<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
- - --- EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 1995
___ 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 1-9639
REAL ESTATE INVESTMENT TRUST OF CALIFORNIA
(Exact name of registrant as specified in its charter)
CALIFORNIA 95-2565432
(State or other jurisdiction of (I.R.S. Employer I.D. Number)
incorporation or organization)
12011 SAN VICENTE BLVD., SUITE 707
LOS ANGELES, CALIFORNIA 90049
(Address of principal executive offices) Zip Code
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (310) 476-7793
NOT APPLICABLE
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 .
--- ---
Shares of Beneficial Interest outstanding
as of March 31, 1995 - 9,324,317
<PAGE>
REAL ESTATE INVESTMENT TRUST OF CALIFORNIA
PART I - FINANCIAL INFORMATION
Item 1: Consolidated Balance Sheets (Unaudited) (Note 1)
<TABLE>
<CAPTION>
Mar. 31, Dec. 31,
1995 1994
--------------------------------
($ in thousands)
ASSETS
<S> <C> <C>
Investments in Rental Properties . . . . . .
Land . . . . . . . . . . . . . . . . . . . 44,220 $ 44,213
Buildings and improvements . . . . . . . . 164,114 162,015
-------- --------
208,334 206,228
Less accumulated depreciation. . . . . . (20,103) ( 18,889)
-------- --------
188,231 187,339
Investment in Unconsolidated Partnership . . 1,416 1,524
Notes Receivable Secured by Real Properties. 5,384 7,437
Cash . . . . . . . . . . . . . . . . . . . . 1,362 867
Other Assets . . . . . . . . . . . . . . . . 1,023 1,793
-------- --------
$197,416 $198,963
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes Payable. . . . . . . . . . . . . . . . $ 87,261 $ 88,675
Accounts Payable and Accrued Expenses. . . . 2,053 1,901
Distributions Payable to Shareholders. . . . 3,310 3,299
-------- --------
92,624 93,875
-------- --------
SHAREHOLDERS' EQUITY
Shares of Beneficial Interest - no
par value - unlimited shares
authorized; 9,324,317 shares in
1995 and 9,294,251 shares in 1994
issued and outstanding . . . . . . . . . . 104,792 105,090
-------- --------
$197,416 $198,965
-------- --------
-------- --------
</TABLE>
See accompanying Notes to Financial Information
2
<PAGE>
REAL ESTATE INVESTMENT TRUST OF CALIFORNIA
PART I - FINANCIAL INFORMATION
Item 1: Consolidated Statements of Income (Unaudited) (Note 1)
<TABLE>
<CAPTION>
For the Three Months Ended
March 31, March 31,
1995 1994
---------------------------------------
($ in thousands, except per-share data)
<S> <C> <C>
REVENUES
Rental . . . . . . . . . . . . . . . . $8,066 $5,719
Interest/Other . . . . . . . . . . . . 351 290
------ ------
8,417 6,009
------ ------
REAL ESTATE EXPENSES
Depreciation . . . . . . . . . . . . . 1,322 851
Interest . . . . . . . . . . . . . . . 1,733 605
Property Taxes . . . . . . . . . . . . 469 252
Repairs and Maintenance. . . . . . . . 435 285
Insurance. . . . . . . . . . . . . . . 59 31
Leasing Commissions and Payroll. . . . 519 320
Utilities. . . . . . . . . . . . . . . 520 350
Other. . . . . . . . . . . . . . . . . 428 260
----- -----
5,485 2,954
----- -----
ADMINISTRATIVE EXPENSES
Trustees Fees. . . . . . . . . . . . . 30 21
Professional Services. . . . . . . . . 37 36
Salaries and Overhead. . . . . . . . . 252 231
------ ------
319 288
------ ------
NET INCOME . . . . . . . . . . . . . . . $2,613 $2,767
------ ------
FUNDS FROM OPERATIONS - NOTE 5 . . . . . $3,958 $3,638
------ ------
Weighted Average Shares Outstanding
(in thousands). . . . . . . . . . . . . 9,306 9,246
Per Share Data
Net Income. . . . . . . . . . . . . . . $.281 $.299
---- ----
Cash Distributions. . . . . . . . . . . $.355 $.330
---- ----
</TABLE>
See accompanying Notes to Financial Information
3
<PAGE>
REAL ESTATE INVESTMENT TRUST OF CALIFORNIA
PART I - FINANCIAL INFORMATION
Item 1: Consolidated Statements of Cash Flows (Unaudited) (Note 1)
<TABLE>
<CAPTION>
For the Three Months Ended
March 31, March 31,
1995 1994
---------------------------
($ in thousands)
<S> <C> <C>
Cash Flow from operating activities:
Net income . . . . . . . . . . . . . . . . $2,613 $2,767
Adjustment to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization. . . . . . . 1,345 871
Decrease (increase) other assets . . . . . 884 ( 259)
Increase (decrease) in accounts payable. . 153 254
------- -------
Net cash provided by operating activities. . 4,995 3,633
------- -------
Cash flows from investing activities:
Additions to buildings and improvements. . ( 2,106) ( 306)
Purchases of rental properties . . . . . . -0- (20,142)
Collections on notes receivable. . . . . . 2,054 6
------- -------
Net Cash (used in) provided by . . . . . . .
investing activities . . . . . . . . . . . ( 52) (20,442)
------- -------
Cash flow from financing activities:
Principal payments on notes payable
and lines of credit . . . . . . . . . . . ( 1,414) (32,750)
Distributions to Shareholders. . . . . . . ( 3,299) ( 3,048)
Proceeds from long-term unsecured
borrowings. . . . . . . . . . . . . . . . -0- 55,000
Net proceeds from sale of Shares of
Beneficial Interest . . . . . . . . . . . 265 171
------- -------
Net cash provided by (used in) financing
activities . . . . . . . . . . . . . . . . ( 4,448) 19,373
------- -------
Net increase in cash . . . . . . . . . . . . 495 2,564
Cash at beginning of period. . . . . . . . . 867 218
------- -------
Cash at end of period. . . . . . . . . . . . $ 1,362 $ 2,782
------- -------
</TABLE>
See accompanying Notes to Financial Information
4
<PAGE>
REAL ESTATE INVESTMENT TRUST OF CALIFORNIA
PART I - FINANCIAL INFORMATION (Unaudited)
Item 1: Notes to Financial Information
Note 1: Reference is made to Notes to Audited Consolidated Financial
Statements appearing in the Annual Report to Shareholders for the year ended
December 31, 1994.
Note 2: All adjustments which, in the opinion of management, are necessary
for a fair statement of the results for the interim periods shown are reflected
therein.
Note 3: The consolidated financial statements include the accounts of
REIT-Santa Maria Properties, Ltd., a limited partnership in which the Trust is
general partner and has significantly all the partnership capital. The accounts
of the limited partnership have been consolidated with those of the Trust as of
April 15, 1981, the date when the partnership interest was acquired.
Note 4: No provision has been made for income taxes as the Trust believes
that it qualifies as a real estate investment trust under Sections 856-860 of
the Internal Revenue Code and under similar state statutes.
Note 5: Funds from Operations are calculated by adding back the non-cash
depreciation and amortization of direct Finance Lease charges to net income.
The Trust believes that Funds from Operations is an appropriate supplemental
measure of operation performance.
5
<PAGE>
REAL ESTATE INVESTMENT TRUST OF CALIFORNIA
PART I - FINANCIAL INFORMATION (Unaudited)
Item 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations
OVERVIEW
Real Estate Investment Trust of California is a regionally focused, self-
administered equity real estate investment trust which owns a diversified
portfolio of real estate investments. The Trust primarily currently invests in
apartment communities which offer attractive current returns, solid potential
for long-term appreciation and earnings growth. The continuing policy of the
Trust is to emphasize Funds from Operations (FFO) rather than the realization of
capital gains through property dispositions, although in furtherance of the
strategy emphasizing apartment investments, the Trust is contemplating the
possible disposition of certain shopping center investments. Revenues of the
Trust consist primarily of rental income derived from its portfolio of income-
producing properties and to a much lesser extent interest income from secured
notes receivable.
The Trust continues to focus on equity investments in apartment communities
in various diversified markets, including Northern and Southern California,
Arizona and Nevada. Market conditions have adjusted investment yields of
apartment communities more in line with the general real estate market for
investment grade real estate. In furtherance of this strategic focus, during
1994 the Trust acquired nine apartment communities totaling 1,381 units. These
and prior acquisitions are the basis of a major impact on the financial
operations of the Trust. No apartment communities were acquired in the first
quarter of 1995, as the Trust focused its activities on the management of its
core portfolio of assets.
The Trust acquired the following apartment properties in 1991, 1992, 1993
and 1994:
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------
MONTH # OF PROPERTY PURCHASE PER
ACQUIRED UNITS LOCATION PRICE UNIT
- - -----------------------------------------------------------------------------------------------------
FOR YEAR 1991
- - -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
WindRush Village
Apartments March 366 Colton, CA $15,450,000 $42,200
- - -----------------------------------------------------------------------------------------------------
Los Senderos
Apartments April 120 Phoenix, AZ 3,200,000 26,700
- - -----------------------------------------------------------------------------------------------------
Brentwood
Apartments December 224 Phoenix, AZ 3,950,000 17,600
- - -----------------------------------------------------------------------------------------------------
Shadow Bend
Apartments December 108 Scottsdale, AZ 3,200,000 29,600
- - -----------------------------------------------------------------------------------------------------
FOR YEAR 1992
- - -----------------------------------------------------------------------------------------------------
Park Scottsdale
Apartments September 128 Scottsdale, AZ $4,175,000 32,600
- - -----------------------------------------------------------------------------------------------------
Monte Vista
Apartments December 60 Phoenix, AZ 900,000 15,000
- - -----------------------------------------------------------------------------------------------------
Ocotillo
Apartments December 173 Phoenix, AZ 2,400,000 13,900
- - -----------------------------------------------------------------------------------------------------
FOR YEAR 1993
- - -----------------------------------------------------------------------------------------------------
Telegraph Canyon Villas
Apartments February 183 Chula Vista , CA $11,200,000 61,200
- - -----------------------------------------------------------------------------------------------------
Posada del Este
Apartments April 148 Phoenix, AZ 3,400,000 23,000
- - -----------------------------------------------------------------------------------------------------
Lakeview
Apartments August 300 San Diego, CA 15,300,000 51,000
- - -----------------------------------------------------------------------------------------------------
6
<PAGE>
- - -----------------------------------------------------------------------------------------------------
MONTH # OF PROPERTY PURCHASE PER
ACQUIRED UNITS LOCATION PRICE UNIT
- - -----------------------------------------------------------------------------------------------------
FOR YEAR 1994
- - -----------------------------------------------------------------------------------------------------
Hazel Ranch
Apartments February 208 Fair Oaks, CA $8,900,000 42,800
- - -----------------------------------------------------------------------------------------------------
The Summit
Apartments February 125 Chino Hills, CA 7,495,000 60,000
- - -----------------------------------------------------------------------------------------------------
Countryside Village
Apartments February 96 El Cajon, CA 3,700,000 38,500
- - -----------------------------------------------------------------------------------------------------
Stonegate
Apartments June 310 Phoenix, AZ 13,550,000 43,700
- - -----------------------------------------------------------------------------------------------------
Cypress Springs II
Apartments June 144 Las Vegas, NV 7,500,000 52,100
- - -----------------------------------------------------------------------------------------------------
Tango
Apartments July 136 Las Vegas, NV 7,700,000 56,600
- - -----------------------------------------------------------------------------------------------------
Shaliko
Apartments October 151 Rocklin, CA 8,550,000 56,600
- - -----------------------------------------------------------------------------------------------------
Rocklin Gold
Apartments November 121 Rocklin, CA 6,300,000 52,000
- - -----------------------------------------------------------------------------------------------------
Quail Chase
Apartments December 90 Folsom, CA 5,500,000 61,100
- - -----------------------------------------------------------------------------------------------------
Total 3,191 $132,370,000 $41,500
- - -----------------------------------------------------------------------------------------------------
</TABLE>
ACQUISITION RECAP BY STATE
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------
TOTAL AVERAGE % INVESTMENT
STATE # OF UNITS INVESTMENT UNIT COST BY STATE
- - ------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CALIFORNIA 1,640 $82,395,000 $50,200 62%
- - ------------------------------------------------------------------------
ARIZONA 1,271 34,775,000 $27,400 26%
- - ------------------------------------------------------------------------
NEVADA 280 15,200,000 $54,300 12%
- - ------------------------------------------------------------------------
TOTAL: 3,191 $132,370,000 $41,000 100%
- - ------------------------------------------------------------------------
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
The Trust has lines of credit with Sanwa Bank ($29,000,000) and Union Bank
($7,500,000) for use in the acquisition of income producing properties and
general operating purposes, including the payment of distributions to
shareholders. Reference is made to the Notes to the Trust's 1994 Annual Report
to Shareholders for full details of the terms of these lines of credit. As of
March 31, 1995, the Trust had outstanding balances on the lines of credit of
$28,000,000.
The Trust is actively marketing two shopping center investments, that if
sold, would generate additional funds to be used to reduce short-term debt or be
reinvested in additional apartment communities. There can be no guarantee that
these properties can be sold on terms acceptable to the Trust. On November 1,
1994, the Trust sold the La Verne Towne Center, La Verne, California, for a net
sales price of $13,300,000. The funds were used to reduce outstanding
borrowings under the Trust's lines of credit and for property acquisitions.
As the owner of real estate, the Trust is subject to risks arising in
connection with the underlying real estate such as defaults or nonrenewal of the
leases, increased operating costs, environmental problems, financing
availability, changes in real estate and zoning laws and increases in real
property tax rates. The success of the Trust also depends upon trends of the
economy, including interest rates, income tax laws, governmental regulation and
legislation, and population changes.
CHANGES IN RESULTS OF OPERATIONS - FOR THE THREE MONTHS ENDED MARCH 31,1995 AND
MARCH 31, 1994
The following table summarizes the financial comparison of the three months
ended March 31, 1995 and March 31, 1994 ($ in thousands, except per share data).
7
<PAGE>
<TABLE>
<CAPTION>
MARCH 31, MARCH 31, PERCENTAGE
FOR THE THREE MONTHS ENDED 1995 1994 CHANGE
- - --------------------------------------------------------------------------------
<S> <C> <C> <C>
Total revenues $8,417 $6,009 40.1%
- - --------------------------------------------------------------------------------
Depreciation 1,322 851 55.3
- - --------------------------------------------------------------------------------
Interest 1,733 605 186.4
- - --------------------------------------------------------------------------------
Property operating costs 2,430 1,498 62.2
- - --------------------------------------------------------------------------------
Administrative expenses 319 288 10.8
- - --------------------------------------------------------------------------------
NET INCOME $2,613 $2,767 (5.6%)
- - --------------------------------------------------------------------------------
RECONCILIATION TO FUNDS FROM OPERATIONS
- - --------------------------------------------------------------------------------
Add:
- - --------------------------------------------------------------------------------
Depreciation 1,322 851
- - --------------------------------------------------------------------------------
Amortization of Direct Finance
Leases 23 20
- - --------------------------------------------------------------------------------
FUNDS FROM OPERATIONS (FFO) $3,958 $3,638 8.8%
- - --------------------------------------------------------------------------------
Weighted Average Shares
Outstanding (000's) 9,306 9,246
- - --------------------------------------------------------------------------------
PER SHARE FUNDS FROM OPERATIONS $0.425 $0.393 8.1%
- - --------------------------------------------------------------------------------
</TABLE>
The improved financial results of the Trust, as measured by increased Funds
from Operations, has primarily been effected by the acquisition of apartment
communities. Revenues, real estate expenses and Funds from Operations have
increased from March 31, 1994 to March 31, 1995 primarily due to those
acquisitions and improvements in occupancies and operating performances of
existing apartment investments. As new investments were acquired, depreciation
expense has increased. In March 1994, the Trust funded the Prudential Insurance
Company of America $55,000,000 unsecured note payable. The interest on this
borrowing is the major portion of the increase in interest expense between the
periods. These funds were used to fund 1994 property acquisitions. The
operating costs increased due to the 1994 property acquisitions totaling 1,381
apartment units, as shown in the table above.
Expenses related to apartment operations, which include payroll of on-site
personnel (such as resident managers, leasing staff, maintenance and janitorial
staff), utilities, advertising, direct office expenses and management fees, have
increased in direct relation to acquisitions of those properties. All operating
expenses for apartment complexes, including real property taxes and insurance,
but excluding depreciation, range from approximately 35% to 40% of gross
scheduled income. This compares to retail and commercial properties, which are
generally leased on a "net" basis with the tenant paying operating expenses.
The retail portfolio continues to experience weakness in rental rates and
occupancy due to the effects of the Southern California economy.
8
<PAGE>
REAL ESTATE INVESTMENT TRUST OF CALIFORNIA
PART II - OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2: Changes in Securities - None
Item 3: Defaults upon Senior Securities - None
Item 4: Submission of Matters to a Vote of Security Holders
On April 19, 1995, Real Estate Investment Trust of California held its
Annual Meeting of Shareholders. At that meeting, seven Trustees were elected to
serve until the next Annual Meeting.
The following table sets forth the voting results for the respective
Trustees.
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
For Against Withheld Abstain Broker Nonvotes
- - --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Austin Anderson 8,145,625 -0- -0- -0- -0-
- - --------------------------------------------------------------------------------
William E. Borsari 8,145,625 -0- -0- -0- -0-
- - --------------------------------------------------------------------------------
Roger P. Kuppinger 8,142,466 -0- 3,159 -0- -0-
- - --------------------------------------------------------------------------------
Marshall C. Milligan 8,145,625 -0- -0- -0- -0-
- - --------------------------------------------------------------------------------
Jay W. Pauly 8,145,625 -0- -0- -0- -0-
- - --------------------------------------------------------------------------------
Gregory M. Simon 8,145,625 -0- -0- -0- -0-
- - --------------------------------------------------------------------------------
R. Randall Woods 8,145,625 -0- -0- -0- -0-
- - --------------------------------------------------------------------------------
</TABLE>
Item 5: Other Information - None
Item 6: Exhibits and Reports on Form 8-K - None
SIGNATURE
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 duly authorized.
REAL ESTATE INVESTMENT TRUST OF CALIFORNIA
Date:__________________ By:__________________________________________
LEROY E. CARLSON
Vice President, Secretary and Treasurer
(for the Registrant and as Chief
Accounting Officer)
9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 1362
<SECURITIES> 0
<RECEIVABLES> 5384
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 208334
<DEPRECIATION> 20103
<TOTAL-ASSETS> 197416
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 104792
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 197416
<SALES> 8417
<TOTAL-REVENUES> 8417
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3752
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1733
<INCOME-PRETAX> 2613
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2613
<EPS-PRIMARY> .281
<EPS-DILUTED> .281
</TABLE>
