Two major Washington-area real estate investment firms yesterday reported financial troubles related to their inabilities to repay millions of dollars in borrowings.
American Realty Trust of Arlington, the firm headed by Thomas Broyhill, yesterday was ordered to pay $1.7 million in borrowings that it defaulted on in March.
A federal judge in New York granted a motion for summary judgment against the trust company, but American Realty officials said they don't have sufficient cash on hand to pay the $1.7 million.
On the other side of the Potomac, Mortgage Investors of Washington, a Bethesda-based firm, yesterday was unable to make its scheduled $8 million senior debt repayments under agreements with 11 banks and an insurance company.
The trust has $17 million in debt outstanding which could be declared due upon the trust's failure to make yesterday's payment, the company said.
"We are current on interest, but we could not make the principal," said the trust's controller Jeff M. Russell. The trust's officials knew a month ago that it would be unable to make its payment and it has been negotiating with the banks since then, Russell said. The banks could technically request immediate payment, Russell said, but they know the company doesn't have the funds.
The trust hopes to have the payment deadline extended, Russel said.
The default will have no effect on the trust's customers, mostly large developers, Russell said. But he was unaware of the effect on the company's stock, which he said "is pretty low right now. We haven't paid a dividened since 1976."
The firm defaulted because "our borrowers couldn't pay us," Russell said.
The trust must also repay $9 million of the outstanding $17 million debt by Dec. 15, Russell said. That deadline would also probably be extended, Russell said.
Part of the trust's problems stemmed from the real estate recession four years ago, Russell said. "We haven't made a loan in four or five years," Russell said.
American Realty, the Arlington firm, is working on several plans to repay its debts including selling some real estate property or notes, the trust's officials said.
American Realty was unble to pay a total of 13.5 million of borrowings due March 15. The company reported at that time that it had lost $1.6 million in the quarter ended Dec. 31 because it lost a $2 million judgment against it by the Chase Manhattan Bank, Chase Manhattan had accused American Realty of fraud in its law suit.
Also, last March American Realty and Broyhill were sued for $33.5 million by former Rep. Joel T. Broyhill, a coussin, claiming that the company and its officers withheld information from investors.
Several days later the Securities and Exchange Commission obtained a permanent injunction barring securities law violations by American Realty. The injunction ended a five-year legal battle between the trust and the SEC which accused American Realty of failing to disclose important information to investors who bought $15 million worth of the firm's debentures in 1974.
The company ran into financial problems during the recession of 1974, then hit legal difficulties when stock-holders and business associates claimed American Realty management had misled them about the company's financial status.