SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
_______________________________________________________
[X] Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Quarterly Period Ended September 30, 1996
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 0-20047
I.R.S. Employer Identification Number 41-1691930
Royale Investments, Inc.
3430 List Place
Minneapolis,MN 55416
Telephone: (612) 920-4078
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
requirements for the past 90 days. Yes X No_____
The number of shares outstanding of the Registrant's stock as of
November 11, 1996 was:
1,420,000 Shares of Common Stock
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<TABLE>
Royale Investments, Inc.
BALANCE SHEETS
<CAPTION>
Sept. 30, Dec. 31,
1996 1995
(Unaudited)
ASSETS
REAL ESTATE INVESTMENTS:
<S> <C> <C>
Property subject to operating leases $25,027,358 $25,027,358
Less: accumulated depreciation 1,818,840 1,403,020
23,208,518 23,624,338
CASH AND CASH EQUIVALENTS 143,799 257,970
MARKETABLE SECURITIES 537,235 580,121
OTHER ASSETS 362,150 316,944
$24,251,702 $24,779,373
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
<S> <C> <C>
Mortgage notes payable $14,718,451 $14,915,643
Dividends payable 177,500 177,500
Accounts payable and other liabilities 86,023 97,922
14,981,974 15,191,065
STOCKHOLDERS' EQUITY:
Common stock - $.01 par value
Authorized - 50,000,000 shares
Issued - 1,420,000 shares 14,200 14,200
Additional paid-in capital 12,353,398 12,353,398
Distributions in excess of
accumulated earnings (3,097,870) (2,779,290)
9,269,728 9,588,308
$24,251,702 $24,779,373
</TABLE>
<PAGE>
<TABLE>
Royale Investments, Inc.
STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
INCOME:
<S> <C> <C> <C> <C>
Rental income $616,525 $609,045 $1,844,187 $1,827,136
Interest income 7,858 11,392 25,120 37,065
624,383 620,437 1,869,307 1,864,201
EXPENSES:
Operations and management 79,153 80,832 269,276 261,765
Mortgage and other interest 310,941 316,135 936,812 951,630
Depreciation and amortization 141,771 141,610 425,312 425,710
Administrative and general 3,715 7,034 23,987 27,236
535,580 545,611 1,655,387 1,666,341
NET INCOME $ 88,803 $ 74,826 $ 213,920 $ 197,860
PER COMMON SHARE:
Net income $.06 $.05 $.15 $.14
Dividends declared $.13 $.13 $.38 $.38
Weighted average number of
shares outstanding 1,420,000 1,420,000 1,420,000 1,420,000
FUNDS FROM OPERATIONS $227,410 $213,433 $629,741 $613,681
PER SHARE $.16 $.15 $.44 $.43
</TABLE>
<PAGE>
<TABLE>
Royale Investments, Inc.
STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Nine Months Ended Sept 30,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 213,920 $ 197,860
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 425,312 425,710
Amortization of marketable securities (20,842) -
Changes in operating assets and liabilities:
(Increase) decrease in other assets (54,697) 12,102
Decrease in accounts payable and
other liabilities (11,899) (169,536)
Net cash provided by operating activities 551,794 466,136
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturity of marketable securities 588,000
Purchase of marketable securities (524,272) -
Net cash provided by investing activities 63,728 -
CASH FLOWS FROM FINANCING ACTIVITIES:
Refund of mortgage acquisition costs - 11,188
Principal payments on mortgage loans (197,193) (175,562)
Dividends paid (532,500) (532,500)
Net cash (used) by financing activities (729,693) (696,874)
NET DECREASE IN CASH (114,171) (230,738)
CASH AND CASH EQUIVALENTS:
Beginning of period 257,970 1,130,864
End of period $ 143,799 $ 900,126
Supplementary data:
Income taxes paid $4,542 $4,542
Interest paid $944,952 $951,247
</TABLE>
<PAGE>
Royale Investments, Inc.
NOTES TO FINANCIAL STATEMENTS
September 30, 1996
Note 1 - Basis of Presentation
The accompanying unaudited financial statements have been prepared in accordance
with the instructions to Form 10-QSB and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three and nine months ended September 30, 1996, should
not be considered indicative of the results that may be expected for the year
ended December 31, 1996. The accompanying financial statements and footnotes
thereto should be read in conjunction with the company's annual report on Form
10-KSB for the year ended December 31, 1995.
<PAGE>
ROYALE INVESTMENTS, INC.
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
Results of Operations
During the nine month periods ended September 30, 1996 and 1995, the Company
owned and leased seven properties in five states to operators of retail food
stores.
Revenues for the third quarter and for the nine months ended September 30, 1996,
increased slightly over the comparable periods of 1995 due to an increase in
rent income from the Minneapolis Cub store, which was partially offset by a
decrease in interest income.
Expenses in 1996 were generally consistent with 1995 and with management's
expectations. Mortgage interest decreased in 1996, and is the primary reason
for the increase in net income.
Net income increased to $89,000 for the third quarter of 1996 versus $75,000 for
the third quarter of 1995, a 19% increase. For the nine months ended September
30, 1996, net income increased 8% to $214,000 from $198,000 in the first nine
months of 1995.
The Company considers Funds from operations ("FFO") along with net income and
cash flows as a measure of the Company's operating performance and liquidity.
FFO is essentially net income computed in accordance with generally accepted
accounting principles, but excluding depreciation expense and gains (or losses)
from the sales of property. For the third quarter of 1996, FFO increased 6.5%
to $227,000 from $213,000 in 1995. For the nine months ended September 30,
1996, FFO increased to $630,000 versus $614,000 for the first nine months of
1995.
Liquidity and Capital Resources
The Company's properties are all leased on a triple-net basis, which places
the risk of rising property costs, such as maintenance insurance and property
taxes, on the tenant. The leases generally provide that the tenant is also
responsible for roof and structural repairs. Hence, the Company's only demand
for funds has been for the payment of management and administrative expenses,
dividends and mortgage payments. Property acquisitions have been funded by
equity offerings and mortgage borrowings.
Net cash provided by operating activities totaled $552,000 and $466,000 for
the nine months ended September 30, 1996 and 1995, respectively. The increase
was primarily the result of changes in operating assets and liabilities arising
from timing differences in receipts and disbursements from year to year. The
Company considers its liquidity to be sufficient to meet its operating and
distribution requirements for the remainder of 1996.
The Company invests in short-term treasury securities from time to time, and net
cash provided by investing activities reflect those transactions.
Net cash used in financing activities totaled $730,000 and $697,000 for the nine
months ended September 30, 1996 and 1995, respectively, including dividends paid
to shareholders. The increase is due primarily to the increase in mortgage
amortization.
The Company declared a dividend of $177,500, or $.125 per share, on September
24, 1996, payable to shareholders of record on September 30, 1996. The dividend
was paid on October 15, 1996.
<PAGE>
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits filed with Form 10-QSB
Exhibit 27. Financial Data Schedule
b) No reports filed on Form 8-K for the quarter ended September 30, 1996.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused the report to be signed on it's behalf by the
undersigned, thereunto duly authorized.
Dated: November 14, 1996
ROYALE INVESTMENTS, INC.
By:________________________
Vernon R. Beck
Chief Executive Officer
By:________________________
Kenneth R. Neubauer
Chief Financial Officer
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 143799
<SECURITIES> 537325
<RECEIVABLES> 4375
<ALLOWANCES> 0
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<CURRENT-ASSETS> 687419
<PP&E> 25027358
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<TOTAL-ASSETS> 24251702
<CURRENT-LIABILITIES> 263523
<BONDS> 14718451
0
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<COMMON> 14200
<OTHER-SE> 9255528
<TOTAL-LIABILITY-AND-EQUITY> 24251702
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<CGS> 0
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<OTHER-EXPENSES> 718575
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