<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 (FEE REQUIRED) for the fiscal year ended November 30, 1994, or
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 (NO FEE REQUIRED) for the transition period from
____________ to ____________
Commission File Number 1-8383
MISSION WEST PROPERTIES
Incorporated in California IRS Employer Identification
Number: 95-2635431
Principal Executive Offices: Telephone: (619) 450-3135
6815 Flanders Drive, Suite 250
San Diego, California 92121-3914
Securities registered pursuant to Section 12(b) of the Act:
Title of Class Exchanges on Which Registered
- ------------------------------------ -----------------------------
Shares of common stock, no par value American Stock Exchange
Pacific Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, 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 the
Form 10-K. [ ]
The aggregate market value of voting stock held by nonaffiliates of the
Registrant was $3,244,000 as of January 27, 1995.
The number of shares of the Registrant's common stock outstanding as of January
27, 1995, was 1,468,721.
Portions of Part III are incorporated by reference from the Registrant's
definitive Proxy Statement dated February 14, 1995, for the annual meeting of
shareholders to be held on March 3, 1995.
<PAGE>
PART I
Item 1. Business
- -----------------
Mission West Properties (the "Company"), located in San Diego, California, is a
California corporation engaged in developing, owning, operating, and selling
income-producing commercial real estate. Since completing its most recent
development projects in 1991, the Company has been principally involved in
owning and operating real estate projects.
The Company was formed in 1969 as Palomar Mortgage Investors, a California
business trust. It operated as a real estate investment trust ("REIT") (as
defined by the Internal Revenue Code), investing primarily in short- and
intermediate-term construction and development loans secured by first trust
deeds on real property. In 1974, the Company terminated new loan activity
except to facilitate the sale of property acquired from borrowers through
foreclosure or by deed in lieu of foreclosure and, in 1975, changed its name to
Mission Investment Trust. In 1979, the Company terminated its status as a REIT
and began directly to develop and market properties it owned. Since then, the
Company has acquired, developed, and sold properties in southern California and
Arizona in accordance with its business strategy; the Company currently manages
ten operating properties it has developed or acquired. In 1982 the Company
incorporated under its present name.
In fiscal 1993, the Company's Board of Directors began to explore various
strategic alternatives to maintain and enhance shareholder value, including
raising additional capital in order to grow the Company, refinancing or
repositioning its debt, effecting a business combination, or considering an
outright sale of the Company or its assets. After several months of
negotiations with one party, in January 1995 the Company executed a definitive
agreement for the sale of substantially all of the Company's real estate assets.
The agreement was subsequently terminated during a due diligence period provided
in the agreement. The Company intends to continue to manage its real estate
investments and to explore means of maintaining and enhancing shareholder value
and realizing a return to its shareholders.
Wholly Owned Subsidiaries:
- -------------------------
The Company has two wholly owned subsidiaries, MIT Realty, Inc. and Mission West
Executive Aircraft Center, Inc. ("MWEAC"). MIT Realty, Inc. has no signed
contracts or commitments. MWEAC owns and operates office buildings and aircraft
hangars as part of a fixed-base operations center at the McClellan-Palomar
Airport in San Diego County; management of this facility is provided by an
independent contractor and the results of the operations of this subsidiary are
included in the consolidated financial statements of the Company.
Employees:
- ---------
The Company had eight full-time employees as of November 30, 1994.
Real Estate Investments and Marketing:
- -------------------------------------
At November 30, 1994, the Company had investments in ten real estate projects
and two undeveloped parcels of land totaling $45,199,000, net of depreciation
and allowances for estimated losses. The Company completed its most recent
development projects in 1991 and, since that time, has principally focused on
managing its real estate properties. Because the Company's property portfolio
contains what management believes to be high-quality projects located in
desirable markets, the Company historically has been successful in both leasing
projects and effecting sales. The Company's properties are substantially
leased, with an average portfolio occupancy of 84 percent in fiscal year 1994,
and currently have an aggregate positive cash flow. Due to market conditions,
however, no significant property sales have occurred since 1990. In 1990, the
Company sold a 25,000 square foot office building in Carlsbad, a 72,000 square
foot office building in San Diego, and the Company's 36.5 percent interest in a
San Diego joint venture build-to-suit project. The Company executed a
definitive agreement to sell substantially all its assets in January 1995, which
agreement was subsequently terminated during a due diligence period provided in
the agreement.
-2-
<PAGE>
Environmental Issues:
- --------------------
In recent years, the government and the general public have become increasingly
concerned with the impact of real estate development and construction on the
physical and social environment. Governmental agencies have increasingly
focused on environmental effects when considering zoning applications and
applications for construction of sewer, water, and other facilities generally
required of real estate developers. Additionally, lending institutions have
begun to place a greater emphasis on environmental factors when considering
property financing. Although ecological and other environmental concerns have
not had a material impact on its development or operating activities, there can
be no assurance that the Company will not be affected in the future either by
governmental policies or public attitudes in this regard.
Item 2. Properties
- -------------------
The Company has developed or acquired commercial properties located in southern
California and Arizona. Each property was selected for its perceived potential
to contribute value to the Company's real estate portfolio and ability to
generate profit, typically upon sale. In the pursuit of enhancing property
values and profits, the Company is committed to maintaining its high quality
projects and providing superior property management services to its tenants.
The Company's real estate investments as of November 30, 1994, are as follows:
<TABLE>
<CAPTION>
YEAR FISCAL 1994
NUMBER OF AMOUNT CONSTRUCTED/ AVERAGE NUMBER OF
DESCRIPTION AND LOCATION BUILDINGS INVESTED ACQUIRED SQ. FT. OCCUPANCY TENANTS
------------------------ -------- -------- ------- ------- --------- ------
<S> <C> <C> <C> <C> <C> <C>
OFFICE PROJECTS:
Two-story, Carlsbad, CA 2 $7,649,000 1988 80,540 97% 7
Three-story, San Diego, CA 1 7,511,000 1989 75,711 77% 15
Two-story, Carlsbad, CA 1 5,575,000 1991 52,696 95% 7
Two-story, San Diego, CA 1 4,167,000 1989 45,097 45% 5
INDUSTRIAL/R&D PROJECTS:
Manufacturing, Riverside, CA 1 6,579,000 1991 161,588 100% 1
R&D, San Diego, CA 4 6,208,000 1984 87,409 64% 5
R&D, San Diego, CA 4 6,652,000 1990 72,320 77% 7
Light industrial, Chandler, AZ 2 3,750,000 1986 65,630 94% 15
Industrial, Carlsbad, CA 3 3,589,000 1991 44,574 78% 16
AIRPORT PROJECTS:
Hangars/office bldg., Carlsbad, CA 1 1,796,000 1990 43,116 74% 6
Hangars/office bldg., Carlsbad, CA 3 3,113,000 1990 90,155 91% 57
UNDEVELOPED LAND, Tucson and N/A 725,000 1974 N/A N/A N/A
Chandler, AZ 1984
</TABLE>
During the year ended November 30, 1994, the Company's operating property
portfolio was, on average, 84 percent leased. The rental rate for leases,
exclusive of airport hangar space, in effect during the year ranged from $0.40
to $1.45 per square foot, net of concessions. The Company has negotiated each
lease separately; typically, office building and airport lease rates are full-
service, net of utilities, and industrial rates are triple net or modified
gross. Nearly all leases contain provisions for annual cost-of-living or
percentage increases. Lease terms average from one to five years, ranging up to
ten years.
Item 3. Legal Proceedings
- --------------------------
Periodically the Company is party to certain lawsuits and various claims arising
out of its ordinary business activities. As of November 30, 1993, the Company
was party to litigation that was settled in December 1993; this settlement
resulted in a $1,500,000 cash receipt to the Company, as more fully described in
Note 7 to the consolidated financial statements.
-3-
<PAGE>
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
quarter ended November 30, 1994.
PART II
Item 5. Market for the Registrant's Shares of Common Stock and Related
- -----------------------------------------------------------------------
Stockholder Matters
- -------------------
Common Stock of the Company is traded on the American and Pacific Stock
Exchanges under the symbol MSW. The following are the high and low sales
prices, by quarter, of the Registrant's shares for the two most recent fiscal
years.
<TABLE>
<CAPTION>
1994 1993
------------- --------------
High Low High Low
------ ----- ------ ------
<S> <C> <C> <C> <C>
1st Quarter 5 3 1/2 3 7/8 3 1/8
2nd Quarter 4 3/8 3 3/4 4 3
3rd Quarter 5 1/8 3 3/4 3 2 5/8
4th Quarter 7 4 1/4 3 1/2 2 9/16
</TABLE>
As of January 27, 1995, the approximate number of holders of record of the
Company's stock was 550. The Company paid no dividends during fiscal 1994;
during fiscal 1993, the Company declared and paid a $0.05 per share dividend in
the first quarter and suspended payments of dividends thereafter. Certain
banks, through their debt agreements, have restricted the Company from paying
cash dividends to shareholders.
Item 6. Selected Consolidated Financial Data
- ---------------------------------------------
Selected consolidated financial information follows (in thousands, except per
share data).
<TABLE>
<CAPTION>
Years Ended November 30
----------------------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Results of Operations:
Revenues $ 9,297 $ 7,142 $ 7,297 $ 6,482 $24,518
Net Income (Loss) (1,943) (1,065) (824) (869) 2,535
Net Income (Loss) per Share (1.32) (0.73) (0.56) (0.59) 1.70
Financial Condition:
Total Assets $50,963 $56,236 $59,731 $60,596 $53,086
Notes Payable 34,382 35,938 38,229 37,265 29,248
Shareholders' Equity per Share 10.02 11.27 12.04 12.95 13.96
Cash Dividends Declared per Share 0.00 0.05 0.35 0.40 0.38
Average Shares Outstanding 1,469 1,469 1,469 1,475 1,492
</TABLE>
-4-
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
- --------------------------------------------------------------------------------
of Operations
- -------------
RESULTS OF OPERATIONS:
Fiscal 1994 Compared with Fiscal 1993
- -------------------------------------
The Company did not engage in development activity during fiscal year 1994 and
no properties were acquired or sold during the year. The Company did, however,
enter into an agreement to sell substantially all its real estate assets. As a
result of this proposed sales transaction, the Company recorded a $5,200,000
provision for estimated losses on real estate during the fourth quarter; this
provision represented the difference between the carrying value of the assets
and the proposed sales price, which was considered to approximate market value
(subsequent to November 30, 1994, the proposed sales transaction was
terminated).
During 1994, occupancy rates remained fairly stable, averaging 84 percent,
compared to 85 percent in fiscal 1993. As a result of consistent occupancy
rates and minimal rental rate decreases, rental revenues from real estate
remained relatively constant. The related operating expenses of real estate,
including depreciation, decreased $460,000, or 11 percent, between years. This
decrease resulted from reductions in depreciation expense, property taxes,
general operating expenses, and the provision for bad debts. (See discussion of
fiscal 1993 results; one-time adjustments that contributed to increases were
recorded in 1993.) During the fourth quarter of fiscal 1994, an affiliate
continued to remit only partial rent. The affiliate has requested a
renegotiation of its lease obligation and it is anticipated that a lease
renegotiation will be completed in early 1995. This renegotiation may include a
provision for the Company's and the affiliate's common parent, Triton Group
Ltd., to deliver 100,000 shares of the Company's Common Stock to the Company in
exchange for a reduced rental rate and an extended lease term for the affiliate.
During the first quarter of fiscal 1994, the Company settled litigation,
receiving $1,500,000 in cash. The matter related to property sold by the
Company in 1986; therefore, the settlement amount was recorded as revenue from
sales of real estate. Also in fiscal 1994, the Company received nonrecurring
proceeds on a note receivable related to the same 1986 land sale, which
contributed to the $1,994,000 increase in sales of real estate between years.
Other revenue increased $202,000 between years as a result of reimbursements
from tenants for interior improvements in excess of a standard allowance.
As a result of a reduction in Corporate staff and continuing cost containment,
general and administrative expenses were $183,000, or 13 percent, lower in
fiscal 1994 than 1993. Interest expense decreased $117,000 between years; this
decrease resulted from the Company's lenders abating certain loan fees, which
were offset by increased expense due to higher interest rates (the prime lending
rate increased from six percent to 8.5 percent during 1994).
The Company recorded a $440,000 effect of a required change in accounting for
income taxes during the first quarter of fiscal 1994. This change is more fully
described in Notes 1 and 5 to the consolidated financial statements.
Fiscal 1993 Compared with Fiscal 1992
- -------------------------------------
During fiscal year 1993, the Company did not engage in development activity, nor
were any properties acquired or sold. During 1993, occupancy rates remained
fairly stable, averaging 85 percent, compared to 86 percent in fiscal 1992. As
a result of consistent occupancy rates and non-fluctuating rental rates, rental
revenues from real estate remained constant. The related operating expenses of
real estate, including depreciation, increased $496,000, or 14 percent, between
years. This increase was proportionally larger than the increase in rental
revenue due to several factors, primarily a one-time increase in the provision
for bad debts, a reflection of the weak economy and real estate industry in
general in southern California. Also affecting the results were increases in
depreciation expense, building repair expenses, and property tax expense.
Other revenues decreased $158,000, or 30 percent, from fiscal 1992 primarily due
to decreased mortgage loan interest revenue resulting from lower outstanding
receivable balances and lower earning rates on those balances.
As a result of a reduction in Corporate staff and general cost containment,
general and administrative expenses were $104,000, or seven percent, lower in
fiscal 1993 than 1992. Interest expense decreased between years due primarily
to the Company's lenders abating certain loan fees during fiscal 1993.
-5-
<PAGE>
CHANGES IN FINANCIAL POSITION:
November 30, 1994 Compared with November 30, 1993
- -------------------------------------------------
During fiscal year 1994, the Company's cash and investments position increased
$894,000. Numerous items contributed to this increase. Among the most
significant factors was the settlement of litigation (see "MANAGEMENT'S
DISCUSSION AND ANALYSIS -- Results of Operations" above) and receipts on notes
receivable, which were offset by $1,056,000 in scheduled debt amortizations and
a $500,000 paydown upon renewal of a note payable.
The $799,000 decrease in real estate investments during fiscal 1994 resulted
from depreciation, net of tenant improvement additions. As a result of a
proposed sale of substantially all the Company's real estate assets, an increase
in the allowance for estimated losses on real estate was recorded during 1994.
This adjustment reduced the recorded value of the assets to the proposed sales
price, which was considered to approximate market value.
LIQUIDITY AND CAPITAL RESOURCES:
Management believes the Company continues to be in a stable and competitive
position with its current real estate portfolio. The Company has maintained
$4,911,000 in cash and investments as of November 30, 1994. All of the
Company's debt has been renewed and currently has maturities in 1996 or later;
all secured notes currently amortize on a monthly basis. An additional
principal reduction is possible during fiscal 1995 in conjunction with a lease
renegotiation of a single-tenant property leased to an affiliate.
The Company's real estate portfolio continues to generate sufficient rental
revenue to cover real estate operating expenses and interest expense and it is
generating cash, after normal debt service (interest and monthly principal
amortization); however, the portfolio's operations have not yet reached a level
to additionally cover corporate overhead. Historically, the Company has
experienced net income and cash increases in the years properties were sold and
has experienced losses and cash decreases in the years where no property sales
occurred. The occurrences of major property sales depends on several factors,
including prevailing market conditions and available financing for potential
purchasers (see "Impact of Recession on Operations" below).
The Company is currently evaluating its future strategic options and intends to
pursue all viable growth or other opportunities. The Company has no projects
under development and none are specifically planned. The only capital
expenditures anticipated are interior improvements to existing buildings, which
may be required as new tenants are obtained or existing leases extended. The
real estate portfolio comprises operating properties that are either leased or
partially available for lease. The Company anticipates financing future
projects with internally and externally generated funds, including strategic
capital or debt transactions and/or sales proceeds from existing projects. The
need for additional financing in the future will depend mainly on the number and
size of new projects undertaken, if any. The Company plans to continue to
finance its general and administrative operations with internally generated
funds, including rental receipts from the rental properties, and existing cash
and investments.
IMPACT OF RECESSION ON OPERATIONS:
The southern California economy continues to recover, although at a relatively
modest pace. Corporate combinations and downsizing have contributed to reduced
employment and decreased demand for commercial property. The commercial and
industrial real estate markets in the region are still overbuilt. Although
absorption in the markets in which the Company competes has increased,
commercial real estate is still selling below replacement values. An upturn in
the economy may positively impact the occupancy, rental rates, and values of
commercial properties (including the Company's investments), while a downturn
would have the opposite effect. Additionally, alternative financing for
commercial property may be limited during a weak economy; this would reduce the
ability of the Company to borrow and the ability of potential investors to
purchase property.
Continued economic difficulties may impair further the business performance and
credit worthiness of some of the Company's tenants, which in turn may affect
these tenants' ability to meet lease obligations. Although losses were
insignificant in fiscal 1994, the Company did experience a number of tenant
failures during fiscal 1993, resulting in increased bad debt expenses.
-6-
<PAGE>
A majority of the leases between the Company and its tenants have terms from one
to five years. The Company devotes a significant amount of time to renewing
leases with existing tenants and replacing tenants that vacate at lease maturity
(or sooner in the case of business failures). Because recent economic
conditions have placed downward pressure on market rental rates, management
believes leases may continue to be renewed or replaced at lower rental rates
than those of currently existing leases.
IMPACT OF INFLATION AND CHANGING PRICES ON OPERATIONS:
In recent years, inflation has not been a significant factor and has not had a
significant impact on the Company's operations and business decisions. Indeed,
values of southern California properties have generally declined over the past
several years. While renewed inflation may increase the future market value of
certain real estate owned by the Company, it also is likely to increase the cost
of construction on, or improvements to, that real estate. In addition, higher
inflation and interest rates tend to increase the cost and restrict the
availability of long-term mortgage funds, which in turn may impede sales of the
Company's properties and limit development activity.
The Company typically leases property to tenants with terms that provide for
periodic rent increases in proportion to increases in inflation as measured by
the Consumer Price Index. However, most leases provide for a limit on the
amount by which such rent can increase in any given period.
Item 8. Consolidated Financial Statements and Supplementary Data
- -----------------------------------------------------------------
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES: Page
----
<TABLE>
<CAPTION>
<S> <C>
Report of Independent Accountants 8
Consolidated Balance Sheets 9
Consolidated Statements of Operations 10
Consolidated Statements of Cash Flows 11
Consolidated Statements of Shareholders' Equity 12
Notes to Consolidated Financial Statements 13 - 16
Schedule XI -- Real Estate and Accumulated Depreciation 17
</TABLE>
(All other schedules are omitted because they are not applicable or the
required information is presented in the financial statements or notes
thereto.)
-7-
<PAGE>
Report of Independent Accountants
---------------------------------
To the Board of Directors and
Shareholders of Mission West Properties
In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of Mission West Properties and its subsidiaries (the "Company") at
November 30, 1994 and 1993, and the results of their operations and their cash
flows for each of the three years in the period ended November 30, 1994, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
As discussed in Notes 1 and 5, during 1994 the Company changed its method of
accounting for income taxes.
PRICE WATERHOUSE LLP
San Diego, California
January 13, 1995
-8-
<PAGE>
MISSION WEST PROPERTIES
Consolidated Balance Sheets
At November 30
<TABLE>
<CAPTION>
ASSETS 1994 1993
------ ------------- ------------
<S> <C> <C>
Cash and cash equivalents (Note 1) $ 2,192,000 $ 806,000
Short-term investments 2,719,000 3,211,000
Real estate investments (Notes 1, 2, 3, 4 and 7):
Rental properties, less accumulated depreciation of 48,887,000 49,686,000
$7,702,000 in 1994 and $6,233,000 in 1993 ($47,428,000
pledged in 1994 and $48,512,000 in 1993)
Unimproved land ($461,000 pledged in 1994 and 1993) 725,000 725,000
------------- ------------
49,612,000 50,411,000
Less allowance for estimated losses (Notes 1 and 2) (4,413,000) (880,000)
------------- ------------
Net real estate investments 45,199,000 49,531,000
Other assets, less allowances of $2,694,000 in 1994 and
$1,008,000 in 1993 and accumulated depreciation of
$304,000 in 1994 and $309,000 in 1993 (Notes 1, 2 and 5) 853,000 2,688,000
------------- ------------
$50,963,000 $56,236,000
============= ============
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
Notes payable (Note 4) $34,382,000 $35,938,000
Accounts payable and accrued expenses 1,861,000 1,493,000
Deferred income taxes (Notes 1 and 5) - 2,257,000
------------- ------------
Total liabilities $34,382,000 39,688,000
------------- ------------
Commitments and contingencies (Note 7)
Shareholders' equity (Note 6):
Common stock, no par value, 10,000,000 shares authorized
(5,000,000 in 1993); 1,468,721 shares issued and
outstanding (1,468,725 in 1993) 20,081,000 19,966,000
Accumulated deficit (5,361,000) (3,418,000)
------------- ------------
Total shareholders' equity 14,720,000 16,548,000
------------- ------------
$50,963,000 $56,236,000
============= ============
</TABLE>
See accompanying notes to consolidated financial statements.
-9-
<PAGE>
MISSION WEST PROPERTIES
Consolidated Statements of Operations
Years Ended November 30
<TABLE>
<CAPTION>
1994 1993 1992
------------- ------------ ------------
<S> <C> <C> <C>
REVENUES:
Rental revenues from real estate (Note 3) $ 6,637,000 $ 6,678,000 $ 6,643,000
Sales of real estate (Notes 1 and 7) 2,096,000 102,000 134,000
Other, including interest 564,000 362,000 520,000
----------- ----------- -----------
9,297,000 7,142,000 7,297,000
----------- ----------- -----------
EXPENSES:
Operating expenses of real estate (Note 7) 2,220,000 2,464,000 2,119,000
Depreciation of real estate (Note 1) 1,472,000 1,688,000 1,537,000
Provision for estimated losses on real estate (Note 2) 5,200,000 94,000 -
General and administrative 1,200,000 1,383,000 1,487,000
Interest (Note 4) 3,088,000 3,205,000 3,368,000
----------- ----------- -----------
13,180,000 8,834,000 8,511,000
----------- ----------- -----------
Loss before income taxes, minority partnership interest,
and cumulative effect of change in accounting (3,883,000) (1,692,000) (1,214,000)
Income tax benefit (Notes 1 and 5) 1,500,000 630,000 480,000
Minority partnership interest - (3,000) (90,000)
----------- ------------ -----------
Loss before cumulative effect of change in accounting (2,383,000) (1,065,000) (824,000)
Cumulative effect of change in accounting for income
taxes (Notes 1 and 5) 440,000 - -
----------- ------------ -----------
NET LOSS $(1,943,000) $(1,065,000) $ (824,000)
=========== ============ ===========
PER SHARE (Note 1):
Loss before cumulative effect of change in accounting $ (1.62) $(0.73) $(0.56)
Cumulative effect of change in accounting for income
taxes 0.30 - -
------ ------ -----------
Net loss per share $(1.32) $(0.73) $(0.56)
====== ====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
-10-
<PAGE>
MISSION WEST PROPERTIES
Consolidated Statements of Cash Flows
Years Ended November 30
<TABLE>
<CAPTION>
1994 1993 1992
----------- ------------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(1,943,000) $(1,065,000) $ (824,000)
Adjustments to reconcile net loss to net cash provided
by (used for) operating activities:
Provision for estimated losses on real estate 5,200,000 94,000 -
Depreciation 1,479,000 1,704,000 1,579,000
Cumulative effect of change in accounting for
income taxes (440,000) - -
Compensation expense of stock options (Note 6) 82,000 - -
Minority partnership interest - 3,000 90,000
Changes in assets and liabilities:
Increase in real estate investments (673,000) (462,000) (1,159,000)
Decrease in other assets 361,000 1,325,000 87,000
Increase (decrease) in accounts payable and
accrued expenses 168,000 207,000 (632,000)
Increase (decrease) in deferred income taxes (1,784,000) (276,000) 52,000
----------- ----------- -----------
Net cash provided by (used for) operating activities 2,450,000 1,530,000 (807,000)
----------- ----------- -----------
Cash flows from investing activities:
Net redemptions (purchases) of short-term investments 492,000 (121,000) (3,090,000)
----------- ----------- -----------
Cash flows from financing activities:
Repayments on notes payable (1,556,000) (2,291,000) (969,000)
Borrowings on notes payable - - 1,933,000
Payments of cash dividends - (73,000) (515,000)
----------- ----------- -----------
Net cash provided by (used for) financing activities (1,556,000) (2,364,000) 449,000
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents 1,386,000 (955,000) (3,448,000)
Cash and cash equivalents at beginning of year 806,000 1,761,000 5,209,000
----------- ----------- -----------
Cash and cash equivalents at end of year (Note 1) $ 2,192,000 $ 806,000 $ 1,761,000
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE>
MISSION WEST PROPERTIES
Consolidated Statements of Shareholders' Equity
Years Ended November 30, 1994, 1993 and 1992
<TABLE>
<CAPTION>
Common Accumulated
Stock Deficit Total
----------- ----------- -----------
<S> <C> <C> <C>
Balance at November 30, 1991 $19,966,000 $ (941,000) $19,025,000
Cash dividends ($0.35 per share) - (515,000) (515,000)
Net loss for 1992 - (824,000) (824,000)
----------- ----------- -----------
Balance at November 30, 1992 19,966,000 (2,280,000) 17,686,000
Cash dividends ($0.05 per share) - (73,000) (73,000)
Net loss for 1993 - (1,065,000) (1,065,000)
----------- ----------- -----------
Balance at November 30, 1993 19,966,000 (3,418,000) 16,548,000
Grant of 125,000 nonqualified stock options, net
(Note 6) 115,000 - 115,000
Net loss for 1994 - (1,943,000) (1,943,000)
----------- ----------- -----------
Balance at November 30, 1994 $20,081,000 $(5,361,000) $14,720,000
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
-12-
<PAGE>
MISSION WEST PROPERTIES
Notes to Consolidated Financial Statements
November 30, 1994
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation: Mission West Properties (the "Company") is engaged
- ---------------------------
in developing, owning, operating, and selling income-producing real estate
located principally in southern California. The accompanying financial
statements consolidate the accounts of the Company and its wholly owned
subsidiaries. All transactions between the Company and its subsidiaries have
been eliminated. The Company is a 53 percent-owned subsidiary of Triton Group
Ltd. ("Triton").
Real estate: The Company's net real estate investments are carried at the lower
- -----------
of cost or estimated net realizable value; an allowance for estimated losses is
provided based on the Directors' and management's evaluation of those
investments. This evaluation considers recent appraised values, market
conditions, and the Company's investment strategies. Revenues from sales of
real estate are reported at the time of sale or when certain financial criteria
are met.
Depreciation: Depreciation on rental properties is computed using the straight-
- ------------
line method over the estimated useful lives of the assets, generally 30 years.
Income taxes: The Company adopted Statement of Financial Accounting Standards
- ------------
("SFAS") No. 109, "Accounting for Income Taxes," on a prospective basis,
effective December 1, 1993. SFAS No. 109 requires recognition of deferred tax
assets and liabilities for differences between the financial statement carrying
amounts and the tax basis of assets and liabilities, at anticipated tax rates.
The Company had previously used the deferral method of accounting for income
taxes as prescribed by Accounting Principles Board Opinion No. 11, "Accounting
for Income Taxes."
Net loss per share: Net loss per share of common stock is based on 1,468,721
- ------------------
shares in fiscal year 1994 and 1,468,725 shares in fiscal years 1993 and 1992,
the weighted average number of shares outstanding during those years. The
effect of stock options is antidilutive; therefore, such effect is not reflected
in the per share computations.
Cash and cash equivalents: For reporting purposes, cash and cash equivalents
- -------------------------
includes cash on hand, money market funds, U.S. Treasury Bills and Notes, and
certificates of deposit with an original maturity of 90 days or less. Funds in
the amount of $634,000 at November 30, 1994, are restricted to use for tenant
improvements and lease commissions and are classified as short-term investments.
Other short-term investments include U.S. Treasury Bills and Notes and
certificates of deposit. Cash paid during the fiscal year for interest, net of
amount capitalized, was $3,102,000, $2,973,000, and $3,459,000 in 1994, 1993,
and 1992, respectively. The Company paid income taxes, net of refunds, of
$145,000 in fiscal year 1994 and received income tax refunds, net of payments,
of $480,000 in fiscal year 1993 and $583,000 in fiscal year 1992.
Concentrations of credit risk: Credit risk is primarily concentrated in cash
- -----------------------------
equivalents, short-term investments, and rent receivables. Cash in excess of
operating requirements is invested in U.S. Treasury securities or with Federally
insured institutions in short-term certificates of deposit; amounts invested
with a single institution are limited to minimize risk. The Company's primary
operations consist of leasing commercial space to small and medium-sized
tenants, primarily in southern California. To reduce credit risk, the Company
obtains and holds security deposits from a majority of tenants and performs
ongoing credit evaluations of all major tenants' financial condition.
NOTE 2 - REAL ESTATE INVESTMENTS
As of November 30, 1994, the Company had entered into an agreement to sell
substantially all its real estate investments (the agreement was terminated
effective February 3, 1995). As a result of the proposed sales transaction, the
related assets were recorded at their estimated sales price, which approximated
market value; accordingly, a $5,200,000 provision for estimated losses on real
estate was recorded in the fourth quarter of fiscal year 1994. This provision
reduced the book value of deferred rent and prepaid lease commissions (both of
which directly relate to the real estate) to zero and reduced the book value of
the real estate by $3,533,000.
-13-
<PAGE>
NOTE 3 - RENTAL PROPERTIES
Minimum future rentals on non-cancelable operating leases amount to $5,648,000,
$4,449,000, $2,777,000, $1,947,000, and $1,294,000 for fiscal years 1995 through
1999, respectively, and $1,421,000 thereafter. During the years ended November
30, 1994, 1993, and 1992, rental revenue from real estate of $763,000, $669,000,
and $873,000, respectively, was recorded for property leased to Triton
affiliates.
<TABLE>
<CAPTION>
NOTE 4 - NOTES PAYABLE
November 30
----------------------------------
Notes payable comprise the following: 1994 1993
---- ----
<S> <C> <C>
Secured notes payable to banks, due 1996 through 1998, interest rates $32,532,000 $33,997,000
ranging from 9.5% (prime plus 1%) to 10.5% (prime plus 2%), principal
and interest due in monthly installments of $355,000, balance of
principal due at maturity
Unsecured note payable to bank, due 1996, interest rate of 10% (prime 250,000 250,000
plus 1.5%), interest only due monthly, principal due at maturity
Secured note payable to insurance company, due 1997, interest rate of
10%, principal and interest due in monthly installments of $21,000 1,600,000 1,691,000
----------- ------------
$34,382,000 $35,938,000
=========== ============
</TABLE>
Aggregate principal payments required on the notes payable at November 30, 1994,
are $1,461,000, $29,867,000, $1,475,000, and $1,579,000 for the years 1995
through 1998. During the years ended November 30, 1994, 1993, and 1992 the
Company incurred interest expense of $3,088,000, $3,205,000, and $3,507,000,
respectively, of which $139,000 was capitalized in 1992 (no amounts were
capitalized in fiscal years 1994 or 1993).
Certain of the notes payable contain financial covenants such as minimum cash
balances and net worth and maximum debt-to-worth ratios. Additionally,
covenants restrict the Company from paying cash dividends and other provisions
specify that a change in the majority voting power of the Company's stock,
either by transfer or the issuance of additional voting securities, is an event
of default.
<TABLE>
<CAPTION>
NOTE 5 - INCOME TAXES
November 30
Deferred tax assets (liabilities) comprise the following: 1994
-----------
<S> <C>
Basis of depreciable assets $1,153,000
Other 259,000
-----------
Deferred tax assets 1,412,000
-----------
Deferred rental revenue (468,000)
Other (71,000)
-----------
Deferred tax liabilities (539,000)
-----------
873,000
Deferred tax asset valuation allowance (269,000)
-----------
$ 604,000
===========
</TABLE>
-14-
<PAGE>
<TABLE>
<CAPTION>
The provision for (benefit from) income taxes comprises the following: Years Ended November 30
---------------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Current
- -------
Federal $ 696,000 $(353,000) $(477,000)
State 83,000 - -
------------ --------- ---------
779,000 (353,000) (477,000)
------------ --------- ---------
Deferred
- --------
Federal (1,916,000) (197,000) 57,000
State (363,000) (80,000) (60,000)
------------ --------- ----------
(2,279,000) (277,000) (3,000)
------------ --------- ---------
$(1,500,000) $(630,000) $(480,000)
============ ========== =========
The provision for (benefit from) income taxes reconciles to the Years Ended November 30
-----------------------
statutory rate as follows: 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Statutory Federal tax rate (34.0)% (34.0)% (34.0)%
Increase (decrease) in taxes resulting from:
Change in deferred tax asset valuation allowance 5.3 - -
State income tax, net of Federal tax benefit (7.6) (3.1) (3.3)
Minority partnership interest and other (2.3) (0.1) (2.2)
----- ------ ------
(38.6)% (37.2)% (39.5)%
===== ===== =====
</TABLE>
The Company adopted SFAS No. 109 effective December 1, 1993. The cumulative
effect of this change in the method of accounting for income taxes resulted in a
$440,000 decrease in the net loss for fiscal year 1994. As of November 30, 1994,
the Company's net deferred tax asset is included in other assets. Due to the
uncertainty of realizing the benefit of certain deferred tax assets, a valuation
allowance was established in fiscal year 1994.
The provision for (benefit from) income taxes reflects temporary differences in
the recognition of revenue and expense for tax and financial reporting purposes.
These temporary differences primarily arise from the recognition of rental
revenue from real estate, recognition of accrued expenses, capitalized interest,
and a different depreciable basis for tax than for financial reporting purposes.
NOTE 6 - STOCK OPTIONS AND STOCK PURCHASE PLAN
The Company has a Director Stock Option Plan and an Incentive Stock Option Plan
under which non-salaried directors and officers, respectively, may purchase
shares of the Company's stock at a minimum option price based on market value at
the date of grant. Options granted under the plans become exercisable ratably
over five years and expire after a period not to exceed ten years. At November
30, 1994, 300,000 and 350,000 shares were authorized under each plan, of which
114,000 and 153,600 were available for grant and 30,400 and 36,080 were
exercisable under the Director Stock Option Plan and the Incentive Stock Option
Plan, respectively.
<TABLE>
<CAPTION>
Activity in these plans is summarized as follows: Years Ended November 30
-----------------------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Beginning share balance 156,200 199,000 160,800
Granted - 23,200 43,200
Canceled ($4.125 to $10.125 per share in 1994) (49,800) (66,000) (5,000)
------- ------- -------
Ending share balance ($3.25 to $10.125 per share) 106,400 156,200 199,000
======= ======= =======
</TABLE>
-15-
<PAGE>
NOTE 6 - STOCK OPTIONS AND STOCK PURCHASE PLAN (CONTINUED)
Effective July 1, 1994, the Company granted nonqualified options to purchase
125,000 shares of the Company's Common Stock to a key executive. The exercise
price of the options is $3.00 per share and the options expire ten years from
the date of grant. Options to purchase 73,000 shares of the grant vested
immediately; the remainder of the options become exercisable if specific
financial milestones occur.
The Company has a Stock Purchase Plan for which all directors and employees are
eligible. Under terms of the plan, each eligible participant may contribute up
to $3,000 per month, to be invested in shares of the Company's stock purchased
on the open market. The Company contributes $0.50 to the plan for each $1.00
contributed by a participant. The total amounts expended by the Company for
such contributions during the years ended November 30, 1994, 1993, and 1992 were
$19,000, $17,000, and $44,000, respectively.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
In 1985, the Company adopted a Management Incentive Plan that provides the
executive officers and employees, in aggregate, a ten percent interest in the
profits generated from the operation and sale of real estate projects developed
by the Company, to the extent profits exceed cumulative losses plus a fixed
return. No payments were made under the Plan in fiscal year 1994 and it is not
anticipated that future payments will be made under the Plan. In addition to
the projects covered under the Management Incentive Plan, the executive
officers, former officers, and employees participate in ten percent of the
profits from the Del Mar properties, a major portion of which were sold in 1986.
During the years ended November 30, 1994, and 1992, a total of $198,000 and
$21,000, respectively, was distributed to participants from receipts related to
the sale of the Del Mar properties; there were no distributions to participants
during the year ended November 30, 1993.
The Company is a lessee on two 30-year land leases at an airport in San Diego
County and incurred rental expense of $189,000, $187,000, and $185,000 for
fiscal years ended November 30, 1994, 1993, and 1992, respectively. The
provisions of the leases require minimum lease payments of $177,000, $186,000,
$195,000, $205,000, and $215,000 during the Company's fiscal years 1995 through
1999 and $7,217,000 thereafter, and contingent payments of five percent of
certain sublease income. The lease amounts are subject to renegotiation to
reflect cost of living increases every five years. The Company holds subleases
and records sublease revenue from these two parcels; the related minimum future
rentals are included in the amounts set forth in Note 3 to these consolidated
financial statements.
During December 1993, a settlement agreement and mutual release was entered into
by the Company, The Dai-Ichi Kangyo Bank, Ltd. (the "Bank"), and Old Del Mar
Hotel Properties, Ltd. ("ODM") for settlement of a claim the Bank had served
against the Company and others in September 1992 in the Superior Court of
California for San Diego County. The claim was for quiet title to a parcel of
property in Del Mar, California, previously sold by the Company to ODM; the
Company had filed cross-claims for breach of contract and declaratory relief.
The Company held a profits interest in the property, which the Bank contended
was junior to the Bank's deed of trust on the property. Pursuant to the terms
of the Settlement Agreement and Mutual Release, the Company received $1,500,000
in return for releasing all of its existing interests in the property arising
out of the profits interest. The $1,500,000, less approximately ten percent
subject to the Company's Management Incentive Plan, was recorded as fiscal year
1994 revenue.
-16-
<PAGE>
MISSION WEST PROPERTIES
SCHEDULE XI -- Real Estate and Accumulated Depreciation
November 30, 1994
(in thousands)
<TABLE>
<CAPTION>
Costs Capitalized
Subsequent to Carrying
Initial Cost Acquisition Amount
----------------- -----------------
at End Accum. Date
Bldgs. & Improve- Prop. of Year Deprec. of Date
Location and Description Encumbrances Land Impvmts. ments Taxes (a)(c) (b) Const. Acq'd.
- ---------------------------- ------------ ------- -------- ------- ----- ----------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
RENTAL PROPERTIES:
Carlsbad, California:
Industrial buildings $ 1,858 $ 1,029 $ - $ 2,529 $ 31 $ 3,589 $ 319 3/91 7/88
Office building 3,127 1,029 - 4,460 86 5,575 442 3/91 7/88
Office buildings 4,989 1,434 - 6,156 59 7,649 1,206 9/88 11/85
Hangar/office building 1,842 - - 3,084 29 3,113 546 2/90 6/88
Hangar/office building - - 1,353 443 - 1,796 337 - 9/90
Riverside, California:
Manufacturing building 3,857 2,187 28 4,328 36 6,579 606 3/91 9/90
San Diego, California:
Office building 5,666 2,155 3,498 1,858 - 7,511 872 5/85 7/89
R&D buildings 4,817 2,122 - 4,038 48 6,208 1,170 11/84 1/84
R&D/office buildings 6,626 2,786 - 7,967 66 10,819 1,332 3/90 1/84
Chandler, Arizona:
Industrial buildings 1,600 760 - 2,942 48 3,750 872 9/86 6/85
UNIMPROVED LAND:
Chandler, Arizona:
Vacant land - 457 - - 4 461 - - 6/85
Tucson, Arizona:
46 Condominium sites - 220 - 24 20 264 - - 4/81
------- ------- -------- ------- ---- ------- ------
$34,382 $14,179 $4,879 $37,829 $427 $57,314 $7,702
======= ======= ======== ======= ==== ======= ======
</TABLE>
___________________
(a) The cost basis of real estate for Federal income tax purposes approximates
its gross carrying value, before accumulated depreciation and allowance for
estimated losses. The allowance for estimated losses of $4,413,000 at
November 30, 1994, was determined in accordance with the Company's policy
as described in Note 1 to the consolidated financial statements.
(b) Rental properties are depreciated on a straight-line basis over a 30-year
life (certain attachments are depreciated over a 10-year life). Changes in
accumulated depreciation for the three years ended November 30, 1994,
follows:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of year $6,233 4,545 $ 3,010
Charged to expense during the year 1,472 1,688 1,537
Deletions for property sold during the year and other (3) - (2)
------- ------- -------
Balance at end of year $7,702 $ 6,233 $ 4,545
======= ======= =======
(c) Changes in the carrying amount for the three years ended November 30, 1994, follows: 1994 1993 1992
---- ---- ----
Balance at beginning of year $56,644 $56,182 $55,024
Additions: Improvements 673 464 1,006
Capitalized interest and property taxes - - 167
Deductions: Other (3) (2) (15)
------- ------- -------
Balance at end of year 57,314 $56,644 $56,182
======= ======= =======
</TABLE>
-17-
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
- ------------------------------------------------------------------------
Financial Disclosure
- --------------------
There have been no changes in, or disagreements with, independent accountants on
matters of accounting principles or practices or of financial disclosure.
PART III
Item 10. Directors and Executive Officers of the Registrant
- ------------------------------------------------------------
Director information is incorporated herein by reference to the Company's
definitive Proxy Statement dated February 14, 1995, for the annual meeting of
shareholders to be held on March 3, 1995. There is no relationship by blood,
marriage, or adoption among the officers. All officers hold office at the
discretion of the Board of Directors. Executive officers of the Company are as
follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
J. Gregory Kasun 39 President, Chief Executive Officer, Director
Employed by the Company since 1989; President since November 1993, previously
CFO and Secretary. Formerly a Senior Manager with Price Waterhouse
Harve Filuk 52 Vice President Real Estate Operations
Employed by the Company since 1975; Vice President since 1978
Katrina L. Thompson 36 Chief Financial Officer, Corporate Secretary
Employed by the Company since 1991; CFO and Secretary since November 1993,
previously Controller. Formerly an Audit Senior wit h Price Waterhouse
</TABLE>
Item 11. Executive Compensation
- --------------------------------
Incorporated herein by reference to the Company's definitive Proxy Statement
dated February 14, 1995, for the annual meeting of shareholders to be held on
March 3, 1995.
Item 12. Security Ownership of Certain Beneficial Owners and Management
- ------------------------------------------------------------------------
Incorporated herein by reference to the Company's definitive Proxy Statement
dated February 14, 1995, for the annual meeting of shareholders to be held on
March 3, 1995.
Item 13. Certain Relationships and Related Transactions
- --------------------------------------------------------
Incorporated herein by reference to the Company's definitive Proxy Statement
dated February 14, 1995, for the annual meeting of shareholders to be held on
March 3, 1995.
-18-
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
- --------------------------------------------------------------------------
(a) 1. Financial Statements
--------------------
The financial statements and financial statement schedules listed in
the index under Item 8 "CONSOLIDATED FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA" are filed as part of this annual report.
2. Exhibits
--------
(23) Consent of Independent Accountants
(27) Financial data schedules
(b) Reports on Form 8-K
-------------------
November 10, 1994 -- Filed for Item 5 Other Events. The Company
announced a preliminary agreement to sell substantially all of its
real estate assets to Bedford Property Investors, Inc.
January 9, 1995 -- Filed for Item 5 Other Events. The Company
announced a Definitive Agreement to sell substantially all of its
real estate assets to Bedford Property Investors, Inc.
February 3, 1995 -- Filed for Item 5 Other Events. The Company
announced that the proposed sales transaction with Bedford Property
Investors, Inc. had been terminated.
-19-
<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 Annual Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
MISSION WEST PROPERTIES
---------------------------------
Registrant
DATE: February 14, 1995 /s/ J. GREGORY KASUN
---------------------------------
J. Gregory Kasun
President, Chief Executive Officer & Director
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ KATRINA L. THOMPSON Chief Financial Officer and Secretary February 14, 1995
- --------------------------------- (Principal Financial and Accounting Officer)
Katrina L. Thompson
/s/ MICHAEL M. EARLEY Director February 14, 1995
- ---------------------------------
Michael M. Earley
/s/ MARK G. FOLETTA Director February 14, 1995
- ---------------------------------
Mark G. Foletta
/s/ J. GREGORY KASUN Director February 14, 1995
- ---------------------------------
J. Gregory Kasun
/s/ WILLIAM E. NELSON Director February 14, 1995
- ---------------------------------
William E. Nelson
/s/ JOHN C. STISKA Director February 14, 1995
- ---------------------------------
John C. Stiska
/s/ RICHARD R. TARTRE Director February 14, 1995
- ----------------------------------
Richard R. Tartre
/s/ BYRON B. WEBB, JR. Director February 14, 1995
- ----------------------------------
Byron B. Webb, Jr.
</TABLE>
20
<PAGE>
Exhibit 23
Consent of Independent Accountants
----------------------------------
We hereby consent to the incorporation by reference in the Registration
Statement on Forms S-8 (Numbers 2-68161, 33-16154, 33-40664, and 33-40665) of
Mission West Properties of our report dated January 13, 1995 appearing on page 8
of this Form 10-K.
PRICE WATERHOUSE LLP
San Diego, California
February 14, 1995
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheets as of November 30, 1994 and the related consolidated
statements of operations for the year then ended and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1994
<PERIOD-END> NOV-30-1994
<CASH> 4,277
<SECURITIES> 0
<RECEIVABLES> 267
<ALLOWANCES> 179
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 322
<DEPRECIATION> 304
<TOTAL-ASSETS> 50,963
<CURRENT-LIABILITIES> 0
<BONDS> 34,382
<COMMON> 20,081
0
0
<OTHER-SE> (5,361)
<TOTAL-LIABILITY-AND-EQUITY> 50,963
<SALES> 0
<TOTAL-REVENUES> 9,297
<CGS> 0
<TOTAL-COSTS> 3,692
<OTHER-EXPENSES> 6,400
<LOSS-PROVISION> 59
<INTEREST-EXPENSE> 3,088
<INCOME-PRETAX> (3,883)
<INCOME-TAX> (1,500)
<INCOME-CONTINUING> (2,383)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 440
<NET-INCOME> (1,943)
<EPS-PRIMARY> (1.32)
<EPS-DILUTED> (1.32)
</TABLE>
