<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 MARCH 31, 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 MAY 11, 2000.
<PAGE> 2
ASSOCIATED PLANNERS REALTY FUND
INDEX
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
PAGE NO.
--------
<S> <C>
Item 1. Consolidated Financial Statements
Balance Sheets -
March 31, 2000 and December 31, 1999 3
Statements of Stockholders' Equity -
Three Months Ended March 31, 2000 and 1999 4
Statements of Income -
Three Months Ended March 31, 2000 and 1999 5
Statements of Cash Flows -
Three Months Ended March 31, 2000 and 1999 6
Summary of Accounting Policies 7
Notes to Financial Statements 9
Item 2. Management's Discussion and Analysis of 17
Financial Condition and Results of Operations
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 24
Item 2. Changes in Securities 24
Item 3. Defaults Upon Senior Securities 24
Item 4. Submission of Matters to a Vote of Security Holders 24
Item 5. Other Information 24
Item 6. Exhibit and Reports on Form 8-K 24
</TABLE>
<PAGE> 3
PART 1. FINANCIAL INFORMATION
WEST COAST REALTY INVESTORS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
===========================================================================================================
MARCH 31, 2000 December 31, 1999
(UNAUDITED) (Audited)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Rental real estate, less accumulated
depreciation (Note 1) $ 45,572,519 $ 45,778,403
Cash and cash equivalents 2,194,652 1,874,880
Deferred rent 588,342 569,442
Accounts receivable 343,872 362,714
Loan origination fees, net of accumulated
amortization of $110,031 and $101,927 222,367 230,471
Other assets 39,749 48,590
- -----------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 48,961,501 $ 48,864,500
===========================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Accounts payable $ 26,442 $ 728
Due to related party (Note 3(e)) 67,107 87,166
Dividends payable (Note 5) 512,394 --
Security deposits and prepaid rent 455,481 484,854
Other liabilities 213,935 201,733
Notes payable (Note 4) 24,534,813 24,616,551
- -----------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 25,810,172 25,391,032
COMMITMENTS AND CONTINGENCIES (NOTE 6)
STOCKHOLDERS' EQUITY
Common stock, $.01 par-shares authorized,
5,000,000 shares issued, 2,927,967 outstanding in 2000 and 1999 29,280 29,280
Additional paid-in capital 26,812,187 26,738,963
Dividend in excess of retained earnings (3,690,138) (3,294,775)
- -----------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 23,151,329 23,473,468
- -----------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 48,961,501 $ 48,864,500
===========================================================================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE> 4
WEST COAST REALTY INVESTORS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
DIVIDENDS IN
COMMON STOCK ADDITIONAL PAID EXCESS OF
SHARES AMOUNT CAPITAL RETAINED 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 3 (f)) -- -- 73,224 --
Net income -- -- -- 292,709
Dividends declared (Note 5) -- -- -- (688,072)
--------- ------- ----------- -----------
BALANCE AT MARCH 31, 2000 2,927,967 $29,280 $26,812,187 $(3,690,138)
========= ======= =========== ===========
</TABLE>
THREE MONTHS ENDED MARCH 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
DIVIDENDS IN
COMMON STOCK ADDITIONAL PAID EXCESS OF
SHARES AMOUNT CAPITAL RETAINED EARNINGS
--------- ------- --------------- -----------------
<S> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1998 2,932,762 $29,328 $26,495,731 $(2,490,779)
Equity contribution by Affiliates through
expense reimbursements (Note 3 (f)) -- -- 72,719 --
Net income -- -- -- 145,672
Dividends declared (Note 5) -- -- -- (469,242)
--------- ------- ----------- -----------
BALANCE AT MARCH 31, 1999 2,932,762 $29,328 $26,568,450 $(2,814,349)
========= ======= =========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 5
WEST COAST REALTY INVESTORS, INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
=====================================================================================
THREE MONTHS ENDED Three Months Ended
MARCH 31, 2000 March 31, 1999
(UNAUDITED) (Unaudited)
- -------------------------------------------------------------------------------------
<S> <C> <C>
Revenues
Rental (Notes 1 and 2) $1,362,749 $1,136,944
Interest 24,847 17,788
- -------------------------------------------------------------------------------------
1,387,596 1,154,732
- -------------------------------------------------------------------------------------
Costs and expenses
Operating 88,822 53,755
Property taxes 46,369 31,001
Property management fees (Note 3 (e)) 53,608 41,930
Interest expense 560,254 342,737
General and administrative 131,846 368,216
Depreciation and amortization 213,988 171,421
- -------------------------------------------------------------------------------------
1,094,887 1,009,060
- -------------------------------------------------------------------------------------
Net income $ 292,709 $ 145,672
=====================================================================================
Net income per share (Note 5) $ .10 $ .05
=====================================================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE> 6
WEST COAST REALTY INVESTORS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
=======================================================================================================
THREE MONTHS Three Months
ENDED Ended
MARCH 31,2000 March 31,1999
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (UNAUDITED) (Unaudited)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 292,709 $ 145,672
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 205,884 163,904
Interest expense on amortization of loan origination fees 8,104 7,517
Equity contribution by Affiliates through expense
reimbursements 73,224 72,719
Increase (decrease) from changes in:
Deferred rent (18,900) (36,003)
Accounts receivable 18,842
Other assets 8,841 7,792
Accounts payable 25,714 (5,795)
Due to related party (20,059) 13,830
Security deposits and prepaid rent (29,373) 43,201
Other liabilities 12,202 23,269
- -------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 577,188 436,106
- -------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to rental real estate -- (4,614,964)
- -------------------------------------------------------------------------------------------------------
NET CASH (USED IN) INVESTING ACTIVITIES -- (4,614,964)
- -------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends declared and paid (175,678) --
Increase in notes payable -- 4,250,000
Payments on notes payable (81,738) (90,075)
(Increase) in loan origination fees -- (38,224)
- -------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (257,416) 4,121,701
- -------------------------------------------------------------------------------------------------------
NET INCREASE, (DECREASE) IN CASH AND CASH EQUIVALENTS 319,772 (57,157)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,874,880 4,594,587
- -------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 2,194,652 $ 4,537,430
=======================================================================================================
</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 1999, 1998, and 1997 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
March 31, 2000 and the results of operations and cash flows for the three months
ended March 31, 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 began expensing 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. Prior to this, the Company capitalized internal
acquisition costs and included it as part of the cost of the property.
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 MONTHS ENDED MARCH 31, 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
Huntington Beach, California (OPTO-22) September 15, 1993 2,628,985
Riverside, California November 29, 1994 3,655,500
Tustin, California (Safeguard) May 22, 1995 4,862,094
Fremont, California (Technology Drive) October 31, 1995 3,747,610
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>
March 31, December 31,
2000 1999
================================================================================
<S> <C> <C>
Land $16,318,835 $16,318,835
Buildings and improvements 31,959,668 31,959,668
--------------------------------------------------------------------------------
48,278,503 48,278,503
Less accumulated depreciation 2,705,984 2,500,100
--------------------------------------------------------------------------------
Net rental properties $45,572,519 $45,778,403
================================================================================
</TABLE>
<PAGE> 10
WEST COAST REALTY INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 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:
Three tenants accounted for 13%, 10% and 10%, respectively, for the three months
ended March 31, 2000; and
Three tenants accounted for 14%, 13% and 10%, respectively, for the three months
ended March 31, 1999.
NOTE 2 - FUTURE MINIMUM RENTAL INCOME
As of March 31, 2000, future minimum rental income under the existing leases
that have remaining noncancelable terms in excess of one year are as follows:
<TABLE>
<CAPTION>
<S> <C>
2000 .................................. $ 3,772,250
2001 .................................. 4,753,631
2002 .................................. 4,285,529
2002 .................................. 4,285,529
2003 .................................. 3,638,304
2004 .................................. 3,520,554
Thereafter ............................ 12,970,455
-----------
Total $32,940,723
===========
</TABLE>
Future minimum rental income does not include lease renewals or new leases that
may result after a noncancelable-lease expires.
NOTE 3 - 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 March 31, 1999,
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.
<PAGE> 11
WEST COAST REALTY INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999 (UNAUDITED) AND DECEMBER 31, 1999
NOTE 3 - RELATED PARTY TRANSACTIONS (CONTINUED)
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>
THREE MONTHS ENDED FOR THE YEAR ENDED
MARCH 31, 2000 DECEMBER 31, 1999
-------- --------
<S> <C> <C>
Acquisition fees and refinancing fees $ -- $682,414
Overhead expenses 6,000 24,000
-------- --------
$ 6,000 $706,414
======== ========
</TABLE>
(b) At March 31, 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 $53,608 and
$41,930 for the three months ended March 31, 2000 and 1999, respectively.
(e) The Corporation had related party accounts payable as follows:
<TABLE>
<CAPTION>
MARCH 31, 2000 DECEMBER 31, 1999
<S> <C> <C>
Associated Securities Corp. $ 7,499 $22,723
West Coast Realty Management 53,608 58,443
West Coast Realty Advisors 6,000 6,000
------- -------
$67,107 $87,166
======= =======
</TABLE>
(f) Advisory fees earned by WCRA totaled $73,224 and $72,719 for the
three months ended March 31, 2000 and 1999, respectively. WCRA
waived collection of $73,224, (or 100%) and $72,719 (or 100%)
respectively, of these fees which are included in additional
paid-in capital.
<PAGE> 12
WEST COAST REALTY INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999 (UNAUDITED) AND DECEMBER 31, 1999
NOTE 4 - NOTES PAYABLE
<TABLE>
<CAPTION>
MARCH 31, December 31,
2000 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 due August 1, 2003 $ 588,341 $ 590,029
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, due October 1, 2003 1,637,399 1,641,227
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 524,962 527,580
8.25% promissory note secured by a Deed of Trust on the Riverside property,
monthly principal and interest payments are $9,988, due November 8, 2004 1,141,457 1,143,447
9.625% promissory note secured by a Deed of Trust on the Safeguard property,
monthly principal and interest payments are $24,190, due February 1, 200 1,850,455 1,868,858
</TABLE>
<PAGE> 13
WEST COAST REALTY INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2000 AND 1990 (UNAUDITED) AND DECEMBER 31, 1999
NOTE 4 - NOTES PAYABLE (CONTINUED)
<TABLE>
<CAPTION>
MARCH 31, December 31,
2000 1999
===================================================================================================================
<S> <C> <C>
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 1,967,734 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, due November 1, 2001 310,873 312,318
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 357,557 358,931
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 (7.65% at December 31, 1998), monthly payments of
principal and interest are $16,693, due June 30, 2007 2,223,357 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, 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) 907,317 909,618
7.5% promissory note secured by a Deed of Trust on the Vacaville property,
monthly principal and interest payments are $10,346, 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) 1,373,242 1,376,725
</TABLE>
<PAGE> 14
WEST COAST REALTY INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999 (UNAUDITED) AND DECEMBER 31, 1999
NOTE 4 - NOTES PAYABLE (CONTINUED)
<TABLE>
<CAPTION>
MARCH 31, December 31,
2000 1999
===================================================================================================================
<S> <C> <C>
7.375% promissory note secured by a Deed of Trust on the Horn Road property,
monthly principal and interest payments are $7,309, 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) 975,335 977,933
8.33% promissory note secured by a Deed of Trust on the Roseville property,
monthly principal and interest payments are $11,510 due July 1, 2008 1,422,391 1,425,641
7.375% promissory note secured by a Deed of Trust on the Corona property,
monthly principal and interest payments are $7,309 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) 975,335 977,933
7.50% promissory note secured by a Deed of Trust on the Cerritos property,
monthly principal and interest payments are $9,238 due April 1, 2011 1,235,347 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 due March 1, 2004 2,965,180 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 $29,425, due September 1, 2001 4,078,531 4,089,050
- -------------------------------------------------------------------------------------------------------------------
$24,534,813 $24,616,551
===================================================================================================================
</TABLE>
<PAGE> 15
WEST COAST REALTY INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999 (UNAUDITED) AND DECEMBER 31, 1999
NOTE 4 - NOTES PAYABLE (CONTINUED)
The aggregate annual future maturities at March 31, 2000 are as follows:
<TABLE>
<S> <C>
2000 .................................. $ 1,832,787
2001 .................................. 6,056,972
2002 .................................. 2,049,660
2003 .................................. 3,415,092
2004 .................................. 4,237,987
Thereafter ............................ 6,942,315
-----------
Total $24,534,813
===========
</TABLE>
NOTE 5 - 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 three months ended March 31, 2000 and 1999 was
computed using the weighted average number of outstanding shares of 2,927,967
and 2,932,762, respectively.
Dividends declared during the first quarter 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
---------
TOTAL $688,072
========
March 31, 1999 2,932,762 $0.160 469,242
---------
TOTAL $469,242
========
</TABLE>
<PAGE> 16
WEST COAST REALTY INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999 (UNAUDITED) AND DECEMBER 31, 1999
NOTE 6 - 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 7 - SUBSEQUENT EVENTS
(a) On April 15, 2000, the Company paid dividends totaling $512,394 ($0.175 per
share), payable to shareholders of record as of March 31, 2000 (Note 8).
(b) During January 2000 the tenant of the Opto 22 property executed its right to
purchase the property. The sale of the property closed in April 2000 for a sales
price $3,675,000. The Company realized an approximate gain of $1,100,000 on the
sale.
(c) During April 2000, the Company entered into a contract to sell the Fremont,
California property to an unrelated buyer. The property is in escrow with an
expected sale price of $4,850,000. The Company expects to realize an approximate
gain of $1 million from the sale. There is no assurance that the sale will
ultimately be consummated and if consummated it is reasonably possible that the
gain could differ.
<PAGE> 17
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> 18
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, 2000
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 - MARCH 31, 2000 VS. MARCH 31, 1999
Operations for the quarter ended March 31, 2000 represented a full quarter of
rental operations for all properties, compared to the quarter ended March 31,
1999, which excluded the Folsom property which was purchased in May 1999 and
eleven days of the Ontario property which was purchased January 12, 1999.
The net income for the quarter ended March 31, 2000 of $292,709 increased
significantly from net income for the quarter ending March 31, 1999 of $145,672,
principally because the Company did not incur acquisition and financing costs in
the quarter ended March 31, 2000. In the quarter ended March 31, 1999, the
Company incurred acquisition and financing costs of $261,036.
Rental revenue increased $225,805 (20%) primarily due to the ownership of the
Folsom property in 2000. Interest income increased $7,059 (40%) due to higher
average balances maintained in interest earning assets during the quarter ended
March 31, 2000 as compared to the quarter ended March 31, 1999. Average balances
of interest earning assets for the quarter ended March 31, 1999 were
significantly less that comparable balances at either March 31, 1999 or December
31, 1998 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, Property taxes, and Property management fees increased
$62,113 (49%) primarily due to the cost of operating the Folsom property in
2000. Interest expense increased $217,517 (63%) due to the additional debt
incurred in connection with property acquisitions and refinancing activities.
Despite the large debt amounts, the
<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 - MARCH 31, 2000 VS. MARCH 31, 1999 (CONTINUED)
Company is still below the maximum 50% debt, a maximum that is allowed by the
Company's by-laws. General and administrative costs decreased $236,370 (64%)
principally because the Company did not incur acquisition and financing fees in
2000 (the Company incurred $261,036 of such fees in the first three months of
1999). Depreciation and amortization expense increased $42,567 (25%) as a result
of the ownership of additional properties during the quarter ended March 31,
2000 compared to the quarter ended March 31, 1999. Net income of $292,709 for
the quarter ended March 31, 2000 was $147,037 (101%) higher than the three
months ended March 31, 1999.
The average number of shares outstanding during 2000 was 2,927,967 vs. 2,932,762
in 1999. Net income per share increased from $.05 in 1999 to $.10 in 2000.
During the quarter ended March 31, 2000, the Company declared dividends totaling
$688,072, which included a "1999 Spill-Over Dividend" of $175,678. This compares
to dividends of $469,242 declared for the quarter ended March 31, 1999. Cash
basis net income for the quarter ended March 31, 2000 was $506,697. This was
derived by adding depreciation and amortization expense to net income. Cash
distributions based on 2000 operations of $512,394 were $5,697 greater than cash
basis net income. In comparison, distributions in the first quarter 1999 were
$152,149 greater than cash basis income of $317,093. The Company continued to
qualify as a REIT in 2000, and liquidity of the Company continues to be strong.
RESULTS OF OPERATIONS - MARCH 31, 1999 VS. MARCH 31, 1998
Operations for the quarter ended March 31, 1999 represented a full quarter of
rental operations for all properties except the Ontario property, which was
owned for two and one-half months.
The net income for the quarter ended March 31, 1999 of $145,672 decreased
significantly from the quarter ending March 31, 1998 of $258,474.
Rental revenue increased $342,387 (43%) due to a full quarter ownership of the
Chino, Vacaville, Cerritos and two and one-half months ownership for the Ontario
property (as compared to no ownership of these properties during the quarter
ended March 31, 1998). Interest income decreased $14,047 (44%) due to lower cash
balances maintained during the quarter ended March 31, 1999 as compared to the
quarter ended March 31, 1998.
<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 - MARCH 31, 2000 VS. MARCH 31, 1999 (CONTINUED)
Operating expenses increased $24,905 (86%) primarily due to increases in common
area maintenance, consulting services, advertising and legal expenses, offset by
lower utilities and property insurance expenses during the quarter ended March
31, 1999 compared to March 31, 1998. Interest expense increased $108,993 (47%)
due to the additional debt incurred in connection with property acquisitions and
refinancing activities. Despite the large debt amounts, the Company is still
below the maximum 50% debt a maximum that is allowed by the Company's by-laws.
General and administrative costs increased $285,030 (343%) due to acquisition
fees of $261,036 expended in connection with property acquisitions. Depreciation
and amortization expense increased $2,153 (1%) as a result of the ownership of
additional properties during the quarter ended March 31, 1999 compared to the
quarter ended March 31, 1998, offset by a change in asset allocations relating
to the Roseville property. Net income of $145,672 for the quarter ended March
31, 1999 was $112,802 (44%) lower than the three months ended March 31, 1998.
The average number of shares outstanding during 1999 was 2,932,762 vs. 2,247,145
in 1998. Net income per share decreased from $.12 in 1998 to $.05 in 1999.
During the quarter ended March 31, 1999, the Company declared dividends totaling
$469,242, compared to dividends of $455,614 declared for the quarter ended March
31, 1998. Cash basis net income for the quarter ended March 31, 1999 was
$317,093. This was derived by adding depreciation and amortization expense to
net income. Thus, cash distributions this quarter were $152,149 greater than
cash basis net income. In comparison, distributions in the first quarter 1998
were $27,872 greater than cash basis income of $427,742. In either event, the
Company continued to qualify as a REIT in 1999, and liquidity of the Company
continues to be strong.
LIQUIDITY AND CAPITAL RESOURCES
During the quarter ended March 31, 2000, the Company declared dividends totaling
$512,394 based on operations for the first quarter of 2000. 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:
<PAGE> 21
WEST COAST REALTY INVESTORS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS - MARCH 31, 2000 VS. MARCH 31, 1999 (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
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 March 31,
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 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 March 31,
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 $450,000 towards a "reserve", $512,000 of
cash is held pending dividend distribution to stockholders, $150,000 of cash to
be paid for current mortgage and accounts payable commitments, $455,000 in
tenant security deposits and prepaid rents, and the balance-approximately
$628,000, is to be held for working capital purposes. The Company's operations
generated $507,000 in net operating cash flow during the quarter ended March 31,
2000 (net income plus depreciation and amortization expense). 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.
<PAGE> 22
WEST COAST REALTY INVESTORS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS - MARCH 31, 2000 VS. MARCH 31, 1999 (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
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.
CASH FLOWS - MARCH 31, 2000 VS. MARCH 31, 1999
Cash resources increased $319,772 during the three months ended March 31, 2000
compared to a $57,157 decrease in cash resources for the three months ended
March 31, 1999. Cash provided by operating activities increased by $577,188 with
the largest contributor being $506,697 in cash basis net income for the three
months ended March 31, 2000. In contrast, the three months ended March 31, 1999
provided $436,106 in cash from operating activities due primarily to $317,093 in
cash basis net income. The sole use of cash in investing activities for the
three months ended March 31, 1999 was $4,614,964 expended for the acquisition of
an additional property located in Ontario, California. There were no investing
activities elements in cash flow for the three month ended March 31, 2000. For
the three months ended March 31, 2000, financing activities required $257,416,
$81,738 for principal payments on notes payable and $175,678 for the payment of
dividends. For the three months ended March 31, 1999, financing activities
provided $4,121,701 due to $4,250,000 in financing obtained in connection with
the acquisition of the Cerritos and Ontario, California properties, offset by
repayments on notes payable of $90,075 and increase in loan origination fees of
$38,224.
CASH FLOWS - MARCH 31, 1999 VS. MARCH 31, 1998
Cash resources decreased $57,157 during the three months ended March 31, 1999
compared to a $433,258 decrease in cash resources for the three months ended
March 31, 1998. Cash provided by operating activities increased by $436,106 with
the largest contributor being $317,093 in cash basis net income for the three
months ended March 31, 1999. In contrast, the three months ended March 31, 1998
provided $209,786 in cash from operating activities due primarily to $427,742 in
cash basis net income. The sole use of cash in investing activities for the
three months ended March 31, 1999 was $4,614,964 expended for the acquisition of
an additional property located in Ontario,
<PAGE> 23
WEST COAST REALTY INVESTORS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS - MARCH 31, 2000 VS. MARCH 31, 1999 (CONTINUED)
CASH FLOWS - MARCH 31, 1999 VS. MARCH 31, 1998 (CONTINUED)
California. In contrast, the three months ended March 31, 1998 used $2,243,152
in cash for investing activities in connection with the acquisition of an
additional property located in Corona, California. For the three months ended
March 31, 1999, financing activities provided an additional $4,121,701 due to
$4,250,000 in financing obtained in connection with the acquisition of the
Cerritos and Ontario, California properties, offset by repayments on notes
payable of $90,075 and increase in loan origination fees of $38,224. In
contrast, for the three months ended March 31, 1998, financing activities
provided an additional $1,600,108 via the sale of additional shares in the
Company ($2,141,854 in net proceeds), less dividends paid and payable of
$455,614, less an increase in loan origination fees of $65,000 and repayments of
notes payable principal of $63,247.
<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
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.
Management cannot determine the likelihood of an unfavorable outcome or range of
potential loss.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
<PAGE> 25
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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. 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
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: May 12, 2000 /s/ W. THOMAS MAUDLIN JR.
------------------------------------------------------
W. THOMAS MAUDLIN JR.
(Director, President and Principal Executive Officer)
Date: May 12, 2000 /s/ JOHN R. LINDSEY
------------------------------------------------------
JOHN R. LINDSEY
(Vice President/Treasurer,
Principal Financial Officer, and
Principal Accounting Officer)
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