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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-27562
ATLANTIC REALTY TRUST
(Exact name of registrant as specified in its charter.)
MARYLAND 13-3849655
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
747 Third Avenue, New York, N.Y. 10017
(Address of principal executive offices) (Zip Code)
212-702-8561
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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Number of shares of beneficial interest ($.01 par value) of the Registrant
outstanding as of August 12, 1996: 3,561,553.
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ATLANTIC REALTY TRUST FORM 10-Q JUNE 30, 1996
I N D E X
<TABLE>
<CAPTION>
Part I. FINANCIAL INFORMATION PAGE NO.
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<S> <C>
Item 1. Financial Statements
Statements of Net Assets in Liquidation
June 30, 1996 and May 10, 1996 (Date of Transfer).......... 3
Statements of Changes in Net Assets in Liquidation -
Periods May 11, 1996 through June 30, 1996 and April 1,
1996 through May 10, 1996 (Date of Transfer)............... 4
Notes to Financial Statements.............................. 5
Item 2.
Management's Discussion of Liquidation Activities........... 8
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K...................... 9
</TABLE>
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ATLANTIC REALTY TRUST FORM 10-Q JUNE 30, 1996
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
STATEMENTS OF NET ASSETS IN LIQUIDATION (UNAUDITED)
(LIQUIDATION BASIS OF ACCOUNTING)
<TABLE>
<CAPTION> MAY 10, 1996
JUNE 30, 1996 (DATE OF TRANSFER)
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<S> <C> <C>
ASSETS:
Investment in Real Estate $ 36,318,300 $36,606,600
Mortgage Loans and Interest Receivable 9,840,106 15,180,106
Cash and Short Term Investments 7,263,824 2,658,354
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Total Assets 53,422,230 54,445,060
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LIABILITIES:
Loan Payable 5,849,325 5,849,325
Estimated Cost of Liquidation 2,536,811 3,731,520
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Total Liabilities 8,386,136 9,580,845
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Net Assets in Liquidation $ 45,036,094 $44,864,215
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</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
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ATLANTIC REALTY TRUST FORM 10-Q JUNE 30, 1996
STATEMENTS OF CHANGES IN NET ASSETS IN LIQUIDATION (UNAUDITED)
(LIQUIDATION BASIS OF ACCOUNTING)
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE PERIOD
5/11/96 TO 6/30/96 4/1/96 TO 5/10/96
<S> <C> <C>
Net Assets in Liquidation
Beginning of Period $44,864,215 $ 100
Net Assets Transferred to
Atlantic Realty Trust
(at Historical Cost) - 49,281,693
Adjustments for RPS Transaction
(Note 5) - (5,514,484)
Adjustments to Reflect Liquidation
Basis of Accounting 171,879 1,096,906
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Net Assets in Liquidation
End of Period $45,036,094 $44,864,215
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</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
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ATLANTIC REALTY TRUST FORM 10-Q JUNE 30, 1996
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Atlantic Realty Trust (the "Trust") a Maryland real estate investment
trust, was formed on July 27, 1995 for the purpose of liquidating the
mortgage loan portfolio and certain other assets and liabilities which
were transferred to the Trust from RPS Realty Trust ("RPS") on May 10,
1996 (the "Transaction"). The Trust intends to liquidate its assets
within eighteen months and, therefore, adopted the liquidation basis of
accounting on May 10 1996.
The interim financial data is unaudited; however, in the opinion of
management, the Trust's interim financial data for the six months
ended June 30, 1996 includes all adjustments (consisting of recording
the transfer of the net assets described above, recording the
adjustments for the liquidation basis of accounting described below
and other recurring adjustments) necessary for a fair presentation
of the results of the interim period on the liquidation basis
of accounting.
LIQUIDATION BASIS OF ACCOUNTING
The Trust's financial statements are prepared on the liquidation basis
of accounting. The liquidation basis of accounting is appropriate when
liquidation appears imminent and the Trust is no longer viewed as a
going concern. Under this method of accounting, assets are stated at
their estimated net realizable values and liabilities are stated at the
anticipated settlement amounts.
In determining the net realizable values of the assets, the Trust
considered each asset's ability to generate future cash flows, offers to
purchase received from third parties, if any, and other general market
information. Such information was considered in conjunction with the
Trust's plan for disposition of assets. Computations of net realizable
value necessitate the use of assumptions and estimates. Future events,
including economic conditions that relate to real estate markets in
general, may differ from those assumed or estimated in the computations.
There can be no assurance that the amounts ultimately realized will
equal at least the amounts recorded for such assets. The actual value of
any liquidating distributions will depend upon a variety of factors
including, among others, the proceeds from the sale of the Trust's
assets and the timing of distributions.
The valuations presented in the accompanying Statements of Net Assets in
Liquidation represent the estimates at the date shown, based on current
facts and circumstances, of the estimated net realizable value of assets
and estimated costs of liquidating the Trust. Adjustments to the net
realizable value of assets and anticipated settlement amounts of
liabilities may be recognized from time to time as a result of
differences between estimated and actual amounts received and costs
incurred, as well as additional information that may arise relating to
the liquidation of the Trust. There can be no assurance that the net
values ultimately realized and costs actually incurred for such assets
will not materially differ from the amounts recorded.
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ATLANTIC REALTY TRUST FORM 10-Q JUNE 30, 1996
2. MORTGAGE LOANS RECEIVABLE
<TABLE>
<CAPTION>
ESTIMATED NET
CURRENT AVERAGE MATURITY REALIZABLE VALUE
DESCRIPTION TYPE RATE ACCRUED DATE JUNE 30, 1996(a) MAY 10, 1996
<S> <C> <C> <C> <C> <C> <C>
Branhaven Plaza Shopping Ctr. 14.25% 0.00% Aug-96 $ 3,365,750 $ 3,365,750
Mt. Morris Commons Shopping Ctr. 10.50% 2.00% Jun-99 1,752,923 1,752,923
Copps Hill Plaza Shopping Ctr. 6.00% 0.50% Jul-96 2,945,251 2,945,251
1733 Massachusetts
Avenue Shopping Ctr. 8.58% 1.42% Jun-01 -- 3,382,805
NCR Building Office Bldg. 10.00% 0.00% Dec-95 520,586 520,586
Rector Office Bldg. 0.00% 6.00% Mar-04 1,255,596 1,255,596
1-5 Wabash Avenue Office Bldg. 5.00% 0.00% Mar-01 -- 1,957,195
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$ 9,840,106 $15,180,106
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</TABLE>
(a) Includes estimated cash flows using a twelve month disposition period.
Realized values may differ depending on actual disposition periods.
(b) On June 17, 1996, the Trust received proceeds of $2,150,000 from the
repayment of the 1-5 Wabash loan.
(c) On June 26, 1996, the Trust received proceeds of $3,382,805 from the
prepayment of the 1733 Massachusetts Avenue loan. The proceeds consisted
of the prepayment of the principal loan balance of $2,200,000, deferred
interest of $375,467, current interest of $32,618, contingent interest of
$50,187 and additional contingent interest of $724,533.
3. INVESTMENTS IN REAL ESTATE
<TABLE>
<CAPTION>
ESTIMATED NET
REALIZABLE VALUE
PROPERTY LOCATION JUNE 30, 1996(a) MAY 10, 1996
<S> <C> <C>
Hylan Shopping Center Staten Island, NY $29,775,000 $30,000,000
Norgate Shopping Center Indianapolis, IN 4,663,300 4,726,600
9 North Wabash Building Chicago, IL 1,880,000 1,880,000
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$36,318,300 $36,606,600
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</TABLE>
(a) Includes estimated cash flows using a twelve month disposition period.
Realized values may differ depending on actual disposition periods.
4. SHORT-TERM INVESTMENTS
Short-term investments at June 30, 1996 consist of a $6,500,000
Certificate of Deposit at a major New York bank, bearing interest at a
fixed rate of 4.50%.
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ATLANTIC REALTY TRUST FORM 10-Q JUNE 30, 1996
5. LOAN PAYABLE
In connection with the Transaction the Trust assumed $5,550,000 in
indebtedness, the proceeds of which, together with existing resources of
RPS, were used by RPS primarily for the payment of termination of
employment agreements and severance benefits of approximately $3,000,000,
distributions to shareholders of approximately $2,279,000, directors' and
officers' insurance premiums of approximately $1,150,000 and approximately
$750,000 in working capital for the Trust. Such indebtedness bears
interest at 8.25% per annum and matures on November 9, 1997. The expected
interest payable on the loan over the Trust's 18 month life has been
included in the Adjustments to reflect Liquidation Basis Accounting. The
indebtedness is secured by a collateral assignment on the Trust's interest
in the Hylan Shopping Center.
6. TAX CONTINGENCY
During the third quarter of 1994, RPS held more than 25% of the value
of its gross assets in overnight Treasury Bill reverse repurchase
transactions which the Internal Revenue Service ("IRS") may view as
non-qualifying assets for the purposes of satisfying an asset
qualification test applicable to REITs, based on a Revenue Ruling
published in 1977 (the "Asset Issue"). RPS has requested that the IRS
enter into a closing agreement with RPS that the Assets Issue will not
impact RPS' status as a REIT. The IRS has deferred any action relating
to the Asset Issue pending the further examination of RPS' 1991-1994 tax
returns (the "RPS Audit," and together with the Asset Issue, the "RPS
Tax Issues"). Based on developments in the law which occurred since
1977, RPS' tax counsel, rendered an opinion that RPS' investment in
Treasury Bill repurchase obligations would not adversely affect its REIT
status. However, such opinion is not binding upon the IRS. In connection
with the Transaction, the Trust assumed all tax liability arising out of
the RPS Tax Issues (other than liability that relates to events occurring
or actions taken by RPS following the date of the Transaction). In
connection with the assumption of such potential liabilities, the Trust
and RPS entered into a tax agreement which provides that RPS (under the
direction of its Continuing Trustees), and not the Trust, will control,
conduct and effect the settlement of any tax claims against RPS relating
to the RPS Tax Issues. Accordingly, the Trust does not have any control
as to the timing of the resolution or disposition of any such claims and
no assurance can be given that the resolution or disposition of any such
claims will be on terms or conditions as favorable to the Trust as if
they were resolved or disposed of by the Trust. RPS and the Trust also
have received an opinion from legal counsel that, to the extent there is
a deficiency in RPS' taxable income arising out of the IRS examination
and provided RPS timely makes a deficiency dividend (i.e. declares and
pays a distribution which is permitted to relate back to the year for
which each deficiency was determined to satisfy the requirement that a
REIT distribute 95 percent of its taxable income), the classification of
RPS as a REIT for the taxable years under examination would not be
affected. If, notwithstanding the above-described opinions of legal
counsel, the IRS successfully challenged the status of RPS as a REIT, the
REIT status of the Trust could be adversely affected. Management
estimates that this would have an effect of approximately $600,000 for
1995 and $400,000 for 1994 which has not been provided in the financial
statements of RPS or the Trust. Such amounts do not include potential
penalties and interest. The possible effect on the Trust for subsequent
periods could be significant depending on the taxable income of either
RPS or the Trust in such periods. As of June 30, 1996, the Trust has not
been required to perform its indemnity with respect to the RPS Tax Issues
and Management is not aware of any determination of tax liability by the
IRS against RPS.
7. SUBSEQUENT EVENTS
On July 10, 1996 the Trust prepaid $3,500,000 of the principal balance of
the promissory note, dated as of May 10, 1996, in favor of RPS. (See Note
5 above.)
On July 12, 1996 the Trust received proceeds of $539,802 from the
repayment of the NCR Building loan. The proceeds consisted of the
repayment of the principal loan balance of $468,493, current interest of
$52,093 and expenses due to the foreclosure action of $19,216.
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ATLANTIC REALTY TRUST FORM 10-Q JUNE 30, 1996
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND LIQUIDATION ACTIVITIES
CAPITAL RESOURCES AND LIQUIDITY
Upon consummation of the Transaction, the Trust owned seven mortgage loans and
three retail properties (which include the Hylan Plaza Shopping Center, located
in Staten Island, New York, the Norgate Shopping Center, located in
Indianapolis, Indiana and the 9 North Wabash Avenue Building, located in
Chicago, Illinois), as well as cash and certain other assets, which include
furniture, fixtures and equipment, formerly held by RPS. In addition, upon
consummation of the Transaction, the Trust assumed $5,550,000 in indebtedness
from RPS, borrowed by RPS in connection with the acquisition of certain stock
interests in Ramco-Gershenson, Inc. ("Ramco") and substantially all of the real
estate assets of Ramco's affiliates (the "Ramco Acquisition") pursuant to a
promissory note which bears interest at a rate of 8.25% and matures on November
9, 1997 (the "Promissory Note"). The Promissory Note is secured by a collateral
assignment of the Trust's interest in the Hylan Shopping Center. On July 10,
1996, the Trust repaid $3,500,000 of the principal balance of the Promissory
Note. The Trust does not intend to make new loans or actively engage in either
the mortgage lending or the property acquisition business, other than in
connection with potential workouts of certain of its mortgage loans.
The Trust's primary objective is to liquidate its assets in an eighteen month
period while realizing the maximum values for such assets. Although the Trust
considers its assumptions and estimates as to the values and timing of such
liquidations to be reasonable, the period of time to liquidate the assets and
distribute the proceeds of such assets is subject to significant business,
economic and competitive uncertainties and contingencies, many of which are
beyond the Trust's control. There can be no assurance that the net values
ultimately realized and costs actually incurred for such assets will not
materially differ from the Trust's estimate.
The Trust believes that cash and cash equivalents on hand, proceeds generated
from the mortgage loans and real estate properties that continue to operate and
from the eventual sale of such assets will be sufficient to support the Trust's
operations and meet its obligations.
During the period ended June 30, 1996 the Trust received proceeds of
approximately $5,340,000 from the prepayment of two mortgage loans. At June 30,
1996 the Trust owned five mortgage loans and the three retail properties
discussed above. The Trust intends to reduce to cash or cash equivalents the
mortgage loan and real property portfolio in an orderly manner as soon as
practicable and make a liquidating distribution or distributions to its
shareholders, or merge or combine operations with another real estate entity.
-8-
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ATLANTIC REALTY TRUST FORM 10-Q JUNE 30, 1996
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
A. EXHIBITS
27.1 Financial Data Schedule
B. The registrant filed the following current reports on Form 8-K
(i) Current report on Form 8-K, filed with the Securities and Exchange
Commission on July 18, 1996 which reported the partial prepayment of the
promissory note and the prepayment of three mortgage loans.
(ii) Current report on Form 8-K, filed with the Securities and Exchange
Commission on July 29, 1996 which reported the financial statements of the
Net Assets Transferred to Atlantic Realty Trust and the pro forma
financial information of Atlantic Realty Trust.
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<PAGE> 10
ATLANTIC REALTY TRUST FORM 10-Q JUNE 30, 1996
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ATLANTIC REALTY TRUST
Date: August 13, 1996 By:/s/ Joel Pashcow
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Joel Pashcow
Chairman and President
(Chief Executive Officer)
Date: August 13, 1996 By:/s/ Edwin R. Frankel
------------------------------
Executive Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 7,263,824
<SECURITIES> 0
<RECEIVABLES> 9,840,106
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 17,103,930
<PP&E> 36,318,300
<DEPRECIATION> 0
<TOTAL-ASSETS> 53,422,230
<CURRENT-LIABILITIES> 8,386,136
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 45,036,094
<TOTAL-LIABILITY-AND-EQUITY> 53,422,230
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
