--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
AMENDMENT NO. 1
AMENDED AND RESTATED
FORM 10-KSB/A
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
---
OF 1934 For the fiscal year ended December 31, 1994
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
---
ACT OF 1934 For the transition period from to
---------------- ---------------
Comission File Number: 1-9942
LANDSING PACIFIC FUND, INC.
(Name of small business issuer in its charter)
Maryland 94-3066597
(State or other jurisdiction of I.R.S. Employer
incorporation or organization) Identification Number)
155 Bovet Road, Suite 101
San Mateo, California 94402
(Address of principal executive offices) (ZIP Code)
Issuer's telephone number, including area code: (415) 513-5252
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
Common Stock, $.001 par value American Stock Exchange
Securities registered pursuant to section 12(g) of the Exchange Act:
None
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by Sections
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
--- ---
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB/A or any amendment to this Form 10-KSB. [ ]
The issuer's revenues for the fiscal year ended December 31, 1994 were
$12,189,000.
The aggregate market value of the voting stock held by non-affiliates as of
March 1, 1995, was approximately $16,912,000.
The number of shares outstanding of the registrant's Common Stock as of March 1,
1995, was 5,953,137 shares.
Traditional Small Business Disclosure Fomat: Yes No X
--- ---
DOCUMENTS INCORPORATED BY REFERENCE:
None
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
LANDSING PACIFIC FUND
(Registrant)
Date: September 8, 1995 By: /s/ Dean Banks
-----------------------------
Dean Banks
Chief Financial Officer
================================================================================
<PAGE>
LANDSING PACIFIC FUND, INC.
ANNUAL REPORT ON FORM 10-KSB
For the Year Ended December 31, 1994
TABLE OF CONTENTS
Form 10-KSB
Item No. Name of Item Page
PART I
Item 1. Description of Business ...................................... 3
Item 2. Description of Property ...................................... 5
Item 3. Legal Proceedings ............................................ 9
Item 4. Submission of Matters to a Vote of Security Holders........... 9
PART II
Item 5. Market for Common Equity and Related Stockholder Matters ..... 9
Item 6. Management's Discussion and Analysis of Financial
Condition and Results of Operations......................... 10
Item 7. Financial Statements ......................................... 17
Item 8. Changes In and Disagreements With Accountants on
Accounting and Financial Disclosure......................... 32
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act .......... 33
Item 10. Executive Compensation........................................ 35
Item 11. Security Ownership of Certain Beneficial
Owners and Management....................................... 39
Item 12. Certain Relationships and Related Transactions................ 40
PART IV
Item 13. Exhibits and Reports on Form 8-K.............................. 41
Signatures ............................................................ 43
-2-
<PAGE>
PART I
ITEM 1. 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 100%
of its taxable income is distributed to stockholders.
The Fund is a real estate investment trust currently engaged in the business of
operating income-producing real estate investments. The Fund's current objective
is to maximize the value of the stockholders' investment in the Fund by a
merger, sale of substantially all of its assets or, if unable to complete such a
transaction on favorable terms, liquidation of the Fund. During 1994, the Fund
explored various strategic alternatives, including raising additional capital
and merging with another real estate company. 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.
During 1994, the Fund initiated a program to dispose of its real estate
investments which were not industrial or business park properties and which were
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, St. Paul, Minnesota and
Houston, Texas.
Pending the liquidation or merger of the Fund, management continues to focus on
managing the Fund's portfolio, which as of December 31, 1994, consisted of fee
title ownership of 20 properties. These include 14 industrial properties, 4
retail properties, and 2 properties in a redevelopment project. See "Description
of Property" which follows. 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 Item 6, 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.
-3-
<PAGE>
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 Multnomah Building and Imperial Gargage
in Portland, Oregon, the Country Hills Towne Center in Diamond Bar, California
and the 466 Forbes Building in South San Francisco, only minor amounts of any
such materials have been indicated. Those materials representing a potential
hazard, 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.
The Multnomah Building has been found to contain asbestos. The clean-up for this
project is estimated at between $250,000 and $750,000 and was completed by the
purchaser of the property with no 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, the tanks were removed and the contamination
remediated at a cost to the Fund of approximately $150,000. The Country Hills
Towne Center has soil partially contaminated by dry cleaning solvents.
Preliminary estimates indicate that the cost of remediation will not exceed
$50,000. 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.
At December 31, 1994, the Fund had 11 full-time employees. All of the Fund's
operations are located in the United States.
-4-
<PAGE>
ITEM 2. DESCRIPTION OF PROPERTY
A description of the Fund's real estate investments at December 31, 1994 is as
follows:
<TABLE>
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.) 12/31/94 12/31/94(1) 12/31/94
----------------- --------- -------- -------- --------
<S> <C> <C> <C> <C>
PACIFIC WEST COAST REGION
Pacific International Business Center
301 East Grand Building South San Francisco, CA 57,800 100% $ 3,014 $ 2,106 (2)
342 Allerton Building South San Francisco, CA 69,300 100% 3,031 3,047 (2)
400 Grandview Building South San Francisco, CA 107,000 100% 5,960 4,687 (3)
410 Allerton Building South San Francisco, CA 46,100 100% 1,406 1,653 (2)
417 Eccles Building South San Francisco, CA 24,600 100% 1,215 759 (3)
466 Forbes Building South San Francisco, CA 65,600 100% 3,401 2,204 (2)
Auburn Court Industrial Park Fremont, CA 68,000 100% 5,483 2,481 (3)
Westinghouse Building Fremont, CA 24,000 100% 1,727 648 (2)
Nohr Plaza San Leandro, CA 12,100 43% 996 1,481
Country Hills Towne Center Diamond Bar, CA 156,300 90% 15,188 14,910 (4)
Twin Oaks Business Park Beaverton, OR 65,200 90% 3,560 1,143
Twin Oaks Technology Center Beaverton, OR 94,200 86% 5,281 1,176
------------------------------------------------------------------------------------------------------------------
790,200 95% 50,262 36,295
------- --- ------ ------
ROCKY MOUNTAIN/MIDWEST REGION
Academy Place Shopping Center Colorado Springs, CO 84,400 100% 6,075 3,796
Bryant Street Annex Denver, CO 55,000 100% 1,305 940
Bryant Street Quad Denver, CO 155,500 99% 4,495 2,197
St. Paul Business Center West Maplewood, MN 108,800 92% 2,967 2,895
St. Paul Distribution Center Maplewood, MN 77,000 95% 2,587 1,806
------------------------------------------------------------------------------------------------------------------
480,700 97% 17,429 11,634
------- --- ------ ------
SOUTHWEST REGION
Inwood Central Shopping Center Houston, TX 83,100 78% 1,803 -
83,100 78% 1,803 -
Portfolio Operations - - 35 (5) -
------------------------------------------------------------------------------------------------------------------
TOTAL 1,354,000 94% 69,529 47,929
--------- --- ------ ------
Real estate under contract for sale
Imperial Garage(6) Portland, OR 70,000 0% 867 -
Multnomah Building Portland, OR 245,000 0% 1,283 -
------------------------------------------------------------------------------------------------------------------
TOTAL 1,669,000 $71,679 $47,929
========= ======= =======
<FN>
(1) Net book value represents total acquisition cost plus cost capitalized
subsequent to acquisition less provision for loss in value and
accumulated depreciation.
(2) Collateral for $9,658,000 term loan allocated according to property
appraised value.
(3) Collateral for $7,927,000 term loan allocated according to property
appraised value.
(4) Includes a construction loan with an outstanding balance of $884,000 at
December 31, 1994.
(5) Purchase price for trailing equity interest in properties, net of
amortization, in addition to corporate assets.
(6) Reflects costs incurred at Imperial Garage which are part of the
Multnomah Building development.
</FN>
</TABLE>
-5-
<PAGE>
In the opinion of management, the properties are adequately covered by
insurance.
COUNTRY HILLS TOWNE CENTER
Description. The property is located at 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 Springs 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 17.7 acres.
The Center is a shopping center originally constructed in 1960 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 vested
in Landsing Pacific Fund, Inc. 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 December 31, 1994 of
$14,026,000. The loan bears interest equal to the lender's prime rate plus 1%
(9.50% at December 31, 1994). Monthly payments of interest and principal are
$114,000 until the maturity of the loan on March 31, 1995, at which time the
remaining principal balance will be $14,012,000. The loan may be prepaid in
whole or in part without penalty.
The property also is collateral for a second mortgage construction loan
which had an outstanding principal balance of $884,000 at December 31, 1994. The
loan provides for monthly payments of interest only at the lender's prime rate
plus 1.25 percent (9.75% at December 31, 1994). The loan matures on March 31,
1995.
Subsequent to December 31, 1994, the lender for the two loans agreed to
extend the maturities to June 30, 1995 in order to accommodate the Fund's
intention to sell the property.
Competitive Conditions The Greater Los Angeles area has been adversely
affected by the current 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.
-6-
<PAGE>
Operating Data As of December 31, 1994, the property was 86% occupied
and 90% leased, and the average effective annual rental rate per square foot was
$11.31. 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
------------------------------
(1) Expressed as dollars per square foot.
(2) Includes rents in place prior to the Center's expansion and
redevelopment which was substantially completed in 1990.
<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 jeweler, among others.
The following presents the schedule of lease expirations 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 - - - -
-7-
<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 1.33 percent of
assessed value and annual property taxes for the fiscal year ended June 30, 1995
are $311,000. The Fund believes that the property is adequately covered by
insurance.
-8-
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
On May 17, 1993, Triad Investment Properties, Ltd. ("Triad") initiated binding
arbitration of a dispute regarding adjustment of Triad's capital account in a
partnership which was dissolved in 1990 and in which the Fund was a general
partner. Triad claimed that the adjustment was necessary to remove a tax
liability of $700,000. In August of 1994, the Fund settled the claim in full for
$25,000.
During 1993, the Fund's security for its $2,064,000 second mortgage loan secured
by a shopping center in Alameda, California, was foreclosed by a senior lender.
On June 23, 1994, the majority shareholder of the borrower (William Zenklusen)
filed a court approved plan of reorganization ("Plan") under which certain
distributions are to be paid to unsecured creditors in accordance with the Plan.
The Fund has reached an agreement with Zenklusen for a claim of $925,000. 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 has received $39,000 in
distribution proceeds.
King Cole Homes, Inc. ("King Cole") filed a Chapter 11 bankruptcy on April 9,
1993. The Fund filed a claim in the bankruptcy for $2,444,000 as of April 6,
1993. The Fund's collateral was sold to Kaufman and Broad Home Corporation and
the Fund received payment of $1,690,000 in December 1994. Subsequent to December
31, 1994, the borrower agreed to settle the Fund's remaining claim as an
unsecured creditor for $455,000, which was the amount paid on March 22, 1995.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter has been submitted to a vote of security holders, through solicitation
of proxies or otherwise, during the fourth quarter 1994.
PART II
ITEM 5. 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 low sales price for each quarterly period during 1994 and 1993 is
as follows:
1994 1993
----------------- -----------------
High Low High Low
---- --- ---- ---
1st Quarter................ $3.563 $3.375 $3.875 $3.000
2nd Quarter................ 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 March 1, 1995. However, the Fund estimates the number of
stockholders to be in excess of 12,000, since certain shares of record are held
by nominees.
-9-
<PAGE>
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 distribution from operations during calendar
year 1995. See Item 6, 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 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
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.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
<TABLE>
SELECTED FINANCIAL DATA
Operating Results and Distributions
-----------------------------------
<CAPTION>
Years Ended December 31,
---------------------------------------------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
(Amounts in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Revenues ........................ $ 12,189 $ 14,441 $ 13,565 $ 16,910 $ 16,406
---------- ---------- ---------- ---------- ----------
Income (loss) before gain
or loss from sale of real
estate ...................... $ (9,618) $ (27,754) $ (12,249) $ (2,845) $ (12,545)
Gain or loss from sale of real
estate ...................... - - 392 - (151)
---------- ---------- ---------- ---------- ---------
Net income (loss)................ $ (9,618) $ (27,754) $ (11,857) $ (2,845) $ (12,696)
========== ========== ========== ========== =========
Per Share:
Net income (loss) ............... $ (1.62) $ (4.61) $ (1.89) $ (.46) $ (2.08)
========== ========== ========== ========== =========
Distributions declared .......... $ - $ - $ .24 $ .64 $ .80
========== ========== ========== ========== =========
</TABLE>
<TABLE>
Balance Sheet Data
------------------
<CAPTION>
December 31,
-----------------------------------------------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
(Amounts in thousands)
<S> <C> <C> <C> <C> <C>
Total assets ................... $ 80,328 $ 100,686 $ 124,691 $ 137,070 $ 134,532
Notes payable................... 47,929 57,966 53,757 53,309 43,162
Stockholders' equity ........... 30,750 40,368 68,103 81,336 89,119
</TABLE>
-10-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Following the decrease in revenues resulting from removal of the Multnomah
Building as an earning asset in November 1991, the Fund has increasingly relied
upon increased borrowings to fund capital expenditures for tenant and building
improvements in order to maintain property occupancy rates. The continuing need
for capital expenditures and the Fund's increasing debt service requirements has
indicated a decrease in liquidity. Current projections are that capital
expenditures for tenant and building improvements will be approximately
$1,500,000 in 1995. The principal source of liquidity for these requirements is
current cash reserves.
Because of the already significant amount of debt, increased borrowings has been
viewed as a limited source of long-term liquidity. The Fund's intention to
liquidate, recent net losses and the suspension of distributions 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.
As of December 31, 1994, the principal amount of the Fund's debt that will
mature in the next three years is as follows: 1995 - $21,515,000, 1996 -
$6,166,000, and 1997 - $12,554,000. It is anticipated that substantially all of
these loan maturities will either be extended, restructured or the loans repaid
with proceeds from the sale of properties.
During substantially all of 1994, 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 a continuing erosion of
stockholder's equity, on March 27, 1995, the Board of Directors approved 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.
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 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 proceeds of $10,205,000 from the
sale of rental property and the receipt 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 $5,895,000. 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.
-11-
<PAGE>
The gross sales prices, before deduction for costs of sale, of properties sold
in 1994 was $10,527,000. See Note 6 of Notes to Financial Statements for the
sales 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.
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: business parks/industrial -
representing 76% of rentable square footage of the portfolio, and retail -
representing 24% of rentable square footage of the portfolio. 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:
Percentage Leased Rate
------------------------------
Business Parks/
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:
Business Parks/Industrial - Demand for the Fund's business park and 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.
-12-
<PAGE>
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 I 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 and other financing costs increased 9% 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 are being held for sale or
are currently 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 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 has agreed to settlement, terminated capital equity at
Country Hills Towne Center, and costs incurred
-13-
<PAGE>
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 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.
-14-
<PAGE>
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.
TABLE 1
PROFORMA OPERATING RESULTS
INCLUDING ONLY PROPERTIES HELD THROUGHOUT 1994 AND 1993
(EXCLUDES PROPERTIES DISPOSED)
(AMOUNTS IN THOUSANDS)
1994 1993
---- ----
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)
========= =========
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 1.
Performa 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 expense 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, 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 are being held for sale or are currently
being marketed for sale.
-15-
<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 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 above under Liquidity and Capital Resources, if the Fund is unable
to complete a near-term merger or sale to a single purchaser of substantially
all of the assets of the Fund, then, subject to stockholder approval, a
liquidation of individual properties would occur. As properties are sold, 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
closings 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 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.
-16-
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
The following financial statements are filed as part of this annual report:
Page
----
Report of Independent Accountants ........................ 18
Balance Sheets - December 31, 1994 and 1993 .............. 19
Statements of Operations for the Years Ended
December 31, 1994, 1993 and 1992 ....................... 20
Statements of Changes in Stockholders' Equity for
the Years Ended December 31, 1994, 1993 and 1992 ....... 21
Statements of Cash Flows for the Years Ended
December 31, 1994, 1993 and 1992 ....................... 22
Notes to Financial Statements ............................ 24
-17-
<PAGE>
LANDSING PACIFIC FUND, INC.
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.
As described in Note 16, the previously issued financial statements have been
restated to reclasify certain items in the financial statements referred to
above, as well as to expand certain disclosures in the notes to financial
statements.
COOPERS & LYBRAND L.L.P.
San Francisco, California
March 27, 1995, except Note 16,
which is dated September 7, 1995
-18-
<PAGE>
<TABLE>
LANDSING PACIFIC FUND, INC.
BALANCE SHEETS, DECEMBER 31, 1994 AND 1993
(Amounts in thousands, except share amounts)
A S S E T S
<CAPTION>
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
============ ============
<FN>
The accompanying notes are an integral part of the financial statements.
</FN>
</TABLE>
-19-
<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
=========== ========== ==========
<FN>
The accompanying notes are an integral part of the financial statements.
</FN>
</TABLE>
-20-
<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 Notes Retained
Common Stock in Excess 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
========= === ========= ======= ======== ========== =======
<FN>
The accompanying notes are an integral part of the financial statements.
</FN>
</TABLE>
-21-
<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 .................................... (540) (62) (396)
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 ...................... 602 1,790 1,266
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of rental properties .......................... 10,205 - 5,490
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 ............ 8,822 (4,704) (981)
--------- --------- ---------
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 ........................................ (23,820) (3,589) (20,404)
--------- --------- ---------
Net cash provided by (used) in financing activities ............ (5,895) 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
========= ========= =========
<FN>
The acompanying notes are an integral part of the financial statements.
</FN>
</TABLE>
-22-
<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 forgiven $ (4,142) $ - $ -
Cost of rental property returned to lender
(net of accumulated depreciation) 3,997 - -
Other assets and liabilities retired or forgiven 53 - -
--------- -------- ---------
Net proceeds from disposition of rental property $ (92) $ - $ -
========= ======== =========
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)
--------- -------- ---------
$ - $ - $ -
========= ======== =========
<FN>
The accompanying notes are an integral part of the financial statements.
</FN>
</TABLE>
-23-
<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.
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
-24-
<PAGE>
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
=========== ============
-25-
<PAGE>
3. COLLATERAL FOR PARTICIPATING MORTGAGE LOAN
As of December 31, 1994, as a result of repayments of $2,145,000 from 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.
-26-
<PAGE>
4. NOTES PAYABLE
<TABLE>
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>
-27-
<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.
-28-
<PAGE>
5. OTHER EXPENSE
<TABLE>
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, five properties from
the group identified for disposition were sold for approximately their
carrying value at December 31, 1993. Accordingly, no additional loss or
gain was recognized in 1994. The properties sold are as follows:
<CAPTION>
Property Date of Sale Gross 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
Camden Park Shopping Center June 7, 1994 $1,500,000
Houston, Texas
Franklin Business Park November 10, 1994 $2,815,000
Boise, Idaho
6900 Place Shopping Center December 22, 1994 $2,700,000
Oklahoma City, Oklahoma
</TABLE>
In addition, on February 28, 1994, title to the 101 Park Avenue Office
Building in Oklahoma City, Oklahoma was transferred to the lender in
full satisfaction of the $4,142,000 loan collateralized by the
-29-
<PAGE>
property. The carrying value of the property had previously been
written down to an amount which was approximately equal to the amount
of the loan.
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 revenues of $2,244,000, $2,889,000 and $2,162,000,
respectively, from tenants of certain operating expenses.
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 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.
-30-
<PAGE>
11. STOCK OPTION PLANS
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.
<TABLE>
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.
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.
<TABLE>
Information regarding the Directors' Stock Option Plan is as follows:
<CAPTION>
1994 1993
---- ----
<S> <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
</TABLE>
No options have been exercised.
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.
-31-
<PAGE>
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>
16. RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
The previously issued financial statements have been restated to
reclassify certain items appearing in the Statements of Operations and
the Statements of Cash Flows and Supplemental Schedule of Non-Cash
Investing and Financing Activities. None of these reclassifications had
an effect on previously reported net loss or retained deficit and
accumulated distributions. In addition, certain disclosures in the
Notes to the Financial Statements have been expanded.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
-32-
<PAGE>
PART III
<TABLE>
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
<CAPTION>
Director/Officer Term
Name Age Position Since Expires
---- --- -------- ---------------- -------
<S> <C> <C> <C> <C>
Martin I. Zankel 60 President, Chief Executive 1991 1995
Officer and Director
J. Arthur deBoer 70 Independent Director 1989 1996
Robert K. McAfee 64 Independent Director 1988 1995
Frank A. Morrow 55 Independent Director 1988 1997
Frederick P. Rehmus 60 Independent Director 1989 1996
Norman H. Scheidt 60 Independent Director 1993 1997
Joseph M. Mock 55 Executive Vice President & 1993
Chief Operating Officer
Dean Banks 53 Chief Financial Officer, 1992
Treasurer & Secretary
</TABLE>
Martin I. Zankel. Mr. Zankel has served as Chairman of the Board since
May 17, 1992, Chief Executive Officer since July 17, 1992 and President since
September 13, 1993. 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, Director, 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.
Robert K. McAfee. Mr. McAfee, Director, has been a principal of Robert
McAfee & Associates, Penn Valley, California, a firm specializing in finance and
investment consultation since 1983. Mr. McAfee is a Director of XIOX
Corporation, a software development company.
Frank A. Morrow. Mr. Morrow, Director, 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, Director, is President of Brownson,
Rehmus & Foxworth, a national financial advisory and investment counseling firm
where he has served as President since 1978.
-33-
<PAGE>
Norman H. Scheidt. Mr. Scheidt, Director, is President of Independent
Holdings, a real estate management and development firm in San Francisco,
California. He is also a general partner of McDonald-Halliday Enterprises, a
partnership which owns and operates commercial real estate.
Joseph M. Mock. Mr. Mock 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 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.
Section 16(a) of the Securities Exchange Act of 1934 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 Securities Exchange Act of 1934 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, except
that Mr. Mock did not file a Form 3 reporting his ownership of no shares of
common stock. Mr. Mock, however, reported such ownership on a Form 5 on a timely
basis.
-34-
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth information regarding executive compensation for
the last three years:
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long-Term
Compensation
Name and Annual Compensation Awards All
Principal ------------------- ------------ Other
Position Year Salary Bonus(5) Options Comp.(1)
-------- ---- ---------- ----- ------- -----
(number)
<S> <C> <C> <C> <C> <C>
Martin Zankel, Chief 1994 $ 150,000 $48,645 39,549(6) $7,500
Executive Officer 1993 $ 150,000 $48,645 63,183(7) $4,000
1992 $ 72,000(2) - - -
Joseph M. Mock, Chief 1994 $ 125,000 $38,920 10,000(6) $7,200
Operating Officer 1993 $ 13,000(3) - - $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(4) -
<FN>
(1) 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. 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).
(2) 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 director. Mr. Zankel has served as Chief
Executive Officer since July 17, 1992.
(3) Mr. Mock joined the Fund on October 22, 1993.
(4) Mr. Banks joined the Fund on September 28, 1992.
(5) Cash awards made pursuant to the Fund's Management Incentive Plan.
(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 pursuant to the Fund's Employee Stock Incentive Plan on March
25, 1994 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 became exercisable on May 14, 1994 and
options to acquire the remaining 25,000 shares will become 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.
</FN>
</TABLE>
-35-
<PAGE>
<TABLE>
OPTIONS GRANTED IN LAST FISCAL YEAR
<CAPTION>
% of Total
Options Options Granted Exercise Expiration
Officer Granted(1) to Employees Price Date
------- ------- --------------- -------- ----------
<S> <C> <C> <C> <C>
Martin I. Zankel 13,183 43% $3.69 3/25/04
Martin I. Zankel 39,549 15% $3.69 3/25/04
Joseph M. Mock 10,000 11% $3.69 3/25/04
Dean Banks 9,229 10% $3.69 3/25/04
Dean Banks 19,229 21% $3.69 3/25/04
------ ----
91,190 100%
====== ====
<FN>
(1) All options were granted under the Landsing Pacific Fund Employee Stock
Incentive Plan discussed under "Executive Compensation - Employee Stock
Incentive Plan". Such options vest and become exercisable at a rate of
25% per year commencing on the first anniversary of the date of grant.
</FN>
</TABLE>
<TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<CAPTION>
Value of
Number of Unexercised
Unexercised in-the-Money
Options/SARs Options/SARs
at Fiscal at Fiscal
Year-End (#) Year-End ($)
(All Exercisable/ (Exercisable/
Name Unexercisable) Unexercisable)
---- -------------- --------------
<S> <C> <C>
Martin I. Zankel 25,000/77,732 (1)
Joseph M. Mock 0/10,000 (1)
Dean Banks 0/28,458 (1)
<FN>
(1) Based on a fair market value of the Fund's common stock of $2.94 per
share at December 31, 1994, none of the unexercised options are
in-the-money.
</FN>
</TABLE>
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 Management Incentive Plan, and the Severance Payment
Plan discussed below.
-36-
<PAGE>
Management Incentive Plan
The Fund has a management incentive plan (the "Management Incentive
Plan") which provides the opportunity for participants to earn additional cash
compensation for superior results in managing the Fund's business. The
Management Incentive Plan has also provided for the grant of stock options to
participants in the Management Incentive Plan under the Fund's Employee Stock
Incentive Plan. It is the Board's current intent that eligibility to participate
in the Management Incentive Plan will be extended to Martin I. Zankel, Joseph M.
Mock, and Dean Banks.
In considering management's performance goals for 1994, the Board
concluded that the dynamic nature of the Fund's expected activities would
preclude the use of quantitative measures. In determining the amount of cash
awards with respect to 1994 performance, the Board considered the following
factors: progress in achieving the Fund's strategic objectives, performance
accomplishing financing objectives, and operating and transaction results during
1994. Cash awards with respect to 1993 performance were based on the achievement
of operating and transaction results compared with quantified performance goals
established for that year.
During 1994, the Board determined to increase the number of option
grants relative to cash awards under the Management Incentive Plan as compared
with option grants for performance during 1993. In 1993, the number of options
granted was determined by dividing the amount of each officer's cash awards by
the closing price of the Fund's common shares on the American Stock Exchange on
the date of grant. The number of options granted on March 25, 1994 pursuant to
the Management Incentive Plan was based on a formula which was tied to the
achievement of goals. As a result of the adoption on March 27, 1994, of a
resolution to liquidate the Fund, subject to stockholder approval, no option
grants were made for performance during 1994.
In addition, Messrs. Mock and Banks would receive additional
compensation equal to 1 1/2% and 1% respectively, of aggregate liquidating
distributions to stockholders in excess of $4.50 per share.
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") pursuant
to which employees and officers may be granted stock options based on
performance criteria established by the Board or the Fund's Compensation
Committee. The total number of common shares reserved and available for
distribution pursuant to options granted under the Incentive Plan is 500,000
shares. While the Management Incentive Plan provides for options to be granted
to its participants under the Employee Stock Plan, awards under the Employee
Stock Plan may also be made independent of the Management Incentive Plan.
Severance Payment Plan
In light of the objectives of the Board of Directors to complete a
merger of the Fund with another company or to liquidate the Fund by sale of all
its assets, the directors recognized 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 ("Plan") for key officers and employees. Under
-37-
<PAGE>
the Plan, Messrs. Mock and Banks could be entitled to receive a severance
payment equal to one year of salary, if their employment is terminated as a
result of a merger or liquidation of the Fund.
Director Compensation
The annual director compensation of the Fund is $10,000 per year and
the regular meeting fee is $1,500 per meeting. 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, 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. 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 each
director who was not also an employee of the Fund, was granted options to
purchase 5,000 common shares on May 14, 1993. Subject to the stockholders
approval of the Plan of Liquidation, the Directors Plan was terminated by the
Board of Directors on March 27, 1995.
Under the Directors Plan, on January 1 of 1994 and 1995, each director
then in office, who was not also an employee of the Fund was granted an option
to purchase a number of common shares which was equal to the amount of the
annual directors' fee divided by the fair market value for one common share on
such date. Each option granted under the Directors' Plan has an exercise price
equal to the fair market value of the common shares on the date of grant.
During the first year after an option was granted under the Directors'
Plan, no portion of such option vested. Thereafter, on each succeeding
anniversary of the grant date, such option vests with respect to 25% of the
shares subject to the option, such that after the fourth anniversary of grant,
each option will be fully vested. Each option or portion thereof is exercisable
for ten years after such option was granted.
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.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Fund's Compensation Committee are Robert K. McAfee,
Frank Morrow, and Frederick P. Rehmus, none of whom are current or former
employees or officers of the Fund or have 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.
-38-
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table set forth, as of March 1, 1995, information with
respect to the ownership of common shares by any person who is known by the Fund
to be the beneficial owner of more than 5% of the outstanding common stock of
the Fund.
Number
of Shares Percent of
Beneficially Outstanding
Name and Address Owned Shares
---------------- ------------ -----------
Tweedy, Browne Company L.P. 311,285(1) 5.2%
and TBK Partners L.P.
52 Vanderbilt Avenue
New York, NY 10017
David S. Gottesman, 442,300(2) 7.4%
Arthur Zankel and
Daniel Rosenbloom
(collectively)
(1) According to a Schedule 13D, dated November 23, 1992, Tweedy Browne
Company L.P. ("TBC") reported that it may be deemed to beneficially own
278,985 shares of the Fund which are held in various TBC customers'
accounts with respect to which TBC has investment discretion. In the
Schedule 13D, TBK Partners, L.P. ("TBK"), which has the same general
partners as TBC, reported that TBK owns directly 32,300 shares of the
Fund. TBC and TBK reported that they may be deemed to be members of a
group which may be deemed to be the beneficial owner in the aggregate
of 311,285 shares of common stock.
(2) As reported on Schedule 13D filed on May 22, 1992, 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
President, Chief Executive Officer and Chairman of the Board.
-39-
<PAGE>
The following table sets forth the holdings of common stock of each
director and executive officer of the Fund as of March 1, 1995, and all
directors and officers as a group.
Number of
Shares
Beneficially
Owned
Name Age Position 3/1/95 Percent
---- --- -------- ------------ -------
Martin I. Zankel 60 President, Chief 148,883(1) 2.5%
Executive Officer
and Director
J. Arthur deBoer 70 Director 4,202(2) *
Robert K. McAfee 64 Director 7,202(2) *
Frank A. Morrow 55 Director 5,702(2) *
Frederick P. Rehmus 60 Director 32,902(2) *
Norman H. Scheidt 60 Director 76,102(2) 1.3%
Joseph M. Mock 55 Executive Vice
President and Chief 2,500(3) *
Operating Officer
Dean Banks 53 Treasurer/ 7,114(4) *
Secretary and
Chief Financial
Officer
All Executive Officers and
Directors as a Group (8 persons) 284,607 4.7%
* Less than 1%
(1) Includes options with respect to 63,183 common shares which are
exercisable as of May 14, 1995.
(2) Includes options with respect to 3,202 common shares which are
exercisable as of May 14, 1995.
(3) Represents options with respect to 2,500 common shares which are
exercisable as of March 25, 1995.
(4) Represents options with respect to 7,114 common shares which are
exercisable as of March 25, 1995.
ITEM 12. 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 and 1993. Payments to the firm for these services was $62,000 in 1994 and
$263,000 in 1993.
-40-
<PAGE>
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
2 Agreement and Plan of Merger. Incorporated by
reference to the Proxy Statement for the Fund's
Annual Meeting of Stockholders held on August 6,
1993, which Proxy Statement is filed as an exhibit to
the Fund's registration statement on Form 8-B filed
with the Commission November 1, 1993.
3.1 Articles of Incorporation. Incorporated by reference
to the Proxy Statement for the Fund's Annual Meeting
of Stockholders held on August 6, 1993, which Proxy
Statement is filed as an exhibit to the Fund's
registration statement on Form 8-B filed with the
Commission November 1, 1993.
3.2 Bylaws. Incorporated by reference to the Proxy
Statement for the Fund's Annual Meeting of
Stockholders held on August 6, 1993, which Proxy
Statement is filed as an exhibit to the Fund's
registration statement on Form 8-B filed with the
Commission November 1, 1993.
10.1 Rights Agreement dated as of July 26, 1990 between
Landsing Pacific Fund and Gemysis, Inc. as Rights
Agent. Incorporated by reference to Quarterly Report
on Form 10-Q for the quarter ended June 30, 1990.
10.2 Amendment to Rights Agreement dated July 8, 1993
between Landsing Pacific Fund and Registrar and
Transfer Company. Incorporated by reference to
Amendment No. 4 to Form S-3 filed with Commission on
February 11, 1994.
10.3 Settlement Agreement and Release of Claims, dated
October 15, 1992, between Landsing Pacific Fund,
Pacific Coast Capital, The Landsing Corporation, and
Gary K. Barr (without exhibits). Incorporated by
reference to Exhibit 10.2 to Annual Report on Form
10-K for the year ended December 31, 1992.
10.4*
Landsing Pacific Fund Management Incentive Plan dated
May 17, 1993. Incorporated by reference to Quarterly
Report on Form 10-Q for the quarter ended June 30,
1993.
10.5* Employee Stock Incentive Plan. Incorporated by
reference to Amendment No. 4 to Form S-3 filed with
the Commission on February 11, 1994.
10.6* 1993 Directors Stock Option Plan. Incorporated by
reference to Amendment No. 4 to Form S-3 filed with
the Commission on February 11, 1994.
10.7 Agreement dated June 18, 1993. Incorporated by
reference to Exhibit 10.1 to Quarterly Report on Form
10-Q for the quarter ended June 30, 1993.
-41-
<PAGE>
10.8* Severance Payment Plan for Executive Officers dated
as of November 1, 1994.
* Management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K
The Fund filed a report on Form 8-K dated November 14, 1994, which
disclosed the disposition of a real estate investment located in Boise,
Idaho and repayment of a $1 million loan on the property.
The Fund filed a report on Form 8-K dated November 18, 1994, which
disclosed that it had signed a non-binding letter of intent to sell all
of its real estate assets for a price of approximately $75 million.
The Fund filed a report on Form 8-K dated January 20, 1995, which
announced that discussions regarding a potential sale of its real
estate assets had been terminated on December 15, 1994. In addition, on
December 27, 1994, the Fund announced that it had received $1,700,000
in partial satisfaction of a loan and had sold the 6900 Place Shopping
Center in Oklahoma City, Oklahoma for $2,700,000.
-42-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
LANDSING PACIFIC FUND, INC.
---------------------------
(Registrant)
March 27, 1995 By: /s/ Martin I. Zankel
---------------------------------
Martin I. Zankel, President and
Chief Executive Officer
<TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following person on behalf of the Registrant and in
the capacities and on the dates indicated.
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
President, Chief Executive Officer
and Director
(Principal Executive
/s/ Martin I. Zankel Officer) March 27, 1995
-------------------------------------------------
Martin I. Zankel
Treasurer and Secretary
(Principal Financial
and Accounting
/s/ Dean Banks Officer) March 27, 1995
-------------------------------------------------
Dean Banks
/s/ J. Arthur deBoer Director March 27, 1995
-------------------------------------------------
J. Arthur deBoer
/s/ Robert K. McAfee Director March 27, 1995
-------------------------------------------------
Robert K. McAfee
/s/ Frank A. Morrow Director March 27, 1995
-------------------------------------------------
Frank A. Morrow
/s/ Frederick P. Rehmus Director March 27, 1995
-------------------------------------------------
Frederick P. Rehmus
/s/ Norman H. Scheidt Director March 27, 1995
-------------------------------------------------
Norman H. Scheidt
</TABLE>
-43-
<PAGE>
E X H I B I T I N D E X
Exhibit
Number Exhibit Description Page
2 Agreement and Plan of Merger. Incorporated by reference to
the Proxy Statement for the Fund's Annual Meeting of
Stockholders held on August 6, 1993, which Proxy Statement
is filed as an exhibit to the Fund's registration statement
on Form 8-B filed with the Commission November 1, 1993.
3.1 Articles of Incorporation. Incorporated by reference to the
Proxy Statement for the Fund's Annual Meeting of
Stockholders held on August 6, 1993, which Proxy Statement
is filed as an exhibit to the Fund's registration statement
on Form 8-B filed with the Commission November 1, 1993.
3.2 Bylaws. Incorporated by reference to the Proxy Statement for
the Fund's Annual Meeting of Stockholders held on August 6,
1993, which Proxy Statement is filed as an exhibit to the
Fund's registration statement on Form 8-B filed with the
Commission November 1, 1993.
10.1 Rights Agreement dated as of July 26, 1990 between Landsing
Pacific Fund and Gemysis, Inc. as Rights Agent. Incorporated
by reference to Quarterly Report on Form 10-Q for the quarter
ended June 30, 1990.
10.2 Amendment to Rights Agreement dated July 8, 1993 between
Landsing Pacific Fund and Registrar and Transfer Company.
Incorporated by reference to Amendment No. 4 to Form S-3
filed with the Commission on February 11, 1994.
10.3 Settlement Agreement and Release of Claims, dated October
15, 1992, between Landsing Pacific Fund, Pacific Coast
Capital, The Landsing Corporation, and Gary K. Barr (without
exhibits). Incorporated by reference to Exhibit 10.2 to
Annual Report on Form 10-K for the year ended December 31,
1992.
10.4 Landsing Pacific Fund Management Incentive Plan dated May 17,
1993. Incorporated by reference to Quarterly Report on Form
10-Q for the quarter ended June 30, 1993.
-44-
<PAGE>
10.5 Employee Stock Incentive Plan. Incorporated by reference to
Amendment No. 4 to Form S-3 filed with the Commission on
February 11, 1994.
10.6 1993 Directors Stock Option Plan. Incorporated by reference
to Amendment No. 4 to Form S-3 filed with the Commission on
February 11, 1994.
10.7 Agreement dated June 18, 1993. Incorporated by reference to
Exhibit 10.1 to Quarterly Report on Form 10-Q for the quarter
ended June 30, 1993.
10.8 Severance Payment Plan for Executive Officers dated as of
November 1, 1994.
-45-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THE SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS INCLUDED IN THE FORM 10 KSB/A FOR THE
YEAR ENDED DECEMBER 31, 1994 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS
</LEGEND>
<CIK> 0000831300
<NAME> Pacific Financial Printing
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 5334
<SECURITIES> 0
<RECEIVABLES> 1512
<ALLOWANCES> 78
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 90876
<DEPRECIATION> 19197
<TOTAL-ASSETS> 80328
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 6
0
0
<OTHER-SE> 30744
<TOTAL-LIABILITY-AND-EQUITY> 80328
<SALES> 12087
<TOTAL-REVENUES> 12189
<CGS> 0
<TOTAL-COSTS> 3770
<OTHER-EXPENSES> 4240
<LOSS-PROVISION> 6645
<INTEREST-EXPENSE> 4952
<INCOME-PRETAX> (9618)
<INCOME-TAX> 0
<INCOME-CONTINUING> (9618)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9618)
<EPS-PRIMARY> (1.62)
<EPS-DILUTED> (1.62)
</TABLE>
