U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
[X]QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
[ ]TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission file No. 1-13080
GROVE PROPERTY TRUST
(Exact name of small business issuer as specified in its charter)
Maryland 06-1391084
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
598 Asylum Avenue, Hartford, Connecticut 06105
(Address of principal executive offices) (Zip Code)
(860) 246-1126
(Issuer's telephone number)
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:
3,953,829 common shares, $.01 par value, were
outstanding as of August 8, 1997.
Transitional Small Business Disclosure Format (check one): Yes: No: X
<PAGE>
GROVE PROPERTY TRUST
Form 10-QSB
Index
Page
Part I: Financial Information 3
Item 1: Condensed Consolidated Financial Statements (unaudited) 3
Condensed Consolidated Balance Sheets of Grove Property
Trust as of June 30, 1997 and December 31, 1996 3
Condensed Consolidated Income Statements of Grove
Property Trust for the three months ended June 30, 1997
and June 30, 1996 4
Condensed Consolidated Income Statements of Grove
Property Trust for the six months ended June 30, 1997
and June 30, 1996 5
Condensed Consolidated Statements of Cash Flows of
Grove Property Trust for the six months ended
June 30, 1997 and June 30, 1996 6
Notes to Condensed Consolidated Financial Statements 7
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations 11
Part II: Other Information 15
Item 4: Submission of Matters to a Vote of Security Holders 15
Item 6: Exhibits and Reports on Form 8-K 16
Signatures 17
Exhibit Index 18
<PAGE>
June 30, 1997 December 31, 1996
(Unaudited) (Audited)
----------- ---------
ASSETS
Real estate assets:
Land ..................................... $ 10,830,350 $ 920,293
Buildings and improvements ............... 99,104,926 8,528,075
Furniture, fixtures and equipment ........ 5,258,010 349,768
------------ ------------
115,193,286 9,798,136
Less - accumulated depreciation .......... (28,589,729) (1,049,815)
------------ ------------
Net real estate assets ................... 86,603,557 8,748,321
Cash and cash equivalents ................ 1,762,117 381,340
Cash - resident security deposits ........ 1,170,271 157,537
Other assets ............................. 3,018,535 233,412
------------ ------------
Total assets ............................ $92,554,480 $ 9,520,610
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Mortgage notes payable ......................... $44,027,948 $5,668,578
Revolving credit facility ...................... 1,825,000 --
Other liabilities .............................. 3,759,653 350,341
Due to affiliates .............................. 88,163 19,190
----------- -----------
Total liabilities .............................. 49,700,765 6,038,109
----------- -----------
Commitments
Minority interest .............................. 5,213,588 --
Shareholders' equity:
Preferred shares, $.01 par value per share,
4,000,000 shares authorized; no shares
issued or outstanding ......................... -- --
Common shares, $.01 par value per share,
10,000,000 shares authorized; 3,953,829 and
525,000 shares issued and outstanding ......... 39,538 5,250
Additional paid-in capital .................... 38,275,159 3,913,176
Distributions in excess of earnings ........... (674,569) (435,925)
----------- -----------
Total equity ................................... 37,640,128 3,482,501
----------- -----------
Total liabilities and shareholders' equity ..... $92,554,480 $ 9,520,610
=========== ===========
<PAGE>
For the Three Months Ended
-----------------------------------------
June 30, June 30,
1997 1996
---- ----
Revenues:
Rental income .............................. $4,261,223 $ 514,593
Property management ........................ 172,897 --
Interest and other income .................. 43,901 10,857
--------- ---------
Total revenues ......................... 4,478,021 525,450
--------- ---------
Expenses:
Property operating and maintenance ......... 1,407,781 165,595
Real estate taxes .......................... 426,463 52,105
Related party management fees .............. -- 27,059
General and administrative ................. 277,659 20,026
--------- ---------
Total expenses ......................... 2,111,903 264,785
--------- ---------
2,366,118 260,665
Interest expense ............................... 603,905 110,580
Depreciation and amortization .................. 915,678 87,789
--------- ---------
Income before minority interest .............. 846,535 71,297
Minority interest ............................ 337,859 --
--------- ---------
Net income ............................... $508,676 $71,297
========= =========
Net income per share ........................... $ 0.13 $ 0.11
========= =========
Weighted average number of shares .............. 3,953,699 620,102
========= =========
<PAGE>
For the Six Months Ended
---------------------------------
June 30, June 30,
1997 1996
---- ----
Revenues:
Rental income .................................. $ 5,438,245 $1,000,825
Property management ............................ 218,197 --
Interest and other income ...................... 127,747 19,729
--------- ---------
Total revenues ............................. 5,784,189 1,020,554
--------- ---------
Expenses:
Property operating and maintenance.............. 1,895,411 346,069
Real estate taxes .............................. 542,481 101,712
Related party management fees .................. 21,795 52,594
General and administrative ..................... 346,694 40,450
--------- ---------
Total expenses ............................. 2,806,381 540,826
--------- ---------
2,977,808 479,729
Interest expense ................................... 777,026 189,203
Depreciation and amortization ...................... 1,155,306 198,275
Conveyance taxes ................................... 68,761 --
--------- ---------
Income before minority interest .................. 976,715 92,250
Minority interest ................................ 371,486 --
--------- ---------
Net income ................................... $ 605,229 $ 92,250
========= =========
Net income per share ............................... $ 0.23 $ 0.15
========= =========
Weighted average number of shares .................. 2,627,601 620,102
========= =========
<PAGE>
For the Six Months Ended
-------------------------------
June 30, June 30,
1997 1996
---- ----
Net cash provided by operating activities .......... $ 608,046 $ 309,185
----------- -----------
Cash flows from investing activities:
Acquisition charges ............................... (2,980,306) --
Acquisition of partnership assets, net ............ 3,213,353 --
Additions to real estate assets ................... (319,054) (48,823)
----------- -----------
Net cash used in investing activities .............. (86,007) (48,823)
----------- -----------
Cash flows from financing activities:
Net proceeds from mortgage payable on acquisition . 16,909,000 220,198
Financing costs ................................... (648,216) (23,169)
Proceeds from New Equity Investment ............... 30,000,000 --
Repayment of mortgage payable ..................... (41,043,645) (27,043)
Purchase of limited partnership interests ......... (3,383,089) --
Payments to affiliates ............................ (757,962) (95,732)
Dividends paid .................................... (217,350) (238,875)
----------- -----------
Net cash provided by (used in) financing activities 858,738 (164,621)
----------- -----------
Net increase in cash and cash equivalents .......... 1,380,777 95,741
Cash and cash equivalents, beginning of period ..... 381,340 383,725
----------- -----------
Cash and cash equivalents, end of period ........... $1,762,117 $ 479,466
=========== ===========
<PAGE>
GROVE PROPERTY TRUST
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. FORMATION AND BUSINESS OF THE COMPANY
Grove Property Trust (formerly Grove Real Estate Asset Trust) (the
"Company") was organized in the State of Maryland on April 4, 1994 as a
Real Estate Investment Trust ("REIT"). The Company currently operates
twenty-eight properties with a total of 2,475 residential apartments and
95,255 square feet of commercial property including a 79,000 square foot
neighborhood retail center. The Company purchased three properties on June
23, 1994 (the "Original Properties"), a fourth property ("Cambridge") in
January of 1996, twenty additional properties on March 14, 1997 (the
"Partnership Properties") from affiliated partnerships (the "Property
Partnerships") in conjunction with a series of transactions (the
"Consolidation Transactions"), three additional properties on June 1, 1997
(the "June97 Properties") from affiliated partnerships in conjunction with
the assumption of debt and the issuance of additional Common Units (as
defined below) (the "June97 Acquisitions") and one property on July 2,
1997 from an unrelated third party (the "July97 Property") (collectively
the "Properties").
These statements do not contain all information required by generally
accepted accounting principles to be included in a full set of financial
statements. In the opinion of management, the accompanying unaudited
financial statements reflect all the adjustments necessary to present
fairly the financial position of the Company at June 30, 1997 and results
of operations and its cash flows for the period then ended and the period
ended June 30, 1996. These unaudited financial statements should be read in
conjunction with the audited financial statements and notes contained in
the Company's Form 10-KSB for the year ended December 31, 1996. Results of
operations for this period are not necessarily indicative of results to be
expected for the full year.
Earnings per share is based on the weighted average number of common shares
issued and outstanding; 620,102 shares from January 1, 1997 to March 14,
1997, 3,953,435 shares from March 15, 1997 to April 30, 1997, 3,953,829
shares from May 1, 1997 to June 30, 1997, and 620,102 from January 1, 1996
to June 30, 1996 (all adjusted for the Stock Split, as defined in note 2).
The dilutive effect of the assumed exercise of outstanding stock options
and warrants is less than 3% and, therefore, is not included.
In February 1997, the Financial Accounting Standard Board issued Statement
No. 128, Earnings Per Share, which is required to be adopted on December
31, 1997. At that time, the Company will be required to change the method
currently used to compute earnings per share and to restate all prior
periods. Under the new requirements for calculating primary earnings per
share, the dilutive effect of stock options will be excluded. The impact of
Statement 128 on the calculation of primary and fully diluted earnings per
share for the periods ended June 30, 1997 and June 30, 1996 is not
material.
2. CONSOLIDATION TRANSACTIONS
The Consolidation Transactions were completed on March 14, 1997 and
included the following:
The Company formed an operating partnership to serve as the vehicle
for the consolidation of ownership and/or control of the operations and
assets of the Company (the "Operating Partnership").
Pursuant to an exchange offer, the Operating Partnership purchased
from limited partners (the "Limited Partners") the outstanding
partnership interest of each of the Property Partnerships in exchange
for partnership units (the "Common Units") of the Operating
Partnership, or, in certain circumstances, cash. The number of Common
Units received by a Limited Partner was calculated based upon such
partner's interest in the applicable partnership as applied to the
value of the Property Partnership associated therewith.
Immediately prior to the consummation of the Consolidation
Transactions, the Company declared a stock dividend aggregating 26,250
Common Shares and concurrently effected a stock split of 1.125 to 1
(collectively the "Stock Split"), thereby issuing on a pro rata basis a
total of 95,102 Common Shares to the holders of the issued and
outstanding Common Shares as March 10, 1997.
The Company issued 3,333,333 Common Shares to new equity investors in
exchange for $30 million.
Pursuant to a contribution agreement (the "Contribution Agreement")
among the Company, certain companies and individuals affiliated with
the Company (the "Grove Companies") and the Operating Partnership,
substantially all of the assets and operations of the Company, the
management services division of Grove Property Services Limited
Partnership and the Grove Companies' interests in the acquired Property
Partnerships were transferred to the Operating Partnership.
In exchange for the above, the Grove Companies received an aggregate of
904,867 Common Units in the Operating Partnership and a cash payment of
$177,669 from the Company, and the Company received 620,102 Common
Units in the Operating Partnership. Additionally, the Company
contributed to the Operating Partnership the gross proceeds received
from new equity investments in exchange for a number of additional
Common Units equal to the number of Common Shares issued by the Company
to the new equity investors.
In connection with the Consolidation Transactions, the Operating
Partnership entered into a three-year secured revolving acquisition and
working capital credit facility of approximately $25 million (the
"Revolving Credit Facility") and an approximately $15.1 million
ten-year term mortgage loan.
The Company used a portion of the proceeds from the new equity
investment, together with borrowings under the new credit facilities to
refinance approximately $39.6 million of mortgage indebtedness of the
Property Partnerships and to acquire certain minority interests in
certain of the Property Partnerships.
3. RECENT ACQUISITIONS
Pursuant to a Contribution Agreement dated as of May 30, 1997 (the
"Contribution Agreement"), effective June 1, 1997, the Company acquired two
residential apartment complexes through the Operating Partnership. These
acquisitions were effected by the Operating Partnership through the
acquisition of the assets (other than certain amounts of cash) and the
assumption of liabilities of Northeast Apartments I Limited Partnership, the
owner of Four Winds Apartments ("Northeast L.P."), and of West Hartford
Center Associates, Limited Partnership, the owner of Brooksyde Apartments
("West Hartford L.P."). In addition, simultaneously with the acquisition of
Four Winds Apartments and Brooksyde Apartments and through the Operating
Partnership, the Company acquired an interest in Windsor Arbor Limited
Partnership, the owner of River's Bend Apartments ("Windsor Arbor"), and
anticipates that it will acquire the remaining limited partnership
interests in Windsor Arbor on or before December 31, 1997 for $4.9 million.
Upon consummation of the transactions referred to above, the Operating
Partnership issued an aggregate of 420,183 Common Units valued at $10
per unit, which, under certain circumstances, could be redeemed for an
equal number of Common Shares of the Company. The Company also assumed
mortgage debt on Four Winds Apartments and Brooksyde Apartments in the
aggregate remaining principal amount of $6.2 million. Additionally,
the Windsor Arbor investment is encumbered by a $8.6 mortgage debt
which is included in the Company's consolidated financial statements
at June 30, 1997. To complete these transactions, the Company borrowed
$1.8 million under its line of credit and used $68,000 of its
available cash.
Four Winds Apartments is a 168-unit apartment complex located in North Fall
River, Massachusetts. The complex, which includes six two-story wood frame
buildings, a clubhouse, indoor and outdoor pools, tennis courts and other
recreational facilities, is located on approximately 24 acres of land. The
Company intends to continue to operate the complex as rental apartments.
Brooksyde Apartments is an 80-unit apartment complex located in West
Hartford, Connecticut. The complex, which includes eight two-story
buildings, is located on approximately 4 acres. The property is located near
retail and recreational facilities. The Company intends to continue to
operate the complex as rental apartments.
River's Bend Apartments is a 432-unit condominium complex located in
Windsor, Connecticut, of which 349 units are own by Windsor Arbor. The
complex, which includes 33 two-story buildings, outdoor and indoor pools and
a fitness center, is located on approximately 72 acres of land. The Company
intends to continue to operate the complex as rental apartments.
4. PRO FORMA INFORMATION
The following unaudited pro forma information for the six months ended
June 30, 1997 and 1996 is presented as if the Consolidation Transactions
and the June97 Acquisitions had occurred at the beginning of 1996. The
unaudited information does not purport to represent what the Company's
results of operations would have actually been if such transactions, in
fact, had occurred on January 1, 1996, nor does it purport to represent the
results of operations for future periods.
June 30, 1997 June 30, 1996
------------- -------------
Revenues $ 11,321,779 $10,985,878
Net income after minority interest
and extraordinary items 375,492 345,219
Earnings per share 0.10 0.09
5. MORTGAGE NOTES PAYABLE
Mortgage notes payable at June 30, 1997 and December 31, 1996 consist of
the following:
June 30, 1997 December 31, 1996
------------- -----------------
Amortizing first mortgage notes $ 10,042,537 $ 5,668,578
Interest only first mortgage notes 33,985,411 0
---------- ------------
$ 44,027,948 $ 5,668,578
============= ============
The Amortizing first mortgage notes have fixed interest rates between 7.04%
and 7.49%, have monthly principal and interest payments based on
amortization schedules between 25 and 30 years, and maturities between the
year 2000 and 2013. The notes are collateralized by 6 of the Properties and
are partially guaranteed by certain executive officers and shareholders of
the Company.
The Interest only first mortgage notes are comprised of variable rate and
fixed rate notes, are collateralized by 11 of the Properties, and are
partially guaranteed by certain executive officers and shareholders of the
Company. One note has a principal balance of $4.0 million, monthly payments
of interest only at a fixed rate of 7.50%, and matures in 1999. One note
has a principal balance of $15.1 million, monthly payments of interest only
at a variable rate of one month LIBOR plus 1.14% (one month LIBOR was
5.72% on June 30, 1997), and matures in 2007. Three notes have an
aggregate principal balance of $14.8 million, monthly payments of interest
only at a variable rate of one month LIBOR plus 1.20%, and mature between
1999 and 2005.
The interest rate on the variable notes has been partially fixed with three
interest rate swap contracts (the "Interest Swaps") with two banks. The
Interest Swaps, in effect, (i) have fixed $7.6 million of debt at 7.67% for
the period from October 1, 1997 through October 1, 2007, (ii) have fixed
$7.6 million of debt at 7.68% for the period from October 1, 1997 through
January 4, 2005, and (iii) have fixed $9.1million of debt at 7.09% from
December 15, 1995 through December 15, 2000. The Interest Swaps have been
pledged as collateral under the various related variable notes.
6. REVOLVING CREDIT FACILITY
In March 1997, the Operating Partnership entered into a three year
Revolving Credit Facility with a bank, guaranteed by the Company, for up to
$25.0 million. Borrowings under the Revolving Credit Facility are
collateralized by 9 of the Properties (the "Collateral Properties") and
bear interest payable monthly at a floating rate of 1.2% above the 30, 60,
or 90 day LIBOR rate. The Operating Partnership is required to maintain
certain financial covenants as defined in the Revolving Credit Facility
agreement. The Revolving Credit Facility is available to fund future
property acquisitions, up to $4.0 million is available to fund working
capital needs, and up to $2.0 million is available to fund the redemption
of Common Units or the purchase of Common Shares by the Operating
Partnership. As of June 30, 1997, there was $1.825 million outstanding
under the Revolving Credit Facility.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Overview
The following discussion should be read in conjunction with the financial
statements and notes thereto included elsewhere in this Report.
The results of operations for the six months ended June 30, 1997 and three
months ended June 30, 1997 include the three multifamily properties (the
"Original Properties") that Grove Property Trust (the "Company") has owned since
its inception, a fourth property ("Cambridge") that the Company acquired on
January 12, 1996, twenty properties acquired on March 14, 1997 in conjunction
with the Consolidation Transactions (the "Consolidation Properties"), and three
properties acquired on June 1, 1997 from affiliated partnerships (the twenty
March 14, 1997 acquisitions and the three June 1, 1997 acquisitions collectively
referred to as the "1997 Acquisitions") (collectively, the "Properties").
Results of Operations
Results of operations of the Company for the six months ended June 30, 1997 and
June 30, 1996.
Total revenues increased $4,763,635 from $1,020,554 to $5,784,189 during the six
months ended June 30, 1997, as compared to the corresponding period in 1996.
Approximately $4,479,700 of the increase is due to the operations of the 1997
Acquisitions. Additionally, $218,200 of the increase is related to property
management revenues which represent fees earned on management services provided
to properties owned by affiliated entities. Such revenue is derived from
management contracts acquired in conjunction with the Consolidation
Transactions; therefore there was no comparable revenue during the corresponding
period in 1996. The remainder of the increase in total revenues is attributable
to the increases in rental rates, offset by slight decreases in occupancy
experienced at the Original Properties and Cambridge, discussed below.
The Original Properties and Cambridge experienced increases in rental rates
which were slightly offset by decreases in occupancy, having the net effect of
increasing revenues. The weighted average rental rates for the Original
Properties and Cambridge increased to $709 for the six months ended June 30,
1997 from $688 for the six months ended June 30, 1996. Physical occupancy for
the Original Properties and Cambridge decreased to an aggregate weighted average
occupancy of 97.6% for the six months ended June 30, 1997 from an aggregate
weighted average of 97.9% for the six months ended June 30, 1996. Physical
occupancy for the Original Properties and Cambridge decreased to 97.5% at June
30, 1997 from 98.2% at June 30, 1996. At June 30, 1997 the weighted average
physical occupancy for the Properties was 97.3%.
Property operating and maintenance expenses increased $1,549,342 from $346,069
to $1,895,411 during the six months ended June 30, 1997, as compared to the
corresponding period in 1996. The increase is primarily due to the operations of
the 1997 Acquisitions.
Real estate taxes increased $440,769 from $101,712 to $542,481 during the six
months ended June 30, 1997, as compared to the corresponding period in 1996. The
increase is due primarily to the 1997 Acquisitions. Related party management
fees decreased $30,799 from $52,594 to $21,795. This decrease is due to the
Company's acquisition of the management company in conjunction with the
Consolidation Transactions, resulting in the elimination of all such expenses in
consolidation.
General and administrative expenses increased $306,244 from $40,450 to $346,694
during the six months ended June 30, 1997, as compared to the corresponding
period in 1996. This increase is primarily due to the increased costs associated
with the change in size and structure of the Company.
Interest expense increased $587,823 from $189,203 to $777,026 during the six
months ended June 30, 1997, as compared to the corresponding period in 1996. The
increase is primarily due to the $38.3 million mortgage debt assumed and/or
refinanced as part of the 1997 Acquisitions.
Depreciation and amortization increased $957,031 from $198,275 to $1,155,306
during the six months ended June 30, 1997, as compared to the corresponding
period in 1996. This increase results from approximately $966,100 attributable
to the 1997 Acquisitions.
Conveyance taxes of $68,761 for the six months ended June 30, 1997 relate to the
Consolidation Transactions. This expense is a non-recurring item.
The Company's net income increased $512,980 from $92,250 to $605,230 during the
six months ended June 30, 1997, as compared to the corresponding period in 1996.
Approximately $59,000 of this increase results from the net effect of decreasing
expenses and increasing rental rates at the Original Properties and Cambridge.
The remaining increase is due to the operations of the 1997 Acquisitions.
Results of operations of the Company for the three months ended June 30, 1997
and June 30, 1996.
Total revenues increased $3,952,571 from $525,450 to $4,478,021 during the three
months ended June 30, 1997, as compared to the corresponding period in 1996.
Approximately $3,768,700 of the increase is due to the operations of the 1997
Acquisitions. Additionally, $172,900 of the increase is related to property
management revenues which represent fees earned on management services provided
to properties owned by affiliated entities. Such revenue is derived from
management contracts acquired in conjunction with the Consolidation
Transactions; therefore there was no comparable revenue during the corresponding
period in 1996. The remainder of the increase in total revenues is attributable
to the increases in rental rates, offset by slight decreases in occupancy,
experienced at the Original Properties and Cambridge, discussed below.
The Original Properties and Cambridge experienced increases in rental rates
which were slightly offset by decreases in occupancy, having the net effect of
increasing revenues. The weighted average rental rates for the Original
Properties and Cambridge increased to $712 for the three months ended June 30,
1997 from $690 for the three months ended June 30, 1996. Physical occupancy for
the Original Properties and Cambridge decreased to an aggregate weighted average
occupancy of 97.7% for the three months ended June 30, 1997 from an aggregate
weighted average of 98.2% for the three months ended June 30, 1996.
Property operating and maintenance expenses increased $1,242,186 from $165,595
to $1,407,781 during the three months ended June 30, 1997, as compared to the
corresponding period in 1996. Expenses increased approximately $1,233,200 due to
the operations of the 1997 Acquisitions.
Real estate taxes increased $374,358 from $52,105 to $426,463 during the three
months ended June 30, 1997, as compared to the corresponding period in 1996.
Approximately $372,982 of this increase is attributable to the 1997
Acquisitions. Related party management fees decreased $27,059 from $27,059 to $0
during the three months ended June 30, 1997, as compared to the corresponding
period in 1996. This decrease is due to the Company's acquisition of the
management company in conjunction with the Consolidation Transactions, resulting
in the elimination of all such expenses in consolidation.
General and administrative expenses increased $257,633 from $20,026 to $277,659
during the three months ended June 30, 1997, as compared to the corresponding
period in 1996. This increase is primarily due to the increased costs associated
with the change in size and structure of the Company.
Interest expense increased $493,325 from $110,580 to $603,905 during the three
months ended June 30, 1997, as compared to the corresponding period in 1996. The
increase is due primarily to the $38.3 million mortgage debt assumed and/or
refinanced as part of the 1997 Acquisitions.
Depreciation and amortization increased $805,711 from $87,789 to $915,678 during
the six months ended June 30, 1997, as compared to the corresponding period in
1996. The increase is primarily due to the 1997 Acquisitions.
The Company's net income increased $437,379 from $71,297 to $508,676 during the
three months ended June 30, 1997, as compared to the corresponding period in
1996. Approximately $19,000 of this increase results from the net effect of
decreasing expenses and increasing rental rates at the Original Properties and
Cambridge, as discussed above. The remaining increase is due to the operations
of the 1997 Acquisitions.
Liquidity and Capital Resources
Cash and cash equivalents totaled $1,762,117 as of June 30, 1997. The Company's
long-term debt to market capitalization on June 30, 1997 was 39.9% based on
total market capitalization of $114,852,357 (6,494,062 Operating Partnership
units outstanding including minority interest at $68,999,409 plus long-term
debt) and long-term debt of $45,852,948.
Cash provided by operating activities was $608,046 for the six months ended June
30, 1997. Cash used in investing activities was $86,007 for the six months ended
June 30, 1997.
Net cash provided by financing activities was $858,738 for the six months ended
June 30, 1997.
On June 18, 1997, the Company declared a long dividend of $0.189 per share
for the period from March 14, 197 to June 30, 1997. The dividend was paid on
July 16, 1997 to shareholders of record on June 30, 1997. On March 10, 1997, the
Company declared a short dividend of $0.184 per share for the period from
January 1, 1997 to March 13, 1997, which was paid on March 28, 1997 to
shareholders of record on March 10, 1997. The dividends declared during the
period of $0.373 per share resulted in a 70.7% payout of funds from operations
for the six months ended June 30, 1997.
The Company declared a distribution of $0.189 per common unit of Grove
Operating, L.P. for all unit holders who were unit holders for the period March
14, 1997 to June 30, 1997. The distribution amount was prorated for unit holders
that were not unit holders for the entire period of March 14, 1997 to June 30,
1997. The distribution was paid on July 16, 1997.
The Company intends to meet its short term liquidity requirements through cash
flow provided by operations. The Company considers its ability to generate cash
to be adequate, and expects it to continue to be adequate to meet operating
requirements and pay shareholder dividends in accordance with REIT requirements.
The Company may use other sources of capital to finance additional acquisitions
including, but not limited to, the selling of additional equity interest in the
Company, non-distributed Funds From Operations, the issuance of debt securities,
funds from the Revolving Credit Facility, and exchanging Common Shares or Common
Units for properties or interests in properties.
The Company continuously evaluates properties for possible acquisition or
disposition. Individual properties may be acquired through direct purchase of
the property or through the purchase of the entity owning such property and may
be made for cash or securities of the Company or the Operating Partnership. In
connection with any acquisition, the Company may incur additional indebtedness.
If the Company acquires or disposes of any property, such acquisition or
disposition could have a significant effect on the Company's financial
condition, results of operations or cash flows.
Funds from Operations
Industry analysts generally consider funds from operations ("FFO") an
appropriate measure of performance of an equity REIT. Funds from operations is
defined as income before gains (losses) on investments and extraordinary items
(computed in accordance with generally accepted accounting principles) plus real
estate depreciation, less preferred dividends and after adjustment for
significant non-recurring items, if any. This definition conforms to the
recommendations set forth in a White Paper adopted by the National Association
of Real Estate Investment Trusts ("NAREIT") in early 1995. FFO for years prior
to 1996 have been adjusted to conform to the NAREIT definition. The Company
believes that in order to facilitate a clear understanding of its operating
results, FFO should be examined in conjunction with the net income as presented
in the financial statements and information included elsewhere in this Report.
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. FFO should not be considered as an
alternative to net income as an indication of the Company's performance or as an
alternative to cash flow as a measure of liquidity.
FFO increased $933,268 from $259,580 for the six months ended June 30, 1996 to
$1,192,848 for the six months ended June 30, 1997. Dividends declared for the
six months ended June 30, 1997 were $843,874, representing 71.3% of FFO.
Dividends declared for the six months ended June 30, 1996 were $240,188,
representing 92.5% of FFO. FFO per share was $0.45 and $0.42 for the six months
ended June 30, 1997 and 1996, respectively.
FFO increased $835,505 from $143,426 for the three months ended June 30, 1996 to
$978,931 for the three months ended June 30, 1997. Dividends declared for the
the long period March 14, 1997 to June 30, 1997 were $747,274, representing
76.3% of FFO. Dividends declared for the three months ended June 30, 1996 were
$120,750, representing 84.2% of FFO. FFO per share was $0.25 and $0.23 for the
three months ended June 30, 1997 and 1996, respectively.
<PAGE>
Cash Available for Distribution
Cash Available for Distribution ("CAD") is defined as FFO (as defined above)
plus depreciation on personal property, less mortgage principal payments and
recurring capital improvements. Recurring capital improvements include, but are
not limited to, carpet and flooring replacement, appliance replacements, and
electrical and plumbing fixture replacement. The Company believes that in order
to facilitate a clear understanding of its operating results, CAD should be
examined in conjunction with net income as presented in the financial statements
and information included elsewhere in this Report. CAD 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. CAD should not be considered as an alternative to net income as
an indication of the Company's performance or as an alternative to cash flow as
a measure of liquidity.
CAD increased $915,805 from $228,982 for the six months ended June 30, 1996
to $1,144,787 for the six months ended June 30, 1997. Dividends declared for the
six months ended June 30, 1997 were $843,874, representing 73.7% of CAD.
Dividends declared for the six months ended June 30, 1996 were $240,188,
representing 104.9% of CAD. CAD per share was $0.44 and $0.37 for the six months
ended June 30, 1997 and 1996, respectively.
CAD increased $816,218 from $128,370 for the three months ended June, 1996
to $944,558 for the three months ended June 30, 1997. Dividends declared for the
long period March 14, 1997 to June 30, 1997 were $747,274, representing 79.1% of
CAD. Dividends declared for the three months ended June 30, 1996 were $120,750,
representing 94.1% of CAD. CAD per share was $0.24 and $0.21 for the three
months ended June 30, 1997 and 1996, respectively.
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. Such short-term leases generally lessen the risk to the Company of
the potential adverse effects of inflation.
"Safe Harbor" Statement under Private Securities Litigation Reform Act of 1996
Certain statements contained in this report, and in particular in this
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," statements in other filings with the Securities and Exchange
Commission and statements in other public documents of the Company may be
forward looking and are subject to a variety of risks and uncertainties. Many
factors could cause actual results to differ materially from these statements.
These factors include, but are not limited to, (i) population shifts which may
increase or decrease the demand for rental housing, (ii) the value of commercial
and residential rental properties in the Northeast where all of the Company's
properties are located, in recent years, have fluctuated considerably, (iii) the
effect on the Company's properties of competition from new apartment complexes
which may be completed in proximity to such properties thereby increasing
competition, (iv) the effect of weather and other conditions which can
significantly affect property operating expenses, (v) the availability of
acquisition financing or refinancing, (vi) compliance with applicable laws and
regulations and (vii) other factors which might be described from time to time
in the Company's filings with the Securities and Exchange Commission. In
addition, the Company is subject to the effects of changes in the general
business economic conditions.
Although the Company believes that its properties will continue to be attractive
to tenants and that it will be able to control expenses, future revenue and
operating trends cannot be reliably predicted. These trends may cause the
Company to adjust its operation in the future. Factors external to the Company
can also affect the price of the Company's Common Shares. Because of the
foregoing and other factors, recent trends should not be considered reliable
indicators of future financial results or stock prices.
<PAGE>
PART II. OTHER INFORMATION
Item 2. Changes in Securities
(a) Not applicable.
(b) Not applicable.
(c) During the quarter ended June 30, 1997, the Company's
subsidiary Grove Operating L.P. (the "Operating Partnership") issued an
aggregate of 420,183 of its Common Units as part of the consideration for its
acquisition of the assets of Northeast Apartments I Limited Partnership and West
Hartford Center Associates, Limited Partnership and its acquisition of an
interest in Windsor Arbor Limited Partnership. The assets of each of these
limited partnerships consists primarily of interests in rental apartment
complexes. Each person who acquired Common Units in these transactions
represented to the Operating Partnership that such person was an accredited
investor within the meaning of Rule 501 under the Securities Act of 1933, as
amended (the "1933 Act"). The offer and sale of these Common Units was made by
the Operating Partnership in reliance on Rule 506 under the 1933 Act.
The Common Units issued in the transactions referred to in the
preceding paragraph are redeemable, under certain circumstances, at the option
of the holders thereof. If redeemed, the Company has the option of paying the
redemption price in cash based on the then market value per Common Share of the
Company or by the issuance of one Common Share of the Company for each Common
Unit redeemed.
In addition, on May 1, 1997, the Company sold 394 Common
Shares to J. Joseph Garrahy, a member of the Board of Trust Managers of the
Company, upon the exercise of options by Mr. Garrahy. Mr. Garrahy paid an
aggregate of $2,836.80 for such Common Shares. As a member of the Board of Trust
Managers of the Company, Mr. Garrahy is an "accredited investor" within the
meaning of Rule 501 under the 1933 Act, and the sale of the Common Shares to him
upon the exercise of his option was made by the Company in reliance on Rule 506
under the 1933 Act.
No underwriting discounts or commissions were paid by the
Company or the Operating Partnership in connection with the transactions
described above.
Item 4. Submission of Matters to a Vote of Security Holders.
The Company held its Annual Meeting of Shareholders on June 18, 1997
(the "Annual Meeting"). At the Annual Meeting, the shareholders of the Company
elected all of the nominees for Trustee and ratified the selection of Ernst &
Young, LLP as the Company's independant public accountants for the fiscal year
ending December 31, 1997, each as described in the Notice of Annual Meeting and
Proxy Statement distributed in connection with the Annual Meeting. The results
of the voting of the shareholders with respect to such matters is set forth
below.
I. Election of Trustees
Total Vote for Total Vote Withheld
Each Trustee from Each Trustee
------------ -----------------
Theodore R. Bigman 2,680,344 11,302
Harold V. Gorman 2,680,344 11,302
Damon D. Navarro 2,679,754 11,892
II. Ratification of the selection of Ernst & Young, LLP as the Company's
independant public accountants for the fiscal year ending
December 31, 1997.
For Against Abstain Broker Non Vote
--- ------- ------- ---------------
2,688,593 3,053 0 0
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 - Financial Data Schedule
(b) During the quarter ended June 30, 1997, the Company filed
a Current Report on Form 8-K dated May 30, 1997 responding to Items 2 and 7.
Amendment No. 1 to such Current Report included the following financial
statements:
Financial Statements of Businesses Acquired.
Four Winds Apartments
---------------------
Statement of Revenue and Certain Expenses for the three months ended
March 31, 1997 and the year ended December 31, 1996 and for the period
September 28, 1995 (date operations commenced) to December 31, 1995.
Brooksyde Apartments
----------------------
Statement of Revenue and Certain Expenses for the three months ended
March 31, 1997 and the period from October 1, 1996 (date operations
commenced) to December 31, 1996, the period from
January 1, 1996 to September 30, 1996 and the year ended December 31,
1995.
River's Bend Apartments
-----------------------
Statement of Revenue and Certain Expenses
for the three months ended March 31, 1997 and years ended December 31,
1996 and 1995.
Pro Forma Financial Statements
Pro Forma Condensed Balance Sheet as of March 31, 1997. Pro Forma
Condensed Consolidated Statement of Operations for the year ended
December 31, 1996 and the three months ended March 31, 1997.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has
cause this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
REGISTRANT:
GROVE PROPERTY TRUST
Date: August 13, 1997 By: /s/Joseph R. LaBrosse
---------------------
Name: Joseph R. LaBrosse
(on behalf of the registrant and as Chief Financial
Officer)
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
JUNE 30, 1997 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-START> JAN-01-1997 APR-01-1997
<PERIOD-END> JUN-30-1997 JUN-30-1997
<CASH> 2,932,388 2,932,388
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 5,950,923 5,950,923
<PP&E> 115,193,286 115,193,286
<DEPRECIATION> 28,589,729 28,589,729
<TOTAL-ASSETS> 92,554,480 92,554,480
<CURRENT-LIABILITIES> 3,847,816 3,847,816
<BONDS> 45,852,948 45,852,948
0 0
0 0
<COMMON> 39,538 39,538
<OTHER-SE> 37,600,590 37,600,590
<TOTAL-LIABILITY-AND-EQUITY>92,554,480 92,554,480
<SALES> 0 0
<TOTAL-REVENUES> 5,784,189 4,478,021
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 4,030,448 3,027,581
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 777,026 603,905
<INCOME-PRETAX> 605,229 508,676
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 605,229 508,676
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 605,229 508,676
<EPS-PRIMARY> .23 .13
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