SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________________
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission File No. 0-10547
MERIDIAN POINT REALTY TRUST VIII CO.
-------------------------------------------------------------------------
(Exact name of Registrant as specified in its Charter)
Missouri 94-3058019
------------------------------- ------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
655 Montgomery Street, Suite 800, San Francisco, California 94111
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(Address and zip code of principal executive offices)
Registrant's telephone number, including area code: (415) 393-8000
50 California Street, Suite 1600, San Francisco, CA 94111
- - --------------------------------------------------------------------------
(Former name, address and former fiscal year, if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
Indicate the number of shares outstanding of the common and
preferred stock, as of the latest practicable date:
Shares of Common Stock outstanding as of April 30, 1996: 1,609,937.
Shares of Preferred Stock outstanding as of April 30, 1996: 5,273,927.
<PAGE>
__________________________________________________________________________
PART I: FINANCIAL INFORMATION
__________________________________________________________________________
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS.
The accompanying unaudited consolidated financial statements should be
read in conjunction with the 1995 Form 10-K of the registrant (the
"Company"). These statements have been prepared in accordance with the
instructions of the Securities and Exchange Commission Form 10-Q and do not
include all of the information and footnotes required by generally accepted
accounting principles for complete consolidated financial statements.
In the opinion of the Company's management, all material adjustments
considered necessary for a fair presentation of results of operations for
the interim periods have been included. The results of consolidated
operations for the three months ended March 31, 1996 are not necessarily
indicative of the results that may be expected for the year ending December
31, 1996.
<PAGE>
<TABLE>
MERIDIAN POINT REALTY TRUST VIII CO.
CONSOLIDATED BALANCE SHEETS
March 31, 1996 (Unaudited) and December 31, 1995
1996 1995
- - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Investment in Real Estate:
Rental Properties, Net $81,785,403 $81,765,163
Less: Accumulated Deprecation (13,556,196) (12,987,770)
- - ----------------------------------------------------------------------------------------------------------------------
68,229,207 68,777,393
Other Assets:
Cash and Cash Equivalents 4,882,619 5,016,216
Receivables, Net of Reserves of $134,971
as of March 31, 1996 and December 31, 1995 451,287 585,771
Notes Receivable From Affiliates 228,000 228,000
Personal Property, Net of Accumulated Depreciation of $726,568
December 31, 1995 0 30,521
Capitalized Loan Costs, Net of Accumulated Amortization of $791,231
and $765,089 as of March 31, 1996 and December 31, 1995, respectively 187,347 213,489
Capitalized Lease Commissions, Net of Accumulated Amortization of $259,776
and $308,514 as of March 31, 1996 and December 31, 1995, respectively 357,459 363,504
Other Assets, Net of Accumulated Amortization of $324,698 and
$305,295 as of March 31, 1996 and December 31, 1995, respectively 1,289,937 1,279,431
- - ----------------------------------------------------------------------------------------------------------------------
Total Assets $75,625,856 $76,494,325
======================================================================================================================
Liabilities and Shareholders' Equity
Liabilities:
Mortgage Notes Payable $7,730,902 $7,782,168
Long-Term Debt Facilities 24,033,730 24,259,396
Due To Affiliates 172,700 116,209
Accounts Payable 983,686 1,073,280
Prepaid Rent, Tenant Deposits and Other Liabilities 116,705 221,982
- - ----------------------------------------------------------------------------------------------------------------------
Total Liabilities 33,037,723 33,453,035
- - ----------------------------------------------------------------------------------------------------------------------
Shareholders' Equity:
Shares of Common and Preferred Stock with par value of $0.001;
an aggregate of 50,000,000 Common and Preferred Shares authorized;
1,609,937 Common Shares and 5,273,927 Preferred Shares issued and
outstanding as of March 31, 1996 and December 31, 1995, respectively 6,884 6,884
Paid-in Capital 65,389,820 65,389,820
Distributions in Excess of Income (22,808,571) (22,355,414)
- - ----------------------------------------------------------------------------------------------------------------------
Total Shareholders' Equity 42,588,133 43,041,290
- - ----------------------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $75,625,856 $76,494,325
======================================================================================================================
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
MERIDIAN POINT REALTY TRUST VIII CO.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 1996 and 1995
(Unaudited)
1996 1995
- - ------------------------------------------------------------------------------------------
<S> <C> <C>
Revenues:
Rentals from Real Estate Investments $2,304,672 $2,973,188
Interest and Other 41,967 71,104
- - ------------------------------------------------------------------------------------------
Total Revenues 2,346,639 3,044,292
- - ------------------------------------------------------------------------------------------
Expenses:
Interest and Amortization of Debt Premium 690,690 938,214
Property Taxes 468,704 427,553
Property Operating Costs 333,395 357,231
General and Administrative 229,770 249,037
Provision for Decrease in Net Realizable Value 0 1,182,015
Depreciation and Amortization 642,818 768,332
- - ------------------------------------------------------------------------------------------
Total Expenses 2,365,377 3,922,382
- - ------------------------------------------------------------------------------------------
Net Income (Loss) before Gain on Disposition of Assets (18,738) (878,090)
Gain on Disposition of Assets 47,452 0
- - ------------------------------------------------------------------------------------------
Net Income (Loss) $28,714 $(878,090)
==========================================================================================
Net Income (Loss) per Common Share $0.02 $(0.55)
==========================================================================================
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
MERIDIAN POINT REALTY TRUST VIII CO.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 1996 and 1995
(Unaudited)
1996 1995
- - ------------------------------------------------------------------------------------------
<S> <C> <C>
Cash Flows From Operating Activities
Net Income (Loss) $28,714 $ (878,090)
Adjustments to Reconcile Net Income (Loss) to Net
Cash Provided By Operating Activities:
Depreciation 571,887 680,384
Amortization - Other 70,930 87,948
Gain on Disposition of Assets (47,452) 0
Rent Adjustment 0 2,150
Provision for Decrease in Net Realizable Value 0 1,182,015
(Increase) Decrease in Accounts Receivable 134,484 53,300
Decrease in Accounts Payable (89,594) (343,501)
Net Change in Other Assets and Other Liabilities (73,508) 153,002
- - ------------------------------------------------------------------------------------------
Net Cash Provided By Operating Activities 595,461 937,208
- - ------------------------------------------------------------------------------------------
Cash Flows From Investing Activities
Improvements to Existing Real Estate (20,240) (64,039)
Leasing Commissions (23,618) 0
- - ------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities (43,858) (64,039)
- - ------------------------------------------------------------------------------------------
Cash Flows From Financing Activities
Principal Payments on Long Term Debt Facilities (225,666) (167,907)
Principal Payments on Mortgage Notes (51,266) (47,018)
Dividends Paid (481,871) 0
Proceeds from Sales of Assets 73,603 0
- - ------------------------------------------------------------------------------------------
Net Cash Used In Financing Activities (685,200) (214,925)
- - ------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents (133,597) 658,244
Cash and Cash Equivalents, Beginning of Period 5,016,216 4,960,399
- - ------------------------------------------------------------------------------------------
Cash and Cash Equivalents, End of Period $4,882,619 $5,618,643
==========================================================================================
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
MERIDIAN POINT REALTY TRUST VIII CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996
(Unaudited)
1. General.
Meridian Point Realty Trust VIII Co. (the "Company") is a corporation
organized for the purpose of acquiring, operating, holding for investment
and ultimately selling income-producing commercial and industrial real
estate. Generally, it is the Company's intention not to invest net proceeds
from sales in additional properties, and, accordingly, the Company is a
self-liquidating/finite life trust. However, at its annual meeting of
shareholders to be held June 14, 1996, the Company will be considering a
proposal to amend its by-laws to allow it to purchase new properties. The
Company commenced operations on October 17, 1988.
2. Consolidation.
The consolidated financial statements include the Company and NASH-IND
Corporation, a wholly-owned corporate subsidiary of the Company. All
significant intercompany transactions and balances have been eliminated.
3. Statements of Cash Flows.
For purposes of the statements of cash flows, the Company considers
all short-term investments with a maturity of three months or less to be
cash equivalents.
Cash paid for interest was $690,690 and $939,377 for the three months
ended March 31, 1996 and 1995, respectively.
4. Rentals From Real Estate Investments.
Certain of the Company's leases require lessees to pay all or a
portion of real estate taxes, insurance, and operating costs ("Expense
Recaptures"). Expense Recaptures of $192,825 and $416,637 were included in
Rentals from Real Estate Investments for the three months ended March 31,
1996 and 1995, respectively.
5. Investments in Real Estate and Depreciation Methods.
Investments in Real Estate are stated at the lower of depreciated cost
or net realizable value. Net realizable value for financial reporting
purposes: (i) is evaluated and identified quarterly by the Company on a
property by property basis using undiscounted cashflows; (ii) is measured
by comparing the Company's estimate of fair value based upon either sales
comparables or the net cash expected to be generated by the property
(comprised of the forecasted operations for the property based upon
historical results, together with management's estimates of the property's
future occupancy, lease rates and capital improvement requirements), less
estimated carrying costs (including interest) throughout the anticipated
holding period, plus the estimated cash proceeds from the ultimate
disposition of the property; and (iii) is not necessarily an indication of
the property's current value of the amount that will be realized upon the
ultimate disposition of the property. To the extent net realizable value
is less than carrying value, a Provision for Decrease in Net Realizable
Value is recorded. Net realizable value is not necessarily an indication
of the property's current value or the amount that will be realized on its
disposition. As of March 31, 1996 and December 31, 1995, the Company had
recognized a cumulative Provision for Decrease in Net Realizable Value of
$5,167,000.
Depreciation and amortization have been calculated under the straight-
line method, based upon the estimated useful lives of the assets. Property
and property additions are depreciated over 35 years. Expenditures for
maintenance, repairs, and improvements which do not materially prolong the
normal useful life of an asset are charged to operations as incurred.
Leasing commissions and tenant improvements are amortized under the
straight-line method over the term of the related lease.
6. Long-Term Debt Facilities.
Facilities
As of March 31, 1996 and December 31, 1995, there was outstanding
under a facility with an insurance company $24,033,730 and $24,259,396,
respectively. This facility has provided the Company with financing for
property acquisitions, capital improvements, and general operating needs.
Interest and Principal Maturities
Under the insurance company facility, there are outstanding five
advances totaling $24,033,730 at March 31, 1996. These advances bear fixed
interest rates for periods ranging from six months to three years. Under
the existing facility agreements, the various advances and the
corresponding interest rate contracts mature on the dates specified below.
<TABLE>
Advance and
Notional Amount Interest Maturity
as of 03/31/96 Rate Date
--------------- ------ -----------------
<S> <C> <C> <C>
$ 3,686,593 7.81% December 1996
6,030,112 8.87% June 1997
11,476,977 8.87% June 1997
2,840,048 8.80% May 1998
------------
$ 24,033,730
============
</TABLE>
7. Net Income (Loss) Per Common Share.
Net income (loss) per common share is determined by dividing net
income, after deduction of preferred stock dividends, by the weighted
average number of shares of common stock outstanding during the year.
Weighted average common shares outstanding for the three months ended
March 31, 1996 and 1995 was 1,609,937.
8. Income Taxes.
The Company intends to qualify and elect to be treated as a real
estate investment trust ("REIT") for the year ending December 31, 1996. As
such, the Company should be allowed a deduction for dividends paid to
shareholders if the Company satisfies certain income, asset and
distribution requirements. (See Note 9.) Accordingly, no provision for
federal income taxes has been made in the accompanying Consolidated
Statements of Operations for the three months ended March 31, 1996 and
1995.
9. Declaration of Dividends.
Under the Company's articles of incorporation, the Board cannot
declare any dividends on common shares until it had first declared
dividends on the preferred shares' annual preference amount as computed
under those articles.
The preferred shares generally have a non-cumulative preferential
right to such current dividends as are declared each year by the Board up
to an amount equal to the lesser of (a) 6% of the aggregate adjusted stated
value of preferred shares, (b) earnings and profits for the prior year, or
(c) the amount legally available for distribution by the Company.
On March 12, 1996, the Board of Directors (the "Board") declared
dividends in the amount of $0.07 per preferred share and $0.07 per common
share, payable on March 29, 1996 to shareholders of record on March 19,
1996.
10. Management Agreement
Effective December 1, 1995, the Company terminated the Amended and
Restated Employee Leasing Agreement with Meridian Point Properties, Inc.
("MPP") of San Francisco, California and entered into a management
agreement with TIS Financial Services, Inc. ("TIS") of San Francisco,
California. Under the new management agreement, the Company retained TIS
to manage its assets, properties and investments in addition to performing
administrative services for the Company. The initial term of the
management agreement is for six months after which the agreement will be on
a month to month basis. The Company pays TIS for services rendered under
the agreement a base management fee calculated on an annual basis to be an
mount equal to 0.75% of the Company's Average Invested Assets, as defined
in the agreement. This agreement requires that TIS pay the employment
expenses of its personnel.
Under the new management agreement with TIS, the Company accrued
$150,000 as the estimated management fee for the three months ended March
31, 1996. All of this amount is included in Property Operating Costs.
During the three months ended March 31, 1995, the Company accrued $166,486
payable to MPP as its share of allocated overhead costs. Of this amount,
$106,103 is included in Property Operating Costs and $60,383 in General and
Administrative.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The Company owns a diversified portfolio of real estate equity
interests consisting of income-producing industrial and commercial real
estate. The Company is a self-liquidating, finite-life real estate
investment trust ("REIT"). The following discussion should be read in
conjunction with the Company's Consolidated Balance Sheets and Consolidated
Statements of Operations, Shareholders' Equity, and Cash Flows and the
notes thereto included on pages 2 through 7 of this report. Unless
otherwise defined in this report, or unless the context otherwise requires,
the capitalized words or phrases referred to in this section either: (a)
describe accounting terms that are used as line items in such financial
statements, or (b) have the meanings ascribed to them in such financial
statements and the notes thereto.
Liquidity and Capital Resources.
The Company's main sources of liquidity are Funds From Operations,
cash reserves, and net proceeds from the sale of the Company's real
properties. Funds From Operations is defined as net income (loss) before
extraordinary items, adjusted for certain non-cash items such as
depreciation and amortization, decreases in net realizable value, and gains
from the sale of property. Industry analysts generally consider Funds From
Operations to be an appropriate measure of the performance of an equity
real estate organization. However, it does not measure whether cash flow
is sufficient to fund all the Company's cash needs including principal
amortization, capital improvements, and distributions to shareholders. It
also does not represent cash generated from operating activities or
determined in accordance with generally accepted accounting principles.
The Company generated Funds From Operations (income before
depreciation and amortization and provision for decrease in net realizable
value) of $624,079 and $1,072,257 for the three months ended March 31, 1996
and 1995, respectively. The decrease of $448,178 for the first three
months of 1996, as compared with the same period in 1995, was primarily due
to a decrease in Rentals from Real Estate Investments offset in part by a
decrease in operating costs and interest expense. These changes result
primarily from the sales in May and July 1995 of the Kroger property,
located in Jackson, Mississippi, and the Tropicana Marketplace, located in
Las Vegas, Nevada. (See "Material Changes in Results of Operations".)
The Company's principal applications of its cash resources are (i)
operating expenses related to real estate operations, general and
administrative expenses, interest expense, and legal costs, (ii) capital
improvements, and (iii) principal payments under its long-term debt
facilities and mortgage notes payable. During the first three months of
1996, Funds From Operations were sufficient to fully fund the Company's
cash needs. The Company considers its ability to generate cash from
operations adequate to meet its presently foreseeable cash requirements.
However, (i) unanticipated decreases in revenues and/or unanticipated
increases in expenses, (ii) an unanticipated decrease in property values
resulting in additional required principal payments, or (iii) renegotiation
of the Company's debt facility on terms unfavorable to the Company (see
Note 6 to the Company's financial statements) could adversely affect cash
flow and cause the Company to make use of other sources of liquidity.
Funds From Operations may be affected in the future by changes in
rental rates and occupancy levels. As of March 31, 1996, the Company's
properties were 98% occupied. During 1996, leases covering approximately
13% of the Company's leased space are scheduled to expire.
As of March 31, 1996, the Company had cash and cash equivalents of
approximately $4.9 million.
Based on management's estimates of the values as of December 31, 1995,
the Company is in compliance with all covenants contained in the loan
agreement for its facility. The lender, however, has complete discretion
regarding valuations and is currently reviewing management's estimates of
value. If the lender were to calculate a loan-to-value ratio greater than
55%, the Company would have to make an Excess Cash payment, and the
Company's dividends could be restricted. (See Note 6 to the Company's
financial statements.)
During the three months ended March 31, 1995, the Company determined
that a soil settlement problem at the 1033 East Maricopa property in
Phoenix, Arizona was far more serious than previously expected. Outside
consultants have indicated that if the soil under the building continues to
settle at its current rate, a portion of the building will likely be
uninhabitable within a year. As a result, the Company is actively trying
to relocate the building's tenant. The Company is also investigating its
options with respect to rehabilitating some portion of the building. In
addition, the Company has filed a lawsuit against the entity from which it
purchased the property as well as various third party consultants. The
Company has not provided for any valuation reserves or any accruals to
rectify the settlement problem as such amounts are not currently
determinable.
Capital expenditures for the three months ended March 31, 1996 and
1995 totaled $43,858 and $64,039, respectively.
During the three months ended March 31, 1996, distributions totaling
$481,871 were made to shareholders. No distributions to shareholders were
made during the three month period ended March 31, 1995.
On March 12, 1996, the Board of Directors (the "Board") declared
dividends in the amount of $0.07 per preferred share and $0.07 per common
share, payable on March 29, 1996 to shareholders of record on March 19,
1996. In addition to the dividends described above, the Board also
declared quarterly preference dividends on the Company's preferred stock
each equal to $0.06018 per preferred share, payable on June 30, September
29 and December 29, 1995. (See Note 9 to the Company's consolidated
financial statements.)
Material Changes in Results of Operations.
Rentals from Real Estate Investments totaled $2,304,672 and $2,973,188
for the three months ended March 31, 1996 and 1995, respectively. The
decrease of $668,516 in 1996 is primarily due to the sales in 1995 of two
of the Company's rental properties.
Compared to the same period in 1995, Interest and Other revenue
decreased by $29,137 to $41,967 for the three month period ended March 31,
1996. The decrease is primarily due to decreases in the Company's average
cash balances available for investment. Prior year funds available for
investment increased as a result of the suspension of dividend payments
during the first nine months of 1994 and the two preceding years. (See
Note 9 to the Company's financial statements.)
Compared to the same period in 1995, General and Administrative costs
decreased by $19,267 to $229,770 for the three month period ended March 31,
1996. This decrease is primarily due to the exclusion of any portion of
management fees paid to TIS Financial Services, Inc. from general and
administrative costs (see Note 10 to the Company's consolidated financial
statements) as compared to the amounts paid in 1995 to Meridian Point
Properties ("MPP") for costs incurred by MPP in conducting the Company's
daily operations, offset by increases in professional fees incurred in
connection with the Company's termination of the employee leasing agreement
with MPP and the review and evaluation of strategic business plans for the
Company.
During the three months ended March 31, 1995, the Company recognized a
Provision for Decrease in Net Realizable Value totaling $1,182,015 in
connection with the pending sale of the Tropicana property.
Included in Net Income are the non-cash expenses of Depreciation and
Amortization. For the three months ended March 31, 1996 and 1995, these
expenses totaled $642,818 and $768,332, respectively. The decrease of
$125,514 during 1996, compared to 1995, is primarily due to the sale of two
of the Company's rental properties in 1995.
<PAGE>
__________________________________________________________________________
PART II: OTHER INFORMATION
__________________________________________________________________________
ITEM 1. LEGAL PROCEEDINGS.
There are no material pending legal proceedings which the Company or
any partnership in which the Company has an interest is a party, or to
which any of the assets of the Company or any such partnership is
subject.
ITEM 2. CHANGES IN SECURITIES.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits: None
(b) No reports on Form 8-K were filed during the quarter
ended March 31, 1996:
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
REGISTRANT
MERIDIAN POINT REALTY TRUST VIII CO.
Date: May 13, 1996 By: /s/ Lorraine O. Legg
----------------------
Lorraine O. Legg, President and
Chief Executive Officer
(Principal Executive Officer)
Date: May 13, 1996 By: /s/ John E. Castello
----------------------
John E. Castello,
Senior Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1996 AND THE CONDENSED CONSOLIDATED
STATEMENT OF INCOME FOR THE THREE MONTHS ENDED MARCH 31,
1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 4,882,619
<SECURITIES> 0
<RECEIVABLES> 720,742
<ALLOWANCES> 134,971
<INVENTORY> 0
<CURRENT-ASSETS> 228,000
<PP&E> 81,785,403
<DEPRECIATION> 13,556,196
<TOTAL-ASSETS> 75,625,856
<CURRENT-LIABILITIES> 1,273,091
<BONDS> 0
<COMMON> 1,610
0
5,274
<OTHER-SE> 42,581,249
<TOTAL-LIABILITY-AND-EQUITY> 75,625,856
<SALES> 0
<TOTAL-REVENUES> 2,394,091
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,674,687
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 690,690
<INCOME-PRETAX> 28,714
<INCOME-TAX> 0
<INCOME-CONTINUING> 28,714
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28,714
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
