Non-Earning Loans Mounting at BRT Realty Trust

Bad Debt Rises to 21% of Loan Portfolio

BRT Realty Trust in Great Neck, NY, has found itself saddled with more than $55 million in bad debt tied to the slow down in residential sales activity.

BRT plans to reclassify four first mortgage loans as non-earning at the end of the current quarter (Sept. 30), unless interest that remains unpaid for Aug. 1 and Sept. 1 is brought current. The loans total $66.35 million, on which there is presently $44.79 million outstanding.

Foreclosure actions are being or will be pursued with respect to each of the loans.

Each of these four first mortgage loans are secured by an existing multifamily residential or hotel property, or unsold condominium units in Florida, that have converted or are being converted to condominium ownership.

As a result of the widely reported weakness in the single-family and condominium sales market, and the difficulty potential purchasers of residential condominium units are having in obtaining mortgage loans, the pace of sales has slowed considerably, and many BRT borrowers engaged in condominium conversions are being adversely affected, the company said.

The four loans are in addition to $23.38 million of non-earning loans reported by BRT as of June 30. Those loans also represent four first mortgage loans. Two of the properties, which secured mortgage loans with an aggregate principal balance of $11.6 million, are in foreclosure and are categorized as real estate owned.

The combined non-earning loans represent about 21.6% of BRT's gross loan portfolio and 16.6% of its total assets.

"All of the loans which are non-earning are first mortgage loans and the properties which serve as collateral for all these loans are properties which we are capable of taking over and operating," said Jeffrey Gould, president and CEO of BRT.

Gould added that "since our organization has experience and capability in real estate operations and management, the key for us is taking control of properties collateralizing non-earning loans as quickly as possible and, accordingly, we are diligently pursuing foreclosure actions and all other remedies which may be available to us." Written by Mark Heschmeyer

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