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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

     
þ
  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
    For the quarterly period ended June 30, 2004
 
or
 
o
   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 0-49782

T REIT, Inc.

(Exact name of registrant as specified in its charter)
     
Virginia   52-2140299
(State or other jurisdiction of
incorporation or organization)		   (I.R.S. Employer
Identification No.)
 
1551 N. Tustin Avenue, Suite 200   (877) 888-7348
Santa Ana, California 92705   (Registrant’s telephone number,
(Address of principal executive offices)   including area code)

N/ A

(Former name)

          Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 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 þ          No o

          Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).     Yes o          No þ

          As of August 16, 2004, there were 4,643,000 shares of common stock of T REIT, Inc. outstanding.

T REIT, INC.

FORM 10-Q

For the Quarterly Period Ended June 30, 2004

INDEX

             
Page
 PART I — FINANCIAL INFORMATION
   Financial Statements     2  
     Consolidated Balance Sheets as of June 30, 2004 (Unaudited) and December 31, 2003     3  
     Consolidated Statements of Operations for the three and six month periods ended June 30, 2004 and 2003 (Unaudited)     4  
     Consolidated Statement of Shareholders’ Equity for the six month period ended June 30, 2004 (Unaudited)     5  
     Consolidated Statements of Cash Flows for the six month period ended June 30, 2004 and 2003 (Unaudited)     6  
     Notes to Consolidated Financial Statements     7  
   Management’s Discussion and Analysis of Financial Condition and Results of Operations     18  
   Quantitative and Qualitative Disclosure About Market Risks     24  
   Controls and Procedures     25  
 PART II — OTHER INFORMATION
   Legal Proceedings     26  
   Changes in Securities and Use of Proceeds     26  
   Defaults Upon Senior Securities     26  
   Submission of Matters to a Vote of Security Holders     26  
   Other Information     27  
   Exhibits and Reports on Form 8-K     27  
 Signatures     30  
 EXHIBIT 31.1
 EXHIBIT 31.2
 EXHIBIT 32.1
 EXHIBIT 32.2

1

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PART I — FINANCIAL INFORMATION

 
Item 1. Financial Statements

      The accompanying June 30, 2004 and 2003 interim financial statements of the Company required to be filed with this Form 10-Q Quarterly Report were prepared by management without audit and commence on the following page, together with the related Notes. In the opinion of management, these interim financial statements present fairly the financial condition, results of operations and cash flows of the Company, but should be read in conjunction with the consolidated financial statements of the Company for the year ended December 31, 2003 included in our Annual Report on Form 10-K/ A previously filed with the Securities and Exchange Commission.

2

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T REIT, INC.

CONSOLIDATED BALANCE SHEETS
                   
June 30, December 31,
2004 2003
(Unaudited)
ASSETS
Real estate investments:
               
 
Operating properties, net
  $ 7,008,000     $ 15,747,000  
 
Investments in unconsolidated real estate
    25,741,000       19,331,000  
     
     
 
      32,749,000       35,078,000  
Cash and cash equivalents
    346,000       12,189,000  
Investment in marketable securities
    465,000       —  
Accounts receivable, net
    96,000       37,000  
Accounts receivable from related parties
    418,000       538,000  
Real estate deposits
    —       11,000  
Other assets, net
    363,000       870,000  
Note receivable
    9,339,000       647,000  
     
     
 
Total assets
  $ 43,776,000     $ 49,370,000  
     
     
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts payable and accrued liabilities
  $ 868,000     $ 1,635,000  
Distributions payable
    318,000       318,000  
Security deposits and prepaid rent
    54,000       59,000  
Notes payable
    5,071,000       9,250,000  
     
     
 
      6,311,000       11,262,000  
Commitments and contingencies
               
Shareholders’ equity:
               
Common stock, $.01 par value; 10,000,000 shares authorized; 4,720,000 shares issued, 4,643,000 and 4,646,000 outstanding at June 30, 2004 and December 31, 2003, respectively
    47,000       47,000  
Additional paid-in capital
    41,265,000       41,265,000  
Treasury stock, 77,000 shares and 74,000 at June 30, 2004 and December 31, 2003, respectively
    (707,000 )     (675,000 )
Distributions in excess of earnings
    (3,131,000 )     (2,529,000 )
Other comprehensive loss
    (9,000 )     —  
     
     
 
Total shareholders’ equity
    37,465,000       38,108,000  
     
     
 
Total liabilities and shareholders’ equity
  $ 43,776,000     $ 49,370,000  
     
     
 

The accompanying notes are an integral part of these consolidated financial statements.

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T REIT, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)
                                   
Three Months Ended Six Months Ended
June 30, June 30,
2004 2003 2004 2003
(As restated) (As restated)
Revenues
                               
 
Rental income
  $ 239,000     $ 272,000     $ 485,000     $ 506,000  
     
     
     
     
 
      239,000       272,000       485,000       506,000  
Expenses
                               
 
Rental expenses
    96,000       61,000       133,000       124,000  
 
General and administrative
    265,000       221,000       356,000       333,000  
 
Depreciation and amortization
    38,000       37,000       75,000       74,000  
 
Interest (including amortization of deferred financing fees)
    79,000       63,000       153,000       125,000  
     
     
     
     
 
      478,000       382,000       717,000       656,000  
     
     
     
     
 
Loss before other income and discontinued operations
    (239,000 )     (110,000 )     (232,000 )     (150,000 )
Other income
                               
 
Interest income
    139,000       41,000       179,000       65,000  
 
Dividend income
    21,000       —       61,000       —  
 
Gain on sale of marketable securities
    3,000       —       50,000       —  
 
Equity in earnings of unconsolidated real estate
    55,000       406,000       335,000       964,000  
     
     
     
     
 
Income (loss) from continuing operations before discontinued operations
    (21,000 )     337,000       393,000       879,000  
Gain (loss) on sale of real estate investments
    (9,000 )     —       813,000       (191,000 )
Income (loss) from discontinued operations — property held for sale, net
    (4,000 )     546,000       101,000       767,000  
     
     
     
     
 
Net income (loss)
  $ (34,000 )   $ 883,000     $ 1,307,000     $ 1,455,000  
     
     
     
     
 
Net income (loss) per common share:
                               
Basic and diluted:
                               
 
Continuing operations
  $ (0.01 )   $ 0.07     $ 0.08     $ 0.18  
 
Discontinued operations
  $ (0.00 )   $ 0.12     $ 0.20     $ 0.12  
     
     
     
     
 
Total net income (loss) per common share
  $ (0.01 )   $ 0.19     $ 0.28     $ 0.30  
     
     
     
     
 
Diluted:
                               
Weighted average common shares outstanding — basic
    4,643,000       4,695,000       4,644,000       4,696,000  
Weighted average common shares outstanding — diluted
    4,643,000       4,704,000       4,644,000       4,696,000  
Dividends declared per share
  $ 0.21     $ 0.21     $ 0.41     $ 0.41  
     
     
     
     
 

The accompanying notes are an integral part of these consolidated financial statements.

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T REIT, INC.

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
For the Six Months Ended June 30, 2004
(Unaudited)
                                                         
Common Additional Distributions Accumulated Net
Number of Stock Par Paid-In Treasury in Excess of Comprehensive
Shares Value Capital Stock Earnings Income/(Loss) Total
BALANCE — December 31, 2003
     4,646,000     $ 47,000     $ 41,265,000     $ (675,000 )   $ (2,530,000 )   $ —     $ 38,107,000  
Net Income
    —       —       —       —       1,307,000       —       1,307,000  
Comprehensive income (loss)
    —       —       —       —       —       (9,000 )     (9,000 )
                                                     
 
Comprehensive income
                                                    1,298,000  
Distributions
    —       —       —       —       (1,908,000 )     —       (1,908,000 )
Repurchase of Shares
    (3,000 )     —       —       (32,000 )     —       —       (32,000 )
     
     
     
     
     
     
     
 
BALANCE — June 30, 2004
     4,643,000     $ 47,000     $ 41,265,000     $ (707,000 )   $ (3,131,000 )   $ (9,000 )   $ 37,465,000  
     
     
     
     
     
     
     
 

The accompanying notes are an integral part of these consolidated financial statements.

5

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T REIT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)
                     
Six Months Six Months
June 30, 2004 June 30, 2003
(As restated)
CASH FLOWS FROM OPERATING ACTIVITIES
                
Net income
  $ 1,307,000     $ 1,455,000  
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
               
 
Equity in earnings of unconsolidated real estate
    (335,000 )     (964,000 )
 
(Gain)/ loss on sale of real estate investments
    (813,000 )     191,000  
 
Gain on sale of marketable securities
    (50,000 )     —  
 
Depreciation — continuing operations
    75,000       74,000  
 
Depreciation — discontinued operations
    77,000       203,000  
 
Deferred financing costs
    11,000       89,000  
Change in operating assets and liabilities:
               
 
Accounts receivable
    (58,000 )     (116,000 )
 
Accounts receivable from related parties
    120,000       239,000  
 
Other assets
    245,000       (815,000 )
 
Accounts payable and accrued liabilities
    (607,000 )     (185,000 )
 
Security deposits and prepaid rent
    (6,000 )     (45,000 )
     
     
 
   
Net cash (used in) provided by operating activities
    (34,000 )     126,000  
CASH FLOWS FROM INVESTING ACTIVITIES
                
 
Purchase of marketable securities
    (4,229,000 )     —  
 
Proceeds from sale of marketable securities
    3,806,000       —  
 
Purchase of real estate operating properties
    —       (8,891,000 )
 
Purchase of investments in unconsolidated real estate
    (6,587,000 )     (5,025,000 )
 
Distributions received from investments in unconsolidated real estate
    1,058,000       1,049,000  
 
Capital expenditures
    (1,662,000 )     —  
 
Proceeds from disposition of property
    2,452,000       3,843,000  
 
Collections of notes receivable
    8,000       4,000  
 
Real estate deposits applied to purchases
    11,000       3,919,000  
     
     
 
   
Net cash used in investing activities
    (5,143,000 )     (5,101,000 )
CASH FLOWS FROM FINANCING ACTIVITIES
                
 
Borrowings under notes payable
    —       5,000,000  
 
Principal payments on notes payable
    (4,936,000 )     (3,059,000 )
 
Borrowings on line of credit
    710,000       —  
 
Repayment on line of credit
    (500,000 )     —  
 
Distributions paid
    (1,908,000 )     (1,928,000 )
 
Repurchase of shares
    (32,000 )     (16,000 )
     
     
 
   
Net cash used in financing a