<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
-----------------------
[_] TRANSITION REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________________ to ______________________
Commission file number 1-12514
------------
American Real Estate Investment Corporation
- ------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Maryland 84-1246585
- -------------------------------- ----------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1670 Broadway, Suite 3350, Denver, Colorado 80202
--------------------------------------------------
(Address of principal executive offices)
(303) 869-4700
----------------------------
(Issuer's telephone number)
______________________________________________________________________________
(Former name, former address and former fiscal year, if changed since last
report)
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. Yes X No_____
----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by court. Yes ______ No ______
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 1,117,002
-----------------
Transitional Small Business Disclosure Format (check one):
Yes ______ No X
-----
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
FORM 10-QSB
INDEX
<TABLE>
<CAPTION>
Page
Number
------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheet (unaudited) as of
September 30, 1996 3
Consolidated Condensed Statements of Operations (unaudited)
for the nine months ended September 30, 1996 and
September 30, 1995 and the three months ended
September 30, 1996 and September 30, 1995 4
Consolidated Condensed Statements of Cash Flows (unaudited)
for the nine months ended September 30, 1996 and
September 30, 1995 5
Notes to Consolidated Condensed Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis or Plan of Operation 8
PART II. OTHER INFORMATION 14
SIGNATURES 14
</TABLE>
2
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
September 30,
1996
----------------------
ASSETS
- ------
<S> <C>
Investment in real estate:
Land $ 8,624,135
Buildings and improvements 38,983,848
----------------------
47,607,983
Less: Accumulated depreciation (4,026,322)
----------------------
43,581,661
Investment in partnership 1,162,552
----------------------
Total investment in real estate 44,744,213
Cash & cash equivalents 529,323
Restricted cash 827,882
Accounts receivable 103,633
Other assets, net 451,653
----------------------
Total assets $ 46,656,704
======================
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Liabilities:
Mortgage notes payable $ 33,115,842
Other notes payable 6,330,828
Accrued interest 182,893
Accrued property taxes 329,170
Accrued expenses and other liabilities 335,580
Security deposits 276,720
----------------------
Total liabilities 40,571,033
----------------------
Commitments and contingencies
Minority interest 1,931,007
Shareholders' equity:
Preferred stock, $.01 par value; 5,000,000 shares authorized;
no preferred shares issued and outstanding 0
Common stock, $.001 par value; 30,000,000 shares authorized;
1,117,002 common shares issued and outstanding 1,117
Additional paid-in capital 5,333,424
Cumulative net income 1,200,303
Cumulative dividends (2,380,180)
----------------------
Total shareholders' equity 4,154,664
----------------------
Total liabilities and shareholders' equity $ 46,656,704
======================
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of this balance sheet.
3
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended Three months ended
-------------------------------------------- --------------------------------------
September 30, September 30, September 30, September 30,
1996 1995 1996 1995
---------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Revenues:
Rents and fees $ 7,404,880 $ 7,093,017 $ 2,487,705 $ 2,374,894
Other income 215,723 260,464 71,909 95,078
---------------- ------------- ------------- --------------
Total revenues 7,620,603 7,353,481 2,559,614 2,469,972
---------------- ------------- ------------ --------------
Operating expenses:
Repairs and maintenance 539,744 505,383 236,366 187,303
Property taxes 323,910 334,365 112,120 119,923
Property management fees 262,720 250,427 87,267 84,928
Utilities 802,051 710,339 271,299 223,343
Payroll 653,883 591,710 222,511 208,205
Other property operations 730,154 725,954 253,679 238,474
General and administrative 329,945 400,639 45,577 130,196
Depreciation and amortization 981,183 972,365 328,923 327,645
---------------- --------------- ------------ --------------
Total operating expenses 4,623,590 4,491,182 1,557,742 1,520,017
---------------- --------------- ------------ --------------
Financing expenses:
Non-related party interest expense 2,931,078 3,032,187 976,921 1,010,615
Related party interest expense 0 200,959 0 0
Loss from debt repayment 0 242,605 0 0
---------------- --------------- ------------ --------------
Total financing expenses 2,931,078 3,475,751 976,921 1,010,615
---------------- --------------- ------------ --------------
Equity in earnings from investment
in partnership 363,466 361,128 121,177 120,434
---------------- --------------- ------------ --------------
Net income (loss) before minority interest 429,401 (252,324) 146,128 59,774
Minority interest 0 0 0 0
---------------- --------------- ------------ --------------
Net income (loss) $ 429,401 $ (252,324) $ 146,128 $ 59,774
================ =============== ============ ==============
Primary earnings (loss) per share $ 0.39 $ (0.23) $ 0.13 $ 0.05
================ =============== ============ ==============
Fully diluted earnings (loss) per share $ 0.25 $ (0.23) $ 0.08 $ 0.03
================ =============== ============ ==============
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
4
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine months Nine months
ended ended
September 30, September 30,
1996 1995
------------------ -------------------
<S> <C> <C>
Operating Activities:
Net income (loss)$ $ 429,401 $ (252,324)
Adjustments to reconcile net income (loss) to cash
provided by operating activities:
Depreciation & amortization 1,021,361 1,022,321
Common stock compensation 174,000 121,499
Cash provided by operating assets 87,803 304,926
Cash used in operating liabilities (187,122) (635,085)
------------------ -------------------
Net cash provided by operating activities 1,525,443 561,337
------------------ -------------------
Investing Activities:
Cash used in investment in real estate (321,756) (188,277)
Cash provided by investment in partnership 190,262 184,908
------------------ -------------------
Net cash used in investing activities (131,494) (3,369)
------------------ -------------------
Financing activities:
Dividends paid (703,101) (672,653)
Minority interest distributions (504,905) (493,024)
Proceeds from notes payable 0 10,310,000
Repayment of notes payable (292,578) (10,003,334)
------------------- -------------------
Net cash used in financing activities (1,500,584) (859,011)
------------------- -------------------
Net decrease in cash and cash equivalents (106,635) (301,043)
Cash and cash equivalents, beginning of period $ 635,958 1,263,280
------------------- -------------------
Cash and cash equivalents, end of period $ 529,323 $ 962,237
=================== ===================
Supplemental Disclosure of Cash
Flow Information:
Cash paid for interest 2,437,681 $ 2,654,013
=================== ===================
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
5
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements include the account balances as
of September 30, 1996 and the activity for the nine months ended September 30,
1996 and September 30, 1995 and for the three months ended September 30, 1996
and September 30, 1995 for the Company on a consolidated basis.
The unaudited interim financial statements prepared by management
include all normal recurring adjustments which are, in the opinion of
management, necessary for a fair presentation.
Allocations of Income and Distributions of Cash
All income of the Operating Partnership for the nine months ended
September 30, 1996 and September 30, 1995 and for the three months ended
September 30, 1996 and September 30, 1995 was allocated to the Company,
therefore there were no allocations to the minority interest for such periods.
All such allocations of net income and net loss will be made subject to
compliance with the provisions of Section 704(b) and 704(c) of the Internal
Revenue Code and the Treasury Regulations promulgated thereunder.
The Company has the right to cause the Operating Partnership to
distribute all or any portion of its "net operating cash flow" (as defined) to
the partners as determined from time to time. The Company, in its capacity as
general partner, will make this determination. The Company is required to use
its best efforts to cause the Operating Partnership to distribute sufficient
amounts to enable the Company to pay shareholders dividends that will satisfy
the REIT requirements and avoid any Federal income tax or excise tax liabilities
for the Company.
Revenue Recognition
Revenues, consisting primarily of rentals for apartments, are
recognized on the accrual basis of accounting.
6
<PAGE>
Earnings per Share
Primary earnings per share were calculated based on weighted average
shares outstanding of 1,102,758 and 1,080,644 for the nine months ended
September 30, 1996 and September 30, 1995, respectively, and 1,111,232 and
1,086,005 for the three months ended September 30, 1996 and September 30, 1995,
respectively. Fully diluted earnings per share were calculated based on
weighted average shares outstanding upon conversion of the limited partner
interests, or a total of 1,738,943 and 1,791,968 for the nine months ended
September 30, 1996 and September 30, 1995, respectively, and a total of
1,747,417 and 1,797,329 for the three months ended September 30, 1996 and
September 30, 1995, respectively.
2. COMPANY STRATEGY AND OPERATIONS
The Company has from time to time engaged in negotiations with respect
to the sale of one or more of its properties and such negotiations are expected
to continue on an ongoing basis. In the event of such a sale, management
intends to determine at the time in the light of industry, economic and other
conditions how the proceeds of such a transaction will be re-deployed.
The Company is continuing its attempt to resolve the matter relating
to the lawsuit commenced during 1995 by the Company's co-general partner in the
partnership that owns Emerald Pointe apartments.
3. SUBSEQUENT EVENTS
The Company announced on November 13, 1996 that it had declared a cash
dividend of $.215 per share for the quarter ended September 30, 1996 payable on
December 10, 1996 to shareholders of record on November 27, 1996.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
OVERVIEW
The following discussion should be read in conjunction with the
consolidated condensed financial statements of American Real Estate Investment
Corporation (the "Company"), including Notes to Consolidated Condensed Financial
Statements. The Company presently owns either a full or partial interest in
multifamily residential properties which comprise an aggregate of 2,142 units.
RESULTS OF OPERATIONS
The following discussion of results of operations relates to the
consolidated operations of the Company for the nine months ended September 30,
1996 and September 30, 1995 and the three months ended September 30, 1996 and
September 30, 1995. Certain operating expenses for the periods ended September
30, 1995 were reclassified for comparability to the current reporting
classifications for the same periods in 1996.
NINE MONTHS AND THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS
AND THREE MONTHS ENDED SEPTEMBER 30, 1995
Rents and fees revenues increased from $7,093,017 for the nine months
ended September 30, 1995 to $7,404,880 for the same period in 1996 and from
$2,374,894 for the three months ended September 30, 1995 to $2,487,705 for the
same period in 1996, primarily as a result of rental increases. Higher net
rental revenues in 1996 at Quadrangles was a significant component of this
increase.
Other income decreased from $260,464 to $215,723 for the nine months
ended September 30, 1995 and September 30, 1996, respectively and from $95,078
to $71,909 for the three months ended September 30, 1995 and September 30, 1996,
respectively. A cable television and telephone agreement relating to the
properties, excluding Emerald, was executed during the first calendar quarter of
1995, generating additional revenues in 1995, resulting in a decrease in other
income in 1996.
Repairs and maintenance increased from $505,383 to $539,744 for the
nine months ended September 30, 1995 and September 30, 1996, respectively, and
from $187,303 to $236,366 for the three months ended September 30, 1995 and
September 30, 1996, respectively. Repairs and maintenance increased in both
periods primarily as a result of additional general repairs completed on the
Sedona, International and Timberleaf properties during the 1996 periods.
Property taxes were $112,120 and $323,910 for the three months ended
September 30, 1996 and the nine months ended September 30, 1996, respectively.
Property taxes for these same two periods in 1995 were $119,923 and $334,365,
respectively. This slight decrease in property taxes from 1995 to 1996 resulted
from a slightly lower property tax assessment on the Denver
8
<PAGE>
properties even though the assessed property values remained relatively stable
from year to year.
Property management fees increased from $250,427 to $262,720 for the
nine months ended September 30, 1995 and September 30, 1996, respectively, and
from $84,928 for the three months ended September 30, 1995 to $87,267 for the
three months ended September 30, 1996 primarily due to higher net revenues for
Quadrangles in 1996.
Utilities increased from $710,339 to $802,051, respectively, for the
nine months ended September 30, 1995 and September 30, 1996 and from $223,343 to
$271,299, respectively, for the three months ended September 30, 1995 and
September 30, 1996 primarily as a result of higher water and sewer utility
expenses during the 1996 periods for Sedona and Timberleaf.
Payroll increased to $653,883 for the nine months ended September 30,
1996 from $591,710 for the nine months ended September 30, 1995 and from
$208,205 to $222,511, respectively, for the three months ended September 30,
1995 and September 30, 1996 as a result of on site employee turnover costs
associated with new management personnel at the Denver properties in addition to
salary and wage increases.
Other property operations remained relatively stable for the nine
months ended September 30, ranging from $725,954 in 1995 to $730,154 in 1996,
while increasing slightly from $238,474 in 1995 to $253,679 in 1996 for the
three months ended September 30.
General and administrative expenses decreased from $400,639 to
$329,945 for the nine months ended September 30, 1995 and September 30, 1996,
respectively, and from $130,196 to $45,577 for the three months ended September
30, 1995 and September 30, 1996, respectively. Increases in costs relating to
the directors and officers insurance policy, along with salaries and wages, in
1996, were more than offset by the decreases in legal fees and acquisition costs
incurred by the Company in 1996 in comparison to 1995.
Depreciation and amortization expense increased slightly from $972,365
for the nine months ended September 30, 1995 to $981,183 for the nine months
ended September 30, 1996 and for the three months ended September 30 from
$327,645 in 1995 to $328,923 in 1996. The slight increase resulted primarily
from the depreciation associated with property improvements.
Total financing expenses decreased from $3,475,751 to $2,931,078 for
the nine month periods ended September 30, 1995 and 1996, respectively, and from
$1,010,615 to $976,921 for the three months ended September 30, 1995 and
September 30, 1996, respectively. The decrease in financing expenses was a
result of many factors. Lower interest rates were experienced on the Company's
bank loan facilities resulting from the 50 basis point reduction recognized upon
renewal of such loan facilities in August of 1995 in addition to the decrease in
the prime rate since the 1995 periods. The Company also refinanced the mortgage
note payable collateralized
9
<PAGE>
by Americana on April 27, 1995 with a loan from General Electric Capital
Corporation ("GECC"). A loss from debt repayment of $242,605, resulting from a
prepayment penalty, was recognized for the nine months ended September 30, 1995
in conjunction with the April, 1995 repayment of the previously existing first
mortgage loan secured by Americana with proceeds from the GECC first mortgage
loan secured by the same property. There were no such expenses incurred in
1996. In addition, the bridge loan which was originally obtained from a related
party to provide a portion of the financing to acquire Quadrangles was paid off
in its entirety with proceeds from the GECC first mortgage loan. The remaining
unamortized loan costs for both loans which were repaid in full were included in
interest expense during the nine months ended September 30, 1995. This
refinancing is also the reason for the decrease in related party interest
expense of $200,959 for the nine months ended September 30, 1995 to zero for the
same period in 1996. Finally, the principal balances of all mortgage loans have
been regularly amortized in the normal course of business during the past year,
resulting in lower interest expense payments in 1996 on the reduced loan
amounts.
Equity in earnings from investment in partnership was $363,466 and
$121,177, respectively, for the nine months ended September 30, 1996 and the
three months ended September 30, 1996 as compared to $361,128 and $120,434 for
the same two respective periods ended September 30, 1995. These amounts, which
reflect stability for the periods shown, represent the Company's 50% general
partnership interest in the earnings of Emerald Vista Associates, L.P.
In accordance with the terms of the partnership agreement of the
Operating Partnership there were no allocations to minority interest based on
results of operations for the nine months ended September 30, 1996 and September
30, 1995 and the three months ended September 30, 1996 and September 30, 1995.
Net income of the Company was $429,401 and $146,128, respectively, for
the nine months ended September 30, 1996 and the three months ended September
30, 1996. The net loss of the Company for the nine months ended September 30,
1995 was $(252,324) and net income was $59,774 for the three months ended
September 30, 1995. The net loss for the nine months ended September 30, 1995
resulted primarily from the one time prepayment penalty of approximately
$243,000 relating to the refinancing of the first mortgage loan secured by
Americana and the one time write offs of all remaining unamortized loan costs
relating to the Americana first mortgage loan and the Quadrangles bridge loan.
The increase in net income for the periods from 1995 to 1996 was also
attributable to the increased rents and fees revenues and reduced interest
expense relating to the Company's existing bank loans and mortgage loans.
10
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The primary source of cash during the nine months ended September 30,
1996 was the Company's cash from operations. Principal cash outflows for the
same nine month period were dividends paid to holders of common stock,
distributions to limited partners (i.e. minority interest distributions) and
principal and interest payments on existing indebtedness.
The Company expects to meet its short term liquidity requirements
generally through its cash flow provided by operations. The Company believes
that its cash from operations will be sufficient to meet operating requirements
and to make dividend payments to stockholders in accordance with REIT
qualification requirements.
The Company had outstanding indebtedness of approximately $39,447,000
as of September 30, 1996, representing three non-recourse mortgage notes payable
aggregating $33,116,000, a bank loan with an outstanding balance of $5,831,000
and a fully funded bank line of credit in the amount of $500,000.
One non-recourse mortgage note payable, collateralized by Americana
Lakewood apartments, bears interest at GECC's composite commercial paper rate
plus 3.75%, adjusted on a monthly basis, and matures on April 30, 2000. In
addition, quarterly principal payments are required based on a stipulated
percentage of the excess cash flow, as defined, from the Americana Lakewood
apartment complex. The note contains a 1% prepayment penalty from April 27, 1996
to April 26, 1997 and no prepayment penalty from April 27, 1997 to maturity. The
note requires a balloon payment in the amount of the outstanding principal
balance on April 30, 2000, the maturity date. Proceeds from the GECC loan were
used to repay the previously existing first mortgage loan collateralized by the
Americana Lakewood apartments.
A non-recourse mortgage note payable, collateralized by Timberleaf
apartments, bears interest at 9.0% per annum payable monthly and matures in
2004. Through March 20, 2003, such note may only be prepaid upon payment of all
principal and accrued interest and a prepayment penalty calculated in accordance
with a formula based on the yield rate of a certain U.S. Treasury security.
Thereafter there is a 1% prepayment penalty through maturity. At maturity on
April 1, 2004, a balloon payment of approximately $5,822,000 will be payable.
A non-recourse mortgage note payable, collateralized by Quadrangles
Village apartments, which is a financing by the Department of Housing and Urban
Development, bears interest at 6.35% per annum payable monthly and matures in
2026. The note cannot be prepaid prior to June, 2003 and thereafter contains a
prepayment penalty as follows: 2% from June, 2003 to May, 2004; 1% from June,
2004 to May, 2005; 0% thereafter. At maturity on May 1, 2026, the note will be
fully amortized.
11
<PAGE>
The Company refinanced the bank line of credit collateralized by the
Sedona apartments and the International apartments in the form of two separate
loan facilities on August 31, 1995. The two loans bear interest at the bank's
prime rate plus 0.50%, which is 50 basis points lower than the original line of
credit. The first loan facility, which was recently refinanced on August 28,
1996, is a $500,000 bank line of credit which bears interest at the bank's prime
rate plus 0.50%, adjusted on a daily basis, and matures on January 3, 1997. The
Company intends to pay off this bank line of credit with proceeds from the
potential sale of one or more of the properties, a loan refinancing pertaining
to one of its properties or from other sources. Monthly interest payments are
required during the term of this loan. The second loan facility is a bank loan
in the face amount of $5,904,143 which bears interest at the bank's prime rate
plus 0.50%, adjusted on a daily basis. This loan requires monthly principal and
interest payments based on a 25 year amortization period. The note can be
prepaid at any time without penalty and matures on August 31, 1998.
The Company may continue to seek additional multifamily investment
opportunities, as well as alternative real estate investment opportunities. To
finance such potential acquisitions the Company may seek to enter into secured
borrowings or to sell additional equity interests in the Company. There can be
no assurance such arrangements can be entered into or that additional capital
will be available. In addition, the Company may offer in exchange for such
investment opportunities its shares of Common Stock or additional limited
partnership interests in the Operating Partnership which may be exchangeable for
Common Stock of the Company under the terms of the Operating Partnership
agreement. The Company may also use other sources of capital to finance such
acquisitions, including non-distributed funds from operations or the issuance of
debt securities. There can be no assurance such financing can be obtained. The
Company has no material commitments for additional capital improvements to the
properties.
See the accompanying Consolidated Condensed Statements of Cash Flows
included in the financial statements for a reconciliation of cash for the
periods described therein.
FUNDS FROM OPERATIONS
Funds From Operations ("FFO"), which is a commonly used measurement of
the performance of an equity real estate investment trust ("REIT"), as defined
by the National Association of Real Estate Investment Trusts, Inc. ("NAREIT"),
is net income (computed in accordance with generally accepted accounting
principles), excluding gains (or losses) from debt restructuring and sales of
property, plus depreciation and amortization, and after adjustments for
unconsolidated partnerships and joint ventures. Adjustments for unconsolidated
partnerships and joint ventures will be calculated to reflect funds from
operations on the same basis. FFO does not represent cash generated from
operating activities in accordance with generally accepted accounting principles
and is not necessarily indicative of cash available to fund cash needs. The
12
<PAGE>
Company's FFO was $544,349 for the three months ended September 30, 1996 as
compared to $498,185 for the three months ended September 30, 1995. FFO for the
three months ended September 30, 1996 was calculated by deducting the Company's
equity in earnings from investment in partnership (i.e. the Company's
unconsolidated investment in Emerald Vista Associates, L.P.) of $121,177 from
net income before minority interest of $146,128, and then adding depreciation
and amortization of $328,923 and adding the Company's FFO allocation from
Emerald Vista Associates, L.P. of $190,475. FFO for the three months ended
September 30, 1995 was calculated by deducting the Company's equity in earnings
from investment in partnership (i.e. the Company's unconsolidated investment in
Emerald Vista Associates, L.P.) of $120,434 from net income before minority
interest of $59,774, and then adding depreciation and amortization of $327,645,
adding amortization of loan costs aggregating $38,274 and adding the Company's
FFO allocation from Emerald Vista Associates, L.P. of $192,926. NAREIT recently
clarified the application of its FFO definition and as a result of this new
application, loan cost amortization of $38,274 would not be added back to FFO
presented for the period ended September 30, 1995. NAREIT recommended the
implementation of the new application of its FFO definition no later than for
fiscal periods beginning in 1996. The Company has implemented the new
application of the NAREIT FFO definition, effective for the 1996 reporting
periods wherein amortization of loan costs aggregating $18,048 has not been
included in FFO for the three months ended September 30, 1996.
INFLATION
Substantially all of the leases at the Properties are for a term of
one year or less which may enable the Company to seek increased rents upon
renewal or reletting of apartment units. Such short-term leases generally
minimize the risk to the Company of the adverse effects of inflation.
13
<PAGE>
PART II. OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits filed with this Form 10-QSB - None
(b) No report on Form 8-K was filed by the registrant
during the fiscal quarter ended September 30, 1996
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.
AMERICAN REAL ESTATE INVESTMENT CORPORATION
By: /s/ Evan Zucker
-------------------------------------
Evan Zucker
President
By: /s/ Rick A. Burger
-------------------------------------
Rick A. Burger
Treasurer
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 529
<SECURITIES> 0
<RECEIVABLES> 104
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,912
<PP&E> 47,608
<DEPRECIATION> 4,026
<TOTAL-ASSETS> 46,657
<CURRENT-LIABILITIES> 1,124
<BONDS> 39,447
0
0
<COMMON> 1
<OTHER-SE> 4,154
<TOTAL-LIABILITY-AND-EQUITY> 46,657
<SALES> 0<F1>
<TOTAL-REVENUES> 7,621
<CGS> 0
<TOTAL-COSTS> 4,294
<OTHER-EXPENSES> 330<F2>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,931
<INCOME-PRETAX> 429
<INCOME-TAX> 0
<INCOME-CONTINUING> 429
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 429
<EPS-PRIMARY> 0.39
<EPS-DILUTED> 0.25
<FN>
<F1>The Company's revenues relate primarily to income from rental property.
<F2>Other expenses reflects the Company's general and administrative expenses.
</FN>
</TABLE>
