-----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, HdQI+BE/BnjxRDYfgUAZApwgm6q6EiLzDDvGzMszH33SdAHEae0nzUk7EZsK+etl YPDQFgkuUCATkNho13qKhg== 0000018934-97-000002.txt : 19970417 0000018934-97-000002.hdr.sgml : 19970417 ACCESSION NUMBER: 0000018934-97-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970416 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CV REIT INC CENTRAL INDEX KEY: 0000018934 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 590950354 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08073 FILM NUMBER: 97581813 BUSINESS ADDRESS: STREET 1: 100 CENTURY BLVD CITY: WEST PALM BEACH STATE: FL ZIP: 33417 BUSINESS PHONE: 4076403157 MAIL ADDRESS: STREET 1: 100 CENTURY BOULEVARD CITY: WEST PALM BEACH STATE: FL ZIP: 33417 FORMER COMPANY: FORMER CONFORMED NAME: CENVILL INVESTORS INC DATE OF NAME CHANGE: 19900515 FORMER COMPANY: FORMER CONFORMED NAME: CENVILL COMMUNITIES INC DATE OF NAME CHANGE: 19810812 10-Q 1 FORM 10-Q 3/31/97 1 SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 __________ FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended March 31, 1997 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________ to _______________ Commission File Number: 1-8073 CV REIT, INC. (Exact name of registrant as specified in its charter) Delaware 59-0950354 (State of Incorporation) (I.R.S. Employer Identification No.) 100 Century Boulevard, West Palm Beach, Florida 33417 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 407-640-3155 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered Common stock, par value New York Stock Exchange $.01 per share Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No 2 CV REIT, INC. AND SUBSIDIARIES PART I. Financial Information Item 1. Financial Statements The consolidated financial statements included herein have been prepared by the registrant, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been consolidated or omitted pursuant to such rules and regulations; however, the registrant believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these consolidated financial statements be read in conjunction with the financial statements and the notes thereto included in the registrant's annual report on Form 10-K for the fiscal year ended December 31, 1996. The consolidated financial statements for the interim periods included herein, which are unaudited, include, in the opinion of management, all adjustments (consisting only of normal recurring accruals) necessary to present fairly the financial position and results of operations of the registrant for the periods presented. The results of operations for interim periods should not be considered indicative of results to be expected for the full year. 3 CV REIT, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (dollars in thousands) Mar.31, Dec.31, Assets 1997 1996 ------ -------- -------- Real estate mortgage notes: Long Term Recreation Notes $ 67,134 $ 67,302 Other 17,700 17,506 -------- -------- 84,834 84,808 Real estate acquired by foreclosure (net of allowance for losses of $2,401) 5,451 5,451 Real estate and investments in real estate partnerships, net of accumulated depreciation 13,140 13,243 Cash and cash equivalents (includes $902 and $898 restricted) 6,045 7,564 Short-term investments 6,436 6,436 Other 2,195 1,428 -------- -------- $118,101 $118,930 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Liabilities and other credits: Collateralized Mortgage Obligations $ 34,531 $ 35,064 Accounts payable, accruals and other liabilities 476 599 Dividends payable 2,551 2,552 Deferred income taxes 7,041 7,041 -------- -------- Total liabilities and other credits 44,599 45,256 -------- -------- Stockholders' equity: Common stock, $.01 par-shares authorized 10,000,000; outstanding 7,966,621 80 80 Additional paid-in capital 18,490 18,490 Retained earnings 54,932 55,104 -------- -------- Total stockholders' equity 73,502 73,674 -------- -------- $118,101 $118,930 ======== ======== See accompanying notes to consolidated financial statements. 4 CV REIT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (dollars in thousands, except per share data) Three Months Ended March 31, ------------------- 1997 1996 ------- ------- Revenues: Interest, substantially from mortgage notes $ 2,685 $ 3,000 Rent and income from real estate partnerships 662 290 ------- ------- 3,347 3,290 ------- ------- Expenses: Interest 774 824 Operating, general and administrative 333 307 Depreciation 102 40 ------- ------- 1,209 1,171 ------- ------- 2,138 2,119 Recovery of losses, net - 243 ------- ------- Net income $ 2,138 $ 2,362 ======= ======= Net income per common share $0.27 $0.30 ======= ======= Dividends declared per common share $0.29 $0.27 ======= ======= Average common shares outstanding 7,966,621 7,966,621 ========= ========= See accompanying notes to consolidated financial statements. 5 CV REIT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF RETAINED EARNINGS (in thousands) Balance at December 31, 1996 $55,104 Net income for the three months ended March 31, 1997 2,138 Dividends declared (2,310) ------- Balance at March 31, 1997 $54,932 ======= See accompanying notes to consolidated financial statements. 6 CV REIT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Three Months Ended March 31, ------------------- 1997 1996 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $2,138 $2,362 Adjustment to reconcile net income to net cash provided by operating activities: Depreciation 102 40 Equity in depreciation of real estate partnerships 44 44 Recovery of losses, net - (243) -------- -------- 2,284 2,203 Changes in operating assets and liabilities: Increase in other assets (767) (652) Increase (decrease) in accounts payable, accruals and other liabilities (123) 12 -------- -------- Net cash provided by operating activities 1,394 1,563 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Investments in real estate mortgage notes (5,091) (3,895) Collections on real estate mortgage notes 5,065 5,203 Other (43) (17) -------- -------- Net cash provided by (used in) investing activities (69) 1,291 -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayments of borrowings (533) (486) Cash dividends paid (2,311) (2,152) Increase in restricted cash (4) (3) -------- -------- Net cash used in financing activities (2,848) (2,641) -------- -------- Net increase (decrease) in unrestricted cash and cash equivalents (1,523) 213 Unrestricted cash and cash equivalents at beginning of the period 6,666 6,749 -------- -------- Unrestricted cash and cash equivalents at end of the period $5,143 $6,962 ======== ======== Supplemental disclosure of cash flow information: Cash paid during the period for interest $ 768 $ 827 ======== ======== See accompanying notes to consolidated financial statements. 7 CV REIT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) Real Estate Mortgage Notes (a) Investments in real estate mortgage notes, substantially all of which are collateralized by real estate located in southeast Florida, consist of (in thousands): Mar. 31, Dec. 31, 1997 1996 -------- -------- Long Term Recreation Notes (the "Recreation Notes") (Note 1(b)) $ 67,134 $ 67,302 Hilcoast Development Corp. ("Hilcoast"): (Note 1(c)): Lines of Credit 10,310 10,039 Other 6,233 6,308 First mortgage notes, maturing through 1998, with interest ranging from 8.9% to 11.5%, collateralized primarily by real property in Palm Beach and Broward Counties, Florida 1,157 1,159 -------- -------- Totals $ 84,834 $ 84,808 ======== ======== (b) At March 31, 1997, the Recreation Notes consisted of $25 million due from Hilcoast (the "Hilcoast Recreation Note"), collateralized by a first mortgage on certain real estate within the Century Village at Pembroke Pines, Florida adult condominium project (the "Pembroke Century Village"), including the recreation facilities at that project (the "Pembroke Recreation Facilities") and $42.1 million, collateralized by first mortgages on the recreation facilities at the three previously completed Century Village communities. The Hilcoast Recreation Note bears interest at prime (8.5% at March 31, 1997 plus 3%, but in any event not less than 9% nor more than 11%, and currently requires monthly interest payments only. Upon the earlier to occur of delivery of the last condominium apartment at the Pembroke Century Village or July 31, 1998, the Hilcoast Recreation Note is scheduled to be converted to an 11%, fixed rate, 25 year, $25 million, self-amortizing loan providing for equal monthly payments of principal and interest. This note may not be prepaid by Hilcoast without a prepayment penalty and will be collateralized by a first mortgage on the Pembroke Recreation Facilities. 8 The remaining Recreation Notes principally provide for self- amortizing equal monthly principal and interest payments due through 2012, with interest rates averaging 13%, and contain certain prepayment prohibitions. (c) Hilcoast Lines of Credit to Hilcoast consist of revolving construction loan commitments which as of March 31, 1997 aggregated $10.9 million of which $10.3 million was outstanding on that date. The Lines of Credit are collateralized by real estate within the Pembroke Century Village; bear interest, payable monthly, ranging from prime plus 3% (but in any event not less than 9% nor more than 11%) to 12.5%; mature gradually through July 1998; provide for unused commitment fees ranging from .9% to 1.8% per annum; and, require specific release prices, principally based on sales of condominium apartments at the Pembroke Century Village, to be applied as permanent reductions of amounts available under the Lines of Credit. Other real estate mortgage notes due from Hilcoast amounted to $6.2 million as of March 31, 1997 and includes $5 million payable July 31, 1998, with interest, payable quarterly, at 10%, collateralized by the Pembroke Recreation Facilities. The remaining mortgage note due from Hilcoast matures in December 1997 and bears interest, payable monthly, at prime plus 3% (but in any event not less than 9% nor more than 11%). (2) Real Estate Acquired by Foreclosure Real estate acquired by foreclosure consists of (in thousands): Mar. 31, Dec. 31, 1997 1996 Commercial: -------- -------- Broward County, Florida: Nine acre commercial site in Dania $5,000 $5,000 29 acre commercial site in Miramar 2,595 2,595 ------ ------ Total commercial 7,595 7,595 Residential 257 257 ------ ------ 7,852 7,852 Less allowance for losses (2,401) (2,401) ------ ------ Totals $5,451 $5,451 ====== ====== 9 (3) Real Estate and Investments in Real Estate Partnerships Real estate and investments in real estate partnerships are located in southeast Florida and consist of (in thousands): Mar. 31, Dec. 31, 1997 1996 -------- -------- Century Plaza shopping center $ 7,408 $ 7,402 Days Inn motel 4,058 4,058 Administration Building 962 962 Other 81 81 -------- -------- 12,509 12,503 Less accumulated depreciation (2,527) (2,425) -------- -------- 9,982 10,078 45%-50% investments in self-storage warehouse partnerships 3,158 3,165 -------- -------- Totals $13,140 $13,243 ======== ======== (4) Borrowings The Collateralized Mortgage Obligations ("CMO's") amounted to $34.5 million at March 31, 1997 (net of unamortized discount of $776,000, based on an effective interest rate of 8.84%), are collateralized by the Recreation Notes, excluding the Hilcoast Recreation Note (Note 1(b)), require quarterly self-amortizing principal and interest payments and mature on March 15, 2007. (5) Commitments and Contingencies (a) TGI Development, Inc. ("TGI") On October 9, 1989, TGI filed a complaint in the Circuit Court of Palm Beach County against the Company, H. Irwin Levy and certain unrelated parties alleging misrepresentations by the defendants in connection with TGI's purchase and development of land from a previous borrower of the Company. The complaint, as subsequently amended, consisted of counts of common law fraud and breach of contract and sought compensatory damages of approximately $2 million in addition to punitive damages. On October 3, 1990, the Company filed a counterclaim against TGI in connection with an $800,000 promissory note from TGI to the Company. On February 9, 1994, the Circuit Court granted a Final Judgment in favor of the Company, which dismissed TGI's claim of common law fraud against the Company and struck its punitive damage claim. In accordance with an agreement between the parties, on August 23, 1994, the Court dismissed the breach of contract claim with prejudice and entered a judgment in the amount of $1.1 million in favor of the Company on the aforementioned counterclaim. The Company agreed not to execute that judgment until completion of TGI's appeal of the Final Judgment on its claim for compensatory damages. On January 3, 1996, the Fourth District Court of Appeals reversed the Final Judgment. 10 The Company unsuccessfully appealed this reversal to the Florida Supreme Court and the case has been remanded for trial to the Circuit Court. Although the Company believes it has substantial defenses, the ultimate outcome of this litigation cannot presently be determined. Accordingly, no provision for any liability that may result upon final adjudication has been made in the accompanying financial statements. In management's opinion, the final outcome of this litigation will not have a material adverse effect on the Company's financial condition. (b) Other The Company is subject to various claims and complaints relative to its business activities. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company's financial position. (6) Consulting and Advisory Agreement with Hilcoast Effective July 31, 1992, the Company and Hilcoast entered into a consulting and advisory agreement under which Hilcoast provides certain investment advisory, consulting and administrative services to the Company, excluding matters related to Hilcoast's loans from the Company. The agreement, which originally expired on July 31, 1994, has been extended to July 31, 1997, and provides for the payment of $10,000 per month to Hilcoast, plus reimbursement for reasonable out of pocket expenses. The agreement may be terminated by Hilcoast upon 180 days notice and by the Company upon 30 days notice. (7) Recent Development On February 3, 1997, the Company announced that it was engaged in discussions with private parties with respect to several related transactions under which the Company would acquire controlling interests in a number of strip shopping centers. Under the proposed transactions, the Company would issue additional shares and, together with others, would transfer real estate interests to an operating partnership of which a principal of one of the other parties would be the chief executive officer. The Company has entered into an agreement with respect to the sharing of certain due diligence expenses relating to the proposed transactions, which are also subject to the negotiation of agreements, board and shareholder approvals, and other conditions. There is no assurance that the proposed transactions will be consummated. 11 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition Results of Operations Funds From Operations The Company's Funds From Operations generally consists of net income, excluding recovery of previously recorded losses, plus depreciation of real property (including the Company's share of depreciation in connection with its equity in earnings of unconsolidated partnerships). For the quarter ended March 31, 1997, Funds From Operations amounted to $2,284,000 compared to $2,203,000 for the same quarter of 1996. The increase in Funds From Operations reflects higher net rental income (rent income less related operating costs) resulting from the acquisition of the Century Plaza shopping center on September 30, 1996, partially offset by the elimination of interest income on income producing assets utilized in the acquisition. Funds From Operations also reflect reductions in administrative expenses, principally personnel costs, professional fees and insurance, partially offset by lower net interest income (interest income less interest expense) resulting from net principal payments received under the Hilcoast mortgage notes, which repayments were generally reinvested in lower yielding short-term investments. Net Income For the quarter ended March 31, 1997, net income was $2,138,000 or $.27 per share compared to $2,362,000 or $.30 per share for the corresponding quarter of 1996. The 1996 quarter includes a $243,000 net non-recurring credit, primarily consisting of a recovery of previously recorded losses. 12 Liquidity and Capital Resources At March 31, 1997, total assets were $118 million, including $84.8 million in real estate mortgage notes. Approximately $67.1 million of the real estate mortgage notes are collateralized by recreation facilities under long-term leases with unit owners at approximately 29,000 apartments at Century Village adult condominium communities at Pembroke Pines, West Palm Beach, Deerfield Beach and Boca Raton, Florida, and generally provide for self-amortizing, equal monthly installment payments through 2028 (the "Recreation Notes" - see Note 1(b) to Consolidated Financial Statements). The operations of these facilities historically have been profitable and, in the Company's opinion, are not likely to be affected by adverse economic conditions. The remaining $17.7 million of real estate mortgage notes are collateralized by real estate within residential projects, generally located in southeast Florida, including $16.5 million due from Hilcoast, principally collateralized by first mortgages on certain real estate at the Century Village at Pembroke Pines adult condominium community in Broward County, Florida (the "Pembroke Century Village" - see Note 1(c) to Consolidated Financial Statements). At March 31, 1997, 7,186 units had been sold and delivered at the planned 7,780 unit Pembroke Century Village and the backlog of units under contract for future delivery was 183 units with a sales value of $14.9 million. Collections on the Company's real estate mortgage notes may be affected by the future success of the projects which collateralize these notes, which may, in turn, be affected by conditions in the housing market. Operating funds are currently generated from interest income, principally on mortgage notes, and rentals from income producing properties. Dividend payments to stockholders, in accordance with the provisions of the Internal Revenue Code, limit the Company from utilizing significant amounts of income-generated funds for investment purposes. Since its qualification as a REIT and until 1990, monies received from the repayment of existing mortgage notes and borrowings were generally reinvested in new and existing mortgage notes and other real estate related investments, including loans to developers for the purpose of acquiring, developing or constructing real estate. In more recent years, the Company's only new loan commitments have been in connection with its existing borrowers. The Company has generally reinvested its other available funds in high quality short-term corporate and government securities. The Company expects to pursue this strategy while it continues to evaluate alternative real estate investments. See Note 7 to Consolidated Financial Statements regarding discussions concerning possible acquisition of controlling interests in a number of shopping centers. During the quarter ended March 31, 1997, there were no new loan commitments. 13 At March 31, 1997, commitments on outstanding real estate loans consisted of $600,000 under the Hilcoast Lines of Credit. The Company expects to be able to meet these commitments with operating cash flows and existing cash balances. There are currently no material commitments for capital expenditures. During the quarter ended March 31, 1997, the Company declared a cash dividend of $.29 per share, aggregating $2.3 million which approximates the Company's Funds From Operations. At March 31, 1997, the outstanding balance of the Company's Collateralized Mortgage Obligations (the "CMO's") amounted to $34.5 million (net of unamortized discount of $776,000 based on an effective interest rate of 8.84%). The CMO's are collateralized by $42.1 million of the Recreation Notes and require self-amortizing principal and interest payments through March 2007. During the term of the CMO's, the Company's scheduled annual debt service requirement approximates $5.2 million compared to annual principal and interest payments scheduled to be received under the related mortgage notes receivable of $6.5 million. Inflation As of March 31, 1997, the Company had no variable interest rate borrowings; however, the Company's interest-sensitive mortgage notes receivable amounted to $37 million. Of this amount, the interest rate on $34 million is limited to the lower of 11% or prime + 3%. As of March 31, 1997, the interest rate on those notes had reached the 11% ceiling; accordingly, in the event of inflation, even if such inflation is accompanied by rising interest rates, the effect on the Company's results of operations is not expected to be material. 14 PART II. Other Information Item 6 - Exhibits and Reports on Form 8-K: Exhibits: 10(i) Letter, dated February 26, 1997, from Hilcoast Development Corp. to CV Reit, Inc. in connection with $3 million Promissory Note. 10(ii) Letter, dated February 26, 1997, from CV Reit, Inc. to Hilcoast Development Corp. in connection with $3 million Promissory Note. 27 Financial Data Schedule Reports on Form 8-K: The Company was not required to file Form 8-K during the quarter for which this report is filed. 15 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. CV REIT, INC. ________________________________ (Registrant) /s/ Stanley Brenner April 16, 1997 ________________________________ Stanley Brenner, President /s/ Elaine Kahant April 16, 1997 ________________________________ Elaine Kahant, Vice President, Treasurer and Principal Financial and Accounting Officer EX-10 2 EXHIBIT 10(I)&10(II) EXHIBIT 10(i) HILCOAST DEVELOPMENT CORP. 19146 Lyons Road Boca Raton, FL 33434 February 26, 1997 CV Reit, Inc. Century Village Administration Building 100 Century Blvd. West Palm Beach, FL 33417 Attn: Mr. Stanley Brenner, President RE: $3,000,000.00 Promissory Note ("Note") dated September 30, 1993 from NewCen Communities, Inc., a Florida corporation ("Maker") in favor of CV Reit, Inc., a Delaware corporation ("Payee") Guaranteed by Hilcoast Development Corp., a Delaware corporation ("Guarantor"); said Note being secured by that certain Mortgage ("Mortgage") recorded in Official Records Book 21247, at Page 768 of the Public Records of Broward County, Florida Dear Stan: The Guarantor is aware of the fact that the Maker has requested the Payee to extend the "Maturity Date" as set forth in the Note, as extended by those certain letter agreements, dated September 30, 1994, February 6, 1995 and August 11, 1995, to November 30, 1997 provided, of course, that the monthly interest payments shall continue to be made to and including the first business day of November, 1997. Please be advised that the Guarantor consents to the foregoing and same shall in no way affect the obligations of the Guarantor as the guarantor of the Note. Very truly yours, HILCOAST DEVELOPMENT CORP. /s/ H. Irwin Levy By:_______________________________ H. Irwin Levy, President EXHIBIT 10(ii) CV REIT, INC. 100 Century Blvd. West Palm Beach, FL 33417 February 26, 1997 NewCen Communities, Inc. 19146 Lyons Road Boca Raton, FL 33434 Attn: Mr. Jack Jaiven, Vice President RE: $3,000,000.00 Promissory Note ("Note") dated September 30, 1993 from NewCen Communities, Inc., a Florida corporation ("Maker") in favor of CV Reit, Inc., a Delaware corporation ("Payee") Guaranteed by Hilcoast Development Corp., a Delaware corporation ("Guarantor"); said Note being secured by that certain Mortgage ("Mortgage") recorded in Official Records Book 21247, at Page 768 of the Public Records of Broward County, Florida Dear Jack: This letter will confirm that CV Reit has extended the "Maturity Date" as set forth in the Note, as extended by those certain letter agreements, dated September 30, 1994, February 6, 1995 and August 11, 1995, to November 30, 1997 provided, of course, that the monthly interest payments shall continue to be made through and including the first business day of November, 1997. In all other respects, the Note shall remain in full force and effect in accordance with the terms and provisions thereof. Very truly yours, CV REIT, INC. /s/ Stanley Brenner By:_________________________________ Stanley Brenner, President EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1997 MAR-31-1997 6,045 6,436 84,834 2,401 0 0 23,519 2,527 118,101 0 34,531 0 0 80 73,422 118,101 0 3,347 0 0 333 0 774 2,138 0 0 0 0 0 2,138 .27 .27 INCLUDES $902 OF RESTRICTED CASH.
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