SUPPLEMENT NO. 5 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 October 28, 1997.
This Supplement amends and supersedes the corresponding sections of the
Prospectus, and Supplements 1, 2, 3 and 4 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. 5 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 October 28, 1997, the Company has sold 698,688 Shares ($6,972,874) 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 $6,136,000 as of October 28, 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 June
30, 1997. The amount waived was $55,569. The effect of this was to increase
Dividends approximately $.03 per Share for the six months ended June 30, 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. Dividends totaling
$362,441 were paid on July 15, 1997 for shareholders of record on April 1, May
1, and June 1, 1997. Dividends totaling $383,474 were paid on October 15, 1997
for shareholders of record on July 1, August 1, and September 1, 1997.
<PAGE>
Approximately 37% of these dividends constituted a return of capital. The
dividend payments are 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
04/01/97 7/15/97 0.0666 1,810,916 120,607
05/01/97 7/15/97 0.0666 1,815,579 120,917
06/01/97 7/15/97 0.0666 1,815,579 120,917
07/01/97 10/15/97 0.0666 1,815,579 120,917
08/01/97 10/15/97 0.0666 1,974,144 131,478
09/01/97 10/15/97 0.0666 1,968,144 131,078
The following supplements or amends the "REAL PROPERTY INVESTMENTS " Section
of the Prospectus, beginning on page 29.
OPTO-22 PROPERTY
The existing lease on the OPTO-22 building expired on April 30, 1997. OPTO-22,
the tenant, and Claremont School, the sub-tenant, both vacated the premises on
September 10, 1997. West Coast Realty Investors, Inc. has settled with OPTO-22
for the amounts owed by OPTO-22 to West Coast Realty Investors, Inc. for rent
and for deferred maintenance. OPTO-22 has paid the amounts owed to West Coast
Realty Investors, Inc. in accordance with the terms and conditions of a
Settlement Agreement dated October 31, 1997 and the parties have released one
another from any further claims as provided in said agreement.
The following supplements or amends the "REAL PROPERTY INVESTMENTS " Section of
the Prospectus, beginning on page 31.
NORTH PALM STREET PROPERTY
As of October 28, 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 September 30, 1997 totaled $972,345.
Additionally, the Buyer has agreed to contribute an additional $15,000 to
prepay the mortgage loan.
<PAGE>
The following supplements or amends the "REAL PROPERTY INVESTMENTS " Section of
the Prospectus, beginning on page 40.
TYCOM PROPERTY
The Company negotiated the refinancing of an existing short term promissory note
on the Tycom Property loan which was scheduled to mature on February 1, 1998.
The terms of the new first deed of trust loan are as follows:
Lender: Union Bank of California, N.A.
Loan Amount: $2,312,500
Interest Rate: Variable Rate - margin is 1.9% over the 3 month LIBOR with right
to convert after the first year. The conversion margin would be 1.9%
over selected Treasury Rate for the selected loan term.
Loan Term: Ten year term
Amortization: Twenty-five years
Monthly Debt Service: $17,469
Other: Recourse is only to West Coast Realty Investors, Inc.; The Company
must maintain a minimum net worth of $5,000,000; loan fees and a majority
of the administrative expenses are being paid by the former owner from whom
the Company purchased the property.
ROSEVILLE PROPERTY
In early November 1997, the Company intends on acquiring the
investment described below (the "Roseville Property" or the "Property"). The
funds to acquire the Roseville will result from the Section S1031 tax free
exchange of the Brea property (as described above), plus additional proceeds
resulting from the sale of the Company's Shares in the current offering. No
debt financing will be used in connection with the Roseville acquisition.
Description. The Roseville Property is currently under construction, and
an official address has not yet been assigned to the Property. Construction has
been completed, with the Company taking ownership of the Property two to three
weeks after the occupancy permit is issued. The Property is located at the
corner of Stanford Ranch Road and Fairway Drive in Roseville, California.
Roseville is a city of 59,700 residents (1997 Sacramento Area Council of
Governments estimate) located in the Sacramento region of Northern California.
The property is located on a lot size of .87 acres (approximately 37,900
square feet). This site is part of a larger shopping center which includes well-
known retailers such as Costco, Toys 'R Us, Shell Gasoline, Ross Dress For Less,
and McDonald's Restaurants. The total lot size is approximately 8.66 acres
(378,000 square feet). There are 61 parking spaces assigned to this site, with
the property also enjoying the use of hundreds of other parking spaces located
within the larger shopping center. The building size is expected to total 5,133
square feet.
<PAGE>
The sole tenant of the Property will be Applebee's Restaurant. Applebee's
is a well-known, national franchise of sit-down casual restaurants. This
particular Applebee's is being developed by, and acquired from, Christian Knox
(an individual and unrelated third party), and the restaurant franchise will be
owned and operated by him in a sale-leaseback arrangement. Mr. Knox has seven
Applebees and nine Burger King franchises, as evidence of his experience in this
industry.
The lease on the property will commence upon the concurrent issuance of the
Certificate of Occupancy and transfer of the Property to the Company. The lease
is a 20 year triple net lease, including provisions for collection of common
area charges that will be assessed by the shopping center owner. Lease payments
are initially $14,333.33 per month ($172,000 per year) with rental increases
scheduled every five years at the rate of 12 /%. Assuming the lease were to
commence November 1, 1997, the lease payments on a calendar year basis are noted
below:
1997 $ 28,667
1998-2001 172,000
2002 179,167
2003-2006 193,500
2007 201,563
2008-2011 217,688
2012 226,758
2013-2016 244,898
2017 (through September 1) 163,266
Mr. Knox has personally guaranteed the lease and has provided documentation
demonstrating a personal net worth in excess of $10 million.
Property Operations. The Roseville Property will be 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. Although the tenant
will be obligated to pay property taxes, property tax in the first full year of
operations is estimated to be $20,000 (approximately 1% of the sales price).
Terms of Purchase. Total consideration expected to be paid by the Company
for the Roseville property is $2,067,000. This cost is expected to include the
$1,950,000 sales price payable to the Seller/Operator, $7,000 in estimated
legal, appraisal, and closing costs, and a $110,000 Acquisition Fee payable to
the Advisor. In addition, a yet undetermined amount is expected to be received
from the Seller/Operator as a security deposit. The sale is expected to be paid
for from approximately $1,500,000 received from the disposition of the Brea
property (as described above), with the balance (approximately $567,000) from
the proceeds resulting from the sale of the Company's shares in the current
offering.
The purchase price was arrived at through arms-length negotiations with the
Seller/Operator.
<PAGE>
General. The computation of depreciation for the Roseville Property will
be based on the cost of the property, including Acquisition Fees and Expenses.
The allocation of the cost of the Property to various asset categories will be
estimated, based on allocations in the appraisal report. Depreciation will be
computed on a straight-line basis over the component useful life of the assets.
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 October 28, 1997, the Company has raised $14,462,708 in capital from prior
offerings and $6,972,874 from the current offering. An additional $664,091 has
been raised in the current offering for sales between September 22, 1997 and
October 28, 1997; these funds are expected to be released from escrow in
January, 1998.
RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS
ENDED JUNE 30, 1996
Operations for the six months ended June 30, 1997 represented a full six months
of rental operations for all properties except Tycom which was owned for five
and one-half months.
The net income for the six months ended June 30, 1997 continued to be
significantly larger than the prior six months 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 six months ended June 30, 1997, and all
properties that have been purchased by the Company have operated at levels equal
to current expectations.
Rental revenue increased $293,431 (25.4%) due to a full six months ownership of
the Java City property and five and one-half months of the Tycom property (as
compared to no ownership of these properties during the six months ended June
30, 1996). Interest income decreased $17,637 (34.9%) 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 decreased $5,067 (7%) primarily due to the reclassification
of general liability insurance from operating to general and administrative
expenses during the six months ended June 30, 1997 as compared to the six months
ended June 30, 1996. Interest expense increased $100,572 (24%) 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
June 30, 1997). General and administrative costs increased $111,016 (223%) due
to the reclassification of general liability insurance from operating expense to
general and administrative expense for the six months ended June 30, 1997 as
compared to the six months ended June 30, 1996. Additionally, much of this
increase is due to $85,569 that the Advisor was paid during the six months ended
June 30, 1997 due to the revised provisions of the Advisor agreement. No
advisor fees were earned during the six months ended June 30, 1996. Depreciation
and amortization expense increased $49,457 (26%) as the result of the ownership
of additional properties during 1997 as compared to 1996. Net income of
$382,291 for the six months ended June 30, 1997 was $2,836 (1%) lower than the
six months ended June 30, 1996.
<PAGE>
The average number of shares outstanding during the six months ended June 30,
1997 was 1,698,025 vs. 1,385,908 for the six months ended June 30, 1996. Partly
because of the greater number of shares outstanding, the net income per share
decreased from $.28 in 1996 to $.23 in 1997.
During the six months ended June 30, 1997, the Company declared dividends
totaling $688,348, compared to dividends of $532,290 declared for the six months
ended June 30, 1996. Cash basis income for the six months ended June 30, 1997
was $621,221. This was derived by adding depreciation and amortization expense
to net income. Thus, cash distributions during the six months ended June 30,
1997 were $67,127 greater than cash basis net income. The calculation of cash
basis net income is not adjusted for the $55,569 in advisory fees waived during
the first six months of 1997. In comparison, distributions in the first six
months of 1996 were $42,310 less than cash basis income of $574,600. 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 six months ended June
30, 1997 are as follows:
Advisor--$599,691
Property Manager --$55,803
The following supplements or amends the "ERISA CONSIDERATIONS" and "DESCRIPTION
OF COMMON STOCK" sections on pages 62 and 63 of the Prospectus.
As of October 28, 1997, there are 2,147,524 Shares of the Company outstanding,
held by approximately 1,000 Shareholders. In addition, $664,901 in gross
proceeds has been raised from the sale of 66,823 shares in the current offering
to twenty-seven investors between September 22 and October 28, 1997; these funds
have been deposited into an escrow account, and shares are expected to be issued
in January 1998.
<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 June 30, 1997.......F-33
Statements of Income for the three and six months ended June 30, 1997 and
1996.........................................................F-34
Statements of Stockholders' Equity for the six months ended June 30, 1997
and 1996.....................................................F-35
Statement of Cash Flows for the six months ended June 30, 1997 and
1996.........................................................F-36
Summary of Accounting Policies.................................F-37
Notes to Financial Statements..................................F-39
West Coast Realty Investors, Inc.
Pro Forma Statement of Income for the six months ended
June 30, 1997...............................................F-48
Notes to Pro Forma Financial Statement for the six months ended
June 30, 1997...............................................F-49
Pro Forma Statement of Income for the six months ended
June 30, 1997...............................................F-50
Notes to Pro Forma Financial Statement for the six months ended
June 30, 1997...............................................F-51
Pro Forma Statement of Income for the year ended
December 31, 1996...........................................F-52
Notes to Pro Forma Financial Statement for the year ended
December 31, 1996...........................................F-53
Pro Forma Balance Sheet for the six months ended June 30, 1997.F-54
Notes to Pro Forma Financial Statement for the six months ended
June 30, 1997...............................................F-55
<PAGE>
<TABLE>
WEST COAST REALTY INVESTORS, INC.
BALANCE SHEETS
JUNE 30, 1997 (UNAUDITED) AND DECEMBER 31, 1996
<CAPTION>
JUNE 30, 1997 December 31, 1996
<S> <C> <C>
ASSETS
Rental real estate, less accumulated
depreciation (Note 2) $25,793,024 $21,118,203
Cash and cash equivalents 1,756,814 2,017,194
Accounts receivable 328,600 247,948
Loan origination fees, net of accumulated
amortization of $46,339 and $40,248 96,532 102,622
Other assets 37,888 85,871
TOTAL ASSETS $28,012,858 $23,571,838
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Accounts payable $32,946 $13,922
Due to related party (Note 5(e)) 70,551 46,285
Dividends payable (Note 8) 362,205 302,760
Security deposits and prepaid rent 186,939 124,734
Other liabilities 93,542 100,453
Notes payable (Note 6) 12,272,173 10,078,793
TOTAL LIABILITIES 13,018,356 10,666,947
COMMITMENTS
STOCKHOLDERS' EQUITY
Common stock, $.01 par-shares authorized,
5,000,000 shares issued, 1,823,887 and
1,550,607 outstanding in 1997 and 1996 18,239 15,506
Additional paid-in capital 16,254,698 13,861,763
Retained earnings (1,278,435) (972,378)
TOTAL STOCKHOLDERS' EQUITY 14,994,502 12,904,891
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $28,012,858 $23,571,838
</TABLE>
[FN]
See accompanying notes to financial statements.
F-33
<PAGE>
<TABLE>
WEST COAST REALTY INVESTORS, INC.
STATEMENTS OF INCOME
THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)
<CAPTION>
THREE MONTHS THREE MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
REVENUES:
Rental $717,926 $564,777 $1,447,812 $1,154,381
Interest 22,578 27,877 32,953 50,950
740,504 592,654 1,480,765 1,204,971
COSTS AND EXPENSES:
Operating 31,442 42,445 67,696 72,763
Property taxes 27,722 18,259 55,445 37,398
Property management fees
related party (Note 5 (d)) 26,313 25,091 55,803 51,198
Interest 275,565 208,979 519,712 419,140
General and administrative 82,445 30,705 160,888 49,872
Depreciation and amortization 119,465 94,736 238,930 189,473
562,952 420,215 1,098,474 819,844
NET INCOME $177,552 $172,439 $382,291 $385,127
NET INCOME PER SHARE (NOTE 8) $.10 $.12 $.23 $.28
</TABLE>
[FN]
See accompanying notes to financial statements.
F-34
<PAGE>
<TABLE>
WEST COAST REALTY INVESTORS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
<CAPTION>
CAPITAL STOCK ADDITIONAL PAID-IN
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 273,280 2,733 2,337,366 ---
Equity contribution by Affiliates
through expense reimbursements --- --- 55,569 ---
Net income --- --- --- 382,291
Dividends declared (Note 8) --- --- --- (688,348)
BALANCE AT JUNE 30, 1997 1,823,887 $18,239 $16,254,698 $(1,278,435)
</TABLE>
<TABLE>
SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
<CAPTION>
CAPITAL STOCK ADDITIONAL PAID-IN
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 126,432 1,264 1,154,137 ---
Net income --- --- --- 385,127
Dividends declared (Note 8) --- --- --- (532,290)
BALANCE AT JUNE 30, 1996 1,448,836 $14,488 $12,925,167 $(696,580)
</TABLE>
[FN]
See accompanying notes to financial statements.
F-35
<PAGE>
<TABLE>
WEST COAST REALTY INVESTORS, INC.
STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1997 AND 1996 (UNAUDITED)
<CAPTION>
SIX MONTHS Six Months
ENDED Ended
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS JUNE 30,1997 June 30, 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $382,291 $385,127
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 232,840 189,473
Interest expense on amortization of loan
origination fees 6,090 ---
Increase (decrease) from changes in:
Accounts receivable (80,652) (51,514)
Other assets 47,983 12,886
Accounts payable 19,024 (166,667)
Due to related party 24,266 ---
Security deposits and prepaid rent 62,205 (19,709)
Other liabilities (6,911) ---
NET CASH PROVIDED BY OPERATING ACTIVITIES 687,136 349,596
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 2,340,434 1,155,401
Equity contribution by Affiliates through expense
reimbursements 55,569 ---
Dividends declared and paid (629,458) (486,401)
Increase in notes payable 2,300,000 ---
Payments on notes payable (106,620) (85,883)
NET CASH PROVIDED BY FINANCING ACTIVITIES 3,959,925 583,117
NET (DECREASE) INCREASE IN CASH AND CASH (260,380) 932,713
EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 2,017,194 1,450,022
CASH AND CASH EQUIVALENTS, END OF PERIOD $1,756,814 $2,382,735
</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 June 30, 1997, the income statements and
statements of cash flow for the six months periods ended June 30, 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 six month period ended June 30, 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 1997 and 1996 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 or 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 income is recognized on a straight-line basis to the extent that rental
income is deemed collectable. Where there is uncertainty of collecting higher
scheduled rental amounts, due to the tendency of tenants to renegotiate their
leases for 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 deposits, 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 AND SIX MONTHS ENDED JUNE 30, 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
June 30, 1997 the Company has raised $18,211,913 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 AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996 (UNAUDITED)
AND DECEMBER 31, 1996
NOTE 2 - RENTAL PROPERTIES (CONTINUED)
THE MAJOR CATEGORIES OF PROPERTY ARE:
JUNE 30, 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 1,047,568 814,948
Net rental properties $ 25,793,024 $ 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:
JUNE 30, 1997 DECEMBER 31, 1996
Deposits and prepaid expenses $38,877 $86,640
Organization costs 14,330 14,330
53,207 100,970
Less accumulated amortization 15,319 15,099
Net other assets $37,888 $85,871
F-40
<PAGE>
WEST COAST REALTY INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996 (UNAUDITED)
AND DECEMBER 31, 1996
NOTE 4 - FUTURE MINIMUM RENTAL INCOME
As of June 30, 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:
JUNE 30, 1997 DECEMBER 31,1996
1997 .............................. $1,079,798 $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 $28,462,030 $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 AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996 (UNAUDITED)
AND DECEMBER 31, 1996
NOTE 5 - RELATED PARTY TRANSACTIONS (CONT.)
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:
SIX MONTHS ENDED FOR THE YEAR
JUNE 30, 1997 ENDED
DECEMBER 31, 1996
Syndication fees $317,307 $82,864
Acquisition fees 270,384 78,177
Overhead expenses 12,000 12,000
$599,691 $173,041
(b) At June 30, 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 $198,374 for the six months ended June 30, 1997 and $84,496 for the six
months ended June 30, 1996.
(d) Property management fees earned by WCRM totaled $26,313 and $25,091
for the three months ended June 30, 1997 and 1996, respectively. For the six
months ended June 30, 1997 and 1996, WCRM earned $55,803 and $51,198,
respectively in property management fees.
(e) The Corporation had related party accounts payable as follows:
JUNE 30, 1997 DECEMBER 31, 1996
Associated Securities Corp. $ 2,182 $ 396
West Coast Realty Management 26,313 24,839
West Coast Realty Advisors 42,056 21,050
$70,551 $46,285
F-42
<PAGE>
WEST COAST REALTY INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996 (UNAUDITED)
AND DECEMBER 31, 1996
NOTE 6 - NOTES PAYABLE
NOTES PAYABLE ARE MADE UP OF THE FOLLOWING:
JUNE 30, 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 ............. $ 622,177 $ 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
June 30, 1997), and may never go below 6.5%
or above 11.0%, monthly principal and interest
payments are $12,723, due October 1, 2003 ......... 1,698,602 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 ........... 562,899 569,132
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 ..1,172,067 1,177,055
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 ....................... 975,414 981,338
F-43
<PAGE>
WEST COAST REALTY INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996 (UNAUDITED)
AND DECEMBER 31, 1996
NOTE 6 - NOTES PAYABLE (CONT.)
JUNE 30, DECEMBER 31,
1997 1996
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 .......................................... $2,113,327 $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 ................................ 2,115,660 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............... 332,722 336,272
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.................... 379,305 382,277
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 ---
$12,272,173 $10,078,793
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.
F-44
<PAGE>
WEST COAST REALTY INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996 (UNAUDITED)
AND DECEMBER 31, 1996
NOTE 6 - NOTES PAYABLE (CONT.)
The aggregate annual future maturities at June 30, 1997 and December 31, 1996
are as follows:
YEAR ENDING JUNE 30, 1997 DECEMBER 31, 1996
1997 .................................. $103,702 $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 $12,272,173 $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 June 30, 1997 and 1996 was
computed using the weighted average number of outstanding shares of 1,698,025
and 1,385,908, respectively.
Dividends declared during the first six months 1997 and 1996 were as follows:
OUTSTANDING AMOUNT TOTAL
RECORD DATE SHARES PER UNIT 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
April 1, 1997 1,810,916 0.0666 120,607
May 1, 1997 1,815,579 0.0666 120,917
June 1, 1997 1,815,579 0.0666 120,917
TOTAL $688,347
F-45
<PAGE>
WEST COAST REALTY INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996 (UNAUDITED)
AND DECEMBER 31, 1996
NOTE 8 - NET INCOME AND DIVIDENDS PER SHARE (CONT.)
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
TOTAL $532,832
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 EVENTS
(a) In July 1997, the Company paid dividends totaling $362,442 ($0.0666 per
share per period), payable to shareholders of record on April 1, May 1, and June
1, 1997, respectively (Note 8).
(b) On July 2, and July 16, 1997, a total of $1,463,808 in proceeds from the
sale of shares in the Company's current offering was released from an escrow
account, and 146,784 shares were issued to investors.
F-46
<PAGE>
WEST COAST REALTY INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996 (UNAUDITED)
AND DECEMBER 31, 1996
NOTE 10 - SUBSEQUENT EVENTS (CONT.)
(c) The Company ("Seller") is negotiating the sale of the North Palm Street
Property to a unrelated buyer. The offer to purchase the property 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 expected to be $2,515,860 in cash. The Seller must pay off
the existing lender of the first deed of trust which as of June 30, 1997 totaled
$975,309. Additionally, the Buyer has agreed to contribute an additional
$15,000 to prepay the mortgage loan.
(d) In late August or early September 1997, the Company intends on acquiring
an investment known as the Roseville Property. The funds to acquire the
Roseville will result from the Section S1031 tax free exchange of the Brea
property (as described above), plus additional proceeds resulting from the sale
of the Company's Shares in the current offering. No debt financing will be used
in connection with the Roseville acquisition. The Roseville Property is
currently under construction with construction expected to be completed by
August 15, 1997, and the Company taking ownership of the Property two to three
weeks later when an occupancy permit is issued. The property's tenant intends
on using the property as a sit-down, casual restaurant. Roseville is a city
located in the Sacramento region of Northern California.
F-47
<PAGE>
<TABLE>
WEST COAST REALTY INVESTORS, INC.
PRO FORMA STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1997
INTRODUCTION
The following unaudited pro forma financial statement is presented to
illustrate the acquisition of the Roseville Property and the disposition of the
Brea 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 or sold
by the Company 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>
Disposition Acquisition
HISTORICAL BREA ROSEVILLE PRO FORMA
JUNE 30, PROPERTY PROPERTY CONDENSED
1997 JUNE 30, 1997
<S> <C> <C> <C> <C> <C> <C>
REVENUE:
Rental $1,447,812 $(122,507) (a) $86,000 (a) $1,411,305
Gain on sale of
property --- 621,449 (f) 621,449
Interest 32,953 50,000 (b) (41,300) (b) 41,653
1,480,765 548,942 44,700 2,074,407
EXPENSES:
Operating 67,696 (37,935) (a) 6,000 (c) 35,761
Interest 519,712 (46,451) (d) 473,261
Depreciation and
amortization 238,930 (18,463) (e) 16,974 (e) 237,441
General and
administrative 272,136 272,136
1,098,474 (102,849) 22,974 1,018,599
Net income $382,291 $651,791 $21,726 $1,055,808
Net income per share $.23 $.62
Weighted Average Shares Used Weighted Average Shares Used for Pro
for Historical Calculation 1,698,025 Forma Calculation 1,698,025
</TABLE>
F-48
<PAGE>
WEST COAST REALTY INVESTORS, INC.
NOTES TO PRO FORMA FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
1. BASIS OF PRESENTATION
The pro forma statements of income reflect operations for the Company assuming
that the Roseville Property was acquired, and the Brea Property, was sold 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 six
month's worth of operations reflected in the Statement of Income for the six
months ended June 30, 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 Roseville Property, and the
reduction of rental income for the Brea Property
so that a full six months are recognized.
(b) To eliminate interest income due to funds used for the acquisition of the
Roseville Property and the addition to interest income to reflect funds
provided by the sale of the Brea Property.
(c) To reflect additional property management fees for six months based on the
first year of the lease on the Roseville Property and the reflection of
operating costs savings from the sale of the Brea Property.
(d) To reflect interest expense savings for the six months on the Brea
property.
(e) To reflect depreciation expense on the Roseville and Brea Properties from
January 1, to June 30, 1997.
(f) To reflect the gain on the sale of the Brea Property.
F-49
<PAGE>
<TABLE>
WEST COAST REALTY INVESTORS, INC.
PRO FORMA STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1997
INTRODUCTION
The following unaudited pro forma financial statement is presented to
illustrate the acquisition of the Roseville and Tycom Properties and the
disposition of the Brea 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, and the
Brea property was sold, 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>
Disposition Acquisitions
HISTORICAL BREA ROSEVILLE TYCOM PRO FORMA
JUNE 30, PROPERTY PROPERTY PROPERTY CONDENSED
1997 JUNE 30, 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUE:
Rental $1,447,812 $(122,507) (a) $86,000 (a) $25,754 (a) $1,437,059
Gain on sale of
property --- 621,449 (f) 621,449
Interest 32,953 50,000 (b) (41,300) (b) (7,400) (b) 34,253
1,480,765 548,942 44,700 18,354 2,092,761
EXPENSES:
Operating 67,696 (37,935) (c) 6,000 (c) 773 (c) 36,534
Interest 519,712 (46,451) (d) 12,240 (d) 485,501
Depreciation and
amortization 238,930 (18,463) (e) 16,974 (e) 237,441
General and
administrative 272,136 272,136
1,098,474 (102,849) 22,974 13,013 1,031,612
Net income $382,291 $651,791 $21,726 $5,341 $1,061,149
Net income per share $.23 $.63
Weighted Average Shares Used Weighted Average Shares Used for Pro
for Historical Calculation 1,698,025 Forma Calculation 1,698,025
</TABLE>
F-50
<PAGE>
WEST COAST REALTY INVESTORS, INC.
NOTES TO PRO FORMA FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
1. BASIS OF PRESENTATION
The pro forma statements of income reflect operations for the Company assuming
that the Roseville and Tycom Properties were acquired, and the Brea Property was
sold, 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 six month's worth of operations reflected in the Statement of Income for
the six months ended June 30, 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 Roseville and Tycom Properties
from January 1, 1997 to the date of acquisition or June 30, 1997
(whichever is first), and the reduction of rental income due to the
assumed sale of the Brea Property on January 1, 1997.
(b) To eliminate interest income to reflect funds used for the acquisition of
Roseville and Tycom Properties and the addition to interest income to
reflect funds provided by the sale of the Brea Property.
(c) To reflect additional property management fees for six months based on the
first year of the lease on the Roseville and Tycom Properties and the
reflection of operating costs savings from the sale of the Brea Property.
(d) To reflect interest expense savings for the six months on the Brea property
and to reflect added interest expense for six months for the Tycom Property
based on the first year of payments under the projected amortization
schedule for the Tycom Property loan.
(e) To reflect depreciation expense on the Roseville and Brea Properties from
January 1, to June 30, 1997.
(f) To reflect the gain on the sale of the Brea Property.
F-51
<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 financial statement is presented to
illustrate the acquisition of the Roseville, Tycom and Java City Properties and
the disposition of the Brea 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, 1996 or in the case of the Brea Property, disposed of on that date.
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>
Disposition Acquisitions
HISTORICAL BREA ROSEVILLE TYCOM JAVA PRO FORMA
DECEMBER PROPERTY PROPERTY PROPERTY CITY CONDENSED
31, 1996 PROPERTY DECEMBER 31, 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUE:
Rental $2,377,530 $(285,019) (a) $172,000 (a) $459,348 (a) $135,340 (a) $2,859,199
Gain on sale
of property --- 666,751 (f) 666,751
Interest 97,097 89,950 (b) (30,475) (b) 156,572
2,474,627 471,682 172,000 459,348 104,865 3,682,522
EXPENSES:
Operating 302,858 (80,696) (c) 10,500 (c) 14,040 (c) 17,980 (c) 264,682
Interest 880,978 (93,717) (d) 184,042 (d) 37,900 (d) 1,009,203
Depreciation
and
amortization 360,901 (36,924) (e) 33,950 (e) 88,540 (e) 15,160 (e) 461,627
General and
administrative 224,254 224,254
1,768,991 (211,337) 44,450 286,622 71,040 1,959,766
Net income $705,636 $683,019 $127,550 $172,726 $33,825 $1,722,756
Net income $.49 $1.19
per share
Weighted Average Shares Used Weighted Average Shares Used for Pro
for Historical Calculation 1,447,366 Forma Calculation 1,447,366
</TABLE>
F-52
<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 reflect operations for the Company assuming
that the Roseville, Tycom and Java City Properties were acquired and the Brea
Property was sold 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 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:
(a) To reflect additional rental income for the Roseville, Tycom and Java City
Properties, and a reduction of rental income for the Brea Property.
(b) To eliminate interest income to reflect funds used for the acquisition of
Java City Property and the addition to interest income to reflect funds
provided by the sale of the Brea Property.
(c) To reflect additional property management fees for year ended December 31,
1996 on the lease of the Roseville, Tycom and Java City Properties and the
reflection of operating costs savings from the sale of the Brea Property.
(d) To reflect interest expense savings for the year ended December 31, 1996 on
the Brea property and to reflect added interest expense for year for the
Roseville, Tycom and Java City Properties based on the first year of
payments under the projected amortization schedules.
(e) To reflect depreciation expense on the Roseville, Tycom, Java City and Brea
Properties for the year ended December 31, 1996.
(f) To reflect the gain on the sale of the Brea Property.
F-53
<PAGE>
<TABLE>
WEST COAST REALTY INVESTORS, INC.
PRO FORMA BALANCE SHEET
JUNE 30, 1997
<CAPTION>
HISTORICAL PRO FORMA PRO FORMA
JUNE 30, ADJUSTMENTS CONDENSED
1997 JUNE 30, 1997
<S> <C> <C> <C> <C>
ASSETS:
Rental Real Estate $25,793,024 2,067,000 (1) $25,734,761
(2,125,263) (2)
Cash & Cash Equivalents 1,756,814 1,734,666 (2) 1,424,480
(2,067,000) (1)
Accounts Receivable 328,600 328,600
Loan Origination fees, net of accumulated
amortization of $46,339 and $40,248 96,532 96,532
Other Assets 37,888 37,888
TOTAL ASSETS $28,012,858 $27,622,261
LIABILITIES AND STOCKHOLDERS EQUITY
Accounts Payable $32,946 $32,946
Due to Related Party 70,551 70,551
Dividends Payable 362,205 362,205
Security Deposits and Prepaid Rents 186,939 (12,245) (2) 174,694
Other Liabilities 93,542 93,542
Notes Payable 12,272,173 (975,414) (2) 11,296,759
TOTAL LIABILITIES 13,018,356 12,030,697
COMMITMENTS AND CONTENGENCIES
Common Stock and Additional Paid-in Capital 16,272,937 16,272,937
Distributions in Excess of Earnings (1,278,435) 597,062 (2) (681,373)
TOTAL STOCKHOLDERS EQUITY 14,994,502 15,591,564
TOTAL LIABILITIES & STOCKHOLDERS EQUITY $28,012,858 $27,622,261
</TABLE>
F-54
<PAGE>
WEST COAST REALTY INVESTORS, INC.
NOTES TO PRO FORMA BALANCE SHEET
JUNE 30, 1997
The pro forma Balance Sheet assumes that the Roseville Property was acquired
and the Brea Property was sold on June 30, 1997. This statement reflects
certain changes to the balance sheet that would be reflected if the properties
were acquired and sold on that date.
NOTE 1 - ACQUISITION OF TYCOM PROPERTY
These adjustments reflect the effect of acquiring the Roseville Property,
including an increase in rental real estate and a net decrease in cash and cash
equivalents. A significant amount of the proceeds for the purchase of the
Roseville Property will be provided by the sale of the Brea Property
(see Note 2).
NOTE 2 - SALE OF THE BREA PROPERTY
These adjustments reflect the effect of the sale of the Brea Property,
including a decrease in rental real estate, security deposits and notes payable,
a net increase in cash and cash equivalents, and a gain on the sale of the
property.
F-55
