SUPPLEMENT NO. 7 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 December 15, 1997.
This Supplement amends and supersedes the corresponding sections of the
Prospectus, and Supplements 1, 2, 3, 4, 5 and 6 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. 7 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 December 15, 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 December 15, 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
September 30, 1997. The amount waived was $88,742. The effect of this was to
increase Dividends approximately $.03 per Share for the nine months ended
September 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
On October 31, 1997, the Company ("Seller") sold the North Palm Street Property
to a unrelated buyer. The sale was unsolicited and was partially contingent on
the Seller utilizing the Internal Revenue Service Code Section S1031 to
facilitate a tax free exchange. The total sales price was $2,515,860 in cash.
The Seller must pay off the existing lender of the first deed of trust which as
of October 31, 1997 totaled $971,305. 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
On November 26, 1997, the Company acquired the investment described
below (the "Roseville Property" or the "Property"). The funds to acquire the
Roseville resulted 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 was used in
connection with the Roseville acquisition.
Description. 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 is 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 in September 1997. 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 1/2%. Assuming the lease were to commence December 1, 1997,
the lease payments on a calendar year basis are noted below:
1997 $ 14,333
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 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. Although the tenant
is 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 paid by the Company for the
Roseville property is $2,067,000. This cost includes the $1,950,000 sales price
payable to the Seller/Operator, $12,500 in estimated legal, appraisal, and
closing costs, and a $110,000 Acquisition Fee payable to the Advisor. In
addition, $14,333 was received from the Seller/Operator as a security deposit.
The sale was 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 is
based on the cost of the property, including Acquisition Fees and Expenses. The
allocation of the cost of the Property to various asset categories is 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 December 15, 1997, the Company has raised $14,462,708 in capital from
prior offerings and $6,972,874 from the current offering. An additional
$1,809,286 has been raised in the current offering for sales between September
24, 1997 and December 15, 1997; these funds are expected to be released from
escrow in January, 1998.
RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE
MONTHS ENDED SEPTEMBER 30, 1996
Operations for the nine months ended September 30, 1997 represented a full nine
months of rental operations for all properties except Tycom which was owned for
eight and one-half months.
The net income for the nine months ended September 30, 1997 continued to be
significantly larger than the prior nine 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 nine months ended September 30, 1997, and all
properties that have been purchased by the Company have operated at levels equal
to current expectations.
Rental revenue increased $410,407 (23.2%) due to a full nine months ownership of
the Java City property and eight and one-half months of the Tycom property (as
compared to no ownership of these properties during the nine months ended
September 30, 1996).
<PAGE>
Operating expenses increased $27,711 (33%) primarily due to a increase in
property liability insurance, utilities and common area maintenance during the
nine months ended September 30, 1997 as compared to the nine months ended
September 30, 1996. Interest expense increased $163,220 (25.5%) 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 maximum that is allowed by the
Company's by-laws (debt was 46% of property cost (as defined in the by-laws) at
September 30, 1997). General and administrative costs increased $106,202 (75%),
much of this increase is due to $133,742 that the Advisor was paid during the
nine months ended September 30, 1997 due to the revised provisions of the
Advisor agreement. In contrast, the Advisor was paid $35,912 during the nine
months ended September 30, 1996 for Advisory fees in accordance to the revised
Advisor Agreement. Depreciation and amortization expense increased $163,219
(26%) as the result of the ownership of additional properties during 1997 as
compared to 1996. Net income of $567,017 for the nine months ended September
30, 1997 was $10,210 (2%) higher than the nine months ended September 30, 1996.
The average number of shares outstanding during 1997 was 1,764,404 vs. 1,430,333
in 1996. Partly because of the greater number of shares outstanding, the net
income per share decreased from $.39 in 1996 to $.32 in 1997. If this figure is
analyzed using flow of funds - that is net income plus depreciation expense,
plus adding advisory fee expense with was incurred in 1997 and not 1996 - then
the amount in 1997 was $.60 per share vs. $.62 per share in 1996.
During the nine months ended September 30, 1997, the Company declared dividends
totaling $1,071,820, compared to dividends of $825,059 declared for the nine
months ended September 30, 1996. Cash basis income for the nine months ended
September 30, 1997 was $925,901. This was derived by adding depreciation and
amortization expense to net income. Thus, cash distributions during the nine
months ended September 30, 1997 were $145,919 greater than cash basis net
income. In comparison, distributions in the first nine months of 1996 were
$19,985 less than cash basis income of $845,044. In either event, the Company
is expected 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
<PAGE>
The following supplements the "Liquidity and Capital Resources" section on Page
45.
Fees paid to the Advisor and the Property Manager for the nine months ended
September 30, 1997 are as follows:
Advisor--$770,691
Property Manager --$83,384
The following supplements or amends the "ERISA CONSIDERATIONS" and "DESCRIPTION
OF COMMON STOCK" sections on pages 62 and 63 of the Prospectus.
As of December 15, 1997, there are 2,147,524 Shares of the Company outstanding,
held by approximately 1,000 Shareholders. In addition, $1,809,286 in gross
proceeds has been raised from the sale of 181,509 shares in the current offering
to seventy investors between September 24 and December 15, 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 September 30, 1997.........F-33
Statements of Income for the three and nine months ended September 30, 1997
and 1996........................................................F-34
Statements of Stockholders' Equity for the nine months ended September 30,
1997 and 1996...................................................F-35
Statement of Cash Flows for the nine months ended September 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 nine months ended September 30,
1997...........................................................F-48
Notes to Pro Forma Financial Statement for the nine months ended
September 30, 1997 ............................................F-49
Pro Forma Statement of Income for the nine months ended September 30,
1997...........................................................F-50
Notes to Pro Forma Financial Statement for the nine months ended
September 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 nine months ended September 30, 1997.F-54
Notes to Pro Forma Financial Statement for the nine months ended September
30, 1997.......................................................F-55
<PAGE>
<TABLE>
WEST COAST REALTY INVESTORS, INC.
BALANCE SHEETS
SEPTEMBER 30, 1997 (UNAUDITED) AND DECEMBER 31, 1996
<CAPTION>
SEPTEMBER December 31,
30, 1997 1996
<S> <C> <C>
ASSETS
Rental real estate, less accumulated
depreciation (Note 2) $25,676,713 $21,118,203
Cash and cash equivalents 2,882,215 2,017,194
Accounts receivable 404,203 247,948
Loan origination fees, net of accumulated
amortization of $49,872 and $40,248 122,335 102,622
Other assets 44,869 85,871
TOTAL ASSETS $29,130,335 $23,571,838
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Accounts payable $11,322 $13,922
Due to related party (Note 5(e)) 80,557 46,285
Dividends payable (Note 8) 383,236 302,760
Security deposits and prepaid rent 137,392 124,734
Other liabilities 137,484 100,453
Notes payable (Note 6) 12,228,139 10,078,793
TOTAL LIABILITIES 12,978,130 10,666,947
COMMITMENTS
STOCKHOLDERS' EQUITY
Common stock, $.01 par-shares authorized,
5,000,000 shares issued, 1,968,144 and
1,550,607 outstanding in 1997 and 1996 19,681 15,506
Additional paid-in capital 17,609,705 13,861,763
Retained earnings (1,477,181) (972,378)
TOTAL STOCKHOLDERS' EQUITY 16,152,205 12,904,891
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $29,130,335 $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 NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
<CAPTION>
THREE THREE NINE NINE
MONTHS MONTHS MONTHS MONTHS
ENDED ENDED ENDED ENDED
SEPTEMBER SEPTEMBER SEPTEMBER SEPTEMBER
30, 30, 30, 1997 30, 1996
1997 1996
<S> <C> <C> <C> <C>
REVENUES:
Rental $735,057 $618,081 $2,182,869 $1,772,462
Interest 37,605 19,974 70,558 70,564
772,662 638,055 2,253,427 1,843,026
COSTS AND EXPENSES:
Operating 43,076 40,405 110,772 83,061
Property taxes 27,722 18,528 83,167 55,927
Property management fees
-related party (Note 5 (d)) 27,581 27,015 83,384 78,213
Interest 282,835 220,188 802,547 639,327
General and administrative 86,767 61,476 247,656 141,454
Depreciation and amortization 119,954 98,764 358,884 288,237
587,935 466,376 1,686,410 1,286,219
NET INCOME $184,727 $171,679 $567,017 $556,807
NET INCOME PER SHARE (NOTE 8) $.10 $.12 $.32 $.39
</TABLE>
[FN]
See accompanying notes to financial statements.
F-34
<PAGE>
<TABLE>
WEST COAST REALTY INVESTORS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
<CAPTION>
COMMON 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 417,537 4,175 3,659,200 ---
Equity contribution by Affiliates
through expense reimbursements --- --- 88,742 ---
Net income --- --- --- 567,017
Dividends declared (Note 8) --- --- --- (1,071,820)
BALANCE AT SEPTEMBER 30, 1997 1,968,144 $19,681 $17,609,705 $(1,477,181)
</TABLE>
<TABLE>
NINE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
<CAPTION>
COMMON 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 178,342 1,783 1,584,406 ---
Equity contribution by Affiliates
through expense reimbursements --- --- 20,912 ---
Net income --- --- --- 556,807
Dividends declared (Note 8) --- --- --- (825,059)
BALANCE AT SEPTEMBER 30, 1996 1,500,746 $15,007 $13,376,348 $(817,669)
</TABLE>
[FN]
See accompanying notes to financial statements.
F-35
<PAGE>
<TABLE>
WEST COAST REALTY INVESTORS, INC.
STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 (UNAUDITED)
<CAPTION>
NINE MONTHS Nine Months
ENDED Ended
INCREASE (DECREASE) IN CASH AND CASH SEPTEMBER September
EQUIVALENTS 30, 1997 30, 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $567,017 $556,807
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 349,260 288,237
Interest expense on amortization of loan
origination fees 9,624 ---
Increase (decrease) from changes in:
Accounts receivable (156,255) (109,016)
Other assets 41,002 119
Accounts payable (2,600) (78,462)
Due to related party 34,272 ---
Security deposits and prepaid rent 12,658 (16,443)
Other liabilities 37,031 ---
NET CASH PROVIDED BY OPERATING ACTIVITIES 892,009 641,242
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to rental real estate (4,907,441) (1,828,500)
NET CASH (USED IN) INVESTING ACTIVITIES (4,907,441) (1,828,500)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock, net 3,544,372 1,579,005
Equity contribution by Affiliates through
expense reimbursements 88,742 20,912
Dividends declared and paid (931,344) (773,302)
Proceeds from notes payable 2,312,500 724,465
Payments on notes payable (163,154) (133,910)
Increase in loan origination fees 29,337 ---
NET CASH PROVIDED BY FINANCING ACTIVITIES 4,880,453 1,417,170
NET INCREASE IN CASH AND CASH EQUIVALENTS 865,021 229,912
CASH AND CASH EQUIVALENTS, BEGINNING OF 2,017,194 1,450,022
PERIOD
CASH AND CASH EQUIVALENTS, END OF PERIOD $2,882,215 $1,679,934
</TABLE>
[FN]
See accompanying notes to financial statements.
F-36
<PAGE>
WEST COAST REALTY INVESTORS, INC.
SUMMARY OF ACCOUNTING POLICIES
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 (UNAUDITED)
AND DECEMBER 31, 1996
BASIS OF PRESENTATION
The accompanying balance sheet as of September 30, 1997, the income statements
and statements of cash flow for the nine months periods ended September 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 nine month period ended September
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 Code. The Company has complied with all requirements imposed
on REIT's for 1996 and 1995 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 NINE MONTHS ENDED SEPTEMBER 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
September 30, 1997 the Company has raised $19,650,602 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 NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 (UNAUDITED)
AND DECEMBER 31, 1996 (Continued)
NOTE 2 - RENTAL PROPERTIES (CONTINUED)
The major categories of property are:
SEPTEMBER 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 1,163,879 814,948
Net rental properties $ 25,676,713 $ 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:
SEPTEMBER 30, 1997 DECEMBER 31, 1996
Deposits and prepaid expenses $44,869 $85,871
Organization costs 14,330 14,330
59,199 100,201
Less accumulated amortization 14,330 14,330
Net other assets $44,869 $85,871
F-40
<PAGE>
WEST COAST REALTY INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 (UNAUDITED)
AND DECEMBER 31, 1996 (Continued)
NOTE 4 - FUTURE MINIMUM RENTAL INCOME
As of September 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:
SEPTEMBER 30, 1997 DECEMBER 31,1996
1997 ........................ $ 763,725 $2,123,959
1998 ........................ 1,839,402 2,037,591
1999 ........................ 1,845,801 1,976,664
2000 ........................ 1,863,450 1,864,724
2001 ........................ 1,751,311 1,771,212
Thereafter .................. 15,193,805 15,255,711
Total $23,257,494 $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 NINE MONTHS ENDED SEPTEMBER 30, 1997, AND 1996 (UNAUDITED)
AND DECEMBER 31, 1996 (Continued)
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:
NINE MONTHS ENDED FOR THE YEAR
SEPTEMBER 30, 1997 ENDED
DECEMBER 31, 1996
Syndication fees $482,307 $82,864
Acquisition fees 270,384 78,177
Overhead expenses 18,000 12,000
$770,691 $173,041
(b) At September 30, 1997 and December 31, 1996, the Advisor owned 22,505
shares of the issued and outstanding shares of the Company.
(c) Sales commissions paid in accordance with the selling agreement to
ASC totaled $310,421 for the nine months ended September 30, 1997
and $119,083 for the nine months ended September 30, 1996.
(d) Property management fees earned by WCRM totaled $27,581 and $27,015
for the three months ended September 30, 1997 and 1996,
respectively. For the nine months ended September 30, 1997 and
1996, WCRM earned $83,384 and $78,213, respectively in property
management fees.
(e) The Corporation had related party accounts payable as follows:
SEPTEMBER 30, 1997 DECEMBER 31, 1996
Associated Securities Corp. $ 4,156 $ 396
West Coast Realty Management 19,249 24,839
West Coast Realty Advisors 57,152 21,050
$80,557 $46,285
(f) A financing fee of $23,125 was paid in August 1997 in connection
with the refinancing of the note payable on the Tycom property
(Note 6).
F-42
<PAGE>
WEST COAST REALTY INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1997, AND 1996 (UNAUDITED)
AND DECEMBER 31, 1996 (Continued)
NOTE 6 - NOTES PAYABLE
Notes payable are made up of the following:
SEPTEMBER 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 ............. $ 619,366 $ 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
September 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 ........... 1,693,720 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 ............ 559,684 569,132
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 .. 1,169,786 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 ........................... 972,345 981,338
F-43
<PAGE>
WEST COAST REALTY INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1997, AND 1996 (UNAUDITED)
AND DECEMBER 31, 1996 (Continued)
NOTE 6 - NOTES PAYABLE (CONT.)
SEPTEMBER 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 ................................................ $2,091,431 $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 ...................................... 2,103,427 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..................... 330,971 336,272
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......................... 377,482 382,277
Variable rate promissory note secured by a Deed of Trust
on the Tycom Property, interest rate is 1.90% over the
3 month LIBOR with right to convert after first year; The
conversion margin would be 1.90% over selected Treasury
Rate for the 10 year loan term, monthly principal and interest
payments vary depending upon interest rates and are
currently $17,469 due July 31, 2007................... 2,309,927 ---
$12,228,139 $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 NINE MONTHS ENDED SEPTEMBER 30, 1997, AND 1996 (UNAUDITED)
AND DECEMBER 31, 1996 (Continued)
The aggregate annual future maturities at September 30, 1997 and
December 31, 1996 are as follows:
YEAR ENDING SEPTEMBER 30, 1997 DECEMBER 31, 1997
1997 $60,032 $210,322
1998 239,183 228,391
1999 259,579 248,287
2000 281,228 269,435
2001 594,384 582,090
Thereafter 10,793,733 8,540,268
Total $12,228,139 $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 nine months ended September 30, 1997 and 1996 was
computed using the weighted average number of outstanding shares of 1,764,404
and 1,430,333, respectively.
Dividends declared during the first nine 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
July 1, 1997 1,815,579 0.0666 120,917
August 1, 1997 1,974,144 0.0666 131,478
September 1, 1997 1,968,144 0.0666 131,078
TOTAL $1,071,820
F-45
<PAGE>
WEST COAST REALTY INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1997, AND 1996 (UNAUDITED)
AND DECEMBER 31, 1996 (Continued)
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
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 99,783
TOTAL $825,599
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 October 1997, the Company paid dividends totaling $383,474 ($0.0666 per
share per period), payable to shareholders of record on July 1, August 1, and
September 1, 1997, respectively (Note 8).
(b) On October 3, and October 10, 1997, a total of $1,775,984 in proceeds from
the sale of shares in the Company's current offering was released from an escrow
account, and 178,105 shares were issued to investors.
F-46
<PAGE>
WEST COAST REALTY INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1997, AND 1996 (UNAUDITED)
AND DECEMBER 31, 1996 (Continued)
NOTE 10 - SUBSEQUENT EVENTS (CONT.)
(c) On October 31, 1997, the Company ("Seller") sold the North Palm Street
Property to a unrelated buyer. The offer to purchase the property was
unsolicited and was partially contingent on the Seller utilizing the Internal
Revenue Service Code Section S1031 to facilitate a tax free exchange. The total
sales price is $2,515,860 in cash. The Seller paid off the existing lender of
the first deed of trust which as of September 30, 1997 totaled $975,309.
Additionally, the Buyer agreed to contribute an additional $15,000 to prepay
the mortgage loan.
(d) On November 26, 1997, the Company acquired an investment known as the
Roseville Property. The funds to acquire the Roseville resulted 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 property's tenant is 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 NINE MONTHS ENDED SEPTEMBER 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
SEPTEMBER PROPERTY PROPERTY CONDENSED
30, 1997 SEPTEMBER
30, 1997
<S> <C> <C> <C> <C> <C> <C>
REVENUE:
Rental $2,182,869 $(195,033) (a) $129,000 (a) $2,116,836
Gain on sale of property --- 325,791 (f) 325,791
Interest 70,558 75,000 (b) (62,000) (b) 83,558
2,253,427 205,758 67,000 2,526,185
EXPENSES:
Operating 277,323 (59,093) (c) 9,000 (c) 227,230
Interest 802,547 (69,569) (d) 732,978
Depreciation and
amortization 358,884 (27,695) (e) 25,460 (e) 356,649
General and
administrative 247,656 --- --- 247,656
1,686,410 (156,357) 34,460 1,564,513
Net income $567,017 $362,115 $32,540 $961,672
Net income per share $.32 $.55
Weighted Average Shares Used Weighted Average Shares Used for Pro
for Historical Calculation 1,764,404 Forma Calculation 1,764,404
</TABLE>
F-48
<PAGE>
WEST COAST REALTY INVESTORS, INC.
NOTES TO PRO FORMA FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 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 nine
months ended September 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 nine
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 nine 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 nine months on the Brea
property.
(e) To reflect depreciation expense on the Roseville and Brea Properties
from January 1, to September 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 NINE MONTHS ENDED SEPTEMBER 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
SEPTEMBER PROPERTY PROPERTY PROPERTY CONDENSED
30, 1997 SEPTEMBER
30, 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUE:
Rental $2,182,869 $(195,033) (a) $129,000 (a) $25,754 (a) $2,142,590
Gain on sale of --- 325,791 (f) 325,791
property
Interest 70,558 75,000 (b) (62,000) (b) (7,400) (b) 76,158
2,253,427 205,758 67,000 18,354 2,544,539
EXPENSES:
Operating 277,323 (59,093) (c) 9,000 (c) 773 (c) 228,003
Interest 802,547 (69,569) (d) 12,240 (d) 745,218
Depreciation and
amortization 358,884 (27,695) (e) 25,460 (e) 356,649
General and
administrative 247,656 --- --- --- 247,656
1,686,410 (156,357) 34,460 13,013 1,577,526
Net income $567,017 $362,115 $32,540 $5,341 $967,013
Net income per share $.32 $.55
Weighted Average Shares Used Weighted Average Shares Used for Pro
for Historical Calculation 1,764,404 Forma Calculation 1,764,404
</TABLE>
F-50
<PAGE>
WEST COAST REALTY INVESTORS, INC.
NOTES TO PRO FORMA FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 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 nine month's worth of operations reflected in the Statement of Income for
the nine months ended September 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 September 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 nine 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 nine 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 September 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 1997 Acquisitions 1996 Acquisition
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 --- 390,400 (f) 390,400
Interest 97,097 89,950 (b) --- --- (30,475) (b) 156,572
2,474,627 195,331 172,000 459,348 104,865 3,406,171
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 $406,668 $127,550 $172,726 $33,825 $1,446,405
Net income per share $.49 $.73
Weighted Average Shares Used Weighted Average Shares Used for Pro
for Historical Calculation 1,447,366 Forma Calculation (Note 3) 1,960,521
</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.
3. PER SHARE AMOUNTS
The pro forma income statement assumes that the Roseville Property, Tycom
Property and the Java City Property were owned and the Brea Property was sold as
of January 1, 1996. The Company used approximately $5.4 million in cash to
acquire these properties, offset by approximately $2.5 million provided by the
sale to the Brea property. However, as of January 1, 1996, the Company had
approximately $2.0 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
$5.7 million in shares (570,000 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-53
<PAGE>
<TABLE>
WEST COAST REALTY INVESTORS, INC.
PRO FORMA BALANCE SHEET
SEPTEMBER 30, 1997
<CAPTION>
HISTORICAL PRO FORMA PRO FORMA
SEPTEMBER ADJUSTMENTS CONDENSED
30, 1997 SEPTEMBER
30, 1997
<S> <C> <C> <C> <C>
ASSETS:
Rental Real Estate $25,676,713 2,067,000 (1) $25,627,682
(2,116,031) (2)
Cash & Cash Equivalents 2,882,215 1,472,003 (2) 2,287,218
(2,067,000) (1)
Accounts Receivable 404,203 404,203
Loan Origination fees, net of accumulated
amortization of $49,872 and $40,248 122,335 (29,467) (2) 92,868
Other Assets 44,869 44,869
TOTAL ASSETS $29,130,335 $28,456,840
LIABILITIES AND STOCKHOLDERS EQUITY
Accounts Payable $11,322 $11,322
Due to Related Party 80,557 80,557
Dividends Payable 383,236 383,236
Security Deposits and Prepaid Rents 137,392 (12,245) (2) 125,147
Other Liabilities 137,484 137,484
Notes Payable 12,228,139 (972,345) (2) 11,255,794
TOTAL LIABILITIES 12,978,130 11,993,540
COMMITMENTS AND CONTENGENCIES
Common Stock and Additional Paid-in Capital 17,629,386 17,629,386
Distributions in Excess of Earnings (1,477,181) 311,095 (2) (1,166,086)
TOTAL STOCKHOLDERS EQUITY 16,152,205 16,463,300
TOTAL LIABILITIES & STOCKHOLDERS EQUITY $29,130,335 $28,456,840
</TABLE>
F-54
<PAGE>
WEST COAST REALTY INVESTORS, INC.
NOTES TO PRO FORMA BALANCE SHEET
SEPTEMBER 30, 1997
The pro forma Balance Sheet assumes that the Roseville Property was acquired
and the Brea Property was sold on September 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
