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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1998
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 11,
1999 was approximately $338,939,000. The number of shares of
Registrant's Common Stock, par value $0.02 per share, outstanding as of
March 11, 1999 was 22,252,295.
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, 1999, 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, 1998, the Company owned and operated, either directly or
through wholly-owned subsidiaries, 93 properties aggregating
approximately 7.5 million rentable square feet and comprised of 69
industrial properties (the "Industrial Properties") and 24 suburban
office properties (the "Suburban Office Properties" and, together with
the Industrial Properties, the "Properties"). The portfolio includes 2
properties which were under rehabilitation on December 31, 1998. As of
December 31, 1998, the 91 operating Properties were approximately 96%
leased with over 540 tenants. The Properties are located in Northern and
Southern California, Oregon, Washington, Arizona, Nevada, Utah, Colorado,
Texas, Kansas, and Missouri.
The Company seeks to grow its asset base through the acquisition of
industrial and suburban office properties and portfolios of such
properties, as well as through the development of new industrial and
suburban office properties. The Company's strategy is to operate in
suburban markets that are experiencing, or are expected by the Company
to experience, superior economic growth and that are subject to
limitations on the development of similar properties. The Company
believes that employment growth is a reliable indicator of future demand
for both industrial and suburban office space. In addition, the Company
believes that certain supply-side constraints, such as limited
availability of undeveloped land in a market, increase a market's
potential for higher average rents over time. The Company continues to
target selected markets in which the Properties are located as well as
selected other markets in which the Company has expertise.
Business Objectives and Growth Plan
Business Objectives
The Company's business objective is to increase stockholders' long-term
total return through increases in the dividend and the appreciation in
value of the Common Stock. To achieve this objective, the Company seeks
to (i) increase cash flow from its 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 1998, leases for 1,326,200 square feet expired with a weighted
average base rental rate of $7.99 per square foot. Approximately 87% of
this space has been re-leased, and the weighted average base rental rate
of the new leases is $9.52 per square foot, an increase of 19%. 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 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 available borrowings under 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 us to refine our 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 officer of the Company
typically visit each proposed acquisition property before the purchase
is closed.
The Company's activities relating to the acquisition of new properties,
including the due diligence process, are conducted on an exclusive basis
by Bedford Acquisitions, Inc. (BAI), a California corporation wholly-
owned by Mr. Bedford. BAI receives fees in amounts equal to the lesser
of (i) 1 1/2% of the gross amount of the aggregate purchase price of
property acquisitions and dispositions plus 5% of development project
costs, or (ii) an amount equal to (a) the aggregate amount of approved
expenses funded by BAI through the time of such acquisition, disposition
or development minus (b) the aggregate amount of fees previously paid to
BAI pursuant to such arrangement. In no event will the aggregate amount
of fees paid to BAI exceed the aggregate amount of costs funded by BAI.
The agreement with BAI has a term of one year and is renewable at the
option of the Company for additional one year terms. The current
agreement will expire January 1, 2000.
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
Washington, 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 1998 the shell construction of
five properties representing 322,000 square feet of industrial space and
office space was started.
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. 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. Maximize its Capital Structure.
As of December 31, 1998 the Company's total market capitalization was
$612 million. With a debt to total market capitalization ratio of 37%,
the Company believes that it is well positioned for future growth.
Funding of new acquisitions and development is expected to be provided
by a combination of debt and limited asset sales. The Company currently
intends to take advantage of the low interest rates 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.
Transactions and Significant Events During 1998
Acquisitions and Development
During the year, the Company acquired 18 Properties, including ten
Industrial Properties, six Suburban Office Properties and two
Properties under rehabilitation, aggregating approximately 1.3 million
rentable square feet, for a total investment of approximately $152
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 the total acquisition cost) of 9.15%. The Company
estimates the purchase price of acquisitions completed in 1998 to be
approximately 91% of the replacement costs.
The Company also acquired 6 parcels of vacant land aggregating
approximately 26 acres for a total investment of approximately $8.2
million, 3 of which were adjacent to existing Properties. The Company
plans to develop industrial or office properties on each of these
parcels when market conditions warrant new construction.
Development activity during the year included (i) the initial lease up
of the four projects constructed in 1997, adding 107,374 rentable
square feet to the available inventory (as of December 31, 1998, these
projects were approximately 71% occupied); (ii) completion of
construction and occupancy of the 297,228 square foot Adobe project in
Seattle, which was under construction at the time of acquisition; and
(iii) commencement of construction of five new projects which are
expected to add approximately 322,000 rentable square feet to the
inventory of available space in 1999. The Company believes that this
new leasable space should provide it with a significant opportunity to
increase its operating revenue.
The Company's Markets
The Properties are located in select markets proximate to metropolitan
areas in Northern and Southern California, Oregon, Washington,
Arizona, Nevada, Utah, Colorado, Texas, Kansas and Missouri. From
1994 through the early part of 1998 most of these markets were
recovering from the economic recession of the early 1990's. During
this recovery, these markets were characterized by strong demand for
commercial property without significant increases in supply. The
Company believes that this "recovery phase" of the economic cycle for
the real estate market came to an end during 1998 and that we are now
entering an "equilibrium phase" where supply and demand for properties
are more or less in balance. Accordingly, the Company expects
commercial property values during this equilibrium phase to be driven
less by supply and demand imbalances and more by continuing economic
strength in these markets. The Company believes that this continuing
economic strength should result in high occupancy levels, increasing
rents and potentially increasing real estate values.
In particular, the Company believes that continuing economic growth in
the San Francisco Bay Area (where 35% of the square footage of the
Company's Properties is located) and Seattle (where 10% of the square
footage of the Company's Properties is located) will result in strong
returns on its properties in those markets during the coming year.
The Company believes that these markets are particularly attractive as
a result of the excellent quality of life they offer and their limited
supply of new commercial real estate resulting from environmental
concerns and geographic barriers. In fact the 1999 edition of
Emerging Trends in Real Estate, a publication of
PricewaterhouseCoopers LLP and Lend Lease Real Estate Investments,
ranked San Francisco, for the third consecutive year, and Seattle, for
the second consecutive year, as the number one and number two
investment markets for this equilibrium phase of the real estate
cycle.
Despite this positive outlook, the Company's markets (particularly the
San Francisco Bay Area) remain susceptible to the current economic
downturn in Asia. During the first half of 1998, sources have
indicated that California's exports to East Asia fell by 17.5%
compared to the first half of 1997. Although the Company believes
that the effect of this manufacturing slowdown on the California real
estate market has been largely offset by strong demand
for California's products in the U.S. and Europe, there can be no
assurance that a more sustained economic downturn in Asia will not
have an adverse effect on California's manufacturing sector and
accordingly on the California real estate market and the Company's
portfolio.
Operating Performance
For the year ended December 31, 1998, the Company reported income
before gain on sale of $31,496,000 or $1.38 per diluted share, on
rental revenues of $73,451,000, compared with income before gain on
sale of $19,758,000 or $1.23 per diluted share, on rental revenues of
$46,377,000 for the year ended December 31, 1997. The Company's Funds
From Operations ("FFO": see definition under "Selected Financial
Data") for the year ended December 31, 1998 was $42,312,000 as
compared to $25,582,000 for the year ended December 31, 1997.
Increase in Dividends on Common Stock
On December 7, 1998, the Company announced a 9% increase in its
quarterly Common Stock dividend from $.33 to $.36 per share, which is
equal to $1.44 on an annualized basis. The higher dividend rate
commenced with the Company's dividend for the fourth quarter of 1998.
The Company previously announced, in May 1998, a 10%
increase in its quarterly dividend from $.30 to $.33 per share which,
together with the December 1998 increase, represents a total increase
of 17% in the Company's dividends declared for 1998 when compared with
the dividends declared for 1997.
Credit Facility
In June 1998, the Company amended and restated its secured revolving
line of credit facility led by Bank of America. Under the facility,
which matures June 2001, the Company can borrow up to $175 million on
a secured basis. The facility contains an unsecured sub-line of $50
million. The secured loans bear interest at a floating rate equal to
either the lender's published "reference rate" or LIBOR plus a margin
ranging from 1.10% to 1.35% (depending on leverage levels). The
unsecured loans bear interest at either the lender's published
"reference rate" or LIBOR plus a margin of 1.50%. As of December 31,
1998 the Company was in compliance with the covenants and requirements
of its revolving credit facility which had an outstanding balance of
$147,443,000, all of which was secured. During the first quarter of
1999, the Company entered into discussions with Bank of America
regarding a bridge facility of $28 million. This facility would
consist of secured loans, bear the same interest rates as the secured
loans under the $175 million facility and have a six-month term with
the option to extend for another six months.
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 ten times since that time from $0.10 per
share in the second quarter of 1993 to $0.36 per share in the fourth
quarter of 1998. In March 1999, the Company declared a dividend
distribution for the first quarter 1999 to its stockholders in the
amount of $0.36 per share of Common Stock, payable 15 days after the
quarter-end.
Tenants
Based on rentable square feet, as of December 31, 1998, the Suburban
Office Properties and Industrial Properties were approximately 96%
occupied by a total of 546 tenants, of which 112 were Suburban Office
Property tenants and 434 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 2001. 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 $20 million subject to a
deductible of 5-10% of total insurable value per building with respect
to the earthquake coverage. The Company also carries director and
officer liability insurance with an aggregate limit of $10 million.
This coverage protects the Company's directors and officers against
liability claims as well as the cost of defense.
Competition, Regulation, and Other Factors
The success of the Company depends upon, among other factors, general
economic conditions and trends, including real estate trends, interest
rates, government regulations and legislation, income tax laws and
zoning laws.
The Company's real estate investments are located in markets in which
they face significant competition for the rental revenues they
generate. Many of the Company's investments, particularly the office
buildings, are located in markets in which there is a significant
supply of available space, resulting in intense competition for
tenants and low rents.
Government Regulations
The Company's properties are subject to various federal, state and
local regulatory requirements such as local building codes and other
similar regulations. The Company believes its properties are
currently in substantial compliance with all applicable regulatory
requirements, although expenditures at its properties may be required
to comply with changes in these laws. No material expenditures are
contemplated at this time in order to comply with any such laws or
regulations.
Under various federal, state and local laws, ordinances and
regulations, an owner or operator of real estate is liable for the
costs of removal or remediation of certain hazardous or toxic
substances released on, above, under, or in such property. Such laws
often impose such liability without regard to whether the owner knew
of, or was responsible for, the presence of such hazardous or toxic
substances. The costs of such removal or remediation could be
substantial.
Additionally, the presence of such substances or the failure to
properly remediate such substances may adversely affect the owner's
ability to borrow using such real estate as collateral.
The Company believes that it is in compliance in all material respects
with all federal, state and local laws regarding hazardous or toxic
substances, and the Company has not been notified by any governmental
authority of any non-compliance or other claim in connection with any
of its present or former properties. Accordingly, the Company does
not currently anticipate that compliance with federal, state and local
environmental protection regulations will have any material adverse
impact on the financial position, results of operations or liquidity
of the Company. There can be no assurance, however, that future
discoveries or events at the Company's properties, or changes to
current environmental regulations, will not result in such a material
adverse impact.
Year 2000 Compliance
In 1997 the Company purchased and put in place new information system
hardware and software to accommodate the rapid growth of its real
estate portfolio. The Company believes the new information system
hardware and software is Year 2000 compliant. In addition, the
Company has evaluated Year 2000 compliance risk relative to operations
of its rental properties, and retained the services of a team of
consultants. Since January 1998, these consultants have been
conducting a survey of the Company's outside relationships (e.g.,
tenants, vendors and creditors) to assess their state of readiness in
regards to Year 2000 compliance. The survey indicates that a majority
of these parties' information systems are or will be Year 2000
compliant. In addition, the Company is performing a detailed
Information Technology review of its key outside relationships. As of
December 31, 1998, the Company has spent $10,000 on surveys and
systems reviews and expects to spend approximately $20,000 in 1999.
The Company is in the process of developing a contingency plan in the
event of non-compliance. The Company believes that Year 2000
compliance will not have a material impact on the Company's financial
position, results of operations, or liquidity.
Other Information
The Company currently employs 34 full time employees. The Company is
not dependent upon a single tenant or a limited number of tenants.
ITEM 2. PROPERTIES
Real Estate Summary
As of December 31, 1998, the Company's real estate investments were
diversified by property type as follows:
Number of Percent
Properties Cost of Total
Industrial properties 68 $312,911,000 52
Office properties 23 258,479,000 43
Properties under development 9 24,686,000 4
Land held for development 6 3,905,000 1
Total 106 $599,981,000 100
As of December 31, 1998, the Company's real estate investments (net of
accumulated depreciation) were diversified by geographic region as
follows:
Number of Investment % of Total
Properties Amount Investment
Industrial Properties
Northern California 33 $162,691,000 27
Southern California 10 50,908,000 9
Arizona 10 48,431,000 8
Greater Kansas City Area 7 20,456,000 3
Texas 4 14,039,000 2
Greater Portland Area 2 11,192,000 2
Colorado 2 5,194,000 1
Total Industrial Properties 68 312,911,000 52
Suburban Office Properties
Greater Seattle Area 4 93,948,000 16
Colorado 2 50,821,000 9
Arizona 4 26,393,000 4
Southern California 3 25,427,000 4
Northern California 5 23,689,000 4
Nevada 1 12,635,000 2
Texas 1 9,855,000 2
Greater Kansas City Area 2 8,780,000 1
Salt Lake City 1 6,931,000 1
Total Suburban Office Properties 23 258,479,000 43
Industrial Properties
Under Development
Arizona 6 13,500,000 2
Greater Seattle Area 1 8,110,000 1
Greater Kansas City Area 1 2,086,000 1
Northern California 1 990,000 *
Total Industrial Properties
Under Development 9 24,686,000 4
Land Held for Development
Northern California 3 2,654,000 *
Southern California 2 1,063,000 *
Texas 1 188,000 *
Total Land held
for Development 6 3,905,000 1
Total 106 $599,981,000 100
* 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, 1998.
Percentage Occupied/Number of Tenants Occupying 10% or more
1994 1995 1996 1997 1998
Property % # % # % # % # % # Principal Business at December 31, 1998
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 90% 2 83% 2 83% 2 100% 2 92% 2 Warehouse of scaffolding materials and
construction supplies; general contractor.
Milpitas Town Center, Milpitas 100% 4 100% 4 100% 4 100% 4 100% 3 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 100% 1 100% 1 100% 1 Manufacturing of personal computers.
350 East Plumeria Drive,
San Jose N/A 100% 1 100% 1 100% 1 100% 1 Manufacturer of computer chips.
Auburn Court, Fremont N/A 100% 4 100% 4 100% 4 100% 4 Manufacturing of computer equipment,
assembly of computer and
other electronic components, lab
engineering, and marketing design.
47650 Westinghouse Drive,
Fremont N/A 100% 1 100% 1 100% 1 100% 1 Electronic personal computer board
assembly.
417 Eccles, South
San Francisco N/A 100% 2 100% 2 53% 1 100% 1 Warehousing and delivery of high-end
furniture.
INDUSTRIAL PROPERTIES (continued)
410 Allerton, South
San Francisco N/A 100% 1 100% 1 100% 1 100% 1 Candy manufacturer and distributor.
400 Grandview, South
San Francisco N/A 100% 5 100% 5 100% 4 100% 4 Radiology research and developer,
freight forwarding, manufacturing and
distribution of point-of-sale
marketing products.
342 Allerton, South
San Francisco N/A 100% 4 100% 4 100% 4 100% 4 Freight forwarding.
301 East Grand, South
San Francisco N/A 71% 2 100% 3 100% 3 100%3 Freight forwarding, furniture wholesale,
and distributor of MRI equipment.
Fourier Avenue, Fremont N/A N/A 100% 1 100% 1 100% 1 Manufacturer of testers and equipment for
semi-conductors.
Lundy Avenue, San Jose N/A N/A 100% 2 100% 2 82% 1 Testing and distribution of semi-
conductors and other related electronic
components
115 Mason Circle, Concord N/A N/A 100% 5 100% 5 100% 5 Mechanical systems insulation and
acoustical contractor, pipeline servicing
co., wholesale distributor of coputer
peripherals and software, distributor of
fluid ceiling products, manufacturer and
welder of pipes.
47600 Westinghouse Drive,
Fremont N/A N/A 100% 1 100% 1 100% 1 Research and development assembly and
testing related to the semi-
conductor/electronics industry.
860-870 Napa Valley Corporate
Way, Napa N/A N/A 96% 3 86% 3 100% 3 Winery, engineering company and software
developer.
INDUSTRIAL PROPERTIES (continued)
47633 Westinghouse Drive,
Fremont N/A N/A 100% 1 100% 1 100% 1 Research and development assembly and
testing related to the semi-
conductor/electronics industry.
47513 Westinghouse Drive,
Fremont N/A N/A N/A N/A 100% 2 Manufacturing and sales of semi-conductor
equipment; manufacture and design of
arterial balloon catheters
and other related devices.
Bordeaux Centre, Napa N/A N/A N/A N/A 38% 2 Manufacturing and printing of corks, and
light manufacturing, warehousing and
distribution of recreational marine
accessories.
O'Toole Business Center,
San Jose N/A N/A 94% 0 90% 0 89% 0 N/A
Doherty Avenue, Modesto N/A N/A 100% 1 100% 1 100% 1 Storing canned goods.
6500 Kaiser Drive, Fremont N/A N/A N/A 100% 1 100% 1 Office, research and development,
manufacturing of computers.
Bedford Fremont Business Center,
Fremont N/A N/A N/A 100% 1 100% 1 Administration and testing of samples for
managed care organizations.
Spinnaker Court, Fremont N/A N/A N/A 100% 2 100% 2 Manufacturing and distribution of
personal computers, peripherals and
related electronic parts and software,
transportation of industrial and
hazardous wastes.
2277 Pine View Way, Petaluma N/A N/A N/A 100% 1 100% 1 Manufacturer and distributor of plastic
and glass eyeglass lenses for world-wide
distribution
The Mondavi Building, Napa N/A N/A N/A 100% 1 100% 1 Wine storage and administration.
INDUSTRIAL PROPERTIES (continued)
Monterey Commerce Center 2,
Monterey N/A N/A N/A 100% 1 100% 1 Language interpretation - over seas
calls.
Monterey Commerce Center 3,
Monterey N/A N/A N/A 100% 3 100% 3 Storage of office and long-distance
telephone equipment and medical supplies.
Parkpoint Business Center,
Santa Rosa N/A N/A N/A N/A 100% 3 Customized computer software company,
rehabilitation center;
mortgage broker.
2180 S. McDowell, Petaluma N/A N/A N/A N/A 100% 2 Manufacturer of high-end, commercial
grade sound equipment; assembly of PC
boards.
2190 S. McDowell, Petaluma N/A N/A N/A N/A 100% 2 Bread distributor; distributor of paper
and packaging products.
Southern California
Dupont Industrial Center,
Ontario 91% 1 100% 1 59% 0 100% 1 97% 1 Distribution of swimming pool supplies.
3002 Dow Business Center,
Tustin N/A 83% 0 99% 0 100% 0 99% 0 N/A
Carroll Tech I, San Diego N/A N/A 100% 1 100% 1 100% 1 Manufacturer adn distributor of cash
registers.
Vista 1, Vista N/A N/A 100% 1 100% 1 0% 0 N/A
Vista 2, Vista N/A N/A 100% 1 100% 1 100% 1 Manufacturer of graphite golf club shaft.
Signal Systems Building,
San Diego N/A N/A 100% 1 100% 1 100% 1 Developer and manufacturer of avionic
diagnostic equipment.
INDUSTRIAL PROPERTIES (continued)
Carroll Tech II, San Diego N/A N/A 100% 1 100% 1 100% 1 Bio-technology company.
2230 Oak Ridge Way N/A N/A N/A 100% 1 100% 1 Manufacturer of equipment for circuit
board assembly.
5502 Oberlin Drive, San Diego N/A N/A N/A N/A 100% 1 Manufacturer of micro-circuits.
6960 Flanders Drive, San Diego N/A N/A N/A N/A 100% 1 Geotechnical and environmental consultant.
Kansas City, Kansas
Ninety-Ninth Street #3, Lenexa 100% 2 100% 2 89% 2 100% 2 98% 2 Warehouse for computer cables/wiring and
storage of corporate records/supplies.
Lackman Business Center,
Lenexa N/A 98% 2 91% 2 100% 2 98% 3 Network and communications specialists.
Ninety-Ninth Street #1, Lenexa N/A 100% 2 100% 2 100% 2 100% 2 Tool distribution and surgical instrument
manufacturing.
Ninety-Ninth Street #2, Lenexa N/A 100% 1 100% 1 100% 1 100% 1 Drug testing clinic.
Ninety-Ninth Street #4, Lenexa N/A N/A N/A N/A 79% 3 Distribution of shrink wrap products,
distributor of computers and computer
related parts, home nursing and health
care administration.
Panorama Business Center,
Kansas City N/A N/A 100% 2 100% 2 91% 2 Distribution of pharmaceuticals,
distribution of appliances.
17725 W. 85th Street, Lenexa N/A N/A N/A 100% 1 100% 1 Manufacturing of plastic containers.
INDUSTRIAL PROPERTIES (continued)
Colorado
Bryant Street Quad, Denver N/A 97% 3 100% 3 100% 3 100% 3 Health cre provider, photo processing
lab, and radiator coating plant/distributor.
Bryant Street Annex, Denver N/A 100% 2 100% 2 100% 2 100% 2 Office supplies distributor and automotive
paint distributor.
Greater Portland Area, Oregon
Twin Oaks Technology Center,
Beaverton N/A 81% 2 91% 3 96% 2 89% 3 Software developer and
telecommunications.
Twin Oaks Business Park,
Beaverton N/A 94% 3 80% 4 81% 4 84% 4 Electronic engineering, electronic
equipment assembly, computer equipment
distributor and postal service.
Arizona
Westech Business Center,
Phoenix N/A N/A 93% 0 96% 0 95% 0 N/A
Westech II, Phoenix N/A N/A N/A N/A 100% 3 Healthcare consultants and travel agency.
2601 W. Broadway, Tempe N/A N/A N/A 100% 1 100% 1 Wireless phone service provider.
Phoenix Airport Center #2,
Phoenix N/A N/A N/A 100% 1 100% 1 Electronics and customer service.
Phoenix Airport Center #3,
Phoenix N/A N/A N/A 100% 1 100% 1 Cosmetic manufacturing and distribution.
Phoenix Airport Center #4,
Phoenix N/A N/A N/A 100% 1 100% 1 Package delivery/service call center.
Phoenix Airport Center #5,
Phoenix N/A N/A N/A N/A 100% 1 Healthcare maintenance organization
corporate office.
Butterfield Business Center,
Tucson N/A N/A N/A 100% 3 100% 3 Sears call center, polish/wax research
and development.
Cimmarron Industrial Park,
Scottsdale N/A N/A N/A N/A 98% 2 Printing and sales office.
Expressway Corporate
Center, Tempe N/A N/A N/A N/A 68% 1 Manufacture photographic equipment for
wafer circuiting.
Texas
Ferrell Drive N/A N/A N/A 100% 5 100% 5 Glass manufacturing (sub-tenant is
telecommunications), medical products
distribution, hardware distribution, and
direct sales of nutritional products.
Austin Braker 2, Austin N/A N/A N/A N/A 100% 3 Computer technology for television,
lottery and gaming association, computer
sales and customer service.
Austin Rutland 10, Austin N/A N/A N/A N/A 100% 5 Service of copier equipment, printing for
small businesses, tool distribution,
environmental field work, trade show and
conference coordination.
Austin Southpark A, B and C,
Austin N/A N/A N/A N/A 100% 4 Spare parts storage for computer chip
manufacturer, environmental testing,
proto-type testing for computer chip
manufacturer and valuable storage for
pawn broker.
SUBURBAN OFFICE PROPERTIES
Northern California
Village Green, Lafayette 82% 3 100% 2 100% 1 99% 1 100% 2 Software developer and real estate
investment trust.
100 View Street, Mountain View N/A N/A 100% 4 100% 3 100% 3 Architectural servicing, designing and
marketing of integrated circuits for semi-
conductors, research and development of
governmental devices.
Canyon Park, San Ramon N/A N/A N/A 100% 2 100% 2 Medical administrative offices and
geotechnical lab; soils
testing, engineering services.
Monterey Commerce Center 1
Monterey N/A N/A N/A 87% 4 82% 4 Financial services, software development,
telecommunications sales, and electronic
equipment sales.
3380 Cypress, Petaluma N/A N/A N/A N/A 100% 1 Manufacture hearing devices.
Southern California
Laguna Hills Square, Laguna N/A N/A 86% 2 96% 4 93% 4 Medical facility and securities brokerage
firm.
Carroll Tech III, San Diego N/A N/A N/A 100% 1 100% 1 Biomedical firm.
Scripps Wateridge, San Diego N/A N/A N/A 100% 2 100% 2 Wireles communications; supplier of
digital wireless communication products
and technologies.
Greater Kansas City Area
6600 College Blvd., Overland Park N/A 100% 1 98% 1 100% 1 100% 1 Telecommunication.
Didde Building, Overland Park N/A N/A N/A N/A 100% 3 Investment firm, printing and packaging
technology corporate offices and
reinsurance brokerage.
Colorado
Oracle Building N/A N/A N/A 100% 2 100% 2 Software company and banking.
Texaco Building N/A N/A N/A N/A 100% 1 Oil company.
Salt Lake City
Woodlands Tower II,
Salt Lake City 98% 2 95% 2 100% 2 100% 2 97% 2 Insurance services and health care
staffing.
Arizona
Executive Center at Southbank,
Phoenix N/A N/A N/A 98% 3 98% 3 Appliance sales, travel agency, and
customer credit call center.
Troika Building, Tucson N/A N/A N/A 100% 1 100% 1 Architectural services
Phoenix Airport Center #1,
Phoenix N/A N/A N/A 100% 5 100% 5 Electronics, banking services, and sales
office.
Cabrillo Executive Center,
Phoenix N/A N/A N/A N/A 97% 2 Medical insurance company and software
developer.
Greater Seattle Area
Kenyon Center, Bellevue N/A N/A 100% 1 100% 1 100% 1 Manufacturer of aircraft.
Orillia Office Park, Renton N/A N/A N/A 100% 1 100% 1 Manufacturer of aircraft.
Adobe Systems Bldg. 1, Seattle N/A N/A N/A N/A 100% 1 Computer software.
Adobe Systems Bldg. II, Seattle N/A N/A N/A N/A 77% 1 Computer software.
Texas
9737 Great Hills Trail, Austin N/A N/A N/A 100% 1 100% 1 Home mortgage business.
Nevada
U. S. Bank Centre, Reno N/A N/A N/A 94% 1 99% 1 Insurance services.
Lease Expirations - Real Estate Portfolio
The following table presents lease expirations for each of the ten
years beginning January 1, 1999. The table presents: (i) the number
of leases that expire each year, (ii) the square feet covered by such
expiring leases, (iii) the annualized base rent (the "Annualized Base
Rent") represented by such expiring leases and (iv) the percentage of
total Annualized Base Rent for expiring leases.
Number of Percentage
Leases Rentable Annualized of Annualized Base
Year Expiring Square Feet Base Rent Rent
1999 125 749,836 6,867,552 9.7%
2000 134 1,039,117 10,726,704 15.2%
2001 117 1,157,838 10,856,304 15.4%
2002 81 709,617 7,074,012 10.0%
2003 52 826,042 9,710,916 13.7%
2004 14 713,867 6,490,848 9.2%
2005 8 536,605 8,519,916 12.0%
2006 7 513,271 2,990,640 4.2%
2007 6 421,219 2,411,316 3.4%
2008 and
thereafter 6 420,114 5,124,516 7.2%
Total 550 7,087,526 $70,772,724 100.0%
Principal Provisions of Leases
The following table sets forth the principal provisions of leases which
represent more than 10% of the gross leasable area ("GLA") of each of the
Company's Properties and the realty tax rate for each Property for 1998.
Annual # of Leases Square Feet Contract Rent
Property with 10% or Project of Each ($/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 $15,630 1 21,840 21,840 $6.84 Feb. 00 1-3 yr.
Diablo Ind. Park, Concord $1.03/100
Building #8 at Contra Costa $22,487 1 31,800 31,800 $6.00 Dec. 00 2-5 yr.
Diablo Ind. Park, Concord $1.03/100
Building #18 at Mason $19,185 2 28,836 7,225 $6.96 May 00 None
Industrial Park, Concord $1.03/100 4,825 $7.20 Feb. 01 None
Milpitas Town Center, $67,421 4 102,620 23,924 $9.63 Sep. 99 1-2 yr.
Milpitas $1.09/100 24,426 $11.04 Apr. 02 1-2 yr.
30,840 $13.20 Jul. 03 1-5 yr.
23,430 $8.12 Jan. 00 1-5 yr.
598 Gibraltar Drive, $44,875 1 45,090 45,090 $10.44 Apr. 01 1-5 yr.
Milpitas $1.10/100
350 East Plumeria Drive, $137,918 1 142,700 142,700 $15.00 Apr. 05 1-5 yr.
San Jose $1.08/100
Auburn Court, Fremont $50,142 4 68,030 15,755 $10.56 Apr. 99 1-3 yr.
$1.06/100 16,095 $13.80 Jul. 01 1-5 yr.
12,060 $12.60 Apr. 03 None
12,060 $7.20 Jul. 00 None
47650 Westinghouse Drive, $15,515 1 24,030 24,030 $9.60 Sep. 04 None
Fremont $1.06/100
417 Eccles, $13,114 1 24,624 24,624 $7.68 Jul. 08 None
South San Francisco $1.03/100
410 Allerton, $25,383 1 46,050 46,050 $6.60 Apr. 01 None
South San Francisco $1.03/100
400 Grandview, $79,040 4 107,004 21,841 $7.80 Dec. 03 None
South San Francisco $1.03/100 43,642 $7.70 Jul. 02 1-5 yr.
18,789 $7.05 May 04 None
18,864 $6.60 Jan. 03 None
342 Allerton, $53,290 4 69,312 19,751 $7.20 Mar. 00 None
South San Francisco $1.03/100 9,720 $8.74 Mar. 02 None
30,953 $7.28 M-T-M None
8,888 $9.36 Aug. 02 None
301 East Grand, $32,929 3 57,846 26,240 $7.80 Jun. 03 None
South San Francisco $1.03/100 14,400 $5.52 Oct. 99 None
17,206 $4.68 Dec. 03 None
Fourier Avenue, Fremont $118,423 1 104,400 104,400 $8.99 Apr. 04 None
$1.06/100
Lundy Avenue, San Jose $60,020 1 60,428 49,342 $7.02 Dec. 98 1-5 yr.
$1.09/100
115 Mason Circle, Concord $18,538 5 35,000 5,833 $5.31 Jan. 00 None
$1.03/100 5,832 $6.55 Dec. 98 1-3 yr.
8,154 $7.20 Aug. 02 None
7,296 $7.20 Nov. 98 1-3 yr.
7,885 $6.36 Apr. 99 None
47600 Westinghouse Drive, $17,800 1 24,030 24,030 $10.56 Oct. 03 1-3 yr.
Fremont $1.06/100
860-870 Napa Valley Corporate $82,667 3 67,775 13,111 $10.05 Dec. 00 1-5 yr.
Way, Napa $1.03/100 7,558 $10.19 Sep. 01 None
8,474 $9.96 Dec. 99 None
47633 Westinghouse Drive, $53,524 1 50,088 50,088 $11.83 Oct. 03 1-3 yr.
Fremont $1.06/100
47513 Westinghouse Drive, $14,495 2 65,385 35,132 $14.76 Feb. 05 1-5 yr.
Fremont $1.06/100 30,253 $13.80 Feb. 04 1-5 yr.
Bordeaux Centre, Napa $104,379 2 150,000 22,075 $7.38 Nov. 07 2-5 yr.
$1.03/100 16,076 $7.07 Nov. 07 1-5 yr.
O'Toole Business Center, $117,218 0 122,320 N/A N/A N/A N/A
San Jose $1.09/100
Doherty Avenue, Modesto $55,734 1 251,308 251,308 $1.89 Dec. 06 None
$1.06/100
6500 Kaiser Drive, Fremont $155,400 1 78,611 78,611 $9.00 Sep. 04 2-5 yr.
$1.06/100
Bedford Fremont Business Center,
Fremont $205,403 1 146,509 71,532 $14.28 Jul. 03 1-3 yr.
$1.06/100
Spinnaker Court, Fremont $161,212 2 98,500 69,230 $8.10 Mar. 00 None
$1.06/100 29,270 $8.59 Mar. 00 None
2277 Pine View Way, $115,103 1 120,480 120,480 $6.91 Mar. 07 2-5 yr.
Petaluma $1.09/100
The Mondavi Building, Napa $133,256 1 120,157 120,157 $4.92 Sep. 12 1-5 yr.
$1.03/100
Monterey Commerce $22,667 1 28,020 28,020 $14.64 Dec. 00 1-3 yr.
Center 2, Monterey $1.00/100
Monterey Commerce $22,367 3 24,240 3,817 $13.68 Jul. 01 1-5 yr.
Center 3, Monterey $1.00/100 3,050 $12.96 Nov. 00 2-3 yr.
17,373 $15.96 Oct. 00 None
Parkpoint Business Center, $64,350 3 67,869 8,767 $14.40 Oct. 02 1-5 yr.
Santa Rosa $1.08/100 7,894 $14.74 Oct. 01 1-5 yr.
17,505 $14.40 Mar. 03 1-5 yr.
2180 McDowell, Petaluma $15,841 2 43,083 35,014 $8.55 Apr. 06 3-5 yr.
$1.09/100 8,069 $7.56 Jul. 05 None
2190 S. McDowell, Petaluma $12,029 2 32,719 17,131 $8.45 Mar. 04 1-5 yr.
$1.09/100 15,588 $7.90 Apr. 06 2-5 yr.
Southern California
Dupont Industrial Center, $205,668 1 451,192 183,244 $2.88 Jan. 07 2-5 yr.
Ontario $1.04/100
3002 Dow Business Center, $184,992 0 192,125 N/A N/A N/A N/A
Tustin $1.02/100
Carroll Tech I, $21,408 1 21,936 21,936 $3.17 Nov. 05 2-3 yr.
San Diego $1.12/100
Vista 1, Vista $34,012 0 42,508 N/A N/A N/A N/A
$1.04/100
Vista 2, Vista $50,781 1 47,550 47,550 $6.88 Sep. 01 2-5 yr.
$1.04/100
Signal Systems Building, $97,422 1 109,780 109,780 $10.20 Aug. 06 None
San Diego $1.02/100
Carroll Tech II, $34,933 1 37,586 37,586 $12.00 Dec. 01 None
San Diego $1.11/100
2230 Oak Ridge Way, $36,381 1 44,063 44,063 $6.36 Aug. 04 2-5 yr.
Vista $1.01/100
5502 Oberlin Drive, $13,304 1 20,771 20,771 $9.96 Mar. 03 1-5 yr.
San Diego $1.11/100
6960 Flanders Drive, $19,049 1 33,144 33,144 $9.60 May 03 1-5 yr.
San Diego $1.11/100
Greater Kansas City Area
Ninety Ninth Street #3, $51,275 2 50,000 13,000 $7.35 Dec. 03 1-5 yr.
Lenexa $1.01/100 31,250 $5.38 May 03 None
Lackman Business Center, $54,806 3 45,956 5,510 $13.00 Jan. 01 1-3 yr.
Lenexa $1.01/100 5,132 $9.97 May 01 None
5,320 $7.95 Jun. 99 None
Ninety-Ninth Street #1, $40,627 2 35,516 19,019 $8.33 Sep. 00 1-3 yr.
Lenexa $1.01/100 13,305 $7.25 Oct. 02 None
Ninety-Ninth Street #2, $23,674 1 12,974 12,974 $8.62 Oct. 04 None
Lenexa $1.01/100
Ninety Ninth Street #4, $74,698 3 68,831 19,540 $5.75 Feb. 01 1-3 yr.
Lenexa $1.01/100 19,316 $5.85 Feb. 03 1-3 yr.
14,751 $7.37 Sep. 02 None
Panorama Business Center, $111,956 2 103,457 12,491 $5.95 Jul. 01 None
Kansas City $9.28/100 12,951 $5.15 Feb. 01 None
17725 W. 85th Street, $108,997 1 171,642 171,642 $3.20 Nov. 01 1-5 yr.
Lenexa $1.01/100
Colorado
Bryant Street Quad, Denver $82,173 3 155,536 17,440 $4.25 Apr. 02 None
$8.08/100 20,726 $3.30 Feb. 01 1-5 yr.
16,055 $3.80 Feb. 02 1-3 yr.
Bryant Street Annex, Denver $29,241 2 55,000 42,148 $4.25 Nov. 00 3-1 yr.
$8.08/100 12,852 $3.90 Mar. 00 None
Greater Portland Area
Twin Oaks Technology Center, $63,292 3 95,519 11,460 $5.76 Nov. 01 None
Beaverton $1.44/100 10,069 $5.96 N/A None
9,732 $9.36 Feb. 03 1-5 yr.
Twin Oaks Business Park, $40,466 4 66,339 7,633 $9.60 Nov. 02 None
Beaverton $1.44/100 6,702 $9.00 Feb. 00 None
14,522 $10.67 Jul. 99 1-3 yr.
11,475 $7.84 Oct. 00 1-3 yr.
Arizona
Westech Business Center, $82,013 0 143,940 N/A N/A N/A N/A
Phoenix $13.30/100
Westech II, Phoenix $67,798 3 80,878 14,615 $8.52 Oct. 04 None
$9.18/100 11,819 $8.97 Nov. 02 1-2 yr.
11,739 $7.80 Nov. 02 1-2 yr.
2601 W. Broadway, Tempe $54,535 1 44,244 44,244 $7.14 Jan. 07 2-5 yr.
$12.89/100
Phoenix Airport Center #2, $55,305 1 35,768 35,768 $7.20 Aug. 01 None
Phoenix $13.31/100
Phoenix Airport Center #3, $47,307 1 55,122 55,122 $6.36 Jul. 01 None
Phoenix $13.31/100
Phoenix Airport Center #4, $28,053 1 30,504 30,504 $7.80 Jun. 00 None
Phoenix $13.31/100
Phoenix Airport Center #5, $70,795 1 60,000 60,000 $8.68 Sep. 02 None
Phoenix $13.31/100
Butterfield Business Center, $77,194 3 95,746 50,000 $7.92 Aug. 04 3-5 yr.
Tucson $12.42/100 14,982 $2.60 Aug. 04 2-5 yr.
22,002 $8.61 Jun. 01 None
Cimarron Business Park, $129,369 2 94,800 13,800 $9.93 Mar. 04 None
Scottsdale $12.76/100 9,510 $8.76 Sep. 00 1-4 yr.
Expressway Corporate Center $63,377.80 1 79,331 40,528 $8.10 Mar. 03 None
$12.75/100
Texas
Ferrell Drive, Dallas $42,408 5 68,580 11,430 $4.50 Jan. 00 1-5 yr.
$8.73/100 11,430 $4.50 M-T-M None
11,430 $4.20 Feb. 00 None
11,430 $4.50 Jul. 01 1-5 yr.
11,430 $4.50 Apr. 99 1-3 yr.
Austin Braker 2, $33,263 3 27,322 16,522 $9.00 Jan. 03 1-3 yr.
Austin $2.51/100 5,400 $7.92 Jan. 00 None
5,400 $9.00 Feb. 03 None
Austin Rutland 10, $50,208 5 54,000 7,200 $6.96 Nov. 01 2-3 yr.
Austin $2.51/100 7,200 $6.84 May 00 None
7,200 $5.40 Sep. 02 None
7,200 $7.20 Aug. 99 None
14,400 $5.40 Dec. 02 None
Austin Southpark A, B, and C, $95,019 4 78,276 13,550 $8.52 Apr. 01 2-3 yr.
Austin $2.51/100 11,957 $7.32 Feb. 00 None
9,813 $8.64 Jun. 99 None
8,100 $8.64 May 03 1-5 yr.
SUBURBAN OFFICE PROPERTIES
Northern California
Village Green, Lafayette $26,025 2 16,795 2,119 $22.33 Aug. 99 None
$1.14/100 11,062 $24.12 Mar. 05 None
100 View Street, $58,665 3 42,141 5,490 $20.88 Jul. 01 1-5 yr.
Mountain View $1.08/100 12,112 $18.60 Mar. 99 1-3 yr.
9,875 $23.09 Oct. 00 None
Canyon Park, $65,612 2 57,667 48,265 $15.68 Feb. 00 None
San Ramon $1.07/100 9,402 $20.32 Jan. 03 None
Monterey Commerce Center 1, $61,307 4 50,031 5,809 $20.64 Aug. 99 None
Monterey $1.00/100 7,000 $18.96 Mar. 03 1-5 yr.
16,088 $19.80 Jul. 03 1-5 yr.
5,046 $19.80 Sep. 99 1-5 yr.
3880 Cypress Dr., $20,584 1 35,100 35,100 $13.08 May 07 1-5 yr.
Santa Rosa $1.09/100
Southern California
Laguna Hills Square, Laguna $65,191 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 $18.84 Jun. 02 2-3 yr.
Carroll Tech III, San Diego $23,045 1 29,307 29,307 $8.52 Dec. 98 1-5 yr.
$1.11/100
Scripps Wateridge, San Diego $182,552 2 123,853 49,295 $11.85 Jul. 06 1-5 yr.
$1.11/100 74,558 $12.98 Aug. 05 2-3 yr.
Greater Kansas City Area
6600 College Blvd., $174,815 1 79,316 62,441 $11.80 Dec. 99 None
Overland Park $11.23/100
Didde Building, $48,745 3 20,168 10,962 $19.50 Jan. 08 1-5 yr.
Overland Park $11.23/100 3,667 $15.75 Jan. 02 None
2,132 $17.50 Mar. 01 None
Colorado
Oracle Building, Denver $261,122 2 90,712 10,043 $18.00 Aug. 11 4 yr.
$13.32/100 77,090 $24.00 Sep. 03 None
Texaco Building, Denver $528,534 1 237,055 237,055 $18.05 Jan. 05 2-5 yr.
$10.56/100
Salt Lake City
Woodlands Tower II, $131,142 2 114,352 54,500 $16.44 Feb. 02 1-5 yr.
Salt Lake City $1.18/100 17,797 $17.50 Jan. 01 1-3 yr.
Arizona
Executive Center at Southbank, $165,326 4 140,157 38,106 $9.45 Apr. 02 1-5 yr.
Phoenix $17.68/100 17,910 $8.20 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 $105,641 1 52,000 52,000 $10.00 Oct. 01 None
$16.90/100
Phoenix Airport Center #1, $32,785 5 32,460 11,990 $10.95 Aug. 00 None
Phoenix $13.31/100 4,527 $15.00 Mar. 01 None
4,449 $17.55 Dec. 02 None
4,041 $18.33 Jul. 01 None
4,502 $12.00 Aug. 00 None
Cabrillo Executive Center, $113,989 2 60,321 12,400 $17.50 Aug. 01 1-5 yr.
Phoenix $13.95/100 18,267 $17.00 Dec. 99 1-5 yr.
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 1 334,255 334,255 $9.35 Feb. 04 None
$1.32/100
Adobe Systems Bldg. 1, $22,738 1 161,117 161,117 $15.53 Jul. 10 2-5 yr.
Seattle $1.22/100
Adobe Systems Bldg. 2, $11,063 1 136,111 93,211 $15.53 Jul. 10 2-5 yr.
Seattle $1.22/100
Texas
9737 Great Hills Trail, $241,500 1 82,680 82,680 $18.00 Dec. 01 1-5 yr.
Austin $2.51/100
Nevada
U.S. Bank Centre, Reno $122,061 1 104,324 37,820 $17.48 Apr. 00 2-5 yr.
$3.41/100
Average Base Rent
The following table sets forth for each of the Properties the average
rent at the end of each year for the last five years.
Average Base Rent Average Base Rent
($/Sq/Yr) ($/Sq/Yr)
Properties At End of Year Properties At End of Year
INDUSTRIAL PROPERTIES:
Northern California
Building #3 at Contra Costa
Diablo 350 East Plumeria Drive
1994 $8.35 1994 N/A
1995 $4.95 1995 $7.80
1996 $6.64 1996 $7.80
1997 $6.84 1997 $8.40
1998 $6.84 1998 $15.00
Building #8 at Contra Costa
Diablo Auburn Court
1994 $7.81 1994 N/A
1995 $6.00 1995 $6.54
1996 $6.00 1996 $6.78
1997 $6.00 1997 $7.80
1998 $6.00 1998 $10.62
Building #18 at Mason Industrial
Park 47650 Westinghouse Drive
1994 $6.95 1994 N/A
1995 $6.63 1995 $5.52
1996 $6.78 1996 $5.52
1997 $6.88 1997 $9.00
1998 $6.93 1998 $9.60
Milpitas Town Center 417 Eccles
1994 $7.11 1994 N/A
1995 $7.35 1995 $5.71
1996 $8.03 1996 $6.01
1997 $8.90 1997 $6.36
1998 $10.69 1998 $7.68
598 Gibraltar Drive 410 Allerton
1994 N/A 1994 N/A
1995 N/A 1995 $5.16
1996 $9.48 1996 $5.16
1997 $9.48 1997 $5.16
1998 $10.44 1998 $6.60
Average Base Rent Average Base Rent
($/Sq/Yr) ($/Sq/Yr)
Properties At End of Year Properties At End of Year
INDUSTRIAL PROPERTIES(continued):
400 Grandview 47600 Westinghouse Drive
1994 N/A 1994 N/A
1995 $7.49 1995 N/A
1996 $7.53 1996 $5.94
1997 $7.03 1997 $10.20
1998 $7.50 1998 $10.56
342 Allerton 860-870 Napa Valley Corporate
1994 N/A 1994 N/A
1995 $6.88 1995 N/A
1996 $7.18 1996 $9.44
1997 $7.57 1997 $8.86
1998 $7.73 1998 $9.48
301 East Grand 47633 Westinghouse Drive
1994 N/A 1994 N/A
1995 $5.92 1995 N/A
1996 $5.57 1996 $11.37
1997 $5.58 1997 $11.60
1998 $6.30 1998 $11.83
Fourier Avenue 47513 Westinghouse Drive
1994 N/A 1994 N/A
1995 N/A 1995 N/A
1996 $8.99 1996 N/A
1997 $8.99 1997 N/A
1998 $8.99 1998 $14.32
Lundy Avenue Bordeaux Centre
1994 N/A 1994 N/A
1995 N/A 1995 N/A
1996 $7.09 1996 N/A
1997 $7.09 1997 N/A
1998 $7.36 1998 $7.33
115 Mason Circle O'Toole Business Center
1994 N/A 1994 N/A
1995 N/A 1995 N/A
1996 $6.05 1996 $8.75
1997 $6.22 1997 $10.31
1998 $6.59 1998 $13.81
Average Base Rent Average Base Rent
($/Sq/Yr) ($/Sq/Yr)
Properties At End of Year Properties At End of Year
INDUSTRIAL PROPERTIES (continued):
Doherty Avenue Monterey Commerce Center 2
1994 N/A 1994 N/A
1995 N/A 1995 N/A
1996 $1.87 1996 N/A
1997 $1.88 1997 $14.16
1998 $1.89 1998 $14.64
6500 Kaiser Drive Monterey Commerce Center 3
1994 N/A 1994 N/A
1995 N/A 1995 N/A
1996 N/A 1996 N/A
1997 $9.00 1997 $14.70
1998 $9.60 1998 $15.22
Bedford Fremont Business Center Parkpoint Business Center
1994 N/A 1994 N/A
1995 N/A 1995 N/A
1996 N/A 1996 N/A
1997 $11.93 1997 N/A
1998 $14.63 1998 $15.19
Spinnaker Court 2180 S. McDowell
1994 N/A 1994 N/A
1995 N/A 1995 N/A
1996 N/A 1996 N/A
1997 $8.01 1997 N/A
1998 $8.25 1998 $8.37
2277 Pine View Way 2190 S. McDowell
1994 N/A 1994 N/A
1995 N/A 1995 N/A
1996 N/A 1996 N/A
1997 $6.91 1997 N/A
1998 $6.91 1998 $8.19
The Mondavi Building
1994 N/A
1995 N/A
1996 N/A
1997 $4.92
1998 $4.92
Average Base Rent Average Base Rent
($/Sq/Yr) ($/Sq/Yr)
Properties At End of Year Properties At End of Year
INDUSTRIAL PROPERTIES (continued):
Southern California
Dupont Industrial Center Signal Systems Building
1994 $3.07 1994 N/A
1995 $3.17 1995 N/A
1996 $3.53 1996 $7.80
1997 $3.40 1997 $8.11
1998 $3.44 1998 $10.20
3002 Dow Business Center Carroll Tech II
1994 N/A 1994 N/A
1995 $8.88 1995 N/A
1996 $8.55 1996 N/A
1997 $8.32 1997 $11.52
1998 $8.86 1998 $12.00
Carroll Tech I 2230 Oak Ridge Way
1994 N/A 1994 N/A
1995 N/A 1995 N/A
1996 $10.35 1996 N/A
1997 $11.93 1997 N/A
1998 $3.17 1998 $6.49
Vista 1 5502 Oberlin Drive
1994 N/A 1994 N/A
1995 N/A 1995 N/A
1996 $5.16 1996 N/A
1997 $0.00** 1997 N/A
1998 $0.00 1998 $9.96
Vista 2 6960 Flanders Drive
1994 N/A 1994 N/A
1995 N/A 1995 N/A
1996 $6.36 1996 N/A
1997 $6.61 1997 N/A
1998 $6.88 1998 $9.60
**Bankruptcy
Average Base Rent Average Base Rent
($/Sq/Yr) ($/Sq/Yr)
Properties At End of Year Properties At End of Year
INDUSTRIAL PROPERTIES (continued):
Greater Kansas City Area
Ninety-Ninth Street #3 Ninety-Ninth Street #4
1994 $5.86 1994 N/A
1995 $5.86 1995 N/A
1996 $5.30 1996 N/A
1997 $6.08 1997 N/A
1998 $6.14 1998 $6.16
Lackman Business Center Panorama Business Center
1994 N/A 1994 N/A
1995 $8.36 1995 N/A
1996 $8.59 1996 $6.54
1997 $8.77 1997 $6.70
1998 $9.36 1998 $6.87
Ninety-Ninth Street #1 17725 W. 85th Street
1994 N/A 1994 N/A
1995 $7.96 1995 N/A
1996 $8.32 1996 N/A
1997 $7.72 1997 $3.11
1998 $7.89 1998 $3.20
Ninety-Ninth Street #2
1994 N/A
1995 $7.56
1996 $8.62
1997 $8.62
1998 $8.62
Colorado
Bryant Street Quad Bryant Street Annex
1994 N/A 1994 N/A
1995 $3.09 1995 $4.02
1996 $3.39 1996 $3.93
1997 $3.82 1997 $4.09
1998 $3.96 1998 $4.17
Average Base Rent Average Base Rent
($/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
1994 N/A 1994 N/A
1995 $7.27 1995 $7.75
1996 $7.32 1996 $8.35
1997 $7.67 1997 $8.86
1998 $7.78 1998 $8.87
Arizona
Westech Business Center Phoenix Airport Center #4
1994 N/A 1994 N/A
1995 N/A 1995 N/A
1996 $8.85 1996 N/A
1997 $9.44 1997 $7.20
1998 $9.99 1998 $7.80
Westech II Phoenix Airport Center #5
1994 N/A 1994 N/A
1995 N/A 1995 N/A
1996 N/A 1996 N/A
1997 N/A 1997 $7.21
1998 $8.86 1998 $8.68
2601 W. Broadway Butterfield Business Center
1994 N/A 1994 N/A
1995 N/A 1995 N/A
1996 N/A 1996 N/A
1997 $7.14 1997 $7.08
1998 $7.14 1998 $7.11
Phoenix Airport Center #2 Cimarron Business Park
1994 N/A 1994 N/A
1995 N/A 1995 N/A
1996 N/A 1996 N/A
1997 $7.20 1997 N/A
1998 $7.20 1998 $8.94
Phoenix Airport Center #3 Expressway Corporate Center
1994 N/A 1994 N/A
1995 N/A 1995 N/A
1996 N/A 1996 N/A
1997 $6.36 1997 N/A
1998 $6.36 1998 $8.21
Average Base Rent Average Base Rent
($/Sq/Yr) ($/Sq/Yr)
Properties At End of Year Properties At End of Year
INDUSTRIAL PROPERTIES(continued):
Texas
Ferrell Drive Austin Rutland 10
1994 N/A 1994 N/A
1995 N/A 1995 N/A
1996 N/A 1996 N/A
1997 $4.55 1997 N/A
1998 $4.62 1998 $6.54
Austin Braker 2 Austin Southpark A, B and C
1994 N/A 1994 N/A
1995 N/A 1995 N/A
1996 N/A 1996 N/A
1997 N/A 1997 N/A
1998 $8.79 1998 $8.38
SUBURBAN OFFICE PROPERTIES:
Northern California
Village Green Monterey Commerce Center 1
1994 $20.85 1994 N/A
1995 $18.23 1995 N/A
1996 $19.99 1996 N/A
1997 $23.24 1997 $20.12
1998 $23.70 1998 $19.78
100 View Street 3880 Cypress Drive
1994 N/A 1994 N/A
1995 N/A 1995 N/A
1996 $18.82 1996 N/A
1997 $20.10 1997 N/A
1998 $21.72 1998 $13.08
Canyon Park
1994 N/A
1995 N/A
1996 N/A
1997 $15.92
1998 $16.44
Average Base Rent Average Base Rent
($/Sq/Yr) ($/Sq/Yr)
Properties At End of Year Properties At End of Year
SUBURBAN OFFICE PROPERTIES(continued):
Southern California
Laguna Hills Square Scripps Wateridge
1994 N/A 1994 N/A
1995 N/A 1995 N/A
1996 $25.38 1996 N/A
1997 $23.90 1997 $11.41
1998 $24.79 1998 $12.53
Carroll Tech III
1994 N/A
1995 N/A
1996 N/A
1997 $8.52
1998 $8.52
Greater Kansas City Area
6600 College Boulevard Didde Building
1994 N/A 1994 N/A
1995 $12.01 1995 N/A
1996 $11.99 1996 N/A
1997 $12.28 1997 N/A
1998 $12.35 1998 $18.25
Colorado
Oracle Building Texaco Building
1994 N/A 1994 N/A
1995 N/A 1995 N/A
1996 N/A 1996 N/A
1997 $23.37 1997 N/A
1998 $23.34 1998 $18.05
Salt Lake City
Woodlands Tower II
1994 $14.47
1995 $14.25
1996 $14.58
1997 $15.86
1998 $16.75
Average Base Rent Average Base Rent
($/Sq/Yr) ($/Sq/Yr)
Properties At End of Year Properties At End of Year
Arizona
Executive Center at Southbank Phoenix Airport Center #1
1994 N/A 1994 N/A
1995 N/A 1995 N/A
1996 N/A 1996 N/A
1997 $9.23 1997 $13.81
1998 $9.46 1998 $13.69
Troika Building Cabrillo Executive Center
1994 N/A 1994 N/A
1995 N/A 1995 N/A
1996 N/A 1996 N/A
1997 $9.00 1997 N/A
1998 $10.00 1998 $16.64
Greater Seattle Area
Kenyon Center Adobe Systems Bldg. 1
1994 N/A 1994 N/A
1995 N/A 1995 N/A
1996 $11.61 1996 N/A
1997 $11.61 1997 N/A
1998 $11.61 1998 $15.53
Orillia Office Park Adobe Systems Bldg. 2
1994 N/A 1994 N/A
1995 N/A 1995 N/A
1996 N/A 1996 N/A
1997 $9.35 1997 N/A
1998 $9.35 1998 $22.04
Texas
9737 Great Hills Trail
1994 N/A
1995 N/A
1996 N/A
1997 $18.00
1998 $18.00
Nevada
U. S. Bank Centre
1994 N/A
1995 N/A
1996 N/A
1997 $18.59
1998 $18.76
Tax Information
The following table sets forth tax information of the Company's real
estate investments at December 31, 1998, 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 3,784 3.18% Straight Line 31.5
109,201 2.56% Straight Line 39.0
112,985
Southern California 35,790 2.56% Straight Line 39.0
Greater Kansas City Area 2,132 3.18% Straight Line 31.5
14,286 2.56% Straight Line 39.0
16,418
Colorado 3,283 2.56% Straight Line 39.0
Greater Portland Area 8,540 2.56% Straight Line 39.0
Arizona 27,199 2.56% Straight Line 39.0
Texas 11,015 2.56% Straight Line 39.0
Total depreciable assets for industrial properties 215,230
SUBURBAN OFFICE PROPERTIES
Northern California 17,667 2.56% Straight Line 39.0
Southern California 18,114 2.56% Straight Line 39.0
Greater Kansas City Area 5,451 2.56% Straight Line 39.0
Colorado 45,260 2.56% Straight Line 39.0
Salt Lake City 6,553 2.56% Straight Line 39.0
Arizona 26,198 2.56% Straight Line 39.0
Greater Seattle Area 78,801 2.56% Straight Line 39.0
Texas 7,089 2.56% Straight Line 39.0
Nevada 10,533 2.56% Straight Line 39.0
Total depreciable assets for
suburban office properties 215,666
430,896
For additional information on the Company's real estate portfolio, see
Note 2 to the Consolidated Financial Statements.
ITEM 3. LEGAL PROCEEDINGS
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Common Stock of the Company trades on the New York Stock Exchange
and the Pacific Exchange under the symbol "BED." As of December 31,
1998 the Company had 869 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 1997 and 1998.
Dividend
High Low Per Share
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
1998
First Quarter $22 $19 3/16 $.30
Second Quarter $20 $17 7/16 $.33
Third Quarter $20 1/8 $15 $.33
Fourth Quarter $18 3/4 $15 3/4 $.36
Credit Facility
In June 1998, the Company amended and restated its secured revolving
credit facility with Bank of America. Under this facility, which
matures June 15, 2001, the Company can borrow up to $175 million on a
secured basis. The facility contains an unsecured sub-line of $50
million. Secured loans bear interest at a floating rate equal to
either the lender's published "reference rate" or LIBOR plus a margin
ranging from 1.10% to 1.35% (depending on leverage levels). The
interest rate of the unsecured loans is either the lender's published
"reference rate" or LIBOR plus a margin of 1.50%. The credit facility
contains various restrictive covenants including, among other things,
a covenant limiting quarterly dividends to 95% of average Funds From
Operations. During the first quarter of 1999, the Company entered
into discussions with Bank of America regarding a bridge facility of
$28 million. This facility would consist of secured loans, bear the
same interest rates as the secured loans under the $175 million
facility and have a six-month term with the option to extend for
another six months.
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)
1998 1997 1996 1995 1994
Operating Data:
Rental income $ 73,451 $ 46,377 $ 27,541 $ 11,695 $ 9,154
Net income 31,496 31,291 11,021 2,895 3,609
Net income applicable
to common stockholders 31,496 27,791 6,516 1,607 3,609
Per common share -
assuming dilution
Income before gain or loss
on sale of real estate
investments $ 1.38 $ 1.23 $ 1.09 $ 1.14 $ 0.79
Net income $ 1.38 $ 1.94 $ 1.14 $ 0.52 $ 1.17
Balance Sheet Data:
Real estate investments $ 581,458 $ 423,086 $ 224,501 $ 128,964 $ 55,053
Bank loan payable 147,443 8,216 46,097 43,250 22,400
Mortgage loans payable 80,116 60,323 51,850 - -
Redeemable preferred shares - - 50,000 50,000 -
Common and other
stockholders' equity 347,589 346,426 73,756 32,435 36,932
Other Data:
Net cash provided by
operating activities $ 38,949 $ 25,041 $ 14,378 $ 4,898 $ 2,716
Net cash used by
investing activities 168,018 180,358 96,964 73,259 19,720
Net cash provided by
financing activities 128,994 155,350 82,887 64,655 16,807
Funds From Operations(1) 42,312 25,582 13,645 5,021 3,622
Dividends declared per share $ 1.32 $ 1.13 $ 1.00 $ 0.82 $ 0.71
(1) Management considers Funds From Operations to be one measure of
the performance of an equity REIT. Funds From Operations is used by
financial analysts in evaluating REITs and can be one measure of a
REIT's ability to make cash distributions. Presentation of this
information provides the reader with an additional measure to compare
the performance of REITs. Funds From Operations generally is defined
by NAREIT as net income (loss) (computed in accordance with generally
accepted accounting principles), excluding gains (losses) from debt
restructurings, sales of property, and non-recurring items, plus
depreciation and amortization, and after adjustments for
unconsolidated partnerships and joint ventures. Funds From Operations
was computed by the Company in accordance with this definition. Funds
From Operations does not represent cash generated by operating
activities in accordance with generally accepted accounting
principles; it is not necessarily indicative of cash available to fund
cash needs and should not be considered as an alternative to net
income (loss) as an indicator of the Company's operating performance
or as an alternative to cash flow as a measure of liquidity. Further,
Funds From Operations as disclosed by other REITs may not be
comparable to the Company's 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 sections entitled
"Potential Factors Affecting Future Operating Results" and "Market Risk"
below. Readers are cautioned not to place undue reliance on these
forward-looking statements which speak only as of the date hereof. The
Company undertakes no obligation to publicly release the result of any
revisions to these forward-looking statements which may be made to
reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
Results of Operations
The Company's operations consist of owning and operating industrial and
suburban office properties located primarily in the Western United
States.
Increases in revenues, expenses, net income and cash flows in the years
compared below were due primarily to the acquisition, development and
sale of operating properties as follows:
1998 1997 1996
Number of Square Number of Square Number of Square
Properties Feet Properties Feet Properties Feet
Acquisitions
Industrial 10 531,000 13 1,091,000 13 1,251,000
Office 6 650,000 13 1,199,000 3 189,000
16 1,181,000 26 2,290,000 16 1,440,000
Development
Industrial - - 4 365,000 1 45,000
Sales
Industrial - - - - 2 186,000
Office - - 2 213,000 - -
Retail - - 1 84,000 - -
- - 3 297,000 2 186,000
Comparison of 1998 to 1997
Income from Property Operations
Income from property operations (defined as rental income less rental
expenses) increased $16,108,000 or 54% in 1998 compared with 1997. This
is due to an increase in rental income of $27,074,000 offset by an
increase in rental expenses (which include operating expenses, real
estate taxes and depreciation and amortization) of $10,966,000.
The increase in rental income and expenses is primarily attributable to
the acquisition and development of real estate investments during 1998
and 1997. This acquisition and development activity increased rental
income and rental expenses in 1998 by $24,964,000 and $10,133,000,
respectively, as compared to 1997. The remaining increase in rental
income of $5,226,000 is due primarily to overall increases in property
rental rates, while the remaining increase in rental expenses of
$2,113,000 is due primarily to increases in property tax assessments,
landscaping costs and other property operating expenses. These increases
were partially offset by the sales of two office properties and one
retail property in 1997, which resulted in a reduction in rental income
and rental expenses in 1998 of $3,116,000 and $1,280,000, respectively,
as compared to 1997.
Expenses
Interest expense, which includes amortization of loan fees, increased
$3,246,000 or 41% in 1998 compared with 1997. The increase is
attributable to the Company's higher level of borrowings to finance the
acquisition and development of properties in 1998, and higher financing
costs incurred in connection with its credit facility and mortgage loans.
The amortization of loan fees was $1,013,000 and $816,000 for 1998 and
1997, respectively. General and administrative expense increased
$1,049,000 or 45% from $2,337,000 in 1997 to $3,386,000 in 1998. The
1998 general and administrative expenses included costs of $434,000
related to the Company exploring strategic alternatives including selling
its portfolio of properties. Such discussions were terminated in the
fourth quarter of 1998. Excluding these costs, general and
administrative expenses increased 26% in 1998 compared with 1997,
primarily the result of managing a larger real estate portfolio. The
1997 general and administrative expenses included $250,000 alternative
minimum tax expense the Company incurred on the retention and
reinvestment of gains on property sales.
Gain on Sale
In July 1997, the Company sold two of its Southern California office
properties for a combined sales price of approximately $25,800,000, which
resulted in a gain of $10,785,000. In October 1997, the Company sold
Academy Place Shopping Center in Colorado Springs, Colorado for a sale
price of approximately $7,500,000, which resulted in a gain of
approximately $748,000. Net operating loss carryforward was utilized to
offset substantially all of the 1997 taxable income remaining after the
deduction of dividends paid in 1997.
Dividends
The 1998 quarterly dividend declared for each share of common stock was
$0.30 for the first quarter, $0.33 for the second and third quarters,
and $0.36 for the fourth quarter. Consistent with the Company's policy,
dividends are paid in the quarter after the quarter in which they are
declared.
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 in 1997
by $21,545,000 and $7,055,000, respectively, as compared to 1996. This
increase 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 in 1997 of
$3,256,000 and $1,779,000, respectively, as compared to 1996.
Expenses
Interest expense, which includes amortization of loan fees, increased
$3,571,000 or 82% 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% in 1997 compared with 1996, as a result of managing a larger real
estate portfolio and as a result of the $250,000 alternative minimum tax
expense the Company incurred in 1997 on the retention and reinvestment
of gains on property sales.
Gain on Sale
In July 1997, the Company sold two of its Southern California office
properties for a combined sales price of approximately $25,800,000, which
resulted in a gain of $10,785,000. In October 1997, the Company sold
Academy Place Shopping Center in Colorado Springs, Colorado for a sale
price of approximately $7,500,000, which resulted in a gain of
approximately $748,000. Net operating loss carryforward was utilized to
offset substantially all of the 1997 taxable income remaining after the
deduction of dividends paid in 1997. 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
The 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 the quarter in which they are
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.
Financial Condition
Total assets of the Company at December 31, 1998 increased by
$164,421,000 compared with December 31, 1997, primarily as a result of
an increase in real estate investments of $167,910,000. Total
liabilities at December 31, 1998 increased by $163,386,000 compared with
December 31, 1997, primarily as a result of the increase in bank and
mortgage loan borrowings made in support of property acquisitions and
development.
Liquidity and Capital Resources
In June 1998, the Company amended and restated its secured revolving
credit facility with Bank of America. Under this facility, which matures
June 15, 2001, the Company can borrow up to $175 million on a secured
basis. The facility contains an unsecured sub-line of $50 million.
Secured loans bear interest at a floating rate equal to either the
lender's published "reference rate" or LIBOR plus a margin ranging from
1.10% to 1.35%. The interest rate of the unsecured loans is either the
lender's published "reference rate" or LIBOR plus a margin of 1.50%. As
of December 31, 1998, the Company was in compliance with the covenants
and requirements of its revolving credit facility which had an
outstanding balance of $147,443,000 and an effective interest rate of
6.48%. During the first quarter of 1999, the Company entered into
discussions with Bank of America regarding a bridge facility of $28
million. This facility would consist of secured loans, bear the same
interest rates as the secured loans under the $175 million facility and
have a six-month term with the option to extend for another six months.
The Company anticipates that the cash flow generated by its real estate
investments and funds available under the above credit facility will be
sufficient to meet its short-term liquidity requirements.
During the twelve months ended December 31, 1998, the Company's operating
activities provided cash flow of $38,949,000. Investing activities
utilized cash of $168,018,000 for real estate acquisitions. Financing
activities provided net cash flow of $128,994,000 consisting of the
proceeds from bank borrowings and mortgage loans of $179,181,000 and net
proceeds from the exercise of stock options of $1,367,000, offset by
repayment of bank borrowings and mortgage loans of $20,996,000, payment
of dividends and distributions of $28,615,000, and redemption of
partnership units of $128,000. Net cash flow was also offset by the
repurchase of 111,375 shares of common stock at an average purchase price
of $16.30 per share during the fourth quarter of 1998.
The Company expects to fund the cost of acquisitions, capital expenditure
costs associated with lease renewals and reletting of space, repayment
of indebtedness, and development of properties from (i) cash flow from
operations, (ii) borrowings under the credit facility and, if available,
other indebtedness (which may include indebtedness assumed in
acquisitions), (iii) the sale of certain real estate investments, and
(iv) the sale of equity securities and, possibly, the issuance of equity
securities in connection with acquisitions.
The ability to obtain mortgage loans on income producing property is
dependent upon the ability to attract and retain tenants and the
economics of the various markets in which the properties are located, as
well as the willingness of mortgage-lending institutions to make loans
secured by real property. The ability to sell real estate investments
is partially dependent upon the ability of purchasers to obtain financing
at commercially reasonable rates.
Potential Factors Affecting Future Operating Results
Many factors affect the Company's actual financial performance and may
cause the Company's future results to be markedly outside of the
Company's current expectations. These factors include the following:
Interest Rate Fluctuations
At the present time, borrowings under the Company's credit facility bear
interest at a floating rate. The Company recognizes that its results
from operations may be negatively impacted by future increases in
interest rates and substantial additional borrowings to finance property
acquisitions.
Lease Renewals
While the Company has historically been successful in renewing and
reletting space, the Company is subject to the risk that certain leases
expiring in 1999 and beyond may not be renewed, or the terms of renewal
may be less favorable to the Company than current lease terms. The
Company expects to incur costs in making improvements or repairs to its
portfolio of properties required by new or renewing tenants and expects
to incur expenses associated with brokerage commissions payable in
connection with the reletting of space.
Inflation
Most of the leases require the tenants to pay their share of operating
expenses, including common area maintenance, real estate taxes and
insurance, thereby reducing the Company's exposure to increases in costs
and operating expenses resulting from inflation. Inflation, however,
could result in an increase in the Company's borrowing costs.
Government Regulations
The Company's properties are subject to various federal, state and local
regulatory requirements such as local building codes and other similar
regulations. The Company believes its properties are currently in
substantial compliance with all applicable regulatory requirements,
although expenditures at its properties may be required to comply with
changes in these laws. No material expenditures are contemplated at this
time in order to comply with any such laws or regulations.
Under various federal, state and local laws, ordinances and regulations,
an owner or operator of real estate is liable for the costs of removal
or remediation of certain hazardous or toxic substances released on,
above, under, or in such property. Such laws often impose such liability
without regard to whether the owner knew of, or was responsible for, the
presence of such hazardous or toxic substances. The costs of such
removal or remediation could be substantial.
Additionally, the presence of such substances or the failure to properly
remediate such substances may adversely affect the owner's ability to
borrow using such real estate as collateral.
The Company believes that it is in compliance in all material respects
with all federal, state and local laws regarding hazardous or toxic
substances, and the Company has not been notified by any governmental
authority of any non-compliance or other claim in connection with any of
its present or former properties. Accordingly, the Company does not
currently anticipate that compliance with federal, state and local
environmental protection regulations will have any material adverse
impact on the financial position, results of operations or liquidity of
the Company. There can be no assurance, however, that future discoveries
or events at the Company's properties, or changes to current
environmental regulations, will not result in such a material adverse
impact.
Financial Performance
Management considers Funds From Operations (FFO) to be one measure of the
performance of an equity REIT. FFO during the three and twelve months
ended December 31, 1998 amounted to $11,666,000 and $42,312,000,
respectively. During the same periods in 1997, FFO amounted to
$8,092,000 and $25,582,000, respectively. 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 the
National Association of Real Estate Investment Trusts as net income
(loss) (computed in accordance with generally accepted accounting
principles), excluding gains (losses) from debt restructurings, sales of
property and non-recurring items, plus depreciation and amortization, and
after adjustments for unconsolidated partnerships and joint ventures.
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 REITs may not be comparable to the
Company's calculation of Funds From Operations.
Three Months Ended Twelve Months Ended
December 31, December 31,
1998 1997 1998 1997
Funds From Operations
(in thousands):
Net Income $ 8,243 $ 6,995 $31,496 $31,291
Add Back:
Depreciation
and Amortization 2,958 1,814 10,265 5,716
Minority Interest 31 29 117 108
Non-recurring
Portfolio
Disposition Costs (1) 434 - 434 -
Less Gain on Sale - (746) - (11,533)
Funds From Operations $11,666 $ 8,092 $42,312 $25,582
(1) In the second quarter of 1998, the Company engaged Lehman Brothers,
Inc. as financial advisor to assist the Company in the exploration of
strategic alternatives, which included the potential sale of the
Company's operating portfolio. Due to changes in the real estate
market, the Company abandoned its plan to sell its operating portfolio
and expensed all related costs.
Year 2000 Compliance
In 1997 the Company purchased and put in place new information system
hardware and software to accommodate the rapid growth of its real estate
portfolio. The Company believes the new information system hardware and
software is Year 2000 compliant. In addition, the Company has evaluated
Year 2000 compliance risk relative to operations of its rental
properties, and retained the services of a team of consultants. Since
January 1998, these consultants have been conducting a survey of the
Company's outside relationships (e.g., tenants, vendors and creditors)
to assess their state of readiness in regards to Year 2000 compliance.
The survey indicates that a majority of these parties' information
systems are or will be Year 2000 compliant. In addition, the Company is
performing a detailed Information Technology review of its key outside
relationships. As of December 31, 1998, the Company has spent $10,000
on surveys and systems reviews and expects to spend approximately $20,000
in 1999. The Company is in the process of developing a contingency plan
in the event of non-compliance. The Company believes that Year 2000
compliance will not have a material impact on the Company's financial
statements.
ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to interest rate changes primarily as a result of
its line of credit and long-term debt used to maintain liquidity and fund
capital expenditures and expansion of the Company's real estate
investment portfolio and operations. The Company's interest rate risk
management objective is to limit the impact of interest rate changes on
earnings and cash flows and to lower its overall borrowing costs. To
achieve its objectives the Company balances its borrowings between fixed
and variable rate debt. The Company does not enter into derivative or
interest rate transactions for speculative purposes.
The Company's interest rate risk is monitored using a variety of
techniques. The table below presents the principal amounts, weighted
average interest rates, fair values and other terms required by year of
expected maturity to evaluate the expected cash flows and sensitivity to
interest rate changes (in thousands):
Fair
1999 2000 2001 2002 2003 Thereafter Total Value
Fixed rate debt $ 1,315 $ 1,415 $ 1,524 $ 24,103 $ 23,608 $ 26,354 $ 78,319 $ 79,504
Average interest rate 7.37% 7.38% 7.38% 7.49% 7.04% 7.49% 7.35% 7.00%
Variable rate LIBOR debt - - $147,443 - - - $ 147,443 $147,443
Average interest rate - - 6.48% - - - 6.48% 6.48%
Variable rate prime debt $ 1,797 - - - - - $ 1,797 $ 1,797
Average interest rate 8.00% - - - - - 8.00% 8.00%
As the table incorporates only those exposures that exist as of December
31, 1998, it does not consider those exposures or positions which could
arise after that date. Moreover, because firm commitments are not
presented in the table above, the information presented therein has
limited predictive value. As a result, the Company's ultimate realized
gain or loss with respect to interest rate fluctuations will depend on
the exposures that arise during the period, the Company's hedging
strategies at that time, and interest rates.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements and Schedule Covered by Independent
Auditors' Report
Independent Auditors' Report 53
Consolidated Balance Sheets as of December 31, 1998 and 1997 54
For the Years Ended December 31, 1998, 1997 and 1996:
- - Consolidated Statements of Income 55
- - Consolidated Statements of Stockholders' Equity 56
- - Consolidated Statements of Cash Flows 57
Notes to Consolidated Financial Statements 58
Financial Statement Schedule:
- - Schedule III - Real Estate and Accumulated Depreciation 71
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
The information required by Items 10 through 13 of Part III is
incorporated by reference from the Registrant's Proxy Statement which
will be mailed to stockholders in connection with the Registrant's annual
meeting of stockholders scheduled to be held on May 13, 1999.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K
A. 1. Financial Statements
Independent Auditors' Report.
The following consolidated financial statements of the
Company and its subsidiaries are included in Item 8 of this
report:
Consolidated Balance Sheets as of December 31, 1998 and 1997.
Consolidated Statements of Income for the years ended December
31, 1998, 1997 and 1996.
Consolidated Statements of Stockholders' Equity for the years
ended December 31, 1998, 1997 and 1996.
Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996.
Notes to Consolidated Financial Statements.
2. Financial Statement Schedules
Schedule III - Real Estate and Accumulated Depreciation
All other schedules have been omitted as they are not
applicable, or not required or because the information is
given in the Consolidated Financial Statements or related
Notes to Consolidated Financial Statements.
3. Exhibits
Exhibit No.List of Exhibits
3.1 Charter of the Company, as amended, is incorporated
herein by reference to Exhibit 4.1 to the Company's
Registration Statement on Form S-2, Registration No. 333-
921.
3.2 Amended and Restated Bylaws of the Company are
incorporated herein by reference to Exhibit 3.2 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1995.
10.1 The Company's Automatic Dividend Reinvestment and Share
Purchase Plan, as adopted by the Company, is incorporated
herein by reference to Exhibit 4.1 to Amendment No. 2 to
Registration Statement No. 2-94354 of ICM Property
Investors Incorporated.
10.4 Second Amended and Restated Credit Agreement dated as of
June 26, 1996, by and between the Company, as Borrower,
Bank of America National Trust and Savings Association
and the several financial institutions (the "Banks") is
incorporated herein by reference to Exhibit 10.4 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1997.
10.5 Sale and Option Agreement dated as of August 26, 1995, by
and between Kemper Investors Life Insurance Company, on
behalf of itself and Participants (as defined therein),
as Lender, the Company, as Purchaser, and Tustin
Properties, as Owner, for 3002 Dow Business Center is
incorporated herein by reference to Exhibit 10.19 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1995.
10.6 BPIA Agreement dated as of January 1, 1995, by and
between Westminster Holdings, Inc., a California
corporation and the Company is incorporated herein by
reference to Exhibit 10.14 to the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30,
1995.
10.7 Employment Agreement made as of February 17, 1993, by and
between ICM Property Investors Incorporated and Peter B.
Bedford is incorporated by reference to Exhibit 10.14 to
the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994, as amended by Form 10-K/A
filed on May 1, 1995, and Form 10-K/A-2 filed on August
8, 1995.
10.8 Amendment No. 1 to Employment Agreement dated as of
September 18, 1995, by and between Peter B. Bedford and
the Company is incorporated herein by reference to
Exhibit 10.10 to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1995.
10.12 Purchase and Sale Agreement dated as of October 19, 1995,
between Landsing Pacific Fund, Inc., a Maryland
corporation as Seller, and the Company, the Buyer, as
amended, is incorporated herein by reference to Exhibit
2.1 to the Company's Current Report on Form 8-K filed on
December 27, 1995.
10.13 Amended and Restated Promissory Note date May 24, 1996
executed by the Company and payable to the order of
Prudential Insurance Company of America is incorporated
herein by reference to Exhibit 10.13 to the Company's
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996.
10.14 Loan Agreement dated as of December 24, 1996 between
Bedford Property Investors, Inc. as Borrower and Union
Bank of California, N.A. as Lender is incorporated herein
by reference to Exhibit 10.14 to the Company's Form 10-K
for the year ended December 31, 1996.
10.15 Loan Agreement dated as of January 30, 1998 between
Bedford Property Investors, Inc. as Borrower and
Prudential Insurance Company of America as Lender is
incorporated herein by reference to Exhibit 10.15 to the
Company's Form 10-K for the year ended December 31, 1997.
10.16 The Company's Amended and Restated Employee Stock Plan is
incorporated herein by reference to Exhibit 10.16 to the
Company's Form 10-K for the year ended December 31, 1997.
10.17 Form of Employee Stock Plan Option Agreement between the
Company and the Named Executive Officers under the
Company's Amended and Restated Employee Stock Plan is
incorporated herein by reference to Exhibit 10.17 to the
Company's Form 10-K for the year ended December 31, 1997.
10.18 The Company's Amended and Restated 1992 Directors' Stock
Option Plan is incorporated herein by reference to
Exhibit 10.18 to the Company's Form 10-K for the year
ended December 31, 1997.
10.19 Form of Retention Agreement is incorporated herein by
reference to Exhibit 10.19 to the Company's Form 10-K for
the year ended December 31, 1997.
10.20 Employment Agreement made as of August 4, 1997, by and
between Bedford Property Investors Incorporated and Scott
R. Whitney is incorporated herein by reference to Exhibit
10.20 to the Company's Form 10-K for the year ended
December 31, 1997.
10.21 Employment Agreement made as of November 18, 1997, by and
between Bedford Property Investors Incorporated and
Dennis Klimmek is incorporated herein by reference to
Exhibit 10.21 to the Company's Form 10-K for the year
ended December 31, 1997.
10.22* Credit Agreement made as of February 26, 1999, by and
between Bedford Property Investors Incorporated and Bank
of America National Trust and Savings Association and the
several financial institutions (the "Banks") as may be
party thereto from time to time.
10.23* Revolving Note made as of March 5, 1999, by and between
Bedford Property Investors Incorporated and Bank of America
National Trust and Savings Association.
10.24* Revolving Note made as of March 5, 1999, by and between
Bedford Property Investors Incorporated and Union Bank
of California.
12* Ratio of Earnings to Fixed Charges.
21.1* Subsidiaries of the Company.
23.1* Consent of KPMG LLP, independent auditors.
27* Financial Data Schedules
* Filed herewith
B. Reports on Form 8-K
None
Independent Auditors' Report
To the Stockholders and the Board of Directors of
Bedford Property Investors, Inc.:
We have audited the consolidated financial statements of Bedford Property
Investors, Inc. and subsidiaries as listed in the accompanying index.
In connection with our audits of the consolidated financial statements,
we also have audited the financial statement schedule as listed in the
accompanying index. These consolidated financial statements and
financial statement schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedule based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Bedford Property Investors, Inc. and subsidiaries as of December 31, 1998
and 1997, and the results of their operations and their cash flows for
each of the years in the three-year period ended December 31, 1998, in
conformity with generally accepted accounting principles. Also in our
opinion, the related financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth
therein.
KPMG LLP
San Francisco, California
January 29, 1999
BEDFORD PROPERTY INVESTORS, INC.
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1998 AND 1997
(in thousands, except share and per share amounts)
1998 1997
Assets:
Real estate investments:
Industrial buildings $312,911 $237,184
Office buildings 258,479 170,948
Properties under development 24,686 18,227
Land held for development 3,905 5,712
599,981 432,071
Less accumulated depreciation 18,523 8,985
581,458 423,086
Cash 1,286 1,361
Other assets 15,580 9,456
$598,324 $433,903
Liabilities and Stockholders' Equity:
Bank loan payable $147,443 $ 8,216
Mortgage loans payable 80,116 60,323
Accounts payable and accrued expenses 7,574 6,026
Dividends and distributions payable 8,191 6,804
Other liabilities 6,042 4,611
Total liabilities 249,366 85,980
Minority interest in consolidated partnership 1,369 1,497
Stockholders' equity:
Common stock, par value $0.02 per share;
authorized 50,000,000 shares;
issued and outstanding 22,666,856
shares in 1998 and 22,583,867 shares in 1997 453 452
Additional paid-in capital 407,760 408,209
Accumulated dividends in
excess of net income (60,624) (62,235)
Total stockholders' equity 347,589 346,426
$598,324 $433,903
See accompanying notes to consolidated financial statements.
BEDFORD PROPERTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 and 1996
(in thousands, except share and per share amounts)
1998 1997 1996
Property operations:
Rental income $73,451 $46,377 $27,541
Rental expenses:
Operating expenses 11,026 6,852 5,352
Real estate taxes 6,220 3,977 2,595
Depreciation and amortization 10,265 5,716 3,030
Income from property operations 45,940 29,832 16,564
General and administrative expenses (3,386) (2,337) (1,752)
Interest income 223 289 150
Interest expense (11,164) (7,918) (4,347)
Income before gain on sales of real
estate investments and
minority interest 31,613 19,866 10,615
Gain on sales of real
estate investments - 11,533 406
Minority interest (117) (108) -
Net income $31,496 $31,291 $11,021
Net income applicable to common
stockholders $31,496 $27,791 $ 6,516
Earnings per share - basic $ 1.39 $ 2.21 $ 1.21
Weighted average number of
shares - basic 22,634,656 12,566,065 5,405,727
Earnings per share - assuming dilution $ 1.38 $ 1.94 $ 1.14
Weighted average number of shares -
assuming dilution 22,929,807 16,166,454 9,702,552
See accompanying notes to consolidated financial statements.
BEDFORD PROPERTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(in thousands, except share and per share amounts)
Accumulated Total
Additional dividends stock-
Common paid-in in excess of holders'
stock capital net income equity
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
Issuance of common stock 1 1,366 - 1,367
Repurchase and retirement of
common stock - (1,815) - (1,815)
Net income - - 31,496 31,496
Dividends to common stockholders - - (29,885) (29,885)
($1.32 per share)
Balance, December 31, 1998 $ 453 $407,760 $(60,624) $347,589
See accompanying notes to consolidated financial statements.
BEDFORD PROPERTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(in thousands)
1998 1997 1996
Operating Activities:
Net income $ 31,496 $ 31,291 $ 11,021
Adjustments to reconcile net income to net cash provided
by operating activities:
Minority interest 117 108 -
Depreciation and amortization 11,508 6,697 3,757
Gain on sale of real estate investments - (11,533) (406)
Increase in other assets (7,259) (4,655) (2,118)
Increase in accounts payable and accrued expenses 1,656 1,282 763
Increase in other liabilities 1,431 1,851 1,361
Net cash provided by operating activities 38,949 25,041 14,378
Investing Activities:
Investments in real estate (168,018) (212,267) (104,483)
Proceeds from sales of real estate investments - 31,909 7,519
Net cash used by investing activities (168,018) (180,358) (96,964)
Financing Activities:
Proceeds from bank loan payable 158,097 167,559 101,189
Repayment of bank loan payable (19,889) (206,804) (99,048)
Proceeds from mortgage loans payable 21,084 - 49,384
Repayment of mortgage loans payable (1,107) (441) -
Issuance of common stock 1,367 210,953 40,476
Redemption of partnership units (128) (257) -
Payment of dividends and distributions (28,615) (15,660) (9,114)
Repurchase and retirement of common stock (1,815) - -
Net cash provided by financing activities 128,994 155,350 82,887
Net increase (decrease) in cash (75) 33 301
Cash at beginning of year 1,361 1,328 1,027
Cash at end of year $ 1,286 $ 1,361 $ 1,328
Supplemental disclosure of cash flow information
a) Non-cash investing and financing activities:
Debt incurred with real estate acquired $ - $ 8,914 $ 2,283
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 $ 9,329 $ 7,291 $ 3,380
c) Conversion of Preferred Stock (see footnote 9) $ - $ 50,000 $ -
See accompanying notes to consolidated financial statements.
BEDFORD PROPERTY INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Organization and Summary of Significant Accounting Policies and
Practices
The Company
Bedford Property Investors, Inc. (the Company) is a Maryland real estate
investment trust with investments primarily in industrial and suburban
office properties concentrated in the Western United States. The
Company's Common Stock trades under the symbol "BED" on both the New York
Stock Exchange and Pacific Exchange.
Principles of Consolidation
The consolidated financial statements include the accounts of the
Company, its wholly-owned subsidiaries and Bedford Realty Partners, L.P.
All significant inter-entity balances have been eliminated in
consolidation.
Use of Estimates
The preparation of these financial statements in conformity with
generally accepted accounting principles requires management of the
Company to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of financial statements, and the reported
amounts of revenues and expenses during the reporting periods. Actual
results could differ from those estimates.
Federal Income Taxes
The Company has elected to be taxed as a real estate investment trust
under Sections 856 to 860 of the Internal Revenue Code of 1986, as
amended ("the Code"). A real estate investment trust is generally not
subject to Federal income tax on that portion of its real estate
investment trust taxable income ("Taxable Income") which is distributed
to its stockholders, provided that at least 95% of Taxable Income is
distributed and other requirements are met. The Company believes it is
in compliance with the Code.
Taxable income differs from net income for financial reporting purposes
primarily because of the different methods of accounting for
depreciation. As of December 31, 1998, for Federal income tax purposes,
the Company had an ordinary loss carry forward of approximately $32
million. As the Company does not expect to incur income tax liabilities,
the asset value of these losses has been effectively fully reserved. For
Federal income tax purposes, dividend distributions made for 1998 were
classified 96% as ordinary income and 4% as return of capital; dividend
distributions made for 1997 were classified 88% as ordinary income and
12% as capital gain; all dividend distributions made for 1996 were
classified as ordinary income.
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 are considered as held for sale are carried at the
lower of the carrying amount or fair value less costs to sell and such
properties are no longer depreciated.
Income Recognition
Rental income from operating leases is recognized in income on a
straight-line basis over the period of the related lease agreement.
Aggregate rental income exceeded contractual rentals by $2,252,000,
$1,644,000 and $573,000 for 1998, 1997 and 1996, respectively.
Per Share Data
Per share data are based on the weighted average number of common shares
outstanding during the year. Stock options issued under the Company's
stock option plans are included in the calculation of diluted per share
data if, upon exercise, they would have a dilutive effect. The diluted
earnings per share calculation also 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.
Recent Accounting Pronouncements
In June 1998, the FASB issued Financial Accounting Standard No. 133,
Accounting for Derivatives Instruments and Hedging Activities. FAS 133
is effective for all fiscal quarters of all fiscal years beginning after
June 15, 1999. Management believes that the adoption of this statement
will not have a material impact on the Company's financial statements.
Note 2 - Real Estate Investments
The following table sets forth the Company's real estate investments as
of December 31, 1998 (in thousands):
Less
Accumulated
Land Building Depreciation Total
INDUSTRIAL PROPERTIES
Northern California $ 49,052 $113,640 $ 6,084 $156,608
Southern California 15,327 35,581 2,326 48,582
Greater Kansas City Area 3,917 16,538 1,232 19,223
Colorado 1,911 3,283 250 4,944
Greater Portland Area 2,652 8,540 783 10,409
Arizona 13,275 35,156 1,295 47,136
Texas 2,981 11,058 146 13,893
Total Industrial Properties 89,115 223,796 12,116 300,795
SUBURBAN OFFICE PROPERTIES
Northern California 6,023 17,667 644 23,046
Southern California 7,312 18,115 803 24,624
Greater Kansas City Area 3,330 5,451 329 8,452
Colorado 5,560 45,260 755 50,065
Salt Lake City 359 6,572 976 5,955
Arizona 9,149 17,244 556 25,837
Greater Seattle Area 15,116 78,831 1,687 92,260
Texas 2,766 7,089 248 9,607
Nevada 2,102 10,533 409 12,226
Total Suburban Office Properties 51,717 206,762 6,407 252,072
PROPERTIES UNDER DEVELOPMENT
Northern California - 990 - 990
Greater Seattle Area - 8,110 - 8,110
Arizona - 13,500 - 13,500
Colorado 2,086 - - 2,086
Total Properties Under Development 2,086 22,600 - 24,686
LAND HELD FOR DEVELOPMENT
Northern California 2,654 - - 2,654
Southern California 1,063 - - 1,063
Texas 188 - - 188
Total Land Held for Development 3,905 - - 3,905
Total $146,823 $453,158 $ 18,523 $581,458
The Company internally manages all but 8 of its properties from its
regional offices in Lafayette, CA; Tustin, CA; Phoenix, AZ; Lenexa, KS;
Denver, CO; and Seattle, WA. For the 8 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.
In December 1998, an industrial property located in Northern California
was identified for sale. Proceeds from the sale will be reinvested in
further property acquisitions.
During 1998 and 1997, the Company capitalized interest costs relating to
properties under development totaling $2,177,000 and $627,000,
respectively.
The Company has remaining construction commitments of $12.5 million at
December 31, 1998 relating to five of its properties under development.
Note 3 - Consolidated Partnership
In December 1996, the Company formed Bedford Realty Partners, L.P. (the
"Operating Partnership"), with the Company as the sole general partner,
for the purpose of acquiring real estate. In exchange for contributing
a property into the Operating Partnership, the owners of the property
receive limited partnership units ("OP Units"). A limited partner can
seek redemption of the OP Units at any time. The Company, at its option,
may redeem the OP Units by either (i) issuing common stock at the rate
of one share of common stock for each OP Unit, or (ii) paying cash to a
limited partner based on the average trading price of its common stock.
Each OP Unit is allocated partnership income and cash flow at a rate
equal to the dividend being paid by the Company on a share of common
stock. Additional partnership income and cash flow is allocated 99% to
the Company and 1% to the limited partners.
This acquisition strategy is referred to as a "Down REIT" transaction;
as long as certain tax attributes are maintained, the income tax
consequences to a limited partner are generally deferred until such time
as the limited partner redeems their OP Units.
On December 17, 1996, the Company acquired a $3.6 million industrial
property located in Modesto, California utilizing the Operating
Partnership. The sellers of the property received 108,495 OP Units. A
director of the Company was a 9% owner of the property, but did not
participate in the approval of the acquisition. As of December 31, 1998
the Company has redeemed 21,607 OP units for cash.
Note 4 - Leases
Minimum future lease payments to be received as of December 31, 1998 are
as follows (in thousands):
1999 $ 72,490
2000 64,478
2001 56,010
2002 44,663
2003 36,291
Thereafter 74,023
$347,955
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 of the
aggregate purchase price of the property for acquisitions and
dispositions plus 5% of development project costs, or (ii) an amount
equal to (a) the aggregate amount of approved expenses funded by BAI
through the time of such acquisition, disposition or development minus
(b) the aggregate amount of fees previously paid to BAI pursuant to such
arrangement. In no event will the aggregate amount of fees paid to BAI
exceed the aggregate amount of costs funded by BAI. The agreement with
BAI has a term of one year and is renewable at the option of the Company
for additional one-year terms. The current agreement will expire on
January 1, 2000.
For 1998, 1997 and 1996, the Company paid BAI $2,272,000, $3,156,000, and
$1,808,000, respectively, for acquisition and financing activities
performed pursuant to the foregoing arrangements. The Company believes
that since the fees charged under the foregoing arrangements (i) have
been and continue to be comparable to those charged by other sponsors of
real estate investment entities or other third party service providers
and (ii) have been and continue to be charged only for services on
acquired properties or completed financings, such fees are properly
includable in direct acquisition costs and capitalized as part of the
asset or financing activities.
Note 6 - Stock Option Plans
Initially 900,000 shares of the Company's Common Stock were reserved for
issuance under the Employee Stock Option Plan (the "Employee Plan"). In
May 1998, the shareholders approved an additional 2,100,000 shares. The
Employee Plan expires in 2003. The Employee Plan provides for
non-qualified stock options and incentive stock options.
The Employee Plan is administered by the Compensation Committee of the
Board of Directors, which determines the terms of options granted,
including the exercise price, the number of shares subject to the option,
and the exercisability of the options. Options granted to employees are
exercisable upon vesting, and typically vest over a four-year period.
The Employee Plan requires that the exercise price of incentive stock
options be at least equal to the fair market value of such shares on the
date of grant and that the exercise price of non-qualified stock options
be equal to at least 85% of the fair market value of such shares on the
date of the grant. The maximum term of options granted is ten years.
Initially 250,000 shares of the Company's Common Stock were reserved for
issuance under the Directors' Stock Option Plan (the "Directors' Plan").
In May 1996 and 1997, the shareholders approved an additional 250,000
shares and 500,000 shares, respectively. The Directors' Plan expires in
2002. The Directors' Plan provides for the grant of non-qualified stock
options to directors of the Company. The Directors' Plan contains an
automatic grant feature whereby a director receives a one-time "initial
option" to purchase 25,000 shares upon a director's appointment to the
Board of Directors and thereafter receives automatic annual grants of
options to purchase 10,000 shares upon re-election to the Board of
Directors. Options granted are generally exercisable six months from the
date of grant.
The Directors' Plan requires that the exercise price of options be equal
to the fair market value of the underlying shares on the date of grant.
The maximum term of options granted is ten years.
In September 1995, the Company established a Management Stock Acquisition
program. Under the program, options exercised by key members of
management shortly after the grant date may be exercised either in cash
or with a note payable to the Company. Such note bears interest at 7.5%
or the Applicable Federal Rate as defined by the Internal Revenue
Service, whichever is higher. The note is due in five years or within
ninety days from termination of employment, with interest payable
quarterly. During 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 was
$1,021,000 and $1,466,000 at December 31, 1998 and 1997, respectively,
and is included in the accompanying consolidated balance sheet as a
reduction of additional paid-in capital.
In addition, the Company may grant restricted stock to key employees.
These shares generally vest over five years and are subject to forfeiture
under certain conditions. As of December 31, 1998, the Company has
granted 105,200 shares.
The Company applies APB Opinion No. 25 and related interpretations in
accounting for its plans. Accordingly, compensation costs have not been
recognized for either the Employee or the Directors' Plan. Had
compensation costs for the plans been determined consistent with FASB
Statement No. 123, the Company's net income and earnings per share would
have been reduced to the pro forma amounts indicated below:
1998 1997 1996
Net income:
As reported $31,496,000 $31,291,000 $11,021,000
Pro forma 31,158,000 31,045,000 10,831,000
Earnings per share - basic:
As reported $ 1.39 $ 2.21 $ 1.21
Pro forma 1.38 2.19 1.17
Earnings per share -
assuming dilution:
As reported $ 1.38 $ 1.94 $ 1.14
Pro forma 1.36 1.92 1.12
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 1998, 1997 and 1996, respectively:
dividend yield of 7.3%, 5.8% and 6.9%; expected volatility of 17.0%,
16.8%, and 18.1%; risk-free interest rates of 4.6%, 5.7% and 6.3%. The
expected life for the director's options is five years for each period.
The expected life for the employee's options is ten years for 1998, and
five years each for 1997 and 1996.
A summary of the status of the Company's plans as of December 31, 1998,
1997 and 1996 and changes during the years ended on those dates is
presented below:
1998 1997 1996
Weighted Avg. Weighted Avg. Weighted Avg.
Shares Exercise Price Shares Exercise Price Shares Exercise Price
Employee Plan
Outstanding at beginning
of year 713,750 $16.52 242,250 $12.94 93,750 $12.78
Granted 619,000 19.67 483,000 18.25 267,000 13.00
Exercised (29,625) 13.03 (7,125) 13.37 (106,000) 12.96
Forfeited (185,875) 18.05 (4,375) 14.99 (12,500) 12.92
Outstanding at end of year 1,117,250 $18.10 713,750 $16.52 242,250 $12.94
Options exercisable 239,250 118,750 45,063
Weighted average fair value
of options granted during
the year $ 1.12 $ 1.94 $ 1.37
Directors' Plan
Outstanding at beginning
of year 365,000 $11.65 295,000 $ 9.94 250,000 $ 8.28
Granted 70,000 19.56 70,000 18.82 70,000 14.22
Exercised (125,000) 5.81 - - (25,000) 5.33
Outstanding at end of year 310,000 $15.79 365,000 $11.65 295,000 $ 9.94
Options exercisable 310,000 365,000 295,000
Weighted average fair value
of options granted during
the year $ 1.32 $ 1.59 $ 1.06
The following table summarizes information about stock options
outstanding on December 31, 1998:
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 4.4 $ 8.50 2,750 $ 8.50
13.75 to 14.00 48,000 1.4 13.95 48,000 13.95
11.50 31,625 6.7 11.50 23,625 11.50
13.00 100,750 7.3 13.00 53,750 13.00
17.63 to 20.75 405,125 8.3 18.31 111,125 18.31
16.28 to 19.56 529,000 9.3 19.67 - -
$ 8.50 to 20.75 1,117,250 8.3 $18.10 239,250 $15.45
Directors' Plan
$ 12.97 25,000 0.8 12.97 25,000 12.97
11.82 to 11.85 75,000 2.2 11.84 75,000 11.84
14.22 70,000 7.8 14.22 70,000 14.22
18.82 70,000 8.8 18.82 70,000 18.82
19.56 70,000 9.8 19.56 70,000 19.56
$11.82 to 19.56 310,000 6.6 $15.79 310,000 $15.79
Note 7 - Bank Loan Payable
In June 1998, the Company amended and restated its secured revolving
credit facility with Bank of America. Under this facility, which matures
June 15, 2001, the Company can borrow up to $175 million on a secured
basis. The facility contains an unsecured sub-line of $50 million.
Secured loans bear interest at a floating rate equal to either the
lender's published "reference rate" or LIBOR plus a margin ranging from
1.10% to 1.35%. The interest rate of the unsecured loans is either the
lender's published "reference rate" or LIBOR plus a margin of 1.50%. The
credit facility contains various restrictive covenants including, among
other things, a covenant limiting quarterly dividends to 95% of average
Funds From Operations. As of December 31, 1998, the Company was in
compliance with the covenants and requirements of its revolving credit
facility which had an outstanding balance of $147,443,000. The credit
facility is secured by mortgages on 47 properties (which properties
collectively accounted for approximately 52% of the Company's Annualized
Base Rent and approximately 43% of the Company's total assets as of
December 31, 1998), together with the rental proceeds from such
properties. During the first quarter of 1999, the Company entered into
discussions with Bank of America regarding a bridge facility of $28
million. This facility would consist of secured loans, bear the same
interest rates as the secured loans under the $175 million facility and
have a six-month term with the option to extend for another six months.
The daily weighted average amount owed to the bank was $94,338,000 and
$45,642,000 in 1998 and 1997, respectively. The weighted average
interest rates in these periods were 6.81% and 7.42%, respectively. The
effective interest rate at December 31, 1998 was 6.48%.
Note 8 - Mortgage Loans Payable
Mortgage loans payable at December 31, 1998 consist of the following (in
thousands):
Floating rate note due December 15, 1999,
current rate of 8.00% $ 1,797
7.5% note due January 1, 2002 24,297
7.02% note due March 15, 2003 24,717
8.9% note due July 31, 2006 8,674
6.91% note due July 31, 2006 20,631
$80,116
The mortgage loans are collaterized by 21 properties (which Properties
collectively accounted for approximately 27% of the Company's Annualized
Base Rent and approximately 21% of the Company's total assets as of
December 31, 1998).
The following table presents scheduled principal payments on mortgage
loans as of December 31, 1998 (in thousands):
1999 $ 3,112
2000 1,415
2001 1,524
2002 24,103
2003 23,608
Thereafter 26,354
$80,116
Note 9 - Redeemable Preferred Stock
On September 18, 1995, the Company issued and sold 8,333,334 shares of
Series A Convertible Preferred Stock (the "Convertible Preferred Stock")
for $6.00 per share. Holders of the Convertible Preferred Stock were
entitled to cumulative quarterly dividends in cash in an amount equal to
the greater of (i) $0.135 per share or (ii) the dividends payable on the
Common Stock into which the Convertible Preferred Stock is convertible
plus, in both cases, the accumulated but unpaid dividends on the
Convertible Preferred Stock. Dividends may be declared and paid on
shares of Common Stock only if full cumulative dividends have been paid
or authorized and set apart on all shares of Convertible Preferred Stock.
On October 14, 1997, the 8,333,334 shares of the Series A Convertible
Preferred Stock were converted to 4,166,667 shares of common stock.
Note 10 - Sales of Common Stock
The Company completed the sale of 4,600,000 shares of common stock at $17
3/8 per share in February 1997 and 7,245,000 shares of common stock at
$19 5/8 per share in November 1997. Net cash proceeds from these
offerings were used to pay off the outstanding borrowings under the
Company's credit facility.
Note 11 - Comprehensive Income
There are no adjustments necessary to net income as presented in the
accompanying consolidated statements of income to derive comprehensive
income in accordance with FASB Statement No. 130, Reporting Comprehensive
Income.
Note 12 - Segment Disclosure
The Company has six reportable segments organized by the region in which
they operate: Northern California (Northern California, Utah and Nevada),
Southwest (Arizona and greater Austin, Texas area), Southern California,
Northwest (greater Portland, Oregon and greater Seattle, Washington
areas), Colorado and Midwest (greater Kansas City, Kansas/Missouri and
greater Dallas, Texas areas).
The accounting policies of the segments are the same as those described
in the summary of significant accounting policies. The Company evaluates
performance based upon income from real estate from the combined
properties in each segment.
1998 (in thousands)
Northern Southern Corporate
California Southwest California Northwest Colorado Midwest & Other Consolidated
Rental income $ 30,759 $ 11,900 $ 10,274 $ 9,281 $ 6,317 $ 4,943 $ (23) $ 73,451
Operating expenses and
real estate taxes 6,954 3,200 2,142 1,345 1,935 1,326 344 17,246
Depreciation and
amortization 3,939 1,629 1,495 1,586 837 779 - 10,265
Income from property
operations $ 19,866 $ 7,071 $ 6,637 $ 6,350 $ 3,545 $ 2,838 $ (367) $ 45,940
Percent of income from
property operations 43% 15% 15% 14% 8% 6% (1)% 100%
Interest income(1) 15 - - 16 - - 192 223
Interest expense - - - - - - (11,164) (11,164)
General and administrative
expenses - - - - - - (3,386) (3,386)
Minority interest - - - - - - (117) (117)
Net Income $ 19,881 $ 7,071 $ 6,637 $ 6,366 $ 3,545 $ 2,838 $ (14,842) $ 31,496
Real estate investments $209,589 $109,432 $ 77,398 $113,250 $58,101 $32,211 $ - $599,981
Additions to real
estate investments $ 24,182 $ 41,420 $ 6,349 $ 56,852 $36,179 $ 2,928 $ - $167,910
Total Assets $210,867 $103,637 $ 81,708 $109,471 $57,068 $30,602 $ 4,971 $598,324
(1) The interest income in the Northern California and Northwest
segments represents interest earned from tenant notes receivable.
1997 (in thousands)
Northern Southern Corporate
California Southwest California Northwest Colorado Midwest & Other Consolidated
Rental income $ 20,614 $ 5,367 $ 8,637 $ 4,112 $ 1,410 $ 3,129 $ 3,108 $ 46,377
Operating expenses and
real estate taxes 4,551 1,336 1,859 415 310 970 1,388 10,829
Depreciation and
amortization 2,799 603 1,105 698 140 371 - 5,716
Income from property
operations $ 13,264 $ 3,428 $ 5,673 $ 2,999 $ 960 $ 1,788 $ 1,720 $ 29,832
Percent of income from
property operations 44% 12% 19% 10% 3% 6% 6% 100%
Interest income(1) 9 - - 2 - - 278 289
Interest expense - - - - - - (7,918) (7,918)
General and administrative
expenses - - - - - - (2,337) (2,337)
Gain on sale of real estate
investments - - - - - - 11,533 11,533
Minority interest - - - - - - (108) (108)
Net Income $ 13,273 $ 3,428 $ 5,673 $ 3,001 $ 960 $ 1,788 $ 3,168 $ 31,291
Real estate investments $185,407 $ 68,012 $ 71,049 $ 56,398 $ 21,922 $29,283 $ - $432,071
Additions to real
estate investments $ 82,792 $ 58,764 $ 6,559 $ 33,233 $ 10,589 $10,720 $ - $202,657
Total Assets $183,714 $ 65,925 $ 73,491 $ 57,005 $ 22,090 $26,952 $ 4,726 $433,903
(1) The interest income in the Northern California and Northwest
segments represents interest earned from tenant notes receivable.
Note 13 - Fair Value of Financial Instruments
The carrying value of trade accounts payable and receivable
approximate fair value due to the short-term maturity of these
instruments. Management has determined that the carrying amount of
debt approximates market value.
Note 14 - Earnings per Share
Following is a reconciliation of earnings per share:
Year Ended December 31,
1998 1997 1996
Basic:
Net income $ 31,496 $ 31,291 $ 11,021
Less:Dividends on the Series A Convertible
Preferred Stock - (3,500) (4,500)
Distributions to Operating
Partnership Unit Holders - - (5)
Net income applicable to common stockholders 31,496 27,791 6,516
Weighted average number of shares 22,634,656 12,566,065 5,405,727
Earnings per share - basic $ 1.39 $ 2.21 $ 1.21
Diluted:
Net income (from above) $ 31,496 $ 31,291 $ 11,021
Add: Minority interest 117 108 -
Net income - assuming dilution 31,613 31,399 11,021
Weighted average number of shares (from above) 22,634,656 12,566,065 5,405,727
Weighted average shares issuable upon
conversion of the Series A Convertible
Preferred Stock - 3,264,840 4,166,667
Weighted average shares of dilutive stock
options using average period stock price
under the treasury stock method 205,522 237,185 125,711
Weighted average shares issuable upon the
conversion of operating partnership units 89,629 98,364 4,447
Weighted average number of shares -
assuming dilution 22,929,807 16,166,454 9,702,552
Earnings per share - assuming dilution $ 1.38 $ 1.94 $ 1.14
Note 15 - Quarterly Financial Data-Unaudited
The following is a summary of quarterly results of operations for 1998
and 1997 (in thousands of dollars, except per share data):
1998 Quarters Ended 3/31 6/30 9/30 12/31
Rental income $15,361 $17,118 $20,156 $20,816
Income from property operations 9,880 10,939 12,191 12,930
Income before gain on sales of real estate
investments and minority interest 7,486 7,896 7,957 8,274
Net income $ 7,457 $ 7,868 $ 7,928 $ 8,243
Earnings per share- basic $ 0.33 $ 0.35 $ 0.35 $ 0.36
Earnings per share -
assuming dilution $ 0.33 $ 0.34 $ 0.35 $ 0.36
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
stockholders(1) $ 2,530 $ 3,735 $14,531 $ 6,995
Earnings per share - basic $ 0.28 $ 0.34 $ 1.30 $ 0.37
Earnings per share -
assuming dilution $ 0.27 $ 0.31 $ 1.01 $ 0.35
(1) Reflects 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.
BEDFORD PROPERTY INVESTORS, INC.
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1998
(in thousands of dollars)
Initial Cost Accum- Deprec-
Cost to Company Capitalized Gross Amount ulated Date Date iable
Buildings & Subsequent to Carried at Close of Period Deprec- Con- Ac- Life
Description Land Improvement Acquisition Land Building Total iation structed quired (Years)
INDUSTRIAL PROPERTIES:
Northern California
Building #3 at Contra Costa
Diablo Industrial Park,
Concord $ 495 $ 1,159 $ 89 $ 495 $ 1,248 $ 1,743 $ 276 1983 12/90 45
Building #8 at Contra Costa
Diablo Industrial Park,
Concord 877 1,548 142 877 1,690 2,567 363 1981 12/90 45
Building #18 at Mason Industrial
Park, Concord 610 1,265 138 610 1,403 2,013 272 1984 12/90 45
Milpitas Town Center, Milpitas 1,400 4,421 86 1,400 4,507 5,907 440 1983 8/94 45
598 Gibraltar Drive, Milpitas 535 2,522 - 535 2,522 3,057 233 1996 5/96 45
350 E. Plumeria Drive, San Jose 3,621 4,704 202 3,683 4,844 8,527 346 1983 9/95 45
Auburn Court, Fremont 1,391 2,473 268 1,415 2,717 4,132 183 1983 12/95 45
47650 Westinghouse Drive,
Fremont 267 893 59 271 948 1,219 63 1982 12/95 45
417 Eccles, South San Francisco 649 510 41 661 539 1,200 36 1964 12/95 45
410 Allerton, South
San Francisco 1,333 889 40 1,356 906 2,262 61 1970 12/95 45
400 Grandview, South
San Francisco 3,246 3,517 253 3,300 3,716 7,016 260 1976 12/95 45
342 Allerton, South
San Francisco 2,516 1,542 329 2,558 1,829 4,387 125 1969 12/95 45
301 East Grand, South
San Francisco 2,036 959 160 2,070 1,085 3,155 89 1974 12/95 45
Fourier Avenue, Fremont 2,120 7,018 - 2,120 7,018 9,138 403 1982 5/96 45
Lundy Avenue, San Jose 2,055 2,184 192 2,055 2,376 4,431 131 1982 7/96 45
115 Mason Circle, Concord 697 854 40 697 894 1,591 50 1971 9/96 45
47600 Westinghouse Drive,
Fremont 356 1,067 43 356 1,110 1,466 57 1982 9/96 45
860-870 Napa Valley Corporate
Way, Napa 933 3,515 312 933 3,827 4,760 222 1984 9/96 45
47633 Westinghouse Drive,
Fremont 1,051 3,239 251 1,051 3,490 4,541 168 1983 10/96 45
47513 Westinghouse Drive,
Fremont 1,624 - 3,596 1,624 3,596 5,220 143 N/A 10/96 45
Bordeaux Centre, Napa 1,151 - 6,091 1,151 6,091 7,242 193 N/A 12/96 45
O'Toole Business Center,
San Jose 3,934 5,748 394 3,934 6,142 10,076 280 1984 12/96 45
Doherty Avenue, Modesto 464 3,178 266 470 3,438 3,908 150 1963-71 12/96 45
6500 Kaiser Drive, Fremont 1,556 6,411 29 1,556 6,440 7,996 286 1990 1/97 45
Bedford Fremont Business
Center, Fremont 3,598 9,004 102 3,598 9,106 12,704 400 1990 3/97 45
Spinnaker Court, Fremont 2,548 5,989 35 2,548 6,024 8,572 223 1986 5/97 45
2277 Pine View Way, Petaluma 1,861 7,074 3 1,862 7,076 8,938 249 1989 6/97 45
Mondavi Building, Napa 1,315 5,214 - 1,315 5,214 6,529 145 1985 9/97 45
Building #2 at Monterey
Commerce Center, Monterey 611 1,833 1 611 1,834 2,445 44 1990 12/97 45
Building #3 at Monterey
Commerce Center, Monterey 604 1,812 (14) 604 1,798 2,402 44 1990 12/97 45
Parkpoint Business Center,
Santa Rosa 1,975 4,474 448 1,976 4,921 6,897 89 1981 2/98 45
2180 S. McDowell, Petaluma 773 3,006 1 774 3,006 3,780 33 1990 7/98 45
2190 S. McDowell, Petaluma 587 2,283 1 588 2,283 2,871 25 1996 7/98 45
Southern California
Dupont Industrial Center,
Ontario 3,588 6,162 239 3,588 6,401 9,989 770 1989 5/94 45
3002 Dow Business Center,
Tustin 4,209 7,291 978 4,305 8,173 12,478 750 1987-89 12/95 45
Building #1 at Carroll Tech
Center, San Diego 511 1,372 157 511 1,529 2,040 70 1984 10/96 45
Building #1 at Oak Ridge
Business Center, Vista 646 2,135 64 646 2,199 2,845 104 1990 10/96 45
Building #2 at Oak Ridge
Business Center, Vista 566 1,832 - 566 1,832 2,398 88 1990 10/96 45
Signal Systems Building,
San Diego 2,228 7,264 - 2,228 7,264 9,492 323 1990 12/96 45
Building #2 at Carroll Tech
Center, San Diego 1,022 2,129 - 1,022 2,129 3,151 106 1984 10/96 45
2230 Oak Ridge Way, Vista 684 2,191 - 684 2,191 2,875 64 1997 10/97 45
5502 Oberlin Drive, San Diego 911 1,274 3 912 1,276 2,188 21 1982 3/98 45
6960 Flanders Drive, San Diego 864 2,591 (3) 864 2,588 3,452 29 1989 6/98 45
Greater Kansas City Area
Ninety-Ninth Street #3, Lenexa 360 2,167 179 360 2,346 2,706 436 1990 12/90 45
Lackman Business Center, Lenexa 619 1,631 240 628 1,862 2,490 181 1985 9/95 45
Ninety-Ninth Street #1, Lenexa 404 1,547 40 408 1,583 1,991 117 1988 9/95 45
Ninety-Ninth Street #2, Lenexa 180 555 13 183 565 748 41 1988 9/95 45
Ninety-Ninth Street #4, Lenexa 519 - 3,086 519 3,086 3,605 195 N/A 6/96 45
Panorama Business Center,
Kansas City 675 3,098 276 675 3,374 4,049 180 1984 12/96 45
17725 W. 85th Street, Lenexa 1,144 3,722 - 1,144 3,722 4,866 83 1972 12/97 45
Colorado
Bryant Street Quad, Denver 1,394 2,181 139 1,416 2,298 3,714 174 1971-73 12/95 45
Bryant Street Annex, Denver 487 866 127 495 985 1,480 75 1968 12/95 45
Greater Portland Area, Oregon
Twin Oaks Technology Center,
Beaverton 1,444 4,836 514 1,469 5,325 6,794 513 1984 12/95 45
Twin Oaks Business Center,
Beaverton 1,163 2,847 388 1,183 3,215 4,398 270 1984 12/95 45
Arizona
Westech Business Center,
Phoenix 3,531 4,422 366 3,531 4,788 8,319 360 1985 4/96 45
Westech II, Phoenix 1,033 - 3,890 1,033 3,890 4,923 294 N/A 7/96 45
2601 W. Broadway, Tempe 1,127 2,348 91 1,127 2,439 3,566 76 1977 7/97 45
Building #2 at Phoenix Airport
Center, Phoenix 723 3,278 - 723 3,278 4,001 103 1990 7/97 45
Building #3 at Phoenix Airport
Center, Phoenix 682 3,163 - 682 3,163 3,845 100 1990 7/97 45
Building #4 at Phoenix Airport
Center, Phoenix 517 1,732 - 517 1,732 2,249 55 1990 7/97 45
Building #5 at Phoenix Airport
Center, Phoenix 1,507 3,860 3 1,507 3,863 5,370 122 1990 7/97 45
Butterfield Business Center,
Tucson 909 4,230 54 910 4,283 5,193 111 1986 11/97 45
Cimarron Business Park,
Scottsdale 1,776 4,471 75 1,778 4,544 6,322 75 1979-85 3/98 45
Expressway Corporate Center 1,467 3,175 1 1,468 3,175 4,643 - N/A 11/98 45
Texas
Ferrell Drive, Dallas 1,105 1,639 43 1,106 1,681 2,787 38 1984 12/97 45
Austin Braker 2, Austin 413 1,864 (32) 414 1,831 2,245 21 1982 6/98 45
Austin Rutland 10, Austin 389 2,854 12 390 2,865 3,255 33 1979 6/98 45
Austin Southpark A, B and C 1,070 4,647 36 1,072 4,681 5,753 55 1981 6/98 45
SUBURBAN OFFICE PROPERTIES:
Northern California
Village Green, Lafayette 547 1,245 530 743 1,579 2,322 188 1983 7/94 45
100 View Street, Mountain View 1,020 3,144 281 1,020 3,425 4,445 203 1985 5/96 45
Canyon Park, San Ramon 1,933 3,098 512 1,933 3,610 5,543 80 1971-72 12/97 45
Building #1 at Monterey Commerce
Center, Monterey 616 5,302 (10) 616 5,292 5,908 131 1990 12/97 45
3380 Cypress, Petaluma 1,709 3,760 1 1,710 3,760 5,470 42 1989 7/98 45
Southern California
Laguna Hills Square, Laguna 2,436 3,655 583 2,436 4,238 6,674 317 1983 3/96 45
Building #3 at Carroll Tech
Center, San Diego 716 1,400 2 716 1,402 2,118 71 1984 10/96 45
Scripps Wateridge, San Diego 4,160 12,472 3 4,160 12,475 16,635 416 1990 6/97 45
Kansas City, Kansas
6600 College Blvd., Overland Park 2,480 3,880 213 2,518 4,055 6,573 300 1982-83 10/95 45
Didde Building, Overland Park 810 1,344 53 811 1,396 2,207 29 1981 1/98 45
Colorado
Oracle Building, Denver 1,860 13,249 13 1,860 13,262 15,122 344 1996 10/97 45
Texaco Building, Denver 3,699 31,631 368 3,700 31,998 35,698 412 1981 5/98 45
Salt Lake City, Utah
Woodlands II, Salt Lake City 359 5,805 767 359 6,572 6,931 976 1990 8/93 45
Arizona
Executive Center at Southbank,
Phoenix 4,943 7,134 69 4,943 7,203 12,146 294 1989 3/97 45
Troika Building, Tucson 1,332 2,631 35 1,332 2,666 3,998 93 1985 6/97 45
Building #1 at Phoenix Airport
Center, Phoenix 944 1,541 36 944 1,557 2,521 49 1990 7/97 45
Phoenix Airport Center Parking,
Phoenix 1,450 - - 1,450 - 1,450 3 1990 7/97 45
Cabrillo Executive Center,
Phoenix 480 5,614 186 481 5,799 6,280 117 1983 2/98 45
Greater Seattle Area
Kenyon Center, Bellevue 5,095 7,250 46 5,095 7,296 12,391 376 1987 9/96 45
Orillia Office Park, Renton 10,021 22,975 - 10,021 22,975 32,996 766 1986 7/97 45
Adobe Systems Bldg. 1, Seattle - 22,403 3,903 - 26,306 26,306 292 1998 3/98 45
Adobe Systems Bldg. 2, Seattle - 18,931 3,323 - 22,254 22,254 252 1998 3/98 45
Texas
9737 Great Hills Trail, Austin 2,766 7,028 61 2,766 7,089 9,855 248 1984 5/97 45
Nevada
U.S. Bank Centre, Reno 2,102 10,264 269 2,102 10,533 12,635 409 1989 5/97 45
INDUSTRIAL PROPERTIES
UNDER DEVELOPMENT
Belleview Corporate Plaza II, CO 1,645 - 441 2,086 - 2,086 - N/A 10/98 45
Mountain Pointe Office Park, AZ 837 - 2,041 - 2,878 2,878 - N/A 2/98 45
Rio Salado Corporate Centre, AZ 1,723 2,882 301 - 4,906 4,906 - 1982-84 7/98 45
West Tempe Lots 30 and 31
(Wells Fargo), AZ 551 - 21 - 572 572 - N/A 7/98 45
10232 S. 51st Street
(Calsonic Building), AZ 1,322 945 101 - 2,368 2,368 - 1985 8/98 45
Highlands Land, WA 5,474 - 2,636 - 8,110 8,110 - 1984 6/98 45
LAND HELD FOR DEVELOPMENT
Napa Lot 10A, Napa, CA 961 - 25 986 - 986 - N/A 12/96 45
Oak Ridge Way Lot, Vista, CA 359 - 10 369 - 369 - N/A 10/97 45
Scripps Land, San Diego, CA 622 - 72 694 - 694 - N/A 6/97 45
Butterfield Land, Tucson, AZ 102 - 1,077 - 1,179 1,179 - N/A 11/97 45
Canyon Park Land, San Ramon, CA 778 - 212 - 990 990 - N/A 12/97 45
Greystone Business Park,
Tempe, AZ 1,232 - 365 - 1,597 1,597 - N/A 12/97 45
Mondavi Land, Napa Lot 12G,
Northern CA 1,150 - 7 1,154 3 1,157 - N/A 3/98 45
Ferrell Drive Land, TX 185 - 3 186 2 188 - N/A 5/98 45
210 Lafayette Circle,
Northern CA 511 - - 511 - 511 - N/A 11/98 45
$157,586 $399,262 $43,133 $146,820 $453,161 $599,981 $18,523
(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, 1998, 1997 and 1996 is presented below:
Investment Accumulated Depreciation
1998 1997 1996 1998 1997 1996
BALANCE AT BEGINNING OF PERIOD $432,071 $229,414 $131,183 $ 8,985 $ 4,913 $ 2,219
Add (deduct):
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) -
Acquisition of Didde Building 2,207 - - - - -
Acquisition of El Caro Executive Center 6,279 - - - - -
Acquisition of Park Point Business Center 6,897 - - - - -
Acquisition of Mountain Pointe Office Park 2,878 - - - - -
Acquisition of Mondavi Land, Napa Lot 12G 1,157 - - - - -
Acquisition of Adobe I 26,306 - - - - -
Acquisition of Adobe II 22,254 - - - - -
Acquisition of 5502 Oberlin Drive 2,188 - - - - -
Acquisition of Cimarron Business Park 6,322 - - - - -
Acquisition of Ferrell Drive Land 188 - - - - -
Acquisition of Texaco Building 35,698 - - - - -
Acquisition of Geocon Building 3,452 - - - - -
Acquisition of Austin Braker 22,245 - - - - -
Acquisition of Austin Rutland 10 3,255 - - - - -
Acquisition of Austin Southpark A, B and C 5,753 - - - - -
Acquisition of Highlands Campus Land 8,110 - - - - -
Acquisition of Rio Salado Corporate Centre 4,906 - - - - -
Acquisition of West Tempe Land Lots 30 and 31 572 - - - - -
Acquisition of 3880 Cypress Drive 5,470 - - - - -
Acquisition of 2180 S. McDowell Blvd. 3,780 - - - - -
Acquisition of 2190 S. McDowell Blvd. 2,870 - - - - -
Acquisition of 10232 S. 51st Street 2,368 - - - - -
Acquisition of 210 Lafayette Circle 511 - - - - -
Acquisition of Expressway Corporate Center 4,644 - - - - -
Capitalized costs 7,600 16,874 3,884 - - -
Depreciation - - - 9,538 5,381 2,775
BALANCE AT END OF PERIOD $599,981 $432,071 $229,414 $18,523 $8,985 $4,913
(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 25, 1999
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 25, 1999
Peter B. Bedford, Chairman of the Board
and Chief Executive Officer
/s/ Claude M. Ballard March 25, 1999
Claude M. Ballard, Director
/s/ Anthony Downs March 25, 1999
Anthony Downs, Director
/s/ Anthony M. Frank March 25, 1999
Anthony M. Frank, Director
/s/ Martin I. Zankel March 25, 1999
Martin I. Zankel, Director
/s/ Thomas H. Nolan, Jr. March 25, 1999
Thomas H. Nolan, Jr., Director
/s/ Thomas G. Eastman March 25, 1999
Thomas G. Eastman, Director
/s/ Hanh Kihara March 25, 1999
Hanh Kihara
Senior Vice President and
Chief Financial Officer
/s/ Krista K. Rowland March 25, 1999
Krista K. Rowland, 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,
1998 1997 1996 1995 1994
Net income $31,496 $31,291 $ 11,021 $ 2,895 $3,609
Fixed charges - interest and amortization
of loan fees 11,164 7,918 4,347 1,594 955
Fixed charges - interest capitalized 2,177 627 - - -
Net income including fixed charges 44,837 39,836 15,368 4,489 4,564
Preferred dividends and limited partner
distributions 117 3,608 4,505 1,288 -
Net income including fixed charges,
preferred dividends and limited
partner distributions $44,954 $43,444 $ 19,873 $ 5,777 $4,564
Ratio of earnings to fixed charges,
including preferred dividends and
limited partner distributions 3.34 3.57 2.25 2.00 4.78
Ratio of earnings to fixed charges,
excluding preferred dividends and
limited partner distributions 3.36 4.66 3.54 2.82 4.78
Exhibit 21.1
Subsidiaries of Bedford Property Investors, Inc.
Name Under
Subsidiary Which Subsidiary is
Name State of Incorporation doing Business
1. ICMPI (Concord Diablo 3), Inc. Delaware ICMPI (Concord Diablo 3), Inc.
2. ICMPI (Concord Diablo 8), Inc. Delaware ICMPI (Concord Diablo 8), Inc.
3. ICMPI (Concord Mason 18), Inc. Delaware ICMPI (Concord Mason 18), Inc.
4. ICMPI (Overland Park), Inc. Delaware ICMPI (Overland Park), Inc.
5. ICMPI (Lenexa), Inc. Delaware ICMPI (Lenexa), Inc.
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors
Bedford Property Investors, Inc.:
We consent to incorporation by reference in the registration
statements on Form S-3 (No.'s 33-15233, 333-23687,
333-33643 and 333-33795) and the registration statements on Form S-8
(No.'s 333-52375, 333-18215, 333-70681 and
333-74707) of Bedford Property Investors, Inc. of our report dated
January 29, 1999, relating to the consolidated balance sheets of
Bedford Property Investors, Inc. as of December 31, 1998 and 1997, 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, 1998, and the related financial statement schedule as of
December 31, 1998, which report appears in the December 31, 1998
annual report on Form 10-K of Bedford Property Investors, Inc.
KPMG LLP
San Francisco, California
March 25, 1999