-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TEVyH9CZZZUtERp8VduaDdCC3AujY8ypKSmVtIGySWA2bCG1Z2icXAU/BcdkWMrF 6vqomTf3Of6pNEcOCwBtAA== 0000018914-02-000002.txt : 20020415 0000018914-02-000002.hdr.sgml : 20020415 ACCESSION NUMBER: 0000018914-02-000002 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20011231 FILED AS OF DATE: 20020329 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CENTURY REALTY TRUST CENTRAL INDEX KEY: 0000018914 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 351284316 STATE OF INCORPORATION: IN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-07716 FILM NUMBER: 02592800 BUSINESS ADDRESS: STREET 1: 419 CHAMBER OF COMMERCE BLDG CITY: INDIANAPOLIS STATE: IN ZIP: 46204 BUSINESS PHONE: 3176325467 MAIL ADDRESS: STREET 2: 419 CHAMBER OF COMMERCE BLDG CITY: INDIANAPOLIS STATE: IN ZIP: 46204 10-K 1 crt10k01.txt 10K FILING FOR 2001 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20259 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2001 Commission file number 0-7716 CENTURY REALTY TRUST (Exact name of Registrant as specified in its charter) INDIANA 35-1284316 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 823 Chamber of Commerce Building Indianapolis, Indiana 46204 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (317)632-5467 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Shares of Beneficial Interest (Title of Class) 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 --- --- The aggregate market value of the voting stock held by nonaffiliates of the Registrant was $16,048,309 based upon the average bid and asked prices on March 5, 2002. Shares of Beneficial Interest, no par value--1,751,711 shares outstanding as of March 5, 2002. PART I ITEM 1. BUSINESS The principal business of Century Realty Trust, an Indiana business trust, is the ownership of income-producing real properties, which consist of fifteen apartment complexes, two restaurant properties, three commercial properties, and various parcels of undeveloped land which are situated adjacent to rental properties owned by the Trust. In 1997, the Trust expanded its investment options to include the exclusive control of real estate through the use of operating partnerships. Five of the Trust's fifteen apartment properties are owned by operating partnerships. Other than long-term leases on the restaurant properties, the Trust's rental income is derived from short-term leases of units in its various buildings. The residential properties are managed under agreements with independent property management firms. The Trust and its operating partnerships reimburse the management firms for compensation of approximately 65 persons employed at the apartment properties. The Trust has elected to be treated as a real estate investment trust under the Internal Revenue Code and to distribute substantially all of its real estate investment trust taxable income. A real estate investment trust is an investment vehicle which permits individuals, by purchasing shares, to invest in real estate equities and/or mortgage loans, and share in the profits therefrom without having profits subjected to federal income taxes at the trust level. ITEM 2. PROPERTIES The following investment properties were owned by the registrant at December 31, 2001: Year No. of 2001 Net Apartments Location Acquired Units Occupancy Investment - ---------- -------- -------- ------ --------- ---------- Park Plaza Indianapolis, IN 1973 176 87% $ 523,450 Fontenelle Kokomo, IN 1973 176 86 797,507 Park Forest Marion, IN 1973 64 85 281,777 Chester Heights Richmond, IN 1973 110 95 286,599 Driftwood Park Indianapolis, IN 1989 48 87 918,873 Regency Royale Mishawaka, IN 1993 132 91 3,140,383 Creek Bay Indianapolis, IN 1993 208 89 6,239,353 Eagle Creek Indianapolis, IN 1994 188 95 5,302,422 Fox Run Indianapolis, IN 1995 256 91 6,116,796 Charter Oaks Evansville, IN 1997 192 98 4,722,455 Barcelona* Kokomo, IN 1997 64 83 1,380,278 Beech Grove* Jeffersonville, IN 1997 182 92 3,929,984 Hampton Court* Indianapolis, IN 1997 92 95 1,629,390 Sheffield Square* New Albany, IN 1997 152 97 3,960,349 West Wind Terrace* Indianapolis, IN 1997 96 84 1,663,340 ----- -- ----------- Total Apartments 2,136 91 40,892,956 * Property is owned by a partnership controlled by the Trust. Year Square Currently Net Commercial Location Acquired Feet Leased Investment - ---------- -------- -------- ------ --------- ---------- Office/Warehouse 401 Industrial Dr. Carmel, IN 1977 38,000 100% $ 257,343 Office Buildings 1810 E. 62nd St. Indianapolis, IN 1986 17,000 100 361,986 3510-20 E. 96th St., Indianapolis, IN 1997 34,000 77 1,503,471 ------ ----------- Total Commercial 89,000 2,122,800 Year Square Lease Net Restaurants Location Acquired Feet Expires Investment - ----------- -------- -------- ------ -------- ---------- Fortune House Indianapolis, IN 1979 5,000 2004 328,441 Miami Subs Orlando, FL 1979 3,500 2004 149,814 ----- ------- Total Restaurants 8,500 478,255 ----------- ALL INVESTMENT PROPERTIES $43,494,011 ----------- ----------- ITEM 3. LEGAL PROCEEDINGS There are no material pending legal proceedings against the trust, and no such proceedings are known to be contemplated. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted to a vote of security holders during the fourth quarter of the year ended December 31, 2001. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Trust's shares of beneficial interest are traded on the NASDAQ SmallCap market. Cash distributions are paid approximately 45 days after the end of each quarter. The high and low published bid prices and distributions for the last two years were: Distributions 2001 High Low Declared - ---- ---- ---- ------------- 1st Quarter $12.50 $11.38 $0.21 2nd Quarter 13.00 11.38 0.19 3rd Quarter 11.75 11.25 0.19 4th Quarter 12.00 11.11 0.14 Distributions 2000 High Low Declared - ---- ---- ---- ------------- 1st Quarter $12.25 $10.75 $0.20 2nd Quarter 13.00 9.56 0.20 3rd Quarter 13.00 9.88 0.21 4th Quarter 12.94 10.75 0.21 ITEM 6. SELECTED FINANCIAL DATA In thousands, except per share data and number of apartments Years ended December 31, 2001 2000 1999 1998 1997 - ------------------------ ---- ---- ---- ---- ---- Operating Data: Rental and other operating income $13,017 $13,294 $13,227 $12,845 $ 9,364 Gains on sale of property - - - - - Income before minority interest in operating partnerships 706 1,133 1,071 990 832 Net income 749 1,110 934 884 832 Cash distributions declared 1,269 1,408 1,238 1,222 1,307 Weighted average number of shares outstanding 1,740 1,717 1,548 1,547 1,515 Per share: Basic earnings $ 0.43 $ 0.65 $ 0.60 $ 0.57 $ 0.57 Diluted earnings 0.43 0.65 0.60 0.57 0.56 Distributions declared 0.73 0.82 0.80 0.79 0.87 Balance Sheet Data: Total real estate investments(a) $58,115 $57,539 $57,429 $57,041 $56,608 Allowances for depreciation (14,624) (13,011) (11,690) (10,167) (8,641) Total assets 47,556 47,821 49,533 50,489 51,528 Mortgage and other notes payable 34,482 34,013 35,171 35,777 36,478 Total liabilities 36,934 36,588 37,829 38,439 39,124 Minority interest in operating partnerships 802 1,149 3,476 3,521 3,536 Shareholders' equity 9,819 10,084 8,228 8,529 8,868 Number of shares outstanding 1,749 1,726 1,548 1,547 1,547 Other Data: Cash flow data: Cash provided by operating activities $ 2,382 $ 3,148 $ 2,711 $ 2,730 $ 2,098 Cash (used in) investing activities (702) (498) ( 570) ( 637) (3,299) Cash provided by (used in) financing activities (1,114) (2,752) (2,002) (2,130) (1,668) Funds from operations(b): Income before minority interest in operating partnerships $ 706 $ 1,133 $ 1,071 $ 990 $ 832 Deduct gains on sale of property - - - - - Add back investment real estate depreciation 1,801 1,774 1,770 1,741 1,265 Deduct funds attributed to minority interest (66) (160) (492) (450) - ------- ------- ------- ------- ------- Funds from operations $ 2,441 $ 2,747 $ 2,349 $ 2,281 $ 2,097 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Apartment units owned(a): Owned at December 31 2,136 2,136 2,136 2,136 2,136 Weighted average number of apartments owned during the year 2,136 2,136 2,136 2,136 1,503 (a) Real estate owned includes apartments owned by operating partnerships created and controlled by the Trust. (b) Funds from operations (FFO) is defined as income before gains on sale of property and minority interest of unitholders in operating partnerships created and controlled by the Trust plus investment property depreciation. The amount of funds attributed to minority interest is not available to shareholders of the Trust and is deducted. FFO should be considered along with, not as an alternative to, net income and cash flows as a measure of the Trust's operating performance and liquidity. FFO does not represent cash flow from operating activities and is not necessarily indicative of cash available to fund capital expenditures, debt repayment, or other cash needs. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW Contained in this discussion and elsewhere in this annual report are forward-looking statements which management believes to be reasonable and informative. Such statements are based on assumptions which may not prove to be correct for reasons management cannot predict. Consequently, the inclusion of forward-looking statements should not be considered as representations by the Trust or its management that expected results will be achieved or that stated objectives will be attained. During 2001 the Trust created a wholly owned subsidiary, CRT Investments, Inc. and a limited partnership, Century Realty Properties, L.P. Century Realty Trust is the sole general partner and CRT Investments, Inc. is the sole limited partner of Century Realty Properties, L.P. The accounts of both new entities are included in the consolidated financial statements of the Trust. As of January 1, 2002, titles to most of the Trust's investment properties and operations had been conveyed to the new limited partnership. Management believes that the new structure will facilitate the acquisition of investment properties from individuals and partnerships. During all of 2001 and 2000 the Trust owned or controlled fifteen apartment communities containing 2,136 apartment units, three multi-tenant commercial properties containing 89,000 rentable square feet, and two restaurant properties leased to operators under net leases. Five of the apartment properties containing 586 units are owned by separate partnerships that are controlled by the Trust through a wholly-owned subsidiary. A description of partnership-owned real estate acquisitions is contained in Note 3 to the financial statements. In 1999, the Trust registered 286,908 shares of beneficial interest which were subsequently offered to holders of an equal number of operating partnership units in the five partnership entities it has controlled, as General Partner, since November, 1997. As of January 1, 2002, holders of 217,390 partnership units, representing 75.8% of outstanding units, had exercised their exchange options. As of January 1, 2001 holders of 192,609, or 67.1%, of the outstanding partnership units had exchanged units for shares. Unit holders who have not exercised their options may do so as of the first day of each calendar quarter through 2007(See Note 3 to the financial statements). Management anticipates that the increase in outstanding shares and corresponding decrease in the minority interest will not have a material impact on funds from operations and net income per share during the next year. At December 31, 2001 the Trust's net investment in real estate consisted of apartment properties (94%), commercial properties (5%) and net-leased restaurant properties (1%). The apartment communities account for most of the rental income and expenses reported. The 2,136 apartment units in the portfolio throughout 2001 and 2000 contributed 94.6% and 94.3%, respectively, of the total revenue from real estate operations, and 98.3% and 98.6%, respectively, of real estate operating expenses. CRITICAL ACCOUNTING POLICIES Amortization of Management Contracts. In November 1997 the Trust paid $650,350 for the general partner interest and absolute management control over five partnerships. The Trust granted to the limited partners in those partnerships options to exchange their interests for shares of beneficial interest of the Trust. Those options will expire in November 2007 at which time the Trust will have the option to issue shares in exchange for any outstanding limited partnership interests. The Trust elected in 1997 to amortize, on a straight line method, its cost to acquire its position over the ten year option period that it granted to the limited partners; consequently, depreciation expense each year includes $65,035 of acquisition cost amortization. Carpet Replacement Policy. From its inception in 1973, the Trust has consistently followed the practice of charging the cost to replace carpets in its apartment units to real estate operating expense as incurred. The costs to replace carpets amounted to $322,994, $286,453 and $341,740 for 2001, 2000 and 1999 respectively. An acceptable alternative method of accounting would be the capitalization of costs as incurred, followed by charges for depreciation over the estimated useful life of the carpet. Management believes that, due to the relatively short useful life of apartment carpets, the annual expense for replacements is not materially greater than would be the annual charges for depreciation had the carpets been capitalized when purchased. RESULTS OF OPERATIONS -- 2001 The Trust experienced a decrease of approximately 1.4% in income and an increase of 4.0% in expenses, other than depreciation, related to its apartment operations in 2001. The commercial properties experienced a 4.6% decrease in gross income and an 11.4% increase in operating expenses in 2001 compared to the previous year. The restaurant property in Orlando, Florida that had been, since early 1999, operated as a Miami Subs franchised restaurant under a five-year operating lease with the operator, was closed during the first four months of 2001. The Trust terminated that lease, under its default provisions; and in May, it re-leased the property to a new Miami Subs franchisee-operator. The new lease, which will expire in 2004, contains terms and conditions similar to the terminated lease. Income lost during the change in lessees amounted to approximately $16,730. The decrease in gross income from apartment properties resulted from the combined effect of .9% higher average rental rates and a 2.1% decrease in overall occupancy rates. Apartment occupancy rates decreased from an average of 93.2% in 2000 to 91.2% in 2001. At December 31, 2001 the aggregate occupancy rate for the Trust's apartment properties was 90.6%. At the end of 2000, the overall apartment occupancy was 93.5%. The lower occupancy rates in 2001 resulted from higher unemployment rates in several Indiana communities, and lower mortgage loan interest rates that made home ownership a viable alternative for residents of higher-rent apartments. Real estate operating expenses, including real estate taxes (excluding interest and depreciation) for the apartment properties increased 4.0%. Operating expenses amounted to 51.7% of gross possible income for 2001, up from 50.1% in 2000. Approximately 39% of the increase in operating expenses related to property employee costs which include salaries, payroll taxes and group insurance benefits. Property employee costs in 2001 increased by 6.5% from 2000. Approximately half of the increase resulted from adding employees in June, 2000 to perform certain maintenance, painting and janitorial services previously provided by outside contractors. The remainder of the increase represented increased compensation rates and health insurance costs. Employee costs, as a percent of gross possible income, increased from 12.3% in 2000 to 12.9% in 2001. Due to declining occupancy rates, other administrative expenses, primarily advertising, which amounted to 4.1% of gross possible income in 2001, was up 13.1% from the previous year. Declining occupancy rates also resulted in 7.7% higher decorating expenses. Insurance premiums for casualty and workers compensation coverage increased 14.7% in 2001, but accounted for less than 10% of the increase in operating expenses. While the Trust's insurance claims history is not unfavorable, management anticipates that other market forces will result in a substantial increase in premiums for replacement coverage when the current policies expire on June 30, 2002. Nonresidential properties, other than the net leased restaurant properties, accounted for 4.8% of total income from operations in 2001, and 4.9% in 2000. The decrease resulted primarily from lower occupancy rates in 2001. The two office properties that, in the aggregate, contain 51,000 square feet accounted for 90% of the decrease. Together, they averaged 90% occupancy during 2001, down from 95% for 2000. Expenses related to the turnover of tenants during the 2001 resulted in an 11.4% increase in operating expenses compared with the previous year. During 2001, 30% of the interest income was earned at money market rates on sweep account demand deposit funds and 70% was earned at savings account rates on restricted cash balances. Restricted cash balances consist of tax and insurance escrow deposits and replacement fund balances held by mortgage lenders, and tenant security deposit savings accounts. In 2001, the Trust earned a 3.14% average rate of return on an average total amount of cash and short-term investments of $392,000, exclusive of the restricted cash accounts over which the Trust does not have investment discretion. In 2000, 41% of the interest income earned by the Trust was derived from the day to day investment of excess cash deposits at money market rates of return that averaged 5.06% on an average daily balance of $792,000. In August, 2001, the Trust obtained a $5,000,000 mortgage loan on one of its apartment properties. That loan, which provides for interest at the rate of 7.04% will mature in August, 2011 with a scheduled balance at maturity of approximately $3,950,000. Proceeds from that loan were used to repay $2.9 million of short-term debt and to pay off a mortgage loan balance of $1.08 million on one of the Trust's office properties. For 2001, interest expense related to properties wholly owned by the Trust and its subsidiaries, including the short-term loan referred to above, averaged 7.64% on average outstanding balances of $24.6 million. For 2000, the overall effective interest rate was 8.26% on average outstanding loan balances of $25.1 million. For partnership-owned properties, the average effective interest rate for 2001 and 2000 was 8.69% on average outstanding loan balances of $9.6 and $9.7 million, respectively. In January, 2002 the Trust completed a modification of two mortgage loans that had unpaid balances totaling approximately $1.4 million at December 31, 2001. Both loans, from the same lender, provided for interest at 8.875% until maturity in June, 2003. As modified, the loans provide for interest at 7.625% and will mature in June, 2008. State income taxes decreased by approximately $26,000 in 2001 because income subject to the Indiana gross income decreased by approximately $2.2 million. Management expects that state income taxes in 2002 will be further reduced since more of the gross receipts from rental operations that would be taxable if received by the Trust will not by taxable when received by Century Realty Properties, L.P. General and administrative expenses, which included approximately $26,000 related to the formation of Century Realty Properties, L.P., amounted to 4.5% of income from real estate operations in 2001, compared with 4.3% in 2000. Employee compensation costs, including payroll taxes and benefits, that are included in administrative expenses amounted to $262,500 in 2001, up 4.5% from $251,300 in 2000. RESULTS OF OPERATIONS -- 2000 The Trust experienced increases of approximately .6% in income and 1.9% in expenses, other than depreciation, related to its apartment operations in 2000. The commercial and restaurant properties experienced a decrease in gross income and a slight decrease in operating expenses in 2000 compared to the previous year. The increase in gross income from apartment properties resulted from the combined effect of 1.9% higher average rental rates and a 1.3% decrease in overall occupancy rates. Apartment occupancy rates decreased from an average of 94.3% in 1999 to 93.2% in 2000. At December 31, 2000 the aggregate occupancy rate for the Trust's apartment properties was 93.5%. At the end of 1999, the overall apartment occupancy was 95%. Real estate operating expenses, including real estate taxes (excluding interest and depreciation) for the apartment properties increased 1.9%. Operating expenses amounted to 50.1% of gross possible income for both 2000 and 1999. Approximately 89% of the increase in operating expenses related to property employee costs which include salaries, payroll taxes and group insurance benefits. Property employee costs in 2000 increased by 7% from 1999. Approximately half of the increase resulted from adding employees to perform certain maintenance, painting and janitorial services previously provided by outside contractors. The remainder of the increase represented increased compensation rates and health insurance costs. Employee costs, as a percent of gross possible income, increased from 11.6% in 1999 to 12.3% in 2000, the combined costs for maintenance and repairs, painting and decorating and building services declined from 10.3% in 1999 to 10% in 2000. Nonresidential properties, which accounted for 5.7% of total income from operations in 2000, and 6% in 1999, experienced a 4.7% decrease in gross income. The decrease resulted primarily from lower occupancy rates in 2000. The two office properties that, in the aggregate, contain 51,000 square feet were the Trust's most efficient commercial property investments in 2000, both as to occupancy rate and expense ratio. Together, they averaged 95% occupancy during 2000, which resulted in a 1.8% increase in rental income. Low turnover of tenants during the year resulted in a decrease in operating expenses to 28.4% of gross income in 2000 from 31.6% in 1999. During 2000, 41% of interest income was earned at money market rates on sweep account demand deposit funds and 41% was earned at savings account rates on restricted cash balances. The balance was received from a property management firm formerly employed by the Trust whose services were terminated in 1999. Restricted cash balances consist of tax and insurance escrow deposits and replacement fund balances held by mortgage lenders, and tenant security deposit savings accounts. In 2000, the Trust earned a 5.06% average rate of return on an average total amount of cash and short-term investments of $793,000, exclusive of the restricted cash accounts over which the Trust does not have investment discretion. In 1999, 33% of the interest income earned by the Trust was derived from the day to day investment of excess cash deposits at money market rates of return that averaged 3.9% on an average daily balance of $655,000. The reduction in interest expense from the prior year includes approximately $55,000 that resulted from the scheduled conversion, effective in the second quarter of 2000, of a $5,075,000 mortgage loan balance from a fixed rate of interest to a variable rate. The balance of the reduction resulted from the scheduled debt service payments. In December, 2000, a mortgage loan with a balance of $3.4 million matured and was paid with a combination of cash on hand and a short-term bank loan against the Trust's line of credit. The interest cost incurred in 2000 on the short-term loan was comparable to the amount that would have been incurred had the mortgage loan not matured. For 2000, interest expense related to Trust-owned properties, including the short-term loan referred to above, averaged 8.26% on average outstanding balances of $25.1 million. For 1999, the overall effective interest rate was 8.27% on average outstanding mortgage loan balances of $25.6 million. For partnership-owned properties, the average effective interest rate for 2000 and 1999 was 8.69% on average outstanding loan balances of $9.7 and $9.8 million, respectively. General and administrative expenses amounted to 4.2% of income from real estate operations in 2000, compared with 4.5% in 1999. Employee compensation costs, which includes payroll taxes and benefits, that are included in administrative expenses amounted to $251,300 in 2000, up .6% from $249,700 in 1999. LIQUIDITY AND SOURCES OF CAPITAL On January 3, 2002, the Trust declared a $.14 per share cash distribution payable February 18, 2002 to holders of record on January 25, 2002 on its 1,751,711 outstanding shares of beneficial interest. The cash requirement for that distribution amounts to $245,240. Two of the five partnerships declared surplus cash distributions aggregating $18,200 payable February 27, 2002, including $4,300 payable to minority interest partners of record January 25, 2002. Other than the cash required to pay declared distributions, management is not aware of any significant transactions or events which will require material expenditures in 2002. The Trust has no other obligations, nor has it made any commitments, which would require expenditures in excess of funds expected to be provided by operations during 2002. At December 31, 2001, the Trust and its controlled partnerships had $1,316,000 in cash, including $271,400 in partnership accounts, which management believes is sufficient to meet anticipated capital requirements. Management expects to continue to operate the Trust as a real estate investment trust, and to distribute to shareholders all of its otherwise taxable income. At December 31, 2001, the Trust had no undistributed earnings and profits. Distributions to shareholders during 2001, which totaled $1,269,000, included all of the Trust's taxable income and earnings and profits for 2001 plus $241,800 that was designated as return of capital. During 2000, the Trust distributed $1,408,000, of which $209,000 was designated as return of capital. The aggregate surplus cash distributed to the minority interest partners by the controlled partnerships totaled $20,400 and $65,000 during 2001 and 2000, respectively. Due to differences in depreciation rates and carrying values of some properties, reported income for 2001 was 19% lower; for 2000, 5% lower; and, for 1999 14% lower, than income for income tax purposes. MARKET RISK The Trust does not believe it is subject to market risk. IMPACT OF INFLATION Inflation has not had a significant impact on the Trust during 2001, 2000 and 1999. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements, which are included on pages 7 through 15 of the annual shareholders report for the year ended December 31, 2001, are included as exhibits under Item 14. Unaudited summarized consolidated quarterly financial data for the year ended December 31, 2001 is as follows: Three Months Ended ______________________________________________ March 31 June 30 September 30 December 31 _______________________________________________________________________________ Rental and other operating income $3,275,174 $3,263,857 $3,249,806 $3,227,828 Income before minority interest in operating partnerships 188,504 186,307 52,817 278,313 Net income 204,038 210,446 69,029 265,079 Earnings per share: Basic $ 0.12 $ 0.12 $ 0.04 $ 0.15 Diluted $ 0.12 $ 0.12 $ 0.04 $ 0.15 Unaudited summarized consolidated quarterly financial data for the year ended December 31, 2000 is as follows: Three Months Ended ______________________________________________ March 31 June 30 September 30 December 31 _______________________________________________________________________________ Rental and other operating income $3,290,500 $3,362,799 $3,356,508 $3,284,258 Income before minority interest in operating partnerships 278,307 335,798 278,162 240,313 Net income 263,880 302,780 275,375 268,140 Earnings per share: Basic $ 0.15 $ 0.18 $ 0.16 $ 0.16 Diluted $ 0.15 $ 0.18 $ 0.16 $ 0.16 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE No change of accountants or reported disagreements have occurred which are to be disclosed hereunder. ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information relative to members of the Board of Trustees and nominee(s) for election to the Board of Trustees, which is included on pages 2 through 6 of the proxy statement for the annual meeting of shareholders to be held May 1 2002, is incorporated herein by reference. The proxy statement will be filed with the Commission pursuant to Regulation 14A within 120 days after December 31, 2001. The Trust has no executive officers other than those individuals presently serving as Trustees. ITEM 11. EXECUTIVE COMPENSATION Information relative to management remuneration and transactions is included on page 5 of the proxy statement for the annual meeting of shareholders to be held May 1 2002, and is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information relative to security ownership of certain beneficial owners and management is included on pages 2 through 6 of the proxy statement for the annual meeting of shareholders to be held May 1, 2002, and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS There were no relationships or transactions, as defined under this item, nor are any contemplated, to be disclosed hereunder. ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a)(1) and (2) The response to this portion of Item 14 is submitted as a separate section of this report. (3) Listing of Exhibits: Exhibit 13-Annual report to shareholders (b) Reports on Form 8-K No reports on Form 8-K were filed by the Registrant during the last quarter of the period covered by this report. (c) Exhibits Response to this portion of Item 14 is submitted as an attachment to this report. (d) Financial Statement Schedules The response to this portion of Item 14 is submitted as a separate section of this report. 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 be signed on its behalf by the undersigned, thereunto duly authorized. CENTURY REALTY TRUST Date: 3/25/02 By: S/ JOHN I. BRADSHAW, JR. President and Trustee 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: 3/22/02 S/ DAVID F. WHITE Controller Date: 3/27/02 S/ FRANCIS M. HAPAK Trustee, Chairman of the Board Date: 3/25/02 S/ JOHN W. ADAMS Trustee Date: 3/27/02 S/JOHN J. DILLON Trustee Date: 3/26/02 S/ MARVIN L. HACKMAN Trustee Date: 3/27/02 S/ JOHN A. WALLACE Trustee Date: 3/26/02 S/MURRAY R. WISE Trustee ITEM 14(A)(1) AND (2). LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES The following consolidated financial statements of Century Realty Trust and subsidiaries are included herein and in the annual report of the Registrant to its shareholders for the year ended December 31, 2001: Consolidated balance sheets - December 31, 2001 and 2000 Consolidated statements of income - Years ended December 31, 2001, 2000 and 1999 Consolidated statements of shareholders' equity - Years ended December 31, 2001, 2000 and 1999 Consolidated statements of cash flows - Years ended December 31, 2001, 2000 and 1999 Notes to consolidated financial statements The following financial statement schedule of Century Realty Trust and Subsidiaries is included in Item 14(d): Schedule III - Real estate and accumulated depreciation All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted. CONSENT OF INDEPENDENT AUDITORS Board of Trustees Century Realty Trust We consent to the incorporation by reference in this Annual Report (Form 10-K) of Century Realty Trust of our report dated February 15, 2002, included in the 2001 Annual Report to Shareholders of Century Realty Trust. Our audits also included the financial statement schedule of Century Realty Trust listed in Item 14(a). This schedule is the responsibility of the Trust's management. Our responsibility is to express an opinion based on our audits. In our opinion, the financial statement schedule, referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. S/ ERNST & YOUNG LLP Indianapolis, Indiana March 26, 2002 Century Realty Trust and Subsidiaries Consolidated Balance Sheets December 31 2001 2000 ___________ ___________ Assets Real estate investments: Land $3,776,383 $3,776,383 Buildings 52,792,086 52,231,244 Equipment 1,357,386 1,301,796 Allowances for depreciation (14,623,791) (13,011,130) ___________ ___________ 43,302,064 44,298,293 Net investment in direct financing leases 191,947 229,698 ___________ ___________ 43,494,011 44,527,991 Cash and cash equivalents 1,316,299 781,215 Restricted cash 1,412,694 1,295,266 Accounts and accrued interest receivable 209,914 130,998 Unamortized management contracts 384,791 449,826 Unamortized mortgage costs 487,082 441,906 Undeveloped land 99,675 99,675 Other assets 151,486 94,259 ___________ ___________ $47,555,952 $47,821,136 ___________ ___________ ___________ ___________ Liabilities and shareholders' equity Liabilities: Short-term debt $92,406 $3,000,000 Mortgage notes payable 34,389,954 31,013,235 Accounts payable and accrued liabilities 244,088 426,647 Accrued Interest 214,811 251,817 Accrued State income and property taxes 1,422,088 1,391,927 Tenants' security deposits and unearned rent 571,123 503,952 ___________ ___________ 36,934,470 36,587,578 Minority interest in operating partnerships 802,403 1,149,187 Shareholders' equity: Shares of Beneficial Interest, no par value - authorized 5,000,000 shares, issued - 1,768,249 shares in 2001 and 1,743,243 in 2000, including 19,207 shares in 2001 and 16,806 shares in 2000, in treasury 9,327,102 9,043,334 Undistributed(overdistributed)income other than from gain on the sale of real estate (625,709) (104,950) Undistributed net realized gain from the sale of real estate 1,316,078 1,316,078 Cost of treasury shares (198,392) (170,091) ___________ ___________ 9,819,079 10,084,371 ___________ ___________ $47,555,952 $47,821,136 ___________ ___________ ___________ ___________ See accompanying notes. Century Realty Trust and Subsidiaries Consolidated Statements of Income Year ended December 31 2001 2000 1999 __________ __________ __________ Income: Real estate operations: Rental Income $12,652,983 $12,859,735 $12,854,221 Income from direct financing leases 28,344 33,142 37,331 Other income 287,892 300,130 258,292 __________ __________ __________ 12,969,219 13,193,007 13,149,844 Less: Real estate operating expenses 5,722,545 5,457,880 5,337,115 Depreciation 1,810,144 1,781,461 1,800,474 Real estate taxes 1,361,841 1,303,226 1,233,153 __________ __________ __________ 8,894,530 8,542,567 8,370,742 __________ __________ __________ 4,074,689 4,650,440 4,779,102 Interest income 47,446 101,058 77,443 __________ __________ __________ 4,122,135 4,751,498 4,856,545 Expenses: Interest 2,744,801 2,953,433 3,070,700 State income taxes 87,216 113,181 119,934 General and administrative expenses 584,177 552,304 594,634 __________ __________ __________ 3,416,194 3,618,918 3,785,268 __________ __________ __________ Income before minority interest in operating partnerships 705,941 1,132,580 1,071,277 Minority interest in operating partnerships 42,651 (22,405) (137,722) __________ __________ __________ Net income $748,592 $1,110,175 $933,555 __________ __________ __________ __________ __________ __________ Earnings per share: Basic earnings per share $0.43 $0.65 $0.60 Diluted earnings per share $0.43 $0.65 $0.60 See accompanying notes. Century Realty Trust and Subsidiaries Consolidated Statements of Shareholders' Equity Undistributed (Overdistributed) Undistributed Income Other Net Outstanding Than From Realized Shares of Shares of Gain on Gain from Cost of Benefical Benefical Sale of Sale of Treasury Interest Interest Real Estate Real Estate Shares Total _________ __________ __________ __________ __________ __________ Balance at January 1, 1999 1,547,314 6,758,619 496,940 1,316,078 (42,518) 8,529,119 Net income for 1999 - - 933,555 - - 933,555 Dividends ($.80 per share) - - (1,237,911) - - (1,237,911) Stock options exercised 300 798 - - 2,052 2,850 _________ __________ __________ __________ __________ __________ Balance at December 31, 1999 1,547,614 6,759,417 192,584 1,316,078 (40,466) 8,227,613 Shares issued 189,715 2,283,917 - - - 2,283,917 Shares purchased for treasury (10,892) (129,625) (129,625) Net income for 2000 - - 1,110,175 - - 1,110,175 Dividends ($.82 per share) - - (1,407,709) - - (1,407,709) _________ __________ __________ __________ __________ __________ Balance at December 31, 2000 1,726,437 $9,043,334 ($104,950) $1,316,078 ($170,091)$10,084,371 Shares issued 25,006 283,703 - - - 283,703 Shares purchased for treasury (2,901) (33,361) (33,361) Stock options exercised 500 65 - - 5,060 5,125 Net income for 2001 - - 748,592 - - 748,592 Dividends ($.73 per share) - - (1,269,351) - - (1,269,351 _________ __________ __________ __________ __________ __________ Balance at December 31, 2001 1,749,042 $9,327,102 ($625,709) $1,316,078 ($198,392) $9,819,079 _________ __________ __________ __________ __________ __________ _________ __________ __________ __________ __________ __________ See accompanying notes.
Century Realty Trust and Subsidiaries Consolidated Statements of Cash Flows Year ended December 31 2001 2000 1999 __________ __________ __________ Operating Activities Net income $748,592 $1,110,175 $933,555 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,865,684 1,830,216 1,849,791 Minority interest (42,651) 22,405 137,722 Changes in operating assets and liabilities: Restricted cash 8,295 (37,561) (205,701) Accounts and accrued income receivable (77,863) 303,585 39,495 Other assets (96,752) 10,810 (17,620) Accounts payable and accrued liabilities (90,918) (110,258) 15,947 Tenants' security deposits and unearned rent 67,171 18,399 (42,089) __________ __________ __________ Net cash provided by operations 2,381,558 3,147,771 2,711,100 Investing Activities: Purchase of property and improvements (740,030) (530,969) (602,152) Lease principal payments received 37,752 32,953 31,732 __________ __________ __________ Net cash used in investing activities (702,278) (498,016) (570,420) Financing Activities: Net short-term bank borrowings (repayments) (2,907,594) 2,900,000 - Net proceeds from mortgage notes payable 4,788,590 - - Principal payments on mortgage notes payable (1,623,281) (4,058,179) (595,994) Shares purchased for treasury (33,361) (129,625) - Sale of treasury shares 5,125 - 2,850 Distributions to minority interest (20,427) (64,999) (182,947) Dividends paid to shareholders (1,353,248) (1,399,467) (1,225,760) __________ __________ __________ Net cash used in financing activities (1,144,196) (2,752,270) (2,001,851) __________ __________ __________ Net increase (decrease) in cash and cash equivalents 535,084 (102,515) 138,829 Cash and cash equivalents at beginning of year 781,215 883,730 744,901 __________ __________ __________ Cash and cash equivalents at end of year $1,316,299 $781,215 $883,730 __________ __________ __________ __________ __________ __________ Supplemental Data: Selected noncash activities related to investing and financing activities were as follows: Issued 26,006 shares of beneficial interest in 2001 and 189,715 shares of beneficial interest in 2000 in exchange for operating partnership units (See Note 3) $283,703 $2,283,917 - See accompanying notes. Century Realty Trust Notes to Consolidated Financial Statements December 31, 2001 1. Significant Accounting Policies Organization and Management Agreements: Century Realty Trust (the Trust) commenced operations under a Plan of Reorganization as of January 1, 1973, as the successor in interest to American National Trust and Republic National Trust. CRT Investments, Inc. was formed as a wholly owned subsidiary in 2001. Century Realty Properties, L.P., an Indiana limited partnership, was formed in 2001, with Century Realty Trust as its manager and sole general partner and CRT Investments, Inc. as its sole limited partner. During 2001, the Trust conveyed substantially all of its investment properties to Century Realty Properties, L.P. Charter Oaks Associates, LLC and CR Management, Inc. were formed as wholly-owned subsidiaries in 1997. CR Management, Inc. is the manager and sole general partner of five partnerships (Porter Portfolio), each of which owns one apartment property as its principal asset. As the sole general partner and pursuant to each partnership agreement, the Trust has full, exclusive and complete responsibility and discretion in the management and control of each of these five partnerships. Control is demonstrated by the ability of the general partner to manage day-to-day operations, refinance debt and sell the assets of the partnerships without the consent of the limited partners and the inability of the limited partners to replace the general partner. Interests held by limited partners other than the Trust in the five real estate partnerships are reflected as minority interests in operating partnerships. Charter Oaks Associates, LLC holds title to the Charter Oaks apartments in Evansville, Indiana, which the Trust purchased in 1997. The residential rental properties owned and controlled by the Trust are managed under agreements with independent property management firms. The agreements provide for management fees based generally on gross rental collections. Principles of Consolidation: The accompanying consolidated financial statements include the accounts of the Trust, and its wholly-owned and controlled subsidiaries, including the five operating partnerships controlled by CR Management, Inc. All significant intercompany balances and transactions have been eliminated in consolidation. Revenue Recognition: The revenue of the Trust primarily consists of rental income associated with short-term leases from apartments with terms generally of one year or less. Rental income is recognized when earned. Cash and Cash Equivalents: Cash and cash equivalents include cash and short-term investments with original maturities of less than 30 days. Restricted Cash: Restricted cash includes security deposit savings accounts, capital and completion replacement reserves, and real estate tax and insurance escrow accounts held by lenders. Unamortized Management Contracts: Unamortized management contracts represent the allocation of the purchase price related to the Porter Portfolio acquisition identifiable with obtaining management of those properties (See Note 3). Amortization is computed by the straight-line method for a 10 year period which is the number of years the limited partners in the five controlled partnerships have to exchange their operating partnership units (O.P. units) into shares of beneficial interest of the Trust. The cumulative amortization was $265,559 and $200,524 at December 31, 2001 and 2000, respectively. Unamortized Mortgage Costs: Unamortized mortgage costs represent costs incurred to acquire long-term financing. Amortization is computed by the straight-line method based on the terms of the loans which approximates the effective interest method. The cumulative amortization was $250,531 and $208,306 at December 31, 2001 and 2000, respectively. Real Estate Investments: Real estate investments are stated on the basis of cost, except for real estate investments transferred from the predecessor trusts which are stated at appraised values as of January 1, 1973. Depreciation is computed by the straight-line method based on estimated economic lives ranging from 29 to 40 years for buildings and 3 to 15 years for equipment. Treasury Shares: Treasury shares are carried at cost and shares reissued are removed based on average cost. The difference between proceeds received on reissuance and the average cost is credited or charged to Shares of beneficial interest. Income Taxes: The Trust intends to continue to qualify as a real estate investment trust as defined in the Internal Revenue Code and will distribute the majority of its taxable income. Realized gains on the sale of investments are distributed to shareholders if and when recognized for income tax purposes. Assuming compliance with other requirements of the Code, income so distributed will not be taxable to the Trust. Accordingly, no provision for federal income taxes is made in the consolidated financial statements. For income tax purposes, distributions paid to shareholders consist of ordinary income, capital gains, return of capital or a combination thereof. Earnings and profits, which determine the taxability of dividends to shareholders, differ from reported net income due to differences for tax purposes in the estimated useful lives used to compute depreciation and the carrying values of the depreciable properties. No provision has been made for income taxes or related credits of the operating partnerships, as the results of operations are includable in the tax returns of the partners. Net Income per Share: Net income per share is computed in accordance with Statement of Financial Accounting Standards No. 128. New Accounting Pronouncements: The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 141 and No. 142, Business Combinations and Goodwill and Other Intangible Assets which address accounting and reporting for business combinations and the impairment of Goodwill and Other Intangible Assets effective for fiscal years beginning after December 15, 2001. The Trust adopted FAS 141 and 142 as of January 1, 2002 and does not expect that either will have a significant impact on the Trust's financial position and results of operations. The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 144, which addresses accounting and reporting for the impairment or disposal of long-lived assets effective for fiscal years beginning after December 15, 2001. The Trust adopted FAS 144 as of January 1, 2002 and does not expect that it will have a significant impact on the Trust's financial position and results of operations. Use of Estimates: The preparation of financial statements requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. 2. Real Estate Investments Real estate investments consist principally of apartments and commercial properties in Indiana. In connection with these properties, the Trust is principally a lessor using short-term operating leases except for two restaurant properties which it leases to the operators using long-term agreements expiring in 2004. In addition to specified minimum payments, the restaurant leases provide for contingent rentals based upon percentage of gross receipts derived by the lessees. The Trust has no obligation to grant purchase options to the lessees. The Trust's net investment in direct financing leases consists of: 2001 2000 ------------ ------------ Minimum lease payments receivable $192,778 $258,873 Estimated unguaranteed residual values 47,419 47,419 Unearned income (48,250) (76,594) ------------ ------------ Net investment $191,947 $229,698 ------------ ------------ ------------ ------------ At December 31, 2001 future minimum lease payments receivable from direct financing leases are $66,095 for 2002 and 2003, and $60,587 for 2004. Also, at December 31, 2001, future minimum annual lease payments due from noncancelable operating leases are $69,099 for 2002 and 2003, and $17,329 for 2004. 3. Real Estate Investment Transactions In 1997, the Trust, through its wholly-owned subsidiary, CR Management, Inc., acquired from a single unrelated seller, the general partner interest in five limited partnerships (the "Porter Portfolio") each of which owned a single apartment property as its principal asset. The acquisition resulted in creating five new partnerships that issued, in the aggregate, 286,908 O.P. units to the selling partnerships for their contribution of net assets to the newly formed partnerships. At the date of acquisition, the market value of the Trust's shares of beneficial interest was $11.625 per share. The acquisition agreement provided that the Trust would use its best efforts to grant to each beneficial owner of O.P. units, commencing two years after closing, the right to exchange those units on a one for one basis for shares of beneficial interest of the Trust. Such exchange rights were granted in December, 1999, effective January 1, 2000 and on the first day of each quarter thereafter, and will exist until November 27, 2007, at which time the Trust may, at its option, require the exchange of any remaining outstanding O.P. units. Through December 31, 2001, holders of 214,721 O.P. units elected to exchange their units for shares of beneficial interest. The Trust repurchased 13,793 of those shares, for a total cost of $162,986 from residents of certain states with which the Trust elected not to register its shares. As a result of the exchanges, the Trust owned 75.2% of the limited partnership interests in the Porter Portfolio partnerships at December 31, 2001. Due to the level of control that the Trust has over the activities and operations of each of the partnerships included in the Porter Portfolio, the financial position and results of operations of those partnerships are included in the consolidated financial statements as the minority interest in operating partnerships. 4. Short-term Debt The Trust maintains a line of credit which is renewed annually, and at December 31, 2001, the maximum borrowing limit was $3,000,000. As of December 31, 2001 and 2000, the Trust had borrowed $92,406 and $3,000,000, respectively. The Trust repaid $2,900,000 in August, 2001 with proceeds from a long-term mortgage loan on one of its apartment properties. The line of credit rate of interest was 4.75% and 9.5% and at December 31, 2001 and 2000, respectively. At December 31, 2001 and 2000, approximately $312,000 and $273,000, respectively, in bank deposit accounts represent collateral for the short-term debt. 5. Mortgage Notes Payable Mortgage notes applicable to properties wholly owned by the Trust and by Century Realty Properties, L.P. are payable in monthly installments, including interest at rates ranging from 4.53% to 8.5% per annum, and mature from October 3, 2004 to February 1, 2012. At December 31, 2001 and 2000, mortgage notes payable by the Trust amounted to $24,867,919 and $21,368,039, respectively. The aggregate amount of long-term debt maturities for each of the five years after December 31, 2001 are: 2002, $475,514; 2003, $504,679; 2004, $1,253,869; 2005, $5,125,099; 2006, $5,808,444 and thereafter, $11,700,314. Mortgage notes applicable to properties included in the Porter Portfolio controlled by the Trust are payable in monthly installments, including interest at rates ranging from 8.125% to 8.875% per annum, and mature from June 1, 2006 to May 1, 2030. At December 31, 2001 and 2000, mortgage notes payable by partnerships controlled by the Trust amounted to $9,522,035 and $9,645,196, respectively. The aggregate amount of long-term debt maturities for each of the five years after December 31, 2001 are: 2002, $108,914; 2003, $113,355; 2004, $123,327; 2005, $134,180; 2006, $2,549,342 and thereafter $6,492,917. Cash paid for interest was $2,781,807, $2,965,411, and $3,071,684 for years ended December 31, 2001, 2000, and 1999, respectively. At December 31, 2001, approximately $26,618,222 of the owned real estate investments, and $12,563,000 of controlled real estate investments, after allowances for depreciation, represent collateral for the mortgage notes payable. 6. Shareholder Rights Plan In 1989, the Board of Trustees adopted a Shareholder Rights Plan and distributed as a dividend one purchase right (a "Right") for each outstanding share of beneficial interest. At December 31, 2001 there were 1,749,042 Rights outstanding. Each Right entitles the holder to purchase from the Trust one share of beneficial interest at a price of $20 per share, subject to certain antidilution adjustments. The Rights are not exercisable or transferable apart from the shares until certain events occur relating to the acquisition of shares of the Trust as defined in the Plan. The Rights may be redeemed by the Board of Trustees at a redemption price of $.01 per Right until certain events relating to the acquisition of shares of the Trust as defined by the Plan occur. The Rights will expire December 31, 2004, unless the date is extended or the Rights are exercised by the holder or redeemed by the Trust before that date. Until exercised, the holder of the Rights, as such, will have no rights as a shareholder of the Trust, including, without limitation, the right to vote as a shareholder or receive dividends. 7. Stock Options In 1996, the Board of Trustees granted to a newly-elected trustee, an option to purchase up to 5,000 shares of beneficial interest exercisable on or before April 30, 1999, at a price of $9.50 per share, the fair market value at the date of the grant. Options for 700 shares and 300 shares were exercised in 1997 and 1999, respectively. The option for the remaining 4,000 shares granted in 1996 expired unexercised on April 30, 1999. Upon expiration of that option, the Board of Trustees granted the same trustee a new option to purchase 4,000 shares exercisable on or before April 30, 2002, at a price of $12.375, the fair market value at the date of the grant. In May, 2000, the Board of Trustees granted to each of three newly elected Trustees, an option to purchase up to 5,000 shares of beneficial interest exercisable on or before April 30, 2003, a price of $10.25 per share, the fair market value at the date of grant. Options for 500 shares were exercised in February, 2001. Except for the 500 shares purchased in Febrary, 2001, the options granted in 1999 and 2000 were unexercised at December 31, 2001. 8. Fair Values of Financial Instruments The following methods and assumptions were used by the Trust in estimating its fair value disclosures for financial instruments: Cash, Cash Equivalents and Restricted Cash: The carrying amount reported in the balance sheet for cash and cash equivalents approximates fair value. Short-term Debt and Mortgage Notes Payable: The fair values of the Trust's mortgage notes payable are estimated using discounted cash flow analyses, based on the Trust's current incremental borrowing rates for similar types of borrowing arrangements. The carrying amounts and fair values of the Trust's financial instruments are as follows: December 31, 2001 Carrying Amount Fair Value ---------------- --------------- Cash and cash equivalents $ 1,316,299 $ 1,316,000 Restricted cash 1,412,694 1,412,000 Short-term debt 92,406 92,000 Mortgage notes payable 34,389,954 35,700,000 December 31, 2000 Carrying Amount Fair Value ---------------- -------------- Cash and cash equivalents $ 781,215 $ 781,000 Restricted cash 1,295,266 1,295,000 Short-term debt 3,000,000 3,000,000 Mortgage notes payable 31,013,235 31,210,000 9. Earnings Per Share A reconciliation of the numerator and denominator of the earnings per share computation is as follows: 2001 2000 1999 ---------- ---------- ---------- Numerator (net income): Numerator for basic and diluted earnings per share $ 748,595 $1,110,175 $ 933,555 ---------- ---------- ---------- ---------- ---------- ---------- Denominator: Denominator for basic earnings per share-weighted average shares 1,739,882 1,716,560 1,547,516 Effect of dilutive securities: Stock options 1,553 807 341 ---------- ---------- ---------- Denominator for diluted earnings per share-adjusted weighted average shares and assumed conversions 1,741,435 1,717,367 1,547,857 ---------- ---------- ---------- ---------- ---------- ---------- Basic earnings per share $ .43 $ .65 $ .60 ---------- ---------- ---------- ---------- ---------- ---------- Diluted earnings per share $ .43 $ .65 $ .60 ---------- ---------- ---------- ---------- ---------- ---------- Shareholder rights have not been included in the earnings per share calculation because they would be anti-dilutive at December 31, 2001, 2000 and 1999. Report of Independent Auditors Board of Trustees Century Realty Trust We have audited the accompanying consolidated balance sheets of Century Realty Trust and Subsidiaries (the "Trust") as of December 31, 2001 and 2000, and the related consolidated statements of income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 2001. These financial statements are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the 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, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Century Realty Trust and Subsidiaries at December 31, 2001 and 2000, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States. ERNST & YOUNG LLP February 15, 2002 Indianapolis, IN SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION CENTURY REALTY TRUST December 31, 2001 Col. B Col. C Col. D Cost Capitalized Initial Cost to Company Subsequent to Acquision ___________________________________ _______________________ Buildings and Carrying Description Encumbrances Land Improvements Improvements Costs ______________________________________________________________________________________________________ Garden apartments (no. of units): Chester Heights (110), Richmond, IN First mortg $56,700 $852,500 $359,488 $ - Park Forest (64), Marion, IN First mortg 57,800 517,200 582,848 - Fontenelle (176), Kokomo, IN None 128,000 1,622,000 1,401,398 - Park Plaza I (88), Indianapolis, IN None 37,655 693,295 393,277 - Park Plaza II (96), Indianapolis, IN None 47,345 871,705 - Driftwood Park (48), Indianapolis, IN First mortg 117,000 1,168,308 214,413 - Regency Royale (132), Mishawaka, IN First mortg 125,000 3,638,499 166,072 - Creek Bay (208), Indianapolis, IN First mortg 340,940 7,101,480 159,906 - Eagle Creek Park (188), Indianapolis, IN First mortg 378,000 5,679,172 448,673 - Fox Run (256), Indianapolis, IN First mortg 398,000 6,446,469 354,713 - Charter Oaks (192), Evansville, IN First mortg 241,500 4,851,716 174,175 - Barcelona (64), Kokomo, IN First mortg 59,200 1,350,384 110,815 - Beech Grove (182), Jeffersonville, IN First mortg 469,000 3,612,360 173,896 - Hampton Court (92), Indianapolis, IN First mortg 225,600 1,481,900 59,571 - Sheffield Square (152), New Albany, IN First mortg 227,000 4,020,424 106,357 - West Wind Terrace (96), Indianapolis, IN First mortg 136,700 1,610,241 82,217 - Commercial (square feet): - Office/Warehouse (38,000), Carmel, IN First mortg 54,000 446,075 158,411 - Office (17,000), Indianapolis, IN None 71,500 457,818 65,718 - Office (34,000), Indianapolis, IN None 348,725 1,184,344 126,967 - Net leased restaurants (square feet): - Miami Subs (3,500), Longwood, FL None 113,479 54,026 --- - Fortune House (5,000), Indianapolis, IN None 136,494 --- --- - ______________________________________________ 3,769,638 47,659,916 5,138,915 - Construction in progress - various locations --- --- --- - ______________________________________________ 3,769,638 47,659,916 5,138,915 - Equipment--various locations None --- 492,266 865,120 - ______________________________________________ TOTAL REAL ESTATE INVESTMENTS $3,769,638 $48,152,182 $6,004,035 $ - ______________________________________________ ______________________________________________ Undeveloped land - various locations None $99,675 $ --- $ --- $ - ______________________________________________ ______________________________________________ Col. E Col. F Col. G Col. H Col.I Gross Amount at Which Carried at Close of Period Life on Which ______________________________ Depreciation in Buildings Latest Income and Accumulated Date of Date Statements Description Land Improvements Total Depreciation Construction Acquired Is Computed _________________________________________________________________________________________________________________________ Garden apartments (no. of units): Chester Heights (110), Richmond, IN $63,445 $1,205,243 $1,268,688 $992,961 1965 01/73 31 years Park Forest (64), Marion, IN 57,800 1,100,048 1,157,848 880,167 1962 01/73 31 years Fontenelle (176), Kokomo, IN 128,000 3,023,398 3,151,398 2,416,808 1966 01/73 29 years Park Plaza I (88), Indianapolis, IN 37,655 1,086,572 1,124,227 802,647 1965 01/73 33 years Park Plaza II (96), Indianapolis, IN 47,345 871,705 919,050 758,382 1967 01/73 33 years Driftwood Park (48), Indianapolis, IN 117,000 1,382,721 1,499,721 591,180 1963 09/89 28 years Regency Royale (132), Mishawaka, IN 125,000 3,804,571 3,929,571 835,317 1983 06/93 40 years Creek Bay (208), Indianapolis, IN 340,940 7,261,386 7,602,326 1,472,702 1992 12/93 40 years Eagle Creek Park (188), Indianapolis, IN 378,000 6,127,845 6,505,845 1,257,623 1974 03/94 40 years Fox Run (256), Indianapolis, IN 398,000 6,801,182 7,199,182 1,184,821 1974 03/95 40 years Charter Oaks (192), Evansville, IN 241,500 5,025,891 5,267,391 569,782 1984 06/97 40 years Barcelona (64), Kokomo, IN 59,200 1,461,199 1,520,399 157,314 1971 11/97 33 years Beech Grove (182), Jeffersonville, IN 469,000 3,786,256 4,255,256 391,416 1973 11/97 33 years Hampton Court (92), Indianapolis, IN 225,600 1,541,471 1,767,071 158,432 1980 11/97 33 years Sheffield Square (152), New Albany, IN 227,000 4,126,781 4,353,781 430,617 1974 11/97 33 years West Wind Terrace (96), Indianapo1is, IN 36,700 1,692,458 1,829,158 176,147 1967 11/97 33 years Commercial (square feet): Office/Warehouse (38,000), Carmel, IN 54,000 604,486 658,486 401,143 1972 10/77 33 years Office (17,000), Indianapolis, IN 71,500 523,536 595,036 233,744 1966 7/86 33 years Office (34,000), Indianapolis, IN 348,725 1,311,311 1,660,036 157,259 1975 5/97 40 years Net leased restaurants (square feet): Miami Subs (3,500), Longwood, FL 113,479 54,026 167,505 17,691 1978 1/79 10 years Fortune House (5,000), Indianapolis, IN 136,494 --- 136,494 --- 1979 11/79 N/A _______________________________________________ 3,776,383 52,792,086 56,568,469 13,886,153 Construction in progress - various locations --- --- --- --- N/A _______________________________________________ 3,776,383 52,792,086 56,568,469 13,886,153 Equipment--various locations --- 1,357,386 1,357,386 737,638 Various Various 3-15 years ________________________________________________ TOTAL REAL ESTATE INVESTMENSTS $3,776,383 $54,149,472 $57,925,855(A)$14,623,791(A) ________________________________________________ ________________________________________________ Undeveloped land - various locations $99,675 $ --- $99,675(B) $ --- N/A 1/73 N/A ________________________________________________ ________________________________________________ (A) The aggregate carrying value for tax purposes is $38,510,332 (B) The aggregate carrying value for tax purposes is $72,522 SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION (CONTINUED) CENTURY REALTY TRUST December 31, 2001 Total Land, Buildings Buildings and and Accumulated Undeveloped Land Improvements Improvements Equipment Depreciation Land ____________ ____________ ____________ ___________ ____________ _________ Balance December 31, 1998 $3,776,383 $51,642,208 $55,418,591 $1,273,636 $10,166,811 $99,675 Additions: Improvements --- 514,380 514,380 141,799 --- --- Depreciation --- --- --- --- 1,705,249 --- Deductions: Fully amortized costs --- 71,380 71,380 110,601 181,981 --- ____________ ____________ ____________ ___________ ____________ _________ Balance December 31, 1999 $3,776,383 $52,085,208 $55,861,591 $1,304,834 $11,690,079 $99,675 Additions: Improvements --- 369,866 369,866 161,103 --- --- Depreciation --- --- --- --- 1,709,022 --- Deductions: Fully amortized costs --- 223,830 223,830 164,141 387,971 --- ____________ ____________ ____________ ___________ ____________ _________ Balance December 31, 2000 $3,776,383 $52,231,244 $56,007,627 $1,301,796 $13,011,130 $99,675 Additions: Improvements --- 627,448 627,448 112,582 --- --- Depreciation --- --- --- --- 1,736,259 --- Deductions: Fully amortized costs --- 66,606 66,606 56,992 123,598 --- ____________ ____________ ____________ ___________ ____________ _________ Balance December 31, 2001 $3,776,383 $52,792,086 $56,568,469 $1,357,386 $14,623,791 $99,675
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