SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. 1)
Filed by the registrant X
Filed by a party other than the registrant
Check the appropriate box:
X Preliminary proxy statement
Definitive proxy statement
Definitive additional materials
Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Landsing Pacific Fund, Inc.
---------------------------
(Name of Registrant as Specified in Its Charter)
Dean Banks
----------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
$125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2).
$500 per each party to the controversy pursuant to Exchange Act Rule 14a
-6(i)(3).
X Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock
------------
(2) Aggregate number of securities to which transaction applies:
5,953,137
---------
(3) Proposed maximum aggregate value of transaction:
Not determinable - fee based on estimated net proceeds
------------------------------------------------------
Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date filed:
<PAGE>
August 11, 1995
Landsing Pacific Stockholders
Re: Proxy Statement - Plan of Liquidation
-------------------------------------
Dear Stockholder:
Enclosed is your Proxy Statement for the Annual Meeting of
Landsing Pacific Fund to be held on October , 1995. The Statement contains
--
detailed information about the Fund and the issues to be voted upon. We request
that you carefully read this material.
Stockholders must make a critical decision this year
concerning a Board proposal to liquidate the Fund. The Board of Directors
believes this plan to be in the best interest of stockholders for the following
reasons:
1. The Board believes that stockholders will receive a higher
value per share than if the Fund were merged into another entity, even if one
were to assume that another entity could be found on a satisfactory basis.
Management has been seeking a merger partner, or other corporate transaction for
more than a year. None of the proposals we have received to date would yield as
great a return to stockholders as the anticipated proceeds from liquidation as
set forth in the attached Proxy Statement, even at the low end of the range.
2. The Fund operates at a cash loss on a continuing basis,
thus eroding stockholder equity. At its current size the Fund cannot operate
profitably on a cash basis.
3. For the above reasons, dividends are not foreseeable.
Management believes that the Fund can be liquidated
expeditiously. If the Plan of Liquidation is adopted, it is our hope to be able
to start making cash distributions in the first quarter of 1996.
For many reasons, the Fund has been an unprofitable venture,
but this is no time for reflecting on history. It is time to return to the
stockholders the current value of their investment so that these funds can be
more profitably employed in investments which will actually show a return. There
is no foreseeable prospect of a return on investment on Landsing Pacific Fund
shares as the Fund is currently constituted.
<PAGE>
Landsing Pacific Shareholders
August 11, 1995
Page 2
We invite your careful review of the enclosed information. We
are available to answer your questions at any time prior to the vote.
We recommend a vote FOR all matters tendered for stockholder
vote as the most expeditious way to maximize the benefit to stockholders.
Very truly yours,
LANDSING PACIFIC FUND, INC.
By:
-------------------------------
Martin I. Zankel
Chairman of the Board
<PAGE>
LANDSING PACIFIC FUND, INC.
155 Bovet Road, Suite 101
San Mateo, California 94402
(415) 513-5252
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO THE STOCKHOLDERS:
The Annual Meeting of Stockholders of Landsing Pacific Fund, Inc., a
Maryland corporation (the "Fund"), will be held at the Hotel Sofitel, 223 Twin
Dolphin Drive, Redwood City, California, on October 13, 1995, at 9:00 a.m.,
local time, to consider the following proposals:
o To approve the Fund's Plan of Liquidation and Dissolution;
o To amend the Fund's Charter to eliminate the classified board
provisions thereof;
o To elect two directors; and
o To transact such other business as may properly come before the
meeting.
Only stockholders of record at the close of business on August 25, 1995
are entitled to notice of and to vote at said meeting and any adjournment
thereof.
THE PRESENCE AT THE MEETING, IN PERSON OR BY PROXY, OF STOCKHOLDERS
HOLDING A MAJORITY OF ALL THE OUTSTANDING SHARES OF COMMON STOCK AS OF THE
RECORD DATE IS REQUIRED FOR A QUORUM. IF YOU CANNOT ATTEND THE MEETING, PLEASE
COMPLETE, DATE, SIGN AND RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED
ENVELOPE AS PROMPTLY AS POSSIBLE.
<PAGE>
THE PROMPT RETURN OF YOUR PROXY CARD WILL HELP THE FUND AVOID THE
EXPENSE OF FURTHER REQUESTS FOR PROXIES TO OBTAIN A QUORUM.
By Order of the Board of Directors
DEAN BANKS, Secretary
San Mateo, California
, 1995
----------------
<PAGE>
TABLE OF CONTENTS
Page
----
INTRODUCTION............................................................... 1
SUMMARY.................................................................... 3
Proposal One: Approval of the Plan of Liquidation and
Dissolution................................................................ 3
Reasons for the Proposed Liquidation................................. 3
The Board's Conclusions.............................................. 4
Estimate of Net Proceeds of Liquidation............................. 5
The Plan.............................................................. 5
Benefits to Certain Affiliates....................................... 7
Risks Attendant to the Adoption of the Plan.......................... 8
Effect of Failure to Approve the Plan................................. 9
Appraisal Rights...................................................... 9
Proposal Two: Approval of Proposal to Eliminate the
Classified Board Provisions from the Fund's Charter................... 9
Certain Considerations................................................ 10
THE FUND.................................................................. 12
Description Of Business.............................................. 12
Description of the Properties........................................ 15
Market For Common Equity and Related Stockholder Matters............. 19
Selected Financial Data.............................................. 21
Management's Discussion and Analysis Of Financial Condition
and Results of Operations....................................... 22
Additional Financial Information..................................... 34
PROPOSAL ONE: APPROVAL OF PLAN OF LIQUIDATION AND DISSOLUTION............ 35
Reasons for the Proposed Liquidation................................. 35
Issuance of Securities............................................... 36
Mergers and Acquisitions............................................. 36
The Board's Conclusions.............................................. 38
Summary of the Plan.................................................... 38
Appraisal Rights....................................................... 41
Effect of Failure to Approve the Plan.................................. 42
Estimate of Net Proceeds of Liquidation................................ 43
i
<PAGE>
TABLE OF CONTENTS
(continued)
Page
----
Interest of Certain Affiliates in the Liquidation and Dissolution... 45
Risks Attendant to the Adoption of the Plan.......................... 46
Certain Federal Income Tax Consequences.............................. 48
Summary of Reasons to Vote for the Adoption of the Plan.............. 53
PROPOSAL TWO: APPROVAL OF PROPOSAL TO ELIMINATE THE CLASSIFIED
BOARD PROVISIONS FROM THE FUND'S CHARTER............................. 55
Reasons for the Proposal ............................................ 55
Certain Considerations............................................... 55
PROPOSAL THREE: ELECTION OF DIRECTORS ................................... 58
Current Charter Provisions........................................... 58
Nominees............................................................. 58
1996 Annual Meeting.................................................. 59
DIRECTORS AND EXECUTIVE OFFICERS........................................ 61
Beneficial Ownership................................................. 62
Compliance with Section 16(a) of the Securities Exchange Act of 1934. 65
Committees........................................................... 65
EXECUTIVE COMPENSATION.................................................... 66
Summary Compensation Table........................................... 66
Options Granted in Last Fiscal Year.................................. 68
Aggregated Option/SAR Exercised in Last Fiscal Year and FY
-End Option/SAR Values.......................................... 68
Director Compensation................................................ 69
Management Incentive Plan............................................ 70
Employee Stock Incentive Plan ....................................... 70
Severance Payment Plan............................................... 70
Compensation Committee Interlocks and Insider Participation.......... 71
Certain Relationships and Related Transactions....................... 71
INDEPENDENT ACCOUNTANTS................................................... 71
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........................... 71
STOCKHOLDER PROPOSALS..................................................... 72
ii
<PAGE>
TABLE OF CONTENTS
(continued)
Page
----
EXHIBITS
--------
Exhibit A Plan of Liquidation and Dissolution........................ A-1
SCHEDULES
---------
Schedule 1 Financial Statements as set forth in the Fund's
Form 10-KSB for the fiscal year ended December 31,
1994.
Schedule 2 Financial Statements as set forth in the Fund's
Form 10-QSB for the three months and
six months ended June 30, 1995.
iii
<PAGE>
LANDSING PACIFIC FUND, INC.
155 Bovet Road, Suite 101
San Mateo, California 94402
(415) 513-5252
PROXY STATEMENT
INTRODUCTION
The accompanying Proxy is solicited by the Board of Directors
(the "Board") of Landsing Pacific Fund, Inc., a Maryland corporation (the
"Fund"), for use at the Annual Meeting of Stockholders (the "Meeting") of the
Fund to be held on October 13, 1995, and at any adjournment or postponement
thereof, for the purposes set forth in the attached Notice. The votes entitled
to be cast by the shares of Common Stock represented by the accompanying proxy
will be cast in accordance with the specification of the holder of the shares of
Common Stock, as properly indicated by the holder on the proxy. In the absence
of a specification thereon, proxies will be voted for each proposal and for the
nominees for director. A holder of the Fund's Common Stock (a "Stockholder")
giving a proxy may revoke it at any time prior to its exercise by filing with
the Secretary of the Fund a written revocation or a duly executed proxy bearing
a later date, or by attending the Meeting and voting in person.
The cost of solicitation of proxies will be borne by the Fund.
In addition to solicitation by mail, officers and directors of the Fund may
solicit proxies by mail, telephone, facsimile or personal interview. The Fund
intends to engage Corporate Investor Communications, Inc. to solicit
Stockholders' proxies. The Fund estimates that the cost of such solicitation
will be approximately $6,000.
Only Stockholders of record at the close of business on
August 25, 1995 (the "Record Date") will be entitled to notice
1
<PAGE>
of and to vote at the Meeting. As of the close of business on August 1, 1995,
there were outstanding 5,953,137 shares of Common Stock in the Fund (the "Common
Stock"). There is no cumulative voting; each share of Common Stock will be
entitled to one vote on all matters.
This Proxy Statement and accompanying form of Proxy will first
be sent or given to Stockholders on or about , 1995.
---------------
The affirmative vote of the holders of a majority of the
outstanding shares of Common Stock is required for approval of the Plan of
Liquidation and Dissolution (Proposal 1) and of the amendment to the Fund's
Charter (Proposal 2). The affirmative vote of a plurality of all the votes cast
at the Meeting, in person or by proxy, is required for the election of directors
(Proposal 3).
Abstentions and broker non-votes (i.e., votes not cast by a
broker or other record holder in "street" or nominee name who returns a properly
executed proxy because such record holder does not have discretionary authority
to vote on the matter) will be counted towards the presence of a quorum.
Abstentions and broker non-votes will have the same effect as votes against the
amendment to the Charter and the approval of the Plan of Liquidation.
Abstentions and broker non-votes will not be counted as votes cast and will have
no effect on the election of directors.
2
<PAGE>
SUMMARY
The following is a brief summary of certain information
contained elsewhere in this Proxy Statement (the "Proxy Statement"). This
summary does not describe Proposal 3 regarding the election of directors and is
not intended to be a complete description of the matters covered in this Proxy
Statement. This summary is subject to and qualified in its entirety by reference
to the more detailed information contained elsewhere in this Proxy Statement,
including the Schedules and Exhibit hereto and the documents incorporated herein
by reference. Stockholders are urged to read carefully the entire Proxy
Statement, including the Exhibits.
Proposal One: Approval of the Plan of Liquidation and Dissolution
The Board of Directors of the Fund (the "Board") has unanimously
approved a Plan of Liquidation and Dissolution of the Fund (the "Plan"), a copy
of which is attached hereto as Exhibit A. Stockholders will be asked at the
Annual Meeting to adopt the Plan and authorize the Board of Directors to take
all action necessary or appropriate to implement the Plan.
Reasons for the Proposed Liquidation
The Fund has generated net operating losses since 1989, due in
large part to provisions for losses on investments in real estate, the Fund's
high level of debt, and the high level of general and administrative costs
associated with administering a public REIT relative to the revenue generated by
the Fund's properties. In light of such losses, management's goal has been to
(i) raise additional capital to finance an increase in the Fund's asset base to
a level necessary to generate sufficient revenue to offset general and
administrative costs, (ii) grow the Fund by merging it with another REIT or real
estate company, or (iii) terminate the Fund by entering into a merger or sale of
assets following which the Fund would not be the surviving entity.
3
<PAGE>
At present, the Board believes, after consultation with members
of the investment community, that there would be insufficient demand among
investors to complete a sale of additional securities primarily because of (i)
the Fund's poor operating record, (ii) the Fund's small market capitalization,
and (iii) its high level of debt in relation to its market capitalization.
The Fund has pursued mergers with other entities. Initially, the
Fund pursued mergers through which the Fund would be the surviving entity.
Because of (i) the Fund's lack of cash to finance an acquisition of another
entity, (ii) the decline in the trading price of the Fund's Common Stock, and
(iii) the failure to pay dividends thereon, the latter two of which reduced the
likelihood that the stockholders of another company would accept the Fund's
Common Stock in a merger, the Fund changed its focus toward mergers or other
transactions through which it would be the acquired entity. The Fund has entered
into extensive negotiations with several REITs and real estate companies
concerning this type of merger or sale of the Fund's properties. However, it
ultimately determined that none of the proposed transactions would be in the
best interest of the Fund's Stockholders.
The Board's Conclusions
The Board has determined that a liquidation is in the best
interest of the Stockholders. The continuation of the Fund's operations at
current levels will, most likely, cause further erosion of Stockholders' equity.
Based on management's analysis and a report by Ernst & Young indicating the
likely aggregate value of the Fund's properties, the Board believes that the
trading price of the Common Stock does not reflect the underlying market value
of its investments. See Proposal 1 - "Estimate of Net Proceeds of Liquidation".
There can be no assurance, however, that the estimate of liquidation proceeds
will prove accurate. See "Risks Attendant to the Adoption of the Plan -
Uncertainty of Amount and Timing of Liquidating Distributions". Therefore, the
amount ultimately received by Stockholders through liquidating distributions may
or may not exceed the current trading price of the Common Stock.
4
<PAGE>
Estimate of Net Proceeds of Liquidation
The Fund engaged Ernst & Young, LLP ("Ernst & Young") to conduct
a valuation analysis of sixteen of the Fund's eighteen Real Properties. Pursuant
to the report, Ernst & Young concluded that, as of March 15, 1995, the aggregate
market value of the sixteen Real Properties evaluated by it was between $[ ] and
$[ ]. Based on the dollar amount of offers to purchase the Fund's two additional
real properties, Nohr Plaza and Inwood Shopping Center, management believes that
the value of these properties is approximately $[ ]. Based on the foregoing,
management believes that the liquidation value of the Fund's real properties,
net of the debt thereon and the cost of liquidation as estimated by management,
would be between $[ ] and $[ ] on a per share basis. It should be noted,
however, that this value represents the value as of the date of the report, and
that pending the liquidation process, such value could decline. In addition,
management's estimate of costs may not prove accurate. As a result of this and
other factors, the aggregate amount of any liquidating distributions pursuant to
the Plan may be materially lower. See "Risks Attendant to the Adoption of the
Plan -Uncertainty of Amount and Timing of Liquidating Distributions".
As of July 31, 1995, the Fund entered into an agreement with one
of its lenders which allows the Fund to pay off two loans collateralized by
Country Hills Towne Center under certain conditions until December 31, 1995. If
the loans are paid off in accordance with the terms of the agreement, management
believes that the Fund will realize a discount of approximately $2,600,000, and
that the estimate of the net liquidation proceeds would be increased to between
[$ ] and [$ ] per share. See The Fund - "Description of the Properties".
The Plan
Upon approval of the Plan by the Stockholders, the Fund will take
all steps necessary to effect the sale of all of the Fund's real property as
well as its personal property. The Fund's real
5
<PAGE>
property may be sold individually, as a whole, or in discrete groups, to any one
or more buyers. The proceeds of the sale of the properties will be invested
pending any liquidating distributions.
The proceeds of the sale of the Fund's properties and any
interest or other return thereon, less costs of sale, the repayment of debt, and
any provision for reserves and costs of liquidating the Fund, will be
distributed to the Stockholders at such times and in such amounts as shall be
determined by the Board, in its sole discretion. Significantly, the amount and
timing of any liquidating distributions will be determined by the Board and will
be contingent upon, among other things, the sales of properties and the amounts
that the Board deems necessary or appropriate to set aside for liabilities and
continuing expenses of the Fund. The Board is unable to predict when any of the
properties will be sold, and therefore when any distributions will be made, and
if made, the amount that will be distributed. See Proposal 1 - "Summary of the
Plan", and - "Risks Attendant to the Adoption of the Plan".
The Board may, in its sole discretion and on behalf of the
Stockholders, create a liquidating trust (a "Liquidating Trust") for the purpose
of effecting the liquidation. If the Board determines to effect the liquidation
through a Liquidating Trust, the Fund would transfer and assign to the trustee
of the Liquidating Trust all of its assets. Effective upon such transfer, each
of the Fund's Stockholders on such date or as of any record date established in
connection therewith would become a holder of a beneficial interest in the
Liquidating Trust equal to the proportion that such Stockholder held of the
outstanding shares of Common Stock of the Fund. Although the Fund does not
currently expect to create a Liquidating Trust, a vote "for" the approval of the
Plan also constitutes authorization of the transfer of all of the Fund's assets
to the Trust. See Proposal 1 - "Summary of the Plan", and - "Risks Attendant to
the Adoption of the Plan - Effect on Liquidity and Price of Common Stock on the
Market".
At such time as the Board determines, the Fund will take such
action as required under Maryland law to effect the dissolution of the Fund.
6
<PAGE>
Benefits to Certain Affiliates
Severance Payments. Pursuant to the Fund's Severance Payment
Plan, Joseph M. Mock, Chief Operating Officer of the Fund, and Dean Banks, Chief
Financial Officer, will be entitled to receive a severance payment equal to one
year of salary, which currently would be $135,000 and $105,000, respectively, in
the event that their employment is terminated as a result of a liquidation. In
addition, Messrs. Mock and Banks would receive additional compensation equal to
1 1/2% and 1%, respectively, of the value of aggregate distributions, if any, in
excess of $4.50 per share of Common Stock. Based on the estimated maximum net
proceeds of liquidation discussed in the preceding section, the maximum
additional compensation payable to Messrs. Mock and Banks could amount to $[ ]
and $[ ], respectively. See Proposal 1 - "Interest of Certain Affiliates in the
Liquidation and Dissolution", and "Executive Compensation - Severance Payment
Plan".
Vesting and Deemed Exercise of Options. Effective upon approval
of the Plan, all of the outstanding options held by the Fund's officers and
directors will become immediately exercisable. Thereafter, to the extent that
the aggregate per share liquidating distributions exceed the exercise price of
such options, then from and after the distribution date pursuant to which the
aggregate per share distribution amount exceeds the exercise price of any
option, the option holder will be deemed to be a Stockholder with respect to the
shares of Common Stock subject to such options, and will be entitled to receive
distributions on such deemed shares of Common Stock pro rata with the other
Stockholders. It should be noted that the officers and directors will not be
required to pay the exercise price with respect to the options in order to
receive those distributions and, therefore, this represents a form of
compensation. Based on the range of potential net proceeds from liquidation of
$[ ] to $[ ] per share as discussed in the preceding section, the estimated
distributions paid in connection with outstanding stock options would range in
the aggregate from approximately $[ ] to $[ ] for officers and $[ ] to $[ ] for
directors.
7
<PAGE>
Risks Attendant to the Adoption of the Plan
Uncertainty of Amount and Timing of Liquidating Distributions. A
number of factors will affect the amount which will be distributed as
liquidating distributions under the Plan, including the condition of the real
estate market pending the liquidation process, the cost of liquidation and other
matters, many of which are beyond the control of the Fund. As a result, there
can be no assurance as to the timing or amount of liquidating distributions to
Stockholders.
Effect on Liquidity and Price of Common Stock on the Market.
Although it is difficult to predict the effect of developments in the Fund's
business on the market price of the Common Stock, the adoption of the Plan could
cause the market price of the Common Stock to decline. In addition, Stockholders
thereafter could experience difficulty in locating purchasers for their shares
of Common Stock. If, in the future, a Liquidating Trust is created to effect the
liquidation, the beneficial interests in such Trust which will be held by
Stockholders in lieu of Common Stock will be nontransferable by their terms. As
a result of the foregoing factors, Stockholders may experience a decline in the
value and liquidity of their investment in Common Stock for a substantial period
prior to the receipt of liquidating distributions.
Potential Liability of Stockholders. The Board expects to
adequately provide for all of the Fund's liabilities prior to distributing any
of the proceeds of sales of properties to the Stockholders. If, however, the
Fund would be insolvent after any distribution to the Stockholders, then the
Stockholders receiving such distribution could be liable to return to the Fund
the amount causing the Fund to be insolvent, but not exceeding the total amount
distributed in all of such distributions.
Effect on Registration. The Fund anticipates that it will
continue to comply with the registration and reporting requirements under the
Securities and Exchange Act of 1934, as amended. The Fund may, however, seek to
reduce its reporting requirements at some time during the liquidation process in
order to reduce
8
<PAGE>
administrative costs. In the event that all of the assets are transferred to the
Liquidating Trust, it is expected that the Trust will not be subject to the
reporting requirements of the Exchange Act. The Fund anticipates, however, that
the trustees of the Trust will provide the beneficial interest holders with
periodic reports concerning the activities of the trust.
Effect of Failure to Approve the Plan
In the event that the Stockholders fail to approve the Plan of
Liquidation, the Fund will, most likely, continue to operate at a loss as it has
in the past, thereby further eroding Stockholders' equity. Moreover, the Fund
faces substantial debt payments in the near future. Management believes that the
Fund should be able to refinance at least a majority of the debt scheduled to
mature in the next three years, although the terms of the renegotiated debt may
be less favorable to the Fund. With respect to those debts which management
cannot refinance, the Fund could lose the properties financed thereby through
foreclosure. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations".
Appraisal Rights
Stockholders do not have any appraisal, dissenters', or similar
rights in connection with the approval of the Plan.
Proposal Two: Approval of Proposal to Eliminate the Classified
Board Provisions from the Fund's Charter
As currently in effect, the Fund's Charter (the "Charter")
provides that the Board shall be divided into three classes of directors, with
two directors in each class. The Board has passed a resolution recommending for
Stockholder approval an amendment to the Charter to delete the provisions
therein which divide the Board into classes.
The Board believes that it is in the best interest of the Fund to
eliminate the classified board provisions in order to maximize flexibility by
enabling the Board to reduce the number of directors
9
<PAGE>
on the Board when it deems appropriate. In addition, the need for continuity in
Board membership will be reduced if the liquidation is undertaken immediately.
Certain Considerations
Potential Loss of Continuity of Management. Under the proposed
amendment to the Charter, a Stockholder holding a majority of the outstanding
shares of Common Stock (or perhaps fewer shares, depending on the number of
shares represented at a meeting to elect directors) will be able to elect the
entire Board of Directors at the first annual meeting at which that Stockholder
controls such shares. As a result, the Stockholders could lose the benefits
attendant to continuity of the Board's membership and the Fund's management.
Loss of Protection from Unsolicited Takeovers. The classified
board provisions of the Charter provide some measure of protection to the Fund
against unsolicited takeovers in that they could have the effect of delaying the
effective transfer of control of the Board to any Stockholder purchasing shares
of Common Stock in order to gain control of the Fund. Without those provisions,
a Stockholder holding a majority, or in some cases fewer shares, of the
outstanding Common Stock would be able to replace the Board in its entirety at
the first meeting at which directors are elected following the acquisition of
those shares. The removal of the classified board provisions could result in the
Fund becoming more vulnerable to unsolicited tender offers, including coercive,
two-tiered, front-end loaded or partial offers which may not offer full value to
all Stockholders.
Even if the proposal is approved, Maryland law would provide some
protection from such transactions. The Maryland General Corporation Law (the
"MGCL") prohibits, for a period of five years, certain "business combinations"
(including a merger, consolidation, share exchange or, in certain circumstances,
an asset transfer or issuance or a reclassification of equity securities)
between a Maryland corporation and any person who beneficially owns ten percent
or more of the voting power of the corporation's shares (an "Interested
Stockholder"). Thereafter, any such business
10
<PAGE>
combination must either (i) result in the Stockholders' receipt
of a minimum price for their shares (as defined in the MGCL), or (ii) be
recommended by the Board and approved by the affirmative vote of at least (a)
80% of the outstanding shares of voting stock of the corporation and (b)
two-thirds of the outstanding shares held by Stockholders other than the
Interested Stockholder. Currently, the Fund is not subject to these restrictions
on business combinations, because the Board has adopted a resolution opting out
of their application. The Board may, however, repeal that opt-out, and thereby
subject the Fund to these provisions. In addition, these provisions of the MGCL
do not apply to specific business combinations that are approved by the Board
prior to the time that the Interested Stockholder becomes an Interested
Stockholder. Therefore, these provisions would deter many transactions which the
Board did not approve, thereby providing some protection from transactions which
would be detrimental to the Fund or its Stockholders.
In addition, the Fund has entered into a Stockholder Rights Plan
dated July 26, 1990 (the "Rights Plan") which would have the effect of deterring
the concentration of stockholdings without prior approval by the Board.
Generally, the Rights Plan would subject an acquiror of 25% or more of the
Fund's Common Stock to substantial dilution in the value of its investment in
the Fund. Under the Rights Plan, the acquisition of 25% or more of the Fund's
Common Stock without Board approval would trigger the vesting of certain rights
to purchase Common Stock, which rights are currently held by the Stockholders.
The exercise price of the rights held by Stockholders other than the acquiror of
the Common Stock would represent a substantial discount to the value of the
Common Stock to be received on exercise. As a result, the exercise of such
rights would dilute the value of the stock acquired by the acquiror. The Rights
Plan would provide some protection to the Fund from any unsolicited acquisition
of a substantial portion of the Fund's Common Stock.
11
<PAGE>
THE FUND
Description Of Business
Landsing Pacific Fund was initially a Delaware corporation formed
for the purpose of merging the assets and liabilities of Landsing Institutional
Properties Trust-V, Landsing Institutional Properties Trust-VI and Landsing
Institutional Properties Trust-VII. The merger of these predecessor trusts was
completed on November 28, 1988. On September 30, 1993, Landsing Pacific Fund
merged into Landsing Pacific Fund, Inc., (the "Fund") a newly-formed Maryland
corporation. As a result of the merger, the former stockholders of Landsing
Pacific Fund became stockholders of the Fund and the Delaware corporation ceased
to exist. The Fund has elected to be treated as a real estate investment trust
under the Internal Revenue Code of 1986 and will not be subject to federal
income tax as long as real estate investment trust status is maintained and all
of its taxable income is distributed to stockholders.
The Fund is currently engaged in the business of operating
income-producing real estate investments. As discussed in Proposal 1, the Board
of Directors of the Fund has approved a conditional resolution, subject to
Stockholder approval, to liquidate all of the assets of the Fund in an orderly
fashion and to dissolve the Fund in accordance with a Plan of Liquidation.
During 1994, the Fund initiated a program to dispose of all of
its real estate investments which are not industrial properties and its real
estate investments located outside of its core markets in Northern California,
Colorado and Oregon (the "Non-Core Properties"). As a result of the program, the
Fund has withdrawn from Oklahoma City, Oklahoma and Boise, Idaho. The Fund is
exploring the disposition of other properties in Southern California, San
Leandro, California, St. Paul, Minnesota and Houston, Texas.
Pending the liquidation of the Fund, management continues to
focus on managing the Fund's portfolio, which as of June 30, 1995,
12
<PAGE>
consisted of fee title ownership of 18 properties. These include 14 industrial
properties and 4 retail properties. See "Description of the Properties", below.
The results of the Fund's operations depend primarily upon the
successful operations of its existing investments. The return on capital
available from equity ownership of real estate investments depends to a large
extent upon the ability to lease or rent property, to improve properties to
increase rents, competition and other factors, none of which can be predicted
with any certainty. The Fund competes for tenants with other owners of
comparable types of properties in the local geographical areas in which the
Fund's properties are located. The principal methods of competition include
rental rate charged, term of lease, free rent concessions, and tenant
improvement allowances. In recent years, the combination of overbuilding and the
impact of a real estate recession has significantly increased the level of
competition. This intense competition has resulted in decreasing rental rates,
particularly in the Houston, Southern California and Portland markets in which
the Fund has properties. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations", for a more specific discussion of the
impact of the foregoing factors on the Fund's financial condition, operations
and liquidity.
The Fund has not made, nor does it anticipate making, during the
remainder of its current fiscal year or during its succeeding fiscal year, any
material capital expenditures for environmental control facilities. The Fund
does not expect any material effects upon capital expenditures, earnings or
competitive position to result from compliance with present federal, state or
local environmental control provisions. The Fund has previously obtained Phase I
and, in several cases, Phase II surveys of all of its properties relative to the
potential existence of hazardous materials as defined by environmental impact
legislation. With the exception of the Country Hills Towne Center in Diamond
Bar, California and the 466 Forbes Building in South San Francisco, California,
only minor amounts of any such materials, if any, have been indicated. Those
materials representing a potential hazard,
13
<PAGE>
either now or in the future, have been or are being removed. Materials which do
not represent such a hazard, e.g., floor tile, have not been removed but rather
an abatement program has been implemented in connection therewith.
The Country Hills Towne Center has soil partially contaminated
by dry cleaning solvents. Preliminary estimates indicate that the
cost of remediation will not exceed $35,000.
The 466 Forbes property has soil partially contaminated by
gasoline which leaked from underground storage tanks on an adjacent property.
The owner of the adjacent property has initiated action to develop and implement
a remediation program. It is unlikely that the Fund will be required to perform
investigative work or undertake remedial actions at the property.
The Multnomah Building in Portland, Oregon, which was sold in
March 1995, contained asbestos. The purchaser of the property agreed to complete
the clean-up of the property with no further financial obligation to the Fund.
At an adjoining property, the Imperial Garage, there was a partial contamination
of the soil caused by leakage from underground storage tanks. In connection with
the sale of the property in March 1995, the tanks were removed and the
contamination remediated at a cost to the Fund of approximately $150,000.
At June 30, 1995 the Fund had 8 full-time employees and 1
part-time employee. All of the Fund's operations are located in the United
States.
14
<PAGE>
<TABLE>
Description of the Properties
-----------------------------
A description of the Fund's real estate investments is as
follows:
Real Estate Investments
(Amounts in thousands, except square footage amounts)
<CAPTION>
Net Mortgage
Percent Book Loan
Area Leased Value Balance
Name and Location (Sq. Ft.) 6/30/95 6/30/95(1) 6/30/95
----------------- --------- ------- ---------- --------
<S> <C> <C> <C> <C>
PACIFIC WEST COAST REGION
Pacific International Business Center
301 East Grand Building South San Francisco, CA 57,800 100% $2,983 $ 2,099(2)
342 Allerton Building South San Francisco, CA 69,300 100% 2,981 3,036(2)
400 Grandview Building South San Francisco, CA 107,000 100% 5,860 4,662(3)
410 Allerton Building South San Francisco, CA 46,100 100% 1,390 1,646(2)
417 Eccles Building South San Francisco, CA 24,600 100% 1,201 755(3)
466 Forbes Building South San Francisco, CA 65,600 100% 3,436 2,196(2)
Auburn Court Industrial Park Fremont, CA 68,000 100% 5,404 2,468(3)
Westinghouse Building Fremont, CA 24,000 100% 1,711 646(2)
Nohr Plaza Shopping Center San Leandro, CA 12,100 43% 889 -
Twin Oaks Business Park Beaverton, OR 65,200 94% 3,496 1,133
Twin Oaks Technology Center Beaverton, OR 94,200 76% 5,152 1,167
633,900 95% 34,503 19,808
ROCKY MOUNTAIN/MIDWEST REGION
Academy Place Shopping Center Colorado Springs, CO 84,400 98% 5,997 3,736
Bryant Street Annex Denver, CO 55,000 100% 1,285 930
Bryant Street Quad Denver, CO 155,500 100% 4,427 2,173
St. Paul Business Center West Maplewood, MN 108,800 80% 2,892 2,869
St. Paul Distribution Center Maplewood, MN 77,000 100% 2,558 1,788
480,700 95% 17,159 11,496
Portfolio Operations - - (30)(5) -
TOTAL 1,114,600 95% 51,632 31,304
Real estate under contract for sale:
Country Hills Towne Center Diamond Bar, CA 145,800 87% 12,245 14,144(4)
Inwood Central Shopping Center Houston, TX 83,100 80% 1,764 -
<FN>
Footnotes
(1) Net book value represents total acquisition cost plus cost capitalized subsequent to acquisition less provision for
loss in value and accumulated deprecation.
(2) Collateral for $9,623,000 term loan allocated according to property appraised value.
(3) Collateral for $7,884,000 term loan allocated according to property appraised value.
(4) Includes a construction loan with an outstanding balance of $142,000 at June 30, 1995.
(5) Purchase price for trailing equity interest in properties, net of amortization, in addition to corporate assets offset
by a general real estate reserve.
</FN>
</TABLE>
15
<PAGE>
In the opinion of management, the properties are adequately covered by
insurance.
COUNTRY HILLS TOWNE CENTER
Description. The property is located in the northwest corner of
Diamond Bar Boulevard and Cold Springs Lane in Diamond Bar, California. The
street addresses of the property are 21321-21385 Cold Sprigs Lane and 2711-2843
Diamond Bar Boulevard and the property is considered to be located in the
Greater Los Angeles Area. The property's land area is approximately 17.15 acres.
The Center is a shopping center originally constructed in 1964
and expanded and remodeled during 1989 and 1990, with the addition of
approximately 60,000 square feet of new retail space, including an eight-plex
movie theater. This expansion nearly doubled the size of the original property
resulting in a center totaling 156,300 square feet. During 1992 and 1993, a
major grocery store, which occupies 25,600 square feet, was expanded and
remodeled.
The fee simple title to Country Hills Towne Center is currently
technically vested in the Fund's Maryland predecessor. By operation of law,
however, the Fund is the legal owner of the property. The Fund was previously a
joint venture partner in the project and took active control of the property on
February 27, 1990. Prior to that time, the Fund was the major equity investor in
the project.
Mortgage Debt. Country Hills Towne Center is collateral for a
first mortgage loan which had an outstanding principal balance at June 30, 1995
of $14,002,000. The property also is collateral for a second mortgage
construction loan which had an outstanding principal balance of $142,000 at June
30, 1995. Subsequent to June 30, 1995, the Fund executed a forbearance agreement
with its lender for these two loans which permits the Fund to pay off the loans
by payment of $11,500,000. The lender has agreed to accept the lower payoff
amount until September 29, 1995 and will extend that date until October 31, 1995
upon payment of a $50,000 fee. The payoff date can be further extended to
December 31, 1995 with a principal paydown of $2,500,000.
16
<PAGE>
The Fund has made application to another lender to provide a
$9,000,000 mortgage loan which would enable the Fund to complete the payoff
prior to the expiration of the final extension of the payoff date. The balance
of the funds required to make a $2,500,000 principal paydown would be available
from cash reserves.
Country Hills Towne Center is a Non-Core Property. [Additional
information filed on a confidential basis.]
Competitive Conditions. The greater Los Angeles area has been
adversely affected by the recent recession and various other factors including
major cutbacks in defense spending and military base closures. In the local
market, viable retail tenants are currently in a position to negotiate
aggressively for the lower rental rates and greater concessions. In addition,
the general economic conditions in the greater Los Angeles area have made it
more difficult for marginal and average retail tenants to prosper. This has
resulted in a growth in tenant failures and a decline in the number of retail
tenants seeking additional locations. The combination of these factors are
likely to keep effective rental rates from rising as quoted rental rates in the
immediate area have declined over the past year.
Operating Data. As of June 30, 1995, the property was 87%
occupied, and the average effective annual rental rate per square foot was
$11.05. The percentage of space leased and the average effective annual rental
rate per square foot for each of the last five years are as set forth below:
Year Occupancy Rate Rental Rate(1)
---- -------------- --------------
1990 91% $ 7.65(2)
1991 89% $12.02
1992 89% $11.89
1993 88% $11.11
1994 87% $11.82
1995 89%(3) $11.79(4)
--------------------
(1) Expressed as dollars per square foot.
17
<PAGE>
(2) Includes rents in place prior to the Center's expansion and redevelopment
which was substantially completed in 1990.
(3) As of June 30, 1995.
(4) First six months of 1995 annualized.
<TABLE>
Tenants that occupy 10% or more of the property are as set forth
below:
<CAPTION>
Principal Lease Square
Business Expiration Feet Renewal Options Rent per Annum
--------- ---------- ------ --------------- --------------
<S> <C> <C> <C> <C>
Food Sales 8/31/2011 25,600 Three 5-year options $228,000
Drug & Sundry 5/31/2009 21,440 One 10-year option $81,777, increasing to
Sales $97,788 on 6/1/99
Movie Theater 10/3/2009 23,428 Three successive options $393,590 plus adjustment
for 15 years, 10 years, for percentage change in
and 5 years, respectively in Consumer Price index
in 1999 and 2004, or
$91,369, whichever is less
</TABLE>
The principal business of most of the property's other tenants is the sale
of retail goods and services, and includes a bank, photo developing,
restaurants, pet store, dry cleaner, clothes stores, and a jeweler, among
others.
The following presents the schedule of lease expirations as of December 31,
1994, for each of the next ten years:
Number of Square Annual Percentage of
Year Tenants Feet Rental Gross Annual Rental
---- --------- ------ ------ -------------------
1995 9 12,296 $247,000 14.7%
1996 5 6,089 117,000 7.0%
1997 2 5,160 75,000 4.5%
1998 5 7,792 130,000 7.7%
1999 3 12,250 120,000 7.2%
2000 1 1,200 32,000 1.9%
2001-2004 - -
18
<PAGE>
Depreciation for tax purposes is calculated using the straight-line method
based on the following:
Federal Tax
Property Component Cost Basis Life
------------------ ----------- ----
Building and Building Improvements $19,043,000 39 years
Furniture and Equipment 28,000 7 years
-----------
$19,071,000
The property tax rate, including direct assessments, is 1.35 percent of
assessed value and annual property taxes for the fiscal year ended June 30, 1995
were $311,000. The fund believes that the property is adequately covered by
insurance.
Market For Common Equity and Related Stockholder Matters
The Fund's Common Stock was listed on the American Stock
Exchange effective December 5, 1988. The high and the low sales price for each
period during 1994 and 1993 and the first six months of 1995 are as follows:
1995 1994 1993
-------------- -------------- --------------
High Low High Low High Low
---- --- ---- --- ---- ---
1st Quarter $3.000 $2.500 $3.563 $3.375 $3.875 $3.000
2nd Quarter $3.500 $2.625 $3.688 $3.375 $3.375 $3.000
3rd Quarter $3.563 $2.813 $3.375 $3.125
4th Quarter $3.625 $2.188 $4.125 $3.250
There were approximately 7,600 holders of record of the Fund's
shares of Common Stock as of June 15, 1995. However, the Fund estimates the
number of stockholders to be in excess of 12,000, since certain shares of Common
Stock of record are held by nominees. On August 7, 1995, the closing price of
the Common Stock was $3.125.
On August 7, 1992, the directors of the Fund voted to suspend
payment of a distribution to stockholders. The Board has reviewed the policy
periodically and the Fund is not expected to pay a
19
<PAGE>
distribution from operations during calendar year 1995. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations", for a
more specific discussion of the Fund's liquidity and the availability of funds
for distribution. If the Stockholders approve the Plan of Liquidation,
liquidating distributions would be made at such times and in such amounts as may
be determined by the Board of Directors.
On March 27, 1995, the Board of Directors resolved to terminate
the Dividend Reinvestment Plan. The Plan enabled stockholders to have
distributions, when they were paid by the Fund, automatically invested in
additional shares of Common Stock to the Fund. Registrar and Transfer Company,
which is unaffiliated with the Fund, acted as agent for those stockholders who
participated in the Plan. The shares of Common Stock required to fulfill the
requirements of the Plan were purchased on the open market or directly from the
Fund at a 5% discount from the open market price.
20
<PAGE>
<TABLE>
Selected Financial Data
Operating Results and Distributions
-----------------------------------
<CAPTION>
Six Months
Ended June 30, Years Ended December 31,
---------------------------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
---- ---- ---- ---- ---- ---- ----
(Amounts in thousands,except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $ 5,279 $ 6,371 $12,189 $ 14,441 $ 13,565 $ 16,910 $ 16,406
Income (loss) before gain
or loss from sale of
real estate and gain
on extinguishment of
debt $(3,610) $(8,335) $(9,618) $(27,754) $(12,249) $ (2,845) $(12,545)
Gain or loss from sale of
real estate - - - - 392 - (151)
Gain on extinguishment
of debt 467 - - - - - -
Net income (loss) $(3,143) $(8,335) $(9,618) $(27,754) $(11,857) $ (2,845) $(12,696)
Per Share:
---------
Net income (loss) $ (.53) $ (1.40) $ (1.62) $ (4.61) $ (1.89) $ (.46) $ (2.08)
Distributions declared $ - $ - $ - $ - $ .24 $ .64 $ .80
Balance Sheet Data:
------------------
Total Assets $74,403 $86,749 $80,328 $100,686 $124,691 $137,070 $134,532
Notes Payable $45,448 $53,255 $47,929 $ 57,966 $ 53,757 $ 53,309 $ 43,162
Stockholders' Equity $27,608 $32,032 $30,750 $ 40,368 $ 68,103 $ 81,336 $ 89,119
</TABLE>
21
<PAGE>
Management's Discussion and Analysis Of Financial Condition and Results of
Operations
Liquidity and Capital Resources. Current projections are that capital
expenditures for tenant and building improvements will be approximately $900,000
for the last six months of 1995. The principal source of liquidity for these
requirements is current cash reserves. At June 30, 1995, the Fund's unrestricted
cash and cash requirements were $6,778,000.
At June 30, 1995 the Fund had borrowings of $19,000,000 that
mature prior to December 31, 1995. As of June 30, 1995, the principal amount of
the Fund's debt that will mature in the next three years is as follows: (i) in
1995 - $19,000,000 which includes $14,144,000 principal amount currently payable
on two loans collateralized by Country Hills Towne Center; (ii) in 1996
-$6,227,000; and (iii) in 1997 - $12,505,000. It is expected that substantially
all of these loans will either be extended or the loans restructured.
The Fund has completed an agreement with one of its lenders which
provides that the lender will accept $11,500,000 as repayment of two loans
collateralized by Country Hills Towne Center. These loans matured on June 30,
1995 and had an outstanding principal balance of $14,144,000. One of the
conditions of the agreement is that the payoff occur prior to October 31, 1995.
The payoff date
22
<PAGE>
can be extended to December 31, 1995 if the loan balance is paid down by
$2,500,000. (See Note 4 of Notes to Financial Statements in Schedule 2.) The
potential sources of liquidity to accomplish the payoff of the loans are current
cash reserves and a new $9,000,000 mortgage loan collateralized by the property
for which the Fund has made application. [Additional information filed on a
confidential basis.]
Because of the already significant amount of debt, increased
borrowings have been viewed as a limited source of long-term liquidity. The
Fund's intention to liquidate, recent net losses and the suspension of dividends
in June 1992 significantly limit the Fund's ability to access sources of equity
capital. Management believes that the only long-term source of liquidity to fund
capital requirements and to meet loan repayments is the sale of properties.
During the first six months of 1995, the Fund sold the Multnomah
Building, the Imperial Garage, and a parcel of Country Hills Towne Center, which
produced net cash proceeds of $2,242,000.
During substantially all of 1994 and the first six months of
1995, the Fund sought to increase its capital base, arrange a merger, or to sell
all, or substantially all of its assets. No such transaction was accomplished.
In order to prevent continuing erosion of Stockholders' equity, the Board of
Directors adopted a resolution, subject to Stockholder approval, to liquidate
all of the assets of the Fund and to dissolve the Fund in accordance with a Plan
of Liquidation and Dissolution. See Proposal 1 - Approval of Plan of Liquidation
and Dissolution.
Analysis of Cash Flows. During 1994, the Fund generated $1,078,000 in Net Cash
Provided by Operating Activities as compared with $1,790,000 during 1993, as
presented in the accompanying Statements of Cash Flows.
Net cash provided by operating activities decreased in 1994
primarily as a result of the sale of properties which were outside
23
<PAGE>
of the Fund's core markets. In addition, interest expense increased
significantly due to increases in 1994 in borrowing rates. Approximately 84% of
the Fund's debt bears interest which is tied to short-term interest rates.
Net cash provided by operating activities, the net proceeds of
$5,465,000 from the sale of rental property and the receipt of payment of
$2,145,000 in satisfaction of a participating mortgage loan were the sources of
capital to fund capital expenditures and development costs and to pay down debt
by $1,631,000. The balance of net cash flows was used to increase reserves for
future cash requirements. During 1994, as a result of the sale of properties,
$4,264,000 of debt was retired . In addition, title to one of the Fund's
properties was transferred to the lender in satisfaction of the $4,142,000 loan
collateralized by the property.
The gross sales prices of properties sold in 1994 was
$10,527,000. See Note 6 of Notes to Financial Statements in Schedule 1 for the
sale price of each property. As a result of the sale of properties, there was a
14% decrease in total investments in real estate in 1994. The gross sales prices
of properties sold in the six months ended June 30, 1995 was $3,080,000. See
Note 2 of Notes to Financial Statements in Schedule 2 for the sale price of each
property. As a result of the sale of properties, there was a 4% decrease in
total investments in real estate in the first six months of 1995.
Results of Operations
Operating Trends. Substantially all of the Fund's investments
are in rental properties. The Fund has investments in two specific property
types: industrial - representing 76% of rentable square footage of the
portfolio, and retail - representing 24% of rentable square footage of the
portfolio. See "Description of Properties". The table below presents the
percentage leased at the end of each of the past three years, for each of the
specific property types in which the Fund currently has investments:
24
<PAGE>
Percentage Leased Rate
----------------------
Date Industrial Retail
---- ---------- ------
December 31, 1992 90% 87%
December 31, 1993 96% 86%
December 31, 1994 97% 88%
The primary reasons for the occupancy trends were the same for
each property type. During 1992, the impact of the economic recession was
reflected in a significant increase in tenant failures. Aggressive leasing
activity since 1992 has resulted in improved occupancy. The overall trend in the
past three years for each of the Fund's property types is as follows:
Industrial - Demand for the Fund's industrial space has seen
improvement over the past three years, particularly in the South San Francisco
market. However, rental rates have declined as leases have expired and releasing
has been at lower rates reflecting the competition for space.
Retail - The demand for retail space has declined with the
slowdown in economic growth. This has the effect of reducing rental rates in
order to maintain relatively constant occupancy rates over the past three years.
Management believes that the geographic market in which a
property is located has been a critical factor in determining operating results.
The trend in the Fund's occupancy has been favorable in Northern California, and
both occupancy and rental rates have been favorable in Colorado, reflecting the
relative strength of that economy. In Minnesota, the market has been stable with
occupancy rates of 93%, but at highly competitive rental rates due to weak
demand. The competition for rental space is intense in Southern California
resulting in occupancy rates below the portfolio average and reflecting the
weakness in the economy in that market. In the Houston and Portland markets, an
oversupply of retail and industrial properties, respectively, has resulted in
intense price competition in order to maintain occupancy levels.
Six Months Ended June 30, 1995 Compared with the Six Months Ended
June 30, 1994. Operating
25
<PAGE>
results for the periods ending June 30, 1995 and 1994 are not directly
comparable because of the difference in the number and magnitude of investments
held. Events which impacted the comparability of these results include: (i) the
sale of Twin Oaks Executive Center in Beaverton, Oregon on January 20, 1994,
(ii) the disposition of BancFirst and 101 Park Avenue Office Buildings in
Oklahoma City, Oklahoma on February 28, 1994, (iii) the sale of Camden Park
Shopping Center in Houston, Texas on June 7, 1994, (iv) the sale of Franklin
Business Park in Boise, Idaho on November 10, 1994, (v) the sale of 6900 Place
Shopping Center in Oklahoma City, Oklahoma on December 22, 1994, and (vi) the
sale of the Multnomah Building and Imperial Garage in Portland, Oregon on March
30, 1995. Decreases in rental income, operating expenses and depreciation and
amortization primarily resulted from these sales.
The following table reclassifies the 1995 and 1994 operating
results of the Fund in order to present the results as if the Fund had not owned
eight properties which were disposed of during 1995 and 1994.
26
<PAGE>
Table I
Proforma Operating Results
Including Only Properties Held Throughout Comparable
Periods
(Excludes Disposed Properties)
(amounts in thousands)
Three Months Ended Six Months Ended
------------------ ----------------
June 30, June 30,
1995 1994
Revenues $ 2,541 $ 2,743 $ 5,247 $ 5,291
Operating expenses 685 782 1,406 1,586
Income from property
operations $ 1,856 $ 1,961 $ 3,841 $ 3,705
Interest expense and other
financing costs 1,300 1,181 2,594 2,267
General and administrative
expenses 392 429 828 963
Other expense 197 66 258 168
Depreciation and amortization 726 901 1,515 1,818
Provision for loss in value of
investments in real estate and
loan collateral value 2,300 7,000 2,300 7,000
4,915 9,577 7,495 12,216
Loss before gain on extinguishment
of debt (3,059) (7,616) (3,654) (8,511)
Gain on extinguishment of debt 467 - 467 -
Loss before operating results of
disposed properties (2,592) (7,616) (3,187) (8,511)
Operating results of disposed
properties - 117 44 176
Net Loss $(2,592) $(7,499) $(3,143) $(8,335)
27
<PAGE>
The discussion of changes in results of operations which follows
is based on the proforma comparison of operating results excluding disposed
properties as presented in Table I.
Operating expenses decreased 11% in 1995 primarily as a result of
reduced property tax assessments and maintenance and repair costs at several
properties.
Interest expense and other financing costs were 14% higher in
1995 as compared with 1994 primarily as a result of the effect of increases in
the prime rate on the Fund's variable rate debt.
General and administrative expense declined by 14% in 1995 due to
a reduction in personnel in 1994 and a decline in corporate legal costs.
Other expense consisted of merger/liquidation and toxic
remediation costs in 1995 and terminated equity offering and loan refinancing
negotiations costs in 1994.
Depreciation and amortization expense decreased 17% in 1995 due
to a reduction in carrying value resulting from writedowns to net realizable
value in June and December 1994.
During the six months ended June 30, 1995, a $2,333,000 provision
for loss was recorded to reduce the carrying value to the properties' estimated
net realizable value of the properties which are being held for sale. All of the
writedown was attributable to Country Hills Towne Center and Nohr Plaza. The
Fund also recognized a $33,000 recovery on a participating mortgage loan that
was written off in a prior year.
28
<PAGE>
In 1995, the Fund realized a $467,000 discount by making a cash
payment of $1,027,000 to pay off a $1,494,000 loan collateralized by the Nohr
Plaza Shopping Center in San Leandro, California.
Year Ended December 31, 1994 Compared to Year Ended December 31,
1993. The following discussion, and the comparisons set forth therein are based
on the actual operations of the Fund for the respective periods, and include all
properties held by the Fund in each such period. Due to dispositions, the
operating results are not directly comparable. See the discussion following the
supplemental information in Table II for a comparison of operating results
including only properties held in 1994 and 1993.
Rental income decreased 16% in 1994 from 1993 as a result of the
sale of six Non-Core properties.
Operating expenses decreased 33% in 1994 from 1993 as a result
of the sale of six Non-Core Properties , lower property tax assessments at
several properties, and a significant reduction in administrative costs.
Interest expense increased 11% in 1994 over 1993 as a result of
the effect of prime rate increases on variable rate debt, offset by the impact
of the sale of four Non-Core Properties.
General and administrative costs decreased 20% in 1994 from 1993
as a result of the Fund's effort to reduce franchise tax, legal, professional
services, personnel, and printing/mailing costs.
Other expense in 1994 was comprised of merger/liquidation costs,
terminated property sale and loan transaction costs, and terminated equity
offering costs.
During the twelve months ended December 31, 1994, an $8,150,000
provision for loss was recorded to reduce the carrying value of the Fund's
portfolio to the estimated net realizable value of properties which were being
held for sale or were being marketed for sale.
29
<PAGE>
During December 1994, the Fund recognized the recovery of
substantially all of the King Cole Homes participating mortgage loan. The Fund
realized $1,505,000 in excess of the loan's carrying value, net of legal costs,
and the recovery reduced the provision for loss discussed above.
The factors discussed above caused the Fund's net loss to
decrease from $27,754,000 in 1993 to $9,618,000 in 1994.
Year Ended December 31, 1993 Compared to Year Ended December 31,
1992.
Rental revenue increased 7% in 1993 as compared with 1992
primarily due to non-recurring recoveries of prior year operating expenses,
higher percentage of space leased for the portfolio and increased revenue from
acceleration of rental payments by certain tenants in connection with early
termination of leases. The 1992 revenues included approximately $350,000 from
Lakeridge Business Park which was sold in June of that year.
Other income decreased 42% primarily because of a decrease in
interest income from notes receivable from officers which were canceled in late
1992 and 1993. The decrease was partially offset by higher interest income on
increased cash reserves in 1993 and the non-accrual of participating loan income
in 1993.
Other expense in 1993 was comprised of costs associated with
litigation in which the Fund was engaged or agreed to settlement, terminated
capital projects at Country Hills Towne Center, and costs incurred in a
terminated equity offering. Litigation costs were significantly lower than those
in 1992 due to management's initiative to accelerate the completion of
litigation and reduce the number of matters in dispute.
During 1993, the borrower for the mortgage loan collateralized by
the land in Sonoma, California filed for bankruptcy protection, causing a delay
in realizing the expected value of the collateral. Principally as a result of
the delay, the Fund made a provision for additional loss of $542,000. During
1992, the Fund made a provision of $1,084,000 for loss on the Sonoma land loan
and a
30
<PAGE>
provision of $2,252,000 for loss on the second mortgage loan previously secured
by a shopping center in Alameda, California.
Subsequent to December 31, 1993, the Fund announced its decision
to explore the disposition of its real estate investments in Southern
California; St. Paul, Minnesota; Oklahoma City, Oklahoma; Houston, Texas; Boise,
Idaho; and Colorado Springs, Colorado, in order to determine whether such
dispositions could be made on a satisfactory basis. Since the Fund's real estate
investments in those markets were no longer considered to be held on a long-term
basis, a $19,062,000 provision for loss was recognized as of December 31, 1993,
to reduce the carrying value of the properties to their estimated net realizable
value. As a result of revisions in the development prospects for the Multnomah
Building and Imperial Garage, the carrying value of those investments was
reduced by a $3,977,000 provision for loss. In addition, a $446,000 provision
for loss was recognized in 1993 to reflect the contract for sale of the Twin
Oaks Executive Center property. In 1992, a $3,011,000 provision for loss was
made to reduce the carrying value of the Multnomah Building.
The factors discussed above caused the Fund's net loss to
increase from $11,857,000 in 1992 to $27,754,000 in 1993.
The following supplemental information provides comparative
operating information for 1994 and 1993 including only those properties which
remained in the portfolio as of December 31, 1994.
31
<PAGE>
<TABLE>
Table II
Proforma Operating Results
Including Only Properties Held Throughout 1994 and 1993
(Excludes Properties Disposed)
(Amounts in thousands)
<CAPTION>
<S> <C> <C>
REVENUES:
Rental income $ 10,647 $10,466
Other income 92 88
-------- -------
Total revenues 10,739 10,554
-------- -------
EXPENSES:
Operating 3,115 3,452
Depreciation and amortization 3,762 3,668
Interest and other financing costs 4,679 4,024
General and administrative 1,897 2,366
Other expense 303 558
Provision for loss in value of investments
in real estate and loan collateral value 6,645 10,816
------ -------
Total expenses 20,401 24,884
------ -------
Loss before operating results of
disposed properties (9,662) (14,330)
Operating results of disposed properties 44 (13,424)
------- --------
Net loss $ (9,618) $(27,754)
========= ========
</TABLE>
The discussion of changes in results of operations which follows
is based on the comparison of operating results excluding disposed properties as
presented in Table II.
Proforma Results of Year Ended December 31, 1994 Compared to Year
Ended December 31, 1993. Operating expenses decreased 10% in 1994 from 1993 as a
result of lower property tax assessments at several properties and a significant
reduction in administrative costs.
Interest and other financing costs increased 16% in 1994 from
1993 as a result of the effect of prime rate increases on variable rate debt.
General and administrative costs decreased 20% in 1994 from 1993
as a result of the Fund's effort to reduce franchise tax,
32
<PAGE>
legal, professional services, personnel, and printing/mailing costs.
Other expense in 1994 was comprised of merger/liquidation costs,
terminated property sale and loan transaction costs, and terminated equity
offering costs.
During the twelve months ended December 31, 1994, an $8,150,000
provision for loss was recorded to reduce the carrying value to the properties'
estimated net realizable values of properties which were being held for sale or
being marketed for sale.
During December 1994, the Fund recognized the recovery of
substantially all of the King Cole Homes Participating Mortgage Loan. The Fund
realized $1,505,000 in excess of the loans carrying value, net of legal costs,
and the recovery reduced the provision for loss discussed above.
Potential Factors Affecting Future Operating Results.
As discussed hereafter in Proposal One, the Board of Directors
has adopted a resolution, subject to Stockholder approval, to liquidate the
Fund. As properties are sold pursuant to any liquidation of the Fund, the effect
would be to decrease the contribution of such properties to overall Fund
operating results. Because certain of the Fund's general and administrative
expenses are fixed rather than variable, the decreased contribution from
properties which are sold would result in a decrease in total Fund operating
results.
If the Stockholders approve the proposed Plan of Liquidation, all
of the Fund's investments would be valued on the basis of estimated liquidation
prices. Preliminary estimates indicate that the aggregate of sales prices net of
closing costs would not be less than the projected carrying values at the time
of sale. If the Plan of Liquidation is adopted, the Fund may record the
estimated costs of liquidation and dissolution. Preliminary estimates, as
33
<PAGE>
of June 30, 1995, indicate that a provision of approximately $2,000,000 would be
required to record such costs.
Since 84% of the Fund's debt bears variable rate interest,
increases or decreases in the prime rate will increase or decrease the Fund's
interest expense.
Additional Financial Information
A copy of the Fund's financial statements as set forth in the
Fund's Form 10-KSB for the fiscal year ended December 31, 1994 is attached
hereto as Schedule 1, and a copy of the Fund's financial statements as set forth
in the Fund's Form 10-QSB for the three months and six months ended June 30,
1995 is attached hereto as Schedule 2. The financial information contained in
Schedules 1 and 2 is hereby incorporated into this document as though set forth
herein.
34
<PAGE>
PROPOSAL ONE:
APPROVAL OF PLAN OF LIQUIDATION AND DISSOLUTION
Reasons for the Proposed Liquidation
The Board of Directors of the Fund (the "Board") has unanimously
approved a Plan of Liquidation and Dissolution of the Fund (the "Plan"), and
directed that the Plan be submitted for adoption by Stockholders of the Fund at
the Meeting. Stockholders will be asked at the Meeting, among other things, to
adopt the Plan and authorize the Board of Directors to take all action necessary
or appropriate to implement the Plan. A copy of the Plan is included with this
Proxy Statement as Exhibit A. Reference is made to Exhibit A for a more complete
description of the terms and conditions of the Plan.
The Fund is a Maryland corporation which has elected to be
treated as a real estate investment trust (a "REIT") under the Internal Revenue
Code of 1986, as amended. The investment policy of the Fund emphasizes
equity-oriented real estate investments to generate both income and capital
appreciation for the Stockholders. The Fund has generated net operating losses
since 1989, due in large part to (i) provisions for losses on investments in
real estate, (ii) the Fund's high level of debt, and (iii) the high level of
general and administrative costs associated with administering a public REIT
relative to the revenue generated by the Fund's properties. The Fund's
management has sought to improve operating results by implementing cost-cutting
measures. While the Fund has been successful in reducing costs, management has
concluded that the Fund's asset base is too small to generate sufficient revenue
to cover the costs, even as reduced, of administering a public REIT.
In light of the foregoing, management's goal has been to (i)
raise additional capital to finance an increase in the Fund's asset base to a
level necessary to generate sufficient revenue to offset operating costs, (ii)
grow the Fund by merging it with another REIT or real estate company, or (iii)
terminate the Fund by entering into a merger or sale of assets following which
the Fund would not be the surviving entity.
35
<PAGE>
Issuance of Securities
Management and the Board have investigated the possibility of
raising capital through the issuance of additional securities. In November,
1993, the Fund filed a registration statement with the Securities and Exchange
Commission in connection with an offering to its Stockholders of rights to
purchase shares of Common Stock in the Fund. Ultimately, it was determined that
the costs of completing the offering outweighed the benefits of the small amount
of cash that would have been raised.
At present, the Board believes, after consultation with members
of the investment community, that there would be insufficient demand among
investors to complete a sale of additional securities if issued by the Fund.
Management believes that, as a general rule, in order to attract capital to an
equity offering by a REIT the aggregate amount of debt should not exceed 40% of
the REIT's total market capitalization. The aggregate amount of the Fund's debt,
however, is approximately two times its market capitalization. Moreover,
management believes that many investors are less likely to invest in a REIT with
an equity market capitalization as small as the Fund's. Because of these
factors, and because the Fund has not paid a dividend since the second quarter
of 1992, it is unlikely that an offering of the Fund's securities would be
successful.
Mergers and Acquisitions
Since March of 1990, the Fund has pursued growth through mergers
and acquisitions pursuant to which the Fund would be the surviving entity. The
Fund actively pursued transactions with other real estate companies in order to
increase the Fund's asset base, but did not enter into any of the potential
transactions identified because management did not believe that any of them
would enhance Stockholder value. More specifically, none of the merger or
acquisition targets considered met all of the Fund's criteria concerning
acquisition price, geographic location, property-type, and leverage ratios.
Since March of 1994, the Fund has shifted its focus away from
growth toward pursuing transactions through which the Fund would
36
<PAGE>
be the acquired entity. This shift resulted from the recognition by the Board of
(i) the Fund's lack of cash to finance an acquisition of another entity, and
(ii) the decline in the trading price of the Fund's Common Stock and (iii) the
failure to pay dividends on the Fund's Common Stock, the latter two of which
reduced the likelihood that stockholders of another company would accept Common
Stock of the Fund as consideration for shares in a merger. As a result, the Fund
began pursuing the possibility of mergers and other transactions pursuant to
which the Fund's Stockholders would receive cash or securities in exchange for
their shares of Common Stock.
In order to make the Fund and its properties more attractive to
potential acquirors as well as investors in the equity market, the Fund has
sought to narrow the geographic scope of its properties as well as the type of
properties within its portfolio. To that end, the Fund has attempted to sell its
Non-Core Properties, which are those properties which are located outside of
Northern California, Colorado and Oregon, as well as those which are not
industrial buildings . Of the fourteen Non-Core Properties held by the Fund as
of January 1, 1994, the Fund has sold eight.
The Fund has entered into extensive negotiations with several
REITs and real estate companies concerning mergers and the sale of the Fund's
properties. With one exception those negotiations were terminated because the
parties were unable to reach agreement as to the material terms. In one case in
which it was likely that an agreement would have been reached as to the material
terms, the Fund ultimately determined not to pursue a definitive agreement. The
Board concluded that the transaction considered would not be in the best
interests of the Stockholders in light of a review of the current market
conditions for real property. Based on a report by Ernst & Young, LLP ("Ernst &
Young") and the analysis of management, the Board concluded that, although there
can be no assurance in this regard, the proceeds to the Stockholders from a
liquidation would likely exceed the proceeds to the Stockholders from the merger
transaction considered. See "Estimate of Net Proceeds of Liquidation",
discussing the above-referenced report.
37
<PAGE>
The Board's Conclusions
The Board has determined that a liquidation is in the best
interest of Stockholders. The continuation of the Fund's operations at current
levels will, most likely, cause further erosion of Stockholders' equity. Based
on management's analysis and the Ernst & Young report indicating the likely
aggregate value of the Fund's properties, the Board believes that the trading
price of the Common Stock does not reflect the underlying market value of its
investments. See "Estimate of Net Proceeds of Liquidation". It should be noted,
however, that there can be no assurance that the estimate of liquidation
proceeds will prove accurate. See "Risks Attendant to the Adoption of the Plan
Uncertainty of Amount and Timing of Liquidating Distributions". Therefore, the
amount ultimately received by Stockholders through liquidating distributions may
or may not exceed the trading price of the Common Stock.
Summary of the Plan
The following summary of the Plan is qualified in its entirety by
the Plan itself. The Plan will become effective only upon the approval thereof
by the affirmative vote of holders of a majority of the outstanding shares of
Common Stock.
Sale of the Properties. Upon approval of the Plan by the
Stockholders, the Fund will take all steps necessary to effect the sale of all
of the Fund's real property (the "Real Property") as well as its personal
property (the "Personal Property") (collectively, the "Properties"). The Real
Property may be sold individually, together as a whole, or in discrete groups,
to any one or more buyers.
The Board may authorize its Real Estate Committee (the
"Committee") to approve sales of the Fund's Real Properties. The Board of
Directors will establish guidelines pursuant to which the Committee, if
established, or in the absence thereof, the officers of the Fund, may sell the
Real Property without further approval of the Board. If the Committee or the
officers, as the case may be, propose to sell Real Property upon terms and
conditions which do not conform to the guidelines, any such sale may be
completed
38
<PAGE>
only after the Board approval. Similarly, the Board will establish guidelines
pursuant to which the officers may sell the Personal Property without further
approval of the Board. Any sale on terms and conditions which do not conform to
the guidelines may be made only after Board approval.
The proceeds of the sale of the Properties will, pending any
liquidating distributions, be invested by the Board in any manner it deems
appropriate, subject to the limitation that such investments do not result in
the Fund's becoming an Investment Company under the Investment Company Act of
1940.
Liquidating Distributions. The proceeds of the sale of Properties
and any interest or other return thereon, less costs of sale, the repayment of
debt, and any provision for reserves and costs of liquidating the Fund, will be
distributed to the Stockholders at such times and in such amounts as shall be
determined by the Board, in its sole discretion. At such time as the Board of
Directors authorizes any liquidating distribution to be made to the
Stockholders, the Board will cause the aggregate amount of funds, securities, or
other assets (the "Distributable Assets") to be distributed to the Stockholders
(the "Eligible Stockholders") of record on the record date fixed with respect to
such distribution to be set aside. All Distributable Assets set aside for
distribution will be distributed through the Fund's transfer agent, or some
other agent of the Fund, to the Eligible Stockholders. As of the time that the
Fund makes the final liquidating distribution to the Eligible Stockholders, all
of the outstanding shares of Common Stock will be deemed cancelled.
All Distributable Assets set aside for distribution that are not
distributed because an Eligible Stockholder cannot be located will be held by
the Transfer Agent for a period of three years from the date that notice is sent
to Stockholders regarding the Fund's dissolution. Upon expiration of this three
year period, or any longer period that the Board may determine, the
Distributable Assets will be distributed, pro rata, to the other Eligible
Stockholders. In the event that any of those Eligible Stockholders who had
previously been located as of the date of the final liquidating distribution
thereafter becomes unlocatable, the amounts payable to such unlocatable
Stockholder shall be paid to
39
<PAGE>
the appropriate State official, or to another beneficiary that the Board may
designate in accordance with the law.
Significantly, the amount and timing of any liquidating
distributions will be determined by the Board and will be contingent upon, among
other things, the sales of Properties and the amounts that the Board deems
necessary or appropriate to set aside for liabilities and continuing expenses of
the Fund. The Board is unable to predict when any of the Properties will be
sold, and therefore when any distributions will be made, and if made, the amount
that will be distributed.
Liquidating Trust Agreement. If the Board of Directors deems it
advisable for any reason, the Board may at any time, in its sole discretion and
on behalf of the Stockholders, create a liquidating trust (the "Liquidating
Trust") by entering into a Liquidating Trust Agreement (the "Liquidating Trust
Agreement") for the purpose of (a) completing the liquidation of the Properties,
(b) providing for the payment of all liabilities, (c) making liquidating
distributions to the Eligible Stockholders, and (d) holding and distributing
liquidating distributions on behalf of any unlocated Eligible Stockholders.
Concurrently with the execution of the Liquidating Trust Agreement, the Fund
would transfer and assign to the trustee of the Liquidating Trust all of
Landsing's right, title and interest in and to all of its assets. Effective upon
such transfer, each of the Fund's Stockholders on such date or as of any record
date established in connection therewith, would become a holder of a beneficial
interest in the Trust equal to the proportion that such Stockholder held of the
outstanding shares of Common Stock of the Fund. The Board of Directors may
appoint one or more persons to act as trustees of the Liquidating Trust.
It should be noted that, although the Fund does not currently
expect to create a Liquidating Trust, a vote "for" the approval of the Plan also
constitutes authorization of the transfer of all of the Fund's assets to the
Trust.
Dissolution. At such time as the Board determines, the Fund will
(a) give notice of dissolution to all its known creditors of its intended
dissolution, (b) cause Articles of Dissolution to be prepared, executed, and
filed with and accepted for record by the
40
<PAGE>
State Department of Assessments and Taxation of Maryland ("SDAT"), (c) cause any
documentation required by federal or state tax authorities to be prepared,
executed and filed, (d) after filing the Articles of Dissolution, provide notice
to Stockholders of any final liquidating distribution or notice of the filing of
the Articles of Dissolution and (e) withdraw its ability to do business as a
foreign corporation in any state in which it presently has such authority.
Amendments. Following the adoption of the Plan by the
Stockholders at the Annual Meeting, the Board of Directors may modify or amend
the Plan, to the extent permitted under Maryland law. Before the Articles of
Dissolution are accepted for record by the SDAT, the Fund may abandon or rescind
the dissolution by following the same procedure as followed for approval of the
dissolution. Thereafter, the dissolution may not be abandoned or rescinded.
Indemnification/Insurance. The Board of Directors shall have the
power and authority after the effective date of the Plan to purchase and/or
maintain insurance covering acts or omissions of its directors and officers and
the Fund's indemnification obligations to its directors and officers. The Board
of Directors will also have the power and authority to satisfy any of the
indemnification obligations of the Fund out of the assets of the Fund. In that
regard, the Board intends to purchase, for a period of three years following the
dissolution of the Fund, directors and officers liability insurance which would
indemnify the Fund's directors and officers from the costs and liability
associated with any claim made during such period.
Appraisal Rights
Section 3-202(c)(1)(ii) of the Maryland General Corporation Law
provides that because the shares of Common Stock are listed on a national
securities exchange, Stockholders do not have any appraisal, dissenters', or
similar rights in connection with the approval of the Plan.
41
<PAGE>
Effect of Failure to Approve the Plan
42
<PAGE>
In the event that the Stockholders fail to approve the Plan of
Liquidation, the Fund will, most likely, continue to operate at a loss as it has
in the past, thereby further eroding Stockholders' equity. Moreover, the Fund
faces substantial debt payments in the near future. Specifically, the aggregate
principal amount of the Fund's debt that will mature (i) in 1995 is $19,000,000
(which includes approximately $14 million currently payable on the Country Hills
Towne Center loans), (ii) in 1996 is $6,227,000, and (iii) in 1997 is
$12,505,000. Management believes that the Fund should be able to refinance the
majority of the debt scheduled to mature in the next three years, although the
terms of the renegotiated debt may be less favorable to the Fund. With respect
to those debts which management cannot refinance, the Fund could lose the
properties financed thereby through foreclosure. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations".
Estimate of Net Proceeds of Liquidation
The Fund engaged Ernst & Young to conduct a valuation analysis of
sixteen of the Fund's eighteen Real Properties. The Fund did not engage Ernst &
Young to value the other two Real Properties, as one property (Nohr Plaza)
represents a relatively small portion of the aggregate value of the Fund's Real
Properties, and the other property (Inwood Central Shopping Center) was under
contract for sale as of the date of the valuation. That contract, however, has
since been terminated, but another contract for the sale of the property has
been entered into on substantially the same terms. Ernst & Young is a firm of
Certified Public Accountants experienced in conducting valuations and appraisals
of real property, and management selected Ernst & Young based on its expertise
in the field. As compensation for the report, the Fund paid Ernst & Young
$70,000 plus $4,000 in expenses.
Ernst & Young followed the Uniform Standards of Professional
Appraisal Practices ("USPAP") guidelines in reaching its conclusions, except
that the scope of Ernst & Young's analysis of the value of the Real Properties
was narrower than the USPAP guidelines in two respects. First, pursuant to the
Fund's request,
43
<PAGE>
Ernst & Young relied on management's representations as to zoning matters, title
to the properties, and certain other matters. In addition, Ernst & Young did not
use the cost approach to value because, in the opinion of both management and
Ernst & Young, typical buyers and sellers in the current market do not rely on
this approach to estimate value.
In preparing its valuation analysis, Ernst & Young reviewed
information regarding each of the 16 properties and the markets in which they
are located. Each property was inspected, an analysis was made of market supply
and demand characteristics, and sales and operating results of comparable
properties were analyzed. A market value range of estimated values was prepared
based on the income and sales comparison approaches to value. The income
approach analysis included both the direct capitalization and discounted cash
flow methodologies.
Pursuant to the report, Ernst & Young concluded that, as of March
15, 1995, the aggregate market value of the sixteen Real Properties evaluated by
it was between $[ ] and $[ ]. Based on the dollar amount of offers to purchase
the Fund's two additional Real Properties, Nohr Plaza and Inwood Shopping
Center, management believes that the value of these properties is approximately
$[ ]. Based on the foregoing, management believes that the liquidation value of
the Fund's Real Properties, net of the debt thereon and the cost of liquidation
as estimated by management, would be between $[ ] and $[ ] on a per share basis.
It should be noted, however, that this value represents the value as of the date
of the report, and that pending the liquidation process, such value could
decline . In addition, management's estimate of costs may not prove accurate. As
a result of this and other factors, the aggregate amount of any liquidating
distributions pursuant to the Plan may be materially lower. See "Risks Attendant
to the Adoption of the Plan - Uncertainty of Amount and Timing of Liquidating
Distributions".
As of July 31, 1995, the Fund entered into an agreement with one
of its lenders which allows the Fund to pay off two loans collateralized by
Country Hills Towne Center under certain conditions until December 31, 1995. If
the loans are paid off in
44
<PAGE>
accordance with the terms of the agreement, management believes that the Fund
will realize a discount of approximately $2,600,000, and that the estimate of
the net liquidation proceeds would be increased to between [$ ] and [$ ] per
share. See The Fund - "Description of the Properties".
Current Negotiations Regarding the Sale of Properties. In
accordance with the program to dispose of its Non-Core Properties, the Fund has
entered into negotiations to sell Nohr Plaza in San Leandro, California and
Academy Place Shopping Center in Colorado Springs, Colorado. The terms of
contracts for sale are currently being negotiated. In addition, the Inwood
Central Shopping Center in Houston, Texas is under a contract for sale.
[Additional information filed on a confidential basis]
Interest of Certain Affiliates in the Liquidation and Dissolution
Pursuant to the Fund's Severance Payment Plan, Joseph M. Mock,
Chief Operating Officer of the Fund, and Dean Banks, Chief Financial Officer,
will be entitled to receive a severance payment equal to one year of salary,
which currently would be $[ ] and $[ ], respectively, in the event that their
employment is terminated as a result of a liquidation. In addition, Messrs. Mock
and Banks would receive additional compensation equal to 1 1/2% and 1%,
respectively, of the value of aggregate distributions, if any, in excess of
$4.50 per share of Common Stock. Based on the estimated maximum net proceeds per
share of liquidation discussed in the preceding section, the maximum additional
compensation payable to Messrs. Mock and Banks could amount to $[ ] and $[ ],
respectively. See "Executive Compensation -Severance Payment Plan".
Effective upon approval of the Plan, all of the outstanding
options held by the Fund's officers and directors will become immediately
exercisable. Thereafter, to the extent that the aggregate per share liquidating
distributions exceed the exercise price of such options, then from and after the
distribution date pursuant to which the aggregate per share distribution amount
exceeds the exercise price of any option, the option holder will be deemed to be
a Stockholder with respect to the shares of Common
45
<PAGE>
Stock subject to such options, and will be entitled to receive distributions on
such deemed shares of Common Stock pro rata with the other Stockholders. It
should be noted that the officers and directors will not be required to pay the
exercise price with respect to the options in order to receive those
distributions, and therefore, that this represents a form of compensation.
Based on the range of potential net proceeds from liquidation of
$[ ] to $[ ] per share as discussed in the preceding section, the estimated
distributions paid in connection with outstanding stock options would range in
the aggregate from approximately $[ ] to $[ ] for officers and $[ ] to $[ ] for
directors.
Risks Attendant to the Adoption of the Plan
The following is a description of certain of the risks which
management believes, as of the date of this Proxy Statement, are most
significant in connection with the adoption of the Plan. There may be other
risks associated therewith. Stockholders should consider the following factors,
among others noted elsewhere in this Proxy Statement, in reaching a decision as
to whether to vote to approve the Plan:
Uncertainty of Amount and Timing of Liquidating Distributions. A
number of factors will affect the amount which will be distributed as
liquidating distributions under the Plan, including the condition of the real
estate market pending the liquidation process, the cost of liquidation and other
matters, many of which are beyond the control of the Fund. As a result, there
can be no assurance as to the timing or amount of liquidating distributions to
Stockholders.
Effect on Liquidity and Price of Common Stock on the Market.
Although it is difficult to predict the effect of developments in the Fund's
business on the market price of the Common Stock, the adoption of the Plan could
cause the market price of the Common Stock to decline. In addition, Stockholders
thereafter could experience difficulty in locating purchasers for their shares
of Common Stock. If, in the future, a Liquidating Trust is created to effect the
liquidation, the beneficial interests in such Trust
46
<PAGE>
which will be held by Stockholders in lieu of Common Stock will be
nontransferable by their terms. As a result of the foregoing factors,
Stockholders may experience a decline in the liquidity and value of their
investment in Common Stock for a substantial period prior to the receipt of
liquidating distributions.
Effect on Registration. The Fund also anticipates that following
the approval of the Plan, the shares of Common Stock will remain registered
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
the Fund will continue to comply with the registration and reporting
requirements under the Exchange Act until such time as the Fund is no longer
subject to those reporting requirements. The Fund may, however, seek to reduce
its reporting requirements at some time during the liquidation process in order
to reduce administrative costs. In the event that all of the assets are
transferred to the Liquidating Trust, it is expected that the beneficial
interests in the Trust received by the Stockholders will not be registered under
the Exchange Act, and that the Trust will not be subject to the reporting
requirements of the Exchange Act. The Fund anticipates, however, that the
trustees of the Trust will provide the beneficial interest holders with periodic
reports concerning the activities of the Trust. The Fund would seek a no-action
position from the staff of the Securities and Exchange Commission prior to (i)
deregistering its Common Stock, or (ii) reducing or eliminating its disclosure
obligations pursuant to the reporting requirements of the Exchange Act.
Potential Liability of Stockholders. The Board expects to
adequately provide for all of the Fund's liabilities prior to distributing any
of the proceeds of sales of Properties to the Stockholders. If, however, the
Fund would be insolvent after any distribution to the Stockholders, then the
Stockholders receiving such distribution could be liable to return to the Fund
the amount causing the Fund to be insolvent, but not exceeding the total amount
distributed in all of such distributions.
47
<PAGE>
Certain Federal Income Tax Consequences
The following discussion is a summary of the material federal
income tax consequences to Stockholders relevant to the Fund's adoption and
implementation of the Plan. The discussion does not deal with all of the tax
consequences of the Plan that may be relevant to every Stockholder. STOCKHOLDERS
SHOULD THEREFORE CONSULT THEIR OWN TAX ADVISORS AS TO THE TAX CONSEQUENCES OF
THE PLAN TO THEM UNDER APPLICABLE FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS.
The discussion of tax consequences that follows is based upon the Internal
Revenue Code of 1986, as amended (the "Code"), Treasury Regulations, Internal
Revenue Service (the "IRS") rulings, and judicial decisions now in effect, all
of which are subject to change at any time; any such changes may be applied
retroactively.
Tax Consequences to the Fund. For federal income tax purposes,
the Fund is taxed as a real estate investment trust. In order for the Fund to
continue to qualify as a REIT, it must satisfy a number of asset, income and
distribution tests. First, at least 75% of the value of the Fund's assets at the
close of each quarter of the Fund's taxable year must be represented by real
estate assets, cash, cash items (including receivables arising in the ordinary
course of the Fund's operations), and government securities. The Fund may not
have more than 25% of its total assets represented by non-government securities,
and in connection with investments in such non-government securities, not more
than 5% of the value of the Fund's total assets may be invested in such
securities of any one issuer. In addition, the Fund may not hold more than 10%
of the outstanding voting securities of any one issuer.
The Fund must also meet a threefold source of income test. First,
at least 75% of the Fund's gross income must be derived from rents from real
property, interest on obligations secured by mortgages on real property, and
other sources directly related to its real estate activities. Second, at least
95% of the Fund's gross income must be derived from the sources described above
and from dividends, interest and gains from sales or dispositions of stock or
securities. Third, no more than 30% of the Fund's gross income may be derived
from the sale or disposition of stock or securities held for less than four
years. In this regard, all the
48
<PAGE>
Fund's properties have been held for at least four years. Finally, the Fund must
distribute 95% of its REIT taxable income (determined without regard to the
dividends paid deduction and by excluding any net capital gain) to its
Stockholders each taxable year.
The Fund anticipates that it will remain qualified under the
foregoing tests throughout the period of the liquidation. However, given the
changes in the nature of the Fund's assets and in the Fund's sources of income
which may result from sales of assets in the liquidation, and the need to retain
assets to meet liabilities, there can be no assurance that the qualification
tests will be met. If the Fund ceases to qualify as a REIT for any taxable year,
it would not be entitled to deduct dividends paid to Stockholders from its
taxable income and would, therefore, be liable for federal income taxes with
respect to its gains from sales of assets and its income from operations for
that year and for subsequent taxable years, although its substantial net
operating loss carryforwards would be available to offset most of such income.
Net operating loss carryforwards are, however, allowed to offset a maximum of
90% of a corporation's alternative minimum taxable income. In addition, certain
states, such as California, impose restrictions on a corporation's use of net
operating carryforwards. Thus, if the Fund fails to maintain its qualification
as a REIT and has taxable income for a taxable year, some federal and state tax
will be owing in spite of the Fund's net operating loss carryforwards.
For purposes of calculating a REIT's taxable income for a given
year, Section 857(b) of the Code allows the REIT a deduction for dividends paid
to its shareholders during that taxable year, and, therefore, a REIT generally
is not subject to federal income tax to the extent it distributes its taxable
income to its shareholders as a dividend.
In order to be entitled to this deduction, a REIT's distributions
to shareholders must be "dividends", but distributions in liquidation of a
corporation are generally treated as being in full payment for a shareholder's
interest in the corporation. In the context of the liquidation of a REIT,
Section 562(b) of the Code provides a special rule which will classify
distributions in liquidation as dividends if certain conditions are met. Section
562(b) provides that, if a REIT is liquidated within
49
<PAGE>
The 24-month period following the adoption of a plan of liquidation,
distributions pursuant to such plan will, to the extent of the distributing
corporation's earnings and profits for the year of the distribution, be treated
as dividends for purposes of computing the corporation's dividends paid
deduction.
Adoption of the Plan by the Stockholders will constitute adoption
of a plan of liquidation for this purpose. It is anticipated that the Fund will
completely liquidate within 24- months of the adoption of the plan of
liquidation so as to take advantage of Section 562(b), but no assurance can be
provided that this timetable will, in fact, be met. For instance, it may not be
possible to sell the Funds' Properties at acceptable prices during such period.
As the end of the 24-month period approaches, the Fund will evaluate the then
current situation and will consider whether distribution of its remaining assets
and liabilities to a liquidating trust (which would satisfy the complete
liquidation requirement) would be appropriate, or whether existing
circumstances, taken as a whole, indicate that Stockholders would be advantaged
by a course of action which might forego the benefits of Section 562(b). If for
any reason a dividend paid deduction were not available to eliminate the Fund's
taxable income, the Fund's substantial net operating loss carryforwards would
offset such income, provided, as noted above, that such net operating loss
carryforwards may only offset a maximum of 90% of a corporation's alternative
minimum taxable income.
Although Section 562(b) may treat liquidating distributions as
dividends, it only does so "to the extent of the earnings and profits of the
corporation for the taxable year of the distribution". Section 562(e) of the
Code provides that, for purposes of determining a REIT's dividends paid
deduction, a REIT's earnings and profits for a taxable year are to be increased
by the total amount of gain recognized on the sale or exchange of real property
during that year. Thus, there should be sufficient earnings and profits to allow
distribution of such gain on sale to qualify as a dividend. It is anticipated
that the Fund will distribute sufficient amounts to the Stockholders each year
so that it will remain qualified as a REIT under the rules described above and
that the Fund will have no REIT taxable income as a result of the proposed
liquidation.
50
<PAGE>
The Fund is also subject to a 100% excise tax on any gain from a
"prohibited transaction". The term "prohibited transaction" means the sale or
other disposition of Fund property which is held for sale to customers in the
ordinary course of the Fund's trade or business. The determination of whether
property is held for sale to customers in the ordinary course of the Fund's
trade or business is inherently factual in nature and, thus, cannot be predicted
with certainty. The Code does provide a "safe harbor" which, if all its
conditions are met, would protect a REIT's property sales from being considered
prohibited transactions, but the Fund may not be able to satisfy these
conditions in every case, either because its liquidation activity will result in
more sales in a year than permitted under the safe harbor or because certain
expenses directly incurred by the Fund may be too high. While, as noted above,
this determination is inherently factual, the Fund does not believe that any of
its property is held for sale to customers in the ordinary course of business,
but rather that they are all held for investment and the production of rental
income.
Consequences to Stockholders. The Fund believes that Liquidating
Distributions to Stockholders pursuant to the Plan will be treated as
distributions in complete liquidation of the Fund; that is, they will not be
treated as dividends, but rather as if the Stockholder had sold his or her
stock. In such case, a Stockholder will recognize gain or loss with respect to
each share of Common Stock held by the Stockholder, measured by the difference
between (i) the Stockholder's basis in that share and (ii) the total amount of
cash and fair market value of other property, if any, received by the
Stockholder with respect to such share pursuant to the Plan. (See below,
"Liquidating Trust" for consequences to Stockholders if the Fund's assets are
dispersed to a liquidating trust.) If a Stockholder holds more than one block of
Common Stock (groups of shares acquired at different times or at different
costs), each Liquidating Distribution will be allocated ratably among the
various blocks of shares of Common Stock and gain or loss will be computed
separately with respect to each block of shares of Common Stock.
Gain or loss recognized by a Stockholder will be capital gain or
loss provided the shares of Common Stock are held by the
51
<PAGE>
Stockholder as capital assets; capital gain or loss will be long-term if the
shares were held for more than one year. Corporate Stockholders may deduct
capital losses recognized in a taxable year only to the extent of capital gains
recognized during such year. Unused capital losses of a corporation may be
carried back three years and forward for five years, but may not be carried to
any year in which they would create or increase a net operating loss. On the
other hand, individual Stockholders may deduct capital losses to the extent of
their capital gains, plus $3,000. Any unused capital loss may be carried forward
indefinitely until the individual taxpayer recognizes sufficient capital gains
to absorb them. Capital losses may not be carried back by an individual.
The Plan will likely result in more than one Liquidating
Distribution to the Stockholders. If so, each Liquidating Distribution will be
first applied against the adjusted tax basis of each of a Stockholder's shares
of Common Stock and gain will be recognized with respect to a share only after
an amount equal to the adjusted tax basis of such share has been fully
recovered. Any losses with respect to a share of Common Stock may be recognized
by a Stockholder only after the Fund has made its final Liquidating Distribution
or after the last substantial Liquidating Distribution is determinable with
reasonable certainty. As a consequence of the foregoing, Stockholders incurring
losses under the Plan will likely be prevented from recognizing such losses
until the receipt of the final Liquidating Distribution.
Liquidating Trust. If the Fund's assets are distributed to a
Liquidating Trust, such distribution would be treated, for federal income tax
purposes, as a distribution of the Fund's assets to the Stockholders followed by
a contribution by the Stockholders of the assets to the Liquidating Trust. As a
result, each Stockholder would recognize gain or loss upon the transfer of
assets to the Liquidating Trust based upon the value of the assets transferred,
reduced by fixed liabilities assumed by the Liquidating Trust. If gain is
recognized by a Stockholder on the transfer of assets to the Liquidating Trust,
that Stockholder will be liable for the payment of any resulting tax, whether or
not any distribution of cash has been made to the Stockholder. In addition, the
Stockholders would be taxed on all income earned by the Liquidating Trust,
whether or not such income is distributed.
52
<PAGE>
Further, if a contingent liability of the Fund is paid by the Liquidating Trust,
the payment would give rise to a capital loss to the Stockholders.
Taxation of Non-United States Stockholders. Because the
liquidating distributions pursuant to the Plan will be treated as paid in
exchange for a Stockholder's shares of Common Stock and not as dividends, no
withholding on Liquidating Distributions will generally be required because of
the Foreign Investment in Real Property Tax Act, commonly known as "FIRPTA",
unless a Stockholder who is not a U.S. citizen or resident owns, or has owned
within the prior five years, 5% or more of the Fund's outstanding stock.
State and Local Income Tax. Stockholders may also be subject to
state or local taxes with respect to distributions received by them pursuant to
the Plan and should consult their tax advisors regarding such taxes.
Backup Withholding. Liquidating Distributions will not be subject
to back-up withholding.
Pending Legislation. Stockholders should be aware that a variety
of tax-related legislation is currently pending in Congress, some of which could
affect the tax treatment of transactions described in this Proxy. For example,
one bill calls for decreasing the tax rate on capital gains and extending
favorable capital gains treatment to corporations. Another bill would impose a
withholding tax on all distributions to non-U.S. shareholders. Neither the Fund
nor its counsel can predict whether any of these proposals will ultimately be
enacted or whether any enactments would have an adverse effect on the Fund or
any Stockholder. Stockholders are urged to contact their own tax advisors
regarding the effect any proposed changes may have on their own individual
situations.
Summary of Reasons to Vote for the Adoption of the Plan
In summary, the Board recommends that Stockholders vote for the
adoption of the Plan because (i) liquidation will permit Stockholders to receive
a portion of the value of the Fund's Real Properties, which the Board believes
is not currently reflected in
53
<PAGE>
the trading price of the Common Stock, (ii) liquidation will prevent further
erosion of Stockholders' equity through continuing net operating losses, and
(iii) the Fund has been unable to identify a transaction which would generate
greater return to Stockholders, despite its active pursuit of opportunities for
several years.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
"FOR" ADOPTION OF THE PLAN OF DISSOLUTION AND LIQUIDATION
AND, IN THE ABSENCE OF INSTRUCTIONS TO THE CONTRARY,
PROPERLY EXECUTED AND RETURNED PROXIES SOLICITED IN
CONNECTION WITH THIS PROXY STATEMENT WILL BE SO VOTED.
54
<PAGE>
PROPOSAL TWO: APPROVAL OF PROPOSAL TO ELIMINATE
THE CLASSIFIED BOARD PROVISIONS FROM THE FUND'S CHARTER
Reasons for the Proposal
Article X, Section 2 of the Fund's Charter (the "Charter")
provides that the Board of Directors shall be divided into three classes.
Generally, under such a "classified board" system, each of the three classes of
directors is elected every three years. Under the Charter provisions as
currently in effect, in order to elect a majority of the Board (four directors),
a Stockholder must wait at least two years. In order to elect the entire Board,
a Stockholder must wait at least three years.
The Board believes that it is in the best interest of the Fund
to eliminate the classified board provisions in the Charter in order to, among
other things, maximize flexibility by enabling the Board, when it deems it
appropriate, to reduce the number of directors on the Board. Moreover, assuming
that the proposal to liquidate is approved at the Meeting and the liquidation
process is undertaken immediately thereafter, the need for continuity in Board
membership will be reduced.
As a result, the Board of Directors adopted a resolution
declaring that it was advisable and in the best interest of the Fund for the
Charter to be amended as follows:
The Charter of Landsing Pacific Fund, Inc. is hereby amended by
(i) deleting any and all references to classes of Directors from Section 1 of
Article X, (ii) deleting existing Section 2 of Article X in its entirety, (iii)
deleting the existing caption to Section 3 of Article X and replacing such
caption with "Section 2. Vacancies". and (iv) deleting the existing caption to
Section 4 of Article X and replacing such caption with "Section 3. Removal".
Certain Considerations
55
<PAGE>
Potential Loss of Continuity of Management. Under the proposed
amendment to the Charter, a Stockholder holding a majority of the outstanding
shares of Common Stock (or perhaps fewer shares, depending on the number of
shares represented at a meeting to elect directors) will be able to elect the
entire Board of Directors at the first annual meeting at which he controls such
shares. Therefore, there would be no two-year delay in any change in control
resulting from purchases of Common Stock, and the Stockholders could lose the
benefit attendant to continuity of the Board's membership and the Fund's
management.
Loss of Protection from Unsolicited Takeovers. The classified
board provisions of the Charter provide some measure of protection to the Fund
against unsolicited takeovers in that they could have the effect of delaying the
effective transfer of control of the Board to any Stockholder purchasing shares
of Common Stock in order to gain control of the Fund. Without those provisions,
a Stockholder holding a majority, or in some cases fewer shares, of the
outstanding Common Stock would be able to replace the Board in its entirety at
the first meeting at which directors are elected following the acquisition of
those shares. The removal of the classified board provisions could result in the
Fund becoming more vulnerable to unsolicited tender offers, including coercive,
two-tiered, front-end loaded or partial offers which may not offer full value to
all Stockholders.
Even if the proposal is approved, Maryland law would provide some
protection from such transactions. The Maryland General Corporation Law (the
"MGCL") prohibits, for a period of five years, certain "business combinations"
(including a merger, consolidation, share exchange or, in certain circumstances,
an asset transfer or issuance or a reclassification of equity securities)
between a Maryland corporation and any person who beneficially owns ten percent
or more of the voting power of the corporation's shares (an "Interested
Stockholder"). Thereafter, any such business combination must either (i) result
in the Stockholders' receipt of a minimum price for their shares (as defined in
the MGCL), or (ii) be recommended by the Board and approved by the affirmative
vote of at least (a) 80% of the outstanding shares of voting stock of the
corporation and (b) two-thirds of the outstanding shares held by Stockholders
other than the Interested Stockholder. Currently,
56
<PAGE>
the Fund is not subject to these restrictions on business combinations, because
the Board has adopted a resolution opting out of their application. The Board
may, however, repeal that optout, and thereby subject the Fund to these
provisions. In addition, these provisions of the MGCL do not apply to specific
business combinations that are approved by the Board prior to the time that the
Interested Stockholder becomes an Interested Stockholder. Therefore, these
provisions would deter many transactions which the Board did not approve,
thereby providing some protection from transactions which would be detrimental
to the Fund or its Stockholders.
In addition, the Fund has entered into a Stockholder Rights Plan
dated July 26, 1990 (the "Rights Plan") which would have the effect of deterring
the concentration of stockholdings without prior approval by the Board.
Generally, the Rights Plan would subject an acquiror of 25% or more of the
Fund's Common Stock to substantial dilution in the value of its investment in
the Fund. Under the Rights Plan, the acquisition of 25% or more of the Fund's
Common Stock without Board approval would trigger the vesting of certain rights
to purchase Common Stock, which rights are currently held by the Stockholders.
The exercise price of the rights held by Stockholders other than the acquiror of
the Common Stock would represent a substantial discount to the value of the
Common Stock to be received on exercise. As a result, the exercise of such
rights would dilute the value of the stock acquired by the acquiror. The Rights
Plan would provide some protection to the Fund from any unsolicited acquisition
of a substantial portion of the Fund's Common Stock.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR"
THIS PROPOSAL, AND, IN THE ABSENCE OF INSTRUCTIONS TO THE
CONTRARY, PROPERLY EXECUTED AND RETURNED PROXIES SOLICITED
IN CONNECTION WITH THIS PROXY WILL BE SO VOTED.
57
<PAGE>
PROPOSAL THREE: ELECTION OF DIRECTORS
Current Charter Provisions
Pursuant to the current Charter provisions, the Board is divided
into three classes, with two directors in each class. As more fully described
above in Proposal Two, the Board has passed a resolution recommending for
Stockholder approval the amendment of the Charter to delete the provision
therein which divides the Board into three classes.
Nominees
Pursuant to an amendment to the Bylaws, the size of the Board of
Directors has been reduced from six members to five members. The terms of Martin
I. Zankel and Robert J. McAfee expire as of the date of the Meeting and upon
election of their successors. Mr. McAfee will retire from the Board effective as
of the date of the Meeting. Therefore, only Mr. Zankel has been nominated for
reelection to serve in this class. If Mr. Zankel is elected by the Stockholders,
and if Proposal Two is approved by the Stockholders, Mr. Zankel will serve until
the next annual meeting and until his successor is elected. If Proposal Two is
not adopted by the Stockholders, Mr. Zankel will serve for three years, and
until his successor is duly elected.
58
<PAGE>
Norman H. Scheidt, a former director of the Fund whose term was
scheduled to expire in 1997, passed away in June, 1995. To replace Mr. Scheidt,
the Board elected Herbert A. West. Because he was elected by the Board, under
Maryland Law Mr. West's term will expire as of the date of the Meeting. The
Board has nominated Mr. West for reelection. If Mr. West is elected by the
Stockholders, and if Proposal Two is adopted by the Stockholders, then Mr.
West's term will expire at the next Annual Meeting and upon election of his
successor. If Proposal Two is not adopted by the Stockholders, then Mr. West's
term as a director will expire in 1997 (when Mr. Scheidt's term would have
expired).
1996 Annual Meeting
It is expected that if the proposed amendment to the Charter set
forth in Proposal 2 is adopted by the Stockholders, Frank A. Morrow, whose term
would otherwise expire in 1997, will agree to stand for reelection one year
early, such that all of the members of the Board of Directors will stand for
reelection (if nominated) at the Annual Meeting of Stockholders in 1996.
If the proposed amendment set forth in Proposal Two is not
adopted by the Stockholders, however, only the terms of J. Arthur deBoer and
Frederick T. Rehmus will expire at the 1996 annual meeting of Stockholders, and
therefore only they will be up for reelection, if nominated, at the 1996 Annual
Meeting.
All of the nominees have agreed to serve if elected. If any of
the nominees becomes unable or unwilling to serve as of the date of the Meeting
or any adjournment thereof, the proxyholders will vote for a substitute nominee.
59
<PAGE>
THE BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" MR. ZANKEL AND MR. WEST, AND IN THE ABSENCE OF
INSTRUCTIONS TO THE CONTRARY, PROPERLY EXECUTED AND RETURNED
PROXIES SOLICITED IN CONNECTION WITH THIS PROXY WILL BE SO
VOTED.
60
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
Martin I. Zankel. Mr. Zankel, age 61, has served as Chairman of
the Board since May 17, 1992, Chief Executive Officer since July 17, 1992 and
President since September 13, 1993. His term of office as director will expire
at the Meeting. He has been a Senior Partner in the law firm of Bartko, Zankel,
Tarrant & Miller, or its predecessors, since 1974. He is a director of Bedford
Property Investors, Inc. and he is a director and Chairman of the Board of
Independent Holdings, a real estate management and development firm in San
Francisco, California.
J. Arthur deBoer. Mr. deBoer, age 70, has been a director of the
Fund since 1989. His term of office as director is scheduled to expire at the
1996 Annual Meeting. He has served as a consultant to financial institutions
since 1986. He served as Vice President of East County Bank from February 1,
1994 to December 31, 1994, and he served as Senior Vice President and Manager of
the Special Asset Department of The Pacific Bank from November 1992 to April
1993. From 1987 to 1991 he served as Senior Vice President at Westamerica Bank,
where he managed the Special Asset Department and then served as the credit
administrator for real estate construction loans.
Frank A. Morrow. Mr. Morrow, age 55, has been a director of the
Fund since 1988. His term of office as director is scheduled to expire at the
1997 Annual Meeting. He has been the Chief Executive Officer of the Peregrine
Real Estate Trust since March 1994. He served as the president of FAMA
Management, Inc. from 1984 until 1994. FAMA provided management consulting and
advisory services, specializing in the real estate industry.
Frederick P. Rehmus. Mr. Rehmus, age 60, has been a director of
the Fund since 1989. His term of office as director is scheduled to expire at
the 1996 Annual Meeting. He is President of Brownson, Rehmus & Foxworth, a
national financial advisory and investment counseling firm where he has served
as President since 1978.
Herbert A. West. Mr. West, age 63, has been a director of the
Fund since August 11, 1995, when he was elected by the Board
61
<PAGE>
to replace Norman H. Scheidt, who passed away in June, 1995. He has served in
various management, partnership and ownership positions in the real estate
industry since 1968, including Bank of America International Realty Corporation
and McDonald-Halliday Enterprises. From 1984 to 1992 he served as President of
Independent Holdings, Inc., a real estate management and development firm .
Since 1992 he has been the Executive Director and Administrator of the San
Rafael Canal Ministry.
Joseph M. Mock. Mr. Mock, age 55, has served as Executive Vice
President and Chief Operating Officer of the Fund since October 22, 1993. He was
President of Byron Partners, Inc., a real estate consulting and management firm
from September 1987 to October 1993. Prior to that, he spent 17 years with Grubb
& Ellis Company, during the last eight years of which he directed the Asset
Management Division.
Dean Banks. Mr. Banks, age 53, joined Landsing Pacific Fund in
September 1992 as Chief Financial Officer, Treasurer and Secretary. He served as
Chief Financial Officer for Grubb & Ellis Realty Income Trust and Grubb & Ellis
Realty Advisors, Inc. in San Francisco, California from 1985 to 1992.
Beneficial Ownership
Security Ownership of Certain Beneficial Owners. The following
table sets forth, as of July 19, 1995, information with respect to the ownership
of shares of Common Stock by any person who is known by the Fund to be the
beneficial owner of more than 5% of the outstanding shares of Common Stock.
62
<PAGE>
Number
of Shares Percent of
Beneficially Outstanding
Name and Address(1) Owned Shares
------------------- ------------ ------------
David S. Gottesman, 442,300(2) 7.4%
Arthur Zankel and
Daniel Rosenbloom
(collectively)
(1) According to an amended Schedule 13D dated July 19, 1995, filed with the
Securities and Exchange Commission, Tweedy Browne Company L.P. ("TBC") and
TBK Partners, L.P. ("TBK"), which has the same general partners as TBC,
reported that together they currently own less than 5% of the outstanding
Common Stock. They had previously owned greater than 5% of the outstanding
Common Stock.
(2) According to a Schedule 13D dated May 22, 1992, filed with the Securities
and Exchange Commission, Mr. Gottesman, Mr. Arthur Zankel and Mr. Rosenbloom
reported that such filing was made as a group for informational purposes
only, but disclaimed that they were a group. Arthur Zankel is the brother of
Martin Zankel, the Fund's Chief Executive Officer and Chairman of the Board.
Security Ownership of Management. The following table sets forth
information, as of June 1, 1995, regarding beneficial ownership of shares of
Common Stock of the nominees for election as directors of the Fund, and for the
directors and officers of the Fund.
63
<PAGE>
Amount
of
Bene-
ficial
Direc- Owner-
tor/ ship
Officer Term at
Name Position Since Expires 6/1/95 Percent
----- -------- ------- ------- -------- -------
Martin I. Zankel President, 1991 1995 148,883(1) 2.5%
Chief Execu-
tive Officer
and Director
J. Arthur deBoer Director 1989 1996 4,202(2) *
Frank A. Morrow Director 1988 1997 5,702(2) *
Frederick P. Rehmus Director 1989 1996 32,902(2) *
Herbert A. West Director 1995 72,800 1.2%
Joseph M. Mock Executive Vice
President and
Chief
Operating Officer 1993 2,500(3) *
Dean Banks Treasurer/
Secretary and
Chief Financial
Officer 1992 7,114(4) *
All Executive Officers and
Directors as a Group (8 persons) 274,103 4.6%
========
* Less than 1%.
(1) Includes options with respect to 63,183 shares of Common Stock, all of
which were exercisable as of May 14, 1995.
(2) Includes options with respect to 3,202 shares of Common Stock which were
exercisable as of May 14, 1995.
(3) Includes options with respect to 2,500 shares of Common Stock which were
exercisable as of March 25, 1995.
(4) Includes options with respect to 7,114 shares of Common Stock which were
exercisable as of March 25, 1995.
64
<PAGE>
Compliance with Section 16(a) of
the Securities Exchange Act of 1934
Section 16(a) of the Exchange Act requires the Fund's directors
and executive officers, and persons who own more than ten percent of a
registered class of the Fund's equity securities, to file with the Securities
and Exchange Commission and the American Stock Exchange initial reports of
ownership and reports of changes in ownership of Common Stock and other
securities of the Fund. Officers, directors and greater than ten-percent
Stockholders are required by the SEC to furnish the Fund with copies of all
Section 16(a) forms they file.
Based solely upon review of copies of the foregoing reports and
upon written representations furnished to the Fund, all filing requirements of
Section 16(a) of the Exchange Act applicable to Fund officers, directors and
greater than ten percent beneficial owners of the Fund's stock were filed, on a
timely basis, with respect to the 1994 fiscal year.
Committees
During 1994 the directors held 8 meetings. All directors attended
more than 75% of such meetings except Mr. Robert McAfee, who attended 62% of the
directors' meetings. All of the members of the Audit Committee and the
Compensation Committee attended all of the respective Committee meetings in
1994.
During 1994 the members of the Fund's Audit Committee were
Messrs. Morrow, deBoer and McAfee. The Audit Committee's functions include
general oversight of the Fund's financial reporting and all related party
transactions. During 1994, the Audit Committee held two meetings.
Messrs. Morrow, Rehmus and McAfee served as the members of the
Compensation Committee in 1994. The Compensation Committee held two meetings in
1994.
Because Mr. McAfee will not stand for re-election as a director,
as a result he will not serve on the Audit or Compensation Committee following
the Meeting.
65
<PAGE>
Mr. Rehmus and Mr. Scheidt have, in the past, served as a
nominating committee when necessary to select new directors to fill any
vacancies. It is expected that the Board will appoint a successor to Mr. Scheidt
to serve on the nominating committee. The nominating committee will consider
nominees recommended by Stockholders provided that Stockholders submit their
recommendations at least four months in advance of the record date for the
Fund's annual meeting.
<TABLE>
EXECUTIVE COMPENSATION
The following tables set forth information regarding executive
compensation for the Fund's last three fiscal years:
<CAPTION>
Summary Compensation Table
Long-Term
Compensation
Name and Annual Compensation Awards All
Principal ------------------- Options Other
Position Year Salary Bonus(1) (number) Comp.(2)
--------- ---- ------ -------- ------------- -------
<S> <C> <C> <C> <C> <C>
Martin I. Zankel, 1994 $150,000 $48,645 39,549(6) $ 7,500
Chief Executive 1993 $150,000 $48,645 63,183(7) $ 4,000
Officer 1992 $ 72,000(3) - -
Joseph M. Mock, Chief 1994 $125,000 $38,920 10,000(6) $ 7,200
Operating Officer 1993 $ 13,000(4) - - $ 1,200
Dean Banks, Chief 1994 $100,000 $34,055 19,229(6) $ 4,060
Financial Officer 1993 $100,000 $34,055 9,229(8) $ 3,000
1992 $ 26,000(5) - -
<FN>
(1) Cash awards made pursuant to the Fund's Management Incentive Plan.
(2) Includes for Mr. Zankel a $3,000 per year automobile allowance and matching
funds contributed by the Fund under its 401(k) Plan. Includes for Mr. Mock a
$7,200 per year automobile allowance.
</FN>
</TABLE>
66
<PAGE>
Includes for Mr. Banks matching funds contributed by the Fund under its
401(k) Plan. The Fund's 401(k) Plan is a defined contribution plan pursuant
to which eligible employees may contribute through payroll deductions. The
Fund makes contributions to the Plan equal to 50% of the employee's
contribution up to the first 6% of each employee's compensation deferred
(subject to certain limitations).
(3) Includes Mr. Zankel's 1992 compensation as a director prior to November
1992. Mr. Zankel receives an annual salary of $150,000 and receives no
separate compensation as a director. Mr. Zankel has served as Chief
Executive Officer since July 17, 1992.
(4) Mr. Mock joined the Fund on October 22, 1993.
(5) Mr. Banks joined the Fund on September 28, 1992.
(6) Options granted pursuant to the Fund's Employee Stock Incentive Plan. Such
options vest and become exercisable at a rate of 25% per year beginning on
the first anniversary of the grant.
(7) Includes 50,000 options granted on May 14, 1993 and 13,183 options granted
on March 25, 1994 pursuant to the Fund's Employee Stock Incentive Plan for
performance during 1993. The options granted on March 25, 1994 vest and
become exercisable at a rate of 25% per year beginning on the first
anniversary of grant. Of the options granted on May 14, 1993, options to
acquire 25,000 shares of Common Stock became exercisable on May 14, 1994 and
options to acquire the remaining 25,000 shares of Common Stock became
exercisable on May 14, 1995.
(8) Options granted pursuant to the Fund's Employee Stock Incentive Plan on
March 25, 1994 for performance during 1993. Such options vest and become
exercisable at a rate of 25% per year beginning on the first anniversary of
grant.
67
<PAGE>
<TABLE>
<CAPTION>
Options Granted in Last Fiscal Year
% of Total Per Share
Options Options Granted Exercise Expiration
Officer Granted(1) to Employees Price Date
------- ---------- --------------- --------- ----------
<S> <C> <C> <C> <C>
Martin I. Zankel 39,549 43% $3.69 3/25/04
13,183 15% $3.69 3/25/04
Joseph M. Mock 10,000 11% $3.69 3/25/04
Dean Banks 19,229 21% $3.69 3/25/04
9,229 10% $3.69 3/25/04
------ --- -----
91,190 100%
<FN>
(1) All options were granted under the Landsing Pacific Fund Employee Stock
Incentive Plan discussed under "Executive Compensation -Employee Stock
Incentive Plan". Such options vest and become exercisable at a rate of 25%
per year commencing on the first anniversary of the date of grant.
</FN>
</TABLE>
Aggregated Option/SAR Exercised in Last Fiscal Year
and FY-End Option/SAR Values
Value of
Number of Unexercised
Unexercised in-the-Money
Options/SARs Options/SARs
at Fiscal at Fiscal
Year-End (#) Year-End($)
Exercisable/ Exercisable/
Name Unexercisable) Unexercisable)
---- -------------- --------------
Martin I. Zankel 25,000/77,732 $0/0(1)
Joseph M. Mock 0/10,000 $0/0(1)
Dean Banks 0/28,458 $0/0(1)
(1) Based on a fair market value of the Fund's common stock of $2.94 per share
of Common Stock at December 31, 1994, none of the unexercised options are
"in the money".
None of the executive officers of the Fund has a written
employment contract or any other plan, agreement or arrangement regarding
employment or compensation other than the Severance
68
<PAGE>
Payment Plan and the Management Incentive Plan, both of which are discussed
below.
Director Compensation
Each non-employee director of the Fund is paid an annual fee of
$10,000 per year and $1,500 for each meeting attended. Each director also
receives $600 for each special meeting and $300 for each telephone conference in
which he participates. Members of the Compensation, Audit, and Nominating
Committees receive $600 for each committee meeting attended, unless the meeting
is held on the same day as another type of meeting. When two or more types of
meetings are held on the same day, directors will be paid for one meeting at the
highest meeting rate. The Fund reimburses each director for his travel expenses.
Directors who are salaried employees of the Fund do not receive
any compensation for board or committee service. Directors providing consulting
services to the Fund may also receive up to $150 per hour, subject to a limit of
$1,000 per day. A majority of the Board may change the compensation arrangement
at any time.
In addition, on August 6, 1993, the Fund's Stockholders approved
the 1993 Directors' Stock Option Plan (the "Directors' Plan") pursuant to which
on January 1 of each year each director then in office, who is not also an
employee of the Fund, is granted an option to purchase a number of shares of
Common Stock which is equal to the amount of the annual director fee payable to
such director during such year divided by the fair market value for one share of
Common Stock on such date. For the purposes of the Directors' Plan, the fair
market value of the Fund's Common Stock will be the last reported sale price on
the American Stock Exchange on the trading day before the date that any options
are granted thereunder. Each option granted under the Directors' Plan has an
exercise price equal to the fair market value of the Common Stock on the date of
grant.
Options granted pursuant to the Directors' Plan become
exercisable with respect to 25% of the shares of Common Stock subject to the
option on each anniversary of the date of grant. Each option or portion thereof
will be exercisable for ten years
69
<PAGE>
after such option is granted. In light of the decision to propose the
liquidation of the Fund, the Directors' Plan has been terminated effective as of
March 27, 1995, subject to and conditioned upon Stockholder approval of the
Plan.
Management Incentive Plan
The Fund's Management Incentive Plan (the "Management Incentive
Plan") provides the opportunity for participants to earn additional cash
compensation for superior results in managing the Fund's business. It is the
Board's current intent that eligibility to participate in the Management
Incentive Plan will be limited to Martin I. Zankel, Joseph M. Mock and Dean
Banks.
Employee Stock Incentive Plan
On August 6, 1993, the Stockholders of the Fund adopted the
Landsing Pacific Fund Employee Stock Incentive Plan (the "Employee Stock Plan")
based on performance criteria established by the Board or the Fund's
Compensation Committee. The total number of shares of Common Stock reserved and
available for distribution pursuant to options granted under the Incentive Plan
is 500,000 shares of Common Stock.
Severance Payment Plan
In light of the objective of the Board of Directors to liquidate
and dissolve the Fund, the directors recognize the importance of retaining key
employees in order to accomplish the Fund's objectives. On November 9, 1994 the
directors adopted a Severance Payment Plan (the "Severance Plan") for key
officers and employees. Under the Plan, Messrs. Mock and Banks, among others,
would be entitled to receive a severance payment equal to one year of salary,
which currently would amount to $135,000 and $105,000, respectively, if their
employment is terminated as a result of a merger or liquidation of the Fund. In
addition, Messrs. Mock and Banks would receive additional compensation equal to
1 1/2% and 1% respectively, of any aggregate liquidating distributions to
stockholders in excess of $4.50 per share of Common Stock, if any. Based on the
estimated maximum net proceeds per share from the
70
<PAGE>
Liquidation, the maximum additional compensation payable to Messrs. Mock and
Banks would be $[ ] and $[ ], respectively.
Compensation Committee Interlocks and Insider Participation
The members of the Fund's Compensation Committee are currently
Robert K. McAfee, Frederick P. Rehmus and Frank A. Morrow, none of whom (i) is a
former or current employee or officer of the Fund, or (ii) has a financial
interest in any transaction with the Fund. There are no Compensation Committee
interlocks between the Fund and any other entity involving any executive officer
or director of the Fund who serves as executive officer of any such entity.
Certain Relationships and Related Transactions
Martin I. Zankel, the Chairman of the Board and Chief Executive
Officer of the Fund is a member of a law firm which provided legal services to
the Fund during 1994, 1993 and 1992. Payments to the firm for these services
were $62,000 in 1994, $263,000 in 1993, and $213,000 in 1992.
INDEPENDENT ACCOUNTANTS
A representative of Coopers & Lybrand LLP, the Fund's independent
certified public accountants, will be present at the Meeting, will have an
opportunity to make a statement, and is expected to be available to respond to
appropriate questions.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Fund's Current Reports on Form 8-K dated April 12, 1995, and
June 5, 1995, filed with the Securities and Exchange Commission by the Fund
pursuant to the Exchange Act are incorporated by reference into this Proxy
Statement.
71
<PAGE>
STOCKHOLDER PROPOSALS
Proposals of Stockholders intended to be presented at the 1996
Annual Meeting of Stockholders of the Fund must be received at the principal
executive office of the Fund no later than April 10, 1996 for inclusion in next
year's proxy statement and proxy card.
By Order of the Board of Directors
DEAN BANKS, Secretary
San Mateo, California
, 1995
-------------------------
YOUR VOTE IS IMPORTANT REGARDLESS OF THE
NUMBER OF SHARES YOU OWN. WHETHER OR NOT YOU
PLAN TO BE PRESENT AT THE MEETING, PLEASE
DATE, MARK, SIGN AND MAIL THE ENCLOSED PROXY
CARD PROMPTLY IN THE ENVELOPE PROVIDED. THANK
YOU.
72
<PAGE>
LANDSING PACIFIC FUND, INC.
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED BY MANAGEMENT
The undersigned stockholder of Landsing Pacific Fund, Inc., a Maryland
corporation (the "Fund"), hereby appoints Dean Banks and Joseph M. Mock, and
each of them, as proxy for the undersigned, with full power of substitution, to
vote and otherwise represent all of the shares of Common Stock that the
undersigned is entitled to vote at the Annual Meeting of Stockholders of the
Fund to be held on October 13, 1995 at 9:00 a.m. local time at Hotel Sofitel,
223 Twin Dolphin Drive, Redwood City, CA, and at any adjournment(s) or
postponement(s) thereof, with the same effect as if the undersigned were present
and voting such shares of Common Stock, on the following matters and in the
following manner as further described in the accompanying Proxy Statement. The
undersigned hereby revokes any proxy previously given with respect to such
shares of Common Stock.
1. Approval of the Plan of [ ] FOR [ ] AGAINST [ ] ABSTAIN
Liquidation and Dissolution
2. Approval of the Amendment [ ] FOR [ ] AGAINST [ ] ABSTAIN
to the Fund's Charter
to delete the provisions
thereof creating a
classified board of directors
3. Election of Directors:
s
Martin I. Zankel [ ] FOR [ ] WITHHOLD AUTHORITY
Herbert A. West [ ] FOR [ ] WITHHOLD AUTHORITY
4. In their discretion, the proxies are authorized to vote upon matters not
known to the Board of Directors as of the date of this Proxy as may properly
come before the meeting or any adjournment or postponement thereof.
The undersigned acknowledges receipt of the Notice of Annual
Meeting of Stockholders and the accompanying Proxy Statement.
THE SHARES OF COMMON STOCK REPRESENTED BY THIS PROXY WILL BE
VOTED IN ACCORDANCE WITH THE SPECIFICATIONS MADE. IF THIS PROXY IS EXECUTED BUT
NO SPECIFICATION IS MADE, THE SHARES OF COMMON STOCK REPRESENTED BY THIS PROXY
WILL BE VOTED FOR EACH PROPOSAL AT THE MEETING OR ANY ADJOURNMENT(S) OR
POSTPONEMENT(S) THEREOF.
[ ] MARK HERE IF YOU PLAN TO ATTEND THE MEETING
Please sign exactly as name appears hereon and
date. If the shares of Common Stock are held
jointly, each holder should sign. When signing
as an attorney, executor, administrator,
trustee, guardian or as an officer signing for
a corporation, please give full title under
signature.
Dated , 1995
-------------------------
-----------------------------------------------
Signature
-----------------------------------------------
Signature, if held jointly
<PAGE>
Votes must be indicated by filling in X in Black or Blue ink.
Sign, Date and Return the Proxy Card Promptly Using the Enclosed Envelope
<PAGE>
EXHIBIT A
PLAN OF LIQUIDATION AND DISSOLUTION
OF
LANDSING PACIFIC FUND, INC.
1. Scope of Plan. This Plan of Liquidation ("Plan") provides for
-------------
the complete liquidation and dissolution of Landsing Pacific Fund, Inc., a
Maryland corporation ("Landsing"), by providing for (a) the sale or other
disposition of all of the assets of Landsing, (b) the dissolution of Landsing in
accordance with the Maryland General Corporation Law, and (c) distribution to
its stockholders of the net cash proceeds or other assets (after payment of
liabilities and expenses) to be realized from the sales or other dispositions of
its assets in complete cancellation of each stockholder's stock. The
liquidation, dissolution and distributions shall be accomplished in the manner
stated in this Plan.
2. Adoption of Plan by Stockholders. The Board of Directors has
---------------------------------
determined that the Plan is advisable for Landsing and has adopted the Plan and
submitted it to the stockholders for their vote in accordance with applicable
law. The Plan shall be adopted and shall become effective, upon the adoption of
a resolution to dissolve Landsing in accordance with the Plan by the affirmative
vote of holders of shares entitled to cast at least a majority of all the votes
entitled to be cast on this matter at the annual meeting of stockholders to be
held on July 18, 1995 (the "Annual Meeting") pursuant to a notice and Proxy
Statement.
3. Sale of Assets. Following the adoption of the Plan by the
---------------
stockholders, the Board of Directors shall cause Landsing to sell, convey,
transfer, and deliver or otherwise dispose of all of its assets, as follows:
(a) The Board of Directors shall cause the officers of Landsing
to negotiate the sale, conveyance, transfer and delivery or other disposition of
each of the real properties of Landsing. The real properties of Landsing may be
sold or otherwise disposed of individually, together as a whole or in discrete
groups, to any one or more buyers, as the officers of Landsing shall deem
advisable, in exchange for cash, one or more promissory notes or shares of stock
of the acquiring corporation or its affiliates, or any combination thereof. The
full Board of Directors is authorized to establish guidelines pursuant to which
the Real Estate Committee of the Board (the "Committee") if in existence, or, in
the absence of such Committee, the officers of Landsing, may sell, convey,
transfer and deliver or otherwise dispose of the real properties of Landsing. In
either case, if the Committee or the officers of Landsing propose to sell,
convey,
1
<PAGE>
transfer and deliver or otherwise dispose of any real property upon terms and
conditions which do not conform to the guidelines established by the Board of
Directors, any such sale may only be consummated only after the Board approves
the material terms and conditions of such sale.
(b) The Board of Directors shall cause the officers of Landsing
to negotiate the sale, conveyance, transfer and delivery or other disposition of
all personal property and other assets of Landsing in exchange for cash, one or
more promissory notes or shares of stock of the acquiring corporation or its
affiliates, or any combination thereof, consistent with the orderly disposition
of Landsing's real properties under this Plan. The Board of Directors is
authorized to establish guidelines pursuant to which the officers of Landsing
may sell, convey, transfer and deliver or otherwise dispose of the personal
property of Landsing without further approval of the Board. If the officers of
Landsing propose to sell, convey, transfer, and deliver any personal property
upon terms and conditions which do not conform to the guidelines established by
the Board of Directors, any such sale may only be consummated after the Board
approves the material terms and conditions of such sale.
4. Payment of and Reserve for Liabilities. After the closing of
---------------------------------------
any sale or other disposition of any real property or other assets of Landsing,
the officers of Landsing shall pay, or shall make adequate provision for payment
of, all known liabilities of Landsing (including expenses of the sale) which are
attributable to such real property or other assets and which are not assumed by
the buyer thereof. The officers of Landsing, at the direction of the Board of
Directors, shall set aside from the cash or other proceeds of any sale or other
disposition of any real property or other assets such additional amount as the
directors determine to be reasonably necessary for payment of other known
liabilities or expenses and unknown, unascertained or contingent liabilities or
expenses of Landsing.
5. Investment of Cash Proceeds. The cash proceeds of the sale or
---------------------------
other disposition of the real properties and personal property assets of
Landsing, if any, shall, pending any liquidating distributions, be invested by
the Board of Directors of Landsing in such manner as the Board of Directors
deems appropriate, in its sole discretion; provided, however, that any such
proceeds will be invested by the Board of Directors in such manner that Landsing
will not be deemed an investment company under, and for the purposes of, the
Investment Company Act of 1940.
6. Subsequent Sale of Non-Cash Proceeds. If and when the real
--------------------------------------
properties and personal property assets of Landsing are disposed of under this
Plan in exchange for one or more promissory notes or stock, the Board of
Directors, in its sole discretion, may direct the officers of Landsing to sell
all or a portion of such
2
<PAGE>
non-cash proceeds in exchange for cash, on such terms and conditions as shall be
negotiated by the officers of Landsing in accordance with guidelines established
by the Board, or as shall otherwise be approved by the Board. The Board of
Directors shall not be required to cause the sale of such non-cash proceeds and
may, in its sole discretion, direct the distribution in kind of all or a portion
of such non-cash proceeds to the stockholders of Landsing, in accordance with
Section 7 of this Plan.
7. Liquidating Distributions. The cash proceeds or other assets
--------------------------
realized from the sale or other disposition of real properties and other assets
of Landsing, and any interest or other return thereon, shall be distributed to
the stockholders of Landsing at such times and in such amounts as shall be
determined by the Board of Directors, in its sole discretion. Any liquidating
distributions shall be made through the agency of The Registrar and Transfer
Company, Landsing's transfer agent, or such other agent as may be selected by
the Board ("Transfer Agent"). At such time as the Board of Directors determines
that any liquidating distribution shall be made to the stockholders, the Board
of Directors shall cause the officers of Landsing to deposit with the Transfer
Agent the aggregate amount of funds or other assets to be distributed to
stockholders as a liquidating distribution. For the purpose of making any
liquidating distribution to the stockholders, the Board of Directors shall set a
record date for determining the stockholders entitled to receive such
liquidating distribution (any such date to be a "Distribution Record Date"), and
the Transfer Agent shall distribute all funds or other assets deposited with it
for such purpose to the stockholders of record on any such Distribution Record
Date ("Eligible Stockholders").
The liquidating distributions shall be in complete redemption and
cancellation of all of the outstanding stock of Landsing. At such time as
Landsing makes the Final Liquidating Distribution (as defined herein) to the
Eligible Stockholders, all of the outstanding shares of stock shall be deemed
cancelled.
8. Trading of Shares. At any time after this Plan becomes
-------------------
effective under Section 2, the Board of Directors may, if the Board deems such
action to be in the best interests of Landsing and the stockholders, cause the
shares of Landsing's common stock to be delisted from any securities exchange on
which they are traded or to no longer be traded or completely prohibit the
trading or other transfer of Landsing's common stock if and to the extent
permitted by law (the "Stop Trading Date"). The Board of Directors shall cause
the officers of Landsing to send notice of any Stop Trading Date in advance of
such date to all stockholders and to such brokers and market makers as the Board
deems advisable.
9. Liquidating Trust Agreement. If the Board of Directors deems
----------------------------
it advisable for any reason, it may at any time, in its sole discretion and on
behalf of the stockholders, create
3
<PAGE>
a Liquidating Trust ("Liquidating Trust") by entering into a Liquidating Trust
Agreement ("Liquidating Trust Agreement") for the purpose of (a) completing the
liquidation of the real properties and other assets of Landsing, (b) providing
for the payment of all known, unknown, unascertained and contingent liabilities,
(c) making liquidating distributions to the Eligible Stockholders in cash or in
kind, and (d) holding and distributing liquidating distributions on behalf of
any unlocated Eligible Stockholders.
Concurrently with the execution of the Liquidating Trust
Agreement, Landsing shall transfer and assign to the trustee of the Liquidating
Trust all of Landsing's right, title and interest in and to all of its assets,
including without limitation, any real properties or personal property assets
still owned by Landsing, and any cash proceeds. Effective upon the date of such
transfer, each stockholder of Landsing as of the date of such transfer, or any
record date that may be established in connection therewith, shall become a
beneficial interest holder of the Liquidating Trust, and all outstanding shares
of stock of Landsing shall be deemed cancelled. Each such stockholder shall hold
a proportion of the outstanding beneficial interests in the Liquidating Trust
equal to the proportion of shares of common stock that such stockholder held of
the total outstanding shares of common stock of Landsing as of the date of such
transfer, or the record date established in connection therewith, as the case
may be.
The Liquidating Trust Agreement shall provide that any funds or
other assets available for distribution to Eligible Stockholders which are not
distributed because one or more Eligible Stockholders cannot be located shall be
held by the trustee of the Liquidating Trust for a period not less than three
(3) years from the date Landsing provides the notice to stockholders in
accordance with Paragraph 11(d). Such undistributed funds or other assets shall
be held by the trustee of the Liquidating Trust solely for the benefit of and
ultimate distribution to the Eligible Stockholders entitled to receive such
funds or other assets, who shall constitute the sole equitable owners thereof.
Upon expiration of this three (3) year term, or any longer period, the trustee
of the Liquidating Trust shall distribute the funds or other assets held on
behalf of unlocated Eligible Stockholders pro rata to the other Eligible
Stockholder (the "Final Liquidating Trust Distribution"). After making such
distribution, if there are still funds or other assets held by the trustee of
the Liquidating Trust because the trustee becomes unable to locate any other
Eligible Stockholders, the trustee of the Liquidating Trust shall transfer any
such funds or other assets to the state official, trustee or other person
authorized by law to receive distributions for the benefit of the unlocated
Eligible Stockholders.
The Board of Directors is authorized to appoint one or more
individuals or corporate persons to act as trustees of the
4
<PAGE>
Liquidating Trust and to cause Landsing to enter into the Liquidating Trust
Agreement with such trustee or trustees on such terms and conditions as the
Board of Directors shall determine in its sole discretion. Adoption of the Plan
will constitute the approval of the stockholders of any such appointment and
Liquidating Trust Agreement.
10. Unlocated Eligible Stockholders. In the absence of a
---------------------------------
Liquidating Trust, if any funds or other assets deposited with the Transfer
Agent for distribution to Eligible Stockholders are not distributed because one
or more Eligible Stockholders cannot be located, such undistributed funds or
other assets shall be held by the Transfer Agent for a period not less than
three (3) years from the date Landsing provides the notice to stockholders in
accordance with Paragraph 11(d). Such undistributed funds or other assets shall
be held by the Transfer Agent solely for the benefit of and ultimate
distribution to the Eligible Stockholders entitled to receive such funds or
other assets, who shall constitute the sole equitable owners thereof. Upon
expiration of this three (3) year term, or any longer period, Landsing shall
direct the Transfer Agent to distribute the funds or other assets held on behalf
of unlocated Eligible Stockholders pro rata to the other Eligible Stockholders
(in the absence of a Liquidating Trust, the "Final Liquidating Distribution").
After making such distribution, if there are still funds or other assets held by
the Transfer Agent because the Transfer Agent becomes unable to locate any other
Eligible Stockholders, Landsing shall direct the Transfer Agent to transfer any
such funds or other assets to the state official, trustee or other person
authorized by law to receive distributions for the benefit of unlocated Eligible
Stockholders.
11. Dissolution. At such time as the Board of Directors of
-----------
Landsing shall determine, in its sole discretion, Landsing shall (a) provide
notice of dissolution to all its known creditors and its employees at their
address shown on the records of the corporation not less than 20 days prior to
the filing of the Articles of Dissolution, as required by Section 3-404 of the
Maryland General Corporation Law, (b) cause Articles of Dissolution to be
prepared, executed, and filed with the State Department of Assessments and
Taxation of Maryland, (c) cause any documentation required by federal or state
tax authorities to be obtained, prepared, executed and filed, (d) after the
filing of Articles of Dissolution, provide notice of any liquidation
distribution to stockholders other than the Final Liquidating Distribution and
the Final Liquidating Trust Distribution, or if no such liquidation
distributions are to occur, notice of the filing of Articles of Dissolution, to
each stockholder of the Fund by mail at his address as it appears on the records
of the corporation and by publishing such notice at least once a week for three
consecutive weeks in a newspaper of general circulation published in Baltimore
City, Maryland, and (e) withdraw its ability to do business as a foreign
corporation in any states in which it presently has such authority.
5
<PAGE>
12. Power of Board of Directors. The Board of Directors and, if
---------------------------
authorized by the Board, the officers, shall have authority to do or authorize
any and all acts and things as provided for in this Plan and any and all such
further acts and things as they may consider desirable to carry out the purposes
of this Plan, including the execution and filing of all such certificates,
documents, tax returns, and other documents which may be necessary or
appropriate to implement the Plan. The Board of Directors may authorize such
variations from or amendments to the provisions of the Plan as may be necessary
or appropriate to effectuate the complete liquidation, dissolution and
termination of existence of Landsing, and the distribution of its assets to the
Eligible Stockholders in accordance with the laws of the State of Maryland. The
death, resignation, or other disability of any Director or officer of Landsing
shall not impair the authority of the surviving or remaining Director(s) or
officer(s) to exercise any of the powers provided for in the Plan. Upon such
death, resignation, or other disability, the surviving or remaining Director(s)
shall have authority to fill the vacancy or vacancies so created, but the
failure to fill such vacancy or vacancies shall not impair the authority of the
surviving or remaining Directors(s) or officer(s) to exercise any of the powers
provided for in the Plan.
13. Amendments. Notwithstanding adoption of the Plan by the
----------
stockholders at the Annual Meeting, the Board of Directors of Landsing may
modify or amend the Plan without further action by the stockholders, to the
extent permitted under then current Maryland law. Prior to the filing of
Articles of Dissolution, the Board of Directors may abandon the Plan only with
the further approval of the stockholders, unless and to the extent that then
current Maryland law permits the Board to abandon the Plan without the further
approval of the stockholders.
14. Indemnification/Insurance. The Board of Directors shall have
-------------------------
the power and authority after the effective date of this Plan to purchase and/or
continue and maintain insurance as it deems necessary to cover Landsing's
indemnification obligations, including insurance which shall remain in effect
subsequent to the dissolution of Landsing in accordance with Paragraph 11. All
indemnification agreements to which Landsing is a party shall remain in full
force and effect after the effective Date of this Plan.
15. Costs. Without limiting the authority of the Board of
-----
Directors to authorize the payment of Landsing's expenses, the Board is
authorized, empowered and directed to pay any and all fees and expenses incurred
by Landsing in connection with the Plan and the sale of assets and liquidating
distributions contemplated thereunder, including, but not limited to, all legal,
accounting, printing, appraisal and other fees and expenses of persons rendering
services to Landsing.
6
<PAGE>
7
<PAGE>
LANDSING PACIFIC FUND, INC.
SCHEDULE 1
REPORT OF INDEPENDENT ACCOUNTANTS
To the Directors and Stockholders of
Landsing Pacific Fund, Inc.
We have audited the accompanying balance sheets of Landsing Pacific Fund, Inc.
as of December 31, 1994 and 1993, and the related statements of operations,
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 1994. These financial statements are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
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 also 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 financial statements referred to above present fairly, in
all material respects, the financial position of Landsing Pacific Fund, Inc. as
of December 31, 1994 and 1993, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1994, in
conformity with generally accepted accounting principles.
As discussed in Note 14 to the financial statements, on March 27, 1995, the
Board of Directors of Landsing Pacific Fund, Inc. approved a Plan of
Liquidation, subject to stockholder approval. At present, it cannot be
determined whether or not the stockholders will approve such a plan.
Accordingly, no adjustments have been made to the accompanying financial
statements which may result from the stockholder's approval of the Plan of
Liquidation.
COOPERS & LYBRAND L.L.P.
San Francisco, California
March 27, 1995
- 1 -
<PAGE>
<TABLE>
LANDSING PACIFIC FUND, INC.
BALANCE SHEETS, DECEMBER 31, 1994 AND 1993
(Amounts in thousands, except share amounts)
<CAPTION>
A S S E T S
........ 1994 1993
---- ----
<S> <C> <C>
INVESTMENTS IN REAL ESTATE:
Rental properties $ 88,698 $ 109,495
Accumulated depreciation (19,169) (22,191)
------------- -------------
Rental properties - net 69,529 87,304
Real estate under development - 3,828
Real estate under contract for sale (net of accumulated depreciation
of $28 in 1994 and $1,270 in 1993) 2,150 3,261
Collateral for non-performing participating mortgage loan
(net of allowance for loss of $542 in 1993) - 675
------------- -------------
Total investments in real estate 71,679 95,068
CASH AND CASH EQUIVALENTS 5,534 2,005
------------- -------------
OTHER ASSETS:
Accounts and interest receivable (net of allowance for
doubtful accounts of $78 in 1994 and $364 in 1993) 1,434 1,408
Prepaid expenses, deposits and other assets 324 136
Deferred leasing commissions, loan costs, and other assets
(net of accumulated amortization of $2,380 in 1994
and $2,635 in 1993) 1,357 2,069
------------- -------------
Total other assets 3,115 3,613
------------- -------------
TOTAL ASSETS $ 80,328 $ 100,686
============= =============
L I A B I L I T I E S A N D S T O C K H O L D E R S' E Q U I T Y
LIABILITIES:
Notes payable $ 47,929 $ 57,966
Accounts payable 449 637
Other liabilities 1,200 1,715
------------- -------------
Total liabilities 49,578 60,318
------------- -------------
COMMITMENTS: (Note 13)
STOCKHOLDERS' EQUITY:
Shares of preferred stock, par value of $.01;
shares authorized: 5,000,000; shares issued and outstanding: none
Shares of common stock, par value of $.001;
shares authorized: 20,000,000; shares issued and
outstanding: 5,953,137 in 1994 and 1993 6 6
Capital in excess of par value 131,389 131,389
Retained deficit and accumulated distributions (100,645) (91,027)
------------- -------------
Total stockholders' equity 30,750 40,368
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 80,328 $ 100,686
============= =============
The accompanying notes are an integral part of the financial statements.
</TABLE>
-2-
<PAGE>
<TABLE>
LANDSING PACIFIC FUND, INC.
STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1994, 1993 and 1992
(Amounts in thousands, except per share amounts)
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
REVENUES:
Rental income $ 12,087 $ 14,339 $ 13,389
Other income 102 102 176
----------- ----------- ----------
Total revenues 12,189 14,441 13,565
----------- ----------- ----------
EXPENSES:
Operating 3,770 5,646 5,788
Depreciation and amortization 4,240 5,043 5,029
Interest and other financing costs 4,952 4,537 4,549
General and administrative 1,897 2,366 2,349
Other expense 303 558 1,752
Provision for loss in value of investments in real estate
and loan collateral value 6,645 24,045 6,347
----------- ----------- ----------
Total expenses 21,807 42,195 25,814
----------- ----------- ----------
Loss before gain on sale of real estate (9,618) (27,754) (12,249)
Gain on sale of real estate - - 392
----------- ----------- ----------
Net loss $ (9,618) $ (27,754) $ (11,857)
=========== =========== ==========
NET LOSS PER SHARE $ (1.62) $ (4.61) $ (1.89)
=========== =========== ==========
Weighted average shares outstanding 5,953 6,020 6,260
=========== =========== ==========
The accompanying notes are an integral part of the financial statements.
</TABLE>
-3-
<PAGE>
<TABLE>
LANDSING PACIFIC FUND, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the Years Ended December 31, 1994, 1993, and 1992
(Amounts in thousands, except share amounts)
<CAPTION>
Shares of Capital Retained
Common Stock in Excess Notes and Deficit and Total
------------------ of Par Treasury Interest Accumulated Stockholders'
Shares Par Value Value Stock Receivable Distributions Equity
------ --------- ----- ----- ---------- ------------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1991 ......... 6,284,792 $6 $135,300 $(1,300) $(2,782) $(49,888) $81,336
Treasury stock acquired ............ (7,805) - - (57) - - (57)
Treasury stock reacquired .......... (125,000) - (391) (438) - - (829)
Shares/notes receivable canceled ... (100,000) - (900) - 1,729 - 829
Shares issued:
Dividend reinvestment program .. 41,150 - 181 - - - 181
Net loss ........................... - - - - - (11,857) (11,857)
Interest receivable ................ - - - - 28 - 28
Distributions ...................... - - - - - (1,528) (1,528)
---------- ---- --------- --------- --------- --------- -------
BALANCE, DECEMBER 31, 1992 ......... 6,093,137 6 134,190 (1,795) (1,025) (63,273) 68,103
Treasury stock issued .............. - - - 4 - - 4
Treasury stock reacquired .......... (100,000) - (325) (325) - - (650)
Treasury stock eliminated .......... - - (2,116) 2,116 - - -
Shares/notes receivable canceled ... (40,000) - (360) - 1,010 - 650
Net loss ........................... - - - - - (27,754) (27,754)
Interest receivable ................ - - - - 15 - 15
---------- ---- --------- --------- --------- --------- -------
BALANCE, DECEMBER 31, 1993 ......... 5,953,137 $ 6 $ 131,389 $ - $ - $(91,027) $40,368
Net loss ........................... - - - - - (9,618) (9,618)
---------- ---- --------- --------- --------- --------- -------
BALANCE, DECEMBER 31, 1994 ......... 5,953,137 $ 6 $ 131,389 $ - $ - $(100,645) $30,750
========== ==== ========= ========= ========= ========== =======
The accompanying notes are an integral part of the financial statements.
</TABLE>
-4-
<PAGE>
<TABLE>
LANDSING PACIFIC FUND, INC.
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1994, 1993 and 1992
(Amounts in thousands)
--------------------------------------------------------------------------------
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ......................................................... $(9,618) $ (27,754) $ (11,857)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Provision for loss in value and gain on sale of real estate - net 6,645 23,485 2,619
Depreciation and amortization .................................... 4,240 5,043 5,029
Provision for doubtful accounts .................................. - 640 352
Provision for participating loan losses .......................... - 560 3,336
Changes in operating assets and liabilities:
Increase in accounts and interest receivable ..................... (146) (313) (155)
Decrease in other liabilities .................................... (64) (62) (209)
Decrease in deposits ............................................. 50 65 989
Decrease in prepaid expenses and other assets .................... 160 543 734
Increase (decrease) in accounts payable .......................... (189) (417) 615
------- ------ -------
Net cash provided by operating activities ...................... 1,078 1,790 1,453
------- ------ -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of rental property ............................ 5,465 - 5,303
Capital expenditures and development costs ....................... (2,804) (3,734) (4,973)
Increase in deferred expenses .................................... (724) (906) (1,463)
Repayment of participating mortgage loan ......................... 2,145 - 2
Disbursement of participating mortgage loans ..................... - (64) (37)
------- ------ -------
Net cash provided by (used in) investing activities ............ 4,082 (4,704) (1,168)
------- ------ -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to stockholders .................................... - - (1,347)
Issuance (acquisition) of treasury stock ......................... - 4 (57)
Proceeds from notes payable ...................................... 17,925 7,798 20,852
Payments on notes payable ........................................ (19,556) (3,589) (20,404)
------- ------ -------
Net cash provided by (used) in financing activities ............ (1,631) 4,213 (956)
------- ------ -------
Increase (decrease) in cash and cash equivalents ................. 3,529 1,299 (671)
Cash and cash equivalents at beginning of year ................... 2,005 706 1,377
------- ------ -------
Cash and cash equivalents at end of year ......................... $5,534 $2,005 $706
======= ====== =======
The accompanying notes are an integral part of the financial statements.
</TABLE>
-5-
<PAGE>
<TABLE>
LANDSING PACIFIC FUND, INC.
STATEMENTS OF CASH FLOWS (Continued)
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
(Amounts in thousands)
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Cash paid during the period for interest, net of $256
capitalized in 1994, $524 in 1993, and $671 in 1992 $ 4,583 $ 4,035 $ 3,983
========== ========= ===========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Notes payable retired or forgiven $ (8,406) $ - $ -
Cost of rental properties sold (net of accumulated depreciation) 13,782 - 4,906
Other assets and liabilities retired or forgiven 89 - 397
---------- --------- -----------
Net proceeds from sale of rental properties $ 5,465 $ - $ 5,303
========== ========= ===========
Reclassification:
Real estate held for sale $ 2,150 $ 3,261 $ -
Rental properties - net (2,150) (3,261) -
---------- --------- -----------
$ - $ - $ -
========== ========= ===========
Note receivable canceled in exchange for shares:
Treasury stock $ - $ (325) $ (438)
Note receivable - 1,010 1,729
Capital in excess of par - (685) (1,291)
---------- --------- -----------
$ - $ - $ -
========== ========= ===========
Reclassification:
Real estate under development $ - $ 3,828 $ 6,505
Rental properties - net - (3,828) (6,505)
---------- --------- -----------
$ - $ - $ -
========== ========= ===========
Treasury stock eliminated:
Treasury stock $ - $ 2,116 $ -
Capital in excess of par - (2,116) -
---------- --------- -----------
$ - $ - $ -
========== ========= ===========
Payment of stock dividends:
Dividend reinvestment shares $ - $ - $ 181
Dividend distributions - - (181)
---------- --------- -----------
$ - $ - $ -
========== ========= ===========
Collateral for participating mortgage loan $ - $ - $ 1,171
Participating mortgage loans - - (1,171)
---------- --------- -----------
$ - $ - $ -
========== ========= ===========
The accompanying notes are an integral part of the financial statements.
</TABLE>
-6-
<PAGE>
LANDSING PACIFIC FUND, INC.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - Landsing Pacific Fund was a Delaware corporation formed
------------
for the purpose of merging the assets and liabilities of Landsing
Institutional Properties Trust-V, Landsing Institutional Properties
Trust-VI and Landsing Institutional Properties Trust-VII. The merger
was completed on November 28, 1988.
On September 30, 1993, Landsing Pacific Fund, a Delaware corporation,
merged into Landsing Pacific Fund, Inc., (the "Fund") a newly-formed
Maryland corporation. As a result of the merger, the former
stockholders of Landsing Pacific Fund became stockholders of the Fund
and the Delaware corporation ceased to exist.
Maryland corporate law does not recognize the treasury stock of
Maryland corporations. As a result, the Fund has reclassified treasury
stock to paid in capital as of December 31, 1993.
Evaluation of Carrying Values - The Fund, as a matter of policy, holds
-----------------------------
properties on a long-term basis and believes the book value of the
Fund's properties will be fully recovered over the Fund's long-term
holding period. This determination is reviewed at least anually, or
whenever events or changes at a property suggest that the carrying
amount may not be recoverable, and is based on an analysis of the sum
of a property's undiscounted future cash flows as compared with the
carrying value of the property. If an impairment exists, an estimate of
the deficiency in the property's net realizable value as compared with
its carrying value is recorded as an increase in the provision for loss
in value and a reduction in the property's carrying value. Accordingly,
the accompanying financial statements do not include any adjustments,
except as noted in Footnote 6, relating to the excess of property costs
over estimated net realizable value.
Income Recognition - Minimum rental income from leases is recognized on
------------------
a straight-line basis over the term of occupancy in accordance with the
provisions of the leases. Additionally, leases provided for
reimbursement of certain operating expenses which are recognized as
income when earned and when the amounts can be reasonably estimated.
Depreciation - Depreciation is computed by the straight-line method
------------
over estimated useful lives ranging from four to forty years. Tenant
improvements are being amortized over the average lives of the related
leases. When assets are retired or otherwise disposed of, the costs and
related accumulated depreciation are removed from the accounts, and any
gain or loss on disposal is included in the results of operations.
Deferred Leasing Commissions and Loan Costs - Leasing commissions are
--------------------------------------------
amortized over the average lives of the tenant leases. Amounts paid to
obtain loans are deferred and amortized over the lives of the related
notes payable as an adjustment to interest expense.
Cash and Cash Equivalents - The Fund considers all highly liquid
---------------------------
investments with a maturity of three months or less at the time of
purchase to be cash equivalents. As of December 31, 1994, approximately
$5,345,000 of the Fund's cash was held in money market accounts at two
U.S. commercial banks. At times, such investments may exceed federally
insured limits.
-7-
<PAGE>
Income Taxes - The Fund has elected to be treated as a real estate
-------------
investment trust under the provisions of the Internal Revenue Code.
Under these provisions, the Fund will qualify and not be subject to any
federal income tax if 100% of its real estate investment trust taxable
income is distributed to stockholders. Since the Fund has qualified as
a real estate investment trust, no provision for federal income taxes
has been made in the accompanying financial statements.
Net Loss Per Share - Net loss per share is computed by dividing net
------------------
loss by the weighted average number of shares outstanding of 5,953,137
in 1994, 6,019,877 in 1993, and 6,260,079 in 1992. The effect of the
outstanding warrants and stock options on the calculation of net loss
per share was anti-dilutive.
Reclassifications - Certain amounts in the 1993 and 1992 financial
-----------------
statements have been reclassified to conform to the 1994 presentation.
2. RENTAL PROPERTIES AND REAL ESTATE UNDER DEVELOPMENT
The carrying value of rental properties is as follows:
December 31,
--------------------------------
1994 1993
Land $19,392,000 $ 22,784,000
Building and improvements 69,194,000 86,644,000
Construction in progress 112,000 67,000
------------- -------------
Total rental properties $88,698,000 $109,495,000
============= =============
Prior to February 22, 1994, the Fund was engaged in the predevelopment
of the Multnomah Building in Portland, Oregon. Interest capitalized as
part of the redevelopment was $256,000 in 1994 and $502,000 in 1993.
Subsequent to December 31, 1993, the Fund announced its decision to
explore the disposition of its real estate investments located outside
the western United States. As a result, a provision for loss of
$23,485,000 was recognized at December 31, 1993 to reduce the carrying
value of the properties to their estimated net realizable value and an
additional provision of $8,150,000 was recognized during 1994. (See
Footnote 6 for additional information.)
The carrying value of real estate under contract for sale is as
follows:
December 31,
--------------------------------
1994 1993
Imperial Garage $ 867,000 $ -
Multnomah Building 1,283,000 -
BancFirst Building - 2,583,000
Twin Oaks Executive Center - 678,000
------------- -------------
$2,150,000 $3,261,000
============= =============
-8-
<PAGE>
3. COLLATERAL FOR PARTICIPATING MORTGAGE LOAN
As of December 31, 1994, as a result of repayment of substantially all
of a participating mortgage loan collateralized by a first mortgage on
land in Sonoma, California, the Fund recognized a recovery of
$1,470,000, which reduced the provision for loss in value of
investments in real estate (see Note 6). Approximately $455,000 of the
recovery relates to funds collected subsequent to December 31, 1994. In
1992 and 1993, the Fund recorded provisions for loss in the value of
the loan of $1,000,000 and $542,000, respectively.
During 1994, the Fund's unsecured claim for $925,000 was recognized in
the bankruptcy of a guarantor of a participating mortgage loan, the
collateral for which was foreclosed by a senior lender in 1993. The
eventual maximum payment out of the bankruptcy is estimated to be $.30
per $1.00 of claims. As of December 31, 1994, the fund had received
$39,000 in distribution proceeds, which was recognized as a reduction
in the provision for loss in value of investments in real estate.
-9-
<PAGE>
<TABLE>
4. NOTES PAYABLE
The amount of the Fund's notes payable were as follows:
<CAPTION>
December 31,
-----------------------------------
Lender Collateral/Location 1994 1993
-------------------------- ------------------------------------------------- ---------------- ----------------
<S> <C> <C> <C>
Commercial Bank Country Hills Towne Center $14,910,000 $14,771,000
Diamond Bar, California
Commercial Bank 310 E. Grand, 342 Allerton, 410 Allerton, 9,658,000 10,000,000
466 Forbes and Westinghouse Buildings
South San Francisco and Fremont, California
Commercial Bank 400 Grandview, 417 Eccles Buildings and 7,927,000 6,309,000
Auburn Court Industrial Park
South San Francisco and Fremont, California
Commercial Finance Academy Place Shopping Center 3,796,000 3,867,000
Company
Life Insurance Company Bryant Street Quad and Annex 3,137,000 3,201,000
Denver, Colorado
Commercial Finance Twin Oaks Business Park and 2,319,000 3,904,000
Company Twin Oaks Technology Center
Beaverton, Oregon
Commercial Finance St. Paul Business Center West 2,895,000 2,941,000
Company Maplewood, Minnesota
Commercial Bank St. Paul Distribution Center 1,806,000 1,837,000
Maplewood, Minnesota
Commercial Savings and Nohr Plaza 1,481,000 1,481,000
Loan San Leandro, California
Commercial Bank 101 Park Office Building - 4,153,000
Oklahoma City, Oklahoma
Commercial Bank BancFirst Building - 2,024,000
Oklahoma City, Oklahoma
Commercial Bank 6900 Place - 1,221,000
Oklahoma City, Oklahoma
Commercial Bank Multnomah Building and Imperial Garage - 1,093,000
Portland, Oregon
Commercial Bank Franklin Business Park - 1,058,000
Boise, Idaho
Other - - 106,000
------------- -----------
Total notes payable $47,929,000 $57,966,000
============ ===========
</TABLE>
-10-
<PAGE>
Most of the Fund's rental properties are pledged as collateral for
notes payable. At December 31, 1994 interest rates on the notes ranged
from 9.50% to 11.50% per annum and are payable through 2001 with
principal payments required in future years as follows:
1995 $ 21,515,000
1996 6,166,000
1997 12,554,000
1998 95,000
1999 106,000
2000 and thereafter 7,493,000
-----------------
Total $ 47,929,000
=================
Subsequent to December 31, 1994, the Fund was granted an extension of
its $14,026,000 permanent loan collateralized by the Country Hills
Towne Center in Diamond Bar, California. The loan requires monthly
principal and interest payments of $113,717, bears interest equal to
the lender's prime rate plus 1% (9.50% on December 31, 1994), and
matures on June 30, 1995.
Subsequent to December 31, 1994, the Fund was granted an extension of
its $1,500,000 construction loan collateralized by the Country Hills
Towne Center in Diamond Bar, California. The loan bears interest equal
to the lender's prime rate plus 1.25% (9.75% on December 31, 1994) and
matures on June 30, 1995. The outstanding balance at December 31, 1994
was $884,000.
On June 21, 1994, the Fund converted a four-year $6,065,000 term loan
to a seven-year term loan with a balance at December 31, 1994 of
$7,927,000 and an interest rate equal to the lender's prime rate plus
1.75% (10.25% as of December 31, 1994). The new loan requires monthly
principal and interest payments of $74,625 and matures on July 5, 2001.
On July 8, 1994, the Fund paid off a $970,000 term loan which was
collateralized by the Multnomah Building and the Imperial Garage
Building which are located in Portland, Oregon.
On August 31, 1994, the Fund converted a $10,000,000 line of credit to
a three-year term loan with a balance at December 31, 1994 of
$9,658,000 and an interest rate equal to the lender's prime rate plus
1.25% (9.75% as of December 31, 1994). The new loan requires monthly
principal and interest payments of $81,276 and matures on August 31,
1997.
As of October 25, 1994, the Fund was granted an extension of its
$1,481,000 loan collateralized by the Nohr Plaza Shopping Center in San
Leandro, California. The loan bears interest at 10% per annum with
payments at 6% per annum and the difference accrued to the loan
balance. The loan matures on April 25, 1995.
On December 26, 1994, the Fund made a $1,500,000 paydown on a term loan
collateralized by the Twin Oaks Business Park and Technology Center in
Beaverton, Oregon. The loan has been modified to reduce the interest
rate to the prime rate plus 2.5% (11% as of December 31, 1994) and
extend the maturity to December 19, 1996.
Effective December 19, 1994, the Fund was granted an extension of its
$3,796,000 term loan collateralized by the Academy Place Shopping
Center in Colorado Springs, Colorado. The new loan bears interest at
the lender's prime rate plus 2.5% (11 % on December 31, 1994) and
matures on December 19, 1995.
-11-
<PAGE>
<TABLE>
5. OTHER EXPENSE
The following presents certain charges included in other expense
incurred in each of the three years ended December 31, 1994:
<CAPTION>
1994 1993 1992
-------------- -------------- ---------
<S> <C> <C> <C>
Terminated loan transactions $ 73,000 $ - $ -
Terminated property sales transactions 80,000 - -
Terminated capital projects 46,000 250,000 -
Rights offering costs 53,000 140,000 -
Merger/liquidation costs 27,000 - -
Settlements of litigation (16,000) 168,000 1,374,000
Write-down of non-real estate assets - - 246,000
Other 40,000 - 132,000
------------ ------------ ------------
$ 303,000 $ 558,000 $ 1,752,000
============ ============ ============
</TABLE>
In 1992, management initiated action to accelerate the completion of
litigation in order to reduce the number of matters in dispute. The
$1,374,000 of costs incurred reflected settlements or judgements
primarily related to four seperate legal proceedings which were
incidental to the Fund's business.
6. GAIN (LOSS) FROM SALE OF INVESTMENTS IN REAL ESTATE AND PROVISION FOR
LOSS IN VALUE
As a result of the Fund's decision to focus on industrial and business
park properties and to no longer hold for long-term investment those
properties outside of Northern California, the Northwest, and Colorado,
a $19,508,000 provision for loss was recognized as of December 31,
1993, to reduce the carrying value of certain real estate investments
to net realizable value.
<TABLE>
During the twelve months ended December 31, 1994, six properties from
the group identified for disposition were sold or disposed of for
approximately their carrying value at December 31, 1993. Accordingly,
no additional loss or gain was recognized in 1994. The properties sold
or disposed of are as follows:
<CAPTION>
Property Date of Sale or Disposition Sale Price
-------- --------------------------- ----------
<S> <C> <C>
Twin Oaks Executive Center January 20, 1994 $712,000
Beaverton, Oregon
BancFirst Building February 28, 1994 $2,800,000
Oklahoma City, Oklahoma
101 Park Avenue Office Building February 28, 1994 $4,142,000(1)
Oklahoma City, Oklahoma
Camden Park Shopping Center June 7, 1994 $1,500,000
Houston, Texas
Franklin Business Park November 10, 1994 $2,815,000
Boise, Idaho
-12-
<PAGE>
Property Date of Sale or Disposition Sale Price
-------- --------------------------- ----------
6900 Place Shopping Center December 22, 1994 $2,700,000
Oklahoma City, Oklahoma
(1) Title to the property was transferred to the lender in full
satisfaction of the $4,142,000 loan collateralized by the property.
</TABLE>
During the twelve months ended December 31, 1994, a $8,150,000
provision for loss was recorded to reduce the carrying value to the
properties' estimated net realizable values of properties which are
being held for sale or are currently being marketed for sale.
At December 31, 1994, the Fund recognized $1,505,000 in recoveries on
two participating mortgage loans. (See Footnote 3 for further
discussion.)
7. RELATED PARTY TRANSACTIONS
The Chairman of the Board and Chief Executive Officer of the Fund is a
member of a law firm which provided legal services to the Fund in each
of the three years ended December 31, 1994. Payments for these services
were, $62,000 in 1994, $263,000 in 1993 and $213,000 in 1992.
8. DISTRIBUTIONS TO STOCKHOLDERS
The Fund paid per-share distributions of $.24 in 1992. The
distributions were treated as a return of capital for federal income
tax purposes.
9. RENTAL PROPERTIES UNDER OPERATING LEASES
Minimum future revenues from rental properties under non-cancelable
operating leases at December 31, 1994 are as follows:
1995 $ 7,964,000
1996 7,079,000
1997 5,628,000
1998 3,933,000
1999 2,629,000
2000 and thereafter 14,282,000
----------------
Total $ 41,515,000
================
For the periods ended December 31, 1994, 1993 and 1992, the Fund
recorded reimbursement revenues of $2,244,000, $2,889,000 and
$2,162,000 respectively.
10. CAPITAL STOCK AND NOTES RECEIVABLE
The Fund's authorized capital stock consists of 20,000,000 shares of
common stock, having a par value of $.001 and 5,000,000 shares of
preferred stock, having a par value of $.01. The Fund may issue the
preferred stock in classes or series and with any rights, privileges
and preferences the Fund's Board of
-13-
<PAGE>
Directors may determine without any action or consent by the Fund's
stockholders of common stock or preferred stock.
Warrants to purchase 200,000 common shares at $9.50 per share were
outstanding as of December 31, 1994. The warrants are fully exercisable
and expire on March 31, 1995.
On June 18, 1993, the Fund and R. Mark Wyman entered into an agreement
related to Mr. Wyman's purchase in prior years of 140,000 Fund shares
(the "Shares"). Under the terms of the agreement, on June 18, 1993, the
Fund reduced the principal amount of notes receivable used to finance
acquisition of the Shares from $1,010,000 to $455,000 and subsequently,
on June 24, 1993, Mr. Wyman returned the Shares. The Fund recorded the
return of 100,000 shares to the treasury and canceled 40,000 shares and
the notes receivable.
1. STOCK OPTION PLANS
<TABLE>
Employee Stock Incentive Plan - On August 6, 1993, the Fund's
shareholders approved the Employee Stock Incentive Plan (the "Plan")
under which key employees may be granted options to acquire shares of
common stock at a price not less than the fair market value on the date
the option is granted. The Plan provides for a maximum of 500,000
shares which would be available for issuance upon the exercise of
options.
Information regarding the Employee Stock Incentive Plan is as follows:
<CAPTION>
1994 1993
------- ------
<S> <C> <C>
Shares under option at beginning of year 50,000 -
Granted, at $3.69 per share in 1994 and $3.25 per share in 1993 91,190 50,000
------- ------
Shares under option at end of year 141,190 50,000
======= ======
Exercisable at end of year 25,000 -
Available for grant at end of year 358,810 450,000
</TABLE>
No options have been exercised.
<TABLE>
1993 Directors' Stock Option Plan - On August 6, 1993, the Fund's
shareholders approved the 1993 Directors' Stock Option Plan (the
"Directors' Plan"). The Directors' Plan provides for a maximum of
75,000 shares which would be available for issuance upon the exercise
of options.
Information regarding the Directors' Stock Option Plan is as follows:
<CAPTION>
1994 1993
------- ------
<S> <C> <C> <C>
Shares under option at beginning of year 25,000 -
Granted, at $3.56 per share in 1994 and $3.25 per share in 1993 14,045 25,000
------ ------
Shares under option at end of year 39,045 25,000
====== ======
Exercisable at end of year 6,250 -
Available for grant at end of year 35,955 50,000
No options have been exercised.
</TABLE>
-14-
<PAGE>
12. COMMON STOCK PURCHASE RIGHTS
On July 26, 1990, the Fund declared a distribution to stockholders of
record on August 27, 1990, of one common stock purchase right for each
outstanding share of common stock. Each right entitles the holder to
purchase one share of common stock at an exercise price of $25.00. The
rights become exercisable if a person acquires 25% or more of the
Fund's common stock or announces a tender offer for 30% or more of the
Fund's common stock. The rights may be redeemed by the Fund at a price
of $.01 per right at any time prior to the tenth day after a 25%
position has been acquired.
If the Fund is acquired in a merger or other business combination, each
right will entitle its holder to purchase common shares of the
acquiring company having a market value of twice the exercise price of
each right, i.e., at a 50% discount. Each right will also entitle its
holder to purchase the Fund's common stock at a similar 50% discount in
the event an acquirer merges into the Fund and leaves the Fund's stock
unchanged.
13. COMMITMENTS
In November 1990, the Fund signed a five-year lease for office space.
Under the terms of the lease, the Fund is also responsible for its
proportionate share of property taxes, utilities and other operating
expenses. The Fund subleased a portion of its office space through June
25, 1993. Rent expense was $78,000, $50,000, and $60,000 in 1994, 1993,
and 1992, respectively, net of sublease income of $15,000 in 1993 and
$51,000 in 1992. Minimum rental payments in 1995 under the lease are
$84,000.
During 1994, the Fund adopted a Severance Payment Plan under which
certain key employees could be entitled to receive a severance benefit
if their employment is terminated as a result of a merger or
liquidation of the Fund. As of December 31, 1994, the aggregate benefit
payable in the event the Fund's stockholders approve a merger or
liquidation is approximately $360,000.
14. SUBSEQUENT EVENTS
On March 27, 1995, the Board of Directors of the Fund approved a
conditional resolution, subject to stockholder approval, to liquidate
all of the assets of the Fund in an orderly fashion and to dissolve the
Fund in accordance with a Plan of Liquidation, if a suitable
transaction for all or substantially all of the Fund is not arranged.
15. SELECTED QUARTERLY FINANCIAL DATA
<TABLE>
The following presents a summary of the unaudited quarterly financial
information for the years ended December 31, 1994 and 1993 (amounts in
thousands, except per share amounts):
<CAPTION>
1994 1993
------------------------------------------------ --------------------------------------------
First Second Third Fourth First Second Third Fourth
Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total revenues $ 3,261 $ 3,110 $ 3,005 $ 2,813 $ 3,509 $ 3,634 $ 3,674 $ 3,624
---------- ---------- ---------- ----------- ---------- ---------- ---------- ----------
Net loss $ (836) $ (7,499) $ (716) $ (565) $ (870) $ (1,342) $ (992) $ (24,550)
========== ========== ========== =========== ========== ========== ========== ==========
Per share:
Net loss $ (.14) $ (1.26) $ (.12) $ (.10) $ (.14) $ (.22) $ (.17) (4.08)
========== ========== ========== =========== ========== ========== ========== ==========
</TABLE>
-15-
<PAGE>
<TABLE>
LANDSING PACIFIC FUND, INC.
SCHEDULE 2
BALANCE SHEETS, JUNE 30, 1995 AND DECEMBER 31, 1994
(Amounts in thousands, except share amounts)
--------------------------------------------------------------------------------
<CAPTION>
June 30, December 31,
1995 1994
------------ ------------
<S> <C> <C>
ASSETS
------
INVESTMENTS IN REAL ESTATE:
Rental properties $ 67,222 $ 88,698
Accumulated depreciation (15,590) (19,169)
-------- --------
Rental properties - net 51,632 69,529
Real estate under contract for sale (net of accumulated depreciation
of $4,866 in 1995 and $28 in 1994) 14,009 2,150
-------- --------
Total investments in real estate 65,641 71,679
-------- --------
CASH AND CASH EQUIVALENTS 6,778 5,534
-------- --------
OTHER ASSETS:
Accounts and interest receivable (net of allowance for doubtful
accounts of $108 in 1995 and $78 in 1994) 601 1,434
Prepaid expenses and deposits 252 324
Deferred leasing commissions, loan costs, and other assets (net of accumulated
amortization of $1,488 in 1995
and $2,380 in 1994) 1,131 1,357
-------- --------
Total other assets 1,984 3,115
-------- --------
TOTAL ASSETS $ 74,403 $ 80,328
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
LIABILITIES:
Notes payable $ 45,448 $ 47,929
Accounts payable 260 449
Other liabilities 1,087 1,200
-------- --------
Total liabilities 46,795 49,578
-------- --------
STOCKHOLDERS' EQUITY:
Shares of preferred stock, par value of $.01;
shares authorized: 5,000,000; shares issued and outstanding: none
Shares of common stock, par value of $.001;
shares authorized: 20,000,000; shares issued and
outstanding: 5,953,137 in 1995 and 1994 6 6
Capital in excess of par value 131,389 131,389
Retained deficit and accumulated distributions (103,787) (100,645)
-------- --------
Total stockholders' equity 27,608 30,750
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 74,403 $ 80,328
======== ========
</TABLE>
-1-
<PAGE>
<TABLE>
LANDSING PACIFIC FUND, INC.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND SIX MONTHS ENDED
JUNE 30, 1995 AND 1994
(Amounts in thousands, except share amounts)
--------------------------------------------------------------------------------
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
----------------------- -----------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES:
Rental income $ 2,463 $ 3,097 $ 5,147 $ 6,344
Other income 79 13 132 27
---------- --------- -------- ---------
Total revenues 2,542 3,110 5,279 6,371
---------- --------- -------- ---------
EXPENSES:
Operating 686 951 1,427 2,116
Depreciation and amortization 726 1,001 1,516 2,140
Interest and other financing costs 1,300 1,162 2,560 2,319
General and administrative 392 429 828 963
Other expense 197 66 258 168
Provision for loss in value of investments
in real estate and loan collateral value 2,300 7,000 2,300 7,000
---------- --------- -------- ---------
Total expenses 5,601 10,609 8,889 14,706
---------- --------- -------- ---------
Loss before gain on extinguishment of debt (3,059) (7,499) (3,610) (8,335)
Gain on extinguishment of debt 467 - 467 -
---------- --------- -------- ---------
NET LOSS $ (2,592) $ (7,499) $ (3,143) $ (8,335)
========== ========= ======== =========
NET LOSS PER SHARE
(Based on weighted average number
of shares outstanding) $ (.44) $ (1.26) $ (.53) $ (1.40)
========== ========= ======== =========
Weighted average shares outstanding 5,953 5,953 5,953 5,953
========== ========= ======== =========
</TABLE>
-2-
<PAGE>
<TABLE>
LANDSING PACIFIC FUND, INC.
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994
(Amounts in thousands)
--------------------------------------------------------------------------------
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (3,143) $ (8,335)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 1,516 2,140
Provision for doubtful accounts 73 29
Provision for loss in value of real estate and loan collateral 2,300 7,000
Changes in operating assets and liabilities:
Decrease in accounts and interest receivable 546 176
Decrease in prepaid expenses, deposits, and other assets 205 128
Decrease in other liabilities (143) (180)
Decrease in accounts payable (189) (235)
---------- ---------
Net cash provided by operating activities 1,165 723
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of rental properties 2,242 2,628
Capital expenditures and construction (289) (1,682)
Increase in deferred expenses (134) (764)
---------- ---------
Net cash provided by investing activities 1,819 182
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable - 8,240
Payments on notes payable (1,740) (6,767)
---------- ---------
Net cash provided by (used in) financing activities (1,740) 1,473
---------- ---------
Increase in cash and cash equivalents 1,244 2,378
Cash and cash equivalents at beginning of period 5,534 2,005
---------- ---------
Cash and cash equivalents at end of period $ 6,778 $ 4,383
========== =========
</TABLE>
-3-
<PAGE>
<TABLE>
LANDSING PACIFIC FUND, INC.
STATEMENTS OF CASH FLOWS (Continued)
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
(Amounts in thousands)
--------------------------------------------------------------------------------
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Cash disbursed during the period for interest, net of $34
capitalized in 1995 and $170 in 1994. $ 2,355 $2,171
======== ========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Cost of rental properties sold or disposed
(net of accumulated depreciation) $ 2,705 $8,864
Notes payable retired or forgiven (741) (6,184)
Other assets and liabilities retired or forgiven 278 (52)
-------- --------
Net proceeds from sale of rental properties $ 2,242 $2,628
======== ========
</TABLE>
-4-
<PAGE>
LANDSING PACIFIC FUND, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements for Landsing Pacific Fund, Inc.
("the Fund") should be read in conjunction with the Fund's 1994 Annual
Report on Form 10-KSB. The balance sheet at December 31, 1994 was
derived form audited financial statements. The balance sheet as of June
30, 1995 and the statements of operations and cash flows for the
interim periods ending June 30, 1995 are unaudited. Certain disclosures
which would normally be included with audited statements have been
condensed or omitted. However, in the opinion of the Fund's management,
all adjustments considered necessary for a fair presentation have been
included.
Net loss per share is computed by dividing net loss by the weighted
average number of shares outstanding during the period.
Certain amounts in the 1994 financial statements have been reclassified
to conform to the 1995 presentation.
2. GAIN (LOSS) FROM SALE OF INVESTMENTS IN REAL ESTATE AND PROVISION
FOR LOSS IN VALUE OF REAL ESTATE AND LOAN COLLATERAL
During the six months ended June 30, 1995, a $2,333,000 provision for
loss was recorded to reduce the carrying value to the estimated net
realizable values of properties which are currently being held for sale
or are currently being marketed for sale. All of the write down was
attributable to the Country Hills Towne Center in Diamond Bar,
California, and the Nohr Plaza Shopping Center in San Leandro,
California.
During the six months ended June 30, 1995, the Fund recognized a
$33,000 in recovery on one participating mortgage loan.
Subsequent to June 30, 1995, contracts were executed for the sale of
Inwood Shopping Center in Houston, Texas, and Country Hills Towne
Center.
During the six months ended June 30, 1994, two properties and one
parcel from the group identified for disposition were sold for
approximately their carrying value at December 31, 1994. Accordingly,
no additional gain or loss was recognized in 1995. The properties and
parcel sold are as follows:
Property Date of Sale Sales Price
-------- ------------ -----------
Multnomah Building
and Imperial Garage March 30, 1995 $2,300,000
Portland, Oregon
Approximately 1.2 acres of
land at Country Hills
Towne Center June 28, 1995 $780,000
-5-
<PAGE>
3. COLLATERAL FOR PARTICIPATING MORTGAGE LOAN
In March 1995, the Fund received $455,000 in final proceeds on a
participating mortgage loan collateralized by a first mortgage on land
in Sonoma, California. These funds were recognized as of December 31,
1994, as a recovery which reduced the provision for loss in value of
investments in real estate.
During 1994, an unsecured claim by the Fund for $925,000 was recognized
in the bankruptcy of a guarantor of a participating mortgage loan, the
collateral for which was foreclosed by a senior lender in 1993. The
eventual maximum payment out of the bankruptcy is estimated to be $.30
per $1.00 of claims. During the six months ended June 30, 1995, the
Fund collected $33,000 from the bankruptcy estate, bringing total
distribution proceeds to $73,000.
4. NOTES PAYABLE
Subsequent to June 30, 1995, the Fund entered into an agreement with
one of its lenders to restructure two loans collateralized by the
Country Hills Towne Center in Diamond Bar, California. The agreement
allows the Fund to pay off the $14,144,000 balance of the loans by
making a payment of $11,500,000 by September 29, 1995, or to extend
that date to October 31, 1995 upon payment of a fee. The payoff date
can be further extended to December 31, 1995, if the Fund pays down the
principal balance of the loans by $2,500,000.
The restructure agreement also provides for an increase in the
effective interest rate on the loans from approximately prime plus 1%
to prime plus 1.5%.
On April 5, 1995, the Fund made a cash payment of $1,027,000 to retire
a $1,494,000 loan, thereby realizing a $467,000 discount granted by the
lender. The loan was collateralized by the Nohr Plaza Shopping Center
in San Leandro, California.
-6-
