<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1996
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE ACT
For the transition period from ____________ to _____________
Commission File Number 0-20272
<TABLE>
<CAPTION>
<S> <C>
RESOURCE CAPITAL GROUP, INC.
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 13-3617377
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
419 Crossville Road, Suite 204 Roswell, GA 30075
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
770-649-7000
- --------------------------------------------------------------------------------
(Issuer's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last report)
</TABLE>
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15 (d) of the Exchange Act during the past 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. X Yes [ ] No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Check whether the registrant filed all documents and reports required to be
filed by Sections 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
X Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of September 30, 1996, 411,489 shares of common stock of the Registrant were
outstanding.
<PAGE> 2
INDEX
RESOURCE CAPITAL GROUP, INC.
<TABLE>
<CAPTION>
Part I. Financial Information
Page
Number
------
<S> <C> <C>
Item 1. Consolidated Financial Statements (Unaudited)
Consolidated Balance Sheet - September 30, 1996
and December 31, 1995 3
Consolidated Statement of Operations - For the
Three Months and Nine Months Ended September 30,
1996 and 1995 4
Consolidated Statement of Cash Flows - For the
Nine Months Ended September 30, 1996 and 1995 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis or
Plan of Operation 11
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 15
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
a) Consolidated Balance Sheet
RESOURCE CAPITAL GROUP, INC.
Consolidated Balance Sheet
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
September 30, December 31,
1996 1995
------------- -------------
<S> <C> <C>
Cash and cash equivalents $ 424,440 $ 1,236,202
Investment in marketable equity securities- at cost, market $93,262 88,891 84,375
Investments in and receivables from partnerships (note 3) 2,685,514 2,579,375
Receivable from affiliated entity 225,000
Real and personal property, at cost (note 5)
Land 1,086,645 458,035
Buildings and improvements 5,382,027 1,085,207
Furniture and equipment 698,557 68,217
------------ -------------
7,167,229 1,611,459
Less accumulated depreciation (124,987) (24,076)
------------ -------------
7,042,242 1,587,383
Deferred charges-net of accumulated amortization 540,789 20,114
Other assets 76,546 12,207
------------ -------------
$ 10,858,422 $ 5,744,656
============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Note payable $ 169,850 $ 210,680
Accounts payable 94,527 23,214
Accrued expenses
Interest 40,442 3,877
Payroll 21,184 29,068
Professional fees 27,000 36,000
Taxes 43,898 50,412
Other 11,463 24,321
------------ -------------
143,987 143,678
Security deposits 73,791 12,625
Mortgages payable (note 7) 5,730,753 355,486
Deferred tax liability 26,991 68,991
------------ -------------
Total Liabilities 6,239,899 814,674
Commitments and contingencies
Minority interest 109,021 283,181
Stockholders' equity
Common stock - authorized 1,000,000 shares
$.01 par value per share, issued 498,608 shares 4,986 4,986
Additional paid-in capital 4,459,034 4,459,034
Retained earnings 177,194 247,078
Less treasury stock, at cost, 87,119 shares (131,712) (60,543)
Unrealized (loss) on investment 0 (3,754)
------------ -------------
Total Stockholders' Equity 4,509,502 4,646,801
------------ -------------
$ 10,858,422 $ 5,744,656
============ =============
</TABLE>
See notes to consolidated financial statements
3
<PAGE> 4
b) Consolidated Statement of Operations
RESOURCE CAPITAL GROUP, INC.
Consolidated Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ --------------------------
1996 1995 1996 1995
---------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Income
Rental operations $ 405,696 $ 22,125 $ 688,542 $ 40,126
Interest - affiliated entity 53,145 74,381 159,436 469,213
Equity in earnings (loss) of
unconsolidated partnerships (143) (38,749) (2,978) 672,099
Management fees - affiliated entity 15,000 15,000 45,000 45,000
Interest - investments 10,603 29,524 30,554 69,176
Gain on settlement of note-affiliated entity (note 4) 0 0 0 529,091
Other income 529 0 1,114 0
---------- ----------- ---------- -----------
Total Income 484,830 102,281 921,668 1,824,705
---------- ----------- ---------- -----------
Expenses
Rental operations 208,002 6,829 337,997 12,867
General and administrative 117,485 103,789 354,807 303,181
Interest 122,296 11,934 213,031 20,146
Depreciation and amortization 61,306 4,185 107,697 8,050
---------- ----------- ---------- -----------
Total Expenses 509,089 126,737 1,013,532 344,244
Income (loss) before minority share of (income) (24,259) (24,456) (91,864) 1,480,461
Minority share of (income) (3,822) (779) (14,020) (2,879)
---------- ----------- ---------- -----------
Income (loss) before income taxes (28,081) (25,235) (105,884) 1,477,582
(Provision for) benefit of income taxes (note 6) 9,547 8,580 36,000 (403,268)
---------- ----------- ---------- -----------
Net income (loss) $ (18,534) $ (16,655) $ (69,884) $ 1,074,314
========== =========== ========== ===========
Net income (loss) per share $ (.05) $ (.04) $ (.17) $ 2.50
========== =========== ========== ===========
</TABLE>
See notes to consolidated financial statements
4
<PAGE> 5
b.) Consolidated Statement of Cash Flows
RESOURCE CAPITAL GROUP, INC
Consolidated Statement of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------------
1996 1995
---------- ----------
<S> <C> <C>
Cash flows from operating activities
Net Income (loss) $ (69,884) $ 1,074,314
Adjustments to reconcile net income (loss) to
cash provided (used) by operating activities
Depreciation and amortization 107,697 8,050
Equity in (earnings) loss of unconsolidated partnerships 66,686 (672,099)
Minority share of income (loss) 14,020 30,379
Changes in certain other accounts
Investment in marketable securities, net (762)
Accrued interest receivable 1,066,672
Deferred charges and other assets (591,800) (33,208)
Net deferred tax asset 265,406
Accounts payable 71,313 587
Accrued expenses 309 (59,228)
Deferred income taxes (42,000) 137,862
Security deposit 61,166 7,375
----------- -----------
Net cash provided (used) by operating activities (383,255) 1,826,110
----------- -----------
Cash flows from investing activities
Additions to real and personal property (5,555,770) (453,799)
Deposits receivable (144,500)
Purchase of limited partner interest in
unconsolidated partnerships (39,325)
Repayments from (advances to) affiliated entity, net (133,500) 69,920
Receipt of notes and mortgage receivables from MLP 675,133
Receipt from affiliated entity 225,000
----------- -----------
Net cash provided (used) by investing activities (5,503,595) 146,754
----------- -----------
Cash flows from financing activities
Proceeds of mortgage payable, net 5,375,267 358,179
Receipt from minority interest 13,070
Payments on note payable (40,830) (29,808)
Purchase of treasury stock (71,169) (60,000)
Distribution to minority interest (201,250)
----------- -----------
Net cash provided by financing activities 5,075,088 268,371
----------- -----------
Net increase (decrease) in cash and cash equuivalents (811,762) 2,241,235
Cash and cash equivalents at beginning of period 1,236,202 64,595
----------- -----------
Cash and cash equivalents at end of period $ 424,440 $ 2,305,830
=========== ===========
</TABLE>
See notes to consolidated financial statements
5
<PAGE> 6
RESOURCE CAPITAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(Unaudited)
Readers of this quarterly report should refer to the Company's audited
financial statements for the year ended December 31, 1995 as certain footnote
disclosures which would substantially duplicate those contained in such audited
financial statements have been omitted from this report.
NOTE 1 ADJUSTMENTS
In the opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments necessary to present the Company's financial
position, results of operations and cash flows for the periods indicated. Such
adjustments consisted only of normal recurring items.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principals of Consolidation
The consolidated financial statements of Resource Capital Group, Inc. have been
prepared in accordance with generally accepted accounting principles and
reflect the policies detailed below.
The consolidated financial statements of the Company include the accounts of
Resource Capital Group, Inc. and its seventy-five (75) percent owned
subsidiaries, 8050 Roswell Associates, LLC, (Roswell) and 419 Crossville
Associates, LLC (Crossville) and its ninety-nine (99) percent owned
subsidiaries, AGS Carriage House Associates (Carriage House), AGS Compass
Pointe Associates (Compass Pointe), Colonial Park Commons, LLC (Colonial Park),
Heide Lot, LLC (Heide Lot) and Meggan Lot, LLC (Meggan Lot). The remaining
twenty-five (25) percent ownership of Roswell and Crossville and one (1)
percent ownership of Carriage House, Compass Pointe, Colonial Park, Heide Lot
and Meggan Lot is controlled by Hunter Management Company. All intercompany
transactions and balances have been eliminated in consolidation.
6
<PAGE> 7
NOTE 3 INVESTMENTS IN AND RECEIVABLES FROM PARTNERSHIPS
The balances are summarized as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------ -----------
<S> <C> <C>
Notes receivable from MLP $1,983,501 $1,983,501
Accrued interest receivable from MLP 24,794 24,794
Advances receivable from MLP 977,677 844,177
Accountability to partnerships (139,783) (73,097)
Purchase of limited partner
interest in AGS Carriage House/
AGS Compass Pointe 39,325 --
---------- ----------
2,885,514 2,779,375
Valuation allowance (200,000) (200,000)
---------- ----------
$2,685,514 $2,579,375
========== ==========
</TABLE>
In January 1995, MLP completed the sale of two of its properties, the Birchwood
and Foxfire Apartments. As a result of this sale, MLP repaid the Company
$942,581 covering the principal and accrued interest due on the Birchwood and
Foxfire notes receivable and a portion of the advances receivable due to the
Company. In addition, MLP refinanced the mortgage loans on Aspen Walk
Apartments and Rolling Hills Apartments on March 17, 1995. Cash proceeds of
$1,833,765 from this refinancing were sufficient to cover a substantial portion
of the remaining accrued interest receivable on the MLP notes, and the $600,000
mortgage note receivable (see note 4).
Interest income earned and received on the notes receivable from MLP for the
three months ended September 30, 1996 amounted to $74,381. Interest income
reported for the corresponding period in 1995 was also $74,381.
Based upon an evaluation of the Company's notes receivable from MLP, in 1995
management provided a $200,000 valuation allowance to reflect its estimate of
their realizability.
In 1996 the Company was assigned 23.825 limited partner units from existing
limited partners of AGS Compass Pointe Associates (Compass) for $23,825 and
15.5 limited partner units of AGS Carriage House Associates (Carriage) for
$15,500. These assignments represent 90.5% ownership of Compass and 73.6%
ownership of Carriage. In addition the Company acquired an additional 3.5%
limited partner interest in Compass and 20.4% limited partner interest in
Carriage (by default pursuant to the Partnership Agreements) from the
non-participating limited partners.
7
<PAGE> 8
NOTE 4 MORTGAGE NOTE RECEIVABLE - AFFILIATED ENTITY
In March 1995, the Company received $659,524 in full settlement of its $600,000
second mortgage note and accrued interest receivable due from MLP. This note,
which carried a face value of $600,000 along with accrued interest thereon and
54,317 shares of the Company's common stock was purchased from a finance
company in 1993 for $100,000. The Company carried the note on its books at its
cost basis of $70,909 and accordingly reflected a gain of $529,091 in the 1995
statement of operations. Interest income on this note for the three months
ended March 31, 1995 amounted to $62,524.
NOTE 5 ACQUISITION OF PROPERTIES
In 1995 the Company purchased a 75% interest in both Roswell and Crossville,
each of which was accounted for as a purchase. The entire purchase price was
allocated to real and personal property since this amount was less than the
fair value of the properties. The remaining 25% interest in each entity was
purchased by Hunter Management Company (Hunter). Hunter provides management
services to Roswell, Crossville, Carriage House, Compass Pointe, Colonial Park
and the Company's Partnership holdings. Additionally, the sole shareholder of
Hunter is a minority shareholder of the Company.
The purchase price for Roswell approximated $440,000 of which $330,000 was
contributed by the Company with the remaining $110,000 being contributed by
Hunter. Operations of Roswell have been included in the Company's 1995
financial statements since May 1995. The purchase price of Crossville
approximated $1,000,000, of which the Companycontributed $750,000 while Hunter
contributed $250,000. Operations of Crossville have been included in the
Company's 1995 financial statements since November, 1995.
In June 1995, Roswell obtained a mortgage in the amount of $360,000 and with
the proceeds returned $247,500 to the Company and $82,500 to Hunter. In
addition, in May, 1996 Crossville obtained a mortgage in the amount of $880,000
and with the proceeds returned $600,000 to the Company (75%) and $200,000 to
Hunter (25%). Proceeds returned to Hunter were used, in part, to satisfy a
$225,000 advance made by the Company on behalf of Hunter in connection with
this acquisition.
The Company acquired an additional 94% limited partner interest in AGS Compass
Pointe Associates for $23,825 and acquired an additional 94% limited partner
interest in AGS Carriage House Associates for $15,500. Hunter acquired the
remaining 1% interest in Compass Pointe and Carriage House. Operations of
Carriage House have been included in the Company's 1996 financial statements
since June, 1996. Operations of Compass Pointe have been included in the
Company's 1996 financial statements since May, 1996.
8
<PAGE> 9
In September 1996 the Company purchased a 99% interest in Colonial Park, Heide
Lot and Meggan Lot. The remaining 1% interest in each entity was purchased by
Hunter Management Company. Colonial Park owns a 18,387 square foot office
building in Roswell, Fulton County, Georgia. Heide Lot and Meggan Lot each own
a developmental building lot adjacent to the Colonial Park office building.
The purchase price for Colonial Park approximated $1,087,500. Colonial Park
obtained a mortgage in the amount of $787,500 and the Company contributed
$297,000 with the remaining $3,000 being contributed by Hunter. The purchase
price for Heide Lot and Meggan Lot approximated $100,000 each of which the
Company contributed $198,000 ($99,000 each) and Hunter contributed the
remaining $2,000 ($1,000 each). Operations of Colonial Park, Heide Lot and
Meggan Lot have been included in the Company's 1996 financial statements since
September 25, 1996.
The following summarized, unaudited pro forma results of operations for the
three months and nine months ended September 30, 1996 and 1995 assumes the
Roswell, Crossville, Carriage House, Compass Pointe, Colonial Park, Heide Lot
and Meggan Lot acquisitions occurred January 1, 1995:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Rental operating income $458,350 $418,720 $1,314,275 $1,295,840
Net income (loss) $(11,750) $ (6,764) $ (67,063) $1,092,993
-------- -------- ---------- ----------
Net income (loss)
Per share $ (.03) $ (.02) $ (.16) $ 2.54
======== ======== ========== ==========
</TABLE>
NOTE 6 INCOME TAXES
The provision for income taxes of $403,268 for the nine months ended September
30, 1995 is based on the tax obtained by applying the statutory rate to the
taxable income earned in the period. In 1996 the Company recorded a tax
benefit of $9,547 for the three months and $36,000 for the nine months ended
September 30, 1996.
9
<PAGE> 10
NOTE 7 MORTGAGES PAYABLE
The mortgages payable consist of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------- ------------
<S> <C> <C>
Roswell - mortgage note payable (a) $ 346,742 $355,486
Crossville - mortgage note payable (b) 872,850 --
Carriage House-mortgage note payable (c) 1,922.386 --
Compass Pointe-mortgage note payable (d) 1,801,275 --
Colonial Park-mortgage note payable (e) 787,500 --
---------- --------
$5,730,753 $355,486
========== ========
</TABLE>
A) In June, 1995 Roswell obtained a $360,000 mortgage payable which matures
July 1, 2010. Required monthly payments of $3,766 are applied first to
interest at 9.53% with the balance to reduction of principal. Interest adjusts
every five years and is computed as 3.25 basis points over the average yield on
U.S. Treasury Securities, as defined. The mortgage has been quaranteed by both
the Company and Hunter.
B) In May, 1996 Crossville obtained a $880,000 mortgage payable which matures
June 1, 2011. Required monthly payments of $8,821 are applied first to
interest at 8.8% with the balance to reduction of principal. Interest adjusts
every five years and is computed as 3.25 basis points over the average yield on
U.S. Treasury Securities, as defined. The mortgage has been guaranteed by both
the Company and Hunter.
C) In 1996 Carriage House paid $566,747 to the first mortgage holder to fully
reinstate the mortgage. The Company contributed $443,500 in this regard. The
9 3/4% mortgage payable provides for equal monthly installments of principal
and interest of $16,812 until maturity on December 1, 2023. The mortgage is
non recourse to the Company.
D) In 1996 Compass Pointe paid $459,232 to the first mortgage holder to fully
reinstate the mortgage. The Company contributed $355,500 in this regard. The
9 3/4% mortgage payable provides for equal monthly installments of principal
and interest of $15,753 until maturity on December 1, 2023. The mortgage is
non recourse to the Company.
E) In September, 1996 Colonial Park obtained a $787,500 mortgage payable which
matures October 1, 2006. Required monthly payments of $7,276 are applied first
to interest at 9.375% with the balance to reduction of principal. Interest
adjusts every 5 years and is computed as 3.00 basis points over the average
yield on U.S. Treasury Securities, as defined. The mortgage has been
guaranteed by both the Company and Hunter.
10
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity is based primarily on its cash reserves, real estate
investment income, ability to obtain mortgage financing, plus the interest
income and loan repayments received on its notes receivable from its affiliate,
AGS Partners MLP, L.P. (MLP). These funds are used to pay the Company's normal
operating expenses and fund new acquisitions.
As of September 30, 1996, the Company had cash reserves of $424,440. For the
nine months ended September 30, 1996, the advances receivable from MLP
increased $133,500 for major capital improvements. This amount will be
refunded to the Company by MLP from escrows held by the first mortgage lender
and other reserves. The Company's cash reserves and current level of income
are sufficient to meet the Company's current level of operating expenses on an
ongoing basis.
Occupancy levels and rental rates have continued to increase during the past 3
years. The net operating income at the property levels combined with MLP
reserves continue to be sufficient to make full interest payments to the
Company. As the rental markets have continued to recover the Company has
allowed MLP to defer interest payments to make capital improvements,
replacements and upgrades to the individual apartment units, buildings and
mechanical systems. As a result of this program, in January, 1995 MLP
successfully sold two of its properties, the Birchwood and Foxfire Apartments
at a substantial profit and refinanced its two remaining properties (Aspen Walk
and Rolling Hills Apartments) in March 1995. MLP plans to continue to make
major capital improvements during the balance of 1996 and 1997 in an attempt to
maximize the resale values of the properties.
During the three months ended September 30, 1996, the Company received $74,381
in interest income from MLP. The ultimate realization of the Company's
investment in and receivable from MLP is dependent on the future operations
and/or sale of the MLP properties. However based on 1996 and future budgets
and recent property valuations, management believes that the two remaining MLP
properties have potential for future operating cash flows and future re-sale
values. In 1995, management made a valuation allowance against the MLP notes
of $200,000. During 1996, management has not changed this allowance but
intends to make adjustments pending the results of fourth quarter operations
and marketing efforts. MLP plans to list Rolling Hills Apartments for sale in
the fourth quarter of 1996.
The operating properties of the MLP and the various other real
11
<PAGE> 12
estate partnerships in which the Company is the general partner are financed
with non-recourse debt. The Company is not liable for the principal or
interest on the mortgages and the other assets of the partnerships are more
than adequate to satisfy other recourse liabilities. Therefore, the Company's
liquidity should not be adversely affected by these general partner
obligations.
In May 1995, the Company acquired for $330,000 a 75% interest in 8050 Roswell
Associates, LLC (Roswell) a Georgia limited liability Company which owns a
9,000 square foot office building in Atlanta, Georgia. Hunter Management
Company owns the remaining 25% interest. The purchase price for Roswell
approximated $440,000 and was financed, in part, with a $360,000 mortgage on
the building. The Company was repaid $247,500 in capital from the proceeds of
the mortgage. The Company and Hunter have both guaranteed this mortgage.
Based on 1996 and future budgets and recent property valuations the investment
should produce future operating cash flows and future resale values for the
Company.
In November 1995 the Company purchased for $750,000 a 75% interest in 419
Crossville Associates, LLC (Crossville) a Georgia limited liability Company
which owns a 19,000 square foot office building in Roswell, Fulton County,
Georgia. Hunter Management Company owns the remaining 25% interest. The
Company advanced $225,000 to Hunter for this acquisition. The building was
purchased in an all cash transaction, however, in May, 1996 Crossville closed
an $880,000 mortgage on the property and used the proceeds to return $600,000
in capital to the Company and $200,000 in capital to Hunter. Proceeds returned
to Hunter were used, in part, to satisfy the $225,000 advance from the Company.
The Company and Hunter have both guaranteed this mortgage. Based on 1996 and
future budgets and recent property valuations, the investment should produce
future operating cash flows and future resale values for the Company.
The Company is the General Partner and also a Limited Partner of AGS Carriage
House Associates and AGS Compass Pointe Associates. In 1996, the Company
expanded both partnerships to raise additional capital. In this regard the
Company has contributed $799,000 to these two properties and has obtained a 94%
limited partner interest in the partnerships. Hunter contributed $8,070 in
capital and has obtained a 1% limited partner interest. The capital was
utilized by the partnerships to satisfy debt requirements. The investment
should produce future operating cash flows and future resale values for the
Company.
In September 1996, the Company purchased for $297,000 a 99% interest in
Colonial Park Commons, LLC (Colonial Park) which owns a 18,387 square foot
office building in Roswell, Fulton County, Georgia. Hunter Management
contributed $3,000 and owns the remaining 1%. Colonial Park obtained a
$787,500 mortgage on the office building. The mortgage is guaranteed by the
Company and
12
<PAGE> 13
Hunter. In addition the Company acquired for $198,000 a 99% interest in Heide
Lot, LLC and Meggan Lot, LLC which owns the two developmental building lots
adjacent to the Colonial Park office building. Hunter contributed $2,000 and
owns the remaining 1%. Based on 1996 and future budgets and recent property
valuations, these investments should produce future operating cash flows and
future resale values for the Company.
For the three months ended September 30, 1996 the Company received $15,000 in
fees from Hunter Management Company for management supervisory services.
During the fourth quarter of 1996 the Company intends to list Compass Pointe
and Carriage House for sale and MLP intends to list Rolling Hills for sale. A
successful sale of any of these properties is expected to substantially
increase the Company's working capital and further finance the transition
described in the next section.
RESULTS OF OPERATIONS
The Company's business plan includes a transition from its current asset base
of mortgage receivables from MLP and general and limited partner interests in
apartment buildings located throughout the country, into small apartment
properties and suburban office buildings concentrated in Atlanta, Georgia and
other fast growing metropolitan areas in the southeast. Consistent with this
transition, for the three months ended September 30, 1996, the Company
recognized a loss of $18,534 compared to a loss of $16,655 for the
corresponding period in 1995. Total revenue for the three months ended
September 30, 1996 was $484,830 versus $102,281 for the same period in 1995.
This increase in revenue was primarily the result of an increase in rental
income of $383,571 in 1996 due to the November 1995 acquisition of Crossville
and the 1996 acquisitions of Carriage House, Compass Pointe and Colonial Park.
Total expenses for the three months ended September 30, 1996 were $509,089
compared to $126,737 for the same period in 1995. The increase in expenses in
1996 was caused by the increase in rental operating expenses of $201,173
incurred from the acquisition of Crossville in November 1995 and Carriage
House, Compass Pointe, Colonial Park, Heide Lot and Meggan Lot in 1996.
General and administrative expenses for the three months ended September 30,
1996 of $117,485 increased $13,696 from the same period last year. The
increase is attributable to additional staff in 1996.
In 1996, consistent with its business plan, the Company acquired 94% of the
ownership interest in Carriage House and Compass Pointe Apartments. As a
result, depreciation and amortization of $61,306 for the three months ended
September 30, 1996 increased $57,121
13
<PAGE> 14
from the same period in 1995 due to the acquisition of Carriage House, Compass
Pointe and Colonial Park in 1996 and Crossville in November 1995.
Interest expense increased $110,362 for the three months ended September 30,
1996 as compared to the corresponding period in 1995 due to the amortization of
the mortgage payable obtained on the Roswell and Crossville acquisitions in
1995 and Carriage House, Compass Pointe and Colonial Park acquisitions in 1996.
INFLATION
Inflation in the future may increase rental revenues as well as operating
expenses, all in accordance with general market trends.
14
<PAGE> 15
PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
------------------------------------------
(a) Exhibits - 27 Financial Data Schedule (for SEC use only)
(b) Reports - None
15
<PAGE> 16
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
Registrant caused this Report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Resource Capital Group, Inc.
(Registrant)
By: /s/ Albert G. Schmerge III
---------------------------
Albert G. Schmerge III
President, CEO and
Chairman of the Board
Date: November 14, 1996
16
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 424,440
<SECURITIES> 88,891
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 7,167,229
<DEPRECIATION> 124,987
<TOTAL-ASSETS> 10,858,422
<CURRENT-LIABILITIES> 0
<BONDS> 5,730,753
0
0
<COMMON> 4,986
<OTHER-SE> 4,504,516
<TOTAL-LIABILITY-AND-EQUITY> 10,858,422
<SALES> 0
<TOTAL-REVENUES> 921,668
<CGS> 0
<TOTAL-COSTS> 337,997
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 213,031
<INCOME-PRETAX> (105,884)
<INCOME-TAX> 36,000
<INCOME-CONTINUING> (69,884)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (69,884)
<EPS-PRIMARY> (.17)
<EPS-DILUTED> 0
</TABLE>
