UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 22, 2016
BRT REALTY TRUST
(Exact name of Registrant as specified in charter)
|
| | | | |
Massachusetts | | 001-07172 | | 13-2755856 |
(State or other jurisdiction of incorporation) | | (Commission file No.) | | (IRS Employer I.D. No.) |
60 Cutter Mill Road, Suite 303, Great Neck, New York 11021
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code 516-466-3100
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
Explanatory Note
We are filing this current report on Form 8-K (the “Current Report”) to include under (i) Item 9.01(a), the Audited Statement of Revenues and certain expenses of Retreat at Cinco Ranch, a 268 unit multi-family property located at 3306 S. Fry Road, Katy, Texas. (“Retreat at Cinco Ranch”), for the year ended December 31, 2014 and (ii) Item 9.01(b), our unaudited Pro forma Financial Statements reflecting the acquisition of Retreat at Cinco Ranch. The property was purchased on January 22, 2016 for a purchase price of $40.3 million of which $30.8 million was financed with mortgage debt.
The mortgage bears interest at a rate of 4.44%, and matures in 10 years, is interest only for the first 60 months and thereafter amortizes over a 30-year period. We contributed $8.2 million to this venture for our 75% interest.
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Item 9.01 | Financial Statements and Exhibits. |
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| | | |
(a) | Financial Statement of Business Acquired-Retreat at Cinco Ranch | Page |
| (i) Independent Auditor’s Report | 1 |
| (ii) Statement of Revenues and Certain Expenses for the year ended December 31, 2014 (iii) Statement of Revenues and Certain Expenses for the nine months ended September 30, 2015. (Unaudited) | 2 |
| (iv) Notes to Statements of Revenues and Certain Expenses | 3 |
(b) | Unaudited Pro Forma Consolidated Financial Statements | 4 |
| (i) Pro Forma Consolidated Balance Sheet at September 30, 2015 | 5 |
| (ii) Pro Forma Consolidated Statements of Income: For the year ended September 30, 2015 | 6 |
| (iii) Notes to Pro Forma Consolidated Financial Statements | 7 |
(c) | Exhibits | |
| | | |
| Exhibit No. | Title of Exhibit | |
| 23.1 | Consent of BDO USA, LLP dated February 8, 2016 | |
Independent Auditor’s Report
Board of Trustees and Shareholders
BRT Realty Trust and Subsidiaries
Great Neck, New York
We have audited the accompanying statement of revenues and certain expenses of The Retreat at Cinco Ranch located at 3306 S. Fry Road, Katy, Texas for the year ended December 31, 2014.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of the statement of revenues and certain expenses in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the statement of revenues and certain expense's that is free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on the statement of revenues and certain expenses based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the statement of revenues and certain expenses is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the statement of revenues and certain expenses. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the statement of revenues and certain expenses, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to The Retreat at Cinco Ranch's preparation and fair presentation of the statement of revenues and certain expenses in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal controls. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the statement of revenues and certain expenses.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the statement of revenues and certain expenses referred to above presents fairly, in all material respects, the statement of revenues and certain expenses of The Retreat at Cinco Ranch for the year ended December 31, 2014, in accordance with accounting principles generally accepted in the United States of America.
Emphasis of Matter
The accompanying statement of revenues and certain expenses was prepared for the purpose of complying with rules and regulations of the U.S. Securities and Exchange Commission and for inclusion in a Current Report on Form 8-K of BRT Realty Trust as described in Note 2 to the statement of revenues and certain expenses and is not intended to be a complete presentation of The Retreat at Cinco Ranch’s revenues and expenses.
/s/ BDO USA, LLP
New York, New York
February 8, 2016
Retreat at Cinco Ranch
Statements of Revenues and Certain Expenses
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| | | | | | | |
| Nine Months Ended September 30, 2015 | | Year Ended December 31, 2014 |
| (Unaudited) | | |
Revenues: | | | |
Rental and other income | $ | 3,013,000 |
| | $ | 3,979,000 |
|
| | | |
Certain Expenses: | | | |
Real estate taxes | 518,000 |
| | 741,000 |
|
Management fees | 150,000 |
| | 199,000 |
|
Utilities | 92,000 |
| | 143,000 |
|
Payroll | 156,000 |
| | 189,000 |
|
Insurance | 44,000 |
| | 58,000 |
|
Repairs and maintenance | 146,000 |
| | 195,000 |
|
Total certain expenses | 1,106,000 |
| | 1,525,000 |
|
| | | |
Revenues in excess of certain expenses | $ | 1,907,000 |
| | $ | 2,454,000 |
|
See Independent Auditor’s report and accompanying notes to the Statements of Revenues and Certain Expenses.
Retreat at Cinco Ranch
Notes to Statements of Revenues and Certain Expenses
1. Organization
The property, located at 3306 S. Fry Road, Katy, TX (“Retreat at Cinco Ranch” or the “Property”), is a garden apartment complex containing 268 units.
BRT Realty Trust (“BRT” or the “Trust”) is a business trust organized in Massachusetts. BRT owns, operates and develops multi‑family properties, commercial and mixed use real estate assets.
On January 22, 2016, a consolidated joint venture comprised of our wholly-owned subsidiary and an unaffiliated joint venture partner acquired the Property for a purchase price of $40.3 million, financed with $30.8 million of mortgage debt.
2. Basis of Presentation and Significant Accounting Policies
The accompanying statements of revenues and certain expenses of the Property has been prepared in accordance with Rule 3-14 of Regulation S-X of the U.S. Securities and Exchange Commission for inclusion in the Trust’s Current Report on Form 8-K. Accordingly, the statements of revenues and certain expenses excludes certain expenses that may not be comparable to those expected to be incurred in the future operations of the aforementioned property. Items excluded consist of interest expense, depreciation, amortization, corporate expenses, and other costs not directly related to future operations.
Use of Estimates
The preparation of the statements of revenues and certain expenses in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the statements of revenues and certain expenses. Actual results could differ from those estimates.
Revenue Recognition
Rental revenue is recognized on an accrual basis when earned and due from tenants. Leases are generally for a one-year term and have no renewal options.
Income Taxes
The entity that owns the Property was organized as a limited liability company and is not directly subject to federal or state income taxes.
3. Subsequent Events
Subsequent events were evaluated from December 31, 2014 through February 8, 2016, the date on which the statements of revenues and certain expenses were issued.
BRT REALTY TRUST AND SUBSIDIARIES
Pro Forma Consolidated Financial Statements
(Unaudited)
On January 22, 2016, TRB Cinco Ranch LLC, a wholly owned subsidiary of BRT Realty Trust (the “Trust”) and an unaffiliated joint venture partner, acquired a multi-family garden apartment complex located at 3306 S. Fry Road, Katy, TX (“Retreat at Cinco Ranch”) containing 268 units for a purchase price of $40.3 million, including $30.8 million of mortgage debt.
The pro forma unaudited consolidated balance sheet is presented as if the acquisitions had been completed on September 30, 2015. The pro forma unaudited consolidated statement of income for the year ended September 30, 2015 is presented as if the acquisition of Retreat at Cinco Ranch had been completed on October 1, 2014.
These pro forma unaudited consolidated financial statements are presented for informational purposes only and should be read in conjunction with the Trust’s Annual Report on Form 10-K for the year ended September 30, 2015.
The pro forma unaudited consolidated financial statements are based on assumptions and estimates considered appropriate by the Trust’s management; however, such statements do not purport to represent what the Trust’s financial position and results of operations would have been assuming the completion of the acquisition on October 1, 2014, nor do they purport to project the Trust’s financial position and results of operations at any future date or for any future period.
In the opinion of the Trust’s management, all adjustments necessary to reflect the effects of the transactions described above have been included in the pro forma consolidated financial statements.
BRT REALTY TRUST AND SUBSIDIARIES
PRO FORMA - UNAUDITED CONSOLIDATED BALANCE SHEET
At September 30, 2015
(Amounts in thousands, except per share data)
|
| | | | | | | | | | | |
| The Trust Historical | | Purchase of Retreat at Cinco Ranch | | The Trust
Pro Forma
as Adjusted |
ASSETS | | | | | |
Real estate properties, net of accumulated depreciation of $40,640 | $ | 733,168 |
| | $ | 40,250 |
| | $ | 773,418 |
|
| | | | | |
Cash and cash equivalents | 15,556 |
| | (7,942 | ) | | 7,614 |
|
Restricted cash - Newark | 13,277 |
| | — |
| | 13,277 |
|
Restricted cash - multi-family | 6,518 |
| | — |
| | 6,518 |
|
Deferred costs, net | 15,010 |
| | 305 |
| | 15,315 |
|
Deposits and escrows | 12,875 |
| | 568 |
| | 13,443 |
|
Other assets | 15,616 |
| | 61 |
| | 15,677 |
|
Real estate property held-for-sale | 23,859 |
| | — |
| | 23,859 |
|
Total Assets | $ | 835,879 |
| | $ | 33,242 |
| | $ | 869,121 |
|
| | | | | |
LIABILITIES AND EQUITY | | | | | |
Liabilities: | | | | | |
Mortgages payable | $ | 566,438 |
| | $ | 30,750 |
| | $ | 597,188 |
|
Junior subordinated notes | 37,400 |
| | — |
| | 37,400 |
|
Accounts payable and accrued liabilities | 21,629 |
| | 46 |
| | 21,675 |
|
Deferred income | 30,990 |
| | — |
| | 30,990 |
|
Mortgage payable held-for-sale | 19,248 |
| | — |
| | 19,248 |
|
Total Liabilities | 675,705 |
| | 30,796 |
| | 706,501 |
|
| | | | | |
Commitments and contingencies | — |
| | — |
| | — |
|
| | | | | |
Equity: | | | | | |
BRT Realty Trust shareholders' equity: | | | | | |
Preferred shares, $1 par value: | | | | | |
authorized 10,000 shares, none issued | — |
| | — |
| | — |
|
Shares of beneficial interest, $3 par value: | | | | | |
authorized number of shares, unlimited, 13,428 issued | 40,285 |
| | — |
| | 40,285 |
|
Additional paid-in capital | 161,842 |
| | — |
| | 161,842 |
|
Accumulated other comprehensive income | (58 | ) | | — |
| | (58 | ) |
Accumulated deficit | (79,414 | ) | | — |
| | (79,414 | ) |
Total BRT Realty Trust shareholders' equity | 122,655 |
| | — |
| | 122,655 |
|
Non-controlling interests | 37,519 |
| | 2,446 |
| | 39,965 |
|
Total Equity | 160,174 |
| | 2,446 |
| | 162,620 |
|
Total Liabilities and Equity | $ | 835,879 |
| | $ | 33,242 |
| | $ | 869,121 |
|
See accompanying notes to the unaudited pro forma consolidated financial statements
BRT REALTY TRUST AND SUBSIDIARIES
PRO FORMA - UNAUDITED CONSOLIDATED STATEMENT OF INCOME
For The Year Ended September 30, 2015
(Dollars in thousands, except per share data)
|
| | | | | | | | | | | |
| The Trust Historical | | Purchase of Retreat at Cinco Ranch | | The Trust Pro Forma as Adjusted |
Revenues: | | | | | |
Rental and other revenue from real estate properties | $ | 81,358 |
| | $ | 4,059 |
| | $ | 85,417 |
|
Other income | 1,139 |
| | — |
| | 1,139 |
|
Total revenues | 82,497 |
| | 4,059 |
| | 86,556 |
|
Expenses: | | | | | |
Real estate operating expenses - including $1,233 to related parties | 43,219 |
| | 1,937 |
| | 45,156 |
|
Interest expense | 24,177 |
| | 1,434 |
| (a) | 25,611 |
|
Advisor's fees, related party | 2,448 |
| | |
| 2,448 |
|
Property acquisition costs - including $1,293 to related parties | 1,885 |
| | — |
| | 1,885 |
|
General and administrative-including $171 to related party | 6,683 |
| | — |
| | 6,683 |
|
Depreciation | 20,695 |
| | 1,208 |
| (b) | 21,903 |
|
Total expenses | 99,107 |
| | 4,579 |
| | 103,686 |
|
Total revenues less total expenses | (16,610 | ) | | (520 | ) | | (17,130 | ) |
Gain on sale of real estate assets | 15,005 |
| | — |
| | 15,005 |
|
Net loss | (1,605 | ) | | (520 | ) | | (2,125 | ) |
Plus: net loss attributable to non-controlling interests | (783 | ) | | 104 |
| | (679 | ) |
Net loss attributable to common shareholders | $ | (2,388 | ) | | (416 | ) | | (2,804 | ) |
| | | | | |
Basic and diluted per share amounts attributable to | | | | | |
common shareholders: | | | | | |
Basic and diluted loss per share | $ | (0.17 | ) | | $ | (0.03 | ) | | $ | (0.20 | ) |
| | | | | |
Weighted average number of common shares outstanding: | | | | | |
Basic and diluted | 14,133,352 |
| | 14,133,352 |
| | 14,133,352 |
|
| | | | | |
See accompanying notes to the pro forma unaudited consolidated financial statements.
BRT REALTY TRUST AND SUBSIDIARIES
Notes to Pro Forma Unaudited Consolidated Financial Statements
(Unaudited)
Basis of Pro Forma Presentation
| |
1. | The historical consolidated financial statements of the Trust include the accounts of the Trust and consolidated subsidiaries in which the Trust is presumed to have control in accordance with the consolidation guidance of the Financial Accounting Standards Board Accounting Standards Codification (“ASC”). Investments in entities for which the Trust has the ability to exercise significant influence but does not have financial or operating control, are accounted for under the equity method of accounting. Accordingly, the Trust’s share of the net earnings (or losses) of entities accounted for under the equity method are included in consolidated net income (loss) under the caption “Other Revenues”. Investments in entities for which the Trust does not have the ability to exercise any influence are accounted for under the cost method of accounting. |
| |
2. | Notes to the pro forma unaudited consolidated balance sheet and statement of income for Retreat at Cinco Ranch and other previously reported acquisitions for the year ended September 30, 2015. |
| |
a) | To reflect the interest expense resulting from the mortgage securing Retreat at Cinco Ranch which expense is calculated an interest rate of 4.44% and includes amortization of loan related fees. |
| |
b) | To reflect depreciation expense on the estimated useful life of the properties of 30 years. |
SIGNATURE
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 hereunto duly authorized.
BRT REALTY TRUST
By: /s/ George Zweier
George Zweier
February 8, 2016 Vice President and
Great Neck, NY Chief Financial Officer
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
BRT Realty Trust and Subsidiaries
Great Neck, New York
We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (Nos. 333-190686, 333-128458, 333-118915, and 333-160569) and Form S-8 (Nos. 333-101681, 333-104461, 333-159903 and 333-182044) of BRT Realty Trust and subsidiaries of our report dated February 8, 2016 with respect to the statement of revenues and certain expenses of Retreat at Cinco Ranch for the year ended December 31, 2014, which appears in this Current Report on Form 8-K of BRT Realty Trust.
/s/ BDO USA, LLP
New York, New York
Date: February 8, 2016
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