0000912057-95-006175.txt : 19950811 0000912057-95-006175.hdr.sgml : 19950811 ACCESSION NUMBER: 0000912057-95-006175 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950810 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: REAL ESTATE INVESTMENT TRUST OF CALIFORNIA CENTRAL INDEX KEY: 0000082373 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 952565432 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09639 FILM NUMBER: 95560500 BUSINESS ADDRESS: STREET 1: 12011 SAN VICENTE BLVD STE 707 CITY: LOS ANGELES STATE: CA ZIP: 90049 BUSINESS PHONE: 3104767793 MAIL ADDRESS: STREET 1: 12011 SAN VICENTE BLVD STE 707 CITY: LOS ANGELES STATE: CA ZIP: 90049 10-Q 1 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ___________________ FORM 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES --- EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1995. TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ---- EXCHANGE ACT OF 1934 For the transition period from __________ to __________ COMMISSION FILE NUMBER 1-9639 REAL ESTATE INVESTMENT TRUST OF CALIFORNIA (Exact name of Registrant as specified in its charter) CALIFORNIA 95-2565432 (State or other jurisdiction of (I.R.S. Employer I.D. Number) incorporation or organization) 12011 SAN VICENTE BLVD., SUITE 707 LOS ANGELES, CALIFORNIA 90049 (Address of principal executive offices) Zip Code REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (310) 476-7793 NOT APPLICABLE 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 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____. Shares of Beneficial Interest outstanding as of June 30, 1995 - 9,340,697 REAL ESTATE INVESTMENT TRUST OF CALIFORNIA PART I - FINANCIAL INFORMATION Item 1: Consolidated Balance Sheets (Unaudited) (Note 1)
June 30, Dec. 31, 1995 1994 ----------------------------- ($ in thousands) ASSETS Investments in Rental Properties............... Land......................................... $ 44,220 $ 44,213 Buildings and improvements................... 164,812 162,015 -------- -------- 209,032 206,228 Less accumulated depreciation.............. (21,332) (18,889) -------- -------- 187,700 187,339 Investment in Unconsolidated Partnership....... 1,308 1,524 Notes Receivable Secured by Real Properties.... 5,381 7,437 Cash........................................... 486 867 Other Assets................................... 1,862 1,798 -------- -------- 196,737 198,965 -------- -------- LIABILITIES AND SHAREHOLDERS' EQUITY Notes Payable Secured by Real Properties....... 87,047 88,675 Accounts Payable and Accrued Expenses.......... 2,064 1,901 Distributions Payable to Shareholders.......... 3,315 3,299 -------- -------- 92,426 93,875 -------- -------- SHAREHOLDER' EQUITY Shares of Beneficial Interest - no par value - unlimited shares authorized; 9,340,697 shares in 1995 and 9,294,251 shares in 1994 issued and outstanding........................ 104,311 105,090 -------- -------- $196,737 $198,965 -------- --------
See accompanying Notes to Financial Information 2 REAL ESTATE INVESTMENT TRUST OF CALIFORNIA PART I - FINANCIAL INFORMATION Item 1: Consolidated Statements of Income (Unaudited) (Note 1)
For the Three Months Ended For the Six Months Ended June 30, June 30, June 30, June 30, 1995 1994 1995 1994 ------------------------------------------------------- (in thousands, except per-share data) REVENUES Rental........................ $8,058 $6,584 $16,124 $12,303 Interest/Other................ 403 328 754 618 ------- ------- ------- ------- 8,461 6,912 16,878 12,921 ------- ------- ------- ------- REAL ESTATE EXPENSES Depreciation.................... 1,338 1,060 2,660 1,911 Interest........................ 1,744 1,027 3,477 1,632 Property Taxes.................. 470 306 939 558 Repairs and Maintenance......... 416 371 851 656 Insurance....................... 47 44 106 75 Leasing Commissions and Payroll. 571 442 1,090 762 Utilities....................... 626 411 1,146 761 Other........................... 447 313 875 573 ------- ------- ------- ------- 5,659 3,974 11,144 6,928 ------- ------- ------- ------- ADMINISTRATIVE EXPENSES Trustees Fees................... 29 21 59 42 Professional Services........... 134 132 171 168 Salaries and Overhead........... 86 175 338 406 ------- ------- ------- ------- 249 328 568 616 ------- ------- ------- ------- NET INCOME........................ $2,553 $2,610 $5,166 $5,377 ------- ------- ------- ------- FUNDS FROM OPERATIONS............. $3,915 $3,693 $7,873 $7,329 ------- ------- ------- ------- Weighted Average Shares Outstanding (in thousands)....... 9,333 9,256 9,320 9,251 ------- ------- ------- ------- Per Share Data Net Income...................... $ .274 $ .282 $ .555 $ .581 ------- ------- ------- ------- Cash Distributions.............. $ .355 $ .345 $ .710 $ .675 ------- ------- ------- -------
See accompanying Notes to Financial Information 3 REAL ESTATE INVESTMENT TRUST OF CALIFORNIA PART I - FINANCIAL INFORMATION Item 1: Consolidated Statements of Cash Flows (Unaudited) (Note 1)
For the Three Months Ended For the Six Months Ended June 30, June 30, June 30, June 30, 1995 1994 1995 1994 ------------------------------------------------------- ($ in thousands) Cash Flow from operating activities: Net income.................... $ 2,553 $ 2,610 $ 5,166 $ 5,377 Adjustment to reconcile net income to net cash provided by operating activities: Depreciation and amortization................. 1,362 1,083 2,707 1,952 Decrease (increase) other assets....................... (839) (677) 45 (936) Increase (decrease) in accounts payable............. 11 357 164 611 ------- ------- ------- ------- Net cash provided by operating activities..................... 3,087 3,373 8,082 7,004 ------- ------- ------- ------- Cash flows from investing activities: Additions to buildings and improvements................. (698) (1,704) (2,804) (2,020) Purchases of rental properties................... -0- (21,108) -0- (41,238) Collections on notes receivable................... 3 1,292 2,057 1,298 ------- ------- ------- ------- Net Cash (used in) provided by investing activities........... (695) (21,520) (747) (41,960) ------- ------- ------- ------- Cash flow from financing activities: Principal payments on notes payable...................... (214) (-0-) (1,628) (32,750) Distributions to shareholders. (3,310) (3,052) (6,609) (6,100) Proceeds from short-term unsecured borrowings......... -0- 19,500 -0- 19,500 Proceeds from long-term unsecured borrowings......... -0- -0- -0- 55,000 Net proceeds from sale of Shares of Beneficial Interest..................... 256 185 521 356 ------- ------- ------- ------- Net cash provided by (used in) financing activities........... (3,268) 16,633 (7,716) 36,006 ------- ------- ------- ------- Net increase (decrease) in cash. (876) (1,514) (381) 1,050 Cash at beginning of period..... 1,362 2,782 867 218 ------- ------- ------- ------- Cash at end of period........... $ 486 $ 1,268 $ 486 $ 1,268 ------- ------- ------- -------
See accompanying Notes to Financial Information 4 REAL ESTATE INVESTMENT TRUST OF CALIFORNIA PART I - FINANCIAL INFORMATION (Unaudited) Item 1: Notes to Financial Information Note 1: Reference is made to Notes to Audited Consolidated Financial Statements appearing in the Annual Report to Shareholders for the year ended December 31, 1994. Note 2: All adjustments (consisting only of normal recurring accruals) which, in the opinion of management, are necessary for a fair statement of the results for the interim periods shown are reflected therein. Note 3: The consolidated financial statements include the accounts of REIT-Santa Maria Properties, Ltd., a limited partnership in which the Trust is general partner and has significantly all the partnership capital. The accounts of the limited partnership have been consolidated with those of the Trust as of April 15, 1981, the date when the partnership interest was acquired. Note 4: No provision has been made for income taxes as the Trust believes that it qualified as a real estate investment trust under Sections 856-860 of the Internal Revenue Code and under similar state statutes. Note 5: Funds from Operations are calculated by adding back the non-cash depreciation and amortization of Direct Finance Lease charges to net income. The Trust believes that Funds from Operations is an appropriate supplemental measure of operating performance. 5 REAL ESTATE INVESTMENT TRUST OF CALIFORNIA PART I - FINANCIAL INFORMATION (Unaudited) Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations OVERVIEW Real Estate Investment Trust of California is a regionally focused, self-administered equity real estate investment trust which owns a diversified portfolio of real estate investments. The Trust primarily currently invests in apartment communities which offer attractive current returns, solid potential for long-term appreciation and earnings growth. The continuing policy of the Trust is to emphasize Funds from Operations (FFO) rather than the realization of capital gains through property dispositions, although in furtherance of the strategy emphasizing apartment investments, the Trust is contemplating the possible disposition of certain shopping center investments. Revenues of the Trust consist primarily of rental income derived from its portfolio of income-producing properties and to a much lesser extent interest income from secured notes receivable. The Trust continues to focus on equity investments in apartment communities in various diversified markets, including Northern and Southern California, Arizona and Nevada. Market conditions have adjusted investment yields of apartment communities more in line with the general real estate market for investment grade real estate. In furtherance of this strategic focus, during 1994 the Trust acquired nine apartment communities totaling 1,381 units. These and prior multi-family community acquisitions are the basis of a major impact on the financial operations of the Trust. No apartment communities were acquired in the first and second quarters of 1995, as the Trust focused its activities on the management of its core portfolio of assets and securing long-term financing. The following table is a summary of apartment acquisitions of the Trust since March of 1991:
TOTAL AVERAGE % INVESTMENT STATE # OF UNITS INVESTMENT UNIT COST BY STATE ---------- ---------- ---------- --------- ------------ CALIFORNIA 1,640 $82,395,000 $50,200 62% ARIZONA 1,271 34,775,000 $27,400 26% NEVADA 280 15,200,000 $54,300 12% TOTAL: 3,191 $132,370,000 $41,000 100%
LIQUIDITY AND CAPITAL RESOURCES As of June 30, 1995, the Trust had lines of credit with Sanwa Bank ($29,000,000) and Union Bank ($7,500,000) for use in the acquisition of income producing properties and general operating purposes, including the payment of distributions to shareholders. Reference is made to the Notes to the Trust's 1994 Annual Report to Shareholders for full details of the terms of these lines of credit. As of June 30, 1995, the Trust had outstanding balances on the lines of credit of $28,000,000. As of July, the Trust reduced its line of credit with Sanwa Bank to $18,500,000 and has retired the Union line. Outstanding balance as of July 31, 1995 on the Sanwa line is $11,800,000. In order to reduce exposure to variable rate debt on the Trust's short-term bank lines of credit, the Trust obtained, in July 1995, an $18-million, 10-year collaterized loan with The Prudential Insurance Company of America. The fixed interest rate is 7.88%, with interest-only payments and the opportunity to convert in the future to an unsecured loan. Proceeds of this loan were used to reduce outstanding borrowings at Sanwa Bank and Union Bank. The Trust is actively marketing a number of its investments, that if sold, would generate additional funds to be used to reduce short-term debt or be reinvested in additional apartment communities. There can be no guarantee that these properties can be sold on terms acceptable to the Trust. On November 1, 1994, the Trust sold the La Verne Towne Center, La Verne, California, for a net sales price of $13,300,000. The funds were used for property acquisitions. 6 REAL ESTATE INVESTMENT TRUST OF CALIFORNIA As the owner of real estate, the Trust is subject to risks arising in connection with the underlying real estate such as defaults or nonrenewal of the leases, increased operating costs, environmental problems, financing availability, changes in real estate and zoning laws and increases in real property tax rates. The success of the Trust also depends upon trends of the economy, including interest rates, income tax laws, governmental regulation and legislation, and population changes. CHANGES IN RESULTS OF OPERATIONS - FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1995 AND JUNE 30, 1994 The following table summarizes the financial comparison of the six months ended June 30, 1995 and June 30, 1994 ($ in thousands, except per share data).
THREE MONTHS THREE MONTHS SIX MONTHS SIX MONTHS FOR THE THREE AND ENDED JUNE ENDED JUNE % ENDED JUNE ENDED JUNE % SIX MONTHS ENDED 30, 1995 30, 1994 CHANGE 30, 1995 30, 1994 CHANGE ----------------------- ------------ ------------ ------ ---------- ---------- ------ Total revenues $8,461 $6,912 22.4% $16,124 $12,303 31.1% Depreciation 1,338 1,060 26.2 2,660 1,911 39.2 Interest 1,744 1,027 69.8 3,477 1,632 113.1 Property operating costs 2,577 1,887 36.6 5,007 3,385 47.9 Administrative expenses 249 328 (24.1%) 568 616 (7.8) Net Income $2,553 $2,610 (2.2%) $5,166 $5,377 (3.9%) RECONCILIATION TO FUND FROM OPERATIONS Add: Depreciation 1,338 1,060 2,660 1,911 Amortization of Direct Finance Leases 24 23 47 41 FUNDS FROM OPERATIONS (FFO) $3,915 $3,693 6.0% $7,873 $7,329 7.5% Weighted Average Shares Outstanding (000's) 9,333 9,256 9,320 9,251 PER SHARE FUNDS FROM OPERATIONS $0.419 $0.399 5.0% $0.845 $0.792 6.7%
The improved financial results of the Trust, as measured by increased Funds from Operations, has primarily been effected by the acquisition of apartment communities. Revenues, real estate expenses and Funds from Operations have increased from June 30, 1994 to June 30, 1995 primarily due to those acquisitions and improvements in occupancies and operating performances of existing apartment investments. As new investments were acquired, depreciation expense has increased. In March 1994, the Trust funded the Prudential Insurance Company of America $55,000,000 unsecured note payable. The interest on this borrowing is the major portion of the increase in interest expense between the periods. These funds were used to fund 1994 property acquisitions. The operating costs increased due to the 1994 property acquisitions totaling 1,381 apartment units. Expenses related to apartment operations, which include payroll of on-site personnel (such as resident managers, leasing staff, maintenance and janitorial staff), utilities, advertising, direct office expenses and management fees, have increased in direct relation to acquisitions of those properties. All operating expenses for apartment complexes, including real property taxes and insurance, but excluding depreciation, range from approximately 35% to 40% of gross scheduled income. This compares to retail and commercial properties, which are generally leased on a "net" basis with the tenant paying operating expenses. 7 REAL ESTATE INVESTMENT TRUST OF CALIFORNIA The retail portfolio continues to experience weakness in rental rates and occupancy due to the effects of the Southern California economy. Although retail and commercial properties continue to present leasing problems, the Trust increased revenues by approximately 5% when the first six months of 1995 is compared with the same period in 1994. New leases account for the improved performance. PART II - OTHER INFORMATION Item 1. Legal Proceedings - None Item 2: Changes in Securities - None Item 3: Defaults upon Senior Securities - None Item 4: Submission of Matters to a Vote of Security Holders - Information regarding Shareholder action at the April 19, 1995 Annual Meeting of Shareholders was disclosed in the Trust's Form 10-Q for the quarter ended March 31, 1995. Item 5: Other Information - None Item 6: Exhibits and Reports on Form 8-K - None 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 duly authorized. REAL ESTATE INVESTMENT TRUST OF CALIFORNIA Date: August 9, 1995 By: /s/ LEROY E. CARLSON ---------------- --------------------------------------- LEROY E. CARLSON Vice President, Secretary and Treasurer (for the Registrant and as Chief Accounting Officer) 8 EX-27 2 EXHIBIT 27 - FDS
5 1,000 US $ 6-MOS DEC-31-1995 JAN-01-1995 JUN-30-1995 1 486 0 5381 0 0 0 209032 21332 196737 0 87047 104311 0 0 0 196737 0 16878 0 0 7667 0 3477 5166 0 0 0 0 0 5166 .555 .555