<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: MARCH 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File No. 0-12166
MERIDIAN POINT REALTY TRUST `83
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(Exact name of registrant as specified in its charter)
CALIFORNIA 94-6542723
------------------------------- ----------------------------
(State or other jurisdiction of (I.R.S. Employer I.D. Number)
incorporation or organization)
655 MONTGOMERY STREET, SUITE 800, SAN FRANCISCO, CALIFORNIA 94111
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(Address and zip code of principal executive offices)
Registrant's telephone number, including area code: (415) 393-8000
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(Former name, address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [_]
Indicate the number of shares outstanding of the
common stock as of the latest practicable date:
SHARES OF BENEFICIAL INTEREST OUTSTANDING AS OF MAY 14, 1998: 3,031,618
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PART I: FINANCIAL INFORMATION
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ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS.
The accompanying unaudited consolidated financial statements should be
read in conjunction with the 1997 Form 10-K of the registrant (the "Company").
These statements have been prepared in accordance with the instructions of the
Securities and Exchange Commission Form 10-Q and do not include all of the
information and footnotes required by generally accepted accounting principles
for complete consolidated financial statements.
In the opinion of the Company's management, all material adjustments of
a normal recurring nature considered necessary for a fair presentation of
results of operations for the interim periods have been included. The results of
consolidated operations for the three months ended March 31, 1998 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1998.
2
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<TABLE>
<CAPTION>
MERIDIAN POINT REALTY TRUST `83
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1998 AND DECEMBER 31, 1997
(UNAUDITED)
1998 1997
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<S> <C> <C>
ASSETS:
Cash and Cash Equivalents $ 2,764,915 $ 2,886,339
Accounts Receivable, Net of Reserves of $25,000 as of
March 31, 1998 and December 31, 1997 -- --
Other Assets, Net -- 21,052
- -------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 2,764,915 $ 2,907,391
=============================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Accounts Payable 25,839 102,057
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TOTAL LIABILITIES 25,839 102,057
- -------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY:
Shares of Beneficial Interest - $1.00 stated value:
Authorized - Unlimited; 3,031,618 shares issued and
outstanding as of March 31, 1998 and December 31, 1997 3,031,618 3,031,618
Paid-in Capital 22,755,694 22,755,694
Distributions in Excess of Income (23,048,236) (22,981,978)
- -------------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 2,739,076 2,805,334
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 2,764,915 $ 2,907,391
=============================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
3
<PAGE>
<TABLE>
<CAPTION>
MERIDIAN POINT REALTY TRUST `83
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(UNAUDITED)
1998 1997
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<S> <C> <C>
REVENUES:
Rentals from Real Estate Investments $ -- $ 314,612
Interest and Other 35,992 71,804
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TOTAL REVENUES 35,992 386,416
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EXPENSES:
Interest and Amortization of Debt Discount -- 103,080
Property Taxes -- 31,896
Property Operating Costs, Including Amounts Paid to Related
Parties of $0 and $30,000 respectively -- 66,451
General and Administrative, Including Amounts Paid to Related
Parties of $30,000 and $14,000, respectively 102,250 74,732
Depreciation and Amortization -- 6,923
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TOTAL EXPENSES 102,250 283,082
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NET (LOSS) INCOME $ (66,258) $ 103,334
=========================================================================================================
BASIC NET (LOSS) INCOME PER SHARE $ (0.02) $ 0.03
=========================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
4
<PAGE>
<TABLE>
<CAPTION>
MERIDIAN POINT REALTY TRUST `83
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(UNAUDITED)
1998 1997
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ (66,258) $ 103,334
Adjustments to Reconcile Net Income (Loss) to
Amortization - Other -- 8,998
(Increase) in Restricted Cash -- (121,521)
(Increase) in Accounts Receivable -- (58,718)
Decrease (Increase) in Other Assets 21,052 (112,495)
Increase (Decrease) in Accounts Payable (76,218) 34,494
Decrease in Other Liabilities -- (67,895)
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NET CASH USED IN OPERATING ACTIVITIES (121,424) (213,803)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Improvements to Existing Real Estate -- (1,103)
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NET CASH USED IN INVESTING ACTIVITIES -- (1,103)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Principal Payments on Mortgage Notes -- (29,411)
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NET CASH USED IN FINANCING ACTIVITIES -- (29,411)
- -------------------------------------------------------------------------------------------------------------
NET DECREASE IN CASH AND EQUIVALENTS (121,424) (244,317)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 2,886,339 4,437,422
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END OF PERIOD $ 2,764,915 $ 4,193,105
=============================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
(UNAUDITED)
1. GENERAL
Meridian Point Realty Trust `83 (the "Company") is a business trust
organized under the laws of the State of California for the purpose of
acquiring, operating, holding for investment and ultimately selling
income-producing commercial and industrial real estate. 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. The Company was formed on June 24, 1982 and commenced operations on
April 12, 1983. On February 23, 1996, the Company sold all of its real estate
properties except for the Charleston Business Park ("Charleston") (See Note 5).
On August 21, 1997, the Company sold the Charleston property. The Company's
remaining assets consist almost entirely of cash and cash equivalents. The Board
of Trustees is in the process of evaluating the options available, including the
sale or liquidation of the Company. In the event that the Board of Trustees
concludes that liquidation is the desired course of action, management presently
estimates that costs associated with liquidation and wind-up of the Company's
affairs would approximate $500,000. However, the Board of Trustees has not
concluded on the ultimate course of action and, accordingly, the accompanying
financial statements are presented on a going concern basis with no accrual for
any costs associated with winding up the Company's affairs.
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, the
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 estimates.
2. CASH EQUIVALENTS
The Company considers all investments with an original maturity of
three months or less to be cash equivalents.
3. RENTALS FROM REAL ESTATE INVESTMENTS.
Certain of the Company's leases required lessees to pay all or a
portion of real estate taxes, insurance and operating costs ("Expense
Recaptures"). Expense Recaptures of $0 and $46,720 for the three months ended
March 31, 1998 and 1997, respectively, have been included in Rentals from Real
Estate Investments.
4. INVESTMENTS IN REAL ESTATE AND DEPRECIATION METHODS.
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. Leasing commissions and tenant
improvements were amortized under the straight-line method over the term of the
related lease.
6
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5. DISPOSITION OF ASSETS
On August 21, 1997, the Company sold the Charleston property, the last
property remaining in its portfolio. The total purchase price for the Property
was $13,000,000 less a $1,350,000 credit for estimated remediation work (see
Note 9) and related costs, resulting in a net sales price of $11,650,000. The
purchase price was paid entirely in cash. Out of escrow, the Company used
$4,557,500 of the sales proceeds to pay off the then outstanding principal on
the mortgage note payable. The Company also paid $891,504 in closing costs and
$189,070 in mortgage prepayment penalties. In connection with the sale, the
Company recognized a Gain on Sale of Property of $4,528,701. If this transaction
had occurred on January 1, 1997, the Company's pro forma results of operations
for the respective three month period would have been (in thousands except per
share amounts):
1997
------
Revenues $ 77
Expenses (117)
------
Net Income $ (40)
======
Net Income per Share $(0.01)
======
7
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6. EARNINGS PER SHARE.
Basic earnings per share of beneficial interest is determined by
dividing net income (loss) by the weighted average number of shares of
beneficial interest outstanding during the period. Weighted average number of
shares outstanding was 3,031,618 for the three months ended March 31, 1998 and
1997, respectively. During the three months ended March 31, 1997 and 1998, the
Company had no cash distributions.
7. INCOME TAXES.
The Company has previously elected to be taxed as a REIT pursuant to
Section 856(c)(1) of the Internal Revenue Code (the "Code") and intends to be
taxed as a REIT under the Code for the fiscal year ended December 31, 1998. The
REIT provisions of the Code generally allow a REIT to deduct dividends paid to
shareholders in computing the Company's taxable income. The Company currently
distributes all of its net taxable income (including net capital gains) to its
Shareholders. No provisions for federal or state income taxes have been made in
the accompanying consolidated statements of operations.
To qualify for REIT status, the Company must meet a number of highly
technical organizational and operations requirements on a continuing basis.
Those requirements seek to ensure, among other things, that the gross income and
investments of a REIT are largely real estate related , with certain other
permitted assets, that a REIT distributes substantially all its ordinary taxable
income to shareholders on a current basis and that the REIT's ownership is not
overly concentrated. Due to the complex nature of these rules, the limited
available guidance concerning interpretation of the rules, the importance of
ongoing factual determinations and the possibility of adverse changes in or
interpretations of the law, administrative interpretations of the law and
developments at the Company, no assurance can be given regarding the Company's
qualification as a REIT for any particular year. As a result of the Company's
sale of its last real estate property in August 1997, the Company's status as a
REIT for 1998 is dependent, in part, upon tax rules regarding investments by
REITs in certain types of non-real estate assets.
If the Company failed to qualify as a REIT for the fiscal year ended
December 31, 1998, it would be taxed as a regular corporation, and distributions
to shareholders would not be deductible in computing the Company's taxable
income. The resulting corporate tax liabilities could materially reduce the
funds available for distribution to the Company's shareholders or for
reinvestment. If the Company failed to qualify as a REIT, distributions to
stockholders would no longer be required. Moreover, the Company might not be
able to elect to be treated as a REIT for the four taxable years after the year
during which the Company ceased to qualify as a REIT. In addition, if the
Company later requalified as a REIT, it might be required to pay a full
corporate-level tax on any unrealized gain associated with its assets as of the
date of requalification and to make distributions equal to any C corporation
earnings accumulated during the period of non-REIT status.
8. RELATED PARTIES
Effective February 24, 1996, the Company entered into an agreement with
E&L Associates, Inc. ("E&L") under which E&L provides asset management and
certain other administrative services to the Company. E&L receives a monthly fee
of $10,000 plus reimbursement for other expenses incurred on behalf of the
Company. During the three months ended March 31, 1998, E&L received management
fees of $30,000, all of which is included in General and Administrative 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 fees paid to
E&L, Ms. Legg receives no other compensation from the Company.
In connection with the sale of the Charleston property, the Board of
Trustees adopted an incentive payment plan for E&L for arranging, structuring,
negotiating and closing the transaction. The amount of the incentive fee would
vary depending upon the sales price achieved and subject to a maximum payment.
Under this plan, E&L received a fee of $233,000 in September, 1997.
9. 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.
As part of the sale of Charleston to Rubin Pachulski Properties, Inc.
("Rubin"), Rubin agreed to indemnify the Company broadly against the pending
SCRs and other types of environmental claims. Rubin's indemnity is backed by an
environmental insurance policy placed with Reliance Insurance Company of
Illinois. It is possible that the RQWCB could still name the Company when it
ultimately issues its SCRs Order for the property based on the Company's former
ownership of Charleston. If that occurs, the Company would tender the SCRs
Order to Rubin for compliance. Similarly, the Company would tender any other
environmental claim brought against the Company on the basis of its former
ownership of Charleston to Rubin pursuant to the indemnity.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The Company was formed and currently operates as a self-liquidating,
finite-life REIT. The following discussion should be read in conjunction with
the Company's Consolidated Balance Sheets and Consolidated Statements of
Operations and Cash Flows and the notes thereto. Unless otherwise defined in
this report, or unless the context otherwise requires, the capitalized words or
phrases referred to in this section either: (a) describe accounting terms that
are used as line items in such financial statements, or (b) have the meanings
ascribed to them in such financial statements and the notes thereto.
Before February 23, 1996, the Company's principal asset and source of
revenue was its portfolio of ten industrial and commercial properties. On
February 23, 1996, the Company: (1) sold nine of the ten properties in its
portfolio to MIT for $3.6 million in cash, 390,360 shares of MIT common stock,
and the assumption of certain mortgage notes and other liabilities by MIT; (2)
announced a dividend which was paid March 22, 1996 of approximately $1 million
in cash (or $0.33 per share of beneficial interest in the Company) and all of
the 390,360 shares of MIT common stock (or 0.1287 of a share of MIT common stock
per share of beneficial interest in the Company) to stockholders of record at
the close of business on March 12, 1996; and (3) appointed E & L Associates,
Inc. to provide property management and certain other administrative services to
the Company, effective February 24, 1996.
On August 21, 1997, the Company sold the Charleston property, the last
property remaining in its portfolio. The total purchase price for the property
was $13,000,000 less a $1,350,000 credit for potential remediation work and
related costs, resulting in a net sales price of $11,650,000. The purchase price
was paid entirely in cash. Out of escrow, the Company used $4,557,500 of the
sales proceeds to pay off the then outstanding principal on the mortgage note
payable. The Company also paid $891,504 in closing costs and $189,070 in
mortgage prepayment penalties. In connection with the sale, the Company
recognized a Gain on Sale of Property of $4,528,701.
As a result of the sale of the Charleston property, the Board of
Trustees on August 22, 1997 declared a dividend in the amount of $3.00 cash per
share payable on September 12, 1997 to shareholders of record on September 2,
1997.
Since the Charleston property was the Company's sole remaining real
estate holding, the Board of Trustees is in the process of evaluating the
options available, including the sale or termination of the Company. However,
the Board of Trustees has not concluded on the ultimate course of action and,
accordingly, the accompanying financial statements are presented on a going
concern basis with no accrual for any costs associated with winding up the
Company's affairs. The Company's remaining assets consist almost entirely of
cash and cash equivalents. The Company will retain assets to satisfy its
liabilities, as well as to cover overhead and operating expenses. In the event
the Board of Trustees concludes that liquidation is the desired course of
action, management currently estimates that the costs associated with
liquidation and wind-up of the Company's affairs would approximate $500,000.
Liquidity and Capital Resources
- -------------------------------
The Company's liquidity and capital resources have been dramatically
changed as a result of the February 23, 1996 and August 21, 1997 asset sales.
The Company's source of near-term liquidity is its unrestricted cash
which, at March 31, 1998, totaled $2,764,915. This amount is expected to be
adequate to satisfy the Company's liabilities, as well as its overhead and
operating expenses.
The Company's remaining principal application of its resources after
meeting expenses and liabilities is the payment of dividends.
9
<PAGE>
Capital expenditures for the three months ended March 31, 1998 and 1997
were $0 and $1,103 respectively. The Company has no future commitments other
than the potential remediation discussed in the Notes to the financial
statements.
During the three months ended March 31, 1997 and 1998, the Company had
no cash distributions.
Material Changes in Results of Operations
- -----------------------------------------
Rentals from Real Estate Investments totaled $ 0 and $ 314,612 for the
three months ended March 31, 1998 and 1997, respectively. The decrease is the
result of the sale of the Charleston property in August, 1997.
Interest and other revenues were $35,992 and $71,804 in the three
months ended March 31, 1998 and 1997, respectively. The change was due to
primarily the sale of the Charleston property in August, 1997 and changes in the
Company's average cash balances available for investment.
Interest expense, property taxes and property operating costs during
the three months declined from period to period because of the August 1997
property sale. Depreciation and amortization declined from period to period of
the August 1997 property sale.
General and administrative expense was $102,251 and $74,732 in the
three months ended March 31, 1998 and 1997, respectively. The increase resulted
from increased expenditures related to the Board of Trustees evaluation of the
Company's future plans.
10
<PAGE>
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PART II: OTHER INFORMATION
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ITEM 1. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Company is
a party or to which any of the assets of the Company is subject.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits: None.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter March 31,
1998.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
REGISTRANT
MERIDIAN POINT REALTY TRUST `83
Date: May 14, 1998 By: /s/ Lorraine O. Legg
---------------------------------------------
Lorraine O. Legg,
President and Chief Executive Officer
(Principal Executive Officer)
Date: May 14, 1998 By: /s/ John E. Castello
--------------------------------------------
John E. Castello,
Senior Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer)
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 2,764,915
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,764,915
<CURRENT-LIABILITIES> 25,819
<BONDS> 0
0
0
<COMMON> 3,031,618
<OTHER-SE> 292,542
<TOTAL-LIABILITY-AND-EQUITY> 2,764,915
<SALES> 0
<TOTAL-REVENUES> 35,992
<CGS> 0
<TOTAL-COSTS> 102,250
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (66,258)
<INCOME-TAX> 0
<INCOME-CONTINUING> (66,258)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (66,258)
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
