<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED: DECEMBER 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 0-12166
MERIDIAN POINT REALTY TRUST '83
(Exact name of registrant as specified in its charter)
CALIFORNIA 94-6542723
(State of incorporation) (I.R.S. Employer Identification No.)
655 MONTGOMERY STREET, SUITE 800
SAN FRANCISCO, CALIFORNIA 94111
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (415) 393-8000
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: SHARES OF
BENEFICIAL INTEREST
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 by check mark if disclosures of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained here, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. Yes X No
_____ _____
The aggregate market value of the voting stock held by non-affiliates
of the registrant on March 27, 1997 was $9,094,854 based on the closing price on
that date of shares of beneficial interest quoted on the National Market System
of NASDAQ and by excluding shares owned by trustees, executive officers and
principal shareholders (i.e., holders of 5% or more of the registrant's
outstanding shares).
The registrant had 3,031,618 shares of beneficial interest
outstanding on March 27, 1997.
<PAGE>
MERIDIAN POINT REALTY TRUST '83
INDEX TO ANNUAL REPORT
ON FORM 10-K
<TABLE>
<CAPTION>
PART I Page
- ------ ----
<S> <C>
Item 1: Business..................................................................... 3
Item 2: Properties................................................................... 7
Item 3: Legal Proceedings............................................................ 7
Item 4: Submission of Matters to a Vote of Security Holders.......................... 7
PART II
Item 5: Market for the Registrant's Common Equity and Related Shareholder Matters.... 8
Item 6: Selected Financial Data...................................................... 9
Item 7: Management's Discussion and Analysis of Financial Condition and Results of
Operations.......................................................... 10
Item 8: Financial Statements and Supplementary Data.................................. 15
Item 9: Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................................. 15
PART III
Item 10: Information about Directors and Executive Officers of the Registrant.......... 16
Item 11: Executive Compensation........................................................ 19
Item 12: Security Ownership of Certain Beneficial Owners and Management................ 21
Item 13: Certain Relationships and Related Transactions................................ 22
PART IV
Item 14: Exhibits, Financial Statements and Reports on Form 8-K........................ 23
</TABLE>
2
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PART I
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ITEM 1. BUSINESS
The Company
- -----------
Meridian Point Realty Trust '83, a California business trust (the
"Company"), is a finite-life real estate investment trust ("REIT"). Since
February 23, 1996, the Company has owned only one property, the Charleston
Business Park, located in Mountain View, California ("Charleston"). The
Company's shares of beneficial interest are quoted on the National Market System
of the National Association of Securities Dealers Automated Quotations ("NMS").
The Company was organized on June 24, 1982 and commenced operations on April 12,
1983. It changed its name from Sierra Real Estate Equity Trust '83 to Meridian
Point Realty Trust '83 in October 1991.
The Company was organized to qualify as a REIT under Sections 856-860
of the Internal Revenue Code of 1986, as amended (the "Code"). Under the Code,
a REIT must meet certain criteria, including requirements that certain
percentages of its gross income be derived from specific sources and that it
distribute annually to its shareholders at least 95% of its REIT taxable income
(as defined in the Code).
The Company was formed for the purpose of making equity investments in
income-producing industrial and commercial real estate in selected areas of
projected growth in the United States. Prior to February 23, 1996, the Company
had six real estate equity investments consisting of ten properties, all but one
(Charleston) of which were sold on February 23, 1996 as discussed below (refer
also to Item 2 for a description of Charleston). The Company's principal
objective is to sell Charleston, adopt a plan of liquidation, distribute its net
assets to its shareholders and then liquidate. There is no guarantee the
Company will meet its objective.
On June 27, 1996, the Company announced that it had entered into an
exclusive listing agreement for the sale of the Charleston property.
Subsequently, the Company received offers to purchase the property at a price of
$12,500,000 less an environmental remediation reserve of $1,000,000. The
Company is currently negotiating the sale with one of the potential buyers and,
in December 1996, the Company entered into a letter of intent to sell Charleston
under essentially these terms. Management is actively trying to structure a
transaction that would limit the cost of the environmental remediation clean-up
at Charleston for both the Company and any potential buyer. At the present
time, however, there can be no assurances that such a transaction can be
structured or that the Company will be able to conclude arrangements to sell
Charleston. See discussion of environmental conditions at Charleston below and
Note 7 to the Company's financial statements.
On September 22, 1994, the Company entered into a Stock Purchase
Agreement (the "Agreement") with Hunt Realty Acquisitions, L.P. ("Hunt") whereby
the Company was to issue 606,323 shares of common stock to Hunt for $3.50 per
share. On March 30, 1995, Hunt terminated the Agreement due to concerns
regarding environmental conditions at Charleston (see discussion below).
On May 31, 1995, the Company entered into an Asset Purchase Agreement
with a newly formed infinite-life industrial REIT, Meridian Industrial Trust,
Inc. ("MIT"). The Asset Purchase Agreement provided that the Company would sell
all of its real estate assets, other than the Charleston property, to MIT for
approximately $3.6 million in cash, 390,360 shares of MIT common stock, and the
assumption of certain mortgage notes and other liabilities by MIT. Charleston
was excluded from the transaction because of MIT's concerns regarding the
environmental conditions at that property (see discussion below and Note 7 to
the Company's financial statements). Completion of the transaction was subject
to a number of contingencies, including shareholder approval of the Asset
Purchase Agreement, the
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effectiveness of a registration statement for MIT's common stock and completion
of the merger of three other Meridian Point REITs into MIT.
On February 22, 1996, the Company's shareholders approved the Asset
Purchase Agreement with MIT. On February 23, 1996, MIT acquired all of the
Company's real estate assets (other than Charleston) pursuant to the terms
outlined above in the Asset Purchase Agreement.
On February 23, 1996, the Company 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 shareholders of record at the close of business on March 12,
1996.
The Company's remaining property, Charleston, has experienced soil and
groundwater problems (see Regulation and Supervision below). As the Company
negotiates the sale of that property, it expects to seek environmental
insurance, indemnities or both in favor of the Company. In December 1996, the
Company entered into a letter of intent to sell Charleston to an unrelated third
party at a price of $12,500,000 less a $1,000,000 credit in favor of the buyer
for potential remediation work. The parties continue to negotiate the terms of
this prospective sale, including the provision of certain environmental
indemnities from the prospective buyer as discussed in Note 7 to the Company's
financial statements. Management anticipates that the final terms of this sale
will not differ materially from the terms of the letter of intent; however,
management can provide no assurances as to the timing, final terms or closure of
this or any other sale of Charleston. If the Company is unable to sell
Charleston on acceptable terms, it may choose to conduct any required
remediation and then resume selling efforts. In that event, the Company may
seek reimbursement from the parties it believes are primarily responsible for
the environmental problem.
Management and Employees
- ------------------------
The Company's affairs are overseen by a Board of Trustees
("Trustees"). There are five Trustees, four of whom are independent (i.e., not
an affiliate of a person or entity providing services for the Company other than
in his or her capacity as a Trustee) and one of whom is president of the Company
providing management services for the Company. A listing of the Trustees is set
forth in Item 10, Trustees and Executive Officers of the Registrant.
During the period April 1, 1991 through February 23, 1996, the Company
and other companies of common initial sponsorship were effectively self-
administered through an internalized management structure from Meridian Point
Properties, Inc., a California corporation ("MPP"). The Company and the other
companies are collectively referred to here as the "Companies".
MPP performed administrative, accounting, asset management and
property management functions. In addition, through December 31, 1994, MPP, at
cost, acted as the transfer agent for the Companies and provided shareholder
account maintenance, dividend disbursement, and reinvestment services.
Effective January 1, 1995, the transfer agent function was transferred to First
Chicago Trust Company of New York. This arrangement with MPP permitted the
Companies to share employees collectively rather than each of the Companies
separately employing a staff of full or part-time personnel to perform similar
tasks. Under this arrangement, the Companies each (i) reimbursed MPP for actual
costs incurred by it in connection with employees leased to the Companies and
(ii) through December 31, 1994 reimbursed MPP for the costs of transfer agent
services. Because MPP was paid only to the extent necessary to reimburse it for
actual costs, it did not realize any profit.
The cost reimbursements made to MPP were allocated among the Companies
in accordance with agreements among MPP and the Companies. Costs directly
attributable to a particular Company were allocated to that Company. Costs that
were not directly attributable to a particular Company but rather
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benefited a group or all of the Companies were allocated among those Companies
under formulas that varied depending upon the type of cost involved.
Effective February 24, 1996, the Company terminated its leasing
agreement with MPP and entered into an agreement with E & L Associates, Inc. ("E
& L"). Under this agreement E & L received a monthly fee of $8,333 to June 30,
1996. Effective July 1, 1996, the monthly fee was increased to $10,000. E & L
is a wholly-owned subsidiary of a company in which Lorraine O. Legg (the
Company's Chief Executive Officer and a Trustee) has an ownership interest.
Other than the management fees paid to E & L, Ms. Legg receives no other
compensation from the Company.
Scripps Venturers
- -----------------
Through February 23, 1996, the Company was the managing venturer and
had a 99% interest in Scripps Venturers. Accordingly, the financial condition
and operating results of Scripps Venturers are included in the Company's
consolidated financial statements for the period from January 1, 1996 to
February 23, 1996 and the years ended December 31, 1995 and 1994. (See Note 1
to the Company's financial statements.)
Insurance
- ---------
At December 31, 1996, and in addition to other types of insurance
maintained by the Company, the Company carried comprehensive general liability
and excess liability coverage on the Charleston property in the aggregate amount
of $3,000,000 to insure against liability claims and the costs of defense.
Similarly, the Company insured against the risk of direct physical damage in
amounts necessary to reimburse the Company on a replacement cost basis for costs
incurred to repair or rebuild the Charleston property, including loss of rental
income during the construction period, in the aggregate amount of $5,500,000.
Tenants
- -------
As of December 31, 1996, the Company's sole real estate asset was
Charleston, located in Mountain View, California. The table contains
information about the three existing leases at Charleston.
<TABLE>
<CAPTION>
________________________________________________________________________________________________________________________
Annual Rent as a
Number of Leases Total Sq. Ft. of % of Trust Total Leases Expiring % of Trust Total
Year Expiring Leases Expiring Potential Sq. Ft. (in dollars) (1) Annual Rent (1)
---- ---------------- --------------- ----------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
1997 1 20,640 17.3% $185,760 17.4%
1998 1 86,401 72.6% 777,609 73.1%
1999 -- -- -- -- --
2000 1 12,000 10.1% 100,800 9.5%
________________________________________________________________________________________________________________________
(1) Based on the projected 1997 base rent of existing leases.
</TABLE>
Leases at Charleston are on a triple net basis. Accordingly, tenants are
responsible for most of the day-to-day operating expenses such as real estate
taxes, insurance, utilities, maintenance of common areas and non-structural
repairs. Triple net leases reduce the Company's exposure to increases in
operating expenses.
Charleston was 100% leased as of February 21, 1997. However, two leases
covering approximately 90% of the space will expire by February 1, 1998. The
three tenants under lease at Charleston in order of lease expirations are: (1)
Davila International Circuit, (2) Tencor Instruments (Tencor Instruments has
vacated the premises but continues to honor the lease) and (3) Television
Associates. The loss of any one of the existing tenants or the Company's
inability to release vacant space would have a material adverse impact on
operations. See Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations.
5
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Real Estate Considerations
- --------------------------
The future results of the Company's operations will depend to a great
extent on the Company's ability to lease space at Charleston. In attracting and
retaining tenants, the Company competes with similar properties as to location,
lease terms and property condition. In addition, the success of the Company
depends, among other factors, upon trends in the economy, the financial
condition of tenants and prospective tenants, increases or decreases in
operating expenses, income tax laws, governmental regulations and legislation,
real estate market fluctuations, population trends and zoning laws.
Regulation and Supervision. The Federal Government and the state of
---------------------------
California (where Charleston is located) have adopted laws and regulations
relating to the ownership of real estate. Compliance with these requirements
may from time to time require capital expenditures by the Company (for example,
expenditures necessary to comply with the Americans with Disabilities Act or
changes in local building or other codes). In addition, the ownership of real
estate entails environmental risks and liabilities to the owner.
Charleston Business Park. Environmental investigation has indicated that
-------------------------
soil and groundwater at Charleston contain volatile organic compounds (primarily
trichloroethylene) in amounts ranging from 1 to 1300 parts per billion. It
appears that some of the contamination originated at Charleston and additional
contamination originated from offsite but migrated to the groundwater under
Charleston. It has not been determined whether the contamination occurred
before or after the Company acquired Charleston in 1983.
The California Regional Water Quality Control Board ("RWQCB") has taken
jurisdiction as the "lead agency" with regard to the environmental conditions at
Charleston. By letter dated February 17, 1997, the RWQCB notified the Company
that it intends to issue a Site Cleanup Requirements ("SCRs") Order naming the
Company, one of Charleston's current tenants and a former tenant as parties
responsible for further environmental investigation and remediation of
Charleston. The RWQCB has indicated that it also intends to issue a similar
order to parties associated with an adjacent site that may be an offsite source
of a portion of the contamination in the groundwater underlying Charleston.
The Company has requested that the RWQCB defer issuing the SCRs to give the
Company time to complete the pending sale of Charleston. As discussed in Item 7
below, the Company is in negotiations with a prospective purchaser of
Charleston, and is negotiating certain environmental indemnities, insurance and
other protections from the prospective buyer as part of the potential sale to
satisfy obligations it may have under the pending SCRs or otherwise in
connection with the contamination at the site. The RWQCB has not yet decided
whether to defer the SCRs, and it is not possible to determine whether any sale
of Charleston can be structured in a manner or within a timeframe necessary to
protect the Company from liabilities associated with the contamination. Thus,
it is possible that the Company will be named as a responsible party in the SCRs
or in actions initiated by other parties held responsible for the contamination.
If the Company is required to remediate the property, it would have statutory
and common law rights to contribution and indemnity for the remediation costs
against the parties that actually caused the contamination.
Based on very preliminary investigation and on current policies of the
RWQCB, the estimated present value of the ultimate amount of remedial costs and
other losses associated with all of the soil and groundwater conditions in the
vicinity of Charleston ranges from $1 million to $5.4 million. It should be
noted, however, (i) that under current RWQCB policies, the RWQCB would seek to
charge a number of parties with the remediation; (ii) that the range of
remediation costs takes into account the possibility that more than one type of
treatment method might be acceptable to the RWQCB, (iii) that there is a high
degree of uncertainty associated with remedial cost estimates at this relatively
early stage of the environmental investigation, and (iv) that due to the
relatively limited soil and groundwater data available at this early
investigative stage, it is not feasible to provide a more precise estimate of
these costs. In addition, there are uncertainties generated by: (i) the lack of
information concerning the identity and
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financial condition of the potentially responsible parties who would be expected
to be charged with the entire cost of remediation and (ii) the possibility of
changes in regulatory enforcement policies. As a result, it is not feasible at
this time to estimate either the Company's risk of actually incurring any
remedial costs or the amount of those costs that the Company might actually
incur.
Golden Cove Shopping Center. Environmental investigation at the Golden
----------------------------
Cove Shopping Center (which was sold to MIT under the Asset Purchase Agreement)
has indicated that soil at the property contains volatile organic compounds
(tetrachloroethane and trichloroethane) in concentrations which exceed the
clean-up goals typically cited by the RWQCB. Furthermore, these investigations
estimate the cost for soil remediation at between $110,000 to $140,000. As
part of the Asset Purchase Agreement with MIT, the Company is obligated to fully
fund the remediation costs. The Company may be entitled to seek contribution
and indemnity for the remediation costs against other potentially responsible
parties who may have caused the contamination at the property. During 1994, the
Company accrued $140,000 toward the cost of remediation. Through February 1997,
$94,586 had been expended by the Company for remediation costs.
ITEM 2. PROPERTY
Subsequent to February 23, 1996, Charleston is the Company's only real
estate investment. The property is located in Mountain View, California and
includes six industrial/flex buildings containing 119,041 square feet fully
leased to three tenants. In addition, the property serves as collateral
pursuant to a first deed of trust for repayment of a promissory note which
matures on March 1, 1999 (see Note 4 of the Company's financial statements).
ITEM 3. 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's security holders
during the last quarter of its fiscal year ended December 31, 1996.
7
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PART II
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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
The principal market on which the Company's shares of beneficial interest
are quoted is the National Market System of NMS. The listing symbol of the
shares of beneficial interest on the NMS is MPTBS.
As of March 28, 1997, the Company had outstanding a total of 3,031,618
shares of beneficial interest. As of the same date, these shares were held by
approximately 2,560 holders of record (this figure does not reflect beneficial
ownership of shares held in nominee names).
The following table sets forth the published high and low closing sales
prices for the shares of beneficial interest during each calendar quarter for
1995 and 1996 (amounts in dollars).
<TABLE>
<CAPTION>
CALENDAR QUARTER HIGH LOW
----------------------------------
<S> <C> <C>
1995
First Quarter 3-3/4 2-7/8
Second Quarter 3-3/8 2-1/8
Third Quarter 2-1/2 1-3/8
Fourth Quarter 2-1/4 1-7/16
1996
First Quarter 3-3/4 0-1/2
Second Quarter 2-1/8 1
Third Quarter 2-3/8 1-3/8
Fourth Quarter 3 2
</TABLE>
On March 26, 1997, the high and low closing sales price for shares of
beneficial interest on the NMS were $3.
The Company suspended the payment of dividends in the fourth quarter of
1992 with the goal of preserving and enhancing its future liquidity. However,
as a result of the closing of the Asset Purchase Agreement, the Company
announced on February 23, 1996 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 ownership in the Company) to
shareholders of record at the close of business on March 12, 1996. The board
has not made any decision regarding the payment of future dividends, which will
depend, in part, on the availability of operating cash flow and the sale of
Charleston (see Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations).
Under the REIT tax rules, the Company is required to make distributions to
shareholders that aggregate annually at least 95% of its taxable income. Due to
net operating loss carry-forwards, the Company remains in compliance with this
rule. In accordance with the Company's organizational documents, dividend
distributions to be made by the Company will always be at the discretion of the
Trustees and will depend on, among other factors, the Company's operations, cash
flow and financial condition, principal amortization payments, and applicable
statutory restrictions on the payment of dividends.
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ITEM 6. SELECTED FINANCIAL DATA
The following table summarizes certain selected financial data for the
Company for the five years ended December 31, 1996. 1996 data reflects the sale
of nine of the ten properties previously owned by the Company through February
23, 1996. On February 22, 1996, the Company's shareholders approved the sale of
all but one of the Company's real estate assets to Meridian Industrial Trust,
Inc. ("MIT") for approximately $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 sale was completed on February 23, 1996. The selected financial
data presented below for the year ended December 31, 1996 is thus not comparable
to the prior years' selected financial data. This table should be read in
conjunction with the more detailed financial statements included elsewhere
herein.
Effective December 1, 1993, the Company and a commonly-sponsored REIT
("Trust '82") reached an agreement under which Trust '82 withdrew from Scripps
Venturers. The Company previously had a 56.83% equity interest in the
partnership and the Company's investment in the partnership was accounted for
using the equity method the years prior to December 31, 1993. As a result of
Trust '82's withdrawal from the partnership in December 1993, the Company's
ownership interest increased to 99%. The results of operations and financial
condition of the partnership for the period from January 1, 1996 through
February 22, 1996 and years ended December 31, 1995, 1994 and 1993 are
consolidated into the Company's operating results.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Rentals from Real Estate
Investments $ 2,026,861 $ 5,834,499 $ 6,440,653 $ 6,947,791 $ 5,178,892
Net Income (Loss) Before
Gain (Loss) on Sales
of Property 97,168 (534,476) (479,892) 246,015 (13,286)
Gain (Loss) on Sales
of Property 2,582,606 -- 58,977 (48,964) --
Net Income (Loss) 2,679,774 (534,476) (420,915) 197,051 (13,286)
Rental Properties, Net 6,191,573 28,780,485 29,346,374 35,741,420 28,326,048
Total Assets 12,345,964 34,053,336 36,422,599 39,923,901 31,526,992
Mortgage Notes
Payable, Net 4,627,123 20,873,011 22,626,668 25,905,608 17,878,986
Per Share
Net Income (Loss) $ 0.88 ($0.18) ($0.14) $0.07 ($0.00)
Distributions Declared
Cash 0.33 -- -- -- --
Shares of MIT stock .1287 -- -- -- --
- ------------------------------------------------------------------------------------------------
</TABLE>
See "Material Changes in Results of Operations" under Item 7 for information
regarding material changes in results of operations during 1996, 1995, and 1994.
9
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Introduction and Discussion of Known Trends, Events and Uncertainties
- ---------------------------------------------------------------------
The Company was formed and currently operates as a self-liquidating, finite-
life REIT. 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 approximately $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 ownership in the Company) to shareholders
of record at the close of business on March 12, 1996; and (3) appointed E & L to
provide property management and certain other administrative services to the
Company, effective February 24, 1996. All of these events are described in
greater detail in Item 1 and Notes 1, 2 and 6 to the Company's financial
statements.
The Company's future sources of liquidity will be significantly influenced by
the operations at Charleston, the Company's sole remaining real estate
investment. For example, leases covering approximately 90% of the space at
Charleston will expire by February 1, 1998. There can be no assurances that the
current tenants will renew or that they will not renew on less favorable terms
(see Item 1, Tenants). Furthermore, the mortgage loan agreement requires that a
certain amount 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 4 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 (see Item 1 Real Estate Considerations - Charleston
Business Park). 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
- -------------------------------
Because of the significant decrease in the scope of operations of the Company
following the sale of substantially all of its real estate on February 23, 1996,
management's discussion of liquidity and capital resources is addressed under
the following categories: Current and Historical. Under the Current category,
the discussion of liquidity and capital resources focuses on the operations
after taking into account the sale. The Historical discussion reviews the
liquidity and capital resources for the years ended 1995 and 1994 without regard
to the asset sale.
Current
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. As of December 31, 1996, the
Company had unrestricted cash of approximately $4.4 million. Secondary sources
of liquidity include: (i) cash flow from Charleston (subject to the restrictions
thereon as discussed in the Company's financial statements) and (ii) net
proceeds from the eventual sale of Charleston.
Given the environmental situation at Charleston, it is unlikely the property
could be refinanced at interest rates or terms more favorable than those of the
existing first mortgage loan (which loan bears an annual fixed interest rate of
8.75% and matures on March 1, 1999). Furthermore, the relatively low total
capitalization of the Company makes it remote that it could sell either debt or
equity securities in the public markets.
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The Company's principal applications of its resources are: (a) property
operating costs, property taxes, general and administrative expenses, interest
expense, and legal costs, (b) potential environmental remediation, tenant
leasing and capital improvements at Charleston (refer to Item 1. Real Estate
Considerations - Charleston Business Park), (c) principal payments on the
Charleston mortgage note, (d) the escrowing of the cash flow from Charleston as
required under its mortgage loan agreement, and (e) dividends.
During 1995 and 1996, Funds From Operations were insufficient to fully meet
the cash needs of the Company. The Company anticipates this trend to continue
which would result in further declines in its unrestricted cash of approximately
$4.4 million as of December 31, 1996.
On June 27, 1996, the Company announced that it had entered into an exclusive
listing agreement for the sale of the Charleston property. Subsequently, the
Company received offers to purchase the property at a price of $12,500,000 less
an environmental remediation reserve of $1,000,000. The Company is currently
negotiating the sale with one of the potential buyers. Management is actively
trying to structure a transaction that would limit the cost of the environmental
remediation clean up at Charleston for both the Company and any potential buyer.
In December 1996, the Company entered into a letter of intent to sell Charleston
to an unrelated third party at a price of $12,500,000 less a $1,000,000 credit
in favor of the buyer for potential remediation work. The parties continue to
negotiate the terms of this prospective sale, including the provision of certain
environmental indemnities from the prospective buyer. At the present time,
however, there can be no assurances that such a transaction can be structured or
that the Company will be able to conclude arrangements to sell Charleston.
Historical
The following discussion summarizes the liquidity and capital resources of the
Company for the years ended 1995 and 1994. Because the operations of the
Company were dramatically changed following the sale of substantially all of its
real estate on February 23, 1996, the following is presented for comparative
purposes only and is not indicative of future operating results.
Historically, the Company's main sources of liquidity were: (i) cash flows
from operating activities, (ii) cash reserves, and (iii) net proceeds from the
sale of the Company's real properties. Secondary sources of liquidity included
proceeds from secured and unsecured debt. A summary of the Company's historical
cash flows is as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
-------------------------
1995 1994
------------ ------------
<S> <C> <C>
Cash flows provided by (used in):
Operating activities $ 622,124 $1,029,276
Investing activities (1,238,384) (519,137)
Financing activities (1,842,785) 1,943,398
</TABLE>
In addition to cash flows and net income, management and industry analysts
generally consider Funds From Operations to be one additional measure of the
performance of an equity REIT because, together with net income and cash flows,
Funds From Operations provides investors with an additional basis to evaluate
the ability of the Company to incur and service debt and to fund acquisitions
and other capital expenditures. However, Funds From Operations does not measure
whether cash flow is sufficient to fund all of the Company's cash needs
including principal amortization, capital improvements, and distributions to
shareholders. Funds From Operations also does not represent cash generated from
operating, investing or financing activities as determined in accordance with
generally accepted accounting principles. Funds From Operations should not be
considered as an alternative to net income as an indicator of the Company's
operating performance or as an alternative to cash flow as a measure of
liquidity. Funds From Operations represents net income (loss) before
extraordinary items, adjusted for
11
<PAGE>
depreciation on real property and amortization of tenant improvement costs and
lease commissions and gains from the sale of property. The Company's Funds From
Operations are as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
YEAR ENDING DECEMBER 31,
1996 1995 1994
---------------------------------------
<S> <C> <C> <C>
Net Income (Loss) $ 2,679,774 ($534,476) ($420,915)
Reconciling Items
Depreciation and Amortization 372,240 1,494,611 1,645,341
(Gains) Losses from Sales of (2,582,606) -- (58,977)
Property
- --------------------------------------------------------------------------------
Funds from Operations $ 469,408 $ 960,135 $1,165,449
- --------------------------------------------------------------------------------
</TABLE>
Funds From Operations during 1996 decreased by $490,727 because of the
February 23, 1996 sale of most of the Company's portfolio of rental properties.
Funds From Operations during 1995 decreased by $205,314 primarily due to: (i)
lower property operating results attributable to the sale of the Homestead Trade
Center in December 1994, (ii) the timing in the recognition of expense
recaptures, and (iii) an increase of $363,133 in expenses related to the
terminated Hunt stock purchase transaction.
On March 11, 1994, the Company completed the restructure of the mortgage note
on Charleston which matured in June 1993. The negotiation of this restructure
centered around short term leasing risks and the presence of groundwater
contamination at the property. This restructure positions the Company to
recognize potential future equity. The term of the loan is five years, and
calls for monthly principal and interest payments based on an interest rate of
8.75% per annum and a 20 year amortization schedule. In addition, the Company
will make monthly escrow payments of $35,000. This escrow account will be
available to fund the cost of environmental remediation, if any. Such escrow
payments continue through the maturity of the Charleston mortgage note, except
that, subsequent to the expiration of the lease referred to in Item 1, Tenants
for the tenant under lease for 73% of the square footage (which lease expires
January 31, 1998), such monthly escrow payments will be equal to 90% of the
property's net cash flow. Upon maturity, any proceeds remaining will be applied
to the mortgage loan as a principal pay down. As a result, substantially all of
the revenues from Charleston will go to the lender or to the non-refundable
escrow account.
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 report of this environmental engineering
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 (ii) a former tenant at Charleston. The exact location of the
off-site sources has not yet been determined. During 1993 a further
investigation 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 the current tenant's
occupancy in 1986 and may have migrated off-site. It has not been determined
whether the contamination occurred before or after the Company acquired
Charleston in 1983. The Company has requested that the RWQCB pursue the
responsible parties for the remediation costs. The RWQCB has responded to the
Company's request by indicating that it will issue an SCRs Order to certain
offsite parties who may be responsible for a portion of the contamination
underlying Charleston. As Noted in Item 7, the RWQCB has also indicated that it
intends to issue SCRs to the Company and two tenants of Charleston. Charleston
has not been classified as a superfund site by the Environmental Protection
Agency.
At this time, Company management is not able to reasonably estimate the amount
of remediation costs, if any, that it may be required to expend to clean-up the
contamination. If the parties responsible
12
<PAGE>
for the contamination do not have the financial wherewithal to fund the
necessary clean-up costs, it is possible that the Company, as property owner,
would be financially responsible for such costs. Through December 31, 1996, the
Company has incurred approximately $160,000 of ongoing legal, environmental
engineering, testing and reporting costs associated with this problem.
See Item 1, above, for additional discussion of environmental issues related
to Charleston.
Environmental investigation has indicated that soil at the Golden Cove
Shopping which was sold to MIT under the Asset Purchase Agreement contains
volatile organic compounds (tetrachloroethane and trichloroethane) in
concentrations which exceed the clean-up goals typically cited by the RWQCB.
Furthermore, these investigations estimate the cost for soil remediation at
between $110,000 to $140,000. As part of the Asset Purchase Agreement with MIT,
the Company is obligated to fully fund the remediation costs. The Company may
be entitled to seek contribution and indemnity for the remediation costs against
other potentially responsible parties who may have caused the contamination at
the property. During 1994, the Company accrued $140,000 toward the cost of
remediation. Through February 1997, $94,586 had been expended by the Company
for remediation costs.
Capital expenditures for the years ended December 31, 1996, 1995 and 1994
totaled $70,397, $768,345 and $452,963, respectively. Additionally, lease
commissions for these years totaled $46,064, $390,539 and $63,760, respectively.
The 1996 capital expenditures were primarily for tenant improvements at
Charleston. The 1995 and 1994 capital expenditures were primarily for: (i)
repair of the drainage system at the Golden Cove Shopping Center property; and
(ii) tenant improvements at the Scripps Ranch Business Park, Airport Building
#16 A, El Dorado Industrial Plaza, and North Irvine Business Park properties.
In formulating plans for capital improvements, the Company considers, among
other factors, the reasonable prospect of being able to recover the costs of
such improvements over a reasonable period of time either from increased rental
revenues or upon the sale of the property, and the potential effects of such
improvements on per-share earnings.
The Company suspended the payment of dividends in the fourth quarter of 1992.
(See Item 5 above). However, as a result of the closing of the Asset Purchase
Agreement, the Company announced on February 23, 1996 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
ownership in the Company) to shareholders of record at the close of business on
March 12, 1996. The board has not made any decision regarding the payment of
future dividends which will depend, in part, on the availability of operating
cash flow and the sale of Charleston (see Item 7 - Management's Discussion and
Analysis of Financial Condition and Results of Operations).
Material Changes in Results of Operations
- -----------------------------------------
Revenues
Rentals from Real Estate Investments totaled $2,026,861 and $5,834,499 for
the years ended December 31, 1996 and 1995, respectively. The decrease of
$3,807,638 during 1996 was primarily due to the sale of nine of the Company's
ten properties on February 23, 1996. 1996 rental revenues consisted of
$1,274,648 from Charleston and $752,213 from the nine sold properties to the
date of sale. Charleston rentals in 1995 totaled $1,303,576.
Rentals from Real Estate Investments totaled $5,834,499 and $6,440,653 for
the years ended December 31, 1995 and 1994, respectively. The decrease of
$606,154 during 1995 was primarily due to the sale of the Homestead Trade Center
property on December 28, 1994.
Interest and Other Revenue totaled $264,902 and $311,627 for the years
ended December 31, 1996 and 1995, respectively. The decrease of $46,725 is
primarily due to decreases in the Company's
13
<PAGE>
average cash balances available for investment. Compared to 1994, Interest and
Other Revenues increased in 1995 by $173,978 primarily because of increases in
the Company's average cash balances available for investment. Funds available
for investment were augmented with the refund of "contingency escrow reserves"
from properties sold in December 1994.
Expenses
Interest and Amortization of Debt Discount totaled $651,111 and $2,177,988
for the years ended December 31, 1996 and 1995, respectively. The decrease of
$1,526,877 during 1996 was primarily due to the assumption of debt related to
the properties sold on February 23, 1996 by MIT. 1996 expense included $418,525
related to Charleston and $232,586 related to debt secured by the properties
sold.
Compared to the same period in 1994, Interest and Amortization of Debt
Discount decreased by $219,858 for the year ended December 31, 1995. The
decrease was primarily due to the pay off of the mortgage note secured by the
Homestead Trade Center property when the property was sold in December 1994.
Property Taxes for the year ended December 31, 1996 totaled $183,136 of
which $104,019 related to the Charleston property. 1995 Property Taxes totaled
$612,621. Compared to 1994, Property Taxes for the year ended December 31, 1995
decreased by $78,505. The decrease was primarily due to the sale of the
Homestead Trade Center property in December 1994.
Property Operating Costs totaled $664,101 for the year ended December 31,
1996. This amount consisted of Charleston operating costs of $183,788, asset
management fees paid to MPP and E & L of $236,098, and operating costs of the
properties sold to the date of sale of $244,215. For the year ended December
31, 1995 Property Operating Costs were $1,576,378. The decrease in total
Property Operating Costs from 1995 to 1996 was not in proportion to the decrease
in rental income because of the write-off of uncollectible receivables and legal
and professional fees incurred related to the Charleston environmental situation
in 1995.
Property Operating Costs totaled $1,576,378 and $1,330,156 for the years
ended December 31, 1995 and 1994, respectively. The increase of $246,222 was
due to: (i) an increase in bad debt expense of $117,000 at the Golden Cove
Shopping Center property, (ii) a $55,600 lease termination fee paid to a former
tenant at the same property in 1995 and (iii) $50,000 of expenses incurred in
connection with groundwater test drilling done in 1995 at Charleston.
Legal Costs totaled $47,724 and $26,653 for the years ended December 31,
1996 and 1995, respectively. The increase of $21,071 during 1996 was primarily
due to costs related to the sale of nine of the Company's operating properties
to MIT and the potential sale of Charleston. Legal Costs totaled $26,653 and
$415,697 for the years ended December 31, 1995 and 1994, respectively. The
decrease of $389,044 during 1995 was primarily due to the professional fees
charged to operations in 1994 in connection with the review and evaluation of
various strategic plans for the Company. (See Item 1, the Company).
General and Administrative expenses for the year ended December 31, 1996
were $276,283, a decrease of $152,935 from the 1995 level of $429,218. The
decrease resulted from the sale of properties in 1996. General and
Administrative expenses for 1994 totaled $438,028, approximately the same as the
1995 level.
On May 30, 1995, the Company and Hunt, terminated their Stock Purchase
Agreement due to concerns regarding the environmental condition at Charleston.
The Company incurred expenses totaling $363,133 in connection with the Stock
Purchase Agreement and resulting termination. These costs were charged to
operations during the year ended December 31, 1995. (See Item 1, the Company).
14
<PAGE>
Depreciation and Amortization totaled $372,240 and $1,494,611 in the years
ended December 31, 1996 and 1995, respectively. The decline relates entirely to
the sale of nine of the Company's operating properties in February 1996. For
the years ended December 31, 1995 and 1994, these expenses totaled $1,494,611
and $1,645,341, respectively. The decrease of $150,730 during 1995 was
primarily due to the sale of the Homestead Trade Center property in December
1994.
Income before gain on sales of property was $97,168 in the year ended
December 31, 1996 as compared to a loss of $534,476 in the year ended December
31, 1995. The improvement in profitability is attributable to operating
efficiencies attained by the Company subsequent to the February 1996 sale of
nine of its operating properties, investible cash as a more significant
percentage of the Company's total assets and the 1995 expenses totaling $363,133
relating to the Hunt Stock Purchase Agreement. (See Item 1, the Company).
Net Loss for the year ended December 31, 1995 totaled $534,476. The net
change was $113,561 compared to the Net Loss of $420,915 for the year ended
December 31, 1994. The increased loss was primarily due to expenses incurred as
a result of the termination of the Stock Purchase Agreement and the decrease in
Rentals From Real Estate Investments. These items were partially offset by the
increase in Interest and Other Revenue, and decreases in Property Taxes and
Legal Costs.
Other Matters
On February 23, 1996, the Company sold all of its real estate assets, other
than the Charleston property, to MIT for approximately $3.6 million in cash,
390,360 shares of MIT common stock, and the assumption of certain mortgage notes
and other liabilities by MIT. As a result of this transaction, the Company
recognized a gain on sale of property of $2,582,606.
During the year ended December 31, 1994, the Company recorded a Provision
for Environmental Clean-up Costs associated with the Golden Cove Shopping Center
property amounting to $140,000. (See Note 7 to the financial statements of the
Company.)
In connection with the sale of the Homestead Trade Center property and one
of the buildings at the Scripps property during 1994, the Company recognized a
Gain on Sale of Properties totaling $33,769 after factoring in a prepayment
penalty of $98,229 associated with the pay-off of the related mortgage note.
In accordance with Statement of Financial Accounting Standard No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of", the Company reviews long-lived assets for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. An impairment loss is recognized when expected
undiscounted cash flows are less than the carrying value of the asset.
Measurement of impairment is based upon the estimated fair value of the asset.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements and supplementary data listed in Item 14(a)(1) and
(a)(2) below are incorporated herein by reference and filed as part of this
report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
The Company has not changed its independent certified public accountants and
has not had any disagreement with its independent certified public accountants
on accounting or financial disclosures required to be made under rules of the
Securities and Exchange Commission.
15
<PAGE>
- --------------------------------------------------------------------------------
PART III
- --------------------------------------------------------------------------------
ITEM 10. TRUSTEES AND EXECUTIVE OFFICERS OF THE REGISTRANT.
TRUSTEES
- --------
The Trustees are elected annually and serve until the next annual meeting of
shareholders and until their successors are elected and qualified. The Company's
Declaration of Trust provides that the number of Trustees shall be not less than
five nor more than fifteen. Presently the authorized number of Trustees is five.
In addition, the Declaration of Trust provides that a majority of the Trustees
shall be "Independent Trustees." An "Independent Trustee" generally means a
Trustee who is neither an affiliate of a person or entity providing services to
the Company nor is performing services for the Company other than as a Trustee.
The Board of Trustees of the Company consists of the five individuals named
below. Except for Lorraine O. Legg, all Trustees are "Independent Trustees." Set
forth below are each Trustee's age, current position with the Company and
business experience during the past five years or more.
PETER O. HANSON
Trustee
Age: 63
Mr. Hanson has been the President of James E. Hanson, Inc., an industrial real
estate development, property management and realty brokerage firm, since 1966.
Since 1984, he has served as President of Property Investors Associates, Inc. (a
subsidiary of James E. Hanson, Inc.), which is the general partner of five
public real estate partnerships. He has been a director of seven privately-held
corporations and general partner of 11 privately-held real estate partnerships.
He currently serves as a director of New American Network. Mr. Hanson is a
member of the Society of Industrial and Office Realtors and served as its
National President in 1985. He is also a member of the New York Metropolitan
Real Estate Brokers Association and in 1970 was its President. Mr. Hanson holds
a BA from Colgate University. Mr. Hanson served as a Trustee of the Company
from April 1, 1992 through October, 1993, and since June 1994.
LORRAINE O. LEGG
Trustee (2)
Age: 57
Ms. Legg has been President and Chief Executive Officer and a director of TIS
Financial Services, Inc. since 1984, TIS Mortgage Investment Company since 1988,
and TIS Asset Management, Inc. since 1990. She is also President and Chief
Executive Officer and a director of Corporate Capital Investment Advisors. TIS
Financial Services, Inc. and its affiliates supervise collateralized mortgage
obligation issuances and manage portfolios for individuals and corporations,
including TIS Mortgage Investment Company, which is a real estate investment
trust traded on the New York Stock Exchange. In addition, Ms. Legg is a
director of CFI Proservice, Inc., located in Portland, Oregon. Ms. Legg has
over 32 years of experience in corporate and real estate finance. Ms. Legg has
served as a Trustee of the Company since October 1993.
16
<PAGE>
ROBERT E. MORGAN
Trustee (2)
Age: 77
Mr. Morgan has served as an independent consultant since 1988, primarily
assisting financial institutions with respect to problem commercial loans and
commercial real estate. From 1984 to 1988, he served as President and General
Manager of Coldwell Banker Real Estate Finance Services, and from 1981 to 1988
as President and General Manager of Coldwell Banker First Newport. Mr. Morgan
has over 47 years of real estate experience. He currently serves as a director
of Pacific Gulf Properties (a real estate investment trust). Mr. Morgan has
served as a Trustee of the Company since March 1993.
JAMES M. POLLAK
Trustee (1)(3)
Age: 64
Mr. Pollak has been owner of James Pollak Company, an independent real estate
investment, development and advisory firm since 1985. From 1979 to 1985, he was
Chief Executive Officer of Christiana Investment Realty, Inc., a real estate
investment banking firm and developer of commercial and industrial properties.
Mr. Pollak has spent most of his real estate and finance career living in Europe
and Latin America. He founded the real estate investment bank of Banco Nacional
de Mexico. As a long-time member of the Urban Land Institute, he served as
International Vice Chairman of its Industrial and Park Council. He graduated
from Yale University in 1954 with an AB degree and from the University of
California at Los Angeles in 1966 with an MBA. degree. Mr. Pollak has been a
Trustee of the Company from 1982 to 1986 and since 1991.
HERBERT E. STANSBURY, JR.
Chairman and Trustee (1)(3)
Age: 71
Mr. Stansbury has served as a director of San Francisco Federal Savings and Loan
Association since 1973 and served as its Board Chairman from 1986 to 1994. He
is also a director of the Mountain View Cemetery Association (since 1985), owns
Stansbury & Company (a consulting firm), and Smart Chart Productions (financial
cartoon humor for syndication). He is also a former director and/or past
President of four firms in the hospital and biomedical research field as well as
publisher and author. Mr. Stansbury received his BA Degree from the University
of California at Berkeley in 1947 and was awarded the University's "Wheeler Oak
Meritorious Service Award" in 1982 and the "Director's Citation for
Intercollegiate Athletics" in 1991. Mr. Stansbury has been a Trustee of the
Company since 1988 and Chairman since 1991.
____________________________
(1) Member of the Executive Committee
(2) Member of the Audit Committee
(3) Member of the Nominating Committee
17
<PAGE>
Executive Officers
- ------------------
The following table sets forth as to each person who currently serves as an
executive officer, his or her name, age, and positions with the Company:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Lorraine O. Legg 57 President and Chief Executive Officer
John E. Castello 52 Executive Vice President, Chief Financial Officer
and Secretary
Michael Gilbert 53 Vice President Real Estate
</TABLE>
Officers of the Company hold office at the discretion of the Trustees. Each
executive officer's principal occupations during the past five years or more are
set forth below.
LORRAINE O. LEGG. Ms. Legg was appointed President and Chief Executive
Officer of the Company effective February 24, 1996. See above for additional
background.
JOHN E. CASTELLO. Mr. Castello was appointed Executive Vice President,
Chief Financial Officer and Secretary of the Company effective February 24,
1996. He is also a Senior Vice President and Chief Financial Officer of
Meridian Point Realty Trust VIII Co. (since 1995), Senior Vice President, TIS
Financial Services, Inc. since 1985, Executive Vice President and Chief
Financial Officer of TIS Mortgage Investment Company since 1988, and Senior Vice
President and Chief Financial Officer of TIS Asset Management since 1991. He is
a director of TIS Mortgage Acceptance Corporation and a director and Senior Vice
President of TIS Asset Management (since 1991).
MICHAEL GILBERT. Mr. Gilbert was appointed Vice President, Real Estate of
the Company effective February 24, 1996. He is also a Vice President Real
Estate of Meridian Point Realty Trust VIII Co. (since 1995). Mr. Gilbert has
served as Vice President Real Estate for TIS Financial Services since 1995.
Prior to this time, he was a real estate consultant active in development
projects in Southern California and many other areas of the country. Previously
Mr. Gilbert was Vice President of S.H. Management, Inc., a privately owned Los
Angeles based investment concern. He was previously a Vice President and
director of Gordon Capital Limited, a member firm of the major Canadian Stock
Exchanges.
18
<PAGE>
ITEM 11. COMPENSATION OF EXECUTIVE OFFICERS.
COMPENSATION OF EXECUTIVE OFFICERS
- ----------------------------------
Subsequent to the closing of the Asset Purchase Agreement on February 23,
1996, the Company had no employees and no compensation of any sort was paid to
its executive officers. During the period April 1, 1991 through October 21,
1994, the Companies shared employee costs under an internalized management
structure using MPP. See Item 1. For the year ended December 31, 1995, the
Company's allocated share of each of its executive officers' cash and non-cash
compensation did not exceed $100,000.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
--------------------
<TABLE>
<CAPTION>
(A) (B) (C) (D) (I)
Name and
Principal All Other
Position Year Salary (2) Bonus (4) Compensation (3)
- -------- ---- ---------- --------- ----------------
<S> <C> <C> <C> <C>
Milton K. Reeder 1994 $22,547 $12,000 $882
President and
Chief Executive 1995 21,693 32,415 892
Officer (1)
1996 7,549 -- --
</TABLE>
(1) Mr. Reeder was appointed as President and Chief Executive Officer of the
Company in January 1991. Mr. Reeder was employed pursuant to an Employment
Agreement dated July 2, 1991, the material terms and conditions of which are
described below. In connection with closing of the Asset Purchase
Agreement and the selection of E & L effective February 24, 1996, Mr. Reeder
resigned and his duties and responsibilities were assumed by Lorraine O.
Legg.
(2) Amounts shown above represent the Company's share of Mr. Reeder's cash
compensation. Mr. Reeder received no non-cash compensation for 1994, 1995
or 1996. The amounts shown above include salary deferral contributions made
by Mr. Reeder under a 401(k) Investment and Retirement Plan ("401(k) Plan")
established by MPP. The aggregate value of certain personal benefits
received by Mr. Reeder has not been included in the amounts shown above. In
each of 1994, 1995, and 1996, the aggregate value of these benefits did not
exceed the lesser of $50,000 or 10% of Mr. Reeder's annual salary as set
forth above.
(3) The amounts shown above include the Company's share of premiums for the
following insurance provided to Mr. Reeder in excess of that generally
provided to all leased employees: term life insurance coverage; disability
insurance; and dependent medical. The amounts shown above also include the
Company's share of matching contributions made by MPP under the 401(k) Plan.
(4) Amounts represent bonus earned during the subject year.
EMPLOYMENT AGREEMENT
- --------------------
Mr. Reeder was employed as President and Chief Executive Officer of the
Company through the closing of the Asset Purchase Agreement on February 23,
1996. Prior to that date, Mr. Reeder's employment was subject to an Employment
Agreement dated July 2, 1991 (the "Employment Agreement").
19
<PAGE>
Mr. Reeder's aggregate annual salary paid by the Companies under the
Employment Agreement was $225,000, an amount that was subject to adjustment each
year at the discretion of the directors/trustees of the Companies. Mr. Reeder
was also entitled to certain fringe benefits, including paid vacation and
health, life, and long-term disability insurance. Mr. Reeder's business
expenses incurred in the performance of duties under the Employment Agreement
were also reimbursed by the Companies. The boards of the Companies could also
separately award Mr. Reeder a bonus each year under the Employment Agreement
based upon an annual review of Mr. Reeder's performance. In addition to the
annual salary specified in the Employment Agreement, Mr. Reeder received an
additional $210,000 from the Companies in the form of bonus compensation for
1995, of which a portion of was paid in 1996. Payments of Mr. Reeder's salary
and benefits were allocated among the Companies upon such Companies' relative
asset size. His employment under the Employment Agreement ended on February 23,
1996.
Effective February 24, 1996, the Company terminated its employee leasing
agreement with MPP and entered into an agreement with E & L. Under this
agreement, E & L will provide property management and certain other
administrative services to the Company (see Management and Employees and Note 2
of the Company's financial statements).
SEVERANCE AGREEMENTS WITH THE TRUSTS' EXECUTIVES
Effective May 31, 1995 the Companies entered into severance agreements (the
"Severance Agreements") with six members of the Trusts then senior management
(the "Trust Executives"). Under the Severance Agreements, if a Trust Executive
accepted employment with MIT and, by August 23, 1996 (i) MIT terminated such
executive's employment (other than for cause) or (ii) the executive terminated
employment with MIT (for certain reasons), the Trust Executive would be entitled
to nine months severance benefits (consisting of base salary and benefits)
except, in the case of Milton K. Reeder, who would be entitled to severance
equal to 18 months base salary and benefits ("Severance Benefits"). In
addition, the Severance Agreements provided that if a Trust Executive's
employment with the Trusts was terminated without cause (as defined under the
Severance Agreements) such executive would be entitled to Severance Benefits.
In accordance with the Severance Agreements, the Company is obligated to pay a
share of severance payments for three Trust Executives whose employment with the
Company was terminated without cause. The Company's obligations with respect to
those three employees is estimated to be $23,333.
COMPENSATION OF TRUSTEES
- ------------------------
Trustee Fees. The Company pays each independent Trustee an annual fee of
------------
$8,000. In 1996, Messrs. Hanson, Morgan, Pollak, and Stansbury each received
$8,000 as a Trustee fee and Ms. Legg received $2,000 as a Trustee fee.
Chairman's Fees. The Chairman of the Company, as a member of the Executive
---------------
Committee and Nominating Committee, is not paid a committee meeting fee for
participating in Executive Committee and Nominating Committee meetings.
Instead, the Chairman is entitled to an annual fee of $5,000.
Committee and Other Meeting Fees. The Trustees are also entitled to be paid
--------------------------------
$500 for each Board meeting attended in person, $400 for each committee meeting
attended in person, and $300 for each Board or committee meeting attended by
means of conference telephone call. However, the Chairman is not paid committee
fees for Executive Committee and Nominating Committee meetings attended.
Trustees are also paid $300 per half day for time spent attending to the
Company's business. During 1996, Mr. Hanson was paid $2,800, Ms. Legg was paid
$1,700, Mr. Morgan was paid $2,500, Mr. Pollak was paid $3,000, and Mr.
Stansbury was paid $2,450, in respect of committee and other meeting fees.
20
<PAGE>
Reimbursements. All Trustees are reimbursed for reasonable travel and other
--------------
out-of-pocket expenses incurred in connection with attending Board and committee
meetings.
As a result of Ms. Legg's ownership interest in E & L, Ms. Legg no longer
meets the criteria for Independent Trustee status, and as a result will no
longer receive Annual Trustee, Committee and Other Meeting Fees.
The compensation and expense reimbursement arrangements for Trustees as set
forth above may be changed by the Board of Trustees pursuant to the authority
granted to it in the Company's Declaration of Trust.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table sets forth the amount and nature of the beneficial
ownership of shares of beneficial interest as of March 28, 1997 by (i) each
person known by the Company to own more than 5% of the outstanding shares of
beneficial interest (based upon filings made with the Securities and Exchange
Commission), (ii) each Trustee, (iii) the executive officer named in the Summary
Compensation Table, and (iv) all Trustees and executive officers of the Company
as a group.
<TABLE>
<CAPTION>
Number of Shares
Beneficially Owned
Name (1) Directly or Indirectly Percent
-------- ---------------------- -------
<S> <C> <C>
Turkey Vulture Fund XIII, Ltd. 153,500 (2) 5.1%
Richard M. Osborne Trust 113,844 (2) (2)
7001 Center Street
Mentor, Ohio 44060
Peter O. Hanson 13,940 (3) (5)
Lorraine O. Legg --
Robert E. Morgan --
James M. Pollak 1,000 (4) (5)
Herbert E. Stansbury, Jr. --
All Trustees and executive
officers as a group (7 persons) 15,940 (3)(4) (5)
</TABLE>
- --------------------
(1) Unless otherwise indicated in these footnotes, the persons listed above have
sole voting and investment power over the shares attributable to them,
subject to community property laws where applicable.
(2) The Turkey Vulture Fund XIII, Led. ("Fund") beneficially owns 153,500
shares, or approximately 5.1% of the outstanding shares, and the Richard M.
Osborne Trust ("Trust") beneficially owns 113,844 shares, or approximately
3.8% of the outstanding shares. The Trust is also a shareholder in the
Fund. Because Mr. Richard M. Osborne is sold manager of the Fund and sole
trustee of the Trust, (I) Mr. Osborne may be deemed to beneficially own such
shares, and (ii) the Trust and the Fund may be deemed members of a group
under Section 13(d)(3) of the Exchange Act. Together the Fund and the Trust
beneficially own 267,344 shares, or approximately 8.8% of the outstanding
shares.
(3) Includes 10,300 shares owned by Mr. Hanson's spouse for which Mr. Hanson
disclaims beneficial ownership.
(4) 500 shares are owned by Mr. Pollak's spouse.
(5) Less than 1%
21
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
During the period April 1, 1991 through October 21, 1994, the Company and
the other Companies were self-administered through an internalized management
structure. Companies that participated in the internalized management structure
are collectively referred to as the "Participating Companies". The structure of
the self-administered management is described in Item 1.
As more fully described in Item 2 and Note 2 to the Company's financial
statements, effective February 24, 1996, the Company terminated its employee
leasing agreement with MPP and signed an agreement with E & L to provide
property management and certain other administrative services to the Company.
E & L is a wholly-owned subsidiary of a company in which Lorraine O. Legg (the
Company's Chief Executive Officer and a Trustee) has an ownership interest.
Other than the management fees paid to E & L, Ms. Legg receives no other
compensation from the Company.
The REIT tax rules prohibit a REIT from owning more than 10% of the voting
securities of any company (the "10% Ownership Rule"). The Articles of
Incorporation of MPP placed certain limitations on the ownership and transfer of
MPP shares. The goal of these limitations was to ensure that MPP continued
under the control of those Participating Companies that leased employees from
MPP to the extent consistent with the 10% Ownership Rule. Messrs. Hanson,
Pollak and Stansbury are directors of MPP and the executive officers of the
Company (prior to February 23, 1996) are officers of MPP. See Note 2 to the
Company's financial statements for a description of the cost reimbursements made
to MPP.
22
<PAGE>
- --------------------------------------------------------------------------------
PART IV
- --------------------------------------------------------------------------------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) (1) FINANCIAL STATEMENTS. The following Company financial statements are
--------------------
filed as part of this report:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants......... 33
Consolidated Balance Sheets...................... 34
Consolidated Statements of Operations............ 35
Consolidated Statements of Shareholders' Equity.. 36
Consolidated Statements of Cash Flows............ 37
Supplemental Schedule of Non-Cash Transactions... 38
Notes to Consolidated Financial Statements....... 39
</TABLE>
(a) (2) FINANCIAL STATEMENT SCHEDULES. The following financial statement
-----------------------------
schedules are filed as part of this report:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Valuation and Qualifying Accounts......... 47
Real Estate and Accumulated Depreciation.. 48
</TABLE>
Schedules for which provision is made in applicable accounting regulations
of the Securities and Exchange Commission which have not been included have been
omitted because of the absence of conditions for which they are required or
because the information is included elsewhere in this report.
(a) (3) EXHIBITS.
--------
<TABLE>
<CAPTION>
NO. DESCRIPTION
- --- -----------
(In accordance with Item 601 of Regulation S-K)
<C> <S>
2.1 Amended and Restated Asset Purchase Agreement dated November 10, 1995
between Meridian Point Realty Trust '83 and Meridian Industrial Trust, Inc.
filed as Appendix D to Registrant's Amendment #3 to Preliminary Proxy
Statement filed December 22, 1995 and incorporated herein by reference.
3.1 Amended and Restated Declaration of Trust of the Registrant dated March 5,
1992 filed as Exhibit 3.l to Registrant's Form 10-K for the fiscal year ended
December 31, 1991 and incorporated herein by reference.
3.2 Amended and Restated Trustees' Regulations of the Registrant dated March 5,
1992 filed as Exhibit 3.2 to Registrant's Form l0-K for the fiscal year ended
December 31, 1991 and incorporated herein by reference.
3.3 Certificate of First Amended and Restated Declaration of Trust of the
Registrant dated July 12, 1993 filed as Exhibit 3.2 to Registrant's Form 10-Q
for the quarter ended June 30, 1993 and incorporated herein by reference.
4.1 See Exhibits 3.1 through 3.4 for instruments defining rights of security
holders.
</TABLE>
23
<PAGE>
<TABLE>
<C> <S>
3.4 Amendments to Amended and Restated Declaration of Trust adopted February
10, 1995 filed as part of Registrant's Form 8-K dated February 10, 1995 and
incorporated herein by reference.
10.1 Employment Agreement dated July 2, 1991 by and among Trust '82, Trust '83,
Trust '84, Trust IV, Trust VI, Trust VII, Trust VIII, Milton K. Reeder, and
Meridian Point Company filed as Exhibit 10.2 to Registrant's Form 10-Q for the
quarter ended September 30, 1991 and incorporated herein by reference.
10.2 Change of Control Agreement dated December 12, 1991 among Al E. Andrews,
Jr. and Meridian Point Realty Trust '82, Meridian Point Realty Trust '83,
Sierra Real Estate Equity Trust '84 Co., Meridian Point Realty Trust IV Co.,
Meridian Point Realty Trust VI Co., Meridian Point Realty Trust VII Co. and
Sierra Capital Realty Trust VIII Co. filed as Exhibit 10.11 to Registrant's
Form l0-K for the fiscal year ended December 31, 1991 and incorporated herein
by reference.
10.3 Change of Control Agreement dated December 12, 1991 among Robert A. Dobbin
and Meridian Point Realty Trust '82, Meridian Point Realty Trust '83, Sierra
Real Estate Equity Trust '84 Co., Meridian Point Realty Trust IV Co., Meridian
Point Realty Trust VI Co., Meridian Point Realty Trust VII Co. and Sierra
Capital Realty Trust VIII Co. filed as Exhibit 10.12 to Registrant's Form l0-K
for the fiscal year ended December 31, 1991 and incorporated herein by
reference.
10.4 Change of Control Agreement dated December 12, 1991 among Dennis D. Higgs
and Meridian Point Realty Trust '82, Meridian Point Realty Trust '83, Sierra
Real Estate Equity Trust '84 Co., Meridian Point Realty Trust IV Co., Meridian
Point Realty Trust VI Co., Meridian Point Realty Trust VII Co. and Sierra
Capital Realty Trust VIII Co. filed as Exhibit 10.13 to Registrant's Form l0-K
for the fiscal year ended December 31, 1991 and incorporated herein by
reference.
10.5 Change of Control Agreement dated December 12, 1991 among Barbara J.
Schuessler and Meridian Point Realty Trust '82, Meridian Point Realty Trust
'83, Sierra Real Estate Equity Trust '84 Co., Meridian Point Realty Trust IV
Co., Meridian Point Realty Trust VI Co., Meridian Point Realty Trust VII Co.
and Sierra Capital Realty Trust VIII Co. filed as Exhibit 10.15 to
Registrant's Form 10-K for the fiscal year ended December 31, 1991 and
incorporated herein by reference.
10.6 Stock Option Agreement, effective April 1, 1991, among Milton K. Reeder,
Meridian Point Properties, Inc., Meridian Point Company, Meridian Point Realty
Trust '82, Meridian Point Realty Trust '83, Sierra Real Estate Equity Trust
'84 Co., Meridian Point Realty Trust IV Co., Meridian Point Realty Trust VI
Co., Meridian Point Realty Trust VII Co. and Sierra Capital Realty Trust VIII
Co. filed as Exhibit 10.20 to Registrant's Form 10-K for the fiscal year ended
December 31, 1991 and incorporated herein by reference.
10.7 Master Lease dated July 5, 1988 between Sierra Real Estate Equity Trust '83
and Tencor Instruments filed as Exhibit 10.21 to Registrant's Form 10-K for
the fiscal year ended December 31, 1991 and incorporated herein by reference.
10.8 Joint Venture Agreement of Scripps Venturers, dated December 8, 1982
between Sierra Real Estate Equity Trust and Robert A. Alleborn Associates
filed as Exhibit 10.22 to Registrant's Form 10-K for the fiscal year ended
December 31, 1991 and incorporated herein by reference.
10.9 First Amendment to Joint Venture Agreement of Scripps Venturers, dated
March 10, 1983 filed as Exhibit 10.23 to Registrant's Form 10-K for the fiscal
year ended December 31, 1991 and incorporated herein by reference.
</TABLE>
24
<PAGE>
<TABLE>
<C> <S>
10.10 Second Amendment to Joint Venture Agreement of Scripps Venturers, dated
July 1, 1983 filed as Exhibit 10.24 to Registrant's Form 10-K for the fiscal
year ended December 31, 1991 and incorporated herein by reference.
10.11 Third Amendment to Joint Venture Agreement of Scripps Venturers, dated
December 31, 1987 filed as Exhibit 10.25 to Registrant's Form 10-K for the
fiscal year ended December 31, 1991 and incorporated herein by reference.
10.12 Secured Promissory Note, dated December 27, 1988 for $9,500,000 to First
Interstate Bank of California on behalf of Scripps Venturers filed as Exhibit
10.1 to Registrant's Form 8-K, dated December 30, 1988 and incorporated herein
by reference.
10.13 Deed of Trust with Assignment of Rents, dated December 27, 1988, between
Scripps Venturers and First Interstate Bank of California filed as Exhibit
10.2 to Registrant's Form 8-K, dated December 30, 1988 and incorporated herein
by reference.
10.14 Second Deed of Trust with Assignment of Rents, dated December 27, 1988,
between Scripps Venturers and First Interstate Bank of California filed as
Exhibit 10.7 to Registrant's Form 8-K, dated December 30, 1988 and
incorporated herein by reference.
10.15 Promissory Note, dated May 22, 1986, for $5,000,000 to New England Mutual
Life Insurance Company on behalf of Charleston filed as Exhibit 10.32 to
Registrant's Form l0-K for the fiscal year ended December 31, 1991 and
incorporated herein by reference.
10.16 Deed of Trust and Security Agreement, dated May 22, 1986, between Sierra
Real Estate Equity Trust '83 and New England Mutual Life Insurance Company for
Charleston filed as Exhibit 10.33 to Registrant's Form l0-K for the fiscal
year ended December 31, 1991 and incorporated herein by reference.
10.17 Loan Agreement dated September 28, 1987, between Sierra Real Estate
Equity Trust '83 and Home Federal Savings and Loan Association for Golden Cove
filed as Exhibit 10.1 to Registrant's Form 8-K, dated October 9, 1987 and
incorporated herein by reference.
10.18 Note, dated September 28, 1987, for $4,575,000, between Sierra Real
Estate Equity Trust '83 and Home Federal Savings and Loan Association for
Golden Cove filed as Exhibit 10.2 to Registrant's Form 8-K, dated October 9,
1987 and incorporated herein by reference.
10.19 Deed of Trust, dated September 28, 1987, between Sierra Real Estate
Equity Trust '83 and Home Federal Savings and Loan Association for Golden Cove
filed as Exhibit 10.3 to Registrant's Form 8-K, dated October 9, 1987 and
incorporated herein by reference.
10.20 Modification Agreement, dated August 1, 1991, between Meridian Point
Realty Trust '83 and The Mutual Benefit Life Insurance Company in
Rehabilitation for Spokane filed as Exhibit 10.39 to Registrant's Form 10-K
for the fiscal year ended December 31, 1991 and incorporated herein by
reference.
10.21 Memorandum of Modification Agreement and First Amendment to Deed of
Trust, dated December 31, 1991, between Meridian Point Realty Trust '83 and
The Mutual Benefit Life Insurance in Rehabilitation for Spokane filed as
Exhibit 10.40 to Registrant's Form 10-K for the fiscal year ended December 31,
1991 and incorporated herein by reference.
10.22 Indemnity Agreement, dated June 19, 1987, between Sierra Real Estate
Equity Trust '83 and Thomas B. Swartz filed as Exhibit 10.41 to Registrant's
Form 10-K for the fiscal year ended December 31, 1991 and incorporated herein
by reference.
</TABLE>
25
<PAGE>
<TABLE>
<C> <S>
10.23 Indemnity Agreement, dated June 19, 1987, between Sierra Real Estate
Equity Trust '83 and Robert R. Walker, Jr. filed as Exhibit 10.42 to
Registrant's Form 10-K for the fiscal year ended December 31, 1991 and
incorporated herein by reference.
10.24 Indemnity Agreement, dated June 19, 1987, between Sierra Real Estate
Equity Trust '83 and William B. Stevenson filed as Exhibit 10.43 to
Registrant's Form 10-K for the fiscal year ended December 31, 1991 and
incorporated herein by reference.
10.25 Indemnity Agreement, dated June 19, 1987, between Sierra Real Estate
Equity Trust '83 and James B. Davis filed as Exhibit 10.44 to Registrant's
Form 10-K for the fiscal year ended December 31, 1991 and incorporated herein
by reference.
10.26 Indemnity Agreement, dated June 19, 1987, between Sierra Real Estate
Equity Trust '83 and Lee W. Wilson filed as Exhibit 10.45 to Registrant's Form
10-K for the fiscal year ended December 31, 1991 and incorporated herein by
reference.
10.27 Indemnity Agreement, dated April 8, 1988, between Sierra Real Estate
Equity Trust '83 and Herbert E. Stansbury, Jr. filed as Exhibit 10.46 to
Registrant's Form 10-K for the fiscal year ended December 31, 1991 and
incorporated herein by reference.
10.28 Indemnity Agreement, dated April 8, 1988, between Sierra Real Estate
Equity Trust '83 and Kermit Mowbray filed as Exhibit 10.47 to Registrant's
Form 10-K for the fiscal year ended December 31, 1991 and incorporated herein
by reference.
10.29 Indemnity Agreement, dated June 29, 1988, between Sierra Real Estate
Equity Trust '83 and Thomas B. Swartz filed as Exhibit 10.48 to Registrant's
Form 10-K for the fiscal year ended December 31, 1991 and incorporated herein
by reference.
10.30 Indemnity Agreement, dated June 29, 1988, between Sierra Real Estate
Equity Trust '83 and Robert A. Dobbin filed as Exhibit 10.49 to Registrant's
Form 10-K for the fiscal year ended December 31, 1991 and incorporated herein
by reference.
10.31 Indemnity Agreement, dated June 29, 1988, between Sierra Real Estate
Equity Trust '83 and William B. Stevenson filed as Exhibit 10.50 to
Registrant's Form 10-K for the fiscal year ended December 31, 1991 and
incorporated herein by reference.
10.32 Indemnity Agreement, dated June 29, 1988, between Sierra Real Estate
Equity Trust '83 and Milton K. Reeder filed as Exhibit 10.51 to Registrant's
Form 10-K for the fiscal year ended December 31, 1991 and incorporated herein
by reference.
10.33 Indemnity Agreement, dated June 29, 1988, between Sierra Real Estate
Equity Trust '83 and Steven B. Sinnett filed as Exhibit 10.52 to Registrant's
Form 10-K for the fiscal year ended December 31, 1991 and incorporated herein
by reference.
10.34 Indemnity Agreement, dated June 29, 1988, between Sierra Real Estate
Equity Trust '83 and Arnold L. Hoffman filed as Exhibit 10.53 to Registrant's
Form 10-K for the fiscal year ended December 31, 1991 and incorporated herein
by reference.
10.35 Indemnity Agreement, effective June 6, 1991, between Meridian Point
Realty Trust '83 and Richard H. Hughes filed as Exhibit 10.55 to Registrant's
Form 10-K for the fiscal year ended December 31, 1991 and incorporated herein
by reference.
</TABLE>
26
<PAGE>
<TABLE>
<C> <S>
10.36 Indemnity Agreement, dated August 8, 1989, between Sierra Real Estate
Equity Trust '83 and William B. Stevenson filed as Exhibit 10.54 to
Registrant's Form 10-K for the fiscal year ended December 31, 1991 and
incorporated herein by reference.
10.37 Indemnity Agreement, effective June 6, 1991, between Meridian Point
Realty Trust '83 and James M. Pollak filed as Exhibit 10.56 to Registrant's
Form 10-K for the fiscal year ended December 31, 1991 and incorporated herein
by reference.
10.38 Indemnity Agreement, dated September 13, 1991, between Meridian Point
Realty Trust '83 and Al E. Andrews, Jr. filed as Exhibit 10.57 to Registrant's
Form 10-K for the fiscal year ended December 31, 1991 and incorporated herein
by reference.
10.39 Indemnity Agreement, dated March 5, 1992, between Meridian Point Realty
Trust '83 and Arnold L. Hoffman filed as Exhibit 10.58 to Registrant's Form
10-K for the fiscal year ended December 31, 1991 and incorporated herein by
reference.
10.40 Indemnity Agreement, dated March 5, 1992, between Meridian Point Realty
Trust '83 and Milton K. Reeder filed as Exhibit 10.59 to Registrant's Form 10-
K for the fiscal year ended December 31, 1991 and incorporated herein by
reference.
10.41 Indemnity Agreement, dated March 5, 1992, between Meridian Point Realty
Trust '83 and Robert A. Dobbin filed as Exhibit 10.60 to Registrant's Form 10-
K for the fiscal year ended December 31, 1991 and incorporated herein by
reference.
10.42 Indemnity Agreement, dated March 5, 1992, between Meridian Point Realty
Trust '83 and Dennis D. Higgs filed as Exhibit 10.61 to Registrant's Form 10-K
for the fiscal year ended December 31, 1991 and incorporated herein by
reference.
10.43 Indemnity Agreement, dated March 5, 1992, between Meridian Point Realty
Trust '83 and James S. McCaffrey filed as Exhibit 10.62 to Registrant's Form
10-K for the fiscal year ended December 31, 1991 and incorporated herein by
reference.
10.44 Indemnity Agreement, dated March 5, 1992, between Meridian Point Realty
Trust '83 and Steven B. Sinnett filed as Exhibit 10.63 to Registrant's Form
10-K for the fiscal year ended December 31, 1991 and incorporated herein by
reference.
10.45 Indemnity Agreement, dated March 5, 1992, between Meridian Point Realty
Trust '83 and Barbara J. Finnegan filed as Exhibit 10.64 to Registrant's Form
10-K for the fiscal year ended December 31, 1991 and incorporated herein by
reference.
10.46 Amended and Restated Articles of Incorporation of Meridian Point
Properties filed March 24, 1992 filed as Exhibit 10.65 to Registrant's Form
10-K for the fiscal year ended December 31, 1991 and incorporated herein by
reference.
10.47 Indemnity Agreement, dated March 5, 1992, between Meridian Point Realty
Trust '83 and Meridian Point Properties, Inc. filed as Exhibit 10.66 to
Registrant's Form 10-K for the fiscal year ended December 31, 1991 and
incorporated herein by reference.
10.48 Indemnity Agreement, dated March 5, 1992, between Meridian Point Realty
Trust '83 and Meridian Point Company filed as Exhibit 10.67 to Registrant's
Form 10-K for the fiscal year ended December 31, 1991 and incorporated herein
by reference.
</TABLE>
27
<PAGE>
<TABLE>
<C> <S>
10.49 Amended and Restated Employee Leasing Agreement, effective March 24,
1992, among Meridian Point Realty Trust '82, Meridian Point Realty Trust '83,
Sierra Real Estate Equity Trust '84 Co., Meridian Point Realty Trust IV Co.,
Meridian Point Realty Trust VI Co., Meridian Point Realty Trust VII Co., and
Sierra Capital Realty Trust VIII Co. filed as Exhibit 10.l to Registrant's
Form l0-Q for the quarter ended June 30, 1992 and incorporated herein by
reference.
10.50 Amended and Restated Registrar, Transfer Agent, Dividend Disbursement and
Service Agreement, effective March 24, 1992, among Meridian Point Properties,
Inc. and Meridian Point Realty Trust '82, Meridian Point Realty Trust '83,
Sierra Real Estate Equity Trust '84 Co., Meridian Point Realty Trust IV Co.,
Meridian Point Realty Trust VI Co., Meridian Point Realty Trust VII Co., and
Sierra Capital Realty Trust VIII Co. filed as Exhibit 10.2 to Registrant's
Form l0-Q for the quarter ended June 30, 1992 and incorporated herein by
reference.
10.51 Amendment No. l to Stock Option Agreement, effective March 24, 1992,
among Milton K. Reeder, Meridian Point Properties, Inc., Meridian Point Realty
Trust '82, Meridian Point Realty Trust '83, Sierra Real Estate Equity Trust
'84 Co., Meridian Point Realty Trust IV Co., Meridian Point Realty Trust VI
Co., Meridian Point Realty Trust VII Co., and Sierra Capital Realty Trust VIII
Co. filed as Exhibit 10.3 to Registrant's Form l0-Q for the quarter ended June
30, 1992 and incorporated herein by reference.
10.52 Sublease dated September 11, 1992 between Chicago Title Insurance Company
and Meridian Point Properties, Inc. filed as Exhibit 10.64 to Registrant's
Form 10-K for the fiscal year ended December 31, 1992 and incorporated herein
by reference.
10.53 Indemnity Agreement effective February l, 1992 between Meridian Point
Realty Trust '83 and Debra H. Paul filed as Exhibit 10.65 to Registrant's Form
10-K for the fiscal year ended December 31,1992 and incorporated herein by
reference.
10.54 Indemnity Agreement dated September l0, 1992 between Meridian Point
Realty Trust '83 and Dennis D. Higgs filed as Exhibit 10.66 to Registrant's
Form 10-K for the fiscal year ended December 31, 1992 and incorporated herein
by reference.
10.55 Secured Promissory Note dated February 23, 1993 in the amount of
$2,345,000 made by Meridian Point Realty Trust '83 for Principal Mutual Life
Insurance Company filed as Exhibit 10.68 to Registrant's Form 10-K for the
fiscal year ended December 31, 1992 and incorporated herein by reference.
10.56 Deed of Trust, Security Agreement and Assignment of Rents dated February
23, 1993 between Meridian Point Realty Trust '83, Ronald B. Franklin, and
Principal Mutual Life Insurance Company filed as Exhibit 10.69 to Registrant's
Form 10-K for the fiscal year ended December 31, 1992 and incorporated herein
by reference.
10.57 Indemnity Agreement dated April 9, 1992 between Meridian Point Realty
Trust '83 and Peter O. Hanson filed as Exhibit 10.1 to Registrant's Form 10-Q
for the quarter ended March 31, 1993 and incorporated herein by reference.
10.58 Indemnity Agreement dated March 4, 1993 between Meridian Point Realty
Trust '83 and Earl F. Cheit filed as Exhibit 10.2 to Registrant's Form 10-Q
for the quarter ended March 31, 1993 and incorporated herein by reference.
10.59 Indemnity Agreement dated March 4, 1993 between Meridian Point Realty
Trust '83 and Robert E. Morgan filed as Exhibit 10.3 to Registrant's Form 10-Q
for the quarter ended March 31, 1993 and incorporated herein by reference.
</TABLE>
28
<PAGE>
<TABLE>
<C> <S>
10.60 Amendment No. 1 to Employment Agreement of Milton K. Reeder dated
September 14, 1993 filed as Exhibit 10.1 to Registrant's Form 10-Q for the
quarter ended September 30, 1993 and incorporated herein by reference.
10.61 Letter Agreement dated August 2, 1993 amending Change of Control
Agreement for Al E. Andrews, Jr. filed as Exhibit 10.2 to Registrant's Form
10-Q for the quarter ended September 30, 1993 and incorporated herein by
reference.
10.62 Letter Agreement dated August 2, 1993 amending Change of Control
Agreement for Robert A. Dobbin filed as Exhibit 10.3 to Registrant's Form 10-Q
for the quarter ended September 30, 1993 and incorporated herein by reference.
10.63 Letter Agreement dated August 2, 1993 amending Change of Control
Agreement for Barbara S. Finnegan filed as Exhibit 10.4 to Registrant's Form
10-Q for the quarter ended September 30, 1993 and incorporated herein by
reference.
10.64 Letter Agreement dated August 2, 1993 amending Change of Control
Agreement for Dennis D. Higgs filed as Exhibit 10.5 to Registrant's Form 10-Q
for the quarter ended September 30, 1993 and incorporated herein by reference.
10.65 Purchase and Sale Agreement dated June 15, 1993 between Thomas C.
Farnsworth, Jr. and Meridian Point Realty Trust '83 (for Memphis 15 property)
filed as Exhibit 10.8 to Registrant's Form 10-Q for the quarter ended
September 30, 1993 and incorporated herein by reference.
10.66 Indemnity Agreement dated October 29, 1993 between Meridian Point Realty
Trust '83 and Lorraine O. Legg filed as Exhibit 10.61 to Registrant's Form 10-
K for the fiscal year ended December 31, 1993 and incorporated herein by
reference.
10.67 Promissory Note, dated March 1, 1994, for $4,919,266 to New England Life
Insurance Company, executed by Meridian Point Realty Trust '83 filed as
Exhibit 10.62 to Registrant's Form 10-K for the fiscal year ended December 31,
1993 and incorporated herein by reference.
10.68 Deed of Trust and Security Agreement, dated March 1994 between Meridian
Point Realty Trust '83 and New England Life Insurance Company filed as Exhibit
10.63 to Registrant's Form 10-K for the fiscal year ended December 31, 1993
and incorporated herein by reference.
10.69 Environmental Indemnity Agreement, dated March 1, 1994, between Meridian
Point Realty Trust '83 and New England Life Insurance Company filed as Exhibit
10.64 to Registrant's Form 10-K for the fiscal year ended December 31, 1993
and incorporated herein by reference.
10.70 Assignment of Leases and Rents, dated March 1994, between Meridian Point
Realty Trust '83 and New England Life Insurance Company filed as Exhibit 10.65
to Registrant's Form 10-K for the fiscal year ended December 31, 1993 and
incorporated herein by reference.
10.71 Escrow Agreement, dated March 4, 1994, by and among New England Life
Insurance Company, Meridian Point Realty Trust '83, and Norris, Beggs, and
Simpson filed as Exhibit 10.66 to Registrant's Form 10-K for the fiscal year
ended December 31, 1993 and incorporated herein by reference.
10.72 Modification of Note Agreement, dated January 14, 1994 between First
Interstate Bank of California and Scripps Venturers filed as Exhibit 10.1 to
Registrant's Form 10-Q for the quarter ended March 31, 1994 and incorporated
herein by reference.
</TABLE>
29
<PAGE>
<TABLE>
<C> <S>
10.73 Extension and Modification Agreement, dated June 29, 1994, between First
Interstate Bank of California and Scripps Venturers filed as Exhibit 10.1 to
Registrant's Form 10-Q for the quarter ended June 30, 1994 and incorporated
herein by reference.
10.74 Letter Agreement modifying Loan No. 331423 dated May 4, 1994, between
Mutual Benefit Life Insurance Company in Rehabilitation and Meridian Point
Realty Trust '83 filed as Exhibit 10.2 to Registrant's Form 10-Q for the
quarter ended June 30, 1994 and incorporated herein by reference.
10.75 Indemnity Agreement dated June 3, 1994 between Meridian Point Realty
Trust '83 and Peter O. Hanson filed as Exhibit 10.3 to Registrant's Form 10-Q
for the quarter ended June 30, 1994 and incorporated herein by reference.
10.76 Amendment No. 1 to Amended and Restated Employee Leasing Agreement,
effective as of February 1, 1994 filed as Exhibit 10.1 to Registrant's Form
10-Q for the quarter ended September 30, 1994 and incorporated herein by
reference.
10.77 Stock Purchase Agreement dated as of September 22, 1994 between Meridian
Point Realty Trust '83 and Hunt Realty Acquisitions, L.P. filed as Exhibit
10.1 to Registrant's Form 8-K dated September 22, 1994 and incorporated herein
by reference.
10.78 Purchase and Sale Agreement entered into December 2, 1994 by and between
Meridian Point Realty Trust '83 and DJ&J Software Corporation filed as Exhibit
10.1 to Registrant's Form 8-K, dated December 29, 1993 and incorporated herein
by reference.
10.79 Amendment No. 1 to Stock Purchase Agreement dated November 22, 1994,
between Meridian Point Realty Trust '83 and Hunt Realty Acquisitions, L.P.
filed as Exhibit 10.1 to Registrant's Form 8-K dated January 17, 1995 and
incorporated herein by reference.
10.80 Indemnity Agreement effective January 3, 1995, between Meridian Point
Realty Trust '83 and Brian F. Zywiciel filed as Exhibit 10.1 to Registrant's
Form 8-K dated January 3, 1995, and incorporated herein by reference.
10.81 Indemnity Agreement effective January 3, 1995, between Meridian Point
Realty Trust '83 and Barbara S. Finnegan filed as Exhibit 10.2 to Registrant's
Form 8-K dated January 3, 1995, and incorporated herein by reference.
10.82 Indemnity Agreement effective January 3, 1995, between Meridian Point
Realty Trust '83 and Brian F. Zywiciel filed as Exhibit 10.3 to Registrant's
Form 8-K dated January 3, 1995, and incorporated herein by reference.
10.83 Agreement for Dissolution and Winding Up of Scripps Ventures, effective
December 31, 1995.
10.84 Amended and Restated Asset Purchase Agreement dated November 10, 1995
between Meridian Point Realty Trust '83 and Meridian Industrial Trust, Inc.
filed as Appendix D to Registrant's Amendment No. #3 to Preliminary Proxy
Statement filed December 22, 1995 and incorporated herein by reference.
10.85 Agreement between Meridian Point Realty Trust '83 and E & L Associates,
Inc. dated February 23, 1996.
</TABLE>
30
<PAGE>
(b) REPORTS ON FORM 8-K.
-------------------
The following Form 8-K report was filed during the quarter ended December
31, 1996:
None
(c) The exhibits listed in Item 14(a)(3) above are submitted as part of this
report.
(d) The financial statement schedules listed in Item 14(a)(2) above are
submitted as part of this report.
31
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Dated: March 28, 1997 MERIDIAN POINT REALTY TRUST '83
By: /s/ Lorraine O. Legg
-------------------------------------
Lorraine O. Legg
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
/s/ Lorraine O. Legg Dated: March 28, 1997
- --------------------------------------
Lorraine O. Legg
President and Chief Executive Officer
(Principal Executive Officer)
/s/ John E. Castello Dated: March 28, 1997
- --------------------------------------
John E. Castello
Executive Vice President,
Chief Financial Officer and Secretary
(Principal Financial and Accounting Officer)
/s/ Herbert E. Stansbury, Jr Dated: March 28, 1997
- --------------------------------------
Herbert E. Stansbury, Jr.
Chairman and Trustee
/s/ Peter O. Hanson Dated: March 28, 1997
- --------------------------------------
Peter O. Hanson
Trustee
/s/ Lorraine O. Legg Dated: March 28, 1997
- --------------------------------------
Lorraine O. Legg
Trustee
/s/ Robert E. Morgan Dated: March 28, 1997
- --------------------------------------
Robert E. Morgan
Trustee
/s/ James M. Pollak Dated: March 28, 1997
- --------------------------------------
James M. Pollak
Trustee
32
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To The Shareholders and Board of Trustees
of Meridian Point Realty Trust '83:
We have audited the accompanying Consolidated Balance Sheets of
Meridian Point Realty Trust '83 (a California business trust) as of December 31,
1996 and 1995, and the related Consolidated Statements of Operations,
Shareholders' Equity and Cash Flows for each of the three years in the period
ended December 31, 1996. These financial statements and the schedules referred
to below are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and schedules based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Meridian Point Realty Trust '83 as of December 31, 1996 and 1995, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1996, in conformity with generally accepted accounting
principles.
Our audits were made for the purpose of forming an opinion on the
basic financial statements taken as a whole. The Financial Statement Schedules
listed in Item 14(a)(2) are presented for purposes of complying with the
Securities and Exchange Commission's rules and are not part of the basic
financial statements. These schedules have been subjected to the auditing
procedures applied in our audits of the basic financial statements and, in our
opinion, fairly state in all material respects the financial data required to be
set forth therein in relation to the basic financial statements taken as a
whole.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
San Francisco, California
March 25, 1997
33
<PAGE>
MERIDIAN POINT REALTY TRUST '83
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
<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 4,437,422 2,525,918
Cash Held in Escrow -- 98,363
Restricted Cash 1,580,139 1,119,831
Accounts Receivable, Net of Reserves of
$197,452 and $178,146 as of December 31,
1996 and 1995, respectively 32,353 193,796
Notes Receivable From Affiliates -- 84,000
Investment in Real Estate Investment Trust -- 79,500
Capitalized Loan Costs, Net of Accumulated
Amortization of $95,491 and 324,324 as of
December 31, 1996 and 1995, respectively 17,983 65,445
Capitalized Lease Commissions, Net of
Accumulated Amortization of $49,128 and
$522,059 as of December 31, and 1995,
respectively 40,130 548,856
Other Assets, Net 46,364 557,142
- ---------------------------------------------------------------------
TOTAL ASSETS $ 12,345,964 $ 34,053,336
=====================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Mortgage Notes Payable, Net $ 4,627,123 $ 20,873,011
Due to Affiliates -- 67,046
Accounts Payable 13,139 368,861
Prepaid Rent, Tenant Deposits and Other
Liabilities 192,354 518,265
- ---------------------------------------------------------------------
TOTAL LIABILITIES 4,832,616 21,827,183
- ---------------------------------------------------------------------
SHAREHOLDERS' EQUITY:
Shares of Beneficial Interest - $1.00
stated value:
Authorized - Unlimited; 3,031,618
shares issued and outstanding as of
December 31, 1996 and 1995 3,031,618 3,031,618
Paid-in Capital 22,755,694 22,755,694
Distributions in Excess of Income (18,273,964) (13,561,159)
- ---------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 7,513,348 12,226,153
- ---------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 12,345,964 $ 34,053,336
=====================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
34
<PAGE>
MERIDIAN POINT REALTY TRUST '83
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES:
Rentals from Real Estate Investments $2,026,861 $5,834,499 $6,440,653
Interest and Other 264,902 311,627 137,649
- -----------------------------------------------------------------------------
TOTAL REVENUES 2,291,763 6,146,126 6,578,302
- -----------------------------------------------------------------------------
EXPENSES:
Interest and Amortization of Debt 651,111 2,177,988 2,397,846
Discount
Property Taxes 183,136 612,621 691,126
Property Operating Costs, Including
Amounts Paid to Related Parties of
$236,098, $466,125, and $501,403,
respectively 664,101 1,576,378 1,330,156
Legal Costs 47,724 26,653 415,697
General and Administrative, Including
Amounts Paid to Related Parties of
$56,190, $106,544, and $89,858,
respectively 276,283 429,218 438,028
Expenses of Terminated Stock Purchase -- 363,133 --
Provision for Environmental Clean-up
Costs -- -- 140,000
Depreciation and Amortization 372,240 1,494,611 1,645,341
- -----------------------------------------------------------------------------
TOTAL EXPENSES 2,194,595 6,680,602 7,058,194
- -----------------------------------------------------------------------------
INCOME (LOSS) BEFORE GAIN ON SALE OF
PROPERTY 97,168 (534,476) (479,892)
Gain on Disposition of Properties 2,582,606 -- 58,977
- -----------------------------------------------------------------------------
NET INCOME (LOSS) $2,679,774 ($534,476) ($420,915)
=============================================================================
NET INCOME (LOSS) PER SHARE $0.88 ($0.18) ($0.14)
=============================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
35
<PAGE>
MERIDIAN POINT REALTY TRUST '83
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
SHARES OF
BENEFICIAL INTEREST DISTRIBUTIONS
--------------------- PAID-IN IN EXCESS
SHARES AMOUNT CAPITAL OF INCOME
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE - JANUARY 1, 1994 3,031,618 $3,031,618 $22,755,694 ($12,605,768)
Net Loss -- -- -- (420,915)
- --------------------------------------------------------------------------------
BALANCE - DECEMBER 31, 1994 3,031,618 3,031,618 22,755,694 (13,026,683)
Net Loss -- -- -- (534,476)
- --------------------------------------------------------------------------------
BALANCE - DECEMBER 31, 1995 3,031,618 3,031,618 22,755,694 (13,561,159)
Net Income 2,679,774
Distributions Paid -- -- -- (7,392,579)
- --------------------------------------------------------------------------------
BALANCE - DECEMBER 31, 1996 3,031,618 $3,031,618 $22,755,694 ($18,273,964)
================================================================================
</TABLE>
The accompany notes are an integral part of these consolidated statements.
36
<PAGE>
MERIDIAN POINT REALTY TRUST '83
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ 2,679,774 ($ 534,476) ($ 420,915)
Adjustments to Reconcile Net Income
(Loss) to Net Cash Provided by Operating
Activities:
Gain on Disposition of Properties (2,582,606) -- (58,977)
Depreciation 317,048 1,340,402 1,510,082
Amortization of Debt Discount 5,438 89,128 62,670
Amortization - Other 66,779 182,225 190,971
Rent Adjustment -- 77,083 86,518
Realized Gain on Marketable
Securities -- -- (2,997)
Decrease (Increase) in Cash Held in Escrow 98,363 (5,666) 16,854
Increase in Restricted Cash (460,308) (451,475) (370,095)
Decrease (Increase) in Accounts Receivable 161,443 81,788 (57,513)
Increase in Other Assets (129,724) (75,755) (220,160)
Increase (Decrease) in Accounts Payable (260,354) (57,998) 67,186
Increase in Due to Affiliates 16,954 13,662 24,909
Increase (Decrease) in Other Liabilities (325,911) (36,794) 200,743
- -------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (413,104) 622,124 1,029,276
- -------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Improvements to Existing Real Estate (70,397) (768,345) (452,963)
Additions to Capitalized Lease Commissions (46,064) (390,539) (63,760)
Dividends Received from Marketable Securities -- -- 4,832
Investment in Real Estate Investment Trust -- (79,500) --
Purchase of Personal Property -- -- (7,246)
- -------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (116,461) (1,238,384) (519,137)
- -------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Disposition of Properties 3,603,849 -- 3,200,669
Principal Payments on Mortgage Notes (162,346) (1,842,785) (1,047,442)
Cash Disbursed Due to Refinancing -- -- (209,829)
Cash Distributions Paid (1,000,434) -- --
- -------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 2,441,069 (1,842,785) 1,943,398
- -------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND
EQUIVALENTS 1,911,504 (2,459,045) 2,453,537
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD 2,525,918 4,984,963 2,531,426
- -------------------------------------------------------------------------------------
END OF PERIOD $ 4,437,422 $ 2,525,918 $ 4,984,963
=====================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
37
<PAGE>
MERIDIAN POINT REALTY TRUST '83
SUPPLEMENTAL SCHEDULE OF NON-CASH TRANSACTIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Disposition of Properties Due to Sale:
Proceeds from Sale of Properties Used
to Pay Down Mortgage Notes Payable $ -- $ -- $2,294,169
Disposition of Properties, Net -- -- 5,345,708
Elimination of Mortgage Notes Payable -- -- 2,294,169
Proceeds from Disposition of Assets -
Shares of Meridian Industrial Trust,
Inc. (MIT) Common Stock 6,392,145 -- --
Mortgages Assumed by MIT 16,334,297 -- --
Disposition of Properties, Net (22,343,329) -- --
Reduction in Other Assets
Related to Properties Sold (1,403,250) -- 90,153
Distribution Paid in Shares of
MIT Common Stock (6,392,145) -- --
Redemption of Investment in Real
Estate Trust (79,500) -- --
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
38
<PAGE>
MERIDIAN POINT REALTY TRUST '83
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
(a) ORGANIZATION. 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 property. The Company was formed as
a self-liquidating/finite life trust. Under this self-liquidating policy, the
Company may not invest net proceeds from sales or refinancings in additional
properties. Company operations commenced on April 12, 1983.
From April 1, 1991 to February 23, 1996, the Company operated under a
self-administered management structure in conjunction with other commonly-
sponsored real estate companies (the Company and such other real estate
companies are collectively referred to herein as the "Companies"). Under this
management structure, Meridian Point Properties, Inc. ("MPP"), a captive company
controlled by the Companies, leased employees to the Company at cost to perform
the administrative, accounting, asset management, and property management
functions. In addition, through December 31, 1994, MPP, at cost, acted as the
transfer agent for the Companies and provided shareholder account maintenance
and dividend disbursement services. The reimbursements made to MPP are
allocated among the Companies in accordance with agreements between MPP and the
Companies.
Effective February 24, 1996, the Company terminated its employee leasing
agreement with MPP and entered into an agreement with E & L Associates, Inc. ("E
& L", see Note 2).
On February 22, 1996, and as more fully described in Note 6, the
Company's shareholders approved the sale of substantially all of the Company's
real estate assets to Meridian Industrial Trust, Inc. ("MIT") for approximately
$3.6 million in cash, 390,360 shares of MIT common stock, and the assumption of
certain mortgage notes and other liabilities by MIT (collectively referred to as
the "Asset Sale"). The sale was completed on February 23, 1996 at which time
the Company also announced a dividend payable on 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 ownership in the Company) to shareholders
of record at the close of business on March 12, 1996.
(b) ESTIMATES, RISKS AND UNCERTAINTIES. The preparation of financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimated.
Subsequent to the February 23, 1996 Asset Sale discussed in Note 6, the
Company's ability to (i) meet its remaining mortgage obligation and (ii) provide
future distributions (other than the March 22, 1996 dividend referred to above)
either from operations or the ultimate disposition of its sole remaining
property, the Charleston Business Park, located in Mountain View, California
("Charleston"), may be impacted by, among other factors, the contingencies
discussed on Note 7, trends in the economy, the financial condition of tenants
and prospective tenants, increases or decreases in operating expenses, income
tax laws, governmental regulations and legislation, real estate market
fluctuations, zoning changes, changes in interest rates, or the entry of other
competitors to the market. Additionally, the Federal Government and the state
of California have adopted laws and regulations relating to the ownership of
real estate. Compliance with these requirements may from time to time require
capital
39
<PAGE>
expenditures by the Company (for example, expenditures necessary to comply with
the Americans with Disabilities Act or changes in local building or other
codes). The accompanying financial statements do not provide for any adjustments
with regard to these uncertainties.
From time to time, the Company is subject to legal claims arising in the
ordinary course of business in connection with the Company's ownership of real
estate and leasing of such real estate to tenants. The Company maintains
liability insurance, subject to customary deductibles and, accordingly,
management does not believe the ultimate resolution of such matters will have a
material effect on the Company's financial position.
(c) INSURANCE. Charleston is located in an area that is subject to
earthquake activity and the Company's comprehensive liability, fire, flood,
extended coverage and rental loss insurance does not cover damage resulting from
an earthquake and certain other losses. Accordingly, should Charleston sustain
damage as a result of an earthquake or other uninsured loss, the Company could
lose its investment in, and anticipated profits and cash flows from Charleston.
The accompanying financial statements do not reflect any adjustments for these
uncertainties.
(d) CONSOLIDATION. The consolidated financial statements, include the
Company and Scripps Venturers ("Scripps"), a joint venture between the Company
and Robert A. Alleborn Associates of December 31, 1995 and Scripps' results of
operations for the period from January 1, 1996 through February 22, 1996 and the
years ended December 31, 1995 and 1994. No minority interest is reflected as
the minority partner has no equity in the venture due to the allocation of prior
losses. Scripps was sold as part of the Asset Sale.
(e) STATEMENTS OF CASH FLOWS. For purposes of the statements of cash
flows, the Company considers all short-term investments with an original
maturity of three months or less to be cash equivalents.
Cash paid for interest was $634,087, $2,070,567 and $2,214,225 for the
years ended December 31, 1996, 1995, and 1994, respectively.
(f) INVESTMENT IN REAL ESTATE AND DEPRECIATION METHODS. In accordance
with Statement of Financial Accounting Standard No. 121, "Accounting for the
Impairment of Assets and for Long Lived-Assets to Be Disposed Of", 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 cash flows; (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 a
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, 1996, the Company's investment in Real Estate is
stated at depreciated cost. At December 31, 1995, the Company's Investment in
Real Estate is stated net of a cumulative Provision for Decrease in Net
Realizable Value of $838,000. Investors should consider any net realizable value
provisions in evaluating realization of their investments (see Note 3).
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
40
<PAGE>
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 terms of the related leases.
Since the Company entered into an exclusive listing agreement for the sale of
the Charleston property on June 27, 1996, the Company ceased depreciating the
property as of August 1, 1996. In December 1996, the Company entered into a
letter of intent to sell Charleston to an unrelated third party at a price of
$12,500,000 less a $1,000,000 credit in favor of the buyer for potential
remediation work. The parties continue to negotiate the terms of this
prospective sale, including the provision of certain environmental indemnities
from the prospective buyer as discussed in Note 7. Management anticipates that
the final terms of this sale will not differ materially from the terms of the
letter of intent; however, management can provide no assurances as to the
timing, final terms or closure of this or any other sale of Charleston.
(g) 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 $351,186, $718,746 and $644,201 for the years ended 1996, 1995,
and 1994, 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 other assets, represents the excess of rental revenue
recognized on a straight-line basis over cash received under the applicable
lease provisions.
(h) INCOME TAXES. The Company elected to be treated as a real estate
investment trust ("REIT") for the tax years ended December 31, 1996, 1995, and
1994, under Sections 856-860 of the Internal Revenue Code. Under these
provisions, the Company is allowed a deduction for distributions paid to
shareholders if the Company satisfies certain income, asset, and distribution
requirements.
As a result of the Company's net operating loss carryforwards utilized in
1996, 1995, and 1994, the Company has no federal taxable income. Accordingly,
no provision for federal income taxes has been made in the accompanying
statements of operations for the years ended December 31, 1996, 1995, and 1994.
(i) CAPITALIZED LOAN COSTS. Amounts paid to acquire long-term loans have been
capitalized and amortized in relation to the loans.
(J) RECLASSIFICATIONS. Certain prior year amounts have been reclassified in
the financial statements and the related notes to conform to the 1996
presentation.
2. RELATED PARTIES.
For the years ended December 31, 1996, 1995, and 1994, the Company incurred
fees and expenses for services rendered by the trustees of the Company totaling
$56,190, $106,544 and $89,858, respectively. Such amounts were paid directly to
the trustees.
Cost reimbursements made to MPP under the management structure discussed in
Note 1 amounted to $140,178, $466,125 and $501,403 and are classified within
Property Operating Costs on the accompanying consolidated statements of
operations.
In accordance with agreements between the Companies and MPP, these
reimbursements were allocated among the Companies based on (i) gross rental
receipts of the Companies' properties and the Companies' relative real estate
assets for property and asset management costs; and (ii) proportionate time
incurred, the number of shareholders and relative real estate assets for costs
incurred in conducting the Companies' daily operations. In the opinion of
management, the allocation methodology is reasonable.
41
<PAGE>
As discussed in Note 1, the Company terminated its employee leasing
agreement with MPP and entered into an agreement with E & L. Under this
agreement, E & L provides property management and certain other services to the
Company. Under the agreement, E & L received a monthly fee of $8,333 through
June 30, 1996. Effective July 1, 1996 the monthly management fee payment is
$10,000. During the year ended December 31, 1996, E & L received management
fees of $95,920, all of which is included within Property Operating Costs on the
accompanying consolidated statements of operations. E & L is a wholly-owned
subsidiary of a company in which Lorraine O. Legg (the Company's Chief Executive
Officer and a Trustee) has an ownership interest. Other than the management
fees paid to E & L, Ms. Legg receives no other compensation from the Company.
<TABLE>
<CAPTION>
<S> <C>
3. RENTAL PROPERTIES, NET
</TABLE>
Rental properties, net at December 31, 1996 and 1995 consisted of the
following:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C> <C>
Land $2,084,923 $ 8,883,944
Buildings 6,254,983 27,148,399
Capital Improvements 383,733 4,169,163
Construction in Progress -- 74,715
---------------------------------------------------
Total $8,723,639 $40,276,221
===================================================
</TABLE>
At December 31, 1996 there was no cumulative provision for decrease in
net realizable value. At December 31, 1995, rental properties were stated net
of a cumulative provision for decrease in net realizable value of $838,000.
At December 31, 1996, Charleston was 100% leased to three tenants
representing approximately 17%, 73% and 10% (based upon square footage), with
leases expiring in 1997, 1998 and 2000, respectively. The tenant under lease
for 73% of the square footage has vacated the premises but continues to honor
the lease which expires January 31, 1998.
All of the Company's leases relating to its rental properties are
operating leases. The minimum future rental revenues from leases in effect as
of December 31, 1996, are as follows:
<TABLE>
<CAPTION>
<S> <C>
1997 $1,064,169
1998 165,601
1999 100,800
2000 8,400
</TABLE>
See Note 6 for a discussion of property dispositions.
42
<PAGE>
4. MORTGAGE NOTES PAYABLE, NET.
The following table presents information regarding the Company's
mortgage notes payable at December 31, 1996 and 1995. All debt instruments are
first lien notes secured by the rental properties.
<TABLE>
<CAPTION>
STATED DISCOUNTED ANNUAL MATURITY BALANCE AS OF DECEMBER 31,
INTEREST RATE INTEREST RATE PAYMENTS DATES 1996 1995
<S> <C> <C> <C> <C> <C> <C>
Charleston Business Park, Mt. 8.750% -- $526,543 03/01/99 $4,627,123 $ 4,738,563
View, CA
Golden Cove, Palos Verdes, CA Variable -- 313,559 11/01/97 -- 3,253,775
N. Irvine Business Park, Santa 8.500% -- 277,116 03/01/96 -- 2,096,774
Ana, CA
Airport Bldg. 14, Memphis, TN 9.500% 13.600% 153,450 08/01/03 -- 819,589
Airport Bldg. 16A & B, Memphis, TN 9.250% 13.600% 125,869 09/01/09 -- 971,517
El Dorado Industrial Plaza, 10.625% -- 189,076 09/01/08 -- 1,314,923
Phoenix, AZ
Scripps Business Ranch, San Variable -- 951,739 03/31/96 -- 7,982,646
Diego, CA
- ----------------------------------------------------------------------------------------------------------------------------------
4,627,123 21,177,787
Less Unamortized Discount -- (304,776)
- ----------------------------------------------------------------------------------------------------------------------------------
Total $4,627,123 $20,873,011
==================================================================================================================================
Principal payments are due
as follows:
--------------------------------------------
1997 $ 121,591
1998 132,668
1999 4,372,864
--------------------------------------------
TOTAL $4,627,123
============================================
</TABLE>
On March 11, 1994, the mortgage note securing Charleston was
restructured. The new loan, in original principal amount of $4,919,266, is for
five years with 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.
The restructuring of the Charleston mortgage note required that the
Company make monthly payments of $35,000 to an escrow account through December
1995. Such escrow payments will continue through the maturity of the Charleston
mortgage note, except that, subsequent to the expiration of the lease referred
to in Note 3 for the tenant under lease for 73% of the square footage (which
lease expires January 31, 1998), such monthly escrow payments will be equal to
ninety percent (90%) of the property's net cash flow. This escrow account will
be available to fund the cost of remediation, if any, of the groundwater
contamination at the property (see Note 7). Any funds remaining will be applied
to the mortgage loan as a principal pay down upon the maturity of the loan. As
of December 31, 1996 and 1995, the escrow account has a balance of $1,580,139
and $1,119,831, respectively.
5. WEIGHTED AVERAGE SHARES OUTSTANDING.
The net income (loss) per share was computed based on weighted average
shares outstanding of 3,031,618 for 1996, 1995 and 1994.
43
<PAGE>
6. DISPOSITIONS OF PROPERTY.
As discussed in Note 1, on February 23, 1996, the Company sold all of
its real estate assets except Charleston 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. The MIT common stock was valued at $6,392,145.
In addition, the Company sold all of its personal property. 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 $ 8,253,975 $ 329,088 $ 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 22,343,329 1,403,250 2,579,863
Personal Property
and Investments 93,309 -- 90,566 -- 2,743
----------------------------------------------------------------
Total $10,085,454 $16,334,297 $22,433,895 $1,403,250 $ 2,582,606
================================================================
</TABLE>
Unaudited Pro Forma Information
- -------------------------------
If the sale of the properties and investments had occurred on January 1,
1996 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 year ended December 31, 1996
would have been:
<TABLE>
<CAPTION>
<S> <C> <C>
Revenues $1,535,023
Expenses 1,284,615
------------
Net Income $ 250,408
============
Net Income per Share $ 0.08
============
</TABLE>
On December 29, 1994, the Company sold one of the buildings located at
Scripps Business Ranch Park property for a selling price of $1,228,109. The net
proceeds totaling $1,215,517, after deductions for closing costs and prorated
items, were used to pay down the mortgage note secured by this property. In
connection with this sale, the Company recognized a gain on sale of property
totaling $25,208.
On December 28, 1994, the Company sold the Homestead Trade Center
property. The selling price of $4,900,000 was paid entirely in cash. The
Company received net cash proceeds of $3,200,669 after deductions for: (i)
payoff of the mortgage note securing the property amounting to $1,078,652; (ii)
interest in the amount of $11,141; (iii) a prepayment penalty associated with
the payoff of the mortgage note amounting to $98,229; (iv) closing costs and
other prorated items totaling $311,309; and (v) an escrow holdback for rent
guarantee given to the buyer totaling $200,000. The Company recognized a gain
on disposition of property totaling $33,769 in connection with this sale.
44
<PAGE>
7. 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 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. 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. By letter dated February 17, 1997, the
RWQCB notified the Company that it intends to issue a Site Cleanup Requirements
("SCRs") Order naming the Company, one of Charleston's current tenants and a
former tenant as parties responsible for further environmental investigation and
remediation of Charleston. The SCRs will require that certain tenants and the
owner of Charleston complete additional investigations and develop a soil and
groundwater cleanup plan for Charleston. The RWQCB has indicated that it also
intends to issue a similar order to parties associated with an adjacent site
that may be an offsite source of a portion of the contamination in the
groundwater underlying Charleston.
The Company has requested that the RWQCB defer issuing the SCRs to give the
Company time to complete the pending sale of Charleston. As discussed in Note
1, the Company is in negotiations with a prospective purchaser of Charleston,
and is negotiating certain environmental indemnities, insurance and other
protections from the prospective buyer as part of the potential sale to satisfy
obligations it may have under the pending SCRs or otherwise in connection with
the contamination at the site. The RWQCB has not yet decided whether to defer
the SCRs, and it is not possible to determine whether any sale of Charleston can
be structured in a manner or within a timeframe necessary to protect the Company
from liabilities associated with the contamination. Thus, it is possible that
the Company will be named as a responsible party in the SCRs or in actions
initiated by other parties held responsible for the contamination. If the
Company is required to remediate the property, it would have statutory and
common law rights to contribution and indemnity for the remediation costs
against the parties that actually caused the contamination.
Based on very preliminary investigation and on current policies of the
RWQCB, the estimated present value of the ultimate amount of remedial costs and
other losses associated with all of the soil and groundwater conditions in the
vicinity of Charleston ranges from $1 million to $5.4 million. It should be
noted, however, (i) that under current RWQCB policies, the RWQCB would seek to
charge a number of parties with the remediation; (ii) that the range of
remediation costs takes into account the possibility that more than one type of
treatment method might be acceptable to the RWQCB, (iii) that there is a high
degree of uncertainty associated with remedial cost estimates at this relatively
early stage of the environmental investigation, and (iv) that due to the
relatively limited soil and groundwater data available at this early
investigative stage, it is not feasible to provide a more precise estimate of
these costs. In addition, there are uncertainties generated by: (i) the lack of
information concerning the identity and financial condition of the potentially
responsible parties who would be expected to be charged with the entire cost of
remediation and (ii) the possibility of changes in regulatory enforcement
policies. As a result, it is not feasible at this time to estimate either the
Company's risk of actually incurring any remedial costs or the amount of those
costs that the Company might actually incur.
45
<PAGE>
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.
See Note 4 regarding restricted cash held in an escrow account for possible
Charleston envirnomental remediation costs.
Environmental investigation at the Golden Cove Shopping Center (which was
sold to MIT in connection with the Asset Sale) has indicated that soil at the
property contains volatile organic compounds (tetrachloroethane and
trichloroethane) in concentrations which exceed the cleanup goals typically
cited by the RWQCB. Furthermore, these investigations estimate the cost for
soil remediation at between $110,000 to $140,000. As part of the Asset Sale
discussed in Note 6, the Company is obligated to fully fund the remediation
costs. The Company may be entitled to seek contribution and indemnity for the
remediation costs against other potentially responsible parties who may have
caused the contamination at the property. During 1994, the Company accrued
$140,000 toward the cost of remediation. Through February 1997, $94,586 had
been expended by the Company for remediation costs.
8. TERMINATED STOCK PURCHASE AGREEMENT.
On September 22, 1994, the Company entered into a Stock Purchase Agreement
(the "Agreement") with Hunt Realty Acquisitions, L.P. ("Hunt"). The Agreement
provided that, subject to shareholder approval of amendments to the Company's
organizational documents (which was obtained in February 1995), completion of
property due diligence, and certain other contingencies, the Company would issue
606,323 shares of common stock to Hunt for $3.50 per share ($2,122,131 in
total), less reimbursement of certain expenses. The Agreement contemplated that
following the stock purchase by Hunt, the Company would propose a merger of the
Company with three other Meridian Point REIT's of common initial sponsorship
into MIT. On March 30, 1995, Hunt terminated the Agreement due to concerns
regarding the environmental conditions at Charleston (see Note 7). The Company
completed the Asset Sale with MIT as discussed in Note 6. Costs incurred in
connection with the terminated Agreement, totaling $363,133, were charged to
operations in 1995.
46
<PAGE>
MERIDIAN POINT REALTY TRUST '83
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
BEGINNING OF CHARGED TO ADDITIONS END OF
DESCRIPTION YEAR EXPENSE (DEDUCTIONS) YEAR
- ---------------------------------------------------------------------------
1994
- ----
<S> <C> <C> <C> <C>
Reserve for Bad Debts $140,882 $ 35,344 ($18,740) $157,486
1995
- ----
Reserve for Bad Debts 157,486 104,916 (84,256) 178,146
1996
- ----
Reserve for Bad Debts 178,146 25,837 (6,531) 197,452
</TABLE>
47
<PAGE>
MERIDIAN POINT REALTY TRUST '83
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
Industrial/Flex Building - Mountain View, CA
<TABLE>
<CAPTION>
<S> <C>
Encumbrances $4,627,123
Initial Cost to Company
Land 2,084,923
Building 6,254,983
Costs Capitalized Subsequent to Acquisition
Improvements 383,733
Gross Amount Carried at End of Period 8,723,639
Accumulated Depreciation 2,532,066
Date of Construction 1969
Date of Acquisition 12/15/83
Depreciable Life 35 years
</TABLE>
A reconciliation of Cost and Accumulated Depreciation for the years ended
December 31, 1996, 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
ACCUMULATED
COST DEPRECIATION
<S> <C> <C>
Balance, January 1, 1994 $ 47,125,808 $11,384,388
Additions
Capital Improvements 452,963
Depreciation 1,502,301
Deletions (501,499) (501,499)
Cost of Real Estate Sold (1) (7,154,747) (1,809,039)
- -----------------------------------------------------------------
Balance, December 31, 1994 39,922,525 10,576,151
Additions
Capital Improvements 768,347
Depreciation 1,334,236
Deletions (414,651) (414,651)
- -----------------------------------------------------------------
Balance, December 31, 1995 40,276,221 11,495,736
Additions
Capital Improvements 70,397
Depreciation 315,980
Cost of Real Estate Sold (2) (31,622,979) (9,279,650)
- -----------------------------------------------------------------
Balance, December 31, 1996 $ 8,723,639 $ 2,532,066
=================================================================
</TABLE>
(1) Represents the gross book basis of Spokane and one of the buildings at
Scripps Ranch Business park sold on December 28 and December 29, 1994,
respectively.
(2) Represents the book value of nine operating properties sold to MIT on
February 23, 1996.
48
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 6,017,561
<SECURITIES> 0
<RECEIVABLES> 229,805
<ALLOWANCES> 197,452
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 8,723,639
<DEPRECIATION> 2,532,066
<TOTAL-ASSETS> 12,345,964
<CURRENT-LIABILITIES> 4,832,616
<BONDS> 0
0
0
<COMMON> 3,031,618
<OTHER-SE> 4,481,730
<TOTAL-LIABILITY-AND-EQUITY> 12,345,964
<SALES> 0
<TOTAL-REVENUES> 4,874,369
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,543,484
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 651,111
<INCOME-PRETAX> 0
<INCOME-TAX> 2,679,774
<INCOME-CONTINUING> 2,679,774
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,679,774
<EPS-PRIMARY> 0.88
<EPS-DILUTED> 0.88
</TABLE>
