<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 10, 1996
ATLANTIC REALTY TRUST
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
MARYLAND
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(State or other jurisdiction of incorporation)
0-27562 13-3849655
- ----------------------------------- -----------------------------------
(Commission File Number) (IRS Employer Identification No.)
747 Third Avenue, New York, New York 10017
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 355-1255
--------------------------
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(Former name or former address, if changed since last report)
<PAGE> 2
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Businesses Acquired
Financial Statements of the Net Assets to be Transferred to
Atlantic Realty Trust for the three months ended March 31, 1996
and for the years ended December 31, 1995, 1994 and 1993
(b) Pro forma financial information of Atlantic Realty Trust for the
three months ended March 31, 1996 and for the year ended
December 31, 1995
<PAGE> 3
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees of
RPS Realty Trust and
Atlantic Realty Trust:
We have audited the accompanying combined balance sheets of the Net Assets to be
Transferred to Atlantic Realty Trust as of December 31, 1995 and 1994 and the
related combined statements of operations, shareholders' equity and cash flows
for each of the three years in the period ended December 31, 1995. These
combined financial statements are the responsibility of management. Our
responsibility is to express an opinion on these financial statements 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 combined financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such combined financial statements present fairly, in all
material respects, the financial position of the Net Assets to be Transferred to
Atlantic Realty Trust as of December 31, 1995 and 1994, and the results of their
operations and cash flows for each of the three years in the period ended
December 31, 1995 in conformity with generally accepted accounting principles.
As more fully described in Note 1, Atlantic Realty Trust will be obligated to
adopt the liquidation basis of accounting upon completion of the Transaction.
The accompanying combined financial statements do not give effect to the
adjustments, if any, to be recorded at such time.
March 7, 1996
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<PAGE> 4
NET ASSETS TO BE TRANSFERRED TO
ATLANTIC REALTY TRUST
COMBINED BALANCE SHEETS
AS OF MARCH 31, 1996 (UNAUDITED) AND DECEMBER 31, 1995 AND 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARCH 31,
1996 DECEMBER 31,
ASSETS (UNAUDITED) 1995 1994
<S> <C> <C> <C>
Mortgage loans receivable - net of allowance
for possible loan losses of $10,231,336 in 1996,
$10,231,336 in 1995 and $6,581,336 in 1994 $32,606,701 $36,023,265 $39,417,669
Investment in real estate - net 6,838,821 6,866,189 7,503,105
Short-term investments 4,533,358 3,356,995 1,342,979
Interest and accounts receivable 7,221,635 7,523,583 7,363,759
Other assets 460,000 460,000 460,000
----------- ----------- -----------
TOTAL $51,660,515 $54,230,032 $56,087,512
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Accounts payable $ 316,850 $ 717,036 $ 546,299
Deferred commitment fees 346,320 346,320 346,320
----------- ----------- -----------
Total liabilities 663,170 1,063,356 892,619
COMMITMENTS AND CONTINGENCIES -- -- --
SHAREHOLDERS' EQUITY 50,997,345 53,166,676 55,194,893
----------- ----------- -----------
TOTAL $51,660,515 $54,230,032 $56,087,512
=========== =========== ===========
</TABLE>
See notes to combined financial statements.
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<PAGE> 5
NET ASSETS TO BE TRANSFERRED TO
ATLANTIC REALTY TRUST
COMBINED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 (UNAUDITED) AND
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
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<TABLE>
<CAPTION>
THREE
MONTHS ENDED YEAR ENDED
MARCH 31, 1996 DECEMBER 31,
------------------------------------------------
(UNAUDITED) 1995 1994 1993
REVENUES:
<S> <C> <C> <C> <C>
Interest income $ 797,557 $ 3,515,614 $ 3,514,395 $ 5,185,483
Contingent interest and fee income -- 63,028 41,836 134,004
Rental income 149,267 994,369 867,288 169,314
----------- ----------- ----------- -----------
Total revenues 946,824 4,573,011 4,423,519 5,488,801
----------- ----------- ----------- -----------
EXPENSES:
Provision for possible loan losses -- 3,650,000 2,100,000 4,100,000
Provision for impairment of real estate -- 800,000 -- --
Loss on disposition of mortgage loans 128,886 -- -- --
General and administrative expenses 280,069 1,185,161 910,760 865,092
Property operating 42,872 200,209 125,750 3,923
Real estate tax 84,319 311,642 502,046 72,377
Depreciation 27,368 108,763 62,905 11,518
----------- ----------- ----------- -----------
Total expenses 563,514 6,255,775 3,701,461 5,052,910
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ 383,310 $(1,682,764) $ 722,058 $ 435,891
=========== =========== =========== ===========
</TABLE>
See notes to combined financial statements.
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<PAGE> 6
NET ASSETS TO BE TRANSFERRED TO
ATLANTIC REALTY TRUST
COMBINED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1996 (UNAUDITED) AND
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ADDITIONAL CUMULATIVE TOTAL
NUMBER OF PAID-IN CUMULATIVE CONTRIBUTIONS/ SHAREHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS (DISTRIBUTIONS) EQUITY
BALANCE,
<S> <C> <C> <C> <C> <C> <C>
JANUARY 1, 1993 28,492,421 $ 2,849,242 $ 195,591,125 $ 50,166,122 $(185,028,609) $ 63,577,880
Net Income -- -- -- 435,891 -- 435,891
Distributions -- -- -- -- (9,244,165) (9,244,165)
---------- ------------- ------------- ------------- ------------- -------------
BALANCE,
DECEMBER 31, 1993 28,492,421 2,849,242 195,591,125 50,602,013 (194,272,774) 54,769,606
Net Income -- -- -- 722,058 -- 722,058
Distributions -- -- -- -- (296,771) (296,771)
---------- ------------- ------------- ------------- ------------- -------------
BALANCE,
DECEMBER 31, 1994 28,492,421 2,849,242 195,591,125 51,324,071 (194,569,545) 55,194,893
Net Loss -- -- -- (1,682,764) -- (1,682,764)
Distributions -- -- -- -- (345,453) (345,453)
---------- ------------- ------------- ------------- ------------- -------------
BALANCE,
DECEMBER 31, 1995 28,492,421 2,849,242 195,591,125 49,641,307 (194,914,998) 53,166,676
Net Income (unaudited) -- -- -- 383,310 -- 383,310
Distributions (unaudited) -- -- -- -- (2,552,641) (2,552,641)
---------- ------------- ------------- ------------- ------------- -------------
BALANCE,
MARCH 31, 1996 28,492,421 $ 2,849,242 $ 195,591,125 $ 50,024,617 $(197,467,639) $ 50,997,345
========== ============= ============= ============= ============= =============
</TABLE>
See notes to combined financial statements.
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<PAGE> 7
NET ASSETS TO BE TRANSFERRED TO
ATLANTIC REALTY TRUST
COMBINED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 (UNAUDITED) AND
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE
MONTHS ENDED YEAR ENDED
MARCH 31, 1996 DECEMBER 31,
--------------------------------------------
(UNAUDITED) 1995 1994 1993
CASH FLOWS FROM OPERATING
ACTIVITIES:
<S> <C> <C> <C> <C>
Net income (loss) $ 383,310 $(1,682,764) $ 722,058 $ 435,891
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for possible loan losses -- 3,650,000 2,100,000 4,100,000
Provision for impairment of real estate -- 800,000 -- --
Loss on disposition of mortgage loans 128,886 -- -- --
Depreciation 27,368 108,763 62,905 11,518
Changes in operating assets and
liabilities:
Interest and accounts receivable 173,062 (159,824) 216,456 1,159,963
Accounts payable and deferred
commitment fee (400,186) 170,737 52,737 (209,181)
----------- ----------- ----------- -----------
Net cash provided by
operating activities 312,440 2,886,912 3,154,156 5,498,191
----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Satisfaction of mortgage loans receivable 3,416,564 -- 77,662 3,809,974
Investment in mortgage loans receivable -- (255,596) -- (64,000)
Investment in real estate -- (271,847) (1,592,068) --
----------- ----------- ----------- -----------
Net cash provided by (used in)
investing activities 3,416,564 (527,443) (1,514,406) 3,745,974
----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Distributions to RPS Realty Trust (2,552,641) (345,453) (296,771) (9,244,165)
----------- ----------- ----------- -----------
Net cash used in
financing activities (2,552,641) (345,453) (296,771) (9,244,165)
----------- ----------- ----------- -----------
NET INCREASE IN CASH AND
CASH EQUIVALENTS 1,176,363 2,014,016 1,342,979 --
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 3,356,995 1,342,979 -- --
----------- ----------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF
PERIOD $ 4,533,358 $ 3,356,995 $ 1,342,979 $ --
=========== =========== =========== ===========
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Investment in real estate $ -- $ -- $ 2,685,460 $ 3,300,000
Investment in limited partnership -- -- -- 460,000
Interest and accounts receivable -- -- (3,195,876) (1,500,000)
Use (recovery) of allowance for possible
loan losses -- -- (381,336) 4,440,000
Gross mortgage receivable exchanged for
real estate -- -- (2,500,000) (6,700,000)
Mortgage receivable exchanged -- -- (3,000,000) --
</TABLE>
See notes to combined financial statements.
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<PAGE> 8
NET ASSETS TO BE TRANSFERRED TO
ATLANTIC REALTY TRUST
NOTES TO COMBINED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
AND FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
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1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Atlantic Realty Trust (the "Trust") is a newly formed Maryland real estate
investment trust formed as a condition of the Transaction described in
Note 7 for the transfer from RPS Realty Trust ("RPS") of the remaining
mortgage loan portfolio, as well as certain other assets and liabilities
("Net Assets").
The combined financial statements reflect the Net Assets and the related
results of their operations for the periods presented. Historical
performance of the Net Assets are presented as if those assets were
separately managed. Under the provisions of its Declaration of Trust, the
Trust is obligated to make a final liquidating distribution of the net
cash proceeds attributable to the sale or other disposition of the Trust's
assets within 18 months, or to merge or combine operations with another
real estate entity during such 18-month period, unless on or before such
date the holders of at least two-thirds of the Trust's outstanding shares
approve the extension of such date. In the event that at the end of such
18-month period, the Trust is unable to dispose of all of its assets, and
the shareholders of the Company have not approved an extension of such
date, the Trust will appoint an independent third party to liquidate the
Trust's remaining assets.
As a result, upon completion of the Transaction, the Trust will be
obligated to adopt the liquidation basis of accounting. Under this method
of accounting, assets are stated at the amounts to be realized in
liquidation and liabilities are stated at anticipated settlement amounts.
The accompanying financial statements do not give effect to the
adjustments, if any, to be recorded upon adoption of the liquidation basis
of accounting.
Certain common payroll and other general and administrative expenses have
been allocated to the Net Assets based on the average of the weighted
average of the Trust's total assets under management to the total assets
of RPS and the Trust's total revenue to the total revenue of RPS. Such
averages were 29 percent, 24 percent and 24 percent in the years ended
December 31, 1995, 1994 and 1993, respectively and 26 percent in the three
months ended March 31, 1996.
The following is a summary of significant accounting policies followed in
the preparation of the historical financial statements of the Net Assets:
a. Income Tax Status - The Trust intends to conduct its operations with
the intent of meeting the requirements applicable to a real estate
investment trust ("REIT") under Section 856 through 860 of the
Internal Revenue Code of 1986, as amended (the "Code"). RPS conducts
its operations with the intent of meeting the requirements
applicable to a REIT under Section 856 through 860 of the Code. For
the year ended December 31, 1995, the Trust has distributed all of
its taxable income prior to filing its tax return. As a result, the
Trust will have no current and deferred tax liabilities.
See Note 6 for current developments.
b. Principles of Combination - The combined financial statements
include the accounts of the Net Assets.
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<PAGE> 9
c. Cash Equivalents - Short-term investments are considered cash
equivalents for purposes of the statement of cash flows and consist
primarily of highly liquid investments having original maturities of
less than three months.
d. Investment in Real Estate - Investment in real estate is stated at
cost less accumulated depreciation and is depreciated using the
straight-line method over the estimated useful life of the property.
Additions and improvements which extend the estimated useful life of
the property are capitalized. Repairs and maintenance are expensed.
In the event that it appears that the cost less accumulated
depreciation cannot be recovered through operations and/or a sale
over a reasonable future period, then it will be considered probable
that an impairment that is other than temporary has occurred and the
net cost less accumulated depreciation will be written down to
market value and a new cost basis will be established.
In March 1995, the Financial Accounting Standards Board issued
Statement No. 121, "Accounting for the Impairment of Long-Lived
Assets and Assets to be Disposed of" which requires that long-lived
assets and certain identifiable intangibles to be held and used by
an entity be reviewed for impairment whenever changes or events in
circumstances indicate that the carrying amount of an asset may not
be recoverable. The adoption of this Statement is required for years
beginning after December 15, 1995. The provision of this Statement
will be adopted as of January 1, 1996 and the adoption of this
Statement will not have a significant impact on the carrying value
of the real estate.
The Company records properties received in foreclosures or by deed
in lieu of foreclosure at the lower of the carrying value of the
related mortgage loan, plus accrued interest and costs incurred in
connection with the foreclosure, or the market value of the
property.
e. Income Recognition - Current interest income on mortgage loans is
recognized on the accrual method during the periods in which the
mortgage loans are outstanding. Deferred interest, due at the
maturity of the mortgage loan, is recognized as income based on the
interest method using the implicit rate of interest on the mortgage
loan. Income from operating leases held in connection with the
investments in real estate is recognized when earned. Contingent and
additional contingent income and prepayment premium income are
recognized as cash is received. Certain leases at one of the Trust's
real estate properties may have percentage rent features and such
amounts are recognized upon receipt.
f. Impairment of Loans - In May 1993, the Financial Accounting
Standards Board issued Statement No. 114, "Accounting by Creditors
for Impairment of a Loan," which requires creditors to account for
impaired loans at the present value of their future cash flows or at
the fair value of the collateral, if the loan is collateral
dependent. The provisions of this Statement were adopted as of
January 1, 1995 and the adoption of this statement did not have a
significant impact on the carrying value of the loans.
g. Allocation of Distributions - Net cash flows from operating,
financing and investing activities are those amounts which would
have been distributed to RPS or received from RPS to the extent
required to fulfill the cash contributions of RPS to the Operating
Partnership, as described in Note 7.
h. Use of Estimates -The preparation of financial statement in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those
estimates.
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<PAGE> 10
2. MORTGAGE LOANS RECEIVABLE
The principal amounts of the mortgage loans receivable at March 31, 1996
(Unaudited), December 31, 1995 and 1994 are summarized below:
<TABLE>
<CAPTION>
INTEREST RATE (B) MARCH 31, 1996
------------------------------------------ -----------------------------------------------
CURRENT PAY NET
AVERAGE RATE AT AMOUNT ALLOWANCE CARRYING
RATE OF MARCH 31, AVERAGE MATURITY ADVANCED FOR LOSS AMOUNT
DESCRIPTION LOAN 1996 ACCRUED DATE (a)(d)(i) (g)(h) (j)
----------- ---- ---- ------- ---- --------- ------ ---
Shopping centers/retail:
<S> <C> <C> <C> <C> <C> <C> <C>
Holiday Park 10.00% 9.75% -- 12/01 $ -- $ -- $ --
Branhaven Plaza 11.19 14.25 -- 08/01 2,800,000 -- 2,800,000
1733 Massachusetts Avenue 8.58 8.58 1.42 06/01 2,200,000 -- 2,200,000
Mt. Morris Commons 11.20 10.50 2.00 06/01 2,700,000 (1,000,000) 1,700,000
Copps Hill Plaza 6.00 6.00 0.50 07/01 3,563,948 (350,000) 3,213,948
Hylan Center (f) and (Note 3a.) 7.50 7.50 4.50 01/01 25,000,000 (6,000,336) 18,999,664
Office buildings:
NCR Building (e) 10.00 10.00 -- 12/95 468,493 (231,000) 237,493
1-5 Wabash Avenue 5.00 5.00 -- 03/01 2,850,000 (650,000) 2,200,000
Rector (c) and (Note 3a.) 6.00 -- 6.00 03/04 3,255,596 (2,000,000) 1,255,596
Industrial/commercial:
Simmons Mfg. Warehouse 10.00 10.00 2.00 08/01 -- -- --
------------ ------------ ------------
$ 42,838,037 $(10,231,336) $ 32,606,701
============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1995 DECEMBER 31, 1994
---------------------------------------------- ---------------------------------------------
NET NET
AMOUNT ALLOWANCE CARRYING AMOUNT ALLOWANCE CARRYING
ADVANCED FOR LOSS AMOUNT ADVANCED FOR LOSS AMOUNT
DESCRIPTION (a)(d)(i) (g)(h) (j) (a)(d)(i) (g)(h) (j)
----------- --------- ------ --- --------- ------ ---
shopping centers/retail:
<S> <C> <C> <C> <C> <C> <C>
Holiday Park $ 1,916,564 $ -- $ 1,916,564 $ 1,916,564 $ 1,916,564
Branhaven Plaza 2,800,000 -- 2,800,000 2,800,000 -- 2,800,000
1733 Massachusetts Avenue 2,200,000 -- 2,200,000 2,200,000 -- 2,200,000
Mt. Morris Commons 2,700,000 (1,000,000) 1,700,000 2,700,000 (1,000,000) 1,700,000
Copps Hill Plaza 3,563,948 (350,000) 3,213,948 3,563,948 (350,000) 3,213,948
Hylan Center (f) and (Note 3a.) 25,000,000 (6,000,336) 18,999,664 25,000,000 (3,000,336) 21,999,664
Office buildings:
NCR Building (e) 468,493 (231,000) 237,493 468,493 (231,000) 237,493
1-5 Wabash Avenue 2,850,000 (650,000) 2,200,000 2,850,000 -- 2,850,000
Rector (c) and (Note 3a.) 3,255,596 (2,000,000) 1,255,596 3,000,000 (2,000,000) 1,000,000
Industrial/commercial:
Simmons Mfg. Warehouse 1,500,000 -- 1,500,000 1,500,000 -- 1,500,000
------------ ------------ ------------ ------------ ------------ ------------
$ 46,254,601 $(10,231,336) $ 36,023,265 $ 45,999,005 $ (6,581,336) $ 39,417,669
============ ============ ============ ============ ============ ============
</TABLE>
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<PAGE> 11
Deferred interest due at maturity of the mortgage loans is recognized as
income based on the interest method. The amounts currently recognized
through March 31, 1996 (unaudited), December 31, 1995 and 1994, are as
follows:
<TABLE>
<CAPTION>
FOR MARCH 31,
1996 FOR DECEMBER 31, FOR DECEMBER 31,
DEFERRED INTEREST 1995 1994
ACCRUED DEFERRED INTEREST DEFERRED INTEREST
(UNAUDITED) ACCRUED ACCRUED
<S> <C> <C> <C>
Holiday Park $ -- $ 67,080 $ 67,080
Branhaven Plaza 296,998 345,998 267,329
1733 Massachusetts Avenue 337,675 335,127 325,786
Mt. Morris Commons 52,923 52,923 52,923
Hylan Center 6,275,000 6,275,000 6,275,000
Simmons Mfg. Warehouse -- 128,886 100,352
---------- ---------- ----------
Balance, end of period $6,962,596 $7,205,014 $7,088,470
========== ========== ==========
</TABLE>
(a) Of the 8 loans outstanding at March 31, 1996, 3 are wraparound and 5
are first mortgage loans. Of the 10 loans outstanding at December
31, 1995, 4 are wraparound and 6 are first mortgage loans. The
wraparound mortgage loans are subordinate to prior liens held by
others with no recourse to the Trust. Such prior liens are not to be
liabilities of the Trust and, therefore, are not reflected in the
accompanying financial statements.
(b) In addition to fixed interest, on certain loans the Trust would be
entitled to contingent interest in an amount equal to a percentage
of the gross rent received by the borrower from the property
securing the mortgage above a base amount, payable annually, and
additional contingent interest based on a predetermined multiple of
the contingent interest or a percentage of the net value of the
property at such date, payable at maturity (equity participation).
Contingent interest in the amount of $43,862, $41,836, and $50,121
was received for the years ended December 31, 1995, 1994, and 1993,
respectively. During the three months ended March 31, 1996, the
Trust did not receive any contingent interest.
(c) Pursuant to the terms of the restructuring of the collateral
assigned loan which was partially secured by a security interest in
a mortgage on 19 Rector Street, the interest held was converted to a
direct first mortgage lien by delivery on September 21, 1995 of an
Assignment of Senior Participation in the mortgage loan which
formerly had been only collaterally assigned by its mortgagee in
consideration of an additional $255,596.
(d) The aggregate cost for Federal income tax purposes approximates that
used for financial reporting.
(e) The NCR mortgage loan matured on December 31, 1995 and is in
default. The Trust has initiated foreclosure proceedings with
respect to the loan.
(f) The interest income from the Hylan loan represented more than 35
percent of total revenues for the three months ended March 31, 1996
and for the years ended December 31, 1995, 1994 and 1993,
respectively. The mortgage receivable balance and deferred interest
receivable also represented more than 45 percent of total assets at
March 31, 1996, December 31, 1995 and 1994.
(g) As of March 31, 1996, December 31, 1995 and 1994, there were six,
six and five loans respectively that were in arrears (three monthly
payments or more) or otherwise considered to be "problem loans." The
aggregate gross principal amounts of these loans, together with
receivables relating to such loans comprised of accrued interest and
payments made on behalf of the borrowers for
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<PAGE> 12
mortgage payments relating to such properties, totaled $44,165,960,
$44,165,960, and $44,467,648, representing 85 percent, 81 percent
and 79 percent of total assets at March 31, 1996, December 31, 1995
and 1994, respectively. At March 31, 1996, December 31, 1995 and
1994, the Trust was not accruing current and deferred interest on
one, one and one, respectively, of the above-mentioned loans, in the
aggregate approximate principal amounts of $2,700,000, $2,700,000
and $2,700,000, respectively. In addition, as of such dates,
deferred interest on three, three and three additional loans in the
aggregate approximate principal amounts of $ 31,819,544, $31,819,544
and $28,000,000, respectively, was not being accrued. There
is an allowance for possible loan losses of $10,231,336, $10,231,336
and $6,581,336 at March 31, 1996, December 31, 1995 and 1994,
respectively.
(h) An allowance for possible loan losses is established based upon a
review of each of the loans in the portfolio. In performing the
review, management considers the estimated net realizable value of
the property or collateral as well as other factors, such as the
current occupancy, the amount and status of senior debt, if any, the
prospects for the property, the credit worthiness and current
financial position of the borrower and the economic situation in the
region where the property is located. Because this determination of
the collectibility of loans is based upon future economic events,
the amounts ultimately realized at disposition may differ materially
from the carrying value as of March 31, 1996, December 31, 1995 and
1994.
(i) The allowance is indicative of the continued weakness and protracted
declines in values of commercial real estate throughout the country
resulting in part from the general economic decline and the lack of
available credit sources for real estate. The allowance is
inherently subjective and is based on management's best estimates of
current conditions and assumptions about expected future conditions.
It is reasonably possible that future conditions during 1996 may not
meet management's expectation and that additional allowances for
possible loan losses may be required.
(i) A summary of mortgage receivable loan activity for the three months
ended March 31, 1996 and for the years ended December 31, 1995 and
1994 is as follows:
<TABLE>
<CAPTION>
MARCH 31, 1996
(UNAUDITED) 1995 1994
<S> <C> <C> <C>
Balance, beginning of period $ 36,023,265 $ 39,417,669 $ 47,476,667
Mortgage loans issued -- 255,596 --
Mortgage loan satisfaction (3,416,564) -- (5,958,998)
Provision for possible loan losses -- (3,650,000) (2,100,000)
------------ ------------ ------------
Balance, end of period $ 32,606,701 $ 36,023,265 $ 39,417,669
============ ============ ============
</TABLE>
3. PREPAYMENTS AND OTHER ACTIVITY
(a) On January 25, 1994, a mortgage loan in the original principal
amount of $31,000,000 which was secured by a collateral assignment
of mortgages on two properties, an office building located on Rector
Street in New York City (the "Rector Property") and a shopping
center located on Hylan Boulevard in Staten Island, New York (the
"Hylan Center") was restructured. Pursuant to the restructuring, a
direct assignment of the first mortgage with a principal amount of
$25,000,000 and accrued interest of $7,881,250 secured by the Hylan
Center was received and the collateral assignment of the Rector
Property mortgage, the principal amount of which was reduced to
$3,000,000 was retained. The holder of the first mortgage secured by
the Rector Property has granted a pledge of a senior participation
interest in such mortgage. In addition, upon a
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<PAGE> 13
foreclosure, a direct first mortgage secured by the Rector Property
will be obtained. The restructuring was completed in October 1994.
(b) On August 23, 1993, the Norgate Shops, Corp. exercised its right to
receive rental payments pursuant to an Assignment of Rents for its
approximately $2,500,000 mortgage loan secured by the Norgate Plaza
Shopping Center property. On September 21, 1993, a foreclosure
action was commenced, and on motion a receiver was appointed. On
June 30, 1994, Norgate Shops, Corp., a wholly-owned subsidiary,
acquired title to the Norgate Shopping Center property. The property
was subject to a first mortgage in the approximate amount of
$1,463,830, which was prepaid at the time of such acquisition.
(c) As of April 30, 1993, a Settlement Agreement (the "Agreement") was
entered into with respect to the note secured by a mortgage on 5 and
9 North Wabash Avenue, Chicago, Illinois. Pursuant to the Agreement,
(a) a subsidiary received title by deed in lieu of foreclosure to
the property at 9 North Wabash Avenue, b) $1,350,000 was received
and c) another subsidiary received a 20% limited partnership
interest in a newly organized limited partnership which owns 5 North
Wabash Avenue. This interest is reflected on the balance sheet as
other assets of $460,000. A note secured by a first mortgage on 5
North Wabash Avenue in the reduced amount of $3,450,000 will
continue to be held. The note bears interest at 5% per annum,
matures on March 31, 1996 and is nonamortizing, except for a
$600,000 principal reduction payment made on December 20, 1993. The
maturity date of the note may be extended to March 31, 1997 at the
option of the borrower under the note, provided, among other things,
that the principal amount of the note is reduced by an additional
$600,000 payment prior to its initial maturity. Interest during the
extension period shall be at 7% per annum. As to the limited
partnership interest to be held by a subsidiary, no distributions
shall be made with respect thereto until the maturity or earlier
repayment of the mortgage loan. Thereafter, other than distributions
of net operating income, no cash distributions will be received from
refinancing or a sale of the property on account of its limited
partnership interest until the general and initial limited partner
of the limited partnership have received $1,550,000 and any payments
reducing the loan balance below $3,450,000 in aggregate
distributions from such sources. The transaction closed on July 7,
1993 and resulted in a taxable loss approximating $4,500,000, which
amount was previously recognized for accounting purposes in 1992.
(d) On July 2, 1993, proceeds of $3,506,713 were received from the
partial prepayment of the NCR mortgage loan. The original principal
balance of $2,300,000 was reduced to $468,493. The remaining
principal amount matured on December 31, 1995 and bears current
interest of 10% payable quarterly. Also included in the proceeds was
approximately $1,675,000 of deferred interest.
-13-
<PAGE> 14
4. INVESTMENT IN REAL ESTATE
<TABLE>
<CAPTION>
PROVISION
CAPITAL GROSS FOR
IMPROVEMENTS AMOUNT (1) IMPAIRMENT
MARCH 31, 1996 MARCH 31, 1996 MARCH 31, 1996
(UNAUDITED) (UNAUDITED) (UNAUDITED) ACCUMULATED
INITIAL COST TO AND AND AND DEPRECIATION
COMPANY DECEMBER 31, DECEMBER 31, DECEMBER 31, MARCH 31,
--------------------------- 1995 1995 1995 1996
LAND BUILDING -------------- -------------- -------------- ------------
---------- ---------- (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
9 North Wabash
Chicago, Illinois $2,319,900 $ 980,100 $ -- $3,300,000 $ (800,000) $ 68,061
Norgate Shopping Center
Indianapolis, Indiana 1,260,000 2,940,000 349,375 4,549,375 -- 142,493
---------- ---------- ---------- ---------- ---------- ----------
Totals $3,579,900 $3,920,100 $ 349,375 $7,849,375 $ (800,000) $ 210,554
========== ========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
ACCUMULATED NET CARRYING
DEPRECIATION AMOUNT
DECEMBER 31, MARCH 31,
1995 1996
---------- ----------
(Unaudited)
<S> <C> <C>
9 North Wabash
Chicago, Illinois $ 61,778 $2,431,939
Norgate Shopping Center
Indianapolis, Indiana 121,408 4,406,882
---------- ----------
Totals $ 183,186 $6,838,821
========== ==========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, ------------------------------
1996 1995 1994
(UNAUDITED)
<S> <C> <C> <C>
REAL ESTATE OWNED:
Balance at beginning of year $ 7,049,375 $ 7,577,528 $ 3,300,000
Acquired Properties -- -- 4,200,000
Capital Improvements -- 271,847 77,528
Provision for Impairment -- (800,000) --
----------- ----------- -----------
Balance at end of year $ 7,049,375 $ 7,049,375 $ 7,577,528
=========== =========== ===========
ACCUMULATED DEPRECIATION:
Balance at beginning of year: $ 183,186 $ 74,423 $ 11,518
Depreciation Expense (2) 27,368 108,763 62,905
----------- ----------- -----------
Balance at end of year $ 210,554 $ 183,186 $ 74,423
=========== =========== ===========
</TABLE>
(1) Aggregate cost for Federal income tax purposes at March 31, 1996
(unaudited) and December 31, 1995 and 1994 approximates $7,849,375,
$7,849,375 and $7,577,528, respectively.
(2) Properties are depreciated over an estimated life of 39 years using the
straight-line method.
(3) As the sole tenant at 9 North Wabash terminated its lease on December 31,
1995, the property value was impaired and a provision for impairment of
$800,000 was recognized.
-14-
<PAGE> 15
RENTALS UNDER OPERATING LEASES
The following is a schedule by years of minimum future rentals to be
received on noncancelable operating leases at December 31, 1995:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, AMOUNT
<S> <C> <C>
1996 $ 353,148
1997 337,746
1998 337,746
1999 144,100
2000 126,496
Later Years 973,509
-------------
$ 2,272,745
=============
</TABLE>
5. FINANCIAL INSTRUMENTS
The market value of mortgage loans and receivables relating to such loans
as of December 31, 1995 and 1994 is estimated to be approximately
$45,000,000 and $44,000,000, respectively. At December 31, 1995, the
aggregate estimated fair market value of five of the ten mortgage loans
exceeded the aggregate carrying value of $32,516,828 by $3,593,795. The
remaining five mortgage loans were stated at their fair market value. At
December 31, 1994, the aggregate estimated fair market value of three of
the ten mortgage loans exceeded the aggregate carrying value of $5,616,564
by $1,311,020. The remaining seven mortgage loans were stated at their
fair market value. The estimated market value has been determined, using
available market information, methodologies deemed reasonable and the
present value of estimated future cash flows using a discount rate
commensurate with the risks involved. Estimated market values represent
management's estimate as of the date of the valuation and are based on
facts and conditions existing on the date of the valuation and on a number
of assumptions concerning future circumstances, which assumptions may or
may not prove to be accurate. Management believes that the estimated
market value as stated is not necessarily indicative of the price which
could be realized if it were actively attempting to sell the mortgages in
its portfolio.
6. INCOME TAXES
In February 1992, the Financial Accounting Standards Board issued
Statement No. 109, "Accounting for Income Taxes" ("SFAS 109"). The
adoption of the statement is required for years beginning after December
15, 1992. Even though the Trust will not be subject to income taxes as
discussed in Note 1, since the Trust is a public enterprise, in accordance
with SFAS 109, it is required to disclose the net differences between the
assets and liabilities for tax purposes and financial reporting purposes
as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Net assets, financial statements $ 53,166,676 $ 55,194,893
Interest 7,600,000 7,600,000
Allowance for loan losses 10,250,000 6,600,000
Provision for impairment of real estate 800,000 -
Deferred interest (7,200,000) (7,100,000)
------------- -------------
Net assets, tax reporting $ 64,616,676 $ 62,294,893
============= =============
</TABLE>
-15-
<PAGE> 16
During the third quarter of 1994, RPS held more that 25% of the value of
its gross assets in overnight Treasury Bill reverse repurchase
transactions which the 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 United States Internal Revenue Service (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'
counsel Battle Fowler LLP, has 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 will assume all tax liability arising out
of the RPS Tax Issues. In connection with the assumption of such potential
liabilities, the Trust and RPS will enter 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
will 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 Company as if they were resolved or
disposed of by the Company. 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.
7. RAMCO TRANSACTION
On December 27, 1995, RPS and Ramco-Gershenson, Inc. ("Ramco") and its
affiliates (the "Ramco Group") entered into an amended and restated
agreement relating to the acquisition through an operating partnership
(the "Operating Partnership") controlled by RPS of substantially all of
the real estate assets as well as the business operations of Ramco (the
"Transaction"). As part of the Transaction, the Operating Partnership will
succeed to the ownership of interests in 22 shopping center and retail
properties (the "Ramco Properties"), as well as 100% of the non-voting
stock and 5% of the voting stock of Ramco (representing in excess of 95%
of the economic interests of Ramco). Under the proposed revised structure
to the Transaction, RPS will contribute to the Operating Partnership six
retail properties ("RPS Properties") and $68,000,000 in cash and will be
liable for approximately $7,000,000 of Transaction expenses. Following the
closing of the Transaction, Ramco will manage the Ramco Properties, the
RPS Properties and properties of certain third parties and other Ramco
affiliates.
Upon consummation of the Transaction, RPS will be the sole general partner
of and a limited partner in the Operating Partnership and under the
proposed revised structure to the Transaction will initially will hold
approximately 75% of the interests therein. The members of the Ramco Group
will be limited partners in the Operating Partnership and will initially
hold, in the aggregate, approximately 25% of the interests therein. The
Ramco Group could also increase its interest in the Operating Partnership
based on the future performance of certain of the Ramco Properties; such
performance incentives could increase the Ramco Group's interest in the
Operating Partnership to approximately 29% in the aggregate. The Ramco
Group's units in the Operating Partnership will be exchangeable for shares
of RPS Realty Trust
-16-
<PAGE> 17
commencing one year after consummation of the Transaction, subject to
purchase of such OP Units for cash by RPS Realty Trust, at RPS's option.
As part of the Transaction, it is anticipated that RPS will change its
name to Ramco-Gershenson Properties Trust and will implement a
one-for-four reverse share split.
Upon consummation of the Transaction, it is contemplated that four of the
nine current members of the Board of Trustees of RPS will resign and will
be replaced by four individuals designated by the Ramco Group, two of whom
will be independent of RPS, Ramco and their respective affiliates. In
addition, the five current principal executive officers of Ramco will
become executive officers of RPS and will be responsible for the
management of the RPS's real estate operations.
In connection with the Transaction, and as a condition thereto, RPS will
transfer its remaining mortgage loan portfolio, as well as certain other
assets, to the Trust and thereafter will distribute the shares after
taking into account the reverse stock split referred to above, to the RPS
shareholders. Additionally, pursuant to the terms of the Transaction, RPS
will incur approximately $6,500,000 in indebtedness, the proceeds of
which, together with existing resources of RPS, will be used primarily for
the payment of severance benefits of approximately $4,500,000,
distributions to shareholders of approximately $2,279,000 and directors'
and officers' insurance premiums of approximately $1,150,000 and
approximately $750,000 in working capital. It is anticipated that such
indebtedness will accrue interest at 10% per annum (approximately $650,000
per year) and mature on the date which is 18 months after the Transaction.
Such interest will be included as a decrease in the Statement of Changes
in Net Assets following consummation of the Transaction. Upon consummation
of the Transaction, the Trust will assume this indebtedness. The actual
amount of such indebtedness may be less than $6,500,000 to the extent that
RPS effects the sale of any of the assets to be distributed to the Trust
or is prepaid by any of the borrowers under its mortgage loans.
8. COMMITMENTS
In March 1995 a lease was entered into for approximately 4,863 square feet
of office space at 747 Third Avenue, New York, New York. The term of the
lease commences on April 1, 1995, at an annual base rental of
approximately $150,000. The lease will expire on April 30, 1997.
9. SUBSEQUENT EVENTS
On January 19, 1996, the Trust received proceeds of $2,008,560 from the
repayment of the Holiday Park loan. The proceeds consisted of the
repayment of the principal loan balance of $1,916,564, current interest of
$24,916 and deferred interest of $67,080.
On February 1, 1996, the Trust received proceeds of $1,512,500 from the
repayment of the Simmons Manufacturing Warehouse loan. The proceeds
consisted of the repayment of the principal loan balance of $1,500,000 and
current interest of $12,500.
On February 5, 1996, Norgate Shops, Inc., a wholly-owned subsidiary of the
Trust, signed a non-binding letter of intent for the sale of the Norgate
property for a purchase price of $4,800,000 in cash. The sale is subject
to several conditions and there is no assurance that the proposed sale
will be consummated.
10. SUBSEQUENT EVENTS (UNAUDITED)
On April 30, 1996, Hylan Plaza shops, Inc., a Delaware corporation and a
wholly-owned subsidiary of the Trust, acquired the Hylan Plaza Shopping
Center (which includes approximately 349,000 square feet of rentable space
located in Staten Island, New York) in connection with a workout of a
mortgage held by the Trust for approximately $1.1 million over the
mortgage held by the Trust, plus closing costs.
-17-
<PAGE> 18
On May 10, 1996, the Trust consummated the previously announced
acquisition of Ramco-Gershenson, Inc. (the "Ramco Acquisition"), including
the spin-off of its wholly-owned subsidiary Atlantic Realty Trust, a
Maryland real estate investment trust (the "Spin-Off Company"). In
connection with the Ramco Acquisition, the Trust changed its name to
"Ramco-Gershenson Properties Trust" and effectuated as of the close of
business on May 10, 1996, a one for four reverse split.
Upon the closing of the Ramco Acquisition, the Spin-Off Company was spun
off to RPS's shareholders. The Spin-off Company now holds title to RPS's
former mortgage loan portfolio as well as its 9 North Wabash, Norgate and
Hylan Plaza properties.
On June 17, 1996, the Trust received proceeds of $2,150,000 from the
repayment of the 1-5 Wabash loan.
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.
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.
******
-18-
<PAGE> 19
ATLANTIC REALTY TRUST
PRO FORMA STATEMENTS OF NET ASSETS IN LIQUIDATION
(LIQUIDATION BASIS OF ACCOUNTING)
MARCH 31, 1996 AND DECEMBER 31, 1995
(UNAUDITED)
- --------------------------------------------------------------------------------
The unaudited Pro Forma Statements of Net Assets in Liquidation have been
presented as if the mortgage loan portfolio and certain other assets and
liabilities of RPS Realty Trust had been transferred to Atlantic Realty Trust
(the "Trust") on December 31, 1995 and March 31, 1996, respectively. The Pro
Forma Statements of Net Assets in Liquidation also give effect to the adoption
of the liquidation basis of accounting which the Trust will adopt upon the
transfer of assets and liabilities from RPS.
The liquidation basis of accounting is deemed appropriate as liquidation appears
imminent and the Company 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 their anticipated settlement amounts.
The valuation of assets and liabilities requires many estimates and assumptions,
and there are substantial uncertainties in implementing the transfer of assets
and liabilities to the Trust. The actual value of any liquidating distributions
will depend upon a variety of factors including, the proceeds from the sale of
any of the Trust's assets, the timing of such sales and the actual timing of
distributions.
The unaudited Pro Forma Statements of Net Assets in Liquidation should be read
in conjunction with the combined financial statements of the Net Assets to be
Transferred to the Trust included elsewhere herein. In management's opinion, all
adjustments necessary to reflect the transfer and the related transactions,
including those adjustments resulting from the adoption of the liquidation basis
of accounting have been made.
The valuations presented in the accompanying Statements of Net Assets in
Liquidation represent estimates, based on current facts and circumstances, of
the net realizable value of assets and estimated costs of liquidating the Trust.
The values ultimately realized could be higher or lower than the amounts
recorded and such differences could be material.
The unaudited Pro Forma Statements of Net Assets in Liquidation are not
necessarily indicative of what actual net assets in liquidation would have been
at December 31, 1995 and March 31, 1996, nor do they purport to present the
future net assets in liquidation of the Trust.
-19-
<PAGE> 20
ATLANTIC REALTY TRUST
PRO FORMA STATEMENTS OF NET ASSETS IN LIQUIDATION
(LIQUIDATION BASIS OF ACCOUNTING)
MARCH 31, 1996
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS ADJUSTMENTS
HISTORICAL TRANSFERRED TO REFLECT PRO FORMA
BALANCE SHEET IN SPIN-OFF ADJUSTMENTS LIQUIDATION STATEMENT OF
AT AS OF FOR RPS BASIS NET ASSETS IN
MARCH 31, 1996 MARCH 31, 1996 TRANSACTION ACCOUNTING LIQUIDATION
(1) (2) (3) (4) MARCH 31, 1996
ASSETS
<S> <C> <C> <C> <C> <C>
Cash/ Short Term Investments $ 100 $ 4,533,358 $35,516 $ -- $ 4,568,974
Mortgage Loans Receivable -- 32,606,701 -- (282,948) 32,323,753
Investment in Real Estate -- 6,838,821 -- (200,821) 6,638,000
Interest and Accounts Receivable -- 7,221,635 -- 4,087,225 11,308,860
Other Assets -- 460,000 -- (460,000) --
----------- ----------- ----------- ---------- -----------
TOTAL ASSETS 100 51,660,515 35,516 3,143,456 54,839,587
----------- ----------- ----------- ---------- -----------
LIABILITIES AND SHAREHOLDERS'
EQUITY/ NET ASSETS IN LIQUIDATION
LIABILITIES
Accounts Payable/ Estimated Costs
of Liquidation -- 316,850 -- 1,751,250 2,068,100
Deferred Commitment Fee -- 346,320 -- (346,320) --
Loan Payable -- -- 5,550,000 337,906 5,887,906
----------- ----------- ----------- ---------- -----------
TOTAL LIABILITIES -- 663,170 5,550,000 1,742,836 7,956,006
----------- ----------- ----------- ---------- -----------
SHAREHOLDERS' EQUITY/
NET ASSETS IN LIQUIDATION $ 100 $50,997,345 $(5,514,484) $1,400,620 $46,883,581
=========== =========== =========== ========== ===========
</TABLE>
See notes to the pro forma financial statements.
-20-
<PAGE> 21
ATLANTIC REALTY TRUST
PRO FORMA STATEMENTS OF NET ASSETS IN LIQUIDATION
(LIQUIDATION BASIS OF ACCOUNTING)
DECEMBER 31, 1995
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS ADJUSTMENTS
HISTORICAL TRANSFERRED TO REFLECT PRO FORMA
BALANCE SHEET IN SPIN--OFF ADJUSTMENTS LIQUIDATION STATEMENT OF
AT AS OF FOR RPS BASIS NET ASSETS IN
DECEMBER 31, 1995 DECEMBER 31, 1995 TRANSACTION ACCOUNTING LIQUIDATION
(1) (2) (3) (4) DECEMBER 31, 1995
ASSETS
<S> <C> <C> <C> <C> <C>
Cash/ Short Term Investments $ 100 $ 3,356,995 $ 35,516 $ -- $ 3,392,611
Mortgage Loans Receivable -- 36,023,265 -- (282,948) 35,740,317
Investment in Real Estate -- 6,866,189 -- (228,189) 6,638,000
Interest and Accounts Receivables -- 7,523,583 -- 3,877,273 11,400,856
Other Assets -- 460,000 -- (460,000) --
----------- ----------- ----------- ----------- -----------
TOTAL ASSETS 100 54,230,032 35,516 2,906,136 57,171,784
----------- ----------- ----------- ----------- -----------
LIABILITIES AND SHAREHOLDERS'
EQUITY/ NET ASSETS IN LIQUIDATION
LIABILITIES
Accounts Payable/ Estimated Costs
of Liquidation -- 717,036 -- 1,751,250 2,468,286
Deferred Commitment Fees -- 346,320 -- (346,320) --
Loan Payable -- -- 5,550,000 337,906 5,887,906
----------- ----------- ----------- ----------- -----------
TOTAL LIABILITIES -- 1,063,356 5,550,000 1,742,836 8,356,192
----------- ----------- ----------- ----------- -----------
SHAREHOLDERS' EQUITY/
NET ASSETS IN LIQUIDATION $ 100 $53,166,676 $(5,514,484) $1,163,300 $48,815,592
=========== =========== =========== =========== ===========
</TABLE>
See notes to the pro forma financial statements.
-21-
<PAGE> 22
ATLANTIC REALTY TRUST
PRO FORMA STATEMENTS OF CHANGES IN NET ASSETS IN LIQUIDATION
(LIQUIDATION BASIS OF ACCOUNTING)
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND
FOR THE YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
- --------------------------------------------------------------------------------
The unaudited Pro Forma Statements of Changes in Net Assets in Liquidation have
been presented as if the mortgage loan portfolio and certain other assets and
liabilities of RPS Realty Trust had been transferred to Atlantic Realty Trust
(the "Trust") on January 1, 1995 for the year ended December 31, 1995 and on
January 1, 1996 for the three months ended March 31, 1996. The Pro Forma
Statements of Changes in Net Assets in Liquidation also give effect to the
adoption of the liquidation basis of accounting which the Trust will adopt upon
the transfer of assets from RPS.
The unaudited Pro Forma Statements of Changes in Net Assets in Liquidation
should be read in conjunction with the combined financial statements of the Net
Assets to be Transferred to the Trust included elsewhere herein. In management's
opinion, all adjustments necessary to reflect the transfer and the related
transactions, including those adjustments resulting from the adoption of the
liquidation basis of accounting have been made.
The unaudited Pro Forma Statements of Changes in Net Assets in Liquidation are
not necessarily indicative of what actual net assets in liquidation would have
been had this transfer and related transaction actually occurred as of January
1, 1995 or 1996, nor do they it purport to represent the results of operations
of Atlantic Realty Trust for future periods.
-22-
<PAGE> 23
ATLANTIC REALTY TRUST
PRO FORMA STATEMENTS OF CHANGES IN NET ASSETS IN LIQUIDATION
(LIQUIDATION BASIS OF ACCOUNTING)
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND
FOR THE YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FOR THE THREE
YEAR ENDED MONTHS ENDED
DECEMBER 31, 1995 MARCH 31, 1996
NOTE (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Net Assets in Liquidation 1 $ 100 $ 100
Net Assets Transferred to Atlantic Realty Trust 2 53,166,676 50,997,345
Adjustment for RPS Transaction 3 (5,514,484) (5,514,484)
Adjustment to Reflect Liquidation Basis of Accounting 4 (1,163,300) (1,400,620)
------------ ------------
Net Assets in Liquidation $ 48,815,592 $ 46,883,581
============ ============
</TABLE>
See notes to the pro forma financial statements.
-23-
<PAGE> 24
ATLANTIC REALTY TRUST
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND
FOR THE YEAR ENDED DECEMBER 31, 1995 (UNAUDITED)
NOTES TO PRO FORMA FINANCIAL STATEMENTS
(UNAUDITED)
- --------------------------------------------------------------------------------
1. Represents the initial funding of the registrant and equity in the
registrant held by RPS.
2. Represents the mortgage loan portfolio and certain other assets and
liabilities of RPS Realty Trust transferred to the Trust.
3. Pursuant to the terms of the Transaction, RPS incurred approximately
$5,550,000 in indebtedness, the proceeds of which, together with existing
resources of RPS, were used 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. Upon consummation of the
Transaction, the Trust assumed this indebtedness. Such indebtedness bears
interest at 8.25% per annum (approximately $457,875 per year) and matures
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. As
discussed in Note 5 below, on April 30, 1996 the Trust acquired the Hylan
Shopping Center in connection with the workout of a mortgage held by the
Trust.
4. Represents adjustment to reflect assets at their estimated net realizable
value and estimated costs of liquidating the Trust over its expected 18
month liquidation period. 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. As
a result, the amounts ultimately realized may differ from those currently
reflected in these financial statements.
5. On April 30, 1996, Hylan Plaza Shops, Inc. a Delaware corporation and a
wholly-owned subsidiary of the Trust, acquired the Hylan Plaza Shopping
Center (which includes approximately 349,000 square feet of rentable space
located in Staten Island, New York) in connection with a workout of a
mortgage held by the Trust for approximately $1.1 million over the mortgage
held by the Trust, plus closing costs. The difference between the estimated
net realizable value of the property and the estimated net realizable value
of the mortgage loan and related interest is insignificant.
6. On July 10, 1996 the Trust prepaid $3,500,000 of the principal balance of
the promissory note dated as of May 10, 1996. (See note 3 above).
-24-
<PAGE> 25
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
(Registrant)
Date: July 29, 1996 By: /s/Edwin R. Frankel
----------------------------------------
Edwin R. Frankel, Executive Vice
President, Chief Financial Officer and
Secretary
-25-
<PAGE> 26
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequential
Exhibit Page No.
- ------- ----------
<S> <C> <C>
27.1 Financial Data Schedule (Net Assets to be Transferred
to Registrant for the three months ended March 31,
1996 and for the year ended December 31, 1995)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 4,533,358
<SECURITIES> 0
<RECEIVABLES> 50,059,672
<ALLOWANCES> 10,231,336
<INVENTORY> 0
<CURRENT-ASSETS> 44,821,694
<PP&E> 7,049,375
<DEPRECIATION> 210,554
<TOTAL-ASSETS> 51,660,515
<CURRENT-LIABILITIES> 663,170
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 50,997,345
<TOTAL-LIABILITY-AND-EQUITY> 51,660,515
<SALES> 0
<TOTAL-REVENUES> 946,824
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 563,514
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 383,310
<INCOME-TAX> 0
<INCOME-CONTINUING> 383,310
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 383,310
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
