<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1 TO:
(Mark One)
[X] 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, 1994 or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No Fee Required)
For the transition period from______________to____________
Commission File No. 1-9639
REAL ESTATE INVESTMENT TRUST OF CALIFORNIA
(Exact name of Registrant as specified in its Declaration of Trust)
CALIFORNIA 95-2565432
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
12011 SAN VICENTE BLVD., SUITE 707
LOS ANGELES, CALIFORNIA 90049-4949
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (310)-476-7793
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
SHARES OF BENEFICIAL INTEREST NEW YORK STOCK EXCHANGE
COMMON STOCK PURCHASE RIGHTS NEW YORK STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act:
NONE
Title of Class
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
At February 2, 1995, 9,309,286 Shares of Beneficial Interest of the
Registrant were outstanding and the aggregate market value of the shares held
by non-affiliates of the Registrant, based on the closing price ($15.25) of the
Registrant's Shares of Beneficial Interest on the New York Stock Exchange on
such date was $140,547,325. For purposes of this computation, 93,068 shares of
the Registrant's Shares of Beneficial Interest held by its trustees and
officers have been excluded; such exclusion is not intended, and should not be
deemed, to be an admission that such persons are affiliates of the Registrant.
DOCUMENTS INCORPORATED BY REFERENCE:
PARTS I and II: Portions of the Annual Report to Shareholders for the year
ended December 31, 1994.
PART III: Portions of the Proxy Statement for Annual Meeting of Shareholders
to be held on April 19, 1995.
<PAGE>
PART I
ITEM 1 - BUSINESS
Real Estate Investment Trust of California ("REIT-Cal" or the "Trust") is a
regionally focused, self-administered equity real estate investment trust
which has investments in a diversified portfolio of 42 (as of March 4, 1995)
income-producing properties, 32 of which are located in California, 8 of
which are located in Arizona and 2 of which are located in Nevada. The Trust
was organized in October 1968 at which time it succeeded to the business of
its two corporate predecessors, the first of which was founded in 1890. The
42 properties in which the Trust has invested contain, in the aggregate,
approximately 4,113,000 net rentable square feet of improvements on
approximately 261 acres of land.
REIT-Cal's principal executive offices are located at 12011 San Vicente
Blvd., Suite 707, Los Angeles, California 90049 and its telephone number is
(310) 476-7793.
The following tables indicate the composition of the Trust's real estate
investments by type of property and location.
PORTFOLIO SUMMARY
Portfolio Distribution by Property
<TABLE>
<CAPTION>
Number of Percent of
Investments Cost
----------- ----------
<S> <C> <C>
Apartment Complexes........................ 22 69
Shopping Centers........................... 6 17
Industrial and Commercial Properties....... 11 8
Medical Office Buildings................... 3 6
---- ----
Total 42 100%
</TABLE>
Portfolio Distribution by County in California, Arizona and Nevada:
<TABLE>
<S> <C>
California:
Ventura County.......................... 10
Los Angeles County...................... 6
Orange County........................... 3
San Diego County........................ 3
Riverside County........................ 2
Santa Barbara County.................... 1
San Bernardino County................... 2
Sacramento ............................. 2
Placer County........................... 2
Kern County............................. 1
Arizona:
Maricopa County......................... 8
Nevada
Clark County............................ 2
----
Total 42
</TABLE>
There is hereby incorporated by reference the information contained under the
caption, "SCHEDULE OF INVESTMENTS" on page four of the Registrant's Annual
Report to Shareholders for the year ended December 31, 1994, as filed with
the Commission pursuant to Regulation 14c-3(b) of the Rules and Regulations
of the Commission, hereinafter the "Registrant's 1994 Annual Report."
2
<PAGE>
REIT-Cal's strategy is to invest in existing income producing properties
which offer the potential for providing attractive current returns, income
growth and capital appreciation. The Trust emphasizes cash investments
ranging in size from approximately $3,000,000 to approximately $15,000,000 in
properties located in California and adjacent states, geographic areas in
which the Trust believes it has extensive market knowledge. The Trust seeks
property investments which it believes will benefit from its management
capabilities.
REIT-Cal believes that it can compete effectively for properties because it
operates in a specific market segment, is a cash buyer and has the ability to
respond quickly to investment opportunities. The Trust generally offers
prospective sellers all cash, which it believes enables it to achieve more
favorable terms than buyers whose offers are contingent upon obtaining
financing.
The Trust seeks to increase the income it receives each year from the
properties it owns. Substantially all of the Trust's properties leased to
commercial tenants are leased under long-term leases which provide for rent
increases based upon scheduled or market rate increases, increases in
consumer price indices or percentage participations in a tenant's gross
sales. The Trust's apartments and mini-warehouses are leased under short-
term leases which permit the Trust to negotiate rental increases upon
renewal. Historically, the Trust's yields from its income producing
properties have increased as the properties have matured. Over the long
term, the Trust believes the value of its properties increases as the yields
from those properties increases.
MANAGEMENT
Effective October 1, 1990, the Trust became self-administered upon the
termination of its long-term (from 1980 to 1990) Advisory Contract. The
Trust is responsible for all day-to-day operations and directly incurs the
costs of management, including, but not limited to, direct payroll and
benefits, office rent, office expenses and other administrative costs.
EMPLOYEES
The Trust has 12 employees (including the officers of the Trust) who perform
the day-to-day administrative duties of the company. The Trust had, at
December 31, 1994, an additional 72 on-site apartment managers and other on-
site employees. In addition, the Trust has contracted with two outside
property management firms to manage four of the Trust's apartment properties.
Trustees and officers of the Trust may obtain reimbursement from the Trust
pursuant to terms of the Declaration of Trust for expenses and all other
costs incurred by such persons in the performance of their duties. However,
this reimbursement obligation of the Trust is not currently covered by
insurance due to the high cost of insurance generally.
COMPETITION
The Trust competes with many similar domestic and foreign real estate
companies for investments in quality properties and for tenants to occupy the
space in its shopping centers, industrial and commercial projects, and
apartment complexes.
ITEM 2 - PROPERTIES
The Trust is headquartered in a leased office of approximately 4,700 square
feet in the Brentwood area of Los Angeles, California. The lease expires in
June 2000.
As to the Trust's investment properties, many of the commercial leases
contain provisions which require scheduled increases in base rental
contingent upon various consumer price indices or percentage rental payments
if sales exceed specified amounts. A majority of the Trust's commercial
properties are subject to leases pursuant to which the tenants are
responsible for most day-to-day operating expenses, such as real estate
taxes, utilities, insurance and normal maintenance and repair. These leases
usually provide that the Trust, as landlord, must
3
<PAGE>
repair and maintain building exteriors, outside plumbing, electrical and
other equipment and, in the case of shopping centers, common areas (including
parking lots).
Expenses related to apartment operations, which include property taxes,
repairs and maintenance, property insurance, payroll of on-site personnel
(such as resident managers, leasing staff, maintenance and janitorial staff),
utilities, advertising, direct office expenses and management fees, are paid
for by the Trust. All operating expenses for apartment complexes, including
real property taxes and insurance, but excluding depreciation and interest,
range from approximately 35% to 40% of Gross Scheduled Income. All of the
leases with residents are for one year or less.
Substantially all of the commercial leases require the tenants to carry
casualty and liability coverage on the properties. In the opinion of the
Trustees, all the Trust's properties are adequately insured, but the Trust
does not carry earthquake or flood insurance. Most of the Trust's properties
are located in areas of California where earthquakes have been known to
occur. Earthquake insurance, when it can be obtained, typically carries a
high premium cost and has a high deductible clause. Having evaluated the
risk/cost relationship, the Trustees have elected not to carry earthquake
insurance.
As the Trust has focused on apartment investments in regionally diverse areas
(Northern and Southern California, Las Vegas, Nevada, and Phoenix, Arizona)
the Trustees have elected not to carry earthquake insurance on those
investments.
Due to this continued expansion into multi-family investments in 1994, no one
investment had a book value equal to 10% or more of the total assets or
gross revenue equal to 10% or more of aggregate gross revenue of the Trust.
During 1994, the Trust's overall economic occupancy rate was 95%.
POTENTIAL ENVIRONMENTAL RISKS
Investments in real property create a potential for environmental liability
on the part of the owner of or any mortgage lender on such real property. If
hazardous substances are discovered on any of the Trust's properties or
discovered to be emanating from any of the Trust's properties, the owner or
operator of the property (including the Trust) may be held strictly liable
for all costs and liabilities relating to such hazardous substances. In
August 1989, the Trust adopted a policy of conducting a Phase I environmental
study on each property it seeks to acquire and a Phase I environmental study
has been made on each property acquired since that date. The Trust is the
lessee and a sublessor as to certain property located in the County of
Ventura that is currently operated by a sub-tenant as a gasoline station. In
1987, the County of Ventura initially notified the sub-tenant that its
underground fuel tanks would have to be removed and replaced with a double-
walled secondary containment system. The amount, extent and cost to
remediate the contamination, if any, and the cost of compliance with the
County's requirements, has not yet been ascertained. The Trust believes that
the sub-tenant is responsible for the compliance and clean up but in the
event that the sub-tenant fails to perform, the Trust may be required to
cause the property to be brought into compliance with the County's
requirements.
In October 1994 a Phase I environmental assessment was prepared on the Santa
Fe Springs Shopping Center. The Phase I study indicated the presence of
contamination from a prior dry cleaning operation on the property. The Trust
is proceeding with a remediation program to remove such contamination.
Management of the Trust believes that the cost of remediation of the above
described gas station site or the dry cleaner site will not have a material
adverse effect on the Trust's consolidated financial position, results of
operations or liquidity.
Limited environmental studies have been done on the Trust's other properties
to determine whether hazardous substances exist on the properties. Other
than as set forth above, management of the Trust has no reason to believe
that any hazardous substances exist on such properties in violation of any
applicable laws; however, no assurance can be given that such substances are
not located on any of the properties.
4
<PAGE>
ITEM 3 - LEGAL PROCEEDINGS
From time to time the Trust is a party to claims and legal proceedings
arising in the ordinary course of business. After taking into consideration
information furnished by counsel to the Trust as to the current status of
various claims and legal proceedings to which the Trust is a party,
management of the Trust believes that the ultimate aggregate liability
represented thereby, if any, will not have a material adverse effect on the
trust's consolidated financial position, results of operations or liquidity.
PART II
ITEM 6 - SELECTED FINANCIAL DATA
Five-year Financial Highlights
<TABLE>
<CAPTION>
Audited at December 31, 1994 1993 1992 1991 1990
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total Assets $198,965,379 $143,167,195 $127,725,867 $121,989,821 $106,701,761
Versus prior year 39.0% 12.1% 4.7% 14.3% (1.1%)
Long-term obligations $59,275,446 - $10,882,163 $11,000,000 $20,224,329
Shareholders' Equity $105,089,879 $106,156,517 $106,845,083 $106,718,170 $83,148,176
Per Share $11.31 $11.49 $11.62 $11.67 $11.23
Revenues $29,148,707 $22,251,576 $18,338,165 $16,789,889 $14,788,203
Net Income $10,748,696 $10,456,294 $11,762,077 $9,451,741 $8,752,598
Per Share $1.16 $1.13 $1.28 $1.14 $1.19
Distributions to Shareholders $12,495,643 $11,788,538 $12,684,671 $11,137,057 $10,485,419
Per Share $1.38 $1.29 $1.35 $1.42 $1.42
</TABLE>
<TABLE>
<CAPTION>
Per Share Quarterly Distributions
Month paid or accrued 1994 1993 1992 1991 1990
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
April $ .330 $ .320 $ .355 $ .355 $ .355
July .345 .320 .355 .355 .355
October .345 .320 .320 .355 .355
December .355 .330 .320 .355 .355
----- ----- ----- ----- -----
$1.38 $1.29 $1.35 $1.42 $1.42
----- ----- ----- ----- -----
----- ----- ----- ----- -----
</TABLE>
ITEM 7 - 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 portfolio of
quality real estate investments. The current goals of the Trust are as
follows:
- To focus on multi-family investments,
- To expand its geographic area for those investments,
- To orderly divest a majority of its shopping center and commercial
investments, and
- To increase its asset base and equity.
The Trust has focused on equity investments in apartment communities in
California, Nevada and Arizona. The Trust uses its management experience to
upgrade and enhance the returns on these investments. In 1994, the Trust
acquired nine apartment communities totaling 1,381 units for approximately
$69,200,000. In addition, the Trust sold the LaVerne Towne Center (a shopping
center investment) for $13,300,000. This sale is consistent with the Trust's
plan to continue to focus on multi-family investments.
5
<PAGE>
The financial operation of the Trust's apartment investments and the debt and
equity funds used for their acquisition, are the largest factors to changes in
the financial condition and results of operations of the Trust.
The Trust has acquired the following apartment properties since 1991.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
MONTH # OF PROPERTY PURCHASE
ACQUIRED UNITS LOCATION PRICE
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FOR YEAR 1991
- --------------------------------------------------------------------------------------
WindRush Village Apartments March 366 Colton, CA $15,450,000
- --------------------------------------------------------------------------------------
Los Senderos Apartments April 120 Phoenix, AZ 3,200,000
- --------------------------------------------------------------------------------------
Brentwood Apartments December 224 Phoenix, AZ 3,950,000
- --------------------------------------------------------------------------------------
Shadow Bend Apartments December 108 Scottsdale, AZ 3,200,000
- --------------------------------------------------------------------------------------
FOR YEAR 1992
- --------------------------------------------------------------------------------------
Park Scottsdale Apartments September 128 Scottsdale, AZ $4,175,000
- --------------------------------------------------------------------------------------
Monte Vista Apartments December 60 Phoenix, AZ 900,000
- --------------------------------------------------------------------------------------
Ocotillo Apartments December 173 Phoenix, AZ 2,400,000
- --------------------------------------------------------------------------------------
FOR YEAR 1993
- --------------------------------------------------------------------------------------
Canyon Villas Apartments February 183 Chula Vista, CA $11,200,000
- --------------------------------------------------------------------------------------
Posada del Este Apartments April 148 Phoenix, AZ 3,400,000
- --------------------------------------------------------------------------------------
Lakeview Apartments August 300 San Diego, CA 15,300,000
- --------------------------------------------------------------------------------------
FOR YEAR 1994
- --------------------------------------------------------------------------------------
Hazel Ranch Apartments February 208 Fair Oaks, CA $8,900,000
- --------------------------------------------------------------------------------------
The Summit Apartments February 125 Chino Hills, CA 7,495,000
- --------------------------------------------------------------------------------------
Countryside Village Apartments February 96 El Cajon, CA 3,700,000
- --------------------------------------------------------------------------------------
Stonegate Apartments June 310 Phoenix, AZ 13,550,000
- --------------------------------------------------------------------------------------
Cypress Springs II Apartments June 144 Las Vegas, NV 7,500,000
- --------------------------------------------------------------------------------------
Tango Apartments July 136 Las Vegas, NV 7,700,000
- --------------------------------------------------------------------------------------
Shaliko Apartments October 151 Rocklin, CA 8,550,000
- --------------------------------------------------------------------------------------
Rocklin Gold Apartments November 121 Rocklin, CA 6,300,000
- --------------------------------------------------------------------------------------
Quail Chase Apartments December 90 Folsom, CA 5,500,000
- --------------------------------------------------------------------------------------
TOTAL 3191 $132,370,000
- --------------------------------------------------------------------------------------
</TABLE>
The funds for these acquisitions have primarily come from the following sources:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
$ in millions
<S> <C>
- -------------------------------------------------------------------------------------------------------
Sale of Shares of Beneficial Interest, including 1991 public offering and proceeds
of Dividend Reinvestment Plan.......................................................... $ 28.3
- -------------------------------------------------------------------------------------------------------
Proceeds of unsecured note for $55 million, funded in March 1994....................... 55.0
- -------------------------------------------------------------------------------------------------------
Borrowing on lines of credit, principal balance as of December 31, 1994................ 29.4
- -------------------------------------------------------------------------------------------------------
Proceeds of sales of rental properties, including the 1994 sale of LaVerne Towne
- -------------------------------------------------------------------------------------------------------
Center with net proceeds of approximately $13.3 million................................ 18.9
- -------------------------------------------------------------------------------------------------------
General funds.......................................................................... 0.8
- -------------------------------------------------------------------------------------------------------
Total.................................................................................. $132.4
- -------------------------------------------------------------------------------------------------------
</TABLE>
The continuing policy of the Trust is to emphasize cash flow from operations
rather than the realization of capital gains through property dispositions. In
1994 and 1993, however, in keeping with the current goals of the Trust the
Trust sold parts of its land and improvements having book values of $13,383,536
and $527,115 respectively, realizing a gain of $271,767 and $145,885,
respectively. Revenues to the Trust consist primarily of rental income (95.0%,
90.4% and 88.9% of total revenues for 1994, 1993 and 1992, respectively)
derived from its portfolio of income-producing properties.
6
<PAGE>
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 the trends of
the economy, including interest rates, income tax laws, governmental regulation
and legislation and population changes.
Management defines "Economic Occupancy Rate" as the ratio of the actual rent
earned to the total rental the property is capable of yielding. Management
believes that this measure is more meaningful to the users of the financial
statements because it measures how effectively management has leased the
Trust's properties, rather than whether the property is physically occupied.
RESULTS OF OPERATIONS
INCOME Total revenues (excluding gains on sale of rental properties) were
$29,149,000 in 1994 compared to $22,252,000 in 1993 and $18,338,000 in 1992. A
summary of revenues for the years 1994, 1993 and 1992 is as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
% OF % OF % OF
1994 TOTAL 1993 TOTAL 1992 TOTAL
REVENUES REVENUES REVENUES
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
- --------------------------------------------------------------------------------------------------------------
Apartment rentals: $18,370,000 63% $10,777,000 48% $5,993,000 33%
- --------------------------------------------------------------------------------------------------------------
Commercial rental:
- --------------------------------------------------------------------------------------------------------------
Fixed rate or long-term $2,315,000 8% $2,430,000 11% $2,556,000 14%
- --------------------------------------------------------------------------------------------------------------
Variable (*) $7,010,000 24% $6,920,000 31% $7,748,000 42%
- --------------------------------------------------------------------------------------------------------------
TOTAL RENTAL REVENUES: $27,695,000 95% $21,890,000 90% $16,297,000 89%
- --------------------------------------------------------------------------------------------------------------
Interest and other: $1,453,000 5% $2,125,000 10% $2,041,000 11%
- --------------------------------------------------------------------------------------------------------------
TOTAL REVENUES: $29,148,000 100% $22,252,000 100% $18,338,000 100%
- --------------------------------------------------------------------------------------------------------------
PERCENTAGE CHANGE FROM
PRIOR YEAR:
- --------------------------------------------------------------------------------------------------------------
Apartment rentals: 70.5% 79.8% 62.1%
- --------------------------------------------------------------------------------------------------------------
Commercial rental:
- --------------------------------------------------------------------------------------------------------------
Fixed rate or long-term (4.7%) (4.9%) (0.3%)
- --------------------------------------------------------------------------------------------------------------
Variable (*) 1.3% (10.7%) 3.7%
- --------------------------------------------------------------------------------------------------------------
TOTAL RENTAL REVENUES: 26.5% 34.3% 19.0%
- --------------------------------------------------------------------------------------------------------------
Interest and other: (31.6%) 4.1% (33.1%)
- --------------------------------------------------------------------------------------------------------------
TOTAL REVENUES: 31.0% 21.3% 9.3%
- --------------------------------------------------------------------------------------------------------------
</TABLE>
(*) Revenues from leases containing clauses that allow for adjustments to rental
rates during the term of the lease based upon market conditions and/or inflation
factors and short-term leases.
Apartment rentals have increased, as the Trust has acquired additional apartment
units (see table above), increased rental rates on existing apartment units and
increased occupancy rates at existing and newly acquired apartment communities,
by $7,593,000, $4,784,000 and $2,294,000 in 1994, 1993 and 1992, respectively.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
1994 % 1993 % 1992 %
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Rentals attributed to new property
acquisitions during year................. $5,094,000 67% $3,092,000 64% $ 95,000 4%
- --------------------------------------------------------------------------------------------------------------
Rentals attributed to occupancy
changes and/or rental increases and
prior year acquisitions.................. 2,499,000 33% 1,692,000 36% 2,196,000 96%
- --------------------------------------------------------------------------------------------------------------
Total increase for the year as
compared to prior year................... $7,593,000 100% $4,784,000 100% $2,294,000 100%
- --------------------------------------------------------------------------------------------------------------
</TABLE>
Commercial rentals (income received from the Trust's shopping center and
commercial investments) which have remained relatively constant, reflects the
California commercial-industrial market in general, which continues to
7
<PAGE>
experience a weakening in rental rates and increased vacancy. Commercial
rentals (including Fixed rate or long-term and Variable) decreased by $25,000
and $954,000 in 1994 and 1993 as compared to the prior year and increase by
$263,000 in 1992 when compared to the prior year. In 1994, the Trust did
experience some limited improvement in the economic occupancy in its commercial
portfolio of investments. Income from the Trust's portfolio of notes receivable
decreased by $672,000 and $1,009,000 in 1994 and 1992, as compared to the prior
year. In 1993, interest income was up $84,000. However, the trend is for the
Trust to reduce its portfolio of notes receivable and redeploy the funds into
multi-family investments.
EXPENSES Real estate expenses were $17,607,000 in 1994, compared to $10,888,000
in 1993 and $7,600,000 in 1992. Total real estate expenses increased by 61.7%
in 1994 as compared to 1993 and increased by 43.3% in 1993 as compared to 1992.
Depreciation expense has increased in each of the three years ($4,856,000,
$3,185,000 and $2,561,000 for the years ended December 31, 1994, 1993 and 1992,
respectively) as new acquisitions are completed and placed into service. The
increase in interest expense in 1994 as compared to 1993 ($4,231,000 versus
$1,988,000) is due to increased borrowing of the Trust's lines of credit and
interest on the $55,000,000 unsecured debt and one mortgage loan added in 1994.
(See Notes to Consolidated Financial Statements - Note 7)
Expenses related to apartment operations. which include property taxes, repairs
and maintenance, property insurance, 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 and interest 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 expense directly.
The Trust continues to borrow on a short-term basis on its lines of credit and
therefore has an exposure to interest rate increases. The balances on the lines
of credit were $29,400,000 as of December 31, 1994. A one per cent increase in
interest rates (at current borrowing levels) would reduce net income
approximately three cents per share. The remainder of the Trust's debt is at a
fixed rate, including the $55,000,000 unsecured Note. (See Notes to
Consolidated Financial Statements - Note 7.)
As total revenues have increased, administrative expenses have remained
relatively constant for each of the three years 1994, 1993 and 1992.
IMPACT OF INFLATION As the Trust's investment in apartment complexes continues
to increase due to new acquisitions, rental revenues from this source will rise.
Due to the short-term nature of these leases (one year or less), the Trust can
adjust rents to attempt to minimize the impact of inflation and adjust to an
improvement in the local rental market. In addition, as the Trust's goal of
geographic diversity in its apartments investments continues, this diversity
will give some protection from inflation in one or more markets. Although the
effects of inflation on the Trust's income cannot be measured with precision,
the Trust believes also that because a substantial number of its commercial
leases include provisions requiring scheduled increases in base rental based
upon increases in various consumer price indices, percentage rental payment if
sales exceed defined base amounts, and "net" leases where specified operating
expense increases are borne by the tenant, inflation has not had any appreciable
negative impact on the Trust's net income and cash flow.
LIQUIDITY AND CAPITAL RESOURCES At December 31, 1994, the Trust's cash balances
totaled $867,000. This modest cash balance is supplemented by the Trust's lines
of credit in the amount of $36,500,000 which are available to pay distributions
to Shareholders and to fund capital improvements and operating expenses. The
cash balances were $218,000 and $158,000 in 1993 and 1992, respectively. As of
December 31, 1994 the Trust is fully invested in income producing assets. As of
December 31, 1994, $7,100,000 of the lines of credit are available to the Trust.
As security for the lines of credit, first deeds of trust were recorded against
eight properties which were appraised by the banks at an aggregate value of over
$75,000,000. Long-term financing of $55,000,000 was secured in March 1994 in
the form of an unsecured note with The Prudential Insurance Company of America
(see Notes to Consolidated Financial Statements - Note 7). The line and
credit agreements which mature on May 31, 1996 (as to $29,000,000) and December
29, 1995 (as to $7,500,000) are contemplated to be renewed yearly for successive
two-year periods.
8
<PAGE>
The line of credit agreements have payment terms based upon prime (or the banks'
reference rate or LIBOR plus 1.25% to 1.75% as to $29,000,000 and LIBOR plus
1.25% as to $7,500,000). The Trust believes that its cash on hand and its funds
expected from operations and its lines of credit will be sufficient to meet its
operating commitments. Future additional capital requirements are a function of
the expansion and business growth of the Trust which may be met by new debt or
equity capital.
The follow table quantifies cash flows from operating, investing and financing
activities using information from the Consolidated Statements of Cash Flows.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
1994 1993 1992
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net cash provided by operating activities........... $ 14,433,827 $ 14,655,158 $12,485,345
- --------------------------------------------------------------------------------------------------------------
Net cash used in investing activities............... (58,145,184) (19,325,523) (7,894,856)
- --------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities. 44,360,788 4,730,307 (5,957,318)
- --------------------------------------------------------------------------------------------------------------
Net increase (decrease in cash)..................... $ 649,431 $ 59,942 ($ 1,366,829)
- --------------------------------------------------------------------------------------------------------------
Cash at end of year................................. $ 867,491 $ 218,060 $ 158,118
- --------------------------------------------------------------------------------------------------------------
</TABLE>
See "Overview" above.
The Trust goal is to keep cash balances on hand to a minimum and remain fully
invested in income producing real estate assets.
DIVIDENDS A cash distribution of income has been paid to Shareholders each
quarter since the Trust's inception in 1968. Distributions per share were $1.38
in 1994 and $1.29 in 1993. The current quarterly distribution is $.355 per
share or $1.42 per share on an annualized basis. Total distributions paid to
Shareholders for the three years ended December 31, 1994, 1993 and 1992 were
$12,496,000, $11,789,000 and $12,684,000, respectively. Total distributions paid
to Shareholders for the three years ended December 31, 1994, 1993 and 1992
included return of capital distributions of $1,687,000, $1,426,000 and
$469,000, or on a per share basis of $.185 (13.5%), $.156 (12.1%) and $.050
(3.7%), respectively.
As a real estate investment trust, the Trust is required under the Internal
Revenue Code to distribute to its Shareholders at least 95% of its taxable
income.
9
<PAGE>
INDEPENDENT AUDITORS' REPORT
Kenneth Leventhal & Company
2049 Century Park East
Los Angeles, California 90067
To the Shareholders and Trustees of
Real Estate Investment Trust of California
We have audited the accompanying consolidated balance sheets of Real Estate
Investment Trust of California as of December 31, 1994 and 1993, and the related
consolidated statements of income, changes in shareholders' equity and cash
flows for each of the three years ended December 31, 1994, 1993, and 1992.
These consolidated financial statements are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these consolidated
financial statements 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, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Real
Estate Investment Trust of California as of December 31, 1994 and 1993 and the
consolidated results of its operations and its consolidated cash flows for each
of the three years ended December 31, 1994, 1993, and 1992, in conformity with
generally accepted accounting principles.
KENNETH LEVENTHAL & COMPANY
January 12, 1995
10
<PAGE>
REAL ESTATE INVESTMENT TRUST OF CALIFORNIA
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31,
1994 1993
---- ----
<S> <C> <C>
ASSETS
INVESTMENTS IN RENTAL PROPERTIES - Notes 1, 5, 7 and 12
Land.............................................................. $ 44,212,654 $ 37,486,606
Buildings and improvements........................................ 162,015,001 111,469,507
-------------- --------------
206,227,655 148,956,113
Less accumulated depreciation..................................... (18,888,941) (16,570,878)
-------------- --------------
187,338,714 132,385,235
INVESTMENT IN UNCONSOLIDATED PARTNERSHIP - Notes 1, 6, and 12....... 1,523,810 1,523,810
NOTES RECEIVABLE SECURED BY REAL PROPERTIES - Notes 1 and 3......... 7,436,623 8,286,604
CASH................................................................ 867,491 218,060
OTHER ASSETS........................................................ 1,798,741 753,486
-------------- --------------
$ 198,965,379 $ 143,167,195
-------------- --------------
-------------- --------------
LIABILITIES AND SHAREHOLDERS' EQUITY
LINES OF CREDIT AND NOTES PAYABLE -Note 7........................... $88,675,446 $32,750,000
ACCOUNTS PAYABLE AND ACCRUED EXPENSES............................... 1,900,595 1,211,899
DISTRIBUTION PAYABLE TO SHAREHOLDERS - Note 4 ...................... 3,299,459 3,048,779
-------------- --------------
93,875,500 37,010,678
COMMITMENTS AND CONTINGENCIES - Notes 7 and 8....................... - -
SHAREHOLDERS' EQUITY
Shares of Beneficial Interest - no par value: unlimited shares
authorized; 9,294,251 shares in 1994 and 9,238,724
shares in 1993 issued and outstanding - Notes 9 and 10............ 105,089,879 106,156,517
-------------- --------------
$ 198,965,379 $ 143,167,195
-------------- --------------
-------------- --------------
</TABLE>
See accompanying notes to consolidated financial statements.
11
<PAGE>
REAL ESTATE INVESTMENT TRUST OF CALIFORNIA
<TABLE>
<CAPTION>
Consolidated Statements of Income
For The Years Ended December 31,
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
REVENUES
Rental......................................................... 27,695,219 20,126,346 16,297,213
Interest and other investment income........................... 1,453,488 2,125,230 2,040,952
----------- ----------- -----------
29,148,707 22,251,576 18,338,165
REAL ESTATE EXPENSES
Depreciation................................................... 4,231,148 3,185,074 2,560,864
Interest....................................................... 4,855,524 1,988,399 1,192,759
Property taxes................................................. 1,302,013 847,708 604,883
Repairs and maintenance........................................ 1,705,964 1,221,946 895,194
Insurance...................................................... 186,231 120,409 87,846
Leasing commissions and payroll................................ 1,819,016 1,172,274 834,112
Utilities...................................................... 2,038,496 1,257,666 706,752
Other.......................................................... 1,468,993 1,094,089 717,913
----------- ----------- -----------
17,607,385 10,887,565 7,600,323
ADMINISTRATIVE EXPENSES
Trustees' fees................................................. 84,000 82,000 80,000
Professional services.......................................... 108,022 236,165 221,449
Salaries and other - Note 12................................... 872,371 735,439 779,971
----------- ----------- -----------
1,064,393 1,053,603 1,081,420
----------- ----------- -----------
INCOME BEFORE GAIN ON SALE OF RENTAL PROPERTY.................. 10,476,929 10,310,408 9,656,422
Gain on sale of rental properties - Notes 1 and 5.............. 271,767 145,885 2,105,655
----------- ----------- -----------
NET INCOME..................................................... $10,748,696 $10,456,294 $11,762,077
----------- ----------- -----------
----------- ----------- -----------
NET INCOME PER SHARE: $1.16 $1.13 $1.28
----------- ----------- -----------
----------- ----------- -----------
DISTRIBUTIONS PAID OR ACCRUED PER SHARE
Taxable at ordinary income rates............................... $1.160 $1.118 $1.070
Taxable at capital gain rates.................................. .030 .016 .230
Non-taxable return of capital.................................. .185 .156 .050
----------- ----------- -----------
Total per share distributions.................................. $1.375 $1.290 $1.350
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
12
<PAGE>
REAL ESTATE INVESTMENT TRUST OF CALIFORNIA
Consolidated Statements of Changes in Shareholders' Equity
For the Years Ended December 31, 1994, 1993, and 1992
<TABLE>
<CAPTION>
Shares of Total
Beneficial Undistributed Shareholders'
Interest Net Income Equity
<S> <C> <C> <C>
BALANCE AT JANUARY 1, 1992 106,718,170 - 106,718,170
Proceeds from sale of Shares of Beneficial Interest - Note 10 745,190 - 745,190
Net income for the year ended December 31, 1992 - 11,762,077 11,762,077
Cash distributions (618,277) (11,762,077) (12,380,354)
------------ ------------ ------------
BALANCE AT DECEMBER 31, 1992 106,845,083 - 106,845,083
Proceeds from sale of Shares of Beneficial Interest - Note 10 751,008 - 751,008
Net income for the year ended December 31, 1993 - 10,456,294 10,456,294
Cash distributions (1,439,574) (10,456,294) (11,895,868)
------------ ------------ ------------
BALANCE AT DECEMBER 31, 1993 $106,156,517 $ - $106,156,517
Proceeds from sale of Shares of Beneficial Interest - Note 10 930,989 - 930,989
Net income for the year ended December 31, 1994 - 10,748,696 10,748,696
Cash distributions (1,997,627) (10,748,696) (12,746,323)
------------ ------------ ------------
BALANCE AT DECEMBER 31, 1994 $105,089,879 $ - $105,089,879
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements.
13
<PAGE>
REAL ESTATE INVESTMENT TRUST OF CALIFORNIA
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows
For The Years Ended December 31, 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income................................................... $10,748,696 $10,456,293 $11,762,077
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED
BY OPERATING ACTIVITIES:
Depreciation and amortization............................... 4,313,457 3,260,650 2,606,927
Gain on sale of rental properties........................... (271,767) (145,885) (2,105,655)
Decrease (increase) in other assets......................... (1,045,255) 829,372 290,709
Increase (decrease) in accounts payable..................... 688,696 254,728 (68,713)
------------ ------------ ------------
Net cash provided by operating activities................. 14,433,827 14,655,158 12,485,345
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to land, buildings and improvements............... (72,745,165) (32,202,699) (9,851,268)
Collections on notes receivable............................. 1,459,981 10,103,132 99,280
Increase in notes receivable................................ (610,000) (116,662) (436,354)
Net proceeds from sales of rental properties................ 13,750,000 2,890,706 2,293,486
------------ ------------ ------------
Net cash used in investing activities..................... (58,145,184) (19,325,523) (7,894,856)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on secured notes payable................. (22,824) (10,882,163) (117,837)
Distributions to shareholders............................... (11,812,735) (11,154,817) (12,111,943)
Cash proceeds from sales of Shares of Beneficial Interest... 248,080 117,287 172,462
Net proceeds from issuance of unsecured note................ 55,000,000 - -
Net proceeds from secured note payable...................... 4,298,267 - -
Proceeds from line of credit................................ 52,250,000 61,800,000 10,700,000
Principal payments on line of credit........................ (55,600,000) (35,150,000) (4,600,000)
------------ ------------ ------------
Net cash provided by (used in) financing activities....... 44,360,788 4,730,307 (5,957,318)
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH............................... 649,431 59,942 (1,366,829)
CASH AT BEGINNING OF YEAR..................................... 218,060 158,118 1,524,947
------------ ------------ ------------
CASH AT END OF YEAR........................................... $ 867,491 $ 218,060 $ 158,118
------------ ------------ ------------
------------ ------------ ------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for interest...................... $ 4,472,651 $ 2,053,317 $ 1,192,759
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
14
<PAGE>
REAL ESTATE INVESTMENT TRUST OF CALIFORNIA
Notes to Consolidated Financial Statements
DECEMBER 31, 1994, 1993, AND 1992
NOTE 1 - ACCOUNTING POLICIES
The significant accounting policies of the Trust are as follows:
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements as of December 31, 1994 and 1993, and for
each of the three years ended December 31, 1994, 1993, and 1992, include the
accounts of the Trust and a limited partnership in which the Trust acquired
substantially all of the economic ownership as of April 15, 1981; the Trust is
the general partner. All significant intercompany balances and transactions
have been eliminated in consolidation.
INVESTMENTS IN RENTAL PROPERTIES
Investment in rental properties are recorded at depreciated cost, unless the
property is permanently impaired. Properties identified by management for
current disposition are recorded at the lower of depreciated cost or net
realizable value. Net realizable value is determined based on management's
estimates of the selling price of the property less cost of the sale
transaction. At December 31, 1994, none of the Trust's assets are impaired or
held for current disposition.
RENTAL OPERATIONS
Rental income and income from direct financing leases are recorded on the
accrual basis of accounting and, accordingly, such income is recorded when
earned. Certain lease agreements contain provisions for additional rents based
upon the sales volume of the lessee. These additional rents are estimated and
reflected for quarterly reporting purposes. However, amounts which are not
determinable by the end of the year are not accrued.
Rental expenses are recorded on the accrual basis of accounting and,
accordingly, expenses are recorded when incurred.
Depreciation on the buildings and improvements is provided on a straight-line
basis over estimated useful lives primarily ranging from 10 to 40 years.
Expenditures for maintenance and repairs are charged to operations and renewals
and betterments are capitalized. At the time of disposal of any property, the
asset is relieved of the cost and the accumulated depreciation is removed from
the accounts.
Amortization of major leasing costs, principally commissions, is computed on the
straight-line method over the period of the related lease.
INVESTMENT IN UNCONSOLIDATED PARTNERSHIP
The Trust's investment in an unconsolidated partnership is reflected under the
equity method. (See Note 6 - Investment in Unconsolidated Partnership)
GAIN ON SALE OF RENTAL PROPERTIES
Sales are generally recorded at the close of escrow or after title has been
transferred to the buyer and after appropriate down payments have been received
and there is reasonable assurance that the remaining receivables will be
collected.
15
<PAGE>
REAL ESTATE INVESTMENT TRUST OF CALIFORNIA
Notes to Consolidated Financial Statements (Continued)
FINANCIAL INSTRUMENTS
For those instruments, as defined under Statement of Financial Accounting
standards No. 107, "Disclosures About Fair Value of Financial Instruments," for
which it is practical to estimate fair value, management has determined that the
carrying amounts of the Trust's financial instruments approximate their fair
value at December 31, 1994.
RECLASSIFICATIONS
Certain items in the consolidated financial statements have been reclassified to
be in conformity with the 1994 presentation.
NOTE 2 - INCOME TAXES
The Trust has not provided for federal income taxes because the Trust believes
it qualifies as a real estate investment trust under Sections 856-860 of the
Internal Revenue Code and similar California statutes and distributes
substantially all of its taxable income to its Shareholders. The book value for
financial reporting purposes of certain investments in rental properties exceeds
the cost basis for income tax reporting purposes by approximately $397,000 at
December 31, 1994 and 1993. The difference relates to properties acquired by
the Trust in prior periods for Shares of Beneficial Interest where the Trust
succeeded to the transferor's tax basis. Accordingly, a portion of the current
and future depreciation expense charged to operations for financial statement
purposes is not deductible on the Trust's income tax return.
Additional timing differences arise primarily from the use of accelerated
methods of depreciation and differences in income recognition due to the
application of Statement of Financial Accounting Standards No. 13 (Note 5).
The aggregate of these differences is approximately $1,493,000 and $2,475,000
of cumulative book income over cumulative taxable income (before the deduction
for distributions) at December 31, 1994 and 1993, respectively.
NOTE 3 - NOTES RECEIVABLE SECURED BY REAL PROPERTIES
Notes receivable secured by real properties primarily in Southern California
consist of mortgage notes that arose, in part, from the sale of rental
properties and bear interest at rates ranging from 6.0% to 12.0% and are due in
various periods through 1999.
Principal maturities for the succeeding years are approximately as follows:
<TABLE>
<S> <C>
---------------------------------------
1995 $466,623
---------------------------------------
1996 1,630,000
---------------------------------------
1997 -
---------------------------------------
1998 -
---------------------------------------
1999 5,340,000
---------------------------------------
---------------------------------------
Total $7,436,623
---------------------------------------
</TABLE>
Certain of the Trust's notes receivable secured by real properties located in
Southern California totaling $6,810,000, have provisions in which the loans are
secured by buildings and improvements that are constructed on land owned by the
Trust and leased-back to the mortgagee. The ground lease and related mortgage,
in each case, have coinciding expiration and due dates, respectively.
Provisions in the ground leases allow for both the mortgagee and the Trust to
participate in appreciation in value, if any, upon ultimate sale of the
property, including the land and improvements. Should the property not be sold
before the expiration of the ground lease, the improvements would, upon
expiration, revert to the Trust.
16
<PAGE>
REAL ESTATE INVESTMENT TRUST OF CALIFORNIA
Notes to Consolidated Financial Statements (Continued)
NOTE 4 - DISTRIBUTIONS PAYABLE TO SHAREHOLDERS
In the years 1994 and 1993, the Trust declared distributions of income in the
amount of $.355 and $.33 per share payable to Shareholders of record on December
31, 1994 and December 31, 1993 with payment dates of January 19, 1995 and
January 20, 1994, respectively.
NOTE 5 - LEASES AND RENTAL PROPERTIES
The Trust's rental properties, exclusive of apartment units (which have leases
for one year or less), generally are leased to tenants under noncancellable
leases with remaining terms ranging from one to 30 years and requiring monthly
payments of minimum specified rents. Certain of the leases require the tenant
to pay all operating expenses of the properties. In addition, some leases
provide for additional rental payments based upon gross revenues of the tenant
in excess of specified amounts. For the years ended December 31, 1994, 1993,
and 1992, the Trust earned overage rents of approximately $344,000, $335,000,
and $477,000, respectively.
Two of the Trust's leases are classified as direct financing leases with a net
investment as outlined below. Essentially, under this method of accounting the
Trust recognizes income on a basis similar to interest on a decreasing loan
principal amount rather than a level stream of rental payments.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
1994 1993
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Total minimum lease payments to be received $3,028,328 $3,287,196
- -----------------------------------------------------------------------------------------------
Estimated unguaranteed residual values of leased properties 270,205 270,205
- -----------------------------------------------------------------------------------------------
Unearned income (1,703,783) (1,878,226)
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Net investment $1,594,750 $1,679,175
- -----------------------------------------------------------------------------------------------
</TABLE>
The remainder of the Trust's leases are classified as operating leases and the
costs, at December 31, 1994 and 1993, of the related rental properties by major
class are as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
1994 1993
- ----------------------------------------------------------------------
<S> <C> <C>
Land $44,212,654 $37,486,606
- ----------------------------------------------------------------------
Apartments 114,815,947 55,802,698
- ----------------------------------------------------------------------
Shopping Centers 24,458,883 34,354,302
- ----------------------------------------------------------------------
Warehouses 4,209,014 2,630,495
- ----------------------------------------------------------------------
Other commercial property 16,936,407 17,002,837
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
204,632,905 147,276,938
- ----------------------------------------------------------------------
Less Accumulated depreciation (18,888,940) (16,570,878)
- ----------------------------------------------------------------------
185,743,964 $130,706,060
- ----------------------------------------------------------------------
</TABLE>
In 1994, 1993 and 1992, the Trust sold parts of its land and improvements
having book values of $13,383,536, $527,115 and $187,831, respectively,
realizing a gain of $271,767, $145,885 and $2,105,655, respectively.
The future minimum lease payments receivable under direct financing leases and
the future minimum rental income from noncancellable operating leases due within
the five years subsequent to December 31, 1994, and all periods thereafter are
as follows:
17
<PAGE>
REAL ESTATE INVESTMENT TRUST OF CALIFORNIA
Notes to Consolidated Financial Statements (Continued)
<TABLE>
<CAPTION>
--------------------------------------------------
Direct Financing Operating
Leases Leases
<S> <C> <C>
--------------------------------------------------
1995 258,858 $6,982,862
--------------------------------------------------
1996 258,858 6,035,205
--------------------------------------------------
1997 258,858 5,124,330
--------------------------------------------------
1998 258,858 3,666,753
--------------------------------------------------
1999 258,858 2,134,078
--------------------------------------------------
Thereafter 1,734,048 11,377,668
--------------------------------------------------
--------------------------------------------------
$3,028,338 $35,320,896
--------------------------------------------------
</TABLE>
NOTE 6 - INVESTMENT IN UNCONSOLIDATED PARTNERSHIP
On December 15, 1986, the Trust purchased for $1,523,810, a 21% interest in
Chateau de Ville Apartment Fund, Ltd., a California limited partnership. The
partnership owns and operates a 258-unit apartment complex in Anaheim,
California. The general partner of the partnership is the William Walters
Company, the Trust's former Advisor.
As disclosed in Note 1, the Trust accounts for its partnership investment under
the equity method. The equity method accounts for the investment at the
underlying equity in the net assets of the partnership and records income or
loss from the partnership based on the Trust's pro rata share. The income from
the partnership recorded by the Trust is included in rental income and was
$149,143, $149,143, and $150,857, in 1994, 1993 and 1992, respectively. The
total assets and total liabilities of the partnership were approximately
$9,493,000 and $2,381,000 at December 31, 1994 and $9,584,000 and $2,473,000 at
December 31, 1993, respectively.
NOTE 7 - LINE OF CREDIT AND NOTE PAYABLE
<TABLE>
<CAPTION>
<S> <C> <C>
---------------------------------------------------------------------------------------------------------
SECURED BY REAL ESTATE 1994 1993
---------------------------------------------------------------------------------------------------------
First trust deed note bearing interest at 9.35% per annum with monthly
payments of $37,975 applied to principal and interest based on a 30 year
amortization schedule until maturity on June 15, 1999. $ 4,275,446 $ -
---------------------------------------------------------------------------------------------------------
Lines of Credit secured by deeds of trust bearing interest at Bank's prime
or reference rate or LIBOR plus 1.25% to 1.75% paid monthly on the
outstanding principal balance. Lines of Credit totaling $36,500,000
expire on May 31, 1996 as to $29,000,000 and December 31, 1995 as to
$7,500,000 at which time the entire principal balance plus accrued
interest would be due. 29,400,000 32,750,000
---------------------------------------------------------------------------------------------------------
UNSECURED
---------------------------------------------------------------------------------------------------------
Unsecured note payable bearing interest at 7.44% (payable monthly) due in
principal installments as follows in the years: 2000 -$10,000,000, 2001 -
$10,000,000, 2002 - $10,000,000, 2003 - $10,000,000, 2004 - $15,000,000. 55,000,000
---------------------------------------------------------------------------------------------------------
$88,675,446 $32,750,000
---------------------------------------------------------------------------------------------------------
</TABLE>
In 1991 and 1993, the Trust entered into $29,000,000 and $7,500,000 (for a total
of $36,500,000) line of credit agreements with two major California banks. The
lines of credit, which were established or renewed in 1993, are secured by first
trust deeds on various properties with an aggregate carrying value of
approximately $70,510,000. Pursuant to the agreements, the banks will not loan
more than 50% of the aggregate appraised value of the properties. The
agreements (including the unsecured $55,000,000 note) obligate the Trust to
comply with certain restrictive covenants of a non-financial nature. The line
of credit agreements and unsecured note require, among other things, a minimum
debt to tangible net worth ratio and a minimum cash flow to debt ratio. At
December 31, 1994, the prime or reference rate was 8.5%.
18
<PAGE>
REAL ESTATE INVESTMENT TRUST OF CALIFORNIA
Notes to Consolidated Financial Statements (Continued)
The following table summarizes the aggregate maturities of the above secured and
unsecured debt for each of the next five years:
<TABLE>
<CAPTION>
<S> <C>
--------------------------------------
Year Amount
--------------------------------------
1995 $ 58,407
--------------------------------------
1996 29,464,108
--------------------------------------
1997 70,366
--------------------------------------
1998 77,234
--------------------------------------
1999 4,005,331
--------------------------------------
Thereafter 55,000,000
--------------------------------------
Total $88,675,446
--------------------------------------
</TABLE>
NOTE 8 - CONTINGENT LIABILITIES
Earthquake insurance, when it can be obtained, typically costs up to 10% of the
value of the insured property per year. Having evaluated the risk/cost
relationship, the Trustees have elected not to carry earthquake insurance.
Additionally, Trustees and officers of the Trust may obtain reimbursement from
the Trust pursuant to terms of the Declaration of Trust for expenses incurred by
such persons in the performance of their duties. This reimbursement obligation
of the Trust is not currently covered by insurance due to the high cost of
insurance generally.
NOTE 9 - STOCK OPTION PLAN
During 1992, the Trust reset the stock options issued to two key employees of
the Trust pursuant to the Plan adopted in 1991. The total option shares
authorized are 350,000, of which all shares are granted subject to certain
restrictions. In 1994, 120,000 shares were vested. The option prices are
$13.00 per share as to 200,000 shares and $16.75 as to 150,000 with the options
to expire in the year 2002 and 2003, respectively. As of December 31, 1994, no
options were exercised. The remaining options vest 70,000 shares per year to
qualified key employees.
NOTE 10 - PROCEEDS FROM SALES OF SHARES OF BENEFICIAL INTEREST
In 1994, 1993 and 1992, the Trust sold Shares of Beneficial Interest pursuant to
its Dividend Reinvestment and Stock Purchase Plan.
<TABLE>
<CAPTION>
------------------------------------------------
Shares sold
pursuant to
Dividend Price range Net
Reinvestment per share proceeds
Plan
<S> <C> <C> <C>
------------------------------------------------
1994 55,527 $16.33 - $17.85 $930,989
------------------------------------------------
1993 46,693 $14.25 - $17.78 $751,008
------------------------------------------------
1992 49,026 $13.50 - $16.45 $745,190
------------------------------------------------
</TABLE>
Included in net proceeds for each of the years 1994, 1993 and 1992, are cash
payments for stock purchases per the plan of $248,080, $117,287 and $172,462,
respectively.
NOTE 11 - NET INCOME PER SHARE
Net income per share is based upon the weighted average number of shares
outstanding during each period. The weighted average number of shares
outstanding during the years ended December 31, 1994, 1993, and 1992 were
9,266,546, 9,218,519 and 9,168,244, respectively. Outstanding stock options
have not been included as they are anti-dilutive.
19
<PAGE>
NOTE 12 - TRANSACTIONS WITH RELATED PARTIES
The Walters Management Company, which is partially owned by a Trustee (and
effective January 1, 1995, Chairman of the Board) of the Trust, managed four
apartment properties owned by the Trust as follows; WindRush Village Apartments
(until June 30, 1994, at which time the Trust assumed direct management), Canyon
Villas Apartments, Countryside Apartments and Lakeview Village Apartments. Its
management fees were comparable to fees which would be charged by similar
management organizations operating in the geographic areas where the property
was located. Management fees paid to The Walters Management Company for the
years ended December 31, 1994, and December 31, 1993 were $179,362 and $138,506,
respectively.
A company controlled by a Trustee (who retired from the Board at the end of
December 1994), is the general partner in the partnership described in Note 6
and owns a 14% interest in the partnership.
The following consolidated schedules are included in this report (and
Independent Auditors' Report, thereon, filed as Exhibit 24.1) and should be read
in conjunction with the Consolidated Financial Statements contained in the
Registrant's 1994 Annual Report.
Consolidated Schedule of Investments in Rental Properties and Accumulated
Depreciation
Consolidated Schedule of Notes Receivable Secured by Real Properties
20
<PAGE>
CONSOLIDATED SCHEDULE OF INVESTMENTS IN RENTAL PROPERTIES AND ACCUMULATED
DEPRECIATION
The changes in the carrying amounts of rental properties and accumulated
depreciation for the years ended December 31, 1994, 1993, and 1992, are as
follows:
<TABLE>
<CAPTION>
Buildings
and
Land Improvements Total
------------ ------------ ------------
RENTAL PROPERTIES
<S> <C> <C> <C>
Balance at January 1, 1992 $ 31,639,587 $ 78,614,519 $110,254,106
Additions during the year 1,429,308 8,375,897 9,805,205
Deductions for properties sold (177,998) (31,427) (209,425)
------------ ------------ ------------
Balance at December 31,1992 $ 32,890,897 $ 86,958,989 $119,849,886
Additions during the year 6,863,829 25,245,593 32,109,422
Deductions for properties sold (2,268,120) (735, 075) (3,003,195)
------------ ------------ ------------
Balance at December 31,1993 $ 37,486,606 $111,469,507 $148,956,113
Additions during the year 11,999,852 58,974,558 70,974,410
Deductions for properties sold (5,273,804) (10,023,814) (15,297,618)
------------ ------------ ------------
Balance at December 31, 1994 $ 44,212,654 $160,420,251 $204,632,905
------------ ------------ ------------
------------ ------------ ------------
ACCUMULATED DEPRECIATION
Balance at January 1, 1992 11,122,614
Add depreciation charged to expense during period 2,560,864
Deduct accumulated depreciation on properties sold (21,594)
------------
Balance at December 31, 1992 13,661,884
Add depreciation charged to expense during period 3,185,074
Deduct accumulated depreciation on properties sold (276,080)
------------
Balance at December 31, 1993 16,570,878
Add depreciation charged to expense during period4,231,148 4,231,148
Deduct accumulated depreciation on properties sold (1,913,085)
------------
Balance at December 31, 1994 $18,888,941
-----------
-----------
</TABLE>
21
<PAGE>
Schedule of Investments in Rental Properties and Accumulated Depreciation
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Amount of Initial Cost to Trust Net Cost at December 31, 1994
Encumbrance ________________________ Improvements ________________________
at Buildings to Buildings
Description December 31, and December 31, and
Classification of Property of Property 1994 Land Improvements Total 1994 Land Improvements
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
200 South Glenn Drive Apartment (4) 378,031 1,477,267 1,855,298 765,218 378,031 2,242,485
Camarillo, California Complex
218 North 8th Street Apartment 94,620 15,574 110,194 918,855 94,620 934,429
Santa Paula, California Complex
1699 East Washington Street Apartment (4) 2,915,415 12,542,704 15,458,119 419,172 2,915,415 12,961,876
Colton, California Complex
12844 N. Paradise Village Parkway Apartment 665,600 2,698,861 3,364,461 241,801 665,600 2,940,662
Phoenix, Arizona Complex
11821 N. 28th Drive Apartment 1,115,000 2,853,480 3,968,480 768,875 1,115,000 3,622,355
Phoenix, Arizona Complex
2938 N. 61st Place Apartment 540,000 2,764,769 3,304,769 294,125 540,000 3,058,894
Scottsdale, Arizona Complex
5877 N. Granite Reef Road Apartment 820,000 3,438,476 4,258,476 164,797 820,000 3,603,273
Scottsdale, Arizona Complex
1780 W. Missouri Apartment 425,000 2,075,780 2,500,780 217,907 425,000 2,293,687
Phoenix, Arizona Complex
302 E. Monte Vista Apartment 153,000 747,299 900,299 87,026 153,000 834,325
Phoenix, Arizona Complex
601 Telegraph Canyon Road Apartment (4) 2,374,000 8,838,253 11,212,253 254,551 2,374,000 9,092,804
San Diego, California Complex
1212 East Bethany Home Road Apartment 680,000 2,813,716 3,493,716 272,894 680,000 3,086,610
Phoenix, Arizona Complex
3200 Sweetwater Avenue Apartment (4) 3,626,100 11,692,761 15,318,861 141,356 3,626,100 11,834,117
San Diego, California Complex
8842 Winding Way Apartment 1,246,000 7,687,652 8,933,652 171,750 1,246,000 7,859,402
Fair Oaks, California Complex
2400 Ridgeview Drive Apartment (4) 1,566,455 5,958,911 7,525,366 5,171 1,566,455 5,964,082
Chino Hills, California Complex
1525 Graves Avenue Apartment 969,400 2,735,857 3,705,257 60,558 969,400 2,796,415
El Cajon, California Complex
13220 S. 48th Street Apartment 2,700,000 10,824,335 13,524,335 545,369 2,700,000 11,369,704
Phoenix, Arizona Complex
3651 North Rancho Rd. Apartment 1,152,000 6,378,167 7,530,167 4,975 1,152,000 6,383,142
Las Vegas, Nevada Complex
6570 West Flamingo Road Apartment 4,275,446 1,855,163 5,882,811 7,737,974 1,855,163 5,882,811
Las Vegas, Nevada Complex
5051 El Don Drive Apartment 744,860 7,839,467 8,584,327 10,004 744,860 7,849,471
Rocklin, California Complex
2651 Sunset Boulevard Apartment 825,300 5,501,129 6,326,429 825,300 5,501,129
Rocklin, California Complex
99 Cable Circle Apartment 810,835 4,700,680 5,511,515 3,594 810,835 4,704,274
Folsom, California Complex
2505 Vineyard Avenue Shopping 171,832 171,832 4,188,137 171,832 4,188,137
Oxnard, California Center
9276-9432 Telephone Road Shopping (4) 270,000 738,317 1,008,317 1,639,254 270,000 2,377,571
Ventura, California Center
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Description Accumulated Date
Classification of Property of Property Total Depreciation Acquired
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
200 South Glenn Drive Apartment 2,620,516 1,452,187 1972
Camarillo, California Complex
218 North 8th Street Apartment 1,029,049 412,780 1972
Santa Paula, California Complex
1699 East Washington Street Apartment 15,877,291 1,252,325 1991
Colton, California Complex
12844 N. Paradise Village Parkway Apartment 3,606,262 281,540 1991
Phoenix, Arizona Complex
11821 N. 28th Drive Apartment 4,737,355 275,128 1991
Phoenix, Arizona Complex
2938 N. 61st Place Apartment 3,598,894 232,901 1991
Scottsdale, Arizona Complex
5877 N. Granite Reef Road Apartment 4,423,273 203,678 1992
Scottsdale, Arizona Complex
1780 W. Missouri Apartment 2,718,687 115,923 1992
Phoenix, Arizona Complex
302 E. Monte Vista Apartment 987,325 41,111 1992
Phoenix, Arizona Complex
601 Telegraph Canyon Road Apartment 11,466,804 440,539 1993
San Diego, California Complex
1212 East Bethany Home Road Apartment 3,766,610 128,194 1993
Phoenix, Arizona Complex
3200 Sweetwater Avenue Apartment 15,460,217 425,719 1993
San Diego, California Complex
8842 Winding Way Apartment 9,105,402 161,930 1994
Fair Oaks, California Complex
2400 Ridgeview Drive Apartment 7,530,537 124,248 1994
Chino Hills, California Complex
1525 Graves Avenue Apartment 3,765,815 57,580 1994
El Cajon, California Complex
13220 S. 48th Street Apartment 14,069,704 136,944 1994
Phoenix, Arizona Complex
3651 North Rancho Rd. Apartment 7,535,142 80,638 1994
Las Vegas, Nevada Complex
6570 West Flamingo Road Apartment 7,737,974 73,821 1994
Las Vegas, Nevada Complex
5051 El Don Drive Apartment 8,594,331 49,207 1994
Rocklin, California Complex
2651 Sunset Boulevard Apartment 6,326,429 22,937 1994
Rocklin, California Complex
99 Cable Circle Apartment 5,515,109 9,900 1994
Folsom, California Complex
2505 Vineyard Avenue Shopping 4,359,969 2,595,685 1959
Oxnard, California Center
9276-9432 Telephone Road Shopping 2,647,571 1,178,127 1973
Ventura, California Center
</TABLE>
22
<PAGE>
Schedule of Investments in Rental Properties and Accumulated Depreciation
(continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Amount of Initial Cost to Trust Net Cost at December 31, 1994
Encumbrance________________________ Improvements______________________
at Buildings to Buildings
Description December 31, and December 31, and
Classification of Property of Property 1994 Land Improvements Total 1994 Land Improvements
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
2501 East Lakeshore Drive (1) Shopping 383,905 1,110,474 1,494,379 42,796 383,905 1,153,270
Lake Elsinore, California Center
13271-13499 East Telegraph Road Shopping 4,771,556 12,900,873 17,672,429 876,219 4,771,556 13,777,092
Santa Fe Springs, California Center
133 S. Yorba/2512-2462 E. Chapman (3) Shopping 1,505,257 1,505,257 1,505,257
Orange, California Center
25842-25864 Tournament Road Shopping 2,827,526 2,827,527 5,655,053 135,286 2,827,526 2,962,813
Valencia, California Center
2705 Loma Vista Road (1) Medical 281,000 281,000 29,676 281,000 29,676
Ventura, California Office
23560 Madison Medical (4) 1,560,000 4,449,737 6,009,737 1,468,670 1,560,000 5,918,407
Torrance, California Office
25880 Tournament Road Medical 235,000 4,466,220 4,701,220 221,174 235,000 4,687,394
Valencia, California Office
756 East Thompson Blvd. (2) Motel 11,329 11,329 11,329
Ventura, California Site (Land)
541-549 West Betteravia Road Business Park/ 272,000 1,428,000 1,700,000 93,481 272,000 1,521,481
Santa Maria, California Mini-Warehouse
4600 Pierce Road Storage 102,180 1,120,151 1,222,331 2,595 102,180 1,122,746
Bakersfield, California Mini-Warehouse
2625 Johnson Drive (3) Retail 1,403,673 1,403,673 7,690 1,411,363
Ventura, California Building
12917 Park Street Warehouse 105,000 325,291 430,291 6,000 105,000 331,291
Santa Fe Springs, California Building
2591 & 2595 Katherine Avenue Warehouse 289,877 1,175,798 1,465,675 57,697 289,877 1,233,495
Oxnard, California Building
705-719 East Santa Barbara Street Retail 8,925 79,194 88,119 55,745 8,925 134,939
Santa Paula, California Buildings
1050-1098 East Thompson Blvd. Retail 16,841 80,189 97,030 1,221,222 16,841 1,301,411
Ventura, California Buildings
20016-20150 Hawthorne Blvd. (3) Retail 1,520,000 1,520,000 1,520,000
Torrance, California Buildings
2501-2519 West 5th Street Industrial 628,000 1,740,325 2,368,325 9,365 628,000 1,749,690
Santa Ana, California Building
16818 Via del Campo Court Industrial (4) 2,184,284 2,669,603 4,853,887 299,999 2,184,284 2,969,602
Rancho Bernardo, California Building
12011 San Vicente Blvd. Headquarters 78,290 78,290 66,999 145,289
Los Angeles, California Office
TOTAL: 33,675,446 44,204,964 144,657,938 188,862,903 15,771,996 44,212,654 160,420,251
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Description Accumulated Date
Classification of Property of Property Total Depreciation Acquired
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
2501 East Lakeshore Drive (1) Shopping 1,537,175 330,533 1984
Lake Elsinore, California Center
13271-13499 East Telegraph Road Shopping 18,548,648 2,975,463 1986
Santa Fe Springs, California Center
133 S. Yorba/2512-2462 E. Chapman (3) Shopping 1,505,257 1987
Orange, California Center
25842-25864 Tournament Road Shopping 5,790,339 423,448 1989
Valencia, California Center
2705 Loma Vista Road (1) Medical 310,676 18,322 1952
Ventura, California Office
23560 Madison Medical 7,478,407 1,974,557 1985
Torrance, California Office
25880 Tournament Road Medical 4,922,394 902,227 1987
Valencia, California Office
756 East Thompson Blvd. (2) Motel 11,329 1921
Ventura, California Site (Land)
541-549 West Betteravia Road Business Park 1,793,481 594,348 1981
Santa Maria, California Mini-Warehouse
4600 Pierce Road Storage 1,224,926 468,052 1978
Bakersfield, California Mini-Warehouse
2625 Johnson Drive (3) Retail 1,411,363 1986
Ventura, California Building
12917 Park Street Warehouse 436,291 106,497 1982
Santa Fe Springs, California Building
2591 & 2595 Katherine Avenue Warehouse 1,523,372 17,093 1994
Oxnard, California Building
705-719 East Santa Barbara Street Retail 143,864 103,735 1963
Santa Paula, California Buildings
1050-1098 East Thompson Blvd. Retail 1,318,252 199,662 1953
Ventura, California Buildings
20016-20150 Hawthorne Blvd. (3) Retail 1,520,000 1985
Torrance, California Buildings
2501-2519 West 5th Street Industrial 2,377,690 297,262 1985
Santa Ana, California Building
16818 Via del Campo Court Industrial 5,153,886 634,427 1987
Rancho Bernardo, California Building
2011 San Vicente Blvd. Headquarters 145,289 90,279 1990
Los Angeles, California Office
TOTAL: 204,632,905 18,888,941
</TABLE>
(1) Additional amounts classified as direct financing leases, see Note 5 to
Consolidated Financial Statements.
(2) Ground leased and lessee constructed improvements.
(3) Ground lease where Trust also has a note receivable.
(4) Deed of Trust recorded in favor of Sanwa Bank or Union Bank in connection
with lines of credit totalling $36,500,000.
At December 31, 1994, the balance outstanding on the lines of credit was
$29,400,000.
23
<PAGE>
CONSOLIDATED SCHEDULE OF NOTES RECEIVABLE SECURED BY REAL PROPERTIES
<TABLE>
<CAPTION>
Carrying
Original Final Amount
Face Amount Interest Maturity of Notes
Description of Notes Rate Date Receivable
----------- -------- ------- -----------
<S> <C> <C> <C> <C>
Shopping Centers:
Orange, California (1)(2) $3,580,000 9.50% 1999 $ 3,580,000
Commercial/Industrial
Torrance, California (1)(2) 1,630,000 12.00% 1996 1,630,000
Oxnard, California 450,000 11.50% 1995 450,000
Lassen County, California 160,000 8.50% 1999 160,000
Ventura, California (1) 1,600,000 10.00% 1998 1,600,000
Other:
Miscellaneous notes 16,623 10.0-11.0% 1995-6 16,623
----------- -----------
$7,436,623 $ 7,436,623
----------- -----------
----------- -----------
</TABLE>
(1) Note receivable where Trust also has a ground lease.
(2) These properties secure second deeds of trust listed under "Other." Note is
due upon sale of any of the properties securing the note.
The changes in the carrying amounts of the notes receivable for the years ended
December 31, 1994, 1993, and 1992, are as follows:
<TABLE>
<CAPTION>
<S> <C>
Balance - at January 1, 1992 $ 17,936,480
Additions to notes receivable 435,874
Collection of principal during the year (99,280)
------------
Balance - at December 31, 1992 18,273,074
Additions to notes receivable 116,661
Collection of principal during the year (10,103,131)
------------
Balance - at December 31, 1993 8,286,604
Additions to notes receivable 610,000
Collection of principal during the year (1,459,981)
------------
Balance - at December 31, 1994 $ 7,436,623
------------
------------
</TABLE>
Management believes that the notes are collectible, therefore no allowance for
loan losses has been established.
24
<PAGE>
SUPPLEMENTARY DATA (Unaudited)
<TABLE>
<CAPTION>
Quarterly Operating Results ($ In Thousands Except Per Share Data)
For The Quarter Ended
March 31, 1994 June 30, 1994 Sept. 30, 1994 Dec. 31, 1994 Total For Year
-------------- ------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Income $ 6,009 $ 6,912 $ 7,760 $ 8,467 $ 29,148
Real estate expenses 2,954 3,974 4,982 5,697 17,607
Administrative expenses 288 328 227 221 1,064
------- ------- ------- ------- -------
Income before gain on sale
of real estate 2,767 2,610 2,551 2,549 10,477
Gain on sale of real estate - - - 272 272
------- ------- ------- ------- -------
Net income $ 2,767 $ 2,610 $ 2,551 $ 2,821 $10,749
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Net income per share $ 0.30 $ 0.28 $ 0.28 $ 0.30 $ 1.16
------ ------ ------ ------ ------
------ ------ ------ ------ ------
</TABLE>
<TABLE>
<CAPTION>
For The Quarter Ended
March 31, 1993 June 30, 1993 Sept. 30, 1993 Dec. 31, 1993 Total For Year
-------------- ------------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Income $ 5,077 $ 5,417 $ 5,620 $ 6,138 $22,252
Real estate expenses 2,195 2,511 2,890 3,292 10,888
Administrative expenses 233 309 224 288 1,054
------- ------- ------- ------- -------
Income before gain on sale
of real estate 2,649 2,597 2,506 2,558 10,310
Gain on sale of real estate - - 146 - 146
------- ------- ------- ------- -------
Net income $ 2,649 $ 2,597 $ 2,652 $ 2,558 $10,456
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Net income per share $ 0.29 $ 0.28 $ 0.29 $ 0.27 $ 1.13
------ ------ ------ ------ ------
------ ------ ------ ------ ------
</TABLE>
<TABLE>
<CAPTION>
For The Quarter Ended
March 31, 1992 June 30, 1992 Sept. 30, 1992 Dec. 31, 1992 Total For Year
-------------- ------------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Income $ 4,472 $ 4,570 $ 4,510 $ 4,786 $18,338
Real estate expenses 1,771 1,795 1,852 2,182 7,600
Administrative expenses 270 330 199 282 1,081
------- ------- ------- ------- -------
Income before gain on sale
of real estate 2,431 2,445 2,459 2,322 9,657
Gain on sale of real estate 2,105 - - - 2,105
------- ------- ------- ------- -------
Net income $ 4,536 $ 2,445 $ 2,459 $ 2,322 $11,762
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Net income per share $ 0.50 $ 0.27 $ 0.27 $ 0.24 $ 1.28
------ ------ ------ ------ ------
------ ------ ------ ------ ------
</TABLE>
25
<PAGE>
PART III
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. All schedules other than those indicated under 14(a)(1) above have been
omitted since they are not required, not applicable, or the information is
included in the financial statements or notes thereto.
2. Exhibits required to be filed by Item 601 of Regulation S-K: Each of
the exhibits listed on the exhibits index are incorporated by reference.
(b) Reports on Form 8-K.
Reports on Form 8-K filed during the last quarter of the Registrant's fiscal
year ended December 31, 1994: None
26
<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 amendment to report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Real Estate Investment Trust of California
Dated:_________________
__________________________________________
LeRoy E. Carlson
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
In accordance with the Exchange Act, this amendment to report has been signed
below by the following persons on behalf of the Registrant and in capacities and
on the dates indicated.
<TABLE>
<CAPTION>
<S> <C>
By /s/ William E. Borsari October 2, 1995
---------------------------------------------------- ---------------
William E. Borsari, Chairman of the Board
Member - Board of Trustees
By /s/ Austin G. Anderson October 2, 1995
---------------------------------------------------- ---------------
Austin G. Anderson
Member - Board of Trustees
By /s/ Roger P. Kuppinger October 2, 1995
---------------------------------------------------- ---------------
Roger P. Kuppinger
Member - Board of Trustees
By /s/ Marshall C. Milligan October 2, 1995
---------------------------------------------------- ---------------
Marshall C. Milligan
Member - Board of Trustees
By /s/ Gregory M. Simon October 2, 1995
---------------------------------------------------- ---------------
Gregory M. Simon
Member - Board of Trustees
By /s/ R. Randall Woods October 2, 1995
---------------------------------------------------- ---------------
R. Randall Woods
Member - Board of Trustees
By /s/ Jay W. Pauly October 2, 1995
---------------------------------------------------- ---------------
Jay W. Pauly, President and Chief Operating Officer
Member - Board of Trustees
</TABLE>
27
<PAGE>
INDEX TO EXHIBITS PAGE (BY
SEQUENTIAL
EXHIBIT NUMBERING
NUMBER IDENTITY OF EXHIBIT SYSTEM)
- ------ ------------------- -------
3.1 Certificate of Amendment to Declaration of Trust, dated as
of April 10, 1991. (Previously filed on May 3, 1991 in the
Exhibits to Form S-3 (File No. 33-40350) and incorporated
by reference herein.) ---
3.2 Rights Agreement, dated as of May 29, 1990, between
Registrant, as issuer, and Registrant, as rights agent.
(Previously filed on May 29, 1990 in the Exhibits to
Registrant's Current Report on Form 8-K (File No. 1-9639)
and incorporated by reference herein.) ---
3.3 Trustees' Regulations, as amended and restated August 10,
1987. (Previously filed on August 27, 1987 in Exhibits to
Registrant's Form S-2 (File No. 33-16829) and incorporated
by reference herein.) ---
10.1 Ground Lease and Option to Purchase dated September 15, 1980
between Elsinore-Lakeshore, Ltd., and SavOn Drugs, Inc.
(Previously filed on August 24, 1984 in the Exhibits to Form
S-2 (File No. 2-92534) and incorporated by reference herein.) ---
10.2 Agreement for the Purchase and Sale of Real Property/Ground
Lease Back, and Permanent Loan on Improvements by and
between Registrant and Interstate Consolidated Industries
dated as of May 21, 1985. (Previously filed on August 24,
1984 in the Exhibits to Form S-2 (File No. 2-92534) and
incorporated by reference herein.) ---
10.3 Secured Promissory Note between Registrant and Principal
Mutual Life Insurance Company dated November 24, 1986.
(Previously filed on March 24, 1987 in the Exhibits to
Registrant's Annual Report on Form 10-K (File No. 0-8668) for
the year ended December 31, 1986 and incorporated by
reference herein.) ---
10.4 Real Estate Investment Trust of California 1991 Stock
Option Plan. (Previously filed on March 6, 1991 as Appendix
B to the Registrant's Proxy Materials (File No. 1-9639)
and incorporated by reference herein.) ---
10.5 Line of Credit Agreement between Real Estate Investment
Trust of California and Sanwa Bank California dated as of
June 21, 1991 filed in the Exhibits to Registrant's Annual
Report on Form 10-K (File No. 0-8668) for the year ended
December 31, 1992 and incorporated by reference herein. ---
10.6 Line of Credit Agreement Between Real Estate Investment
Trust of California and Union Bank dated as of December 6,
1993 filed in the Exhibits to Registrant's Annual Report
on Form 10-K (File No. 0-8668) for the year ended December
31, 1993 and incorporated by reference herein. ---
10.7 Loan Agreement between The Prudential Insurance Company of
America and Real Estate Investment Trust of California dated
as of January 31, 1994 filed in the Exhibits to Registrant's
Annual Report on Form 10-K (File No. 0-8668) for the year
ended December 31, 1993 and incorporated by reference herein. ---
28
<PAGE>
INDEX TO EXHIBITS PAGE (BY
CONTINUED SEQUENTIAL
EXHIBIT NUMBERING
NUMBER IDENTITY OF EXHIBIT SYSTEM)
- ------ ------------------- -------
10.8 Extension Agreement to Line of Credit Agreement between
Real Estate Investment Trust of California and Sanwa Bank
California dated as of June 21, 1991 filed in the Exhibits
to this Form 10-K.
10.9 Employment agreement between Real Estate Investment Trust
of California and Jay W. Pauly dated as of June 1, 1993
filed in the Exhibits to this Form 10-K.
10.10 Employment agreement between Real Estate Investment Trust of
California and LeRoy E. Carlson dated as of October 1, 1990
filed in the Exhibits to this Form 10-K.
10.11 Employment agreement between Real Estate Investment Trust of
California and John H. Nunn dated as of October 1, 1990 filed
in the Exhibits to this Form 10-K.
13.1 Registrant's 1994 Annual Report to Shareholders.
23.1 Independent Auditor's Report on Consolidated Schedule of
Investments in Rental Properties and Accumulated Depreciation
and Consolidated Schedule of Notes Receivable Secured by Real
Properties.
29
<PAGE>
EXHIBIT 10.9
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into and
effective as of June 1, 1993, by and between REAL ESTATE INVESTMENT TRUST OF
CALIFORNIA, a California real estate investment trust ("Employer") , and JAY
W. PAULY, an individual ("Employee").
RECITALS
A. Employee is currently employed by Employer in the capacity of
Assistant to the President of Employer and is experienced in the field of
financial control and management and commercial real estate investment; and
B. Employer desires to retain the continued services of Employee
and Employee desires to provide such services to Employer on the terms and
conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants
hereinafter set forth, the parties agree as follows:
1. EMPLOYMENT. Employer hereby employs Employee, and Employee
hereby accepts employment, upon the terms and conditions of this Agreement.
2. TERM AND ANNUAL REVIEW.
(a) TERM. Subject to the provisions in Sections 9 and 10
hereof, the term of this Agreement shall begin on the date first above
written and shall terminate on the first anniversary thereof.
(b) RENEWAL. Subject to the provisions in Sections 9 and 10
hereof, this Agreement shall be renewed automatically for successive one year
terms.
(c) ANNUAL REVIEW. The Board of Trustees of Employer or any
duly empowered committee thereof (hereinafter referred to as the "Board")
shall perform an annual evaluation and review of Employee's job performance
and shall conduct a performance review session with Employee regarding these
evaluations.
3. COMPENSATION. During the first twelve-month period of this
Agreement, Employer shall pay Employee a salary of $200,000 (Employee's
salary, as adjusted for the most recent twelve-month period, is hereinafter
referred to as the "Salary"), payable in equal installments in accordance
with Employer's normal payment cycle. Based in part on the results of the
annual evaluation and review conducted pursuant to Section 2(c) hereof, for
each subsequent twelve-month period of this Agreement,
-1-
<PAGE>
Employee's Salary may be adjusted by such amount as a majority of the
independent Trustees of the Board, in their sole discretion, shall determine.
4. DUTIES. Employee shall be engaged as President of Employer.
Employee shall have the authority and power to perform, and shall perform,
all duties that are customary for a chief executive of a company, and shall
have such other authority and perform such other duties as may be reasonably
assigned by the Board. Without limiting the generality of the foregoing,
Employee shall be responsible, subject to the direction of the Board, for the
day-to-day operations and management of the business of Employer, including
regular consultation with and supervision of other officers and employees
with respect to such matters as purchasing, marketing, sales, promotion,
business administration and personnel matters. If Employee is elected or
appointed as a Trustee of Employer, Employee will serve in that capacity
without further compensation. Employee agrees to provide the services
contemplated by this Agreement (without additional compensation) without
regard to whether any of Employer's operations are conducted directly by
Employer or through any division, subsidiary or affiliate of Employer.
Employee's office shall be located at Employer's principal business offices,
which are presently located at 12011 San Vicente Boulevard, Suite 707, Los
Angeles, California 90049, but which may be moved from time to time as
determined by the Board.
5. EXTENT OF SERVICE. Employee shall devote his attention and
energies on a full-time basis to the business of Employer and to the
discharge of his duties as set forth in Section 4 above.
6. EXPENSES. Employee is authorized to incur ordinary and
necessary expenses for performing his duties hereunder, consistent with such
policies as may from time to time be established by the Board. Employer will
reimburse Employee for all such expenses upon the presentation by Employee,
from time to time, of an itemized account of such expenditures.
7. INSURANCE AND OTHER EMPLOYEE BENEFITS.
(a) INSURANCE. Employer shall maintain medical insurance
coverage for the benefit of all employees on such basis and terms as approved
by the Board. Employee and his qualifying dependents shall be entitled to
participate in such medical insurance coverage and in any retirement,
pension, group insurance, death benefit or other employee benefit programs
maintained by Employer during the term of this Agreement.
(b) STOCK OPTION PLAN. The Board, in its sole discretion,
may establish a stock option plan pursuant to which certain employees
selected by the Board shall be granted options to purchase shares of
Employer's Shares of Beneficial Interest.
-2-
<PAGE>
Employee will be eligible to participate in such stock option plan. Grants
under the stock option plan, if any, will be in the sole discretion of the
Board.
8. DISABILITY. Subject to the provisions of Section 9(a) hereof,
if Employee is unable to perform his normal duties by reason of illness or
incapacity (whether physical or mental) for a period of more than one month
during any six-month period, the Salary otherwise payable to him during the
continued period of such illness or incapacity shall be reduced by 50%;
provided, however, that Employee shall be further entitled to all benefits
available to him under any disability insurance policy maintained by
Employer. Employee's full Salary shall be reinstated upon his return to
employment and the discharge of his full duties hereunder.
9. TERMINATION. This Agreement shall terminate prior to the
termination date set forth in Section 2(a) or (b) hereof, as the case may be,
upon the following terms and conditions:
(a) DEATH OR PERMANENT DISABILITY. This Agreement shall
terminate upon the death of Employee or in the event Employee suffers a
disability which is deemed to be permanent. Employee shall be deemed
permanently unable to perform his normal duties for Employer if for a period
of 90 calendar days, or for any 120 days during any period of 180 calendar
days, whether or not consecutive, he shall have for all purposes been in a
non-performing state. An additional determination of permanent disability may
be made at any time by a physician chosen by the majority of the independent
Trustees of the Board, which physician shall opine as to the physical
condition of Employee.
(b) CAUSE. If a majority of the independent Trustees of the
Board vote to remove Employee from his duties for cause, this Agreement shall
terminate and Employee shall be removed from office effective on the date
specified by the Board. For purposes of this Agreement, the term "cause"
shall mean any of the following:
(i) Employee has been convicted or pled guilty or no
contest to any crime or offense involving monies or other property, or any
felony offense for any crime of moral turpitude;
(ii) Employee has committed fraud or embezzlement (such
determination to be made by a majority of independent Trustees of the Board
in their reasonable judgment);
(iii) Employee has breached any of his fiduciary duties
to Employer (such determination to be made by a majority of independent
Trustees of the Board in their reasonable judgment); or
-3-
<PAGE>
(iv) Employee has neglected or failed to obey a specific
written direction from the Board consistent with this Agreement and
Employee's duties hereunder, has materially neglected or failed to
satisfactorily discharge any of his duties, responsibilities or obligations
under this Agreement, or in the opinion of the independent Trustees does not
meet the standards of performance expected of a person in Employee's position
(such determination to be made by a majority of the independent Trustees of
the Board in their reasonable judgment).
(c) UPON NOTICE. Employer may terminate this Agreement, for
any reason other than death, disability or cause, effective, in the sole
discretion of the Trustees, either immediately upon written notice by
Employer to Employee of such termination, or effective on the 30th day after
such written notice of such termination, if a majority of the independent
Trustees, In their sole discretion, vote to remove Employee from his duties.
(d) TERMINATION BY EMPLOYEE. Employee may terminate his
obligations under this Agreement by giving Employer at least 90 calendar
days' written notice of such termination.
(e) EFFECT OF TERMINATION. Upon any termination pursuant to
this Section 9, all rights of Employee under this Agreement shall cease to be
effective as of the date of termination, Employee shall be removed from
office and shall resign from all positions with Employer and, to the extent
permitted by law, Employee shall have no right to receive any payments or
benefits hereunder except for:
(i) the Salary, payable pursuant to Section 3 hereof,
up to the date of termination; provided, however, that if the termination of
employment is pursuant to Section 9(c) hereof, Employee will be entitled to
payment of an amount equal to six months' Salary;
(ii) reimbursement of expenses incurred in accordance
with Section 6 hereof prior to the date of termination to the extent not
previously reimbursed by Employer; and
(iii) in the case of any termination pursuant to Section
9(a) hereof, Employee shall be entitled to all benefits available to him
under any disability insurance policy maintained by Employer.
10. TERMINATION OF EMPLOYMENT DUE TO CHANGE IN CONTROL. Upon the
termination of employment of Employee as a result of; (a) the sale of
substantially all of Employer's assets; (b) the dissolution of Employer; or
(c) a change in the controlling shareholder interest in Employer resulting
from a tender offer, exchange offer, reorganization, merger or consolidation,
Employee shall be entitled to payment of an amount
-4-
<PAGE>
equal to the then-existing Salary provided for in Section 3 hereof, plus an
amount equal to the product of the average of the last three (3) years
bonuses, if any, multiplied by a fraction of which the numerator is equal to
the number of calendar days in the then current year up to the date of
termination and the denominator is 365, payable in one payment or on a
monthly basis over a twelve-month period at Employee's election, and in
addition, shall be entitled to the benefits of the insurance coverage
provided for in Section 7(a) hereof, for a period of one year from the date
of Employee's termination of employment.
11. TRADE SECRETS. Employee specifically agrees that he will not at
any time, whether during or subsequent to the term of his employment by
Employer, in any fashion, form or manner, unless specifically consented to in
writing by Employer, either directly or indirectly use or divulge, disclose
or communicate to any person, corporation, firm or entity, in any manner
whatsoever, any confidential information of any kind, nature or description
concerning any matters affecting or relating to the business of Employer,
including, without limiting the generality of the foregoing, operating
expenses, lists or other written records used in Employer's business,
compensation paid to employees and other terms of employment, or any other
confidential information concerning the business of Employer, its manner of
operation, or any other confidential data of any kind, nature or description,
the parties hereto stipulating that as between them, each of the same
constitutes important, material and confidential trade secret information and
affects the successful conduct of Employer's business, and its goodwill, and
that any breach of any of the terms of this section is a material breach of
this Agreement. All equipment, notebooks, documents, memoranda, reports,
files, books, correspondence, lists, other written and graphic records, and
the like, affecting or relating to the business of Employer, which Employee
may prepare, use, construct, observe, possess or control shall be and remain
Employer's sole property, and upon the termination of Employee's employment
by Employer for any reason, Employee agrees to deliver promptly to Employer
all of the foregoing items which are or have been in his possession or under
his control. Employee agrees that any breach by him of this Section could
not reasonably or adequately be compensated in damages in an action at law
and that Employer shall be entitled to injunctive relief, which may include
but shall not be limited to restraining Employee from taking any act that
would breach this Section.
12. NOTICES. All notices, demands and other communications
hereunder shall be deemed duly given when given in writing and delivered in
hand or when mailed by registered or certified mail, return receipt
requested, postage and registration or certification charges prepaid,
addressed:
-5-
<PAGE>
(a) if to Employee:
Mr. Jay W. Pauly
709 33rd Street
Manhattan Beach, California 90366
Telephone: (310) 545-4505
(b) if to Employer:
Real Estate Investment Trust of California
12011 San Vicente Boulevard, Suite 707
Los Angeles, California 90042
Telephone: (310) 476-7793
Telefax: (310) 472-4107
or to such other address as may hereafter be designated by any party in a
written notice given to the other party.
13. BENEFITS. This Agreement shall inure to the benefit of and
shall be binding upon the parties hereto and their respective successors and
assigns, heirs and legal representatives. The provisions of Sections 9(e),
11 and 21 of this Agreement shall survive termination of this Agreement.
14. WAIVER. The failure or either party to insist on strict
compliance with any of the terms, covenants or conditions of this Agreement
by the other party shall not be deemed a waiver of that term, covenant or
condition, nor shall any waiver or relinquishment of any right or power at
any one time or times be deemed a waiver or relinquishment of that right or
power for all or any other times.
15. ENTIRE AGREEMENT. This instrument contains the entire
agreement of the parties with respect to the subject matter hereof. It may
not be changed orally but only by an agreement in writing signed by the
parties hereof.
16. CAPTIONS. The headings of this Agreement are inserted solely
for convenience of reference and are not a part of or are not intended to
govern, limit or aid in the construction of any term or provision in this
Agreement.
17. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which so executed shall be deemed an original but all of which
together shall constitute one and the same instrument.
18. REMEDIES. No remedy conferred by any of the specific
provisions of this Agreement (including those contained in Section 11 hereof)
is intended to be exclusive of any other remedy, and each and every remedy
shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
-6-
<PAGE>
otherwise. The election of any one or more remedies by either party hereto
shall not constitute a waiver of the right to pursue other available remedies.
19. SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, but
shall be enforced to the maximum extent permitted by law, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
20. ARBITRATION. Any dispute or disagreement hereunder or otherwise
relating to Employee's services shall be submitted to arbitration in Los
Angeles, California, before the American Arbitration Association in
accordance with the commercial arbitration rules then in effect; provided,
however, that the arbitrator shall not have the power to award punitive or
exemplary damages. The findings of the arbitrator shall be final and
conclusive upon both parties.
21. GOVERNING LAW. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of California.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
EMPLOYER:
REAL ESTATE INVESTMENT TRUST
OF CALIFORNIA
By:
-------------------------------------
William A. Walters, Jr.
Chairman of the Board
EMPLOYEE:
----------------------------------------
Jay W. Pauly
-7-
<PAGE>
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
THIS FIRST AMENDMENT TO EMPLOYMENT AGREEMENT (the "AMENDMENT") is
made and entered into effective as of January 1, 1995, by and between REAL
ESTATE INVESTMENT TRUST OF CALIFORNIA, a California real estate investment
trust ("EMPLOYER"), and JAY W. PAULY, an individual ("EMPLOYEE"), with
reference to the following facts:
A. Employee and Employer executed that certain Employment
Agreement (the "AGREEMENT") dated June 1, 1993, with respect to the retention
by Employer of the continued services of Employee; and
B. The parties hereto wish to amend the Agreement in order to
reflect current information.
NOW, THEREFORE, the parties hereto agree as follows:
1. Paragraph 2 (a) captioned "Term" shall be deleted and
replaced in its entirety by the following:
"Subject to the provisions of Sections 9 and 10 hereof, the term of
this Agreement shall begin on January 1, 1995 and shall terminate on
the first anniversary thereof."
2. The first sentence of Section 3 captioned "Compensation"
shall be deleted and replaced in its entirety by the following:
"Employer shall pay Employee a salary of $17,290.00 per month
(Employee's salary, as adjusted for the most recent twelve-month
period, is hereinafter referred to as the "Salary"), payable in equal
installments in accordance with Employer's normal payment cycle."
3. All other terms and conditions of the Agreement shall remain
in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
as of the date first above written.
REAL ESTATE INVESTMENT TRUST
OF CALIFORNIA
By: WILLIAM BORSARI
---------------------------------------
Chairman of the Board
JAY W. PAULY
---------------------------------------
Jay W. Pauly
<PAGE>
EXHIBIT 10.10
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into and
effective as of October 1, 1990, by and between REAL ESTATE INVESTMENT TRUST
OF CALIFORNIA, a California real estate investment trust ("Employer"), and
LEROY E. CARLSON, an individual ("Employee").
RECITALS
A. Employee is currently employed by Employer in the capacity of
Vice President, Treasurer and Secretary of Employer and is experienced in the
field of commercial real estate investment; and
B. Employee desires to retain the continued services of Employee
and Employee desires to provide such services to Employer on the terms and
conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants
hereinafter set forth, the parties agree as follows:
1. EMPLOYMENT. Employer hereby employs Employee, and Employee
hereby accepts employment, upon the terms and conditions of this Agreement.
2. TERM AND ANNUAL REVIEW.
(a) TERM. Subject to the provisions in Sections 9 and 10
hereof, the term of this Agreement shall begin on the date first above
written and shall terminate on the first anniversary thereof.
(b) RENEWAL. Subject to the provisions in Sections 9 and 10
hereof, this Agreement shall be renewed automatically for successive one year
terms.
(c) ANNUAL REVIEW. The Board of Trustees of Employer or any
duly empowered committee thereof (hereinafter referred to as the "Board")
shall perform an annual evaluation and review of Employee's job performance
and shall conduct a performance review session with Employee regarding these
evaluations.
3. COMPENSATION. During the first twelve-month period of this
Agreement, Employer shall pay Employee a salary of $180,000 (Employee's
salary, as adjusted for the most recent twelve-month period, is hereinafter
referred to as the "Salary"), payable in equal installments in accordance
with Employer's normal payment cycle. Based in part on the results of the
annual evaluation and review conducted pursuant to Section 2(c) hereof, for
each subsequent twelve-month period of this Agreement,
<PAGE>
Employee's Salary may be adjusted by such amount as a majority of the
independent Trustees of the Board, in their sole discretion, shall determine.
4. DUTIES. Employee shall be engaged as Vice President, Treasurer
and Secretary of Employer. Employee shall have the authority and power to
perform, and shall perform, all duties that are customary for a Vice
President, Treasurer and Secretary of a company, and shall have such other
authority and perform such other duties as may be reasonably assigned by the
Board. If Employee is elected or appointed as a Trustee of Employer,
Employee will serve in that capacity without further compensation. Employee
agrees to provide the services contemplated by this Agreement (without
additional compensation) without regard to whether any of Employer's
operations are conducted directly by Employer or through any division,
subsidiary or affiliate of Employer. Employee's office shall be located at
Employer's principal business offices, which are presently located at 12011
San Vicente Boulevard, Suite 707, Los Anqeles, California 90049, but which
may be moved from time to time as determined by the Board.
5. EXTENT OF SERVICE. Employee shall devote his attention and
energies on a full-time basis to the business of Employer and to the
discharge of his duties as set forth in Section 4 above.
6. EXPENSES. Employee is authorized to incur ordinary and
necessary expenses for performing his duties hereunder, consistent with such
policies as may from time to time be established by the Board. Employer will
reimburse Employee for all such expenses upon the presentation by Employee,
from time to time, of an itemized account of such expenditures.
7. INSURANCE AND OTHER EMPLOYEE BENEFITS.
(a) INSURANCE. Employer shall maintain medical insurance
coverage for the benefit of all employees on such basis and terms as approved
by the Board. Employee and his qualifying dependents shall be entitled to
participate in such medical insurance coverage and in any retirement,
pension, group insurance, death benefit or other employee benefit programs
maintained by Employer during the term of this Agreement.
(b) STOCK OPTION PLAN. The Board, in its sole discretion, may
establish a stock option plan pursuant to which certain employees selected by
the Board shall be granted options to purchase shares of Employer's Shares of
Beneficial Interest. Employee will be eligible to participate in such stock
option plan. Grants under the stock option plan, if any, will be in the sole
discretion of the Board.
-2-
<PAGE>
8. DISABILITY. Subject to the provisions of Section 9(a) hereof,
if Employee is unable to perform his normal duties by reason of illness or
incapacity (whether physical or mental) for a period of more than one month
during any six-month period, the Salary otherwise payable to him during the
continued period of such illness or incapacity shall be reduced by 50%;
provided, however, that Employee shall be further entitled to all benefits
available to him under any disability insurance policy maintained by
Employer. Employee's full Salary shall be reinstated upon his return to
employment and the discharge of his full duties hereunder.
9. TERMINATION. This Agreement shall terminate prior to the
termination date set forth in Section 2(a) or (b) hereof, as the case may be,
upon the following terms and conditions:
(a) DEATH OR PERMANENT DISABILITY. This Agreement shall
terminate upon the death of Employee or in the event Employee suffers a
disability which is deemed to be permanent. Employee shall be deemed
permanently unable to perform his normal duties for Employer if for a period
of 90 calendar days, or for any 120 days during any period of 180 calendar
days, whether or not consecutive, he shall have for all purposes been in a
non-performing state. An additional determination of permanent disability
may be made at any time by a physician chosen by the majority of the
independent Trustees of the Board, which physician shall opine as to the
physical condition of Employee.
(b) CAUSE. If a majority of the independent Trustees of the
Board vote to remove Employee from his duties for cause, this Agreement shall
terminate and Employee shall be removed from office effective on the date
specified by the Board. For purposes of this Agreement, the term "cause"
shall mean any of the following:
(i) Employee has been convicted or pled guilty or no
contest to any crime or offense involving monies or other property, or any
felony offense for any crime of moral turpitude;
(ii) Employee has committed fraud or embezzlement (such
determination to be made by a majority of independent Trustees of the Board
in their reasonable judgment);
(iii) Employee has breached any of his fiduciary duties to
Employer (such determination to be made by a majority of independent Trustees
of the Board in their reasonable judgment); or
(iv) Employee has neglected or failed to obey a specific
written direction from the Board consistent with this
-3-
<PAGE>
Agreement and Employee's duties hereunder, has materially neglected or
failed to satisfactorily discharge any of his duties, responsibilities or
obligations under this Agreement, or in the opinion of the independent
Trustees does not meet the standards of performance expected of a person in
Employee's position (such determination to be made by a majority of the
independent Trustees of the Board in their reasonable judgment).
(c) UPON NOTICE. Employer may terminate this Agreement, for
any reason other than death, disability or cause, effective, in the sole
discretion of the Trustees, either immediately upon written notice by
Employer to Employee of such termination, or effective on the 30th day after
such written notice of such termination, if a majority of the independent
Trustees, in their sole discretion, vote to remove Employee from his duties.
(d) TERMINATION BY EMPLOYEE. Employee may terminate his
obligations under this Agreement by giving Employer at least 90 calendar
days' written notice of such termination.
(e) EFFECT OF TERMINATION. Upon any termination pursuant to
this Section 9, all rights of Employee under this Agreement shall cease to be
effective as of the date of termination, Employee shall be removed from
office and shall resign from all positions with Employer and, to the extent
permitted by law, Employee shall have no right to receive any payments or
benefits hereunder except for:
(i) the Salary, payable pursuant to section 3 hereof, up
to the date of termination; provided, however, that if the termination of
employment is pursuant to Section 9(c) hereof, Employee will be entitled to
payment of an amount equal to six months' Salary;
(ii) reimbursement of expenses incurred in accordance with
Section 6 hereof prior to the date of termination to the extent not
previously reimbursed by Employer; and
(iii) in the case of any termination pursuant to Section
9(a) hereof, Employee shall be entitled to all benefits available to him
under any disability insurance policy maintained by Employer.
10. TERMINATION OF EMPLOYMENT DUE TO CHANGE IN CONTROL. Upon the
termination of employment of Employee as a result of: (a) the sale of
substantially all of Employer's assets; (b) the dissolution of Employer; or
(c) a change in the controlling shareholder interest in Employer resulting
from a tender offer, exchange offer, reorganization, merger or consolidation,
Employee shall be entitled to payment of an amount equal to the then-existing
Salary provided for in Section 3
-4-
<PAGE>
hereof, plus an amount equal to the product of the average of the last three
(3) years bonuses, if any, multiplied by a fraction of which the numerator is
equal to the number of calendar days in the then current year up to the date
of termination and the denominator is 365, payable in one payment or on a
monthly basis over a twelve-month period at Employee's election, and in
addition, shall be entitled to the benefits of the insurance coverage
provided for in Section 7(a) hereof, for a period of one year from the date
of Employee's termination of employment.
11. TRADE SECRETS. Employee specifically agrees that he will not
at any time, whether during or subsequent to the term of his employment by
Employer, in any fashion, form or manner, unless specifically consented to in
writing by Employer, either directly or indirectly use or divulge, disclose
or communicate to any person, corporation, firm or entity, in any manner
whatsoever, any confidential information of any kind, nature or description
concerning any matters affecting or relating to the business of Employer,
including, without limiting the generality of the foregoing, operating
expenses, lists or other written records used in Employer's business,
compensation paid to employees and other terms of employment, or any other
confidential information concerning the business of Employer, its manner of
operation, or any other confidential data of any kind, nature or description,
the parties hereto stipulating that as between them, each of the same
constitutes important, material and confidential trade secret information and
affects the successful conduct of Employer's business, and its goodwill, and
that any breach of any of the terms of this Section is a material breach of
this Agreement. All equipment, notebooks, documents, memoranda, reports,
files, books, correspondence, lists, other written and graphic records, and
the like, affecting or relating to the business of Employer, which Employee
may prepare, use, construct, observe, possess or control shall be and remain
Employer's sole property, and upon the termination of Employee's employment
by Employer for any reason, Employee agrees to deliver promptly to Employer
all of the foregoing items which are or have been in his possession or under
his control. Employee agrees that any breach by him of this Section could
not reasonably or adequately be compensated in damages in an action at law
and that Employer shall be entitled to injunctive relief, which may include
but shall not be limited to restraining Employee from taking any act that
would breach this Section.
12. NOTICES. All notices, demands and other communications
hereunder shall be deemed duly given when given in writing and delivered in
hand or when mailed by registered or certified mail, return receipt
requested, postage and registration or certification charges prepaid,
addressed:
-5-
<PAGE>
(a) if to Employee:
Mr. LeRoy E. Carlson
843 S. Bundy Drive
Brentwood, California 90049
Telephone: (213) 820-5819
(b) if to Employer:
Real Estate Investment Trust of California
12011 San Vicente Boulevard, Suite 707
Los Angeles, California 90049
Telephone: (213) 476-7793
Telefax: (213) 472-4107
or to such other address as may hereafter be designated by any party in a
written notice given to the other party.
13. BENEFITS. This Agreement shall inure to the benefit of and
shall be binding upon the parties hereto and their respective successors and
assigns, heirs and legal representatives. The provisions of Sections 9(e),
11 and 21 of this Agreement shall survive termination of this Agreement.
14. WAIVER. The failure of either party to insist on strict
compliance with any of the terms, covenants or conditions of this Agreement
by the other party shall not be deemed a waiver of that term, covenant or
condition, nor shall any waiver or relinquishment of any right or power at
any one time or times be deemed a waiver or relinquishment of that right or
power for all or any other times.
15. ENTIRE AGREEMENT. This instrument contains the entire
agreement of the parties with respect to the subject matter hereof. It may
not be changed orally but only by an agreement in writing signed by the
parties hereof.
16. CAPTIONS. The headings of this Agreement are inserted solely
for convenience of reference and are not a part of or are not intended to
govern, limit or aid in the construction of any term or provision in this
Agreement.
17. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which so executed shall be deemed an original but all of which
together shall constitute one and the same instrument.
18. REMEDIES. No remedy conferred by any of the specific
provisions of this Agreement (including those contained in Section 11 hereof)
is intended to be exclusive of any other remedy, and each and every remedy
shall be cumulative and shall
-6-
<PAGE>
be in addition to every other remedy given hereunder or now or hereafter
existing at law or in equity or by statute or otherwise. The election of any
one or more remedies by either party hereto shall not constitute a waiver of
the right to pursue other available remedies.
19. SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, but
shall be enforced to the maximum extent permitted by law, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
20. ARBITRATION. Any dispute or disagreement hereunder or
otherwise relating to Employee's services shall be submitted to arbitration
in Los Angeles, California, before the American Arbitration Association in
accordance with the commercial arbitration rules then in effect; provided,
however, that the arbitrator shall not have the power to award punitive or
exemplary damages. The findings of the arbitrator shall be final and
conclusive upon both parties.
21. GOVERNING LAW. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of California.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
EMPLOYER:
REAL ESTATE INVESTMENT TRUST OF CALIFORNIA
By: A. A. MILLIGAN
--------------------------------------
Chairman of Board
EMPLOYEE:
LEROY E. CARLSON
----------------------------------------
LeRoy E. Carlson
-7-
<PAGE>
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
THIS FIRST AMENDMENT TO EMPLOYMENT AGREEMENT (the "AMENDMENT") is
made and entered into effective as of January 1, 1995, by and between REAL
ESTATE INVESTMENT TRUST OF CALIFORNIA, a California real estate investment
trust ("EMPLOYER"), and LEROY E. CARLSON, an individual ("EMPLOYEE"), with
reference to the following facts:
A. Employee and Employer executed that certain Employment
Agreement (the "AGREEMENT") dated October 1, 1990, with respect to the
retention by Employer of the continued services of Employee; and
B. The parties hereto wish to amend the Agreement in order to
reflect current information.
NOW, THEREFORE, the parties hereto agree as follows:
1. Paragraph 2(a) captioned "Term" shall be deleted and replaced
in its entirety by the following:
"Subject to the provisions of Sections 9 and 10 hereof, the term
of this Agreement shall begin on January 1, 1995 and shall terminate
on the first anniversary thereof."
2. The first sentence of Section 3 captioned "Compensation" shall
be deleted and replaced in its entirety with the following:
"Employer shall pay Employee a salary of $16,667.00 per month
(Employee's salary, as adjusted for the most recent twelve-month
period, is hereinafter referred to as the "Salary"), payable in
equal installments in accordance with Employer's normal payment
cycle."
3. All other terms and conditions of the Agreement shall remain in
full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
as of the date first above written.
REAL ESTATE INVESTMENT TRUST OF CALIFORNIA
By: WILLIAM BORSARI
--------------------------------------
Chairman of the Board
LEROY E. CARLSON
--------------------------------------
LeRoy E. Carlson
<PAGE>
EXHIBIT 10.11
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into and
effective as of October 1, 1990, by and between REAL ESTATE INVESTMENT TRUST
OF CALIFORNIA, a California real estate investment trust ("Employer"), and
JOHN R. NUNN, an individual ("Employee").
RECITALS
A. Employee is currently employed by Employer in the capacity of Asset
Manager of Employer and is experienced in the field of commercial real estate
investment; and
B. Employer desires to retain the continued services of Employee and
Employee desires to provide such services to Employer on the terms and
conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth, the parties agree as follows:
1. EMPLOYMENT. Employer hereby employs Employee, and Employee hereby
accepts employment, upon the terms and conditions of this Agreement.
2. TERM AND ANNUAL REVIEW.
(a) TERM. Subject to the provisions in Sections 9 and 10 hereof,
the term of this Agreement shall begin on the date first above written and
shall terminate on the first anniversary thereof.
(b) RENEWAL. Subject to the provisions in Sections 9 and 10
hereof, this Agreement shall be renewed automatically for successive one year
termS.
(c) ANNUAL REVIEW. The Board of Trustees of Employer or any duly
empowered committee thereof (hereinafter referred to as the "Board") shall
perform an annual evaluation and review Of Employee's job performance and
shall conduct a performance review session with Employee regarding these
evaluations.
3. COMPENSATION. During the first twelve-month period of this
Agreement, Employer shall pay Employee a salary of $100,000 (Employee's
salary, as adjusted for the most recent twelve-month period, is hereinafter
referred to as the "Salary"), payable in equal installments in accordance
with Employer's normal payment cycle. Based in part on the results of the
annual evaluation and review conducted pursuant to Section 2(c) hereof,
<PAGE>
for each subsequent twelve-month period of this Agreement, Employee's Salary
may be adjusted by such amount as a majority of the independent Trustees of
the Board, in their sole discretion, shall determine.
4. DUTIES. Employee shall be engaged as Asset Manager of Employer.
Employee shall have the authority and power to perform, and shall perform,
all duties that are customary for an asset manager of a company, and shall
have such other authority and perform such other duties as may be reasonably
assigned by the Board. If Employee is elected or appointed as a Trustee of
Employer, Employee will serve in that capacity without further compensation.
Employee agrees to provide the services contemplated by this Agreement
(without additional compensation) without regard to whether any of Employer's
operations are conducted directly by Employer or through any division,
subsidiary or affiliate of Employer. Employees's office shall be located at
Employer's principal business offices, which are presently located at 12011
San Vicente Boulevard, Suite 707, Los Angeles, California 90049, but which
may be moved from time to time as determined by the Board.
5. EXTENT OF SERVICE. Employee shall devote his attention and
energies on a full-time basis to the business of Employer and to the
discharge of his duties as set forth in Section 4 above.
6. EXPENSES. Employee is authorized to incur ordinary and necessary
expenses for performing his duties hereunder, consistent with such policies
as may from time to time be established by the Board. Employer will reimburse
Employee for all such expenses upon the presentation by Employee, from time
to time, of an itemized account of such expenditures.
7. INSURANCE AND OTHER EMPLOYEE BENEFITS.
(a) INSURANCE. Employer shall maintain medical insurance coverage
for the benefit of all employees on such basis and terms as approved by the
Board. Employee and his qualifying dependents shall be entitled to
participate in such medical insurance coverage and in any retirement,
pension, group insurance, death benefit or other employee benefit programs
maintained by Employer during the term of this Agreement.
(b) STOCK OPTION PLAN. The Board, in its sole discretion, may
establish a stock option plan pursuant to which certain employees selected by
the Board shall be granted options to purchase shares of Employer's Shares of
Beneficial Interest. Employee will be eligible to participate in such stock
option plan. Grants under the stock option plan, if any, will be in the sole
discretion of the Board.
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<PAGE>
8. DISABILITY. Subject to the provisions of Section 9(a) hereof, if
Employee is unable to perform his normal duties by reason of illness or
incapacity (whether physical or mental) for a period of more than one month
during any six-month period, the Salary otherwise payable to him during the
continued period of such illness or incapacity shall be reduced by 50%;
provided, however, that Employee shall be further entitled to all benefits
available to him under any disability insurance policy maintained by
Employer. Employee's full Salary shall be reinstated upon his return to
employment and the discharge of his full duties hereunder.
9. TERMINATION. This Agreement shall terminate prior to the termination
date set forth in Section 2(a) or (b) hereof, as the case may be, upon the
following terms and conditions:
(a) DEATH OR PERMANENT DISABILITY. This Agreement shall terminate
upon the death of Employee or in the event Employee suffers a disability
which is deemed to be permanent. Employee shall be deemed permanently unable
to perform his normal duties for Employer if for a period of 90 calendar
days, or for any 120 days during any period of 180 calendar days, whether or
not consecutive, he shall have for all purposes been in a non-performing
state. An additional determination of permanent disability may be made at any
time by a physician chosen by the majority of the independent Trustees of the
Board, which physician shall opine as to the physical condition of Employee.
(b) CAUSE. If a majority of the independent Trustees of the Board
vote to remove Employee from his duties for cause, this Agreement shall
terminate and Employee shall be removed from office effective on the date
specified by the Board. For purposes of this Agreement, the term "cause"
shall mean any of the following:
(i) Employee has been convicted or pled guilty or no contest
to any crime or offense involving monies or other property, or any felony
offense for any crime of moral turpitude;
(ii) Employee has committed fraud or embezzlement (such
determination to be made by a majority of independent Trustees of the Board
in their reasonable judgment);
(iii) Employee has breached any of his fiduciary duties to
Employer (such determination to be made by a majority of independent Trustees
of the Board in their reasonable judgment); or
(iv) Employee has neglected or failed to obey a specific
written direction from the Board consistent with this
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Agreement and Employee's duties hereunder, has materially neglected or failed
to satisfactorily discharge any of his duties, responsibilities or
obligations under this Agreement, or in the opinion of the independent
Trustees does not meet the standards of performance expected of a person in
Employee's position (such determination to be made by a majority of the
independent Trustees of the Board in their reasonable judgment).
(c) UPON NOTICE. Employer may terminate this Agreement, for any
reason other than death, disability or cause, effective, in the sole
discretion of the Trustees, either immediately upon written notice by
Employer to Employee of such termination, or effective on the 30th day after
such written notice of such termination, if a majority of the independent
Trustees, in their sole discretion, vote to remove Employee from his duties.
(d) TERMINATION BY EMPLOYEE. Employee may terminate his obligations
under this Agreement by giving Employer at least 90 calendar days' written
notice of such termination.
(e) EFFECT OF TERMINATION. Upon any termination pursuant to this
Section 9, all rights of Employee under this Agreement shall cease to be
effective as of the date of termination, Employee shall be removed from
office and shall resign from all positions with Employer and, to the extent
permitted by law, Employee shall have no right to receive any payments or
benefits hereunder except for:
(i) the Salary, payable pursuant to Section 3 hereof,
up to the date of termination; provided, however, that if the termination
of employment is pursuant to Section 9(c) hereof, Employee will be
entitled to payment of an amount equal to six months' Salary;
(ii) reimbursement of expenses incurred in
accordance with Section 6 hereof prior to the date of termination to the
extent not previously reimbursed by Employer; and
(iii) in the case of any termination pursuant to Section 9(a)
hereof, Employee shall be entitled to all benefits available to him under any
disability insurance policy maintained by Employer.
10. TERMINATION OF EMPLOYMENT DUE TO CHANGE IN CONTROL. Upon the
termination of employment of Employee as a result of: (a) the sale of
substantially all of Employer's assets; (b) the dissolution of Employer; or
(c) a change in the controlling shareholder interest in Employer resulting
from a tender offer, exchange offer, reorganization, merger or consolidation,
Employee shall be entitled to payment of an amount equal to the then-existing
Salary provided for in Section 3
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hereof, plus an amount equal to the product of the average of the last three
(3) years bonuses, if any, multiplied by a fraction of which the numerator is
equal to the number of calendar days in the then current year up to the date
of termination and the denominator is 365, payable in one payment or on a
monthly basis over a twelve-month period at Employee's election, and in
addition, shall be entitled to the benefits of the insurance coverage
provided for in Section 7(a) hereof, for a period of one year from the date
of Employee's termination of employment.
11. TRADE SECRETS. Employee specifically agrees that he will not at any
time, whether during or subsequent to the term of his employment by Employer,
in any fashion, form or manner, unless specifically consented to in writing
by Employer, either directly or indirectly use or divulge, disclose or
communicate to any person, corporation, firm or entity, in any manner
whatsoever, any confidential information of any kind, nature or description
concerning any matters affecting or relating to the business of Employer,
including, without limiting the generality of the foregoing, operating
expenses, lists or other written records used in Employer's business,
compensation paid to employees and other terns of employment, or any other
confidential information concerning the business of Employer, its manner of
operation, or any other confidential data of any kind, nature or description,
the parties hereto stipulating that as between them, each of the same
constitutes important, material and confidential trade secret information and
affects the successful conduct of Employer's business, and its goodwill, and
that any breach of any of the terms of this Section is a material breach of
this Agreement. All equipment, notebooks, documents, memoranda, reports,
files, books, correspondence, lists, other written and graphic records, and
the like, affecting or relating to the business of Employer, which Employee
may prepare, use, construct, observe, possess or control shall be and remain
Employer's sole property, and upon the termination of Employee's employment
by Employer for any reason, Employee agrees to deliver promptly to Employer
all of the foregoing items which are or have been in his possession or under
his control. Employee agrees that any breach by him of this Section could not
reasonably or adequately be compensated in damages in an action at law and
that Employer shall be entitled to injunctive relief, which may include but
shall not be limited to restraining Employee from taking any act that would
breach this Section.
12. NOTICES. All notices, demands and other communications hereunder
shall be deemed duly given when given in writing and delivered in hand or
when mailed by registered or certified mail, return receipt requested,
postage and registration or certification charges prepaid, addressed:
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(a) if to Employee:
Mr. John H. Nunn
2756 Barry Avenue
Los Angeles, California 90064
Telephone: (213) 477-9286
(b) if to Employer:
Real Estate Investment Trust of California
12011 San Vicente Boulevard, Suite 707
Los Angeles, California 90049
Telephone: (213) 476-7793
Telefax: (213) 472-4107
or to such other address as may hereafter be designated by any party in a
written notice given to the other party.
13. BENEFITS. This Agreement shall inure to the benefit of and shall
be binding upon the parties hereto and their respective successors and
assigns, heirs and legal representatives. The provisions of Sections 9(e), 11
and 21 of this Agreement shall survive termination of this Agreement.
14. WAIVER. The failure of either party to insist on strict compliance
with any of the terms, covenants or conditions of this Agreement by the other
party shall not be deemed a waiver of that term, covenant or condition, nor
shall any waiver or relinquishment of any right or power at any one time or
times be deemed a waiver or relinquishment of that right or power for all or
any other times.
15. ENTIRE AGREEMENT. This instrument contains the entire
agreement of the parties with respect to the subject matter hereof. It
may not be changed orally but only by an agreement in writing signed by
the parties hereof.
16. CAPTIONS. The headings of this Agreement are inserted solely for
convenience of reference and are not a part of or are not intended to govern,
limit or aid in the construction of any term or provision in this Agreement.
17. COUNTERPARTS. This Agreement may be executed in counterparts, each of
which so executed shall be deemed an original but all of which together shall
constitute one and the same instrument.
18. REMEDIES. No remedy conferred by any of the specific provisions of
this Agreement (including those contained in Section 11 hereof) is intended
to be exclusive of any other remedy, and each and every remedy shall be
cumulative and shall
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be in addition to every other remedy given hereunder or now or hereafter
existing at law or in equity or by statute or otherwise. The election of any
one or more remedies by either party hereto shall not constitute a waiver of
the right to pursue other available remedies.
19. SEVERABILITY. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, but shall be enforced to the
maximum extent permitted by law, and any such prohibition or unenforceability
in any jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction.
20. ARBITRATION. Any dispute or disagreement hereunder or otherwise
relating to Employee's services shall be submitted to arbitration in Los
Angeles, California, before the American Arbitration Association in
accordance with the commercial arbitration rules then in effect; provided,
however, that the arbitrator shall not have the power to award punitive or
exemplary damages. The findings of the arbitrator shall be final and
conclusive upon both parties.
21. GOVERNING LAW. This Agreement shall be governed by
and interpreted in accordance with the laws of the State of California.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
EMPLOYER:
REAL ESTATE INVESTMENT TRUST
OF CALIFORNIA
By: A. A. MILLIGAN
-----------------------------------
Chairman of the Board
EMPLOYEE:
JOHN H. NUNN
------------------------------------
John H. Nunn
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FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
THIS FIRST AMENDMENT TO EMPLOYMENT AGREEMENT (the "AMENDMENT") is made
and entered into effective as of January 1, 1995, by and between REAL ESTATE
INVESTMENT TRUST OF CALIFORNIA, a California real estate investment trust
("EMPLOYER"), and JOHN H. NUNN, an individual ("EMPLOYEE"), with reference to
the following facts:
A. Employee and Employer executed that certain Employment Agreement (the
"AGREEMENT") dated October 1, 1990, with respect to the retention by Employer
of the continued services of Employee; and
B. The parties hereto wish to amend the Agreement in order to reflect
current information.
NOW, THEREFORE, the parties hereto agree as follows:
1. Paragraph 2(a) captioned "Term" shall be deleted and replaced in its
entirety by the following:
"Subject to the provisions of Sections 9 and 10 hereof, the term of this
Agreement shall begin on January 1, 1995 and shall terminate on the first
anniversary thereof."
2. The first sentence of Section 3 captioned "Compensation" shall be
deleted and replaced in its entirety with the following;
"Employer shall pay Employee a salary of $12,084.00 per month
(Employee's salary, as adjusted for the most recent twelve-month period, is
hereinafter referred to as the "Salary"), payable in equal installments in
accordance with Employer's normal payment cycle."
3. All other terms and conditions of the Agreement shall remain in full
force and affect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date first above written.
REAL ESTATE INVESTMENT TRUST
OF CALIFORNIA
By: WILLIAM BORSARI
--------------------------------
Chairman of the Board
JOHN H. NUNN
--------------------------------
John H. Nunn
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the use of our report dated January 12, 1995 with respect to
the consolidated financial statements of Real Estate Investment Trust of
California as of and for the year ended December 31, 1994, incorporated by
reference in Amendment No. 1 to the 1994 Annual Report (Form 10-K/A) of Real
Estate Investment Trust of California.
ERNST & YOUNG, LLP
Los Angeles, California
December 20, 1995
