Back to GetFilings.com
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, 1997
Commission file number 1-12222
BEDFORD PROPERTY INVESTORS, INC.
(Exact name of Registrant as specified in its charter)
MARYLAND 68-0306514
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
270 Lafayette Circle, Lafayette, CA 94549
(Address of principal executive offices)
Registrant's telephone number, including area code (925) 283-8910
Securities Registered Pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, par value $0.02 per share New York Stock Exchange
Pacific Exchange
Securities Registered Pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes x No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [X] The aggregate market value
of the voting stock held by non-affiliates of Registrant as of March 13,
1998 was approximately $425,368,000. The number of shares of
Registrant's Common Stock, par value $0.02 per share, outstanding as of
March 13, 1998 was 22,583,867.
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 13, 1998, 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
When used in this annual report, the words "believes," "anticipates" and
similar expressions are intended to identify forward-looking statements.
Such statements are subject to certain risks and uncertainties which
could cause actual results to differ materially from those projected,
including, but not limited to, those set forth in the section entitled
"Potential Factors Affecting Future Operating Results" 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.
ITEM 1. BUSINESS
The Company
Bedford Property Investors, Inc. is a self-administered and self-managed
equity REIT engaged in the business of owning, managing, acquiring and
developing industrial and suburban office properties proximate to
metropolitan areas primarily in the Western United States. As of
December 31, 1997, the Company owned and operated, either directly or
through one of its wholly-owned subsidiaries, 75 properties aggregating
approximately 6.2 million rentable square feet and comprised of 55
industrial properties (the "Industrial Properties") and 20 suburban
office properties (the "Suburban Office Properties" and, together with
the Industrial Properties, the "Properties"). This portfolio of
properties includes 4 industrial properties which were developed by the
Company in 1997 and 71 existing properties. In addition, the portfolio
includes 7 parcels of land held for future development. As of December
31, 1997, the existing Properties were approximately 99% leased by over
440 tenants and the development properties were approximately 44% leased
by 14 tenants. The Properties are located in Northern and Southern
California, Oregon, Washington, Arizona, Nevada, Utah, Colorado, Texas
and Kansas.
The Company seeks to grow its asset base through the acquisition of
industrial and suburban office properties and portfolios of such
properties, as well as through the development of new industrial and
suburban office properties. The Company's strategy is to operate in
suburban markets that are experiencing, or are expected by the Company
to experience, superior economic growth that are subject to limitations
on the development of similar properties. The Company believes that
employment growth is a reliable indicator of future demand for both
industrial and suburban office space. In addition, the Company believes
that certain supply-side constraints, such as limited availability of
undeveloped land in a market, increase a market's potential for higher
average rents over time. The Company is currently targeting selected
markets in which the Properties are located as well as selected markets
in which the Company has expertise. The Company believes that due to
recent economic improvements in these markets, and related improvements
in the commercial property markets, an investment in industrial or
suburban office properties in these markets provides the potential for
attractive returns through increased occupancy levels, rents and real
estate values.
Business Objectives and Growth Plan
Business Objectives
The Company's business objective is to increase stockholders' long-term
total return through the appreciation in value of the common stock. To
achieve this objective, the Company seeks to (i) increase cash flow from
our existing Properties, (ii) acquire quality industrial and suburban
office properties and/or portfolios of such properties, and (iii) develop
new industrial and suburban office properties.
Internal Growth
The Company seeks to increase cash flow from existing Properties through
(i) the lease-up of vacant space, (ii) the reduction of costs associated
with tenant turnover through the retention of existing tenants, (iii) the
negotiation of increases in rental rates and of contractual periodic rent
increases when market conditions permit, and (iv) the strict containment
of operating expenses and capital expenditures.
During 1997, leases for 946,920 square feet expired with a weighted
average base rental rate of $8.25 per square foot. Approximately 76% of
this space has been re-leased, and the weighted average base rental rate
of the new leases is $9.10 per square foot, an increase of 10.3%.
Changes in average rental rate do not reflect changes in expense recovery
rates, if any. In addition, past performance is not necessarily
indicative of results that will be obtained in the future, and no
assurance can be given in that regard.
Acquisitions
The Company seeks to acquire 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 existing $175 million credit facility, (iii)
its relationships with private and institutional real estate owners, (iv)
its strong relationships with real estate brokers, and (v) its integrated
asset management program enable it to effectively identify and capitalize
on acquisition opportunities. Each acquisition opportunity is reviewed
to evaluate whether it meets the following criteria: (i) potential for
higher occupancy levels and/or rents as well as for lower turnover and/or
operating expenses, (ii) ability to generate returns in excess of the
Company's weighted average cost of capital, taking into account the
estimated costs associated with tenant turnover (i.e., tenant
improvements, leasing commissions and the loss of income due to vacancy),
and (iii) availability for purchase at a price at or below estimated
replacement cost. The Company has, however, acquired and may in the
future acquire properties which do not meet one or more of these
criteria. This may be particularly true with the acquisition of a
portfolio of properties, which may include individual properties that do
not meet one or more of the foregoing criteria.
Following completion of an initial review, the Company may make a
purchase offer, subject to satisfactory completion of its due diligence
process. The due diligence process enables the Company to refine its
original estimate of a property's potential performance and typically
includes a complete review and analysis of the property's physical
structure, systems, environmental status and projected financial
performance, as well as an evaluation of the local market and competitive
properties and of relevant economic and demographic information. Mr.
Bedford (the Chief Executive Officer) and at least one other member of
the Board of Directors typically visit each proposed acquisition property
before the purchase is closed.
The Company's activities relating to the acquisition of new properties,
including the due diligence process, are conducted on an exclusive basis
by Bedford Acquisitions, Inc. (BAI), a California corporation wholly-
owned by Mr. Bedford. BAI receives a fee in an amount equal to the
lesser of (i) 1 1/2% of the gross amount raised in financings or the
aggregate purchase price of property acquisitions, or (ii) an amount
equal to (a) the aggregate amount of approved 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 and is renewable at the option of the Company for
additional one year terms. The current agreement will expire January 1,
1999.
Development
The Company seeks to develop properties in markets where (i) strong
demand for space has caused or is expected to cause occupancy rates to
remain high, and (ii) there is a limited supply of land available for new
development. The Company's management team has experience in all phases
of the development process, including market analysis, site selection,
zoning, design, pre-development leasing, construction and permanent
financing and construction management. The Company believes that a
general decrease in competition in development activity as well as higher
occupancy rates in most of the Company's markets will lead to additional
attractive development opportunities. The Company is currently in the
process of developing properties in Northern California, Arizona, and
Kansas and is considering developing additional properties in Northern
California, Southern California, Arizona, Colorado and Washington. The
Company's management team has significant development experience in each
of these markets. In 1997 the shell construction of 4 properties was
completed, representing 365,000 square feet of industrial space. These
properties are now in the lease up phase and were 44% leased by year end.
Corporate Strategies
In pursuing its business objectives and growth plans, the Company intends
to:
1. Pursue a Market Driven Strategy.
The Company's strategy is to operate in suburban markets which are
experiencing, or are expected by the Company to experience, economic
growth, and which are, ideally, subject to supply-side constraints. The
Company believes that the metropolitan areas in which it operates have
multiple suburban "cores" and that the potential for growth in these
metropolitan areas is generally greatest in and around these suburban
cores. The Company believes that such suburban cores emerge as jobs move
to the suburbs and typically offer a well-trained and well-educated work
force, high quality of life and, in many cases, a diversified economic
base. The Company focuses on owning, managing, acquiring and developing
properties in these suburban cores. Additionally, the Company seeks out
real estate markets that are subject to supply-side constraints such as
limited availability of undeveloped land and/or geographic, topographic,
regulatory and/or infrastructure restrictions. The Company believes that
such restrictions limit the supply of new commercial space, which, when
combined with a growing employment and population base, enhances the
long-term return potential for an investment in real estate assets.
2. Focus its Efforts in the Western United States.
The Company is currently targeting selected suburban markets in the
Western United States, including markets in which the Company's
Properties are located as well as selected new markets. The Company
believes that due to continued economic improvements in these markets,
and related improvements in the commercial property markets, an
investment in industrial or suburban office properties in these markets
provides the potential for attractive returns through increased occupancy
levels, rents and real estate values. The Company believes that this
geographic focus, combined with management's market experience,
contributes to a more thorough understanding of these industrial and
suburban office property markets and allows the Company to anticipate
trends and therefore to better identify investment opportunities.
3. Acquire and Develop "Service Center/Flex" Industrial
Properties.
One of the Company's targeted property types is "service center/flex"
industrial properties. These properties are generally smaller than other
industrial buildings and are divisible into units ranging from
approximately 1,500 square feet to approximately 20,000 square feet in
order to accommodate multiple tenants of various sizes and needs. The
buildings generally range in size from 8,000 to 80,000 square feet, have
a clear height of 12 to 18 feet and are built using concrete tilt
construction with store fronts incorporated in the front elevation and
grade level service doors in the back elevation. The Company believes
that these properties require more management expertise than other types
of industrial properties and that it has developed such expertise. The
Company also believes that many potential buyers do not wish or are not
well-positioned to undertake such active management. As a result, the
Company believes that it often faces fewer competitors for this product
and is generally able to acquire these properties at above average
yields.
4. Plan for Future 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 property cash flow. Due to the capital
intensive nature of suburban office properties, and to a lesser degree,
industrial properties, the Company believes that planning and budgeting
for future costs associated with tenant turnover is a prudent component
of managing the cash flow of the 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 budgets and longer-term forecasts and seeks to
maintain cash and/or availability under the Credit Facility adequate to
cover these budgeted expenditures. The Company believes that its ability
to commit capital to fund tenant improvements and pay lease commissions
helps to retain and attract tenants. To the extent that a vacancy in one
of the Properties does occur, the Company believes that its policy of
budgeting ahead for anticipated tenant improvement costs and leasing
commissions enables it to compete effectively for new tenants.
5. Utilize In-House Asset and Property Management.
The Company believes that the long-term value of its Properties is
enhanced through in-house asset management and currently manages 68 of
its 75 properties from its seven regional property management offices and
its corporate headquarters. The Company conducts its Northern California
property management activities out of its headquarters office in
Lafayette, California; its Southern California property management
activities out of its regional office in Tustin, California; its Kansas
City property management activities out of its regional office in Lenexa,
Kansas; its Arizona property management activities out of its regional
office in Phoenix, Arizona; its Washington property management activities
out of its regional office in Seattle, Washington; its Colorado property
management activities out of its regional office in Denver, Colorado; and
its Texas property management activities out of its regional office in
Dallas, Texas. The Company's three Properties in Utah and Oregon are
currently managed for the Company by third parties. The Company intends
to open additional property management offices in those regions as its
portfolios grow to a point where it becomes economically justified.
The Company's asset management team develops and monitors a comprehensive
asset management plan for each Property in an effort to ensure its
efficient operation. The Company's Senior Vice President of
Property/Asset Management works directly with the Company's internal
finance and accounting staff to develop and monitor detailed budgets and
financial reports for each Property. He also works with each property
manager to identify and implement opportunities to improve cash flow from
each Property and to maximize each Property's long-term investment value.
The Company's property management staff is generally responsible for
leasing activities, ordinary maintenance and repairs, financial record
keeping on income and expenses, rent collection, payment of operating
expenses and property operations. The Company's property management
philosophy is based on the belief that the long-term value of the
Properties is enhanced by attention to detail and hands-on service
provided by professional in-house property managers. The Company
believes that a successful leasing program starts by servicing existing
tenants first. Costs associated with tenant turnover (i.e., tenant
improvements, leasing commissions and the loss of income due to vacancy)
can be significant and, by addressing and attending to existing tenants'
needs, the Company believes that it can increase its retention of
existing tenants and simultaneously make its properties more attractive
to tenants.
6. Cooperate with Local Real Estate Brokers.
The Company seeks to develop strong relationships with local real estate
brokers, who can provide access to tenants as well as general market
intelligence and research. The Company believes that these relationships
have enhanced the Company's ability to attract and retain tenants.
7. Maximize its Capital Structure.
As of December 31, 1997 the Company's total market capitalization was
$565 million. With a debt to total market capitalization ratio of 12%,
the Company is well positioned for future growth. Funding of new
acquisitions and development is expected to be provided by a combination
of debt and equity. The Company currently intends to take advantage of
the low interest rates available today by locking in long term debt
financing on a portion of its portfolio. At the same time, the Company
intends to preserve its financing flexibility through the use of short
term debt facilities such as its existing $175 million bank line of
credit as well as other means of managing interest rate risk. The
Company plans to access the equity markets from time to time to balance
its overall capital structure.
Transactions and Significant Events During 1997
Acquisitions and Development
During the year, the Company acquired 26 Properties, including 13
Industrial Properties and 13 Suburban Office Properties aggregating
approximately 2.3 million rentable square feet, for a total investment
of approximately $206 million. At acquisition, the Company estimated
that these Properties would provide an initial weighted average
unleveraged return on cost (computed as annualized property NOI at the
date of acquisition divided by total acquisition cost) of 9.4%. The
Company estimates that the purchase price of acquisitions completed in
1997 is approximately 84% of the replacement cost.
In addition, the Company completed shell construction of four industrial
properties aggregating approximately 365,000 square feet, for a total
investment to date of approximately $18 million.
The Company also acquired 6 parcels of land aggregating approximately 21
acres for a total investment of approximately $5 million, 5 of which are
adjacent to existing Properties. The Company plans to develop industrial
or office properties on each of these parcels.
Property Dispositions
In 1997, the Company sold three properties aggregating approximately
297,000 square feet. On July 31, 1997, two of its Southern California
office properties were sold for a sale price of approximately $25.8
million, which resulted in a gain of approximately $10.8 million. The
properties were 1000 Town Center Drive in Oxnard, California and Mariner
Court in Torrance, California. On October 22, 1997, Academy Place
Shopping Center in Colorado Springs, Colorado was sold for a sale price
of approximately $7.5 million, which resulted in a gain of approximately
$748,000.
Common Stock Offerings and Credit Facility
The Company completed the sale of 4,600,000 shares of common stock at $17
3/8 per share in February 1997 and 7,245,000 shares of common stock at
$19 5/8 per share in November 1997. Net cash proceeds from these
offerings were used to pay off the outstanding borrowings under the
Company's credit facility. The facility was amended and expanded to $150
million in June 1997, and was further expanded to $175 million in
September 1997. Under this facility, the Company can borrow up to $25
million on an unsecured basis. The secured loans bear interest at a rate
of LIBOR plus 1.50% and the unsecured loans bear interest at LIBOR plus
1.75%. The amended facility matures on June 1, 2000 and had an
outstanding balance of $8 million at December 31, 1997. The Company was
in compliance with the covenants and requirements of its revolving credit
facility at December 31, 1997.
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 eight times since that time from $0.10 per share
in the second quarter of 1993 to $0.30 per share in each of the third and
fourth quarters of 1997. In March 1998, the Company declared a dividend
distribution for the first quarter 1998 to its stockholders in the amount
of $0.30 per share of Common Stock, payable 15 days after the quarter-
end.
The Company paid dividends to the holders of the 8,333,334 shares of its
Series A Convertible Preferred Stock par value $0.01 per share (the
"Convertible Preferred Stock") in the amount of $.135 per share for each
of the first two quarters of 1997 and $.15 per share for the third
quarter of 1997. In October 1997, the Convertible Preferred stock was
converted to 4,166,667 shares of common stock.
Tenants
Based on rentable square feet, as of December 31, 1997, the Suburban
Office Properties and Industrial Properties were approximately 99%
occupied by a total of 444 tenants, of which 94 were Suburban Office
Property tenants and 350 were Industrial Property tenants. The Company's
tenants include local, regional, national and international companies
engaged in a wide variety of businesses.
Financing
The Company expects cash flow from operations to be sufficient to pay
operating expenses, real estate taxes, general and administrative
expenses, and interest on indebtedness and to make distributions to
stockholders required to maintain the Company's REIT qualification.
The Company expects to fund the cost of acquisitions, capital
expenditures, costs associated with lease renewals and reletting of
space, repayment of indebtedness, and development of properties from (i)
cash flow from operations, (ii) borrowings under the credit facility and,
if available, other indebtedness (which may include indebtedness assumed
in acquisitions), (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 then outstanding under the
credit facility when it becomes due in 2000. 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 $20 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 $12.5 million subject to a deductible of 5-10% of
total insurable value per building with respect to the earthquake
coverage. The Company also carries director and officer liability
insurance with an aggregate limit of $10 million. This coverage protects
the Company's directors and officers against liability claims as well as
the cost of defense.
Competition, Regulation, and Other Factors
The success of the Company depends upon, among other factors, general
economic conditions and trends, including real estate trends, interest
rates, government regulations and legislation, income tax laws and
zoning laws.
The Company's real estate investments are located in markets in which
they face significant competition for the rental revenues they generate.
Many of the Company's investments, particularly the office buildings, are
located in markets in which there is a significant supply of available
space, resulting in intense competition for tenants and low rents.
Government Regulations
The Company's properties are subject to various federal, state and local
regulatory requirements such as local building codes and other similar
regulations. The Company believes its properties are currently in
substantial compliance with all applicable regulatory requirements,
although expenditures at its properties may be required to comply with
changes in these laws. No material expenditures are contemplated at this
time in order to comply with any such laws or regulations.
Under various federal, state and local laws, ordinances and regulations,
an owner or operator of real estate is liable for the costs of removal
or remediation of certain hazardous or toxic substances released on,
above, under, or in such property. Such laws often impose such liability
without regard to whether the owner knew of, or was responsible for, the
presence of such hazardous or toxic substances. The costs of such
removal or remediation could be substantial.
Additionally, the presence of such substances or the failure to properly
remediate such substances may adversely affect the owner's ability to
borrow using such real estate as collateral.
The Company believes that it is in compliance in all material respects
with all federal, state and local laws regarding hazardous or toxic
substances, and the Company has not been notified by any governmental
authority of any non-compliance or other claim in connection with any of
its present or former properties. 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 46 full time employees. The Company is not
dependent upon a single tenant or a limited number of tenants.
The Company has conducted a comprehensive review of its computer systems
to identify "Year 2000" issues. The Year 2000 problem is a result of
computer programs being written using two digits rather than four to
define the applicable year. The Company purchased and implemented a new
computer information system in January 1997 in order to increase
efficiencies related to asset management and reporting. The new computer
information system is Year 2000 compliant. The Company presently
believes that the Year 2000 issue will not pose significant operational
problems for the Company and the Company does not anticipate material
expenditures related to this issue.
ITEM 2. PROPERTIES
Real Estate Summary
As of December 31, 1997, 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 51 $230,890,000 55
Office Buildings 20 168,326,000 40
Properties Under Development 4 18,158,000 4
Land Held for Development 7 5,712,000 1
Total 82 $423,086,000 100
As of December 31, 1997, the Company's real estate investments (net of
accumulated depreciation) were diversified by geographic region as
follows:
Number of Investment
Properties Amount % of Total
Industrial
Northern California 28 132,735,000 31
Southern California 8 43,276,000 10
Denver, Colorado 2 5,014,000 1
Arizona 4 20,486,000 5
Greater Portland Area 2 10,596,000 3
Greater Kansas City Area 6 16,039,000 4
Dallas, Texas 1 2,744,000 1
Total Industrial 51 230,890,000 55
Suburban Office
Northern California 4 17,394,000 4
Southern California 3 25,028,000 6
Salt Lake City 1 6,093,000 1
Greater Kansas City Area 1 6,361,000 2
Greater Seattle Area 2 44,871,000 11
Reno, Nevada 1 12,387,000 3
Austin, Texas 1 9,750,000 2
Arizona 6 31,382,000 7
Denver, Colorado 1 15,060,000 4
Total Suburban Office 20 168,326,000 40
Industrial Properties
Under Development
Northern California 2 10,484,000 2
Arizona 1 4,407,000 1
Greater Kansas City Area 1 3,267,000 1
Total Industrial Properties
Under Development 4 18,158,000 4
Land Held for Development
Northern California 2 1,752,000 *
Southern California 2 981,000 *
Arizona 2 1,334,000 *
Denver, Colorado 1 1,645,000 *
Total Land held for Development 7 5,712,000 1
Total 82 423,086,000 100
* Less than 1%.
Percentage Leased and 10% Tenants
The following table sets forth the occupancy rates for each of the last five
years, the number of tenants occupying 10% or more of the developed square feet
at the Property as of the end of the year and the principal business of the
tenants in the Company's properties at December 31, 1997.
Percentage Occupied/Number of Tenants Occupying 10% or more
1993 1994 1995 1996 1997
Property % # % # % # % # % # Principal Business at December 31, 1997
INDUSTRIAL PROPERTIES
Northern California
Building #3 at 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 at Contra Costa
Diablo Ind. Park, Concord 100% 1 100% 1 100% 1 100% 1 100% 1 Warehouse and storage of medical supplies.
Building #18 at
Mason Ind. Park, Concord 100% 2 90% 2 83% 2 83% 2 100% 2 Warehouse of scaffolding materials and
construction supplies.
115 Mason Circle, Concord N/A N/A N/A 100% 5 100% 5 Mechanical systems insulation and acoustical
contractor, pipeline servicing co.,
wholesale distributor of computer peripherals
and software, distributor of fluid celing
products, manufacturer and welder of pipes.
Auburn Court, Fremont N/A N/A 100% 4 100% 4 100% 4 Manufacturing of computer equipment,
assembly of cable items, lab engineering, and
marketing design.
47650 Westinghouse Drive,
Fremont N/A N/A 100% 1 100% 1 100% 1 Electronic personal computer board
assembly.
47600 Westinghouse Drive,
Fremont N/A N/A N/A 100% 1 100% 1 Research and development assembly and
testing related to the semi-conductor/
electronics industry.
47633 Westinghouse Drive,
Fremont N/A N/A N/A 100% 1 100% 1 Design and manufacture chemical vapor
equipment for semi-conductors.
6500 Kaiser Drive, Fremont N/A N/A N/A N/A 100% 1 Office, research and development,
manufacturing of computers.
Bedford Fremont Business Center,
Fremont N/A N/A N/A N/A 100% 1 Administration and testing of samples for
kidney dialysis facilities.
Spinnaker Court, Fremont N/A N/A N/A N/A 100% 2 Warehouse and assembly of computer
products and general industrial, warehouse
research and development.
Fourier Avenue, Fremont N/A N/A N/A 100% 1 100% 1 Manufacturer of testers and equipment for
semi-conductors.
Milpitas Town Center, Milpitas N/A 100% 4 100% 4 100% 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.
598 Gibraltar Drive, Milpitas N/A N/A N/A 100% 1 100% 1 Manufacturing of personal computers.
Doherty Avenue, Modesto N/A N/A N/A 100% 1 100% 1 Storing canned goods.
860-870 Napa Valley Corporate
Way, Napa N/A N/A N/A 96% 3 86% 3 Winery, engineering company and software
developer.
The Mondavi Building, Napa N/A N/A N/A N/A 100% 1 Wine storage and administration.
350 East Plumeria Drive,
San Jose N/A N/A 100% 1 100% 1 100% 1 Developer of data transmission
technology.
Lundy Avenue, San Jose N/A N/A N/A 100% 2 100% 2 Distributor of electronic components,
manufacturer and distributor of high
quality personal computers.
INDUSTRIAL PROPERTIES (continued)
O'Toole Business Center, San Jose N/A N/A N/A 94% 0 90% 0 N/A
301 East Grand, South
San Francisco N/A N/A 71% 2 100% 3 100% 3 Freight forwarding, furniture wholesale,
and distributor of MRI Equipment.
342 Allerton, South
San Francisco N/A N/A 100% 4 100% 4 100% 4 Freight forwarding.
400 Grandview, South
San Francisco N/A N/A 100% 5 100% 5 100% 4 Radiology research and developer, freight
forwarding, manufacturing and distribution
of point-of-sale marketing products.
410 Allerton, South
San Francisco N/A N/A 100% 1 100% 1 100% 1 Candy manufacturer and distributor.
417 Eccles, South
San Francisco N/A N/A 100% 2 100% 2 53% 1 Storage/distribution of food products.
2277 Pine View Way, Petaluma N/A N/A N/A N/A 100% 1 Manufacturer and distributor of plastic and
glass eyeglass lenses for world-wide
distribution.
Monterey Commerce Center 2,
Monterey N/A N/A N/A N/A 100% 1 Language interpretation - over seas
calls.
Monterey Commerce Center 3,
Monterey N/A N/A N/A N/A 100% 3 Sales.
INDUSTRIAL PROPERTIES (continued)
Southern California
Dupont Industrial Center,
Ontario N/A 91% 1 100% 1 59% 0 100% 1 Distribution of swimming pool supplies.
3002 Dow Business Center, N/A N/A 83% 0 99% 0 100% 0 N/A
Tustin
Carroll Tech I, San Diego N/A N/A N/A 100% 1 100% 1 Bio-technology company. Vacated 12/31/97.
Carroll Tech II, San Diego N/A N/A N/A 100% 1 100% 1 Bio-technology company.
Signal Systems Building,
San Diego N/A N/A N/A 100% 1 100% 1 Developer and manufacturer of avionic
diagnostic equipment.
Filed Chapter 11.
Vista 1, Vista N/A N/A N/A 100% 1 100% 1 Manufacturer of heat sensitive film
paper. Vacated 12/31/97. Company
liquidated under statute per the general
assignment for the benefit of creditors.
Vista 2, Vista N/A N/A N/A 100% 1 100% 1 Manufacturer of graphite golf club shaft.
2230 Oak Ridge Way N/A N/A N/A N/A 100% 1 Manufacturer of equipment for circuit
board assembly.
Denver, Colorado
Bryant Street Annex, Denver N/A N/A 100% 2 100% 2 100% 2 Office supplies distributor and automotive
paint distributor.
Bryant Street Quad, Denver N/A N/A 97% 3 100% 3 100% 3 Health care provider, photo processing lab,
and radiator coating plant/distributor.
INDUSTRIAL PROPERTIES (continued)
Arizona
Westech Business Center, Phoenix N/A N/A N/A 93% 0 96% 0 N/A
2601 W. Broadway, Tempe N/A N/A N/A N/A 100% 1 Wireless phone service provider.
Phoenix Airport Center #3,
Phoenix N/A N/A N/A N/A 100% 1 Cosmetic manufacturing and distribution.
Butterfield Business Center,
Tucson N/A N/A N/A N/A 100% 3 Sears call center, polish/wax research
and development.
Greater Portland Area, Oregon
Twin Oaks Technology Center,
Beaverton N/A N/A 81% 2 91% 3 96% 2 Software developer and telecommunications.
Twin Oaks Business Park,
Beaverton N/A N/A 94% 3 80% 4 81% 4 Electronic engineering, electronic
equipment assembly, computer equipment
distributor and postal service.
Kansas City, Kansas
Ninety-Ninth Street #1, Lenexa N/A N/A 100% 2 100% 2 100% 2 Tool distribution and surgical instrument
manufacturing.
Ninety-Ninth Street #2, Lenexa N/A N/A 100% 1 100% 1 100% 1 Drug testing clinic.
Ninety-Ninth Street #3, Lenexa 100% 2 100% 2 100% 2 89% 2 100% 2 Warehouse for computer cables/wiring and
storage of corporate records/supplies.
Lackman Business Center,
Lenexa N/A N/A 98% 2 91% 2 100% 2 Data document services and environmental
testing and survey.
85th Street, Lenexa N/A N/A N/A N/A 100% 1 Manufacturing of plastic containers.
INDUSTRIAL PROPERTIES (continued)
Kansas City, Kansas (continued)
Panorama Business Center,
Kansas City N/A N/A N/A 100% 2 100% 2 Graphics and refrigeration companies.
Dallas, Texas
Ferrell N/A N/A N/A N/A 100% 5 Glass manufacturing (sub-tenant is
telecommunications), medical products
distribution, hardware distribution, and
direct sales of nutritional products.
SUBURBAN OFFICE PROPERTIES
Northern California
Village Green, Lafayette N/A 82% 3 100% 2 100% 1 99% 1 Software developer.
100 View Street, Mountain View N/A N/A N/A 100% 4 100% 3 Architectural servicing (two tenants),
designing and marketing of integrated
circuits for semi-conductors, research and
development of governmental devices.
Monterey Commerce Center 1
Monterey N/A N/A N/A N/A 87% 4 Financial services, software development,
telecommunications sales, electronic
equipment sales.
Canyon Park, San Ramon N/A N/A N/A N/A 100% 2 Medical administrative offices and
geotechnical lab; soils testing, engineering
services.
Southern California
Laguna Hills Square, Laguna N/A N/A N/A 86% 2 96% 4 Medical facility and securities brokerage firm.
Carroll Tech III, San Diego N/A N/A N/A N/A 100% 1 Biomedical firm.
Scripps Wateridge, San Diego N/A N/A N/A N/A 100% 2 Wireless communications.
Denver, Colorado
Oracle Building N/A N/A N/A N/A 100% 2 Software company.
Salt Lake City
Woodlands Tower II,
Salt Lake City 96% 2 98% 2 95% 2 100% 2 100% 2 Insurance services and health care
staffing.
Greater Kansas City Area
6600 College Blvd., Overland Park N/A N/A 100% 1 98% 1 100% 1 Telecommunication.
Greater Seattle Area
Kenyon Center, Bellevue N/A N/A N/A 100% 1 100% 1 Manufacturer of aircraft.
Orillia Office Park, Renton N/A N/A N/A N/A 100% 1 Manufacturer of aircraft.
Reno
U. S. Bank Centre, Reno N/A N/A N/A N/A 94% 1 Insurance services.
Austin
9737 Great Hills Trail, Austin N/A N/A N/A N/A 100% 1 Home mortgage business.
Arizona
Executive Center at Southbank,
Phoenix N/A N/A N/A N/A 98% 3 Appliance sales, travel agency, and
customer credit call center.
Troika Building, Tucson N/A N/A N/A N/A 100% 1 Architectural Services
Phoenix Airport Center #1,
Phoenix N/A N/A N/A N/A 100% 5 Electronics, customer service, and sales
office.
Phoenix Airport Center #2,
Phoenix N/A N/A N/A N/A 100% 1 Electronics and customer service.
Phoenix Airport Center #4,
Phoenix N/A N/A N/A N/A 100% 1 Package delivery/service call center.
Phoenix Airport Center #5, Parking,
Phoenix N/A N/A N/A N/A N/A
Lease Expirations - Real Estate Portfolio
The following table presents lease expirations for each of the ten
years beginning January 1, 1998. The table presents: (i) the number
of leases that expire each year, (ii) the square feet covered by such
expiring leases, (iii) the annualized base rent (the "Annualized Base
Rent") represented by such expiring leases and (iv) the percentage of
total Annualized Base Rent for expiring leases.
Number of Percentage
Leases Rentable Annualized of Annualized
Year Expiring Square Feet Base Rent Base Rent
1998 118 905,135 7,146,108 14.5%
1999 86 664,328 5,819,472 11.8%
2000 102 839,316 8,766,924 17.8%
2001 51 953,514 8,022,576 16.3%
2002 53 507,664 5,138,448 10.4%
2003 8 235,997 3,325,836 6.8%
2004 5 585,359 5,267,640 10.7%
2005 3 127,203 1,400,148 2.9%
2006 4 413,327 1,862,940 3.8%
2007 and thereafter 5 478,168 2,447,544 5.0%
Total 435 5,710,011 49,197,636 100.0%
Principal Provisions of Leases
The following table sets forth the principal provisions of leases which
represent more than 10% of the gross leasable area ("GLA") of each of the
Company's Properties and the realty tax rate for each Property for 1997.
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 PROPERTIES
Northern California
Building #3 at Contra Costa $14,829 1 21,840 21,840 $6.84 Aug. 98 None
Diablo Ind. Park, Concord $1.03/100
Building #8 at Contra Costa $24,023 1 31,800 31,800 $6.00 Dec. 00 2-5 yr.
Diablo Ind. Park, Concord $1.03/100
Building #18 at Mason $18,944 2 28,836 7,225 $6.75 Oct. 98 None
Industrial Park, Concord $1.03/100 4,825 $7.70 Mar. 98 None
115 Mason Circle, Concord $18,293 5 35,000 5,833 $5.16 Jan. 00 None
$1.03/100 5,832 $6.18 Dec. 98 1-3 yr.
8,154 $6.96 Aug. 02 None
7,296 $6.24 Nov. 98 1-3 yr.
7,885 $6.24 Apr. 99 None
Auburn Court, Fremont $49,487 4 68,030 15,755 $10.20 Apr. 99 1-5 yr.
$1.07/100 16,095 $6.00 Sep. 98 1-5 yr.
12,060 $9.00 Apr. 98 None
12,060 $7.20 Jul. 00 None
47650 Westinghouse Drive, $15,308 1 24,030 24,030 $9.00 Sep. 04 1-3 yr.
Fremont $1.07/100
47600 Westinghouse Drive, $17,132 1 24,030 24,030 $10.20 Oct. 03 1-3 yr.
Fremont $1.07/100
47633 Westinghouse Drive, $52,810 1 50,088 50,088 $11.60 Oct. 03 1-3 yr.
Fremont $1.07/100
6500 Kaiser Drive, Fremont $134,912 1 78,611 78,611 $9.00 Sep. 04 2-5 yr.
$1.07/100
Bedford Fremont Business Center,
Fremont $132,082 1 146,509 27,750 $11.65 Jul. 98 1-3 yr.
$1.07/100
Spinnaker Court, Fremont $73,380 2 98,500 69,230 $8.10 Feb. 98 None
$1.07/100 29,270 $7.78 Mar. 00 None
Fourier Avenue, Fremont $105,583 1 104,400 104,400 $8.99 Apr. 04 None
$1.07/100
Milpitas Town Center, $65,950 4 102,620 23,924 $9.63 Sep. 99 1-2 yr.
Milpitas $1.07/100 24,426 $11.04 Apr. 02 1-2 yr.
30,840 $7.68 Jul. 03 1-5 yr.
23,430 $7.52 Jan. 00 1-5 yr.
598 Gibraltar Drive, $58,448 1 45,090 45,090 $9.48 Apr. 01 1-5 yr.
Milpitas $1.07/100
Doherty Avenue, Modesto $56,189 1 251,308 251,308 $1.88 Dec. 06 None
$1.10/100
860-870 Napa Valley Corporate $82,094 3 67,775 13,111 $9.61 Dec. 00 1-5 yr.
Way, Napa $1.03/100 7,558 $9.89 Sep. 01 None
8,474 $9.60 Dec. 99 None
The Mondavi Building, Napa $124,256 1 120,157 120,157 $4.92 Sep. 12 1-5 yr.
$1.03/100
350 East Plumeria Drive, $134,490 1 142,700 142,700 $8.40 Dec. 01 1-3 yr.
San Jose $1.08/100
Lundy Avenue, San Jose $60,310 3 60,428 11,086 $7.14 Jul. 98 None
$1.10/100 32,877 $7.80 Apr. 99 1-5 yr.
16,465 $5.64 Apr. 99 1-3 yr.
O'Toole Business Center, $111,276 0 122,320 N/A N/A N/A N/A
San Jose $1.10/100
301 East Grand, $32,333 3 57,846 26,240 $6.24 Jun. 98 None
South San Francisco $1.03/100 14,400 $5.46 Oct. 99 None
17,206 $4.68 Aug. 98 None
342 Allerton, $51,485 4 69,312 19,751 $6.96 Mar. 00 None
South San Francisco $1.03/100 9,720 $8.40 Mar. 02 None
30,953 $7.28 Feb. 99 None
8,888 $9.00 Aug. 02 None
400 Grandview, $75,734 4 107,004 21,841 $7.20 Dec. 98 None
South San Francisco $1.03/100 43,642 $7.41 Jul. 02 1-5 yr.
18,789 $6.45 May 99 1-5 yr.
18,864 $6.00 Jan. 03 None
410 Allerton, $25,858 1 46,050 46,050 $5.16 Apr. 01 None
South San Francisco $1.03/100
417 Eccles, $12,532 1 24,624 12,960 $6.36 Dec. 97 1-5 yr.
South San Francisco $1.03/100
2277 Pine View Way, $24,607 1 120,480 120,480 $6.91 Mar. 07 2-5 yr.
Petaluma $1.08/100
Monterey Commerce $22,627 1 28,020 28,020 $14.16 Dec. 00 None
Center 2, Monterey $1.00/100
Monterey Commerce $22,347 3 24,240 3,817 $13.08 Jul. 01 None
Center 3, Monterey $1.00/100 3,050 $12.96 Nov. 00 None
17,373 $15.36 Oct. 00 None
Southern California
Dupont Industrial Center, $205,346 1 451,192 183,244 $2.88 Jan. 07 2-5 yr.
Ontario $1.01/100
3002 Dow Business Center, $195,932 0 192,125 N/A N/A N/A N/A
Tustin $1.02/100
Carroll Tech I, $21,207 1 21,936 21,936 $11.93 Dec. 97 None
San Diego $1.12/100
Carroll Tech II, $34,605 1 37,586 37,586 $11.52 Dec. 98 1-3 yr.
San Diego $1.12/100
Signal Systems Building, $96,473 1 109,780 109,780 $8.11 Aug. 06 2-5 yr.
San Diego $1.02/100
Vista 1, Vista $33,289 1 42,508 42,508 $0.00 Chapter 11, 12/31/97
$1.04/100
Vista 2, Vista $36,584 1 47,550 47,550 $6.61 Sep. 01 1-5 yr.
$1.04/100
Denver, Colorado
Bryant Street Annex, Denver $27,293 2 55,000 42,148 $4.25 Nov. 00 1-3 yr.
$7.54/100 12,852 $3.55 Mar. 00 None
Bryant Street Quad, Denver $77,203 3 155,536 17,440 $4.25 Apr. 02 None
$7.54/100 20,726 $3.30 Feb. 01 1-5 yr.
16,055 $3.60 Feb. 99 1-3 yr.
Arizona
Westech Business Center, Phoenix $78,241 0 143,940 N/A N/A N/A N/A
$12.69/100
2601 W. Broadway, Tempe $49,095 1 44,244 44,244 $7.14 Jan. 07 None
$12.27/100
Phoenix Airport Center #3, $42,460 1 55,122 55,122 $6.36 Jul. 01 None
Phoenix $12.69/100
Butterfield Business Center, $73,510 3 95,746 50,000 $7.92 Aug. 99 None
Tucson $15.95/100 14,982 $2.60 Aug. 99 None
22,002 $8.37 Jun. 01 None
Greater Portland Area
Twin Oaks Technology Center, $54,684 2 95,173 11,460 $5.20 Nov. 98 None
Beaverton $1.41/100 14,690 $7.56 Aug. 98 None
Twin Oaks Business Park, $39,439 4 66,339 7,633 $9.60 Nov. 02 None
Beaverton $1.41/100 6,702 $9.00 Feb. 00 None
14,522 $10.67 Jul. 99 1-3 yr.
11,686 $7.48 May 99 1-2 yr.
Greater Kansas City Area
Ninety-Ninth Street #1, $48,647 2 35,516 19,019 $8.09 Sep. 00 1-3 yr.
Lenexa $1.13/100 13,305 $7.25 Oct. 02 None
Ninety-Ninth Street #2, $26,397 1 12,974 12,974 $8.62 Oct. 99 None
Lenexa $1.13/100
Ninety Ninth Street #3, $61,354 2 50,000 13,000 $7.10 Dec. 03 1 yr.
Lenexa $1.13/100 31,250 $5.38 May 98 1-5 yr.
Lackman Business Center, $61,235 3 45,956 5,510 $10.45 Jan. 98 None
Lenexa $1.13/100 5,132 $9.68 May 98 None
5,320 $7.95 Jun. 99 None
85th Street, Lenexa $81,453 1 171,642 171,642 $3.11 Nov. 01 1-5 yr.
$1.13/100
Panorama Business Center, $111,362 2 103,457 12,491 $5.95 Sep. 01 1-5 yr.
Kansas City $9.23/100 12,951 $5.15 Feb. 01 None
Dallas, Texas
Ferrell $37,349 5 68,580 11,430 $4.50 Jan. 00 None
$4.76/100 11,430 $4.50 Feb. 99 None
11,430 $4.20 Feb. 00 None
11,430 $4.50 Jul. 01 1 yr.
11,430 $4.50 Apr. 99 1-3 yr.
SUBURBAN OFFICE PROPERTIES
Northern California
Village Green, Lafayette $25,176 4 16,895 2,119 $21.66 Aug. 99 None
$1.14/100 3,675 $26.84 Mar. 05 None
1,798 $22.05 Mar. 05 None
2,516 $22.03 Mar. 05 None
100 View Street, $56,297 3 42,141 5,490 $20.28 Jul. 01 1-5 yr.
Mountain View $1.06/100 12,112 $18.60 Mar. 99 1-3 yr.
9,875 $22.20 Oct. 00 None
Monterey Commerce Center 1, $57,957 4 50,031 5,809 $20.04 Aug. 99 None
Monterey $1.00/100 7,000 $18.96 Mar. 03 None
16,088 $20.92 Jul. 98 None
5,046 $19.62 Mar. 98 None
Canyon Park, $67,261 2 57,667 43,415 $16.48 Feb. 00 None
San Ramon $1.08/100 7,736 $18.60 Jan. 98 None
Southern California
Laguna Hills Square, Laguna $67,008 4 51,734 8,474 $33.60 Jun. 02 1-5 yr.
$1.05/100 7,368 $25.24 Apr. 00 1-3 yr.
6,391 $24.24 Sep. 00 1-5 yr.
9,229 $17.64 Jun. 02 2-3 yr.
Carroll Tech III, San Diego $22,829 1 29,307 29,307 $8.52 Dec. 98 1-5 yr.
$1.12/100
Scripps Wateridge, San Diego $175,873 2 123,853 49,295 $9.62 Jul. 06 1-5 yr.
$1.12/100 74,558 $12.60 Aug. 05 2-3 yr.
Denver
Oracle Building, $250,217 2 90,712 10,043 $18.00 Aug. 11 1-4 yr.
Denver $12.76/100 74,265 $24.00 Sep. 03 1-2 yr.
Salt Lake City
Woodlands Tower II, $119,869 2 114,352 42,590 $15.74 Feb. 02 1-5 yr.
Salt Lake City $1.27/100 22,599 $15.00 Jan. 01 None
Greater Kansas City Area
6600 College Blvd., $167,955 1 79,316 62,441 $11.80 Dec. 99 None
Overland Park $11.95/100
Greater Seattle Area
Kenyon Center, Bellevue $171,902 1 94,840 94,840 $11.61 Feb. 00 1-5 yr.
$1.16/100
Orillia Office Park, Renton $262,365 2 334,255 274,405 $9.35 Feb. 04 None
$1.32/100 59,850 $9.35 Feb. 04 None
Reno
U.S. Bank Centre, Reno $109,333 1 104,324 35,361 $17.40 Apr. 00 2-5 yr.
$3.35/100
Austin
9737 Great Hills Trail, Austin $168,973 1 82,680 82,680 $18.00 Dec. 01 1-5 yr.
$2.48/100
Arizona
Executive Center at Southbank, $151,381 4 140,157 38,106 $9.18 Apr. 02 1-5 yr.
Phoenix $16.50/100 17,910 $7.96 Sep. 03 2-5 yr.
30,518 $10.00 Jun. 01 2-5 yr.
21,626 $10.00 Jul. 02 2-5 yr.
Troika Building, Tucson $109,698 1 52,000 52,000 $9.00 Oct. 01 None
$16.94/100
Phoenix Airport Center #1, $31,022 5 32,460 11,990 $10.95 Aug. 00 None
Phoenix $12.69/100 4,527 $15.00 Mar. 01 None
4,449 $17.55 Dec. 02 None
4,041 $16.39 Jul. 01 None
4,502 $12.00 M-T-M None
Phoenix Airport Center #2, $48,035 1 35,768 35,768 $7.20 Aug. 01 None
Phoenix $12.69/100
Phoenix Airport Center #4, $25,100 1 30,504 30,504 $7.20 Jun. 00 None
Phoenix $12.69/100
Phoenix Airport Center #5, $17,358 N/A N/A N/A N/A N/A N/A
Parking, Phoenix $12.69/100
Average Effective Rent
The following table sets forth for each of the Properties the average
rent at the end of each year for the last five years.
Net Effective Rent Net Effective Rent
($/Sq/Yr) ($/Sq/Yr)
Properties At End of Year Properties At End of Year
INDUSTRIAL PROPERTIES:
Northern California
Building #3 at Contra Costa Diablo 47650 Westinghouse Drive
1993 $8.35 1993 N/A
1994 $8.35 1994 N/A
1995 $4.95 1995 $5.52
1996 $6.64 1996 $5.52
1997 $6.84 1997 $9.00
Building #8 at Contra Costa Diablo 47600 Westinghouse Drive
1993 $7.43 1993 N/A
1994 $7.81 1994 N/A
1995 $6.00 1995 N/A
1996 $6.00 1996 $5.94
1997 $6.00 1997 $10.20
Building #18 at Mason Industrial Park 47633 Westinghouse Drive
1993 $7.03 1993 N/A
1994 $6.95 1994 N/A
1995 $6.63 1995 N/A
1996 $6.78 1996 $11.37
1997 $6.88 1997 $11.60
115 Mason Circle 6500 Kaiser Drive
1993 N/A 1993 N/A
1994 N/A 1994 N/A
1995 N/A 1995 N/A
1996 $6.05 1996 N/A
1997 $6.22 1997 $9.00
Auburn Court Bedford Fremont Business Center
1993 N/A 1993 N/A
1994 N/A 1994 N/A
1995 $6.54 1995 N/A
1996 $6.78 1996 N/A
1997 $7.80 1997 $11.93
Net Effective Rent Net Effective Rent
($/Sq/Yr) ($/Sq/Yr)
Properties At End of Year Properties At End of Year
INDUSTRIAL PROPERTIES(continued):
Spinnaker Court The Mondavi Building
1993 N/A 1993 N/A
1994 N/A 1994 N/A
1995 N/A 1995 N/A
1996 N/A 1996 N/A
1997 $8.01 1997 $4.92
Fourier Avenue 350 East Plumeria Drive
1993 N/A 1993 N/A
1994 N/A 1994 N/A
1995 N/A 1995 $7.80
1996 $8.99 1996 $7.80
1997 $8.99 1997 $8.40
Milpitas Town Center Lundy Avenue
1993 N/A 1993 N/A
1994 $7.11 1994 N/A
1995 $7.35 1995 N/A
1996 $8.03 1996 $7.09
1997 $8.90 1997 $7.09
598 Gibraltar Drive O'Toole Business Center
1993 N/A 1993 N/A
1994 N/A 1994 N/A
1995 N/A 1995 N/A
1996 $9.48 1996 $8.75
1997 $9.48 1997 $10.31
Doherty Avenue 301 East Grand
1993 N/A 1993 N/A
1994 N/A 1994 N/A
1995 N/A 1995 $5.92
1996 $1.87 1996 $5.57
1997 $1.88 1997 $5.58
860-870 Napa Valley Corporate 342 Allerton
1993 N/A 1993 N/A
1994 N/A 1994 N/A
1995 N/A 1995 $6.88
1996 $9.44 1996 $7.18
1997 $8.86 1997 $7.57
Net Effective Rent Net Effective Rent
($/Sq/Yr) ($/Sq/Yr)
Properties At End of Year Properties At End of Year
INDUSTRIAL PROPERTIES(continued):
400 Grandview 410 Allerton
1993 N/A 1993 N/A
1994 N/A 1994 N/A
1995 $7.49 1995 $5.16
1996 $7.53 1996 $5.16
1997 $7.03 1997 $5.16
417 Eccles 2277 Pine View Way
1993 N/A 1993 N/A
1994 N/A 1994 N/A
1995 $5.71 1995 $5.16
1996 $6.01 1996 $5.16
1997 $6.36 1997 $5.16
Monterey Commerce Center 2 Monterey Commerce Center 3
1993 N/A 1993 N/A
1994 N/A 1994 N/A
1995 N/A 1995 N/A
1996 N/A 1996 N/A
1997 $14.16 1997 $14.70
Southern California
Dupont Industrial Center Carroll Tech II
1993 N/A 1993 N/A
1994 $3.07 1994 N/A
1995 $3.17 1995 N/A
1996 $3.53 1996 N/A
1997 $3.40 1997 $11.52
3002 Dow Business Center Signal Systems Building
1993 N/A 1993 N/A
1994 N/A 1994 N/A
1995 $8.88 1995 N/A
1996 $8.55 1996 $7.80
1997 $8.32 1997 $8.11
Carroll Tech I Vista 1
1993 N/A 1993 N/A
1994 N/A 1994 N/A
1995 N/A 1995 N/A
1996 $10.35 1996 $5.16
1997 $11.93 1997 $0.00**
**Bankruptcy
Net Effective Rent Net Effective Rent
($/Sq/Yr) ($/Sq/Yr)
Properties At End of Year Properties At End of Year
INDUSTRIAL PROPERTIES (continued):
Vista 2
1993 N/A
1994 N/A
1995 N/A
1996 $6.36
1997 $6.61
Denver
Bryant Street Annex Bryant Street Quad
1993 N/A 1993 N/A
1994 N/A 1994 N/A
1995 $4.02 1995 $3.09
1996 $3.93 1996 $3.39
1997 $4.09 1997 $3.82
Arizona
Westech Business Center Phoenix Airport Center #3
1993 N/A 1993 N/A
1994 N/A 1994 N/A
1995 N/A 1995 N/A
1996 $8.85 1996 N/A
1997 $9.44 1997 $6.36
2601 W. Broadway Butterfield Business Center
1993 N/A 1993 N/A
1994 N/A 1994 N/A
1995 N/A 1995 N/A
1996 N/A 1996 N/A
1997 $7.14 1997 $7.08
Net Effective Rent Net Effective Rent
($/Sq/Yr) ($/Sq/Yr)
Properties At End of Year Properties At End of Year
INDUSTRIAL PROPERTIES (continued):
Greater Portland Area, Oregon
Twin Oaks Technology Center Twin Oaks Business Park
1993 N/A 1993 N/A
1994 N/A 1994 N/A
1995 $7.27 1995 $7.75
1996 $7.32 1996 $8.35
1997 $7.67 1997 $8.86
Greater Kansas City Area
Ninety-Ninth Street #1 Ninety-Ninth Street #2
1993 N/A 1993 N/A
1994 N/A 1994 N/A
1995 $7.96 1995 $7.56
1996 $8.32 1996 $8.62
1997 $7.72 1997 $8.62
Lackman Business Center Ninety-Ninth Street #3
1993 N/A 1993 $5.86
1994 N/A 1994 $5.86
1995 $8.36 1995 $5.86
1996 $8.59 1996 $5.30
1997 $8.77 1997 $6.08
85th Street, Lenexa Panorama Business Center
1993 N/A 1993 N/A
1994 N/A 1994 N/A
1995 N/A 1995 N/A
1996 N/A 1996 $6.54
1997 $3.11 1997 $6.70
Dallas, Texas
Ferrell
1993 N/A
1994 N/A
1995 N/A
1996 N/A
1997 $4.55
Net Effective Rent Net Effective Rent
($/Sq/Yr) ($/Sq/Yr)
Properties At End of Year Properties At End of Year
SUBURBAN OFFICE PROPERTIES:
Northern California
Village Green 100 View Street
1993 N/A 1993 N/A
1994 $20.85 1994 N/A
1995 $18.23 1995 N/A
1996 $19.99 1996 $18.82
1997 $23.24 1997 $20.10
Monterey Commerce Center 1 Canyon Park
1993 N/A 1993 N/A
1994 N/A 1994 N/A
1995 N/A 1995 N/A
1996 N/A 1996 N/A
1997 $20.12 1997 $15.92
Southern California
Laguna Hills Square Scripps Wateridge
1993 N/A 1993 N/A
1994 N/A 1994 N/A
1995 N/A 1995 N/A
1996 $25.38 1996 N/A
1997 $23.90 1997 $11.41
Carroll Tech III
1993 N/A
1994 N/A
1995 N/A
1996 N/A
1997 $8.52
Net Effective Rent Net Effective Rent
($/Sq/Yr) ($/Sq/Yr)
Properties At End of Year Properties At End of Year
SUBURBAN OFFICE PROPERTIES(continued):
Denver, Colorado Reno
Oracle Building U.S. Bank Centre
1993 N/A 1993 N/A
1994 N/A 1994 N/A
1995 N/A 1995 N/A
1996 N/A 1996 N/A
1997 $23.37 1997 $18.59
Salt Lake City Austin
Woodlands Tower II 9737 Great Hills Trail
1993 $13.02 1993 N/A
1994 $14.47 1994 N/A
1995 $14.25 1995 N/A
1996 $14.58 1996 N/A
1997 $15.86 1997 $18.00
Greater Kansas City Area
6600 College Boulevard
1993 N/A
1994 N/A
1995 $12.01
1996 $11.99
1997 $12.28
Greater Seattle Area
Kenyon Center
1993 N/A
1994 N/A
1995 N/A
1996 $11.61
1997 $11.61
Orillia Office Park
1993 N/A
1994 N/A
1995 N/A
1996 N/A
1997 $9.35
Net Effective Rent Net Effective Rent
($/Sq/Yr) ($/Sq/Yr)
Properties At End of Year Properties At End of Year
SUBURBAN OFFICE PROPERTIES(continued):
Arizona
Executive Center at Southbank Phoenix Airport Center #2
1993 N/A 1993 N/A
1994 N/A 1994 N/A
1995 N/A 1995 N/A
1996 N/A 1996 N/A
1997 $9.23 1997 $7.20
Troika Building Phoenix Airport Center #4
1993 N/A 1993 N/A
1994 N/A 1994 N/A
1995 N/A 1995 N/A
1996 N/A 1996 N/A
1997 $9.00 1997 $7.20
Phoenix Airport Center #1 Phoenix Airport Center #5
1993 N/A 1993 N/A
1994 N/A 1994 N/A
1995 N/A 1995 N/A
1996 N/A 1996 N/A
1997 $13.81 1997 $7.21
Tax Information
The following table sets forth tax information of the Company's real
estate investments at December 31, 1997, as follows: (i) Federal tax
basis, (ii) annual rate of depreciation, (iii) method of depreciation,
and (iv) life claimed, with respect to each property or component
thereof for purposes of depreciation (in thousands):
Federal Annual Rate of Depreciation Life
Depreciable assets Tax Basis Depreciation Method In Years
INDUSTRIAL PROPERTIES
Northern California 3,789 3.18% Straight Line 31.5
91,871 2.56% Straight Line 39.0
95,660
Southern California 31,067 2.56% Straight Line 39.0
Denver, Colorado 3,256 2.56% Straight Line 39.0
Greater Phoenix Area, Arizona 13,688 2.56% Straight Line 39.0
Tucson, Arizona 4,231 2.56% Straight Line 39.0
Greater Portland Area 8,404 2.56% Straight Line 39.0
Greater Kansas City Area 2,132 3.18% Straight Line 31.5
13,888 2.56% Straight Line 39.0
16,020
Dallas, Texas 1,639 2.56% Straight Line 39.0
Total depreciable assets for industrial properties 173,965
SUBURBAN OFFICE PROPERTIES
Northern California 13,138 2.56% Straight Line 39.0
Southern California 18,075 2.56% Straight Line 39.0
Salt Lake City 6,472 2.56% Straight Line 39.0
Greater Kansas City Area 4,046 2.56% Straight Line 39.0
Greater Seattle Area 30,225 2.56% Straight Line 39.0
Reno, Nevada 10,438 2.56% Straight Line 39.0
Austin, Texas 7,075 2.56% Straight Line 39.0
Phoenix, Arizona 17,645 2.56% Straight Line 39.0
Tucson, Arizona 2,666 2.56% Straight Line 39.0
Denver, Colorado 13,248 2.56% Straight Line 39.0
Total depreciable assets for suburban office properties 123,028
296,993
For additional information on the Company's real estate portfolio, see
Note 2 to the Consolidated Financial Statements.
ITEM 3. LEGAL PROCEEDINGS
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Common Stock of the Company trades on the New York Exchange and
the Pacific Exchange under the symbol "BED." As of December 31, 1997
the Company had 518 stockholders of record. A significant number of
these stockholders are also nominees holding stock in street name for
individuals. The following table shows the high and low sale prices
per share reported on the New York Stock Exchange and the dividends
declared per share by the Company on the Common Stock for each
quarterly period during 1996 and 1997. All of the following
quotations have been adjusted to reflect the one-for-two reverse stock
split of the Common Stock effected on March 29, 1996.
Dividend
High Low Per Share
1996
First Quarter $15 1/4 $14 $.24
Second Quarter $16 $12 3/8 $.24
Third Quarter $14 5/8 $12 3/4 $.26
Fourth Quarter $17 1/2 $14 1/8 $.26
1997
First Quarter $21 1/4 $16 5/8 $.26
Second Quarter $20 1/8 $17 $.27
Third Quarter $22 $19 $.30
Fourth Quarter $22 7/8 $19 3/16 $.30
Credit Facility
Effective January 13, 1997, the Company's existing credit facility
(the "Credit Facility") was amended to lower the interest rate from
LIBOR plus 2.00% to LIBOR plus 1.75%. On June 13, 1997, the Company
further reduced this interest rate to LIBOR plus 1.50% and increased
the size of the Credit Facility to $150 million. On September 24,
1997 the Company again increased the size of the Credit Facility from
$150 million to $175 million. The credit facility contains various
restrictive covenants including, among other things, a covenant
limiting quarterly dividends to 95% of average Funds From Operations
for the immediately preceding two fiscal quarters. The Company is
currently under negotiations to restructure its Credit Facility as an
unsecured line and to further lower the interest rate thereunder. No
assurance can be given that the Credit Facility will be restructured
or that the interest rate will be further reduced.
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)
1997 1996 1995 1994 1993
Operating Data:
Rental income $ 46,377 $ 27,541 $ 11,695 $ 9,154 $ 7,207
Net income 31,291 11,021 2,895 3,609 3,147
Net income applicable
to common stockholders 27,791 6,516 1,607 3,609 3,147
Net income
per common share -
assuming dilution $ 1.94 $ 1.14 $ 0.52 $ 1.17 $ 1.04
Balance Sheet Data:
Real estate investments $ 423,086 $ 224,501 $ 128,964 $ 55,053 $ 35,962
Bank loan payable 8,216 46,097 43,250 22,400 3,621
Mortgage loans payable 60,323 51,850 - - -
Redeemable preferred shares - 50,000 50,000 - -
Common and other
stockholders' equity 346,426 73,756 32,435 36,932 35,441
Other Data:
Net cash provided by
operating activities $ 25,041 $ 14,378 $ 4,898 $ 2,716 $ 1,220
Net cash (used) provided
by investing activities (180,358) (96,964) (73,259) (19,720) 10,085
Net cash provided (used)
by financing activities 155,350 82,887 64,655 16,807 (6,550)
Funds From Operations (1) 25,582 13,645 5,021 3,622 1,964
Dividends declared per share $ 1.13 $ 1.00 $ 0.82 $ 0.71 $ 0.36
(1) Management considers Funds From Operations to be one measure of
the performance of an equity REIT. Funds From Operations is used by
financial analysts in evaluating REITs and can be one measure of a
REIT's ability to make cash distributions. Presentation of this
information provides the reader with an additional measure to compare
the performance of REITs. Funds From Operations generally is defined
by NAREIT as net income (loss) (computed in accordance with generally
accepted accounting principles), excluding gains (losses) from debt
restructurings 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
generally accepted accounting principles; it is not necessarily
indicative of cash available to fund cash needs and should not be
considered as an alternative to net income (loss) as an indicator of
the Company's operating performance or as an alternative to cash flow
as a measure of liquidity. Further, Funds from Operations as
disclosed by other Reit's may not be comparable to the Company's
calculation of Funds from Operations.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Overview
The following should be read in conjunction with the Selected Financial
Data and the Consolidated Financial Statements and Notes thereto, all of
which are included herein.
When used in this annual report, the words "believes," "anticipates" and
similar expressions are intended to identify forward-looking statements.
Such statements are subject to certain risks and uncertainties which
could cause actual results to differ materially from those projected,
including, but not limited to, those set forth in the section entitled
"Potential Factors Affecting Future Operating Results" 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
The Company's operations consist of owning and operating industrial and
suburban office properties located primarily in the Western United
States.
Increases in revenues, expenses, net income and cash flows in the years
compared below were due primarily to the acquisition, development and
sale of operating property as follows:
1997 1996 1995
Number of Square Number of Square Number of Square
Properties Feet Properties Feet Properties Feet
Acquisitions
Industrial 13 1,091,000 13 1,251,000 18 1,384,000
Office 13 1,199,000 3 189,000 1 79,000
Retail - - - - 1 84,000
26 2,290,000 16 1,440,000 20 1,547,000
Development
Industrial 4 365,000 1 45,000 - -
Sales
Industrial - - 2 186,000 1 38,000
Office 2 213,000 - - 1 88,000
Retail 1 84,000 - - - -
3 297,000 2 186,000 2 126,000
Comparison of 1997 to 1996
Income from Property Operations
Income from property operations (defined as rental income less rental
expenses) increased $13,268,000 or 80% in 1997 compared with 1996. This
is due to an increase in rental income of $18,836,000 offset by an
increase in rental expenses (which include operating expenses, real
estate taxes and depreciation and amortization) of $5,568,000.
The increase in rental income and expenses is primarily attributable to
the acquisition of real estate investments during 1997 and 1996. This
acquisition activity increased rental income and rental expenses by
$21,545,000 and $7,055,000,
respectively. This was partially offset by the sales of two office
properties and one retail property in 1997 and two industrial properties
in 1996, which generated a reduction in rental income and rental expenses
of $3,256,000 and $1,779,000, respectively.
Expenses
Interest expense, which includes amortization of loan fees, increased
$3,571,000 or 82.1% in 1997 compared with 1996. The increase is
attributable to the Company's higher level of borrowings to finance the
acquisition of properties in 1997, and higher financing costs incurred
in connection with its credit facility and mortgage loans. The
amortization of loan fees was $816,000 and $650,000 for 1997 and 1996,
respectively. General and administrative expenses increased $585,000 or
33.4% in 1997 compared with 1996, a result of managing a larger real
estate portfolio.
Gain on Sale
In July 1997, the Company sold two of its Southern California office
properties for a sale price of approximately $25,800,000, which resulted
in a gain of $10,785,000. In October 1997, the Company sold Academy
Place Shopping Center in Colorado Springs, Colorado for a sale price of
approximately $7,500,000, which resulted in a gain of approximately
$748,000. Net operating loss carryforward was utilized to offset
substantially all of the 1997 taxable income remaining after the
deduction of dividends paid in 1997. Retention and reinvestment of gains
on property sales generated alternative minimum tax expense of
approximately $250,000 which is included in 1997 general and
administrative expense.
In April 1996, the Company sold 3.6 acres of land adjacent to its
suburban office property in Utah for $1,000,000, receiving $950,000 in
cash and a $50,000 note. The 10% interest bearing note was paid in April
1997. The sale resulted in a gain of $359,000. In December 1996, the
Company sold two industrial properties in St. Paul, Minnesota for a cash
price of $6,705,000. The sale resulted in a gain of $47,000.
Dividends
1997 quarterly dividend declared for each share of common stock was $0.26
for the first quarter, $0.27 for the second quarter, and $0.30 for the
third and fourth quarters. Consistent with the Company's policy,
dividends are paid in the quarter after declared. In addition, the
Company declared a quarterly dividend of $1,125,000 in each of the first
two quarters of 1997 and $1,250,000 for the third quarter of 1997 on the
Series A Convertible Preferred Stock. The preferred shares were
converted into 4,166,667 shares of common stock on October 15, 1997.
Comparison of 1996 to 1995
Income from Property Operations
Income from property operations increased $10,202,000 or 160% in 1996
compared with 1995. This is due to an increase in rental income of
$15,846,000 offset by an increase in rental expenses of $5,644,000.
The increase in rental income and expenses is primarily attributable to
the acquisition and development of real estate investments. This
acquisition and development activity increased rental income and rental
expenses by $16,684,000 and $5,445,000, respectively. This was partially
offset by the sale of an office property and an industrial property in
1995 which generated a reduction in rental income and rental expenses of
$1,078,000 and $687,000, respectively.
Expenses
Interest expense, which includes amortization of loan fees, increased
$2,753,000 or 173% in 1996 compared with 1995. The increase is
attributable to the Company's higher level of borrowings to finance the
acquisition of properties in 1996, and higher financing costs incurred
in connection with its credit facility and mortgage loans. The
amortization of loan fees was $650,000 and $277,000 for 1996 and 1995,
respectively. General and administrative expenses increased $295,000 or
20% in 1996 compared with 1995, a result of managing a larger real estate
portfolio.
Gain on Sale
In April 1996, the Company sold 3.6 acres of land adjacent to its
suburban office property in Salt Lake City, Utah for $1,000,000,
receiving $950,000 in cash and a $50,000 note due in April 1997, with 10%
interest payable monthly. The sale resulted in a gain of $359,000. In
December 1996, the Company sold two industrial properties in St. Paul,
Minnesota for a cash sale price of $6,705,000. The sale resulted in a
gain of $47,000.
In 1995, the Company sold an office property located in Mississippi and
an industrial property located in Kansas for $8,000,000 cash. The sales
resulted in a loss of $642,000.
Dividends
Quarterly dividends declared for the first and second quarters of 1996
were $0.24 per share of common stock, and $0.26 per share of common stock
for the third and fourth quarters of 1996. Consistent with the Company's
policy, dividends are paid in the quarter after declared. In addition,
the Company declared a quarterly dividend of $1,125,000 on the Series A
Convertible Preferred Stock in each of the four quarters of 1996. The
preferred stock dividends are due and payable 45 days after the quarter
end.
Financial Condition
Total assets of the Company at December 31, 1997 increased by
$202,079,000 compared with December 31, 1996, primarily as a result of
an increase in real estate investments (net of depreciation) of
$198,585,000. Total liabilities at December 31, 1997 decreased by
$20,379,000 compared with December 31, 1996, primarily as a result of the
paydown of the Company's credit facility.
Liquidity and Capital Resources
During the year ended December 31, 1997, the Company's operating
activities provided net cash flow of $25,041,000. Investing activities
provided cash flow of $31,909,000 from the sale of properties and
utilized $212,267,000 to acquire and improve real estate investments.
Financing activities provided net cash flow of $155,350,000 consisting
of the proceeds from bank borrowings of $167,559,000 and net proceeds
from the sale of common stock of $210,953,000, offset by repayment of
bank borrowings and mortgage loans of $207,245,000, payment of dividends
of $15,660,000, and redemption of partnership units of $257,000.
The Company's mortgage loans, obtained in 1997 and 1996, totaled
$60,323,000 at December 31, 1997. They are secured by 17 properties
(which Properties collectively accounted for approximately 26% of the
Company's Annualized Base Rent and 20% of the Company's total assets as
of December 31, 1997). The loans bear interest at rates ranging from
7.02% to 8.9% per annum and have terms ranging from two to nine years.
Interest is due and payable monthly. In February 1998, the Company
secured a mortgage loan of $20,900,000 which bears interest at 6.9% and
has an eight year term. The proceeds of the mortgage loans were used to
pay down a portion of the outstanding borrowings under the credit
facility.
The Company completed the sale of 3,350,000 shares of common stock at $13
per share in April 1996. In February 1997, the Company completed the
sale of 4,600,000 shares of the common stock at $17 3/8 per share and in
November 1997 sold an additional 7,245,000 shares of common stock at $19
5/8 per share. Net cash proceeds from each of these offerings was used
to pay off the outstanding borrowings under the Company's credit
facility. The facility was amended and expanded to $150 million in June
1997, and was further expanded to $175 million in September 1997. Under
this facility, the Company can borrow up to $25 million on an unsecured
basis. The secured loans bear interest at a rate of LIBOR plus 1.50% and
the unsecured loans bear interest at LIBOR plus 1.75%. The credit
facility contains various restrictive covenants including, among other
things, a covenant limiting quarterly dividends to 95% of average Funds
From Operations for the immediately preceding two fiscal quarters. At
December 31, 1997 the Company was in compliance with the covenants and
requirements of the credit facility.
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 properties 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
At the present time, borrowings under the Company's credit facility bear
interest at a floating rate. Results from operations in 1998 may be
negatively impacted if interest rates increase in the future.
While the Company has historically been successful in renewing and
reletting space, the Company will be subject to the risk that certain
leases expiring in 1998 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 1998
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.
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.
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.
Accounting Developments
In June 1997, the FASB issued Financial Accounting Standard No. 130 (SFAS
130), Reporting Comprehensive Income. SFAS 130 is effective with the
year-end 1998 financial statements; however, the total comprehensive
income is required in the financial statements for interim periods
beginning in 1998. In June 1997, the FASB issued Financial Accounting
Standard No. 131, Disclosure About Segments of An Enterprise and Related
Information. SFAS 131 is effective with the year-end 1998 financial
statements. Management believes that the adoption of these statements
will not have a material impact on the Company's financial statements.
General Litigation
The Company is involved in various legal matters in the ordinary course
of business. In the opinion of management, none of these matters could
have a material impact on the Company's financial statements.
Inflation
Most of the Company's 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 Schedule Covered by Reports of
Independent Public Accountants
Report of Independent Public Accountants 48
Consolidated Balance Sheets as of December 31, 1997 and 1996 49
For the Years Ended December 31, 1997, 1996 and 1995:
- - Consolidated Statements of Income 50
- - Consolidated Statements of Stockholders' Equity 51
- - Consolidated Statements of Cash Flows 52
Notes to Consolidated Financial Statements 53
Financial Statement Schedule:
- - Schedule III - Real Estate and Accumulated Depreciation 64
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 13, 1998.
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, 1997 and 1996.
Consolidated Statements of Income for the years ended
December 31, 1997, 1996 and 1995.
Consolidated Statements of Stockholders' Equity for the years
ended December 31, 1997, 1996 and 1995.
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995.
Notes to Consolidated Financial Statements.
2. Financial Statement Schedules
Schedule III - Real Estate and Accumulated Depreciation
All other schedules have been omitted as they are not
applicable, or not required or because the information is
given in the Consolidated Financial Statements or related
Notes to Consolidated Financial Statements.
3. Exhibits
Exhibit No. List of Exhibits
3.1 Charter of the Company, as amended, is incorporated
herein by reference to Exhibit 4.1 to the Company's
Registration Statement on Form S-2, Registration No. 333-
921.
3.2 Amended and Restated Bylaws of the Company are
incorporated herein by reference to Exhibit 3.2 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1995.
10.1 The Company's Automatic Dividend Reinvestment and Share
Purchase Plan, as adopted by the Company, is incorporated
herein by reference to Exhibit 4.1 to Amendment No. 2 to
Registration Statement No. 2-94354 of ICM Property
Investors Incorporated.
10.4 Second Amended and Restated Credit Agreement dated as of
June 26, 1996, by and between the Company, as Borrower,
Bank of America National Trust and Savings Association
and the several financial institutions (the "Banks") is
incorporated herein by reference to Exhibit 10.4 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1997.
10.5 Sale and Option Agreement dated as of August 26, 1995, by
and between Kemper Investors Life Insurance Company, on
behalf of itself and Participants (as defined therein),
as Lender, the Company, as Purchaser, and Tustin
Properties, as Owner, for 3002 Dow Business Center is
incorporated herein by reference to Exhibit 10.19 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1995.
10.6 BPIA Agreement dated as of January 1, 1995, by and
between Westminster Holdings, Inc., a California
corporation and the Company is incorporated herein by
reference to Exhibit 10.14 to the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30,
1995.
10.7 Employment Agreement made as of February 17, 1993, by and
between ICM Property Investors Incorporated and Peter B.
Bedford is incorporated by reference to Exhibit 10.14 to
the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994, as amended by Form 10-K/A
filed on May 1, 1995, and Form 10-K/A-2 filed on August
8, 1995.
10.8 Amendment No. 1 to Employment Agreement dated as of
September 18, 1995, by and between Peter B. Bedford and
the Company is incorporated herein by reference to
Exhibit 10.10 to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1995.
10.12 Purchase and Sale Agreement dated as of October 19, 1995,
between Landsing Pacific Fund, Inc., a Maryland
corporation as Seller, and the Company, the Buyer, as
amended, is incorporated herein by reference to Exhibit
2.1 to the Company's Current Report on Form 8-K filed on
December 27, 1995.
10.13 Amended and Restated Promissory Note date May 24, 1996
executed by the Company and payable to the order of
Prudential Insurance Company of America is incorporated
herein by reference to Exhibit 10.13 to the Company's
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996.
10.14 Loan Agreement dated as of December 24, 1996 between
Bedford Property Investors, Inc. as Borrower and Union
Bank of California, N.A. as Lender is incorporated herein
by reference to Exhibit 10.14 to the Company's Form 10-K
for the year ended December 31, 1996.
10.15* Loan Agreement dated as of January 30, 1998 between
Bedford Property Investors, Inc. as Borrower and
Prudential Insurance Company of America as Lender.
10.16* The Company's Amended and Restated Employee Stock Plan.
10.17* Form of Employee Stock Plan Option Agreement between the
Company and the Named Executive Officers under the
Company's Amended and Restated Employee Stock Plan.
10.18* The Company's Amended and Restated 1992 Directors' Stock
Option Plan.
10.19* Form of Retention Agreement.
10.20* Employment Agreement made as of August 4, 1997, by and
between Bedford Property Investors Incorporated and Scott
R. Whitney.
10.21* Employment Agreement made as of November 18, 1997, by and
between Bedford Property Investors Incorporated and
Dennis Klimmek.
12* Ratio of Earnings to Fixed Charges.
21.1* Subsidiaries of the Company.
23.1* Consent of KPMG Peat Marwick LLP, independent auditors.
27* Financial Data Schedule
* Filed herewith
B. Reports on Form 8-K
During the quarter ended December 31, 1997 the Company
filed on October 31, 1997, a report on Form 8-K dated
September 16, 1997, reporting items 5 and 7 and
announcing the acquisitions of the Mondavi Building, 2230
Oak Ridge Way and Oracle Center.
The following financial statements were filed: (i)
Historical Summary of Gross Income and Direct Operating
Expenses for Oracle Center for the four months ended
December 31, 1996 and (ii) pro forma financial statements
showing the effect resulting from all the Company's
acquisitions through October 16, 1997.
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, 1997
and 1996, and the results of their operations and their cash flows for
each of the years in the three-year period ended December 31, 1997, in
conformity with generally accepted accounting principles. Also in our
opinion, the related financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth
therein.
KPMG Peat Marwick LLP
San Francisco, California
February 2, 1998
BEDFORD PROPERTY INVESTORS, INC.
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1997 AND 1996
(in thousands, except share and per share amounts)
1997 1996
Assets:
Real estate investments:
Industrial buildings $237,184 $164,674
Office buildings 170,948 53,071
Retail buildings - 6,281
Properties under development 18,227 5,388
Land held for development 5,712 -
432,071 229,414
Less accumulated depreciation 8,985 4,913
423,086 224,501
Cash 1,361 1,328
Other assets 9,456 5,995
$433,903 $231,824
Liabilities and Stockholders' Equity:
Bank loan payable 8,216 46,097
Mortgage loans payable 60,323 51,850
Accounts payable and accrued expenses 6,026 2,214
Dividend and distribution payable 6,804 2,827
Other liabilities 4,611 3,371
Total liabilities 85,980 106,359
Redeemable preferred stock:
Series A convertible preferred stock, par value
$0.01 per share; authorized 10,000,000 shares,
issued and outstanding none in 1997 and 8,333,334
shares in 1996; aggregate redemption amount
$50,000; aggregate liquidation preference $52,500 - 50,000
Minority interest in consolidated partnership 1,497 1,709
Stockholders' equity:
Common stock, par value $0.02 per share;
authorized 50,000,000 shares in 1997 and 15,000,000
shares in 1996; issued and outstanding 22,583,867
shares in 1997 and 6,526,325 shares in 1996 452 131
Additional paid-in capital 408,209 147,622
Accumulated losses and distributions in
excess of net income (62,235) (73,997)
Total stockholders' equity 346,426 73,756
$433,903 $231,824
See accompanying notes to consolidated financial statements.
BEDFORD PROPERTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 and 1995
(in thousands, except share and per share amounts)
1997 1996 1995
Property operations:
Rental income $46,377 $27,541 $11,695
Rental expenses:
Operating expenses 6,852 5,352 2,744
Real estate taxes 3,977 2,595 1,105
Depreciation and amortization 5,716 3,030 1,484
Income from property operations 29,832 16,564 6,362
General and administrative expenses (2,337) (1,752) (1,457)
Interest income 289 150 226
Interest expense (7,918) (4,347) (1,594)
Income before gain (loss) on sales of real
estate investments and minority interest 19,866 10,615 3,537
Gain (loss) on sales of real estate investments 11,533 406 (642)
Minority interest (108) - -
Net income $31,291 $11,021 $ 2,895
Net income applicable to common
stockholders $27,791 $ 6,516 $ 1,607
Basic earnings per share $ 2.21 $ 1.21 $ 0.53
Weighted average number of shares 12,566,065 5,405,727 3,005,950
Earnings per share - assuming dilution $ 1.94 $ 1.14 $ 0.52
Weighted average number of shares -
assuming dilution 16,166,454 9,702,552 3,089,549
See accompanying notes to consolidated financial statements.
BEDFORD PROPERTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(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, 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
($0.82 per share) - - (2,477) (2,477)
Dividends to preferred stockholders - - (1,288) (1,288)
Balance, December 31, 1995 $ 61 $107,214 $(74,840) $ 32,435
Issuance of common stock 70 43,778 - 43,848
Costs of issuance of preferred stock - - (2) (2)
Costs of issuance of common stock - (3,370) - (3,370)
Net income - - 11,021 11,021
Dividends to common stockholders
($1.00 per share) - - (5,671) (5,671)
Distributions to limited partnership unit holders - - (5) (5)
Dividends to preferred stockholders - - (4,500) (4,500)
Balance, December 31, 1996 $ 131 $147,622 $(73,997) $73,756
Issuance of common stock 321 265,622 - 265,943
Costs of issuance of common stock - (4,990) - (4,990)
Redemption of partnership units - (45) - (45)
Net income - - 31,291 31,291
Dividends to common stockholders
($1.13 per share) - - (16,029) (16,029)
Dividends to preferred stockholders - - (3,500) (3,500)
Balance, December 31, 1997 $ 452 $408,209 $(62,235) $346,426
See accompanying notes to consolidated financial statements.
BEDFORD PROPERTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(in thousands)
1997 1996 1995
Operating Activities:
Net income $31,291 $11,021 $2,895
Adjustments to reconcile net income to net cash provided
by operating activities:
Minority interest 108 - -
Depreciation and amortization 6,697 3,757 1,806
Loss (gain) on sale of real estate investments (11,533) (406) 642
Increase in other assets (4,655) (2,118) (1,679)
Increase in accounts payable and accrued expenses 1,282 763 601
Increase in other liabilities 1,851 1,361 633
Net cash provided by operating activities 25,041 14,378 4,898
Investing Activities:
Investments in real estate (212,267) (104,483) (81,173)
Proceeds from sales of real estate investments 31,909 7,519 7,914
Net cash used by investing activities (180,358) (96,964) (73,259)
Financing Activities:
Proceeds from bank loan payable 167,559 101,189 47,100
Repayment of bank loan payable (206,804) (99,048) (26,250)
Proceeds from mortgage loans payable - 49,384 -
Repayment of mortgage loans payable (441) - -
Issuance of common stock 210,953 40,476 64
Net proceeds from sale of preferred stock - - 46,369
Redemption of rights - - (60)
Redemption of partnership units (257) - -
Payment of dividends (15,660) (9,114) (2,568)
Net cash provided by financing activities 155,350 82,887 64,655
Net increase (decrease) in cash 33 301 (3,706)
Cash at beginning of year 1,328 1,027 4,733
Cash at end of year $ 1,361 $ 1,328 $1,027
Supplemental disclosure of cash flow information
a) Non-cash investing and financing activities:
Debt incurred with real estate acquired $ 8,914 $ 2,283 $3,000
Issuance of limited partnership units for real estate
acquired - 1,709 -
Note receivable from sale of real estate investment - 50 -
b) Cash paid during the year for interest, net of amounts
capitalized $ 7,291 $ 3,380 $1,283
c) Conversion of Preferred Stock (see footnote 9) $ 50,000 - -
See accompanying notes to consolidated financial statements.
BEDFORD PROPERTY INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Organization and Summary of Significant Accounting Policies
and Practices
The Company
Bedford Property Investors Inc. (the Company) is a Maryland real
estate investment trust with investments primarily in industrial and
suburban office properties concentrated in the Western United States.
The Company's Common Stock trades under the symbol "BED" on both the
New York Exchange and Pacific Exchange.
Principles of Consolidation
The consolidated financial statements include the accounts of the
Company, its wholly-owned subsidiaries and its general partnership
interest in Bedford Realty Partners, L.P. All significant
inter-entity balances have been eliminated in consolidation.
Use of Estimates
The preparation of these financial statements in conformity with
generally accepted accounting principles requires management of the
Company to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of financial statements, and the reported
amounts of revenues and expenses during the reporting periods. Actual
results could differ from those estimates.
Federal Income Taxes
The Company has elected to be taxed as a real estate investment trust
under Sections 856 to 860 of the Internal Revenue Code of 1986, as
amended ("the Code"). A real estate investment trust is generally not
subject to Federal income tax on that portion of its real estate
investment trust taxable income ("Taxable Income") which is
distributed to its stockholders, provided that at least 95% of Taxable
Income is distributed and other requirements are met. The Company
believes it is in compliance with the Code.
Taxable income differs from net income for financial reporting
purposes primarily because of the different methods of accounting for
depreciation. As of December 31, 1997, for Federal income tax
purposes, the Company had an ordinary loss carry forward of
approximately $32 million. As the Company does not expect to incur
income tax liabilities, the asset value of these losses has been
effectively fully reserved. Dividend distributions made for 1997 were
classified 88% as ordinary income and 12% as capital gain 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 amount of a real estate investment
is impaired, it reduces such carrying amount to the estimated fair
value of the investment. Investments which have been classified as
held for sale are carried at the lower of the carrying amount or fair
value less costs to sell.
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
$1,644,000, $573,000 and $377,000 for 1997, 1996 and 1995,
respectively.
Per Share Data
Per share data are based on the weighted average number of common and
common equivalent shares outstanding during the year. Per share data
reflects the retroactive application of the one-for-two reverse stock
split which took place on March 29, 1996. Stock options issued under
the Company's stock option plans are included in the calculation of
per share data if, upon exercise, they would have a dilutive effect.
The diluted earnings per share calculation assumes conversion of the
Series A Convertible Preferred Stock of the Company and the limited
partnership units of Bedford Realty Partners, L.P., if such
conversions would have dilutive effects, as of the beginning of the
year. Dividends accrued on the Series A Convertible Preferred Stock
and distributions accrued on the limited partnership units are
deducted from net income for purposes of determining net income
applicable to common stockholders.
Effective December 15, 1997, the Company adopted Statement of
Financial Accounting Standard No. 128, Earnings per share (FAS 128).
Earnings per share data for previous periods have been restated to
conform to FAS 128.
Note 2 - Real Estate Investments
The following table sets forth the Company's real estate investments
as of December 31, 1997 (in thousands):
Less
Accumulated
Land Building Depreciation Total
INDUSTRIAL PROPERTIES
Northern California $ 42,941 $ 93,152 $ 3,358 $132,735
Southern California 13,551 31,130 1,405 43,276
Denver, Colorado 1,911 3,256 153 5,014
Arizona 6,248 14,502 264 20,486
Greater Portland Area 2,652 8,404 460 10,596
Greater Kansas City Area 3,398 13,295 654 16,039
Dallas, Texas 1,105 1,639 - 2,744
Total Industrial 71,806 165,378 6,294 230,890
SUBURBAN OFFICE PROPERTIES
Northern California 4,313 13,357 276 17,394
Southern California 7,312 18,074 358 25,028
Salt Lake City 359 6,491 757 6,093
Greater Kansas City Area 2,518 4,046 203 6,361
Greater Seattle Area 15,116 30,225 470 44,871
Reno, Nevada 2,102 10,439 154 12,387
Austin, Texas 2,766 7,075 91 9,750
Arizona 11,416 20,230 264 31,382
Denver, Colorado 1,860 13,249 49 15,060
Total Suburban Office 47,762 123,186 2,622 168,326
PROPERTIES UNDER DEVELOPMENT
Northern California 2,775 7,732 23 10,484
Arizona 1,033 3,407 33 4,407
Greater Kansas City Area 518 2,762 13 3,267
Total Properties Under Development 4,326 13,901 69 18,158
LAND HELD FOR DEVELOPMENT
Northern California 1,752 - - 1,752
Southern California 981 - - 981
Arizona 1,334 - - 1,334
Denver, Colorado 1,645 - - 1,645
Total Land Held for Development 5,712 - - 5,712
Total $129,606 $302,465 $ 8,985 $423,086
The Company internally manages all but 7 of its properties from its
regional offices in Lafayette, CA; Tustin, CA; Phoenix, AZ; Lenexa,
KS; Denver, CO; Dallas, TX; and Seattle, WA. For the 7 properties
located in markets not served by a regional office, the Company has
subcontracted on-site management to local firms. All financial
record-keeping is centralized at the Company's corporate office in
Lafayette, CA.
During 1997 and 1996, the Company capitalized interest costs relating
to properties under development totaling $627,000 and $223,000,
respectively.
Note 3 - Consolidated Partnership
In December, 1996 the Company formed Bedford Realty Partners, L.P.
(the "Operating Partnership"), with the Company as the sole general
partner, for the purpose of acquiring real estate. In exchange for
contributing a property into the Operating Partnership, the owners of
the property receive limited partnership units ("OP Units"). A
limited partner can seek redemption of the OP Units at any time after
90 days. The Company, at its option, may redeem the OP Units by
either (i) issuing common stock at the rate of one share of common
stock for each OP Unit, or (ii) paying cash to a limited partner based
on the average trading price of its common stock. Each OP Unit is
allocated partnership income and cash flow at a rate equal to the
dividend being paid by the Company on a share of common stock.
Additional partnership income and cash flow is allocated 99% to the
Company and 1% to the limited partners.
This acquisition strategy is referred to as a "Down REIT" transaction;
as long as certain tax attributes are maintained, the income tax
consequences to a limited partner are generally deferred until such
time as the limited partner redeems their OP Units.
On December 17, 1996, the Company acquired a $3.6 million industrial
property located in Modesto, California utilizing the Operating
Partnership. The sellers of the property received 108,495 OP Units.
A director of the Company was a 9% owner of the property, but did not
participate in the approval of the acquisition. In March 1997, 13,446
OP Units were redeemed for cash.
Note 4 - Leases
Minimum future lease payments to be received as of December 31, 1997
are as follows (in thousands):
1998 $ 7,146
1999 5,819
2000 8,767
2001 8,023
2002 5,138
Thereafter 14,304
$49,197
The total minimum future lease payments shown above do not include
tenants' obligations for reimbursement of operating expenses or taxes
as provided by the terms of certain leases.
Note 5 - Related Party Transactions
Due to the Company's limited financial resources existing in prior
years, its activities relating to the acquisition of new properties
and debt and equity financings have been performed by Bedford
Acquisitions, Inc. (BAI) pursuant to a written contract dated January
1, 1995. 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 and is renewable at the option of the Company for
additional one-year terms. The current agreement will expire on
January 1, 1999.
For 1997, 1996 and 1995, the Company paid BAI $3,156,000, $1,808,000
and $2,143,000, respectively for acquisition and financing activities
performed pursuant to the foregoing arrangements. The Company
believes that since the fees charged under the foregoing arrangements
(i) have been and continue to be comparable to those charged by other
sponsors of real estate investment entities or other third party
service providers and (ii) have been and continue to be charged only
for services on acquired properties or completed financings, such fees
were and continue to be properly includable in direct acquisition
costs and capitalized as part of the asset or financing activities.
Note 6 - Stock Option Plans
A total of 900,000 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 in 2003. The Employee
Plan provides for non-qualified stock options and incentive stock
options.
The Employee Plan is administered by the Compensation Committee of the
Board of Directors, which determines the terms of options granted,
including the exercise price, the number of shares subject to the
option, and the exercisability of the options. Options granted to
employees are exercisable upon vesting, and typically vest over a
four-year period.
The Employee Plan requires that the exercise price of incentive stock
options be at least equal to the fair market value of such shares on
the date of grant and that the exercise price of non-qualified stock
options be equal to at least 85% of the fair market value of such
shares on the date of the grant. The maximum term of options granted
is ten years.
Initially 250,000 shares of the Company's Common Stock were reserved
for issuance under the Directors' Stock Option Plan (the "Directors'
Plan"). On May 16, 1996 the shareholders approved an additional
250,000 shares. The Directors' Plan expires in 2002. The Directors'
Plan provides for the grant of non-qualified stock options to
directors of the Company. The Directors' Plan contains an automatic
grant feature whereby a director receives a one-time "initial option"
to purchase 25,000 shares upon a director's appointment to the Board
of Directors and thereafter receives automatic annual grants of
options to purchase 10,000 shares upon re-election to the Board of
Directors. Options granted are generally exercisable six months from
the date of grant.
The Directors' Plan requires that the exercise price of options be
equal to the fair market value of the underlying shares on the date of
grant. The maximum term of options granted is ten years.
In September 1995, the Company established a Management Stock
Acquisition program. Under the program, options exercised by key
members of management shortly after the grant date may be exercised
either in cash or with a note payable to the Company. Such note bears
interest at 7.5% or the Applicable Federal Rate as defined by the
Internal Revenue Service, whichever is higher. The note is due in
five years or within ninety days from termination of employment, with
interest payable quarterly. During 1996 and 1995, options for 155,000
shares of Common Stock were exercised in exchange for notes payable to
the Company. The notes bear interest at 7.5%. The unpaid balance of
the notes is $1,466,000 and is included in the accompanying
consolidated balance sheet as a reduction of additional paid-in
capital.
In addition, the Company may grant restricted stock to key employees.
These shares generally vest over five years and are subject to
forfeiture under certain conditions. In 1997, 42,500 shares were
granted.
The Company applies APB Opinion No. 25 and related interpretations in
accounting for its plans. Accordingly, compensation costs have not
been recognized for either the Employee or Directors' Plan. Had
compensation costs for the plans been determined consistent with FASB
Statement No. 123, the Company's net income and earnings per share
would have been reduced to the pro forma amounts indicated below:
1997 1996 1995
Net income:
As reported $31,291 $11,021 $2,895
Pro forma 31,045 10,831 2,821
Basic earnings per share:
As reported $ 2.21 $ 1.21 $ 0.53
Pro forma 2.19 1.17 0.51
Earnings per share - assuming dilution:
As reported $ 1.94 $ 1.14 $ 0.52
Pro forma 1.92 1.12 0.50
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option pricing model with the following
weighted-average assumptions used for grants in 1997, 1996 and 1995,
respectively: dividend yield of 5.8%, 6.9% and 6.7%; expected
volatility of 16.8%, 18.1% and 19.4%; risk-free interest rates of
5.7%, 6.3% and 5.3%; and expected lives of five years for each period.
A summary of the status of the Company's plans as of December 31,
1997, 1996 and 1995 and changes during the years ended on those dates
is presented below:
1997 1996 1995
Weighted Avg. Weighted Avg. Weighted Avg.
Shares Exercise Price Shares Exercise Price Shares Exercise Price
Employee Plan
Outstanding at beginning
of year 242,250 $12.94 93,750 $ 12.78 107,500 $ 13.04
Granted 483,000 18.25 267,000 13.00 86,000 11.50
Exercised (7,125) 13.37 (106,000) 12.96 (56,875) 11.14
Forfeited (29,375) 13.30 ( 12,500) 12.92 (42,875) 12.91
Outstanding at end of year 688,750 $16.64 242,250 $ 12.94 93,750 $ 12.78
Options exercisable 118,750 45,063 25,875
Weighted average fair value
of options granted during
the year $ 1.94 $ 1.37 $ 1.19
Directors' Plan
Outstanding at beginning
of year 295,000 $ 9.94 250,000 $ 8.28 175,000 $ 6.76
Granted 70,000 18.82 70,000 14.22 75,000 11.84
Exercised - - (25,000) 5.33 - -
Outstanding at end of year 365,000 $11.65 295,000 $ 9.94 250,000 $ 8.28
Options exercisable 365,000 295,000 175,000
Weighted average fair value
of options granted during
the year $ 1.59 $ 1.06 $ 1.16
The following table summarizes information about stock options
outstanding on December 31, 1997:
Options Outstanding Options Exercisable
Weighted Avg.
Range of Number Remaining Weighted Avg. Number Weighted Avg.
Exercise Price Outstanding Contractual Life Exercise Price Exercisable Exercise Price
Employee Plan
$ 8.50 2,750 0.4 $ 8.50 2,750 $ 8.50
13.75 to 14.00 49,750 2.5 13.93 47,750 13.95
11.50 34,500 7.7 11.50 17,250 11.50
13.00 120,750 8.3 13.00 51,000 13.00
$ 17.63 to 20.75 481,000 9.3 18.25 - -
$ 8.50 to 20.75 688,750 8.5 $16.64 118,750 $ 13.06
Directors' Plan
$ 5.33 100,000 0.9 $ 5.33 100,000 $ 5.33
7.71 25,000 0.9 7.71 25,000 7.71
12.97 25,000 1.8 12.97 25,000 12.97
11.82 to 11.85 75,000 3.2 11.84 75,000 11.84
14.22 70,000 8.8 14.22 70,000 14.22
$ 18.82 70,000 9.8 $18.82 70,000 $ 18.82
$ 5.33 to 18.82 365,000 4.7 $11.65 365,000 $ 11.65
Note 7 - Bank Loan Payable
In June 1997, the Company expanded its secured revolving credit
facility with Bank of America from $100 million to $150 million,
maturing on June 1, 2000. In September 1997, the credit facility was
further expanded to $175 million. Under this facility, the Company
can borrow up to $25 million on an unsecured basis. The secured loans
bear interest at a floating rate equal to either the lender's
published "reference rate" or LIBOR plus 1.50%. The interest rate of
the unsecured loans is 25 basis points higher than that of the secured
loans. The credit facility is secured by mortgages on 35 properties
(which properties collectively accounted for approximately 49% of the
Company's Annualized Base Rent and approximately 47% of the Company's
total assets as of December 31, 1997), together with the rental
proceeds from such properties. The credit facility contains various
restrictive covenants including, among other things, a covenant
limiting quarterly dividends to 95% of average Funds From Operations
for the immediately preceding two fiscal quarters.
The daily weighted average amount owed to the bank was $45,642,000 and
$10,997,000 in 1997 and 1996, respectively. The weighted average
interest rates in these periods were 7.42% and 8.03%, respectively.
The effective interest rate at December 31, 1997 was 7.50%.
Note 8 - Mortgage Loans Payable
Mortgage loans payable at December 31, 1997 consist of the following
(in thousands):
Floating rate note due December 15, 1999,
current rate of 8.75% $ 1,823
7.5% note due January 1, 2002 24,677
7.02% note due March 15, 2003 25,000
8.9% note due July 31, 2006 8,823
$ 60,323
The mortgage loans are collaterized by 17 properties (which Properties
collectively accounted for approximately 26% of the Company's
Annualized Base Rent and approximately 20% of the Company's total
assets as of December 31, 1997).
The following table presents scheduled principal payments on mortgage
loans as of December 31, 1997 (in thousands):
1998 $ 838
1999 2,768
2000 1,048
2001 1,130
2002 23,681
Thereafter 30,858
$ 60,323
Note 9 - Redeemable Preferred Stock
On September 18, 1995, the Company issued and sold 8,333,334 shares of
Series A Convertible Preferred Stock (the "Convertible Preferred
Stock") for $6.00 per share. Holders of the Convertible Preferred
Stock were entitled to cumulative quarterly dividends in cash in an
amount equal to the greater of (i) $0.135 per share or (ii) the
dividends payable 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. Each share of
Convertible Preferred Stock was convertible at any time after
September 18, 1997 into one-half share of Common Stock. On October
14, 1997, the 8,333,334 shares of the Series A Convertible Preferred
Stock were converted to 4,166,667 shares of common stock.
Note 10 - Sales of Common Stock
The Company completed the sale of 3,350,000 shares of common stock at
$13 per share in April 1996. In February 1997, the Company
completed the sale of 4,600,000 shares of the common stock at $17 3/8
per share and in November 1997 sold an additional 7,245,000 shares of
common stock at $19 5/8 per share. Net cash proceeds from each of
these offerings was used to pay off the outstanding borrowings under
the Company's credit facility.
Note 11 - Earnings per Share
Following is a reconciliation of earnings per share:
Year Ended December 31,
1997 1996 1995
Basic:
Net income $ 31,291 $ 11,021 $ 2,895
Less:Dividends on the Series A Convertible
Preferred Stock (3,500) (4,500) (1,288)
Distributions to Operating
Partnership Unit Holders - (5) -
Net income applicable to common stockholders 27,791 6,516 1,607
Weighted average number of shares 12,566,065 5,405,727 3,005,950
Basic earnings per share $ 2.21 $ 1.21 $ 0.53
Diluted:
Weighted average number of shares (from above) 12,566,065 5,405,727 3,005,950
Weighted average shares issuable upon
conversion of the Series A Convertible
Preferred Stock1 3,264,840 4,166,667 -
Weighted average shares of dilutive stock
options using average period stock price
under the treasury stock method 237,185 125,711 83,599
Weighted average shares issuable upon the
conversion of operating partnership units2 98,364 4,447 -
Weighted average number of common shares -
assuming dilution 16,166,454 9,702,552 3,089,549
Earnings per share - assuming dilution $ 1.94 $ 1.14 $ 0.52
Per share amounts and number of shares have been adjusted to
reflect the one-for-two reverse stock split effective
March 29, 1996.
1Not applicable before 1995. The Series A Convertible Preferred Stock
was issued in September 1995.
2Not applicable before 1996. The Operating Partnership Units were
issued in December 1996.
Note 12 - Quarterly Financial Data-Unaudited
The following is a summary of quarterly results of operations for 1997
and 1996 (in thousands of dollars, except per share data):
1997 Quarters Ended 3/31 6/30 9/30 12/31
Rental income $9,056 $10,627 $12,789 $13,905
Income from property operations 5,642 6,929 8,295 8,966
Income before gain on sales of real estate
investments and minority interest 3,680 4,886 5,022 6,278
Net income $3,655 $ 4,860 $15,781 $ 6,995
Net income applicable to common
stockholders1 $2,530 $ 3,735 $14,531 $ 6,995
Basic earnings per share3 $ 0.28 $ 0.34 $ 1.30 $ 0.37
Earnings per share -
assuming dilution3 $ 0.27 $ 0.31 $ 1.01 $ 0.35
1996 Quarters Ended 3/31 6/30 9/30 12/31
Rental income $5,709 $ 6,369 $ 7,090 $ 8,373
Income from property operations 3,347 3,857 4,230 5,130
Income before gain on sales of real
estate investments 1,953 2,621 2,932 3,109
Net income $1,953 $ 2,980 $ 2,932 $ 3,156
Net income applicable to common
stockholders2 $ 828 $ 1,855 $ 1,807 $ 2,026
Basic earnings per share3 $ 0.27 $ 0.33 $ 0.28 $ 0.31
Earnings per share -
assuming dilution3 $ 0.26 $ 0.30 $ 0.27 $ 0.29
1Reflects reduction for dividends and distributions of $1,125 each for
the first and second quarter of 1997 and $1,250 for the third quarter
of 1997.
2Reflects reduction for dividends and distributions of $1,130 for the
fourth quarter of 1996 and $1,125 each for the first, second and third
quarter of 1996.
3Reflects the one-for-two reverse stock split effective March 29,
1996.
BEDFORD PROPERTY INVESTORS, INC.
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997
(in thousands of dollars)
Initial Cost Cost Gross Amount
to Company Capital- Carried at Close Accumu-
Build- ized Sub- of Period Accumu- Deprec-
ings & sequent to lated De- Date iable
Improve- Acquisi- precia- Con- Date Life
Land ment tion Land Building Total tion structed Acquired (Years)
INDUSTRIAL PROPERTIES:
Northern California
Building #3 at Contra Costa
Diablo Industrial Park, Concord $ 495 $ 1,159 $ 89 $ 495 $ 1,248 $ 1,743 $ 235 1983 12/90 45
Building #8 at Contra Costa
Diablo Industrial Park, Concord 877 1,548 143 877 1,691 2,568 300 1981 12/90 45
Building #18 at Mason Industrial
Park, Concord 610 1,265 60 610 1,325 1,935 237 1984 12/90 45
115 Mason Circle, Concord 697 854 36 697 890 1,587 27 1971 9/96 45
Auburn Court, Fremont 1,391 2,473 232 1,416 2,680 4,096 119 1983 12/95 45
47650 Westinghouse Drive, Fremont 267 893 60 271 949 1,220 42 1982 12/95 45
47600 Westinghouse Drive, Fremont 356 1,067 43 356 1,110 1,466 32 1982 9/96 45
47633 Westinghouse Drive, Fremont 1,051 3,239 142 1,051 3,381 4,432 92 1983 10/96 45
Fourier Avenue, Fremont 2,120 7,018 - 2,120 7,018 9,138 247 1982 5/96 45
Milpitas Town Center, Milpitas 1,400 4,421 86 1,400 4,507 5,907 339 1983 8/94 45
598 Gibraltar Drive, Milpitas 535 2,522 - 535 2,522 3,057 145 1996 5/96 45
Doherty Avenue, Modesto 464 3,178 266 470 3,438 3,908 76 1963-71 12/96 45
860-870 Napa Valley Corporate
Way, Napa 933 3,515 219 933 3,734 4,667 107 1984 9/96 45
350 E. Plumeria Drive, San Jose 3,621 4,704 166 3,683 4,808 8,491 240 1983 9/95 45
Lundy Avenue, San Jose 2,055 2,184 190 2,055 2,374 4,429 78 1982 7/96 45
O'Toole Business Center, San Jose 3,934 5,748 204 3,934 5,952 9,886 131 1984 12/96 45
301 East Grand, South
San Francisco 2,036 959 160 2,070 1,085 3,155 60 1974 12/95 45
342 Allerton, South
San Francisco 2,516 1,542 324 2,558 1,824 4,382 81 1969 12/95 45
400 Grandview, South
San Francisco 3,246 3,517 227 3,300 3,690 6,990 169 1976 12/95 45
410 Allerton, South
San Francisco 1,333 889 40 1,356 906 2,262 41 1970 12/95 45
417 Eccles, South San Francisco 649 510 28 661 526 1,187 24 1964 12/95 45
6500 Kaiser Drive, Fremont 1,556 6,411 29 1,556 6,440 7,996 143 1990 1/97 45
Bedford Fremont Business Center,
Fremont 3,598 9,004 97 3,598 9,101 12,699 176 1990 3/97 45
Spinnaker Court, Fremont 2,548 5,989 32 2,548 6,021 8,569 89 1986 5/97 45
2277 Pine View Way, Petaluma 1,861 7,074 2 1,861 7,076 8,937 92 1989 6/97 45
Mondavi Building, Napa 1,315 5,214 - 1,315 5,214 6,529 29 1985 9/97 45
Building #2 at Monterey Commerce
Center, Monterey 611 1,833 - 611 1,833 2,444 3 1990 12/97 45
Building #3 at Monterey Commerce
Center, Monterey 604 1,812 - 604 1,812 2,416 3 1990 12/97 45
Southern California
Dupont Industrial Center, Ontario 3,588 6,162 185 3,588 6,347 9,935 579 1989 5/94 45
3002 Dow Business Center, Tustin 4,209 7,291 665 4,305 7,860 12,165 452 1987-89 12/95 45
Building #1 at Carroll Tech
Center, San Diego 511 1,372 - 511 1,372 1,883 38 1984 10/96 45
Building #2 at Carroll Tech
Center, San Diego 1,022 2,129 - 1,022 2,129 3,151 59 1984 10/96 45
Signal Systems Building,
San Diego 2,228 7,264 - 2,228 7,264 9,492 161 1990 12/96 45
Building #1 at Oak Ridge Business
Center, Vista 646 2,135 - 646 2,135 2,781 55 1990 10/96 45
Building #2 at Oak Ridge Business
Center, Vista 566 1,832 - 566 1,832 2,398 47 1990 10/96 45
2230 Oak Ridge Way, Vista 684 2,191 - 684 2,191 2,875 13 1997 10/97 45
Denver Metropolitan Area
Bryant Street Annex, Denver 487 866 105 495 963 1,458 40 1968 12/95 45
Bryant Street Quad, Denver 1,394 2,181 135 1,416 2,294 3,710 113 1971-73 12/95 45
Greater Phoenix Area, Arizona
Westech Business Center, Phoenix 3,531 4,422 257 3,531 4,679 8,210 197 1985 4/96 45
2601 W. Broadway, Tempe 1,127 2,348 80 1,127 2,428 3,555 22 1977 7/97 45
Building #3 at Phoenix Airport
Center, Phoenix 682 3,163 - 682 3,163 3,845 29 1990 7/97 45
Greater Portland Area, Oregon
Twin Oaks Technology Center,
Beaverton 1,444 4,836 438 1,469 5,249 6,718 305 1984 12/95 45
Twin Oaks Business Center,
Beaverton 1,163 2,847 328 1,183 3,155 4,338 155 1984 12/95 45
Greater Kansas City Area
Panorama Business Center, Kansas
City 675 3,098 177 675 3,275 3,950 81 1984 12/96 45
Ninety-Ninth Street #3, Lenexa 360 2,167 179 360 2,346 2,706 361 1990 12/90 45
Ninety-Ninth Street #1, Lenexa 404 1,547 40 408 1,583 1,991 79 1988 9/95 45
Ninety-Ninth Street #2, Lenexa 180 555 14 183 566 749 28 1988 9/95 45
Lackman Business Center, Lenexa 619 1,631 182 628 1,804 2,432 106 1985 9/95 45
Continental Can, Lenexa 1,144 3,722 - 1,144 3,722 4,866 - 1972 12/97 45
Tucson, Arizona
Butterfield Business Center,
Tucson 909 4,230 1 909 4,231 5,140 16 1986 11/97 45
Dallas, Texas
Ferrell Drive, Dallas 1,105 1,639 - 1,105 1,639 2,744 - 1984 12/97 45
SUBURBAN OFFICE PROPERTIES:
Southern California
Laguna Hills Square, Laguna 2,436 3,655 546 2,436 4,201 6,637 180 1983 3/96 45
Building #3 at Carroll Tech
Center, San Diego 716 1,400 - 716 1,400 2,116 39 1984 10/96 45
Scripps Wateridge, San Diego 4,160 12,472 - 4,160 12,472 16,632 139 1990 6/97 45
Salt Lake City, Utah
Woodlands II, Salt Lake City 359 5,805 686 359 6,491 6,850 757 1990 8/93 45
Kansas City, Kansas
6600 College Blvd., Overland
Park 2,480 3,880 204 2,518 4,046 6,564 203 1982-83 10/95 45
Northern California
Village Green, Lafayette 547 1,245 508 743 1,557 2,300 140 1983 7/94 45
100 View Street, Mountain View 1,020 3,144 254 1,020 3,398 4,418 121 1985 5/96 45
Canyon Park, San Ramon 1,933 3,098 - 1,933 3,098 5,031 6 1971-72 12/97 45
Building #1 at Monterey Commerce
Center, Monterey 616 5,302 - 616 5,302 5,918 10 1990 12/97 45
Greater Seattle Area, Washington
Kenyon Center, Bellevue 5,095 7,250 - 5,095 7,250 12,345 215 1987 9/96 45
Orillia Office Park, Renton 10,021 22,975 - 10,021 22,975 32,996 255 1986 7/97 45
Phoenix, Arizona
Executive Center at Southbank,
Phoenix 4,943 7,134 - 4,943 7,134 12,077 133 1989 3/97 45
Building #1 at Phoenix Airport
Center, Phoenix 944 1,541 16 944 1,557 2,501 14 1990 7/97 45
Building #2 at Phoenix Airport
Center, Phoenix 723 3,278 - 723 3,278 4,001 30 1990 7/97 45
Building #4 at Phoenix Airport
Center, Phoenix 517 1,732 - 517 1,732 2,249 16 1990 7/97 45
Building #5 at Phoenix Airport
Center, Phoenix 1,507 3,860 3 1,507 3,863 5,370 36 1990 7/97 45
Phoenix Airport Center Parking,
Phoenix 1,450 - - 1,450 - 1,450 1 1990 7/97 45
Tucson, Arizona
Troika Building, Tucson 1,332 2,631 35 1,332 2,666 3,998 34 1985 6/97 45
Reno, Nevada
U.S. Bank Centre, Reno 2,102 10,264 175 2,102 10,439 12,541 154 1989 5/97 45
Austin, Texas
9737 Great Hills Trail, Austin 2,766 7,028 47 2,766 7,075 9,841 91 1984 5/97 45
Denver Metropolitan Area, Colorado
Oracle Building, Denver 1,860 13,249 - 1,860 13,249 15,109 49 1996 10/97 45
INDUSTRIAL PROPERTIES UNDER DEVELOPMENT
99th Street Building #4, Lenexa,
KS 519 - 2,762 519 2,762 3,281 13 N/A 6/96 45
Westech Business Center II,
Phoenix, AZ 1,033 - 3,407 1,033 3,407 4,440 33 N/A 7/96 45
Westinghouse Land, Fremont, CA 1,624 - 2,629 1,624 2,629 4,253 - N/A 10/96 45
Bordeaux Centre, Napa, CA 1,151 - 5,102 1,151 5,102 6,253 23 N/A 12/96 45
LAND HELD FOR DEVELOPMENT
Napa Lot 10A, Napa, CA 961 - 13 974 - 974 - N/A 12/96
Scripps Land, San Diego, CA 622 - - 622 - 622 - N/A 6/97
Oak Ridge Way Lot, Vista, CA 359 - - 359 - 359 - N/A 10/97
Oracle Land, Denver, CO 1,645 - - 1,645 - 1,645 - N/A 10/97
Butterfield Land, Tucson, AZ 102 - - 102 - 102 - N/A 11/97
Canyon Park Land, San Ramon, CA 778 - - 778 - 778 - N/A 12/97
Eaton Freeway Land, Tempe, AZ 1,232 - - 1,232 - 1,232 - N/A 12/97
$128,910 $281,113 $22,048 $129,606 $302,465 $432,071 $8,985
(A) (B)
NOTES TO SCHEDULE III
(in thousands of dollars)
(A) An analysis of the activity in real estate investments for the
years ended December 31, 1997, 1996 and 1995 is presented below:
Investment Accumulated Depreciation
1997 1996 1995 1997 1996 1995
BALANCE AT BEGINNING OF PERIOD $229,414 $131,183 $ 58,203 $4,913 $2,219 $3,150
Add (deduct):
Acquisition of Lackman Business Center - - 2,250 - - -
Acquisition of 350 E. Plumeria Drive - - 8,325 - - -
Sale of Cody Street Park, Building 6 (C) - - (1,639) - - (203)
Acquisition of Ninety-Ninth Street, Building 1 - - 1,951 - - -
Acquisition of Ninety-Ninth Street, Building 2 - - 735 - - -
Sale of IBM Building (D) - - (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 - - -
Acquisition of Laguna Hills Square - 6,091 - - - -
Acquisition of Westech Business Center - 7,953 - - - -
Acquisition of 100 View Street - 4,164 - - - -
Acquisition of Fourier Avenue - 9,138 - - - -
Acquisition of 598 Gibraltar - 1,743 - - - -
Acquisition of Lundy Avenue - 4,239 - - - -
Acquisition of Kenyon Center - 12,345 - - - -
Acquisition of 47600 Westinghouse Drive - 1,423 - - - -
Acquisition of 860-870 Napa Valley Corp. Way - 4,448 - - - -
Acquisition of 115 Mason Circle - 1,551 - - - -
Acquisition of Oak Ridge Business Center - 5,179 - - - -
Acquisition of Carroll Tech Center - 7,151 - - - -
Acquisition of 47633 Westinghouse Drive - 4,290 - - - -
Acquisition of Panorama Business Center - 3,774 - - - -
Acquisition of Signal Systems Building - 9,492 - - - -
Acquisition of O'Toole Business Center - 9,681 - - - -
Acquisition of Doherty Avenue - 3,642 - - - -
Acquisition of Westinghouse Land - 1,625 - - - -
Acquisition of Napa Lot 10A - 961 - - - -
Acquisition of Napa Lots 12J & K - 1,151 - - - -
Acquisition of Lenexa Land - 518 - - - -
Acquisition of Phoenix Land - 1,033 - - - -
Sale of Woodland Land (E) - (614) - - - -
Sale of St. Paul East (F) - (2,792) - - (45) -
Sale of St. Paul West (F) - (3,839) - - (36) -
Acquisition of 6500 Kaiser Drive 7,967 - - - - -
Acquisition of Bedford Fremont
Business Center 12,602 - - - - -
Acquisition of Spinnaker Court 8,537 - - - - -
Acquisition of 2277 Pine View Way 8,935 - - - - -
Acquisition of Mondavi Building 6,529 - - - - -
Acquisition of Building #2 at Monterey
Commerce Center 2,444 - - - - -
Acquisition of Building #3 at Monterey
Commerce Center 2,416 - - - - -
Acquisition of 2230 Oak Ridge Way 2,875 - - - - -
Acquisition of 2601 W. Broadway 3,475 - - - - -
Acquisition of Building #3 at Phoenix
Airport Center 3,845 - - - - -
Acquisition of Continental Can 4,866 - - - - -
Acquisition of Butterfield Business Center 5,139 - - - - -
Acquisition of Ferrell Drive 2,744 - - - - -
Acquisition of Scripps Wateridge 16,632 - - - - -
Acquisition of Canyon Park 5,031 - - - - -
Acquisition of Building #1 at Monterey
Commerce Center 5,918 - - - - -
Acquisition of Orillia Office Park 32,996 - - - - -
Acquisition of Executive Center
At Southbank 12,077 - - - - -
Acquisition of Building #1 at Phoenix
Airport Center 2,485 - - - - -
Acquisition of Building #2 at Phoenix
Airport Center 4,001 - - - - -
Acquisition of Building #4 at Phoenix
Airport Center 2,249 - - - - -
Acquisition of Building #5 at Phoenix
Airport Center 5,367 - - - - -
Acquisition of Phoenix Airport Center
Parking 1,450 - - - - -
Acquisition of Troika Building 3,963 - - - - -
Acquisition of U.S. Bank Centre 12,366 - - - - -
Acquisition of 9737 Great Hills Trail 9,794 - - - - -
Acquisition of Oracle Building 15,109 - - - - -
Acquisition of Scripps Land 622 - - - - -
Acquisition of Oak Ridge Way Lot 359 - - - - -
Acquisition of Oracle Land 1,645 - - - - -
Acquisition of Butterfield Land 102 - - - - -
Acquisition of Canyon Park Land 778 - - - - -
Acquisition of Eaton Freeway Land 1,232 - - - - -
Sale of 1000 Town Center Drive (G) (6,622) - - (780) - -
Sale of Mariner Court (G) (7,864) - - (419) - -
Sale of Academy Place Shopping Center (H) (6,281) - - (110) - -
Capitalized costs 16,874 3,884 2,115 - - -
Depreciation - - - 5,381 2,775 1,296
BALANCE AT END OF PERIOD $432,071 $229,414 $131,183 $8,985 $4,913 $2,219
(B) The aggregate cost for Federal income tax purposes is $296,993.
(C) In the third quarter 1995, the Company decided to sell the Cody Street
Park, Building 6. The property was sold on September 20, 1995.
(D) 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.
(E) The property was sold in April 1996.
(F) The properties were sold in December 1996.
(G) The properties were sold in July 1997.
(H) The property was sold in October 1997.
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 27, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following person on behalf of
the Registrant and in the capacity and on the date indicated.
/s/ Peter B. Bedford March 27, 1998
Peter B. Bedford, Chairman of the Board
and Chief Executive Officer
/s/ Claude M. Ballard March 27, 1998
Claude M. Ballard, Director
/s/ Anthony Downs March 27, 1998
Anthony Downs, Director
/s/ Anthony M. Frank March 27, 1998
Anthony M. Frank, Director
/s/ Martin I. Zankel March 27, 1998
Martin I. Zankel, Director
/s/ Thomas H. Nolan, Jr. March 27, 1998
Thomas H. Nolan, Jr., Director
/s/ Thomas G. Eastman March 27, 1998
Thomas G. Eastman, Director
/s/ Scott R. Whitney March 27, 1998
Scott R. Whitney
Senior Vice President and
Chief Financial Officer
/s/ Hanh Kihara March 27, 1998
Hanh Kihara, Vice President Controller
Exhibit 12
Bedford Property Investors, Inc.
Computation of Ratio of Earnings to Fixed Charges and Preferred
Dividends and Limited Partner Distributions
(in thousands, except for ratio)
Year Ended December 31,
1997 1996 1995 1994 1993
Net income $31,291 $ 11,021 $ 2,895 $3,609 $3,147
Fixed charges - interest and
amortization of loan fees 7,918 4,347 1,594 955 716
Fixed charges - interest capitalized 627 - - - -
Net income including fixed charges 39,836 15,368 4,489 4,564 3,863
Preferred dividends and limited partner
distributions 3,608 4,505 1,288 - -
Net income including fixed charges,
preferred dividends and limited
partner distributions $43,444 $19,873 $ 5,777 $4,564 $3,863
Ratio of earnings to fixed charges,
including preferred dividends and
limited partner distributions 3.57 2.25 2.00 4.78 5.40
Ratio of earnings to fixed charges,
excluding preferred dividends and
limited partner distributions 4.66 3.54 2.82 4.78 5.40
Exhibit 21.1
Subsidiaries of Bedford Property Investors, Inc.
Name Under
Subsidiary Which Subsidiary is
Name State ofIncorporation 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.
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors
Bedford Property Investors, Inc.:
We consent to incorporation by reference in the registration
statements on Form S-3 (No.'s 33-15233 and 333-23687) and the
registration statement on Form S-8 (No. 333-18215) of Bedford Property
Investors, Inc. of our report dated February 2, 1998, relating to the
consolidated balance sheets of Bedford Property Investors, Inc. as of
December 31, 1997 and 1996, 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, 1997, and the related
financial statement schedule as of December 31, 1997, which report
appears in the December 31, 1997 annual report on Form 10-K of Bedford
Property Investors, Inc.
KPMG Peat Marwick LLP
San Francisco, California
March 27, 1998