<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission file number 0-24594
WEST COAST REALTY INVESTORS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 95-4246740
--------- ----------
(State or other Jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5933 W. CENTURY BLVD., 9TH, FLOOR
LOS ANGELES, CALIFORNIA 90045
-----------------------------
(Address of principal executive offices)
(Zip Code)
(310) 670-0800
--------------
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S
CLASSES OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE. 2,927,967 SHARES
OUTSTANDING AS OF NOVEMBER 14, 2000.
<PAGE> 2
WEST COAST REALTY INVESTORS, INC.
INDEX
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
Item 1. Financial Statements
Balance Sheets -
September 30, 2000 and December 31, 1999 3
Statements of Stockholders' Equity -
Nine Months Ended September 30, 2000 and 1999 4
Statements of Income -
Three Months and Nine Months Ended September 30, 2000 and 1999 5
Statements of Cash Flows -
Nine Months Ended September 30, 2000 and 1999 6
Summary of Accounting Policies 7
Notes to Financial Statements 9
Item 2. Management's Discussion and Analysis of 16
Financial Condition and Results of Operations
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 23
Item 2. Exhibit and Reports on Form 8-K 24
</TABLE>
<PAGE> 3
PART 1. FINANCIAL INFORMATION
WEST COAST REALTY INVESTORS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
======================================================================================
SEPTEMBER 30, 2000 December 31, 1999
(UNAUDITED)
--------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Rental real estate, less accumulated
depreciation (Note 1) $ 39,351,831 $ 45,778,403
Cash and cash equivalents 1,671,947 1,874,880
Deferred rent 599,187 569,442
Accounts receivable 301,953 362,714
Loan origination fees, net of accumulated
Amortization of $126,239 and $101,927 206,159 230,471
Other assets 25,416 48,590
--------------------------------------------------------------------------------------
TOTAL ASSETS $ 42,156,493 $ 48,864,500
======================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Accounts payable $ -- $ 728
Due to related party (Note 2(e)) 63,487 87,166
Security deposits and prepaid rent 326,105 484,854
Other liabilities 245,027 201,733
Notes payable (Note 3) 20,369,835 24,616,551
--------------------------------------------------------------------------------------
TOTAL LIABILITIES 21,004,454 25,391,032
COMMITMENTS AND CONTINGENCIES (NOTE 5)
STOCKHOLDERS' EQUITY
Common stock, $.01 par-shares authorized,
5,000,000 shares, issued and outstanding
2,927,967, in 2000 and 1999 29,280 29,280
Additional paid-in capital 26,920,556 26,738,963
Dividends in excess of retained earnings (5,797,797) (3,294,775)
--------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 21,152,039 23,473,468
--------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 42,156,493 $ 48,864,500
======================================================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE> 4
WEST COAST REALTY INVESTORS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
DIVIDENDS IN
EXCESS
COMMON STOCK ADDITIONAL PAID OF RETAINED
SHARES AMOUNT CAPITAL EARNINGS
--------- --------- ------------ -----------
<S> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1999 2,927,967 $ 29,280 $ 26,738,963 $(3,294,775)
Equity contribution by Affiliates through
expense reimbursements (Note 2 (f)) -- -- 181,593 --
Net income -- -- -- 3,235,794
Dividends declared (Note 4) -- -- -- (5,738,816)
--------- --------- ------------ -----------
BALANCE AT SEPTEMBER 30, 2000 2,927,967 $ 29,280 $ 26,920,556 $(5,797,797)
========== ========= ============ ===========
</TABLE>
NINE MONTHS ENDED SEPTEMBER 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
DIVIDENDS IN
EXCESS
COMMON STOCK ADDITIONAL PAID OF RETAINED
SHARES AMOUNT CAPITAL EARNINGS
--------- --------- ------------ -----------
<S> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1998 2,932,762 $ 29,328 $ 26,495,731 $(2,490,779)
Treasury Stock (4,795) (48) (47,764) --
Equity contribution by Affiliates through
expense reimbursements (Note 2 (f)) -- -- 217,772 --
Net income -- -- -- 595,065
Dividends declared (Note 4) -- -- -- (1,406,191)
--------- --------- ------------ -----------
BALANCE AT SEPTEMBER 30, 1999 2,927,967 $ 29,280 $ 26,665,739 $(3,301,905)
========== ========= ============ ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 5
WEST COAST REALTY INVESTORS, INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
===========================================================================================================
THREE MONTHS Three Months NINE MONTHS Nine Months
ENDED Ended ENDED Ended
SEPTEMBER 30, September 30, SEPTEMBER 30, September 30,
2000 1999 2000 1999
(UNAUDITED) (Unaudited) (UNAUDITED) (Unaudited)
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues
Rental (Notes 1) $1,085,540 $1,336,411 $3,738,079 $3,769,539
Gain on sale of property -- -- 2,154,727 --
Interest 25,196 24,392 83,254 71,003
-----------------------------------------------------------------------------------------------------------
1,110,736 1,360,803 5,976,060 3,840,542
-----------------------------------------------------------------------------------------------------------
Costs and expenses
Operating 39,437 65,567 181,518 130,815
Property taxes 32,059 50,093 119,657 119,991
Property management fees (Note 2 (c)) 37,912 52,994 141,955 142,259
Interest expense 369,774 487,540 1,356,690 1,313,080
General and administrative 76,984 91,266 333,819 985,251
Depreciation and amortization 188,245 195,260 606,627 554,081
-----------------------------------------------------------------------------------------------------------
744,411 942,720 2,740,266 3,245,477
-----------------------------------------------------------------------------------------------------------
Net income $ 366,325 $ 418,083 $3,235,794 $ 595,065
===========================================================================================================
Net income per share (Note 4) $ .13 $ .14 $ 1.11 $ .20
===========================================================================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE> 6
WEST COAST REALTY INVESTORS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
=====================================================================================================
NINE MONTHS Nine Months
ENDED Ended
SEPTEMBER 30, September 30,
2000 1999
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (UNAUDITED) (Unaudited)
-----------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 3,235,794 $ 595,065
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 582,314 531,014
Interest expense on amortization of loan origination fees 24,313 23,067
Gain on sale of property (2,154,727) --
Equity contribution by Affiliates through expense 181,593 217,772
reimbursements
Increase (decrease) from changes in:
Deferred rent (50,645) (120,788)
Accounts receivable 60,761
Other assets (7,044) (133,475)
Accounts payable (728) 3,416
Due to related party (23,679) 17,795
Security deposits and prepaid rent (107,748) 94,124
Other liabilities 43,294 73,162
-----------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,783,498 1,301,152
-----------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to rental real estate -- (10,625,919)
Proceeds from sale of rental real estate 7,999,102 --
-----------------------------------------------------------------------------------------------------
NET CASH (USED IN) INVESTING ACTIVITIES 7,999,102 (10,625,919)
-----------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Purchase of Treasury Stock -- (47,812)
Dividends paid (5,738,816) (937,716)
Increase in notes payable -- 8,375,870
Payments on notes payable (4,246,717) (320,030)
(Increase) in loan origination fees -- (42,996)
-----------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES (9,985,533) 7,027,316
-----------------------------------------------------------------------------------------------------
NET INCREASE, (DECREASE) IN CASH AND CASH EQUIVALENTS (202,933) (2,297,451)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,874,880 4,594,587
-----------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,671,947 $ 2,297,136
=====================================================================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE> 7
WEST COAST REALTY INVESTORS, INC.
SUMMARY OF ACCOUNTING POLICIES
BUSINESS
West Coast Realty Investors, Inc. (the "Company") is a corporation formed on
October 26, 1989 under the laws of the State of Delaware. The Company 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 2000, 1999, and 1998 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 and commercial properties located primarily in California and the west
coast of the United States. The Company intends to acquire property for cash or
on a moderately leveraged basis with aggregate mortgage indebtedness not to
exceed fifty percent of the value of all properties on a combined basis, or
eighty percent individually and intends on owning and operating such properties
for investment purposes, over an anticipated holding period of five to ten
years.
RENTAL REAL ESTATE 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.
PRESENTATION OF INTERIM INFORMATION
In the opinion of the Advisor of West Coast Realty Investors, Inc. (the
"Company"), the accompanying unaudited financial statements include all normal
adjustments considered necessary to present fairly the financial position as of
September 30, 2000 and the results of operations and cash flows for the three
and nine months ended September 30, 2000 and 1999. Interim results are not
necessarily indicative of results for a full year.
The financial statements and notes are presented as permitted by Form 10-Q, and
do not contain certain information included in the Company's audited financial
statements and notes for the fiscal year ended December 31, 1999.
<PAGE> 8
WEST COAST REALTY INVESTORS, INC.
SUMMARY OF ACCOUNTING POLICIES
RENTAL INCOME
Rental revenue is recognized on a straight-line basis to the extent that rental
income is deemed collectible. 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 amounts are collected.
ACQUISITION COSTS
The Company expenses internal acquisition costs in accordance with Emerging
Issues Task Force 97-11, "Accounting for Internal Costs Relating to Real Estate
Property Acquisitions" which was issued in March 1998. Acquisition costs are
paid to an affiliate, West Coast Realty Advisors ("WCRA") who incurs such
internal acquisition costs.
LOAN ORIGINATION FEES
Loan origination fees are capitalized and amortized over the life of the loan.
CASH AND CASH EQUIVALENTS
The Company considers cash in the bank, liquid money market funds, and all
highly liquid certificates of deposit, with original maturities of three months
or less, to be cash and cash equivalents.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
NET INCOME PER SHARE
Net income per share is calculated by dividing the net income by the weighted
average number of shares outstanding for the period.
<PAGE> 9
WEST COAST REALTY INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 (UNAUDITED)
AND DECEMBER 31, 1999
NOTE 1 - RENTAL PROPERTIES
The Company owns the following income-producing properties:
<TABLE>
<CAPTION>
Original
Acquisition
Location (Property Name) Date Purchased Cost
------------------------------------------------------------------------------------------------
<S> <C> <C>
Huntington Beach, California (Blockbuster) February 26, 1991 $ 1,676,210
Fresno, California May 14, 1993 1,414,893
Riverside, California November 29, 1994 3,655,500
Tustin, California (Safeguard) May 22, 1995 4,862,094
Sacramento, California (Java City) August 2, 1996 1,828,500
Irvine, California (Tycom) January 17, 1997 4,907,440
Roseville, California (Applebee's) October 31, 1997 1,976,484
Corona, California December 31, 1997 1,904,452
Sacramento, California (Horn Road) January 15, 1998 2,141,200
Chino, California April 19, 1998 1,859,338
Vacaville, California May 20, 1998 2,735,308
Cerritos, California December 23, 1998 2,314,569
Ontario, California January 12, 1999 4,614,964
Folsom, California May 1, 1999 6,010,956
</TABLE>
The major categories of property are:
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
---------------------------------------------------------------------
<S> <C> <C>
Land $13,958,415 $16,318,835
Buildings and improvements 27,943,493 31,959,668
---------------------------------------------------------------------
41,901,908 48,278,503
Less accumulated depreciation 2,550,077 2,500,100
---------------------------------------------------------------------
Net rental properties $39,351,831 $45,778,403
=====================================================================
</TABLE>
On April 12, 2000 the Huntington Beach property (OPTO-22) was sold to an
unaffiliated buyer for a sales price of $3,675,000. The net book value of the
property was $2,395,417 which resulted in a gain of $999,150 net of selling
costs.
On June 30, 2000 the company sold the Fremont property to an unaffiliated buyer
for a sales price of $4,850,000. The net book value of the property was
$3,448,840 which resulted in a gain of $1,155,577 net of selling costs.
<PAGE> 10
WEST COAST REALTY INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 (UNAUDITED)
AND DECEMBER 31, 1999
NOTE 1 - RENTAL PROPERTIES (CONTINUED)
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:
Two tenants accounted for 13% and 10%, respectively for the nine months ended
September 30, 2000.
Two tenants accounted for 12%, and 11%, respectively, for the nine months ended
September 30, 1999.
NOTE 2 - RELATED PARTY TRANSACTIONS
Sales commissions and wholesaling fees, representing 7% of the gross proceeds
from the sale of common shares, were paid to Associated Securities Corp.
("ASC"), a member of the National Association of Securities Dealers, Inc.
("NASD") and an affiliate of the Advisor.
The Advisor has an agreement with the Company to provide advice on investments
and to administer the day-to-day operations of the Company. At September 30,
2000, the Advisor owned 22,556 shares of the Company. Property management
services for the Company's properties are provided by West Coast Realty
Management, Inc. ("WCRM"), an affiliate of the Advisor.
Certain officers and directors of the Company are also officers and directors of
the Advisor and its affiliates.
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:
<TABLE>
<CAPTION>
NINE MONTHS ENDED FOR THE YEAR ENDED
SEPTEMBER 30, 2000 DECEMBER 31, 1999
------------------ ------------------
<S> <C> <C>
Acquisition fees and refinancing fees $ -- $682,414
Disposition fees 255,750 --
Overhead expenses 18,000 24,000
-------- --------
$273,750 $706,414
======== ========
</TABLE>
<PAGE> 11
WEST COAST REALTY INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 (UNAUDITED)
AND DECEMBER 31, 1999
NOTE 2 - RELATED PARTY TRANSACTIONS (CONTINUED)
(b) At September 30, 2000 and December 31, 1999, the Advisor owned
22,556 shares of the issued and outstanding shares of the Company.
(c) Property management fees earned by WCRM totaled $141,955 and
$142,259 for the nine months ended September 30, 2000 and 1999, respectively.
(e) The Corporation had related party accounts payable as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, 2000 DECEMBER 31, 1999
<S> <C> <C>
Associated Securities Corp. $16,875 $22,723
West Coast Realty Management 40,612 58,443
West Coast Realty Advisors 6,000 6,000
------- -------
$63,487 $87,166
======= =======
</TABLE>
(f) Advisory fees earned by WCRA totaled $181,593 and $217,772 for the
nine months ended September 30, 2000 and 1999, respectively. WCRA waived
collection of $181,593, (or 100%) and $217,772 (or 100%) respectively, of these
fees which are included in additional paid-in capital.
NOTE 3 - NOTES PAYABLE
<TABLE>
SEPTEMBER 30, 2000 December 31, 1999
===========================================================================================================================
<S> <C> <C>
8.25% promissory note secured by a Deed of Trust on the Fresno Property,
monthly principal and interest payments are $5,244 balance due
August 1, 2003 $ 579,128 $ 590,029
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,
balance due February 1, 2004 515,490 527,580
8.25% promissory note secured by a Deed of Trust on the Riverside property,
monthly principal and interest payments are $9,116, balance due
November 8, 2004 1,133,155 1,143,447
</TABLE>
<PAGE> 12
WEST COAST REALTY INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 (UNAUDITED)
AND DECEMBER 31, 1999
NOTE 3 - NOTES PAYABLE (CONTINUED)
<TABLE>
SEPTEMBER 30, 2000 December 31, 1999
===========================================================================================================================
<S> <C> <C>
9.625% promissory note secured by a Deed of Trust on the Safeguard property,
monthly principal and interest payments are $24,190, balance due
February 1, 2005 $ 1,783,340 $ 1,868,858
8% promissory note secured by a Deed of Trust on the Java City property,
monthly principal and interest payments are $3,126, balance due
June 1, 2018 352,418 358,931
Variable rate promissory note secured by a Deed of Trust on the Tycom property,
interest rate margin is 1.9% over the 3 month LIBOR with right of
conversion after the first year (7.23% at June 30, 2000), monthly payments
of principal and interest are $16,693, balance due August 1, 2007 2,199,834 2,229,873
7.5% promissory note secured by a Deed of Trust on the Chino property, monthly
principal and interest payments are $6,836, balance due October 1, 2010
(rate is adjustable on the fourth and eighth anniversary years of the loan,
to the weekly average of the five-year Treasury Note yield for the seventh
week prior to the Adjustment Date plus 200 basis points, but no less than
the existing rate) 898,997 909,618
7.5% promissory note secured by a Deed of Trust on the Vacaville property,
monthly principal and interest payments are $10,346, balance due October 1,
2010 (rate is adjustable on the fourth and eighth anniversary years of the
loan, to the weekly average of the five-year Treasury Note yield for the
seventh week prior to the Adjustment Date plus 200 basis points, but no
less than the existing rate) 1,360,654 1,376,725
7.375% promissory note secured by a Deed of Trust on the Horn Road property,
monthly principal and interest payments are $7,309, balance due June 1,
2011 (rate is adjustable on the fourth and eighth anniversary years of the
loan, to the weekly average of the five-year Treasury Note yield for the
seventh week prior to the Adjustment Date plus 195 basis points, but no
less than the existing rate) 965,952 977,933
8.33% promissory note secured by a Deed of Trust on the Roseville
property, monthly principal and interest payments are $11,510
balance due July 1, 2008 1,410,707 1,425,641
</TABLE>
<PAGE> 13
WEST COAST REALTY INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 (UNAUDITED)
AND DECEMBER 31, 1999
NOTE 3 - NOTES PAYABLE (CONTINUED)
<TABLE>
SEPTEMBER 30, 2000 December 31, 1999
===========================================================================================================================
<S> <C> <C>
7.375% promissory note secured by a Deed of Trust on the Corona property,
monthly principal and interest payments are $7,309 balance due June 1, 2011
(rate is adjustable on the fourth and eighth anniversary years of the loan,
to the weekly average of the five-year Treasury Note yield for the seventh
week prior to the Adjustment Date plus 195 basis points, but no less than
the existing rate) $ 965,952 $ 977,933
7.50% promissory note secured by a Deed of Trust on the Cerritos property,
monthly principal and interest payments are $9,238 balance due April 1,
2011 (rate is adjustable on the fourth and eighth anniversary years of the
loan, to the weekly average of the five-year Treasury Note yield for the
seventh week prior to the Adjustment Date plus 275 basis points, but no
less than the existing rate) 1,224,516 1,238,343
7.50% promissory note secured by a Deed of Trust on the Ontario property,
monthly principal and interest payments are $22,390 balance due
March 1, 2004 2,939,501 2,971,576
1.75% plus LIBOR rate (7.87% at December 31, 1999) promissory note secured by a
deed of trust of the Folsom property, monthly principal and interest
payments are $35,083, balance due September 1, 2001 4,040,191 4,089,050
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 $18,898, balance due August 1,
2015 (Paid-off June 30, 2000) -- 1,977,469
10% promissory note secured by a Deed of Trust on the Java City property,
monthly principal and interest payments are $3,413, balance due November 1,
2001 (Paid-off June 30, 2000) -- 312,318
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% (7.963% at December 31, 1998), and may
not go below 6.5% or above 11.0%, monthly principal and interest payments
are $12,794, balance due October 1, 2003 (Paid-off April 12, 2000) -- 1,641,227
---------------------------------------------------------------------------------------------------------------------------
TOTAL $20,369,835 $24,616,551
===========================================================================================================================
</TABLE>
<PAGE> 14
WEST COAST REALTY INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 (UNAUDITED)
AND DECEMBER 31, 1999
NOTE 3 - NOTES PAYABLE (CONTINUED)
The aggregate annual future maturities at September 30, 2000 are as follows:
<TABLE>
<S> <C>
2001 .................................. $ 4,423,517
2002 .................................. 417,704
2003 .................................. 983,079
2004 .................................. 3,638,664
2005 .................................. 2,495,048
Thereafter ............................ 8,411,823
-----------
Total $20,369,835
===========
</TABLE>
NOTE 4 - NET INCOME AND DIVIDENDS PER SHARE
Dividends are declared and accrued based approximately upon the previous
quarter's income from operations before depreciation and amortization.
Net Income Per Share for the nine months ended September 30, 2000 and 1999 was
computed using the weighted average number of outstanding shares of 2,927,967
and 2,929,885 respectively.
Dividends declared during the first nine months of 2000 and 1999 were as
follows:
<TABLE>
<CAPTION>
OUTSTANDING AMOUNT TOTAL
RECORD DATE SHARES PER SHARE DIVIDEND
----------- ----------- --------- ----------
<S> <C> <C> <C>
December 31, 1999 2,927,967 $ 0.060 $ 175,678
March 31, 2000 2,927,967 0.175 512,394
May 23, 2000 2,927,967 0.650 1,903,179
June 30, 2000 2,927,967 1.075 3,147,565
----------
TOTAL 2000 $5,738,816
==========
March 31, 1999 2,932,762 $ 0.160 469,243
June 30, 1999 2,927,967 0.160 468,474
September 30, 1999 2,927,967 0.160 468,474
----------
TOTAL 1999 $1,406,191
==========
</TABLE>
<PAGE> 15
WEST COAST REALTY INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 (UNAUDITED)
AND DECEMBER 31, 1999
NOTE 5 - LITIGATION
The Company is a defendant in a lawsuit entitled JOHN LONBERG & RUTHEE GOLDKORN
V. SANBORN THEATERS, INC. A CALIFORNIA CORPORATION DOING BUSINESS AS MARKET LACE
CINEMA; SO-CAL CINEMA, INC., A CALIFORNIA CORPORATION; AND
SALTS-TROUTMAN-KANESHIRO, INC., WEST COAST REALTY INVESTORS, INC., USDC Central
District of California, Eastern Division Case No. CV-97-6598AHM (JGx). This is
an Americans with Disabilities Act claim brought against the Market Place Cinema
located in Riverside, California. The theater is owned by the Company and leased
to and operated by Sanborn Theaters. Plaintiffs allege certain features of the
theater discriminated against them and violated state and federal disabled
access laws. Plaintiffs demand statutory damages, damages for emotional
distress, a "lodestar" multiplier, attorneys' fees, and punitive damages.
Plaintiffs have not quantified their damages, however, it is expected that
Plaintiffs claims will exceed $300,000. The United States Department of Justice
has intervened in this suit. This case has now been stayed pending the outcome
of a similar case filed against AMC Theaters. Management cannot determine the
likelihood of an unfavorable outcome or range of potential loss.
NOTE 6 - SUBSEQUENT EVENTS
(a) On October 16, 2000, the Company paid dividends totaling $439,195 ($0.15 per
share), payable to shareholders of record as of October 1, 2000. This cash
distribution was based on the operations for the quarter ending September 30,
2000.
NOTE 7 - SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
2000 1999
---------- ----------
<S> <C> <C>
Cash paid during the period for interest: $1,386,500 $1,313,080
Supplemental Disclosure of non-cash financing activities:
Equity contributed by an affiliate through expense
Reimbursement: $ 181,593 $ 217,772
Dividends declared net of dividends paid: $ -- $ 468,474
</TABLE>
<PAGE> 16
WEST COAST REALTY INVESTORS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Certain statements in the Management Discussion and Analysis constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 (the "Reform Act"). Such forward-looking
statements involve known and unknown risks, uncertainties, and other factors
which may cause the actual results, performance or achievements of the Company
to be materially different from any future results, performance or achievements,
expressed or implied by such forward-looking statements.
INTRODUCTION
West Coast Realty Investors, Inc. (the "Company") was organized in October 1989
under the laws of the State of Delaware. The Company qualifies as a Real Estate
Investment Trust ("REIT") for federal and state income tax purposes. The Company
is advised by West Coast Realty Advisors, Inc. (the "Advisor"), a wholly owned
subsidiary of Associated Financial Group, Inc. The Advisor will oversee the
investments of the Company, subject to the direction of the Company's Board of
Directors.
The Company is organized for the purpose of investing in, holding, and managing
income-producing retail or commercial properties located primarily in California
and on the West Coast of the United States. Properties have been and will be
acquired for cash or on a moderately leveraged basis with aggregate mortgage
indebtedness not to exceed fifty percent of the value of all properties on a
combined basis or eighty percent individually. The Company intended on holding
each property for approximately seven to ten years.
The Company's principal goals are to:
1. Invest in properties which will preserve and protect capital;
2. Provide shareholders with cash dividends, a portion of which will not
constitute taxable income;
3. Provide capital gains through potential appreciation of properties; and
The ownership and operation of any income-producing real estate is subject to
those risks inherent in all real estate investments, including national and
local economic conditions, the supply and demand for similar types of real
property, competitive marketing conditions, zoning changes, possible casualty
losses, and increases in real estate taxes, assessments, and operating expenses,
as well as others.
<PAGE> 17
WEST COAST REALTY INVESTORS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
INTRODUCTION (CONTINUED)
In addition, the Company is subject to the usual competitive factors that are
common in real estate including new construction, changes in the economy, and
vacancy factors at other rental real estate locations.
The Company is operated by the Advisor, subject to the terms of the Amended
Advisory Agreement dated January 1, 1992, which was renewed until June 30, 2001
by a majority vote of the shareholders, and will thereafter be renewable
annually with the approval of a majority of the shareholders. The Company has no
employees, and all administrative services are provided by the Advisor.
RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 2000 VS. NINE MONTHS
ENDED SEPTEMBER 30, 1999
Operations for the nine months ended September 30, 2000 represented a full nine
months of rental operations for all properties except for the OPTO-22 property
which was sold April 12, 2000 and the Fremont property which was sold June 30,
2000. This compares to the nine months ended September 30, 1999, which
represented a full nine months of rental operations including the above
properties but excluding the Folsom property which was purchased on May 1, 1999
and the Ontario property which was purchased January 12, 1999.
The net income for the nine months ended September 30, 2000 of $3,235,794
increased significantly from net income for the nine months ending September 30,
1999 of $595,065 primarily due to the gain on sale of the OPTO-22 and Fremont
properties, and because the Company did not incur acquisition and financing
costs in the nine months ended September 30, 2000. In the nine months ended
September 30, 1999, the Company incurred acquisition and financing costs of
$682,414.
Rental revenue decreased $31,460 (0.83%) primarily due to the loss of rents from
the sale of the OPTO-22 property in April 2000 and the sale of the Fremont
property in June 2000 mostly offset by the ownership of the Folsom property for
a full nine months in 2000 (compared to 5 months during the nine months ended
September 30, 1999). Interest income increased $12,251 (17.25%) due to higher
average balances maintained in interest earning assets during the nine months
ended September 30, 2000 as compared to the nine months ended September 30,
1999. Average balances of interest earning assets for the nine months ended
September 30, 2000 were significantly higher due to investment of the proceeds
from the sale of the OPTO-22 and Fremont sales until their subsequent
<PAGE> 18
WEST COAST REALTY INVESTORS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 2000 VS. NINE MONTHS
ENDED SEPTEMBER 30, 1999 (CONTINUED)
distribution. Average balances for the nine months ended September 30, 1999 were
also lower because the Ontario property was purchased for all cash on January
12, 1999 and the Company received the proceeds from financing the Ontario and
Cerritos properties in March 1999.
Operating expenses, increased $50,703 (38.76%) primarily due to the cost of
operating the Folsom property in 2000. Interest expense increased $43,610
(3.32%) due to the additional debt incurred in connection with property
acquisitions and refinancing activities. General and administrative costs
decreased $651,432 (66.12%) principally because the Company did not incur
acquisition and financing fees in 2000 (the Company incurred $682,414 of such
fees in the first nine months of 1999). Depreciation and amortization expense
increased $52,546 (9.48%) as a result of the ownership of additional properties
during the nine months ended September 30, 2000 compared to the nine months
ended September 30, 1999.
The average number of shares outstanding during the nine months ended September
30, 2000 was 2,927,967 vs. 2,929,885 for the nine months ended September 30,
1999. Net income per share increased from $.20 in 1999 to $1.11 in 2000.
During the nine months ended September 30, 2000, the Company declared dividends
totaling $5,738,816, which included a "1999 Spill-Over Dividend" of $175,678. In
addition, in October 2000 the Company declared and paid dividends totaling
$439,195 based on the operations for the quarter ending September 30, 2000
payable to shareholders of record as of October 1, 2000. This compares to
dividends of $1,406,191 declared for the nine months ended September 30, 1999.
The company generated $1,869,287 in cash basis net income from operations before
depreciation expense of $606,627, equity contribution by Affiliate through
expense reimbursements of $181,593, and the combined gain from the sales of the
OPTO-22 and Fremont properties of $2,154,727 for the nine months ended September
30, 2000. Cash distributions based on 2000 operations of $1,463,983 (including
the October distribution) were $405,304 less than cash basis net income. In
comparison, distributions in the nine months ended September 30, 1999 were
$39,273 more than cash basis income of $1,366,918. The Company continued to
qualify as a REIT in 2000, and liquidity of the Company continues to be strong.
<PAGE> 19
WEST COAST REALTY INVESTORS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 2000 VS. THREE MONTHS
ENDED SEPTEMBER 30, 1999
Operations for the quarter ended September 30, 2000 represented a full quarter
of rental operations for all properties except for the OPTO-22 property which
was sold April 12, 2000 and the Fremont property which was sold June 30, 2000.
Operations for the three months ended September 30, 1999 represented a full
quarter of rental operations for all properties.
The net income for the quarter ending September 30, 2000 of $366,325 decreased
significantly from the quarter ending September 30, 1999 of $418,083, primarily
due to the sale of the OPTO-22 and Fremont properties.
Rental revenue decreased for the quarter ending September 30, 2000 by $250,871
(18.77%) primarily due to the sales of OPTO-22 on April 12, 2000 and the Fremont
property which was sold June 30, 2000.
Operating expenses, property taxes, and property management fees decreased
$59,246 (35.13%) for the quarter ending September 30, 2000, compared to the
quarter ending September 30, 1999, primarily due to the sales of the OPTO-22 and
Fremont properties. Interest expense decreased $117,766 (24.16%) primarily due
to the payoff of the notes payable on the OPTO-22 property on April 12, 2000,
and the Fremont and Java City properties on June 30, 2000. General and
administrative costs decreased $14,282 (15.65%) for the quarter ended September
30, 2000 primarily due to reimbursement of a previously expensed insurance
policy disbursement. Depreciation and amortization expense decreased $7,015
(3.59%) because fewer properties were owned during the quarter ended September
30, 2000.
The average number of shares outstanding during both the quarter ending
September 30, 2000 and ending September 30, 1999 was 2,927,967. Net income per
share decreased from $.14 for the quarter ended September 30, 1999 to $.13 for
the quarter ended September 30, 2000.
The Company did not declare dividends during the quarter ended September 30,
2000; however, in October 2000 the Company declared and paid dividends totaling
$439,195 based on the operations for the quarter ending September 30, 2000. This
compares to dividends of $468,474 declared for the quarter ended September 30,
1999. Cash basis net income for the quarter ended September 30, 2000 was
$611,026. This was derived by adding depreciation and amortization expense, and
the equity contribution by Affiliate
<PAGE> 20
WEST COAST REALTY INVESTORS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 2000 VS. THREE MONTHS
ENDED SEPTEMBER 30, 1999 (CONTINUED)
through expense reimbursement to net income. Cash distributions of $439,195
based on the quarter ending September 30, 2000 operations were $171,831 less
than cash basis net income. In comparison, distributions in the three months
ending September 30, 1999 were $217,257 less than cash basis income of $685,731.
LIQUIDITY AND CAPITAL RESOURCES
During the nine months ended September 30, 2000, the Company declared and paid
dividends totaling $5,738,816, which included a "1999 Spill-Over Dividend" of
$175,678. In addition, in October 2000 the Company declared and paid dividends
totaling $439,195 based on the operations for the quarter ending September 30,
2000 payable to shareholders of record as of October 1, 2000. When compared to
the nine months ended September 30, 1999 the Company declared dividends totaling
$1,406,191 of which $937,717 was paid prior to September 30, 1999 and $468,474
was paid subsequent to September 30, 1999. Dividends are determined by
management based on cash flows and the liquidity position of the Company. It is
the intention of management to declare quarterly dividends, subject to the
maintenance of reasonable reserves.
Management uses cash and cash equivalents as its primary measure of the
Company's liquidity. The amount of cash that represents adequate liquidity for a
real estate investment company is dependent on several factors. Among them are:
1. Relative risk of the Company's operations;
2. Condition of the Company's properties;
3. Stage in the Company's operating cycle (e.g., money-raising,
acquisition, operating or disposition phase); and
4. Shareholders dividends.
The Company is adequately liquid and management believes it has the ability to
generate sufficient cash to meet both short-term and long-term liquidity needs,
based upon the above four factors.
The first factor refers to the risk of the Company's investments. At September
30, 2000, the Company's excess funds were invested in short-term money market
funds. The Company acquires rental property either entirely for cash or with
moderate financing. Although the notes payable, which evidence such financing,
are set up on an amortization schedule
<PAGE> 21
WEST COAST REALTY INVESTORS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
allowing for the repayment of principal over time, most of the principal on the
notes is due in balloon payments that come due in the years 2001 through 2011.
The Company is aware that the balloon payments must be satisfied either through
refinancing of the loans or the sale of the property(ies) in order to protect
the interests of the Company's shareholders. Furthermore, most of the
properties' tenants are nationally known retailers or well-established
businesses committed under long-term leases.
The second factor refers to the condition of the Company's properties. The
Company's properties are in good condition without significant deferred
maintenance obligations and are leased under "triple-net" leases, which reduces
the Company's risk pertaining to excessive maintenance and operating costs.
The third factor refers to operating cycle. The Company was liquid at September
30, 2000 and is in the "operating" stage of its life cycle. Virtually all excess
funds were invested in a short-term money market fund. At quarter-end, the
Company has allocated approximately $400,000 towards a "reserve", $440,000 of
cash is held pending dividend distribution to stockholders, which was paid
October 16, 2000, $100,000 of cash to be paid for current mortgage and accounts
payable commitments, $330,000 in tenant security deposits and prepaid rents, and
the balance-approximately $400,000, is to be held for working capital purposes.
The Company's operations generated $1,869,287 in net operating cash flow during
the nine months ending September 30, 2000 (net income from operations before
depreciation expense, equity contribution by Affiliate through expense
reimbursements, and gain on sale of properties). Thus, the Company is generating
significant amounts of cash flow and could withhold payment of all or a portion
of dividends, if necessary, in order to rebuild cash balances.
The fourth factor refers to distribution of dividends to shareholders. Dividends
to shareholders were made at a level consistent with the amount of net income
available after application of expenses. The Advisor is careful not to make
distributions in excess of the available income.
Inflation and changing prices have not had a material effect on the Company's
operations. Operations in the near future may be materially affected as and when
the Company acquires additional property.
<PAGE> 22
WEST COAST REALTY INVESTORS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
CASH FLOWS - SEPTEMBER 30, 2000 VS. SEPTEMBER 30, 1999
Cash resources decreased $202,933 during the nine months ended September 30,
2000 compared to a $2,297,451 decrease in cash resources for the nine months
ended September 30, 1999. Cash provided by operating activities increased by
$1,783,498 with the largest contributor being $1,869,287 in cash basis net
income for the nine months ended September 30, 2000. In contrast, the nine
months ended September 30, 1999 provided $1,301,152 in cash from operating
activities due primarily to $1,366,918 in cash basis net income. Cash provided
by investing activities for the nine months ending September 30, 2000 of
$7,999,102 was the result of proceeds from the sales of the OPTO-22 and Fremont
properties. The sole use of cash in investing activities for the nine months
ended September 30, 1999 was $10,625,919 expended for the acquisition of two
additional properties located in Ontario and Folsom, California. For the nine
months ended September 30, 2000, financing activities required $9,985,533,
resulting from the pay-off of the OPTO-22, Fremont, and Java City property notes
payable as well as principal payments on other notes payable, and $5,738,816 for
dividends paid. For the nine months ended September 30, 1999, financing
activities provided $7,027,316 due to $8,375,870 in financing obtained in
connection with the acquisition of the Cerritos, Ontario, and Folsom, California
properties, offset by purchases of Treasury Stock of $47,812, dividends paid of
$937,716, repayments on notes payable of $320,030 and increases in loan
origination fees of $42,996.
<PAGE> 23
WEST COAST REALTY INVESTORS, INC.
PART II
O T H E R I N F O R M A T I O N
ITEM 1. LEGAL PROCEEDINGS
The Company is a defendant in a lawsuit entitled JOHN LONBERG; RUTHEE
GOLDKORN V. SANBORN THEATERS, INC.; SO-CAL CINEMA, INC.; SALTS, TROUTMAN AND
KANESHIRO, INC.; WEST COAST REALTY INVESTORS, INC., in the U.S. District Court
for the Central District of California. (Case #CV-97-6598AHM(JGx)
The Company was added as a defendant in the plaintiff's First Amended Complaint
filed May 7, 1998, apparently due to the Company's status as landlord for a
movie theater known as the Riverside Market Place Cinema.
The plaintiffs alleged violations of the federal Americans with Disabilities Act
and the California Unruh Civil Rights Act with respect to their movie-going
experiences, including inadequate physical accommodations for wheelchair-bound
guests and insensitive theater personnel. Sanborn is the tenant and theater
operator. Troutman is the architect who designed the theater and its interiors.
The plaintiffs seek actual damages of $1,000 for each violation of law; three
times actual damages; and attorneys fees, expenses and costs. The plaintiffs
also seek mandatory injunctive relief requiring the defendants to make the
theater accessible to and useable by disabled individuals.
The plaintiffs have agreed to dismiss their claims under the Unruh Civil Rights
Act.
The U.S. Department of Justice, Civil Rights Division ("DOJ") filed a Motion to
Intervene in the case on March 1, 1999. DOJ has sued Sanborn Theaters only and
preliminary discussions have been held between the DOJ and Sanborn. Sanborn
intends to vigorously defend against the DOJ.
This case has now been stayed pending the outcome of a similar case filed
against AMC Theaters.
Management cannot determine the likelihood of an unfavorable outcome or range of
potential loss.
<PAGE> 24
WEST COAST REALTY INVESTORS, INC.
PART II
O T H E R I N F O R M A T I O N (CONTINUED)
ITEM 2. EXHIBIT AND REPORTS ON FORM 8-K
(a) Information required under this section has been included in the
financial statements.
(b) Reports on Form 8-K
None.
<PAGE> 25
S I G N A T U R E S
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WEST COAST REALTY INVESTORS, INC.
(Registrant)
Date: November 14, 2000 /s/ W. Thomas Maudlin Jr.
-----------------------------------------------------
W. THOMAS MAUDLIN JR.
(Director, President and Principal Executive Officer)
Date: November 14, 2000 /s/ John R. Lindsey
-----------------------------------------------------
JOHN R. LINDSEY
(Vice President/Treasurer,
Principal Financial Officer, and
Principal Accounting Officer)
