<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED JUNE 30, 1999
Commission File Number 0-8725
PACIFIC REAL ESTATE INVESTMENT TRUST
A CALIFORNIA TRUST
I.R.S. Employer Identification No. 94-1572930
1010 El Camino Real, Suite 210
Menlo Park, CA 94025
Telephone: (650) 327-7147
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------- -------
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the close of the period covered by this report.
$10 Par Value, 3,706,845 shares
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<PAGE>
PACIFIC REAL ESTATE INVESTMENT TRUST
PART I - FINANCIAL INFORMATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
ITEM I - FINANCIAL STATEMENTS THREE MONTHS ENDED SIX MONTHS ENDED
------------------ ----------------
JUNE 30, 1999 JUNE 30, 1998 JUNE 30, 1999 JUNE 30, 1998
------------- ------------- ------------- -------------
(LIQUIDATION (LIQUIDATION (LIQUIDATION (LIQUIDATION
BASIS) BASIS) BASIS) BASIS)
<S> <C> <C> <C> <C>
Rental revenues............................................ $ 48,000 $ 465,000 $ 94,000 $ 871,000
---------- ----------- ---------- -----------
Operating expenses (including related party amounts of
$64,000 for the three months ended June 30, 1999, $32,000
for the three months ended June 30, 1998, $82,000 for the
six months ended June 30, 1999 and $108,000 for the
six months ended June 30, 1998)
Operating............................................ 53,000 143,000 68,000 330,000
Property tax......................................... 5,000 23,000 10,000 46,000
General and administrative........................... 129,000 78,000 247,000 173,000
Property management fees............................ 3,000 16,000 5,000 31,000
Loss (gain) on property sale......................... (36,000) (36,000)
---------- ----------- ---------- -----------
Total operating expenses.......................... 190,000 224,000 330,000 544,000
---------- ----------- ---------- -----------
Operating income (loss).................................... (142,000) 241,000 (236,000) 327,000
---------- ----------- ---------- -----------
Other income/(expense):
Interest income...................................... 35,000 24,000 73,000 47,000
Interest expense..................................... (33,000) (65,000)
---------- ----------- ---------- -----------
Total other income/(expense)........................ 35,000 (9,000) 73,000 (18,000)
---------- ----------- ---------- -----------
Net income (loss) before minority interest................. (107,000) 232,000 (163,000) 309,000
---------- ----------- ---------- -----------
Minority interest in joint venture......................... (172,000) (313,000)
Income tax................................................. (65,000)
---------- ----------- ---------- -----------
Net income (loss).......................................... $(107,000) $ 60,000 $(228,000) $ (4,000)
---------- ----------- ---------- -----------
---------- ----------- ---------- -----------
Basic and diluted income (loss) per share of beneficial
interest................................................ $ (0.03) $ 0.02 $ (0.06) $ (0.00)
---------- ----------- ---------- -----------
---------- ----------- ---------- -----------
</TABLE>
See notes to consolidated financial statements.
Page 1 of 6
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PACIFIC REAL ESTATE INVESTMENT TRUST
CONSOLIDATED STATEMENTS OF NET ASSETS
(LIQUIDATION BASIS)
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
JUNE 30,1999 DEC 31, 1998
------------------ -----------------
<S> <C> <C>
Investment in operating commercial properties:
Land................................................. $ 1,650,000 $ 1,650,000
Buildings and improvements........................... 1,344,000 1,275,000
------------------ -----------------
Commercial properties - net.......................... 2,994,000 2,925,000
Cash........................................................ 3,637,000 3,563,000
Accounts receivable (net of allowance of $33,000 in 1999
and $42,000 in 1998)........................................ 12,000 30,000
Other assets................................................ 177,000 578,000
------------------ -----------------
Total.............................................. $ 6,820,000 $ 7,096,000
------------------ -----------------
------------------ -----------------
LIABILITIES
Security deposits..................................... $ 4,000 $ 1,000
Accounts payable and other liabilities................ 18,000 69,000
Reserve for estimated costs during the period of
liquidation........................................... 244,000 244,000
------------------ -----------------
Total liabilities.................................. 266,000 314,000
------------------ -----------------
Net assets.................................................. $ 6,554,000 $ 6,782,000
------------------ -----------------
------------------ -----------------
</TABLE>
See notes to consolidated financial statements.
Page 2 of 6
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PACIFIC REAL ESTATE INVESTMENT TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30,
1999 1998
------------------- -------------------
(liquidation basis) (liquidation basis)
<S> <C> <C>
Cash Flow from Operating Activities:
Net loss............................................. $ (228,000) $ (4,000)
Adjustments to reconcile net loss to net
cash provided (used) by operating
activities:
Minority interest in joint venture's operations.... 313,000
Gain on sale of property........................... (36,000)
Changes in operating assets and liabilities
Accounts payable and other liabilities............. (51,000) (465,000)
Security deposits.................................. 3,000 2,000
Accounts receivable................................ 18,000 52,000
Other assets....................................... 401,000 136,000
-------------------- --------------------
Net cash provided (used) by operating activities.......... 143,000 (2,000)
-------------------- --------------------
Cash Flow from Investing Activities:
Construction of properties......................... (69,000) (463,000)
Collection of notes receivable..................... 9,000
Proceeds from the sale of property................. 36,000
-------------------- -------------------
Net cash used by investing activities..................... (69,000) (418,000)
-------------------- --------------------
Cash Flow from Financing Activities:
Re-payment of mortgage loans....................... (18,000)
Distributions of joint venture partner............. (180,000)
-------------------- --------------------
Net cash used by financing activities..................... (198,000)
-------------------- --------------------
Increase (decrease) in cash.......................... 74,000 (618,000)
Cash, January 1.................................... 3,563,000 3,479,000
-------------------- --------------------
Cash, June 30...................................... $ 3,637,000 $ 2,861,000
-------------------- --------------------
-------------------- --------------------
</TABLE>
See notes to consolidated financial statements.
Page 3 of 6
<PAGE>
PACIFIC REAL ESTATE INVESTMENT TRUST
NOTES TO INTERIM FINANCIAL STATEMENTS
(UNAUDITED)
Basis of Presentation
The accompanying unaudited financial statements include all adjustments
that are, in the opinion of management, necessary for fair presentation
of the Trust's financial position, including changes therein, and results
of operations for the interim period reported upon. Such statements have
been prepared from the Trust's accounting records in accordance with the
instructions to Form 10-Q.
Plan of Liquidation
On February 4, 1998, the Trust's shareholders approved a Plan of
Dissolution. As a result, the Trust's financial statements as of December
31, 1997 and thereafter have been prepared on a liquidation basis.
Accordingly, assets have been valued at estimated net realizable value
and liabilities include estimated costs associated with carrying out the
plan of liquidation.
Income Taxes
The Trust qualifies as a real estate investment trust under the Internal
Revenue Code.
Wanlass Shopping Center
In 1998, the Trust purchased the fee title to the land at the Wanlass
Shopping Center. The purchase was required under the terms of the then
existing ground lease between the Trust and the ground lessor. The Trust
will dispose of the property when the redevelopment is complete. This is
expected to occur during 1999.
Related Party Transactions
Fees paid or payable to Menlo Management Company for three months and six
months ended 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
MENLO MANAGEMENT COMPANY
Property management fees...................... $ 3,000 $ 16,000 $ 5,000 $ 31,000
Administrative services....................... 17,000 16,000 33,000 33,000
Lease commissions............................. 44,000 44,000 44,000
-------------- --------------- --------------- --------------
Total.................................. $ 64,000 $ 32,000 $ 82,000 $ 108,000
-------------- --------------- --------------- --------------
-------------- --------------- --------------- --------------
</TABLE>
Basic and diluted income (loss) Per Share of Beneficial Interest
Basic and diluted income (loss) per share of beneficial interest,
computed by dividing net income (loss) by the weighted average number of
shares outstanding, for the three months and six months ended June 30,
1999 and 1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Weighted average number of shares outstanding 3,706,845 3,706,845
</TABLE>
Page 4 of 6
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PACIFIC REAL ESTATE INVESTMENT TRUST
PART I - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND OF OPERATIONS.
(1) LIQUIDITY AND CAPITAL RESOURCES:
Cash flow provided by operating activities was $143,000 for the six months ended
June 30, 1999 as compared to cash flow used by operating activities of $2,000
for the six months ended June 30, 1998. The net change is primarily due to the
change in expense levels resulting from the sale of Kings Court Shopping Center
in 1998.
Cash flow used by investing activities was $69,000 for the six months ended June
30, 1999 compared to $418,000 for the six months ended June 30, 1998. The net
change is primarily the result of a decrease in construction costs at the
Wanlass property.
Cash flow used by financing activities was zero for the six months ended June
30, 1999 as compared to $198,000 for the six months ended June 30, 1998. The
decrease is primarily due to the re-payment of the Kings Court mortgage debt and
distribution to joint venture partners in 1998.
(2) MATERIAL CHANGES IN RESULTS OF OPERATIONS FOR SIX MONTHS ENDED JUNE 30,
1999 COMPARED TO 1998:
Net loss for the six months ended June 30, 1999 was $228,000 as compared to a
net loss of $4,000 for the six months ended June 30, 1998.
During the first six months rental revenues decreased from $871,000 in 1998 to
$94,000 in 1999, a decrease of $777,000 or 89%. This decrease resulted from the
sale of Kings Court Shopping Center in August 1998.
Operating expenses decreased from $330,000 in 1998 to $68,000 in 1999, a
decrease of $262,000 or 79%. Property taxes decreased from $46,000 in 1998 to
$10,000 in 1999, a decrease of $36,000, or 78%. Property management fees
decreased from $31,000 in 1998 to $5,000 in 1999, a decrease of $26,000, or 84%.
Each of these decreases resulted from the sale of Kings Court Shopping Center in
August 1998
General and administrative expense increased from $173,000 in 1998 to $247,000
in 1999, an increase of $74,000 or 43%. The increase in 1999 is the result of
insurance expense related to the liquidation.
Interest income increased from $47,000 in 1998 to $73,000 in 1999, an increase
of $26,000, or 55%. The net change is the result of cash received from the sale
of Kings Court Shopping Center in August 1998.
Interest expense decreased from $65,000 in 1998 to zero in 1999, a decrease of
$65,000, or 100%. The decrease was due to the re-payment of the Kings Court
Shopping Center mortgage debt in August 1998.
Material changes for the three months ended June 30, 1999 as compared to 1998
were for the same reason in relative proportionate amounts as those shown for
the six months.
ITEM 6 (B) - Report on Form 8K -- None was filed for the six months ended June
30, 1999.
Page 5 of 6
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned.
PACIFIC REAL ESTATE INVESTMENT TRUST
Date: August 6, 1999 By: ROBERT CH. GOULD
--------------- -----------------------
Robert Ch. Gould
VICE PRESIDENT
Date: August 6, 1999 By: HARRY E. KELLOGG
-------------------- -----------------------
Harry E. Kellogg
TREASURER
Page 6 of 6
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 3,637,000
<SECURITIES> 0
<RECEIVABLES> 45,000
<ALLOWANCES> 33,000
<INVENTORY> 0
<CURRENT-ASSETS> 3,826,000
<PP&E> 2,994,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,820,000
<CURRENT-LIABILITIES> 266,000
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 6,554,000<F1>
<SALES> 0
<TOTAL-REVENUES> 167,000
<CGS> 0
<TOTAL-COSTS> 330,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (163,000)
<INCOME-TAX> (65,000)
<INCOME-CONTINUING> (228,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (228,000)
<EPS-BASIC> (.06)
<EPS-DILUTED> (.06)
<FN>
<F1>NET ASSETS - LIQUIDATION BASIS
</FN>
</TABLE>
