<PAGE>
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, 1994 Commission File No. 0-2809
WESTERN INVESTMENT REAL ESTATE TRUST
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 94-6100058
------------------------------------------- -----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3450 California Street, San Francisco, CA 94118
------------------------------------------- -----------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (415) 929-0211
-----------------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
8% Convertible Debentures Due 2008 American Stock Exchange
------------------------------------------- -----------------------
Securities registered pursuant to Section 12(g) of the Act:
Shares of beneficial interest, without par value
--------------------------------------------------------------------------------
(Title of class)
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]
<PAGE>
The aggregate market value of the voting shares held by nonaffiliates of the
registrant on March 14, 1995, based on the reported closing sales price of the
Trust's shares of beneficial interest on the American Stock Exchange on such
date was $198,613,000.
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
Shares of Beneficial Interest, No Par Value - 16,745,026
shares as of March 14, 1995.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Trust's proxy statement with respect to its 1995 Annual Meeting
of Shareholders which will be filed with the Commission regarding the fiscal
year covered by this Form 10-K are incorporated by reference in Part III, Items
10, 11 and 12.
WESTERN INVESTMENT REAL ESTATE TRUST
INDEX TO 10-K
PART I
Item 1 Business 3 to 11
Item 2 Properties 11 to 15
Item 3 Legal Proceedings 16
Item 4 Submission of Matters to a Vote of Security Holders 16
PART II
Item 5 Market for Registrant's Common Equity and Related
Stockholder Matters 16
Item 6 Selected Financial Data 17
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations 18 to 19
Item 8 Financial Statements 20 to 33
Financial Statement Schedule 34 to 36
Additional Information: 1994 Building Improvement and
Leasing Commission Additions (unaudited) 37
Item 9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 38
PART III
Item 10 Directors and Executive Officers of the Registrant 38
Item 11 Executive Compensation 38
Item 12 Security Ownership of Certain Beneficial
Owners and Management 38
Item 13 Certain Relationships and Related Transactions 38
PART IV
Item 14 Exhibits, Financial Statement Schedules
and Reports on Form 8-K 39 to 41
Signatures 42
-2-
<PAGE>
PART I
ITEM 1. BUSINESS.
(a) GENERAL DEVELOPMENT OF BUSINESS.
Western Investment Real Estate Trust ("The Trust") is a real estate investment
trust ("REIT") and qualifies as such under Sections 856 and 960 of the Internal
Revenue Code. The Trust was organized under the laws of the State of California
in 1962 and commenced real estate operations in 1964.
In order that the Trust may continue to qualify as a real estate investment
trust: (i) more than 75% of the Trust's total assets must be invested in real
estate, cash, cash items or government securities, (ii) at least 75% of the
Trust's gross income must be derived from real estate assets, (iii) the Trust
can hold no property primarily for sale to customers in the ordinary course of
business, (iv) beneficial ownership of the Trust must be held by more than 100
persons during at least 335 days of each taxable year, and (v) the Trust must
distribute annually to its shareholders an amount equal to or exceeding 95% of
its real estate investment trust taxable income. Under the terms of its
Declaration of Trust, the Trust is permitted to invest its funds in ownership of
real estate, mortgages, deeds of trust and certain financial instruments as
permitted by law. Substantially all of the Trust's funds have been invested in
the ownership of real estate.
(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS.
The Trust is not engaged in different segments of a business nor is the Trust
engaged in more than one line of business.
(c) NARRATIVE DESCRIPTION OF BUSINESS.
The Trust, which at December 31, 1994 employed 48 people, is in the business of
acquiring, managing, leasing and developing retail, commercial and industrial
properties. At December 31, 1994, the Trust owned 49 retail properties, 10
commercial properties and 2 industrial properties with a combined gross leasable
area of 4.7 million square feet.
The Trust has its executive office at 3450 California Street, San Francisco,
California, 94118, and can be reached at (415) 929-0211. Additionally, the
Trust maintains two branch offices in Granite Bay and Fresno, California.
The Trust's portfolio of 61 properties at December 31, 1994 is summarized as
follows:
<TABLE>
<CAPTION>
Product Type State Number of Land Gross Leasable Area
------------ ----- Properties ---- -------------------
---------- (square feet) (square feet)
<S> <C> <C> <C> <C>
Shopping Center and Retail California 40 15,809,013 3,848,942
Nevada 9 4,062,307 609,002
--- ---------- ---------
Total Shopping Centers and Retail 49 19,871,320 4,457,944
Commercial California 10 634,669 189,075
Industrial California 1 274,311 58,022
Colorado 1 162,500 15,680
--- ---------- ---------
Total Industrial 2 436,811 73,702
--- ---------- ---------
TOTAL 61 20,942,800 4,720,721
--- ---------- ---------
--- ---------- ---------
</TABLE>
-3-
<PAGE>
At December 31, 1994, Occupancy for each Property Type is as follows:
<TABLE>
<CAPTION>
Property Type Occupancy Rate (1)
------------- ------------------
<S> <C>
Shopping Center and Retail 92.0%
Commercial 79.3%
Industrial 100.0%
------
Average Occupancy for All Property Types 91.7%
------
------
<FN>
(1) Once a space is subject to an executed lease, the space is then
included in occupied space. A space continues to be incorporated in
our occupancy percentage until: (1) the related lease expires and the
tenant is no longer in legal possession, or (2) the related lease is
formally terminated and the tenant is no longer in legal possession.
</TABLE>
The following table summarizes the composition of the Trust's real estate
investments as of December 31, 1994 by type based on amounts invested by the
Trust.
<TABLE>
<CAPTION>
Portfolio Summary
December 31, 1994
-----------------
Number of Amount of Percentage
Investments Investment ----------
----------- ----------
<S> <C> <C> <C>
Shopping Center/Retail 49 $360,268,000 93%
Commercial 10 25,982,000 6%
Industrial 2 2,844,000 1%
--- ------------ ----
61 $389,094,000 100%
--- ------------ ----
--- ------------ ----
</TABLE>
During 1993, the Trust obtained two parcels of undeveloped land by deed-in lieu
of foreclosure. Since these parcels were adjacent to two shopping centers
already owned by the Trust, the Trust incorporated this undeveloped land into
the total land area of the two existing shopping centers. During 1994, the
Trust developed 4,500 square feet of previously undeveloped land in Elko (Phase
II) and is currently negotiating other developments to this same parcel
including a 47,000 square foot Ernst Home Center to be constructed on six acres.
Because it is the Trust's intention to develop both of these properties, the
Trust has chosen to break out and report these parcels as separate shopping
center properties.
In addition to the parcel development described more fully in the preceding
paragraph, the Trust owns 20 unimproved pads located in its shopping centers
that are available for development and leasing.
The weighted average age of the Trust's 61 properties is 11.9 years. The
weighted average age of the Trust's commercial, industrial and retail properties
is 19.9 years, 14.7 years and 11.5 years, respectively. This calculation is
weighted by Gross Leasable Area and is based on the original construction date
of the property. As such, construction or renovation occurring subsequent to
the original construction date is not reflected in this calculation.
-4-
<PAGE>
CURRENT ECONOMIC CLIMATE
Over the past few years the Trust's operating results have been negatively
impacted by the sluggish California economy. While the magnitude of the
California economic recovery is uncertain, improvement in economic conditions
should help strengthen the Trust's operating results in 1995. Rising interest
rates resulting from increasing economic activity could dampen the benefit to
the Trust's operating performance. Recent property acquisitions have been
completely or partially funded with advances under the Trust's variable rate
line of credit. If interest rates were to increase substantially the interest
rate under the line of credit could approach, or exceed the yield on the
property acquisitions. However, improving economic conditions, which could lead
to higher interest rates, should lead to improved occupancy and rental rates.
FINANCING
In February 1994, the Trust raised $50 million through a public offering of 7
7/8% ten-year senior notes. The proceeds from this offering, as well as the
proceeds from the sale of five properties and funds available under the bank
line of credit, were used to acquire six retail properties and to pay off
borrowings under a previous line of credit. The senior notes contain certain
covenants that impose limitations on the incurrence of debt and other
restrictions.
On May 31, 1994, the Trust obtained a new unsecured line of credit in the amount
of $60 million. The credit facility has a two-year term, expiring May 31, 1996.
The interest rate was either LIBOR plus 2.0% or the participating banks'
reference rate, at the Trust's election. This line of credit replaced the
existing $35 million credit facility.
On March 14, 1995, the Trust successfully negotiated a reduction of the LIBOR
interest rate on its unsecured bank line of credit. The amended $60 million
credit facility now provides for an interest rate of LIBOR plus 1.6%, compared
to the previous rate of LIBOR plus 2.0%. The reduced LIBOR interest rate
provides for a reduction of 40 basis points, a substantial savings in the
Trust's annual borrowing costs.
ACQUISITIONS AND DISPOSITIONS DURING 1994
The Trust's investment strategy is to seek superior quality retail, office and
industrial properties. During 1994 the Trust acquired properties at prices
ranging from $4.8 million to $14.7 million. Properties in this general price
range allow the Trust to avoid undue investment concentration while still
allowing for management efficiencies. The Trust acquires properties which can
provide growth in cash flow and property value.
In 1994 the Trust acquired six retail properties in Northern California.
Additionally, the Trust disposed of two retail properties, a commercial
building, an industrial building and a parcel of land. The 1994 acquisitions
and dispositions resulted in a net increase of gross leasable area of 324,000
square feet.
In particular:
- On January 27, 1994, the Trust sold its Marin General Hospital property in
Larkspur, California. The sales price was $12.4 million, resulting in a
gain of $3.6 million. The Trust used the net proceeds of the sale to reduce
the outstanding balance on its previous line of credit.
- On May 10, 1994, pursuant to a tax-deferred exchange, the Trust sold its
fifty percent (50%) interest in the Mid-Peninsula Plaza property and the
adjoining wholly-owned Marshall's property located in Redwood City,
California. The combined sales price of $7.3 million resulted in a gain of
$1.7 million.
-5-
<PAGE>
- On May 27, 1994, the Trust acquired a 99,000 square foot shopping center
property located in Livermore, California, for $14.7 million. The purchase
was funded from a portion of the proceeds received from the February, 1994
Senior Notes offering.
- On June 7, 1994, the Trust acquired three shopping center properties
totaling 283,550 square feet located in Elk Grove, Fair Oaks and Manteca,
California, for $34.3 million. These shopping center properties were
purchased with (i) the remaining proceeds received from the Senior Notes
offering, (ii) proceeds from the sale of the Mid-Peninsula Plaza and
Marshall's properties, and (iii) funds from the bank line of credit.
- On July 18, 1994, the Trust acquired a 127,870 square foot shopping center
property located in Hanford, California for $11 million. The acquisition
was funded from a portion of the $60 million line of credit.
- On September 26, 1994, pursuant to a tax-deferred exchange, the Trust sold
for $4.5 million, land located in Rocklin, California. This unimproved
property was previously leased to Raley's. The sale resulted in a gain of
$70,000.
- On November 22, 1994, the Trust acquired a 47,900 square foot Nob Hill
Foods supermarket in Hollister, California, which is subject to a 25-year
lease with Nob Hill General Store Inc. The Trust acquired this property
from Nob Hill for $4.8 million. Proceeds of the sale of the Trust's
property in Rocklin, California, substantially funded the purchase of the
Hollister property pursuant to a tax-deferred exchange.
- On December 30, 1994, the Trust sold its industrial property in Oakland,
California, which was previously leased to Safeway Stores. The sale was
structured to provide for a total sales price of $1,225,000, of which
$567,000 was received in cash. The balance represents the buyers'
assumption of Western's accrued liability for environmental remediation
expenses of $658,000. Under the terms of the sale agreement, the Trust
is responsible for clean-up costs that exceed the sum of: (i)
$658,000 and (ii) any amounts recovered by the buyer from third parties.
After sales commission, legal and other fees, the Trust recorded a loss on
disposition of $93,000. On the basis of the current facts and
circumstances, the Trust has not recorded a provision for any future
environmental liability resulting from this property. The Trust will
continue to monitor the environmental remediation activity and status of
this property.
COMPETITION
During the past several years, volume discount retailers, such as Wal-Mart and
Costco, have entered certain areas of California and Nevada where Trust
community shopping center properties are located. The Trust expects that these
discounters may positively or negatively affect certain of the Trust's shopping
center tenants. The Trust believes that its tenants could benefit if these
discounters attract additional customers to nearby Trust properties and thereby
generate increased sales for Trust tenants. Conversely, the Trust's tenants
could be negatively affected if discounters draw customers away from the Trust's
properties. The Trust believes that to date the trend has had no significant
impact on the Trust's results of operations.
The Trust competes for quality properties with other investors and engages in a
continuing effort to identify desirable properties for acquisition. As the
number of prospective buyers of the types of properties the Trust considers for
purchase increases, the prices of such properties may increase and the yield
decrease. The Trust believes it can continue to compete effectively in the
current real estate environment because of its experience in real estate
investment, property management and leasing.
-6-
<PAGE>
The Trust competes for tenants primarily on the basis of location, rental rates,
services provided and the design and condition of the properties. In some of
the geographic areas in which the Trust owns properties, the available supply of
space for lease exceeds the demand by prospective tenants. In order to compete
effectively, the Trust employs experienced property managers and leasing agents.
TENANTS
The Trust's principal shopping center and retail tenants include substantial,
well-recognized businesses such as Food-4-Less, Kmart, Lucky Stores, J.C.
Penney, Raley's, Ross Stores, Save Mart Supermarket and Thrifty Drug. The
Trust's commercial tenants include Coast Federal Bank and Fireman's Fund.
No single property investment accounted for more than 5% of total revenues in
1994. However, at December 31, 1994, Raley's, the Trust's most significant
tenant, a supermarket and super drug retailer, was a lessee in nineteen of the
Trust's properties. Raley's, a privately owned company, currently operates 81
stores in Northern California and Nevada. The Raley's organization has released
information indicating that its sales exceeded $1.7 billion in its most recently
reported fiscal year ended June 25, 1994.
The following table provides the location, size and expiration of the Raley's
leases:
Lease
Location Gross Leasable Area Expiration Date
-------- ------------------- ---------------
1 Fallon, NV Note (1) 6/30/03
2 Fair Oaks, CA 59,231 3/31/06
3 Yuba City, CA 61,842 9/01/08
4 Carson City, NV 59,018 8/31/12
5 Redding, CA 60,000 5/31/14
6 Yreka, CA 60,000 11/30/14
7 Chico, CA 61,046 4/30/15
8 Winnemucca, NV 60,000 12/31/15
9 Fallon, NV 60,114 2/28/16
10 Reno, NV 61,046 3/31/16
11 Ukiah, CA 61,046 6/30/16
12 Elko, NV 61,000 1/31/17
13 Vallejo, CA 60,114 9/30/17
14 Folsom, CA 60,114 12/31/17
15 Turlock, CA 60,114 2/28/18
16 GrassValley, CA 60,114 4/30/18
17 Granite Bay, CA 60,114 6/30/18
18 Suisun City, CA 60,114 5/31/19
19 Oroville, CA 59,885 6/01/19
NOTE (1): Although Raley's no longer occupies this Fallon, Nevada,
property, it guarantees the J. C. Penney and Hub leases and subsidizes a
portion of the rental payments of the Fallon, Nevada, property.
NOTE (2): For the twelve months ended December 31, 1994, revenue received
from Raley's represented 22%.
-7-
<PAGE>
MAJOR PRODUCERS OF
1994 TOTAL REVENUE
<TABLE>
<CAPTION>
% of Total
Operating Number of
Tenant Revenue Revenues Locations
------ ------- ---------- ---------
<S> <C> <C> <C>
1) Raley's Supermarkets $9,401,000 22.0 20 (1)
2) Coast Federal Bank 1,814,000 4.2 6
3) Save Mart Supermarkets 1,731,000 4.1 7
4) Safeway 1,154,000 2.7 4
5) PayLess Drugs 1,051,000 2.5 5
6) Ross Stores 608,000 1.4 3
7) Food-4-Less 607,000 1.4 2
8) Kmart 593,000 1.4 2
9) Scolari's Supermarket 526,000 1.2 1
10) Lucky's 502,000 1.2 3
(1) Raley's was a tenant in one property acquired and one property
disposed of during 1994. Therefore, even though at year-end for 1993
and 1994, Raley's was a lessee at 19 of the Trust's locations, Raley's
contributed to the Trust's total revenue from 20 locations.
</TABLE>
The Trust receives sales and other information on a monthly, quarterly or annual
basis from its retail tenants, including Raley's, under leases which provide for
such reports. The Trust uses this information to monitor the payment of
percentage rents. The Trust received $537,000 and $530,000 of percentage rents
during 1994 and 1993, respectively. Virtually all of the Trust's existing
leases include at least one of the following provisions for payment of
additional rent: (1) scheduled increases, (2) percentage rent based on tenants'
gross sales, or (3) CPI-based escalation clauses. The Trust endeavors to
structure leases on a triple-net basis with the lessees being responsible for
most operating expenses, such as real estate taxes, certain types of insurance,
utilities, normal repairs and maintenance. To the extent such provisions cannot
be negotiated and in regard to vacant space, the Trust pays such expenses from
current operating income. Most of the Trust's leases require the tenant to
carry liability insurance coverage on their leased premises. The Trust monitors
tenant compliance with insurance coverage requirements. While the Trust believes
its properties are adequately insured, the Trust does not carry earthquake or
flood coverage (with the exception of the Hollister property which has
earthquake insurance). Most of the Trust's properties are located in areas of
California and Nevada where earthquakes have been known to occur. The Trust
does not believe earthquake insurance is cost effective because of relatively
high premiums charged for relatively limited coverage. Additionally, the Trust
portfolio is geographically diversified, principally consisting of single story,
relatively newly constructed buildings.
-8-
<PAGE>
TENANT LEASE EXPIRATIONS AND RENEWALS
The following table shows tenant lease expirations as of December 31, 1994 for
the next ten years assuming none of the tenants exercise renewal options:
<TABLE>
<CAPTION>
Percentage of
Average Base Total Leased
Annualized Base Rent Per Sq. Ft. Gross Leasable
No. of Gross Leasable Rent Under Under Area
Leases Area in Expiring Expiring Represented by
Expiration Year Expiring Square Feet Leases Leases Expiring Leases
---------------- -------- -------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
1995 72 118,452 1,519,440 $12.83 2.8%
1996 75 232,387 1,934,352 8.32 5.4%
1997 84 158,333 2,215,200 13.99 3.7%
1998 108 267,128 3,395,352 12.71 6.2%
1999 75 191,744 2,315,076 12.07 4.5%
2000 34 188,630 2,451,180 12.99 4.4%
2001 15 104,539 1,242,684 11.89 2.4%
2002 23 198,284 1,536,828 7.75 4.6%
2003 26 283,658 2,888,376 10.18 6.6%
2004 13 84,154 861,396 10.24 2.0%
--- --------- ---------- ------ -----
Total 525 1,827,309 20,359,884 112.98 42.7%
</TABLE>
ASSET MANAGEMENT
The Trust is a fully integrated REIT which provides full asset management
services to all but two of its properties. Asset management includes property
management, leasing, marketing, accounting and legal support. Internal
management provides for regular interaction between the Trust and its tenants
and close supervision of properties.
The Trust directly manages 59 of its 61 properties. In order to facilitate its
present and future asset management activities, the Trust maintains two branch
offices which are centrally located to the properties. The offices are located
at the Trust's Country Gables shopping center in Granite Bay, California and at
the Victorian Walk shopping center in Fresno, California.
Internal management permits the Trust to provide value added services to its
tenants. For example, the Trust's marketing staff works with the Trust's
tenants on promotional and advertising activities to draw consumers to the
shopping centers. These activities help the Trust attract and retain the
national, regional and local retail tenants which serve the Northern California
and Nevada markets. The Trust believes that the cost of internal property
management and leasing is generally less expensive than employing independent
property management, marketing and leasing firms due to lower commissions and
fees and certain economies of scale.
-9-
<PAGE>
Two of the 61 properties are managed by independent property managers. G & W
Management Co. provides management services for the property leased to Fireman's
Fund Insurance Company, in Petaluma, California, for fees equal to 3.5% of gross
receipts. The Trust's property is part of a larger office park which is managed
by G & W Management Co. Commercial Real Estate Service (CRES) provides
management services with respect to Serra Center, located in Colma, California,
for fees equal to 4% of gross rents attributable to the Trust's 30% interest in
the center. CRES is an affiliate of the co-owner of the Serra Center and has
been managing the property for approximately 20 years. Neither one of the
above-named property managers are affiliated with the Trust, its trustees,
officers or any shareholder owning 5% or more of the Trust's shares. Repairs
and maintenance of the Trust's properties not undertaken by tenants under the
terms of the Trust's triple-net leases are performed by independent contractors
not affiliated with the Trust, its trustees or officers, or any shareholder
owning 5% or more of the Trust's shares.
POTENTIAL ENVIRONMENTAL RISKS
Investments in real property create a potential for environmental liability on
the part of the owner of such real property. If hazardous substances are
discovered on or emanating from any of the Trust's properties, the Trust and/or
others may be held strictly liable for all costs and liabilities relating to the
clean-up of such hazardous substances.
The Trust, as far as it is aware, owns only 3 properties which presently contain
underground storage tanks. The Trust has no knowledge of any leakage or
contamination resulting from these tanks. There are, however, reported low
levels of soil contamination from underground storage tanks removed from the
Heritage Place Shopping center in Tulare, California, prior to its acquisition
by the Trust. The prior owner is currently proceeding with testing and
remediation of this property and has been approved for funding by the California
Leaking Underground Storage Tank Fund. Should the prior owner fail to
remediate and should funding be declined, the Trust's exposure would be
approximately $230,000 per the initial estimate by an environmental consultant.
In addition, there is a potential for contamination from reported off-site
leaking petroleum underground storage tanks located on properties adjacent
to certain Trust properties.
In order to mitigate environmental risks, in 1989 the Trust adopted a policy of
obtaining at least a Phase I environmental study (a preliminary site assessment
which does not include environmental sampling, monitoring or laboratory
analysis) on each property it seeks to acquire. From time to time, when the
Trust deems it appropriate, we have acquired independent environmental analyses
on properties acquired prior to 1989. Although the Trust has no knowledge that
any material environmental contamination has occurred, no assurance can be given
that hazardous substances are not located under any of the properties. The
Trust carries no express insurance coverage for the type of environmental risk
described above.
The Trust assesses on an ongoing basis measures necessary to comply with
environmental laws and regulations. The probable overall costs of these
measures cannot be determined at this time due to uncertainty about the extent
of environmental risks and the Trust's responsibility, the complexity of
environmental laws and regulations, and the selection of alternative compliance
approaches. However, the Trust is not aware of any environmental conditions
which will have a material impact on its financial position or results of
operations except as described herein.
-10-
<PAGE>
On December 30, 1994, the Trust sold its industrial property in Oakland,
California, which was previously leased to Safeway Stores. The sale was
structured to provide for a total sales price of $1,225,000, of which $567,000
was received in cash. The balance represents the buyer's assumption of
Western's accrued liability for environmental remediation expenses of $658,000.
Under the terms of the sale agreement, the Trust is responsible for clean-up
costs that exceed the sum of: (i) $658,000 and (ii) any amounts recovered by
the buyer from third parties. On the basis of the current facts and
circumstances, the Trust has not recorded a provision for any future
environmental liability resulting from this property. The Trust will continue
to monitor the environmental remediation activity and status of this property.
ITEM 2. PROPERTIES.
Property information is presented on the following pages.
-11-
<PAGE>
ITEM 2: PROPERTIES
<TABLE>
<CAPTION>
Minimum Rent
-------------------- 12/31/94 Year Year
Name Location 1994 1993 Occupancy(1) Completed Renovated
---- -------- ---- ---- ------------ --------- ---------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
I.
SHOPPING CENTER/RETAIL
Luckys El Cerrito, CA $241 $241 100.00% 1964 1983
San Antonio Center Mountain View, CA 495 522 80.99% 1959 1990
Luckys Santa Maria, CA 49 49 100.00% 1962
Denny's Redwood City, CA 66 66 100.00% 1968
Carpeteria Concord, CA 222 221 100.00% 1963
Kwik Stop Santa Rosa, CA 52 52 100.00% 1970
Acapulco Y Los Arcos Fresno, CA 125 132 100.00% 1972
Serra Center (30% interest) Colma, CA 497 404 100.00% 1972
Dodge Center Fallon, NV 282 282 100.00% 1976
West Town Winnemuca, NV 461 462 100.00% 1978 1991
Nob Hill General Store Watsonville, CA 195 195 100.00% 1982
Mid-Pennisula Plaza (50% Int.) (2) Redwood City, CA 191 430 SOLD
Eastridge Plaza Shopping Center Porterville, CA 450 469 79.58% 1985
Angel's Camp Town Center Angel's Camp, CA 523 547 98.51% 1986
Heritage Place Shopping Center Tulare, CA 1,024 954 100.00% 1986
Marshall's (2) Redwood City, CA 96 268 SOLD
Raley's Shopping Center Yuba City, CA 838 738 92.85% 1963 1984
Canal Farms Shopping Center Los Banos, CA 764 748 84.14% 1988
Kmart Center Sacramento, CA 380 343 86.84% 1964 1986
Park Place Shopping Center Vallejo, CA 1,419 1,254 93.64% 1987
Blossom Valey Plaza Turlock, CA 1,072 1,089 100.00% 1988 1991
Coalinga Shopping Center Coalinga, CA 308 324 81.03% 1977
Commonwealth Square Shopping Center Folsom, CA 1,468 1,527 92.34% 1988
Country Gables Shopping Center Granite Bay, CA 1,275 1,192 87.04% 1988
Heritage Oak Shopping Center Gridley, CA 436 437 74.81% 1981
Belle Mill Landing Red Bluff, CA 571 675 94.08% 1982 1987/1994
Anderson Square Anderson, CA 226 267 71.10% 1979
North Hills Shopping Center Reno, CA 810 774 90.36% 1986
North Hills (Phase II)(4) Reno, CA N/A N/A N/A N/A N/A
Cobblestone Shopping Center Redding, CA 943 910 92.99% 1984
Victorian Walk Shopping Center Fresno, CA 740 744 91.39% 1988
Elko Junction Shopping Center Elko, NV 883 743 99.92% 1986 1991
Elko Junction (Phase II) (4) Elko, NV 8 0 100.00% 1994
Skypark Plaza Shopping Center Chico, CA 1,339 1,274 86.07% 1985 1991
continued on next page
-12-
<PAGE>
Item 2: Properties
<CAPTION>
Minimum Rent
-------------------- 12/31/94 Year Year
Name Location 1994 1993 Occupancy(1) Completed Renovated
---- -------- ---- ---- ------------ --------- ---------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
I.
Heritage Park Shopping Center Suisun, CA 1,194 1,263 79.31% 1989
Pinecreek Shopping Center Grass Valley, CA 857 856 94.20% 1988
Eagle Station Shopping Center Carson City, CA 905 892 90.48% 1982
Currier Square Shopping Center Oroville, CA 932 923 97.02% 1969 1989
Yreka Junction Yreka, CA 714 683 97.80% 1984
Ukiah Crossroads Shopping Center Ukiah, CA 850 831 86.34% 1986
Raley's Supermarket Fallon, NV 401 401 100.00% 1991
Caughlin Ranch Shopping Center Reno, NV 805 781 82.83% 1990 1991
Mercantile Row Shopping Center Dinuba, CA 722 731 89.91% 1990
Elverta Crossing Shopping Center Sacramento, CA 1,202 1,066 89.84% 1991 1993
Centennial Plaza Shopping Center (3) Hanford, CA 546 0 99.00% 1991
Laguna 99 Shopping Center (3) Elk Grove, CA 751 0 97.67% 1993
Mission Ridge Shopping Center (3) Manteca, CA 672 0 100.00% 1993
Northridge Shopping Center (3) Fair Oaks, CA 338 0 96.20% 1958 1986
Plaza 580 Shopping Center (3) Livermore, CA 828 0 97.41% 1993
Nob Hill General Store (3) Hollister, CA 52 0 100.00% 1994
-------- --------
Sub-total - Shopping Center/Retail $30,218 $26,760
-------- --------
UNDEVELOPED LAND
Raley's Willowrock Shopping Center (2) Rocklin, CA $263 $369 SOLD
-------- --------
Sub-total - Undeveloped Land $263 $369
-------- --------
INDUSTRIAL
Viking Freight Systems Santa Clara, CA $396 $389 100.00% 1978
Safeway Stores, Inc. (2) Oakland, CA 409 546 SOLD
Merchants, Inc. Commerce City, CA 183 183 100.00% 1984
-------- --------
Sub-total - Industrial $988 $1,118
-------- --------
COMMERCIAL
US Postal Service Boulder Creek, CO $25 $25 100.00% 1959
Coast Savings & Loan Cupertino, CA 190 190 100.00% 1980
Coast Savings & Loan (Taraval St) San Francisco, CA 306 306 100.00% 1975
Coast Savings & Loan Monterey, CA 421 421 100.00% 1963
continued on next page
-13-
<PAGE>
Item 2: Properties
<CAPTION>
Minimum Rent
------------------ 12/31/94 Year Year
Name Location 1994 1993 Occupancy(1) Completed Renovated
---- -------- ---- ---- ------------ --------- ---------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
I.
Coast Savings & Loan (Market St) San Francisco, CA 272 272 100.00% 1964
Coast Savings & Loan Santa Cruz, CA 173 173 100.00% 1980
Coast Savings & Loan Salinas, CA 300 300 100.00% 1937
Marin General Hospital (2) Larkspur, CA 96 1,350 SOLD
3450 California St San Francisco, CA 219 211 100.00% 1957 1987
Redwood II Petaluma, CA 619 619 100.00% 1985
Crystal Lake Park Milpitas, CA 44 23 29.62% 1987
-------- --------
Sub-total - Commercial $2,665 $3,890
-------- --------
TRUST
Other ($34) $89
-------- --------
Sub-total - Trust ($34) $89
-------- --------
Total Minimum Rent $34,100 $32,266
-------- --------
-------- --------
<CAPTION>
Percentage Rents
------------------
1994 1993
---- ----
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
II.
Kmart Napa, CA $133 $158 100.00% 1964
Luckys Santa Maria, CA 95 96 100.00% 1962
Kwik Stop Santa Rosa, CA 0 (7) 100.00% 1970
Acapulco Y Los Arcos Fresno, CA 0 8 100.00% 1972
Serra Center Colma, CA 0 1 100.00% 1972
Dodge Center Fallon, NV 12 11 100.00% 1976
Nob Hill General Stores Watsonville, CA 92 101 100.00% 1982
Heritage Place Shopping Center Tulare, CA 0 0 100.00% 1986
Raley's Shopping Center Yuba City, CA (8) (12) 92.85% 1963 1984
Kmart Center Sacramento, CA 56 55 86.84% 1964 1986
Park Place Shopping Center Vallejo, CA 4 0 93.64% 1987
Blossom Valley Plaza Turlock, CA 0 (2) 100.00% 1988 1991
Coalinga Shopping Center Coalinga, CA 58 51 81.03% 1977
Commonwealth Square Shopping Center Folsom, CA 9 7 92.34% 1988
continued on next page
-14-
<PAGE>
Item 2: Properties
<CAPTION>
Percentage Rents
------------------ 12/31/94 Year Year
Name Location 1994 1993 Occupancy(1) Completed Renovated
---- -------- ---- ---- ------------ --------- ---------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
II.
Heritage Oak Shopping Center Gridley, CA 8 10 74.81% 1981
Anderson Square Anderson, CA 30 21 71.10% 1979
Cobblestone Shopping Center Redding, CA 4 6 92.99% 1984
Heritage Park Shopping Center Suisun, CA 7 1 79.31% 1989
Pinecreek Shopping Center Grass Valley, CA 2 3 94.20% 1988
Eagle Station Shopping Center Carson City, CA 4 5 90.48% 1982
Yreka Junction Yreka, CA 1 1 97.80% 1984
Ukiah Crossroads Shopping Center Ukiah, CA 2 12 86.34% 1986
Caughlin Ranch Shopping Center Reno, NV 1 0 82.83% 1990 1991
Elverta Crossing Shopping Center Sacramento, CA 0 4 89.84% 1991 1993
Northridge Shopping Center (3) Fair Oaks, CA 27 0 96.20% 1958 1986
-------- --------
Total Percentage Rent Income $537 $530
-------- --------
-------- --------
<CAPTION>
Direct Financing Leases(5)
--------------------------
1994 1993
---- ----
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
III.
Kmart Napa, CA $150 $170 100.00% 1964
Viking Freight Systems Santa Clara, CA 115 122 100.00% 1978
-------- --------
$265 $292
-------- --------
-------- --------
<FN>
(1) Once a space is subject to an executed lease, the space is then included in
occupied space. A space continues to be incorporated in our occupied
percentage until: 1) the related lease expires and the tenant is no longer
in legal possession, or 2) the related lease is formally terminated and the
tenant is no longer in legal possession.
(2) Sold in 1994.
(3) Acquired in 1994.
(4) Investment converted to equity ownership through a deed in lieu of
foreclosure in 1993.
(5) Included in Other Income.
</TABLE>
-15-
<PAGE>
ITEM 3. LEGAL PROCEEDINGS.
The Trust is involved in various legal actions arising in the normal course of
business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Principal Market:
The shares of beneficial interest, without par value, of the Trust are listed on
the American Stock Exchange under the symbol "WIR". The following table sets
forth the high and low sales prices of the shares as reported by the American
Stock Exchange:
<TABLE>
<CAPTION>
Quarter Ended High Low Dividends
------------- ---- --- ---------
<S> <C> <C> <C>
March 31, 1993 17 1/4 12 1/4 .28
June 30, 1993 17 1/8 13 1/2 .28
September 30, 1993 14 7/8 13 3/4 .28
December 31, 1993 14 1/4 12 1/2 .28
March 31, 1994 15 1/8 12 1/4 .28
June 30, 1994 14 5/8 12 3/8 .28
September 30, 1994 14 1/2 12 1/2 .28
December 31, 1994 13 11 3/8 .28
Through
March 14, 1995 13 12 1/8 .28 (1)
<FN>
(1) Paid March 15, 1995.
</TABLE>
Approximate number of equity security holders:
Title of Class Number of Record Holders
-------------- ------------------------
(as of December 31, 1994)
Shares of Beneficial Interest, without par value 2,542
The Trust estimates that there were over 18,000 beneficial owners of shares,
including owners whose shares were held in brokerage and trust accounts.
-16-
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Year Ended December 31, 1994 1993 1992 1991 1990
---------------------------------------------------------------------------------------------------
(in thousands, except for per share and share data)(l)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues(2). . . . . . . . . . . . $ 42,737 $ 39,741 $ 38,165 $ 35,915 $ 34,271
Income from operations . . . . . . 10,907 11,594 11,323 14,653 17,902
Net income . . . . . . . . . . . . 15,266 11,594 11,323 14,653 18,428
Funds from operations(3) . . . . . 20,572 20,854 20,305 22,801 24,380
Cash dividends paid. . . . . . . . 18,683 18,531 18,316 20,855 23,161
PER SHARE DATA:
Income from operations . . . . . . $0.654 $0.701 $0.692 $0.906 $1.117
Net income . . . . . . . . . . . . $0.915 $0.701 $0.692 $0.906 $1.150
Cash dividends paid. . . . . . . . $1.120 $1.120 $1.120 $1.290 $1.445
Weighted average number
of shares outstanding. . . . . . . 16,682,675 16,548,198 16,356,462 16,177,460 16,028,557
BALANCE SHEET DATA:
Real estate owned(4) . . . . . . . $389,094 $345,088 $337,703 $334,073 $299,492
Total assets . . . . . . . . . . . 347,172 309,345 316,622 318,941 302,014
Long-term debt . . . . . . . . . . 116,961 67,500 69,429 71,782 74,121
Bank line of credit balance. . . . 23,645 33,244 35,902 28,617 6,018
Shareholders' equity . . . . . . . 202,684 204,938 209,345 213,851 217,497
<FN>
(1) Certain financial statement amounts from prior years have been reclassified
to conform to the 1994 presentation.
(2) Revenues comprise Minimum Rents, Percentage Rents, Recoveries from Tenants
and Other Income.
(3) The Trust, along with most industry analysts, considers Funds From
Operations to be an appropriate supplemental measure of the operating
performance of an equity REIT. Funds From Operations, as defined by the
National Association of Real Estate Investment Trusts, is: net income
excluding gains or losses from debt restructuring and sales of property,
plus depreciation and amortization, and after adjustments for
unconsolidated joint ventures. Funds From Operations does not replace net
income as a measure of performance or net cash provided by operating
activities as a measure of liquidity.
(4) Real estate owned reflects acquisition costs and capitalized costs of
improvements before deduction of depreciation and amortization.
</TABLE>
-17-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Trust anticipates that cash flows provided by operating activities will
continue to provide adequate funds for all current principal and interest
payments as well as dividend payments in accordance with REIT requirements. Cash
on hand, borrowings under its existing bank line of credit, as well as other
debt and equity alternatives, will provide the necessary funds to achieve future
growth. The Trust has only one loan secured by one of its properties.
Additionally, the Trust jointly owns one property where the co-owner is
obligated under a note that is secured by the property. Any incurrence of
additional debt would be subject to limitations imposed by the Indenture
executed in connection with the senior notes and the Trust's bank line of
credit.
As of December 31, 1994, the Trust had approximately $36.4 million available
under its $60 million bank line of credit. This facility, which has certain
covenants (including minimum shareholders' equity, maximum ratio of debt to net
worth and income coverage requirements), will be used to fund acquisitions and
other cash requirements. The bank line of credit's interest rate is either LIBOR
plus 2.0% or the participating banks' reference rate, at the Trust's election.
This facility expires May 31, 1996, at which time the Trust intends to renew it.
In February 1994, the Trust raised $50 million through a public offering of
7 7/8% ten-year senior notes. The proceeds from this offering, as well as the
proceeds from the sale of five properties and funds available under the bank
line of credit, were used to acquire six retail properties and to pay off
borrowings under a previous line of credit. The senior notes contain certain
covenants that impose limitations on the incurrence of debt and other
restrictions.
RESULTS OF OPERATIONS
COMPARISON OF YEARS ENDED DECEMBER 31, 1994 AND 1993
Funds From Operations (as defined by NAREIT) decreased $282,000, or 1.4%, to
$20.6 million from $20.9 million. The major components of this decrease are the
provision for environmental costs related to the Oakland, California, property
and increased interest expense partially offset by increased minimum rents.
Funds From Operations for the year ended December 31, 1994, was calculated by
reducing net income of $15,266,000 by the gains on sales of real estate
investments ($5,355,000), and adding back: (i) the Oakland property write-down
of $463,000, (ii) depreciation and amortization ($9,879,000) and (iii)
amortization of deferred debt issuance costs ($319,000). The Trust, along with
most industry analysts, considers Funds From Operations to be an appropriate
supplemental measure of the operating performance of an equity REIT. Funds From
Operations does not replace net income as a measure of performance or net cash
provided by operating activities as a measure of liquidity.
Net income increased $3.7 million, or 31.7%, to $15.3 million, or $0.915 per
share, in 1994 from $11.6 million, or $0.701 per share, in 1993. This increase
reflects the gains realized from the sales of real estate investments and
increases achieved in revenues from the Trust's six 1994 acquisitions, offset by
increased interest expense and reduced revenues due to property dispositions.
-18-
<PAGE>
Minimum rents increased $1.9 million to $34.1 million, a 5.8% increase over the
1993 total of $32.2 million. This growth reflects rental revenues from the
acquisition of six properties, offset by reduced rental revenues due to the
dispositions of two retail properties, a commercial building, an industrial
building and a parcel of land. The 1994 acquisitions and dispositions resulted
in a net increase of 324,000 square feet to the portfolio.
Other income increased $937,000, or 86.8%, to $2,017,000 in 1994 from $1,080,000
for the comparable period in 1993. Most of this increase is due to (i) a lease
termination fee of $600,000 and (ii) investment income from the senior notes
proceeds earned prior to the completion of several acquisitions.
Interest expense increased by $2.3 million in 1994 to $10.1 million from $7.8
million in 1993. This 29.4% increase is due to the Trust's increased borrowings
to fund property acquisitions and higher interest rates. On February 24, 1994,
the Trust issued $50 million of 7 7/8 % senior notes due February 15, 2004.
Proceeds from the sale of the senior notes were used in part to pay the
outstanding balance on the previous bank line of credit of $17.6 million. The
remaining proceeds were used to acquire additional properties. On May 31, 1994,
the Trust obtained a two-year unsecured $60 million bank line of credit
(replacing the previous $35 million bank line of credit), which the Trust has
drawn upon to fund additional acquisitions. For the years 1994 and 1993, the
daily weighted average amount owing to the bank under the line of credit was
$13.7 million and $31.5 million, respectively. The weighted average interest
rate during these periods was 7.17% and 6.25%, respectively.
COMPARISON OF YEARS ENDED DECEMBER 31, 1993 AND 1992
Funds From Operations increased $549,000 to $20.9 million in 1993, a 2.7%
increase over the 1992 figure of $20.3 million. Net income increased $271,000,
or 2.4%, to $11,594,000 in 1993 compared to $11,323,000 in 1992. The significant
components of this change include increased rental income offset by decreased
interest income on mortgage loans receivable and increased other operating
expenses.
Minimum rents increased $1.3 million in 1993 to $32.2 million, a 4.3% increase
over $30.9 million earned in 1992. This increase resulted from increased rental
rates, collection of prior year rents and $612,000 of deferred rent receivable.
Other operating expenses increased by 51.2%, or $1.1 million, to $3.1 million in
1993 as compared to $2 million in 1992. This increase is primarily the result
of developing internal asset management capabilities that include leasing,
marketing and property management.
IMPACT OF THE ECONOMY
Substantially all of the Trust's properties are leased on a triple-net basis
which reduces the Trust's exposure to increases in property operating expenses
resulting from inflation. Future increases in inflation would likely increase
rental income and thereby further protect the Trust from the impact of
inflation. Rental income increases could be realized through CPI-based
escalation of rents, percentage rents based on tenants' gross sales and
inflation-adjusted base rents on new leases.
Increases in interest rates could increase the Trust's borrowing costs. As of
December 31, 1994, the Trust had $23.6 million outstanding on its unsecured
variable rate bank line of credit. This amount represents approximately 16% of
the Trust's total liabilities and approximately 6% of the Trust's historical
cost of real estate owned.
The continuing recovery of the California economy should lead to increases in
employment, personal income and retail spending. Improving economic conditions
should help strengthen the Trust's operating results in 1995 as occupancy
continues to increase and rental rates continue to stabilize and improve.
-19-
<PAGE>
WESTERN INVESTMENT REAL ESTATE TRUST
Financial Statements
Form 10-K Item 8
December 31, 1994
-20-
<PAGE>
WESTERN INVESTMENT REAL ESTATE TRUST
INDEX TO FINANCIAL STATEMENTS
Page
----
Report of Independent Certified Public Accountants 22
Balance Sheets - December 31, 1994 and December 31, 1993 23
Statements of Income - For the Years Ended
December 31, 1994, 1993 and 1992 24
Statements of Shareholders' Equity - For the Years Ended
December 31, 1994, 1993 and 1992 25
Statements of Cash Flows - For the Years Ended
December 31, 1994, 1993 and 1992 26
Notes to Financial Statements 27 to 33
Financial Statement Schedule III: Real Estate and
Accumulated Depreciation 34 to 36
Additional Information: 1994 Building Improvement and Leasing
Commission Additions (unaudited) 37
-21-
<PAGE>
Report of Independent Certified Public Accountants
To the Trustees and Shareholders
Western Investment Real Estate Trust:
We have audited the financial statements and financial statement schedule of
Western Investment Real Estate Trust (a California real estate investment trust)
as listed in the accompanying index. These financial statements and financial
statement schedule are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these 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 financial statements referred to above present fairly, in
all material respects, the financial position of Western Investment Real Estate
Trust as of December 31, 1994 and 1993, and the results of its operations and
its cash flows for each of the years in the three-year period ended December 31,
1994, in conformity with generally accepted accounting principles. Also in our
opinion, the related financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
San Francisco, California KPMG PEAT MARWICK LLP
February 1, 1995
(except as to note 16, which
is of February 16, 1995)
-22-
<PAGE>
WESTERN INVESTMENT REAL ESTATE TRUST
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
------------
ASSETS 1994 1993
--------------------
<S> <C> <C>
Real estate investments:
Real estate owned. . . . . . . . . . . . . . . . . . . . . . . . $389,094 $345,088
Less accumulated depreciation and amortization . . . . . . . . . (50,802) (45,635)
-------- --------
Net real estate owned. . . . . . . . . . . . . . . . . . . . . 338,292 299,453
Mortgage loan receivable . . . . . . . . . . . . . . . . . . . . --- 2,809
-------- --------
Net real estate investments. . . . . . . . . . . . . . . . . . 338,292 302,262
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . 648 328
Deferred long-term debt issuance costs, net. . . . . . . . . . . . 2,794 2,515
Accounts receivable and other assets . . . . . . . . . . . . . . . 5,438 4,240
-------- --------
$347,172 $309,345
-------- --------
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Bank line of credit. . . . . . . . . . . . . . . . . . . . . . . . $ 23,645 $ 33,244
Convertible debentures . . . . . . . . . . . . . . . . . . . . . . 65,731 66,076
Senior notes, net. . . . . . . . . . . . . . . . . . . . . . . . . 49,868 ---
Real estate loan payable . . . . . . . . . . . . . . . . . . . . . 1,362 1,424
-------- --------
140,606 100,744
Interest payable . . . . . . . . . . . . . . . . . . . . . . . . . 1,497 1,322
Prepaid rents and security deposits. . . . . . . . . . . . . . . . 1,272 1,483
Other liabilities. . . . . . . . . . . . . . . . . . . . . . . . . 1,113 858
-------- --------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . 144,488 104,407
Shareholders' equity:
Shares of beneficial interest, no par value,
unlimited share authorization.
Issued and outstanding:
December 31, 1994 - 16,734,532 shares;
December 31, 1993 - 16,645,791 shares. . . . . . . . . . . . . 237,341 236,178
Accumulated dividends in excess of net income. . . . . . . . . . (34,657) (31,240)
-------- --------
Commitments and contingencies (notes 3, 6, 7, 8, 9, 11 and 15)
Total shareholders' equity . . . . . . . . . . . . . . . . . . 202,684 204,938
-------- --------
$347,172 $309,345
-------- --------
-------- --------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
-23-
<PAGE>
WESTERN INVESTMENT REAL ESTATE TRUST
Statements of Income
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1994 1993 1992
-----------------------------------
(In thousands, except for per share
and share data)
<S> <C> <C> <C>
REVENUES:
Minimum rents. . . . . . . . . . . . . . . . . . . $34,100 $32,226 $30,891
Percentage rents . . . . . . . . . . . . . . . . . 537 530 756
Recoveries from tenants. . . . . . . . . . . . . . 6,083 5,905 5,269
Other income . . . . . . . . . . . . . . . . . . . 2,017 1,080 1,249
------- ------- -------
Total revenues . . . . . . . . . . . . . . . . . . . 42,737 39,741 38,165
------- ------- -------
EXPENSES:
Interest . . . . . . . . . . . . . . . . . . . . . 10,063 7,779 7,925
Property operating costs . . . . . . . . . . . . . 7,411 6,783 6,603
Depreciation and amortization. . . . . . . . . . . 9,879 9,078 8,610
Other operating expenses . . . . . . . . . . . . . 2,967 3,058 2,023
General and administrative . . . . . . . . . . . . 1,510 1,449 1,681
------- ------- -------
Total expenses . . . . . . . . . . . . . . . . . . . 31,830 28,147 26,842
------- ------- -------
Income from operations . . . . . . . . . . . . . . 10,907 11,594 11,323
------- ------- -------
Provision for loss on real estate investment . . . . 996 --- ---
------- ------- -------
Income before gains on sales of
real estate investments . . . . . . . . . . . . 9,911 11,594 11,323
Gains on sales of real estate investments. . . . . . 5,355 --- ---
------- ------- -------
Net income . . . . . . . . . . . . . . . . . . . . $15,266 $11,594 $11,323
------- ------- -------
------- ------- -------
Per share data:
Income from operations . . . . . . . . . . . . . . $.65 $.70 $.69
------- ------- -------
------- ------- -------
Net income . . . . . . . . . . . . . . . . . . . . $.92 $.70 $.69
------- ------- -------
------- ------- -------
Cash dividends paid. . . . . . . . . . . . . . . . $1.12 $1.12 $1.12
------- ------- -------
------- ------- -------
Weighted average number of shares outstanding. . . . 16,682,675 16,548,198 16,356,462
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
-24-
<PAGE>
WESTERN INVESTMENT REAL ESTATE TRUST
Statements of Shareholders' Equity
Years Ended December 31, 1994, 1993 and 1992
(In thousands, except share data)
<TABLE>
<CAPTION>
Accumulated
Shares of Dividends Total
Beneficial Interest in Excess of Share-
------------------- Net holders'
Number Amount Income Equity
-------------------------------------------------
<S> <C> <C> <C> <C>
Balance, January 1, 1992 . . . . . . . . . 16,264,744 $231,161 $(17,310) $213,851
Net proceeds from issuance of shares . . . 70,997 898 --- 898
Debenture redemptions . . . . . . . . . . 130,307 1,589 --- 1,589
Net income . . . . . . . . . . . . . . . . --- --- 11,323 11,323
Cash dividends paid. . . . . . . . . . . . --- --- (18,316) (18,316)
---------- -------- -------- --------
Balance, December 31, 1992 . . . . . . . . 16,466,048 233,648 (24,303) 209,345
Net proceeds from issuance of shares . . . 65,614 935 --- 935
Debenture redemptions . . . . . . . . . . 114,129 1,595 --- 1,595
Net income . . . . . . . . . . . . . . . . --- --- 11,594 11,594
Cash dividends paid. . . . . . . . . . . . --- --- (18,531) (18,531)
---------- -------- -------- --------
Balance, December 31, 1993 . . . . . . . . 16,645,791 236,178 (31,240) 204,938
Net proceeds from issuance of shares . . . 63,740 834 --- 834
Debenture redemptions . . . . . . . . . . 25,001 329 --- 329
Net income . . . . . . . . . . . . . . . . --- --- 15,266 15,266
Cash dividends paid. . . . . . . . . . . . --- --- (18,683) (18,683)
---------- -------- -------- --------
Balance, December 31, 1994 . . . . . . . . 16,734,532 $237,341 $(34,657) $202,684
---------- -------- -------- --------
---------- -------- -------- --------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
-25-
<PAGE>
WESTERN INVESTMENT REAL ESTATE TRUST
Statements of Cash Flows
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1994 1993 1992
-------------------------------
(In thousands)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . $15,266 $11,594 $11,323
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . 9,879 9,078 8,610
Amortization of deferred debt issuance costs. . . . . . . 319 182 199
Gains on sales of real estate investments . . . . . . . . (5,355) --- ---
Increase in accounts receivable
and other assets . . . . . . . . . . . . . . . . . . . (558) (59) (1,505)
Increase in deferred rent receivable. . . . . . . . . . . (692) (612) ---
Increase (decrease) in interest payable . . . . . . . . . 175 1,322 (1,405)
Increase (decrease) in prepaid rents,
security deposits and other liabilities. . . . . . . . 182 395 (1,345)
Provision for loss on real estate investment. . . . . . . 996 --- ---
------- ------- -------
Net cash provided by operating activities . . . . . . . . 20,212 21,900 15,877
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of real estate investments . . . . . . . . 24,470 --- ---
Acquisitions of real estate investments. . . . . . . . . . . . (64,907) --- ---
Improvements of real estate investments. . . . . . . . . . . . (4,301) (2,083) (3,784)
Recovery of investment in direct financing leases. . . . . . . 205 177 154
Proceeds from payoff (acquisition)
of mortgage loans receivable . . . . . . . . . . . . . 2,809 (46) (569)
------- ------- -------
Net cash used in investing activities . . . . . . . . . . (41,724) (1,952) (4,199)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances on bank line of credit. . . . . . . . . . . . . . . . 46,856 25,927 30,285
Principal payments on bank line of credit. . . . . . . . . . . (56,455) (28,585) (23,000)
Principal payments on real estate loan payable . . . . . . . . (62) (56) (47)
Redemption of convertible debentures . . . . . . . . . . . . . (4) (216) (646)
Net proceeds from issuance of shares . . . . . . . . . . . . . 834 935 898
Proceeds from senior notes offering. . . . . . . . . . . . . . 49,855 --- ---
Senior notes issuance costs. . . . . . . . . . . . . . . . . . (509) (122) ---
Cash dividends paid. . . . . . . . . . . . . . . . . . . . . . (18,683) (18,531) (18,316)
------- ------- -------
Net cash provided by (used in) financing activities . . . 21,832 (20,648) (10,826)
------- ------- -------
Net increase (decrease) in cash and cash equivalents. . . 320 (700) 852
Cash and cash equivalents, at beginning of period. . . . . . . . $ 328 $ 1,028 $ 176
------- ------- -------
Cash and cash equivalents, at end of period. . . . . . . . . . . $ 648 $ 328 $ 1,028
------- ------- -------
------- ------- -------
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Cash paid during the year for interest. . . . . . . . . . $ 9,568 $ 6,247 $ 9,143
------- ------- -------
------- ------- -------
SUPPLEMENTAL NON-CASH OPERATING ACTIVITY:
Property buyer's assumption of liability. . . . . . . . . $ 658 $ --- $ ---
------- ------- -------
------- ------- -------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
-26-
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 1: SIGNIFICANT ACCOUNTING POLICIES
(A) Real Estate Investments
Properties comprising real estate investments are stated at cost plus
capitalized improvements. Depreciation and amortization are calculated primarily
using the straight-line method over the estimated useful lives of 20-45 years
for buildings and 3-31 years for improvements. Included in real estate
investments are net investments in direct financing leases consisting of the
aggregate minimum lease payments to be received over the terms of the leases
plus an estimated residual value, less unearned income.
(B) Rental Income
The Trust accrues base rental income (minimum contractual lease payments) as
earned. Certain of the Trust's leases provide for additional rent based on
specified percentages of the lessee's revenues. Such percentage-based rental
income is recognized during the year based on estimates. The Trust recognizes
income from deferred rental receivables in accordance with Financial Accounting
Standards Board Statement No. 13. Deferred rent receivable recognized as income
was $692,000 in 1994 and $612,000 in 1993.
Unearned income on direct financing leases, representing the difference between
the minimum lease payments and estimated residual value, less the costs of the
leased property, is recognized over the life of the lease using the interest
rate implicit in the lease, which provides a level rate of return on the net
investment in the property.
(C) Cash and Cash Equivalents
Cash equivalents comprise certain highly liquid investments with a maturity of
less than three months.
(D) Deferred Long-Term Debt Issuance Costs
The costs incurred in connection with the issuance of debt are amortized over
the term of the debt instruments.
(E) Earnings Per Share
Earnings per share have been computed using the weighted average number of
shares outstanding during each year. Exercise of the outstanding stock options
would not have a material dilutive effect on earnings per share.
(F) Impairment Accounting Policy
When the Trust concludes that recovery of the carrying value of a real estate
investment is permanently impaired, it reduces such carrying value to amounts
deemed recoverable.
(G) Reclassifications
Certain 1993 and 1992 financial statement amounts have been reclassified to
conform to the 1994 presentation.
-27-
<PAGE>
Note 2: REAL ESTATE INVESTMENTS
The following is a reconciliation of real estate investments and the related
accumulated depreciation and amortization:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1994 1993 1992
----------------------------------
(In thousands)
<S> <C> <C> <C>
Real estate investments:
Balance at beginning of year . . . . . . . . . . . . . . $345,088 $337,703 $334,073
Increases: Acquisitions . . . . . . . . . . . . . . . . 64,907 --- ---
Improvements . . . . . . . . . . . . . . . . 3,842 1,932 3,784
Conversion of secured loans. . . . . . . . . --- 5,630 ---
Decreases: Dispositions . . . . . . . . . . . . . . . . (24,075) --- ---
Write-down due to impairment . . . . . . . . (463) --- ---
Amortization of direct financing leases. . . (205) (177) (154)
-------- -------- --------
Balance at end of year . . . . . . . . . . . . . . . . . $389,094 $345,088 $337,703
-------- -------- --------
-------- -------- --------
Accumulated depreciation and amortization:
Balance at beginning of year . . . . . . . . . . . . . . $ 45,635 $ 36,954 $ 28,433
Additions charged to operations. . . . . . . . . . . . . 9,469 8,681 8,521
Dispositions . . . . . . . . . . . . . . . . . . . . . . (4,302) --- ---
-------- -------- --------
Balance at end of year . . . . . . . . . . . . . . . . . $ 50,802 $ 45,635 $ 36,954
-------- -------- --------
-------- -------- --------
</TABLE>
On December 30, 1994, the Trust sold its industrial property in Oakland,
California, which was previously leased to Safeway Stores. The sale was
structured to provide for a total sales price of $1,225,000, of which $567,000
was received in cash. The balance represents the buyers' assumption of Western's
accrued liability for environmental remediation expenses of $658,000. Under the
terms of the sale agreement, the Trust is responsible for clean-up costs that
exceed the sum of: (i) $658,000 and (ii) any amounts recovered by the buyer
from third parties. After sales commission, legal and other fees, the Trust
recorded a loss on disposition of $93,000. On the basis of the current facts
and circumstances, the Trust has not recorded a provision for any future
environmental liability resulting from this property. The Trust will continue
to monitor the environmental remediation activity and status of this property.
Note 3: CAPITAL EXPENDITURES
It is the Trust's practice to capitalize costs that exceed $4,000 and are
associated with the improvement of real estate investments. Capitalized costs
include third party leasing commissions, tenant improvements and capital
expenditures. During 1994, the Trust capitalized $4.3 million in such
expenditures. This amount comprises $1,325,000 of "Build to Suit" capital
improvements; $266,000 of capitalized costs incurred in connection with the
leasing of previously unleased space; $1,679,000 of capitalized costs incurred
in connection with previously leased space; and $1,031,000 of capitalized costs
that relate to general improvements to common areas. The Trust's leasing
department costs, as well as legal and accounting costs associated with leasing,
are expensed as incurred.
The Trust has entered into several new leases that call for approximately $1.5
million in future tenant improvements and leasing commissions. These
expenditures will be paid from borrowings under the bank line of credit or from
operating cash flows.
-28-
<PAGE>
Note 4: LEASES
Two of the Trust's investment properties are accounted for as direct financing
leases. All other leases are accounted for as operating leases.
Future minimum lease payments under direct financing leases that have initial or
remaining noncancellable lease terms in excess of one year as of December 31,
1994, are as follows: 1995 -- $469,000; 1996 -- $469,000; 1997 -- $469,000;
1998 -- $469,000; 1999 -- $469,000; thereafter -- $454,000. At December 31,
1994, the Trust's investment in direct financing leases was $2,305,000, and was
calculated by adding the estimated residual value of $383,000 to the total
remaining minimum lease payments of $2,799,000, less unearned income of
$877,000. The original cost of the properties subject to these direct financing
leases is $4,449,000.
Future minimum lease payments under operating leases that have initial or
remaining noncancellable lease terms in excess of one year as of December 31,
1994, are as follows: 1995 -- $35,000,000; 1996 -- $33,626,000; 1997 --
$31,505,000; 1998 -- $28,993,000; 1999 -- $26,492,000; thereafter --
$265,861,000. The total minimum lease payments are $421,477,000.
Included in other income is income recorded under direct financing leases of
$265,000, $292,000 and $315,000 in 1994, 1993 and 1992, respectively.
Note 5: MAJOR TENANT
Revenues (minimum rents, percentage rents and expense reimbursements)
attributable to leases with Raley's Supermarket, the Trust's most significant
tenant, were $9,400,000, $9,614,000 and $9,041,000 in 1994, 1993 and 1992,
respectively. These amounts represented 22%, 24% and 24% of revenues during
1994, 1993 and 1992, respectively.
Note 6: BANK LINE OF CREDIT
At December 31, 1994, the Trust had borrowed $23,645,000 under a $60,000,000
unsecured line of credit. Interest on funds drawn under this line of credit is
either LIBOR plus 2.0% or the participating bank's reference rate, at the
Trust's election and is payable monthly on any outstanding balance. In addition,
the Trust pays an annual fee of $140,000. The Trust is not required to pledge
any assets or maintain compensating balances for this line of credit although
the Trust has agreed to certain covenants that impose limitations on the
incurrence of debt and other restrictions. Additionally, if amounts due under
the line of credit are not paid at maturity, the lender, at its option, can
require the Trust to provide security interests in Trust properties. This line
of credit, if not renewed, expires May 31, 1996. At December 31, 1993, the Trust
had a $35 million line of credit with an outstanding balance of $33,244,000.
The weighted average interest rate on the outstanding balance under the Trust's
bank line of credit was 8.16% and 6.25% at December 31, 1994, and 1993,
respectively.
The daily weighted average amount owing to the bank under the line of credit
during 1994 and 1993 was $13,689,000 and $31,529,000, respectively. The
weighted average interest rate during 1994 and 1993 was 7.17% and 6.25%,
respectively.
-29-
<PAGE>
Note 7: CONVERTIBLE DEBENTURES
In August, 1988 the Trust issued $75,000,000 of 8% convertible debentures (the
"debentures"), due in 2008. The debentures are convertible prior to maturity,
unless previously redeemed, at a conversion price equal to $22.23 per share. The
debentures are subject to limited mandatory redemption at 100% of their
principal amount plus accrued interest (i) on June 30 in any year, with the
consent of any holder thereof, or (ii) at any time within 60 days after the
receipt of a consent on behalf of a deceased holder. The Trust has the option
either to redeem debentures for cash or to exchange its shares in an amount
equal to 100% of the principal amount of such debentures. Such redemption
obligations are limited to an annual, non-cumulative maximum principal amount of
$25,000 per holder and $2,250,000 in the aggregate, with priority being given to
consents on behalf of deceased holders. In addition, the Trust has the option
to redeem the debentures without the consent of the holders, in whole or in
part, at a redemption price of 101% of the principal balance of the debentures
until June 30, 1995, and at par thereafter.
On June 30, 1994 and 1993, respectively, $212,000 and $1,657,000 of the
debentures were presented for limited mandatory redemption. The Trust elected to
exchange 15,216 and 114,129 shares at $14.00 and $14.50, respectively, for the
debentures. During 1994 and 1993, respectively, an additional $133,000 and
$216,000 of debentures were presented for mandatory redemption on behalf of
deceased debenture holders.
Note 8: SENIOR NOTES
In February 1994, the Trust sold $50 million of 7 7/8% senior notes in a public
offering. These notes are due in 2004 and contain certain covenants that impose
limitations on the incurrence of debt and other restrictions. These restrictions
include a cap on total borrowings, minimum shareholders' equity and income
coverage requirements. The notes are not redeemable prior to maturity. During
1994 the proceeds of this offering, as well as the proceeds from the sale of
five properties and funds available under the bank line of credit, were used to
acquire six retail properties and to pay off borrowings under a previous bank
line of credit.
Note 9: REAL ESTATE LOAN PAYABLE
The Trust has a loan secured by one of its properties. The real estate loan
balance was $1,362,000 and $1,424,000 at December 31, 1994, and 1993,
respectively. Principal payments for the years following December 31, 1994, are:
1995 -- $68,000; 1996 -- $75,000; 1997 -- $83,000; 1998 -- $91,000; 1999
--$100,000; thereafter -- $945,000. Additionally, the Trust jointly owns one
property where the co-owner is obligated under a note secured by the property.
Note 10: DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value:
Cash and Cash Equivalents - The carrying amount approximates fair value because
of the liquidity of this asset.
Mortgage Loan Receivable - The carrying amount approximates fair value because
of the short maturity of this receivable.
Marketable Securities - The fair value of marketable securities is based on
quoted market prices.
Bank Line of Credit - The carrying amount approximates fair value because of the
variable interest rate of this liability.
-30-
<PAGE>
Convertible Debentures - The fair value of convertible debentures is based on
quoted market prices.
Senior Notes - The fair value of senior notes is based on interest rates
currently available to the Trust for issuance of debt with similar terms and
remaining maturities.
Real Estate Loan Payable - The carrying value of this liability approximates
fair value.
The estimated fair values of the Trust's financial instruments as of December
31, are as follows (in thousands):
<TABLE>
<CAPTION>
1994 1993
---- ----
Carrying Fair Carrying Fair
Amount Value Amount Value
-------------------- --------------------
<S> <C> <C> <C> <C>
Cash and cash equivalents. . . . $ 648 $ 648 $ 328 $ 328
Mortgage loan receivable . . . . --- --- 2,809 2,809
Marketable securities. . . . . . 159 159 159 184
Bank line of credit. . . . . . . $23,645 $23,645 $33,244 $33,244
Convertible debentures . . . . . 65,731 61,130 66,076 66,654
Senior notes . . . . . . . . . . 49,868 44,605 --- ---
Real estate loan payable . . . . 1,362 1,362 1,424 1,424
</TABLE>
Note 11: TRUSTEE AND OFFICER COMPENSATION
Trustee Emeritus, Death and Disability Programs
Under the Trustee Emeritus Program, Chester R. MacPhee, O. A. Talmage, Bernard
Etcheverry, and Chester R. MacPhee, Jr., are eligible to become a Trustee
Emeritus after reaching age 65. A Trustee Emeritus shall serve the Trust in an
advisory capacity and will be compensated accordingly, up to a maximum of
$60,000 annually ($75,000 for one trustee). Mr. Etcheverry elected to become
Trustee Emeritus on January 1, 1993, and Mr. MacPhee elected to become Trustee
Emeritus on January 1, 1991.
Chester R. MacPhee, O. A. Talmage, Bernard Etcheverry, and Chester R. MacPhee,
Jr., are eligible to participate in the Death and Disability Program. The Trust
will pay an annual death or disability benefit under the program based on a
percentage of the participant's average annual compensation for his 36 months of
service as a trustee during which his compensation was the greatest up to a
maximum of $60,000 annually ($75,000 for one trustee). In the case of a
participant's death, his eligible spouse will be entitled to receive benefits
under the program. Commencing on August 1, 1994, one participant qualified for
disability benefits under this program and is no longer receiving payment under
the Trustee Emeritus Program. The Death and Disability benefit was calculated
using a discount rate of 8.5% and 7.25% during 1994 and 1993, respectively.
Stock Option Plan
On May 12, 1988, the Trust instituted a non-qualified stock option plan (the
"Plan"). The purchase price of shares of beneficial interest purchased pursuant
to this Plan is to be not less than the fair market value of the shares on the
date of grant. Options granted under the Plan, which expire six years from the
grant date if not exercised, vest and become exercisable at a rate of 20% per
year from the date of grant until completely vested. A total of 300,000 shares
of beneficial interest have been authorized under the Plan.
-31-
<PAGE>
The following options have been issued and are outstanding as of December 31,
1994:
<TABLE>
<CAPTION>
Option Price Percent
Grant Date Shares Per Share Vested
-----------------------------------------------------------------------------
<S> <C> <C> <C>
November 20, 1989 36,500 $18.000 100%
November 18, 1991 35,300 11.440 60%
November 23, 1992 15,400 12.625 40%
November 11, 1993 67,000 13.810 20%
June 28, 1994 25,000 13.875 0%
November 11, 1994 81,800 12.310 0%
</TABLE>
During the years ended December 31, 1994, 160 shares were issued at $11.44 a
share as a result of the exercise of stock options.
Note 12: DIVIDEND REINVESTMENT PLAN
In accordance with the Dividend Reinvestment and Share Purchase Plan adopted by
the Trust in 1990, the Trust received $832,000 and $935,000 net of issuance
costs and issued 63,580 and 65,614 shares of beneficial interest in 1994 and
1993, respectively.
Note 13: QUARTERLY RESULTS OF OPERATIONS
The following is a summary of quarterly financial information for the last two
years:
<TABLE>
<CAPTION>
Unaudited Quarters
-----------------------------------------
(In thousands, except for per share and share data) First Second Third Fourth
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1994
----
Total revenues . . . . . . . . . . . . . . . . . $9,536 $10,852 $10,627 $11,722
------- ------- ------- -------
------- ------- ------- -------
Income from operations . . . . . . . . . . . . . $2,779 $3,151 $2,491 $2,486
------- ------- ------- -------
------- ------- ------- -------
Net income . . . . . . . . . . . . . . . . . . . $6,408 $4,900 $1,565 $2,393
------- ------- ------- -------
------- ------- ------- -------
Per share:
Net income . . . . . . . . . . . . . . . . . . $.39 $.30 $.09 $.14
Dividends. . . . . . . . . . . . . . . . . . . $.28 $.28 $.28 $.28
Weighted average number of shares. . . . . . . . 16,648,662 16,667,946 16,697,659 16,718,995
1993
----
Total revenues . . . . . . . . . . . . . . . . . $10,460 $9,456 $9,381 $10,444
------- ------- ------- -------
------- ------- ------- -------
Income from operations . . . . . . . . . . . . . $2,877 $3,165 $2,657 $2,895
------- ------- ------- -------
------- ------- ------- -------
Net income . . . . . . . . . . . . . . . . . . . $2,877 $3,165 $2,657 $2,895
------- ------- ------- -------
------- ------- ------- -------
Per share:
Net income . . . . . . . . . . . . . . . . . . $.18 $.19 $.16 $.17
Dividends. . . . . . . . . . . . . . . . . . . $.28 $.28 $.28 $.28
Weighted average number of shares. . . . . . . . 16,468,355 16,482,586 16,612,784 16,629,068
</TABLE>
-32-
<PAGE>
Note 14: INCOME TAX STATUS OF TRUST
The Trust has qualified, and intends to continue to qualify, as a real estate
investment trust under the applicable provisions of the Internal Revenue Code
and the comparable California statutes. Under such provisions, the Trust will
not be taxed on that portion of its taxable income distributed currently to
shareholders, provided that at least 95% of its real estate investment trust
taxable income is distributed. As the Trust intends to distribute all of its
income currently, no provision has been made for federal or state income taxes.
Federal taxable income of the Trust prior to the dividend-paid deductions for
the three years ended December 31, 1994, was: 1994 -- $15,129,000; 1993 --
$12,351,000; and 1992 -- $11,368,000. The difference between net income for
financial reporting purposes and taxable income results primarily from different
methods of accounting for leases, depreciation of investment properties and
gains on property dispositions.
The taxable and nontaxable portions of distributions to shareholders for federal
income tax purposes in 1994 are as follows:
<TABLE>
<CAPTION>
Percentages
Distribution -------------------------------------
Dates Paid Paid Per Share Taxable Non-taxable
---------------------------------------------------------------------------
Ordinary Capital
Income Gain
<S> <C> <C> <C> <C>
March 15, 1994 $.28 72.1% 8.9% 19.0%
June 15, 1994 $.28 72.1% 8.9% 19.0%
September 15, 1994 $.28 72.1% 8.9% 19.0%
December 15, 1994 $.28 72.1% 8.9% 19.0%
</TABLE>
Note 15: COMMITMENTS AND CONTINGENCIES
The Trust identifies and evaluates prospective investments on a continuous
basis. In connection therewith, the Trust initiates letters of interest and
extends offers on a regular basis. At December 31, 1994, the Trust was not
committed to fund any acquisition.
As discussed more fully in note 2, the Trust concluded the sale of its
industrial property in Oakland, California, on December 30, 1994. Under the
terms of the sale agreement, the Trust is responsible for clean-up costs that
exceed the sum of: (i) $658,000 and (ii) any amounts recovered by the buyer
from third parties. On the basis of the current facts and circumstances, the
Trust has not recorded a provision for any future environmental liability
resulting from this property. The Trust will continue to monitor the
environmental remediation activity and status of this property.
The Trust is involved in various legal actions arising in the normal course of
business.
Note 16: SUBSEQUENT EVENT
On February 16, 1995, the Trust purchased a Nob Hill Foods Store with a gross
leasable area of 33,033 square feet. Nob Hill General Store Inc. signed a 25-
year lease for the store, located in Newman, California. The Trust acquired
this property for $3.1 million. This acquisition was funded from proceeds of
the recent sale of the Oakland, California, property with additional funding
coming from a portion of the $60 million bank line of credit.
-33-
<PAGE>
<TABLE>
<CAPTION>
(in thousands except for dates of acquisition and construction and depreciable lives)
------------------------------------------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E
----------------------------------------------- ------------- -------------------- ------------- ---------------------------
Cost
capitalized Gross amount
Initial cost to subsequent to of which carried at
company acquisition close of period
-------------------- ------------- ---------------------------
Buildings Buildings
and and
Property Name Encumbrances Land improvements Improvements Land improvements
----------------------------------------------- ------------- --------------------- ------------ ---------------------------
<S> <C> <C> <C> <C> <C> <C>
SHOPPING CENTER/RETAIL
Luckys, El Cerrito CA $250 $450 $625 $250 $1,075
San Antonio Center, Mountain View CA 310 534 4,427 310 4,961
Kmart, Napa CA - 0
Luckys, Santa Maria CA 77 273 164 77 437
Denny's, Redwood City CA 101 138 0 101 138
Carpeteria, Concord CA 794 249 142 794 391
Kwik Stop, Santa Rosa CA 20 54 0 20 54
Acapulco Y Los Arcos, Fresno CA 163 382 0 163 382
Serra Center, Colma CA (30% interest) 433 914 31 433 945
Dodge Center, Fallon NV 405 1,595 32 405 1,627
West Town, Winnemuca NV 130 3,386 0 130 3,386
Nob Hill General Store, Watsonville CA 416 1,084 0 416 1,084
Eastridge Plaza Shopping Center, Porterville CA 939 4,390 39 939 4,429
Angel's Camp Town Center, Angel's Camp CA 580 4,447 12 580 4,459
Heritage Place Shopping Center, Tulare CA 1,427 7,117 213 1,427 7,330
Raley's Shopping Center, Yuba City CA 2,101 5,151 792 2,101 5,943
Canal Farms Shopping Center, Los Banos CA 1,180 6,904 240 1,180 7,144
Kmart Center, Sacramento CA 1,875 3,116 196 1,875 3,312
Park Place Shopping Center, Vallejo CA 3,850 11,291 460 3,850 11,751
Blossom Valley Plaza, Turlock CA 2,448 8,315 381 2,448 8,696
Coalinga Shopping Center, Coalinga CA $1,362 816 2,144 792 816 2,936
Commonwealth Square Shopping Center, Folsom CA 3,312 13,022 134 3,312 13,156
Country Gables Shopping Center, Granite Bay CA 2,704 12,684 316 2,704 13,000
Heritage Oak Shopping Center, Gridley CA 1,603 3,597 51 1,603 3,648
Belle Mill Landing, Red Bluff CA 2,247 6,043 1,225 2,247 7,268
Anderson Square, Anderson CA 1,145 2,125 236 1,145 2,361
North Hills Shopping Center, Reno NV 1,700 6,911 56 1,700 6,967
North Hills (Phase II) 3,706 3,706 0
Cobblestone Shopping Center, Redding CA 2,375 7,969 123 2,375 8,092
Victorian Walk Shopping Center, Fresno CA 1,120 7,356 134 1,120 7,490
Elko Junction Shopping Center, Elko CA 580 7,631 697 580 8,328
Elko Junction (Phase II) 1,936 539 1,936 539
Skypark Plaza Shopping Center, Chico CA 2,854 10,454 1,275 2,854 11,729
Heritage Park Shopping Center, Suisun CA 3,575 12,187 129 3,575 12,316
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Column E Column F Column G Column H Column I
----------------------------------------- -------------------------- -------------- -------------- ---------- -------------
Gross amount
of which carried at
close of period
--------------------------- Life on which
Properties depreciation
Operating in the latest
under Direct income
Financing Accumulated Date of Date statement is
Leases Total Depreciation Construction Acquired computed
----------------------------------------- --------------- -------- -------------- -------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Luckys, El Cerrito CA $1,325 $703 1964/1983 1964 31
San Antonio Center, Mountain View CA 5,271 1,484 1959/1990 1965 10 to 31
Kmart, Napa CA 935 935 1964 1966
Luckys, Santa Maria CA 514 364 1962 1967 28
Denny's, Redwood City CA 239 117 1968 1968 45
Carpeteria, Concord CA 1,185 276 1963 1969 20 to 30
Kwik Stop, Santa Rosa CA 74 54 1970 1970 25
Acapulco Y Los Arcos, Fresno CA 545 342 1972 1972 28
Serra Center, Colma CA (30% interest) 1,378 628 1972 1973/1988 23 to 31
Dodge Center, Fallon NV 2,032 1,089 1976 1977 24 to 31
West Town, Winnemuca NV 3,516 1,384 1978/1991 1978 25 to 31
Nob Hill General Store, Watsonville CA 1,500 534 1982 1982 25
Eastridge Plaza Shopping Center,
Porterville CA 5,368 1,207 1985 1985 5 to 35
Angel's Camp Town Center, Angel's Camp CA 5,039 1,155 1986 1985 31
Heritage Place Shopping Center, Tulare CA 8,757 1,817 1986 1985 10 to 31
Raley's Shopping Center, Yuba City CA 8,044 1,293 1963/1984 1986 5 to 40
Canal Farms Shopping Center, Los Banos CA 8,324 1,472 1988 1986 31
Kmart Center, Sacramento CA 5,187 869 1964/1986 1986 5 to 31
Park Place Shopping Center, Vallejo CA 15,601 1,740 1987 1990 10 to 31
Blossom Valley Plaza, Turlock CA 11,144 1,228 1988/1991 1990 10 to 31
Coalinga Shopping Center, Coalinga CA 3,752 757 1977 1987 10 to 31
Commonwealth Square Shopping Center,
Folsom CA 16,468 1,917 1988 1990 5 to 31
Country Gables Shopping Center,
Granite Bay CA 15,704 1,557 1988 1991 10 to 31
Heritage Oak Shopping Center, Gridley CA 5,251 882 1981 1987 5 to 31
Belle Mill Landing, Red Bluff CA 9,515 1,500 1982/1987/1994 1987 5 to 31
Anderson Square, Anderson CA 3,506 561 1979 1987 10 to 31
North Hills Shopping Center, Reno NV 8,667 1,484 1986 1988 10 to 31
North Hills (Phase II) 3,706 1993
Cobblestone Shopping Center, Redding CA 10,467 1,696 1984 1988 7 to 31
Victorian Walk Shopping Center, Fresno CA 8,610 1,443 1988 1988 3 to 31
Elko Junction Shopping Center, Elko CA 8,908 1,463 1986/1991 1988 31
Elko Junction (Phase II) 2,475 1994 1993 31
Skypark Plaza Shopping Center, Chico CA 14,583 2,199 1985/1991 1988 28 to 31
Heritage Park Shopping Center, Suisun CA 15,891 1,818 1989 1990 31
continued on next page
-34-
<PAGE>
Western Investment Real Estate Trust
Schedule III - Real Estate and Accumulated Depreciation
December 31, 1994
<CAPTION>
(in thousands except for dates of acquisition and construction and depreciable lives)
------------------------------------------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E
----------------------------------------------- ------------- -------------------- ------------- ---------------------------
Cost
capitalized Gross amount
Initial cost to subsequent to of which carried at
company acquisition close of period
-------------------- ------------- ---------------------------
Buildings Buildings
and and
Property Name Encumbrances Land improvements Improvements Land improvements
----------------------------------------------- ------------- --------------------- ------------ ---------------------------
<S> <C> <C> <C> <C> <C> <C>
SHOPPING CENTER/RETAIL
Pinecreek Shopping Center, Grass Valley CA
(50% interest)(1) 2,725 7,966 102 2,725 8,068
Eagle Station Shopping Center, Carson City NV 1,735 7,585 86 1,735 7,671
Currier Square Shopping Center, Oroville CA 2,025 7,203 706 2,025 7,909
Yreka Junction, Yreka CA 1,350 5,846 394 1,350 6,240
Ukiah Crossroads Shopping Center, Ukiah CA 1,925 8,119 311 1,925 8,430
Raley's Supermarket, Fallon NV 1,000 3,220 0 1,000 3,220
Caughlin Ranch Shopping Center, Reno NV 2,950 7,123 196 2,950 7,319
Mercantile Store Shopping Center, Dinuba CA 1,440 6,208 (18) 1,440 6,190
Elverta Crossing Shopping Center,
Sacramento CA 3,370 7,477 636 3,370 8,113
Centennial Plaza Shopping Center, Hanford CA 2,225 8,935 0 2,225 8,935
Laguna 99 Shopping Center, Elk Grove CA 2,791 11,194 0 2,791 11,194
Mission Ridge Shopping Center, Manteca CA 2,373 9,552 3 2,373 9,555
Northridge Shopping Center, Fair Oaks CA 1,666 6,830 1,666 6,830
Plaza 580 Shopping Center, Livermore CA 2,941 11,768 0 2,941 11,768
Nob Hill General Stores, Hollister CA 960 3,869 0 960 3,869
----------------------------------------------------------------------------------
Total Shopping Center/Retail 1,362 78,648 264,808 15,877 78,648 280,685
INDUSTRIAL
Viking Freight Systems, Santa Clara CA 548 0 0 548 0
Merchants, Inc., Commerce City CO 278 648 0 278 648
----------------------------------------------------------------------------------
Total Industrial 0 826 648 0 826 648
COMMERCIAL
US Postal Service, Boulder Creek CA 8 38 31 8 69
Coast Savings & Loan, Cupertino CA 615 845 0 615 845
Coast Savings & Loan (Taraval St),
San Francisco CA 366 1,824 0 366 1,824
Coast Savings & Loan, Monterey CA 911 2,189 0 911 2,189
Coast Savings & Loan (Market St),
San Francisco CA 873 1,068 0 873 1,068
Coast Savings & Loan, Santa Cruz CA 205 823 0 205 823
Coast Savings & Loan, Salinas CA 516 1,632 0 516 1,632
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Column E Column F Column G Column H Column I
----------------------------------------- -------------------------- -------------- -------------- ---------- -------------
Gross amount
of which carried at
close of period
--------------------------- Life on which
Properties depreciation
Operating in the latest
under Direct income
Financing Accumulated Date of Date statement is
Leases Total Depreciation Construction Acquired computed
----------------------------------------- --------------- -------- -------------- -------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
SHOPPING CENTER/RETAIL
Pinecreek Shopping Center, Grass Valley CA
(50% interest)(1) 10,793 1,537 1988 1989 7 to 31
Eagle Station Shopping Center,
Carson City NV 9,406 1,299 1982 1989 10 to 31
Currier Square Shopping Center, Oroville CA 9,934 1,315 1969/1989 1989 5 to 31
Yreka Junction, Yreka CA 7,590 1,032 1984 1990 7 to 31
Ukiah Crossroads Shopping Center, Ukiah CA 10,355 1,403 1986 1989 7 to 31
Raley's Supermarket, Fallon NV 4,220 407 1991 1991 31
Caughlin Ranch Shopping Center, Reno NV 10,269 814 1990/1991 1990 10 to 31
Mercantile Store Shopping Center, Dinuba CA 7,630 800 1990 1990 10 to 31
Elverta Crossing Shopping Center,
Sacramento CA 11,483 815 1991/1993 1990 7 to 31
Centennial Plaza Shopping Center,
Hanford CA 11,160 144 1991 1994 10 to 31
Laguna 99 Shopping Center, Elk Grove CA 13,985 211 1993 1994 31
Mission Ridge Shopping Center, Manteca CA 11,928 179 1993 1994 31
Northridge Shopping Center, Fair Oaks CA 8,496 128 1958/1986 1994 5 to 31
Plaza 580 Shopping Center, Livermore CA 14,709 222 1993 1994 31
Nob Hill General Stores, Hollister CA 4,829 13 1994 1994 31
------------------------------------------
Total Shopping Center/Retail 935 360,268 45,352
INDUSTRIAL
Viking Freight Systems, Santa Clara CA 1,370 1,918 N/A 1978 1978 N/A
Merchants, Inc., Commerce City CO 926 192 1984 1984 35
------------------------------------------
Total Industrial 1,370 2,844 192
COMMERCIAL
US Postal Service, Boulder Creek CA 77 45 1959 1969 5 to 30
Coast Savings & Loan, Cupertino CA 1,460 312 1980 1985 25
Coast Savings & Loan (Taraval St),
San Francisco CA 2,190 657 1975 1985 25
Coast Savings & Loan, Monterey CA 3,100 788 1963 1985 25
Coast Savings & Loan (Market St),
San Francisco CA 1,941 385 1964 1986 25
Coast Savings & Loan, Santa Cruz CA 1,028 177 1980 1986 40
Coast Savings & Loan, Salinas CA 2,148 347 1937 1986 40
continued on next page
-35-
<PAGE>
Western Investment Real Estate Trust
Schedule III - Real Estate and Accumulated Depreciation
December 31, 1994
<CAPTION>
(in thousands except for dates of acquisition and construction and depreciable lives)
------------------------------------------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E
----------------------------------------------- ------------- -------------------- ------------- ---------------------------
Cost
capitalized Gross amount
Initial cost to subsequent to of which carried at
company acquisition close of period
-------------------- ------------- ---------------------------
Buildings Buildings
and and
Property Name Encumbrances Land improvements Improvements Land improvements
----------------------------------------------- ------------- --------------------- ------------ ---------------------------
<S> <C> <C> <C> <C> <C> <C>
COMMERCIAL
3450 California St., San Francisco CA 1,450 1,159 279 1,450 1,438
Redwood II, Petaluma CA 1,017 3,052 0 1,017 3,052
Crystal Lake Park, Milpitas CA 979 6,020 82 979 6,102
----------------------------------------------------------------------------------
Total Commercial 0 6,940 18,650 392 6,940 19,042
----------------------------------------------------------------------------------
Total All Properties $1,362 $86,414 $284,106 $16,269 $86,414 $300,375
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Column E Column F Column G Column H Column I
----------------------------------------- -------------------------- -------------- -------------- ---------- -------------
Gross amount
of which carried at
close of period
--------------------------- Life on which
Properties depreciation
Operating in the latest
under Direct income
Financing Accumulated Date of Date statement is
Leases Total Depreciation Construction Acquired computed
----------------------------------------- --------------- -------- -------------- -------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
COMMERCIAL
3450 California St., San Francisco CA 2,888 526 1957/1987 1987 10 to 31
Redwood ST., Pateluma CA 4,069 574 1985 1989 31
Crystal Lake Park, Migitas CA 7,081 1,447 1987 1987 10 to 31
------------------------------------------
Total Commercial 0 25,982 5,258
------------------------------------------
Total All Properties $2,305 $389,094 $50,802
------------------------------------------
------------------------------------------
<FN>
(1) Pinecreek is encumbered by a note and deed of trust under which the 50% co-
owner is the borrower.
(2) The aggregate cost or adjusted basis of rental property for federal income
tax purposes reconciles to the amount reflected in the financial statements
at December 31, 1994 as follows:
Basis for federal income tax purposes $385,957
Direct financing leases capitalized for financial reporting purposes ($2,908)
Reduction in tax basis for deferred gains on condemnation and other
sales and discharge of indebtedness $6,045
------------
Financial statement reporting basis $389,094
------------
------------
</TABLE>
-36-
<PAGE>
WESTERN INVESTMENT REAL ESTATE TRUST
1994 BUILDING IMPROVEMENT AND LEASING COMMISSION ADDITIONS
<TABLE>
<CAPTION>
BUILDING LEASING
NAME LOCATION IMPROVEMENTS COMMISSIONS
---- -------- ------------ -----------
<S> <C> <C> <C>
SHOPPING CENTERS / RETAIL
SAN ANTONIO CENTER MOUNTAIN VIEW $33 -
SERRA CENTER, (30%) COLMA - $12
EASTRIDGE PLAZA PORTERVILLE 21 -
ANGELS CAMP TOWNE CENTER ANGELS CAMP 4 -
HERITAGE PLACE TULARE 13 -
RALEY'S CENTER YUBA CITY 103 10
CANAL FARMS LOS BANOS 5 5
KMART CENTER SACRAMENTO 112 -
PARK PLACE VALLEJO 28 13
BLOSSOM VALLEY PLAZA TURLOCK 15 -
COALINGA SHOPPING CENTER COALINGA 61 -
COMMONWEALTH SQUARE FOLSOM 52 49
COUNTRY GABLES GRANITE BAY 46 12
BELLE MILL LANDING RED BLUFF 1,123 150
ANDERSON SQUARE ANDERSON 108 -
NORTH HILLS RENO 32 3
COBBLESTONE REDDING 39 -
VICTORIAN WALK FRESNO 6 6
ELKO JUNCTION ELKO 590 31
SKYPARK PLAZA CHICO 41 18
HERITAGE PARK SUISUN 10 3
PINECREEK (50%) GRASS VALLEY 60 55
EAGLE STATION CARSON CITY 33 3
CURRIER SQUARE OROVILLE 147 29
YREKA JUNCTION YREKA 127 -
CROSSROADS UKIAH 1 -
CAUGHLIN RANCH RENO 82 38
MERCANTILE ROW DINUBA 7 -
ELVERTA CROSSING SACRAMENTO 340 22
CENTENNIAL PLAZA HANFORD 9 -
LAGUNA 99 ELK GROVE - -
MISSION RIDGE MANTECA 4 -
NORTHRIDGE FAIR OAKS 186 -
PLAZA 580 LIVERMORE - -
NOB HILL HOLLISTER - -
---------- ----------
SUBTOTAL - SHOPPING CENTERS / RETAIL 3,438 459
INDUSTRIAL
SAFEWAY STORES, INC. (SOLD) OAKLAND 360 -
---------- ----------
SUBTOTAL - INDUSTRIAL 360 -
COMMERCIAL
CRYSTAL LAKE PARK MILPITAS 44 -
---------- ----------
SUBTOTAL - COMMERCIAL 44 -
---------- ----------
TOTAL $3,842 $459
---------- ----------
---------- ----------
</TABLE>
-37-
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information with respect to the trustees and executive officers of the Trust is
incorporated by reference to the section entitled "Trustees and Executive
Officers" of the Trust's definitive Proxy Statement in connection with the
annual Meeting of Shareholders to be held May 11, 1995, which will be filed with
the Commission not later than 120 days after the end of the fiscal year covered
by this Form 10-K, pursuant to General Instruction G to this Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION.
Information with respect to executive compensation is incorporated by reference
to the sections entitled "Compensation of Trustees", Compensation of Executive
Officers", "Compensation Pursuant to Plans", "Trustee Emeritus Program and Death
and Disability Program", "Stock Option Grants and Exercises" and "Report of
Compensation Committee on Executive Compensation" of the Trust's definitive
Proxy Statement in connection with the annual Meeting of Shareholders to be held
May 11, 1995, which will be filed with the Commission not later than 120 days
after the end of the fiscal year covered by this Form 10-K, pursuant to General
Instruction G to this Form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information with respect to security ownership of certain beneficial owners and
management is incorporated by reference to the section entitled "Trustees and
Executive Officers" of the Trust's definitive Proxy Statement in connection with
the annual Meeting of Shareholders to be held May 11, 1995, which will be filed
with the Commission not later than 120 days after the end of the fiscal year
covered by this Form 10-K, pursuant to General Instruction G to this Form 10-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Trust, its employees, officers or trustees are not engaged in any related
transactions with the Trust. Additionally, the Trust has never made any loans to
its management.
-38-
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) 1. Financial Statements - Included in Item 8 Page
----
Report of Independent Certified Public Accountants 22
Balance Sheets - December 31, 1994 and 1993 23
Financial Statements for the Years Ended
December 31, 1994, 1993 and 1992:
Statements of Income 24
Statements of Shareholders' Equity 25
Statements of Cash Flows 26
Notes to Financial Statements 27 to 33
2. Financial Statement Schedule III: Real Estate and
Accumulated Depreciation 34 to 36
3. Additional Information: 1994 Building Improvement
and Leasing Commission Additions (unaudited) 37
(b) 1. Reports on Form 8-K.
Form 8-K dated December 30, 1994. This report
contains Item 5.
-39-
<PAGE>
Page
----
(c) Exhibits.
(3) Declaration of Trust, as amended (filed as Exhibit
3.1 to Registration Statement on Form S-3 No.33-22893 and
incorporated herein by reference).
(4.1) Form of Indenture relating to the 8% Convertible
Debentures (filed as Exhibit 4.1 to Registration Statement
on Form S-3 No. 33-22893 and incorporated herein by
reference).
(4.2) Form of Indenture relating to the Senior Notes (filed
as Exhibit 4.1 to Registration Statement on Form S-3
No.33-71270 and incorporated herein by reference).
(4.3) Form of Senior Notes (filed as Exhibit 4.2 to
Registration Statement on Form S-3 No.33-71270 and incorporated
herein by reference).
(10.1)** Trust's Nonqualified Stock Option Plan (filed as
Exhibit 4.2 to Registration Statement on Form S-8 No. -33-22893
and incorporated herein by reference).
(10.2)** Trust's Trustee Emeritus Plan (filed as Exhibit to
Proxy Statement dated March 25, 1986 and incorporated herein by
reference).
(23)* Consent of Independent Certified Public Accountants. 41
------------------
* Filed with this report.
** Management contract or compensatory plan or arrangement.
-40-
<PAGE>
Consent of Independent Certified Public Accountants
The Trustees
Western Investment Real Estate Trust:
We consent to incorporation by reference in the registration statement (No. 33-
27016) on Form S-8 of Western Investment Real Estate Trust of our report dated
February 1, 1995, except as to Note 16 which is as of February 16, 1995,
relating to the balance sheets of Western Investment Real Estate Trust as of
December 31, 1994 and 1993, and the related statements of income, shareholders'
equity and cash flows for each of the years in the three-year period ended
December 31, 1994, and the related schedule, which report appears in the
December 31, 1994, annual report on Form 10-K of Western Investment Real Estate
Trust.
San Francisco, California KPMG PEAT MARWICK LLP
March 29, 1995
-41-
<PAGE>
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 there unto duly authorized.
WESTERN INVESTMENT REAL ESTATE TRUST
(Registrant)
By: s/ Dennis D. Ryan
--------------------------------------
Dennis D. Ryan
Vice President and
Dated: March 29, 1995 Chief Financial Officer
--------------
Pursuant to the requirements of the Security Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
s/ O. A. Talmage Chairman of the March 29, 1995
---------------------------- Board, President, --------------
O. A. Talmage Chief Executive
Officer and Trustee
s/ Dennis D. Ryan Vice President, March 29, 1995
---------------------------- Chief Financial Officer --------------
Dennis D. Ryan and Trustee
s/ William A. Talmage Executive Vice President, March 29, 1995
---------------------------- Chief Operating Officer --------------
William A. Talmage and Trustee
s/ Chester R. MacPhee, Jr. Trustee March 29, 1995
---------------------------- --------------
Chester R. MacPhee, Jr.
s/ Reginald B. Oliver Trustee March 29, 1995
---------------------------- --------------
Reginald B. Oliver
s/ James L. Stell Trustee March 29, 1995
---------------------------- --------------
James L. Stell
s/ John R. Beckett Trustee March 29, 1995
---------------------------- --------------
John R. Beckett
-42-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S STATEMENTS OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1994 AND
BALANCE SHEET AT DECEMBER 31, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 648
<SECURITIES> 0
<RECEIVABLES> 0<F1>
<ALLOWANCES> 0<F1>
<INVENTORY> 0
<CURRENT-ASSETS> 0<F2>
<PP&E> 389094
<DEPRECIATION> 50802
<TOTAL-ASSETS> 347172
<CURRENT-LIABILITIES> 0<F2>
<BONDS> 140606
<COMMON> 237341
0
0
<OTHER-SE> (34657)<F3>
<TOTAL-LIABILITY-AND-EQUITY> 347172
<SALES> 0
<TOTAL-REVENUES> 42737
<CGS> 0
<TOTAL-COSTS> 10378<F4>
<OTHER-EXPENSES> 11389<F5>
<LOSS-PROVISION> 996<F8>
<INTEREST-EXPENSE> 10063
<INCOME-PRETAX> 9911<F6>
<INCOME-TAX> 0
<INCOME-CONTINUING> 15266
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15266
<EPS-PRIMARY> 0.92
<EPS-DILUTED> 0.92<F7>
<FN>
<F1>AMOUNT INSIGNIFICANT
<F2>BALANCE SHEET IS NOT CLASSIFIED.
<F3>AMOUNT REPRESENTS ACCUMULATED DIVIDENDS IN EXCESS OF TRUST NET INCOME.
<F4>AMOUNT COMPRISED OF PROPERTY OPERATING COSTS ($7,411) AND OTHER OPERATING
EXPENSE ($2,967).
<F5>AMOUNT COMPRISED OF DEPRECIATION EXPENSE ($9,879), AND GENERAL AND
ADMINISTRATIVE EXPENSE ($1,510).
<F6>AMOUNT REPRESENTS INCOME BEFORE GAINS ON SALES OF REAL ESTATE INVESTMENTS.
(GAINS ON SALES OF REAL ESTATE INVESTMENTS EQUALED $5,355).
<F7>EXERCISE OF THE OUTSTANDING STOCK OPTIONS WOULD NOT HAVE MATERIAL DILUTIVE
EFFECT ON EARNINGS PER SHARE.
<F8>AMOUNT REPRESENTS PROVISION FOR LOSS ON REAL ESTATE.
</FN>
</TABLE>
