BRT Realty Trust (BRT) SEC Annual Report (10-K) for 2009

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

Commission file number 001-07172

BRT REALTY TRUST
(Exact name of registrant as specified in its charter)

516-466-3100
Registrant's telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:

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  o  No  ý

         Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes  o  No  ý

         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  ý  No  o

         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  o  No  ý

         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  o

         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):

         Indicate by check mark whether registrant is a shell company (as defined in Exchange Act Rule 12b-2). Yes  o  No  ý

         The aggregate market value of voting and non-voting common equity held by non-affiliates of the registrant was $25,726,000 based on the last sale price of the common equity on March 31, 2009, which is the last business day of the registrant's most recently completed second quarter.

         As of December 1, 2009, the registrant had 14,009,489 Shares of Beneficial Interest outstanding, excluding treasury shares.

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, 2010 are incorporated by reference into Part III of this Form 10-K.

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:

        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.

PART I

Item l.    Business.

General

        Our primary business is to originate and hold for investment senior mortgage loans secured by commercial and multi-family real estate property in the United States. The loans we originate generally have relatively high yields and are short term or bridge loans with a duration ranging from six months to one year. We generally lend at a floating rate of interest based on a spread over the prime rate and receive an origination fee for the loans we originate. We conduct our operations to qualify as a real estate investment trust, or REIT, for federal income tax purposes.

        From time-to-time we originate junior commercial and multi-family mortgage loans, participate as an equity investor in, and mortgage lender to, joint ventures which acquire income producing real estate property and, in the past, we have purchased securities of other REITs.

        The unprecedented disruptions in the credit markets and the economic recession have caused significant declines in the value of real estate property assets and loss of liquidity, both long and short term, from the capital markets. As discussed below, these conditions had an adverse effect on our business, requiring us to refocus our business activities from originating loans to servicing our loan portfolio, which included workout activities, pursuing foreclosure actions, acquiring title to real estate properties securing our loans and, subsequent to acquiring title, operating these properties and engaging in activities related to selling these properties.

        With respect to information regarding segment reporting, the information included in Note 14 to our Consolidated Financial Statements is hereby incorporated by 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 address is www.brtrealty.com .

The Effect of the Crisis in the Credit and Real Estate Markets on BRT

        The crisis in the credit and real estate markets and the recession had a material adverse effect on our business in Fiscal 2009, resulting in a net loss of $47,755,000 for the year ended September 30, 2009. The net loss contributed to the decrease in our shareholders' equity from $186,772,000 at September 30, 2008 to $121,227,000 at September 30, 2009. Specifically, the crisis in the credit and real estate markets and the recession negatively impacted our business in the following ways:

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Our Loan Portfolio

        At September 30, 2009, we had twenty senior loans outstanding, including loans held for sale, secured by properties located in five states, of which 76% were secured by properties in the New York metropolitan area. Our outstanding loans had an aggregate principal balance as of September 30, 2009 of $81,232,000, before allowance for possible losses of $1,618,000, and an aggregate contractual interest rate of 9.11%. At September 30, 2009, eleven of our loans, with a principal balance of $17,481,000, or 22% of our outstanding loans, represented senior purchase money mortgage loans provided by us to facilitate the sale of real estate properties acquired in foreclosure proceedings. With respect to the outstanding loans, including loans held for sale, at September 30, 2009, $19,074,000, or 23.5% of our loan portfolio, was not earning interest. This compares with a loan portfolio, including loans held for sale, at September 30, 2008 of $136,008,000, before allowance for possible losses of $6,710,000, with an average contractual rate of interest of 12.42%. Of the loans outstanding at September 30, 2008, $18,407,000, or 13.5% of our loan portfolio, was not earning interest. A decrease in new originations

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year-over-year (excluding our senior purchase money mortgage loans), combined with loan repayments, contributed to a 38% decrease in outstanding real estate loans year-over-year. Also contributing to the decrease in outstanding real estate loans year-over-year was the acquisition by us of real estate properties, securing our loans, in foreclosure proceedings.

        During the year ended September 30, 2009, we originated an aggregate of $12,704,000 of new loans, an aggregate of $20,207,000 loans were repaid, in whole or in part, and we provided $17,777,000 of senior purchase money mortgage loans to facilitate the sale by us of real estate properties acquired in foreclosure proceedings. Interest on our loans is payable to us monthly. Our loans usually require that our borrowers pay to us monthly escrow amounts that are adequate to pay, when due, real estate tax installments on the properties securing our loans. We may also require and hold funds in escrow for the payment of casualty insurance premiums. At September 30, 2009, our three largest loans outstanding, including loans held for sale and senior purchase money mortgages, of approximately $26,075,000, $16,238,000 and $9,975,000, respectively, each of which is secured by one property, represented approximately 13.5%, 8.4% and 5.2%, respectively, of our total assets. There were no other loans in our portfolio that represented more than 5% of our total assets as of September 30, 2009.

        With respect to certain loans originated by us, the borrower funds an interest reserve out of the loan proceeds, from which all or a portion of the interest payments due to us are made for a specified period of time. We generally lend at a floating rate of interest based on a spread over the prime rate, with a stated minimum interest rate. In Fiscal 2009, we provided senior purchase money mortgages with a fixed rate of interest to purchasers of properties acquired by us in foreclosure proceedings in order to facilitate the sale of these properties. Additionally, in certain loan work-out situations, we converted existing floating interest rate loans to fixed rate loans to reduce the risk of borrower defaults. As a result, the percentage of our loan portfolio which was at a floating rate of interest at September 30, 2009 was less than our historical percentage. At September 30, 2009, approximately 43% of our outstanding loans, including loans held for sale, had a floating rate of interest and 57%, including loans held for sale, were fixed rate mortgages.

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        The following table sets forth information regarding mortgage loans outstanding at September 30, 2009 (including senior purchase money mortgages and loans held for sale) before giving effect to deferred fee income:

(1) Includes a loan of $8,488,000 (representing a 50% parri passu interest in a loan of $16,976,000). The borrower filed for protection under Chapter XI of the Federal Bankruptcy Code in December 2009.
(2) This loan was paid in full in November, 2009.
(3) This loan was sold in December, 2009 for its approximate book value.

Loan Defaults

        At September 30, 2009, three loans, including one loan held for sale, each to a separate borrower, with an aggregate outstanding principal balance of $19,074,000, before allowances for possible losses of $1,618,000, were not earning interest.

        The following table sets forth the information concerning loans not earning interest at September 30, 2009:

(1) Subject to foreclosure proceedings at September 30, 2009.
(2) This loan was sold in December, 2009 for its approximate book value.

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