10-K 1 bsrt_10k.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2002 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission File Number 0-15465 Banyan Strategic Realty Trust ----------------------------------------------------- (Exact name of Registrant as specified in its charter) Massachusetts 36-3375345 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 55 East Monroe Street, Suite 3850 Chicago, IL 60603 (Address of principal executive offices) (Zip Code) Registrant's telephone number including area code (312) 424-3999 2625 Butterfield Road, Suite 101N, Oak Brook, IL 60523 (630) 218-7250 (Former address and telephone number of principal executive offices) Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered None None Securities registered pursuant to Section 12(g) of the Act: Shares of Beneficial Interest (Title of Class) 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 [ X ]. NO [ ]. Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K 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. [ X ] Shares of beneficial interest outstanding as of December 31, 2002: 15,373,806. The aggregate market value of the Registrant's shares of beneficial interest held by non-affiliates on such date was $3,096,000. DOCUMENTS INCORPORATED BY REFERENCE Exhibit index located on page 39 of sequentially numbered pages. TABLE OF CONTENTS PART I ITEM 1. BUSINESS . . . . . . . . . . . . . . . . . . . . . . 1 ITEM 2. PROPERTIES . . . . . . . . . . . . . . . . . . . . . 2 ITEM 3. LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . 3 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. . . . . . . . . . . . . . . . . 4 PART II ITEM 5. MARKET FOR THE REGISTRANT'S SHARES AND RELATED SHAREHOLDER MATTERS. . . . . . . . . . . . . 5 ITEM 6. SELECTED FINANCIAL DATA. . . . . . . . . . . . . . . 7 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. . . . 11 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK. . . . . . . . . . . . . . . . . . 13 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. . . . . 14 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE . . . . . . . 32 PART III ITEM 14. CONTROLS AND PROCEDURES. . . . . . . . . . . . . . . 32 ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. . . . . . . . . . . . . . . 32 SIGNATURES/CERTIFICATIONS . . . . . . . . . . . . . . . . . . . 33 PART I ITEM 1. BUSINESS Certain statements in this annual report that are not historical in fact constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on our current expectations, estimates and projections. These statements are not a guaranty of future performance. Without limiting the foregoing, words such as "believes," "intends," "anticipates," "expects," and similar expressions are intended to identify forward-looking statements which are subject to a number of risks and uncertainties, including, among other things: . resolution of existing litigation; and . potential inadequacy of our cash reserves. Actual results could differ materially from those projected in these forward-looking statements. See "Managements's Discussion and Analysis of Financial Condition and Results of Operations -Risk Factors" for a more complete discussion. GENERAL On January 3, 2003, we completed our termination and dissolution by transferring all of our assets and liabilities into the newly-formed BSRT Liquidating Trust (the "Liquidating Trust"). After the close of trading on January 2, 2003, our shareholders automatically received an uncertificated interest in the BSRT Liquidating Trust, equal to their prior interest in Banyan Strategic Realty Trust. The Liquidating Trust interests will not be listed on any stock exchange and will not be exchangeable or transferable, except by operation of law. The transfer into the Liquidating Trust constitutes a distribution, in kind, to our shareholders, the effect of which must be reported by our shareholders on their individual income tax returns for the year 2003 (filed in Spring of 2004). Prior to our termination and dissolution, we were a self-administered infinite life real estate investment trust ("REIT"), organized as a Massachusetts business trust. On January 5, 2001, we adopted a Plan of Termination and Liquidation (the "Plan"). The Plan called for the liquidation of all of our assets as soon as practical but provided that a liquidating trust could be established if, in the judgment of our Board of Trustees, all liabilities could not be discharged or adequately provided for within a two-year period. During the term of the Plan, we sold our entire real estate portfolio, realizing more than $220 million in gross proceeds and made a total of $5.45 per share in liquidating distributions to our shareholders. However, we remain involved in a lawsuit with our suspended President, Leonard G. Levine, that has been pending in the Circuit Court of Cook County since October of 2000 (the "Levine Litigation"). (See - Item 3. Legal Proceedings section below.) BUSINESS The transfer of our net assets to BSRT Liquidating Trust was completed in an effort to reduce costs and maximize the final distribution to the shareholders as we resolve the Levine Litigation. The Liquidating Trust took over the management of the lawsuit effective January 3, 2003 and will be administered by our First Vice President and General Counsel, Robert G. Higgins, as the Primary Liquidating Trustee, and Interim President and CEO, L. G. Schafran, as the Secondary Liquidating Trustee. The Primary Liquidating Trustee will be responsible for the operation of the Liquidating Trust including the day-to-day administrative tasks, while the Secondary Liquidating Trustee will act in an advisory role. We expect that the liquidating trust will have a three-year term, subject to extension, if necessary, depending upon the status of the assets of the trust at the end of the three years. If all of the assets are liquidated prior to the end of the three-year period, the Liquidating Trust will be terminated and make a final distribution to its beneficiaries. In October of 2002, we announced that no further distributions would be made to our shareholders until the litigation with Mr. Levine was completed. OTHER INFORMATION Our business operations are not seasonal. We had no real property investments located outside of the United States. We do not segregate revenue or assets by geographic region, since, in management's view, such a presentation would not be significant to an understanding of our business or financial results taken as a whole. As of December 31, 2002, we had seven employees, four of whom serve as executive officers. We reviewed and monitored compliance with federal, state and local provisions which have been enacted or adopted regulating the discharge of material into the environment, or otherwise relating to the protection of the environment. ITEM 2. PROPERTIES As of December 31, 2002, we did not own any properties. On May 17, 2001, we sold 24 of our 27 properties to affiliates of Denholtz Management Corporation ("Denholtz") for a total sales price of $185.3 million. On March 14, 2002, we acquired the interests of our partner, M&J Wilkow, Ltd., in the Northlake Tower Shopping Center property for a gross purchase price of $1.3 million. On April 1, 2002, we sold our University Square Business Center for a total sales price of $8.5 million. On May 1, 2002, we sold our 6901 Riverport Drive in Louisville, Kentucky for a total sales price of approximately $5.7 million to Riverport LLC and Riverport Group, LLC. On October 15, 2002, we sold our Northlake Tower Shopping Center in Atlanta, Georgia for a total sales price of approximately $20.4 million to Northlake Festival, LLC. ITEM 3. LEGAL PROCEEDINGS On August 14, 2000, we exercised our rights under the Trust's employment agreement with Mr. Leonard G. Levine by suspending him and placing him on leave from his position as president. Simultaneously, we initiated an arbitration proceeding as required under the employment agreement. On October 5, 2000, Mr. Levine filed an action in the Circuit Court of Cook County, Illinois asking the court to terminate the arbitration proceedings by reason of improper forum. On October 18, 2000, we filed a lawsuit against Mr. Levine in the Circuit Court of Cook County, Illinois. Our complaint alleged violations of Mr. Levine's duty of loyalty owed to the Trust. On December 6, 2000, we and Mr. Levine, through our respective attorneys, agreed to dismiss the arbitration action and Mr. Levine's lawsuit challenging the arbitration and further agreed to resolve all issues under Mr. Levine's employment contract within the lawsuit we have filed against Mr. Levine in the Circuit Court of Cook County (the "Employment Litigation"). On January 19, 2001, Mr. Levine filed an answer, affirmative defenses and counterclaim in the Employment Litigation. The pleading generally denies that Mr. Levine breached his fiduciary duties, raises various defenses and seeks a judgment in favor of Mr. Levine and against us on the counterclaim for money damages and also seeks a reinstatement to active employment status. Discovery in this case has commenced and is continuing. On May 2, 2001, Mr. Levine presented a motion for partial judgment on the pleadings, which was denied at a hearing on July 19, 2001. We filed a Third Amended Complaint on September 6, 2001, seeking, among other things, $300,000 in compensatory damages and $3 million in punitive damages against Mr. Levine in connection with various alleged breaches of fiduciary duty. The factual bases underlying the Third Amended Complaint include allegations that (i) Mr. Levine caused the Trust to pay on his account or reimburse him for expenses that were not reasonable, ordinary and necessary business expenses; (ii) during negotiations between the Trust and The Oak Realty Group, Inc. (an entity solely owned by Mr. Levine) Mr. Levine attempted to pressure the Trust into accepting Oak's offer to acquire the Trust by revealing to one of the trustees that Oak had entered into certain confidentiality and exclusivity agreements which had the effect of excluding potential purchasers and/or capital providers from purchasing or providing financing to a potential purchaser of the Trust, except through Oak; (iii) Mr. Levine's failure to disclose to our Board of Trustees a prior pattern and practice of obtaining unauthorized expense reimbursements allows the Board to rescind Mr. Levine's 1999 Employment Contract and legally estops Mr. Levine from obtaining any benefits under that contract and (iv) Mr. Levine's prosecution of a shareholder derivative action from January to April of 2001, which action was resolved by summary judgment in favor of the Trust, amounts to a separate breach of fiduciary duty by Mr. Levine. Mr. Levine has answered all counts. On May 7, 2001, we amended our answer to Mr. Levine's counterclaim in the Employment Litigation to add several affirmative defenses based upon Mr. Levine's breaches of his fiduciary duty of loyalty. The maximum potential liability in connection with Mr. Levine's contract (inclusive of incentives but exclusive of base salary) is estimated to be approximately $1.6 million. During the pendency of the litigation, we continue to pay a base salary to Mr. Levine in accordance with our contractual obligations. We are seeking recovery of these payments, among other recoveries, in the litigation. On December 17, 2001, we filed a motion for partial summary judgment in the Employment Litigation. This motion sought a ruling by the court that the Trust had "just cause" to terminate Mr. Levine's employment contract at the time we placed Mr. Levine on suspension on August 14, 2000. The motion was heard and denied on April 4, 2002. On the same date, the court extended the deadline for the completion of written fact discovery from March 31, 2002 to May 31, 2002. On March 18, 2002, Mr. Levine filed a motion for judgment on the pleadings which sought a judgment in favor of Mr. Levine on Counts I, IV and VI of our Third Amended Complaint. On May 1, 2002, Judge Siebel granted the motion (without prejudice) in regard to Count I and denied the motion in regard to Counts IV and VI. On May 9, 2002, after obtaining leave, we filed a Fourth Amended Complaint. This compliant amended Count I of the Third Amended Complaint to allege a breach of contract and added Count VII, which alleges an additional fiduciary breach by Mr. Levine related to an offer by a third party in the spring of 2000 to purchase a substantial portion of the Trust's assets. On June 14, 2002, Mr. Levine answered portions of and filed a motion to strike and dismiss portions of the Fourth Amended Complaint. Mr. Levine moved to dismiss Counts III and V, and to strike portions of Counts I, II, IV, VI, and VII. On August 20, 2002, Judge Siebel denied the motion. On December 10, 2002, the Court entered an order confirming that written fact discovery must be completed by January 31, 2003, but extending other discovery dates. Oral fact discovery must be concluded by March 31, 2003 and Mr. Levine's opinion witness disclosures must be made by March 1, 2003. The Court also set the case for a status conference on April 14, 2003. On December 18, 2002, after obtaining leave of Court, Mr. Levine filed an amended counterclaim. On January 8, 2003, we answered Counts I, II, and III of Mr. Levine's amended counterclaim, which concern alleged breaches of Mr. Levine's employment agreements with us. On January 7, 2003, we moved to dismiss Count IV of Mr. Levine's amended counterclaim. This count asks the Court to rewrite the 1999 Employment Agreement to include additional benefits, which Mr. Levine alleges were mistakenly omitted from the written agreement. Under the schedule set by the Court, Mr. Levine's opposition to the motion to dismiss is due February 4, 2003 and our reply in support is due February 18, 2003. The Court has set a hearing on the motion to dismiss for March 5, 2003 at 11:00 a.m. We believe that we have meritorious defenses and intend to pursue the case vigorously. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None PART II ITEM 5. MARKET FOR THE REGISTRANT'S SHARES AND RELATED SHAREHOLDER MATTERS Our shares were included for quotation on the NASDAQ National Market (symbol - BSRTS). On February 15, 2002, we were notified by Nasdaq that our shares would be subject to delisting if the closing price of our shares did not exceed the $1.00 minimum bid price for ten consecutive trading days during the 90-day period ending on May 15, 2002. In May, Nasdaq notified us of the imminent delisting. We appealed on the basis that the diminished stock price was not unintended, but rather was in keeping with our Plan of Termination and Liquidation, adopted in January of 2001. On July 11, 2002, we were notified by representatives of the Nasdaq Listing Qualifications Panel that our June 20, 2002 appeal of a determination to delist our shares of beneficial interest had been denied. Nasdaq offered to transfer our listing to its Small Cap Market, but we have declined, because of the $45,000 cost involved in a transfer of the listing. Accordingly, we consented to a delisting of our shares as of the opening of the market on July 12, 2002. From July 12, 2002 to January 2, 2003, our shares were quoted on the Over the Counter Bulletin Board ("OTCBB"). On January 2, 2003, all of our assets and liabilities were transferred to BSRT Liquidating Trust completing the termination and dissolution of the Trust. All of our shareholders automatically received an uncertified interest in BSRT Liquidating Trust equal to their prior interest in the Trust. The Liquidating Trust interests are not listed on any stock exchange and are not exchangeable or transferable, except by death or operation of law. The table below shows the quarterly high and low bid prices reported by NASDAQ and OTCBB and the amount of cash distributions we paid per share for the years ended December 31, 2002 and 2001. 2002 ---- Quarter Share Per Share Declaration Ended Price Distributions Date ------- ----- ------------- ----------- 3/31 High $0.75 $ -- Low $0.61 6/30 High $0.85 $0.30 5/01/02 Low $0.46 0.20 6/18/02 9/30 High $0.54 $ -- Low $0.25 12/31 High $0.39 $ -- Low $0.28 2001 ---- Quarter Share Per Share Declaration Ended Price Distributions Date ------- ----- ------------- ----------- 3/31 High $5.94 $ -- Low $5.31 6/30 High $5.85 $4.75 5/30/01 Low $1.04 9/30 High $1.19 $0.20 9/13/01 Low $0.91 12/31 High $1.04 $ -- Low $0.59 During 2002 and 2001, we paid distributions to common shareholders equal to $0.50 and $4.98 per share, respectively. All of the distributions represented a return of capital to common shareholders. During 2001, we also paid distributions to preferred shareholders of $2.93 per share. Our ability to make future distributions to our shareholders is dependent upon, among other things: . resolution of existing litigation; and . our level of operating expenses. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Risk Factors" for a more complete discussion. As of December 31, 2002, there were 2,981 record holders of shares of beneficial interest. ITEM 6. SELECTED FINANCIAL DATA (1)

QUARTERLY RESULTS OF OPERATIONS The following is a summary of the quarterly changes in net assets in liquidation for the year ended December 31, 2002.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL On January 3, 2003, we completed our termination and dissolution by transferring all of our assets and liabilities into the newly-formed BSRT Liquidating Trust (the "Liquidating Trust"). After the close of trading on January 2, 2003, our shareholders automatically received an uncertificated interest in the BSRT Liquidating Trust, equal to their prior interest in Banyan Strategic Realty Trust. The Liquidating Trust interests will not be listed on any stock exchange and will not be exchangeable or transferable, except by operation of law. The transfer into the Liquidating Trust constitutes a distribution, in kind, to our shareholders, the effect of which must be reported by our shareholders on their individual income tax returns for the year 2003 (filed in Spring of 2004). Prior to our termination and dissolution, we were a self-administered infinite life real estate investment trust ("REIT"), organized as a Massachusetts business trust. On January 5, 2001, we adopted a Plan of Termination and Liquidation (the "Plan"). The Plan called for the liquidation of all of our assets as soon as practical but provided that a liquidating trust could be established if, in the judgment of our Board of Trustees, all liabilities could not be discharged or adequately provided for within a two-year period. On May 17, 2001, we sold 24 of our 27 properties to affiliates of Denholtz Management Corporation ("Denholtz") for a total sales price of $185.3 million. On March 14, 2002, we acquired the interests of our partner, M&J Wilkow, Ltd., in the Northlake Tower Shopping Center property for a gross purchase price of $1.3 million. On April 1, 2002, we sold our University Square Business Center for a total sales price of $8.5 million. On May 1, 2002, we sold our 6901 Riverport Drive in Louisville, Kentucky for a total sales price of approximately $5.7 million to Riverport LLC and Riverport Group, LLC. On October 15, 2002, we sold our Northlake Tower Shopping Center in Atlanta, Georgia for a total sales price of approximately $20.4 million to Northlake Festival, LLC. We did not acquire or sell any properties during the year ended December 31, 2000. RESULTS OF OPERATIONS As a result of the adoption of the Plan, we began reporting on the liquidation basis of accounting effective for the quarter ended March 31, 2001. Therefore, operations for the years ended December 31, 2002 and 2001 are reported on the Consolidated Statement of Changes in Net Assets in Liquidation while the operations for the year ended December 31, 2000 are reported on a going concern basis on the Consolidated Statement of Operations. The Statement of Changes in Net Assets in Liquidation differs from the Statement of Operations in that we no longer amortize deferred financing fees and leasing commissions and we no longer record straight line rental income. We do, however, deduct leasing commissions in the computation of Operating Income. As a result of these differences, the results for the years ended December 31, 2002 and 2001 are not comparable to the results for the year ended December 31, 2000. Prior to reporting the operating activity for the year ended December 31, 2001, we adjusted our Shareholders' Equity as of December 31, 2000 as reported on a going concern basis to the liquidation basis of accounting. As a result, we recorded an adjustment of approximately $5.5 million related to the write off of certain intangible assets, specifically leasing commissions, deferred financing fees and straight line rents receivable, that were included in our total assets as of December 31, 2000. In addition, we recorded a charge of approximately $0.8 million for costs related to the liquidation and termination of the Trust and reclassed approximately $3.1 million of employees' notes from shareholders' equity to assets. COMPARISON OF YEAR ENDED DECEMBER 31, 2002 TO YEARS ENDED DECEMBER 31, 2001 AND 2000 For the year ended December 31, 2002, our Net Assets in Liquidation decreased by approximately $6.1 million from approximately $12.4 million at December 31, 2001 to approximately $6.3 million at December 31, 2002. This decrease is primarily the result of distributions paid to shareholders of approximately $7.7 million, operating loss of approximately $2.4 million and minority interest of approximately $0.1 million decreased by approximately $0.3 million of interest income on cash and cash equivalents and approximately $3.9 million of net gains on disposition of investment in real estate held for sale. The operating loss consists of property operating income after interest expense of approximately $1.0 million reduced by approximately $0.9 million of litigation expenses, approximately $1.7 million of general and administrative costs, and approximately $0.8 million of severance and termination costs. For the year ended December 31, 2001, our Net Assets in Liquidation decreased by approximately $51.8 million from approximately $64.2 million at December 31, 2000 to approximately $12.4 million at December 31, 2001. This decrease was primarily due to total distributions paid to shareholders of approximately $77.3 million. Offsetting this decrease were gains on disposition of investment in real estate (net of minority interest of approximately $6.4 million) of $25.8 million, operating income in the amount of approximately $3.0 million, receipt of forfeited earnest money of $1.0 million, recovery of losses on loans, notes and interest receivable of approximately $1.0 million and interest income on cash and cash equivalents of approximately $0.8 million, reduced by depreciation expense of approximately $3.2 million and valuation allowance of approximately $2.7 million. We recorded a provision for asset impairment in order to write down the net carrying value of our Riverport property to reflect the sale price agreed to in the sale agreement that we executed on February 20, 2002. The recovery of losses on loans, notes and interest receivable of approximately $1.0 million represents cash received in respect of our interest in a liquidating trust established for the benefit of the unsecured creditors of VMS Realty Partners and its affiliates. Our interest in this liquidating trust had previously been accorded no value in our financial statements. For the year ended December 31, 2000, we reported Net Income Available to Common Shares of approximately $2.0 million. Because of the differences between the liquidation basis of accounting and the going concern basis of accounting described above, this amount is not comparable to the changes in net assets in liquidation as reported for the year ended December 31, 2001. SEVERANCE AND TERMINATION COSTS In September 2000, we adopted an employee severance and retention program. We have since terminated all of our employees. The total expenses for the year ended December 31, 2000 include a charge of approximately $1.9 million for this program. These costs include a charge of approximately $0.3 million for base compensation payable to Mr. Leonard G. Levine from August 14, 2000 through December 31, 2001 under the terms of his employment agreement. Subsequent to September 30, 2000, we entered into employment agreements with Messrs. Schafran, Higgins and Teglia, and into separation agreements with Messrs. Hansen and Schmidt. Pursuant to these separation agreements and Mr. Teglia's new employment agreement, we paid a total of approximately $0.8 million in severance and termination costs in the fourth quarter of 2000. These costs are included in the $1.9 million severance and termination costs discussed above. Additional amounts of approximately $0.8 million and $0.6 million were accrued under the program for the years ended December 31, 2002 and 2001, respectively. LIQUIDITY AND CAPITAL RESOURCES At December 31, 2002, our total assets were approximately $7.6 million, a decrease of approximately $33.8 million from total assets at December 31, 2001 of approximately $41.4 million. Our liabilities totaled approximately $1.2 million at December 31, 2002, a decrease of approximately $27.8 million from approximately $29.0 million at December 31, 2001. At December 31, 2002, our net assets in liquidation were approximately $6.3 million (transferred to Liquidating Trust on January 3, 2003) compared to net assets in liquidation of approximately $12.4 million at December 31, 2001, a decrease of approximately $6.1 million. The significant decreases in total assets and total liabilities are primarily due to the sale of our remaining three properties in 2002, distributions paid to shareholders in the amount of approximately $7.7 million and distributions to minority interest of approximately $0.1 million. See "Results of Operations", above, for the discussion regarding the decrease of net assets in liquidation and the differences between the liquidation basis of accounting and the going concern basis of accounting. Cash and cash equivalents consist of cash and short-term investments. Our cash and cash equivalents balance was approximately $7.5 million at December 31, 2002 and 2001. Having made four liquidating distributions totaling $5.45 per share, we have established unrestricted cash reserves of approximately $7.5 million. We currently believe that these reserves will be sufficient to cover the net costs of operating the Trust and the Liquidating Trust discussed above through final liquidation, liquidation costs and contingent liabilities related to pending litigation. RISK FACTORS FACTORS PERTAINING TO PLAN OF TERMINATION AND LIQUIDATION THE OUTCOME OF PENDING LITIGATION WILL AFFECT THE TIMING AND AMOUNT OF DISTRIBUTIONS THAT WE WILL MAKE TO OUR SHAREHOLDERS. On November 30, 2001, we announced that our Board of Trustees determined that completion of our pending litigation against Mr. Levine, our suspended president and chief executive officer, will be the primary focus of our liquidation strategy going forward. Including costs, fees and potential damages, the suit and Mr. Levine's counterclaim involve amounts in excess of $2 million. We cannot predict with any certainty either the outcome of the pending litigation or the timing of its ultimate resolution. The outcome of the pending litigation will impact the amount of liquidating distributions that we will ultimately pay to our shareholders. The timing of the ultimate resolution of the pending litigation will affect the timing of future liquidating distributions as well as our ability to complete our liquidation in a timely manner. For a description of the pending litigation with Mr. Levine, see "Item 3 - Legal Proceedings." ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK We do not engage in any hedge transaction or in the ownership of any derivative financial instruments. As of December 31, 2002, we do not have any debt. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA BANYAN STRATEGIC REALTY TRUST INDEX TO CONSOLIDATED FINANCIAL STATEMENTS PAGE ---- Report of Independent Auditors 15 Consolidated Statements of Net Assets in Liquidation (Liquidation Basis), December 31, 2002 and 2001 16 Consolidated Statement of Changes in Net Assets in Liquidation (Liquidation Basis) for the year ended December 31, 2002 17 Consolidated Statement of Changes in Net Assets in Liquidation (Liquidation Basis) for the year ended December 31, 2001 18 Consolidated Statement of Income For the Year Ended December 31, 2000 19 Consolidated Statement of Shareholders' Equity For the Year Ended December 31, 2000 20 Consolidated Statement of Cash Flows For the Year Ended December 31, 2000 21 Notes to Consolidated Financial Statements 22 SCHEDULES NOT FILED: All schedules are omitted since the required information is not present or is not present in amounts sufficient to require submission of the schedule or because the information required is included in the consolidated financial statements and notes thereto. REPORT OF INDEPENDENT AUDITORS THE SHAREHOLDERS BANYAN STRATEGIC REALTY TRUST We have audited the consolidated statements of net assets in liquidation as of December 31, 2002 and 2001, and the related consolidated statements of changes in net assets in liquidation of Banyan Strategic Realty Trust for the years then ended. We have also audited the accompanying consolidated statements of income, shareholders' equity and cash flows for the year ended December 31, 2000. These financial statements are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. As described in Note 1, on January 5, 2001, the Trustees adopted a Plan of Termination and Liquidation under which the Trust will be dissolved. As a result, the Trust has changed its basis of accounting from a going concern to a liquidation basis effective January 1, 2001. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated net assets in liquidation of Banyan Strategic Realty Trust at December 31, 2002 and 2001 and the consolidated changes in net assets in liquidation for the years then ended and the consolidated results of operations, shareholders' equity and the cash flows for the year ended December 31, 2000 in conformity, with accounting principles generally accepted in the United States. ERNST & YOUNG LLP Chicago, Illinois January 17, 2003 BANYAN STRATEGIC REALTY TRUST CONSOLIDATED STATEMENTS OF NET ASSETS IN LIQUIDATION (LIQUIDATION BASIS) DECEMBER 31, 2002 AND 2001 (Dollars in thousands) ASSETS ------ 2002 2001 ---------- ---------- Investment in Real Estate Held for Sale: Land. . . . . . . . . . . . . . . . . $ -- $ 3,137 Building. . . . . . . . . . . . . . . -- 28,066 Building Improvements . . . . . . . . -- 2,984 ---------- ---------- -- 34,187 Less: Accumulated Depreciation . . . -- (5,764) ---------- ---------- -- 28,423 ---------- ---------- Cash and Cash Equivalents . . . . . . . 7,460 7,493 Restricted Cash - Capital Improvements. -- 212 Restricted Cash - Other . . . . . . . . -- 2,095 Interest and Accounts Receivable. . . . -- 212 Employees' Notes, Net of Allowance for Uncollectible Accounts of $7 at December 31, 2002 . . . . . . . . . . 66 412 Notes Receivable. . . . . . . . . . . . -- 2,264 Other Assets. . . . . . . . . . . . . . 48 282 ---------- ---------- Total Assets. . . . . . . . . . . . . . $ 7,574 $ 41,393 ========== ========== LIABILITIES ----------- Mortgage Loans Payable. . . . . . . . . $ -- $ 21,555 Bonds Payable . . . . . . . . . . . . . -- 3,900 Accrued Severance and Termination Costs 1,053 2,018 Accounts Payable and Accrued Expenses . 176 1,218 Accrued Real Estate Taxes . . . . . . . -- 23 Accrued Interest Payable. . . . . . . . -- 148 Unearned Revenue. . . . . . . . . . . . -- 85 Security Deposits . . . . . . . . . . . -- 87 ---------- ---------- Total Liabilities . . . . . . . . . . . 1,229 29,034 ---------- ---------- Net Assets in Liquidation . . . . . . . $ 6,345 $ 12,359 ========== ========== The accompanying notes are an integral part of the consolidated financial statements. BANYAN STRATEGIC REALTY TRUST CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION (LIQUIDATION BASIS) FOR THE YEAR ENDED DECEMBER 31, 2002 (Dollars in thousands) Net Assets in Liquidation at December 31, 2001. . . . $ 12,359 Net Gains on Disposition of Investment in Real Estate Held for Sale . . . . . . . . . . . . . 3,903 Interest Income on Employees' Notes . . . . . . . . . 18 Interest Income on Cash and Cash Equivalents. . . . . 266 Operating Loss. . . . . . . . . . . . . . . . . . . . (2,383) Recovery of Losses on Loans, Notes and Interest Receivable . . . . . . . . . . . . . . . . 80 Minority Interest in Consolidated Partnerships. . . . (76) Shares Cancelled. . . . . . . . . . . . . . . . . . . (74) Distributions to Shareholders . . . . . . . . . . . . (7,748) -------- Net Assets in Liquidation at December 31, 2002. . . . $ 6,345 ======== The accompanying notes are an integral part of the consolidated financial statements. BANYAN STRATEGIC REALTY TRUST CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION (LIQUIDATION BASIS) FOR THE YEAR ENDED DECEMBER 31, 2001 (Dollars in thousands) Shareholders' Equity at January 1, 2001 (Going concern basis) . . . . . . . . . . . . . . . $ 67,350 Adjustments to Liquidation Basis: Liquidation and Termination costs . . . . . . . . . (810) Elimination of Intangible Assets and Deferred Charges. . . . . . . . . . . . . . . . . (5,470) Reclassification of Employees' Notes. . . . . . . . 3,144 -------- Net Assets in Liquidation at January 1, 2001. . . . . 64,214 Net Gains on Disposition of Investment in Real Estate Held for Sale (Net of Minority Interests of $6,445). . . . . . . . . . . . . . . . 25,771 Interest Income on Employees' Notes . . . . . . . . . 135 Interests Income on Cash and Cash Equivalents . . . . 759 Forfeited Earnest Money . . . . . . . . . . . . . . . 1,000 Operating Income. . . . . . . . . . . . . . . . . . . 2,964 Provision for Asset Impairment. . . . . . . . . . . . (2,658) Recovery of Losses on Loans, Notes and Interest Receivable . . . . . . . . . . . . . . . . 970 Depreciation. . . . . . . . . . . . . . . . . . . . . (3,211) Minority Interest in Consolidated Partnerships. . . . (358) Issuance of Shares. . . . . . . . . . . . . . . . . . 91 Distributions Paid to Shareholders. . . . . . . . . . (77,318) -------- Net Assets in Liquidation at December 31, 2001. . . . $ 12,359 ======== The accompanying notes are an integral part of the consolidated financial statements. BANYAN STRATEGIC REALTY TRUST CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 2000 (Dollars in thousands, except per share data) REVENUE Rental Income . . . . . . . . . . . . . . . . . . . . $ 32,744 Operating Cost Reimbursement. . . . . . . . . . . . . 3,961 Miscellaneous Tenant Income . . . . . . . . . . . . . 437 Income on Investments and Other Income. . . . . . . . 654 -------- Total Revenue . . . . . . . . . . . . . . . . . . . . . 37,796 -------- EXPENSES Property Operating. . . . . . . . . . . . . . . . . . 4,587 Repairs and Maintenance . . . . . . . . . . . . . . . 3,979 Real Estate Taxes . . . . . . . . . . . . . . . . . . 2,823 Interest. . . . . . . . . . . . . . . . . . . . . . . 9,180 Ground Lease. . . . . . . . . . . . . . . . . . . . . 925 Depreciation and Amortization . . . . . . . . . . . . 6,923 General and Administrative. . . . . . . . . . . . . . 4,098 Amortization of Deferred Financing Costs. . . . . . . 292 Severance and Termination Costs . . . . . . . . . . . 1,873 -------- Total Expenses. . . . . . . . . . . . . . . . . . . . . 34,680 -------- Income Before Minority Interest and Extraordinary Item. . . . . . . . . . . . . . . . . . 3,116 Minority Interest in Consolidated Partnerships. . . . . (491) -------- Income Before Extraordinary Item . . . . . . . . . . . 2,625 Extraordinary Item. . . . . . . . . . . . . . . . . . . (42) -------- Net Income. . . . . . . . . . . . . . . . . . . . . . . 2,583 Less Income Allocated to Preferred Shares . . . . . . . (585) -------- Net Income Available to Common Shares . . . . . . . . . $ 1,998 ======== Basic and Diluted Earnings Available to Common Shares per weighted-average Common Share: Income before Extraordinary Item. . . . . . . . . . . $ 0.14 ======== Net Income. . . . . . . . . . . . . . . . . . . . . . $ 0.14 ======== The accompanying notes are an integral part of the consolidated financial statements. BANYAN STRATEGIC REALTY TRUST CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY FOR THE YEAR ENDED DECEMBER 31, 2000 (Dollars in thousands)

BANYAN STRATEGIC REALTY TRUST CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2000 (Dollars in thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net Income. . . . . . . . . . . . . . . . . . . . . . . $ 2,583 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Extraordinary Item, Net of Minority Interest. . . . . 42 Depreciation and Amortization . . . . . . . . . . . . 7,215 Minority Interest in Consolidated Partnerships. . . . 491 Net Change In: Restricted Cash - Other . . . . . . . . . . . . . . (7) Interest and Accounts Receivable. . . . . . . . . . (158) Other Assets. . . . . . . . . . . . . . . . . . . . (1,096) Accounts Payable and Accrued Expenses . . . . . . . 380 Accrued Interest Payable. . . . . . . . . . . . . . 61 Accrued Real Estate Taxes Payable . . . . . . . . . (10) Unearned Revenue. . . . . . . . . . . . . . . . . . (344) Security Deposits . . . . . . . . . . . . . . . . . 236 -------- Net Cash Provided By Operating Activities . . . . . . . 9,393 -------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to Investment in Real Estate. . . . . . . . (6,422) Restricted Cash - Capital Improvements. . . . . . . . 297 -------- Net Cash Used In Investing Activities . . . . . . . . . (6,125) -------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from Loans Payable . . . . . . . . . . . . . 10,500 Distributions To Minority Partners. . . . . . . . . . (430) Deferred Financing Costs. . . . . . . . . . . . . . . (159) Payment of Preferred Shares Issuance Costs. . . . . . (30) Repayment of Employees' Notes . . . . . . . . . . . . 94 Principal Payments on Mortgage Loans, Bonds Payable and Unsecured Loan Payable. . . . . . . . . . . . . (17,372) Distributions Paid to Shareholders. . . . . . . . . . (6,808) Payment of Preferred Distributions. . . . . . . . . . (585) Prepayment Penalties on Early Extinguishment of Debt. (6) Shares Issued, Net of Issuance Costs. . . . . . . . . 824 -------- Net Cash Used In Financing Activities . . . . . . . . . (13,972) -------- Net Decrease In Cash and Cash Equivalents . . . . . . . (10,704) Cash and Cash Equivalents at Beginning of Year. . . . . 13,097 -------- Cash and Cash Equivalents at End of Year. . . . . . . . $ 2,393 ======== Supplemental Information: Interest Paid During the Year . . . . . . . . . . . . $ 9,119 ======== Non-Cash Financing Activities: Preferred Share Debt Conversion . . . . . . . . . . . $ 6,157 ======== Employees' Notes. . . . . . . . . . . . . . . . . . . $ 3,238 ======== The accompanying notes are an integral part of the consolidated financial statements. BANYAN STRATEGIC REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 1. LIQUIDATION OF THE TRUST On January 3, 2003, the termination and dissolution of Banyan Strategic Realty Trust ("the Trust") was completed by transferring all of the Trust's assets and liabilities into the newly-formed BSRT Liquidating Trust (the "Liquidating Trust"). After the close of trading on January 2, 2003, the Trust's shareholders automatically received an uncertificated interest in the BSRT Liquidating Trust, equal to their prior interest in Banyan Strategic Realty Trust. The Liquidating Trust interests will not be listed on any stock exchange and will not be exchangeable or transferable, except by operation of law. The transfer into the Liquidating Trust constitutes a distribution, in kind, to the Trust's shareholders, the effect of which must be reported by the shareholders on their individual income tax returns for the year 2003 (filed in Spring of 2004). On January 5, 2001, the Trustees adopted a Plan of Termination and Liquidation under which, the Trust will be dissolved, the obligations of the Trust will be paid, appropriate reserves will be taken and the net proceeds will be distributed to the shareholders. On May 17, 2001, the Trust sold 24 of its 27 properties (representing 85% of the portfolio) to affiliates of Denholtz Management Corporation ("Denholtz") for a total sales price of $185,250, of which $3,000 was in the form of unsecured promissory notes and the remainder was in cash, pursuant to a Purchase and Sale Agreement dated January 8, 2001 as amended on March 30, 2001, April 9, 2001 and May 11, 2001. The notes bear interest at 12 percent per annum, require monthly payment of interest only and mature on June 30, 2002. As of December 31, 2001, Denholtz repaid $736 in principal. In addition, Denholtz paid the cost of all prepayment penalties and assumption fees related to the Trust's mortgage debt secured by the properties that were sold. The Trust realized net gains on disposition of investment in real estate (net of minority interest of $6,445) of $25,771. As of December 31, 2001, the Trust owned interests in three properties: University Square Business Center in Huntsville, Alabama, 6901 Riverport Drive in Louisville, Kentucky and Northlake Tower Shopping Center in Atlanta, Georgia. Subsequent to the first closing and prior to December 3, 2001, in accordance with the Purchase and Sale Agreement, the Trust was contractually obliged to sell University Square Business Center to Denholtz and was permitted to sell the Riverport property and the Northlake Tower Shopping Center to third parties or to "put" these properties to Denholtz at agreed upon prices. The sum of $1,000 was held in escrow to secure Denholtz's performance under these deferred closings. On December 3, 2001, Denholtz notified the Trust in writing that it no longer intended to acquire University Square as required under the contract. The Trust received $1,000 in forfeited earnest money that was recorded as income in the fourth quarter. The forfeiture of the University Square earnest money also extinguished the Trust's right to "put" the other two properties to Denholtz. During the fourth quarter of 2001, the Trust recorded a Provision for Asset Impairment in the amount of $2,658 related to its Louisville, Kentucky property. On February 20, 2002, the Trust entered into a contract to sell its Louisville, Kentucky property for a gross purchase price of $6,050. On March 14, 2002, the Trust acquired the interests of its partner, M & J Wilkow, Ltd., in the Northlake Tower Shopping Center property for a gross purchase price of $1,300. Prior to sale, M & J Wilkow had an 18.1% interest in the property's cash flow and a 28.1% interest in its capital proceeds. BANYAN STRATEGIC REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED On April 1, 2002, the Trust sold its University Square Business Center located in Huntsville, Alabama for a total sales price of $8,450. The purchaser is USBC, LLC, an Alabama limited liability company, whose principals include Alan C. Jenkins and Joel L. Teglia. Mr. Jenkins is a principal in InterSouth Properties, Inc., the Trust's former contract manager of the property, and Mr. Teglia is the Executive Vice President and Chief Financial Officer of the Trust. The net sales proceeds, after repayment of the first mortgage on the property, adjustment for unfinished tenant improvements, sales commissions, prorations and closing costs, were $3,312. In addition, USBC, LLC paid the prepayment penalty of $732 associated with the payoff of the first mortgage. On May 1, 2002, the Trust sold its 6901 Riverport Drive in Louisville, Kentucky for a total sales price of $5,652 to Riverport LLC and Riverport Group, LLC. The principals of these entities included Daniel Smith. Mr. Smith, or entities owned or controlled by him, was previously the Trust's joint venture partner on the Woodcrest property in Tallahassee, Florida and also managed the Commerce Center property in Sarasota, Florida and the Fountain Square property in Tampa, Florida. The net sales proceeds, after repayment of the bond indebtedness, sales commission, prorations and closing costs were $2,116. On October 15, 2002, the Trust sold its Northlake Tower Shopping Center in Atlanta, Georgia for a total sales price of $20,390 to Northlake Festival, LLC. The net sales proceeds, after crediting the purchaser for the outstanding balance on the first mortgage, and after deducting sales commissions, prorations and closing costs, were $3,241. 2. ORGANIZATION AND DESCRIPTION OF BUSINESS Banyan Strategic Realty Trust (the "Trust") was organized in 1986 as a business trust under the laws of the Commonwealth of Massachusetts. The business of the Trust was the ownership and operation of real estate properties. 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION As a result of the Plan of Termination and Liquidation, the Trust changed its basis of accounting from the going concern to the liquidation basis effective January 1, 2001. Under the liquidation basis of accounting, assets are stated at their estimated net realizable values and liabilities are stated at their estimated settlement amounts. The valuation of assets and liabilities requires many estimates and assumptions and there are substantial uncertainties in carrying out the provisions of the Plan of Termination and Liquidation. The actual value of the liquidating distributions will depend upon a variety of factors including, among others, the resolution of the existing litigation and the payment of all of the Trust's liabilities. The accompanying consolidated financial statements include the accounts of the Trust, its wholly-owned subsidiaries and its controlled Partnerships. All intercompany balances and transactions have been eliminated in consolidation. BANYAN STRATEGIC REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED INVESTMENT IN REAL ESTATE Depreciation of buildings was computed in 2001 and 2000 using the straight-line method over the estimated useful lives of the assets, generally 40 years. Depreciation of tenant improvements was computed using the straight-line method over the shorter of the lease term or useful life. For the years ended December 31, 2001 and 2000, depreciation expense amounted to $3,211 and $6,091, respectively. Repairs and maintenance are charged to expense when incurred. The Trust recognizes impairment losses for its properties when indicators of impairment are present and a property's expected undiscounted cash flows are not sufficient to recover the property's carrying amount. The Trust classifies its real estate properties as held for sale when its Board of Trustees has authorized the sale and an active program to find a buyer has been initiated. The Trust did not own any properties as of December 31, 2002, and it classified all of its properties as held for sale as of December 31, 2001. DEFERRED FINANCING COSTS Deferred financing costs were amortized in 2000 over the term of the related loans. REVENUE RECOGNITION Minimum rentals were recognized on a straight-line basis in 2000 over the term of the related leases. Additional rents in the form of operating expense reimbursements for common area maintenance expenses and real estate taxes are recognized in the period in which the related expenses are incurred. FAIR VALUE OF FINANCIAL INSTRUMENTS The Trust believes the carrying amount of its financial instruments approximates fair value at December 31, 2002 and 2001, because (i) the fixed rates on mortgage loans payable are comparable to rates currently offered in the market, (ii) the rates on the line of credit and bonds payable are variable and the terms are comparable to those currently offered in the market and (iii) the maturities of the Trust's cash equivalents are relatively short. INCOME TAXES For the years ended December 31, 2002, 2001 and 2000, the Trust elected or will elect to be treated as a real estate investment trust ("REIT") under Internal Revenue Code Sections 856-860. In order to qualify, the Trust is required to distribute at least 90% (prior to January 1, 2001, 95%) of its "REIT" taxable income to shareholders, meet asset and income tests and comply with certain other requirements. As of December 31, 2002, the Trust has no Investment in Real Estate for income tax purposes. As of December 31, 2002, the Trust has a net operating loss carry- forward of $16,029 which will expire in 2006 ($7,787), 2008 ($789), and 2012 ($7,453). BANYAN STRATEGIC REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED CASH EQUIVALENTS The Trust considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. RESTRICTED CASH Restricted cash at December 31, 2001 represented amounts held in escrow for post closing adjustments related to the Denholtz sale, future redemption of a portion of the Bonds Payable and amounts held by lenders to provide for future real estate tax expenditures and tenant improvements, utility deposits and security deposits. During 2002, the Trust sold its remaining properties and finalized the post closing adjustments related to the Denholtz sale. The amounts held in escrows were released. 4. EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings per share: 2000 ---------- Numerator: Income Available to Common Shares Before Extraordinary Item. . . . . . . . . . . . . . . . $ 2,040 Extraordinary Item. . . . . . . . . . . . . . . . . (42) ---------- Net Income Available to Common Shares . . . . $ 1,998 ========== Denominator: Denominator for basic earnings per weighted- average shares. . . . . . . . . . . . . . . . . . 14,182,800 Effect of dilutive securities: Employee stock options. . . . . . . . . . . . . . 4,717 Convertible debt. . . . . . . . . . . . . . . . . -- ---------- Dilutive potential common shares. . . . . . . . . . 4,717 Denominator for diluted earnings per share-adjusted weighted-average shares and assumed conversions . . . . . . . . . . 14,187,517 ========== Basic and Diluted Earnings Available to Common Shares Per weighted-average Common Share: Income before Extraordinary Item. . . . . . . . . . $ 0.14 Extraordinary Item. . . . . . . . . . . . . . . . . -- ---------- Net Income. . . . . . . . . . . . . . . . . . $ 0.14 ========== For purposes of the computation of diluted earnings per share, options to purchase common shares at $6.375 per share that were outstanding during 2000 were not included in the 2000 computation because the options' exercise price was greater than the average market price of the common shares and, therefore, the effect would be antidilutive. BANYAN STRATEGIC REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED The effect of conversion of $7,400 of convertible debt was not included in the calculations since the effect was antidilutive. For additional information relating to convertible debt and employee stock options, see notes 5 and 10. 5. LONG-TERM DEBT The Trust's long-term debt consists of the following at December 31, 2002 and 2001: 2002 2001 --------------------- ---------------------- Weighted Weighted Average Average Interest Interest Balance Rate Balance Rate --------- -------- --------- -------- Mortgage loans. . $ -- -- $ 21,555 7.91% Bonds . . . . . . -- -- 3,900 3.46% -------- ----- -------- ----- Total collatera- lized debt . . . $ -- -- $ 25,455 7.24% ======== ===== ======== ===== Mortgage loans of $21,555 had fixed interest rates that ranged from 7.64% to 8.89% at December 31, 2001. Bonds payable consist of variable rate tax exempt revenue bonds which bear interest equal to 3.46% at December 31, 2001. Substantially all of the mortgage loans and bonds contain prepayment penalties. During 2000, the Trust recognized extraordinary losses of $42 related to prepayments on refinanced debt and the writeoff of unamortized financing costs. Substantially all of the Trust's real estate was pledged as collateral for the mortgage loans and bonds. During 1998, the Trust borrowed $7.4 million pursuant to its $20 million 1997 Convertible Term Loan Agreement for an unsecured convertible term loan (the "Unsecured Loan"). On January 20, 2000, the Trust repaid $1,243 of the Unsecured Loan and the remaining balance of $6,157 was converted into 61,572 Series A convertible preferred shares and on April 27, 2001, these preferred shares were further converted into 1,195,574 common shares at a conversion price of $5.15 per share. The Series A convertible preferred shares paid quarterly preferred dividends at rate of 10% per annum. Prior to conversion, the Unsecured Loan bore interest at an annual interest rate of 12% payable quarterly and the Trust was required to pay an annual fee equal to 2% of the amount outstanding on October 14, of each year. On October 12, 2001, the Trust entered into an Amendment to Substituted, Amended and Restated Reimbursement Agreement with the issuer of the Letter of Credit (the "LOC Bank") collateralizing the bonds payable related to the Riverport property. This amendment primarily extended for a period of one year, the term of the letter of credit which otherwise would have expired on December 1, 2001. On that same date, the Trust deposited $300 with the LOC Bank which was used to make the mandatory bond redemption payment scheduled for December 1, 2001. The Trust additionally agreed to pay the LOC Bank $500 to be utilized to further redeem additional outstanding bonds payable over and above any otherwise scheduled redemption payments, upon its receipt of the $1,000 earnest money deposit in connection with the Denholtz contract. As of December 31, 2001, the $500 was held in restricted cash by the trustee of the bonds and was utilized to redeem bonds on February 1, 2002. BANYAN STRATEGIC REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED 6. BUSINESS SEGMENTS The Trust had no properties as of December 31, 2002. As of December 31, 2001, the Trust's only operating segment was the disposal of its remaining properties. During 2000, the Trust owned and operated real estate properties located principally in the Midwest and Southeast United States. The Trust had three operating segments corresponding to the three property types comprising its real estate assets: flex/industrial, office and retail. As of December 31, 2000, the flex/industrial segment was comprised of twelve complexes with long-term leases to approximately 180 tenants; the office segment was comprised of fourteen office sites with long-term leases to approximately 270 tenants; and the retail segment was comprised of one retail center with long-term leases to approximately 50 tenants. During 2000, the Trust's long-term tenants were in a variety of businesses and no individual tenant was significant to the Trust's business when considered as a whole. Information by business segments is set forth below: 2000 -------- Revenue Flex/Industrial . . . . . . . . . . . . . . . . . $ 11,205 Office. . . . . . . . . . . . . . . . . . . . . . 21,313 Retail. . . . . . . . . . . . . . . . . . . . . . 4,705 Corporate/Other . . . . . . . . . . . . . . . . . 573 -------- $ 37,796 ======== Income (loss) before extraordinary item Flex/Industrial . . . . . . . . . . . . . . . . . $ 2,857 Office. . . . . . . . . . . . . . . . . . . . . . 4,686 Retail. . . . . . . . . . . . . . . . . . . . . . 576 Corporate/Other . . . . . . . . . . . . . . . . . (5,494) -------- $ 2,625 ======== Total Assets Flex/Industrial . . . . . . . . . . . . . . . . . $ 69,176 Office. . . . . . . . . . . . . . . . . . . . . . 107,151 Retail. . . . . . . . . . . . . . . . . . . . . . 17,444 Corporate/Other . . . . . . . . . . . . . . . . . 2,286 -------- $196,057 ======== Depreciation and amortization Flex/Industrial . . . . . . . . . . . . . . . . . $ 2,366 Office. . . . . . . . . . . . . . . . . . . . . . 3,984 Retail. . . . . . . . . . . . . . . . . . . . . . 573 Corporate/Other . . . . . . . . . . . . . . . . . -- -------- $ 6,923 ======== Interest expense Flex/Industrial . . . . . . . . . . . . . . . . . $ 2,954 Office. . . . . . . . . . . . . . . . . . . . . . 4,914 Retail. . . . . . . . . . . . . . . . . . . . . . 1,312 Corporate/Other . . . . . . . . . . . . . . . . . -- -------- $ 9,180 ======== BANYAN STRATEGIC REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED 2000 -------- Additions to Investment in Real Estate Flex/Industrial . . . . . . . . . . . . . . . . . $ 1,906 Office. . . . . . . . . . . . . . . . . . . . . . 4,473 Retail. . . . . . . . . . . . . . . . . . . . . . 43 Corporate/Other . . . . . . . . . . . . . . . . . -- -------- $ 6,422 ======== 7. TRANSACTIONS WITH AFFILIATES During the first eight months of 2000, the Trust paid no salary to, but purchased legal services from an executive officer of the Trust. Fees for legal services totaled $246. The executive paid no rent, as such, to the Trust for the use of office space or equipment but granted the Trust a discount equal to approximately 20% compared to rates charged to third parties for all time billed to the Trust by the executive and his employees. The executive also reimbursed the Trust for the cost of two full time and certain part time employees. As of September 1, 2000, this executive signed an employment agreement whereby he became a full time employee of the Trust. 8. DISTRIBUTIONS PAID AND PAYABLE To qualify as a REIT, the Trust must distribute at least 90% (prior to January 1, 2001, 95%) of its "REIT Taxable Income" to shareholders. A portion of the distributions paid during the subsequent year may be allocable to taxable income earned in the prior year. The Trust has determined the shareholders' treatment for federal income tax purposes to be as follows: 2002 2001 2000 ------- ------- ------- Ordinary income. . . . . . . . $ -- $ -- $ 5,652 Long-term capital gain . . . . -- -- -- Return of capital. . . . . . . 7,748 77,318 1,741 ------- ------- ------- $ 7,748 $77,318 $ 7,393 ======= ======= ======= 9. LEASES GROUND LEASE The Trust owned a leasehold interest in a shopping center in Atlanta, Georgia. The lease expires in 2067. The ground lease required annual lease payments of $600 through October 4, 2007 plus 7% of total annual gross rental income commencing when gross rental income exceeds $2,000 from the operations of the shopping center. The ground lease also required that the Trust pay property operating expenses, including real estate taxes. The base rent is reset in 2007 based upon a market rent within a contractually defined range. BANYAN STRATEGIC REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED 10. STOCK OPTIONS As of December 31, 2001, the Trust had a stock option plan under which options for 18,000 shares were outstanding and exercisable at a weighted average exercise price per share of $5.486. On January 30, 2002, the Trust's board of directors approved terminating the stock option plan. In connection with the termination, the outstanding options were surrendered for a total cash payment of $11 or $0.59 per share. In 1999, holders of stock options were given the opportunity to exercise all their vested options with the proceeds of a loan from the Trust. Each loan was non-recourse, collateralized by the shares acquired, and required interest at an annual rate of 6.5%. Of the approximately $3,200 borrowed, $66 remains outstanding at December 31, 2002. 11. DISTRIBUTION REINVESTMENT AND SHARE PURCHASE PLAN The Trust had established the Trust's Distribution Reinvestment and Share Purchase Plan (the "DRIP Plan"). The DRIP Plan allowed shareholders of the Trust to: (i) automatically reinvest the cash distributions on all, or part, of shares registered in their name; and (ii) make cash investments of not more than $120 per calendar year. Shares purchased under the DRIP Plan were issued directly by the Trust at either: (i) 97% of the average closing sales price of the shares as reported on the NASDAQ National Market on the last five business days preceding the relevant investment date in the case of reinvested cash distributions; or (ii) 100% of the aforementioned average closing price in the case of cash investments. For the years ended December 31, 2001 and 2000, the Trust issued 9,923 and 149,367 shares of beneficial interest under the DRIP Plan and received total proceeds of $55 and $797, respectively. The Trust did not permit the reinvestment of liquidating distributions. 12. SEVERANCE AND TERMINATION COSTS In September 2000, the Trust adopted an employee severance and retention program. The Trust has since terminated all of its employees. The accompanying consolidated financial statements for the year ended December 31, 2000 include a charge of approximately $1,900 related to the severance and retention program. These severance and termination costs include a charge of approximately $300 related to base compensation payable to Mr. Leonard Levine from August 14, 2000 through December 31, 2001 under the terms of his employment agreement (see Note 13). An additional $801 and $613 was accrued under the program for the year ended December 31, 2002 and 2001, respectively. 13. LITIGATION On August 14, 2000, the Trust exercised its rights under the Trust's employment agreement with Mr. Leonard G. Levine by suspending him and placing him on leave from his position as president. Simultaneously, the Trust initiated an arbitration proceeding as required under the employment agreement. On October 5, 2000, Mr. Levine filed an action in the Circuit Court of Cook County, Illinois asking the court to terminate the arbitration proceedings by reason of improper forum. On October 18, 2000, the Trust filed a lawsuit against Mr. Levine in the Circuit Court of Cook County, Illinois. The Trust's complaint alleged violations of Mr. Levine's duty of loyalty owed to the Trust. BANYAN STRATEGIC REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED On December 6, 2000, Mr. Levine and the Trust, through their respective attorneys, agreed to dismiss the arbitration action and Mr. Levine's lawsuit challenging the arbitration and further agreed to resolve all issues under Mr. Levine's employment contract within the Trust's lawsuit against Mr. Levine in the Circuit Court of Cook County (the "Employment Litigation"). On January 19, 2001, Mr. Levine filed an answer, affirmative defenses and counterclaim in the Employment Litigation. The pleading generally denies that Mr. Levine breached his fiduciary duties, raises various defenses and seeks a judgment in favor of Mr. Levine and against the Trust on the counterclaim, for money damages and also seeks a reinstatement to active employment status. Discovery in this case has commenced and is continuing. On May 2, 2001, Mr. Levine presented a motion for partial judgment on the pleadings, which was denied at a hearing on July 19, 2001. The Trust filed a Third Amended Complaint on September 6, 2001, seeking, among other things, $300 in compensatory damages and $3,000 in punitive damages against Mr. Levine in connection with various alleged breaches of fiduciary duty. The factual bases underlying the Third Amended Complaint include allegations that (i) Mr. Levine caused the Trust to pay on his account or reimburse him for expenses that were not reasonable, ordinary and necessary business expenses; (ii) during negotiations between the Trust and The Oak Realty Group, Inc. (an entity solely owned by Mr. Levine) Mr. Levine attempted to pressure the Trust into accepting Oak's offer to acquire the Trust by revealing to one of the trustees that Oak had entered into certain confidentiality and exclusivity agreements which had the effect of excluding potential purchasers and/or capital providers from purchasing or providing financing to a potential purchaser of the Trust, except through Oak; (iii) Mr. Levine's failure to disclose to the Board of Trustees a prior pattern and practice of obtaining unauthorized expense reimbursements allows the Board to rescind Mr. Levine's 1999 Employment Contract and legally estops Mr. Levine from obtaining any benefits under that contract and (iv) Mr. Levine's prosecution of a shareholder derivative action from January to April of 2001, which action was resolved by summary judgment in favor of the Trust, amounts to a separate breach of fiduciary duty by Mr. Levine. Mr. Levine has answered all counts. On May 7, 2001, the Trust amended its answer to Mr. Levine's counterclaim in the Employment Litigation to add several affirmative defenses based upon Mr. Levine's breaches of his fiduciary duty of loyalty. The maximum potential liability in connection with Mr. Levine's contract (inclusive of incentives but exclusive of base salary) is estimated to be approximately $1.6 million. During the pendency of the litigation, the Trust continues to pay a base salary to Mr. Levine in accordance with the Trust's contractual obligations. The Trust is seeking recovery of these payments, among other recoveries, in the litigation. On December 17, 2001, the Trust filed a motion for partial summary judgment in the Employment Litigation. This motion sought a ruling by the court that the Trust had "just cause" to terminate Mr. Levine's employment contract at the time the Trust placed Mr. Levine on suspension on August 14, 2000. The motion was heard and denied on April 4, 2002. On the same date, the court extended the deadline for the completion of written fact discovery from March 31, 2002 to May 31, 2002. On March 18, 2002, Mr. Levine filed a motion for judgment on the pleadings which sought a judgment in favor of Mr. Levine on Counts I, IV and VI of our Third Amended Complaint. On May 1, 2002, Judge Siebel granted the motion (without prejudice) in regard to Count I and denied the motion in regard to Counts IV and VI. BANYAN STRATEGIC REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED On May 9, 2002, after obtaining leave, the Trust filed a Fourth Amended Complaint. This compliant amended Count I of the Third Amended Complaint to allege a breach of contract and added Count VII, which alleges an additional fiduciary breach by Mr. Levine related to an offer by a third party in the spring of 2000 to purchase a substantial portion of the Trust's assets. On June 14, 2002, Mr. Levine answered portions of and filed a motion to strike and dismiss portions of the Fourth Amended Complaint. Mr. Levine moved to dismiss Counts III and V, and to strike portions of Counts I, II, IV, VI, and VII. On August 20, 2002, Judge Siebel denied the motion. On December 10, 2002, the Court entered an order confirming that written fact discovery must be completed by January 31, 2003, but extending other discovery dates. Oral fact discovery must be concluded by March 31, 2003 and Mr. Levine's opinion witness disclosures must be made by March 1, 2003. The Court also set the case for a status conference on April 14, 2003. On December 18, 2002, after obtaining leave of Court, Mr. Levine filed an amended counterclaim. On January 8, 2003, we answered Counts I, II, and III of Mr. Levine's amended counterclaim, which concern alleged breaches of Mr. Levine's employment agreements with us. On January 7, 2003, we moved to dismiss Count IV of Mr. Levine's amended counterclaim. This count asks the Court to rewrite the 1999 Employment Agreement to include additional benefits, which Mr. Levine alleges were mistakenly omitted from the written agreement. Under the schedule set by the Court, Mr. Levine's opposition to the motion to dismiss is due February 4, 2003 and the Trust's reply in support is due February 18, 2003. The Court has set a hearing on the motion to dismiss for March 5, 2003 at 11:00 a.m. The Trust believes that it has meritorious defenses and intends to pursue the case vigorously. The Trust is also involved in various litigation arising in the ordinary course of business. It is management's opinion that the defense of these matters and the potential liability are adequately protected by insurance coverage. Although the final outcome of these matters cannot be determined, based on the facts presently known, it is management's opinion that the final resolution of these matters will not have an adverse effect on the Trust's net assets in liquidation. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE There have been no changes in, or disagreements with, the accountants on any matter of accounting principles, practices or financial statement disclosure. PART III ITEM 14. CONTROLS AND PROCEDURES As of December 31, 2002, an evaluation was performed under the supervision and with the participation of the Trust's management, including the Interim President through January 3, 2003, currently, Secondary Liquidating Trustee; Executive Vice President and Chief Financial Officer through January 3, 2003, currently, Consultant to the Liquidating Trust; and First Vice President and General Counsel through January 3, 2003, currently, Primary Liquidating Trustee, of the effectiveness of the design and operation of the Trust's disclosure controls and procedures. Based on that evaluation, the Trust's management, including the CEO and CFO, concluded that the Trust's disclosure controls and procedures were effective as of December 31, 2002. There have been no significant changes in the Trust's internal controls or in other factors that could significantly affect internal controls subsequent to December 31, 2002. However, on January 3, 2003, the Trust transferred all of its assets and liabilities into a newly formed Liquidating Trust to complete its termination and dissolution. ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) (1) Financial Statements of the Company are set forth in this report in Item 8. (b) Reports on Form 8-K: . dated October 1, 2002, filed October 2, 2002 including Item 7. . dated October 3, 2002, filed October 4, 2002 including Item 7. . dated October 10, 2002, filed October 11, 2002 including Item 7. . dated and filed October 16, 2002 including Item 7. . dated November 12, 2002, filed November 13, 2002 including Item 7. . dated December 9, 2002, filed December 10, 2002 including Item 7. (c) Exhibits (see Exhibit Index included elsewhere herein). (d) None. SIGNATURES 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. BANYAN STRATEGIC REALTY TRUST By: /s/ L.G. Schafran Date: February 7, 2003 L.G. Schafran, Interim President through 1/3/03 Currently, Secondary Liquidating Trustee 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 capacities and on the dates indicated. By: /s/ L.G. Schafran Date: February 7, 2003 L.G. Schafran, Interim President and Trustee through 1/3/03 Currently, Secondary Liquidating Trustee By: /s/ Joel L. Teglia Date: February 7, 2003 Joel L. Teglia, Executive Vice President and Chief Financial Officer through 1/3/03 Currently, Consultant to the Liquidating Trust By: /s/ Robert G. Higgins Date: February 7, 2003 Robert G. Higgins, First Vice President and General Counsel through 1/3/03 Currently, Primary Liquidating Trustee CERTIFICATIONS -------------- CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, L.G. Schafran, the Interim President of Banyan Strategic Realty Trust through January 3, 2003; currently, Secondary Liquidating Trustee, certify that: 1. I have reviewed this annual report on Form 10-K of Banyan Strategic Realty Trust; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the net assets in liquidation and the changes in net assets in liquidation of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a. designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b. evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c. presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date:February 7, 2003 /s/ L.G. Schafran -------------------------------- L.G. Schafran Interim President through 1/3/03 Currently, Secondary Liquidating Trustee CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Joel L. Teglia, the Executive Vice President and Chief Financial Officer of Banyan Strategic Realty Trust through January 3, 2003; currently, Consultant to the Liquidating Trust, certify that: 1. I have reviewed this annual report on Form 10-K of Banyan Strategic Realty Trust; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the net assets in liquidation and the changes in net assets in liquidation of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a. designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b. evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c. presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date:February 7, 2003 /s/ Joel L. Teglia -------------------------------------- Joel L. Teglia Executive Vice President and Chief Financial Officer through 1/3/03 Currently, Consultant to the Liquidating Trust CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Robert G. Higgins, the First Vice President and General Counsel of Banyan Strategic Realty Trust through January 3, 2003; currently, Primary Liquidating Trustee, certify that: 1. I have reviewed this annual report on Form 10-K of Banyan Strategic Realty Trust; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the net assets in liquidation and the changes in net assets in liquidation of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a. designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b. evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c. presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date:February 7, 2003 /s/ Robert G. Higgins -------------------------------- Robert G. Higgins First Vice President and General Counsel through 1/3/03 Currently, Primary Liquidating Trustee EXHIBIT INDEX ------- 2.1 Plan of Termination and Liquidation (1) 3.1 Third Amended and Restated Declaration of Trust dated as of August 8, 1986, as amended on March 8, 1991, May 1, 1993, August 12, 1998 and December 13, 1999, including Certificate of designations, preferences and rights of Series A convertible preferred shares. (2) 3.2 First Amendment of Third Amended and Restated Declaration of Trust effective December 13, 1999. (3) 3.3 By-Laws dated March 13, 1996. (4) 3.4 BSRT UPREIT Limited Partnership Limited Partnership Agreement (5) 4.1 Convertible Term Loan Agreement dated as of October 10, 1997 among Banyan Strategic Realty Trust, as Borrower, and the Entities listed therein, as Lenders. (6) 4.2 First Amendment to Convertible Term Loan Agreement dated as of March 30, 1998 made by and among Banyan Strategic Realty Trust and the Entities listed therein, as Lenders. (7) 4.3 Second Amendment to Convertible Term Loan Agreement dated as of June 26, 1998 made by and among Banyan Strategic Realty Trust and the Entities listed therein, as Lenders. (8) 4.4 Revolving Credit Agreement dated April 30, 1998 among Banyan Strategic Realty Trust, as Borrower and the Capital Company of America, as Lender. (9) 4.5 Loan Agreement dated May 22, 1998 among BSRT Fountain Square L.L.C., BSRT Phoenix Business Park L.L.C., BSRT Newtown Trust, BSRT Southlake L.L.C., BSRT Technology Center L.L.C., BSRT Airways Plaza L.L.C., BSRT Peachtree Pointe L.L.C., BSRT Avalon Center L.L.C., BSRT Sand Lake Tech Center L.L.C., BSRT Park Center L.L.C., BSRT Metric Plaza L.L.C., and BSRT University Corporate Center L.L.C., as Borrower, and the Capital Company of America, as Lender. (8) 4.6 First Amendment to Loan Agreement dated September 11, 1998 among BSRT Fountain Square L.L.C., BSRT Phoenix Business Park L.L.C., BSRT Newton Trust, BSRT Southlake L.L.C., BSRT Technology Center L.L.C., BSRT Airways Plaza L.L.C., BSRT Peachtree Pointe L.L.C., BSRT Avalon Center L.L.C., BSRT Sand Lake Tech Center L.L.C., BSRT Park Center L.L.C., BSRT Metric Plaza L.L.C., and BSRT University Corporate Center L.L.C., as Borrower, and the Capital Company of America LLC, as Lender. (10) 4.7 Loan Agreement dated June 22, 1998 between Banyan/Morgan Wisconsin L.L.C., and Banyan/Morgan Elmhurst L.L.C., as Borrower and the Capital Company of America, as Lender. (8) 4.8 First Amendment to Loan Agreement dated September 11, 1998 between Banyan/Morgan Wisconsin L.L.C., and Banyan/Morgan Elmhurst L.L.C., as Borrower and the Capital Company of America LLC, as Lender. (10) 10.1 Employment Agreement of L.G. Schafran dated October 26, 2000. (14) 10.2 First Amendment to Employment Agreement of L.G. Schafran dated February 13, 2002. (15) EXHIBIT INDEX ------- 10.3 Employment Agreement of Leonard G. Levine as of December 14, 1999. (2) 10.4 Employment Agreement of Leonard G. Levine as of October 1, 1997. (11) 10.5 Employment Agreement of Joel L. Teglia dated November 1, 2000. (14) 10.6 Employment Agreement of Joel L. Teglia dated December 31, 1998. (5) 10.7 Employment Agreement of Robert G. Higgins dated September 1, 2000. (14) 10.8 Separation Agreement of Neil Hansen dated October 1, 2000. (14) 10.9 Separation Agreement of Jay Schmidt dated October 1, 2000. (14) 10.10 1997 Omnibus Stock and Incentive Plan dated July 9, 1997. (12) 10.11 Share Purchase Agreement by and among Banyan Strategic Realty Trust and the Purchasers listed on the signature page attached thereto dated as of October 10, 1997. (6) 10.12 Registration Rights Agreement dated as of October 10, 1997 between Banyan Strategic Realty Trust and the Purchasers listed on the Signature Pages attached thereto. (6) 10.13 Registration Rights Agreement dated as of October 1, 1997 between Banyan Strategic Realty Trust and Leonard G. Levine. (5) 10.14 Consulting Agreement dated as of February 18, 2000 between CFC Advisory Services Limited Partnership and Banyan Strategic Realty Trust. (13) 10.15 Modification to Consulting Agreement dated as of May 31, 2000 between CFC Advisory Services Limited Partnership and Banyan Strategic Realty Trust. (13) 10.16 Purchase and Sale Agreement dated January 8, 2001. (1) 10.17 First Amendment to Purchase and Sale Agreement dated March 28, 2001. (16) 10.18 Second Amendment to Purchase and Sale Agreement dated April 9, 2001. (17) 10.19 Third Amendment to Purchase and Sale Agreement dated May 11, 2001. (18) 21. Subsidiaries of Banyan Strategic Realty Trust (*) 99.2 Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (*) 99.3 Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (*) 99.4 Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (*) -------------------- (*) Filed herewith. (1) Incorporated by reference from the Trust's Form 8-K dated January 8, 2001. (2) Incorporated by reference from the Trust's Form 10-K for the year ended December 31, 1999. (3) Incorporated by reference from the Trust's Form 10-Q dated March 31, 2000. (4) Incorporated by reference from the Trust's Registration Statement on Form S-11 (file number 33-4169). (5) Incorporated by reference from the Trust's Form 10-K for the year ended December 31, 1998. (6) Incorporated by reference from the Trust's Form 8-K dated October 14, 1997. (7) Incorporated by reference from the Trust's Form 10-K/A for the year ended December 31, 1997. (8) Incorporated by reference from the Trust's Form 8-K dated May 22, 1998. (9) Incorporated by reference from the Trust's Form 10-Q dated March 31, 1998. (10) Incorporated by reference from the Trust's Form 8-K/A-1 dated August 14, 1998. (11) Incorporated by reference from the Trust's Form 10-K dated December 31, 1997. (12) Incorporated by reference from the Trust's Form 10-Q for the quarter ended June 30, 1997. (13) Incorporated by reference from the Trust's Form 10-Q for the quarter ended June 30, 2000. (14) Incorporated by reference from the Trust's Form 10-Q for the quarter ended September 30, 2000. (15) Incorporated by reference from the Trust's Form 8-K dated February 13, 2002. (16) Incorporated by reference from the Trust's Form 8-K dated March 28, 2001. (17) Incorporated by reference from the Trust's Form 8-K dated April 9, 2001. (18) Incorporated by reference from the Trust's Form 10-Q for the quarter ended March 31, 2001.

BANYAN STRATEGIC REALTY TRUST 10-K