-----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, I/lvL8VrFSN+Gw+oZzzNHcjOFLzwrNIEMiW+SFQ9yWQvTX9/2nHY/2aeZn0DHk2T vE9WPHWljfOA6vPhMSGwUw== 0000912057-95-010247.txt : 19951121 0000912057-95-010247.hdr.sgml : 19951121 ACCESSION NUMBER: 0000912057-95-010247 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951120 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: 95595120 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 SEPTEMBER 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 September 30, 1995 - 9,357,736 REAL ESTATE INVESTMENT TRUST OF CALIFORNIA PART I - FINANCIAL INFORMATION ITEM 1: CONSOLIDATED BALANCE SHEETS (UNAUDITED) (NOTE 1)
SEPT. 30, DEC. 31, 1995 1994 --------------------- ($ in thousands) ASSETS Investments in Rental Properties................. Land........................................... $ 44,220 $ 44,213 Buildings and improvements..................... 165,340 162,015 -------- -------- 209,560 206,228 Less accumulated depreciation............... (22,592) (18,889) -------- -------- 186,968 187,339 Investment in Unconsolidated Partnership......... 1,200 1,524 Notes Receivable Secured by Real Properties...... 1,791 7,437 Cash............................................. 1,655 867 Other Assets..................................... 1,364 1,798 -------- -------- $192,978 $198,965 -------- -------- LIABILITIES AND SHAREHOLDERS' EQUITY Notes Payable Secured by Real Properties......... $ 83,832 $ 88,675 Accounts Payable and Accrued Expenses............ 2,007 1,901 Distributions Payable to Shareholders............ 3,322 3,299 -------- -------- 89,161 93,875 -------- -------- SHAREHOLDERS' EQUITY Shares of Beneficial Interest - no par value - unlimited shares authorized; 9,357,736 shares in 1995 and 9,294,251 shares in 1994 issued and outstanding................................ 103,817 105,090 -------- -------- $192,978 $198,965 -------- --------
See accompanying Notes to Financial Information 2 REAL ESTATE INVESTMENT TRUST OF CALIFORNIA PART I - FINANCIAL INFORMATION ITEM 1: CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (NOTE 1)
For the Three Months Ended For the Nine Months Ended Sept. 30, Sept. 30, Sept. 30, Sept. 30, 1995 1994 1995 1994 ------------------------------------------------------- ($ in thousands, except per-share data) REVENUES Rental.......................................... $8,188 $7,179 $24,312 $19,482 Interest........................................ 403 581 1,157 1,199 ------ ------ ------- ------- 8,591 7,760 25,469 20,681 ------ ------ ------- ------- REAL ESTATE EXPENSES Depreciation.................................... 1,367 1,132 4,027 3,043 Interest........................................ 1,744 1,452 5,221 3,084 Property Taxes.................................. 493 409 1,432 967 Repairs and Maintenance......................... 499 462 1,350 1,118 Insurance....................................... 47 53 153 128 Leasing Commissions and Payroll................. 542 462 1,632 1,224 Utilities....................................... 682 615 1,828 1,376 Other........................................... 427 397 1,302 970 ------ ------ ------- ------- 5,801 4,982 16,945 11,910 ------ ------ ------- ------- ADMINISTRATIVE EXPENSES Trustees Fees................................... 30 21 89 63 Professional Services........................... 47 20 218 188 Salaries and Overhead........................... 157 186 495 592 ------ ------ ------- ------- 234 227 802 843 ------ ------ ------- ------- NET INCOME $2,556 $2,551 $7,722 $7,928 ------ ------ ------- ------- ------ ------ ------- ------- Weighted Average Shares Outstanding (in thousands) 9,354 9,273 9,331 9,258 ------ ------ ------- ------- ------ ------ ------- ------- Per Share Data Net Income...................................... $ .27 $ .28 $ .83 $ .86 ------ ------ ------- ------- ------ ------ ------- ------- Cash Distributions.............................. $ .355 $ .345 $ 1.065 $ 1.020 ------ ------ ------- ------- ------ ------ ------- -------
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 Nine Months Ended Sept. 30, Sept. 30, Sept. 30, Sept. 30, 1995 1994 1995 1994 ------------------------------------------------------- ($ in thousands) Cash Flow from operating activities: Net income.................................... $2,556 $2,551 $7,722 $7,928 Adjustment to reconcile net income to net cash provided by operating activities: Depreciation and amortization.................. 1,479 1,173 4,186 3,125 Decrease (increase) other assets............... 389 524 434 (412) Increase (decrease) in accounts payable........ (58) 9 106 620 ------ ------- ------- -------- Net cash provided by operating activities........ 4,366 4,257 12,448 11,261 ------ ------- ------- -------- Cash flows from investing activities: Additions to buildings and improvements, net... (528) (576) (3,332) (2,596) Purchases of rental properties................. -0- (7,730) -0- (48,968) Collections on notes receivable................ 3,589 (1) 5,646 1,297 ------ ------- ------ -------- Net Cash (used in) provided by investing activities........................... 3,061 (8,307) 2,314 (50,267) ------ ------- ------ -------- Cash flow from financing activities: Principal payments on notes payable............ (3,214) -0- (4,842) (32,750) Distributions to shareholders.................. (3,316) (3,194) (9,925) (9,294) Proceeds from short-term unsecured borrowings -0- 2,400 -0- 21,900 Proceeds from long-term secured borrowings..... -0- 4,291 -0- 4,291 Proceeds from long-term unsecured borrowings. -0- -0- -0- 55,000 Net proceeds from sale of Shares of Beneficial Interest.................................... 272 309 793 665 ------ ------- ------- -------- Net cash provided by (used in) financing activities..................................... (6,258) 3,806 (13,974) 39,812 ------ ------- ------- -------- Net increase (decrease) in cash.................. 1,169 (244) 788 806 Cash at beginning of period...................... 486 1,268 867 218 ------ ------- ------ -------- Cash at end of period............................ $ 1,655 $ 1,024 $ 1,655 $ 1,024 ------ ------- ------ -------- ------ ------- ------ --------
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 Trust's Annual Report on Form 10-K, as amended, for the year ended December 31, 1994. Note 2: The accompanying unaudited consolidated financial statements are prepared in accordance with instructions to Form 10-Q and in the opinion of management, include all material adjustments (consisting only of normal recurring accruals) which are necessary for a fair presentation of the results for the interim periods shown. The results for the nine month period ended September 30, 1995 are not necessarily indicative of the results to be expected for the full year. 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. ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW On October 11, 1995, Real Estate Investment Trust of California and BRE Properties, Inc. announced the execution of a definitive agreement in which the two companies will be merged, forming one of the largest multifamily real estate investment trusts in the Western United States. BRE Properties will be the surviving entity. 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 currently invests primarily 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 current returns, rather than the realization of capital gains through property dispositions. 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 during the first three quarters of 1995, as the Trust focused its activities on the management of its portfolio of assets and securing long-term financing. In addition, on November 1, 1995, the Trust purchased the 173 unit Canterbury Downs Apartments (built in 1993) in Rocklin, California (near metro Sacramento) for $9,400,000. The 173 unit, Ocotillo Apartments (built in 1972), located in Phoenix, Arizona, is scheduled to be sold on November 28, 1995 for $3,650,000. See Part II, Item 5, Other Information. LIQUIDITY AND CAPITAL RESOURCES As of September 30, 1995, the Trust had a line of credit with Sanwa Bank ($18,500,000) 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 of the Trust's 1994 Annual Report on Form 10-K, as amended, for full details of the terms of this line of credit. As of September 30, 1995, the Trust had an outstanding balance on 5 the line of credit of $6,600,000. On November 1, 1995, the Trust borrowed an additional $9,000,000 on its line of credit to complete the purchase of the Canterbury Downs Apartments. 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 on the Trust's lines of credit outstanding at that time. In September 1995, the Trust received payment in full of a note receivable secured by real estate in the amount of $3,580,000. Proceeds of the payoff were used to reduce the outstanding balance on the Trust's line of credit. The Trust is marketing some 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. The following table quantifies cash flows from operating, investing and financing activities using information from the Consolidated Statements of Cash Flows:
THREE MONTHS ENDED NINE MONTHS ENDED -------------------- -------------------- September September September September For the Three and Nine Months Ended 30, 1995 30, 1994 30, 1995 30, 1994 ------------------------------------------ Net cash provided by operating activities........... $ 4,366 $ 4,257 $ 12,448 $ 11,261 Net cash provided by (used in) investing activities. 3,589 (8,307) 2,314 (50,267) Net cash provided by (used in) financing activities (6,258) 3,806 (13,974) 39,812 Net increase (decrease) in cash..................... $ 1,169 $ (244) $ 788 $ 806 Cash at end of period............................... $ 1,655 $ 1,024 $ 1,655 $ 1,024
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 NINE MONTHS ENDED SEPTEMBER 30, 1995 AND SEPTEMBER 30, 1994 The following table summarizes the financial comparison of the three and nine months ended September 30, 1995 and September 30, 1994 ($ in thousands, except per share data).
THREE MONTHS ENDED NINE MONTHS ENDED ---------------------------- ----------------------------- FOR THE THREE AND SEPTEMBER SEPTEMBER % SEPTEMBER SEPTEMBER % NINE MONTHS ENDED 30, 1995 30, 1994 CHANGE 30, 1995 30, 1994 CHANGE - ------------------------------------------------------------------------------------- Total revenues $ 8,591 $ 7,760 10.7% $25,469 $20,681 23.2% Depreciation 1,367 1,132 20.8 4,027 3,043 32.3 Interest expense 1,744 1,452 20.1 5,221 3,084 69.3 Property operating costs 2,690 2,398 12.2 7,697 5,793 32.9 Administrative expenses 234 227 3.1 802 843 (4.9) NET INCOME $ 2,556 $ 2,551 0.2% $ 7,722 $ 7,928 (2.6)% Weighted Average Shares Outstanding 9,354 9,273 9,331 9,258
6 Revenues and real estate expenses increased from September 30, 1994 to September 30, 1995 primarily due to 1994 acquisitions and improvements in occupancies and operating performances of existing apartment investments. Approximately 75% of this increase was attributed to 1994 property acquisitions and 25% to prior acquisitions and improved occupancies and rental increases. 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. The retail portfolio continues to experience weakness in rental rates and occupancy due to the effects of the Southern California economy. Retail and commercial properties continue to present leasing and occupancy problems with results relatively unchanged from prior periods. 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 - None Item 5: Other Information ACQUISITION OR DISPOSITION OF ASSETS On November 1, 1995, the Trust acquired Canterbury Downs Apartments, a garden apartment community ("Project") in Rocklin, California (near metro Sacramento) for approximately $9,400,000 plus related acquisition costs. The Project, completed in October 1993, consists of approximately 8.6 acres of land improved with 173 apartment units (72 one bedroom units, 100 two bedroom units and 1 three bedroom unit) totaling approximately 133,272 net rentable square feet. There are 16 frame and stucco structures, a clubhouse/leasing office and a pool and gym building. The seller was Canterbury Downs Associates Limited Partnership, not related to the Trust or its Trustees or Officers. The following data was derived from information supplied to the Trust by the seller: The occupancy rate and average effective rental per square foot of the property during the period from completion (October 1993) to December 31, 1994 are as follows:
1993(1) 1994 ------- ----- Occupancy rate n/a 84.6% Average rent per square foot n/a $9.06
(1) Project was in lease up during 1993 and 1994. The occupancy rate as of December 31, 1994 was 92.2%. 7 As of November 1, 1995, the project was approximately 97% occupied. All leases to tenants are for terms of one year or less, with rentals ranging from approximately $605 to $895 depending on unit type and location. The property is in excellent physical condition and only minor improvements are planned. The project competes for tenants with many similar properties in the area. On November 1, 1995, the Trust added the property to coverage under its master insurance policy which management has determined to be adequate. The 1994-1995 real property taxes were $89,751 at a rate of $104.10 per $100 of assessed value. The 1995-1996 real property taxes are $89,586 at a rate of $102.70 per $100 of assessed value. The sources of funds used to acquire the project were as follows: 1. $9,000,000 was borrowed under the Trust's line of credit with Sanwa Bank California. 2. The balance of the funds were from general operating cash held by the Trust. On August 1, 1995, the Trust entered into an agreement to sell the 173 unit Ocotillo Apartments (built in 1972) located in Phoenix, Arizona for $3,650,000. The sale is expected to close on approximately November 28, 1995. The book value of the investment at September 30, 1995 is approximately $2,589,000 and the gain on sale will be approximately $900,000 after selling and closing costs. The buyer is not related to the Trust, its Trustees or Officers. The Trust's plan is to reinvest this funds in additional apartment communities built after 1985 or to reduce outstanding balances on the line of credit. 8 REAL ESTATE INVESTMENT TRUST OF CALIFORNIA 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. REAL ESTATE INVESTMENT TRUST OF CALIFORNIA Date: November 20, 1995 By: /s/ LeRoy E. Carlson ------------------------------------- LEROY E. CARLSON Vice President, Secretary and Treasurer (For the Registrant and as Chief Accounting Officer) 9 EX-27 2 EX-27 FDS
5 9-MOS DEC-31-1995 SEP-30-1995 1,655 0 0 0 0 0 209,560 (22,592) 192,978 0 83,832 103,817 0 0 0 192,978 0 25,969 0 11,724 802 0 5,221 0 0 0 0 0 0 7,722 .83 .83
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