SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarter ended September 30, 1996.
___ 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 1-12222
BEDFORD PROPERTY INVESTORS, INC.
(Exact name of Registrant as specified in its charter)
MARYLAND 68-0306514
(state or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
270 Lafayette Circle, Lafayette, CA 94549
(Address of principal executive offices)
Registrant's telephone number, including area code (510)283-8910
Indicate by check mark whether 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 Registrant was required to file such reports and (2) has been
subject to such filing requirements for the past 90 days. Yes x No___
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of the latest practicable date.
Class Outstanding as of November 13, 1996
Common Stock, $0.02 par value 6,501,325
<PAGE>
BEDFORD PROPERTY INVESTORS, INC.
INDEX
PART I. FINANCIAL INFORMATION Page
ITEM 1. FINANCIAL STATEMENTS
Statement 1
Consolidated Balance Sheets as of September 30, 1996
and December 31, 1995 2
Consolidated Statements of Income for the three and nine
months ended September 30, 1996 and 1995 3
Consolidated Statements of Stockholders' Equity for the
nine months ended September 30, 1996 and the year ended
December 31, 1995 4
Consolidated Statements of Cash Flows for the nine months
ended September 30, 1996 and 1995 5
Notes to Consolidated Financial Statements 6-12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
Management's Discussion and Analysis of Results of Operations
and Financial Condition 13-16
PART II. OTHER INFORMATION
ITEMS 1 - 6 17-26
SIGNATURES 26
<PAGE>
BEDFORD PROPERTY INVESTORS, INC.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
STATEMENT
The financial statements included herein have been prepared by the
Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. The information furnished reflects
all adjustments which are, in the opinion of management, necessary for
a fair presentation of results of operations for the interim periods.
Such adjustments are of a normal recurring nature. These financial
statements should be read in conjunction with the notes to financial
statements appearing in the annual report to stockholders for the year
ended December 31, 1995.
<PAGE>
<TABLE>
BEDFORD PROPERTY INVESTORS, INC.
CONSOLIDATED BALANCE SHEETS (Unaudited)
AS OF SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
(in thousands, except share and per share amounts)
<S>
<C> <C>
September 30, December 31,
1996 1995
ASSETS:
Real estate investments:
Industrial buildings - held for investment $122,001 $ 94,897
Office buildings 52,677 30,025
Industrial buildings - held for sale 6,355 -
Retail buildings 6,281 6,261
187,314 131,183
Less accumulated depreciation 4,150 2,219
183,164 128,964
Cash 1,127 1,027
Other assets 5,654 3,487
Total assets $189,945 $133,478
LIABILITIES AND STOCKHOLDERS' EQUITY:
Bank loan payable 30,754 43,250
Mortgage loan payable 25,000 -
Accounts payable and accrued expenses 2,349 1,451
Dividend payable 2,815 1,765
Acquisition payable 3,000 3,000
Other liabilities 2,480 1,577
Total liabilities $ 66,398 $ 51,043
Redeemable preferred stock:
Series A convertible preferred stock,
par value $0.01 per share; authorized
10,000,000 shares; issued and outstanding
8,333,334 shares; aggregate redemption
amount $50,000; aggregate liquidation
preference $52,500. 50,000 50,000
Common stock and other stockholders' equity:
Common stock, par value $0.02 per share;
authorized 15,000,000 shares, issued
and outstanding, 6,501,325 shares in
1996; 3,045,325 shares in 1995 130 61
Additional paid-in capital 147,744 107,214
Accumulated losses and distributions
in excess of net income (74,327) (74,840)
Total common stock and other
stockholders' equity 73,547 32,435
Total liabilities and stockholders'
equity $189,945 $133,478
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
BEDFORD PROPERTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 (Unaudited)
(in thousands, except share and per share amounts)
Three Months Nine Months
<S>
<C> <C> <C> <C>
1996 1995 1996 1995
Property operations:
Rental income $ 7,090 $ 2,774 $19,168 $ 8,052
Rental expenses:
Operating expenses 1,483 772 3,797 2,077
Real estate taxes 589 261 1,823 743
Depreciation and amortization 788 372 2,114 1,070
Provision for loss on real
estate investment - 630 - 630
Income from property operations 4,230 739 11,434 3,532
General and administrative expenses (414) (336) (1,341) (1,018)
Interest income 43 37 105 56
Interest expense (927) (401) (2,692) (1,309)
Income before gain (loss) on sale 2,932 39 7,506 1,261
Gain (loss) on sale of real
estate investment - (12) 359 (12)
Net income $ 2,932 $ 27 $ 7,865 $ 1,249
Net income (loss) applicable to
common stockholders (1) $ 1,807 $ (133) $ 4,490 $ 1,089
Primary earnings (loss) per
common and common equivalent
share (1) $ 0.27 $ (0.04) $ 0.87 $ 0.36
Primary weighted average number
of common and common
equivalent shares (2) 6,601,527 3,081,186 5,161,087 3,071,380
Earnings (loss) per common share
- assuming full dilution $ 0.27 $ (0.04) $ 0.84 $ 0.36
Weighted average number of common
shares(2) - assuming
full dilution 10,782,393 3,081,186 9,323,223 3,071,380
</TABLE>
See accompanying notes to consolidated financial statements.
(1) Reflects dividends of $1,125 for each quarter of 1996 and $160 for
the third quarter of 1995 on $50,000 of preferred stock issued on
September 18, 1995.
(2) Reflects the one-for-two reverse stock split effective March 29, 1996.
<TABLE>
BEDFORD PROPERTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
AND THE YEAR ENDED DECEMBER 31, 1995 (Unaudited)
(in thousands, except per share data)
<S>
<C> <C> <C> <C>
Total
Accumulated common
losses and stock and
Additional distributions other stock-
Common paid-in in excess of holders'
stock capital net income equity
Balance, December 31, 1994 $ 60 $107,151 $(70,279) $36,932
Issuance of common stock 1 63 - 64
Costs of issuance of
preferred stock - - (3,631) (3,631)
Redemption of rights - - (60) (60)
Net income - - 2,895 2,895
Dividends to common
stockholders
($0.82 per share) - - (2,477) (2,477)
Dividends to preferred
stockholders (9%) - - (1,288) (1,288)
Balance, December 31, 1995 61 107,214 (74,840) 32,435
Issuance of common stock 69 43,632 - 43,701
Costs of issuance of
preferred stock - - (2) (2)
Costs of issuance of
common stock - (3,102) - (3,102)
Net income - - 7,865 7,865
Dividends to common
stockholders
($.74 per share) - - (3,975) (3,975)
Dividends to preferred
stockholders (9%) - - (3,375) (3,375)
Balance, September 30, 1996 $130 $147,744 $(74,327) $73,547
</TABLE>
See accompanying notes to consolidated financial statements.
<TABLE>
BEDFORD PROPERTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 (Unaudited)
(in thousands)
<S>
<C> <C>
1996 1995
Operating Activities:
Net income $7,865 $1,249
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,643 1,273
Loss (gain) on sale of real estate investments (359) 12
Provision for loss on real estate investment - 630
Change in other assets (2,829) (2,090)
Change in accounts payable and accrued expenses 898 270
Change in other liabilities 470 157
Net cash provided by operating activities 8,688 1,501
Investing Activities:
Investments in real estate (56,311) (14,688)
Proceeds from sale of real estate investments 922 1,433
Net cash used by investing activities (55,389) (13,255)
Financing Activities:
Proceeds from bank loan 55,092 3,850
Proceeds from mortgage loan 25,000 -
Repayments of bank loan (67,588) (26,250)
Issuance of common stock 40,597 58
Net proceeds from sale of preferred stock - 46,750
Redemption of rights - (60)
Payment of dividends (6,300) (1,765)
Net cash provided by financing activities 46,801 22,583
Net increase in cash 100 10,829
Cash at beginning of period 1,027 4,733
Cash at end of period $1,127 $15,562
Supplemental disclosure of cash flow information:
a) Non cash investing and financing activities:
Debt incurred with real estate acquired $ 433 $ -
Note receivable from the sale of real
estate investments 50 -
b) Cash paid during the period for interest 2,125 1,283
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
BEDFORD PROPERTY INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. The Company and Basis of Presentation
The Company
Bedford Property Investors Inc. (the "Company") is an equity real estate
investment trust with investments primarily in industrial and suburban
office properties concentrated in the Western United States.
Basis of Presentation
The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-Q and, therefore, do not
include all information and footnotes necessary for a fair presentation
of financial condition, results of operations, and cash flows in
conformity with generally accepted accounting principles. When
necessary, reclassifications have been made to prior period balances to
conform to current period presentation.
Per Share Data
Per share data is based on the weighted average number of common and
common equivalent shares outstanding during the period. Per share data
reflects the retroactive application of the one-for-two reverse stock
split which took place on March 29, 1996. The 1996 per share data
reflects earnings per share on a primary and fully diluted basis. Stock
options issued under the Company's stock option plans are considered
common stock equivalents and are included in the calculation of per share
data if, upon exercise, they would have a dilutive effect. The earnings
per share calculation assuming full dilution assumes the conversion of
the Company's Series A Convertible Preferred Stock. If exercised, the
Series A Convertible Preferred Stock would have a dilutive effect.
Dividends accrued on the Series A Convertible Preferred Stock are
deducted from net income for purposes of determining net income
applicable to common stockholders.
<PAGE>
Note 2. Real Estate Investments
As of September 30, 1996, the Company's real estate investments (net of
accumulated depreciation) were diversified by property type as follows
(in thousands):
<TABLE>
<S>
<C> <C> <C>
Number of Investment
Properties Amount % of Total
Industrial buildings - held for investment 29 $119,662 65
Office buildings 8 51,007 28
Industrial buildings - held for sale 2 6,274 4
Retail buildings 1 6,221 3
Total 40 $183,164 100
</TABLE>
As of September 30, 1996, the Company's real estate investments (net of
accumulated depreciation) were diversified by geographic region as
follows:
<TABLE>
<S>
<C> <C> <C>
Number of Investment
Properties Amount % of Total
San Francisco Bay Area, California 20 $ 72,776 40
Greater Los Angeles Area, California 5 40,890 22
Kansas City, Kansas 5 14,141 8
Bellevue, Washington 1 12,332 7
Denver Metropolitan Area, Colorado 3 11,215 6
Greater Portland Area, Oregon 2 10,381 6
Phoenix, Arizona 1 9,091 5
Minneapolis/St. Paul, Minnesota 2 6,274 3
Salt Lake City, Utah 1 6,064 3
Total 40 $183,164 100
</TABLE>
As of September 30, 1996 the Company decided to offer for sale the two
industrial properties located in St. Paul, Minnesota. Since the sales
price approximates the current carrying value of the properties, no
provision for possible loss is recorded.
<PAGE>
The following table sets forth the Company's real estate investments as
of September 30, 1996 (in thousands):
<TABLE>
<S>
<C> <C> <C> <C>
Less
Accumulated
Land Building Depreciation Total
INDUSTRIAL - HELD FOR INVESTMENT
Greater San Francisco Bay Area, California
Building 3
Contra Costa Diablo Industrial Park,
Concord $ 495 $ 1,235 $ 174 $ 1,556
Building 8
Contra Costa Diablo Industrial Park,
Concord 877 1,690 222 2,345
Building 18
Mason Industrial Park, Concord 610 1,316 184 1,742
115 Mason Circle, Concord 697 855 2 1,550
Milpitas Town Center, Milpitas 1,400 4,507 215 5,692
598 Gibraltar Drive, Milpitas 535 2,522 37 3,020
Auburn Court, Fremont 1,415 2,632 44 4,003
47650 Westinghouse Drive, Fremont 271 913 16 1,168
47600 Westinghouse Drive, Fremont 356 1,067 2 1,421
Fourier Avenue, Fremont 2,120 7,018 52 9,086
350 E. Plumeria Drive, San Jose 3,683 4,793 107 8,369
Lundy Avenue, San Jose 2,055 2,262 12 4,305
301 East Grand, South San Francisco 2,070 1,013 18 3,065
342 Allerton, South San Francisco 2,558 1,795 28 4,325
400 Grandview, South San Francisco 3,300 3,597 63 6,834
410 Allerton, South San Francisco 1,356 905 16 2,245
417 Eccles, South San Francisco 661 521 9 1,173
860-870 Napa Valley Corporate Way 933 3,515 - 4,448
Subtotal 25,392 42,156 1,201 66,347
Greater Los Angeles Area, California
Dupont Industrial Center, Ontario 3,588 6,162 372 9,378
3002 Dow Business Center, Tustin 4,305 7,597 156 11,746
Subtotal 7,893 13,759 528 21,124
Kansas City, Kansas
Ninety-Ninth Street #1, Lenexa 408 1,565 35 1,938
Ninety-Ninth Street #2, Lenexa 183 565 13 735
Ninety-Ninth Street #3, Lenexa 360 2,172 281 2,251
Lackman Business Center, Lenexa 628 1,686 40 2,274
Lenexa Land, Lenexa 527 - - 527
Subtotal 2,106 5,988 369 7,725
Denver, Colorado
Bryant St. Annex, Denver 495 879 15 1,359
Bryant St. Quad, Denver 1,416 2,261 42 3,635
Subtotal 1,911 3,140 57 4,994
Greater Portland Area, Oregon
Twin Oaks Tech. Center, Beaverton 1,469 4,945 89 6,325
Twin Oaks Business Park, Beaverton 1,183 2,926 53 4,056
Subtotal 2,652 7,871 142 10,381
Phoenix, Arizona
Westech Business Center, Phoenix 3,531 4,560 42 8,049
Phoenix Land, Phoenix 1,042 - - 1,042
Subtotal 4,573 4,560 42 9,091
Total Industrial - held for investment $44,527 $77,474 $2,339 $119,662
SUBURBAN OFFICE
Greater San Francisco Bay Area, California
Village Green, Lafayette $ 743 $ 1,535 $ 85 $ 2,193
100 View Street, Mountain View 1,020 3,245 29 4,236
Subtotal 1,763 4,780 114 6,429
Greater Los Angeles Area, California
1000 Town Center Drive, Oxnard 1,785 4,828 588 6,025
Mariner Court, Torrance 3,221 4,613 317 7,517
Laguna Hills Square, Laguna Hills 2,436 3,832 44 6,224
Subtotal 7,442 13,273 949 19,766
Kansas City, Kansas
6600 College Blvd., Overland Park 2,518 3,986 88 6,416
Salt Lake City, Utah
Woodlands Tower II, Salt Lake City 359 6,211 506 6,064
Bellevue, Washington
Kenyon Center, Bellevue 5,095 7,250 13 12,332
Total Suburban Office 17,177 35,500 1,670 51,007
INDUSTRIAL - HELD FOR SALE
Minneapolis/St. Paul, Minnesota
St. Paul Business Center - East, Maplewood 766 1,878 36 2,608
St. Paul Business Center - West, Maplewood 1,236 2,475 45 3,666
Total Industrial - held for sale 2,002 4,353 81 6,274
RETAIL
Academy Place Shopping Center,
Colorado Springs 2,890 3,391 60 6,221
Total $66,596 $120,718 $4,150 $183,164
</TABLE>
350 East Plumeria Drive
The property, a suburban research and development facility located in San
Jose, California, was purchased for $8,325,000 or $58 per square foot on
September 19, 1995. The Company recorded acquisition costs of $125,000
paid to Bedford Acquisitions, Inc. ("BAI"), a company wholly-owned by Mr.
Bedford.
Lackman Business Center
The property, a single-story service center industrial project located
in Lenexa, Kansas, was purchased for $2,250,000 or $49 per square foot
on September 19, 1995. The Company recorded acquisition costs of $34,000
paid to BAI.
Ninety-Ninth Street Buildings 1 and 2
The properties, two service industrial buildings located in Lenexa,
Kansas, were purchased for $2,685,000 or $55 per square foot on September
20, 1995. The Company recorded acquisition costs of $40,000 paid to BAI.
Cody Street Park, Building 6
In the third quarter 1995, the Company decided to sell the Cody Street
Park, Building 6. The sale was completed on September 20, 1995, and
resulted in a loss of $12,000.
6600 College Boulevard
The property, a suburban service center industrial complex located in
Overland Park, Kansas, was purchased for $6,360,000 or $80 per square
foot, on October 6, 1995. The property was acquired from AEW #25 Trust,
an affiliate of BED Preferred No. 1 Limited Partnership which purchased
$50 million of the Company's Series A Convertible Preferred Stock in
September 1995. The directors of the Company who are affiliated with BED
Preferred No. 1 Limited Partnership, however, played no role in this
acquisition. The Company recorded acquisition costs of $95,000 paid to
BAI.
IBM Building
During 1995, the Company continued to offer for sale the IBM Building
located in Jackson, Mississippi. This property was first offered for
sale in 1991, at which time the Company's investment in the property was
written down by $2,113,000. On October 2, 1995, the Company completed
the sale of the IBM Building for a cash sale price of $6,500,000,
resulting in a loss of $630,000.
3002 Dow Business Center
The property, a five-building industrial project located in Tustin,
California, was purchased for $11,500,000 or $60 per square foot on
December 5, 1995. The Company recorded acquisition costs of $172,500
paid to BAI.
The Landsing Pacific Portfolio
On December 14, 1995, the Company acquired the Landsing Pacific Portfolio
which consists of thirteen industrial properties and one retail property
aggregating approximately one million rentable square feet located in
Maplewood, Minnesota; Denver and Colorado Springs, Colorado; South San
Francisco and Fremont, California; and Beaverton, Oregon. The Company
paid $49,700,000 for the Landsing Pacific Portfolio or $50 per square
foot. The acquisition was financed with $4,000,000 cash, borrowings of
$42,700,000 under the Company's credit facility and a $3,000,000 payable
secured by a letter of credit due one year from the date of issuance.
The Company recorded acquisition costs of $594,000 paid to BAI.
The Landsing Pacific Portfolio comprised substantially all of the real
estate assets of the Landsing Pacific Fund, Inc., a publicly-traded REIT
based in San Mateo, California. At all times relevant to the
transaction, Martin I. Zankel, a director and stockholder of the Company,
was Chairman of the Board of Directors, Chief Executive Officer and
President of the Landsing Pacific Fund, Inc. Mr. Zankel had no role on
behalf of the Company in this acquisition.
Laguna Hills Square
The property, a suburban three-building office complex located in Laguna
Hills, California, was purchased for $5,998,000 or $117 per square foot
on March 27, 1996. The Company recorded acquisition costs of $90,000
paid to BAI.
Woodlands Tower II
On April 8, 1996, the Company sold 3.6 acres of entitled land adjacent
to its suburban office property in Salt Lake City, Utah for $1,000,000,
consisting of $950,000 of cash and a note of $50,000 due in April 1997,
with 10% interest payable monthly. The sale resulted in a gain of
$359,000.
Westech Business Center
The property, a five-building service industrial project located in
Phoenix, Arizona, was purchased for $7,677,000 or $53 per square foot on
April 25, 1996. The Company recorded acquisition costs of $115,000 paid
to BAI.
598 Gibraltar Drive
The property was developed on an unleased basis on a 3.1 acre parcel
located on the Company's Milpitas Town Center property in Milpitas,
California, and consists of a single story research and development
facility with approximately 45,090 square feet. The project was
completed in April of 1996, with total costs (excluding land) amounting
to $2,522,000. The Company recorded development costs of $63,000 paid
to BAI.
100 View Street
The property, a two-story office building located in Mountain View,
California, was purchased for $4,100,000 or $97 per square foot on
May 3, 1996. The Company recorded acquisition costs of $61,500 paid to BAI.
Fourier Avenue
The property, a two-building research and development/office complex in
Fremont, California, was purchased for $9,000,000 or $86 per square foot
on May 30, 1996. The Company recorded acquisition costs of $135,000 paid
to BAI.
Lenexa Land
The property, a 4.8 acre parcel of land adjacent to Ninety-Ninth Street
#2 and #3 in Lenexa, Kansas, was purchased for $508,000 on June 5, 1996.
The purchase price consists of $75,000 cash and a non-interest bearing
note of $433,000 due and payable in December 1997. The Company plans to
construct a 68,000 square-foot building on the site. The Company
recorded acquisition costs of $7,600 paid to BAI.
Lundy Avenue
The property, a research and development building in San Jose,
California, was purchased for $4,167,000 or $69 per square foot on
July 9, 1996. The Company recorded acquisition costs of $62,500 paid to BAI.
Phoenix Land
The property, a six acre parcel of land located in Phoenix, Arizona, was
purchased for $916,000 on July 31, 1996. The company plans to construct
two buildings on the site totalling 81,000 square feet to complement the
existing 143,000 square feet Westech Business Center. The Company
recorded acquisition costs of $14,000 paid to BAI.
Kenyon Center
The property, a four story suburban office building located in Bellevue,
Washington, was purchased for $12,156,000 or $128 per square foot on
September 5, 1996. The Company recorded acquisition costs of $182,000
paid to BAI.
115 Mason Circle
The property, a warehouse building located in Concord, California, was
purchased for $1,525,000 or $44 per square foot on September 5, 1996.
The Company recorded acquisition costs of $23,000 paid to BAI.
47600 Westinghouse Drive
The property, a research and development building located in Fremont,
California, was purchased for $1,400,000 or $58 per square foot on
September 5, 1996. The Company recorded acquisition costs of $21,000
paid to BAI.
860-870 Napa Valley Corporate Way
The property, a service center/office complex located in Napa,
California, was purchased for $4,375,000 or $65 per square foot on
September 19, 1996. The Company recorded acquisition costs of $66,000
paid to BAI.
Carroll Tech Center
The property, a three building research and development complex located
in San Diego, California, was purchased for $7,044,000 or $79 per square
foot on October 7, 1996. The Company recorded acquisition costs of
$106,000 paid to BAI.
47633 Westinghouse Drive
The property, a research and development building located in Fremont,
California, was purchased for $4,225,000 or $85 per square foot on
October 15, 1996. Additionally, an adjacent 4.48 acre of vacant land was
purchased for $1,600,000. The Company recorded acquisitions costs of
$87,000 paid to BAI.
Vista #1 and 2
The property, a two industrial building complex located in Vista,
California was purchased for $5,100,000 or $57 per square foot on
October 17, 1996. The Company recorded acquisition costs of $76,500
paid to BAI.
There has been no significant development in environmental matters or
proceedings since the filing of the Company's 1995 Annual Report on Form
10-K.
The Company internally manages the majority of its properties and
maintains centralized financial record-keeping. For all the properties
located outside of California, Kansas and Arizona, the Company has
subcontracted on-site maintenance to local firms.
Note 3. Stock Options
In September 1995, the Company established a Management Stock Acquisition
program. Under the program, options exercised by key members of
management within thirty days of the grant date may be exercised either
in cash or with a note payable to the Company. Such note bears interest
at 7.5% or the Applicable Federal Rate as defined by the Internal Revenue
Service, whichever is higher. The note is due in five years or within
ninety days from termination of employment, with interest payable
quarterly. During 1995, options for 50,000 shares of Common Stock were
exercised in exchange for two notes, of $287,500 each, payable to the
Company. During 1996, options for 105,000 shares of Common Stock were
exercised in exchange for five notes, totalling $1,365,000, payable to
the Company. The notes bear interest at 7.5%. Additional paid in
capital in the accompanying consolidated financial statements is shown
net of the unpaid balance of these notes.
Note 4. Debt
Bank Loan Payable
The Company's Credit Facility, which as of September 30, 1996, had an
outstanding balance of $30,754,000, permits the Company to borrow and
issue letters of credit thereunder. Borrowings under the facility bear
interest at a floating rate, which is equal to prime plus 0.25% or LIBOR
plus 2%. As of September 30, 1996, the facility was secured by mortgages
on 19 properties which collectively accounted for approximately 43% of
the Company's annualized base rents along with the rental proceeds from
such properties. As of September 30, these 19 properties comprised 41%
of the Company's total assets. The facility expires on July 1, 1999,
when the principal amount of all outstanding borrowings must be paid.
The daily weighted average amounts owing to the Bank of America under the
credit facility were $23,182,000 and $18,112,000 for the nine months
ending September 30, 1996 and 1995, respectively. The weighted average
interest rates in these periods were 8.13% and 8.73%, respectively. The
effective interest rate at September 30, 1996 was 7.70%.
Mortgage Loans
In 1996, the Company obtained $25,000,000 in mortgage loans which are
secured by Woodlands Tower II, Dupont Industrial Center, 3002 Dow
Business Center and Milpitas Town Center. The loans bear interest at
7.02% per annum and have a seven year term. Interest is due and payable
monthly. The proceeds of the mortgage loans were used to pay down a
portion of the outstanding borrowings under the credit facility.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
When used in the following discussion, the words "believes,"
"anticipates" and similar expressions are intended to identify forward-
looking statements. Such statements are subject to certain risks and
uncertainties which could cause actual results to differ materially from
those projected, including, but not limited to, those set forth in the
section entitled "Potential Factors Affecting Future Operating Results,"
below. Readers are cautioned not to place undue reliance on these
forward-looking statements which speak only as of the date hereof. The
Company undertakes no obligation to publicly release the result of any
revisions to these forward-looking statements which may be made to
reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
Results of Operations - Nine Months Ended September 30, 1996, Compared
with Nine Months Ended September 30, 1995.
Income
Income from property operations (defined as rental income less rental
expenses) for the nine months ended September 30, 1996, increased
$7,902,000 or 224% compared to income from property operations for the
same period in 1995. This is due primarily to an increase in rental
income of $11,116,000 for the first nine months in 1996 compared to the
first nine months in 1995, offset by an increase in rental expenses of
$3,214,000.
The increase in rental income and expenses is primarily attributable to
the acquisition of real estate investments in the third and fourth
quarters of 1995 and the first nine months in 1996. The Company acquired
860-870 Napa Valley Corporate Way, 47600 Westinghouse Drive, 115 Mason
Circle, and Kenyon Center in September 1996; Lundy Avenue in July 1996;
100 View Street and Fourier Avenue in May 1996; Westech Business Center
in April 1996; Laguna Hills in March 1996; the Landsing Pacific Portfolio
and 3002 Dow Business Center in December 1995; 6600 College Boulevard in
October 1995; 350 East Plumeria Drive, Lackman Business Center, Ninety-
Ninth Street #1 and Ninety-Ninth Street #2 in September 1995. In
addition, the Company completed the development of a speculative building
at 598 Gibraltar Drive which was 100% leased in May 1996. These
acquisitions and development activity increased rental income and rental
expenses by $11,933,000 and $3,945,000, respectively. This was partially
offset by the sales of the IBM Building and Cody Street Park, Building
6 in October and September 1995, respectively, generating a reduction in
rental income and rental expenses of approximately $1,057,000 and
$683,000, respectively.
In September 1995, the Company recorded a provision for possible loss of
$630,000 in anticipation of the sale of the IBM Building which was
completed on October 2, 1995. There was no provision for possible loss
recorded during the nine months ended September 30, 1996.
Expenses
Interest expense, which includes amortization of loan fees, increased
$1,383,000 or 106% for the first nine months of 1996 compared with the
same period in 1995. The increase is attributable to the Company's
higher level of borrowings to finance the acquisition of properties in
1996, and higher financing costs incurred in connection with its credit
facility and mortgage loans. The amortization of loan fees was $475,000
and $167,000 in the first nine months of 1996 and 1995, respectively.
General and administrative expenses increased $323,000 or 32% for the
first nine months of 1996 compared with the same period in 1995, a result
of managing a larger real estate portfolio.
Gain on Sale
On April 8, 1996, the Company sold 3.6 acres of entitled land adjacent
to its suburban office property in Salt Lake City, Utah for $1,000,000,
consisting of $950,000 of cash and a note of $50,000 due in April 1997,
with 10% interest payable monthly. The sale resulted in a gain of
$359,000.
As of September 30, 1996, the Company decided to offer for sale the two
industrial properties located in St. Paul, Minnesota. Since the sale
price approximates the current carrying value of the properties, no
provision for possible loss is recorded. As of January 1, 1996, the
Company adopted the provisions of Statement of Financial Accounting
Standards No. 121, Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed of. Under the provisions of SFAS
121, depreciation expense will not be recorded on St. Paul East and St.
Paul West beyond September 30, 1996.
Results of Operations - Three Months Ended September 30, 1996, Compared
with Three Months Ended September 30, 1995.
Income
Income from property operations (defined as rental income less rental
expenses) for the three months ended September 30, 1996, increased
$3,491,000 or 472% compared to income from property operations for the
same period in 1995. This is due primarily to an increase in rental
income of $4,316,000 for the third quarter of 1996 compared to the third
quarter of 1995, offset by an increase in rental expenses of $825,000.
The increase in rental income and expenses is primarily attributable to
the acquisition of real estate investments in the third and fourth
quarter of 1995 and the first nine months of 1996. The Company acquired
860-870 Napa Valley Corporate Way, 47600 Westinghouse Drive, 115 Mason
Circle, and Kenyon Center in September 1996; Lundy Avenue in July 1996;
100 View Street and Fourier Avenue in May 1996; Westech Business Center
in April 1996; Laguna Hills in March 1996; the Landsing Portfolio and
3002 Dow Business Center in December 1995; 6600 College Boulevard in
October 1995; 350 East Plumeria Drive, Lackman Business Center, Ninety-
Ninth Street #1 and Ninety-Ninth Street #2 in September 1995. In
addition, the Company completed the development of a speculative building
at 598 Gibraltar Drive which was 100% leased in May 1996. These
acquisitions and development activity increased rental income and rental
expenses by $4,595,000 and $1,538,000, respectively. This was partially
offset by the sales of the IBM Building and Cody Street Park, Building
6 in October and September 1995, respectively, generating a reduction in
rental income and rental expenses of approximately $349,000 and $235,000,
respectively.
Expenses
Interest expense, which includes amortization of loan fees, increased
$526,000 or 131% for the third quarter of 1996 compared with the same
period in 1995. The increase is attributable to the Company's higher
level of borrowings on its credit facility to finance the acquisition of
properties in 1995, and higher financing costs incurred in connection
with credit facility and mortgages. The amortization of loan fees was
$172,000 and $56,000 in the third quarter of 1996 and 1995, respectively.
General and administrative expenses increased $78,000 or 23% for the
third quarter of 1996 compared with the same period in 1995, a result of
managing a larger real estate portfolio.
Liquidity and Capital Resources
On September 18, 1995, the Company completed the sale of $50,000,000 of
Series A Convertible Preferred Stock to an entity beneficially owned by
an investment fund managed by Aldrich Eastman Waltch. The Series A
Convertible Preferred Stock contains financial covenants and conditions
that if the Company fails to maintain or achieve, its holders have the
right to cause the Company to redeem all of the outstanding shares of
Series A Convertible Preferred Stock at a redemption price of $6.00 per
share plus all accrued dividends payable. In that case, the Company
could experience substantial difficulty in financing such redemption and
may be required to liquidate a substantial portion of its properties.
In 1996, the Company obtained $25,000,000 in mortgage loans which are
secured by Woodlands Tower II, Dupont Industrial Center, 3002 Dow
Business Center and Milpitas Town Center. The loans bear interest at
7.02% per annum and have a seven year term. Interest is due and payable
monthly. The proceeds of the mortgage loans were used to pay down a
portion of the outstanding borrowings under the credit facility.
On April 24, 1996, the Company completed the sale of 3,350,000 shares of
common stock at $13.00 per share. A portion of the net cash proceeds
from the common stock was used to pay off the outstanding borrowings
under the Company's $60 million credit facility. The facility, obtained
in December 1993 for $20 million and increased to $23 million in August
1994, was restated and amended to $60 million on September 18, 1995. The
facility was used, in part, to finance the acquisitions of Mariner Court,
Dupont Industrial Center, Village Green, and Milpitas Town Center during
the first nine months of 1994; the Landsing Pacific Fund Portfolio in
1995; Laguna Hills, Fourier Avenue, Lundy Avenue and the development of
the 598 Gibraltar Drive in 1996. In July 1996, the facility was amended
to (i) increase the commitment amount from $60 million to $100 million,
(ii) extend the term to July 1, 1999 and (iii) reduce the interest rates
by 0.25%. At September 30, 1996, the Company was in compliance with the
covenants and requirements of the revolving credit facility.
The Company anticipates that the cash flow generated by its real estate
investments and funds available under the above credit facility will be
sufficient to meet its short-term liquidity requirements.
The Company expects to fund the cost of acquisitions, capital
expenditures, costs associated with lease renewals and reletting of
space, repayment of indebtedness, and development of properties from (i)
cash flow from operations, (ii) borrowings under the credit facility and,
if available, other indebtedness (which may include indebtedness assumed
in acquisitions), (iii) the sale of real estate investments, and (iv) the
sale of equity securities and, possibly, the issuance of equity
securities in connection with acquisitions.
The ability to obtain mortgage loans on income producing property is
dependent upon the ability to attract and retain tenants and the
economics of the various markets in which the properties are located, as
well as the willingness of mortgage-lending institutions to make loans
secured by real property. The ability to sell real estate investments
is partially dependent upon the ability of purchasers to obtain financing
at commercially reasonable rates.
Potential Factors Affecting Future Operating Results
At the present time, borrowings under the Company's credit facility bear
interest at a floating rate. The Company anticipates that its results
from operations may be impacted negatively by future increases in
interest rates and borrowings to finance additional property
acquisitions.
While the Company has historically been successful in renewing and
releasing space, the Company will be subject to the risk that certain
leases expiring in 1996 and thereafter may not be renewed or the terms
of renewal may be less favorable to the Company than current lease terms.
The Company expects to incur costs in making improvements or repairs to
its portfolio of properties required by new or renewing tenants and
expects to incur expenses associated with brokerage commissions payable
in connection with the reletting of space.
Many other factors affect the Company's actual financial performance and
may cause the Company's future results to be markedly outside of the
Company's current expectations.
Inflation
Most of the leases require the tenants to pay their share of operating
expenses, including common area maintenance, real estate taxes and
insurance, thereby reducing the Company's exposure to increases in costs
and operating expenses resulting from inflation. Inflation, however,
could result in an increase in the Company's borrowing costs.
Dividends
Quarterly dividends declared for the first and second quarters of 1996
were $0.24 per share of common stock, and $0.26 per share of common stock
for the third quarter of 1996. Consistent with the Company's policy,
dividends are paid the quarter after declared. As of September 30, 1996,
dividends of $1,125,000 were accrued on the Series A Convertible
Preferred Stock. They are due and payable 45 days after the quarter end.
Government Regulations
The Company's properties are subject to various federal, state and local
regulatory requirements such as local building codes and other similar
regulations. The Company believes that the properties are currently in
substantial compliance
with all applicable regulatory requirements, although expenditures at its
properties may be required to comply with changes in these laws. No
material expenditures are contemplated at this time in order to comply
with any such laws or regulations.
All of the Company's properties have had Phase I environmental site
assessments (which involve inspection without soil sampling or
groundwater analysis) by independent environmental consultants and have
been inspected for hazardous materials as part of the Company's
acquisition inspections. None of these Phase I assessments has revealed
any environmental conditions requiring material expenditures for
remediation.
The Company believes that it is in compliance in all material respects
with all federal, state and local laws regarding hazardous or toxic
substances, and the Company has not been notified by any governmental
authority of any non-compliance or other claim in connection with any of
its present or former properties. The Company does not anticipate that
compliance with federal, state and local environmental protection
regulations will have any material adverse impact on the financial
position, results of operations or liquidity of the Company.
Financial Condition
During the nine months ended September 30, 1996, the Company's operating
activities provided cash flow of $8,688,000. Investing activities
utilized cash of $55,389,000, mainly for real estate acquisitions.
Financing activities provided cash flow of $46,801,000.
Management considers Funds From Operations (FFO) to be one measure of the
performance of an equity REIT. FFO during the three and nine months
ended September 30, 1996 amounted to $3,720,000 and $9,620,000,
respectively. During the same periods in 1995, FFO amounted to
$1,041,000 and $2,961,000, respectively. FFO was determined in
accordance with the National Association of Real Estate Investment
Trusts' interpretation published in March 1995. FFO is defined as net
income, excluding gains or losses from debt restructuring and sales of
property, plus depreciation and amortization of assets related to real
estate, after adjustments for unconsolidated ventures. FFO, therefore,
does not represent cash generated from operating activities in accordance
with generally accepted accounting principles and should not be
considered an alternative to net income as an indication of the Company's
performance or to cash flow as a measure of liquidity or its ability to
pay distributions.
<PAGE>
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
None
Item 2. CHANGES IN SECURITIES
At the Company's special stockholders' meeting on March 28, 1996,
the Company's stockholders approved the Company's one-for-two reverse
stock split of the Company's common stock. The split, in which every two
issued and outstanding shares of common stock of the Company, par value
$0.01 per share, were changed into one share of common stock of the
Company, par value $0.02, was effective as of March 29, 1996. The
Company's common stock began trading on the New York Stock Exchange and
the Pacific Stock Exchange on a post-reverse stock split basis on
April 1, 1996.
Item 3. DEFAULTS UPON SENIOR SECURITIES
None
Item 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
None
Item 5. OTHER INFORMATION
The following proforma consolidated balance sheet and income
statements give effect to the acquisition of: 350 East Plumeria Drive,
Lackman Business Center, Ninety-Ninth Street #1, Ninety-Ninth Street #2,
6600 College Boulevard, 3002 Dow Business Center, the Landsing Pacific
Portfolio, Laguna Hills Square, Westech Business Center, 100 View Street,
Fourier Avenue, Lenexa land, Lundy Avenue, Phoenix land, Kenyon Center,
115 Mason Circle, 47600 Westinghouse Drive, Napa Valley Corporate Way,
Carroll Tech Center, 47633 Westinghouse Drive and Vista Buildings 1 and
2 and the disposition of Cody Street Park and IBM Building for the
periods specified in notes 1, 2 and 4 of the pro forma balance sheet and
income statements.
<PAGE>
<TABLE>
BEDFORD PROPERTY INVESTORS, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1996
(Unaudited)
(in thousands, except share and per share amounts)
<S>
<C> <C> <C>
Consolidated Acquired Consolidated
Historical Properties (1) Pro Forma
ASSETS:
Real estate investments:
Industrial buildings - held for investment $122,001 $18,244 $140,245
Office buildings 52,677 - 52,677
Industrial buildings - held for sale 6,355 - 6,355
Retail buildings 6,281 - 6,281
187,314 18,244 205,558
Less accumulated depreciation 4,150 - 4,150
183,164 18,244 201,408
Cash 1,127 - 1,127
Other assets 5,654 - 5,654
Total assets $189,945 $18,244 $208,189
LIABILITIES AND STOCKHOLDERS' EQUITY:
Bank loan payable 30,754 18,118 48,872
Mortgage loan payable 25,000 - 25,000
Accounts payable and accrued expenses 2,349 57 2,406
Dividend payable 2,815 - 2,815
Acquisition payable 3,000 - 3,000
Other liabilities 2,480 69 2,549
Total liabilities 66,398 18,244 84,642
Redeemable preferred stock:
Series A convertible preferred stock,
par value $0.01 per share; authorized
10,000,000 shares; issued and outstanding
8,333,334 shares; aggregate redemption
amount $50,000; aggregate liquidation
preference $52,500. 50,000 - 50,000
Common stock and other stockholders' equity:
Common stock, par value $0.02 per share;
authorized 15,000,000 shares, issued
and outstanding, 6,501,325 shares 130 - 130
Additional paid-in capital 147,744 - 147,744
Accumulated losses and distributions
in excess of net income (74,327) - (74,327)
Total common stock and other stockholders'
equity 73,547 - 73,547
Total liabilities and stockholders' equity $189,945 $18,244 $208,189
</TABLE>
<PAGE>
<TABLE>
BEDFORD PROPERTY INVESTORS, INC.
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(Unaudited)
(in thousands, except share and per share amounts)
<S>
<C> <C> <C> <C>
Consolidated Acquired Pro Forma Pro Forma
Historical Properties (2) Adjustments Consolidated
Property operations:
Rental income $19,168 $4,794 $ - $23,962
Rental expenses:
Operating expenses 3,797 498 - 4,295
Real estate taxes 1,823 332 - 2,155
Depreciation and amortization 2,114 555 - 2,669
Income from property operations 11,434 3,409 - 14,843
General and administrative expenses (1,341) - - (1,341)
Interest income 105 - - 105
Interest expense (2,692) - (2,079) (3) (4,771)
Income before gain on sale 7,506 3,409 (2,079) 8,836
Gain on sale of real estate investments 359 - - 359
Net income $ 7,865 $3,409 $(2,079) $ 9,195
Net income applicable to common
stockholders* $ 4,490 $3,409 $(2,079) $ 5,820
Primary earnings per common and
common equivalent share* $ 0.87 $ 0.89
Weighted average number of common and
common equivalent shares outstanding** 5,161,087 6,554,423 (3)
Earnings per common share - assuming
full dilution $ 0.84 $ 0.86
Weighted average number of common
shares - assuming full dilution** 9,323,223 10,716,559 (3)
</TABLE>
* Reflects dividends of $3,375 on $50,000 preferred stock issued on
September 18. 1995.
** Reflects the one-for-two reverse stock split effective March 29, 1996.
<TABLE>
BEDFORD PROPERTY INVESTORS, INC.
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
(Unaudited)
(in thousands, except share and per share amounts)
<S>
<C> <C> <C> <C> <C>
Consolidated Acquired Properties Pro Forma Pro Forma
Historical Properties (4) Sold (5) Adjustments Consolidated
Property operations:
Rental income $11,695 $19,610 $(1,085) $ - $30,220
Rental expenses:
Operating expenses 2,744 2,685 (321) - 5,108
Real estate taxes 1,105 1,971 (143) - 2,933
Depreciation and amortization 1,484 1,984 (223) - 3,245
Income from property operations 6,362 12,970 (398) - 18,934
General and administrative expenses (1,457) - - - (1,457)
Interest income 226 - - - 226
Interest expense (1,594) - - (4,955) (6) (6,549)
Income before loss on sale 3,537 12,970 (398) (4,955) 11,154
Loss on sale of real estate investments (642) - (205) - (847)
Net income $ 2,895 $12,970 $ (603) $(4,955) $10,307
Net income applicable to common
stockholders $ 1,607 $12,970 $ (603) $(8,167) $ 5,807 (7)
Primary earnings per common and
common equivalent share $ 0.52 $ 0.90
Weighted average number of common and
common equivalent shares outstanding 3,089,549 6,439,549 (8)
</TABLE>
<PAGE>
BEDFORD PROPERTY INVESTORS, INC.
NOTES TO PRO FORMA FINANCIAL STATEMENTS
PRO FORMA CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1996
(1) The unaudited pro forma consolidated balance sheet reflects the
acquisition of (i) Carroll Tech Center located in San Diego,
California, (ii) 47633 Westinghouse Drive located in Fremont,
California and (iii) Vista Buildings 1 and 2 located in Vista,
California, as if such acquisitions had occurred on September 30,
1996. The Company acquired Carroll Tech Center on October 7,
1996, 47633 Westinghouse Drive on October 15, 1996 and Vista
Buildings 1 and 2 on October 17, 1996.
The combining balance sheet for these acquisitions as of
September 30, 1996 is as follows (in thousands):
<TABLE>
<S>
<C> <C> <C> <C>
47633 Vista
Carroll Tech Westinghouse Buildings
Center Drive 1 and 2 Total
Assets:
Real estate investment:
Industrial buildings - held
for investment $7,151 $5,914 $5,179 $18,244
Total assets $7,151 $5,914 $5,179 $18,244
Liabilities:
Bank loan payable 7,107 5,894 5,117 18,118
Accounts payable and
accrued expenses 19 20 18 57
Other liabilities 25 - 44 69
Total liabilities $7,151 $5,914 $5,179 $18,244
</TABLE>
Consolidated pro forma real estate investments as of
September 30, 1996 include capitalized fees of $269,500 paid by
the Company to Bedford Acquisitions, Inc., a corporation wholly
owned by Mr. Bedford ("Bedford Acquisitions"), in connection with the
Company's acquisition of Carroll Tech Center, 47633 Westinghouse
Drive and Vista Buildings 1 and 2.
PROFORMA CONSOLIDATED STATEMENT OF INCOME FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996
(2) The unaudited pro forma consolidated statement of income reflects
the property acquisitions through September 30, 1996 and probable
acquisitions as of September 30, 1996 as if they had occurred on
January 1, 1996. The Company acquired (i) Laguna Hills Square on
March 27, 1996, (ii) Westech Business Center on April 25, 1996,
(iii) 100 View Street on May 3, 1996, (iv) Fourier Avenue on May
30, 1996, (v) Lenexa land on June 4, 1996, (vi) Lundy Avenue on
July 9, 1996, (vii) Phoenix land on July 30, 1996, (viii) Kenyon
Center, 115 Mason Circle and 47600 Westinghouse Drive on
September 5, 1996, (ix) 860-870 Napa Valley Corporate Way on
September 19, 1996, (x) Carroll Tech Center on October 7, 1996,
(xi) 47633 Westinghouse Drive on October 15, 1996, and (xii)
Vista Buildings 1 and 2 on October 17, 1996.
The combining historical statement of income for the period from
January 1, 1996 through the date of acquisition for the
properties acquired from January 1 through September 30, 1996 is
as follows (in thousands):
<TABLE>
<S>
<C> <C> <C> <C> <C> <C> <C>
Laguna Hills Westech 100 View Fourier Lenexa Lundy Subtotal
Square Business Center Street Avenue Land Avenue carried forward
Rental income $294 $374 $306 $434 $ - $274 $1,682
Rental expenses:
Operating expenses 74 63 83 21 - 34 275
Real estate taxes 9 28 17 33 3 29 119
Depreciation and amortization 20 33 23 65 - 24 165
$191 $250 $183 $315 $(3) $187 $1,123
</TABLE>
<TABLE>
<S>
<C> <C> <C> <C> <C> <C> <C>
Total
860-870 properties
Subtotal 47600 Napa Valley acquired from
brought Phoenix Kenyon 115 Mason Westinghouse Corporate Jan. 1 through
forward Land Center Circle Drive Way Sept. 30, 1996
Rental income $1,682 $ - $788 $142 $119 $399 $3,130
Rental expenses:
Operating expenses 275 - 26 21 14 61 397
Real estate taxes 119 6 - 14 10 74 223
Depreciation and amortization 165 - 107 13 16 52 353
$1,123 $(6) $655 $ 94 $ 79 $212 $2,157
</TABLE>
The combining historical statement of income for the first nine
months of 1996 for properties acquired after September 30, 1996
and the statement summarizing all the acquisitions in 1996 are as
follows (in thousands):
<TABLE>
<S>
<C> <C> <C> <C> <C> <C> <C>
Total Total properties Total
Carroll 47633 Vista properties acquired from Properties
Tech Westinghouse Westinghouse Buildings acquired after Jan. 1 through Acquired
Center Drive Land 1 and 2 Sept. 30, 1996 Sept. 30, 1996 in 1996
Rental income $801 $472 $ - $391 $1,664 $3,130 $4,794
Rental expenses:
Operating expenses 77 14 - 10 101 397 498
Real estate taxes 58 40 11 - 109 223 332
Depreciation and
amortization 82 54 - 66 202 353 555
$584 $364 $(11) $315 $1,252 $2,157 $3,409
</TABLE>
Incremental costs of managing the acquired properties are
reflected in the property operating expenses.
(3) The unaudited pro forma consolidated statement of income reflects
the effects of the sale of 3,350,000 shares of common stock at
$13.00 per share, and the mortgage loan financing of $25,000,000
as if they had occurred on January 1, 1996. Net proceeds of the
common stock sale, the mortgage loan financing and the borrowings
of $48,000,000 on the credit facility were utilized to finance
the Company's acquisition of real estate investments during the
first nine months of 1996. The sale of 3,350,000 shares of
common stock was completed on April 24, 1996. The $25,000,000
mortgage financing was completed on May 31, 1996.
The pro forma consolidated interest expense consists of the
amortization of loan fees incurred for the amendment and
expansion of the credit facility to $100,000,000, amortization of
loan fees incurred to secure the mortgage loans, and interest
expense incurred on the mortgage loans and borrowings on the
credit facility.
PRO FORMA CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER
31, 1995
(4) The unaudited pro forma consolidated statement of income reflects
the property acquisitions in 1995 as if they had occurred on
January 1, 1995. The Company acquired (i) 350 East Plumeria
Drive and Lackman Business Center on September 19, 1995, (ii)
Ninety-Ninth Street #1 and Ninety-Ninth Street #2 on September
20, 1995, (iii) 6600 College Boulevard on October 6, 1995, (iv)
3002 Dow Business Center on December 5, 1995 and (v) the Landsing
Pacific Portfolio on December 14, 1995.
The combining historical statement of income for the period from
January 1, 1995 through the date of acquisition for these
properties is as follows (in thousands):
<TABLE>
<S>
<C> <C> <C> <C> <C> <C> <C>
Ninety- Total
350 East Lackman Ninth 6600 3002 Dow Landsing Properties
Plumeria Business Street College Business Pacific Acquired
Drive Center #1 and #2 Boulevard Center Portfolio in 1995
Rental income $1,001 $269 $326 $831 $1,552 $7,056 $11,035
Rental expenses:
Operating expenses 35 41 30 105 210 1,037 1,458
Real estate taxes 104 46 49 112 189 801 1,301
Depreciation and amortization 79 27 35 66 152 616 975
Income from property operations $ 783 $155 $212 $548 $1,001 $4,602 $ 7,301
</TABLE>
The unaudited pro forma consolidated statement of income reflects
the property acquisitions through September 30, 1996 and probable
acquisitions as of September 30, 1996 as if they had occurred on
January 1, 1995. The Company acquired (i) Laguna Hills Square on
March 27, 1996, (ii) Westech Business Center on April 25, 1996,
(iii) 100 View Street on May 3, 1996, (iv) Fourier Avenue on
May 30, 1996, (v) Lenexa land on June 4, 1996, (vi) Lundy Avenue on
July 9, 1996, (vii) Phoenix land on July 30, 1996, (viii) Kenyon
Center, 115 Mason Circle and 47600 Westinghouse Drive on
September 5, 1996, (ix) 860-870 Napa Valley Corporate Way on
September 19, 1996, (x) Carroll Tech Center on October 7, 1996,
(xi) 47633 Westinghouse Drive on October 15, 1996 and (xii) Vista
Buildings 1 and 2 on October 17, 1996.
The combining historical statement of income for the twelve
months of 1995 for these properties is as follows (in thousands):
<TABLE>
<S>
<C> <C> <C> <C> <C> <C> <C> <C> <C>
Westech Subtotal
Laguna Hills Business 100 View Fourier Lenexa Lundy Phoenix Kenyon carried
Square Center Street Avenue Land Avenue Land Center forward
Rental income $1,080 $1,115 $640 $1,041 $ - $494 $ - $1,141 $5,511
Rental expenses:
Operating expenses 345 194 240 51 - 60 - 40 930
Real estate taxes 60 90 67 80 6 57 11 - 371
Depreciation and
amortization 82 100 70 156 - 49 - 161 618
$ 593 $ 731 $263 $ 754 $(6) $328 $(11) $ 940 $3,592
</TABLE>
<TABLE>
<S>
<C> <C> <C> <C> <C> <C> <C> <C> <C>
47600 860-870 47633 Total
Subtotal Westing- Napa Valley Carroll Westing- Westing- Vista Properties
brought 115 Mason house Corporate Tech house house Buildings Acquired
forward Circle Drive Way Center Drive Land 1 and 2 in 1996
Rental income $5,511 $201 $174 $399 $1,170 $629 $ - $491 $8,575
Rental expenses:
Operating expenses 930 30 26 103 105 20 - 13 1,227
Real estate taxes 371 20 18 91 102 53 15 - 670
Depreciation and
amortization 618 20 24 78 109 72 - 88 1,009
$3,592 $131 $106 $127 $ 854 $484 $(15) $390 $5,669
</TABLE>
The statement summarizing the operating results for the twelve
months of 1995 for all acquisitions made during 1995 and 1996 is
as follows (in thousands):
Total Total
Properties Properties Total
Acquired Acquired Properties
in 1995 in 1996 Acquired
Rental income $11,035 $8,575 $19,610
Rental expenses:
Operating expenses 1,458 1,227 2,685
Real estate taxes 1,301 670 1,971
Depreciation and
amortization 975 1,009 1,984
$ 7,301 $5,669 $12,970
Incremental costs of managing the acquired properties are
reflected in the property operating expenses.
(5) The unaudited pro forma consolidated statement of income reflects
the elimination of the actual results of operations of Cody
Street Park and the IBM Building from January 1, 1995 through the
date of sale. The statement also reflects the loss on the sale
of these properties as if the sales had occurred on January 1,
1995. The Company sold Cody Street Park on September 20, 1995
and the IBM Building on October 2, 1995.
The combining historical statement of income from January 1, 1995
through the date of sale for these properties is as follows (in
thousands):
IBM
Cody Street Park Building Total
Rental income $146 $939 $1,085
Rental expenses:
Operating expenses 13 308 321
Real estate taxes 25 118 143
Depreciation and amortization 45 178 223
Income from property operations $ 63 $335 $ 398
(6) The unaudited pro forma consolidated statement of income reflects
the effects of the sale of 3,350,000 shares of common stock at
$13.00 per share, the mortgage loans financing of $25,000,000 and
the sale of the $50,000,000 Convertible Preferred Stock as if
they had occurred on January 1, 1995. Net proceeds of the sale
of common stock and convertible preferred stock, mortgage loan
financing and borrowings of $48,000,000 on the credit facility
were utilized to finance all the Company's acquisitions of real
estate investments during 1995 and 1996. The sale of the
$50,000,000 Convertible Preferred Stock was completed on
September 18, 1995, the sale of the 3,350,000 shares of common
stock on April 24, 1996 and the mortgage loan financing on May
31, 1996.
The pro forma consolidated interest expense consists of the
amortization of loan fees incurred for the amendment and
expansion of the credit facility to $100,000,000, amortization of
loan fees incurred to secure the mortgage loans, and interest
expense incurred on the mortgage loans and borrowings on the
credit facility.
(7) Net income applicable to common stockholders shown on the pro
forma consolidated statement of income reflects the 9% dividends
($4,500,000) accrued to the holders of the convertible preferred
stock less accrued dividends reflected in the historical column
of $1,288,000.
(8) The weighted average number of common and common equivalent
shares outstanding shown on the pro forma consolidated statement
of income reflects the Company's one-for-two reverse stock split
that took place on March 29, 1996, and the sale of the 3,350,000
shares of common stock.
<PAGE>
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
Exhibit No.. . . . . . . . . . .Exhibit
3.1 Charter of the Company, as amended, is incorporated herein by
reference to Exhibit 4.1 to the Company's Registration
Statement on Form S-2, Registration No. 333-921.
3.2 Amended and Restated Bylaws of the Company are incorporated
herein by reference to Exhibit 3.2 to the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1995.
10.1 The Company's Automatic Dividend Reinvestment and Share
Purchase Plan, as adopted by the Company, is incorporated
herein by reference to Exhibit 4.1 to Amendment No. 2 to
Registration Statement No. 2-94354 of ICM Property Investors
Incorporated.
10.2 The Company's Employee Stock Option Plan, as amended and
restated, is incorporated herein by reference to Exhibit 10.2
to the Company's Registration Statement on Form S-2,
Registration No. 333-921.
10.3 The Company's 1992 Directors' Stock Option Plan, as amended
and restated, is incorporated herein by reference to Exhibit
10.3 to the Company's Registration Statement on Form S-2,
Registration No. 333-921.
10.4 Second Amended and Restated Credit Agreement dated as of June
26, 1996, by and between the Company, as Borrower, Bank of
America National Trust and Savings Association and the
several financial institutions (the "Banks").
10.5 Sale and Option Agreement dated as of August 26, 1995, by and
between Kemper Investors Life Insurance Company, on behalf of
itself and Participants (as defined therein), as Lender, the
Company, as Purchaser, and Tustin Properties, as Owner, for
3002 Dow Business Center is incorporated herein by reference
to Exhibit 10.19 to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1995.
10.6 BPIA Agreement dated as of January 1, 1995, by and between
Westminster Holdings, Inc., a California corporation and the
Company is incorporated herein by reference to Exhibit 10.14
to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1995.
10.7 Employment Agreement made as of February 17, 1993, by and
between ICM Property Investors Incorporated and Peter B.
Bedford is incorporated by reference to Exhibit 10.14 to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994, as amended by Form 10-K/A filed on
May 1, 1995, and Form 10-K/A-2 filed on August 8, 1995.
10.8 Amendment No. 1 to Employment Agreement dated as of September
18, 1995, by and between Peter B. Bedford and the Company is
incorporated herein by reference to Exhibit 10.10 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995.
10.9 Series A Convertible Preferred Stock Purchase Agreement,
among the Company, AEW Partners, L.P. and Peter B. Bedford
dated as of May 18, 1995, is incorporated herein by reference
to Exhibit 10.15 to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1995.
10.10 Amendment No. 1 to the Series A Convertible Preferred Stock
Purchase Agreement dated September 11, 1995, among the
Company, AEW Partners, L.P. and Peter B. Bedford, is
incorporated herein by reference to Exhibit 10.12 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995.
10.11 Standstill Agreement dated as of September 18, 1995, by and
between the Company and Peter B. Bedford is incorporated
herein by reference to Exhibit 10.13 to the Company's
Quarterly Report on Form 10-Q for the quarter ended September
30, 1995.
10.12 Purchase and Sale Agreement dated as of October 19, 1995,
between Landsing Pacific Fund, Inc., a Maryland corporation
as Seller, and the Company, the Buyer, as amended, is
incorporated herein by reference to Exhibit 2.1 to the
Company's Current Report on Form 8-K filed on December 27,
1995.
10.13 Amended and Restated Promissory Note date May 24, 1996
executed by the Company and payable to the order of
Prudential Insurance Company of America.
27* Financial Data Schedule
* Filed herewith
B. Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, Sections 13 or 15(a), Registrant has duly caused this report
to be signed on its behalf of the undersigned, thereunto duly
authorized.
Dated: November 13, 1996
BEDFORD PROPERTY INVESTORS, INC.
(Registrant)
By: /s/ PETER B. BEDFORD
Peter B. Bedford
Chairman of the Board
and
Chief Executive
Officer
By: /s/ DONALD A. LORENZ
Donald A. Lorenz
Executive Vice
President and
Chief Financial
Officer
(Principal Financial
Officer)
By: /s/ HANH KIHARA
Hanh Kihara
Controller
(Principal Accounting
Officer)
<PAGE>
<PAGE>
<PAGE>
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<PERIOD-END> SEP-30-1996
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