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EX-23.1 - EX-23.1 - BRT Apartments Corp.a12-19531_1ex23d1.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.   20549

 

FORM 8-K/A

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): June 20, 2012

 

BRT REALTY TRUST

(Exact name of Registrant as specified in charter)

 

Massachusetts

 

001-07172

 

13-2755856

(State or other

 

(Commission file No.)

 

(IRS Employer

jurisdiction of

 

 

 

I.D. No.)

incorporation)

 

 

 

 

 

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):

 

o            Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o            Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o            Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o            Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 



 

Explanatory Note

 

On June 25, 2012, we filed a Current Report on Form 8-K (the “Current Report”) disclosing that we entered into a joint venture and the purchase by the venture of a 325 unit multi-family residential property located in Collierville, Tennessee for a net purchase price of $32.1 million, of which $25.7 million was financed with mortgage debt.

 

We are filing this amendment to the Current Report to include under (i) Item 9.01(a), audited statement of revenues and certain expenses of this property and (ii) Item 9.01(b), unaudited pro forma financial statements of the Trust reflecting the acquisition of properties as described therein.

 

Item 9.01                                           Financial Statements and Exhibits.

 

 

 

Page

(a)

Financial Statements of Businesses Acquired.

 

 

 

 

 

 

(i)

Independent Auditors’ Report

1

 

(ii)

Statements of Revenues and Certain Expenses for the year ended December 31, 2011 and the three months ended March 31, 2012 (Unaudited)

2

 

(iii)

Notes to Statements of Revenues and Certain Expenses

3

 

 

 

 

(b)

Unaudited Pro Forma Consolidated Financial Statements.

 

 

 

 

 

 

(i)

Pro Forma Consolidated Balance Sheet as of March 31, 2012

5

 

(ii)

Pro Forma consolidated Income Statements:

 

 

 

For the six months ended March 31, 2012

 

 

 

For the year ended September 30, 2011

 

 

(iii)

Notes to Pro Forma Consolidated Financial Statements

8

 

(c)                                  Exhibits

 

Exhibit No.

 

Title of Exhibit

23.1

 

Consent of BDO USA, LLP dated August 30, 2012

 



 

Independent Auditors’ Report

 

To the Board of Trustees and Stockholders of

BRT Realty Trust and Subsidiaries

 

We have audited the accompanying statement of revenues and certain expenses of 160 Madison Farms Lane (“Madison at Schilling Farms”) for the year ended December 31, 2011.  The statement of revenues and certain expenses is the responsibility of BRT Realty Trust’s management.  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.  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement.  An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of Madison at Schilling Farms’ internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audit provides a reasonable basis for our opinion.

 

The accompanying statement of revenues and certain expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission for inclusion in a Form 8-K/A of BRT Realty Trust.  As described in Note 2, material amounts that would not be comparable to those resulting from the proposed future operations of Union Square are excluded from the statement of revenues and certain expenses and the statement of revenues and certain expenses is not intended to be a complete presentation of Madison at Schilling Farms’ revenues and expenses.

 

In our opinion, the financial statement referred to above presents fairly, in all material respects, the revenues and certain expenses of Madison at Schilling Farms for the year ended December 31, 2011, on the basis of accounting described in Note 2.

 

 

 

/s/ BDO USA, LLP

 

 

 

 

New York, New York

 

August 30, 2012

 

 

1



 

160 Madison Farms Lane

Statements of Revenues and Certain Expenses

 

 

 

Three Months
Ended
March 31, 2012

 

Year Ended
December 31, 2011

 

 

 

(unaudited)

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

Rental and other income

 

$

889,000

 

$

3,520,000

 

 

 

 

 

 

 

Certain Expenses:

 

 

 

 

 

Real estate taxes

 

140,000

 

543,000

 

Management fees

 

27,000

 

105,000

 

Utilities

 

41,000

 

159,000

 

Other real estate operating expenses

 

181,000

 

703,000

 

Total certain expenses

 

389,000

 

1,510,000

 

 

 

 

 

 

 

Revenues in excess of certain expenses

 

$

500,000

 

$

2,010,000

 

 

See Independent Auditors’ Report and accompanying notes.

 

2



 

160 Madison Farms Lane

Notes to Statements of Revenues and Certain Expenses

 

1.  Organization

 

160 Madison Farms Lane (“Madison at Schilling Farms”) is a 325 unit multi-family garden apartment complex located in Collierville, Tennessee.

 

BRT Realty Trust and subsidiaries (collectively, the “Trust”) is a real estate investment trust. The Trust originates and holds for investment senior mortgage loans secured by commercial and multi-family real estate properties and participates as an equity investor in joint ventures which acquire multi-family residential or other real estate assets.

 

On June 20, 2012, a consolidated joint venture comprised of TRB Schilling LLC, a wholly owned subsidiary of the Trust, and an unaffiliated joint venture partner, acquired Madison at Schilling Farms for a net purchase price of $32.1 million, including $25.7 million of mortgage debt.

 

2.  Basis of Presentation and Significant Accounting Policies

 

The accompanying statements of revenues and certain expenses of Madison at Schilling Farms have been prepared in accordance with Rule 3-14 of Regulation S-X of the Securities and Exchange Commission for inclusion in the Trust’s Current Report on Form 8-K/A.  Accordingly, the statements of revenues and certain expenses exclude 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.

 

In assessing Madison at Schilling Farms, the Trust considered the sources of revenue including, but not limited to, competitive factors present in the local market for residential rentals, the demographics of the area, and the local economic conditions and outlook.  We also considered Madison at Schilling Farms’ expenses including, but not limited to, utility costs, real estate tax rates and maintenance expenses.

 

After reasonable inquiry, the Trust is not aware of any other material factors other than those discussed above that would cause the reported financial information not to be necessarily indicative of future operating results.

 

Use of Estimates

 

The preparation of the statements of revenues and certain expenses in conformity with Regulation S-X Rule 3-14 requires management to make estimates and assumptions that affect the amounts reported in the statements of revenues and certain expenses and accompanying notes.  Actual results could differ from those estimates.

 

Revenue Recognition

 

Rental revenue is recognized on an accrual basis.  Generally leases are for a one-year term and have no renewal options.

 

Income Taxes

 

Madison at Schilling Farms was organized as a limited liability company and is not directly subject to federal income taxes. The limited liability company is subject to Tennessee franchise tax.

 

3



 

BRT REALTY TRUST

Pro Forma Consolidated Financial Statements

(Unaudited)

 

On June 20, 2012, a consolidated joint venture comprised of TRB Schilling LLC, a wholly owned subsidiary of the Trust, and an unaffiliated joint venture partner acquired Madison at Schilling Farms, a 325-unit- multi-family garden apartment complex located in Collierville, Tennessee.  The net purchase price was $32.1 million and included $25.7 million of mortgage debt.

 

On March 22, 2012, a consolidated joint venture comprised of TRB Union Palm LLC, a wholly owned subsidiary of the Trust, and an unaffiliated joint venture partner acquired Union Square, a 542-unit, multi-family garden apartment complex located in Palm Beach Gardens, Florida.  The net purchase price was $59.4 million and included $45.2 million of mortgage debt.

 

The following unaudited pro forma consolidated balance sheet of the Trust as of March 31, 2012, has been prepared as if the acquisition of Madison at Schilling Farms had been completed on March 31, 2012.  The unaudited pro forma consolidated statement of income for the year ended September 30, 2011 is presented as if both acquisitions had been completed on October 1, 2010. The unaudited pro forma consolidated income statement for the six months ended March 31, 2012 is presented as if both acquisitions had been completed on October 1, 2011.

 

The pro forma income statement for the six months ended March 31, 2012 has been adjusted to reflect the income and expense items of Union Square from March 22, 2012 (the date of the acquisition) and March 31, 2012.

 

These pro forma consolidated financial statements are presented for informational purposes only and should be read in conjunction with (a) the Trust’s 2011 Annual Report on Form 10-K and (b) the Trust’s Quarterly Report on Form 10-Q for the six months ended March 31, 2012.

 

The unaudited pro forma 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, 2010, 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.

 

4



 

BRT REALTY TRUST AND SUBSIDIARIES

PRO FORMA - CONSOLIDATED BALANCE SHEET

As of March 31, 2012

(Unaudited)

(Amounts in thousands, except share data)

 

 

 

The Trust
Historical

 

Purchase of
Madison
at
Schilling
Farms

 

The Trust
Pro Forma
As Adjusted

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate loans, all earning interest

 

$

73,503

 

 

$

73,503

 

Deferred fee income

 

(1,302

)

 

(1,302

)

 

 

72,201

 

 

72,201

 

 

 

 

 

 

 

 

 

Real estate properties, net of accumulated depreciation of $2,867

 

131,997

 

$

32,100

 

164,097

 

Investment in unconsolidated ventures

 

5,503

 

 

5,503

 

Cash and cash equivalents

 

37,094

 

(5,277

)

31,817

 

Restricted cash — construction holdbacks

 

33,064

 

 

33,064

 

Available-for-sale securities at market

 

2,509

 

 

2,509

 

Deferred Costs

 

8,501

 

243

 

8,744

 

Other assets

 

8,475

 

457

 

8,932

 

Total Assets

 

$

299,344

 

$

27,523

 

$

326,867

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

Junior subordinated notes

 

$

37,400

 

 

$

37,400

 

Mortgages payable

 

100,306

 

$

25,680

 

125,986

 

Accounts payable and accrued liabilities

 

1,045

 

253

 

1,298

 

Deposits payable

 

2,614

 

40

 

2,654

 

Deferred Income

 

13,730

 

 

13,730

 

Total Liabilities

 

155,095

 

25,973

 

181,068

 

 

 

 

 

 

 

 

 

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, 13,924 issued

 

41,772

 

 

41,772

 

Additional paid-in capital

 

167,044

 

 

167,044

 

 

 

 

 

 

 

 

 

Accumulated other comprehensive income—net unrealized gain on available-for-sale securities

 

548

 

 

548

 

Accumulated deficit

 

(74,169

)

 

(74,169

)

Cost of 451 treasury shares of beneficial interest

 

(3,505

)

 

(3,505

)

Total BRT Realty Trust shareholders’ equity

 

131,690

 

 

 

131,690

 

Non-controlling interests

 

12,559

 

1,550

 

14,109

 

Total Equity

 

144,249

 

1,550

 

145,799

 

Total Liabilities and Equity

 

$

299,344

 

$

27,523

 

$

326,867

 

 

See accompanying notes to the unaudited pro forma consolidated financial statements

 

5



 

BRT REALTY TRUST AND SUBSIDIARIES

PRO FORMA - CONSOLIDATED STATEMENT OF INCOME

For the Six Months Ended March 31, 2012

(Unaudited)

(Amounts in thousands, except share data)

 

 

 

The Trust
Historical

 

Purchase of
Union Square

 

Purchase of
Madison At
Schilling
Farms

 

The Trust
Pro Forma
As Adjusted

 

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

Interest on real estate loans

 

$

3,614

 

 

 

$

3,614

 

Loan fee income

 

840

 

 

 

840

 

Rental revenue from real estate properties

 

1,787

 

$

3,302

 

$

1,794

 

6,883

 

Recovery of previously provided allowances

 

10

 

 

 

10

 

Other, primarily investment income

 

590

 

 

 

590

 

Total revenues

 

6,841

 

3,302

 

1,794

 

11,937

 

Expenses:

 

 

 

 

 

 

 

 

 

Interest on borrowed funds

 

1,342

 

813

(a)

514

(e)

2,669

 

Advisor’s fees, related party

 

444

 

151

(b)

58

(b)

653

 

Property acquisition costs

 

1,793

 

 

 

1,793

 

General and administrative—including $481 to related party

 

3,680

 

 

 

3,680

 

Operating expenses relating to real estate properties

 

1,745

 

1,489

 

768

 

4,002

 

Amortization and depreciation

 

364

 

864

(c)

518

(c)

1,746

 

Total expenses

 

9,368

 

3,317

 

1,858

 

14,543

 

Total revenues less total expenses

 

(2,527

)

(15

)

(64

)

(2,606

)

Equity in loss of unconsolidated ventures

 

(115

)

 

 

(115

)

Loss on sale of available-for-sale securities

 

324

 

 

 

324

 

Gain on sale of loan

 

3,192

 

 

 

3,192

 

Income (loss) from continuing operations

 

874

 

(15

)

(64

)

795

 

 

 

 

 

 

 

 

 

 

 

Discontinued operations:

 

 

 

 

 

 

 

 

 

Gain on sale of real estate assets

 

490

 

 

 

490

 

Net income(loss)

 

1,364

 

(15

)

(64

)

1,285

 

Plus: net loss (income) attributable to non-controlling interests

 

1482

 

(27

)(d)

1

(d)

,456

 

Net income (loss) attributable to common shareholders

 

$

2,846

 

$

(42

)

$

(63

)

$

2,741

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted per share amounts attributable to common shareholders:

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

.17

 

$

 

$

 

$

.17

 

Discontinued operations

 

.03

 

 

 

.03

 

Basic and diluted income per share

 

$

.20

 

$

 

$

 

$

.20

 

 

 

 

 

 

 

 

 

 

 

Amounts attributable to BRT Realty Trust:

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations

 

$

2,356

 

$

(42

)

$

(63

)

$

2,251

 

Discontinued operations

 

490

 

 

 

490

 

Net income (loss)

 

$

2,846

 

$

(42

)

$

(63

)

$

2,741

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding:

 

 

 

 

 

 

 

 

 

Basic and diluted

 

14,015,940

 

14,015,940

 

14,015,940

 

14,015,940

 

 

See accompanying notes to the unaudited pro forma consolidated financial statements

 

6



 

BRT REALTY TRUST AND SUBSIDIARIES

PRO FORMA - CONSOLIDATED STATEMENT OF INCOME

For The Year Ended September 30, 2011

(Unaudited)

 (Dollars in thousands, except share data)

 

 

 

The Trust
Historical

 

Purchase of
Union Square

 

Purchase of
Madison at
Schilling Farms

 

The Trust Pro
Forma As
Adjusted

 

 

 

(Audited)

 

(Unaudited)

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

Interest on real estate loans an purchase money mortgage

 

$

8,500

 

 

 

$

8,500

 

Loan fee income

 

1,828

 

 

 

1,828

 

Rental revenue from real estate properties

 

3,456

 

$

6,787

 

$

3,520

 

13,763

 

Recovery of previously provided allowances

 

3,595

 

 

 

3,595

 

Other, primarily investment income

 

502

 

 

 

502

 

Total revenues

 

17,881

 

6,787

 

3,520

 

28,188

 

Expenses:

 

 

 

 

 

 

 

 

 

Interest on borrowed funds

 

2,112

 

1,721

(a)

1,004

(e)

4,837

 

Advisor’s fees, related party

 

916

 

356

(b)

193

(b)

1,465

 

Foreclosure related professional fees

 

579

 

 

 

579

 

General and administrative—including $847 to related party

 

6,149

 

 

 

6,149

 

Operating expenses relating to real estate properties

 

3,340

 

3,116

 

1,510

 

7,966

 

Amortization and depreciation

 

738

 

1,728

(c)

1,036

(c)

3,502

 

Total expenses

 

13,834

 

6,921

 

3,743

 

24,498

 

Total revenues less total expenses

 

4,047

 

(134

)

(223

)

3,690

 

Equity in earnings of unconsolidated ventures

 

350

 

 

 

350

 

Gain on sale of available-for-sale securities

 

1,319

 

 

 

1,319

 

Loss on extinguishment of debt

 

(2,138

)

 

 

(2,138

)

Income (loss) from continuing operations

 

3,578

 

(134

)

(223

)

3,221

 

 

 

 

 

 

 

 

 

 

 

Discontinued operations:

 

 

 

 

 

 

 

 

 

Gain on sale of real estate assets

 

1,346

 

 

 

1,346

 

Net income (loss)

 

4,924

 

(134

)

(223

)

4,567

 

Plus:net loss (income) attributable to non controlling interests

 

1,450

 

(44

)(d)

6

(d)

1,412

 

Net income (loss) attributable to common shareholders

 

$

6,374

 

$

(178

)

$

(217

)

$

5,979

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted per share amounts attributable to common shareholders:

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations

 

$

.35

 

$

(.01

)

$

(.02

)

$

. 32

 

Discontinued operations

 

.10

 

 

 

.10

 

Basic and diluted income (loss) per share

 

$

.45

 

$

(.01

)

$

(.02

)

$

.42

 

 

 

 

 

 

 

 

 

 

 

Amounts attributable to BRT Realty Trust:

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations

 

$

5,028

 

$

(178

)

$

(217

)

$

4,633

 

Discontinued operations

 

1,346

 

 

 

1,346

 

Net income (loss)

 

$

6,374

 

$

(178

)

$

(217

)

$

5,979

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding:

 

 

 

 

 

 

 

 

 

Basic and diluted

 

14,041,509

 

14,041,509

 

14,041,509

 

14,041,509

 

 

See accompanying notes to the unaudited pro forma consolidated financial statements.

 

7



 

BRT REALTY TRUST AND SUBSIDIARIES

Notes to Pro Forma Consolidated Financial Statements

(Unaudited)

 

Basis of Pro Forma Presentation

 

1.               The consolidated financial statements include the consolidated accounts of the Trust and its investments in limited liability companies in which the Trust is presumed to have control in accordance with the consolidation guidance of the Financial Accounting Standards Board Accounting Standards Codification.  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 under the caption Equity in Earnings (Losses) of Unconsolidated Ventures.  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.

 

In March 2012, the Trust, entered into a joint venture, and the joint venture acquired 4205 Union Square Blvd. (“Union Square”) for a net purchase price of $59.4 million, funded with cash and mortgage debt of $45.2 million.

 

In June 2012 the Trust, entered into a joint venture, and the joint venture acquired 160 Madison Farms Lane (“Madison at Schilling Farms”) for a net purchase price of $32.1 million, funded with cash and  mortgage debt of $25.7 million.

 

2.               Notes to the pro forma consolidated statements of income for both the six months ended March 31, 2012 and the year ended September 30, 2011.

 

a)              To reflect the interest expense resulting from the mortgage that is securing Union Square.  Interest expense is calculated using an interest rate of 3.72%, and also includes amortization of loan related fees.

 

b)             To reflect the advisory fee to be paid by the Trust pursuant the Amended and Restated Advisory Agreement, as amended.

 

c)              To reflect depreciation on the estimated useful life of 27.5 years of the building and the estimated useful life of 10 years for the furniture and fixtures.

 

d)             To reflect the non-controlling interest share of income from the property for its 20%  equity interest in the joint venture.

 

e)              To reflect the interest expense resulting from the mortgage that is securing Madison at Schilling Farms.  Interest expense is calculated using an interest rate of 3.91% and also includes amortization of loan fees.

 

8



 

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 Vice President and Chief Financial Officer

August 30, 2012

 

Great Neck, NY

 

 

9