<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
PACIFIC REAL ESTATE INVESTMENT TRUST
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / No fee required.
/X/ Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Shares
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
3,706,845
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
$1,240 (Liquidation Value)
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
$6,200,000
-----------------------------------------------------------------------
(5) Total fee paid:
$1,240
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
-----------------------------------------------------------------------
(4) Date Filed:
-----------------------------------------------------------------------
<PAGE>
PACIFIC
[Stylized Logo]
REAL ESTATE INVESTMENT TRUST
1010 El Camino Real, Suite 210
Menlo Park, CA 94025
(415) 327-7147
FAX (415) 327-8516
October 23, 1997
To the Shareholders of
PACIFIC REAL ESTATE INVESTMENT TRUST:
A Special Meeting of the Shareholders in Lieu of the Annual Meeting of
Pacific Real Estate Investment Trust (the "Trust" or "Pacific REIT") has been
called for November 20, 1997, to consider the (i) election of Trustees; (ii)
approval of appointment of Deloitte & Touche LLP as independent auditors for the
year ending December 31, 1997; (iii) approval of a series of transactions that
will result in the dissolution, termination and liquidation of the Trust (the
"Dissolution" or the "Dissolution Transactions"); and (iv) such other business
as may be brought before the meeting. The Trustees at present know of no other
formal business to be brought before the meeting.
Enclosed with this letter are a Notice of Special Meeting of the
Shareholders in Lieu of the Annual Meeting and a Proxy Statement, which describe
the nominees for Trustee and the Dissolution proposal in detail. Also enclosed
is a form of Proxy being solicited by the Trustees in connection with the
Special Meeting.
The Trustees have unanimously approved the Dissolution proposal, and
recommend that you vote FOR the proposal. YOUR VOTE IS ESSENTIAL TO PROCEEDING
WITH THE DISSOLUTION. THE TRUST'S DECLARATION OF TRUST REQUIRES THE APPROVAL OF
BOTH A MAJORITY OF THE SHAREHOLDERS AND OF THE HOLDERS OF A MAJORITY OF THE
SHARES OUTSTANDING TO PROCEED WITH THE DISSOLUTION. THUS, UNLESS AT LEAST
APPROXIMATELY 1751 SHAREHOLDERS VOTE SHARES CONSTITUTING A MAJORITY OF THE
OUTSTANDING SHARES IN FAVOR OF THE DISSOLUTION, THE TRUST CANNOT BE DISSOLVED.
The Trustees' reasons for determining to proceed with the Dissolution and
the risks associated with the Dissolution Transactions, are discussed in detail
in the attached Proxy Statement.
Please carefully review and consider the Proxy Statement, and complete and
return the enclosed Proxy as soon as possible, whether or not you expect to
attend the Special Meeting. Returning the completed Proxy will not prevent you
from attending and voting in person at the Special Meeting.
<TABLE>
<S> <C>
WILCOX PATTERSON,
[SIG]
PRESIDENT
</TABLE>
<PAGE>
PACIFIC
[Stylized Logo]
REAL ESTATE INVESTMENT TRUST
1010 EL CAMINO REAL, SUITE 210
MENLO PARK, CA 94025
(415) 327-7147
FAX (415) 327-8516
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
IN LIEU OF ANNUAL MEETING
TO BE HELD NOVEMBER 20, 1997
------------------------
To The Shareholders of
PACIFIC REAL ESTATE INVESTMENT TRUST
NOTICE IS HEREBY GIVEN to the holders of record (the "Shareholders") of
shares of beneficial interest (the "Trust Shares") of Pacific Real Estate
Investment Trust (the "Trust") that a Special Meeting of the Shareholders in
Lieu of the Annual Meeting (the "Special Meeting") will be held on November 20,
1997 at 10:00 a.m. at The Holiday Inn, 625 El Camino Real, Palo Alto,
California, for the following purposes, as more completely described in the
attached Proxy Statement:
1. Election of Trustees.
2. Approval of appointment of Deloitte & Touche LLP as independent auditors
for the year ending December 31, 1997.
3. To approve the dissolution, termination and liquidation of the Trust
through a series of transactions described in the proposed Plan of
Dissolution, Termination and Liquidation, a copy of which is attached as
EXHIBIT A to the accompanying Proxy Statement.
4. To consider and transact such other business as may properly be brought
before the Special Meeting. The Trustees at present know of no other
formal business to be brought before the Special Meeting.
The record holders of Trust Shares as of the close of business on October
23, 1997 will be entitled to notice of the Special Meeting and to vote at the
Special Meeting or any postponement(s) or adjournment(s) of the Special Meeting.
It is anticipated that this Notice and the accompanying Proxy Statement will
first be mailed to Trust Shareholders on or about October 27, 1997.
<TABLE>
<S> <C>
WILCOX PATTERSON,
[SIG]
PRESIDENT
</TABLE>
October 23, 1997
IMPORTANT: WHETHER OR NOT YOU EXPECT TO BE AT THE MEETING, PLEASE FILL IN, DATE
AND SIGN THE ACCOMPANYING PROXY, AND RETURN IT PROMPTLY IN THE ENCLOSED STAMPED
ENVELOPE. YOU MAY NEVERTHELESS VOTE IN PERSON IF YOU ATTEND THE MEETING.
<PAGE>
PACIFIC
[Stylized Logo]
REAL ESTATE INVESTMENT TRUST
1010 EL CAMINO REAL, SUITE 210
MENLO PARK, CA 94025
(415) 327-7147
FAX (415) 327-8516
PROXY STATEMENT
---------------------
SPECIAL MEETING OF SHAREHOLDERS
IN LIEU OF THE ANNUAL MEETING
TO BE HELD NOVEMBER 20, 1997
------------------------
This Proxy Statement is being furnished by the Trustees to the holders (the
"Shareholders") of shares of beneficial interest (the "Trust Shares") of Pacific
Real Estate Investment Trust, a California real estate investment trust (the
"Trust" or "Pacific REIT"), in connection with solicitation of the accompanying
Proxy by the Trustees of the Trust for use at the Special Meeting of
Shareholders in Lieu of the Annual Meeting to be held on November 20, 1997, at
10:00 a.m., California time, at the Holiday Inn, 625 El Camino Real, Palo Alto,
California, and at any adjournment(s) or postponement(s) thereof (the "Special
Meeting"). At the Special Meeting, Shareholders will consider and vote upon: (i)
the election of Trustees; (ii) approval of appointment of Deloitte & Touche LLP
as independent auditors for the year ending December 31, 1997; (iii) a proposal
to approve a series of transactions resulting in the dissolution, termination
and liquidation of the Trust (the "Dissolution Transactions" or the
"Dissolution") described in the proposed Plan of Dissolution, Termination and
Liquidation, a copy of which is attached hereto as EXHIBIT A (the "Dissolution
Plan"); and (iv) such other business as may be brought before the meeting. The
Trustees at present know of no other formal business to be brought before the
Special Meeting.
This Proxy Statement is dated October 23, 1997 and is first being mailed to
Trust Shareholders on or about October 27, 1997.
1
<PAGE>
AVAILABLE INFORMATION
The Trust is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the SEC.
Such reports, proxy statements and other information filed by the Trust may be
inspected and copied at the public reference facilities maintained by the SEC at
450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of
the SEC located at 75 Park Place, New York, New York 10007 and 500 West Madison
Street, Chicago, Illinois 60661. Copies of such material can be obtained from
the Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates. In addition, certain of the documents filed by
the Trust with the Commission are available through the Commission's Electronic
Data Gathering and Retrieval System ("EDGAR") at www.sec.gov.
The Trust furnishes Shareholders with annual reports containing consolidated
financial statements audited by independent certified public accountants and
with quarterly reports containing unaudited, condensed financial statements for
each of the first three quarters of each fiscal year.
No person is authorized to give any information or to make any
representations other than the information or representations contained herein
and, if given or made, such information or representations should not be relied
upon as having been authorized. This Proxy Statement does not constitute the
solicitation of a proxy in any jurisdiction where, or to any person to whom, it
is unlawful to make such a solicitation. The delivery of this Proxy Statement
shall not, under any circumstances, create any implication that there has been
no change in the affairs of the Trust since the date hereof, or the dates as of
which certain information is set forth herein.
INFORMATION INCORPORATED BY REFERENCE
The Trust's Annual Report on Form 10-K for the fiscal year ended December
31, 1996, Quarterly Report on Form 10-Q for the fiscal quarter ended March 31,
1997, Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1997,
Report on Form 8-K dated April 1, 1997, Report on Form 8-K/A dated April 1, 1997
and Report on Form 8-K dated July 9, 1997 (Commission File Number 0-8725), are
hereby incorporated by reference into this Proxy Statement. All documents filed
by the Trust with the SEC pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act after the date of this Proxy Statement and prior to the completion
of the vote at the Special Meeting shall be deemed to be incorporated by
reference into this Proxy Statement and to be a part hereof from the date of
filing of such documents. Any statement contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Proxy Statement to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Proxy
Statement.
THIS PROXY STATEMENT INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF ANY SUCH DOCUMENTS, OTHER THAN
EXHIBITS TO SUCH DOCUMENTS WHICH ARE NOT SPECIFICALLY INCORPORATED BY REFERENCE
THEREIN, ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON, INCLUDING ANY SHAREHOLDER,
TO WHOM THIS PROXY STATEMENT IS DELIVERED, UPON WRITTEN OR ORAL REQUEST TO
PACIFIC REAL ESTATE INVESTMENT
TRUST, SHAREHOLDER RELATIONS, 1010 EL CAMINO REAL, SUITE 210, MENLO PARK,
CALIFORNIA 94025; TELEPHONE NO: (415) 327-7147; FAX: (415) 327-8516. IN ORDER TO
ASSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BEFORE
NOVEMBER 5, 1997.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
THE SPECIAL MEETING................................................................... 4
Matters to be Considered at the Special Meeting..................................... 4
Voting Rights....................................................................... 4
Voting Securities and Principal Holders............................................. 5
Costs and Manner of Solicitation.................................................... 5
PROPOSAL 1 ELECTION OF TRUSTEES....................................................... 5
There Is No Nominating Committee.................................................... 6
Officers............................................................................ 7
Board of Trustees and Committees of the Board....................................... 7
Certain Relationships and Related Transactions...................................... 8
PROPOSAL 2 APPOINTMENT OF THE TRUST'S AUDITORS........................................ 9
PROPOSAL 3 APPROVAL OF THE DISSOLUTION TRANSACTIONS................................... 10
Introduction........................................................................ 10
Alternatives Considered by the Board of Trustees.................................... 10
Shareholder Action Proposed......................................................... 11
Description of the Dissolution Plan................................................. 11
Description of Certain Long-Term Liabilities........................................ 13
Federal Income Tax Consequences..................................................... 14
Shareholder Approval Required for the Dissolution Transactions...................... 16
Nonapproval of the Dissolution Plan................................................. 16
Amendment of the Dissolution Plan................................................... 16
Dissenters' Rights.................................................................. 16
Estimated Fees and Expenses......................................................... 16
Recommendations of the Trustees..................................................... 16
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT........................ 17
DISCRETIONARY AUTHORITY............................................................... 17
CERTAIN LEGAL MATTERS................................................................. 17
SHAREHOLDER PROPOSALS................................................................. 17
REPORTS............................................................................... 17
EXHIBIT A PLAN OF DISSOLUTION, TERMINATION AND LIQUIDATION............................ A-1
</TABLE>
3
<PAGE>
THE SPECIAL MEETING OF SHAREHOLDERS
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
This Proxy Statement is being furnished by the Trustees to the Shareholders
of the Trust, in connection with the solicitation by the Trustees of proxies for
use at the Special Meeting which is being held in lieu of the Annual Meeting. At
the Special Meeting, the Shareholders will be asked to consider and vote upon:
(i) the election of Trustees; (ii) approval of appointment of Deloitte & Touche
LLP as independent auditors for the year ending December 31, 1997; (iii) a
Dissolution proposal described in the proposed Dissolution Plan; and (iv) such
other business as may be brought before the meeting. The Trustees at present
know of no other formal business to be brought before the Special Meeting.
VOTING RIGHTS
Each Trust Share is entitled to one vote on the matters to be considered at
the Special Meeting, except for the election of Trustees, in which case each
Shareholder will be entitled to cumulate his or her votes as described below. If
a Shareholder entitled to vote at the Special Meeting has given the Proxy
solicited by this Proxy Statement, unless the Proxy has been previously revoked
(and unless otherwise directed by the Shareholder giving such Proxy), the Proxy
holders will vote the Trust Shares represented by the Proxy at the Special
Meeting FOR the election of the nominated trustees, the approval of the
appointment of Deloitte & Touche LLP, the Dissolution Transactions and otherwise
as the Proxy holders determine in their discretion with respect to all other
matters properly brought before the Special Meeting.
A Shareholder may revoke such Shareholder's Proxy at will at any time prior
to the voting of the Trust Shares covered by the Proxy, by voting in person at
the Special Meeting, by filing with the Secretary of the Trust a duly executed
Proxy bearing a later date, or by delivering to the Secretary of the Trust a
written notice prior to the Special Meeting, stating that such Shareholder
revokes the Proxy.
Votes cast by Proxy or in person at the Special Meeting will be counted by
the person appointed by the Trust to act as Inspector of Elections for the
Special Meeting. The Inspector of Elections will treat Trust Shares represented
by Proxies that reflect abstentions or include "broker non-votes" as Trust
Shares that are present and entitled to vote for purposes of determining the
presence of a quorum at the Special Meeting. Abstentions or "broker non-votes"
do not constitute a vote "for" or "against" any matter. Any unmarked Proxies,
including those submitted by brokers or nominees, will be voted in favor of the
proposals, as indicated in the accompanying Proxy card.
In the election of Trustees, each shareholder shall be entitled to one (1)
vote per share on a cumulative basis, for each trusteeship to be filled in the
election. The candidates receiving the highest number of votes, up to the number
of trusteeships to be filled in the election, shall be elected as the Trustees
of the Trust. Votes cast by Proxy shall be cumulated at the discretion of the
proxy holder. The proposal to approve the appointment of Deloitte & Touche LLP
as independent auditors for the year ending December 31, 1997 requires approval
by Shareholders holding a majority of the Trust Shares.
THE DISSOLUTION PROPOSAL REQUIRES APPROVAL BY A MAJORITY OF THE SHAREHOLDERS
AND BY THE HOLDERS OF A MAJORITY OF THE OUTSTANDING SHARES. If fewer
Shareholders vote in favor of approval of the Dissolution Transactions than the
number required for approval, the Special Meeting may be adjourned for the
purpose of soliciting additional Proxies, or for any other purpose, and, at any
subsequent reconvening of the Special Meeting, all Proxies will be voted in the
same manner as such Proxies would have been voted at the original Special
Meeting (except for any Proxies which have theretofore effectively been revoked
or withdrawn), notwithstanding that they may have been effectively voted on the
same or any other matter at a previous meeting.
4
<PAGE>
VOTING SECURITIES AND PRINCIPAL HOLDERS
Only Shareholders of the Trust of record at the close of business on October
23, 1997 will be entitled to vote, in person or by proxy, at the Special
Meeting. On that date, there were 3,706,845 Trust Shares outstanding.
The Trustees are not aware of any beneficial owners of more than 5% of the
outstanding Trust Shares. Trust Shares beneficially owned by all of the Trustees
and officers as a group are as follows:
<TABLE>
<S> <C>
Title of Class of Securities:................. "Shares of Beneficial
Interest" (referred to in
this Proxy Statement as
"Trust Shares")
Amount Beneficially Owned:.................... 107,375 Trust Shares(1)
Percent of Class:............................. 2.90%
</TABLE>
- ------------------------
(1) Includes 21,584 Trust Shares owned by members of a Trustee's family as to
which the Trustee disclaims any beneficial ownership interest.
The Trustees and officers of the Trust have indicated that they intend to
vote their Trust Shares in favor of the Dissolution Transactions.
COSTS AND MANNER OF SOLICITATION
All expenses in connection with this solicitation will be borne by the
Trust. The Trust has engaged D.F. King & Co., Inc. ("D.F. King & Co., Inc.") to
aid in the solicitation of proxies for the Trust. D.F. King will solicit proxies
by mail, telephone, in person or otherwise. The anticipated fees of D.F. King
for such assistance will be $15,000. It is expected that solicitation will also
be made by employees of Menlo Management Company, the Trust's investment advisor
(the "Advisor"), or representatives of the Trust by mail, telephone, in person
or otherwise, without additional compensation. The Trust will also request
brokerage firms, nominees, custodians and fiduciaries to forward proxy material
to the beneficial owners of shares held of record by such persons for the
purpose of obtaining authorization for the execution of proxies. The Trust will
reimburse such persons and the Trust's transfer agent for their reasonable
out-of-pocket expenses in forwarding such material.
PROPOSAL 1
ELECTION OF TRUSTEES
It is proposed to elect a Board of five Trustees to serve for the ensuing
year and until their successors are elected and qualified, for the purpose of
implementing and carrying out the Dissolution Plan. Proxies cannot be voted for
more than the number of nominees named in this Proxy Statement. If the enclosed
form of proxy is properly executed and returned, the shares represented thereby
will be voted for the election of nominees presented below, and the proxy
holders shall in their discretion cumulate such votes. All of the nominees are
currently serving as Trustees for the Trust, and one was an original Trustee
named in the Declaration of Trust dated April 17, 1963. If for any reason any
nominee becomes unable to serve or will not serve for good cause, which is not
now anticipated, the proxy holders will vote for such substitute nominees as
they shall determine. The five candidates receiving the highest number of votes
shall be elected.
The Trustees have regular meetings approximately once a month and special
meetings as required. Twelve regular meetings and three special meetings plus
the annual meeting were held in the calendar year 1996.
5
<PAGE>
NOMINATING COMMITTEE
None.
TRUSTEES
The following table sets forth the current Trustees, each Trustee also being
an Officer and nominee for re-election as Trustee, his principal occupation,
other offices with the Trust, the period which he has served as a Trustee and
Officer of the Trust, and the number of Trust Shares owned, directly or
indirectly, by him on June 30, 1997. No person is known by the Trust to be the
beneficial owner of more than five percent of the Trust's outstanding Trust
Shares. Each person identified in the table has sole voting and investment power
with respect to all Trust Shares shown as beneficially owned by such person,
except as otherwise set forth in the notes to the table. Unless otherwise
indicated, the address of each person listed below is 1010 El Camino Real, Suite
210, Menlo Park, California 94025.
<TABLE>
<CAPTION>
NUMBER OF YEARS NO. OF
AS SHARES PERCENT
TRUSTEE/OFFICER BENEFICIALLY OF
NAME AND PRINCIPAL OFFICES WITH TRUST AGE OF TRUST OWNED CLASS(1)
- ---------------------------------------- --- --------------- ------------ -------
<S> <C> <C> <C> <C>
John H. Hoefer.......................... 81 15 68,003 1.835%
Vice President of the Trust, Private
Investor, Trustee (2)(3)
Harry E. Kellogg........................ 74 34 7,293 .197%
Treasurer of Trust, Investment
Consultant, Private Investor, Trustee
(4)
Wilcox Patterson........................ 56 17 27,900 .753%
President of Trust, Private Investor,
Trustee (5)
William S. Royce........................ 78 17 2,708 .073%
Secretary of the Trust, Management
Consultant, Private Investor, Trustee
(2)(3)(4)
Robert C. Gould (6)..................... 53 12 1,471 .040%
Vice President of the Trust, Real
Estate Manager, Trustee
</TABLE>
- ------------------------
(1) Based on 3,706,845 Trust Shares outstanding as of June 30, 1997.
(2) Member of Audit Committee.
(3) Member of Compensation Committee.
(4) Voting and investment power are shared equally with spouse.
(5) Includes 21,584 Trust Shares owned by members of Mr. Patterson's family as
to which Mr. Patterson disclaims any beneficial ownership interest.
(6) Robert C. Gould served as an Officer of the Trust for three years from 1985
to 1988 prior to his election as a Trustee and Officer in 1989.
Mr. Hoefer is a Rear Admiral, United States Naval Reserve. He was founder of
Hoefer, Dieterich and Brown, Inc., an advertising agency in San Francisco, and
was its Chairman at the time of its merger with Chiat/Day, Inc. in 1979. He was
also a Chairman of Chiat/Day, Inc. (San Francisco). Mr. Hoefer was elected a
Trustee in 1982.
Mr. Kellogg has served as Trustee of the Seattle Retail Clerks Union Pension
Fund, the GEMCO Retail Clerks Union Pension Trust Fund and is the former Vice
President--Finance and Secretary of Leslie Salt Co., a salt production company
with extensive real estate holdings in the San Francisco Bay Area. At
6
<PAGE>
Leslie Salt Co. from which he retired in 1979, Mr. Kellogg was responsible for
the financial, administrative and tax matters of the company. Mr. Kellogg was
elected Executive Vice President of the Trust on December 5, 1978 and was
President from February 22, 1980 to May 7, 1985.
Mr. Patterson is a director of Grove Farm Company, Inc., a sugar plantation
and real estate development corporation located on Kauai in the Hawaiian
Islands. He is also an independent real estate manager and investor. Mr.
Patterson served as Regional Vice President of Northern California Savings and
Loan between April 1979 and September 1980. Prior to that appointment, he served
as a Vice President and Manager of the Menlo Park branch of Northern California
Savings and Loan Association. In these capacities he has gained considerable
experience in real estate financing. Mr. Patterson was elected a Trustee in 1980
and has served as President since 1985.
Mr. Royce is an independent management consultant specializing in business
planning and regional economic development. He retired in 1984 from SRI
International (Stanford Research Institute). He has been an investor in the
Trust since 1964 and was elected a Trustee in 1980. Mr. Royce is also the
treasurer of the Silicon Valley Economic Roundtable.
Mr. Robert C. Gould is President and a Director of Menlo Management Company.
Mr. Gould has previously served as a Vice President and Secretary of the Trust
from 1985 through 1988. Mr. Gould was elected a Trustee and appointed Vice
President on June 27, 1989.
OFFICERS
Wilcox Patterson is the President of the Trust. He was initially elected on
May 7, 1985.
John Hoefer is a Vice President of the Trust. He was initially elected on
June 8, 1988.
Harry E. Kellogg is the Treasurer of the Trust. He has been Treasurer of the
Trust since its inception.
William S. Royce is the Secretary of the Trust. He was initially elected on
June 15, 1988.
Robert C. Gould is a Vice President of the Trust. He was initially elected
on June 27, 1989.
Each officer of the Trust is elected annually for the ensuing year or until
a successor is elected and qualified. There are no family relationships amongst
the Officers and Trustees.
BOARD OF TRUSTEES AND COMMITTEES OF THE BOARD
The Board of Trustees held twelve regular and three special meetings during
1996. No Trustee attended fewer than 75% of the meetings.
The Trust formerly paid each Trustee a fee of $200 per month for continuing
services, $200 for attendance at each Board meeting and $100 for each Committee
meeting attended. Payments have been suspended since June 1997.
Pacific REIT currently employs no full-time executives. All officers are
currently chosen from among the members of the Board of Trustees. All Trustees
are shareholders in the Trust. The President was formerly compensated for his
services at an annual rate of $16,200. Currently, the President is receiving no
compensation for his services. Trustees received no bonuses, stock options, or
other deferred compensation. No officer currently receives any compensation. The
aggregate direct Remuneration paid to the Trustees and officers in 1996 was
$40,100. In June 1997, the Board of Trustees voted to discontinue all salaries
and fees to the officers and Trustees.
There are no "incentive" plans currently offered by the Trust.
7
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Investment Advisor received a total of $50,000 as fees for 1996. As of
June 30, 1997, the Investment Advisor received $17,000. The Investment Advisor
currently provides his services at no cost to the Trust.
The Trust's administrative functions are performed by Menlo Management
Company, an independent real estate management organization owned by Robert C.
Gould, a Trustee of the Trust. In 1996 the total administrative fees paid to
Menlo Management Company was $150,000. Cessation of attempts to recapitalize the
Trust and the related disposition of a major portion of the Trust's assets has
reduced the Trust's administrative activity and enabled a reduction of the
administrative fees to a rate of $5,500 per month or $66,000 per year. Menlo
Management Company also provides property management, leasing, development,
financing and real estate brokerage services to the Trust. The total of all fees
earned by Menlo Management Company for 1996 totaled $510,000.
8
<PAGE>
PROPOSAL 2
APPOINTMENT OF THE TRUST'S AUDITORS
Unless otherwise indicated on any proxy, it is intended that the shares
represented by the enclosed proxy will be voted for the appointment of Deloitte
& Touche LLP as independent auditors for the examination of the financial
statements of the Trust for the year ending December 31, 1997. Deloitte & Touche
LLP has served as independent auditors since 1978. The Board of Trustees, on
recommendation of the audit committee, has approved the selection of Deloitte &
Touche LLP as auditors for 1997.
Representatives of Deloitte & Touche LLP are expected to be present at the
Special Meeting to respond to appropriate questions and to make a statement
should they desire to do so.
The Declaration of Trust does not require that shareholders approve the
appointment of independent auditors but the Trustees considered it appropriate
to obtain such approval. If the shareholders vote against the approval, the
Trustees will appoint other independent auditors for 1997. The votes of more
than 50% of the shares voting are required for approval.
9
<PAGE>
PROPOSAL 3
APPROVAL OF THE DISSOLUTION TRANSACTIONS
INTRODUCTION
The Trustees have adopted the Dissolution Plan for the purpose of
dissolving, terminating and liquidating the Trust. Pursuant to the Dissolution
Plan, the Trustees are soliciting the accompanying Proxy from the Shareholders
of the Trust to approve a proposal to adopt the Dissolution Plan.
Following termination of the previously announced merger agreement with Pan
Pacific Development (U.S.), Inc. and review by investment bankers and the
investment advisor of the Trust, the Trustees failed to identify viable
alternatives for developing the Trust, and have therefore proposed an orderly
liquidation of the assets of the Trust as in the best interests of the
Shareholders. The Trustees and officers of the Trust who own approximately 2.9%
of the outstanding Trust Shares have indicated to the Trust that they intend to
vote all such Trust Shares to approve the Dissolution Plan.
ALTERNATIVES CONSIDERED BY THE BOARD OF TRUSTEES
Prior to recommending Dissolution of the Trust to the Shareholders, the
Trustees explored and considered many alternatives, including those summarized
below.
Amidst the prolonged and deep national economic recession which affected
California from 1991 onwards, the Trust found access to affordable equity and
long-term debt capital increasingly difficult. During 1992 in order to create
positive options in this difficult environment, the Trust engaged Dean Witter
Reynolds, Inc. to act as an advisor to analyze and to make recommendations
regarding the Trust's overall investment position relative to the capital and
real estate markets. By the end of the 1992 Dean Witter recommended that the
Trust list its shares on a national stock exchange, reduce dividend payments in
order to conserve capital, seek private equity investment at a discount price to
cover short-term capital needs, reduce short-term debt and, pending such
listing, reorganize as a self-administered equity trust.
In early 1993, the Trust began to implement this strategy. It suspended
dividends in February 1993 in order to conserve capital. It also initiated
discussions with private equity sources seeking an equity investment adequate to
reduce debt and enable the Trust to grow with a long term goal of positioning
the Trust for a successful national public offering. By Summer of 1993 the
public REIT market had become quite strong and the Trust engaged Montgomery
Securities, Inc. and Oppenheimer and Co., Inc. to act as its underwriters for a
proposed public offering. In the underwriters' opinion there were two critical
elements for a successful national offering: the need to substantially increase
the Trust's property asset base and to obtain shareholder approval for
conversion of the Trust to a Maryland Corporation. The Trust immediately began
to develop options to purchase ten additional shopping centers to bring it up to
national size. A new Maryland structure for a self-administered trust was
organized. However, during the Fall of 1993 the market for initial public
offerings of real estate investment trusts deteriorated rapidly due to rising
interest rates and a flood of REIT offerings. Therefore the Trust was forced to
postpone its plan for a national public offering. It then simultaneously
embarked on exploring alternative recapitalization approaches, including sale,
merger with another real estate investment trust and private equity and debt
placements. During the Spring of 1994 the Trust formally engaged the services of
Morgan Stanley Realty, Inc., investment bankers, to pursue these alternative
strategies and to act as advisor to the Trust.
Morgan Stanley developed offers of either merger, joint-venture and direct
equity/debt placement during the following months. However, due primarily to the
continuing recession in the California real estate markets, continued reductions
in real estate valuation, and emerging difficulties with several major tenants
at the Trust's properties, all of these proposals were financially unacceptable
to the Trust. As a consequence the Trust determined that it would have to sell
some of its real estate assets in order to reduce debt while continuing to
explore possible equity investment partners. While the Trust did successfully
sell
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two of its major assets in 1995 and 1996, the effort to secure equity investment
partners on acceptable terms was not achieved due chiefly to tenant problems in
the Trust's asset portfolio.
These tenant problems included the loss of several anchor tenants at two of
the Trust's shopping centers. These losses were due primarily to changes in the
retailing industry. The trend towards discount and warehouse type stores and the
growth of predatory market-share tactics amongst "big-box" retailers created
many problems for established retailers. The negative impact of these trends
most gravely affected the Trust at its El Portal Shopping Center in San Pablo
and at Monterey Plaza Shopping Center in San Jose, two of the Trust's major cash
flow generators. At Kings Court Shopping Center, an attractive and very
successful property, complications arising from toxic pollution and a maturing
ground lease effectively prevented equity investors from stepping forward. These
issues emerged against the continuing backdrop of the deepest recession in
California since the 1930's.
In November 1996 the Trust entered into an agreement with Pan Pacific
Development (U.S.) Inc., ("Pan Pacific") whereby the Trust proposed to transfer
its assets and liabilities to a Maryland corporation ("PAC REIT"), and then to
merge a subsidiary of PAC REIT with a subsidiary of Pan Pacific to reduce the
Trust's debt and to acquire additional property with a view to listing on a
national stock exchange. This agreement ultimately failed in March 1997 because
of the above problems. After the failure of these negotiations the Trust sold
one more of its centers and all of its Notes Receivable to Pan Pacific in order
to reduce debt and put the Trust into a balanced cash flow situation. This
transaction generated sufficient capital to eliminate all remaining short term
debt and create a positive cash balance. At this juncture the Trustees concluded
that the only feasible way forward was through liquidation of the Trust's
remaining assets.
If the Trust were simply permitted to continue in existence, its funds would
likely be consumed in the course of its business in accounting, legal and other
fees relating to the routine corporate filings which must be made by all public
companies. Accordingly, the Board of Trusties determined that the best course to
follow was to dissolve the Trust as promptly as possible.
SHAREHOLDER ACTION PROPOSED
At the Special Meeting, the shareholders of the Trust will be asked to vote
on a proposal to adopt the Dissolution Plan, pursuant to which the Trust,
without further action by the Shareholders (except as such action may be
required by law or as the Board of Trustees may deem appropriate), will dissolve
after payment of, or provisions for the payment of, legally enforceable
obligations of the Trust. Any remaining assets would be distributed to
Shareholders. PURSUANT TO THE AMENDED AND RESTATED DECLARATION OF TRUST OF THE
TRUST AND THE CALIFORNIA CORPORATION CODE (AND THE REGULATIONS PROMULGATED
THEREUNDER), THE APPROVAL OF BOTH A MAJORITY OF THE SHAREHOLDERS (A "HEAD COUNT"
VOTE) AND THE APPROVAL OF THE HOLDERS OF A MAJORITY OF THE OUTSTANDING TRUST
SHARES IS REQUIRED TO ADOPT THE DISSOLUTION PLAN.
THE TEXT OF THE PLAN IS CONTAINED IN EXHIBIT A ATTACHED HERETO. THE BRIEF
DESCRIPTION OF THE PLAN SET FORTH HEREIN IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE DISSOLUTION PLAN.
DESCRIPTION OF THE DISSOLUTION PLAN
The Trustees have unanimously adopted a Dissolution Plan providing for the
dissolution, termination and liquidation of the Trust conditioned upon approval
by the Shareholders of the Trust, for which the Proxy described in this Proxy
Statement is being solicited.
The Dissolution Plan contemplates that upon its adoption by the Trust's
Shareholders, payment of, or provision for payment of, any legally enforceable
obligations of the Trust will be made out of the Trust's assets. Thereafter,
remaining assets will be distributed to Shareholders as promptly as possible.
The
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Dissolution Plan also authorizes the Board of Trustees to abandon the
dissolution of the Trust at any time if the Board of Trustees deems such action
to be in the best interests of the Shareholders.
The following is a summary of the transactions contemplated by the
Dissolution Plan. Reference is made to EXHIBIT A for a complete description of
the terms and conditions thereof.
The Dissolution Plan provides for the dissolution, termination and
liquidation of the Trust pursuant to the applicable provisions of the Amended
and Restated Declaration of Trust and the California Corporations Code (and the
regulations promulgated thereunder). The effective date of the Dissolution Plan
will be the date of its approval by the Shareholders. If the Dissolution Plan is
approved by the Shareholders, the stock transfer books of the Trust will be
closed as of the close of business on a date fixed by the Board of Trustees for
the distribution. Thereafter, no assignments or transfers of the Trust Shares
(except for those occurring by will, intestate succession or operation of law)
will be recorded.
OPERATIONS. Upon the Dissolution Plan becoming effective, the Trust will
cease business operations; except, however, that the Trust will complete the
sale of Kings Court Shopping Center, the two parcels of land in San Pablo,
California and Redding, California and complete the redevelopment and sale of
the Wanlass Shopping Center property. The Trust's corporate existence will
continue thereafter, but solely for the purpose of completing work in progress,
disposing of its assets, providing for the satisfaction of its obligations,
adjusting and winding up its business and affairs, and distributing its
remaining assets under the Dissolution Plan. No further approvals by the
Shareholders will be obtained. A distribution following the liquidation of these
remaining assets will be conditioned upon setting aside a sufficient amount of
money for the purpose of meeting any residual Trust obligations or liabilities
which it has not otherwise met. These include the leasehold, financing and
environmental and indemnification obligations and liabilities described below.
See "Description of Certain Long-Term Liabilities". Based on the Trustees'
estimate of residual equity value before any of these set asides, the maximum
value of the Trust's net equity is expected not to exceed $2.00 per share and
will probably be less than this amount.
SHARE CERTIFICATES. At the time of any distribution of assets to the
Shareholders, those Shareholders who have share certificates will be required to
surrender them before they will receive any cash or other assets to which they
are entitled under the Dissolution Plan. This will not be necessary for those
Shareholders who have elected to have their shares held for them by the Transfer
Agent.
If a Shareholder fails to surrender any certificate he has in his
possession, his share of any distribution will be retained until his certificate
is surrendered or until he furnishes an indemnity bond in the event of loss or
destruction of the certificate. No interest will be paid or accrued on the cash
or other assets payable upon surrender of Trust share certificates. The
Shareholders of the Trust will be notified as promptly as possible of the
effective date of the Dissolution Plan and will be advised as to the procedure
for surrender of their certificates in exchange for any remaining cash or other
assets to which they are entitled.
PAYMENT OF LEGALLY ENFORCEABLE CLAIMS. The Trust will satisfy, or provide
for the satisfaction of, all legally enforceable claims and obligations of the
Trust in an orderly manner. This will include claims arising from the residual
liabilities discussed below. See "Description of Certain Long-Term Liabilities".
CONTINUED INDEMNIFICATION OF TRUSTEES AND OFFICERS. The Trust will also
reserve sufficient assets (or obtain such insurance) as shall be necessary to
provide for the continued indemnification of the Trustees and the officers of
the Trust to the full extent provided by the Declaration of Trust, any existing
indemnification agreements between the Trust and any of such persons, and
applicable law.
DISTRIBUTIONS TO SHAREHOLDERS. It is impossible to determine at this time
with any precision the aggregate net proceeds that may ultimately be available
for distribution to the Trust's shareholders upon liquidation or the timing of
any such distribution. That amount will depend upon a variety of factors,
including the timing of and the net proceeds realized from the sale of the
Trust's assets, as well as the ultimate amounts of liquidation-related expenses
and other obligations and liabilities that must be satisfied
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<PAGE>
out of the Trust's assets. After satisfaction of all of the Trust's legally
enforceable obligations, remaining assets will be distributed to the
Shareholders of the Trust in accordance with their respective shareholdings.
MAJORITY OF TRUST SHAREHOLDERS BIND MINORITY. If the requisite number of
Shareholders of the Trust approve the Dissolution Transactions, the Trust will
be dissolved, terminated and liquidated, even though individual Trust
Shareholders may have voted against the Dissolution.
TERMINATION OF REIT STATUS. The Trustees shall have the authority to
terminate the Trust's status as a real estate investment trust under Sections
856-860 of the Internal Revenue Code of 1986, as amended, if they determine that
such action would be in the best interests of the Shareholders.
DESCRIPTION OF CERTAIN LONG-TERM LIABILITIES
The Trust has certain long-term obligations and liabilities that will affect
the timing and amount of any distributions to the Trust's Shareholders upon the
liquidation of its assets.
GROUND LEASE OBLIGATIONS. The Trust has long-term obligations under three
separate ground leases: First, the Mt. Shasta shopping center ground lease;
second, the Kings Court shopping center ground lease; and third, the Wanlass
shopping center ground lease. If the Trust is unable to negotiate releases for
its obligations pursuant to the three ground leases, then the Trust must reserve
sufficient assets to satisfy its obligations pursuant to the ground leases.
The Trust is obligated pursuant to the Mt. Shasta ground lease to make
annual rental payments of the greater of either $24,000 or eight percent of
gross annual rental revenues received from the shopping center tenants until
July 11, 2034. During the year ended December 31, 1996, the actual ground rental
paid to the ground lessor was $40,211, based on gross annual rents of $504,381.
As a general partner of Kingsco, a California general partnership, the Trust
is jointly and severally liable for the partnership's rental obligations
pursuant to the Kings Court ground lease, which extends through July 24, 2024.
The Trust's rental payment obligation for the Kings Court ground lease is the
greater of either $40,000 per year or a percentage of gross rental revenues
received from the shopping center tenants. During the year ended December 31,
1996, that actual ground rental paid to the ground lessor was $177,569, based on
gross rents of $1,538,367.
The Trust is obligated pursuant to the Wanlass Shopping Center ground lease
to pay $147,872 per year as rental payments, with adjustments based upon the
rental rate at which a portion of the leased property is subleased to acceptable
tenants. The ground lease extends through May, 2045. The lease contains a "put"
option, by virtue of which, at any time after the death of one of the ground
lessors or after May 25, 1998, the ground lessor may require that the Trust
purchase the real property in exchange for extinguishing the lease. The terms of
the "put" option indicate a purchase price of ten times the amount of the ground
rental in force at the time of the exercise of the "put" option. The Trust is
presently engaged in completing the development of retail buildings for tenants
at this center.
FINANCING OBLIGATIONS. The Trust is also liable pursuant to certain
long-term financing agreements.
The Trust is primary obligor on a Promissory Note to The Travelers Insurance
Company. This Note is secured by a First Deed of Trust on the Trust's leasehold
estate at Mt. Shasta Shopping Center. The Note will have a principal balance of
$1,478,527 at September 30, 1997 and requires minimum payments of principal and
interest at the rate of $237,828 per year. The Note matures in 1999 when a
balloon payment of $1,338,198 is due and payable in full.
The Trust is obligated to make subsidy payments to the owner of Menlo Center
as a consequence of the terms under which the Trust sold the property to its
current owner in February, 1996. Under the terms of this agreement the Trust is
required to make up any shortfall in net income derived from the Menlo Center
insofar as such income fails to achieve a minimum amount of $464,941 per year.
In 1996 there was a
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subsidy payment made of $37,132. No subsidy payment is expected to be made in
1997. The agreement obligations expire on February 28, 2000.
ENVIRONMENTAL OBLIGATIONS. The Trust may also be liable for certain
environmental claims relating to two of its properties.
The Trust may be liable for a toxic spill caused by a dry cleaning tenant at
one of the Trust's former properties, the El Portal Shopping Center, in San
Pablo, California. The spill probably occurred prior to the Trust's acquisition
of El Portal in 1976. Although the Trust no longer owns the El Portal Shopping
Center property, the Trust remains potentially liable for the costs of the
environmental clean-up. The liability has been quantified and assessed by
professional engineers at approximately $100,000; however, this liability could
be a greater amount. The Trust has not yet determined whether it may have
recourse against third parties for this environmental damage. A second toxic
spill emanating from an adjacent property has affected El Portal. The spill is
presently being remediated and Atlantic-Richfield Company, Inc. ("ARCO") has
indicated that it will take responsibility for the costs of remediation.
The Kings Court Shopping Center has suffered two known toxic spills. One is
from the Exxon gas station which leases a parcel of land on the site. This spill
is presently under remediation in accordance with a remediation plan approved by
the Regional Water Quality Control Board and the County of Santa Clara
Department of Health. Exxon Corporation has agreed to indemnify the Kingsco
Partnership against all clean-up, legal and engineering costs and related fees
arising from this spill.
A second spill from a dry cleaner occurred prior to the Trust's ownership of
Kings Court Shopping Center. This spill is presently under remediation. The
Reliance Insurance Group ("Reliance") has indicated in writing that it accepts
responsibility with reservations for rejection of the agreement in the event of
subsequent discovery of a cause of non-liability. Reliance is paying for the
costs of remediation and it has taken financial and physical responsibility for
implementing a clean-up plan which has been approved by the Regional Water
Quality Control Board and County of Santa Clara Department of Health.
The Kingsco Partnership is a General Partnership and so the Trust's
liability is shared jointly and severally with the other general partners. The
Trust believes that the terms under which it purchased its partnership interest
will provide financial protection from the co-general partners. However, it is
possible ultimately that the Trust could be held liable in the event the
co-general partners refuse to or are unable to meet their obligation, and in the
event that Reliance Insurance abrogates its provision of indemnity under color
of a legal deficit in the insurance coverage under which Kingsco has been able
thus far to claim protection as an insured.
FEDERAL INCOME TAX CONSEQUENCES
TAXATION OF THE TRUST. The Trust has elected to qualify as a real estate
investment trust ("REIT") under Sections 856-860 (the "REIT Provisions") of the
Internal Revenue Code of 1986, as amended (the "Code"). Under the REIT
Provisions, an entity that qualifies as a REIT is generally not subject to
federal income tax with respect to income which it distributes to its
Shareholders. If the Dissolution Plan is adopted by the Shareholders, it is
presently contemplated that the Trust will be liquidated in a manner that will
allow the Trust to continue to meet the requirements of the REIT Provisions
until the distribution of all of its assets to the Shareholders (including the
possible transfer of assets to a liquidating trust), although the Plan gives the
Trustees the authority to cause the Trust to discontinue its status as a REIT at
any time if they find it in the best interests of the Shareholders to do so.
In order to maintain its status as a REIT, the Trust must continue to
satisfy various technical requirements imposed by the Code, including
requirements that it derive its gross income from qualified sources, that it
hold qualifying assets, and that it make certain distributions to its
Shareholders. So long as the Trust qualifies for taxation as a REIT, it will not
be subject to federal corporate income taxes on net income that is currently
distributed to the Shareholders because a REIT generally is entitled to a
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dividends-paid deduction. The Code also provides that distributions pursuant to
a plan of liquidation that are made 24 months after adoption of the plan of
liquidation will, to the extent of earnings and profits of the REIT for the
taxable year, be treated as dividends for purposes of the dividends-paid
deduction. To minimize federal income taxation of the Trust, therefore, the
Trustees intend to complete the Dissolution Plan within 24 months of its
adoption. If necessary, the Trustees may utilize a Liquidating Trust to complete
the liquidation and dissolution of the Trust within the 24-month period.
TAXATION OF SHAREHOLDERS. The amount of any cash and the fair market value
of any property (including a pro rata share of the fair market value of any
assets that might be contributed to a liquidating trust) distributed to a
Shareholder pursuant to the Dissolution Plan will in general be applied first to
reduce the Shareholder's basis in such Shareholder's Trust Shares. Liquidating
distributions in excess of the Shareholder's basis will be taxed as a capital
gain if the Trust Shares are held by the Shareholder as a capital asset. If the
sum of all liquidating distributions with respect to Trust Shares held as a
capital asset is less than the Shareholder's basis therein, the difference will
constitute a capital loss. A Shareholder's gain or loss on liquidating
distributions will be calculated separately with respect to Trust Shares with
different bases or holding periods.
The taxation of capital gains has been extensively changed pursuant to the
Taxpayer Relief Act of 1997, passed by Congress on July 31, 1997 and signed into
law by the President on August 5, 1997. Generally, the holding periods for
long-term capital assets have been increased and the tax rates for long-term
capital gains have been reduced. After July 28, 1997, sales and exchanges of
most assets, including assets such as the Shares, held for more than 18 months
are subject to a maximum capital gain rate of 20%. For assets held more than 12
months and not more than 18 months, the maximum capital gain rate is 28%.
POSSIBLE USE OF LIQUIDATING TRUST. As noted above, a dividends-paid
deduction for the Trust with respect to liquidating distributions is available
for distributions within 24 months after the adoption of the Dissolution Plan.
In the event that the Trust will not have completed the liquidation of all of
its assets within the required period, it is possible that the Trustees might,
if they determine it to be in the best interests of the Trust and the
Shareholders, contribute the remaining assets of the Trust to a liquidating
trust and distribute to Shareholders beneficial interests in such liquidating
trust. Upon the distribution of beneficial interests in a liquidating trust, the
Shareholders would be required to recognize gain to the extent the fair market
value of such interests exceeded their remaining basis in the Shares. This could
cause a Shareholder to incur a tax liability upon the receipt of the beneficial
interests in the liquidating trust even though the Shareholder would have
received no cash with which to pay such liability.
The Trustees expect that any liquidating trust established with respect to
the assets of the Trust would qualify as a grantor trust under the Code.
Shareholders holding beneficial interests in a grantor trust would be deemed to
own a pro rata portion of the assets of such trust and would be required to
report on their own federal income tax returns their pro rata portion of any
income, gain, deduction or loss realized by the trust. It is possible that
Shareholders that are tax-exempt organizations, including pension trusts and
individual retirement accounts, would realize unrelated business taxable income
if assets contributed to the liquidating trust were encumbered by debt
obligations, such that assets held by the liquidating trust would constitute
debt-financed property under Section 514 of the Code.
THE ABOVE DISCUSSION DOES NOT ATTEMPT TO DISCUSS ALL TAX MATTERS THAT MAY
AFFECT THE TRUST OR THE SHAREHOLDERS IN THE COURSE OF THE LIQUIDATION, NOR TO
CONSIDER VARIOUS FACTS OR LIMITATIONS APPLICABLE TO ANY PARTICULAR SHAREHOLDER.
SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISERS WITH RESPECT TO THE TAX
CONSEQUENCES TO THEM OF THE LIQUIDATION.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
As of June 30, 1997, the Trust had approximately 3,500 Shareholders. The
following table sets forth information regarding the beneficial ownership of
Trust Shares by certain of the Trust's executive officers and Trustees and by
the Trust's executive officers and Trustees as a group, as of June 30, 1997. No
person is known by the Trust to be the beneficial owner of more than five
percent of the Trust's outstanding Trust Shares. Each person identified in the
table has sole voting and investment power with respect to all Trust Shares
shown as beneficially owned by such person, except as otherwise set forth in the
notes to the table. Unless otherwise indicated, the address of each person
listed below is 1010 El Camino Real, Suite 210, Menlo Park, California 94025.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
NAME TRUST SHARES TOTAL(1)
- -------------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Wilcox Patterson (2)(3)............................................. 27,900 0.753%
John H. Hoefer...................................................... 68,003 1.835%
Robert C. Gould..................................................... 1,471 0.040%
Harry E. Kellogg (3)................................................ 7,293 0.197%
William S. Royce.................................................... 2,708 0.073%
All Executive Officers and Directors as a Group
(five persons).................................................... 107,375 2.898%
</TABLE>
- ------------------------
(1) Based on 3,706,845 Trust Shares outstanding as of June 30, 1997.
(2) Includes 21,584 Trust Shares owned by members of Mr. Patterson's family as
to which Mr. Patterson disclaims any beneficial ownership interest.
(3) Voting and investment powers are shared.
DISCRETIONARY AUTHORITY
While the Notice of the Special Meeting of Shareholders calls for the
transaction of such other business as may properly come before the meeting, the
Trustees have no knowledge of any matters to be presented for action by the
Shareholders other than as set forth above. The enclosed Proxy gives
discretionary authority, however, in the event any additional matters should be
presented.
CERTAIN LEGAL MATTERS
Certain legal matters will be passed upon for the Trust by Gibson, Dunn &
Crutcher LLP, Palo Alto, California. The description of federal income tax
consequences contained in this Proxy Statement under "Federal Income Tax
Considerations" is based upon the opinion of Gibson, Dunn & Crutcher LLP.
SHAREHOLDER PROPOSALS
If any Shareholder wishes to submit a proposal to be voted on at the 1998
Annual Meeting of the Shareholders, the Shareholder must submit the proposal to
the Trust on or before January 15, 1998 and must be a beneficial owner at that
time.
REPORTS
The Trust will provide a copy of its Annual Report on Form 10-K for the year
ended December 31, 1996, a copy of its Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997, a copy of its Report on Form 8-K dated April 1,
1997, a copy of its Report on Form 8-K/A dated April 1, 1997 and a copy of its
Report on Form 8-K dated July 9, 1997 to any shareholder who so requests in
writing to the Trust's address first set forth above or by calling (415)
327-7147.
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SHAREHOLDERS ARE URGED TO IMMEDIATELY MARK, DATE, SIGN AND RETURN THE ENCLOSED
PROXY IN THE ENVELOPE PROVIDED, TO WHICH NO POSTAGE NEED BE AFFIXED IF MAILED IN
THE UNITED STATES.
BY ORDER OF THE TRUSTEES
WILCOX PATTERSON,
PRESIDENT
October 23, 1997
Menlo Park, California
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EXHIBIT A
PLAN OF DISSOLUTION, TERMINATION AND LIQUIDATION
This Plan of Dissolution, Termination and Liquidation (this "Plan") is for
the purpose of effecting the dissolution, termination and complete liquidation
of PACIFIC REAL ESTATE INVESTMENT TRUST (the "Trust").
1. APPROVAL OF THIS PLAN. In accordance with Article 11 of the Amended and
Restated Declaration of Trust of the Trust, this Plan shall be submitted to the
shareholders of the Trust for approval at the Special Meeting in Lieu of the
Annual Meeting of Shareholders to be held for that purpose. This Plan shall
become effective upon the approval of a majority of the shareholders of the
Trust and the approval of the holders of a majority of the outstanding shares
(the "Effective Date")
2. CESSATION OF BUSINESS. Following approval of this Plan, the Trust shall
not engage in any further business activities, except for the purpose of
completing work in process, including but not limited to the redevelopment of
the Wanlass Shopping Center property, disposing of its assets, providing for
satisfaction of its obligations, adjusting and winding up its business and
affairs, and distributing the proceeds from the disposition of its assets in
accordance with this Plan. The Trustees then in office shall continue in office
solely for that purpose.
3. CONTINUING EMPLOYEES. For the purpose of effecting the liquidation of
the Trust's assets, the Trust shall retain, subject to the pleasure of the Board
of Trustees, such employees as the Board of Trustees deems desirable to
supervise the liquidation.
4. EXPENSES OF LIQUIDATION. The Board of Trustees may provide, from the
assets of the Trust, reasonable funds for payment of the expenses of the
dissolution, termination and liquidation of the Trust, including filing fees and
other expenses relating to the holding of the Special Meeting in Lieu of the
Annual Meeting of Shareholders to consider this Plan and other documentation
required in connection with this Plan, continuation of employees engaged in the
liquidation process, accounting and attorneys' fees and expenses, and other
reasonable fees and expenses incurred in connection with the liquidation
process.
5. PAYMENT OF LEGALLY ENFORCEABLE CLAIMS. The Trust shall satisfy, or
provide for the satisfaction of, all legally enforceable claims and obligations
of the Trust in an orderly manner.
6. PROVISION FOR CONTINUED INDEMNIFICATION OF TRUSTEES AND OFFICERS. The
Trust shall reserve sufficient assets (or obtain such insurance) as shall be
necessary to provide for continued indemnification of the Trustees and officers
of the Trust to the full extent provided by the Declaration of Trust, any
existing indemnification agreements between the Trust and any of such persons,
and applicable law.
7. DISTRIBUTION TO SHAREHOLDERS. After satisfaction of all of the Trust's
legally enforceable obligations, remaining assets will be distributed to the
shareholders of the Trust in accordance with their respective shareholdings.
8. TERMINATION OF REIT STATUS. In the course of liquidation, the Board of
Trustees, acting in its discretion, shall have the authority to terminate the
Trust's election to be taxed as a real estate investment trust under Sections
856-860 of the Internal Revenue Code of 1986, as amended, if it determines that
such action would be in the best interests of the Shareholders.
9. LIQUIDATING TRUST. The Board of Trustees may cause the Trust to create
a liquidating trust (the "Liquidating Trust") and to distribute beneficial
interests in the Liquidating Trust to the Shareholders as part of the
liquidation process. The Liquidating Trust shall be constituted pursuant to a
Liquidating Trust Agreement in such form as the Board of Trustees may approve,
it being intended that the transfer and assignment to the Liquidating Trust
pursuant hereto and the distribution to Shareholders of the beneficial interests
therein shall constitute a part of the final liquidating distribution by the
Trust to the Shareholders
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of their pro rata interest in the remaining amount of cash and other property
held by or for the account of the Trust. From and after the date of the Trust's
transfer of cash and property to the Liquidating Trust, the Trust shall have no
interest of any character in and to any such cash and property and all of such
cash and property shall thereafter be held by the Liquidating Trust solely for
the benefit of and ultimate distribution of the Shareholders, subject to any
unsatisfied debts, liabilities and expenses.
10. AUTHORIZATION. The Board of Trustees of the Trust, or the trustees of
the Liquidating Trust, and such officers of the Trust as the Board of Trustees
may direct, are hereby authorized to interpret the provisions of this Plan and
are hereby authorized and directed to take such further actions, to execute such
agreements, conveyances, assignments, transfers, certificates and other
documents, as may in their judgment be necessary or desirable in order to wind
up expeditiously the affairs of the Trust and complete the liquidation thereof,
including, without limitation, (i) the execution of any contracts, deeds,
assignments or other instruments necessary or appropriate to sell or otherwise
dispose of, any and all property of the Trust, whether real or personal,
tangible or intangible, (ii) the appointment of other persons to carry out any
aspect of this Plan, (iii) the temporary investment of funds in such medium as
the Board of Trustees may deem appropriate, and (iv) the modification of this
Plan as may be necessary to implement this Plan. The death, resignation or other
disability of any Trustee or officer of the Trust shall not impair the authority
of the surviving or remaining Trustees or officers of the Trust (or any persons
appointed as substitutes therefor) to exercise any of the powers provided for in
this Plan. Upon such death, resignation or other disability, the surviving or
remaining Trustees shall have the authority to fill the vacancy or vacancies so
created, but the failure to fill such vacancy or vacancies shall not impair the
authority of the surviving or remaining Trustees or officers to exercise any of
the powers provided for in this Plan.
11. TERMINATION OF THIS PLAN. The Board of Trustees may, by vote of the
majority of the Trustees then in office, terminate this Plan and revoke the
dissolution of the Trust, whether or not a vote of the shareholders has
previously occurred.
12. DECLARATION OF TRUST. The approval of this Plan of Complete
Liquidation and Termination by the shareholders as provided in paragraph 1
hereof shall constitute the authorization and approval contemplated by Section
11.5 of the Trust's Declaration of Trust for (i) the termination of the Trust,
(ii) the sale of all or substantially all of the Trust Property and (iii) the
amendment of the Declaration of Trust pursuant to Section 11.1 thereof such that
the provisions of this Plan shall supersede and take precedence over any
conflicting provision of the Declaration of Trust. Following such approval by
the shareholders, a certificate or certificates setting forth such approval
shall be recorded or filed pursuant to Section 12.4 of the Declaration of Trust,
which certificate shall constitute evidence of the authorization and approval of
this Plan and of the amendment of the Declaration of Trust as aforesaid.
A-2
<PAGE>
PACIFIC REAL ESTATE INVESTMENT TRUST
1010 EL CAMINO REAL, SUITE 210
MENLO PARK, CALIFORNIA 94025
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE TRUSTEES
The undersigned hereby appoints Wilcox Patterson, Harry E. Kellogg and
Robert C. Gould as proxies, each with the power to appoint his substitute, and
hereby authorizes each of them, having authority hereby to act alone, to
represent and to vote, as designated below, all the shares of beneficial
interest ("Trust Shares") of Pacific Real Estate Investment Trust (the "Trust"),
held of record by the undersigned on October 23, 1997, at the Special Meeting of
Shareholders in Lieu of the Annual Meeting to be held on November 20, 1997, at
10:00 a.m. at The Holiday Inn, 625 El Camino Real, Palo Alto, California, or any
postponement or adjournment thereof, on the following proposals.
1. To vote for the election of the following nominees for Trustee listed
below, and to cumulate such votes in their discretion:
J. Hoefer, H. Kellogg, W. Patterson, W. Royce, and R. Gould.
For / / Against / / Abstain / /
For / /, except withheld from the following nominees: _________________ .
2. Approval of appointment of Deloitte & Touche LLP as independent auditors
for the year ending December 31, 1997.
For / / Against / / Abstain / /
3. Proposal to approve the dissolution, termination and liquidation of the
Trust through a series of transactions described in the proposed Plan of
Dissolution, Termination and Liquidation, a copy of which is attached as
EXHIBIT A to the accompanying Proxy Statement.
For / / Against / / Abstain / /
PLEASE SIGN WHERE INDICATED ON THE REVERSE SIDE OF THIS PROXY.
<PAGE>
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting and any postponements or
adjournments thereof.
For / / Against / / Abstain / /
THIS PROXY IS SOLICITED BY THE TRUSTEES AND MAY BE REVOKED PRIOR TO
EXERCISE. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IN THE ABSENCE OF DIRECTION, THIS PROXY WILL BE
VOTED "FOR" ITEMS 1, 2 AND 3.
DATED: ___________________________
__________________________________
Signature of Shareholder
__________________________________
Signature (if held jointly)
INSTRUCTIONS (IMPORTANT) Please
sign exactly as name appears
hereon. Executors, Administrators,
Trustees, Guardians and Attorneys
should give full title. If shares
are registered in more than one
name, ALL registered owners should
sign.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY
USING THE ENCLOSED ENVELOPE
