424
Interest on note payable to related party 110,438 76,319
Fee to related party investment advisor 73,832 92,215
Operating expenses of real estate held for sale 504,724 495,559
Depreciation of building held for sale 62,283 60,500
Amortization of tenant improvements and deferred leasing commissions 41,362 11,479
Other operating expenses 6,774 235,209
----------- ----------
1,273,924 1,702,704
----------- ----------
NET INCOME $ 141,138 $ 226,161
=========== ==========
NET INCOME PER SHARE $.14 $.22
==== ====
CASH DIVIDENDS PER SHARE DECLARED $.20 $.20
==== ====
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
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<PAGE> 5
<TABLE>
REALTY ReFUND TRUST
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UNAUDITED
---------
STATEMENTS OF CASH FLOWS
------------------------
FOR THE THREE MONTHS ENDED APRIL 30, 1995 AND 1994
--------------------------------------------------
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Interest received $ 890,744 $ 1,392,066
Interest paid (591,188) (824,171)
Cash payments to investment advisor and other suppliers (291,761) (342,018)
Rental revenue received from real estate held for sale 535,780 547,124
Cash payments for operating costs of real estate held for sale (270,973) (540,801)
----------- -----------
Net cash provided by operating activities 272,602 232,200
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Principal collected on mortgage loans receivable 1,602,229 10,841,018
Principal payments on mortgage loans payable (1,544,675) (3,427,132)
Payments for tenant improvements (124,985) (14,247)
----------- -----------
Net cash (used for) provided by investing activities (67,431) 7,399,639
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payment on note payable to related party (125,000) -
Net bank borrowings (repayments) 100,000 (7,375,000)
Payment of cash dividends (204,117) (183,705)
----------- -----------
Net cash used for financing activities (229,117) (7,558,705)
----------- -----------
NET (DECREASE) INCREASE IN CASH (23,946) 73,134
CASH AT BEGINNING OF PERIOD 39,073 50,474
----------- -----------
CASH AT END OF PERIOD $ 15,127 $ 123,608
=========== ===========
</TABLE>
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<PAGE> 6
<TABLE>
<CAPTION>
1995 1994
------------- -------------
<S> <C> <C>
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING
ACTIVITIES:
Net income $ 141,138 $ 226,161
Adjustments to reconcile net income to net cash provided by
operating activities-
Depreciation 62,283 60,500
Amortization of tenant improvements, deferred leasing
commissions and deferred financing costs 41,362 30,958
Amortization of deferred loan fees (4,500) (5,394)
Deferral of interest income - (71,650)
Decrease in interest receivable and other assets 291,352 88,549
Decrease in deposits and accrued expenses (259,033) (96,924)
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$ 272,602 $ 232,200
============= =============
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
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<PAGE> 7
REALTY ReFUND TRUST
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NOTES TO UNAUDITED FINANCIAL STATEMENTS
---------------------------------------
APRIL 30, 1995 AND 1994
-----------------------
1. BASIS OF PRESENTATION:
---------------------
The accompanying unaudited financial statements contain all adjustments which
are, in the opinion of the Trust's management, necessary to present fairly the
financial position of the Trust as of April 30, 1995, and the results of its
operations and cash flows for the three-month periods ended April 30, 1995 and
1994. Such adjustments are of a normal recurring nature.
The financial statements included herein have been prepared by the Trust,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Accordingly, footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. It is suggested that these financial statements be read in
conjunction with the financial statements and the notes thereto included in the
Trust's latest annual report on Form 10-K.
2. DIVIDEND DECLARATION:
--------------------
On May 15, 1995, the Trustees declared a distribution, payable on June 15,
1995, in the amount of 20 cents per share of beneficial interest.
3. NET INCOME PER SHARE:
--------------------
Net income per share has been computed based on the weighted average number of
shares outstanding. Net income per share for the three months ended April 30,
1995 and 1994, was based upon 1,020,586 shares. During these periods, the
Trust had no potentially dilutive securities outstanding. At April 30, 1995
and 1994, there were 1,020,586 shares of beneficial interest outstanding.
4. PRIOR YEAR RECLASSIFICATIONS:
-----------------------------
Certain prior year amounts have been reclassified to conform with current year
presentation.
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<PAGE> 8
Management's Discussion and Analysis of Financial Condition
- -----------------------------------------------------------
and Results of Operations
- -------------------------
Interest income on mortgage loans receivable decreased during the quarter ended
April 30, 1995 as compared to the corresponding period of 1994 due to the
prepayments of the Akron, Ohio and Dallas, Texas wrap-around mortgage loans in
April and May 1994, respectively, prepayment and other income of $147,000
earned in the prior year period in connection with the Akron, Ohio loan
prepayment, principal prepayments of $2,200,000 received on the Toledo, Ohio
wrap-around mortgage loan in fiscal 1995 and the normal amortization of
mortgage loan balances. Interest income from the Saginaw, Michigan investment
made in July 1994 and the effect of higher prime lending rates on variable rate
mortgage loans in the current year quarter partially offset the decrease in
interest income. Interest expense on mortgage loans payable decreased due to
the prepayments of the loans underlying the Akron, Ohio and Dallas, Texas
wrap-around loan investments and the normal amortization of mortgage loan
balances.
During the three months ended April 30, 1995, the Chicago property incurred a
net operating loss of approximately $79,000, inclusive of depreciation and
amortization charges totaling approximately $104,000. For the prior year
quarter, the Chicago property incurred a net operating loss of approximately
$11,000 inclusive of depreciation and amortization charges of approximately
$72,000. Rental revenue decreased approximately $26,000 between periods
primarily due to the expiration of a lease. The impact of this lease
expiration will be partially offset by new lease agreements which have been
entered into with both new and existing tenants. Operating expenses of the
Chicago property remained relatively constant between periods. Amortization of
tenant improvements and deferred leasing commissions increased due to increased
investments in tenant improvements and higher levels of leasing commissions
paid. These expenditures have increased in connection with both the obtaining
of new tenants and the renewals of leases with existing tenants.
Average bank borrowing levels were considerably lower in the current year
quarter as the proceeds received in the prior year in connection with the
Akron, Ohio and Dallas, Texas loan prepayments and the principal prepayments
received on the Toledo, Ohio loan in the prior fiscal year were used to reduce
bank borrowings. The effect of reduced borrowing levels more than offset the
effect of higher prime lending rates in the current year quarter.
Interest expense on the note payable to related party increased due to higher
prime lending rates in the current year period.
The fee to investment advisor decreased in the current year due to the lower
level of net investment in mortgage loans.
Other operating expenses decreased in the current period due to lower levels of
legal and professional expense. Such expenses were greater than normal in the
prior year period due to a higher level of legal activity.
Liquidity
- ---------
To maintain tax-exempt status, the Trust is required to distribute at least 95%
of its taxable income to its shareholders. It is currently the policy of the
Trust to distribute sufficient dividends to maintain its tax-exempt status. As
a result of the substantial net loss in fiscal 1993, the Trust has available
approximately $4.6 million of net operating loss carryforwards for income tax
purposes. The loss carryforwards can be used to reduce future dividend payment
requirements and still allow the Trust to maintain its tax-exempt status. The
Trustees will assess the level of dividends to be declared on a quarterly
basis.
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<PAGE> 9
For the three months ended April 30, 1995 as compared to the prior year period,
net cash provided by operating activities increased due to a lower level of net
cash payments for operating costs of the Chicago property resulting from the
receipt of $300,000 for reimbursement of building repairs and maintenance
expenses. The reimbursement was accrued at January 31, 1995 but not received
until February. These factors more than offset the effect of prepayment and
other income recognized in the prior year quarter on the Akron, Ohio loan
prepayment and the current year reduction in interest income.
Cash from investing activities decreased considerably in the three-month period
ended April 30, 1995 due to the Akron, Ohio wrap-around mortgage loan
prepayment in the prior year quarter. The Trust's net investment in the loan
was approximately $7,400,000 at the time of prepayment. In addition, the Trust
increased expenditures for tenant improvements at the Chicago property in the
current year quarter.
Cash used for financing activities decreased as the proceeds received from the
Akron, Ohio wrap-around mortgage loan prepayment were utilized to reduce bank
borrowings in the prior year quarter. Also, dividends paid increased as the
Trustees declared and paid a higher dividend in the quarter ended April 30,
1995 than in the prior year.
In connection with the Trust's wrap-around loans, while the entire debt service
is received in cash, the Trust is obligated to the borrower to make debt
service payments on the underlying indebtedness. Additionally, the Trust must
fund any operating deficits of the Chicago property until such time as it is
sold. The Trust's primary sources of funds are a bank credit agreement in the
amount of $22,000,000 until August 1, 1995, at which time availability will be
reduced to $10,000,000, repayments of mortgage loans receivable and rental
revenue from the Chicago property. The credit agreement is used to provide the
Trust with a source of funds when payments due on loans underlying the Trust's
wrap-around loans are in excess of the payments due the Trust, to fund any
operating deficits of the Chicago property or to fund losses such as
experienced in the fiscal year ended January 31, 1993. The credit agreement
expires in July 1996. As of April 30, 1995, the Trust had available
$10,090,000 under the credit agreement.
Inflation
- ---------
Generally, inflation affects the Trust as it affects its borrowers and the
underlying real estate collateral. This type of collateral traditionally has
been able to sustain itself during periods of inflation.
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<PAGE> 10
FORM 10-Q - PART II: OTHER INFORMATION
---------------------------------------
Items 1 through 3 and 5 are not applicable or the answer to
such items is negative; therefore, the items have been omitted
and no reference is required in this report.
ITEM 4: Submission of Matters to a Vote of Security Holders
- ------- ---------------------------------------------------
(a) The Trust's Annual Meeting of Shareholders was held May
15, 1995.
(b) The following Trustees were elected at such annual
meeting, each for a one-year term expiring in 1996:
James H. Berick
Alan M. Krause
Alvin M. Kendis
Frank L. Kennard
Samuel S. Pearlman
(c) The Election of Trustees was the only matter voted on at
the annual meeting of shareholders:
<TABLE>
<CAPTION>
Trustee Name Votes For Abstentions
------------ --------- -----------
<S> <C> <C>
James H. Berick 869,420 17,290
Alan M. Krause 868,720 17,790
Alvin M. Kendis 863,720 22,590
Frank L. Kennard 864,520 22,190
Samuel S. Pearlman 864,620 22,090
</TABLE>
ITEM 6: Exhibits and reports on Form 8-K
- ------ --------------------------------
(a) Exhibit
Number Exhibit
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27 Financial Data Schedule(1)
(b) No Reports on Form 8-K have been filed during the quarter
for which this report is filed.
_____________________
(1)Filed only in electronic format pursuant to Item 601(b)(27) of Regulation
S-K.
<PAGE> 11
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
June 13, 1995. REALTY ReFUND TRUST
-------------------------------
(Registrant)
By
/s/ Alan M. Krause
-------------------------------
Alan M. Krause
Chairman
And By
/s/ James H. Berick
-------------------------------
James H. Berick
President and Principal
Financial Officer
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE
SHEETS AS OF APRIL 30, 1995 AND JANUARY 31, 1995 AND STATEMENTS OF INCOME FOR
THE THREE MONTHS ENDED APRIL 30, 1995 AND 1994 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000082473
<NAME> REALITY REFUND TRUST
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-START> FEB-01-1995
<PERIOD-END> APR-30-1995
<CASH> 15,127
<SECURITIES> 0
<RECEIVABLES> 33,907,550
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 9,135,695
<DEPRECIATION> 460,000
<TOTAL-ASSETS> 43,269,168
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 29,337,311
<COMMON> 12,651,562
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 43,269,168
<SALES> 0
<TOTAL-REVENUES> 1,415,062
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 688,975
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 584,949
<INCOME-PRETAX> 141,138
<INCOME-TAX> 0
<INCOME-CONTINUING> 141,138
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 141,138
<EPS-PRIMARY> .14
<EPS-DILUTED> .14
<FN>
<F1>The Registrant utilizes an unclassified Balance Sheet. Therefore, the captions
"Total Current Assets" and "Total Current Liabilities" are not applicable.
</FN>
</TABLE>
