<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
/X/ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended June 30, 1998
/ / Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from to
-------------- ----------------
Commission file number 1-9524
BURNHAM PACIFIC PROPERTIES, INC.
------------------------------------------------------
(Exact name of Registrant as specified in its Charter)
Maryland 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
NA
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year if changed since last report.
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
----- -----
Number of shares of the Registrant's common stock outstanding at August 13,
1998: 31,932,008
<PAGE>
PART 1 FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
- -----------------------------
BURNHAM PACIFIC PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1998 AND DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS June 30, 1998 December 31, 1997
------------- -----------------
<S> <C> <C>
Real Estate $1,093,564 $964,755
Less Accumulated Depreciation (67,841) (55,823)
---------- --------
Real Estate-Net 1,025,723 908,932
Cash and Cash Equivalents 6,219 6,841
Restricted Cash 5,054 5,242
Receivables-Net 9,560 7,456
Investment in Unconsolidated Subsidiaries 3,683 3,683
Other Assets 12,196 11,641
---------- --------
Total $1,062,435 $943,795
---------- --------
---------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts Payable and Other Liabilities $17,890 $19,296
Tenant Security Deposits 2,731 2,396
Notes Payable 406,988 369,511
Line of Credit Advances 137,869 180,869
---------- --------
Total Liabilities 565,478 572,072
---------- --------
Commitments and Contingencies
Minority Interest 71,024 58,759
---------- --------
Preferred Stock 0 28,160
---------- --------
Stockholders' Equity:
Par Value $.01/share Preferred Stock, 5,000,000
Shares Authorized; 4,800,000 Shares Designated as
Series 1997-A Convertible Preferred, 2,800,000
Shares Outstanding at June 30, 1998 and December 28 17
31, 1997
Common Stock, $.01 Par Value, 95,000,000 Shares
Authorized; 31,932,008 and 23,448,852 Shares
Outstanding at June 30, 1998, and
December 31, 1997, Respectively 319 234
Paid in Capital in Excess of Par 524,639 376,326
Dividends Paid in Excess of Net Income (99,053) (91,773)
---------- --------
Total Stockholders' Equity 425,933 284,804
---------- --------
Total $1,062,435 $943,795
---------- --------
---------- --------
</TABLE>
See the Accompanying Notes
2
<PAGE>
BURNHAM PACIFIC PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
6/30/98 6/30/97 6/30/98 6/30/97
----------------------------------------
<S> <C> <C> <C> <C>
REVENUES
Rents $31,899 $ 16,798 $61,538 $ 29,601
Interest 226 189 454 363
------- -------- ------- --------
Total Revenues 32,125 16,987 61,992 29,964
------- -------- ------- --------
COSTS AND EXPENSES
Interest 7,749 4,725 17,215 8,056
Rental Operating 8,596 4,757 16,848 8,386
General and Administrative 1,392 712 2,503 1,555
Depreciation and Amortization 6,750 3,387 13,181 6,929
------- -------- ------- --------
Total Costs and Expenses 24,487 13,581 49,747 24,926
------- -------- ------- --------
Income From Operations Before
Income from Unconsolidated
Subsidiaries, Minority Interest
and Extraordinary Item 7,638 3,406 12,245 5,038
Income from Unconsolidated
Subsidiaries 33 49 128 64
Minority Interest (1,159) (11) (2,325) (22)
------- -------- ------- --------
Income before Extraordinary Item 6,512 3,444 10,048 5,080
Loss from Early Extinguishment of
Debt -- -- -- (52)
------- -------- ------- --------
Net Income $ 6,512 $ 3,444 $10,048 $ 5,028
Dividends Paid to Preferred
Stockholders (1,400) -- (2,800) --
------- -------- ------- --------
Income Available to Common
Stockholders $ 5,112 $ 3,444 $ 7,248 $ 5,028
------- -------- ------- --------
------- -------- ------- --------
BASIC AND DILUTED EARNINGS PER SHARE:
Income before Extraordinary Item $0.16 $0.16 $0.26 $0.27
Extraordinary Item -- -- -- ( 0.01)
------- -------- ------- --------
Net Income $0.16 $0.16 $0.26 $0.26
------- -------- ------- --------
------- -------- ------- --------
</TABLE>
See the Accompanying Notes
3
<PAGE>
BURNHAM PACIFIC PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
6/30/98 6/30/97
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $10,048 $5,028
Adjustments to Reconcile Net Income to Net Cash Provided by
Operating Activities:
Depreciation and Amortization 13,181 6,929
Minority Interest 2,325 22
Provision for Bad Debt 350 246
Common Stock - Directors' Fees 172 151
Stock Options - Compensation Expense 145 --
Changes in Other Assets and Liabilities:
Receivables and Other Assets (4,169) (2,554)
Accounts Payable and Other (74) 1,923
Tenant Security Deposits 335 394
--------- ---------
Net Cash Provided By Operating Activities 22,313 12,139
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for Acquisitions of Real Estate and Capital Improvements (87,036) (173,328)
Proceeds from Sales of Real Estate -- 7,852
--------- ---------
Net Cash Used For Investing Activities (87,036) (165,476)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings Under Line of Credit Agreement 37,000 140,683
Repayments Under Line of Credit Agreement (80,000) (74,146)
Principal Payments of Notes Payable (25,044) (36,231)
Proceeds from Issuance of Notes Payable 38,925 61,363
Restricted Cash 188 (1,601)
Issuance of Stock - Net 112,976 73,175
Distributions made to Minority Interest Holders (2,441) (22)
Payment for Minority Interest (175) --
Dividends Paid (17,328) (10,133)
--------- ---------
Net Cash Provided for Financing Activities 64,101 153,088
--------- ---------
Net Decrease in Cash and Cash Equivalents (622) (249)
Cash and Cash Equivalents at Beginning Of Period 6,841 4,095
--------- ---------
Cash and Cash Equivalents at End Of Period $ 6,219 $ 3,846
--------- ---------
--------- ---------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash Paid During Six Months For Interest $19,870 $9,306
--------- ---------
--------- ---------
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES
Notes Payable Assumed $23,596 $15,517
Operating Partnership Units Issued in Connection with
Real Estate Acquisitions 18,083 23
Proceeds from Notes Payable -- 25,400
Liability due to Seller 1,352 --
Cash Paid For Real Estate 13,532 41,607
--------- ---------
Fair Value of Real Estate Acquired $56,563 $82,547
--------- ---------
--------- ---------
</TABLE>
See the Accompanying Notes
4
<PAGE>
BURNHAM PACIFIC PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998, DECEMBER 31, 1997, AND JUNE 30, 1997
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements are unaudited but, in
the opinion of management, reflect all normal recurring adjustments
necessary for a fair presentation of operating results. These financial
statements should be read in conjunction with the audited financial
statements of Burnham Pacific Properties, Inc. for the year ended December
31, 1997. Certain of the 1997 amounts have been reclassified to conform to
the 1998 presentation.
Dividends Per Share - Dividends of .2625 cents per share were paid on June
30, 1998 to shareholders of record on June 23, 1998.
On May 21, 1998, the Emerging Issues Task Force of the Financial Accounting
Standards Board issued EITF Number 98-9, requiring that the recognition of
revenue related to percentage rent be deferred until the specified sales
target is achieved. The Company does not believe that the implementation
of this standard will have a material impact on future financial statements
of the Company.
The allowance for doubtful accounts was approximately $1,579,000 and
$1,311,000 as of June 30, 1998 and December 31, 1997, respectively.
2. NET INCOME PER SHARE
Net income per share is computed by dividing net income for the respective
periods by the weighted average number of shares outstanding during the
applicable period.
At December 31, 1997, the Company adopted the Financial Accounting
Standards Board (FASB) Statement of Financial Accounting Standards (SFAS)
No. 128, EARNINGS PER SHARE (EPS) which replaced primary and fully diluted
earnings per share with basic and diluted earnings per share. Basic
earnings per share is calculated on the weighted average shares of common
stock outstanding during the period. Diluted earnings per share includes
the effect of all potential common shares.
5
<PAGE>
The following table is the reconciliation from the basic to the diluted EPS
computations for "net income" for the three and six month periods ended June
30, 1998 and 1997 (dollars except per share amounts in thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Numerator:
Net Income $ 6,512 $ 3,444 $ 10,048 $ 5,028
Less:
Dividends Paid to Preferred Stockholders (1,400) -- (2,800) --
---------- ---------- ---------- ----------
Income Available to Common
Stockholders for Basic and Diluted
Earnings Per Share $ 5,112 $ 3,444 $ 7,248 $ 5,028
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Denominator:
Shares for Basic Earnings Per Share-
weighted average shares outstanding 31,911,239 21,203,276 27,798,879 19,161,209
Effect of Dilutive Securities:
Stock Options 209,771 41,047 209,771 41,047
---------- ---------- ---------- ----------
Shares for Diluted Earnings Per Share 32,121,010 21,244,323 28,008,650 19,202,256
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Basic Earnings Per Share $ 0.16 $ 0.16 $ 0.26 $ 0.26
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Diluted Earnings Per Share $ 0.16 $ 0.16 $ 0.26 $ 0.26
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
In 1998, dividends and shares from conversion of Preferred Stock were
excluded from the diluted earnings per share calculations because they were
anti-dilutive. (There was no Preferred Stock for the 1997 periods
presented). In 1998 and 1997, minority interest expense and shares from the
conversion of Operating Partnership units were excluded from the diluted
earnings per share calculations because they were anti-dilutive.
3. SECURITIES
On May 11, 1998, at the Company's 1998 Annual Meeting, the holders of the
Company's Common Stock approved the issuance of Common Stock upon the
conversion of $70,000,000 stated value of the Company's outstanding Series
A Preferred Stock. As a result, the Company's consolidated balance sheet
was adjusted to reclassify $28,160,000 of Preferred Stock into
Stockholders' Equity.
6
<PAGE>
At June 30, 1998, the Company had effective shelf registration statements
on file with the Securities and Exchange Commission relating to an
aggregate of $202,144,000 of registered and unissued debt and equity
securities.
4. REAL ESTATE
Real Estate is summarized as follows (in thousands):
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
------------- -----------------
<S> <C> <C>
Retail Centers $931,618 $845,536
Office/Industrial Buildings 57,872 57,846
Retail Centers Under Development 97,820 56,443
Other 6,254 4,930
----------- --------
Total Real Estate 1,093,564 964,755
Accumulated Depreciation (67,841) (55,823)
----------- --------
Real Estate-Net $1,025,723 $908,932
----------- --------
----------- --------
</TABLE>
On February 3, 1998, the Company purchased a retail shopping center for
approximately, $14,825,000. The acquisition was financed with a new
$7,000,000, 7-year mortgage loan bearing interest at 7.54% secured by the
shopping center, with the balance coming from borrowings under the
Company's Credit Facility.
On May 28, 1998, the Company purchased a retail shopping center for
approximately, $31,500,000. The acquisition was financed by the assumption
of a $19,615,000 mortgage loan bearing interest at 9.20%, maturity in
September 2011; the issuance of Operating Partnership units with a value of
approximately, $10,715,000; and with the balance coming from borrowings
under the Company's Credit Facility. The issuer of the $19,615,000
mortgage note is a bankruptcy remote, special purpose, partnership in which
the Company has substantially all economic benefits.
On June 3, 1998, the Company purchased a portfolio of three retail shopping
centers. The purchase price of the portfolio was approximately,
$10,600,000. The acquisition of the portfolio was financed by the issuance
of Operating Partnership units with a value of approximately, $4,100,000;
and with the balance coming from borrowings under the Company's Credit
Facility.
On June 9, 1998, the Company purchased a portfolio of three retail shopping
centers. The purchase price of the portfolio was approximately,
$13,100,000. The acquisition of the portfolio was financed by the issuance
of Operating Partnership units with a value of approximately, $3,300,000;
the assumption of a mortgage loan in an amount of approximately, $4,000,000
bearing interest at 10.13%, due in September 2000, secured by one of the
properties; and with the balance coming from borrowings under the Company's
Credit Facility.
7
<PAGE>
5. SUBSEQUENT EVENTS
On July 23, 1998, the Company purchased a retail shopping center for
approximately, $9,600,000. The acquisition was financed with borrowings
under the Company's Credit Facility.
On July 31, 1998, the Company purchased a portfolio of three retail
shopping centers. The purchase price of the portfolio was approximately,
$15,500,000. The acquisition of the portfolio was financed with borrowings
under the Company's Credit Facility.
On August 4, 1998, the Company sold the parking lot structure of its 1000
Van Ness project for approximately, $13,125,000. Proceeds of $7,875,000
were used to reduce borrowings under a construction loan secured by this
project, with the remaining proceeds used to reduce borrowings under the
Company's Credit Facility. No gain or loss resulted from such sale.
8
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
June 30, 1998 and 1997:
During the three months ended June 30, 1998, net income increased $3,068,000 or
89%, to $6,512,000 ($0.16 per share) compared to $3,444,000 ($0.16 per share)
for the same period in 1997. For the six months ended June 30, 1998, net income
increased $5,020,000 or 100% to $10,048,000 ($0.26 per share) compared to
$5,028,000 ($0.26 per share) for the same period in 1997. Income available to
common stockholders increased to $5,112,000 for the three month period ended
June 30, 1998 from $3,444,000 in 1997. For the six month period, income
available to common stockholders increased from $5,028,000 in 1997 to $7,248,000
in 1998. The principal reasons for these changes are discussed in the following
paragraphs.
Compared to the same period in 1997, revenues increased $15,138,000 for the
three month period and $32,028,000 for the six month period. These increases
were primarily attributable to the acquisition activity in 1997 and 1998 and
a lease termination fee of approximately $1,795,000. The Company expects the
same tenant to pay a final lease termination fee of approximately $1,795,000
during the three months ending September 30, 1998, in addition to their
existing rental obligation of approximately $250,000.
Interest expense increased $3,024,000 for the 1998 three month period and
$9,159,000 for the 1998 six month period, as compared to the same period in
1997. This increase is attributable to the increase in debt related to the
Company's 1997 and 1998 acquisition activity, offset by the reduction in
borrowings of the Company's Credit Facility as a result of the March 1998 and
May 1997 Common Stock offerings. The debt outstanding (exclusive of
approximately $14,934,000 of fixed rate mortgage debt in unconsolidated
subsidiaries) on June 30, 1998 and related weighted average rate were
$544,857,000 and 7.61% respectively, compared to $281,723,000 and 7.91% on June
30, 1997. Interest capitalized in conjunction with development and expansion
projects was approximately $2,009,000 and $3,146,000 for the three and six
months ended June 30, 1998, respectively, as compared to approximately $778,000
and $1,471,000 for the same periods in 1997.
Rental operating expenses increased over 1997 by $3,839,000 for the 1998 three
month period and $8,462,000 for the 1998 six month period. This increase is
primarily attributable to the addition of new properties in 1997 and 1998.
General and administrative expenses increased $680,000 and $948,000 for the 1998
three and six month periods, respectively, as compared to the same periods in
1997. These increases reflect increased staffing levels and the opening of
offices in Concord, Sacramento, Fremont, Portland and Seattle.
Compared to the same period in 1997, depreciation and amortization expense
increased $3,363,000 for the 1998 three month period and $6,252,000 for the 1998
six month period. This increase is primarily attributable to the growth related
to the shopping centers acquired in 1997 and 1998.
9
<PAGE>
FUNDS FROM OPERATIONS
June 30, 1998 and 1997
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 means net income (computed in accordance with generally
accepted accounting principles), before gains (or losses) from debt
restructuring and sales of property, plus depreciation of real property. 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.
For the three and six months ended June 30, 1998, Basic FFO increased
$4,777,000 and $7,904,000 respectively, compared to the same period in 1997.
The increase was net of several effects, but was primarily attributable to
the increase in revenues from acquisitions and a lease termination fee of
approximately $1,795,000. The Company expects the same tenant to pay a
final lease termination fee of approximately $1,795,000 during the three
months ending September 30, 1998, in addition to their existing rental
obligation of approximately $250,000.
The calculation of FFO for the respective periods is as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income Available to
Common Stockholders $5,112 $3,444 $7,248 $5,028
Adjustments:
Depreciation of Real Estate and
Tenant Improvements 6,079 3,023 11,875 6,256
Amortization of Leasing Costs 171 118 325 208
Early Extinguishment of Debt -- -- -- 52
------- ------ ------- -------
Funds from Operations - Basic 11,362 6,585 19,448 11,544
Adjustments:
Dividends Paid to
Preferred Stockholders 1,400 -- 2,800 --
Minority Interest 1,159 11 2,325 22
------- ------ ------- -------
Funds from Operations - Dilutive $13,921 $6,596 $24,573 $11,566
------- ------ ------- -------
------- ------ ------- -------
</TABLE>
10
<PAGE>
MATERIAL CHANGES IN FINANCIAL CONDITION
June 30, 1998 compared to December 31, 1997:
On February 3, 1998, the Company purchased a retail shopping center for
approximately, $14,825,000. The acquisition was financed with a new
$7,000,000, 7-year mortgage loan bearing interest at 7.54% secured by the
shopping center, with the balance coming from borrowings under the Company's
Credit Facility.
On May 28, 1998, the Company purchased a retail shopping center for
approximately, $31,500,000. The acquisition was financed by the assumption of
a $19,615,000 mortgage loan bearing interest at 9.20%, maturity in September
2011; the issuance of Operating Partnership units with a value of
approximately, $10,715,000; and with the balance coming from borrowings under
the Company's Credit Facility. The issuer of the $19,615,000 mortgage note is
a bankruptcy remote, special purpose, partnership in which the Company has
substantially all economic benefits.
On June 3, 1998, the Company purchased a portfolio of three retail shopping
centers. The purchase price of the portfolio was approximately, $10,600,000.
The acquisition of the portfolio was financed by the issuance of Operating
Partnership units with a value of approximately, $4,100,000; and with the
balance coming from borrowings under the Company's Credit Facility.
On June 9, 1998, the Company purchased a portfolio of three retail shopping
centers. The purchase price of the portfolio was approximately, $13,100,000.
The acquisition of the portfolio was financed by the issuance of Operating
Partnership units with a value of approximately, $3,300,000; the assumption of a
mortgage loan in an amount of approximately, $4,000,000 bearing interest at
10.13%, due in September 2000, secured by one of the properties; and with the
balance coming from borrowings under the Company's Credit Facility.
As of June 30, 1998, and December 31, 1997 approximately, $4,006,000 and
$3,185,000, respectively, of straight-lined rent is included in other assets.
At June 30, 1998, the Company's total debt was approximately $544,857,000 and
consisted of approximately $373,462,000 of fixed rate debt, and $171,395,000 of
variable rate debt. The Company has a $205,000,000 Credit Facility of which
$135,000,000 is secured or to be secured by mortgages on various of the
Company's properties and $70,000,000 is unsecured. The Credit Facility bears
interest at rates of LIBOR (London Inter-Bank Offer Rate) plus 1.40% for secured
borrowings or LIBOR plus 1.50% for unsecured borrowings. The Credit Facility is
scheduled to mature in November 1998, with a one year extension option
available. At June 30, 1998, borrowings of approximately $100,888,000 were
outstanding under the secured portion of the Credit Facility and $36,981,000 was
outstanding under the unsecured portion.
11
<PAGE>
At June 30, 1998, the Company had approximately $31,925,000 outstanding under a
$44,457,000 construction loan, secured by one of the Company's development
properties. The remaining availability of $12,532,000 is expected to be used to
fund the completion of a 131,500 square foot entertainment center in downtown
San Francisco, California. Borrowings under this loan bear interest at LIBOR
plus 1.90% or at prime plus .50%. The loan matures in January 1999.
At June 30, 1998, the Company's capitalization consisted of $544,857,000 of debt
(excluding the Company's proportionate share of joint venture mortgage debt
which is approximately 25% of $14,934,000), $120,000,000 of preferred stock and
preferred Operating Partnership units, and approximately $478,723,000 of market
equity (market equity is defined as (i) the sum of the number of outstanding
shares of Common Stock of the Company plus Common Units of the Operating
Partnership held by partners of the Operating Partnership other than the
Company, multiplied by (ii) the closing price of the share of Common Stock on
the New York Stock Exchange at June 30, 1998 of $14.1875) resulting in a debt to
total market capitalization ratio of .48 to 1.0 compared to the ratio of .53 to
1.0 at December 31, 1997.
On March 30, 1998, the Company issued 7,475,000 shares of Common Stock at a
public offering price of $14.125 per share. In addition, on March 30, 1998, the
Company issued 965,518 shares of Common Stock to a Unit Investment Trust at a
price based upon the March 25, 1998 market value of $14.50 per share. The
combined shares were sold pursuant to the Company's shelf registration
statements. The net proceeds from the combined offerings of $113,353,000 were
used to reduce borrowings under the Company's Credit Facility, pay off the
balance outstanding under a construction loan agreement secured by one of the
Company's development properties and for general working capital purposes.
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 borrowings and public
offerings, private placements of debt and equity securities and proceeds from
sales of non-strategic assets. At June 30, 1998, the Company had effective
shelf registration statements on file with the Securities and Exchange
Commission relating to an aggregate of $202,144,000 of registered and unissued
debt and equity securities.
YEAR 2000 ISSUES
The Company recognizes the importance and complexity of the Year 2000 issue.
A Year 2000 Committee has been formed to formulate the overall Company-wide
strategic plan, and to manage the Company's Y2k efforts. This plan includes
assessing the exposure to internal and external risks. The Company has
substantially completed the assessment of internal risks relative to computer
systems and believes that most of these systems are either Y2k compliant, or
will be compliant by the first quarter of 1999. In connection with the
Company's operating properties, the Company is evaluating all systems that
contain embedded chips such as security systems, escalators, lighting, and
HVAC systems. The Company will continue to commit the resources necessary to
the management and elimination of Y2k risks. Although it is not possible to
quantify the total cost of all corrections at this time, the Company does not
expect that these costs will have a material adverse effect on its operations
or financial condition. The Company expects that all internal Y2k issues
will be solved prior to the year 2000.
The Company is currently evaluating the Y2k readiness of third parties such as
tenants and vendors, and the impact, if any on the Company. However, the
Company cannot quantify or ensure that these external systems, whether certified
to be Y2k compliant or not, would not create difficulties before, on, or after
the year 2000.
12
<PAGE>
FORWARD LOOKING STATEMENTS
The preceding comments in this Form 10-Q contain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. Reference is made to the Company's Form
10-K Report for the year ended December 31, 1997 under the caption "Risk
Factors" for a discussion of certain factors which could cause the Company's
actual results to differ materially from those set forth in the forward-looking
statements.
13
<PAGE>
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS:
The Corporation was not a party to any material legal proceedings during the
period covered by this report or subsequently.
ITEM 2. CHANGES IN SECURITIES:
During the three months ended June 30, 1998, the Operating Partnership of
which the Company is the general partner, issued 1,236,123 limited partnership
units in connection with the acquisition of a retail shopping center and two
portfolios containing six retail shopping centers. Each such limited
partnership unit is redeemable under certain circumstances for a share of the
Company's Common Stock. No registration statement was necessary as the
issuance did not involve a public offering.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES:
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
On May 11, 1998, the Company held its regular Annual Meeting of Shareholders.
Proxies for such meeting were solicited pursuant to Regulation 14 under the
Act. At such meeting, three matters were presented for vote. The matters were
(1) the election of nine directors; (2) the approval to issue the
Corporation's Common Stock upon the conversion or exchange of all of the
Series 1997-A Convertible Preferred Stock of the Corporation and all of the
Common Operating Partnership units and Preferred Operating Partnership units
of the Corporation's recently formed operating partnership, Burnham Pacific
Operating Partnership, L.P., and; (3) the approval of amendments to the
Company's stock option and incentive plan. There was no solicitation in
opposition to the nominated Directors and all such directors were elected for
a one-year term.
Shares were voted as follows:
<TABLE>
<CAPTION>
WITHHELD/ BROKER
FOR AGAINST ABSTAINED NON-VOTES
--- ------- --------- --------------
<S> <C> <C> <C> <C>
(1) Election of Directors
---------------------
Malin Burnham 24,299,721 0 171,794 0
James D. Harper, Jr. 24,294,692 0 176,823 0
James D. Klingbeil 24,301,485 0 170,030 0
J. David Martin 24,308,129 0 163,386 0
Nina B. Matis 24,290,852 0 180,663 0
Donne P. Moen 24,311,168 0 160,347 0
Thomas A. Page 24,288,458 0 183,057 0
Philip S. Schlein 24,299,708 0 171,807 0
Robin Wolaner 24,302,461 0 161,054 0
(2) Issuance Upon Conversion 18,315,193 358,968 303,697 440,873
------------------------
(3) Stock Option and Incentive Plan 22,058,948 2,032,663 379,729 0
-------------------------------
</TABLE>
14
<PAGE>
ITEM 5. OTHER INFORMATION:
Not Applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
(a) The following Exhibits are part of this report:
The contracts filed as Exhibits to the Form 8-K reports described in
(b) below are incorporated by reference herein.
27.0 Financial Data Schedule.
(b) The following reports on Form 8-K were filed during or with respect to
matters occurring within the period covered by this report:
Form 8-K Report filed April 6, 1998, (earliest event reported March 24, 1998):
Item 5, regarding underwriting agreement regarding the underwritten public
offering of 7,465,518 shares of the Company's Common Stock and an option to
purchase an additional 975,000 shares of Common Stock.
Form 8-K Report filed June 1, 1998, (earliest event reported May 11, 1998): Item
5, regarding amendment to the Agreement of Limited Partnership of Burnham
Pacific Operating Partnership, L.P.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BURNHAM PACIFIC PROPERTIES, INC.
Date: 8/13/98 By: /s/ J. David Martin
----------------------- ------------------------------------------
J. David Martin, Chief Executive Officer
Date: 8/13/98 By: /s/ Daniel B. Platt
----------------------- ------------------------------------------
Daniel B. Platt, Chief Financial Officer
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 11,273<F1>
<SECURITIES> 0
<RECEIVABLES> 11,139
<ALLOWANCES> 1,575
<INVENTORY> 0
<CURRENT-ASSETS> 36,712<F2><F3>
<PP&E> 1,093,564
<DEPRECIATION> 67,841
<TOTAL-ASSETS> 1,062,435
<CURRENT-LIABILITIES> 20,621
<BONDS> 544,857
0
68,894
<COMMON> 357,039
<OTHER-SE> (99,053)
<TOTAL-LIABILITY-AND-EQUITY> 1,062,435<F4><F5>
<SALES> 61,538
<TOTAL-REVENUES> 61,992
<CGS> 16,498
<TOTAL-COSTS> 16,498
<OTHER-EXPENSES> 15,684
<LOSS-PROVISION> 350
<INTEREST-EXPENSE> 17,215
<INCOME-PRETAX> 7,248
<INCOME-TAX> 0
<INCOME-CONTINUING> 7,248<F6><F7><F8>
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,248
<EPS-PRIMARY> .26
<EPS-DILUTED> .26
<FN>
<F1>Includes 5,054 of restricted cash.
<F2>Includes 3,683 of Investment in Unconsolidated Subsidiaries.
<F3>Also includes 12,196 of Other Assets and 9,560 of Receivables-Net.
<F4>Includes 524,639 of paid in capital in excess of par.
<F5>Also includes 71,024 of Minority Interest.
<F6>Includes 2,800 Dividends paid to Preferred Stockholders.
<F7>Includes 2,325 Minority Interest.
<F8>Also includes 128 of Income from Unconsolidated Subsidiaries.
</FN>
</TABLE>
