<PAGE> 1
UNITED STATES
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 Quarter Ended: March 31, 1995 Commission File Number: 0-9097
THE PEREGRINE REAL ESTATE TRUST
(Exact Name of Registrant as Specified in its Charter)
CALIFORNIA 94-2255677
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1300 ETHAN WAY, SUITE 200, SACRAMENTO, CALIFORNIA 95825
(Address of registrant's principal executive office) (Zip Code)
(916) 929-8244
(Registrant's telephone number, including area code)
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.
X Yes No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the close of the latest practical date.
Class Outstanding at March 31, 1995
Shares of Beneficial Interest 4,884,000
Par value one dollar per share
- ------------------------------------------------------------------------------
<PAGE> 2
THE PEREGRINE REAL ESTATE TRUST
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDEX PAGE
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1: Financial Statements
Consolidated Condensed Balance Sheets -
March 31, 1995 and December 31, 1994 1
Consolidated Condensed Statements of Operations -
For the Three Months Ended March 31, 1995 and 1994 2
Consolidated Condensed Statements of Cash Flows -
For the Three Months Ended March 31, 1995 and 1994 3
Notes to Consolidated Financial Statements 4 - 10
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of Operations 11 - 12
PART II. OTHER INFORMATION
Item 1: Legal Proceedings 13
Item 2: Changes in Securities 13
Item 3: Defaults Upon Senior Securities 13
Item 4: Submission of Matters to a Vote of Security Holders 13
Item 5: Other Information 13
Item 6: Exhibits and Reports on Form 8-K 13
</TABLE>
<PAGE> 3
PART I: FINANCIAL INFORMATION
THE PEREGRINE REAL ESTATE TRUST
AND AFFILIATES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
(UNAUDITED) (AUDITED)
------------- -------------
<S> <C> <C>
ASSETS
INVESTMENTS:
Rental properties, less accumulated depreciation of $3,587,000 and
$2,812,000 at March 31, 1995 and December 31, 1994, respectively,
and valuation allowance of $5,863,000 at March 31, 1995 and
December 31, 1994 $ 108,061,000 $ 111,767,000
Partnership interests 4,000,000 4,000,000
Notes receivable, net of valuation allowance and deferred gains
of $7,116,000 and $7,182,000 at March 31, 1995 and
December 31, 1994, respectively 16,295,000 17,049,000
------------- -------------
128,356,000 132,816,000
Cash 5,369,000 5,366,000
Restricted cash 317,000 317,000
Rents and accrued interest receivable, net of valuation allowance of $518,000
and $285,000 at March 31, 1995 and December 31, 1994, respectively 1,450,000 1,323,000
Other assets, net of valuation allowance of $310,000 at March 31, 1995
and December 31, 1994 3,348,000 2,434,000
------------- -------------
Total assets $ 138,840,000 $ 142,256,000
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Long-term notes payable, collateralized by
deeds of trust on rental properties $ 45,491,000 $ 48,277,000
Notes payable to Lender Group 41,737,000 40,869,000
Line of credit 4,695,000 4,410,000
Accounts payable and accrued expenses 8,786,000 9,867,000
------------- -------------
100,709,000 103,423,000
------------- -------------
Minority interests 6,584,000 6,525,000
------------- -------------
Redeemable convertible preferred stock, 25,000,000 shares authorized;
11,804,000 and 11,516,000 shares issued and outstanding at March 31, 1995
and December 31,1994, respectively; net of unaccreted discount of
$2,148,000 and $2,169,000 at March 31,1995 and December 31, 1994,
respectively; liquidation preference of $23,608,000 21,459,000 20,863,000
Shares of beneficial interest 50,000,000 shares authorized; 4,884,000
shares outstanding 13,339,000 13,339,000
Accumulated deficit (3,251,000) (1,894,000)
Commitments and contingencies ------------- -------------
Total liabilities and shareholders' equity $ 138,840,000 $ 142,256,000
============= =============
</TABLE>
See accompanying notes to consolidated condensed financial statements.
1
<PAGE> 4
THE PEREGRINE REAL ESTATE TRUST
AND AFFILIATES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1995 1994
---- ----
(Post-Reorganization) (Pre-Reorganization)
<S> <C> <C>
REVENUES:
Rent $ 3,376,000 $ 3,888,000
Interest 420,000 505,000
Hotel 3,057,000 3,354,000
----------- -----------
6,853,000 7,747,000
----------- -----------
EXPENSES:
Operating expenses 1,263,000 1,784,000
Hotel operating expenses 2,502,000 2,953,000
Property management 118,000 121,000
Depreciation and amortization 854,000 1,243,000
Interest 2,096,000 3,348,000
General and administrative 784,000 835,000
----------- -----------
7,617,000 10,284,000
----------- -----------
(Loss) before reorganization items, loss on foreclosure or
sale of investments, extraordinary item and minority interest (764,000) (2,537,000)
Reorganization items -- (936,000)
----------- -----------
(Loss) before loss on foreclosure or sale of investments,
extraordinary item and minority interest (764,000) (3,473,000)
Loss on foreclosure or sale of investments (7,000) (215,000)
----------- -----------
(Loss) before extraordinary item and minority interest (771,000) (3,688,000)
Extraordinary item 68,000 --
----------- -----------
Net loss before minority interest (703,000) (3,688,000)
Minority interest in net income (58,000) (4,000)
----------- -----------
Net loss $ (761,000) $(3,692,000)
=========== ===========
Loss per share before extraordinary item $ (0.17) $ (0.15)
======= =======
Income per share of extraordinary item $ 0.01 $ (0.00)
======= =======
Loss per share of beneficial interest $ (0.16) $ (0.15)
======= =======
</TABLE>
See accompanying notes to consolidated condensed financial statements.
2
<PAGE> 5
THE PEREGRINE REAL ESTATE TRUST
AND AFFILIATES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1995 1994
---- ----
(Post-reorganization) (Pre-Reorganization)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (761,000) $ (3,692,000)
----------- ------------
Adjustments to reconcile net loss to net cash (used in)
provided by operating activities:
Depreciation and amortization 854,000 1,243,000
Accretion of discount -- (80,000)
Loss on foreclosure or sale of investments 7,000 215,000
Forgiveness of debt (68,000) --
Minority interest in net income 58,000 4,000
Changes in other assets and liabilities
(Increase) in rents and accrued interest receivable (140,000) (517,000)
(Increase) in other assets (473,000) (162,000)
Increase in accounts payable and accrued expenses 76,000 3,727,000
----------- ------------
Total adjustments to net loss (314,000) 4,430,000
----------- ------------
Net cash (used in) provided by operating activities (447,000) 738,000
----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Improvements to rental properties (633,000) (232,000)
Principal collections on notes receivable 820,000 13,000
----------- ------------
Net cash provided by (used in) investing activities 187,000 (219,000)
----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term notes payable (22,000) (95,000)
Borrowings on line of credit, net 285,000 0
----------- ------------
Net cash provided by (used in) financing activities 263,000 (95,000)
----------- ------------
Net increase in cash 3,000 424,000
Cash, beginning of period 5,366,000 5,828,000
----------- ------------
Cash, end of period $ 5,369,000 $ 6,252,000
=========== ============
See accompanying notes to consolidated condensed financial statements.
</TABLE>
3
<PAGE> 6
THE PEREGRINE REAL ESTATE TRUST
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------------
1. Organization, Plan of Reorganization and Basis of Presentation:
Organization
The Peregrine Real Estate Trust (Trust) was organized under the laws of
the State of California pursuant to a Declaration of Trust dated July
31, 1973 and reorganized under a Restated Declaration of Trust dated
October 7, 1994, which gave effect to the reorganization of the Trust
under Chapter 11 of the United States Bankruptcy Code.
Plan of Reorganization Under Chapter 11 Proceeding
On August 2, 1993, the Trust filed a petition for reorganization under
Chapter 11 of the United States Bankruptcy Code, which case was heard
in the United States Bankruptcy Court for the Eastern District of
California, Sacramento Division, as In re Commonwealth Equity Trust
Case No. 93-26727-C-11.
On June 9, 1994, the Trust, the PacMutual Lenders, the Equity Holders
Committee and the Creditors Committee (collectively, Proponents) filed
with the Court the Third Amended Plan of Reorganization. The Third
Amended Plan of Reorganization as modified (Plan) was confirmed in all
respects on August 8, 1994.
The Effective Date of the Plan (the date on which the Trust emerged
from bankruptcy) was October 7, 1994. The Trust is under the
jurisdiction of the United States Bankruptcy Court until entry of a
final decree which is expected to be approximately one year from the
Effective Date.
The Plan provided for inter alia: (a) the restructuring of virtually
all of the Trust's secured and unsecured debt; (b) the reduction in the
number of Shares of Beneficial Interest held by current shareholders
from approximately 25,100,000 (old) shares to 2,334,000 (new) shares
(effectively a reverse stock split); and the issuance of 2,550,000 new
Shares of Beneficial Interest, as well as a new class of Redeemable
Convertible Preferred Stock, of the Trust to the PacMutual Lenders. The
authorized number of new Shares of Beneficial Interest is 50,000,000.
From the Effective Date, the PacMutual Lenders own a majority of the
new Shares of Beneficial Interest and all of the new Redeemable
Convertible Preferred Stock. The PacMutual Lenders also received
Restructured Secured Notes in the aggregate original principal amount
of $40,000,000.
4
<PAGE> 7
THE PEREGRINE REAL ESTATE TRUST
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization, Plan of Reorganization and Basis of Presentation,
continued:
The Plan provides for the reservation of 150,000 new Shares of
Beneficial Interest for options for trustees who are neither employees
nor management of the Trust. Eighty thousand of these shares have been
reserved for the current independent Trustees.
The Plan also provides that the Trust, at the discretion of the Board
of Trustees, may adopt a stock option plan under which management may
be granted options exercisable into a maximum of five percent of the
Shares of Beneficial Interest, on a fully diluted basis.
The Plan also required that the Trust obtain a $10,000,000 working
capital line of credit (Credit Facility) to which the PacMutual Lenders
agreed to subordinate. The Credit Facility, which is collateralized by
certain of the Trust's real property, was obtained prior to the
Effective Date.
Capital Structure
The Trust's obligation of approximately $80,000,000 to the PacMutual
Lenders was satisfied in the Plan by the issuance to the PacMutual
Lenders of the following securities:
(a) Restructured Notes Payable in the amount of $40,000,000 which
bear interest at 8.5% per annum and which are due on October 1, 2000.
Interest is payable in kind through September 30, 1996, by means of
Interest Deferral Notes issued quarterly; thereafter, interest is
payable monthly in cash.
Interest Deferral Notes accrue interest at 8.5% per annum, from the
date of issuance. Interest payments, both on principal and the interest
accrued through September 30, 1996, shall be payable monthly in cash
commencing on November 1, 1996.
Restructured Notes Payable and Interest Deferral Notes (collectively
Notes) are collateralized generally by all interests of the Trust in
real and personal property and are subordinated only to certain liens
which are specified in the Plan. The Notes contain certain covenants
and restrictions and provide for the prepayment of principal in the
amount of 80% of the net proceeds from the sale of the collateral for
the Notes and from other specified sources.
5
<PAGE> 8
THE PEREGRINE REAL ESTATE TRUST
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
1. Organization, Plan of Reorganization and Basis of Presentation,
continued:
(b) Redeemable Convertible Preferred Stock in the face amount of
$22,500,000 which carries a dividend of 10% per annum. Dividends are
payable in kind through October 1, 1998, by means of additional shares
of Redeemable Convertible Preferred Stock issued quarterly; thereafter,
dividends are payable quarterly in cash. The Redeemable Convertible
Preferred Stock automatically converts into Shares of Beneficial
Interest pursuant to an established formula if any dividend payment is
not made in full when due. If all dividends were paid in kind through
October 1, 1998, no other Shares of Beneficial Interest were issued and
the Redeemable Convertible Preferred Stock were converted to Shares of
Beneficial Interest on October 1, 1998, the PacMutual Lenders would, on
account of that conversion, acquire 77% of the total Shares of
Beneficial Interest outstanding after the conversion bringing their
total holdings to 89%.
The Redeemable Convertible Preferred Stock is redeemable in cash (total
redemption amount of $23,608,000 and $23,032,000 at March 31, 1995 and
December 31, 1994, respectively) on October 1, 2000, but in certain
circumstances, including the sale of all or substantially all the
assets of Peregrine, may be redeemed earlier.
The Redeemable Convertible Preferred Stock has been recorded at a
discount to its face amount, which face amounts are $23,608,000 and
$23,032,000 at March 31, 1995 and December 31, 1994, respectively,
based on an imputed rate of return of 12%.
(c) Shares of Beneficial Interest equal to approximately 52% of the
total outstanding Shares of Beneficial Interest.
Basis of Presentation
The accompanying financial statements are unaudited; however, they have
been prepared in accordance with generally accepted accounting
principles for interim financial information and in conjunction with
the rules and regulations of the Securities and Exchange Commission.
Accordingly, they do not include all of the disclosures required by
generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting
solely of normal recurring matters) necessary for a fair presentation
of the financial statements for these interim periods have been
included. The results for the interim period ended March 31, 1995 are
not necessarily indicative of the results to be obtained for the full
fiscal year and are not comparable to the results for the interim
period ended March 31, 1994 due to the implementation of fresh start
accounting, as discussed below. These financial statements should be
read in
6
<PAGE> 9
THE PEREGRINE REAL ESTATE TRUST
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------------------
1. Organization, Plan of Reorganization and Basis of Presentation,
continued:
conjunction with the December 31, 1994 audited financial statements and
notes thereto, included in The Peregrine Real Estate Trust Transition
Report on Form 10-K.
The accompanying unaudited consolidated condensed financial statements
of The Peregrine Real Estate Trust include the accounts of the Trust
and its majority-owned affiliate, California Real Estate Investment
Trust (CalREIT), a real estate investment trust in which the Trust owns
a greater than 50% interest.
Fresh Start Accounting
In accounting for the effects of the reorganization, the Trust
implemented Statement of Position 90-7 (SOP 90-7), "Financial Reporting
by Entities in Reorganization Under the Bankruptcy Code." Fresh start
accounting as defined by SOP 90-7 is applicable because
pre-reorganization shareholders received less than 50% of the Trust's
new Shares of Beneficial Interest and the reorganization value of the
assets of the reorganized Trust was less than the total of all
post-petition liabilities and allowed claims.
Under the principles of fresh start accounting, all of the Trust's
assets and liabilities were restated to reflect their reorganization
value which approximated fair value at the date of the reorganization,
October 7, 1994.
As a result of the implementation of fresh start accounting, the
financial statements of the Trust after consummation of the Plan are
not comparable to the Trust's financial statements for prior periods.
The reorganization value of the Trust's assets is primarily the
estimated fair value of the Trust's property and interest in CalREIT.
The aggregate property value was reached through the use of an eleven
year cash flow analysis discounted at rates generally ranging from 12%
to 15% and assuming a ten year holding period. The discounted cash flow
analysis also includes an estimate of terminal value, which was
determined using the discounted value of estimated net operating income
of each of the respective properties beginning in the year following
the holding period. This analysis relies on estimates of future
property performance and the various market factors including the
supply, demand and price of competing product. Estimates were also made
as to property lease-up, required capital expenditures and similar
matters. All of these estimates may vary from the actual future
occurrences.
7
<PAGE> 10
THE PEREGRINE REAL ESTATE TRUST
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------------------
2. Income Taxes:
The interest in CalREIT was valued based on an income capitalization
approach, without any control premium being attributed to the Trust's
majority ownership position in CalREIT. The income capitalization
approach was also used to value the assets underlying the notes
receivable to determine the value of each note.
In 1977, the Trust elected to be and was taxed as a real estate
investment trust (REIT) through the year ended September 30, 1992. A
REIT is not taxed on that portion of its taxable income which is
distributed to shareholders, provided that at least 95% of its real
estate investment trust taxable income is distributed and subject to
certain other requirements.
During the year ended September 30, 1993, the Trust did not qualify to
be taxed as a REIT. The termination of its REIT status was effective as
of October 1, 1992. The Trust may not be eligible to re-elect to be
taxed as a REIT prior to its fifth taxable year ended after September
30, 1993.
At December 31, 1994, the Trust had tax net operating loss
carryforwards (NOL) which may be applied against future taxable income
of $70,866,000 (Federal) and $44,186,000 (California).
As required by SOP 90-7, any future benefit realized from NOL's which
arose before the Effective Date of the Plan will be reported as a
direct addition to paid-in capital.
The Trust's alternative minimum tax operating loss carryforwards are
substantially the same as its NOL at December 31, 1994.
Pursuant to the Plan, debt in the amount of $14,395,000 was forgiven.
In addition, the Plan resulted in an ownership change under the
Internal Revenue Code. Because of the forgiveness of debt and the
ownership change, the NOL amounts and/or extent of allowable usage
could be changed as defined in the Internal Revenue Code. The Trust has
yet to determine which available methods under the Code will yield the
most beneficial result. It is, however, anticipated that the
forgiveness of debt and the change in ownership may result in a
substantial reduction/limitation on the NOL available in future years.
8
<PAGE> 11
THE PEREGRINE REAL ESTATE TRUST
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------------------
3. Related-Party Transactions:
The Trust and CalREIT are both self-administered. However, they share
certain costs, including personnel costs for which CalREIT reimburses
the Trust pursuant to a cost allocation agreement based on each trust's
respective asset values (real property and notes receivable) that is
negotiated annually. During the three months ended March 31, 1995,
reimbursable costs charged to CalREIT by the Trust approximated
$108,000. This amount was offset against the following amounts due to
CalREIT from the Trust.
At March 31, 1995 and December 31, 1994, the Trust had amounts due to
CalREIT aggregating $93,000 and $202,000. Such uncollateralized amounts
are due on demand; the remaining $93,000 due from the Trust to CalREIT
will be satisfied against future cost allocations.
4. Cash Flow Information:
Cash paid for interest during the periods reported was as follows:
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
1995 1994
---- ----
<S> <C> <C>
Interest $ 2,231,000 $ 1,640,000
=========== ===========
</TABLE>
5. Per Share Data:
Per share data for the three months ended March 31, 1995 and March 31,
1994 is based on the weighted average number of common shares,
4,884,000 and 25,093,000, respectively, outstanding during each period.
9
<PAGE> 12
THE PEREGRINE REAL ESTATE TRUST
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. Historical Funds from Operations and Funds Available for Distribution:
Equity REIT analysts generally consider Funds From Operations (FFO) an
appropriate measure of performance in comparing the results of
operations of REITs. FFO is defined by the National Association of Real
Estate Investment Trusts as net income computed in accordance with
generally accepted accounting principles before gains and losses on
sales of property and from debt restructuring plus depreciation and
amortization. Funds Available for Distribution (FAD) is defined as FFO
less capital expenditures funded by operations and loan amortization.
The Trust believes that in order to facilitate a clear understanding of
the historical operating results of the Trust, FFO and FAD should be
examined in conjunction with net income (loss) as presented in this
report. FFO and FAD should not be considered as an alternative to net
income (loss) as an indication of the Trust's performance or to cash
flow as a measure of liquidity.
Funds From Operations and Funds Available for Distribution for the
three months ended March 31, 1995 and 1994 are summarized as follows:
Calculation of Funds From Operations and Funds Available for Distribution
(Dollars in thousands)
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
(Post-reorganization) (Pre-Reorganization)
1995 1994
---- ----
<S> <C> <C>
Net loss before reorganization items, loss
on foreclosure or sale of investments,
extraordinary items and minority interest $ (764) $ (2,537)
Depreciation and amortization 854 1,243
------ --------
Funds From (used by) Operations 90 (1,294)
Capital improvements (35) (232)
Loan principal payments (22) (95)
------ --------
Funds Available for Distribution $ 33 $ 0
====== ========
</TABLE>
10
<PAGE> 13
- ------------------------------------------------------------------------------
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
- ------------------------------------------------------------------------------
The following discussion should be read in conjunction with the consolidated
financial statements and notes thereto appearing elsewhere in this Form 10-Q.
Historical results set forth are not necessarily indicative of future financial
position and results of operations of the Trust.
During the last quarter of 1994 and the first quarter of l995, with property
operations largely stabilized, the Trust began to evaluate its operating
strategies. In the near term, the immediate priority is to meet the Trust's
present and medium term debt obligations. This objective will best be
accomplished by maximizing the income stream from the properties through
improved occupancy levels, the reduction of operating expenses and the
disposition of certain assets. In order to implement this strategy, management
priorities for the current year include a continued emphasis on leasing the
remaining space at the Trust's commercial properties; improving occupancy levels
and completing capital improvements at the hotel properties; reflagging the Park
Terrace Inn hotel in Redding, California with the flag of a national lodging
chain; and continuing efforts to reduce the Trust's operating expenses.
The Trust has analyzed various strategies to enhance long-term share value,
exploring opportunities in single and multi-tenant industrial buildings, retail
centers and hotel properties. At this time, the course of action that appears to
hold the greatest likelihood for success is a strategy that builds on the
Trust's activity in the lodging industry, while continuing to focus on improving
current property operations and the disposition of certain assets.
Results of Operations
The Trust believes that to facilitate a clear understanding of the operating
results of the Trust, Funds From Operations should be examined in conjunction
with net income (loss). Industry analysts generally define Funds From Operations
as net income (loss) adjusted for certain non-cash expenses, primarily
depreciation and amortization. Funds From Operations should not be considered as
a substitute for net income as an indication of the Trust's performance or as a
substitute for cash flow as a measure of its liquidity.
Because the three months ended March 31, 1995 are not comparable to the three
months ended March 31, 1994 due to fresh start accounting, no comparison has
been made between the two periods.
11
<PAGE> 14
Total Revenues for the three months ended March 31, 1995 were $6,853,000:
$3,376,000 or 49% of total revenues came from rent; $3,057,000 or 45% was
hotel revenue.
Total Expenses for the three months ended March 31, 1995 were $7,617,000:
$2,502,000 or 33% of the total was attributable to hotel operating expenses;
$2,096,000 or 28% of the total was attributable to interest expense; and
$1,381,000 or 18% of the total was attributable to property operating and
property management expenses.
The remaining expenses were depreciation and amortization and general and
administrative.
Liquidity and Capital Resources
During the remainder of 1995, the Trust anticipates that its primary sources of
funds will be operating income and its Credit Facility, a revolving line of
credit in the maximum amount of $10,000,000, which bears interest at 2.25% over
prime. It is collateralized by a first lien on certain of the Trust's
properties. The Trust believes that these resources will be adequate for its
anticipated needs. Pursuant to the agreements with respect to the Restructured
Notes Payable and the Credit Facility, the Trust is generally not permitted to
incur or assume additional indebtedness other than trade payables and certain
lease expenses without the consent of the PacMutual Lenders and the lender
providing the Credit Facility. It is unlikely that the Trust will be able to
satisfy those specified conditions within the coming year.
The Trust's cash flows for the three months ended March 31, 1995 totaled $3,000,
comprising cash used in operations of $447,000, cash provided by investing
activities of $187,000, and cash provided by financing activities of $263,000.
Systems Integrators, Inc. (Tenant) leases and occupies 100% of two Sacramento,
California office buildings which total 90,000 square feet under leases
scheduled to expire in April and May 1998. The Tenant has notified the Trust
that, while under the protection of Chapter 11, it has rejected its leases with
the Trust for the entire 90,000 square feet and will vacate the space and cease
paying rent effective May 31, 1995. Under the existing leases, the space
produced gross rents of approximately $75,000 per month. Property operating
expenses payable by the Trust approximated $3,300 per month.
12
<PAGE> 15
PART II. OTHER INFORMATION
Item 1: Legal Proceedings
None
Item 2: Changes in Securities
None
Item 3: Defaults Upon Senior Securities
None
Item 4: Submission of Matters to a Vote of Security Holders
None
Item 5: Other Information
None
Item 6: Exhibits and Reports on Form 8-K
None
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF OPERATIONS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-1-1995
<PERIOD-END> MAR-31-1995
<CASH> 5,686
<SECURITIES> 0
<RECEIVABLES> 29,037
<ALLOWANCES> (13,807)
<INVENTORY> 0
<CURRENT-ASSETS> 20,916
<PP&E> 121,511
<DEPRECIATION> (3,587)
<TOTAL-ASSETS> 138,840
<CURRENT-LIABILITIES> 15,370
<BONDS> 91,923
<COMMON> 13,339
21,459
0
<OTHER-SE> (3,251)
<TOTAL-LIABILITY-AND-EQUITY> (138,840)
<SALES> 0
<TOTAL-REVENUES> 6,788
<CGS> 0
<TOTAL-COSTS> 3,883
<OTHER-EXPENSES> 1,638
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,096
<INCOME-PRETAX> (829)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 68
<CHANGES> 0
<NET-INCOME> (761)
<EPS-PRIMARY> (0.16)<F1>
<EPS-DILUTED> (0.16)<F1>
<FN>
<F1>SHARES OF BENEFICIAL INTEREST EQUIVALENTS WERE ANTI-DILUTIVE. THE FIGURES
PRESENTED ABOVE ARE SIMPLE EPS.
</FN>
</TABLE>
