SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the registrant [ X ]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ X ] Preliminary proxy statement
[ ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Landsing Pacific Fund, Inc.
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Dean Banks
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[ ] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ x ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock
- - --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
5,953,137
- - --------------------------------------------------------------------------------
(3) Proposed maximum aggregate value of transaction:
Not determinable--fee based on estimated net proceeds.
- - --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
-------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
-------------------------------------------------------------------------
(3) Filing party:
-------------------------------------------------------------------------
(4) Date filed:
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- - --------
<PAGE>
LANDSING PACIFIC FUND, INC.
155 BOVET ROAD, SUITE 101
SAN MATEO, CALIFORNIA 94402
(415) 513-5252
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO THE STOCKHOLDERS:
The Annual Meeting of Stockholders of Landsing Pacific Fund, Inc., a
Maryland corporation (the "Fund"), will be held at the Hotel Sofitel, 223 Twin
Dolphin Drive, Redwood City, California, on September 14, 1995, at 9:00 a.m.,
local time, to consider the following proposals:
* To approve the Fund's Plan of Liquidation and Dissolution;
* To amend the Fund's Charter to eliminate the classified board
provisions thereof;
* To elect a director to serve until the next annual meeting of
the stockholders and until his successor is duly elected and
qualifies; and
* To transact such other business as may properly come before
the meeting.
Only stockholders of record at the close of business on July 28, 1995
are entitled to notice of and to vote at said meeting and any adjournment
thereof.
THE PRESENCE AT THE MEETING, IN PERSON OR BY PROXY, OF STOCKHOLDERS
HOLDING A MAJORITY OF ALL THE OUTSTANDING SHARES OF COMMON STOCK AS OF THE
RECORD DATE IS REQUIRED FOR A QUORUM. IF YOU CANNOT ATTEND THE MEETING, PLEASE
COMPLETE, DATE, SIGN AND RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED
ENVELOPE AS PROMPTLY AS POSSIBLE.
THE PROMPT RETURN OF YOUR PROXY CARD WILL HELP THE FUND AVOID THE
EXPENSE OF FURTHER REQUESTS FOR PROXIES TO OBTAIN A QUORUM.
By Order of the Board of Directors
DEAN BANKS, Secretary
San Mateo, California
, 1995
- - ---------------
<PAGE>
TABLE OF CONTENTS
Page
----
GENERAL ................................................................... 1
REQUIRED VOTE ............................................................. 2
DESCRIPTION OF BUSINESS ................................................... 2
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS .................. 5
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS ............................................ 7
SELECTED FINANCIAL DATA ................................................... 7
PROPOSAL ONE: APPROVAL OF PLAN OF LIQUIDATION AND DISSOLUTION ............ 19
Reasons for the Proposed Liquidation ................................. 19
Summary of the Plan .................................................. 22
Appraisal Rights ..................................................... 25
Effect on Trading and Registration ................................... 26
Effect of Failure to Approve the Plan ................................ 27
Estimate of Net Proceeds of Liquidation .............................. 27
Interest of Certain Persons in the Liquidation and
Dissolution ...................................................... 28
Risks Attendant to the Adoption of the Plan .......................... 29
Certain Federal Income Tax Consequences .............................. 30
Summary of Reasons to Vote for the Adoption of the Plan .............. 36
PROPOSAL TWO: APPROVAL OF PROPOSAL TO ELIMINATE THE
CLASSIFIED BOARD PROVISIONS OF THE FUND'S CHARTER .................... 37
Reasons for the Proposal ............................................. 37
PROPOSAL THREE: ELECTION OF DIRECTORS .................................... 38
DIRECTORS AND EXECUTIVE OFFICERS .......................................... 39
BENEFICIAL OWNERSHIP ...................................................... 40
Compliance with Section 16(a) of the Securities Exchange Act
of 1934 .......................................................... 43
COMMITTEES ................................................................ 43
EXECUTIVE COMPENSATION .................................................... 44
Summary Compensation Table ........................................... 44
Options Granted in Last Fiscal Year .................................. 45
Aggregated Option/SAR Exercised in Last Fiscal Year and FY-
End Option/SAR Values ............................................ 46
Director Compensation ................................................ 46
Management Incentive Plan ............................................ 47
Employee Stock Incentive Plan ........................................ 47
i
<PAGE>
TABLE OF CONTENTS
(continued)
Page
----
Severance Payment Plan ............................................... 48
Compensation Committee Interlocks and Insider Participation .......... 48
Certain Relationships and Related Transactions ....................... 48
INDEPENDENT ACCOUNTANTS ................................................... 49
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE ........................... 49
STOCKHOLDER PROPOSALS ..................................................... 50
EXHIBITS
Exhibit A Plan of Liquidation and Dissolution........................... A-1
Exhibit B Articles of Amendment......................................... B-1
SCHEDULES
Schedule 1 Financial Statements as set forth in the Fund's Form 10-KSB for
the fiscal year ended December 31, 1994.
Schedule 2 Financial Statements as set forth in the Fund's Form 10-QSB for
the fiscal year ended March 31, 1995.
ii
<PAGE>
LANDSING PACIFIC FUND, INC.
155 Bovet Road, Suite 101
San Mateo, California 94402
(415) 513-5252
PROXY STATEMENT
GENERAL
The accompanying Proxy is solicited by the Board of Directors (the
"Board") of Landsing Pacific Fund, Inc., a Maryland corporation (the "Fund"),
for use at the Annual Meeting of Stockholders (the "Meeting") of the Fund to be
held on September 14, 1995, and at any adjournment of the Fund thereof, for the
purposes set forth in the attached Notice. The votes entitled to be cast by the
shares of Common Stock represented by the accompanying proxy will be cast in
accordance with the specification of the holder of the shares of Common Stock,
as properly indicated by the holder on the proxy. In the absence of a
specification thereon, proxies will be voted for each proposal and for the
nominee for director. A holder of the Fund's Common Stock (a "Stockholder")
giving a proxy may revoke it at any time prior to its exercise by filing with
the Secretary of the Fund a written revocation or a duly executed proxy bearing
a later date, or by attending the Meeting and voting in person.
The cost of solicitation of proxies will be borne by the Fund. In
addition to solicitation by mail, officers and directors of the Fund may solicit
proxies by mail, telephone, facsimile or personal interview. The Fund intends to
engage Corporate Investor Communications, Inc. to solicit Stockholders' proxies.
The Fund estimates that the cost of such solicitation will be approximately
$6,000.
1
<PAGE>
Only Stockholders of record at the close of business on July 28, 1995
(the "Record Date") will be entitled to notice of and to vote at the Meeting. As
of the close of business on June 1, 1995, there were outstanding 5,953,137
shares of Common Stock in the Fund (the "Common Stock"). There is no cumulative
voting; each share of Common Stock will be entitled to one vote on all matters.
This Proxy Statement and accompanying form of Proxy will first be sent
or given to Stockholders on or about , 1995.
-------------
REQUIRED VOTE
The affirmative vote of the holders of a majority of the outstanding
shares of Common Stock is required for approval of the Plan of Liquidation and
Dissolution (Proposal 1) and of the amendment to the Fund's Charter (Proposal
2). The affirmative vote of a plurality of all the votes cast at the Meeting, in
person or by proxy, is required for the election of a director pursuant to
(Proposal 3).
Abstentions and broker non-votes (i.e., votes not cast by a broker or
other record holder in "street" or nominee name who returns a properly executed
proxy because such record holder does not have discretionary authority to vote
on the matter) will be counted towards the presence of a quorum. Abstentions and
broker non-votes will have the same effect as votes against the amendment to the
Charter and the approval of the Plan of Liquidation. Abstentions and broker
non-votes will not be counted as votes cast and will have no effect on the
election of directors.
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
2
<PAGE>
Fund and the Delaware corporation ceased to exist. The Fund has elected to be
treated as a real estate investment trust under the Internal Revenue Code of
1986 and will not be subject to federal income tax as long as real estate
investment trust status is maintained and all of its taxable income is
distributed to stockholders.
The Fund is currently engaged in the business of operating
income-producing real estate investments. The Board of Directors of the Fund has
approved a conditional resolution, subject to stockholder approval, to liquidate
all of the assets of the Fund in an orderly fashion and to dissolve the Fund in
accordance with a Plan of Liquidation.
During 1994, the Fund initiated a program to dispose of its real estate
investments which were not industrial properties and which were located outside
of its core markets in Northern California, Colorado and Oregon. As a result of
the program, the Fund has withdrawn from Oklahoma City, Oklahoma and Boise,
Idaho. The Fund is exploring the disposition of other properties in Southern
California, San Leandro, California, St. Paul, Minnesota and Houston, Texas.
Pending the liquidation of the Fund, management continues to focus on
managing the Fund's portfolio, which as of June 30, 1995, consisted of fee title
ownership of 18 properties. The Fund owns industrial properties and shopping
centers, which are located in 7 metropolitan areas, principally in the western
United States. 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.
3
<PAGE>
This intense competition has resulted in decreasing rental rates, particularly
in the Houston, Southern California and Portland markets in which the Fund has
properties. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations", for a more specific discussion of the impact of the
foregoing factors on the Fund's financial condition, operations and liquidity.
The Fund has not made, nor does it anticipate making, during the
remainder of its current fiscal year or during its succeeding fiscal year, any
material capital expenditures for environmental control facilities. The Fund
does not expect any material effects upon capital expenditures, earnings or
competitive position to result from compliance with present federal, state or
local environmental control provisions. The Fund has previously obtained Phase I
and, in several cases, Phase II surveys of all of its properties relative to the
potential existence of hazardous materials as defined by environmental impact
legislation. With the exception of the Country Hills Towne Center in Diamond
Bar, California and the 466 Forbes Building in South San Francisco, California,
only minor amounts of any such materials, if any, have been indicated. Those
materials representing a potential hazard, either now or in the future, have
been or are being removed. Materials which do not represent such a hazard, e.g.,
floor tile, have not been removed but rather an abatement program has been
implemented in connection therewith.
The Country Hills Towne Center has soil partially contaminated by dry
cleaning solvents. Preliminary estimates indicate that the cost of remediation
will not be material. The 466 Forbes property has soil partially contaminated by
gasoline which leaked from underground storage tanks on an adjacent property.
The owner of the adjacent property has initiated action to develop and implement
a remediation program. It is unlikely that the Fund will be required to perform
investigative work or undertake remedial actions at the property. The Multnomah
Building in Portland, Oregon, which was sold in March 1995, contained asbestos.
The purchaser of the property agreed to complete the clean-up of the property
with no further financial obligation to the Fund. At an adjoining property, the
Imperial Garage, there was a partial contamination of the soil caused by leakage
from underground storage tanks. In connection
4
<PAGE>
with the sale of the property in March 1995, the tanks were removed and the
contamination remediated at a cost to the Fund of approximately $150,000.
At June 30, 1995 the Fund had 8 full-time employees and 1 part time
employee. All of the Fund's operations are located in the United States.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Fund's Common Stock was listed on the American Stock Exchange
effective December 5, 1988. The high and the low sales price for each period
during 1994 and 1993 and the first three months of 1995 are as follows:
1995 1994 1993
-----------------------------------------------------------
High Low High Low High Low
---- --- ---- --- ---- ---
1st Quarter ...... $ 3.000 $ 2.500 $ 3.563 $ 3.375 $ 3.875 $ 3.000
2nd Quarter ...... $ 3.688 $ 3.375 $ 3.375 $ 3.000
3rd Quarter ...... $ 3.563 $ 2.813 $ 3.375 $ 3.125
4th Quarter ...... $ 3.625 $ 2.188 $ 4.125 $ 3.250
There were approximately 7,600 holders of record of the Fund's shares
of Common Stock as of June 15, 1995. However, the Fund estimates the number of
stockholders to be in excess of 12,000, since certain shares of Common Stock of
record are held by nominees. On June 15, 1995, the closing price of the Common
Stock was $3.25.
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 "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.
5
<PAGE>
On March 27, 1995, the Board of Directors resolved to terminate the
Dividend Reinvestment Plan. The Plan enabled stockholders to have distributions,
when they were paid by the Fund, automatically invested in additional shares of
Common Stock to the Fund. Registrar and Transfer Company, which is unaffiliated
with the Fund, acted as agent for those stockholders who participated in the
Plan. The shares of Common Stock required to fulfill the requirements of the
Plan were purchased on the open market or directly from the Fund at a 5%
discount from the open market price.
6
<PAGE>
<TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
SELECTED FINANCIAL DATA
Operating Results and Distributions
<CAPTION>
Three Months
Ended March 31, Years Ended December 31,
------------------- ----------------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
---- ---- ---- ---- ---- ---- ----
(Amounts in thousands,except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues .......................... $ 2,737 $ 3,261 $12,189 $ 14,441 $ 13,565 $ 16,910 $ 16,406
-----------------------------------------------------------------------------------
Income (loss) before gain
or loss from sale of
real estate ...................... $ (551) $ (836) $(9,618) $(27,754) $(12,249) $ (2,845) $(12,545)
Gain or loss from sale of
real estate ...................... - - - - 392 - (151)
------------------------------------------------------------------------------------
Net income (loss) ................. $ (551) $ (836) $(9,618) $(27,754) $(11,857) $ (2,845) $(12,696)
====================================================================================
Per Share:
Net income (loss) ................. $ (.09) $ (.14) $ (1.62) $ (4.61) $ (1.89) $ (.46) $ (2.08)
====================================================================================
Distributions declared ............ $ - $ - $ - $ - $ .24 $ .64 $ .80
====================================================================================
Other Data:
Funds from Operations(1) .......... $ 307 $ 396 $ 1,665 $ 1,777 $ (376) $ 2,381 $ 1,724
===================================================================================
March 31, December 31,
------------------- ----------------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
---- ---- ---- ---- ---- ---- ----
(Amounts in thousands)
Balance Sheet Data:
Total Assets ...................... $79,595 $87,801 $80,328 $100,686 $124,691 $137,070 $134,532
Notes Payable ..................... $47,189 $51,664 $47,929 $ 57,966 $ 53,757 $ 53,309 $ 43,162
Stockholders' Equity .............. $30,199 $39,531 $30,750 $ 40,368 $ 68,103 $ 81,336 $ 89,119
<FN>
- - --------------------
(1) Funds from Operations means net income (loss), excluding gain (loss) on
the sale to real estate and provisions for losses, plus depreciation
and amortization. Funds from operations should not be considered an
alternative to net income as an indicator of the Fund's operating
performance or to cash flows as a measure of liquidity. However, the
Fund believes that
</FN>
</TABLE>
7
<PAGE>
analysts of real estate investment trusts consider Funds from
Operations to be useful in comparing results in the industry.
LIQUIDITY AND CAPITAL RESOURCES
Current projections are that capital expenditures for tenant and
building improvements will be approximately $1,300,000 for the last nine months
of 1995. The principal source of liquidity for these requirements is current
cash reserves. At March 31, 1995, the Fund's unrestricted cash and cash
requirements were $8,002,000.
At March 31, 1995 the Fund had borrowings of $21,401,000 that mature
prior to December 31, 1995. As of March 31, 1995, the principal amount of the
Fund's debt that will mature in the next three years is as follows: 1995 -
$21,401,000; 1996 - $6,188,000; 1997 - $12,537,000. It is expected that
substantially all of these loans will either be extended or the loans
restructured.
Because of the already significant amount of debt, increased borrowings
have been viewed as a limited source of long-term liquidity. Recent net losses
and the suspension of dividends in June 1992 significantly limit the Fund's
ability to access sources of equity capital. The only long-term source of
liquidity to fund capital requirements and to meet loan repayments is the sale
of properties.
During substantially all of 1994 and the first six months of 1995, the
Fund sought to increase its capital base, arrange a merger, or to sell all, or
substantially all of its assets. No such transaction was accomplished. In order
to prevent continuing erosion of stockholders' equity, the Board of Directors
adopted a resolution, subject to stockholder approval, to liquidate all of the
assets of the Fund and to dissolve the Fund in accordance with a Plan of
Liquidation and Dissolution. See Proposal 1 - Approval of Plan of Liquidation
and Dissolution.
8
<PAGE>
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 the sale of
rental property and the payment of $2,145,000 in satisfaction of a participating
mortgage loan were the sources of capital to fund capital expenditures and
development costs and to pay down debt by $1,631,000. The balance of net cash
flows was used to increase reserves for future cash requirements. As a result of
the sale of properties, $8,400,000 of debt was retired during 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: 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:
9
<PAGE>
Percentage Leased Rate
----------------------
Date Industrial Retail
--------------------------------------------------------------------
December 31, 1992 ................. 90% 87%
December 31, 1993 ................. 96% 86%
December 31, 1994 ................. 97% 88%
The primary reasons for the occupancy trends were the same for each
property type. During 1992, the impact of the economic recession was reflected
in a significant increase in tenant failures. Aggressive leasing activity since
1992 has resulted in improved occupancy. The overall trend in the past three
years for each of the Fund's property types is as follows:
Industrial - Demand for the Fund's industrial space has seen
improvement over the past three years, particularly in the South San Francisco
market. However, rental rates have declined as leases have expired and releasing
has been at lower rates reflecting the competition for space.
Retail - The demand for retail space has declined with the slowdown in
economic growth. This has the effect of reducing rental rates in order to
maintain relatively constant occupancy rates over the past three years.
Management believes that the geographic market in which a property is
located has been a critical factor in determining operating results. The trend
in the Fund's occupancy has been favorable in Northern California, and both
occupancy and rental rates have been favorable in Colorado, reflecting the
relative strength of that economy. In Minnesota, the market has been stable with
occupancy rates of 93%, but at highly competitive rental rates due to weak
demand. The competition for rental space is intense in Southern California
resulting in occupancy rates below the portfolio average and reflecting the
weakness in the economy in that market. In the Houston and Portland markets, an
oversupply of retail and industrial properties, respectively, has resulted in
intense price competition in order to maintain occupancy levels.
10
<PAGE>
THREE MONTHS ENDED MARCH 31, 1995 COMPARED WITH THE THREE MONTHS
ENDED MARCH 31, 1994
Operating results for the periods ending March 31, 1995 and 1994 are
not directly comparable because of the difference in the number and magnitude of
investments held. Events which impacted the comparability of these results
include: (i) the sale of Twin Oaks Executive Center in Beaverton, Oregon on
January 20, 1994, (ii) the disposition of BancFirst and 101 Park Avenue Office
Buildings in Oklahoma City, Oklahoma on February 28, 1994, (iii) the sale of
Camden Park Shopping Center in Houston, Texas on June 7, 1994, (iv) the sale of
Franklin Business Park in Boise, Idaho on November 10, 1994, and (v) the sale of
6900 Place Shopping Center in Oklahoma City, Oklahoma on December 22, 1994.
Decreases in rental income, operating expenses and depreciation and amortization
primarily resulted from these sales.
The following supplemental information provides comparative operating
information for 1995 and 1994 including only those properties which remained in
the portfolio as of March 31, 1995.
11
<PAGE>
Table I
Proforma Operating Results
Including Only Properties Held Throughout 1995 and 1994
(Excludes Properties Disposed)
(Amounts in thousands)
Three Months Ended
March 31,
-----------------------
1995 1994
---- ----
Revenues ......................................... $ 2,737 $ 2,568
Operating expenses ............................... 741 819
-----------------------
Income from property operations ................ 1,996 1,749
Interest expense ................................. 1,192 946
General and administrative expense ............... 436 534
Other expense .................................... 61 102
-----------------------
Funds from operations(1) ....................... 307 167
Depreciation and amortization .................... 858 1,010
-----------------------
Loss before operating results of
disposed properties ............................ (551) (843)
Operating results of disposed properties ......... -- 7
-----------------------
Net Loss ....................................... $ (551) $ (836)
=======================
- - --------------------
(1) Funds from operations means net income (loss), excluding gain (loss) on
the sale of real estate and provision for losses, plus depreciation and
amortization. Funds from operations should not be considered an
alternative to net income as an indicator of the Fund's operating
performance or to cash flows as a measure of liquidity. However, the
Fund believes that analysts of real estate investment trusts consider
funds from operations to be useful in comparing results in the
industry.
12
<PAGE>
The discussion of changes in results of operations which follows is
based on the proforma comparison of operating results excluding disposed
properties as presented in Table I.
Operating expenses decreased 10% in 1995 primarily as a result of
reduced property tax assessments and maintenance and repair costs at several
properties.
Interest expense was 26% higher in 1995 as compared with 1994 primarily
as a result of the effect of increases in the prime rate on the Fund's variable
rate debt.
General and administrative expense declined by 18% in 1995 due to a
reduction in personnel in 1994 and a decline in corporate legal costs.
Other expense was comprised of merger/liquidation costs and terminated
property sale transactions in 1995 and terminated common share offering and loan
refinancing negotiation costs in 1994.
Funds from operations in the three months ended March 31, 1995
increased 84% as compared with the same period in 1994 primarily as a result of
the decreases in expenses discussed above.
Depreciation and amortization expense decreased 15% in 1995 due to the
impact of property writedowns to net realizable value in June and December 1994.
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31,1993
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.
13
<PAGE>
Interest expense increased 11% in 1994 over 1993 as a result of the
effect of prime rate increases on variable rate debt, offset by the impact of
the sale of four non-core properties.
General and administrative costs decreased 20% in 1994 from 1993 as a
result of the Fund's effort to reduce franchise tax, legal, professional
services, personnel, and printing/mailing costs.
Other expense in 1994 was comprised of merger/liquidation costs,
terminated property sale and loan transaction costs, and terminated equity
offering costs.
During the twelve months ended December 31, 1994, an $8,150,000
provision for loss was recorded to reduce the carrying value of the Fund's
portfolio to the estimated net realizable value of properties which were being
held for sale or were being marketed for sale.
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
14
<PAGE>
canceled in late 1992 and 1993. The decrease was partially offset by higher
interest income on increased cash reserves in 1993 and the non-accrual of
participating loan income in 1993.
Other expense in 1993 was comprised of costs associated with litigation
in which the Fund was engaged or agreed to settlement, terminated capital
projects at Country Hills Towne Center, and costs incurred in a terminated
common share 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.
15
<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 II
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 ...................... 4,152 4,098
Interest ........................................... 4,289 3,594
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 II.
16
<PAGE>
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 expense increased 19% 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 were being held for sale or
being marketed for sale.
During December 1994, the Fund recognized the recovery of substantially
all of the King Cole Homes Participating Mortgage Loan. The Fund realized
$1,505,000 in excess of the loans carrying value, net of legal costs, and the
recovery reduced the provision for loss discussed above.
POTENTIAL FACTORS AFFECTING FUTURE OPERATING RESULTS
As discussed hereafter in Proposal One, the Board of Directors has
adopted a resolution, subject to Stockholder approval, to liquidate the Fund. As
properties are sold pursuant to any liquidation of the Fund, the effect would be
to decrease the contribution of such properties to overall Fund operating
results. Because certain of the Fund's general and administrative expenses are
fixed rather than variable, the decreased contribution from
17
<PAGE>
properties which are sold would result in a decrease in total Fund operating
results.
If the stockholders approve a proposed Plan of Liquidation, all of the
Fund's investments would no longer be held for long-term investment. To the
extent that the estimated net realizable value of a property which is currently
held for long-term investment is less than its net book value, a loss would be
recognized.
Since 84% of the Fund's debt bears variable rate interest, increases or
decreases in the prime rate will increase or decrease the Fund's interest
expense.
ADDITIONAL FINANCIAL INFORMATION
A copy of the Fund's financial statements as set forth in the Fund's
Form 10-KSB for the fiscal year ended December 31, 1994 is attached hereto as
Schedule 1, and a copy of the Fund's financial statements as set forth in the
Fund's Form 10-QSB for the fiscal quarter ended March 31, 1995 is attached
hereto as Schedule 2. The financial information contained in Schedules 1 and 2
is hereby incorporated into this document as though set forth herein.
18
<PAGE>
PROPOSAL ONE:
-------------
APPROVAL OF PLAN OF LIQUIDATION AND DISSOLUTION
-----------------------------------------------
REASONS FOR THE PROPOSED LIQUIDATION
The Board of Directors of the Fund (the "Board") has unanimously
approved a Plan of Liquidation and Dissolution of the Fund (the "Plan"), and
directed that the Plan be submitted for adoption by Stockholders of the Fund at
the Meeting. Stockholders will be asked at the Meeting, among other things, to
adopt the Plan and authorize the Board of Directors to take all action necessary
or appropriate to implement the Plan. A copy of the Plan is included with this
Proxy Statement as Exhibit A. Reference is made to Exhibit A for a more complete
description of the terms and conditions of the Plan.
The Fund is a Maryland corporation which has elected to be treated as a
real estate investment trust (a "REIT") under the Internal Revenue Code of 1986,
as amended. The investment policy of the Fund emphasizes equity-oriented real
estate investments to generate both income and capital appreciation for the
Stockholders. The Fund has generated net operating losses since 1989, due in
large part to (i) provisions for losses on investments in real estate, (ii) the
Fund's high level of debt, and (iii) the high level of general and
administrative costs associated with administering a public REIT relative to the
revenue generated by the Fund's properties. The Fund's management has sought to
improve operating results by implementing cost-cutting measures. While the Fund
has been successful in reducing costs, management has concluded that the Fund's
asset base is too small to generate sufficient revenue to cover the costs, even
as reduced, of administering a public REIT.
In light of the foregoing, management's goal has been to (i) raise
additional capital to finance an increase in the Fund's asset base to a level
necessary to generate sufficient revenue to offset operating costs, (ii) grow
the Fund by merging it with another REIT or real estate company, or (iii)
terminating the Fund by entering into a merger or sale of assets following which
the Fund would not be the surviving entity.
19
<PAGE>
ISSUANCE OF SECURITIES
Management and the Board have investigated the possibility of raising
capital through the issuance of additional securities. In November, 1993, the
Fund filed a registration statement with the Securities and Exchange Commission
in connection with an offering to its Stockholders of rights to purchase shares
of Common Stock in the Fund. Ultimately, it was determined that the costs of
completing the offering outweighed the benefits of the small amount of cash that
would have been raised.
At present, the Board believes, after consultation with members of the
investment community, that there would be insufficient demand among investors to
complete a sale of additional securities if issued by the Fund. Management
believes that, as a general rule, in order to attract capital to an equity
offering by a REIT, the aggregate amount of debt should not exceed 40% of the
REIT's total market capitalization. The aggregate amount of the Fund's debt,
however, is approximately two times its market capitalization. Moreover,
management believes that many investors are less likely to invest in a REIT with
a market capitalization as small as the Fund's. Because of these factors, and
because the Fund has not paid a dividend since the second quarter of 1992, it is
unlikely that an offering of the Fund's securities would be successful.
MERGERS AND ACQUISITIONS
Since March of 1990, the Fund has pursued growth through mergers and
acquisitions pursuant to which the Fund would be the surviving entity. The Fund
actively pursued transactions with other real estate companies in order to
increase the Fund's asset base, but did not enter into any of the potential
transactions identified because management did not believe that any of them
would enhance Stockholder value. More specifically, none of the merger or
acquisition targets considered met all of the Fund's criteria concerning
acquisition price, geographic location, property-type, and leverage ratios.
Since March of 1994, the Fund has shifted its focus away from growth
toward pursuing transactions through which the Fund would
20
<PAGE>
be the acquired entity. This shift resulted from the recognition by the Board of
(i) the Fund's lack of cash to finance an acquisition of another entity, and
(ii) the decline in the trading price of the Fund's Common Stock and the failure
to pay dividends on the Fund's Common Stock, both of which reduced the
likelihood that stockholders of another company would accept Common Stock of the
Fund as consideration for shares in a merger. As a result, the Fund began
pursuing the possibility of mergers and other transactions pursuant to which the
Fund's Stockholders would receive cash or securities in exchange for their
shares of Common Stock.
In order to make the Fund and its properties more attractive to
potential acquirors as well as investors in the equity market, the Fund has
sought to narrow the geographic scope of its properties as well as the type of
properties within its portfolio. To that end, the Fund has attempted to sell
those properties which lie outside of Northern California, Colorado and Oregon,
as well as those which are not industrial buildings (collectively, the "Non-Core
Properties"). Of the fourteen Non-Core Properties held by the Fund as of January
1, 1994, the Fund has sold eight.
The Fund has entered into extensive negotiations with several REITs and
real estate companies concerning mergers and the sale of the Fund's properties.
With one exception those negotiations were terminated because the parties were
unable to reach agreement as to the material terms. In one case in which it was
likely that an agreement would have been reached as to the material terms, the
Fund ultimately determined not to pursue a definitive agreement. The Board
concluded that the transaction considered would not be in the best interests of
the Stockholders in light of a review of the current market conditions for real
property. Based on a report by Ernst & Young, LLP ("Ernst & Young") and the
analysis of management, the Board concluded that, although there can be no
assurance in this regard, the proceeds to the Stockholders from a liquidation
would likely exceed the proceeds to the Stockholders from the merger transaction
considered. See "Estimate of Net Proceeds of Liquidation", discussing the
above-referenced report.
21
<PAGE>
THE BOARD'S CONCLUSIONS
The Board has determined that a liquidation is in the best interest of
Stockholders. The continuation of the Fund's operations at current levels will,
most likely, cause further erosion of Stockholders' equity. Based on
management's analysis and a report by Ernst & Young indicating the likely
aggregate value of the Fund's properties, the Board believes that the trading
price of the Common Stock does not reflect the underlying market value of its
investments. See "Estimate of Net Proceeds of Liquidation". It should be noted,
however, that there can be no assurance that the estimate of liquidation
proceeds will prove accurate. See "Risks Attendant to the Adoption of the Plan -
Uncertainty of Amount and Timing of Liquidating Distributions". Therefore, the
amount ultimately received by Stockholders through liquidating distributions may
or may not exceed the trading price of the Common Stock.
SUMMARY OF THE PLAN
SALE OF THE PROPERTIES. The following summary of the Plan is qualified
in its entirety by the Plan itself. The Plan will become effective only upon the
approval thereof by the affirmative vote of holders of a majority of the
outstanding shares of Common Stock.
Upon approval of the Plan by the Stockholders, the Fund will take all
steps necessary to effect the sale of all of the Fund's real property (the "Real
Property") as well as its personal property (the "Personal Property")
(collectively, the "Properties"). The Real Property may be sold individually,
together as a whole, or in discrete groups, to any one or more buyers.
The Board may authorize its Real Estate Committee (the "Committee") to
approve sales of the Fund's Real Properties. The Board of Directors will
establish guidelines pursuant to which the Committee, if established, or in the
absence thereof, the officers of the Fund, may sell the Real Property without
further approval of the Board. If the Committee or the officers, as the case may
be, propose to sell Real Property upon terms and conditions which do not conform
to the guidelines, any such sale may be completed
22
<PAGE>
only after the Board approval. Similarly, the Board will establish guidelines
pursuant to which the officers may sell the Personal Property without further
approval of the Board. Any sale on terms and conditions which do not conform to
the guidelines may be made only after Board approval.
The proceeds of the sale of the Properties will, pending any
liquidating distributions, be invested by the Board in any manner it deems
appropriate, subject to the limitation that such investments do not result in
the Fund's becoming an Investment Company under the Investment Company Act of
1940.
LIQUIDATING DISTRIBUTIONS. The proceeds of the sale of Properties and
any interest or other return thereon, less costs of sale, the repayment of debt,
and any provision for reserves and costs of liquidating the Fund, will be
distributed to the Stockholders at such times and in such amounts as shall be
determined by the Board, in its sole discretion. At such time as the Board of
Directors authorizes any liquidating distribution to be made to the
Stockholders, the Board will cause the aggregate amount of funds, securities, or
other assets (the "Distributable Assets") to be distributed to the Stockholders
(the "Eligible Stockholders") of record on the record date fixed with respect to
such distribution to be set aside. All Distributable Assets set aside for
distribution will be distributed through the Fund's transfer agent, or some
other agent of the Fund, to the Eligible Stockholders. As of the time that the
Fund makes the final liquidating distribution to the Eligible Stockholders, all
of the outstanding shares of Common Stock will be deemed cancelled.
All Distributable Assets set aside for distribution that are not
distributed because an Eligible Stockholder cannot be located will be held by
the Transfer Agent for a period of three years from the date that notice is sent
to Stockholders regarding the Fund's dissolution. Upon expiration of this three
year period, or any longer period that the Board may determine, the
Distributable Assets will be distributed, pro rata, to the other Eligible
Stockholders. In the event that any of those Eligible Stockholders who had
previously been located as of the date of the final liquidating distribution
thereafter becomes unlocatable, the amounts payable to such unlocatable
Stockholder shall be paid to
23
<PAGE>
the appropriate State official, or to another beneficiary that the Board may
designate in accordance with the law.
Significantly, the amount and timing of any liquidating distributions
will be determined by the Board and will be contingent upon, among other things,
the sales of Properties and the amounts that the Board deems necessary or
appropriate to set aside for liabilities and continuing expenses of the Fund.
The Board is unable to predict when any of the Properties will be sold, and
therefore when any distributions will be made, and if made, the amount that will
be distributed.
LIQUIDATING TRUST AGREEMENT. If the Board of Directors deems it
advisable for any reason, the Board may at any time, in its sole discretion and
on behalf of the Stockholders, create a liquidating trust (the "Liquidating
Trust") by entering into a Liquidating Trust Agreement (the "Liquidating Trust
Agreement") for the purpose of (a) completing the liquidation of the Properties,
(b) providing for the payment of all liabilities, (c) making liquidating
distributions to the Eligible Stockholders, and (d) holding and distributing
liquidating distributions on behalf of any unlocated Eligible Stockholders.
Concurrently with the execution of the Liquidating Trust Agreement, the Fund
would transfer and assign to the trustee of the Liquidating Trust all of
Landsing's right, title and interest in and to all of its assets. Effective upon
such transfer, each of the Fund's Stockholders on such date or as of any record
date established in connection therewith, would become a holder of a beneficial
interest in the Trust equal to the proportion that such Stockholder held of the
outstanding shares of Common Stock of the Fund. The Board of Directors may
appoint one or more persons to act as trustees of the Liquidating Trust.
IT SHOULD BE NOTED THAT, ALTHOUGH THE FUND DOES NOT CURRENTLY EXPECT TO
CREATE A LIQUIDATING TRUST, A VOTE "FOR" THE APPROVAL OF THE PLAN ALSO
CONSTITUTES AUTHORIZATION OF THE TRANSFER OF ALL OF THE FUND'S ASSETS TO THE
TRUST.
DISSOLUTION. At such time as the Board determines, the Fund will (a)
give notice of dissolution to all its known creditors of its intended
dissolution, (b) cause Articles of Dissolution to be prepared, executed, and
filed with and accepted for record by the
24
<PAGE>
State Department of Assessments and Taxation of Maryland ("SDAT"), (c) cause any
documentation required by federal or state tax authorities to be prepared,
executed and filed, (d) after filing the Articles of Dissolution, provide notice
to Stockholders of any final liquidating distribution or notice of the filing of
the Articles of Dissolution and (e) withdraw its ability to do business as a
foreign corporation in any state in which it presently has such authority.
AMENDMENTS. Following the adoption of the Plan by the Stockholders at
the Annual Meeting, the Board of Directors may modify or amend the Plan, to the
extent permitted under Maryland law. Before the Articles of Dissolution are
accepted for record by the SDAT, the Fund may abandon or rescind the dissolution
by following the same procedure as followed for approval of the dissolution.
Thereafter, the dissolution may not be abandoned or rescinded.
INDEMNIFICATION/INSURANCE. The Board of Directors shall have the power
and authority after the effective date of the Plan to purchase and/or maintain
insurance covering acts or omissions of its directors and officers and the
Fund's indemnification obligations to its directors and officers. The Board of
Directors will also have the power and authority to satisfy any of the
indemnification obligations of the Fund out of the assets of the Fund. In that
regard, the Board intends to purchase, for a period of three years following the
dissolution of the Fund, directors and officers liability insurance which would
indemnify the Fund's directors and officers from the costs and liability
associated with any claim made during such period.
APPRAISAL RIGHTS
Section 3-202(c)(1)(ii) of the Maryland General Corporation Law
provides that because the shares of Common Stock are listed on a national
securities exchange, Stockholders do not have any appraisal, dissenters', or
similar rights in connection with the approval of the Plan.
25
<PAGE>
EFFECT ON TRADING AND REGISTRATION
The Common Stock is currently traded on the American Stock Exchange
under the symbol "LPF". It will continue to be transferable, subject to
currently effective customary REIT transfer restrictions, until the date set by
the Board just prior to the record date established in connection with a final
liquidating distribution or in connection with the creation of the Liquidating
Trust. On June 13, 1995, the closing price of the Common Stock was $3.25.
Although it is unclear what effect, if any, the adoption of the Plan would have
on the market price of the Common Stock, the adoption thereof could adversely
affect the market value and the ability to locate purchasers for shares of
Common Stock. In addition, in the event that all of the assets of the Fund are
transferred to a Liquidating Trust and the Fund's Stockholders receive
beneficial interests in such Trust in exchange for their shares of Common Stock,
those beneficial interests will be nontransferable by their terms. As a result,
the former Stockholders, as beneficial interest holders, would hold an
investment which would be illiquid.
The Fund also anticipates that following the approval of the Plan, the
shares of Common Stock will remain registered under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and the Fund will continue to comply
with the registration and reporting requirements under the Exchange Act until
such time as the Fund is no longer subject to those reporting requirements. The
Fund may, however, seek to reduce its reporting requirements at some time during
the liquidation process in order to reduce administrative costs. In the event
that all of the assets are transferred to the Liquidating Trust, it is expected
that the beneficial interests in the trust received by the Stockholders will not
be registered under the Exchange Act, and that the trust will not be subject to
the reporting requirements of the Exchange Act. The Fund anticipates, however,
that the trustees of the trust will provide the beneficial interest holders with
periodic reports concerning the activities of the trust. The Fund would seek a
no- action position from the staff of the Securities and Exchange Commission
prior to (i) deregistering its Common Stock, or (ii) reducing or eliminating its
disclosure obligations pursuant to the reporting requirements of the Exchange
Act.
26
<PAGE>
EFFECT OF FAILURE TO APPROVE THE PLAN
In the event that the Stockholders fail to approve the Plan of
Liquidation, the Fund will, most likely, continue to operate at a loss as it has
in the past, thereby further eroding Stockholders' equity. Moreover, the Fund
faces substantial debt payments in the near future. Specifically, the aggregate
principal amount of the Fund's debt that will mature in 1995 is $21,401,000, in
1996 is $6,188,000, and in 1997 is $12,537,000. Management believes that the
Fund could refinance the majority of the debt scheduled to mature in the next
three years, although the terms of the renegotiated debt may be less favorable
to the Fund. With respect to those debts which management cannot refinance, the
Fund could lose the properties financed thereby through foreclosure. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".
ESTIMATE OF NET PROCEEDS OF LIQUIDATION
The Fund engaged Ernst & Young to conduct a valuation analysis of
sixteen of the Fund's eighteen Real Properties. The Fund did not engage Ernst &
Young to value the other two Real Properties, as one property (Nohr Plaza)
represents a relatively small portion of the aggregate value of the Fund's Real
Properties, and the other property (Inwood Shopping Center) was under contract
for sale as of the date of the valuation. That contract, however, has since been
terminated. Ernst & Young is a firm of Certified Public Accountants experienced
in conducting valuations and appraisals of real property, and management
selected Ernst & Young based on its expertise in the field. As compensation for
the report, the Fund paid Ernst & Young $70,000 plus $4,000 in expenses.
Ernst & Young followed the Uniform Standards of Professional Appraisal
Practices ("USPAP") guidelines in reaching its conclusions, except that the
scope of Ernst & Young's analysis of the value of the Real Properties was
narrower than the USPAP guidelines in two respects. First, pursuant to the
Fund's request, Ernst & Young relied on management's representations as to
zoning matters, title to the properties, and certain other matters. In addition,
Ernst & Young did not use the cost approach to value
27
<PAGE>
because, in the opinion of both management and Ernst & Young, typical buyers and
sellers in the current market do not rely on this approach to estimate value.
Pursuant to the report, Ernst & Young concluded that, as of March 15,
1995, the aggregate market value of the sixteen Real Properties evaluated by it
was between $[ ] and $[ ]. Based on the dollar
amount of offers to purchase the Fund's two additional Real Properties, Nohr
Plaza and Inwood Shopping Center, management believes that the value of these
properties is approximately $[ ]. Based on the foregoing,
management believes that the liquidation value of the Fund's Real Properties,
net of the debt thereon and the cost of liquidation as estimated by management,
would be between $[ ] and $[ ] on a per share
basis. It should be noted, however, that this value represents the value as of
the date of the report, and that pending the liquidation process, such value
could decline substantially. In addition, management's estimate of costs may not
prove accurate. As a result of this and other factors, the aggregate amount of
any liquidating distributions pursuant to the Plan may be materially lower. See
"Risks Attendant to the Adoption of the Plan - Uncertainty of Amount and Timing
of Liquidating Distributions".
INTEREST OF CERTAIN PERSONS IN THE LIQUIDATION AND DISSOLUTION
Pursuant to the Fund's Severance Payment Plan, Joseph M. Mock, Chief
Operating Officer of the Fund, and Dean Banks, Chief Financial Officer, will be
entitled to receive a severance payment equal to one year of salary, which
currently would be $135,000 and $105,000, respectively, in the event that their
employment is terminated as a result of a liquidation. In addition, Messrs. Mock
and Banks would receive additional compensation equal to 1 1/2% and 1%,
respectively, of the value of aggregate distributions, if any, in excess of
$4.50 per share of Common Stock. See "Executive Compensation - Severance Payment
Plan".
Effective upon approval of the Plan, all of the outstanding options
held by the Fund's officers and directors will become immediately exercisable.
Thereafter, to the extent that the aggregate per share liquidating distributions
exceed the exercise price of such options, then from and after the distribution
date
28
<PAGE>
pursuant to which the aggregate per share distribution amount exceeds the
exercise price of any option, the option holder will be deemed to be a
Stockholder with respect to the shares of Common Stock subject to such options,
and will be entitled to receive distributions on such deemed shares of Common
Stock pro rata with the other Stockholders. It should be noted that the officers
and directors will not be required to pay the exercise price with respect to the
options in order to receive those distributions, and therefore, that this
represents a form of compensation.
RISKS ATTENDANT TO THE ADOPTION OF THE PLAN
The following is a description of certain of the risks which management
believes, as of the date of this Proxy Statement, are most significant in
connection with the adoption of the Plan. There may be other risks associated
therewith. Stockholders should consider the following factors, among others
noted elsewhere in this Proxy Statement, in reaching a decision as to whether to
vote to approve the Plan:
UNCERTAINTY OF AMOUNT AND TIMING OF LIQUIDATING DISTRIBUTIONS. A number
of factors will affect the amount which will be distributed as liquidating
distributions under the Plan, including the condition of the real estate market
pending the liquidation process, the cost of liquidation and other matters, many
of which are beyond the control of the Fund. As a result, there can be no
assurance as to the timing or amount of liquidating distributions to
Stockholders.
EFFECT ON LIQUIDITY AND PRICE OF COMMON STOCK ON THE MARKET. Although
it is difficult to predict the effect of developments in the Fund's business on
the market price of the Common Stock, the adoption of the Plan could cause the
market price of the Common Stock to decline. In addition, Stockholders
thereafter could experience difficulty in locating purchasers for their shares
of Common Stock. If, in the future, a Liquidating Trust is created to effect the
liquidation, the beneficial interests in such Trust which will be held by
Stockholders in lieu of Common Stock will be nontransferable by their terms. As
a result of the foregoing factors, Stockholders may experience a decline in the
value of their investment in Common Stock for a substantial period prior to
29
<PAGE>
the receipt of liquidating distributions. See "Effect on Trading and
Registration".
POTENTIAL LIABILITY OF STOCKHOLDERS. The Board expects to adequately
provide for all of the Fund's liabilities prior to distributing any of the
proceeds of sales of Properties to the Stockholders. If, however, the Fund would
be insolvent after any distribution to the Stockholders, then the Stockholders
receiving such distribution could be liable to return to the Fund the amount
causing the Fund to be insolvent, but not exceeding the total amount distributed
in all of such distributions.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a summary of the material federal income
tax consequences to Stockholders relevant to the Fund's adoption and
implementation of the Plan. The discussion does not deal with all of the tax
consequences of the Plan that may be relevant to every Stockholder. STOCKHOLDERS
SHOULD THEREFORE CONSULT THEIR OWN TAX ADVISORS AS TO THE TAX CONSEQUENCES OF
THE PLAN TO THEM UNDER APPLICABLE FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS.
The discussion of tax consequences that follows is based upon the Internal
Revenue Code of 1986, as amended (the "Code"), Treasury Regulations, Internal
Revenue Service (the "IRS") rulings, and judicial decisions now in effect, all
of which are subject to change at any time; any such changes may be applied
retroactively.
TAX CONSEQUENCES TO THE FUND. For federal income tax purposes, the Fund
is taxed as a real estate investment trust. In order for the Fund to continue to
qualify as a REIT, it must satisfy a number of asset, income and distribution
tests. First, at least 75% of the value of the Fund's assets at the close of
each quarter of the Fund's taxable year must be represented by real estate
assets, cash, cash items (including receivables arising in the ordinary course
of the Fund's operations), and government securities. The Fund may not have more
than 25% of its total assets represented by non-government securities, and in
connection with investments in such non-government securities, not more than 5%
of the value of the Fund's total assets may be invested in such securities of
any one issuer. In addition, the Fund may not hold
30
<PAGE>
more than 10% of the outstanding voting securities of any one issuer.
The Fund must also meet a threefold source of income test. First, at
least 75% of the Fund's gross income must be derived from rents from real
property, interest on obligations secured by mortgages on real property, and
other sources directly related to its real estate activities. Second, at least
95% of the Fund's gross income must be derived from the sources described above
and from dividends, interest and gains from sales or dispositions of stock or
securities. Third, no more than 30% of the Fund's gross income may be derived
from the sale or disposition of stock or securities held for less than four
years. In this regard, all the Fund's properties have been held for at least
four years. Finally, the Fund must distribute 95% of its REIT taxable income
(determined without regard to the dividends paid deduction and by excluding any
net capital gain) to its Stockholders each taxable year.
The Fund anticipates that it will remain qualified under the foregoing
tests throughout the period of the liquidation. However, given the changes in
the nature of the Fund's assets and in the Fund's sources of income which may
result from sales of assets in the liquidation, and the need to retain assets to
meet liabilities, there can be no assurance that the qualification tests will be
met. If the Fund ceases to qualify as a REIT for any taxable year, it would not
be entitled to deduct dividends paid to Stockholders from its taxable income and
would, therefore, be liable for federal income taxes with respect to its gains
from sales of assets and its income from operations for that year and for
subsequent taxable years, although its substantial net operating loss
carryforwards would be available to offset most of such income. Net operating
loss carryforwards are, however, allowed to offset a maximum of 90% of a
corporation's alternative minimum taxable income. In addition, certain states,
such as California, impose restrictions on a corporation's use of net operating
carryforwards. Thus, if the Fund fails to maintain its qualification as a REIT
and has taxable income for a taxable year, some federal and state tax will be
owing in spite of the Fund's net operating loss carryforwards.
For purposes of calculating a REIT's taxable income for a given year,
Section 857(b) of the Code allows the REIT a deduction
31
<PAGE>
for dividends paid to its shareholders during that taxable year, and, therefore,
a REIT generally is not subject to federal income tax to the extent it
distributes its taxable income to its shareholders as a dividend.
In order to be entitled to this deduction, a REIT's distributions to
shareholders must be "dividends," but distributions in liquidation of a
corporation are generally treated as being in full payment for a shareholder's
interest in the corporation. In the context of the liquidation of a REIT,
Section 562(b) of the Code provides a special rule which will classify
distributions in liquidation as dividends if certain conditions are met. Section
562(b) provides that, if a REIT is liquidated within the 24-month period
following the adoption of a plan of liquidation, distributions pursuant to such
plan will, to the extent of the distributing corporation's earnings and profits
for the year of the distribution, be treated as dividends for purposes of
computing the corporation's dividends paid deduction.
Adoption of the Plan by the Stockholders will constitute adoption of a
plan of liquidation for this purpose. It is anticipated that the Fund will
completely liquidate within 24- months of the adoption of the plan of
liquidation so as to take advantage of Section 562(b), but no assurance can be
provided that this timetable will, in fact, be met. For instance, it may not be
possible to sell the Funds' Properties at acceptable prices during such period.
As the end of the 24-month period approaches, the Fund will evaluate the then
current situation and will consider whether distribution of its remaining assets
and liabilities to a liquidating trust (which would satisfy the complete
liquidation requirement) would be appropriate, or whether existing
circumstances, taken as a whole, indicate that Stockholders would be advantaged
by a course of action which might forego the benefits of Section 562(b). If for
any reason a dividend paid deduction were not available to eliminate the Fund's
taxable income, the Fund's substantial net operating loss carryforwards would
offset such income, provided, as noted above, that such net operating loss
carryforwards may only offset a maximum of 90% of a corporation's alternative
minimum taxable income.
32
<PAGE>
Although Section 562(b) may treat liquidating distributions as
dividends, it only does so "to the extent of the earnings and profits of the
corporation for the taxable year of the distribution." Section 562(e) of the
Code provides that, for purposes of determining a REIT's dividends paid
deduction, a REIT's earnings and profits for a taxable year include gain
realized on the sale or exchange of real property during that year. Thus, there
would be sufficient earnings and profits to allow distribution of such gain on
sale to qualify as a dividend. It is anticipated that the Fund will distribute
sufficient amounts to the Stockholders each year so that it will remain
qualified as a REIT under the rules described above and that the Fund will have
no REIT taxable income as a result of the proposed liquidation.
The Fund is also subject to a 100% excise tax on any gain from a
"prohibited transaction". The term "prohibited transaction" means the sale or
other disposition of Fund property which is held for sale to customers in the
ordinary course of the Fund's trade or business. The determination of whether
property is held for sale to customers in the ordinary course of the Fund's
trade or business is inherently factual in nature and, thus, cannot be predicted
with certainty. The Code does provide a "safe harbor" which, if all its
conditions are met, would protect a REIT's property sales from being considered
prohibited transactions, but the Fund may not be able to satisfy these
conditions in every case, either because its liquidation activity will result in
more sales in a year than permitted under the safe harbor or because certain
expenses directly incurred by the Fund may be too high. While, as noted above,
this determination is inherently factual, the Fund does not believe that any of
its property is held for sale to customers in the ordinary course of business,
but rather that they are all held for investment and the production of rental
income.
CONSEQUENCES TO STOCKHOLDERS. The Fund believes that Liquidating
Distributions to Stockholders pursuant to the Plan will be treated as
distributions in complete liquidation of the Fund; that is, they will not be
treated as dividends, but rather as if the Stockholder had sold his or her
stock. In such case, a Stockholder will recognize gain or loss with respect to
each share of Common Stock held by the Stockholder, measured by the difference
between (i) the Stockholder's basis in that share and (ii) the
33
<PAGE>
total amount of cash and fair market value of other property, if any, received
by the Stockholder with respect to such share pursuant to the Plan. (See below,
"Liquidating Trust" for consequences to Stockholders if the Fund's assets are
dispersed to a liquidating trust.) If a Stockholder holds more than one block of
Common Stock (groups of shares acquired at different times or at different
costs), each Liquidating Distribution will be allocated ratably among the
various blocks of shares of Common Stock and gain or loss will be computed
separately with respect to each block of shares of Common Stock.
Gain or loss recognized by a Stockholder will be capital gain or loss
provided the shares of Common Stock are held by the Stockholder as capital
assets; capital gain or loss will be long-term if the shares were held for more
than one year. Corporate Stockholders may deduct capital losses recognized in a
taxable year only to the extent of capital gains recognized during such year.
Unused capital losses of a corporation may be carried back three years and
forward for five years, but may not be carried to any year in which they would
create or increase a net operating loss. On the other hand, individual
Stockholders may deduct capital losses to the extent of their capital gains,
plus $3,000. Any unused capital loss may be carried forward indefinitely until
the individual taxpayer recognizes sufficient capital gains to absorb them.
Capital losses may not be carried back by an individual.
The Plan will likely result in more than one Liquidating Distribution
to the Stockholders. If so, each Liquidating Distribution will be first applied
against the adjusted tax basis of each of a Stockholder's shares of Common Stock
and gain will be recognized with respect to a share only after an amount equal
to the adjusted tax basis of such share has been fully recovered. Any losses
with respect to a share of Common Stock may be recognized by a Stockholder only
after the Fund has made its final Liquidating Distribution or after the last
substantial Liquidating Distribution is determinable with reasonable certainty.
As a consequence of the foregoing, Stockholders incurring losses under the Plan
will likely be prevented from recognizing such losses until the receipt of the
final Liquidating Distribution.
34
<PAGE>
LIQUIDATING TRUST. If the Fund's assets are distributed to a
Liquidating Trust, such distribution would be treated, for federal income tax
purposes, as a distribution of the Fund's assets to the Stockholders followed by
a contribution by the Stockholders of the assets to the Liquidating Trust. As a
result, each Stockholder would recognize gain or loss upon the transfer of
assets to the Liquidating Trust based upon the value of the assets transferred,
reduced by fixed liabilities assumed by the Liquidating Trust. If gain is
recognized by a Stockholder on the transfer of assets to the Liquidating Trust,
that Stockholder will be liable for the payment of any resulting tax, whether or
not any distribution of cash has been made to the Stockholder. In addition, the
Stockholders would be taxed on all income earned by the Liquidating Trust,
whether or not such income is distributed. Further, if a contingent liability of
the Fund is paid by the Liquidating Trust, the payment would give rise to a
capital loss to the Stockholders.
TAXATION OF NON-UNITED STATES STOCKHOLDERS. Because the liquidating
distributions pursuant to the Plan will be treated as paid in exchange for a
Stockholder's shares of Common Stock and not as dividends, no withholding on
Liquidating Distributions will generally be required because of the Foreign
Investment in Real Property Tax Act, commonly known as "FIRPTA," unless a
Stockholder who is not a U.S. citizen or resident owns, or has owned within the
prior five years, 5% or more of the Fund's outstanding stock.
STATE AND LOCAL INCOME TAX. Stockholders may also be subject to state
or local taxes with respect to distributions received by them pursuant to the
Plan and should consult their tax advisors regarding such taxes.
BACKUP WITHHOLDING. Liquidating Distributions will not be
subject to back-up withholding.
PENDING LEGISLATION. Stockholders should be aware that a variety of
tax-related legislation is currently pending in Congress, some of which could
affect the tax treatment of transactions described in this Proxy. For example,
one bill calls for decreasing the tax rate on capital gains and extending
favorable capital gains treatment to corporations. Another bill
35
<PAGE>
would impose a withholding tax on all distributions to non-U.S. shareholders.
Neither the Fund nor its counsel can predict whether any of these proposals will
ultimately be enacted or whether any enactments would have an adverse effect on
the Fund or any Stockholder. Stockholders are urged to contact their own tax
advisors regarding the effect any proposed changes may have on their own
individual situations.
SUMMARY OF REASONS TO VOTE FOR THE ADOPTION OF THE PLAN
In summary, the Board recommends that Stockholders vote for the
adoption of the Plan because (i) liquidation will permit Stockholders to receive
a portion of the value of the Fund's Real Properties, which the Board believes
is not reflected in the trading price of the Common Stock, (ii) liquidation will
prevent further erosion of Stockholders' equity through continuing net operating
losses, and (iii) the Fund has been unable to identify a transaction which would
generate greater return to Stockholders, despite its active pursuit of
opportunities for several years.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR"
ADOPTION OF THE PLAN OF DISSOLUTION AND LIQUIDATION AND, IN THE ABSENCE
OF INSTRUCTIONS TO THE CONTRARY, PROPERLY EXECUTED AND RETURNED PROXIES
SOLICITED IN CONNECTION WITH THIS PROXY STATEMENT WILL BE SO VOTED.
36
<PAGE>
PROPOSAL TWO: APPROVAL OF PROPOSAL TO ELIMINATE
THE CLASSIFIED BOARD PROVISIONS OF THE FUND'S CHARTER
REASONS FOR THE PROPOSAL
Article X, Section 2 of the Fund's Charter (the "Charter") provides
that the Board of Directors shall be divided into three classes. Generally,
under such a "staggered board" system, each of the three classes of directors is
elected every three years.
The Board believes that it is in the best interest of the Fund to
eliminate the staggered board provisions in the Articles in order to, among
other things, maximize flexibility by enabling the Board, when it deems it
appropriate, to reduce the number of directors on the Board. Moreover, assuming
that the proposal to liquidate is approved at the Meeting and the liquidation
process is undertaken immediately thereafter, the need for continuity in Board
membership will be reduced. As a result, the Board of Directors adopted a
resolution declaring that it was advisable and in the best interest of the
Company for the Charter to be amended as set forth in the Articles of Amendment
attached hereto as Exhibit B.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THIS
PROPOSAL, AND, IN THE ABSENCE OF INSTRUCTIONS TO THE CONTRARY, PROPERLY
EXECUTED AND RETURNED PROXIES SOLICITED IN CONNECTION WITH THIS PROXY
WILL BE SO VOTED.
37
<PAGE>
PROPOSAL THREE: ELECTION OF DIRECTORS
-------------------------------------
The Board currently consists of six members and is divided into three
classes. Pursuant to the current Charter provisions, the terms of Martin I.
Zankel and Robert J. McAffee expire as of the date of the Meeting and upon
election of their successors. Mr. McAffee expects to retire from the Board
effective as of the date of the Meeting. Pursuant to the Bylaws, and in light of
the Fund's plans to liquidate, the Board of Directors voted to reduce the size
of the Board from six to five members. As a result, Mr. Zankel alone has been
nominated for reelection to the Board. Mr. Zankel has agreed to serve if
elected. In the event that he becomes unable or unwilling to stand for
re-election at the date of the Meeting or any adjournment thereof, the proxy
holders will vote for a substitute nominee in their discretion.
As described above in Proposal Two, the Board has passed a resolution
authorizing the amendment of the Charter to delete the provision therein which
divides the Board into three classes. It is expected that if the proposed
amendment is adopted by the Stockholders, the directors elected in 1994, Frank
A. Morrow and Norman H. Scheidt, will resign from the board effective as of the
annual meeting of Stockholders in 1996. In that event, all of the members of the
Board of Directors will be up for re-election (if nominated) at the annual
meeting of Stockholders in 1996. Each director elected at the 1996 annual
meeting of Stockholders, and at every subsequent annual meeting, will hold
office until the next annual meeting of Stockholders and until his successor is
elected and qualifies.
In the event that the proposed amendment to the Charter set forth in
Proposal Two is not adopted by the Stockholders, only the terms of J. Arthur
deBoer and Frederick P. Rehmus will expire at the 1996 annual meeting of
Stockholders.
THE BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" MR.
ZANKEL, AND IN THE ABSENCE OF INSTRUCTIONS TO THE CONTRARY, PROPERLY
EXECUTED AND RETURNED PROXIES SOLICITED IN CONNECTION WITH THIS PROXY
WILL BE SO VOTED.
38
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
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 predecessor, 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.
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.
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
39
<PAGE>
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.
BENEFICIAL OWNERSHIP
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS. The following table
sets forth, as of June 1, 1995, information with respect to the ownership of
shares of Common Stock by any person who is known by the Fund to be the
beneficial owner of more than 5% of the outstanding shares of Common Stock.
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, filed with the
Securities and Exchange Commission, Tweedy Browne Company L.P. ("TBC")
reported that it may be deemed to beneficially own 278,985 shares of
Common Stock 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
Common Stock 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.
40
<PAGE>
(2) According to a Schedule 13D dated May 22, 1992, filed with the
Securities and Exchange Commission, Mr. Gottesman, Mr. Arthur Zankel
and Mr. Rosenbloom reported that such filing was made as a group for
informational purposes only, but disclaimed that they were a group.
Arthur Zankel is the brother of Martin Zankel, the Fund's Chief
Executive Officer and Chairman of the Board.
SECURITY OWNERSHIP OF MANAGEMENT. The following table sets forth
information, as of June 1, 1995, regarding beneficial ownership of shares of
Common Stock of the nominees for election as directors of the Fund, and for the
directors and officers of the Fund.
41
<PAGE>
<TABLE>
<CAPTION>
Amount
of Bene-
ficial
Direc- Owner-
tor/ ship
Officer Term at
Name Age Position Since Expires 6/1/95 Percent
- - ---- --- -------- ----- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Martin I. Zankel ............... 61 President, 1991 1995 148,883(1) 2.5%
Chief Execu-
tive Officer
and Director
J. Arthur deBoer ............... 70 Director 1989 1996 4,202(2) *
Frank A. Morrow ................ 55 Director 1988 1997 5,702(2) *
Frederick P. Rehmus ............ 60 Director 1989 1996 32,902(2) *
Norman H. Scheidt .............. 60 Director 1993 1997 76,102(2) 1.3%
Joseph M. Mock ................. 55 Executive Vice
President and Chief
Operating Officer 1993 2,500(3) *
Dean Banks ..................... 53 Treasurer/
Secretary and
Chief Financial
Officer 1992 7,114(4) *
All Executive Officers and
Directors as a Group (8 persons) ............................................................ 284,607 4.7%
<FN>
* Less than 1%.
(1) Includes options with respect to 63,183 shares of Common
Stock, all of which were exercisable as of May 14, 1995.
(2) Includes options with respect to 3,202 shares of Common Stock
which were exercisable as of May 14, 1995.
(4) Represents options with respect to 2,500 shares of Common
Stock which were exercisable as of March 25, 1995.
(5) Represents options with respect to 7,114 shares of Common
Stock which were exercisable as of March 25, 1995.
</FN>
</TABLE>
42
<PAGE>
COMPLIANCE WITH SECTION 16(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires the Fund's directors and executive
officers, and persons who own more than ten percent of a registered class of the
Fund's equity securities, to file with the Securities and Exchange Commission
and the American Stock Exchange initial reports of ownership and reports of
changes in ownership of Common Stock and other securities of the Fund. Officers,
directors and greater than ten-percent Stockholders are required by the SEC to
furnish the Fund with copies of all Section 16(a) forms they file.
Based solely upon review of copies of the foregoing reports and upon
written representations furnished to the Fund, all filing requirements of
Section 16(a) of the Exchange Act applicable to Fund officers, directors and
greater than ten percent beneficial owners of the Fund's stock were filed with
respect to the 1994 fiscal year.
COMMITTEES
During 1994 the directors held 8 meetings. All directors attended more
than 75% of such meetings except Mr. Robert McAffee, who attended 62% of the
directors' meetings. All of the members of the Audit Committee and the
Compensation Committee attended all of the respective Committee meetings in
1994.
During 1994 the members of the Fund's Audit Committee were Messrs.
Morrow, deBoer and McAffee. The Audit Committee's functions include general
oversight of the Fund's financial reporting and all related party transactions.
During 1994, the Audit Committee held two meetings.
Messrs. Morrow, Rehmus and McAffee served as the members of the
Compensation Committee in 1994. The Compensation Committee held two meetings in
1994.
Because Mr. McAffee will not stand for re-election as a director, he
will not serve on the Audit or Compensation Committee following the Meeting.
43
<PAGE>
Mr. Rehmus and Mr. Scheidt serve as a nominating committee when
necessary to select new directors to fill any vacancies. The directors will
consider nominating for election as director persons who are recommended by
Stockholders. Any Stockholder who wishes to suggest a nominee for election at
the next Annual Meeting should submit his or her suggestion in writing to the
Secretary of the Fund at the address set forth on the first page of this Proxy
Statement no later than December 15, 1995.
<TABLE>
EXECUTIVE COMPENSATION
The following tables set forth information regarding executive
compensation for the Fund's last three fiscal years:
SUMMARY COMPENSATION TABLE
<CAPTION>
Long-Term
Compensation
Awards
------------
Name and Annual Compensation Options All
Principal ------------------- ------- Other
Position Year Salary Bonus(1) (number) Comp.(2)
- - --------- ---- ---------- -------- -------
<S> <C> <C> <C> <C> <C>
Martin I. Zankel, ............................. 1994 $150,000 $ 48,645 39,549(6) $ 7,500
Chief Executive .............................. 1993 $150,000 $ 48,645 63,183(7) $ 4,000
Officer ...................................... 1992 $ 72,000(3) -- -- --
Joseph M. Mock, Chief ........................ 1994 $125,000 $ 38,920 10,000(6) $ 7,200
Operating Officer ............................ 1993 $ 13,000(4) -- -- $ 1,200
Dean Banks, Chief ............................. 1994 $100,000 $ 34,055 19,229(6) $ 4,060
Financial Officer ............................ 1993 $100,000 $ 34,055 9,229(8) $ 3,000
1992 $ 26,000(5) -- -- --
<FN>
(1) Cash awards made pursuant to the Fund's Management Incentive Plan.
(2) Includes for Mr. Zankel a $3,000 per year automobile allowance and
matching funds contributed by the Fund under its 401(k) Plan. Includes
for Mr. Mock a $7,200 per year automobile allowance. 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).
44
<PAGE>
(3) Includes Mr. Zankel's 1992 compensation as a director prior to November
1992. Mr. Zankel receives an annual salary of $150,000 and receives no
separate compensation as a director. Mr. Zankel has served as Chief
Executive Officer since July 17, 1992.
(4) Mr. Mock joined the Fund on October 22, 1993.
(5) Mr. Banks joined the Fund on September 28, 1992.
(6) Options granted pursuant to the Fund's Employee Stock Incentive Plan.
Such options vest and become exercisable at a rate of 25% per year
beginning on the first anniversary of the grant.
(7) Includes 50,000 options granted on May 14, 1993 and 13,183 options
granted on March 25, 1994 pursuant to the Fund's Employee Stock
Incentive Plan for performance during 1993. The options granted on
March 25, 1994 vest and become exercisable at a rate of 25% per year
beginning on the first anniversary of grant. Of the options granted on
May 14, 1993, options to acquire 25,000 shares of Common Stock became
exercisable on May 14, 1994 and options to acquire the remaining 25,000
shares of Common Stock became exercisable on May 14, 1995.
(8) Options granted pursuant to the Fund's Employee Stock Incentive Plan on
March 25, 1994 for performance during 1993. Such options vest and
become exercisable at a rate of 25% per year beginning on the first
anniversary of grant.
</FN>
</TABLE>
<TABLE>
OPTIONS GRANTED IN LAST FISCAL YEAR
<CAPTION>
% of Total Per Share
Options Options Granted Exercise Expiration
Officer Granted(1) to Employees Price Date
------ --------- ------------- ----- -----------
<S> <C> <C> <C> <C>
Martin I. Zankel ................ 39,549 43% $3.69 3/25/04
13,183 15% $3.69 3/25/04
Joseph M. Mock .................. 10,000 11% $3.69 3/25/04
Dean Banks ...................... 19,229 21% $3.69 3/25/04
9,229 10% $3.69 3/25/04
------ ---- -----
91,190 100%
====== ====
<FN>
(1) All options were granted under the Landsing Pacific Fund Employee Stock
Incentive Plan discussed under "Executive Compensation - Employee Stock
Incentive Plan". Such options vest and become exercisable at a rate of
25% per year commencing on the first anniversary of the date of grant.
</FN>
</TABLE>
45
<PAGE>
AGGREGATED OPTION/SAR EXERCISED IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
Value of
Number of Unexercised
Unexercised in-the-Money
Options/SARs Options/SARs
at Fiscal at Fiscal
Year-End (#) Year-End($)
Exercisable/ Exercisable/
Name Unexercisable) Unexercisable)
- - ---- ------------- ---------------
Martin I. Zankel .......... 25,000/77,732 $0/0(1)
Joseph M. Mock ............ 0/10,000 $0/0(1)
Dean Banks ................ 0/28,458 $0/0(1)
(1) Based on a fair market value of the Fund's common stock of $2.94 per
share of Common Stock at December 31, 1994, none of the unexercised
options are "in the money".
None of the executive officers of the Fund has a written employment
contract or any other plan, agreement or arrangement regarding employment or
compensation other than the Severance Payment Plan and the Management Incentive
Plan, both of which are discussed below.
DIRECTOR COMPENSATION
Each non-employee director of the Fund is paid an annual fee of $10,000
per year and $1,500 for each [Board or committee] meeting attended. Each
director also receives $600 for each special meeting and $300 for each telephone
conference in which he participates. Members of the Compensation, Audit, and
Nominating Committees receive $600 for each committee meeting attended, unless
the meeting is held on the same day as another type of meeting. When two or more
types of meetings are held on the same day, directors will be paid for one
meeting at the highest meeting rate. The Fund reimburses each director for his
travel expenses.
Directors who are salaried employees of the Fund do not receive any
compensation for board or committee service. Directors
46
<PAGE>
providing consulting services to the Fund may also receive up to $150 per
hour, subject to a limit of $1,000 per day. A majority of the Board may
change the compensation arrangement at any time.
In addition, on August 6, 1993, the Fund's Stockholders approved the
1993 Directors' Stock Option Plan (the "Directors' Plan") pursuant to which on
January 1 of each year each director then in office, who is not also an employee
of the Fund, is granted an option to purchase a number of shares of Common Stock
which is equal to the amount of the annual director fee payable to such director
during such year divided by the fair market value for one share of Common Stock
on such date. For the purposes of the Directors' Plan, the fair market value of
the Fund's Common Stock will be the last reported sale price on the American
Stock Exchange on the trading day before the date that any options are granted
thereunder. Each option granted under the Directors' Plan has an exercise price
equal to the fair market value of the Common Stock on the date of grant.
Options granted pursuant to the Directors' Plan become exercisable with
respect to 25% of the shares of Common Stock subject to the option on each
anniversary of the date of grant. Each option or portion thereof will be
exercisable for ten years after such option is granted. In light of the decision
to propose the liquidation of the Fund, the Directors' Plan has been terminated
effective as of March 27, 1995, subject to and conditioned upon Stockholder
approval of the Plan.
MANAGEMENT INCENTIVE PLAN
The Fund's Management Incentive Plan (the "Management Incentive Plan")
provides the opportunity for participants to earn additional cash compensation
for superior results in managing the Fund's business. It is the Board's current
intent that eligibility to participate in the Management Incentive Plan will be
limited to Martin I. Zankel, Joseph M. Mock and Dean Banks.
EMPLOYEE STOCK INCENTIVE PLAN
On August 6, 1993, the Stockholders of the Fund adopted the Landsing
Pacific Fund Employee Stock Incentive Plan (the "Employee Stock Plan")
47
<PAGE>
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 shares of Common Stock reserved and available for
distribution pursuant to options granted under the Incentive Plan is 500,000
shares of Common Stock.
SEVERANCE PAYMENT PLAN
In light of the objective of the Board of Directors to liquidate and
dissolve the Fund, the directors recognize the importance of retaining key
employees in order to accomplish the Fund's objectives. On November 9, 1994 the
directors adopted a Severance Payment Plan (the "Severance Plan") for key
officers and employees. Under the Plan, Messrs. Mock and Banks, among others,
would be entitled to receive a severance payment equal to one year of salary,
which currently would amount to $135,000 and $105,000, respectively, if their
employment is terminated as a result of a merger or liquidation of the Fund. In
addition, Messrs. Mock and Banks would receive additional compensation equal to
1 1/2% and 1% respectively, of any aggregate liquidating distributions to
stockholders in excess of $4.50 per share of Common Stock, if any.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Fund's Compensation Committee are currently Robert
K. McAffee, Frederick P. Rehmus and Frank A. Morrow, none of whom (i) is a
former or current employee or officer of the Fund, or (ii) has a financial
interest in any transaction with the Fund. There are no Compensation Committee
interlocks between the Fund and any other entity involving any executive officer
or director of the Fund who serves as executive officer of any such entity.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Chairman of the Board and Chief Executive Officer of the Fund is a
member of a law firm which provided legal services to the Fund during 1994, 1993
and 1992. Payments to the firm for these services were $62,000 in 1994, $263,000
in 1993, and $213,000 in 1992.
48
<PAGE>
INDEPENDENT ACCOUNTANTS
A representative of Coopers & Lybrand LLP, the Fund's independent
certified public accountants, will be present at the Meeting, will have an
opportunity to make a statement, and is expected to be available to respond to
appropriate questions.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Fund's Current Reports on Form 8-K dated April 12, 1995, and June
5, 1995, filed with the Securities and Exchange Commission by the Fund pursuant
to the Exchange Act are incorporated by reference into this Proxy Statement.
49
<PAGE>
STOCKHOLDER PROPOSALS
Proposals of Stockholders intended to be presented at the 1996 Annual
Meeting of Stockholders of the Fund must be received at the principal executive
office of the Fund no later than April 10, 1996 for inclusion in next year's
proxy statement and proxy card.
By Order of the Board of Directors
DEAN BANKS, Secretary
San Mateo, California
, 1995
- - ---------------
----------------------------------------
YOUR VOTE IS IMPORTANT REGARDLESS OF THE
NUMBER OF SHARES YOU OWN. WHETHER OR NOT
YOU PLAN TO BE PRESENT AT THE MEETING,
PLEASE DATE, MARK, SIGN AND MAIL THE
ENCLOSED PROXY CARD PROMPTLY IN THE
ENVELOPE PROVIDED. THANK YOU.
----------------------------------------
50
<PAGE>
APPENDIX A
LANDSING PACIFIC FUND, INC.
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED BY MANAGEMENT
The undersigned stockholder of Landsing Pacific Fund, Inc., a Maryland
corporation (the "Fund"), hereby appoints Dean Banks and Joseph M. Mock, and
each of them, as proxy for the undersigned, with full power of substitution, to
vote and otherwise represent all of the shares of Common Stock that the
undersigned is entitled to vote at the Annual Meeting of Stockholders of the
Fund to be held on September 14, 1995 at 9:00 a.m. local time at Hotel Sofitel,
223 Twin Dolphin Drive, Redwood City, CA, and at any adjournment(s) or
postponement(s) thereof, with the same effect as if the undersigned were present
and voting such shares of Common Stock, on the following matters and in the
following manner as further described in the accompanying Proxy Statement. The
undersigned hereby revokes any proxy previously given with respect to such
shares of Common Stock.
1. Approval of the Plan of [ ] FOR [ ] AGAINST [ ] ABSTAIN
Liquidation and Dissolution
2. Approval of the Amendment [ ] FOR [ ] AGAINST [ ] ABSTAIN
to the Fund's Charter
to delete the provisions
thereof creating a
classified board of directors
3. Election of Director: Martin I. Zankel
For the nominee [ ] Withhold authority [ ]
4. In their discretion, the proxies are authorized to vote upon matters
not known to the Board of Directors as of the date of this Proxy as may
properly come before the meeting or any adjournment or postponement
thereof.
The undersigned acknowledges receipt of the Notice of Annual Meeting of
Stockholders and the accompanying Proxy Statement.
THE SHARES OF COMMON STOCK REPRESENTED BY THIS PROXY WILL BE VOTED IN
ACCORDANCE WITH THE SPECIFICATIONS MADE. IF THIS PROXY IS EXECUTED BUT NO
SPECIFICATION IS MADE, THE SHARES OF COMMON STOCK REPRESENTED BY THIS PROXY WILL
BE VOTED FOR EACH PROPOSAL AT THE MEETING OR ANY ADJOURNMENT(S) OR
POSTPONEMENT(S) THEREOF.
[ ] MARK HERE IF YOU PLAN TO ATTEND THE MEETING
Please sign exactly as name appears hereon
and date. If the shares of Common Stock are
held jointly, each holder should sign. When
signing as an attorney, executor,
administrator, trustee, guardian or as an
officer signing for a corporation, please
give full title under signature.
Dated , 1995
--------------------------------------------
Signature
--------------------------------------------
Signature, if held jointly
Votes must be indicated by filling in X in Black or Blue ink.
Sign, Date and Return the Proxy Card Promptly Using the Enclosed Envelope
<PAGE>
EXHIBIT A
PLAN OF LIQUIDATION AND DISSOLUTION
OF
LANDSING PACIFIC FUND, INC.
1. Scope of Plan. This Plan of Liquidation ("Plan") provides
for the complete liquidation and dissolution of Landsing Pacific Fund, Inc., a
Maryland corporation ("Landsing"), by providing for (a) the sale or other
disposition of all of the assets of Landsing, (b) the dissolution of Landsing in
accordance with the Maryland General Corporation Law, and (c) distribution to
its stockholders of the net cash proceeds or other assets (after payment of
liabilities and expenses) to be realized from the sales or other dispositions of
its assets in complete cancellation of each stockholder's stock. The
liquidation, dissolution and distributions shall be accomplished in the manner
stated in this Plan.
2. Adoption of Plan by Stockholders. The Board of Directors
has determined that the Plan is advisable for Landsing and has adopted the Plan
and submitted it to the stockholders for their vote in accordance with
applicable law. The Plan shall be adopted and shall become effective, upon the
adoption of a resolution to dissolve Landsing in accordance with the Plan by the
affirmative vote of holders of shares entitled to cast at least a majority of
all the votes entitled to be cast on this matter at the annual meeting of
stockholders to be held on July 18, 1995 (the "Annual Meeting") pursuant to a
notice and Proxy Statement.
3. Sale of Assets. Following the adoption of the Plan
by the stockholders, the Board of Directors shall cause Landsing
to sell, convey, transfer, and deliver or otherwise dispose of all
of its assets, as follows:
(a) The Board of Directors shall cause the officers
of Landsing to negotiate the sale, conveyance, transfer and delivery or other
disposition of each of the real properties of Landsing. The real properties of
Landsing may be sold or otherwise disposed of individually, together as a whole
or in discrete groups, to any one or more buyers, as the officers of Landsing
shall deem advisable, in exchange for cash, one or more promissory notes or
shares of stock of the acquiring corporation or its affiliates, or any
combination thereof. The full Board of Directors is authorized to establish
guidelines pursuant to which the Real Estate Committee of the Board (the
"Committee") if in existence, or, in the absence of such Committee, the officers
of Landsing, may sell, convey, transfer and deliver or otherwise dispose of the
real properties of Landsing. In either case, if the Committee or the officers of
Landsing propose to sell, convey, transfer and deliver or otherwise dispose of
any real property upon terms and conditions which do not conform to the
guidelines established by the Board of Directors, any such sale may only be
A-1
<PAGE>
consummated only after the Board approves the material terms and conditions of
such sale.
(b) The Board of Directors shall cause the officers
of Landsing to negotiate the sale, conveyance, transfer and delivery or other
disposition of all personal property and other assets of Landsing in exchange
for cash, one or more promissory notes or shares of stock of the acquiring
corporation or its affiliates, or any combination thereof, consistent with the
orderly disposition of Landsing's real properties under this Plan. The Board of
Directors is authorized to establish guidelines pursuant to which the officers
of Landsing may sell, convey, transfer and deliver or otherwise dispose of the
personal property of Landsing without further approval of the Board. If the
officers of Landsing propose to sell, convey, transfer, and deliver any personal
property upon terms and conditions which do not conform to the guidelines
established by the Board of Directors, any such sale may only be consummated
after the Board approves the material terms and conditions of such sale.
4. Payment of and Reserve for Liabilities. After the closing
of any sale or other disposition of any real property or other assets of
Landsing, the officers of Landsing shall pay, or shall make adequate provision
for payment of, all known liabilities of Landsing (including expenses of the
sale) which are attributable to such real property or other assets and which are
not assumed by the buyer thereof. The officers of Landsing, at the direction of
the Board of Directors, shall set aside from the cash or other proceeds of any
sale or other disposition of any real property or other assets such additional
amount as the directors determine to be reasonably necessary for payment of
other known liabilities or expenses and unknown, unascertained or contingent
liabilities or expenses of Landsing.
5. Investment of Cash Proceeds. The cash proceeds of the sale
or other disposition of the real properties and personal property assets of
Landsing, if any, shall, pending any liquidating distributions, be invested by
the Board of Directors of Landsing in such manner as the Board of Directors
deems appropriate, in its sole discretion; provided, however, that any such
proceeds will be invested by the Board of Directors in such manner that Landsing
will not be deemed an investment company under, and for the purposes of, the
Investment Company Act of 1940.
6. Subsequent Sale of Non-Cash Proceeds. If and when the real
properties and personal property assets of Landsing are disposed of under this
Plan in exchange for one or more promissory notes or stock, the Board of
Directors, in its sole discretion, may direct the officers of Landsing to sell
all or a portion of such non-cash proceeds in exchange for cash, on such terms
and conditions as shall be negotiated by the officers of Landsing in accordance
with guidelines established by the Board, or as shall otherwise be approved by
the Board. The Board of Directors shall not be required to cause the sale of
such non-cash proceeds and may, in its sole discretion, direct the distribution
in kind of all
A-2
<PAGE>
or a portion of such non-cash proceeds to the stockholders of Landsing, in
accordance with Section 7 of this Plan.
7. Liquidating Distributions. The cash proceeds or other
assets realized from the sale or other disposition of real properties and other
assets of Landsing, and any interest or other return thereon, shall be
distributed to the stockholders of Landsing at such times and in such amounts as
shall be determined by the Board of Directors, in its sole discretion. Any
liquidating distributions shall be made through the agency of The Registrar and
Transfer Company, Landsing's transfer agent, or such other agent as may be
selected by the Board ("Transfer Agent"). At such time as the Board of Directors
determines that any liquidating distribution shall be made to the stockholders,
the Board of Directors shall cause the officers of Landsing to deposit with the
Transfer Agent the aggregate amount of funds or other assets to be distributed
to stockholders as a liquidating distribution. For the purpose of making any
liquidating distribution to the stockholders, the Board of Directors shall set a
record date for determining the stockholders entitled to receive such
liquidating distribution (any such date to be a "Distribution Record Date"), and
the Transfer Agent shall distribute all funds or other assets deposited with it
for such purpose to the stockholders of record on any such Distribution Record
Date ("Eligible Stockholders").
The liquidating distributions shall be in complete redemption
and cancellation of all of the outstanding stock of Landsing. At such time as
Landsing makes the Final Liquidating Distribution (as defined herein) to the
Eligible Stockholders, all of the outstanding shares of stock shall be deemed
cancelled.
8. Trading of Shares. At any time after this Plan becomes
effective under Section 2, the Board of Directors may, if the Board deems such
action to be in the best interests of Landsing and the stockholders, cause the
shares of Landsing's common stock to be delisted from any securities exchange on
which they are traded or to no longer be traded or completely prohibit the
trading or other transfer of Landsing's common stock if and to the extent
permitted by law (the "Stop Trading Date"). The Board of Directors shall cause
the officers of Landsing to send notice of any Stop Trading Date in advance of
such date to all stockholders and to such brokers and market makers as the Board
deems advisable.
9. Liquidating Trust Agreement. If the Board of Directors
deems it advisable for any reason, it may at any time, in its sole discretion
and on behalf of the stockholders, create a Liquidating Trust ("Liquidating
Trust") by entering into a Liquidating Trust Agreement ("Liquidating Trust
Agreement") for the purpose of (a) completing the liquidation of the real
properties and other assets of Landsing, (b) providing for the payment of all
known, unknown, unascertained and contingent liabilities, (c) making liquidating
distributions to the Eligible Stockholders in cash or in kind, and (d) holding
and distributing liquidating distributions on behalf of any unlocated Eligible
Stockholders.
A-3
<PAGE>
Concurrently with the execution of the Liquidating Trust
Agreement, Landsing shall transfer and assign to the trustee of the Liquidating
Trust all of Landsing's right, title and interest in and to all of its assets,
including without limitation, any real properties or personal property assets
still owned by Landsing, and any cash proceeds. Effective upon the date of such
transfer, each stockholder of Landsing as of the date of such transfer, or any
record date that may be established in connection therewith, shall become a
beneficial interest holder of the Liquidating Trust, and all outstanding shares
of stock of Landsing shall be deemed cancelled. Each such stockholder shall hold
a proportion of the outstanding beneficial interests in the Liquidating Trust
equal to the proportion of shares of common stock that such stockholder held of
the total outstanding shares of common stock of Landsing as of the date of such
transfer, or the record date established in connection therewith, as the case
may be.
The Liquidating Trust Agreement shall provide that any funds
or other assets available for distribution to Eligible Stockholders which are
not distributed because one or more Eligible Stockholders cannot be located
shall be held by the trustee of the Liquidating Trust for a period not less than
three (3) years from the date Landsing provides the notice to stockholders in
accordance with Paragraph 11(d). Such undistributed funds or other assets shall
be held by the trustee of the Liquidating Trust solely for the benefit of and
ultimate distribution to the Eligible Stockholders entitled to receive such
funds or other assets, who shall constitute the sole equitable owners thereof.
Upon expiration of this three (3) year term, or any longer period, the trustee
of the Liquidating Trust shall distribute the funds or other assets held on
behalf of unlocated Eligible Stockholders pro rata to the other Eligible
Stockholder (the "Final Liquidating Trust Distribution"). After making such
distribution, if there are still funds or other assets held by the trustee of
the Liquidating Trust because the trustee becomes unable to locate any other
Eligible Stockholders, the trustee of the Liquidating Trust shall transfer any
such funds or other assets to the state official, trustee or other person
authorized by law to receive distributions for the benefit of the unlocated
Eligible Stockholders.
The Board of Directors is authorized to appoint one or more
individuals or corporate persons to act as trustees of the Liquidating Trust and
to cause Landsing to enter into the Liquidating Trust Agreement with such
trustee or trustees on such terms and conditions as the Board of Directors shall
determine in its sole discretion. Adoption of the Plan will constitute the
approval of the stockholders of any such appointment and Liquidating Trust
Agreement.
10. Unlocated Eligible Stockholders. In the absence of a
Liquidating Trust, if any funds or other assets deposited with the Transfer
Agent for distribution to Eligible Stockholders are not distributed because one
or more Eligible Stockholders cannot be located, such undistributed funds or
other assets shall be held by the Transfer Agent for a period not less than
three (3) years
A-4
<PAGE>
from the date Landsing provides the notice to stockholders in accordance with
Paragraph 11(d). Such undistributed funds or other assets shall be held by the
Transfer Agent solely for the benefit of and ultimate distribution to the
Eligible Stockholders entitled to receive such funds or other assets, who shall
constitute the sole equitable owners thereof. Upon expiration of this three (3)
year term, or any longer period, Landsing shall direct the Transfer Agent to
distribute the funds or other assets held on behalf of unlocated Eligible
Stockholders pro rata to the other Eligible Stockholders (in the absence of a
Liquidating Trust, the "Final Liquidating Distribution"). After making such
distribution, if there are still funds or other assets held by the Transfer
Agent because the Transfer Agent becomes unable to locate any other Eligible
Stockholders, Landsing shall direct the Transfer Agent to transfer any such
funds or other assets to the state official, trustee or other person authorized
by law to receive distributions for the benefit of unlocated Eligible
Stockholders.
11. Dissolution. At such time as the Board of Directors of
Landsing shall determine, in its sole discretion, Landsing shall (a) provide
notice of dissolution to all its known creditors and its employees at their
address shown on the records of the corporation not less than 20 days prior to
the filing of the Articles of Dissolution, as required by Section 3-404 of the
Maryland General Corporation Law, (b) cause Articles of Dissolution to be
prepared, executed, and filed with the State Department of Assessments and
Taxation of Maryland, (c) cause any documentation required by federal or state
tax authorities to be obtained, prepared, executed and filed, (d) after the
filing of Articles of Dissolution, provide notice of any liquidation
distribution to stockholders other than the Final Liquidating Distribution and
the Final Liquidating Trust Distribution, or if no such liquidation
distributions are to occur, notice of the filing of Articles of Dissolution, to
each stockholder of the Fund by mail at his address as it appears on the records
of the corporation and by publishing such notice at least once a week for three
consecutive weeks in a newspaper of general circulation published in Baltimore
City, Maryland, and (e) withdraw its ability to do business as a foreign
corporation in any states in which it presently has such authority.
12. Power of Board of Directors. The Board of Directors and,
if authorized by the Board, the officers, shall have authority to do or
authorize any and all acts and things as provided for in this Plan and any and
all such further acts and things as they may consider desirable to carry out the
purposes of this Plan, including the execution and filing of all such
certificates, documents, tax returns, and other documents which may be necessary
or appropriate to implement the Plan. The Board of Directors may authorize such
variations from or amendments to the provisions of the Plan as may be necessary
or appropriate to effectuate the complete liquidation, dissolution and
termination of existence of Landsing, and the distribution of its assets to the
Eligible Stockholders in accordance with the laws of the State of Maryland. The
death, resignation, or other disability of any Director or officer of Landsing
shall not impair the authority of the surviving
A-5
<PAGE>
or remaining Director(s) or officer(s) to exercise any of the powers provided
for in the Plan. Upon such death, resignation, or other disability, the
surviving or remaining Director(s) shall have authority to fill the vacancy or
vacancies so created, but the failure to fill such vacancy or vacancies shall
not impair the authority of the surviving or remaining Directors(s) or
officer(s) to exercise any of the powers provided for in the Plan.
13. Amendments. Notwithstanding adoption of the Plan by the
stockholders at the Annual Meeting, the Board of Directors of Landsing may
modify or amend the Plan without further action by the stockholders, to the
extent permitted under then current Maryland law. Prior to the filing of
Articles of Dissolution, the Board of Directors may abandon the Plan only with
the further approval of the stockholders, unless and to the extent that then
current Maryland law permits the Board to abandon the Plan without the further
approval of the stockholders.
14. Indemnification/Insurance. The Board of Directors shall
have the power and authority after the effective date of this Plan to purchase
and/or continue and maintain insurance as it deems necessary to cover Landsing's
indemnification obligations, including insurance which shall remain in effect
subsequent to the dissolution of Landsing in accordance with Paragraph 11. All
indemnification agreements to which Landsing is a party shall remain in full
force and effect after the effective Date of this Plan.
15. Costs. Without limiting the authority of the Board of
Directors to authorize the payment of Landsing's expenses, the Board is
authorized, empowered and directed to pay any and all fees and expenses incurred
by Landsing in connection with the Plan and the sale of assets and liquidating
distributions contemplated thereunder, including, but not limited to, all legal,
accounting, printing, appraisal and other fees and expenses of persons rendering
services to Landsing.
A-6
<PAGE>
EXHIBIT B
ARTICLES OF AMENDMENT
OF
LANDSING PACIFIC FUND, INC.
THIS IS TO CERTIFY THAT:
FIRST: The charter of Landsing Pacific Fund, Inc., a Maryland
corporation (the "Corporation"), is hereby amended by (i) deleting any and all
references to classes of Directors from Section 1 of Article X, (ii) deleting
existing Section 2 of Article X in its entirety, (iii) deleting the existing
caption to Section 3 of Article X and replacing such caption with "Section 2.
Vacancies." and (iv) deleting the existing caption to Section 4 of Article X and
replacing such caption with "Section 3. Removal."
SECOND: The amendments to the charter of the Corporation as
set forth above have been duly advised by the Board of Directors and approved by
the stockholders of the Corporation as required by law.
THIRD: The undersigned president acknowledges these Articles
of Amendment to be the corporate act of the Corporation and as to all matters or
facts required to be verified under oath, the undersigned president acknowledges
that to the best of his knowledge, information and belief, these matters and
facts are true in all material respects and that this statement is made under
the penalties for perjury.
IN WITNESS WHEREOF, the Corporation has caused these Articles
to be signed in its name and on its behalf by its president and attested to by
its secretary on this day of , 1995.
----------- -----------------------
ATTEST: LANDSING PACIFIC FUND, INC.
By:
- - ----------------------------- -----------------------------
Secretary President
B-1
<PAGE>
LANDSING PACIFIC FUND, INC.
SCHEDULE 1
REPORT OF INDEPENDENT ACCOUNTANTS
To the Directors and Stockholders of
Landsing Pacific Fund, Inc.
We have audited the accompanying balance sheets of Landsing Pacific Fund, Inc.
as of December 31, 1994 and 1993, and the related statements of operations,
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 1994. These financial statements are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Landsing Pacific Fund, Inc. as
of December 31, 1994 and 1993, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1994, in
conformity with generally accepted accounting principles.
As discussed in Note 14 to the financial statements, on March 27, 1995, the
Board of Directors of Landsing Pacific Fund, Inc. approved a Plan of
Liquidation, subject to stockholder approval. At present, it cannot be
determined whether or not the stockholders will approve such a plan.
Accordingly, no adjustments have been made to the accompanying financial
statements which may result from the stockholder's approval of the Plan of
Liquidation.
COOPERS & LYBRAND L.L.P.
San Francisco, California
March 27, 1995
-1-
<PAGE>
LANDSING PACIFIC FUND, INC.
BALANCE SHEETS, DECEMBER 31, 1994 AND 1993
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
A S S E T S
1994 1993
---- ----
INVESTMENTS IN REAL ESTATE:
Rental properties ...................................... $ 88,698 $109,495
Accumulated depreciation ............................... (19,169) (22,191)
-------- --------
Rental properties - net ................................ 69,529 87,304
Real estate under development .......................... - 3,828
Real estate under contract for sale (net of accumulated
depreciation of $28 in 1994 and $1,270 in 1993) ...... 2,150 3,261
Collateral for non-performing participating mortgage
loan (net of allowance for loss of $542 in 1993) ..... - 675
-------- --------
Total investments in real estate .................. 71,679 95,068
CASH AND CASH EQUIVALENTS .............................. 5,534 2,005
-------- --------
OTHER ASSETS:
Accounts and interest receivable (net of allowance for
doubtful accounts of $78 in 1994 and $364 in 1993) ... 1,434 1,408
Prepaid expenses, deposits and other assets ............ 324 136
Deferred leasing commissions, loan costs, and other
assets (net of accumulated amortization of $2,380
in 1994 and $2,635 in 1993) .......................... 1,357 2,069
-------- --------
Total other assets ................................ 3,115 3,613
-------- --------
TOTAL ASSETS ................................... $ 80,328 $100,686
======== ========
L I A B I L I T I E S A N D S T O C K H O L D E R S' E Q U I T Y
LIABILITIES:
Notes payable .......................................... $ 47,929 $ 57,966
Accounts payable ....................................... 449 637
Other liabilities ...................................... 1,200 1,715
-------- --------
Total liabilities .................................... 49,578 60,318
-------- --------
COMMITMENTS: (Note 13)
STOCKHOLDERS' EQUITY:
Shares of preferred stock, par value of $.01;
shares authorized: 5,000,000; shares issued and
outstanding: none
Shares of common stock, par value of $.001;
shares authorized: 20,000,000; shares issued and
outstanding: 5,953,137 in 1994 and 1993 .............. 6 6
Capital in excess of par value ......................... 131,389 131,389
Retained deficit and accumulated distributions ......... (100,645) (91,027)
-------- --------
Total stockholders' equity ........................ 30,750 40,368
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ..... $ 80,328 $100,686
======== ========
The accompanying notes are an integral part of the financial statements.
-2-
<PAGE>
LANDSING PACIFIC FUND, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1994 1993 1992
---- ---- ----
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 ............ 4,638 5,486 5,526
Interest ................................. 4,554 4,094 4,052
General and administrative ............... 1,897 2,366 2,349
Other expense ............................ 303 558 1,752
Provision for loss in value of investments
in real estate and loan collateral value 6,645 24,045 6,347
-------- --------- ---------
Total expenses ........................ 21,807 42,195 25,814
-------- --------- ---------
Loss before gain on sale of real estate .. (9,618) (27,754) (12,249)
Gain on sale of real estate .............. -- -- 392
-------- --------- ---------
Net loss .............................. $ (9,618) $ (27,754) $ (11,857)
======== ========= =========
NET LOSS PER SHARE ....................... $ (1.62) $ (4.61) $ (1.89)
======== ========= =========
Weighted average shares outstanding ...... 5,953 6,020 6,260
======== ========= =========
The accompanying notes are an integral part of the financial statements.
-3-
<PAGE>
<TABLE>
LANDSING PACIFIC FUND, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993, AND 1992
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<CAPTION>
Shares of Capital 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>
-4-
<PAGE>
LANDSING PACIFIC FUND, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(AMOUNTS IN THOUSANDS)
- - --------------------------------------------------------------------------------
1994 1993 1992
---- ---- ----
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 ............... 4,638 5,486 5,526
Provision for doubtful accounts ............. - 640 352
Provision for participating loan losses ..... - 560 3,336
Changes in operating assets and liabilities:
Increase in accounts and interest receivable (146) (313) (155)
Decrease in other liabilities ............... (64) (62) (209)
Decrease in deposits ........................ 50 65 989
Decrease (increase) in prepaid expenses
and other assets .......................... (238) 100 237
Increase (decrease) in accounts payable ..... (189) (417) 615
------- -------- --------
Net cash provided by operating activities . 1,078 1,790 1,453
------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of rental property ....... 5,465 - 5,303
Capital expenditures and development costs .. (2,804) (3,734) (4,973)
Increase in deferred expenses ............... (724) (906) (1,463)
Repayment of participating mortgage loan .... 2,145 - 2
Disbursement of participating mortgage loans - (64) (37)
------- -------- --------
Net cash provided by (used in) investing
activities ............................. 4,082 (4,704) (1,168)
------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to stockholders ............... - - (1,347)
Issuance (acquisition) of treasury stock .... - 4 (57)
Proceeds from notes payable ................. 17,925 7,798 20,852
Payments on notes payable ................... (19,556) (3,589) (20,404)
------- -------- --------
Net cash provided by (used) in financing
activities ............................. (1,631) 4,213 (956)
------- ------- -------
Increase (decrease) in cash and cash
equivalents ............................ 3,529 1,299 (671)
Cash and cash equivalents at beginning
of year ................................ 2,005 706 1,377
------- -------- -------
Cash and cash equivalents at end of year .... $ 5,534 $ 2,005 $ 706
======== ======== ========
The accompanying notes are an integral part of the financial statements.
-5-
<PAGE>
LANDSING PACIFIC FUND, INC.
STATEMENTS OF CASH FLOWS (Continued)
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
(Amounts in thousands)
1994 1993 1992
---- ---- ----
Cash paid during the period for interest,
net of $256 capitalized in 1994, $524 in
1993, and $671 in 1992 ....................... $ 4,583 $ 4,035 $ 3,983
======= ======= =======
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Notes payable retired or forgiven .............. $(8,406) $ - $ -
Cost of rental properties sold (net of
accumulated depreciation).................... 13,782 - 4,906
Other assets and liabilities retired or forgiven 89 - 5
Gain (loss) on sale of rental properties........ - - 392
------- ------- -------
Net proceeds from sale of rental properties..... $ 5,465 $ - $ 5,303
======= ======= =======
Reclassification:
Real estate held for sale ...................... $ 2,150 $ 3,261 $ -
Rental properties - net ........................ (2,150) (3,261) -
------- ------- -------
$ - $ - $ -
======= ======= =======
Note receivable canceled in exchange for shares:
Treasury stock.................................. $ - $ (325) $ (438)
Note receivable................................. - 1,010 1,729
Capital in excess of par........................ - (685) (1,291)
------- ------- -------
$ - $ - $ -
======= ======= =======
Reclassification:
Real estate under development .................. $ - $ 3,828 $ 6,505
Rental properties - net......................... - (3,828) (6,505)
------- ------- -------
$ - $ - $ -
======= ======= =======
Treasury stock eliminated:
Treasury stock................................ $ - $ 2,116 $ -
Capital in excess of par ..................... - (2,116) -
------- ------- -------
$ - $ - $ -
======= ======= =======
Payment of stock dividends:
Dividend reinvestment shares.................... $ - $ - $ 181
Dividend distributions.......................... - - (181)
------- ------- -------
$ - $ - $ -
======= ======= =======
Collateral for participating mortgage loan .... $ - $ - $ 1,171
Participating mortgage loans .................. - - (1,171)
------- ------- -------
$ - $ - $ -
======= ======= =======
The accompanying notes are an integral part of the financial statements.
-6-
<PAGE>
LANDSING PACIFIC FUND, INC.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - Landsing Pacific Fund was a Delaware corporation formed
for the purpose of merging the assets and liabilities of Landsing
Institutional Properties Trust-V, Landsing Institutional Properties
Trust-VI and Landsing Institutional Properties Trust-VII. The merger
was completed on November 28, 1988.
On September 30, 1993, Landsing Pacific Fund, a Delaware corporation,
merged into Landsing Pacific Fund, Inc., (the "Fund") a newly-formed
Maryland corporation. As a result of the merger, the former
stockholders of Landsing Pacific Fund became stockholders of the Fund
and the Delaware corporation ceased to exist.
Maryland corporate law does not recognize the treasury stock of
Maryland corporations. As a result, the Fund has reclassified treasury
stock to paid in capital as of December 31, 1993.
Evaluation of Carrying Values - The Fund, as a matter of policy, holds
properties on a long-term basis and believes the book value of the
Fund's properties will be fully recovered over the Fund's long-term
holding period. This determination is based on an analysis of the sum
of a property's future cash flows as compared with the carrying value
of the property. If an impairment exists, an estimate of the deficiency
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.
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 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.
-7-
<PAGE>
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
========== ==========
3. COLLATERAL FOR PARTICIPATING MORTGAGE LOAN
As of December 31, 1994, as a result of repayment of substantially all
of a participating mortgage loan collateralized by a first mortgage on
land in Sonoma, California, the Fund recognized a recovery of
$1,470,000, which reduced the provision for loss in value of
investments in real estate (see Note 6). Approximately $455,000 of the
recovery relates to funds collected subsequent to December 31, 1994. In
1992 and 1993, the Fund recorded provisions for loss in the value of
the loan of $1,000,000 and $542,000, respectively.
During 1994, the Fund's unsecured claim for $925,000 was recognized in
the bankruptcy of a guarantor of a participating mortgage loan, the
collateral for which was foreclosed by a senior lender in 1993. The
eventual maximum payment out of the bankruptcy is estimated to be $.30
per $1.00 of claims. As of December 31, 1994, the fund had received
$39,000 in distribution proceeds, which was recognized as a reduction
in the provision for loss in value of investments in real estate.
-8-
<PAGE>
4. NOTES PAYABLE
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 and thereafter ........ 106,000
2000........................ 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, 1996.
-9-
<PAGE>
<TABLE>
5. OTHER EXPENSE
The following presents certain charges included in other expense
incurred in each of the three years ended December 31, 1994:
<CAPTION>
1994 1993 1992
------- -------- --------
<S> <C> <C> <C>
Terminated loan transactions ............ $ 73,000 $ - $ -
Terminated property sales transactions .. 80,000 - -
Terminated capital projects ............. 46,000 250,000 -
Rights offering costs ................... 53,000 140,000 -
Merger/liquidation costs ................ 27,000 - -
Settlement 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>
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.
<TABLE>
During the twelve months ended December 31, 1994, six properties from
the group identified for disposition were sold or disposed of for
approximately their carrying value at December 31, 1993. Accordingly,
no additional loss or gain was recognized in 1994. The properties sold
or disposed of are as follows:
<CAPTION>
Property Date of Sale or Disposition Sale Price
-------- --------------------------- ----------
<S> <C> <C>
Twin Oaks Executive Center January 20, 1994 $712,000
Beaverton, Oregon
BancFirst Building February 28, 1994 $2,800,000
Oklahoma City, Oklahoma
101 Park Avenue Office Building February 28, 1994 $4,142,000(1)
Oklahoma City, Oklahoma
Camden Park Shopping Center June 7, 1994 $1,500,000
Houston, Texas
Franklin Business Park November 10, 1994 $2,815,000
Boise, Idaho
6900 Place Shopping Center December 22, 1994 $2,700,000
Oklahoma City, Oklahoma
<FN>
(1) Title to the property was transferred to the lender in full
satisfaction of the $4,142,000 loan collateralized by the property.
</FN>
</TABLE>
-10-
<PAGE>
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
==========
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.
-11-
<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.
Information regarding the Employee Stock Incentive Plan is as follows:
1994 1993
---- ----
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
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.
Information regarding the Directors' Stock Option Plan is as follows:
1994 1993
---- ----
Shares under option at beginning of year ... 25,000 -
Granted, at $3.56 per share in 1994 and
$3.25 per share in 1993 ................ 14,045 25,000
------ ------
Shares under option at end of year ......... 39,045 25,000
====== ======
Exercisable at end of year ................. 6,250 -
Available for grant at end of year ......... 35,955 50,000
No options have been exercised
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.
-12-
<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.
<TABLE>
15. SELECTED QUARTERLY FINANCIAL DATA
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>
-13-
<PAGE>
LANDSING PACIFIC FUND, INC.
SCHEDULE 2
<TABLE>
BALANCE SHEETS, MARCH 31, 1995 (Unaudited) AND
DECEMBER 31, 1994
(Amounts in thousands, except share amounts)
---------------------------------------------------------------------------------------------------------
<CAPTION>
March 31, December 31,
1995 1994
--------- ------------
<S> <C> <C>
ASSETS
INVESTMENTS IN REAL ESTATE:
Rental properties ..................................................... $ 85,409 $ 88,698
Accumulated depreciation .............................................. (18,203) (19,169)
---------- ----------
Rental properties - net ............................................... 67,206 69,529
Real estate under contract for sale (net of accumulated
depreciation of $1,640 in 1995 and $28 in 1994) .................... 1,788 2,150
---------- ----------
Total investments in real estate ................................. 68,994 71,679
---------- ----------
CASH AND CASH EQUIVALENTS ............................................. 8,002 5,534
---------- ----------
OTHER ASSETS:
Accounts and interest receivable (net of allowance for doubtful
accounts of $83 in 1995 and $78 in 1994) ............................ 941 1,434
Prepaid expenses, deposits, and other assets .......................... 420 324
Deferred leasing commissions, loan costs, and other assets (net of
accumulated amortization of $1,442 in 1995 and $2,380 in 1994) ..... 1,238 1,357
---------- ----------
Total other assets ............................................... 2,599 3,115
---------- ----------
TOTAL ASSETS ................................................. $ 79,595 $ 80,328
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Notes payable ......................................................... $ 47,819 $ 47,929
Accounts payable ...................................................... 416 449
Other liabilities ..................................................... 1,161 1,200
---------- ----------
Total liabilities ................................................ 49,396 49,578
---------- ----------
STOCKHOLDERS' EQUITY:
Shares of preferred stock, par value of $.01; shares
authorized: 5,000,000; shares issued and outstanding: none
Shares of common stock, par value of $.001;
shares authorized: 20,000,000; shares issued and
outstanding: 5,953,137 in 1995 and 1994 ........................... 6 6
Capital in excess of par value ........................................ 131,389 131,389
Retained deficit and accumulated distributions ........................ (101,196) (100,645)
---------- ----------
Total stockholders' equity ....................................... 30,199 30,750
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ................... $ 79,595 $ 80,328
========== ==========
<FN>
The accompanying notes are an integral part of the financial statements.
</FN>
</TABLE>
-1-
<PAGE>
LANDSING PACIFIC FUND, INC.
STATEMENTS OF OPERATIONS (Unaudited)
FOR THE THREE MONTHS ENDED
MARCH 31, 1995 AND 1994
(Amounts in thousands, except per share amounts)
- - --------------------------------------------------------------------------------
Three Months Ended
March 31
------------------
1995 1994
------- ------
REVENUES:
Rental income ................................. $ 2,684 $ 3,247
Other income .................................. 53 14
------- --------
Total revenues ........................... 2,737 3,261
------- --------
EXPENSES:
Operating ..................................... 741 1,165
Depreciation and amortization ................. 858 1,232
Interest ...................................... 1,192 1,064
General and administrative .................... 436 534
Other expense ................................. 61 102
-------- --------
Total expenses ........................... 3,288 4,097
-------- --------
Net loss ............................. $ (551) $ (836)
======== ========
NET LOSS PER SHARE
(Based on weighted average number
of shares outstanding) ..................... $ (.09) $ (.14)
======== ========
Weighted average shares outstanding ........... 5,953 5,953
======== ========
The accompanying notes are an integral part of the financial statements.
-2-
<PAGE>
LANDSING PACIFIC FUND, INC.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994 (Unaudited)
(Amounts in thousands)
- - --------------------------------------------------------------------------------
1995 1994
------- ------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ........................................ $ (551) $ (836)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization ................... 858 1,232
Provision for doubtful accounts ................. 6 46
Changes in operating assets and liabilities:
(Increase)decrease in accounts and interest
receivable 487 (43)
Increase in prepaid expenses and deposits ....... (96) (91)
Increase(decrease) in other liabilities ......... (63) 122
Decrease in accounts payable .................... (33) (34)
------ ------
Net cash provided by operating activities .. 608 396
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of rental properties ......... 2,242 1,225
Capital expenditures and construction ........... (208) (995)
Increase in deferred expenses ................... (64) (538)
------ ------
Net cash provided by (used in) investing
activities ............... 1,970 (308)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable ..................... - 240
Payments on notes payable ....................... (110) (381)
------ ------
Net cash used in financing activities ...... (110) (141)
------ ------
Increase (decrease) in cash and cash equivalents . 2,468 (53)
Cash and cash equivalents at beginning of period . 5,534 2,005
------ ------
Cash and cash equivalents at end of period ....... $ 8,002 $ 1,952
====== ======
The accompanying notes are an integral part of the financial statements.
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<PAGE>
LANDSING PACIFIC FUND, INC.
STATEMENTS OF CASH FLOWS (Continued)
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
(Amounts in thousands)
- - --------------------------------------------------------------------------------
1995 1994
------ -----
Cash paid during the period for interest,
net of $34 capitalized in 1995 and $74 in 1994 ... $ 1,235 $ 1,087
======= =====
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Cost of rental properties sold (net of accumulated
depreciation) .................................... $ 2,218 $ 7,250
Notes payable retired or forgiven ................... - (6,161)
Other assets and liabilities retired or forgiven .... 24 136
----- -----
Net proceeds from sale of rental properties ......... $ 2,242 $ 1,225
===== =====
The accompanying notes are an integral part of the financial statements.
-4-
<PAGE>
LANDSING PACIFIC FUND, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements for Landsing Pacific
Fund, Inc. ("the Fund") should be read in conjunction with the Fund's
1994 Annual Report on Form 10-KSB. Except for the balance sheet at
December 31, 1994, the financial statements are unaudited, and certain
disclosures which would normally be included with audited statements
have been condensed or omitted. However, in the opinion of the Fund's
management, all adjustments considered necessary for a fair
presentation have been included.
Net loss per share is computed by dividing net loss by the
weighted average number of shares outstanding during the period.
Certain amounts in the 1994 financial statements have been
reclassified to conform to the 1995 presentation.
2. GAIN (LOSS) FROM SALE OF INVESTMENTS IN REAL ESTATE AND PROVISION FOR
LOSS IN VALUE
On March 30, 1995, the Fund sold the Multnomah Building and
Imperial Garage in Portland, Oregon for $2,300,000. At December 31,
1994, the carrying value of the properties were reduced to the
estimated net proceeds from sale by recording a $3,249,000 provision
for loss. Accordingly, no additional gain or loss was recognized in
1995.
As of March 31, 1995, the Inwood Shopping Center was under
contract for sale.
3. COLLATERAL FOR PARTICIPATING MORTGAGE LOAN
In March 1995, the Fund received $455,000 in final proceeds on
a participating mortgage loan collateralized by a first mortgage on
land in Sonoma, California. These funds were recognized as of December
31, 1994, as a recovery which reduced the provision for loss in value
of investments in real estate.
During 1994, an unsecured claim by the Fund for $925,000 was
recognized in the bankruptcy of a guarantor of a participating mortgage
loan, the collateral for which was foreclosed by a senior lender in
1993. The eventual maximum payment out of the bankruptcy is estimated
to be $.30 per $1.00 of claims. During the three months ended March 31,
1995, the Fund collected $7,000 from the bankruptcy estate, bringing
total distribution proceeds to $46,000.
4. NOTES PAYABLE
On March 31, 1995, the Fund was granted an extension of its
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 at the lender's prime
rate plus 1% (10% on March 31, 1995), and matures on June 30, 1995.
On March 31, 1995, 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 at the
lender's prime rate plus 1.25% (10.25% on March 31, 1995), and matures
on June 30, 1995. The outstanding balance at March 31, 1995 was
$844,000.
Subsequent to March 31, 1995, the Fund used $1,045,000 of
excess cash to retire a $1,494,000 loan, thereby realizing a $467,000
discount granted by the lender. The loan was collateralized by the Nohr
Plaza Shopping Center in San Leandro, California.
-5-
