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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED JUNE 30, 1996
Commission File Number 1-9948
AMERICAN REALTY TRUST, INC.
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(Exact Name of Registrant as Specified in Its Charter)
Georgia 54-0697989
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
10670 North Central Expressway, Suite 300, Dallas, Texas 75231
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(Address of Principal Executive Offices) (Zip Code)
(214) 692-4700
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(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
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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 6,740,328
- ---------------------------- ------------------------------
(Class) (Outstanding at July 30, 1996)
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This Form 10-Q/A amends the Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1996 as follows:
ITEM 1. FINANCIAL STATEMENTS - pages 4 and 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - pages 19 and 26
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AMERICAN REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
---------------------------------- ------------------------------------
1996 1995 1996 1995
-------------- -------------- --------------- --------------
(dollars in thousands, except per share)
<S> <C> <C> <C> <C>
Income
Rents....................... $ 4,084 $ 3,684 $ 9,394 $ 9,091
Interest.................... 1,135 1,257 2,273 2,580
Other....................... 127 611 469 (39)
-------------- -------------- --------------- --------------
5,346 5,552 12,136 11,632
-------------- -------------- --------------- --------------
Expenses
Property operations......... 3,856 3,333 7,566 7,212
Interest.................... 3,270 1,999 6,416 3,756
Advisory and servicing fees
to affiliate.............. 381 239 701 543
General and administrative.. 595 667 1,237 1,227
Depreciation and
amortization.............. 453 402 890 842
Equity in (losses) of
real estate investees..... 1,530 1,699 2,420 2,959
Minority interest........... - 671 - 671
-------------- -------------- --------------- --------------
10,085 9,010 19,230 17,210
-------------- -------------- --------------- --------------
(Loss) before gain on sale of
real estate and extraordinary
gain........................ (4,739) (3,458) (7,094) (5,578)
Gain on sale of real estate... 2,348 24 4,475 948
-------------- -------------- --------------- --------------
Loss before extraordinary gain (2,391) (3,434) (2,619) (4,630)
Extraordinary gain............ 247 12 260 327
-------------- -------------- --------------- --------------
Net (loss).................... (2,144) (3,422) (2,359) (4,303)
Preferred dividend requirement (17) - (17) -
-------------- -------------- --------------- --------------
Net (loss) applicable to
Common shares............... $ (2,161) $ (3,422) $ (2,376) $ (4,303)
============== ============== =============== ==============
Earnings per share
(Loss) before extraordinary
gain...................... $ (.37) $ (.59) $ (.42) $ (.79)
Extraordinary gain.......... .04 - .04 .06
-------------- -------------- --------------- --------------
Net (loss) applicable to
Common shares............. $ (.33) $ (.59) $ (.38) $ (.73)
============== ============== =============== ==============
Weighted average Common shares
used in computing earnings
per share................... 6,615,317 5,858,328 6,236,823 5,858,328
============== ============== =============== ==============
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
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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, 1996 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, 1996 June 30, 1996 June 30, 1996 June 30, 1996
- -------- ---------------- ---------------- ------------------ ------------------
<S> <C> <C> <C> <C>
NRLP 52.2% $ 10,838 $ * $ 36,004
CMET 38.9 13,971 30,503 16,301
IORI 27.5 2,706 6,272 4,305
TCI 29.1 8,818 25,214 11,823
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36,333 $ 68,433
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General partner interest in
NRLP and NOLP 7,130
Other equity investees 10,369
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$ 53,832
=============
</TABLE>
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* At June 30, 1996, NRLP reported a deficit partners' capital. The
Company's share of NRLP's revaluation equity at December 31, 1995,
was $161.5 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, 1995.
The difference between the carrying value of the Company's investment and the
equivalent investee book value is being amortized over the life of the
properties held by each investee.
The Company's management continues to believe that the market value of each of
the REITs and NRLP undervalues their assets and the Company may, therefore,
continue to increase its ownership in these entities in 1996.
Set forth below is summarized results of operations for the Company's
equity investees for the six months ended June 30, 1996:
Equity investees owned over 50%:
<TABLE>
<S> <C> <C>
Revenues.................................................... $ 60,367
Property operating expenses................................. (38,591)
Depreciation................................................ (5,262)
Interest expense............................................ (17,302)
--------
Net (loss).................................................. $ (788)
========
</TABLE>
The Company's share of over 50% owned equity investees' losses was $215,000 for
the six months ended June 30, 1996.
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AMERICAN REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
NOTE 5. INVESTMENT IN REAL ESTATE ENTITIES (Continued)
Equity investees owned less than 50%:
<TABLE>
<S> <C>
Revenues......................................................... $ 49,458
Equity in (loss) of partnerships................................. (210)
Property operating expenses...................................... (34,069)
Depreciation..................................................... (6,986)
Interest expense................................................. (14,637)
Provision for loss............................................... (1,579)
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(Loss) before gains on sale of real estate and extraordinary
gains......................................................... (8,023)
Gain on sale of real estate...................................... 7,819
Extraordinary gain............................................... 711
--------
Net income....................................................... $ 507
========
</TABLE>
The Company's share of less than 50% owned equity investees' loss before gain
on sale of real estate and extraordinary gains was $2.2 million for the six
months ended June 30, 1996. The Company's share of equity investees gains on
sale of real estate and extraordinary gains was $3.3 million and $260,000,
respectively, for the six months ended June 30, 1996.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Liquidity and Capital Resources (Continued)
Also in May 1996, the Company purchased a 2,271 square foot single family
residence in Dallas, Texas for $266,000 in cash.
In June 1996, the Company purchased 442 acres of partially developed land in
Denver, Colorado for $8.5 million. In connection with the acquisition, the
Company obtained purchase money financing for $7.5 million and issued 15,000
shares of the Company's Series C 10% cumulative preferred stock with an
aggregate liquidation value of $1.5 million. The excess financing proceeds of
$500,000 was applied to the various closing costs associated with the
acquisition in addition to $272,000 of such costs paid by the Company.
Also in June 1996, the Company sold a tract of land that was leased under a
long-term land lease for $120,000 in cash.
In July 1996, a newly formed limited partnership of which the Company is the
general partner acquired 580 acres of land in Collin County, Texas for $5.7
million in cash. The Company paid $100,000 in cash with the remaining $5.6
million being paid by the limited partner.
In October 1995, the Company purchased 92.6 acres of partially developed land
in Las Colinas, Texas. In February 1996, the Company entered into a contract
to sale 72.5 of the 92.6 acres for $12.9 million in cash. In July 1996, the
Company closed the first phase of the contract selling 32.3 acres for $4.9
million in cash. In accordance with the provisions of the term loan, the
Company applied the $4.7 million net proceeds to paydown the term loan in
exchange for that lender's partial release of its collateral interest in such
land.
On June 12, 1996, the Company's Board of Directors announced the resumption of
dividend payments at the initial rate of $.10 per share. The distribution,
totaling 674,000, was payable on July 8, 1996 to stockholders of record on June
21, 1996.
Also on June 12, 1996, the Company announced the redemption of the share
purchase rights for $.01 per right. The redemption price, totaling $101,000,
was also paid on July 8, 1996 to stockholders of record on June 21, 1996.
The Company expects that funds from existing cash resources, collections on
mortgage notes receivable, sales or refinancing of real estate and/or mortgage
notes receivable, and borrowings against its investments inmarketable equity
securities, mortgage notes receivable and to the extent available, borrowings
from the Company's advisor, will be sufficient to meet the cash requirements
associated with the Company's current and anticipated level of operations,
maturing debt obligations and existing commitments. To the extent that the
Company's liquidity permits or financing sources are available, the Company may
make investments in real estate, primarily investments in partially developed
and/or raw land, continue making additional investments in real estate entities
and marketable equity securities and fund or acquire mortgage notes.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Liquidity and Capital Resources (Continued)
The Company expects that it will be necessary for it to sell $8.9 million, $6.0
million and $10.3 million of such land during the remainder of 1996 and in each
of the next two years, respectively, to satisfy the debt on its land holdings
as they mature. If the Company is unable to sell at least the minimum amount
of land to satisfy the debt obligations on such land as it matures, the
Company, if it was not able to extend such debt, would either sell other of its
assets to pay such debt or return the property to the lender.
19A
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Recent Accounting Pronouncement (Continued)
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 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. The Company adopted SFAS No. 121 effective
January 1, 1996.
The adoption of SFAS No. 121 had no effect on the Company's net loss for the
six months ended June 30, 1996, as the Company's one depreciable asset
classified as held for sale is fully depreciated and none of the Company's
other long lived assets are considered to be impaired.
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PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
Effective May 8, 1996, the Company filed Articles of Amendment to its Articles
of Incorporation creating and designating a Series B 10% Cumulative Preferred
Stock, par value $2.00 per share, out of the special class of stock, $2.00 par
value per share, of the Company, which series consists of a maximum of 4,000
shares, all of which were issued April 4, 1996. See NOTE 9. "PREFERRED STOCK"
of NOTES TO CONSOLIDATED FINANCIAL STATEMENTS under ITEM 1. FINANCIAL
STATEMENTS. Pursuant to the terms of the Articles of Amendment creating and
designating such series, so long as any shares of the Series B 10% Cumulative
Preferred Stock remain outstanding, no dividend may be declared or paid and no
other distribution may be made on the Common Stock of the Company or any other
shares junior to the Series B 10% Cumulative Preferred Stock, except in shares
junior to the Series B 10% Cumulative Preferred Stock, unless all accumulated
dividends on the Series B 10% Cumulative Preferred Stock have been paid. Such
provision might be considered to be a limitation or qualification on another
class of securities.
Effective June 5, 1996, the Company filed an Articles of Amendment to its
Articles of Incorporation creating and designating a Series C 10% Cumulative
Preferred Stock, par value $2.00 per share, out of the special class of stock,
$2.00 par value per share, of the Company, which
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