<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED JUNE 30, 1995
-------------
Commission File Number 1-9948
------
AMERICAN REALTY TRUST, INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Georgia 54-0697989
------------------------------- ---------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
10670 North Central Expressway, Suite 300, Dallas, Texas 75231
----------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(214) 692-4700
-------------------------------
(Registrant's Telephone Number,
Including Area Code)
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
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date.
Common Stock, $.01 par value 2,929,164
- ---------------------------- --------------------------------
(Class) (Outstanding at July 28, 1995)
1
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The accompanying Consolidated Financial Statements have not been examined by
independent certified public accountants but in the opinion of the management
of American Realty Trust, Inc. (the "Company"), all adjustments (consisting of
normal recurring accruals) necessary for a fair presentation of consolidated
results of operations, consolidated financial position and consolidated cash
flows at the dates and for the periods indicated, have been included.
AMERICAN REALTY TRUST, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
--------------- --------------
(dollars in thousands)
<S> <C> <C>
Assets
------
Notes and interest receivable
Performing........................................ $ 47,512 $ 47,378
Nonperforming, nonaccruing........................ 1,820 2,315
--------------- --------------
49,332 49,693
Real estate held for sale, net of accumulated
depreciation ($5,098 in 1995 and $5,423 in 1994).. 29,322 23,748
Less - allowance for estimated losses............... (8,201) (8,201)
--------------- --------------
70,453 65,240
Real estate held for investment, net of accumulated
depreciation ($1,997 in 1995 and $1,396 in 1994).. 28,054 27,950
Marketable equity securities, at market............. 7,302 1,309
Cash and cash equivalents........................... 431 193
Investments in real estate entities................. 40,683 38,844
Other assets........................................ 4,589 3,826
--------------- --------------
$ 151,512 $ 137,362
=============== ==============
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
2
<PAGE> 3
AMERICAN REALTY TRUST, INC.
CONSOLIDATED BALANCE SHEETS - Continued
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
--------------- --------------
(dollars in thousands)
<S> <C> <C>
Liabilities and Stockholders' Equity
------------------------------------
Liabilities
Notes and interest payable......................... $ 54,678 $ 45,695
Margin borrowing................................... 34,982 26,391
Accounts payable and other liabilities (including
$475,000 in 1995 and $1,505 in 1994 to affiliate) 9,164 8,921
--------------- --------------
98,824 81,007
Minority interest.................................. 1,097 461
Commitments and contingencies
Stockholders' equity
Common stock, $.01 par value; authorized
16,667,000 shares, issued and outstanding
2,929,164 shares................................. 29 29
Paid-in capital.................................... 66,749 66,749
Accumulated (deficit).............................. (15,187) (10,884)
--------------- --------------
51,591 55,894
--------------- --------------
$ 151,512 $ 137,362
=============== ==============
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
3
<PAGE> 4
AMERICAN REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
---------------------------------- ---------------------------------
1995 1994 1995 1994
-------------- -------------- --------------- -------------
(dollars in thousands, except per share)
<S> <C> <C> <C> <C>
Income
Rents....................... $ 3,684 $ 4,813 $ 9,091 $ 7,194
Interest.................... 1,257 1,064 2,580 1,805
Equity in (losses) of
real estate investees..... (1,699) (545) (2,959) (1,072)
Other....................... 611 353 (39) 718
-------------- -------------- --------------- -------------
3,853 5,685 8,673 8,645
-------------- -------------- --------------- -------------
Expenses
Property operations......... 3,333 3,661 7,212 5,238
Interest.................... 1,999 2,050 3,756 3,684
Advisory and servicing fees
to affiliate.............. 239 305 543 625
General and administrative.. 667 406 1,227 1,014
Depreciation and
amortization.............. 402 421 842 756
Minority interest........... 671 103 671 158
-------------- -------------- --------------- -------------
7,311 6,946 14,251 11,475
-------------- -------------- --------------- -------------
(Loss) before gain on sale of
real estate and extraordinary
gain........................ (3,458) (1,261) (5,578) (2,830)
Gain on sale of real estate... 24 57 948 233
Extraordinary gain............ 12 14 327 50
-------------- -------------- --------------- -------------
Net (loss).................... $ (3,422) $ (1,190) $ (4,303) $ (2,547)
============== ============== =============== =============
Earnings per share
(Loss) before gain on sale
of real estate and extra-
ordinary gain............. $ (1.18) $ (.40) $ (1.90) $ (.94)
Gain on sale of real
estate.................... .01 .02 .32 .08
Extraordinary gain.......... - - .11 .01
-------------- ------------- -------------- -------------
Net (loss).................. $ (1.17) $ (.38) $ (1.47) $ (.85)
============== ============= ============== =============
Weighted average Common shares
used in computing earnings
per share................... 2,929,164 3,092,515 2,929,164 2,988,915
============== ============= ============== =============
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
4
<PAGE> 5
AMERICAN REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the Six Months Ended June 30, 1995
<TABLE>
<CAPTION>
Common Stock
----------------------------- Paid-in Accumulated Stockholders'
Shares Amount Capital Earnings Equity
------------ ------------- ------------- --------------- ---------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Balance,
January 1, 1995...... 2,929,164 $ 29 $ 66,749 $ (10,884) $ 55,894
Net (loss)........... - - - (4,303) (4,303)
------------ ------------- ------------- --------------- ---------------
Balance, June 30, 1995. 2,929,164 $ 29 $ 66,749 $ (15,187) $ 51,591
============ ============= ============= =============== ==============
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
5
<PAGE> 6
AMERICAN REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
-------------------------------------
1995 1994
---------------- ---------------
(dollars in thousands)
<S> <C> <C>
Cash Flows From Operating Activities
Rents collected................................. $ 9,437 $ 6,197
Interest and dividends collected................ 3,054 1,696
Distributions received from real estate
investees' operating cash flow................ 878 986
Payments for property operations................ (6,702) (5,561)
Interest paid................................... (3,922) (3,259)
Advisory and servicing fees paid to affiliate... (543) (625)
General and administrative expenses paid........ (1,284) (1,672)
Deferred borrowing costs........................ (1,200) -
Other........................................... 228 147
---------------- ---------------
Net cash (used in) operating activities....... (54) (2,091)
Cash Flows From Investing Activities
Collections on notes receivable................. 1,186 1,832
Proceeds from sale of real estate............... 9,731 847
Proceeds from sale of marketable equity
securities.................................... 3,061 3,955
Purchase of marketable equity securities........ (9,870) (7,029)
Investment in real estate entities.............. (5,546) (1,803)
Purchase of real estate......................... (14,076) -
Real estate improvements........................ (1,026) (875)
---------------- ---------------
Net cash (used in) investing activities....... (16,540) (3,073)
Cash Flows From Financing Activities
Proceeds from notes payable.................... 23,700 526
Payments on notes payable...................... (14,401) (2,039)
Net collections (advances) to/from affiliates.. (1,059) 159
Margin borrowings, net......................... 8,592 5,973
---------------- ---------------
Net cash provided by financing activities.... 16,832 4,619
Net increase (decrease) in cash and cash
equivalents................................ 238 (545)
Cash and cash equivalents, beginning of period... 193 843
---------------- ---------------
Cash and cash equivalents, end of period......... $ 431 $ 298
================ ===============
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
6
<PAGE> 7
AMERICAN REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
-------------------------------------
1995 1994
---------------- ---------------
(dollars in thousands)
<S> <C> <C>
Reconciliation of net (loss) to net cash (used in)
operating activities
Net (loss)....................................... $ (4,303) $ (2,547)
Adjustments to reconcile net (loss) to net cash
(used in) operating activities
Extraordinary gain............................. (327) (50)
Depreciation and amortization.................. 842 756
Gain on sale of real estate.................... (948) (233)
Distributions from real estate investees'
operating cash flow.......................... 878 986
Equity in losses of real estate investees...... 2,959 1,072
Unrealized loss on marketable equity securities 899 83
(Increase) decrease in interest receivable..... 266 (45)
(Increase) in other assets..................... (569) (1,697)
Increase (decrease) in interest payable........ (260) 200
Increase (decrease) in accounts payable and
other liabilities............................ 414 (963)
Other.......................................... 95 347
---------------- ---------------
Net cash (used in) operating activities...... $ (54) $ (2,091)
================ ===============
Schedule of noncash investing activities
Carrying value of real estate acquired through
assumption of debt with a carrying value
of $6,080....................................... $ - $ 6,341
Carrying value of real estate acquired through
satisfaction of a receivable with a carrying
value of $125................................... - 125
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
7
<PAGE> 8
AMERICAN REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The accompanying Consolidated Financial Statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. Operating results for the six month period ended June 30, 1995 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 1995. For further information, refer to the Consolidated
Financial Statements and Notes thereto included in the Company's Annual Report
on Form 10-K for the year ended December 31, 1994 (the "1994 Form 10-K").
NOTE 2. NOTES AND INTEREST RECEIVABLE
The borrower on a $1.7 million first mortgage note receivable secured by land
in Osceola, Florida failed to make required payments subsequent to August 10,
1993, including the payment of principal and interest due at the note's
maturity on November 1, 1993. The Company instituted judicial foreclosure
proceedings and was awarded a summary judgment in January 1994. During 1994,
the borrower paid the Company a total of $235,000 in nonrefundable fees to
delay foreclosure of the property. In February and March 1995, the borrower
paid the Company a total of $35,000 to delay the foreclosure until April 24,
1995. On April 21, 1995, the borrower filed for bankruptcy protection. In
July 1995, the Company filed a motion with the bankruptcy court to lift the
court's stay and allow the Company to proceed with foreclosure. The note had a
principal balance of $1.6 million at June 30, 1995. The Company does not
expect to incur any loss upon foreclosure as the estimated fair value of the
collateral property, less estimated costs of sale, exceeds the carrying value
of the note.
As discussed in the Company's 1994 Form 10-K, the Company sold the Continental
Hotel and Casino in Las Vegas, Nevada for a $22.0 million wraparound mortgage
note receivable, a $500,000 unsecured note receivable, and $100,000 in cash in
June 1992. The $500,000 note was paid off on July 30, 1993. In April 1994,
the Company, the borrower and the underlying lienholder agreed to modify and
extend both the Company's wraparound mortgage note receivable and the
underlying liens. The wraparound mortgage note receivable and the underlying
liens matured July 1, 1995. The Company, the borrower and the underlying
lienholder are currently in negotiations to extend the wraparound mortgage note
receivable and the underlying liens to December 1, 1995. Other terms of the
notes are to remain the same. At June 30, 1995, the principal balance on the
wraparound note receivable was $24.1 million and the principal balance of the
underlying liens was $4.5 million.
NOTE 3. REAL ESTATE
In February 1995, the Company sold the Boulevard Villas Apartments in Las
Vegas, Nevada, for $9.6 million. The Company initially treated the
8
<PAGE> 9
AMERICAN REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
NOTE 3. REAL ESTATE (Continued)
sale as a financing transaction, the Company having provided the purchaser with
his $1.6 million down payment, by loaning a like amount, secured by a second
lien on an office building in Houston, Texas. In March 1995, the office
building was sold and the Company's loan was paid in full. The Company
received net cash of $3.4 million from the sale of the apartment after the
payoff of $5.9 million in existing mortgage debt recognizing a gain of $924,000
on the sale. The Company paid a real estate brokerage commission of $288,000
to Carmel Realty, Inc., an affiliate of Basic Capital Management, Inc. ("BCM"),
the Company's advisor, based on the $9.6 million sales price.
On May 15, 1995, the Company purchased four tracts of partially developed land
in Irving, Texas totaling 74.9 acres for $13.5 million. The Company paid a real
estate acquisition fee of $405,000 to Carmel Realty, Inc., an affiliate of BCM,
the Company's advisor, based on the $13.5 million purchase price. To make the
acquisition, the Company borrowed $15.0 million under a term loan, which bears
interest at prime plus 4%, (13% per annum at June 30, 1995), requires monthly
interest only payments, a 1% annual maintenance fee, principal reduction
payments of $1.5 million on the first day of November 1995 and May 1996 and
$3.0 million every six months thereafter from November 1996, with the balance
of principal and accrued but unpaid interest due at maturity on May 1, 1998.
The loan is secured by the land in Irving, Texas, a participation interest in
two of the Company's notes receivable, land in Atlanta, Georgia and 65,200
National Realty, L.P. ("NRLP") limited partner units owned by the Company. The
Company received net cash proceeds of $210,000 after the purchase of land and
payment of associated closing costs. In June 1995, the Company borrowed an
additional $3.0 million from this lender increasing the term loan balance to
$18.0 million. This $3.0 million borrowing is due on December 31, 1995.
In 1991, the Company purchased all of the capital stock of a corporation which
owned 198 developed residential lots in Fort Worth, Texas. Through December
31, 1994, a total of 172 of the residential lots had been sold. In the first
six months of 1995 three additional lots were sold and 26 lots were remaining at
June 30, 1995.
Also in 1991, the Company purchased all of the capital stock of a company which
owned a 60% interest in a joint venture, which in turn owned 113 partially
developed residential lots in Denton, Texas. Through December 31, 1994, 109 of
the residential lots had been sold. In the first six months of 1995 the final
four lots were sold for an aggregate gain of $24,000.
NOTE 4. SYNTEK ASSET MANAGEMENT, L.P.
In July 1989, the Company acquired Southmark Corporation's ("Southmark") 96%
limited partner interest in SAMLP, the general partner of NRLP and National
Operating, L.P. ("NOLP"), the operating partnership of NRLP.
9
<PAGE> 10
AMERICAN REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
NOTE 4. SYNTEK ASSET MANAGEMENT, L.P. (Continued)
Gene E. Phillips, a Director and Chairman of the Board of the Company until
November 16, 1992, is a general partner, and until March 4, 1994, William S.
Friedman, a Director and President of the Company until December 31, 1992, was
also general partner of SAMLP. In February 1992, in accordance with the
provisions of the settlement of certain adversary proceedings, in the Southmark
bankruptcy the Company assigned to Southmark a 19.2% limited partner interest
in SAMLP.
NRLP, SAMLP and Messrs. Phillips and Friedman were among the defendants in a
class action lawsuit arising from the formation of NRLP. An agreement
settling such lawsuit for the above mentioned defendants became effective on
July 5, 1990. The settlement agreement provides for, among other things; (i)
the appointment of an NRLP oversight committee, (ii) the establishment of
specified annually increasing targets for five years relating to the price of
NRLP's units of limited partner interest, (iii) a limitation and deferral or
waiver of NRLP's reimbursement to SAMLP of certain future salary costs, (iv) a
deferral or waiver of certain future compensation to SAMLP, (v) the required
distribution to unitholders of all of NRLP's cash from operations in excess of
certain renovation costs unless the NRLP oversight committee approves
alternative uses for such cash from operations, (vi) the issuance of unit
purchase warrants to members of the plaintiff class, and (vii) the contribution
by the then individual general partners of $2.5 million to NRLP over a
four-year period. In accordance with the indemnification provisions of SAMLP's
agreement of limited partnership, SAMLP indemnified Messrs. Phillips and
Friedman, the individual general partners, at the time, of SAMLP, for the $2.5
million payment to NRLP. The final annual installment of principal and
interest was paid by SAMLP in May 1994.
The settlement agreement provides for the withdrawal and replacement of SAMLP
as general partner if the unit price targets are not met for two consecutive
anniversary dates. The unit price targets for the first and second anniversary
dates were not met. On July 8, 1992, SAMLP notified the NRLP oversight
committee of the failure of NRLP to meet the unit price targets for two
successive years and that it expects to resign as general partner of NRLP and
NOLP.
The withdrawal of SAMLP as general partner would require NRLP to purchase
SAMLP's general partner interest (the "Redeemable General Partner Interest") at
its then fair value, and to pay certain fees and other compensation as provided
in the partnership agreement. Syntek Asset Management, Inc. ("SAMI"), the
managing general partner of SAMLP, has calculated the fair value of such
Redeemable General Partner Interest to be $33.0 million at December 31, 1994,
before reduction for the principal balance ($4.2 million at June 30, 1995) and
accrued interest ($4.8 million at June 30, 1995) on the note receivable from
SAMLP for its original capital contribution to NRLP. There can be no assurance
that such amount at the time of any such withdrawal will not be substantially
higher or lower. The NRLP oversight committee
10
<PAGE> 11
AMERICAN REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
NOTE 4. SYNTEK ASSET MANAGEMENT, L.P. (Continued)
previously has informed NRLP that it calculated the amount of such Redeemable
General Partner Interest, to be less than the amount calculated by SAMI. Any
dispute pertaining to the amount of the Redeemable General Partner Interest
upon the withdrawal of SAMLP as general partner of NRLP and NOLP, will be
resolved by the Judge appointed pursuant to the class action settlement to
supervise its implementation (the "Supervising Judge"). NRLP's purchase of the
Redeemable General Partner Interest could have an adverse effect on the
Company's investment in limited partner units of NRLP ($14.0 million at June
30, 1995).
In January 1995, NRLP, SAMLP, the NRLP oversight committee and William H.
Elliott executed an Implementation Agreement which provides for the nomination
of an entity controlled by Mr. Elliott as successor general partner and for the
resolution of all related matters under the class action settlement. The
Implementation Agreement was subject to receipt of a notice from Mr. Elliott
that he consented to stand for election as the successor general partner. On
April 20, 1995, Mr. Elliott formally notified the parties that he would stand
for such election.
On June 29, 1995, the Implementation Agreement was submitted to the Supervising
Judge for tentative approval and approval of the notice to be sent to the
original class members. As of August 10, 1995, the tentative approval of the
Supervising Judge had not been obtained and therefore the class members had not
been notified. Upon final approval by the Supervising Judge, the proposal to
elect the successor general partner will be submitted to the NRLP unitholders
for a vote. In addition, the unitholders will vote upon amendments to NRLP's
partnership agreement which relate to the proposed compensation of the
successor general partner and other related matters.
Upon approval by the unitholders, SAMLP shall withdraw as general partner and
the successor general partner shall take office. If the required approvals are
obtained, it is anticipated that the successor general partner may be elected
and take office during the first quarter of 1996.
The Implementation Agreement provides that SAMLP, and its affiliates owning
units in NRLP, shall not vote to remove the successor general partner, except
for removal with cause, for a period of thirty months from the date the
successor general partner takes office. In addition, the Supervising Judge
shall make a determination of any amounts which NRLP may owe to SAMLP upon
SAMLP's withdrawal as general partner and any amounts which SAMLP or its
affiliates may owe to NRLP. Any amounts which NRLP may be determined to owe to
SAMLP may be paid over a period of time to be determined by the parties on
terms which shall not hinder NRLP's ability to meet its other financial
obligations.
Upon the election and taking office of the successor general partner, the class
action settlement and the NRLP oversight committee shall be
11
<PAGE> 12
AMERICAN REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
NOTE 4. SYNTEK ASSET MANAGEMENT, L.P. (Continued)
terminated. If the successor general partner nominee is not elected, the
existing settlement shall remain in full force and effect and all of the
provisions of the Implementation Agreement shall be voided.
On April 24, 1995, the Company's Board of Directors approved the Company's
entering into a comfort and indemnification letter whereby the Company would
agree to indemnify Mr. Elliott and any entity controlled by Mr. Elliott which
is elected to serve as the successor general partner of NRLP and NOLP. Such
indemnification will stand behind any indemnification to which Mr. Elliott or
any entity controlled by Mr. Elliott may be entitled to under the NRLP
partnership agreement.
NOTE 5. INVESTMENT IN REAL ESTATE ENTITIES
The Company's investment in real estate entities includes (i) equity securities
of three publicly traded real estate investment trusts (collectively the
"Trusts"), Continental Mortgage and Equity Trust ("CMET"), Income Opportunity
Realty Trust ("IORT") and Transcontinental Realty Investors, Inc. ("TCI"), (ii)
units of limited partner interest of NRLP, (iii) a general partnership interest
in NRLP and NOLP, through the Company's 76.8% limited partner interest in SAMLP
and (iv) interests in real estate joint venture partnerships. BCM, the
Company's advisor, serves as advisor to the Trusts, and performs certain
administrative and management functions for NRLP and NOLP on behalf of SAMLP.
Because the Company may be considered to have the ability to exercise
significant influence over the operating and investing policies of these
entities, the Company accounts for its investment in the Trusts, and
the joint venture partnerships under the equity method of accounting. In the
case of NRLP, the Company continues to account for its investment under the
equity method due to the pending change in NRLP's general partner from SAMLP to
an unaffiliated third party. (See NOTE 4. "SYNTEK ASSET MANAGEMENT, L.P.")
Substantially all of the Company's equity securities of the Trusts and NRLP are
pledged as collateral for borrowings.
[THIS SPACE INTENTIONALLY LEFT BLANK.]
12
<PAGE> 13
AMERICAN REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
NOTE 5. INVESTMENT IN REAL ESTATE ENTITIES (Continued)
The Company's investment in real estate entities, accounted for using the
equity method, at June 30, 1995 was as follows:
<TABLE>
<CAPTION>
Equivalent
Percentage Carrying Investee
of the Company's Value of Book Value Market Value
Ownership at Investment at at of Investment at
Investee June 30, 1995 June 30, 1995 June 30, 1995 June 30, 1995
- -------- ---------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
NRLP 51.0% $ 13,966 $ * $ 33,148
CMET 36.0 11,946 27,818 15,243
IORT 25.5 2,732 6,230 3,955
TCI 26.8 7,410 23,864 10,932
------------- ------------
36,054 $ 63,278
============
General partner
interest in NRLP
and NOLP 7,551
Other (2,922)
--------------
$ 40,683
===============
</TABLE>
____________________
* At June 30, 1995, NRLP reported a deficit partners' capital. The
Company's share of NRLP's revaluation equity at December 31, 1994,
was $144.9 million. Revaluation equity is defined as the difference
between the appraised value of the partnership's real estate,
adjusted to reflect the partnership's estimate of disposition costs,
and the amount of the mortgage notes payable and accrued interest
encumbering such property as reported in NRLP's Annual Report on Form
10-K for the year ended December 31, 1994.
The Company's management continues to believe that the market value of each of
the Trusts and NRLP undervalues their assets and the Company has, therefore,
continued to increase its ownership in these entities in 1995.
Set forth below is summarized combined results of operations for the real
estate entities the Company accounts for using the equity method for the six
months ended June 30, 1995:
<TABLE>
<S> <C>
Revenues.................................................... $ 99,137
Property operating expenses................................. (66,292)
Depreciation................................................ (11,729)
Interest expense............................................ (30,220)
Provision for losses........................................ (541)
Extraordinary gain.......................................... 1,341
--------------
Net (loss).................................................. $ (8,304)
==============
</TABLE>
The Company's cash flow from the Trusts and NRLP is dependent on the ability of
each of the entities to make distributions. TCI's distribution policy provides
for an annual determination of distribu-
13
<PAGE> 14
AMERICAN REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
NOTE 5. INVESTMENT IN REAL ESTATE ENTITIES (Continued)
tions after year end, and then only to the extent necessary to retain its
status as a Real Estate Investment Trust ("REIT") for federal tax purposes.
The Company expects to receive no distributions from TCI in 1995. CMET, IORT
and NRLP all make regular quarterly distributions. In the six months ended
June 30, 1995, the Company received aggregate distributions of $829,000 from
CMET, IORT and NRLP.
In the six months ended June 30, 1995, the Company purchased a total of $4.6
million of equity securities of the Trusts and NRLP.
On June 14, 1995, the Company purchased the general partner of a limited
partnership which owns three apartment complexes, with a total of 900 units,
located in Illinois, Florida and Minnesota. The purchase price was $628,000 in
cash. The general partner has a 1% interest in the partnership which is
subordinated to a priority return of the limited partner.
In January 1992, the Company entered into a partnership agreement with an
entity affiliated with the owner of, at the time, in excess of 14% of the
Company's outstanding shares of Common Stock, to acquire 287 developed
residential lots adjacent to the Company's other residential lots in Fort
Worth, Texas. The partnership agreement designates the Company as managing
general partner. The partnership agreement also provides each of the partners
with a guaranteed 10% return on their respective investments. Through December
31, 1994, 60 residential lots had been sold. In the six months ended June 30,
1995 an additional 46 lots were sold and 181 lots remained to be sold. In the
six months ended June 30, 1995, each partner has received $49,000 in
distributions from the partnership.
NOTE 6. MARKETABLE EQUITY SECURITIES - TRADING PORTFOLIO
In the first quarter of 1994, the Company began purchasing equity securities of
entities other than those of the Trusts and NRLP to diversify and increase the
liquidity of its margin accounts. In the six months ended June 30, 1995, the
Company purchased $9.9 million, sold $2.7 million, and received $238,000 in
return of capital, of such securities. These equity securities are considered
a trading portfolio and are carried at market value. At June 30, 1995, the
Company recognized an unrealized decline in the market value of its trading
portfolio securities of $899,000. Also in the six months ended June 30, 1995,
the Company realized a net gain of $79,000 from the sale of trading portfolio
securities and received $530,000 in dividends on such securities. Unrealized
and realized gains and losses as well as dividends received on trading
portfolio securities are included in other income in the accompanying
Consolidated Statements of Operations.
14
<PAGE> 15
AMERICAN REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
NOTE 7. NOTES AND INTEREST PAYABLE
In April 1995, the Company refinanced the mortgage debt secured by the Kansas
City Holiday Inn in the amount of $3.5 million, with the ability to increase
the principal balance of the new mortgage by an additional $1.0 million over an
18 month period if certain performance criteria are achieved. The Company
received net cash of $485,000 after the payoff of $2.9 million of existing
mortgage debt and closing costs associated with the refinancing. The new
mortgage bears a variable interest rate of 4% over the three month London
Interbank Offered Rate adjusted quarterly, 10 1/4% per annum at June 30, 1995,
not to exceed 14% per annum nor be less than 9 1/2% per annum. The new
mortgage requires a $32,423 monthly principal and interest payment and matures
May 1, 2002. The Company paid a mortgage brokerage and equity refinancing fee
of $35,000 to BCM, the Company's advisor, based on the $3.5 million
refinancing.
In May 1995, the Company obtained a $15.0 million term loan, the proceeds of
which were used to acquire 74.9 acres of partially developed land in Irving,
Texas. See NOTE 3. "REAL ESTATE." In June 1995, the Company borrowed an
additional $3.0 million from this lender increasing the term loan balance to
$18.0 million. The $3.0 million borrowing is due on December 31, 1995.
As discussed in the Company's 1994 Form 10-K, the Company's underlying liens
secured by the wraparound mortgage note receivable on the Continental
Hotel and Casino in Las Vegas, Nevada matured July 1, 1995. The Company
and the underlying lienholder are currently in negotiations to extend the
underlying liens to December 1, 1995. The principal balance of the underlying
liens was $4.5 million at June 30, 1995. See NOTE 2. "NOTES AND INTEREST
RECEIVABLE."
Also, as discussed in the Company's 1994 Form 10-K, the Company has a borrowing
from a financial institution with a principal balance of $8.2 million at June
30, 1995. The borrowing is collateralized by a note receivable with a
principal balance of $17.1 million at June 30, 1995. In December 1994, the
loan was modified and extended to December 18, 1997. On June 27, 1995, the
lender took exception to the Company's granting a second lien on the note
receivable and has given the Company 60 days to seek third party financing to
pay off the loan or make other arrangements to resolve the matter. See NOTE 3.
"REAL ESTATE."
The Company has margin arrangements with various brokerage firms which provide
for borrowing of up to 50% of the market value of the Company's marketable
equity securities. The borrowings under such margin arrangements are secured
by equity securities of the Trusts, NRLP and other marketable equity
securities, and bear interest rates ranging from 6.75% to 11% per annum.
Margin borrowing totaled $35.0 million at June 30, 1995.
15
<PAGE> 16
AMERICAN REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
NOTE 8. INCOME TAXES
Financial statement income varies from taxable income principally due to the
accounting for income and losses of investees, gains and losses from asset
sales, depreciation on owned properties, amortization of discounts on notes
receivable and payable and the difference in the allowance for estimated
losses. The Company had no taxable income or provision for income taxes in the
three and six months ended June 30, 1994 or 1995.
NOTE 9. COMMITMENTS AND CONTINGENCIES
Litigation. The Company is involved in various lawsuits arising in the
ordinary course of business. The Company's management is of the opinion that
the outcome of these lawsuits would have no material impact on the Company's
financial condition.
________________________________________
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Introduction
American Realty Trust, Inc. (the "Company") was organized in 1961 to provide
investors with a professionally managed, diversified portfolio of equity real
estate and mortgage loan investments selected to provide opportunities for
capital appreciation as well as current income.
Liquidity and Capital Resources
General. Cash and cash equivalents at June 30, 1995 aggregated $431,000,
compared with $193,000 at December 31, 1994. Although the Company anticipates
that during the remainder of 1995 it will generate excess cash flow from
operations, as discussed below, such excess cash flow is not sufficient to
discharge all of the Company's debt obligations as they mature. The Company
will therefore continue to rely on externally generated funds, including
borrowing against its investments in various real estate entities and other
marketable securities, mortgage notes receivable and the sale or refinancing of
properties to meet its debt service obligations, pay taxes, interest and other
non-property related expenses.
At June 30, 1995, notes payable totaling $15.1 million have scheduled
maturities during the remainder of 1995. The Company intends to either payoff,
extend the maturity dates or obtain alternate financing for its debt
obligations that mature during the remainder of 1995. There can be no
assurance, however, that these efforts to obtain alternative financing or debt
extensions will be successful.
The Company expects a modest increase in cash flow from property operations
during the remainder of 1995. This increase in cash flow is
16
<PAGE> 17
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Liquidity and Capital Resources (Continued)
expected to be derived from improved operations of the Kansas City Holiday Inn,
which the Company acquired in 1993, due to major rehabilitation completed in
1994 and from the operations of the Denver Merchandise Mart and Inn at the Mart
(collectively the "Mart") which were obtained in the second quarter of 1994.
The Company expects that funds from existing cash sources, collections on
mortgage notes receivable, sales or refinancing of real estate and/or mortgage
notes receivable, and borrowings against its investments in marketable equity
securities and notes receivable will be sufficient to meet the cash
requirements associated with its current and anticipated level of operations,
maturing debt obligations and existing commitments in the foreseeable future.
To the extent that the Company's liquidity permits, the Company may make equity
investments in real estate, additional investments in marketable equity
securities and fund or acquire mortgage notes.
Notes Receivable. The Company has received $1.2 million in principal payments
in the six months ended June 30, 1995, including an $860,000 note payoff at its
maturity in February 1995.
Loans Payable. In April 1995, the Company refinanced the mortgage debt secured
by the Kansas City Holiday Inn. The Company received net cash of $485,000
after the payoff of the existing $2.9 million mortgage and the payment of
closing costs associated with the refinancing. The Company has the ability to
increase the principal balance of the new mortgage by an additional $1.0
million if certain performance criteria are met. The Company expects to
receive the additional $1.0 million in September or October 1995. See NOTE 7.
"NOTES AND INTEREST PAYABLE."
In May 1995, the Company borrowed $15.0 million under a term loan to purchase
four tracts of partially developed land totaling 74.9 acres in Irving, Texas.
After purchase of land and the payment of related closing costs the Company
received $210,000 net cash. See NOTE 3. "REAL ESTATE." In June 1995, the
Company borrowed an additional $3.0 million under the term loan. The
additional $3.0 million is due December 31, 1995.
The Company has margin arrangements with various brokerage firms which provide
for borrowing up to 50% of the market value of marketable equity securities.
The borrowing under such margin arrangements are secured by such equity
securities and bear interest rates ranging from 6.75% to 11% per annum. Margin
borrowing totaled $35.0 million at June 30, 1995, an increase of $8.6 million
from December 31, 1994.
Equity Investments. The Company has investments in shares of three Real Estate
Investment Trusts (the "Trusts") having the same advisor as the Company, and
units of limited partner interest in National Realty, L.P. ("NRLP"). It is
anticipated that additional equity securities of the Trusts, Continental
Mortgage and Equity Trust ("CMET"), Income Opportunity Realty Trust ("IORT")
and Transcontinental Realty Investors,
17
<PAGE> 18
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Liquidity and Capital Resources (Continued)
Inc. ("TCI"), and of NRLP will be acquired in the future through open-market
and negotiated transactions to the extent the Company's liquidity permits.
Equity securities of the Trusts and NRLP held by the Company may be deemed to
be "restricted securities" under Rule 144 of the Securities Act of 1933
("Securities Act"). Accordingly, the Company may be unable to sell such equity
securities other than in a registered public offering or pursuant to an
exemption under the Securities Act for a period of two years after they are
acquired. Such restrictions may reduce the Company's ability to realize the
full fair market value of such investments if the Company attempted to dispose
of such securities in a short period of time.
The Company's cash flow from these investments is dependent on the ability of
each of the entities to make distributions. TCI's distribution policy provides
for an annual determination of distributions after year end, and then only to
the extent necessary to retain its status as a REIT for federal tax purposes.
The Company expects to receive no distributions from TCI in 1995. CMET, IORT
and NRLP pay regular quarterly distributions. The Company has received
distributions totaling $829,000 in the first six months of 1995 from CMET, IORT
and NRLP.
On a quarterly basis, the Company's management reviews the carrying value of
the Company's mortgage notes receivable, properties held for investment and
properties held for sale. Generally accepted accounting principles require that
the carrying amount of such assets cannot exceed the lower of their respective
carrying amounts or estimated net realizable value. In an instance where the
estimated net realizable value is less than the carrying amount at the time of
evaluation, a provision for loss is recorded by a charge against earnings. The
estimate of net realizable value of a mortgage note receivable is based on
management's review and evaluation of the collateral property securing such
note. The review generally includes selective property inspections, a review
of the property's current rents compared to market rents, a review of the
property's expenses, a review of the maintenance requirements, discussions with
the manager of the property and a review of the surrounding area.
Commitments and Contingencies
Syntek Asset Management, L.P. ("SAMLP") serves as the general partner of NRLP.
The Company owns a 76.8% limited partner interest in SAMLP. The Company also
owns approximately 51% of the outstanding units of NRLP. In January 1995,
NRLP, SAMLP, the NRLP oversight committee and William H. Elliott executed an
Implementation Agreement which provides for the nomination of an entity
controlled by Mr. Elliott to stand for election as the successor general
partner of NRLP and for the resolution of all related matters under a prior
class action settlement. The Implementation Agreement was subject to receipt
of a notice from Mr.
18
<PAGE> 19
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Commitments and Contingencies (Continued)
Elliott that he consented to stand for election as the successor general
partner. On April 20, 1995, Mr. Elliott formally notified the parties that he
would stand for such election.
On June 29, 1995, the Implementation Agreement was submitted to the Supervising
Judge for tentative approval and approval of the notice to be sent to the
original class members. As of August 10, 1995, the tentative approval of the
Supervising Judge had not been obtained and therefore the class members had not
been notified. Upon final approval by the Supervising Judge, the proposal to
elect the successor general partner will be submitted to the NRLP unitholders
for a vote. In addition, the unitholders will vote upon amendments to NRLP's
partnership agreement which relate to the proposed compensation of the
successor general partner and other related matters.
Upon approval by the unitholders, SAMLP shall withdraw as general partner and
the successor general partner shall take office. If the required approvals are
obtained, it is anticipated that the successor general partner may be elected
and take office during the first quarter of 1996.
The Implementation Agreement provides that SAMLP, and its affiliates owning
units in NRLP (including the Company), shall not vote to remove the successor
general partner, except for removal with cause, for a period of thirty months
from the date the successor general partner takes office. In addition, the
Supervising Judge shall make a determination of any amounts which NRLP may owe
to SAMLP upon SAMLP's withdrawal as general partner and any amounts which SAMLP
or its affiliates may owe to NRLP. Any amounts which NRLP may be determined to
owe to SAMLP may be paid over a period of time to be determined by the parties
on terms which shall not hinder NRLP's ability to meet its other financial
obligations.
Upon the election and taking office of the successor general partner, the class
action settlement and the NRLP oversight committee shall be terminated. If the
successor general partner nominee is not elected, the existing settlement shall
remain in full force and effect and all of the provisions of the Implementation
Agreement shall be voided.
On April 24, 1995, the Company's Board of Directors approved the Company's
entering into a comfort and indemnification letter whereby the Company would
agree to indemnify Mr. Elliott and any entity controlled by Mr. Elliott which
is elected to serve as the successor general partner of NRLP and NOLP. Such
indemnification will stand behind any indemnification to which Mr. Elliott or
any entity controlled by Mr. Elliott may be entitled to under the NRLP
partnership agreement.
Results of Operations
For the three months ended June 30, 1995, the Company reported a net loss of
$3.4 million, compared to a net loss of $1.2 million for the
19
<PAGE> 20
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Results of Operations (Continued)
three months ended June 30, 1994. For the six months ended June 30, 1995, the
Company had a net loss of $4.3 million compared with a net loss of $2.5 million
for the six months ended June 30, 1994. The primary factors contributing to
the Company's net loss are discussed in the following paragraphs.
Net rental income (rents less property operating expenses) decreased from $1.2
million and $2.0 million for the three and six months ended June 30, 1994 to
$351,000 and $1.9 million for the three and six months ended June 30, 1995.
The decreases are principally due to the Company's sale of four apartment
complexes in November 1994 and an additional apartment complex in February 1995
offset in part by improved performance at the Kansas City Holiday Inn and the
Mart.
Interest income from mortgage notes receivable increased from $1.1 million and
$1.8 million for the three and six months ended June 30, 1994 to $1.3 million
and $2.6 million for the three and six months ended June 30, 1995. The
increase is primarily due to the collection of interest on the note receivable
secured by the Continental Hotel and Casino throughout the entire first six
months of 1995 compared to the note's nonperformance through May of 1994.
Equity in loss of investees increased from a loss of $545,000 and $1.1 million
for the three and six months ended June 30, 1994 to a loss of $1.7 million and
$3.0 million for the three and six months ended June 30, 1995. The increase in
equity losses is attributable to the Company's continued increase in equity
ownership in each of CMET, IORT, TCI and NRLP, increasing the Company's
proportionate share of equity in the results of operations of each such entity.
Combined operating losses of the four entities increased from a loss of $3.4
million and $4.7 million for the three and six months months ended June 30,
1994 to an operating loss of $5.5 million and $8.3 million for the three and
six months ended June 30, 1995.
Other income increased from $353,000 for the three months ended June 30, 1994
to $611,000 for the three months ended June 30, 1995 and decreased from
$718,000 for the six months ended June 30, 1994 to a loss of $39,000 for the
six months ended June 30, 1995. The increase in other income in the three
months ended June 30, 1995 is primarily due to a $335,000 increase in dividend
income received on the Company's trading portfolio and a $98,000 positive
market value adjustment compared to a $16,000 market write down for the three
months ended June 30, 1994, and $233,000 recognized in preferred returns on a
50% partnership interest. The six months decrease is primarily due to a net
$899,000 unrealized loss in the Company's trading portfolio in first quarter of
1995 compared to a net $83,000 loss for the six months ended June 1994 and a
$155,000 decrease in gains on the sale of the Company's trading portfolio.
These decreases were offset in part by a $523,000 increase in dividend income
on the Company's trading portfolio. See NOTE 6. "MARKETABLE EQUITY SECURITIES
- - TRADING PORTFOLIO."
20
<PAGE> 21
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Results of Operations (Continued)
Interest expense was comparable at $2.0 million for the three months ended June
30, 1994 and 1995 and increased from $3.7 million for the six months ended June
30, 1994 to $3.8 million for the six months ended June 30, 1995. The six month
increase is primarily attributable to debt assumed by the Company on obtaining
the Mart in March 31, 1994 and a $12.9 million increase in margin borrowing
from June 30, 1994.
Depreciation and amortization was comparable at $400,000 for the three months
ended June 30, 1994 and increased from $756,000 for the six months ended June
30, 1994 to $842,000 for the six months ended June 30, 1995. The six month
increase is primarily due to the Mart acquisition in March 1994 offset in part
by the sale of four apartment complexes in November 1994 and a fifth apartment
complex in February 1995.
Advisory and mortgage servicing fees decreased from of $305,000 and $625,000
for the three and six months ended June 30, 1994 to $239,000 and $543,000 for
the three and six months ended June 30, 1995. The decreases are primarily
attributable to the Company's decrease in gross assets, primarily as a result
of the apartment complex sales discussed above.
General and administrative expenses increased from $406,000 and $1.0 million
for the three and six months ended June 30, 1994 to $667,000 and $1.2 million
for the three and six months ended June 30, 1995. The three and six month
increases are primarily attributable to consulting fees incurred in connection
with the Company's notes receivable and hotels.
Minority interest expense increased from $103,000 and $158,000 for the three
and six months ended June 30, 1994 to $671,000 for both the three and six
months ended June 30, 1995. The increases are due to final settlement of the
Company's investment in a joint venture. See NOTE 3. "REAL ESTATE."
Gains on sale of real estate were $24,000 and $948,000 for the three and six
months ended June 30, 1995 compared with $57,000 and $233,000 for the three and
six months ended June 30, 1994. In the three months ended June 30, 1995, the
Company recognized a $24,000 gain on the sale of the final four lots in its
Denton Road project. The first six months of 1995 include an additional
$924,000 gain on the sale of the Boulevard Villas Apartments in February. The
1994 gains relate to the sale of residential lots.
The extraordinary gain of $327,000 for the six months ended June 30, 1995 is
the Company's share of an equity investee's extraordinary gain from the early
payoff of debt. The extraordinary gain for the six months ended June 30, 1994
of $50,000 is due to the forgiveness of a portion of a first mortgage as the
result of the early payoff of a second mortgage.
21
<PAGE> 22
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Environmental Matters
Under various federal, state and local environmental laws, ordinances and
regulations, the Company may be potentially liable for removal or remediation
costs, as well as certain other potential costs relating to hazardous or toxic
substances (including governmental fines and injuries to persons and property)
where property-level managers have arranged for the removal, disposal or
treatment of hazardous or toxic substances. In addition, certain environmental
laws impose liability for release of asbestos-containing materials into the
air, and third parties may seek recovery from the Company for personal injury
associated with such materials.
The Company's management is not aware of any environmental liability relating
to the above matters that would have a material adverse effect on the Company's
business, assets or results of operations.
Inflation
The effects of inflation on the Company's operations are not quantifiable.
Revenues from property operations generally fluctuate proportionately with
inflationary increases and decreases in housing costs. Fluctuations in the
rate of inflation also affect the sales values of properties and,
correspondingly, the ultimate gains to be realized by the Company from property
sales. Moreover, the Company frequently lends at fixed rates while it borrows
at floating rates. In periods of falling interest rates, this could result in
the Company's mortgage loan portfolio yielding above-market rates while the
cost of borrowing decreases.
Recent Accounting Pronouncement
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 121 - "Accounting for the
Impairment of Long-lived Assets and for Long-lived Assets to Be Disposed Of".
The statement requires that long-lived assets be considered impaired "...if the
sum of the expected future cash flows (undiscounted and without interest
charges) is less than the carrying amount of the asset." If impairment exists,
an impairment loss shall be recognized, by a charge against earnings, equal to
"...the amount by which the carrying amount of the asset exceeds the fair value
of the asset." If impairment of a long-lived asset is recognized, the carrying
amount of the asset shall be reduced by the amount of the impairment, shall be
accounted for as the asset's "new cost" and such new cost shall be depreciated
over the asset's remaining useful life.
SFAS No. 121 further requires that long-lived assets held for sale "...be
reported at the lower of carrying amount or fair value less cost to sell." If
a reduction in a held for sale asset's carrying amount to fair value less cost
to sell is required, a provision for loss shall be recognized by a charge
against earnings. Subsequent revisions, either upward or downward, to a held
for sale asset's fair value less cost to
22
<PAGE> 23
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Recent Accounting Pronouncement (Continued)
sell shall be recorded as an adjustment to the asset's carrying amount, but not
in excess of the asset's carrying amount when originally classified or held for
sale. A corresponding charge or credit to earnings is to be recognized.
Long- lived assets held for sale are not to be depreciated. SFAS No. 121 is
effective for fiscal years beginning after December 15, 1995.
The Company's management has not fully evaluated the effects of adopting SFAS
No. 121, but expects that the Company's policy with regard to the
classification of revenue producing properties as assets held for sale prior to
entering into a firm contract of sale, will require reevaluation.
The Company's management estimates that if the Company had adopted SFAS No. 121
effective January 1, 1995, its depreciation and net loss in the three and six
months ended June 30, 1995 would not have been affected and that a provision
for loss for either impairment of its properties held for investment or for a
decline in estimated fair value less cost to sell of its properties held for
sale would not have been required in either period.
_____________________________________________
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- ---------------------------------------------------------
<S> <C>
27.0 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K as follows:
None.
23
<PAGE> 24
SIGNATURE PAGE
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.
AMERICAN REALTY TRUST, INC.
Date: August , 1995 By: /s/ Karl L. Blaha
------------------------- -----------------------------------
Karl L. Blaha
President
Date: August , 1995 By: /s/ Thomas A. Holland
-------------------------- -----------------------------------
Thomas A. Holland
Senior Vice President and
Chief Accounting Officer
24
<PAGE> 25
AMERICAN REALTY TRUST, INC.
EXHIBITS TO
QUARTERLY REPORT ON FORM 10-Q
For the Quarter ended June 30, 1995
<TABLE>
<CAPTION>
Exhibit Page
Number Description Number
- ------- --------------------------------------------------- ------
<S> <C> <C>
27.0 Financial Data Schedule 26
</TABLE>
25
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 431
<SECURITIES> 7,302
<RECEIVABLES> 49,332
<ALLOWANCES> 8,201
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 64,471
<DEPRECIATION> 7,095
<TOTAL-ASSETS> 151,512
<CURRENT-LIABILITIES> 0
<BONDS> 54,678
<COMMON> 29
0
0
<OTHER-SE> 51,562
<TOTAL-LIABILITY-AND-EQUITY> 151,512
<SALES> 0
<TOTAL-REVENUES> 9,091
<CGS> 0
<TOTAL-COSTS> 7,212
<OTHER-EXPENSES> 842
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,756
<INCOME-PRETAX> (5,578)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,578)
<DISCONTINUED> 0
<EXTRAORDINARY> 327
<CHANGES> 0
<NET-INCOME> (4,303)
<EPS-PRIMARY> (1.47)
<EPS-DILUTED> (1.47)
</TABLE>
