<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ........... to ...........
Commission file number 1-10093
--------
RPS REALTY TRUST
----------------
(Exact name of registrant as specified in its charter.)
MASSACHUSETTS 13-6908486
- - ------------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
747 Third Avenue, New York, New York 10017
- - ------------------------------------ -----
(Address of principal executive offices) (Zip Code)
212-355-1255
------------
(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
----- -----
Number of shares of beneficial interest ($.10 par value) of the Registrant
outstanding as of November 3, 1995: 28,492,421.
<PAGE> 2
RPS REALTY TRUST FORM 10-Q SEPTEMBER 30, 1995
I N D E X
<TABLE>
<CAPTION>
Part I. FINANCIAL INFORMATION PAGE NO.
--------
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets - September 30, 1995 and
December 31, 1994 ......... ........................................................3
Consolidated Statements of Operations - Nine Months and Quarters Ended
September 30, 1995 and 1994 ........................................................4
Consolidated Statement of Shareholders' Equity - Nine Months Ended
September 30, 1995..................................................................5
Consolidated Statements of Cash Flows - Nine Months Ended
September 30, 1995 and 1994.........................................................6
Notes to Consolidated Financial Statements...........................................7
Item 2.
Management's Discussion and Analysis of Financial Condition
and Results of Operations..........................................................12
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K..............................................14
</TABLE>
-2-
<PAGE> 3
RPS REALTY TRUST FORM 10-Q SEPTEMBER 30, 1995
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
----------- ------------
<S> <C> <C>
ASSETS:
Mortgage Loans Receivable
(Net of allowance for possible loan losses of $12,781,336
in 1995 and $11,657,236 in 1994) $ 36,217,669 $ 41,891,769
Investment In Real Estate-Net 56,220,040 56,109,381
REMIC Investments 60,072,258 -
Short-term Investments 10,452,561 73,781,582
Interest and Accounts Receivable 8,114,282 8,607,992
Deferred Acquisition Expenses
(Net of accumulated amortization of $1,468,104 in 1995
and $1,319,706 in 1994) 2,203,709 2,352,107
Cash 1,583,597 802,384
Transaction Advances 2,471,100 -
Other Assets 5,736,718 2,625,607
------------ ------------
TOTAL ASSETS $183,071,934 $186,170,822
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Distributions Payable $ 2,279,394 $ 2,279,394
Accounts Payable and Accrued Expenses 1,502,825 1,292,260
------------ ------------
TOTAL LIABILITIES 3,782,219 3,571,654
SHAREHOLDERS' EQUITY 179,289,715 182,599,168
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $183,071,934 $186,170,822
============ ============
</TABLE>
See notes to consolidated financial statements
-3-
<PAGE> 4
RPS REALTY TRUST FORM 10-Q SEPTEMBER 30, 1995
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Quarter For the Nine Months
Ended Ended
September 30, September 30,
------------------- -------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Interest income:
Mortgage loans $ 884,155 $ 3,782,973 $ 2,717,440 $ 8,146,873
Short-term investments 404,558 684,134 2,404,825 1,677,138
REMIC investments 594,111 - 594,111 -
Rental income 2,371,429 2,344,829 6,813,781 4,625,896
Additional contingent
interest and prepayment
premium income - 8,405,813 - 8,405,813
Other - - 49,173 -
----------- ----------- ----------- -----------
4,254,253 15,217,749 12,579,330 22,855,720
----------- ----------- ----------- -----------
Expenses:
Provision for possible
loan losses $ - $ - $ 3,000,000 $ -
General and Administrative 452,622 449,578 1,587,370 1,511,316
Payroll and Related Expenses 429,388 509,566 1,268,567 1,328,735
Amortization of Deferred
Acquisition Expenses 49,466 49,466 148,398 148,398
Loss on disposition of
real estate - 227,708 - 227,708
Interest on Mortgages - 205,810 - 426,414
Property Operating 444,091 576,317 1,297,002 1,121,828
Real Estate Taxes 327,974 273,345 987,589 617,933
Depreciation 256,219 230,478 761,675 535,478
----------- ----------- ----------- -----------
1,959,760 2,522,268 9,050,601 5,917,810
----------- ----------- ----------- -----------
Net Income $ 2,294,493 $12,695,481 $ 3,528,729 $16,937,910
=========== =========== =========== ===========
Net Earnings Per Share $.08 $.44 $.12 $.59
==== ==== ==== ====
Cash Dividend Declared $.08 $.08 $.24 $.24
==== ==== ==== ====
</TABLE>
See notes to consolidated financial statements
-4-
<PAGE> 5
RPS REALTY TRUST FORM 10-Q SEPTEMBER 30, 1995
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Additional Cumulative Total
Shares of Paid-In Earnings/ Shareholders'
Beneficial Interest Capital (Distributions) Equity
-------------------------------- ----------- --------------- -----------
Number Amount
----------- ----------
<S> <C> <C> <C> <C> <C>
Balance at
January 1, 1995 28,492,421 $2,849,242 $194,924,231 ($15,174,305) $182,599,168
Net income for the
nine months ended
September 30, 1995 -- -- -- 3,528,729 3,528,729
Cash distributions
declared -- -- -- (6,838,182) (6,838,182)
Balance at
---------- ---------- ------------ ------------ ------------
September 30, 1995 28,492,421 $2,849,242 $194,924,231 $(18,483,758) $179,289,715
========== ========== ============ ============ ============
</TABLE>
See notes to consolidated financial statements
-5-
<PAGE> 6
RPS REALTY TRUST FORM 10-Q SEPTEMBER 30, 1995
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30,
--------------------------------
1995 1994
------------ -------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income $ 3,528,729 $ 16,937,910
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Provision for possible loan losses 3,000,000 -
Loss on Disposition of Real Estate - 227,708
Amortization of Deferred Acquisition Expense 148,398 148,398
Depreciation 761,675 535,478
Changes in Operating Assets and Liabilities:
Interest and Accounts Receivable 167,810 (1,066,415)
Other Assets (3,111,111) (897,309)
Transaction Advances (2,471,100) -
Accounts Payable and Accrued Expenses 210,565 (606,640)
------------ -------------
Net Cash Provided by Operating Activities 2,234,966 15,279,130
------------ ------------
Cash Flows From Investing Activities:
Satisfaction of Mortgage Loans Receivable 3,000,000 44,522,430
Investment in REMICs (60,072,258) -
Sale of Real Estate - 112,500
Investments in Real Estate (872,334) (8,590,097)
------------- -------------
Net Cash Used in/Provided by Investing Activities (57,944,592) 36,044,833
------------- ------------
Cash Flows From Financing Activities:
Dividends Declared and Paid (6,838,182) (6,843,846)
Shares Repurchased - (237,734)
Repayment of Mortgages Payable - (6,490,854)
------------- -------------
Net Cash Used in Financing Activities (6,838,182) (13,572,434)
------------- -------------
Net Increase (Decrease) in Cash and Cash Equivalents (62,547,808) 37,751,529
Cash and Cash Equivalents, Beginning of Period 74,583,966 38,800,763
------------ ------------
Cash and Cash Equivalents, End of Period $ 12,036,158 $ 76,552,292
============ ============
Cash and Cash Equivalents, End of Period:
Cash $ 1,583,597 $ 701,013
Short-Term Investments 10,452,561 75,851,279
------------ ------------
$ 12,036,158 $ 76,552,292
============ ============
Supplemental Disclosures of Cash Flow Information:
Interest Paid $ - $ 426,414
============ ============
Supplemental Schedule of Noncash Investing and
Financing Activities:
Accounts Payable - (839,402)
Interest and Accounts Receivable (325,900) (1,761,023)
Use of Allowance for Possible Loan Losses 1,875,900 14,567,301
Mortgages Receivable (1,550,000) (26,329,129)
Deposit on Sale of Loans - 1,365,042
Other Assets - (165,200)
Investment in Real Estate - 14,626,242
Mortgages Payable Assumed - (1,463,831)
</TABLE>
See notes to consolidated financial statements
-6-
<PAGE> 7
RPS REALTY TRUST FORM 10-Q SEPTEMBER 30, 1995
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL
In the opinion of management of RPS Realty Trust (the "Trust"), the
accompanying unaudited interim consolidated financial statements
contain all adjustments (consisting only of normal recurring accruals)
necessary to present fairly the consolidated financial position as of
September 30, 1995 and the results of operations for the nine months
ended September 30, 1995 and September 30, 1994. The financial
statements, related footnotes and discussions should be read in
conjunction with the consolidated financial statements, related
footnotes and discussions contained in the Trust's annual report on
Form 10-K for the year ended December 31, 1994. Certain
reclassifications have been made to prior year financial statements to
conform with classifications adopted in the current year.
2. EARNINGS PER SHARE
The weighted average number of shares outstanding for the nine months
ended September 30, 1995 and 1994 was 28,492,421 and 28,496,369,
respectively. The weighted average number of shares outstanding for
the quarters ended September 30, 1995 and 1994 was 28,492,421.
3. MORTGAGE LOANS RECEIVABLE
The following table summarizes the mortgage loans of the Trust as of
September 30, 1995:
<TABLE>
<CAPTION>
NET
CURRENT AVERAGE MATURITY AMOUNT ALLOWANCE CARRYING
DESCRIPTION RATE (A) ACCRUED DATE ADVANCED FOR LOSS AMOUNT (1)
<S> <C> <C> <C> <C> <C> <C>
Shopping Centers/Retail:
Holiday Park 9.50% -% 12/95 $ 1,916,564 $ - $ 1,916,564
Branhaven Plaza 10.50 2.25 12/95 2,800,000 - 2,800,000
1733 Massachusetts Avenue 8.00 1.42 6/99 2,200,000 - 2,200,000
Mt. Morris Commons 10.50 2.00 7/01 2,700,000 (1,000,000) 1,700,000
Copps Hill Plaza 6.00 0.50 7/96 3,563,948 (350,000) 3,213,948
Hylan Center 7.50 4.50 1/01 25,000,000 (6,000,336) 18,999,664
Office Buildings:
NCR Building 10.00 - 12/95 468,493 (231,000) 237,493
New England Telephone Co. 8.27 3.58 12/99 3,000,000 (3,200,000) (200,000)
1-5 Wabash Avenue 5.00 - 3/96 2,850,000 - 2,850,000
Rector (e) - 6.00 4/04 3,000,000 (2,000,000) 1,000,000
Industrial/Commercial:
Simmons Mfg. Warehouse 10.00 2.00 8/01 1,500,000 - 1,500,000
----------- ----------- -----------
$48,999,005 $(12,781,336) $36,217,669
=========== ============= ===========
</TABLE>
(1) Before taking into consideration booked deferred interest as described on
the following table.
-7-
<PAGE> 8
RPS REALTY TRUST FORM 10-Q SEPTEMBER 30, 1995
Deferred interest due at maturity of the mortgage loans is recognized as income
based on the interest method. The amounts which have been recognized, are
included on the consolidated balance sheet in interest and accounts receivable
at September 30, 1995 are as follows:
<TABLE>
<CAPTION>
DEFERRED INTEREST ACCRUED
-------------------------
<S> <C>
Holiday Park $ 67,080
Branhaven Plaza 326,331
1733 Massachusetts Avenue 332,792
Mt. Morris Commons 52,923
Copps Hill Plaza -
Hylan Center 6,275,000
NCR Building -
New England Telephone Co. 407,284
1-5 Wabash Avenue -
Simmons Mfg. Warehouse 121,753
Rector -
----------
Balance, end of period $7,583,163
==========
</TABLE>
(a) In addition to fixed interest, the Trust is entitled to contingent
interest on certain loans in an amount equal to a percentage of the
gross rent received by the borrower from the property securing the
mortgage above a base amount, payable annually, and additional
contingent interest (equity participation) based on a predetermined
multiple of the contingent interest or a percentage of the net value
of the property at such date payable at maturity. Contingent interest
in the amount of $43,862 and $440,688 was received in the nine months
ended September 30, 1995 and 1994 respectively.
(b) As of September 30, 1995, the Trust had 6 loans that were in arrears
(three monthly payments or more) or otherwise considered to be
"problem loans" by the Trust. The aggregate gross principal amounts
of these loans, together with receivables relating to such loans
comprised of accrued interest and payments made on behalf of the
borrowers for mortgage payments relating to such properties, totaled
approximately $44,467,648, representing 24.3% of the Trust's total
assets, at September 30, 1995. At September 30, 1995 and 1994, the
Trust was not accruing current and deferred interest on two and four
of the above-mentioned loans, in the aggregate approximate principal
amount of $5,700,000 and $10,250,000, respectively. In addition, as of
September 30, 1995 and 1994 respectively, the Trust was not accruing
deferred interest on three and two additional loans, in the aggregate
approximate principal amount of $31,563,948 and 28,000,000.
(c) On February 14, 1995, the holder of the first mortgage loan secured by
the Madison Heights Shopping Center, whose loan was superior to the
Trust's wraparound mortgage loan with respect to such property,
foreclosed upon such property. The shopping center has been sold at
auction and the interest of the Trust has thereby been eliminated.
(d) On March 1, 1995, the Trust received proceeds of $3,021,000 from the
prepayment of the Coral Way Shopping Center mortgage loan. The
proceeds consisted of the repayment of the principal loan balance of
$3,000,000 and current interest of $21,000.
(e) Pursuant to the terms of the restructuring of the collateral
assignment loan which was partially secured by a security interest in
a mortgage of 19 Rector Street, the interest held by the Trust was
converted to a direct first mortgage lien by delivery to the Trust on
September 21, 1995 of an Assignment of Senior Participation in the
mortgage loan which formerly had been only collaterally assigned by
its mortgagee to the Trust.
-8-
<PAGE> 9
RPS REALTY TRUST FORM 10-Q SEPTEMBER 30, 1995
4. INVESTMENTS IN REAL ESTATE
The following table summarizes the Trust's equity investments in real
properties, and the carrying amount, net of accumulated depreciation
of such properties, as of September 30, 1995:
<TABLE>
<CAPTION>
Property Location Carrying Value
- - -------- -------- --------------
<S> <C> <C>
Sunshine Plaza Tamarac, FL $ 9,061,131
Shopping Center
Crofton Shopping Center Crofton, MD 9,929,276
Trinity Corners Pound Ridge, NY 2,883,523
Shopping Center
Commack Property Commack, NY 2,778,562
Retail Center
Chester Shopping Center Chester, NJ 18,429,972
Lantana Plaza Lantana, FL 5,444,171
Shopping Center
9 North Wabash Chicago,IL 3,244,505
Retail Building
Norgate Shopping Center Indianapolis, IN 4,448,900
-----------
Total $56,220,040
===========
</TABLE>
5. REMIC INVESTMENTS
REMIC Investments at September 30, 1995 consist of collateralized
mortgage backed securities which are guaranteed by the Federal
National Mortgage Association ("FNMA"), Government National Mortgage
Association ("GNMA") and the Federal Home Loan Mortgage Corporation
("FMLMC"). These investments bear interest from 40-50 basis points
above the 1 month libor rate and have average lives of 3 to 5 years.
6. SHORT-TERM INVESTMENTS
Short-term investments at September 30, 1995 consist primarily of U.S.
Treasuries instruments.
7. DIVIDENDS TO SHAREHOLDERS
Under the Internal Revenue Code, a REIT must meet certain
qualifications including a requirement that it distribute annually to
its shareholders at least 95% of its taxable income. The Trust's
policy is to distribute to shareholders all taxable income. Dividends
declared for the nine months ended September 30, 1995 are summarized
below:
<TABLE>
<CAPTION>
RECORD DATE DIVIDEND PAYMENT DATE
------------- ---------- --------------
<S> <C> <C>
April 27, 1995 $ .08 May 17, 1995
July 28, 1995 $ .08 August 17, 1995
October 27, 1995 $ .08 November 17, 1995
</TABLE>
-9-
<PAGE> 10
RPS REALTY TRUST FORM 10-Q SEPTEMBER 30, 1995
The difference, if any, between dividends and net income result from
timing differences related to the recognition of income and expense
between financial reporting and income tax purposes.
During 1995, the Trust will have tax write-offs on certain of the
mortgages which write-offs were previously recognized for financial
reporting purposes in prior years.
8. INCOME TAXES
The Trust has entered into a closing agreement with the Internal
Revenue Service ("IRS") pursuant to which the IRS agreed that the
status of the Trust as a REIT will not be lost solely because of its
failure to satisfy certain shareholder notice requirements for its
taxable years 1988-1992. Nothing in the closing agreement affects the
rights of the IRS to assess a deficiency on other grounds or to
challenge the characterization of the Trust as a REIT on other
grounds. During the third quarter of 1994, the Trust held more than
25% of the value of its gross assets in Treasury Bill repurchase
transactions which the IRS may view as non-qualifying assets for the
purposes of the 75% Asset Test. The Trust expects to receive an
opinion from legal counsel that its investment in short-term
repurchase obligations constitutes qualifying assets for purposes of
determining whether it has satisfied the 75% Asset Test.
Additionally, the IRS has commenced an examination of the tax returns
of the Trust for its 1991-1994 taxable years. If the Transaction
occurs, it is contemplated that the Spin-Off Company as defined in
Note 9 will assume all tax liabilities attributable to tax claims
against the Trust arising out of the IRS examination (other than the
liability that relates to events occurring or actions taken by RPS
following the date of the Transaction). The Trust also expects to
receive an opinion from legal counsel that, to the extent there is a
deficiency in the Trust's taxable income arising out of the IRS
examination and provided the Trust timely makes a deficiency dividend
(i.e. - declares and pays a distribution which is permitted to relate
back to the year for which each deficiency was determined to satisfy
the requirement that a REIT distribute 95 percent of its taxable
income), the classification of the Trust as a REIT for the taxable
years under examination would not be affected. If, notwithstanding
the above described opinions of legal counsel, the IRS successfully
challenged the status of the Trust as a REIT, the REIT status of the
Trust could be affected. In addition, management estimates that this
would result in the Trust incurring a tax liability for 1994 of
approximately $400,000. The possible effect of the loss of REIT
status of the Trust for subsequent periods could be significant
depending on the income of the Trust in such periods.
9. RAMCO TRANSACTION
On April 10, 1995, the Trust and Ramco-Gershenson, Inc. ("Ramco") and
its affiliates (the "Ramco Group") entered into an agreement (the
"Transaction Agreement") relating to the acquisition through an
operating partnership (the "Operating Partnership") controlled by the
Trust of substantially all of the real estate assets as well as the
business operations of Ramco (the "Transaction"). The Trust and the
Ramco Group are currently negotiating certain amended terms to the
Transaction Agreement as a result of events which have occurred since
the date the Transaction Agreement was signed. As part of the
Transaction, the Trust will succeed to the ownership of interests in
22 shopping center and retail properties (the "Ramco Properties"), as
well as 100% of the non-voting stock and 5% of the voting stock of
Ramco (representing in excess of 95% of the economic interests of
Ramco). Under the proposed revised structure to the Transaction, the
Trust will contribute to the Operating Partnership six retail
properties (the "RPS Properties") and $68,000,000 in cash and will be
liable for approximately $7,000,000 of Transaction expenses.
Following the closing of the Transaction, Ramco will manage the Ramco
properties, the RPS properties and properties of certain third
parties and other Ramco affiliates.
-10-
<PAGE> 11
RPS REALTY TRUST FORM 10-Q SEPTEMBER 30, 1995
Upon consummation of the Transaction, the Trust will be the sole
general partner of and a limited partner in the Operating Partnership
and under the proposed revised structure to the Transaction will
initially hold approximately 77.7% of the interests therein. The
members of the Ramco Group will be limited partners in the Operating
Partnership and will initially hold, in the aggregate, approximately
22.3% of the interests therein. Under the proposed revised structure
to the Transaction, the Ramco Group could also increase its interest
in the Operating Partnership based on the future performance of
certain of the Ramco Properties; such performance incentives could
increase the Ramco Group's interest in the Operating Partnership to
approximately 28.7% in the aggregate. The Ramco Group's units in the
Operating Partnership will be exchangeable for shares of the Trust
commencing one year after consummation of the Transaction, subject to
purchase of such OP Units for cash by the Trust, at the Trust's
option.
As part of the Transaction, it is also anticipated that the Trust will
change its name to Ramco-Gershenson Properties Trust and will
implement a one for four reverse share split.
Upon consummation of the Transaction, it is contemplated that four of
the nine current members of the Board of Trustees will resign and will
be replaced by four individuals designated by the Ramco Group, two of
whom will be independent of the Trust, Ramco and their respective
affiliates. In addition, the five current principal executive
officers of Ramco will become executive officers of the Trust and will
be responsible for the management of the Trust's real estate
operations.
In connection with the Transaction, and as a condition thereto, the
Trust will transfer its remaining mortgage loan portfolio, as well as
certain other assets, to a newly-formed Maryland real estate
investment trust (the "Spin-Off Company"), and thereafter will
distribute the shares after taking into account the reverse stock
split referred to above, of the Spin-Off Company to the Trust's
shareholders.
The Transaction is currently expected to close late in the fourth
quarter of 1995 or in the first quarter of 1996, is subject to a
number of conditions, including the successful negotiation of an
amendment to the Transaction Agreement that is currently being
discussed by the parties. Additional significant closing conditions
include shareholder approval and refinancing of certain Ramco property
debt. Although the Trust has no reason to believe that the conditions
to closing (including entering into an amendment to the Transaction
Agreement) will not be satisfied, there can be no assurance that the
transaction will be consummated.
10. TRANSACTION ADVANCES
In connection with the transaction with Ramco, the Trust advanced the
sum of $2,471,100 to the members of the Ramco Group (the "Ramco
Advance") to be used for the sole purpose of paying application fees,
commitment fees and other fees and charges in connection with a
refinancing loan to be obtained in connection with the Transaction.
The Ramco Advance is evidenced by a promissory note (the "Ramco Note")
which accrues interest at a per annum rate equal to the prime rate of
the Bank of Boston, and matures on April 13, 1996; the Ramco Note is
secured by the pledge of certain partnership and stock interests owned
by the members of the Ramco Group who are the obligors under the Ramco
Note. Upon the occurrence of certain events, the Ramco Advance will
be converted into a Transaction expense of the Trust, and the Ramco
Note will be cancelled. In such event, the $68,000,000 to be
contributed by the Trust to the Operating Partnership will be reduced
by the amount of the Ramco Advance.
-11-
<PAGE> 12
RPS REALTY TRUST FORM 10-Q SEPTEMBER 30, 1995
11. SUBSEQUENT EVENTS
On October 18, 1995 Norgate Shops, Inc. a wholly owned subsidiary of
the Trust entered into a contract for the sale of the Norgate Shopping
Center. The purchase price is $4,950,000. The closing of the
transaction is contingent upon the purchaser's satisfaction with
various matters relative to which the purchaser is conducting due
diligence reviews as well as the satisfaction of other conditions
usual to most contracts for the sale of real property. Accordingly,
there is no assurance that the sale will be consummated.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CAPITAL RESOURCES AND LIQUIDITY
As of December 31, 1994 the Trust had $41,891,769 invested in mortgage loans
(after deducting allowance for possible loan losses of $11,657,236),
$56,109,381 invested in real properties and $73,781,582 in short-term
investments. During the first quarter of 1995 the Trust received proceeds of
$3,021,000 from the prepayment of the Coral Way Shopping Center loan.
Additionally during the first quarter the Trust added $3,000,000 to its
allowance for possible loan losses bringing the allowance to $12,781,336.
During future periods additional provisions for loan losses may be required, as
loans are re-valued. As of September 30, 1995 the Trust had $36,217,669
invested in mortgage loans (after deducting allowance for possible loan losses
of $12,781,336), $56,220,040 invested in real properties, $60,072,258 invested
in REMICs and $10,452,561 in short-term investments. It is anticipated that the
Trust will have to borrow approximately $6,500,000 to fund severance payments
and certain expenses if the Transaction closes without additional prepayments
or sales. If such borrowing occurs, such obligation will be assumed by the
Spin-Off Company.
RESULTS OF OPERATIONS
Nine months ended September 30, 1995 compared to nine months ended September
30, 1994.
Total revenues for the nine months ended September 30, 1995 (before rental
income) decreased $12,464,275 or 68% as compared to the nine months ended
September 30, 1994. During the nine month period of 1994 the Trust received
$8,405,813 in additional contingent interest and pre-payment premium income as
compared to none in the current nine month period. Interest from mortgage
loans decreased in the nine months ended September 30, 1995 as compared to the
nine months ended September 30, 1994 by $5,429,433 or 67%. The reduction in
interest from mortgage loans is attributable to the reduction in the size of
the Trust's mortgage loan portfolio from 16 loans during the 1994 period as
compared to 11 loans during the 1995 period. Interest from short-term
investments increased $727,687 or 43% as a result of the Trust having higher
balances in short-term investments during the nine month period of 1995.
Income from Mortgage Backed Securities increased 100% or $594,111 as a result
of the Trust investing in Mortgage Backed Securities to maintain REIT
qualifying income.
During the nine months ended September 30, 1995 expenses (excluding property
operating, real estate taxes, interest on mortgages and depreciation expenses)
increased $2,788,178 or 87% as compared to the nine months ended September 30,
1994. This increase was primarily due to the additional provision for possible
loan losses in the first quarter of $3,000,000 based on an offer for the sale of
the Hylan mortgage loan. During the nine month period of 1994 the Trust
recognized a loss of $227,708 as a result of selling its capital stock of the
Saratoga Building, Inc., a wholly owned subsidiary of the Trust.
-12-
<PAGE> 13
RPS REALTY TRUST FORM 10-Q SEPTEMBER 30, 1995
During the nine months of 1995, the Trust recognized rental income of
$6,813,781 as compared to $4,625,896 for the nine months of 1994. This
increase of $2,187,885 or 47% is primarily as a result of the Trust receiving
rental income on 8 properties during the 1995 period compared to 6 during the
1994 period. Interest expense on mortgages payable in 1995 decreased 100% or
$426,414 due to the Trust exercising its right to prepay the first mortgage
loan relating to the Crofton Plaza Shopping Center property on September 30,
1994. Property operating expenses, real estate taxes and depreciation expense
increased during the 1995 period by $175,174 or 16%, $369,656 or 60% and
$226,197 or 42% respectively over the 1994 period due to the aforementioned
increase in number of properties. For the nine months ended September 30,
1995, the Trust recognized net income from the investment of real estate of
$3,767,515 as compared to $1,924,243 for the nine months of 1994.
As a result of the foregoing factors, the Trust net income for the nine months
of 1995 as compared to the nine months of 1994 decreased $13,409,181 or 79%.
Three months ended September 30, 1995 compared to three months ended September
30, 1994.
Total revenues for the three months ended September 30, 1995 (before rental
income) decreased $10,990,096 or 85% as compared to the three months ended
September 30, 1994. During the three month period of 1994 the Trust received
$8,405,813 in additional contingent interest and pre-payment premium income as
compared to none in the current three month period. Interest from mortgage
loans decreased in the three months ended September 30, 1995 as compared to the
three months ended September 30, 1994 by $2,898,818 or 77%. The reduction in
interest from mortgage loans is attributable to the reduction in the size of
the Trust's mortgage loan portfolio from 16 loans during the 1994 period as
compared to 11 loans during the 1995 period. Interest from short-term
investments decreased $279,576 or 41% as a result of the Trust having lower
balances in short-term investments during the three month period of 1995.
Income from Mortgage Backed Securities increased 100% or $594,111 as a result
of the Trust investing in Mortgage Backed Securities to maintain REIT
qualifying income.
During the three months ended September 30, 1995 expenses (excluding property
operating, real estate taxes, interest on mortgages and depreciation expenses)
decreased $304,842 or 25% as compared to the three months ended September 30,
1994. The decrease was primarily due to the Trust recognizing a loss of
$227,708 as a result of selling its capital stock of the Saratoga Building,
Inc., a wholly owned subsidiary of the Trust.
During the three months of 1995, the Trust recognized rental income of
$2,371,429 as compared to $2,344,829 for the three months of 1994. This
resulted in an increase of $26,600 or 1%. Interest expense on mortgages
payable in 1995 decreased 100% or $205,810 due to the Trust exercising its
right to prepay the first mortgage loan relating to the Crofton Plaza Shopping
Center property on September 30, 1994. Real estate taxes and depreciation
expense increased $54,629 or 20% and $25,471 or 11% respectively over the 1994
period. The increase in real estate tax expense is as a result of a change in
the Lane Bryant lease at the 9 North Wabash property. For the three months
ended September 30, 1995, the Trust recognized net income from the investment
of real estate of $1,343,145 as compared to $1,058,879 for the three months of
1994.
As a result of the foregoing factors, the Trust net income for the three months
of 1995 as compared to the three months of 1994 decreased $10,400,988 or 82%.
-13-
<PAGE> 14
RPS REALTY TRUST FORM 10-Q SEPTEMBER 30, 1995
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
A. No exhibits are filed with this report.
B. No Reports on Form 8-K were filed during the quarter.
-14-
<PAGE> 15
RPS REALTY TRUST FORM 10-Q SEPTEMBER 30, 1995
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned thereunto duly authorized.
RPS REALTY TRUST
By:/s/ Joel M. Pashcow
------------------------------
Joel M. Pashcow
Chairman and Trustee
(Principal Executive Officer)
By:/s/ Herbert Liechtung
------------------------------
Herbert Liechtung
President and Trustee
(Principal Executive Officer)
By:/s/ Edwin R. Frankel
----------------------------
Edwin R. Frankel
Senior Vice President and Treasurer
(Chief Financial Officer)
Date: November 14, 1995
<PAGE> 16
EXHIBIT INDEX
Exhibit 27 - Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 12,036,158
<SECURITIES> 60,072,258
<RECEIVABLES> 8,114,282
<ALLOWANCES> 12,781,336
<INVENTORY> 0
<CURRENT-ASSETS> 118,123,400
<PP&E> 0
<DEPRECIATION> 2,492,828
<TOTAL-ASSETS> 183,071,934
<CURRENT-LIABILITIES> 3,782,219
<BONDS> 0
<COMMON> 2,849,242
0
0
<OTHER-SE> 176,440,473
<TOTAL-LIABILITY-AND-EQUITY> 183,071,934
<SALES> 0
<TOTAL-REVENUES> 12,579,330
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 6,050,601
<LOSS-PROVISION> 3,000,000
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,528,729
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,528,729
<EPS-PRIMARY> .12
<EPS-DILUTED> .12
</TABLE>
