SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark one)
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
------------- ----------------
Commission File Number 33-82040
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MAIN PLACE REAL ESTATE INVESTMENT TRUST
---------------------------------------
(Exact name of registrant as specified in its charter)
Maryland 56-1996001
- -------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
100 North Tryon Street, 23rd floor, Charlotte, NC 28255
-------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(704) 388-7436
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes x No
--- ---
On August 14, 1997, there were 100,000 shares of the registrant's Class A Trust
shares outstanding and 110 shares of the registrant's Class B Trust shares
outstanding.
THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H (1) (a)
AND (b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH THE REDUCED
DISCLOSURE FORMAT.
Main Place Real Estate Investment Trust
June 30, 1997 Form 10-Q
Index
Part I. Financial Information
Item 1. Financial Statements
Statement of Income for the Three Months and Six Months Ended
June 30, 1997 and 1996
Balance Sheet on June 30, 1997 and December 31, 1996
Statement of Cash Flows for the Six Months Ended
June 30, 1997 and 1996
Statement of Changes in Shareholders' Equity for the Six Months
Ended June 30, 1997 and 1996
Notes to Financial Statements
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signature
Index to Exhibits
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
Main Place Real Estate Investment Trust
Statement of Income
(Dollars in Thousands)
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
-------------------- --------------------
1997 1996 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Income
Interest and fees on loans........ $ 264,658 $ 86,171 $ 533,146 $ 173,918
Interest on securities
available for sale.............. 11,517 - 25,502 -
Interest on time deposits placed.. 25,464 - 35,223 -
Gains on sales of available for
sale securities................. 15,940 - 15,990 -
-------------------------------------------
Total income.................... 317,579 86,171 609,861 173,918
-------------------------------------------
Expenses
Interest on securities sold under
agreements to repurchase........ 9,368 - 18,952 -
Interest on long-term and
subordinated debt............... 59,755 65,380 119,669 133,295
Other operating expenses.......... 7,899 3,284 16,065 6,640
-------------------------------------------
Total expenses.................. 77,022 68,664 154,686 139,935
-------------------------------------------
Income before income taxes.......... 240,557 17,507 455,175 33,983
Income tax expense.................. - 7,144 - 12,914
-------------------------------------------
Net income.......................... $ 240,557 $ 10,363 $ 455,175 $ 21,069
===========================================
See accompanying notes to financial statements.
</TABLE>
<TABLE>
Main Place Real Estate Investment Trust
Balance Sheet
(Dollars in Thousands)
<CAPTION>
June 30 December 31
1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash and cash equivalents...................... $ 50,299 $ 253,578
Time deposits placed with affiliates........... 2,588,161 -
Securities available for sale.................. - 836,938
Amount due from Trustee........................ 126,511 101,325
Loans, net of unearned income.................. 13,566,778 14,704,375
Allowance for credit losses.................... (42,398) (42,396)
-----------------------------
Loans, net of unearned income and
allowance for credit losses............... 13,524,380 14,661,979
-----------------------------
Interest receivable............................ 75,869 91,836
Accounts receivable from affiliates............ 178,858 214,856
Other assets................................... 21,999 6,927
-----------------------------
$ 16,566,077 $ 16,167,439
=============================
Liabilities
Accrued expenses............................... $ 51,941 $ 27,316
Mortgage-backed bonds.......................... 3,999,645 2,999,544
Subordinated notes............................. - 1,072,733
-----------------------------
4,051,586 4,099,593
-----------------------------
Shareholders' Equity
Class A Trust shares, $1 par value -
authorized: 200,000 shares;
issued: 100,000 shares...................... 100 100
Class B Trust shares, $10,000 par value -
authorized: 200 shares;
issued: 110 shares.......................... 1,100 1,100
Additional paid-in capital..................... 12,044,801 12,044,801
Retained earnings.............................. 468,490 13,315
Net unrealized gains on securities
available for sale.......................... - 8,530
-----------------------------
Total shareholders' equity................... 12,514,491 12,067,846
-----------------------------
$ 16,566,077 $ 16,167,439
=============================
See accompanying notes to financial statements.
</TABLE>
<TABLE>
Main Place Real Estate Investment Trust
Statement of Cash Flows
(Dollars in Thousands)
<CAPTION>
Six Months
Ended June 30
------------------------
1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Operating Activities
Net income.......................................... $ 455,175 $ 21,069
Reconciliation of net income to net cash
provided by (used in) operating activities
Net decrease in accounts receivable from
affiliates....................................... 35,998 -
Net decrease in interest receivable............... 15,967 888
Net increase in accrued expenses.................. 24,625 10,475
Gains on sales of securities...................... (15,990) -
Other operating activities........................ (14,237) 1,554
-----------------------
Net cash provided by operating activities....... 501,538 33,986
-----------------------
Investing Activities
Proceeds from sales of securities
available for sale................................. 843,666 -
Net (increase) decrease in amount due from Trustee.. (25,186) 20,546
Net increase in time deposits placed................ (2,588,161) -
Collections of loans outstanding.................... 1,137,597 519,144
-----------------------
Net cash (used in) provided by investing
activities..................................... (632,084) 539,690
-----------------------
Financing Activities
Increase in securities sold under
agreements to repurchase.......................... 738,403 -
Decrease in securities sold under
agreements to repurchase.......................... (738,403) -
Issuances of long-term debt........................ 1,000,000 1,110,585
Retirement of subordinated debt.................... (1,072,733) (1,091,104)
Distribution of capital and cash dividends paid to
former shareholder................................ - (516,592)
------------------------
Net cash used in financing activities........... (72,733) (497,111)
------------------------
Net (decrease) increase in cash and cash equivalents... (203,279) 76,565
Cash and cash equivalents at beginning of period....... 253,578 4,870
------------------------
Cash and cash equivalents at end of period............. $ 50,299 $ 81,435
========================
See accompanying notes to financial statements.
</TABLE>
<TABLE>
Main Place Real Estate Investment Trust
Statement of Changes in Shareholders' Equity
(Dollars in Thousands)
<CAPTION>
Total
Class A Class B Additional Share-
Trust Trust Paid-In Retained holders'
Shares Shares Capital Earnings Other Equity
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance on December 31, 1995... $ - $ - $ 299,648 $ 7,136 $ - $ 306,784
Net income................ 21,069 21,069
Cash dividends paid to
NationsBank Texas...... (17,842) (17,842)
Net assets contributed by
NationsBank South...... 79,280 79,280
Net assets contributed by
NationsBank Texas...... 502,486 502,486
Distribution of capital to
NationsBank Texas...... (505,553) (505,553)
-----------------------------------------------------------------
Balance on June 30, 1996....... $ - $ - $ 375,861 $ 10,363 $ - $ 386,224
=================================================================
Balance on December 31, 1996... $ 100 $ 1,100 $ 12,044,801 $ 13,315 $ 8,530 $ 12,067,846
Net income................ 455,175 455,175
Net change in unrealized
gain on securities
available for sale..... (8,530) (8,530)
-----------------------------------------------------------------
Balance on June 30, 1997....... $ 100 $ 1,100 $ 12,044,801 $ 468,490 $ - $ 12,514,491
=================================================================
There were 100 common shares outstanding at December 31, 1995 and June 30, 1996 with a par value
of one cent. There were no common shares outstanding subsequent to November 1, 1996.
See accompanying notes to financial statements.
</TABLE>
Main Place Real Estate Investment Trust
Notes to Financial Statements
Note 1 - Accounting Policies
Main Place Real Estate Investment Trust (MPREIT) is an indirect subsidiary of
NationsBank, N.A., which is a wholly owned indirect subsidiary of NationsBank
Corporation (the Corporation). MPREIT was established on October 29, 1996 as a
Maryland real estate investment trust to consolidate the acquisition, holding
and management of certain closed-end residential mortgage loans owned by certain
affiliates of the Corporation. Main Place Funding Corporation (MPFC) merged
with and into MPREIT on November 1, 1996, and, as the surviving entity, MPREIT
issues and sells mortgage-backed bonds and subordinated indebtedness and
acquires, owns, holds and pledges the related mortgage notes and other assets
serving as collateral in connection therewith. The merger between MPREIT and
MPFC was accounted for in a manner similar to a pooling of interests and,
accordingly, the accompanying financial statements include the results of
operations and financial condition of MPFC since inception.
The information contained in the financial statements is unaudited. In the
opinion of management, all normal recurring adjustments necessary for a fair
presentation of the interim period results have been made. Certain prior period
amounts have been reclassified to conform to current period classifications.
Accounting policies followed in the presentation of interim financial results
are presented on pages 11 and 12 of the Annual Report on Form 10-K for the year
ended December 31, 1996, as updated by Note 1 on page 7 of MPREIT's quarterly
report on Form 10-Q for March 31, 1997 and the following.
A real estate investment trust (REIT) is subject to a number of organizational
and operational requirements, including the requirement that it currently
distribute to beneficial holders at least 95 percent of its "real estate
investment trust taxable income." Prior to November 1, 1996, MPREIT did not
qualify as a REIT and its operating results were included in the consolidated
federal income tax return of the Corporation. For the periods subsequent to
November 1, 1996, MPREIT was taxed as a REIT and, accordingly, no current or
deferred tax expense was provided.
Note 2 - Loans
The following table presents the composition of loans (dollars in thousands):
June 30 December 31
1997 1996
- --------------------------------------------------------------------------------
Residential mortgage............................. $ 13,538,778 $ 14,671,836
Commercial real estate........................... 28,000 32,539
-----------------------------
Total loans, net of unearned income............ $ 13,566,778 $ 14,704,375
=============================
Mortgage loans collateralizing mortgage-backed bonds were comprised of the
following (dollars in thousands):
June 30 December 31
1997 1996
- --------------------------------------------------------------------------------
Fixed-rate...................................... $ 1,382,183 $ 1,473,739
Adjustable-rate................................. 5,150,085 2,955,181
-----------------------------
Total mortgage loans.......................... $ 6,532,268 $ 4,428,920
=============================
Transactions in the allowance for credit losses were as follows (dollars in
thousands):
Six Months
Ended June 30
---------------------
1997 1996
- --------------------------------------------------------------------------------
Balance on January 1.................................... $ 42,396 $ 17,805
Recoveries of mortgage loans previously charged off..... 2 -
Allowance acquired with contributed loans............... - 1,344
---------------------
Balance on June 30...................................... $ 42,398 $ 19,149
=====================
There was no activity in the allowance for credit losses during the second
quarter of 1997 and 1996.
MPREIT had $50.9 million of nonperforming loans on June 30, 1997 compared to
$27.5 million on December 31, 1996. The increase is due primarily to the
seasoning of the loan portfolio. There was no other real estate owned on June
30, 1997 compared to $.5 million on December 31, 1996.
Note 3 - Affiliate Transactions
During the first six months of 1997, MPREIT purchased $2.6 billion in time
deposits from NationsBank, N.A. and NationsBank of Texas, N.A. (NationsBank
Texas). Interest income on time deposits placed for the three months and six
months ended June 30, 1997 was $25.5 million and $35.2 million, respectively.
MPREIT has entered into agreements with NationsBanc Mortgage Corporation, a
subsidiary of NationsBank Texas, and with NationsBank, N.A., for the servicing
and administration of its mortgage portfolio. Servicing fees paid to
NationsBanc Mortgage Corporation approximated $15.5 million and $6.6 million for
the six months ended June 30, 1997 and 1996, respectively, and are included in
"Other operating expenses" on the accompanying statement of income.
MPREIT maintains its cash and cash equivalent accounts with NationsBank, N.A.
and NationsBank Texas. At June 30, 1997, MPREIT had $178.9 million of accounts
receivable from affiliates of the Corporation. These receivables are related to
mortgage payments in process and generally clear within 30 days. Accounts
payable to affiliates of the Corporation, primarily NationsBank Texas, totaled
$25.4 million on June 30, 1997 and are included in "Accrued expenses" in the
accompanying balance sheet.
NationsBank, N.A. plans to contribute $9.2 billion in mortgage-backed securities
and collateralized mortgage obligation interest rate contracts to MPREIT on
August 18, 1997.
During the third quarter of 1997, MPREIT will begin purchasing on a monthly
basis certain mortgage loans originated by the Corporation's mortgage affiliate.
Note 4 - Long-Term Debt
The following table displays the primary terms of MPREIT's Series 1995-1, 1995-
2, and 1997-1 Mortgage-Backed Bonds as of June 30, 1997 (dollars in thousands):
Series Series Series
1995-1 1995-2 1997-1
(Issued (Issued (Issued
July 1995) October 1995) March 1997)
------------------------------------------
Amount issued....................... $ 1,500,000 $ 1,500,000 $ 1,000,000
Reference rate...................... 1-mo. LIBOR 3-mo. LIBOR 3-mo. LIBOR
+21 bps +17 bps +5 bps
Period-end interest rate............ 5.898% 5.998% 5.831%
Maturity............................ 1998 2000 2000
Mortgage loans collateralizing
mortgage-backed bonds:
Collateral - book value......... $ 2,264,810 $ 1,912,648 $ 2,354,810
Collateral - discounted value... 1,708,717 1,817,352 1,562,104
Collateral - approximate amount
exceeding minimum indenture
requirements.................. 164,000 235,000 507,000
On March 18, 1997, MPREIT repaid in full $629.5 million and $443.2 million,
respectively, of subordinated notes from NationsBank N.A. (South) (NationsBank
South) (succeeded in interest by NationsBank, N.A. effective June 1, 1997) and
NationsBank Texas, respectively.
Interest expense on the Series 1995-1, 1995-2 and 1997-1 Bonds for the three
months and six months ended June 30, 1997 was $59.8 million and $105.7 million,
respectively, compared to $43.6 million and $87.9 million, respectively, on the
Series 1995-1 and 1995-2 Bonds for the three months and six months ended June
30, 1996. Interest expense on the subordinated notes for the second quarter
and first half of 1997 was $0 and $14.0 million, respectively, compared to
$21.8 million and $45.4 million for the second quarter and first half of 1996,
respectively.
On August 13, 1997, MPREIT had no remaining capacity available for the issuance
of additional mortgage-backed bonds under its existing shelf registration.
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
Net income for the three months and six months ended June 30, 1997 was $240.6
million and $455.2 million, respectively, compared to $10.4 million and $21.1
million, respectively, in the comparable prior-year periods. The change in net
income reflects the impact of several factors including the levels and average
interest yields on the mortgage loan portfolio, the issuance of the Series 1997-
1 Bonds, the effects of securities market conditions, the volatility of interest
rates and MPREIT's election to be taxed as a REIT.
Interest income increased $215.5 million and $420.0 million for the three months
and six months ended June 30, 1997, respectively, compared to the same periods
in 1996 due primarily to increases in average loans outstanding and, to a lesser
extent, increases in average time deposits placed and average securities
available for sale. During the second quarter of 1997, MPREIT sold its
available for sale securities resulting in gains of $15.9 million. Interest
expense increased $3.7 million and $5.3 million for the three months and six
months ended June 30, 1997, respectively, compared to the same periods in the
prior year due primarily to interest expense associated with securities sold
under agreements to repurchase. This increase was partially offset by lower
interest expense on subordinated debt due to the repayment of the subordinated
notes. Other operating expenses increased $4.6 million and $9.4 million for the
three months and six months ended June 30, 1997, respectively, compared to the
same periods in 1996 due primarily to higher mortgage servicing costs associated
with the increase in average loans outstanding during 1997. Due to MPREIT's
election to be taxed as a REIT, there was no income tax expense in the three
months and six months ended June 30, 1997.
The average yields on mortgage loans for the three months and six months ended
June 30, 1997 were 7.63 percent and 7.53 percent, respectively, compared to 7.45
percent and 7.41 percent in the same periods of 1996. Changes in the average
yields were primarily related to the mix between fixed- and adjustable-rate
loans, the repricing terms of adjustable rate loans, the impact of the general
level of interest rates, the levels of prepayments on mortgage loans and
scheduled amortization of the portfolio as a whole.
The weighted average interest rates on mortgage-backed bonds outstanding for the
three months and six months ended June 30, 1997, were 5.98 percent and 5.90
percent, respectively, compared to 5.81 percent and 5.86 percent, respectively,
for the same prior year periods.
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
3(a) Declaration of Trust of the Registrant, incorporated
by reference to Exhibit 3(a) of the Registrant's
Quarterly Report on Form 10-Q dated November 14, 1996.
3(b) Bylaws of the Registrant, incorporated by reference to
Exhibit 3(b) of the Registrant's Quarterly Report on
Form 10-Q dated November 14, 1996.
12 Ratio of Earnings to Fixed Charges.
27 Financial Data Schedule.
(b) Reports on Form 8-K:
None.
SIGNATURE
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.
Main Place Real Estate Investment Trust
----------------------------------------
Date: August 14, 1997 /s/ Karin Hirtler-Garvey
----------------------------------------
Karin Hirtler-Garvey
Senior Vice President/Principal
Accounting Officer
(Principal Accounting and Duly
Authorized Officer)
Main Place Real Estate Investment Trust
Form 10-Q
Index to Exhibits
Exhibit Description
- ------- -----------
3(a) Declaration of Trust of the Registrant, incorporated by reference
to Exhibit 3(a) of the Registrant's Quarterly Report on Form 10-Q
dated November 14, 1996.
3(b) Bylaws of the Registrant, incorporated by reference to Exhibit
3(b) of the Registrant's Quarterly Report on Form 10-Q dated
November 14, 1996.
12 Ratio of Earnings to Fixed Charges.
27 Financial Data Schedule.
<TABLE>
Main Place Real Estate Investment Trust Exhibit 12
Ratio of Earnings to Fixed Charges
- --------------------------------------------------------------------------------
(Dollars in Thousands)
<CAPTION>
Year Year From Inception
Six Months Ended Ended Through
Ended December 31, December 31, December 31,
June 30, 1997 1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Income before taxes........ $ 455,175 $ 216,709 $ 48,070 $ 5,459
Fixed charges:
Interest expense ........ 136,876 255,318 145,822 25,701
Amortization of debt
discount and appropriate
issuance costs......... 1,745 2,856 983 -
------------------------------------------------
Total fixed charges... 138,621 258,174 146,805 25,701
Earnings................... $ 593,796 $ 474,883 $ 194,875 $ 31,160
================================================
Fixed charges.............. $ 138,621 $ 258,174 $ 146,805 $ 25,701
================================================
Ratio of Earnings to Fixed
Charges............... 4.28 1.84 1.33 1.21
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary information extracted from the June 30, 1997 Form
10-Q for Main Place Real Estate Investment Trust and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 50,299
<INT-BEARING-DEPOSITS> 2,588,161
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 13,566,778
<ALLOWANCE> (42,398)
<TOTAL-ASSETS> 16,566,077
<DEPOSITS> 0
<SHORT-TERM> 0
<LIABILITIES-OTHER> 51,941
<LONG-TERM> 3,999,645
0
0
<COMMON> 1,200
<OTHER-SE> 12,513,291
<TOTAL-LIABILITIES-AND-EQUITY> 16,566,077
<INTEREST-LOAN> 533,146
<INTEREST-INVEST> 25,502
<INTEREST-OTHER> 35,223
<INTEREST-TOTAL> 593,871
<INTEREST-DEPOSIT> 0
<INTEREST-EXPENSE> 138,621
<INTEREST-INCOME-NET> 455,250
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 15,990
<EXPENSE-OTHER> 16,065
<INCOME-PRETAX> 455,175
<INCOME-PRE-EXTRAORDINARY> 455,175
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 455,175
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 0
<LOANS-NON> 50,873
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 42,396
<CHARGE-OFFS> 0
<RECOVERIES> 2
<ALLOWANCE-CLOSE> 42,398
<ALLOWANCE-DOMESTIC> 42,398
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
