<PAGE> 1
TYPE: 425
SEQUENCE: 1
Description: Form 425
Filed by Pan Pacific Retail Properties, Inc.
Pursuant to Rule 425 under the Securities Act of 1913
and deemed filed pursuant to Rule 14a-12
of the Securities Exchange Act of 1934
Subject Company: Western Properties Trust
Commission File No.: 001-08723
THE FOLLOWING IS THE SCRIPT OF A TELEPHONE CONFERENCE WITH INVESTORS HELD ON
TUESDAY, NOVEMBER 7, 2000 AT 8:30 AM PST:
CAROL MERRIMAN:
Thank you and good morning. Welcome to Pan Pacific's third quarter conference
call. This morning, the Company's earnings press release was faxed to each of
you. If there is anyone on the line who needs a copy of the release, please
contact me after the call at 760-727-1002. In just a minute, management will
review the quarter, then the call will be opened up for a question and answer
session.
First I would like to read a Safe Harbor statement. Certain matters discussed
within this conference call are forward-looking statements, within the meaning
of the Private Securities Litigation Reform Act of 1995. Although, the Company
believes the expectations reflected in such forward-looking statements are based
on reasonable assumptions, it can give no assurance that these expectations will
be attained. Factors that could cause actual results to differ materially from
expectations include financial performance and operations of its shopping
centers, changes in real estate, economic or stock market conditions, interest
rates, the completion of pending acquisitions, including the pending transaction
with Western Properties Trust, and other risks which are detailed from time to
time in reports filed the with Securities and Exchange Commission, including the
Company's Annual Report on Form 10-K for the year ended December 31, 1999.
At this time, I would like to introduce Stuart Tanz, President and Chief
Executive Officer.
STUART TANZ:
<PAGE> 2
Thanks Carol and good morning everyone. With me today is Jeff Stauffer, our
Chief Operating Officer, and Joe Tyson, our Chief Financial Officer.
We are pleased to report another solid quarter for the company. Total FFO grew
by 9.5% and by 8.6% on a per share basis over the third quarter of last year.
This growth was largely driven by the performance of our core portfolio. For the
third quarter, we maintained our high occupancy rate of 97% and had another very
active quarter on the leasing front. Retail demand across our markets remains
strong, and we continue to work with our tenant base resulting in a double-digit
same-store rent increase of 17% for the quarter.
In terms of acquisitions, we have previously stated that our strategy has been
to be patient, select only the best, most strategic opportunities in our core
markets capitalizing on relationships our established infrastructure and
financial capabilities. To that end, in August, we announced that Pan Pacific
had entered into a definitive agreement to acquire Western Properties Trust
through a stock-for-stock transaction valued at $440 million. This acquisition
will establish Pan Pacific as the largest neighborhood shopping center REIT on
the West Coast with 111 properties totaling over 15 million square feet. The
transaction significantly enhances our presence in the best markets on the West
Coast, where we can maximize our operating platform, achieve exceptional results
and accelerate our earnings growth.
<PAGE> 3
We are very pleased to report that we are moving forward as planned.
Stockholders will meet to vote on the transaction this Thursday, November 9th,
and subject to stockholder approval we plan to close soon thereafter.
We've been working hard over the past several months in order to hit the ground
running when we close. We have a comprehensive business plan integrating
Western's 50 properties into our portfolio.
Fortunately, we already have the regional infrastructure to absorb these
centers. One other advantage is that both companies utilize compatible
accounting and property management systems, which we have now combined.
In addition to the Western transaction, our "one-off" acquisition program
continues on track. During the third quarter we acquired two grocery-anchored
centers in Southern California for a total of $26 million. Both properties are
well-located in demographically strong sub-markets. The average occupancy at the
time we acquired the properties was just shy of 90%, which we have already
increased to 95% today. Our average yield is currently at about 10% and we
expect to exceed that number by year-end. With that, I'll turn it over to Joe.
JOE TYSON:
<PAGE> 4
Thanks Stuart and good morning everyone. I'll start by running through the
numbers for the third quarter and the first nine months. As a note, all per
share amounts are on a diluted basis.
For the quarter ended September 30th, funds from operations totaled $14.1
million, or 63 cents a share, as compared to FFO of $12.9 million for the third
quarter of 1999, or 58 cents a share, representing a 9.5% increase in total FFO,
and an 8.6% increase on a per share basis. One note on the numbers, G&A was
unusually low in the third quarter. This was a result of slowed activity in
terms of hiring, travel and other overhead expenses, as we held back while
focusing on the Western transaction. There was also an accrual adjustment
relating to leasing as a result of being well ahead of budget. Looking at the
fourth quarter, we expect G&A to be more in-line with our normal quarterly
run-rate of around $1.2 million.
After adjusting for capital expenditures, principal payments and straight lining
of rents, funds available for distribution for the third quarter was $10.6
million or 47 cents per share.
Looking at the nine months ended September 30th, FFO totaled $41 million, or
$1.83 a share, as compared to $37.7 million for the first nine months of 1999,
or $1.71 per share. FAD for the first nine months of 2000 was $33 million, or
$1.47 a share, as compared to $31.3 million, or $1.42 a share for the first nine
months of 1999.
<PAGE> 5
During the third quarter we distributed 42 cents a share in dividends
representing a 67% FFO pay out ratio and an 89% FAD pay out ratio.
As part of the Western transaction, Pan Pacific intends to increase its
quarterly dividend in the first quarter of next year by 8.3% to 45.5 cents,
which will provide Western shareholders with the same level of dividend they
have historically received after giving effect to the share exchange ratio. We
also plan to adjust our dividend payment date to coincide with Western's payment
date, so that instead of receiving a dividend in mid-January next year, the
dividend will be paid in mid-March. To make up for the two-month delay, subject
to the transaction closing, Pan Pacific will pay, a special two-month dividend
of 28 cents. The dividend is expected to be paid on November 15th to Pan Pacific
stockholders of record on November 3rd. Western shareholders, who normally
receive a dividend in mid-December, will be receiving their normal quarterly
dividend early, on November 10th, because of the transaction. So, again, the
first quarterly dividend for the combined company will be in mid-March in the
amount of 45.5 cents per share.
For the 54 properties owned by Pan Pacific during both the third quarter of 2000
and 1999, net operating income increased 2.4% and for the first nine months NOI
increased 3.4%.
As for our balance sheet, at September 30th the company had a total market cap
of $844 million with $394 million of debt outstanding, representing a 47%
debt-to-total
<PAGE> 6
market cap ratio. Approximately two-thirds of our debt, or $226 million, is
fixed-rate, long-term debt with a weighted average interest rate of 7.7% and a
weighted average maturity of over seven years. The remaining $169 million, is
part of our unsecured line of credit.
Our interest coverage remains strong and for the third quarter was 2.9 to one.
With the Western transaction, our total market cap will increase to
approximately $1.3 billion. One of the key benefits of the transaction is that
Western's debt structure and investment-grade rating fit hand-in-glove with
ours. On a combined basis, our debt ratio, weighted average interest rate,
maturity and interest coverage ratio will remain roughly the same; in fact,
there will be a modest improvement.
The transaction significantly enhances our financial flexibility and capacity to
grow. 95% of Western's debt is unsecured, including $125 million of investment
grade bonds, which Pan Pacific will be assuming. This will substantially enhance
Pan Pacific's unsecured debt-to-total debt ratio from 43% to 60% and 91 of the
111 properties will be unencumbered representing 71% of the combined company's
NOI.
After closing, our unsecured financing of credit will be doubled from $200
million to $400 million the average borrowing spread will be reduced from 115
basis points to 108 basis points and the bank line maturity will be extended to
2004. Post closing, we will
<PAGE> 7
have approximately $160 million available to fund future acquisitions. This will
enable us to execute our business plan over the next two years without
additional equity.
And now I'll turn it over to Jeff.
JEFF STAUFFER:
Thanks Joe. Following Joe's lead, I'll quickly review our operating results for
the third quarter and then comment on the Western transaction.
At September 30th, Pan Pacific's portfolio stood at 61 shopping centers totaling
9.5 million square feet and was 97% leased.
In terms of leasing, it was another very strong quarter during which we executed
a total of 81 leases.
To walk you through some of the details, during the quarter we executed 78
non-anchor leases totaling 192,000 square feet with same-store, straight-line
increase in rents of 17.4% and an 8.1% cash increase. In terms of anchor leases,
we executed three leases totaling 76,000 square feet, achieving a 14.8%
straight-line increase in rents and a 9.2% cash increase. So on a blended basis
we achieved a 17% straight-line increase and an 8.3% cash increase.
<PAGE> 8
Turning to the Western transaction, as Stuart commented, their portfolio is very
comparable to Pan Pacific. For example 72% of our properties are
grocery-anchored centers 74% of Western's portfolio are grocery-anchored. Both
portfolios have about a 60%-40% split between anchor and non-anchor tenants,
which is ideal for neighborhood centers. And roughly 80% of each portfolio is
leased to national and regional tenants.
In terms of leasing opportunities, over the next 12 to 24 months approximately
600,000 square feet is scheduled to expire in the Western portfolio. The
majority of this space is located in the very strong San Francisco and
Sacramento markets. At Pan Pacific's centers in these markets we have
consistently achieved same store rent growth of better than 20%. Now with a much
greater presence in these markets, we will have more flexibility to move tenants
around attract new tenants and drive rental rates. And with that, I'll turn it
back over to Stuart.
<PAGE> 9
STUART TANZ:
Thanks Jeff. Before opening up the call for questions, I would like to add a
couple of important points on the eve of the Western transaction.
Starting with Pan Pacific's performance and progress over the past three years
since our IPO. We have grown our FFO per share by 50%, increased our dividend by
26%, maintained our portfolio occupancy above 96%, and we have achieved
double-digit growth in same-store rents for 13 consecutive quarters.
We've worked hard at achieving these results. Staying focused, making sure to
acquire quality assets, and delivering consistent growth each quarter, has
brought Pan Pacific to this point.
We are prepared to take our business to the next level. As part of our long-term
strategy, we have carefully built a management and leasing infrastructure across
our core markets in anticipation of this very day.
With the acquisition of Western, we will be uniquely positioned as the largest
shopping center REIT on the West Coast. With 111 shopping centers, we will have
an exceptional platform on the West Coast with the ability to continue to grow
in many ways. In terms of external growth, by having greater market dominance
and greater financial flexibility and capacity will significantly enhance our
ability to capitalize on additional investment opportunities. West Coast retail
remains highly fragmented - we
<PAGE> 10
are truly are in a very strong position to continue to be the leader in
consolidating quality shopping centers on the West Coast.
In terms of internal growth, as Jeff indicated, with 111 centers, providing a
dominant position in demographically strong, supply-constrained markets, we will
have greater flexibility to manage our portfolio and work our tenant base to
achieve strong operating results going forward.
In summary, we are very excited as to what this transaction will mean for Pan
Pacific and we look forward to continuing to work hard to deliver solid results
and increased shareholder value.
With that, we would be happy to answer any questions you may have.
Q&A SESSION
<PAGE> 11
CLOSING REMARKS
STUART TANZ:
Thank you again for joining us this morning. As always, we appreciate your
participation and support. Jeff, Joe and I are available to answer any
questions. If you would like to receive our quarterly supplemental package,
please contact Carol Merriman, or you can find additional information on the
company on our web site at www.pprp.com.
For those of you interested, we intend to hold our year-end, fourth quarter
conference call on February 15, at this same time. Thank you.
<PAGE> 12
THE FOLLOWING IS THE PRESS RELEASE DISSEMINATED BY PAN PACIFIC RETAIL
PROPERTIES, INC. ON TUESDAY, NOVEMBER 7, 2000:
PAN PACIFIC RETAIL PROPERTIES, INC. TRADED: NYSE: PNP
1631 SOUTH MELROSE DRIVE, SUITE B
VISTA CA 92083
CONTACT:
Pan Pacific Retail Properties,
Inc.
Carol Merriman, Investor
(760) 727-1002 x102
--------------------------------------------------------------------------------
FOR IMMEDIATE RELEASE
Tuesday, November 7, 2000
PAN PACIFIC RETAIL PROPERTIES REPORTS THIRD QUARTER RESULTS;
8.6% INCREASE IN FUNDS FROM OPERATIONS PER SHARE
STOCKHOLDER MEETING SET FOR NOVEMBER 9TH TO VOTE ON WESTERN PROPERTIES TRUST
ACQUISITION
THIRD QUARTER HIGHLIGHTS:
- 9.5% INCREASE IN TOTAL FFO TO $14.1 MILLION FOR 3Q `00 VS. 3Q `99
- 8.6% INCREASE IN FFO PER SHARE TO $0.63 FOR 3Q `00 VS. 3Q `99
- 17.0% BASE RENT INCREASE ON SAME STORE NEW AND RENEWED LEASES
- 97.4% PORTFOLIO OCCUPANCY AT SEPTEMBER 30TH
- ACQUIRED TWO GROCERY-ANCHORED CENTERS TOTALING $25.7 MM
- $0.42 PER SHARE QUARTERLY CASH DIVIDEND PAID
WESTERN PROPERTIES TRUST PENDING ACQUISITION HIGHLIGHTS:
- STOCK-FOR-STOCK TRANSACTION WITH EACH WIR SHARE TO BE EXCHANGED FOR 0.62
PNP SHARE
- TOTAL TRANSACTION VALUE OF $440 MILLION o INCREASES PAN PACIFIC'S
PORTFOLIO FROM 61 PROPERTIES TO 111 TOTALING 15 MILLION SQUARE FEET
- CREATES LARGEST WEST COAST NEIGHBORHOOD SHOPPING CENTER REIT
- EXPECTED TO BE ACCRETIVE TO PAN PACIFIC'S FFO PER SHARE IN 2001
- ENHANCES PAN PACIFIC'S BALANCE SHEET, FLEXIBILITY AND KEY FINANCIAL
RATIOS
- INCREASES PAN PACIFIC'S SHARE BASE BY 50% FROM 21.3 MILLION COMMON
SHARES TO 32.0 MILLION
- PAN PACIFIC TO INCREASE ITS QUARTERLY DIVIDEND BY 8.3% TO $0.455 PER
SHARE
SAN DIEGO, CALIF., NOVEMBER 7, 2000 -- Pan Pacific Retail Properties, Inc.
(NYSE:PNP), a leading West Coast shopping center owner and operator, today
announced results for the third quarter ended September 30, 2000. All per share
amounts are on a diluted basis. Funds from Operations (FFO) were $0.63 per
share, representing an 8.6% increase compared with third quarter 1999.
"This is our 13th consecutive quarter of delivering solid FFO per share
growth," said Stuart A. Tanz, President and Chief Executive Officer. "Our
consistent performance continues to be driven by robust market conditions on the
West Coast. As a result, our portfolio and leasing activity remain at record
high levels. In addition to our ongoing operations, during the third quarter we
announced our most strategically important transaction to date -- our plans to
acquire Western Properties Trust. The pending transaction will firmly establish
Pan Pacific as the largest West Coast shopping center REIT with an unmatched
platform of high-quality, grocery-anchored centers concentrated in
high-barrier-to-entry growth markets such as San Francisco, Sacramento, Portland
and Seattle." Mr. Tanz also commented, "We are fully on track to close the
transaction following each company's stockholder meetings on November 9th. More
importantly, we are fully prepared to immediately and seamlessly integrate the
Western portfolio and expect to quickly take advantage of a multitude of
operational and leasing synergies."
<PAGE> 13
Pan Pacific Retail Properties Page 2 of 7
FINANCIAL RESULTS
For the quarter ended September 30, 2000 total FFO increased 9.5% to $14.1
million, or $0.63 per share, compared with FFO for the third quarter of 1999 of
$12.9 million, or $0.58 per share. Net income increased to $8.7 million, or
$0.41 per share, compared with net income for the third quarter of 1999 of $8.0
million, or $0.38 per share, representing an 8.8% increase in net income, and a
7.9% increase on a per share basis. Total revenue increased 10.6% to $28.0
million compared with total revenue of $25.4 million for the third quarter of
1999.
For the quarter ended September 30, 2000 Funds Available for Distribution
(FAD) totaled $10.6 million, or $0.47 per share, and the Company distributed a
dividend of $0.42 per share representing an FFO payout ratio of 67.0% and an FAD
payout ratio of 88.7%.
At September 30, 2000 total assets were $819.6 million. The Company had
$394.4 million in debt outstanding, including $225.9 million in fixed rate
long-term mortgage debt with a weighted average interest rate of 7.7%, and a
weighted average maturity of 7.3 years. For the quarter ended September 30, 2000
the Company's interest coverage ratio was 2.9 to 1.
OPERATING RESULTS
LEASING ACTIVITY
At September 30, 2000 the Company's portfolio had an occupancy rate of
97.4%. During the quarter the Company executed 81 leases (new and renewed),
totaling 267,284 square feet, and achieved a 17.0% increase over prior rents on
a same store basis.
SAME PROPERTY OPERATING RESULTS
The following table sets forth certain operating results with respect to the
54 properties owned and operated for the entirety of both the three months ended
September 30, 2000 and 1999.
<TABLE>
<CAPTION>
-------------------------------------------------------------------
SAME PROPERTY OPERATING DATA
(In thousands except for number of properties and percentages)
Three Months Ended
September 30,
----------------------
<S> <C> <C> <C>
2000 1999
------- -------
# of Properties 54 54
Total GLA 7,539 7,535
Occupancy 97.5% 97.8%
Revenue:
Rental $20,202 $19,776
Recoveries from tenants 4,513 4,382
Income from unconsolidated
partnership 79 84
Other 318 416
------- -------
25,112 24,658
Property operating and
property taxes 4,833 4,844
------- -------
OPERATING INCOME $20,279 $19,814 2.4%
======= ======= ====
-------------------------------------------------------------------
</TABLE>
ACQUISITION ACTIVITY
<PAGE> 14
Pan Pacific Retail Properties Page 3 of 7
During the quarter, the Company acquired two grocery store anchored
neighborhood shopping centers in Southern California for $25.7 million.
On August 15, 2000 the Company acquired Sycamore Plaza, a 105,100 square
foot grocery and drug store anchored neighborhood center located in Anaheim. The
property is located at the intersection of State College Boulevard and La Palma
Avenue, just south of the 91 Freeway. Sycamore Plaza is situated in a
demographically strong in-fill market with a population of 198,600 within a
3-mile radius, and an average household income of $66,300. Sycamore Plaza is
currently 96% leased and anchored by Stater Bros. Supermarket and Sav-on Drugs.
On September 19, 2000 the Company acquired Granary Square, a 137,000
square foot grocery and drug store anchored neighborhood center located in
Valencia. The property, which is 20 miles north of Los Angeles' San Fernando
Valley, is situated in a demographically strong market with a population of
58,000 within a 3-mile radius of the center and an average household income in
excess of $84,000. Granary Square is currently 98% leased and is anchored by
Ralph's Supermarket and Long's Drugs.
PENDING ACQUISITION OF WESTERN PROPERTIES TRUST
On August 22, 2000 the Company announced that it had entered into a
definitive agreement with Western Properties Trust under which Pan Pacific will
acquire Western. The transaction is being structured as a stock for stock
exchange whereby Western common shares will be exchanged into newly issued Pan
Pacific common shares, based upon a fixed 0.62 exchange ratio. The transaction
values Western at approximately $440 million including transaction costs and the
assumption of approximately $200 million of debt, including Pan Pacific's
assumption of Western's $125 million senior unsecured notes. Once the
transaction is completed, Pan Pacific will be the largest West Coast
neighborhood shopping center REIT, with an expected total market capitalization
of approximately $1.3 billion and a portfolio totaling 111 properties,
encompassing 15 million square feet, with a broad geographic representation in
key West Coast growth markets.
The transaction is subject to approval by each company's stockholders.
Both companies' respective stockholders meetings are scheduled for November 9,
2000. Pending the outcome of each meeting, the companies expect to close the
transaction soon thereafter.
Pursuant to the terms of the definitive agreement, Pan Pacific will
increase its quarterly dividend to $0.455 per share ($1.82 per share on an
annualized basis), expected to commence in the first quarter of 2001. Based upon
the fixed 0.62 exchange ratio, the $0.455 per share dividend equates to
Western's current quarterly dividend. Pan Pacific will also adjust its dividend
payment dates from its previous schedule of mid-January, mid-April, mid-July and
mid-October to a schedule of mid-March, mid-June, mid-September and
mid-December. In addition, Pan Pacific expects to pay a special, one-time
dividend of $0.28 per share, payable on November 15th, 2000 to Pan Pacific
stockholders of record on November 3, 2000, subject to the transaction closing
by the payment date.
Additional information regarding the pending transaction can be obtained
on the Internet at www.pprp.com or by contacting the Company at (760) 727-1002.
<PAGE> 15
Pan Pacific Retail Properties Page 4 of 7
THIRD QUARTER CONFERENCE CALL
On Tuesday, November 7, 2000 at 11:30 AM Eastern Time, the Company will be
hosting a conference call to discuss its third quarter 2000 results. The
Company's remarks will be followed by a question and answer period, which will
be limited to questions from analysts and investors. Stockholders and interested
parties may participate in this conference call by dialing (800) 982-3661. A
taped replay of the call will be available through November 15, 2000 at (888)
266-2081, pass code 4666989.
A live web cast (listen-only mode) of the conference call will be available
at www.pprp.com via a link to www.streetevents.com. An online replay will also
be available through November 15, 2000. You must have RealPlayer installed on
your computer to listen to the web cast. RealPlayer may be downloaded for free
at the websites listed above.
ABOUT THE COMPANY
Pan Pacific Retail Properties, Inc. is an equity real estate investment
trust (REIT) traded on the New York Stock Exchange under the symbol PNP. Pan
Pacific focuses on creating long-term stockholder value by specializing in the
acquisition, ownership and management of community and neighborhood shopping
centers for everyday essentials. Pan Pacific's strategy is aimed at providing
stockholders with long-term stable cash flow through maintaining a diverse
portfolio and tenant base, balanced with consistent growth through implementing
its acquisition and property management programs.
Pan Pacific's portfolio currently totals 61 properties, encompassing 9.5
million square feet, and is 97% leased to over 1,400 retailers. The portfolio is
diversified across five Western U.S. markets: Northern California, Southern
California, Washington, Oregon and Nevada.
Pan Pacific is a full service real estate company with in-house expertise in
acquisitions, leasing, development, property management, marketing and
accounting. Pan Pacific is headquartered in Vista (San Diego), California, and
has five regional offices located in Sacramento, California; Chino, California;
Kent, Washington; Portland, Oregon; and Las Vegas, Nevada.
The Company develops on a quarterly basis a supplemental packet of
information, which includes property and corporate level detail. This
information is available upon request. Additional information about Pan Pacific
Retail Properties, Inc. can be obtained on the Internet at www.pprp.com.
(Note: Certain matters discussed within this press release are forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. These forward looking statements relate to matters such as the future
operating results of Pan Pacific and Western, the potential G&A cost savings
from the transaction, future earnings growth of the combined company, the
successful integration of the businesses of Western and Pan Pacific, and the
ability of the combined company to obtain equity and debt financing. Such
forward looking statements are based on the beliefs of Pan Pacific's and
Western's management as well as assumptions made by and information currently
available to each company's management. The words "anticipate," "believe,"
"may," "expect," "will," and similar expressions, variations of such terms or
the negative of such terms as they relate to Pan Pacific or Western used in this
press release, are intended to identify such forward looking statements.
Although the companies believe the expectations reflected in such
forward-looking statements are based on reasonable assumptions, they can give no
assurance that its expectations will be attained. Factors that could cause
actual results to differ materially from the companies' expectations include
market valuations of their stock, financial performance and operations of their
shopping centers, real estate conditions, execution of shopping center
development programs, successful completion of renovations, completion of
pending acquisitions including the completion of customary due diligence and
closing conditions, changes in the availability of additional acquisitions,
changes in local or national economic conditions, and other risks detailed from
time to time in reports filed with the Securities and Exchange Commission
including each company's Annual Report on Form 10-K for the year ended December
31, 1999.)
<PAGE> 16
Pan Pacific Retail Properties Page 5 of 7
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, 2000 DECEMBER 31, 1999
------------------- -----------------
(UNAUDITED)
<S> <C> <C>
ASSETS:
Operating properties, at cost:
Land $ 219,952 $ 209,071
Buildings and improvements 600,668 569,519
Tenant improvements 29,402 26,496
----------- -----------
850,022 805,086
Less accumulated depreciation and amortization (68,575) (57,025)
----------- -----------
781,447 748,061
Investment in unconsolidated partnership 1,515 1,496
Cash and cash equivalents -- 1,097
Restricted cash 171 592
Accounts receivable 4,008 3,295
Accrued rent receivable 13,930 12,391
Notes receivable 2,886 3,043
Deferred lease commissions 4,630 3,943
Prepaid expenses 6,984 7,987
Other assets 4,004 2,632
----------- -----------
$ 819,575 $ 784,537
=========== ===========
LIABILITIES AND EQUITY:
Notes payable $ 225,926 $ 228,490
Line of credit payable 168,500 128,800
Accounts payable, accrued expenses and other 12,264 13,074
Distributions payable 9,408 8,960
----------- -----------
416,098 379,324
Minority interests 22,680 23,347
----------- -----------
Stockholders' equity:
Common stock 213 213
Paid in capital in excess of par value 481,574 481,312
Accumulated deficit (100,990) (99,659)
----------- -----------
380,797 381,866
----------- -----------
$ 819,575 $ 784,537
=========== ===========
</TABLE>
<PAGE> 17
Pan Pacific Retail Properties Page 6 of 7
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
-----------------------
2000 1999
-------- --------
<S> <C> <C>
REVENUE:
Base rent $ 22,163 $ 20,014
Percentage rent 135 185
Recoveries from tenants 5,011 4,500
Net gain on sale of real estate -- --
Income from unconsolidated partnership 77 82
Other 658 584
-------- --------
28,044 25,365
-------- --------
EXPENSES:
Property operating 3,330 3,100
Property taxes 2,054 1,895
Depreciation and amortization 4,992 4,598
Interest 7,627 6,165
General and administrative 812 1,178
Other 32 68
-------- --------
18,847 17,004
-------- --------
INCOME BEFORE MINORITY INTERESTS 9,197 8,361
Minority interests (473) (341)
-------- --------
NET INCOME $ 8,724 $ 8,020
======== ========
Basic and diluted earnings per share $ 0.41 $ 0.38
</TABLE>
<PAGE> 18
Pan Pacific Retail Properties Page 7 of 7
CALCULATION OF FUNDS FROM OPERATIONS
AND FUNDS AVAILABLE FOR DISTRIBUTION
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
FUNDS FROM OPERATIONS:
Net Income $ 8,724 $ 8,020 $ 25,448 $ 23,937
Plus depreciation and amortization expense 4,992 4,598 14,418 13,062
Plus depreciation on unconsolidated partnership 2 2 6 6
Less corporate FF&E depreciation (included (106) (100) (312) (296)
Plus DownREIT minority interests 473 344 1,463 1,023
Less net gain on sale of real estate -- -- -- (75)
------------ ------------ ------------ ------------
Funds From Operations $ 14,085 $ 12,864 $ 41,023 $ 37,657
============ ============ ============ ============
Funds From Operations per share $ 0.63 $ 0.58 $ 1.83 $ 1.71
FUNDS AVAILABLE FOR DISTRIBUTION:
Funds From Operations $ 14,085 $ 12,864 $ 41,023 $ 37,657
Plus corporate FF&E depreciation (included above) 106 100 312 296
Plus amortization of pre-paid financing costs 216 238 651 650
Less amortization of debt premiums (49) (31) (145) (148)
Less capital expenditures:
Tenant improvements (1,669) (643) (3,565) (2,295)
Leasing commissions (660) (302) (1,149) (670)
Capital improvements (106) (15) (150) (32)
Less scheduled debt principal payments (825) (591) (2,419) (1,804)
Less straight line rent (460) (969) (1,540) (2,238)
------------ ------------ ------------ ------------
Funds Available for Distribution $ 10,638 $ 10,651 $ 33,018 $ 31,274
============ ============ ============ ============
Funds Available for Distribution per Share $ 0.47 $ 0.48 $ 1.47 $ 1.42
Diluted Weighted Average Shares Outstanding 22,472,226 22,083,566 22,424,212 22,028,701
</TABLE>
The White Paper on Funds from Operations approved by the Board of Governors of
the National Association of Real Estate Investment Trusts ("NAREIT") in March
1995 (the "White Paper") defines Funds from Operations as net income (loss)
(computed in accordance with GAAP), excluding gains (or losses) from debt
restructuring and sales of property, plus real estate related depreciation and
amortization and after adjustments for unconsolidated partnerships and joint
ventures. Management considers Funds from Operations an appropriate measure of
performance of an equity REIT because it is predicated on cash flow analyses.
The Company computes Funds from Operations in accordance with standards
established by the White Paper. The Company's computation of Funds from
Operations may, however, differ from the methodology for calculating Funds from
Operations utilized by other equity REITs and, therefore, may not be comparable
to such other REITs. Funds from Operations should not be considered as an
alternative to net income (determined in accordance with GAAP) as a measure of
the Company's liquidity, nor is it indicative of funds available to fund the
Company's cash needs, including its ability to make distributions. NAREIT's
clarification to the definition of Funds from Operations, which became effective
January 1, 2000, had no impact on the calculation of Funds from Operations.
The Company also cautions that the calculation of Funds Available for
Distribution (FAD) may vary from entity to entity and, as such, the presentation
of FAD by the Company may not be comparable to other similarly titled measures
of other equity REITs. FAD does not represent cash generated from operating
activities in accordance with generally accepted accounting principles; is not
necessarily indicative of cash available to fund the Company's cash needs; and
should not be considered as an alternative to cash flow as a measure of
liquidity.
# # #
<PAGE> 19
The foregoing communication contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. The forward-looking statements are those that
do not state historical facts and are inherently subject to risk and
uncertainties. The forward-looking statements contained herein are based on
current expectations and entail various risks and uncertainties that could cause
actual results to differ materially from those projected in the forward-looking
statements. Such risks and uncertainties include, among others, risks
associated with completion of the merger, risk associated with integration of
the two companies' businesses, risks associated with the market valuations of
each company's stock, the financial performance and operations of their shopping
centers, real estate conditions, execution of shopping center development
programs, successful completion of renovations, completion of pending
acquisitions including the completion of customary due diligence and closing
conditions, changes in the availability of additional acquisitions, changes in
local or national economic conditions, and other factors discussed in each
company's Annual Report on Form 10-K.
Investors and security holders of both Pan Pacific and Western are urged to read
the joint proxy statement/prospectus regarding the business combination
transaction referred to in the foregoing information, because it contains
important information. The joint proxy statement/prospectus has been filed with
the Securities and Exchange Commission (the "Commission"). Pan Pacific and
Western security holders may obtain a free copy of the joint proxy
statement/prospectus and other documents filed by Pan Pacific and Western with
the Commission at the Commission's Web site at www.sec.gov. The joint
prospectus and these other documents may also be obtained free of charge from
Pan Pacific by directing a request to Pan Pacific Retail Properties, Inc.,
1631-B Melrose Drive, Vista, California 92083, Attention: Joseph B. Tyson,
Executive Vice President, Chief Financial Officer and Secretary, telephone:
(760) 727-1002; or from Western by directing a request to Western Properties
Trust, 2200 Powell Street, Suite 600, Emeryville, California 94608, Attention:
Dennis Ryan, Chief Financial Officer, telephone: (888) 831-5770.
Pan Pacific and its officers and directors may be deemed to be participants in
the solicitation of proxies from Pan Pacific's stockholders with respect to the
proposed merger and related transactions. Information regarding such officers
and directors is included in Pan Pacific's Proxy Statement for the 2000 Annual
Meeting of Stockholders filed with the Commission on March 30, 2000. This
document is available free of charge at the Commission's Web site at www.sec.gov
and from the Pan Pacific contact referred to above. Western and its officers
and directors may be deemed to be participants in the solicitation of proxies
from Western's shareholders with respect to the proposed merger and related
transactions. Information regarding such officers and directors is included in
Western's Proxy Statement for the 2000 Annual Meeting of Shareholders filed with
the Commission on March 30, 2000. This document is available free of charge at
the Commission's Web site at www.sec.gov and from the Western contact referred
to above.
