American Realty Trust, based in Arlington, has secured a $9 million, three-year loan from Southmark Properties of Norcross, Ga., which may signal a break in the financial woes that have plagued the trust in recent years, according to a company official.
The loan will be used to pay off outstanding debts, for further investment and working capital purposes.
"From a practical standpoint, this is great news for us," said John Rutledge, corporation counsel and assistant to the president. "We needed funds to retire indebtedness and to develop some properties," he added, declining to name the properties.
Two series of American Realty debentures recently came due, one totaling $3.49 million and the other totaling just under $1.5 million. Rutledge said the loan "takes care of our debenture holders as well as all our financing. We can start rebuilding the trust from an equity standpoint."
Under the loan agreement, American Realty received $1.2 million when it signed the documents Oct. 19 and will receive an additional $6.3 million before Dec. 1. The loan can be increased an additional $1.5 million to the full $9 million upon 30-day notice to the lender.
Concurrent with approval of the loan, American Realty appointed three principals of Southmark Properties to its board of trustees, bringing to 12 the number on that board.
"They Southmark Properties wanted to be sure the company grows," Rutledge explained. "All three will lend their expertise to that growth."
American Realty, one of the country's oldest real estate investment trusts, has suffered from plummeting profits, defaults on borrowing and lawsuits in recent years.
Less than two months ago, the Supreme Court of Virginia affirmed a lower court ruling against the trust, awarding $2 million plus interest to Chase Manhattan Bank. The case, initiated in 1978, involved a condominium property in Arlington to which American Realty had made construction loans and which was subsequently acquired under foreclosure proceedings by Chase Manhattan.
Thomas J. Broyhill, president of the trust, said at that time "a reserve has been established, pending the outcome of the appeal so payment of the judgment would not have a deleterious effect upon the trust or its operations." Last week, Rutledge affirmed Broyhill's statement concerning that judgment.
The new trustees are Gene Phillips, chairman and president of Southmark Properties, and Southmark trustees William Friedman and Arthur Weiss.