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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, 1993
Commission file number 1-8822
BEDFORD PROPERTY INVESTORS, INC.
(Exact name of Registrant as specified in
its charter)
MARYLAND 68-0306514
(State or other jurisdiction of I.R.S.
Employer
incorporation or organization)
Identification No.)
3658 Mt. Diablo Boulevard, Suite 210,
Lafayette, CA 94549
Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including
area code (510) 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 $0.01 per share New
York Stock Exchange
Pacific Stock
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 February 28, 1994, was
approximately $29,018,000.
The number of shares of Registrant's common
stock, par value $0.01
per share, outstanding as of March 15,1994,
was 5,976,900.
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, 1994, 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.
PART I
ITEM 1. BUSINESS
Bedford Property Investors, Inc. (the
"Company") was formerly known as ICM
Property Investors Incorporated ("ICM"), a
Delaware corporation, organized in
November 1984. On July 1, 1993, ICM
Property Investors Incorporated
reincorporated from the state of Delaware
to the state of Maryland under a new
name, Bedford Property Investors, Inc. The
Company is operated so as to qualify
as a real estate investment trust ("REIT")
under the applicable provisions of the
Internal Revenue Code of 1986, as amended
(the "Code"). To qualify, the
Company must meet certain tests which, among
other things, require that its
assets consist primarily of real estate, its
income be derived primarily from
real estate, and at least 95% of its taxable
income be distributed to its shareholders.
Because the Company qualifies as a REIT, it
is not generally subject to Federal income
taxes.
Business Plan
The Company's business plan emphasizes asset
and acquisition portfolio. The original
business plan of ICM had been to invest in
office buildings, via direct ownership or
joint venture mortgage loan investment,
dispersed throughout the United States. In
1993, the Board of Directors approved a new
business plan under which the Company would
move
its investment focus to the western United
States, make wholly-owned equity investments
in suburban office and industrial properties,
develop these property types and, subject to
the
Company's ability to raise additional capital
and other factors, grow the asset base of the
Company. As a result of this change in the
Company's business plan, in 1993 the Company
identified four non-strategic assets for
disposition. During 1993, two of the four
office
building investments were sold (University
Tower and Point West Place). In January
1994, the Company sold the third asset, its
office building investment in Texas (Texas
Bank North),
and continues to offer for sale the office
building investment located in Mississippi
(IBM Building). During 1993, the Company
purchased two suburban office
buildings, Woodlands II in Utah and 1000 Town
Center Drive in California.
In January 1994, the Company purchased the
Mariner Court office building,
also in California.
Real Estate Investments
The Company's real estate portfolio consists
of equity investments in completed, income-
producing properties such as office buildings
and industrial buildings
located primarily in the western United
States. As of December 31, 1993, the
Company directly owned nine properties
including four suburban office
buildings and five industrial buildings
located in five states. Two of these
properties were classified as offered for
sale, one of which has subsequently been
sold.
As of December 31, 1993, the Company's
property portfolio had an overall occupancy
level of 88%. The majority of the portfolio
vacancy related to the 1000 Town Center
Drive building acquired on December 30, 1993.
The 1000 Town Center Drive building
was 41% occupied as of December 31, 1993.
Excluding the 1000 Town Center Drive
building, the Company's property portfolio
had an overall occupancy level of 98%.
The favorable overall occupancy is the result
of management's continuing focus on
reducing the risk of vacant space and the
costs associated with re-leasing by
concentrating efforts on servicing those
tenants with expiring leases,
and wherever possible, extending their lease
expiration dates. In addition,
lease expirations for the next several years
have been staggered so that the
lease renewal risk is not significantly
greater in any one year.
Significant 1993 Events
Sale of Edison Square Joint Venture: On May
31, 1993, the Company sold
its partnership interest in the three Edison,
New Jersey properties in exchange
for a note receivable of $300,000 with an
interest rate of 8%, payable quarterly
in July, October, January and April until May
31, 1998, at which time the note
matures. The sale of the Company's interest
in the unconsolidated joint venture
partnerships resulted in a gain of
$2,686,000.
Name Change and Reincorporation: On June 9,
1993, at the Company's Annual
Meeting, the stockholders approved the
Company's proposals to change the
Company's name from ICM Property Investors
Incorporated to Bedford Property Investors,
Inc. (now traded on the New York Stock
Exchange under the symbol "BED")
And to reincorporate from Delaware to
Maryland.
Increase in Number of Authorized Shares: On
June 9, 1993, at the Company's
Annual Meeting, the stockholders approved the
Company's proposals to increase
the number of authorized shares of Common
Stock from 10,000,000 shares to
30,000,000 million shares and to increase the
number of authorized shares of
Preferred Stock from 1,000,000 shares to
10,000,000 shares.
Sale of University Tower, Irvine, California:
On July 31, 1992, the Company
entered into a contract to sell its
investment in University Tower. The sale
contract subsequently expired, but a lease
was signed with the potential buyer for
approximately 20% of the space, and as part
of the lease, the lessee obtained a
short-term option to purchase the building.
On May 25, 1993, the option was
exercised and, on August 18, 1993, the sale
of University Tower was completed.
The cash sale price, including the
reimbursement of tenant relocation costs of
$300,000, was $15,200,000, or $96 per
square foot, and produced a gain of
$407,000. Sale proceeds were used to pay
off the Company's bank loan of
$6,000,000 which was secured by the
property, and to fund the Company's
acquisition of Woodlands II.
Purchase of Woodlands II, Salt Lake City,
Utah: On August 25, 1993, the
Company acquired the Woodlands II complex in
Salt Lake City, Utah, for
$6,750,000, or $59 per square foot. The
property consists of a 106,084
square foot six-story Class "A" office
building, a single story 8,268
square foot retail building and a 3.6
acre parcel available for future
development. The complex was 96% occupied
at the time of purchase.
Sale of Point West Place, Framingham,
Massachusetts: On October 1, 1993,
the property was sold for a cash price of
$7,180,000, or $66 per square foot,
resulting in a gain of $497,000. A portion
of the sale proceeds from Point
West Place was used to retire $5,113,000 of
mortgage debts secured by the
five industrial properties.
$20,000,000 Acquisition Line of Credit
Secured: On December 29, 1993,
the Company secured a $20,000,000 acquisition
revolving line of credit from
Bank of America. The credit facility has a
term of three years and features a
competitive interest rate and fee structure.
At December 31, 1993, the
outstanding balance was $3,621,000.
Purchase of 1000 Town Center Drive, Oxnard,
California: On December 30, 1993,
the Company completed the acquisition of 1000
Town Center Drive, a 109,611
square foot six-story Class "A" suburban
office building located in Oxnard,
California for $5,100,000, or $47 per square
foot. The seller received $3,600,000,
or $33 per square foot, in cash, at closing
with the balance of $1,500,000, or $14
per square foot, payable in December 1994.
The $3,600,000 cash payment was
financed using the Company's new $20 million
revolving line of credit from Bank
of America. The line of credit was
subsequently paid off in January 1994 with
the remaining sale proceeds from Point West
Place. The building was 41% occupied
at the time of purchase. It was acquired
from NCEC Realty Incorporated, a wholly
owned subsidiary of Citicorp which foreclosed
on the property over two years ago.
Subsequent Events
Purchase of Mariner Court, Torrance,
California: On January 5, 1994, the Company
completed the acquisition of Mariner Court, a
105,673 square foot three-story suburban
office building located in Torrance,
California for $7,500,000 or $71 per square
foot.
The building was 91% occupied at the time of
purchase. The Company borrowed
$7,438,000 against the $20 million revolving
line of credit with Bank of America to
acquire the property.
Sale of Texas Bank North, San Antonio, Texas:
In July, 1993, the Company entered
into a contract to sell the Texas Bank North
building for a cash sale price of $8,500,000,
or $56 per square foot. The sale was
completed on January 14, 1994. The balance
borrowed on the line of credit for the
purchase of Mariner Court was paid off in
January 1994 with the sale proceeds from the
building.
Investment Analysis
Prospective real estate investments are
carefully analyzed by the Company pursuant
to several underwriting criteria,
including expected initial cash returns on
investment, competition and other market
factors, and prospects for growth in
income and market value. In determining
the returns on investment, the Company
takes into consideration
any initial capital expenditures for
leasing, deferred maintenance, and estimated
costs associated with tenant turnover. In
addition, the Company has formerly
established a reserve policy in an attempt
to normalize the cash flow from the
Company's real estate investments. The
reserve policy is a cash management
technique designed to anticipate future
expenditures associated with capital
improvements and tenant turnover.
These expenditures are converted to a
monthly sinking fund payment that is
subtracted
from the net operating income of the real
estate investment to determine net
operating cash flow for cash management
purposes.
Dividends
The Company made regular quarterly dividend
distributions in the second, third and
fourth quarters of 1993 of $0.05, $0.06 and
$0.07 respectively per share following a
nine quarter suspension. All dividend
distributions made in 1993 were classified
as a return of capital since no earnings
and profits were reported for 1993. The
disposition in 1993 of two of the Company's
investments resulted in the Company
incurring an ordinary loss for income tax
purposes, in addition to capital losses.
The ordinary loss carryforward is expected
to exceed the Company's taxable
income for several years. As a REIT, the
Company is not required to make
distributions when it incurs an ordinary
federal income tax loss or applies
unused ordinary tax loss carryforwards.
Decisions on future distributions
will be made on the basis of the Company's
capital needs, cash flows,
taxable income and other relevant factors.
Tenants
The Company's real estate investments are
leased to tenants for terms ranging
from month-to-month tenancies to 10 year
leases. The Company leases space
directly to 72 tenants, including 58
office tenants and 14 industrial tenants.
Self-Management
In the past, all of the Company's
properties were managed by independent
property management companies whose primary
responsibilities included
leasing, maintenance, and rent collection
activities. Effective February 1, 1993,
the Company began internally managing all of
its industrial properties. The
office properties are still contract managed.
Effective July 1, 1993, the
Company centralized recordkeeping for all
properties, with the exception
of Texas Bank North, at corporate
headquarters. In-house property
management and record keeping, which have not
increased the number
of employees, have resulted in savings of
approximately $43,000 in 1993.
Self-Administration
On July 31, 1992, the Company terminated an
Investment Management
Agreement with an independent investment
manager. The Board of
Directors determined that as of August 1,
1992, the Company would be
self-administered. By being self-
administered the Company assumes
direct responsibility for the administration
of its day-to-day business affairs,
including responsibility for retaining
personnel, obtaining office space and
arranging of other administrative functions.
Financing
The Company expects to sell one office
building, offer additional equity securities
and/or borrow under lines of credit to
finance additional real estate acquisitions
during 1994. Short-term borrowings are
expected to be repaid with future
offerings of shares of beneficial interest
or long-term financing.
As of December 31, 1993, the Company had
$3,621,000 of debt outstanding against
a revolving acquisition line of credit with
Bank of America bearing interest at the rate
of 6.75% (rate floats with prime). The
balance on the line of credit was subsequently
repaid in January, 1994.
For additional information, see Item 7,
"Management's Discussion and Analysis of
Financial Condition and Results of
Operations", and Note 9 to the Consolidated
Financial Statements.
Insurance
The Company carries commercial general
liability coverage on its properties with
limits of
$11,000,000 per occurrence and $12,000,000 in
the aggregate. 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
$10,000,000 for each peril. The Company also
carries director and officer liability
insurance with an aggregate limit of
$10,000,000. 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, among
other factors, upon 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 which have a
significant supply of available space,
resulting in intense competition for tenants
and low rents.
Government Regulations
A number of jurisdictions have laws and
regulations relating to the ownership of real
estate, such as local building codes and
similar regulations. From time to time,
capital expenditures at properties owned by
the Company may be required to comply with
changes in these laws. No material
expenditures are contemplated at this time in
order to comply with any laws or regulations.
Under various federal, state and local laws,
ordinances and regulations, a current or
previous owner or operator of real estate may
be liable for the cost of removal or
remediation of hazardous or toxic substances
released on, under or in its property. The
costs of such removal or remediation could be
substantial. The Company's properties have
been professionally inspected as a result of
ongoing review, acquisition due diligence and
financing requirements. Management believes
that through these professional environmental
inspections and testing for asbestos and other
hazardous materials, the Company can minimize
its exposure to potential liability associated
with such environmental hazards. To the best
of its knowledge, the Company is in compliance
with all applicable environmental rules and
regulations. Management is not aware of any
material violation of applicable environmental
requirements with respect to any of its real
estate investments. To date, compliance with
federal, state and local environmental
protection regulations has not had a material
effect upon the capital expenditures, earnings
or competitive position of the Company.
Other Information
The Company's current business constitutes a
single business segment. The Company is not
dependent upon a single tenant or a limited
number of tenants. The Company's operations
are not impacted by seasonal changes. The
Company's business is not subject to
government contracts. The Company does not
have any expenditures for research and
development. The Company has no foreign
operations or export sales.
ITEM 2. PROPERTIES
The Company's real estate portfolio (net of
accumulated depreciation) consists of the
following:
LOTUS FORMAT TABLE TO BE INCLUDED ON
HARD COPY SUBMITTAL
As of December 31, 1993, the Company's real
estate investments (net of accumulated
depreciation) were diversified by geographic
region as follows:
LOTUS FORMAT TABLE TO BE INCLUDED ON
HARD COPY SUBMITTAL
For additional information on the Company's
real estate portfolio, see Note 2 to the
Consolidated Financial Statements.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any material
pending legal proceedings other than routine
litigation incidental to its business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS
No matters were submitted to a vote of the
Company's security holders during the fourth
quarter of 1993.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
The Common Stock of Bedford Property
Investors, Inc. is listed for trading on the
New York Stock Exchange and the Pacific Stock
Exchange under the symbol "BED". Prior to
July 1, 1993, the Company's stock was traded
on the same exchanges under the symbol "ICM".
As of February 28, 1994, the Company had 475
stockholders of record. A significant number
of these stockholders are also nominees
holding stock in street name for individuals.
The following tables show the high and low
share prices as traded on the New York Stock
Exchange for each quarter for the past two
years.
LOTUS FORMAT TABLE TO BE INCLUDED ON
HARD COPY SUBMITTAL
ITEM 6. SELECTED FINANCIAL DATA
Following is a table (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) of selected financial
data of the Company for the last five
fiscal years:
LOTUS FORMAT TABLE TO BE INCLUDED ON
HARD COPY SUBMITTAL
1Includes rental income, interest income,
equity in joint venture partnership operations
and gains on sales of real estate
investments and partnership interest in joint
ventures. See "Consolidated Statements of
Operations".
2Includes rental expenses consisting of:
operating expenses, real estate taxes,
depreciation and amortization, interest,
general and administrative expenses, provision
for possible loss on real estate investments
and extraordinary item-extinguishment of debt.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Management's Discussion and Analysis of
Financial Condition and Results of Operations
should be read in conjunction with the
Consolidated Financial Statements and Notes
thereto.
Results of Operations - 1993 Compared to 1992
Income
Rental income decreased by $1,849,000 from the
prior year, primarily due to the Company
ceasing to record the operations of Columbia
Business Center as of March 31, 1992, the
sales of University Tower and Point West Place
in 1993, and the absence in 1993 of three
additional months of rental income recorded
for Texas Bank North Building in 1992, offset
in part by the purchase of Woodlands II in
August 1993. Correspondingly, rental
expenses decreased by $2,012,000 from the
prior year. As a result, 1993 income from
property operations increased $163,000 over
1992.
Interest income increased by $131,000, a
result of investing the remaining cash
proceeds from the sales of University Tower
and Point West Place after acquiring Woodlands
II and paying off bank and mortgage loans.
Equity in joint venture partnership operations
produced a loss of $153,000 for 1993, compared
with a loss of $702,000 in 1992. The $549,000
reduction in the loss is attributable
primarily to the sale of the joint venture
partnership during the year. Only three
months of joint venture partnership operations
were recorded in 1993.
Expenses
Interest expense decreased by $420,000 from
the prior year primarily attributable to the
Company ceasing to record the operations of
Columbia Business Center as of March 31, 1992
and paying off the $6,000,000 bank loan on
August 18, 1993 and the $5,113,000 in mortgage
loans on November 1, 1993.
General and administrative expenses decreased
by $1,320,000, the result of self
administration and implemented cost
reductions.
In 1992, the Company recorded a provision for
possible loss on real estate investments
relating to University Tower, Columbia
Business Center, Point West Place and Texas
Bank North Building aggregating $18,921,000.
Gains on Sales and Extraordinary Item
On May 1, 1993, the Company sold its interest
in the Edison Square joint venture
partnerships for a note receivable of $300,000
which produced a gain of $2,686,000. In
August 1993, the Company sold its investment
in University Tower for $15,200,000, which
produced a gain of $407,000. In October 1993,
the Company sold its investment in Point West
Place for $7,180,000, which produced a gain of
$493,000.
In 1992, the Company recorded an extraordinary
item of $3,818,000 which represented the gain
on extinguishment of debt as a result of the
disposition of its investment in Columbia
Business Center.
Dividends
Dividends declared for 1993 totaled $0.18 per
share. They were paid approximately 30 days
following the end of each quarter.
Results of Operations - 1992 Compared to 1991
Income
For 1992, the Company's operating results were
mixed when compared to 1991. Rental income
and rental expenses increased slightly over
1991 as a result of recording a full year of
operations for University Tower (three months
were recorded in 1991) and recording an
additional three months of operations (fifteen
months in total) for Texas Bank North, offset
in part by recording only three months of
operations for Columbia Business Center in
1992. Income from property operations
declined slightly reflecting lower effective
rents, offset in part by higher occupancies
during the year.
The decrease in interest income in 1992
reflects the absence of the interest income
received in 1991 from the Company's mortgage
loan to the partnership that owned University
Tower during the first nine months of 1991.
Equity in joint venture partnership operations
produced a loss of $702,000 for 1992, compared
with a loss of $1,108,000 for 1991. The
$406,000 decline in the loss is attributable
primarily to the absence in 1992 of the
Company's equity in the operating losses of
University Tower, which was consolidated as of
September 30, 1991, and the reduction in the
operating losses of Jefferson Plaza as a
result of the Company ceasing to record its
share of the partnership's operations as of
March 31, 1992.
Expenses
Of the $1,241,000 decrease in interest
expense, $1,176,000 was attributable to the
Company ceasing to record the operations of
Columbia Business Center as of March 31, 1992.
The $651,000 increase in general and
administrative expenses was attributable
primarily to severance expense of two
executive officers, a provision for state
taxes for the years 1985 through 1989 and an
increase in director and officer liability
coverage, offset by lower professional and
shareholder reporting costs.
In 1992, the Company recorded a provision for
possible loss on real estate investments
relating to University Tower, Columbia
Business Center, Point West Place and Texas
Bank North Building aggregating $18,921,000.
In 1991, the Company wrote down its investment
in the IBM Building by $2,113,000.
Extraordinary Item
In 1992, the Company recorded an extraordinary
item of $3,818,000 which represented the gain
on extinguishment of debt as a result of the
disposition of its investment in Columbia
Business Center.
Dividends
No dividends were declared and paid in 1992.
Financial Condition
During fiscal year 1993, total assets of the
Company decreased by $4,502,000 primarily as
a result of a decrease in real estate
investments of $9,591,000 and an increase in
cash of $4,755,000. The decrease in real
estate investments is due to the sale of
University Tower and Point West Place (book
value of $14,476,000 and $6,468,000,
respectively) offset in part by $13,052,000
invested in Woodlands II, 1000 Town Center
Drive and tenant improvements to existing real
estate investments. The increase in cash
consists of the remaining proceeds from the
sales of University Tower and Point West Place
after acquiring Woodlands II and 1000 Town
Center Drive and paying off bank and mortgage
loans.
Total liabilities for the same period
decreased by $6,573,000, of which $9,513,000
was attributable to the pay-off of the bank
and mortgage loans, offset by the Company's
borrowing of $3,621,000 on its revolving
credit facility and recording a liability of
$1,500,000 for the purchase of 1000 Town
Center Drive. In addition, the Company
accrued a dividend of $418,000 for the fourth
quarter, payable on January 31, 1994 to
shareholders of record on January 14, 1994.
Liquidity and Capital Resources
During the year ended December 31, 1993, the
Company's operating activities and the sale of
University Tower and Point West Place provided
cash flow in the amount of $22,857,000. The
Company funded $11,552,000 of real estate
investments, paid off $9,513,000 of bank and
mortgage loans and distributed dividends of
$658,000. The Company secured a $20 million
revolving credit facility with Bank of
America, which was used in part to finance the
acquisition of 1000 Town Center Drive (Note 9
to the Consolidated Financial Statements). At
December 31, 1993, the Company was in
compliance with covenants and requirements of
its revolving credit facility with Bank of
America.
The Company anticipates that the cash flow
generated by its real estate investments will
be sufficient to meet its short-term liquidity
requirements.
The capital resources for long-term liquidity
requirements, including the repayment of the
revolving credit facility, may be provided by
some or all of the following: (a) the cash
flow generated by the Company's real estate
investments, (b) other bank borrowings, (c)
the financing of real estate investments, (d)
the
sale of real estate investments and (e) sale
of new equity.
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.
ITEM 8. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA
Index to Financial Statements and Schedules
Covered by Reports of Independent Public
Accountants
Report of Independent Public Accountants
............ 12
Consolidated Balance Sheets as of December 31,
1993
and
1992..........................................
. .... 13
For Years Ended December 31, 1993, 1992 and
1991
- -Consolidated Statements of
Operations....................................
. ........... 14
- -Consolidated Statements of Changes in
Stockholders'
Equity................................. 15
- Consolidated Statements of Cash
Flows.........................................
. ........... 16
- Notes to Consolidated Financial
Statements....................................
. .......... 17-22
Financial Statement Schedules:
Schedule XI - Real Estate and Accumulated
Depreciation . . 23-24
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, under
the captions "Election of Directors",
"Principal Stockholders", "Certain
Transactions", and "Compensation of Directors
and Executive Officers", which Proxy Statement
will be mailed to stockholders in connection
with the Registrant's annual meeting of
stockholders which is scheduled to be held on
May 18, 1994.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT
SCHEDULES, AND REPORTS ON
FORM 8-K
(a) 1. Financial Statements
Report of independent public
accountants.
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, 1993 and 1992.
Consolidated Statements of
Operations for the years ended December 31,
1993, 1992 and 1991.
Consolidated Statements of Changes
in Stockholders' Equity for the years ended
December 31, 1993, 1992 and 1991.
Consolidated Statements of Cash
Flows for the years ended December 31, 1993,
1992 and 1991.
Notes to Consolidated Financial
Statements.
(a) 2. Financial Statement Schedules
Schedule XI - 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.
(a) 3. Exhibits
Exhibit No.List of Exhibits2.1Agreement and
Plan of Merger dated July 1, 1993 between ICM
Property Investors Incorporated, a Delaware
corporation, and Bedford Property Investors,
Inc., a Maryland corporation, is incorporated
herein by reference to the Company's
registration statement on Form 8-B/A filed
March 6, 1994.3.1Articles of Incorporation of
Bedford Property Investors, Inc. is
incorporated herein by reference to the
Company's registration statement on Form 8-B/A
filed March 6, 1994.3.2Bylaws of Bedford
Property Investors, Inc. are incorporated
herein by reference to the Company's
registration statement on Form 8-B/A filed
March 6, 1994.4.1The Rights Agreement between
ICM Property Investors Incorporated and the
Chase Manhattan Bank, N.A., dated July 18,
1989, is incorporated herein by reference to
Exhibit A, filed with the Company's Form 8-K
dated July 19, 1989.4.2Amendment No. 1 to the
Rights Agreement, dated March 20, 1990,
between ICM Property Investors Incorporated
and The Chase Manhattan Bank, N.A., is
incorporated herein by reference to Exhibit B,
filed with the Company's Form 8-K dated April
6, 1990.4.3The Registration Rights Agreement
dated as of December 5, 1990, between ICM
Property Investors Incorporated and Peter B.
Bedford, is incorporated herein by reference
to Exhibit D, filed with the Company's Form 8-
K dated December 13, 1990.
10.1 (b)Termination Agreement, dated as of
July 31, 1992, between Registrant and
Kingswood Realty Advisors, Inc. is
incorporated herein by reference to the
Company's Form 10-K dated March 26,
1993.10.2The Company's Automatic Dividend
Reinvestment and Share Purchase Plan, as
adopted by the Company, is incorporated herein
by reference to Exhibit 4.1 filed with
Amendment No. 2 to the Registration Statement
No. 2-94354, of ICM Property Investors
Incorporated dated January 25,
1985.10.3Contract of Sale dated July 31, 1992
by and among ICMPI (Irvine) Inc. as Seller and
In-N-Out Burger, Inc. and Rich Snyder,
Revocable InterVivos Trust U/D/T 10/11/89,
jointly and severally as Purchaser, for
University Tower, is incorporated herein by
reference to the Company's Form 10-Q filed for
the quarter ended September 30, 1993.10.4Real
Estate Purchase and Sale Agreement dated as of
June 4, 1993 by and between Bay Street Number
Two, Ltd., as Seller and ICM Property
Investors Incorporated, as Purchaser, for
Woodlands Tower II and Woodlands Commercial
Center, Plan II and Related Properties, filed
with the Company's Form 10-Q filed for the
quarter ended September 30, 1993.10.5*1989 ICM
Property Investors Incorporated Share
Equivalent Plan (as Amended and Restated as of
January 1, 1991), as adopted by the Company,
incorporated herein by reference to Exhibit
10.6 to the Company's quarterly report on Form
10-Q filed for the quarter ended September 30,
1993.10.6*Bedford Property Investors, Inc.
Employee Stock Option Plan, effective
September 16, 1985, amended as of June 9,
1993, as adopted by the Company on September
27, 1993 and amended and restated as of
February 7, 1994 incorporated herein by
reference to the Company's registration
statement on Form 8-B/A filed March 6,
1994.10.7*Bedford Property Investors, Inc.
Directors' Stock Option Plan effective May 20,
1992, as adopted by the Company on September
27, 1993 and amended and restated as of
February 7, 1994 incorporated herein by
reference to the Company's registration
statement on Form 8-B/A filed March 6,
1994.10.8Agreement to Purchase Real Property,
dated July 23, 1993, by and between Bedford
Property Investors, Inc., as Seller, and MGI
Properties, as Purchaser, for Point West
Place.10.9Sale-Purchase Agreement dated
December 14, 1993, by and between NCEC Realty,
Inc., as Seller and Bedford Property
Investors, Inc., as Purchaser, for 1000 Town
Center Drive, is incorporated herein by
reference to the Company's Form 8-K filed
January 13, 1994.10.10Purchase and Sale
Agreement, dated December 20, 1993, by and
between Mariner Court Associates, as Seller,
and Bedford Property Investors, Inc., as
Purchaser for Mariner Court, is incorporated
herein by reference to the Company's Form 8-K
filed January 13, 1994.10.11Agreement to
Purchase Real Property, dated June 11, 1993,
by and between Country Hollow Associates, as
Seller, and A.S., Inc., as Purchaser, for
Texas Bank North Building, is incorporated
herein by reference to the Company's Form 8-K
filed January 27, 1994.21Subsidiaries of
Registrant.24.1Consent of KPMG Peat
Marwick.*Compensatory plans required to be
filed as an exhibit pursuant to item 14(c) of
Form 10-K. (b) Reports on Form 8-KFor
the quarter ended September 30, 1993, the
Company filed a report on Form 8-K dated
August 18, 1993, announcing the sale of the
University Tower office building and the
acquisition of the Woodlands II office
building. During the quarter ended
December 31, 1993, the Company filed a report
on Form 8-K/A, which amended items reported on
Form 8-K dated August 18, 1993. Also, the
Company filed a report on Form 8-K dated
October 1, 1993, announcing the sale of Point
West Place.
BEDFORD PROPERTY INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Summary of Significant Accounting
Policies
The Company
On July 1, 1993, the Company (formerly known
as ICM Property Investors Incorporated)
reincorporated from the state of Delaware to
the state of Maryland under a new name,
Bedford Property Investors, Inc. As of July
1st, the Company's Common Stock traded under
the symbol "BED" on both the New York and
Pacific Stock Exchanges. Concurrent with the
reincorporation, the number of authorized
shares of Preferred Stock was increased from
1,000,000 shares to 10,000,000 shares and the
number of authorized shares of Common Stock
was increased from 10,000,000 to 30,000,000
shares. Also, the par value of both the
Preferred and Common Stock was reduced from
$1.00 to $0.01 per share and Treasury Stock
was eliminated. For comparative purposes,
stockholders' equity for the years ended
December 31, 1992 and 1991 has been
reclassified to reflect the above
changes.
Principles of Consolidation
The consolidated financial statements include
the accounts of Bedford Property Investors,
Inc., its wholly-owned subsidiaries and its
consolidated joint venture partnerships. As of
June 30, 1992, the Company no longer had
investments in joint venture partnerships
which were consolidated. As of May 31, 1993,
the Company no longer had investments in
unconsolidated joint venture partnerships.
All significant inter-entity balances have
been eliminated in consolidation.
Federal Income Taxes
The Company has qualified 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. No provision for federal income
taxes has been made in the consolidated
financial statements, as 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
joint venture partnerships and the difference
in timing of the recognition of losses. As of
December 31, 1993, for federal income tax
purposes, the Company had an ordinary loss
carryforward of approximately $31,227,000 and
a capital loss carryforward of approximately
$13,675,000.
Real Estate Investments
When the Company concludes that the recovery
of the carrying value of a real estate
investment is permanently impaired, it reduces
such carrying value to the amount deemed
recoverable. Investments which have been
classified as offered for sale are written
down to estimated net realizable value if net
realizable value is less than the carrying
amount of the investment.
Depreciation and Amortization
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 being depreciated over the
useful lives of the buildings. Leasing
commissions and improvements to tenants' space
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.
Income Recognition
Rental income from operating leases is
recognized in income on a straight-line basis
over the period of the related lease
agreement.
The Company records its proportionate share of
joint venture operations on the basis of its
obligation to fund or its right to receive
cash flows in accordance with the partnership
agreements, rather than on the Company's legal
ownership percentage of the partnerships.
Per Share Data
Per share data are based on the weighted
average number of shares outstanding during
the year. Weighted average shares for
computing per share data were 5,975,900 for
1993, 1992 and 1991. Outstanding warrants and
stock options during the above periods have
not been included in the calculation of shares
outstanding because the effect of their
assumed conversion would be immaterial.
Reclassifications
Certain reclassifications have been made to
the 1992 and 1991 financial statements to
conform to the 1993 presentation.
Note 2 - Real Estate Investments
The following table sets forth the Company's
real estate investments as of December 31,
1993 (in thousands):
LOTUS FORMAT TABLE TO BE
SUBMITTED WITH HARD COPY
University TowerOn July 31, 1992, the Company
entered into a contract to sell its investment
in University Tower for $15,350,000 in cash.
In anticipation of the proposed sale, the
Company provided a $3,200,000 provision for
possible loss related to this investment. The
contract of sale, which was scheduled to
expire on November 13, 1992, was extended and
expired on December 31, 1992. Subsequent to
the expiration of the contract, the Company
signed a tenant lease with the potential buyer
for approximately 20% of the building's space
and, as part of the lease, the lessee obtained
a short-term option to purchase the building.
On May 25, 1993, the option was exercised and
the sale of University Tower was completed on
August 18, 1993. The cash sale price,
including the reimbursement of tenant
relocation costs of $300,000, was $15,200,000
and produced a gain of $407,000.
Point West Place
During the fourth quarter of 1992, the Company
decided to offer Point West Place for sale.
In anticipation of such sale, the Company
wrote down its investment in this property by
$9,290,000 in 1992. On October 1, 1993, the
property was sold for a cash price of
$7,180,000, resulting in a gain of $493,000.
A portion of the sale proceeds from Point West
Place was used to retire $5,113,000 of
mortgage debt secured by the five industrial
properties.
IBM Building
The Company continues to offer the IBM
Building for sale.
Texas Bank North Building
As of May 1, 1992, the Company's partner in
the partnership that owns the Texas Bank North
Building assigned its interest in the
partnership to the Company. During the fourth
quarter of 1992, the Company decided to offer
the Texas Bank North Building for sale. In
anticipation of such sale, the Company wrote
down its investment in this property by
$3,631,000. In December, 1993, the Company
entered into a contract to sell the Texas Bank
North Building for a cash sale price of
$8,500,000. The sale was completed on January
14, 1994 and resulted in a gain of $1,193,000.
Woodlands II
The property, a suburban six-story office
building located in Salt Lake City, Utah, was
purchased for $6,750,000 on August 25, 1993.
The Company also recorded acquisition costs of
$101,000 paid to Peter B. Bedford, Chairman of
the Board and Chief Executive Officer of the
Company (see Note 5).
1000 Town Center Drive
The property, a suburban six-story office
building located in Oxnard, California, was
purchased on December 30, 1993. The purchase
price of $5,100,000 consisted of $3,600,000 in
cash and $1,500,000 to be paid in December
1994. The Company also recorded acquisition
costs of $77,000 paid to Peter B. Bedford,
Chairman of the Board and Chief Executive
Officer of the Company (see Note 5). The
$3,600,000 cash payment was financed using the
Company's new $20,000,000 revolving credit
facility with Bank of America. The credit
facility was subsequently paid off in January,
1994.
Columbia Business Center
In accordance with a Settlement Agreement
dated June 3, 1992 between the Company and the
first mortgagee, ownership of Columbia
Business Center was transferred to the first
mortgagee. As of June 30, 1992, the Company
wrote off its investment in this property,
resulting in the recognition of a net gain of
$1,018,000 (comprised of an extraordinary gain
of $3,818,000 attributable to the
extinguishment of the first mortgage on the
property and a $2,800,000 loss related to the
write-off of the property's buildings and
improvements). The property was managed by a
company owned by Peter B. Bedford, then a
Board member and
significant stockholder in the Company.
Industrial Buildings
On December 5, 1990, the Company purchased
five industrial properties from Peter B.
Bedford. The aggregate purchase price of the
properties to the Company was $9,050,000, plus
closing and acquisition costs. The purchase
price consisted of $3,938,000 in the form of
500,000 newly-issued shares of the Company's
Common Stock and $5,113,000 in the form of
interestonly first mortgage loans, scheduled
to mature on December 4, 1995, bearing
interest at rates of either 9% or 9.5%. Under
a Registration Rights Agreement dated as of
December 5, 1990 between the Company and Mr.
Bedford, upon written request of Mr. Bedford
after March 6, 1991, the Company will use its
best efforts to effect the registration of the
500,000 shares of Common Stock. The Company
and the seller entered into separate property
management agreements under which an affiliate
of the seller managed each of the properties
on a dayto-day basis. Effective February 1,
1993, the Company began internally managing
all of its industrial properties. The Company
paid off the mortgage loans, including
principal and accrued interest, on November
1, 1993.
On-site maintenance of the suburban office
buildings is managed by independent property
managers. With the exception of Texas Bank
North, the Company centralized financial
recordkeeping of all its properties effective
July 1, 1993.
Note 3 - Unconsolidated Joint Venture
Partnerships
Edison Square
Distributions to the Company exceeded its
combined mortgage loan and equity investments
in these joint venture partnerships and such
amounts had been recorded as liabilities in
the Company's financial statements. On May
31, 1993, the Company sold its partnership
interests in the three Edison Square
properties in exchange for a note receivable
of $300,000 with an interest rate of 8%
payable quarterly in July, October, January
and April until May 31, 1998 at which time the
note matures. The sale of the Company's
interest in the three unconsolidated joint
venture partnerships resulted in a gain of
$2,686,000.
Jefferson Plaza
In May 1992, the Company paid $400,000 to
settle a dispute with the partners in the
partnership that owns Jefferson Plaza and
transferred its interest in the property for a
nominal sum, in exchange for general releases
by the Company's partners. As of December 21,
1992, the investment in Jefferson Plaza was
written off, resulting in a gain of $37,000.
The combined balance sheets of the Company's
unconsolidated joint venture partnerships in
Edison Square reflected assets, liabilities
and partners' deficit of $23,786,000,
$31,599,000 and $7,813,000, respectively.
The following table reflects the combined
results of the operations of the Company's
unconsolidated joint venture partnerships for
each of the three years ended December 31,
1993, 1992 and 1991 (in thousands).
LOTUS FORMAT TABLE TO BE INCLUDED ON
HARD COPY SUBMITTAL
1 Includes the operations of Edison Square for
the three months ended March 31, 1993.
2Includes the operations of Edison Square for
the fifteen months ended December 31, 1992.
3Includes the operations of Edison Square for
the year ended September 30, 1991, Jefferson
Plaza for the year ended
October 31, 1991 and University Tower for
the eleven-month period ended September 30,
1991.
Note 4 - Leases
Minimum future rental receipts under occupancy
leases outstanding at December 31, 1993 were
as follows (in thousands):
1994 $6,640
1995 4,890
1996 4,053
1997 2,443
1998 1,341
Thereafter 2,106
The total minimum future rental 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
Certain of the Company's properties were
managed by Bedford Properties Holdings, Ltd.,
Inc., a wholly-owned company of Peter B.
Bedford, Chairman of the Board and Chief
Executive Officer of the Company. Fees of
$2,000, $40,000 and $83,000 were earned during
1993, 1992 and 1991 respectively by Bedford
Properties Holdings, Ltd., Inc. Effective
February 1993, Bedford Properties Holdings,
Ltd., Inc. ceased to render management
services due to the Company's implementation
of selfmanagement of the industrial buildings.
In January 1993, the Company entered into an
office lease with a company in which Peter B.
Bedford is a 90% shareholder. The rental
obligation for the two year term is $136,000
for 3,236 square feet. As of December 31,
1993, another company wholly-owned by Peter B.
Bedford was leasing 2,400 square feet of space
in one of the Company's industrial buildlings
on a month-to-month basis at a rental rate of
$1,248 per month, which the Company feels is
market rent. The furniture and equipment
currently being used by the staff of the
Company is the property of Bedford Properties
Holdings, Ltd., Inc. and will be transferred
to the Company at a price based on an outside
appraisal.
In 1993, BPI Acquisitions was formed as a
separate division of the Company to engage in
the solicitation of equity capital, financing
and the acquisition of properties. The
salaries and costs associated with the
division are funded by Mr. Bedford. To the
extent capital is raised, financing is
obtained or properties are acquired, the
Company pays a fee
to Mr. Bedford at a rate of one and one half
(11/2) percent of such transactions up to the
amount advanced. Such fees are capitalized as
capital raising, financing or acquisition
costs. The fundings by Mr. Bedford and any
subsequent fees are subject to ongoing review
and approval by the Company's independent
directors. During 1993, the Company paid Mr.
Bedford $478,000 in connection with the
acquisition of two properties and the
placement of a new revolving line of credit
for property acquisitions. As of December 31,
1993, Mr. Bedford had funded $63,000 of costs
related to BPI Acquisitions net of fees.
Note 6 - Stock Option Plans
The Employee Stock Option Plan provides for
NonQualified Stock Options, Incentive Stock
Options and Stock Appreciation Rights. On
June 9, 1993, the Employee Stock Option Plan
was amended whereby the aggregate number of
shares which may be issued under the Plan was
increased from 300,000 to 1,800,000. The
amendment made consultants engaged in
acquisition, financing and fund raising
activities for the Company eligible under the
Plan in addition to officers and key
employees.
The option price may not be less than 85% of
the fair market value of the common stock at
the time the option is granted, with the
exception of incentive stock options, wherein
the option price may not be less than 100% of
the fair market value of the stock at the time
the option is granted. On June 9, 1993,
39,000 stock options were granted to officers
of the Company at an exercise price of $4.25
per share, which was the closing price at
that date. These options vest at a rate of
25% per year of service.
On May 20, 1992, the Board of Directors
adopted the 1992 Directors' Stock Option
Plan, which was subsequently amended by the
Board and ratified by the shareholders on
June 9, 1993. On May 20, 1992, each director
was granted, subject to shareholder approval
of the plan, options to purchase 50,000
shares of the Company's common stock at
$2.875 per share, the closing price on that
date. These options became exercisable on
June 9, 1993. On June 9, 1993, each director
was granted options to purchase an additional
10,000 shares at $4.25 per share, the closing
price on that date. These options became
exercisable on December 9, 1993. Pursuant to
the reincorporation to the State of Maryland,
the Board of Directors ratified the Employee
and Directors' Plan on September 27, 1993,
and on February 7, 1994 amended the Plan to
reflect the Company's name change.
Note 7 - Share Equivalent Incentive Plan
The 1989 Share Equivalent Incentive Plan (the
"Plan") provides for up to 300,000
"performance units" to be awarded to key
employees of the Company over the eleven-year
period ending December 31, 1999. Key
employees selected to participate in the Plan
will be paid a cash "performance award"
measured by the appreciation, if any, in
value of the Company's Common Stock over a
three-year "performance cycle". In addition,
a participating employee will be paid, at the
end of the performance cycle, an amount equal
to the cash distributions paid or credited by
the Company during the three-year period on
the number of shares of common stock
equivalent to the number of units awarded.
At December 31, 1993, there were no
performance units outstanding.
Note 8 - Stockholder Rights Plan
On July 18, 1989, the Company's Board of
Directors adopted a Stockholder Rights Plan
and declared a dividend distribution of one
right for each share of the Company's Common
Stock outstanding on July 31, 1989. The
Rights entitle the holders to purchase, under
certain conditions, one-hundredth of a newly-
issued share of Series A voting Preferred
Stock at an exercise price of $30.00. The
Rights may also, under certain conditions,
entitle the holders to receive Common Stock
or other consideration having a value equal
to two times the exercise price of each
Right. The Rights are redeemable by the
Company at a price of $0.01 per Right. If not
so redeemed, the Rights expire on July 18,
1999.
Note 9 - Bank Loan Payable
The Company's bank credit facility which
matured on January 31, 1993 was not repaid
and was extended through June 15, 1993. On
April 26, 1993, a new credit facility with
Bank of America, which consisted of a
$6,000,000 threeyear term loan secured by a
deed of trust on University Tower, was
approved. On July 14, 1993, the new facility
was funded and the previous bank credit
facility was paid off. The new loan was paid
off on August 18, 1993.
In December 1993, the Company concluded an
agreement with Bank of America for a $20
million revolving line of credit for real
estate acquisitions. This facility, which
matures on January 1, 1997, carries an
interest rate option of either prime plus
0.75% or an offshore interest rate, similar
to LIBOR, plus 3.00% and is secured by deeds
of trust on the Woodlands II and IBM
buildings. The outstanding amount on the
facility of $3,621,000 at December 31, 1993
was used to finance the purchase of 1000 Town
Center Drive. Borrowings under the facility
were subsequently repaid in January 1994.
The daily weighted average amount owing to
the bank was $3,253,000 and $4,137,000 in
1993 and 1992 respectively. The weighted
average interest rate in these periods was
6.7% and 5.7% respectively.
Note 10 - Quarterly Financial Data-Unaudited
The following is a summary of quarterly
results of operations for 1993 and 1992:
In thousands of dollars, except per share
data)
LOTUS FORMAT TABLE TO BE INCLUDED ON
HARD COPY SUBMITTAL
Company's investment in the Texas Bank North
Building and Point West Place.
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 25, 1994
Pursuant to the requirements of the
Securities Exchange Act of 1934, this report
has been
signed below by the following persons on
behalf of the Registrant and in the
capacities and on the dates indicated.
By: /s/ Peter B. Bedford March 25,
1994 Peter B. Bedford, Chairman of the Board
and Chief Executive Officer
By: /s/Claude M. Ballard March
25,
1994
Claude M. Ballard, Director
By: /s/ Anthony Downs March
25,
1994
Anthony Downs, Director
By: /s/ Anthony M. Frank March
25,
1994
Anthony M. Frank, Director
By: /s/ Martin I. Zankel, Esq. March
25,
1994
Martin I. Zankel, Esq., Director
By:/s/ Jay Spangenberg March
25,
1994
Jay Spangenberg
Chief Financial Officer
By:\s\Hanh Kihara ________March
25, 1994
Hanh Kihara
Controller