-----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, IxxinAFf8cx6AiViQbaZ86feytdoFwZ87BfOzHKpJwtTYOR/znWsPFBewigD+HV7 ezGANbOgKpPgTKzJOiWpwA== 0000910079-04-000012.txt : 20040224 0000910079-04-000012.hdr.sgml : 20040224 20040224145046 ACCESSION NUMBER: 0000910079-04-000012 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20040224 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20040224 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEDFORD PROPERTY INVESTORS INC/MD CENTRAL INDEX KEY: 0000910079 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 680306514 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-12222 FILM NUMBER: 04624567 BUSINESS ADDRESS: STREET 1: 270 LAFAYETTE CIRCLE STREET 2: P. O. BOX 1058 CITY: LAFAYETTE STATE: CA ZIP: 94549 BUSINESS PHONE: 9252838910 8-K/A 1 f8k121103revision2.htm SECURITIES AND EXCHANGE COMMISSION

SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549




FORM 8-K/A


CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934



Date of Report (Date of earliest event reported):

December 11, 2003



BEDFORD PROPERTY INVESTORS, INC.

(Exact name of registrant as specified in its charter)




Maryland

1-12222

68-0306514

(State or other jurisdiction

(Commission

(I.R.S. Employer

of incorporation)

File Number)

Identification No.)





 

270 Lafayette Circle, Lafayette, California         94549

       (Address of principal executive offices)             (Zip Code)



Registrant’s telephone number, including area code:

(925) 283-8910






Not Applicable


(Former name or former address, if changed since last report)





#








#







BEDFORD PROPERTY INVESTORS, INC.


INDEX





ITEM 7.  Financial Statements and Exhibits

1


Towne Centre Plaza (Attachment A)

3

Report of Independent Auditors

4

Statement of Revenue and Certain Expenses for the

5

    year ended December 31, 200 2

Notes to Statement of Revenue and Certain Expenses

5

Statement of Estimated Taxable Operating Results and

7

    Cash to be Made Available by Operations (unaudited)





Northport Business Center (Attachment B)

8

Report of Independent Auditors

9

Statement of Revenue and Certain Expenses for the

10

    year ended December 31, 200 2

Notes to Statement of Revenue and Certain Expenses

10

Statement of Estimated Taxable Operating Results and

12

    Cash to be Made Available by Operations (unaudited)


Pro Forma Financial Statements (Attachment C)

13





Pro Forma Balance Sheet as of September 30, 200 3 (unaudited)

14

Pro Forma Statement of Income for the nine months ended

15

     September 30, 200 3 (unaudited)

Pro Forma Statement of Income for the year ended

16

    December 31, 200 2 (unaudited)

Notes to Pro Forma Financial Statements

17









Exhibit 23.1 - Consent of Independent Accountants

22





#























The registrant filed a report on Form 8-K on December 23, 2003 with regard to its acquisition s of real estate properties without the required financial information.  The registrant is filing this amendment on Form 8-K/A to include such financial information.












Item 7.  Financial Statements and Exhibits:


The registrant hereby amends Item 7 by deleting sub parts (a) and (b) in their entirety and replacing such sections with:


(a)   Financial Statements Under Rule 3-14 of Regulation S-X


Towne Centre Plaza (Attachment A)


Report of Independent Auditors

Statement of Revenue and Certain Expenses for the year ended

    December 31, 2002

Notes to Statement of Revenue and Certain Expenses

Statement of Estimated Taxable Operating Results and Cash to be

    Made Available by Operations (unaudited)



Northport Business Center (Attachment B)


Report of Independent Auditors

Statement of Revenue and Certain Expenses for the year ended

    December 31, 2002

Notes to Statement of Revenue and Certain Expenses

Statement of Estimated Taxable Operating Results and Cash to be

    Made Available by Operations (unaudited)






#








(b)  

Pro Forma Financial Statements (Attachment C)


Pro Forma Balance Sheet as of September 30, 2003 (unaudited)

Pro Forma Statement of Income for the nine months ended

     September 30, 2003 (unaudited)

Pro Forma Statement of Income for the year ended

    December 31, 200 2 (unaudited)

Notes to Pro Forma Financial Statements


The registrant hereby amends Item 7 sub part (c) by adding the following exhibit:


(c)   Exhibit and Exhibit Index


23.1 Consent of PricewaterhouseCoopers LLP .



1










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, hereunto duly authorized.



BEDFORD PROPERTY INVESTORS, INC.




By: /s/ Hanh Kihara                     

Hanh Kihara

Senior Vice President and

Chief Financial Officer



Date:  February 24, 2004

















2






Attachment A


TOWNE CENTRE PLAZA


STATEMENT OF REVENUE AND CERTAIN EXPENSES


Year Ended December 31, 2002




CONTENTS


Report of Independent Auditors

4


Statement of Revenue and

  Certain Expenses

5


Notes to Statement of Revenue

  and Certain Expenses

5-6


Statement of Estimated Taxable Operating Results

  and Cash to be Made Available by

  Operations (unaudited)

7





3






Report of Independent Auditors


To the Board of Directors of

Bedford Property Investors, Inc.:




We have audited the accompanying statement of revenue and certain expenses of Towne Centre Plaza (the Property) for the year ended December 31, 2002.  This statement is the responsibility of the Company’s management.  Our responsibility is to express an opinion on this statement based on our audit.


We conducted our audit in accordance with auditing standards generally accepted in the United States of America.  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the statement of revenue and certain expenses is free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the statement.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the statement.  We believe that our audit provides a reasonable basis for our opinion.


The accompanying statement of revenue and certain expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission as described in Note A and is not intended to be a complete presentation of the Property’s revenues and expenses.


In our opinion, the statement referred to above presents fairly, in all material respects, the revenue and certain expenses as described in Note A of the Property for the year ended December 31, 2002 in conformity with accounting principles generally accepted in the United States of America.




PricewaterhouseCoopers LLP


San Francisco, California

February 20, 2004










4






Towne Centre Plaza


Statement of Revenue and Certain Expenses


Year Ended December 31, 2002


 


Revenue-rental income and other


$4,954,000

 


Certain expenses:

    Utilities



598,000

 

     Real estate taxes

251 ,000

 

     Repairs and maintenance

181,000

 

    Cleaning

163,000

 

     Insurance

67,000

 

     Property association

21 ,000

  

1,281,000

 

      Revenue in excess of

         certain expenses


$3,673,000


Notes to Statement of Revenue and Certain Expenses


A.

Property and Basis of Accounting


Towne Centre Plaza (the “ Property ” ) is a three-building 205,077 square-foot office complex located in Foothill Ranch, California.  


Bedford Property Investors, Inc. (the “Company”) acquired the property on November 3, 2003 from Foothill-Operon I, LLC, (the “Seller”) for $41,780,000 .  

The Property was purchased pursuant to the Purchase Agreement dated October 2, 2003, between the Seller and the Company.  The Company is not affiliated with the Seller, and the purchase price was established through arm’s length negotiations.  The factors considered by the Company in determining the purchase price included:  (i) the historical and expected cash flow of the Property; (ii) the quality of the tenants with in-place leases and the potential for higher occupancy levels and rents; (iii) the current operating costs and estimation of future operating costs; (iv) the physical condition and location of the property; and (v) the ability to generate returns in excess of the Company’s cost of capital.  The Company, after investigation of the Property, is not aware of any material factors, other than those discussed above, which would cause t he reported financial information not to be necessarily indicative of future operating results.


The statement of revenue and certain expenses has been prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and , accordingly, is not representative of the actual results of operations of the Property for the year ended December 31, 2002 due to the exclusion of the following expenses, which may not be comparable to the proposed future operations of the Property :




5






-

Depreciation and amortization ;

-

Interest on mortgages which were not assumed by the Company ;

-

Federal and state income taxes ;

-

Management fees which were based on the previous owner’s management agreement ; and

-

Other costs not directly related to the proposed future operations of the p roperty .


The acquisition of the Property may result in a new valuation for purposes of determining future property tax assessments.


Rental income of the Property is recognized on a straight-line basis over the term of the related leases.  For the year ended December 31, 2001, contractual income exceeded rental income on a straight-line basis by $34,000.




The preparation of the Property’s financial statement in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of revenue and certain expenses during the reporting period.  These estimates are based on information that is currently available and on various other assumptions that are believed to be reasonable under the circumstances.   Accordingly, a ctual results could vary from those estimates.


B.

Leases


Minimum future rents of the Property to be received under non-cancelable operating leases in effect at December 31, 2002 are as follows:


 

2003

$  4,767,000

 

2004

4,971,000

 

2005

4,926,000

 

2006

4,259,000

 

2007

3,843,000

 

Thereafter

572,000

  


$23,338,000



The minimum future rents shown above do not include tenants’ obligations for reimbursement of operating expenses, insurance and real estate taxes which total ed $ 153 ,000 for the year ended December 31, 200 2 and which are included as other revenue in the accompanying statement of revenue and certain expenses.


C.

Concentration of Credit Risk


At December 31, 200 2 , three tenants accounted for 82% of the revenue derived from the Property.




6



















Towne Centre Plaza




Statement of Estimated Taxable Operating Results and Cash to be Made Available by Operations (unaudited)

Year Ended December 31, 200 2


 

Revenues (1)

$4,988,000

 

Operating expenses

1,281,000

 

Estimated cash to be made

   available by operations


3,707,000

 

Depreciation expense

1,166,000

 

        Estimated taxable

            operating income


$2,541,000


(1) Excludes $34,000 which represents the excess of aggregate rental income on a contractual basis over straight-line rents.


Depreciation expense on a federal tax basis is calculated based on the acquisition cost and purchase price allocation.  Building cost, tenant improvements, and value of in-place leases are depreciated on a straight-line basis over a 39 year life.  Origination value of in-place leases is amortized over the remaining lease terms.


This statement of estimated taxable operating results and estimated cash to be made available by operations is an estimate of operating results of Towne Centre Plaza (the “Property”) for a period of twelve months as if the Property had been acquired on January 1, 200 2 .  The estimate is based on information provided by management and does not purport to reflect actual results for any period.  The Company does not expect to pay federal income tax because of its election to be taxed as a REIT.

















7





















Attachment B


NORTHPORT BUSINESS CENTER


STATEMENT OF REVENUE AND CERTAIN EXPENSES


Year Ended December 31, 2002



CONTENTS


Report of Independent Auditors

9


Statement of Revenue and

   Certain Expenses

10


Notes to Statement of Revenue

   and Certain Expenses

10-11


Statement of Estimated Taxable Operating Results

  and Cash to be Made Available by

  Operations (unaudited)

12
























8




9







Report of Independent Auditors



To the Board of Directors of

Bedford Property Investors, Inc.:



We have audited the accompanying statement of revenue and certain expenses of Northport Business Center (the Property) for the year ended December 31, 2002.  This statement is the responsibility of the Company’s management.  Our responsibility is to express an opinion on this statement based on our audit.


We conducted our audit in accordance with auditing standards generally accepted in the United States of America.  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the statement of revenue and certain expenses is free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the statement.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the statement.  We believe that our audit provides a reasonable basis for our opinion.


The accompanying statement of revenue and certain expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission as described in Note A and is not intended to be a complete presentation of the Property’s revenues and expenses.


In our opinion, the statement referred to above presents fairly, in all material respects, the revenue and certain expenses as described in Note A of the Property for the year ended December 31, 2002 in conformity with accounting principles generally accepted in the United States of America.




PricewaterhouseCoopers LLP


San Francisco, California

February 20, 2004











9










Northport Business Center


Statement of Revenue and Certain Expenses


Year Ended December 31, 2002


 

Revenue – rental income and other

$1,038,000

 


Certain expenses:

     Real estate taxes



69,000

 

     Utilities

66,000

 

     Repairs and maintenance

57,000

 

     Insurance

20,000

  

212,000

 

          Revenue in excess of

              certain expenses


$826,000



Notes to Statement of Revenue and Certain Expenses


A.

Property and Basis of Accounting


Northport Business Center (the “ Property ” ) is a six-building 126,209 square-foot service center/flex complex located in North Las Vegas, Nevada.  


Bedford Property Investors, Inc. (the “Company”) acquired the Property on December 11, 2003 from Jackson-Shaw/Northport Limited Partnership (the “Seller”) for $17,842,000 .  The Property was purchased pursuant to the Purchase Agreement dated November 4, 2003, between the Seller and the Company.  The Company is not affiliated with the Seller, and the purchase price was established through arm’s length negotiations.  The factors considered by the Company in determining the purchase price included:  (i) the historical and expected cash flow of the Property; (ii) the quality of the tenants with in-place leases and the potential for higher occupancy levels and rents; (iii) the current operating costs and estimation of future operating costs; (iv) the physical condition and location of the property; and (v) the ability to generate returns in excess of the Company’s cost of capital.  The Company, after investigation of the Property, is not aware of any material factors, other than those discussed above, which would cause the reported financial information not to be necessarily indicative of future operating results.


The statement of revenue and certain expenses has been prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and , accordingly, is not representative of the actual results of operations of the Northport Business Center for the year ended December 31, 2002 due to the exclusion of the following expenses, which may not be comparable to the proposed future operations of the Northport Business Center:




10







-

Depreciation and amortization ;

-

Interest on mortgages which were not assumed by the Company;


-

Federal and state income taxes ;

-

Management fees which were based on the previous owner’s management agreement ; and

-

Other costs not directly related to the proposed future operations of the property.


Rental income of the Property is recognized on a straight-line basis over the term of the related leases.  For the year ended December 31, 2002, rental income on a straight-line basis exceeded contractual income by $181,000.


The preparation of the Property’s financial statement in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of revenue and certain expenses during the reporting period.  These estimates are based on information that is currently available and on various other assumptions that are believed to be reasonable under the circumstances.   Accordingly, a ctual results could vary from those estimates.


B.

Leases


Minimum future rents of the Property to be received under non-cancelable operating leases in effect at December 31, 2002 are as follows:


 

2003

$1,444,000

 

2004

1,589,000

 

2005

1,623,000

 

2006

1,594,000

 

2007

972,000

 

Thereafter

137,000

  


$7,359,000


The minimum future rents shown above do not include tenants’ obligations for reimbursement of operating expenses, insurance and real estate taxes which total ed $ 102 ,000 for the year ended December 31, 200 2 and which are included as other revenue in the accompanying statement of revenue and certain expenses ..



C.

Concentration of Credit Risk


At December 31, 200 2 , one tenant accounted for 50 % of the revenue derived from the Property.





11

















Northport Business Center



Statement of Estimated Taxable Operating Results and Cash to be Made Available by Operations (unaudited)


For the Year Ended December 31, 2002


 

Revenues (1)

$857,000

 

Operating expenses

212,000

 

Estimated cash to be made available

  by operations


645,000

 

Depreciation expense

385,000

 

        Estimated taxable

            operating income


$260,000


(1)

Excludes $181,000 which represents the excess of aggregate straight-line rents over rental income on a contractual basis.


Depreciation expense on a federal tax basis is calculated based on the acquisition cost and purchase price allocation.  Building cost, tenant improvements, and value of in-place leases are depreciated on a straight-line basis over a 39 year life.  Origination value of in-place leases is amortized over the remaining lease terms.



This statement of estimated taxable operating results and estimated cash to be made available by operations is an estimate of operating results of Northport Business Center (the “Property”) for a period of twelve months as if the Property had been acquired on January 1, 200 2 .  The estimate is based on information provided by management and does not purport to reflect actual results for any period.  The Company does not expect to pay federal income tax because of its election to be taxed as a REIT.
















12











Attachment C


BEDFORD PROPERTY INVESTORS, INC.

PRO FORMA FINANCIAL STATEMENTS


The following unaudited pro forma condensed balance sheet as of September 30, 2003 is presented as if the acquisitions of Towne Centre Plaza, Superstition Springs, and Northport Business Center had occurred on September 30, 2003 .


The following unaudited pro forma condensed statement of income for the year ended December 31, 200 2 is presented as if: (i) the acquisitions of Cotton Center I & II, South San Francisco Business Center, and the Philips Business Center (collectively, the "2002 Acquisitions") and the related borrowings on the bank loan payable, (ii) the acquisitions of Roosevelt Commons, Russell Commerce Center, Towne Centre Plaza, Superstition Springs, and the Northport Business Center (collectively, the "2003 Acquisitions") and the related mortgage financing and borrowings on the bank loan payable, and ( i ii) the dispositions of Vista 1 & 2 , 2230 Oak Ridge Way, 6960 Flanders Drive, Cimarron Business Park, and the Monterey Commerce Center (collectively, the “2002 Dispositions”) and the related repayment on the bank loan payable with the net sales proceeds had all occurred on January 1, 200 2 .  


The following unaudited pro forma condensed statement of income for the nine months ended September 30, 200 3 is presented as if the 200 3 Acquisitions and the related mortgage financing and borrowings on the bank loan payable had all occurred on

January 1, 200 2 .  


The pro forma condensed financial statements should be read in conjunction with the financial statements of Bedford Property Investors, Inc. (the “Company”), including the notes thereto that were filed with and as part of the Company’s annual report on Form 10-K for the year ended December 31, 200 2 filed on March 11, 2003 , and the quarterly report on Form 10-Q for the period ended September 30, 2003 filed on November 14, 2003 . The pro forma condensed financial statements do not purport to represent the Company’s financial position as of September 30, 2003 or the results of operations for the nine months ended September 30, 2003 or for the year ended December 31, 200 2 that would actually have occurred had the Company completed the transactions described above nor do they purport to represent the results of operations as of any future date or for any future period.




13









BEDFORD PROPERTY INVESTORS, INC.

PRO FORMA BALANCE SHEET

AS OF SEPTEMBER 30, 2003 (Unaudited)

(in thousands, except share and per share amounts)


 

Company

Historical

 

Properties

Acquired (1)

 

Company

Pro Forma

ASSETS:

  Real estate investments:

    Industrial buildings



$395,185

 



$22,805

 



$417,990

    Office buildings

340,138

 

34,432

 

374,570

    Land held for development

13,936

 

-

 

13,936


749,259

 

57,237

 

806,496

    Less accumulated depreciation

76,533

 

          -

 

76,533

Total real estate investments

672,726

 

57,237

 

729,963


Cash and cash equivalents


4,762

 


-

 


4,762

Other assets

28,081

 

9,624

 

37,705

 


$705,569

 


$66,861

 


$772,430

LIABILIT I ES AND

 STOCKHOLDERS’ EQUITY:


Bank loan payable




$  82,195

 




$37,895

 




$120,090

Mortgage loans payable

285,342

 

28,127

 

313,469

Accounts payable and accrued expenses

8,386

 

-

 

8,386

Dividend and distributions payable

8,305

 

-

 

8,305

Other liabilities

14,430

 

839

 

15,269


      Total liabilities


398,658

 


66,861

 


465,519

Stockholders’ equity:

  Preferred stock, par value $0.01 per share;

    authorized 49,195,000 shares; issued none

  Series A 8.75% Cumulative Redeemable

    Preferred stock, par value $0.01 per share;

    authorized and issued 805,000 shares in 2003;

    stated liquidation preference of $40,250

  Common stock, par value $0.02 per share;

    authorized 50,000,000 shares; issued and

    outstanding 16,284,725 shares in 2003



-




39,042



326

 



-




-



-

 



-




39,042



326

  Additional paid-in capital

289,953

 

-

 

289,953

  Deferred stock compensation

(5,735)

 

-

 

(5,735)

  Accumulated dividends in excess of net income

(16,689)

 

          -

 

(16,689)

  Accumulated other comprehensive income

14

 

-

 

14

      Total stockholders’ equity

306,911

 

          -

 

306,911



$705,569

 


$66,861

 


$772,430


See accompanying notes to pro forma financial statements.




14






BEDFORD PROPERTY INVESTORS, INC.

PRO FORMA STATEMENT OF INCOME

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003

(Unaudited)

(in thousands, except share and per share amounts)


 

Company

Historical

 

Properties

Acquired (2)

 

Pro Forma

Interest (3)

 

Company

Pro Forma

Property operations:

  Rental income


$79,857

 


$6,970

 


$          -

 


$86,827

  Rental expenses:

     Operating expenses


14,107

 


1,205

 


-

 


15,312

     Real estate taxes

7,810

 

465

 

-

 

8,275

     Depreciation and a mortization

15,879

 

2,450

 

-

 

18,329


Income from property   operations


42,061

 


2,850

 


-

 


44,911


General & administrative expenses


(4,308)

 


-

 


-

 


(4,308)

Interest income

94

 

-

 

-

 

94

Interest expense

(16,154)

 

         -

 

(2,493)

 

(18,647)


     Income from continuing operations before

       sales of real estate investments and

       discontinued operations




$21,693

 




$2,850

 




$(2,493)    

 




$  22,050

        

Earnings per share – basic:

Income from continuing operations


$    1.35

 


   


$      1.37

        

Weighted average number of shares - basic

16,070,459

     

16,070,459

        

Earnings per share – diluted:

Income from continuing operations


$    1.32

 


 


 


$      1.35


Weighted average number of shares – diluted


16,386,088

 


   


16,386,088





See accompanying notes to pro forma financial statements.




15






BEDFORD PROPERTY INVESTORS, INC.

PRO FORMA STATEMENT OF INCOME

FOR THE YEAR ENDED DECEMBER 31, 2002

(Unaudited)

(in thousands, except share and per share amounts)


 

Company

Historical

 

Properties

Acquired (4)

 

Pro Forma

Interest (5)

 

Company

Pro Forma

Property o perations:

  Rental income


$  99,740

 


$14,422

 


$        -

 


$114,162

  Rental expenses:

     Operating expenses


17,012

 


1,988

 


-

 


19,000

     Real estate taxes

8,865

 

1,372

 

-

 

10,237

     Depreciation and

       amortization


17,209

 


4,990

 


-

 


22,199


Income from property

  operations



56,654

 



6,072

 



-

 



62,726


General & administrative

  expenses



(4,616)

 



-

 



-

 



(4,616)

Interest income

199

 

-

 

-

 

199

Interest expense

(20,555)

 

-

 

(5,655)

 

(26,210)


  Income from continuing

    operations before  

    sales of real estate

    investments and

    discontinued operations






$  31,682

 






$  6,072

 






$(5,655)     

 






$  32,099

        

Earnings per share – basic:

Income from continuing

  operations



$      1.95

     



$     1.98

Weighted average number

  of shares – basic


16,240,722

     


16,240,722


Earnings per share –  diluted:

Income from continuing

  operations




$      1.91

     




$      1.93

Weighted average number

  of shares – diluted


16,604,069

     


16,604,069



See accompanying notes to pro forma financial statements.





16






BEDFORD PROPERTY INVESTORS, INC.

NOTES TO PRO FORMA FINANCIAL STATEMENTS


PRO FORMA BALANCE SHEET AS OF SEPTEMBER 30, 2003



(1)

The unaudited pro forma balance sheet reflects the acquisition of (i) Towne Centre Plaza located in Foothill Ranch, California, (ii) Superstition Springs located in Mesa, Arizona, and (iii) Northport Business Center located in North Las Vegas, Nevada as if such acquisitions had occurred on September 30, 2003.  The Company acquired Towne Centre Plaza on November 3, 2003, Superstition Springs on November 25, 2003, and Northport Business Center on December 11, 2003 .


The combin ed balance sheet for these acquisitions (acquired from unrelated third parties, recorded at cost) as of September 30, 2003 is as follows (in thousands):


 


Towne Centre

Plaza

 


Superstition Springs

 

Northport Business Center

 



Total

Assets:

 Real estate investment -

   Industrial buildings



$          -

 



$6,334

 



$16,471

 



$22,805

   Office buildings

34,432

 

-

 

-

 

34,432

        

 Other assets

7,614

 

555

 

1,455

 

9,624

        
 

$42,046

 

$6,889

 

$17,926

 

$66,861


Liabilities:

 Bank loan payable



$16,635

 



$3,648

 



$17,612

 



$37,895

 Mortgage payable

25,000

 

3,127

 

-

 

28,127

 Other liabilities

411

 

114

 

314

 

839

 


$42,046

 


$6,889

 


$17,926

 


$66,861


In accordance with Statement of Financial Accounting Standards 141, “Business Combinations,” the acquisition of real estate investments results in the allocation of a portion of the purchase price to tenant improvements and identifiable intangible assets or liabilities.  Tenant improvements represent the tangible assets associated with the existing leases valued on a historical basis and are classified as an asset under real estate investments.  The in-place operating leases have four forms of intangible assets and liabilities with identifiable fair values:  (i) origination value, which represents the value associated with “cost avoidance” of acquiring in-place leases, such as lease commissions;  (ii) value of in-place leases, which represents the estimated loss of revenue and costs incurred for the period required to lease the “assumed vacant” ; property to the occupancy level when purchased;  (iii) market value of in-place leases, which represents the difference between the contractual rents and market rents at the time of the acquisition, discounted for tenant credit risks; and (iv) value of tenant relationships, which reflects estimated future benefits from enhanced renewal probabilities and cost savings in lease commissions and tenant improvements.  Origination value and value of in-place leases are




17




recorded as other assets.  Market value of in-place leases is classified as an other asset or other liability, depending on whether the contractual lease terms are above or below market.


The combined balance sheet for the acquisitions reflects $25,000,000 mortgage financing in connection with Towne Centre Plaza, the assumption of $3,127,000 of existing mortgages in connection with Superstition Springs, and financing of $37,895,000 under the Company’s credit facility for the remaining acquisition costs.



PRO FORMA STATEMENT OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003


(2)

The unaudited pro forma statement of income for the nine months ended September 30, 2003 reflects the 2003 property acquisitions as if they had occurred on January 1, 2002.  The Company acquired (i) Roosevelt Commons on August 20, 2003, (ii) Russell Commerce Center on August 20, 2003, (iii) Towne Centre Plaza on November 3, 2003, (iv) Superstition Springs on November 25, 2003, and (v) Northport Business Center on

December 11, 2003 .


The following reflects the incremental effects of the 2003 property acquisitions for the nine month period ended September 30, 2003 (in thousands):


 


Roosevelt

Commons

 

Russell

Commerce

Center

 

Towne Centre

Plaza

 


Superstition

Springs

 

Northport

Business

Center

 

Total

Properties

Acquired

            

Rental income

$665

 

$540

 

$3,780

 

$668

 

$1,317

 

$6,970

Rental expenses:

  Operating expenses


81

 


53

 


844

 


72

 


155

 


1,205

  Real estate taxes

110

 

42

 

193

 

66

 

54

 

465

  Depreciation and

    amortization


190

 


284

 


1,493

 


114

 


369

 


2,450


Income from property

  operations



$284

 



$161

 



$1,250

 



$416

 



 $739

 



$2,850




Pro forma amounts above are based on historical data.   All historical d epreciation and amortization expense has been excluded and replaced by pro forma depreciation and amortization, which are based on the Company’s acquisition cost and purchase price allocation.

Building costs are depreciated on a straight-line basis over an estimated useful life of 45 years.

Tenant improvements are depreciated on a straight-line basis over the remaining lease terms.  Origination value of in-place leases as described in Note 1 is amortized over the remaining lease terms.  Value of in-place leases as described in Note 1 is amortized over the average term of the acquired leases.  

Incremental costs of managing the acquired properties are reflected in the property operating expenses.  Pro forma rental income includes the following adjustments to the historical rental income: (i) the recognition of additional management fee recovery income as a result of pro forma management fee expense, (ii) an increase in straight-line rental income due to the exclusion of periods prior to the pro forma date and (iii) amortization of above or below




18




market rents for acquired leases .  Pro forma operating expenses include an adjustment to recognize the management fee expense under the new owner’s management agreement.   



(3)

The pro forma interest expense reflects the incremental amounts incurred from mortgage financing and borrowings on the credit facility to fund acquisitions.  Mortgage financing consisted of a $25,000,000 loan with a fixed interest rate of 5.74%, a $1,659,000 loan with a fixed interest rate of 7.25%, and a $1,469,000 loan with a fixed interest rate of 7.0%.  Incremental borrowings on the credit facility to fund acquisitions were calculated with a 3.19% interest rate, which was the average cost of borrowing from the credit facility during the period.





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PRO FORMA STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 2002


(4)

The unaudited pro forma statement of income for the year ended December 31, 2002 reflects the 2002 and 2003 property acquisitions as if they had occurred on January 1, 2002.  The Company acquired (i) Cotton Center I & II on July 26, 2002, (ii) South San Francisco Business Center on August 16, 2002, (iii) Philips Business Center on September 10, 2002, (iv) Roosevelt Commons on August 20, 2003, (v) Russell Commerce Center on August 20, 2003, (vi) Towne Centre Plaza on November 3, 2003, (vii) Superstition Springs on November 25, 2003, and (viii) Northport Business Center on December 11, 2003 .


The following reflects the incremental effects of the 2002 property acquisitions for the twelve months of 2002 (in thousands):


 


Cotton

Center

I & II

 


Philips

Business

Center

 

South San

Francisco

Business

Center

 

Total

Properties

Acquired

During 2002

        

Rental income

$1,207

 

$2,991

 

$1,663

 

$5,861

        

Rental expenses:

    Operating expenses


94

 


150

 


152

 


396

    Real estate taxes

115

 

522

 

136

 

773

    Depreciation and amortization

727

 

590

 

463

 

1,780

        

Income from property operations

$  271

 

$1,729

 

$  912

 

$2,912


The following reflects the pro forma statement of income for the 2003 acquisitions for the twelve months of 2002 (in thousands):


 



Roosevelt

Commons

 


Russell Commerce Center

 



Towne Centre

Plaza

 



Superstition

Springs

 


Northport

Business Center

 

Total

Properties

Acquired

During 2003

            

Rental income

$1,015

 

$627

 

$5,080

 

$788

 

$1,051

 

$8,561

            

Rental expenses:

    Operating expenses


119

 


66

 


1,153

 


97

 


157

 


1,592

    Real estate taxes

164

 

27

 

251

 

87

 

70

 

599

    Depreciation and amortization

278

 

363

 

1,972

 

139

 

458

 

3,210

            

Income from property operations

$  454

 

$171

 

$1,704

 

$465

 

$366

 

$3,160





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The following reflects the combined incremental effects of the 2002 and 2003 property acquisitions for the twelve months of 2002 (in thousands):


 

Properties

Acquired

During 2002

 

Properties

Acquired

During 2003

 



Total

      

Rental income

$5,861

 

$8,561

 

$14,422

      

Rental expenses:

    Operating expenses


396

 


1,592

 


1,988

    Real estate taxes

773

 

599

 

1,372

    Depreciation and amortization

1,780

 

3,210

 

4,990

      

Income from property operations

$2,912

 

$3,160

 

$6,072


P ro forma amounts above are based on historical data.   All historical d epreciation and amortization expense has been excluded and replaced by pro forma depreciation and amortization, which are based on the Company’s acquisition cost and purchase price allocation.  Building costs are depreciated using a straight-line method over an estimated useful life of 45 years.  Tenant improvements are depreciated on a straight-line basis over the remaining lease terms.  Origination value of in-place leases as described in Note 1 is amortized over the remaining lease terms.  Value of in-place leases as described in Note 1 is amortized over the average term of the acquired leases.  Incremental costs of managing the acquired properties are reflected in the property operating expenses. Pro forma rental income includes the following adjustments to the historical rental income: (i) the recognition of additional m anagement fee recovery income as a result of pro forma management fee expense, (ii) an increase in straight-line rental income due to the exclusion of periods prior to the pro forma date and (iii) amortization of above or below market rents for acquired leases.   Pro forma operating expenses include an adjustment to recognize the management fee expense under the new owner’s management agreement.   


(5)

The pro forma interest expense reflects an adjustment for mortgage financing and borrowings on the credit facility to fund acquisitions net of paydowns on the credit facility with proceeds from the sold properties.  Mortgage financing consisted of a $25,000,000 loan with a fixed interest rate of 5.74%, a $1,659,000 loan with a fixed interest rate of 7.25%, and a $1,469,000 loan with a fixed interest rate of 7.0%.  Incremental borrowings on the credit facility were calculated with a 4.25% interest rate, which was the average cost of borrowing from the credit facility during the period.






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Exhibit 23.1


Consent of Independent Accountants




To the Board of Directors of

Bedford Property Investors, Inc.:


We consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-23687, 333-33643, 333-33795, 333-108908 and 333-112144) of Bedford Property Investors, Inc. (the “Company”) of our report s dated February 20, 2004 , with respect to the statement s of revenue and certain expenses of Towne Centre Plaza and Northport Business Center for the year ended December 31, 200 2 , which reports appear in th is Form 8-K/A of the Company.




PricewaterhouseCoopers LLP


San Francisco, California

February 24, 2004







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