<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K 405
<TABLE>
<S> <C>
- -Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (Fee Required)
For the fiscal year ended December 31, 1995 Commission file number 1-9524
BURNHAM PACIFIC PROPERTIES, INC.
--------------------------------
(Exact name of Registrant as specified in its Charter)
California 33-0204162
- ------------------------------------------ -------------------------------
(State of other jurisdiction of incorporation) (IRS Employer Identification No.)
610 West Ash Street, San Diego, California 92101
- ------------------------------------------ -------------------------------
(Address of principal executive offices) (Zip Code)
(619) 652-4700
--------------
Registrant's telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class On Which Registered
- ------------------- -------------------
Common Stock, No Par Value New York Stock Exchange
8-1/2% Convertible Debenture Due 2002 New York Stock Exchange
- ------------------------------------- -----------------------
Securities registered pursuant to Section 12(g) of the Act:
None
----
</TABLE>
- --------------------------------------------------------------------------------
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
----- -----
- --------------------------------------------------------------------------------
Indicated 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 this
Form 10-K [X]
- --------------------------------------------------------------------------------
At March 27, 1996 the aggregate market value of the Registrant's shares of
common stock, no par value, held by non-affiliates of the Registrant was
$183,625,609.
- --------------------------------------------------------------------------------
There were 17,081,452 shares of common stock outstanding at March 27, 1996.
- --------------------------------------------------------------------------------
Part III incorporates certain provisions of the Registrant's Proxy
Statement for its 1996 Annual Meeting to be filed subsequently.
<PAGE>
ITEM 1. BUSINESS
Burnham Pacific Properties, Inc., a California corporation (the "Company"),
is a self-administered and self-managed Real Estate Investment Trust ("REIT").
The Company was formed in 1987 as the successor to a publicly-traded real estate
limited partnership which was organized in 1963.
The Company's mission is the ownership, management, acquisition,
development and redevelopment of retail shopping centers in California. As of
December 31, 1995, the Company owned 16 completed and operating retail shopping
centers, and had interests in 5 retail shopping centers in various stages of
development. The Company also owned 7 completed and operating office/industrial
properties which were considered non-strategic (See Item 2 - Properties). It is
the Company's intent to dispose of the non-strategic properties in the future as
market conditions permit.
On September 28, 1995 the Company and various persons affiliated with The
Martin Group of Companies, Inc., a San Francisco-based real estate development
firm owned by J. David Martin, executed definitive documents relating to the
Company's acquisition of a portfolio of six retail properties in the San
Francisco Bay area (the "Martin Properties"). On October 1, 1995, Mr. Martin
became President and Chief Executive Officer of the Company and a member of the
Company's Board of Directors.
The six Martin Properties consist of one completed retail center, one
center currently under construction, and four properties (the "Development
Properties"), to which the Martin Group affiliates owned development rights and
that are in various stages of pre-development.
The acquisition vehicles for the six Martin Properties are six separate
limited partnerships of which the Company is general partner and affiliates of
The Martin Group are the limited partners. Each of the partnership agreements
contemplates that the Company will acquire or develop a specified Martin
Property through the relevant partnership and that upon completion and
stabilization of the Property the Company will receive an initial 10% annual
return on its investment. Under the terms of the agreements entered into on
September 28, 1995, the Martin Group affiliates have contributed all of their
interest in the relevant Martin Properties in exchange for limited partnership
units in their respective partnerships. At the closing of the completed and
operating retail center, the Company paid approximately $1,400,000 of cash to
acquire minority interests and as general partner of the relevant partnership
became responsible for mortgage indebtedness of approximately $7,132,000 secured
by such Property. For the Property currently under construction, the
partnership will only become effective upon completion of construction and
stabilization of net operating income. At such time that partnership will
become responsible for mortgage indebtedness of approximately $19,200,000
secured by such Property. Upon the closing of the acquisition of the
development rights for each of the Development Properties, the Company became
obligated to contribute funds to the partnership sufficient to reimburse the
Martin Group for its out-of-pocket costs with respect to the relevant
Development Property and thereafter to make further contributions to the
partnership to fund the completion of the Property. The Board of Directors of
the Company (exclusive of Mr. Martin) has the authority to determine not to
proceed with the commencement of construction of a Development Property, in
which event the Martin Group affiliates would have the option to reacquire the
Property at the Company's cost.
<PAGE>
The partnership agreement for the Property currently under construction and
each of the Development Properties provides that upon completion of the
Property, the annualized stabilized net operating income of the Property will be
multiplied by 10 in order to arrive at the completed value of the Property, the
cost of construction and other project costs will be deducted from such
completed value in order to "value" the equity interests of the limited partners
in the Property, and such equity interest will be stated as a number of limited
partnership units determined by dividing such limited partners' equity by $16.
The actual value of such limited partnership units is intended to be the market
value of an equivalent number of shares of the Company's Common Stock, inasmuch
as each holder of limited partnership units will have the right to "put" such
units to the partnership at the then market value of an equivalent number of
Company shares. Upon the exercise of such "put", the Company has the option of
exchanging such units for Company shares on a 1-for-1 basis.
The limited partnership that acquired the completed retail center issued
limited partnership units exchangeable for 41,878 shares of Common Stock in
consideration for the interests of the Martin Group affiliates in the Property.
At December 31, 1995, these operating partnership units had a cost basis of
approximately $434,000 and are reflected as minority interest in the
accompanying financial statements. Current estimates of the total project cost,
net operating income and the resulting "value" of the Martin Group affiliates'
equity interest in the Property currently under construction and each of the
Development Properties were made as of September 28, 1995, and based upon such
estimates each partnership agreement specifies the maximum number of units that
may be issued to the limited partners of that partnership, and the Board of
Directors of the Company has accordingly reserved the same maximum number of
shares of Common Stock that may be issued pursuant to the exchanges for limited
partnership units described above. If the actual resulting equity is determined
to be less than originally estimated (either because project costs are higher
than estimated or because stabilized net operating income is less than estimated
or both), then the number of limited partnership units - and the corresponding
number of Company shares for which such units may be exchanged - will be
reduced. Other than to reflect a stock split or other capital adjustment of the
shares of Common Stock of the Company, under no circumstances can the number of
units be increased above the number specified in the applicable partnership
agreement. The Board of Directors of the Company has reserved a maximum of
1,915,000 Company shares for issuance upon exchange of the maximum number of
1,915,000 limited partnership units that may be issued with respect to all six
Martin Properties.
On November 29, 1995, the Company announced that its Board of Directors had
formally adopted a new strategic plan ("Plan") for the Company intended to
maximize total return to shareholders by focusing on growth through the
acquisition, development, redevelopment and management of targeted retail
properties. As a part of this Plan, the Board of Directors also approved a plan
to dispose of certain non-retail, non-core properties that lack strategic fit,
with the objective of redeploying those assets into more attractive retail
properties.
<PAGE>
The disposition plan was initiated with the December 1995 sale of the
Company's interest in the Beverly Garland Holiday Inn Hotel. In the fourth
quarter of 1995, the Company recognized one-time charges of $24,920,000 related
to the implementation of the Plan. See Item 7 - Management's Discussion and
Analysis of Financial Condition and Results of Operations.
As a part of the overall Plan, the Company determined that it was
appropriate to internalize the management of its properties which were
previously managed by an outside property management firm. The internalization
process was completed on December 31, 1995.
Also in support of the Plan, the Board of Directors determined that a
reduction in the dividend would assist the Company in accomplishing its
objectives and reduced the quarterly dividend from $.36 per share to $.25 per
share for payment on December 29, 1995 to shareholders of record as of December
15, 1995. This represents an annual dividend level of $1.00 per share, compared
to the prior annual dividend rate of $1.44 per share.
The Company operates so as to qualify as a Real Estate Investment Trust
("REIT") under Sections 856-860 of the Internal Revenue Code. Under those
sections of the Internal Revenue Code, the Company must distribute annually to
its stockholders at least 95% of its taxable income and must meet certain other
asset and income tests. REITs are subject to a number of organizational and
operational requirements. If the Company fails to qualify as a REIT in any
taxable year, the Company will be subject to federal income tax on its taxable
income at regular corporate rates.
The Company competes with developers, real estate companies, pension funds
and other real estate investors, many of which have greater financial resources
than the Company, in seeking land for development, and properties for
acquisition. There are many shopping centers that compete with the Company's
properties in attracting tenants to lease space. In addition, tenants at the
Company's properties face increasing competition from other shopping centers,
direct mail and telemarketing.
The Company currently employs 30 people. Its principal executive offices
are located at 610 West Ash Street, Suite 1600, San Diego, California, 92101,
and its telephone number is (619) 652-4700.
<PAGE>
ITEM 2. PROPERTIES
The retail properties consist of 13 neighborhood/community shopping
centers, 1 promotional/power center, and 2 factory outlet centers containing in
the aggregate approximately 2.3 million square feet of total gross leasable area
("GLA"). The majority of these properties are located in Southern California,
including 12 in San Diego County, 1 in Los Angeles County, and 1 in Orange
County. Two retail properties are located in Northern California.
The retail properties range in size from approximately 36,722 square feet
to approximately 516,538 square feet. They are designed to attract local and
regional area customers and are typically anchored by one or more nationally or
regionally known retailers. Depending on the market focus of a specific
property, major retailers at a property may include value-oriented discount
stores, supermarkets, drugstores, membership warehouses, shops or well-known
specialty retailers. A number of the properties contain an entertainment
component such as a theater multiplex.
The non-strategic properties consist of 7 office/industrial properties, 6
located in San Diego County and 1 in Orange County. Five of these properties
are single tenant facilities ranging in size from approximately 28,600 square
feet and 338,485 square feet. Two are multi-tenant office facilities of
approximately 101,920 square feet and approximately 117,128 square feet.
Twenty of the properties are owned by the Company in fee and 3 are held by
the Company under long-term ground leases expiring at various dates through
2035. The Company leases its properties to approximately 427 different tenants.
Overall occupancy of properties owned by the Company at December 31, 1994
remained at 94% during calendar 1995. No single tenant accounts for as much as
10% of the Company's current scheduled revenues.
The following table sets forth the completed, operating properties owned by
the Company at December 31, 1995.
<TABLE>
<CAPTION>
PERCENT NET DECEMBER 31, 1995
OWNED BY YEAR RENTABLE PERCENT
COMPANY ACQUIRED SQUARE FEET LEASED PRINCIPAL TENANTS (LEASE EXPIRATION DATE)
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
RETAIL PROPERTIES
The Plaza at Puente Hills 100% 1993 516,538 92% IKEA (10/31/07)
City of Industry Circuit City (1/31/08)
AMC Theatres (11/30/07)
Smart & Final (11/30/11)
Office Depot (8/31/12)
San Diego Factory 100% 1992 254,400 93% Nike (5/31/04)
Outlet Center 1993 Levi's (1/31/01)
San Ysidro Mikasa (12/27/98)
Van Heusen (12/31/98)
K-Mart (8/31/06)
Point Loma Plaza 100% 1989 213,229 96% Vons (12/31/08)
San Diego (Point Loma) Sports Chalet (11/20/97)
Millers Outpost (1/31/08)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PERCENT NET DECEMBER 31, 1995
OWNED BY YEAR RENTABLE PERCENT
COMPANY ACQUIRED SQUARE FEET LEASED PRINCIPAL TENANTS (LEASE EXPIRATIONS)
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Pacific West Outlet Ctr. 100% 1993 202,795 100% Liz Claiborne (5/31/06)
Gilroy Nike (1/31/05)
Levi's (8/31/01)
Mikasa (1/31/02)
Miramar Business Plaza 100% 1985 185,930 87% Oak 'N Brass (7/31/01)
San Diego (Mira Mesa) 1991 Krause's Sofa Factory (2/28/03)
Mesa Shopping Center 100% 1984 142,532 93% Lucky Stores (11/30/09)
San Diego (Mira Mesa) Thrifty Drugs (5/31/99)
McDonald's (6/16/99)
Wiegand Plaza II 100% 1986 110,212 85% AMC Theatres (12/31/02)
Encinitas 1988 TJ Maxx (3/31/05)
1990 Burger King (8/31/02)
La Mancha Shopping 98% 1988 103,904 100% Ralphs Supermarket (4/30/99)
Center Thrifty Drugs (5/31/99)
Fullerton Marriott Corp. (Carrows) (12/31/98)
Independence Square 100% 1983 92,627 97% Ethan-Allen Interiors (11/30/14)
San Diego (Kearny Mesa)
Santee Village Square 100% 1985 80,995 92% AMC Theatres (12/31/98)
Santee Family Fitness (4/30/05)
Poway Plaza 100% 1988 71,560 87% Thrifty Drugs (5/31/07)
Poway Wherehouse Records (1/31/98)
Kentucky Fried Chicken (10/31/02)
Navajo Shopping Ctr. 100% 1983 81,435 67% Thrifty Drugs (5/31/13)
San Diego (Lake Murray) 1993
1995
Village Station 100% 1984 57,673 86% Village Station Market (12/31/09)
La Mesa 1993 Round Table Pizza (12/31/96)
Ruffin Village 100% 1985 44,594 83% Carl's Jr. (10/23/99)
San Diego Subway (3/31/04)
(Kearny Mesa) Tam's Stationers (4/13/00)
Plaza Rancho Carmel 100% 1988 36,722 79% Graziano's Pizza (9/30/00)
San Diego ABC Daycare (12/31/02)
(Carmel Mtn. Ranch)
Richmond Shopping Ctr. 95% 1995 76,670 97% Walgreens (11/30/33)
Richmond, CA --------- FoodsCo (9/30/13)
Total Retail 2,271,816
---------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PERCENT NET DECEMBER 31, 1995
OWNED BY YEAR RENTABLE PERCENT
COMPANY ACQUIRED SQUARE FEET LEASED PRINCIPAL TENANTS (LEASE EXPIRATIONS)
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OFFICE/INDUSTRIAL PROPERTIES
Anacomp Building 100% 1992 338,485 100% Anacomp Regional Manufacturing/
Poway Engineering Facility (6/30/08) (1)
Bergen Brunswig Bldg. 100% 1992 175,000 100% Bergen Brunswig Corp. (3/31/00)
Orange
McDonnell Douglas Bldg. 100% 1987 159,854 100% McDonnell Douglas (Alcoa)
San Diego (7/14/96)(2)
(Rancho Bernardo)
Fireman's Fund Bldg. 100% 1989 117,128 95% Fireman's Fund (9/30/05)
San Diego CREDCO (9/13/98)
(Kearny Mesa)
Highlands Plaza 100% 1988 101,920 86% Laser Power Corp. (12/31/01)
San Diego Applied Retail Solutions (4/30/00)
(Del Mar Highlands)
IMED Buildings 100% 1987 49,284 100% IMED Corporation (3/21/97)
San Diego 1988
(Scripps Ranch)
Marcoa Building 100% 1989 28,600 100% Marcoa Publishing Company (9/30/99)
San Diego --------
(Sorrento Mesa)
Total Office/Industrial 970,271
-------
Total 3,242,087
---------
---------
</TABLE>
Notes:
(1) In January 1996, Anacomp Corporation filed for protection under Chapter 11
of the Bankruptcy Code and has subsequently entered into negotiations with
the Company to reduce its leased space by approximately 50 percent at
current lease rates for a reduced term.
(2) The Company has entered into an agreement to sell the McDonnell Douglas
building.
<PAGE>
The following table sets forth the indebtedness of the Company secured by
its properties at December 31, 1995.
<TABLE>
<CAPTION>
Principal
Balance
Outstanding Interest Annual
Property (1) 12/31/95 Maturity Date Rate Payment
- ------------ -------- ------------- ---- -------
<S> <C> <C> <C> <C>
The Plaza at Puente Hills $34,342,094 July 2001 (3) 7.98% (2) $3,235,128 (2)
Point Loma Plaza 16,312,026 December 1999 (3) 8.13 1,772,892
Bergen Brunswig Building 9,738,547 October 1999 (3) 8.38 912,096
Mesa Shopping Center 8,189,381 December 2001 (3) 10.00 911,976
Wiegand Plaza II 7,579,016 December 2001 (3) 10.00 977,328
Richmond Shopping Center 7,132,012 January 2005 (3) 9.50 755,280
Village Station 3,953,895 November 1996 (3) 9.38 415,596
San Diego Factory Outlet Center 3,161,633 September 2006 8.67 453,132
La Mancha Shopping Center 1,764,183 September 2004 7.75 282,120
----------- ----------
$92,172,787 $9,715,548
----------- ----------
----------- ----------
</TABLE>
Notes:
(1) Fireman's Fund Building, Poway Plaza, Santee Village and Pacific West Outlet
Center are jointly encumbered under the Company's secured revolving line of
credit agreement, which had $24,933,000 outstanding at December 31, 1995.
(2) Adjusted semi-annually at August 1 and February 1.
(3) Balloon payment at maturity.
For additional information concerning encumbrances secured by the Company's
properties, reference is made to Notes 2, 4 and 5 to the consolidated financial
statements.
THE PLAZA AT PUENTE HILLS represents 17.04% of the Company's total assets and
17.25% of the Company's total revenues as of December 31, 1995. Annual rentals
range from $7.20 to $52.96 per square foot. One tenant, IKEA Furniture, occupies
more than 10% of the rentable square footage (150,000 square feet) at a rental
of $1.1 million per annum, for a term ending in 2007, with four five-year
renewal options. The 1995 property tax rate was 1.97% resulting in a tax of
approximately $1,186,000 (including special assessments), substantially all of
which is reimbursed by tenants under their leases. Management believes that the
property is adequately covered by insurance.
During the period 1993 to 1995 this property has experienced the following a
average rental per square foot and occupancy percentage:
<TABLE>
<CAPTION>
Average Rental
Year-End Per Square Foot Occupancy %
-------- --------------- -----------
<S> <C> <C>
1993 $12.40 94%
1994 12.70 93
1995 12.77 92
</TABLE>
<PAGE>
The property was constructed in three phases from 1987 to 1992 and the
Company does not believe that operating data during the various construction
phases would be meaningful.
The following tabulation shows the expiration schedule of leases as of
December 31, 1995.
<TABLE>
<CAPTION>
Annual
No. leases Net Rentable Scheduled Rents % of
Expiring Square Feet (in thousands) Total Rent
-------- ----------- -------------- ----------
<S> <C> <C> <C> <C>
1996 7 19,232 $286 5%
1997 6 31,460 503 8
1998 10 24,710 399 7
1999 1 10,350 93 2
2000 9 28,638 498 8
2001 2 11,237 164 3
2002 3 17,795 408 7
2003 4 24,968 379 6
2004 1 6,500 177 3
2005+ 9 301,968 3,184 51
</TABLE>
THE PACIFIC WEST OUTLET CENTER represents 10.09% of the Company's total
assets and 11.17% of the Company's total revenues as of December 31, 1995.
Annual rentals range from $14 to $24 per square foot. No tenant leases more
than 10% of the total space. The 1995 property tax rate was 1.12% resulting in
a tax of approximately $485,000 (including special assessments), substantially
all of which is reimbursed by tenants under their leases. Management believes
that the property is adequately covered by insurance.
During the period 1993 to 1995 this property has experienced the following
average rental per square foot and occupancy percentage:
<TABLE>
<CAPTION>
Average Rental
Year-End Per Square Foot Occupancy %
-------- --------------- -----------
<S> <C> <C>
1993 $18.79 100%
1994 19.01 100
1995 19.45 100
</TABLE>
The property was constructed in 2 phases from 1990 to 1992 and the Company
does not believe that operating data during the various construction phases
would be meaningful.
<PAGE>
The following tabulation shows the expiration schedule of leases as of
December 31, 1995.
<TABLE>
<CAPTION>
Annual
No. leases Net Rentable Scheduled Rents % of
Expiring Square Feet (in thousands) Total Rent
-------- ----------- -------------- ----------
<S> <C> <C> <C> <C>
1996 22 82,465 $1,645 42%
1997 5 9,100 187 5
1998 7 17,275 371 9
1999 2 4,550 98 2
2000 12 31,625 686 17
2001 5 24,830 440 11
2002 3 14,700 258 7
2003 0 0 0 0
2004 0 0 0 0
2005+ 2 18,250 259 7
</TABLE>
DEVELOPMENT PROPERTIES
The Development Properties consist of one center currently under
construction which will be acquired by the Company upon completion of
construction and stabilization of net operating income, and four properties that
are in various stages of pre-development. The properties consist of 3
promotional/power centers, 1 neighborhood/community shopping center, and 1
entertainment dominated complex. These properties range in size from
approximately 180,000 square feet to approximately 350,000 square feet and are
all located in the San Francisco Bay area. The total project costs for the five
properties is estimated to be $180,000,000.
ENVIRONMENTAL
Under various federal, state and local laws, ordinances and regulations, an
owner or operator of real property may become liable for the costs of removal or
remediation of certain hazardous or toxic substances on or in its properties.
Such laws may impose such liability without regard to whether the Company knew
of, or was responsible for, the presence of such hazardous or toxic substances.
The costs of investigation, removal, or remediation of such substances may be
substantial and the presence of such substances, or the failure to properly
remediate such substances, may adversely affect the Owner's ability to sell such
real estate or to borrow using such real estate as collateral. In connection
with its development, ownership and operation of properties, the Company may be
potentially liable under such laws and may incur costs in responding to such
liabilities. No assurance can be given that any existing environmental studies
with respect to any of the Company's properties reveal all environmental
liabilities, that any prior owner or tenant of a property owned by the Company
did not create any material environmental condition not known to the Company,
that future laws, ordinances or regulations will not impose any material
environmental liability, or that a material environmental condition does not
otherwise exist as to any one or more of the Company's properties.
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
The Company is not presently involved in any material litigation nor, to
its knowledge, is any material litigation threatened against the Company or its
properties, other than routine litigation arising in the ordinary course of
business or which is expected to be covered by the Company's liability
insurance.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Common Stock of the Company is listed on the New York Stock Exchange under
the symbol "BPP". The following table sets forth the high and low sale prices
of the Common Stock, as reported by the New York Stock Exchange Composite Tape,
and the per share dividends paid by the Company for each calendar quarter during
1995 and 1994.
<TABLE>
<CAPTION>
Dividends
Quarter Ended High Low Paid
------------- ---- --- -----
<S> <C> <C> <C>
March 31, 1995 $13.38 $11.88 $.36
June 30, 1995 13.50 11.63 .36
September 30, 1995 14.50 11.50 .36
December 31, 1995 11.88 9.50 .25
March 31, 1994 19.13 17.00 .35
June 30, 1994 18.50 16.88 .35
September 30, 1994 17.63 15.75 .355
December 31, 1994 16.13 12.63 .36
</TABLE>
At December 31, 1995, there were approximately 4,074 holders of record of
the Company's Common Stock.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data is supplied
to shareholders in order to present significant data covering the last
five fiscal years and when combined with Management's Discussion and
Analysis of Financial Conditions and Results of Operations
(which is included elsewhere in this Annual Report)
provides an analysis of trends in Company size,
earnings, dividends, and scope of operations.
(in thousands except per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
OPERATING STATEMENT DATA
TOTAL REVENUES $ 48,669 $ 51,387 $ 41,179 $ 28,025 $ 24,838
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Income (Loss) From Operations $ (14,951) $ 13,164 $ 9,846 $ 1,058 $ 2,469
Gain on Sales of Real Estate 2,233
--------- --------- --------- --------- ---------
NET INCOME (LOSS) $ (12,718) $ 13,164 $ 9,846 $ 1,058 $ 2,469
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
NET INCOME (LOSS) PER SHARE $ (0.75) $ .84 $ .77 $ .13 $ .40
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
DIVIDENDS PAID $ 22,564 $ 22,723 $ 18,324 $ 11,880 $ 8,416
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
DIVIDENDS PAID PER SHARE $ 1.33 $ 1.415 $ 1.39 $ 1.36 $ 1.36
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
TAXABLE INCOME PER SHARE-
ORDINARY $ .59 $ .95 $ .88 $ .52 $ .49
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
TAXABLE INCOME PER SHARE-
CAPITAL GAIN $ .17 $ -0- $ -0- $ -0- $ -0-
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
BALANCE SHEET DATA
Total Assets $ 327,770 $ 358,022 $ 360,262 $ 259,790 $ 189,786
Total Notes Payable $ 92,173 $ 89,799 $ 56,153 $ 59,622 $ 59,011
Line of Credit Advances $ 24,933 $ 26,000 $ 64,100 $ 19,100 $ 44,809
Convertible Subordinated
Debentures $ 25,700 $ 25,700 $ 42,354 $ 80,530 $ 16,173
Number of Shares Outstanding at
Year End 17,082 16,905 14,987 8,838 6,295
Weighted Average Number of Shares 17,016 15,732 12,768 8,292 6,170
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS:
OVERVIEW
The following discussion should be read in conjunction with the consolidated
financial statements and notes thereto appearing elsewhere in this Annual
Report. Historical results and percentage relationships set forth in the
consolidated statements of income contained in the consolidated financial
statements, including trends which might appear, should not be taken as
indicative of future operations.
The Company's mission is the development, construction, acquisition, and
operation of retail shopping centers in California. As of the date of this
report, the Company owned 16 completed and operating retail shopping centers,
and had interests in 5 retail shopping centers in various stages of development.
The Company also owned 7 completed and operating office/industrial properties
which are recently considered non-strategic. It is the Company's intent to
dispose of the non-strategic properties in the future as market conditions
permit.
RESULTS OF OPERATIONS
Comparison of 1995 to 1994
In the fourth quarter of 1995, the Company announced that its Board of Directors
had approved a plan to dispose of a portion of the Company's office portfolio
and to redeploy the proceeds from disposition into target retail properties. As
a result of the decision to dispose of these properties, the Company took a one-
time non-cash charge of $21,373,000 to write those assets down to their fair
market value. The Company took additional one-time charges of $1,047,000 to
write down goodwill, outdated computer equipment and a discontinued investment
in a real estate advisor, and $2,500,000 related to the implementation of the
Company's new strategic plan. The $2,500,000 charge includes a non-cash
reduction in revenues of $1,278,000 primarily as a result of a change in the
formula used to estimate common area maintenance reimbursements and percentage
rents; and $975,000 in one-time general and administrative expenses related to
the transition to a new management team, studies by new management of various
organizational and operating policies of the Company, and organizational and
strategic changes resulting from those studies including the internalization of
property management and the installation of a new property management operating
system.
Including these charges, NET INCOME decreased $25,882,000 from a net income of
$13,164,000 in 1994 to a net loss of $12,718,000 in 1995. If the one-time
charges were excluded, the Company would have reported net income before gain on
sales of real estate of $9,969,000 in 1995 as compared to $13,164,000 in 1994.
The principal reasons for this decrease include increases in interest expense,
provision for bad debt, and depreciation and amortization, the sale of A-Storage
in June 1995, and the changes in the formula used to estimate common area
maintenance reimbursements and percentage rents. The principal reasons for this
decrease are discussed in the following paragraphs.
<PAGE>
REVENUES decreased $2,718,000 to $48,669,000 in 1995 from $51,387,000 in 1994.
This decrease is primarily due to the changes in estimation techniques
previously mentioned, recognition in 1994 of certain 1993 tenant percentage
rents that were not estimatable at the end of 1993, and a decrease in other
percentage rents and sale of the A-Storage facility in 1995.
RENTAL OPERATING EXPENSE decreased $114,000 to $12,067,000 in 1995 from
$12,181,000 in 1994. The decrease is primarily due to the sale of A-Storage.
THE PROVISION FOR BAD DEBT increased $670,000 to $972,000 in 1995 from $302,000
in 1994. This increase is primarily attributable to higher than normal credit
problems amongst smaller tenants and a decision by the Company to increase the
general provision for bad debt by $150,000.
INTEREST EXPENSE increased $378,000 to $11,960,000 in 1995 from $11,582,000 in
1994. The increase is primarily attributable to a higher short-term interest
rate environment for much of 1995 and slightly higher average outstandings under
the Company's lines of credit.
DEPRECIATION AND AMORTIZATION EXPENSE increased $1,153,000 to $13,117,000 in
1995 from $11,964,000 in 1994. The increase reflects additional depreciation
expense for rehabilitations of existing properties during 1994 and 1995.
GENERAL AND ADMINISTRATIVE EXPENSE increased $890,000 to $3,084,000 in 1995 from
$2,194,000 in 1994. The increase reflects the previously mentioned one-time
charges.
In July 1995, the Company disposed of its A-Storage facility. Proceeds from the
disposition totaled $2,619,000, resulting in a gain of $1,428,000. In December
1995, the Company sold its interest in Beverly Garland's Holiday Inn Hotel.
Proceeds from the sale totaled $10,000,000 resulting in a gain of $805,000.
Proceeds from these sales were used to reduce the Company's line of credit.
The Company considers FUNDS FROM OPERATIONS (FFO) to be a relevant supplemental
measure of the performance of an equity REIT since such measure does not
recognize depreciation and certain amortization expenses as operating expenses.
Management believes that reductions for these charges are not meaningful in
evaluating income-producing real estate, which historically has not depreciated.
FFO does not represent cash generated from operating activities in accordance
with generally accepted accounting principles and is not necessarily indicative
of cash available to fund cash needs and 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.
During 1995, the Company reported that FFO decreased $4,542,000 to $20,586,000
from $25,128,000 in 1994. The principal reasons for this decrease include
increases in interest expense and the provision for bad debt, the sale of the A-
Storage facility, changes in accounting estimation techniques, and a decrease in
tenant percentage rents. If the one-time charges were excluded, the Company
would have reported FFO of $23,086,000 in 1995, a decrease of $2,042,000 from
1994.
<PAGE>
Comparison of 1994 to 1993
NET INCOME increased $3,318,000 to $13,164,000 from $9,846,000 in 1993. This
improvement was primarily attributable to property acquisitions during the
latter half of 1993. The principal reasons for this improvement are discussed
in the following paragraphs.
REVENUES increased $10,208,000 to $51,387,000 in 1994 from $41,179,000 in 1993.
This increase resulted primarily from the combined effect of shopping center
acquisitions (two new centers were purchased, along with additional interests in
three partially owned centers and two free standing buildings adjacent to an
existing center) and minor increases in occupancy and rental rates at existing
properties.
RENTAL OPERATING EXPENSE increased $2,989,000 to $12,181,000 in 1994 from
$9,192,000 in 1993. This increase was primarily due to the property
acquisitions during 1993 which gave rise to an overall increase in real estate
taxes, and operating and maintenance expenses.
INTEREST EXPENSE increased $1,099,000 to $11,582,000 in 1994 from $10,483,000 in
1993. This increase resulted from the combined effect of an increase in
mortgage debt and an increase in interest rates in 1994 as compared to 1993.
These increases were offset in part by a decrease in outstanding borrowings
under the Company's line of credit and the conversion of a portion of the
convertible debentures.
DEPRECIATION AND AMORTIZATION EXPENSE increased $2,534,000 to $11,964,000 in
1994 from $9,430,000 in 1993. The increase was due to the property acquisitions
completed during the latter half of 1993.
During 1994, the Company reported that FFO increased $5,852,000 to $25,128,000
from $19,276,000 in 1993. This increase was primarily the result of property
acquisitions during the latter half of 1993.
FUTURE EFFECT OF CERTAIN EVENTS
As described elsewhere in this report, during 1995 the Company's Board of
Directors took a number of steps designed to concentrate the Company's future
activities on retail properties. These steps included the acquisition of
interests in six retail centers, five of which remain to be developed, the sale
of its A-Storage and Beverly Garland's Holiday Inn interests, and the decision
to sell its office/industrial properties over time and to redeploy the proceeds
into retail properties. The Company is also undertaking planned rehabilitations
at its Plaza at Puente Hills and Navajo Shopping Center that will involve
temporary vacancies and reduced rental income during the rehabilitation period.
During 1995, McDonnell Douglas announced that it will not renew its lease from
the Company upon expiration in July 1996. Current rent of $234,000 per month is
well above market, and even though the Company has entered into an agreement to
sell the McDonnell Douglas building, redeployment of the sales proceeds is not
expected to produce a comparable
<PAGE>
level of replacement income. In January 1996, Anacomp Corporation filed for
protection under Chapter 11 of the Bankruptcy Code and has subsequently entered
into negotiations with the Company to reduce its leased space by approximately
50 percent at current lease rates for a reduced term. Depending upon the
outcome of negotiations relating to the remaining space, revenues for 1996 and
beyond could be adversely affected.
While the Company believes that the property writedowns that it took in 1995
reflect the current fair market values of each affected property, there can be
no assurance that further losses may not be recognized upon the actual sale of
any such property or that further writedowns may not be necessary to reflect
changing market conditions prior to sale. Further, in addition to possible
additional loss - or gain - on the redeployment of the proceeds of non-strategic
properties that are sold, the impact on the Company's operations will depend
upon the amount of sales proceeds from each asset sale and the timing and
parameters of reinvestment opportunities.
While management is optimistic that its acquisition of the six retail
development projects in 1995 will positively impact the Company's revenues, net
income and FFO, such impact is expected to be minimal for 1996 as only one such
property is fully operational today. Two properties are expected to be
completed and operational in the third and fourth quarters of 1996, and
completion of the development of the remaining three properties is not
anticipated until 1997. Management also notes the risks inherent in the
development of the properties and that actual costs of completion may exceed
budgeted costs and/or that actual rental revenues upon completion may be less
than anticipated.
In sum, management believes that 1996 will be a period of transition towards
greater focus on the development, ownership and operation of retail properties.
Because of the uncertainties involved in such transition, however, management is
not now in a position to estimate the effects on operating results or net income
for 1996.
LIQUIDITY
The Company anticipates that cash flow from operating activities will continue
to provide adequate capital for all principal payments on notes payable,
recurring tenant improvements, and dividend payments in accordance with REIT
requirements and that cash on hand, available borrowings under credit
facilities, proceeds from sales of non-strategic assets, and the use of project
financing, as well as other debt and equity alternatives, will be adequate to
provide the necessary capital to achieve growth.
Cash provided by operating activities and investing activities for 1995
increased to $26,597,000 as compared to $14,687,000 in 1994 primarily as a
result of the proceeds received from the sales of real estate during 1995.
The Company satisfied its REIT requirement of distributing at least 95% of
ordinary taxable income with dividend distributions of $22,564,000 in 1995.
Accordingly, federal income taxes were not incurred at the corporate level.
<PAGE>
CAPITAL RESOURCES
During 1995, the Company renegotiated its secured and unsecured credit
facilities to provide additional capacity of $15,000,000. Borrowings under the
facilities bear interest at rates of IBOR (the bank's international reference
rate) plus 1.75% or prime per annum and IBOR plus 2.00% or prime per annum,
respectively. As of December 31, 1995, approximately $25,000,000 was available
to be drawn under these facilities. These facilities in their present form, are
scheduled to mature on June 1, 1997.
At December 31, 1995, the Company's capitalization consisted of $142,806,000 of
debt and $164,496,000 of market equity (market equity is defined as shares
outstanding multiplied by the closing price of the common shares on the New York
Stock Exchange at December 31, 1995 of $9.63) resulting in a debt to total
market capitalization rate of .46 to 1.0. At December 31, 1995, the Company's
total debt consisted of $83,531,000 of fixed rate debt, including $25,700,000 of
convertible debentures and $59,275,000 of variable rate debt. The average rate
of interest on the fixed and variable rate debt was 8.8% and 7.8%, respectively,
at December 31, 1995.
During 1995, reinvested dividends under the Dividend Reinvestment Plan (the
"Plan") provided $2,546,000 of additional equity to the Company (222,894 shares
of Common Stock). During 1995, the Company suspended the optional cash payment
portion of the Plan.
It is management's intention that the Company have access to the capital
resources necessary to expand and develop its business. Accordingly, the
Company may seek to obtain funds through additional equity offerings or debt
financing in a manner consistent with its intention to operate with an
acceptable debt capitalization policy. The Company has on file with the
Securities and Exchange Commission a $200 million shelf registration statement
on Form S-3. This registration statement was filed for the purpose of issuing
either common stock or debentures for the purpose of repaying outstanding debt,
potential future acquisitions of commercial properties and for general corporate
purposes. As of December 31, 1995, no such issuance has occurred.
EFFECTS OF INFLATION
Substantially all of the Company's leases contain provisions designed to
mitigate the adverse impact of inflation. Such provisions include clauses
enabling the Company to receive percentage rentals based on tenant's gross
sales, which generally increase as prices rise, and/or escalation clauses, which
generally increase rental rates during the terms of the leases. Such escalation
clauses are often related to increases in the consumer price index or similar
inflation indices. Most of the Company's leases require the tenant to pay its
share of operating expenses, including common area maintenance, real estate
taxes and insurance, thereby reducing the Company's exposure to increases in
costs and operating expenses resulting from inflation. The Company periodically
evaluates its exposure to short-term interest rates and will, from time to time,
enter into interest rate protection agreements which mitigate, but do not
eliminate, the effect of changes in interest rates on its floating-rate loans.
<PAGE>
CAUTIONARY STATEMENT IDENTIFYING CERTAIN FACTORS THAT COULD AFFECT FUTURE
RESULTS.
Management's Discussion and Analysis of Financial Condition and Results of
Operations contains certain forward-looking statements that are subject to risk
and uncertainty. Investors and potential investors in the Company's securities
are cautioned that a number of factors could adversely affect the Company and
cause actual results to differ materially from those in the forward-looking
statements, including (a) the inability to lease currently vacant space in the
Company's properties; (b) decisions by tenants and anchor tenants who own their
space to close stores at the Company's properties; (c) the inability of tenants
to pay rent and other expenses; (d) tenant bankruptcies; (e) decreases in rental
rates available from tenants; (f) increases in operating costs at the Company's
properties; (g) lack of availability of financing for acquisition, development
and rehabilitation of properties by the Company; (h) increases in interest
rates; (i) a general economic downturn resulting in lower retail sales and
causing downward pressure on occupancies and rents at retail properties; as well
as (j) the adverse tax consequences if the Company were to fail to qualify as a
REIT in any taxable year and (k) the competitive factors described in "Item 1 -
Business" and (l) unexpected environmental liabilities including of the type
referred to in "Item 2 - Properties - Environmental" of this report.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying consolidated balance sheets of Burnham Pacific
Properties, Inc. as of December 31, 1995 and 1994, and the related consolidated
statements of income, stockholders' equity, and cash flows for each of the three
years in the period ended December 31, 1995. Our audits also included the
financial statement schedule listed in Item 14(a). These consolidated financial
statements and financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on the
consolidated financial statements and financial statement schedule 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, such financial statements present fairly, in all material
respects, the financial position of Burnham Pacific Properties, Inc. as of
December 31, 1995 and 1994, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1995, in conformity
with generally accepted accounting principles. Also, in our opinion, such
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly in all
material respects the information set forth herein.
//Deloitte & Touche LLP//
San Diego, California
March 11, 1996
<PAGE>
BURNHAM PACIFIC PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
(in thousands, except share amounts)
<TABLE>
<CAPTION>
ASSETS 1995 1994
------ ---- ----
<S> <C> <C>
Real Estate $367,088 $387,959
Less Accumulated Depreciation (54,388) (49,506)
--------- ---------
Real Estate-Net 312,700 338,453
Cash and Cash Equivalents 1,543 1,664
Receivables-Net 5,647 9,109
Other Assets 7,880 8,796
--------- ---------
Total $327,770 $358,022
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts Payable and Other $ 3,458 $ 1,877
Accrued Interest on Convertible Debentures 943 943
Tenant Security Deposits 969 932
Notes Payable 92,173 89,799
Convertible Debentures 25,700 25,700
Line of Credit Advances 24,933 26,000
--------- ---------
Total Liabilities 148,176 145,251
--------- ---------
Commitments and Contingencies
Minority Interest 434 -0-
--------- ---------
Stockholders' Equity
Preferred Stock, 5,000,000 Shares Authorized; No
Shares Issued or Outstanding
Common Stock, No Par Value, 40,000,000 Shares
Authorized; 17,081,670 and 16,905,276
Shares Outstanding at December 31, 1995
and 1994, Respectively 262,130 260,262
Notes Receivable-Directors' Stock Purchase (197)
Dividends Paid in Excess of Net Income (82,773) (47,491)
--------- ---------
Total Stockholders' Equity 179,160 212,771
--------- ---------
Total $327,770 $358,022
--------- ---------
--------- ---------
</TABLE>
See the Accompanying Notes
<PAGE>
BURNHAM PACIFIC PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
REVENUES 1995 1994 1993
-------- ---- ---- ----
<S> <C> <C> <C>
Rents $ 48,188 $ 51,026 $ 40,410
Interest 481 361 769
------------ ------------ ------------
Total Revenues 48,669 51,387 41,179
------------ ------------ ------------
COSTS AND EXPENSES
Interest 11,960 11,582 10,483
Rental Operating 12,067 12,181 9,192
Provision for Bad Debt 972 302 373
General and Administrative 3,084 2,194 1,855
Depreciation and Amortization 13,117 11,964 9,430
Impairments/Writedowns of Assets 22,420
------------ ------------ ------------
Total Costs and Expenses 63,620 38,223 31,333
------------ ------------ ------------
Income (Loss) from Operations Before
Gain on Sales of Real Estate (14,951) 13,164 9,846
Gain on Sales of Real Estate 2,233
------------ ------------ ------------
Net Income (Loss) $ (12,718) $ 13,164 $ 9,846
------------ ------------ ------------
------------ ------------ ------------
Net Income (Loss) Per Share $ (0.75) $ 0.84 $ 0.77
------------ ------------ ------------
------------ ------------ ------------
Weighted Average Number of Shares 17,016,354 15,731,552 12,767,606
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
See the Accompanying Notes
<PAGE>
BURNHAM PACIFIC PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the Years Ended December 31, 1995, 1994 and 1993
(in thousands, except share amounts)
<TABLE>
<CAPTION>
Notes
Receivable Dividends
Directors' Paid in
Common Stock Stock Excess of
Shares Amount Purchase Net Income Total
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1993 8,837,947 $123,333 $(29,454) $ 93,879
Issuance of Common Stock:
Public Offering-Net 3,450,000 64,231 64,231
Conversion of Debentures-
Net of Related Costs 2,206,069 34,671 34,671
Optional Cash Payments 178,113 3,141 3,141
Acquisitions of Real Estate 146,381 2,891 2,891
Dividend Reinvestment 133,828 2,319 2,319
Exercised Options 34,759 435 435
Net Income 9,846 9,846
Dividends Paid (18,324) (18,324)
---------- -------- -------- --------- ---------
Balance, December 31, 1993 14,987,097 $231,021 $(37,932) $193,089
Issuance of Common Stock:
Conversion of Debentures-
net of related costs 1,040,873 15,987 15,987
Optional Cash Payments 703,635 10,731 10,731
Dividend Reinvestment 161,363 2,488 2,488
Acquisitions of Real Estate 10,058
Exercised Options 2,250 35 35
Net Income 13,164 13,164
Dividends Paid (22,723) (22,723)
---------- -------- -------- --------- ---------
Balance, December 31, 1994 16,905,276 $260,262 $(47,491) $212,771
Issuance of Common Stock:
Dividend Reinvestment 222,894 2,546 2,546
Open Market Repurchase of
Common Stock (94,500) (1,279) (1,279)
Directors' Stock Purchase 48,000 601 (197) 404
Net Loss (12,718) (12,718)
Dividends Paid (22,564) (22,564)
---------- -------- -------- --------- ---------
Balance, December 31, 1995 17,081,670 $262,130 $ (197) $(82,773) $179,160
---------- -------- -------- --------- ---------
---------- -------- -------- --------- ---------
</TABLE>
See the Accompanying Notes
<PAGE>
BURNHAM PACIFIC PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1995, 1994 and 1993
(in thousands)
<TABLE>
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES: 1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Net Income (Loss) $ (12,718) $ 13,164 $ 9,846
Adjustments to Reconcile Net Income (Loss)
to Net Cash Provided by Operating Activities:
Impairments/Writedowns of Assets 22,420
Gain on Sales of Real Estate (2,233)
Depreciation and Amortization 13,117 11,964 9,430
Provision for Bad Debt 972 302 373
Changes in Other Assets and Liabilities:
Receivables and Other Assets 902 (4,791) (2,644)
Accounts Payable and Other Liabilities 1,581 (806) (2,277)
Tenant Security Deposits 37 (8) 184
----------- ---------- ----------
Net Cash Provided by Operating Activities 24,078 19,825 14,912
----------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for Acquisitions of Real Estate and
Capital Improvements (10,380) (5,939) (99,838)
Proceeds from Sales of Real Estate 12,619
Principal Payments on Notes Receivable 280 801 149
Advances for Notes Receivable (1,626)
----------- ---------- ----------
Net Cash Provided (Used) by Investing Activities 2,519 (5,138) (101,315)
----------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings Under Line of Credit Agreements 27,025 26,660 16,200
Repayments Under Line of Credit Agreements (28,092) (29,760) (11,200)
Principal Payments of Notes Payable (4,758) (1,354) (31,881)
Open Market Repurchase of Stock (1,279)
Repayments on Notes Receivable-
Directors' Stock Purchase 404
Dividends Paid (22,564) (22,723) (18,324)
Dividend Reinvestment 2,546 2,488 2,319
Issuance of Stock, Net 10,766 67,807
Proceeds From Issuance of Notes Payable 61,953
Issuance of Convertible Debentures-Net of
Related Costs (1,631)
----------- ---------- ----------
Net Cash Provided (Used) by Financing Activities (26,718) (13,923) 85,243
----------- ---------- ----------
Net Increase (Decrease) in Cash and Cash Equivalents (121) 764 (1,160)
Cash and Cash Equivalents at Beginning of Year 1,664 900 2,060
----------- ---------- ----------
Cash and Cash Equivalents at End of Year $ 1,543 $ 1,664 $ 900
----------- ---------- ----------
----------- ---------- ----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BURNHAM PACIFIC PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1995, 1994 and 1993
(in thousands)
(continued)
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION: 1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Cash Paid During the Year for Interest
(Net of Amounts Capitalized) $11,930 $12,450 $11,714
------- ------- -------
------- ------- -------
SUPPLEMENTAL DISCLOSURES OF
NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Notes Payable Assumed $ 7,132 $ 6,459
Operating Partnership Units Issued
in Connection with Real Estate Acquisition 434
Other 1,838 400
Reduction of Receivables in Connection
With Real Estate Acquisitions 2,922
Common Stock Issued in Connection
With Real Estate Acquisitions 2,891
------- -------- -------
Fair Value of Real Estate Acquired $ 9,404 $ -0- $12,672
------- ------- -------
------- ------- -------
Conversion of Debentures into Common Stock $ -0- $16,654 $36,545
------- ------- -------
------- ------- -------
Notes Receivable-Directors' Stock Purchase $ 601 $ -0- $ -0-
------- ------- -------
------- ------- -------
</TABLE>
See the Accompanying Notes
<PAGE>
BURNHAM PACIFIC PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Burnham Pacific Properties, Inc. (the "Company") is an equity real estate
investment trust ("REIT") which owns, operates and develops retail properties in
California. The Company's properties consist of 16 retail centers, 5 single
tenant office/industrial buildings and 2 multi-tenant office buildings.
Eighteen of these properties are located in San Diego County, two in Orange
County, one in Los Angeles County, one in Santa Clara County and one in Contra
Costa County. In addition, the Company has interests in 5 retail shopping
centers in various states of development. (See Note 3)
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
the Company and all majority-owned partnerships. All significant intercompany
balances and transactions have been eliminated in consolidation.
Real Estate
Real Estate is stated at cost or, in the case of real estate which
management believes is impaired, at the lower fair value of such properties.
Additions, renovations and improvements are capitalized. Maintenance and
repairs which do not extend asset lives are expensed as incurred. Depreciation
is computed using the straight-line method over estimated useful lives ranging
from 14 to 30 years for buildings, 2 to 17 years for improvements, and 3 to 10
years for furniture, fixtures and equipment.
Amortization
Deferred loan fees, direct lease costs and certain other costs are
amortized using the straight-line method over the related estimated life.
Income Taxes
Income taxes have not been provided as the Company believes that it has met
all requirements in 1995, 1994, and 1993 to qualify as a REIT under Internal
Revenue Code Sections 856-860 including the distribution of at least 95% of
ordinary taxable income to stockholders. Taxable income differs from net income
for financial reporting purposes principally because of differences in the
timing of recognition of interest, depreciation, rental revenue, and
Impairments/Writedowns of assets. The reported amounts of the Company's net
assets at December 31, 1995 was less than their tax basis for Federal purposes
by approximately $19,158,000.
<PAGE>
Net Income Per Share
Net income per share is calculated using the weighted average number of
shares outstanding during each year.
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include
cash and certificates of deposit with original maturities of less than 90 days.
Financial Instruments
The carrying values reflected in the consolidated balance sheets at
December 31, 1995 and 1994 reasonably approximate the fair values for cash and
cash equivalents, receivables, accounts payable, and line of credit advances.
In making such assessment, the Company has utilized discounted cash flow
analyses, estimates, and quoted market prices as appropriate. The Company
estimates that the fair value of the Convertible Debentures at December 31, 1995
is lower than their carrying value by approximately $900,000 and the fair value
of notes payable is higher than their carrying value by approximately
$2,600,000. At December 31, 1994, the Company estimated that the fair value of
the Convertible Debentures was lower than their carrying value by approximately
$3,400,000 and the fair value of notes payable was higher than their carrying
value by approximately $2,200,000.
Accounting for Impairments
In the fourth quarter of 1995, the Company adopted statement of accounting
standards number 121 (FAS 121), "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of." FAS 121 requires that
assets to be held and used be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of the asset in question may
not be recoverable (see Note 7).
Reclassifications
Certain of the 1994 and 1993 amounts have been reclassified to conform to
1995 presentation.
<PAGE>
2. REAL ESTATE
Real Estate is summarized as follows (in thousands):
<TABLE>
<CAPTION>
December 31,
1995 1994
---- ----
<S> <C> <C>
Retail Centers $260,177 $247,486
Office/Industrial Buildings 103,017 123,987
Retail Centers Under Development 2,691 0
Hotel 0 14,762
Other 1,203 1,724
-------- --------
Total Real Estate 367,088 387,959
Accumulated Depreciation (54,388) (49,506)
-------- --------
Real Estate - Net $312,700 $338,453
-------- --------
-------- --------
</TABLE>
The Real Estate is leased to tenants under leases expiring at various dates
through 2033. Certain of these leases contain provisions for rent increases
based on cost-of-living indices and certain leases contain renewal options of up
to 55 years. Future minimum rental income to be received by the Company under
the terms of these operating leases is as follows as of December 31, 1995 (in
thousands):
<TABLE>
<CAPTION>
<S> <C>
Year Ending December 31,
1996 $ 38,246
1997 34,439
1998 31,396
1999 29,902
2000 15,553
Later Years 106,369
--------
Total $255,905
--------
--------
</TABLE>
Certain real estate, with a net book value of $228,592,000 at December 31,
1995, is pledged as collateral for notes payable described in Note 4. In
addition, the notes are secured by assignments of rents on such real estate.
Certain real estate is located on land which is subject to noncancelable ground
leases expiring at various dates through 2035 with minimum annual lease payments
of approximately $406,000.
3. DEVELOPMENT PROPERTIES
On September 28, 1995 the Company and various persons affiliated with The
Martin Group of Companies, Inc., a San Francisco-based real estate development
firm owned by J. David Martin, executed definitive documents relating to the
Company's acquisition of a portfolio of six retail properties in the San
Francisco Bay area (the "Martin Properties"). On October 1, 1995, Mr. Martin
became President and Chief Executive Officer of the Company and a member of the
Company's Board of Directors.
<PAGE>
The six Martin Properties consist of one completed retail center, one
center currently under construction, and four properties (the "Development
Properties"), to which the Martin Group affiliates had development rights and
that are in various stages of pre-development.
The acquisition vehicles for the six Martin Properties are six separate
limited partnerships of which the Company is general partner and affiliates of
The Martin Group are the limited partners. Each of the partnership agreements
contemplates that the Company will acquire or develop a specified Martin
Property through the relevant partnership and that upon completion and
stabilization of the Property the Company will receive an initial 10% annual
return on its investment. Under the terms of the agreements entered into on
September 28, 1995, the Martin Group affiliates have contributed all of their
interest in the relevant Martin Properties in exchange for limited partnership
units in their respective partnerships. At the closing of the completed and
operating retail center, the Company paid approximately $1,400,000 of cash to
acquire minority interests and as general partner of the relevant partnership
became responsible for mortgage indebtedness of approximately $7,132,000 secured
by such Property. For the Property currently under construction, the
partnership will only become effective upon completion of construction and
stabilization of net operating income. At such time that partnership will
become responsible for mortgage indebtedness of approximately $19,200,000
secured by such Property. Upon the closing of the acquisition of the
development rights for each of the Development Properties, the Company became
obligated to contribute funds to the partnership sufficient to reimburse the
Martin Group for its out-of-pocket costs with respect to the relevant
Development Property and thereafter to make further contributions to the
partnership to fund the completion of the Property. The Board of Directors of
the Company (exclusive of Mr. Martin) has authority to determine not to proceed
with the commencement of construction of a Development Property, in which event
the Martin Group affiliates would have the option to reacquire the Property at
the Company's cost.
The partnership agreement for the Property currently under construction and
each of the Development Properties provides that upon completion of the
Property, the annualized stabilized net operating income of the Property will be
multiplied by 10 in order to arrive at the completed value of the Property, the
cost of construction and other project costs will be deducted from such
completed value in order to "value" the equity interests of the limited partners
in the Property, and such equity interest will be stated as a number of limited
partnership units determined by dividing such limited partners' equity by $16.
The actual value of such limited partnership units is intended to be the market
value of an equivalent number of shares of the Company's Common Stock, inasmuch
as each holder of limited partnership units will have the right to "put" such
units to the partnership at the then market value of an equivalent number of
Company shares. Upon the exercise of such "put", the Company has the option of
exchanging such units for Company shares on a 1-for-1 basis.
The limited partnership that acquired the completed retail center issued
limited partnership units exchangable for 41,878 shares of Common Stock in
consideration for the interests of the Martin Group affiliates in the Property.
At December 31, 1995, these operating partnership units had a cost basis of
approximately $434,000 and are reflected as minority interest in the
accompanying financial statements. Current estimates of the total project cost,
net operating income and the resulting "value" of the Martin Group affiliates'
equity interest in the Property currently under construction and each of the
Development Properties have been made, and based upon such estimates each
partnership agreement
<PAGE>
specifies the maximum number of units that may be issued to the limited partners
of that partnership, and the Board of Directors of the Company has accordingly
reserved the same maximum number of shares of Common Stock that may be issued
pursuant to the exchanges for limited partnership units described above. If the
actual resulting equity is determined to be less than originally estimated
(either because project costs are higher than estimated or because stabilized
net operating income is less than estimated or both), then the number of limited
partnership units - and the corresponding number of Company shares for which
such units may be exchanged - will be reduced. Other than to reflect a stock
split or other capital adjustment of the shares of Common Stock of the Company,
under no circumstances can the number of units be increased above the number
specified in the applicable partnership agreement. The Board of Directors of
the Company has reserved a maximum of 1,915,000 Company shares for issuance upon
exchange of the maximum number of 1,915,000 limited partnership units that may
be issued with respect to all six Martin Properties.
The total project cost (exclusive of partnership units representing the
equity interest of the limited partners) for the Property currently under
construction and all four Development Properties is estimated to be
$180,000,000.
4. NOTES PAYABLE
Mortgage notes are summarized as follows (in thousands):
<TABLE>
<CAPTION>
December 31,
1995 1994
---- ----
<S> <C> <C>
Mortgage notes at fixed rate of 7.75% to 10.00%
payable in monthly installments to 2006:
Insurance Companies $33,166 $33,896
Banks and Savings and Loan Associations 36,106 36,697
Pension Funds 22,901 16,070
Other 0 3,136
------- -------
Total Notes Payable $92,173 $89,799
------- -------
------- -------
</TABLE>
Principal maturities on the notes payable are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
Year Ending December 31,:
<S> <C>
1996 $ 5,785
1997 1,993
1998 2,121
1999 25,928
2000 1,789
Later Years 54,557
-------
Total $92,173
-------
-------
</TABLE>
<PAGE>
5. LINE OF CREDIT ADVANCES
The Company has a $40,000,000 revolving bank line of credit secured by
certain real estate on which outstanding borrowings during 1995 accrued interest
or IBOR (the bank's international reference rate) plus 1.75% or prime. At
December 31, 1995 and 1994, the Company had $24,933,000 and $21,000,000,
respectively, outstanding under this line at an average rate of approximately
7.56% and 8.24%, respectively.
In addition, the Company has a $10,000,000 unsecured line of credit with a
bank under which outstanding borrowings during 1995 accrued interest at IBOR
plus 2.00% or prime. At December 31, 1995 and 1994, $-0- and $5,000,000 were
outstanding, respectively.
Both of the Company's lines of credit expire in June 1997 and are subject
to various borrowing base and debt service coverage limitations including that
the ratio of dividends paid to "funds from operations" (net income plus
depreciation and amortization) must not exceed 95%.
6. CONVERTIBLE DEBENTURES
On March 6, 1992, the Company issued $75,000,000 of 8-1/2% Convertible
Debentures due 2002 at $1,000 per Debenture. The Debentures are convertible at
any time prior to maturity into shares of Common Stock at a conversion price of
$16 per share, subject to adjustment under certain conditions. On December 31,
1995, the last sale price of the Common Stock, as reported on the New York Stock
Exchange, was $9.63 per share. Through December 31, 1995, 3,081,238 shares were
issued as a result of the conversion of $49,300,000 of these Debentures.
7. IMPAIRMENTS/WRITEDOWNS OF ASSETS
During the fourth quarter 1995, the Company announced that its Board of
Directors had approved a plan to dispose of a portion of the Company's office
portfolio and to redeploy the proceeds from disposition into target retail
properties. As a result of the decision to dispose of these properties, the
Company took a one-time non-cash charge of $21,373,000 to write those assets
down to their fair market value of approximately $30,533,000 at December 31,
1995. Fair market value was based on estimated sales proceeds and discounted
cash flows for the related properties. In addition, the Company took additional
one-time charges of $1,047,000 to write down goodwill, outdated computer
equipment and a discontinued investment in a real estate advisor.
8. GAIN ON SALES OF REAL ESTATE
During 1995, the Company disposed of A-Storage Place and Beverly Garland's
Holiday Inn. Proceeds from the dispositions totaled approximately $12,619,000,
resulting in a gain of approximately $2,233,000. Such proceeds were used to
reduce borrowings under the Company's credit facilities.
<PAGE>
9. DIVIDEND DISTRIBUTIONS
Based on information provided by the Company's regular tax advisor, the
status of the dividends distributed for 1995, 1994 and 1993 for Federal income
tax purposes is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Taxable Portion:
Ordinary 44.4% 67.0% 63.2%
Capital Gain 12.4% -0- -0-
------ ------ ------
56.8% 67.0% 63.2%
Return of Capital 43.2% 33.0% 36.8%
------ ------ ------
TOTAL 100.0% 100.0% 100.0%
------ ------ ------
------ ------ ------
</TABLE>
10. PUBLIC OFFERINGS
During September 1993, the Company filed with the Securities and Exchange
Commission a $200,000,000 shelf registration statement on Form S-3. This
registration statement was filed for the purpose of issuing either Common Stock
or debentures for repaying outstanding debt, potential future acquisitions of
commercial real estate and general corporate purposes.As of December 31, 1995,
no issuances have occurred.
11. PRICE RANGE OF COMMON STOCK
<TABLE>
<CAPTION>
Market Quotations
Dividends
Quarter Ended High Low Paid
- ------------------------------------------------------------------
<S> <C> <C> <C>
March 31, 1993 $20.50 $15.75 $.34
June 30, 1993 20.63 18.38 .35
September 30, 1993 19.75 18.50 .35
December 31, 1993 20.88 16.13 .35
March 31, 1994 19.13 17.00 .35
June 30, 1994 18.50 16.88 .35
September 30, 1994 17.63 15.75 .355
December 31, 1994 16.13 12.63 .36
March 31, 1995 13.38 11.88 .36
June 30, 1995 13.50 11.63 .36
September 30, 1995 14.50 11.50 .36
December 31, 1995 11.88 9.50 .25
</TABLE>
Market quotations are from the New York Stock Exchange Index. As of
December 31, 1995, there were approximately 4,074 holders of record of the
Company's shares.
<PAGE>
12. STOCK OPTIONS
The Company has a stock option plan which expires in November 1997 and
is administered by the Compensation Committee of the Board of Directors. The
plan provided options for a maximum of 1,000,000 shares of Common Stock at an
exercise price of at least 100% of the market value of such stock on the date
the options are granted.Options granted expire 10 years from the date of
grant. In November 1995, the Board of Directors increased the number of
shares available for grant by 800,000 subject to approval by the shareholders
at the 1996 Annual Meeting. At December 31, 1995, options for 501,537 shares
are exercisable and, assuming approval by the shareholders of the 800,000
option increase, options for 625,152 shares will be available for granting
(see Note 18).
Activity under the stock options plan is summarized below:
<TABLE>
<CAPTION>
Exercise
Number of Shares Price
Incentive Non-Qualified Total Per Share
<S> <C> <C> <C> <C>
Outstanding, January 1, 1993 149,116 272,181 421,297 $15.20-$18.63
Granted, May 25, 1993 6,000 6,000 $18.81
Granted, June 10, 1993 57,500 57,500 $18.88
Granted, July 26, 1993 24,000 24,000 $18.88
Exercised (54,158) (26,800) (80,958) $16.19-$18.88
Reclassified 4,036 (4,036)
-------- -------- --------
Outstanding, December 31, 1993 156,494 271,345 427,839 $15.20-$18.88
Granted, May 3, 1994 30,000 30,000 $17.59
Exercised (2,250) (2,250) $15.20-$16.00
Canceled (56,052) (56,052) $16.00-$18.88
-------- -------- --------
Outstanding, December 31, 1994 100,442 299,095 399,537 $15.20-$18.88
Granted, May 4, 1995 25,000 25,000 $12.09
Granted, June 1, 1995 125,000 125,000 $12.50
Granted, October 1, 1995 250,000 250,000 $12.88
Granted, October 1, 1995* 235,000 235,000 $12.88
Exercised (48,000) (48,000) $12.50
-------- -------- -------- -------------
Outstanding, December 31, 1995 100,442 886,095 986,537 $12.09-$18.88
-------- -------- -------- -------------
-------- -------- -------- -------------
</TABLE>
*The options granted on October 1, 1995 for 235,000 shares are subject to
approval of the 800,000 option increase by the shareholders at the 1996 Annual
Meeting.
13. DIVIDEND REINVESTMENT PLAN
During 1995, 1994 and 1993, the Company had a Dividend Reinvestment Plan
which enabled shareholders to invest their dividends in newly issued shares at a
5% discount from "fair market value" (as defined in the Plan). For 1995, 1994
and 1993, 222,894 shares, 161,363 shares, and 133,828 shares, respectively, were
issued through the Plan. During 1994 and 1993, the Plan permitted participants
to make optional cash payments to purchase stock at a 5% discount with a $100
minimum and a $5,000 maximum investment per quarter. During 1994 and 1993,
approximately $10,731,000 and $3,141,000, respectively, of such optional
payments were received and 703,635 and 178,113 shares, respectively, were
issued. The Company suspended the optional cash payment portion of the Plan
effective January 1, 1995 and the direct discounted reinvestment portion of the
Plan effective January 1, 1996.
<PAGE>
14. REPURCHASE OF STOCK
The Board of Directors has approved the repurchase of shares of the
Company's Common Stock. During the second quarter of 1995, the Company
purchased 94,500 shares of stock on the open market at an average price of
$13.28. No such repurchases occurred during 1993 or 1994.
15. TRANSACTIONS WITH RELATED PARTIES
During 1993, the Company loaned to its then president $898,700, due March
31, 1995. Interest on the note was at the same variable rate the Company paid
on its unsecured line of credit plus .25%. The note is secured by approximately
71,000 shares of the Company's Common Stock owned by such former officer. In
connection with the resignation of such officer in the fourth quarter of 1994,
the note was modified to be interest-free from January 1, 1994 through March 31,
1995. Additionally, effective April 1, 1995 the note was reduced by the amount
of accrued incentive compensation plus interest thereon (approximately
$154,000), and was extended on an interest bearing basis, until March 31, 1996.
In January 1996, the Board of Directors authorized the extension of the maturity
of $700,000 of the note for one year to March 31, 1997, with interest payable in
an amount equal to dividends payable on the shares of the Company's Common Stock
securing the note.
In April 1995, the Company entered into an agreement to contribute up to
$650,000 as an investor in a real estate advisor organized to provide advisory
services to investment vehicles acquiring real property located in the Republic
of Mexico. The Company's chairman and two other unrelated individuals were the
managers of, and individually owned interests in, the advisor. In November
1995, following the investment of $350,000 in the advisor, and in conjunction
with the Board of Directors' determination to concentrate the Company's future
activities on retail properties, the Company terminated the contribution
agreement and wrote off its investment in the advisor.
The Company temporarily advanced the $200,000 purchase price for 16,000
shares of its Common Stock purchased during 1995 by each of three Company
directors, at the then fair market value of such stock. The note of one
director, for $197,000 bearing interest at the Company's cost of borrowing,
remained outstanding at December 31, 1995. The sales to the directors were a
part of a stock purchase program offered to all Company employees which, except
for the purchases by the three directors, was rescinded prior to year-end.
For a description of transactions in which the Company's current president
and chief executive officer was an interested party prior to his election to
such positions and as a director (see Note 3).
<PAGE>
16. RETIREMENT SAVINGS PLAN
In 1992, the Company implemented a contributory Retirement Savings Plan.
The maximum contribution is 15% of annual salaries of which up to 3% is
contributed by the Company at a rate of up to 75% of employee contributions.
The Company's contributions to this Plan for 1995, 1994 and 1993 were
approximately $29,000, $25,000 and $27,000, respectively.
17. QUARTERLY FINANCIAL DATA (Unaudited)
Summarized quarterly financial data for 1995 and 1994 is as follows (in
thousands, except per share amounts):
<TABLE>
<CAPTION>
Net Income
Total Revenues Net Income (loss) (loss) Per Share
-------------- ----------------- ----------------
<S> <C> <C> <C>
1995:
First $12,552 $ 3,161 $ 0.190
Second 12,439 4,231 0.250
Third 12,413 2,335 0.140
Fourth 11,265 (22,445) (1.330)
------- --------- --------
Total $48,669 $(12,718) $(0.750)
------- --------- --------
------- --------- --------
1994:
First $12,800 $ 3,336 $ 0.221
Second 12,854 3,592 0.230
Third 12,947 3,724 0.234
Fourth 12,786 2,512 0.151
------- --------- --------
Total $51,387 $ 13,164 $ 0.840
------- --------- --------
------- --------- --------
</TABLE>
In the fourth quarter of 1995 in addition to the one-time charges described
in Note 7, the Company took additional one-time charges of $2,500,000 related to
the implementation of the Company's new strategic plan. The $2,500,000 charge
includes a non-cash reduction in revenues of $1,278,000 primarily as a result of
a change in the formula used to estimate common area maintenance reimbursements
and percentage rents; and $975,000 in one-time general and administrative
expenses related to the transition to a new management team, studies by new
management of various organizational and operating policies of the Company, and
organizational and strategic changes resulting from those studies including the
internalization of property management and the installation of a new property
management operating system.
18. SUBSEQUENT EVENTS
On January 31, 1996, the Company exercised its option to purchase the land
for one of the Development Properties referred to in Note 3 for approximately
$8,600,000.
<PAGE>
Subsequent to December 31, 1995, the Company granted 46,500 options to
certain officers and employees. Such options are subject to approval of the
800,000 option increase by the shareholders at the 1996 Annual Meeting.
In January 1996, Anacomp Corporation filed for protection under Chapter 11
of the Bankruptcy Code and has subsequently entered into negotiations with the
Company to reduce its leased space by approximately 50 percent at current lease
rates for a reduced term. Depending upon the outcome of negotiations relating
to the remaining space, revenues for 1996 and beyond could be adversely
affected.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
The Company has had no disagreements with its independent auditors on
accounting or financial disclosure.
PART III
ITEMS 10 THROUGH 13.
Incorporated by reference to the Company's Proxy Statement for its 1996
Annual Meeting to be filed subsequently hereto.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following financial statements and Independent Auditors' Report are
included under Item 8.
Independent Auditors' Report.
Consolidated Balance sheets as of December 31, 1995 and 1994.
Consolidated Statements of Income for each of the three years in the period
ended December 31, 1995.
Consolidated Statements of Stockholders' Equity for each of the three years
in the period ended December 31, 1995.
Consolidated Statements of Cash Flows for each of the three years in the
period ended December 31, 1995.
Notes to Consolidated Financial Statements, December 31, 1995, 1994, and
1993.
<PAGE>
The following Supplemental Financial Schedules are included herein:
III - Real Estate and Accumulated Depreciation.
All other schedules are omitted because of the absence of the conditions under
which they are required or because the required information is included in the
financial statements and notes.
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended December 31,
1994.
(c) EXHIBITS
3.1 Articles of Incorporation of the Company, incorporated by reference
to Registration Statement No. 33-14571. Reference is also made to
pages A-4 through A-6 of Registration Statement No. 33-20489 for
amendments adopted at the Company's Annual Meeting of Shareholders
on June 3, 1988.
3.2 Amended and Restated Bylaws of the Company, incorporated by
reference to Exhibit 3.2.2 filed with the Company's 1993 Form 10-K.
4.1 Share certificate for Common Stock of the Company, incorporated by
reference to Exhibit 4.0 to Registration Statement No. 33-20489.
4.2 Indenture for 8-1/2% Convertible Debentures Due 2002 dated as of
January 1, 1992, between the Company and Trustee (including text of
Debenture), incorporated by reference to Exhibit 4.1 to
Registration Statement No. 33-45160.
10.1 Stock Option Plan of the Company, as amended July 26, 1993,
incorporated by reference to Exhibit 10.1 filed with the Company's
1993 report on Form 10-K.
10.2.1 Bank of America NT&SA Modification Loan Agreement dated October 6,
1993 for $25,000,000 secured revolving line of credit, incorporated
by reference to Exhibit 10.2.2 filed with the Company's 1993 report
on Form 10-K.
10.2.2 Bank of America NT&SA Loan Agreement dated March 15, 1995 for
$40,000,000, incorporated by reference to Exhibit 10.1 filed with
the Company's March 31, 1995 report on Form 10-Q (replaced Loan
Agreement referred to in 10.2.1).
10.2.3 Bank of America NT&SA Modification Loan Agreement dated October 6,
1993 for $5,000,000 unsecured revolving line of credit,
incorporated by reference to Exhibit 10.2.3 filed with the
Company's 1993 report on Form 10-K.
<PAGE>
10.2.4 Bank of America NT&SA Loan Agreement dated March 15, 1995 for
$10,000,000, incorporated by refernece to Exhibit 10.2 filed with
the Company's March 31, 1995 report on Form 10-Q (replaced Loan
Agreement referred to in 10.2.3).
10.4 Bank of America NT&SA Loan Agreement dated July 26, 1994 for
$35,000,000, incorporated by reference to Exhibit 10.1 filed with
the Company's September 30, 1994 report on Form 10-Q.
10.5 Employment Agreement between the Company and J. David Martin, dated
as of October 1, 1995, incorporated by reference to Exhibit 10.1
filed with the Company's September 31, 1995 report on Form 10-Q..
10.6* Form of Indemnification Agreement dated November 28, 1995 entered
into with each of the Company's directors and officers.
23.1* Consent of Independent Auditors.
___________________
*Exhibit enclosed with this filing.
<PAGE>
BURNHAM PACIFIC PROPERTIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
FORM 10-K SCHEDULE III
DECEMBER 31, 1995
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
INITIAL COST TO COMPANY: COSTS CAPITALIZED
SUBSEQUENT TO ACQUISITION:
PROPERTY ENCUMBRANCES LAND BLDGS & IMPS LAND BLDGS & IMPS CARRYING
COSTS
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Independence Square 0 0 0 0
4,213,782 3,519,275
San Diego, California
Navajo Shopping Center 0 0
571,588 961,731 1,197,679 3,290,977
San Diego, California
Village Station 0
3,953,895 307,143 847,841 528,426 4,525,300
San Diego, California
Mesa Shopping Center 0 0
8,189,381 2,962,405 5,924,810 2,069,688
San Diego, California
Santee Village 0 0
3,019,122 4,528,684 0 670,830
San Diego, California
Miramar Business Plaza 0 0 0 0
3,759,067 6,579,884
San Diego, California
Ruffin Village 0 0 0 0
3,779,139 287,379
San Diego, California
Wiegand Plaza II 0
7,579,016 4,986,224 9,279,037 414,574 3,583,269
Encinitas, California
IMED Building 0 0
2,085,891 2,081,981 0 2,599,291
San Diego, California
McDonnell Douglas Building 0 (2,304,272) 0
3,388,440 17,785,111 (4,536,573)
San Diego, California
Plaza Rancho Carmel 0 0
1,837,304 4,288,043 0 359,842
San Diego, California
Poway Plaza 0 0
2,747,538 6,413,725 0 280,198
Poway, California
Highland Plaza Office Building 0 (1,249,699) 0
3,911,301 11,733,866 (2,142,105)
San Diego, California
La Mancha Shopping Center 0
1,764,183 2,202,830 5,981,355 99,473 463,109
Fullerton, California
Firemen's Fund Building 0 0
6,018,798 14,057,412 (2,312,681) (3,791,124)
San Diego, California
Marcoa Building 0 0
1,432,434 3,342,347 247 576
San Diego, California
Point Loma Plaza 0
16,312,026 11,942,554 23,885,108 23,408 1,350,036
San Diego, California
San Diego Factory Outlet Center 0
3,161,633 6,466,909 12,934,577 2,156,882 5,934,909
San Diego, California
Bergen Brunswig Building 0
9,738,547 7,878,067 15,756,135 10,754 111,488
Orange, California
Anacomp Building 0 0
7,467,253 14,934,506 6,747 13,503
Poway, California
John Burnham & Co. Building 0 0
200,000 1,800,000 (200,000) (1,602,921)
San Diego, California
Pacific West Outlet Center 0 0
11,660,208 23,342,431 3,682 118,182
Gilroy, California
The Plaza at Puente Hills 0
34,342,094 19,333,333 38,666,667 48,744 685,031
City of Industry, California
Richmond Shopping Center 0 0 0
7,132,012 3,139,965 6,264,175
Richmond, California
- ------------------------------------------------------------------------------------------------------------------------
$ $ $ $(1,576,034) $24,370,043 $-
- ------------------------------------------------------------------------------------------------------------------------
92,172,787 103,559,307 236,561,530
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
AMOUNTS AT WHICH CARRIED
AT CLOSE OF PERIOD:
LAND BLDGS & IMPS CARRYING ACCUMULATED DATE LIFE
COSTS DEPRECIATION ACQUIRED
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Independence Square 0 Sep 1983 3-25
7,733,057 7,733,057 2,559,672
San Diego, California
Navajo Shopping Center Sep 1983 3-15
1,769,267 4,252,708 6,021,975 933,481
San Diego, California
Village Station Apr 1984 15
835,569 5,373,141 6,208,711 1,966,288
San Diego, California
Mesa Shopping Center Jun 1984 25
2,962,405 7,994,498 10,956,903 3,336,491
San Diego, California
Santee Village Jan 1985 30
3,019,122 5,199,514 8,218,636 1,904,809
San Diego, California
Miramar Business Plaza 0 Dec 1985 25
10,338,951 10,338,951 3,608,225
San Diego, California
Ruffin Village 0 Dec 1985 25
4,066,518 4,066,518 1,674,982
San Diego, California
Wiegand Plaza II Sep 1986 30
5,400,798 12,862,306 18,263,104 3,416,503
Encinitas, California
IMED Building May-87 30
2,085,891 4,681,272 6,767,163 1,276,840
San Diego, California
McDonnell Douglas Building Jul 1987 30
1,084,168 13,248,538 14,332,706 5,042,401
San Diego, California
Plaza Rancho Carmel Jul 1988 30
1,837,304 4,647,885 6,485,189 1,180,335
San Diego, California
Poway Plaza Oct 1988 30
2,747,538 6,693,923 9,441,462 1,669,205
Poway, California
Highland Plaza Office Building Dec 1988 30
2,661,602 9,591,761 12,253,363 2,186,137
San Diego, California
La Mancha Shopping Center Dec 1988 30
2,302,303 6,444,464 8,746,767 4,017,742
Fullerton, California
Firemen's Fund Building Jan 1989 30
3,706,118 10,266,288 13,972,405 2,834,167
San Diego, California
Marcoa Building Sep 1989 30
1,432,681 3,342,923 4,775,604 693,825
San Diego, California
Point Loma Plaza Dec 1989 30
11,965,962 25,235,144 37,201,106 5,301,419
San Diego, California
San Diego Factory Outlet Center Jan 1992 30
8,623,791 18,869,486 27,493,277 2,040,020
San Diego, California
Bergen Brunswig Building Oct 1992 30
7,888,821 15,867,623 23,756,444 1,693,838
Orange, California
Anacomp Building Dec 1992 30
7,474,000 14,948,009 22,422,009 1,494,144
Poway, California
John Burnham & Co. Building 0 Dec 1992 30
197,079 197,079 193,140
San Diego, California
Pacific West Outlet Center Apr 1993 30
11,663,890 23,460,613 35,124,503 2,087,979
Gilroy, California
The Plaza at Puente Hills Oct 1993 30
19,382,077 39,351,698 58,733,775 2,926,855
City of Industry, California
Richmond Shopping Center Dec 1995 30
3,139,965 6,264,175 9,404,140 17,196
Richmond, California
- -----------------------------------------------------------------------------------------------
$101,983,273 $260,931,573 $362,914,846 $54,055,694
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
</TABLE>
See Notes to Schedule III on next page
<PAGE>
BURNHAM PACIFIC PROPERTIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
FORM 10-K SCHEDULE III NOTES
DECEMBER 31, 1995
Note 1: Firemen's Fund Building, Poway Plaza, Santee Village and Pacific West
Outlet Center are jointly encumbered under the Company's secured revolving line
of credit agreement, under which $24,933,000 was outstanding at December 31,
1995, which was not included in the table above.
Note 2: The amounts above do not include:
$1,481,765 of furniture fixtures and equipment and $332,745 of related
accumulated depreciation, and $2,691,070 of costs incurred to date on
development of five retail centers which are also classified with property in
the financial statements.
Note 3: The aggregate cost for federal income tax purposes for buildings and
improvements December 31, 1995 was approximately $261,196,477.
<TABLE>
<CAPTION>
Land
Buildings & Accumulated
Improvements Depreciation
------------ -------------
<S> <C> <C>
Balance at December 31, 1993 $382,339,660 $40,021,696
Additions during period 3,541,661(A) 8,540,674
------------- ------------
Balance at December 31, 1994 $385,881,321 $48,562,370
Additions during period 16,640,020(A) 11,108,133
Cost of Real Estate sold (18,233,809) (5,614,809)
Write down to Net Realizable Value:
McDonnell Douglas Building (6,912,816)
Firemen's Fund Building (6,990,564)
Highlands Plaza (3,774,800)
John Burnham & Co. Building (1,958,696)
Miramar Business Plaza (1,735,810)
------------- ------------
Balance at December 31, 1995 $362,914,846 $54,055,694
------------- ------------
------------- ------------
</TABLE>
(A) Additions during the period are broken down as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Cash Expenditures $ 9,073,524 $ 3,541,661
Assumption of Debt 7,132,012
Operating Partnership Units Issued 434,484
------------- ------------
$ 16,640,020 $ 3,541,661
------------- ------------
------------- ------------
</TABLE>
<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.
Burnham Pacific Properties, Inc.
By://J. David Martin//
--------------------------------
J. David Martin, President
Dated: //3-27-95//
----------------------------
SIGNATURES
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.
Signature Title Date
- ------------------- ---------------- -------------------
//Malin Burnham// Chairman of the Board //3-27-95//
- ---------------------------- -------------------
Malin Burnham
//J. David Martin// President, Director //3-27-95//
- ---------------------------- -------------------
J. David Martin
//Daniel B. Platt// Chief Financial Officer //3-27-95//
- ---------------------------- -------------------
Daniel B. Platt
//Henry Rasmussen, Jr.// Director //3-27-95//
- ---------------------------- -------------------
Henry Rasmussen, Jr.
//Richard R. Tartre// Director //3-27-95//
- ---------------------------- -------------------
Richard R. Tartre
Director
- ---------------------------- -------------------
Philip L. Gildred, Jr.
//Thomas A. Page// Director //3-27-95//
- ---------------------------- -------------------
Thomas A. Page
//Robert J. Lauer// Director 3-27-95
- ---------------------------- -------------------
Robert J. Lauer
<PAGE>
DIRECTORS' INDEMNIFICATION AGREEMENT
THIS AGREEMENT, is made and entered into November 28, 1995 between Burnham
Pacific Properties, Inc., a California corporation ("Corporation"), and
________________________ ("Director").
RECITALS
WHEREAS, member of the Board of Directors of Corporation, performs a
valuable service in such capacity for Corporation, and
WHEREAS, the Articles of Incorporation and Bylaws of Corporation authorize
and permit contracts between Corporation and the members of its Board of
Directors and officers with respect to indemnification of such directors and
officers; and
WHEREAS, in accordance with the authorization provided by the California
General Corporation Law, as amended ("Code"), Corporation may purchase and
maintain a policy or policies of Directors and Officers Liability Insurance
("D&O Insurance"), covering certain liabilities which may be incurred by its
directors and officers in the performance of service as directors and officers
of Corporation; and
WHEREAS, Corporation has determined that, after reviewing the terms, scope
and availability of D&O Insurance, there exists general uncertainty as to the
extent and overall desirability of protection afforded members of the Board of
Directors and Officers by such D&O Insurance, if any, and by Statutory and Bylaw
indemnification provisions; and
WHEREAS, in order to induce Director to continue to serve as a Director of
Corporation, free from undue concern for the risks and potential liabilities
associated with such services, Corporation has determined and agreed to enter
into this contract with Director,
AGREEMENT
NOW, THEREFORE, in consideration of Director's continued service as a
Director after the date hereof, the parties hereto agree as follows:
1. INDEMNITY OF DIRECTOR. Corporation hereby agrees to hold harmless and
indemnify Director to the fullest extent authorized by the provisions of the
Code, as it may be amended from time to time.
2. ADDITIONAL INDEMNITY. Subject only to the limitations set forth in
Section 3 hereof, Corporation hereby further agrees to hold harmless and
indemnify Director:
(a) against any and all expenses (including attorneys', accountants',
and other professionals' fees and disbursements), judgments, fines and
amounts paid in settlement actually and reasonable incurred by Director in
connection with any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
<PAGE>
investigative (including an action by or in the right of Corporation) to which
Director is, was or at any time becomes a party or is threatened to be made a
party, or is otherwise involved, by reason of the fact that Director is, was or
at any time becomes a director, officer, employee or agent of Corporation, by
reason of any action taken by him or inaction on his part while acting as such,
or by reason of the fact that Director is or was serving or at any time serves
at the request of corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise; and
(b) otherwise to the fullest extent as may be provided to Director by
Corporation under the indemnification non-exclusivity provision of the
Articles of Incorporation and Bylaws of Corporation and the Code.
3. LIMITATION ON ADDITIONAL INDEMNITY.
(a) No indemnity pursuant to Section 2 hereof shall be paid by
Corporation:
(i) except to the extent the aggregate of losses to be
indemnified thereunder exceeds the sum of such losses for which Director is
indemnified pursuant to Section 1 hereof or pursuant to any D&O Insurance
purchased and maintained by Corporation;
(ii) in respect to remuneration paid to Director if it shall be
determined by a final judgment or other final adjudication that such
remuneration was in violation of law;
(iii) on account of any suit in which judgment is rendered
against or a settlement is agreed to by Director for an accounting of
profits made from the purchase or sale by Director of securities of
Corporation pursuant to the provisions of Section 16(b) of the Securities
Exchange Act of 1934 and amendments thereto or similar provisions of any
federal, state or local statutory law;
(iv) on account of Director's acts or omissions that involve
intentional misconduct or a knowing and culpable violation of law;
(v) on account of any proceeding (other than a proceeding
referred to in Section 8(b) hereof) initiated by Director unless such
proceeding was authorized by the Board of Directors of Corporation; or
(vi) if a final decision by a court having jurisdiction in the
matter shall determine that such indemnification is not lawful.
(b) In addition to those limitations set forth above in paragraph (a)
of this Section 3, no indemnity pursuant to Section 2 hereof in an action
by or in the right of Corporation shall be paid by Corporation for any of
the following:
2
<PAGE>
(i) on account of acts or omissions that Director believes to be
contrary to the best interests of Corporation or its shareholders or that
involve the absence of good faith on the part of Director;
(ii) with respect to any transaction from which Director derived
an improper personal benefit;
(iii) on account of acts or omissions that show a reckless
disregard for Director's duty to Corporation or its shareholders in
circumstances in which Director was aware, or should have been aware, in
the ordinary course of performing a Director's duties, of a risk of serious
injury to Corporation or its shareholders;
(iv) on account of acts or omissions that constitute an
unexcused pattern of inattention that amounts to an abdication of
Director's duty to Corporation or its shareholders;
(v) to the extent prohibited by Section 310 of the Code,
"Transactions Between Corporations and Directors or Corporations Having
Interrelated Directors";
(vi) to the extent prohibited by Section 316 of the Code,
"Directors' Liability for Distributions, Loans and Guarantees";
(vii) in respect of any claim, issue or matter as to which
Director shall have been adjudged to be liable to Corporation in the
performance of Director's duty to Corporation and its shareholders, unless
and only to the extent that the court in which such proceeding is or was
pending shall determine upon application that, in view of all the
circumstances of the case, Director is fairly and reasonably entitled to
indemnity for expenses and then only to the extent that the court shall
determine;
(viii) of amounts paid in settling or otherwise disposing of a
pending action without court approval; and
(ix) of expenses incurred in defending a pending action which is
settled or otherwise disposed of without court approval.
4. CONTRIBUTION. If the indemnification provided in Sections 1 and 2 is
unavailable and may not be paid to Director for any reason other than those set
forth in Section 3 (excluding subsections 3(b) (vii) and (ix)), then in respect
of any threatened, pending or completed action, suit or proceeding in which
Corporation is or is alleged to be jointly liable with Director (or would be if
joined in such action, suit or proceeding), Corporation shall contribute to the
amount of expenses (including professional fees and disbursements), judgments,
fines and amounts paid in settlement actually and reasonably incurred and paid
or payable by Director in such proportion as is appropriate to reflect (i) the
relative benefits received by Corporation on the one hand and Director on the
other hand from the transaction from which such action, suit or proceeding
arose, and (ii) the relative faults of Corporation on the one hand and of
Director on the other in connection with the events which resulted in such
expenses, judgments, fines or settlement
3
<PAGE>
amounts, as well as any other relevant equitable considerations. The relative
fault of Corporation on the one hand and of Director on the other shall be
determined by reference to, among, other things, the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent the
circumstances resulting in such expenses, judgments, fines or settlement
amounts. Corporation agrees that it would not be just and equitable if
contribution pursuant to this Section 4 were determined by pro rata allocation
or any other method of allocation which does not take account of the foregoing
equitable considerations.
5. CONTINUATION OF OBLIGATIONS. All agreements and obligations of
Corporation contained herein shall continue during the period Director is a
director, officer, employee or agent of Corporation (or is or was serving at the
request of Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise) and shall continue thereafter so long as Director shall be subject
to any possible claim or threatened, pending or completed action, suit or
proceeding, whether civil, criminal or investigative, by reason of the fact that
Director was at any time serving Corporation or any such other entity in any
capacity referred to herein.
6. NOTIFICATION AND DEFENSE OF CLAIM. Promptly after receipt by Director
of notice of the threat or commencement of any action, suit or proceeding,
Director will, if a claim in respect thereof is to be made against Corporation
under this Agreement, notify Corporation of the threat or commencement thereof;
but the omission so to notify Corporation will not relieve it from any liability
which it may have to Director otherwise than under this Agreement. With respect
to any such action, suit or proceeding as to which Director notifies Corporation
of the threat or commencement thereof:
(a) Corporation will be entitled to participate therein at its own
expense;
(b) except as otherwise provided below, to the extent that it may
wish, Corporation jointly with any other indemnifying party similarly
notified will be entitled to assume the defense thereof, with counsel
satisfactory to Director. After notice from Corporation to Director of its
election to assume the defense thereof, Corporation will not be liable to
Director under this Agreement for any legal or other expenses subsequently
incurred by Director in connection with the defense thereof other than
reasonable costs of investigation or as otherwise provided below. Director
shall have the right to employ its counsel in such action, suit, or
proceeding but the fees and expenses of such counsel incurred after notice
from Corporation of its assumption of the defense thereof shall be at the
expense of Director unless (i) the employment of counsel by Director has
been authorized by Corporation, (ii) Director shall have reasonably
concluded that there may be a conflict of interest between Corporation and
Director in the conduct of the defense of such action or (iii) Corporation
shall not in fact have employed counsel to assume the defense of such
action, in each of which cases the fees and expenses of counsel shall be at
the expense of Corporation. Corporation shall not be entitled to assume
the defense of any action, suit or proceeding brought by or on behalf of
Corporation or as to which Director shall have made the conclusion provided
for in (ii) above;
4
<PAGE>
(c) Corporation shall not be liable to indemnify Director under this
Agreement for any amounts paid in settlement of any action or claim
effected without its written consent. Corporation shall not settle any
action or claim in any manner which would impose any penalty or limitation
on Director without Director's written consent. Neither Corporation nor
Director will unreasonably withhold its consent to any proposed settlement;
and
(d) Director shall provide Corporation with such information and
cooperation in the defense of such proceeding as Corporation may reasonably
request and as shall be within Director's power.
7. ADVANCEMENT AND REPAYMENT OF EXPENSES.
(a) Corporation shall advance to Director, prior to any final
disposition of any threatened or pending action, suit or proceeding,
whether civil, criminal, administrative or investigative, any and all
reasonable expenses (including professional fees and disbursements)
incurred in investigating or defending any such action, suit or proceeding
within ten (10) days after receiving copies of invoices presented to
Director for such expenses.
(b) Director hereby undertakes to repay such advances to the extent
it is ultimately determined that Director is not entitled to
indemnification. In determining whether or not to make an advance
hereunder, the ability of Director to repay shall not be a factor.
Notwithstanding the foregoing Section 7(a), in a proceeding brought by
Corporation directly, in its own right (as distinguished from an action
brought derivatively or by any receiver or trustee), Corporation shall not
be required to make the advances called for hereby if a majority of the
disinterested directors determine that it does not appear that Director has
met the standards of conduct which made it permissible under applicable law
to indemnify Director and the advancement of expenses would not be in the
best interests of Corporation and its shareholders.
8. ENFORCEMENT.
(a) Corporation expressly confirms and agrees that it has entered
into this Agreement and assumed the obligations imposed on Corporation
hereby in order to induce Director to continue as a Director of
Corporation, and acknowledges that Director is relying upon this Agreement
in continuing in such capacity. Notwithstanding the foregoing, Director
shall have no right or obligation hereunder (although such right or
obligation may exist pursuant to another agreement) to continue as an
Director of Corporation for any particular period of time after the date
hereof.
(b) In the event Director is required to bring any action to enforce
rights or to collect moneys due under this Agreement and is successful in
such action, corporation shall reimburse Director for all of Director's
reasonable professional fees and disbursements in bringing and pursuing
such action.
5
<PAGE>
9. PARTIAL INDEMNIFICATION. If Director is entitled under any provision
of this Agreement to indemnification or advancement by Corporation of some or a
portion of any expenses or liabilities of any type whatsoever (including, but
not limited to, judgments, fines, penalties, and amounts paid in settlement)
incurred by Director in the investigation, defense, settlement or appeal of a
proceeding, but is not entitled to indemnification or advancement or the total
amount thereof, Corporation shall nevertheless indemnify or pay advancements to
Director for the portion of such expenses or liabilities to which Director is
entitled.
10. NOTICE TO INSURERS. If, at the time of the receipt of a notice of a
claim pursuant to Section 6 hereof, Corporation has D&O Insurance in effect,
Corporation shall give prompt notice of the commencement of such proceeding to
the insurers in accordance with the procedures set forth in the respective
policies. Corporation shall thereafter take all necessary or desirable action
to cause such insurers to pay, on behalf of Director, all amounts payable as a
result of such proceeding in accordance with the terms of such policies.
11. SEPARABILITY. Each of the provisions of this Agreement is a separate
and distinct agreement and independent of the others, so that if any provision
hereof shall be held to be invalid or unenforceable to any extent for any
reasons, such invalidity or unenforceability shall not affect the validity or
enforceability of the other provisions hereof, and the affected provision shall
be construed and enforced so as to effectuate the parties intent to the maximum
extent possible.
12. GOVERNING LAW. This Agreement shall be governed by and interpreted
and enforced in accordance with the laws of the State of California.
13. BINDING EFFECT. This Agreement establishes contractual rights that
shall be binding upon Director and upon Corporation, its successors and assigns,
and shall inure to the benefit of Director, his heirs, personal representatives
and assigns and to the benefit of Corporation, its successors and assigns.
14. NON-EXCLUSIVITY.
(a) The provisions for indemnification and advancement of expenses
set forth in this Agreement shall not be deemed to be exclusive of any
other rights that Director may have under any provision of law,
Corporation's Articles of Incorporation or Bylaws, the vote of
Corporation's shareholders or disinterested directors, other agreements or
otherwise, both as to action in Director's official capacity and action in
another capacity while occupying his position as Director; provided,
however, that this Agreement shall be deemed to supersede the Directors'
Indemnification Agreement dated ___________________, between Director and
Corporation.
(b) In the event of any changes, after the date of this Agreement, in
any applicable law, statute or rule which expand the right of a California
corporation to indemnify its directors and officers, Director's rights and
Corporation's obligations under
6
<PAGE>
this Agreement shall be expanded to the fullest extent permitted by such
changes. In the event of any changes in any applicable law, statute or
rule, which narrow the right of a California corporation to indemnify a
director and officer, such changes, to the extent not otherwise required by
such law, statute or rule to be applied to this Agreement, shall have no
effect on this Agreement or the parties' rights and obligations hereunder.
15. AMENDMENT AND TERMINATION. No amendment, modification, waiver,
termination or cancellation of this Agreement shall be effective for any purpose
unless set forth in a writing signed by both parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and
as of the day and year first above written.
BURNHAM PACIFIC PROPERTIES, INC.
a California corporation
By:
------------------------------------------
J. David Martin
President
------------------------------------------
7
<PAGE>
OFFICERS' INDEMNIFICATION AGREEMENT
THIS AGREEMENT, is made and entered into November 28, 1995 between Burnham
Pacific Properties, Inc., a California corporation ("Corporation"), and
_____________________ ("Officer").
RECITALS
WHEREAS, Officer, an employee (or member of the Board of Directors) of
Corporation, performs a valuable service in such capacity for Corporation, and
WHEREAS, the Articles of Incorporation and Bylaws of Corporation authorize
and permit contracts between Corporation and the members of its Board of
Directors and officers with respect to indemnification of such directors and
officers; and
WHEREAS, in accordance with the authorization provided by the California
General Corporation Law, as amended ("Code"), Corporation may purchase and
maintain a policy or policies of Directors and Officers Liability Insurance
("D&O Insurance"), covering certain liabilities which may be incurred by its
directors and officers in the performance of service as directors and officers
of Corporation; and
WHEREAS, Corporation has determined that, after reviewing the terms, scope
and availability of D&O Insurance, there exists general uncertainty as to the
extent and overall desirability of protection afforded members of the Board of
Directors and Officers by such D&O Insurance, if any, and by Statutory and Bylaw
indemnification provisions; and
WHEREAS, in order to induce Officer to continue to serve as an Officer of
Corporation, free from undue concern for the risks and potential liabilities
associated with such services, Corporation has determined and agreed to enter
into this contract with Officer,
AGREEMENT
NOW, THEREFORE, in consideration of Officer's continued service as an
Officer after the date hereof, the parties hereto agree as follows:
1. INDEMNITY OF OFFICER. Corporation hereby agrees to hold harmless and
indemnify Officer to the fullest extent authorized by the provisions of the
Code, as it may be amended from time to time.
2. ADDITIONAL INDEMNITY. Subject only to the limitations set forth in
Section 3 hereof, Corporation hereby further agrees to hold harmless and
indemnify Officer:
(a) against any and all expenses (including attorneys', accountants',
and other professionals' fees and disbursements), judgments, fines and
amounts paid in settlement actually and reasonable incurred by Officer in
connection with any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
<PAGE>
investigative (including an action by or in the right of Corporation) to
which Officer is, was or at any time becomes a party or is threatened to be
made a party, or is otherwise involved, by reason of the fact that Officer
is, was or at any time becomes a director, officer, employee or agent of
Corporation, by reason of any action taken by him or inaction on his part
while acting as such, or by reason of the fact that Officer is or was
serving or at any time serves at the request of corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise; and
(b) otherwise to the fullest extent as may be provided to Officer by
Corporation under the indemnification non-exclusivity provision of the
Articles of Incorporation and Bylaws of Corporation and the Code.
3. LIMITATION ON ADDITIONAL INDEMNITY.
(a) No indemnity pursuant to Section 2 hereof shall be paid by
Corporation:
(i) except to the extent the aggregate of losses to be
indemnified thereunder exceeds the sum of such losses for which Officer is
indemnified pursuant to Section 1 hereof or pursuant to any D&O Insurance
purchased and maintained by Corporation;
(ii) in respect to remuneration paid to Officer if it shall be
determined by a final judgment or other final adjudication that such
remuneration was in violation of law;
(iii) on account of any suit in which judgment is rendered
against or a settlement is agreed to by Officer for an accounting of
profits made from the purchase or sale by Officer of securities of
Corporation pursuant to the provisions of Section 16(b) of the Securities
Exchange Act of 1934 and amendments thereto or similar provisions of any
federal, state or local statutory law;
(iv) on account of Officer's acts or omissions that involve
intentional misconduct or a knowing and culpable violation of law;
(v) on account of any proceeding (other than a proceeding
referred to in Section 8(b) hereof) initiated by Officer unless such
proceeding was authorized by the Board of Directors of Corporation; or
(vi) if a final decision by a court having jurisdiction in the
matter shall determine that such indemnification is not lawful.
(b) In addition to those limitations set forth above in paragraph (a)
of this Section 3, no indemnity pursuant to Section 2 hereof in an action
by or in the right of Corporation shall be paid by Corporation for any of
the following:
2
<PAGE>
(i) on account of acts or omissions that Officer believes to be
contrary to the best interests of Corporation or its shareholders or that
involve the absence of good faith on the part of Officer;
(ii) with respect to any transaction from which Officer derived
an improper personal benefit;
(iii) on account of acts or omissions that show a reckless
disregard for Officer's duty to Corporation or its shareholders in
circumstances in which Officer was aware, or should have been aware, in the
ordinary course of performing an Officer's duties, of a risk of serious
injury to Corporation or its shareholders;
(iv) on account of acts or omissions that constitute an
unexcused pattern of inattention that amounts to an abdication of Officer's
duty to Corporation or its shareholders;
(v) to the extent prohibited by Section 310 of the Code,
"Transactions Between Corporations and Directors or Corporations Having
Interrelated Directors";
(vi) to the extent prohibited by Section 316 of the Code,
"Directors' Liability for Distributions, Loans and Guarantees";
(vii) in respect of any claim, issue or matter as to which
Officer shall have been adjudged to be liable to Corporation in the
performance of Officer's duty to Corporation and its shareholders, unless
and only to the extent that the court in which such proceeding is or was
pending shall determine upon application that, in view of all the
circumstances of the case, Officer is fairly and reasonably entitled to
indemnity for expenses and then only to the extent that the court shall
determine;
(viii) of amounts paid in settling or otherwise disposing of a
pending action without court approval; and
(ix) of expenses incurred in defending a pending action which is
settled or otherwise disposed of without court approval.
4. CONTRIBUTION. If the indemnification provided in Sections 1 and 2 is
unavailable and may not be paid to Officer for any reason other than those set
forth in Section 3 (excluding subsections 3(b) (vii) and (ix)), then in respect
of any threatened, pending or completed action, suit or proceeding in which
Corporation is or is alleged to be jointly liable with Officer (or would be if
joined in such action, suit or proceeding), Corporation shall contribute to the
amount of expenses (including professional fees and disbursements), judgments,
fines and amounts paid in settlement actually and reasonably incurred and paid
or payable by Officer in such proportion as is appropriate to reflect (i) the
relative benefits received by Corporation on the one hand and Officer on the
other hand from the transaction from which such action, suit or proceeding
arose, and (ii) the relative faults of Corporation on the one hand and of
Officer on the other in connection with the events which resulted in such
expenses, judgments, fines or settlement
3
<PAGE>
amounts, as well as any other relevant equitable considerations. The relative
fault of Corporation on the one hand and of Officer on the other shall be
determined by reference to, among, other things, the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent the
circumstances resulting in such expenses, judgments, fines or settlement
amounts. Corporation agrees that it would not be just and equitable if
contribution pursuant to this Section 4 were determined by pro rata allocation
or any other method of allocation which does not take account of the foregoing
equitable considerations.
5. CONTINUATION OF OBLIGATIONS. All agreements and obligations of
Corporation contained herein shall continue during the period Officer is a
director, officer, employee or agent of Corporation (or is or was serving at the
request of Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise) and shall continue thereafter so long as Officer shall be subject to
any possible claim or threatened, pending or completed action, suit or
proceeding, whether civil, criminal or investigative, by reason of the fact that
Officer was at any time serving Corporation or any such other entity in any
capacity referred to herein.
6. NOTIFICATION AND DEFENSE OF CLAIM. Promptly after receipt by Officer
of notice of the threat or commencement of any action, suit or proceeding,
Officer will, if a claim in respect thereof is to be made against Corporation
under this Agreement, notify Corporation of the threat or commencement thereof;
but the omission so to notify Corporation will not relieve it from any liability
which it may have to Officer otherwise than under this Agreement. With respect
to any such action, suit or proceeding as to which Officer notifies Corporation
of the threat or commencement thereof:
(a) Corporation will be entitled to participate therein at its own
expense;
(b) except as otherwise provided below, to the extent that it may
wish, Corporation jointly with any other indemnifying party similarly
notified will be entitled to assume the defense thereof, with counsel
satisfactory to Officer. After notice from Corporation to Officer of its
election to assume the defense thereof, Corporation will not be liable to
Officer under this Agreement for any legal or other expenses subsequently
incurred by Officer in connection with the defense thereof other than
reasonable costs of investigation or as otherwise provided below. Officer
shall have the right to employ its counsel in such action, suit, or
proceeding but the fees and expenses of such counsel incurred after notice
from Corporation of its assumption of the defense thereof shall be at the
expense of Officer unless (i) the employment of counsel by Officer has been
authorized by Corporation, (ii) Officer shall have reasonably concluded
that there may be a conflict of interest between Corporation and Officer in
the conduct of the defense of such action or (iii) Corporation shall not in
fact have employed counsel to assume the defense of such action, in each of
which cases the fees and expenses of counsel shall be at the expense of
Corporation. Corporation shall not be entitled to assume the defense of
any action, suit or proceeding brought by or on behalf of Corporation or as
to which Officer shall have made the conclusion provided for in (ii) above;
4
<PAGE>
(c) Corporation shall not be liable to indemnify Officer under this
Agreement for any amounts paid in settlement of any action or claim
effected without its written consent. Corporation shall not settle any
action or claim in any manner which would impose any penalty or limitation
on Officer without Officer's written consent. Neither Corporation nor
Officer will unreasonably withhold its consent to any proposed settlement;
and
(d) Officer shall provide Corporation with such information and
cooperation in the defense of such proceeding as Corporation may reasonably
request and as shall be within Officer's power.
7. ADVANCEMENT AND REPAYMENT OF EXPENSES.
(a) Corporation shall advance to Officer, prior to any final
disposition of any threatened or pending action, suit or proceeding,
whether civil, criminal, administrative or investigative, any and all
reasonable expenses (including professional fees and disbursements)
incurred in investigating or defending any such action, suit or proceeding
within ten (10) days after receiving copies of invoices presented to
Officer for such expenses.
(b) Officer hereby undertakes to repay such advances to the extent it
is ultimately determined that Officer is not entitled to indemnification.
In determining whether or not to make an advance hereunder, the ability of
Officer to repay shall not be a factor. Notwithstanding the foregoing
Section 7(a), in a proceeding brought by Corporation directly, in its own
right (as distinguished from an action brought derivatively or by any
receiver or trustee), Corporation shall not be required to make the
advances called for hereby if a majority of the disinterested directors
determine that it does not appear that Officer has met the standards of
conduct which made it permissible under applicable law to indemnify Officer
and the advancement of expenses would not be in the best interests of
Corporation and its shareholders.
8. ENFORCEMENT.
(a) Corporation expressly confirms and agrees that it has entered
into this Agreement and assumed the obligations imposed on Corporation
hereby in order to induce Officer to continue as an Officer of Corporation,
and acknowledges that Officer is relying upon this Agreement in continuing
in such capacity. Notwithstanding the foregoing, Officer shall have no
right or obligation hereunder (although such right or obligation may exist
pursuant to another agreement) to continue as an Officer of Corporation for
any particular period of time after the date hereof.
(b) In the event Officer is required to bring any action to enforce
rights or to collect moneys due under this Agreement and is successful in
such action, corporation shall reimburse Officer for all of Officer's
reasonable professional fees and disbursements in bringing and pursuing
such action.
5
<PAGE>
9. PARTIAL INDEMNIFICATION. If Officer is entitled under any provision
of this Agreement to indemnification or advancement by Corporation of some or a
portion of any expenses or liabilities of any type whatsoever (including, but
not limited to, judgments, fines, penalties, and amounts paid in settlement)
incurred by Officer in the investigation, defense, settlement or appeal of a
proceeding, but is not entitled to indemnification or advancement or the total
amount thereof, Corporation shall nevertheless indemnify or pay advancements to
Officer for the portion of such expenses or liabilities to which Officer is
entitled.
10. NOTICE TO INSURERS. If, at the time of the receipt of a notice of a
claim pursuant to Section 6 hereof, Corporation has D&O Insurance in effect,
Corporation shall give prompt notice of the commencement of such proceeding to
the insurers in accordance with the procedures set forth in the respective
policies. Corporation shall thereafter take all necessary or desirable action
to cause such insurers to pay, on behalf of Officer, all amounts payable as a
result of such proceeding in accordance with the terms of such policies.
11. SEPARABILITY. Each of the provisions of this Agreement is a separate
and distinct agreement and independent of the others, so that if any provision
hereof shall be held to be invalid or unenforceable to any extent for any
reasons, such invalidity or unenforceability shall not affect the validity or
enforceability of the other provisions hereof, and the affected provision shall
be construed and enforced so as to effectuate the parties intent to the maximum
extent possible.
12. GOVERNING LAW. This Agreement shall be governed by and interpreted
and enforced in accordance with the laws of the State of California.
13. BINDING EFFECT. This Agreement establishes contractual rights that
shall be binding upon Officer and upon Corporation, its successors and assigns,
and shall inure to the benefit of Officer, his heirs, personal representatives
and assigns and to the benefit of Corporation, its successors and assigns.
14. NON-EXCLUSIVITY.
(a) The provisions for indemnification and advancement of expenses
set forth in this Agreement shall not be deemed to be exclusive of any
other rights that Officer may have under any provision of law,
Corporation's Articles of Incorporation or Bylaws, the vote of
Corporation's shareholders or disinterested directors, other agreements or
otherwise, both as to action in Officer's official capacity and action in
another capacity while occupying his position as Officer; provided,
however, that this Agreement shall be deemed to supersede the Officers'
Indemnification Agreement dated ___________________, between Officer and
Corporation.
(b) In the event of any changes, after the date of this Agreement, in
any applicable law, statute or rule which expand the right of a California
corporation to indemnify its directors and officers, Officer's rights and
Corporation's obligations under
6
<PAGE>
this Agreement shall be expanded to the fullest extent permitted by such
changes. In the event of any changes in any applicable law, statute or
rule, which narrow the right of a California corporation to indemnify a
director and officer, such changes, to the extent not otherwise required by
such law, statute or rule to be applied to this Agreement, shall have no
effect on this Agreement or the parties' rights and obligations hereunder.
15. AMENDMENT AND TERMINATION. No amendment, modification, waiver,
termination or cancellation of this Agreement shall be effective for any purpose
unless set forth in a writing signed by both parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and
as of the day and year first above written.
BURNHAM PACIFIC PROPERTIES, INC.
a California corporation
By:
------------------------------------------
J. David Martin
President
------------------------------------------
7
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
Burnham Pacific Properties, Inc.
We consent to the incorporation by reference in Registration Statement Nos.
33-25431 on Form S-8, 33-56555 on Form S-3 and 33-68712 on Form S-2 of Burnham
Pacific Properties, Inc. of our report dated March 11, 1996 appearing in this
Annual Report on Form 10-K of Burnham Pacific Properties, Inc. for the year
ended December 31, 1995.
//Deloitte & Touche, LLP//
March 27, 1996
San Diego, California
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