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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the quarterly period ended March 31, 1996
--------------------------
[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
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Commission file number 000-21470
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WINDSOR REAL ESTATE INVESTMENT TRUST 8
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(Exact name of small business issuer as specified in its charter)
California 33-6109499
- - ---------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
120 W. Grand Avenue, Suite 202, Escondido, California 92025
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(Address of principal executive offices)
(619) 746-2411
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(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 [_]
1
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TABLE OF CONTENTS
PART I
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Page
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Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II
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Item 6. Exhibits and Reports on Form 8-K 10
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SIGNATURE
2
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WINDSOR REAL ESTATE INVESTMENT TRUST 8
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BALANCE SHEET
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(unaudited)
<TABLE>
<CAPTION>
March 31, 1996
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<S> <C>
ASSETS
- - ------
Property held for investment:
Land $ 1,799,600
Buildings and improvements 4,775,100
Fixtures and equipment 72,300
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6,647,000
Less accumulated depreciation (632,200)
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6,014,800
Investment in joint venture 610,000
Cash and cash equivalents 225,700
Deferred financing costs 85,400
Other assets 51,300
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$ 6,987,200
==================
LIABILITIES AND SHAREHOLDERS' EQUITY
- - ------------------------------------
Liabilities:
Mortgage notes payable $ 3,379,600
Accounts payable 10,300
Accrued expenses 72,900
Tenant deposits and other liabilities 10,900
Due to Advisor 95,100
------------------
3,568,800
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Shareholders' equity:
Preferred shares of beneficial interest, no par value, unlimited
shares authorized; 98,073 shares issued and outstanding 2,121,700
Common shares of beneficial interest, no par value, unlimited
shares authorized; 90,169 shares issued and outstanding 1,922,900
Dividends paid in excess of net income (626,200)
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3,418,400
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$ 6,987,200
==================
</TABLE>
See accompanying notes to financial statements.
3
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WINDSOR REAL ESTATE INVESTMENT TRUST 8
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STATEMENTS OF OPERATIONS
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(unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31
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1996 1995
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<S> <C> <C>
REVENUES
- - --------
Rent and utilities $ 282,300 $ 274,500
Equity in earnings of joint venture 9,600
Interest 2,800 6,000
Other 3,700 3,500
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298,400 284,000
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COSTS AND EXPENSES
- - ------------------
Property operating 130,500 121,500
Interest 75,700 56,100
Depreciation 67,200 64,100
Advisory fee 20,100 15,000
General and administrative:
Related parties 6,400 7,900
Other 10,200 10,800
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310,100 275,400
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Net (loss) income $ (11,700) $ 8,600
=========== =============
Net (loss) income attributable to common shares $ (5,600) $ 2,600
=========== =============
Net (loss) income per common share $ (0.06) $ 0.03
=========== =============
Dividends per common share $ 0.37 $ 0.34
=========== =============
</TABLE>
See accompanying notes to financial statements.
4
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WINDSOR REAL ESTATE INVESTMENT TRUST 8
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STATEMENTS OF CASH FLOWS
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(unaudited)
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<CAPTION>
Three Months Ended March 31
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1996 1995
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<S> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (11,700) $ 8,600
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Depreciation 67,200 64,100
Equity in earnings of joint venture (9,600)
Joint venture cash distributions 9,600
Amortization of deferred financing costs 4,300
Loss on sale of property held for investment 700
Changes in operating assets and liabilities:
Other assets (5,400) 3,100
Accounts payable (9,000) (7,100)
Accrued expenses 7,700 6,800
Tenant deposits and other liabilities (6,300) (13,900)
Due to Advisor 20,100 15,000
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Net cash provided by operating activities 67,600 76,600
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Cash flows from investing activities:
Increase in property held for investment (35,400) (34,800)
Joint venture cash distributions 2,400
Proceeds from sale of property held for investment 200
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Net cash used in investing activities (32,800) (34,800)
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Cash flows from financing activities:
Dividends paid (70,600) (64,800)
Repayment of mortgage notes payable (4,700) (12,400)
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Net cash used in financing activities (75,300) (77,200)
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Net decrease in cash and cash equivalents (40,500) (35,400)
Cash and cash equivalents at beginning of period 266,200 510,300
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Cash and cash equivalents at end of period $ 225,700 $ 474,900
=========== ============
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest (none capitalized) $ 64,100 $ 54,600
=========== ============
</TABLE>
See accompanying notes to financial statements.
5
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WINDSOR REAL ESTATE INVESTMENT TRUST 8
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NOTES TO FINANCIAL STATEMENTS
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NOTE 1. BASIS OF PRESENTATION
---------------------
The balance sheet at March 31, 1996 and the related statements of operations and
of cash flows for the three months ended March 31, 1996 and 1995 are unaudited.
However, in the opinion of the Advisor, they contain all adjustments, of a
normal recurring nature, necessary for a fair presentation of such financial
statements. Interim results are not necessarily indicative of results for a
full year.
The financial statements and notes are presented as permitted by Form 10-QSB and
do not contain certain information included in the Trust's annual financial
statements and notes.
NOTE 2. INVESTMENT IN JOINT VENTURE
---------------------------
The Trust's investment in joint venture consists of a 40% undivided interest in
one manufactured home community, acquired in June 1995. The condensed results
of operations of the joint venture for the three months ended March 31, 1996
follows:
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<CAPTION>
1996
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Total revenues $ 162,000
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Expenses:
Property operating 84,400
Interest 35,800
Depreciation 17,800
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138,000
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Net income $ 24,000
==============
</TABLE>
NOTE 3. NET (LOSS) INCOME PER COMMON SHARE
----------------------------------
Net (loss) income per common share is calculated using the two class method and
is based on the weighted average number of common shares outstanding during the
period and the net (loss) income allocated to the common shareholders. The
weighted average number of common shares outstanding during both the three
months ended March 31, 1996 and 1995 was 90,169.
NOTE 4. RELATED PARTY TRANSACTIONS
--------------------------
The Advisor is entitled to receive various fees and compensation from the Trust
which are summarized as follows:
Operational Stage
- - -----------------
For management of the Trust's business, the Advisor is paid an advisory fee of
1% of invested assets and .5% of uninvested assets. The fee is subject to
limitation if the Trust's total operating expenses (as defined) for the year
exceed the greater of 2% of the Trust's average invested assets or 25% of the
Trust's net income. The fee is also subordinated to preferred shareholders
receiving a minimum
6
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of 6% and a maximum of 7% annual cumulative dividend, and to common shareholders
receiving a 6% annual noncumulative dividend. During the three months ended
March 31, 1996 and 1995, the Trust accrued advisory fees of $20,100 and $15,000,
respectively, payable to the Advisor.
The Trust reimburses The Windsor Corporation for certain direct expenses, and
employee, executive and administrative time, which are incurred on the Trust's
behalf. The Trust was charged $7,600 and $9,100 for such costs during the three
months ended March 31, 1996 and 1995, respectively. These costs are included in
property operating and general and administrative expenses in the accompanying
Statements of Operations.
7
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WINDSOR REAL ESTATE INVESTMENT TRUST 8
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
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CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
Changes in Financial Condition
- - ------------------------------
March 31, 1996 as compared to December 31, 1995
- - -----------------------------------------------
The Trust's primary sources of cash during the three months ended March 31, 1996
were from the operations of its investment properties and interest income. The
primary uses of cash during the same period were for cash dividends, debt
service and capital improvements.
There have been no significant changes in the financial condition of the Trust
since December 31, 1995. The Trust's cash balance decreased from $266,200 at
December 31, 1995 to $225,700 at March 31, 1996, due mainly to dividends and
capital improvements exceeding cash provided from operations.
Shareholders' equity decreased from $3,500,700 at December 31, 1995 to
$3,418,400 at March 31, 1996 due to a net loss of $11,700 for the three months
ended March 31, 1996 and cash dividends of $70,600 during the same period.
The future sources of cash for the Trust will be provided from property
operations, interest income, cash reserves, and ultimately from the sale of
property. The future uses of cash will be for property and Trust operations,
debt service and cash dividends to shareholders. The Advisor believes that the
future sources of cash are sufficient to meet the working capital requirements
of the Trust for the foreseeable future.
Results of Operations
- - ---------------------
Three months ended March 31, 1996 as compared to three months ended
- - -------------------------------------------------------------------
March 31, 1995
- - --------------
The results of operations for the three months ended March 31, 1996 and 1995 are
not directly comparable due to the purchase of an interest in the Long Lake
Village manufactured home community in June 1995. The Trust incurred a net loss
of $11,700 ($0.06 per common share) for the three months ended March 31, 1996
and realized net income of $8,600 ($0.03 per common share) for the three months
ended March 31, 1995.
Rent and utilities revenues increased from $274,500 in 1995 to $282,300 in 1996.
The overall occupancy of the Trust's three wholly-owned properties increased
slightly from 95% at March 31, 1995 to 97% at March 31, 1996. In addition, rent
increases implemented during the past year include $8 per month at West Star
effective January 1996, $7 per month at El Frontier effective August 1995, and
$12 per month at Griffwood effective May 1995.
Equity in earnings of joint venture represents the Trust's 40% undivided
interest in the net income of the Long Lake manufactured home community,
acquired in June 1995. The Long Lake community was 93% occupied at March 31,
1996 and a $10 per month rent increase was implemented in January 1996.
Interest income decreased from $6,000 in 1995 to $2,800 in 1996 due mainly to
lower cash balances maintained by the Trust.
8
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Property operating expense increased from $121,500 in 1995 to $130,500 in 1996
due mainly to higher property taxes and utilities costs.
Interest expense increased from $56,100 in 1995 to $75,700 in 1996 due mainly to
approximately $570,000 of additional long-term indebtedness incurred by the
Trust in connection with the refinancing of El Frontier in May 1995.
Advisory fee expense represents a fee payable to the Advisor for management of
the Trust's business. The fee is computed based on invested and uninvested
asset levels and is subject to certain subordination provisions. Advisory fee
expense increased from $15,000 in 1995 to $20,100 in 1996 due to a higher
invested asset level after the acquisition of the 40% undivided interest in Long
Lake Village in June 1995.
General and administrative expenses decreased slightly from $18,700 in 1995 to
$16,600 in 1996.
9
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PART II
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Item 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
a) Exhibits and Index of Exhibits
11) Computation of Net (Loss) Income Per Common Share
27) Financial Data Schedule
b) Reports on Form 8-K
There were no reports on Form 8-K filed during the period covered
by this Form 10-QSB.
10
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EXHIBIT 11
WINDSOR REAL ESTATE INVESTMENT TRUST 8
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COMPUTATION OF NET (LOSS) INCOME PER COMMON SHARE (1)
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<TABLE>
<CAPTION>
For the Three Months Ended March 31
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1996 1995
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<S> <C> <C>
Net (Loss) Income $ (11,700) $ 8,600
Less:
Dividends Paid - Preferred (36,800) (33,800)
- Common (33,800) (31,000)
Unpaid Preferred Dividends (3,100)
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Overdistributed Earnings $ (82,300) $ (59,300)
=============== ================
Allocation of Overdistributed Earnings (2)
- - ------------------------------------------
Preferred $ (42,900) $ (30,900)
Common (39,400) (28,400)
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$ (82,300) $ (59,300)
=============== ================
Earnings Per Common Share
- - -------------------------
Dividends Paid $ 33,800 $ 31,000
Allocation of Overdistributed Earnings (39,400) (28,400)
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Net (Loss) Income Attributable to Common Shares $ (5,600) $ 2,600
=============== ================
Weighted Average Common Shares Outstanding 90,169 90,169
=============== ================
Net (Loss) Income Per Common Share $ (0.06) $ 0.03
=============== ================
</TABLE>
Note
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(1) Net (loss) income per common share is computed using the two class method.
(2) Overdistributed earnings are allocated evenly, on a per share basis, between
common and preferred shares.
11
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SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
WINDSOR REAL ESTATE INVESTMENT TRUST 8
--------------------------------------
(Registrant)
By /s/ John A. Coseo, Jr.
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JOHN A. COSEO, JR.
Chairman, Chief Executive Officer,
President, Secretary
Date: May 10, 1996
12
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET OF WINDSOR REAL ESTATE INVESTMENT TRUST 8 AS OF MARCH 31, 1996 AND THE
RELATED STATEMENTS OF OPERATIONS AND OF CASH FLOWS FOR THE THREE MONTHS THEN
ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 225,700
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 6,647,000
<DEPRECIATION> 632,200
<TOTAL-ASSETS> 6,987,200
<CURRENT-LIABILITIES> 0
<BONDS> 3,379,600
0
2,121,700
<COMMON> 1,922,900
<OTHER-SE> (626,200)
<TOTAL-LIABILITY-AND-EQUITY> 6,987,200
<SALES> 0
<TOTAL-REVENUES> 298,400
<CGS> 0
<TOTAL-COSTS> 130,500
<OTHER-EXPENSES> 103,900
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 75,700
<INCOME-PRETAX> (11,700)
<INCOME-TAX> 0
<INCOME-CONTINUING> (11,700)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,700)
<EPS-PRIMARY> (0.06)
<EPS-DILUTED> 0
</TABLE>
