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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1999
Commission file number 1-12222
BEDFORD PROPERTY INVESTORS, INC.
(Exact name of Registrant as specified in its charter)
MARYLAND 68-0306514
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
270 Lafayette Circle, Lafayette, CA 94549
(Address of principal executive offices)
Registrant's telephone number, including area code(925) 283-8910
Securities Registered Pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, par value $0.02 per share New York Stock Exchange
Pacific Exchange
Securities Registered Pursuant to Section 12(g) of the Act: None
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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [X] The aggregate market value
of the voting stock held by non-affiliates of Registrant as of March 10,
2000 was approximately $230,579,000. The number of shares of
Registrant's Common Stock, par value $0.02 per share, outstanding as of
March 10, 2000 was 19,649,910.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement to be mailed to stockholders
in connection with the Registrant's annual meeting of stockholders,
scheduled to be held on May 18, 2000, are incorporated by reference in
Part III of this report. Except as expressly incorporated by reference,
the Registrant's Proxy Statement shall not be deemed to be part of this
report.
When used in this annual report, the words "believes," "anticipates" and
similar expressions are intended to identify forward-looking statements.
Such statements are subject to certain risks and uncertainties which
could cause actual results to differ materially from those projected,
including, but not limited to, those set forth in the section entitled
"Potential Factors Affecting Future Operating Results" and "Qualitative
and Quantitative Disclosures About Market Risk" below. Readers are
cautioned not to place undue reliance on these forward-looking statements
which speak only as of the date hereof. The Company undertakes no
obligation to publicly release the result of any revisions to these
forward-looking statements which may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
PART I
ITEM 1. BUSINESS
The Company
Bedford Property Investors, Inc. is a self-administered and self-managed
equity REIT engaged in the business of owning, managing, acquiring and
developing industrial and suburban office properties proximate to
metropolitan areas primarily in the Western United States. As of
December 31, 1999, the Company owned and operated, either directly or
through wholly-owned subsidiaries, 98 properties aggregating
approximately 7.6 million rentable square feet. Of these 98 properties
(the "Properties"), there are 72 industrial (the "Industrial Properties")
and 26 suburban office (the "Suburban Office Properties"). As of
December 31, 1999, the Properties include two projects which were under
rehabilitation. The remaining 96 operating Properties were approximately
97% leased to almost 600 tenants. The Properties are located in Northern
and Southern California, Oregon, Washington, Arizona, Nevada, Colorado,
Texas, Kansas, and Missouri.
In addition to the Properties, the Company owns three suburban office and
two industrial development projects totaling 380,000 rentable square
feet. During 1999, the Company completed shell construction and initial
lease-up on these five projects and as of December 31, 1999, the projects
were approximately 67% leased.
The Company seeks to grow its asset base through the acquisition of
industrial and suburban office properties and portfolios of such
properties, as well as through the development of new industrial and
suburban office properties. The Company's strategy is to operate in
suburban markets that are experiencing, or are expected by the Company
to experience, superior economic growth and that are subject to
limitations on the development of similar properties. The Company
believes that employment growth is a reliable indicator of future demand
for both industrial and suburban office space. In addition, the Company
believes that certain supply-side constraints, such as limited
availability of undeveloped land in a market, increase a market's
potential for higher than average rental growth over time. The Company
continues to target selected markets in which the Properties are located
as well as selected other markets in which the Company has expertise.
Business Objective and Growth Plan
Business Objective
The Company's business objective is to increase stockholders' long-term
total return through increases in the dividend and the appreciation in
value of the Common Stock. To achieve this objective, the Company seeks
to (i) increase cash flow by internal growth of rents from its existing
Properties, (ii) acquire quality industrial and suburban office
properties and/or portfolios of such properties, (iii) develop new
industrial and suburban office properties, and (iv) repurchase its common
stock.
Internal Growth
The Company seeks to increase cash flow from existing Properties through
(i) the lease-up of vacant space, (ii) the reduction of costs associated
with tenant turnover by retaining existing tenants, (iii) the negotiation
of increases in rental rates and of contractual periodic rent increases
when market conditions permit, and (iv) the strict containment of
operating expenses and capital expenditures.
During 1999, 1,123,000 square feet of leased space expired with a
weighted average base rental rate of $8.48 per square foot.
Approximately 89% of this space has been re-leased, and the weighted
average base rental rate of the new leases is $10.24 per square foot, an
increase of 21%. Past performance is not necessarily indicative of
results that will be obtained in the future, and no assurance can be
given in that regard.
Acquisitions
The Company seeks to acquire industrial and suburban office properties
and/or portfolios of such properties. The Company believes that (i) the
experience of its management team, (ii) its existing $175 million credit
facility, (iii) its relationships with private and institutional real
estate owners, (iv) its strong relationships with real estate brokers,
and (v) its integrated asset management program enable it to effectively
identify and capitalize on acquisition opportunities. Each acquisition
opportunity is reviewed to evaluate whether it meets the following
criteria: (i) potential for higher occupancy levels and/or rents as well
as for lower turnover and/or operating expenses, (ii) ability to generate
returns in excess of the Company's weighted average cost of capital,
taking into account the estimated costs associated with tenant turnover
(i.e., tenant improvements, leasing commissions and the loss of income
due to vacancy), and (iii) availability for purchase at a price at or
below estimated replacement cost. However, the Company has in the past
acquired, and may in the future acquire, properties which do not meet one
or more of these criteria. This may be particularly true with the
acquisition of a portfolio of properties, which may include individual
properties that do not meet one or more of the foregoing criteria.
Following completion of an initial review of a property, the Company may
make a purchase offer, subject to satisfactory completion of its due
diligence process. The due diligence process enables the Company to
refine its original estimate of a property's potential performance and
typically includes a complete review and analysis of the property's
physical structure, systems, environmental status and projected financial
performance. The due diligence also includes an evaluation of the local
market including competitive properties and relevant economic and
demographic information. Mr. Bedford (the Chief Executive Officer),
along with at least one other officer and one other Board member of the
Company, will typically visit each proposed acquisition property before
the purchase is closed.
The Company's activities relating to the acquisition of new properties,
including the due diligence process, are conducted on an exclusive basis
by Bedford Acquisitions, Inc. (BAI), a California corporation wholly-
owned by Mr. Bedford. BAI receives fees in amounts equal to the lesser
of (i) 1 1/2 % of the gross amount of the aggregate purchase price of
property acquisitions and dispositions, up to 1 1/2 % of any loans arranged
by BAI, plus 5% of development project costs, or (ii) an amount equal to
(a) the aggregate amount of approved expenses funded by BAI through the
time of such acquisition, disposition, loan or development minus (b) the
aggregate amount of fees previously paid to BAI pursuant to such
arrangement. In no event will the aggregate amount of fees paid to BAI
exceed the aggregate amount of costs funded by BAI. The current
agreement with BAI has a one-year term expiring January 1, 2001.
Development
The Company seeks to develop properties in strong markets where (i)
demand for space has caused or is expected to cause occupancy rates to
remain high, (ii) barriers to entry such as scarcity of land or
entitlement challenges exist, and (iii) the project complements the
existing portfolio. The Company's management team has experience in all
phases of the development process, including market analysis, site
selection, zoning, design, pre-development leasing, construction and
permanent financing, and construction management. The Company plans to
be especially focused on the development of office tech and flex tech
product in 2000. These are multi-tenant buildings designed to meet the
needs of the widest range of uses. The flex tech product anticipates the
changing needs of high-growth tenants and accommodates their need for
flexible facility configurations. The Company evaluates the competitive
environment, demand and rent trends, and development pipelines before
embarking on or acquiring each new development project. The Company is
currently in the process of developing properties in Northern California,
Arizona, Washington, and Colorado, and is considering developing
additional properties in Northern California, Southern California,
Washington and Colorado. The Company's management team has significant
development experience in each of these markets. In 1999, the shell
construction of 380,000 square feet was completed in five projects of
service-flex, tech-flex and office space. Sixty-seven percent of these
projects were leased at year-end.
Share Repurchase
Since 1998, the Company's stock has traded at a discount to its net asset
value (determined based on current cap rate and earning estimates) as a
result of the softening of the REIT market. With a dividend yield close
to 10%, the repurchase and retirement of the Company's common stock
increases the stockholders' ownership in the Company and therefore brings
value to the stockholders' investment.
In July 1998, the Company's board of directors approved a share
repurchase program of 3 million shares which was increased to 4.5 million
shares in September 1999. Since November 1998, the Company has
repurchased and retired 3,458,000 shares at an average price of $16.89
per share.
Corporate Strategies
In pursuing its business objectives and growth plans, the Company intends
to:
1. Pursue a Market Driven Strategy.
The Company's strategy is to operate in suburban markets which are
experiencing, or are expected by the Company to experience, above average
economic growth, and which are, ideally, subject to supply-side
constraints. The metropolitan areas in which the Company operates have
multiple suburban "cores" and it believes that the potential for growth
in these metropolitan areas is generally greatest in and around these
suburban cores. It is the Company's experience that such suburban cores
emerge as jobs move to the suburbs and typically offer a well-trained and
well-educated work force, high quality of life and, in many cases, a
diversified economic base. The Company focuses on owning, managing,
acquiring and developing properties in these suburban cores.
Additionally, the Company seeks out real estate markets that are subject
to supply-side constraints such as limited availability of undeveloped
land and/or geographic, topographic, regulatory and/or infrastructure
restrictions. Such restrictions limit the supply of new commercial
space, which, when combined with a growing employment and population
base, enhances the long-term return potential for an investment in real
estate assets.
2. Focus its Efforts in the Western United States.
The Company is currently targeting selected suburban markets in the
western United States. Continued economic improvements in these markets,
and related improvements in the commercial property markets, and the
level of investment in industrial or suburban office properties in these
markets should provide the potential for attractive returns through
increased occupancy levels, rents and real estate values. This
geographic focus, combined with management's market experience,
contributes to a more thorough understanding of these industrial and
suburban office property markets and allows the Company to anticipate
trends and therefore to better identify investment opportunities.
3. Acquire and Develop "Service-Flex, Tech-Flex and Office-Tech"
Properties.
Among the Company's targeted properties are service and tech-flex
industrial properties as well as office-tech buildings. These buildings
provide for a wider range of function than that offered by traditional
office or industrial properties and are an efficient facility choice for
today's high growth technology sector firms that have frequently changing
space needs. These properties are divisible into units ranging from
approximately 1,500 square feet to approximately 20,000 square feet in
order to accommodate multiple tenants of various sizes and needs. The
buildings, which generally range in size from 8,000 to 80,000 square
feet, have a clear height of 12 to 18 feet and are built using concrete
tilt construction with store fronts incorporated in the front elevation
and service doors in the back elevation. The Company believes that these
properties require more management expertise than other types of
industrial properties and that it has developed such expertise. The
Company also believes that many potential buyers do not wish or are not
well-positioned to undertake such active management. As a result, the
Company believes that it often faces fewer competitors for this product
and is generally able to acquire these properties at above average
yields.
4. Asset Sales
The Company funds a portion of its acquisition activities and share
repurchase program through the sale of selected assets. Such assets
include buildings that have maximized their value or have become obsolete
due to their physical attributes. In addition, the Company continues to
redefine its geographical focus in the western United States and intends
to sell real estate assets that do not fit this western orientation.
5. Neighborhooding
Neighborhooding describes the expansion in areas where the Company owns
existing properties. This strategy capitalizes on management's expertise
and knowledge of the local market, economy and tenant needs for
expansion. It results in efficiency in property management and therefore
enables the Company to acquire or develop properties at greater yields.
The Company utilized this concept in developing projects and acquiring
properties in Fremont, Napa and Petaluma, California; Phoenix, Arizona;
Lenexa, Kansas; Denver, Colorado; and Federal Way, Washington.
Transactions and Significant Events During 1999
Acquisitions and Development
During the year, the Company invested approximately $65 million to
acquire nine Properties, including five Industrial Properties and four
Suburban Office Properties, aggregating approximately 614,000 rentable
square feet. At acquisition, the Company estimated that these
Properties would provide an initial weighted average unleveraged
return on cost (computed as annualized property net operating income
at the date of acquisition divided by the total acquisition cost) of
9.76%. The Company estimates the purchase price of acquisitions
completed in 1999 to be approximately 90% of the replacement cost of
those properties.
The Company also acquired two parcels of vacant land in southeast
Denver, Colorado, aggregating 23.7 acres for a total investment of
approximately $6 million. One of these parcels of land is adjacent to
an existing Property. The Company is in the preliminary planning
stage to develop industrial or office properties on each of these
parcels.
Development activity during the year included (i) the completion of
construction and initial lease-up of five projects located in Arizona,
Washington, and Northern California, adding 380,000 rentable square
feet to the available inventory (as of December 31, 1999, these
projects were approximately 67% leased); (ii) completion of
construction and leasing of one rehabilitation project of 39,000
rentable square feet; and (iii) commencement of construction of one
new project in Colorado, which is expected to add approximately
103,000 rentable square feet to the inventory of available space in
2000. This new leasable space provides the Company with a significant
opportunity to increase its operating revenue.
Sell Selected Assets
During the year, the Company sold four Properties, including three
Industrial Properties and one Suburban Office Property, aggregating
562,000 rentable square feet for $24,726,000. In addition, the
Company sold one 1.39 acre parcel of land for $455,000. The sales
produced gain totaling $7,743,000.
The dispositions of a Suburban Office Property and an Industrial
Property were structured as like-kind exchanges to defer approximately
$9,453,000 of taxable gain. The cash proceeds from other sales were
used to partially fund the repurchases of the Company's common stock.
The Company's Markets
The Properties are located in select markets proximate to metropolitan
areas in Northern and Southern California, Oregon, Washington,
Arizona, Nevada, Colorado, Texas, Kansas and Missouri. From 1994
through the early part of 1998 most of these markets were recovering
from the economic recession of the early 1990s. During this recovery,
these markets were characterized by strong demand for commercial
property without significant increases in supply. The Company
believes that this "recovery phase" of the economic cycle for the real
estate market came to an end during 1998 and that we are now entering
an "equilibrium phase" where supply and demand for properties are more
or less in balance. Accordingly, the Company expects commercial
property values during this equilibrium phase to be driven less by
supply and demand imbalances and more by continuing economic strength
in these markets. This continuing economic strength should result in
the maintenance of high occupancy levels, increasing rents and
potentially increasing real estate values.
In particular, the Company believes that continuing economic growth in
the San Francisco Bay Area (where 32% of the square footage of the
Company's Properties are located) and Seattle (where 12% of the square
footage of the Company's Properties are located) will result in strong
returns on its properties in these markets during the coming year.
These markets are particularly attractive as a result of the excellent
quality of life they offer and their limited supply of new commercial
real estate resulting from both environmental concerns and geographic
barriers. The 2000 edition of Emerging Trends in Real Estate, a
publication of PricewaterhouseCoopers and Lend Lease Real Estate
Investments, ranked San Francisco (for the fourth consecutive year)
and Seattle, as the number one and number seven investment markets in
the United States, respectively, for this equilibrium phase of the
real estate cycle.
Despite this positive outlook, the Company's markets (particularly the
San Francisco Bay Area) remain susceptible to an economic downturn in
Asia. During the first half of 1998, sources have indicated that
California's exports to East Asia fell by 17.5% compared to the first
half of 1997. Although there were indications that the Asian economy
showed signs of recovery in 1999, there can be no assurance that an
economic downturn in Asia will not have an adverse effect on
California's manufacturing sector and accordingly on the California
real estate market and the Company's portfolio.
Operating Performance
For the year ended December 31, 1999, the Company reported income
before gain on sales and extraordinary item of $32,410,000, on rental
revenues of $90,527,000, compared with income before gain on sale and
extraordinary item of $31,496,000, on rental revenues of $73,451,000
for the year ended December 31, 1998. The Company's Funds From
Operations ("FFO": see definition under "Selected Financial Data") for
the year ended December 31, 1999 was $45,554,000 as compared to
$42,312,000 for the year ended December 31, 1998. With the share
repurchase program, this growth in FFO was spread over fewer shares,
increasing the "per share" growth rate.
Increase in Dividends on Common Stock
In December 1999, the Company announced an 8% increase in its
quarterly Common Stock dividend from $0.39 to $0.42 per share, or
$1.68 on an annualized basis. The higher dividend rate commenced with
the Company's dividend for the fourth quarter of 1999. The Company
previously announced, in May 1999, an 8% increase in its quarterly
dividend from $0.36 to $0.39 per share which, together with the
December 1999 increase, represents a total increase of 18% in the
Company's dividends declared for 1999 of $1.56 when compared with the
dividends declared for 1998 of $1.32.
Credit Facility
In June 1998, the Company amended and restated its secured revolving
line of credit facility led by Bank of America. Under the facility,
which matures June 2001, the Company can borrow up to $175 million on
a secured basis. The facility contains an unsecured sub-line of $50
million. The secured loans bear interest at a floating rate equal to
either the lender's published "reference rate" or LIBOR plus a margin
ranging from 1.10% to 1.35% depending on the Company's leverage level.
The unsecured loans bear interest at either the lender's published
"reference rate" or LIBOR plus a margin of 1.50%. At December 31,
1999, the facility, which was all secured, had an outstanding balance
of $137,156,000, with an interest rate of LIBOR plus 1.35%.
Approximately 55% ($75 million) of the loan was fixed at a six-month
LIBOR rate which expires in June 2000.
In February 1999, the credit facility was restructured to include a
$30 million bridge facility which carried the same interest rate as
the $175 million facility. In May 1999, the Company obtained a total
of $108 million of new first mortgage financing from Teachers
Insurance and Annuity Association of America (TIAA). The proceeds
from the mortgage loans were used to repay and retire the $30 million
bridge facility and pay down the outstanding balance on its $175
million line of credit. The Company was in compliance with the
covenants and requirements of its revolving credit facility throughout
1999.
Mortgage Loans Payable
As noted above, in May 1999 the Company obtained a total of $108
million of new first mortgage financing from TIAA. The financing
consists of a $43.45 million 10-year loan, a $37.2 million 8-year
loan, and a $27.35 million 6-year loan, all with interest at a fixed
rate of 7.17%.
In November 1999, the Company secured an additional $22.15 million
mortgage loan from TIAA. The loan has a 7-year term with interest at
a fixed rate of 7.95%.
In December 1999, the Company secured a $4.6 million mortgage loan
from Union Bank. The loan has a 5-year term with interest at a
variable rate of LIBOR plus 2.50%. Proceeds of the mortgage loans
were used to pay down the outstanding balance of the Company's $175
million line of credit.
Dividends
The Company has made regular quarterly distributions to the holders of
the Common Stock in each quarter since the second quarter of 1993,
having increased the dividend twelve times since that time from $0.10
per share in the second quarter of 1993 to $0.42 per share in the
fourth quarter of 1999. In March 2000, the Company declared a
dividend distribution for the first quarter 2000 to its stockholders
in the amount of $0.42 per share of Common Stock, payable 15 days
after the quarter-end.
Tenants
Based on rentable square feet, as of December 31, 1999, the Suburban
Office Properties and Industrial Properties were approximately 97%
occupied by a total of 575 tenants, of which 114 were Suburban Office
Property tenants and 461 were Industrial Property tenants. The
Company's tenants include local, regional, national and international
companies engaged in a wide variety of businesses.
Financing
The Company expects cash flow from operations to be sufficient to pay
operating expenses, real estate taxes, general and administrative
expenses, and interest on indebtedness and to make distributions to
stockholders required to maintain the Company's REIT qualification.
The Company expects to fund the cost of acquisitions, capital
expenditures, costs associated with lease renewals and reletting of
space, repayment of indebtedness, and development of properties from
(i) cash flow from operations, (ii) borrowings under the credit
facility and, if available, other indebtedness (which may include
indebtedness assumed in acquisitions), and (iii) the sale of certain
real estate investments.
The Company does not anticipate that cash flow from operations will be
sufficient to enable it to repay amounts then outstanding under the
credit facility when it becomes due in 2001. The Company expects to
make such payment by refinancing or extending the credit facility,
obtaining additional third party mortgage financing, or by raising
funds through the sale of certain properties.
Insurance
The Company carries commercial general liability coverage with primary
limits of $1 million per occurrence and $2 million in the aggregate,
as well as a $40 million umbrella liability policy. This coverage
protects the Company against liability claims as well as the cost of
defense. The Company carries property insurance on a replacement
value basis covering both the cost of direct physical damage and the
loss of rental income. Separate flood and earthquake insurance is
provided with an annual aggregate limit of $20 million subject to a
deductible of 5-10% of total insurable value per building with respect
to the earthquake coverage. The Company also carries director and
officer liability insurance with an aggregate limit of $10 million,
and a fidelity bond in the amount of $1 million. This coverage
protects the Company's directors and officers against liability claims
as well as the cost of defense.
Competition, Regulation, and Other Factors
The success of the Company depends upon, among other factors, general
economic conditions and trends, including real estate trends, interest
rates, government regulations and legislation, income tax laws and
zoning laws.
The Company's real estate investments are located in markets in which
they face significant competition for the rental revenues they
generate. Many of the Company's investments, particularly the office
buildings, are located in markets in which there is a significant
supply of available space, resulting in intense competition for
tenants and low rents.
Government Regulations
The Company's properties are subject to various federal, state and
local regulatory requirements such as local building codes and other
similar regulations. The Company believes its properties are
currently in substantial compliance with all applicable regulatory
requirements, although expenditures at its properties may be required
to comply with changes in these laws. No material expenditures are
contemplated at this time in order to comply with any such laws or
regulations.
Under various federal, state and local laws, ordinances and
regulations, an owner or operator of real estate is liable for the
costs of removal or remediation of certain hazardous or toxic
substances released on, above, under, or in such property. Such laws
often impose such liability without regard to whether the owner knew
of, or was responsible for, the presence of such hazardous or toxic
substances. The costs of such removal or remediation could be
substantial.
Additionally, the presence of such substances or the failure to
properly remediate such substances may adversely affect the owner's
ability to borrow using such real estate as collateral.
The Company believes that it is in compliance in all material respects
with all federal, state and local laws regarding hazardous or toxic
substances, and the Company has not been notified by any governmental
authority of any non-compliance or other claim in connection with any
of its present or former properties. Accordingly, the Company does
not currently anticipate that compliance with federal, state and local
environmental protection regulations will have any material adverse
impact on the financial position, results of operations or liquidity
of the Company. There can be no assurance, however, that future
discoveries or events at the Company's properties, or changes to
current environmental regulations, will not result in such a material
adverse impact.
Other Information
The Company currently employs 29 full time employees. The Company is
not dependent upon a single tenant or a limited number of tenants.
ITEM 2. PROPERTIES
Real Estate Summary
As of December 31, 1999, the Company's real estate investments were
diversified by property type as follows (dollars in thousands):
Number of Percent
Properties Cost of Total
Industrial buildings 56 $ 279,367 41%
Office buildings 25 294,420 43%
Operating properties held for sale 21 80,563 12%
Properties under development 8 19,246 3%
Land held for development 4 6,137 1%
Total 114 $ 679,733 100%
As of December 31, 1999, the Company's real estate investments were
diversified by geographic region as follows:
Number of Investment % of Total
Properties Amount Investment
Industrial buildings
Northern California 30 $151,059 22
Arizona 14 65,163 10
Southern California 10 57,951 8
Colorado 2 5,194 1
Total industrial buildings 56 279,367 41
Office buildings
Northern California 6 30,057 4
Arizona 5 34,439 5
Southern California 4 30,771 4
Colorado 2 51,180 8
Greater Seattle Area 7 135,193 20
Nevada 1 12,780 2
Total office buildings 25 294,420 43
Operating properties held for sale
Northern California 1 8,570 1
Arizona 1 4,011 1
Southern California 2 5,033 1
Greater Kansas City Area 9 27,313 4
Texas 6 24,152 3
Greater Portland Area 2 11,484 2
Total operating properties held for sale 21 80,563 12
Properties under development
Northern California 1 660 *
Arizona 3 8,726 1
Colorado 3 6,157 1
Greater Seattle Area 1 3,703 1
Total properties under development 8 19,246 3
Land held for development
Northern California 2 2,133 *
Southern California 1 703 *
Colorado 1 3,301 1
Total land held for development 4 6,137 1
Total 114 $679,733 100%
* Less than 1%
Percentage Leased and 10% Tenants
The following table sets forth the occupancy rates for each of the last five
years, the number of tenants occupying 10% or more of the developed square
feet at the Property as of the end of the year and the principal business of
the tenants in the Company's properties at December 31, 1999.
Percentage Occupied/Number of Tenants Occupying 10% or more
1995 1996 1997 1998 1999
Property % # % # % # % # % # Principal Business at December 31, 1999
INDUSTRIAL PROPERTIES
Northern California
Building #3 at Contra Costa
Diablo Ind. Park, Concord 100% 1 100% 1 100% 1 100% 1 100% 1 Storage of cabling products.
Building #8 at Contra Costa
Diablo Ind. Park, Concord 100% 1 100% 1 100% 1 100% 1 100% 1 Warehouse and storage of medical supplies.
Building #18 at
Mason Ind. Park, Concord 83% 2 83% 2 100% 2 92% 2 100% 2 Warehouse of scoffolding materials and
construction supplies; general contractor.
Milpitas Town Center, Milpitas 100% 4 100% 4 100% 4 100% 3 100% 4 Manufacturing of blood glucose meters,
assembly and repair of accelerator
systems, light manufacturing of OEM's
and assembly
and manufacturing of vacuum components.
598 Gibraltar Drive, Milpitas N/A 100% 1 100% 1 100% 1 100% 1 Manufacturing of personal computers.
350 East Plumeria Drive,
San Jose 100% 1 100% 1 100% 1 100% 1 100% 1 Manufacturer of computer chips.
Auburn Court, Fremont 100% 4 100% 4 100% 4 100% 4 68% 3 Manufacturing of computer equipment,
assembly of computer and
other electronic components, lab
engineering, and marketing design.
47650 Westinghouse Drive,
Fremont 100% 1 100% 1 100% 1 100% 1 100% 1 Electronic personal computer board assembly.
410 Allerton, South
San Francisco 100% 1 100% 1 100% 1 100% 1 100% 1 Candy manufacturer and distributor.
400 Grandview, South
San Francisco 100% 5 100% 5 100% 4 100% 4 100% 4 Radiology research and developer, freight
forwarding, manufacturing and distribution of
point-of-sale marketing products.
342 Allerton, South
San Francisco 100% 4 100% 4 100% 4 100% 4 100% 4 Freight forwarding.
301 East Grand, South
San Francisco 71% 2 100% 3 100% 3 100% 3 75% 2 Freight forwarding, and distributor of
MRI equipment.
Fourier Avenue, Fremont N/A 100% 1 100% 1 100% 1 100% 1 Manufacturer of testers and equipment for
semi-conductors.
Lundy Avenue, San Jose N/A 100% 2 100% 2 82% 1 100% 2 Testing and distribution of semi-
conductors and other related electronic
components, software sales and
development.
115 Mason Circle, Concord N/A 100% 5 100% 5 100% 5 100% 5 Pipeline servicing company, manufacturer
and welder of pipes, distributor of water
and water dispensers.
47600 Westinghouse Drive,
Fremont N/A 100% 1 100% 1 100% 1 100% 1 Research and development assembly and
testing related to the semi-
conductor/electronics industry.
860-870 Napa Valley Corporate
Way, Napa N/A 96% 3 86% 3 100% 3 88% 2 Winery, engineering company and software
developer.
47633 Westinghouse Drive,
Fremont N/A 100% 1 100% 1 100% 1 100% 1 Research and development assembly and
testing related to the semi-
conductor/electronics industry.
47513 Westinghouse Drive,
Fremont N/A N/A N/A 100% 2 100% 2 Manufacturing of semi-conductor
equipment, manufacture
and design of arterial balloon catheters
and other related devices.
Bordeaux Centre, Napa N/A N/A N/A 38% 2 89% 4 Manufacturing and printing of corks,
light manufacturing, warehousing and
distribution of recreational marine
accessories, storage and distribution of
case good wines, design and manufacture
of molded fiber packaging products.
O'Toole Business Park, San Jose N/A 94% 0 90% 0 89% 0 100% 0 N/A
6500 Kaiser Drive, Fremont N/A N/A 100% 1 100% 1 100% 1 Office, research and development, manufacturing
of computers.
Bedford Fremont Business Park,
Fremont N/A N/A 100% 1 100% 1 97% 1 Administration and testing of samples for
managed care organizations.
Spinnaker Court, Fremont N/A N/A 100% 2 100% 2 100% 2 Manufacturing and distribution of
personal computers, peripherals and
related electronic parts and software.
2277 Pine View Way, Petaluma N/A N/A 100% 1 100% 1 100% 1 Manufacturer and distributor of plastic and
glass eyeglass lenses for world-wide
distribution.
The Mondavi Building, Napa N/A N/A 100% 1 100% 1 100% 1 Wine storage and administration.
Monterey Commerce Center 2,
Monterey N/A N/A 100% 1 100% 1 100% 1 Language interpretation - over seas calls.
Monterey Commerce Center 3,
Monterey N/A N/A 100% 3 100% 3 100% 3 Storage of office and long-distance
telephone equipment and medical supplies,
copier sales and distribution.
Parkpoint Business Center,
Santa Rosa N/A N/A N/A 100% 3 100% 3 Customized computer software company,
rehabilitation center, mortgage broker.
2180 S. McDowell, Petaluma N/A N/A N/A 100% 2 81% 1 Manufacturer of high-end, commercial grade
sound equipment.
2190 S. McDowell, Petaluma N/A N/A N/A 100% 2 100% 2 Bread distributor; distributor of paper and
packaging products.
Southern California
Dupont Industrial Center,
Ontario 100% 1 59% 0 100% 1 97% 1 100% 2 Distribution of swimming pool supplies,
and transportation trucking company.
3002 Dow Business Center,
Tustin 83% 0 99% 0 100% 0 99% 0 99% 0 N/A
Carroll Tech I, San Diego N/A 100% 1 100% 1 100% 1 100% 1 Sales and service of point of sales equipment.
Vista 1, Vista N/A 100% 1 100% 1 0% 0 0% 0 N/A
Vista 2, Vista N/A 100% 1 100% 1 100% 1 100% 1 Manufacturer of graphite golf club shaft.
Signal Systems Building,
San Diego N/A 100% 1 100% 1 100% 1 100% 1 Developer and manufacturer of avionic
diagnostic equipment.
Carroll Tech II, San Diego N/A 100% 1 100% 1 100% 1 100% 1 Bio-technology company.
2230 Oak Ridge Way, Vista N/A N/A 100% 1 100% 1 100% 1 Manufacturer of eqipment for circuit
board assembly.
5502 Oberlin Drive, San Diego N/A N/A N/A 100% 1 100% 1 Manufacturer of micro-circuits.
6960 Flanders Drive, San Diego N/A N/A N/A 100% 1 100% 1 Geotechnical and environmental consultant.
Canyon Vista Center, San Diego N/A N/A N/A N/A 100% 3 Designer of interactive entertainment
software, full service hearing aid company,
provider of product testing certification.
6325 Lusk Blvd., San Diego N/A N/A N/A N/A 100% 2 Bio-tech company developing diabetes self-
test products and apparel company.
Kansas City, Kansas
Ninety-Ninth Street #3, Lenexa 100% 2 89% 2 100% 2 98% 2 98% 2 Warehouse for computer cables/wiring and
storage of corporate records/supplies.
Lackman Business Center,
Lenexa 98% 2 91% 2 100% 2 98% 3 92% 2 Network and communications specialists.
Ninety-Ninth Street #1, Lenexa 100% 2 100% 2 100% 2 100% 2 100% 3 Tool distribution and surgical instrument
manufacturing.
Ninety-Ninth Street #2, Lenexa 100% 1 100% 1 100% 1 100% 1 100% 1 Drug testing clinic.
Ninety-Ninth Street #4, Lenexa N/A N/A N/A 79% 3 79% 3 Distribution of shrink wrap products,
distributor of computers and computer
related parts, home nursing and health
care administration.
Panorama Business Park,
Kansas City N/A 100% 2 100% 2 91% 2 89% 2 Distribution of pharmaceuticals,
distribution of appliances.
Panorama III, Kansas City N/A N/A N/A N/A 100% 4 Manufacturer of dental products, storage
of pre-packaged baked goods, manufacturer
of intercom and security systems, wholesale
sales and distribution of security systems
parts.
Colorado
Bryant Street Quad, Denver 97% 3 100% 3 100% 3 100% 3 100% 3 Health care provider, photo processing lab,
and radiator coating plant/distributor.
Bryant Street Annex, Denver 100% 2 100% 2 100% 2 100% 2 100% 2 Office supplies distributor and automotive
paint distributor.
Greater Portland Area, Oregon
Twin Oaks Technology Center,
Beaverton 81% 2 91% 3 96% 2 89% 3 95% 3 Software developer and telecommunications.
Twin Oaks Business Center,
Beaverton 94% 3 80% 4 81% 4 84% 4 75% 3 Electronic engineering, electronic
equipment assembly, computer equipment
distributor and postal service.
Arizona
Westech Business Center, Phoenix N/A 93% 0 96% 0 95% 0 96% 0 N/A
Westech II, Phoenix N/A N/A N/A 100% 3 100% 2 Healthcare consultants and travel agency.
2601 W. Broadway, Tempe N/A N/A 100% 1 100% 1 100% 1 Wireless phone service provider.
Phoenix Airport Center #2,
Phoenix N/A N/A 100% 1 100% 1 100% 1 Electronic parts sales and customer
service.
Phoenix Airport Center #3,
Phoenix N/A N/A 100% 1 100% 1 100% 1 Cosmetic manufacturing and distribution.
Phoenix Airport Center #4,
Phoenix N/A N/A 100% 1 100% 1 100% 1 Package delivery/service call center.
Phoenix Airport Center #5,
Phoenix N/A N/A N/A 100% 1 100% 1 Healthcare maintenance organization
corporate office.
Butterfield Business Center,
Tucson N/A N/A 100% 3 100% 3 100% 2 Sears call center, polish/wax research
and development.
Butterfield Tech Center II,
Tucson N/A N/A N/A N/A 56% 2 Package distribution facility and school
book distribution facility.
Greystone Business Park,
Tempe N/A N/A N/A N/A 11% 1 Sales and service of electronic
equipment.
Cimarron Business Park,
Scottsdale N/A N/A N/A 98% 2 97% 2 Printing and sales office, computer
equipment.
Expressway Corporate
Center, Tempe N/A N/A N/A 68% 1 100% 2 Manufacture photographic equipment for
wafer circuiting, and food
supplement manufacturing.
The Adams Brothers Building,
Phoenix N/A N/A N/A N/A 100% 1 Interior design and home products sales.
Bedford Realty Partners, L.P.,
Phoenix N/A N/A N/A N/A 100% 2 Offices and laboratories for
environmental and soils testing and
clinical studies.
Texas
Ferrell Drive, Farmers Branch N/A N/A 100% 5 100% 5 83% 4 Medical products distribution, hardware
distribution, and engineering.
Austin Braker 2, Austin N/A N/A N/A 100% 3 100% 3 Computer technology for television,
lottery and gaming association, computer
sales and customer service.
Austin Rutland 10, Austin N/A N/A N/A 100% 5 100% 5 Service of copier equipment, printing for
small businesses, tool distribution,
environmental field work, trade show and
conference coordination.
Austin Southpark A, B and C,
Austin N/A N/A N/A 100% 4 87% 3 Spare parts storage for computer chip
manufacturer, environmental testing,
proto-type testing for computer chip
manufacturer and valuable storage for
pawn broker.
SUBURBAN OFFICE PROPERTIES
Northern California
Village Green, Lafayette 100% 2 100% 1 99% 1 100% 2 100% 2 Event planner and organizer, and real
estate investment trust.
100 View Street, Mountain View N/A 100% 4 100% 3 100% 3 100% 4 Architectural servicing, designing and marketing
of integrated circuits for semi-conductors,
computer software design of on-line reporting
and surveying devices.
Canyon Park, San Ramon N/A N/A 100% 2 100% 2 100% 2 Medical administrative offices and
geotechnical lab; soils
testing, engineering services.
Crow Canyon Centre, San Ramon N/A N/A N/A N/A 50% 1 Health care provider.
Monterey Commerce Center 1,
Monterey N/A N/A 87% 4 82% 4 79% 3 Financial services, software development,
telecommunications sales, electronic equipment
sales, and real estate services.
3380 Cypress, Petaluma N/A N/A N/A 100% 1 100% 1 Manufacture hearing devices.
Southern California
Laguna Hills Square, Laguna N/A 86% 2 96% 4 93% 4 95% 4 Medical facility and securities brokerage firm.
Carroll Tech III, San Diego N/A N/A 100% 1 100% 1 100% 1 On-line game developer.
Scripps Wateridge, San Diego N/A N/A 100% 2 100% 2 100% 2 Wireless communications, supplier of
digital wireless communication products and
technologies.
Carroll Tech IV, San Diego N/A N/A N/A N/A 100% 1 Information management for healthcare.
Greater Kansas City Area
6600 College Blvd.,
Overland Park 100% 1 98% 1 100% 1 100% 1 100% 1 Telecommunication.
Didde Building, Overland Park N/A N/A N/A 100% 3 100% 3 Investment firm, printing and packaging
technology corporate offices and reinsurance
brokerage.
Colorado
Oracle Building, Denver N/A N/A 100% 2 100% 2 100% 2 Software company and banking.
Texaco Building, Denver N/A N/A N/A 100% 1 100% 1 Oil company.
Arizona
Executive Center at Southbank,
Phoenix N/A N/A 98% 3 98% 3 98% 3 Post graduate education facilities,
travel agency, and customer
credit call center.
Troika Building, Tucson N/A N/A 100% 1 100% 1 100% 1 Architectural services
Phoenix Airport Center #1,
Phoenix N/A N/A 100% 5 100% 5 100% 3 Electronics, computer sales, banking
services, and security services sales
office.
Cabrillo Executive Center,
Phoenix N/A N/A N/A 97% 2 100% 2 Medical insurance company and software
developer.
Mountain Pointe Office Park,
Phoenix N/A N/A N/A N/A 0% 0 N/A
1355 S. Clearview Avenue,
Mesa N/A N/A N/A N/A 100% 1 Debt collection services.
Greater Seattle Area
Kenyon Center, Bellevue N/A 100% 1 100% 1 100% 1 100% 1 Manufacturer of aircraft.
Orillia Office Park, Renton N/A N/A 100% 1 100% 1 100% 1 Manufacturer of aircraft.
Adobe Systems Bldg. 1, Seattle N/A N/A N/A 100% 1 100% 1 Computer software design and engineering.
Adobe Systems Bldg. II, Seattle N/A N/A N/A 77% 1 100% 2 Computer software design and engineering,
non-profit acupuncture and alternative
medicine school and clinic.
Highlands Phase I, Bothell N/A N/A N/A N/A 38% 1 Cellular phone service and sales via the
internet.
The Federal Way Building,
Federal Way N/A N/A N/A N/A 100% 3 Property/casualty insurance company,
electronic equipment manufacturer, and
oil company.
Federal Way Building II,
Federal Way N/A N/A N/A N/A 100% 4 Equipment leasing, commercial real estate
developer, and full service insurance
company.
Texas
9737 Great Hills Trail, Austin N/A N/A 100% 1 100% 1 100% 1 Home mortgage business.
Nevada
U. S. Bank Centre, Reno N/A N/A 94% 1 99% 1 100% 2 Insurance services and mining.
Lease Expirations - Real Estate Portfolio
The following table presents lease expirations for each of the ten
years beginning January 1, 2000. The table presents: (i) the number
of leases that expire each year, (ii) the square feet covered by such
expiring leases, (iii) the annualized base rent (the "Annualized Base
Rent") represented by such expiring leases and (iv) the percentage of
total Annualized Base Rent for expiring leases.
Number of Percentage
Leases Rentable Annualized of Annualized Base
Year Expiring Square Feet Base Rent Rent
2000 161 1,233,792 12,700,872 16.3%
2001 122 1,046,520 10,862,342 13.9
2002 120 973,187 9,616,715 12.3
2003 71 941,686 10,912,326 14.0
2004 65 1,273,438 12,673,311 16.3
2005 15 638,473 9,852,127 12.6
2006 7 278,645 3,178,135 4.1
2007 6 421,219 2,464,003 3.2
2008 2 12,720 242,724 .3
2009 and thereafter 6 436,286 5,450,952 7.0
Total 575 7,255,966 77,953,507 100.0%
Principal Provisions of Leases
The following table sets forth the principal provisions of leases which
represent more than 10% of the gross leasable area ("GLA") of each of the
Company's Properties and the realty tax rate for each Property for 1999.
Annual # of Square Contract
Property Leases Project Feet of Rent
Taxes/ with 10% or Square Each ($/Sq/Yr) At Lease Renewal
Property Rate More of GLA Feet Tenant End of Year Expiration Options
INDUSTRIAL PROPERTIES
Northern California
Building #3 at Contra Costa $16,465 1 21,840 21,840 $7.80 Feb. 02 1-3 yr.
Diablo Ind. Park, Concord $1.01/100
Building #8 at Contra Costa $23,534 1 31,800 31,800 $6.72 Dec. 00 2-5 yr.
Diablo Ind. Park, Concord $1.01/100
Building #18 at Mason $17,313 2 28,836 7,225 $7.20 May 00 None
Industrial Park, Concord $1.01/100 4,825 $7.49 Feb. 01 None
Milpitas Town Center, $69,454 4 102,620 23,924 $17.40 Apr. 02 1-5 yr.
Milpitas $1.09/100 24,426 $11.28 Apr. 02 1-2 yr.
30,840 $13.80 Jul. 03 1-5 yr.
23,430 $8.12 Jan. 05 None
598 Gibraltar Drive, $46,270 1 45,090 45,090 $10.44 Apr. 01 1-5 yr.
Milpitas $1.10/100
350 East Plumeria Drive, $139,546 1 142,700 142,700 $15.75 Apr. 05 1-5 yr.
San Jose $1.05/100
Auburn Court, Fremont $48,563 3 68,030 16,095 $14.35 Jul. 01 1-5 yr.
$1.04/100 12,060 $13.20 Apr. 03 None
12,060 $7.20 Jul. 00 None
47650 Westinghouse Drive, $15,848 1 24,030 24,030 $10.20 Sep. 04 None
Fremont $1.04/100
410 Allerton, $25,821 1 46,050 46,050 $7.20 Apr. 01 None
South San Francisco $1.03/100
400 Grandview, $86,654 4 107,004 21,841 $7.80 Dec. 03 None
South San Francisco $1.03/100 43,642 $8.06 Jul. 02 1-5 yr.
18,789 $8.64 May 04 1-5 yr.
18,864 $6.60 Jan. 03 None
342 Allerton, $53,537 4 69,312 19,751 $7.20 Mar. 00 None
South San Francisco $1.03/100 9,720 $9.09 Mar. 02 None
30,953 $10.20 Jun. 04 None
8,888 $9.73 Aug. 02 None
301 East Grand, $33,328 2 57,846 26,240 $8.11 Jun. 03 None
South San Francisco $1.03/100 17,206 $5.04 Dec. 03 None
Fourier Avenue, Fremont $106,368 1 104,400 104,400 $8.99 Apr. 04 None
$1.04/100
Lundy Avenue, San Jose $57,815 2 60,428 49,342 $14.40 Apr. 06 1-5 yr.
$1.08/100 11,086 $14.40 Jul. 04 1-5 yr.
115 Mason Circle, Concord $18,806 5 35,000 5,833 $5.47 Jan. 00 None
$1.01/100 5,832 $6.84 Jul. 01 None
8,154 $7.44 Aug. 02 None
7,296 $6.60 Nov. 02 1-3 yr.
7,885 $7.20 Apr. 00 None
47600 Westinghouse Drive, $16,989 1 24,030 24,030 $10.92 Oct. 03 1-3 yr.
Fremont $1.04/100
860-870 Napa Valley Corporate $84,339 2 67,775 13,111 $10.53 Dec. 00 1-5 yr.
Way, Napa $1.03/100 7,558 $10.58 Sep. 01 None
47633 Westinghouse Drive, $53,558 1 50,088 50,088 $12.06 Oct. 03 1-3 yr.
Fremont $1.04/100
47513 Westinghouse Drive, $122,919 2 65,385 35,132 $15.36 Feb. 05 1-5 yr.
Fremont $1.04/100 30,253 $14.40 Feb. 04 1-5 yr.
Bordeaux Centre, Napa $123,903 4 150,000 22,075 $7.62 Nov. 07 2-5 yr.
$1.03/100 16,076 $7.43 Nov. 07 1-5 yr.
51,790 $5.76 Jan. 04 1-5 yr.
18,434 $6.04 Dec. 04 1-5 yr.
O'Toole Business Park, $111,306 0 122,320 N/A N/A N/A N/A
San Jose $1.09/100
6500 Kaiser Drive, Fremont $179,066 1 78,611 78,611 $9.60 Sep. 04 2-5 yr.
$1.04/100
Bedford Fremont Business Center,
Fremont $236,399 1 146,509 71,532 $15.24 Jul. 03 1-3 yr.
$1.04/100
Spinnaker Court, Fremont $167,552 2 98,500 69,230 $8.10 Mar. 00 None
$1.07/100 29,270 $8.59 Mar. 00 None
2277 Pine View Way, $102,816 1 120,480 120,480 $7.25 Mar. 07 2-5 yr.
Petaluma $1.00/100
The Mondavi Building, Napa $99,417 1 120,157 120,157 $5.17 Sep. 12 1-5 yr.
$1.03/100
Monterey Commerce $22,876 1 28,020 28,020 $15.12 Dec. 00 1-3 yr.
Center 2, Monterey $1.00/100
Monterey Commerce $22,574 3 24,240 3,817 $14.28 Jul. 01 1-5 yr.
Center 3, Monterey $1.00/100 3,050 $12.96 Nov. 00 2-3 yr.
17,373 $15.96 Oct. 00 None
Parkpoint Business Center, $74,179 3 67,869 8,767 $15.00 Oct. 02 1-5 yr.
Santa Rosa $1.00/100 7,894 $14.74 Oct. 01 1-5 yr.
17,505 $15.00 Mar. 03 1-5 yr.
2180 McDowell, Petaluma $42,721 1 43,083 35,014 $11.20 Feb. 00 None
$1.00/100
2190 S. McDowell, Petaluma $32,439 2 32,719 17,131 $8.84 Mar. 04 1-5 yr.
$1.00/100 15,588 $7.90 Apr. 06 2-5 yr.
Southern California
Dupont Industrial Center, $205,774 1 451,192 183,244 $2.88 Jan. 07 2-5 yr.
Ontario $1.04/100
3002 Dow Business Center, $189,691 0 192,125 N/A N/A N/A N/A
Tustin $1.01/100
Carroll Tech I, $17,185 1 21,936 21,936 $9.11 Nov. 05 2-3 yr.
San Diego $1.11/100
Vista 1, Vista $20,575 0 42,508 N/A N/A N/A N/A
$1.04/100
Vista 2, Vista $42,050 1 47,550 47,550 $7.15 Sep. 01 2-5 yr.
$1.04/100
Signal Systems Building, $99,254 1 109,780 109,780 $10.42 Aug. 06 2-5 yr.
San Diego $1.02/100
Carroll Tech II, $35,581 1 37,586 37,586 $13.79 Dec. 01 None
San Diego $1.11/100
2230 Oak Ridge Way, $32,845 1 44,063 44,063 $6.63 Aug. 04 2-5 yr.
Vista $1.01/100
5502 Oberlin Drive, $25,531 1 20,771 20,771 $9.96 Mar. 03 1-5 yr.
San Diego $1.11/100
6960 Flanders Drive, $38,442 1 33,144 33,144 $9.98 May 03 1-5 yr.
San Diego $1.11/100
Canyon Vista Center, $61,727 3 63,746 17,591 $7.44 Dec. 04 1-5 yr.
San Diego $1.11/100 18,643 $8.14 Mar. 00 None
27,512 $10.25 May 02 1-5 yr.
6325 Lusk Blvd., $46,691 2 49,942 31,849 $15.48 Nov. 03 None
San Diego $1.11/100 18,093 $7.20 Jun. 01 None
Greater Kansas City Area
Ninety Ninth Street #3, $59,583 2 50,000 13,000 $7.35 Dec. 03 1-5 yr.
Lenexa $9.89/100 31,250 $5.38 May 03 None
Lackman Business Center, $57,934 2 45,956 5,510 $13.52 Feb. 01 1-3 yr.
Lenexa $9.89/100 5,320 $8.50 Jun. 01 None
Ninety-Ninth Street #1, $51,301 3 35,516 19,019 $8.33 Sep. 00 None
Lenexa $9.89/100 8,902 $8.42 Mar. 04 1-5 yr.
4,403 $8.25 Mar. 02 None
Ninety-Ninth Street #2, $23,232 1 12,974 12,974 $8.66 Oct. 04 None
Lenexa $9.89/100
Ninety Ninth Street #4, $92,573 3 68,831 19,540 $5.75 Feb. 01 None
Lenexa $9.89/100 19,316 $5.85 Mar. 03 1-3 yr.
14,751 $7.37 Oct. 02 1-5 yr.
Panorama Business Park, $114,341 2 103,457 12,491 $5.95 Jul. 01 None
Kansas City $9.24/100 12,951 $5.15 Feb. 01 None
Panorama III, Kansas City $57,321 4 46,860 12,122 $8.00 May 02 1-5 yr.
$9.24/100 6,569 $7.99 May 00 1-5 yr.
5,864 $6.10 Mar. 02 None
6,312 $11.20 Dec. 02 2-5 yr.
Colorado
Bryant Street Quad, Denver $84,932 3 155,536 17,440 $4.50 Apr. 02 None
$6.73/100 20,726 $3.30 Feb. 01 1-5 yr.
16,055 $4.11 Feb. 02 1-3 yr.
Bryant Street Annex, Denver $34,547 2 55,000 42,148 $4.25 Nov. 00 3-1 yr.
$6.73/100 12,852 $3.90 Mar. 00 None
Greater Portland Area
Twin Oaks Technology Center, $66,767 3 95,519 11,460 $5.93 Nov. 01 None
Beaverton $1.44/100 10,069 $5.96 M-T-M None
9,732 $10.56 Feb. 03 None
Twin Oaks Business Center, $42,141 3 66,339 7,633 $10.20 Nov. 02 None
Beaverton $1.44/100 6,702 $9.00 Feb. 00 None
11,475 $9.00 Oct. 00 1-3 yr.
Arizona
Westech Business Center, Phoenix $127,276 0 143,940 N/A N/A N/A N/A
$13.64/100
Westech II, Phoenix $110,764 3 80,878 14,615 $8.52 Oct. 04 None
$13.64/100 11,819 $8.97 Nov. 02 1-2 yr.
11,739 $7.80 Nov. 02 1-2 yr.
2601 W. Broadway, Tempe $62,311 1 44,244 44,244 $7.14 Jan. 07 2-5 yr.
$13.21/100
Phoenix Airport Center #2, $60,614 1 35,768 35,768 $7.80 Aug. 01 2-5 yr.
Phoenix $13.64/100
Phoenix Airport Center #3, $56,060 1 55,122 55,122 $7.02 Jul. 01 2-5 yr.
Phoenix $13.64/100
Phoenix Airport Center #4, $33,134 1 30,504 30,504 $7.80 Jun. 00 2-5 yr.
Phoenix $13.64/100
Phoenix Airport Center #5, $92,049 1 60,000 60,000 $8.68 Sep. 02 1-5 yr.
Phoenix $13.64/100
Butterfield Business Center, $94,937 3 95,746 50,000 $6.30 Aug. 04 2-5 yr.
Tucson $16.38/100 14,982 $2.86 Aug. 04 1-5 yr.
22,002 $8.85 Jun. 01 None
Butterfield Tech Center II, $13,711 2 33,082 7,383 $7.31 Mar. 06 2-5 yr.
Tucson $12.61/100 11,064 $6.24 Sep. 02 1-2 yr.
Greystone Business Park, $15,024 1 60,738 6,520 $10.56 Nov. 04 2-3 yr.
Tempe $13.09/100
Cimarron Business Park, $113,317 2 94,800 13,800 $10.31 Mar. 04 None
Scottsdale $12.10/100 9,510 $9.00 Sep. 00 1-4 yr.
Expressway Corporate Center, $87,678 2 79,331 40,528 $8.40 Mar. 03 None
Tempe $13.21/100 18,825 $9.27 Aug. 06 None
The Adams Brothers Building, $32,784 1 71,345 71,345 $4.56 Jan. 04 2-5 yr.
Phoenix $18.83/100
Bedford Realty Partners, L.P., $176,648 2 101,835 13,245 $7.30 Dec. 01 None
Phoenix $18.83/100 30,409 $7.08 Jun. 05 None
Texas
Ferrell Drive, $56,795 4 68,580 11,430 $4.50 Jan. 00 None
Farmers Branch $1.61/100 11,430 $4.20 Feb.00 None
11,430 $4.50 Jul. 01 1-5 yr.
11,430 $4.75 Apr. 02 None
Austin Braker 2, $42,913 3 27,322 16,522 $9.00 Jan. 03 1-3 yr.
Austin $2.60/100 5,400 $7.92 Jan. 04 None
5,400 $9.00 Feb. 03 None
Austin Rutland 10, $69,857 5 54,000 7,200 $6.96 Nov. 01 None
Austin $2.60/100 7,200 $6.84 May 00 None
7,200 $5.64 Sep. 02 None
7,200 $8.40 Aug. 00 None
14,400 $5.40 Dec. 02 1-3 yr.
Austin Southpark A, B, and C, $118,834 3 78,276 13,550 $8.52 Apr. 01 2-3 yr.
Austin $2.60/100 11,957 $7.56 Feb. 00 None
8,100 $8.64 May 03 1-5 yr.
SUBURBAN OFFICE PROPERTIES
Northern California
Village Green, Lafayette $26,300 2 16,795 3,240 $23.40 Jun. 00 None
$1.11/100 11,062 $24.12 Mar. 05 None
100 View Street, $52,856 4 42,141 5,490 $21.48 Jul. 01 1-5 yr.
Mountain View $1.08/100 12,112 $33.00 Sep. 04 1-5 yr.
5,070 $40.20 Apr. 04 None
7,453 $33.00 May 04 None
Canyon Park, $63,964 2 57,667 48,265 $15.68 Feb. 00 None
San Ramon $1.07/100 9,402 $20.32 Jan. 03 None
Crow Canyon Centre, $10,156 1 39,108 19,615 $25.20 Oct. 06 2-5 yr.
San Ramon $1.06/100
Monterey Commerce Center 1, $61,873 3 50,031 5,809 $19.80 Aug. 02 1-3 yr.
Monterey $1.00/100 7,000 $18.96 Mar. 03 1-5 yr.
19,478 $19.80 Jul. 03 1-5 yr.
3880 Cypress Dr., $65,639 1 35,100 35,100 $13.08 May 07 1-5 yr.
Santa Rosa $1.00/100
Southern California
Laguna Hills Square, Laguna $64,962 4 51,734 8,474 $33.60 Jun. 02 1-5 yr.
$1.05/100 7,368 $25.24 Apr. 05 1-5 yr.
6,391 $24.24 Sep. 00 1-5 yr.
9,229 $19.80 Jun. 02 2-3 yr.
Carroll Tech III, San Diego $23,473 1 29,307 29,307 $9.60 Sep. 04 1-5 yr.
$1.11/100
Scripps Wateridge, San Diego $194,312 2 123,853 49,295 $12.85 Jul. 06 1-5 yr.
$1.11/100 74,558 $13.37 Aug. 05 2-3 yr.
Carroll Tech IV, San Diego $50,963 1 43,415 43,415 $15.00 Dec. 02 1-5 yr.
$1.11/100
Greater Kansas City Area
6600 College Blvd., $187,186 1 79,316 62,441 $11.80 M-T-M None
Overland Park $10.81/100
Didde Building, $54,270 3 20,168 10,962 $19.50 Jan. 08 1-5 yr.
Overland Park $10.81/100 3,667 $16.60 Jan. 02 None
2,132 $17.50 Mar. 01 None
Colorado
Oracle Building, Denver $349,086 2 90,712 10,043 $18.00 Aug. 11 4-5 yr.
$10.75/100 77,090 $24.00 Sep. 03 None
Texaco Building, Denver $570,576 1 237,055 237,055 $18.05 Jan. 05 2-5 yr.
$8.67/100
Arizona
Executive Center at Southbank, $258,438 4 140,157 38,106 $9.74 Apr. 02 1-5 yr.
Phoenix $18.83/100 17,910 $8.44 Sep. 03 2-5 yr.
30,518 $10.00 Jun. 01 2-5 yr.
21,626 $10.00 Jul. 02 2-5 yr.
Troika Building, Tucson $120,424 1 52,000 52,000 $10.00 Oct. 01 None
$17.40/100
Phoenix Airport Center #1, $47,414 5 32,460 11,990 $10.95 Aug. 00 1-5 yr.
Phoenix $13.64/100 4,527 $15.00 Mar. 01 1-5 yr.
4,449 $19.05 Dec. 02 None
4,041 $18.33 Jul. 01 None
4,502 $12.50 Aug. 00 1-5 yr.
Cabrillo Executive Center, $119,103 2 60,321 12,400 $17.75 Aug. 01 1-5 yr.
Phoenix $13.72/100 18,267 $17.50 M-T-M 1-5 yr.
Mountain Pointe Office Park, $5,761 0 54,584 N/A N/A N/A N/A
Phoenix $13.51/100
1355 S. Clearview Avenue, $52,625 1 57,193 57,193 $12.72 Apr. 05 2-5 yr.
Mesa $11.00/100
Greater Seattle Area
Kenyon Center, Bellevue $137,074 1 94,840 94,840 $11.61 Dec. 99 None
$1.11/100
Orillia Office Park, Renton $373,060 1 334,255 334,255 $9.35 Feb. 04 None
$1.34/100
Adobe Systems Bldg. 1, $298,957 1 161,117 161,117 $15.53 Jul. 10 2-5 yr.
Seattle $1.25/100
Adobe Systems Bldg. 2, $243,742 2 136,111 93,211 $15.53 Jul. 10 2-5 yr.
Seattle $1.25/100 19,867 $19.75 May 03 None
Highlands Phase I, $19,314 1 192,256 38,213 $11.38 Aug. 04 1-5 yr.
Bothell $1.34/100
The Federal Way Building, $3,293 3 65,000 32,871 $11.11 Apr. 06 2-3 yr.
Federal Way $1.38/100 7,107 $14.40 Sep. 04 1-5 yr.
19,313 $14.16 Oct. 04 1-5 yr.
Federal Way II, $4,683 4 115,032 30,000 $13.44 Aug. 09 2-5 yr.
Federal Way $1.38/100 20,000 $13.44 Aug. 09 None
22,856 $14.40 Sep. 02 None
42,176 $14.99 Dec. 99 None
Texas
9737 Great Hills Trail, Austin $273,084 1 82,680 82,680 $18.00 Dec. 01 1-5 yr.
$2.60/100
Nevada
U.S. Bank Centre, Reno $137,716 2 104,324 35,361 $17.40 Apr. 00 1-5 yr.
$3.45/100 13,064 $20.76 Jun. 04 None
Average Base Rent
The following table sets forth for each of the Properties the average
rent at the end of each year for the last five years.
Average Base Rent ($/Sq Ft/Yr) At End of Year
1995 1996 1997 1998 1999
INDUSTRIAL PROPERTIES:
Northern California
Building #3 at Contra Costa Diablo $4.95 $6.64 $6.84 $6.84 $7.80
Building #8 at Contra Costa Diablo $6.00 $6.00 $6.00 $6.00 $6.72
Building #18 at Mason Industrial Park $6.63 $6.78 $6.88 $6.93 $7.22
Milpitas Town Center $7.35 $8.03 $8.90 $10.69 $12.74
598 Gibraltar Drive N/A $9.48 $9.48 $10.44 $10.44
350 East Plumeria Drive $7.80 $7.80 $8.40 $15.00 $15.75
Auburn Court $6.54 $6.78 $7.80 $10.62 $11.25
47650 Westinghouse Drive $5.52 $5.52 $9.00 $9.60 $10.20
410 Allerton $5.16 $5.16 $5.16 $6.60 $7.20
400 Grandview $7.49 $7.53 $7.03 $7.50 $7.95
342 Allerton $6.88 $7.18 $7.57 $7.73 $9.13
301 East Grand $5.92 $5.57 $5.58 $6.30 $6.90
Fourier Avenue N/A $8.99 $8.99 $8.99 $8.99
Lundy Avenue N/A $7.09 $7.09 $7.36 $14.40
115 Mason Circle N/A $6.05 $6.22 $.6.59 $6.78
47600 Westinghouse Drive N/A $5.94 $10.20 $10.56 $10.92
860-870 Napa Valley Corporate N/A $9.44 $8.86 $9.48 $9.90
47633 Westinghouse Drive N/A $11.37 $11.60 $11.83 $12.06
47513 Westinghouse Drive N/A N/A N/A $14.32 $14.92
Bordeaux Centre N/A N/A N/A $7.33 $6.57
O'Toole Business Center N/A $8.75 $10.31 $13.81 $14.38
6500 Kaiser Drive N/A N/A $9.00 $9.60 $9.60
Bedford Fremont Business Center N/A N/A $11.93 $14.63 $16.39
Spinnaker Court N/A N/A $8.01 $8.25 $8.25
2277 Pine View Way N/A N/A $6.91 $6.91 $7.25
The Mondavi Building N/A N/A $4.92 $4.92 $5.17
Monterey Commerce Center 2 N/A N/A $14.16 $14.64 $15.12
Monterey Commerce Center 3 N/A N/A $14.70 $15.22 $15.32
Parkpoint Business Center N/A N/A N/A $15.19 $15.68
2180 McDowell N/A N/A N/A $8.37 $11.20
2190 McDowell N/A N/A N/A $8.19 $8.39
Southern California
Dupont Industrial Center $3.17 $3.53 $3.40 $3.44 $3.67
3002 Dow Business Center $8.88 $8.55 $8.32 $8.86 $9.52
Carroll Tech I N/A $10.35 $11.93 $3.17 $9.11
Vista 1 N/A $5.16 $0.00** $0.00 $0.00
** Bankruptcy
Average Base Rent ($/Sq Ft/Yr) At End of Year
1995 1996 1997 1998 1999
INDUSTRIAL PROPERTIES (continued):
Southern California (continued)
Vista 2 N/A $6.36 $6.61 $6.88 $7.15
Signal Systems Building N/A $7.80 $8.11 $10.20 $10.42
Carroll Tech II N/A N/A $11.52 $12.00 $13.79
2230 Oak Ridge Way N/A N/A N/A $6.49 $6.63
5502 Oberlin Drive N/A N/A N/A $9.96 $9.96
6960 Flanders Drive N/A N/A N/A $9.60 $9.98
Canyon Vista Center N/A N/A N/A N/A $8.86
6325 Lusk Blvd. N/A N/A N/A N/A $12.48
Greater Kansas City Area
Ninety-Ninth Street #3 $5.86 $5.30 $6.08 $6.14 $6.14
Lackman Business Center $8.36 $8.59 $8.77 $9.36 $9.85
Ninety-Ninth Street #1 $7.96 $8.32 $7.72 $7.89 $8.31
Ninety-Ninth Street #2 $7.56 $8.62 $8.62 $8.62 $8.66
Ninety-Ninth Street #4 N/A N/A N/A $6.16 $6.23
Panorama Business Park N/A $6.54 $6.70 $6.87 $7.01
Panorama III N/A N/A N/A N/A $8.83
Colorado
Bryant Street Quad $3.09 $3.39 $3.82 $3.96 $4.13
Bryant Street Annex $4.02 $3.93 $4.09 $4.17 $4.17
Greater Portland Area, Oregon
Twin Oaks Technology Center $7.27 $7.32 $7.67 $7.78 $8.44
Twin Oaks Business Center $7.75 $8.35 $8.86 $8.87 $7.83
Arizona
Westech Business Center N/A $8.85 $9.44 $9.99 $9.97
Westech II N/A N/A N/A $8.86 $8.87
2601 W. Broadway N/A N/A $7.14 $7.14 $7.14
Phoenix Airport Center #2 N/A N/A $7.20 $7.20 $7.80
Phoenix Airport Center #3 N/A N/A $6.36 $6.36 $7.02
Phoenix Airport Center #4 N/A N/A $7.20 $7.80 $7.80
Phoenix Airport Center #5 N/A N/A $7.21 $8.68 $8.68
Butterfield Business Center N/A N/A $7.08 $7.11 $6.38
Butterfield Tech Center II N/A N/A N/A N/A $6.67
Greystone Business Park N/A N/A N/A N/A $10.56
Cimarron Business Park N/A N/A N/A $8.94 $10.09
Expressway Corporate Center N/A N/A N/A $8.21 $8.78
The Adams Brothers Building N/A N/A N/A N/A $4.56
Bedford Realty Partners, L.P. N/A N/A N/A N/A $7.21
Texas
Ferrell Drive N/A N/A $4.55 $4.62 $4.70
Austin Braker 2 N/A N/A N/A $8.79 $8.79
Austin Rutland 10 N/A N/A N/A $6.54 $6.77
Austin Southpark A, B and C N/A N/A N/A $8.38 $8.48
Average Base Rent ($/Sq Ft/Yr) At End of Year
1995 1996 1997 1998 1999
SUBURBAN OFFICE PROPERTIES:
Northern California
Village Green $18.23 $19.99 $23.24 $23.70 $24.45
100 View Street N/A $18.82 $20.10 $21.72 $32.16
Canyon Park N/A N/A $15.92 $16.44 $16.44
Crow Canyon Centre N/A N/A N/A N/A $25.20
Monterey Commerce Center 1 N/A N/A $20.12 $19.78 $19.69
3880 Cypress Drive N/A N/A N/A $13.08 $13.08
Southern California
Laguna Hills Square N/A $25.38 $23.90 $24.79 $25.17
Carroll Tech III N/A N/A $8.52 $8.52 $9.60
Scripps Wateridge N/A N/A $11.41 $12.53 $13.16
Carroll Tech IV N/A N/A N/A N/A $15.00
Greater Kansas City Area
6600 College Boulevard $12.01 $11.99 $12.28 $12.35 $12.32
Didde Building N/A N/A N/A $18.25 $18.61
Colorado
Oracle Building N/A N/A $23.37 $23.34 $23.34
Texaco Building N/A N/A N/A $18.05 $18.05
Arizona
Executive Center at Southbank N/A N/A $9.23 $9.46 $9.64
Troika Building N/A N/A $9.00 $10.00 $10.00
Phoenix Airport Center #1 N/A N/A $13.81 $13.69 $13.97
Cabrillo Executive Center N/A N/A N/A $16.64 $17.03
Mountain Pointe Office Park N/A N/A N/A N/A N/A
1355 S. Clearview Avenue N/A N/A N/A N/A $12.72
Greater Seattle Area
Kenyon Center N/A $11.61 $11.61 $11.61 $11.61
Orillia Office Park N/A N/A $9.35 $9.35 $9.35
Adobe Systems Bldg. 1 N/A N/A N/A $15.53 $15.53
Adobe Systems Bldg. 2 N/A N/A N/A $22.04 $16.71
Highlands Phase I N/A N/A N/A N/A $12.51
The Federal Way Building N/A N/A N/A N/A $12.65
Federal Way II N/A N/A N/A N/A $14.20
Texas
9737 Great Hills Trail N/A N/A $18.00 $18.00 $18.00
Nevada
U.S. Bank Centre N/A N/A $18.59 $18.76 $19.03
Tax Information
The following table sets forth tax information of the Company's real
estate investments at December 31, 1999, as follows: (i) Federal tax
basis, (ii) annual rate of depreciation, (iii) method of depreciation,
and (iv) life claimed, with respect to each property or component
thereof for purposes of depreciation (in thousands):
Federal Annual Rate of Depreciation Life
Depreciable assets Tax Basis Depreciation Method In Years
INDUSTRIAL PROPERTIES
Northern California $ 3,783 3.18% Straight Line 31.5
107,229 2.56% Straight Line 39.0
111,012
Southern California 63,123 2.56% Straight Line 39.0
Greater Kansas City Area 2,132 3.18% Straight Line 31.5
13,020 2.56% Straight Line 39.0
15,152
Colorado 3,283 2.56% Straight Line 39.0
Greater Portland Area 8,831 2.56% Straight Line 39.0
Arizona 42,287 2.56% Straight Line 39.0
Texas 11,122 2.56% Straight Line 39.0
Total depreciable assets for industrial properties 254,810
SUBURBAN OFFICE PROPERTIES
Northern California 19,156 2.56% Straight Line 39.0
Southern California 21,412 2.56% Straight Line 39.0
Greater Kansas City Area 5,452 2.56% Straight Line 39.0
Colorado 45,619 2.56% Straight Line 39.0
Arizona 34,791 2.56% Straight Line 39.0
Greater Seattle Area 110,317 2.56% Straight Line 39.0
Texas 7,094 2.56% Straight Line 39.0
Nevada 10,677 2.56% Straight Line 39.0
Total depreciable assets for
suburban office properties 254,518
$509,328
For additional information on the Company's real estate portfolio, see
Note 2 to the Consolidated Financial Statements.
ITEM 3. LEGAL PROCEEDINGS
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Common Stock of the Company trades on the New York Stock Exchange
and the Pacific Exchange under the symbol "BED." As of December 31,
1999 the Company had 1,056 stockholders of record. A significant
number of these stockholders are also nominees holding stock in street
name for individuals. The following table shows the high and low sale
prices per share reported on the New York Stock Exchange and the
dividends declared per share by the Company on the Common Stock for
each quarterly period during 1998 and 1999.
Dividend
High Low Per Share
1998
First Quarter $22 $19 3/16 $.30
Second Quarter $20 $17 7/16 $.33
Third Quarter $20 1/8 $15 $.33
Fourth Quarter $18 3/4 $15 3/4 $.36
1999
First Quarter $17 3/16 $14 5/8 $.36
Second Quarter $18 7/16 $14 1/2 $.39
Third Quarter $18 1/4 $16 11/16 $.39
Fourth Quarter $17 5/8 $15 11/16 $.42
ITEM 6. SELECTED FINANCIAL DATA
Following is a table of selected financial data of the Company for the
last five years (which should be read in conjunction with the
discussion under "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Consolidated Financial
Statements and Notes thereto contained herein):
(in thousands of dollars, except per share data)
1999 1998 1997 1996 1995
Operating Data:
Rental income $ 90,527 $ 73,451 $ 46,377 $ 27,541 $ 11,695
Gain (loss) on sales of real
estate investments 7,743 - 11,533 406 (642)
Net income 39,855 31,496 31,291 11,021 2,895
Net income applicable
to common stockholders 39,855 31,496 27,791 6,516 1,607
Per common share -
assuming dilution
Income before
extraordinary item $ 1.87 $ 1.38 $ 1.94 $ 1.14 $ 0.52
Net income $ 1.86 $ 1.38 $ 1.94 $ 1.14 $ 0.52
Balance Sheet Data:
Real estate investments $651,038 $581,458 $423,086 $224,501 $128,964
Bank loan payable 137,156 147,443 8,216 46,097 43,250
Mortgage loans payable 206,880 80,116 60,323 51,850 -
Redeemable preferred shares - - - 50,000 50,000
Common and other
stockholders' equity 300,180 347,589 346,426 73,756 32,435
Other Data:
Net cash provided by
operating activities $ 45,540 $ 38,949 $ 25,041 $ 14,378 $ 4,898
Net cash used by
investing activities 72,317 168,018 180,358 96,964 73,259
Net cash provided by
financing activities 27,075 128,994 155,350 82,887 64,655
Funds From Operations(1) 45,554 42,312 25,582 13,645 5,021
Dividends declared per share $ 1.56 $ 1.32 $ 1.13 $ 1.00 $ 0.82
(1) Management considers Funds From Operations to be one measure of
the performance of an equity REIT. Funds From Operations is used by
financial analysts in evaluating REITs and can be one measure of a
REIT's ability to make cash distributions. Presentation of this
information provides the reader with an additional measure to compare
the performance of REITs. Funds From Operations generally is defined
by NAREIT as net income (loss) (computed in accordance with generally
accepted accounting principles), excluding gains (losses) from debt
restructurings, sales of property, and non-recurring items, plus
depreciation and amortization, and after adjustments for
unconsolidated partnerships and joint ventures. Funds From Operations
was computed by the Company in accordance with this definition.
Beginning in the first quarter of 2000, non-recurring items other than
extraordinary items as defined by generally accepted accounting
principles will no longer be excluded in the calculation of Funds From
Operations. Funds From Operations does not represent cash generated
by operating activities in accordance with generally accepted
accounting principles; it is not necessarily indicative of cash
available to fund cash needs and should not be considered as an
alternative to net income (loss) as an indicator of the Company's
operating performance or as an alternative to cash flow as a measure
of liquidity. Further, Funds From Operations as disclosed by other
REITs may not be comparable to the Company's presentation.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Overview
The following should be read in conjunction with the Selected Financial
Data and the Consolidated Financial Statements and Notes thereto, all of
which are included herein.
Results of Operations
The Company's operations consist of owning and operating industrial and
suburban office properties located primarily in the western United
States.
Increases in revenues, expenses, net income and cash flows in the years
compared below were due primarily to the acquisition, development and
sale of operating properties as follows:
1999 1998 1997
Number of Square Number of Square Number of Square
Properties Feet Properties Feet Properties Feet
Acquisitions
Industrial 5 334,000 10 531,000 13 1,091,000
Office 4 280,000 6 650,000 13 1,199,000
9 614,000 16 1,181,000 26 2,290,000
Development
Industrial 5 380,000 - - 4 365,000
Sales
Industrial 3 448,000 - - - -
Office 1 114,000 - - 2 213,000
Retail - - - - 1 84,000
4 562,000 - - 3 297,000
Comparison of 1999 to 1998
Income from Property Operations
Income from property operations (defined as rental income less rental
expenses) increased $8,947,000 or 19% in 1999 compared with 1998. This
is due to an increase in rental income of $17,076,000 offset by an
increase in rental expenses (which include operating expenses, real
estate taxes and depreciation and amortization) of $8,129,000.
The increase in rental income and expenses is primarily attributable to
properties acquired and, to a lesser extent, properties developed during
1999 and 1998. These activities increased rental income and rental
expenses in 1999 by $14,787,000 and $7,646,000, respectively, as compared
to 1998. These increases were partially offset by the sale of one
office property and three industrial properties in 1999, which resulted
in a reduction in rental income and rental
expenses of $1,505,000 and $729,000, respectively, as compared to 1998.
The remaining increase in rental income of $3,794,000 and rental expenses
of $1,212,000, is due primarily to increased occupancy in 1999 as
compared to 1998, as well as an overall increase in rental rates.
Expenses
Interest expense, which includes amortization of loan fees, increased
$7,806,000 or 70% in 1999 compared with 1998. The increase is
attributable to the Company's higher level of borrowings and related
costs to finance the property acquisitions and development activities
during 1998 and 1999 and the repurchase of shares since November 1998.
The amortization of loan fees was $1,495,000 and $1,013,000 for 1999 and
1998, respectively. General and administrative expense increased
$175,000 or 5% from $3,386,000 in 1998 to $3,561,000 in 1999. The 1998
general and administrative expenses included costs of $434,000 related
to the Company exploring strategic alternatives including selling its
portfolio of properties. Such discussions were terminated in the fourth
quarter of 1998. Excluding these costs, general and administrative
expenses increased 21% in 1999 compared with 1998, primarily the result
of increased personnel costs.
Gain on Sale
In March 1999, the Company sold 417 Eccles in South San Francisco,
California, for a net sales price of $1,789,000, which resulted in a gain
of approximately $540,000. In June 1999, the Company sold Woodlands
Tower II in Salt Lake City, Utah, for a net sales price of $13,122,000,
which resulted in a gain of approximately $6,998,000. In June 1999, the
Company also sold Oak Ridge Land in Vista, California, for a net sales
price of $423,000, which resulted in a gain of approximately $45,000.
In August 1999, the Company sold 331 Doherty Avenue in Modesto,
California for a net sales price of $4,012,000, which resulted in a gain
of approximately $218,000. In December 1999, the Company sold
Continental Can in Lenexa, Kansas, for a net sales price of $4,895,000,
which resulted in a loss of approximately $58,000. The sales of
Woodlands Tower II and 331 Doherty Avenue were completed as part of a
tax-deferred exchange, under Section 1031 of the Internal Revenue Code,
in which the Company acquired four properties.
Dividends
The 1999 quarterly dividend declared for each share of common stock was
$0.36 for the first quarter, $0.39 for the second and third quarters, and
$0.42 for the fourth quarter. Consistent with the Company's policy,
dividends are paid in the quarter after the quarter in which they are
declared.
Comparison of 1998 to 1997
Income from Property Operations
Income from property operations increased $16,108,000 or 54% in 1998
compared with 1997. This is due to an increase in rental income of
$27,074,000 offset by an increase in rental expenses of $10,966,000.
The increase in rental income and expenses is primarily attributable to
the acquisition and development of real estate investments during 1998
and 1997. This acquisition and development activity increased rental
income and rental expenses in 1998 by $24,964,000 and $10,133,000,
respectively, as compared to 1997. The remaining increase in rental
income of $5,226,000 is due primarily to overall increases in property
rental rates, while the remaining increase in rental expenses of
$2,113,000 is due primarily to increases in property tax assessments,
landscaping costs and other property operating expenses. These increases
were partially offset by the sales of two office properties and one
retail property in 1997, which resulted in a reduction in rental income
and rental expenses in 1998 of $3,116,000 and $1,280,000, respectively,
as compared to 1997.
Expenses
Interest expense, which includes amortization of loan fees, increased
$3,246,000 or 41% in 1998 compared with 1997. The increase is
attributable to the Company's higher level of borrowings and related
costs to finance the property acquisitions and development activities
during 1997 and 1998, and higher financing costs incurred in connection
with its credit facility and mortgage loans. The amortization of loan
fees was $1,013,000 and $816,000 for 1998 and 1997, respectively.
General and administrative expense increased $1,049,000 or 45% from
$2,337,000 in 1997 to $3,386,000 in 1998. The 1998 general and
administrative expenses included costs of $434,000 related to the Company
exploring strategic alternatives including selling its portfolio of
properties. Such discussions were terminated in the fourth quarter of
1998. Excluding these costs, general and administrative expenses
increased 26% in 1998 compared with 1997, primarily the result of
managing a larger real estate portfolio. The 1997 general and
administrative expenses included $250,000 alternative minimum tax expense
the Company incurred on the retention and reinvestment of gains on
property sales.
Gain on Sale
In July 1997, the Company sold two of its Southern California office
properties for a combined sales price of approximately $25,800,000, which
resulted in a gain of $10,785,000. In October 1997, the Company sold
Academy Place Shopping Center in Colorado Springs, Colorado for a sale
price of approximately $7,500,000, which resulted in a gain of
approximately $748,000. Net operating loss carryforwards were utilized
to offset substantially all of the 1997 taxable income remaining after
the deduction of dividends paid in 1997.
Dividends
The 1998 quarterly dividend declared for each share of common stock was
$0.30 for the first quarter, $0.33 for the second and third quarters, and
$0.36 for the fourth quarter. Consistent with the Company's policy,
dividends are paid in the quarter after the quarter in which they are
declared.
Financial Condition
Total assets of the Company at December 31, 1999 increased by $73,086,000
compared with December 31, 1998, primarily as a result of an increase in
real estate investments of $79,752,000. Total liabilities at December
31, 1999 increased by $120,635,000 compared with December 31, 1998,
primarily as a result of the increase in mortgage loan borrowings made
in support of property acquisitions, development, and share repurchases.
Liquidity and Capital Resources
In June 1998, the Company amended and restated its secured revolving
credit facility with Bank of America. Under this facility, which matures
June 15, 2001, the Company can borrow up to $175 million on a secured
basis. The facility contains an unsecured sub-line of $50 million.
Secured loans bear interest at a floating rate equal to either the
lender's published "reference rate" or LIBOR plus a margin ranging from
1.10% to 1.35%. The interest rate of the unsecured loans is either the
lender's published "reference rate" or LIBOR plus a margin of 1.50%. As
of December 31, 1999, the facility, which was all secured, had an
outstanding balance of $137,156,000, and an effective interest rate of
7.52%. Approximately 52% ($75 million) of the loan was fixed at a six-
month LIBOR rate which expires in June 2000.
In February 1999, the credit facility was restructured to include a $30
million bridge facility with the same interest rate as the $175 million
facility. In May 1999, the Company obtained a total of $108 million of
new first mortgage financing from Teachers Insurance and Annuity
Association of America (TIAA). The proceeds from the mortgage loans were
used to pay off and retire the $30 million bridge facility and pay down
the outstanding balance on its $175 million line of credit. The $108
million TIAA financings consist of a $43.45 million 10-year loan, a $37.2
million 8-year loan, and a $27.35 million 6-year loan, all with interest
at a fixed rate of 7.17%.
In November 1999, the Company obtained an additional $22.15 million
mortgage loan from TIAA. The loan has a 7-year term with interest at a
fixed rate of 7.95%. In December 1999, the Company obtained a $4.6
million mortgage loan from Union Bank. The loan has a 5-year term with
interest at a variable rate of LIBOR plus 2.50%.
Proceeds from the mortgage loans were used to pay down the outstanding
balance of the Company's $175 million line of credit. The Company was
in compliance with the covenants and requirements of its various debt
financings throughout 1999. The Company anticipates that the cash flow
generated by its real estate investments and funds available under the
above credit facility will be sufficient to meet its short-term liquidity
requirements.
During the twelve months ended December 31, 1999, the Company's operating
activities provided cash flow of $45,540,000. Investing activities
utilized cash of $96,558,000 for real estate acquisitions, offset by
proceeds from real estate sales of $24,241,000. Financing activities
provided net cash flow of $27,075,000 consisting of the proceeds from
bank borrowings and mortgage loans of $276,180,000 and net proceeds from
the exercise of stock options of $2,004,000, offset by repayment of bank
borrowings and mortgage loans of $161,652,000, payment of dividends and
distributions of $32,712,000, redemption of partnership units of
$160,000, and the repurchase of 3,346,625 shares of common stock for
$56,585,000.
The Company expects to fund the cost of acquisitions, capital expenditure
costs associated with lease renewals and reletting of space, repayment
of indebtedness, and development of properties from (i) cash flow from
operations, (ii) borrowings under the credit facility and, if available,
other indebtedness (which may include indebtedness assumed in
acquisitions), and (iii) the sale of certain real estate investments.
The ability to obtain mortgage loans on income producing property is
dependent upon the ability to attract and retain tenants and the
economics of the various markets in which the properties are located, as
well as the willingness of mortgage-lending institutions to make loans
secured by real property. The ability to sell real estate investments
is partially dependent upon the ability of purchasers to obtain financing
at commercially reasonable rates.
Potential Factors Affecting Future Operating Results
Many factors affect the Company's actual financial performance and may
cause the Company's future results to be markedly outside of the
Company's current expectations. These factors include the following:
Interest Rate Fluctuations
At the present time, borrowings under the Company's credit facility and
the $4.6 million mortgage loan from Union Bank bear interest at floating
rates. The Company recognizes that its results from operations may be
negatively impacted by future increases in interest rates and substantial
additional borrowings to finance property acquisitions, development
projects and share repurchases.
Lease Renewals
While the Company historically has been successful in renewing and
reletting space, the Company is subject to the risk that certain leases
expiring in 2000 and beyond may not be renewed, or the terms of renewal
may be less favorable to the Company than current lease terms. The
Company expects to incur costs in making improvements or repairs to its
portfolio of properties required by new or renewing tenants and expects
to incur expenses associated with brokerage commissions payable in
connection with the reletting of space.
Inflation
Most of the leases require the tenants to pay their share of operating
expenses, including common area maintenance, real estate taxes and
insurance, thereby reducing the Company's exposure to increases in costs
and operating expenses resulting from inflation. Inflation, however,
could result in an increase in the Company's borrowing and other
operating expense.
Government Regulations
The Company's properties are subject to various federal, state and local
regulatory requirements such as local building codes and other similar
regulations. The Company believes its properties are currently in
substantial compliance with all applicable regulatory requirements,
although expenditures at its properties may be required to comply with
changes in these laws. No material expenditures are contemplated at this time
in order to comply with any such laws or regulations.
Under various federal, state and local laws, ordinances and regulations,
an owner or operator of real estate is liable for the costs of removal
or remediation of certain hazardous or toxic substances released on,
above, under, or in such property. Such laws often impose such liability
without regard to whether the owner knew of, or was responsible for, the
presence of such hazardous or toxic substances. The costs of such
removal or remediation could be substantial.
Additionally, the presence of such substances or the failure to properly
remediate such substances may adversely affect the owner's ability to
borrow using such real estate as collateral.
The Company believes that it is in compliance in all material respects
with all federal, state and local laws regarding hazardous or toxic
substances, and the Company has not been notified by any governmental
authority of any non-compliance or other claim in connection with any of
its present or former properties. Accordingly, the Company does not
currently anticipate that compliance with federal, state and local
environmental protection regulations will have any material adverse
impact on the financial position, results of operations or liquidity of
the Company. There can be no assurance, however, that future discoveries
or events at the Company's properties, or changes to current
environmental regulations, will not result in such a material adverse
impact.
Financial Performance
Management considers Funds From Operations (FFO) to be one measure of the
performance of an equity REIT. FFO during the three and twelve months
ended December 31, 1999 was $11,014,000 and $45,554,000, respectively.
During the same periods in 1998, FFO was $11,666,000 and $42,312,000,
respectively. FFO is used by financial analysts in evaluating REITs and
can be one measure of a REIT's ability to make cash distributions.
Presentation of this information provides the reader with an additional
measure to compare the performance of REITs. FFO generally is defined
by the National Association of Real Estate Investment Trusts as net
income (loss) (computed in accordance with generally accepted accounting
principles), excluding gains (losses) from debt restructurings, sales of
property and non-recurring items, plus depreciation and amortization, and
after adjustments for unconsolidated partnerships and joint ventures.
FFO was computed by the Company in accordance with this definition.
Beginning in the first quarter of 2000, non-recurring items other than
extraordinary items as defined by generally accepted accounting
principles will no longer be excluded in the calculation of FFO. FFO
does not represent cash generated by operating activities in accordance
with generally accepted accounting principles; it is not necessarily
indicative of cash available to fund cash needs and should not be
considered as an alternative to net income (loss) as an indicator of the
Company's operating performance or as an alternative to cash flow as a
measure of liquidity. Further, FFO as disclosed by other REITs may not
be comparable to the Company's presentation.
Three Months Ended Twelve Months Ended
December 31, December 31,
1999 1998 1999 1998
Funds From Operations (in thousands):
Net income $ 6,962 $ 8,243 $39,855 $31,496
Add:
Depreciation and amortization 3,962 2,958 13,016 10,265
Minority interest 32 31 128 117
Non-recurring portfolio
disposition costs (1) - 434 - 434
Extraordinary item - - 298 -
Loss (gain) on sales 58 - (7,743) -
Funds From Operations $11,014 $11,666 $45,554 $42,312
(1) In the second quarter of 1998, the Company engaged Lehman Brothers,
Inc. as financial advisor to assist the Company in the exploration of
strategic alternatives, which included the potential sale of the
Company's operating portfolio. Due to changes in the real estate
market, the Company abandoned its plan to sell its operating portfolio
and expensed all related costs.
Year 2000 Compliance
The year 2000 issue related to the ability of computer systems and
programs to recognize and process dates after the year 1999. The failure
to distinguish between such dates could have had detrimental effects on
business critical systems and could have caused disruptions in building
services, such as security systems, HVAC/building automation, and energy
management systems.
In the first quarter of 1998, the Company formed a Year 2000 project team
which includes the Chief Operating Officer (COO), legal counsel,
information systems (IS) consultants, and property managers. The COO and
IS consultants conducted monthly meetings to review and monitor progress
relating to the Year 2000 project. The Year 2000 project was divided
into two distinct parts: (1) information systems and (2) embedded
systems.
The information systems portion of the Year 2000 project pertained to the
Company's internal computer systems, hardware and software and entailed
the following actions: (1) compiling an inventory of all hardware and
software used in the Company's information processing systems, including
personal computers, servers, routers, hubs, switches, phone and voice
equipment, operating systems, e-mail systems, accounting software, fixed
asset software, office automation software, internet and other service
providers, wide area and local area network carriers, and web host, (2)
obtaining product certifications from vendors and manufacturers, stating
that their products are Y2K compliant, (3) obtaining Y2K upgrades for
software from web sites and identifying non-Y2K compliant personal
computers, (4) legal review and recommendations by legal counsel, (5)
determining alternative solutions, financial and personnel resources
necessary, and costs to remediate any information systems or components
thereof, which are not Y2K compliant, and (6) completing all system
upgrades to achieve Y2K compliance.
The embedded systems portion of the Year 2000 project was related to
building services, such as HVAC/building automation, electrical,
lighting, emergency power, fire and safety, elevator, parking access,
security, and energy management. This portion of the Year 2000 project
entailed the following: (1) compiling an inventory of all physical
systems on each property where the Company provides any of the
aforementioned services, (2) obtaining product certifications from
vendors and manufacturers, stating that their products are Y2K compliant,
(3) identifying testing procedures and cost of implementation of
solutions, (4) performing selective system tests on a sample of the
Company's portfolio based on the type of the property, tenant makeup,
location, and size, (5) reviewing the results of these tests and
identifying alternative solutions, resources, and costs to remediate any
embedded system or component thereof, which were not Y2K compliant, (6)
developing a review and certification process for newly acquired
properties, (7) legal review and recommendations by the legal counsel,
and (8) completing all embedded system upgrades to achieve Y2K
compliance.
The Company had a "Y2K Weekend Watch" during which personnel were on duty
to insure a staff presence for each building in the Company's real estate
portfolio during the weekend of December 31, 1999. In addition, IS
consultants were on duty to monitor the Company's information systems.
Management is not aware of any significant Year 2000 issues affecting the
Company, and believes that Year 2000 compliance will not have a material
impact on the Company's financial statements. As of December 31, 1999,
the Company had expensed approximately $81,000 on surveys and systems
reviews.
ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to interest rate changes primarily as a result of
its line of credit and long-term debt used to maintain liquidity and fund
capital expenditures and expansion of the Company's real estate
investment portfolio and operations. The Company's interest rate risk
management objective is to limit the impact of interest rate changes on
earnings and cash flows and to lower its overall borrowing costs. To
achieve its objectives the Company balances its borrowings between fixed
and variable rate debt. The Company does not enter into derivative or
interest rate transactions for speculative purposes.
The Company's interest rate risk is monitored using a variety of
techniques. The table below presents the principal amounts, weighted
average interest rates, fair values and other terms required by year of
expected maturity to evaluate the expected cash flows and sensitivity to
interest rate changes (dollars in thousands):
Fair
2000 2001 2002 2003 2004 Thereafter Total Value
Variable rate LIBOR debt $ 49 $137,214 $ 63 $ 69 $ 75 $ 4,286 $141,756 $141,756
Average interest rate 8.69% 7.52% 8.69% 8.69% 8.69% 8.69% 7.56% 7.56%
Fixed rate debt $3,360 $ 3,615 $26,353 $21,371 $3,459 $144,122 $202,280 $189,882
Average interest rate 7.34% 7.34% 7.48% 7.07% 7.37% 7.34% 7.33% 8.75%
As the table incorporates only those exposures that exist as of December
31, 1999, it does not consider those exposures or positions which could
arise after that date. Moreover, because firm commitments are not
presented in the table above, the information presented therein has
limited predictive value. As a result, the Company's ultimate realized
gain or loss with respect to interest rate fluctuations will depend on
the exposures that arise during the period, the Company's hedging
strategies at that time, and interest rates.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements and Schedule Covered by Independent
Auditors' Report
Independent Auditors' Report 51
Consolidated Balance Sheets as of December 31, 1999 and 1998 52
For the Years Ended December 31, 1999, 1998 and 1997:
- - Consolidated Statements of Income 53
- - Consolidated Statements of Stockholders' Equity 54
- - Consolidated Statements of Cash Flows 55
Notes to Consolidated Financial Statements 56
Financial Statement Schedule:
- - Schedule III - Real Estate and Accumulated Depreciation 71
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
The information required by Items 10 through 13 of Part III is
incorporated by reference from the Registrant's Proxy Statement which
will be mailed to stockholders in connection with the Registrant's annual
meeting of stockholders scheduled to be held on May 18, 2000.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K
A. 1. Financial Statements
Independent Auditors' Report.
The following consolidated financial statements of the
Company and its subsidiaries are included in Item 8 of this
report:
Consolidated Balance Sheets as of December 31, 1999 and 1998.
Consolidated Statements of Income for the years ended December
31, 1999, 1998 and 1997.
Consolidated Statements of Stockholders' Equity for the years
ended December 31, 1999, 1998 and 1997.
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997.
Notes to Consolidated Financial Statements.
2. Financial Statement Schedules
Schedule III - Real Estate and Accumulated Depreciation
All other schedules have been omitted as they are not
applicable, or not required or because the information is
given in the Consolidated Financial Statements or related
Notes to Consolidated Financial Statements.
3. Exhibits
Exhibit No.List of Exhibits
3.1 Charter of the Company, as amended, is incorporated
herein by reference to Exhibit 4.1 to the Company's
Registration Statement on Form S-2, Registration No. 333-
921.
3.2 Amended and Restated Bylaws of the Company are
incorporated herein by reference to Exhibit 3.2 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1995.
10.1 The Company's Automatic Dividend Reinvestment and Share
Purchase Plan, as adopted by the Company, is incorporated
herein by reference to Exhibit 4.1 to Amendment No. 2 to
Registration Statement No. 2-94354 of ICM Property
Investors Incorporated.
10.4 Second Amended and Restated Credit Agreement dated as of
June 26, 1996, by and between the Company, as Borrower,
Bank of America National Trust and Savings Association
and the several financial institutions (the "Banks") is
incorporated herein by reference to Exhibit 10.4 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1997.
10.5 Sale and Option Agreement dated as of August 26, 1995, by
and between Kemper Investors Life Insurance Company, on
behalf of itself and Participants (as defined therein),
as Lender, the Company, as Purchaser, and Tustin
Properties, as Owner, for 3002 Dow Business Center is
incorporated herein by reference to Exhibit 10.19 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1995.
10.6 BPIA Agreement dated as of January 1, 1995, by and
between Westminster Holdings, Inc., a California
corporation and the Company is incorporated herein by
reference to Exhibit 10.14 to the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30,
1995.
10.7 Employment Agreement made as of February 17, 1993, by and
between ICM Property Investors Incorporated and Peter B.
Bedford is incorporated by reference to Exhibit 10.14 to
the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994, as amended by Form 10-K/A
filed on May 1, 1995, and Form 10-K/A-2 filed on August
8, 1995.
10.8 Amendment No. 1 to Employment Agreement dated as of
September 18, 1995, by and between Peter B. Bedford and
the Company is incorporated herein by reference to
Exhibit 10.10 to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1995.
10.12 Purchase and Sale Agreement dated as of October 19, 1995,
between Landsing Pacific Fund, Inc., a Maryland
corporation as Seller, and the Company, the Buyer, as
amended, is incorporated herein by reference to Exhibit
2.1 to the Company's Current Report on Form 8-K filed on
December 27, 1995.
10.13 Amended and Restated Promissory Note date May 24, 1996
executed by the Company and payable to the order of
Prudential Insurance Company of America is incorporated
herein by reference to Exhibit 10.13 to the Company's
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996.
10.14 Loan Agreement dated as of December 24, 1996 between
Bedford Property Investors, Inc. as Borrower and Union
Bank of California, N.A. as Lender is incorporated herein
by reference to Exhibit 10.14 to the Company's Form 10-K
for the year ended December 31, 1996.
10.15 Loan Agreement dated as of January 30, 1998 between
Bedford Property Investors, Inc. as Borrower and
Prudential Insurance Company of America as Lender is
incorporated herein by reference to Exhibit 10.15 to the
Company's Form 10-K for the year ended December 31, 1997.
10.16 The Company's Amended and Restated Employee Stock Plan is
incorporated herein by reference to Exhibit 10.16 to the
Company's Form 10-K for the year ended December 31, 1997.
10.17 Form of Employee Stock Plan Option Agreement between the
Company and the Named Executive Officers under the
Company's Amended and Restated Employee Stock Plan is
incorporated herein by reference to Exhibit 10.17 to the
Company's Form 10-K for the year ended December 31, 1997.
10.18 The Company's Amended and Restated 1992 Directors' Stock
Option Plan is incorporated herein by reference to
Exhibit 10.18 to the Company's Form 10-K for the year
ended December 31, 1997.
10.19 Form of Retention Agreement is incorporated herein by
reference to Exhibit 10.19 to the Company's Form 10-K for
the year ended December 31, 1997.
10.20 Employment Agreement made as of August 4, 1997, by and
between Bedford Property Investors Incorporated and Scott
R. Whitney is incorporated herein by reference to Exhibit
10.20 to the Company's Form 10-K for the year ended
December 31, 1997.
10.21 Employment Agreement made as of November 18, 1997, by and
between Bedford Property Investors Incorporated and
Dennis Klimmek is incorporated herein by reference to
Exhibit 10.21 to the Company's Form 10-K for the year
ended December 31, 1997.
10.22 Credit Agreement made as of February 26, 1999, by and
between Bedford Property Investors Incorporated and Bank
of America National Trust and Savings Association and the
several financial institutions as may be party thereto
from time to time is incorporated herein by reference to
Exhibit 10.22 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1998.
10.23 Revolving Note made as of March 5, 1999, by and between
Bedford Property Investors Incorporated and Bank of
America National Trust and Savings Association is
incorporated herein by reference to Exhibit 10.23 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1998.
10.24 Revolving Note made as of March 5, 1999, by and between
Bedford Property Investors Incorporated and Union Bank of
California is incorporated herein by reference to Exhibit
10.24 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1998.
10.25 Promissory Note made as of May 28, 1999, by and between
Bedford Property Investors, Incorporated and Teachers
Insurance and Annuity Association of America is
incorporated herein by reference to Exhibit 10.22 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1999.
10.26 Promissory Note made as of May 28, 1999, by and between
Bedford Property Investors, Incorporated and Teachers
Insurance and Annuity Association of America is
incorporated herein by reference to Exhibit 10.23 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1999.
10.27 Promissory Note made as of May 28, 1999, by and between
Bedford Property Investors, Incorporated and Teachers
Insurance and Annuity Association of America is
incorporated herein by reference to Exhibit 10.24 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1999.
10.28* Promissory Note made as of November 22, 1999, by and
between Bedford Property Investors, Incorporated and
Teachers Insurance and Annuity Association of America.
12* Ratio of Earnings to Fixed Charges.
21.1* Subsidiaries of the Company.
23.1* Consent of KPMG LLP, independent public accountants.
27* Financial Data Schedules
* Filed herewith
B. Reports on Form 8-K
The Company filed on May 11, 1999, a report on Form 8-K
dated May 11, 1999, reporting items 5 and 7.
The following financial statements were filed: (i)
Historical Summary of Gross Income and Direct Operating
Expenses for Cabrillo Executive Center, Parkpoint
Business Center, Cimarron Business Park and Texaco
Building for the year ended December 31, 1997, and (ii)
pro forma income statement showing the effect resulting
from all the Company's acquisitions through December 31,
1998.
Independent Auditors' Report
To the Stockholders and the Board of Directors of
Bedford Property Investors, Inc.:
We have audited the consolidated financial statements of Bedford Property
Investors, Inc. and subsidiaries as listed in the accompanying index.
In connection with our audits of the consolidated financial statements,
we also have audited the financial statement schedule as listed in the
accompanying index. These consolidated financial statements and
financial statement schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedule based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Bedford Property Investors, Inc. and subsidiaries as of December 31, 1999
and 1998, and the results of their operations and their cash flows for
each of the years in the three-year period ended December 31, 1999, in
conformity with generally accepted accounting principles. Also in our
opinion, the related financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth
therein.
KPMG LLP
San Francisco, California
February 4, 2000
BEDFORD PROPERTY INVESTORS, INC.
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1999 AND 1998
(in thousands, except share and per share amounts)
1999 1998
Assets:
Real estate investments:
Industrial buildings $279,367 $312,911
Office buildings 294,420 258,479
Operating properties held for sale 80,563 -
Properties under development 19,246 24,686
Land held for development 6,137 3,905
679,733 599,981
Less accumulated depreciation 28,695 18,523
651,038 581,458
Cash 1,584 1,286
Other assets 18,788 15,580
$671,410 $598,324
Liabilities and Stockholders' Equity:
Bank loan payable $137,156 $147,443
Mortgage loans payable 206,880 80,116
Accounts payable and accrued expenses 9,767 7,574
Dividends and distributions payable 8,270 8,191
Other liabilities 7,928 6,042
Total liabilities 370,001 249,366
Minority interest in consolidated partnership 1,229 1,369
Stockholders' equity:
Common stock, par value $0.02 per share;
authorized 50,000,000 shares;
issued and outstanding 19,613,522
shares in 1999 and 22,666,856 shares in 1998 392 453
Additional paid-in capital 353,220 407,760
Accumulated dividends in
excess of net income (53,432) (60,624)
Total stockholders' equity 300,180 347,589
$671,410 $598,324
See accompanying notes to consolidated financial statements.
BEDFORD PROPERTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 and 1997
(in thousands, except share and per share amounts)
1999 1998 1997
Property operations:
Rental income $90,527 $73,451 $46,377
Rental expenses:
Operating expenses 14,550 11,026 6,852
Real estate taxes 8,074 6,220 3,977
Depreciation and amortization 13,016 10,265 5,716
Income from property operations 54,887 45,940 29,832
General and administrative expenses (3,561) (3,386) (2,337)
Interest income 182 223 289
Interest expense (18,970) (11,164) (7,918)
Income before gain on sales of real
estate investments and minority interest 32,538 31,613 19,866
Gain on sales of real estate investments 7,743 - 11,533
Minority interest (128) (117) (108)
Income before extraordinary item 40,153 31,496 31,291
Extraordinary item-loss on early extinguishment of debt (298) - -
Net income $39,855 $31,496 $31,291
Net income applicable to common stockholders $39,855 $31,496 $27,791
Earnings per share - basic:
Income before extraordinary item $ 1.88 $ 1.39 $ 2.21
Extraordinary item-loss on early extinguishment of debt (0.01) - -
Net income $ 1.87 $ 1.39 $ 2.21
Weighted average number of shares - basic 21,267,088 22,634,656 12,566,065
Earnings per share - diluted:
Income before extraordinary item $ 1.87 $ 1.38 $ 1.94
Extraordinary item-loss on early extinguishment of debt (0.01) - -
Net income $ 1.86 $ 1.38 $ 1.94
Weighted average number of shares - diluted 21,477,013 22,929,807 16,166,454
See accompanying notes to consolidated financial statements.
BEDFORD PROPERTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(in thousands, except per share amounts)
Accumulated Total
Additional dividends stock-
Common paid-in in excess of holders'
stock capital net income equity
Balances, December 31, 1996 $ 131 $147,622 $(73,997) $ 73,756
Issuance of common stock 321 265,622 - 265,943
Costs of issuance of common stock - (4,990) - (4,990)
Redemption of partnership units - (45) - (45)
Net income - - 31,291 31,291
Dividends to common stockholders
($1.13 per share) - - (16,029) (16,029)
Dividends to preferred stockholders - - (3,500) (3,500)
Balances, December 31, 1997 452 408,209 (62,235) 346,426
Issuance of common stock 1 1,366 - 1,367
Repurchase and retirement of
common stock - (1,815) - (1,815)
Net income - - 31,496 31,496
Dividends to common stockholders - - (29,885) (29,885)
($1.32 per share)
Balances, December 31, 1998 453 407,760 (60,624) 347,589
Issuance of common stock 6 1,978 - 1,984
Repurchase and retirement of common stock (67) (56,518) - (56,585)
Net income - - 39,855 39,855
Dividends to common stockholders
($1.56 per share) - - (32,663) (32,663)
Balances, December 31, 1999 $ 392 $353,220 $(53,432) $300,180
See accompanying notes to consolidated financial statements.
BEDFORD PROPERTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(in thousands)
1999 1998 1997
Operating Activities:
Net income $ 39,855 $ 31,496 $ 31,291
Adjustments to reconcile net income to net cash provided
by operating activities:
Minority interest 128 117 108
Depreciation and amortization 14,212 11,508 6,697
Gain on sales of real estate investments (7,743) - (11,533)
Increase in other assets (4,436) (7,259) (4,655)
Increase in accounts payable and accrued expenses 1,534 1,656 1,282
Increase in other liabilities 1,990 1,431 1,851
Net cash provided by operating activities 45,540 38,949 25,041
Investing Activities:
Investments in real estate (96,558) (168,018) (212,267)
Proceeds from sales of real estate investments 24,241 - 31,909
Net cash used by investing activities (72,317) (168,018) (180,358)
Financing Activities:
Proceeds from bank loan payable 141,972 158,097 167,559
Repayment of bank loan payable (152,657) (19,889) (206,804)
Proceeds from mortgage loans payable 134,208 21,084 -
Repayment of mortgage loans payable (8,995) (1,107) (441)
Issuance of common stock 2,004 1,367 210,953
Repurchase and retirement of common stock (56,585) (1,815) -
Redemption of partnership units (160) (128) (257)
Payment of dividends and distributions (32,712) (28,615) (15,660)
Net cash provided by financing activities 27,075 128,994 155,350
Net increase (decrease) in cash 298 (75) 33
Cash at beginning of year 1,286 1,361 1,328
Cash at end of year $ 1,584 $ 1,286 $ 1,361
Supplemental disclosure of cash flow information
a) Non-cash investing and financing activities:
Debt incurred with real estate acquired $ 5,602 $ - $ 8,914
b) Cash paid during the year for interest, net of amounts
capitalized $ 16,624 $ 9,329 $ 7,291
c) Conversion of preferred stock (see footnote 9) $ - $ - $ 50,000
See accompanying notes to consolidated financial statements.
BEDFORD PROPERTY INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Organization and Summary of Significant Accounting Policies and
Practices
The Company
Bedford Property Investors, Inc. (the "Company") is a Maryland real
estate investment trust with investments primarily in industrial and
suburban office properties concentrated in the western United States.
The Company's common stock trades under the symbol "BED" on both the New
York Stock Exchange and Pacific Exchange.
Principles of Consolidation
The consolidated financial statements include the accounts of the
Company, its wholly-owned subsidiaries and Bedford Realty Partners, L.P.
All significant inter-entity balances have been eliminated in
consolidation.
Use of Estimates
The preparation of these financial statements in conformity with
generally accepted accounting principles requires management of the
Company to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of financial statements, and the reported
amounts of revenues and expenses during the reporting periods. Actual
results could differ from those estimates.
Federal Income Taxes
The Company has elected to be taxed as a real estate investment trust
under Sections 856 to 860 of the Internal Revenue Code of 1986, as
amended (the "Code"). A real estate investment trust is generally not
subject to federal income tax on that portion of its real estate
investment trust taxable income ("Taxable Income"), which is distributed
to its stockholders, provided that at least 95% of Taxable Income is
distributed and other requirements are met. The Company believes it is
in compliance with the Code.
Taxable Income differs from net income for financial reporting purposes
primarily because of the different methods of accounting for
depreciation. As of December 31, 1999, for federal income tax purposes,
the Company had an ordinary loss carry forward of approximately $32
million. As the Company does not expect to incur income tax liabilities,
the asset value of these losses has been effectively fully reserved. For
federal income tax purposes, dividend distributions made for 1999 were
classified 97% as ordinary income and 3% as capital gain; dividend
distributions made for 1998 were classified 96% as ordinary income and
4% as return of capital; dividend distributions made for 1997 were
classified 88% as ordinary income and 12% as capital gain.
Real Estate Investments
Buildings and improvements are carried at cost less accumulated
depreciation. Buildings are depreciated on a straight-line basis over
45 years. Upon the acquisition of an investment by the Company,
acquisition-related costs are added to the carrying cost of that
investment. These costs are depreciated over the useful lives of the
buildings. Leasing commissions and improvements to tenants' space
incurred subsequent to the acquisition are amortized over the terms of
the respective leases. Expenditures for repairs and maintenance, which
do not add to the value or prolong the useful life of a property, are
expensed as incurred. When the Company concludes that the recovery of
the carrying amount of a real estate investment is impaired, it reduces
such carrying amount to the estimated fair value of the investment.
Investments which are considered as held for sale are carried at the
lower of the carrying amount or fair value less costs to sell and such
properties are no longer depreciated.
Income Recognition
Rental income from operating leases is recognized in income on a
straight-line basis over the period of the related lease agreement.
Aggregate rental income exceeded contractual rentals by $2,797,000,
$2,252,000, and $1,644,000 for 1999, 1998, and 1997, respectively.
Per Share Data
Per share data are based on the weighted average number of common shares
outstanding during the year. Stock options issued under the Company's
stock option plans, non-vested restricted stock, and the limited
partnership units of Bedford Realty Partners, L.P. are included in the
calculation of diluted per share data if, upon exercise or vestiture,
they would have a dilutive effect.
Recent Accounting Pronouncements
In April 1998, the Accounting Standards Executive Committee issued
Statement of Position 98-5, Reporting on the Costs of Start-up
Activities. SOP 98-5 is effective for fiscal years beginning after
December 15, 1998. The adoption of this statement did not have a
material impact on the Company's financial statements.
In June 1998, the FASB issued Financial Accounting Standard No. 133,
Accounting for Derivatives Instruments and Hedging Activities. SFAS 133,
as amended, is effective for all fiscal quarters of all fiscal years
beginning after June 15, 2000. Management believes that the adoption of
this statement will not have a material impact on the Company's financial
statements.
Note 2 - Real Estate Investments
As of December 31, 1999, the Company's real estate investments were
diversified by property type as follows (dollars in thousands):
Number of Percent
Properties Cost of Total
Industrial buildings 56 $ 279,367 41%
Office buildings 25 294,420 43%
Operating properties held for sale 21 80,563 12%
Properties under development 8 19,246 3%
Land held for development 4 6,137 1%
Total 114 $ 679,733 100%
Note 2 - Real Estate Investments (continued)
The following table sets forth the Company's real estate investments as
of December 31, 1999 (in thousands):
Less
Development Accumulated
Land Building In Progress Depreciation Total
Industrial buildings
Northern California $ 44,238 $106,821 $ - $ 8,841 $142,218
Arizona 17,173 47,990 - 2,398 62,765
Southern California 17,663 40,288 - 3,031 54,920
Colorado 1,911 3,283 - 345 4,849
Total industrial buildings 80,985 198,382 - 14,615 264,752
Office buildings
Northern California 6,801 23,256 - 1,082 28,975
Arizona 10,622 23,817 - 873 33,566
Southern California 9,361 21,410 - 1,271 29,500
Colorado 5,560 45,620 - 1,771 49,409
Greater Seattle Area 23,652 111,541 - 3,762 131,431
Nevada 2,102 10,678 - 658 12,122
Total office buildings 58,098 236,322 - 9,417 285,003
Operating properties held for sale
Northern California 3,683 4,887 - 373 8,197
Arizona 1,332 2,679 - 153 3,858
Southern California 1,558 3,475 - 144 4,889
Greater Kansas City Area 6,571 20,742 - 2,184 25,129
Texas 5,932 18,220 - 813 23,339
Greater Portland Area 2,652 8,832 - 996 10,488
Total operating properties held for sale 21,728 58,835 - 4,663 75,900
Properties under development
Northern California - - 660 - 660
Arizona - - 8,726 - 8,726
Colorado - - 6,157 - 6,157
Greater Seattle Area - - 3,703 - 3,703
Total properties under development - - 19,246 - 19,246
Land held for development
Northern California 2,133 - - - 2,133
Southern California 703 - - - 703
Colorado 3,301 - - - 3,301
Total land held for development 6,137 - - - 6,137
Total $166,948 $493,539 $19,246 $28,695 $651,038
Company personnel directly manage all but eleven of the Company's
properties from regional offices in Lafayette, CA; Tustin, CA; Phoenix,
AZ; Lenexa, KS; and Seattle, WA. For the eleven properties located in
markets not served by one of the Company's regional offices, the Company
has subcontracted management to local firms. All financial record-
keeping is centralized at the Company's corporate office in Lafayette,
CA.
Income from property operations for properties held for sale as of
December 31, 1999 was $7,725,000, $6,094,000, and $4,483,000 for the
twelve months ending December 31, 1999, 1998 and 1997, respectively.
During 1999, 1998 and 1997, the Company capitalized interest costs
relating to properties under development totaling $2,148,000, $2,177,000
and $627,000, respectively.
The Company has contractual construction commitments of $13.2 million at
December 31, 1999 relating to eight of its properties under development.
Note 3 - Consolidated Partnership
In December 1996, the Company formed Bedford Realty Partners, L.P. (the
"Operating Partnership"), with the Company as the sole general partner,
for the purpose of acquiring real estate. In exchange for contributing
a property into the Operating Partnership, the owners of the property
receive limited partnership units ("OP Units"). A limited partner can
seek redemption of the OP Units at any time. The Company, at its option,
may redeem the OP Units by either (i) issuing common stock at the rate
of one share of common stock for each OP Unit, or (ii) paying cash to a
limited partner based on the average trading price of its common stock.
Each OP Unit is allocated partnership income and cash flow at a rate
equal to the dividend being paid by the Company on a share of common
stock. Additional partnership income and cash flow is allocated 99% to
the Company and 1% to the limited partners.
This acquisition strategy is referred to as a "Down REIT" transaction;
as long as certain tax attributes are maintained, the income tax
consequences to a limited partner are generally deferred until such time
as the limited partner redeems their OP Units.
On December 17, 1996, the Company acquired a $3.6 million industrial
property located in Modesto, California utilizing the Operating
Partnership. The sellers of the property received 108,495 OP Units. A
director of the Company was a 9% owner of the property, but did not
participate in the approval of the acquisition. In December 1999, the
Modesto, California property was exchanged for a property located in
Phoenix, Arizona. As of December 31, 1999 the Company has redeemed
30,505 OP units for cash.
Note 4 - Leases
Minimum future lease payments to be received as of December 31, 1999 are
as follows (in thousands):
2000 $ 81,135
2001 74,904
2002 63,302
2003 53,049
2004 38,240
Thereafter 64,139
$374,769
The total minimum future lease payments shown above do not include
tenants' obligations for reimbursement of operating expenses or taxes as
provided by the terms of certain leases.
Note 5 - Related Party Transactions
The Company's activities relating to the acquisition of new properties
and debt and equity financings have been performed by Bedford
Acquisitions, Inc. (BAI) pursuant to a written contract dated January 1,
1995, as amended. The contract provides that BAI is obligated to provide
services to the Company with respect to the Company's acquisition and
financing activities, and that BAI is responsible for the payment of its
expenses incurred in connection therewith. The contract provides that
BAI is to be paid a fee in an amount equal to the lesser of (i) 1 1/2% of
the gross amount of the aggregate purchase price of the property for
acquisitions and dispositions, up to 1 1/2% of any loans arranged by BAI,
plus 5% of development project costs, or (ii) an amount equal to (a) the
aggregate amount of approved expenses funded by BAI through the time of
such acquisition, disposition, loan, or development minus (b) the
aggregate amount of fees previously paid to BAI pursuant to such
arrangement. In no event will the aggregate amount of fees paid to BAI
exceed the aggregate amount of costs funded by BAI. The agreement with
BAI has a term of one year and is renewable at the option of the Company
for additional one-year terms. The current agreement will expire on
January 1, 2001.
For 1999, 1998, and 1997, the Company paid BAI $2,783,000, $2,272,000,
and $3,156,000, respectively, for acquisition and financing activities
performed pursuant to the foregoing arrangements. The Company believes
that since the fees charged under the foregoing arrangements (i) have
been and continue to be comparable to those charged by other sponsors of
real estate investment entities or other third party service providers
and (ii) have been and continue to be charged only for services on
acquired properties or completed financings, such fees are properly
includable in direct acquisition costs and capitalized as part of the
asset or financing activities.
Note 6 - Stock Option Plans
Initially 900,000 shares of the Company's Common Stock were reserved for
issuance under the Employee Stock Option Plan (the "Employee Plan"). In
May 1998, the shareholders approved an additional 2,100,000 shares. The
Employee Plan expires in 2003. The Employee Plan provides for
non-qualified stock options and incentive stock options.
The Employee Plan is administered by the Compensation Committee of the
Board of Directors, which determines the terms of options granted,
including the exercise price, the number of shares subject to the option,
and the exercisability of the options. Options granted to employees are
exercisable upon vesting, and typically vest over a four-year period.
The Employee Plan requires that the exercise price of incentive stock
options be at least equal to the fair market value of such shares on the
date of grant and that the exercise price of non-qualified stock options
be equal to at least 85% of the fair market value of such shares on the
date of the grant. The maximum term of options granted is ten years.
Initially 250,000 shares of the Company's Common Stock were reserved for
issuance under the Directors' Stock Option Plan (the "Directors' Plan").
In May 1996 and 1997, the shareholders approved an additional 250,000
shares and 500,000 shares, respectively. The Directors' Plan expires in
2002. The Directors' Plan provides for the grant of non-qualified stock
options to directors of the Company. The Directors' Plan contains an
automatic grant feature whereby a director receives a one-time "initial
option" to purchase 25,000 shares upon a director's appointment to the
Board of Directors and thereafter receives automatic annual grants of
options to purchase 10,000 shares upon re-election to the Board of
Directors. Options granted are generally exercisable six months from the
date of grant.
The Directors' Plan requires that the exercise price of options be equal
to the fair market value of the underlying shares on the date of grant.
The maximum term of options granted is ten years.
In September 1995, the Company established a Management Stock Acquisition
program. Under the program, options exercised by key members of
management shortly after the grant date may be exercised either in cash
or with a note payable to the Company. Such note bears interest at 7.5%
or the Applicable Federal Rate as defined by the Internal Revenue
Service, whichever is higher. The note is due in five years or within
ninety days from termination of employment, with interest payable
quarterly. During 1999, 1996 and 1995, options for 157,500 shares of
Common Stock were exercised in exchange for notes payable to the Company.
The notes bear interest at 7.5%. The unpaid balance of the notes was
$974,000 and $1,021,000 at December 31, 1999 and 1998, respectively, and
is included in the accompanying consolidated balance sheet as a reduction
of additional paid-in capital.
In addition, the Company may grant restricted stock to key employees.
These shares generally vest over five years and are subject to forfeiture
under certain conditions. For 1999, 1998 and 1997, the Company granted
219,888 shares, 50,200 shares, and 30,000 shares of restricted stock net
of forfeitures, respectively.
The Company applies APB Opinion No. 25 and related interpretations in
accounting for its plans. Accordingly, compensation costs have not been
recognized for either the Employee or the Directors' Plan. Had
compensation costs for the plans been determined consistent with FASB
Statement No. 123, the Company's net income and earnings per share would
have been reduced to the pro forma amounts indicated below:
1999 1998 1997
Net income:
As reported $39,855,000 $31,496,000 $31,291,000
Pro forma 39,496,000 31,158,000 31,045,000
Earnings per share - basic:
As reported $ 1.87 $ 1.39 $ 2.21
Pro forma 1.86 1.38 2.19
Earnings per share - diluted:
As reported $ 1.86 $ 1.38 $ 1.94
Pro forma 1.84 1.36 1.92
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option pricing model with the following weighted-
average assumptions used for grants in 1999, 1998 and 1997, respectively:
dividend yield of 9.4%, 7.3%, and 5.8%; expected volatility of 18.4%,
17.0%, and 16.8%; risk-free interest rates of 6.8%, 4.6%, and 5.7%. The
expected life for the director's options is five years for each period.
The expected life for the employee's options is ten years each for 1998
and five years for 1997.
A summary of the status of the Company's plans as of December 31, 1999,
1998 and 1997 and changes during the years ended on those dates is
presented below:
1999 1998 1997
Weighted Avg. Weighted Avg. Weighted Avg.
Shares Exercise Price Shares Exercise Price Shares Exercise Price
Employee Plan
Outstanding at beginning
of year 1,117,250 $18.10 713,750 $16.52 242,250 $12.94
Granted - - 619,000 19.67 483,000 18.25
Exercised (63,500) 13.66 (29,625) 13.03 (7,125) 13.37
Forfeited and cancelled (317,125) 19.15 (185,875) 18.05 (4,375) 14.99
Outstanding at end of year 736,625 $17.72 1,117,250 $18.10 713,750 $16.52
Options exercisable 330,875 239,250 118,750
Weighted average fair value
of options granted during
the year - $ 1.12 $ 1.94
Directors' Plan
Outstanding at beginning
of year 310,000 $15.79 365,000 $11.65 295,000 $ 9.94
Granted 70,000 17.72 70,000 19.56 70,000 18.82
Exercised (25,000) 12.97 (125,000) 5.81 - -
Expired (10,000) 17.72 - - - -
Outstanding at end of year 345,000 $16.33 310,000 $15.79 365,000 $11.65
Options exercisable 345,000 310,000 365,000
Weighted average fair value
of options granted during
the year $ 1.24 $ 1.32 $ 1.59
The following table summarizes information about stock options
outstanding on December 31, 1999:
Options Outstanding Options Exercisable
Weighted Avg.
Range of Number Remaining Weighted Avg. Number Weighted Avg.
Exercise Price Outstanding Contractual Life Exercise Price Exercisable Exercise Price
Employee Plan
$ 8.50 2,750 3.4 $ 8.50 2,750 $ 8.50
11.50 31,625 5.7 11.50 31,625 11.50
13.00 80,250 6.4 13.00 44,250 13.00
13.75 5,000 4.7 13.75 5,000 13.75
17.63 to 20.06 342,000 7.5 18.05 178,500 18.03
19.56 275,000 8.4 19.56 68,750 19.56
$ 8.50 to 20.06 736,625 7.6 $ 17.72 330,875 $ 16.91
Directors' Plan
$11.82 to 11.85 75,000 1.2 11.84 75,000 11.84
14.22 70,000 6.8 14.22 70,000 14.22
17.72 60,000 9.8 17.72 60,000 17.72
18.82 70,000 7.8 18.82 70,000 18.82
19.56 70,000 8.8 19.56 70,000 19.56
$11.82 to 19.56 345,000 6.7 $16.33 345,000 $ 16.33
Note 7 - Bank Loan Payable
In June 1998, the Company amended and restated its secured revolving line
of credit facility led by Bank of America. Under the facility, which
matures June 2001, the Company can borrow up to $175 million on a secured
basis. The facility contains an unsecured sub-line of $50 million. The
secured loans bear interest at a floating rate equal to either the
lender's published "reference rate" or LIBOR plus a margin ranging from
1.10% to 1.35% depending on the Company's leverage level. The unsecured
loans bear interest at either the lender's published "reference rate" or
LIBOR plus a margin of 1.50%. At December 31, 1999, the facility, which
was all secured, had an outstanding balance of $137,156,000, with an
interest rate of LIBOR plus 1.35%. Approximately 52% ($75 million) of
the loan was fixed at a six-month LIBOR rate which expires in June 2000.
The credit facility is secured by mortgages on 44 properties, which
properties collectively accounted for approximately 45% of the Company's
annualized base rent and approximately 40% of the Company's total real
estate assets as of December 31, 1999, together with the rental proceeds
from such properties.
In February 1999, the credit facility was restructured to include a $30
million bridge facility which carried the same interest rate as the $175
million facility. In May 1999, the Company obtained a total of $108
million of new first mortgage financing from TIAA. The proceeds from the
mortgage loans were used to repay and retire the $30 million bridge
facility and pay down the outstanding balance on its $175 million line
of credit. The credit facility contains various restrictive covenants
including, among other things, a covenant limiting quarterly dividends
to 95% of average Funds From Operations. The Company was in compliance
with the covenants and requirements of its revolving credit facility
throughout 1999.
The daily weighted average amount owed to the bank was $113,082,000 and
$94,338,000 in 1999 and 1998, respectively. The weighted average
interest rates in these periods were 6.48% and 6.81%, respectively. The
effective interest rate at December 31, 1999 was 7.52%.
Note 8 - Mortgage Loans Payable
Mortgage loans payable at December 31, 1999 and 1998 consist of the
following (in thousands):
1999 1998
Floating rate note due December 15, 1999 $ - $ 1,797
7.50% note due January 1, 2002 23,889 24,297
7.02% note due March 15, 2003 19,257 24,717
Floating rate note due January 1, 2005, current rate of 8.69% 4,600 -
7.17% note due June 1, 2005 27,150 -
8.90% note due July 31, 2006 8,513 8,674
6.91% note due July 31, 2006 20,288 20,631
7.95% note due December 1, 2006 22,150 -
7.17% note due June 1, 2007 36,928 -
7.75% note due April 1, 2009 973 -
7.17% note due June 1, 2009 43,132 -
$206,880 $80,116
The mortgage loans are collaterized by 41 properties at December 31,
1999, which properties collectively accounted for approximately 47% of
the Company's annualized base rent and approximately 45% of the Company's
total real estate assets as of December 31, 1999, together with the
rental proceeds from such properties. The Company was in compliance with
the covenants and requirements of its various mortgage financings
throughout 1999.
The following table presents scheduled principal payments on mortgage
loans as of December 31, 1999 (in thousands):
2000 $ 3,409
2001 3,673
2002 26,416
2003 21,440
2004 3,534
Thereafter 148,408
$206,880
Note 9 - Redeemable Preferred Stock
On September 18, 1995, the Company issued and sold 8,333,334 shares of
Series A Convertible Preferred Stock (the "Convertible Preferred Stock")
for $6.00 per share. Holders of the Convertible Preferred Stock were
entitled to cumulative quarterly dividends in cash in an amount equal to
the greater of (i) $0.135 per share or (ii) the dividends payable on the
Common Stock into which the Convertible Preferred Stock is convertible
plus, in both cases, the accumulated but unpaid dividends on the
Convertible Preferred Stock. Dividends may be declared and paid on
shares of Common Stock only if full cumulative dividends have been paid
or authorized and set apart on all shares of Convertible Preferred Stock.
On October 14, 1997, the 8,333,334 shares of the Series A Convertible
Preferred Stock were converted to 4,166,667 shares of common stock.
Note 10 - Sales of Common Stock
The Company completed the sale of 4,600,000 shares of common stock at $17
3/8 per share in February 1997 and 7,245,000 shares of common stock at
$19 5/8 per share in November 1997. Net cash proceeds from these
offerings were used to pay off the outstanding borrowings under the
Company's credit facility.
In July 1998, the Company's board of directors approved a share
repurchase program of 3 million shares which was increased to 4.5 million
shares in September 1999. Since November 1998, the Company has
repurchased and retired 3,458,000 shares at an average price of $16.89
per share.
Note 11 - Comprehensive Income
There are no adjustments necessary to net income as presented in the
accompanying consolidated statements of income to derive comprehensive
income in accordance with FASB Statement No. 130, Reporting Comprehensive
Income.
Note 12 - Segment Disclosure
The Company has five reportable segments organized by the region in which
they operate: Northern California (Northern California, Utah and Nevada),
Southwest (Arizona and greater Austin, Texas), Southern California,
Northwest (greater Portland, Oregon and greater Seattle, Washington), and
Midwest (greater Kansas City, Kansas/Missouri, greater Dallas, Texas and
Colorado).
The accounting policies of the segments are the same as those described
in the summary of significant accounting policies. The Company evaluates
performance based upon income from real estate from the combined
properties in each segment.
For the year ended December 31, 1999
(in thousands)
Northern Southern Corporate
California Southwest California Northwest Midwest & Other Consolidated
Rental income $ 32,900 $ 15,726 $ 12,382 $ 15,528 $ 13,991 $ - $ 90,527
Operating expenses and
real estate taxes 7,193 4,274 2,481 3,944 4,456 276 22,624
Depreciation and
amortization 4,624 2,087 1,768 2,509 2,028 - 13,016
Income from property operations $ 21,083 $ 9,365 $ 8,133 $ 9,075 $ 7,507 $ (276) $ 54,887
Percent of income from
property operations 38% 17% 15% 17% 14% (1)% 100%
Interest income(1) 24 3 - 4 - 151 182
Interest expense - - - - - (18,970) (18,970)
General and administrative
expenses - - - - - (3,561) (3,561)
Income before minority interest
and gain on sales 21,107 9,368 8,133 9,079 7,507 (22,656) 32,538
Minority interest - - - - - (128) (128)
Gain (loss) on sales of real estate
investments 7,756 - 45 - (58) - 7,743
Income before extraordinary item 28,863 9,368 8,178 9,079 7,449 (22,784) 40,153
Loss on early extinguishment of debt (298) - - - - - (298)
Net income $ 28,565 $ 9,368 $ 8,178 $ 9,079 $ 7,449 $(22,784) $ 39,855
Real estate investments $205,258 $133,511 $94,458 $150,381 $96,125 $ - $679,733
Additions/dispositions of real
estate investments $ (4,331) $ 24,079 $17,060 $ 37,131 $ 5,813 $ - $ 79,752
Total assets $212,612 $123,411 $101,542 $134,843 $93,991 $5,011 $671,410
(1) The interest income in Northern California, Southwest, and
Northwest segments represents interest earned from tenant notes
receivable.
For the year ended December 31, 1998 (in thousands)
Northern Southern Corporate
California Southwest California Northwest Midwest & Other Consolidated
Rental income $ 30,759 $ 11,900 $ 10,274 $ 9,281 $ 11,260 $ (23) $ 73,451
Operating expenses and
real estate taxes 6,954 3,200 2,142 1,345 3,261 344 17,246
Depreciation and
amortization 3,939 1,629 1,495 1,586 1,616 - 10,265
Income from property
operations $ 19,866 $ 7,071 $ 6,637 $ 6,350 $ 6,383 $ (367) $ 45,940
Percent of income from
property operations 43% 15% 15% 14% 14% (1)% 100%
Interest income(1) 15 - - 16 - 192 223
Interest expense - - - - - (11,164) (11,164)
General and administrative
expenses - - - - - (3,386) (3,386)
Income before minority interest 19,881 7,071 6,637 6,366 6,383 (14,725) 31,613
Minority interest - - - - - (117) (117)
Net income $ 19,881 $ 7,071 $ 6,637 $ 6,366 $ 6,383 $(14,842) $ 31,496
Real estate investments $209,589 $109,432 $ 77,398 $113,250 $ 90,312 $ - $599,981
Additions to real
estate investments $ 24,182 $ 41,420 $ 6,349 $ 56,852 $ 39,107 $ - $167,910
Total assets $210,867 $103,637 $ 81,708 $109,471 $ 87,670 $ 4,971 $598,324
(1) The interest income in the Northern California and Northwest
segments represents interest earned from tenant notes receivable.
For the year ended December 31, 1997 (in thousands)
Northern Southern Corporate
California Southwest California Northwest Midwest & Other Consolidated
Rental income $ 20,614 $ 5,367 $ 8,637 $ 4,112 $ 4,539 $ 3,108 $ 46,377
Operating expenses and
real estate taxes 4,551 1,336 1,859 415 1,280 1,388 10,829
Depreciation and
amortization 2,799 603 1,105 698 511 - 5,716
Income from property
operations $ 13,264 $ 3,428 $ 5,673 $ 2,999 $ 2,748 $ 1,720 $ 29,832
Percent of income from
property operations 44% 12% 19% 10% 9% 6% 100%
Interest income(1) 9 - - 2 - 278 289
Interest expense - - - - - (7,918) (7,918)
General and administrative
expenses - - - - - (2,337) (2,337)
Income before minority interest
and gain on sales 13,273 3,428 5,673 3,001 2,748 (8,257) 19,866
Minority interest - - - - - (108) (108)
Gain on sale of real estate
investments - - - - - 11,533 11,533
Net income $ 13,273 $ 3,428 $ 5,673 $ 3,001 $ 2,748 $ 3,168 $ 31,291
Real estate investments $185,407 $ 68,012 $ 71,049 $ 56,398 $51,205 $ - $432,071
Additions to real
estate investments $ 82,792 $ 58,764 $ 6,559 $ 33,233 $21,309 $ - $202,657
Total assets $183,714 $ 65,925 $ 73,491 $ 57,005 $49,042 $ 4,726 $433,903
(1) The interest income in the Northern California and Northwest
segments represents interest earned from tenant notes receivable.
Note 13 - Fair Value of Financial Instruments
The carrying values of trade accounts payable and receivable
approximate fair value due to the short-term maturity of these
instruments. Management has determined that the market value of the
$202,280 fixed rate debt is approximately $189,882 based on the terms
of existing debt compared to those available in the marketplace. The
carrying value of variable rate debt approximates fair value, as the
interest rates and other terms are comparable to current market terms.
Note 14 - Earnings per Share
Following is a reconciliation of earnings per share:
(in thousands, except share and per share amounts)
Year Ended December 31,
1999 1998 1997
Basic:
Income before extraordinary item $ 40,153 $ 31,496 $ 31,291
Less: Dividends on the Series A
Convertible
Preferred Stock - - (3,500)
Extraordinary item - loss on early
extinguishment of debt (298) - -
Net income applicable to common stockholders $ 39,855 $ 31,496 $ 27,791
Weighted average number of shares - basic 21,267,088 22,634,656 12,566,065
Income before extraordinary item $ 1.88 $ 1.39 $ 2.21
Extraordinary item - loss on early extinguishment of debt (0.01) - -
Net income $ 1.87 $ 1.39 $ 2.21
Diluted:
Income before extraordinary item $ 40,153 $ 31,496 $ 31,291
Add: Minority interest 128 117 108
Extraordinary item - loss on early extinguishment of debt (298) - -
Net income for diluted earnings per share $ 39,983 $ 31,613 $ 31,399
Weighted average number of shares (from above) 21,267,088 22,634,656 12,566,065
Weighted average shares issuable upon
conversion of the Series A Convertible
Preferred stock - - 3,264,840
Weighted average shares issuable upon exercise
of dilutive stock options using average
period stock price under the treasury
stock method 62,196 205,522 237,185
Weighted average shares issuable upon the
conversion of operating partnership units 82,402 89,629 98,364
Weighted average shares of non-vested restricted
stock using average period stock
price under the treasury stock method 65,327 - -
Weighted average number of shares -
diluted 21,477,013 22,929,807 16,166,454
Income before extraordinary item $ 1.87 $ 1.38 $ 1.94
Extraordinary item - loss on early extinguishment of debt (0.01) - -
Net income for diluted earnings per share $ 1.86 $ 1.38 $ 1.94
Note 15 - Quarterly Financial Data-Unaudited
The following is a summary of quarterly results of operations for 1999
and 1998 (in thousands of dollars, except per share data):
1999 Quarters Ended 3/31 6/30 9/30 12/31
Rental income $21,359 $22,346 $22,475 $24,347
Income from property operations 12,899 14,229 14,081 13,678
Income before gain on sales of real estate
investments and minority interest 8,274 8,556 8,656 7,052
Net income $ 8,811 $15,267 $ 8,815 $ 6,962
Earnings per share - basic $ 0.39 $ 0.70 $ 0.41 $ 0.35
Earnings per share - diluted $ 0.39 $ 0.70 $ 0.41 $ 0.35
1998 Quarters Ended 3/31 6/30 9/30 12/31
Rental income $15,361 $17,118 $20,156 $20,816
Income from property operations 9,880 10,939 12,191 12,930
Income before gain on sales of real estate
investments and minority interest 7,486 7,896 7,957 8,274
Net income $ 7,457 $ 7,868 $ 7,928 $ 8,243
Earnings per share - basic $ 0.33 $ 0.35 $ 0.35 $ 0.36
Earnings per share - diluted $ 0.33 $ 0.34 $ 0.35 $ 0.36
BEDFORD PROPERTY INVESTORS, INC.
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1999
(in thousands of dollars)
Initial Cost Cost Gross Amount Deprec-
to Company Capitalized Carried at Close of Period Accumu- Date Deprec-
Buildings Subsequent lated De- Con- Date iable
& Improve- to Acquisi- precia- struct- Ac- Life
Description Land ment tion Land Building Total tion ed quired (Years)
Industrial buildings:
Northern California
Building #3 at Contra Costa
Diablo Industrial Park,
Concord* $ 495 $ 1,159 $ 46 $ 495 $ 1,205 $ 1,700 $ 243 1983 12/90 45
Building #8 at Contra Costa
Diablo Industrial Park,
Concord* 877 1,548 203 877 1,751 2,628 426 1981 12/90 45
Building #18 at Mason
Industrial Park, Concord* 610 1,265 126 610 1,391 2,001 287 1984 12/90 45
Milpitas Town Center,
Milpitas* 1,400 4,421 91 1,400 4,512 5,912 540 1983 8/94 45
598 Gibraltar Drive, Milpitas* 535 2,522 - 535 2,522 3,057 780 1996 5/96 45
Auburn Court, Fremont* 1,391 2,473 268 1,415 2,717 4,132 254 1983 12/95 45
47650 Westinghouse Drive,
Fremont* 267 893 59 271 948 1,219 84 1982 12/95 45
410 Allerton, South
San Francisco* 1,333 889 39 1,356 905 2,261 81 1970 12/95 45
400 Grandview, South
San Francisco* 3,246 3,517 945 3,300 4,408 7,708 357 1976 12/95 45
342 Allerton, South
San Francisco* 2,516 1,542 363 2,558 1,863 4,421 176 1969 12/95 45
301 East Grand, South
San Francisco* 2,036 959 160 2,070 1,085 3,155 113 1974 12/95 45
Fourier Avenue, Fremont* 2,120 7,018 - 2,120 7,018 9,138 559 1982 5/96 45
Lundy Avenue, San Jose* 2,055 2,184 216 2,055 2,400 4,455 186 1982 7/96 45
115 Mason Circle, Concord* 697 854 46 697 900 1,597 74 1971 9/96 45
47600 Westinghouse Drive,
Fremont* 356 1,067 43 356 1,110 1,466 82 1982 9/96 45
860-870 Napa Valley Corporate
Way, Napa* 933 3,515 518 933 4,033 4,966 342 1984 9/96 45
47633 Westinghouse Drive,
Fremont* 1,051 3,239 252 1,051 3,491 4,542 246 1983 10/96 45
47513 Westinghouse Drive,
Fremont* 1,624 - 4,088 1,624 4,088 5,712 413 1998 10/96 45
Bordeaux Centre, Napa* 1,151 - 6,476 1,151 6,476 7,627 540 1998 12/96 45
O'Toole Business Park,
San Jose* 3,933 5,748 494 3,933 6,242 10,175 442 1984 12/96 45
6500 Kaiser Drive, Fremont* 1,556 6,411 29 1,556 6,440 7,996 429 1990 1/97 45
Bedford Fremont Business
Center, Fremont* 3,598 9,004 123 3,598 9,127 12,725 606 1990 3/97 45
Spinnaker Court, Fremont* 2,548 5,989 35 2,548 6,024 8,572 357 1986 5/97 45
See accompanying independent
auditors' report.
Industrial buildings (continued):
Northern California (continued)
2277 Pine View Way, Petaluma* 1,861 7,074 2 1,861 7,076 8,937 406 1989 6/97 45
Mondavi Building, Napa* 1,315 5,214 - 1,315 5,214 6,529 261 1985 9/97 45
Building #2 at Monterey
Commerce Center, Monterey* 611 1,833 1 611 1,834 2,445 85 1990 12/97 45
Building #3 at Monterey
Commerce Center, Monterey* 604 1,812 (14) 604 1,798 2,402 84 1990 12/97 45
Parkpoint Business Center,
Santa Rosa* 1,975 4,474 481 1,976 4,954 6,930 213 1981 2/98 45
2180 S. McDowell, Petaluma* 773 3,006 1 774 3,006 3,780 100 1990 7/98 45
2190 S. McDowell, Petaluma* 587 2,283 1 588 2,283 2,871 76 1996 7/98 45
Arizona
Westech Business Center,
Phoenix* 3,531 4,422 452 3,531 4,874 8,405 523 1985 4/96 45
Westech II, Phoenix* 1,033 - 3,967 1,033 3,967 5,000 550 1998 7/96 45
2601 W. Broadway, Tempe* 1,127 2,348 98 1,127 2,446 3,573 130 1977 7/97 45
Building #2 at Phoenix Airport
Center, Phoenix* 723 3,278 16 723 3,294 4,017 176 1990 7/97 45
Building #3 at Phoenix Airport
Center, Phoenix* 682 3,163 - 682 3,163 3,845 170 1990 7/97 45
Building #4 at Phoenix Airport
Center, Phoenix* 517 1,732 - 517 1,732 2,249 93 1990 7/97 45
Building #5 at Phoenix Airport
Center, Phoenix* 1,507 3,860 4 1,507 3,864 5,371 207 1990 7/97 45
Butterfield Business Center,
Tucson* 909 4,230 77 910 4,306 5,216 208 1986 11/97 45
Butterfield Tech Center II,
Tucson 102 - 1,559 102 1,559 1,661 34 1999 11/97 45
Greystone Business Park, Tempe 1,232 - 2,776 1,232 2,776 4,008 3 1999 12/97 45
Cimarron Business Park,
Scottsdale* 1,776 4,471 173 1,778 4,642 6,420 182 1979-85 3/98 45
Expressway Corporate Center,
Tempe 1,467 3,175 208 1,468 3,382 4,850 88 1985 11/98 45
The Adams Brothers Building,
Phoenix 1,572 1,613 49 1,572 1,662 3,234 21 1988-95 6/99 45
Bedford Realty Partners, L.P.,
Phoenix* 992 6,241 80 992 6,321 7,313 12 1986 12/99 45
Southern California
Dupont Industrial Center,
Ontario* 3,588 6,162 202 3,588 6,364 9,952 869 1989 5/94 45
3002 Dow Business Center,
Tustin* 4,209 7,291 948 4,305 8,143 12,448 953 1987-89 12/95 45
Building #1 at Carroll Tech
Center, San Diego* 511 1,372 187 511 1,559 2,070 125 1984 10/96 45
See accompanying independent
auditors' report.
Industrial buildings (continued):
Southern California (continued)
Building #2 at Oak Ridge Business
Center, Vista 566 1,832 - 566 1,832 2,398 129 1990 10/96 45
Signal Systems Building,
San Diego* 2,228 7,264 - 2,228 7,264 9,492 484 1990 12/96 45
Building #2 at Carroll Tech
Center, San Diego* 1,022 2,129 - 1,022 2,129 3,151 154 1984 10/96 45
2230 Oak Ridge Way, Vista* 684 2,191 - 684 2,191 2,875 115 1997 10/97 45
6960 Flanders Drive, San Diego* 864 2,591 (2) 865 2,588 3,453 86 1989 6/98 45
Canyon Vista Center, San Diego* 1,664 4,645 80 1,664 4,725 6,389 79 1986 4/99 45
6325 Lusk Blvd., San Diego* 2,229 3,484 10 2,229 3,494 5,723 39 1991 7/99 45
Colorado
Bryant Street Quad, Denver* 1,394 2,181 140 1,416 2,299 3,715 235 1971-73 12/95 45
Bryant Street Annex, Denver* 487 866 127 495 985 1,480 110 1968 12/95 45
Office buildings:
Northern California
Village Green, Lafayette* 547 1,245 556 743 1,605 2,348 220 1983 7/94 45
100 View Street, Mountain View* 1,020 3,144 298 1,020 3,442 4,462 291 1985 5/96 45
Canyon Park, San Ramon* 1,933 3,098 1,073 1,933 4,171 6,104 164 1971-72 12/97 45
Crow Canyon Centre, San Ramon* 778 - 4,859 778 4,859 5,637 10 1999 12/97 45
Building #1 at Monterey Commerce
Center, Monterey* 616 5,302 117 616 5,419 6,035 271 1990 12/97 45
3380 Cypress Drive, Petaluma* 1,709 3,760 - 1,709 3,760 5,469 125 1989 7/98 45
Arizona
Executive Center at Southbank,
Phoenix* 4,943 7,134 85 4,943 7,219 12,162 460 1989 3/97 45
Building #1 at Phoenix Airport
Center, Phoenix* 944 1,541 46 944 1,587 2,531 84 1990 7/97 45
Phoenix Airport Center Parking,
Phoenix* 1,369 81 - 1,369 81 1,450 4 1990 7/97 45
Cabrillo Executive Center,
Phoenix* 480 5,614 194 481 5,807 6,288 254 1983 2/98 45
Mountain Pointe Office Park,
Phoenix 837 - 3,670 837 3,670 4,507 - 1999 2/98 45
1355 S. Clearview Avenue, Mesa* 2,049 5,450 3 2,049 5,453 7,502 71 1998 6/99 45
See accompanying independent
auditors' report.
Office buildings (continued):
Southern California
Laguna Hills Square, Laguna* 2,436 3,655 542 2,436 4,197 6,633 420 1983 3/96 45
Building #3 at Carroll Tech
Center, San Diego* 716 1,400 56 716 1,456 2,172 103 1984 10/96 45
Scripps Wateridge, San Diego* 4,160 12,472 3 4,160 12,475 16,635 693 1990 6/97 45
Building #4 at Carroll Tech
Center, San Diego* 2,050 3,224 56 2,050 3,280 5,330 55 1986 3/99 45
Colorado
Oracle Building, Denver* 1,860 13,249 60 1,860 13,309 15,169 644 1996 10/97 45
Texaco Building, Denver* 3,699 31,631 682 3,700 32,312 36,012 1,127 1981 5/98 45
Greater Seattle Area
Kenyon Center, Bellevue* 5,095 7,250 92 5,095 7,342 12,437 539 1987 9/96 45
Orillia Office Park, Renton* 10,021 22,975 - 10,021 22,975 32,996 1,277 1986 7/97 45
Adobe Systems Bldg. 1, Seattle* - 22,403 3,923 - 26,326 26,326 877 1998 3/98 45
Adobe Systems Bldg. 2, Seattle* - 18,931 3,353 - 22,284 22,284 757 1998 3/98 45
Highlands Phase I, Bothell 3,828 - 11,299 3,828 11,299 15,127 155 1999 6/98 45
The Federal Way Building,
Federal Way* 2,208 7,009 - 2,208 7,009 9,217 78 1999 6/99 45
Federal Way II, Federal Way 2,500 14,307 - 2,500 14,307 16,807 79 1999 9/99 45
Nevada
U.S. Bank Centre, Reno* 2,102 10,264 414 2,102 10,678 12,780 658 1989 5/97 45
Operating properties held
for sale:
Northern California
350 E. Plumeria Drive,
San Jose* 3,621 4,704 245 3,683 4,887 8,570 373 1983 9/95 45
Arizona
Troika Building, Tucson* 1,332 2,631 47 1,332 2,678 4,010 153 1985 6/97 45
Southern California
Vista I, Vista 646 2,135 64 646 2,199 2,845 116 1990 10/96 45
5502 Oberlin Drive, San Diego 911 1,274 3 912 1,276 2,188 28 1982 3/98 45
Greater Kansas City Area
Ninety-Ninth Street #3,
Lenexa* 360 2,167 191 360 2,358 2,718 511 1990 12/90 45
Lackman Business Center,
Lenexa* 619 1,631 247 628 1,869 2,497 241 1985 9/95 45
See accompanying independent
auditors' report.
Operating properties held
for sale (continued):
Greater Kansas City
Area (continued)
Ninety-Ninth Street #1,
Lenexa* 404 1,547 119 408 1,662 2,070 149 1988 9/95 45
Ninety-Ninth Street #2,
Lenexa 180 555 93 183 645 828 60 1988 9/95 45
6600 College Boulevard,
Overland Park* 2,480 3,880 207 2,518 4,049 6,567 388 1982-83 10/95 45
Ninety-Ninth Street #4,
Lenexa 519 - 3,160 519 3,160 3,679 461 1998 6/96 45
Panorama Business Park,
Kansas City* 675 3,098 309 675 3,407 4,082 286 1984 12/96 45
Didde Building,
Overland Park 810 1,344 59 810 1,403 2,213 60 1981 1/98 45
Panorama III, Kansas City* 468 2,027 163 468 2,190 2,658 27 1986 7/99 45
Texas
9737 Great Hills Trail,
Austin* 2,766 7,028 65 2,766 7,093 9,859 405 1984 5/97 45
Ferrell Drive, Farmers Branch* 1,105 1,639 48 1,106 1,686 2,792 76 1984 12/97 45
Austin Braker 2, Austin 413 1,864 (24) 414 1,839 2,253 62 1982 6/98 45
Austin Rutland 10, Austin 389 2,854 35 390 2,888 3,278 100 1979 6/98 45
Austin Southpark A, B and C,
Austin 1,070 4,647 67 1,072 4,712 5,784 170 1981 6/98 45
Ferrell Drive Land,
Farmers Branch 185 - 3 186 2 188 - N/A 5/98 45
Greater Portland Area, Oregon
Twin Oaks Technology Center,
Beaverton* 1,444 4,836 601 1,469 5,412 6,881 589 1984 12/95 45
Twin Oaks Business Center,
Beaverton* 1,163 2,847 593 1,183 3,420 4,603 407 1984 12/95 45
Properties under development:
Northern California
Carneros Commons Phase I, Napa 500 - 160 500 160 660 - N/A 12/96 45
Arizona
Rio Salado Corporate Centre,
Tempe 1,723 2,882 861 1,723 3,743 5,466 - 1982-84 7/98 45
West Tempe Lots 30 and 31,
Tempe 551 - 65 551 65 616 - N/A 7/98 45
Phoenix Tech Center, Phoenix 1,322 945 376 1,322 1,321 2,643 - 1985 8/98 45
Colorado
Belleview Corporate Plaza II
Office, Denver 2,622 - 459 2,622 459 3,081 - N/A 10/98 45
Belleview Corporate Plaza,
Retail, Denver 807 - 115 807 115 922 - N/A 10/98 45
Belleview Corporate Plaza,
Parking, Denver 487 - 48 487 48 535 - N/A 10/98 45
WaterPark @ Briarwood Phase I,
Englewood 1,002 - 618 1,002 618 1,620 - N/A 4/99 45
See accompanying independent
auditors' report.
Properties under development
(continued):
Greater Seattle Area
Highlands Phase II, Bothell 1,646 - 2,057 1,646 2,057 3,703 - N/A 6/98 45
Land held for development:
Carneros Commons, Phase II,
Napa 461 - - 461 - 461 - N/A 12/96 45
Scripps Land, San Diego, CA 622 - 82 622 82 704 - N/A 6/97 45
Mondavi Land, Napa Lot 12G,
Northern CA 1,150 - 8 1,150 8 1,158 - N/A 3/98 45
210 Lafayette Circle,
Northern CA 511 - 2 511 2 513 - N/A 11/98 45
WaterPark @ Briarwood
Phase II, Englewood 1,002 - - 1,002 - 1,002 - N/A 4/99 45
Belleview Corporate Plaza III,
IV, Denver, CO 2,299 - - 2,299 - 2,299 - N/A 10/99 45
$176,835 $434,128 $68,770 $177,516 $502,217 $679,733 $28,695
(A) (A)
* Property is encumbered, see footnotes 7 and 8 to the consolidated
financial statements.
See accompanying independent auditors' report.
NOTES TO SCHEDULE III
(in thousands of dollars)
(A) An analysis of the activity in real estate investments for the
years ended December 31, 1999, 1998 and 1997 is presented below:
Investment Accumulated Depreciation
1999 1998 1997 1999 1998 1997
BALANCE AT BEGINNING OF PERIOD $599,981 $432,071 $229,414 $18,523 $ 8,985 $4,913
Add (deduct):
Acquisition of 6500 Kaiser Drive - - 7,967 - - -
Acquisition of Bedford Fremont
Business Center - - 12,602 - - -
Acquisition of Spinnaker Court - - 8,537 - - -
Acquisition of 2277 Pine View Way - - 8,935 - - -
Acquisition of Mondavi Building - - 6,529 - - -
Acquisition of Building #2 at Monterey
Commerce Center - - 2,444 - - -
Acquisition of Building #3 at Monterey
Commerce Center - - 2,416 - - -
Acquisition of 2230 Oak Ridge Way - - 2,875 - - -
Acquisition of 2601 W. Broadway - - 3,475 - - -
Acquisition of Building #3 at Phoenix
Airport Center - - 3,845 - - -
Acquisition of Continental Can - - 4,866 - - -
Acquisition of Butterfield Business Center - - 5,139 - - -
Acquisition of Ferrell Drive - - 2,744 - - -
Acquisition of Scripps Wateridge - - 16,632 - - -
Acquisition of Canyon Park - - 5,031 - - -
Acquisition of Building #1 at Monterey
Commerce Center - - 5,918 - - -
Acquisition of Orillia Office Park - - 32,996 - - -
Acquisition of Executive Center
At Southbank - - 12,077 - - -
Acquisition of Building #1 at Phoenix
Airport Center - - 2,485 - - -
Acquisition of Building #2 at Phoenix
Airport Center - - 4,001 - - -
Acquisition of Building #4 at Phoenix
Airport Center - - 2,249 - - -
Acquisition of Building #5 at Phoenix
Airport Center - - 5,367 - - -
Acquisition of Phoenix Airport Center
Parking - - 1,450 - - -
Acquisition of Troika Building - - 3,963 - - -
Acquisition of U.S. Bank Centre - - 12,366 - - -
Acquisition of 9737 Great Hills Trail - - 9,794 - - -
Acquisition of Oracle Building - - 15,109 - - -
Acquisition of Scripps Land - - 622 - - -
Acquisition of Oak Ridge Way Lot - - 359 - - -
Acquisition of Oracle Land - - 1,645 - - -
Acquisition of Butterfield Land - - 102 - - -
Acquisition of Canyon Park Land - - 778 - - -
Acquisition of Eaton Freeway Land - - 1,232 - - -
Sale of 1000 Town Center Drive (B) - - (6,622) - - (780)
Sale of Mariner Court (B) - - (7,864) - - (419)
Sale of Academy Place Shopping Center (C) - - (6,281) - - (110)
Acquisition of Didde Building - 2,207 - - - -
Acquisition of El Caro Executive Center - 6,279 - - - -
Acquisition of Park Point Business Center - 6,897 - - - -
Acquisition of Mountain Pointe Office Park - 2,878 - - - -
See accompanying independent
auditors' report.
Acquisition of Mondavi Land, Napa Lot 12G - 1,157 - - - -
Acquisition of Adobe I - 26,306 - - - -
Acquisition of Adobe II - 22,254 - - - -
Acquisition of 5502 Oberlin Drive - 2,188 - - - -
Acquisition of Cimarron Business Park - 6,322 - - - -
Acquisition of Ferrell Drive Land - 188 - - - -
Acquisition of Texaco Building - 35,698 - - - -
Acquisition of Geocon Building - 3,452 - - - -
Acquisition of Austin Braker 2 - 2,245 - - - -
Acquisition of Austin Rutland 10 - 3,255 - - - -
Acquisition of Austin Southpark A, B and C - 5,753 - - - -
Acquisition of Highlands Campus Land - 8,110 - - - -
Acquisition of Rio Salado Corporate Centre - 4,906 - - - -
Acquisition of West Tempe Land Lots 30 and 31 - 572 - - - -
Acquisition of 3880 Cypress Drive - 5,470 - - - -
Acquisition of 2180 S. McDowell Blvd. - 3,780 - - - -
Acquisition of 2190 S. McDowell Blvd. - 2,870 - - - -
Acquisition of 10232 S. 51st Street - 2,368 - - - -
Acquisition of 210 Lafayette Circle - 511 - - - -
Acquisition of Expressway Corporate Center - 4,644 - - - -
Acquisition of Carroll Tech IV 5,330 - - - - -
Acquisition of Canyon Vista Center 6,389 - - - - -
Acquisition of WaterPark at Briarwood 1,620 - - - - -
Acquisition of 1355 S. Clearview Avenue 7,502 - - - - -
Acquisition of The Adams Brothers Building 3,234 - - - - -
Acquisition of The Federal Way Building 9,217 - - - - -
Acquisition of 6325 Lusk Blvd. 5,723 - - - - -
Acquisition of Panorama III 2,658 - - - - -
Acquisition of Federal Way II 16,807 - - - - -
Acquisition of Belleview Corporate Plaza 6,837 - - - - -
Sale of 417 Eccles (D) (1,200) - - (37) - -
Sale of Woodlands Tower II (E) (6,963) - - (1,031) - -
Sale of Oak Ridge Land (E) (378) - - - - -
Sale of Doherty Avenue (F) (3,909) - - (152) - -
Sale of Continental Can (G) (5,016) - - (124) - -
Capitalized costs 31,901 7,600 16,874 - - -
Depreciation - - - 11,516 9,538 5,381
BALANCE AT END OF PERIOD $679,733 $599,981 $432,071 $28,695 $18,523 $8,985
(B) The properties were sold in July 1997.
(C) The property was sold in October 1997.
(D) The property was sold in March 1999.
(E) The properties were sold in June 1999.
(F) The property was sold in August 1999.
(G) The property was sold in December 1999.
See accompanying independent auditors' report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
BEDFORD PROPERTY INVESTORS, INC.
By: /s/ Peter B. Bedford
Peter B. Bedford
Chairman of the Board and
Chief Executive Officer
Dated: March 29, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following person on behalf of
the Registrant and in the capacity and on the date indicated.
/s/ Peter B. Bedford March 29, 2000
Peter B. Bedford, Chairman of the Board
and Chief Executive Officer
/s/ Claude M. Ballard March 29, 2000
Claude M. Ballard, Director
/s/ Anthony Downs March 29, 2000
Anthony Downs, Director
/s/ Anthony M. Frank March 29, 2000
Anthony M. Frank, Director
/s/ Martin I. Zankel March 29, 2000
Martin I. Zankel, Director
/s/ Thomas H. Nolan, Jr. March 29, 2000
Thomas H. Nolan, Jr., Director
/s/ Hanh Kihara March 29, 2000
Hanh Kihara
Senior Vice President and
Chief Financial Officer
/s/ Krista K. Rowland March 29, 2000
Krista K. Rowland, Vice President Controller
Exhibit 12
Bedford Property Investors, Inc.
Computation of Ratio of Earnings to Fixed Charges and Preferred
Dividends and Limited Partner Distributions
(in thousands, except for ratio)
Year Ended December 31,
1999 1998 1997 1996 1995
Net income $39,855 $31,496 $31,291 $11,021 $ 2,895
Fixed charges - interest and amortization
of loan fees 18,970 11,164 7,918 4,347 1,594
Fixed charges - interest capitalized 2,148 2,177 627 - -
Net income including fixed charges 60,973 44,837 39,836 15,368 4,489
Preferred dividends and limited partner
distributions 128 117 3,608 4,505 1,288
Net income including fixed charges,
preferred dividends and limited
partner distributions $61,101 $44,954 $43,444 $19,873 $ 5,777
Ratio of earnings to fixed charges,
including preferred dividends and
limited partner distributions $ 2.88 $ 3.34 $ 3.57 $ 2.25 $ 2.00
Ratio of earnings to fixed charges,
excluding preferred dividends and
limited partner distributions $ 2.89 $ 3.36 $ 4.66 $ 3.54 $ 2.82
Exhibit 21.1
Subsidiaries of Bedford Property Investors, Inc.
Name Under
Subsidiary Which Subsidiary is
Name State of Incorporation doing Business
1. ICMPI (Concord Diablo 3), Inc. Delaware ICMPI (Concord Diablo 3), Inc.
2. ICMPI (Concord Diablo 8), Inc. Delaware ICMPI (Concord Diablo 8), Inc.
3. ICMPI (Concord Mason 18), Inc. Delaware ICMPI (Concord Mason 18), Inc.
4. ICMPI (Overland Park), Inc. Delaware ICMPI (Overland Park), Inc.
5. ICMPI (Lenexa), Inc. Delaware ICMPI (Lenexa), Inc.
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors
Bedford Property Investors, Inc.:
We consent to incorporation by reference in the registration
statements on Form S-3 (No.'s 333-23687, 333-33643 and 333-33795) and
the registration statements on Form S-8 (No.'s 33-52375, 333-18215,
333-70681 and 333-74707) of Bedford Property Investors, Inc. of our
report dated February 4, 2000, relating to the consolidated balance
sheets of Bedford Property Investors, Inc. as of December 31, 1999 and
1998, and the related consolidated statements of income, stockholders'
equity and cash flows for each of the years in the three-year period
ended December 31, 1999, and the related financial statement schedule
as of December 31, 1999, which report appears in the December 31, 1999
annual report on Form 10-K of Bedford Property Investors, Inc.
KPMG LLP
San Francisco, California
March 29, 2000