SUPPLEMENT NO. 2 TO PROSPECTUS DATED MAY 1, 1997.
This supplement ("Supplement") to the Prospectus ("Prospectus") updates the
Prospectus of West Coast Realty Investors, Inc. (the "Company") dated May 1,
1997. This Supplement is part of and must accompany the Prospectus. The date
of this supplement is June 9, 1997.
This Supplement amends and supersedes the corresponding sections of the
Prospectus and Supplement 1 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. 2 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 Cover Page and pages 1, 4, 8 ("Prior Experience
in Raising Funds"), and 68 ("Plan of Distribution") of the Prospectus
As of June 9, 1997, the Company has sold 484,599 Shares ($4,840,805) in this
offering.
The following supplement page 21 of the Prospectus ("Use of Initial Capital").
The Company intends to use the net proceeds of this offering, which will be not
less than a minimum $4,260,000 as of June 9, 1997, and a maximum $13,300,000 for
the purchase of Properties, for the payment of Acquisition Fees, and for the
establishment of appropriate reserves. See "Estimated Use of Proceeds."
The following supplements page 23 ("Dividends") and page 45 ("Liquidity and
Capital Resources") of the Prospectus.
The Company waived a portion of its Advisory Fees from January 1, 1997 to March
31, 1997. The amount waived was $26,043. The effect of this was to increase
Dividends approximately $.01 to $.02 per Share for the quarter ended March 31,
1997.
The following supplements the "Dividends" portion of INVESTMENT OBJECTIVES AND
POLICIES section of the Prospectus, beginning on page 23, and continuing to page
24.
Dividends totaling $325,906 were paid on April 15, 1997, for shareholders of
record on January 1, February 1, and March 1, 1997.
Approximately 37% of these dividends constituted a return of capital. This
dividend payment is summarized below:
Record Date Per Outstanding Total
Date Paid Share Shares Dividend
- ------ ------ ------ -------------- -----------
01/01/97 4/15/97 $0.0666 1,550,607 $103,270
02/01/97 4/15/97 0.0666 1,671,442 111,318
03/01/97 4/15/97 0.0666 1,671,442 111,318
<PAGE>
The following supplements or amends the "REAL PROPERTY INVESTMENTS " Section of
the Prospectus, beginning on page 29.
The existing lease on the OPTO-22 building expired on April 30, 1997. Thirty
days previous to the lease expiration date, the Company gave the tenant, OPTO-
22, a legal notice of such lease termination. Notwithstanding such notice, the
sub-tenant of the tenant, Claremont School, failed to vacate the premises and is
still in occupancy. In fact, Claremont School has filed for protection under
Chapter 11 Bankruptcy. OPTO-22 is pursuing the eviction of Claremont and until
Claremont vacates the premises, OPTO-22 continues to be liable to the Company
for the payment of rent. In addition, OPTO-22 is liable to the Company for
reimbursement of its legal fees in connection with its effort to gain possession
of the premises from OPTO-22 (and Claremont) as well as its obligation to
restore the premises to the condition existing when the property was originally
leased in 1987 (normal wear and tear expected) and for the removal of any
interior additions to the building not desired by Company's management.
The following supplements or amends the "REAL PROPERTY INVESTMENTS " Section of
the Prospectus, beginning on page 31.
As of June 9, 1997, the Company ("Seller") is negotiating the sale of the North
Palm Street Property to a unrelated buyer. The sale was unsolicited and is
partially contingent on the Seller utilizing the Internal Revenue Service Code
Section S1031 to facilitate a tax free exchange. However, if the Seller does
not locate an exchange property by October 31, 1997, the Buyer may close escrow
with no Section S1031 tax free exchange requirement. The total sales price is
$2,515,860 in cash. The Seller must pay off the existing lender of the first
deed of trust which as of May 31, 1997 totaled $976,421. Additionally, the
Buyer has agreed to contribute an additional $15,000 to prepay the mortgage
loan.
Proforma financial statements do not reflect the affects of the possible sale
due to the uncertainties regarding the date the transaction will take place, and
the uncertainties of a possible tax free exchange.
The following supplements or amends the "REAL PROPERTY INVESTMENTS " Section of
the Prospectus, beginning on page 40.
The Company is negotiating the refinancing of the short term promissory note for
the Tycom Property loan which matures on February 1, 1998. The terms of the
prospective lender of the first deed of trust are as follows:
Lender: Union Bank of California, N.A.
Loan Amount: $2,312,500
Interest Rate: Variable Rate - spread is 1.9% over the 3 month LIBOR with right
of conversion after the first year. The conversion rate is 1.9% over
selected Treasury Rate.
Term of Loan: Ten year term
Amortization: Twenty-five years
Monthly Payment: $17,469
Other: Only recourse is to West Coast Realty Investors, Inc.; The Company
must maintain a minimum net worth of $5,000,000; All expenses, including
loan fees are being paid by the former owner from whom the Company
purchased the property.
<PAGE>
The following supplements or amends the "MANAGEMENT'S DISCUSSION OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS" Section of the Prospectus, beginning on
page 41.
As of June 9, 1997, the Company has raised $14,462,708 in capital from prior
offerings and $3,729,535 from the current offering. An additional $1,128,270
has been raised in the current offering for sales between April 3, 1997 and June
9, 1997; these funds are expected to be released from escrow in or prior to
July, 1997.
RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE
MONTHS ENDED MARCH 31, 1996
Operations for the quarter ended March 31, 1997 represented a full quarter of
rental operations for all properties except Tycom which was owned for two and
one-half months.
The net income for the quarter ended March 31, 1997 continued to be
significantly larger than the prior quarter's amount 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 quarter ended March 31, 1997, 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 $140,282 (24%) due to a full quarter ownership of the
Java City property and two and one-half months of the Tycom property (as
compared to no ownership of these properties during the quarter ended March 31,
1996). Interest income decreased $12,338 (54%) 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 $5,939 (20%) as a reflection of the additional
properties owned during the quarter. Interest expense increased $33,986 (16%)
as a reflection of the additional debt taken on in connection with additional
property acquisition and refinancing activities. Despite the large debt
amounts, the Company is still below the maximum 50% debt a maximum that is
allowed by the Company's by-laws (debt was 46% of property cost (as defined in
the by-laws) at March 31, 1997). General and administrative costs increased
$59,276 (309%) due to higher accounting, taxes, and general insurance expense
and overhead costs related to the Company. General and administrative costs
increased as a percentage of revenue going from 3% in 1996 to 11% in 1997. Much
of this increase is due to $41,043 that the Advisor was paid during the quarter
ended March 31, 1997 due to the revised provisions of the Advisor agreement. No
advisor fees were earned during the quarter ended March 31, 1996. Depreciation
and amortization expense increased $24,729 (26%) as the result of the ownership
of additional properties during 1997 as compared to 1996. Net income of
$204,738 for the quarter ended March 31, 1997 was $6,093 (3%) lower than the
three months ended March 31, 1996.
The average number of shares outstanding during 1997 was 1,641,233 vs. 1,378,132
in 1996. Partly because of the greater number of shares outstanding, the net
income per share decreased from $.15 in 1996 to $.13 in 1997. If this figure is
analyzed using flow of funds - that is net income plus depreciation expense -
then the amount in 1997 was $.20 per share vs. $.22 per share in 1996.
<PAGE>
During the quarter ended March 31, 1997, the Company declared dividends totaling
$325,906, compared to dividends of $245,932 declared for the quarter ended March
31, 1996. Cash basis income for the quarter ended March 31, 1996 was $324,203.
This was derived by adding depreciation and amortization expense to net income.
Thus, cash distributions this quarter were $1,703 greater than cash basis net
income. In comparison, distributions in the first quarter 1996 were $59,635
less than cash basis income of $305,567. In either event, the Company continued
to qualify as a REIT in 1997, and liquidity of the Company continues to be
strong.
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 operated profitably.
The following supplements the "Liquidity and Capital Resources" section on Page
45.
Fees paid to the Advisor and the Property Manager for the three months ended
March 31, 1997 are as follows:
Advisor--$426,384
Property Manager --$29,489
The following supplements or amends the "ERISA CONSIDERATIONS" and "DESCRIPTION
OF COMMON STOCK" sections on pages 62 and 63 of the Prospectus.
As of June 9, 1997, there are 1,671,442 Shares of the Company outstanding, held
by approximately 900 Shareholders. In addition, $1,128,270 in gross proceeds
has been raised from the sale of 112,880 shares in the current offering to
fifty-seven investors between April 3 and June 9, 1997; these funds have been
deposited into an escrow account, and shares are expected to be issued in or
prior to July 1997.
<PAGE>
The following amends the Index to Financial Statements on p. 78.
West Coast Realty Investors
Unaudited Financial Statements
Balance Sheet as of December 31, 1996 and March 31, 1997...............F-33
Statements Of Income for the three months ended March 31,1997 and 1996.F-34
Statements of Stockholders' Equity for the three months ended March 31,
1997 and 1996..........................................................F-35
Statement of Cash Flows for the three months ended March 31, 1997 and
1996...................................................................F-36
Summary of Accounting Policies.........................................F-37
Notes to Financial Statements..........................................F-38
West Coast Realty Investors, Inc.
Pro Forma Statement of Income for the three months ended March 31,1997.F-47
Notes to Pro Forma Financial Statement for the three months ended
March 31, 1997 ........................................................F-48
<PAGE>
<TABLE>
WEST COAST REALTY INVESTORS, INC.
BALANCE SHEETS
MARCH 31, 1997 (UNAUDITED) AND DECEMBER 31, 1996
<CAPTION>
MARCH 31, December 31,
1997 1996
<S> <C> <C>
ASSETS
Rental real estate, less accumulated
depreciation (Note 2) $25,909,334 $21,118,203
Cash and cash equivalents 522,061 2,017,194
Accounts receivable 337,992 247,948
Loan origination fees, net of accumulated
amortization of $43,293 and $40,248 99,578 102,622
Other assets 77,570 85,871
TOTAL ASSETS $26,946,535 $23,571,838
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Accounts payable $58,904 $13,922
Due to related party (Note 5(e)) 50,700 46,285
Dividends payable (Note 8) 325,669 302,760
Security deposits and prepaid rent 242,892 124,734
Other liabilities 70,826 100,453
Notes payable (Note 6) 12,325,239 10,078,793
TOTAL LIABILITIES 13,074,230 10,666,947
COMMITMENTS
STOCKHOLDERS' EQUITY
Common stock, $.01 par-shares authorized,
5,000,000 shares issued, 1,671,442 and
1,550,607 outstanding in 1997 and 1996 16,714 15,506
Additional paid-in capital 14,949,137 13,861,763
Retained earnings (1,093,546) (972,378)
TOTAL STOCKHOLDERS' EQUITY 13,872,305 12,904,891
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $26,946,535 $23,571,838
</TABLE>
[FN]
See accompanying notes to financial statements.
F-33
<PAGE>
<TABLE>
WEST COAST REALTY INVESTORS, INC.
STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
<CAPTION>
THREE MONTHS Three
ENDED Months
MARCH 31, Ended
1997 March 31, 1996
<S> <C> <C>
Revenues
Rental (Notes 2 and 3) $729,886 $589,604
Interest 10,375 22,713
740,261 612,317
Costs and expenses
Operating 36,256 30,317
Property taxes 27,722 19,140
Property management fees (Note 5 (e)) 29,489 27,964
Interest expense 244,147 210,161
General and administrative 78,444 19,168
Depreciation and amortization 119,465 94,736
535,523 401,486
Net income $204,738 $210,831
Net income per share (Note 8) $.13 $.15
</TABLE>
[FN]
See accompanying notes to financial statements.
F-34
<PAGE>
<TABLE>
WEST COAST REALTY INVESTORS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 1997
(UNAUDITED)
<CAPTION>
ADDITIONAL
COMMON STOCK PAID
SHARES AMOUNT CAPITAL DEFICIT
<S> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1996 1,550,607 $15,506 $13,861,763 $(972,378)
Issuance of stock, net 120,835 1,208 1,061,331 ---
Equity contribution by Affiliates
through expense reimbursements --- --- 26,043 ---
Net income --- --- --- 204,738
Dividends declared (Note 8) --- --- --- (325,906)
BALANCE AT MARCH 31, 1997 1,671,442 $16,714 $14,949,137 $(1,093,546)
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1996
(UNAUDITED)
ADDITIONAL
COMMON STOCK PAID
SHARES AMOUNT CAPITAL DEFICIT
<S> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1995 1,322,404 $13,224 $11,771,030 $(549,417)
Issuance of stock, net 91,260 913 883,375 ---
Net income --- --- --- 210,831
Dividends declared (Note 8) --- --- --- (245,932)
BALANCE AT MARCH 31, 1996 1,413,664 $14,137 $12,654,405 $(584,518)
</TABLE>
[FN]
See accompanying notes to financial statements.
F-35
<PAGE>
<TABLE>
WEST COAST REALTY INVESTORS, INC.
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996 (UNAUDITED)
<CAPTION>
Three Months Three Months
Ended Ended
INCREASE (DECREASE) IN CASH AND CASH March March
EQUIVALENTS 31,1997 31,1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $204,738 $210,831
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 119,465 94,736
Interest expense on amortization of loan
origination fees 3,045 6,953
Increase (decrease) from changes in:
Accounts receivable (90,044) (30,326)
Other assets 8,300 10,745
Accounts payable 44,982 (8,621)
Due to related party (4,415) ---
Security deposits and prepaid rent 118,158 ---
Other liabilities (29,627) ---
NET CASH PROVIDED BY OPERATING ACTIVITIES 374,602 284,318
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to rental real estate (4,907,441) ---
NET CASH (USED IN) INVESTING ACTIVITIES (4,907,441) ---
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock, net 1,045,305 794,236
Equity contribution by Affiliates through
expense reimbursements 26,043 ---
Dividends declared and paid (280,088) (226,886)
Increase in notes payable 2,300,000 ---
Payments on notes payable (53,554) (41,505)
NET CASH PROVIDED BY FINANCING ACTIVITIES 3,037,706 525,845
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (1,495,133) 810,163
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD 2,017,194 1,450,022
CASH AND CASH EQUIVALENTS, END OF PERIOD $522,061 $2,260,185
</TABLE>
[FN]
See accompanying notes to financial statements.
F-36
<PAGE>
WEST COAST REALTY INVESTORS, INC.
SUMMARY OF ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying balance sheet as of March 31, 1997, the income statements and
statements of cash flow for the three month periods ended March 31, 1997, and
1996 are unaudited, but in the opinion of management include all adjustments,
consisting only of normal recurring accruals, necessary for a fair presentation
of the financial position and results of operations for the periods presented.
The results of operations for the three month period ended March 31, 1997, are
not necessarily indicative of results to be expected for the year ended December
31, 1997.
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 exists 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 PROPERTIES AND DEPRECIATION
Assets are stated at lower of cost net realizable value. Depreciation is
computed using the straight-line method over 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.
LOAN ORIGINATION FEES
Loan origination fees are capitalized and amortized over the life of the loan.
F-37
<PAGE>
WEST COAST REALTY INVESTORS, INC.
SUMMARY OF ACCOUNTING POLICIES(Continued)
RENTAL INCOME
Rental revenue is recognized on a straight-line basis to the 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.
CASH AND CASH EQUIVALENTS
The Company considers cash in the bank, liquid money market funds, and all
highly liquid certificates of deposit, with original maturities of three months
or less, to be cash and cash equivalents.
USE OF ESTIMATES
The preparation of financial statements in conformity with 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.
RECLASSIFICATIONS
For comparative purposes, certain prior year amounts have been reclassified to
conform to the current year presentation.
NEW ACCOUNTING PRONOUCEMENTS
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-38
<PAGE>
WEST COAST REALTY INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996 (UNAUDITED) AND DECEMBER 31, 1996
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
March 31, 1997 the Company has raised $16,687,616 in capital.
Sales commissions and wholesaling fees, representing 8% 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
Irvine, California (Tycom) January 17, 1997 4,907,441
F-39
<PAGE>
WEST COAST REALTY INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996 (UNAUDITED) AND DECEMBER 31, 1996
NOTE 2 - RENTAL PROPERTIES (CONTINUED)
The major categories of property are:
MARCH 31, 1997 DECEMBER 31, 1996
Land $ 8,971,126 $ 7,401,126
Buildings and improvements 17,869,466 14,532,025
26,840,592 21,933,151
Less accumulated depreciation 931,258 814,948
Net rental properties $ 25,909,334 $ 21,118,203
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 28%, 22%, 20%, 19% and 10% in 1997;
Five tenants accounted for 23%, 19%, 18%, 12% and 10% in 1996;
Four tenants accounted for 24%, 20%, 15% and 10% in 1995;
NOTE 3 - OTHER ASSETS
Other assets consists of the following:
MARCH 31, 1997 DECEMBER 31, 1996
Deposits and prepaid expenses $78,449 $86,640
Organization costs 14,330 14,330
92,779 100,970
Less accumulated amortization 15,209 15,099
Net other assets $77,570 $85,871
F-40
<PAGE>
WEST COAST REALTY INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996 (UNAUDITED) AND DECEMBER 31, 1996
NOTE 4 - FUTURE MINIMUM RENTAL INCOME
As of March 31, 1997 and December 31, 1996, future minimum rental income under
the existing leases that have remaining noncancelable terms in excess of one
year are as follows:
MARCH 31, 1997 DECEMBER 31,1996
1997 .................................$1,729,798 $2,123,959
1998 ..................................2,485,224 2,037,591
1999 ..................................2,424,297 1,976,664
2000 ..................................2,312,357 1,864,724
2001 ..................................2,218,845 1,771,212
Thereafter .......................... 17,941,509 15,255,711
Total $29,112,030 $25,029,861
Future minimum rental income does not include lease renewals or new leases that
may result after a noncancelable-lease expires.
NOTE 5 - 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. Property management
services for the Company's properties are provided by West Coast Realty
Management, Inc. ("WCRM"), an affiliate of the Advisor.
F-41
<PAGE>
WEST COAST REALTY INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996 (UNAUDITED) AND DECEMBER 31, 1996
During the periods presented, the Company had the following related party
transactions:
(a) In accordance with the advisory agreement, compensation earned by, or
services reimbursed or reimbursable to the advisor, consisted of the
following:
THREE MONTHS ENDED FOR THE YEAR
MARCH 31, 1997 ENDED
DECEMBER 31, 1996
Syndication fees $150,000 $82,864
Acquisition fees 270,384 78,177
Overhead expenses 6,000 12,000
$426,384 $173,041
(b) At March 31, 1997 and December 31, 1996, the Advisor owned 22,556
shares of the issued and outstanding shares of the Company.
(c) Sales commissions paid in accordance with the selling agreement to ASC
totaled $100,778 for the three months ended March 31, 1997 and $63,741 for the
three months ended March 31, 1996.
(d) Property management fees earned by WCRM totaled $29,489 and $27,964
for the three months ended March 31, 1997 and 1996, respectively.
(e) The Corporation had related party accounts payable as follows:
MARCH 31, 1997 DECEMBER 31, 1996
Associated Securities Corp. $ 1,210 $ 396
West Coast Realty Management 29,490 24,839
West Coast Realty Advisors 20,000 21,050
$50,700 $46,285
F-42
<PAGE>
WEST COAST REALTY INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996 (UNAUDITED) AND DECEMBER 31, 1996
(Continued)
NOTE 6 - NOTES PAYABLE
Notes payable are made up of the following:
MARCH 31, DECEMBER 31,
1997 1996
8.25% promissory note secured by a Deed of Trust
on the Fresno Property, monthly principal and interest
payments are $5,244 due August 1, 2003 ................$ 625,069 $ 628,471
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 ............1,703,640 1,708,362
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 ..............566,047 569,132
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 ..1,174,294 1,177,055
F-43
<PAGE>
WEST COAST REALTY INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996 (UNAUDITED) AND DECEMBER 31, 1996
(Continued)
MARCH 31, DECEMBER 31,
1997 1996
NOTE 6 - NOTES PAYABLE (CONT.)
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 ......................... $ 978,411 $ 981,338
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..2,134,704 2,155,575
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 ................................... 2,127,634 2,140,311
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.................. 334,427 336,272
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.................... 381,013 382,277
9.25% promissory note secured by a Deed of Trust on the
Tycom property, monthly payments of interest only are
approximately $17,000, due January 8, 1998 2,300,000 ---
$12,325,239 $10,078,793
F-44
<PAGE>
WEST COAST REALTY INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996 (UNAUDITED) AND DECEMBER 31, 1996
NOTE 6 - 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 March 31, 1997 and December 31, 1996
are as follows:
YEAR ENDING MARCH 31, 1997 DECEMBER 31, 1996
1997 .................................. $156,768 $210,322
1998 ................................. 2,528,391 228,391
1999 .................................. 248,287 248,287
2000 .................................. 269,435 269,435
2001 .................................. 582,090 582,090
Thereafter ............................8,540,268 8,540,268
Total $12,325,239 $10,078,793
NOTE 7 - 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 8 - NET INCOME AND DIVIDENDS PER SHARE
Net Income Per Share for the three months ended March 31, 1997 and 1996 was
computed using the weighted average number of outstanding shares of 1,641,233
and 1,378,132, respectively.
F-45
<PAGE>
WEST COAST REALTY INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996 (UNAUDITED) AND DECEMBER 31, 1996
NOTE 8 - NET INCOME AND DIVIDENDS PER SHARE (CONT.)
Dividends declared during the first quarter 1997 and 1996 were as follows:
OUTSTANDING AMOUNT TOTAL
RECORD DATE SHARES PER SHARE DIVIDEND
January 1, 1997 1,550,607 $0.0666 $103,270
February 1, 1997 1,671,442 0.0666 111,318
March 1, 1997 1,671,442 0.0666 111,318
TOTAL $325,906
January 1, 1996 1,325,404 0.060 $79,524
February 1, 1996 1,371,794 0.060 82,308
March 1, 1996 1,401,664 0.060 84,100
TOTAL $245,932
NOTE 9 - NEW ACCOUNTING PRONOUNCEMENTS
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.
NOTE 10 - SUBSEQUENT EVENT
(a) In April 1997, the Company paid dividends totaling $325,906 ($0.0666 per
share per period), payable to shareholders of record on January 1, February 1,
and March 1, 1997, respectively (Note 8).
(b) On April 1, 1997, a total of $1,402,438 in proceeds from the sale of shares
in the Company's current offering was released from an escrow account, and
139,422 shares were issued to investors.
F-46
<PAGE>
<TABLE>
WEST COAST REALTY INVESTORS, INC.
PRO FORMA STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1997
INTRODUCTION
The following unaudited pro forma financial statement is presented to
illustrate the acquisition of the Tycom Property 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, 1997 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 TYCOM ADJUST- PRO FORMA
MARCH 31, (I) MENTS CONDENSED
1997 (NOTE 1) MARCH 31, 1997
<S> <C> <C> <C> <C>
REVENUE:
Rental 729,886 25,754 (a) 755,640
Interest 10,375 (7,400) (b) 2,975
740,261 18,354 758,615
EXPENSES:
Operating 93,467 19,800 773 (c) 94,240
(19,800) (e)
Interest 244,147 12,240 (d) 256,387
Depreciation
and 119,465 119,465
amortization
General and
administrative 78,444 --- --- 78,444
535,523 19,800 (6,787) 548,536
Net income $204,738 $(19,800) 25,141 210,079
Net income per $.13 $.14
share
Weighted Average Shares Used Weighted Average Shares Used for Pro
for Historical Calculation 1,641,233 Forma Calculation 1,641,233
</TABLE>
[FN]
(I) Period January 12, 1996 to December 17, 1996 (audited)
F-47
<PAGE>
WEST COAST REALTY INVESTORS, INC.
NOTES TO PRO FORMA FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(UNAUDITED)
1. BASIS OF PRESENTATION
The pro forma statements of income reflect operations for the Company assuming
that the Tycom Property was acquired on January 1, 1997. This statement
contains certain adjustments which are expected to be incurred in those
properties' first year of operations, with a full three month's worth of
operations reflected in the Statement of Income for the three months ended
March 31, 1997.
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:
(a) To reflect additional rental income for the Tycom Property, so that a
full three months are recognized.
(b) To eliminate interest income to reflect funds used for the acquisition of
Tycom.
(c) To reflect additional property management fees for three months based on
the first year of the lease on the Tycom property.
(d) To reflect added interest expense for the quarter for the Tycom property
based on the first year of payments under the projected amortization schedule
for the Tycom Property loan.
(e) 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.
F-48
