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 quarter ended September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
Commission File Number 33-22976-NY
INTERVEST CORPORATION OF NEW YORK
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
New York 13-3415815
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10 Rockefeller Plaza, New York, New York 10020-1903
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 757-7300
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 .
Indicate the number of shares outstanding of each of the Registrant's classes of
Common Stock as of the latest practicable date.
Class of Common Stock Outstanding at September 30, 1998
- --------------------- ---------------------------------
Common Stock: No Par Value 31.84 Shares
Class B Stock: No Par Value 15.89 Shares
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
- -----------------------------
Results for the three months and for the nine months ended September 30, 1998
and 1997 include, in the opinion of management, all adjustments (consisting only
of normal recurring accruals) necessary for a fair presentation of the results
for such interim periods. Results for the three months and for the nine months
ended September 30, 1998 and 1997 are not necessarily indicative of the results
for the full years.
<PAGE>
INTERVEST CORPORATION OF NEW YORK AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, December 31
1998 1997
-------------------------
ASSETS
Cash and cash equivalents $16,428,000 $15,596,000
Mortgages receivable, including due from affiliates
of $3,950,000 and $6,250,000 (Notes 2, 4 and 5) 75,823,000 74,316,000
Deferred debenture offering costs, net of accumulated
amortization of $3,346,000 and $2,675,000 (Note 2) 3,599,000 4,270,000
Other assets (Note 7) 1,372,000 1,389,000
---------- ----------
TOTAL ASSETS $97,222,000 $95,571,000
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Account payable and accrued expenses $ 391,000 $ 114,000
Mortgage escrow deposits 2,117,000 1,617,000
Subordinated debentures payable (Note 3) 77,000,000 78,000,000
Debenture interest payable at maturity (Note 3) 5,953,000 4,966,000
Debenture mortgage interest and fees 311,000 353,000
---------- ----------
TOTAL LIABILITIES 85,772,000 85,050,000
---------- ----------
Commitments and other matters (Note 6)
STOCKHOLDERS' EQUITY
Common stock, no par value; authorized 200 shares;
issued and outstanding 32 shares 2,000,000 2,000,000
Class B stock, no par value; authorized 100 shares;
issued and outstanding 16 shares 100,000
Additional paid-in capital 3,509,000 3,509,000
Retained earnings 5,841,000 5,012,000
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 11,450,000 10,521,000
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $97,222,000 $95,571,000
========== ==========
See notes to financial statements
<PAGE>
INTERVEST CORPORATION OF NEW YORK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
AND RETAINED EARNINGS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1998 1997 1998 1997
------------------ -----------------
(Unaudited) (Unaudited)
REVENUE
<S> <C> <C> <C> <C>
Interest income
Affiliates $ 219,000 $ 173,000 $ 606,000 $ 520,000
Others 2,551,000 2,391,000 7,777,000 6,964,000
--------- --------- --------- ---------
Total 2,770,000 2,564,000 8,383,000 7,484,000
Other income (Note 5) 227,000 96,000 527,000 324,000
Gain on early repayment of Discounted
mortgages receivable (Note 4) 142,000 13,000 279,000 216,000
--------- --------- --------- ---------
3,139,000 2,673,000 9,189,000 8,024,000
--------- --------- --------- ---------
EXPENSES
Interest 2,147,000 2,096,000 6,416,000 6,060,000
General and administrative (Note 5) 206,000 231,000 570,000 566,000
Amortization of deferred debenture offering
costs (Note 2) 223,000 224,000 671,000 734,000
--------- --------- --------- ---------
2,576,000 2,551,000 7,657,000 7,360,000
--------- --------- --------- ---------
Income before income taxes 563,000 122,000 1,532,000 664,000
Provision for income taxes (Note 7) 259,000 56,000 703,000 302,000
--------- --------- --------- ---------
NET INCOME 304,000 66,000 829,000 362,000
Retained earnings - beginning 5,537,000 4,862,000 5,012,000 4,566,000
--------- --------- --------- ---------
RETAINED EARNINGS - END $5,841,000 $4,928,000 $5,841,000 $4,928,000
========= ========= ========= =========
</TABLE>
See notes to financial statements
<PAGE>
INTERVEST CORPORATION OF NEW YORK AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1998 1997
---- ----
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $ 829,000 $ 362,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization of discount on mortgages receivable (442,000) (318,000)
Amortization of deferred debenture offering costs 671,000 734,000
Gain on early repayment of discounted mortgages (279,000) (216,000)
Changes inoperating assets and liabilities:
Other assets 17,000 (105,000)
Accounts payable and accrued liabilities 277,000 (303,000)
Mortgage escrow deposits 500,000 (771,000)
Debenture interst payable at maturity 987,000 1,015,000
Deferred mortgage interest and fees (42,000) (61,000)
---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,518,000 337,000
---------- ----------
INVESTING ACTIVITIES
Collection of mortgages receivable 35,132,000 23,026,000
Mortgages receivable acquired
Properties owned by affiliates (2,000,000)
Properties owned by others (33,918,000) (21,100,000)
---------- ----------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (786,000) 1,926,000
---------- ----------
FINANCIING ACTIVITIES
Proceeds from issuance of Class B Stock 100,000
Proceeds from subordinated debenture offerings 8,500,000
Payment of debenture offering costs (751,000)
Principal payments of subordinated debentures (1,000,000) (6,000,000)
---------- ----------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (900,000) 1,749,000
---------- ----------
INCREASE IN CASH AND CASH EQUIVALENTS 832,000 4,012,000
Cash and cash equivalents at beginning of period 15,596,000 16,911,000
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 16,428,000 $ 20,923,000
========== ==========
</TABLE>
See notes to financial statements
<PAGE>
INTERVEST CORPORATION OF NEW YORK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited with Respect to the Three Month and
Nine Month Periods Ended September 30, 1998 and 1997)
(NOTE 1) - The Company:
- -----------------------
Intervest Corporation of New York (the "Company") is engaged in the real estate
business, which includes the acquisition and purchase of real estate mortgage
loans.
(NOTE 2) - Significant Accounting Policies:
- -------------------------------------------
(a) Consolidation Policy:
---------------------
The financial statements include the accounts of all subsidiaries.
Material intercompany items are eliminated in consolidation.
(b) Mortgage Loans:
---------------
Loans are stated at their outstanding principal balances, net of any
deferred fees or costs on originated loans and unamortized discounts on
purchased loans. Interest income is accrued on the unpaid principal balance.
Discounts are amortized to income over the life of the related receivables using
the constant interest method. Loan origination fees net of certain direct
origination costs are deferred and recognized as an adjustment of the yield of
the related loans.
(c) Allowance for Losses:
---------------------
An allowance for loss related to loans that are impaired is based on
discounted cash flows using the loan's initial effective interest rate or the
fair value of the collateral. Management's periodic evaluation of the need for,
or adequacy of the allowance is based on the Company's past loan loss
experience, known and inherent risks in the portfolio, adverse situations that
may affect the borrower's ability to repay (including the timing of future
payments), the estimated value of the underlying collateral and other relevant
factors. This evaluation is inherently subjective as it requires material
estimates including the amounts and timing of future cash flows expected to be
received on any impaired loans that may be susceptible to significant change.
For financial reporting purposes mortgages are deemed to be delinquent when
payment of either principal or interest is more than 90 days past due.
(d) Deferred debenture offering costs:
----------------------------------
Costs relating to offerings of debentures are amortized over the terms
of the debentures based on serial maturities. Deferred debenture offering costs
consist primarily of underwriters commissions.
<PAGE>
INTERVEST CORPORATION OF NEW YORK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited with Respect to the Three Month and
Nine Month Periods Ended September 30, 1998 and 1997)
(NOTE 2) - Significant Accounting Policies: (continued)
- ------------------------------------------
(e) Statement of cash flows:
------------------------
For purposes of the statement of cash flows, the Company considers all
highly liquid instruments (principally commercial paper) purchased with an
original maturity of three months or less to be cash equivalents. Interest and
income taxes were paid as follows:
Nine Months Ended September 30, Interest Income Taxes
- ------------------------------- -------- ------------
1998 $5,430,000 $417,000
1997 5,045,000 736,000
(f) Estimated fair value of financial instruments:
----------------------------------------------
The Company considers the carrying amounts presented for mortgages
receivable and subordinated debentures payable on the consolidated balance
sheets to be reasonable approximations of fair value. The Company's variable or
floating interest rates on large portions of its receivables and payables
approximate those, which would prevail in current market transactions.
Considerable judgement is necessarily required in interpreting market data to
develop the estimates of fair value, and accordingly, the estimates are not
necessarily indicative of the amounts that the Company could realize in a
current market transaction.
(g) Use of estimates:
-----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(h) Concentration of credit risk:
-----------------------------
(1) The Company places its temporary cash investments with higher
credit-quality financial institutions, including a bank, which is an affiliate
of the shareholders of the Company and in governmental obligations. Such
investments are generally in excess of the FDIC insurance limit. The Company has
not experienced any losses from such investments.
<PAGE>
INTERVEST CORPORATION OF NEW YORK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited with Respect to the Three Month and
Nine Month Periods Ended September 30, 1998 and 1997)
(NOTE 2) - Significant Accounting Policies: (continued)
- ------------------------------------------
(2) The Company's mortgage portfolio includes mortgages on multi-family
residential properties in the New York City area, most of which are subject to
applicable rent control and rent stabilization statutes and regulations. In both
cases, any increases in rent are subject to specific limitations. As such,
properties of the nature of those constituting the most significant portion of
the Company's mortgage portfolio are not affected by the general movement of
real estate values in the same manner as other income-producing properties. The
rental housing market in New York City remains stable and the Company expects
that such properties will continue to appreciate in value with little or no
reduction in occupancy rates.
(NOTE 3) - Subordinated Debentures Payable:
- -------------------------------------------
The Company's Registered Floating Rate Redeemable Debentures consist of the
following:
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- ------------
<S> <C> <C>
Series 5/13/91, interest at 2% above prime $ 6,000,000 $ 6,000,000
Series 2/20/92, interest at 2% above prime 4,500,000 4,500,000
Series 6/29/92, interest at 2% above prime 7,000,000 7,000,000
Series 9/13/93, interest at 2% above prime 8,000,000 8,000,000
Series 1/28/94, interest at 2% above prime 4,500,000 4,500,000
Series 10/28/94, interest at 2% above prime 4,500,000 4,500,000
Series 5/12/95, interest at 2% above prime 9,000,000 9,000,000
Series 10/19/95, interest at 2% above prime 9,000,000 9,000,000
Series 5/10/96, interest at 1% above prime - 1,000,000
Series 5/10/96, interest at 2% above prime 10,000,000 10,000,000
Series 10/15/96, interest at 1% above prime 500,000 500,000
Series 10/15/96, interest at 2% above prime 5,500,000 5,500,000
Series 4/30/97, interest at 9% 500,000 500,000
Series 4/30/97, interest at 1% above prime 8,000,000 8,000,000
----------- -----------
$77,000,000 $78,000,000
=========== ===========
</TABLE>
"Prime" refers to the prime rate of Chase Manhattan Bank.
<PAGE>
INTERVEST CORPORATION OF NEW YORK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited with Respect to the Three Month and
Nine Month Periods Ended September 30, 1998 and 1997)
(NOTE 3) - Subordinated Debentures Payable: (continued)
- ------------------------------------------
Prime was 8 1/4% on September 30, 1998 and 8 1/2% on December 31, 1997. Minimum
interest is 9 1/2% and maximum interest is 15% on Series 5/13/91. Series 2/20/92
has minimum interest of 8% and maximum interest of 14%, Series 6/29/92 has
maximum interest of 14%, Series 9/13/93, 1/28/94, 10/28/94, 5/12/95, 10/19/95,
5/10/96, 10/15/96 and 4/30/97 due October 1, 2005 have maximum interest of 12%.
At September 30, 1998 payment of interest on an aggregate of $12,320,000 of
debentures is deferred until maturity and earns interest at prime. Generally
debenture holders who have deferred receipt of interest may at any time elect to
receive the deferred interest and subsequently receive regular payments of
interest.
The debentures may be redeemed, in whole or in part, at any time at the option
of the Company. For debentures issued after 1996, redemption would generally be
at a premium of 1% or 2% if the redemption is prior to 1999.
The debentures are unsecured and subordinate to all present and future senior
indebtedness, as defined. Maturities of debentures are summarized as follows:
Year Ending December 31, September 30, 1998
------------------------ ------------------
1998 $ - 0 -
1999 11,500,000
2000 7,000,000
2001 8,000,000
2002 4,500,000
Thereafter until 2005 46,000,000
-----------
Total $77,000,000
===========
(NOTE 4) - Mortgages Receivable:
- --------------------------------
Information as to mortgages receivable is summarized as follows:
September 30, 1998 December 31, 1997
------------------ -----------------
First Mortgages ........................ $72,477,000 $68,668,000
Junior Mortgages ....................... 3,950,000 6,534,000
----------- -----------
76,427,000 75,202,000
Less Unearned Discount ................. 604,000 886,000
----------- -----------
Total .................................. $75,823,000 $74,316,000
=========== ===========
<PAGE>
INTERVEST CORPORATION OF NEW YORK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited with Respect to the Three Month and
Nine Month Periods Ended September 30, 1998 and 1997)
(NOTE 4) - Mortgages Receivable: (continued)
- -------------------------------
Interest rates on mortgages range from 6% to 15%. Certain mortgages have been
discounted utilizing rates ranging from 9% to 17%.
During 1998 and 1997 certain mortgages were paid in full prior to their maturity
date. This resulted in the recognition of a gain, which represents the balance
of the unamortized discount applicable to these mortgages.
Maturities of mortgages receivable during the next five years are summarized as
follows:
Year Ending December 31, September 30, 1998
------------------------ ------------------
1998 $11,262,000
1999 40,542,000
2000 5,209,000
2001 773,000
2002 932,000
Thereafter until 2015 17,709,000
-----------
Total $76,427,000
===========
The Company evaluates its portfolio of mortgage loans on an individual basis,
comparing the amount at which the investment is carried to its estimated net
realizable value. At the respective balance sheet dates, no allowances were
required.
(NOTE 5) - Related Party Transactions:
- --------------------------------------
Other income includes $4,000 from affiliates for the nine months ended September
30, 1998 and 1997, respectively.
<PAGE>
INTERVEST CORPORATION OF NEW YORK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited with Respect to the Three Month and
Nine Month Periods Ended September 30, 1998 and 1997)
(NOTE 5) - Related Party Transactions: (continued)
- -------------------------------------
The Company utilizes personnel and other facilities of affiliated entities and
is charged service fees for general and administrative expenses for placing
mortgages, servicing mortgages, and distributing debenture interest checks. Such
fees amounted to $224,000 and $198,000 for the nine months ended September 30,
1998 and 1997, respectively. Management believes these service fees are
reasonable.
(NOTE 6) - Commitments:
- -----------------------
(a) Office lease:
------------
The Company occupies its office space under a lease, which terminates on
September 30, 2004. In addition to minimum rent the Company is required to pay
its proportionate share of increases in the building's real estate taxes and
costs of operation and maintenance as additional rent. Rent expense amounted to
$80,000 and $86,000 for the nine months ended September 30, 1998 and 1997,
respectively.
Future minimum annual rents under the lease are as follows:
Year Ending December 31 September 30, 1998
----------------------- ------------------
1998 $ 43,726
1999 174,902
2000 179,133
2001 191,828
2002 191,828
Thereafter 335,699
----------
Total $1,117,116
==========
The Company shares this space with affiliates, who were charged rent of $53,000
and $46,000 for the nine months ended September 30, 1998 and 1997, respectively.
(b) Employment agreement:
--------------------
Effective as of July 1, 1995, the Company entered into an employment agreement
with its Executive Vice President for a term of ten years at an annual salary in
the present amount of $148,877, which is subject to increase annually by six
percent or by the percentage increase in the consumer price index, if higher. In
the event of the executive's death or disability, one-half of this amount will
continue to be paid for a term as defined in the agreement.
(NOTE 7) - Income Taxes:
- -----------------------
The Company has provided for income taxes in the periods presented based on the
federal, state and city tax rates in effect for these periods.
<PAGE>
INTERVEST CORPORATION OF NEW YORK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited with Respect to the Three Month and
Nine Month Periods Ended September 30, 1998 and 1997)
(NOTE 7) - Income Taxes (continued)
- -----------------------
The provision for income taxes consists of the following components:
Nine Months Ended
September 30,
-----------------
1998 1997
---- ----
Current taxes:
Federal ............................... $ 418,000 $ 202,000
State and local ....................... 278,000 137,000
Deferred taxes:
Federal ............................... 4,000 (22,000)
State and local ....................... 3,000 (15,000)
--------- ---------
Total tax provision ................... $ 703,000 $ 302,000
========= =========
Temporary differences exist between financial accounting and tax reporting,
which result in a net deferred asset, included in other assets, as follows:
September 30, 1998 December 31, 1997
------------------ -----------------
Debenture underwriting commissions ........ $ 4,000 $ 9,000
Deferred fees and interest ................ 47,000 49,500
Discount on mortgages receivable .......... (18,000) (18,500)
-------- --------
Total ..................................... $ 33,000 $ 40,000
======== ========
The amounts of income taxes provided varied from the amounts which would be
"expected" to be provided at the statutory federal income tax rates in effect
for the following reasons:
Nine Months Ended
September 30,
-----------------
1998 1997
---- ----
Tax computed based upon the statutory federal tax rate $ 521,000 $ 227,000
State and local income tax,
net of federal income tax benefit ............... 186,000 82,000
Non-taxable income ................................... (4,000) (7,000)
--------- ---------
Total ................................................ $ 703,000 $ 302,000
========= =========
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
- --------------------------------------------------------------------------------
Liquidity and Capital Resources:
The Company is engaged in the real estate business, including the origination
and purchase of real estate mortgage loans, consisting of first mortgages,
junior mortgages and wraparound mortgage loans. The Company's current investment
policy emphasizes the investment in mortgage loans on income producing
properties. The majority of the Company's loans are expected to mature within
approximately five years.
The Company's liquidity is managed to ensure that sufficient funds are available
to meet maturities of borrowings or to make other investments, taking into
account anticipated cash flows and available sources of funds. The Company's
principal sources of funds have consisted of borrowings (principally through the
issuance of its subordinated debentures), mortgage repayments and cash flow from
ongoing operations. Total stockholder's equity at September 30, 1998 was
$11,450,000, compared with $10,521,000 at December 31, 1997. The Company
considers its current liquidity and additional sources of funds sufficient to
satisfy its outstanding commitments and its maturing liabilities.
Results of Operations:
Three Months Ended September 30, 1998 and 1997
For the three months ended September 30, 1998 interest income was $2,770,000 as
compared to $2,564,000 for the same period a year ago. The increase of $206,000
resulted mainly from an increase in mortgages receivable from $68,307,000 at
September 30, 1997 to $75,823,000 at September 30, 1998, offset in part by lower
interest rates on certain mortgages.
Other income for the 1998 period was $227,000 as compared to $96,000 for the
1997 period. The increase of $131,000 resulted mainly from an increase in
mortgage prepayment premium and mortgage late payment penalties.
Interest expense for the 1998 period was $2,147,000 as compared to $2,096,000
for the 1997 period. The increase of $51,000 resulted mainly from an increase in
long-term obligations.
General and administration expenses for the 1998 period was $206,000 as compared
to $231,000 for the 1997 period. The decrease of $25,000 resulted mainly from a
decrease in advertising expenses.
The provision for income taxes are $259,000 and $56,000 for three months ended
September 30, 1998 and 1997, respectively. These provisions represent 46% of
pretax income for each period.
Nine Months Ended September 30, 1998 and 1997
For the nine months ended September 30, 1998 interest income was $8,383,000 as
compared to $7,484,000 for the same period a year ago. The increase of $899,000
resulted mainly from an increase in mortgages receivable from $68,307,000 at
September 30, 1997 to $75,823,000 at September 30, 1998, offset in part by lower
interest rates on certain mortgages.
Other income for the 1998 period was $527,000 as compared to $324,000 for the
1997 period. The increase of $203,000 resulted mainly from an increase in
prepayment premium and mortgage late payment penalties.
Interest expense for the 1998 period was $6,416,000 as compared to $6,060,000
for the 1997 period. The increase of $356,000 resulted mainly from an increase
in long-term obligations.
<PAGE>
The provision for income taxes are $703,000 and $302,000 for nine months ended
September 30, 1998 and 1997, respectively. These provisions represent 46% and
45% of pretax income for each period.
Since the Company intends to continue to expand its asset base, including its
mortgage portfolio, it is anticipated that its interest income will continue to
grow. To the extent that such growth is funded in reliance upon long-term
obligations, such as the Debentures, interest expense will likewise increase.
Such increase will depend upon the principal amounts of the additional assets or
liabilities, as well as interest rates.
The Company is engaged in the real estate business, its results of operations
are affected by general economic trends in real estate markets, as well as by
trends in the general economy and the movement of interest rates. Since many of
the properties underlying the Company's mortgages are in the New York City area,
the economic condition in that area can also have an impact on the Company's
operations.
The Company's mortgage portfolio includes mortgages on multi-family residential
properties, most of which are subject to applicable rent control and rent
stabilization statutes and regulations. In both cases, any increases in rent are
subject to specific limitations. The rental housing market in New York City
remains stable and the Company expects that such properties will continue to
appreciate in value with little or no reduction in occupancy rates. As such,
these properties are not affected by the general movement of real estate values
in the same manner as other income-producing properties.
Business:
The Company is engaged in the real estate business and has historically invested
primarily in real estate mortgage loans secured by income producing real
property. It is anticipated that a substantial portion of the loans to be made
by the Company will be loans with terms of up to five years. Such transactions
typically require an understanding of the underlying real estate transaction and
rapid processing and funding as a principal basis for competing in the making of
these loans. The Company does not finance new construction.
At September 30, 1998, 56% of the outstanding principal amount of the Company's
loans (net of discounts) were secured by properties located in the greater New
York metropolitan area. The balance of the Company's loans are secured by
properties located in Connecticut, Florida, Georgia, New Jersey, Suburbs of New
York City, Pennsylvania, Virginia and Washington D.C.
Certain of the Company's real estate mortgage loans bear interest at a fixed
rate. The balance of such loans bear interest at fluctuating rates. Interest on
the loans is usually payable monthly.
The Company may also, from time to time, acquire interests in real property,
including fee interests.
Investment Policy-Operations:
The Company's current investment policy related to mortgages emphasizes
investments in short-term real estate mortgages secured by income producing real
property.
The properties to be mortgaged are personally inspected by management and
mortgage loans are made only on those properties where management is
knowledgeable as to operating income and expense. The Company generally relies
upon its management in connection with the valuation of properties. From time to
time, however, it may engage independent appraisers and other agents to assist
in determining the value of income-producing properties underlying mortgages, in
which case the costs associated with such services are generally paid by the
mortgagor.
<PAGE>
Current Loan Status:
At September 30, 1998, the Company had 46 real estate mortgage loans in its
portfolio, totaling $76,427,000 (face amount) in aggregate principal amount.
Interest rates on the mortgage portfolio range between 6% and 15% per annum.
Certain mortgages have been discounted utilizing rates between 9% and 17% per
annum.
Certain information concerning the Company's mortgage loans outstanding at
September 30, 1998 is set forth below:
Carrying
Amount of
Mortgage No. of
Loans Prior Liens Loans
----- ----------- -----
First Mortgage Loans ........ $71,873,000 $ 0 43
Junior Mortgages ............ 3,950,000 8,324,000 3
----------- ----------- --
$75,823,000 $ 8,324,000 46
=========== =========== ==
The historical cost of the mortgage loans, which originated in connection with
the sale of real estate includes a discount to reflect an appropriate market
interest rate at the date of origination.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
- -------------------------------------------------------------------
None
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities and Use of Proceeds
During the third quarter, the Certificate of Incorporation of the
Company was amended to create a new class of stock, designated Class B
Stock and consisting of 100 shares, without par value. A total of 15.89
shares of Class B Stock were issued to an officer of the Company for
cash consideration of $100,000. The shares were issued pursuant to an
exemption from registration under Section 4(2) of the Securities Act of
1933.
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8K
(a) Exhibits - The following exhibit is filed herewith
Exhibit 27 - Financial Data Schedule
(b) No reports on Form 8-K were filed during this quarter
<PAGE>
SIGNATURES
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.
INTERVEST CORPORATION OF NEW YORK
(Registrant)
Dated: October 27, 1998 /S/ Lowell S. Dansker
Lowell S. Dansker, President
(Principal Executive Officer),
Treasurer (Principal Financial Officer
and Principal Accounting Officer)
and Director
Dated: October 27, 1998 /S/ Lawrence G. Bergman
Lawrence G. Bergman, Vice President,
Secretary and Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains information extracted from form 10-Q at September 30,
1998, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 16,428
<SECURITIES> 0
<RECEIVABLES> 75,823
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 97,222
<CURRENT-LIABILITIES> 0
<BONDS> 77,000
0
0
<COMMON> 2,000
<OTHER-SE> 9,450
<TOTAL-LIABILITY-AND-EQUITY> 97,222
<SALES> 0
<TOTAL-REVENUES> 9,189
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 570
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,087
<INCOME-PRETAX> 1,532
<INCOME-TAX> 703
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 829
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
