- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER SEPTEMBER 30, 1995
Commission File Number 0-8725
PACIFIC REAL ESTATE INVESTMENT TRUST
A CALIFORNIA TRUST
I.R.S. Employer Identification No. 94-1572930
1010 El Camino Real, Suite 210
Menlo Park, CA 94025
Telephone: (415) 327-7147
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15 (d) of the securities exchange act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes __X__ No _____
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the period covered by this report.
$10 Par Value, 3,706,845 shares
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PACIFIC REAL ESTATE INVESTMENT TRUST
PART I -- FINANCIAL INFORMATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
ITEM I -- FINANCIAL STATEMENTS
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------------ ------------------------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1995 1994 1995 1994
-------------- -------------- -------------- --------------
Rental revenues................................... $ 1,875,000 $ 3,155,000 $ 6,882,000 $ 9,349,000
-------------- -------------- -------------- --------------
Operating expenses (including related party
amounts of $152,000 three months ended September
30, 1995 and $548,000 nine months ended September
30, 1995, $254,000 three months ended September
30, 1994 and $900,000 nine months ended September
30, 1994):
Operating....................................... 525,000 577,000 1,635,000 1,651,000
Property tax.................................... 169,000 260,000 580,000 777,000
General and administrative...................... 141,000 186,000 508,000 614,000
Depreciation and amortization................... 679,000 981,000 2,226,000 2,881,000
Property management fees........................ 67,000 112,000 244,000 334,000
-------------- -------------- -------------- --------------
Total operating expenses...................... 1,581,000 2,116,000 5,193,000 6,257,000
-------------- -------------- -------------- --------------
Operating income.................................. 294,000 1,039,000 1,689,000 3,092,000
-------------- -------------- -------------- --------------
Other income/(expense):
Interest income................................. 162,000 287,000 475,000 893,000
Interest expense................................ (1,184,000 (2,062,000) (4,179,000) (6,199,000)
Recapitalization expenses....................... (9,000) (393,000) (139,000) (714,000)
Gain (loss) on sale of options.................. 0 0 (102,000) 994,000
-------------- -------------- -------------- --------------
Total other income/(expense).................. (1,031,000) (2,168,000) (3,945,000) (5,026,000)
-------------- -------------- -------------- --------------
Net loss before minority interest................. (737,000) (1,129,000) (2,256,000) (1,934,000)
-------------- -------------- -------------- --------------
Minority interest in joint venture................ (83,000) (79,000) (253,000) (240,000)
-------------- -------------- -------------- --------------
Net loss.......................................... (820,000) (1,208,000) (2,509,000) (2,174,000)
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
Net loss per share of beneficial interest......... $ (0.221) $ (0.326) $ (0.677) $ (0.586)
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
Weighted average number of shares................. 3,706,845 3,706,845 3,706,845 3,706,845
-------------- -------------- -------------- --------------
See notes to consolidated financial statements.
Page 2 of 7
PACIFIC REAL ESTATE INVESTMENT TRUST
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
SEPTEMBER 30, DECEMBER 31,
1995 1994
--------------- ---------------
ASSETS
Investment in commercial properties:
Operating properties:
Land....................................................................... $ 14,308,000 $ 24,015,000
Buildings and improvements................................................. 56,261,000 77,521,000
Accumulated depreciation................................................... (17,791,000) (17,000,000)
--------------- ---------------
Operating properties -- net................................................ 52,778,000 84,536,000
Mortgage notes receivable...................................................... 5,239,000 5,190,000
Tenant and other notes receivable -- net....................................... 1,551,000 1,596,000
Cash........................................................................... 641,000 666,000
Accounts receivable (net of allowance of $125,000 in 1995 and $194,000 in
1994)......................................................................... 931,000 1,191,000
Deferred lease commissions -- net.............................................. 754,000 860,000
Deferred financing costs -- net................................................ 470,000 584,000
Other assets................................................................... 718,000 664,000
--------------- ---------------
Total...................................................................... $ 63,082,000 $ 95,287,000
--------------- ---------------
--------------- ---------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Mortgage loans............................................................... $ 36,943,000 $ 57,335,000
Short-term notes............................................................. 10,490,000 15,435,000
Unsecured note payable....................................................... 0 3,000,000
Security deposits............................................................ 226,000 291,000
Accounts payable and other liabilities....................................... 425,000 1,673,000
--------------- ---------------
Total liabilities.......................................................... 48,084,000 77,734,000
--------------- ---------------
Commitments and contingencies
Minority interest in joint venture............................................. 3,310,000 3,356,000
Shareholders' Equity:
Shares of beneficial interest, $10 par value, authorized: 1995 and 1994,
10,611,863; shares issued and outstanding: 1995: 3,706,845; 1994:
3,706,845................................................................... 37,068,000 37,068,000
Additional paid-in capital..................................................... 11,009,000 11,009,000
Distributions in excess of net income.......................................... (36,389,000) (33,880,000)
--------------- ---------------
Shareholders' equity -- net.................................................... 11,688,000 14,197,000
--------------- ---------------
Total...................................................................... $ 63,082,000 $ 95,287,000
--------------- ---------------
--------------- ---------------
See notes to consolidated financial statements.
Page 3 of 7
PACIFIC REAL ESTATE INVESTMENT TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
------------------------------
1995 1994
-------------- --------------
Cash Flow from Operating Activities:
Net loss........................................................................ $ (2,509,000) $ (2,174,000)
Adjustments to reconcile net loss to net cash
provided (used) by operating activities:
Depreciation.................................................................. 1,912,000 2,462,000
Amortization of note receivable discount...................................... (59,000) (79,000)
Amortization of deferred cost................................................. 283,000 433,000
Minority interest in joint venture's operations............................... 254,000 240,000
Provision for doubtful receivables............................................ 79,000 144,000
Gain (loss) on sale of options................................................ 102,000 (994,000)
Changes in operating assets and liabilities:
Accounts payable and other liabilities...................................... (1,248,000) (333,000)
Security deposits........................................................... (65,000) (24,000)
Deferred lease commissions.................................................. (63,000) (165,000)
Accounts receivable......................................................... 181,000 (182,000)
Other assets................................................................ (54,000) (765,000)
-------------- --------------
Net cash (used) by operating activities........................................... (1,187,000) (771,000)
-------------- --------------
Cash Flow from Investing Activities:
Construction of properties.................................................... (23,000) (1,302,000)
Collection of notes receivable................................................ 59,000 811,000
Addition to notes receivable.................................................. (4,000) (1,327,000)
Proceeds from sale of Lakeshore............................................... 29,869,000 0
Proceeds (uses) from sale of option........................................... (102,000) 1,279,000
-------------- --------------
Net cash provided (used) by investing activities.................................. 29,799,000 (539,000)
-------------- --------------
Cash Flow from Financing Activities:
Proceeds from (cost of) Sale of Trust shares.................................... 0 (4,000)
Proceeds from short-term notes due affiliates................................... 100,000 5,155,000
Proceeds from mortgage loans.................................................... 0 1,500,000
Re-payment of mortgage loans.................................................... (20,392,000) (2,366,000)
Re-payment of short-term notes due affiliates................................... (5,045,000) (2,910,000)
Re-payment of unsecured note payable............................................ (3,000,000) 0
Payment of financing costs...................................................... 0 (113,000)
Distributions to joint venture partner.......................................... (300,000) (300,000)
-------------- --------------
Net cash provided (used) by financing activities.................................. (28,637,000) 962,000
-------------- --------------
Increase (decrease) in cash..................................................... 25,000 (348,000)
Cash, January 1............................................................... 666,000 856,000
-------------- --------------
Cash, September 30............................................................ $ 641,000 $ 508,000
-------------- --------------
-------------- --------------
See notes to consolidated financial statements.
Page 4 of 7
PACIFIC REAL ESTATE INVESTMENT TRUST
NOTES TO INTERIM FINANCIAL STATEMENTS
(UNAUDITED)
BASIS OF PRESENTATION
The accompanying unaudited financial statements include all adjustments
which are, in the opinion of management, necessary for fair presentation of the
Trust's financial position, including changes therein, and results of operations
for the interim period reported upon. Such statements have been prepared from
the Trust's accounting records in accordance with the instructions to Form 10-Q.
INCOME TAXES
Since it is the policy of the Trust to distribute amounts approximately
equal to its taxable income plus depreciation, no provision for income taxes has
been made in the accompanying financial statements.
SALE OF LAKESHORE PLAZA
During March 1995 the Trust sold Lakeshore Plaza Shopping Center for
$31,292,000. After re-payment of the existing first and second mortgage loan
balances of $15,880,000 and $4,000,000, respectively, expenses related to the
sale of $1,750,000 and an assumption charge of $158,000, the proceeds to the
Trust were approximately $9,484,000.
In anticipation of above sale the Trust reported a $4,400,000 provision for
loss in the fourth quarter of 1994.
RELATED PARTY TRANSACTIONS
Fees paid or payable to Collier Investment (the "Advisor"), Menlo Management
Company and Presco for three months and nine months ended in 1995 and 1994 were
as follows:
THREE MONTHS ENDED NINE MONTHS ENDED
---------------------------- ----------------------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1995 1994 1995 1994
------------- ------------- ------------- -------------
ADVISOR
Advisory fee..................... $ 16,000 $ 28,000 $ 53,000 $ 84,000
MENLO MANAGEMENT COMPANY
Property management fees......... 66,000 111,000 243,000 333,000
Administrative services.......... 41,000 65,000 156,000 195,000
Lease commission................. 25,000 61,000 43,000 99,000
Brokerage Fee.................... 0 0 0 145,000
Loan fee......................... 26,000 34,000 88,000 98,000
Rent............................. 3,000 0 6,000 0
PRESCO
Capital fund raising............. 0 0 0 36,000
------------- ------------- ------------- -------------
Total........................ $ 177,000 $ 254,000 $ 589,000 $ 990,000
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
NET INCOME PER SHARE OF BENEFICIAL INTEREST
Net income per share of beneficial interest is computed by dividing net
income by the weighted average number of shares outstanding during the period as
follows:
1995 1994
----------- -----------
Three months ended September 30.......................... 3,706,845 3,706,845
Nine months ended September 30........................... 3,706,845 3,706,845
Page 5 of 7
PACIFIC REAL ESTATE INVESTMENT TRUST
ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND OF
OPERATIONS.
(1) LIQUIDITY AND CAPITAL RESOURCES:
Cash used by operating activities was $1,187,000 for the nine months ended
September 30, 1995 as compared to cash used of $771,000 for the nine months
ended September 30, 1994 as a result of payment of $1,248,000 of accounts
payable accrued at December 31, 1995. Of this sum $382,000 comprised interest
accrued on an unsecured note payable which was paid in full in March 1995 and
$345,000 accrued supplemental taxes on Lakeshore Plaza Shopping Center which
were paid at date of sale in March 1995 and $521,000 represented various other
operating liabilities.
Cash flow provided by investing activities was $29,799,000 for the nine
months ended September 30, 1995 compared to $539,000 used in the nine months
ended September 30, 1994 as a result of the sale of Lakeshore Plaza Shopping
Center.
Cash flow used by financing activities was $28,637,000 for the nine months
ended September 30, 1995 compared to $962,000 provided for the nine months ended
September 30, 1994 due to the payoff of mortgage note related to Lakeshore Plaza
Shopping Center as well as other secured and unsecured notes payable.
The Trust's sources of liquity include: extension of short-term notes
payable for periods not to exceed five years; and approximately $5,239,000 in
mortgage loans receivable which mature at various dates over the next five
years.
(2) MATERIAL CHANGES IN RESULTS OF OPERATIONS NINE MONTHS ENDED SEPTEMBER 30,
1995 VS. 1994:
Net loss for the nine months ended September 30, 1995 was $2,509,000 as
compared to a net loss of $2,174,000 for the nine months ended September 30,
1994.
During the first nine months rental revenues decreased from $9,349,000 in
1994 to $6,882,000 in 1995, as a result of the sale of Lakeshore Plaza Shopping
Center and the declining revenues at El Portal Shopping Center as a result of
the Homebase lease termination in 1994.
Operating expenses, property taxes, property management fees and
depreciation expenses decreased from $5,643,000 in 1994 to $4,685,000 in 1995, a
decrease of $958,000 or 17%. This decrease is due chiefly to the sale of
Lakeshore Plaza Shopping Center on March 13, 1995.
General and administrative expense decreased from $614,000 in 1994 to
$508,000 in 1995, a decrease of $106,000 or 17%. This decrease is due to lower
transfer agent costs, legal expenses, advisory fees, and administrative
services.
Interest income decreased by $418,000 as compared to 1994 primarily as the
result of the payoff of a note receivable in December 1994. Interest expense
decreased by $2,020,000, or 33%, from $6,199,000 in 1994 to $4,179,000 in 1995.
Of this decrease $431,000 is related to the lower mortgage loan on El Portal
Shopping Center due to a principal paydown of $5,729,000 in December 1994,
$864,000 is related to the sale of Lakeshore Plaza Shopping Center, $307,000 is
related to the payoff of the Yale University and California Bavarian loans and
$156,000 is due to the payoff of an underlying note payable on the
aforementioned note receivable.
The expense of $102,000 related to options sold in 1994 was accrued to
reflect additional contingent liablity as of September 30, 1995.
Item 6 (b) -- Report on Form 8K was filed on March 27, 1995.
Material changes for the three months ended September 30, 1995 versus 1994
were for the same reasons in relative proportionate amounts as those shown for
the nine months.
Page 6 of 7
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned.
PACIFIC REAL ESTATE INVESTMENT TRUST
Date: October 31, 1995 By: __________________________
Robert Ch. Gould
VICE PRESIDENT
Date: October 31, 1995 By: __________________________
Harry E. Kellogg
TREASURER
Page 7 of 7