BRT REALTY TRUST
BRT REALTY TRUST
60 Cutter Mill Road, Suite 303
60 Cutter Mill Road, Suite 303
Great Neck, NY 11021
Great Neck, NY 11021
(516) 466-3100
(516) 466-3100
www.BRTREALTY.com
www.BRTREALTY.com
BRT REALTY TRUST
BRT REALTY TRUST
BRT Realty Trust is a business trust organized in Massachusetts. BRT is engaged in the ownership, operation and
BRT Realty Trust is a business trust organized in Massachusetts. BRT is engaged in the ownership, operation and
development of multi-family properties and the ownership, operation and development of commercial, mixed-use
development of multi-family properties and the ownership, operation and development of commercial, mixed-use
and other real estate. The multi-family properties are generally acquired with venture partners where the Trust
and other real estate. The multi-family properties are generally acquired with venture partners where the Trust
contributes 50% to 90% of the equity. BRT conducts its operations to qualify as a real estate investment trust, or REIT,
contributes 50% to 90% of the equity. BRT conducts its operations to qualify as a real estate investment trust, or REIT,
for Federal income tax purposes.
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
BRT’s shares of beneficial interest trade on the New York Stock Exchange under the symbol “BRT.” As of the close of
fiscal 2014 there were 14,303,187 shares outstanding and 967 holders of record.
fiscal 2014 there were 14,303,187 shares outstanding and 967 holders of record.
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
FINANCIAL HIGHLIGHTS
FINANCIAL HIGHLIGHTS
Year ended September 30,
Year ended September 30,
Rental and other revenue from real estate properties
Rental and other revenue from real estate properties
Operating expenses relating to real estate properties
Operating expenses relating to real estate properties
Other income
Other income
Total revenues
Total revenues
Interest expense
Interest expense
Advisor’s fee, related party
Advisor’s fee, related party
Property acquisition costs
Property acquisition costs
General and administrative expenses
General and administrative expenses
Depreciation and amortization
Depreciation and amortization
Total expenses
Total expenses
Total revenues less total expenses
Total revenues less total expenses
Equity in earnings of unconsolidated ventures
Equity in earnings of unconsolidated ventures
Gain on sale of available-for-sale securities
Gain on sale of available-for-sale securities
Gain on sale of partnership interest
Gain on sale of partnership interest
Discontinued operations
Discontinued operations
Net (loss) income
Net (loss) income
Plus: net loss attributable to non-controlling interests
Plus: net loss attributable to non-controlling interests
Net (loss) income attributable to common shareholders
Net (loss) income attributable to common shareholders
Loss from continuing operations
Loss from continuing operations
Income from discontinued operations
Income from discontinued operations
Basic and diluted earnings (loss) per share
Basic and diluted earnings (loss) per share
Weighted average shares - basic and diluted
Weighted average shares - basic and diluted
September 30,
September 30,
Total assets
Total assets
Real estate properties
Real estate properties
Cash and cash equivalents
Cash and cash equivalents
Restricted cash - Newark and multi-family
Restricted cash - Newark and multi-family
Mortgages payable
Mortgages payable
Junior subordinated notes
Junior subordinated notes
2014
2014
2013
2013
$
65,254 $ 30,592
65,254 $ 30,592
$
1,141
1,141
1,213
1,213
66,395
66,395
31,805
31,805
83,980
83,980
44,951
44,951
37,067
37,067
20,670
20,670
1,801
1,801
2,542
2,542
6,324
6,324
15,576
15,576
(17,585)
(17,585)
19
19
-
-
-
-
1,400
1,400
16,409
16,409
11,978
11,978
971
971
2,637
2,637
5,862
5,862
7,094
7,094
(13,146)
(13,146)
198
198
530
530
5,481
5,481
9,026
9,026
2,089
2,089
(16,166)
(16,166)
6,712
6,712
2,924
2,924
$ (9,454) $
$ (9,454) $
5,013
5,013
$
(0.76) $
(0.76) $
(0.28)
$
(0.28)
0.10
0.10
0.63
0.63
$
(0.66) $ (0.35)
(0.66) $ (0.35)
$
14,265,589
14,265,589
14,137,091
14,137,091
2014
2014
2013
2013
$
734,620 $
734,620 $
549,491
$
549,491
635,612
635,612
402,896
402,896
23,181
23,181
32,390
32,390
56,905
56,905
32,639
32,639
482,406
482,406
313,216
313,216
37,400
37,400
37,400
37,400
Total BRT Realty Trust shareholders’ equity
Total BRT Realty Trust shareholders’ equity
130,140
130,140
138,791
138,791
BRT REALTY TRUST
BRT REALTY TRUST
BRT Realty Trust is a business trust organized in Massachusetts. BRT is engaged in the ownership, operation and
BRT Realty Trust is a business trust organized in Massachusetts. BRT is engaged in the ownership, operation and
development of multi-family properties and the ownership, operation and development of commercial, mixed-use
development of multi-family properties and the ownership, operation and development of commercial, mixed-use
and other real estate. The multi-family properties are generally acquired with venture partners where the Trust
and other real estate. The multi-family properties are generally acquired with venture partners where the Trust
contributes 50% to 90% of the equity. BRT conducts its operations to qualify as a real estate investment trust, or REIT,
contributes 50% to 90% of the equity. BRT conducts its operations to qualify as a real estate investment trust, or REIT,
for Federal income tax purposes.
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
BRT’s shares of beneficial interest trade on the New York Stock Exchange under the symbol “BRT.” As of the close of
fiscal 2014 there were 14,303,187 shares outstanding and 967 holders of record.
fiscal 2014 there were 14,303,187 shares outstanding and 967 holders of record.
FINANCIAL HIGHLIGHTS
FINANCIAL HIGHLIGHTS
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
Year ended September 30,
Year ended September 30,
2014
2014
2013
2013
Rental and other revenue from real estate properties
Rental and other revenue from real estate properties
$
65,254 $ 30,592
65,254 $ 30,592
BRT REALTY TRUST
BRT REALTY TRUST
60 Cutter Mill Road, Suite 303
60 Cutter Mill Road, Suite 303
Great Neck, NY 11021
Great Neck, NY 11021
(516) 466-3100
(516) 466-3100
www.BRTREALTY.com
www.BRTREALTY.com
Other income
Other income
Total revenues
Total revenues
Operating expenses relating to real estate properties
Operating expenses relating to real estate properties
Interest expense
Interest expense
Advisor’s fee, related party
Advisor’s fee, related party
Property acquisition costs
Property acquisition costs
General and administrative expenses
General and administrative expenses
Depreciation and amortization
Depreciation and amortization
Total expenses
Total expenses
Total revenues less total expenses
Total revenues less total expenses
Equity in earnings of unconsolidated ventures
Equity in earnings of unconsolidated ventures
Gain on sale of available-for-sale securities
Gain on sale of available-for-sale securities
Gain on sale of partnership interest
Gain on sale of partnership interest
Discontinued operations
Discontinued operations
Net (loss) income
Net (loss) income
Plus: net loss attributable to non-controlling interests
Plus: net loss attributable to non-controlling interests
Net (loss) income attributable to common shareholders
Net (loss) income attributable to common shareholders
Loss from continuing operations
Loss from continuing operations
Income from discontinued operations
Income from discontinued operations
Basic and diluted earnings (loss) per share
Basic and diluted earnings (loss) per share
Weighted average shares - basic and diluted
Weighted average shares - basic and diluted
September 30,
September 30,
Total assets
Total assets
Real estate properties
Real estate properties
Cash and cash equivalents
Cash and cash equivalents
Restricted cash - Newark and multi-family
Restricted cash - Newark and multi-family
Mortgages payable
Mortgages payable
Junior subordinated notes
Junior subordinated notes
$
1,141
1,141
1,213
1,213
66,395
66,395
31,805
31,805
37,067
37,067
20,670
20,670
1,801
1,801
2,542
2,542
6,324
6,324
15,576
15,576
16,409
16,409
11,978
11,978
971
971
2,637
2,637
5,862
5,862
7,094
7,094
83,980
83,980
44,951
44,951
(17,585)
(17,585)
19
19
-
-
-
-
1,400
1,400
(16,166)
(16,166)
(13,146)
(13,146)
198
198
530
530
5,481
5,481
9,026
9,026
2,089
2,089
6,712
6,712
2,924
2,924
$ (9,454) $
$ (9,454) $
5,013
5,013
(0.76) $
(0.76) $
(0.28)
(0.28)
$
0.10
$
$
0.10
0.63
0.63
(0.66) $ (0.35)
(0.66) $ (0.35)
$
14,265,589
14,265,589
14,137,091
14,137,091
2014
2014
2013
2013
$
734,620 $
734,620 $
549,491
549,491
635,612
402,896
402,896
$
635,612
23,181
23,181
32,390
32,390
56,905
56,905
32,639
32,639
482,406
482,406
313,216
313,216
37,400
37,400
37,400
37,400
Total BRT Realty Trust shareholders’ equity
Total BRT Realty Trust shareholders’ equity
130,140
130,140
138,791
138,791
TO OUR SHAREHOLDERS:
In our fiscal year ended September 30, 2014, we continued to execute on our multi-family property acquisition
strategy and acquired, either individually or with joint venture partners, 13 multi-family properties containing 3,824 units, for
a total purchase price of approximately $205 million. As of the date of this letter, we own 28 multi-family properties with an
aggregate of 7,885 units. Our occupancy rate is approximately 94%. We have acquired stabilized properties and value added
properties (i.e., properties at which we undertake capital improvements in order to generate higher rental rates and ultimately
add value to our portfolio). We have a strong multi-family underwriting process as demonstrated by the $900,000 increase in
rental revenue in 2014 from 2013 at properties acquired in 2012. Our multi-family property portfolio is performing well and
represents long term investments, which we expect will provide us with a stable cash flow and long term incremental values.
The Newark Joint Venture also made significant progress in its Teachers’ Village development activities. To date, four buildings
have been completed and one is under construction and is to be completed by May 2015. More than 87% of the commercial
space at the four completed buildings is leased, including 16% of the commercial space leased to tenants who are not obligated
to take possession and pay rent until certain conditions are satisfied. Demand for the residential units is strong – approximately
84% of the residential units at the completed buildings are leased, and we anticipate that the balance of the units will be leased
by February 2015. Further, a third financing phase for the Teachers Village project was completed and $30.2 million in debt
financing and New Markets Tax Credits proceeds was obtained, to be used primarily to construct a 62 unit residential building
with grade level retail space. Income will be incrementally generated as the two buildings to be contructed are completed and
the available space is leased.
In early fiscal 2015, we exited the short term lending business. We believe that in light of the changing dynamics of this
business (i.e., significantly increased competition, higher loan to value expectations from borrowers, lower returns and increased
availability of traditional bank financing), the transformation of our company into a multi-family property owner is in our
shareholders’ long-term interests.
Our focus in 2015 is to continue to grow our multi-family property portfolio and continue our Newark development
activities. Growth in the multi-family portfolio will be driven by continuing to generate higher rental income through
improving properties leading to increased occupancy and higher rents per unit. Further, we anticipate that we will begin generating
revenue in 2015 from our Greenville, SC development project. The Newark Joint Venture will also continue to improve as
additional buildings are completed and leased and if we are able to develop our other sites.
There are challenges ahead. Growth in our multi-family portfolio will be constrained by the limited capital available to
us. The Newark Joint Venture must successfully lease the balance of the space constructed and being constructed at Teachers
Village, and create and implement a plan for the development of the Market Street property. We are hopeful that each of these
activities will continue to show progress in 2015 and are confident that the steps we have taken will benefit, over the long-term,
our company and shareholders.
Our entire team put in substantial efforts on behalf of our company in 2014. 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,
Israel Rosenzweig
Chairman of the Board
January 3, 2015
Jeffrey A. Gould
President and Chief Executive Officer
Trustee; President and Chief Executive
Fredric H. Gould
Trustee; Director of Georgetown
Partners, Inc.; President of REIT
Form 10-K Available
Management Corp.; Vice Chairman
A copy of the annual report (Form 10-K)
of the Board of Directors of One
filed with the Securities and Exchange
Liberty Properties Inc.; Director of
Commission may be obtained without
Registrar, Transfer Agent,
Distribution Disbursing Agent
American Stock Transfer and
Trust Company
6201 15th Avenue
Brooklyn, New York 11219
Auditors
BDO USA, LLP
401 Broadhollow Road
Melville, NY 11747
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
CORPORATE DIRECTORY
Israel Rosenzweig
Mitchell K. Gould
Chairman of the Board of Trustees;
Executive Vice President
Partners, Inc.; Senior Vice President
of REIT Management Corp., Advisor
Systems Inc.; President of
Management Diversified Inc.
Senior Vice President of Georgetown
Partners, Inc., the managing general
partner of Gould Investors L.P., a
real estate limited partnership;
Senior Vice President of One Liberty
Properties, Inc.
Jeffrey A. Gould
Officer; Senior Vice President of
Georgetown Partners, Inc.; Senior
Vice President and Director of One
Liberty Properties, Inc.
Matthew J. Gould
Trustee and Senior Vice President;
Chairman of the Board and Chief
Executive Officer of Georgetown
to the Trust; Chairman of the
Board of Directors 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 Counsel; Senior Vice
President of Georgetown Partners,
Inc.; Senior Counsel of One Liberty
Properties, Inc.
Mark H. Lundy
Senior Vice President; President
and Chief Operating Officer of
Georgetown Partners, Inc.; Senior
Vice President and Secretary of One
Liberty Properties, Inc.
George E. Zweier
Vice President and Chief Financial Officer
Isaac Kalish
Vice President and Treasurer; Vice
President and Assistant Treasurer of
Georgetown Partners, Inc.; Vice President
and Assistant Treasurer of One Liberty
Properties, Inc.
East Group Properties, Inc.
Gary J. Hurand
Trustee; President of Dawn Donut
Louis Grassi
Trustee; Managing partner,
Grassi & Co., CPA’s; Director,
Flushing Financial Corp.
Jeffrey Rubin
Trustee; Chief Executive Officer
and President of The JR Group;
Chief Executive Officer of Premier
Payments LLC
Kenneth F. Bernstein
Trustee; President, Chief Executive
Officer and Trustee of Acadia
Realty Trust; Director of Golub
Capital BDC, Inc.
Jonathan H. Simon
Trustee; Chief Executive Officer of
Simon Baron Development Group
Alan Ginsburg
Trustee; Chief Executive Officer,
CED Companies
Elie Weiss
Trustee; Private Investor
TO OUR SHAREHOLDERS:
CORPORATE DIRECTORY
In our fiscal year ended September 30, 2014, we continued to execute on our multi-family property acquisition
strategy and acquired, either individually or with joint venture partners, 13 multi-family properties containing 3,824 units, for
a total purchase price of approximately $205 million. As of the date of this letter, we own 28 multi-family properties with an
aggregate of 7,885 units. Our occupancy rate is approximately 94%. We have acquired stabilized properties and value added
properties (i.e., properties at which we undertake capital improvements in order to generate higher rental rates and ultimately
add value to our portfolio). We have a strong multi-family underwriting process as demonstrated by the $900,000 increase in
rental revenue in 2014 from 2013 at properties acquired in 2012. Our multi-family property portfolio is performing well and
represents long term investments, which we expect will provide us with a stable cash flow and long term incremental values.
The Newark Joint Venture also made significant progress in its Teachers’ Village development activities. To date, four buildings
have been completed and one is under construction and is to be completed by May 2015. More than 87% of the commercial
space at the four completed buildings is leased, including 16% of the commercial space leased to tenants who are not obligated
to take possession and pay rent until certain conditions are satisfied. Demand for the residential units is strong – approximately
84% of the residential units at the completed buildings are leased, and we anticipate that the balance of the units will be leased
by February 2015. Further, a third financing phase for the Teachers Village project was completed and $30.2 million in debt
financing and New Markets Tax Credits proceeds was obtained, to be used primarily to construct a 62 unit residential building
with grade level retail space. Income will be incrementally generated as the two buildings to be contructed are completed and
the available space is leased.
In early fiscal 2015, we exited the short term lending business. We believe that in light of the changing dynamics of this
business (i.e., significantly increased competition, higher loan to value expectations from borrowers, lower returns and increased
availability of traditional bank financing), the transformation of our company into a multi-family property owner is in our
shareholders’ long-term interests.
Our focus in 2015 is to continue to grow our multi-family property portfolio and continue our Newark development
activities. Growth in the multi-family portfolio will be driven by continuing to generate higher rental income through
improving properties leading to increased occupancy and higher rents per unit. Further, we anticipate that we will begin generating
revenue in 2015 from our Greenville, SC development project. The Newark Joint Venture will also continue to improve as
additional buildings are completed and leased and if we are able to develop our other sites.
There are challenges ahead. Growth in our multi-family portfolio will be constrained by the limited capital available to
us. The Newark Joint Venture must successfully lease the balance of the space constructed and being constructed at Teachers
Village, and create and implement a plan for the development of the Market Street property. We are hopeful that each of these
activities will continue to show progress in 2015 and are confident that the steps we have taken will benefit, over the long-term,
our company and shareholders.
Our entire team put in substantial efforts on behalf of our company in 2014. 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,
Israel Rosenzweig
Chairman of the Board
January 3, 2015
Jeffrey A. Gould
President and Chief Executive Officer
Registrar, Transfer Agent,
Distribution Disbursing Agent
American Stock Transfer and
Trust Company
6201 15th Avenue
Brooklyn, New York 11219
Auditors
BDO USA, LLP
401 Broadhollow Road
Melville, NY 11747
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
Israel Rosenzweig
Chairman of the Board of Trustees;
Senior Vice President of Georgetown
Partners, Inc., the managing general
partner of Gould Investors L.P., a
real estate limited partnership;
Senior Vice President of One Liberty
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 and Senior Vice President;
Chairman of the Board and Chief
Executive Officer of Georgetown
Partners, Inc.; Senior Vice President
of REIT Management Corp., Advisor
to the Trust; Chairman of the
Board of Directors 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 Counsel; Senior Vice
President of Georgetown Partners,
Inc.; Senior Counsel of One Liberty
Properties, Inc.
Mark H. Lundy
Senior Vice President; President
and Chief Operating Officer of
Georgetown Partners, Inc.; Senior
Vice President and Secretary of One
Liberty Properties, Inc.
George E. Zweier
Vice President and Chief Financial Officer
Mitchell K. Gould
Executive Vice President
Isaac Kalish
Vice President and Treasurer; Vice
President and Assistant Treasurer of
Georgetown Partners, Inc.; Vice President
and Assistant Treasurer of One Liberty
Properties, Inc.
Fredric H. Gould
Trustee; Director of Georgetown
Partners, Inc.; President of REIT
Management Corp.; Vice Chairman
of the Board of Directors of One
Liberty Properties Inc.; Director of
East Group Properties, Inc.
Gary J. Hurand
Trustee; President of Dawn Donut
Systems Inc.; President of
Management Diversified Inc.
Louis Grassi
Trustee; Managing partner,
Grassi & Co., CPA’s; Director,
Flushing Financial Corp.
Jeffrey Rubin
Trustee; Chief Executive Officer
and President of The JR Group;
Chief Executive Officer of Premier
Payments LLC
Kenneth F. Bernstein
Trustee; President, Chief Executive
Officer and Trustee of Acadia
Realty Trust; Director of Golub
Capital BDC, Inc.
Jonathan H. Simon
Trustee; Chief Executive Officer of
Simon Baron Development Group
Alan Ginsburg
Trustee; Chief Executive Officer,
CED Companies
Elie Weiss
Trustee; Private Investor
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
FORM 10-K
(cid:1) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 2014
Or
(cid:2) 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 (cid:2) No (cid:1)
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the
Act. Yes (cid:2) No (cid:1)
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 (cid:1) No (cid:2)
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 (cid:1) No (cid:2)
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 (cid:2)
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 (cid:2)
Smaller reporting company (cid:2)
Accelerated filer (cid:1)
Non-accelerated filer (cid:2)
(Do not check if a
smaller reporting company)
Indicate by check mark whether registrant is a shell company (as defined in Exchange Act Rule 12b-2). Yes (cid:2) No (cid:1)
The aggregate market value of voting and non-voting common equity held by non-affiliates of the registrant was
approximately $60.6 million based on the last sale price of the common equity on March 31, 2014, which is the last business day
of the registrant’s most recently completed second quarter.
As of December 1, 2014, the registrant had 14,303,237 Shares of Beneficial Interest outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the proxy statement for the annual meeting of shareholders of BRT Realty Trust to be filed not later than
January 28, 2015 are incorporated by reference into Part III of this Form 10-K.
TABLE OF CONTENTS
Form 10-K
Item No.
Page(s)
PART I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.
1A.
1B.
2.
3.
4.
5.
6.
7.
7A.
8.
9.
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . .
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes In and Disagreements With Accountants on Accounting and Financial
9A.
9B.
Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . .
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Security Ownership of Certain Beneficial Owners and Management and Related
10.
11.
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.
3
16
23
24
24
24
24
25
29
39
39
39
39
40
40
40
40
41
41
41
47
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:
(cid:127) factors described in this Annual Report on Form 10-K, including those set forth under the
captions ‘‘Risk Factors’’ and ‘‘Business’’;
(cid:127) our acquisition strategy, which may not produce the cash flows or income expected;
(cid:127) competition could adversely affect our ability to acquire properties;
(cid:127) competition could limit our ability to lease apartments or retail space or increase or maintain
rental income;
(cid:127) losses from catastrophes may exceed all insurance coverage;
(cid:127) a limited number of multi-family property acquisition opportunities acceptable to us;
(cid:127) national and local economic and business conditions;
(cid:127) general and local real estate property conditions;
(cid:127) the condition of Fannie Mae or Freddie Mac, which could adversely impact us;
(cid:127) our failure to comply with laws, including those requiring access to our properties by disabled
persons, which could result in substantial costs;
(cid:127) insufficient cash flows, which could limit our ability to make required payments on our debt
obligations;
(cid:127) an inability to renew, repay, or refinance our outstanding debt;
(cid:127) limitation of credit by institutional lenders;
(cid:127) impairment in the value of real estate property we own;
(cid:127) failure of property managers to properly manage properties;
(cid:127) disagreements with, or misconduct by, joint venture partners;
(cid:127) changes in Federal government policies;
(cid:127) increases in real estate taxes at properties we acquire due to such acquisitions or otherwise;
1
(cid:127) changes in Federal, state and local governmental laws and regulations;
(cid:127) changes in interest rates; and
(cid:127) 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.
2
Item l. Business.
PART I
General
We are a real estate investment trust, also known as a REIT. During the past three years, we
engaged in three principal business activities: the ownership, operation and development of multi-family
properties; the ownership, operation and development of commercial, mixed use and other real estate
assets; and real estate lending. During this period, we commenced and expanded our multi-family
activities and de-emphasized our real estate lending activities due to changes in the real estate lending
business resulting from, among other things, increased competition in the real estate lending business.
As of November 1, 2014, we are no longer engaged in real estate lending and the financial information
(including our consolidated financial statements) included herein presents our real estate lending
activities as discontinued operations.
Our multi-family property activities commenced in 2012 and involves our ownership and operation,
primarily through joint ventures in which we typically have an 80% equity interest, of such properties.
We acquired five multi-family properties with 1,451 units in 2012, nine multi-family properties with
2,334 units in 2013 and 13 multi-family properties with 3,824 units in 2014. At September 30, 2014, we
own 27 multi-family properties located in ten states with an aggregate of 7,609 units and our equity
investment in, and the net book value of, these properties was approximately $110 million and
$512 million, respectively.
We own, operate and develop various other real estate assets, the most significant of which are
properties (including development properties) located in Newark, New Jersey. Since 2012, the joint
venture that owns the Newark assets has obtained, through three financing phases, an aggregate of
$93.1 million in debt financing and an aggregate of $31.4 million in New Markets Tax Credit proceeds
to fund the construction of six buildings with an aggregate of 153,300 square feet of commercial space
and 123 residential units. To date, four buildings have been completed, one building is under
construction and is expected to be completed by May 2015 and the sixth building, on which
construction has not yet begun, is expected to be completed by May 2016. At September 30, 2014, the
net book value of the real property included in these other real estate assets was $123.7 million,
including $113.0 million related to our Newark, New Jersey activities.
Our real estate lending activities decreased during the past three years (i.e., $5.5 million,
$70.3 million and $101.8 million of loan originations in 2014, 2013 and 2012, respectively). In October
2014, we sold the remaining loan in our portfolio to an affiliate for the face amount of such loan
(i.e., $2 million) and accordingly, as of November 1, 2014, we are no longer engaged in such activities.
These lending activities involved originating and holding for investment short-term senior mortgage
loans secured by commercial and multi-family real estate property. Revenue was generated from
interest income and to a lesser extent, loan fee income generated on the origination and extension of
loans. The loans originated generally had relatively high yields and were short-term or bridge loans with
a duration ranging from six months to one year.
Information regarding our multi-family property and other real estate assets segments is included
in Note 13 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.
3
Unless otherwise indicated or the context otherwise requires, all references to (i) a year (e.g., 2014)
refer to the applicable fiscal year ended September 30th and (ii) the multi-family properties we own in
2014 and the residential units associated with such properties, include a development property in
Greenville, SC, that was acquired in 2014 but excludes the 360 units contemplated to be constructed at
such development.
Our Multi-Family Property Activities
Beginning in the second quarter of 2012, we began to acquire with joint venture partners multi-
family properties. As of September 30, 2014, we own 27 multi-family properties with an aggregate of
7,609 units. Typically, these are garden apartment or town home style properties that typically provide
residents with amenities, such as a clubhouse, swimming pool, laundry facilities and cable television
access. Generally, residential leases are for a one year term and may require security deposits equal to
one month’s rent. Substantially all of the units at these properties are market rate and are not subject
to rent control or similar requirements. Set forth below is selected information regarding our multi-
family properties. Except as otherwise indicated in the notes to the table below, all of 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.
Property Name and Location
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(3) . . . . . . . .
Grove at Trinity Pointe—Cordova, TN . . . . . . . . . . . . . . . .
Avondale Station—Decatur, GA(3) . . . . . . . . . . . . . . . . . .
Spring Valley Apartments—Panama City, FL . . . . . . . . . . .
Stonecrossing Apartments—Houston, TX(3)
. . . . . . . . . . .
Courtney Station—Pooler, GA . . . . . . . . . . . . . . . . . . . . .
Pathways—Houston, TX(3)
. . . . . . . . . . . . . . . . . . . . . . .
Autumn Brook Apartments—Hixon, TN(3) . . . . . . . . . . . .
Mountain Park Estates—Kennesaw, GA(3) . . . . . . . . . . . .
The Palms on Westheimer Apartments—Houston, TX(4) . . .
Ashwood Park—Pasadena, TX(4) . . . . . . . . . . . . . . . . . . .
Meadowbrook Apartments—Humble, TX(4) . . . . . . . . . . .
Parkside Apartments—Humble, TX(4)
. . . . . . . . . . . . . . .
Brixworth at Bridge Street—Huntsville, AL . . . . . . . . . . . .
Newbridge Commons—Columbus, OH(3) . . . . . . . . . . . . .
Southridge—Greenville, SC(3)(5) . . . . . . . . . . . . . . . . . . .
Waterside at Castleton—Indianapolis, IN . . . . . . . . . . . . . .
Crossings of Bellevue—Nashville, TN(4) . . . . . . . . . . . . . .
Village Green—Little Rock, AK(4) . . . . . . . . . . . . . . . . . .
Sundance—Wichita, KS(4) . . . . . . . . . . . . . . . . . . . . . . . .
Sandtown Vista—Atlanta, GA . . . . . . . . . . . . . . . . . . . . . .
Landmark at Kendall Manor—Houston, TX . . . . . . . . . . .
Number
of Units
207
170
542
208
324
208
464
212
160
240
300
144
156
450
798
144
260
160
208
264
N/A
400
300
172
496
350
272
Age(1)
40
32
43
27
14
4
28
60
27
36
6
35
25
12 - 15
40
30
32
31
29
15
N/A
7
29
29
15
4
33
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,609
Average
Monthly
Rental
Rate per
Occupancy Unit(2)
Average
Physical
Investment
Date
1/12/12
2/23/12
3/22/12
3/30/12
6/20/12
10/4/12
11/15/12
11/19/12
1/11/13
4/19/13
4/29/13
6/7/13
6/25/13
9/25/13
10/4/13
10/15/13
10/15/13
10/15/13
10/18/13
11/21/13
1/14/14
1/21/14
4/2/14
4/2/14
4/2/14
6/26/14
7/8/14
91.6% $ 725
693
94.1
1,050
96.6
722
95.9
940
94.7
970
93.4
716
95.4
766
96.8
760
95.2
856
94.3
935
93.4
823
93.7
746
95.4
918
93.6
728
91.2
642
95.0
641
94.6
669
93.9
650
93.3
1,124
90.5
N/A
N/A
609
90.7
907
97.9
552
96.7
541
96.6
817
92.8
769
91.2
(1) Reflects the approximate age of the property based on the year original construction was completed.
(2) Gives effect to rent concessions.
4
(3) We own a 90%, 75%, 74% and 50% equity interest in the joint ventures which own the Silvana Oaks
Apartments, Autumn Brooks Apartments, Southridge and Mountain Park Estates, respectively. We are
the sole owner of Newbridge Commons. Effective October 2014, we own a 91% equity interest in the
joint venture that owns the Stonecrossing Apartments and Pathways properties, and effective December
2014, we own all of the equity interests in the entity that owns the Avondale Station property.
(4) The Palms on Westheimer Apartments, Ashwood Park, Meadowbrook Apartments and Parkside
Apartments are owned by one joint venture and the Crossing of Bellevue, Village Green and Sundance
properties are owned by another joint venture.
(5) The Greenville, SC joint venture is developing a 360 unit multi-family property with ground floor retail
of approximately 10,000 square feet. This property is under construction and we anticipate that this
project will be completed in stages from May 2015 through April 2016.
As of December 1, 2014, the 27 properties owned by us are located in 10 states. The following
tables set forth certain information, presented by state, related to our properties as of such date
(dollars in thousands):
Number of
Properties
Number of
Units
Estimated
2015 Revenue(1)
Percent of 2015
Estimated
Revenue
State
Texas . . . . . . . . . . . . . . . . . .
Georgia . . . . . . . . . . . . . . . .
Tennessee . . . . . . . . . . . . . . .
Florida . . . . . . . . . . . . . . . . .
Kansas . . . . . . . . . . . . . . . . .
South Carolina(2) . . . . . . . . .
Ohio . . . . . . . . . . . . . . . . . . .
Indiana . . . . . . . . . . . . . . . . .
Alabama . . . . . . . . . . . . . . . .
Arkansas . . . . . . . . . . . . . . . .
7
6
4
3
1
1
1
1
1
1
Total . . . . . . . . . . . . . . . . . . .
26(2)
2,018
1,689
1,244
910
496
208
264
400
208
172
7,609
$17,698
16,704
14,357
10,906
3,355
2,348
2,777
2,521
1,861
1,149
$73,676
24%
23
19
15
5
3
4
3
2
2
100%
(1) Reflects our estimate of the rental and other revenues to be generated in 2015 by our
multi-family properties located in such state.
(2) Excludes our Greenville, SC development project.
Joint Venture Arrangements
The arrangements with our multi-family property joint 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:
(cid:127) a preferred return of 10% on each party’s unreturned capital contributions, until such preferred
return has been paid in full,
(cid:127) the return in full of each party’s capital contribution,
(cid:127) 35% to our partner, and the balance to us, until an internal rate of return of 15% has been
achieved by us, and
(cid:127) thereafter, shared equally between us and our venture partner.
Though, as noted above, each joint venture operating agreement contains different terms, such
agreements generally provide for a buy-sell procedure under specified circumstances (including (i) after
the passage of time (e.g., two years after the acquisition), (ii) if the partners are unable to agree on
major decisions, (iii) upon a change in control of our subsidiary owning the interest in the joint
5
venture, or (iv) one or more of the foregoing). Further, these arrangements may also allow us, and in
some cases, our joint venture partner, to force the sale of the property after it has been owned by the
joint venture for a specified period (e.g., four to five years after the acquisition).
Our Acquisition Process and Underwriting Criteria
We identify multi-family property acquisition opportunities primarily through relationships
developed over time by our officers with our former borrowers, current joint venture partners, real
estate investors and brokers.
Our goal is to acquire properties with cap rates ranging from 5.5% to 7.5% and that will provide
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 an approximate 8% to
10% annual return on invested cash and a 11% internal rate of return. We have also focused, but have
not limited ourselves, to acquiring properties located in the South and in particular, the Southeast and
Southwest 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 the following
into account in evaluating an acquisition opportunity: location, size of the target market, property
quality, availability and terms and conditions of long term fixed rate mortgage debt, potential for
capital appreciation or recurring income, extent and nature of contemplated capital improvements and
property age. We generally 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 a multi-family property are based on a review of property
information as well as other due diligence activities undertaken by us and, as applicable, our venture
partner. Those activities include a 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, the economic and employment base, presence of and barriers to entry of
alternative housing stock, market prices for comparable properties, the competitive positioning of the
proposed acquisition and the regulatory environment (i.e. applicable rent regulation)), a review of an
independent third party property condition report, a Phase I environmental report with respect to the
property, a review of recent and projected results of operations for the property prepared by the seller,
us or our venture partner, an assessment of our joint venture partner’s knowledge and expertise with
respect to the acquisition and operation of multi-family properties and the relevant market and
sub-market, a site visit to the property and the surrounding area, an inspection of a sample of units at
the property, the potential for rent increases and the possibility of enhancing the property and the costs
thereof. To the extent a property to be acquired requires renovations or improvements, or if we and
our joint venture partner believe that improving a property will generate greater rent, funds are
generally set aside by us and our joint venture partner at the time of acquisition to provide the capital
needed for such renovation and improvements. At September 30, 2014, we have approximately
$9.6 million to fund improvements at our multi-family properties with the expectation that we will be
able to raise rents at improved properties.
A key consideration in our acquisition process is the evaluation of the availability of mortgage debt
to finance the acquisition (or the ability to assume the mortgage debt on the property) and the terms
and conditions (e.g. interest rate, amortization and maturity) of such debt. Typically, approximately 25%
to 35% of the purchase price is paid in cash and the balance is financed with mortgage debt. We
believe that the use of leverage of up to 75% allows us the ability to earn a greater return on our
investment than we would otherwise earn. Generally, the mortgage debt obtained in connection with an
acquisition matures five to ten years thereafter, is interest is only for one to three years after the
6
acquisition, and provides for a fixed interest rate and for the amortization of the principal of such debt
over 30 years.
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 this
committee, all of whom are our executive officers. The approval of our board of trustees is required for
any single multi-family property acquisition in which our equity investment exceeds $15 million.
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. Generally, we can terminate these
management companies upon specified notice or for cause, subject to the approval of the mortgage
lender or our joint venture partner. We believe satisfactory replacements for property managers are
available, if required.
Insurance
The multi-family properties are covered by all risk property insurance covering 100% of the
replacement cost for each building and business interruption and rental loss insurance (covering up to
twelve 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 with 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.
Environmental Regulation
We are subject to regulation at the federal, state and municipal levels and are exposed to potential
liability should our properties or actions result in damage to the environment or to other persons or
properties. These conditions include the presence or growth of mold, potential leakage of underground
storage tanks, breakage or leaks from sewer lines and risks pertaining to waste handling. The potential
costs of compliance, property damage restoration and other costs for which we could be liable for or
which could occur without regard to our fault or knowledge of such conditions, are unknown and could
potentially be material.
In the course of acquiring and owning real estate assets, we or our joint venture partner engage an
independent environmental consulting firm to perform a level 1 environmental assessment (and if
appropriate, a level 2 assessment) to identify and mitigate these risks as part of the due diligence
process. We believe these assessment reports provide a reasonable basis for discovery of potential
hazardous conditions prior to acquisition. Should any potential environmental risks or conditions be
discovered during our due diligence process, the potential costs of remediation will be assessed
carefully and factored into the cost of acquisition, assuming the identified risks and factors are deemed
to be manageable and within reason. Some risks or conditions may be identified that are significant
enough to cause us to abandon the possibility of acquiring a given property. As of September 30, 2014,
we have no knowledge of any material claims made or pending against us with regard to environmental
damage for which we may be found liable, nor are we aware of any potential hazards to the
7
environment related to any of our properties which could reasonably be expected to result in a material
loss.
Mortgage Debt
The following table sets forth scheduled principal (including amortization) mortgage payments due
for our multi-family properties as of September 30, 2014:
YEAR
PRINCIPAL
PAYMENTS DUE
(Amounts in
Thousands)
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 10,104
5,212
6,595
41,335
101,483
220,405
$385,134
As of September 30, 2014, the weighted average annual interest rate of the mortgage debt on our
27 multi-family properties is 4.15% and the weighted average remaining term of such debt is
approximately 7.1 years. The mortgage debt associated with our multi-family properties is generally
non-recourse to (i) the joint venture that owns the property, subject to standard carve-outs and (ii) to
us and our subsidiary acquiring the equity interest in such joint venture. We, at the parent entity level
(i.e., BRT Realty Trust), are the standard carve-out guarantor with respect to the Stonecrossing,
Pathway and Avondale properties. (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, a
voluntary bankruptcy filing, 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.)
Our Other Real Estate Assets and Activities
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 properties (including development sites) in downtown Newark, NJ. The properties are
surrounded by a variety of governmental, educational, cultural and entertainment institutions and
facilities. In close proximity to these properties are the Newark campus of 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 properties 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 properties 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
8
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
converted into a consolidated 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, with other development partners (including adjacent property
owners that may be interested in redeveloping several of such properties at the same time) or sell some
of its sites to developers or end users. Although we own only a 50.1% membership interest in the
Newark Joint Venture, in accordance with generally accepted accounting principles in the United
States, the assets, liabilities and results of operations of the Newark Joint Venture are consolidated with
our financial statements. Accordingly, the $113 million net book value of real estate owned and being
developed by the Newark Joint Venture is included in our real estate properties, mortgage debt of
$95.5 million incurred by the Newark Joint Venture is included in our mortgages payable and at
September 30, 2014, our two mortgage loans aggregating $20.1 million to the Newark Joint Venture
(which are secured by all of the real estate assets of the Newark Joint Venture other than the Teachers
Village properties and the Broad Street properties), are eliminated in consolidation and are not
recorded as mortgage receivables.
We believe that the properties owned by the Newark Joint Venture have adequate insurance
coverage for their current use.
Current Property Information
Except as otherwise noted below, the following table sets forth as of September 30, 2014,
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
Market Street(4) . . . . . Office and retail 303,126
Teachers Village(5) . . . Mixed
Broad Street . . . . . . . . School and retail
Beaver Street . . . . . . . . Retail
Lincoln Park . . . . . . . . Parking
126,983(6)
47,564
8,160
79,063
$510
356
316
20
46
Projected
2015
Contractual
Rental
Income(1)
$ 378
1,354(6)
970
—
21
Number of
Tenants
Percent
Leased(2)
Mortgage
Debt(3)
17
5(6)
2
—
2
34% $
70(6)
100
—
100
900
88,827
5,728
—
—
(1) Refers to the fixed rental payments to be provided by such leases in 2015.
(2) Based on square footage.
(3) See note 7 of our consolidated financial statements. Does not include $20.1 million mortgage debt
payable to us by the Newark Joint Venture which is eliminated in consolidation.
(4) 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.
9
(5) Includes four buildings-two buildings with an aggregate of approximately 113,793 square feet of
commercial space (24,960 and 88,833 square feet of retail space and school space, respectively)
were completed in August/September 2013 as part of Phase I, and two buildings (one completed in
each of August 2014 and December 2014) with an aggregate of 61 residential units and 13,080
square feet of retail space constructed as part of Phase II.
(6) Excludes (i) the 123 residential units constructed and to be constructed as part of Phase II, (ii) the
building contemplated by Phase III and (iii) two parcels aggregating approximately 60,000 square
feet that are currently used as parking lots and may be developed in the future.
See ‘‘—Information and Activities Relating to Development and Other Sites’’ for a description of
Phases I through III of the Teachers Village project.
The following table sets forth as of September 30, 2014, a schedule of the annual lease expirations
of the Newark Joint Venture’s commercial real estate assets and the anticipated contributions to 2015
contractual rental income assuming that none of the tenants exercise renewal or cancellation options, if
any (dollars in thousands):
Lease Expiration
Month-to-month . . . . . . .
2015 . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . .
2024 and thereafter . . . .
Total . . . . . . . . . . . . . . .
Number of
Leases
Expiring(1)
Square
Footage of
Leases
Expiring
Percentage
of Total
Leased
Square
Feet
Projected
2015
Contractual
Rental
Income(2)
Projected %
of 2015
Contractual
Rental
Income(2)
11
5
1
1
1
—
—
1
—
—
5
25
145,831
20,056
5,260
6,214
5,260
—
—
5,000
—
—
131,983
319,604
46%
6
2
2
2
—
—
2
—
—
40
100%
$ 159
102
46
144
48
—
—
43
—
—
2,234
$2,776
6%
4
2
5
2
—
—
2
—
—
79
100%
(1) There are 11 in-place leases which are month- to-month and six leases which contain
cancellation, relocation or demolition provisions across the various development sites.
(2) Assumes all month-to-month tenants remain in occupancy for all of 2015.
Information and Activities Relating to Development and Other Sites
Set forth below is information regarding the Newark Joint Venture’s most significant properties.
Teachers Village
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. From 2012 through 2014, the Newark Joint Venture obtained, in three phases, financing of
approximately $93.1 million, which together with $31.4 million of New Markets Tax Credit net proceeds
is, after payment of transaction expenses and payment of approximately $19.1 million of principal and
accrued interest on debt (inclusive of $13.3 million of principal and accrued interest on debt owed to us
which is eliminated in consolidation), has been and is being used to construct six buildings.
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The first financing phase, which we refer to as Phase I, was used to fund the construction of two
buildings with an aggregate of 113,903 rentable square feet—these buildings were completed in the
summer of 2013. Approximately 88,833 square feet is leased to three charter schools and a day-care
center.
The second financing phase, which we refer to as Phase II, has and is being used to construct
three buildings that are to contain approximately 123 residential rental units and approximately 29,140
square feet of retail space. One building containing 21 residential units and 2,836 square feet of retail
space was completed in August 2014, the second building, containing 40 residential units and 9,100
square feet of retail space was completed in December 2014, and we anticipate the third building will
be completed by May 2015.
In September 2014, in the third financing phase, which we refer to as Phase III, the Newark Joint
Venture and affiliated entities obtained $24.6 million of debt financing and $5.6 million of New
Markets Tax Credits proceeds. This phase contemplates the construction of an 82,547 square feet
mixed-use space which will consist of a (i) 48,772 square foot commercial condominium unit including
10,453 square feet of retail space and 42 residential units, which we refer to as the Commercial Condo,
and (ii) 33,775 square feet residential condominium unit including 39 residential units, which we refer
to as the Residential Condo. The Residential Condo is owned indirectly by the Newark Joint Venture
and the Commercial Condo is owned by certain indirect members of the Newark Joint Venture other
than BRT; however, the owners of the Commercial Condo have agreed to distribute to the Newark
Joint Venture any net distributable proceeds (i.e., cash flow and residual capital event proceeds after
any necessary funds are expended on debt service, reserves and operating expenses) they receive as
owners of the Commercial Condo. It is anticipated that this building will be completed by May 2016.
Leasing Activity at Teachers Village
At December 1, 2014, approximately 84% of the 61 residential units constructed to date are leased
(though not yet fully occupied) and we believe that all of these units will be leased by February 2015.
We estimate that in 2015, the rental income from these 61 units will be approximately $740,000.
At December 1, 2014, of the approximately 126,983 square feet of commercial space (including
retail space) at the four completed buildings, approximately 90,633 square feet is leased to three
charter schools, a day care center and a bank. The Newark Joint Venture has also entered into leases
with 11 tenants with respect to 20,464 square feet of commercial space at these buildings, all of which
is retail space; however, the tenants’ obligations to take possession and pay rent is subject to the
achievement of certain conditions, including the tenants’ receipt of third party financing for tenant
improvements and the completion of same. We can give no assurance that these conditions will be
satisfied. If these conditions are not achieved by the dates specified in the applicable leases, certain
tenants may be entitled to terminate their leases.
Market Street
The Market Street site is an approximately 68,000 square foot site, currently representing
approximately 303,000 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, a hotel, 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. Alternatively, the Newark Joint Venture may enter into a joint venture with a
development partner or sell all or portions of the site. Although there have been discussions with
various parties concerning the development of the Market Street area, the Newark Joint Venture has
not entered into any material 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.
11
Mortgage Debt
The following table sets forth scheduled principal (including amortization) mortgage payments due
for the Newark Joint Venture as of September 30, 2014:
YEAR
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PRINCIPAL PAYMENTS DUE
(Amounts in Thousands)
$ 3,166
2,146
2,225
2,383(1)
21,193
64,392
$95,505
(1) Assumes that if the note holder exercises its right, beginning in 2018, to require the
subsidiaries of the Newark Joint Venture to repurchase $22.7 million of principal amount
of such debt, such subsidiaries would refinance such debt on terms substantially
equivalent to the terms currently in effect. See note 7 of consolidated financial
statements.
At September 30, 2014, the $95.5 million of outstanding debt related to the Newark Joint Venture
(of which approximately $88.8 million is related to Teachers Village), carries a weighted average
effective interest rate (after giving effect to an annual subsidy of $1.0 million from the United States
Department of Treasury), of approximately 4.2%, a weighted average remaining term of 12.1 years and
is secured by the Teachers Village, Broad Street and Market Street properties. This debt is generally
non-recourse to (i) BRT, at the parent company level, and (ii) except as otherwise indicated below, to
the Newark Joint Venture. In connection with Phases I through III, the Newark Joint Venture
guaranteed, among other things, up to $27 million in principal amount of mortgage debt, which
guarantees generally 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 six
buildings to be constructed (four of which have been 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, violations of the Americans with Disabilities Act and similar laws 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
$33 million (exclusive of interest and penalties) and is subject to reduction to the extent the credits are
not disallowed.
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 Member 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
12
required for all major decisions affecting the Newark Joint Venture and its properties. Under specified
circumstances, we may remove the manager immediately or upon six months advance written notice.
Mandatory Capital Calls. Members are generally required to make pro rata capital contributions
to the Newark Joint Venture for any projected budget shortfalls.
Buy-Sell. During specified periods and circumstances, 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 $20.1 million balance due on our loans (which have been eliminated in consolidation on our
financial statements) 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 us, until we receive a 10% return on our preferred capital contributions, (iii) third, to us until we
receive an amount equal to our preferred capital contributions, (iv) fourth, to each member pro rata
until such member receives 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, 42 years of age, has over 20 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. The Newark Joint Venture
carries key man life insurance on Mr. Beit-Halachmy in the amount of $40 million.
Other Real Estate Assets
We also own the following properties with an aggregate net book value of $10.7 million at
September 30, 2014:
(cid:127) an 8.7 acre vacant parcel of land in South Daytona Beach, Florida,
13
(cid:127) 18 cooperative apartments, all of which are rent controlled or rent stabilized, in two buildings in
upper Manhattan, New York, and
(cid:127) a subordinated leasehold interest in a portion (approximately 29% of a 99,000 square foot
facility) of a shopping center in Yonkers, NY.
In addition, we have a 50% equity interest in an unconsolidated joint venture that owns an
aggregate of 19 cooperative apartment units located in Lawrence, New York.
Though we are no longer engaged in real estate lending, we present, for historical purposes, the
following information regarding such activities for the periods indicated:
Our Real Estate Lending Activities
(Dollars in Thousands)
Loans originated . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans repaid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans sold and loan participations . . . . . . . . . . . . . .
Year Ended September 30,
2014
2013
2012
$ 5,533
34,045
—
$70,300
76,900
—
$101,800
124,800
15,700
Junior Subordinated Notes
Financing Arrangements
As of September 30, 2014, $37.4 million in principal amount of our junior subordinated 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
Our $25 million revolving credit facility expired in June 2014. We made limited use of this facility
and its expiration has not and will not have a material adverse effect on us.
Competition
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, 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 an 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
14
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. Eight individuals (including Jeffrey A. Gould, Chief Executive Officer and
President, Mitchell Gould, Executive Vice President and George Zweier, Chief Financial Officer),
devote substantially all of their business time to our activities, 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 Fredric H. Gould, a member
of our Board of Trustees and the former chairman of such board, and he and certain of our executive
officers, including our Chairman of the Board and Chief Executive Officer, receive compensation from
REIT Management. Pursuant to this agreement, REIT Management furnishes advisory and
administrative services with respect to our business, including, without limitation, developing and
maintaining banking and financing relationships, participating in the analysis and approvals of multi-
family property acquisitions, providing investment advice and providing assistance with building
inspections.
The Advisory Agreement, as amended, provides that (i) it renews automatically on July 1st of each
year, unless earlier terminated with or without cause, (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) we pay REIT Management the following annual
fees, which are paid on a quarterly basis:
(cid:127) 0.45% of the average book value of all real estate properties, excluding depreciation;
(cid:127) 0.25% of the average amount of the fair market value of marketable securities;
(cid:127) 1.0% of the average principal amount of earning loans;
(cid:127) 0.35% of the average amount of the fair market value of non-earning loans;
(cid:127) 0.15% of the average amount of cash and cash equivalents; and
(cid:127) to the extent loans or real estate are held by joint ventures or other arrangements in which we
have an interest, varying fees 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.
We paid fees pursuant to this agreement of $2 million and $1.8 million in 2014 and 2013,
respectively. A portion of these fees are reflected in discontinued operations.
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.
15
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 acquisition, development and property improvement activities are limited by available funds.
Our ability to acquire additional multi-family properties, to improve our multi-family properties
and to develop our Newark Joint Venture properties, is limited by the funds available to us. At
September 30, 2014, we had approximately $23.2 million of cash and cash equivalents and
approximately $9.6 million and $22.0 million designated as restricted cash for multi-family property
improvements and Newark Joint Venture development activities, respectively. Our multi-family
acquisition and improvement activities and the Newark Joint Venture development activities are
constrained by funds available to us which will limit growth in our revenues and operating results.
It is unlikely that we will declare any dividends in the next several years.
We have not declared or paid any dividends since 2010. In order to qualify as a REIT, we are
required to distribute 90% of our taxable income. At December 31, 2013, we had a tax loss carry-
forward of approximately $54 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 2015 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.
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 the ownership and operation of multi-family
properties, including other REITs, specialty finance companies, public and private investors and lenders,
investment and pension funds and other entities. The Newark Joint Venture 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 multi-family property operators have the ability and capacity to acquire a greater number of
higher quality properties at more favorable locations and on more favorable terms and conditions.
We may incur impairment charges in 2015.
We evaluate on a quarterly basis our real estate portfolios for indicators of impairment.
Impairment charges reflect management’s judgment of the probability and severity of the decline in the
value of real estate assets we own. These charges and provisions 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 real property assets. If we are required to
take impairment charges, our results of operations will be adversely impacted.
16
Our revenues and the value of our portfolio may be negatively affected by casualty events occurring on our
properties.
The 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 be
insufficient 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 or tenants 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 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. As a result, our returns and the value of our investment may be reduced.
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 with respect
to these properties.
Some of our properties, and in particular, our multi-family properties, face competition from
newer, and updated properties. At September 30, 2014, the approximate weighted average age (based
on the number of units) of our multi-family properties is approximately 28 years. 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 acquire.
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, the presence of hazardous substances on a property may adversely affect
our ability to finance or 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 our ability to sell real estate or borrow
using the real estate as collateral.
17
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 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 two
other executive officers, Mitchell Gould, our executive vice president, and George Zweier, a vice
president and our 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 and accounting
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, 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 Multi-Family 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:
(cid:127) industry slowdowns, plant closings and other factors that adversely affect the local economy;
(cid:127) an oversupply of, or a reduced demand for, multi-family units;
(cid:127) a decline in household formation or employment or lack of employment growth;
(cid:127) the inability or unwillingness of residents to pay rent increases;
(cid:127) 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
(cid:127) economic conditions that could cause an increase in our operating expenses, such as increases in
property taxes, utilities, and routine maintenance.
We may be unable to refinance our multi-family mortgage debt as it matures.
We are subject to the risks associated with mortgage financing, including the risk that our cash
flow will be insufficient to meet required payments of principal and interest and that we will be unable
to refinance our mortgage debt as it matures. At September 30, 2014, the weighted average annual
interest rate on our multi-family mortgage debt is 4.15%, the weighted average remaining term on this
mortgage debt is 7.1 years and approximately $10.1 million, $5.2 million, $6.6 million and $41.3 million
in principal amount of mortgage debt becomes due in 2015, 2016, 2017 and 2018, respectively. As we
will not have sufficient cash flow available to make all required principal payments when due, we will
18
need to refinance a significant portion, if not all, of our outstanding multi-family debt as it matures. We
may not be able to refinance existing debt or, in the event of increased interest rates, refinance on as
favorable terms as currently in effect; either of these outcomes could have a material adverse effect on
our financial condition and results of operations.
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 many of our 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 to be realized upon property sales.
Most of our multi-family properties are located in a limited number of markets, 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. Approximately 24%, 23%, 20% and 15% of our estimated 2015
revenues from multi-family properties is attributable to properties located in Texas, Georgia, Tennessee
and Florida, respectively. Accordingly, adverse economic developments in such markets 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 exposes us to risks of adverse economic
developments which are greater than the risks of owning properties with a more geographically diverse
portfolio.
The failure of third party property management companies to properly manage our properties may adversely
affect us.
We and our joint venture partners rely on third party property management companies to manage
our properties. These management companies are responsible for, among other things, leasing and
marketing rental units, selecting tenants (including an evaluation of the creditworthiness of tenants),
collecting rent, paying operating expenses, and maintaining the property. If these property management
companies do not perform their duties properly or we or our joint venture partners do not effectively
supervise the activities of these companies, we may be adversely affected. Eleven property managers
and their affiliates manage our 27 properties, and one property manager manages seven properties—
the loss of such manager could adversely impact us. Further, some of management companies are
owned by our joint venture partners or their affiliates. The termination of a management company may
require the approval of the mortgagee, our joint venture partner or both. If we are unable to terminate
on a timely basis a property manager not performing its duties, we may be adversely affected.
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, 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.
19
Risks involved in conducting real estate activity through joint ventures.
We have in the past and in the future intend to 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 engage in unlawful or
fraudulent conduct with respect to our jointly owned properties or other properties in which they have
an ownership interest; might become insolvent or otherwise refuse to make capital contributions or
property distributions when due; that we may be responsible to our partner for indemnifiable losses;
that our partner may not perform its property oversight responsibilities; that our partner may 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. 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, our joint venture partners may experience financial distress,
including bankruptcy, and to the extent they do not meet their obligations to us or our joint venture
with them, we may be adversely affected.
Seven of our 27 multi-family property joint ventures are owned with one venture partner or its
affiliates. We may be adversely effected if we are unable to maintain a satisfactory working relationship
with this joint venture partner or if this partner becomes financially distressed.
Risks Related to the Newark Joint Venture and Other Real Estate Operations.
The Newark Joint Venture likely will have an operating loss for the foreseeable future.
We anticipate that the Newark Joint Venture will operate at a loss in 2015 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 becomes 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, 2014, approximately $3.2 million of debt service relating to the Newark Joint
Venture is payable prior to the end of 2015 and $4.4 million of debt service is payable from 2016
through 2017. The cash flow from the properties securing the mortgage debt may be insufficient to
meet required debt service payments. In particular, the rental revenues from the current tenants at
Teachers Village are insufficient to cover all of the Newark Joint Ventures debt service obligations
payable from 2015 through 2017. If efforts to generate additional rental revenues from the Teachers
Village site are unsuccessful (due to, among other things, the failure to complete the buildings under
construction or contemplated to be constructed or to fully lease at satisfactory rates the residential and
commercial space at the six buildings contemplated to comprise Teachers Village), 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.
20
The Newark Joint Venture will be adversely effected if it is limited from using the Teachers Village facilities
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
limit the venture’s ability to use the Teachers Village facilities in a manner other than as permitted to
be used by the governing transaction documents. 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 bonds in principal amount of approximately $22.7 million at
September 30, 2014 requires that the facilities (or certain portions thereof) be used for at least 19 years
as public school facilities and the annual $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 specified periods. The New Jersey Urban Transit Hub tax credits program requires that
certain portions of the facilities 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 located in
downtown Newark, NJ. Since we have limited experience 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, he has limited experience in
development projects. There can be no assurance that the Newark Joint Venture will be successful in
developing and/or managing the redevelopment of the sites.
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 and is responsible for, among other things, overseeing
the construction and leasing activities at Teachers Village and development activities with respect to
Market Street and the other properties owned by the 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 such principal 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:
(cid:127) The inability to complete the Phases II or III of the Teachers Village project because the funds
available from the financing and New Markets Tax Credits transactions, due to cost overruns or
under estimating the funds needed, may be insufficient for such purpose.
21
(cid:127) The failure to obtain governmental and other approvals on a timely basis;
(cid:127) Construction, financing and other costs of developing the properties owned by the Newark Joint
Venture and in particular, Teachers Village, may exceed original estimates, possibly making such
activities unprofitable;
(cid:127) 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;
(cid:127) Occupancy rates and rents of a completed project may be insufficient to make such project
profitable;
(cid:127) The inability to acquire all the properties needed to develop the project to its full potential; and
(cid:127) The inability to complete a development.
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 $31 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 $33 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.
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.
22
Because Real Estate Investments Are Illiquid, We May Not Be Able to Sell Properties As Needed.
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.
Executive Officers of Registrant
Set forth below is a list of our executive officers whose terms will expire at our 2015 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, 2015. References to
a particular year for these biographies refer to the calendar year.
Name
Office
Israel Rosenzweig . . . . . . . . . . . . . Chairman of the Board of Trustees
Jeffrey A. Gould* . . . . . . . . . . . . . President and Chief Executive Officer; Trustee
Mitchell K. Gould . . . . . . . . . . . . . Executive Vice President
Senior Vice President; Trustee
Matthew J. Gould* . . . . . . . . . . . .
Senior Counsel
Simeon Brinberg** . . . . . . . . . . . . .
Senior Vice President, Finance
David W. Kalish*** . . . . . . . . . . . .
Mark H. Lundy** . . . . . . . . . . . . .
Senior Vice President and General Counsel
George E. Zweier . . . . . . . . . . . . . Vice President and Chief Financial Officer
Isaac Kalish*** . . . . . . . . . . . . . . . Vice President and Treasurer
*
Jeffrey A. Gould and Matthew J. Gould are sons of Fredric H. Gould, the former
chairman of our board of trustees and currently, a trustee.
** Simeon Brinberg is the father-in-law of Mark H. Lundy.
*** David W. Kalish is the father of Isaac Kalish.
Mitchell K. Gould (age 42), employed by us since 1998, has been a Vice President since 1999 and
Executive Vice President since 2007.
Simeon Brinberg (age 80) served as our Secretary from 1983 through 2013, as a Senior Vice
President from 1988 through 2013, and as Senior Counsel since 2006. Mr. Brinberg has been a Vice
President of Georgetown Partners, Inc., the managing general partner of Gould Investors L.P., since
1988. Since 1989, Mr. Brinberg has been a Vice President, Senior Vice President or Senior Counsel of
One Liberty Properties, Inc. Mr. Brinberg is a member of the New York Bar.
David W. Kalish (age 67), a certified public accountant, has been our Senior Vice President,
Finance since 1998. Mr. Kalish was our Vice President and Chief Financial Officer from 1990 until
1998. He has been Chief Financial Officer of One Liberty Properties, Inc. and Georgetown
Partners, Inc. since 1990.
Mark H. Lundy (age 52) has been our General Counsel since 2007, Senior Vice President since
2005 and from 1993 to 2005 he served as a Vice President. He served as a Vice President of One
Liberty Properties from 2000 to 2006 and has been its Secretary and Senior Vice President since June
1993 and 2006, respectively. Since 2013, Mr. Lundy has served as President and Chief Operating
Officer, and from 1990 through 2013 as a Vice President (including Senior Vice President), of
Georgetown Partners, Inc. He is a member of the bars of New York and Washington, D.C.
23
George E. Zweier (age 50), a certified public accountant, has served as our Vice President and
Chief Financial Officer since 1998.
Isaac Kalish (age 39), a certified public accountant, has been associated with us since 2004, served
as Assistant Treasurer from 2007 through 2014 and as Vice President and Treasurer since 2013 and
2014, respectively. Mr. Kalish has served as Vice President and Assistant Treasurer of One Liberty
Properties since 2013 and 2007, respectively, as Assistant Treasurer of Georgetown Partners, Inc. from
2012 through 2013, and as its Treasurer since 2013.
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 2014, we paid $149,000
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.
Fiscal Quarters
Fiscal 2014
Fiscal 2013
High
Low
High
Low
First Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$7.24
7.66
7.57
7.76
$6.85
7.01
7.05
7.00
$6.74
7.77
7.73
7.47
$6.20
6.20
6.95
6.76
On December 1, 2014, the high and low sales prices of our Common Shares was $7.21 and $7.16,
respectively.
As of December 1, 2014, there were approximately 957 holders of record of our Common Shares.
We have not paid any cash dividends since 2010. Our tax loss carry forward at December 31, 2013,
was approximately $54 million; therefore, we do not anticipate paying cash dividends in the near future.
24
Stock Performance Graph
This graph compares the performance of our shares with the Standard & Poor’s 500 Stock Index,
an index consisting of publicly traded mortgage REITs (i.e., FTSE NAREIT Mortgage REITs) and an
index consisting of apartment REIT’s (i.e., FTSE NAREIT Equity Apartments). The graph assumes
$100 invested on September 30, 2009 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 Equity Apartments Index
$250
$200
$150
$100
$50
$0
9/09
9/10
9/11
9/12
9/13
9/14
BRT Realty Trust
S&P 500
FTSE NAREIT Mortgage REITs
10DEC201420350724
FTSE NAREIT Equity Apartments
*
$100 invested on 9/30/09 in stock or index, including reinvestment of dividends. Fiscal year ending
September 30.
Copyright(cid:3) 2014 S&P, a division of The McGraw-Hill Companies Inc. All rights reserved.
BRT Realty Trust
. . . . . . . . . . . . . . . . . .
S&P 500 . . . . . . . . . . . . . . . . . . . . . . . . .
FTSE NAREIT Mortgage REITs . . . . . . . .
FTSE NAREIT Equity Apartments . . . . . .
$100.00
100.00
100.00
100.00
$112.11
110.16
110.21
145.83
$109.12
111.42
113.64
164.40
$114.04
145.07
151.36
195.42
$125.79
173.13
138.66
191.98
$131.58
207.30
156.48
224.20
9/09
9/10
9/11
9/12
9/13
9/14
Issuer Purchases of Equity Securities
In September 2013, we announced that our Board of Trustees had authorized a share buyback plan
pursuant to which, through September 30, 2015, we may expend up to $2 million to repurchase our
common shares. We did not repurchase any shares during the quarter ended September 30, 2014.
In December 2014, our Board of Trustees increased to $4 million the amount we can spend to
repurchase our common shares and extended the program through September 30, 2017. On
December 12, 2014, we agreed to purchase 345,081 of our common shares at a price of $7 per share or
a total of $2,416,000. The transaction will settle on December 17, 2014.
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
25
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(1) . . . . . . . . . . . . . . . . . . . . . .
Total expenses(2) . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of available-for-sale securities . . .
. . . . . . . .
Gain on sale of partnership interest
(Loss) income from continuing operations . . . .
Income from discontinued operations . . . . . . .
Net (loss) income attributable to common
2014
2013
2012
2011
2010
$ 66,395
83,980
—
—
(17,566)
1,400
$ 31,805
44,951
530
5,481
(6,937)
9,026
$
9,893
17,390
605
—
(5,927)
7,477
$
3,958
7,479
1,319
—
(3,990)
8,914
$
3,893
10,265
1,586
—
(4,590)
(4,747)
shareholders . . . . . . . . . . . . . . . . . . . . . . . .
(9,454)
5,013
4,430
6,374
(8,015)
Earnings (loss) per beneficial share:
(Loss) income from continuing operations . . . .
Income from discontinued operations . . . . . . .
Basic and diluted (loss) earnings per share . .
Balance sheet data:
Total assets(3) . . . . . . . . . . . . . . . . . . . . . . . .
Real estate properties, net(4) . . . . . . . . . . . . .
Cash and cash equivalents . . . . . . . . . . . . . . .
Restricted cash-construction holdback/multi-
family . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Available-for-sale securities at fair value . . . . .
Assets related to discontinued operations . . . . .
Mortgages payable(5) . . . . . . . . . . . . . . . . . . .
Junior subordinated notes . . . . . . . . . . . . . . . .
Total BRT Realty Trust shareholders’ equity . . .
$
$
(.76) $
.10
(.28) $
.63
(.16) $
.48
(.66) $
.35
$
.32
$
.35
.10
.45
$
$
(.62)
.04
(.58)
$734,620
635,612
23,181
$549,491
402,896
56,905
$385,956
190,317
78,245
$191,012
59,277
44,025
$186,266
55,843
58,497
32,390
—
2,017
482,406
37,400
$130,140
32,369
—
30,589
313,216
37,400
$138,791
55,252
1,249
37,057
169,284
37,400
$133,449
—
2,766
67,333
14,417
37,400
$129,063
—
10,270
49,215
12,557
40,815
$124,554
(1) The increases from 2012 through 2014 are due primarily to the operations of our multi-family
properties.
(2) The increases from 2012 through 2014 are due primarily to increased expenses (i.e., operating
expense, interest expense and depreciation and amortization) related to our multi-family property
activities. The increase in 2012 from 2011 is a result of, among other things, expenses associated
with our multi-family property activities and interest expense associated with Phases I and II of the
Newark Joint Venture financings.
(3) The increases from 2012 through 2014 are due to our multi-family property acquisitions and the
increase in 2012 from 2011 is due primarily to such acquisitions and the proceeds from the Newark
Joint Venture financings and New Markets Tax Credits transactions.
(4) The increases from 2012 through 2014 are due to our multi-family property acquisitions.
(5) Approximately $154.6 million of the increase from 2013 to 2014 and approximately $141.9 million
of the increase from 2012 to 2013 is due to the mortgage debt incurred in the multi-family
property acquisitions. Of the increase from 2011 to 2012, approximately $89.7 million and
$72.8 million is due to the multi-family mortgage debt and the Newark Joint Venture’s financing
transactions, respectively.
26
Funds from Operations; Adjusted Funds from Operations.
In view of our multi- family property activities, 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 (loss) (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
adjusting FFO for our straight-line rent accruals, restricted stock expense and deferred mortgage costs
(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 and capital improvements. 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 (loss) and cash
flows from operating, investing and financing activities. Management also reviews the reconciliation of
net income (loss) to FFO and AFFO.
27
The table below provides a reconciliation of net income (loss) determined in accordance with
GAAP to FFO and AFFO for each of the indicated years (amounts in thousands):
2014
2013
2012
2011
2010
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 . . . . . . . . . . . . . .
Adjustment for non-controlling interest . . . . . . . . . . . .
$ (9,454) $ 5,013
7,076
15,562
$4,430
1,992
$ 6,374
705
$(8,015)
662
34
20
—
—
62
64
— (6,250)
(1,549)
(4,012)
270
—
59
(792)
(600)
39
—
48
(1,346)
(335)
39
3,370
48
(1,937)
(313)
Funds from operations . . . . . . . . . . . . . . . . . . . . . .
2,178
4,388
5,359
5,485
(6,146)
Adjust for: straight line rent accruals . . . . . . . . . . . . .
Add: restricted stock expense . . . . . . . . . . . . . . . . . . .
Add: amortization of deferred mortgage costs . . . . . . .
Adjustment for non-controlling interest . . . . . . . . . . . .
(542)
805
1,825
(424)
(263)
691
1,371
(463)
(23)
757
580
(247)
(78)
847
161
(35)
323
834
161
(35)
Adjusted funds from operations . . . . . . . . . . . . . . .
$ 3,842
$ 5,724
$6,426
$ 6,380
$(4,863)
The table below provides a reconciliation of net income (loss) per common share (on a diluted
basis) determined in accordance with GAAP to FFO and AFFO.
2014
2013
2012
2011
2010
Net (loss) income 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 . . . . . . . . . . . . . . . . . . . . . .
Adjustment for non-controlling interest . . . . . . . . . . . . . . . . . . .
$ (.66) $ .35
.51
1.10
—
—
—
—
—
—
— (.44)
(.11)
(.28)
$ .32
.14
.02
—
—
(.06)
(.04)
$ .45
.05
—
—
—
(.10)
(.02)
Funds from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.16
.30
.38
.38
Adjustment for: straight line rent accruals . . . . . . . . . . . . . . . . .
Add: restricted stock expense . . . . . . . . . . . . . . . . . . . . . . . . . .
Add: amortization of deferred mortgage costs . . . . . . . . . . . . . . .
Adjustment for non-controlling interest . . . . . . . . . . . . . . . . . . .
— (.02) — (.01)
.06
.06
.01
.13
(.02)
(.03)
.05
.04
(.04)
.05
.10
(.03)
$(.58)
.05
—
.24
—
(.14)
(.02)
(.45)
.02
.06
.01
(.02)
Adjusted funds from operations . . . . . . . . . . . . . . . . . . . . . . .
$ .28
$ .40
$ .44
$ .42
$(.38)
28
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Overview
We are a REIT that during the past three years engaged in three principal business activities: the
ownership, operation and development of multi-family properties; the ownership, operation and
development of commercial and mixed use real estate assets; and real estate lending. During this
period, we commenced our multi-family property activities and de-emphasized our real estate lending
activities. As of November 1, 2014, we are not engaged in real estate lending and the financial
information (including our consolidated financial statements) included herein presents our real estate
lending activities as discontinued operations.
Our multi-family activities derives revenue primarily from tenant rental payments. Generally, these
activities involve our investment of 80% of the equity in a joint venture that acquires a multi-family
property, with the balance of the equity contributed by our joint venture partner. We commenced these
activities in 2012 and as of September 30, 2014, 2013 and 2012, we owned 27, 14 and five multi-family
properties, respectively, with 7,609, 3,786 and 1,452 units, respectively.
Our ownership, operation and development of commercial, mixed use and 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 involved in a project known as ‘‘Teachers Village’’—the project currently involves six buildings:
(cid:127) two buildings were completed in the summer of 2013 (i.e., Phase I of the project) and are
partially tenanted by three charter schools and a day care center;
(cid:127) three buildings—one completed in August 2014, one completed in December 2014 and one
anticipated to be completed by May 2015—when the third building is completed, these buildings
will provide approximately 29,140 square feet of retail space and 123 residential units
(i.e., Phase II of the project); and
(cid:127) one building, which will provide approximately 10,000 square feet of retail space and 81
residential units—the construction of this building will be funded from a portion of the financing
and New Markets Tax Credits proceeds in aggregate amount of $30.2 million obtained in
September 2014 (i.e., Phase III of the project).
The venture, which contemplates developing certain of its other properties located in Newark
(e.g., Market Street and some of the other land parcels at Teachers Village), is currently unprofitable
and it is anticipated that the activities will continue to be unprofitable at least until the Teacher’s
Village project is constructed fully 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 for its development activities and even if sufficient funding is obtained and construction
completed, that such activities will be profitable to us.
Our real estate lending activities involved originating and holding for investment short-term senior
mortgage loans secured by commercial and multi-family real estate properties. Revenue was generated
from interest income (i.e, the interest borrowers paid 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. These activities decreased over the past three years and we are no longer engaged in real
estate lending. Accordingly, these activities are presented as discontinued operations.
29
Net (loss) income attributable to common shareholders decreased by $14.5 million or 289% from
$5 million in 2013 to $(9.5) million in 2014. Net loss increased due to the (i) $7.5 million decrease in
income from discontinued operations due to our significantly reduced real estate lending activities and
(ii) inclusion in 2013 of $5.1 million of net income attributable to our other real estate segment due
primarily to the $5.5 million gain realized from sale of substantially all of our interest in a joint venture
that owns a leasehold interest in midtown, New York City. Net (loss) income for 2014 was favorably
impacted in our other real estate segment by a $2.6 million adjustment to non-controlling interest. This
adjustment is due to the add back of the minority partner’s share of interest expense due to a
non-recurring deferred interest payment to us by the Newark Joint Venture on $19.5 million of debt
(which is eliminated in consolidation). Net loss attributable to common shareholders from our multi-
family activities increased in 2014 primarily due to increased real estate operating expenses, interest
expense and depreciation and amortization expense related to the multi-family properties acquired in
2014 and the inclusion, for a full year, of such expenses related to the properties acquired in 2013.
2014 Developments
The following summarizes certain of our activities in 2014 and our financial condition at year-end:
(cid:127) we acquired for an aggregate purchase price of $205.2 million (including aggregate mortgage
debt of $144.7 million), 13 multi-family properties with an aggregate of 3,824 units and invested
equity of approximately $66.0 million in multi-family properties (i.e., $62.3 million through joint
ventures that acquired these properties and $3.7 million in an entity wholly-owned by us);
(cid:127) we originated $5.5 million of mortgage loans in 2014 compared to $70.3 million in 2013—as of
November 1, 2014, we are no longer engaged in real estate lending;
(cid:127) the Newark Joint Venture completed one of the three buildings contemplated by Phase II of the
Teachers Village project (the second building was completed in December 2014) and obtained an
aggregate of $30.2 million in debt and New Markets Tax Credits proceeds to fund, among other
things, Phase III of this project; and
(cid:127) we have cash and cash equivalents of approximately $23.2 million and approximately
$19.8 million, at September 30, 2014 and December 1, 2014, respectively;
Year Ended September 30, 2014 Compared to Year Ended September 30, 2013
Revenues
The following table compares our revenues for the years indicated:
(Dollars in thousands):
Rental and other revenue from real estate
2014
2013
Increase
(Decrease) % Change
properties . . . . . . . . . . . . . . . . . . . . . . .
Other income . . . . . . . . . . . . . . . . . . . . .
$65,254
1,141
$30,592
1,213
$34,662
(72)
Total revenues . . . . . . . . . . . . . . . . . . .
$66,395
$31,805
$34,590
113.3%
(5.9)
108.8%
Rental and other revenue from real estate properties. The components of the increase are:
(i) approximately $20.6 million from 13 multi-family properties acquired in 2014; (ii) approximately
$11.6 million due to the inclusion, for a full year, of nine properties that were owned for a portion of
2013; (iii) approximately $1.6 million primarily due to inclusion for a full year of rental income from
the commercial tenants at Teachers Village; and (iv) $925,000 primarily due to rental rate increases at
multi-family properties acquired prior to 2013.
30
We anticipate that rental income will increase in 2015 as the 2014 operating results only includes
multi- family and Newark Joint Venture rental income for a portion of such year due to the timing of
the acquisitions of multi-family properties and the lease, for a full year, of commercial space at
Teachers Village. Assuming, among other things, that rental and occupancy rates remain stable, and
without giving effect to any further acquisitions, we estimate that rental income in 2015 from our 27
multi-family properties and our Newark Joint Venture will be approximately $76.5 million
(i.e., $73.7 million from multi-family properties and $2.8 million from the Newark Joint Venture).
Expenses
The following table compares our expenses for the periods indicated:
(Dollars in thousands)
Operating expenses related to real estate
properties . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . .
Advisor’s fee, related party . . . . . . . . . . . .
Property acquisition costs . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . .
2014
2013
Increase
(Decrease) % Change
$37,067
20,670
1,801
2,542
6,324
15,576
$16,409
11,978
971
2,637
5,862
7,094
$20,289
8,692
830
(95)
462
8,482
123.6%
72.6
85.5
(3.6)
7.9
119.6
86.8%
Total expenses . . . . . . . . . . . . . . . . . . .
$83,980
$44,951
$39,029
Operating expenses related to real estate properties. The increase is due to (i) operating expenses of
$10.7 million from 13 multi-family properties acquired in 2014, (ii) $6.8 million to the inclusion, for a
full year, of operating expenses from nine multi-family properties acquired in 2013, and
(iii) $1.9 million to an increase in operating expenses at the Newark Joint Venture. Approximately
$1.1 million of the increase at the Newark Joint Venture is due to the commencement of operations at
the two buildings completed in September 2013 and $801,000 is due to the resumption of regular
management fees after a one-time reduction in 2013. Operating expenses will increase in 2015 because
2014 only includes such expense for a portion of such year, as a result of re-assessments with respect to
the 13 multi-family properties acquired in 2014 and real estate taxes at the properties acquired in 2014
may also increase as a result of such acquisitions. Assuming that operating expenses remain stable at
our 27 multi-family properties, we estimate that in 2015, operating expenses with respect to these
properties will be approximately $38.4 million, including $16.9 million attributable to the 13 properties
acquired in 2014.
Interest expense. The components of the increase are as follows: (i) $7.8 million is due to
mortgage interest expense on our multi-family properties (of which $4.7 million is due to mortgages on
the 13 multi-family properties acquired in 2014 and $3.1 million to the inclusion, for a full year, of the
expense associated with nine multi- family properties acquired in 2013; and (ii) $645,000 due to the
decrease in capitalized interest as a result of the completion of the Phase I buildings in September
2013. Interest expense will increase in 2015 primarily because 2014 only includes interest expense for a
portion of 2014 with respect to the aggregate mortgage debt of $139 million incurred in connection
with the 2014 acquisitions of multi-family properties, and does not include the interest expense
associated with the Newark Joint Venture financing completed on September 30, 2014. We estimate
that our aggregate 2015 interest expense will be approximately $23.1 million (i.e., $15.9 million,
$5.4 million and $1.8 million attributable to our multi-family properties, the Newark Joint Venture’s
financing arrangements and the junior subordinated notes, respectively). Capitalized interest was
$1.3 million and $2.3 million in 2014 and 2013, respectively.
31
Advisor’s fee, related party. The fee, calculated based on invested assets, increased primarily due to
the purchase of multi-family properties in 2014 and 2013. Approximately $215,000 and $831,000 of the
fees paid to the advisor is recorded in discontinued operations for 2014 and 2013, respectively.
General and administrative expense. The increase is due primarily to increased time spent by our
full-time personnel on multi-family properties activities and the recording, particularly for 2013, of the
expense related to our real estate lending activities in discontinued operations. General and
administrative expense is allocated between our two segments in 2014 and 2013 in proportion to the
estimated time spent by such personnel on such segments.
Depreciation and amortization. The components of the increase are as follows: (i) $3.2 million is
due to the 13 multi-family properties acquired in 2014, (ii) $4.4 million is due to the inclusion, for a
full year, of nine multi-family properties acquired in 2013 and (iii) $781,000 is due to the
commencement of depreciation with respect to the two Phase I buildings at Teachers Village completed
in August/September 2013. We estimate that in 2015, depreciation and amortization relating to our 27
multi-family and Newark Joint Venture properties will be approximately $19 million.
Other revenue and expense items
The following table compares other revenue and expense items for the years indicated:
(Dollars in thousands)
$ 198
Equity in earnings of unconsolidated ventures . .
$19
Gain on sale of available-for-sale securities . . . . —
530
Gain on sale of partnership interest . . . . . . . . . — 5,481
2014
2013
Increase
(Decrease) % Change
$ (179)
(530)
(5,481)
(90.4)%
(100.0)
(100.0)
$19
$6,209
$(6,190)
99.7%
Equity in earnings of unconsolidated joint ventures. The decrease is primarily due to the inclusion
in 2013 of the equity in earnings of a joint venture. We sold substantially all of our interest in this joint
venture in 2013.
Gain on sale of available-for-sale securities. The decrease is due to the inclusion in the prior year
of gains from the sales of securities. There were no sales in 2014.
Gain on sale of partnership interest.
In July 2013, we sold substantially all of our interest in a joint
venture that owns a leasehold interest in a property in Manhattan, NY, and recognized a gain of
$5.5 million. There was no corresponding gain in 2014.
Discontinued Operations
Discontinued operations primarily reflects our real estate lending activities. Discontinued
operations were $1.4 million in 2014 compared to approximately $9 million in 2013. The decrease is
primarily due to significantly decreased real estate lending activities.
32
Year Ended September 30, 2013 Compared to Year Ended September 30, 2012
Revenues
The following table compares our revenues for the years indicated:
(Dollars in thousands):
Rental and other revenue from real estate
2013
2012
Increase
(Decrease) % Change
properties . . . . . . . . . . . . . . . . . . . . . . .
Other income . . . . . . . . . . . . . . . . . . . . . .
$30,592
1,213
$8,675
1,218
$21,917
(5)
Total revenues . . . . . . . . . . . . . . . . . . . .
$31,805
$9,893
$21,912
252.6%
(.4)
221.5%
Rental and other revenue from real estate properties. The components of the increase are:
(i) approximately $11.8 million from nine multi-family properties acquired in 2013; (ii) approximately
$7.3 million due to the inclusion, for a full year, of three properties that were only owned for a portion
of 2012; (iii) approximately $2.7 million from the consolidation of two properties that were
unconsolidated until August 1, 2012; and (iv) approximately $430,000 due to inclusion, beginning in
September 2013, of rental income from the tenants at Teachers Village. Partially offsetting the increase
was a $365,000 decrease due to the loss of several commercial tenants at the Newark Joint Venture’s
Market Street and Broad Street properties. The Market Street property is a development site and
accordingly, leasing space at this property, which leases are short-term in nature, is difficult.
Expenses
The following table compares our expenses for the periods indicated:
(Dollars in thousands)
Operating expenses related to real estate
properties . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . .
Advisor’s fee, related party . . . . . . . . . . . .
Property acquisition costs . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . .
2013
2012
Increase
(Decrease) % Change
$16,409
11,978
971
2,637
5,862
7,094
$ 6,042
3,778
420
2,407
2,739
2,004
$10,367
8,200
551
230
3,123
5,090
171.6%
217.0
131.1
9.6
114.0
254.0
158.5%
Total expenses . . . . . . . . . . . . . . . . . . .
$44,951
$17,390
$27,561
Operating expenses related to real estate properties. The increase is due to operating expenses of
$5.9 million from nine multi-family properties acquired in 2013, $3.4 million is due to the inclusion, for
a full year, of operating expenses from three multi-family properties acquired in 2012 and $1.6 million
is due to the consolidation of two multi-family properties that were unconsolidated until August 2012.
This was partially offset by a $538,000 reduction in operating expenses at the Newark Joint Venture
primarily due to reduced management fees paid to its manager/developer as a result of a retroactive
change, effective February 2012, in the management agreement.
Interest expense. The components of the increase are as follows: (i) $5.2 million is due to the
mortgage interest expense on our multi- family properties (of which $2.7 million is due to mortgages on
the nine multi-family properties acquired in 2013, $1.9 million is due to the inclusion, for a full year, of
interest expense associated with three multi- family properties acquired in 2012, and $707,000 is due to
the interest expense associated with two multi-family joint ventures that were unconsolidated until
August 2012); (ii) $1.9 million is due to the inclusion, for a full year, of the interest expense related to
33
the Newark Joint Venture’s 2012 financings; and (iii) $592,000 is due to the increase, in August 2012, of
the annual interest rate on the junior subordinated notes from 3% to 4.9%. Capitalized interest was
$2.3 million and $1.6 million in 2013 and 2012, respectively.
Advisor’s fee, related party. The fee, calculated based on invested assets, increased primarily due to
the purchase of 13 multi-family properties in 2013 and 2012. Approximately $831,000 and $684,000 of
the fees paid to the advisor is recorded in discontinued operations for 2013 and 2012, respectively.
Property acquisition costs. These costs were incurred in connection with our purchase of multi-
family properties. Such costs included acquisition fees (including fees paid to our joint venture partners
for sourcing transactions), brokerage fees, and legal, due diligence and other transactional costs and
expenses.
General and administrative expense. The change is due primarily to the manner in which this
expense was allocated between our segments. For 2013, this expense is allocated among our two
segments in proportion to the estimated time spent by our full-time personnel on such segments and in
2012 is allocated in proportion to the equity invested in each segment.
Depreciation and amortization. The components of the increase are as follows: (i) $2.6 million is
due to the nine multi-family properties acquired in 2013; and (ii) $2.3 million is due to the inclusion,
for a full year, of five multi-family properties acquired in 2012 (including two properties that were
unconsolidated until August 2012).
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 partnership interest
2013
2012
$ 198
530
5,481
$965
605
—
Increase
(Decrease) % Change
$ (766)
(75)
5,481
(79.5)%
(12.4)
*
* Not meaningful.
Equity in earnings of unconsolidated joint ventures. The decrease is primarily due to the inclusion
in 2012 of an $864,000 distribution from a joint venture in excess of its basis, resulting from the
refinancing of a mortgage, which was recorded as income. We sold substantially all our interest in this
joint venture in 2013.
Gain on sale of partnership interest.
In July 2013, we sold substantially all of our interest in a joint
venture that owns a leasehold interest in a property in Manhattan, NY, and recognized a gain of
$5.5 million. There was no corresponding gain in 2012.
Discontinued operations
Discontinued operations were approximately $9 million in 2013 compared to approximately
$7.5 million in 2012. The increase is primarily due to the recovery in 2013 of a $1 million of loan
amounts written off in prior years.
Credit Facility
Our $25 million revolving credit facility expired in June 2014. We made limited use of this facility
and its expiration did not and will not have a material adverse effect on us.
34
Disclosure of Contractual Obligations
The following table sets forth as of September 30, 2014 our known contractual obligations:
(Dollars in thousands)
Long-Term Debt Obligations(1) . . . . . . . . . . . . .
Capital Lease Obligations . . . . . . . . . . . . . . . . .
Operating Lease Obligation . . . . . . . . . . . . . . . .
Purchase Obligations(2)(3)(4) . . . . . . . . . . . . . .
Other Long-Term Liabilities Reflected on the
Payment due by Period
Less than
1 Year
$36,561
—
198
5,444
1 - 3
Years
$61,382
—
297
10,888
3 - 5
Years
$204,949
—
116
10,888
More than
5 Years
$396,096
—
349
—
Total
$698,988
—
960
27,220
Trust’s Balance Sheet Under GAAP . . . . . . . .
—
—
—
—
—
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$42,203
$72,657
$215,953
$396,445
$727,168
(1) Includes payments of principal (including amortization payments) and interest. Assumes that the
(i) qualified school construction bonds ($22.7 million as of September 30, 2014) issued in
connection with the Newark Joint Venture financing transactions will be refinanced in 2018 on the
terms currently in effect and (ii) interest rate on the junior subordinated notes after April 30, 2016
will be 2.15% per annum. See note 7 to our consolidated financial statements. The following table
sets forth as of September 30, 2014 information regarding the components of 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
$26,010
8,525
1,833
193
1 - 3
Years
$42,690
16,098
2,208
386
3 - 5
Years
$168,568
34,387
1,608
386
More than
5 Years
$251,886
92,135
50,735
1,340
Total
$489,154
151,145
56,384
2,305
Total . . . . . . . . . . . . . . . . . . .
$36,561
$61,382
$204,949
$396,096
$698,988
(2) Assumes that $474,000 will be paid annually pursuant to the shared services agreement and
$2,212,000 pursuant to the Advisory Agreement. Such sums reflect the amount paid in 2014
pursuant to such agreements. No amounts have been reflected as payable pursuant thereto after
five years as such amounts are not determinable. See ‘‘Business—Our Structure.’’
(3) Assumes that approximately $2.8 million of property management fees will be paid annually to the
managers of our multi-family properties. Such sum reflects the amount we anticipate paying in
2015 on the 27 multi-family properties we owned at September 30, 2014. These fees are typically
charged based on a percentage of rental revenues from a property. No amount has been reflected
as payable pursuant thereto after five years as such amount is not determinable.
(4) Excludes the purchase obligations of the Newark Joint Venture relating to the construction and
related costs of completing Phases II and III of the Teachers Village project. It is anticipated that
such costs will be covered by the application of the $22.8 million reflected on our consolidated
balance sheet as restricted cash—Newark. See also ‘‘—Liquidity and Capital Resources—Newark
Joint Venture.’’
35
Liquidity and Capital Resources
We require funds to acquire properties (including investments in joint ventures that acquire
properties), repay borrowings and pay operating expenses. In 2014, our primary sources of capital and
liquidity were our available cash (including restricted cash) and mortgage debt financing (an aggregate
of $170.8 million, of which $153.7 million was used to acquire multi-family properties). Our available
liquidity at September 30, 2014 and December 1, 2014, was approximately $23.2 million and
$19.8 million, respectively.
Multi-Family Properties
We anticipate that the operating expenses will be funded from cash generated from the operations
of these properties and that the $46.8 million of debt service (including $15.3 million of principal
payments) payable from 2015 through 2016 will be funded from the cash generated from operations of
these properties and the refinancing of the mortgage debt which mature during this period. The
mortgage debt with respect to these properties generally is non-recourse to us and our subsidiary
holding our interest in the applicable joint venture. At September 30, 2014, approximately $9.6 million
of restricted cash is available to fund improvements to these properties.
We anticipate that the construction and other costs associated with the Greenville, South Carolina
development project will be funded by capital previously contributed by our joint venture and us and
in-place construction financing of up to $38.6 million. See note 7 of the consolidated financial
statements.
Newark Joint Venture
The Newark Joint’s Venture’s capital resource and liquidity requirements through September 30,
2016 (excluding development activities, if any, with respect to Market Street or the other Newark Joint
Venture properties) are primarily operating expenses in excess of rental revenue, debt service
associated with Phases I-III of the Teachers Village project and the construction and related costs
associated with Phases II and III of this project.
The approximate $43.8 million required as of September 30, 2014 to complete Phases II and III of
the Teachers Village project will be funded by approximately $22.1 million of the $22.8 million reflected
as restricted cash-Newark on our consolidated balance sheet, and by approximately $21.7 million of
committed but unfunded loans and tax credits, which are not reflected on our consolidated balance
sheet. The foregoing sums are to be released or funded, from time to time upon satisfaction of
specified construction and permitting related conditions. Though we believe that the Newark Joint
Venture has sufficient funds to complete Phases II and III of the Teachers Village project, no assurance
can be given in this regard.
We also anticipate that approximate $17.7 million of debt service payable from 2015 through 2016
and the estimated aggregate operating expenses of $1.8 million for such years for the Teachers Village
project will be funded as follows:
(cid:127) $1.2 million from an interest reserve,
(cid:127) $2.3 million from the US Treasury interest subsidy on the qualified school construction bonds,
(cid:127) $8.1 million from New Jersey tax credits, and
(cid:127) the $8.9 million balance from funds generated from the operations of such properties (i.e., rental
revenues).
After giving effect to the approximately $1.45 million of annual rental payments to be generated
from the leases with the three charter schools and a day-care center, the Newark Joint Venture
36
estimates that it will require at least an additional $6.0 million in rental payments from commercial and
residential tenants at the Teachers Village buildings to cover debt service and operating expenses for
each of 2015 and 2016. While the Newark Joint Venture believes that the tenants of the leased retail
space at the four completed buildings will, subject to the satisfaction of certain requirements, be rent
paying by mid-2015, there is no assurance that such conditions will be satisfied, that the venture will be
able to lease the balance of the space at such buildings or the two remaining buildings under
construction and to be constructed and that if fully leased, the rental payments therefrom and from
rental revenues from the residential units will be sufficient to cover debt service and operating
expenses. We may make additional capital contributions to the Newark Joint Venture to cover the
shortfall, if any.
In December 2014 our board of trustees increased to $4 million the amount we can spend to
repurchase our common shares and extended the program through September 30, 2017. On
December 12, 2014, we agreed to purchase 345,081 of our common shares at a price of $7 per share or
a total of $2,416,000. This transaction will settle on December 17, 2014.
We believe we have sufficient funds to meet our operating expenses in 2015 and 2016 and to fund
any capital contributions required by the general operations of Newark Joint Venture. Our ability to
acquire and/or improve multi-family properties is limited by our available cash and the availability of
mortgage debt.
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 manager of a limited
liability company, we also consider the consolidation guidance relating to the rights of non-managing
members to assess whether any rights held by such members 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.
37
Carrying Value of Real Estate Portfolio
We conduct a quarterly review of each real estate asset owned by us and our joint ventures. This
review is conducted in order to determine if indicators of impairment are present on the real estate.
In reviewing the value of 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 real estate asset by using one
or more valuation techniques, such as comparable sales, discounted cash flow analysis or replacement
cost analysis. Our real estate assets and our joint ventures’ real estate assets are evaluated for
indicators of impairment. 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. Any impairment taken with respect to our real
estate assets reduces our net income, assets and shareholders’ equity to the extent of the amount of the
allowance, but it will not affect our cash flow until such time as the property is sold. No such charges
were taken in the past three years.
Revenue Recognition
We recognize rental income on an accrual basis, unless we make a judgment that impairment of
real estate owned renders doubtful collection of rent in accordance with the applicable lease. In making
a judgment as to the collectability of rent, we consider, among other factors, the status of the property,
the tenant’s financial condition, payment history and anticipated events in the future. Accordingly,
management must make a significant judgment as to whether to treat real estate owned as impaired. If
we make a decision to treat a ‘‘problem’’ or real estate asset as not impaired and therefore continue to
recognize the 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.
Purchase Price Allocations
We allocate the purchase price of properties to net tangible and identified intangible assets
acquired based on their fair values. In making estimates of fair values for purposes of allocating
purchase price, we use a number of sources, including independent appraisals that may be obtained in
connection with the acquisition or financing of the respective property, our own analysis of recently
acquired and existing comparable properties in our portfolio and other market data. We also consider
information obtained about each property as a result of its pre-acquisition due diligence, marketing and
leasing activities in estimating the fair value of the tangible and intangible assets acquired.
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
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
38
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 have not paid cash dividends since 2010. At December 31, 2013, we had a net operating loss
carry-forward of approximately $54 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 2015 and it is unlikely that we will be required to
pay a dividend for several years thereafter to maintain our REIT status. We do not expect to pay
dividends in the near future.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Our junior subordinated notes bear interest at a fixed rate through April 2016 and accordingly, the
effect of changes in interest rates would not currently impact the amount of interest expense that we
incur under such indebtedness.
With the exception of four mortgages (one which is subject to an interest rate swap agreement), all
of our mortgage debt is fixed rate. For the variable rate debt, an increase of 100 basis points in the
interest rate would have a negative annual effect of approximately $298,000 and a decrease of 100 basis
points in the interest rate would have a $69,000 positive effect on income before taxes.
As of September 30, 2014, 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, 2014, if there had been an increase of 100 basis points 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 $78,000. If there had been a decrease of 100 basis points 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 $104,000. These changes would not have
any impact on our net income or cash.
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.
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’s 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
39
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:
(cid:127) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the
transactions and dispositions of the assets of a company;
(cid:127) 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
(cid:127) 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, 2014. 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 (1992).
Based on its assessment, our management believes that, as of September 30, 2014, 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.
See ‘‘Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities—Issuer Purchases of Equity Securities.’’
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 2015 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 2015 Annual Meeting of Shareholders and is
incorporated herein by reference.
40
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 2015 Annual Meeting of Shareholders and is incorporated herein
by reference.
Equity Compensation Plan Information
The table below provides information as of September 30, 2014 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
—
—
—
328,025
328,025
(1) Excludes 271,925 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.
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 2015 Annual Meeting of Shareholders and is
incorporated herein by reference.
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 2015 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
41
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:
(cid:127) 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;
(cid:127) 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;
(cid:127) may apply standards of materiality in a way that is different from what may be viewed as
material to you or other investors; and
(cid:127) 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.
42
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* Amendment No. 2 dated as of March 12, 2014 and effective as of June 30, 2014 to Amended
and Restated Advisory Agreement between us and REIT Management, as amended.
(incorporated by reference to Exhibit 10.1 to our Form 10-Q for the period ended March 31,
2014)
10.4* 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).
10.5 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).
10.6* 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).
10.7* Form of Restricted Shares Agreement for the 2012 Incentive Plan (incorporated by reference
to Exhibit 10.1 to our Form 10-Q for the period ended December 31, 2013).
10.8* 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).
10.9* 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)).
10.10 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).
10.11 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).
10.12 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).
43
Exhibit
No.
Title of Exhibits
10.13 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).
10.14 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).
10.15 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).
10.16
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).
10.17 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).
10.18 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).
10.19
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).
10.20 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).
10.21 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)
10.22 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).
10.23 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).
10.24 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 (incorporated by
reference to exhibit 10.32 to our Form 10-K for the year ended September 30, 2012).
44
Exhibit
No.
Title of Exhibits
10.25 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. (incorporated by reference to exhibit 10.33 to our Form 10-K for the year ended
September 30, 2012).
10.26
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. (incorporated by reference
to exhibit 10.34 to our Form 10-K for the year ended September 30, 2012).
10.27 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.
(incorporated by reference to exhibit 10.35 to our Form 10-K for the year ended
September 30, 2012).
10.28 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. (incorporated by reference to
exhibit 10.36 to our Form 10-K for the year ended September 30, 2012).
10.29 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. (incorporated by reference to exhibit 10.37 to our Form 10-K for the year ended
September 30, 2012).
10.30 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. (incorporated
by reference to exhibit 10.38 to our Form 10-K for the year ended September 30, 2012).
10.31 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. (incorporated by reference to exhibit 10.39 to our
Form 10-K for the year ended September 30, 2012).
10.32 Loan Agreement dated as of September 11, 2012 between Goldman Sachs Bank USA, and
RBH-TRB Newark Holdings, LLC (incorporated by reference to exhibit 10.40 to our
Form 10-K for the year ended September 30, 2012).
10.33 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
(incorporated by reference to exhibit 10.41 to our Form 10-K for the year ended
September 30, 2012 (incorporated by reference to exhibit 10.41 to our Form 10-K for the year
ended September 30, 2012).
10.34 Loan Agreement made as of the 11th 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. (incorporated
by reference to exhibit 10.42 to our Form 10-K for the year ended September 30, 2012).
12.1
Schedule of Computation of Ratio of Earnings to Fixed Charges
45
Exhibit
No.
Title of Exhibits
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
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
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.
46
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 12, 2014
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/ ISRAEL ROSENZWEIG
Israel Rosenzweig
Chairman of the Board
December 12, 2014
/s/ JEFFREY A. GOULD
Jeffrey A. Gould
Chief Executive Officer, President and
Trustee (Principal Executive Officer)
December 12, 2014
/s/ KENNETH BERNSTEIN
Kenneth Bernstein
/s/ ALAN GINSBURG
Alan Ginsburg
/s/ FREDRIC H. GOULD
Fredric H. Gould
/s/ MATTHEW J. GOULD
Matthew J. Gould
/s/ LOUIS C. GRASSI
Louis C. Grassi
Trustee
Trustee
Trustee
Trustee
Trustee
47
December 12, 2014
December 12, 2014
December 12, 2014
December 12, 2014
December 12, 2014
Signature
Title
Date
/s/ GARY HURAND
Gary Hurand
/s/ JEFFREY RUBIN
Jeffrey Rubin
/s/ JONATHAN SIMON
Jonathan Simon
/s/ ELIE WEISS
Elie Weiss
Trustee
Trustee
Trustee
Trustee
December 12, 2014
December 12, 2014
December 12, 2014
December 12, 2014
/s/ GEORGE E. ZWEIER
George E. Zweier
Chief Financial Officer, Vice President
(Principal Financial and Accounting
Officer)
December 12, 2014
48
Item 8, Item 15(a)(1) and (2)
Index to Consolidated Financial Statements and Consolidated Financial Statement Schedules
Reports of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets as of September 30, 2014 and 2013 . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Operations for the years ended September 30, 2014, 2013 and
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Comprehensive (Loss) Income for the years ended September 30,
2014, 2013 and 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Shareholders’ Equity for the years ended September 30, 2014,
2013 and 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows for the years ended September 30, 2014, 2013 and
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Financial Statement Schedule for the year ended September 30, 2014:
Page No.
F-2
F-4
F-5
F-6
F-7
F-8
F-9
III—Real Estate Properties and Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . .
F-35
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.
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Trustees and Shareholders
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, 2014 and 2013 and the related consolidated statements
of operations, comprehensive (loss) income, shareholders’ equity, and cash flows for each of the three
years in the period ended September 30, 2014. In connection with our audits of the financial
statements, we have also audited the financial statement schedule 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 schedule 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, 2014,
and 2013 and the results of its operations and its cash flows for each of the three years in the period
ended September 30, 2014, in conformity with accounting principles generally accepted in the United
States of America.
Also, in our opinion, the financial statement schedule, 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, 2014, based on criteria established in Internal Control—Integrated
Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission
(‘‘COSO’’) and our report dated December 12, 2014 expressed an unqualified opinion thereon.
/s/ BDO USA LLP
New York, New York
December 12, 2014
F-2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Trustees and Shareholders
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, 2014, based on criteria established in Internal Control—Integrated
Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission
(the ‘‘COSO criteria’’). BRT Realty Trust and Subsidiaries 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, 2014, 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, 2014 and 2013, and the related consolidated statements of operations,
comprehensive (loss) income, shareholders’ equity, and cash flows for each of the three years in the
period ended September 30, 2014 and our report dated December 12, 2014 expressed an unqualified
opinion thereon.
New York, New York
December 12, 2014
/s/ BDO USA LLP
F-3
BRT REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except per share data)
ASSETS
Real estate properties, net of accumulated depreciation of $27,424 and $11,862 . .
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted cash—Newark . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted cash—multi-family . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred costs, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deposits and escrows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assets related to discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
September 30,
2014
2013
$635,612
23,181
22,835
9,555
13,515
12,273
15,632
2,017
$402,896
56,905
29,279
3,360
12,833
6,151
7,478
30,589
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$734,620
$549,491
LIABILITIES AND EQUITY
Liabilities:
Mortgages payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Junior subordinated notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments and contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$482,406
37,400
15,185
30,990
565,981
—
$313,216
37,400
7,769
25,848
384,233
—
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, 13,655 and 13,535 issued . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total BRT Realty Trust shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . .
Non-controlling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
40,965
166,209
(8)
(77,026)
130,140
38,499
40,606
165,763
(6)
(67,572)
138,791
26,467
Total Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
168,639
165,258
Total Liabilities and Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$734,620
$549,491
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,
2014
2013
2012
Revenues:
Rental and other revenue from real estate properties . . . .
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenses:
Operating expenses relating to real estate properties . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Advisor’s fees, related party . . . . . . . . . . . . . . . . . . . . . . .
Property acquisition costs . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative—including $623, $779 and
$705 to related party . . . . . . . . . . . . . . . . . . . . . . . . . .
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 partnership interest . . . . . . . . . . . . . . . . . . .
Loss from continuing operations . . . . . . . . . . . . . . . . . . . . .
Discontinued operations:
Income from discontinued operations . . . . . . . . . . . . . . . . . .
Gain on sale of loan . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of real estate assets . . . . . . . . . . . . . . . . . . .
Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . .
$
65,254
1,141
66,395
37,067
20,670
1,801
2,542
6,324
15,576
83,980
(17,585)
19
—
—
(17,566)
1,400
—
—
1,400
Net (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plus: net loss attributable to non-controlling interests . . . . . .
(16,166)
6,712
$
30,592
1,213
31,805
16,409
11,978
971
2,637
5,862
7,094
44,951
(13,146)
198
530
5,481
(6,937)
8,257
—
769
9,026
2,089
2,924
Net (loss) income attributable to common shareholders . . .
$
(9,454) $
5,013
$
8,675
1,218
9,893
6,042
3,778
420
2,407
2,739
2,004
17,390
(7,497)
965
605
—
(5,927)
3,493
3,192
792
7,477
1,550
2,880
4,430
Basic and diluted per share amounts attributable to common
shareholders:
Loss from continuing operations . . . . . . . . . . . . . . . . . . . . .
Income from discontinued operations . . . . . . . . . . . . . . . . . .
Basic and diluted (loss) earnings per share . . . . . . . . . . . .
Amounts attributable to BRT Realty Trust:
Loss from continuing operations . . . . . . . . . . . . . . . . . . . .
Income from discontinued operations . . . . . . . . . . . . . . . .
Net (loss) income attributable to common shareholders . . . .
Weighted average number of common shares outstanding:
Basic and diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
$
$
(.76) $
.10
(.66) $
( .28) $
.63
.35
$
( .16)
.48
.32
(10,854) $
1,400
( 3,244) $
8,257
(2,255)
6,685
(9,454) $
5,013
$
4,430
14,265,589
14,137,091
14,035,972
See accompanying notes to consolidated financial statements.
F-5
BRT REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(Dollars in thousands)
Year Ended September 30,
2014
2013
2012
$(16,166) $2,089
$1,550
—
(2)
(2)
(460)
98
(362)
182
(104)
78
1,628
2,896
Net (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive (loss) income:
Net unrealized (loss) gain on available-for-sale securities . . . . . . . . . . . . .
Unrealized (loss) gain on derivative instruments . . . . . . . . . . . . . . . . . . . .
Other comprehensive (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Comprehensive (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plus comprehensive loss attributable to non-controlling interests . . . . . . . .
(16,168)
6,712
1,727
2,909
Comprehensive (loss) income attributable to common shareholders . . . . . .
$ (9,456) $4,636
$4,524
See accompanying notes to consolidated financial statements.
F-6
BRT REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
Years Ended September 30, 2014, 2013 and 2012
(Dollars in thousands, except share data)
Shares of Additional
Beneficial
Interest
Paid-In
Capital
Accumulated
Other
Non
Comprehensive (Accumulated Treasury Controlling
Income (Loss)
Interests
Deficit)
Shares
Balances, September 30, 2011 . $44,981 $171,889
Restricted stock vesting . . . . . .
(319)
Compensation expense—
—
$ 278
—
$(77,015) $(11,070) $ 6,666
—
319
—
Total
$135,729
—
restricted stock . . . . . . . . . .
Contributions from
non-controlling interests . . . .
Distributions to non-controlling
interests . . . . . . . . . . . . . . .
Shares repurchased (139,507
—
—
—
758
—
—
shares) . . . . . . . . . . . . . . . .
(419)
(461)
Retirement of treasury shares
(1,380,978 shares) . . . . . . . .
Net income (loss) . . . . . . . . . .
Other comprehensive income . .
(4,142)
—
—
(6,609)
—
—
Comprehensive income . . . . . .
—
—
Balances, September 30, 2012 . $40,420 $165,258
(186)
Restricted stock vesting . . . . . .
Compensation expense—
186
restricted stock . . . . . . . . . .
Contributions from
non-controlling interests . . . .
Distributions to non-controlling
interests . . . . . . . . . . . . . . .
Net income (loss) . . . . . . . . . .
Other comprehensive loss . . . .
Comprehensive income . . . . . .
—
—
—
—
—
—
691
—
—
—
—
—
Balances, September 30, 2013 . $40,606 $165,763
Restricted stock vesting . . . . . .
(359)
Compensation expense—
359
$
restricted stock . . . . . . . . . .
Contributions from
non-controlling interests . . . .
Distributions to non-controlling
interests . . . . . . . . . . . . . . .
Net loss . . . . . . . . . . . . . . . . .
Other comprehensive loss . . . .
Comprehensive loss . . . . . . . .
—
—
—
—
—
—
805
—
—
—
—
—
—
—
—
—
—
—
78
—
—
—
—
—
—
—
758
— 11,243
11,243
— (1,460)
(1,460)
—
—
(880)
—
4,430
—
—
10,751
—
— (2,880)
—
—
—
—
—
1,550
78
1,628
$ 356
—
$(72,585)
—
— $13,569
—
—
$147,018
—
—
—
—
—
(362)
—
(6)
—
—
—
—
—
(2)
—
—
—
—
5,013
—
—
—
—
691
— 17,192
17,192
— (1,370)
(2,924)
—
—
—
—
(1,370)
2,089
(362)
1,727
$(67,572)
—
— $26,467
—
—
$165,258
—
—
—
—
(9,454)
—
—
—
—
805
— 22,062
22,062
— (3,318)
(6,712)
—
—
(3,318)
(16,166)
(2)
—
— (16,168)
Balances, September 30, 2014 . $40,965 $166,209
$
(8)
$(77,026) $
— $38,499
$168,639
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:
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Net (loss) income .
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Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
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Recovery of previously provided allowances .
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Depreciation and amortization .
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Amortization of deferred fee income .
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Amortization of restricted stock .
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Gain on sale of partnership interest
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Gain on sale of real estate assets .
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Gain on sale of available-for-sale securities
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Gain on sale of loan .
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Equity in earnings of unconsolidated joint ventures .
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Distribution of earnings of unconsolidated joint ventures
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(Increase) decrease in straight line rent
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Increases and decreases from changes in other assets and liabilities:
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Decrease in interest and dividends receivable .
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Increase in prepaid expenses
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(Increase) decrease in prepaid interest .
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Increase in accounts payable and accrued liabilities .
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Decrease in deferred costs .
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Increase in security deposits and other receivable .
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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-Newark .
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Net change in restricted cash-multi-family .
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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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Proceeds from the sale of partnership interest .
Purchase of available-for-sale securities .
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Distributions of capital from unconsolidated joint ventures .
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Contributions to unconsolidated joint ventures .
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Net cash used in investing activities .
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Cash flows from financing activities:
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Proceeds from borrowed funds
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Repayment of borrowed funds .
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Proceeds from mortgages payable .
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Mortgage principal payments
Increase in deferred borrowing costs
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Capital contributions from non-controlling interests .
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Capital distributions to non-controlling interests .
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Proceeds from sale of New Markets Tax Credits .
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Repurchase of shares of beneficial interest .
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Net cash provided by financing activities
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Net (decrease) increase 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,
2014
2013
2012
$ (16,166)
$
2,089
$
1,550
(10)
17,535
(393)
805
—
—
—
—
(19)
8
(569)
273
(548)
(1,016)
7,416
—
(12,167)
16
(4,835)
34,045
(5,533)
—
10
(205,220)
(43,130)
6,444
(6,195)
180
75
—
—
—
—
—
(1,066)
8,713
(1,820)
691
(5,481)
(769)
(530)
—
(198)
175
(264)
183
(440)
2,463
1,460
(519)
(3,995)
74
766
76,872
(70,288)
—
1,066
(185,453)
(33,860)
25,973
(3,001)
1,520
887
1,318
5,522
—
—
—
(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)
(364)
2,186
859
3,939
—
(1,634)
4,481
(275)
(219,324)
(179,444)
(136,978)
— $
—
170,767
(1,577)
(2,641)
22,062
(3,318)
5,142
—
3,000
(3,000)
147,957
(4,025)
(2,052)
17,192
(1,370)
—
—
3,500
(3,500)
162,508
(7,641)
(11,300)
11,243
(1,460)
25,848
(880)
190,435
157,702
178,318
(33,724)
56,905
20,976
77,881
33,856
44,025
$ 23,181
$ 56,905
$ 77,881
$ 19,700
$ 10,753
$
255
$ 28,615
$
$
$
$
133
— $
6,764
220
—
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Cash paid during the year for interest expense, including capitalized interest of $1,310, $1,820 and $1,373 in
.
.
2014, 2013 and 2012 .
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Cash paid during the year for income and excise taxes .
Acquisition of real estate through assumption of debt
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See accompanying notes to consolidated financial statements.
F-8
BRT REALTY TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 2014
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
(i) owns, operates and develops multi-family properties, (ii) owns, operates and develops commercial
and mixed use real estate assets and (iii) through October 31, 2014, originated and held for investment,
senior mortgage loans secured by commercial and multi-family real estate properties.
The multi-family properties are generally acquired with venture partners in transactions in which
the Trust contributes 50% to 90% of the equity.
BRT conducts its operations to qualify as a real estate investment trust, or REIT, for Federal
income tax purposes.
Principles of Consolidation
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. It was determined that the Trust is 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, other than the joint
venture which owns a multi-family property in Kennesaw, GA, 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 fewer voting rights. It was determined that the Trust is 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.
The joint venture that owns the Kennesaw, GA property was determined not to be a VIE but is
consolidated because the Trust has substantive participating rights in the entity giving it a controlling
financial interest in the entity.
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
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.
F-9
BRT REALTY TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
September 30, 2014
NOTE 1—ORGANIZATION, BACKGROUND AND SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Certain items on the consolidated financial statements for the prior years have been reclassified to
conform with the current year’s presentation including the reclassification of certain expenses from
general and administration to property acquisition costs and the reclassification of the Trust’s loan
segment operations and assets related to discontinued operations.
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.
In accordance with ASC Topic 740, the Trust believes that it has appropriate support for the
income tax positions taken and, as such, does not have any uncertain tax positions that, if successfully
challenged, could result in a material impact on the Trust’s financial position or results of operations.
The Trust’s income tax returns for the previous six years are subject to review by the Internal Revenue
Service.
Revenue Recognition
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.
Rental revenue from commercial properties including the base rent that each tenant is required to
pay in accordance with the terms of their respective leases, net of any rent concessions and lease
incentives is reported on a straight-line basis over the non-cancellable term of the lease.
Real Estate Properties
Real estate properties are stated at cost, net of accumulated depreciation, and include real
property acquired through acquisition, development or foreclosure.
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 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 the estimated useful lives of
the tangible assets. Intangible assets (and liabilities) are amortized over the remaining life of the
related lease at the time of acquisition. There were no unamortized value of in-place leases at
September 30, 2014. Expenditures for maintenance and repairs are charged to operations as incurred.
Real estate is classified as held for sale when management has determined that it has met the
appropriate criteria. 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.
F-10
BRT REALTY TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
September 30, 2014
NOTE 1—ORGANIZATION, BACKGROUND AND SIGNIFICANT ACCOUNTING POLICIES
(Continued)
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.
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 asset is less than the asset’s carrying
amount and that amount exceeds 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 decrease in the value of the property below its carrying value, 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. There were no indicators
of impairments identified during the years ended September 30, 2014 and 2013.
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. A construction project is considered substantially completed when it is available for
occupancy, but no later than one year from cessation of major construction activity. The Trust ceases
capitalization when the project is available for occupancy.
Equity Based Compensation
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
F-11
BRT REALTY TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
September 30, 2014
NOTE 1—ORGANIZATION, BACKGROUND AND SIGNIFICANT ACCOUNTING POLICIES
(Continued)
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
as cash flow hedges, the effective portion of changes in the fair value of the derivative is initially
reported in accumulated other comprehensive income (loss) 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 (loss) per share was determined by dividing net income (loss)
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 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.
Restricted Cash
Restricted cash—Newark and restricted cash—multi-family consist principally of cash held for
construction costs and property improvements at specific properties as required by certain loan
agreements.
Deferred Costs
Fees and costs incurred in connection with obtaining financing and structuring the New Markets
Tax Credits related to the Newark Joint Venture (Note 9) are deferred and amortized over the term of
the related debt obligations. Fees and costs paid related to the successful negotiation of leases are
deferred and amortized on a straight-line basis over the terms of the respective leases.
F-12
BRT REALTY TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
September 30, 2014
NOTE 1—ORGANIZATION, BACKGROUND AND SIGNIFICANT ACCOUNTING POLICIES
(Continued)
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 two reportable segments as of September 30, 2014:
a multi-family real estate segment and an other real estate segment. The multi-family real estate
segment includes the ownership, operation and development of the Trust’s multi-family properties and
the other real estate segment includes all activities related to the development, operation and
disposition of the Trust’s other real estate assets. In the years ended September 30, 2013 and 2012, the
Trust operated in a third segment, the loan and investment segment, which includes all activities related
to the origination and servicing of the Trusts loan portfolio and other investments. The operations and
assets related to this segment are reported as part of discontinued operations as the Trust no longer
operates in this segment.
New Pronouncements
In August 2014 the FASB issued ASU 2014-15, ‘‘Presentation of Financial Statements—Going
Concern (Subtopic 205—40): Disclosure of Uncertainties About an Entity’s Ability to Continue as a
Going Concern.’’ ASU 2014-15 requires management to evaluate whether there are conditions or
events that raise substantial doubt about the entity’s ability to continue as a going concern and to
provide certain disclosures when it is probable that an entity will be unable to meet its obligations as
they become due within one year after the date that the financial statements are issued. ASU 2014-15
is effective for the annual period ended December 31, 2016 and for annual periods and interim periods
thereafter with early adoption permitted. ASU 2014-15 is not expected to have a material impact on
the Trust’s consolidated financial statements.
In June 2014, the Financial Accounting Standards Board (‘‘FASB’’) issued Accounting Standards
Update (‘‘ASU’’) No. 2014-12, ‘‘Accounting for Share-Based Payments When the Terms of an Award
Provide That a Performance Target Could Be Achieved after the Requisite Service Period.’’
ASU 2014-12 provides explicit guidance on how to account for share-based payments that require a
specific performance target to be achieved which may be achieved after an employee completes the
requisite service period. ASU 2014-12 is effective for periods beginning after December 15, 2015 and
may be applied either prospectively or retrospectively. ASU 2014-12 is not expected to have a material
impact on the Trust’s consolidated financial statements.
F-13
BRT REALTY TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
September 30, 2014
NOTE 1—ORGANIZATION, BACKGROUND AND SIGNIFICANT ACCOUNTING POLICIES
(Continued)
In May 2014, the FASB issued ASU No. 2014-09, ‘‘Revenue from Contracts with Customers’’,
which supersedes nearly all existing revenue recognition guidance under GAAP. The core principle of
ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in
an amount that reflects the consideration to which an entity expects to be entitled for those goods or
services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more
judgment and estimates may be required within the revenue recognition process than are required
under existing GAAP. The standard is effective for annual periods beginning after December 15, 2016,
and interim periods therein, using either of the following transition methods: (i) a full retrospective
approach reflecting the application of the standard in each prior reporting period with the option to
elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially
adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote
disclosures). The Trust is currently evaluating the impact of its pending adoption of ASU 2014-09 on its
consolidated financial statements and has not yet determined the method by which the standard will be
adopted in 2017.
In April 2014, the FASB issued updated guidance that changes the criteria for determining which
disposals can be presented as discontinued operations and modifies related disclosure requirements.
Under the new guidance, a discontinued operation is defined as a disposal of a component or group of
components that is disposed of or is classified as held for sale and represents a strategic shift that has
(or will have) a major effect on an entity’s operations and financial results. The guidance is effective
prospectively as of the first quarter of calendar 2015, with early adoption permitted for new disposals
or new classifications as held-for-sale. The Trust early adopted this new guidance in the second quarter
of fiscal 2014 and it did not have any effect on the Trust’s consolidated financial statements.
NOTE 2—REAL ESTATE PROPERTIES
A summary of activity in real estate properties (by type) for the year ended September 30, 2014, is
as follows (dollars in thousands):
Multi-family(a) . . . . . . . . . . . . . . . .
Commercial/mixed use(b) . . . . . . . .
Land(c) . . . . . . . . . . . . . . . . . . . . .
Shopping centers/retail(d) . . . . . . . .
Co-op/Condo Apts . . . . . . . . . . . . .
September 30,
2013
Balance
$299,792
92,354
7,972
2,645
133
Additions
$205,220
—
—
—
—
Total real estate properties . . . . . . .
$402,896
$205,220
Capitalized
Costs and
Improvements
$20,684
22,297
—
137
12
$43,130
Depreciation,
Amortization
and other
Reductions
$(13,830)
(1,630)
—
(104)
(70)
September 30,
2014
Balance
$511,866
113,021
7,972
2,678
75
$(15,634)
$635,612
(a) Set forth below is information for the year ended September 30, 2014 regarding the Trust’s
purchases of multi-family properties through joint ventures. The Trust has an 80% equity interest
F-14
BRT REALTY TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
September 30, 2014
NOTE 2—REAL ESTATE PROPERTIES (Continued)
in each venture, except for the Columbus, OH property which is wholly owned, and the Greenville,
SC property, in which it has a 74% interest (dollars in thousands):
Location
Houston, TX . . . . .
Pasadena, TX . . . . .
Humble, TX . . . . . .
Humble, TX . . . . . .
Huntsville, AL . . . .
Columbus, OH . . . .
Indianapolis, IN . . .
Greenville, SC(i) . .
Nashville, TN . . . . .
Little Rock, AK . . .
Witchita, KS . . . . . .
Atlanta, GA . . . . . .
Houston, TX . . . . .
Other . . . . . . . . . . .
Purchase
Date
No. of
Units
Contract
Purchase
Price
Acquisition
Mortgage
Debt
Initial BRT
Equity
Property
Acquisition
Costs
10/4/13
10/15/13
10/15/13
10/15/13
10/18/13
11/21/13
1/21/14
1/31/14
4/2/14
4/2/14
4/2/14
6/26/14
7/8/14
798
144
260
160
208
264
400
N/A
300
172
496
350
272
—
$ 32,800
5,420
10,500
6,700
12,050
14,050
18,800
7,000
26,750
6,750
20,750
28,350
15,300
—
$ 24,100
4,065
7,875
5,025
9,573
10,651
14,500
—
17,300
4,101
13,863
22,165
11,475
—
$10,525
1,687
3,129
1,908
3,950
3,734
5,300
6,381
8,420
2,372
6,932
5,944
5,080
—
3,824
$205,220
$144,693
$65,362
$ 474
125
180
129
202
97
191
—
296
117
155
189
258
129
$2,542
(i) The Greenville, SC joint venture is developing a 360-unit multi-family property with
ground floor retail of approximately 10,000 square feet. The Trust has funded its required
capital contribution and as of September 30, 2014 had invested $9,631,000.
(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, residential, charter schools and surface parking aggregating approximately
565,000 square feet of commercial space and 61 residential apartment units (another 16,000 square
feet of commercial space and 62 residential apartment units are 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 7—Debt Obligations—Mortgages Payable. The
Trust made net capital contributions of $4,972,000 and $1,729,000 to this venture in the years
ended September 30, 2014 and 2013, 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 2014 contribution includes $2,489,000 for the payment of deferred interest on the
loan held by the Trust.
(c) Represents an 8.9 acre development parcel located in Daytona Beach, Florida acquired in
foreclosure.
(d) The Trust owns, 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
F-15
BRT REALTY TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
September 30, 2014
NOTE 2—REAL ESTATE PROPERTIES (Continued)
feet and, including all option periods, expires in 2045. The Trust has an 85% interest in this joint
venture.
The 2014 acquisitions have been accounted for as business combinations. The purchase prices were
allocated to the acquired assets and assumed liabilities based on management’s estimate of fair value of
these acquired assets and assumed liabilities at the dates of acquisition. The preliminary measurements
of fair value reflected below are subject to change. The Trust expects to finalize the valuations and
complete the purchase price allocations within one year from the dates of acquisition.
The following table summarizes the preliminary allocations of the purchase prices of assets
acquired and liabilities assumed during the year ended September 30, 2014 (dollars in thousands):
Preliminary
Purchase Price
Allocation
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings and Improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 55,110
150,110
Total Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$205,220
The following table summarizes the preliminary allocations of the purchase price of properties as
recorded as of September 30, 2013, and the finalized allocation of the purchase price, as adjusted, as of
September 30, 2014 (dollars in thousands):
Preliminary
Purchase Price
Allocation
$ 21,833
163,250
Adjustments
$ 2,367
(3,313)
Finalized
Purchase Price
Allocation
$ 24,200
159,937
—
—
—
946
—
—
—
946
—
—
$185,083
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings and Improvements . . . . . . . . . . .
Acquisition-related intangible assets (in
Acquired lease intangibles, net) . . . . . . .
Acquisition-related intangible liabilities (in
Acquired lease intangibles, net) . . . . . . .
Above-below market debt assumed . . . . . .
Total Consideration . . . . . . . . . . . . . . . . .
$185,083
F-16
BRT REALTY TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
September 30, 2014
NOTE 2—REAL ESTATE PROPERTIES (Continued)
A summary of the Trust’s multi-family properties by state as at and for the year ended
September 30, 2014, is as follows (dollars in thousands):
Location
Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tennessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Georgia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Florida . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
South Carolina . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Alabama . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Kansas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Indiana . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ohio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Arkansas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number
of Units
2014
Revenue
% of
Revenue
2,018
1,244
1,689
910
208
208
496
400
264
172
7,609
$14,346
12,705
12,328
10,909
2,348
1,628
1,677
1,996
1,851
574
24%
21
20
18
4
3
3
3
3
1
$60,362
100%
Future minimum rentals to be received by the Trust pursuant to non-cancellable operating leases
with terms in excess of one year, from commercial properties owned by the Trust at September 30,
2014, are as follows (dollars in thousands):
Year Ending September 30,
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amount
$ 3,715
3,673
2,826
2,611
2,645
37,060
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$52,530
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.
NOTE 3—IMPAIRMENT CHARGES
The Trust reviews each real estate asset, including those held through investments in
unconsolidated joint ventures, for impairment when there is an event or a change in circumstances
indicating that the carrying amount may not be recoverable. The Trust measures and records
impairment losses, and reduces the carrying value of properties, when indicators of impairment are
present and the expected undiscounted cash flows related to those properties are less than their
carrying amounts. In cases where the Trust does not expect to recover its carrying costs on properties
held for use, the Trust reduces its carrying costs to fair value, and for properties held for sale, the Trust
reduces its carrying value to the fair value less costs to sell. During the years ended September 30,
F-17
BRT REALTY TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
September 30, 2014
NOTE 3—IMPAIRMENT CHARGES (Continued)
2014, 2013, and 2012, no impairment charges were recorded. Management does not believe that the
values of any properties are impaired as of September 30, 2014.
NOTE 4—INVESTMENT IN UNCONSOLIDATED VENTURES
The Trust is a partner in unconsolidated ventures which own and operate two properties. The
Trust’s share of earnings in its unconsolidated joint ventures, was $19,000, $198,000 and $829,000 for
the years ended September 30, 2014, 2013 and 2012, 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, are treated as consolidated
subsidiaries of the Trust due to amendments to the operating agreements of the ventures that provided
the Trust control of these entities.
In the year ended September 30, 2013, the Trust sold substantially all of its interest in a joint
venture that owns a leasehold interest on a property in New York City. The Trust recognized a gain of
$5,481,000 on the sale.
NOTE 5—RESTRICTED CASH
Restricted cash represents funds that are being held for specific purposes and are therefore not
generally available for general corporate purposes. As reflected on the consolidated balance sheet:
(i) ‘‘Restricted cash—Newark’’ represents funds that are held by lenders for the construction of
residential/commercial buildings at the Newark Joint Venture, Teachers Village Project; and
(ii) ‘‘Restricted cash—multi-family’’ represents funds that are held by or on behalf of the Trust
specifically for capital improvements at multi-family properties.
NOTE 6—AVAILABLE-FOR-SALE SECURITIES
The Trust did not hold any available-for-sale securities at September 30, 2014 or 2013. 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,318
788
$3,939
3,334
Gain on sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 530
$ 605
There were no sales of available-for-sale securities during the year ended September 30, 2014.
Year ended
September 30,
2013
2012
F-18
BRT REALTY TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
September 30, 2014
NOTE 7—DEBT OBLIGATIONS
Debt obligations consist of the following (dollars in thousands):
Mortgages payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Junior subordinated notes . . . . . . . . . . . . . . . . . . . . . . . . . . .
$482,406
37,400
$313,216
37,400
Total debt obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$519,806
$350,616
September 30,
2014
2013
Mortgages Payable
The Trust has the following debt obligations outstanding as of the dates indicated all of which are
secured by the underlying properties (dollars in thousands):
Property
2014
2013
Rate
Maturity
September 30,
Yonkers, NY . . . . . . . . . . . . . . . . . . . . . . .
Palm Beach Gardens, FL . . . . . . . . . . . . . .
Melboune, FL . . . . . . . . . . . . . . . . . . . . . .
Marietta, GA . . . . . . . . . . . . . . . . . . . . . .
Lawrenceville, GA . . . . . . . . . . . . . . . . . . .
Lawrenceville, GA—supplemental
. . . . . . .
Collierville, TN . . . . . . . . . . . . . . . . . . . . .
North Charleston, SC . . . . . . . . . . . . . . . .
Cordova TN . . . . . . . . . . . . . . . . . . . . . . .
Decatur, GA . . . . . . . . . . . . . . . . . . . . . . .
Decatur, GA—supplemental . . . . . . . . . . . .
Panama City, FL . . . . . . . . . . . . . . . . . . . .
Houston, TX . . . . . . . . . . . . . . . . . . . . . . .
Pooler, GA . . . . . . . . . . . . . . . . . . . . . . . .
Hixson, TN . . . . . . . . . . . . . . . . . . . . . . . .
Houston, TX . . . . . . . . . . . . . . . . . . . . . . .
Kennesaw, GA . . . . . . . . . . . . . . . . . . . . .
Houston, TX . . . . . . . . . . . . . . . . . . . . . . .
Pasadena, TX . . . . . . . . . . . . . . . . . . . . . .
Humble, TX . . . . . . . . . . . . . . . . . . . . . . .
Humble, TX . . . . . . . . . . . . . . . . . . . . . . .
Huntsville, AL . . . . . . . . . . . . . . . . . . . . . .
Columbus, OH . . . . . . . . . . . . . . . . . . . . .
Indianapolis, IN . . . . . . . . . . . . . . . . . . . .
Greenville, SC(3) . . . . . . . . . . . . . . . . . . . .
Nashville, TN . . . . . . . . . . . . . . . . . . . . . .
Little Rock, AK . . . . . . . . . . . . . . . . . . . . .
Witchita, KS . . . . . . . . . . . . . . . . . . . . . . .
Witchita, KS . . . . . . . . . . . . . . . . . . . . . . .
$
$
1,767
44,874
7,627
7,297
4,652
1,605
25,680
17,716
19,248
8,046
2,474
5,532
13,200
26,400
8,137
6,493
35,900
24,100
4,065
7,875
5,025
9,573
10,528
14,500
5,828
17,300
4,063
10,384
3,372
F-19
5.25% April 2022
3.78% April 2019
3.98% April 2019
6.50% February 2015
4.49% March 2022
5.46% March 2022
3.91% July 2022
3.79% November 2022
3.71% December 2022
3.74% December 2022
5.74% December 2022
4.06% February 2023
3.95% May 2023
4.00% May 2023
4.29% July 2023
1,863
45,200
7,680
7,382
4,687
—
25,680
17,716
19,248
8,046
—
5,588
13,200
26,400
8,137
6,625 Libor + 3.18% February 2023
3.99% October 2018
35,900
4.85% October 2018
—
4.90% November 2018
—
4.90% November 2018
—
4.90% November 2018
—
4.99% November 2023
—
4.35% February 2045
—
4.77% February 2024
—
— Libor +1.95% January 2019
—
—
—
—
3.63% November 2022
3.93% March 2019
5.91% April 2020
4.06% May 2020
BRT REALTY TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
September 30, 2014
NOTE 7—DEBT OBLIGATIONS (Continued)
September 30,
Property
2014
2013
Rate
Maturity
Atlanta, GA . . . . . . . . . . . . . . . . . . . . . . .
Houston, TX . . . . . . . . . . . . . . . . . . . . . . .
65 Market St—Newark, NJ . . . . . . . . . . . .
909 Broad St—Newark, NJ . . . . . . . . . . . .
Teachers Village—Newark, NJ(1) . . . . . . . .
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 . . . . . . . . . .
Teachers Village—Newark, NJ . . . . . . . . . .
Teachers Village—Newark, NJ . . . . . . . . . .
Teachers Village—Newark, NJ . . . . . . . . . .
Teachers Village—Newark, NJ . . . . . . . . . .
22,165
11,475
900
5,728
22,748
4,250
938
—
1,804
15,700
5,250
18,147
2,180
5,100
2,000
10,260
500
—
—
900
5,936
22,748
4,250
963
211
1,832
15,700
5,250
14,762
2,212
5,100
—
—
—
3.87% July 2021
4.07% August 2021
7.00% January 2015
6.00% August 2030
5.50% December 2030
3.46% February 2032
2.00% February 2022
2.50% February 2014
(2) February 2034
Libor +3.00% August 2019
3.28% September 2042
8.65% December 2023
(2) August 2034
1.99% September 2019
15.00% September 2024
5.50% September 2021
3.46% September 2042
$482,406
$313,216
(1) 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
(2) This debt is to be serviced in full by annual payment-in-lieu of taxes (‘‘PILOT’’). These obligations
are not secured by real property.
(3) The joint venture that acquired and is developing the Greenville, SC development property has
access to construction financing of up to $38,623,000 which management anticipates will be
adequate to cover the entire cost of the project. The construction loan, which is to be funded as
and when customary construction financing conditions are met, is secured by a first mortgage on
the property.
F-20
BRT REALTY TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
September 30, 2014
NOTE 7—DEBT OBLIGATIONS (Continued)
Junior Subordinated Notes
At September 30, 2014 and 2013, 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%
Interest expense, which includes amortization of deferred costs relating to the junior subordinated
notes for the years ended September 30, 2014, 2013 and 2012, was $1,853,000, $1,853,000 and
$1,260,000, respectively.
The junior subordinated notes require interest only payments through the maturity date, at which
time repayment of all outstanding principal and interest are due.
NOTE 8—DEFERRED INCOME (NEW MARKETS TAX CREDIT TRANSACTION)
In connection with the Teachers Village project, on September 30, 2014, affiliates of JP Morgan
Chase (‘‘Chase’’) contributed $5,100,000, and on September 12, 2012 and February 3, 2012, affiliates of
Goldman Sachs (‘‘ Goldman’’) contributed $16,400,000 and $11,200,000, respectively, to special purpose
subsidiaries of the Newark Joint Venture and these subsidiaries received the proceeds from the sale of
New Markets Tax Credits (‘‘NMTC’’) for which the project qualified. Chase and Goldman are entitled
to receive tax credits against their qualified investments in the project over the seven years commencing
as of the dates of their respective contributions. 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.
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.
Included in deferred income on the Trust’s consolidated balance sheet at September 30, 2014 are
$30,990,000 of the Chase and Goldman contributions, which are net of fees of the NMTC transactions
and Newark Joint Venture financing transactions. These amounts will be recognized into income when
the obligations 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. The failure
of the Newark Joint Venture to comply with the requirements of the NMTC program may result in the
reversal of the tax credit benefits and the related obligation of the Newark Joint Venture to indemnify
the beneficiaries of such credits. 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, including the debt financing obtained by
the Newark Joint Venture contemporaneously with the NMTC transactions. At September 30, 2014 and
2013, these costs totaled $8.7 million and $9.6 million and are included in deferred costs on the
consolidated balance sheets.
F-21
BRT REALTY TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
September 30, 2014
NOTE 8—DEFERRED INCOME (NEW MARKETS TAX CREDIT TRANSACTION) (Continued)
The Trust determined that the special purpose subsidiaries 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, provide guarantees to Chase and
Goldman and the Trust’s obligation to absorb the losses of the VIE. Management also considered
Chase’s and 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 9—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, 2014, 2013 and 2012, the Trust recorded $155,000, $102,000
and $16,000, respectively, of state franchise tax expense, net of refunds, relating to the 2013, 2012 and
2011 tax years.
During the year ended September 30, 2014 and 2013, the Trust also paid $13,000 and $182,000,
respectively in alternative minimum tax which resulted from the use of net operating loss carryforwards
in tax years 2013 and 2012.
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 provisions, impairment charges, depreciation methods and carrying values.
The financial statement income is not expected to be materially different from income for tax
purposes for calendar 2014.
At December 31, 2013, the Trust had a net operating loss carry forward of $53,385,000. 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 2029.
NOTE 10—SHAREHOLDERS’ EQUITY
Distributions
During the year ended September 30, 2014, the Trust did not declare or pay any dividends.
F-22
BRT REALTY TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
September 30, 2014
NOTE 10—SHAREHOLDERS’ EQUITY (Continued)
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. As of September 30, 2014, 271,975 shares
were issued pursuant to this plan. An aggregate of 384,840 shares of restricted stock were granted
pursuant to the Trust’s 2009 equity incentive plan (the ‘‘Prior Plan’’) and have not yet vested. No
additional awards may be granted under the Prior Plan. The restricted shares that have been granted
under the 2012 Incentive Plan and the Prior Plan 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 sheets
until they vest, but are included in the earnings per share computation.
During the years ended September 30, 2014, 2013 and 2012 the Trust issued 140,600, 131,525 and
136,650 restricted shares, respectively, under the Trust’s equity incentive plans. The estimated fair value
of restricted stock at the date of grant is amortized ratably into expense over the applicable vesting
period. For the years ended September 30, 2014, 2013 and 2012, the Trust recognized $805,000,
$691,000 and $758,000 of compensation expense, respectively. At September 30, 2014, $2,078,000 has
been deferred as unearned compensation and will be charged to expense over the remaining vesting
periods. The weighted average vesting period is 2.47 years.
Changes in number of shares outstanding under the Trust’s equity incentive plans are shown below:
Years Ended September 30,
2014
2013
2012
Outstanding at beginning of the year . . . . . . . . . . . . .
Issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cancelled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
627,425
140,600
(300)
(119,500)
580,180
131,525
(22,000)
(62,280)
491,705
136,650
(7,250)
(40,925)
Outstanding at the end of the year . . . . . . . . . . . . . .
648,225
627,425
580,180
F-23
BRT REALTY TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
September 30, 2014
NOTE 10—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 per share
attributable to common shareholders:
Net (loss) income attributable to common shareholders . . . .
Denominator:
Denominator for basic earnings per share—weighted average
shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Denominator for diluted earnings per share—adjusted
2014
2013
2012
$
(9,454) $
5,013
$
4,430
14,265,589
14,137,091
14,035,972
weighted average shares and assumed conversions . . . . . . .
Basic (loss) earnings per share . . . . . . . . . . . . . . . . . . . . . . .
Diluted (loss) earnings per share . . . . . . . . . . . . . . . . . . . . .
$
$
Share Buyback and Treasury Shares
14,265,589
14,137,091
.35
.35
(.66) $
(.66) $
14,035,972
.32
.32
$
$
In September 2013, the Board of Trustees approved a share repurchase program authorizing the
Trust to spend up to $2,000,000 through September 2015 to repurchase its shares of beneficial interest.
As of September 30, 2014, no shares have been purchased under this program.
In December 2014, our Board of Trustees increased to $4 million the amount the Trust can spend
to repurchase our shares of beneficial interest and extended the program through September 30, 2017.
On December 12, 2014, the trust agreed to purchase 345,081 of our shares of beneficial interest at a
price of $7 per share, or a total of $2,416,000. The transaction will settle on December 17, 2014.
During the year ended September 30, 2012, 40,925 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.
NOTE 11—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, as amended, paid advisory fees for administrative services and investment advice. Fredric H.
Gould, a trustee and former Chairman of the Board of the Trust, is the sole shareholder of REIT
Management. Through December 31, 2011, 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
F-24
BRT REALTY TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
September 30, 2014
NOTE 11—ADVISOR’S COMPENSATION AND RELATED PARTY TRANSACTIONS (Continued)
months and (iii) the Trust is to pay REIT Management the following annual fees which are to be paid
on a quarterly basis:
(cid:127) .45% of the average book value of all real estate properties, excluding depreciation;
(cid:127) .25% of the average amount of the fair market value of marketable securities;
(cid:127) .15% of the average amount of cash and cash equivalents;
(cid:127) 1.0% of the average principal amount of earning loans; and
(cid:127) .35% of the average amount of the fair market value of non-earning loans;
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 $2,016,000, $1,802,000 and $1,104,000 for the years ended
September 30, 2014, 2013 and 2012, respectively, of which $215,000 $831,000 and $684,000, respectively
is reported as a component of discontinued operations.
Through December 31, 2012, the Trust’s borrowers also paid fees directly to REIT Management
based on loan originations, which generally were one-time fees payable upon funding of a loan, in the
amount of .5% of the total loan.
Management of certain properties owned by the Trust and certain joint venture properties is
provided by Majestic Property Management Corp., a corporation in which Fredric H. Gould 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 these properties. For the years ended September 30, 2014, 2013 and 2012, fees for these services
aggregated $28,000, $81,000, and $74,000, respectively.
Fredric H. Gould is also vice 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, Mr. Gould is an executive officer 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 statements of operations. During the years ended September 30, 2014,
2013 and 2012, allocated general and administrative expenses reimbursed by the Trust to Gould
Investors L.P. pursuant to the shared services agreement, aggregated $474,000, $633,000 and $705,000,
respectively.
NOTE 12—DISCONTINUED OPERATIONS
Effective November 1, 2014 the Trust no longer had any loans in its portfolio and has ceased
originating new loans. The loan origination and servicing activities have been reclassified to
discontinued operations on the consolidated statements of operations and balances related to this
activity have been reclassified as ‘‘Assets related to discontinued operations’’ on the consolidated
balance sheets.
F-25
BRT REALTY TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
September 30, 2014
NOTE 13—SEGMENT REPORTING
For the year ended September 30, 2014, management determined that the Trust now operates in
two reportable segments: a multi-family real estate segment which includes the ownership and
operation of its multi-family properties, and an other real estate segment, which includes the
ownership, operation and development of its other real estate assets; in particular, the Newark Joint
Venture. In the years ended September 30, 2013 and 2012 the Trust operated in a third segment which
included the origination and servicing of the Trust’s loan portfolio. The Trust no longer operates in this
segment and the operations of this segment are reported as discontinued operations.
The following table summarizes the Trust’s segment reporting for the year ended September 30,
2014 (dollars in thousands):
Revenues:
Rental and other revenues from real estate properties . . . . . . . . . .
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenses:
Operating expenses relating to real estate properties . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Advisor’s fee, related party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property acquisition costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total revenues less total expenses . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings of unconsolidated ventures . . . . . . . . . . . . . . . .
Loss from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . .
Plus: net loss attributable to non-controlling interests . . . . . . . . . . .
Net (loss) income attributable to common shareholders before
Multi-Family
Real Estate
Other
Real Estate
Total
$
$ 60,362
4
60,366
32,347
16,212
1,466
2,542
5,887
13,828
72,282
(11,916)
—
(11,916)
759
4,892
1,072
5,964
4,720
4,458
335
—
437
1,748
11,698
(5,734)
19
(5,715)
5,953
$ 65,254
1,076
66,330
37,067
20,670
1,801
2,542
6,324
15,576
83,980
(17,650)
19
(17,631)
6,712
reconciling adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (11,157)
$
238
(10,919)
Reconciling adjustments:
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net loss attributable to common shareholders . . . . . . . . . . . . . . . .
65
1,400
$ (9,454)
Segment assets at September 30, 2014 . . . . . . . . . . . . . . . . . . . . . .
$569,357
$163,246
F-26
BRT REALTY TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
September 30, 2014
NOTE 13—SEGMENT REPORTING (Continued)
The following table summarizes the Trust’s segment reporting for the year ended September 30,
2013 (dollars in thousands):
Multi-Family
Real Estate
Other
Real Estate
Total
Revenues:
Rental and other revenues from real estate properties . . . . . . . . . .
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenses:
Operating expenses relating to real estate properties . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Advisor’s fee, related party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property acquisition costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total revenues less total expenses . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings of unconsolidated ventures . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of partnership interest
(Loss) income from continuing operations . . . . . . . . . . . . . . . . . . .
Discontinued operations:
Gain on sale of real estate assets . . . . . . . . . . . . . . . . . . . . . . . . .
Income from discontinued operations . . . . . . . . . . . . . . . . . . . . . .
$
$ 27,265
—
27,265
13,570
8,193
750
2,637
5,490
6,119
36,759
(9,494)
—
—
(9,494)
—
—
Net (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plus: net loss attributable to non-controlling interests . . . . . . . . . . .
(9,494)
480
3,327
1,072
4,399
2,839
3,785
221
—
372
975
8,192
$ 30,592
1,072
31,664
16,409
11,978
971
2,637
5,862
7,094
44,951
(3,793)
198
5,481
(13,287)
198
5,481
1,886
(7,608)
769
769
2,655
2,444
769
769
(6,839)
2,924
Net (loss) income attributable to common shareholders before
reconciling adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (9,014)
$
5,099
(3,915)
Reconciling adjustments:
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of available-for-sale securities . . . . . . . . . . . . . . . . . .
Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to common shareholders . . . . . . . . . . . . . .
141
530
8,257
$ 5,013
Segment assets at September 30, 2013 . . . . . . . . . . . . . . . . . . . . . .
$312,962
$149,487
F-27
BRT REALTY TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
September 30, 2014
NOTE 13—SEGMENT REPORTING (Continued)
The following table summarizes the Trust’s segment reporting for the year ended September 30,
2012 (dollars in thousands):
Multi-Family
Real Estate
Other
Real Estate
Total
Revenues:
Rental and other revenues from real estate properties . . . . . . . . . . .
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenses:
Operating expenses relating to real estate properties . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Advisor’s fee, related party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property acquisition costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total revenues less total expenses . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in (loss) earnings of unconsolidated ventures . . . . . . . . . . . .
Loss from continuing operations
Discontinued operations:
Gain on sale of real estate assets . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . .
Income from discontinued operations . . . . . . . . . . . . . . . . . . . . . . .
5,464
—
5,464
2,644
1,629
230
2,407
1,069
1,276
9,255
(3,791)
(121)
(3,912)
—
—
$
3,211
878
4,089
3,398
2,149
190
—
1,670
728
8,135
(4,046)
1,086
$ 8,675
878
9,553
6,042
3,778
420
2,407
2,739
2,004
17,390
(7,837)
965
(2,960)
(6,872)
792
792
792
792
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plus: net loss attributable to non-controlling interests . . . . . . . . . . .
(3,912)
461
(2,168)
2,419
(6,080)
2,880
Net (loss) income attributable to common shareholders . . . . . . . . . .
$ ( 3,451)
$
251
( 3,200)
Reconciling adjustments: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of available-for-sale securities . . . . . . . . . . . . . . . . . . .
Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
340
605
6,685
$ 4,430
Segment assets at September 30, 2012 . . . . . . . . . . . . . . . . . . . . . .
$121,153
$151,420
F-28
BRT REALTY TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
September 30, 2014
NOTE 14—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, 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: At September 30, 2014 the estimated fair value of the Trust’s remaining loan
which carried a fixed rate of interest is equal to its carrying value assuming a market rate of interest of
10%. At September 30, 2013, the earning mortgage loans of the Trust which had 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 of between 12 and 13%. The Trust’s fixed rate earning
mortgage loans at September 30, 2013, have an estimated fair value approximately $11,000 greater than
their carrying value assuming a market rate of interest of 11% which reflects institutional lender yield
requirements.
Junior subordinated notes: At September 30, 2014 and 2013, the estimated fair value of the Trust’s
junior subordinated notes is less than their carrying value by approximately $22,527,000, and
$24,096,000, respectively based on market interest rates of 6.71% and 7.49%, respectively.
Mortgages payable: At September 30, 2014 and 2013,the estimated fair value of the Trust’s
mortgages payable is lower than their carrying value by approximately $9,451,000 and $10,615,000,
respectively, assuming market interest rates between 2.22% and 9.37% and 2.02% and 9.49%
respectively. 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. The fair values of the real estate loans and debt obligations are
considered to be Level 2 valuations within the fair value hierarchy.
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-29
BRT REALTY TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
September 30, 2014
NOTE 14—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, 2014 (dollars in thousands):
Fair Value
Measurements
Using Fair Value
Hierarchy
Level 1
Level 2
Carrying and
Fair Value
Financial assets:
Interest rate cap . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Liabilities:
Interest rate swap . . . . . . . . . . . . . . . . . . . . . . . .
$—
$ 8
—
—
$—
$ 8
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, and implied volatilities. At
September 30, 2014, these derivatives are included in 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, 2014, 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 15—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
$322,000, $310,000 and $338,000 during the years ended September 30, 2014, 2013 and 2012,
respectively. At September 30, 2014 and 2013, $48,000 and $80,000, respectively, remains unpaid and is
included in accounts payable and accrued liabilities on the consolidated balance sheet.
NOTE 16—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.
F-30
BRT REALTY TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
September 30, 2014
NOTE 16—DERIVATIVE FINANCIAL INSTRUMENTS (Continued)
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 (loss) on our consolidated
balance sheets 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 (loss) 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, 2014, 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
Amount
Rate
Maturity
Interest Rate Swap . . . . . . . . . . . . . . . . . . . . . .
$1,767,000
5.25% April 1, 2022
Non-designated Hedges
Derivatives not designated as hedges are not speculative and are used to manage the Trust’s
exposure to interest rate movements and other identified risks but do not meet the hedge accounting
requirements. Changes in the fair value of derivatives not designated in hedging relationships are
recorded directly in earnings and were equal to a loss $550 and $9,375 for the years ended
September 30, 2014 and 2013, respectively. As of September 30, 2014, the Trust had the following
outstanding derivatives that were not designated as hedges in qualifying hedging relationships (dollars
in thousands):
Interest Rate Derivative
Notional
Amount
Rate
Maturity
Interest Rate Caps . . . . . . . . . . . . . . . . . . . . . .
$24,700
1.0% October 1, 2014
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):
September 30, 2014
September 30, 2013
Balance Sheet Location
Fair
Value
Balance Sheet Location
Derivatives as of:
Other Assets . . . . . . . . . . . . . . . . . . . . . .
Accounts payable and accrued liabilities . .
$— Other assets . . . . . . . . . . . . . . . . . . . . . . .
$ 8 Accounts payable and accrued liabilities . . .
Fair
Value
$1
$6
F-31
BRT REALTY TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
September 30, 2014
NOTE 16—DERIVATIVE FINANCIAL INSTRUMENTS (Continued)
The following table presents the effect of the Trust’s derivative financial instrument on the
consolidated statements of comprehensive income (loss) for the years ended September 30, 2014 and
2013 (dollars in thousands):
Year Ended
September 30,
2014
2013
(Loss) amount of gain (loss) recognized on derivative in Other
Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(37)
$ 61
Amount of (loss) reclassified from Accumulated Other
Comprehensive (loss) income into Interest Expense . . . . . . . . . . . .
$(36)
$(37)
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, 2014 or
2013. During the twelve months ending September 30, 2015, the Trust estimates an additional $32,000
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, 2014, 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
$11,000. As of September 30, 2014, the Trust has not posted any collateral related to this agreement. If
the Trust had been in breach of this agreement at September 30, 2014, it could have been required to
settle it obligations thereunder at its termination value of $11,000.
F-32
BRT REALTY TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
September 30, 2014
NOTE 17—QUARTERLY FINANCIAL DATA (Unaudited)
1st Quarter
Oct. - Dec
2nd Quarter
Jan. - March
3rd Quarter
April - June
4th Quarter
July - Sept.
Total
For Year
2014
Revenues . . . . . . . . . . . . . . . . . . . . . . . . .
Expenses . . . . . . . . . . . . . . . . . . . . . . . . .
$14,078
18,681
$15,152
19,028
$17,766
21,959
$19,399
24,312
$ 66,395
83,980
Revenues less expenses . . . . . . . . . . . . . . .
Equity in earnings of unconsolidated joint
ventures . . . . . . . . . . . . . . . . . . . . . . . .
(Loss) from continuing operations . . . . . . .
Income from discontinued operations:
Discontinued operations . . . . . . . . . . . . . .
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . .
Plus: net loss attributable to
(4,603)
(3,876)
(4,193)
(4,913)
(17,585)
—
4
5
10
19
(4,603)
(3,872)
(4,188)
(4,903)
(17,566)
852
361
185
2
1,400
(3,751)
(3,511)
(4,003)
(4,901)
(16,166)
non-controlling interests . . . . . . . . . . . .
1,018
919
3,672
1,103
6,712
Net loss attributable to common
shareholders . . . . . . . . . . . . . . . . . . . . .
$ (2,733)
$ (2,592)
$ (331)
$ (3,798)
$ (9,454)
Basic and per share amounts attributable
to common shareholders . . . . . . . . . . . .
Continuing operations . . . . . . . . . . . . . .
Discontinued operations . . . . . . . . . . . .
Basic and diluted loss per share . . . . . . .
$
(.25)
.06
(.19)
(.21)
.03
(.18)
$
(.03)
.01
(.02)
$
(.27)
—
(.27)
$
$
(.76)
.10
(.66)
F-33
BRT REALTY TRUST AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
September 30, 2014
NOTE 17—QUARTERLY FINANCIAL DATA (Unaudited) (Continued)
1st Quarter
Oct. - Dec
2nd Quarter
Jan. - March
3rd Quarter
April - June
4th Quarter
July - Sept.
Total
For Year
2013
Revenues . . . . . . . . . . . . . . . . . . . . . . . . .
Expenses . . . . . . . . . . . . . . . . . . . . . . . . .
$ 5,951
9,829
$ 7,179
9,327
$ 8,517
12,029
$ 10,158
13,766
$ 31,805
44,951
Revenues less expenses . . . . . . . . . . . . . . .
Equity in earnings of unconsolidated joint
ventures . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of available- for-sale
securities . . . . . . . . . . . . . . . . . . . . . . .
. . . . .
Gain on sale of partnership interest
(Loss) income from continuing operations .
Income from discontinued operations:
Gain on sale of real estate assets . . . . . . .
Discontinued operations . . . . . . . . . . . . . .
Income from discontinued operations . . . .
Net (loss) income . . . . . . . . . . . . . . . . . . .
Plus: net loss attributable to
non-controlling interests . . . . . . . . . . . .
Net (loss) income attributable to common
(3,878)
(2,148)
(3,512)
(3,608)
(13,146)
61
—
—
68
482
—
54
—
—
(3,817)
(1,598)
(3,458)
—
1,635
1,635
(2,182)
878
—
2,274
2,274
676
334
509
2,789
3,298
(160)
681
15
198
48
5,481
1,936
260
1,559
1,819
3,755
1,031
530
5,481
(6,937)
769
8,257
9,026
2,089
2,924
shareholders . . . . . . . . . . . . . . . . . . . . .
$(1,304)
$ 1,010
$
521
$ 4,786
$ 5,013
Basic and per share amounts attributable
to common shareholders . . . . . . . . . . . .
Continuing operations . . . . . . . . . . . . . .
Discontinued operations . . . . . . . . . . . .
Basic and diluted (loss) earnings per
$
(.21)
.12
$
(.09)
.16
share . . . . . . . . . . . . . . . . . . . . . . . .
$
(.09)
$
.07
$
$
(.19)
.23
.04
$
$
.21
.12
.33
$
$
(.28)
.63
.35
NOTE 18—SUBSEQUENT EVENTS
Subsequent events have been evaluated and any significant events, relative to our consolidated
financial statements as of September 30, 2014 that warrant additional disclosure have been included in
the notes to the consolidated financial statements.
F-34
BRT REALTY TRUST AND SUBSIDIARIES
SCHEDULE III—REAL ESTATE PROPERTIES AND ACCUMULATED DEPRECIATION
SEPTEMBER 30, 2014
(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, 2014
Accumulated
Depreciation Construction Acquired
Date of
Date
Depreciation
Life For
Latest
Income
Statement
F
-
3
5
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
Commercial
.
Yonkers, NY. .
.
.
South Daytona, FL.
Newark, NJ .
.
.
Multi-Family Residential
.
.
.
.
Marietta, GA .
.
Lawrenceville, GA .
.
.
.
Palm Beach Gardens, FL .
.
.
.
Melbourne, FL .
.
.
Collierville, TN .
.
.
.
North Charleston, SC .
.
.
.
.
Cordova, TN .
.
.
.
Decatur, GA .
.
.
.
.
Panama City, FL .
.
.
.
.
.
Houston, TX .
.
.
.
.
.
Pooler, GA .
.
.
.
.
.
.
Houston, TX .
.
.
.
.
.
.
Hixon, TN .
.
.
Kennesaw, GA .
.
.
.
Houston, TX (Palms) .
.
.
Houston, TX (Ashwood) .
Humble, TX (Parkside) .
.
.
Humble, TX (Meadowbrook)
.
.
Huntsville, AL .
.
Columbus, OH .
.
.
Indianapolis, IN .
.
.
Greenville, SC .
.
Nashville, TN .
.
.
.
Little Rock, AK .
.
.
Witchita, KS .
.
.
Atlanta, GA .
.
.
Houston, TX .
.
.
.
Misc.(1) .
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
$
1,767
—
95,504
—
$ 10,437
17,088
$
4,000
—
19,033
—
—
$4,843
$
190
—
68,585
—
— $
$7,873
7,297
6,257
44,874
7,626
25,680
17,716
19,248
10,520
5,532
13,200
26,400
6,494
8,137
35,900
24,100
4,065
5,025
7,875
9,573
10,528
14,500
5,828
17,300
4,063
13,757
22,165
11,475
—
1,750
1,450
16,260
1,150
6,420
2,436
1,823
1,698
1,411
5,143
1,848
3,060
1,231
5,566
16,800
1,084
1,340
2,100
2,410
2,810
3,516
7,000
5,350
1,350
4,150
5,670
1,530
—
6,350
4,800
43,140
8,100
25,680
19,075
23,627
8,752
5,790
11,620
33,402
5,505
9,613
43,484
16,000
4,336
8,400
5,360
9,640
11,240
15,284
—
21,400
5,400
16,600
22,680
13,770
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2,301
1,018
1,433
1,539
502
610
457
905
512
248
365
265
52
577
1,835
184
229
309
681
46
309
12,526
116
28
132
40
689
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
65
—
—
—
—
—
—
—
7,972
21,931
1,750
1,450
16,260
1,150
6,420
2,436
1,823
1,698
1,411
5,143
1,848
3,060
1,231
5,566
16,800
1,084
1,340
2,100
2,410
2,810
3,516
7,000
5,350
1,350
4,150
5,670
1,530
—
$
4,190
—
95,491
$
4,190
7,972
117,422
$ 1,511
—
4,401
(c)
N/A
(c)
39 years
Aug-2000
Feb-2008 N/A
June-2008
39 years
8,651
5,818
44,573
9,639
26,182
19,685
24,084
9,657
6,302
11,868
33,767
5,770
9,665
44,061
17,835
4,520
8,629
5,669
10,321
11,286
15,593
12,591
21,516
5,428
16,732
22,720
14,459
75
10,401
7,268
60,833
10,789
32,602
22,121
25,907
11,355
7,713
17,011
35,615
8,830
10,896
49,627
34,635
5,604
9,969
7,769
12,731
14,096
19,109
19,591
26,866
6,778
20,882
28,390
15,989
75
947
518
4,373
1,011
1,949
1,532
1,707
686
490
711
1,833
313
484
1,751
562
142
275
176
323
313
347
—
357
91
278
189
154
—
30 years
Jan-2012
30 years
Feb-2012
30 years
Mar-2012
30 years
Mar-2012
30 years
June-2012
30 years
Oct-2012
30 years
Nov-2012
30 years
Nov-2012
Jan-2013
30 years
April-2013 30 years
April-2013 30 years
April-2013 30 years
30 years
May-2013
30 years
Sept-2013
30 years
Oct-2013
30 years
Oct-2013
30 years
Oct-2013
30 years
Oct-2013
30 years
Oct-2013
30 years
Nov-2013
30 years
Jan-2014
Jan-2014
30 years
April-2014 30 years
April-2014 30 years
April-2014 30 years
30 years
June-2014
30 years
July-2014
1972
1981
1970
1987
2000
2010
1986
1954
1987
1978
2008
1979
1989
2002
1974
1984
1983
1982
1985
1999
2007
2014
1985
1985
1999
N/A
—
Total .
.
.
.
.
.
.
.
.
.
.
.
.
.
$482,406
$133,881
$422,081
$4,843
$96,683
$7,938
$136,259
$526,777
$663,036
$27,424
(a)
(b)
(1)
Represents loans which are reported as real estate because they do not qualify for sale treatment under current accounting guidance.
Notes to the schedule:
(a) Total real estate properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Accumulated depreciation and amortization . . . . . . . . . . . .
$663,036
27,424
Net real estate properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
635,612
(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:
Balance at beginning of year . . . . . . . . . . . . . . . . .
Additions:
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital improvements . . . . . . . . . . . . . . . . . . . . . .
Capitalized development expenses and carrying
Year Ended September 30,
2014
2013
2012
$402,896
$190,317
$ 59,277
205,220
8,273
185,453
3,371
116,759
3,716
costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
34,857
30,947
12,622
Deductions:
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation/amortization/paydowns . . . . . . . . . . .
248,350
219,771
133,097
80
15,554
15,634
117
7,075
7,192
37
2,020
2,057
Balance at end of year . . . . . . . . . . . . . . . . . . . . .
$635,612
$402,896
$190,317
The aggregate cost of investments in real estate assets for Federal income tax purposes is
approximately $2,625 higher than book value.
F-36
BRT REALTY TRUST
60 Cutter Mill Road, Suite 303
Great Neck, NY 11021
(516) 466-3100
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
BRT REALTY TRUST
BRT Realty Trust is a business trust organized in Massachusetts. BRT is engaged in the ownership, operation and
BRT Realty Trust is a business trust organized in Massachusetts. BRT is engaged in the ownership, operation and
development of multi-family properties and the ownership, operation and development of commercial, mixed-use
development of multi-family properties and the ownership, operation and development of commercial, mixed-use
and other real estate. The multi-family properties are generally acquired with venture partners where the Trust
and other real estate. The multi-family properties are generally acquired with venture partners where the Trust
contributes 50% to 90% of the equity. BRT conducts its operations to qualify as a real estate investment trust, or REIT,
contributes 50% to 90% of the equity. BRT conducts its operations to qualify as a real estate investment trust, or REIT,
for Federal income tax purposes.
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
BRT’s shares of beneficial interest trade on the New York Stock Exchange under the symbol “BRT.” As of the close of
fiscal 2014 there were 14,303,187 shares outstanding and 967 holders of record.
fiscal 2014 there were 14,303,187 shares outstanding and 967 holders of record.
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
FINANCIAL HIGHLIGHTS
FINANCIAL HIGHLIGHTS
Year ended September 30,
Year ended September 30,
Rental and other revenue from real estate properties
Rental and other revenue from real estate properties
Operating expenses relating to real estate properties
Operating expenses relating to real estate properties
Other income
Other income
Total revenues
Total revenues
Interest expense
Interest expense
Advisor’s fee, related party
Advisor’s fee, related party
Property acquisition costs
Property acquisition costs
General and administrative expenses
General and administrative expenses
Depreciation and amortization
Depreciation and amortization
Total expenses
Total expenses
Total revenues less total expenses
Total revenues less total expenses
Equity in earnings of unconsolidated ventures
Equity in earnings of unconsolidated ventures
Gain on sale of available-for-sale securities
Gain on sale of available-for-sale securities
Gain on sale of partnership interest
Gain on sale of partnership interest
Discontinued operations
Discontinued operations
Net (loss) income
Net (loss) income
Plus: net loss attributable to non-controlling interests
Plus: net loss attributable to non-controlling interests
Net (loss) income attributable to common shareholders
Net (loss) income attributable to common shareholders
Loss from continuing operations
Loss from continuing operations
Income from discontinued operations
Income from discontinued operations
Basic and diluted earnings (loss) per share
Basic and diluted earnings (loss) per share
Weighted average shares - basic and diluted
Weighted average shares - basic and diluted
September 30,
September 30,
Total assets
Total assets
Real estate properties
Real estate properties
Cash and cash equivalents
Cash and cash equivalents
Restricted cash - Newark and multi-family
Restricted cash - Newark and multi-family
Mortgages payable
Mortgages payable
Junior subordinated notes
Junior subordinated notes
2014
2014
2013
2013
$
65,254 $ 30,592
65,254 $ 30,592
$
1,141
1,141
1,213
1,213
66,395
66,395
31,805
31,805
83,980
83,980
44,951
44,951
37,067
37,067
20,670
20,670
1,801
1,801
2,542
2,542
6,324
6,324
15,576
15,576
(17,585)
(17,585)
19
19
-
-
-
-
1,400
1,400
16,409
16,409
11,978
11,978
971
971
2,637
2,637
5,862
5,862
7,094
7,094
(13,146)
(13,146)
198
198
530
530
5,481
5,481
9,026
9,026
2,089
2,089
(16,166)
(16,166)
6,712
6,712
2,924
2,924
$ (9,454) $
$ (9,454) $
5,013
5,013
$
(0.76) $
(0.76) $
(0.28)
$
(0.28)
0.10
0.10
0.63
0.63
$
(0.66) $ (0.35)
(0.66) $ (0.35)
$
14,265,589
14,265,589
14,137,091
14,137,091
2014
2014
2013
2013
$
734,620 $
734,620 $
549,491
$
549,491
635,612
635,612
402,896
402,896
23,181
23,181
32,390
32,390
56,905
56,905
32,639
32,639
482,406
482,406
313,216
313,216
37,400
37,400
37,400
37,400
Total BRT Realty Trust shareholders’ equity
Total BRT Realty Trust shareholders’ equity
130,140
130,140
138,791
138,791