BRT REALTY TRUST
60 Cutter Mill Road, Suite 303
Great Neck, NY 11021
(516) 466-3100
www.BRTREALTY.com
BRT Realty Trust
2 0 1 2 A n n u a l R e p o r t
BRT REALTY TRUST
BRT Realty Trust is a business trust organized in Massachusetts. BRT originates and holds for investment senior mortgage loans
secured by commercial and multi-family real estate property in the United States. Additionally, BRT participates as an equity investor
in the purchase of multi-family properties. The loans BRT originate generally have relatively high yields and are short-term or bridge
loans with a duration ranging from six months to one year. BRT’s policy is to lend at a floating rate of interest based on a spread
over the prime rate, with a stated minimum rate, though BRT originates fixed rate loans as circumstances dictate. BRT receives an
origination fee for the loans it originates. The multi-family properties are generally acquired with venture partners where the Trust
contributes 80% to 90% of the equity in each transaction. BRT conducts its operations to qualify as a real estate investment trust, or
REIT, for Federal income tax purposes.
BRT’s shares of beneficial interest trade on the New York Stock Exchange under the symbol “BRT.” As of the close of fiscal 2012
there were 14,053,362 shares outstanding and 1,044 holders of record.
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
FINANCIAL HIGHLIGHTS
Total revenues 19,579 17,881
Interest on borrowed funds 4,729 2,112
Year ended September 30,
Interest and fees on loans
Rental and other revenue from real estate properties
Recovery of previously provided allowance
Other income
Property acquisition costs
General and administrative expenses
Operating expenses relating to real estate properties
Depreciation and amortization
Other expenses
Total expenses
Total revenues less total expenses
Equity in earnings of unconsolidated ventures
Gain on sale of available-for-sale securities
Gain on sale of loan
Loss on early extinguishment of debt
Income from discontinued operations
Net income
Plus: net loss attributable to non-controlling interests
Net income (loss) attributable to common shareholders
Income from continuing operations
Income from discontinued operations
Basic and diluted earnings per share of beneficial interest
Weighted average shares - basic and diluted
September 30,
Total assets
Earning real estate loans
Real estate loans held for sale
Real estate properties
Cash and cash equivalents
Restricted cash - construction holdbacks
Mortgages payable
Junior subordinated notes
Total BRT Realty Trust shareholders’ equity
2,004
1,104
23,447
2012
$ 9,530
8,675
156
1,218
2,407
7,161
6,042
(3,868)
829
605
3,192
-
792
1,550
2,880
$ 4,430
$ 0.26
0.06
$ 0.32
37,096
-
190,317
78,245
55,252
169,284
37,400
133,449
2011
$ 10,328
3,456
3,595
502
-
6,149
3,340
738
1,495
13,834
4,047
350
1,319
-
(2,138)
1,346
4,924
1,450
$ 6,374
$ 0.35
0.10
$ 0.45
67,266
8,446
59,277
44,025
-
14,417
37,400
129,063
14,035,972
14,041,569
2012
2011
$ 385,956
$ 191,012
BRT REALTY TRUST
60 Cutter Mill Road, Suite 303
Great Neck, NY 11021
(516) 466-3100
www.BRTREALTY.com
BRT Realty Trust
2 0 1 2 A n n u a l R e p o r t
BRT REALTY TRUST
BRT Realty Trust is a business trust organized in Massachusetts. BRT originates and holds for investment senior mortgage loans
secured by commercial and multi-family real estate property in the United States. Additionally, BRT participates as an equity investor
in the purchase of multi-family properties. The loans BRT originate generally have relatively high yields and are short-term or bridge
loans with a duration ranging from six months to one year. BRT’s policy is to lend at a floating rate of interest based on a spread
over the prime rate, with a stated minimum rate, though BRT originates fixed rate loans as circumstances dictate. BRT receives an
origination fee for the loans it originates. The multi-family properties are generally acquired with venture partners where the Trust
contributes 80% to 90% of the equity in each transaction. BRT conducts its operations to qualify as a real estate investment trust, or
REIT, for Federal income tax purposes.
BRT’s shares of beneficial interest trade on the New York Stock Exchange under the symbol “BRT.” As of the close of fiscal 2012
there were 14,053,362 shares outstanding and 1,044 holders of record.
FINANCIAL HIGHLIGHTS
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
Year ended September 30,
Interest and fees on loans
Rental and other revenue from real estate properties
Recovery of previously provided allowance
Other income
2012
$ 9,530
8,675
156
1,218
2011
$ 10,328
3,456
3,595
502
Total revenues 19,579 17,881
Interest on borrowed funds 4,729 2,112
Property acquisition costs
General and administrative expenses
Operating expenses relating to real estate properties
Depreciation and amortization
Other expenses
Total expenses
Total revenues less total expenses
Equity in earnings of unconsolidated ventures
Gain on sale of available-for-sale securities
Gain on sale of loan
Loss on early extinguishment of debt
Income from discontinued operations
Net income
Plus: net loss attributable to non-controlling interests
Net income (loss) attributable to common shareholders
Income from continuing operations
Income from discontinued operations
Basic and diluted earnings per share of beneficial interest
Weighted average shares - basic and diluted
September 30,
Total assets
Earning real estate loans
Real estate loans held for sale
Real estate properties
Cash and cash equivalents
Restricted cash - construction holdbacks
Mortgages payable
Junior subordinated notes
Total BRT Realty Trust shareholders’ equity
2,407
7,161
6,042
2,004
1,104
23,447
(3,868)
829
605
3,192
-
792
1,550
2,880
$ 4,430
$ 0.26
0.06
$ 0.32
-
6,149
3,340
738
1,495
13,834
4,047
350
1,319
-
(2,138)
1,346
4,924
1,450
$ 6,374
$ 0.35
0.10
$ 0.45
14,035,972
14,041,569
2012
2011
$ 385,956
$ 191,012
37,096
-
190,317
78,245
55,252
169,284
37,400
133,449
67,266
8,446
59,277
44,025
-
14,417
37,400
129,063
TO OUR SHAREHOLDERS:
In last year’s annual letter to shareholders (included in our 2011 Annual Report), we noted that the company had significant
available cash resources. We also noted that we had evaluated the profitable long-term use of these cash resources and
decided to expand our business model by participating in the acquisition of multi-family real properties through equity investments
in joint ventures with real estate professionals experienced in the field. Our concept was to provide the equity required to bridge
the gap between the mortgage debt available and our co-venturer’s available equity. During the 2012 fiscal year, we explored
numerous multi-family property opportunities and commencing with the second quarter we, together with joint venture partners,
acquired five multi-family garden apartment properties, containing 1,451 units, for a total consideration of approximately $125.5
million, with $89.8 million of the required consideration provided by mortgage loans and an equity investment of approximately
$35.7 million, with our company providing $28.6 million of the equity. In our typical joint venture transaction, we provided 80%
of the equity need and our co-venturer provided 20%.
Since the end of the fiscal year, we have acquired with joint venture partners three additional multi-family properties containing
884 units for an additional equity investment of $14 million. We continue to be pro-active in seeking additional investments in
multi-family properties. Our activity in the multi-family property area represents longer term investments, which we expect to
provide us with satisfactory cash returns and longer term incremental values.
During the acquisition stage of a multi-family property investment, we incur necessary acquisition expenses which vary in
amount from acquisition to acquisition. In accordance with generally accepted accounting principles, acquisition expenses
must be expensed when incurred and, therefore, in the year a property is acquired, these “one-time expenses” adversely affect
our net income. In addition, depreciation and amortization expenses applicable to property ownership are non-cash expenses
which affect our net income, but not our cash return. Because a significant portion of our revenues and expenses are now
derived from our ownership of multi-family properties, we now report funds from operations in our public earnings releases, in
addition to reporting net income. Funds from operations is a widely recognized measure of the performance of an equity REIT
and is frequently used by analysts, investors and other parties in evaluating equity REITs. In fiscal 2012, we reported net income
and net income per share of $4.43 million and $.32, respectively, and funds from operations of $5.94 million and $.42 per share,
respectively. The manner in which funds from operations is calculated, a reconciliation of funds from operations to net income
and a brief discussion on the limitations on the use of funds from operations are set forth at pages 28-29 of our Form 10-K for
the year ended September 30, 2012, which constitutes a part of this Annual Report.
Rental revenues from our multi-family property activities totaled $5.46 million in fiscal 2012 and real estate operating expenses
and interest on mortgages related to these investments totaled $4.40 million. On a property level basis, the multi-family properties
acquired by us generated $1.06 million in cash. Since the five properties acquired in fiscal 2012 were only owned for a portion
of the year (ranging from three months to nine months), property level operations relating to these properties should produce a
greater cash return in fiscal 2013. In addition, the three properties acquired by us in October and November 2012 will positively
impact funds from operations in fiscal 2013. We anticipate our multi-family business to be additive to funds from operations in
2013 and in future years.
We continue to actively pursue our traditional short-term lending business in the current competitive real estate lending environment.
The lending segment of our business was profitable in fiscal 2012. At year-end (and as we write this letter), all of our outstanding loans
are performing and in fiscal 2012 we were not required to take any provisions for loan losses and did not incur any foreclosure
related fees or expenses. As the economy improves in 2013, we look forward to an active year on the lending side of our business.
We also want to bring you up-to-date on the activities of our Newark Joint Venture. We own a 50.1% equity interest in the Newark
Joint Venture. The Newark Joint Venture owns two principal development sites in downtown Newark, New Jersey (Teachers’
Village and Market Street). The Newark Joint Venture has been concentrating on developing the Teachers’ Village Project (a mix
of residential, educational and retail facilities). Construction activities are underway on five buildings at the Teachers’ Village
project. Steel framing has been completed on two buildings, and installing the exterior facades of these two buildings is underway.
With respect to the remaining three buildings, site work has commenced and piles are being driven on one building and demolition
activities are underway with respect to the remaining two sites. It is estimated that the two buildings currently being constructed
will be ready for occupancy in the summer of 2013. The balance of the buildings should be ready for occupancy in the spring
of 2014. In 2012, the Newark Joint Venture consummated financing of $68.5 million which, together with $25.8 million of New
Markets Tax Credit net proceeds, is being used to construct the five buildings. These buildings
will provide space for three charter schools, a day care center, approximately 54,000 sq. ft. of retail space and approximately
123 residential units. The Teachers’ Village project also contemplates the construction of three additional buildings contain-
ing an aggregate of 82 residential units and 9,700 square feet of retail space, to be financed with an additional $30 million
from private and government sources. This financing is not in place and pre-construction activities will not commence on
this phase of the project until financing is obtained.
Much has been accomplished since the Newark Joint Venture was organized in 2009. Completion and occupancy of the first
two buildings at the Teachers’ Village Project will represent a significant milestone.
During fiscal 2012 we achieved favorable operating results in our lending activities, made significant achievements in the
multi-family section and experienced significant progress in the development of the properties owned by the Newark Joint
Venture. We are hopeful that each of these activities will continue to show progress in 2013. We are confident that we have
taken steps for the long-term benefit of our company and our shareholders.
Our entire team put in substantial efforts on behalf of our company in 2012. We are grateful for their diligence and hard work.
We thank our Board of Trustees for their time and effort and their advice and guidance and we thank you, our shareholders,
for your confidence and support.
A very happy and a healthy New Year to all.
Sincerely yours,
Fredric H. Gould Jeffrey A. Gould
Chairman of the Board President and Chief Executive Officer
January 15, 2013
Certain statements contained in this letter are “forward-looking statements” within the meaning of the private securities
litigation reform Act of 1995. Such forward-looking statements are subject to risk, uncertainties and other factors
(including the risk factors set forth on page 15 through 23 of our Annual Report on Form 10-K) that could cause actual
results to differ materially from future results expressed or implied by such forward-looking statements.
The Trust’s most recent Annual Report on Form 10-K for the fiscal year ended September 30, 2012 is included herein.
For additional information about the Trust, we refer you to the Annual Report on Form 10-K for the fiscal year ended
September 30, 2012 and other documents filed by the Trust with the Securities and Exchange Commission. All filings
we have made with the Securities and Exchange Commission can be found on our website www.brtrealty.com.
In 2012, our chief executive officer’s certification regarding the New York Stock Exchange’s corporate governance listing
standards was filed with the New York Stock Exchange without qualification and in a timely fashion. In addition, the certifications
of our chief executive officer and chief financial officer required to be filed with the Securities and Exchange Commission
under Section 302 of the Sarbanes-Oxley Act with respect to the quality of our public disclosure have been filed as an exhibit
to our annual report on Form 10K.
CORPORATE DIRECTORY
Fredric H. Gould
Alan Ginsburg
Chairman of the Board of Trustees;
Trustee; Chairman of Concord
Isaac Kalish
Chairman of the Board of Georgetown
Management Company and AHG
Assistant Treasurer; Assistant Treasurer
Partners, Inc., the Managing General
Group of Companies
of One Liberty Properties, Inc.
Partner of Gould Investors L.P., a
real estate partnership; President of
REIT Management Corp., Advisor to
the Trust; Chairman of the Board of
Elie Weiss
Trustee; Private Investor
Directors of One Liberty Properties Inc.;
Israel Rosenzweig
Director of East Group Properties, Inc.
Registrar, Transfer Agent,
Distribution Disbursing Agent
American Stock Transfer and
Trust Company
59 Maiden Lane
New York, New York 10038
Jeffrey A. Gould
Trustee; President and Chief Executive
Officer; Senior Vice President of
Georgetown Partners, Inc.; Senior
Vice President and Director of One
Liberty Properties, Inc.
Matthew J. Gould
Trustee; Senior Vice President;
President of Georgetown Partners, Inc.;
Senior Vice President of the Advisor;
Senior Vice President and Director of
One Liberty Properties, Inc.
Gary J. Hurand
Trustee; President of Dawn Donut
Systems Inc.; President of Management
Diversified Inc.; Director of Citizens
Republic Bancorp.
Louis Grassi
Trustee; Managing Partner, Grassi & Co.,
CPA’s; Director, Flushing Financial Corp.
Jeffrey Rubin
Trustee; Chief Executive Officer and
President of JR Group.
Vice Chairman of the Board of
Trustees; Senior Vice President;
Senior Vice President of Georgetown
Partners, Inc.; Senior Vice President
of One Liberty Properties, Inc.
Auditors
2011-2012
BDO USA, LLP
David W. Kalish
Senior Vice President-Finance; Senior
Vice President and Chief Financial
Officer of Georgetown Partners, Inc.
Senior Vice President and Chief Financial
Officer of One Liberty Properties, Inc.
401 Broadhollow Road
Melville, NY 11747
2010
Ernst & Young LLP
5 Times Square
New York, New York 10036
Simeon Brinberg
Senior Vice President and Secretary;
Senior Vice President of Georgetown
Partners, Inc; Senior Vice President
of One Liberty Properties, Inc.
Mark H. Lundy
Senior Vice President; Senior Vice
President and Secretary of One
Liberty Properties, Inc; Senior Vice
President of Georgetown Partners, Inc.
George E. Zweier
Vice President and Chief Financial Officer
Mitchell K. Gould
Executive Vice President
Form 10-K Available
A copy of the annual report (Form 10-K)
filed with the Securities and Exchange
Commission may be obtained without
charge by writing to the Secretary,
BRT Realty Trust, 60 Cutter Mill Road,
Suite 303, Great Neck,New York 11021.
Common Stock
The company’s common stock is listed
on the New York Stock Exchange under
the ticker symbol BRT.
Web Site Address
www.BRTRealty.com
Kenneth F. Bernstein
Trustee; President and Chief Executive
Officer of Acadia Realty Trust
Lonnie Halpern
Vice President
Jonathan H. Simon
Alysa Block
Trustee; President and Chief Executive
Officer of Simon Development Group
Properties, Inc.
Treasurer; Treasurer of One Liberty
TO OUR SHAREHOLDERS:
In last year’s annual letter to shareholders (included in our 2011 Annual Report), we noted that the company had significant
available cash resources. We also noted that we had evaluated the profitable long-term use of these cash resources and
decided to expand our business model by participating in the acquisition of multi-family real properties through equity investments
in joint ventures with real estate professionals experienced in the field. Our concept was to provide the equity required to bridge
the gap between the mortgage debt available and our co-venturer’s available equity. During the 2012 fiscal year, we explored
numerous multi-family property opportunities and commencing with the second quarter we, together with joint venture partners,
acquired five multi-family garden apartment properties, containing 1,451 units, for a total consideration of approximately $125.5
million, with $89.8 million of the required consideration provided by mortgage loans and an equity investment of approximately
$35.7 million, with our company providing $28.6 million of the equity. In our typical joint venture transaction, we provided 80%
of the equity need and our co-venturer provided 20%.
Since the end of the fiscal year, we have acquired with joint venture partners three additional multi-family properties containing
884 units for an additional equity investment of $14 million. We continue to be pro-active in seeking additional investments in
multi-family properties. Our activity in the multi-family property area represents longer term investments, which we expect to
provide us with satisfactory cash returns and longer term incremental values.
During the acquisition stage of a multi-family property investment, we incur necessary acquisition expenses which vary in
amount from acquisition to acquisition. In accordance with generally accepted accounting principles, acquisition expenses
must be expensed when incurred and, therefore, in the year a property is acquired, these “one-time expenses” adversely affect
our net income. In addition, depreciation and amortization expenses applicable to property ownership are non-cash expenses
derived from our ownership of multi-family properties, we now report funds from operations in our public earnings releases, in
addition to reporting net income. Funds from operations is a widely recognized measure of the performance of an equity REIT
and is frequently used by analysts, investors and other parties in evaluating equity REITs. In fiscal 2012, we reported net income
and net income per share of $4.43 million and $.32, respectively, and funds from operations of $5.94 million and $.42 per share,
respectively. The manner in which funds from operations is calculated, a reconciliation of funds from operations to net income
and a brief discussion on the limitations on the use of funds from operations are set forth at pages 28-29 of our Form 10-K for
Rental revenues from our multi-family property activities totaled $5.46 million in fiscal 2012 and real estate operating expenses
and interest on mortgages related to these investments totaled $4.40 million. On a property level basis, the multi-family properties
acquired by us generated $1.06 million in cash. Since the five properties acquired in fiscal 2012 were only owned for a portion
of the year (ranging from three months to nine months), property level operations relating to these properties should produce a
greater cash return in fiscal 2013. In addition, the three properties acquired by us in October and November 2012 will positively
impact funds from operations in fiscal 2013. We anticipate our multi-family business to be additive to funds from operations in
2013 and in future years.
We continue to actively pursue our traditional short-term lending business in the current competitive real estate lending environment.
The lending segment of our business was profitable in fiscal 2012. At year-end (and as we write this letter), all of our outstanding loans
are performing and in fiscal 2012 we were not required to take any provisions for loan losses and did not incur any foreclosure
related fees or expenses. As the economy improves in 2013, we look forward to an active year on the lending side of our business.
We also want to bring you up-to-date on the activities of our Newark Joint Venture. We own a 50.1% equity interest in the Newark
Joint Venture. The Newark Joint Venture owns two principal development sites in downtown Newark, New Jersey (Teachers’
Village and Market Street). The Newark Joint Venture has been concentrating on developing the Teachers’ Village Project (a mix
of residential, educational and retail facilities). Construction activities are underway on five buildings at the Teachers’ Village
With respect to the remaining three buildings, site work has commenced and piles are being driven on one building and demolition
activities are underway with respect to the remaining two sites. It is estimated that the two buildings currently being constructed
will be ready for occupancy in the summer of 2013. The balance of the buildings should be ready for occupancy in the spring
of 2014. In 2012, the Newark Joint Venture consummated financing of $68.5 million which, together with $25.8 million of New
Markets Tax Credit net proceeds, is being used to construct the five buildings. These buildings
will provide space for three charter schools, a day care center, approximately 54,000 sq. ft. of retail space and approximately
123 residential units. The Teachers’ Village project also contemplates the construction of three additional buildings contain-
ing an aggregate of 82 residential units and 9,700 square feet of retail space, to be financed with an additional $30 million
from private and government sources. This financing is not in place and pre-construction activities will not commence on
this phase of the project until financing is obtained.
Much has been accomplished since the Newark Joint Venture was organized in 2009. Completion and occupancy of the first
two buildings at the Teachers’ Village Project will represent a significant milestone.
During fiscal 2012 we achieved favorable operating results in our lending activities, made significant achievements in the
multi-family section and experienced significant progress in the development of the properties owned by the Newark Joint
Venture. We are hopeful that each of these activities will continue to show progress in 2013. We are confident that we have
taken steps for the long-term benefit of our company and our shareholders.
Our entire team put in substantial efforts on behalf of our company in 2012. We are grateful for their diligence and hard work.
We thank our Board of Trustees for their time and effort and their advice and guidance and we thank you, our shareholders,
for your confidence and support.
A very happy and a healthy New Year to all.
which affect our net income, but not our cash return. Because a significant portion of our revenues and expenses are now
Sincerely yours,
the year ended September 30, 2012, which constitutes a part of this Annual Report.
January 15, 2013
Fredric H. Gould Jeffrey A. Gould
Chairman of the Board President and Chief Executive Officer
Certain statements contained in this letter are “forward-looking statements” within the meaning of the private securities
litigation reform Act of 1995. Such forward-looking statements are subject to risk, uncertainties and other factors
(including the risk factors set forth on page 15 through 23 of our Annual Report on Form 10-K) that could cause actual
results to differ materially from future results expressed or implied by such forward-looking statements.
The Trust’s most recent Annual Report on Form 10-K for the fiscal year ended September 30, 2012 is included herein.
For additional information about the Trust, we refer you to the Annual Report on Form 10-K for the fiscal year ended
September 30, 2012 and other documents filed by the Trust with the Securities and Exchange Commission. All filings
we have made with the Securities and Exchange Commission can be found on our website www.brtrealty.com.
project. Steel framing has been completed on two buildings, and installing the exterior facades of these two buildings is underway.
In 2012, our chief executive officer’s certification regarding the New York Stock Exchange’s corporate governance listing
standards was filed with the New York Stock Exchange without qualification and in a timely fashion. In addition, the certifications
of our chief executive officer and chief financial officer required to be filed with the Securities and Exchange Commission
under Section 302 of the Sarbanes-Oxley Act with respect to the quality of our public disclosure have been filed as an exhibit
to our annual report on Form 10K.
CORPORATE DIRECTORY
Fredric H. Gould
Alan Ginsburg
Chairman of the Board of Trustees;
Trustee; Chairman of Concord
Isaac Kalish
Chairman of the Board of Georgetown
Management Company and AHG
Assistant Treasurer; Assistant Treasurer
Partners, Inc., the Managing General
Group of Companies
of One Liberty Properties, Inc.
Partner of Gould Investors L.P., a
real estate partnership; President of
REIT Management Corp., Advisor to
the Trust; Chairman of the Board of
Elie Weiss
Trustee; Private Investor
Directors of One Liberty Properties Inc.;
Israel Rosenzweig
Director of East Group Properties, Inc.
Registrar, Transfer Agent,
Distribution Disbursing Agent
American Stock Transfer and
Trust Company
59 Maiden Lane
New York, New York 10038
Jeffrey A. Gould
Trustee; President and Chief Executive
Officer; Senior Vice President of
Georgetown Partners, Inc.; Senior
Vice President and Director of One
Liberty Properties, Inc.
Matthew J. Gould
Trustee; Senior Vice President;
President of Georgetown Partners, Inc.;
Senior Vice President of the Advisor;
Senior Vice President and Director of
One Liberty Properties, Inc.
Gary J. Hurand
Trustee; President of Dawn Donut
Systems Inc.; President of Management
Diversified Inc.; Director of Citizens
Republic Bancorp.
Louis Grassi
Trustee; Managing Partner, Grassi & Co.,
CPA’s; Director, Flushing Financial Corp.
Jeffrey Rubin
Trustee; Chief Executive Officer and
President of JR Group.
Vice Chairman of the Board of
Trustees; Senior Vice President;
Senior Vice President of Georgetown
Partners, Inc.; Senior Vice President
of One Liberty Properties, Inc.
Auditors
2011-2012
BDO USA, LLP
David W. Kalish
Senior Vice President-Finance; Senior
Vice President and Chief Financial
Officer of Georgetown Partners, Inc.
Senior Vice President and Chief Financial
Officer of One Liberty Properties, Inc.
401 Broadhollow Road
Melville, NY 11747
2010
Ernst & Young LLP
5 Times Square
New York, New York 10036
Simeon Brinberg
Senior Vice President and Secretary;
Senior Vice President of Georgetown
Partners, Inc; Senior Vice President
of One Liberty Properties, Inc.
Mark H. Lundy
Senior Vice President; Senior Vice
President and Secretary of One
Liberty Properties, Inc; Senior Vice
President of Georgetown Partners, Inc.
George E. Zweier
Vice President and Chief Financial Officer
Mitchell K. Gould
Executive Vice President
Form 10-K Available
A copy of the annual report (Form 10-K)
filed with the Securities and Exchange
Commission may be obtained without
charge by writing to the Secretary,
BRT Realty Trust, 60 Cutter Mill Road,
Suite 303, Great Neck,New York 11021.
Common Stock
The company’s common stock is listed
on the New York Stock Exchange under
the ticker symbol BRT.
Web Site Address
www.BRTRealty.com
Kenneth F. Bernstein
Trustee; President and Chief Executive
Officer of Acadia Realty Trust
Lonnie Halpern
Vice President
Jonathan H. Simon
Alysa Block
Trustee; President and Chief Executive
Officer of Simon Development Group
Properties, Inc.
Treasurer; Treasurer of One Liberty
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
! ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 2012
Or
"
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 001-07172
BRT REALTY TRUST
(Exact name of registrant as specified in its charter)
Massachusetts
(State or other jurisdiction
of incorporation or organization)
60 Cutter Mill Road, Great Neck, New York
(Address of principal executive offices)
13-2755856
(I.R.S. employer
identification no.)
11021
(Zip Code)
516-466-3100
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Name of each exchange on which registered
Shares of Beneficial Interest, $3.00 Par Value
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
NONE
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes " No !
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.
Yes " No !
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ! No "
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files). Yes ! No "
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this
chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K "
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or
a smaller reporting company. See definitions of ‘‘large accelerated filer,’’ ‘‘accelerated filer’’ and ‘‘smaller reporting company’’
in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer "
Accelerated filer !
Non-accelerated filer "
Smaller reporting company "
Indicate by check mark whether registrant is a shell company (as defined in Exchange Act Rule 12b-2). Yes " No !
The aggregate market value of voting and non-voting common equity held by non-affiliates of the registrant was
approximately $58.2 million based on the last sale price of the common equity on March 31, 2012, which is the last business
day of the registrant’s most recently completed second quarter.
As of November 30, 2012, the registrant had 14,053,362 Shares of Beneficial Interest outstanding.
Portions of the proxy statement for the annual meeting of shareholders of BRT Realty Trust to be filed not later than
January 28, 2013 are incorporated by reference into Part III of this Form 10-K.
DOCUMENTS INCORPORATED BY REFERENCE
TABLE OF CONTENTS
Form 10-K
Item No.
Page(s)
PART I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.
Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.
PART II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.
6.
7.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Management’s Discussion and Analysis of Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . .
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.
Changes In and Disagreements With Accountants on Accounting and Financial
9.
Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9A. Controls and Procedures
9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . .
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11.
Security Ownership of Certain Beneficial Owners and Management and Related
12.
13.
14.
Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Certain Relationships and Related Transactions, and Director Independence . . . . . .
Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15.
2
2
15
23
25
25
25
25
25
27
29
41
41
41
42
42
43
43
43
43
43
44
44
44
50
We refer to certain mortgages as being ‘‘non-recourse (subject to standard carve-outs).’’ The term
‘‘standard carve-outs’’ refers to recourse items to an otherwise non-recourse mortgage and are customary to
mortgage financing. While carve-outs vary from lender to lender and transaction to transaction, the
carve-outs may include, among other things, environmental liabilities, the sale, financing or encumbrance of
the property in violation of loan documents, damage to property as a result of intentional misconduct or
gross negligence, failure to pay valid taxes and other claims which could create liens on property and the
conversion of security deposits, insurance proceeds or condemnation awards.
In the narrative portion of this report, information with respect to our consolidated joint ventures is
generally described as if such venture was our wholly owned subsidiary and information with respect to
unconsolidated joint ventures is generally separately described.
Unless otherwise indicated or the context otherwise requires, all references to a year (e.g., 2012) refer to
the applicable fiscal year ended September 30th.
References herein to the acquisition of multi-family properties includes the acquisition of equity interests
in joint ventures or other entities that have a direct or indirect ownership interest in entities owning such
properties.
Forward-Looking Statements
This Annual Report on Form 10-K, together with other statements and information publicly
disseminated by us, contains certain forward looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. We intend such forward-looking statements to be covered by the safe harbor provisions for
forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and
include this statement for purposes of complying with these safe harbor provisions. Forward-looking
statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or
trends concerning matters that are not historical facts. Forward looking statements are generally
identifiable by use of words such as ‘‘may,’’ ‘‘will,’’ ‘‘will likely result,’’ ‘‘shall,’’ ‘‘should,’’ ‘‘could,’’
‘‘believe,’’ ‘‘expect,’’ ‘‘intend,’’ ‘‘anticipate,’’ ‘‘estimate,’’ ‘‘project’’ or similar expressions or variations
thereof.
Forward-looking statements contained in this Annual Report on Form 10-K are based on our
beliefs, assumptions and expectations of our future performance taking into account all information
currently available to us. These beliefs, assumptions and expectations can change as a result of many
possible events or factors, not all of which are known to us or within our control, and which could
materially affect actual results, performance or achievements. Factors which may cause actual results to
vary from our forward-looking statements include, but are not limited to:
• factors described in this Annual Report on Form 10-K, including those set forth under the
captions ‘‘Risk Factors’’ and ‘‘Business’’;
• availability of mortgage origination and multi-family property acquisition opportunities
acceptable to us;
• national and local economic and business conditions;
• general and local real estate property conditions;
• defaults by borrowers in paying debt service on outstanding loans;
• limitation of credit by institutional lenders;
• impairment in the value of real estate property we own and real estate property securing our
loans;
• changes in Federal government policies;
• changes in Federal, state and local governmental laws and regulations;
• increased competition from mortgage lenders;
• changes in interest rates; and
• the availability of and costs associated with sources of capital and liquidity.
We caution you not to place undue reliance on forward-looking statements, which speak only as of
the date of this Annual Report on Form 10-K. Except to the extent required by applicable law or
regulation, we undertake no obligation to update these forward-looking statements to reflect events or
circumstances after the date of the filing of this Annual Report on Form 10-K or to reflect the
occurrence of unanticipated events.
1
Item l. Business.
General
PART I
We originate and hold for investment senior mortgage loans secured by commercial and multi-
family real estate property in the United States and beginning in 2012, expanded our business activities
by acquiring, with joint venture partners, multi-family properties.
The loans we originate generally have relatively high yields and are short-term or bridge loans with
a duration ranging from six months to one year, with up to a one year extension in certain cases. Our
policy is to lend at a floating rate of interest based on a spread over the prime rate, with a stated
minimum rate, though we originate fixed rate loans as circumstances dictate.
Through November 30, 2012, we had acquired eight multi-family properties with an aggregate of
2,335 units, including three properties with an aggregate of 884 units acquired after year end. Our
equity investment in these properties was approximately $42.6 million. We generally contributed 80% of
the equity in each multi-family property acquisition. At September 30, 2012, the net book value of the
five multi-properties acquired in 2012 was $117.5 million.
We also own and operate various real estate assets, the most significant of which are development
properties located in Newark, New Jersey. At September 30, 2012, the net book-value of such assets
was $72.8 million, inclusive of the net book value of $61.8 million related to our Newark, New Jersey
assets.
We conduct our operations to qualify as a real estate investment trust, or REIT, for federal income
tax purposes.
Information regarding our loan origination and real estate segments is included in Note 15 to our
consolidated financial statements and is incorporated herein by this reference.
We were organized as a business trust under the laws of the Commonwealth of Massachusetts in
June 1972. Our address is 60 Cutter Mill Road, Suite 303, Great Neck, New York 11021, telephone
number 516-466-3100. Our website can be accessed at www.brtrealty.com, where copies of our Annual
Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other
filings with the Securities and Exchange Commission, or SEC, can be obtained free of charge. These
SEC filings are added to our website as soon as reasonably practicable.
The following table highlights certain information regarding our real estate lending activities for
the periods indicated:
Our Real Estate Lending Activities
(Dollars in Thousands)
Loans originated . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans repaid . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans sold and loan participations . . . . . . . . . . . . .
Mortgage lending revenues(1) . . . . . . . . . . . . . . . . .
Mortgage lending expenses(1) . . . . . . . . . . . . . . . . .
Year Ended September 30,
2012
2011
2010
$101,800
124,800
15,700
9,530
4,231
$131,300
66,100
46,300
10,328
6,355
$17,400
22,500
16,900
3,877
9,579
(1) See Note 15 to our consolidated financial statements.
We believe that our originations in fiscal 2012 were less than in fiscal 2011 due to increased
competition and reduced demand for repurchase loans (i.e., loans to borrowers purchasing their own or
third party mortgage debt at a discount to the principal amount thereof). Our originations in fiscal
2011 were higher than in fiscal 2010 due to increased demand for our short-term bridge loans which we
2
believe was due to a more favorable economic climate in 2011 than 2010 and increased demand for
repurchase loans.
Our Loan Portfolio
The following summarizes certain characteristics of our loan portfolio as of the dates indicated:
(Dollars in Thousands)
Number of loans outstanding . . . . . . . . . . . . . . . . . . . .
Principal amount of loans earning interest . . . . . . . . . .
Real estate loan held for sale(1) . . . . . . . . . . . . . . . . .
Percent of loans secured by New York area properties .
Weighted average contractual interest rate . . . . . . . . . .
Weighted average term to maturity(2) . . . . . . . . . . . . .
September 30,
2012
2011
8
$37,096
—
39%
11.3%
5.72 months
13
$67,266
$8,446
71%
11.5%
4.75 months
(1) This loan, net of deferred fees, represented a 50% interest in a loan with a principal
balance of approximately $17 million. In October 2011, pursuant to a Federal Bankruptcy
Court approved joint plan of reorganization, we and our loan participant sold our rights
to the loan for net proceeds of approximately $23.5 million. At the same time, we
provided $15 million of financing in connection with the sale, which financing was repaid
in December 2011.
(2) Without giving effect to extension options.
Interest on our loans is payable monthly. Our loans frequently require that our borrowers pay
monthly escrow amounts that are adequate to pay, when due, real estate tax installments on the
properties securing our loans. We may also require and hold funds in escrow for the payment of
casualty insurance premiums. At September 30, 2012, our three largest loans outstanding of
approximately $13.8 million, $7.8 million and $6.3 million represented approximately 6.3%, 4.6% and
2.1%, respectively, of our total assets. There were no other loans in our portfolio that, at such date,
represented more than 1.0% of our total assets.
With respect to certain loans originated by us, the borrower funds an interest reserve out of the
loan proceeds, from which all or a portion of the interest payments due to us are made for a specified
period of time. It is our policy to lend at a floating rate of interest based on a spread over the prime
rate, with a stated minimum interest rate, though we originate fixed rate loans as circumstances dictate.
At September 30, 2012 and 2011, approximately 95% and 82%, respectively, of the principal amount of
our outstanding loans had a floating rate of interest. The balance of the loans as of such dates were
fixed rate mortgages.
The following table sets forth information regarding the types of properties securing our mortgage
loans outstanding at September 30, 2012, all of which are earning interest:
(Dollars in thousands)
. . . . . . . . . . . . . . . . . . . . . . .
Multi-family residential
Retail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number
of
Loans
7
1
8
Earning
Interest
$35,096
2,000
$37,096
Percentage
94.6%
5.4%
100.0%
Our Investment Strategy
We pursue lending opportunities with purchasers and prospective purchasers of commercial and
multi-family real estate properties and property owners who require short-term financing for renovation
3
or repositioning of a real estate asset. We also originate repurchase loans—such loans are generally
structured as a repurchase agreement pursuant to which we purchase the mortgage and our borrower is
obligated to repurchase such mortgage within a specified period.
Our investment policy emphasizes the origination of short-term real estate loans secured by senior
liens on real property. As of September 30, 2012, other than one mezzanine loan in principal amount
of $2 million, our loan portfolio only consisted of first mortgage loans or pari passu participations in
first mortgage loans. Our lending activities focus on operating properties such as multi-family
properties, residential properties being converted to condominium ownership, office buildings, retail
properties, shopping centers, mixed use buildings, hotels/motels, and industrial buildings.
We also will, on a limited basis, provide senior loans secured by unimproved land, but generally
require that the unimproved land collateralizing our loan has proper entitlements and that zoning is in
place for the intended purpose. We also originate and hold for investment loans secured by improved
commercial or multi-family residential property which is vacant, pending renovation or repositioning
and sale or leasing of the property. We may sell senior, junior or pari passu participations in loans we
originate and acquire senior, junior or pari passu participations in loans originated by others. We also
invest in the securities of other REITs.
From time-to-time we originate junior commercial loans, invest in loans as a junior participant or
sell senior participations in loans we originate. When we invest in junior loans or hold junior
participations, the collateral securing our loan is subordinate to the liens of senior loans or senior
participations. It is possible that the amount which may be recovered by us in cases in which we hold a
junior position may be less, or significantly less, than our total investment.
Our Origination Process and Underwriting Criteria
In originating loans, we primarily rely on relationships developed by our officers and loan
originators with real estate investors, commercial real estate brokers, mortgage brokers and bankers.
We also advertise, use the internet and attend trade shows in order to develop relationships with
potential borrowers and real estate brokers, mortgage brokers and bankers.
When underwriting a loan, the primary focus of our analysis is the value of a property, which we
evaluate by considering a number of factors, including location, current use and potential for
alternative use, current and potential net operating income, if any, the local market for condominium
conversion, if conversion to condominium ownership is contemplated, comparable sales prices, existing
zoning regulations and intended use, if the loan is to be secured by undeveloped land, and local
demographics. We also examine the experience of our potential borrower’s principals in real estate
ownership and management and, if applicable, real estate development.
Loan approvals are based on a review of property information as well as other due diligence
activities undertaken by us. Those activities may include a site visit to the property, an in-house
property valuation, a review of the results of operations of the property (historical and projected, if
any) or, in the case of an acquisition of the property by our prospective borrower, a review of projected
results of operations for the property, and a review of the financial condition and a credit report and
background check of the principals of the prospective borrower. We do not obtain independent
property appraisals, but instead rely on our in-house activities described above. If management
determines that an environmental assessment of the underlying property is necessary, then such an
assessment is conducted by an experienced third-party service provider. Before a loan commitment is
issued, the loan must be reviewed and approved by our loan committee. Loan approval occurs after the
assent of not less than four of the seven members of our loan committee, all of whom are executive
officers of ours. We generally obtain a non-refundable cash deposit for legal, travel, and other expenses
from a prospective borrower prior to or at the time of issuing a loan commitment, and our loan
commitments are generally issued subject to receipt by us of title documentation and title insurance, in
a form satisfactory to us, for the underlying property. The approval of our board of trustees is required
4
for each loan which exceeds $20 million in principal amount, and the approval of our board of trustees
is also required where loans by us to one borrower exceed $50 million, in the aggregate.
We require either a personal guarantee or a ‘‘walk-away guarantee’’ from the principal or
principals of the borrower, in substantially all of the loans originated by us. A ‘‘walk-away guarantee’’
generally provides that the full guarantee of the principal or principals of the borrower terminates if
the borrower conveys title to the property to us within a negotiated period of time after a loan default
if the payment of mortgage interest to us, real estate taxes and other operating expenses are current.
The ‘‘walk-away guarantee’’ is intended to provide an incentive to the principals of a borrower, in a
situation where our borrower will or has defaulted, to have the collateral deeded to us in lieu of
foreclosure, thereby reducing the cost of foreclosure proceedings. By complying with the terms of the
‘‘walk-away guarantee,’’ the principals of the borrower can avoid the risk of being personally
responsible for any difference between the amount owed to us and the amount we recover in a
foreclosure proceeding. If we make more than one loan to a borrower, we may require that all or some
of the outstanding loans to that borrower be cross-collateralized. In our judgment, the ‘‘walk-away
guarantees’’ we have secured upon the origination of certain loans have provided us with leverage in
negotiating loan paydowns from ‘‘walk away guarantors’’ and assisted in expediting the foreclosure
process.
Generally, our policy is to sell properties we acquire in foreclosure proceedings after completing
necessary repairs and maintenance and engaging in leasing activities, if required. We may retain a
property if we determine that holding it will result in a substantial increase in its market value. We may
provide senior purchase money mortgage loans at competitive fixed interest rates, if necessary, in order
to consummate a sale which we deem to be beneficial to us. In fiscal 2012 we provided $15.0 million of
such financing and in fiscal 2011 and 2010, we did not provide any senior purchase money mortgage
financing.
Loan Default
In the event of a default by a borrower on a loan, we will, in substantially all cases, foreclose on
the loan or other collateral held by us and may seek to protect our investment by, among other things,
enforcing our rights against any guarantor(s) of such loan or through negotiations with the borrower or
other interested parties. Once a loan becomes non-performing, we generally do not receive interest
payments, thereby reducing our revenues, cash flow, net income and taxable income. Foreclosure
proceedings in certain jurisdictions can take considerable time, and may extend for as long as two
years. In addition, if a borrower files for protection under the United States bankruptcy laws during the
foreclosure process, the delays may be longer. In a foreclosure proceeding, we will typically seek to
have a receiver appointed by the court or an independent third party property manager appointed with
the borrower’s consent in order to preserve the property’s income stream and provide for the
maintenance of the property.
Our Real Estate Assets
At September 30, 2012, we owned real estate properties with a book value of $190.3 million. These
properties include:
• multi-family properties located in the southeastern United States, with a book value of
$117.8 million,
• development sites and additional properties (vacant land, vacant buildings, retail, office and
parking) with a net book value of $61.8 million located in downtown Newark, NJ, and
• a variety of other properties with a net book value of $10.7 million, located in Daytona, Florida
and the New York metropolitan area.
5
Our Multi-Family Properties
Beginning in the second quarter of fiscal 2012, we, together with joint venture partners, began to
acquire multi-family properties. Through November 30, 2012, we acquired eight multi-family properties
with an aggregate of 2,335 units. These are garden apartment style properties that typically provide
residents with amenities, such as a clubhouse, swimming pool, laundry facilities and cable television
access. All of the units at these properties are market rate and none of these properties are subject to
rent control or similar requirements. The weighted average annual interest rate of the mortgage debt
on our eight multi-family properties is 3.96% and the weighted average maturity of such debt is
approximately eight years.
Set forth below is selected information regarding our multi-family properties. Except as otherwise
indicated, all of (i) these properties are owned by joint ventures in which we have an 80% equity
interest and our joint venture partner has a 20% equity interest, (ii) these joint ventures are accounted
for as consolidated subsidiaries beginning as of the investment date and (iii) the information provided
is as of the investment date.
(Dollars in Thousands)
Property Name and
Location
Number
of Units
Age(1)
Investment
Date
Occupancy(2)
Ivy Ridge Apartments—Marietta, GA . . . . .
Water Vista Apartments—Lawrenceville, GA .
The Fountains Apartments—Palm Beach
Gardens, FL . . . . . . . . . . . . . . . . . . . . .
Waverly Place Apartments—Melbourne, FL .
Madison at Schilling Farms—Collierville, TN .
Silvana Oaks Apartments—N. Charleston,
SC(4) . . . . . . . . . . . . . . . . . . . . . . . . .
Grove at Trinity—Pointe, Cordova, TN . . . .
Avondale Station—Decatur, GA . . . . . . . . .
207
170
542
208
324
208
464
212
39
31
42
25
12
2
26
58
1/12/12(3)
2/23/12(3)
3/22/12
3/30/12
6/20/12
10/4/12
11/15/12
11/19/12
92%
94%
93%
92%
92%
91%
93%
97%
BRT
Equity
Invested
$ 2,560
$ 2,200
$14,480
$ 3,120
$ 6,220
$ 4,410
$ 6,220
$ 3,396
Acquisition
Mortgage
Debt
$ 6,500
$ 4,687
$ 45,200
7,680
$
$ 25,680
$ 17,716
$ 19,248
8,046
$
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . .
2,335
$42,606
$134,757
(1) Reflects the approximate age of the property based on the year original construction was completed. Ivy
Ridge was renovated in 2008, The Fountain Apartments were renovated in 2003 and Waverly Place
Apartments were renovated in 2006.
(2) Calculated by dividing the number of units occupied at such property by the total number of units at such
property. Such calculation is as of November 26, 2012 with respect to Ivy Ridge, as of November 1, 2012 with
respect to Silvana Oaks Apartments, Water Vista, The Fountain Apartments and Waverly Place Apartments,
as of November 19, 2012 with respect to Avondale Station, as of October 25, 2012 with respect to Madison at
Schilling Farms, and as of November 15, 2012, with respect to Grove at Trinity Pointe.
(3) This joint venture became a consolidated subsidiary as of August 1, 2012. See note 5 to our consolidated
financial statements.
(4) We have a 90% equity interest in the joint venture that owns this property.
Joint Venture Arrangements
The joint venture arrangements with our venture partners are deal specific and vary from
transaction to transaction. Generally, these arrangements provide for us and our partner to receive net
cash flow available for distribution in the following order of priority:
• a preferred return of 9% to 10% on such party’s unreturned capital contributions, until such
preferred return has been paid in full,
• the return in full of each party’s capital contribution,
6
• 30% to 35% to our partner, and the balance to us, until an internal rate of return ranging from
14% to 15% has been achieved by us, and thereafter
• shared equally between us and our venture partner.
In addition, these arrangements provide that under specified situations, either venture partner may
require that the property be sold.
Our Acquisition Process and Underwriting Criteria
We identify multi-family property acquisition opportunities primarily through relationships
developed over time by our officers with our borrowers, real estate investors and brokers.
Our goal is to acquire properties that will achieve stable risk adjusted total returns (i.e., operating
income plus capital appreciation). In identifying opportunities that will achieve such goal, we seek
acquisitions that will achieve a minimum 10% annual return on invested cash and 12% internal rate of
return. We have also focused, but will not limit ourselves, to acquiring properties located in the
Southeast United States. Subject to the foregoing, we are opportunistic in pursuing multi-family
property acquisitions and do not mandate any specific acquisition criteria, though we take all of the
following into account in evaluating an acquisition opportunity: location, size of the target market, type
of multi-family property (e.g. garden apartment, mid-rise or high rise), property quality, potential for
capital appreciation or recurring income, extent and nature of contemplated capital improvements and
property age. We generally prefer to acquire these properties with a joint venture partner with
knowledge and experience in owning and operating multi-family properties in the target market as this
enhances our understanding of such market and assists us in managing our risk with respect to a
particular acquisition.
Approvals of the acquisition of multi-family property are based on a review of property
information as well as other due diligence activities undertaken by us and our venture partner. Those
activities include a site visit to the property and the surrounding area (i.e. the target market),
consideration of economic, demographic and other factors with respect to the target market and
sub-market (including the stability of its population and the potential for population growth, its
economic and employment base, presence of, and barriers to entry of, alternative housing stock, the
competitive positioning of the proposed acquisition and the regulatory environment (i.e. applicable rent
regulation)), the potential for rent increases, the possibility of enhancing the property and the costs
thereof, an inspection of a sample of units at the property, an analysis of the terms and conditions of
the mortgage debt secured or to be secured by the property, a review of any independent third party
appraisal and a Phase I environmental report with respect to the property, a review of historical and
projected results of operations for the property prepared by us and, if applicable, our venture partner,
and an assessment of our joint venture partner’s, if any, knowledge and expertise with respect to the
acquisition and operation of multi-family properties and the relevant market and sub-market. Before a
property is acquired, the acquisition must be reviewed and approved by our investment committee.
Approval occurs after the assent of not less than four of the seven members of our investment
committee, all of whom are executive officers of ours. The approval of our board of trustees is required
for acquisitions of any multi-family property in which our equity investment exceeds $10 million.
Generally, the mortgage debt associated with our multi-family properties is non-recourse to (i) the
joint venture that owns the property, subject to customary carve-outs and (ii) to us and our subsidiary
acquiring the equity interest in such joint venture.
Property Management
The day-to-day management of our multi-family properties is overseen by property management
companies operating in the market in which the property is located. Some of these management
companies are owned by our joint venture partners or their affiliates. We can terminate these
management companies with the approval of our joint venture partner and generally, if the property
does not achieve specified financial returns, without such partner’s approval. We believe that adequate
replacements for these property managers are available, if required.
7
Insurance
We generally carry all risk property insurance covering 100% of the replacement cost for each
building and business interruption and rental loss insurance (covering up to 12 months of loss). On a
case-by-case basis, based on an assessment of the likelihood of the risk, availability of insurance, cost of
insurance and in accordance with standard market practice, we obtain earthquake, windstorm, flood,
terrorism and boiler and machinery insurance. We carry comprehensive liability insurance and umbrella
policies for each of our properties which provide no less than $5 million of coverage per incident. We
request certain extension of coverage, valuation clauses, and deductibles in accordance to standard
market practice and availability.
Although we may carry insurance for potential losses associated with our multi-family properties,
we may still incur losses due to uninsured risks, deductibles, co-payments or losses in excess of
applicable insurance coverage and those losses may be material. In addition, certain insurance coverage
is part of blanket policies in which a loss on an unrelated property could affect the coverage limits on a
joint venture property.
Newark Joint Venture
Background
Two of our wholly-owned subsidiaries are members of a joint venture, which we refer to as the
Newark Joint Venture, with two members that are not affiliated with us. The Newark Joint Venture
owns several development sites (e.g., Market Street and Teachers Village) and additional properties
located in downtown Newark, NJ. The development sites are surrounded by a variety of governmental,
educational, cultural and entertainment institutions and facilities. In close proximity to both
development sites is Rutgers University, the New Jersey Institute of Technology, University of Medicine
and Dentistry of New Jersey, Essex County College, Seton Hall Law School, the New Jersey
Performing Arts Center, the Prudential Arena (home of the National Hockey League New Jersey
Devils), the Essex County Court Complex, Newark’s City Hall and a Federal Courthouse. These sites
are within walking distance of Newark Penn Station, which provides access to Amtrak and New Jersey
Transit trains and are accessible to local bus routes. The sites are served by various highways, including
the Garden State Parkway, Interstate-95, Interstate-78 and Interstate-280.
In 2007, immediately prior to the formation of the Newark Joint Venture, we held loans
aggregating approximately $38 million, secured by substantially all of the properties conveyed to the
Newark Joint Venture by our borrowers. We entered into loan work-out negotiations with our
borrowers and, as a result of such negotiations, entered into the Newark Joint Venture. In connection
with the work-out of our loans and the formation of the Newark Joint Venture, our loans were
refinanced with a mortgage loan of $27 million with the balance of our loans converted into a
$6.9 million preferred capital account interest and a 50.1% membership interest in the Newark Joint
Venture, providing us with a separate capital account of $3.9 million. The other members caused all the
properties secured by our loans, and additional properties (unencumbered by our loans) and contract
rights to acquire additional properties, all located in downtown Newark, NJ, to be contributed to the
Newark Joint Venture for which the other members received a 49.9% membership interest in the
Newark Joint Venture (with a separate capital account of $3.9 million).
The Newark Joint Venture is in the process of redeveloping the Teachers Village site and intends
to redevelop all or a portion of the remaining sites, particularly the Market Street site, with personnel
hired by the Newark Joint Venture or with development partners or sell some of its sites to developers
or end users. The assets, liabilities and results of operations of the Newark Joint Venture are
consolidated with our financial statements. Accordingly, the assets of the Newark Joint Venture are
included in our real estate properties, and at September 30, 2012, our two loans aggregating
$20.6 million to the Newark Joint Venture (which are secured by all of the real estate assets of the
8
Newark Joint Venture other than the Teachers Village properties), are eliminated in consolidation and
are not included in our outstanding loans. We believe that the properties owned by the Newark Joint
Venture have adequate insurance coverage for their current use.
Current Property Information
The following table sets forth, as of September 30, 2012, information regarding the properties
owned by the Newark Joint Venture (dollars in thousands):
Assemblage
or Property
Type of
Property
Rentable
Square
Feet
Annual
Real
Estate
Taxes
Number
of
Tenants
Market Street(2) . . . . . . . . . . . Office and retail
Teachers Village(3) . . . . . . . . . . —
Beaver Street . . . . . . . . . . . . . . Retail
Lincoln Park . . . . . . . . . . . . . . Parking
Broad Street . . . . . . . . . . . . . . Retail and school
(1) Based on square footage.
303,126
$363,060
— $180,781
$ 12,334
$ 85,928
$291,485
8,160
79,063
47,564
18
—
1
2
2
Percent
Leased(1)
Mortgage
Debt(4)
900
49% $
$76,721
—
—
25%
49%
—
88% $ 6,314
(2) Leases representing substantially all of the leased space of the Market Street development are
month-to-month or have cancellation, relocation or demolition provisions. Many of these leases are
at below market rentals.
(3) After giving effect to in-progress construction and pre-construction activities, this site will be used
for schools, retail and residential purposes and will consist of five buildings which aggregate
approximately 252,000 square feet. The Newark Joint Venture has entered into leases with six
tenants (three charter schools, one day-care center and two retail establishments) representing
approximately 37% of the anticipated rentable square footage of such buildings and the obligation
to pay rent generally commences at the time the applicable building is ready for occupancy. See
‘‘—Information and Activities Regarding Development Site.’’
(4) See note 10 of our consolidated financial statements. Does not include mortgage debt payable to
us which is eliminated in consolidation.
The following table sets forth as of September 30, 2012, a schedule of the annual lease expirations
of the Newark Joint Venture’s real estate assets (other than in-place leases at Teachers Village pursuant
to which rent is not payable until the applicable space is ready for occupancy) and the contributions to
9
2013 contractual rental income provided by such leases (assumes that none of the tenants exercise
renewal or cancellation options, if any):
Lease Expiration
Month-to-month . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . .
2022 and thereafter
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number of
Leases
Expiring(1)
12
1
1
1
2
2
1
—
—
—
2
22
Square
Footage
of
Leases
Expiring
132,518
2,630
11,988
17,630
10,839
8,864
5,260
—
—
—
40,848
230,577
Percentage
of Total
Leased
Square
Feet
Projected
2013
Rental
Income(2)
Projected %
of 2013
Rental
Income(2)
57%
1%
5%
8%
5%
4%
2%
—
—
—
18%
114,852
11,457
37,080
105,548
102,498
191,753
48,240
—
—
—
745,810
8%
1%
3%
8%
8%
14%
3%
—
—
—
55%
100% 1,357,238
100%
(1) There are twelve in-place leases which are month-to-month and eight leases which contain
cancellation, relocation or demolition provisions across the various development sites. The leases
for the new charter school facilities at Teachers Village are excluded from this table because the
obligation to pay rent does not begin until the buildings are ready for occupancy.
(2) Assumes all month-to-month tenants remain in occupancy for the entire 2013 calendar year.
Information and Activities Relating to Development Sites
The Market Street site is an approximately 68,000 square foot site, currently representing
approximately 303,400 rentable square feet. The site is bounded by Market Street, Campbell Street,
Washington Street and University Avenue in downtown Newark, New Jersey. Potential redevelopment
opportunities with respect to this site include an office complex with a retail component, a medical
office complex containing offices, research laboratories and other medical related services, a retail
center, corporate headquarters, university offices, classrooms and/or dormitories, or a combination of
one or more of these uses. The Newark Joint Venture may redevelop this site for its own account, but
will only do so if it has entered into long-term lease transactions with credit worthy lessees and has
obtained satisfactory assurances that it will obtain necessary construction financing. Alternatively, the
Newark Joint Venture may enter into a joint venture with a development partner or sell all or portions
of the site. Although the Newark Joint Venture has conducted discussions and responded to requests
for bid proposals with various parties concerning the development of portions of the site, which have
included build to suit construction for potential users on a sale/leaseback or long-term lease basis and
the sale of portions of the property to end users and/or developers, the Newark Joint Venture has not
entered into any understandings or agreements concerning the redevelopment of all or any portion of
the site and there is no assurance that it will be able to conclude any such arrangement or obtain the
financing necessary to proceed with any arrangement which it may conclude.
The Teachers Village site encompasses an area bounded by Branford Street to the north, Treat
Place to the east, Hill Street to the south and Washington Street to the west, and is adjacent to Halsey
Street. In 2012, the Newark Joint Venture obtained, in two phases, financing of approximately
$68.5 million, which together with $25.8 million of New Markets Tax Credit net proceeds is, after
payment of transaction expenses and payment of approximately $13.8 million of principal and accrued
10
interest on debt (inclusive of $8 million of principal and accrued interest on debt owed to us which is
eliminated in consolidation), being used to construct five buildings. These buildings will provide space
for three charter schools, a day-care center, approximately 54,000 square feet of retail space and
approximately 123 residential units.
Pre-construction and construction activities are underway on five buildings at the Teachers Village
site. Steel framing has been completed on two buildings being constructed, in part, for use by charter
schools and it is anticipated that the exterior facades of those buildings will be enclosed during the
second quarter of fiscal 2013. With respect to the remaining three buildings containing residential and
retail space, site work has commenced on one building and demolition activities are underway on the
remaining two buildings. It is estimated that two buildings will be ready for occupancy in Spring or
Summer of 2013 and that the balance of the buildings will be ready for occupancy in the Spring of
2014.
The $68.5 million financing obtained by the Newark Joint Venture in the two financing phases
completed in 2012 carries a weighted average effective interest rate (after giving effect to an annual
subsidy of $1.1 million from the United States Department of Treasury), of approximately 3.56%, a
weighted average maturity of 14.66 years and is secured by the Teachers Village properties. In addition,
the Newark Joint Venture guaranteed, among other things, up to $31 million in principal amount of
mortgage debt, which guarantees only expire after satisfaction of performance thresholds relating to the
leasing and occupancy of these facilities within specified periods, losses incurred by the lenders by
reason of the borrower’s bad acts (e.g., fraud or misappropriation), the failure to complete construction
of the five buildings to be constructed and the carrying costs with respect to certain properties. The
Newark Joint Venture has also agreed to provide indemnity with respect to specified environmental
matters and to indemnify the beneficiaries of the New Markets Tax Credits for losses sustained if such
credits are disallowed. We estimate that the New Markets Tax Credit indemnity obligation would not
exceed $40 million (exclusive of interest and penalties) and is subject to reduction to the extent the
credits are not disallowed.
A third financing phase contemplates obtaining an additional $30 million from private and
government sources (other than the Newark Joint Venture) for the construction of three buildings
containing an aggregate of 82 residential units and 9,700 square feet of retail space at Teachers Village.
No assurance can be given that sufficient financing will be obtained to complete all three phases of
the Teachers Village project, that if completed, that the Teachers Village will ever be profitable for us
or that the Newark Joint Venture will ever be able to develop the other properties it owns.
Terms of the Newark Joint Venture Operating Agreement
The following is a summary of the material provisions of the amended and restated limited liability
company operating agreement of the Newark Joint Venture:
Membership Interests. We own 50.1% of the membership interests in the Newark Joint Venture,
and the other members (collectively, the ‘‘Other Member’’) own 49.9% of the membership interests in
the Newark Joint Venture.
Manager. An affiliate of the other members is the manager of the Newark Joint Venture and is
responsible for the day to day management activities of the Newark Joint Venture, but our consent is
required for all major decisions affecting the Newark Joint Venture and its properties. We may remove
the manager upon six months advance written notice or immediately upon the occurrence of certain
significant events.
11
Fees to the Manager. The Newark Joint Venture is to pay to the current manager an asset
management fee and a property management fee aggregating $890,000 per annum, payable monthly in
advance.
Mandatory Capital Calls. Members are required to make pro rata capital contributions to the
Newark Joint Venture for any projected budget shortfalls.
Buy-Sell. Commencing on December 3, 2013 or, under specified circumstances, December 3,
2015, either member group may provide the other member group with written notice setting forth the
amount they will pay to purchase all of the assets of the Newark Joint Venture. The member group
which receives such notice has the option to (i) sell their membership interests in the Newark Joint
Venture to the other members for their pro rata portion of the asset purchase price set forth in the
written notice, or (ii) purchase the other members’ membership interests in the Newark Joint Venture
for their pro rata portion of the asset purchase price set forth in the written notice. If the acquirer is
the Other Member, then the Other Member is required to, among other things, pay in full our
mortgage and our preferred equity interest at closing.
Right of First Refusal and Tag-along Rights. At any time, either member group may provide the
other member group with written notice setting forth the sale price at which it desires to sell all or a
portion of its membership interests. The member group which received such notice may purchase the
offered membership interests at the price set forth in the notice. If they do not elect to purchase the
membership interest in accordance with the terms of the notice, the offering members may secure
another person to purchase its offered membership interests within 180 days. The group of members
which received the sale notice may tag-along in a sale to such other person and sell their pro rata
portion of the membership interests.
Distributions. The Newark Joint Venture may not distribute any cash flow to its members until
the $20.6 million balance due on our loans (which have been eliminated in consolidation) has been
fully repaid, including accrued interest. Once it has been fully repaid, the cash flow of the Newark Joint
Venture will generally be distributed as follows: (i) first, to each member pro rata in an amount equal
to their unreturned additional capital contributions, (ii) second, to our members until we receive a 10%
return on our preferred capital contributions, (iii) third, to our members until we receive an amount
equal to our preferred capital contributions, and (iv) fourth, to each member pro rata until such
members receive a 10% return on their additional capital contributions, (v) fifth, to the members pro
rata an amount equal to their common capital contributions, and (vi) the remainder shall be distributed
as follows: (a) 10% to the managing member, and (b) 90% pro rata to the other members.
Manager of the Newark Joint Venture
The manager of the Newark Joint Venture is RBH Group LLC; its managing member and
President is Ron Beit-Halachmy. Mr. Beit-Halachmy, 40 years of age, has over 18 years of experience
in the real estate industry and has been involved for more than ten years in acquiring sites in Newark,
New Jersey. He was the managing member of the entities which acquired all of the real property
currently owned by the Newark Joint Venture. Mr. Beit-Halachmy earned a BA in Economics from the
University of Wisconsin and a law degree from New York Law School.
12
Financing Arrangements
Junior Subordinated Notes
As of September 30, 2012, $37.4 million in principal amount of these notes were outstanding.
These notes mature in April 2036, are redeemable at any time at our option and bear interest at the
rates set forth below:
Interest Period
Interest Rate
March 15, 2011 through July 31, 2012 . . . . . . . . . . . . . . . . . . . .
August 1, 2012 through April 29, 2016 . . . . . . . . . . . . . . . . . . . .
April 30, 2016 through April 30, 2036 . . . . . . . . . . . . . . . . . . . . LIBOR + 2.00%
3.00%
4.90%
Credit Facility
A subsidiary of ours is able, pursuant to a senior secured revolving credit facility with Capital One,
National Association, to borrow up to an aggregate of $25 million to originate loans. The subsidiary
may borrow (i) on an unsecured basis, $10 million for up to 90 days and (ii) on a secured basis, up to
the lesser of $25 million and the borrowing base. The borrowing base is generally equal to 40% to 65%
(depending on, among other things, the type of property secured by the mortgage receivables
acceptable to the lender and the operating income of the related property) of such receivables. Interest
accrues on the outstanding balance at the greater of (i) 4% plus LIBOR and (ii) 5.50%. The facility
matures in June 2014 and, subject to the satisfaction of specified conditions, the outstanding balance
may be converted at our option into an 18 month term loan. We have guaranteed our subsidiary’s
obligations under this facility. At September 30, 2012 and November 30, 2012, no amount was
outstanding under the facility and the maximum amount we could borrow was $10 million for 90 days.
Competition
We compete for loan origination opportunities with other entities, including other mortgage
REITs, specialty finance companies, public and private lending companies, pension and investment
funds and others. Competitive factors in our lending activities include size of loans offered, rate,
market visibility, fees, term and underwriting standards. To the extent a competitor offers a lower rate,
is willing to risk more capital in a particular transaction, and/or employs more liberal underwriting
standards, our origination volume and profit margins would be adversely impacted. We compete by
offering rapid response time in terms of approval and closing and by offering ‘‘no prepayment penalty’’
loans.
We compete to acquire real estate assets and in particular, multi-family properties, with other
owners and operators of such properties including other multi-family REITs, banks, pension and
investment funds, real estate developers and private real estate investors. Competition to acquire such
properties is based on price and ability to secure financing on a timely basis and complete the
acquisition. To the extent that a potential joint venture partner introduces us to a multi-family
acquisition opportunity, we compete with other sources of equity capital to participate in such joint
venture based on the financial returns we are willing to offer such potential partner and the other
terms and conditions of the joint venture arrangement. We also compete for tenants at our multi-family
properties—such competition depends upon various factors, including alternative housing options
available in the applicable sub-market, rent, amenities provided and proximity to employment and
quality of life venues.
The Newark Joint Venture competes for funding, and in particular, tax credit allocations and
financing provided by governmental and quasi-governmental sources with other real estate developers.
It competes for commercial, retail, residential and educational tenants with landlords owning properties
13
in Newark, New Jersey and the surrounding area and developers interested in developing facilities in
Newark or the surrounding area.
Many of our competitors possess greater financial and other resources than we possess.
Our Structure
We share facilities, personnel and other resources with several affiliated entities including, among
others, Gould Investors L.P., a master limited partnership involved primarily in the ownership and
operation of a diversified portfolio of real estate assets, and One Liberty Properties, Inc., a publicly-
traded equity REIT. Jeffrey A. Gould, our President and Chief Executive Officer, George Zweier, our
Vice President and Chief Financial Officer, two other officers engaged in loan origination, underwriting
and servicing activities, and three others engaged in underwriting and servicing activities devote
substantially all of their business time to us, while our other personnel (including several officers) share
their services on a part-time basis with us and other affiliated entities that share our executive offices.
The allocation of expenses for the shared facilities, personnel and other resources is computed in
accordance with a shared services agreement by and among us and the affiliated entities. The allocation
is based on the estimated time devoted by executive, administrative and clerical personnel to the affairs
of each entity that is a party to the Shared Services Agreement.
In addition, we are party to an Advisory Agreement, as amended, between us and REIT
Management Corp., our advisor. REIT Management is wholly owned by the chairman of our Board of
Trustees and he and certain of our executive officers, including our President and Chief Executive
Officer, receive compensation from REIT Management Corp. Pursuant to this agreement, REIT
Management furnishes advisory and administrative services with respect to our business, including,
without limitation, arranging and negotiating credit facilities, participating in our loan analysis and
approvals, providing investment advice, providing assistance with building inspections and litigation
strategy and support. In addition, in connection with non-performing loans, REIT Management, among
other activities, engages in negotiations with borrowers, guarantors, and their advisors related to
workouts, participates in strategic decisions relating to workouts and foreclosures and may interface
with receivers, managing agents and court appointed trustees with respect to specific collateral securing
our loans.
Through December 31, 2011, REIT Management received, for the services it performed pursuant
to the Advisory Agreement, an asset management fee equal to 0.6% of our invested assets and an
incentive fee from borrowers of 0.5% of the total commitment amount. The Advisory Agreement was
amended effective as of January 1, 2012, and as so amended, provides (i) for a stated termination date
of June 30, 2014, (ii) that the minimum and maximum fees payable in a fiscal year to REIT
Management are $750,000 and $4 million, respectively, subject to adjustment for any fiscal year of less
than twelve months, and (iii) that we pay REIT Management the following annual fees, which are paid
on a quarterly basis:
• 1.0% of the average principal amount of earning loans;
• 0.35% of the average amount of the fair market value of non-earning loans;
• 0.45% of the average book value of all real estate properties, excluding depreciation;
• 0. 25% of the average amount of the fair market value of marketable securities;
• 0.15% of the average amount of cash and cash equivalents; and
• to the extent loans or real estate are held by joint ventures or other arrangements in which we
have an interest, fees varying based on, among other things, the nature of the asset (i.e. real
estate or loans), the nature of our involvement (i.e. active or passive) and the extent of our
equity interests in such arrangement.
14
We believe that the Shared Services Agreement and the Advisory Agreement allow us to benefit
from access to, and from the services of, a group of senior executives with significant real estate
knowledge and experience.
We also engage affiliated entities in management activities with respect to properties acquired by
us in foreclosure proceedings and some of the properties owned by joint ventures in which we are an
equity participant. These management activities include, among other things, rent billing and collection,
property repair, maintenance and improvement, contractor negotiation, construction management and
sales and leasing activities. In management’s judgment, the fees paid by us to these affiliated entities
are competitive with fees that would be charged for comparable services by unrelated entities.
Item 1A. Risk Factors.
Set forth below is a discussion of certain risks affecting our business. The categorization of risks set
forth below is meant to help you better understand the risks facing our business and is not intended to limit
your consideration of the possible effects of these risks to the listed categories. Any adverse effects arising
from the realization of any of the risks discussed, including our financial condition and results of operation,
may, and likely will, adversely affect many aspects of our business.
Risks Related to our Business
Our loan origination, property acquisition and Newark Joint Venture development activities are limited by
available funds.
At December 5, 2012, we had approximately $44 million of cash and cash equivalents, net of
deposits payable, available for loan originations, the acquisition of multi-family properties, capital
contributions to the Newark Joint Venture and general operations. If we pursue the acquisition of
additional multi-family properties or demand for our mortgage loans increases, as to which no
assurances can be given, or if we are required to contribute capital to the Newark Joint Venture, our
ability to engage in these activities or make these contributions will be limited by the funds available to
us. Our ability to use the credit facility is limited by the obligation to pledge collateral acceptable to the
lender (and its ability to make such decisions on a timely basis) and covenants that require us to
maintain certain financial ratios, including net worth and debt service coverage ratios. At December 5,
2012, the maximum amount that we could borrow under our credit facility was $10 million and such
amount can only be borrowed for 90 days. Further, the credit facility may only be used for our loan
origination activities—not for the Newark Joint Venture or multi-family property acquisition activities.
Our loan origination, multi-family property acquisition and Newark Joint Venture development
activities may be limited by the lack of available funds which will limit our revenues and operating
results.
It is highly unlikely that we will declare any dividends in the next few years.
We have not declared or paid any dividends since fiscal 2010. In order to qualify as a REIT, we
are required to distribute 90% of our taxable income. At December 31, 2011, we had a tax loss carry-
forward of $60.5 million. Under current tax laws, we can offset our future taxable income against our
tax loss carry-forward until 2028 or until the tax loss carry-forward has been fully used, whichever
occurs first. As a result, we do not expect to pay a dividend in calendar 2013 and it is unlikely that we
will be required to pay a dividend for many years thereafter in order to maintain our REIT status. The
non-payment of cash dividends may negatively impact the price of our common shares.
15
We may not be able to compete with competitors many of which have greater financial and other resources
than we possess.
We compete with many third parties engaged in real estate lending and the ownership of multi-
family properties, including other REITs, specialty finance companies, public and private lenders,
investment and pension funds and other entities. The Newark Joint Venture also competes (i) with real
estate developers for tax credit allocations and financing provided by governmental and quasi-
governmental authorities, and (ii) for tenants, with landlords and developers with, or interested in
developing, properties in Newark, New Jersey and the surrounding area. Many of these competitors
have substantially greater financial and other resources than we do. Larger and more established
competitors enjoy significant competitive advantages that result from, among other things, enhanced
operating efficiencies and more extensive networks providing greater and more favorable access to
capital, financing and tax credit allocations and more favorable lending and acquisition opportunities.
Larger competitors in our multi-family activities have the ability to acquire a greater number of higher
quality properties on more favorable terms and conditions and at more favorable locations. Larger
competitors engaged in real estate lending are better able to diversify their loan portfolios thereby
reducing the risk of loss from any one performing property or loan and are better equipped to fund
larger loan requests, enhancing their appeal to prospective borrowers.
We may incur loan loss provisions and impairment charges in fiscal 2013.
We evaluate on a quarterly basis our loan and real estate portfolios for indicators of impairment.
Loan loss provisions and impairment charges reflect management’s judgment of the probability and
severity of loan losses and the decline in the value of real estate assets. Loan loss provisions and
impairment charges may be required in the future as a result of factors beyond our control, including,
among other things, changes in the economic environment and market conditions affecting the value of
loan collateral and real property assets. If we are required to take loan loss provisions or impairment
charges, our results of operations would be adversely impacted.
Our revenues and the value of our portfolio may be negatively affected by casualty events occurring on our
properties or on properties securing our loans.
We require our borrowers to obtain, for our benefit, all risk property insurance covering the
property and any improvements to the property collateralizing our loan in an amount intended to be
sufficient to provide for the cost of replacement in the event of casualty. In addition, joint ventures in
which we are an equity participant carry all risk property insurance covering the property and any
improvements to the property owned by the joint venture for the cost of replacement in the event of a
casualty. Further, we carry insurance for such purpose on properties owned by us. However, the
amount of insurance coverage maintained for any property may not be sufficient to pay the full
replacement cost following a casualty event. In addition, the rent loss coverage under a policy may not
extend for the full period of time that a tenant may be entitled to a rent abatement that is a result of,
or that may be required to complete restoration following a casualty event. In addition, there are
certain types of losses, such as those arising from earthquakes, floods, hurricanes and terrorist attacks,
that may be uninsurable or that may not be economically feasible to insure. Changes in zoning, building
codes and ordinances, environmental considerations and other factors may make it impossible for our
borrower, a joint venture or us, as the case may be, to use insurance proceeds to replace damaged or
destroyed improvements at a property. If any of these or similar events occur, the amount of coverage
may not be sufficient to replace a damaged or destroyed property and/or to repay in full the amount
due on loans collateralized by such property. As a result, our returns and the value of our investment
may be reduced.
16
In order for real estate properties to generate positive cash flow or to make real estate properties suitable for
sale, we may need to make significant capital improvements and incur deferred maintenance costs to these
properties.
Some of the properties we acquire may face competition from newer, more updated properties. In
order to remain competitive and increase occupancy at these properties and/or make them attractive to
potential tenants or purchasers, we may have to make significant capital improvements and/or incur
deferred maintenance costs with respect to these properties. The cost of these improvements and
deferred maintenance items may impair our financial condition and liquidity.
Our transactions with affiliated entities involve conflicts of interest.
Entities affiliated with us and with certain of our executive officers provide services to us and on
our behalf. Although our policy is to obtain terms in transactions with affiliates that are at least as
favorable as those that we would receive if the transactions were entered into with unaffiliated entities,
these transactions raise the potential that we may not receive terms as favorable as those that we would
receive if the transactions were entered into with unaffiliated entities.
Liability relating to environmental matters may impact the value of properties that we may acquire or the
properties securing our loans.
We may be subject to environmental liabilities arising from the ownership of properties we acquire.
Under various federal, state and local laws, an owner or operator of real property may become liable
for the costs of removal of certain hazardous substances released on its property. These laws often
impose liability without regard to whether the owner or operator knew of, or was responsible for, the
release of such hazardous substances.
If we acquire properties, including properties acquired through foreclosure proceedings, the
presence of hazardous substances on a property may adversely affect our ability to sell the property and
we may incur substantial remediation costs. The discovery of material environmental liabilities attached
to such properties could have a material adverse effect on our results of operations and financial
condition.
The presence of hazardous substances may adversely affect an owner’s ability to sell real estate or
borrow using real estate as collateral. To the extent that an owner of a property underlying one of our
loans becomes liable for removal costs, the ability of the owner to make payments to us may be
reduced, which in turn may adversely affect the value of the relevant mortgage asset held by us.
Senior management and other key personnel are critical to our business and our future success may depend
on our ability to retain them.
We depend on the services of Fredric H. Gould, chairman of our board of trustees, Jeffrey A.
Gould, our president and chief executive officer, and other members of senior management to carry
out our business and investment strategies. Although Jeffrey A. Gould devotes substantially all of his
business time to our affairs, he devotes a limited amount of his business time to entities affiliated with
us. In addition to Jeffrey A. Gould, only three other executive officers, Mitchell Gould, our executive
vice president, Lonnie Halpern, a vice president, and George Zweier, our vice president and chief
financial officer, devote all or substantially all of their business time to us. The remainder of our
executive management personnel share their services on a part-time basis with entities affiliated with us
and located in the same executive offices pursuant to a shared services agreement. We rely on part-time
executive officers to provide certain services to us, including legal, accounting and computer services,
since we do not employ full-time executive officers to handle these services. If the shared services
agreement is terminated, we will have to obtain such services or hire employees to perform them. We
may not be able to replace these services or hire such employees in a timely manner or on terms,
17
including cost and level of expertise, that are as favorable as those we receive under the shared services
agreement.
In addition, in the future we may need to attract and retain qualified senior management and
other key personnel, both on a full-time and part-time basis. The loss of the services of any of our
senior management or other key personnel or our inability to recruit and retain qualified personnel in
the future, could impair our ability to carry out our business and our investment strategies.
We do not carry key man life insurance on members of our senior management.
Risks Related to our Real Estate Lending Activities
Increased competition and decreased demand for repurchase loans may result in decreased loan originations
adversely affecting our business.
As a result of increased competition and decreased demand for repurchase loans, our loans
originations decreased by 24.9% from $131.3 million in 2011 to $98.6 million in 2012. If loan
originations continue at a reduced level, our revenues, net income and cash flow would be negatively
affected.
The geographic concentration of our loans may make our revenues and the value of the related mortgages
vulnerable to adverse changes in economic conditions in the New York metropolitan and Georgia regions.
At September 30, 2012, 39% and 37% of principal amount of our outstanding loans are secured by
properties located in the New York City and Atlanta, Georgia metropolitan areas, respectively. A lack
of geographical diversification makes our mortgage portfolio more sensitive to local or regional
economic conditions. A significant decline in the economy of either of these regions could result in a
greater risk of default compared with the default rate for loans secured by properties in other
geographic locations. This could result in a reduction of our revenues and provision for loan loss
allowances which might not be as acute if our loan portfolio were more geographically diverse.
Defaults on our loans may cause declines in revenues and net income.
Defaults by our borrowers on their loans result in a decrease in interest income and may require
the establishment of, or an increase in, loan loss reserves. The decrease in interest income resulting
from loan defaults may be for a prolonged period of time as we seek to recover, primarily through
legal proceedings, the outstanding principal balance and accrued interest due on a defaulted loan, plus
the legal costs incurred in pursuing our legal remedies. Legal proceedings, which may include
foreclosure actions and bankruptcy proceedings, are expensive and time consuming. The decrease in
interest income, and the costs involved in pursuing our legal remedies will reduce the amount of cash
available to meet our expenses. In addition, the decrease in interest income, the costs incurred by us in
a defaulted loan situation and increases in loan loss reserves will have an adverse impact on our net
income, taxable income and cash flow.
Financing with high loan-to-value ratios involves increased risk of loss and may adversely affect us.
Our primary source of recovery in the event of a loan default is the real estate underlying a
defaulted loan. Therefore, the value of our loan depends upon the value of the underlying real estate.
The value of the underlying property is dependent on numerous factors outside of our control,
including national, regional and local business and economic conditions, inflation, government
economic policies and the availability of credit. A loan-to-value ratio is the ratio of the amount of our
loan to the estimated market value of the property underlying a loan, as determined by our internal
valuation process. The higher the loan to value ratio, the greater the risk that the amount obtainable
from sale of a property will be insufficient to repay the loan in full upon default.
18
We are subject to the risks associated with loan participations, such as lack of full control rights.
Some of our investments are participating interests in loans in which we share the rights,
obligations and benefits of the loan with participating lenders pursuant to a participation agreement.
We may need the consent of these parties to exercise our rights under such loans, including rights with
respect to amendment of loan documentation, the institution of, and control over, foreclosure actions,
entering into forbearance agreements with borrowers, and sale of the underlying property upon
acquisition in foreclosure. Our participant may have interests and goals that are different from ours
and may desire an action or position which we oppose. As a result, we could become engaged in a
dispute with a participant which may affect our ability to take action with respect to defaulted loans or
disposition of the property, to our detriment.
Risks Related to the Newark Joint Venture and Real Estate Operations.
The Newark Joint Venture may have an operating loss for the foreseeable future.
Our real estate assets include the properties owned by the Newark Joint Venture, which properties
at September 30, 2012, had an aggregate book value of $61.8 million or 32% of the book value of all of
our real estate assets. We anticipate that the Newark Joint Venture will operate at a loss in fiscal 2013
and for several years thereafter. If the Newark Joint Venture operates at a loss, we and our partners in
the venture may be required to fund the operating losses and capital requirements by making
additional capital contributions. No assurance can be given that we or our venture partners will have
the resources or be willing to make such contribution and the failure to make the required contribution
may have an adverse impact on us.
If we are unable to pay debt service as it become due, we may be forced to sell properties at disadvantageous
terms or relinquish our rights to such properties, which would result in the loss of revenues and in a decline
in the value of our real property portfolio.
At September 30, 2012, $14.6 million in debt service (of which $8.8 million and $3.77 million relate
to the Newark Joint Venture and our multi-family properties, respectively) is payable prior to the end
of 2013 and $31 million of debt service (of which $12.6 million and $15 million relate to the Newark
Joint Venture and our multi-family properties, respectively) is payable from 2014 through 2015. The
cash flow from the properties securing the mortgage debt may be insufficient to meet required debt
service payments. In particular, with respect to the $8.8 million of debt service for the Newark Joint
Venture payable in 2013, the Newark Joint Venture contemplates the refinancing of approximately
$2.7 million of such debt—no assurance can be given that such refinancing will be effected. Further, the
anticipated rental revenues from in-place leases for the Teachers Village project are insufficient to
cover all of the Newark Joint Ventures debt service obligations payable in 2014 and 2015. If efforts to
generate additional rental revenues from the Teachers Village site are unsuccessful, or if the in-place
lessees do not fulfill their obligations under their lease agreements, the Newark Joint Venture may be
unable to meet its debt service obligation with respect to the Teachers Village properties and such
properties would require additional capital from the members of the venture or may be foreclosed on
by the lenders.
The Newark Joint Venture will be adversely effected if it is limited from using the facilities being constructed
for purposes other than as contemplated by the applicable financing and tax credit transactions.
The terms and conditions of the financings and tax credits provided to the Newark Joint Venture
may limit the venture’s ability to use the facilities being constructed in a manner other than as currently
contemplated to be used. Among other things, the New Markets Tax Credits and related contractual
obligations provide that if prior to the seven year recapture period, the facilities are used in a manner
prohibited by such tax credit program, the credits may be disallowed. The qualified school construction
19
bonds in principal amount of approximately $22.7 million at September 30, 2012 requires that the
facilities (or certain portions thereof) be used for at least 19 years as public school facilities and the
annual $1.1 million interest reimbursement provided by the US Treasury is subject to recapture if the
facilities or portions thereof are not used for educational purposes for minimum periods. The New
Jersey Urban Transit Hub tax credits program requires that certain portions of the buildings must be
used for residential purposes for at least ten years and that at least 20% of the residential units be
allocated for lower/middle income housing. If as a result of market or other conditions, it is determined
that the contemplated uses of the facilities are not financially viable, the Newark Joint Venture will be
limited in its ability to use these facilities in an alternative manner which may adversely impact our
financial condition and results of operations.
We have limited experience in developing and operating development sites.
The principal assets of our Newark Joint Venture are several development sites and two additional
properties located in downtown Newark, NJ. Since we have not previously engaged in the real estate
development business, we are subject to risks that differ from those to which we have been subject to
historically. Although the principal of the managing member of the Newark Joint Venture (who is
formerly the principal of our borrowers) is knowledgeable with respect to the local real estate market
and has experience in the development of gut rehabilitation properties, this experience may not
necessarily be relevant to a particular redevelopment project. As a result, to redevelop the assemblage
sites, the Newark Joint Venture will have to hire personnel knowledgeable in real estate development
to assist in its development, become involved with a development partner, or sell some or all of the
sites to developers or potential users. There can be no assurance that the Newark Joint Venture will be
successful in hiring experienced personnel, finding a development partner with skills needed to develop
and/or manage the redevelopment of the sites, or that we will be able to sell some or all of the
properties to developers or potential users.
The success of our Newark Joint Venture depends, to a large extent, on the principal of the Newark Joint
Venture’s manager.
The principal of the manager of the Newark Joint Venture was responsible for acquiring all the
properties owned by the Newark Joint Venture. We believe that the principal’s continued involvement
is important to the success of the Newark Joint Venture. The diminution or loss of his services due to
disability, death or for any other reasons could have a material adverse effect on the Newark Joint
Venture’s business, which would result in a material adverse effect on our business.
The Newark Joint Venture carries key man life insurance on the principal of the manager of the
Newark Joint Venture in the amount of $40 million. There can be no assurance that the proceeds from
such life insurance would be sufficient to compensate the Newark Joint Venture for the loss of his
services, and these policies do not provide any benefits if he becomes disabled or is otherwise unable to
render services to the Newark Joint Venture.
Our Newark Joint Venture is subject to risks particular to real estate development activities.
Our Newark Joint Venture is subject to the risks associated with development activities. These
risks include:
• The inability to complete the first two phases of the Teachers Village project because the
requisite funds, due to cost overruns or under estimating the funds needed, are insufficient for
such purpose.
• The inability to obtain the approximately $30 million or more needed to fund the third phase of
the Teachers Village development project;
20
• The failure to obtain governmental and other approvals on a timely basis;
• Construction, financing and other costs of developing the properties owned by the Newark Joint
Venture and in particular, Teachers Village, may not be obtained or if obtained may exceed
original estimates, possibly making such activities unprofitable;
• The time required to complete the construction of Teachers Village or to lease up the completed
project may be greater than originally anticipated, thereby adversely affecting the Newark Joint
Venture’s cash flow and liquidity;
• Occupancy rates and rents of a completed project may be insufficient to make such project
profitable; and
• Acquire all the properties needed to develop the project to its full potential.
We may be unable to renew leases or relet space and are exposed to the risks of defaults by tenants.
In 2012, approximately 22% of our rental revenue was generated from properties at the Newark
Joint Venture. The leases at the properties owned by the Newark Joint Venture are generally
short-term in nature. This has made it more difficult to find tenants for the venture’s Market Street
properties. If our tenants decide not to renew their leases upon their expiration, we may not be able to
relet the space. Even if our tenants do renew or we are able to relet the space, the terms of renewal or
reletting may be less favorable than current lease terms. If we are unable to lease vacant space,
promptly renew leases or relet the space, or if the rental rates upon such initial leasing renewal or
reletting are significantly lower than market or current rates, our income would be adversely affected.
Friends of Team Academy, a charter school located at the Teacher’s Village site, and Petco Animal
Supplies, Inc. and Calidad Furniture Corp. VII, both of which are located in Yonkers, New York,
accounted for approximately 9%, 6% and 6%, respectively, of our rental revenue in 2012. The default,
financial distress or bankruptcy of any of these tenants could cause interruptions in the receipt of, or
the loss of, a significant amount of rental revenue and we could incur substantial costs in enforcing our
rights as landlord. Our rental income could be adversely affected if these tenants do not meet their
obligations to us.
Failure of the Newark Joint Venture to comply with the requirements of the New Markets Tax Credit program
may result in significant losses and impair our financial condition.
The Newark Joint Venture entered into various arrangements to obtain funding under the New
Markets Tax Credit program for the Teachers Village project and in connection therewith received
approximately $25.8 million of net tax credit proceeds. New Markets Tax Credits are subject to
recapture for a period of seven years as provided in the Internal Revenue Code. The Newark Joint
Venture is required to comply with various regulations and contractual provisions that apply to the
these credits and has indemnified the beneficiaries thereof for any loss or recapture of the benefits of
such credits until the obligation to deliver tax benefits is relieved. We estimate that such indemnity
obligation would not exceed approximately $40 million (exclusive of interest and penalties) and is
subject to reduction to the extent the credits are not disallowed. Non-compliance with applicable
requirements could result in the tax benefits not being realized by the beneficiaries which would have
an adverse effect on our financial position and results of operations.
21
Risks Related to our Multi-Family Property Activities
Unfavorable changes in market and economic conditions could adversely affect occupancy, rental rates,
operating expenses, and the overall market value of multi-family properties we acquire.
Conditions in markets in which we acquire multi-family properties may significantly affect
occupancy, rental rates and the operating performance of such assets. The risks that may adversely
affect conditions in those markets include the following:
• industry slowdowns, plant closings and other factors that adversely affect the local economy;
• an oversupply of, or a reduced demand for, multi-family units;
• a decline in household formation or employment or lack of employment growth;
• the inability or unwillingness of residents to pay rent increases;
• rent control or rent stabilization laws, or other laws regulating housing, that could prevent us
from raising rents to offset increases in operating costs; and
• economic conditions that could cause an increase in our operating expenses, such as increases in
property taxes, utilities, and routine maintenance.
We could be negatively impacted by the condition of Fannie Mae or Freddie Mac and by changes in
government support for multi-family housing.
Fannie Mae and Freddie Mac have been a major source of financing for multi-family real estate in
the United States and we have used loan programs sponsored by one or more of these entities to
finance certain acquisitions. Should these entities have their mandates changed or reduced, lose key
personnel, be disbanded or reorganized by the government or otherwise discontinue providing liquidity
for the multi-family sector, it would significantly reduce our access to debt capital and/or increase
borrowing costs and could significantly limit our ability to acquire properties on acceptable terms and
reduce the values realized upon property sales.
Most of our multi-family properties are located in the southeast United States, which makes us susceptible to
adverse economic developments in such markets.
In addition to general, regional and national economic conditions, the operating performance of
our multi-family residential properties is impacted by the economic conditions of the specific markets in
which our properties are concentrated. All of our multi-family units are located in the southeast United
States—accordingly, adverse economic developments in such market could adversely impact the
operations of these properties and therefore our operating results and cash flow. The concentration of
properties in a limited number of markets may expose us to risks of adverse economic developments
which are greater than the risks of owning properties with a more geographically diverse portfolio.
Increased competition and increased affordability of residential homes could limit our ability to retain our
tenants or increase or maintain rents.
Our multi-family properties compete with numerous housing alternatives in attracting residents,
including other multi-family and single-family rental homes, as well as owner occupied single and multi-
family homes. Our ability to retain tenants and increase or maintain rents could be adversely affected
by the alternative housing in a particular area and, due to declining housing prices, mortgage interest
rates and government programs to promote home ownership, the increasing affordability of owner
occupied single and multi-family homes.
22
Risks involved in conducting real estate activity through joint ventures.
We have in the past and may in the future acquire properties in joint ventures with other persons
or entities when we believe that circumstances warrant the use of such structure. Joint venture
investments involve risks, including the possibility that our partner might become insolvent or otherwise
refuse to make capital contributions or distributions when due; that we may be responsible to our
partner for indemnifiable losses; that our partner might at any time have business goals which are
inconsistent with ours; and that our partner may be in a position to take action or withhold consent
contrary to our instructions or requests. Frequently, we and our partner may each have the right to
trigger a buy-sell arrangement, which could cause us to sell our interest, or acquire our partner’s
interest, at a time when we otherwise would not have initiated such a transaction.
In some instances, joint venture partners may have competing interests in our markets that could
create conflicts of interest. Further, the Company’s joint venture partners may experience financial
distress, including bankruptcy, and to the extent they do not meet their obligations to us or our joint
ventures with them, we may be adversely affected.
Risks Related to our Industry
Compliance with REIT requirements may hinder our ability to maximize profits.
In order to qualify as a REIT for Federal income tax purposes, we must continually satisfy tests
concerning among other things, our sources of income, the amounts we distribute to our shareholders
and the ownership of securities. We may also be required to make distributions to shareholders at
disadvantageous times or when we do not have funds readily available for distribution. Accordingly,
compliance with REIT requirements may hinder our ability to operate solely on the basis of
maximizing profits.
In order to qualify as a REIT, we must also ensure that at the end of each calendar quarter at
least 75% of the value of our assets consists of cash, cash items, government securities and qualified
REIT real estate assets. The remainder of our investment in securities cannot include more than 10%
of the outstanding voting securities of any one issuer or more than 10% of the total value of the
outstanding securities of such issuer. In addition, no more than 5% of the value of our assets can
consist of the securities of any one issuer, other than a qualified REIT security. If we fail to comply
with these requirements, we must dispose of the portion of our assets in excess of such amounts within
30 days after the end of the calendar quarter in order to avoid losing our REIT status and suffering
adverse tax consequences. This requirement could cause us to dispose of assets for consideration of less
than their true value and could lead to a material adverse impact on our results of operations and
financial condition.
Because Real Estate Investments Are Illiquid, We May Not Be Able to Sell Properties When Appropriate.
Real estate investments generally cannot be sold quickly. We may not be able to reconfigure our
portfolio promptly in response to economic or other conditions. This inability to reallocate our capital
promptly could adversely affect our financial condition and results of operations.
Item 1B. Unresolved Staff Comments.
None.
23
Executive Officers of Registrant
Set forth below is a list of our executive officers whose terms will expire at our 2013 annual Board
of Trustees’ meeting. The business history of officers who are also Trustees will be provided in our
proxy statement to be filed pursuant to Regulation 14A not later than January 28, 2013.
Name
Office
Fredric H. Gould* . . . . . . . . . . . . . . Chairman of the Board of Trustees
Israel Rosenzweig . . . . . . . . . . . . . . . Vice Chairman of the Board of Trustees and
Jeffrey A. Gould* . . . . . . . . . . . . . . . President and Chief Executive Officer;
Senior Vice President
Trustee
Mitchell K. Gould . . . . . . . . . . . . . . Executive Vice President
Matthew J. Gould* . . . . . . . . . . . . . .
Simeon Brinberg** . . . . . . . . . . . . . .
Senior Vice President; Trustee
Senior Vice President; Senior Counsel; and
Secretary
Senior Vice President, Finance
Senior Vice President and General Counsel
David W. Kalish*** . . . . . . . . . . . . . .
Mark H. Lundy** . . . . . . . . . . . . . . .
George E. Zweier . . . . . . . . . . . . . . . Vice President, Chief Financial Officer
Lonnie Halpern . . . . . . . . . . . . . . . . Vice President
Isaac Kalish*** . . . . . . . . . . . . . . . . . Assistant Treasurer
*
Fredric H. Gould is the father of Jeffrey A. and Matthew J. Gould.
** Simeon Brinberg is the father-in-law of Mark H. Lundy.
*** David W. Kalish is the father of Isaac Kalish.
Israel Rosenzweig (age 65) has been Vice Chairman of our Board of Trustees since September
2012, a Senior Vice President since April 1998. Mr. Rosenzweig has been a Vice President of
Georgetown Partners, Inc., the managing general partner of Gould Investors, L.P., since May 1997.
Gould Investors L.P. is primarily engaged in the ownership and operation of real estate properties held
for investment. From 2000 to March 2009, he was President of GP Partners, Inc., an affiliate of Gould
Investors L.P., which provided advisory services in the real estate and financial services industries to an
investment advisor. He also has been a Senior Vice President of One Liberty Properties, Inc. since May
1997.
Mitchell K. Gould (age 40), employed by us since May 1998, has been a Vice President since
March 1999 and Executive Vice President since March 2007. From January 1998 until May 1998,
Mr. Gould was employed by Bear Stearns Companies, Inc. where he was engaged in originating and
underwriting commercial real estate loans for securitization.
Simeon Brinberg (age 78) has been our Secretary since 1983, a Senior Vice President since 1988,
and Senior Counsel since March 2006. Mr. Brinberg has been a Vice President of Georgetown
Partners, Inc., the managing general partner of Gould Investors L.P., since October 1988. Since June
1989, Mr. Brinberg has been a Vice President or Senior Vice President of One Liberty Properties, Inc.,
a REIT engaged in the ownership of income producing real properties net leased to tenants under long
term leases. Mr. Brinberg is a member of the New York Bar and was engaged in the private practice of
law for approximately 30 years prior to 1988.
David W. Kalish (age 65) has been our Senior Vice President, Finance since August 1998.
Mr. Kalish was our Vice President and Chief Financial Officer from June 1990 until August 1998. He
has been Chief Financial Officer of One Liberty Properties, Inc. and Georgetown Partners, Inc. since
June 1990. For more than five years prior to June 1990, Mr. Kalish, a certified public accountant, was a
partner of Buchbinder Tunick & Company LLP and its predecessors.
24
Mark H. Lundy (age 50) has been our General Counsel since March 2007 and a Senior Vice
President since March 2005. From 1993 to March 2005 he was a Vice President. He has been the
Secretary of One Liberty Properties, Inc. since June 1993 and he also serves as a Senior Vice President
of One Liberty Properties, Inc. Mr. Lundy has been a Vice President of Georgetown Partners, Inc.
(currently Senior Vice President) since July 1990. He is a member of the bars of New York and
Washington, D.C.
George E. Zweier (age 48) has been employed by us since June 1998 and was elected Vice
President, Chief Financial Officer in August 1998. For approximately five years prior to joining us,
Mr. Zweier, a certified public accountant, was an accounting officer with the Bank of Tokyo-Mitsubishi
Limited in its New York office.
Lonnie Halpern (age 37) has been employed by us since August 2005 and was elected a Vice
President in March 2007. Mr. Halpern is a member of the bars of New York and Massachusetts, and
was an associate at Goodwin Procter LLP, New York, N.Y. from September 2001 to March 2004 and
Hogan & Hartson LLP, New York, N.Y. from April 2004 to July 2005.
Isaac Kalish (age 37) has worked with us since 2004 and was elected our Assistant Treasurer in
June 2007. In 2003 and 2004, Mr. Kalish, a certified public accountant, was employed as an accountant
by Buchbinder Tunick & Co, LLP.
Item 2. Properties.
Our executive office is located at 60 Cutter Mill Road, Suite 303, Great Neck, New York. This
office is located in a building owned by a subsidiary of Gould Investors L.P. In 2012, we paid $125,000
for the use of this space. We believe that such facilities are satisfactory for our current and projected
needs.
The information set forth under ‘‘Item 1—Business’’ is incorporated herein by this reference to the
extent responsive to the information called for by this item.
Item 3. Legal Proceedings.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities.
Our common shares of beneficial interest, or Common Shares, are listed on the New York Stock
Exchange, or the NYSE, under the symbol ‘‘BRT.’’ The following table shows for the periods indicated,
the high and low sales prices of the Common Shares as reported in the consolidated transaction
reporting system.
Quarter Ended
Fiscal 2012
Fiscal 2011
High
Low
High
Low
December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
March 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
June 30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
September 30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$6.46
7.00
8.65
6.85
$5.85
6.10
6.35
6.23
$7.40
7.46
6.67
6.48
$6.28
6.25
6.23
5.90
25
On November 30, 2012, the high and low sales prices of our Common Shares was $6.35 and $6.20,
respectively.
As of November 30, 2012, there were approximately 1,044 holders of record of our Common
Shares.
We did not pay any cash dividends in fiscal 2012 or 2011. Our tax loss carry forward at
December 31, 2011, was approximately $60.5 million; therefore, we do not anticipate paying cash
dividends in the near future.
Stock Performance Graph
This graph compares the performance of our shares with the Standard & Poor’s 500 Stock Index
and a peer group index consisting of publicly traded mortgage REITs. The graph assumes $100 invested
on September 30, 2007 and assumes the reinvestment of dividends.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among BRT Realty Trust, the S&P 500 Index, the FTSE NAREIT Mortgage REITs Index,
and the FTSE NAREIT All REITs Index
$140
$120
$100
$80
$60
$40
$20
$0
9/07
9/08
9/09
9/10
9/11
9/12
BRT Realty Trust
S&P 500
11DEC201200484018
FTSE NAREIT Mortgage REITs
*
$100 invested on 9/30/07 in stock or index, including reinvestment of dividends.
Fiscal year ending September 30.
BRT Realty Trust . . . . . . . . . . . . . . . . . . . . . . . . . . .
S&P 500 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
FTSE NAREIT Mortgage REITs . . . . . . . . . . . . . . . .
100.00
100.00
100.00
61.42
78.02
69.18
48.80
72.63
86.91
54.70
80.01
95.79
53.25
80.93
98.77
55.64
105.37
131.55
9/07
9/08
9/09
9/10
9/11
9/12
Issuer Purchases of Equity Securities
In September 2011, we announced that our Board of Trustees had authorized a share buyback plan
pursuant to which we may, through September 30, 2013, expend up to $2 million to repurchase our
common shares. Through September 2012, we had acquired 139,507 common shares for an aggregate
purchase price of $880,000. We did not repurchase any shares during the quarter ended September 30,
2012.
26
Item 6. Selected Financial Data.
The following table, not covered by the report of the independent registered public accounting
firm, sets forth selected historical financial data for each of the fiscal years indicated. This table should
be read in conjunction with the detailed information and financial statements appearing elsewhere
herein.
(Dollars in thousands, except per share amounts)
Operating statement data:
Total revenues . . . . . . . . . . . . . . . . . . . . . . . .
Total expenses(1)(2) . . . . . . . . . . . . . . . . . . . .
Gain on sale of loan . . . . . . . . . . . . . . . . . . . .
Gain on sale of available-for-sale securities . . .
(Loss) gain on extinguishment of debt . . . . . . .
Income (loss) from continuing operations . . . .
Income (loss) from discontinued operations(3) .
Net income (loss) attributable to common
2012
2011
2010
2009
2008
$ 19,579
23,447
3,192
605
—
758
792
$ 17,881
13,834
—
1,319
(2,138)
3,578
1,346
$
8,135
19,844
—
1,586
—
(9,927)
590
$ 12,154
36,329
—
1,016
6,443
(19,236)
(29,124)
$ 21,990
35,554
—
19,940
—
7,734
(7,855)
shareholders . . . . . . . . . . . . . . . . . . . . . . . .
4,430
6,374
(8,015)
(47,755)
(260)
Earnings (loss) per beneficial share:
Income (loss) from continuing operations . . . .
Income (loss) from discontinued operations . . .
Basic and diluted earnings (loss) per share . .
Distribution per common share(4) . . . . . . . . . .
Balance sheet data:
Total assets(5) . . . . . . . . . . . . . . . . . . . . . . . .
Earning real estate loans(6) . . . . . . . . . . . . . .
Non-earning real estate loans(6) . . . . . . . . . . .
Real estate loans held for sale . . . . . . . . . . . .
Real estate properties, net
. . . . . . . . . . . . . . .
Cash and cash equivalents . . . . . . . . . . . . . . .
Restricted cash-construction holdbacks . . . . . .
Available-for-sale securities at market . . . . . . .
Junior subordinated notes . . . . . . . . . . . . . . . .
Mortgages payable(7) . . . . . . . . . . . . . . . . . . .
Total BRT Realty Trust shareholders’ equity . . .
$
$
$
$
.26
.06
.32
—
$
$
.35
.10
.45
—
(.62) $
.04
(.58) $
— $
(2.50) $
(1.60)
(4.10) $
$
1.15
.65
(.67)
(.02)
3.19
$385,956
37,096
—
—
190,317
78,245
55,252
1,249
37,400
169,284
133,449
$191,012
67,266
—
8,446
59,277
44,025
—
2,766
37,400
14,417
129,063
$186,266
17,263
35,143
—
55,843
58,497
—
10,270
40,815
12,557
124,554
$193,333
44,677
2,836
16,915
55,544
25,708
—
8,963
40,234
9,460
121,227
$270,020
95,228
18,407
—
14,154
35,765
—
10,482
56,702
2,315
186,772
(1) Total expenses increased in 2012 from 2011 as a result of, among other things, expenses associated
with the acquisition, ownership and operation of multi-family properties and interest expense
associated with the Newark Joint Venture financings.
(2) Includes $3,165, $17,110 and $15,260 of loan loss provisions for 2010, 2009 and 2008, respectively,
and $2,625, $1,272 and $1,050 of impairment charges in 2010, 2009 and 2008, respectively.
(3) Includes $745, $29,774 and $8,165 of impairment charges for 2010, 2009 and 2008, respectively.
(4) The distribution in fiscal 2008 was paid wholly in cash. In September 2009, a distribution of $1.15
per share was declared and in October 2009 was paid in a combination of an aggregate of $13,308
in cash, representing 10% of this distribution, and the balance in our common shares. The cash
amount was allocated pro rata among all shareholders who elected to receive cash. Since any
shareholder electing to receive cash could not receive the entire dividend in cash, the remainder of
the dividend was paid to shareholders electing to receive cash in our common shares. Shareholders
who did not elect cash received the entire dividend in our common shares.
27
(5) The increase in 2012 from 2011 is due primarily to the acquisition of interests in joint ventures
that acquired multi-family properties and the proceeds from the Newark Joint Venture financings
and New Markets Tax Credits transactions.
(6) Earning and non-earning loans, which exclude loans held for sale, are presented without deduction
of the related allowance for possible losses and deferred fee income.
(7) The increase in 2012 from 2011 is due primarily to the mortgage debt incurred in the multi-family
property acquisitions and the Newark Joint Venture’s financings.
Funds from Operations; Adjusted Funds from Operations.
In view of our equity investments in joint ventures which have acquired multi-family properties, we
disclose below funds from operations (‘‘FFO’’) and adjusted funds from operations (‘‘AFFO’’) because
we believe that such metrics are a widely recognized and appropriate measure of the performance of an
equity REIT.
We compute FFO in accordance with the ‘‘White Paper on Funds From Operations’’ issued by the
National Association of Real Estate Investment Trusts (‘‘NAREIT’’) and NAREIT’s related guidance.
FFO is defined in the White Paper as net income (computed in accordance with generally accepting
accounting principles), excluding gains (or losses) from sales of property, plus depreciation and
amortization, plus impairment write-downs of depreciable real estate and after adjustments for
unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint
ventures will be calculated to reflect funds from operations on the same basis. In computing FFO, we
do not add back to net income the amortization of costs in connection with our financing activities or
depreciation of non-real estate assets. Since the NAREIT White Paper only provides guidelines for
computing FFO, the computation of FFO may vary from one REIT to another. We compute AFFO by
deducting from FFO our straightline rent accruals and amortization of lease intangibles (including our
share of our unconsolidated joint ventures).
We believe that FFO and AFFO are useful and standard supplemental measures of the operating
performance for equity REITs and are used frequently by securities analysts, investors and other
interested parties in evaluating equity REITs, many of which present FFO and AFFO when reporting
their operating results. FFO and AFFO are intended to exclude GAAP historical cost depreciation and
amortization of real estate assets, which assures that the value of real estate assets diminish
predictability over time. In fact, real estate values have historically risen and fallen with market
conditions. As a result, we believe that FFO and AFFO provide a performance measure that when
compared year over year, should reflect the impact to operations from trends in occupancy rates, rental
rates, operating costs, interest costs and other matters without the inclusion of depreciation and
amortization, providing a perspective that may not be necessarily apparent from net income. We also
consider FFO and AFFO to be useful to us in evaluating potential property acquisitions.
FFO and AFFO do not represent net income or cash flows from operations as defined by GAAP.
FFO and AFFO should not be considered to be an alternative to net income as a reliable measure of
our operating performance; nor should FFO and AFFO be considered an alternative to cash flows
from operating, investing or financing activities (as defined by GAAP) as measures of liquidity.
FFO and AFFO do not measure whether cash flow is sufficient to fund all of our cash needs,
including principal amortization, capital improvements and distributions to stockholders. FFO and
AFFO do not represent cash flows from operating, investing or financing activities as defined by GAAP.
Management recognizes that there are limitations in the use of FFO and AFFO. In evaluating our
performance, management is careful to examine GAAP measures such as net income and cash flows
from operating, investing and financing activities. Management also reviews the reconciliation of net
income to FFO and AFFO.
28
The table below provides a reconciliation of net income determined in accordance with GAAP to
FFO and AFFO for each of the indicated years (amounts in thousands):
2012
2011
2010
2009
2008
Net income (loss) attributable to common
shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Add: depreciation of properties . . . . . . . . . . . . . . . . .
Add: our share of depreciation in unconsolidated
joint ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Add: impairment charges . . . . . . . . . . . . . . . . . . . . .
Add: amortization of deferred leasing costs . . . . . . . .
Deduct: gain on sales of real estate . . . . . . . . . . . . . .
Funds from operations . . . . . . . . . . . . . . . . . . . . . . .
Deduct: straight line rent accruals . . . . . . . . . . . . . . .
$4,430
1,992
$ 6,374
705
$(8,015) $(47,755) $ (260)
113
662
250
270
—
59
(792)
5,959
(23)
39
—
48
(1,346)
5,820
78
39
3,370
48
(1,937)
(5,833)
323
38
31,046
15
(2,199)
(18,605)
23
38
9,215
13
(1,517)
7,602
16
Adjusted funds from operations . . . . . . . . . . . . . . . .
$5,936
$ 5,898
$(5,510) $(18,582) $ 7,618
The table below provides a reconciliation of net income per common share (on a diluted basis)
determined in accordance with GAAP to FFO and AFFO.
Net income (loss) attributable to common shareholders . . . . . . .
Add: depreciation of properties . . . . . . . . . . . . . . . . . . . . . . . .
Add: our share of depreciation in unconsolidated joint ventures .
Add: impairment charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Add: amortization of deferred leasing costs . . . . . . . . . . . . . . . .
Deduct: gain on sales of real estate . . . . . . . . . . . . . . . . . . . . .
Funds from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deduct: straight line rent accruals . . . . . . . . . . . . . . . . . . . . . .
2012
2011
2010
2009
2008
$ .32
.14
.02
—
—
(.06)
.42
—
$ .45
.05
—
—
—
(.10)
$(.58) $(4.10) $(.02)
.01
.02
—
—
.78
2.67
—
—
(.13)
(.19)
.05
—
.24
—
(.14)
.40
.01
(.43)
.02
(1.60)
—
.64
—
Adjusted funds from operations . . . . . . . . . . . . . . . . . . . . . . . .
$ .42
$ .41
$(.41) $(1.60) $ .64
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Overview
We are a real estate investment trust, also known as a REIT. We operate in three lines of business:
real estate lending, ownership and operation of multi-family properties, and ownership and operation of
other real estate assets.
Our lending activities involves originating and holding for investment senior mortgage loans
secured by commercial and multi-family real estate property in the United States. Revenues are
generated from the interest income (i.e, the interest borrowers pay on our loans) and to a lesser extent,
loan fee income generated on the origination and extension of loans and investment income from
securities transactions.
Our multi-family activities derive revenues primarily from tenant rental payments. We commenced
these activities in 2012 as we identified a demand for equity capital in this sector. Generally, these
activities involve our investment of 80% of the equity in a joint venture that acquires a multi-family
property. Our multi-family property activities are complementary to our loan origination activities in
that we address the funding needs of multi-family real estate investors by providing them with access to
both equity capital and debt financing.
29
Our ownership and operation of other real estate assets is comprised principally of the activities of
the Newark Joint Venture and to a lesser extent, the ownership and operations of various real estate
assets located in New York and Florida. The Newark Joint Venture is engaged in the development of
properties in downtown Newark, NJ. The properties are to be developed for educational, commercial,
retail and residential use. The Newark Joint Venture is currently developing a project known as
‘‘Teachers Village’’—the project currently involves five buildings, in various stages of construction and
pre-construction, which are to be used for charter schools, retail space and residential units. The
venture is currently unprofitable and it is anticipated that the activities will continue to be unprofitable
at least until the Teacher’s Village is constructed and reasonable occupancy levels achieved. The
venture requires substantial third party funding (including tax credits and financing provided by
governmental authorities) for its development activities—no assurance can be given that sufficient
funding will be available and even if sufficient funding is obtained and construction completed, that
such development activities will ever by profitable to us.
The following table sets forth (i) the impact of these lines of business on our total revenues and
net income attributable to common shareholders for the periods indicated and (ii) our total assets
applicable to each segment as of the dates indicated (dollars in thousands):
Fiscal 2012
Fiscal 2011
Net Income
(Loss)
Attributable
to Common
Shareholders
$ 9,456
(4,248)
(778)
Total
Revenues
$14,425
—
3,456
Net Income
(Loss)
Attributable
to Common
Shareholders
Segment Assets at
September 30,
2012
2011
$ 8,068
—
(1,694)
$113,383
121,153
151,420
$126,916
—
64,096
Total
Revenues
$10,026
5,464
4,089
Loan and investment . . . . . . . . . .
Multi-family real estate . . . . . . . .
Other real estate . . . . . . . . . . . . .
Net income attributable to common shareholders decreased by $2 million or 31.3% from
$6.4 million in 2011 to $4.4 million in 2012. The decrease is primarily due to the net losses sustained in
our multi-family property activities and to a lesser extent, net losses from the activities of our other real
estate assets. These losses were partially offset by the increase in net income attributable to our loan
and investment activities.
Contributing to the net loss attributable to common shareholders of our multi-family activities
were, among other things, property acquisition costs of $2.4 million with respect to the five multi-family
properties acquired in 2012 (and in particular, costs of $1.6 million with respect to the acquisition of
the Palm Beach Gardens, Florida property) and $1.3 million of non-cash depreciation and amortization
expense. Depreciation and amortization expense will continue to negatively impact income—but not
funds from operations—from our multi-family property segment.
Historically, our primary source of revenue and income has been derived from our loan origination
activities. We anticipate that as a result of our multi-family property acquisitions, our primary sources
of revenues and operating cash will, in the future, be generated by a combination of our multi-family
and loan origination activities.
The following highlights certain of our activities in 2012 and our financial condition at year-end:
• we originated $98.6 million of mortgage loans in 2012 ($25.5 million, $40.6 million, $20.1 million
and $12.4 million in the first, second, third and fourth fiscal quarters, respectively), and
$131.3 million of mortgage loans in 2011 ($28.3 million, $60.5 million, $23.6 million and
$18.9 million in the first, second, third and fourth fiscal quarters, respectively);
• we acquired five multi-family properties with an aggregate of 1,451 units and invested equity of
approximately $28.6 million in the joint ventures that acquired these properties;
30
• we have cash and cash equivalents, net of deposits payable, of approximately $76.1 million and
$44 million, at September 30, 2012 and December 5, 2012, respectively;
• interest on loans and loan fee income in 2012 declined $798,000 or 7.7% from 2011; and
• the Newark Joint Venture obtained $68.5 million in financing, which together with New Markets
Tax Credits net proceeds of approximately $25.8 million, is being used to construct five buildings
at the Teacher’s Village site.
From October 1, 2012, through December 5, 2012 we (i) had loan originations, net of repayments,
of approximately $20 million and (ii) invested equity of approximately $14 million in joint ventures that
acquired three additional multi-family properties with an aggregate of 884 units.
Year Ended September 30, 2012 Compared to Year Ended September 30, 2011
Revenues
The following table compares our revenues for the years indicated:
(Dollars in thousands):
Interest on real estate loans
. . . . . . . . . . . . . . . . . . . . . . . .
Loan fee income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rental and other revenue from real estate properties . . . . . .
Recovery of previously provided allowances . . . . . . . . . . . . .
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal
Increase
2012
2011
(Decrease) % Change
$ 7,257
2,273
8,675
156
1,218
$ 8,500
1,828
3,456
3,595
502
$(1,243)
445
5,219
(3,439)
716
(14.6)%
24.3%
151.0%
*
142.6%
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$19,579
$17,881
$ 1,698
9.5%
* Not meaningful.
Interest on real estate loans. The decrease is attributable to the following factors: (i) $797,000 is
due to the inclusion, during fiscal 2011, of cash basis income received primarily from non-performing
loans and purchase money mortgages; and (ii) $425,000 is due to the $3.5 million decrease in the
average balance of earning loans outstanding. This average balance decreased due to lower loan
originations and accelerated repayments by borrowers. We believe that loan originations decreased due
to competitive pressures and reduced demand for repurchase loans and that the accelerated repayments
by borrowers were due to the increased availability of credit on more favorable terms. The weighted
average interest rate on performing loans was 11.85% and 11.82% in 2012 and 2011, respectively.
Loan fee income. The increase is primarily due to higher amortization of loan fees and extension
fees and accelerated amortization of loans that paid off prior to maturity.
Rental and other revenue from real estate properties. The increase is due to the inclusion of
$5.46 million of rental income from five multi-family properties acquired in fiscal 2012. We anticipate
that rental revenue will increase in fiscal 2013 as the 2012 results only includes rental revenue for a
portion of such year due to the timing of these acquisitions and three multi-family properties were
acquired after year end. Assuming, among other things, that rental and occupancy rates remain stable,
we estimate that rental revenues in 2013 from our eight multi-family properties will increase to
approximately $21.6 million. Partially offsetting the increase was the inclusion in 2011 of $77,000 of
rebill income at a Newark Joint Venture property and a $188,000 decrease due to the loss of several
commercial tenants at its Market Street properties. This is a development site and accordingly, leasing
space at this property, which leases are short-term in nature, is difficult.
31
Recovery of previously provided allowances. The decline is due to the inclusion in 2011 of
$2.5 million from the reversal of a previously provided loan loss allowance and a $1 million recovery on
a loan charged off in a prior year.
Other income. The increase is the result of a U.S. Treasury subsidy of $876,000 which covers
approximately 90% of the interest payments with respect to qualified school construction bonds in
principal amount of $22.7 million issued by the Newark Joint Venture at the end of the second quarter
of 2012. We anticipate that this subsidy, in the annual amount of approximately $1.2 million, will
continue until at least 2018. Partially offsetting the increase was a $160,000 decrease in investment
income resulting from the sale of securities that had generated such income in 2011.
Expenses
The following table compares our expenses for the periods indicated:
Fiscal
Increase
2012
2011
(Decrease) % Change
(Dollars in thousands)
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Advisor’s fee, related party . . . . . . . . . . . . . . . . . . . . . . . . .
Foreclosure related professional fees . . . . . . . . . . . . . . . . . .
Property acquisition costs . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . .
Operating expenses related to real estate properties . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . .
$ 4,729
1,104
—
2,407
7,161
6,042
2,004
$ 2,112
916
579
—
6,149
3,340
738
$2,617
188
(579)
2,407
1,012
2,702
1,266
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$23,447
$13,834
$9,613
123.9%
20.5%
(100)%
*
16.5%
80.9%
171.4%
69.5%
* Not meaningful.
Interest expense. The increase is attributable to the following factors: (i) $1.39 million is due to
interest expense related to $68.5 million of mortgage debt incurred in connection with the Newark
Joint Venture’s 2012 financings; (ii) $1.44 million is due to the mortgage debt of $89.7 million incurred
in connection with the multi-family properties acquired in 2012; and (iii) $144,000 is related to interest
expense and amortization of fees associated with our credit line. The increase was partially offset by a
$330,000 interest expense decrease resulting from the March 2011 restructuring of our junior
subordinated notes. As: (i) 2012 only includes interest expense for a portion of such year with respect
to the aggregate mortgage debt of $158.2 million incurred in connection with the acquisitions of multi-
family properties and the Newark Joint Venture financings; and (ii) the interest rate on the junior
subordinated notes increased from 3% to 4.9% in August 2012, we estimate that interest expense in
2013 attributable to our eight multi-family properties, the Newark Joint Venture’s 2012 financings and
the junior subordinated notes, will increase to approximately $5.3 million, $1.8 million and $3.9 million,
respectively, for an aggregate increase of approximately $11 million. Capitalized interest was
$1.66 million and $775,000 in 2012 and 2011, respectively.
Advisor’s fee, related party. The fee is calculated based on invested assets which increased because
of the purchase of five multi-family properties in 2012.
Foreclosure related professional fees. Fees decreased due to the resolution of the foreclosure,
bankruptcy and related proceedings in which we had been involved.
Property acquisition costs. These costs were incurred in connection with our purchase of multi-
family properties. Such costs included acquisition fees, brokerage fees, and legal, due diligence and
other transactional costs and expenses. There was no corresponding expense in 2011.
32
General and administrative expense. The increase is attributable primarily to the following factors:
(i) a net increase of $320,000 is due to increased professional fees resulting from, among other things,
our multi-family joint venture activities; (ii) $205,000 is due to the payment of Federal alternative
minimum tax resulting from our use of net operating loss carryfowards to reduce 2011 taxable income;
(iii) a net increase of $186,000 is due to higher rates of employee compensation; (iv) $150,000 is due to
the fees of $50,000 per quarter payable to the chairman of our board of trustees, which payment
commenced January 2012; (v) $115,000 is due to the inclusion in the prior year of reversals of
over-accruals relating to state franchise taxes; and (v) $70,000 is due to increased travel and related
expenses. General and administrative expense is allocated among our three segments in proportion to
the assets allocated to each segment as of the end of each quarter.
Operating expenses related to real estate properties. The increase is due to the inclusion, for a
portion of 2012, of expenses related to the multi-family properties acquired in such year. We estimate
that in 2013 the expense related to our eight multi-family properties will increase by approximately
$8.1 million to $10.8 million.
Depreciation and amortization. The increase is due to the inclusion of such expense, for a portion
of 2012, of the five multi-family properties we acquired in such year. We estimate that the expense for
2013 related to our eight multi-family properties will be approximately $4.6 million.
Other revenue and expense items
The following table compares other revenue and expense items for the years indicated:
(Dollars in thousands)
Equity in earnings of unconsolidated ventures . . . . . . . . . . . . .
Gain on sale of available-for-sale securities . . . . . . . . . . . . . . .
Gain on sale of loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on extinguishment of debt . . . . . . . . . . . . . . . . . . . . . . .
* Not meaningful.
Fiscal
Increase
2012
2011
(Decrease) % Change
$
$ 829
605
3,192
350
1,319
—
— (2,138)
$
479
(714)
3,192
(2,138)
136.8%
(54.2)%
*
*
Equity in earnings of unconsolidated joint ventures. The increase, reflected in our other real estate
asset segment, is related to a distribution from a joint venture of $864,000 in excess of its basis
resulting from the refinancing of a mortgage which was recorded as income. Partially offsetting the
increase was: (i) $125,000 loss from a joint venture entered into in the March 2012 quarter which is
primarily the result of $193,000 of acquisition costs related to multi-family properties acquired by joint
ventures that were, in the fourth quarter of 2012, included in our consolidated results of operations;
and (ii) $235,000 (which reflects the write-off of $297,000 of capitalized costs) related to a joint venture
that ceased loan purchasing activities in November 2011, which activities are reflected in our loan and
investment segment.
Gain on sale of available-for-sale securities.
In 2012, we sold available-for-sale equity securities
with a cost basis of $3,334,000 and recognized a gain of $605,000. In 2011, we sold available-for-sale
debt and equity securities with a cost basis of $6,270,000 and recognized a gain of approximately
$1,319,000.
Gain on sale of loan.
In October 2011, pursuant to a Federal Bankruptcy Court approved joint
plan of reorganization, we and our loan participant sold the rights to a loan for net proceeds of
approximately $23.5 million. We recognized a $3.2 million gain on the sale, representing our 50%
interest in this loan. There was no corresponding gain in 2011.
33
Loss on extinguishment of debt.
In 2011, we restructured our outstanding junior subordinated
notes. Pursuant to the restructuring, we repaid $5.0 million of the notes at par and reduced the interest
rate on the remaining outstanding notes through the April 2036 maturity date. For financial statement
purposes, this restructuring was treated as an extinguishment of debt, and accordingly, we recognized a
loss of $2,138,000 which represented the unaccreted principal balance of the notes and the related
unamortized costs. There was no corresponding debt extinguishment in 2012.
Discontinued operations
In 2012, discontinued operations consisted of the gain of $792,000 on the sale of two vacant
cooperative apartments. In 2011, discontinued operations consisted of the sale of two vacant
cooperative apartments for a gain of $1,001,000 and a gain of $289,000 from the payoff of a loan which
was accounted for as real estate for financial statement purposes. All of these properties were located
in Manhattan, New York. These activities are reflected in our other real estate assets segment.
Year Ended September 30, 2011 Compared to Year Ended September 30, 2010
Revenues
The following table compares our revenues for the years indicated:
(Dollars in thousands):
Interest on real estate loans . . . . . . . . . . . . . . . . . . . . . . . . .
Loan fee income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rental and other revenue from real estate properties . . . . . . .
Recovery of previously provided allowance . . . . . . . . . . . . . . .
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 8,500
1,828
3,456
3,595
502
$3,624
253
3,422
365
471
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$17,881
$8,135
$4,876
1,575
34
3,230
31
$9,746
135%
623%
1%
885%
7%
120%
Fiscal
2011
2010
Increase
(Decrease) % Change
Interest on real estate loans. The increase is primarily due to a $37.1 million increase in the
average balance of earning loans outstanding attributable to additional loan originations, which we
believe was the result of improved economic conditions. This average balance excludes $11.2 million of
purchase money mortgages that were provided in prior years to facilitate the sale of our owned real
estate. The interest rate on our portfolio increased from 9.83% in 2010 to 11.85% in 2011 as the result
of the payoffs of the lower rate purchase money mortgages.
Loan fee income. The increase is due to the amortization of loan fees received on the increase in
loans originated during 2011.
Recovery of previously provided allowance. The increase reflects the reversal of a previously
provided loan loss allowance of $2.5 million allocated to a non-performing loan that was sold in the
quarter ended March 31, 2011 and the recovery of $1 million on a loan charged off in a prior year.
34
Expenses
The following table compares our expenses for the years indicated:
(Dollars in thousands)
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Advisor’s fee, related party . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreclosure related professional fees . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . .
Operating expenses related to real estate properties . . . . . . .
Amortization and depreciation . . . . . . . . . . . . . . . . . . . . . . .
Fiscal
Increase
2011
2010
(Decrease) % Change
$ 2,112
916
—
—
579
6,149
3,340
738
$ 2,584
785
3,165
2,625
673
6,063
3,216
733
$ (472)
131
(3,165)
(2,625)
(94)
86
124
5
(18.3)%
16.7%
*
*
(13.9)%
1.4%
3.9%
1%
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$13,834
$19,844
$(6,010)
(30.3)%
* Not meaningful.
Interest expense. Approximately $508,000 of the decrease is attributable to the restructuring of the
junior subordinated notes in March 2011 (of which $433,000 is due to the reduction of the interest rate
and $75,000 is due to the decrease in the principal amount outstanding) and approximately $449,000 is
due to the capitalization of interest with respect to a Newark, NJ development site. The decrease was
partially offset by a $448,000 increase in mortgage interest due to the aggregate net increase of
$1.86 million in mortgage debt outstanding. This debt increased due to the borrowing pursuant to an
$8.6 million financing facility for the Newark Joint Venture. The $4 million outstanding at
September 30, 2011 under this facility carried interest at the rate of 17% per year.
Advisor’s fee, related party. The fee is calculated based on invested assets and increased because of
the increase in our portfolio of loans and real estate assets.
Provision for loan losses.
In 2010, we recorded $3,165,000 of loan loss provisions. There were no
such provisions in 2011.
Impairment charges.
In 2010, we recorded $2,625,000 of impairment charges. There were no such
charges in 2011.
Foreclosure related professional fees. Fees decreased primarily due to the resolution in 2011 of
substantially all of the foreclosure, bankruptcy and related proceedings in which we were involved.
General and administrative expense. The increase is attributable primarily to an increase of
$440,000 in payroll related costs reflecting higher salaries, commissions, pension and medical expenses,
partially offset by an approximately $412,000 decline in professional fees, travel related, public company
and other miscellaneous expenses.
Operating expenses related to real estate owned. The increase is attributable primarily to increases
in maintenance, insurance and professional fees on properties owned by the Newark Joint Venture,
partially offset by a $134,000 decline in real estate tax expense on a land parcel we own in Daytona,
FL.
35
Other revenue and expense items
The following table compares other revenue and expense items for the years indicated:
(Dollars in thousands)
Equity in earnings of unconsolidated ventures . . . . . . . . . . . . .
Gain on sale of available-for-sale securities . . . . . . . . . . . . . . .
Loss on extinguishment of debt . . . . . . . . . . . . . . . . . . . . . . .
* Not meaningful.
Fiscal
2011
2010
Increase
(Decrease) % Change
$
350
1,319
(2,138)
$ 196
1,586
$
154
(267)
— (2,138)
78.4%
(16.8)%
*
Equity in earnings of unconsolidated ventures. The increase is attributable to $99,000 of income
generated with respect to the activities of a joint venture engaged in loan purchasing activities and
$54,000 attributable to increased rental income at one of our other ventures properties.
Gain on sale of available-for-sale securities. During fiscal 2011, we sold available-for-sale securities
with a cost basis of $6.3 million for $7.6 million, recognizing a gain of $1.3 million. During fiscal 2010,
we sold available-for-sale securities with a cost basis of $1.8 million for $3.4 million recognizing a gain
of $1.6 million.
Discontinued operations
In fiscal 2011, we had income from discontinued operations of $1.3 million due to the sale of two
cooperative apartment units in New York and the payoff of a loan which was classified as real estate
for financial statement purposes. In fiscal 2010, discontinued operations represented the loss from
operations of $602,000 primarily from the sale of two multi-family garden apartment properties and a
hotel property, an impairment charge of $745,000 which related to a multi-family garden apartment
property and gains of $1,937,000 from the sale of two multi-family properties, a hotel property and
coop and condominium units.
Credit Facility
A subsidiary of ours is able, pursuant to a senior secured revolving credit facility, to borrow up to
an aggregate of $25 million to originate loans. The subsidiary may borrow (i) on an unsecured basis,
$10 million for up to 90 days and (ii) on a secured basis, up to the lesser of $25 million and the
borrowing base. The borrowing base is generally equal to 40% to 65% (depending on, among other
things, the type of property secured by eligible mortgage receivables acceptable to the lender as
collateral and the operating income of the related property) of such receivables. Interest accrues on the
outstanding balance at the greater of (i) 4% plus LIBOR and (ii) 5.50%. The facility matures June 21,
2014 and, subject to the satisfaction of specified conditions, the outstanding balance may be converted
at our option into an 18 month term loan. We have guaranteed the payment and performance of our
subsidiary’s obligations under the facility. The credit facility, among other things, requires us to
maintain specified net worth and liquidity levels, requires the subsidiary to maintain specified debt
service coverage and collateral coverage ratios, and limits our and our subsidiary’s ability to incur debt.
At each of September 30, 2012 and November 30, 2012, no amount was outstanding under the
facility and the maximum amount we could borrow was $10 million for 90 days.
36
Disclosure of Contractual Obligations
The following table sets forth as of September 30, 2012 our known contractual obligations:
(Dollars in thousands)
Long-Term Debt Obligations(1) . . . . . . . . . . . . . .
Capital Lease Obligations . . . . . . . . . . . . . . . . . .
Operating Lease Obligation . . . . . . . . . . . . . . . . .
Purchase Obligations(2) . . . . . . . . . . . . . . . . . . .
Other Long-Term Liabilities Reflected on the
Payment due by Period
Less than
1 Year
1 - 3
Years
3 - 5
Years
$14,601
—
190
1,428
$31,702
—
393
1,919
$24,755
—
297
1,356
More than
5 Years
$233,989
—
406
—
Total
$305,047
—
1,286
4,703
Trust’s Balance Sheet Under GAAP . . . . . . . . .
—
—
—
—
—
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$16,219
$34,014
$26,408
$234,395
$311,036
(1) Includes payments of principal (including amortization payments) and interest. Assumes that the
qualified school construction bonds ($22.7 million as of September 30, 2012) issued in connection
with the Newark Joint Venture financing transactions will be refinanced in 2018 on the terms
currently in effect and that the interest rate after April 30, 2016 on the junior subordinated notes
will be 2.42% per annum. See note 10 to our consolidated financial statements. Does not include
property management fees to be paid to the managers of our multi-family properties, which we
contemplate will be paid from the cash flow generated by such properties or the $45 million in
principal amount of mortgage debt incurred after 2012 in the acquisition of three multi-family
properties. Such debt has a weighted average interest rate of 3.75% per annum and a weighted
average maturity of ten years. The following table sets forth as of September 30, 2012 information
regarding our long-term debt obligations:
(Dollars in thousands)
Multi-family properties . . . . . . .
Newark Joint Venture . . . . . . .
Junior subordinated notes . . . . .
Other . . . . . . . . . . . . . . . . . . .
Payment due by Period
Less than
1 Year
1 - 3
Years
3 - 5
Years
$ 3,767
8,809
1,833
192
$15,004
12,647
3,665
386
$ 9,400
12,619
2,350
386
More than
5 Years
$ 86,281
91,775
54,207
1,726
Total
$114,452
125,850
62,055
2,690
Total . . . . . . . . . . . . . . . . . . . .
$14,601
$31,702
$24,755
$233,989
$305,047
(2) Includes the minimum payment of $750,000 payable commencing January 1, 2012 for every twelve
month period pursuant to our Advisory Agreement, as amended, with REIT Management, an
entity owned by the chairman of our board of trustees. As this agreement terminates June 30, 2014
and amounts payable thereafter are not determinable, no further obligations with respect thereto
are reflected thereafter. Also includes an estimated $678,000 payable annually pursuant to the
Shared Services Agreement. This estimate reflects the amount paid in fiscal 2012 pursuant to such
agreement. No amount has been reflected as payable pursuant thereto after five years as such
amount is not determinable. See ‘‘Business—Our Structure.’’ Does not include purchase
obligations of the Newark Joint Venture relating to the construction of five buildings at the
Teachers Village site. It is anticipated that such costs will be covered by the application of the
$55.3 million reflected on our consolidated balance sheet as restricted cash-construction holdbacks.
37
Liquidity and Capital Resources
We require funds to acquire properties (including investments in joint ventures that acquire
properties), fund loan originations, repay borrowings and pay operating expenses. In 2012, our primary
sources of capital and liquidity were our available cash, mortgage debt financing (an aggregate of
$158.2 million, of which $68.5 million and $89.7 million was used in connection with the Newark Joint
Venture and multi-family property acquisitions, respectively), the sale of loan participations and New
Markets Tax Credit proceeds. Our available liquidity at September 30, 2012 and December 5, 2012,
excluding our deposits payable, available for sale securities and the $10 million available on an
unsecured basis from our credit facility, was approximately $76.1 million and $44 million, respectively.
We anticipate that the debt service that becomes payable during 2013 through 2015 for the eight
multi-family properties acquired through December 5, 2012 ($18.8 million of which relates to the debt
service payments with respect to the five multi-family properties acquired in 2012) and the operating
expenses of these eight properties will be funded from the rental revenues generated by these
properties. The mortgage debt with respect to these properties is non-recourse to us and our subsidiary
holding our interest in the joint venture.
The Newark Joint’s Venture’s capital resource and liquidity requirements for the three years
ending September 30, 2015 are primarily construction and related costs and debt service associated with
the Teacher’s Village project. We anticipate that the construction and associated costs will be funded by
the $55.3 million reflected as restricted cash-construction holdback on our consolidated balance sheet,
which funds are to be released to the venture from time to time upon satisfaction of specified
construction and permitting related conditions.
We anticipate that the $8.8 million in debt service payable during 2013 with respect to the
Teachers Village project, will be paid as follows:
• $2.9 million will be paid from an interest reserve,
• $1.1 million will be paid from the US Treasury interest subsidy on the qualified school
construction bonds,
• $1.5 million will be paid from New Jersey tax credits,
• $600,000 will be paid from a combination of cash flow from the properties and capital
contributions from the members of the Newark Joint Venture, and
• $2.7 million of short-term debt will be refinanced.
We anticipate that approximately $12.6 million debt service payable in 2014 and 2015 and the
estimated operating expenses for such years for the Teachers Village project will be paid as follows:
• $900,000 will be paid from an interest reserve,
• $2.2 million will be paid from the US Treasury interest subsidy on the qualified school
construction bonds,
• $3.4 million will be paid from New Jersey tax credits,
• $900,000 of short-term debt will be refinanced, and
• the $5.2 million balance will be paid from funds generated from the operations of such
properties (i.e., rental revenues).
After giving effect to the approximately $2.4 million of annual rental revenues to be generated
from the in-place lease agreements with the three charter schools and a day-care center, the Newark
Joint Venture estimates that it will require at least an additional $3 million in rental payments from
retail tenants and $4 million in rental payments from residential tenants at the Teachers Village
38
buildings to cover debt service and operating expenses for 2014 and 2015. While the Newark Joint
Venture has commenced marketing the retail space at these buildings, there is no assurance that the
venture will be able to lease such space and that if leased, the rental payments therefrom and from
rental revenues from the residential units (for which marketing has not commenced) will be sufficient
to cover debt service and operating expenses.
The Newark Joint Venture is currently seeking up to $30 million in financing from public and
private sources to fund the third phase of the Teachers Village project. No assurance can be given that
the Newark Joint Venture will obtain the necessary financing on acceptable terms or if such financing is
obtained, that such project will be profitable for us.
We believe we have sufficient funds to meet our operating expenses in 2013 and to fund any
capital contributions required by the general operations of Newark Joint Venture and our other joint
ventures. We also have funds available to engage in our lending business and to make property
acquisitions. The extent of our ability to engage such activities is limited by our available cash and, in
the case of loan origination activities, by our (i) ability to sell participating interests in such loans and
(ii) ability or willingness to use our credit facility, and in the case of multi-family property acquisitions,
the availability of mortgage debt to finance such acquisitions.
Off Balance Sheet Arrangements
Not applicable.
Significant Accounting Estimates and Critical Accounting Policies
Our significant accounting policies are more fully described in Note 1 to our consolidated financial
statements. The preparation of financial statements and related disclosure in conformity with
accounting principles generally accepted in the United States requires management to make certain
judgments and estimates that affect the amounts reported in the consolidated financial statements and
accompanying notes. Certain of our accounting policies are particularly important to understand our
financial position and results of operations and require the application of significant judgments and
estimates by our management; as a result they are subject to a degree of uncertainty. These significant
accounting policies include the following:
Principles of Consolidation
We have entered into, and may continue to enter into, various joint venture agreements with
unrelated third parties to hold or develop real estate assets. We must determine for each of these joint
ventures whether to consolidate the entity or account for our investment under the equity or cost basis
of accounting. Investments acquired or created are continually evaluated based on the accounting
guidance relating to variable interest entities (‘‘VIEs’’), which requires the consolidation of VIEs in
which we are considered to be the primary beneficiary. If the investment is determined not to be a
VIE, then the investment is evaluated for consolidation (primarily using a voting interest model) under
the remaining consolidation guidance relating to real estate entities. If we are the general partner in a
limited partnership, or manager of a limited liability company, we also consider the consolidation
guidance relating to the rights of limited partners (non-managing members) to assess whether any
rights held by the limited partners overcome the presumption of control by us. We evaluate our
accounting for investments on a quarterly basis or when a reconsideration event (as defined in GAAP)
with respect to our investments occurs. The analysis required to identify VIEs and primary beneficiaries
is complex and requires substantial management judgment.
39
Allowance for Possible Losses and Impairment Charges
We conduct a quarterly review of (i) each loan in our mortgage portfolio, including the real estate
securing each loan, (ii) each of our real estate assets, and (iii) each real estate asset owned by our joint
ventures. This review is conducted in order to determine if there is uncertainty that our borrower has
sufficient funds to repay the loan or if indicators of impairment are present on the real estate.
In reviewing the value of the collateral underlying a loan and the real estate assets owned, whether
by us or our joint ventures, if there is an indicator of impairment, we seek to arrive at the fair value of
each piece of collateral and each real estate asset by using one or more valuation techniques, such as
comparable sales, discounted cash flow analysis or replacement cost analysis. Determination of the fair
value of the collateral securing a loan requires significant judgment, estimates and discretion by
management. Our real estate assets (other than real estate held for sale) and our joint ventures’ real
estate assets are evaluated for indicators of impairment using an undiscounted cash flow analysis. If the
analysis suggests that the undiscounted cash flows to be generated by the property will be insufficient to
recover the investment made by us or any joint venture, as the case may be, an impairment provision
will be calculated based upon the excess of the carrying amount of the property over its fair value using
a discounted cash flow model. Real estate assets are valued at the lower of the recorded cost or
estimated fair value. We do not obtain any third party appraisals regarding the value of the property
securing loans made by us or our joint ventures, or the real estate assets owned by us or our joint
ventures. Instead, we rely on our own ‘‘in-house’’ valuations. Any valuation allowances taken with
respect to our loan portfolio or real estate assets reduces our net income, assets and shareholders’
equity to the extent of the amount of the valuation allowance, but it will not affect our cash flow until
such time as the property is sold. For fiscal 2010, $3.17 million of loan loss provisions were recorded
against our mortgage portfolio and $3.37 million of impairment charges were taken with respect to our
real estate assets (including real estate properties held for sale). In fiscal 2011 and fiscal 2012, no such
provisions or changes were taken.
Revenue Recognition
We recognize interest income and rental income on an accrual basis, unless we make a judgment
that impairment of a loan or of real estate owned renders doubtful collection of interest or rent in
accordance with the applicable loan documents or lease. In making a judgment as to the collectability
of interest or rent, we consider, among other factors, the status of the loan or property, the borrower’s
or tenant’s financial condition, payment history and anticipated events in the future. Income recognition
is suspended for loans when, in the opinion of management, a full recovery of income and principal
becomes doubtful. Income recognition is resumed when the loan becomes contractually current and
continued performance is demonstrated. Accordingly, management must make a significant judgment as
to whether to treat a loan or real estate owned as impaired. If we make a decision to treat a
‘‘problem’’ loan or real estate asset as not impaired and therefore continue to recognize the interest
and rent as income on an accrual basis, we could overstate income by recognizing income that will not
be collected and the uncollectible amount will ultimately have to be written off. The period in which
the uncollectible amount is written off could adversely affect taxable income for a specific year.
Cash Distribution Policy
We have elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended,
since our organization. To qualify as a REIT, we must meet a number of organizational and operational
requirements, including a requirement that we distribute currently (within the time frames prescribed
by the Code and the applicable regulations) to our shareholders at least 90% of our adjusted ordinary
taxable income. It is the current intention of our management to maintain our REIT status. As a REIT,
we generally will not be subject to corporate Federal income tax on taxable income we distribute
currently in accordance with the Code and applicable regulations to shareholders. If we fail to qualify
40
as a REIT in any taxable year, we will be subject to Federal income taxes at regular corporate rates
and may not be able to qualify as a REIT for four subsequent tax years. Even if we qualify for Federal
taxation as a REIT, we may be subject to certain state and local taxes on our income and to Federal
income and excise taxes on undistributed taxable income, i.e., taxable income not distributed in the
amounts and in the time frames prescribed by the Code and applicable regulations thereunder.
We did not pay dividends in fiscal 2010 through fiscal 2012. At December 31, 2011, we had a net
operating loss carry-forward of approximately $60.5 million. Since we can offset our future taxable
income, if any, against our tax loss carry-forward until the earlier of 2028 or the tax loss carry-forward
has been fully used, we do not expect to pay a dividend in calendar 2013 and it is unlikely that we will
be required to pay a dividend for several years thereafter to maintain our REIT status. Although our
board of trustees reviews the payment of dividends periodically, there is no expectation that a dividend
will be paid in the 2013 calendar year and for several years thereafter.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Our primary component of market risk is interest rate sensitivity. Our interest income is subject to
changes in interest rates. We seek to minimize these risks by originating loans that are indexed to the
prime rate, with a stated minimum interest rate. At September 30, 2012, approximately 95% of the
principal amount of our outstanding mortgage loans were comprised of variable rate loans tied to the
prime rate and with a stated minimum rate. When determining interest rate sensitivity, we assume that
any change in interest rates is immediate and that the interest rate sensitive assets and liabilities
existing at the beginning of the period remain constant over the period being measured. We assessed
the market risk for our variable rate mortgage receivables as of September 30, 2012 and believe that a
one percent increase in interest rates would cause an increase in income before taxes of $328,000 and a
one percent decline in interest rates would not cause a decrease in income before taxes because all of
our variable rate loans have a stated minimum rate.
As of September 30, 2012, we had one interest rate swap agreement outstanding. The fair value of
our interest rate swap is dependent upon existing market interest rates and swap spreads, which change
over time. At September 30, 2012, if there had been a 1% increase in forward interest rates, the fair
market value of the interest rate swap and net unrealized loss on derivative instrument would have
increased by approximately $128,000. If there had been a 1% decrease in forward interest rates, the fair
market value of the interest rate swap and net unrealized loss on derivative instrument would have
decreased by approximately $123,000. These changes would not have any impact on our net income or
cash.
Our mortgage debt (excluding a mortgage subject to an interest rate swap agreement), and junior
subordinated notes currently bears interest at fixed rates and accordingly, changes in interest rates
would not impact the amount of interest expense that we incur under such indebtedness.
As of September 30, 2012, 39% and 37% of our loan portfolio was secured by properties located
in the New York City and Atlanta, Georgia metropolitan areas, respectively, and therefore subject to
risks associated with the economies in such areas.
Item 8. Financial Statements and Supplementary Data.
The information required by this item appears in a separate section of this Report following
Part IV.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
Not applicable.
41
Item 9A. Controls and Procedures.
A review and evaluation was performed by our management, including our Chief Executive Officer
and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls
and procedures as of the end of the period covered by this Annual Report on Form 10-K. Based on
that review and evaluation, the CEO and CFO have concluded that our current disclosure controls and
procedures, as designed and implemented, were effective. There have been no significant changes in
our internal controls or in other factors that could significantly affect our internal controls subsequent
to the date of their evaluation. There were no material weaknesses identified in the course of such
review and evaluation and, therefore, we took no corrective measures.
Management Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over
financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f)
promulgated under the Securities Exchange Act of 1934, as amended, as a process designed by, or
under the supervision of, a company’s principal executive and principal financial officers and effected
by a company’s board, management and other personnel to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with GAAP and includes those policies and procedures that:
• pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the
transactions and dispositions of the assets of a company;
• provide reasonable assurance that transactions are recorded as necessary to permit preparation
of financial statements in accordance with GAAP, and that receipts and expenditures of a
company are being made only in accordance with authorizations of management and directors of
a company; and
• provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of a company’s assets that could have a material effect on the
financial transactions.
Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the
risks that controls may become inadequate because of changes in conditions or that the degree of
compliance with the policies or procedures may deteriorate.
Our management assessed the effectiveness of our internal control over financial reporting as of
September 30, 2012. In making this assessment, our management used criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated
Framework.
Based on its assessment, our management believes that, as of September 30, 2012, our internal
control over financial reporting was effective based on those criteria.
Our independent auditors, BDO USA, LLP, have issued an audit report on the effectiveness of
internal control over financial reporting. This report appears on page F-1 of this Annual Report on
Form 10-K.
Item 9B. Other Information.
Not applicable.
42
Item 10. Directors, Executive Officers and Corporate Governance.
PART III
Apart from certain information concerning our executive officers which is set forth in Part I of this
report, the other information required by Item 10 is incorporated herein by reference to the applicable
information to be in the proxy statement to be filed for our 2013 Annual Meeting of Shareholders.
Item 11. Executive Compensation.
The information concerning our executive compensation required by Item 11 will be included in
the proxy statement to be filed relating to our 2013 Annual Meeting of Shareholders and is
incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.
Except as set forth below, the information required by Item 12 will be included in the proxy
statement to be filed relating to our 2013 Annual Meeting of Shareholders and is incorporated herein
by reference.
Equity Compensation Plan Information
The table below provides information as of September 30, 2012 with respect to our Common
Shares that may be issued upon exercise of outstanding options, warrants and rights:
Number of securities
to be issued upon exercise
of outstanding options,
warrants and rights
Weighted-average exercise
price of outstanding options,
warrants and rights
Number of securities
remaining available-for
future issuance under
equity compensation plans—
excluding securities
reflected in column (a)
Equity compensation plans
approved by security
holders(1) . . . . . . . . . . . .
Equity compensation plans
not approved by security
holders . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . .
Total
—
—
—
—
—
—
600,000
—
600,000
(1) Excludes 580,180 outstanding shares of restricted stock issued to officers, directors, employees and
consultants. These restricted shares generally vest five years from the effective date of the award,
subject to acceleration as provided in the agreement and incentive plan governing same. These
shares vest as follows: 62,030 shares in 2013; 123,950 shares in 2014; 123,150 shares in 2015;
136,500 shares in 2016; and 134,550 shares in 2017.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information concerning relationships and certain transactions required by Item 13 will be
included in the proxy statement to be filed relating to our 2013 Annual Meeting of Shareholders and is
incorporated herein by reference.
43
Item 14. Principal Accounting Fees and Services.
The information concerning our principal accounting fees required by Item 14 will be included in
the proxy statement to be filed relating to our 2013 Annual Meeting of Shareholders and is
incorporated herein by reference.
PART IV
Item 15. Exhibits, Financial Statement Schedules.
(a)
1. All Financial Statements.
The response is submitted in a separate section of this report following Part IV.
2.
Financial Statement Schedules.
The response is submitted in a separate section of this report following Part IV.
3. Exhibits:
In reviewing the agreements included as exhibits to this Annual Report on Form10-K,
please remember they are included to provide you with information regarding their terms and
are not intended to provide any other factual or disclosure information about us or the other
parties to the agreements. The agreements contain representations and warranties by each of
the parties to the applicable agreement. These representations and warranties have been made
solely for the benefit of the other parties to the applicable agreement and:
• should not in all instances be treated as categorical statements of fact, but rather as a
way of allocating the risk to one of the parties if those statements prove to be
inaccurate;
• have been qualified by disclosures that were made to the other party in connection with
the negotiation of the applicable agreement, which disclosures are not necessarily
reflected in the agreement;
• may apply standards of materiality in a way that is different from what may be viewed
as material to you or other investors; and
• were made only as of the date of the applicable agreement or such other date or dates
as may be specified in the agreement and are subject to more recent developments.
Accordingly, these representations and warranties may not describe the actual state of
affairs as of the date they were made or at any other time.
44
Exhibit
No.
Title of Exhibits
3.1 Third Amended and Restated Declaration of Trust (incorporated by reference to Exhibit 3.1
to our Form 10-K for the year ended September 30, 2005).
3.2 By-laws (incorporated by reference to Exhibit 3.2 to our Form 10-K for the year ended
September 30, 2005).
3.3 Amendment to By-laws, dated December 10, 2007 (incorporated by reference to Exhibit 3.1
to our Form 8-K filed December 11, 2007).
4.1
Junior Subordinated Supplemental Indenture, dated as of March 15, 2011, between us and
the Bank of New York Mellon (incorporated by reference to Exhibit 4.1 to our Form 8-K
filed March 18, 2011).
10.1* Amended and Restated Advisory Agreement, effective as of January 1, 2007, between us
and REIT Management Corp. (incorporated by reference to Exhibit 10.1 to our Form 8-K
filed November 27, 2006).
10.2* Amendment No. 1 dated as of December 8, 2011 to Amended and Restated Advisory
Agreement between us and REIT Management (incorporated by reference to exhibit 10.2
to our Form 10-Q for the period ended December 31, 2011).
10.3* Shared Services Agreement, dated as of January 1, 2002, by and among Gould Investors
L.P., us, One Liberty Properties, Inc., Majestic Property Management Corp., Majestic
Property Affiliates, Inc. and REIT Management Corp. (incorporated by reference to
Exhibit 10.2 to our Form 10-K filed December 11, 2008).
10.4 Amended and Restated Limited Liability Company Operating Agreement by and among
TRB Newark Assemblage LLC, TRB Newark TRS, LLC, RBH Capital, LLC and RBH
Partners LLC (incorporated by reference to Exhibit 10.1 to our Form 8-K filed June 9,
2009).
10.5* Form of Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.5 to
our Form 10-K for the year ended September 30, 2010).
10.6 Loan and Security Agreement, dated as of June 22, 2011, among BRT RLOC LLC, as
borrower, BRT Realty Trust, as guarantor, BRT Realty Trust, as servicer, Capital One,
National Association, as agent, Capital One, National Association, as custodian, and the
lenders from time-to-time party thereto (incorporated by reference to Exhibit 10.1 to our
Form 8-K filed on June 23, 2011).
10.7 Amendment No. 1 to Loan and Security Agreement entered into as of April 17, 2012 by
and among BRT RLOC LLC, BRT Realty Trust and Capital One, National Association
(incorporated by reference to exhibit 10.3 to our Form 10-Q for the period ended
March 31, 2012).
10.8 Guaranty dated as of June 22, 2011 by us in favor of Capital One, National Association
(incorporated by reference to Exhibit 10.2 to our Form 8-K filed on June 23, 2011.
10.9 Account Control Agreement dated as of June 22, 2011 among Capital One, National
Association, BRT RLOC LLC, and Capital One, National Association, as Agent
(incorporated by reference to Exhibit 10.3 to our Form 8-K filed on June 23, 2011).
10.10 Revolving Loan Note dated as of June 22, 2011 in favor of Capital One, National
Association (incorporated by reference to Exhibit 10.4 to our Form 8-K filed on June 23,
2011).
45
Exhibit
No.
10.11
Servicing and Asset Management Agreement between us and BRT RLOC, LLC.
(incorporated by reference to Exhibit 10.5 to our Form 8-K filed on June 23, 2011).
Title of Exhibits
10.12 Custodial Agreement, dated as of June 22, 2011, among Capital One, National Association,
as custodian, BRT RLOC LLC, us, as servicer and Capital One, National Association, as
agent (incorporated by reference to Exhibit 10.6 to our Form 8-K filed on June 23, 2011).
10.13 Limited Liability Company Agreement of BRTL LLC dated as of June 2, 2011 by and
among BRTL LLC, Debt Opportunity Fund III, LLC and BRT Torch Member LLC
(incorporated by reference to exhibit 10.1 to our Form 8-K filed on June 7, 2011).
10.14
Servicing and Asset Management Agreement made as of June 2, 2011 between BRT Realty
Trust and BRTL LLC (incorporated by reference to exhibit 10.2 to our Form 8-K filed on
June 7, 2011).
10.15 Pledge and Security Agreement dated as of June 2, 2011 made by BRT Torch Member LLC
in favor of Debt Opportunity Fund III, LLC (incorporated by reference to exhibit 10.3 to
our Form 8-K filed on June 7, 2011).
10.16* 2009 Incentive Plan, as amended (incorporated by reference to exhibit 10.1 to our Quarterly
Report on Form 10-Q for the period ended December 31, 2011).
10.17* 2012 Incentive Plan (incorporated by reference to exhibit 99.1 to our Registration Statement
on Form S-8 filed on June 11, 2012 (File No. 333-182044)).
10.18 Bond agreement dated as of December 1, 2011 by and among the New Jersey Economic
Development Authority, RBH-TRB East Mezz Urban Renewal Entity, LLC and TD Bank,
N.A. (incorporated by reference to exhibit 10.3 to our Form 10-Q for the period ended
December 31, 2011).
10.19 Note dated December 29, 2011 issued by RBH-TRB East Mezz Urban Renewal Entity LLC
in favor of New Jersey Economic Development Authority (incorporated by reference to
exhibit 10.4 to our Form 10-Q for the period ended December 31, 2011).
10.20 Multi-Family Loan and Security Agreement (Non-Recourse) by and between Landmark at
Garden Square, LLC, and Berkadia Commercial Mortgage LLC, dated as of March 22,
2012 (incorporated by reference to exhibit 10.1 to our Form 10-Q for the period ended
March 31, 2012).
10.21 Consolidated, Amended and Restated Multi-family Note entered into as of March 22, 2012,
by and between Landmark at Garden Square, LLC and Berkadia Commercial Mortgage
LLC. (incorporated by reference to exhibit 10.2 to our Form 10-Q for the period ended
March 31, 2012).
10.22 Mortgage and Security Agreement made as of February 3, 2012, given by RBH-TRB East
Mezz Urban Renewal Entity, LLC, in favor of New Jersey Economic Development
Authority (incorporated by reference to exhibit 10.4 to our Form 10-Q for the period ended
March 31, 2012).
10.23 Guaranty of Completion made as of the 3rd day of February, 2012, by RBH-TRB Newark
Holdings, LLC, and RBH-TRB East Mezz Urban Renewal Entity, LLC, in favor of
TD Bank, N.A. (incorporated by reference to exhibit 10.5 to our Form 10-Q for the period
ended March 31, 2012).
46
Exhibit
No.
10.24
Security Agreement dated as of February 3, 2012, by and between RBH-TRB East Mezz
Urban Renewal Entity, LLC and TD Bank, N.A. (incorporated by reference to exhibit 10.6
to our Form 10-Q for the period ended March 31, 2012).
Title of Exhibits
10.25 Leasehold Mortgage, Assignment of Leases and Rents and Security Agreement dated
February 3, 2012 in the amount of $32,700,000 from Teachers Village School QALICB
Urban Renewal, LLC to NJCC CDE Essex LLC, and Gateway SUB-CDE I, LLC.
(incorporated by reference to exhibit 10.7 to our Form 10-Q for the period ended
March 31, 2012).
10.26 Leasehold Mortgage, Assignment of Leases and Rents and Security Agreement dated
February 3, 2012 in the amount of $27,000,000 from Teachers Village School QALICB
Urban Renewal, LLC to NJCC CDE Essex LLC, and Gateway SUB-CDE I, LLC.
(incorporated by reference to exhibit 10.8 to our Form 10-Q for the period ended
March 31, 2012).
10.27
Joint and Several Completion Guaranty dated as of February 3, 2012, by Teachers Village
School QALICB Urban Renewal, LLC, and RBH-TRB Newark Holdings, LLC, to
TD Bank, N.A. Gateway SUB-CDE I, LLC, and NJCC CDE Essex LLC. (incorporated by
reference to exhibit 10.9 to our Form 10-Q for the period ended March 31, 2012).
10.28 Guaranty of New Markets Tax Credits made as of February 3, 2012, by Teachers Village
School QALICB Urban Renewal, LLC, and RBH-TRB Newark Holdings, LLC, for the
benefit of GSB NMTC Investor LLC. (incorporated by reference to exhibit 10.10 to our
Form 10-Q for the period ended March 31 2012).
10.29 Multi-Family Loan and Security Agreement dated as of the June 20, 2012 by and between
Madison 324, LLC and CWCapital LLC. (incorporated by reference to exhibit 10.1 to our
Form 10-Q for the period ended June 30, 2012)
10.30 Multi-Family Deed of Trust, Assignment of Leases and Rents, Security Agreement and
Fixture Filing dated as of the 20th day of June, 2012, executed by Madison 324, LLC to
Joseph B. Pitt, JR, as trustee for the benefit of CWCapital LLC. (incorporated by reference
to exhibit 10.2 to our Form 10-Q for the period ended June 30, 2012).
10.31 Multi-Family Note dated as of June 20, 2012 in face amount of $25,680,000 issued by
Madison 324, LLC in favor of CWCapital LLC. (incorporated by reference to exhibit 10.3
to our Form 10-Q for the period ended June 30, 2012).
10.32 Guaranty of New Markets Tax Credits made as of September 11, 2012, by Teachers Village
Project A QALICB Urban Renewal Entity, LLC, and RBH-TRB Newark Holdings, LLC for
the benefit of GSB NMTC Investor LLC, its successors and assigns.
10.33 Guaranty of Payment and Recourse Carveouts made as of the 11th day of September, 2012,
by RBH-TRB Newark Holdings, LLC and Ron Beit-Halachmy, in favor of Goldman Sachs
Bank USA.
10.34
Joint and Several Completion Guaranty dated as of September 11, 2012, made on a joint
and several basis by Teachers Village Project A QALICB Urban Renewal Entity, LLC and
RBH-TRB Newark Holdings LLC, to Goldman Sachs Bank USA.
10.35 Environmental Indemnity Agreement dated as of September 11, 2012, made by Teachers
Village Project A QALICB Urban Renewal Entity, LLC, to Goldman Sachs Bank USA.
47
Exhibit
No.
Title of Exhibits
10.36 Environmental Indemnity Agreement dated as of September 11, 2012, made by Teachers
Village Project A QALICB Urban Renewal Entity, LLC, to GSB NMTC Investor LLC;
Carver CDC-Subsidiary CDE 21, LLC; NCIF New Markets Capital Fund IX CDE, LLC;
GSNMF Sub-CDE 2 LLC; and BACDE NMTC Fund 4, LLC.
10.37 Building Loan Agreement dated as of September 11, 2012 by and among GSB NMTC
Investor LLC, and NCIF New Markets Capital Fund IX CDE, LLC; NCIF New Markets
Capital Fund IX CDE LLC, Carver CDC-Subsidiary CDE-21, LLC, BACDE NMTC Fund 4
LLC, GSNMF Sub-CDE 2 LLC and Teachers Village Project A QALICB Urban Renewal
Entity, LLC.
10.38 Mortgage, Assignment of Leases and Rents and Security Agreement dated September 2012
in the amount of $15,699,999 from Teachers Village Project A QALICB Urban Renewal
Entity, LLC to NCIF New Markets Capital Fund IX CDE, LLC, Carver CDC-Subsidiary
CDE 21, LLC, BACDE NMTC Fund 4, LLC and GSNMF Sub-CDE 2, LLC.
10.39 Mortgage, Assignment of Leases and Rents and Security Agreement dated September 2012
in the amount of $9,000,000 from Teachers Village Project A QALICB Urban Renewal
Entity, LLC, to Goldman Sachs Bank USA.
10.40 Loan Agreement dated as of September 11, 2012 between Goldman Sachs Bank USA, and
RBH-TRB Newark Holdings, LLC.
10.41 Building Loan Agreement dated as of September 11, 2012 by and between Goldman Sachs
Bank USA, and Teachers Village Project A QALICB Urban Renewal Entity, LLC.
10.42 Loan Agreement made as of the 11the day of September, 2012, by and between
RBH-TRB-West I Mezz Urban Renewal Entity, LLC, and Goldman Sachs Bank USA,
Carver CDC-Subsidiary CDE 21, LLC, and BACDE NMTC Fund 4, LLC, and GSNMF
Sub- CDE 2 LLC, and Teachers Village Project A QALICB Urban Renewal Entity, LLC.
12.1
Schedule of Computation of Ratio of Earnings to Fixed Charges
14.1 Revised Code of Business Conduct and Ethics of BRT Realty Trust, adopted June 12, 2006
(incorporated by reference to Exhibit 14.1 to the Form 8-K of BRT Realty Trust filed
June 14, 2006).
21.1
Subsidiaries of the Registrant
23.1 Consent of BDO USA LLP
23.2 Consent of Ernst & Young, LLP
31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002 (the ‘‘Act’’)
31.2 Certification of Senior Vice President—Finance pursuant to Section 302 of the Act.
31.3 Certification of Chief Financial Officer pursuant to Section 302 of the Act
32.1 Certification of Chief Executive Officer pursuant to Section 906 of the Act
32.2 Certification of Senior Vice President—Finance pursuant to Section 906 of the Act
32.3 Certification of Chief Financial Officer pursuant to Section 906 of the Act
101.INS XBRL Instance Document
101.SCH XBRL Taxonomy Extension Schema Document
48
Exhibit
No.
Title of Exhibits
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
101.LAB XBRL Taxonomy Extension Definition Label Linkbase Document
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document
*
Indicates management contract or compensatory plan or arrangement.
(b) Exhibits.
See Item 15(a)(3) above. Except as otherwise indicated with respect to a specific exhibit, the file
number for all of the exhibits incorporated by reference is: 001-07172.
(c) Financial Statements.
See Item 15(a)(2) above.
49
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
SIGNATURES
BRT REALTY TRUST
Date: December 13, 2012
By:
/s/ JEFFREY A. GOULD
Jeffrey A. Gould
Chief Executive Officer and President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the Registrant and in the capacity and on the dates
indicated.
Signature
Title
Date
/s/ FREDRIC H. GOULD
Fredric H. Gould
Chairman of the Board
December 13, 2012
/s/ JEFFREY A. GOULD
Jeffrey A. Gould
Chief Executive Officer, President and
Trustee (Principal Executive Officer)
December 13, 2012
/s/ KENNETH BERNSTEIN
Kenneth Bernstein
/s/ ALAN GINSBURG
Alan Ginsburg
/s/ MATTHEW J. GOULD
Matthew J. Gould
/s/ LOUIS C. GRASSI
Louis C. Grassi
/s/ GARY HURAND
Gary Hurand
Trustee
Trustee
Trustee
Trustee
Trustee
50
December 13, 2012
December 13, 2012
December 13, 2012
December 13, 2012
December 13, 2012
Signature
Title
Date
/s/ ISRAEL ROSENZWEIG
Israel Rosenzweig
/s/ JEFFREY RUBIN
Jeffrey Rubin
/s/ JONATHAN SIMON
Jonathan Simon
/s/ ELIE WEISS
Elie Weiss
Trustee
Trustee
Trustee
Trustee
December 13, 2012
December 13, 2012
December 13, 2012
December 13, 2012
/s/ GEORGE E. ZWEIER
George E. Zweier
Chief Financial Officer, Vice President
(Principal Financial and Accounting
Officer)
December 13, 2012
51
Item 8, Item 15(a)(1) and (2)
Index to Consolidated Financial Statements and Consolidated Financial Statement Schedules
Reports of Independent Registered Public Accounting Firms . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets as of September 30, 2012 and 2011 . . . . . . . . . . . . . . . . . . . . . .
Page No.
F-1
F-4
Consolidated Statements of Operations for the years ended September 30, 2012, 2011 and
2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-5
Consolidated Statements of Comprehensive Income (Loss) for the years Ended
September 30, 2012, 2011 and 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-6
Consolidated Statements of Shareholders’ Equity for the years ended September 30, 2012,
2011 and 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-7
Consolidated Statements of Cash Flows for the years ended September 30, 2012, 2011 and
2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Financial Statement Schedules for the year ended September 30, 2012:
III—Real Estate Properties and Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . .
IV—Mortgage Loans on Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-8
F-9
F-37
F-39
All other schedules are omitted because they are not applicable or the required information is
shown in the consolidated financial statements or the notes thereto.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Trustees and Shareholders of
BRT Realty Trust and Subsidiaries
Great Neck, New York
We have audited BRT Realty Trust and Subsidiaries’ (the ‘‘Trust’’) internal control over financial
reporting as of September 30, 2012, based on criteria established in Internal Control—Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the
COSO criteria). The Trust’s management is responsible for maintaining effective internal control over
financial reporting and for its assessment of the effectiveness of internal control over financial reporting
included in the accompanying Item 9A. Controls and Procedures—Management Report on Internal
Control Over Financial Reporting. Our responsibility is to express an opinion on the Trust’s internal
control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was maintained
in all material respects. Our audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the
design and operating effectiveness of internal control based on the assessed risk. Our audit also
included performing such other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles. A company’s internal
control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only
in accordance with authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject
to the risk that controls may become inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
In our opinion, BRT Realty Trust and Subsidiaries maintained, in all material respects, effective
internal control over financial reporting as of September 30, 2012, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated balance sheets of BRT Realty Trust and Subsidiaries
as of September 30, 2012 and 2011, and the related consolidated statements of operations,
comprehensive income (loss), equity, and cash flows for the years then ended and our report dated
December 13, 2012 expressed an unqualified opinion thereon.
New York, New York
December 13, 2012
/s/ BDO USA LLP
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Trustees and Shareholders of
BRT Realty Trust and Subsidiaries
Great Neck, New York
We have audited the accompanying consolidated balance sheets of BRT Realty Trust and
Subsidiaries (the ‘‘Trust’’) as of September 30, 2012 and 2011 and the related consolidated statements
of operations, comprehensive income (loss), shareholders’ equity, and cash flows for the years then
ended. In connection with our audits of the financial statements, we have also audited the financial
statement schedules listed in the Index at Item 15(a). These financial statements and schedules are the
responsibility of the Trust’s management. Our responsibility is to express an opinion on these financial
statements and schedules based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). 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, assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the financial statements and schedules.
We believe that our audits provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of BRT Realty Trust and Subsidiaries at September 30, 2012,
and 2011 and the results of its operations and its cash flows for the years then ended, in conformity
with accounting principles generally accepted in the United States of America.
Also, in our opinion, the financial statement schedules, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly, in all material respects, the
information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), BRT Realty Trust and Subsidiaries’ internal control over financial
reporting as of September 30, 2012, based on criteria established in Internal Control—Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)
and our report dated December 13, 2012 expressed an unqualified opinion thereon.
/s/ BDO USA LLP
New York, New York
December 13, 2012
F-2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Trustees and Shareholders of
BRT Realty Trust and Subsidiaries
We have audited the accompanying consolidated statements of operations, comprehensive income,
equity and cash flows of BRT Realty Trust and Subsidiaries (the ‘‘Trust’’) for the year ended
September 30, 2010. 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 audit.
We conducted our audit in accordance with the standards of the Public Company Accounting
Oversight Board (United States). 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 audit provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects,
the consolidated results of operations of BRT Realty Trust and Subsidiaries and their cash flows for the
year ended September 30, 2010, in conformity with U.S. generally accepted accounting principles.
/s/ Ernst & Young LLP
New York, New York
December 13, 2010
F-3
BRT REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except per share data)
September 30,
2012
2011
ASSETS
Real estate loans, all earning interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred fee income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 37,096
(512)
$ 67,266
(576)
Real estate loan held-for-sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate properties net of accumulated depreciation of $4,787 and $2,511 . . . .
Investment in unconsolidated ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted cash—construction holdbacks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Available-for-sale securities at fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
36,584
—
190,317
291
78,245
55,252
1,249
12,337
5,978
5,703
66,690
8,446
59,277
4,247
44,025
—
2,766
1,692
1,733
2,136
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$385,956
$191,012
LIABILITIES AND EQUITY
Liabilities:
Mortgages payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Junior subordinated notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$169,284
37,400
4,298
2,108
25,848
$ 14,417
37,400
948
2,518
—
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
238,938
55,283
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, 13,473 and 14,994 issued . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive income—net unrealized gain on
40,420
165,258
44,981
171,889
available-for-sale securities
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of 1,422 treasury shares of beneficial interest at September 30, 2011 . . . .
356
(72,585)
278
(77,015)
— (11,070)
Total BRT Realty Trust shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . .
Non-controlling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
133,449
13,569
129,063
6,666
Total Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
147,018
135,729
Total Liabilities and Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$385,956
$191,012
See accompanying notes to consolidated financial statements.
F-4
BRT REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share data)
Year Ended September 30,
2012
2011
2010
Revenues:
Interest on real estate loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Loan fee income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rental and other revenue from real estate properties . . . . . . . . . . . . . .
Recovery of previously provided allowances . . . . . . . . . . . . . . . . . . . .
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,257 $
2,273
8,675
156
1,218
8,500 $
1,828
3,456
3,595
502
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
19,579
17,881
Expenses:
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Advisor’s fees, related party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreclosure related professional fees . . . . . . . . . . . . . . . . . . . . . . . . .
Property acquisition costs
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative—including $705, $847 and $822 to related
party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating expenses relating to real estate properties . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total revenues less total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings of unconsolidated ventures . . . . . . . . . . . . . . . . . . . .
Gain on sale of available-for-sale securities . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on extinguishment of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) from continuing operations . . . . . . . . . . . . . . . . . . . . . . .
Discontinued operations:
Loss from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of real estate assets . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plus: net loss attributable to non-controlling interests . . . . . . . . . . . . . . .
4,729
1,104
—
—
—
2,407
7,161
6,042
2,004
23,447
(3,868)
829
605
3,192
—
758
—
—
792
792
1,550
2,880
2,112
916
—
—
579
—
6,149
3,340
738
13,834
4,047
350
1,319
—
(2,138)
3,578
—
—
1,346
1,346
4,924
1,450
Net income (loss) attributable to common shareholders . . . . . . . . . . . . $
4,430 $
6,374 $
Basic and diluted per share amounts attributable to common shareholders:
Income (loss) from continuing operations . . . . . . . . . . . . . . . . . . . . . . . $
Income from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . .
Basic and diluted earnings (loss) per share . . . . . . . . . . . . . . . . . . . . . $
.26 $
.06
.32 $
.35 $
.10
.45 $
3,624
253
3,422
365
471
8,135
2,584
785
3,165
2,625
673
—
6,063
3,216
733
19,844
(11,709)
196
1,586
—
—
(9,927)
(602)
(745)
1,937
590
(9,337)
1,322
(8,015)
(.62)
.04
(.58)
Amounts attributable to BRT Realty Trust:
Income (loss) from continuing operations . . . . . . . . . . . . . . . . . . . . . . $
Income from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
3,638 $
792
4,430 $
5,028 $
1,346
6,374 $
(8,605)
590
(8,015)
Weighted average number of common shares outstanding:
Basic and diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14,035,972
14,041,569
13,871,668
See accompanying notes to consolidated financial statements.
F-5
BRT REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(Dollars in thousands)
Year Ended September 30,
2012
2011
2010
$ 1,550
$ 4,924
$ (9,337)
182
(104)
(1,316)
—
(1,117)
—
(1,117)
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss):
Net unrealized gain (loss) on available-for-sale securities . . . . . . . . . . . .
Unrealized loss on derivative instruments . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . .
78
(1,316)
Comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,628
3,608
(10,454)
Comprehensive loss attributable to non-controlling interests . . . . . . . . . .
(2,896)
(1,450)
(1,322)
Comprehensive income (loss) attributable to common shareholders . . . .
$ 4,524
$ 5,058
$ (9,132)
See accompanying notes to consolidated financial statements.
F-6
BRT REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
Years Ended September 30, 2012, 2011 and 2010
(Dollars in thousands, except share data)
Balances, September 30, 2009 . . . . .
$38,133
$167,073
Shares of Additional
Beneficial
Interest
Paid-In
Capital
Accumulated
Other
Non
Comprehensive (Accumulated Treasury Controlling
Income
$ 2,711
Deficit)
Shares
Interests
Total
$(75,374)
$(11,316)
$ 4,990
$126,217
Shares issued—stock dividend
(2,437,352 shares) . . . . . . . . . . .
Restricted stock vesting . . . . . . . . .
Compensation expense—restricted
stock . . . . . . . . . . . . . . . . . . . .
Contributions from non-controlling
interests . . . . . . . . . . . . . . . . . .
Distributions to non-controlling
interests . . . . . . . . . . . . . . . . . .
Shares repurchased (52,403 shares)
.
Net loss . . . . . . . . . . . . . . . . . . .
Other comprehensive loss . . . . . . . .
Comprehensive loss . . . . . . . . . . . .
7,312
—
—
—
—
—
—
—
—
4,604
(242)
833
—
—
—
—
—
—
—
—
—
—
—
—
—
(1,117)
—
—
—
—
—
—
—
(8,015)
—
—
—
242
—
—
—
(290)
—
—
—
—
—
—
11,916
—
833
1,846
1,846
(229)
—
(1,322)
—
(229)
(290)
(9,337)
(1,117)
—
(10,454)
Balances, September 30, 2010 . . . . .
$45,445
$172,268
$ 1,594
$(83,389)
$(11,364)
$ 5,285
$129,839
Restricted stock vesting . . . . . . . . .
Compensation expense—restricted
stock . . . . . . . . . . . . . . . . . . . .
Issuance of warrants in connection
with joint venture agreement . . . .
Contributions from non-controlling
interests . . . . . . . . . . . . . . . . . .
Distributions to non-controlling
interests . . . . . . . . . . . . . . . . . .
Purchase of minority interest
. . . . .
Shares repurchased (154,692 shares) .
Net income (loss) . . . . . . . . . . . . .
Other comprehensive loss . . . . . . . .
Comprehensive income . . . . . . . . .
Balances, September 30, 2011 . . . . .
Restricted stock vesting . . . . . . . . .
Compensation expense—restricted
stock . . . . . . . . . . . . . . . . . . . .
Contributions from non-controlling
interests . . . . . . . . . . . . . . . . . .
Distributions to non-controlling
interests . . . . . . . . . . . . . . . . . .
Shares repurchased (139,507 shares) .
Retirement of treasury shares
(1,380,978 shares) . . . . . . . . . . .
Net income (loss) . . . . . . . . . . . . .
Other comprehensive income . . . . .
—
—
—
—
—
—
(464)
—
—
—
(294)
845
259
—
—
(429)
(760)
—
—
—
$44,981
—
$171,889
(319)
$
—
—
—
(419)
(4,142)
—
—
758
—
—
(461)
(6,609)
—
—
—
—
—
—
—
—
—
—
—
(1,316)
—
278
—
—
—
—
—
—
—
78
—
—
—
—
—
—
—
—
6,374
—
—
294
—
—
—
—
—
—
—
—
—
—
—
—
—
845
259
3,181
3,181
(66)
(284)
—
(1,450)
—
—
(66)
(713)
(1,224)
4,924
(1,316)
3,608
$(77,015)
—
$(11,070)
319
$ 6,666
—
$135,729
—
—
—
—
—
—
4,430
—
—
—
—
758
— 11,243
11,243
—
—
10,751
—
—
—
(1,460)
—
—
(2,880)
—
—
(1,460)
(880)
—
1,550
78
1,628
Comprehensive income . . . . . . . . .
—
Balances, September 30, 2012 . . . . .
$40,420
$165,258
$
356
$(72,585)
— $13,569
$147,018
See accompanying notes to consolidated financial statements.
F-7
BRT REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
Cash flows from operating activities:
.
Net income (loss)
.
.
.
.
.
.
.
.
.
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.
.
.
.
.
.
.
.
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
.
.
.
Provision for loan loss .
.
.
.
.
Recovery of previously provided allowances
.
.
.
.
.
Impairment charges .
.
.
.
.
.
Depreciation and amortization .
.
.
.
Amortization of deferred fee income .
.
.
.
.
Accretion of junior subordinated notes principal
.
.
.
Amortization of securities discount .
.
Amortization of restricted stock
.
.
.
.
Gain on sale of real estate assets from discontinued operations
.
.
.
.
Gain on sale of available-for-sale securities .
.
.
.
.
.
Loss on extinguishment of debt .
.
.
.
Gain on sale of loan .
.
.
.
.
.
.
Equity in (earnings) of unconsolidated joint ventures
.
.
.
Distribution of earnings of unconsolidated joint ventures
.
.
.
Decrease (increase) in straight line rent
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Increases and decreases from changes in other assets and liabilities:
.
.
.
.
.
.
.
.
Decrease (increase) in interest and dividends receivable .
.
.
(Increase) decrease in prepaid expenses
(Increase) decrease in prepaid interest
.
.
Increase (decrease) in accounts payable and accrued liabilities .
.
Increase in deferred costs .
.
.
.
.
(Increase) decrease in security deposits and other receivable .
.
.
.
Other
.
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Net cash (used in) provided by operating activities
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Cash flows from investing activities:
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Collections from real estate loans .
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Additions to real estate loans .
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Proceeds from the sale of loans and loan participations
.
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Loan loss recoveries .
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Additions to real estate properties
.
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Net costs capitalized to real estate owned .
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Net change in restricted cash—construction holdbacks .
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Collection of loan fees .
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Proceeds from sale of real estate owned .
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Proceeds from sale of available-for-sale securities .
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Purchase of available-for-sale securities .
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Proceeds from maturity of held-to-maturity security
Distributions of capital from unconsolidated joint ventures .
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Contributions to unconsolidated joint ventures .
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Purchase of interest from non-controlling partner
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Net cash (used in) provided by investing activities
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Cash flows from financing activities:
.
Proceeds from borrowed funds
.
Repayment of borrowed funds
.
.
Repayment of junior subordinated notes
.
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Proceeds from mortgages payable .
.
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Mortgage principal payments
.
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.
Increase in deferred borrowing costs
.
Cash distribution—common shares
.
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Expenses associated with stock issuance .
Capital contributions from non-controlling interests
.
Capital distributions to non-controlling interests
.
Proceeds from sale of new market tax credits .
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Repurchase of shares of beneficial interest
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Net cash provided by (used in) financing activities
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Net increase (decrease) in cash and cash equivalents .
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Cash and cash equivalents at beginning of year .
.
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Cash and cash equivalents at end of year .
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Supplemental disclosures of cash flow information:
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.
Year Ended September 30,
2012
2011
2010
$
1,550
$
4,924
$ (9,337)
—
(156)
2,753
(2,249)
—
—
758
(792)
(605)
(3,192)
(829)
578
33
174
(266)
(3,979)
2,835
(308)
(3,436)
(353)
(7,484)
124,758
(98,607)
15,657
156
(118,382)
(14,500)
(55,252)
2,186
859
3,939
(1,634)
—
4,481
(275)
—
—
(3,595)
—
963
(1,777)
277
(28)
845
(1,346)
(1,319)
2,138
—
(350)
210
(54)
(410)
240
211
375
(142)
153
127
3,165
(365)
3,370
927
(219)
581
(69)
833
(1,937)
(1,586)
—
—
(196)
193
(330)
398
115
—
(960)
—
(270)
(27)
1,442
(5,714)
66,072
(131,255)
46,147
1,039
(2,421)
(3,605)
—
2,465
4,035
7,590
(55)
—
1,010
(4,045)
(713)
22,475
(17,384)
16,815
227
—
(4,120)
—
419
15,930
3,425
(4,194)
1,000
1,701
—
—
(136,614)
(13,736)
36,294
3,500
(3,500)
—
162,508
(7,641)
(11,300)
—
—
11,243
(1,460)
25,848
(880)
178,318
34,220
44,025
—
—
(5,000)
2,130
(270)
(926)
—
—
3,181
(68)
—
(1,225)
(2,178)
(14,472)
58,497
—
—
—
3,202
(105)
(821)
(1,334)
(60)
1,846
(229)
—
(290)
2,209
32,789
25,708
$ 78,245
$ 44,025
$ 58,497
$
$
6,764
220
$
$
1,791
$ 2,120
8
$
17
.
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.
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.
.
.
Cash paid during the year for interest expense, including capitalized interest of $1,373, $775 and $328 in 2012, 2011 and 2010
Cash paid during the year for income and excise taxes .
.
.
.
.
.
.
.
.
.
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.
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.
Non cash investing and financing activities:
Common stock dividend—portion paid in the Trust’s common shares
.
.
.
.
.
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.
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.
.
.
.
.
.
—
—
$ 11,916
See accompanying notes to consolidated financial statements.
F-8
BRT REALTY TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 2012
NOTE 1—ORGANIZATION, BACKGROUND AND SIGNIFICANT ACCOUNTING POLICIES
Organization and Background
BRT Realty Trust (‘‘BRT’’ or the ‘‘Trust’’) is a business trust organized in Massachusetts. BRT
originates and holds for investment senior mortgage loans secured by commercial and multi-family real
estate property in the United States. Additionally, BRT participates as an equity investor in the
purchase of multi-family properties.
The loans BRT originate generally have relatively high yields and are short-term or bridge loans
with a duration ranging from six months to one year. BRT’s policy is to lend at a floating rate of
interest based on a spread over the prime rate, with a stated minimum rate, though BRT originates
fixed rate loans as circumstances dictate. BRT receives an origination fee for the loans it originates.
The multi-family properties are generally acquired with venture partners where the Trust
contributes 80% to 90% of the equity in each transaction.
BRT conducts its operations to qualify as a real estate investment trust, or REIT, for Federal
income tax purposes.
Principles of Consolidation; Basis of Preparation
Certain items on the consolidated financial statements for the preceding period have been
reclassified to conform with the current year’s presentation.
The consolidated financial statements include the accounts and operations of BRT Realty Trust, its
wholly owned subsidiaries, and its majority owned or controlled real estate entities and its interests in
variable interest entities in which the Trust is determined to be the primary beneficiary. Material
intercompany balances and transactions have been eliminated.
RBH-TRB Newark Holdings LLC, referred to herein as the Newark Joint Venture, was
determined to be a Variable Interest Entity (‘‘VIE’’) because the total equity investment at risk is not
sufficient to permit it to finance its activities without additional subordinated financial support by its
equity holders. The Trust was determined to be the primary beneficiary of this joint venture because it
has a controlling interest in that it has the power to direct the activities of the VIE that most
significantly impact the entity’s economic performance and it has the obligation to absorb losses of the
entity and the right to receive benefits from the entity that could potentially be significant to the VIE.
The Trust’s consolidated joint ventures that own multi-family properties were determined to be
VIE’s because the voting rights of some equity investors are not proportional to their obligations to
absorb the expected losses of the entity and their right to receive the expected residual returns. In
addition, substantially all of the entity’s activities either involve or are conducted on behalf of the
investor that has disproportionately few voting rights.
The Trust was determined to be the primary beneficiary of these joint ventures because it has a
controlling interest in that it has the power to direct the activities of the VIE that most significantly
impact the entity’s economic performance and it has the obligation to absorb losses of the entity and
the right to receive benefits from the entity that could potentially be significant to the VIE.
With respect to its unconsolidated joint ventures, as (i) the Trust is primarily the managing
member but does not exercise substantial operating control over these entities or the Trust is not the
F-9
BRT REALTY TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
September 30, 2012
NOTE 1—ORGANIZATION, BACKGROUND AND SIGNIFICANT ACCOUNTING POLICIES
(Continued)
managing member and (ii) such entities are not VIE’s. The Trust has determined that such joint
ventures should be accounted for under the equity method of accounting for financial statement
purposes.
The preparation of the financial statements 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 consolidated financial statements. Actual results could differ from those
estimates.
Income Tax Status
The Trust qualifies as a real estate investment trust under sections 856-860 of the Internal Revenue
Code of 1986, as amended. The Trustees may, at their option, elect to operate the Trust as a business
trust not qualifying as a real estate investment trust.
Income Recognition
Income and expenses are recorded on the accrual basis of accounting for financial reporting
purposes. The Trust does not accrue interest on impaired loans where, in the judgment of management,
collection of interest according to the contractual terms of the loan documents is considered doubtful.
Among the factors the Trust considers in making an evaluation of the amount of interest that is
collectable, are the financial condition of the borrower, the status of the underlying collateral and
anticipated future events. The Trust accrues interest on performing impaired loans and records cash
receipts as a reduction of interest receivable. For impaired non-accrual loans, interest is recognized on
a cash basis. The Trust will resume the accrual of interest if it determines the collection of interest
according to the contractual terms of the loan is probable.
Loan commitment, origination and extension fee income on loans held in our portfolio is deferred
and recorded as loan fee income over the life of the commitment and loan. Commitment fees are
generally non-refundable. When a commitment expires or the Trust no longer has any other obligation
to perform, the remaining fee is recognized in income.
Rental revenue from commercial real estate properties includes the base rent that each tenant is
required to pay in accordance with the terms of their respective leases reported on a straight-line basis
over the initial term of the lease.
Rental revenue from residential properties is recorded when due from residents and is recognized
monthly as it is earned. Rental payments are due in advance. Leases on residential properties are
generally for terms that do not exceed one year.
The basis on which cost was determined in computing the realized gain or loss on sales of
available-for-sale securities is specific cost.
Allowance for Possible Losses
A loan is deemed to be impaired when based on current information and events, it is probable, in
the judgment of management, that the Trust will not be able to collect all amounts due according to
F-10
BRT REALTY TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
September 30, 2012
NOTE 1—ORGANIZATION, BACKGROUND AND SIGNIFICANT ACCOUNTING POLICIES
(Continued)
the contractual terms of the loan documents. When making this evaluation various factors are
considered, as appropriate, including, market evaluations of the underlying collateral, estimated
operating cash flow from the property during the projected holding period, and estimated sales value
which is computed by applying an estimated capitalization rate to the projected stabilized net operating
income of the specific property, less selling costs, discounted at market discount rates. If upon
completion of the evaluation, the value of the collateral securing the loan is less than the recorded
investment in the loan, an allowance is created with a corresponding charge to expense. The fair values
related to the collateral securing impaired loans based on discounted cash flow models are considered
to be level 3 valuations within the fair value hierarchy. When the Trust acquires title to the property,
the loan loss allowance is adjusted by charging off all amounts related to the loan and recording the
property at its fair value.
Real Estate Properties, Real Estate Properties Held-For-Sale and Loan Held-For-Sale
Real estate properties are shown net of accumulated depreciation and include real property
acquired through acquisition and foreclosure and similar proceedings.
The Trust assesses the fair value of real estate acquired (including land, buildings and
improvements, and identified intangibles such as above and below market leases and acquired in-place
leases, if any) and acquired liabilities in accordance with Accounting Standards Codification (‘‘ASC’’)
Topic 805, ‘‘Business Combinations,’’ and ASC Topic 350, ‘‘intangibles—Goodwill and Other,’’ and
allocates the acquisition price based on these assessments. Fixed-rate renewal options have been
included in the calculation of the fair value of acquired leases where applicable. Depreciation is
computed on a straight-line basis over estimated useful lives of the tangible asset. Intangible assets (and
liabilities) are amortized over the remaining life of the related lease at the time of acquisition. There
was no unamortized value of in-place leases at September 30, 2012. Expenditures for maintenance and
repairs are charged to operations as incurred.
When real estate is acquired by foreclosure proceedings, it is recorded at the lower of the
recorded investment of the loan or estimated fair value of the property at the time of foreclosure or
delivery of a deed in lieu of foreclosure. The recorded investment is the face amount of the loan that
has been decreased by any deferred fees, loan loss allowances and any valuation adjustments. Costs
incurred in connection with the foreclosure of the properties collateralizing the real estate loans are
expensed as incurred.
Real estate and real estate loans are classified as held for sale when management has determined
that it has met the appropriate criteria in ASC Topic 360, ‘‘Property, Plant and Equipment’’. Real
estate properties which are held for sale are not depreciated and their operations are shown in
discontinued operations. Real estate assets and loans that are expected to be disposed of are valued at
the lower of their carrying amount or their fair value less costs to sell on an individual asset basis.
The Trust accounts for the sale of real estate when title passes to the buyer, sufficient equity
payments have been received, there is no continuing involvement by the Trust and there is reasonable
assurance that the remaining receivable, if any, will be collected.
F-11
BRT REALTY TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
September 30, 2012
NOTE 1—ORGANIZATION, BACKGROUND AND SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Real Estate Asset Impairments
The Trust reviews each real estate asset owned, including investments in real estate ventures, to
determine if there are indicators of impairment. If such indicators are present, the Trust determines
whether the carrying amount of the asset can be recovered. Recognition of impairment is required if
the undiscounted cash flows estimated to be generated by the assets are less than the assets’ carrying
amount. Measurement of impairment is based upon the estimated fair value of the asset. In evaluating
a property for impairment, various factors are considered, including estimated current and expected
operating cash flow from the property during the projected holding period, costs necessary to extend
the life or improve the asset, expected capitalization rates, projected stabilized net operating income,
selling costs, and the ability to hold and dispose of such real estate in the ordinary course of business.
Valuation adjustments may be necessary in the event that effective interest rates, rent-up periods,
future economic conditions, and other relevant factors vary significantly from those assumed in valuing
the property. If future evaluations result in a diminution in the value of the property, the reduction will
be recognized as an impairment charge. The fair values related to the impaired real estate are
considered to be a level 3 valuation within the fair value hierarchy.
Fixed Asset Capitalization
A variety of costs may be incurred in the development of the Trust’s properties. After a
determination is made to capitalize a cost, it is allocated to the specific project that is benefited. The
costs of land and building under development include specifically identifiable costs. The capitalized
costs include pre-construction costs essential to the development of the property, development costs,
construction costs, interest costs, real estate taxes, and other costs incurred during the period of
development. We consider a construction project as substantially completed when it is available for
occupancy, but no later than one year from cessation of major construction activity. We cease
capitalization when the project is available for occupancy.
Equity Based Compensation
The Trust’s compensation expense for restricted stock awards is amortized over the vesting period
of such awards, based upon the estimated fair value of such restricted stock at the grant date. For
accounting purposes, the restricted shares are not included in the outstanding shares shown on the
consolidated balance sheets until they vest; however, they are included in the calculation of both basic
and diluted earnings per share as they participate in the earnings of the Trust.
Derivatives and Hedging Activities
The Trust’s objective in using derivative financial instruments is to manage interest rate risk. The
Trust does not use derivatives for trading or speculative purposes. The Trust records all derivatives on
the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on
the intended use of the derivative, whether the Trust has elected to designate a derivative in a hedging
relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria
necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure
to variability in expected future cash flows are considered cash flow hedges. For derivatives designated
F-12
BRT REALTY TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
September 30, 2012
NOTE 1—ORGANIZATION, BACKGROUND AND SIGNIFICANT ACCOUNTING POLICIES
(Continued)
as cash flow hedges, the effective portion of changes in the fair value of the derivative is initially
reported in accumulated other comprehensive income and subsequently reclassified to earnings in the
period in which the hedge transaction affects earnings. The ineffective portion of changes in the fair
value of the derivative is recognized directly in earnings. For derivatives not designated as cash flow
hedges, changes in the fair value of the derivative are recognized directly in earnings in the period in
which they occur.
Per Share Data
Basic earnings (loss) per share was determined by dividing net income (loss) applicable to common
shareholders for the applicable year by the weighted average number of shares of beneficial interest
outstanding during such year. Diluted earnings per share reflects the potential dilution that could occur
if securities or other contracts to issue shares of beneficial interest were exercised or converted into
shares of beneficial interest or resulted in the issuance of shares of beneficial interest that share in the
earnings of the Trust. Diluted earnings per share was determined by dividing net income applicable to
common shareholders for the applicable year by the total of the weighted average number of shares of
beneficial interest outstanding plus the dilutive effect of the Trust’s unvested restricted stock and
outstanding options and warrants using the treasury stock method.
Cash Equivalents
Cash equivalents consist of highly liquid investments, primarily direct United States treasury
obligations with maturities of three months or less when purchased.
Use of Estimates
The preparation of the financial statements 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 consolidated financial statements and accompanying notes. Actual results
could differ from those estimates.
Segment Reporting
Management has determined that it operates in three reportable segments: a loan and investment
segment, a multi-family real estate segment and another real estate segment. The loan and investment
segment includes all activities related to the origination and servicing of the Trusts loan portfolio and
other investments, the multi-family real estate segment includes the ownership and operation of its
multi-family properties and the other real estate segment includes all activities related to the
development, operation and disposition of the Trust’s real estate assets. These three lines of business
require different support infrastructures.
New Accounting Pronouncements
In May 2011, the Financial Accounting Standards Board (‘‘FASB’’) issued Accounting Standards
Update (‘‘ASC’’) No. 2011-04, ‘‘Fair Value Measurements (Topic 820): Amendments to Achieve
F-13
BRT REALTY TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
September 30, 2012
NOTE 1—ORGANIZATION, BACKGROUND AND SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS.’’ This
update provides a uniform framework for fair value measurements and related disclosures between
GAAP and International Financial Reporting Standards (‘‘IFRS’’) and requires additional disclosures,
including: (i) quantitative information about unobservable inputs used, a description of the valuation
processes used, and a qualitative discussion about the sensitivity of the measurements to changes in the
unobservable inputs, for Level 3 fair value measurements; (ii) fair value of financial instruments not
measured at fair value but for which disclosure of fair value is required, based on their levels in the fair
value hierarchy; and (iii) transfers between Level 1 and Level 2 of the fair value hierarchy. This update
was effective for the Trust’s interim and annual reporting beginning January 1 2012 and did not have a
material impact on its financial condition, results of operations, or disclosures.
In June 2011, the FASB issued ASC No. 2011-05, ‘‘Comprehensive Income (Topic 220):
Presentation of Comprehensive Income.’’ This update requires the presentation of net income and
other comprehensive income in one continuous statement or in two separate but consecutive
statements. This update was effective for the Trust’s interim and annual reporting beginning on
January 1, 2012, and did not have a material impact on its financial condition, results of operations, or
disclosures.
NOTE 2—REAL ESTATE LOANS
At September 30, 2012 and 2011, information as to real estate loans, all of which are earning
interest, is summarized as follows (dollars in thousands):
Multi-family residential
. . . . . . . . . . . . . . .
Retail . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Office . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . .
Industrial
September 30, 2012
September 30, 2011
Real Estate
Loans
Percent
Real Estate
Loans
Percent
$35,096
2,000
—
—
37,096
95% $26,300
4,117
5%
24,975
—
—
11,874
100% 67,266
39.2%
6.1%
37.1%
17.6%
100%
Deferred fee income . . . . . . . . . . . . . . . . .
(512)
Real estate loans, net . . . . . . . . . . . . . . .
$36,584
(576)
$66,690
There were no non-earning loans and no allowance for possible losses at September 30, 2012 and
2011.
F-14
BRT REALTY TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
September 30, 2012
NOTE 2—REAL ESTATE LOANS (Continued)
A summary of the changes in non-earning loans before allowance for possible losses of $3,165,000
(as of September 30, 2010) for the years ended September 30, 2011 and 2010, is as follows (dollars in
thousands):
2011
2010
Beginning principal balance . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 35,143
$ 2,836
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
— 34,563
— 34,563
Payoffs and paydowns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sale of loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reclassified to real estate loan held for sale . . . . . . . . . . . . . . .
— (2,256)
—
—
(26,655)
(8,488)
Total reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(35,143)
(2,256)
Ending principal balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
— $35,143
At September 30, 2012, 2011 and 2010, no earning loans were deemed impaired and accordingly
no loan loss allowances have been established against our earning portfolio. During the years ended
September 30, 2012, 2011 and 2010, respectively, an average of $0, $7,758,000 and $23,526,000,
respectively, of real estate loans were deemed impaired, and no interest income was recognized in any
period relating to these loans.
The Trust recognized cash basis interest of $0, $621,000 and $571,000 on non-earning loans in the
years ended September 30, 2012, 2011 and 2010, respectively.
Loans originated by the Trust generally provide for interest rates indexed to the prime rate with a
stated minimum. However in 2011, the Trust also originated loans where the interest rate is fixed for
the initial term, and converts to a floating rate loan if the extension option, if any, is exercised.
At September 30, 2012, the Trust’s portfolio consists primarily of senior mortgage loans, secured by
residential or commercial property, 39% of which are located in New York, 37% in Georgia, 17% in
Michigan, and 7% in Florida. All real estate loans in the portfolio at September 30, 2012 mature in
fiscal 2013.
If a loan is not repaid at maturity, the Trust may either extend the loan or commence foreclosure
proceedings. The Trust analyzes each loan separately to determine the appropriate course of action. In
analyzing each situation, management examines various aspects of the loan receivable, including the
value of the collateral, the financial condition of the borrower, past payment history and plans of the
owner of the property. Of the $55,393,000 of real estate loans receivable scheduled to mature in fiscal
2012, $2,556,000 were extended, and $52,837,000 were paid off.
At September 30, 2012, no single borrower had loans outstanding in excess of 5% of the Trust’s
total assets.
F-15
BRT REALTY TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
September 30, 2012
NOTE 2—REAL ESTATE LOANS (Continued)
At September 30, 2012, the three largest real estate loans had principal balances outstanding of
approximately $13,753,000, $7,812,000 and $6,295,000. These three loans accounted for 16.1%, 7.8%
and 1.3% of the total interest and fees earned on our loan portfolio in the year ended September 30,
2012.
On December 5, 2012, the Trust originated a first mortgage loan in the gross amount of
$23,000,000. Gould Investors, a related party, purchased a $7,500,000 pari passu participation in this
loan.
NOTE 3—REAL ESTATE LOAN HELD-FOR-SALE
At September 30, 2011, the Trust had one loan which was classified as held-for-sale. The loan,
which represented a pari passu interest in a loan with a principal balance of approximately $17 million,
had a carrying value of approximately $8.5 million, and represented 11.2% of total real estate loans and
4.4% of total assets at September 30, 2011. In October 2011, pursuant to a Federal Bankruptcy Court
approved joint plan of reorganization, the Trust and its loan participant sold the rights to the loan for
net proceeds of approximately $23.5 million. The Trust provided $15 million of financing for the
purchase which was repaid in full on December 5, 2011.
NOTE 4—ALLOWANCE FOR POSSIBLE LOAN LOSSES
There was no allowance for possible loan losses at September 30, 2012 or 2011. The following is
an analysis of the allowance for possible loan losses for the years indicated (dollars in thousands):
Year Ended
September 30,
2011
2010
Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for loan loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recovery of previously provided allowance . . . . . . . . . . . . . . . . .
Charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 3,165
—
(3,595)
(609)
1,039
$ 1,618
3,165
(365)
(1,480)
227
Balance at end of year
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ — $ 3,165
The allowance for possible losses at September 30, 2010 applies to two loans aggregating
$26,655,000.
F-16
BRT REALTY TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
September 30, 2012
NOTE 5—REAL ESTATE PROPERTIES
A summary of activity in real estate properties for the year ended September 30, 2012 is as follows
(dollars in thousands):
September 30,
2011
Balance
Shopping centers/retail(a) . . . . . . . .
Co-op/Condo Apts . . . . . . . . . . . . .
Commercial/mixed use(b) . . . . . . . .
Multi-family(c) . . . . . . . . . . . . . . . .
Land(d) . . . . . . . . . . . . . . . . . . . . .
$ 2,853
315
48,137
7,972
Additions
$
—
—
1,659
115,100
—
Total real estate properties . . . . . . .
$59,277
$116,759
$16,338
Capitalized
Costs and
Improvements
Depreciation,
Amortization
and other
Reductions
September 30,
2012
Balance
$
—
2
12,622
3,714
—
$ (104)
(67)
(610)
(1,276)
—
$(2,057)
$ 2,749
250
61,808
117,538
7,972
$190,317
(a) The Trust holds, with a minority partner, a leasehold interest in a portion of a retail shopping
center located in Yonkers, New York. The leasehold interest is for approximately 28,500 square
feet and, including all option periods, expires in 2045. The Trust has an 85% interest in this joint
venture.
(b) Represents the real estate assets of RBH-TRB Newark Holdings LLC, a consolidated VIE which
owns operating and development properties in Newark, New Jersey. These properties contain a
mix of office, retail space, charter schools and surface parking totaling approximately 690,000
square feet, which includes 252,000 square feet currently under construction. Certain of these
assets are subject to mortgages in the aggregate principal balance of $20,100,000 held by the Trust,
which are eliminated in consolidation. Several of the assets are also encumbered by other
mortgages which are discussed in Note 10—Debt Obligations—Mortgages Payable.
The Trust made capital contributions of $4,157,000 and $3,194,000 to this venture in the years
ended September 30, 2012 and 2011, respectively, representing its proportionate share of capital
required to fund the operations of the venture for its next fiscal year and to purchase additional
land parcels. The Trust received a distribution of $1,170,000 from the venture in the year ended
September 30, 2012.
F-17
BRT REALTY TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
September 30, 2012
NOTE 5—REAL ESTATE PROPERTIES (Continued)
(c) Set forth below is certain information regarding the Trust’s purchases, through joint ventures in
each of which the Trust has an 80% equity interest, of the following multi-family properties
(dollars in thousands):
Location
Purchase
Date
No. of
Units
Contract
Purchase
Price
Acquisition
Mortgage
Debt
BRT
Equity
Acquisition
Costs
Marietta, GA* . . . . . . . . . . .
Lawrenceville, GA* . . . . . . . .
Palm Beach Gardens, FL . . . .
Melbourne, FL . . . . . . . . . . .
Collierville, TN . . . . . . . . . . .
1/12/2012
2/23/2012
3/22/2012
3/30/2012
6/20/2012
207
170
542
208
325
$
8,100
6,250
59,400
9,250
32,100
$ 6,500
4,687
45,200
7,680
25,680
$ 2,560
2,200
14,480
3,120
6,220
1,452
$115,100
$89,747
$28,580
—
—
$1,561
231
615
$2,407
* As a result of amendments to the operating agreement of the joint venture which owns this
property, this joint venture was treated as a consolidated subsidiary of the Trust effective
August 1, 2012. The Trust was determined to be the primary beneficiary of this venture
because it has a controlling interest in that it now has the power to direct the activities of the
VIE that most significantly impact the entity’s economic performance and it has the obligation
to absorb losses of the entity and the right to receive benefits from the entity that could
potentially be significant to the VIE.
(d) Represents an 8.9 acre development parcel located in Daytona Beach, Florida which was acquired
in foreclosure.
Future minimum rentals to be received by the Trust pursuant to non-cancellable operating leases
with terms in excess of one year, from properties owned by the Trust or a consolidated subsidiary at
September 30, 2012, are as follows (dollars in thousands):
Year Ending September 30,
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amount
$ 2,225
2,227
2,186
2,057
1,113
10,361
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$20,169
Leases at the Trust’s multi-family properties are generally for a term of one year or less and are
not reflected in the above table.
F-18
BRT REALTY TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
September 30, 2012
NOTE 5—REAL ESTATE PROPERTIES (Continued)
Subsequent to September 30, 2012, the Trust purchased through consolidated joint ventures in
which the Trust has an 80% to 90% equity interest, the following multi-family properties:
Location
Purchase
Date
No of
Units
Contract
Purchase Price
North Charleston, SC . . . . . . . . . . . .
Cordova, TN . . . . . . . . . . . . . . . . . .
Decatur, GA . . . . . . . . . . . . . . . . . .
10/4/12
11/15/12
11/19/12
208
464
212
884
$21,500
25,500
10,450
$57,450
Acquisition
Mortgage
Debt
$17,716
19,250
8,560
BRT
Equity
$ 4,410
6,220
3,396
$45,526
$14,026
Estimated
Acquisition
Costs
$213
388
192
$793
NOTE 6—IMPAIRMENT CHARGES
The Trust reviews each real estate asset owned, including investments in unconsolidated joint
ventures, for which indicators of impairment are present to determine whether the carrying amount of
the asset can be recovered. If indicators of impairment are present, measurement is then based upon
the fair value of the asset. Real estate assets held-for-sale are valued at the lower of cost or fair value,
less costs to sell on an individual asset basis. The Trust incurred impairment charges of $3,370,000 for
the fiscal year ended September 30, 2010. There were no impairment charges taken in fiscal 2012 or
2011.
NOTE 7—INVESTMENT IN UNCONSOLIDATED VENTURES
The Trust is a partner in unconsolidated ventures which own and operate in the aggregate two
properties. The Trust’s share of earnings in its unconsolidated joint ventures, including a joint venture
engaged in purchasing loans that ceased investment activities in November 2011, was $829,000,
$350,000 and $196,000 for the years ended September 30, 2012, 2011 and 2010, respectively. The 2012
earnings include a distribution of $846,000 that was in excess of the book basis. Included in 2012 are
the results of two previously unconsolidated joint ventures that, effective August 1, 2012, were treated
as consolidated subsidiaries of the Trust due to amendments to the operating agreements of the
ventures. The Trust’s equity in its unconsolidated ventures totaled $291,000 and $4,247,000 at
September 30, 2012 and September 30, 2011, respectively.
NOTE 8—RESTRICTED CASH
Restricted cash-construction holdbacks represents the remaining net proceeds from mortgage
financings completed in February and September 2012. These funds are to be used for construction of
five buildings at the Teachers Village site in Newark, NJ. Restricted cash was $55,252,000 at
September 30, 2012.
F-19
BRT REALTY TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
September 30, 2012
NOTE 9—AVAILABLE-FOR-SALE SECURITIES
Information regarding our available-for-sale securities is set forth in the table below (dollars in
thousands):
Cost basis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Market value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 789
499
(39)
$1,249
$2,488
406
(128)
$2,766
September 30,
2012
September 30,
2011
Unrealized gains and losses are reflected as a component of accumulated other comprehensive
income in the accompanying consolidated balance sheets.
The Trust’s available-for-sale equity securities were determined to be Level 1 financial assets within
the valuation hierarchy established by current accounting guidance, and the valuation is based on
current market quotes received from financial sources that trade such securities. All of the
available-for-sale securities in an unrealized loss position are not considered impaired on an other than
temporary basis because the Trust expects the value of these securities to recover and plans on holding
them until at least such recovery.
Information regarding the sales of available-for-sale debt and equity securities is presented in the
table below (dollars in thousands):
Proceeds from sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
less cost basis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$3,939
3,334
$7,590
6,271
$3,425
1,839
Gain on sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 605
$1,319
$1,586
Year ended September 30,
2012
2011
2010
For the year ended September 30, 2012, the gain or loss on sale was determined using specific
identification. For the years ended September 30, 2011 and 2010 the calculation of gain or loss on sale
was determined using an average cost.
NOTE 10—DEBT OBLIGATIONS
Debt obligations consist of the following (dollars in thousands):
Line of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Junior subordinated notes . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgages payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
$ 37,400
169,284
—
$37,400
14,417
Total debt obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$206,684
$51,817
Year ended
September 30,
2012
2011
F-20
BRT REALTY TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
September 30, 2012
NOTE 10—DEBT OBLIGATIONS (Continued)
Line of credit
On June 22, 2011, the Trust, through a wholly owned subsidiary, entered into a senior secured
revolving credit facility with Capital One, National Association. The maximum amount that may be
borrowed under the facility is the lesser of $25 million and the borrowing base. The borrowing base is
generally equal to 40% to 65% (depending, among other things, on the type of property secured by the
eligible mortgage receivables pledged to the lender and the operating income of the related property)
of eligible mortgage receivables. Interest accrues on the outstanding balance at the greater of (i) 4%
plus LIBOR and (ii) 5.50%. The facility matures June 21, 2014 and, subject to the satisfaction of
specified conditions, the outstanding balance may be converted at the Trust’s option into an 18 month
term loan. The Trust has guaranteed the payment and performance of its subsidiary’s obligations under
the facility.
On April 17, 2012, the facility was amended to allow the subsidiary to borrow for up to 90 days on
an unsecured basis, a maximum of $10,000,000.
The facility requires the Trust and the subsidiary to maintain or comply with, among other things,
net worth and liquidity covenants, debt service and collateral coverage ratios and limits, with specified
exceptions, the ability to incur debt.
For the years ended September 30, 2012 and 2011 interest expense, which includes fee
amortization with respect to the facility, was $182,000 and $37,000, respectively.
At September 30, 2012 and 2011 there was no outstanding balance on the facility.
Junior Subordinated Notes
At September 30, 2012 and 2011 the Trust’s junior subordinated notes had an outstanding principal
balance of $37,400,000. The interest rates on the outstanding notes is set forth in the table below:
Interest period
Interest Rate
3.00%
March 15, 2011 through July 31, 2012 . . . . . . . . . . . . . . . . . . . . . .
August 1, 2012 through April 29, 2016 . . . . . . . . . . . . . . . . . . . . . .
4.90%
April 30, 2016 through April 30, 2036 . . . . . . . . . . . . . . . . . . . . . . LIBOR + 2.00%
On March 15, 2011, the Trust restructured its existing junior subordinated notes resulting in a
repayment of $5,000,000 and a reduction in the interest rate for the remaining term. The Trust
accounted for the restructuring of this debt as an extinguishment of debt. For the year ended
September 30, 2011, the Trust recognized a loss on the extinguishment of the debt of $2,138,000, which
represented the unamortized principal of $1,308,000 and unamortized costs of $830,000. The Trust also
incurred third party costs of $512,000 which were deferred and will be amortized over the remaining
life of the notes.
Interest expense, which includes amortization of deferred costs relating to the junior subordinated
notes for the years ended September 30, 2012, 2011 and 2010, was $1,260,000, $1,590,000 and
$2,098,000, respectively.
F-21
BRT REALTY TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
September 30, 2012
NOTE 10—DEBT OBLIGATIONS (Continued)
Mortgages Payable
The Trust had the following obligations outstanding as of the dates indicated all of which are
secured by the underlying real property (dollars in thousands):
Property
2012
2011
Rate
Maturity
September 30,
Yonkers, NY(1) . . . . . . . . . . . . . . . . . . . . . . .
Palm Beach Gardens, FL . . . . . . . . . . . . . . . .
Melboune, FL . . . . . . . . . . . . . . . . . . . . . . . .
Marietta, GA . . . . . . . . . . . . . . . . . . . . . . . . .
Lawrenceville, GA . . . . . . . . . . . . . . . . . . . . .
Collierville, TN . . . . . . . . . . . . . . . . . . . . . . .
65 Market St—Newark, NJ . . . . . . . . . . . . . . .
69 Market St—Newark, NJ . . . . . . . . . . . . . . .
909 Broad St—Newark, NJ . . . . . . . . . . . . . . .
Teachers Village—Newark, NJ(2) . . . . . . . . . .
Teachers Village—Newark, NJ(3) . . . . . . . . . .
Teachers Village—Newark, NJ . . . . . . . . . . . . .
Teachers Village—Newark, NJ . . . . . . . . . . . . .
Teachers Village—Newark, NJ . . . . . . . . . . . . .
Teachers Village—Newark, NJ . . . . . . . . . . . . .
Teachers Village—Newark, NJ . . . . . . . . . . . . .
Teachers Village—Newark, NJ . . . . . . . . . . . . .
Teachers Village—Newark, NJ . . . . . . . . . . . . .
Teachers Village—Newark, NJ . . . . . . . . . . . . .
$
1,954
45,200
7,680
6,462
4,687
25,680
900
—
6,132
2,738
22,748
4,250
988
1,380
1,832
15,700
5,250
13,491
2,212
5.25% April 2022
3.78% April 2019
3.98% April 2019
6.50% February 2015
4.49% March 2022
3.91% July 2022
7.00% January 2015
7.00% N/A
6.00% August 2030
17% March 2013
5.50% December 2030
3.46% February 2032
2.00% February 2022
2.50% February 2014
(4) February 2034
$ 2,041
—
—
—
—
—
900
1,200
6,314
3,962
—
—
—
—
—
— Libor +3.00% August 2019
—
—
—
3.28% September 2042
8.65% December 2023
(5) August 2034
$169,284
$14,417
(1) On March 29, 2012, the consolidated joint venture which owns a property in Yonkers, NY,
refinanced an existing mortgage in the amount of $ 1,990,000 with the current lender. The new
mortgage bears interest at one-month LIBOR plus 3.15%. In connection with the transaction, the
venture entered into an interest rate swap agreement which effectively fixes the interest rate at
5.25%.
(2) As of September 30, 2012 and 2011, respectively, the Trust had guaranteed $685,000 and $991,000
of this mortgage obligation.
(3) TD Bank has the right, in 2018, to require subsidiaries of the Newark Joint Venture to repurchase
such debt. If such right is exercised, such subsidiaries will be required to refinance such debt. The
stated interest rate is 5.5% per year; however, the United States Treasury Department is
reimbursing the interest at the rate of 4.99% per year under the Qualified School Construction
Bond program and accordingly, the effective rate of interest thereon until 2018 is 0.51% per year.
F-22
BRT REALTY TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
September 30, 2012
NOTE 10—DEBT OBLIGATIONS (Continued)
(4) The debt is to be serviced in full by annual payment-in-lieu of taxes (‘‘PILOT’’) of $256,000 in
2013 increasing to approximately $281,000 at maturity. This obligation is not secured by real
property.
(5) The debt is to be serviced in full by PILOT payments of $311,000 in 2013 increasing to
approximately $344,000 at maturity.
Scheduled principal repayments on these debt obligations are as follows (dollars in thousands):
Years Ending September 30,
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amount
$ 4,287
1,656
10,389
3,651
3,663
145,638
$169,284
NOTE 11—DEFERRED INCOME (NEW MARKETS TAX CREDIT TRANSACTION ‘‘NMTC’’)
On September 11, 2012 and February 3, 2012 special purpose subsidiaries of the Newark Joint
Venture entered into transactions with affiliates of Goldman Sachs (‘‘Goldman’’) related to the
Teacher’s Village project and received proceeds related to NMTC’s the project qualified for. The
NMTC program was enacted by Congress to serve low-income and distressed communities by providing
investors with tax credit incentives to make capital investments in those communities. The program
permits taxpayers to claim credits against their Federal income tax for up to 39% of qualified
investments.
Goldman contributed $16,400,000 and $11,200,000 to the projects through special-purpose entities
created to effect the financing transaction and is entitled to receive tax credits against its qualified
investment in the project over the next seven years. At the end of the seven years, the Newark Joint
Venture subsidiaries have the option to acquire the special purpose entities for a nominal fee and it is
anticipated that they will exercise this option.
Included in deferred income on the Trust’s consolidated balance sheet at September 30, 2012 is
$25,848,000 of the Goldman contribution, which is net of fees. This amount will be recognized into
income when the obligation to comply with the requirements of the NMTC program as set forth in the
applicable provisions of the Internal Revenue Code of 1986, as amended (the ‘‘Code’’), is eliminated.
Risks of non-compliance include recapture (i.e. reversal of the benefit of the tax credit and the related
indemnity obligation of the Newark Joint Venture). The tax credits are subject to recapture for a seven
year period as provided in the Code.
Costs incurred in structuring these transactions are deferred and will be recognized as an expense
based on the maturities of the various mortgage financings related to the NMTC transaction. At
September 30, 2012, these costs totaled $10.2 million and are included in deferred costs on the
consolidated balance sheet.
F-23
BRT REALTY TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
September 30, 2012
NOTE 11—DEFERRED INCOME (NEW MARKETS TAX CREDIT TRANSACTION ‘‘NMTC’’)
(Continued)
The Trust determined that these special purpose entities are VIE’s. The VIE’s ongoing activities,
which include collecting and remitting interest and fees and NMTC compliance, were all considered in
the design of the special purpose entities and are not anticipated to affect the economic performance
during the life of the VIE’s.
Management considered the obligation to deliver tax benefits and provide guarantees to Goldman
and the Trust’s obligations to absorb the losses of the VIE. Management also considered Goldman’s
lack of a material interest in the underlying economics of the project. Management concluded that the
Trust is the primary beneficiary and has therefore consolidated the VIE’s.
NOTE 12—INCOME TAXES
The Trust elected to be taxed as a real estate investment trust (‘‘REIT’’), as defined under the
Internal Revenue Code of 1986, as amended. As a REIT, the Trust will generally not be subject to
Federal income taxes at the corporate level if it distributes 100% of its REIT taxable income, as
defined, to its shareholders. To maintain its REIT status, the Trust must distribute at least 90% of its
taxable income; however if it does not distribute 100% of its taxable income, it will be taxed on
undistributed income. There are a number of organizational and operational requirements the Trust
must meet to remain a REIT. If the Trust fails to qualify as a REIT in any taxable year, its taxable
income will be subject to Federal income tax at regular corporate tax rates and it may not be able to
qualify as a REIT for four subsequent tax years. Even if it is qualified as a REIT, the Trust is subject to
certain state and local income taxes and to Federal income and excise taxes on the undistributed
taxable income. For income tax purposes the Trust reports on a calendar year.
During the years ended September 30, 2012, 2011 and 2010, the Trust recorded $16,000, $20,000
and $6,000, respectively, of state franchise tax expense, net of refunds, relating to the 2012, 2011 and
2010 tax years.
In 2012, the Trust also paid $205,000 in alternative minimum tax which resulted from the use of
net operating loss carryforwards in tax year 2011.
Earnings and profits, which determine the taxability of dividends to shareholders, differs from net
income reported for financial statement purposes due to various items including timing differences
related to loan loss provision, impairment charges, depreciation methods and carrying values.
The financial statement income is expected to be approximately $3 million (lower) than the income
for tax purposes for calendar 2012, primarily due to the acquisition costs recorded for book purposes in
the current calendar year that is not expensed for tax purposes in the current tax year.
At December 31, 2011, the Trust had a tax loss carry forward of $60,468,000. These net operating
losses can be used in future years to reduce taxable income when it is generated. These tax loss carry
forwards begin to expire in 2028.
F-24
BRT REALTY TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
September 30, 2012
NOTE 13—SHAREHOLDERS’ EQUITY
Distributions
During the year ended September 30, 2012, the Trust did not declare or pay any dividends.
Restricted Shares
The Trust’s 2012 Incentive Plan, approved by its shareholders in January 2012, permits the Trust to
grant stock options, restricted stock, restricted stock units, performance shares awards and any one or
more of the foregoing, up to a maximum of 600,000 shares. No awards have been granted under this
plan. An aggregate of 580,180 shares of restricted stock have been granted pursuant to the Trust’s 2003
and 2009 equity incentive plans (collectively, the ‘‘Prior Plans’’) and have not yet vested. No additional
awards may be granted under the Prior Plans. The restricted shares that have been granted under the
Prior Plans vest five years from the date of grant and under specified circumstances, including a change
in control, may vest earlier. For accounting purposes, the restricted shares are not included in the
outstanding shares shown on the consolidated balance sheet until they vest, but are included in the
earnings per share computation.
During the fiscal years ended September 30, 2012, 2011 and 2010, the Trust issued 136,650, 138,150
and 125,150 restricted shares, respectively, under the Trust’s 2009 equity incentive plan. The estimated
fair value of restricted stock at the date of grant is being amortized ratably into expense over the
applicable vesting period. For the years ended September 30, 2012, 2011 and 2010, the Trust recognized
$758,000, $845,000, and $833,000 of compensation expense, respectively. At September 30, 2012,
$1,870,000 has been deferred as unearned compensation and will be charged to expense over the
remaining vesting periods. The weighted average vesting period is 2.6 years.
Changes in number of shares outstanding under the Prior Plans are shown below:
Years Ended September 30,
2012
2011
2010
Outstanding at beginning of the year . . . . . . . . . . . . .
Issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cancelled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
491,705
136,650
(7,250)
(40,925)
391,580
138,150
(175)
(37,850)
299,280
125,150
(2,050)
(30,800)
Outstanding at the end of the year . . . . . . . . . . . . . . .
580,180
491,705
391,580
F-25
BRT REALTY TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
September 30, 2012
NOTE 13—SHAREHOLDERS’ EQUITY (Continued)
Earnings (Loss) Per Share
The following table sets forth the computation of basic and diluted earnings (loss) per share
(dollars in thousands):
Numerator for basic and diluted earnings (loss) per share
attributable to common shareholders:
Net income (loss) attributable to common shareholders . . . .
$
4,430
$
6,374
$
(8,015)
2012
2011
2010
Denominator:
Denominator for basic earnings (loss) per share—weighted
average shares(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14,035,972
14,041,569
13,871,668
Effect of dilutive securities:
Employee stock options . . . . . . . . . . . . . . . . . . . . . . . . . . .
Denominator for diluted earnings (loss) per share—adjusted
—
—
298
weighted average shares and assumed conversions(1) . . . . .
14,035,972
14,041,569
13,871,668
Basic earnings (loss) per share . . . . . . . . . . . . . . . . . . . . . . .
Diluted earnings (loss) per share . . . . . . . . . . . . . . . . . . . . .
$
$
.32
.32
$
$
.45
.45
$
$
(.58)
(.58)
(1) Outstanding shares for 2010 are the same for basic and diluted as the effect of dilutive shares in
the computation of earnings per share would have been antidilutive.
Share Buyback and Treasury Shares
In September 2011, the Board of Trustees approved a share repurchase program pursuant to which
the Trust may spend up to $2,000,000 to repurchase its shares of beneficial interest. Shares repurchased
under this program will be retired. As of September 30, 2012, the Trust had repurchased 146,812 shares
at an average cost of $6.31 per share. During the fiscal years ended September 30, 2012, 2011 and 2010
the Trust repurchased 139,507, 154,692 and 52,403 shares, respectively, at an average cost of $6.30,
$6.35 and $5.55 per share, respectively.
During the years ended September 30, 2012, 2011 and 2010, 40,925, 37,850 and 30,800 treasury
shares, respectively, were issued in connection with the vesting of restricted stock under the Trust’s
incentive plans. In fiscal 2012, the Trust cancelled, and restored to the status of authorized and
unissued shares, its remaining 1,380,978 treasury shares.
Tender Offer
On October 27, 2010, 147,388 shares of beneficial interest were tendered pursuant to a previously
announced tender offer. The total purchase price of these shares was $6.30 per share, aggregating
$929,000.
F-26
BRT REALTY TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
September 30, 2012
NOTE 14—ADVISOR’S COMPENSATION AND RELATED PARTY TRANSACTIONS
Certain of the Trust’s officers and trustees are also officers and directors of REIT Management
Corp. (‘‘REIT Management’’) to which the Trust, pursuant to an amended and restated advisory
agreement, paid advisory fees for administrative services and investment advice. Fredric H. Gould,
chairman of the board, is the sole shareholder of REIT Management. Advisory fees were charged to
operations at a rate of 0.6% on invested assets which consist primarily of real estate loans, real estate
assets and investment securities.
Effective January 1, 2012, the parties entered into an amendment to the amended and restated
advisory agreement pursuant to which (i) the stated expiration date was extended to June 30, 2014,
(ii) the minimum and maximum fees payable in a twelve month period to REIT Management were set
at $750,000 and $4 million, respectively, subject to adjustment for any period of less than twelve
months and (iii) the Trust is to pay REIT Management the following annual fees which are to be paid
on a quarterly basis:
• 1.0% of the average principal amount of earning loans;
• .35% of the average amount of the fair market value of non-earning loans;
• .45% of the average book value of all real estate properties, excluding depreciation;
• .25% of the average amount of the fair market value of marketable securities;
• .15% of the average amount of cash and cash equivalents; and
To the extent loans or real estate are held by joint ventures or other arrangements in which the
Trust has an interest, fees vary based on, among other things, the nature of the asset (i.e. real estate or
loans), the nature of the Trust’s involvement (i.e. active or passive) and the extent of the Trust’s equity
interests in such arrangements.
Advisory fees amounted to $1,104,000, $916,000 and $785,000 for the years ended September 30,
2012, 2011 and 2010, respectively.
The Trust’s borrowers also paid fees directly to REIT Management based on loan originations,
which generally are one-time fees payable upon funding of a loan, in the amount of 1⁄2 of 1% of the
total loan. These fees were $145,000, $750,000 and $89,000 for the years ended September 30, 2012,
2011 and 2010, respectively. Effective January 1, 2012, all loan origination fees paid by borrowers were
paid directly to the Trust.
Management of certain properties owned by the Trust is provided by Majestic Property
Management Corp., a corporation in which the chairman of the board is the sole shareholder, under
renewable year-to-year agreements. Certain of the Trust’s officers and Trustees are also officers and
directors of Majestic Property Management Corp. Majestic Property Management Corp. provides real
property management, real estate brokerage and construction supervision services to the Trust and
these certain joint venture properties. For the years ended September 30, 2012, 2011 and 2010, fees for
these services aggregated $74,000, $83,000 and $66,000, respectively.
The chairman of the board of the Trust is also chairman of the board of One Liberty
Properties, Inc., a related party, and certain of the Trust’s officers and Trustees are also officers and
directors of One Liberty Properties, Inc. In addition, the Chairman of the Board is an executive officer
F-27
BRT REALTY TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
September 30, 2012
NOTE 14—ADVISOR’S COMPENSATION AND RELATED PARTY TRANSACTIONS (Continued)
and sole shareholder of Georgetown Partners, Inc., the managing general partner of Gould
Investors L.P. and the sole member of Gould General LLC, a general partner of Gould Investors L.P., a
related party. Certain of the Trust’s officers and Trustees are also officers and directors of Georgetown
Partners, Inc. The allocation of expenses for the shared facilities, personnel and other resources is
computed in accordance with a shared services agreement by and among the Trust and the affiliated
entities and is included in general and administrative expense on the statement of operations. During
the years ended September 30, 2012, 2011 and 2010, allocated general and administrative expenses
reimbursed by the Trust to Gould Investors L.P. pursuant to the shared services agreement, aggregated
$705,000, $847,000 and $822,000, respectively. At September 30, 2012, $44,000 remains unpaid and is
included in accounts payable and accrued liabilities on the consolidated balance sheet.
NOTE 15—SEGMENT REPORTING
Management has determined that the Trust now operates in three reportable segments, a loan and
investment segment which include the origination and servicing of its loan portfolio and its investments,
a multi-family real estate segment which includes the ownership and operation of its multi-family
properties and another real estate segment which includes the operation and disposition of its other
real estate assets and in particular the Newark Joint Venture. In prior years the Trust operated in two
reportable segments.
F-28
BRT REALTY TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
September 30, 2012
NOTE 15—SEGMENT REPORTING (Continued)
The following table summarizes the Trust’s segment reporting for the year ended September 30,
2012 (dollars in thousands):
Revenues:
Interest and loan fee income . . . . . . . . . . . . . . . . . . . .
Rental and other revenues from real estate properties . .
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenses:
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Advisor’s fee, related party . . . . . . . . . . . . . . . . . . . . .
Operating expenses relating to real estate properties . . .
General and administrative and other expenses . . . . . . .
Property acquisition costs . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . .
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total revenues less total expenses . . . . . . . . . . . . . . . . .
Equity in (loss) earnings of unconsolidated ventures . . .
Gain on sale of available-for-sale securities . . . . . . . . . .
Gain on sale of loan . . . . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) from continuing operations . . . . . . . . . . .
Discontinued operations:
Gain on sale of real estate assets . . . . . . . . . . . . . . . . .
Income from discontinued operations . . . . . . . . . . . . . .
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plus: net loss attributable to non-controlling interests . .
Loan and Multi-Family
Real Estate
Investment
Other
Real Estate
Total
$
9,530
— $
496
10,026
646
692
—
2,893
—
—
4,231
5,795
(136)
605
3,192
9,456
—
—
9,456
—
—
5,464
—
5,464
1,758
230
2,644
1,719
2,407
1,276
10,034
(4,570)
(139)
—
—
(4,709)
—
—
— $
$
3,211
878
4,089
2,325
182
3,398
2,549
—
728
9,182
(5,093)
1,104
—
—
(3,989)
792
792
9,530
8,675
1,374
19,579
4,729
1,104
6,042
7,161
2,407
2,004
23,447
(3,868)
829
605
3,192
758
792
792
(4,709)
461
(3,197)
2,419
1,550
2,880
Net income (loss) attributable to common shareholders .
$
9,456
$ (4,248)
$
(778) $ 4,430
Segment assets at September 30, 2012 . . . . . . . . . . . . .
$113,383
$121,153
$151,420
$385,956
F-29
BRT REALTY TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
September 30, 2012
NOTE 15—SEGMENT REPORTING (Continued)
The following table summarizes the Trust’s segment reporting for the year ended September 30,
2011 (dollars in thousands):
Loan and
Investment
$ 10,328
Real Estate
Total
— $ 3,456
—
4,097
— $ 10,328
3,456
4,097
14,425
3,456
17,881
1,082
608
—
4,665
—
6,355
8,070
1,030
308
3,340
2,063
738
7,479
(4,023)
251
—
(718)
2,112
916
3,340
6,728
738
13,834
4,047
350
1,319
(2,138)
3,578
1,346
1,346
4,924
1,450
Revenues:
Interest and loan fee income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rental and other revenues from real estate properties . . . . . . . . . . .
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenses:
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Advisor’s fee, related party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating expenses related to real estate properties . . . . . . . . . . . . .
General and administrative and other expenses . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total revenues less total expenses . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings of unconsolidated ventures . . . . . . . . . . . . . . . . .
Gain on sale of available-for-sale securities . . . . . . . . . . . . . . . . . . .
Loss on extinguishment of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . .
99
1,319
(1,420)
Income (loss) from continuing operations . . . . . . . . . . . . . . . . . . . .
8,068
(4,490)
Discontinued operations:
Gain on sale of real estate assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from discontinued operations . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plus: net loss attributable to non-controlling interests . . . . . . . . . . . .
—
—
8,068
—
1,346
1,346
(3,144)
1,450
Net income (loss) attributable to common shareholders . . . . . . . . . .
$
8,068
$ (1,694)
$ 6,374
Segment assets at September 30, 2011 . . . . . . . . . . . . . . . . . . . . . . .
$126,916
$64,096
$191,012
F-30
BRT REALTY TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
September 30, 2012
NOTE 15—SEGMENT REPORTING (Continued)
The following table summarizes the Trust’s segment reporting for the year ended September 30,
2010 (dollars in thousands):
Loan and
Investment
Real Estate
Total
Revenues:
Interest and loan fee income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rental and other revenues from real estate properties . . . . . . . . . . .
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenses:
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Advisor’s fee, related party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating expenses related to real estate properties . . . . . . . . . . . . .
Provision for loan loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative and other expenses . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
3,877
— $
— $ 3,422
—
836
4,713
3,422
3,877
3,422
836
8,135
2,584
785
3,216
3,165
2,625
6,736
733
1,181
523
—
3,165
—
4,710
—
9,579
1,403
262
3,216
—
2,625
2,026
733
10,265
19,844
Total revenues less total expenses . . . . . . . . . . . . . . . . . . . . . . . . . .
(4,866)
(6,843)
(11,709)
Equity in earnings of unconsolidated ventures . . . . . . . . . . . . . . . . .
Gain on sale of available-for-sale securities . . . . . . . . . . . . . . . . . . .
28
1,586
168
—
196
1,586
Loss from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3,252)
(6,675)
(9,927)
Discontinued operations:
Loss from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of real estate assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from discontinued operations . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
—
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plus: net loss attributable to non-controlling interests . . . . . . . . . . . .
(3,252)
—
(602)
(745)
1,937
590
(6,085)
1,322
(602)
(745)
1,937
590
(9,337)
1,322
Net loss attributable to common shareholders . . . . . . . . . . . . . . . . .
$ (3,252)
$ (4,763)
$ (8,015)
Segment assets at September 30, 2010 . . . . . . . . . . . . . . . . . . . . . . .
$124,928
$61,338
$186,266
F-31
BRT REALTY TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
September 30, 2012
NOTE 16—FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial Instruments Not Measured at Fair Value
The following methods and assumptions were used to estimate the fair value of each class of
financial instruments that are not reported at fair value on the consolidated balance sheets:
Cash and cash equivalents, restricted cash—construction holdbacks, accounts receivable (included in
other assets), accounts payable and accrued liabilities: The carrying amounts reported in the balance
sheets for these instruments approximate their fair value due to the short term nature of these
accounts.
Real estate loans: The earning mortgage loans of the Trust, which have variable rate provisions
based upon a spread over prime rate, have an estimated fair value equal to their carrying value,
assuming market rates of interest between 10% and 12%. The earning mortgage loans of the Trust,
which have fixed rate provisions, have an estimated fair value approximately $5,000 greater than their
carrying value assuming a market rate of interest of 11% which reflects institutional lender yield
requirement.
Junior subordinated notes: At September 30, 2012, the estimated fair value of the Trust’s junior
subordinated notes is less than their carrying value by approximately $387,000, based on a market
interest rate of 2.92%.
Mortgages payable: At September 30, 2012, the estimated fair value of the Trust’s mortgages
payable is greater than their carrying value by approximately $4,393,000 assuming market interest rates
between 3.28% and 17%. Market interest rates were determined using current financing transactions
provided by third party institutions.
Considerable judgment is necessary to interpret market data and develop estimated fair value. The
use of different market assumptions and/or estimation methodologies may have a material effect on the
estimated fair value assumptions.
Financial Instruments Measured at Fair Value
The Trust’s fair value measurements are based on the assumptions that market participants would
use in pricing the asset or liability. As a basis for considering market participant assumptions in fair
value measurements, there is a fair value hierarchy that distinguishes between markets participant
assumptions based on market data obtained from sources independent of the reporting entity and the
reporting entity’s own assumptions about market participant assumptions. Level 1 assets/liabilities are
valued based on quoted prices for identical instruments in active markets, Level 2 assets/liabilities are
valued based on quoted prices in active markets for similar instruments, on quoted prices in less active
or inactive markets, or on other ‘‘observable’’ market inputs and Level 3 assets/liabilities are valued
based significantly on ‘‘unobservable’’ market inputs. The Trust does not currently own any financial
F-32
BRT REALTY TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
September 30, 2012
NOTE 16—FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
instruments that are classified as Level 3. Set forth below is information regarding the Trust’s financial
assets and liabilities measured at fair value as of September 30, 2012 (dollars in thousands):
Carrying and
Fair Value
Fair Value
Measurements
Using Fair Value
Hierarchy
Level 1
Level 2
Financial assets:
Available-for-sale equity securities:
. . . . . . . . . . .
Interest rate cap . . . . . . . . . . . . . . . . . . . . . . . . .
$1,249
10
$
$1,249
Financial Liabilities:
Interest rate swap . . . . . . . . . . . . . . . . . . . . . .
$ 104
$ 10
$104
Available-for-sale securities: Fair values are approximated based on current market quotes from
financial sources that track such securities. All of the available-for-sale securities in an unrealized loss
position are equity securities and amounts are not considered to be impaired on an other than
temporary basis because the Trust expects the value of these securities to recover and plans on holding
them until at least such recovery occurs.
Derivative financial instruments: Fair values are approximated using widely accepted valuation
techniques including discounted cash flow analysis on the expected cash flows of the derivatives. This
analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses
observable market-based inputs, including interest rate curves, foreign exchange rates, and implied
volatilities. At September 30, 2012, these derivatives are included in other assets and accounts payable
and accrued liabilities on the consolidated balance sheet.
Although the Trust has determined that the majority of the inputs used to value its derivatives fall
within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with it utilize
Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself
and its counterparty. As of September 30, 2012, the Trust assessed the significance of the impact of the
credit valuation adjustments on the overall valuation of its derivative positions and determined that the
credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result,
the Trust determined that its derivative valuation is classified in Level 2 of the fair value hierarchy.
NOTE 17—COMMITMENT
The Trust maintains a non-contributory defined contribution pension plan covering eligible
employees and officers. Contributions by the Trust are made through a money purchase plan, based
upon a percent of qualified employees’ total salary as defined therein. Pension expense approximated
$338,000, $315,000 and $287,000 during the years ended September 30, 2012, 2011 and 2010,
respectively. At September 30, 2012, $62,000 remains unpaid and is included in accounts payable and
accrued liabilities on the consolidated balance sheet.
F-33
BRT REALTY TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
September 30, 2012
NOTE 18—DERIVATIVE FINANCIAL INSTRUMENTS
Cash Flow Hedges of Interest Rate Risk
The Trust’s objectives in using interest rate derivatives are to add stability to interest expense and
to manage its exposure to interest rate movements. To accomplish this objective, the Trust primarily
uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps
designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange
for the Trust making fixed-rate payments over the life of the agreements without exchange of the
underlying notional amount.
The effective portion of changes in the fair value of derivatives, designated and that qualify as cash
flow hedges, is recorded in accumulated other comprehensive income on our consolidated balance
sheet and is subsequently reclassified into earnings in the period that the hedged forecasted transaction
affects earnings. In March 2012, the Trust entered into an interest rate swap agreement used to hedge
the variable cash flows associated with existing variable-rate debt.
Amounts reported in accumulated other comprehensive income related to derivatives will be
reclassified to interest expense as interest payments are made on the Trust’s variable-rate debt.
As of September 30, 2012, the Trust had the following outstanding interest rate derivative that was
designated as a cash flow hedge of interest rate risk (dollars in thousands):
Interest Rate Derivative
Notional
Rate
Maturity
Interest Rate Swap . . . . . . . . . . . . . . . . . . . . . . . .
$1,954
5.25% April 1, 2022
The table below presents the fair value of the Trust’s derivative financial instrument as well as its
classification on the consolidated balance sheets as of the dates indicated (amounts in thousands):
Derivatives as of:
September 30, 2012
September 30, 2011
Balance Sheet
Location
Fair Value
Balance Sheet
Location
Fair Value
Other Assets
Accounts payable and
accrued liabilities
$ 10
$104
Accounts payable and
accrued liabilities
$—
$—
The following table presents the effect of the Trust’s derivative financial instrument on the
consolidated statements of comprehensive income (loss) for the year ended September 30, 2012 (dollars
in thousands):
Amount of loss recognized on derivative in Other Comprehensive
Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$123
Amount of loss reclassified from Accumulated Other Comprehensive
Income into Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 19
Year ended
September 30,
2012
F-34
BRT REALTY TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
September 30, 2012
NOTE 18—DERIVATIVE FINANCIAL INSTRUMENTS (Continued)
No gain or loss was recognized related to hedge ineffectiveness or to amounts excluded from
effectiveness testing on the Trust’s cash flow hedges during the years ended September 30, 2012, 2011
or 2010. During the twelve months ending September 30, 2013, the Trust estimates an additional
$36,000 will be reclassified from other comprehensive income as an increase to interest expense.
Credit-risk-related Contingent Features
The agreement between the Trust and its derivatives counterparty provides that if the Trust
defaults on any of its indebtedness, including default where repayment of the indebtedness has not
been accelerated by the lender, the Trust could be declared in default on its derivative obligation.
As of September 30, 2012, the fair value of the derivative in a net liability position, which includes
accrued interest, but excludes any adjustment for nonperformance risk related to this agreement, was
$110,000. As of September 30, 2012, the Trust has not posted any collateral related to this agreement.
If the Trust had been in breach of this agreement at September 30, 2012, it could have been required
to settle it obligations thereunder at its termination value of $110,000.
NOTE 19—QUARTERLY FINANCIAL DATA (Unaudited)
1st Quarter
Oct. - Dec
2nd Quarter
Jan. - March
3rd Quarter
April - June
4th Quarter
July - Sept.
Total
For Year
2012
Revenues . . . . . . . . . . . . . . . . . . . . . . . . .
$3,154
$ 3,687
$ 5,555
$7,183
$19,579
(Loss) gain on sale of available- for-sale
securities . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of loan . . . . . . . . . . . . . . . . .
Income (loss) from continuing operations . .
Discontinued operations . . . . . . . . . . . . .
Net income (loss) . . . . . . . . . . . . . . . . . . .
Plus: net loss attributable to non-controlling
. . . . . . . . . . . . . . . . . . . . . . . .
interests
Net income (loss) attributable to common
(18)
3,192
2,971
490
3,461
342
—
(2,097)
—
(2,097)
96
—
(1,093)
302
(791)
413
1,069
649
185
—
977
—
977
749
605
3,192
758
792
1,550
2,880
shareholders . . . . . . . . . . . . . . . . . . . . .
3,874
(1,028)
(142)
1,726
4,430
Income (loss) per beneficial share
Continuing operations . . . . . . . . . . . . .
Discontinued operations . . . . . . . . . . .
Basic earnings per share . . . . . . . . . . .
$
$
.24
.04
.28
$
$
(.07)
—
(.07)
$ (.03)
.02
$ (.01)
$ .12
—
$ .12
$
$
.26
.06
.32
F-35
BRT REALTY TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
September 30, 2012
NOTE 19—QUARTERLY FINANCIAL DATA (Unaudited) (Continued)
1st Quarter
Oct. - Dec
2nd Quarter
Jan. - March
3rd Quarter
April - June
4th Quarter
July - Sept.
Total
For Year
2011
Revenues . . . . . . . . . . . . . . . . . . . . . . . . .
$2,452
$ 5,697
$5,344
$4,388
$17,881
Gain on sale of available-for-sale securities .
Loss on extinguishment of debt . . . . . . . . .
.
(Loss) income from continuing operations
Discontinued operations . . . . . . . . . . . . .
Net (loss) income . . . . . . . . . . . . . . . . . . .
Plus: net loss attributable to non-
421
—
(681)
—
(681)
593
(2,138)
625
697
1,322
controlling interests . . . . . . . . . . . . . . . .
173
525
Net (loss) income attributable to common
176
—
2,072
645
2,717
455
129
—
1,562
4
1,566
1,319
(2,138)
3,578
1,346
4,924
297
1,450
shareholders . . . . . . . . . . . . . . . . . . . . .
(508)
1,847
3,172
1,863
6,374
(Loss) income per beneficial share
Continuing operations . . . . . . . . . . . . .
Discontinued operations . . . . . . . . . . .
$ (.04)
—
Basic earnings (loss) per share . . . . . . .
$ (.04)
$
$
.08
.05
.13
$ .18
.05
$ .23
$ .13
—
$ .13
$
$
.35
.10
.45
NOTE 20—SUBSEQUENT EVENTS
Subsequent events have been evaluated and any significant events, relative to our consolidated
financial statements as of September 30, 2012 that warrant additional disclosure have been included in
the notes to the consolidated financial statements.
F-36
SCHEDULE III—REAL ESTATE PROPERTIES AND ACCUMULATED DEPRECIATION
BRT REALTY TRUST AND SUBSIDIARIES
SEPTEMBER 30, 2012
(Dollars in thousands)
Description
Encumbrances
Land
Buildings and
Improvements Land Improvements
Carrying
Costs
Land
Buildings and
Improvements
Total
Initial Cost to
Company
Costs Capitalized Subsequent to Gross Amount At Which Carried
Acquisition
at September 30, 2012
Accumulated
Amortization Construction Acquired
Date of
Date
Depreciation
Life For
Latest Income
Statement
F
-
3
7
Commercial
Yonkers, NY.
.
South Daytona, FL. .
.
Newark, NJ .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Multi-Family Residential
.
Marietta, GA .
.
.
.
.
Lawrenceville, GA .
Palm Beach Gardens, FL .
.
Melbourne, FL .
.
Collierville, TN .
.
.
Misc.(1)
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Total
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
$
1,954
—
77,621
—
$10,437
17,088
$
4,000
—
19,033
—
—
$4,468
$
53
—
19,177
—
—
— $ 7,972
21,556
$3,962
$
4,053
—
42,172
$
4,053
7,972
63,728
$1,304
—
1,920
(c)
N/A
(c)
39 years
Aug-2000
Feb-2008 N/A
June-2008 39 years
6,462
4,687
45,200
7,680
25,680
—
486
1,450
16,260
1,150
6,420
—
7,614
4,800
43,140
8,100
25,680
—
—
—
—
—
—
1,065
844
741
1,351
—
—
—
486
1,450
—
— 16,260
1,150
—
6,420
—
—
—
8,679
5,644
43,881
9,451
25,680
250
9,165
7,094
60,141
10,601
32,100
250
251
114
827
155
216
—
$169,284
$53,291
$112,367
$4,468
$23,231
$3,962
$55,294
$139,810
$195,104
$4,787
1972
1981
1970
1987
2000
N/A
—
30 years
Jan-2012
30 years
Feb-2012
30 years
Mar-2012
Mar-2012
30 years
June-2012 30 years
(a)
(b)
(1)
Represents loans which are reported as real estate because they do not qualify for sale treatment under current accounting guidance.
BRT REALTY TRUST AND SUBSIDIARIES
SCHEDULE III—REAL ESTATE PROPERTIES
AND ACCUMULATED DEPRECIATION (Continued)
SEPTEMBER 30, 2012
(Dollars in thousands)
Notes to the schedule:
(a) Total real estate properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Accumulated depreciation and amortization . . . . . . . . . . . .
$195,104
4,787
Net real estate properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$190,317
(b) Amortization of the Trust’s leasehold interests is over the shorter of
estimated useful life or the term of the respective land lease.
(c)
Information not readily obtainable.
A reconciliation of real estate properties is as follows:
Year Ended September 30,
2012
2011
2010
Balance at beginning of year . . . . . . . . . . . . . . . . . . .
$ 59,277
$55,843
$69,748
Additions:
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital improvements . . . . . . . . . . . . . . . . . . . . . . .
Capitalized development expenses and carrying costs .
Deductions:
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation/amortization/paydowns . . . . . . . . . . . . .
Impairment charges . . . . . . . . . . . . . . . . . . . . . . . . .
116,759
3,716
12,622
133,097
37
2,020
—
2,057
2,315
141
4,371
6,827
2,561
832
—
3,393
—
1,741
2,379
4,120
13,775
880
3,370
18,025
Balance at end of year . . . . . . . . . . . . . . . . . . . . . . .
$190,317
$59,277
$55,843
The aggregate cost of investments in real estate assets for Federal income tax purposes is
approximately $2,625 higher than book value.
F-38
BRT REALTY TRUST AND SUBSIDIARIES
SCHEDULE IV—MORTGAGE LOANS ON REAL ESTATE
SEPTEMBER 30, 2012
(Dollars in thousands)
F
-
3
9
Description
# of
Loans
Interest
Rate
Interest
Rate
Floor
Final
Maturity
Date
Periodic Payment Terms
Prior Face Amount
Liens
of Mortgage Mortgage(a)
Carrying
Value Of
First Mortgage Loans
Multi-family, Atlanta, GA . . .
Multi-family, New York, NY .
.
Multi-family, Southfield, MI
Multi-family, Jacksonville, FL .
Multi-family, Brooklyn, NY . .
Multi-family, New York, NY .
Multi-family, New York, NY .
Mezzanine Loan
Retail, New York, NY . . . . .
Total
. . . . . . . . . . . . . . . . .
1
1
1
1
1
1
1
1
8
Prime + 6.75% 10.00% Mar.2013 Interest monthly, principal at maturity
Prime + 8.75% 12.00% Jan. 2013 Interest monthly, principal at maturity
Prime + 8.75% 12.00% Aug. 2013 Interest monthly, principal at maturity
Prime + 8.75% 12.00% July 2013 Interest monthly, principal at maturity
Prime + 4.25% 12.50% Dec. 2012 Interest monthly, principal at maturity
Prime + 8.75% 12.00% July 2013 Interest monthly, principal at maturity
Prime + 8.75% 12.00% Dec. 2012 Interest monthly, principal at maturity
— $13,753
7,811
6,295
2,450
2,341
2,008
438
—
—
—
—
$13,556
7,775
6,145
2,413
2,329
1,935
433
12%
Nov. 2012 Interest monthly, principal at maturity $13,607
2,000
1,998
$13,607
$37,096
$36,584
Principal
Amount of
Loans
subject to
delinquent
principal or
interest
—
—
—
—
—
—
—
—
$—
BRT REALTY TRUST AND SUBSIDIARIES
SCHEDULE IV—MORTGAGE LOANS ON REAL ESTATE
(INCLUDING REAL ESTATE LOAN HELD FOR SALE) (Continued)
SEPTEMBER 30, 2012
(Dollars in thousands)
Notes to the schedule:
(a) The following summary reconciles mortgage loans at their carrying values:
Balance at beginning of year . . . . . . . . . . . . . . . . . .
$ 75,136
$ 54,336
$79,570
Year Ended September 30,
2012
2011
2010
Additions:
Advances under real estate loans . . . . . . . . . . . . . . .
Amortization of deferred fee income . . . . . . . . . . . .
Recovery of previously provided allowances . . . . . . .
Deductions:
Collections of principal . . . . . . . . . . . . . . . . . . . . . .
Sale of loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for loan loss . . . . . . . . . . . . . . . . . . . . . .
Collection of loan fees . . . . . . . . . . . . . . . . . . . . . .
Loan loss recoveries . . . . . . . . . . . . . . . . . . . . . . . .
101,800
2,249
156
131,255
1,777
3,595
104,205
136,627
124,758
15,657
—
2,186
156
66,072
46,251
—
2,465
1,039
142,757
115,827
17,384
219
365
17,968
22,475
16,916
3,165
419
227
43,202
Balance at end of year . . . . . . . . . . . . . . . . . . . . . .
$ 36,584
$ 75,136
$54,336
• Carrying value of mortgage loans is net of allowances for loan losses in the amount of $3,165 in
2010.
• Carrying value of mortgage loans is net of deferred fee income in the amount of $512, $618 and
$245 in 2012, 2011 and 2010, respectively.
• The aggregate cost of investments in mortgage loans is the same for financial reporting purposes
and Federal income tax purposes.
F-40
During the acquisition stage of a multi-family property investment, we incur necessary acquisition expenses which vary in
amount from acquisition to acquisition. In accordance with generally accepted accounting principles, acquisition expenses
must be expensed when incurred and, therefore, in the year a property is acquired, these “one-time expenses” adversely affect
our net income. In addition, depreciation and amortization expenses applicable to property ownership are non-cash expenses
for your confidence and support.
A very happy and a healthy New Year to all.
which affect our net income, but not our cash return. Because a significant portion of our revenues and expenses are now
Sincerely yours,
TO OUR SHAREHOLDERS:
In last year’s annual letter to shareholders (included in our 2011 Annual Report), we noted that the company had significant
available cash resources. We also noted that we had evaluated the profitable long-term use of these cash resources and
decided to expand our business model by participating in the acquisition of multi-family real properties through equity investments
in joint ventures with real estate professionals experienced in the field. Our concept was to provide the equity required to bridge
the gap between the mortgage debt available and our co-venturer’s available equity. During the 2012 fiscal year, we explored
numerous multi-family property opportunities and commencing with the second quarter we, together with joint venture partners,
acquired five multi-family garden apartment properties, containing 1,451 units, for a total consideration of approximately $125.5
million, with $89.8 million of the required consideration provided by mortgage loans and an equity investment of approximately
$35.7 million, with our company providing $28.6 million of the equity. In our typical joint venture transaction, we provided 80%
of the equity need and our co-venturer provided 20%.
Since the end of the fiscal year, we have acquired with joint venture partners three additional multi-family properties containing
884 units for an additional equity investment of $14 million. We continue to be pro-active in seeking additional investments in
multi-family properties. Our activity in the multi-family property area represents longer term investments, which we expect to
provide us with satisfactory cash returns and longer term incremental values.
derived from our ownership of multi-family properties, we now report funds from operations in our public earnings releases, in
addition to reporting net income. Funds from operations is a widely recognized measure of the performance of an equity REIT
and is frequently used by analysts, investors and other parties in evaluating equity REITs. In fiscal 2012, we reported net income
and net income per share of $4.43 million and $.32, respectively, and funds from operations of $5.94 million and $.42 per share,
respectively. The manner in which funds from operations is calculated, a reconciliation of funds from operations to net income
and a brief discussion on the limitations on the use of funds from operations are set forth at pages 28-29 of our Form 10-K for
the year ended September 30, 2012, which constitutes a part of this Annual Report.
Rental revenues from our multi-family property activities totaled $5.46 million in fiscal 2012 and real estate operating expenses
and interest on mortgages related to these investments totaled $4.40 million. On a property level basis, the multi-family properties
acquired by us generated $1.06 million in cash. Since the five properties acquired in fiscal 2012 were only owned for a portion
of the year (ranging from three months to nine months), property level operations relating to these properties should produce a
greater cash return in fiscal 2013. In addition, the three properties acquired by us in October and November 2012 will positively
impact funds from operations in fiscal 2013. We anticipate our multi-family business to be additive to funds from operations in
2013 and in future years.
We continue to actively pursue our traditional short-term lending business in the current competitive real estate lending environment.
The lending segment of our business was profitable in fiscal 2012. At year-end (and as we write this letter), all of our outstanding loans
are performing and in fiscal 2012 we were not required to take any provisions for loan losses and did not incur any foreclosure
related fees or expenses. As the economy improves in 2013, we look forward to an active year on the lending side of our business.
We also want to bring you up-to-date on the activities of our Newark Joint Venture. We own a 50.1% equity interest in the Newark
Joint Venture. The Newark Joint Venture owns two principal development sites in downtown Newark, New Jersey (Teachers’
Village and Market Street). The Newark Joint Venture has been concentrating on developing the Teachers’ Village Project (a mix
of residential, educational and retail facilities). Construction activities are underway on five buildings at the Teachers’ Village
With respect to the remaining three buildings, site work has commenced and piles are being driven on one building and demolition
activities are underway with respect to the remaining two sites. It is estimated that the two buildings currently being constructed
will be ready for occupancy in the summer of 2013. The balance of the buildings should be ready for occupancy in the spring
of 2014. In 2012, the Newark Joint Venture consummated financing of $68.5 million which, together with $25.8 million of New
Markets Tax Credit net proceeds, is being used to construct the five buildings. These buildings
will provide space for three charter schools, a day care center, approximately 54,000 sq. ft. of retail space and approximately
123 residential units. The Teachers’ Village project also contemplates the construction of three additional buildings contain-
ing an aggregate of 82 residential units and 9,700 square feet of retail space, to be financed with an additional $30 million
from private and government sources. This financing is not in place and pre-construction activities will not commence on
this phase of the project until financing is obtained.
Much has been accomplished since the Newark Joint Venture was organized in 2009. Completion and occupancy of the first
two buildings at the Teachers’ Village Project will represent a significant milestone.
During fiscal 2012 we achieved favorable operating results in our lending activities, made significant achievements in the
multi-family section and experienced significant progress in the development of the properties owned by the Newark Joint
Venture. We are hopeful that each of these activities will continue to show progress in 2013. We are confident that we have
taken steps for the long-term benefit of our company and our shareholders.
Our entire team put in substantial efforts on behalf of our company in 2012. We are grateful for their diligence and hard work.
We thank our Board of Trustees for their time and effort and their advice and guidance and we thank you, our shareholders,
Fredric H. Gould Jeffrey A. Gould
Chairman of the Board President and Chief Executive Officer
January 15, 2013
Certain statements contained in this letter are “forward-looking statements” within the meaning of the private securities
litigation reform Act of 1995. Such forward-looking statements are subject to risk, uncertainties and other factors
(including the risk factors set forth on page 15 through 23 of our Annual Report on Form 10-K) that could cause actual
results to differ materially from future results expressed or implied by such forward-looking statements.
The Trust’s most recent Annual Report on Form 10-K for the fiscal year ended September 30, 2012 is included herein.
For additional information about the Trust, we refer you to the Annual Report on Form 10-K for the fiscal year ended
September 30, 2012 and other documents filed by the Trust with the Securities and Exchange Commission. All filings
we have made with the Securities and Exchange Commission can be found on our website www.brtrealty.com.
standards was filed with the New York Stock Exchange without qualification and in a timely fashion. In addition, the certifications
of our chief executive officer and chief financial officer required to be filed with the Securities and Exchange Commission
under Section 302 of the Sarbanes-Oxley Act with respect to the quality of our public disclosure have been filed as an exhibit
to our annual report on Form 10K.
project. Steel framing has been completed on two buildings, and installing the exterior facades of these two buildings is underway.
In 2012, our chief executive officer’s certification regarding the New York Stock Exchange’s corporate governance listing
CORPORATE DIRECTORY
Fredric H. Gould
Chairman of the Board of Trustees;
Chairman of the Board of Georgetown
Partners, Inc., the Managing General
Partner of Gould Investors L.P., a
real estate partnership; President of
REIT Management Corp., Advisor to
the Trust; Chairman of the Board of
Directors of One Liberty Properties Inc.;
Director of East Group Properties, Inc.
Jeffrey A. Gould
Trustee; President and Chief Executive
Officer; Senior Vice President of
Georgetown Partners, Inc.; Senior
Vice President and Director of One
Liberty Properties, Inc.
Matthew J. Gould
Trustee; Senior Vice President;
President of Georgetown Partners, Inc.;
Senior Vice President of the Advisor;
Senior Vice President and Director of
One Liberty Properties, Inc.
Gary J. Hurand
Trustee; President of Dawn Donut
Systems Inc.; President of Management
Diversified Inc.; Director of Citizens
Republic Bancorp.
Louis Grassi
Trustee; Managing Partner, Grassi & Co.,
CPA’s; Director, Flushing Financial Corp.
Jeffrey Rubin
Trustee; Chief Executive Officer and
President of JR Group.
Alan Ginsburg
Trustee; Chairman of Concord
Management Company and AHG
Group of Companies
Elie Weiss
Trustee; Private Investor
Israel Rosenzweig
Vice Chairman of the Board of
Trustees; Senior Vice President;
Senior Vice President of Georgetown
Partners, Inc.; Senior Vice President
of One Liberty Properties, Inc.
David W. Kalish
Senior Vice President-Finance; Senior
Vice President and Chief Financial
Officer of Georgetown Partners, Inc.
Senior Vice President and Chief Financial
Officer of One Liberty Properties, Inc.
Simeon Brinberg
Senior Vice President and Secretary;
Senior Vice President of Georgetown
Partners, Inc; Senior Vice President
of One Liberty Properties, Inc.
Mark H. Lundy
Senior Vice President; Senior Vice
President and Secretary of One
Liberty Properties, Inc; Senior Vice
President of Georgetown Partners, Inc.
George E. Zweier
Vice President and Chief Financial Officer
Mitchell K. Gould
Executive Vice President
Kenneth F. Bernstein
Trustee; President and Chief Executive
Officer of Acadia Realty Trust
Lonnie Halpern
Vice President
Jonathan H. Simon
Trustee; President and Chief Executive
Officer of Simon Development Group
Alysa Block
Treasurer; Treasurer of One Liberty
Properties, Inc.
Isaac Kalish
Assistant Treasurer; Assistant Treasurer
of One Liberty Properties, Inc.
Registrar, Transfer Agent,
Distribution Disbursing Agent
American Stock Transfer and
Trust Company
59 Maiden Lane
New York, New York 10038
Auditors
2011-2012
BDO USA, LLP
401 Broadhollow Road
Melville, NY 11747
2010
Ernst & Young LLP
5 Times Square
New York, New York 10036
Form 10-K Available
A copy of the annual report (Form 10-K)
filed with the Securities and Exchange
Commission may be obtained without
charge by writing to the Secretary,
BRT Realty Trust, 60 Cutter Mill Road,
Suite 303, Great Neck,New York 11021.
Common Stock
The company’s common stock is listed
on the New York Stock Exchange under
the ticker symbol BRT.
Web Site Address
www.BRTRealty.com
BRT REALTY TRUST
60 Cutter Mill Road, Suite 303
Great Neck, NY 11021
(516) 466-3100
www.BRTREALTY.com
BRT Realty Trust
2 0 1 2 A n n u a l R e p o r t
BRT REALTY TRUST
BRT Realty Trust is a business trust organized in Massachusetts. BRT originates and holds for investment senior mortgage loans
secured by commercial and multi-family real estate property in the United States. Additionally, BRT participates as an equity investor
in the purchase of multi-family properties. The loans BRT originate generally have relatively high yields and are short-term or bridge
loans with a duration ranging from six months to one year. BRT’s policy is to lend at a floating rate of interest based on a spread
over the prime rate, with a stated minimum rate, though BRT originates fixed rate loans as circumstances dictate. BRT receives an
origination fee for the loans it originates. The multi-family properties are generally acquired with venture partners where the Trust
contributes 80% to 90% of the equity in each transaction. BRT conducts its operations to qualify as a real estate investment trust, or
REIT, for Federal income tax purposes.
BRT’s shares of beneficial interest trade on the New York Stock Exchange under the symbol “BRT.” As of the close of fiscal 2012
there were 14,053,362 shares outstanding and 1,044 holders of record.
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
FINANCIAL HIGHLIGHTS
Total revenues 19,579 17,881
Interest on borrowed funds 4,729 2,112
Year ended September 30,
Interest and fees on loans
Rental and other revenue from real estate properties
Recovery of previously provided allowance
Other income
Property acquisition costs
General and administrative expenses
Operating expenses relating to real estate properties
Depreciation and amortization
Other expenses
Total expenses
Total revenues less total expenses
Equity in earnings of unconsolidated ventures
Gain on sale of available-for-sale securities
Gain on sale of loan
Loss on early extinguishment of debt
Income from discontinued operations
Net income
Plus: net loss attributable to non-controlling interests
Net income (loss) attributable to common shareholders
Income from continuing operations
Income from discontinued operations
Basic and diluted earnings per share of beneficial interest
Weighted average shares - basic and diluted
September 30,
Total assets
Earning real estate loans
Real estate loans held for sale
Real estate properties
Cash and cash equivalents
Restricted cash - construction holdbacks
Mortgages payable
Junior subordinated notes
Total BRT Realty Trust shareholders’ equity
2,004
1,104
23,447
2012
$ 9,530
8,675
156
1,218
2,407
7,161
6,042
(3,868)
829
605
3,192
-
792
1,550
2,880
$ 4,430
$ 0.26
0.06
$ 0.32
37,096
-
190,317
78,245
55,252
169,284
37,400
133,449
2011
$ 10,328
3,456
3,595
502
-
6,149
3,340
738
1,495
13,834
4,047
350
1,319
-
(2,138)
1,346
4,924
1,450
$ 6,374
$ 0.35
0.10
$ 0.45
67,266
8,446
59,277
44,025
-
14,417
37,400
129,063
14,035,972
14,041,569
2012
2011
$ 385,956
$ 191,012