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, 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, 33TH 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 November 11, 1997 is 1,010,776 shares.
<PAGE>
CORPORATE REALTY INCOME TRUST I
Index
PAGE NO.
Part I Financial information 3
Balance Sheets --
September 30, 1997 and December 31, 1996 4
Statements of Income --
For the three months ended September 30, 1997 and 1996 5
Statements of Income -
For the nine months ended September 30, 1997 and 1996 6
Statements of Cash Flows --
For the nine months ended September 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
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
SEPTEMBER 30, DECEMBER 31,
<TABLE>
<CAPTION>
1997 1996
ASSETS: (Unaudited)
<S> <C> <C>
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 5,652,376 5,054,542
----------- -----------
26,947,624 27,545,458
Cash and cash equivalents 1,005,219 834,489
Rent receivable 39,375 -
Prepaid expenses 98,935 102,525
Deferred rent receivable 2,130,533 2,020,078
Deferred financing costs, net of
accumulated amortization of $160,742 in
1997 and $143,594 in 1996 65,416 82,564
----------- -----------
Total assets $30,287,102 $30,585,114
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Liabilities:
Mortgage loans payable $15,350,200 $15,404,146
Accrued expenses 253,030 78,436
Due to affiliates 65,824 13,941
Rent received in advance 206,510 0
Dividends payable 353,772 353,772
----------- -----------
Total liabilities 16,229,336 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 13,956,688 14,633,741
Retained earnings - -
----------- -----------
Total shareholder's equity 14 ,057,766 14,734,819
----------- -----------
Total liabilities and shareholders' equity $30,287,102 $30,585,114
=========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
CORPORATE REALTY INCOME TRUST I
STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
======== ========
<S> <C> <C>
Income:
Rental $ 855,817 $ 855,818
Dividend and interest 7,353 12,811
-------- --------
863,170 868,629
-------- --------
Expenses:
Interest 349,971 352,032
Depreciation 199,278 199,279
General and administrative 50,340 47,696
Annual advisor fee 34,820 44,312
Proposed merger expenses 83,550 0
-------- --------
717,959 643,319
-------- --------
Net income $ 145,211 $ 225,310
======== ========
Net income per share $ .14 $ .22
======== ========
Dividend per share $ .35 $ .35
======== ========
</TABLE>
<PAGE>
See accompanying notes to financial statements
CORPORATE REALTY INCOME TRUST I
STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
======== ========
<S> <C> <C>
Income:
Rental $2,567,450 $2,567,451
Dividend and interest 22,112 26,435
--------- ---------
2,589,562 2,593,886
--------- ---------
Expenses:
Interest 1,051,065 1,056,501
Depreciation 597,834 597,836
General and administrative 136,529 127,220
Annual advisor fee 98,754 131,211
Proposed merger expenses 321,117 0
--------- ---------
2,205,299 1,912,768
--------- ---------
Net income $ 384,263 $ 681,118
======== ========
Net income per share $ .38 $ .67
======== ========
Dividend per share $ 1.05 $ 1.05
======== ========
</TABLE>
See accompanying notes to financial statements
<PAGE>
CORPORATE REALTY INCOME TRUST I
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 384,263 $ 681,118
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization of
deferred financing costs 614,982 614,981
Changes in assets and liabilities:
(Increase) decrease in rent receivable (39,375) 206,510
Decrease in prepaid expenses 3,590 93,688
Increase in deferred rent receivable (110,455) (115,195)
Increase (decrease) in accrued expenses 174,594 (8,634)
Increase in amount due to affiliate 51,883 89,996
Increase in rent received in advance 206,510 -
--------- ---------
Total adjustments 901,729 881,346
--------- ---------
Net cash provided by operating activities 1,285,992 1,562,464
--------- ---------
Cash flows from financing activities:
Principal payments on mortgage (53,946) (49,075)
Dividends paid to shareholders (1,061,316) (1,061,316)
--------- ---------
Net cash used in financing activities (1,115,262) (1,110,391)
--------- ---------
Net increase in cash and cash equivalents 170,730 452,073
Cash and cash equivalents at beginning of period 834,489 531,435
--------- ---------
Cash and cash equivalents at end of period $ 1,005,219 $983,508
========= =========
</TABLE>
Supplemental disclosure of cash flow information:
Cash paid for interest during the nine months ended September 30, 1997
and 1996 amounted to $1,137,585 and $934,605, respectively.
Non-cash transactions:
Dividends declared and unpaid as of September 30, 1997 and 1996
amounted to $353,772.
See accompanying notes to financial statements.
<PAGE>
CORPORATE REALTY INCOME TRUST I
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 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, as
amended, 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 September 30,
1997 and 1996. Dividends declared as of September 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 nine months ended September 30, 1997
and 1996.
<TABLE>
<CAPTION>
For the three months For the nine months
ended September 30, ended September 30,
1997 1996 1997 1996
------- ------- --------- ---------
<S> <C> <C> <C> <C>
Rental income received $818,998 $818,999 $2,456,995 $2,452,256
Deferred rent 36,819 36,819 110,455 115,195
------- ------- --------- ---------
Rental income recognized $855,817 $855,818 $2,567,450 $2,567,451
======= ======= ========= =========
</TABLE>
<PAGE>
CORPORATE REALTY INCOME TRUST I
NOTES TO FINANCIAL STATEMENTS (CONT'D)
SEPTEMBER 30, 1997
(Unaudited)
3. TRANSACTIONS WITH AFFILIATES
The Company maintains an interest-bearing customer account with Smith
Barney Inc. For the three and nine months ended September 30, 1997 and
1996, the Company earned interest on this account of $7,353 and $22,112,
respectively and $12,811 and $26,435, respectively. For purposes of
these financial statements, the Company considers this account to be
cash.
The Company incurred expenses of $33,000 for the nine months ended
September 30, 1997 for administrative services performed by Corporate
Realty Advisors, Inc. (the "Advisor") of which $11,000 was unpaid at
September 30, 1997. The Advisor earned $98,754 of the annual advisor fee
for the nine months ended September 30, 1997, of which $54,824 was
unpaid as of such date.
1. 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 December
1997.
In connection with the proposed merger, the Company has incurred
expenses of approximately $321,000.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
LIQUIDITY AND CAPITAL RESOURCES
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 December.
At September 30, 1997, the Company had cash of approximately
$1,005,000 which was invested in an interest bearing account, and prepaid
expenses and receivables totalling approximately $138,000. Of these
amounts, approximately $264,000 represented a working capital reserve,
$353,772 was reserved to pay the quarterly dividend in November 1997 and
the balance was reserved for operations. The working capital reserve
decreased by approximately $59,000 from the previous quarter due to
incurring additional expenses in connection with a proposed merger of
approximately $83,000.
The Company's only significant liabilities are mortgages aggregating
approximately $15,350,200, 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 $75,000 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 nine months ended September 30, 1997
decreased by approximately $80,000 and $297,000 from each of the
corresponding periods in 1996 due to expenses incurred in 1997 in
connection with the proposed merger. The Company incurred approximately
$83,000 and $321,000 of such merger expenses during the respective three
and nine month periods in 1997. General and administrative expenses
during the nine months ended September 30 increased by approximately
$9,000 in 1997 due to an increase in legal expenses. The annual advisor
fee, which is based on cash flow, decreased by approximately $9,000 and
$32,000 for the three and nine month periods, respectvely, due to the
decreased cash flow from expenses incurred relating to the proposed
merger.
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 September 30, 1997 and
1996.
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(27.1) Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter in which this
report is filed.
<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: November 12, 1997 By: JAMES C. COWLES
Chairman, President, and Treasurer
Dated: November 12, 1997 By: VALERIE A. ST. JOHN
Controller
<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: November 12, 1997 By: /s/ James C. Cowles
James C. Cowles
Chairman, President, and Treasurer
Dated: November 12, 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
SEPTEMBER 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,005,219
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,143,529
<PP&E> 32,600,000
<DEPRECIATION> 5,652,376
<TOTAL-ASSETS> 30,287,102
<CURRENT-LIABILITIES> 879,136
<BONDS> 0
0
0
<COMMON> 101,078
<OTHER-SE> 13,956,688
<TOTAL-LIABILITY-AND-EQUITY> 30,287,102
<SALES> 2,567,450
<TOTAL-REVENUES> 2,589,562
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,154,234
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,051,065
<INCOME-PRETAX> 384,263
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 384,263
<EPS-PRIMARY> .38
<EPS-DILUTED> .38
</TABLE>
