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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 MARCH 31, 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 1 of 7
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PACIFIC REAL ESTATE INVESTMENT TRUST
PART I - FINANCIAL INFORMATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(LIQUIDATION BASIS)
(UNAUDITED)
ITEM I - FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 1999 MARCH 31, 1998
<S> <C> <C>
Rental revenues............................................................ $ 46,000 $ 406,000
------------------ ----------------
Operating expenses (including related party amounts of $19,000 and $76,000
in 1999 and 1998 respectively):
Operating........................................................... 15,000 187,000
Property tax........................................................ 5,000 23,000
General and administrative.......................................... 118,000 95,000
Property management fees............................................ 2,000 15,000
------------------ ----------------
Total operating expenses................................. 140,000 320,000
------------------ ----------------
Operating income (loss).................................................... (94,000) 86,000
------------------ ----------------
Other income/(expense):
Interest income..................................................... 38,000 23,000
Interest expense.................................................... (32,000)
------------------ ----------------
Total other income/(expense)...................................... 38,000 (9,000)
------------------ ----------------
Income (loss) before minority interest & income tax........................ (56,000) 77,000
------------------ ----------------
Minority interest in joint venture......................................... (141,000)
Income tax................................................................. (65,000)
Net loss................................................................... $ (121,000) $ (64,000)
================== ================
Basic and diluted loss per share of beneficial interest.................... $ (0.03) $ (0.02)
================== ================
</TABLE>
See notes to consolidated financial statements.
Page 2 of 7
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PACIFIC REAL ESTATE INVESTMENT TRUST
CONSOLIDATED STATEMENTS OF NET ASSETS
(LIQUIDATION BASIS)
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
MAR 31, 1999 DEC 31, 1998
---------------- ----------------
<S> <C> <C>
Investment in commercial properties:
Land................................................. $ 1,650,000 $ 1,650,000
Buildings and improvements........................... 1,295,000 1,275,000
------------------ -----------------
Commercial properties - net.......................... 2,945,000 2,925,000
Cash........................................................ 3,466,000 3,563,000
Accounts receivable (net of allowance of $33,000 in 1999
and $42,000 in 1998......................................... 13,000 30,000
Other assets................................................ 555,000 578,000
------------------ -----------------
Total.............................................. $ 6,979,000 $ 7,096,000
------------------ -----------------
LIABILITIES
Liabilities:
Security deposits..................................... $ 1,000 $ 1,000
Accounts payable and other liabilities................ 73,000 69,000
Reserve for estimated costs during the period of
liquidation........................................... 244,000 244,000
------------------ -----------------
Total liabilities.................................. 318,000 314,000
------------------ -----------------
Net assets.................................................. $ 6,661,000 $ 6,782,000
================== =================
</TABLE>
See notes to consolidated financial statements.
Page 3 of 7
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PACIFIC REAL ESTATE INVESTMENT TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(LIQUIDATION BASIS)
(UNAUDITED)
For the three months ended March 31,
<TABLE>
<CAPTION>
1999 1998
-------------------- ----------------------
<S> <C> <C>
Cash Flow from Operating Activities:
Net loss............................................... $ (121,000) $ (64,000)
Adjustments to reconcile net loss to net cash used by
Operating activities:
Minority interest in joint venture's operations...... 141,000
Changes in operating assets and liabilities:
Accounts payable and other liabilities............... 4,000 (291,000)
Security deposits.................................... (1,000)
Accounts receivable.................................. 17,000 45,000
Other assets......................................... 23,000 (25,000)
-------------------- ----------------------
Net cash used by operating activities..................... (77,000) (195,000)
-------------------- ----------------------
Cash Flow from Investing Activities:
Construction of properties........................... (20,000) (112,000)
Collection of notes receivable....................... 5,000
-------------------- ----------------------
Net cash used in investing activities..................... (20,000) (107,000)
-------------------- ----------------------
Cash Flow from Financing Activities:
Re-payment of mortgage loans......................... (9,000)
Distributions to joint venture partner............... (120,000)
Net cash used by financing activities..................... (129,000)
-------------------- ----------------------
Decrease in cash....................................... (97,000) (431,000)
Cash, January 1...................................... 3,563,000 3,479,000
-------------------- ----------------------
Cash, March 31....................................... $ 3,466,000 $ 3,048,000
==================== ======================
</TABLE>
See notes to consolidated financial statements.
Page 4 of 7
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PACIFIC REAL ESTATE INVESTMENT TRUST
NOTES TO INTERIM FINANCIAL STATEMENTS
(UNAUDITED)
Basis of Presentation
The accompanying unaudited financial statements include all adjustments,
which 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 ended
March 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
1999 1998
----------------- -----------------
<S> <C> <C>
MENLO MANAGEMENT COMPANY
Property management fees......... $ 2,000 $ 15,000
Administrative services.......... 17,000 17,000
Lease commissions................ 44,000
----------------- -----------------
Total....................... $ 19,000 $ 76,000
================= =================
</TABLE>
Basic and Diluted Loss Per Share of Beneficial Interest
Basic and diluted loss income per share of beneficial interest is computed by
dividing net loss by the weighted average number of shares outstanding for
the three months ended March 31, 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 5 of 7
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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 used by operating activities was $77,000 for the three months ended
March 31, 1999 as compared to cash flow used by operating activities of $195,000
for the three months ended March 31, 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 $20,000 for the three months ended
March 31, 1999 compared to $107,000 for the three months ended March 31, 1998.
The net change was primarily the result of a decrease in construction costs at
the Wanlass property.
Cash flow used by financing activities was zero for the three months ended March
31, 1999 as compared to $129,000 for the three months ended March 31, 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 THREE MONTHS ENDED MARCH
31, 1999 VS. 1998:
Net loss for the three months ended March 31, 1999 was $121,000 as compared to a
net loss of $64,000 for the three months ended March 31, 1998, an increased loss
of $58,000.
During the first three months rental revenues decreased from $406,000 in 1998 to
$46,000 in 1999, a decrease of $360,000 or 89%. This decrease resulted from the
sale of Kings Court Shopping Center in August 1998
Operating expenses decreased from $187,000 in 1998 to $15,000 in 1999, a
decrease of $172,000 or 92%. Property taxes decreased from $23,000 in 1998 to
$5,000 in 1999, a decrease of $18,000, or 78%. Property management fees
decreased from $15,000 in 1998 to $2,000 in 1999, a decrease of $13,000, or 87%.
Each of these decreases resulted primarily from the sale of Kings Court Shopping
Center in August 1998.
General and administrative expense increased from $95,000 in 1998 to $118,000 in
1999, an increase of $23,000 or 24%. The increase in 1999 is the result of
insurance expense related to the liquidation.
Interest income increased by $15,000, or 65%, from $23,000 in 1998 to $38,000 in
1999, as a result of cash received from the sale of Kings Court Shopping Center
in August 1998.
Interest expense decreased by $32,000, or 100%, from $32,000 in 1998 to zero in
1999, due to the re-payment of the Kings Court mortgage debt in 1998.
ITEM 6 (B) - Report on Form 8K - None for the three months ended March 31,
1999.
Page 6 of 7
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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: By:
---------------------- ---------------------------------
Robert Ch. Gould
VICE PRESIDENT
Date: By:
---------------------- ---------------------------------
Harry E. Kellogg
SECRETARY AND TREASURER
Page 7 of 7
<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> MAR-31-1999
<CASH> 3,466,000
<SECURITIES> 0
<RECEIVABLES> 46,000
<ALLOWANCES> 33,000
<INVENTORY> 0
<CURRENT-ASSETS> 3,479,000
<PP&E> 2,945,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,979,000
<CURRENT-LIABILITIES> 318,000
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 6,661,000<F1>
<SALES> 0
<TOTAL-REVENUES> 84,000
<CGS> 0
<TOTAL-COSTS> 140,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (56,000)
<INCOME-TAX> (65,000)
<INCOME-CONTINUING> (121,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (121,000)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
<FN>
<F1>NET ASSETS - LIQUIDATION BASIS
</FN>
</TABLE>
