-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, A7sYbtxyX0br+SC/sZcLmDTMXREDyh+EX2HYpOePZghzA2Je1UGXVaekHLqgor33 1JAPHVFe2PXK0yZW0cMSlw== 0000912057-97-016794.txt : 19970513 0000912057-97-016794.hdr.sgml : 19970513 ACCESSION NUMBER: 0000912057-97-016794 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970512 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PACIFIC REAL ESTATE INVESTMENT TRUST INC CENTRAL INDEX KEY: 0000230437 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 941572930 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-08725 FILM NUMBER: 97600481 BUSINESS ADDRESS: STREET 1: 1010 EL CAMINO REAL STE 210 CITY: MENLO PARK STATE: CA ZIP: 95025 BUSINESS PHONE: 4143277147 MAIL ADDRESS: STREET 1: 1010 EL CAMINO REAL STREET 2: STE 210 CITY: MENLO PARK STATE: CA ZIP: 95025 FORMER COMPANY: FORMER CONFORMED NAME: PACIFIC REAL ESTATE INVESTMENT TRUST DATE OF NAME CHANGE: 19920703 10-Q 1 10-Q - --------------------------------------------------------------------------- - --------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER MARCH 31, 1997 Commission File Number 0-8725 PACIFIC REAL ESTATE INVESTMENT TRUST A CALIFORNIA TRUST I.R.S. Employer Identification No. 94-1572930 1010 El Camino Real, Suite 210 Menlo Park, CA 94025 Telephone: (415) 327-7147 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 the number of shares outstanding of each of the issuer's classes of common stock, as of the close of the period covered by this report. $10 Par Value, 3,706,845 shares - --------------------------------------------------------------------------- - --------------------------------------------------------------------------- PACIFIC REAL ESTATE INVESTMENT TRUST PART I - FINANCIAL INFORMATION CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) ITEM I - FINANCIAL STATEMENTS
THREE MONTHS THREE MONTHS ENDED ENDED MARCH 31, 1997 MARCH 31, 1996 Rental revenues................................. $ 1,130,000 $1,859,000 ----------- ---------- Operating expenses (including related party amounts of $110,000 and $144,000 in 1997 and 1996 respectively): Operating.................................. 313,000 479,000 Property tax............................... 105,000 161,000 General and administrative................. 110,000 123,000 Depreciation and amortization.............. 296,000 608,000 Property management fees................... 42,000 64,000 Loss (gain) on sale of property............ 770,000 (952,000) ----------- ---------- Total operating expenses......... 1,636,000 483,000 ----------- ---------- Operating income (loss)......................... (506,000) 1,376,000 ----------- ---------- Other income/(expense): Interest income............................ 164,000 156,000 Interest expense........................... (724,000) (1,070,000) Reincorporation/merger expenses............ (98,000) ----------- ---------- Total other income/(expense).......... (658,000) (914,000) ----------- ---------- Net income (loss) before minority interest...... (1,164,000) 462,000 Minority interest in joint venture.............. (79,000) (99,000) ----------- ---------- Net income (loss)............................... $(1,243,000) $ 363,000 ----------- ---------- ----------- ---------- Net income (loss) per share of beneficial interest...................................... $ (0.34) $ 0.10 ----------- ---------- ----------- ----------
See notes to consolidated financial statements. Page 2 of 9 PACIFIC REAL ESTATE INVESTMENT TRUST CONSOLIDATED BALANCE SHEETS (UNAUDITED) ASSETS
MAR 31, 1997 DEC 31, 1996 ------------ ------------ Investment in commercial properties: Land........................................ $ 10,104,000 $ 10,104,000 Buildings and improvements.................. 28,188,000 28,187,000 Accumulated depreciation...................... (7,523,000) (7,271,000) ------------ ------------ Commercial properties - net................. 30,769,000 31,020,000 Property in receivership........................ 4,438,000 4,438,000 Notes receivable(net of allowance of $495,000 in 1997 and $507,000 in 1996)........ 6,273,000 6,279,000 Cash............................................ 859,000 1,011,000 Restricted cash................................. 1,023,000 1,154,000 Accounts receivable (net of allowance of $67,000 in 1997 and $143,000 in 1996........... 199,000 489,000 Deferred lease commissions - net................ 395,000 425,000 Deferred financing costs - net.................. 333,000 329,000 Other assets.................................... 1,019,000 1,038,000 ------------ ------------ Total................................... $ 45,308,000 $ 46,183,000 ------------ ------------ ------------ ------------ LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Mortgage loans.............................. $ 25,626,000 $ 25,700,000 Short-term notes............................ 7,840,000 7,700,000 Security deposits........................... 107,000 118,000 Accounts payable and other liabilities............................... 2,322,000 1,968,000 ------------ ------------ Total liabilities....................... 35,895,000 35,486,000 ------------ ------------ Commitments and contingencies Minority interest in joint venture.............. 3,334,000 3,375,000 Shareholders' Equity: Shares of beneficial interest, $10 par value, authorized: 1997 and 1996, 10,611,863; shares issued and outstanding: 1997 and 1996, 3,706,845.... 37,068,000 37,068,000 Additional paid-in capital.................. 11,009,000 11,009,000 Accumulated deficit......................... (41,998,000) (40,755,000) ------------ ------------ Shareholders' equity - net.................. 6,079,000 7,322,000 ------------ ------------ Total................................... $45,308,000 $46,183,000 ------------ ------------ ------------ ------------
See notes to consolidated financial statements. Page 3 of 9 PACIFIC REAL ESTATE INVESTMENT TRUST CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the three months ended March 31, 1997 1996 ------------ ------------ Cash Flow from Operating Activities: Net income (loss)................................. $(1,243,000) $ 363,000 Adjustments to reconcile net loss to net cash provided (used) by operating activities: Depreciation.................................... 252,000 539,000 Amortization of note receivable discount........ (6,000) (5,000) Amortization of deferred cost................... 44,000 68,000 Minority interest in joint venture's operations. 79,000 99,000 Provision for doubtful receivables.............. 63,000 (26,000) Loss (gain) on sale of property................. 770,000 (952,000) Changes in operating assets and liabilities: Accounts payable and other liabilities.......... (416,000) (156,000) Security deposits............................... (11,000) 31,000 Deferred lease commissions...................... (44,000) Deferred financing costs........................ (18,000) Accounts receivable............................. 226,000 (89,000) Other assets.................................... 19,000 (32,000) ----------- ----------- Net cash used by operating activities............... (241,000) (204,000) ----------- ----------- Cash Flow from Investing Activities: Decrease in restricted cash..................... 131,000 Construction of properties...................... (1,000) (26,000) Collection of notes receivable.................. 13,000 19,000 Proceeds from sale of Menlo Center.............. 5,025,000 ----------- ----------- Net cash provided in investing activities........... 143,000 5,018,000 ----------- ----------- Cash Flow from Financing Activities: Proceeds from short-term notes.................. 140,000 Re-Payment of mortgage loans.................... (74,000) (112,000) Re-Payment of short-term notes.................. (4,100,000) Distributions of joint venture partner.......... (120,000) (120,000) ----------- ----------- Net cash used by financing activities............... (54,000) (4,332,000) ----------- ----------- Increase (decrease) in cash....................... (152,000) 482,000 Cash, January 1................................. 1,011,000 308,000 ----------- ----------- Cash, March 31.................................. $ 859,000 $ 790,000 ----------- ----------- ----------- ----------- NON CASH INVESTING AND FINANCING: Assumption of mortgage note payable by the buyer of Menlo Center for $10,730,000 in 1996. Establishment of an impound account for approximately $1,000,000 for Monterey Plaza Shopping Center tenant during 1996, which was funded by another tenant.
See notes to consolidated financial statements. Page 4 of 9 PACIFIC REAL ESTATE INVESTMENT TRUST NOTES TO INTERIM FINANCIAL STATEMENTS (UNAUDITED) Basis of Presentation The accompanying unaudited financial statements include all adjustments which are, in the opinion of management, necessary for fair presentation of the Trust's financial position, including changes therein, and results of operations for the interim period reported upon. Such statements have been prepared from the Trust's accounting records in accordance with the instructions to Form 10-Q. Income Taxes The Internal Revenue Code provides that a trust qualifies as a real estate investment trust if, among other things, the trust distributes each year at least 95% of its taxable income to shareholders. If the Trust distributes at least 95% of its taxable income to shareholders, such distributions can be treated as deductions for income tax purposes. Because it is the policy of the Trust to distribute amounts approximately equal to its taxable income plus depreciation and amortization, no provision for incomes taxes has been made in the accompanying financial statements. Sale of Monterey Plaza and five notes receivable Pacific Real Estate Investment Trust entered into a Purchase Agreement with Pan Pacific Development (U.S.) Inc. ("Pan Pacific"), a wholly owned subsidiary of Revenue Properties Company Limited, a Canadian corporation, dated as of April 1, 1997, pursuant to which Pan Pacific will purchase from the Trust the Monterey Plaza Shopping Center, located in San Jose, California and five notes receivable. The Trust sold Monterey Plaza Shopping Center for $24,957,000 and the Trust's five notes receivable for $4,606,000 to Pan Pacific on April 25, 1997. After assumption of the existing loan balance of approximately $18,371,000, the net cash proceeds to the Trust were $11,192,000, less closing costs from the transaction and repayment of short term debt. As part of this transaction, Pan Pacific has become the primary obligor on the First Deed of Trust secured by Mt. Shasta Shopping Center with a remaining principal balance of $1,519,000. In the event of a default by Pan Pacific, the Trust remains liable on this First Deed of Trust. In connection with the sale, a loss of approximately $770,000 was recorded by the Trust in the first quarter of 1997. Reclassifications Certain 1996 amounts have been reclassified to conform with the 1997 presentation. Related Party Transactions Fees paid or payable to the Advisor and Menlo Management Company for three months ended March 31, 1997 and 1996 were as follows: 1997 1996 ----------- ----------- ADVISOR ------- Advisory fee - .1% of Assets...... $ 11,000 $ 14,000 MENLO MANAGEMENT COMPANY ------------------------ Property management fees.......... 42,000 64,000 Administrative services........... 38,000 38,000 Lease commissions................. 23,000 Loan fee.......................... 19,000 28,000 ----------- ----------- Total......................... $ 110,000 $ 167,000 ----------- ----------- ----------- ----------- Page 5 of 9 Net Income Per Share of Beneficial Interest Net income per share of beneficial interest is computed by dividing net income by the weighted average number of shares outstanding for the three months ended March 31, 1997 and 1996 were as follows: 1997 1996 ---- ---- Weighted average number of shares outstanding 3,706,845 3,706,845 EFFECTS OF RECENT ACCOUNT PRONOUNCEMENTS In February 1997, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 128 (SFAS 128), "Earnings per Share." This statement establishes and simplifies standards for computing and presenting earnings per share. SFAS 128 will be effective for the Trust's fourth quarter of 1997, and requires restatement of all previously reported earnings per share data that are presented. Early adoption of this Statement is not permitted. SFAS 128 replaces primary and fully diluted earnings per share with basic and diluted earnings per share. The Trust expects that basic and diluted earnings per share amounts will not be materially different from the Trust's primary and fully diluted earnings per share amounts. Page 6 of 9 PACIFIC REAL ESTATE INVESTMENT TRUST PART I - FINANCIAL INFORMATION ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND OF OPERATIONS. (1) LIQUIDITY AND CAPITAL RESOURCES: Cash flow used by operating activities was $241,000 for the three months ended March 31, 1997 as compared to cash flow used by operating activities of $204,000 for the three months ended March 31, 1996. The net change is primarily due to the timing differences in the receipt of rents and payments of trade payables and change in expense levels resulting from property disposition. Cash flow provided by investing activities was $143,000 for the three months ended March 31, 1997 compared to $5,018,000 for the three months ended March 31, 1996. The net change was primarily the result of the sale of Menlo Center in 1996. Cash flow used by financing activities was $54,000 for the three months ended March 31, 1997 as compared to $4,332,000 for the three months ended March 31, 1996. The decrease in 1997 is primarily due to assumption of mortgage debt and the repayment of short-term notes payable as the result of the sale of Menlo Center as well as a decrease in the restricted cash accounts. The Trust's other sources of liquidity include: (1) extension of short-term notes payable for periods not to exceed five years and (2) approximately $6,106,000 in mortgage loans receivable which mature at various dates over the next 3 years. (2) MATERIAL CHANGES IN RESULTS OF OPERATIONS FOR THREE MONTHS ENDED MARCH 31, 1997 VS. 1996: Net loss for the three months ended March 31, 1997 was $1,243,000 as compared to a net income of $363,000 for the three months ended March 31, 1996. During the first three months rental revenues decreased from $1,859,000 in 1996 to $1,130,000 in 1997, a decrease of $729,000 or 39%. This decrease resulted from the sale of Menlo Center in February 1996 and the placement of El Portal Shopping Center into receivership in October 1996. Operating expenses decreased from $479,000 in 1996 to $313,000 in 1997, a decrease of $166,000 or 35%. Property taxes decreased from $161,000 in 1996 to $105,000 in 1997, a decrease of $56,000, or 35%. Property management fees decreased from $64,000 in 1996 to $42,000 in 1997, a decrease of $22,000, or 34%. Depreciation and Amortization decreased from $608,000 in 1996 to $296,000 in 1997, a decrease of $312,000, or 51%. Each of these decreases resulted from the sale of Menlo Center in February 1996 and the placement of El Portal Shopping Center into receivership in October 1996. General and administrative expense decreased from $123,000 in 1996 to $110,000 in 1997, a decrease of $13,000 or 11% due to cost saving measures. Loss on the sale of property of $770,000 in 1997 represents the anticipated loss on the sale of Monterey Plaza Shopping Center and the Trust's five notes receivable. Gain on the sale of property of $952,000 in 1996 represents the gain on the sale of Menlo Center which was sold in February 1996. Interest income increased by $8,000, or 5%, from $156,000 in 1996 to $164,000, as a result of the interest earned on restricted funds. Interest expense decreased by $346,000, or 32%, from $1,070,000 in 1996 to $724,000 in 1997, the decrease was primarily due to the sale of Menlo Center in 1996 and the assumption of related mortgage debt by the buyer, and the pay-down of short-term debt, as well as the placement of El Portal Shopping Center in receivership in 1996. Page 7 of 9 EFFECTS OF RECENT ACCOUNTING PRONOUNCEMENTS In February 1997, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 128 (SFAS 128), "Earnings per Share." This statement establishes and simplifies standards for computing and presenting earnings per share. SFAS 128 will be effective for the Trust's fourth quarter of 1997, and requires restatement of all previously reported earnings per share data that are presented. Early adoption of this Statement is not permitted. SFAS 128 replaces primary and fully diluted earnings per share with basic and diluted earnings per share. The Trust expects that basic and diluted earnings per share amounts will not be materially different from the Trust's primary and fully diluted earnings per share amounts. ITEM 6 (b) - Report on Form 8K was filed on April 1, 1997. Page 8 of 9 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned. PACIFIC REAL ESTATE INVESTMENT TRUST Date: May , 1997 By: ------------------------ ------------------------------------ Robert Ch. Gould VICE PRESIDENT Date: May , 1997 By: ------------------------ ------------------------------------ Harry E. Kellogg TREASURER Page 9 of 9 EX-27 2 FDS
5 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 1,882,000 0 6,835,000 (562,000) 0 2,081,000 42,730,000 (7,523,000) 45,308,000 2,429,000 33,466,000 0 0 37,068,000 (30,989,000) 45,308,000 0 1,294,000 0 2,458,000 79,000 562,000 724,000 (1,243,000) 0 (1,243,000) 0 0 0 (1,243,000) (0.34) (0.34) includes $3,334,000 of Minority Interest in Joint Venture represents Minority Interest portion of Current net loss.
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