SUPPLEMENT NO. 9 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 March 18, 1998.
This Supplement amends and supersedes the corresponding sections of the
Prospectus, and Supplements 1, 2, 3, 4, 5, 6, 7 and 8 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. 9 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 March 18, 1998, the Company has sold 891,515 Shares ($8,898,952) 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 March 18, 1998, 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
December 31, 1997. The amount waived was $126,439. The effect of this was to
increase Dividends approximately $.05 per Share for the year ended
December 31, 1997.
The following supplements the "Dividends" portion of INVESTMENT OBJECTIVES
AND POLICIES section of the Prospectus, beginning on page 23, and continuing
to page 24.
<PAGE>
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.
Dividends totaling $417,128 were paid on December 31, 1997 for shareholders of
record on October 1, November 1, and December 1, 1997.
Approximately 51% 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
10/01/97 12/31/97 0.0666 1,968,144 131,078
11/01/97 12/31/97 0.0666 2,147,523 143,025
12/01/97 12/31/97 0.0666 2,147,523 143,025
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 Company effectively was compensated for rental income
through October 15, 1997. The Company also received $115,000 to be applied
towards repair or various deferred maintenance items. These repair funds
were approximately 60% expended as of January 20, 1998.
<PAGE>
The Company is currently attempting to locate a tenant to enter into a long-
term lease for the Property. If its efforts are successful, the Company
expects to spend an additional $200,000 to $300,000 in additional funds
to meet the requirements of a tenant to refurnish the Property. The Company
believes that the rental revenue it was receiving under the old OPTO-22 lease
was 15% to 20% below current market rates; thus, if a new tenant can be
positioned into the property, the Company could experience an increase in
cash flow from the property. However, the Company may need to slightly
decrease distributions to investors in the first and/or second quarters of
1998 due to the effective vacancy at the property since October 15, 1997.
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 1031 to facilitate a tax free exchange. The total sales price was
$2,515,860 in cash. The Seller paid the existing first deed of trust, which
as of October 31, 1997 totaled $971,305. The Buyer agreed to contribute an
additional $15,000 to pay the mortgage loan's early prepayment penalty.
The following supplements or amends the "REAL PROPERTY INVESTMENTS " Section
of the Prospectus, beginning on page 40.
TYCOM PROPERTY
In June 1997, 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.
<PAGE>
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 property 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
totals 5,133 square feet.
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 was developed by, and acquired from, Christian Knox
(an individual and unrelated third party), and the restaurant franchise
is 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 commenced upon the 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 are
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:
<PAGE>
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 taxes 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.
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.
CORONA PROPERTY
On December 31, 1997, the Company acquired the investment described below
(the "Corona Property" or the "Property"). The funds to acquire the Corona
Property resulted from proceeds received in connection with the sale of the
Company's Shares in the current offering. No debt financing was used to
acquire the Corona Property.
<PAGE>
Description. The Corona Property is located at 363 American Circle,
Corona in the Riverside County section of Southern California. The Property
is located near the 91 Freeway and the Maple Street exit. There is easy
access to the freeway and surrounding areas. The Property is in the middle
of an industrial and warehouse/development area. There is a mixture of
light industrial manufacturing, office, industrial, and research/development
space in the immediate area.
The Property is located on a lot size of 77,101 square feet. The Property
is a two-story warehouse/industrial building containing approximately 37,330
square feet. The construction involves concrete footings, foundation and
slab, with a flat tar/gavel roof. Parking is adequate and within applicable
building codes, with some parking available in the Building's basement. The
Building is eight years old.
The sole tenant of the Property is American National Manufacturing, Inc,
which began its lease on June 1, 1997. This company manufactures foundation
or convertible beds, and contract manufacturing of beds of all types. This
triple net lease expires May 31, 2002, with a five year option to renew.
The current scheduled rent per month is as follows:
January 1, 1998 - May 31, 1998 $ 14,932
June 1, 1998 - May 31, 1999 15,679
June 1, 1999 - May 31, 2000 16,425
June 1, 2000 - May 31, 2001 17,172
June 1, 2001 - May 31, 2002 17,918
The Property was acquired from an unrelated third party, American Circle
Limited, A California Limited Partnership (the "Seller").
Property Operations. The Corona 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 taxes in the first full
year of operations is estimated to be approximately $19,000 (approximately
1% of the sales price).
Terms of Purchase. Total consideration paid by the Company for the Corona
Property was $1,908,000.. This cost includes the $1,800,000 sales price
payable to the Seller, approximately $20,000 in legal, appraisal, and
closing costs, and an $98,000 acquisition fee payable to the Advisor. In
addition, $92,000 was received from the Seller in the transfer of prepaid
rents. The sale was paid for from the proceeds resulting from the sale of
the Company's shares in the current offering.
The purchase price was arrived at through an arms-length negotiation with
the Seller. The total cost of $51.11 per square foot is near the average of
recent sales in the area for similar properties. Four sales were
surveyed and the price per square foot ranged from $48.00 to $57.37,
with the weighted square foot average being $51.42. Considering the state
of the recovering economy in the area and the long term lease in place with
a relatively stable and desirable tenant, the price paid for the Property is
considered reasonable.
General. The computation of depreciation for the Corona 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.
<PAGE>
LAUFEN TILE DISTRIBUTION CENTER
On January 14, 1998, the Company acquired the investment described below
(the "Laufen Property" or the "Property"). The funds to acquire the Laufen
Property resulted from proceeds received in connection with the sale of the
Company's Shares in the current offering. No debt financing was used to
acquire the Laufen Property.
Description. The Laufen Property is located at 9970 and 9980 Horn Road,
Sacramento in the Rancho Cordova section of Sacramento, which is located in
Northern California. The Property is located near the U.S. 50 (El Dorado)
Freeway and is also near the Interstate 80 Freeway. There is easy access to
the freeways and surrounding areas. The Property is located in an industrial
area which has recently been under strong demand by businesses in the area.
The property is located on a lot size of 151,153 square feet, which consists
of two contiguous parcels. The Property contains two separate, one-story
24,000 square foot buildings, with a total of 48,000 square feet. The
construction involves concrete footings, foundation and slab, with a flat
tar/gavel roof. There are 38 parking spaces on the site. The Buildings
were originally constructed in 1976.
The sole tenant of the property is Laufen International, Inc. The Company
is a floor tile manufacturer with North American headquarters located in
Tulsa, Oklahoma. Laufen is owned by a parent company located in Germany.
Laufen has been occupying the property since 1987. Under the provisions
of the lease in place when the Company acquired the property, the following
are the minimum rental rates in place:
January 1, 1998 - January 31, 1998 $ 17,242
February 1, 1998 - January 31, 1999 18,391
February 1, 1999 - January 31, 2000 18,502
February 1, 2000 - January 31, 2001 19,570
February 1, 2001 - January 31, 2002 20,265
February 1, 2002 - January 31, 2003 21,188
The lease is substantially a triple-net lease, with the tenant responsible
for reimbursing the Company for 91.67% of the property taxes, insurance and
common area costs that are incurred in connection with the ownership of the
Property.
The Property was acquired from an unrelated third party, the Huarte Family
Trust (the "Seller").
<PAGE>
Property Operations. The Laufen 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 taxes in the first full
year of operations is estimated to be approximately $21,000 (approximately
1% of the sales price).
Terms of Purchase. Total consideration paid by the Company for the Laufen
Property was $2,141,200. This cost includes the $2,020,000 sales price
payable to the Seller, approximately $20,000 in legal, appraisal, and closing
costs, and a approximately a $101,000 acquisition fee payable to the Advisor
(the distribution of amounts between acquisition fees and costs are still
approximate at this point). The sale was paid for from the proceeds resulting
from the sale of the Company's shares in the current offering.
The purchase price was arrived at through an arms-length negotiation with
the Seller. The total cost of $44.61 per square foot is near the average of
recent sales in the area for similar properties. Eight sales were surveyed
and the price per square foot ranged from $45.00 to $51.00. Considering the
state of the recovering economy in the area and the long term lease in place
with a relatively stable and desirable tenant, the price paid for the
Property is considered reasonable.
General. The computation of depreciation for the Corona 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 March 18, 1998, the Company has raised and received $14,462,708 in
gross capital from prior offerings and $8,898,952 from the current offering.
An additional $2,473,563 has been raised in the current offering for sales
between January 1, 1998 and March 18, 1998; these funds are expected to
be released from escrow in April, 1998.
<PAGE>
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).
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.
<PAGE>
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.
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 March 18, 1998, there are 2,340,351 Shares of the Company
outstanding, held by approximately 1,300 Shareholders. In addition,
$2,473,563 in gross proceeds has been raised from the sale of 246,926 shares
in the current offering to seventeen investors between January 1, 1998 and
March 18, 1998; these funds have been deposited into an escrow account, and
shares are expected to be issued in April 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
Corona Property
Report of Independent Certified Public Accountants.....................F-48
Summary of Historical Information Relating to Operating Revenues and
Specified Expenses.....................................................F-49
Notes to Summary of Historical Information Relating to Operating Revenues
and Specified Expenses.................................................F-50
Estimated Twelve Months Pro Forma Statement of TaxableOperating Income.F-51
Notes to Pro Forma Statements..........................................F-52
Laufen Tile Property
Report of Independent Certified Public Accountants.....................F-53
Summary of Historical Information Relating to Operating Revenues and
Specified Expenses.....................................................F-54
Notes to Summary of Historical Information Relating to Operating Revenues
and Specified Expenses.................................................F-55
Estimated Twelve Months Pro Forma Statement of TaxableOperating Income.F-56
Notes to Pro Forma Statements..........................................F-57
West Coast Realty Investors, Inc.
Pro FormaStatement of Income for thenine months ended September30,1997.F-58
Notes to Pro Forma Financial Statement for the nine months ended
September 30, 1997.....................................................F-59
Pro Forma Statement of Income for the year ended December 31, 1996.....F-60
Notes to Pro Forma Financial Statement for the year ended December 31, 1996
.......................................................................F-61
Pro Forma Balance Sheet for the nine months ended September 30, 1997...F-62
Notes to Pro Forma Financial Statement for the nine months ended September
30, 1997...............................................................F-63
<PAGE>
<TABLE>
WEST COAST REALTY INVESTORS, INC.
BALANCE SHEETS
SEPTEMBER 30, 1997 (UNAUDITED) AND DECEMBER 31, 1996
<CAPTION>
SEPTEMBER 30, December 31,
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 MONTHS THREE MONTHS NINE MONTHS NINE 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 PERIOD 2,017,194 1,450,022
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, 1996
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>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Shareholder of
West Coast Realty Investors, Inc.
We have audited the accompanying summary of historical information
relating to operating revenues and specified expenses of 363 American Circle
Drive (the "Property") for the year ended December 31, 1997. These financial
statements are the responsibility of the Property's management. Our
responsibility is to express an opinion on these financial statements based
upon our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the summary of historical
information relating to operating revenues and specified expenses is
free of material misstatement. An audit also includes examining, on a test
basis, evidence supporting the amounts and disclosures in the summary of
historical information relating to operating revenues and specified
expenses. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall summary relating to operating revenues and specified expenses
presentation. We believe our audit provides a reasonable basis for our
opinion.
The accompanying summary of historical information relating to operating
revenues and specified expenses was prepared for the purpose of complying with
the rules and regulations of the Securities and Exchange Commission and
excludes certain material expenses, described in Note 2, that would not be
comparable to those resulting from the proposed future operations of the
Property.
In our opinion, the summary of historical information relating to
operating revenues and specified expenses referred to above presents fairly,
in all material respects, the operating revenues and specified expenses,
exclusive of expenses described in Note 2, of the Property for the year ended
December 31, 1997 in conformity with generally accepted accounting principles.
BDO Seidman LLP
Los Angeles, California
January 8, 1998
F-48
<PAGE>
<TABLE>
363 AMERICAN CIRCLE DRIVE
SUMMARY OF HISTORICAL INFORMATION RELATING TO
OPERATING REVENUES AND SPECIFIED EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1997
<CAPTION>
Year
Ended
December 31,
1997
<S> <C>
OPERATING REVENUES
Rental income $ 181,093
SPECIFIED EXPENSES -
Excess of operating revenues over specified expenses $ 181,093
</TABLE>
[FN]
See accompanying notes to summary of historical information
F-49
<PAGE>
363 AMERICAN CIRCLE DRIVE
NOTES TO SUMMARY OF HISTORICAL INFORMATION RELATING TO
OPERATING REVENUES AND SPECIFIED EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1997
NOTE 1 - THE PROPERTY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
363 American Circle Drive (the "Property") is comprised of a ground level
loading industrial building located in the city of Corona, California. The
363 American Circle Drive property has a rental area of approximating 37,500
square feet. From January 1, 1997 to May 31, 1997, the Property was leased
to American Circle Limited (the "Tenant"), a California limited partnership,
on a month to month basis. On June 1, 1997, the Tenant entered in a 5 year
lease agreement, expiring on May 31, 2002.
Minimum future rental income, under the existing leases are as follows:
Year ending December 31, Amount Due
1998 $ 184,406
1999 193,365
2000 202,329
2001 211,286
2002 89,590
$ 880,976
The Property was acquired by West Coast Realty Investors, Inc. on
December 31, 1997.
NOTE 2 - THE BASIS OF PRESENTATION
The summary of historical information relating to operating revenues and
specified expenses of the Property excludes depreciation expense on buildings,
improvements and equipment, nonrecurring income and expenses and interest
expense on mortgages which are not comparable to the future operation of the
Property under the ownership of West Coast Realty Investors, Inc. All other
expenses relating to the Property are excluded as the current lease agreement
specifically states that all Property expenses are the responsibility of the
lessee.
Rental income is recognized on a straight line basis over the lease term.
F-50
<PAGE>
<TABLE>
363 AMERICAN CIRCLE DRIVE
ESTIMATED TWLEVE MONTH PRO FORMA STATEMENT OF TAXABLE
OPERATING INCOME (NOTE 1)
(UNAUDITED)
<CAPTION>
For the Year Pro Forma Estimated
Ended Adjustments Pro Forma
December 31, (Note 2) Results
1997
<S> <C> <C> <C> <C>
Rental Income $181,093 $18,371 (1) $199,464
EXPENSES:
Management Fees... 5,984 (2) 5,984
Depreciation...... - 30,802 (3) 30,802
Taxable Operating Income $181,093 $(18,415) $162,678
</TABLE>
[FN]
See accompanying notes to pro forma financial statements
<TABLE>
ESTIMATED TWLEVE MONTH PRO FORMA STATEMENT
OF CASH AVAILABLE FROM OPERATIONS (NOTE 1)
(UNAUDITED)
<CAPTION>
<S> <C>
Pro Forma Taxable Net Operating Income........ $162,678
Add: Depreciation (Note 3).................... 30,802
Pro Forma Cash Available from Operations.. $193,480
</TABLE>
[FN]
See accompanying notes to pro forma financial statements
F-51
<PAGE>
363 AMERICAN CIRCLE DRIVE
NOTES TO PRO FORMA STATEMENT
NOTE 1 - BASIS OF PRESENTATION
The preceding unaudited pro forma statements are based on information
obtained from the lease and Agreement to Purchase documents pertaining to the
property located at 363 American Circle Drive, Corona, California (the
"Property").
The pro forma statements use audited financial statements for the year
ended December 31, 1997, as a base for preparing the estimated pro forma
operations for the property during its first full year of operations. The
property's current tenant, American Circle Limited (the "Tenant"), has
occupied the property since inception. The Tenant's current lease term
terminates May 31, 2002.
The pro forma results reflect a full year of operations for the Property
assuming that it was acquired on January 1, 1997. They contain certain
adjustments which are expected to be incurred in the Property's first year of
operations.
There can be no assurance that the foregoing results will be obtained.
NOTE 2 - PRO FORMA ADJUSTMENTS
The adjustments to the pro forma statement of income are as follows:
(1) To reflect a full year's worth of rental income per provisions of the
lease with the Property's sole tenant. In calculating this amount, the
total minimum monthly rent ($880,976) over the remaining term of the
lease (fifty-three months, or four years five months, as of December
31, 1997), is recognized on a straight-line basis ($16,622/ month) in
accordance with generally accepted accounting principles.
(2) To reflect property management fees of 3% of cash basis rental income
in the first year of the lease.
(3) The computation of depreciation is based on the cost of the Property
including estimated Acquisition Fees and Expenses, and is for the
initial twelve months subsequent to the purchase. The allocation of
the cost of the property to the various assets categories and lives
is based on the allocations contained in the final appraisal report
for the Property. The depreciation has been computed on a straight-
line basis over the component useful life of the assets.
Depreciable
Life Cost Depreciation
Building 39 $1,144,256 $29,339
Site Improvements 39 57,054 1,463
Land --- 703,142 ---
$1,904,452 $30,802
F-52
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Shareholder of
West Coast Realty Investors, Inc.
We have audited the accompanying summary of historical information
relating to operating revenues and specified expenses of 9970 and 9980 Horn
Road (the Property) for the year ended December 31, 1997. These financial
statements are the responsibility of 9970 and 9980 Horn Road's management.
Our responsibility is to express an opinion on these financial statements
based upon our audits.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the summary of historical
information relating to operating revenues and specified expenses is free of
material misstatement. An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the summary of historical
information relating to operating revenues and specified expenses. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall summary
relating to operating revenues and specified expenses presentation. We
believe our audit provides a reasonable basis for our opinion.
The accompanying summary of historical information relating to operating
revenues and specified expenses was prepared for the purpose of complying with
the rules and regulations of the Securities and Exchange Commission and
excludes certain material expenses, described in Note 2, that would not be
comparable to those resulting from the proposed future operations of the
Property.
In our opinion, the summary of historical information relating to
operating revenues and specified expenses referred to above presents fairly,
in all material respects, the operating revenues and specified expenses,
exclusive of expenses described in Note 2, of the Property for the year
ended December 31, 1997 in conformity with generally accepted accounting
principles.
BDO Seidman LLP
Los Angeles, California
January 15, 1998
F-53
<PAGE>
<TABLE>
9970 AND 9980 HORN ROAD
SUMMARY OF HISTORICAL INFORMATION RELATING TO
OPERATING REVENUES AND SPECIFIED EXPENSES
<CAPTION>
Year
Ended
December 31,
1997
<S> <C>
OPERATING REVENUES
Rental income $ 206,076
SPECIFIED EXPENSES
Property tax 1,287
Utilities 908
Repairs and maintenance 311
Property insurance 84
Total specified expenses 2,590
Excess of operating revenues over specified expenses $ 203,486
</TABLE>
[FN]
See accompanying notes to summary of historical information
F-54
<PAGE>
9970 AND 9980 HORN ROAD
SUMMARY OF HISTORICAL INFORMATION RELATING TO
OPERATING REVENUES AND SPECIFIED EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1997
NOTE 1 - THE PROPERTY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
9970 and 9980 Horn Road (the "Property") is comprised of two concrete
tilt-up industrial buildings with loading dock platforms, located in the city
of Sacramento, California. The two properties are located in the same
industrial park. The Property has a rental area of approximating 48,000
square feet. Both buildings are currently leased to Laufen International,
Inc., the sole tenant. The lease for both buildings expires on
January 31, 2003.
Minimum rental receipts, under the current lease are as follows:
Year ending December 31, Amount
1998 $ 219,541
1999 226,315
2000 234,176
2001 244,686
2002 253,530
Thereafter 21,188
$1,199,436
The Property was acquired by West Coast Realty Investors, Inc. on
January 14, 1998.
NOTE 2 - THE BASIS OF PRESENTATION
The summary of historical information relating to operating revenues and
specified expenses of the Property excludes depreciation expense on buildings,
improvements and equipment, nonrecurring income and expenses and interest
expense on mortgages which are not comparable to the future operation of the
Property under the ownership of West Coast Realty Investors, Inc. The current
lease agreement specifically states that 91.67% of property expenses are the
responsibility of the lessee. Thus, 8.33% of expenses related to the
property are considered recurring expenses.
Rental income is recognized on a straight line basis over the life of
the lease.
F-55
<PAGE>
<TABLE>
9970 AND 9980 HORN ROAD
ESTIMATED TWLEVE MONTH PRO FORMA STATEMENT OF TAXABLE
OPERATING INCOME (NOTE 1)
(UNAUDITED)
<CAPTION>
For the Year Pro Forma Estimated
Ended Adjustments Pro Forma
December 31, (Note 2) Results
1997
<S> <C> <C> <C> <C>
Rental Income $206,076 $29,880 (1) $235,956
EXPENSES:
Management Fees --- 7,079 (2) 7,079
Property Taxes 1,287 --- 1,287
Utilities 908 --- 908
Repairs and Maintenance 311 --- 311
Property Insurance 84 --- 84
Depreciation --- 13,758 (3) 13,758
Taxable Operating Income $203,486 $9,043 $212,529
</TABLE>
[FN]
See accompanying notes to pro forma financial statements
<TABLE>
ESTIMATED TWLEVE MONTH PRO FORMA STATEMENT
OF CASH AVAILABLE FROM OPERATIONS (NOTE 1)
(UNAUDITED)
<CAPTION>
<S> <C>
Pro Forma Taxable Net Operating Income........ $212,529
Add: Depreciation (Note 3).................... 13,758
Pro Forma Cash Available from Operations.. $226,287
</TABLE>
[FN]
See accompanying notes to pro forma financial statements
F-56
<PAGE>
9970 AND 9980 HORN ROAD
NOTES TO PRO FORMA STATEMENT
NOTE 1 - BASIS OF PRESENTATION
The preceding unaudited pro forma statements are based on information
obtained from the lease and Agreement to Purchase documents pertaining to the
property located at 9970 and 9980 Horn Road, Sacramento, California (the
"Property").
The pro forma statements use audited financial statements for the year
ended December 31, 1997, as a base for preparing the estimated pro forma
operations for the property during its first full year of operations. The
property's current tenant, Laufen International, Inc. (the "Tenant"), has
occupied the property since inception. The Tenant's current lease term
terminates January 31, 2003.
The pro forma results reflect a full year of operations for the Property
assuming that it was acquired on January 1, 1997. They contain certain
adjustments which are expected to be incurred in the Property's first year of
operations.
There can be no assurance that the foregoing results will be obtained.
NOTE 2 - PRO FORMA ADJUSTMENTS
The adjustments to the pro forma statement of income are as follows:
(1) To reflect a full year's worth of rental income per provisions of the
lease with the Property's sole tenant. In calculating this amount, the
total minimum monthly rent ($1,199,436) over the remaining term of the
lease (sixty-one months, or five years one month, as of December 31,
1997), is recognized on a straight-line basis ($19,663/ month) in
accordance with generally accepted accounting principles.
(2) To reflect property management fees of 3% of cash basis rental income
in the first year of the lease.
(3) The computation of depreciation is based on the cost of the Property
including estimated Acquisition Fees and Expenses, and is for the
initial twelve months subsequent to the purchase. The allocation of
the cost of the property to the various assets categories and lives is
based on the allocations contained in the final appraisal report for
the Property. The depreciation has been computed on a straight-line
basis over the component useful life of the assets.
Depreciable
Life Cost Depreciation
Building 39 $1,046,000 $13,410
Site Improvements 39 27,200 349
Land --- 1,068,000 ---
$2,141,200 $13,758
F-57
<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, Tycom, Corona and Laufen Tile
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>
HISTORICAL BREA TYCOM ROSEVILLE LAUFEN CORONA PRO FORMA
SEPTEMBER PROPERTY PROPERTY PROPERTY TILE PROPERTY CONDENSED
30, 1997 (SALE) PROPERTY SEPTEMBER
30, 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUE:
Rental $2,182,869 $(195,033) (a) $25,754 (a) $129,000 (a) $155,178 (a) $134,388 (a) $2,432,156
Gain on sale of --- 325,791 (f) 325,791
property
Interest 70,558 75,000 (b) (7,400) (b) (62,000) (b) (11,200) (b) (10,500) (b) 54,458
2,253,427 205,758 18,354 67,000 143,978 123,888 2,812,405
EXPENSES:
Operating 277,323 (59,093) (c) 773 (c) 9,000 (c) 6,207 (c) 5,375 (c) 239,585
Interest 802,547 (69,569) (d) 12,240 (d) 745,218
Depreciation and
amortization 358,884 (27,695) (e) 25,460 (e) 24,652 (e) 23,545 (e) 404,846
General and
administrative 247,656 --- --- --- --- --- 247,656
1,686,410 (156,357) 13,013 34,460 30,859 28,920 1,637,305
Net income $567,017 $362,115 $5,341 $32,540 $113,119 $94,968 $1,175,100
Net income per share $.32 $.54
Weighted Average Shares Used Weighted Average Shares Used for Pro
for Historical Calculation 1,764,404 Forma Calculation 2,174,404
</TABLE>
F-58
<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, Tycom, Corona and Laufen Tile 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, Tycom, Corona and
Laufen Tile Properties from January 1, 1997 to September 30, 1997, 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, Tycom, Corona and Laufen Tile 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, Tycom, Corona and Laufen
Tile Properties 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 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, which was funded in
June 1997.
(e) To reflect depreciation expense on the Roseville, Corona and Laufen
Tile and Brea Properties from January 1, to September 30, 1997.
(f) To reflect the gain on the sale of the Brea Property.
3. PER SHARE AMOUNTS
The pro forma income statement assumes that the Java City Property, Tycom
Property, Roseville Property, Corona Property and the Laufen Tile Property
were owned and the Brea Property was sold as of January 1, 1997. The Company
used approximately $9.4 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, 1997, the Company had approximately $2.8 million
available for the acquisition of additional properties. The properties were
acquired primarily using funds raised subsequent to January 1, 1997.
Therefore, the weighted average shares outstanding as of September 30, 1997,
was calculated assuming that an additional $4.1 million in shares (410,000
shares) were outstanding as of January 1, 1997, and that no additional
shares were issued throughout the year. This is assumed to be the minimum
number of shares that would be sold given the offering expenses and reserves
that are allocated against shares sold.
F-59
<PAGE>
<TABLE>
WEST COAST REALTY INVESTORS, INC.
PRO FORMA 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, Corona, Laufen Tile 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>
HISTORICAL BREA JAVA TYCOM ROSEVILLE LAUFEN
DECEMBER PROPERTY CITY PROPERTY PROPERTY TILE
31, 1996 (SALE) PROPERTY PROPERTY
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUE:
Rental $2,377,530 $(285,019) (a) $135,340 (a) $459,348 (a) $172,000 (a) $206,904 (a)
Gain on sale
of property --- 190,400 (f)
Interest 97,097 89,950 (b) (30,475) (b) (40,600) (b) (30,200) (b) (30,900) (b)
2,474,627 (4,669) 104,865 418,748 141,800 176,004
EXPENSES:
Operating 302,858 (80,696) (c) 17,980 (c) 14,040 (c) 10,500 (c) 8,276 (c)
Interest 880,978 (93,717) (d) 37,900 (d) 184,042 (d)
Depreciation and
amortization 360,901 (36,924) (e) 15,160 (e) 88,540 (e) 33,950 (e) 86,525 (e)
General and
administrative 224,254 --- --- --- --- ---
1,768,991 (211,337) 71,040 286,622 44,450 94,801
Net income $705,636 $206,668 $33,825 $132,126 $97,350 $81,203
Net income per $.49
share
Weighted Average Shares Used
for Historical Calculation 1,447,366
</TABLE>
<TABLE>
WEST COAST REALTY INVESTORS, INC.
PRO FORMA STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
(CONTINUED)
<CAPTION>
CORONA PRO FORMA
PROPERTY CONDENSED
DECEMBER 31, 1996
<S> <C> <C> <C>
REVENUE:
Rental $179,184 (a) $3,245,287
Gain on sale of property 190,400
Interest (35,550) (b) 19,322
143,634 3,455,009
EXPENSES:
Operating 7,167 (c) 280,125
Interest 1,009,203
Depreciaton and
amortization 83,520 (e) 631,672
General and
administrative --- 224,254
90,687 2,145,254
Net income $52,947 $1,309,755
Net income per share $.68
Weighted Average Shares Used for Pro
Forma Calculation (Note 3) 1,937,366
</TABLE>
F-60
<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, Corona, Laufen Tile 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, Corona,
Laufen Tile 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 Roseville, Tycom, Corona, Laufen Tile and Java City 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 year ended December
31, 1996 on the lease of the Roseville, Tycom, Corona, Laufen Tile 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, Corona, Laufen
Tile, 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 Java City Property, Tycom
Property, Roseville Property, Corona Property and the Laufen Tile Property
were owned and the Brea Property was sold as of January 1, 1996. The Company
used approximately $9.4 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 $4.9 million in shares (490,000
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-61
<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) $31,592,182
(2,116,031) (2)
1,960,000 (3)
1,802,500 (4)
2,202,000 (5)
Cash & Cash Equivalents 2,882,215 1,472,003 (2) 627,718
(2,067,000) (1)
(1,972,000) (3)
(1,717,500) (4)
(2,010,000) (5)
4,040,000 (6)
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 $32,761,840
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) 231,480
14,333 (3)
92,000 (4)
Other Liabilities 137,484 137,484
Notes Payable 12,228,139 (972,345) (2) 11,255,794
TOTAL LIABILITIES 12,978,130 12,099,873
COMMITMENTS AND CONTENGENCIES
Common Stock and Additional Paid-in Capital 17,629,386 4,198,667 (6) 21,828,053
Distributions in Excess of Earnings (1,477,181) 311,095 (2) (1,166,086)
TOTAL STOCKHOLDERS EQUITY 16,152,205 20,661,967
TOTAL LIABILITIES & STOCKHOLDERS EQUITY $29,130,335 $32,761,840
</TABLE>
F-62
<PAGE>
WEST COAST REALTY INVESTORS, INC.
NOTES TO PRO FORMA BALANCE SHEET
SEPTEMBER 30, 1997
The pro forma Balance Sheet assumes that the Tycom, Roseville, Corona and
Laufen Tile Properties were 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.
NOTE 3 - ACQUISITION OF ROSEVILLE PROPERTY
These adjustments reflect the effect of acquiring the Roseville Property,
including an increase in rental real estate and security deposit and a net
decrease in cash and cash equivalents. A significant amount of the proceeds
for the purchase of the Corona Property were provided by the sale of the
Company's shares. (see Note 6).
NOTE 4 - ACQUISITION OF CORONA PROPERTY
These adjustments reflect the effect of acquiring the Corona Property,
including an increase in rental real estate and prepaid rent and a net
decrease in cash and cash equivalents. A significant amount of the proceeds
for the purchase of the Corona Property were provided by the sale of the
Company's shares. (see Note 6).
NOTE 5 - ACQUISITION OF LAUFEN TILE PROPERTY
These adjustments reflect the effect of acquiring the Laufen Tile 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 Laufen Tile Property were provided by the sale of the Company's shares.
(see Note 6).
NOTE 6 - PRO FORMA INCREASE IN SHARES ISSUED
The pro forma balance sheet assumes that the Roseville Property, Tycom
Property, Corona Property, Laufen Tile Property and the Java City Property
were owned and the Brea Property was sold as of September 30, 1997. The
Company used approximately $9.4 million in cash to acquire these properties,
offset by approximately $2.5 million provided by the sale to the Brea
property. However, as of September 30, 1997, the Company had approximately
$2.9 million available for the acquisition of additional properties. The
properties were acquired primarily using funds raised subsequent to
September 30, 1997. Therefore, the weighted average shares outstanding as
of September 30, 1997, was calculated assuming that an additional $9.7
million in shares (970,000 shares) were outstanding as of September 30, 1997,
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-63
