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 June 30, 1997
___ 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 33-29987
Corporate Realty Income Trust I
(Exact name of registrant as specified in its charter)
Massachusetts 13-6931017
(State of organization) (I.R.S. Employer
identification No.)
388 Greenwich Street, 37th Floor, New York, New York 10013
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 816-8237
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
The number of shares of beneficial interest of the Registrant outstanding as of
August 18, 1997 is 1,010,776 shares.
<PAGE>
CORPORATE REALTY INCOME TRUST I
Index
Page No.
Part I Financial information 3
Balance Sheets --
June 30, 1997 and December 31, 1996 4
Statements of Income --
For the three months ended June 30, 1997 and 1996 5
Statements of Income -
For the six months ended June 30, 1997 and 1996 6
Statements of Cash Flows --
For the six months ended June 30, 1997 and 1996 7
Notes to the Financial Statements 8
Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
Part II Other information 11
Signatures 12
<PAGE>
Part I. Financial Information
Item I. Financial Statements
The summarized financial information contained herein is unaudited; however, in
the opinion of management, all adjustments necessary for a fair presentation of
such financial information have been included.
<PAGE>
CORPORATE REALTY INCOME TRUST I
BALANCE SHEETS
June 30, 1997 and December 31, 1996
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
----------- -----------
<S> <C> <C>
ASSETS: (Unaudited)
Real estate, at cost:
Land $ 715,400 $ 715,400
Buildings 31,884,600 31,884,600
----------- -----------
32,600,000 32,600,000
Less: accumulated depreciation 5,453,098 5,054,542
----------- -----------
27,146,902 27,545,458
Cash and cash equivalents 946,623 834,489
Rent receivable 39,375 -
Prepaid expenses 98,935 102,525
Deferred rent receivable 2,093,715 2,020,078
Deferred financing costs, net of
accumulated amortization of $155,027 in
1997 and $143,594 in 1996 71,131 82,564
----------- -----------
Total assets $30,396,681 $30,585,114
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Liabilities:
Mortgage loans payable $15,368,610 $15,404,146
Accrued expenses 181,458 78,436
Due to affiliates 20,004 13,941
Rent received in advance 206,510 0
Dividends payable 353,772 353,772
----------- -----------
Total liabilities 16,130,354 15,850,295
----------- -----------
Shareholders' equity:
Shares of beneficial interest $.10 par value;
20,000,000 shares authorized; 1,010,776
shares issued and outstanding 101,078 101,078
Additional paid-in-capital 14,165,249 14,633,741
Retained earnings - -
----------- -----------
Total shareholder's equity 14 ,266,327 14,734,819
----------- -----------
Total liabilities and
shareholders' equity $30,396,681 $30,585,114
=========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
CORPORATE REALTY INCOME TRUST I
STATEMENTS OF INCOME
For the three months ended June 30, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
-------- ---------
<S> <C> <C>
Income:
Rental $ 855,816 $ 855,817
Dividend and interest 7,866 9,455
-------- ---------
863,682 865,272
-------- ---------
Expenses:
Interest 350,265 352,043
Depreciation 199,278 199,279
General and administrative 44,710 40,661
Annual advisor fee 20,004 43,381
Proposed merger expenses 237,567 0
-------- ---------
851,824 635,364
-------- ---------
Net income $ 11,858 $ 229,908
======== =========
Net income per share $ .01 $ .23
======== =========
Dividend per share $ .35 $ .35
======== =========
</TABLE>
See accompanying notes to financial statements
<PAGE>
CORPORATE REALTY INCOME TRUST I
STATEMENTS OF INCOME
For the six months ended June 30, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Income:
Rental $1,711,633 $1,711,633
Dividend and interest 14,759 13,624
--------- ---------
1,726,392 1,725,257
--------- ---------
Expenses:
Interest 701,094 704,469
Depreciation 398,556 398,557
General and administrative 86,189 79,524
Annual advisor fee 63,934 86,899
Proposed merger expenses 237,567 0
--------- ---------
1,487,340 1,269,449
--------- ---------
Net income $ 239,052 $ 455,808
========= =========
Net income per share $ .24 $ .45
========= =========
Dividend per share $ .35 $ .35
========= =========
See accompanying notes to financial statements
<PAGE>
CORPORATE REALTY INCOME TRUST I
STATEMENTS OF CASH FLOWS
For the six months ended June 30, 1997 and 1996
(Unaudited)
</TABLE>
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 239,052 $ 455,808
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization of
deferred financing costs 409,989 409,987
Changes in assets and liabilities:
(Increase) decrease in rent receivable (39,375) 206,510
Decrease (increase) in prepaid expenses 3,590 (16,477)
Increase in deferred rent receivable (73,637) (78,376)
Increase (decrease) in accrued expenses 103,022 (31,016)
Increase in amount due to affiliate 6,063 44,041
Increase in rent received in advance 206,510 0
-------- --------
Total adjustments 616,162 534,669
-------- --------
Net cash provided by operating activities 855,214 990,477
-------- --------
Cash flows from financing activities:
Principal payments on mortgage (35,536) (32,327)
Dividends paid to shareholders (707,544) (707,543)
-------- --------
Net cash used in financing activities (743,080) (739,870)
-------- --------
Net increase in cash and cash equivalents 112,134 250,607
Cash and cash equivalents at beginning of period 834,489 531,435
-------- --------
Cash and cash equivalents at end of period $ 946,623 $782,042
======== ========
</TABLE>
Supplemental disclosure of cash flow information:
Cash paid for interest during the six months ended June 30, 1997 and 1996
amounted to $812,711 and $628,508, respectively.
Non-cash transactions:
Dividends declared and unpaid as of June 30, 1997 and 1996 amounted to
$353,772.
See accompanying notes to financial statements.
<PAGE>
CORPORATE REALTY INCOME TRUST I
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
(Unaudited)
1. General
The accompanying financial statements and related notes of Corporate Realty
Income Trust I (the "Company") have been prepared in accordance with generally
accepted accounting principles for interim financial reporting and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly,
certain information and footnote disclosures normally included in financial
statements prepared under generally accepted accounting principles have been
condensed or omitted pursuant to such regulations. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation of the Company's financial position, results
of operations and cash flows have been included. These financial statements
should be read in conjunction with the Company's Form 10-K for the year ended
December 31, 1996.
The amount of net income per share was calculated using the number of
shares outstanding of 1,010,776 for the periods ended June 30, 1997 and 1996.
Dividends declared as of June 30, 1997 and 1996 amounted to $.35 per share.
2. Rental Income
In accordance with the Financial Accounting Standards Board Statement No.
13, "Accounting for Leases," the Company recognizes rental income on a
straight-line basis over the fixed term of the lease period. Rental income is
net of the rent due to Circuit City under the terms of the ground lease.
Deferred rent receivable represents unbilled future rentals. The following
reconciles rental income received to rental income recognized for the three and
six months ended June 30, 1997 and 1996.
<TABLE>
<CAPTION>
For the three months For the six months
ended June 30, ended June 30,
1997 1996 1997 1996
------- ------- --------- ---------
<S> <C> <C> <C> <C>
Rental income received $818,998 $816,629 $1,637,996 $1,633,257
Deferred rent 36,818 39,188 73,637 78,376
------- ------- --------- ---------
Rental income recognized $855,816 $855,817 $1,711,633 $1,711,633
======= ======= ========= =========
</TABLE>
<PAGE>
CORPORATE REALTY INCOME TRUST I
NOTES TO FINANCIAL STATEMENTS (Cont'd)
June 30, 1997
(Unaudited)
3. Transactions with Affiliates
The Company maintains an interest-bearing customer account with Smith
Barney Inc. For the three and six months ended June 30, 1997 and 1996, the
Company earned interest on this account of $7,866 and $14,759, respectively and
$9,455 and $13,624, respectively. For purposes of these financial statements,
the Company considers this account to be cash.
The Company incurred expenses of $22,000 for the six months ended June 30,
1997 for administrative services performed by Corporate Realty Advisors, Inc.
(the "Advisor") which was paid at June 30, 1997. The Advisor earned $63,934 of
the annual advisor fee for the six months ended June 30, 1997, of which $20,004
was unpaid as of such date.
4. Proposed Merger Agreement
On May 29, 1997 the Company entered into a definitive merger agreement with
a publicly traded real estate investment trust, Lexington Corporate Properties,
Inc., ("Lexington") whereby the Company would be merged into Lexington. In the
merger, Lexington would assume all of the mortgage debt of the Company and would
issue to the Company shareholders between approximately 1.272 and 1.481 shares
of Lexington common stock for each outstanding share of Company stock. The
number of shares to be issued by Lexington will be based upon the closing price
of Lexington's stock during the twenty trading days immediately preceding the
fifth business day prior to the date of the Company's shareholders' meeting.
The transaction, subject to approval by the Company's shareholders and certain
other customary conditions, is expected to close in September 1997.
In connection with the proposed merger, the Company has incurred expenses
of approximately $238,000.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations for the six months ended June 30, 1997
Liquidity and Capital Resources
- -------------------------------
At June 30, 1997, the Company had cash of approximately $947,000 which was
invested in an interest bearing account, and prepaid expenses and receivables
totalling approximately $138,000. Of these amounts, approximately $323,000
represented a working capital reserve, $353,772 was reserved to pay the
quarterly dividend in August 1997 and the balance was reserved for operations.
The working capital reserve decreased by approximately $190,000 from the
previous quarter due to incurring approximately $238,000 of expenses in
connection with a proposed merger.
On May 29, 1997, the Company entered into a definitive merger agreement
with a publicly traded real estate investment trust, Lexington Corporate
Properties, Inc. ("Lexington") whereby the Company would be merged with and into
Lexington. Under the terms of the merger agreement, the shareholders of the
Company would receive between 1.272 and 1.481 shares of common stock of
Lexington in exchange for each share of Company stock. The merger is subject to
Company shareholder approval and certain other customary conditions. The
transaction, if approved, is expected to close in September.
The Company's only significant liabilities are mortgages aggregating
approximately $15,386,610, maturing at various dates in approximately three to
five years. The Company anticipates satisfying these mortgages with the proceeds
of refinancings or sales of the underlying properties. In the proposed merger,
all of the mortgage debt would be assumed by Lexington.
The Company expects sufficient cash flow to be generated from operations to
meet its current operating and debt service requirements on a short-term and
long-term basis. The Company expects to incur an additional $120,000 in
proposed merger expenses which would be paid from working capital reserves and
would, therefore, not affect the Company's current dividend rate paid to
shareholders.
Results of Operations
- ---------------------
Net income for the three and six months ended June 30, 1997 decreased by
approximately $218,000 from each of the corresponding periods in 1996 due to
expenses incurred in 1997 in connection with the proposed merger. The Company
incurred approximately $238,000 of such merger expenses. These additional
expenses were offset by a decrease in the annual advisor fee, which is based on
cash flow, by approximately $20,000.
The Company completed the property acquisition stage of its life cycle in
1992 and has been in the portfolio management stage since the beginning of
1993. As a result, rental income, interest expense and depreciation are
comparable for the periods ended June 30, 1997 and 1996.
<PAGE>
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(10.1) Agreement and Plan of Merger dated May 29, 1997 between the Company
and Lexington Corporate Properties, Inc. incorporated by reference
to Exhibit (1) to the Company's Form 8-K Current Report dated
May 29, 1997.
(27.1) Financial Data Schedule
(b) Reports on Form 8-K
The Company filed a report on Form 8-K with the Commission dated
May 29,1997 to report under Item 5, Other Events, that the Company had
entered into an Agreement and Plan of Merger with Lexington Corporate
Properties, Inc.
<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.
CORPORATE REALTY INCOME TRUST I
(Registrant)
Dated: August 18, 1997 By: James C. Cowles
Chairman, President, and Treasurer
Dated: August 18, 1997 By: Valerie A. St. John
Controller
<PAGE>
<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.
CORPORATE REALTY INCOME TRUST I
(Registrant)
Dated: August 18, 1997 By: /s/ James C. Cowles
James C. Cowles
Chairman, President, and Treasurer
Dated: August 18, 1997 By: /s/ Valerie A. St. John
Valerie A. St. John
Controller
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
EXHIBIT 27.1
FINANCIAL DATA SCHEDULE
CORPORATE REALTY INCOME TRUST I
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S UNAUDITED FINANCIAL STATEMENTS FOR THE QUARTERLY PERIOD ENDED JUNE 30,
1997 AS REPORTED ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 946,623
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,084,933
<PP&E> 32,600,000
<DEPRECIATION> 5,453,098
<TOTAL-ASSETS> 30,396,681
<CURRENT-LIABILITIES> 761,744
<BONDS> 0
0
0
<COMMON> 101,078
<OTHER-SE> 14,165,249
<TOTAL-LIABILITY-AND-EQUITY> 30,396,681
<SALES> 1,711,633
<TOTAL-REVENUES> 1,726,392
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 786,246
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 701,094
<INCOME-PRETAX> 239,052
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 239,052
<EPS-PRIMARY> .24
<EPS-DILUTED> .24
</TABLE>
