-----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, OCmYb5xQPs0laTcXcgQpeIhVRUjHLCq+qPtTxlOKHrnHwO6HSMOsAfVNGuSaWdUI grIkoDMNPbbreZe27HDgIw== 0001047469-97-001889.txt : 19971030 0001047469-97-001889.hdr.sgml : 19971030 ACCESSION NUMBER: 0001047469-97-001889 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971029 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: SEC FILE NUMBER: 000-08725 FILM NUMBER: 97702347 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 FORM 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 SEPTEMBER 30, 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 ENDED NINE MONTHS ENDED ------------------ ----------------- SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, ------------- ------------- ------------- ------------- 1997 1996 1997 1996 ---- ---- ---- ---- Rental revenues . . . . . . . . . . . . . . . . . . . . . . $463,000 $1,371,000 $ 2,297,000 $4,698,000 -------- ---------- ----------- ---------- Operating expenses (including related party amounts of $57,000 three months ended September 30, 1997 and $113,000 three months ended September 30, 1996, $290,000 nine months ended September 30, 1997, and $374,000 nine months ended September 30, 1996) Operating . . . . . . . . . . . . . . . . . . . . . . . 141,000 468,000 654,000 1,322,000 Property tax. . . . . . . . . . . . . . . . . . . . . . 18,000 127,000 180,000 414,000 General and administrative. . . . . . . . . . . . . . . 72,000 127,000 280,000 386,000 Depreciation and amortization . . . . . . . . . . . . . 126,000 576,000 601,000 1,687,000 Property management fees. . . . . . . . . . . . . . . . 17,000 46,000 89,000 160,000 Loss (gain) on property sale. . . . . . . . . . . . . . 20,000 767,000 (772,000) -------- ---------- ----------- ---------- Total operating expenses . . . . . . . . . . . . . . 374,000 1,364,000 2,571,000 3,197,000 -------- ---------- ----------- ---------- Operating income (loss) . . . . . . . . . . . . . . . . . . 89,000 7,000 (274,000) 1,501,000 -------- ---------- ----------- ---------- Other income/(expense): Interest income . . . . . . . . . . . . . . . . . . . . 33,000 153,000 285,000 470,000 Interest expense. . . . . . . . . . . . . . . . . . . . (33,000) (791,000) (1,003,000) (2,686,000) Merger expenses . . . . . . . . . . . . . . . . . . . . (147,000) -------- ---------- ----------- ---------- Total other income/(expense) . . . . . . . . . . . . 0 (638,000) (865,000) (2,216,000) -------- ---------- ----------- ---------- Net income (loss) before minority interest. . . . . . . . . 89,000 (631,000) (1,139,000) (715,000) -------- ---------- ----------- ---------- Minority interest in joint venture. . . . . . . . . . . . . (96,000) (109,000) (280,000) (313,000) -------- ---------- ----------- ---------- Net loss. . . . . . . . . . . . . . . . . . . . . . . . . . $ (7,000) $ (740,000) $(1,419,000) $(1,028,000) -------- ---------- ----------- ---------- -------- ---------- ----------- ---------- Net loss per share of beneficial interest . . . . . . . . . $ (0.00) $ (0.20) $ (0.38) $ (0.28) -------- ---------- ----------- ---------- -------- ---------- ----------- ----------
See notes to consolidated financial statements. Page 2 of 9 PACIFIC REAL ESTATE INVESTMENT TRUST CONSOLIDATED BALANCE SHEETS (unaudited) ASSETS SEPTEMBER 30, DECEMBER 31, ------------- ------------ 1997 1996 ---- ---- Investment in commercial properties: Operating properties: Land . . . . . . . . . . . . . . . . . . $ 200,000 $ 10,104,000 Buildings and improvements . . . . . . . 9,915,000 28,187,000 Accumulated depreciation . . . . . . . . (4,448,000) (7,271,000) ----------- ------------ Commercial properties - net. . . . . . . 5,667,000 31,020,000 Property under development . . . . . . . . . . 386,000 175,000 Property in receivership . . . . . . . . . . . 4,438,000 4,438,000 ----------- ------------ Total . . . . . . . . . . . . . . . . . . . 10,491,000 35,633,000 Notes receivable (net of allowance of $28,000 in 1997 and $39,000 in 1996). . . . . . 194,000 6,279,000 Cash . . . . . . . . . . . . . . . . . . . . 3,389,000 1,011,000 Restricted cash. . . . . . . . . . . . . . . . 1,154,000 Accounts receivable (net of allowance of $79,000 in 1997 and $119,000 in 1996) . . . . . 6,000 489,000 Deferred lease commissions - net . . . . . . . 258,000 425,000 Deferred financing costs - net . . . . . . . . 62,000 154,000 Other assets . . . . . . . . . . . . . . . . . 747,000 1,038,000 ----------- ------------ Total. . . . . . . . . . . . . . . . . . $15,147,000 $ 46,183,000 ----------- ------------ ----------- ------------ LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Mortgage loans. . . . . . . . . . . . . . . $ 5,718,000 $ 25,700,000 Short-term notes. . . . . . . . . . . . . . 7,700,000 Security deposits . . . . . . . . . . . . . 52,000 118,000 Accounts payable and other liabilities. . . 119,000 1,968,000 ----------- ------------ Total liabilities. . . . . . . . . . . . 5,889,000 35,486,000 ----------- ------------ Commitments and contingencies Minority interest in joint venture . . . . . . 3,355,000 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. . . . . . . . . . . . . . (42,174,000) (40,755,000) ----------- ------------ Shareholders' equity - net . . . . . . . . . . 5,903,000 7,322,000 ----------- ------------ Total. . . . . . . . . . . . . . . . . . $15,147,000 $ 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 nine months ended September 30, 1997 1996 -------- -------- Cash Flow from Operating Activities: Net loss. . . . . . . . . . . . . . . . . . $(1,419,000) $(1,028,000) Adjustments to reconcile net loss to net cash provided (used) by operating activities: Depreciation . . . . . . . . . . . . . . 513,000 1,460,000 Amortization of note receivable discount (17,000) (17,000) Amortization of deferred cost. . . . . . 88,000 223,000 Minority interest in joint venture's operations . . . . . . . . . . . . . . . 280,000 313,000 Provision for doubtful receivables . . . 64,000 77,000 Loss (gain) on sale of property. . . . . 767,000 (772,000) Changes in operating assets and liabilities Accounts payable and other liabilities . (1,758,000) 513,000 Security deposits. . . . . . . . . . . . (16,000) 29,000 Deferred lease commissions . . . . . . . (74,000) (79,000) Accounts receivable. . . . . . . . . . . 321,000 339,000 Other assets . . . . . . . . . . . . . . (16,000) 199,000 ----------- ----------- Net cash provided (used) by operating activities (1,267,000) 1,257,000 ----------- ----------- Cash Flow from Investing Activities: Decrease (increase) in restricted cash . 1,154,000 (1,194,000) Construction of properties . . . . . . . (212,000) (220,000) Property acquisitions. . . . . . . . . . (200,000) Collection of notes receivable . . . . . 62,000 74,000 Additions to notes receivable. . . . . . (73,000) Proceeds from the sale of property . . . 11,006,000 4,845,000 ----------- ----------- Net cash provided in investing activities . . . 11,737,000 3,505,000 ----------- ----------- Cash Flow from Financing Activities: Proceeds from short-term notes . . . . . 215,000 455,000 Re-payment of mortgage loans . . . . . . (92,000) (315,000) Re-payment of short-term notes . . . . . (7,915,000) (4,400,000) Distributions of joint venture partner . (300,000) (300,000) ----------- ----------- Net cash used by financing activities . . . . . (8,092,000) (4,560,000) ----------- ----------- Increase in cash. . . . . . . . . . . . . . 2,378,000 202,000 Cash, January 1. . . . . . . . . . . . . 1,011,000 308,000 ----------- ----------- Cash, September 30 . . . . . . . . . . . $ 3,389,000 $ 510,000 ----------- ----------- ----------- ----------- NON CASH TRANSACTIONS Assumption of mortgage notes payable by the buyers of Menlo Center for $10,730,000 in 1996 and Monterey Plaza Shopping Center for $18,371,000 in 1997. 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 income taxes has been made in the accompanying financial statements. Sale of Monterey Plaza Shopping Center 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 Development (U.S.) Inc. ("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 a co-obligor on the Promissory Note secured by a First Deed of Trust on the leasehold estate at Mt. Shasta Shopping Center. In September 1997, Pan Pacific paid the note in full and the Deed of Trust has been reconveyed. As a result the Trust has no further obligation regarding this loan. In connection with the sale of Monterey Plaza Shopping Center, a loss of $767,000 was recorded. In addition, Pan Pacific assumed responsibility for an impound account totaling approximately $975,000 which was previously shown in restricted cash and accounts payable and other liabilities. Offer on Kings Court Shopping Center The Trust has entered into an agreement to sell it's 40% interest in Kingsco, a General Partnership. Kingsco's sole asset is the Kings Court Shopping Center, in Los Gatos, CA. The sale is contingent upon the approval of the other General Partners in the Kingsco Partnership, the approval of the ground lessor which owns the fee estate at the shopping center and, finally, subject to the ground lessor's right of first refusal. Reclassification 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 and nine months ended 1997 and 1996 were as follows:
Three months ended Nine months ended Sept 30, 1997 Sept 30, 1996 Sept 30, 1997 Sept 30, 1996 ------------- ------------- ------------- ------------- ADVISOR Advisory fee - .1% of Assets. . . . . . . . . . $ $ 12,000 $ 17,000 $ 38,000 MENLO MANAGEMENT COMPANY Property management fees. . . . . . . . . . . . 17,000 46,000 89,000 160,000 Administrative services . . . . . . . . . . . . 17,000 38,000 85,000 113,000 Lease commissions . . . . . . . . . . . . . . . 23,000 29,000 74,000 56,000 Loan fee. . . . . . . . . . . . . . . . . . . . 17,000 25,000 63,000 ------------ ---------- ---------- --------- Total . . . . . . . . . . . . . . . . . . . $ 57,000 $ 142,000 $ 290,000 $ 430,000 ------------ ---------- ---------- --------- ------------ ---------- ---------- ---------
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 and nine months ended September 30, 1997 and 1996 were as follows: 1997 1996 ---- ---- Weighted average number of shares outstanding 3,706,845 3,706,845 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. Page 6 of 9 PACIFIC REAL ESTATE INVESTMENT TRUST PART I - FINANCIAL INFORMATION ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (1) LIQUIDITY AND CAPITAL RESOURCES: Cash flow used by operating activities was $1,267,000 for the nine months ended September 30, 1997 as compared to cash flow provided by operating activities of $1,257,000 for the nine months ended September 30, 1996. The net change is primarily due to the timing differences in the receipt of rents and payments of trade payables, change in expense levels resulting from property dispositions and the loss on the sale of Monterey Plaza in 1996 compared to the gain on the sale of Menlo Center in 1996. Cash flow provided by investing activities was $11,737,000 for the nine months ended September 30, 1997 compared to $3,505,000 for the nine months ended September 30, 1996. The net change is primarily the result of the sale of Monterey Plaza Shopping Center in 1997 and the sale of Menlo Center in 1996. Cash flow used by financing activities was $8,092,000 for the nine months ended September 30, 1997 as compared to $4,560,000 for the nine months ended September 30, 1996. The increase in 1997 is primarily due to the repayment of short term notes payable as the result of the sale of Monterey Plaza as compared to the sale of Menlo Center in 1996. The Trust has entered into an agreement to sell it's 40% interest in Kingsco, a General Partnership. Kingsco's sole asset is the King's Court Shopping Center, in Los Gatos, CA. The sale is contingent upon the approval of the other General Partners in the Kingsco Partnership, the approval of the ground lessor which owns the fee estate at the shopping center and, finally, subject to the ground lessor's right of first refusal. (2) MATERIAL CHANGES IN RESULTS OF OPERATIONS FOR NINE MONTHS ENDED SEPTEMBER 30, 1997 VS. 1996: Net loss for the nine months ended September 30, 1997 was $1,419,000 as compared to a net loss of $1,028,000 for the nine months ended September 30, 1996. During the first nine months rental revenues decreased from $4,698,000 in 1996 to $2,297,000 in 1997, a decrease of $2,401,000 or 51%. This decrease resulted from the sale of Monterey Plaza in April 1997, 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 $1,322,000 in 1996 to $654,000 in 1997, a decrease of $668,000 or 51%. Property taxes decreased from $414,000 in 1996 to $180,000 in 1997, a decrease of $234,000, or 57%. Property management fees decreased from $160,000 in 1996 to $89,000 in 1997, a decrease of $71,000, or 44%. Depreciation and amortization decreased from $1,687,000 in 1996 to $601,000 in 1997, a decrease of $1,086,000, or 64%. Each of these decreases resulted from the sale of Monterey Plaza Shopping Center in April 1997, Menlo Center in February 1996 and the placement of El Portal Shopping Center into receivership in October 1996. General and administrative expense decreased from $386,000 in 1996 to $280,000 in 1997, a decrease of $106,000 or 27% due to reduced administrative activity and cost savings measures. Loss on the sale of property of $767,000 in 1997 represents the loss on the sale of Monterey Plaza Shopping Center and the Trust's five notes receivable. Gain on the sale of property of $772,000 in 1996 represents the gain on the sale of Menlo Center which was sold in February 1996. Interest income decreased by $185,000, or 39%, from $470,000 in 1996 to $285,000 in 1997, the net change was primarily the result of the sale of the Trust's five notes receivable in April 1997. Interest expense decreased by $1,683,000, or 63%, from $2,686,000 in 1996 to $1,003,000 in 1997, the decrease was primarily due to the assumption of related mortgage debt by the buyers of Monterey Plaza Shopping Center in 1997 and Menlo Center in 1996 and the pay-down of short-term debt, as well as the placement of El Portal Shopping Center in receivership in October 1996. Merger expense of $147,000 in 1997 represents the cost related to the proposed merger with Pan Pacific Development (U.S.) Inc. that was terminated in March 1997. Page 7 of 9 Material changes for the three months ended September 30, 1997 as compared to 1996 were for the same reason in relative proportionate amounts as those shown for the nine months. 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 and July 9, 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: October 30, 1997 By: ---------------- -------------------------------- Robert Ch. Gould VICE PRESIDENT Date: October 30, 1997 By: ---------------- -------------------------------- Harry E. Kellogg TREASURER Page 9 of 9 EX-27 2 EXHIBIT 27
5 9-MOS DEC-31-1997 JAN-01-1997 SEP-30-1997 3,389,000 0 307,000 (107,000) 0 3,395,000 14,939,000 (4,448,000) 15,147,000 171,000 5,718,000 37,068,000 0 0 (31,165,000) 15,147,000 0 2,582,000 0 3,721,000 280,000 107,000 1,003,000 (1,419,000) 0 (1,419,000) 0 0 0 (1,419,000) (0.38) (0.38) Includes $3,355,000 of Minority Interest in Joint Venture Represents Minority Interest Portion of Current net Income/(loss)
-----END PRIVACY-ENHANCED MESSAGE-----