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XXXXXX
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REALTY
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TRUST
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A Real Estate Investment Trust
1995
ANNUAL
REPORT
2
[LOGO]
XXXXXX REALTY TRUST, INC.
1995 ANNUAL REPORT
Contents Page
-------- ----
Financial ............................................................. Inside
Front Cover
The Trust
....................................................................... 1
Market Information .................................................... 1
Dividends ............................................................. 1
Letter to Shareholders ................................................ 2
Management's Discussion and Analysis of Financial Condition and Results
of Operations ....................................................... 3
Financial Statements and Notes ........................................ 7
Directors and Officers ................................................ 15
Shareholder Information ............................................... 16
------------------------------
3
FINANCIAL HIGHLIGHTS
Year ended December 31,
-------------------------------------------------------------------------------------------------------
For the year: 1995 1994 1993 1992 1991
------------- ----------- ------------ ----------- ----------- -----------
(Not covered by independent auditors' report)
Rental income........................ $ 2,861,293 $ 2,719,324 $ 2,761,766 $ 2,934,178 $ 2,885,496
Net income........................... 185,597 42,217 163,001 284,994 368,040
Per share.......................... .21 .05 .19 .33 .42
Funds from operations ............ 906,637 749,211 880,578 937,937 991,239
Per share.......................... 1.05 .86 1.02 1.08 1.14
Distributions declared............... 563,307 424,646 433,312 528,641 571,972
Per share.......................... .65 .49 .50 .61 .66
Paid in current year:
Taxable to shareholders........ .31 .22 .24 .51 .36
Return of capital.............. .34 .37 .16 .10 .30
Declared 1993, paid in January
1994......................... (.10) .10
At year end:
------------
Total assets......................... $16,009,017 $16,504,068 $16,761,085 $17,094,706 $17,326,683
Investment property, net............. 14,811,351 15,219,284 15,605,700 16,035,756 16,408,584
Mortgage notes payable............... 4,912,421 4,988,006 4,844,598 4,915,369 4,979,751
Shareholders' equity................. 10,721,216 11,098,926 11,481,355 11,751,666 11,995,313
Number of shares outstanding......... 866,624 866,624 866,624 866,624 866,624
---------------
Represents net income adjusted for depreciation and amortization.
See Management's Discussion and Analysis for discussion of comparability of items.
4
The Trust
Xxxxxx Realty Trust, Inc. is a corporation formed on June 14, 1984, to
make equity investments in income-producing real properties, primarily
commercial and light industrial properties. The Trust has invested in three
properties: The Atrium at Alpha Business Center, an office building in
Bloomington, Minnesota; the Applied Communications, Inc. Building, an office
building in Omaha, Nebraska; and the Franklin Park Distribution Center, a
warehouse and distribution facility in suburban Chicago, Illinois. Since 1985
the Trust has qualified as a real estate investment trust ("REIT") under the
Internal Revenue Code.
Market Information
The Company's common stock trades on The Nasdaq Stock Market under the
symbol NRTI. The Nasdaq high and low prices for the shares during 1994 and 1995
were as follows:
High Low
----- -----
1994
First Quarter....................................... $6.75 $4.75
Second Quarter...................................... $6.00 $5.00
Third Quarter....................................... $7.50 $5.75
Fourth Quarter...................................... $7.50 $6.00
1995
First Quarter....................................... $7.50 $6.25
Second Quarter...................................... $7.00 $6.50
Third Quarter....................................... $9.50 $6.75
Fourth Quarter...................................... $8.00 $7.00
As of February 1, 1996, there were 827 shareholders of record.
Dividends
The following cash dividends were paid to shareholders during 1994
and 1995:
1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
--------- --------- --------- ---------
1994............................... $.20 $.12 $.12 $.15
1995............................... $.15 $.15 $.17 $.18
---------------
Includes bonus dividend of $.10 per share
5
March 15, 1996
To Our Shareholders:
For the fiscal year ended December 31, 1995, the Trust's earnings were
$185,597 or $.21 per share, an increase of $143,380 or $.16 per share when
compared to fiscal year 1994. Funds from operations, which adds depreciation
and amortization to net income computed in accordance with generally accepted
accounting principals, were $906,637 or $1.05 per share for the year ended
December 31, 1995. Funds from operations increased $157,426 or $.18 per share
when compared to fiscal year 1994.
With the increase in funds from operations, the Trust was able to increase
its dividends ten percent (10%) during 1995. In 1995, the Trust paid $563,307
or $.65 per share in dividends. At its last quarterly director's meeting on
February 14, 1996, the Trust increased its quarterly dividend from $.18 per
share to $.20 per share and, provided operations continue as expected, should
be able to maintain this level throughout 1996, for a total of $.80 per share
for the year.
As stated above, the operations of the Trust's properties improved in
1995. The improved operating results are attributable to the Trust's ability to
maintain a high level of occupancy at the Atrium at Alpha and the renewal of a
major tenant's lease at Franklin Park Distribution Center effective January 1,
1995, at an increase in rent. Another factor contributing to the improved
operating results related to the Trust's ability to maintain operating expenses
relatively flat when compared to fiscal year 1994.
Occupancy at both Franklin Park Distribution Center and The Applied
Communications Inc. Building continues at 100%. At the Atrium at Alpha, through
the net leasing of 3,980 square feet, occupancy improved to 98% by December 31,
1995. During 1996, 30,000 square feet of leases expire, 57% of which is one
tenant. Management expects to renew or re-lease all of this space at higher
rent levels.
During 1995 the real estate investment market continued to improve and is
expected to continue this improvement throughout the next several years. The
improvement in the market is evidenced by the ability to maintain high
occupancy levels at each of the Trust's properties. Management believes this
trend should increase the value of the Trust's properties in the future. As a
result, the Board of Directors has again determined that it is premature to
consider selling the properties and liquidating the Trust at this time. This
policy is reviewed by management and the Board of Directors on a quarterly
basis. Management will continue to manage the properties aggressively to
produce the maximum dividend possible.
Sincerely,
XXXXXX REALTY TRUST, INC.
/s/ Xxxxxxx X. Xxxxxx, Xx.
XXXXXXX X. XXXXXX, XX.
Chairman of the Board
6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
Cash reserves on hand as of December 31, 1995, were $517,317, a decrease of
$84,287 from year ended December 31, 1994. The decrease in cash is attributable
to an increase in dividend payout in 1995 along with the receipt of refinancing
proceeds in 1994 which artificially inflated the cash reserves at December 31,
1994. Though cash reserves have decreased from December 31, 1994, the Trust's
current cash position and the properties' ability to provide operating cash
flow should enable the Trust to fund anticipated capital expenditures in 1996.
The anticipated capital expenditures by property are as follows:
Other Leasing
Capital Capital Total
------------ ------------ ------------
Atrium at Alpha...................... $ 33,000 $126,821 $159,821
Franklin Park Dist. Center........... 25,000 0 25,000
Applied Communications Inc. Bldg..... 0 0 0
------------ ------------ ------------
$ 58,000 $126,821 $184,821
Throughout 1996 the Trust anticipates capital expenditures of $184,821.
The capital expenditures include leasing capital at Atrium at Alpha for tenant
alterations along with lease commissions for new tenant leases and renewals.
Along with leasing capital, Atrium at Alpha has set aside funds to purchase and
install a new compressor if necessary. At Franklin Park Distribution Center a
contingency reserve has been set aside for capital expenditures arising from
annual inspections to the property. Capital expenditures at Applied
Communications Inc. building are expected to be minimal.
In November 1994 the Trust successfully negotiated the renewal of the
first mortgage debt for a term of seven years. The mortgage lender committed to
a $5 million loan at a fixed rate of 8.40% and an amortization period of 23
years.
7
Results of Operations
The results of operations for the Trust's properties for the years ended
December 31, 1995, 1994 and 1993 are detailed in the schedule below.
Administrative expenses of the Trust are excluded.
Atrium at Franklin Park Applied Comm.
Alpha Dist. Center Inc. Bldg.
------------- ------------- -------------
1995
Revenues.......................... $1,092,488 $ 752,875 $1,002,033
Expenses.......................... 919,264 583,418 887,751
------------- ------------- -------------
Net Income........................ $ 173,224 $ 169,457 $ 114,282
Depreciation and Amortization..... 336,993 177,021 190,406
------------- ------------- -------------
Funds from Operations............. $ 510,217 $ 346,478 $ 304,688
1994
Revenues.......................... $ 988,232 $ 719,834 $ 995,846
Expenses.......................... 879,581 559,536 942,008
------------- ------------- -------------
Net Income........................ $ 108,651 $ 160,298 $ 53,838
Depreciation and Amortization..... 320,357 163,717 190,406
------------- ------------- -------------
Funds from Operations............. $ 429,008 $ 324,015 $ 244,244
1993
Revenues.......................... $1,045,333 $ 709,546 $ 971,533
Expenses.......................... 814,535 565,174 941,597
------------- ------------- -------------
Net Income........................ $ 230,798 $ 144,372 $ 29,936
Depreciation and Amortization..... 326,115 163,551 190,406
------------- ------------- -------------
Funds from Operations............. $ 556,913 $ 307,923 $ 220,342
The three year operating results of Atrium at Alpha have been mixed, with
revenues decreasing from 1993 to 1994, then increasing from 1994 to 1995, and
expenses increasing from year to year during the three year period. The
decrease in revenues is attributable to a May 1994 move out of a tenant who
occupied approximately 35% of the space. This tenant had previously vacated and
was subleasing 100% of the space to six sub-tenants at below market rates. The
Trust negotiated with several of these tenants to extend their occupancy,
however, some of the tenants vacated. Occupancy at Atrium at Alpha fell below
85%. Since May 1994 occupancy has increased and by December 31, 1994, occupancy
was 95%. During 1995 occupancy remained at high levels resulting in increased
revenues when compared to 1994 and 1993. Expenses at Atrium at Alpha increased
from 1993 to 1994 and can be attributed to the property's operating expenses,
while from 1994 to 1995 the increase is attributable to both the property's
operating expenses and amortization expense. The increase from 1993 to 1994
relates to real estate taxes while from 1994 to 1995 the increases related to
utilities, repairs and maintenance, and real estate taxes and amortization
expense.
8
The operating results at Franklin Park Distribution Center for the year
ended December 31, 1995, 1994 and 1993 have increased from a low in 1993 of
$144,372 to a high in 1995 of $169,457. The steady increase in net income is
attributable to increased revenues from expense pass throughs when comparing
1993 to 1994, while from 1994 to 1995 the increase related to the renewal of a
major tenant's lease effective January 1, 1995. The renewal increased the lease
revenues by approximately 9%.
At Applied Communications Inc. building, the operating results have
significantly improved. For the year ended December 31, 1993, net income was
$29,936 and for the same period ended December 31, 1995, net income was
$114,282. The net income increase from 1993 to 1994 related to increased
revenues from built-in rent step-ups from the building's only tenant. In 1995
net income more than doubled when compared to 1994. The significant increase
related to a decrease in operating expenses, more specifically, utilities
decreased $18,759, parking lot costs decreased $8,209, and interest expense
decreased $25,851.
Occupancy at the Trust's properties during the fourth quarter remained at
a high level. The maintaining of the high occupancy levels can be attributed to
the Trust's ability to renew the properties' major tenants as their leases
mature. The occupancy levels at December 31 are as follows:
Occupancy levels at December 31,
----------------------------------
1995 1994 1993
---------- ---------- ----------
Atrium at Alpha............................ 98% 95% 86%
Franklin Park Dist. Center................. 100% 100% 100%
Applied Communications Inc. Bldg........... 100% 100% 100%
During the fourth quarter the occupancy level at Atrium at Alpha decreased
by 1% when compared to the previous quarter. Three leases were renewed with a
combined square footage of 2,357 square feet. A single tenant occupying 796
square feet vacated its suite. For the year, occupancy increased 3% from the
year ended December 31, 1994, through the leasing of 5,451 square feet to new
tenants, renewing 8,322 square feet, while only two tenants vacated a total
2,374 square feet. The property has two major tenants which lease 23% and 18%
of the available space with leases expiring in May 1999 and July 1996,
respectively.
Franklin Park Distribution Center has been fully leased by two tenants
throughout 1995. The larger of the two tenants occupies 57% of the building
while the other occupies 43% of the building. Their leases expire in December
1999 and June 1998, respectively.
The Applied Communications Inc. building has a single tenant who has
occupied the entire building throughout 1995. The tenant's lease expires in
August 1999.
1995 Comparisons
For the year ended December 31, 1995, the Trust's consolidated revenues
were $2,865,261 compared to $2,726,920 for the year ended December 31, 1994.
The increase in revenues are $138,341 or 5.07%. The increase in consolidated
revenues relates to the three properties held by the Trust. Atrium at Alpha's
9
revenues increased $104,256; Franklin Park Distribution Center's revenues
increased $33,041; and Applied Communications Inc. building's revenues
increased $6,187. As previously stated, Atrium at Alpha's increased revenues
related to increased average occupancy when comparing 1994 to 1995; at Franklin
Park Distribution Center, revenue increases related to the renewal of a major
tenant effective January 1, 1995; and at Applied Communications Inc. building,
revenues increased due to step-up rents received from the property's only
tenant.
The Trust's consolidated expenses for the year ended December 31, 1995,
were $2,679,664 compared to $2,684,703 for the year ended December 31, 1994.
Consolidated expenses remained relatively flat for the two-year period,
however, individual expenses such as interest, real estate taxes, and
depreciation and amortization had noteworthy fluctuations. Interest expense
decreased $36,623 due to the refinancing of the note payable in November 1994
at a lower interest rate. Real estate taxes increased $23,954 due to tax rate
changes at Atrium at Alpha and Franklin Park Distribution Center. Depreciation
and amortization increased $14,046 due to tenant alteration expenditures at
Atrium at Alpha.
With the increase in consolidated income and the decrease in consolidated
expenses, net income has increased $143,380 or $.16 per share when compared to
year ended December 31, 1994. For the year ended December 31, 1995, net income
was $185,597 resulting in earnings of $.21 per share. Cash flow from operations
for the year ended December 31, 1995, was $760,565 or $.88 per share, which
enabled the Trust to pay out $563,307 in dividends or $.65 per share.
The remaining cash flow from operations was used to fund various property
capital expenditures along with principal payments on the Trust's note payable.
1994 Comparisons
For the year ended December 31, 1994, consolidated revenues were
$2,726,920 which represented a $41,090 decrease when compared to the year ended
December 31, 1993. The decrease in revenues is attributable to Atrium at Alpha.
As previously stated, a major tenant who was responsible for approximately 35%
of the available space let their lease expire at the end of May 1994. The
tenant vacated prior to the May 1994 lease expiration and sublet 100% of the
space to six sub-tenants at below market rates. The Trust negotiated with
several of these tenants to extend their occupancy, however, some of the
tenants vacated, reducing occupancy below 85%, resulting in decreasing rental
revenues. The remaining two properties, Franklin Park Distribution Center and
Applied Communications Inc. buildings, both had revenue increases from 1993 to
1994.
For the year ended December 31, 1994, consolidated expenses were
$2,684,703 an increase of $79,694 or 3.06% when compared to the year ended
December 31, 1993. The increase in expenses is attributable to increases in
real estate taxes and professional fees offset by decreases in depreciation and
amortization and interest. The decrease in real estate taxes relates to a
successful appeal in 1993 in which the property received a refund that offset
1993 real estate tax expense. Professional fees increased due to additional
legal fees incurred to renew several leases at Atrium at Alpha. The decrease in
depreciation and amortization is attributable to decreased amortization expense
at Atrium at Alpha caused by tenant alteration expenditures becoming fully
amortized in 1994. Interest expense decreased due to the refinancing of the
note payable in November 1994 to a lower interest rate.
10
Net income for the year ended December 31, 1994, was $42,217 or $.05 per
share. When compared to year ended December 31, 1993, net income decreased by
$120,784 or approximately $.14 per share. However, cash flow provided by
operations for the year ended December 31, 1994, was $502,581 or approximately
$.58 per share. The cash flow provided from operations along with refinancing
proceeds of $143,408 enabled the Trust to pay dividends of $511,308 or $.59 per
share along with various property capital expenditures.
Inflation
The effects of inflation did not have a material impact upon the Trust's
operation in fiscal 1993, 1994 and 1995 and are not expected to have a material
impact in 1996.
11
INDEPENDENT AUDITORS' REPORT
To the Shareholders of
Xxxxxx Realty Trust, Inc.:
We have audited the accompanying balance sheets of Xxxxxx Realty Trust,
Inc. as of December 31, 1995 and 1994, and the related statements of
operations, shareholders' equity, and cash flows for each of the three
years in the period ended December 31, 1995. 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 generally accepted auditing
standards. 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, such financial statements present fairly, in all
material respects, the financial position of Xxxxxx Realty Trust, Inc.
as of December 31, 1995 and 1994, and the results of its operations and
its cash flows for each of the three years in the period ended December 31,
1995 in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
January 19, 1996
12
XXXXXX REALTY TRUST, INC.
BALANCE SHEETS
December 31,
--------------------------
1995 1994
------------ ------------
ASSETS
CASH............................................... $ 517,317 $ 601,604
ACCOUNTS RECEIVABLE-no allowance for doubtful
accounts considered necessary (Note 2)........... 261,972 277,065
PREPAID EXPENSES................................... 84,803 36,609
INVESTMENT PROPERTY-at cost (Notes 2 and 3):
Land............................................. 2,568,955 2,568,955
Buildings and improvements....................... 17,587,161 17,381,201
------------ ------------
20,156,116 19,950,156
Less accumulated depreciation.................... (5,344,765) (4,730,872)
------------ ------------
14,811,351 15,219,284
DEFERRED EXPENSES-at amortized cost (Notes 2
and 5)........................................... 333,574 369,506
------------ ------------
TOTAL.............................................. $16,009,017 $16,504,068
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Mortgage note payable (Note 3)................... $ 4,912,421 $ 4,988,006
Accounts payable and accrued expenses............ 375,380 417,136
------------ ------------
Total liabilities............................ 5,287,801 5,405,142
SHAREHOLDERS' EQUITY:
Common stock, $1 par value:
Authorized, 5,000,000 shares
Issued and outstanding, 866,624 shares......... 866,624 866,624
Additional paid-in capital....................... 14,252,532 14,252,532
Distributions in excess of net income............ (4,397,940) (4,020,230)
------------ ------------
Total shareholders' equity................... 10,721,216 11,098,926
------------ ------------
TOTAL.............................................. $16,009,017 $16,504,068
============ ============
See notes to financial statements.
13
XXXXXX REALTY TRUST, INC.
STATEMENTS OF OPERATIONS
Years ended December 31,
----------------------------------------
1995 1994 1993
------------ ------------ ------------
REVENUES:
Rental and other income (Notes 2, 4 and 6)...................... $2,861,293 $2,719,324 $2,761,766
Interest income................................................. 3,968 7,596 6,244
------------ ------------ ------------
Total revenues................................................ 2,865,261 2,726,920 2,768,010
------------ ------------ ------------
EXPENSES:
Depreciation and amortization (Note 2).......................... 721,040 706,994 717,577
Real estate taxes............................................... 523,735 499,781 429,773
Interest on mortgage note....................................... 416,126 452,749 463,931
Advisory fee-related party (Note 5)............................. 116,309 115,704 113,394
Professional fees............................................... 54,256 57,433 41,408
Property management fees-related party (Note 5)................. 106,367 100,943 101,960
Repairs and maintenance......................................... 60,081 62,737 61,459
Trustee fees and expenses....................................... 14,879 16,565 16,567
Utilities....................................................... 289,392 290,045 293,183
Other operating expenses........................................ 377,479 381,752 365,757
------------ ------------ ------------
Total expenses................................................ 2,679,664 2,684,703 2,605,009
------------ ------------ ------------
NET INCOME........................................................ $ 185,597 $ 42,217 $ 163,001
============ ============ ============
PER SHARE DATA (Note 2):
Net income...................................................... $ .21 $ .05 $ .19
============ ============ ============
Distributions:
Paid in current year:
Taxable to shareholders..................................... $ .31 $ .22 $ .24
Return of capital........................................... .34 .37 .16
------------ ------------ ------------
Total paid in current year.................................... .65 .59 .40
Declared 1993, paid in January 1994........................... (.10) .10
------------ ------------ ------------
Total declared in current year................................ $ .65 $ .49 $ .50
============ ============ ============
Weighted average shares outstanding............................. 866,624 866,624 866,624
============ ============ ============
See notes to financial statements.
14
XXXXXX REALTY TRUST, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
Years Ended December 31, 1995, 1994 and 1993
Common stock
-------------------------- Additional Distributions
Number paid-in in excess of
of shares Amount capital net income
--------------------------------------------------- ------------ ------------ ------------ -------------
BALANCE, DECEMBER 31, 1992......................... 866,624 $866,624 $14,252,532 $(3,367,490)
Net income....................................... 163,001
Dividends declared............................... 866,624 (433,312)
------------ ------------ ------------ -------------
BALANCE, DECEMBER 31, 1993......................... 866,624 $866,624 $14,252,532 $(3,637,801)
Net income....................................... 42,217
Dividends declared............................... (424,646)
------------ ------------ ------------ ------------
BALANCE, DECEMBER 31, 1994......................... 866,624 $866,624 $14,252,532 $(4,020,230)
------------ ------------ ------------ ------------
Net income....................................... 185,597
Dividends declared............................... (563,307)
------------ ------------ ------------ ------------
BALANCE, DECEMBER 31, 1995......................... 866,624 $866,624 $14,252,532 $(4,397,940)
============ ============ ============ ============
See notes to financial statements.
15
XXXXXX REALTY TRUST, INC.
STATEMENTS OF CASH FLOWS
Years ended December 31,
----------------------------------------
1995 1994 1993
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income from operations...................................... $ 185,597 $ 42,217 $ 163,001
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation................................................. 613,893 592,057 604,189
Amortization of deferred expenses............................ 107,147 114,937 113,388
Changes in accounts affecting operations:
Accounts receivable........................................ 15,093 (82,377) 18,844
Prepaid expenses........................................... (48,194) (7,363) (4,231)
Deferred expenses.......................................... (71,215) (225,556) (162,758)
Accounts payable and accrued expenses...................... (41,756) 68,666 (79,201)
------------ ------------ ------------
Net cash provided by operating activities................ 760,565 502,581 653,232
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to investment property................................ (205,960) (205,641) (174,133)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid to shareholders.................................. (563,307) (511,308) (346,650)
Payments on mortgage note payable............................... (75,585) (4,856,592) (70,771)
Proceeds from mortgage note payable............................. 5,000,000
------------ ------------ ------------
Net cash used in financing activities.................... (638,892) (367,900) (417,421)
------------ ------------ ------------
NET (DECREASE) INCREASE IN CASH................................... (84,287) (70,960) 61,678
CASH, BEGINNING OF YEAR........................................... 601,604 672,564 610,886
------------ ------------ ------------
CASH, END OF YEAR................................................. $ 517,317 $ 601,604 $ 672,564
============ ============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for interest.......................... $ 416,126 $ 452,749 $ 463,931
============ ============ ============
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
On November 2, 1993, the Board of Directors declared a dividend of
$86,662 payable January 14, 1994 to shareholders of record on
December 31, 1993.
See notes to financial statements.
16
XXXXXX REALTY TRUST, INC.
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 1995, 1994 and 1993
Note 1-Business:
Xxxxxx Realty Trust, Inc. (the "Trust"), a Missouri corporation, was
formed on June 14, 1984 for the purpose of making equity investments in
income-producing real properties, primarily commercial and light industrial
properties. The Trust's portfolio is comprised of a multi-tenant office
building located in Bloomington, Minnesota; a single-tenant office building
located in Omaha, Nebraska; and a warehouse and distribution facility in
Franklin Park, Illinois. These properties generated 38.4%, 35.2% and 26.4% of
rental and other income, respectively, for the year ended December 31, 1995.
Note 2-Summary of Significant Accounting Policies:
The Trust has qualified and elected to be taxed as a real estate
investment trust (REIT) under the Internal Revenue Code. The Trust intends to
continue to qualify as a REIT and to distribute substantially all of its
taxable income to its shareholders. Accordingly, no provision for income taxes
is reflected in the financial statements. At December 31, 1995, the Trust has
net operating loss carryforwards of approximately $835,000 for tax purposes
which expire in various amounts through 2005.
Investment property is recorded at the lower of cost or net realizable
value.
Buildings are depreciated over their estimated useful lives using the
straight-line method.
Lease agreements are accounted for as operating leases and rentals from
such leases are reported as revenues ratably over the terms of the leases.
Certain lease agreements provide for rent concessions. At December 31, 1995,
accounts receivable include approximately $165,000 ($151,000 in 1994) of
accrued rent which is not yet due under the terms of the various lease
agreements.
Included in rental and other income are amounts received from tenants
under provisions of lease agreements which require the tenants to pay
additional rent equal to specified portions of certain expenses such as real
estate taxes, insurance, utilities and common area maintenance. The income is
recorded in the same period that the related expense is incurred.
Net income per share was computed based upon the weighted average number
of shares of common stock outstanding during each year. Distributions per share
are stated at the amount per share declared by the Directors. The taxability of
all distributions paid is based upon earnings and profits as defined by the
Internal Revenue Code. The taxability of distributions declared but unpaid is
determined in the year the dividend is paid.
Deferred expenses consist of lease fees and financing costs and are
amortized over the terms of the respective leases or notes. Amortization of
such costs charged to expense amounted to $107,000 in 1995 ($115,000 and
$113,000 in 1994 and 1993, respectively).
17
Note 3-Mortgage Note Payable:
Mortgage note payable at December 31 consists of the following:
1994 1993
------------ ------------
8.4%, due in monthly installments of $40,976
including interest to November 2001 when
remaining principal payment of $4,330,508 is
due.............................................. $4,912,421 $4,988,006
============ ============
The mortgage note is collateralized by deeds of trust and assignments of
rents on all investment properties. Principal payments required during the next
five years are as follows:
1996................................................................. $ 82,000
1997................................................................. 89,000
1998................................................................. 97,000
1999................................................................. 106,000
2000................................................................. 115,000
In accordance with Statement of Financial Accounting Standards No. 107,
Disclosures about Fair Value of Financial Instruments, the estimated fair value
of mortgage notes payable with maturities greater than one year is determined
based on rates currently available to the Partnership for mortgage notes with
similar terms and remaining maturities. The carrying amount and estimated fair
value of the Trust's debt at December 31, 1995 are summarized as follows:
Carrying Estimated
Amount Fair Value
------------ ------------
Mortgage notes payable............................. $4,912,421 $5,090,104
Fair value estimates are made at a specific point in time, are subjective
in nature and involve uncertainties and matters of significant judgment.
Settlement of the Trust's debt obligations at fair value may not be possible
and may not be a prudent management decision. The potential loss on
extinguishment at December 31, 1995 does not take into consideration expenses
that would be incurred to settle the debt obligations at fair value.
Note 4-Rental Revenues Under Operating Leases:
Minimum future rental revenues under noncancelable operating leases in
effect as of December 31, 1995 are as follows:
1996............................................................... $2,296,000
1997............................................................... 2,115,000
1998............................................................... 1,917,000
1999............................................................... 1,220,000
2000............................................................... 15,000
----------
Total......................................................... $7,563,000
==========
18
XXXXXX REALTY TRUST, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 1995, 1994 and 1993
Note 5-Related Party Transactions:
The Trust has entered into an agreement with Xxxxxx Advisors Ltd., L.P.
(the "Advisor"), a Missouri limited partnership, to advise the Trust with
respect to the Trust's investments and investment policies and to administer
the operations of the Trust. This advisory agreement is renewable annually by a
vote of the Directors. Its current term expires on March 31, 1996. An Officer
and Director of the Trust is a general partner of Xxxxxx Advisors Ltd., L.P.
The Advisor receives a fee for its services based upon net invested assets or
net operating income as defined in the agreement. The fees were $116,309,
$115,704 and $113,394 for the years ended December 31, 1995, 1994 and 1993,
respectively.
Certain other affiliates of the Advisor receive lease commissions and
property management fees in connection with the operation of investment real
estate owned by the Trust. In 1995, lease commissions of $67,837 ($43,595 and
$156,741 in 1994 and 1993, respectively) were paid by the Trust to Xxxxxx
Xxxxxxxx Company, an affiliate of the Advisor. Additionally, property
management fees paid to Xxxxxx Xxxxxxxx Company were $106,367, $100,943 and
$101,960 for the years ended December 31, 1995, 1994 and 1993, respectively.
Note 6-Major Tenants:
A substantial amount of the Trust's revenue in 1995 was derived from three
major tenants whose rentals amounted to $978,000, $411,000 and $335,000 or 34%,
14% and 12%, respectively of total revenues. A substantial amount of the
Trust's revenue in 1994 was derived from three major tenants whose rentals
amounted to $996,000, $391,000 and $329,000 or 37%, 14% and 12%, respectively,
of total revenues. Four tenants in 1993 amounted to $972,000, $532,000,
$366,000 and $330,000 or 36%, 20%, 14% and 12%, respectively, of total
revenues.
Directors and Officers
Board of Directors
Xxxxxxx X. Xxxxxx, Xx. ...... Chairman of the Board and Chief Executive
Officer, Xxxxxx Company. Xxxxxx Company is a
real estate investment management firm.
Xxxxxxxx X. Xxxxxx .......... Vice President and Chief Financial Officer,
Xxxxxx Xxxxxxxx Company, a wholly-owned
subsidiary of Xxxxxx Company.
Xxxxxx X. Xxxxxx ............ Private investor.
Xxxx X. Xxxxx ............... Corporate consultant.
19
Xxxxx X. Xxxxxx ............. Chairman of the Board, Hayden, Xxxxxxxx &
Associates, Inc., Bloomfield, Connecticut.
Hayden, Xxxxxxxx & Associates, Inc. is a real
estate investment advisory, counseling and
brokerage firm.
Xxxxx X. Xxxxxx ............. President, Cambridge Savings Bank, Cambridge,
Massachusetts.
R. Xxxxxxx X'Xxxxx, Jr. ..... President and Chief Executive Officer, Northland
Financial Company, Minneapolis, Minnesota.
Northland Financial Company is a commercial real
estate investment banking firm.
Officers
Xxxxxxx X. Xxxxxx, Xx. ...... Chairman of the Board and Chief Executive
Officer.
Xxxxxxxx X. Xxxxxx........... President, Secretary and Treasurer.
Xxxx X. Xxxxx................ Chief Financial Officer. Xx. Xxxxx joined Xxxxxx
Xxxxxxxx Company, a wholly-owned subsidiary of
Xxxxxx Company, as Controller in 1995. Xx. Xxxxx
is a certified public accountant, and prior to
joining Xxxxxx Xxxxxxxx Company, Xx. Xxxxx was
employed by The Forsyth Group.
20
[LOGO]
SHAREHOLDER INFORMATION
The 1996 Annual Meeting of Shareholders will be held at 10:00 A.M. at the
Xxxxxx Xxxxxxx Conference Center, 7733 Forsyth Boulevard, 2nd Floor, in
Clayton, Missouri, on Tuesday, May 14, 1996.
Transfer Agent:
Boatmen's Trust Company
000 Xxxxxx Xxxxxx
X.X. Xxx 00000
Xx. Xxxxx, Xxxxxxxx 00000
Advisor:
Xxxxxx Advisors, Ltd., L.P.
St. Louis, Missouri
Legal Counsel:
Xxxxx Xxxx LLP
St. Louis, Missouri
Independent Accountants:
Deloitte & Touche LLP
St. Louis, Missouri
The following information is available to shareholders without charge upon
written request to Xxxxxxxx X. Xxxxxx, Secretary, Xxxxxx Realty Trust, Inc.,
0000 Xxxxxxx Xxxxxxxxx, Xx. Xxxxx, Xxxxxxxx 00000:
Annual Report on Form 10-K filed with the Securities and Exchange
Commission. Form 10-K is available in April.
Quarterly Report on Form 10-Q filed with the Securities and Exchange
Commission. Forms 10-Q are available in May, August and November.
Xxxxxx Realty Trust, Inc. Dividend Reinvestment Plan and Enrollment Card
Investment Properties
The Atrium
at Alpha Business Center
Bloomington, Minnesota
Applied Communications, Inc. Building
Omaha, Nebraska
Franklin Xxxx Xxxxxxxxxxxx Xxxxxx
Xxxxxxxx Xxxx, Xxxxxxxx
Xxxxxx Realty Trust
0000 Xxxxxxx Xxxxxxxxx
Xx. Xxxxx, Xxxxxxxx 00000
