<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
[X] Annual Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [Fee Required]
For the fiscal year ended December 31, 1993
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required]
For the transition period from __________ to __________
Commission file number 1-6736
STARRETT HOUSING CORPORATION
(Exact name of Registrant as specified in its charter)
NEW YORK 13-5411123
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
909 THIRD AVENUE, NEW YORK, NEW YORK 10022
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212)751-3100
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock - par value $1.00 per share American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of recipient's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ X ]
Aggregate market value of the Common Stock held by non-affiliates of the
Registrant, based on the closing price on the American Stock Exchange on March
16, 1994: $22,077,382 (For this purpose, all outstanding shares of Common
Stock have been considered held by non-affiliates, other than the shares owned
by directors, officers and 5% shareholders of the Registrant; certain of such
persons disclaim that they are affiliates of the Registrant.)
Number of shares of Common Stock outstanding at December 31, 1993: 6,566,402
Documents incorporated by reference: Portions of the definitive proxy statement
of Registrant in connection with its 1994 Meeting of Shareholders incorporated
by reference in Part III.
<PAGE> 2
PART I
Item 1. Business
Starrett Housing Corporation was organized in New York in
1922. Through its subsidiary Levitt Corporation ("Levitt"), the Company
engages in the construction and sale of single-family homes and garden
apartments in the United States and Puerto Rico. See "Levitt Corporation."
Over the years Starrett and its subsidiaries have constructed a wide range of
office, industrial, public and institutional buildings, among the most notable
being the Empire State Building, the AT&T World Headquarters, Citicorp Center,
Chemical Bank World Headquarters and the New York State Javits Convention
Center, and many well-known residential communities and developments, including
Starrett City, Manhattan Park at Roosevelt Island and Trump Tower in New York
City. The Company today is actively engaged in various construction,
development, management and related businesses. See "Starrett's Construction
Activities," "Development Activities" and "Management and Rental Services."
Unless the context otherwise requires, references to the
"Company," the "Registrant" or "Starrett" include Starrett Housing Corporation
and/or one or more of its subsidiaries.
Levitt Corporation
Levitt's operations include sale of single family detached
homes and garden apartments, development of rental apartments, mortgage banking
and the development and management of senior citizen health and congregate care
facilities.
Housing
Levitt's residential housing operations are concentrated in
Florida and Puerto Rico. In Puerto Rico, Levitt believes it is the largest
home builder and has been active on the island since 1960. Florida operations
were started in 1978 and are currently conducted on Florida's southeast and
southwest coasts.
During 1993, several new sites were acquired in Florida which
were opened or are scheduled for opening for sales in 1994. Although these
projects are in the beginning phase of marketing, there has been a strong
initial response from home-buyers to these new subdivisions. During 1994,
Levitt expects an increase in sales resulting from these new subdivisions in
Florida. Additionally, as the older projects are being completed, contracts
are being entered into for new sites.
Levitt has concentrated its significant Puerto Rican
homebuilding activities in the greater San Juan area. In recent years, Puerto
Rico operations have provided the majority of revenue and profits for Levitt.
Levitt has a major development called Encantada and other subdivisions in the
San Juan metropolitan area.
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Encantada is a planned unit development located in a suburb of
San Juan with excellent access to schools, shopping and business centers.
Encantada is planned for 2,600 homes of which more than 1,300
homes have been contracted for sale with over 1,000 deliveries as of February
28, 1994. Both single family homes and garden apartments are offered for sale
at various prices in the community. The Company believes that Encantada's
success can be attributed to the quality of the community, quality of the
housing and the family lifestyle provided. With approximately 1,300 more homes
to be sold, Encantada, together with the region's other projects, is expected
to continue as an important source of revenues and profits for the Company.
With the new Florida developments being introduced during
1994, Levitt's domestic operations are expected to be profitable and Puerto
Rico should maintain its level of profitability.
Levitt's performance in 1993 reflects the finalization of its
program involving the disposition of high cost land in Virginia, New York and
New Jersey as these areas were phased out. The disposition of land by selling
and constructing homes at reduced prices resulted in a loss or minimal profit,
but accelerated the receipt of cash from such dispositions. The disposition
program has been virtually completed in 1993.
Levitt's business is affected by other issues such as housing
affordability, increased land costs, legislative growth restrictions, sewer and
water moratoriums, possible changes in the Internal Revenue Code, including
changes in Section 936 of the Internal Revenue Code relating to the taxability
of corporations doing business in Puerto Rico, and increasing infrastructure
demands.
Levitt's backlog of homes contracted for sale at December 31,
1993 was $32,320,000 compared to $33,765,000 at December 31, 1992. Backlog
consists of units which are under sales contract but where title has not yet
passed, and comprises completed and uncompleted houses as well as houses where
construction has not yet begun.
The following table sets forth information concerning homes
contracted for sale (net of cancellations during each period), housing units
delivered (construction completed and title passed), and backlog:
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<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1993 1992 1991
---- ---- ----
(000's omitted from dollar amounts)
<S> <C> <C> <C>
Homes contracted (net of cancellations)
for sale during period:
Units 626 644 550
Dollar amount (estimated) $88,089 $83,991 $62,890
Homes delivered during period:
Units 666 592 563
Revenues $89,534 $77,269 $68,896
Backlog at end of period:
Units 232 272 220
Dollar amount (estimated) $32,320 $33,765 $27,043
</TABLE>
The Company's backlog at February 28, 1994 increased
significantly from the amount at December 31, 1993 and February 28, 1993. This
increase is attributable to the higher level of sales experienced in the
Company's new projects in Florida and Puerto Rico.
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Backlog at February 28:
Units 429 337
Dollar amount (estimated) $63,179 $42,943
</TABLE>
The backlog as of February 28, 1994 includes 23 units under
contract with a contract value of $3,500,000 relating to a joint venture in
which the Company has a 50% interest.
After the initial contract has been received, contracts for
the sale of houses may be canceled at or prior to closing for various reasons,
including failure of the buyer to make the remainder of the required contract
deposit or qualify for mortgage financing and default by the buyer. Levitt
retains the buyer's deposit only if cancellation results from default by the
buyer, except in Puerto Rico where under local law Levitt can retain only a
portion of the deposit. When computing homes contracted for sale and backlog,
Levitt makes no deduction for future cancellations, but nets cancellations as
they occur against sales contracts. Levitt generally estimates that of the
sales contracts entered into by buyers, approximately 65% have historically
resulted in delivered homes. Contracts of sale are not recorded as revenues
until the houses have been completed and title delivered.
Levitt generally builds subdivisions on undeveloped suburban
land having access to water and sewer services, although it does occasionally
purchase fully developed land. Development plans must be approved by local
authorities, which may take two years or more
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after the signing of a purchase contract. See "Regulation of the Company's
Activities," page 8.
Levitt provides home purchasers with warranties against
construction defects for a period of up to two years from the date of purchase.
In Puerto Rico there is a statutory warranty for certain construction defects
which appear generally within ten years after completion.
Rental Apartment Development
In 1991, Levitt, in joint venture with an established
apartment developer, constructed its first apartment project in Florida. This
224 unit apartment complex was completed and sold in 1992 to an institutional
investor at a substantial profit. The Company and the joint venture partner
have completed a second complex and have contracted to sell it to an
institutional investor at a profit in 1994. A third development with Levitt's
joint venture partner is scheduled to begin in the second quarter of 1994 and a
fourth project is projected to begin in the last quarter of 1994.
Levitt's current policy is to develop, lease and sell the
apartment projects and not hold them for investment. The apartment development
program is an integral part of Levitt's business and is anticipated to provide
it with a continuous source of income. It is the Company's plan to develop at
least one or more apartment projects each year.
Mortgage Banking
Levitt Mortgage Corp. ("Mortgage") is a full service mortgage
lender that processes and originates loans in Puerto Rico and processes
mortgage loans domestically. Mortgage is a designated approved direct endorser
of FHA loans in Puerto Rico but does not service loans.
In Puerto Rico, Mortgage also acts as a mortgage banker for
third parties and processes and issues the mortgages it underwrites. These
mortgages are sold to investors in accordance with firm purchase commitments
with the investors. Mortgages are solicited through four offices in the San
Juan area. Mortgage is the fifth largest mortgage banker in Puerto Rico.
Health Care Facilities and Management
Levitt Care Corporation ("Care") develops and manages adult
congregate care ("ACLF") and assisted living facilities ("AL"). In 1987, the
Company developed Northpark, a 376 unit ACLF in Hollywood, Florida. The
facility was sold in 1989, and Care continues to manage it. Care is seeking to
acquire existing ACLFs and AL facilities to rehabilitate and market them on a
profitable basis and to develop sites for AL complexes.
The facilities provide the resident, on a rental basis, meal
service, weekly cleaning of the residents apartment, social activities and
scheduled transportation to doctors'
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offices, shopping and cultural events. The rental cost of an apartment, is
based on the size of the unit and the level of service required by the
resident. In addition to the independent level of care in Northpark, an
assisted living facility is available to the residents. This facility serves
those individuals that require a greater level of care; such as assistance with
bathing, dressing and eating.
Management believes that the growing elderly population will
increase the need for ACLF and AL facilities. Therefore, Care is seeking
opportunities to expand in these areas.
Development Activities
In its development activities, the Company's services, in
addition to those of a construction manager or general contractor, may include
initial planning and development, acquisition of the property, arranging for
financing and ownership of the project typically through general or limited
partnerships, and providing management, consulting and related services. The
Company anticipates marketing its development projects to investors or other
purchasers, based principally on cash flow, capital appreciation and other
non-tax considerations, and may in some instances retain ownership of such
projects. In connection with its sale of projects, the Company may provide
guarantees of completion and cash flow for varying periods. The Company has
focused its development efforts in the areas of rental housing and projects
sponsored by municipalities.
The Company is proceeding with certain development projects.
While the Company has generally been successful in developing such projects,
these projects are in differing stages of development, and there can be no
assurance that any particular project will be completed.
Ownership of Partnership Interests
The Company reviews from time to time projects in which it
acts as a general partner or in which it has an equity interest (which for the
most part have a low income tenancy subsidized in whole or in part by
government-assistance programs) to determine the possibility of refinancing,
resyndicating, selling, converting to condominiums, or co-oping such projects
to obtain fees and other economic benefits.
The Company has three projects located on the Upper West Side
of Manhattan, in which it has a 50% residual partnership interest, with respect
to which the Company has made application for incentives under the Low Income
Housing Preservation and Resident Homeownership Act ("LIHPRHA"). LIHPRHA
provides owners of certain federally subsidized projects with financial
incentives in return for their agreement to continue the use of a project as
affordable housing in lieu of converting the project to fair-market rentals or
ownership. The financial incentives are designed to provide an owner with the
approximate economic equivalent of what an owner would have received had the
project discontinued its low income use and converted to a market rate rental
or ownership, based upon an appraisal valuation and underwriting process set
forth in the statute regulations and HUD guidelines.
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In May 1992, the Company commenced processing the first of its
projects with the United States Department of Housing and Urban Development
("HUD"). On April 28, 1993, HUD provided the Partnership with a Value
Determination Letter establishing a substantial value for the project, and in
August and October 1993 HUD provided technical comments on the Plan of Action
necessary to complete the processing. HUD has notified the Company that it is
reversing its prior Value Determination and consequently will require the
Partnership to reprocess the project, using a different formula for valuation,
presently being developed by HUD. Under HUD's revised formula, the project may
have a substantially diminished value. The Company disagrees with the reversal
of HUD's prior Value Determination position, has so notified HUD and
discussions are in process regarding this matter. In light of the foregoing,
the amount of cash proceeds and profits, if any, the Company could receive for
its 50% residual interest in the project as well as the time required to
complete the processing is uncertain. The revised HUD position also affects
processing under LIHPRHA for the two similar projects in which the Company owns
a 50% residual interest located on the Upper West Side of Manhattan. If
sustained, the revised HUD position will affect all New York projects of a
similar nature.
Starrett's Construction Activities
Through its HRH Construction Corporation subsidiary ("HRH"),
the Company primarily acts as construction manager in the construction of
institutional, office and residential projects, most of which are located in
the New York Metropolitan area. HRH builds projects either as a construction
manager on a cost plus fee basis or a general contractor in which case it
assumes the construction risk. The construction management and general
contracting fees and other income earned by HRH during 1993, 1992 and 1991 were
$4,000,000, $5,396,000 and $8,117,000, respectively. See "Segment
Information," page 8.
As a result of the economic slowdown, HRH has focused its
activities on institutional construction and construction funded by City, State
and Federal governments and is seeking to diversify into new areas of
construction, all of which are subject to intense competition.
In the case of projects where HRH acts as general contractor
rather than construction manager (which has included projects in which the
Company acts as a developer or has an ownership interest), the Company is
required from time to time, as is customary in projects of this kind, to
furnish payment and performance bonds assuring payment to subcontractors. The
Company believes its bonding capacity is adequate for both present and
projected requirements. The aggregate amount of bonds or other security the
Company can obtain at any one time is dependent upon its overall financial
strength.
HRH's estimated backlog of fees for development work and
uncompleted construction in connection with construction projects, including
fees for projects where development work has begun but contracts have not yet
been executed, was $8,151,000 at December 31, 1993 as compared to $8,158,000
and $9,409,000 at the end of 1992 and 1991, respectively. HRH is actively
seeking to increase its backlog of business, particularly in the governmental
and institutional sectors.
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Management and Rental Services
Grenadier Realty Corp. ("Grenadier") is licensed in New York,
New Jersey and Connecticut and manages many different properties with rental,
condominium and cooperative residential units, commercial and retail space, and
garage parking. Grenadier provides a full range of real estate management
services, including on-site administration, accounting, security, maintenance,
procurement, capital budgeting and owner and tenant communication programs to
private owners and to governmental and institutional property owners as well as
banks and thrift institutions. Grenadier operates two power plants and
provides technical services for the development of energy conservation
programs. In addition, Grenadier provides technical support for the
implementation and operation of reliable, cost-effective electrical and
mechanical building systems. Grenadier also designs security systems and
provides security services to a variety of residential, commercial and
industrial clients.
Regulation of the Company's Activities
The development business and home building industry in which
the Company is engaged have, in the last several years, become subject to
increased environmental, building, land use, zoning and sales regulations
administered by various federal, state and local authorities, which affect
construction activities as well as sales activities and other dealings with
customers. Additionally, sewer moratoriums have been imposed from time to time
in Puerto Rico which have caused delays in the delivery of homes to customers.
The Company must obtain for its development and housing activities the approval
of numerous governmental authorities which often have wide discretion in such
matters. Changes in local circumstances or applicable law may necessitate
applications for additional approvals or the modification of existing
approvals. Compliance with these regulations has extended the time required to
market projects by prolonging the time between the initiation of projects and
the commencement and completion of construction. The Company is currently in
various stages of securing governmental approvals for its development and
homebuilding projects. Delay or inability to obtain all required approvals for
a project could have a materially adverse effect on the marketability or
profitability of such a project.
Segment Information
The Company's operations consist of (i) the development,
management and ownership of real estate properties; (ii) the single-family home
and garden apartment business conducted through its Levitt subsidiary; and
(iii) the supplying of construction services through its HRH subsidiary. The
Company groups its business into these three segments. The following table
sets forth the Company's revenues and operating profit attributable to the
respective segments of its operations for each of the years 1991 through 1993,
and the identifiable assets attributable to the respective segments as at the
end of each of those years:
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<TABLE>
<CAPTION>
(Dollars in Thousands)
Development HRH
Management and Levitt Construction
1993 Ownership Corporation Corporation
- - ---- -------------- ----------- ------------
<S> <C> <C> <C>
Revenues $24,504 $93,678 $4,000
Operating Profit (loss) 2,600 4,257 (372)
Identifiable Assets 25,797 86,300 8,187
1992
- - ----
Revenues $23,487 $82,972 $ 5,396
Operating Profit 2,435 864 283
Identifiable Assets 31,299 94,335 11,104
1991
- - ----
Revenues $30,327 $72,645 $ 8,117
Operating Profit (loss) 9,749 (4,575) 243
Identifiable Assets 39,767 99,164 11,359
</TABLE>
Operating profit is comprised of revenues less operating
expenses. In computing operating profit, general corporate expenses and income
taxes have not been deducted.
There were no individual customers from which the Company
derived 10% or more of its revenues in 1991, 1992 or 1993.
Competition
The construction, development and home building industries in
all of the areas in which the Company operates are highly competitive, and the
Company competes with major concerns as well as with smaller contractors or
builders, some of whom have greater financial resources than the Company.
Raw Materials and Equipment
Substantially all the materials used by the Company in
projects now under construction, including fixtures, appliances and systems,
are readily available from many sources. The Company has from time to time
experienced some shortages, delays and increased costs in connection with
material shortages and increases in material prices but the Company does not
believe the effect to have been significant.
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Employees--Labor Relations
The Company directly employed, at December 31, 1993, a total
of approximately 1,100 persons. The Company considers that it has satisfactory
relations with the unions whose members it employs.
Item 2. Properties
The Company leases 25,000 square feet of space for its
corporate offices and its main office for the construction management business,
HRH, located at 909 Third Avenue in New York City. The lease for such space,
which it occupied in 1973, expires in 1997. The Company also maintains a
mobile field office at each of its construction sites.
Levitt leases approximately 5,700 square feet of office space
which it uses for its executive office and main office for its Florida
homebuilding operation in Boca Raton, Florida, and also leases office space in
San Juan, Puerto Rico.
Item 3. Legal Proceedings
The Company is involved in litigation and claims incident to
the normal conduct of its business. Management believes that such litigation
and claims will not have a materially adverse effect on the Company's business
operations.
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
Executive Officers of the Company
The following table sets forth the names and ages of all
executive officers of the Company, the positions and offices with the Company
held by each such person, and the period during which each such person has
served as an executive officer.
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<TABLE>
<CAPTION>
Has Served as
Offices and an Executive
Name Age Positions Held Officer Since
- - ---- --- -------------- --------------
<S> <C> <C> <C>
Paul Milstein 71 Chairman of the 1994
Board
Irving R. Fischer 62 Chairman of the 1977
Board and Chief
Executive Officer of
HRH Construction
Corporation, a subsidiary
of the Company
Lewis A. Weinfeld 51 Senior Vice President, 1974
Treasurer and Secretary
Elliott M. Wiener 59 President of Levitt 1982
Corporation, a subsidiary
of the Company
</TABLE>
The term of office of each executive officer continues until
the first meeting of the Board of Directors of the Company following the next
annual meeting of shareholders, and until the election and qualification of
such officer's successor. There is no family relationship between the
executive officers listed above, or between such executive officers and
directors. All of the executive officers except Paul Milstein have been
principally engaged in his present employment for more than five years. Mr.
Milstein became Chairman on January 1, 1994, and for more than five years has
been active as a real estate developer and investor.
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PART II
Item 5. Market for the Company's Common Equity and Related Stockholder Matters
On March 16, 1994, there were 792 record holders of the
Company's common stock and approximately 1,500 additional persons whose shares
of Common Stock were held in street name. Such common stock is listed on the
American Stock Exchange, which is the principal market on which such stock is
traded. High and low sales prices on the American Stock Exchange for the
Company's common stock during the last two years have been as follows:
<TABLE>
<CAPTION>
1994 High Low
---- ---- ---
<S> <C> <C>
First Quarter 10-1/4 8-1/8
</TABLE>
<TABLE>
<CAPTION>
1993 High Low
---- ---- ---
<S> <C> <C>
First Quarter 7-3/8 4
Second Quarter 6-3/4 5
Third Quarter 7-1/4 5-1/8
Fourth Quarter 8-5/8 5-3/4
</TABLE>
<TABLE>
<CAPTION>
1992 High Low
---- ---- ---
<S> <C> <C>
First Quarter 7-5/8 4-7/8
Second Quarter 7 4-3/4
Third Quarter 5-1/8 4-1/2
Fourth Quarter 4-3/4 3-5/8
</TABLE>
The Company paid an extraordinary dividend of $.25 per share
in 1992. While the directors will consider the payment of dividends in 1994,
at this time it is not anticipated that the Company will pay dividends on its
common stock.
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Item 6. Selected Financial Data
Starrett Housing Corporation and Subsidiaries
<TABLE>
<CAPTION>
(Dollars in Thousands Except Per Share Data)
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues $122,182 $111,855 $111,089 $128,052 $124,650
Income before income
taxes 4,588 1,045 2,283 7,454 10,336
Income before
extraordinary item and
cumulative effect of
accounting change 2,140 284 1,384 4,510 6,555
Extraordinary item 824
Cumulative effect of
accounting change 1,287
Less Preferred stock
requirements 1,537 1,699
Income attributable to
common stockholders $2,140 $2,395 $1,384 $2,973 $4,856
Earnings per share:
Income before
extraordinary item
and cumulative effect
of accounting change $.34 $.04 $.21 $.45 $.74
Extraordinary item .13
Cumulative effect of
accounting change .20
Income attributable to
common stockholders $.34 $.37 $.21 $.45 $.74
Total assets 120,284 136,738 150,290 167,867 173,165
Long-term obligations 41,033 32,603 60,922 69,511 58,796
Redeemable
Preferred Stock 29,451
Common
Stockholders' Equity 41,819 41,139 40,408 39,285 36,137
Cash dividends
(per share) .25
</TABLE>
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Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
1993 Compared to 1992
During the year ended December 31, 1993 the Company had income
from operations of $2,140,000 ($.34 per share) compared to $284,000 ($.04 per
share) for the year ended December 31, 1992. In addition, during the year
ended December 31, 1992, the Company reported an extraordinary gain net of tax
of $824,000 and an accounting change of $1,287,000 or $.13 and $.20 per share,
respectively, which when combined with the income from operations increased net
income to $2,395,000 ($.37 per share). Earnings per share were based on
average shares outstanding of 6,356,000 and 6,417,000 in 1993 and 1992,
respectively.
The Company's revenues increased $10,327,000 compared with the
similar period in 1992. This increase was primarily attributable to an
increase in revenues from the Company's Levitt division resulting from an
increase in the number of houses delivered in the Company's Puerto Rico region.
The increase in revenues from Levitt was offset by a decrease in revenues in
the Company's development and construction management divisions in 1993. In
1992 revenues also included Levitt's Joint Venture share of the gain on the
sale of a rental apartment project. Levitt's backlog of homes contracted for
sale at December 31, 1993 was $32,320,000 compared to $33,765,000 at December
31, 1992. The backlog at February 28, 1994 was $63,179,000 as compared to
$42,943,000 at February 28, 1993.
General and administrative expenses (which were reduced for
all divisions other than Grenadier which showed an overhead increase for the
year) declined by $3,044,000 in 1993 following a $2,200,000 reduction in 1992
as a result of continuing cost reduction programs. Interest expense decreased
by $655,000 for 1993 as compared to 1992 primarily as a result of both a
decrease in borrowings and a decline in interest rates.
Levitt's interest, real estate taxes and sales costs incurred
with certain properties are capitalized in order to achieve better matching of
costs with revenues. The Company's interest incurred on loans was $3,893,000
in 1993 and $5,964,000 in 1992, of which $2,959,000 in 1993 and $4,150,000 in
1992 was capitalized by Levitt in its operations. Levitt amortized capitalized
interest of $5,802,000 in 1993 and $5,177,000 in 1992 to construction and
related costs.
HRH's estimated backlog of fees for development work and
uncompleted construction in connection with construction projects, including
fees for projects where development work has begun but contracts have not yet
been executed, was $8,151,000 at December 31, 1993 as compared to $8,158,000
and $9,409,000 at the end of 1992 and 1991, respectively. HRH is actively
seeking to increase its backlog of business, particularly in the governmental
and institutional sectors, while at the same time continuing to reduce its
overhead (overhead was reduced 21%, 25% and 20% in 1993, 1992 and 1991,
respectively) to reflect the lower level of business activity.
Grenadier continued its steady profitability in 1993 and has
expanded its management services to private owners and institutional property
owners as well as banks and thrift institutions.
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The Company has three projects located on the Upper West Side
of Manhattan, in which it has a 50% residual partnership interest, with respect
to which the Company has made application for incentives under the Low Income
Housing Preservation and Resident Homeownership Act ("LIHPRHA"). On April 28,
1993, HUD provided the Partnership with a Value Determination Letter for the
first of its projects establishing a substantial value for the project, and in
August and October 1993 HUD provided technical comments on the Plan of Action
necessary to complete the processing. HUD has notified the Company that it is
reversing its prior Value Determination and consequently will require the
Partnership to reprocess the project, using a different formula for valuation,
presently being developed by HUD. Under HUD's revised formula, the project may
have a substantially diminished value. The Company disagrees with the reversal
of HUD's prior Value Determination position, has so notified HUD and
discussions are in process regarding this matter. In light of the foregoing,
the amount of cash proceeds and profits, if any, the Company could receive for
its 50% residual interest in the project as well as the time required to
complete the processing is uncertain. The revised HUD position also affects
processing under LIHPRHA for the two similar projects in which the Company owns
a 50% residual interest located on the Upper West Side of Manhattan. If
sustained, the revised HUD position will affect all New York projects of a
similar nature. See "Business - Ownership of Partnership Interests," page 6.
1992 Compared to 1991
During the year ended December 31, 1992 the Company had net
income of $2,395,000 ($.37 per share) as compared with $1,384,000 ($.21 per
share) in 1991. The accounting change and the extraordinary item described
below added $1,287,000 and $824,000 or $.20 and $.13 per share, respectively,
to net income for the year ended December 31, 1992. Earnings per share were
based on average shares outstanding of 6,417,000 for 1992 and 6,495,000 for
1991.
Effective January 1, 1992, the Company adopted Statement of
Financial Accounting Standards No. 109 - Accounting for Income Taxes, which
requires the Company to adjust deferred taxes for the temporary differences
between the tax bases of its assets and liabilities and the amounts reported in
the financial statements at enacted statutory tax rates.
In September 1992, the Company repurchased a $2,600,000
outstanding mortgage loan (including accrued interest) for approximately
$1,300,000, including transaction costs. The extraordinary gain, net of income
tax effect, was $824,000.
In October 1992, Roosevelt Island Associates ("RIA"), a
partnership in which a Company subsidiary is one of several partners, defaulted
on its mortgage payment obligations to the New York City Housing Development
Corporation. The default was cured on January 15, 1993, by RIA entering into a
bond refunding transaction with respect to its FHA insured $157,500,000
mortgage loan. This transaction resulted in an interest rate reduction to
approximately 6.66%, from a prior rate of approximately 9.7%. The refinancing
reduced RIA's debt service by $4,200,000 annually, thereby substantially
reducing RIA's operating deficits which the Company, as a joint venture
partner, has a continuing obligation to fund. As part of the refunding
transaction, the Company provided cash flow guarantees to the investor partner.
15
<PAGE> 16
HRH reported a small profit for 1992. Its fee backlog
decreased to $8,158,000 at December 31, 1992 as compared with $9,409,000 at the
end of 1991.
The Company's development activities also contributed to
profits during 1992 with the recognition of $1,000,000 of income from its
Livingston Plaza project, and the successful development, construction and sale
by its Levitt division of a rental apartment project to a major institutional
investor at a $1,800,000 profit.
Grenadier continued its steady profitability in 1992.
Grenadier is now providing management services to private owners and to
institutional property owners as well as banks and thrift institutions.
The Company's Levitt subsidiary reported income before taxes
for 1992 of $864,000 as compared with a loss before taxes of $4,575,000 in
1991. The income in 1992 was before giving effect to the extraordinary gain on
the repurchase of debt or the accounting change previously described. Sales in
Puerto Rico increased to $48,616,000 for the year compared with $35,598,000 in
1991 and Levitt's company-wide backlog was $33,765,000 at December 31, 1992
compared with $27,043,000 for 1991. Domestically, Levitt's profitability was
adversely affected by slow sales in certain of its projects. Levitt continued
with its aggressive land disposition program, and in 1993 largely completed the
liquidation of certain of its domestic land positions by selling and building
homes at reduced prices. As a result of this program, in 1992 the Company
increased its non-cash reserve by $1,810,000 to reduce the carrying value of
its real estate inventory to its estimated net realizable value.
Revenues increased $766,000 for the year 1992 compared with
the similar period in 1991 as a result of an increase in revenues from Levitt
of $10,327,000, offset principally by a decrease in revenues recognized upon
the completion of a large project, Livingston Plaza in 1991, which was built
and sold to The New York City Transit Authority, as well as a decrease in
revenues of the Company's HRH division.
General and administrative expenses (which were reduced for
all divisions other than Grenadier which showed an overhead increase for the
year) were reduced $2,200,000 in 1992 following a $3,000,000 reduction in 1991
as a result of continuing cost reduction programs. Interest expense decreased
by $1,000,000 for 1992 as compared to 1991 primarily as a result of both a
decrease in borrowings and a decline in interest rates.
Levitt's interest, real estate taxes and sales costs incurred
with certain properties are capitalized in order to achieve better matching of
costs with revenues. The Company's interest incurred on loans was $5,964,000
in 1992 and $8,264,000 in 1991, of which $4,150,000 in 1992 and $5,314,000 in
1991 was capitalized by Levitt in its operations. Levitt amortized capitalized
interest of $5,177,000 in 1992 and $4,909,000 in 1991 to construction and
related costs.
Cash Flow and Liquidity
While the Company presently has various banking relationships,
it does not have any formal lines of credit other than in connection with its
Levitt subsidiary as described below.
16
<PAGE> 17
Levitt's business and earnings are substantially dependent on
its ability to obtain financing on acceptable terms for it's activities. The
Company has a $18,400,000 balance on a term loan, previously a revolving credit
loan which was converted to a term loan in November 1991. As of December 31,
1993, the loan agreement provides for semi-annual principal payments of
$1,000,000 in January and July in 1994 and 1995, a $3,000,000 payment in
January 1996, a $1,000,000 payment in July 1996, a $3,000,000 payment in
January 1997 and a final payment of $7,400,000 in July 1997.
Levitt's Puerto Rico operations are partially financed by an
unsecured $15,000,000 revolving credit facility with a Puerto Rico bank. As a
result of greater than anticipated house sales in Levitt's Puerto Rico
Encantada planned community in 1992 and a resultant increase in capital needed
to complete such homes, Levitt obtained a short-term secured loan for
$6,000,000 in June 1992. This facility was repaid in full in March 1993. In
September 1993, the Puerto Rico mortgage branch operations entered into a
$3,000,000 revolving credit agreement, with a Puerto Rico bank to finance the
warehousing of mortgage note receivables originated by the mortgage operation.
As of December 31, 1993, no amount was outstanding on its warehousing line of
credit.
Levitt also finances the acquisition of property for its
operations on deferred payment terms provided by sellers of such property.
Levitt anticipates that funds generated by operations, together with its
existing credit relationships, will provide it with adequate financial
resources to satisfy its operating needs and to meet its anticipated capital
requirements for new projects.
The timing of introducing Levitt's new projects to the market,
weather conditions in certain of Levitt's regions, and traditional periods of
greater customer activity have tended to create seasonal trends in Levitt's
residential home building activities. Historically, the number of homes
delivered has been greater in the second half of the calendar year.
Net Operating Loss Carryforwards
At December 31, 1993 the Company had net tax operating loss
carryforwards which can be utilized against future taxable income of
approximately $12,957,000 expiring in 2001 through 2008. Under current tax
laws, if the aggregate voting stock owned by the Company's 5% shareholders
increases over the lowest percentage owned by such shareholders during a
three-year period by an amount exceeding 50% of Starrett's total voting stock,
then Starrett's utilization of the net tax operating loss carryforwards could
be limited to an amount per year equal to the market value of all Starrett
equity securities multiplied by an adjusted federal long-term interest rate.
In general, all non-5% shareholders are treated as a single 5% shareholder for
the purpose of such calculations. Such an ownership change might be caused by
sales of shares by the Company's shareholders, repurchases of shares by the
Company, certain reorganizations, or certain other transactions.
Inflation
The Company believes that inflation has not had a material
adverse effect upon its construction, development and management business.
Levitt has from time to time been
17
<PAGE> 18
adversely affected by high interest costs and increases in material and labor
costs which it has not been able to pass through entirely to home purchasers.
Item 8. Consolidated Financial Statements and Supplementary Data
See "Table of Contents to Consolidated Financial Statements
and Financial Statement Schedules," page 19.
Item 9. Disagreements on Accounting and Financial Disclosure
None
PART III
The information called for by Items 10, 11, 12 and 13 is
incorporated herein by reference from the following portions of the definitive
proxy statement to be filed by the Company in connection with its 1994 Meeting
of Shareholders.
Item Incorporated from
Item 10. Directors and Executive "Election of Directors"
Officers of the Company
Item 11. Executive Compensation "Compensation and
Certain Transactions"
Item 12. Security Ownership of "Information as to
Certain Beneficial Stock Ownership"
Owners and Management
Item 13. Certain Relationships "Compensation and
and Related Transactions Certain Transactions"
PART IV
Item 13. Exhibits, Financial Statement Schedules, and Reports on Form
8-K
(a) See the accompanying Table of Contents to
Consolidated Financial Statements and Schedules and the accompanying Exhibit
Index.
(b) Reports on Form 8-K: The Registrant did not file any
report on Form 8-K during the quarter ended December 31, 1993.
18
<PAGE> 19
TABLE OF CONTENTS
TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Statements of Consolidated Financial Position at December 31, 1993 and 1992 . . . . . . . . . . . . . . . . . . . . . . . . . 21
Statements of Consolidated Operations for the Years Ended December 31, 1993,
1992 and 1991 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Statements of Stockholders' Equity for the Years Ended December 31, 1993, 1992
and 1991 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Consolidated Statements of Cash Flows for the Years Ended December 31, 1993,
1992 and 1991 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25-37
Financial Statement Schedule of Condensed Financial Information of Registrant at
December 31, 1993 and 1992 and for the Years Ended December 31, 1993,
1992 and 1991 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38-39
</TABLE>
Financial Statement Schedules, other than that listed above, are omitted
because of the absence of the conditions under which they are required, or
because the information required therein is set forth in the financial
statements or the notes thereto.
19
<PAGE> 20
[DELOITTE & TOUCHE LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders of
Starrett Housing Corporation
We have audited the consolidated financial statements and the related financial
statement schedule of Starrett Housing Corporation and consolidated
subsidiaries, listed in the foregoing table of contents. These consolidated
financial statements and the financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall consolidated financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company and its consolidated
subsidiaries at December 31, 1993 and 1992 and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1993 in conformity with generally accepted accounting principles. Also, in
our opinion, such financial statement schedule, when considered in relation to
the basic consolidated financial statements taken as a whole, present fairly in
all material respects the information set forth therein.
As discussed in note 6, the Company changed its method of accounting for income
taxes effective January 1, 1992 to conform with Statement of Financial
Accounting Standard No. 109.
Deloitte & Touche
March 21, 1994
20
<PAGE> 21
STARRETT HOUSING CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED FINANCIAL POSITION
December 31, 1993 and 1992
(In Thousands)
<TABLE>
<CAPTION>
1993 1992
--------- ---------
<S> <C> <C>
ASSETS:
Cash and Cash Equivalents of $3,000 in 1993
and $4,975 in 1992 (Note 1) . . . . . . . . . . . . . . . . . . . . $ 12,171 $ 11,624
U.S. Treasury/Certificates of Deposit . . . . . . . . . . . . . . . . 7,811 13,296
Receivables (Notes 2 and 7) . . . . . . . . . . . . . . . . . . . . . 22,724 27,812
Inventory of Real Estate (Notes 1 and 3) . . . . . . . . . . . . . . 60,629 62,957
Rental and Other Property and Equipment-Net
(Notes 1 and 4) . . . . . . . . . . . . . . . . . . . . . . . . . . 3,315 7,960
Land Held for Investment . . . . . . . . . . . . . . . . . . . . . . 2,236 2,352
Other Assets (Note 5) . . . . . . . . . . . . . . . . . . . . . . . . 11,398 10,737
-------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $120,284 $136,738
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Liabilities:
Payable Within One Year:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,853 $ 11,554
Current portion of long-term obligations (Note 7) . . . . . . . . . 6,496 33,255
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . 11,035 8,857
-------- --------
Total Liabilities Payable Within One Year . . . . . . . . . . . 30,384 53,666
-------- --------
Deferred Income Taxes (Notes 1 and 6) . . . . . . . . . . . . . . . . 4,108 5,682
Deferred Revenues (Notes 1 and 10) . . . . . . . . . . . . . . . . . 2,940 3,648
Long-Term Obligations (Note 7) . . . . . . . . . . . . . . . . . . . 41,033 32,603
-------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78,465 95,599
-------- --------
Commitments and Contingencies (Note 10)
Stockholders' Equity:
Common stock-par value, $1.00; authorized,
18,000 shares . . . . . . . . . . . . . . . . . . . . . . . . . . 6,566 6,566
Capital in excess of par value . . . . . . . . . . . . . . . . . . 23,933 23,933
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . 13,646 11,506
Pension liability adjustment . . . . . . . . . . . . . . . . . . . (736)
Shares held in treasury-at cost . . . . . . . . . . . . . . . . . . (1,590) (866)
-------- --------
Stockholders' Equity . . . . . . . . . . . . . . . . . . . . . . . . 41,819 41,139
-------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $120,284 $136,738
======== ========
</TABLE>
See Notes to Consolidated Financial Statements
21
<PAGE> 22
STARRETT HOUSING CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED OPERATIONS
For the Years Ended December 31, 1993, 1992 and 1991
(In Thousands Except Per Share Data)
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- -------
<S> <C> <C> <C>
Revenues (Notes 1 and 9) . . . . . . . . . . . . . . . . $122,182 $111,855 $111,089
-------- -------- --------
Construction Costs . . . . . . . . . . . . . . . . . . . 73,015 62,694 58,675
Provision to Reduce Land Inventory to Net
Realizable Value (Note 3) . . . . . . . . . . . . . . . 1,810 1,643
-------- -------- --------
Total Cost . . . . . . . . . . . . . . . . . . . . . 73,015 64,504 60,318
-------- -------- --------
Income from Construction Contracts and
Related Revenues . . . . . . . . . . . . . . . . . . . . 49,167 47,351 50,771
-------- -------- --------
Expenses:
General and Administrative . . . . . . . . . . . . . . . 23,951 26,582 27,272
Security Service Labor and Other Costs . . . . . . . . . 9,438 8,018 9,260
Selling . . . . . . . . . . . . . . . . . . . . . . . . 5,725 5,960 5,508
Mortgage and Closing Costs . . . . . . . . . . . . . . . 4,039 3,430 2,351
Interest . . . . . . . . . . . . . . . . . . . . . . . . 880 1,535 2,536
Loss from Rental Operations-Net . . . . . . . . . . . . 546 781 1,561
-------- -------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . 44,579 46,306 48,488
-------- -------- --------
Income before Income Taxes . . . . . . . . . . . . . . . 4,588 1,045 2,283
Income Taxes (Note 6) . . . . . . . . . . . . . . . . . . 2,448 761 899
-------- -------- --------
Income before extraordinary item and
cumulative effect of accounting change . . . . . . . . . 2,140 284 1,384
Extraordinary item - Gain on repurchase of
mortgage loan (net of income tax effect
of $490) (Note 7) . . . . . . . . . . . . . . . . . . . 824
Cumulative effect of accounting change
(Note 6) . . . . . . . . . . . . . . . . . . . . . . . . 1,287
-------- -------- --------
Net Income . . . . . . . . . . . . . . . . . . . . . . . $ 2,140 $ 2,395 $ 1,384
======== ======== ========
Earnings per Common Share:
Income before extraordinary item and
cumulative effect of accounting change . . . . . . . . . $.34 $.04 $.21
Extraordinary Item . . . . . . . . . . . . . . . . . . . .13
Cumulative effect of accounting change . . . . . . . . . .20
------ ----- ------
Net Income . . . . . . . . . . . . . . . . . . . . . . . $.34 $.37 $.21
==== ==== ====
Weighted Average Number of Shares . . . . . . . . . . . . 6,356 6,417 6,495
===== ===== =====
Cash Dividends per Share . . . . . . . . . . . . . . . . None $.25 None
==== ==== ====
</TABLE>
See Notes to Consolidated Financial Statements
22
<PAGE> 23
STARRETT HOUSING CORPORATION AND SUBSIDIARIES
STATEMENTS OF STOCKHOLDERS' EQUITY
For the Years Ended December 31, 1993, 1992 and 1991
(In Thousands Except Share Data)
<TABLE>
<CAPTION>
CAPITAL IN PENSION SHARES STOCK-
COMMON EXCESS OF RETAINED LIABILITY HELD IN HOLDERS'
STOCK PAR VALUE EARNINGS ADJUSTMENT TREASURY EQUITY
------ --------- -------- ---------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1990
(6,566,402 common shares
issued and 55,760 shares
in Treasury) . . . . . . . . . . . . . $6,566 $23,709 $ 9,331 $ (321) $39,285
Net Income . . . . . . . . . . . . . . 1,384 1,384
Vested Shares Issued under
Restricted Stock Agreement . . . . . . 199 199
Purchase of Treasury Shares . . . . . . (460) (460)
------ ------- ------- ------- -------
Balance, December 31, 1991
(6,566,402 common shares
issued and 146,927 shares
in Treasury) . . . . . . . . . . . . . 6,566 23,908 10,715 (781) 40,408
Net Income . . . . . . . . . . . . . . 2,395 2,395
Vested Shares Issued under
Restricted Stock Agreement . . . . . . 25 25
Dividends to common
stockholders ($.25 a share) . . . . . (1,604) (1,604)
Purchase of Treasury Shares . . . . . . (85) (85)
------ ------- ------- ------- -------
Balance, December 31, 1992
(6,566,402 common shares
issued and 167,227 shares
in Treasury) . . . . . . . . . . . . . 6,566 23,933 11,506 (866) 41,139
Net Income . . . . . . . . . . . . . . 2,140 2,140
Pension Liability
Adjustment (Note 8) . . . . . . . . . $(736) (736)
Purchase of Treasury Shares . . . . . . (724) (724)
------ ------- ------- ----- ------- -------
Balance, December 31, 1993
(6,566,402 common shares
issued and 305,427 shares
in Treasury) . . . . . . . . . . . . . $6,566 $23,933 $13,646 $(736) $(1,590) $41,819
====== ======= ======= ===== ======= =======
</TABLE>
See Notes to Consolidated Financial Statements
23
<PAGE> 24
STARRETT HOUSING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1993, 1992 and 1991
(In Thousands)
<TABLE>
<CAPTION>
1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,140 $ 2,395 $ 1,384
Adjustments to Reconcile Net Income to Net Cash Provided
by Operating Activities:
Cumulative effect of accounting change . . . . . . . . . . . . . . . . . . . . . (1,287)
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . 3,013 2,648 3,308
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,087) (542) (832)
Loss (gain) on sale of rental facilities . . . . . . . . . . . . . . . . . . . . 595 (1,091) 1,156
Extraordinary gain on repurchase of mortgage loan . . . . . . . . . . . . . . . (1,314)
Reduction in carrying value of inventory of real estate . . . . . . . . . . . . 1,810 1,643
Changes in Operating Assets and Liabilities:
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,088 (3,311) 12,935
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,444 2,160 789
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,290 (372) (998)
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,066) 600 1,500
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 955 436 (3,734)
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (708) (1,706) (1,938)
-------- -------- --------
Net Cash Provided by Operating Activities . . . . . . . . . . . . . . . . . . . . . 12,664 426 15,213
-------- -------- --------
INVESTING ACTIVITIES:
Investments in and Advances to Partnerships . . . . . . . . . . . . . . . . . . . . (1,732) (111) 2
U.S. Treasury/Certificates of Deposit . . . . . . . . . . . . . . . . . . . . . . . 5,485 7,791 (3,754)
Purchase of Property and Equipment . . . . . . . . . . . . . . . . . . . . . . . . (1,002) (2,069) (225)
Proceeds (Payments) Relating to Sale of Rental and
Other Property and Equipment, Net . . . . . . . . . . . . . . . . . . . . . . . . 4,186 2,681 (1,861)
-------- -------- --------
Net Cash Provided by (Used in) Investing Activities . . . . . . . . . . . . . . . . 6,937 8,292 (5,838)
-------- -------- --------
FINANCING ACTIVITIES:
Repayment of Notes and Mortgage Payables . . . . . . . . . . . . . . . . . . . . . (16,253) (16,629) (6,894)
Proceeds from Long-Term Obligations . . . . . . . . . . . . . . . . . . . . . . . . 3,769 11,747 7,555
Dividends and Principal Paid on Preferred Stock . . . . . . . . . . . . . . . . . . (13,340)
Payments of Promissory Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,846) (5,846)
Payment of Cash Dividend to Common Stockholders . . . . . . . . . . . . . . . . . . (1,604)
Purchase of Treasury Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . (724) (85) (460)
-------- -------- --------
Net Cash Used In Financing Activities . . . . . . . . . . . . . . . . . . . . . . . (19,054) (12,417) (13,139)
-------- -------- --------
Increase (Decrease) in Cash and Cash Equivalents . . . . . . . . . . . . . . . . . 547 (3,699) (3,764)
Cash and Cash Equivalents Beginning of Year . . . . . . . . . . . . . . . . . . . . 11,624 15,323 19,087
-------- -------- --------
Cash and Cash Equivalents End of Year* . . . . . . . . . . . . . . . . . . . . . . $12,171 $11,624 $15,323
======= ======= =======
*Does not include U.S. Treasury/Certificates of Deposit
held at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,811 $13,296 $21,087
======== ======= =======
</TABLE>
See Notes to Consolidated Financial Statements
24
<PAGE> 25
STARRETT HOUSING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Principles of Consolidation:
The consolidated financial statements include the accounts of
Starrett Housing Corporation (the "Company") and all of its
subsidiaries. Intercompany accounts and transactions have been
eliminated in the consolidated financial statements.
B. Recognition of Income:
The Company follows the percentage-of-completion method of
recording revenues and related costs from construction contracts using
the cost-to-cost method and provides currently for estimated losses on
uncompleted contracts. Profits relating to sales of limited
partnership interests and development fees are recognized on the
percentage-of-completion method and full accrual method as
appropriate.
Revenue from the sale of real estate in which the Company has
a continuing involvement is recognized in accordance with Statement of
Financial Accounting Standards No. 66. Reflected in the deferred
revenues account is that portion of the profit from the sale which is
required to be deferred under the provisions of such Statement.
Revenues from house sales and all related costs and expenses
are recognized upon passage of title to the buyer and receipt of an
adequate down payment.
Revenues from cost-plus fee contracts are recognized on the
basis of costs incurred during the period plus the fee earned.
C. Inventory of Real Estate:
Inventory of real estate is stated at the lower of cost or
estimated net realizable value. Cost includes direct acquisition,
development and construction costs, interest and other indirect
construction costs. Estimated net realizable value is defined as an
estimate of sales proceeds less all estimated costs of carrying,
completing and disposing of the property. Interest is capitalized at
the effective interest rates paid on borrowings for interest costs
incurred on real estate inventory components during the
preconstruction and planning stage and the periods that projects are
under development. Capitalization of interest is discontinued if
development ceases at a project.
Land and improvement costs are allocated based on a method
that approximates the relative sales value method. Construction costs
are charged to individual homesites based on specific identification.
25
<PAGE> 26
D. Land Held for Investment:
Land parcels in which the Company has no formal plans to
develop or sell are classified as land held for investment. Land held
for investment is carried at cost. Land parcels previously included
in inventory of real estate and reclassified to land held for
investment are valued at the lower of their acquisition cost or fair
value at the time of transfer. The carrying value of land held for
investment is evaluated for other than temporary declines in value.
For the years 1993 and 1992, no adjustments for other than temporary
declines were necessary.
E. Rental and Other Property and Equipment:
Rental and other property and equipment are carried at cost
less accumulated depreciation and are depreciated using the
straight-line method over the estimated useful lives of the assets
which range from three to fifty years. Expenditures for maintenance
and repairs are charged to expense as incurred. Costs of major
renewals and betterments which extend useful lives are capitalized.
F. Capitalized Costs:
Mortgage interest, real estate taxes, and sales costs incurred
in connection with certain properties are capitalized in order to
achieve better matching of costs with revenues. Interest incurred on
loans was $3,893,000 in 1993, $5,964,000 in 1992 and $8,264,000 in
1991, of which $2,959,000 in 1993, $4,150,000 in 1992 and $5,314,000
in 1991 was capitalized. Amortization of capitalized interest of
$5,802,000 in 1993, $5,177,000 in 1992 and $4,909,000 in 1991 was
charged to construction costs.
Certain tangible costs incurred that are used directly
throughout the selling period to aid in the sale of units, such as
model furnishings and decorations, sales office furnishings and
facilities, exhibits, displays and signage, are capitalized as
deferred selling costs and amortized over the number of units to be
delivered. Costs incurred during the initial and due diligence phases
of a project, such as land deposits and studies, are capitalized as
preacquisition costs. The unrecovered preacquisition costs are
written off in the period the Company abandons development of the
project.
G. Income Taxes:
The Company adopted SFAS No. 109, "Accounting for Income
Taxes," effective January 1, 1992. The Company has reported the
change in accounting for income taxes as a cumulative effect of a
change in accounting method. Prior year amounts have not been
restated (Note 6).
H. Investments in Partnerships:
Investments in partnerships in which the Company does not have
a controlling interest are accounted for at cost and investments in a
partnership in
26
<PAGE> 27
which the Company does have a controlling interest is accounted for on
the equity method.
I. Cash and Cash Equivalents:
The Company considers all highly liquid debt instruments
purchased with a maturity of three months or less to be cash
equivalents.
J. Reclassifications:
Certain prior year amounts have been reclassified in the
financial statements and segment information to conform with the 1993
presentation.
2. RECEIVABLES
Receivables are summarized as follows:
<TABLE>
<CAPTION>
1993 1992
-------- -------
(Dollars in Thousands)
<S> <C> <C>
Accounts . . . . . . . . . . . . . . . . . . . . $11,371 $13,460
Mortgage notes . . . . . . . . . . . . . . . . . 8,105 11,059
Notes . . . . . . . . . . . . . . . . . . . . . 3,724 3,769
-------- --------
Total . . . . . . . . . . . . . . . . . . . 23,200 28,288
Less allowance for doubtful
accounts . . . . . . . . . . . . . . . . . . . 476 476
-------- --------
Net . . . . . . . . . . . . . . . . . . . . $22,724 $27,812
======= =======
</TABLE>
It is expected that the receivables at December 31, 1993 as
set forth above will be collected as follows: $15,198,000 in 1994,
$1,610,000 in 1995, $46,000 in 1996, $51,000 in 1997, $56,000 in 1998
and $5,763,000 thereafter. At December 31, 1993, approximately
$2,201,000 ($5,400,000 at December 31, 1992) of these mortgage notes
receivable have been pooled into GNMA certificates which are
guaranteed by the United States Government. The Company has pledged
the mortgage notes as collateral to borrow funds from institutions at
interest rates lower than those earned on the mortgage notes
receivable and as collateral for GNMA matched payment serial notes
(Note 7). The remaining mortgage notes receivable have been
originated by the Company under firm commitments for sale to various
third parties.
The mortgage notes receivable, which result primarily from
sales of homes in Puerto Rico, are payable in monthly installments and
earn interest at stated interest rates which ranged from 7.5 to 12% in
1993 and 1992.
27
<PAGE> 28
3. INVENTORY OF REAL ESTATE
Inventory of real estate is summarized as follows:
<TABLE>
<CAPTION>
1993 1992
-------- -------
(Dollars in Thousands)
<S> <C> <C>
Land and land development costs . . . . . . . . $49,186 $51,017
Construction costs - houses . . . . . . . . . . 11,443 11,940
-------- --------
Total . . . . . . . . . . . . . . . . . . . . $60,629 $62,957
======= =======
</TABLE>
Due to the decline in demand for housing and the resultant
weak real estate markets in New York, New Jersey, Virginia-Washington,
D.C. and certain projects in Florida, the Company in 1990, implemented
aggressive home sales programs to reduce land positions and thereby
generate cash which can be used to invest in better yielding
opportunities. The Company liquidated these land positions by selling
and building homes at reduced prices. Due to the continuation of this
program, the Company in 1992 increased the noncash reserve to reduce
the net carrying value of inventory of real estate to its estimated
net realizable value by $1,810,000. At December 31, 1993, the balance
of these reserves is $725,000 (at December 31, 1992 - $2,289,000) and
has been recorded as an allowance to reduce the inventory of land and
land development costs.
4. RENTAL AND OTHER PROPERTY AND EQUIPMENT
Rental and other property and equipment are summarized as
follows:
<TABLE>
<CAPTION>
1993 1992
-------- -------
(Dollars in Thousands)
<S> <C> <C>
Rental properties:
Land and land improvements . . . . . . . . . . $ 1,870
Buildings and improvements . . . . . . . . . . 3,162
Furniture, fixtures and equipment . . . . . . . 114
--------
5,146
--------
Other property and equipment:
Building improvements . . . . . . . . . . . . . $ 153 153
Machinery and equipment . . . . . . . . . . . . 1,834 1,658
Furniture, fixtures and leasehold
improvements . . . . . . . . . . . . . . . . . 8,159 7,333
-------- --------
10,146 9,144
------- --------
Total . . . . . . . . . . . . . . . . . . . 10,146 14,290
Less accumulated depreciation . . . . . . . . . 6,831 6,330
-------- --------
Net . . . . . . . . . . . . . . . . . . . . $ 3,315 $ 7,960
======= =======
</TABLE>
Rental properties consisted of two self storage mini-warehouse
facilities which were sold for cash during 1993.
28
<PAGE> 29
5. OTHER ASSETS
Other assets are summarized as follows:
<TABLE>
<CAPTION>
1993 1992
-------- --------
(Dollars in Thousands)
<S> <C> <C>
Investments in and advances
to partnerships . . . . . . . . . . . . . . . . $ 3,989 $ 2,275
Prepaid development costs . . . . . . . . . . . 3,350 2,280
Deferred selling costs . . . . . . . . . . . . . 1,680 2,851
Preacquisition costs . . . . . . . . . . . . . . 694 482
Deferred financing costs . . . . . . . . . . . . 349 493
Other . . . . . . . . . . . . . . . . . . . . . 1,336 2,356
-------- --------
Total . . . . . . . . . . . . . . . . . . . . $11,398 $10,737
======= =======
</TABLE>
6. INCOME TAXES
The Company and its domestic subsidiaries file a consolidated
federal income tax return. The provision for income taxes consists of
the following:
<TABLE>
<CAPTION>
1993 1992 1991
------ ------ ------
(Dollars in Thousands)
<S> <C> <C> <C>
Federal tax:
Current . . . . . . . . . . . . . . . . . . . . . $1,285
Deferred . . . . . . . . . . . . . . . . . . . . $(1,302) $ (179) (562)
State and foreign taxes:
Current . . . . . . . . . . . . . . . . . . . . . 3,535 1,303 446
Deferred . . . . . . . . . . . . . . . . . . . . 215 (363) (270)
---------- ------- -------
Total . . . . . . . . . . . . . . . . . . . . . $ 2,448 $ 761 $ 899
========= ======= =======
</TABLE>
Deferred income taxes result from temporary differences in the
recognition of revenue and expense for tax and financial reporting
purposes. The sources of these differences are primarily tax losses
from limited partnerships, recognition of fee income, non-cash
valuation reserves on land inventory and capitalization of interest
and overhead.
At December 31, 1993 the Company had a net tax operating loss
carryforward, which can be utilized against future taxable income, of
approximately $12,957,000 expiring in 2001 through 2008. There is no
net operating loss carryforward for financial statement reporting
purposes.
Cash payments for income taxes during the years ended December
31, 1993, 1992 and 1991 were $2,251,000, $1,143,000 and $2,405,000,
respectively.
29
<PAGE> 30
The effective tax rate was different from the statutory
Federal tax rate for the following reasons:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Statutory Federal tax rate . . . . . . . . . . . . 34.0% 34.0% 34.0%
Increase in taxes resulting
from state and foreign
taxes, net of Federal tax benefit . . . . . . . . 19.3 38.8 5.4
---- ---- -----
Effective tax rate . . . . . . . . . . . . . . . . 53.3% 72.8% 39.4%
==== ==== ====
</TABLE>
In February 1992, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 109 -
Accounting for Income Taxes ("SFAS 109"). SFAS 109 requires the
Company to recognize deferred taxes for the temporary differences
between the tax bases of its assets and liabilities and the amounts
reported in the financial statements at enacted statutory tax rates.
The Company adopted SFAS 109 as of January 1, 1992. The
cumulative effect of this change is reported separately in the
Statement of Consolidated Operations for the Year Ended December 31,
1992. The tax effect of each type of temporary difference that gave
rise to the Company's deferred tax liability is as follows:
<TABLE>
<CAPTION>
December 31, December 31,
1993 1992
------- -------
Asset (Liability)
(In Thousands)
<S> <C> <C>
Investments in and sales of limited
partnership interests . . . . . . . . . . . . . . . $(9,032) $(8,178)
Net tax operating loss carryforward . . . . . . . . 4,580 3,231
Capitalized interest and overhead . . . . . . . . . (1,489) (1,850)
Alternative minimum tax and other
miscellaneous Federal tax credits . . . . . . . . . 2,527 2,496
Other . . . . . . . . . . . . . . . . . . . . . . . (694) (1,381)
-------- --------
Net deferred income tax liability . . . . . . . . . $(4,108) $(5,682)
======= =======
</TABLE>
Total deferred tax assets and liabilities were $11,709,000 and
$15,817,000, respectively, at December 31, 1993 and $10,188,000 and
$15,870,000, respectively, at December 31, 1992. No valuation
allowance was required for deferred tax assets.
30
<PAGE> 31
7. DEBT
Notes, mortgages payable and long-term obligations are
summarized as follows:
<TABLE>
<CAPTION>
1993 1992
------- -------
(Dollars in Thousands)
<S> <C> <C>
Subordinated promissory notes, at a
rate of 15% per annum, payable 1993
through 1997 (A) . . . . . . . . . . . . . . . . . . $ 5,867 $ 7,333
Promissory notes 1 1/2% over prime in 1992
due January 2, 1993 (A) . . . . . . . . . . . . . . . 4,379
Notes payable under credit facility
agreement, 1 3/4% over LIBOR (total
facility under LIBOR contracts at
effective rate of 5.30% at
December 31, 1993) (B) . . . . . . . . . . . . . . . 18,400 23,200
Notes payable under credit facility
agreement (an effective rate of
approximately 5.285% at December
31, 1993) (C) . . . . . . . . . . . . . . . . . . . . 15,000 16,436
GNMA matched payments serial notes
at rates between 9% and 10% with
remaining maturities up to 20
years (D) . . . . . . . . . . . . . . . . . . . . . . 2,201 5,360
Other mortgage notes payable at
rates between 6.75% and 7.5%
payable in installments through
March 1997 (E) . . . . . . . . . . . . . . . . . . . 6,061 9,150
-------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . $47,529 $65,858
======= =======
Classified in statements of consolidated
financial position as:
Current portion of long-term
obligations . . . . . . . . . . . . . . . . . . . . $ 6,496 $33,255
Long-term obligations . . . . . . . . . . . . . . . . 41,033 32,603
-------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . $47,529 $65,858
======= =======
</TABLE>
(A) On December 31, 1990, the Company redeemed all of
American Financial Corporation's $5.81 cumulative convertible
preferred stock and issued six equal subordinated promissory notes in
the aggregate principal amount of
31
<PAGE> 32
$8,800,000, maturing 1992 through 1997. The notes bear simple
interest at the rate of 15% per annum. In January 1994 the third
promissory note in the amount of $1,466,667 was paid. In connection
with the redemption of its preferred stock, the Company also had a
$4,379,000 note payable to ITT Corporation at December 31, 1992 which
was paid in January 1993.
(B) The Company has a balance of $18,400,000 under an
unsecured bank credit facility. The terms of the agreement require
the Company to maintain certain financial ratios, and restrict the
payment of cash dividends under certain conditions. This facility was
converted from an unsecured revolving credit loan to an unsecured term
loan as of November 1991. The term loan as of December 31, 1993 which
was originally $28,000,000 provides for semi-annual principal payments
in January and July of $1,000,000 in 1994 and 1995, then $3,000,000 in
January 1996, $1,000,000 in July 1996, $3,000,000 in January 1997 and
a final payment of $7,400,000 in July 1997.
(C) In June 1992, the Company amended its unsecured
$15,000,000 revolving credit agreement with its Puerto Rico bank to
increase the facility $6,000,000 to $21,000,000 and extended the
maturity to March 1993. The additional $6,000,000 facility is secured
by certain developed and undeveloped lots. At December 31, 1992,
$15,000,000 and $1,436,000 were outstanding on the unsecured and
secured portions of the credit facility, respectively. As of March
1993, the secured portion of the facility was repaid. In April 1993,
the Company renewed the unsecured revolving portion of the credit
facility for an additional three years. The agreement provides for
revolving loans up to $15,000,000. Terms of the agreement require the
Company's subsidiary to maintain certain financial ratios and restrict
the payment of cash dividends under certain circumstances.
(D) On December 31, 1993, the Company had loans totalling
$2,201,000 (secured by a pledge of GNMA certificates in the same
amount) through the issuance of long-term debentures by a subsidiary
of a non-profit community development corporation in Puerto Rico.
Both the short-term loans and debentures, which are secured by
mortgage notes receivable pooled into GNMA certificates, bear interest
at rates lower than the interest rates on such mortgage receivables.
(E) In September 1992, the Company repurchased a
$2,600,000 mortgage loan (including accrued interest) for
approximately $1,300,000, including transaction costs. The Company
recorded an extraordinary gain of $824,000 net of income taxes of
$490,000.
In September 1993, the Company's Puerto Rico mortgage
branch operations entered into a $3,000,000 revolving credit agreement
with a Puerto Rico bank to finance the warehousing of mortgage note
receivables originated by the mortgage operation. As of December 31,
1993, no amount was outstanding on this warehousing line of credit.
Notes and mortgages payable were collateralized by
land inventory, land held for investment, rental properties and
mortgage notes receivable with net
32
<PAGE> 33
carrying values aggregating $28,415,000 and $43,333,000 at December
31, 1993 and 1992, respectively.
Debt obligations are scheduled to mature as follows:
$6,496,000 in 1994, $4,207,000 in 1995, $20,513,000 in 1996,
$14,287,000 in 1997, $56,000 in 1998 and $1,970,000 thereafter.
Certain mortgage notes contain provisions for reducing the principal
as individual homes are sold by the Company.
Interest paid (net of amounts capitalized) for the
years ended December 31, 1993, 1992 and 1991 was $1,362,000,
$1,923,000 and $4,509,000, respectively.
As of December 31, 1993, the Company had outstanding
letters of credit totalling approximately $1,175,000 on which there
are service charges ranging from 0.5% to 1% on the outstanding
balances. The Company also had outstanding financial security bonds
in the amount of $7,443,000 securing various obligations.
8. PENSION PLAN
The Company and its subsidiaries have a
noncontributory defined benefit pension plan (the "Plan") covering
employees not represented by a union. The benefits are based on years
of service and the employees' compensation over the last five years.
Effective July 31, 1992, the Board of Directors
amended the Plan to freeze accrued benefits for all participants. The
Company will continue to fund the Plan as required, including any
interest at the assumed average rate of return on Plan assets.
As of December 31, 1993, the plan held fixed income
securities, life insurance policies and short-term investments.
Assumed average future rate of return on Plan assets was 8% for the
years ended December 31, 1993 and 1992, and the projected benefit
obligation was based on a 7.75% and 8% assumed discount rate at
December 31, 1993 and 1992, respectively, and a 5% assumed long-term
rate of compensation increase.
The total pension plan cost was $880,000 in 1991.
The components of net periodic pension (benefit) cost for the years
ended December 31, 1993 and 1992 are as follows:
<TABLE>
<CAPTION>
(Benefit) cost component: 1993 1992
-------- --------
<S> <C> <C>
Service cost . . . . . . . . . . . . . . . . . . . . $524,000
Interest cost . . . . . . . . . . . . . . . . . . . $565,000 668,000
Actual return on plan assets . . . . . . . . . . . . 143,000 (130,000)
Net amortization and deferral . . . . . . . . . . . (710,000) (332,000)
-------- --------
Net periodic pension (benefit) cost . . . . . . . . $ (2,000) $730,000
========= ========
</TABLE>
33
<PAGE> 34
The following table sets forth the Plan's funded status as of
December 31, 1993 and 1992:
<TABLE>
<CAPTION>
1993 1992
--------- ---------
<S> <C> <C>
Actuarial present value accumulated
benefit obligation:
Vested . . . . . . . . . . . . . . . . . . . . . . . $7,331,000 $6,333,000
Nonvested . . . . . . . . . . . . . . . . . . . . . 114,000 419,000
----------- -----------
Total . . . . . . . . . . . . . . . . . . . . . . $7,445,000 $6,752,000
---------- ----------
Projected benefit obligation for service
rendered to date . . . . . . . . . . . . . . . . . . . . . $7,445,000 $6,752,000
Plan assets at fair value . . . . . . . . . . . . . . . . . 6,427,000 5,728,000
----------- -----------
Projected benefit obligation in excess
of plan assets . . . . . . . . . . . . . . . . . . . . . . 1,018,000 1,024,000
Unrecognized net loss . . . . . . . . . . . . . . . . . . . (1,525,000) (144,000)
Unrecognized net asset at date of transition . . . . . . . . 303,000 350,000
Additional minimum liability . . . . . . . . . . . . . . . . 1,210,000
----------- -----------
Accrued pension cost . . . . . . . . . . . . . . . . . . . . $1,006,000 $1,230,000
========== ==========
</TABLE>
In accordance with Statement of Financial Accounting
Standards No. 87, "Employers' Accounting for Pensions," an additional
minimum pension liability, representing the excess of accumulated
benefits over plan assets and accrued pension costs, was recognized at
December 31, 1993. A corresponding amount, net of income tax benefit,
was recorded as a separate reduction to stockholders' equity.
The Company does not provide postretirement or
postemployment benefits other than pensions to employees. Therefore,
SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other
Than Pensions" and SFAS No. 112, "Employers' Accounting for
Postemployment Benefits" have no impact on the Company's financial
statements.
34
<PAGE> 35
9. SEGMENT INFORMATION
The Company's operations consist of (i) the
development, management and ownership of real estate properties; (ii)
the single-family home and garden apartment business conducted
through its Levitt subsidiary; and (iii) the supplying of construction
services through its HRH subsidiary. The Company groups its business
into these three segments. The following table sets forth the
Company's revenues and operating profit attributable to the respective
segments of its operations for each of the years 1991 through 1993,
and the identifiable assets attributable to the respective segments as
at the end of each of those years:
<TABLE>
<CAPTION>
DEVELOPMENT HRH
MANAGEMENT AND LEVITT CONSTRUCTION
OWNERSHIP CORPORATION CORPORATION CONSOLIDATED
--------------- ----------- ----------- ------------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
1993
- - ----
Revenues . . . . . . . . . . . . . . $24,504 $93,678 $ 4,000 $122,182
======= ======= ======== ========
Operating profit (loss) (1) . . . . . $ 2,600 $ 4,257 $ (372) $ 6,485
======== ======== ======== =========
General corporate expenses . . . . . 1,897
---------
Income from operations
before income taxes . . . . . . . . $ 4,588
=========
Identifiable assets . . . . . . . . . $25,797 $86,300 $ 8,187 $120,284
======= ======= ========= ========
1992
- - ----
Revenues . . . . . . . . . . . . . . $23,487 $82,972 $ 5,396 $111,855
======= ======= ======== ========
Operating profit (1) . . . . . . . . $ 2,435 $ 864 $ 283 $ 3,582
======== ======== ======== ========
General corporate expenses . . . . . 2,537
---------
Income from operations
before income taxes . . . . . . . . $ 1,045
=========
Identifiable assets . . . . . . . . . $31,299 $94,335 $11,104 $136,738
======= ======= ======= ========
1991
- - ----
Revenues . . . . . . . . . . . . . . $30,327 $72,645 $ 8,117 $111,089
======= ======= ======== ========
Operating profit (loss) (1) . . . . . $ 9,749 $ (4,575) $ 243 $ 5,417
======= ======= ========
General corporate expenses . . . . . 3,134
---------
Income from operations
before income taxes . . . . . . . . $ 2,283
=========
Identifiable assets . . . . . . . . . $39,767 $99,164 $11,359 $150,290
======= ======= ======= ========
</TABLE>
(1) Operating profit is comprised of revenues less operating expenses. In
computing operating profit, general corporate expenses and income
taxes have not been deducted.
(2) There were no customers from which the Company derived more than 10%
of its revenues in 1993, 1992 or 1991.
35
<PAGE> 36
10. COMMITMENTS AND CONTINGENCIES
Roosevelt Island Associates ("RIA"), a partnership in
which a Company subsidiary is one of several partners, has provided
guaranteed payments to the investor partner. The Company's share of
such guarantees was $250,000 for 1993 and $465,000 for 1994 and
approximately $100,000 each year until 2005, which will be paid by the
Company if project cash flow is insufficient to cover these amounts.
In connection with this project, the Company also provided cash flow
guarantees from which it will be released if the project achieves a
certain cash flow level over a specified period of time.
The Company is also jointly and severally liable for
$3,225,000 of a loan made in connection with a mini-warehouse facility
in which it has an ownership interest.
The Company's Levitt subsidiary provides for
estimated warranty costs when homes are sold and continuously monitors
its warranty exposure and service program.
Rent expense for the years ended December 31, 1993,
1992 and 1991 was $1,004,000, $1,042,000 and $1,225,000, respectively.
At December 31, 1993 the Company and its subsidiaries are committed
under long-term leases expiring at various dates through 1998. The
minimum rentals are $923,000 in 1994, $896,000 in 1995, $804,000 in
1996, $161,000 in 1997, and $102,000 in 1998, or an aggregate of
$2,886,000.
The Company is involved in litigation and claims
incident to the normal conduct of its business. Management believes
that such litigation and claims will not have a materially adverse
effect on the Company's consolidated financial position or results of
operations.
36
<PAGE> 37
11. QUARTERLY FINANCIAL DATA (Unaudited)
The quarterly financial data are set forth below (dollars in
thousands, except per share amounts):
<TABLE>
<CAPTION>
1993 1993 1993 1993 Annual
March 31, June 30, Sept. 30, Dec. 31, Amount
--------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . $26,931 $24,219 $31,662 $39,370 $122,182
Income from construction
contracts and related revenues . . . . . 11,677 11,756 12,694 13,040 49,167
Income before income
taxes . . . . . . . . . . . . . . . . . 703 1,115 1,670 1,100 4,588
Net income . . . . . . . . . . . . . . . 324 547 803 466 2,140
Earnings per common and
common equivalent share - Net
income . . . . . . . . . . . . . . . . . $.05 $.09 $.12 $.08 $.34
</TABLE>
<TABLE>
<CAPTION>
1992 1992 1992 1992 Annual
March 31, June 30, Sept. 30, Dec. 31, Amount
--------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . $19,731 $24,888 $27,546 $39,690 $111,855
Income from construction
contracts and related revenues . . . . . 11,618 11,826 11,407 12,500 47,351
Income before income (A)
taxes . . . . . . . . . . . . . . . . . 885 586 545 (971) 1,045
Income (loss) before extraordinary
item and cumulative effect of
accounting change . . . . . . . . . . . 491 336 280 (823) 284
Extraordinary item . . . . . . . . . . . 824 824
Cumulative effect of accounting
change as restated . . . . . . . . . . . 1,287 1,287
Net income (loss) . . . . . . . . . . . . 1,778 336 1,104 (823) 2,395
Earnings per common and
common equivalent share:
Income before extraordinary item
and cumulative effect of
accounting change . . . . . . . . . . . $.08 $.05 $.04 $(.13) $.04
Extraordinary item . . . . . . . . . . . $.13 $.13
Cumulative effect of accounting
change as restated . . . . . . . . . . . $.20 $.20
Net income (loss) . . . . . . . . . . . . $.28 $.05 $.17 $(.13) $.37
</TABLE>
(A) Includes the effect of $1,810,000 in non-cash reserves to reduce the
carrying value of land to its estimated net realizable value.
Certain quarterly amounts have been reclassified to conform with the
annual presentation.
37
<PAGE> 38
Schedule III
STARRETT HOUSING CORPORATION
(Parent Company Only)
CONDENSED STATEMENTS OF FINANCIAL POSITION
December 31, 1993 and 1992
(In Thousands)
<TABLE>
<CAPTION>
1993 1992
--------- ---------
<S> <C> <C>
Assets:
- - ------
Cash and cash equivalents of $3,000
in 1993 and $2,380 in 1992 . . . . . . . . . . . . . . . . . . $ 3,559 $ 3,661
U.S. Treasury/certificates of deposit . . . . . . . . . . . . . 7,762 13,248
Investments in subsidiaries, at
equity in underlying net assets . . . . . . . . . . . . . . . 70,263 67,949
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . 8,203 9,590
-------- --------
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . $89,787 $94,448
======= =======
Liabilities and Stockholders' Equity:
- - ------------------------------------
Liabilities payable within one year . . . . . . . . . . . . . . $ 5,705 $ 10,931
Advances from subsidiaries . . . . . . . . . . . . . . . . . . 31,547 29,038
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . 3,376 3,826
Deferred revenues . . . . . . . . . . . . . . . . . . . . . . . 2,940 3,648
Long-term obligations . . . . . . . . . . . . . . . . . . . . . 4,400 5,866
Stockholders' equity . . . . . . . . . . . . . . . . . . . . . 41,819 41,139
-------- --------
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . $89,787 $94,448
======= =======
</TABLE>
STARRETT HOUSING CORPORATION
(Parent Company Only)
CONDENSED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1993, 1992 and 1991
(In Thousands)
<TABLE>
<CAPTION>
1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,035 $ 2,671 $11,278
General and administrative expenses . . . . . . . . . . . . (1,897) (2,537) (3,134)
Other costs . . . . . . . . . . . . . . . . . . . . . . . . (104) (19) (749)
Interest . . . . . . . . . . . . . . . . . . . . . . . . . (880) (1,442) (2,219)
Income taxes . . . . . . . . . . . . . . . . . . . . . . . 132 223 (1,835)
-------- ------- --------
Income (loss) before equity in
earnings of subsidiaries . . . . . . . . . . . . . . . . . (714) (1,104) 3,341
Equity in earnings (losses) of subsidiaries . . . . . . . . 2,854 2,212 (1,957)
Cumulative effect of accounting change . . . . . . . . . . 1,287
--------- -------- ---------
Net Income . . . . . . . . . . . . . . . . . . . $ 2,140 $ 2,395 $ 1,384
======== ======= =========
</TABLE>
38
<PAGE> 39
Schedule III
STARRETT HOUSING CORPORATION
(Parent Company Only)
CONDENSED STATEMENTS OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net Income . . . . . . . . . . . . . . . . . . . . . . . . $ 2,140 $ 2,395 $ 1,384
Adjustments to Reconcile Net Income to
Net Cash Provided by (Used In)
Operating Activities:
Charges not affecting funds . . . . . . . . . . . . . . . (2,484) (4,620) 1,388
Changes in Operating Assets and Liabilities:
Liabilities payable within one year . . . . . . . . . . . (995) 515 1,821
Advances from subsidiaries . . . . . . . . . . . . . . . . 2,176 1,178 9,225
Other assets . . . . . . . . . . . . . . . . . . . . . . . 314 (1,274) 6,362
Deferred revenue . . . . . . . . . . . . . . . . . . . . . (708) (1,706) (1,939)
------- ------- -------
Net Cash Provided by (Used In)
Operating Activities . . . . . . . . . . . . . . . . . . . 443 (3,512) 18,241
------- ------- -------
INVESTING ACTIVITIES:
Purchases of U.S. Treasury/Certificates
of Deposit . . . . . . . . . . . . . . . . . . . . . . . . 5,485 7,791 (3,706)
------- ------- -------
FINANCING ACTIVITIES:
Dividends and Principal Paid on
Preferred Stock . . . . . . . . . . . . . . . . . . . . . (13,340)
Payment of Promissory Notes . . . . . . . . . . . . . . . . (5,846) (5,846)
Payment of Cash Dividend to Common
Stockholders . . . . . . . . . . . . . . . . . . . . . . . (1,604)
Receipt of Cash Dividend . . . . . . . . . . . . . . . . . 540
Purchase of Treasury Stock . . . . . . . . . . . . . . . . (724) (85) (460)
------- ------- -------
Net Cash used in Financing Activities . . . . . . . . . . . (6,030) (7,535) (13,800)
------- ------- -------
Increase (Decrease) in Cash and
Cash Equivalents . . . . . . . . . . . . . . . . . . . . . (102) (3,256) 735
Cash and Cash Equivalents Beginning of Year . . . . . . . . 3,661 6,917 6,182
------- ------- -------
Cash and Cash Equivalents End of Year . . . . . . . . . . . $ 3,559 $ 3,661 $ 6,917
======= ======= =======
</TABLE>
39
<PAGE> 40
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
STARRETT HOUSING CORPORATION
Date: March 21, 1994 BY /s/ Paul Milstein
--------------------------------
Paul Milstein
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
Date: March 21, 1994 By /s/ Paul Milstein
--------------------------------
Paul Milstein, Principal
Director
Date: March 21, 1994 By /s/ Lewis A. Weinfeld
--------------------------------
Lewis A. Weinfeld, Principal
Financial and Accounting
Officer
Date: March 21, 1994 By /s/ Henry Benach
--------------------------------
Henry Benach, Director
40
<PAGE> 41
STARRETT HOUSING CORPORATION
EXHIBITS
DECEMBER 31, 1993
COMMISSION FILE NUMBER 1-6736
<PAGE> 42
STARRETT HOUSING CORPORATION
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Page
- - ------- ----
<S> <C>
3(a)(1) Restated Certificate of Incorporation of the Registrant (filed as Exhibit 3(a)(1)
to Registrant's Registration Statement on Form S-4 dated September 16, 1988 and
incorporated herein by reference).
3(a)(2) Certificate of Amendment of the Restated Certificate of Incorporation of the
Registrant relating to $5.08 Cumulative Preferred Shares and $5.00 Cumulative
Preferred Shares (filed as Exhibit 10 to the Registrant's Form 8-K dated June 5,
1981 and incorporated herein by reference).
3(b) By-laws of the Registrant, as amended to January 1, 1987 (filed as Exhibit 3(b)
to Registrant's Registration Statement on Form S-4 dated September 16, 1988 and
incorporated herein by reference).
4(a) Amended and Restated Credit Agreement and Guarantee among Levitt Homes
Incorporated, Levitt Corporation, various subsidiary guarantors and Manufacturers
Hanover Trust Company dated as of August 29, 1988 (filed as Exhibit 4(a) to
Registrant's Registration Statement on Form S-4 dated September 16, 1988 and
incorporated herein by reference).
4(b) First Amendment dated as of March 6, 1990 to Amended and Restated Credit
Agreement and Guarantee (filed as Exhibit 4(b) to Registrant's Form 10-K for 1989
and incorporated herein by reference).
4(c) Amendment dated as of April 30, 1990 to Amended and Restated Credit Agreement and
Guarantee (filed as Exhibit 4(c) to Registrant's Form 10-K for 1990 and
incorporated herein by reference).
</TABLE>
41
<PAGE> 43
<TABLE>
<CAPTION>
Exhibit Page
- - ------- ----
<S> <C>
10(a) Form of Starrett Housing Corporation warrant for the purchase of 151,546 shares
of Common Stock dated May 24, 1984, and subsequently extended to June 2, 1986
(filed as Exhibit 10(o) to the Registrant's Form 10-K for 1984 and incorporated
herein by reference).
10(b) Stock Purchase Agreement dated March 1, 1985 between the Registrant and the
purchasers listed in Schedule 1 to the Agreement (filed as Exhibit 10(p) to the
Registrant's Form 10-K for 1985 and incorporated herein by reference).
10(c)(1) Amended and Restated Agreement, dated as of January 5, 1992, between Henry Benach and the
Registrant (filed as Exhibit 10(c)(1) to the Registrant's Form 10-K for 1991 and
incorporated herein by reference).
10(c)(2) Incentive Compensation Agreement, dated as of January 5, 1989, between Henry Benach and
the Registrant (filed as Exhibit 10(c)(2) to Registrant's Form 10-K for 1989 and
incorporated herein by reference).
10(d)(1) Employment Agreement, dated as of June 1, 1981, between Irving R. Fischer and the
Registrant (filed as Exhibit 10(f)(2) to the Registrant's Form 10-K for 1981 and
incorporated herein by reference).
10(d)(2) Amendment, dated as of January 3, 1986, to the Employment Agreement between Irving R.
Fischer and the Registrant (filed as Exhibit 10(d)(5) to Registrant's Registration
Statement on Form S-4 dated September 16, 1988 and incorporated herein by reference).
10(d)(3) Incentive Compensation Agreement, dated as of January 3, 1986, between Irving R. Fischer
and the Registrant (filed as Exhibit 10(d)(6) to Registrant's Registration Statement on
Form S-4 dated September 16, 1988 and incorporated herein by reference).
</TABLE>
42
<PAGE> 44
<TABLE>
<CAPTION>
Exhibit Page
- - ------- ----
<S> <C>
10(d)(4) Restricted Stock Agreement, dated as of October 27, 1987, between Irving R. Fischer and
the Registrant (filed as Exhibit 10(d)(4) to Registrant's Form 10-K for 1987 and
incorporated herein by reference).
10(d)(5) Extension dated December 30, 1991 to Employment and Incentive Compensation Agreements of
Irving R. Fischer (filed as Exhibit 10(e)(5) to the Registrant's Form 10-K for 1991 and
incorporated herein by reference).
10(e)(1) Employment Agreement, dated as June 1, 1981, between Richard Bassuk and the Registrant
(filed as Exhibit 10(k) to the Registrant's Form 10-K for 1981 and incorporated herein by
reference).
10(e)(2) Amendment, dated as of January 3, 1986, to the Employment Agreement between Richard
Bassuk and the Registrant (filed as Exhibit 10(g)(4) to Registrant's Form 10-K for 1985
and incorporated herein by reference).
10(e)(3) Incentive Compensation Agreement, dated as of January 3, 1986, between Richard Bassuk and
the Registrant (filed as Exhibit 10(g)(5) to the Registrant's Form 10-K for 1985 and
incorporated herein by reference).
10(e)(4) Restricted Stock Agreement, dated as of October 27, 1987, between Richard Bassuk and the
Registrant (filed as Exhibit 10(e)(7) to Registrant's Form 10-K for 1987 and incorporated
herein by reference).
10(e)(5) Extension dated December 30, 1991 to Employment and Incentive Compensation Agreements of
Richard Bassuk (filed as Exhibit 10(d)(5) to the Registrant's Form 10-K for 1991 and
incorporated herein by reference).
10(e)(6) Extension dated January 5, 1993 to Employment 50-52
and Incentive Compensation Agreements of Richard Bassuk (filed as Exhibit 10(d)(6) to the
Registrant's Form 10-K for 1993 and incorporated herein by reference).*
</TABLE>
43
<PAGE> 45
<TABLE>
<CAPTION>
Exhibit Page
- - ------- ----
<S> <C>
10(f) Restricted Stock Agreement, dated as of October 27, 1987, between Stephen Salup
and the Registrant (filed as Exhibit 10(f) to Registrant's Form 10-K for 1987 and
incorporated herein by reference).
10(g)(1) Employment Agreement, dated as of January 1, 1987 between Lewis A. Weinfeld and the
Registrant (filed as Exhibit 10(g)(1) to Registrant's Form 10-K for 1987 and incorporated
herein by reference).
10(g)(2) Incentive Compensation Agreement, dated as of January 1, 1987, between Lewis A. Weinfeld
and the Registrant (filed as Exhibit 10(g)(2) to Registrant's Form 10-K for 1987 and
incorporated herein by reference).
10(g)(3) Restricted Stock Agreement, dated as of October 27, 1987, between Lewis A. Weinfeld and
the Registrant (filed as Exhibit 10(g)(3) to Registrant's Form 10-K for 1987 and
incorporated herein by reference).
10(g)(4) Letter Agreement dated June 9, 1989 between Lewis A. Weinfeld and Starrett Housing
Corporation (filed as Exhibit 10(g)(4) to Registrant's Form 10-K for 1989 and
incorporated herein by reference).
10(h)(i) Employment Agreement dated as of July 1, 1983 between Elliott M. Wiener and Levitt (filed
as Exhibit 10(h)(i) to Registrant's Registration Statement on Form S-4 dated September
16, 1988 and incorporated herein by reference).
10(h)(ii) First Amendment to Employment Agreement dated as of January 1, 1987 between
Elliott M. Wiener and Levitt (filed as Exhibit 10(h)(ii) to Registrant's
Registration Statement on Form S-4 dated September 16, 1988 and incorporated
herein by reference).
</TABLE>
44
<PAGE> 46
<TABLE>
<CAPTION>
Exhibit Page
- - ------- ----
<S> <C>
10(h)(iii) Second Amendment to Employment Agreement dated as of July 1, 1988 between Elliott
M. Wiener and Levitt (filed as Exhibit 10(h)(iii) to Registrant's Registration
Statement on Form S-4 dated September 16, 1988 and incorporated herein by
reference).
10(h)(iv) Third Amendment to Employment Agreement dated as of January 1, 1990 between
Elliott M. Wiener and Levitt (filed as Exhibit 10(h)(iv) to Registrant's Form 10-
K for 1989 and incorporated herein by reference).
10(i)(i) Letter Agreement, dated December 2, 1988, between American Financial Corporation
and Starrett Housing Corporation, with Form of Note attached thereto (filed as
Exhibit 10(j)(i) to Amendment No. 1 to the Registrants' Registration Statement on
Form S-4 dated December 13, 1988 and incorporated herein by reference).
10(i)(ii) Letter Agreement, dated December 2, 1988, between American Financial Corporation
and Henry Benach (filed as Exhibit 10(j)(ii) to Amendment No. 1 to the
Registrant's Registration Statement on Form S-4 dated December 13, 1988 and
incorporated herein by reference).
10(i)(iii) Letter Agreement, dated December 2, 1988, between American Financial Corporation
and Builtland Partners (filed as Exhibit 10(j)(iii) to Amendment No. 1 to the
Registrant's Registration Statement on Form S-4 dated December 13, 1988 and
incorporated herein by reference).
10(i)(iv) Letter Agreement, dated December 2, 1988, between American Financial Corporation
and Oded Aboodi (filed as Exhibit 10(j)(iv) to Amendment No. 1 to the
Registrant's Registration Statement on Form S-4 dated December 13, 1988 and
incorporated herein by reference).
</TABLE>
45
<PAGE> 47
<TABLE>
<CAPTION>
Exhibit Page
- - ------- ----
<S> <C>
10(i)(v) Letter, dated December 2, 1988, from Starrett Housing Corporation to Henry Benach (filed
as Exhibit 10(j)(v) to Amendment No. 1 to the Registrant's Registration Statement on Form
S-4 dated December 13, 1988 and incorporated herein by reference).
10(i)(vi) Letter, dated December 2, 1988, from Starrett Housing Corporation to Builtland
Partners (filed as Exhibit 10(j)(vi) to Amendment No. 1 to the Registrant's
Registration Statement on Form S-4 dated December 13, 1988 and incorporated
herein by reference).
10(i)(vii) Letter, dated December 2, 1988, from Starrett Housing Corporation to Oded Aboodi
(filed as Exhibit 10(j)(vii) to Amendment No. 1 to the Registrant's Registration
Statement on Form S-4 dated December 13, 1988 and incorporated herein by
reference).
10(j)(i) Second Amended and Restated Partnership Agreement of Roosevelt Island Associates dated
February 28, 1989 (filed as Exhibit 10(j)(i) to Registrant's Current Report on Form 8-K
dated March 3, 1989 and incorporated herein by reference).
10(j)(ii) Participation Agreement dated February 28, 1989 by and among Roosevelt Island
Associates, Manhattan Park Leasing Corporation, HRH Construction Corporation, RIA
Construction Company, Starrett Housing Corporation, Grenadier Realty Corporation,
Manhattan Park, Inc., Cohen Roosevelt Associates and NCC RIA Company (Schedules
are omitted, and are available from the Registrant upon request (filed as Exhibit
10(j)(ii) to Registrant's Current Report on Form 8-K dated March 3, 1989 and
incorporated herein by reference).
10(j)(iii) Capital Adjustment Agreement dated February 28, 1989 between Starrett Housing
Corporation, Manhattan Park, Inc., Cohen Roosevelt Associates and NCC RIA Company
(filed as Exhibit 10(j)(iii) to Registrant's Current Report on Form 8-K dated
March 3, 1989 and incorporated herein by reference).
</TABLE>
46
<PAGE> 48
<TABLE>
<CAPTION>
Exhibit Page
- - ------- ----
<S> <C>
10(j)(iv) No-Negative Guaranty Agreement dated February 28, 1989 by and among Starrett
Housing Corporation, Cohen Roosevelt Associates, Grenadier Realty Corporation,
Manhattan Park Leasing Corporation and Roosevelt Island Associates (filed as
Exhibit 10(j)(iv) to Registrant's Current Report on Form 8-K dated March 3, 1989
and incorporated herein by reference).
10(j)(v) First Amendment to No-Negative Guaranty Agreement dated as of January 15, 1993 by and
among Starrett Housing Corporation, Cohen Roosevelt Associates, Grenadier Realty
Corporation, Manhattan Park Leasing Corporation and Roosevelt Island Associates.
10(j)(vi) Construction Completion Guaranty Agreement dated February 28, 1989 by and among
Roosevelt Island Associates, Starrett Housing Corporation, and Cohen Roosevelt
Associates (filed as Exhibit 10(j)(v) to Registrant's Current Report on Form 8-K
dated March 3, 1989 and incorporated herein by reference).
10(j)(vii) Payment Allocation, Contribution and Indemnification Agreement made as of
February 28, 1989 by and among Starrett Housing Corporation, Manhattan Park,
Inc., HRH Construction Corporation, Grenadier Realty Corp.; and Roosevelt
Associates, RIA Construction Company, Charles Steven Cohen and Sherman Cohen
(filed as Exhibit 10(k)(vi) to Registrant's Form 10-K for 1988 and incorporated
herein by reference).
10(j)(viii) Amendment to Payment Allocation, Contribution and Indemnification Agreement,
dated as of February 28, 1989, a Second Amendment thereto dated October 30, 1992
and a Third Amendment thereto made as of February 28, 1989.
10(j)(ix) Master Refunding Agreement dated January 13, 1993 by and among Manhattan Park,
Inc., Cohen Roosevelt Associates, NCC RIA Company, Starrett Housing Corporation,
Charles Steven Cohen, Sherman Cohen and Roosevelt Island Associates.
</TABLE>
47
<PAGE> 49
<TABLE>
<CAPTION>
Exhibit Page
- - ------- ----
<S> <C>
10(k)(i) Letter Agreement dated August 26, 1988 between ITT Corporation and Starrett Housing
Corporation (filed as Exhibit 10(l) to Registrant's Form 10-K for 1988 and incorporated
herein by reference).
10(k)(ii) Letter Agreement dated November 20, 1990 between ITT Corporation and Starrett
Housing Corporation and related forms of promissory notes (filed as Exhibit
10(k)(ii) to Registrant's Form 10-K for 1990 and incorporated herein by
reference).
10(l)(i) Agreement between Levitt Retirement Communities No. 1., Inc. and Resources
Funding Corporation, dated January 11, 1989 (filed as Exhibit 10(m)(i) to
Registrant's Current Report on Form 8-K dated April 20, 1989 and incorporated
herein by reference).
10(l)(ii) Guaranty and Undertaking, dated March 15, 1989 among Levitt Corporation,
Northpark Associates Limited Partnership, Resources Funding Corporation, Special
Housing for America's Retired and Elderly, L.P. and Northpark Corp. (filed as
Exhibit 10(m)(ii) to Registrant's Current Report on Form 8-K dated April 20, 1989
and incorporated herein by reference).
10(l)(iii) First, Second, Third and Fourth Promissory Notes, dated March 15, 1989, issued by
Special Housing for America's Retired and Elderly, L.P. to Levitt Retirement
Communities No. I, Inc. and Levitt Retirement Communities No. II, Inc. (filed as
Exhibit 10(m)(iii) to Registrant's Current Report on Form 8-K dated April 20,
1989 and incorporated herein by reference).
10(l)(iv) Management Agreement among Northpark Associates Limited Partnership, Resources
Property Management Corp. and Levitt Care Corporation (filed as Exhibit 10(m)(iv)
to Registrant's Current Report Form 8-K dated April 20, 1989 and incorporated
herein by reference).
</TABLE>
48
<PAGE> 50
<TABLE>
<CAPTION>
Exhibit Page
- - ------- ----
<S> <C> <C>
10(l)(v) Master Agreement among Levitt Retirement Communities No. I, Inc., Levitt Retirement
Communities No. II, Inc., Levitt Corporation, Special Housing for America's Retired and
Elderly, L.P., Integrated Resources, Inc. and Manufacturers Hanover Trust Company (filed
as Exhibit 10(m)(v) to Registrant's Current Report on Form 8-K dated April 20, 1989 and
incorporated herein by reference).
10(l)(vi) Note Repurchase Agreement between Levitt Corporation and Manufacturers Hanover
Trust Company (filed as Exhibit 10(m)(vi) to Registrant's Current Report on Form
8-K dated April 20, 1989 and incorporated herein by reference).
11(a) Exhibit Setting Forth the Computation of 53
Primary Earnings Per Share Information.*
11(b) Exhibit Setting Forth the Computation of 54
Fully Diluted Earnings Per Share Information.*
22 List of Subsidiaries of the Registrant (filed as Exhibit 22 to Registrant's Form
10-K for 1987 and incorporated herein by reference).
Note: The Exhibits which have not previously been filed are marked with an
asterisk (*).
</TABLE>
49
<PAGE> 1
as of January 5, 1993
Mr. Richard Bassuk
909 Third Avenue
New York, New York 10022
Dear Richard:
We are pleased to confirm that if by December 31, 1993 you
have not entered into a new employment agreement with Starrett Housing
Corporation (collectively, with its subsidiaries, the "Company"), the Company
and you have agreed as follows in connection with any fee paid by Tower West to
the Company from refinancing proceeds received from time to time by Tower West
under the LIHPRHA Program (the "Tower West Fee"):
1. If the Company receives the Tower West Fee on or
before March 31, 1994, such Fee shall be taken into account in calculating your
Incentive Compensation in accordance with your present Incentive Compensation
Agreement, except that (i) if such Fee is received after December 31, 1993 but
on or before March 31, 1994 such Fee shall be treated as though it had been
received during 1993, and (ii) the amount of the Tower West Fee received on or
before March 31, 1994 shall in no event be reduced for purposes of calculating
your Incentive Compensation by more than $1 million as a result of any negative
Adjusted Pre-Tax Income incurred by the Company from sources other than such
Fee but shall exclude all amounts required in connection with the LIHPRHA
program to be placed in escrow. The Company shall be deemed to have received
the Tower West Fee on or before March 31, 1994 for all purposes of this letter
insofar as such Fee is paid from LIHPRHA refinancing proceeds received by Tower
West at the closing with HUD at which the principal funding occurs and taking
place on or before March 31, 1994 or from proceeds received by Tower West prior
to or within 120 days after such closing; any Tower West Fee described in this
sentence which is paid from proceeds received by Tower West after the
expiration of such 120 day period shall not be taken into account in
calculating any payment under this letter. For all purposes of this letter,
the Tower West Fee shall be deemed to be
50
<PAGE> 2
Mr. Richard Bassuk
as of January 5, 1993
Page 2
received by the Company on the date(s) on which Tower West receives the LIHPRHA
proceeds from which such Fee is paid.
2. If the Company receives the Tower West Fee after
March 31, 1994 but on or before June 30, 1995, than you shall be entitled to
receive (provided you have not given us written notice of termination of
employment by December 31, 1993 (it being understood that failure to agree upon
a new employment agreement between us shall in no event be deemed such a notice
of termination) and you continue in our employ on December 31, 1993 or one of
the circumstances described in Section 1(b) or (c) of your present Incentive
Compensation Agreement occurs by such date) 3% of the amount of such Fee, with
such Fee to be without reduction for taxes incurred by the Company but to be
net of and reduced by all amounts required in connection with the LIHPRHA
program to be placed in escrow and all unreimbursed out-of-pocket expenses and
expenditures (if any) incurred or required to be incurred by the Company in
connection with such Fee. Payment will be made to you, or if you are not then
living your estate, within 75 days of the Company's receipt of such Fee,
provided that if subsequently the Company becomes obligated to make an
additional expenditure in connection with such Fee, you agree to promptly
reimburse the Company 3% of such expenditure.
The foregoing assumes that LIHPRHA refinancing proceeds
described above will be paid by Tower West to the Company as a fee, which fee
shall include fees, repayment of the Company's residual receipts note and
distributions under the Tower West Partnership Agreement for the purpose of
defining the Tower West Fee. If, however, such payment should ever be
restructured as a distribution other than such a fee, you would nevertheless be
entitled to the payments described above calculated on the same basis as if
such payment had been made as such a fee, provided such restructured payment
does not have a material adverse affect (specifically excluding any tax matter)
on the Company.
During the period commencing January 1, 1994 and ending June
30, 1995 (or earlier receipt by the Company of the Tower West Fee), you have
agreed to provide the Company from time to time with such advisory assistance
as the Company may reasonably request in obtaining such Fee, such assistance to
be subject to your health, to
51
<PAGE> 3
Mr. Richard Bassuk
as of January 5, 1993
Page 3
be limited to non-business hours and in any event to be rendered at times
consistent with your other business and employment responsibilities.
The Tower West Fee shall not be taken into account in
calculating your Incentive Compensation except as provided in this letter.
Except as amended hereby, your present Employment and
Incentive Compensation Agreements shall remain in full force and effect and
unchanged.
Very truly yours,
STARRETT HOUSING CORPORATION
By /s/ Henry Benach
---------------------------------
AGREED:
/s/ Richard Bassuk
- - ----------------------------
Richard Bassuk
52
<PAGE> 1
EXHIBIT A
STARRETT HOUSING CORPORATION AND SUBSIDIARIES
EXHIBIT SETTING FORTH THE COMPUTATION OF PRIMARY
EARNINGS PER SHARE INFORMATION
(Dollars and number of shares in thousands except per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Common and common equivalent
shares used in computing earnings
per share . . . . . . . . . . . . . . . . . . . . . . . . 6,356 6,417 6,495
====== ====== ======
Income before extraordinary item and
cumulative effect of accounting
change . . . . . . . . . . . . . . . . . . . . . . . . . . $2,140 $ 284 $1,384
Net Income . . . . . . . . . . . . . . . . . . . . . . . . $2,140 $2,395 $1,384
====== ====== ======
Income before extraordinary item and
cumulative effect of accounting change . . . . . . . . . . $.34 $.04 $.21
Extraordinary item . . . . . . . . . . . . . . . . . . . . .13
Cumulative effect of accounting change . . . . . . . . . . .20
---- ---- ----
Net Income . . . . . . . . . . . . . . . . . . . . . . . . $.34 $.37 $.21
==== ==== ====
</TABLE>
53
<PAGE> 1
EXHIBIT B
STARRETT HOUSING CORPORATION AND SUBSIDIARIES
EXHIBIT SETTING FORTH THE COMPUTATION OF FULLY DILUTED
EARNINGS PER SHARE INFORMATION
(Dollars and number of shares in thousands except per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Common and common equivalent
shares used in computing earnings
per share . . . . . . . . . . . . . . . . . . . . . . . . 6,356 6,417 6,495
----- ----- -----
Income before extraordinary item and
cumulative effect of accounting
change . . . . . . . . . . . . . . . . . . . . . . . . . . $2,140 $ 284 $1,384
Net Income . . . . . . . . . . . . . . . . . . . . . . . . $2,140 $2,395 $1,384
====== ====== ======
Income before extraordinary item and
cumulative effect of accounting change . . . . . . . . . . $.34 $.04 $.21
Extraordinary item . . . . . . . . . . . . . . . . . . . . .13
Cumulative effect of accounting change . . . . . . . . . . .20
----- ---- ----
Net Income . . . . . . . . . . . . . . . . . . . . . . . . $.34 $.37 $.21
==== ==== ====
</TABLE>
54
