SUPPLEMENT NO. 8 TO PROSPECTUS DATED MAY 7, 1996.
This supplement ("Supplement") to the Prospectus ("Prospectus") updates the
Prospectus of West Coast Realty Investors, Inc. (the "Company") dated May 7,
1996. This Supplement is part of and must accompany the Prospectus. The date
of this supplement is April 3, 1997.
This Supplement amends and supersedes the corresponding sections of the
Prospectus and Supplements Numbers 1 through 7 to such Prospectus; however,
subject to the qualification above, the Prospectus continues to control the
terms of the offering, and all provisions thereof not supplemented or amended
hereby remain pertinent to the offering and are incorporated herein by
reference. Accordingly, current subscribers and prospective investors should
read both the Prospectus and this Supplement No. 8 very carefully. All
capitalized items used in this Supplement have the same meaning ascribed to them
in the Prospectus unless otherwise indicated herein.
The following supplements the "Dividends" portion of INVESTMENT OBJECTIVES AND
POLICIES section of the Prospectus, beginning on page 23.
Dividends totaling $1,128,597 were paid in 1996 and 1997, for shareholders of
record in 1996. Approximately 37% of these dividends constituted a return of
capital. These 1996 dividends are summarized below:
Record Date Per Outstanding Total
Date Paid Share Shares Dividend
- ------ -------- ------- ---------------- -------------
01/01/96 4/15/96 $0.06 1,325,404 $79,524
02/01/96 4/15/96 0.06 1,371,794 82,308
03/01/96 4/15/96 0.06 1,401,664 84,100
04/01/96 7/15/96 0.0666 1,413,736 94,155
05/01/96 7/15/96 0.0666 1,445,236 96,253
06/01/96 7/15/96 0.0666 1,448,836 96,492
07/01/96 10/15/96 0.0666 1,448,836 96,492
08/01/96 10/15/96 0.0666 1,448,836 96,492
09/01/96 10/15/96 0.0666 1,498,246 99,784
10/01/96 1/15/97 0.0666 1,498,246 99.784
11/01/96 1/15/97 0.0666 1,500,651 99,943
12/01/96 1/15/97 0.0666 1,550,607 103,270
The following supplements or amends the "MANAGEMENT'S DISCUSSION OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS" Section of the Prospectus, beginning on
page 37.
As of April 3, 1997, the Company has raised $14,462,708 in capital from prior
offerings and $3,659,131 from the current offering (which were released from an
escrow account on August 12 and November 4, 1996, and January 2, January 14,
and April 2, 1997, or received in the form of dividend reinvestments). An
additional $70,000 has been raised in the current offering for sales between
March 21, 1997 and April 3, 1997; these funds are expected to be released from
escrow in or prior to July, 1997.
<PAGE>
RESULTS OF OPERATIONS -- YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED
DECEMBER 31, 1995
Operations for the year ended December 31, 1996 represented a full year of
rental operations for all properties, expect Java City which was owned for only
five months.
The net income for the year ended December 31, 1996 ($705,636) was higher than
the year ended December 31, 1995 ($649,605) due to the raising of additional
funds and investment of such funds in additional income producing properties.
The Company did not have any adverse events that significantly impacted net
income during the year ended December 31, 1996, and all properties that have
been purchased by the Company have operated at levels equal to current
expectations. All tenants were current on their lease obligations.
Rental revenue increased $685,354 (41%) due to a full year's ownership of the
Technology Drive and Safeguard Building properties (as compared to partial year
ownership in 1995), and partial year ownership for the Java City property.
Interest income decreased $23,853 (25%) due to a new escrow release procedure on
the current offering where new investor funds come into the Company quarterly
rather than daily, thus lowering the amount of excess cash available for
investment.
Operating expenses increased $133,179 (78%) as a reflection of the additional
properties owned during the year. Interest expense increased $260,947 (42%) as
a reflection of the additional debt incurred in connection with property
acquisition and refinancing activities. Despite the amount of debt, the Company
remains below the maximum 50% debt maximum allowed by the Company's by-laws
(debt was 48% of property cost (as defined in the by-laws) as December 31,
1996). General and administrative costs increased $106,587 (91%) due to higher
accounting, taxes, and general insurance expense costs related to the Company's
increased size. General and administrative costs increased as a percentage of
revenue going from 6.5% in 1996 to 9.0% in 1996. Much of this increase is due
to $74,361 that the Advisor was paid in 1996 due to the revised provisions of
the Advisor agreement. No advisor fees were earned in 1995. Depreciation and
amortization expense increased $104,757 (41%) as the result of the ownership of
additional properties during 1995 as compared to 1996.
The average number of shares outstanding during 1996 was 1,447,366 vs. 1,117,494
in 1995. Partly because of the greater number of shares outstanding, the net
income per share decreased from $.58 in 1995 to $.49 in 1996. If this figure is
analyzed using flow of funds - that is net income plus depreciation expense -
then the amount in 1996 was $.75 per share vs. $.80 in 1995.
The decrease in the per share figures is largely due to the imposition of the
Advisory Fee in 1996 ($74,361) which effectively decreased net income and flow
of funds per share by $.05 per share. However, it should be noted that although
the full Advisory fee is recognized on the Statement of Income, the Advisor
agreed to waive collection of $44,061 (59%) of these fees in 1996, and may elect
to waive collection of all or a portion of the fees in the future. The
Advisor's wavier of these fees has been treated as an infusion of equity into
the Company, rather than as a reduction in expenses.
<PAGE>
In addition to the added Advisory Fee Expense, the Company had a fairly large
drop in interest income. This was due to relatively lower interest rates in
place for most of 1996 as compared to 1995, and a slower level of new fund
raising from the sale of shares in 1996 as compared to 1995. $3,633,687 was
raised in net proceeds in 1995, while only $2,124,626 was raised in 1996. Thus,
the Company had less funds on hand awaiting investment in 1996 than in 1995.
During the year ended December 31, 1996, the Company declared dividends totaling
$1,128,597, compared to dividends of $804,595 declared for the year ended
December 31, 1995. Cash basis income for the year ended December 31, 1996 was
$1,066,537. This was derived by adding depreciation and amortization expense to
net income. Thus, cash distributions this year were greater ($40,898) than cash
basis net income. In contrast, distributions in 1995 were less ($101,154) than
cash basis income. In either event, the Company continues to qualify as a REIT.
In summary then, the operating performance of the Company continued to improve
as additional funds were raised, additional property was acquired, and all
properties were operating profitably.
The following amends the "MANAGEMENT" section on pages 42 through 45 of the
Prospectus, concerning the Directors and Officers of West Coast Realty
Investors, Inc., West Coast Realty Advisors, and West Coast Realty Management.
(These changes are precipitated by the retirement of Mr. Haas, and the
resignation of Mr. McGaughey as Treasurer of West Coast Realty Management in
order to assume unrelated duties within Associated Financial Group).
The Directors and Officers of the Company are:
NAME POSITION
Philip N. Gainsborough....................Director and Chairman of the Board
W. Thomas Maudlin, Jr. ...................Director and President
Neal E. Nakagiri..........................Secretary
Michael G. Clark..........................Vice President/Treasurer
James W. Coulter..........................Director (1)
George Young..............................Director (1)
Steve Bridges.............................Director (1)
(1) Independent Director
The principal executive officers, directors. and key employees of the Advisor
are as follows:
<PAGE>
NAME POSITION
Philip N. Gainsborough..................Director and Chairman of the Board
W. Thomas Maudlin, Jr. .................Director and President
Neal E. Nakagiri........................Secretary
Michael G. Clark........................Director and Treasurer
The principal executive officers, directors, and key employees of the Property
Manager are:
NAME POSITION
Philip N. Gainsborough.....................Director and Chairman of the Board
James E. Prock.............................Director and President
W. Thomas Maudlin, Jr. ....................Director (1)
Murli Sujanani.............................Secretary
David Vazquez..............................Treasurer
(1) AFG owns 75% and Mr. Maudlin owns 25% of the capital stock of West Coast
Realty Management, Inc.
Additional description of occupations of Messrs. Sujanani and Vazquez are noted
below:
Murli Sujanani (Born 1950) has served as Senior Vice President/Investment
Research for AFG since 1994, and has been employed by AFG since December, 1990.
From April 1990 to November 1990, Mr. Sujanani served as Vice President/Mortgage
Securities for GMAC-Residential Funding Corporation. From June, 1983 to March,
1990, Mr. Sujanani worked for Dain Bosworth, Inc. in the corporate finance
department as a Vice President where he was responsible for partnership
origination and due diligence work. Mr. Sujanani is a graduate of St. John's
University in Minnesota.
David Vazquez (Born 1962) has served as Assistant Controller of AFG since April
1995. Prior to joining AFG, Mr. Vazquez served as an auditor for BDO Seidman
LLP in Los Angeles from January 1994 through April 1995, and as an accounting
supervisor for Biggs & Co., a Los Angeles CPA firm, from February 1991 through
January 1994. In addition, Mr. Vazquez served as a staff accountant for P.
Leiner N.P., a manufacturer and distributor of nutritional products, from June
1990 through February 1991. Mr. Vazquez has a Bachelor of Business
Administration degree from the California State University, Los Angeles.
The following supplements or amends the "PRIOR PERFORMANCE" section on pages 45
and 46 of the Prospectus, concerning Associated Planners Realty Growth Fund.
<PAGE>
On August 16, 1996, the Partnership and the Lender executed a deed-in-lieu-of-
foreclosure, in connection with the Park Center Office Building. On November 1,
1996, the Partnership's 10% interest in the San Marcos Property was sold to
Associated Planners Realty Income Fund (an affiliate) for a gross purchase price
of $188,000. The sales price of the transaction was established by an
independent appraisal of the property. Associated Planners Realty Growth Fund
was dissolved on December 4, 1996 after the final distribution of $132,564 in
proceeds to the limited partners.
The following supplements or amends the "ERISA CONSIDERATIONS" and "DESCRIPTION
OF COMMON STOCK" sections on pages 58 and 59 of the Prospectus.
As of April 3, 1997, there are 1,675,442 Shares of the Company outstanding,
held by 925 Shareholders. In addition, $70,000 in gross proceeds has been
raised from the sale of 7,000 shares in the current offering to two
investors between March 21 and April 3, 1997; these funds have been deposited
into an escrow account, and shares are expected to be issued in or prior to July
1997.
The following supplements the Real Property Investments section on page 25 of
the Prospectus.
JAVA CITY PROPERTY, SACRAMENTO, CALIFORNIA
On August 2, 1996, the Company acquired the investment described below (the
"Java City Property" or the "Property"). The funds to acquire the Java City
property were available as the result of the sale of the Company's Shares in the
previous offering, and the receipt of proceeds from bank financing assumed in
connection with the acquisition.
Description. The Java City Property consists of two single story light
industrial buildings located in the Northgate Industrial Park in Sacramento,
California. The addresses of the two properties are 717 and 721 West Del Paso
Road. The building sites are in the northern part of Sacramento, with access
to Interstate 80, Interstate 5, and other major freeways.
The buildings are located on a site of approximately 62,173 square feet. Total
building square footage for both buildings is approximately 20,000 square feet.
The subject lot is zoned M-1 industrial by the City of Sacramento. This zoning
allows for a variety of uses, including the existing use. 721 West Del Paso
Road consists of 8,964 total square feet and 717 West Del Paso Road consists of
11,035 total square feet. Per the provisions of the current lease, 721 West Del
Paso consists of 4,347 rentable square feet of warehouse space and 4,293
rentable square feet of office space. Per the provisions of the current lease,
717 West Del Paso consists of 5,398 rentable square feet of warehouse space and
5,802 of rentable square feet of office space. The properties were originally
constructed in 1988. The Company believes that there are no deferred
maintenance items that need to be corrected or addressed. The buildings are
constructed using concrete footings (foundation and slab), wood frame wall
designs, and flat/tar gravel roofs. The building has sprinklers for fire
prevention and safety. There is adequate parking in the general business park
area for cars that utilize the Property.
<PAGE>
The primary tenant of the Property is Cucina Holdings, Inc. The company owns
and operates forty-one Java City Bakery Cafes and five La Petite Boulangerie
cafes. The Company is popularly known as "Java City". Java City outlets are
located in various areas of California and Arizona, and are generally in high-
visibility, high-traffic locations. These outlets sell high quality, specialty
coffees in a pleasant retail environment setting. In addition, these outlets
sell a selection of sandwiches and baked goods that compliment the sale of
coffee. Java City also operates a wholesale operation that serves approximately
seven hundred customer accounts located primarily in Northern California. The
Company's wholesale customers include supermarkets, gourmet shops, convenience
stores, restaurants, universities, airports, and offices, some of which resell
the coffee in whole bean form for home consumption, while others brew and sell
coffee beverages. Approximately 86% of the Company's sales are from its retail
cafe operations and 14% from its wholesale operations. The tenant was
effectively formed in 1993 when Cucina Holdings, a corporation formed by current
management and InterWest Partners (a Menlo Park Based venture capital firm),
purchased the assets of La Petite Boulangerie from a private investor group in
June 1993, and then purchased Java City in September 1993. Cucina Holdings and
Java City are privately held, and not publicly traded companies.
Java City leases 100% of the rentable square feet in the two buildings located
on the Property. Each building has a separate lease, and both leases are triple
net leases. Both leases expire on August 1, 2003 and there are no options for
extension or purchase of the Property. Java City operates its administrative
offices, coffee bean processing, warehousing facilities, and a Java City retail
outlet out of these two buildings.
The lease payments due on 717 West Del Paso are noted below (rounded to the
nearest dollar):
August 1, 1996 to July 31, 1997 10,004/month
August 1, 1997 to July 31, 1998 10,405/month
August 1, 1998 to July 31, 1999 10,821/month
August 1, 1999 to July 31, 2000 11,254/month
August 1, 2000 to July 31, 2001 11,704/month
August 1, 2001 to July 31, 2002 12,172/month
August 1, 2002 to July 31, 2003 12,659/month
The lease payments due on 721 West Del Paso are noted below (rounded to the
nearest dollar):
August 1, 1996 to July 31, 1997 $5,671/month
August 1, 1997 to July 31, 1998 5,898/month
August 1, 1998 to July 31, 1999 6,134/month
August 1, 1999 to July 31, 2000 6,379/month
August 1, 2000 to July 31, 2001 6,635/month
August 1, 2001 to July 31, 2002 6,900/month
August 1 ,2002 to July 31, 2003 7,176/month
<PAGE>
There are no provisions for consumer price increase adjustments in either lease.
The overall initial rent per square foot is approximately $.76, and this
increases 4% on each lease anniversary date.
The Property was acquired from unrelated third parties--Thomas Weborg and Sandra
Singer--husband and wife (90% ownership), and David and Karen Ewing--husband and
wife (10% ownership)(collectively known as the "Sellers"). Mr. Weborg is
President and Chief Executive Officer of Cucina Holdings, Inc.--the tenant of
the Property. Several methods of economic analysis were used to determine the
propriety of the purchase price, and economic feasibility of the property, prior
to acquisition. A review of rental rates for similar size and style buildings
and uses in the same general area revealed rates ranging from $.41 to $.81 per
square foot for triple net leases. The current monthly rent on these buildings
is $.76 per square foot, meaning that the Property currently rents near the
highest rate available in this market. However, considering the good condition
of the property, the quality of the tenant, and the long-term lease in place,
this property at this price is considered to be desirable. Comparable market
listing and sales activity were also reviewed by the Advisor. These revealed
that the price per square foot for similar buildings in the area range from
$40.00 to $97.50. Several of the buildings that were sold in the lower range
were older and of lower quality, and lacked amenities that are present in the
Property, including fire prevention sprinklers. The $86.25 per square foot that
the Company is paying for the Property is considered reasonable given the recent
positive movements of price in the market, the favorable seven year lease term,
and the credit quality of the tenant (this number does not include acquisition
costs and expenses).
In the opinion of the Advisor, the purchase price of $1,725,000 that the Company
is paying the Sellers for this property is reasonable.
Property Operations. The Java City Property is managed by West Coast Realty
Management Inc.(" WCRM"), an affiliate of the Company. WCRM charges the Company
3% of the gross rents collected as a management fee for managing the Property,
as allowed by the Property Management Agreement. In the opinion of the Advisor,
the Java City Property is adequately insured. Although the tenant is obligated
to pay property taxes, property tax in the first year is estimated to be $18,000
(approximately 1% of the sales price).
Terms of Purchase. Total consideration paid by the Company for the Java City
property was $1,828,500. The total acquisition cost included $1,725,000 paid to
the Sellers, $25,323 in legal, appraisal, and closing costs, and $78,177 in
Acquisition Fees paid to the Advisor.
There is financing on each building of the Property that is being assumed by the
Company. The financing on the 717 West Del Paso Road building is as follows:
Lender: Business & Professional Bank, Sacramento, CA
Original Loan Amount: $350,000 Payment: $3,413.36/month
Interest Rate: 10% fixed rate Amortization: 25 years
Due Date: November, 2001 Assumption Fee: $3,814
Projected Balance of Debt at time of Purchase: $338,977
Other: Nonrecourse loan; no prepayment penalty
<PAGE>
The financing on the 721 West Del Paso Road building is as follows:
Lender: Heller First Capital Corp., Chicago, IL
Original Loan Amount: $405,000 Payment: $3,126/month
Interest Rate: 8% fixed rate Amortization: 25 years
Due Date: June, 2018 Assumption Fee: None
Projected Balance of Debt at Time of Purchase: $385,488
Other: Nonrecourse; no prepayment penalty
Thus, in summary, the total amount of financing/assumption fees that the Company
is paying in connection with the assumption of the above two loans is $3,814.
The balance of the debt at time of purchase was $724,465 with the remaining cost
of acquisition--including financing fees--being paid in cash ($1,107,849). The
source of cash was funds received in connection with the sale of the Company's
shares through April 30, 1996.
The purchase price was arrived at through arms-length negotiations with the
Sellers.
General. The computation of depreciation for the Java City Property is based on
the cost of the property, including Acquisition Fees and Acquisition Expenses.
The allocation of the cost of the Property to various asset categories is
estimated, based on allocations in the appraisal report. Depreciation is
computed on a straight-line basis over the component useful life of the assets.
TYCOM PROPERTY, IRVINE, CALIFORNIA
On January 17, 1997, the Company acquired the investment described below (the
"Tycom Property" or the "Property"). The funds to acquire the Tycom Property
were available as the result of the sale of the Company's Shares in the current
and previous offerings, and the receipt of proceeds from first trust deed
mortgage financing provided by a bank in connection with the acquisition.
Description. The Tycom Property consists of a two story building, with
underground parking, located at 17862 Fitch Street, Irvine, California. The
Building site is in the southern part of Irvine, with access to Interstate 405
(San Diego Freeway) and State Highway 55 (Costa Mesa Freeway) and is within two
miles of John Wayne Airport (the major commercial airport for Orange County).
<PAGE>
The building is located on a site of approximately 92,783 square feet. Total
building square footage is approximately 63,225 square feet (both floors), while
the property has 164 striped parking spaces. These spaces are located both below
the building in a subterranean parking level, and on the side of the building.
The building was constructed using concrete footings foundation, and a
combination of concrete tilt-up and wood frame construction walls, with a flat
tar and gravel roof. The subject lot has been zoned "industrial" by the City of
Irvine. The zoning is designed to preserve city land appropriate for industrial
uses and to attract and preserve desirable manufacturing and
research/development areas. The building is approximately twelve years old.
There are substantial new tenant improvements that were substantially complete
at time of acquisition that enhances the building for office usage. These
improvements include improved air conditioning, Americans with Disabilities Act
compliance, a complete fire sprinkler system, new electrical, new restrooms, and
new carpet. After completion of the improvements, the building will be
allocated to approximately 50% office, 30% research and development, and 20%
manufacturing and storage.
The sole tenant of the Property is Tycom Corporation ("Tycom" or "the Tenant").
Tycom, a privately held company, is a manufacturer of drill bits and assorted
items used by the semi-conductor and dental industries, and has been in business
for approximately ten years. 1995 sales were $100 million, up from $60 million
in 1994. The Tenant initially purchased this building and has invested $1.4
million in improvements and renovation. Tycom sold the building to
Brutten/Reynolds/Shidler Investment Corp. ("the Seller") on December 19, 1996,
for an unknown value. The Tenant began occupying the building December 19,
1996, at which time the provisions of the lease became effective.
The term of the lease is eleven years, and is intended to be a "triple-net"
lease with the Tenant paying for virtually all taxes, insurance, utilities, and
other operating costs of the Property. The base rent is $37,302.75 per month.
Although the rent is fixed, there are provisions for annual rent increases over
the life of the lease based on increases in the consumer price index. The
Tenant has an option to extend the lease for an additional five years.
The Property is being acquired from an unrelated third party--
Brutten/Reynolds/Shidler Investment Corp. Several methods of economic analysis
were used to determine the propriety of the purchase price, and economic
feasibility of the property, prior to acquisition. A review of rental rates for
similar size buildings and uses in the same general area revealed rates ranging
from $.57 to $.72 per square foot--all on a triple net basis. The current
monthly rate is set at $.59 per square foot, meaning that the Property is
renting near the lowest rate available in this market for similar types of
buildings. In addition, this Property is occupied by a quality tenant with a
long-term lease in place. Given the fact that vacancy rates in the surrounding
area range from 3% to 5%, the potential for higher rental rates per square foot
is possible given the fact that the Property's current rental rate of
$.59/square foot is considered to be on the low side. Comparable market listing
and sales activity were also reviewed by the Advisor. These revealed the price
per square foot for similar buildings in the area to range from $67 to $77 per
square foot. The $73 per square foot that the Company is paying for the
Property is reasonable, considering the approximately $1,400,000 in tenant
improvements that the Tenant has invested into the Property, the eleven year
lease term, and the credit quality of the tenant. (The $73/square foot figure
does not include acquisition fees and expenses, which will increase the cost per
square foot to $77).
<PAGE>
In the opinion of the Advisor, the $4,625,000 that the Company paid for the
Property is reasonable.
Property Operations. The Tycom Property is being managed by West Coast Realty
Management, Inc. ("WCRM"), an affiliate of the Company. WCRM will charge the
Company 3% of the gross rents collected as a management fee for managing the
Property, as allowed by the Property Management Agreement. In the opinion of
the Advisor, the Tycom Property is adequately insured. Although the tenant is
obligated to pay property taxes, property tax in the first year is estimated to
be $47,000 (approximately 1% of the sales price).
Terms of Purchase. Total consideration paid by the Company for the Tycom
Property was $4,902,500. The total acquisition cost included $4,625,000 paid to
the Seller, $10,825 in legal, appraisal, and closing costs, and a $266,675
Acquisition Fee payable to the Advisor. In addition, $37,303 was received from
the Seller for the Tenant's security deposit.
Financing was utilized in connection with the acquisition of the Tycom Property.
A short-term promissory note was provided by First National Bank of San Diego
with the following terms:
Original Loan Amount: $2,300,000
Interest Rate: Fixed at 9.25% Term of Loan: One year
Amortization: Interest Only Payments
Monthly Payment: $17,729
Due Date: February 1, 1998
Balance at One year Due Date: $2,300,000
Other: Nonrecourse; no pre-payment penalty; no finance costs or "points".
The Company plans on replacing this financing prior to the due date with a first
trust deed mortgage from a bank with the following expected terms:
<PAGE>
Original Loan Amount: $2,300,000
Interest Rate: Fixed at 140 basis points over the five year Treasury Rate
(rate would be approximately 7.65% currently).
Term of Loan: Five year term, with option to extend the loan for an additional
three years using same interest formula, at not additional cost to the Company.
Amortization: Twenty-five years
Monthly Payment: $17,222 (estimated)
Balance at first three year Due Date (estimated):$2,113,653
Other: Nonrecourse; fully assumable for 1% fee; pre-payment penalty in fifth
year only; all financing costs paid by the Seller.
Thus, in summary, the purchase was funded through $2,300,000 in new financing
and $2,565,197 in cash raised from the sale of shares in the current and
previous offerings (this includes assumption of the tenant's security deposit).
The purchase price was arrived at through arms-length negotiations with the
Seller.
General. The computation of depreciation for the Tycom Property is based on the
cost of the property, including Acquisition Fees and Acquisition Expenses. The
allocation of the cost of the Property to various asset categories is estimated,
based on allocations in the appraisal report. Depreciation is computed on a
straight-line basis over the component useful life of the assets. Pro forma
financial information is prepared based on information contained in the signed
lease for the property, and assuming that the Seller-provided financing will be
in place for one full year (even though the Company intends on replacing it
prior to the due date with financing having more favorable terms).
<PAGE>
The following amends the Index to Financial Statements on p. 74.
West Coast Realty Investors
Audited Financial Statements
Report of Independent Certified Public Accountants ..F-1
Balance Sheet as of December 31, 1996 and December 31, 1995......F-2
Statements Of Income for the years ended December 31, 1996, 1995 and
1994........................................................F-3
Statements of Stockholders' Equity for the years ended December 31, 1996,
1995, 1994................................................. F-4
Statement of Cash Flows for the years ended December 31, 1996, 1995 and
1994 .......................................................F-5
Summary of Accounting Policies................................. F-7
Notes to Financial Statements................................. ..F-9
Schedule III--Real Estate and Accumulated Depreciation...........F-17
Schedule IV--Mortgage Loans on Real Estate.......................F-19
Java City Property
Report of Independent Certified Public Accountants...................F-45
Summary of Historical Information Relating to Operating Revenues and
and Specified Expenses.........................................F-46
Notes to Summary of Historical Information Relating to Operating Revenues
and Specified Expenses...............................................F-47
Estimated Twelve Month Pro Forma Statement of Taxable Operating Income
(unaudited)..........................................................F-48
Estimated Twelve Month Pro Forma Statement of Cash Available from
Operations (unaudited)...............................................F-48
Notes to Pro Forma Statements........................................F-49
Tycom Property
Report of Independent Certified Public Accountants...................F-51
Summary of Historical Information Relating to Operating Revenues and
Specified Expenses...................................................F-52
Notes to Summary of Historical Information Relating to Operating Revenues
and Specified Expenses...............................................F-53
Estimated Twelve Month Pro Forma Statement of Taxable Operating Income
(unaudited)..........................................................F-54
Estimated Twelve Month Pro Forma Statement of Cash Available from
Operations (unaudited)...............................................F-54
Notes to Pro Forma Statements........................................F-55
West Coast Realty Investors, Inc.
Pro Forma Statement of Income for the year ended December 31,
1996 (unaudited).............................................. .F-57
Notes to Pro Forma Financial Statement for the year ended
December 31, 1996 (unaudited)................................. .F-58
Pro Forma Balance Sheet as of December 31, 1996... ..................F-60
Notes to Pro Forma Balance Sheet................................... .F-61
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
West Coast Realty Investors, Inc.
Los Angeles, California
We have audited the accompanying consolidated balance sheets of West Coast
Realty Investors, Inc., as of December 31, 1996 and 1995 and the related
statements of income, stockholders' equity, and cash flows for each of the three
years ended December 31, 1996, 1995 and 1994. We have also audited the
schedules listed in the accompanying index. These financial statements and
schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedules 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 and schedules are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements and
schedules. 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 West Coast Realty Investors,
Inc., at December 31, 1996 and 1995, and the results of its operations and its
cash flows for each of the years ended December 31, 1996, 1995 and 1994 in
conformity with generally accepted accounting principles.
Also in our opinion, the schedules present fairly, in all material respects, the
information set forth therein.
BDO SEIDMAN, LLP
Los Angeles, California
February 28, 1997
F-1
<PAGE>
<TABLE>
WEST COAST REALTY INVESTORS, INC.
BALANCE SHEETS
<CAPTION>
December 31, 1996 1995
<S> <C> <C>
ASSETS
Rental real estate, less accumulated
depreciation (Notes 2 and 3) $21,118,203 $19,650,165
Cash and cash equivalents 2,017,194 1,450,022
Accounts receivable 247,948 132,148
Loan origination fees, net of accumulated
amortization of $21,161 and $19,087 102,622 119,969
Other assets 85,871 40,594
Total assets $23,571,838 $21,392,898
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Accounts payable $13,922 $25,419
Due to related party (Note 4) 46,285 167,314
Dividends payable (Note 7) 302,760 226,649
Security deposits and prepaid rent 124,734 109,068
Other liabilities 100,453 90,431
Notes payable (Note 5) 10,078,793 9,539,180
Total liabilities 10,666,947 10,158,061
COMMITMENTS
STOCKHOLDERS' EQUITY
Common stock, $.01 par-shares authorized,
5,000,000 shares issued, 1,550,607 and
1,322,404 outstanding in 1996 and 1995 15,506 13,224
Additional paid-in capital 13,861,763 11,771,030
Retained earnings (972,378) (549,417)
Total stockholders' equity 12,904,891 11,234,837
Total liabilities and stockholders' equity $23,571,838 $21,392,898
</TABLE>
[FN]
See accompanying summary of accounting policies and notes to financial
statements.
F-2
<PAGE>
<TABLE>
WEST COAST REALTY INVESTORS, INC.
STATEMENTS OF INCOME
<CAPTION>
Years ended December 31, 1996 1995 1994
<S> <C> <C> <C>
REVENUES
Rental (Notes 2 and 3) $2,377,530 $1,692,176 $802,614
Interest 97,097 120,950 100,553
2,474,627 1,813,126 903,167
COSTS AND EXPENSES
Operating 302,858 169,679 96,637
Interest expense 880,978 620,031 302,124
General and administrative 224,254 117,667 70,890
Depreciation and amortization 360,901 256,144 118,238
Loss on government securities --- --- 68,210
1,768,991 1,163,521 656,099
NET INCOME $705,636 $649,605 $247,068
NET INCOME PER SHARE (Note 7) $.49 $.58 $.35
</TABLE>
[FN]
See accompanying summary of accounting policies and notes to financial
statements.
F-3
<PAGE>
<TABLE>
WEST COAST REALTY INVESTORS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1995
<CAPTION>
Additional Distributions
Common Stock Paid-in in Excess of
Shares Amount Capital Earnings
<S> <C> <C> <C> <C>
BALANCE, January 1, 1994 562,885 $5,629 $5,038,512 (118,881)
Issuance of stock for cash,
net of costs and sales
commissions of $399,416 349,101 3,491 3,085,313 ---
Net income for the year --- --- --- 247,068
Equity contribution by
Affiliates through expense
reimbursements (Note 4b) --- --- 17,622 ---
Dividends declared ($.762
per share-Note 7) --- --- --- (522,614)
BALANCE, December 31, 1994 911,986 9,120 8,141,447 (394,427)
Issuance of stock for cash,
net of costs and sales
commissions of $423,603 410,418 4,104 3,629,583 ---
Net income for the year --- --- --- 649,605
Dividends declared ($.72
per share-Note 7) --- --- --- (804,595)
BALANCE, December 31, 1995 1,322,404 13,224 11,771,030 (549,417)
Issuance of stock for cash,
net of costs and sales
commissions of $246,599 228,203 2,282 2,046,672 ---
Net income for the year --- --- --- 705,636
Equity contribution by
Affiliates through expense
reimbursements (Note 4b) --- --- 44,061 ---
Dividends declared ($.779
per share-Note 7) --- --- --- (1,128,597)
BALANCE, December 31, 1996 1,550,607 $15,506 $13,861,763 $(972,378)
</TABLE>
[FN]
See accompanying summary of accounting policies and notes to financial
statements.
F-4
<PAGE>
<TABLE>
WEST COAST REALTY INVESTORS, INC.
STATEMENTS OF CASH FLOW
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<CAPTION>
Years ended December 31, 1996 1995 1994
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $705,636 $649,605 $247,068
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 360,901 256,144 118,238
Interest expense on amortization
of loan origination fees 21,161 11,454 6,335
Increase (decrease) from changes in:
Government securities --- 1,240,190 440,314
Accounts receivable (115,800) (62,784) (19,001)
Other assets (45,277) 30,469 (49,185)
Accounts payable (11,497) 10,731 14,688
Due to related party (121,029) 130,378 (16,412)
Security deposits and prepaid rent 15,666 71,823 12,245
Other liabilities 10,022 35,133 36,900
Net cash provided by operating
activities 819,783 2,373,143 791,190
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to rental real estate (1,828,500) (8,647,090) (5,866,457)
Net cash (used in) investing
activities (1,828,500) (8,647,090) (5,866,457)
</TABLE>
F-5
<PAGE>
<TABLE>
A WEST COAST REALTY INVESTORS, INC.
STATEMENTS OF CASH FLOW (CONT.)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<CAPTION>
Years ended December 31, 1996 1995 1994
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock, net 2,048,954 3,633,687 3,088,804
Equity contribution by Affiliates through
expense reimbursements 44,061 --- 17,622
Dividends declared and paid (1,052,925) (745,172) (437,803)
Increase in notes payable 755,000 4,469,647 2,800,000
Payments on notes payable (215,387) (91,822) (44,171)
Increase in loan origination fees (3,814) (38,200) (64,219)
Net cash provided by financing activities 1,575,889 7,228,140 5,360,233
NET INCREASE IN CASH AND CASH EQUIVALENTS 567,172 954,193 284,966
CASH AND CASH EQUIVALENTS, beginning of year 1,450,022 495,829 210,863
CASH AND CASH EQUIVALENTS, end of year $2,017,194 $1,450,022 $495,829
</TABLE>
[FN]
See accompanying summary of accounting policies and notes to financial
statements.
F-6
<PAGE>
WEST COAST REALTY INVESTORS, INC.
SUMMARY OF ACCOUNTING POLICIES
BUSINESS West Coast Realty Investors, Inc. (the "Company"), is a
corporation formed on October 26, 1989 under the laws of the
State of Delaware. The Company exits as a Real Estate
Investment Trust ("REIT") under Sections 856 to 860 of the
Internal Revenue Service Code. The Company has complied with
all requirements imposed on REIT's for the 1996, 1995 and 1994
tax years; however qualification as a REIT for future years is
dependent upon future operations of the Company. The Company
was organized to acquire interests in income-producing
residential, industrial, retail or commercial properties located
primarily in California and the west coast of the United States.
The Company intends to acquire property for cash on a moderately
leveraged basis with aggregate mortgage indebtedness not to
exceed fifty percent of the purchase price of all properties on
a combined basis, or eighty percent individually and intends to
own and operate such properties for investment over an
anticipated holding period of five to ten years.
RENTAL REAL Assets are stated at lower of cost net realizable value.
ESTATE AND Depreciation is computed using the straight-line method over
DEPRECIATION their estimated useful lives of 31.5 to 39 years for financial
and income tax reporting purposes.
In the event that facts and circumstances indicate that the
cost of an asset may be impaired, an evaluation of
recoverability would be performed. If an evaluation is
required, the estimated future undiscounted cash flows
associated with the asset would be compared to the carrying
amount to determine if a write-down to market value is
required.
RENTAL Rental revenue is recognized on a straight-line basis to the
INCOME extent that rental revenue is deemed collectible. Where there
is uncertainty of collecting higher scheduled rental amounts,
due to the tendency of tenants to renegotiate their leases at
lower amounts, rental income is recognized as the amounts are
collected.
INVESTMENTS The difference between historical cost and market value are
reported as unrealized gains or losses in the statements of
income.
LOAN Loan origination fees are capitalized and amortized over the
ORIGINATION life of the loan.
FEES
CASH AND The Company considers cash in the bank, liquid money market
CASH funds, and all highly liquid certificates of deposit, with
EQUIVALENTS original maturities of three months of less, to be cash and
cash equivalents.
F-7
<PAGE>
WEST COAST REALTY INVESTORS, INC.
SUMMARY OF ACCOUNTING POLICIES
USE OF The preparation of financial statements in conformity with
ESTIMATES generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
For comparative purposes, certain prior year amounts have been
reclassified to conform to the current year presentation.
Statement of Financial Accounting Standards No. 125,
"Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities" (SFAS No. 125) issued by
the Financial Accounting Standards Board (FASB) is effective
for transfers and servicing of financial assets and
extinguishments of liabilities occurring after December 31,
1996, and is to be applied prospectively. Earlier or
retroactive application is not permitted. The new standard
provides accounting and reporting standards for transfers and
servicing of financial assets and extinguishments of
liabilities. The Company does not expect adoption to have a
material effect on its financial position or results of
operations.
F-8
<PAGE>
WEST COAST REALTY INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - GENERAL
On October 30, 1989, West Coast Realty Advisors, Inc. (the "Advisor"), purchased
1,000 shares of the Company's common stock for $10,000. On August 30, 1990, the
Company reached its minimum initial offering funding level of $1,000,000. As of
December 31, 1996 the Company has raised $15,479,714 in capital.
Sales commissions and wholesaling fees, representing 7% of the gross proceeds
from the sale of common shares, were paid to Associated Securities Corp.
("ASC"), a member of the National Association of Securities Dealers, Inc.
("NASD") and an affiliate of the Advisor.
Dividends are declared and accrued based approximately upon the previous
quarter's income from operations before depreciation and amortization.
NOTE 2 - RENTAL PROPERTIES
The Company owns the following income-producing properties
ORIGINAL
LOCATION (PROPERTY NAME) DATE PURCHASED ACQUISITION
COST
Huntington Beach, California
(Blockbuster) February 26, 1991 $ 1,676,210
Fresno, California May 14, 1993 1,414,893
Huntington Beach, California
(OPTO-22) September 15, 1993 2,500,001
Brea, California March 4, 1994 2,248,343
Riverside, California November 29, 1994 3,655,500
Tustin, California
(Safeguard) May 22, 1995 4,862,094
Fremont, California
(Technology Drive) October 31, 1995 3,747,611
Sacramento, California
(Java City) August 2, 1996 1,828,500
F-9
<PAGE>
WEST COAST REALTY INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 2 - RENTAL PROPERTIES (CONTINUED)
The major categories of property are:
DECEMBER 31, 1996 1995
Land $ 7,401,126 $ 6,586,920
Buildings and improvements 14,532,025 13,517,732
21,933,151 20,104,652
Less accumulated depreciation 814,948 454,487
Net rental properties $ 21,118,203 $ 19,650,165
A significant portion of the Company's rental revenue was earned from tenants
whose individual rents represented more than 10% of total rental revenue.
Specifically:
Five tenants accounted for 23%, 19%, 18% , 12% and 10%, respectively, in 1996;
Four tenants accounted for 24%, 20%, 15% and 10%, respectively, in 1995;
Four tenants accounted for 29%, 18%, 17% and 14%, respectively, in 1994;
The following unaudited pro forma information are presented to illustrate the
effect of the three properties acquired in during 1996 and 1995, as discussed
above, and the property acquired in 1997, as discussed in Note 10, as if the
acquisitions occurred on January 1st of each year presented.
PRO FORMAS FOR THE YEARS 1996 1995
ENDED
DECEMBER 31,
Revenues:
Rental Income $ 2,948,961 $ 2,851,554
Interest 7,097 950
2,956,058 2,852,504
Costs and Expenses:
Operating 320,171 214,359
Interest 1,130,255 1,032,764
General & Administrative 224,254 117,667
Depreciation & Amortization 551,399 553,696
2,226,079 1,918,486
Net Income $729,979 $934,018
Net Income per Share $0.45 $0.54
F-10
<PAGE>
WEST COAST REALTY INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 3- FUTURE MINIMUM RENTAL INCOME
As of December 31, 1996, future minimum rental income under the existing leases
that have remaining noncancelable terms in excess of one year are as follows:
DECEMBER 31,1996
1997 .................................$2,123,959
1998 ..................................2,037,591
1999 ..................................1,976,664
2000 ..................................1,864,724
2001 ..................................1,771,212
Thereafter .......................... 15,255,711
Total $25,029,861
Future minimum rental income does not include lease renewals or new leases that
may result after a noncancelable-lease expires.
NOTE 4 - RELATED PARTY TRANSACTIONS
The Advisor has an agreement with the Company to provide advice on investments
and to administer the day-to-day operations of the Company. At December 31,
1996, the Advisor owned 22,556 shares of the Company. Property management
services for the Company's properties are provided by West Coast Realty
Management, Inc. ("WCRM"), an affiliate of the Advisor.
Certain officers and directors of the Company are also officers and directors of
the Advisor and its affiliates.
The following related party transactions are included in the statement of income
(a) In accordance with the advisory agreement, syndication fees earned by
the Advisor totaled $82,864, $150,429 and $173,874 in 1996, 1995 and 1994.
(b) Overhead expenses reimbursed to the Advisor totaled $12,000, $12,000
and $2,000 in 1996, 1995 and 1994. In 1994, the Advisor waived $10,000 of
these costs which are included in additional paid-in capital.
(c) Sales commissions paid in accordance with the selling agreement to ASC
totaled $163,735, $301,706 and $172,098 for 1996, 1995 and 1994.
F-11
<PAGE>
WEST COAST REALTY INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 4 - RELATED PARTY TRANSACTIONS (CONTINUED)
(d) Acquisition fees related to the purchase of real estate totaled
$78,177, $444,795 and $320,006 in 1996, 1995 and 1994 (Note 2). These fees
are split, in accordance with the advisory agreement, between the Advisor
and an affiliate.
(e) Property management fees earned by WCRM totaled $84,749, $46,947 and
$24,077 in 1996, 1995 and 1994. In 1994, WCRM waived $7,622 in property
management fees.
(f) Advisory fees earned by WCRA totaled $74,361 in 1996. WCRA waived
collection of $44,061 of these fees which are included in additional paid-
in capital.
(g) The Corporation had related party accounts payable as follows:
DECEMBER 31, 1996 1995
Associated Financial Group $ --- $ 40,143
Associated Securities Corp. 396 ---
West Coast Realty Management 24,839 15,369
West Coast Realty Advisors 21,050 111,802
$46,285 $167,314
NOTE 5 - NOTES PAYABLE
Notes payable are made up of the following:
DECEMBER 31, 1996 1995
8.25% promissory note secured by a Deed of Trust
on the Fresno Property, monthly principal and interest
payments are $5,244 due August 1, 2003 ................$ 628,471 $ 639,182
Variable rate promissory note secured by a Deed
of Trust on the OPTO-22 property, interest rate
adjustments are monthly and are based on the 11th
District cost of funds rate plus 3% (7.835% at
December 31, 1996), and may never go below 6.5%
or above 11.0%, monthly principal and interest
payments are $12,723, due October 1, 2003 ............1,708,362 1,721,993
F-12
<PAGE>
WEST COAST REALTY INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 5 - NOTES PAYABLE (CONT.)
DECEMBER 31, 1996 1995
8.25% promissory note secured by a Deed of Trust on
the Blockbuster property, interest rate adjusts
to the 5-year Treasury rate plus 350 basis points
on February 1, 1999, monthly principal and interest
payments are $4,934, due February 1, 2004 ..............$569,132 $579,923
9.25% promissory note secured by a Deed of Trust
on the Riverside property, monthly principal and
interest payments are $9,988, due November 8, 2004 ....1,177,055 1,185,778
Variable rate promissory note secured by a Deed of Trust
on the Brea property, interest rate is 9.5% until March 1,
2000 (and each succeeding March 1st) when interest rate
adjusts to the Moody's corporate bond index daily rate
plus 0.125%, monthly principal and interest payments
vary depending upon interest rates and are currently
$8,737, due March 1, 2020 ............... 981,338 992,379
9.625% promissory note secured by a Deed of Trust
on the Safeguard property, monthly principal and
interest payments are $24,191, due February 1,
2005 ........................ 2,155,575 2,234,231
8.24% promissory note secured by a Deed of Trust
on the Fremont property, interest rate equaled the 20-year
Treasury rate plus 1.65% at loan closing, monthly principal
and interest payments are currently $18,898, due
August 1, 2015 .......................... 2,140,311 2,185,694
10% promissory note secured by a Deed of Trust on the
Java City property, monthly principal and interest payments
are $3,413, due November 1, 2001............... 336,272 ---
8% promissory note secured by a Deed of Trust on the
Java City property, monthly principal and interest payments
are $3,126, due June 1, 2018.... 382,277 ---
$10,078,793 $9,539,180
F-13
<PAGE>
WEST COAST REALTY INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 5 - NOTES PAYABLE (CONT.)
The above carrying amounts with the exception of the note on the Fresno property
are reasonable estimates of fair values of notes payable based on current
lending rates in the industry for mortgage loans with similar terms and
maturities. The fair value of the Fresno note is approximately $580,000
calculated by discounting the expected future cash outflows on the note to the
present based on a current lending rate of 10%, which is the approximate
industry lending rate on properties of this type in this location. The
aggregate annual future maturities at December 31, 1996 are as follows:
YEAR ENDING DECEMBER 31, 1996
1997 ..................................$210,320
1998 ......................... 228,391
1999 ......................... 248,287
2000 ................................ 269,435
2001 ................................ 582,090
Thereafter ................... 8,540,268
Total $10,078,793
NOTE 6 - DIVIDEND REINVESTMENT PLAN
The Company has established a Dividend Reinvestment Plan (the "Plan") whereby
cash dividends will, upon election of the shareholders, be used to purchase
additional shares of the Company. The shareholders' participation in the Plan
may be terminated at any time.
NOTE 7 - NET INCOME AND DIVIDENDS PER SHARE
Net Income Per Share was computed using the weighted average number of
outstanding shares of 1,447,366, 1,117,494 and 706,684 for 1996, 1995 and 1994.
Dividends declared during 1996 were as follows:
OUTSTANDING AMOUNT TOTAL
RECORD DATE SHARES PER UNIT DIVIDEND
January 1, 1996 1,325,404 0.0600 $79,524
February 1, 1996 1,371,794 0.0600 82,308
March 1, 1996 1,401,664 0.0600 84,100
April 1, 1996 1,413,736 0.0666 94,155
May 1, 1996 1,445,236 0.0666 96,253
June 1, 1996 1,448,836 0.0666 96,492
July 1, 1996 1,448,836 0.0666 96,492
August 1, 1996 1,448,836 0.0666 96,492
September 1, 1996 1,498,246 0.0666 99,784
October 1, 1996 1,498,246 0.0666 99,784
November 1, 1996 1,500,651 0.0666 99,943
December 1, 1996 1,550,607 0.0666 103,270
TOTAL $1,128,597
F-14
<PAGE>
WEST COAST REALTY INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 7 - NET INCOME AND DIVIDENDS PER SHARE (CONTINUED)
Dividends declared during 1995 were as follows:
OUTSTANDING AMOUNT TOTAL
RECORD DATE SHARES PER UNIT DIVIDEND
January 1, 1995 911,986 $0.060 $54,719
February 1, 1995 945,136 0.060 56,708
March 1, 1995 1,009,084 0.060 60,545
April 1, 1995 1,069,217 0.060 64,153
May 1, 1995 1,109,374 0.060 66,562
June 1, 1995 1,109,874 0.060 66,592
July 1, 1995 1,116,891 0.060 67,013
August 1, 1995 1,151,911 0.060 69,115
September 1, 1995 1,204,517 0.060 72,271
October 1, 1995 1,225,398 0.060 73,524
November 1, 1995 1,261,859 0.060 75,712
December 1, 1995 1,294,683 0.060 77,681
TOTAL $804,595
Dividends declared during 1994 were as follows:
OUTSTANDING AMOUNT TOTAL
RECORD DATE SHARES PER UNIT DIVIDEND
January 1, 1994 562,888 $0.058 $32,648
February 1, 1994 568,404 0.060 34,104
March 1, 1994 590,966 0.062 36,640
April 1, 1994 610,195 0.063 38,442
May 1, 1994 620,421 0.064 39,707
June 1, 1994 637,315 0.065 41,426
July 1, 1994 637,315 0.065 41,426
August 1, 1994 688,203 0.065 44,733
September 1, 1994 747,876 0.065 48,612
October 1, 1994 811,034 0.065 52,717
November 1, 1994 844,800 0.065 54,913
December 1, 1994 880,700 0.065 57,246
TOTAL $522,614
F-15
<PAGE>
WEST COAST REALTY INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 7 - NET INCOME AND DIVIDENDS PER SHARE (CONTINUED)
Dividends are paid in the fiscal quarter following the record date.
The Company has followed the practice of making distributions to shareholders in
amounts approximately equal to its cash basis net income. Since cash flows are
sheltered from tax by depreciation and amortization expense, distributions to
shareholders are in excess of net income. Accordingly, certain distributions
result in a nontaxable return of capital. Distributions per beneficial share
are reportable by shareholders on their individual income tax returns as shown
below:
YEARS ENDED DECEMBER 31, 1996 1995 1994
Taxable ordinary income $0.487 $0.549 $0.469
Nontaxable return of capital 0.292 0.171 0.270
$0.779 $0.720 $0.739
NOTE 8 - TAXES ON INCOME
For the taxable years 1996 and 1995, the Company elected to be treated as a REIT
on the filings of the 1996 and 1995 tax returns and will elect the same for
1997.
NOTE 9 - SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
The Company had a noncash financing activity related to unpaid dividends
declared of $302,996, $226,649 and $164,876 for 1996, 1995 and 1994.
Cash paid for interest during the year ended December 31, 1996, 1995 and 1994
was $857,042, $569,746 and $277,288.
NOTE 10 - SUBSEQUENT EVENTS
(a) From January 2 to January 14, 1997, a total of $1,179,423 in proceeds from
the sale of shares in the Company's current offering was released from an escrow
account, and 117,987 shares were issued to investors.
(b) On January 17, 1997, the Company acquired an industrial building located in
Irvine, California for $4,902,500. The acquisition was accomplished with use of
$2,300,000 in debt financing, and the remainder with proceeds from the Company's
current offering.
(c) On January 15, 1997, the Company paid dividends totaling $302,997 ($0.0666
per share per monthly record date), payable to shareholders of record on October
1, November 1, and December 1, 1996, respectively (Note 7).
F-16
<PAGE>
<TABLE>
WEST COAST REALTY INVESTORS, INC.
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
INFORMATION REQUIRED BY RULE 12-28 IS AS FOLLOWS:
<CAPTION>
Gross Amount at Life on
Cost which which
Initial Cost Capitalized Carried at Close of
Period
Subsequent
Building To Building Depreciation
& Acquisition & Year Computed
Improve- Improve- Improve- Total Accumulated Construction Date Building/
Description Emcumbrances Land ments ments Land ments Cost Depreciation Completed Acquired Improvements
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Retail
Building,
Huntington
Beach, CA 569,132 1,005,965 670,245 0 1,005,965 670,245 1,676,210 125,015 1991 2/91 31.5
Retail
Building,
Shopping
Center,
Fresno, CA 628,471 553,648 861,245 0 553,648 861,245 1,414,893 80,056 1993 5/93 39.0
Industrial
Building
Huntington
Beach,
CA 1,708,362 1,132,159 1,367,842 0 1,132,159 1,367,842 2,500,001 115,450 1976 9/93 39.0
Industrial
Building
Brea, CA 981,338 808,423 1,439,920 0 808,423 1,439,920 2,248,343 104,617 1989 3/94 39.0
Entertainment
Center
Riverside, CA 1,177,055 768,667 2,886,833 0 768,667 2,886,833 3,655,500 154,215 1994 11/94 39.0
Office
Building
Tustin, CA 2,155,575 1,089,796 3,772,298 0 1,089,796 3,772,298 4,862,094 153,145 1986 5/95 39.0
Light
Industrial
Bldg, 2,140,311 1,228,262 2,519,349 0 1,228,262 2,519,349 3,747,611 72,683 1993 10/95 39.0
Fremont, CA
Light
Industrial
Bldg, 336,272 489,182 609,397 0 489,182 609,397 1,098,579 5,868 1988 8/96 39.0
Sacramento,
CA
Light
Industrial
Bldg, 382,277 325,024 404,896 0 325,024 404,896 729,920 3,899 1988 8/96 39.0
Sacramento,
CA
TOTAL 10,078,793 7,401,126 14,532,025 0 7,401,126 14,532,025 21,933,151 814,948
</TABLE>
F-17
<PAGE>
WEST COAST REALTY INVESTORS, INC.
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (CONTINUED)
DECEMBER 31, 1996
A reconciliation of the total cost for the years ending
December 31, 1994, 1995 and 1996 follows:
Balance at January 1, 1994.. $ 5,591,104
1994 Additions ............. 5,866,457
Balance at December 31, 1994 11,457,561
1995 Additions .............. 8,647,091
Balance at December 31, 1995. 20,104,652
1996 Additions .............. 1,828,500
Balance at December 31, 1996 $21,933,152
A reconciliation of accumulated depreciation for the years ending
December 31, 1994, 1995 and 1996 follows:
Balance at January 1, 1994.... $ 85,210
1994 Depreciation ............ 115,372
Balance at December 31, 1994 . 200,582
1995 Depreciation ............ 253,905
Balance at December 31, 1995 . 454,487
1996 Depreciation ............ 360,461
Balance at December 31, 1996 . $ 814,948
F-18
<PAGE>
<TABLE>
WEST COAST REALTY INVESTORS, INC.
SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 1996
INFORMATION REQUIRED BY RULE 12-29 IS AS FOLLOWS:
<CAPTION>
Final Periodic Delinquent
Interest Maturity Payment Prior Face Carrying Principal/
Description Rate Date Terms Liens Amount Amount Interest
<S> <C> <C> <C> <C> <C> <C> <C>
Retail Building Equal
Monthly
Fresno, CA 8.25% 8/1/2003 Payments None $665,000 $628,471 None
First Deed of to
Trust Maturity
Balloon
Payment
due
8/2003
Industrial Variable
Building Monthly
Huntington Variable 10/1/2003 Payments None $1,750,000 $1,708,362 None
Beach, to
California Maturity
First Deed of Balloon
Trust Payment
due
10/2003
Retail Building Variable
Huntington Beach, Monthly
California Variable 2/1/2004 Payments None $600,000 $569,132 None
First Deed of to
Trust Maturity;
25 yr.
Amortization;
Balloon
Payment
due
2/2004
Industrial Variable
Building Rate;
Brea, CA Variable 3/1/2020 25 yr None $1,000,000 $981,338 None
First Deed of Amortization;
Trust
Entertainment Center Equal
Riverside, CA Monthly
First Deed of 9.25% 11/8/2004 Payments; None $1,200,000 $1,177,055 None
Trust Amortized
over 28
yrs,
3 months;
Balloon
Payment
due
11/2004
Office Building Fixed
Tustin, CA Rate;
First Deed of 9.625% 2/2/2005 15 year None $2,300,000 $2,155,575 None
Trust Amortization;
Balloon
Payment
due
2/2005
Light Fixed
Industrial Monthly
Bldg. Fremont
CA. First Deed 8.240% 8/1/2015 Payments None $2,200,000 $2,140,311 None
of Trust 20 years
Amortization
Light Fixed
Industrial Monthly
Bldg.
Sacramento, CA 10.000% 11/1/2001 Payments None $350,000 $336,272 None
First Deed of Trust 25 years
Amortization
Light Fixed
Industrial Monthly
Bldg.
Sacramento, CA 8.000% 6/1/2018 Payments None $405,000 $382,277 None
First Deed of Trust 25 years
Amortization
10,470,000 10,078,793
</TABLE>
F-19
<PAGE>
WEST COAST REALTY INVESTORS, INC.
SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 1996 (CONT.)
A reconciliation of mortgage loans payable for years ending December 31, 1994,
1995, and 1996 follows:
Balance at January 1, 1994 2,405,526
1994 Additions 2,800,000
1994 Paydowns (44,171)
Balance at December 31, 1994 5,161,355
1995 Additions 4,469,647
1995 Paydowns (91,822)
Balance at December 31, 1995 9,539,180
1996 Additions 755,000
1996 Paydowns (215,387)
Balance at December 31, 1996 $10,078,793
F-20
<PAGE>
INDEPENDENT AUDITORS' REPORT
Shareholders
West Coast Realty Investors, Inc.
We have audited the accompanying summary of historical information relating to
operating revenues and specified expenses of 717 and 721 West Del Paso Road (the
Property) for the three months ended March 31, 1996 and for the year ended
December 31, 1995. These financial statements are the responsibility of 717
and 721 West Del Paso's management. Our responsibility is to express an
opinion on these financial statements based upon 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 summary of historical
information relating to operating revenues and specified expenses is free of
material misstatement. An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the summary of historical
information relating to operating revenues and specified expenses. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall summary
relating to operating revenues and specified expenses presentation.
We believe our audits provide a reasonable basis for our opinion.
The accompanying summary of historical information relating to operating
revenues and specified expenses was prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission and
excludes certain material expenses, described in Note 2, that would not be
comparable to those resulting from the proposed future operations of the
Property.
In our opinion, the summary of historical information relating to operating
revenues and specified expenses referred to above presents fairly, in all
material respects, the operating revenues and specified expenses, exclusive
of expenses described in Note 2, of the Property for the three months ended
March 31, 1996 and the year ended December 31, 1995 in conformity with
generally accepted accounting principles.
HUNNICUTT OKAMOTO & ASSOCIATES
May 21, 1996
Woodland Hills, California
F-45
<PAGE>
<TABLE>
717 AND 721 WEST DEL PASO ROAD
SUMMARY OF HISTORICAL INFORMATION RELATING TO
OPERATING REVENUES AND SPECIFIED EXPENSES
For the Three Months Ended March 31, 1996
and
Year Ended December 31, 1995
<CAPTION>
Three
Months Year
Ended Ended
March 31, December 31,
1996 1995
------------ ------------
<S> <C> <C>
Operating Revenues:
Rental income $ 45,219 $ 176,815
Total operating revenue 45,219 176,815
Specified Expenses:
Operating expenses 2,700 170
Interest expense 15,985 63,931
Total specified expenses 18,685 64,101
Excess of operating revenues
over specified expenses $26,534 $112,714
</TABLE>
[FN]
See accompanying notes to summary of
historical information
F-46
<PAGE>
717 and 721 WEST DEL PASO ROAD
NOTES TO SUMMARY OF HISTORICAL INFORMATION RELATING TO
OPERATING REVENUES AND SPECIFIED EXPENSES
NOTE 1 - THE PROPERTY
717 and 721 West Del Paso Road (the Property) is comprised of two adjacent
single story light industrial buildings located in the city of Sacramento,
California. The two properties are located in the same industrial park. The
717 West Del Paso Road property has a rental area approximating 11,200 square
feet. The 721 West Del Paso Road property has a rental area approximating 8,640
square feet. Both properties are currently leased to Java City, a California
corporation. The owners of the Property are also shareholders of the corporate
tenant. Both leases have lease terms expiring in 2003. The lease agreements
provide that specified expenses including insurance, repairs and maintenance and
property taxes of the Property are paid by the lessee. However, the lease of
721 West Del Paso Road provides that the lessor shall keep the foundation, roof
and structural portions of the exterior walls in good order, condition and
repair. During the three months ended March 31, 1996 and the year ended
December 31, 1995 the lessor incurred $2,700 and $170, respectively in roof
repairs to the 721 West Del Paso Road property. These specified expenses
incurred by the Property are included as operating expenses in the accompanying
summary.
Minimum rental income, under the existing leases, is $183,800, $191,200,
$198,800, $206,800, $215,100, $223,700 for the years ended December 31, 1996
through December 31, 2001 and $371,500 for years thereafter.
The Property is expected to be acquired by West Coast Realty Investors, Inc. in
July 1996. The property is expected to be acquired subject to the assumption
of two promissory notes. The first note has an outstanding balance of
approximately $341,800 as of March 31, 1996 and is due in 2001. The note rate
is 10%. Interest expense incurred during the three months ended March 31, 1996
and the year ended December 31, 1995 and during was $8,654 and $33,640,
respectively.
The second note has an outstanding balance of approximately $387,900 as of March
31, 1996 and is due in 2018. The note rate is 8%. Interest expense incurred
during the three months ended March 31, 1996 and during the year ended December
31, 1995 was $7,331 and $30,291, respectively.
NOTE 2 - BASIS OF PRESENTATION
The summary of historical information relating to operating revenues and
specified expenses of the Property excludes the following items, which are not
comparable to the future operations of the Property under the ownership of West
Coast Realty Investors, Inc.
(a) Depreciation of buildings, improvements and equipment
(b) Nonrecurring income and expenses
Rental income is recognized when earned and expenses are recognized when
incurred.
F-47
<PAGE>
<TABLE>
West Coast Realty Investors, Inc.
Estimated Twelve Month Pro Forma Statement of Taxable Operating Income (Note 1)
Based on Acquisition of Java City Property
<CAPTION>
Java City
Property
Audited
Historical Financial
Operating Results
Results for for the Pro Forma Estimated
WCRI period ended Pro
December 31, December Adjustments Forma
1996 31, 1995 (note 2) Results
<S> <C> <C> <C> <C>
REVENUE:
Rental Income $2,377,530 $176,815 $(53,017) (a) $2,501,328
Interest Income 97,097 (36,000) (b) 61,097
2,474,627 176,815 (89,017) 2,562,425
COSTS AND EXPENSES:
Operating 302,858 170 3,714 (c) 306,742
Interest 880,978 63,931 (27,402) 917,507
General and Administrative 224,254 224,254
Depreciation and Amortization 360,901 13,674 (d) 374,575
1,768,991 64,101 (10,014) 1,823,078
Taxable Operating Income $705,636 $112,714 $(79,003) $739,347
</TABLE>
<TABLE>
WEST COAST REALTY INVESTORS, INC.
STATEMENT OF CASH AVAILABLE FROM OPERATIONS (NOTE 1)
<CAPTION>
<S> <C>
Pro Forma Taxable Net Operating Income $739,347
Add: Depreciation 374,575
Pro Forma Cash Available from Operations $1,113,922
</TABLE>
[FN]
See accompanying notes to pro forma financial statements
F-48
<PAGE>
WEST COAST REALTY INVESTORS, INC.
JAVA CITY PROPERTY
NOTES TO PRO FORMA FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 -- BASIS OF PRESENTATION
The preceding unaudited pro forma statements are based on information obtained
from the lease and Agreement to Purchase documents pertaining to the property
located at 717 and 721 West Del Paso Road, Sacramento, California (the "Java
City Property" or the "Property").
The pro forma statements use the audited financial statements for the year ended
December 31, 1996 as a base for preparing the estimated pro forma operations for
the Property during its first full year of operations. The Property's current
tenant, Cucina Holdings, Inc. (doing business as Java City), leases the space in
the two separate buildings. The leases on both buildings expire October 31,
2003. The leases are triple net in nature.
The pro forma results reflect a full year of operations for the Property
assuming that it was acquired January 1, 1996. They contain certain adjustments
which are expected to be incurred in the Property's first year of operations.
There can be no assurance that the foregoing results will be obtained.
The Company acquired the property from a party who is also the President of
Cucina Holdings, Inc. The Company is unaware of any material factors which
would cause the reported financial information not to be indicative of future
operating results.
NOTE 2 - PRO FORMA ADJUSTMENTS
The significant pro forma adjustments are as follows:
(a) To adjust rental income to reflect only a full year of rental income.
$88,450 in rental income from August 2, 1996 (date of acquisition) to
December 31, 1996 is already included in the Historical Operating Results for
WCRI for the year ended December 31, 1996. In calculating this amount, the
total remaining minimum monthly rent from January 1, 1995 to October 31, 2003
is recognized on a straight-line basis in accordance with generally accepted
accounting principles.
(b) To eliminate interest income not earned due to assumed application of funds
toward purchase of Java City Property.
(c) To reflect approximate property management fees of 3% of rental income in
the first year of the lease for the period prior to acquisition (January 1 to
August 1, 1996).
F-49
<PAGE>
WEST COAST REALTY INVESTORS, INC.
JAVA CITY PROPERTY
NOTES TO PRO FORMA FINANCIAL STATEMENTS
(UNAUDITED)
(d) To adjust interest expense to reflect a full year of expense.
(e) To adjust depreciation expense for amount that pertains to the period
January 1, to August 1, 1996.
F-50
<PAGE>
INDEPENDENT AUDITORS' REPORT
Shareholders
West Coast Realty Investors, Inc.
We have audited the accompanying summary of historical information relating to
operating revenues and specified expenses of Tycom Property (the Property)
for the period January 12, 1996 to December 17, 1996. These financial
statements are the responsibility of Tycom Property's management. Our
responsibility is to express an opinion on these financial statements based
upon our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the summary of historical information relating to
operating revenues and specified expenses is free of material misstatement.
An audit also includes examining, on a test basis, evidence supporting the
amounts and disclosures in the summary of historical information relating to
operating revenues and specified expenses. An audit also includes assessing
the accounting principles used and significant estimates made by management,
as well as evaluating the overall summary relating to operating revenues and
specified expenses presentation. We believe our audit provides a reasonable
basis for our opinion.
The accompanying summary of historical information relating to operating
revenues and specified expenses was prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission and
excludes certain material expenses, described in Note 2, that would not be
comparable to those resulting from the proposed future operations of the
Property.
In our opinion, the summary of historical information relating to operating
revenues and specified expenses referred to above presents fairly, in all
material respects, the operating revenues and specified expenses, exclusive
of expenses described in Note 2, of the Property for period January 12, 1996
until December 17, 1996 in conformity with generally accepted accounting
principles.
January 17, 1997
Woodland Hills, California
F-51
<PAGE>
<TABLE>
TYCOM PROPERTY
SUMMARY OF HISTORICAL INFORMATION RELATING TO
OPERATING REVENUES AND SPECIFIED EXPENSES
For the Period January 12, 1996 to December 17, 1996
<CAPTION>
<S> <C>
Operating Revenues:
Rental income $ ---------
Total operating revenue ---------
Specified Expenses:
Operating expenses 19,800
---------
Total specified expenses 19,800
---------
Excess of specified expenses
over operating revenues $(19,800)
=========
</TABLE>
[FN]
See accompanying notes to summary of
historical information
F-52
<PAGE>
TYCOM PROPERTY
NOTES TO SUMMARY OF HISTORICAL INFORMATION RELATING TO
OPERATING REVENUES AND SPECIFIED EXPENSES
NOTE 1 - The Property
The Tycom Property (the Property) is comprised of a two story building with
underground parking located in the city of Irvine, California. The Tycom
Property has a rental area approximating 63,255 square feet.
The sole tenant of the Property is Tycom Corporation. Tycom Corporation
acquired the Property in January 1996. The Property was vacant prior to Tycom
Corporation's acquisition.
Tycom Corporation substantially improved the Property subsequent to acquisition.
Tycom Corporation did not occupy the Property until on or about December 17,
1996 when Tycom Corporation sold the property to an unrelated third party
(Seller) and entered into a lease agreement to occupy the Property under an
eleven year term. Accordingly, the management of the Property from January 12,
1996 until December 17, 1996, Tycom Corporation, did not incur any operating
revenues or specified expenses of the Property other than utility expenses. The
utility expenses are shown as operating expenses on the accompanying summary of
historical information relating to operating revenues and specified expenses .
The lease agreement entered into between Tycom Corporation and the Seller, among
other things, provides minimum rental income of $298,422, $447,633, $447,633,
$447,663, $447,663, for the years ended December 31, 1997 through December 31,
2001 and $2,704,450 for years thereafter.
The Property was acquired by West Coast Realty Investors, Inc. in January 1997
from the Seller.
NOTE 2 - Basis of Presentation
The summary of historical information relating to operating revenues and
specified expenses of the Property excludes the following items, which are not
comparable to the future operations of the Property under the ownership of West
Coast Realty Investors, Inc.
(c) Interest expense on mortgages
(b) Depreciation of buildings, improvements and equipment
(c) Nonrecurring income and expenses
Rental income is recognized when earned and expenses are recognized when
incurred.
F-53
<PAGE>
<TABLE>
WEST COAST REALTY INVESTORS, INC.
ESTIMATED UNAUDITED TWELVE MONTH PRO FORMA STATEMENT
OF TAXABLE OPERATING COME (NOTE 1)
BASED ON THE ACQUISITION OF THE TYCOM PROPERTY
<CAPTION>
Historical Tycom Pro Forma Estimated
Operating Property--- Adjustments Pro Forma
Results Audited (Note 2) Results
for WCRI Financial
December Results For
31, 1996 the Period
January 12,
1996 to
December 17,
1996
<S> <C> <C> <C> <C>
REVENUE:
Rental Income $2,377,530 $477,633 (a) $2,825,163
Interest Income 97,097 (90,000) (b) 7,097
2,474,627 280,725 2,832,260
COSTS AND EXPENSES:
Operating 302,858 19,800 13,429 (c) 316,287
(19,800) (f)
Interest 880,978 212,748 (d) 1,093,726
General and
Administrative 224,254 224,254
Depreciation and
Amortization 360,901 176,824 (e) 537,725
1,768,991 19,800 383,201 2,171,992
Taxable Operating $705,636 $(19,800) $(25,568) $660,268
Income
</TABLE>
<TABLE>
WEST COAST REALTY INVESTORS, INC.
UNAUDITED STATEMENT OF CASH AVAILABLE FROM OPERATIONS (NOTE 1)
<CAPTION>
<S> <C>
Pro Forma Taxable Net Operating Income $660,268
Add: Depreciation 537,725
Pro Forma Cash Available from $1,197,993
Operations
</TABLE>
[FN]
See accompanying noted to unaudited pro forma financial statements.
F-54
<PAGE>
WEST COAST REALTY INVESTORS, INC.
TYCOM PROPERTY
NOTES TO PRO FORMA FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 -- BASIS OF PRESENTATION
The preceding unaudited pro forma statements are based on information obtained
from the lease and Agreement to Purchase documents pertaining to the property
located at 17862 Fitch Street, Irvine, California (the "Tycom Property" or the
"Property").
The pro forma statements use the audited financial statements for the period
from January 18, 1996 to December 18, 1996 as a base for preparing the estimated
pro forma operations for the Property during its first full year of operations.
The Property's current tenant, Tycom Corporation, leases 100% of the space in
the building. The lease on the building expires December, 2007. The lease is
triple net in nature.
The pro forma results reflect a full year of operations for the Property
assuming that it was acquired January 1, 1996. They contain certain adjustments
which are expected to be incurred in the Property's first year of operations.
There can be no assurance that the foregoing results will be obtained.
The Company acquired the property from a third party. The Company is unaware of
any material factors which would cause the reported financial information not to
be indicative of future operating results.
NOTE 2 - PRO FORMA ADJUSTMENTS
The significant pro forma adjustments are as follows:
(a) To reflect a full year's worth of rental income per provisions of the lease
with the Property's tenant. In calculating the amount, the total remaining
minimum monthly rent from December 1996 to December, 2007 is recognized on a
straight-line basis in accordance with generally accepted accounting principles.
(b) To eliminate interest income not earned due to assumed application of funds
toward purchase of Tycom Property.
(c) To reflect approximate property management fees of 3% of rental income in
the first year of the lease.
F-55
<PAGE>
WEST COAST REALTY INVESTORS, INC.
TYCOM PROPERTY
NOTES TO PRO FORMA FINANCIAL STATEMENTS
(UNAUDITED)
(d) To reflect interest expense incurred in connection with debt on the Tycom
property.
(e) The computation of depreciation is based on the cost of the Property
including estimated Acquisition Fees and Expenses, and is for the initial twelve
months subsequent to the purchase. The allocation of the cost of the property
to the various asset categories and lives is based on the allocations contained
in the final appraisal report for the Property. Depreciation has been computed
on a straight-line basis over the component useful life of the assets.
DEPRECIABLE LIFE COST DEPRECIATION
Building & 39 $1,932,500 $49,551
Improvements
Tenant Improvements 11 1,400,000 127,273
Land ------- 1,570,000 --------
$ 4,902,500 $176,824
(f) To eliminate operating expenses incurred in period prior to ownership since
this lease is triple-net in nature.
F-56
<PAGE>
<TABLE>
WEST COAST REALTY INVESTORS, INC.
PRO FORMA STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
INTRODUCTION
The following unaudited pro forma finanancial statement is presented to
illustrate the acquisition of the Java City and Tycom Properties as described in
this offering, on the results of operations of the Company.
The unaudited pro forma statement of income has been prepared as if all the
aforementioned properties had been occupied by their respective tenants on
January 1, 1996.
The unaudited pro forma financial statements are not necessarily indicative
of the Company's future operations and should be read in conjunction with the
other financial statements and notes thereto included elsewhere in this
Prospectus.
<CAPTION>
HISTORICAL JAVA TYCOM ADJUST- PRO FORMA
DECEMBER CITY (I) (II) MENTS CONDENSED
31, 1996 (NOTE 1) DECEMBER
31, 1996
<S> <C> <C> <C> <C> <C>
REVENUE:
Rental $2,377,530 $176,815 $(53,017) (a) $2,948,961
447,633 (b)
Interest 97,097 (90,000) (c) 7,097
2,474,627 176,815 304,616 2,956,058
EXPENSES:
Operating 302,858 170 19,800 3,714 (d) 320,171
13,429 (e)
(19,800) (j)
Interest 880,978 63,931 (27,402) (f) 1,130,255
212,748 (g)
Depreciation 13,674 (h) 551,399
and amortization 176,824 (i)
General and 224,254 224,254
administrative
1,768,991 64,101 19,800 373,187 2,226,079
Net income $705,636 $112,714 $(19,800) $(68,571) $729,979
Net income per $0.49 $0.45
share
Weighted Average Shares Used Weighted Average Shares Used for Pro
for Historical Calculation 1,447,366 Forma Calculation (Note 2) 1,612,404
</TABLE>
[FN]
(I) Year ended December 31, 1995 (audited)
(II) Period January 12, 1996 to December 17, 1996 (audited)
F-57
<PAGE>
WEST COAST REALTY INVESTORS, INC.
NOTES TO PRO FORMA FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
1. BASIS OF PRESENTATION
The pro forma statements of income reflects operations for the Company assuming
that the Java City and Tycom Properties were acquired on January 1, 1996. This
statement contains certain adjustments which are expected to be incurred in
those properties' first year of operations, with a full year's worth of
operations reflected in the Statement of Income for the year ended December 31,
1996.
There can be no assurance that the foregoing results will be obtained.
2. PRO FORMA ADJUSTMENTS
The adjustments to the pro forma statement of income are as follows:
(1) To adjust rental income for the Java City property to recognize rental
income on a straight-line basis for 1996 using lease rates in effect
from January 1, 1995 to August 1, 2003.
(2) To reflect one year of rental income for the Tycom Property.
(3) To eliminate interest income to reflect funds used for the acquisition of
properties.
(4) To reflect property management fees from January 1, 1996 to August 1, 1996
for Java City.
(5) To reflect property management fees for one year based on the first year of
the lease on the Tycom property.
(6) To reflect added interest expense for the Java City property from January
1, 1996 to August 1, 1996.
(7) To reflect added interest expense for the Tycom property based on the first
year of payments under the projected amortization schedule for the Tycom
Property loan.
(8) To reflect depreciation expense on the Java City Property from January 1 to
August 1, 1996.
F-58
<PAGE>
WEST COAST REALTY INVESTORS, INC.
NOTES TO PRO FORMA FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
(9) To reflect depreciation expense on the Tycom Property based on the first
year of operations.
(10) To eliminate operating expenses incurred by previous owner of Tycom
Property in 1996 since the Company will be operating the Property on a triple
net basis.
2. PER SHARE AMOUNTS
The pro forma income statement assumes that the Java City and Tycom properties
were owned as of January 1, 1996. The Company has and is using approximately
$3.7 million in cash to acquire these properties. However, as of January 1,
1996, the Company actually had approximately $1.1 million available for the
acquisition of additional properties. The properties were acquired primarily
using funds raised subsequent to January 1, 1996. Therefore, the weighted
average shares outstanding as of December 31, 1996, was calculated assuming that
an additional $2.9 million in shares (290,000 shares) were outstanding as of
January 1, 1996, and that no additional shares were issued throughout the year.
This is assumed to be the minimum number of shares that would be sold given the
offering expenses and reserves that are allocated against shares sold.
F-59
<PAGE>
<TABLE>
WEST COAST REALTY INVESTORS, INC.
PRO FORMA BALANCE SHEET
DECEMBER 31, 1996
<CAPTION>
12/31/96 PRO FORMA ADJUSTED
ASSETS ADJUSTMENTS BALANCE
<S> <C> <C> <C>
RENTAL REAL ESTATE 21,118,203 4,902,500 (2) 26,020,703
CASH AND CASH EQUIVALENTS 2,017,194 1,000,000 (1) 451,997
(2,565,197) (2)
ACCOUNTS RECEIVABLE 247,948 247,948
OTHER ASSETS 188,493 188,493
23,571,838 26,909,141
LIABILITIES AND STOCKHOLDERS' EQUITY
DUE TO RELATED PARTY 46,285 46,285
DIVIDENDS PAYABLE 302,760 302,760
SECURITY DEPOSITS 124,734 37,303 (2) 162,037
OTHER LIABILITIES 114,375 114,375
NOTES PAYABLE 10,078,793 2,300,000 (2) 12,378,793
TOTAL LIABILITIES 10,666,947 13,004,250
COMMITMENTS AND CONTINGENCIES
COMMON STOCK AND ADDITIONAL PAID-IN
CAPITAL 13,877,269 1,000,000 (1) 14,877,269
DISTRIBUTIONS IN EXCESS OF EARNINGS (972,378) (972,378)
TOTAL STOCKHOLDERS' EQUITY 12,904,891 13,904,891
23,571,838 26,909,141
</TABLE>
F-60
<PAGE>
WEST COAST REALTY INVESTORS, INC.
NOTES TO PRO FORMA BALANCE SHEET
DECEMBER 31, 1996
The pro forma Balance Sheet assumes that the Tycom Property was acquired on
December 31, 1996. This statement reflects certain changes to the balance sheet
that would be reflected if the property was acquired on that date.
NOTE 1 - ADDITIONAL EQUITY RAISED
The Company would not have had enough funds available to acquire the property
as of December 31, 1996. Therefore, an assumption was made that the Company had
raised an additional $1.0 million in investor proceeds, from the sale of
approximately 112,360 shares. This would be sufficient funds to acquire the
Property and maintain a reserve account of 3% of all funds raised. In reality,
between November 6, 1996 and January 14, 1997 the Company received approximately
$1,475,000 in net proceeds from the sale of shares sold from August 1 to
December 29, 1996.
NOTE 2 - ACQUISITION OF TYCOM PROPERTY
These adjustments reflect the effect of acquiring the Tycom Property,
including an increase in security deposits, notes payable and rental real
estate, and a net decrease in cash and cash equivalents.
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