-----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, GDnZkwJkWrNqJW3eGyMYdROLhB5JS6GHnZf3CcFvUv2kQeNK6eByZtnE51RvGSZl A+RpGhcf+A/Ko7LbEgTriw== 0000765195-95-000002.txt : 19951119 0000765195-95-000002.hdr.sgml : 19951119 ACCESSION NUMBER: 0000765195-95-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951113 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PROPERTY RESOURCES EQUITY TRUST CENTRAL INDEX KEY: 0000765195 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 953959770 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-15880 FILM NUMBER: 95590749 BUSINESS ADDRESS: STREET 1: 1800 GATEWAY DR STREET 2: 3RD FLOOR CITY: SAN MATEO STATE: CA ZIP: 94404 BUSINESS PHONE: 4153125824 MAIL ADDRESS: STREET 1: P O BOX 7777 CITY: SAN MATEO STATE: CA ZIP: 94404-7777 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) (x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended SEPTEMBER 30, 1995 -------------------------------------------------- OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE CHANGE ACT OF 1934 For the transition period from TO ---------------------- -------------------------- Commission file number 0-15880 ---------------------------------------------------------- PROPERTY RESOURCES EQUITY TRUST - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) CALIFORNIA 95-3959770 - -------------------------------------------------------------------------------- (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) P. O. BOX 7777, SAN MATEO, CALIFORNIA 94403-7777 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (415) 312-2000 ------------------------------ N/A - -------------------------------------------------------------------------------- Former name, former address and former fiscal year, if changed since last report 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 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 Shares of Series A Common Stock Outstanding as of September 30, 1995: 1,090,067 Shares of Series B Common Stock Outstanding as of September 30, 1995: 1,000 PART I - FINANCIAL INFORMATION Item 1. Financial Statements PROPERTY RESOURCES EQUITY TRUST BALANCE SHEETS SEPTEMBER 30, 1995 AND DECEMBER 31, 1994 ---------------------------------------- (Dollars in 000's except per share amounts) (Unaudited) (Audited) 1995 1994 ---- ---- ASSETS ------ Rental property: Land $ 2,789 $ 2,789 Buildings and improvements 6,528 6,523 Tenant improvements 191 187 Furniture and fixtures 5 5 - ------------------------------------------------------------------------------- 9,513 9,504 Less: accumulated depreciation 2,087 1,912 - -------------------------------------------------------------------------------- 7,426 7,592 Cash and cash equivalents 630 418 Mortgage-backed securities, available for sale 218 217 Deferred rent receivable 74 86 Other assets 74 83 - -------------------------------------------------------------------------------- Total assets $ 8,422 $ 8,396 ================================================================================ LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Notes payable $ 2,750 $ 2,750 Tenants' deposits and other liabilities 103 78 Dividends payable 76 - - -------------------------------------------------------------------------------- Total liabilities 2,929 2,828 - -------------------------------------------------------------------------------- Stockholders' equity: Common stock, Series A, without par value. Stated value $10 per share; 10,000,000 shares authorized; 1,090,067 shares issued and outstanding in 1995 and 1994 9,384 9,384 Common stock, Series B, without par value. Stated value $10 per share; 1,000 shares authorized, issued and outstanding in 1995 and 1994 10 10 Unrealized loss on mortgage-backed securities (9) (25) Retained earnings (deficit) (3,892) (3,801) - -------------------------------------------------------------------------------- Total stockholders' equity 5,493 5,568 - -------------------------------------------------------------------------------- Total liabilities and stockholders' equity $ 8,422 $ 8,396 ================================================================================ See notes to financial statements. Item 1. Financial Statements (continued) PROPERTY RESOURCES EQUITY TRUST STATEMENTS OF OPERATIONS FOR THE THREE MONTH PERIODS ENDED SEPTEMBER 30, 1995 AND 1994 ------------------------------------------------------------- (Unaudited) (Dollars in 000's except per share amounts) 1995 1994 ---- ---- Revenue: Rent $255 $270 Dividends 1 1 Interest 10 8 - -------------------------------------------------------------------------------- Total revenue 266 279 - -------------------------------------------------------------------------------- Expenses: Interest 44 49 Depreciation and amortization 61 66 Operating 103 106 Related party 24 26 General and administrative 4 6 - -------------------------------------------------------------------------------- Total expenses 236 253 - -------------------------------------------------------------------------------- Net income $ 30 $ 26 ================================================================================ Net income per share of Series A common stock $.03 $.02 ================================================================================ Dividends per share of Series A common stock $.07 $.06 ================================================================================ See notes to financial statements. Item 1. Financial Statements (continued) PROPERTY RESOURCES EQUITY TRUST STATEMENTS OF OPERATIONS FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 1995 AND 1994 ------------------------------------------------------------ (Unaudited) (Dollars in 000's except per share amounts) 1995 1994 ---- ---- Revenue: Rent $805 $843 Dividends 2 4 Interest 30 21 - -------------------------------------------------------------------------------- Total revenue 837 868 - -------------------------------------------------------------------------------- Expenses: Interest 147 139 Depreciation and amortization 184 204 Operating 263 289 Related party 72 75 General and administrative 33 37 - -------------------------------------------------------------------------------- Total expenses 699 744 - -------------------------------------------------------------------------------- Net income $138 $124 ================================================================================ Net income per share of Series A common stock $.13 $.11 ================================================================================ Dividends per share of Series A common stock $.21 $.18 ================================================================================ See notes to financial statements. Item 1. Financial Statements (continued) PROPERTY RESOURCES EQUITY TRUST STATEMENT OF STOCKHOLDERS' EQUITY FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1995 -------------------------------------------------- (Unaudited) (Dollars in 000's)
Common Stock Series A Series B Accumulated Unrealized Dividends Gain/Loss in Excess Shares Amount Shares Amount on of Net Total Securities Income Balance, beginning of period 1,090,067 $9,384 1,000 $10 $(25) $(3,801) $5,568 Unrealized gain on mortgage-backed securities - - - - 16 - 16 Net income - - - - - 138 138 Dividends declared - - - - - (229) (229) - ------------------------------------------------------------------------------------------------- Balance,end of period 1,090,067 $9,384 1,000 $10 $(9) $(3,892) $5,493 =================================================================================================
See notes to financial statements Item 1. Financial Statements (continued) PROPERTY RESOURCES EQUITY TRUST STATEMENTS OF CASH FLOWS FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 1995 AND 1994 ------------------------------------------------------------ (Unaudited) (Dollars in 000's) 1995 1994 ---- ---- Cash flows from operating activities: Net income $138 $124 - -------------------------------------------------------------------------------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 184 204 Decrease in deferred rent receivable 12 16 Decrease in other assets - 45 Increase in tenants' deposits and other liabilities 25 16 - -------------------------------------------------------------------------------- Total adjustments 221 281 - -------------------------------------------------------------------------------- Net cash provided by operating activities 359 405 - -------------------------------------------------------------------------------- Cash flows from investing activities: Improvements to rental property (9) (3) Decrease in investment in mortgage-backed securities 15 44 Net cash provided by investing activities 6 41 Cash flows from financing activities: Dividends paid (153) (196) - -------------------------------------------------------------------------------- Net cash used in financing activities (153) (196) - -------------------------------------------------------------------------------- Net increase in cash and cash equivalents 212 250 Cash and cash equivalents, beginning of period 418 240 - -------------------------------------------------------------------------------- Cash and cash equivalents, end of period $630 $490 ================================================================================ See notes to financial statements. Item 1. Financial Statements (continued) PROPERTY RESOURCES EQUITY TRUST NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1995 ------------------------------------------ NOTE 1 - ORGANIZATION Property Resources Equity Trust (the "Fund") is a California corporation formed on February 20, 1985 for the purpose of investing in income-producing real property. The offering period for the sale of the Fund's Series A common stock terminated on July 17, 1987 with total proceeds raised of $10,889,000 less offering costs of $1,505,000. As of the close of the offering, Property Resources Inc., (the "Advisor") had purchased 1,000 shares of the Fund's Series B common stock for $10,000 cash. The Fund is a real estate investment trust ("REIT") and elected REIT status for income tax purposes for the tax years commencing 1988. Under the Internal Revenue Code and applicable state income tax law, a qualified REIT is not subject to income tax if at least 95% of its taxable income is currently distributed to its stockholders and other tests are met. The Fund intends to distribute substantially all of its taxable income in the future. Accordingly, no provision is made for income taxes in these financial statements. NOTE 2- BASIS OF PRESENTATION The accompanying unaudited financial statements contain all adjustments (consisting of normal recurring accruals) which are necessary, in the opinion of management, for a fair presentation. The statements, which do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements, should be read in conjunction with the Fund's financial statements for the year ended December 31, 1994. NOTE 3 - RELATED PARTY TRANSACTIONS The Fund has entered into an agreement with the Advisor to administer the day-to-day operations of the Fund. Under the terms of the agreement, which is renewable annually, the Advisor will receive a fee equal to 5% of the total amount distributed to the stockholders. The fee is not payable with regard to distributions from the sale or refinancing of property. At September 30, 1995, cash equivalents included $2,000 invested in Franklin Money Fund which is an investment company managed by an affiliate of the Advisor. For the nine month period ended September 30, 1995 dividend income earned amounted to $2,000. The agreements between the Fund and the Advisor, or affiliates, provide for certain types of compensation and payments including but not limited to the types of compensation and payments which were paid or accrued by the Fund for those services rendered for the nine month period ended September 30, 1995: Management advisory fees, charged to related party expense $12,000 Reimbursement for data processing expenses, charged to related party expense 27,000 Property management fees, charged to related party expense 26,000 Shareholder services fees, charged to related party expense 7,000 Leasing commission, capitalized and amortized over the term of the related lease 18,000 Item 1. Financial Statements (continued) PROPERTY RESOURCES EQUITY TRUST NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1995 NOTE 4 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION For the nine month period ended September 30, 1995, interest paid amounted to $147,000. NOTE 5 - SUBSEQUENT EVENT On Wednesday, November 1, the Company entered into an Agreement of Purchase and Sale with the intent of selling the Agora Office Building. The buyer is an unaffiliated third party. The contractual purchase price is $850,000. 75% of the purchase price will be paid in the form of a promissory note payable to the Company. Interest at 9% will be payable monthly and all remaining principal will be due and payable two years after the sale. The balance of the purchase price will be paid to the Company in cash at the close of escrow, subject to customary closing costs and prorations. Certain contractual contingencies remain and there can be no assurances that the sale will be completed under these terms or at all. PART I - FINANCIAL INFORMATION Item 2. Management's Discussion and Analysis of Financial Condition AND RESULTS OF OPERATIONS INTRODUCTION Management's discussion and analysis of financial condition and results of operations should be read in conjunction with the Financial Statements and Notes thereto. COMPARISON OF THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 1995 AND 1994 Net income for the nine month period ended September 30, 1995 amounted to $138,000, an increase of $14,000 as compared to net income of $124,000 in 1994. The increase is due to the following factors: a decrease in rental revenue of $38,000; an increase in interest and dividends of $7,000; an increase in interest expense of $8,000; a decrease in depreciation and amortization of $20,000; a decrease in operating expenses of $26,000; a decrease in related party expense of $3,000; and a decrease in general and administrative expense of $4,000. Rental income for the nine month period decreased by $38,000, or 5%, primarily due to a decrease in the average occupancy rate at two of the Fund's properties. The average occupancy rate of net rentable square feet for the nine month periods ended September 30, 1995 and 1994 at Graham Court Business Park was 88% and 90%; and at Good Guys Plaza Shopping Center was 94% and 96%, respectively. Interest and dividend income increased $7,000, or 28%, primarily due to higher yields realized on short-term money market investments. Total expenses for the nine month period decreased by $45,000, or 6%, from $744,000 in 1994 to $699,000. The decrease in total expenses is attributable to the following factors: an increase in interest expense of $8,000, or 6%; a decrease in depreciation and amortization of $20,000, or 10%; a decrease in operating expenses of $26,000, or 9%; a decrease in related party expense of $3,000 or 4%; and a decrease in general and administrative expense of $4,000, or 11%. Interest expense increased $8,000, reflecting rate changes on the outstanding note payable. Operating expenses decreased $26,000, as a result of a decrease in property taxes, utilities, and capital expenses. Related party expense decreased $3,000 due to a decrease in the reimbursement for data processing expenses. General and administrative expense decreased $4,000 due to a decrease in printing and other Fund related expenses. RELATED PARTY EXPENSES The Fund has entered into an agreement with the Advisor to administer the day-to-day operations of the Fund. For the nine month period ended September 30, 1995, the Fund recorded $12,000 of advisory fee expense to the Advisor in accordance with the Advisory Agreement. The Fund's properties are managed by Continental Property Management Co., ("CPMC"), an affiliate of the Advisor. For the nine month period ended September 30, 1995, the Fund recorded $26,000 of property management fee expense to CPMC in accordance with the Property Management Agreement. The Fund's Board of Directors (including all of its Independent Directors) have determined, after review, that the compensation paid to the Advisor and to CPMC referenced above, as well as the expense reimbursements made by the Fund to the Advisor reflected in Note 3 to the accompanying financial statements, are fair and reasonable to the Fund. PART I - FINANCIAL INFORMATION Item 2. Management's Discussion and Analysis of Financial Condition AND RESULTS OF OPERATIONS IMPACT OF INFLATION The Fund's management believes that inflation may have a positive effect on the Fund's property portfolio, but this effect generally will not be fully realized until such properties are sold or exchanged. The Fund's policy of negotiating leases which incorporate operating expense "pass-through" provisions is intended to protect the Fund against increased operating costs resulting from inflation. LIQUIDITY AND CAPITAL RESOURCES The Fund's principal sources of capital for the acquisition and renovation of property and for working capital reserves have been proceeds from the initial offering of its common stock and from funds from operations after payment of dividends. At September 30, 1995, cash and cash equivalents totaled $630,000 and investments in mortgage-backed securities totaled $218,000. As of September 30, 1995, one of the Fund's properties were subject to secured financing. The Good Guys Plaza shopping center is subject to a promissory note collateralized by a Deed of Trust in the amount of $2,750,000. The note is payable, interest only, at an adjustable rate of interest which is based on a certain bond index. The interest rate is not subject to a minimum or maximum rate of interest. On September 30, 1995, the interest rate was 6.5%. In certain circumstances, the payments due may be less than accrued interest. Any resulting accrued interest bears interest at the then current rate. The note is due in full in December, 1996. On Wednesday, November 1, the Company entered into an Agreement of Purchase and Sale with the intent of selling the Agora Office Building. The buyer is an unaffiliated third party. The contractual purchase price is $850,000. 75% of the purchase price will be paid in the form of a promissory note (the "Seller Carryback") payable to the Company. Interest at 9% will be payable monthly and all remaining principal will be due and payable two years after the sale. The balance of the purchase price will be paid to the Company in cash at the close of escrow, subject to customary closing costs and prorations. Certain contractual contingencies remain and there can be no assurances that the sale will be completed under these terms or at all. Under the terms of the Seller Carryback, the potential buyer will be obligated to pay the Company approximately $57,000 in interest per year. Since this amount exceeds the net cash flow generated by the Agora Office Building in either 1993 or 1994, it is anticipated that the sale will not materially affect the capital resources of the Company during the term of the Seller Carryback. After the repayment of the Seller Carryback, if the sale proceeds are distributed, a material reduction in net cash flow could result. However, even with the potential reduction resulting from the possible sale of the Agora Office Building, in the short-term and in the long-term, management believes that the Fund's current sources of capital will continue to be adequate to meet both its operating requirements and the payment of dividends. DIVIDENDS Dividends are paid quarterly at the discretion of the Board of Directors and depend on the Fund's earnings, cash flow, financial condition and other relevant factors. During the nine month period ended September 30, 1995, the Fund declared dividends totaling $229,000. PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Not applicable (b) Reports on Form 8-K No reports on Form 8-K were filed by the Registrant during the quarter ended September 30, 1995. 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 thereunto duly authorized. PROPERTY RESOURCES EQUITY TRUST By: /S/ DAVID P. GOSS David P. Goss Chief Executive Officer Date: NOVEMBER 10, 1995 EX-27 2
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM REGISTRANT'S FINANCIAL STATEMENTS FOR THE QUARTER ENDED SEPTEMBER 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1995 SEP-30-1995 630 218 74 0 0 0 9,513 2,087 8,422 0 0 9,394 0 0 0 8,422 0 266 0 236 0 0 44 0 0 0 0 0 0 30 0 0
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