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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): October 12, 1999
Pacific Gateway Properties, Inc.
(Exact Name of Registrant as Specified in Charter)
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Maryland 1-8692 04-2816560
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
930 Montgomery Street, Suite 400, San Francisco, CA 94133
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (415) 398-4800
N/A
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 5. OTHER EVENTS
As disclosed in prior reports filed by Pacific Gateway Properties,
Inc. (the "Registrant") pursuant to the Securities Exchange Act of 1934, the
Registrant owns general (non-managing) and limited partner interests in
Rincon Center Associates ("RCA"), a California limited partnership, totaling
approximately 22.8%. On October 12, 1999, several actions were taken relating
to RCA.
On October 12, 1999, the Registrant executed Amendment No. 3 to the
Limited Partnership Agreement of RCA (the "Amendment"), which allocated gross
income to the Registrant for fiscal year 1999 to the extent that the
Registrant had a deficit capital account in RCA. As a result of the
Amendment, the Registrant estimates that it incurred a tax gain of
approximately $28.4 million. In addition, a loan to RCA from the managing
general partner of RCA in the amount of approximately $8.6 million was
cancelled, and the agreement obligating the managing general partner to
continue making loans to RCA on behalf of the Registrant was terminated. As a
result of the Amendment and cancellation of the loan, the Registrant
estimates that it incurred a total tax gain of approximately $37.2 million.
The Registrant further estimates that the net tax liability after utilizing
the Registrant's net operating loss carryover and unused tax credits will
amount to approximately $7 million. The Registrant had written off its
investment in RCA to zero in 1995, and has fully reserved for the tax
liability described above. The Registrant will fund the estimated tax
liability from its cash reserves, cash flow from operations, additional
borrowing, or a possible asset sale.
In a separate transaction, RCA completed the disposition of its sole
asset, Rincon Center located in San Francisco, California, to an unrelated
party on October 12, 1999. RCA's disposition of Rincon Center will have no
impact on the Registrant's financial statements. In connection with the
disposition, all contingent liabilities were eliminated, pending litigation
among the parties involved in Rincon Center were dismissed with prejudice,
and mutual settlement and release agreements were executed by all parties.
The Registrant and the managing general partner of RCA have agreed to wind up
the affairs of RCA partnership on or before December 31, 1999. The winding up
of the RCA partnership will have no financial impact on the Registrant's
financial statements.
On October 13, 1999, the Registrant announced the disposition of the
Rincon Center and the engagement of a financial advisor to assist the Board
of Directors in evaluating various strategic alternatives. A copy of the
press release is attached as Exhibit 99 to this Form 8-K.
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ITEM 7. FINANCIAL INFORMATION, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits
EXHIBIT DESCRIPTION
99 Press Release, dated October 13, 1999.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has caused this current report to be signed on its behalf by
the undersigned hereunto duly authorized.
PACIFIC GATEWAY PROPERTIES, INC.
Date: October 19, 1999 By: /s/ Raymond V. Marino
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Name: Raymond V. Marino
Title: President and Chief Executive Officer
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NEWS RELEASE: OCTOBER 13, 1999 EXHIBIT 99
PACIFIC GATEWAY PROPERTIES ANNOUNCES
THE DISPOSITION OF RINCON CENTER,
ENGAGING PRUDENTIAL SECURITIES AS ADVISOR
IN A POSSIBLE SALE OR MERGER, AND
FOURTH QUARTER 1999 DIVIDEND OF $0.15 PER SHARE
SAN FRANCISCO, CALIFORNIA . . . Pacific Gateway Properties, Inc., (PGP-AMEX)
announced today the successful disposition of Rincon Center. As a result of
this disposition, all contingent liabilities associated with the Company's
role as a general partner have been eliminated. As previously disclosed, the
Company has fully reserved for the tax liability associated with its
partnership interest in the Rincon Center Associates partnership. The Company
estimates that this tax liability will total approximately $7,000,000, which
will be funded from its cash reserves, cash flow from operations, additional
borrowing, or a possible asset sale.
The Company also announced that Prudential Securities Incorporated has been
assisting the Board of Directors in evaluating various strategic
alternatives. Following a lengthy review process, the Board of Directors
determined that it would be in the best interest of the Company's
shareholders to pursue a possible sale or merger.
The Board of Directors also met and declared a $0.15 per share dividend to be
paid on December 30, 1999. This represents the third consecutive increase in
dividends since the Board of Directors resumed dividends in the fourth
quarter of 1998. The Board of Directors has fixed the close of business on
December 10, 1999, as the record date for the dividend.
Raymond Marino, President and CEO of PGP commented, "the events leading up to
the disposition of Rincon Center and the winding up of the Company's
involvement in Rincon Center Associates partnership clear the way for the
Company to pursue its strategic goals." Mr. Marino further stated, "in light
of the Board of Directors decision to pursue the possible sale or merger of
the Company, our portfolio represents an opportunity for an investor seeking
to enter the San Francisco Bay Area real estate market or add to an existing
portfolio."
PGP owns and manages 20 office buildings in the San Francisco Bay Area,
consisting of 778,000 square feet which represent 88% of the Company's
portfolio of properties. The San Francisco Bay Area properties are located in
San Jose, San Francisco and Walnut Creek. The balance of the Company's
portfolio consists of two triple net leased office buildings consisting of
102,000 square feet located in Arizona and Florida. As of today, the
Company's portfolio of properties had achieved a weighted average occupancy
level of 96.3%.
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The matters described herein contain forward-looking statements that are made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements involve a number of risks,
uncertainties or other factors that may cause actual results or performance
to be materially different from those expressed or implied by such
forward-looking statements. These risks and uncertainties include, but are
not limited to, economic and real estate industry conditions, lease renewals
and the financial stability of tenants, interest rate risk and other factors
detailed in the Company's registration statement and periodic reports filed
with the Securities Exchange Commission.
FOR MORE INFORMATION CONTACT: RAYMOND MARINO,
PRESIDENT & CEO AT (415) 398-4800, EXTENSION 119
