<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter period ended: SEPTEMBER 30, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File No. 0-12166
MERIDIAN POINT REALTY TRUST '83
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
CALIFORNIA 94-6542723
--------------------- -----------------------------
(State or other jurisdiction of (I.R.S. Employer I.D. Number)
incorporation or organization)
655 MONTGOMERY STREET, SUITE 800, SAN FRANCISCO, CALIFORNIA 94111
- --------------------------------------------------------------------------------
(Address and zip code of principal executive offices)
Registrant's telephone number, including area code: (415) 981-4900
NONE
- --------------------------------------------------------------------------------
(Former name, address and former fiscal year, if changed since last report)
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 the common stock as of the latest
practicable date:
SHARES OF BENEFICIAL INTEREST OUTSTANDING AS OF NOVEMBER 1, 1996: 3,031,618
<PAGE>
- --------------------------------------------------------------------------------
PART 1: FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
ITEM 1: CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements should be
read in conjunction with the 1995 Form 10-K of the registrant (the "Company").
These statements have been prepared in accordance with the instructions of the
Securities and Exchange Commission Form 10-Q and do not include all the
information and footnotes required by generally accepted accounting principles
for complete consolidated financial statements.
In the opinion of the Company's management, all material adjustments
of a normal and recurring nature considered necessary for a fair presentation of
results of operations for the interim periods have been included. The results
of consolidated operations for the three and nine month periods ended September
30, 1996 are not necessarily indicative of the results that may be expected for
the year ending December 31, 1996.
2
<PAGE>
MERIDIAN POINT REALTY TRUST '83
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
1996 1995
<S> <C> <C>
ASSETS
INVESTMENT IN REAL ESTATE HELD FOR SALE:
Rental Properties, Net $ 8,723,639 $ 40,276,221
Less: Accumulated Depreciation (2,532,066) (11,495,736)
- ---------------------------------------------------------------------------------------------
6,191,573 28,780,485
OTHER ASSETS:
Cash and Cash Equivalents 4,363,962 2,525,918
Cash Held in Escrow -- 98,363
Restricted Cash 1,463,369 1,119,831
Accounts Receivable, Net of Reserves of $216,185 and $178,146
as of September 30, 1996 and December 31, 1995, respectively 186,931 193,796
Notes Receivable From Affiliates -- 84,000
Investment in Real Estate Investment Trust -- 79,500
Capitalized Loan Costs, Net of Accumulated Amortization of
$93,416 and 324,324 as of September 30, 1996 and
December 31, 1995, respectively 20,058 65,445
Capitalized Lease Commissions, Net of Accumulated Amortization
of $42,205 and $522,059 as of September 30, 1996 and
December 31, 1995, respectively 42,873 548,856
Other Assets, Net of Accumulated Amortization of
$50,663 as of December 31, 1995 79,536 557,142
- ---------------------------------------------------------------------------------------------
TOTAL ASSETS $ 12,348,302 $ 34,053,336
=============================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Mortgage Notes Payable $ 4,655,900 $ 21,177,787
Less Unamortized Discount -- (304,776)
- ---------------------------------------------------------------------------------------------
4,655,900 20,873,011
Due to Affiliates -- 67,046
Accounts Payable 38,141 368,861
Prepaid Rent, Tenant Deposits and Other Liabilities 213,659 518,265
- ---------------------------------------------------------------------------------------------
TOTAL LIABILITIES 4,907,700 21,827,183
- ---------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY:
Shares of Beneficial Interest - $1.00 stated value:
Authorized - Unlimited; 3,031,618 shares issued and
outstanding as of September 30, 1996 and December 31, 1995 3,031,618 3,031,618
Paid-in Capital 22,755,694 22,755,694
Distributions in Excess of Income (18,346,710) (13,561,159)
- ---------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 7,440,602 12,226,153
- ---------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 12,348,302 $ 34,053,336
=============================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
MERIDIAN POINT REALTY TRUST '83
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1996 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES:
Rentals from Real Estate Investments $347,224 $1,427,591 $1,738,922 $4,353,060
Interest and Other 70,472 71,311 197,170 220,900
- ------------------------------------------------------------------------------------------------------------
TOTAL REVENUES 417,696 1,498,902 1,936,092 4,573,960
- ------------------------------------------------------------------------------------------------------------
EXPENSES:
Interest and Amortization of Debt Discount 104,335 513,898 547,397 1,669,182
Property Taxes 25,002 153,858 154,122 452,292
Property Operating Costs, Including
Amounts Paid to Related Parties of
$21,667, $36,122, $154,453 and
$133,854, respectively 60,445 320,118 521,601 876,319
General and Administrative, Including
Amounts Paid to Related Parties of
$7,200, $51,831, $99,435 and
$275,899, respectively 64,923 124,322 323,232 543,998
Expenses from Terminated Stock Purchase -- -- -- 363,133
Depreciation and Amortization 23,426 397,449 365,318 1,116,913
- ------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 278,131 1,509,645 1,911,670 5,021,837
NET INCOME (LOSS) BEFORE GAIN
ON DISPOSITION OF ASSETS 139,565 (10,743) 24,422 (447,877)
GAIN ON DISPOSITION OF ASSETS -- -- 2,582,606 --
- ------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $139,565 ($ 10,743) $2,607,028 ($ 447,877)
============================================================================================================
NET INCOME (LOSS) PER COMMON SHARE $0.05 ($0.00) $0.86 ($0.15)
============================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
MERIDIAN POINT REALTY TRUST '83
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
- -------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $ 2,607,028 ($447,877)
Adjustments to Reconcile Net Income (Loss) to
Net Cash Provided by Operating Activities:
Gain on Disposition of Assets (2,582,606) --
Depreciation 317,048 1,003,594
Amortization - Debt Discount 5,438 80,971
Amortization - Other 57,781 134,330
Rent Adjustment -- 58,761
Decrease (Increase) in Cash Held in Escrow 98,363 (4,251)
Increase in Restricted Cash (343,538) (337,128)
Decrease in Accounts Receivable 6,865 130,681
Decrease (Increase) in Other Assets (162,895) 9,791
Decrease (Increase) in Due to Affiliates 16,954 (23,035)
Decrease in Accounts Payable (235,352) (24,161)
Decrease in Other Liabilities (304,606) (89,433)
- -------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (519,520) 490,243
- -------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Improvements to Existing Real Estate (70,397) (401,934)
Increase in Capitalized Lease Commissions (41,885) (266,104)
Investment in Real Estate Investment Trust -- (79,500)
- -------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (112,282) (747,538)
- -------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Disposition of Assets 3,693,309 --
Closing Costs on Disposition of Assets (89,460) --
Principal Payments on Mortgage Notes (133,569) (1,716,183)
Cash Dividends Paid (1,000,434) --
- -------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 2,469,846 (1,716,183)
- -------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,838,044 (1,971,478)
Cash and Cash Equivalents - Beginning of Period 2,525,918 4,984,963
- -------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 4,363,962 $ 3,013,485
===========================================================================================
SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS
Proceeds from Disposition of Assets - Shares of Meridian
Industrial Trust, Inc. (MIT) Common Stock $ 6,392,145 $ --
Mortgages Assumed by MIT 16,334,297 --
Reduction of Investment in Real Estate for Properties Sold (22,343,612) --
Reduction of Other Assets for Properties Sold (1,402,967) --
Dividend Paid in Shares of MIT Common Stock (6,392,145) --
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE>
MERIDIAN POINT REALTY TRUST '83
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(UNAUDITED)
1. GENERAL.
Meridian Point Realty Trust '83 (the "Company") is a business trust
organized under the laws of the State of California for the purpose of
acquiring, operating, holding for investment and ultimately selling income-
producing commercial and industrial real estate. It is the Company's intention
not to invest net proceeds from sales or refinancing in additional properties
and accordingly, the Company is a self-liquidating/finite life trust. The
Company was formed on June 24, 1982 and commenced operations on April 12, 1983.
On February 23, 1996, the Company sold all of its real estate properties except
for the Charleston Business Park ("Charleston") (See Note 5).
2. CASH EQUIVALENTS.
The Company considers all investments with an original maturity of three
months or less to be cash equivalents.
Cash paid for interest was $102,260 and $500,782 for the three months ended
September 30, 1996 and 1995, respectively. Cash paid for interest of $532,448
and $1,578,058 for the nine months ended September 30, 1996 and 1995,
respectively.
3. RENTALS FROM REAL ESTATE INVESTMENTS.
Certain of the Company's leases relating to its properties require lessees
to pay all or a portion of real estate taxes, insurance and operating costs
("Expense Recaptures"). Expense Recaptures of $85,291 and $181,704 for the three
months ended September 30, 1996 and 1995, respectively, have been included in
Rentals from Real Estate Investments. For the nine months ended September 30,
1996 and 1995, Expense Recaptures of $326,010 and $512,499, respectively, have
been included in Rentals from Real Estate Investments.
All leases are classified as operating leases. The Company recognizes
rental income on the straight-line basis over the terms of the leases. Deferred
rent receivable, included in accounts receivable, represents the excess of
rental revenue recognized on a straight-line basis over cash received under the
applicable lease provisions.
4. INVESTMENTS IN REAL ESTATE AND DEPRECIATION METHODS.
Investments in Real Estate are stated at the lower of depreciated cost
or net realizable value. Net realizable value for financial reporting purposes:
(i) is evaluated and identified quarterly by the Company on a property by
property basis using undiscounted cashflows; (ii) is measured by comparing the
Company's estimate of fair value based upon either sales comparables or the net
cash expected to be generated by the property (comprised of the forecasted
operations for the property based upon historical results, together with
management's estimates of the property's future occupancy, lease rates and
capital improvement requirements), less estimated carrying costs (including
interest) throughout the anticipated holding period, plus the estimated cash
proceeds from the ultimate disposition of the property; and (iii) is not
necessarily an indication of the property's current value or the amount that
will be realized upon the ultimate disposition of the property. To the extent
net realizable value is less than the carrying value of the property, a
Provision for Decrease in Net Realizable Value is recorded in the amount by
which the carrying value exceeds estimated fair value. As of December 31, 1995,
the Company's Investment in Real
6
<PAGE>
Estate is stated net of a cumulative Provision for Decrease in Net Realizable
Value of $838,000. As of September 30, 1996, the Company's Investment in Real
Estate is stated at depreciated cost.
Depreciation and Amortization have been calculated under the straight-line
method, based upon the estimated useful lives of the assets. Property and
property additions are depreciated over 35 years. Expenditures for maintenance,
repairs and improvements which do not materially prolong the normal useful life
of an asset are charged to operations as incurred. Leasing commissions and
tenant improvements are amortized under the straight-line method over the term
of the related lease.
5. DISPOSITION OF ASSETS.
On February 23, 1996, the Company sold all of its real estate assets except
Charleston to Meridian Industrial Trust, Inc. ("MIT") for $3.6 million in cash,
390,360 shares of MIT common stock, and the assumption of certain mortgage notes
and other liabilities by MIT. The MIT common stock was valued at $6,392,145. In
addition, the Company sold all of its personal property and its $79,500
investment in common stock of Meridian Point Properties, Inc. to MIT. The
details of these transactions are as follows:
<TABLE>
<CAPTION>
Mortgage
Selling Notes Property Other Gain or
Property Price Assumed Basis Costs (Loss)
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Scripps $ 3,472,070 $ 7,965,980 $ 8,254,258 $ 328,805 $ 2,854,987
Golden Cove 1,814,467 3,195,467 3,364,489 39,278 1,606,167
Airport #14 996,870 813,290 2,129,470 196,496 (515,806)
North Irvine 995,329 2,080,234 2,435,232 136,489 503,842
El Dorado 849,252 1,310,809 2,060,263 117,905 (18,107)
Airport #17 782,313 0 1,972,250 129,636 (1,319,573)
Airport #16A 528,714 648,906 910,384 224,213 43,023
Airport #3 384,071 0 760,232 81,775 (457,936)
Airport #16B 169,059 319,611 457,034 148,370 (116,734)
------------------------------------------------------------------
9,992,145 16,334,297 22,343,612 1,402,967 2,579,863
Personal Property
and Investments 93,309 -- 90,566 -- 2,743
------------------------------------------------------------------
Total $10,085,454 $16,334,297 $22,434,178 $1,402,967 $ 2,582,606
==================================================================
</TABLE>
In addition to the costs shown above, the Company paid $89,460 in closing
costs related to the sale of the real estate assets.
If the sale of the properties and investments had occurred on January 1,
1995 and the employee leasing agreement with Meridian Point Properties, Inc. had
been replaced by the management agreement with E & L Associates, Inc., the
Company's pro forma results of operations for the nine months ended September
30, 1996 and 1995 would have been:
<TABLE>
<CAPTION>
1996 1995
-----------------------
<S> <C> <C>
Revenues $1,179,513 $1,195,553
Expenses 1,001,122 1,089,499
-----------------------
Net Income $ 178,391 $ 106,054
=======================
Net Income per Share $ 0.06 $ 0.03
=======================
</TABLE>
6. DISPOSITION OF THE CHARLESTON BUSINESS PARK
7
<PAGE>
On June 27, 1996, the Company announced that it had entered into an
exclusive listing agreement for the sale of the Charleston property. In the
quarter ended September 30, 1996, the Company received offers to purchase the
property for an amount in excess of $12,000,000 less an environmental
remediation reserve of $1,000,000. The Company is currently negotiating the sale
with one of the potential buyers. As a result, the Company ceased depreciating
the property as of August 1, 1996.
7. EARNINGS PER SHARE.
Earnings per share of beneficial interest is determined by dividing net
income by the weighted average number of shares of beneficial interest
outstanding during the period. Weighted average number of shares outstanding was
3,031,618 for the nine months ended September 30, 1996 and 1995, respectively.
No distributions were made during the nine months ended September 30, 1995.
During the nine months ended September 30, 1996, the Company distributed cash of
$1,000,434, or $0.33 per share of beneficial interest, and all of the 390,360
shares of Meridian Industrial Trust, Inc. ("MIT") common stock (or 0.1287 of a
share of MIT common stock per share of beneficial ownership in the Company) to
stockholders of record at the close of business on March 12, 1996.
8. MORTGAGE NOTES PAYABLE.
The mortgage note securing Charleston has an outstanding principal balance
of $4,655,900 at September 30, 1996. This loan has a maturity date of March 1,
1999 and calls for monthly principal and interest payments based on an interest
rate of 8.75% per annum and a twenty-year amortization schedule. In addition,
the Company has made monthly payments of $35,000 to an escrow account which will
be available to fund the cost of remediation, if any (see Note 11). Any funds
remaining will be applied to the mortgage loan as a principal paydown upon the
maturity of the loan. As of September 30, 1996, the escrow account has a balance
of $1,463,369.
9. INCOME TAXES.
The Company intends to qualify and be treated as a real estate investment
trust under Section 856-860 of the Internal Revenue Code for the year ending
December 31, 1996. As such, the Company should be allowed a deduction for
dividends paid to shareholders if the Company satisfies certain income, asset
and distribution requirements. Accordingly, no provision for federal income
taxes has been made in the accompanying Consolidated Statements of Operations
for the three and nine months ended September 30, 1996 and 1995.
10. MANAGEMENT AGREEMENT.
Effective February 24, 1996, the Company appointed E & L Associates, Inc.
to provide property management and certain other administrative services to the
Company. The management agreement is on a month-to-month basis with monthly
management fee payments of $8,333.33 to June 30, 1996. Effective July 1, 1996
the monthly management fee payment is $10,000.
11. COMMITMENTS AND CONTINGENCIES.
In the late 1980s, the San Francisco Bay Region of the California Regional
Water Quality Control Board (the "RWQCB") requested that the Company investigate
and characterize soil and groundwater contamination at Charleston. In response
to that request, the Company engaged an environmental engineering firm which
discovered the presence of trichloroethylene and other solvent chemicals in the
groundwater below Charleston. Based on the preliminary reports of this
environmental firm, it appears that such contamination is the result of
contamination generated by (i) one or more sources located at properties
adjacent to Charleston, and possibly, (ii) a former tenant at Charleston. The
exact locations of the off-site sources have not yet been determined. During
1993, a further investigation
8
<PAGE>
of the on-site contamination was conducted by the environmental engineering firm
and a firm of environmental health and safety specialists. The information
gathered suggests that the on-site groundwater contamination resulted from an
incident which occurred sometime before 1986. It has not been determined whether
the contamination occurred before or after the Company acquired Charleston in
1983, or that contamination has migrated off-site. The Company has requested
that the RWQCB pursue the responsible parties for the remediation costs. The
RWQCB has not yet responded to the Company's request. Charleston has not been
classified as a superfund site by the Environmental Protection Agency.
The RWQCB has taken jurisdiction as the "lead agency" with regard to the
environmental conditions at Charleston. Generally, the RWQCB approaches
remediation of such sites by designating "potentially responsible parties" in
two categories: (i) primarily responsible parties that are jointly and severally
obligated to perform and pay for all of the necessary remedial or clean up work,
and (ii) secondarily responsible parties that are jointly and severally
obligated to perform and pay for the remedial work only if the primarily
responsible parties have failed or refused to comply with the agency's orders.
Parties that have directly caused environmental contamination are generally
included in the class of primarily responsible parties while landowners and
property occupants that have not directly caused the contamination are generally
included in the category of secondarily responsible parties. The Company
believes there are multiple parties that will be identified as primarily and
secondarily liable parties with respect to the contamination at Charleston.
The Company owns Charleston but never conducted operations there that
contributed to soil and groundwater conditions. Based on this fact and other
facts that are currently known, the Company believes the most likely scenario,
if the RWQCB takes action against the Company, is that the Company: (i) will be
named as a secondarily responsible party with respect to the contamination that
originated on Charleston, and (ii) should not be named as a potentially
responsible party with respect to contamination that migrated onto Charleston
from offsite origins. Accordingly, management believes that, under current RWQCB
policies, only if all the primarily responsible parties fail or refuse to comply
with the agency's orders will the Company be required to take any remedial
action with respect to contamination that originated on Charleston. However,
there is always a risk that the Company might be named as a secondarily
responsible party for all the soil and groundwater conditions at the site,
particularly if it becomes impossible to distinguish between contamination that
originated at Charleston and contamination that migrated onto Charleston. There
is also a risk that enforcement policies may change, in which case the Company
and all other parties involved could be named as jointly and severally liable
parties with no distinction between primary and secondary liability. If the
Company were ordered to remediate the property under those circumstances,
however, it would have statutory and common law rights to contribution and
indemnity for the remediation costs against the parties that actually caused the
contamination.
The Company is not presently able to reasonably estimate the amount or
range of remediation costs, if any, or the amount or range of further costs that
may be required to be expended by it to resolve this matter because of the
uncertainty associated with the current limited information about the extent and
sources of the contamination, the types of remedial work that may be required,
and the relative liabilities of the multiple responsible parties under
regulatory enforcement policies. Accordingly, the accompanying consolidated
financial statements do not reflect any adjustments for this matter. The Company
has retained legal counsel to assist in determining its legal obligations with
respect to remediating the contamination and in determining its legal right vis-
a-vis the party or parties directly responsible for the contamination.
In March 1994 the mortgage note secured by Charleston was restructured
providing for, among other things, a maturity date of March 1, 1999. In
connection with the restructuring, the Company made monthly payments of $35,000
to a restricted cash account through December 1995. From December 1995 until the
maturity of the loan, the Company will make monthly payments to the restricted
cash account equal to ninety percent (90%) of the property's net cash flow. The
escrow account will be available to fund the cost of remediation, if any. Any
funds remaining will be applied to the mortgage loan as a
9
<PAGE>
principal paydown upon the maturity of the loan. Prior to the restructuring of
the loan, the Company had been making deposits to the restricted cash account
equal to the net cash flow of the property. As part of the restructuring, the
Company made a cash disbursement totaling $209,829 to cover closing costs and a
required cash deposit into the restricted cash account. As of September 30,
1996, the restricted cash account has a balance of $1,463,369.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The Company was formed and currently operates as a self-liquidating,
finite-life REIT. The following discussion should be read in conjunction with
the Company's Consolidated Balance Sheets and Consolidated Statements of
Operations and Cash Flows and the notes thereto included in this report. Unless
otherwise defined in this report, or unless the context otherwise requires, the
capitalized words or phrases referred to in this section either: (a) describe
accounting terms that are used as line items in such financial statements, or
(b) have the meanings ascribed to them in such financial statements and the
notes thereto.
Before February 23, 1996, the Company's principal asset and source of
revenue was its portfolio of ten industrial and commercial properties. On
February 23, 1996, the Company: (1) sold nine of the ten properties in its
portfolio to MIT for $3.6 million in cash, 390,360 shares of MIT common stock,
and the assumption of certain mortgage notes and other liabilities by MIT; (2)
announced a dividend which was paid March 22, 1996 of approximately $1 million
in cash (or $0.33 per share of beneficial interest in the Company) and all of
the 390,360 shares of MIT common stock (or 0.1287 of a share of MIT common stock
per share of beneficial interest in the Company) to stockholders of record at
the close of business on March 12, 1996; and (3) appointed E & L Associates,
Inc. to provide property management and certain other administrative services to
the Company, effective February 24, 1996.
The Company's future sources of liquidity will be significantly influenced
by the operations at Charleston, the Company's only remaining real estate
investment. Leases covering approximately 90% of the space at Charleston will
expire over the next 24 months. There can be no assurances that the current
tenants will renew or that their renewal will be on the same terms.
Furthermore, the mortgage loan agreement requires that 90% of Charleston's cash
flow be escrowed into a restricted cash account to fund future retenanting costs
and/or any environmental remediation work (see Note 9 to the Company's financial
statements). Finally, before the property can be sold, management must first
quantify the cost to remediate the ground water contamination situation at
Charleston. Accordingly, the Company's future cash flow and results of
operations remain uncertain in light of the above operating challenges at
Charleston.
Liquidity and Capital Resources
- -------------------------------
The Company's liquidity and capital resources have been dramatically
changed as a result of the February 23, 1996 asset sale. The Company's primary
source of near-term liquidity is its unrestricted cash which, at September 30,
1996, totaled $4,363,962. Secondary sources of liquidity include cash flow from
Charleston, 90% of which is required to be escrowed, and net proceeds from the
eventual sale of Charleston. Given the environmental situation at Charleston,
management believes it is unlikely the property could be refinanced at interest
rates or terms more favorable than those in the existing first mortgage loan
(which loan bears an annual fixed interest rate of 8.75% and matures on March 1,
1999). Furthermore, management believes the relatively low total capitalization
of the Company makes it remote that it could sell either debt or equity
securities in the public markets.
The Company's principal application of its resources are: (a) property
operating costs, property taxes, general and administrative expenses, interest
expense and legal costs; (b) environmental remediation, tenant leasing and
capital improvements at Charleston, (c) principal payments on the
10
<PAGE>
Charleston mortgage note, (d) the escrowing of 90% of the cash flow from
Charleston as required under its mortgage loan agreements, and (e) dividends.
During the nine months ended September 30, 1996, funds used in operating
activities totaled $519,520 and were insufficient to fully meet the cash needs
of the Company. However, the quarter ended September 30, 1996 better reflects
the future cash needs of the Company. In that quarter, funds provided by
operations totaled $111,663.
Management is actively preparing the Charleston property for sale. On June
27, 1996, the Company announced that it has entered into an exclusive listing
agreement for the sale of the property. In the quarter ended September 30,
1996, the Company received offers to purchase the property for an amount in
excess of $12,000,000 less an environmental remediation reserve of $1,000,000.
The Company is currently negotiating the sale with one of the potential buyers.
There can be no assurances that the Company will be able to conclude this
transaction.
Capital expenditures for the nine months ended September 30, 1996 and 1995
were $70,397 and $401,934, respectively. At the present time, however, there
are no commitments for capital improvements to the property.
The Company paid a cash dividend of $0.33 and 0.1287 of a share of MIT
common stock per share of beneficial interest.
Material Changes in Results of Operations
- -----------------------------------------
Rentals from Real Estate Investments totaled $1,738,922 and $4,353,060 for
the nine months ended September 30, 1996 and 1995, respectively. The 1996
rentals were less than 1995 because of the sale of nine of the Company's ten
properties in its real estate portfolio on February 23, 1996. In the nine
months ended September 30, 1996, rentals from Charleston were $986,708 which
approximates the rental income to be expected in future comparable periods until
such time as the property is sold.
Interest and other revenues declined by $23,730 to $197,170 in the nine
months ended September 30, 1996 because of decreases in the Company's average
cash balances available for investment.
Property taxes and depreciation and amortization also declined from period
to period because of the February 23, 1996 property sale. Property operating
costs decreased in 1996. However, the decrease was not in proportion to the
decrease in rental income because of the write-off of uncollectible receivables
and legal and professional fees related to the Charleston environmental
situation and the fact that all of the management fee paid to E & L Associates
is included in property operating costs whereas only a portion of the fees paid
to MPP were previously included in this category. See Note 5 to the
consolidated financial statements for pro forma results of operations from the
ongoing operations.
General and administrative expense was $323,232 and $543,998 in the nine
months ended September 30, 1996 and 1995, respectively. The decline resulted
from the lower level of allocated expense following the termination of the MPP
Employee Leasing Agreement.
11
<PAGE>
- -------------------------------------------------------------------------------
PART II: OTHER INFORMATION
- -------------------------------------------------------------------------------
ITEM 1. LEGAL PROCEEDINGS.
There are no material pending legal proceedings to which the Company is a
party or to which any of the assets of the Company is subject.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
27 Financial Data Schedule
(b) Reports on Form 8-K. The following Form 8-K was filed during the quarter
ended September 30, 1996:
Current Report on Form 8-K under Item 5 - Other Events, dated June 27,
1996, concerning the Company's announcement that it has entered into an
exclusive listing agreement for the sale of the Trust's last remaining real
estate asset, the Charleston Business Park.
SIGNATURES
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 thereunto duly authorized.
REGISTRANT
MERIDIAN POINT REALTY TRUST '83
Date: November 1, 1996 By: /s/ Lorraine O. Legg
--------------------
Lorraine O. Legg,
President and Chief Executive Officer
(Principal Executive Officer)
Date: November 1, 1996 By: /s/ John E. Castello
--------------------
John E. Castello,
Senior Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1996 AND THE CONDENSED
CONSOLIDATED STATEMENT OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 5,827,331
<SECURITIES> 0
<RECEIVABLES> 403,116
<ALLOWANCES> 216,185
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 8,723,639
<DEPRECIATION> 2,532,639
<TOTAL-ASSETS> 12,348,302
<CURRENT-LIABILITIES> 251,800
<BONDS> 0
0
0
<COMMON> 3,031,618
<OTHER-SE> 4,408,984
<TOTAL-LIABILITY-AND-EQUITY> 12,348,302
<SALES> 0
<TOTAL-REVENUES> 4,518,698
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,388,695
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 547,397
<INCOME-PRETAX> 2,607,028
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,607,028
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,607,028
<EPS-PRIMARY> .86
<EPS-DILUTED> .86
</TABLE>
