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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, 1995
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 (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 March 15,
1996 was approximately $31,812,000. The number of shares of Registrant's
Common Stock, par value $0.01 per share, outstanding as of March 15, 1996
was 6,090,650.
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 16, 1996, 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. is a self-administered and self-managed
equity REIT engaged in the business of owning, managing, acquiring and,
when appropriate, developing industrial and suburban office properties
proximate to metropolitan areas primarily in the Western United States.
As of December 31, 1995 the Company owned and operated, either directly
or through one of its wholly-owned subsidiaries, 30 properties,
aggregating approximately 2.6 million rentable square feet and comprised
of 24 industrial properties (the "Industrial Properties"), five suburban
office properties (the "Suburban Office Properties") and one retail
property (the "Retail Property"). The Industrial Properties, the
Suburban Office Properties and the Retail Property are hereinafter
referred to individually as a "Property" and collectively as the
"Properties." As of February 29, 1996, the Properties were approximately
96% occupied by over 300 tenants.
The Company's strategy is to own, manage, acquire and, when appropriate,
develop industrial and suburban office properties in markets proximate
to metropolitan areas primarily in the Western United States which are
experiencing, or are expected by the Company to experience, economic
growth and, if possible, 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 and that increased industrial production and consumer
spending are reliable indicators of demand for industrial space. In
addition, the Company believes that certain supply-side constraints, such
as limited availability of undeveloped land in a market and of financing
for speculative real estate construction, increase a market's potential
for higher average rents over time. The Company is currently targeting
selected suburban markets in the Western United States that are
experiencing, or are expected by the Company to experience, economic
growth, increased spending or production and supply-side constraints.
The Company believes that due to improvements in the regional economy and
reduced availability of financing for new construction, an investment in
industrial and suburban office properties in the Western United States
provides the potential for attractive returns. The Company also believes
that further improvement in economic conditions in the Western United
States could favorably affect occupancy levels, rents and real estate
values, although there can be no assurance that this will in fact occur.
The Company seeks to grow its asset base through the acquisition of
individual industrial and suburban office properties and portfolios of
such properties, as well as through the development of new industrial and
suburban office properties, when appropriate.
The Company was formerly a Delaware corporation, incorporated in November
1984 under the name of ICM Property Investors Incorporated. On July 1,
1993, the Company was reincorporated in the state of Maryland under a new
name, Bedford Property Investors, Inc.
Business Objective
The Company's business objectives are (i) to increase funds available for
distribution to stockholders and (ii) to increase stockholders' long term
total return through the appreciation in value of the Company's Common
Stock. To achieve these objectives, the Company will seek to (i)
increase cash flow from the Properties, (ii) acquire quality industrial
and suburban office properties and/or portfolios of such properties and
(iii) when appropriate, develop new industrial and suburban office
properties.
In pursuing its business objective and growth plans, the Company intends
to:
Capitalize on its experienced management team, whose senior
officers have on average over 17 years of experience in the
ownership, management, acquisition and development of industrial
and suburban office properties in the Western United States;
Focus its acquisition efforts in the Western United States;
Pursue a market driven strategy which is based upon an analysis of
the regional factors which the Company believes impact the supply
of, and demand for, industrial and suburban office properties;
Plan for future anticipated expenses associated with tenant
turnover by budgeting for tenant improvements, lease commissions,
and lost income due to vacancy or construction down-time;
Concentrate on acquiring general purpose, flexible properties which
are suitable for a diverse range of tenants;
Utilize its in-house asset and property management personnel in
order to reduce its overhead costs and increase its responsiveness
to its tenants' needs;
Cooperate with local real estate brokers in order to more
effectively attract and retain tenants; and
Maintain a conservative capital structure by limiting total
consolidated indebtedness to no more than 50% of its total market
capitalization (defined as the aggregate market value of the
outstanding Common Stock, plus the outstanding balance of Series
A Convertible Preferred Stock plus the total consolidated
indebtedness of the Company).
Transactions During 1995
Convertible Preferred Stock
On September 18, 1995 the Company completed the sale of $50,000,000 of
Series A convertible preferred stock (the "Convertible Preferred Stock")
to an entity beneficially owned by an investment fund managed by Aldrich
Eastman Waltch. The Company issued 8,333,334 shares of the Convertible
Preferred Stock for $6.00 per share. Holders of the Convertible
Preferred Stock are entitled to receive, when and as authorized by the
Board of Directors, 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. The shares of Convertible Preferred Stock are
convertible at any time after September 18, 1997 into an equal number of
common shares. The conversion rate may be adjusted under certain
conditions.
Amended and Restated Credit Facility
A portion of the net cash proceeds from the Convertible Preferred Stock
sale was used to pay off the outstanding borrowings of $22,400,000 under
the $23 million credit facility with Bank of America. The facility,
obtained in December 1993 for $20 million and increased to $23 million
in August 1994, was restated and amended to $60 million on September 18,
1995. The amended facility, which matures on September 1, 1998, bears
interest at a floating rate equal to either the lender's published
"reference rate" plus 0.50% or its "offshore rate" (similar to LIBOR)
plus 2.25%. The facility is secured by mortgages on 23 properties (which
collectively accounted for approximately 81% of the Company's annualized
base rent as of December 31, 1995), together with the rental proceeds
from such properties. At December 31, 1995, the Company had outstanding
borrowings of $43,250,000 and letters of credit aggregating $3,875,000
(including letters of credit totalling $875,000 expiring in March 1996
and a letter of credit of $3,000,000 securing a payable due in December
1996 relating to the acquisition of the Landsing Pacific Portfolio). The
facility contains various restrictive covenants including among other
things, a covenant limiting quarterly dividends to 90% of average funds
from operations for the immediately preceding two fiscal quarters.
Acquisitions
From September 1995 through December 1995, the Company acquired 20
properties consisting of approximately 1,546,000 square feet and
comprised of 18 industrial properties, one suburban office property and
one retail property. The total cost of these Properties, including
estimated capital expenditures and due diligence costs, was $84.1
million. At acquisition, it was estimated that these Properties would
provide an initial weighted average unleveraged return on cost (computed
as annualized property net operating income divided by total acquisition
cost) of 10.5%, assuming no further lease-up. With expected 1996 leasing
activity, the Company anticipates achieving a weighted average
unleveraged return on cost of 11.4%. The cost of these Properties has
been financed with the proceeds of the $50 million sale of the
Convertible Preferred Stock and borrowings and letters of credit under
the credit facility. The following is a brief description of the
Properties acquired in 1995.
In September 1995, the Company acquired 350 East Plumeria Drive, a
research and development building consisting of approximately 142,700
rentable square feet, in San Jose, California, which is located in the
South Bay market of San Francisco approximately 37 miles south of
downtown San Francisco. The Company paid $8.33 million, or approximately
$58 per rentable square foot, for 350 East Plumeria Drive.
In September 1995, the Company acquired Lackman Business Center, a two-
building industrial property consisting of approximately 45,956 rentable
square feet, in Lenexa, Kansas, which is located approximately eight
miles southeast of Kansas City. The Company paid $2.25 million, or
approximately $49 per rentable square foot, for Lackman Business Center.
In September 1995, the Company acquired Ninety-Ninth Street #1, a single-
story industrial building consisting of approximately 35,516 rentable
square feet, in Lenexa, Kansas, which is located approximately eight
miles southeast of Kansas City. The Company paid $1.95 million, or
approximately $55 per rentable square foot, for Ninety-Ninth Street #1.
In September 1995, the Company acquired Ninety-Ninth Street #2, a single-
story industrial building consisting of approximately 12,974 rentable
square feet, in Lenexa, Kansas, which is located approximately eight
miles southeast of Kansas City. The Company paid $735,000, or
approximately $57 per rentable square foot, for Ninety-Ninth Street #2.
In October 1995, the Company acquired 6600 College Boulevard, a single-
story office building consisting of approximately 79,316 rentable square
feet, in Overland Park, Kansas, which is located approximately ten miles
southeast of Kansas City. The Company paid $6.36 million, or
approximately $80 per rentable square foot, for 6600 College Boulevard.
In December 1995, the Company acquired the Landsing Pacific Portfolio,
which comprised substantially all of the real estate assets of the
Landsing Pacific Fund, Inc., a publicly-traded REIT based in San Mateo,
California. The Landsing Pacific Portfolio consists of thirteen
industrial properties and one retail property aggregating approximately
1.0 million rentable square feet located in Northern California,
Colorado, Minnesota and Oregon. The Company paid $49.7 million, or
approximately $50 per rentable square foot, for the Landsing Pacific
Portfolio.
In December 1995, the Company acquired 3002 Dow Business Center, a five-
building industrial property consisting of approximately 192,215 rentable
square feet, in Tustin, California, which is located in Orange County
approximately 37 miles south of downtown Los Angeles. The Company paid
$11.5 million, or approximately $60 per rentable square foot, for 3002
Dow Business Center.
Development
During 1995, the Company commenced the development of a 3.1 acre parcel
located on the Company's Milpitas Town Center property in Milpitas,
California on an unleased ("speculative") basis. The development will
consist of a single-story research and development facility with
approximately 45,090 rentable square feet. The Company estimates that
it will incur total development costs of approximately $2.7 million with
an expected completion date in April 1996. The Company has recently
signed a five-year lease commencing on May 1, 1996 with Fujitsu PC
Corporation who will occupy the entire building. The Company also owns
3.6 acres of entitled land adjacent to its Suburban Office Property in
Salt Lake City, Utah.
Dispositions
In September 1995, the Company sold Cody Street Park, Building 6 an
industrial property located in Overland Park, Kansas, consisting of
approximately 37,856 rentable square feet, to The Realty Associated Fund
III, L.P. for $1.5 million. The proceeds from the sale of Cody Street
Park, Building 6 were applied toward the purchase of Ninety-Ninth Street
#1 and Ninety-Ninth Street #2, which were purchased from The Realty
Associates Fund III, L.P. and closed concurrently with the sale of Cody
Street Park, Building 6. In October 1995, the Company sold the IBM
Building, a suburban office building located in Jackson, Mississippi,
consisting of approximately 88,000 rentable square feet, to The Parkway
Company for $6.5 million. The sale of the IBM Building completed the
Company's asset repositioning that was commenced in late 1992.
Acquisition Analysis
The Company seeks to acquire quality industrial and suburban office
properties and/or portfolios of such properties. The Company believes
that (i) the experience of its management team, (ii) its conservative
capital structure and its 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 have enhanced, and will continue to enhance its
ability to 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.
Anticipated Expenses Associated with Tenant Turnover
The cash flow of a real estate asset can vary significantly from year to
year depending on tenant turnover. When a lease expires and a tenant
renews or vacates its space, costs associated with tenant improvements,
lease commissions and lost income due to vacancy or construction
down-time can significantly reduce the cash flow from a property. Due
to the capital intensive nature of suburban office properties and, to a
lesser degree, industrial properties, management believes that planning
and budgeting for future costs associated with tenant turnover is a
prudent component of evaluating investment yields and managing the cash
flow of properties. For its existing portfolio, the Company estimates
the future costs for tenant improvements, lease commissions and lost
income due to vacancy and construction down-time on a property by
property basis. Although these future costs are not accrued for
financial reporting purposes, the Company incorporates these estimates
in its annual cash budgets and long-term cash forecasts. The Company
believes that its ability to fund tenant improvements and pay lease
commissions helps to retain and attract tenants.
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 six times since that time from $.05 per share in
the second quarter of 1993 to $.105 per share in each of the second,
third and fourth quarters of 1995. In March 1996, the Company declared
a dividend distribution for the first quarter 1996 to its stockholders
in the amount of $.12 per share of Common Stock, payable 30 days after
the quarter-end.
The Company paid dividends to the holders of the Convertible Preferred
Stock in an amount of approximately $.02 per share of Convertible
Preferred Stock for the partial dividend period commencing September 18,
1995 and ended September 30, 1995 and $.135 per share of Convertible
Preferred Stock for the fourth quarter of 1995. In March 1996, the
Company declared a dividend distribution for the first quarter 1996 to
the holders of the Convertible Preferred Stock in an amount of $.135 per
share of Convertible Preferred Stock, payable 45 days after the quarter-
end. Dividends may be authorized, declared and paid on shares of Common
Stock in any fiscal quarter only if full cumulative dividends have been
paid on, or authorized and set apart on, all shares of Convertible
Preferred Stock for all prior dividend periods through and including the
end of such quarter. Holders of the Convertible Preferred Stock are
entitled to receive in each calendar quarter, when and as authorized and
declared by the Board of Directors, cumulative dividends in cash in an
amount equal to the greater of (i) an amount per share of $.135 or (ii)
the dividends payable with respect to such quarter on each share of the
Common Stock into which each share of the Convertible Preferred Stock is
convertible, plus, in both cases, the accumulated but unpaid dividends
on the Convertible Preferred Stock.
Distributions on the Common Stock by the Company to the extent of its
current and accumulated earnings and profits for federal income tax
purposes generally will be taxable to stockholders as ordinary income.
Distributions in excess of such earnings and profits generally will be
treated as a non-taxable reduction in the stockholder's basis in its
stock to the extent of such basis, and thereafter as gain from the sale
of such stock. For purposes of determining whether distributions are out
of current or accumulated earnings and profits, the earning and profits
of the Company will be allocated first to the Convertible Preferred
Stock, and then allocated to the Common Stock. All dividend
distributions made in the years 1993, 1994 and 1995 were classified as
a return of capital stock for federal income tax purposes. However, it
is likely that a substantial portion of the Company's dividend
distributions in 1996 will be taxable as ordinary income.
The Company currently intends to continue paying regular quarterly
dividends and to distribute amounts sufficient to maintain its status as
a REIT. Dividends on the Common Stock by the Company are made at the
discretion of the Board of Directors and depend on the Board of
Directors' evaluation of the Company's results of operations, financial
condition and capital requirements, restrictions under the Convertible
Preferred Stock, the Credit Facility, and other debt instruments.
Tenants
Based on rentable square feet, as of December 31, 1995, the Suburban
Office Properties and Industrial Properties were approximately 96% and
95% occupied, respectively, by a total of 291 tenants of which 71 were
Suburban Office Property tenants and 220 were Industrial Property
tenants. As of December 31, 1995, the Retail Property was 99% occupied
by 15 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), (iii) the sale of real estate investments, and
(iv) the sale of equity securities and, possibly, the issuance of equity
securities in connection with acquisitions.
The Company does not anticipate that cash flow from operations will be
sufficient to enable it to repay amounts outstanding under the credit
facility when they become due in 1998. The Company expects to make such
payment by refinancing or extending the credit facility or by raising
funds through the sale of equity securities or 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 $10 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 $10 million subject to a deductible of 7.5% to 25% 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. 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 which have a significant supply of available space,
resulting in intense competition for tenants and low rents.
Government Regulations
The properties are subject to various federal, state and local regulatory
requirements such as local building codes and other similar regulations.
The Company believes that the Properties are currently in substantial
compliance with all applicable regulatory requirements, although
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 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. All of the Company's properties have had Phase I
environmental site assessments (which involve inspection without soil
sampling or groundwater analysis) by independent environmental
consultants and have been inspected for hazardous materials as part of
the Company's acquisition inspections. None of these Phase I
assessments has revealed any environmental conditions requiring material
expenditures for remediation. The Phase I assessment for Milpitas Town
Center indicates that the ground water under the property either has been
or may in the future be impacted by the migration of contaminants
originating off-site. According to information available to the Company,
the responsible party for this off-site source has been identified and
has begun remediation pursuant to a clean-up program mandated by a
California environmental authority and the clean-up program is backed by
an insurance policy from CIGNA up to $10 million. The Company does not
believe that this environmental matter will impair the future value of
Milpitas Town Center in any significant respect.
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. The Company does not 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.
Other Information
The Company currently employs eighteen full time employees and one part-
time employee. 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, 1995, the Company's real estate investments (net of
accumulated depreciation) were diversified by property type as follows:
Number of Investment
Properties Amount % of Total
Industrial Buildings 24 93,710,000 73
Office Buildings 5 $28,996,000 22
Retail Buildings 1 6,258,000 5
Total 30 $128,964,000 100
As of December 31, 1995, the Company's real estate investments (net of
accumulated depreciation) were diversified by geographic region as
follows:
Number of Investment
Properties Amount % of Total
San Francisco Bay
Area, California 13 $45,745,000 35
Greater Los Angeles
Area, California 4 34,902,000 27
Kansas City, Kansas 5 13,764,000 11
Denver Metropolitan
Area, Colorado 3 11,245,000 9
Greater Portland Area,
Oregon 2 10,424,000 8
Salt Lake City, Utah 1 6,718,000 5
Minneapolis/St. Paul,
Minnesota 2 6,166,000 5
Total 30 $128,964,000 100
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, 1995.
Percentage Occupied/Number of Tenants Occupying 10% or more
1991 1992 1993 1994 1995
Property % # % # % # % # % # Principal Business at December 31, 1995
INDUSTRIAL
Greater San Francisco
Bay Area, California
Building 3
Contra Costa Diablo
Ind. Park, Concord 100% 1 100% 1 100% 1 100% 1 100% 1 Production and assembly of robotic parts
and machines.
Building 8
Contra Costa Diablo
Ind. Park, Concord 100% 1 100% 1 100% 1 100% 1 100% 1 Warehouse and storage of medical
supplies.
Building 18
Mason Ind. Park,
Concord 87% 2 83% 2 100% 2 90% 2 83% 2 Warehouse of scaffolding materials and
construction supplies.
Milpitas Town Center,
Milpitas N/A N/A N/A 100% 4 100% 4 Manufacturing of blood glucose meters,
assembly and repair of accelerator
systems, light manufacturing of OEM's
and assembly and manufacturing of vacuum
components.
Auburn Court, Fremont N/A N/A N/A N/A 100% 4 Manufacturing of computer equipment,
assembly of cable items, lab engineering,
and marketing design.
Westinghouse Drive,
Fremont N/A N/A N/A N/A 100% 1 Electronic personal computer board
assembly.
350 East Plumeria Drive,
San Jose N/A N/A N/A N/A 100% 1 Developer of data transmission
technology.
301 East Grand, South
San Francisco N/A N/A N/A N/A 71% 2 Freight forwarding and furniture
wholesale.
342 Allerton, South
San Francisco N/A N/A N/A N/A 100% 4 Freight forwarding.
400 Grandview, South
San Francisco N/A N/A N/A N/A 100% 5 Radiology research and development,
freight forwarding, packaging and
distribution of video products.
410 Allerton, South
San Francisco N/A N/A N/A N/A 100% 1 Candy manufacturing and distribution.
417 Eccles, South
San Francisco N/A N/A N/A N/A 100% 2 Storage/distribution of food products
and publishing/binding business.
Greater Los Angeles Area,
California
Dupont Industrial Center,
Ontario N/A N/A N/A 91% 1 100% 1 Warehousing and distribution of retail
goods.
3002 Dow Business Center,
Tustin N/A N/A N/A N/A 83% 0 N/A
Denver, Colorado
Bryant Street Annex,
Denver N/A N/A N/A N/A 100% 2 Materials management for hospital and
automotive paint distributor.
Bryant Street Quad,
Denver N/A N/A N/A N/A 97% 3 Auto parts, photo processing lab, and
radiator coating plant/distributor.
Minneapolis/St. Paul,
Minnesota
St. Paul Business
Center East,
Maplewood N/A N/A N/A N/A 90% 3 Inner ocular lens manufacturing and
railroad company.
St. Paul Business Center
West, Maplewood N/A N/A N/A N/A 81% 1 Corporate offices of testing and
engineering.
Greater Portland Area,
Oregon
Twin Oaks Technology
Center, Beaverton N/A N/A N/A N/A 81% 2 Software developer and
telecommunications.
Twin Oaks Business Park,
Beaverton N/A N/A N/A N/A 94% 3 Laser cutting, electronic equipment
assembly, and postal service.
Kansas City, Kansas
Ninety-Ninth Street #1,
Lenexa N/A N/A N/A N/A 100% 2 Tool distribution and surgical
instrument manufacturing.
Ninety-Ninth Street #2,
Lenexa N/A N/A N/A N/A 100% 1 Drug testing clinic.
Ninety-Ninth Street #3,
Lenexa 100% 2 100% 2 100% 2 100% 2 100% 2 Distribution of medical products and
storage of corporate records/supplies.
Lackman Business Center,
Lenexa N/A N/A N/A N/A 98% 2 Telemarketing and environmental testing
and survey.
SUBURBAN OFFICE PROPERTIES
Greater Los Angeles Area,
California
1000 Town Center Drive,
Oxnard N/A N/A 42% 1 98% 2 93% 2 Law offices, photocopying and printing
services.
Mariner Court, Torrance N/A N/A N/A 96% 2 97% 1 Insurance brokers.
Salt Lake City, Utah
Woodlands Tower II,
Salt Lake City N/A N/A 96% 2 98% 2 95% 2 Insurance services and health care
staffing.
Kansas City, Kansas
6600 College Blvd.,
Overland Park N/A N/A N/A N/A 100% 1 Telecommunication.
Greater San Francisco
Bay Area, California
Village Green, Lafayette N/A N/A N/A 82% 3 100% 2 Software development.
RETAIL
Academy Place Shopping
Center, Colorado Springs N/A N/A N/A N/A 99% 2 Discount clothing store and restaurant.
Lease Expirations - Real Estate Portfolio
The following table sets forth for all of the Company's Properties for
each of the ten years beginning January 1, 1996 (i) the number of
leases that expire in each year, (ii) the square feet covered by such
expiring leases, (iii) the annualized base rent (the "Annualized Base
Rent(1)") represented by such expiring leases and (iv) the percentage
of total Annual Base Rent for expiring leases.
Number of Leases Total Annualized Percentage of
Year Expiring Square Feet Base Rent Annualized Base Rent
1996 84 378,738 $2,529,036 14%
1997 85 722,837 4,771,404 26%
1998 71 538,713 3,989,868 21%
1999 34 328,374 2,357,772 13%
2000 33 240,803 2,287,236 12%
2001 6 201,782 1,974,396 11%
2002 2 17,540 391,356 2%
2003 2 10,279 158,352 1%
2004 1 2,770 27,168 -
2005 and thereafter 2 6,191 94,812 -
Total 320 2,448,027 $18,581,400 100%
Lease Expirations - Significant Properties
The following tables show, as of December 31, 1995, tenant lease
expirations for the next ten years at Properties representing
approximately 10% or more of the Company's total 1995 rental income or
approximately 10% or more of the total Company's gross land and
building assets.
The tables set forth for each property specified below for each of the
ten years beginning January 1, 1996 (i) the number of leases that
expire in that year, (ii) the square feet covered by such expiring
leases, (iii) the Annualized Base Rent represented by such expiring
leases, and (iv) percentage of total Annual Base Rent for leases based
on December 31, 1995 rents.
Number of Leases Total Annualized Percentage of
Year Expiring Square Feet Base Rent Annualized Base Rent
Mariner Court
1996 9 15,030 $259,476 14%
1997 8 19,890 377,796 21%
1998 11 33,752 524,604 29%
1999 3 4,458 70,608 4%
2000 5 12,114 192,168 11%
2001 1 3,734 30,828 2%
2002 1 13,615 334,932 19%
2003 - - - -
2004 - - - -
2005 and thereafter - - - -
Total 38 102,593 $1,790,412 100%
(1) Annualized Base Rent means, for any property and at any date, the
product of (i) the monthly base rent in effect with respect to such
property at such date or, if such monthly base rent has been reduced
by a temporary rent concession, the monthly base rent that would have
been in effect at such date in the absence of such concession,
multiplied by (ii) 12. Annualized Base Rent does not reflect any
increases or decreases in monthly rental rates or lease expirations
which are scheduled to occur or which may occur after the date of
calculation or the cost of any leasing commissions or tenant
improvements.
Lease Expirations - Significant Properties (Continued)
Number of Leases Total Annualized Percentage of
Year Expiring Square Feet Base Rent Annualized Base Rent
1000 Town Center Drive
1996 - - $ - -
1997 1 2,637 45,504 3%
1998 - - - -
1999 2 10,174 157,668 9%
2000 4 35,012 798,300 45%
2001 2 42,186 625,152 35%
2002 - - - -
2003 1 7,390 115,284 6%
2004 1 2,770 27,168 2%
2005 and thereafter - - - -
Total 11 100,169 $1,769,076 100%
Woodlands Tower II
1996 1 3,641 $ 50,976 3%
1997 4 57,110 787,728 51%
1998 3 35,311 511,008 33%
1999 1 5,625 92,940 6%
2000 1 2,661 43,908 3%
2001 - - - -
2002 1 3,925 56,424 4%
2003 - - - -
2004 - - - -
2005 and thereafter - - - -
Total 11 108,273 $1,542,984 100%
Dupont Industrial Center
1996 6 101,137 $ 369,504 26%
1997 4 232,916 670,260 47%
1998 4 49,171 185,484 13%
1999 2 47,088 143,148 10%
2000 1 20,880 62,640 4%
2001 - - - -
2002 - - - -
2003 - - - -
2004 - - - -
2005 and thereafter - - - -
Total 17 451,192 $1,431,036 100%
Principal Provisions of Leases of the Properties
The following table sets forth the principal provisions of leases which represent more than 10%
of the gross leasable area (GLA) of each of the Company's Properties and the realty tax rate for
each property for 1995.
Annual # of Tenants Square Feet Contract Rent
Realty with 10% or Project of Each ($/Sq/Yr) Lease Renewal
Property Taxes/Rate More of GLA Square Feet Tenant At End of Year Expiration Options
INDUSTRIAL
Greater San Francisco
Bay Area, California
Building 3,
Contra Costa Diablo $26,738 1 21,840 21,840 $4.95 Aug. 98 None
Ind. Park, Concord $1.04/100
Building 8, Contra
Costa Diablo $41,287 1 31,800 31,800 $6.00 Dec. 00 2-5 yr.
Ind. Park, Concord $1.04/100
Building 18, Mason
Industrial Park, $20,455 2 28,850 7,225 $6.48 Nov. 98 None
Concord $1.04/100
Milpitas Town Center, $85,341 4 102,620 23,924 $7.80 Jul. 98 None
Milpitas $1.06/100 24,426 $8.24 Apr. 97 None
30,840 $7.20 Jul. 98 1-5 yr.
23,430 $6.15 Jan. 00 1-5 yr.
Auburn Court, Fremont $41,415 4 68,030 15,755 $5.58 Oct. 98 1-5 yr.
$1.07/100 16,095 $5.16 Sep. 98 1-5 yr.
12,060 $9.00 Apr. 98 None
12,060 $7.20 Jul. 00 None
Westinghouse Drive,
Fremont $15,651 1 24,030 24,030 $5.52 Sep. 97 1-3 yr.
$1.07/100
350 East Plumeria
Drive, $133,862 1 142,700 142,700 $7.80 Dec. 01 1-5 yr.
San Jose $1.05/100
301 East Grand, $28,873 2 57,846 26,240 $6.24 Jun. 98 None
South San Francisco $1.00/100 14,400 $5.34 Oct. 99 None
342 Allerton, $45,456 4 69,312 19,751 $6.72 Mar. 97 None
South San Francisco $1.00/100 9,720 $7.80 Mar. 97 1-5 yr.
30,953 $6.60 Feb. 99 None
8,888 $7.20 Aug. 97 None
400 Grandview, $72,657 5 107,004 21,841 $6.72 Dec. 96 None
South San Francisco $1.00/100 26,800 $8.75 Jun. 97 None
20,710 $8.56 Aug. 97 1-3 yr.
18,789 $6.32 May 99 1-5 yr.
18,864 $6.60 Jan. 97 1-5 yr.
410 Allerton, $17,280 1 46,050 46,050 $5.16 Apr. 98 None
South San Francisco $1.00/100
417 Eccles, $12,503 2 24,624 12,960 $6.00 Dec. 97 1-5 yr.
South San Francisco $1.00/100 11,664 $5.39 Aug. 97 1-5 yr.
Greater Los Angeles
Area, California
Dupont Industrial
Center, $212,254 1 451,192 183,244 $2.64 Mar. 97 None
Ontario $1.01/100
3002 Dow Business
Center, $205,352 0 192,125 N/A N/A N/A N/A
Tustin $1.02/100
Denver, Colorado
Bryant Street Annex,
Denver $20,816 2 55,000 42,148 $3.95 Mar. 99 1-1 yr.
$8.12/100 12,852 $4.25 Apr. 98 1-2 yr.
Bryant Street Quad,
Denver $77,807 3 155,536 17,440 $2.65 Mar. 97 1-3 yr.
$8.12/100 20,726 $2.12 Feb. 96 None
16,055 $2.80 Feb. 96 1-3 yr.
Minneapolis/St. Paul,
Minnesota
St. Paul Business
Center East, $139,758 3 77,000 12,300 $6.31 Aug. 98 None
Maplewood $6.62/100 19,000 $6.80 Oct. 98 None
10,200 $8.25 Nov. 97 1-5 yr.
St. Paul Business
Center West, $198,672 1 108,750 11,770 $6.55 Oct. 97 1-3 yr.
Maplewood $6.62/100
Greater Portland
Area, Oregon
Twin Oaks Technology
Center, $57,597 2 94,177 10,780 $7.65 Aug. 97 None
Beaverton $1.34/100 12,240 $7.68 Dec. 96 None
Twin Oaks Business
Park, $41,540 3 65,238 9,409 $4.87 May 99 None
Beaverton $1.34/100 9,236 $7.62 May 96 None
14,522 $10.84 Jul. 96 1-3 yr.
Kansas City, Kansas
Building 3, Ninety-
Ninth Street, $61,423 2 50,000 18,750 $6.66 Mar. 96 None
Lenexa $12.65/100 31,250 $5.38 May 98 None
Building 1, Ninety-
Ninth Street, $46,907 2 35,516 19,019 $7.59 Sep. 98 1-5 yr.
Lenexa $12.65/100 13,305 $8.60 Oct. 97 None
Building 2, Ninety-
Ninth Street, $21,417 1 12,974 12,974 $7.56 Oct. 99 None
Lenexa $12.65/100
Lackman Business
Center, $64,431 2 45,956 5,510 $9.80 Jan. 97 None
Lenexa $12.65/100 5,132 $9.68 May 98 None
SUBURBAN OFFICE
PROPERTIES
Greater Los Angeles
Area, California
1000 Town Center
Drive, $170,058 2 107,653 29,837 $23.71 May 00 2-5 yr.
Oxnard $1.04/100 45,119 $15.45 Aug. 01 1-5 yr.
Mariner Court,
Torrance $87,834 1 105,436 13,615 $24.60 Dec. 02 None
$1.00/100
Salt Lake City, Utah
Woodlands Tower II, $111,842 2 114,352 42,590 $14.12 Feb. 97 None
Salt Lake City $1.43/100 22,599 $15.00 Jan. 98 None
Kansas City, Kansas
6600 College Blvd., $147,294 1 79,316 62,441 $11.80 Dec. 99 None
Overland Park $13.15/100
Greater San Francisco
Bay Area,
California
Village Green,
Lafayette $24,113 2 16,895 1,798 $18.00 Apr. 98 1-5 yr.
$1.08/100 2,119 $18.60 Aug. 96 1-3 yr.
RETAIL
Academy Place
Shopping Center, $63,113 2 84,347 38,703 $8.00 Jan. 00 1-5 yr.
Colorado Springs $6.19/100 10,826 $15.71 Dec. 01 1-5 yr.
Average Effective Rent
The following table sets forth for each of the Properties the average
rent at the end of each year for the last five years.
Net Effective Rent Net Effective Rent
($/Sq/Yr) ($/Sq/Yr)
Properties At End of Year Properties At End of Year
INDUSTRIAL BUILDINGS:
Greater San Francisco Bay Area,
California
Building 3, Contra Costa Diablo Westinghouse Drive
1991 $7.95 1991 N/A
1992 $8.35 1992 N/A
1993 $8.35 1993 N/A
1994 $8.35 1994 N/A
1995 $4.95 1995 $5.52
Building 8, Contra Costa Diablo 350 East Plumeria Drive
1991 $7.08 1991 N/A
1992 $7.08 1992 N/A
1993 $7.43 1993 N/A
1994 $7.81 1994 N/A
1995 $6.00 1995 $7.80
Building 18, Mason Industrial 301 East Grand
Park
1991 $7.47 1991 N/A
1992 $6.28 1992 N/A
1993 $7.03 1993 N/A
1994 $6.95 1994 N/A
1995 $6.63 1995 $5.92
Milpitas Town Center 342 Allerton
1991 N/A 1991 N/A
1992 N/A 1992 N/A
1993 N/A 1993 N/A
1994 $7.11 1994 N/A
1995 $7.35 1995 $6.88
Auburn Court 400 Grandview
1991 N/A 1991 N/A
1992 N/A 1992 N/A
1993 N/A 1993 N/A
1994 N/A 1994 N/A
1995 $6.54 1995 $7.49
Net Effective Rent Net Effective Rent
($/Sq/Yr) ($/Sq/Yr)
Properties At End of Year Properties At End of Year
INDUSTRIAL BUILDINGS:
Greater San Francisco Bay Area,
California
(continued)
410 Allerton 417 Eccles
1991 N/A 1991 N/A
1992 N/A 1992 N/A
1993 N/A 1993 N/A
1994 N/A 1994 N/A
1995 $5.16 1995 $5.71
Greater Los Angeles Area,
California
Dupont Industrial Center 3002 Dow Business Center
1991 N/A 1991 N/A
1992 N/A 1992 N/A
1993 N/A 1993 N/A
1994 $3.07 1994 N/A
1995 $3.17 1995 $8.88
Denver, Colorado
Bryant Street Annex Bryant Street Quad
1991 N/A 1991 N/A
1992 N/A 1992 N/A
1993 N/A 1993 N/A
1994 N/A 1994 N/A
1995 $4.02 1995 $3.09
Minneapolis/St. Paul, Minnesota
St. Paul Business Center - East St. Paul Business Center - West
1991 N/A 1991 N/A
1992 N/A 1992 N/A
1993 N/A 1993 N/A
1994 N/A 1994 N/A
1995 $7.01 1995 $5.41
Greater Portland Area, Oregon
Twin Oaks Technology Center Twin Oaks Business Park
1991 N/A 1991 N/A
1992 N/A 1992 N/A
1993 N/A 1993 N/A
1994 N/A 1994 N/A
1995 $7.27 1995 $7.75
Net Effective Rent Net Effective Rent
($/Sq/Yr) ($/Sq/Yr)
Properties At End of Year Properties At End of Year
INDUSTRIAL BUILDINGS (continued):
Kansas City, Kansas
Building 3, Ninety-Ninth Street Building 2, Ninety-Ninth Street
1991 $5.86 1991 N/A
1992 $5.86 1992 N/A
1993 $5.86 1993 N/A
1994 $5.86 1994 N/A
1995 $5.86 1995 $7.56
Building 1, Ninety-Ninth Street Lackman Business Center
1991 N/A 1991 N/A
1992 N/A 1992 N/A
1993 N/A 1993 N/A
1994 N/A 1994 N/A
1995 $7.96 1995 $8.36
SUBURBAN OFFICE PROPERTIES
Greater Los Angeles Area,
California
1000 Town Center Drive Mariner Court
1991 N/A 1991 N/A
1992 N/A 1992 N/A
1993 $20.84 1993 N/A
1994 $17.11 1994 $19.32
1995 $17.66 1995 $17.67
Salt Lake City, Utah
Woodlands Tower II 6600 College Boulevard
1991 N/A 1991 N/A
1992 N/A 1992 N/A
1993 $13.02 1993 N/A
1994 $14.47 1994 N/A
1995 $14.25 1995 $12.01
Greater San Francisco Bay Area,
California
Village Green
1991 N/A
1992 N/A
1993 N/A
1994 $20.85
1995 $18.23
Net Effective Rent
($/Sq/Yr)
Properties At End of Year
RETAIL PROPERTIES:
Academy Place Shopping Center
1991 N/A
1992 N/A
1993 N/A
1994 N/A
1995 $10.08
Tax Information
The following table sets forth for each of the Company's Properties
tax information 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.
Federal Annual Rate of Depreciation Life
Property Tax Basis Depreciation Method In Years
INDUSTRIAL
Greater San Francisco Bay Area,
California
Building 3, Contra Costa
Diablo, Concord
Building and Improvements $1,116,128 3.18% Straight Line 31.5
Building and Improvements 62,228 2.56% Straight Line 39
Total Depreciable Assets $1,178,356
Building 8, Contra Costa
Diablo, Concord
Building and Improvements 1,461,739 3.18% Straight Line 31.5
Building 18, Mason Industrial
Park, Concord
Building and Improvements 1,210,962 3.18% Straight Line 31.5
Building and Improvements 31,725 2.56% Straight Line 39
Total Depreciable Assets 1,242,687
Milpitas Town Center, Milpitas
Building and Improvements 4,504,839 2.56% Straight Line 39
Auburn Court, Fremont
Building and Improvements 2,506,537 2.56% Straight Line 39
Westinghouse Drive, Fremont
Building and Improvements 905,694 2.56% Straight Line 39
350 East Plumeria Drive,
San Jose
Building and Improvements 4,783,430 2.56% Straight Line 39
301 East Grand,
South San Francisco
Building and Improvements 971,347 2.56% Straight Line 39
342 Allerton, South
San Francisco
Building and Improvements 1,562,551 2.56% Straight Line 39
400 Grandview, South
San Francisco
Building and Improvements 3,563,230 2.56% Straight Line 39
410 Allerton, South
San Francisco
Building and Improvements 901,053 2.56% Straight Line 39
417 Eccles, South San Francisco
Building and Improvements 517,606 2.56% Straight Line 39
Greater Los Angeles Area,
California
Dupont Industrial Park, Ontario
Building and Improvements 6,083,259 2.56% Straight Line 39
3002 Dow Business Center, Tustin
Building and Improvements 7,450,790 2.56% Straight Line 39
Denver, Colorado
Bryant Street Annex, Denver
Building and Improvements 876,566 2.56% Straight Line 39
Bryant Street Quad, Denver
Building and Improvements 2,207,894 2.56% Straight Line 39
Minneapolis/St. Paul, Minnesota
St. Paul Business Center,
East, Maplewood
Building and Improvements 1,782,642 2.56% Straight Line 39
St. Paul Business Center,
West, Maplewood
Building and Improvements 2,391,224 2.56% Straight Line 39
Greater Portland Area, Oregon
Twin Oaks Technology
Center, Beaverton
Building and Improvements 4,901,645 2.56% Straight Line 39
Twin Oaks Business Park,
Beaverton
Building and Improvements 2,886,085 2.56% Straight Line 39
Kansas City, Kansas
Building 3, Ninety-Ninth
Street, Lenexa
Building and Improvements 2,131,840 3.18% Straight Line 31.5
Building and Improvements 4,200 2.56% Straight Line 39
Total Depreciable Assets 2,136,040
Ninety-Ninth Street #1, Lenexa
Building and Improvements 1,570,898 2.56% Straight Line 39
Ninety-Ninth Street #2, Lenexa
Building and Improvements 564,583 2.56% Straight Line 39
Lackman Business Center, Lenexa
Building and Improvements 1,662,259 2.56% Straight Line 39
SUBURBAN OFFICE PROPERTIES
Greater Los Angeles Area,
California
1000 Town Center Drive, Oxnard
Building and Improvements 4,712,185 2.56% Straight Line 39
Mariner Court, Torrance
Building and Improvements 4,463,766 2.56% Straight Line 39
Salt Lake City, Utah
Woodlands Tower II,
Salt Lake City
Building and Improvements 6,093,228 2.56% Straight Line 39
Kansas City, Kansas
6600 College Boulevard,
Overland Park
Building and Improvements 3,981,947 2.56% Straight Line 39
Greater San Francisco
Bay Area, California
Village Green, Lafayette
Building and Improvements 1,411,700 2.56% Straight Line 39
RETAIL
Academy Place Shopping
Center, Colorado Springs
Building and Improvements 3,381,215 2.56% Straight Line 39
Total Depreciable Assets $82,656,995
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
The Annual Meeting of the Stockholders of the Company originally
convened on September 13, 1995 and was reconvened on September 27,
October 12 and November 2, 1995 in order to obtain all votes from the
stockholders to amend the Company's charter to delete in its entirety
Article VIII thereof, relating to certain business combinations.
Approximately 4,587,766 votes were cast for, 162,859 votes were cast
against, 45,815 votes abstained and there were 1,294,210 broker non-
votes on this proposal. Since the Company did not obtain the required
affirmative vote of 80% of the outstanding Common Stock on this
proposal, the proposal will be reconsidered in a special stockholders
meeting to be held on March 28, 1996.
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 March
15, 1996, the Company had 462 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 as traded on the New York Stock Exchange and the dividends
declared per share for each quarter for the past two years.
Dividend
High Low Per Share
1994
First Quarter $7.250 $5.000 $0.080
Second Quarter $7.000 $5.750 $0.090
Third Quarter $7.000 $5.750 $0.090
Fourth Quarter $6.125 $4.875 $0.095
1995
First Quarter $6.375 $5.375 $0.095
Second Quarter $5.875 $5.125 $0.105
Third Quarter $6.750 $5.625 $0.105
Fourth Quarter $7.625 $6.375 $0.105
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)
1995 1994 1993 1992 1991
Operating Data:
Rental income $ 11,695 $ 9,154 $ 7,207 $ 9,056 $ 8,675
Income (loss) before
extraordinary item 2,895 3,609 3,147 (21,943) (5,454)
Net income (loss) 2,895 3,609 3,147 (18,125) (5,454)
Net income (loss) applicable
to common stockholders 1,607 3,609 3,147 (18,125) (5,454)
Income (loss) before
extraordinary item
per common share $ 0.26 $ 0.59 $ 0.53 $ (3.67) $ (0.91)
Net income (loss)
per common share $ 0.26 $ 0.59 $ 0.53 $ (3.03) $ (0.91)
Balance Sheet Data:
Real estate investments $ 128,964 $ 55,053 $ 35,962 $ 45,553 $ 76,310
Total assets 133,478 62,294 43,007 47,509 78,324
Mortgage loans payable - - - 5,113 18,413
Bank loan payable 43,250 22,400 3,621 4,400 3,000
Redeemable preferred shares 50,000 - - - -
Common and other
stockholders' equity 32,435 36,932 35,441 33,370 51,495
Other Data:
Net cash provided by
operating activities $ 4,898 $ 2,716 $ 1,220 $ 198 $ 1,795
Net cash provided (used)
by investing activities (73,259) (19,720) 10,085 (1,750) (1,190)
Net cash provided (used)
by financing activities 64,655 16,807 (6,550) 1,400 (609)
Funds from operations (2) 5,021 3,622 1,964 879 836
Dividends declared per share $ 0.41 $ 0.355 $ 0.18 $ - $ 0.12
(2) Management considers Funds From Operations to be one measure of
the performance of an equity REIT. 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 and sales of property, 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. Funds From Operations does not
represent cash generated by operating activities in accordance with
the 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.
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 Selected
Financial Data set forth above and the Consolidated Financial
Statements and Notes thereto contained herein.
When used in the following discussion, 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," 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.
Results of Operations - 1995 Compared to 1994
Income from Property Operations
Income from property operations (defined as rental income less rental
expenses) increased $1,738,000, or 38%, in 1995 compared with 1994.
This is due primarily to an increase in rental income of $2,541,000
offset by an increase in rental expenses (which include operating
expenses, real estate taxes, and depreciation and amortization) of
$803,000.
The increase in rental income and expenses is primarily attributable
to an increase in real estate investments. The Company acquired the
Landsing Pacific Portfolio and 3002 Dow Business Center in December
1995; 6600 College Boulevard in October 1995; 350 East Plumeria Drive,
Lackman Business Center, Ninety-Ninth Street #1 and Ninety-Ninth
Street #2 in September 1995; Village Green and Milpitas Town Center in
the middle of the third quarter of 1994; and Dupont Industrial Center
in May 1994. These acquisitions increased rental income and rental
expenses by $2,832,000 and $938,000, respectively. Additionally, 1000
Town Center Drive (acquired December 30, 1993) had an increase in
rental income and rental expenses of $553,000 and $304,000,
respectively, resulting from a 49% increase in occupancy from August
1994 to December 1995.
The effect of these acquisitions was partially offset by the sales of
the IBM Building and Cody Street Park, Building 6, and vacancies at
Contra Costa Diablo Buildings 3 and 8, generating a reduction in 1995
rental income and rental expenses of approximately $683,000 and
$204,000, respectively.
Expenses
Interest expense, which includes amortization of loan fees, increased
$639,000, or 67%, in 1995 compared with 1994. The increase is
attributable to the Company's higher level of borrowing on its credit
facility to finance the acquisition of properties in 1994 and the
Landsing Pacific Portfolio in December 1995. The loan fee
amortization expense for 1995 and 1994 was $277,000 and $231,000,
respectively. General and administrative expenses remained relatively
unchanged in 1995 compared with 1994. In 1995, the increase of
$363,000 in personnel costs associated with a larger real estate
portfolio was offset by the reversal of a $245,000 income tax
liability assessed in 1993 by the state of New Jersey and the decrease
of $62,000 in directors and officers (D & O) insurance expense. D &
O insurance was renewed at a lower premium due to the Company's
improved operating performance in the recent years.
Gain (Loss) on Sale
On January 14, 1994, the Company sold its investment in the Texas Bank
North Building for $8,500,000 and recorded a gain of $1,193,000. The
gain on the sale of the Texas Bank North Building primarily resulted
from an improvement in the local real estate economy subsequent to a
1992 write down of this asset by $3,631,000.
On September 20, 1995, the Company sold its investment in Cody Street
Park, Building 6 for $1,500,000, resulting in a loss of $12,000. On
October 2, 1995, the Company sold its investment in the IBM Building
for $6,500,000, resulting in a loss of $630,000. In anticipation of
such sale, the Company recorded a provision for possible loss of
$630,000 in the third quarter of 1995.
Dividends
Dividends declared for the four quarters of 1995 totaled $0.41 per
share. Consistent with the Company's policy, the dividend declared
for the last quarter of 1995 was paid in 1996; as a result, the
Company's statement of cash flows for the year ended December 31, 1995
reflects dividends declared for the fourth quarter of 1994 and the
first three quarters of 1995. The dividends declared for the fourth
quarter of 1995 and 1994 were $0.105 and $0.095 per share,
respectively. Dividends of $163,000 and $1,125,000 were declared on
the $50,000,000 Convertible Preferred Stock for the third and fourth
quarters of 1995, respectively. The declared dividends were paid 45
days after each quarter ended.
Government Regulations
The Properties are subject to various federal, state and local
regulatory requirements such as local building codes and other similar
regulations. The Company believes that the Properties are currently
in substantial compliance with all applicable regulatory requirements,
although expenditures at 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. All
of the Properties have had Phase I environmental site assessments
(which involve inspection without soil sampling or groundwater
analysis) by independent environmental consultants and have been
inspected for hazardous materials as part of the Company's acquisition
inspections. None of these Phase I assessments has revealed any
environmental conditions requiring material expenditures for
remediation. The Phase I assessment for Milpitas Town Center
indicates that the ground water under the property either has been or
may in the future be impacted by the migration of contaminants
originating off-site. According to information available to the
Company, the responsible party for this off-site source has been
identified and has begun remediation pursuant to a clean-up program
mandated by a California environmental authority and the clean-up
program is backed by an insurance policy from CIGNA up to $10 million.
The Company does not believe that this environmental matter will
impair the future value of Milpitas Town Center in any significant
respect.
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. The Company does not 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.
Results of Operations - 1994 Compared to 1993
Income from Property Operations
Income from property operations increased $3,027,000, or 190%, in 1994
compared with 1993. This was due to an increase of rental income of
$1,947,000 combined with a decrease in rental expenses of $1,080,000.
The increase in rental income is primarily attributable to
acquisitions of real estate investments. The major acquisitions
occurring in late 1993 and in 1994 were Woodlands II, 1000 Town Center
Drive, Dupont Industrial Center, Mariner Court, and Milpitas Town
Center. These acquisitions increased 1994 rental income by
approximately $4,000,000. This increase was partially offset by the
sales of Point West Place and University Tower in 1993, generating a
reduction in 1994 rental income of approximately $2,500,000.
The decrease in rental expenses is primarily attributable to the
decrease in the amortization of leasing commissions and tenant
improvements. The newly acquired buildings have not yet incurred
significant leasing commissions and tenant improvement costs.
Since leasing commissions and tenant improvement costs are amortized
over the life of the lease (generally three to five years), the impact
of having the portfolio consisting primarily of newly acquired
buildings has been a significant reduction in amortization expense.
Expenses
Interest expense, which includes amortization of loan fees, increased
$239,000, or 33%, in 1994 compared with 1993. The increase is
attributable to the Company's higher level of borrowing on its credit
facility combined with the increase in interest rates and amortization
expense of loan fees. The higher level of borrowing was attributable
to the acquisition of real estate in late 1993 and 1994. General and
administrative expenses remained relatively unchanged in 1994 compared
with 1993.
Gains on Sales
In 1992, management and the board of directors decided to revise the
investment strategy and geographic focus of investments from a
continental-wide basis to a Western United States focus. This was
done because of the value growth advantage perceived in the Western
United States, new management's knowledge and experience in real
estate in the Western United States and, in part, because greater
management effectiveness and cost efficiencies can be achieved by
operating in a smaller geographic region.
Certain properties in the real estate portfolio were identified for
disposition. Those properties were individually evaluated and written
down to management's best estimate of net realizable value. Such
properties continued to be depreciated during the holding period prior
to disposition.
In writing down the properties, the Company relied on studies
performed by outside appraisers and consultants. The three methods
used, discounted cash flows, NOI capitalization and comparable sales,
indicated that current market values of these properties were below
their book value.
On May 1, 1993, the Company sold its interest in the Edison Square
partnerships, which were unconsolidated joint ventures, and recorded a
gain of $2,686,000; this gain was due primarily to the book value of
those partnerships having been reduced to negative $2,686,000 as the
result of partnership losses. In August 1993, the Company sold its
investment in University Tower for $15,200,000 and recorded a gain of
$407,000. In October 1993, the Company sold its investment in Point
West Place for $7,180,000 and recorded a gain of $493,000. On January
14, 1994, the Company sold its investment in the Texas Bank North
Building for $8,500,000 and recorded a gain of $1,193,000.
The gains on the sales of University Tower and Point West Place
related primarily to the depreciation of those properties during the
holding period. The gain from the sale of Texas Bank North was due to
improvements in 1993 in the local real estate market.
The significant number of property sales occurring in 1993 and 1994
were attributable to management's decision to refocus the real estate
portfolio on suburban office and industrial buildings located in the
Western United States. The Company does not expect this level of
property sales to occur in the future.
Dividends
Dividends declared for the four quarters of 1994 totaled $0.355 per
share. Consistent with the Company's policy, the dividend declared
for the last quarter of 1994 was paid in 1995; as a result, the
Company's statement of cash
flows for the year ended December 31, 1994 reflects dividends declared
for the fourth quarter of 1993 and the first three quarters of 1994.
The dividends declared for the fourth quarter of 1994 and 1993 were
$0.095 and $0.07 per share respectively.
Financial Condition
Total assets of the Company at December 31, 1995 increased by
$71,184,000 compared with December 31, 1994, primarily as a result of
an increase in real estate investments (net of depreciation) of
$73,911,000. During 1995, the Company acquired 20 properties and sold
2 properties. Total liabilities at December 31, 1995 increased by
$25,681,000 compared with December 31, 1994, primarily as a result of
increased borrowings under the Company's credit facility in order to
finance the purchase of the Landsing Pacific Portfolio.
Liquidity and Capital Resources
During the year ended December 31, 1995, the Company's operating
activities provided net cash flow of $4,898,000. Its investing
activities provided cash flow of $7,914,000 from the sale of the IBM
Building and Cody Street, Building 6 and utilized $81,173,000 of cash
to acquire real estate investments. The financing activities provided
cash flow of $64,655,000, primarily from the Convertible Preferred
Stock sale of $50,000,000 less issuance costs of $3,631,000, and bank
borrowings of $47,100,000, offset by repayment of bank loan of
$26,250,000 and payment of dividends of $2,568,000.
On September 18, 1995, the Company completed the sale of $50,000,000
of the Convertible Preferred Stock to an entity beneficially owned by
an investment fund managed by Aldrich Eastman Waltch. The Convertible
Preferred Stock contains financial covenants and conditions that if
the Company fails to maintain or achieve, its holders have the right
to cause the Company to redeem all of the outstanding shares of
Convertible Preferred Stock at a redemption price of $6.00 per share
plus all accrued dividends payable. In that case, the Company could
experience substantial difficulty in financing such redemption and may
be required to liquidate a substantial portion of its properties.
A portion of net cash proceeds from the Convertible Preferred Stock
sale was used to pay off outstanding borrowings under the Company's
$23 million credit facility. The facility, obtained in December 1993
for $20 million and increased to $23 million in August 1994, was
restated and amended to $60 million on September 18, 1995. The
amended facility, which matures on September 1, 1998, bears interest
at a floating rate equal to either the lender's published "reference
rate" plus 0.50% or its "Offshore rate" (similar to LIBOR) plus 2.25%.
The credit facility contains various restrictive covenants including,
among other things, a covenant limiting quarterly dividends to 90% of
average Funds From Operations for the immediately preceding two fiscal
quarters.
The facility was used, in part, to finance the acquisitions of Mariner
Court, Dupont Industrial Center, Village Green, and Milpitas Town
Center in 1994 and the Landsing Pacific Portfolio in 1995. At
September 30, 1995, the Company was in compliance with the covenants
and requirements of the credit facility.
The Company and the lender under the credit facility have agreed, in
principle, to amend the credit facility, subject to the final approval
of the lender and negotiation of definitive documentation. There can
be no assurance, however, that an agreement between the lender and the
Company will actually be finalized. If finalized, the Company
believes that the amendment will increase the commitment from $60
million to $100 million and reduce the interest rates. The amendment
of the credit facility will be conditioned upon the Company's receipt
of net proceeds from its currently proposed public offering of not
less than $45 million.
In addition, the Company has obtained a commitment from a major
financial institution for loans which would be secured by mortgages on
three to four of the Company's properties. The mortgage loans are
subject to the negotiation of definitive documentation and there can
be no assurance that an agreement between the mortgage lender and the
Company will actually be finalized. If finalized, the Company
believes that the principal amount of the loan would be approximately
$20 to $25 million and the loan would mature in 2003.
The Company anticipates that the cash flow generated by its real
estate investments will be sufficient to meet its short-term liquidity
requirements. 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), (iii) the sale of real
estate investments, and (iv) the sale of equity securities and,
possibly, the issuance of equity securities in connection with
acquisitions.
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
For the years ended December 31, 1993 and 1994, net income has been
positively affected by gains on sales of real estate investments and
joint venture partnerships. The Company does not anticipate that its
1996 net income will be materially impacted by such gains on sales.
At the present time, borrowings under the Company's credit facility
bear interest at a floating rate. The Company anticipates that its
results from operations in 1996 may be negatively impacted by future
increases in interest rates and substantial borrowings to finance
property acquisitions.
While the Company has historically been successful in renewing and
releasing space, the Company will be subject to the risk that certain
leases expiring in 1996 may not be renewed or the terms of renewal may
be less favorable than current lease terms. However, the Company
expects to release the vacant spaces without any material adverse
impact on 1996 operations. In addition, the Company expects to incur
costs in making improvements or repairs to its portfolio of properties
required by new or renewing tenants and expenses associated with
brokerage commissions payable in connection with the reletting of
space.
Many other 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.
Accounting Developments
The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards No. 121, Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of (FAS
121) and Statement of Financial Accounting Standards No. 123,
Accounting for Stock-Based Compensation (FAS 123).
The Company has adopted FAS 121 effective January 1, 1996 and believes
that adoption will not have a material impact on the Company's 1996
financial statements. The Company will adopt the disclosure
requirements of FAS 123 in 1996 but continue to account for its stock
option plans under Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees as permitted under FAS 123.
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 increases in the Company's borrowing costs.
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 36
Consolidated Balance Sheets as of December 31, 1995 and 1994 37
For Years Ended December 31, 1995, 1994 and 1993
- Consolidated Statements of Income 38
- Consolidated Statements of Stockholders' Equity 39
- Consolidated Statements of Cash Flows 40
- Notes to Consolidated Financial Statements 41-49
Financial Statement Schedule:
- Schedule III - Real Estate and Accumulated Depreciation 50-53
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 16, 1996.
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, 1995 and 1994.
Consolidated Statements of Income for the years ended
December 31, 1995, 1994, and 1993.
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1995, 1994 and 1993.
Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1994 and 1993.
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
4.1 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.
4.2 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.
10.2 The Company's Employee Stock Option Plan, as amended
and restated, is incorporated herein by reference to
Exhibit 10.2 to the Company's Registration Statement on
Form S-2, Registration No. 333-921.
10.3 The Company's 1992 Directors' Stock Option Plan, as
amended and restated, is incorporated herein by
reference to Exhibit 10.3 to the Company's Registration
Statement on Form S-2, Registration No. 333-921.
10.4 Amended and Restated Credit Agreement for $60 million
revolving line of credit dated as of September 14,
1995, by and between the Company, as Borrower, and Bank
of America National Trust and Savings Association is
incorporated herein by reference to Exhibit 10.15 to
the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1995.
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.
10.9 Series A Convertible Preferred Stock Purchase
Agreement, among the Company, AEW Partners, L.P. and
Peter B. Bedford dated as of May 18, 1995, is
incorporated herein by reference to Exhibit 10.15 to
the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995.
10.10 Amendment No. 1 to the Series A Convertible Preferred
Stock Purchase Agreement dated September 11, 1995,
among the Company, AEW Partners, L.P. and Peter B.
Bedford, is incorporated herein by reference to Exhibit
10.12 to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1995.
10.11 Standstill Agreement dated as of September 18, 1995, by
and between the Company and Peter B. Bedford 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, 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.
21.1* Subsidiaries of the Company.
23.1* Consent of KPMG Peat Marwick LLP, independent auditors.
*Filed herewith.
(b) Reports on Form 8-K
During the quarter ended December 31, 1995, the Company filed on
October 2, 1995, a report on Form 8-K dated September 19, 1995,
reporting Items 2 and 7 and announcing the acquisitions of 350 East
Plumeria Drive, Lackman Business Center and Ninety-Ninth Street
Buildings 1 and 2, and the sale of Cody Street Park, Building 6.
During the quarter ended December 31, 1995, the Company filed on
November 30, 1995, a report on Form 8-K/A dated September 19, 1995
which supplemented Item 7 reported on Form 8-K dated September 19,
1995, regarding the acquisition of 350 East Plumeria Drive, Lackman
Business Center and Ninety-Ninth Street Buildings 1 and 2, and the
sale of Cody Street Park, Building 6. The following financial
statements were filed: (i) Historical Summary of Gross Income and
Direct Operating Expenses of 350 East Plumeria Drive for the year
ended December 31, 1994 and (ii) pro forma financial statements
showing the effect resulting from the acquisitions of 350 East
Plumeria Drive, Lackman Business Center, Ninety-Ninth Street #1 and #2
and the sale of Cody Street Park, Building 6.
During the quarter ended December 31, 1995, the Company filed on
October 16, 1995, a report on Form 8-K dated October 2, 1995,
reporting Items 2 and 7 and announcing the sale of the IBM Building.
Pro forma financial statements showing the effect resulting from the
sale of the IBM Building were filed.
During the quarter ended December 31, 1995, the Company filed on
October 17, 1995, a report on Form 8-K dated October 6, 1995,
reporting Items 2 and 7 and announcing the acquisition of 6600 College
Boulevard.
During the quarter ended December 31, 1995, the Company filed on
December 15, 1995, a report on Form 8-K/A dated October 6, 1995 which
supplemented Item 7 on Form 8-K dated October 6, 1995, regarding the
acquisition of 6600 College Boulevard. The following financial statements
were filed: (i) Historical Summary of Gross Income and Direct Operating
Expenses of 6600 College Boulevard for the year ended December 31,
1994 and (ii) pro forma financial statements showing the effect
resulting from the acquisition of 6600 College Boulevard.
During the quarter ended December 31, 1995, the Company filed on
November 10, 1995 a report on Form 8-K/A-2 dated December 30, 1993
which amended Item 7 on Form 8/K-A regarding the acquisition of
Mariner Court. Pro forma financial statements showing the effect
resulting from the acquisition of Mariner Court were filed.
During the quarter ended December 31, 1995, the Company filed on
November 10, 1995, a report on Form 8-K/A-2 dated May 24, 1994 which
amended Item 7 on Form 8/K-A regarding the acquisition of Dupont
Industrial Center. Pro forma financial statements showing the effect
resulting from the acquisition of Dupont Industrial Center were filed.
During the quarter ended December 31, 1995, the Company filed on
November 10, 1995, a report on Form 8-K/A-2 dated August 11, 1994
which amended Item 7 on Form 8/K-A regarding the acquisition of
Milpitas Town Center. Pro forma financial statements showing the
effect resulting from the acquisition of Milpitas Town Center were
filed.
During the quarter ended December 31, 1995, the Company filed on
November 10, 1995, a report on Form 8-K/A dated January 14, 1994 which
amended Item 7 on Form 8-K regarding the sale of Texas Bank North.
Pro forma financial statements showing the effect resulting from the
acquisition of Texas Bank North were filed.
During the quarter ended December 31, 1995, the Company filed on
December 19, 1995, a report on Form 8-K dated December 5, 1995,
reporting Items 2 and 7 and announcing the acquisition of 3002 Dow
Business Center.
During the quarter ended December 31, 1995, the Company filed on
December 27, 1995, a report on Form 8-K dated December 14, 1995,
reporting Items 2 and 7 and announcing the acquisition of the Landsing
Pacific Portfolio.
Report of Independent Public Accountants
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, 1995 and 1994, and the results of their operations and their cash
flows for each of the years in the three-year period ended December
31, 1995, 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 herein.
San Francisco, California KPMG Peat Marwick LLP
February 6, 1996
BEDFORD PROPERTY INVESTORS, INC.
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1995 AND 1994
(in thousands, except share and per share amounts)
1995 1994
Assets:
Real estate investments:
Industrial buildings $ 94,897 $26,253
Office buildings - held for investment 30,025 23,022
Office buildings - held for sale - 8,928
Retail buildings 6,261 -
131,183 58,203
Less accumulated depreciation 2,219 3,150
128,964 55,053
Cash 1,027 4,733
Other assets 3,487 2,508
Total assets $133,478 $62,294
Liabilities and Stockholders' Equity:
Bank loan payable 43,250 22,400
Accounts payable and accrued expenses 1,451 850
Dividend payable 1,765 568
Acquisition payable 3,000 600
Other liabilities 1,577 944
Total liabilities 51,043 25,362
Redeemable preferred stock:
Series A convertible preferred stock, par
value $0.01 per share; authorized
10,000,000 shares, issued and outstanding
8,333,334 shares in 1995; aggregate
redemption amount $50,000; aggregate
liquidation preference $52,500. 50,000 -
Common stock and other stockholders' equity:
Common stock, par value $0.01 per share;
authorized 30,000,000 shares, issued and
outstanding 6,090,650 shares in 1995,
5,976,900 shares in 1994 61 60
Additional paid-in capital 107,214 107,151
Accumulated losses and distributions in
excess of net income (74,840) (70,279)
Total common stock and other stockholders'
equity 32,435 36,932
Total liabilities and stockholders' equity $133,478 $62,294
See accompanying notes to consolidated financial statements.
BEDFORD PROPERTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 and 1993
(in thousands, except share and per share amounts)
1995 1994 1993
Property operations:
Rental income $11,695 $9,154 $7,207
Rental expenses:
Operating expenses 2,744 2,408 2,520
Real estate taxes 1,105 916 840
Depreciation and amortization 1,484 1,206 2,250
Income from property operations 6,362 4,624 1,597
General and administrative expenses (1,457) (1,309) (1,303)
Interest income 226 56 136
Interest expense (1,594) (955) (716)
Income from joint ventures - - 2,533
Income before gain (loss) on sales
of real estate investments 3,537 2,416 2,247
Gain (loss) on sales of real
estate investments (642) 1,193 900
Net income $2,895 $3,609 $3,147
Net income applicable to common
stockholders3 $1,607 $3,609 $3,147
Net income per common and common
equivalent share3: $ 0.26 $ 0.59 $ 0.53
Weighted average number of common
and common equivalent shares
outstanding 6,179,098 6,147,664 5,975,900
See accompanying notes to consolidated financial statements.
3 Reflects net income reduced by dividends of $1,288 for the
third and fourth quarters of 1995 on $50,000 of Series A Convertible
Preferred Stock issued on September 18, 1995.
BEDFORD PROPERTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(in thousands, except share and per share amounts)
Total
Accumulated common
losses and stock and
Additional distributions other stock-
Common paid-in in excess of holders'
stock capital net income equity
Balance,
December 31, 1992 $ 60 $107,147 $(73,837) $33,370
Net income - - 3,147 3,147
Dividends to common
stockholders
($0.18 per share) - - (1,076) (1,076)
Balance,
December 31, 1993 60 107,147 (71,766) 35,441
Issuance of common stock - 4 - 4
Net income - - 3,609 3,609
Dividends to common
stockholders
($0.355 per share) - - (2,122) (2,122)
Balance,
December 31, 1994 60 107,151 (70,279) 36,932
Issuance of common stock 1 63 - 64
Costs of issuance of
preferred stock - - (3,631) (3,631)
Redemption of rights - - (60) (60)
Net income - - 2,895 2,895
Dividends to common
stockholders
($0.41 per share) - - (2,477) (2,477)
Dividends to preferred
stockholders (9%) - - (1,288) (1,288)
Balance,
December 31, 1995 $61 $107,214 $(74,840) $32,435
See accompanying notes to consolidated financial statements.
BEDFORD PROPERTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(in thousands)
1995 1994 1993
Operating Activities:
Net income $2,895 $3,609 $3,147
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 1,806 1,463 2,349
Loss (gain) on sale of real
estate investments 642 (1,193) (900)
Gain on sale of joint venture
partnership operations - - (2,686)
Equity in joint venture
partnership operations
(including depreciation of
$191 in 1993) - - 153
Change in other assets (1,679) (930) (777)
Change in accounts payable
and accrued expenses 601 (615) (252)
Change in other liabilities 633 382 186
Net cash provided by operating
activities 4,898 2,716 1,220
Investing Activities:
Investments in real estate (81,173) (28,009) (11,552)
Proceeds from sales of real
estate investments 7,914 8,289 21,637
Net cash provided (used) by
investing activities (73,259) (19,720) 10,085
Financing Activities:
Proceeds from bank loan 47,100 36,138 5,221
Repayment of bank loan (26,250) (17,359) (6,000)
Issuance of common stock 64 - -
Net proceeds from sale of
preferred stock 46,369 - -
Redemption of rights (60) - -
Repayment of mortgage loan - - (5,113)
Payment of dividends (2,568) (1,972) (658)
Net cash provided (used) by
financing activities 64,655 16,807 (6,550)
Net increase (decrease) in cash (3,706) (197) 4,755
Cash at beginning of year 4,733 4,930 175
Cash at end of year $1,027 $4,733 $4,930
Supplemental disclosure of cash
flow information
a) Non-cash investing and
financing activities:
Debt incurred in connection
with real estate acquired $3,000 $600 $1,500
b) Cash paid during the year
for interest $1,283 $585 $ 656
See accompanying notes to consolidated financial statements.
BEDFORD PROPERTY INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Summary of Significant Accounting Policies
The Company
Bedford Property Investors Inc. (the Company) is an equity real estate
investment trust with investments primarily in industrial and suburban
office properties concentrated in the Western United States. 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 1, 1993 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 Convertible
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.
Principles of Consolidation
The consolidated financial statements include the accounts of Bedford
Property Investors, Inc., and its wholly-owned subsidiaries. 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.
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 and disclosures of contingent assets
and liabilities at the date of financial statements and the reported
amount of revenues and expenses during the reporting periods. Actual
results could differ from those estimates.
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
depreciation. As of December 31, 1995, for Federal income tax
purposes, the Company had an ordinary loss carry forward of
approximately $39,720,000 and a capital loss carry forward of
approximately $15,195,000. All dividend distributions made for 1995
were classified as return of capital for Federal income tax purposes.
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 being 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 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.
The Company has adopted, effective January 1, 1996, Statement of
Financial Accounting Standards No. 121, Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of (FAS
121). The Company believes that adoption of FAS 121 will not have a
material impact on the Company's 1996 financial statements.
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 aggregate rental income exceeded contractual rentals by $377,000
and $238,000 for 1995 and 1994, respectively.
Per Share Data
Per share data are based on the weighted average number of common and
common equivalent shares outstanding during the year. Stock options
issued under the Company's stock option plans are considered Common
Stock equivalents and are included in the calculation of per share
data if, upon exercise, they would have a dilutive effect. Dividends
accrued on the $50,000,000, Series A Convertible Preferred Stock are
deducted from net income for purposes of determining net income
applicable to common stockholders.
Note 2 - Real Estate Investments
The following table sets forth the Company's real estate investments
as of December 31, 1995 (in thousands):
Less
Accumulated
Land Building Depreciation Total
INDUSTRIAL
Greater San Francisco
Bay Area, California
Building 3
Contra Costa Diablo
Industrial Park, Concord $ 495 $ 1,230 $ 138 $ 1,587
Building 8
Contra Costa Diablo
Industrial Park, Concord 877 1,551 175 2,253
Building 18
Mason Industrial Park,
Concord 610 1,305 155 1,760
Milpitas Town Center,
Milpitas 1,935 5,284 139 7,080
Auburn Court, Fremont 1,410 2,506 2 3,914
Westinghouse Drive,
Fremont 270 906 1 1,175
350 E. Plumeria Drive,
San Jose 3,683 4,783 27 8,439
301 East Grand, South
San Francisco 2,064 971 1 3,034
342 Allerton, South
San Francisco 2,549 1,563 1 4,111
400 Grandview, South
San Francisco 3,289 3,563 3 6,849
410 Allerton, South
San Francisco 1,352 901 1 2,252
417 Eccles, South
San Francisco 659 517 - 1,176
Subtotal 19,193 25,080 643 43,630
Greater Los Angeles
Area, California
Dupont Industrial Center,
Ontario 3,588 6,142 251 9,479
3002 Dow Business Center,
Tustin 4,301 7,451 14 11,738
Subtotal 7,889 13,593 265 21,217
Denver, Colorado
Bryant St. Annex, Denver 493 877 1 1,369
Bryant St. Quad, Denver 1,412 2,208 2 3,618
Subtotal 1,905 3,085 3 4,987
Minneapolis/St. Paul,
Minnesota
St. Paul Business
Center - East, Maplewood 764 1,783 2 2,545
St. Paul Business
Center - West, Maplewood 1,232 2,391 2 3,621
Subtotal 1,996 4,174 4 6,166
Greater Portland Area,
Oregon
Twin Oaks Tech. Center,
Beaverton 1,464 4,902 4 6,362
Twin Oaks Business Park,
Beaverton 1,179 2,886 3 4,062
Subtotal 2,643 7,788 7 10,424
Kansas City, Kansas
Ninety-Ninth Street #3,
Lenexa 360 2,172 244 2,288
Ninety-Ninth Street #1,
Lenexa 410 1,571 9 1,972
Ninety-Ninth Street #2,
Lenexa 183 564 3 744
Lackman Business Center,
Lenexa 628 1,663 9 2,282
Subtotal 1,581 5,970 265 7,286
Total Industrial $35,207 $59,690 $1,187 $93,710
Less
Accumulated
Land Building Depreciation Total
SUBURBAN OFFICE
Greater Los Angeles
Area, California
1000 Town Center Drive,
Oxnard $ 1,785 $4,743 $ 373 $ 6,155
Mariner Court, Torrance 3,221 4,528 219 7,530
Subtotal 5,006 9,271 592 13,685
Salt Lake City, Utah
Woodlands Tower II,
Salt Lake City 945 6,137 364 6,718
Kansas City, Kansas
6600 College Blvd.,
Overland Park 2,518 3,982 22 6,478
Greater San Francisco
Bay Area, California
Village Green, Lafayette 743 1,423 51 2,115
Total Suburban Office 9,212 20,813 1,029 28,996
RETAIL
Academy Place Shopping
Center, Colorado Springs 2,880 3,381 3 6,258
Total $47,299 $83,884 $2,219 $128,964
University Tower
During the third quarter of 1992, the Company decided to offer
University Tower for sale. In anticipation of such sale, the Company
wrote down its investment in this property by $3,200,000 in 1992. On
August 18, 1993, the property was sold for a cash price of $15,200,000
which includes the reimbursement of tenant relocation costs of
$300,000, resulting in 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.
Texas Bank North Building
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.
Mariner Court
The property, a suburban three-story office building located in
Torrance, California, was purchased for $7,500,000 or $71 per square
foot on January 5, 1994. The Company recorded acquisition costs of
$113,000 paid to Peter B. Bedford, Chairman of the Board and Chief
Executive Officer of the Company (see Note 5).
Dupont Industrial Center
The property, a three-building industrial complex located in Ontario,
California, was purchased for $9,750,000 or $22 per square foot on May
24, 1994. The Company recorded acquisition costs of $146,000 paid to
Mr. Bedford. Because the property was only 68% leased at the time of
purchase, the purchase contract established a rental income guarantee
fund of $400,000 which was disbursed to the Company until at least 90%
of the space was leased. At December 31, 1994, the rental income
guarantee fund was terminated since the property was 91% leased. The
Company had received $264,000 of the rental income guarantee fund.
This amount has been accounted for as a reduction in the cost of the
property.
Village Green
The property, a suburban three-building office complex located in
Lafayette, California, was purchased for $1,792,000 or $106 per square
foot on July 7, 1994. The Company recorded acquisition costs of
$27,000 paid to Mr. Bedford.
Milpitas Town Center
The property, a suburban two-building research and development complex
located in Milpitas, California, was purchased for $6,320,000 or $62
per square foot on August 11, 1994. The Company recorded acquisition
costs of $95,000 paid to Mr. Bedford. The property includes a 3.1
acre parcel of land on which the Company is developing a 45,090 square
foot research and development facility.
350 East Plumeria Drive
The property, a suburban research and development facility located in
San Jose, California, was purchased for $8,325,000 or $58 per square
foot on September 19, 1995. The Company also recorded acquisition
costs of $125,000 paid to Bedford Acquisitions, Inc. ("BAI"), a
company wholly-owned by Mr. Bedford (see Note 5).
Lackman Business Center
The property, a single-story service center industrial project located
in Lenexa, Kansas, was purchased for $2,250,000 or $49 per square foot
on September 19, 1995. The Company also recorded acquisition costs of
$34,000 paid to BAI.
Ninety-Ninth Street Buildings 1 and 2
The properties, two service industrial buildings located in Lenexa,
Kansas, were purchased for $2,685,000 or $55 per square foot on
September 20, 1995. The Company also recorded acquisition costs of
$40,000 paid to BAI.
Cody Street Park, Building 6
In the third quarter 1995, the Company decided to sell the Cody Street
Park, Building 6. The sale was completed on September 20, 1995, and
resulted in a loss of $12,000.
6600 College Boulevard
The property, a suburban service center industrial complex located in
Overland Park, Kansas, was purchased for $6,360,000 or $80 per square
foot, on October 6, 1995. The property was acquired from AEW #25
Trust, an affiliate of BED Preferred No. 1 Limited Partnership which
recently purchased $50 million of the Company's Series A Convertible
Preferred Stock. The directors of the Company who are affiliated with
BED Preferred No. 1 Limited Partnership, however, played no role in
this acquisition. The Company also recorded acquisition costs of
$95,000 paid to BAI.
IBM Building
During 1995, the Company continued to offer for sale the IBM Building
located in Jackson, Mississippi. This property was first offered for
sale in 1991, at which time the Company's investment in the property
was written down by $2,113,000. On October 2, 1995, the Company
completed the sale of the IBM Building for a cash sale price of
$6,500,000, resulting in a loss of $630,000.
3002 Dow Business Center
The property, a five-building industrial project located in Tustin,
California, was purchased for $11,500,000 or $60 per square foot on
December 5, 1995. The Company also recorded acquisition costs of
$172,500 paid to BAI.
The Landsing Pacific Portfolio
On December 14, 1995, the Company acquired the Landsing Pacific
Portfolio which consists of thirteen industrial properties and one
retail property aggregating approximately one million rentable square
feet located in Maplewood, Minnesota; Denver and Colorado Springs,
Colorado; South San Francisco and Fremont, California; and Beaverton,
Oregon. The Company paid $49,700,000 for the Landsing Pacific
Portfolio or $50 per square foot. The acquisition was financed with
$4,000,000 cash, borrowings of $42,700,000 under the Company's credit
facility and a $3,000,000 payable secured by a letter of credit due
one year from the date of issuance. The Company also recorded
acquisition costs of $594,000 paid to BAI.
The Landsing Pacific Portfolio comprised substantially all of the real
estate assets of the Landsing Pacific Fund, Inc., a publicly-traded
REIT based in San Mateo, California. At all times relevant to the
transaction, Martin I. Zankel, a director and stockholder of the
Company, was Chairman of the Board of Directors, Chief Executive
Officer and President of the Landsing Pacific Fund, Inc. Mr. Zankel
had no role on behalf of the Company in this acquisition.
The Company internally manages the majority of its properties and
maintains centralized financial record-keeping. For all the
properties located outside of California, the Company has
subcontracted on-site maintenance to local firms.
Note 3 - Unconsolidated Joint Venture Partnerships
Edison Square
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.
Note 4 - Leases
Minimum future rental receipts outstanding at December 31, 1995 are as
follows (in thousands):
1996 $17,475
1997 13,963
1998 9,893
1999 7,112
2000 4,146
Thereafter 3,448
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
Due to the Company's limited financial resources, its activities
relating to the acquisition of new properties and debt and equity
financings are currently performed by BAI pursuant to a written
contract dated January 1, 1995. 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 raised in
financings or the aggregated purchase price of the property for
acquisitions, or (ii) an amount equal to (a) the aggregate amount of
expenses funded by BAI through the time of such acquisition or
financing 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, is renewable at the
option of the Company for additional one-year terms, and will expire no
later than January 1, 1998.
From February 1993 through December 1994, the Company's activities
relating to debt and equity financings and the acquisition of new
properties were handled under arrangements similar to the current
arrangement with BAI through BPI Acquisitions, a separate division
within the Company. This division operated under an arrangement with
Mr. Bedford whereby he provided acquisitions and financing personnel,
allocable overhead costs and the costs of all due diligence conducted
prior to an acquisition. Upon the completion of a financing or the
acquisition of a property, Mr. Bedford was paid a fee by the Company
substantially identical to that described above. In no event could
the aggregate amount of fees paid to Mr. Bedford exceed the aggregate
amount of costs funded by Mr. Bedford.
As of December 31, 1995, the Company had paid Mr. Bedford and BAI an
aggregate of $3,046,000 for acquisition and financing activities
performed since February 1993 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 were and continue to be properly includable in
direct acquisition costs and capitalized as part of the asset or
financing activities.
The Company is leasing 2,400 square feet of industrial space on a
month-to-month basis at a market rental rate of $1,288 per month to a
company wholly-owned by Mr. Bedford.
Note 6 - Stock Option Plans
A total of 1,800,000 shares of the Company's Common Stock have been
reserved for issuance under the Employee Stock Option Plan (the
"Employee Plan"). The Employee Plan expires by its own terms in 2003.
The Employee Plan provides for non-qualified stock options, incentive
stock options and stock appreciation rights. Stock appreciation
rights may only be granted in conjunction with stock options and
entitle the holder to receive the difference between the fair market
value and the exercise price of the Common Stock which would be
receivable upon exercise of the underlying option. The exercise of a
stock appreciation right results in the termination of the related
option on a share-for-share basis.
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 immediately exercisable upon vesting, but 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.
At December 31, 1995, options issued under the Employee Plan to
purchase 187,500 shares were outstanding at a weighted average
exercise price of $6.39 per share, of which 51,750 options were
exercisable. Options to purchase 113,750 shares were exercised in
1995, at a weighted average exercise price of $5.57. At December 31,
1995 1,404,750 shares were available for issuance under the Employee
Plan. Stock appreciation rights were outstanding in connection with
options to purchase an aggregate of 10,000 shares.
A total of 500,000 shares of the Company's Common Stock have been
reserved for issuance under the Directors' Stock Option Plan (the
"Directors' Plan"). The Directors' Plan expires by its own terms 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 50,000 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 five years.
At December 31, 1995, options issued under the Director's Plan to
purchase 500,000 shares were outstanding at a weighted average
exercise price of $3.38 per share, of which 350,000 options were
exercisable. No options had been exercised under the Directors' Plan.
In September 1995, the Company established a Management Stock
Acquisition program. Under the program, options exercised by key
members of management within thirty days of 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 1995, options for
100,000 shares of Common Stock were exercised in exchange for two
notes payable to the Company. The notes, of $287,500 each, bear
interest at 7.5%. The unpaid balance of the notes is included in the
accompanying consolidated balance sheet as a reduction of additional
paid-in capital.
The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation (FAS 123). The Company will adopt the disclosure
requirements of FAS 123 in 1996 but continue to account for its stock
option plans under Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees as permitted under FAS 123.
Note 7 - 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. On September 29, 1995, the Rights were redeemed by the
Company at a price of $0.01 per Right.
Note 8 - Bank Loan Payable
In December 1993, the Company concluded an agreement with Bank of
America for a $20 million revolving line of credit for real estate
acquisitions. In August 1994, the maximum commitment amount of the
facility was increased from $20 million to $23 million. On September
18, 1995, outstanding borrowings under the facility were repaid and
the facility was amended and restated to $60 million. The amended
facility, which matures on September 1, 1998, bears interest at a
floating rate equal to either the lender's published "reference rate"
plus 0.50% or its "offshore rate" (similar to LIBOR) plus 2.25%. The
credit facility is secured by mortgages on 23 properties (which
Properties collectively accounted for approximately 81% of the
Company's Annualized Base Rent as of December 31, 1995), together with
the rental proceeds from such properties. As of December 31, 1995,
these properties comprised approximately 76% of the Company's total
assets. At December 31, 1995, the Company had outstanding borrowings
of $43,250,000 and letters of credit aggregating $3,875,000 (including
letters of credit totalling $875,000 expiring in March 1996, and a
letter of credit of $3,000,000 securing a payable due December 1996
relating to the acquisition of the Landsing Pacific Portfolio). The
credit facility contains various restrictive covenants including,
among other things, a covenant limiting quarterly dividends to 90% of
average Funds From Operations for the immediately preceding two fiscal
quarters.
The daily weighted average amount owing to the bank was $15,003,000
and $8,954,000 in 1995 and 1994, respectively. The weighted average
interest rates in these periods were 8.65% and 8.1%, respectively.
The effective interest rate at December 31, 1995 was 8.14%.
The carrying amount of the above loan approximates fair value as the
loan is at current market rates.
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 are 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 in such quarter 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. The shares of
Convertible Preferred Stock are convertible at any time after
September 18, 1997 into an equal number of common shares. The
conversion rate may be adjusted under certain conditions.
The Convertible Preferred Stock is redeemable at the option of the
Company: (i) after September 18, 1997 but before September 18, 2000,
in whole at a redemption price providing an internal rate of return to
the holder of Convertible Preferred Stock of 25% per annum for the
period from September 18, 1995 to September 18, 1997 and 20% per annum
from and after September 18, 1997 until the date of redemption, but
not beyond September 18, 2000; (ii) after September 18, 2000, in whole
or in part at a redemption price of $6.30 per share, declining $0.06
per share per year for each of the next five years. Prior to any
redemption by the Company, the holders of the Convertible Preferred
Stock may convert their shares of the Convertible Preferred Stock to
shares of Common Stock.
Redemption of the preferred stock is required, at the option of the
preferred shareholders, after one year at a redemption price of $6.00
per share plus accrued and unpaid dividends upon the occurrence of any
of the following: failure to pay preferred dividends for two
consecutive quarters; default on payment of certain debt; failure to
obtain certain required consents of the preferred shareholders; or
failure to meet certain financial targets.
In the event of liquidation, the holders of the preferred stock are
entitled to receive $6.30 per share plus any accrued and unpaid
dividends.
Note 10 - Quarterly Financial Data-Unaudited
The following is a summary of quarterly results of operations for 1995
and 1994 (in thousands of dollars, except per share data):
1995 Quarters Ended 3/31 6/30 9/30 12/31
Rental revenues $2,662 $2,616 $2,774 $3,643
Income from property operations 1,427 1,366 1,369(4) 2,200
Income before loss on sale 606 616 669(5) 1,646
Net income $ 606 $ 616 $ 27 $1,646
Net income (loss) applicable to
common stockholders (4) $ 606 $ 616 $ (133) $ 518
Net income (loss) per common
and common equivalent
share (4): $ 0.10 $ 0.10 $(0.02) $ 0.08
1994 Quarters Ended 3/31 6/30 9/30 12/31
Rental revenues $1,856 $1,976 $2,473 $2,849
Income from property operations 742 995 1,237 1,650
Income before gain on sale 396 565 549 906
Net income $1,589 $ 565 $ 549 $ 906
Net income per common and
common equivalent share: $ 0.26 $ 0.09 $ 0.09 $ 0.15
(4) Reflects dividends of $160 and $1,128 for the third and fourth
quarters of 1995, respectively, on $50,000 of Series A Convertible
Preferred Stock issued on September 18, 1995.
(5) These amounts were reported in the third quarter of 1995, net of a
provision for loss on sale of real estate investment of $630.
BEDFORD PROPERTY INVESTORS, INC.
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1995
(in thousands of dollars)
Cost Gross Amount
Initial Cost Capitalized Carried Accumu-
to Company Subsequent at Close lated Date Depreciable
Buildings & to of Period Depre- Con- Date Life
Description Land Improvement Acquisition Land Building Total ciation structed Acquired (Years)
INDUSTRIAL
BUILDINGS:
Greater San Fran-
cisco Area, CA
Building 3
Contra Costa
Diablo Indus.
Park, Concord $ 495 $1,159 $ 71 $495 $1,230 $1,725 $138 1983 12/90 45
Building 8
Contra Costa
Diablo Indus.
Park, Concord 877 1,548 3 877 1,551 2,428 175 1981 12/90 45
Building 18
Mason Indus.
Park, Concord 610 1,265 40 610 1,305 1,915 155 1984 12/90 45
Milpitas Town
Center, Milpitas 1,899 4,421 899 1,935 5,284 7,219 139 1983 8/94 45
Auburn Court,
Fremont 1,391 2,473 52 1,410 2,506 3,916 2 1983 12/95 45
Westinghouse
Drive, Fremont 267 893 16 270 906 1,176 1 1982 12/95 45
350 E. Plumeria
Drive, San Jose 3,621 4,704 141 3,683 4,783 8,466 27 1983 9/95 45
301 East Grand,
South
San Francisco 2,036 959 40 2,064 971 3,035 1 1974 12/95 45
342 Allerton,
South
San Francisco 2,516 1,542 54 2,549 1,563 4,112 1 1969 12/95 45
400 Grandview,
South
San Francisco 3,246 3,517 89 3,289 3,563 6,852 3 1976 12/95 45
410 Allerton,
South
San Francisco 1,333 889 31 1,352 901 2,253 1 1970 12/95 45
417 Eccles,
South
San Francisco 649 510 17 659 517 1,176 - 1964 12/95 45
Greater Los Angeles
Area, California
Dupont Industrial
Center, Ontario 3,588 6,162 (20)(F) 3,588 6,142 9,730 251 1989 5/94 45
3002 Dow Business
Center, Tustin 4,209 7,291 252 4,301 7,451 11,752 14 1987-89 12/95 45
Denver, Colorado
Bryant Street
Annex, Denver 487 866 17 493 877 1,370 1 1968 12/95 45
Bryant Street
Quad, Denver 1,394 2,181 45 1,412 2,208 3,620 2 1971-73 12/95 45
Minneapolis/
St. Paul,
Minnesota
St. Paul Business
Center - East,
Maplewood 754 1,758 35 764 1,783 2,547 2 1984 12/95 45
St. Paul Business
Center - West,
Maplewood 1,215 2,359 49 1,232 2,391 3,623 2 1981 12/95 45
Greater Portland
Area, Oregon
Twin Oaks Tech.
Center, Beaverton 1,444 4,836 86 1,464 4,902 6,366 4 1984 12/95 45
Twin Oaks Business
Park, Beaverton 1,163 2,847 55 1,179 2,886 4,065 3 1984 12/95 45
Kansas City,
Kansas
Building 3
Ninety-Ninth
Street Park,
Lenexa 360 2,167 5 360 2,172 2,532 244 1990 12/90 45
Building 1
Ninety-Ninth
Street Park,
Lenexa 404 1,547 30 410 1,571 1,981 9 1988 9/95 45
Building 2
Ninety-Ninth
Street Park,
Lenexa 180 555 12 183 564 747 3 1988 9/95 45
Lackman Business
Center, Lenexa 619 1,631 41 628 1,663 2,291 9 1985 9/95 45
SUBURBAN OFFICE
PROPERTIES
Greater Los
Angeles Area,
California
1000 Town Center
Drive, Oxnard 1,785 3,315 1,428 1,785 4,743 6,528 373 1990 12/93 45
Mariner Court,
Torrance 3,221 4,279 249 3,221 4,528 7,749 219 1989 1/94 45
Salt Lake City,
Utah
Woodlands Tower
II, Salt Lake
City 945 5,805 332 945 6,137 7,082 364 1990 8/93 45
Kansas City,
Kansas
6600 College
Blvd.,
Overland Park 2,480 3,880 140 2,518 3,982 6,500 22 1982-83 10/95 45
Greater San
Francisco Bay
Area, Calif.
Village Green,
Lafayette, CA 547 1,245 374 743 1,423 2,166 51 1983 7/94 45
RETAIL PROPERTIES
Academy Place
Shopping Center,
Colorado
Springs, CO 2,844 3,339 78 2,880 3,381 6,261 3 1980-82 12/95 45
$46,579 $79,943 $4,661 $47,299 $83,884 $131,183 $2,219
(A) (B)
NOTES TO SCHEDULE III
(in thousands of dollars)
(A) An analysis of the activity in real estate for the years ended December 31, 1995, 1994 and
1993 is presented below:
Investment Accumulated Depreciation
1995 1994 1993 1995 1994 1993
BALANCE AT BEGINNING OF PERIOD $ 58,203 $41,225 $53,874 $3,150 $5,263 $8,321
Add (deduct):
Sale of University Tower (C) - - (15,946) - - (1,470)
Acquisition of Woodlands
Tower II - - 6,884 - - -
Sale of Point West Place (E) - - (9,505) - - (3,037)
Acquisition of 1000 Town
Center Drive - - 5,190 - - -
Sale of Texas Bank North (D) - (10,131) - - (3,035) -
Acquisition of Mariner Court - 7,500 - - - -
Acquisition of Dupont
Industrial Center - 9,750 - - - -
Acquisition of Village Green - 1,792 - - - -
Acquisition of Milpitas
Town Center - 6,320 - - - -
Acquisition of Lackman
Business Center 2,250 - - - - -
Acquisition of 350 E.
Plumeria Drive 8,325 - - - - -
Sale of Cody Street Park,
Building 6 (G) (1,639) - - (203) - -
Acquisition of Ninety-Ninth
Street, Building 1 1,951 - - - - -
Acquisition of Ninety-Ninth
Street, Building 2 735 - - - - -
Sale of IBM Building (H) (8,325) - - (2,024) - -
Acquisition of 6600
College Boulevard 6,360 - - - - -
Acquisition of 3002 Dow
Business Center 11,500 - - - - -
Acquisition of Landsing
Pacific Portfolio 49,708 - - - - -
Capitalized costs 2,115 1,747 728 - - -
Depreciation - - - 1,296 922 1,449
BALANCE AT END OF PERIOD $131,183 $58,203 $41,225 $2,219 $3,150 $5,263
(B) The aggregate cost for Federal income tax purposes is $131,168,000.
(C) On October 2, 1991, the Company acquired its partner's interest in
the University Tower property. As a result of this transaction, the
University Tower investment became wholly owned. In anticipation of
proposed sale, the Company provided a $3,200,000 provision for
possible loss related to this investment in 1992. The property was sold
on August 18, 1993.
(D) During 1992, it was 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 1992. The property was
sold on January 14, 1994.
(E) During 1992, it was 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. The property was sold on
October 1, 1993.
(F) Rental income guarantee in the amount of $264,000 was received
from the seller and accounted for as a reduction of the cost of the
property.
(G) In the third quarter 1995, the Company decided to sell the Cody
Street Park, Building 6. The property was sold on September 20, 1995.
(H) During 1995, the Company continued to offer for sale the IBM
Building located in Jackson, Mississippi. This property was first
offered for sale in 1991, at which time the Company's investment in the
property was written down by $2,113,000. The property sold on
October 2, 1995.
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, 1996
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.
/s/ Peter B. Bedford March 25, 1996
Peter B. Bedford, Chairman of the Board
and Chief Executive Officer
/s/ Claude M. Ballard March 25, 1996
Claude M. Ballard, Director
/s/ Anthony Downs March 25, 1996
Anthony Downs, Director
/s/ Anthony M. Frank March 25, 1996
Anthony M. Frank, Director
/s/ Martin I. Zankel, Esq. March 25, 1996
Martin I. Zankel, Director
/s/Thomas H. Nolan, Jr. March 25, 1996
Thomas H. Nolan, Jr., Director
/s/Thomas G. Eastman March 25, 1996
Thomas G. Eastman, Director
/s/Donald A. Lorenz March 25, 1996
Donald A. Lorenz,
Executive Vice President and
Chief Financial Officer
/s/ Hanh Kihara March 25, 1996
Hanh Kihara, Controller
Exhibit 21.1*
Subsidiaries of Bedford Property Investors, Inc.
State
of Name Under
Subsidiary Incor- Which Subsidiary is
Name poration 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.
6. ICMPI (Jackson), Inc. Delaware ICMPI (Jackson), Inc.
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Bedford Property Investors, Inc.:
We consent to incorporation by reference in the registration
statements on Form S-8 of Bedford Property Investors, Inc. of our
report dated February 6, 1996, relating to the consolidated balance
sheets of Bedford Property Investors, Inc. as of December 31, 1995 and
1994, 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, 1995, and the related financial statement schedule
as of December 31, 1995, which report appears in the December 31, 1995
annual report on form 10-K of Bedford Property Investors, Inc.
San Francisco, California KPMG Peat Marwick LLP
March 25, 1996