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, 1997.
___ 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 14, 1997
Common Stock, $0.02 par value 21,631,367
<PAGE>
BEDFORD PROPERTY INVESTORS, INC.
INDEX
PART I. FINANCIAL INFORMATION Page
ITEM 1. FINANCIAL STATEMENTS
Statement 1
Consolidated Balance Sheets as of September 30, 1997
and December 31, 1996 2
Consolidated Statements of Income for the three and nine months ended
September 30, 1997 and 1996 3
Consolidated Statements of Stockholders' Equity for the year ended
December 31, 1996 and the nine months ended September 30, 1997 4
Consolidated Statements of Cash Flows for the nine months ended
September 30, 1997 and 1996 5
Notes to Consolidated Financial Statements 6-10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
Management's Discussion and Analysis of Results of Operations
and Financial Condition 10-14
PART II. OTHER INFORMATION
ITEMS 1 - 6 15-16
SIGNATURES 16
Exhibit 11 17
Exhibit 27 18
<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, 1996.
<PAGE>
<TABLE>
BEDFORD PROPERTY INVESTORS, INC.
CONSOLIDATED BALANCE SHEETS (Unaudited)
(in thousands, except share and per share amounts)
<S> <C> <C>
September 30, December 31,
1997 1996
Assets:
Industrial buildings $215,842 $164,674
Office buildings 145,187 53,071
Retail Buildings - 6,281
Operating Properties Held for Sale 6,281 -
Industrial Properties under Development 16,123 5,388
383,433 229,414
Less accumulated depreciation 7,379 4,913
376,054 224,501
Cash 1,042 1,328
Other Assets 8,157 5,995
$385,253 $231,824
Liabilities and Stockholders' Equity:
Bank loan payable 97,645 46,097
Mortgage loan payable 60,455 51,850
Accounts payable and accrued expenses 6,900 2,214
Dividend and distributions payable 4,628 2,827
Other liabilities 3,256 3,371
Total liabilities 172,884 106,359
Redeemable preferred shares:
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
Minority interest in consolidated partnership 1,497 1,709
Common Stock and other stockholders' equity:
Common stock, par value $0.02 per share;
authorized 50,000,000 shares in 1997, and
15,000,000 shares in 1996; issued and
outstanding 11,164,700 shares in 1997 and
6,526,325 shares in 1996 223 131
Additional paid-in capital 223,104 147,622
Accumulated losses and distributions in
excess of net income (62,455) (73,997)
Total stockholders' equity 160,872 73,756
$385,253 $231,824
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
BEDFORD PROPERTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(Unaudited)
(in thousands, except share and per share amounts)
<S> <C> <C> <C> <C>
Three Months Nine Months
1997 1996 1997 1996
Property operations:
Rental income $12,789 $7,090 $32,472 $19,168
Rental expenses:
Operating expenses 1,973 1,483 4,996 3,797
Real estate taxes 993 589 2,708 1,823
Depreciation and amortization 1,528 788 3,902 2,114
Income from property operations 8,295 4,230 20,866 11,434
General and administrative expenses (469) (414) (1,586) (1,341)
Interest income 73 43 217 105
Interest expense (2,877) (927) (5,909) (2,692)
Income before minority interest and gain on sale 5,022 2,932 13,588 7,506
Gain on sale 10,787 - 10,787 359
Minority interest (28) - (79) -
Net income $15,781 $2,932 $24,296 $ 7,865
Net income applicable to common stockholders(1) $14,531 $1,807 $20,796 $ 4,490
Primary earnings per common and
common equivalent share $ 1.27 $ 0.27 $ 1.95 $ 0.87
Primary weighted average number of
common and common equivalent shares 11,436,417 6,601,527 10,639,113 5,161,087
Earnings per common share - assuming
full dilution $ 1.00 $ 0.27 $ 1.63 $ 0.84
Weighted average number of common
shares - assuming full dilution 15,751,338 10,782,393 14,972,966 9,323,223
</TABLE>
(1) Reflects reduction for quarterly dividends on the $50,000 series
A convertible preferred stock.
See accompanying notes to consolidated financial statements.
<TABLE>
BEDFORD PROPERTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1996
AND THE NINE MONTHS ENDED SEPTEMBER 30, 1997 (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, 1995 $ 61 $107,214 $(74,840) $ 32,435
Issuance of common stock 70 43,778 - 43,848
Costs of issuance of preferred stock - - (2) (2)
Costs of issuance of common stock - (3,370) - (3,370)
Net income - - 11,021 11,021
Dividends to common stockholders
($1.00 per share) - - (5,671) (5,671)
Distributions to limited partnership unit
holders - - (5) (5)
Dividends to preferred stockholders (9%) - - (4,500) (4,500)
Balance, December 31, 1996 $ 131 $147,622 $(73,997) $ 73,756
Issuance of common stock 92 80,219 - 80,311
Costs of issuance of common stock - (4,692) - (4,692)
Redemption of partnership units - (45) - (45)
Net income - - 24,296 24,296
Dividends to common shareholders
($0.83 per share) - - (9,254) (9,254)
Dividends to preferred shareholders - - (3,500) (3,500)
Balance September 30, 1997 $ 223 $223,104 $(62,455) $160,872
</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, 1997 AND 1996 (Unaudited)
(in thousands)
<S> <C> <C>
1997 1996
Operating Activities:
Net income $24,296 $ 7,865
Adjustments to reconcile net income to net cash
provided by operating activities:
Minority Interest 79 -
Depreciation and amortization 4,602 2,643
Gain on sale of real estate investments (10,787) (359)
Change in other assets (3,126) (2,829)
Change in accounts payable and
accrued expenses 840 898
Change in other liabilities 152 470
Net cash provided by operating activities 16,056 8,688
Investing Activities:
Investments in real estate (156,566) (56,311)
Change in accounts payable and accrued expenses 879 -
Proceeds from sale of real estate investments 24,938 922
Net cash used by investing activities (130,749) (55,389)
Financing Activities:
Proceeds from bank loan 131,501 55,092
Proceeds from mortgage loan - 25,000
Repayments of bank loan (81,115) (67,588)
Repayments of mortgage loans (309) -
Proceeds from issuance of common stock 75,619 40,597
Redemption of partnership units (257) -
Payment of dividends (11,032) (6,300)
Net cash provided by financing activities 114,407 46,801
Net increase (decrease) in cash (286) 100
Cash at beginning of period 1,328 1,027
Cash at end of period $ 1,042 $ 1,127
Supplemental disclosure of cash flow information:
a) Non cash investing and financing activities:
Debt incurred with real estate acquired $ 8,972 $ 433
Note receivable from the sale of real estate investments $ - $ 50
b) Cash paid during the period for interest $ 5,382 $ 2,125
</TABLE>
See accompanying notes to consolidated financial statements.
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 a Maryland real estate
investment trust with investments primarily in industrial and suburban
office properties concentrated in the Western United States. The
Company's Common Stock trades under the symbol "BED" on both the New York
Stock Exchange and the Pacific Exchange.
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.
Per Share Data
Per share data are 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. 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 fully diluted earnings per share
calculation assumes conversion of the Series A Convertible Preferred
Stock of the Company and redemption of the limited partnership units of
Bedford Realty Partners, L.P. for shares of common stock. Dividends accrued
on the Series A Convertible Preferred Stock are deducted from net income
for purposes of determining net income applicable to common stockholders.
On October 14, 1997, the issued and outstanding 8,333,334 shares of the
Series A Convertible Preferred Stock were converted to 4,166,667 shares of
common stock, which conversion will have a dilutive effect. If converted or
redeemed, the limited partnership units would also have a similar
dilutive effect.
Recent Accounting Pronouncements
The Company will adopt the provisions of Statement of Financial
Accounting Standards No. 128 (SFAS 128), Earnings per Share, for
financial statements for periods ending after December 15, 1997. Earlier
application is not permitted. After the effective date, all prior period
EPS data presented will be restated to conform with the provisions of
SFAS 128. Had the Company applied the provisions of SFAS 128 to the
September 30, 1997 unaudited financial statement, the difference from the
results presented would have been immaterial.
In June 1997, the FASB issued Financial Accounting Standard No. 130 (SFAS
130), Reporting Comprehensive Income. SFAS 130 is effective with the
year-end 1998 financial statements; however, the total comprehensive
income is required in the financial statements for interim periods
beginning in 1998. In June 1997, the FASB issued Financial Accounting
Standard No. 131, Disclosure About Segments of An Enterprise and Related
Information. SFAS 131 is effective with the year-end 1998 financial
statements. Management believes that the adoption of these statements
will not have a material impact on the Company's financial statements.
Note 2. Real Estate Investments
As of September 30, 1997, the Company's real estate investments were
diversified by property type as follows (dollars in thousands):
<TABLE>
<S> <C> <C> <C>
Number of
Properties Cost % of Total
Industrial Buildings 45 $215,842 56
Office Buildings 17 145,187 38
Operating Properties Held for Sale 1 6,281 2
Industrial Properties Under Development 5 16,123 4
Total 68 $383,433 100
</TABLE>
<PAGE>
The following table sets forth the Company's real estate investments as
of September 30, 1997 (in thousands):
<TABLE>
<S> <C> <C> <C> <C> <C>
Development Less
In Accumulated
Land Building Progress Depreciation Total
Industrial
Northern California $ 41,728 $ 89,191 - $ 2,818 $128,101
Southern California 12,866 28,852 - 1,203 40,515
Denver 1,911 3,171 - 133 4,949
Arizona 5,340 10,164 - 183 15,321
Greater Portland Area 2,652 8,194 - 391 10,455
Greater Kansas City Area 2,254 9,519 - 585 11,188
Total Industrial 66,751 149,091 - 5,313 210,529
Suburban Office
Northern California 1,763 4,946 - 230 6,479
Southern California 8,816 17,076 - 243 25,649
Salt Lake City 359 6,462 - 705 6,116
Greater Kansas City Area 2,518 4,043 - 179 6,382
Greater Seattle Area 15,116 30,225 - 302 45,039
Reno 2,102 10,374 - 95 12,381
Austin 2,766 7,029 - 52 9,743
Arizona 11,415 20,177 - 150 31,442
Total Suburban Office 44,855 100,332 - 1,956 143,231
Properties Held for Sale
Colorado Springs 2,890 3,391 - 110 6,171
Total Properties Held for Sale 2,890 3,391 - 110 6,171
Industrial Properties Under Development
Northern California - - 10,253 - 10,253
Arizona - - 3,084 - 3,084
Greater Kansas City Area - - 2,786 - 2,786
Total Industrial Properties Under Development - - 16,123 (1) - 16,123
Total $114,496 $252,814 $16,123 $7,379 $376,054
</TABLE>
(1) Total Development in Progress of $16,123,000 includes $404,000 of
capitalized interest.
<PAGE>
The Company internally manages all but 8 of its properties from its
regional offices in Lafayette, California; San Jose, California; Tustin,
California; Phoenix, Arizona; Lenexa, Kansas; and Bellevue, Washington.
For the eight properties located in markets not served by a regional
office, the Company has subcontracted on-site management to local firms.
All financial record-keeping is centralized at the Company's corporate
office in Lafayette, California.
Note 3. Consolidated Partnership
In December 1996 the Company formed Bedford Realty Partners, L.P. (the
"Operating Partnership"), with the Company as the sole general partner,
for the purpose of acquiring real estate. In exchange for contributing
a property into the Operating Partnership, the owners of the property
received limited partnership units ("OP Units"). A limited partner can
seek redemption of the OP Units at any time after 90 days. The Company,
at its option, may redeem the OP Units by either (i) issuing common stock
at the rate of one share of common stock for each OP Unit, or (ii) paying
cash to a limited partner based on the average trading price of the
Company's common stock. Each OP Unit is allocated partnership income and
cash flow at a rate equal to the dividend being paid by the Company on
a share of common stock. Additional partnership income and cash flow is
allocated 99% to the Company and 1% to the limited partners.
This acquisition strategy is referred to as a "Down REIT" transaction;
as long as certain tax attributes are maintained, the income tax
consequences to a limited partner are generally deferred until such time
as the limited partner redeems their OP Units.
On December 17, 1996, the Company acquired a $3.6 million industrial
property located in Modesto, California utilizing the Operating
Partnership. The sellers of the property received 108,495 OP Units. In
March 1997, the Company redeemed 13,446 OP units for cash. A director
of the Company was an 8% owner of the property and received 8,991 OP
units in connection with the Down REIT transaction. This director did
not participate in the approval of the acquisition.
Note 4. 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 1996 and 1995, options for 155,000 shares of Common
Stock were exercised in exchange for notes payable to the Company,
bearing interest at 7.5%. At September 30, 1997, the unpaid balance of
the notes was $1,475,095. This amount is included in the accompanying
consolidated balance sheet as a reduction of additional paid-in capital.
Note 5. Debt
Bank Loan Payable
In June 1997, the Company expanded its secured revolving credit facility
with Bank of America from $100 million to $150 million, maturing on June
1, 2000. In September 1997, the credit facility was further expanded to
$175 million. Under this facility, the Company can borrow up to $25
million on an unsecured basis. The secured loans bear interest at a
floating rate equal to either the lender's published "reference rate" or
LIBOR plus 1.5%. The interest rate of the unsecured loans is 25 basis
points higher than that of the secured loans. The credit facility is
secured by mortgages on 32 properties (which properties collectively
accounted for approximately 50% of the Company's Annualized Base Rent and
approximately 44% of the Company's total assets as of September 30,
1997), together with the rental proceeds from such properties.
The daily weighted average amount owing to the bank was $45,802,000 and
$23,182,000 for the nine months ended September 30, 1997 and 1996,
respectively. The weighted average interest rates in these periods were
7.43% and 8.13%, respectively. The effective interest rate at September
30, 1997 was 7.40%.
Mortgage Loans Payable
Mortgage loans payable at September 30, 1997 consist of the following (in
thousands):
Floating rate note due December 15, 1999
current rate of 8.75% $ 1,830
7.5% note due January 1, 2002 24,767
7.02% note due March 15, 2003 25,000
8.9% note due July 31, 2006 8,858
$60,455
The mortgage loans are collaterized by 17 properties (which Properties
collectively accounted for approximately 28% of the Company's
Annualized Base Rent and approximately 22% of the Company's total assets
as of September 30, 1997).
The following table presents scheduled principal payments on mortgage
loans as of September 30, 1997 (in thousands):
Twelve months period ending September 30, 1998 $ 731
Twelve months period ending September 30, 1999 2,757
Twelve months period ending September 30, 2000 1,028
Twelve months period ending September 30, 2001 1,109
Twelve months period ending September 30, 2002 1,195
Thereafter 53,635
$60,455
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
When used in the following discussion, the words "believes," "expects,"
"intends," "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
The Company's operations consist of owning and operating industrial and
suburban office properties located primarily in the Western United
States.
<PAGE>
Increases in revenues, expenses, net income and cash flows in the nine
months ended September 30, 1997 when compared with the same period in
1996 were due primarily to the acquisition and sale of operating
properties as follows:
Number of Square
Properties Feet
Acquisitions
Industrial 16 1,450,000
Office 11 1,025,000
27 2,475,000
Sales
Industrial 2 186,000
Office 2 213,000
4 399,000
Three Months Ended September 30, 1997 Compared with Three Months Ended
September 30, 1996.
Income from Property Operations
Income from property operations (defined as rental income less rental
expenses) increased $4,065,000 or 96% in 1997 compared with 1996. This
is due to an increase in rental income of $5,699,000 offset by an
increase in rental expenses (which include operating expenses, real
estate taxes and depreciation and amortization) of $1,634,000.
This increase in rental income and expenses is primarily attributable to
the acquisition of real estate investments. This acquisition activity
increased rental income and rental expenses by $6,045,000 and $1,836,000,
respectively. This was partially offset by the sale of two industrial
properties in December 1996 and two office properties in July 1997 which
generated a reduction in rental income and rental expenses of $976,000
and $630,000 respectively.
Expenses
Interest expense, which includes amortization of loan fees, increased
$1,950,000 or 210% in 1997 compared with 1996. The increase is
attributable to the Company's higher level of borrowings to finance the
acquisition of properties in 1997, and higher financing costs incurred
in connection with the credit facility and mortgage loans. The
amortization of loan fees was $209,000 and $172,000 in the third quarter
of 1997 and 1996, respectively. General and administrative expenses
increased $55,000 or 13% in 1997 compared with 1996, primarily the result
of managing a larger real estate portfolio.
Gain on Sale
In July 1997, the Company sold two of its Southern California office
properties for a sale price of approximately $25.8 million, which
resulted in a gain of $10,787,000. Capital loss and net operating loss
carry forwards will be utilized to offset substantially all of the 1997
taxable income remaining after the deduction of dividends paid in 1997.
Nine Months Ended September 30, 1997 Compared with Nine Months Ended
September 30, 1996.
Income from Property Operations
Income from property operations increased $9,432,000 or 83% in 1997
compared with 1996. This is due to an increase in rental income of
$13,304,000 offset by an increase in rental expenses of $3,872,000. This
increase in rental income and expenses is primarily attributable to the
acquisition of real estate investments. This acquisition activity
increased rental income and rental expenses by $11,122,000 and
$3,379,000, respectively. This was partially offset by the sale of two
industrial properties in 1996 and two office properties in 1997 which
generated a reduction in rental income and rental expenses of $1,068,000
and $525,000, respectively.
Expenses
Interest expense, which includes amortization of loan fees, increased
$3,217,000 or 119% for the first nine months of 1997 compared with the
same period in 1996. The increase is attributable to the Company's
higher level of borrowings to finance the acquisition of properties in
1997, and higher financing costs incurred in connection with the credit
facility and mortgage loans. The amortization of loan fees was $580,000
and $475,000 in the first nine months of 1997 and 1996, respectively.
General and administrative expenses increased $245,000 or 18% for the
first nine months of 1997 compared with the same period in 1996,
primarily the result of managing a larger real estate portfolio.
Gain on Sale
In July 1997, the Company sold two of its Southern California office
properties for a sale price of approximately $25.8 million, which
resulted in a gain of $10,787,000. Capital loss and net operating loss
carry forwards will be utilized to offset substantially all of the 1997
taxable income remaining after the deduction of dividends paid in 1997.
In April 1996, the Company sold 3.6 acres of land adjacent to its
suburban office property in Utah for $1,000,000, receiving $950,000 in
cash and a $50,000 note. The 10% interest bearing note was paid in
April 1997. The sale resulted in a gain of $359,000.
Liquidity and Capital Resources
The Company completed the sale of 4,600,000 shares of common stock at $17
3/8 per share in February 1997 and 6,300,000 shares of common stock at
$19 5/8 per share in November 1997. Net cash proceeds from these
offerings were used to pay off the outstanding borrowings under the
Company's credit facility. The facility was amended and expanded to $150
million in June 1997. It was further expanded to $175 million in
September 1997. Under this facility, the Company can borrow up to $25
million on an unsecured basis. The secured loans bear interest at a rate
of LIBOR plus 1.50% and the unsecured loans bear interest at LIBOR plus
1.75%. The amended facility matures on July 1, 2000 and had no
outstanding balance at November 7, 1997. The Company was in compliance
with the covenants and requirements of its revolving credit facility at
November 7, 1997.
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.
During the nine months ended September 30, 1997, the Company's operating
activities provided cash flow of $16,056,000. Investing activities
utilized cash of $130,749,000 for real estate acquisitions. Financing
activities provided cash flow of $114,407,000.
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 substantial additional 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 1998 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
Common stock dividends declared for the third quarter 1997 were $0.30
per share. Distributions declared for the third quarter of 1997 were
$0.30 per OP Unit. Consistent with the Company's policy, dividends and
distributions were paid in the quarter after they were declared. In
addition, the Company declared an aggregate quarterly dividend of
$1,250,000 on the Series A Convertible Preferred Stock. The preferred
stock dividends were declared based on the rate payable with respect to
the common stock into which the Preferred Stock is convertible. The
preferred stock dividends 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 its 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.
Under various federal, state and local laws, ordinances and regulations,
an owner or operator of real estate is liable for the costs of removal
or remediation of certain hazardous or toxic substances released on,
above, under, or in such property. Such laws often impose such liability
without regard to whether the owner knew of, or was responsible for, the
presence of such hazardous or toxic substances. The costs of such
removal or remediation could be substantial.
Additionally, the presence of such substances or the failure to properly
remediate such substances may adversely affect the owner's ability to
borrow using such real estate as collateral.
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
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, 1997 amounted to $6,550,000 and $17,490,000,
respectively. During the same periods in 1996, FFO amounted to
$3,720,000 and $9,620,000, respectively. Funds From Operations is used
by financial analysts in evaluating REITs and can be one measure of a
REIT's ability to make cash distributions. Presentation of this
information provides the reader with an additional measure to compare the
performance of REITs. Funds From Operations generally is defined by the
National Association of Real Estate Investment Trusts as net income
(computed in accordance with generally accepted accounting principles),
excluding gains from debt restructurings and sales of property, plus
depreciation and amortization, and after adjustments for unconsolidated
partnerships and joint ventures. Funds From Operations was computed by
the Company in accordance with this definition. The Company's
computation of Funds From Operations may, however, differ from the
methodology for calculating Funds From Operations utilized by other
equity REIT's and, therefore, may not be comparable to such other REIT's.
Funds From Operations does not represent cash generated by operating
activities in accordance with the generally accepted accounting
principles; it is not necessarily indicative of cash available to fund
cash needs and should not be considered as an alternative to net income
as an indicator of the Company's operating performance or as an
alternative to cash flow as a measure of liquidity.
Subsequent Events
On October 9, 1997, the Company completed the acquisition of a research
and development building located in Vista, California comprised of 44,063
rentable square feet for an approximate purchase price of $3.0 million.
In conjunction with the purchase, the Company also acquired an adjacent
1.36 acre parcel for approximately $360,000 upon which it plans to
construct a 20,000 square foot research and development building.
On October 14, 1997, the 8,333,334 shares of the Series A Convertible
Preferred Stock were converted to 4,166,667 shares of common stock.
On October 16, 1997, the Company completed the acquisition of a five-
story office building located in Denver, Colorado, comprised of 90,712
rentable square feet and a separate parking structure for an approximate
purchase price of $16.5 million. The purchase price also included an
adjacent 3.1 acre parcel of land that has entitlements allowing the
Company to build an additional 120,000 square feet of office space.
On October 22, 1997, the Company sold its retail property in Colorado for
a sale price of $7.5 million, which resulted in a gain of approximately
$748,000.
On November 4, 1997, the Company completed the acquisition of an
industrial building located in Tucson, Arizona comprised of 95,746
rentable square feet for an approximate purchase price of $5 million.
In conjunction with the purchase, the Company also acquired an adjacent
2.3 acre parcel for approximately $100,000 upon which it plans to
construct a 25,000 square foot distribution building.
In November 1997, the Company completed the sale of 6,300,000 shares of
common stock at $19 5/8 per share. A sale of an additional 945,000
shares of common stock at $19 5/8 per share may occur at any time up to
30 days after November 3, 1997. Net cash proceeds from the offering were
used to pay off the outstanding borrowings under the Company's credit
facility. The amended facility had no outstanding balance at November
7, 1997.
<PAGE>
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
None
Item 2. CHANGES IN SECURITIES
None
Item 3. DEFAULTS UPON SENIOR SECURITIES
None
Item 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
None
Item 5. OTHER INFORMATION
None
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 3.1 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended
June 30, 1997.
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.
10.19* First Modification Agreement to Third Amended and
Restated Credit Agreement among Bedford Property
Investors, Inc., and Bank of America National Trust and
Savings Association, as administrative agent for the
Banks, dated September 8, 1997.
11* Statement of Computation of Earnings Per Share.
27* Financial Data Schedule
* Filed herewith
B. Reports on Form 8-K
During the quarter ended September 30, 1997, the Company filed
on July 23, 1997, a report on Form 8-K dated July 10, 1997,
reporting items 2 and 7 and announcing the acquisition of
Orillia Office Park.
During the quarter ended September 30, 1997, the Company filed
on September 19, 1997, a report on Form 8-K/A dated July 10,
1997, which amended items 5 and 7 of Form 8-K dated July 10,
1997, regarding the acquisition of Orillia Office Park. The
following financial statements were filed: (i) Historical
Summary of Gross Income and Direct Operating Expenses for
Orillia Office Park for the year ended December 31, 1996 and
(ii) pro forma financial statements showing the effect
resulting from all the Company's acquisitions during 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf of the undersigned, hereunto duly authorized.
Dated: November 14, 1997
BEDFORD PROPERTY INVESTORS, INC.
(Registrant)
By: /s/ SCOTT R. WHITNEY
Scott R. Whitney
Senior Vice President and
Chief Financial Officer
By: /s/ HANH KIHARA
Hanh Kihara
Vice President and Controller
(Principal Accounting Officer)
<PAGE>
<TABLE>
Exhibit 11
Bedford Property Investors, Inc.
Statement of Computation of Earnings per Share
(in thousands, except share and share amounts)
<S> <C> <C> <C> <C>
Three Months Nine Months Ended
Ended Sept. 30, Sept. 30,
1997 1996 1997 1996
Primary:
Net income $ 15,781 $ 2,932 $ 24,296 $ 7,865
Less:Dividends on the Series A Convertible
Preferred Stock 1,250 1,125 3,500 3,375
Net income applicable to common stockholders 14,531 1,807 20,796 4,490
Weighted average shares outstanding 11,158,953 6,488,608 10,416,729 5,037,861
Weighted average shares of dilutive stock
options using average stock price under
the treasury stock method 277,464 112,919 222,384 123,226
Primary weighted average number of common
and common equivalent shares outstanding 11,436,417 6,601,527 10,639,113 5,161,087
Primary earnings per common
and common equivalent share $ 1.27 $ 0.27 $ 1.95 $ 0.87
Fully Diluted:
Net income applicable to common
stockholders 14,531 1,807 20,796 4,490
Add: Dividends on the Series A Convertible
Preferred Stock 1,250 1,125 3,500 3,375
Minority interest 28 - 79 -
Net income 15,809 2,932 24,375 7,865
Adjusted shares - primary, from above 11,436,417 6,601,527 10,639,113 5,161,087
Weighted average shares issuable upon
conversion of the Series A Convertible
Preferred Stock 4,166,667 4,166,667 4,166,667 4,166,667
Additional weighted average shares of
dilutive stock options using end of period
stock price under the treasury stock method 53,205 14,199 67,704 (4,531)
Weighted average shares issuable upon the
conversion of operating partnership
units(1) 95,049 - 99,482 -
Weighted average number of common shares
assuming full dilution 15,751,338 10,782,393 14,972,966 9,323,223
Earnings per common
share - assuming full dilution $ 1.00 $ 0.27 $ 1.63 $ 0.84
</TABLE>
(1) Not applicable for the three and nine months ended, September 30,
1996. The Operating Partnership Units were issued in December
1996.
<TABLE> <S> <C>
<ARTICLE> 5
EXHIBIT 27
FINANCIAL DATA SCHEDULE
(in thousands except per share amounts)
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> $ 1,042
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,110
<PP&E> 383,433
<DEPRECIATION> (7,379)
<TOTAL-ASSETS> 385,253
<CURRENT-LIABILITIES> 12,727
<BONDS> 158,099
0
50,000
<COMMON> 223
<OTHER-SE> 160,649
<TOTAL-LIABILITY-AND-EQUITY> 385,253
<SALES> 0
<TOTAL-REVENUES> 32,689
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 13,192
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,909
<INCOME-PRETAX> 24,296
<INCOME-TAX> 0
<INCOME-CONTINUING> 24,296
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> $ 24,296
<EPS-PRIMARY> $ 1.95
<EPS-DILUTED> $ 1.63
</TABLE>
EXHIBIT 10.19
FIRST MODIFICATION AGREEMENT TO THIRD AMENDED
AND RESTATED CREDIT AGREEMENT
This First Modification Agreement to Third Amended and
Restated Credit Agreement (the "Agreement") is made as of September 8,
1997, by BEDFORD PROPERTY INVESTORS, INC., a Maryland corporation (the
"Company"), and BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, a national banking association ("Bank of America"), as
administrative agent (in such capacity, the "Administrative Agent")
for itself and the other financial institutions (each, a "Bank" and
collectively, the "Banks") from time to time party to the Credit
Agreement (as hereinafter defined).
Factual Background
A. Under a Third Amended and Restated Credit Agreement
dated as of June 13, 1997 (the "Credit Agreement"), the Banks agreed
to make available to the Company a secured revolving line of credit
(the "Credit Line") in a maximum principal amount not to exceed
$150,000,000. Capitalized terms used in this Agreement without
definition have the meanings given to them in the Credit Agreement.
B. The Credit Line is evidenced by one or more Promissory
Notes, each made by the Company and payable to the order of a Bank, in
the aggregate stated principal amount of $150,000,000.00
(collectively, the "Revolving Notes"), and by a Promissory Note (Swing
Line) made by the Company and payable to the order of Bank of America
in the principal amount of $25,000,000.00, to evidence the Swing Line
(the "Swing Line Note"; and collectively, together with the Revolving
Notes, the "Notes"). The Notes are collectively secured by certain
Deeds of Trust and Mortgages (collectively, the "Deeds of Trust"),
each executed by the Company or a subsidiary of the Company, as
trustor or mortgagor, for the benefit of the Administrative Agent, as
administrative agent for the Banks.
C. In connection with the Credit Line, the Company
executed a Second Amended and Restated Unsecured Indemnity Agreement
dated as of June 13, 1997 (the "Unsecured Indemnity"). The Unsecured
Indemnity is not a Loan Document, as defined below.
D. As used here, the term "Loan Documents" means the
Credit Agreement, the Notes, the Deeds of Trust, and any other
documents executed in connection with the Credit Line, including those
which evidence, guaranty, secure or modify the Credit Line, as any or
all of them may have been amended to date. The Loan Documents,
however, do not include the Unsecured Indemnity. This Agreement is a
Loan Document.
E. As of the date of this Agreement, the principal amount
outstanding on the Credit Line is $89,444,409.81, including $0
outstanding on the Swing Line, and the face amount of undrawn letters
of credit issued for the account of the Company under the Credit Line
is $0.
F. The Company has requested that the Banks modify the
terms of the Credit Line to, among other things, increase the maximum
principal amount of the secured revolving line of credit available to
the Company from $150,000,000 to $175,000,000. The Banks have agreed
to modify the terms of the Credit Line to, among other things,
increase the maximum principal amount of the secured revolving line of
credit available to the Company, with the $25,000,000 increase in
maximum commitment being allocated (i) $10,000,000 to Union Bank of
California, N.A., (ii) $10,000,000 to The First National Bank of
Chicago and (iii) $5,000,000 to KeyBank, N.A.
G. The Company, the Banks and the Administrative Agent
now wish to modify the Credit Line as set forth below.
Agreement
Therefore, the Company, the Banks and the Administrative
Agent agree as follows:
1. Recitals. The recitals set forth above in the Factual
Background are true, accurate and correct.
2. Reaffirmation of Credit Line. The Company reaffirms
all of its obligations under the Loan Documents and the Unsecured
Indemnity, and the Company acknowledges that it has no claims, offsets
or defenses with respect to the payment of sums due under the Notes or
any other Loan Document or the Unsecured Indemnity.
3. Modification of Loan Documents. The Loan Documents
are hereby amended as follows:
(a) The definition of the term "Maximum Commitment
Amount" set forth in Section 1.1 of the Credit Agreement is
modified in its entirety to read as follows:
"'Maximum Commitment Amount' means, at any time, an
amount equal to $175,000,000.00, subject to the provisions
of Section 2.6."
(b) The definition of the term "Supermajority Banks"
set forth in Section 1.1 of the Credit Agreement is modified in
its entirety to read as follows:
"'Supermajority Banks' means at any time at least two
(2) Banks then holding at least 80% of the then aggregate
unpaid principal amount of the Loans (or, if no principal
amount is then outstanding, at least two (2) banks then
having at least 80% of the unborrowed Commitments);
provided, however, that if at any time there is only one
Bank, then such one Bank shall constitute Supermajority
Banks."
(c) Section 4.1.1 of the Credit Agreement is modified
in its entirety to read as follows:
"4.1.1 Fee Ownership. The Company or a wholly-
owned Subsidiary of the Company owns fee title to such
Parcel."
(d) The Commitment of Union Bank of California, N.A.
is increased from $20,000,000.00 to $30,000,000.00; the
Commitment of The First National Bank of Chicago is increased
from $15,000,000.00 to $25,000,000.00; and the Commitment of
KeyBank, National Association is increased from $15,000,000.00 to
$20,000,000.00. The Commitment of Bank of America remains
$75,000,000.00 (in addition to Bank of America's obligations as
the Swing Line Lender under the Credit Agreement); and the
Commitment of Sanwa Bank California remains $25,000,000.00.
(e) The Deeds of Trust are each modified to secure
payment and performance of the Credit Line as amended to date, in
addition to all other "Secured Obligations" as therein defined.
The foregoing notwithstanding, certain obligations continue to be
excluded from the Secured Obligations, as provided in the Deeds
of Trust.
4. Increases and Decreases in Pro Rata Shares. Upon the
Company's satisfaction of all of the conditions set forth in Section 5
of this Agreement, each Bank whose Pro Rata Share of the combined
Commitments of all of the Banks has increased, as evidenced by the
difference for each Bank between the Pro Rata Share determined on the
basis of such Bank's existing Commitment and the Pro Rata Share
determined on the basis of such Bank's revised Commitment, as
reflected in Section 3(d) of this Agreement, shall pay to the
Administrative Agent, for distribution to the Banks whose Pro Rata
Shares of the combined Commitments of all of the Banks has decreased
pursuant to this Agreement, an amount equal to the product of the
increase in such Bank's Pro Rata Share (expressed as a decimal)
multiplied by the aggregate outstanding principal amount of the Loans
on the date of determination.
5. Conditions Precedent. Before this Agreement becomes
effective and any party becomes obligated under it, all of the
following conditions shall have been satisfied at the Company's sole
cost and expense in a manner acceptable to the Administrative Agent in
the exercise of the Administrative Agent's sole judgment:
(a) All of the Banks shall have signed this
Agreement.
(b) The Administrative Agent shall have received
fully executed and, where appropriate, acknowledged originals of
this Agreement, a recordable modification agreement (the
"Modification Agreement") amending each Deed of Trust,
substantially in the form of Exhibit A attached hereto, and any
other documents (including additional promissory notes and
evidence of Borrower's authority to enter into this Agreement and
the Modification Agreement) that the Administrative Agent may
reasonably require or request in accordance with this Agreement
or in accordance with the other Loan Documents.
(c) Counterparts of the Modification Agreement shall
have been recorded in the official records of each county in
which a Deed of Trust has been recorded.
(d) The Administrative Agent shall be satisfied that
the validity and priority of the Deeds of Trust, as amended by
the Modification Agreement, has not been and will not be impaired
by this Agreement or the transactions contemplated by it, and
that each of the Deeds of Trust, as amended by the Modification
Agreement, secures the Credit Line. Such assurance includes
receipt of endorsements (or commitments to issue such
endorsements) to the policies of title insurance insuring each of
the Deeds of Trust.
(e) The Company shall have paid to the Administrative
Agent, for the account of each Bank whose Commitment increases
pursuant to this Agreement, a commitment fee equal to thirty-five
hundredths of one percent (0.35%) of the aggregate increase in
the Maximum Commitment Amount pursuant to this Agreement,
multiplied by a fraction (i) the numerator of which is the number
of days in the period from and including the day on which all of
the conditions precedent set forth in this Section 5 are
satisfied until the Maturity Date and (ii) the denominator of
which is one thousand eighty (1080).
(f) The Administrative Agent shall have received
reimbursement, in immediately available funds, of all costs and
expenses incurred by the Administrative Agent in connection with
this Agreement, including title insurance fees for the
endorsements referenced in Section 5(d) above, recording, filing
and escrow charges, mortgage taxes, and legal fees and expenses
of the Administrative Agent's counsel. Such costs and expenses
may include, without duplication, the allocated costs for
services of the Administrative Agent's in-house staffs, such as
legal, appraisal and environmental services.
(g) The Administrative Agent shall have received a
written opinion of counsel to the Company and its Subsidiaries
covering such matters relating to the Company, its Subsidiaries,
this Agreement and the Credit Line as the Administrative Agent
may reasonably require.
6. The Company's Representations and Warranties. The
Company represents and warrants to the Administrative Agent and the
Banks as follows:
(a) Loan Documents. All representations and
warranties made and given by The Company in the Loan Documents
and the Unsecured Indemnity are true, accurate and correct.
(b) No Default. No Event of Default has occurred and
is continuing, and no event has occurred and is continuing which,
with notice or the passage of time or both, would be an Event of
Default.
(c) Property. The Company or a wholly-owned
Subsidiary of the Company lawfully possesses and holds fee simple
title to all of the Property encumbered by the Deeds of Trust
that is real property, and each of the Deeds of Trust is a first
and prior lien on the property that it encumbers. The Company or
a wholly-owned Subsidiary of the Company owns all of the Property
encumbered by the Deeds of Trust that is personal property free
and clear of any reservations of title and conditional sales
contracts, and also of any security interests other than those
created by the Deeds of Trust, which create first and prior liens
on the personal property that it encumbers. There is no
financing statement affecting any Property encumbered by the
Deeds of Trust on file in any public office except for financing
statements in favor of the Administrative Agent.
(d) Borrowing Entity. The Company is a corporation
that is duly organized and validly existing under the laws of the
State of Maryland and is qualified to do business in California
and each other jurisdiction in which it owns real property.
There have been no changes in the organization, composition,
ownership structure or formation documents of the Company since
the inception of the Credit Line.
7. Incorporation. This Agreement shall form a part of
each Loan Document, and all references to a given Loan Document shall
mean that document as hereby modified.
8. No Prejudice; Reservation of Rights. This Agreement
shall not prejudice any rights or remedies of the Administrative Agent
or the Banks under the Loan Documents or the Unsecured Indemnity. The
Administrative Agent and the Banks reserve, without limitation, all
rights which they have against any indemnitor, guarantor, or endorser
of any of the Notes.
9. No Impairment. Except as specifically hereby amended,
the Loan Documents and the Unsecured Indemnity shall each remain
unaffected by this Agreement and all such documents shall remain in
full force and effect.
10. Purpose and Effect of Approvals. Approval of any
matter in connection with the Credit Line by the Administrative Agent
or the Banks shall be for the sole purpose of protecting the security
and rights of the Administrative Agent and the Banks. No such
approval shall result in a waiver of any default by the Company. In
no event shall any approval of the Administrative Agent or the Banks
be a representation of any kind with regard to the matter being
approved.
11. Disclosure to Title Company. Without notice to or the
consent of the Company, the Administrative Agent may disclose to any
title insurance company that insures any interest of the
Administrative Agent under any of the Deeds of Trust (whether as
primary insurer, coinsurer or reinsurer) any information, data or
material in the Administrative Agent's possession relating to the
Company, any Subsidiary of the Company, the Credit Line, any Property
encumbered by the Deeds of Trust or any improvements on any such
Property.
12. Integration. The Loan Documents, including this
Agreement, and the Unsecured Indemnity: (a) integrate all the terms
and conditions mentioned in or incidental to the Loan Documents and
the Unsecured Indemnity; (b) supersede all oral negotiations and prior
and other writings with respect to their subject matter; and (c) are
intended by the parties as the final expression of the agreement with
respect to the terms and conditions set forth in those documents and
as the complete and exclusive statement of the terms agreed to by the
parties. If there is any conflict between the terms, conditions and
provisions of this Agreement and those of any other agreement or
instrument, including any of the other Loan Documents or the Unsecured
Indemnity, the terms, conditions and provisions of this Agreement
shall prevail.
13. Miscellaneous. This Agreement may be executed in
counterparts, and all counterparts shall constitute but one and the
same document. If any court of competent jurisdiction determines any
provision of this Agreement or any of the other Loan Documents or the
Unsecured Indemnity to be invalid, illegal or unenforceable, that
portion shall be deemed severed from the rest, which shall remain in
full force and effect as though the invalid, illegal or unenforceable
portion had never been a part of the Loan Documents or the Unsecured
Indemnity. This Agreement shall be governed by the laws of the State
of California, without regard to the choice of law rules of that
State. As used here, the word "include(s)" means "includes(s),
without limitation," and the word "including" means "including, but
not limited to."
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first set forth above.
"Company"
BEDFORD PROPERTY INVESTORS, INC.,
a Maryland corporation
By /s/Scott R. Whitney
Scott R. Whitney
Senior Vice President and
Chief Financial Officer
By /s/ Hanh Kihara
Hanh Kihara
Vice President, Controller
<PAGE>
"Administrative Agent"
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Administrative Agent
By __________________________
Robert Muller, Jr.
Vice President
"Banks"
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By /s/Robert Muller, Jr.
Robert Muller, Jr.
Vice President
SANWA BANK CALIFORNIA,
a California corporation
By /s/Michael White
Michael White
Vice President
THE FIRST NATIONAL BANK OF CHICAGO
By /s/Michael A. Parisi
Michael A. Parisi
Corporate Banking Officer
<PAGE>
UNION BANK OF CALIFORNIA, N.A.
By /s/D. Tim Mahoney
D. Tim Mahoney
Vice President & Manager
KEYBANK NATIONAL ASSOCIATION
By /s/Laird A. Fairchild
Laird A. Fairchild
Assistant Vice President
<PAGE>
CONSENT OF THIRD-PARTY TRUSTORS
Each of the undersigned consent to the foregoing First
Modification Agreement to Third Amended and Restated Credit Agreement.
Dated as of September 8, 1997
ICMPI (CONCORD DIABLO 3), INC.,
a Delaware corporation
By /s/James R. Moore
James R. Moore
Senior Vice President
By /s/Hanh Kihara
Hanh Kihara
Vice President, Controller
ICMPI (CONCORD DIABLO 8), INC.,
a Delaware corporation
By /s/James R. Moore
James R. Moore
Senior Vice President
By /s/Hanh Kihara
Hanh Kihara
Vice President, Controller
<PAGE>
ICMPI (CONCORD MASON 18), INC.,
a Delaware corporation
By /s/James R. Moore
James R. Moore
Senior Vice President
By /s/Hanh Kihara
Hanh Kihara
Vice President, Controller
ICMPI (LENEXA), INC.,
a Delaware corporation
By /s/James R. Moore
James R. Moore
Senior Vice President
By /s/Hanh Kihara
Hanh Kihara
Vice President, Controller
<PAGE>
EXHIBIT A
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
California Real Estate Industries
Division No. 8940
50 California Street, 11th Floor
San Francisco, California 94111
Attn.: Ms. Mary Johnson
_______________________________________________________________
SPACE ABOVE THIS LINE
FOR RECORDER'S USE
MODIFICATION AGREEMENT
(Short Form -- ________ County)
This Modification Agreement (the "Agreement") is made
and entered into as of September __, 1997, by BEDFORD PROPERTY
INVESTORS, INC., a Maryland corporation ("Borrower"), and BANK OF
AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, in its capacity as
Administrative Agent for the Banks pursuant to the terms of the Credit
Agreement described below (in such capacity, the "Administrative
Agent").
Factual Background
A. Pursuant to that certain Third Amended and Restated Credit
Agreement (the "Credit Agreement") dated as of June 13, 1997, among
Borrower, the Banks from time to time party thereto (collectively, the
"Banks") and the Administrative Agent, the Banks agreed to make
available to Borrower a secured revolving line of credit in an
aggregate principal amount at any time outstanding not to exceed to
$150,000,000 (the "Credit Line").
B. Borrower's obligation to repay amounts outstanding from time
to time under the Credit Line is evidenced by certain Promissory
Notes, each made payable to a Bank, in the aggregate stated principal
amount of $150,000,000 (collectively, the "Existing Notes"), and by a
Promissory Note (Swing Line) made by Borrower and payable to the order
of Bank of America in the principal amount of $25,000,000.00, to
evidence the Swing Line (the "Swing Line Note").
C. The Credit Agreement, the Existing Notes, the Swing Line
Note and certain other Loan Documents are secured by, among other
things (a) those certain deeds of trust (collectively, as heretofore
modified, the "Deeds of Trust") more particularly described on
Exhibit "A" attached hereto, each executed by Borrower (unless
otherwise noted), as trustor or grantor, for the benefit of Bank of
America, as Administrative Agent for the Banks, as beneficiary, and
(b) those certain assignments of leases (collectively, as heretofore
modified, the "Lease Assignments") more particularly described on
Exhibit "A" attached hereto, each executed by Borrower (unless
otherwise noted), as assignor, in favor of Bank of America, as
Administrative Agent for the Banks, as assignee. The Deeds of Trust
and the Lease Assignments encumber certain real property more
particularly described therein (collectively, the "Property").
D. (i) The Banks, the Administrative Agent and Borrower have,
concurrently with the execution of this Modification Agreement, made
and entered into a First Modification Agreement to Third Amended and
Restated Credit Agreement (the "First Modification") dated as of the
date hereof, pursuant to which such parties amended the Credit
Agreement to, among other things, increase the maximum principal
amount of the Credit Line from $150,000,000 to $175,000,000, and
(ii) Borrower has, concurrently with the execution of this
Modification Agreement, executed and delivered to the Banks Revolving
Notes (collectively, the "Notes") dated as of the date hereof, each
executed by Borrower to the order of a Bank in the aggregate principal
amount of $175,000,000.00, pursuant to which the Existing Notes were
collectively amended and restated in their entirety.
E. Borrower and the Administrative Agent, with the consent of
the Banks, have agreed to modify the Deeds of Trust and the Lease
Assignments so as to secure the obligations of Borrower evidenced by
the Credit Agreement, as amended by the First Modification, the Notes
and the Swing Line Note.
Agreement
Therefore, Borrower and the Administrative Agent agree as
follows:
1. The Deeds of Trust executed by Borrower are hereby
modified to secure, in addition to the indebtedness and other
obligations heretofore secured by the Deeds of Trust, the payment and
performance of all indebtedness and other obligations of Borrower
under the Credit Agreement, as amended by the First Modification, the
Notes, the Swing Line Note and the other Loan Documents (other than
the Unsecured Indemnity Agreement), and all amendments, modifications,
supplements, replacements, extensions, renewals and substitutions of
or for any and/or all of the foregoing. The Lease Assignments
executed by Borrower are hereby modified so that each reference to the
term "credit agreement" or "Agreement" therein shall refer to the
Credit Agreement, as amended by the First Modification. Among other
things, the First Modification and the Notes have amended the Credit
Agreement and the Existing Notes, respectively, to increase the
maximum principal amount of the Credit Line from $150,000,000 to
$175,000,000.
2. The Credit Agreement, as amended by the First
Modification, the Notes and the Swing Line Note are incorporated into
this Agreement by this reference, the same as though set forth herein
in full.
3. Each capitalized term used herein and not otherwise
defined herein shall have the meaning given such term in the Credit
Agreement, as amended by the First Modification.
The foregoing notwithstanding, certain obligations continue
to be excluded from the Secured Obligations, as provided in the Deeds
of Trust.
"Borrower"
BEDFORD PROPERTY INVESTORS, INC.,
a Maryland corporation
By /s/Scott R. Whitney
Scott R. Whitney
Senior Vice President and
Chief Financial Officer
By /s/Hanh Kihara
Hanh Kihara
Vice President, Controller
<PAGE>
"Administrative Agent"
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Administrative Agent
By /s/Robert Muller, Jr.
Robert Muller, Jr.
Vice President
<PAGE>
ACKNOWLEDGMENT
State of California )
) ss.
County of ___________ )
On _________________ before me, _____________________, Notary Public,
personally appeared _______________________________,
personally known to me or proved to me on the basis of
satisfactory evidence to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their authorized
capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the
person(s) acted, executed the instrument.
WITNESS my hand and official seal.
___________________________
State of California )
) ss.
County of ___________ )
On _________________ before me, _____________________, Notary Public,
personally appeared _____________________________,
personally known to me or proved to me on the basis of
satisfactory evidence to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their authorized
capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the
person(s) acted, executed the instrument.
WITNESS my hand and official seal.
____________________________
State of California )
) ss.
County of ___________ )
On _________________ before me, _____________________, Notary Public,
personally appeared __________,
personally known to me or proved to me on the basis of
satisfactory evidence to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their authorized
capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the
person(s) acted, executed the instrument.
WITNESS my hand and official seal.
____________________________
<PAGE>
EXHIBIT "A"
Deeds of Trust and Lease Assignments
California Properties
1. Village Green: Deed of Trust with Assignment of Rents,
Security Agreement and Fixture Filing, recorded on July 7, 1994, in
the Official Records of Contra Costa County, California, as Instrument
No. 94-176593. Assignment of Leases, recorded on July 7, 1994, in the
Official Records of Contra Costa County, California, as Instrument
No. 94-176594.
2. Concord Diablo 3: Deed of Trust with Assignment of Rents,
Security Agreement and Fixture Filing (Third Party) executed by ICMPI
(Concord Diablo 3), Inc., a Delaware corporation ("Concord 3"), as
trustor, recorded on December 14, 1995, in the Official Records of
Contra Costa County, California, as Instrument No. 95-215846, and
rerecorded on February 13, 1996, as Instrument No. 96-25838.
Assignment of Leases executed by Concord 3, as assignor, recorded on
December 14, 1995, in the Official Records of Contra Costa County,
California, as Instrument No. 95-215847, and rerecorded on
February 13, 1996, as Instrument No. 96-25839.
3. Concord Diablo 8: Deed of Trust with Assignment of Rents,
Security Agreement and Fixture Filing (Third Party) executed by ICMPI
(Concord Diablo 8), Inc., a Delaware corporation ("Concord 8"), as
trustor, recorded on December 14, 1995, in the Official Records of
Contra Costa County, California, as Instrument No. 95-215848, and
rerecorded on February 13, 1996, as Instrument No. 96-25840.
Assignment of Leases executed by Concord 8, as assignor, recorded on
December 14, 1995, in the Official Records of Contra Costa County,
California, as Instrument No. 95-215849, and rerecorded on
February 13, 1996, as Instrument No. 96-25841.
4. Concord Mason 18: Deed of Trust with Assignment of Rents,
Security Agreement and Fixture Filing (Third Party) executed by ICMPI
(Concord Mason 18), Inc., a Delaware corporation ("Mason 18"), as
trustor, and recorded on December 14, 1995, in the Official Records of
Contra Costa County, California, as Instrument No. 95-215850.
Assignment of Leases executed by Mason 18, as assignor, and recorded
on December 14, 1995, in the Official Records of Contra Costa County,
California, as Instrument No. 95-215851.
5. 350 East Plumeria: Deed of Trust with Assignment of Rents,
Security Agreement and Fixture Filing, recorded on December 14, 1995,
in the Official Records of Santa Clara County, California, as
Instrument No. 13130331. Assignment of Leases, recorded on
December 14, 1995, in the Official Records of Santa Clara County,
California, as Instrument No. 13130332.
6. Auburn Court: Deed of Trust with Assignment of Rents,
Security Agreement and Fixture Filing, recorded on December 14, 1995,
in the Official Records of Alameda County, California, as Instrument
No. 95289663. Assignment of Leases, recorded on December 14, 1995, in
the Official Records of Alameda County, California, as Instrument
No. 95289664.
7. 301 E. Grand: Deed of Trust with Assignment of Rents,
Security Agreement and Fixture Filing, recorded on December 14, 1995,
in the Official Records of San Mateo County, California, as Instrument
No. 95-135457. Assignment of Leases, recorded on December 14, 1995,
in the Official Records of San Mateo County, California, as Instrument
No. 95-135458.
8. 342 Allerton: Deed of Trust with Assignment of Rents,
Security Agreement and Fixture Filing, recorded on December 14, 1995,
in the Official Records of San Mateo County, California, as Instrument
No. 95-135460. Assignment of Leases, recorded on December 14, 1995,
in the Official Records of San Mateo County, California, as Instrument
No. 95-135461.
9. 410 Allerton: Deed of Trust with Assignment of Rents,
Security Agreement and Fixture Filing, recorded on December 14, 1995,
in the Official Records of San Mateo County, California, as Instrument
No. 95-135466. Assignment of Leases, recorded on December 14, 1995,
in the Official Records of San Mateo County, California, as Instrument
No. 95-135467.
10. 400 Grandview: Deed of Trust with Assignment of Rents,
Security Agreement and Fixture Filing, recorded on December 14, 1995,
in the Official Records of San Mateo County, California, as Instrument
No. 95-135463. Assignment of Leases, recorded on December 14, 1995,
in the Official Records of San Mateo County, California, as Instrument
No. 95-135464.
11. Fourier: Deed of Trust with Assignment of Rents, Security
Agreement and Fixture Filing, recorded on October 11, 1996, in the
Official Records of Alameda County, California, as Instrument
No. 96262320. Assignment of Leases, recorded on October 11, 1996, in
the Official Records of Alameda County, California, as Instrument
No. 96262321.
12. Lundy: Deed of Trust with Assignment of Rents, Security
Agreement and Fixture Filing, recorded on December 4, 1996, in the
Official Records of Santa Clara County, California, as Instrument
No. 13542186. Assignment of Leases, recorded on December 4, 1996, in
the Official Records of Santa Clara County, California, as Instrument
No. 13542187.
13. Mt. View: Deed of Trust with Assignment of Rents, Security
Agreement and Fixture Filing, recorded on December 4, 1996, in the
Official Records of Santa Clara County, California, as Instrument
No. 13542188. Assignment of Leases, recorded on December 4, 1996, in
the Official Records of Santa Clara County, California, as Instrument
No. 13542189.
14. Laguna Hills: Deed of Trust with Assignment of Rents,
Security Agreement and Fixture Filing, recorded on December 4, 1996,
in the Official Records of Orange County, California, as Instrument
No. 19960614118. Assignment of Leases, recorded on December 4, 1996,
in the Official Records of Orange County, California, as Instrument
No. 19960614119.
15. Gibraltar: Deed of Trust with Assignment of Rents, Security
Agreement and Fixture Filing, recorded on October 11, 1996, in the
Official Records of Santa Clara County, California, as Instrument
No. 13482493. Assignment of Leases, recorded on October 11, 1996, in
the Official Records of Santa Clara County, California, as Instrument
No. 13482494.
16. O'Toole: Deed of Trust with Assignment of Rents, Security
Agreement and Fixture Filing, recorded on May 29, 1997, in the
Official Records of Santa Clara County, California, as Instrument
No. 13720232. Assignment of Leases, recorded on May 29, 1997, in the
Official Records of Santa Clara County, California, as Instrument
No. 13720233.
17. Signal Systems: Deed of Trust with Assignment of Rents,
Security Agreement and Fixture Filing, recorded on May 29, 1997, in
the Official Records of San Diego County, California, as Instrument
No. 1997-0248273. Assignment of Leases, recorded on May 29, 1997, in
the Official Records of San Diego County, California, as Instrument
No. 1997-0248274.
18. Bedford Fremont: Deed of Trust with Assignment of Rents,
Security Agreement and Fixture Filing, recorded on July 8, 1997, in
the Official Records of Alameda County, California, as Instrument
No. 97167840. Assignment of Leases, recorded on July 8, 1997, in the
Official Records of Alameda County, California, as Instrument
No. 97167841.
19. 6500 Kaiser: Deed of Trust with Assignment of Rents,
Security Agreement and Fixture Filing, recorded on July 8, 1997, in
the Official Records of Alameda County, California, as Instrument
No. 97167838. Assignment of Leases, recorded on July 8, 1997, in the
Official Records of Alameda County, California, as Instrument
No. 97167839.
Kansas Properties
1. 99th Street, Bldg. 1: Mortgage, Security Agreement,
Assignment of Rents and Fixture Filing, recorded on January 4, 1996,
in the Official Records of Johnson County, Kansas, as Instrument
No. 2556787, Volume 4764 Page 936. Assignment of Leases, recorded on
January 4, 1996, in the Official Records of Johnson County, Kansas, as
Instrument No. 2556788, Volume 4764 Page 970.
2. 99th Street, Bldg. 3: Mortgage, Security Agreement,
Assignment of Rents and Fixture Filing executed by ICMPI (Lenexa),
Inc., a Delaware corporation ("Lenexa"), and recorded on January 4,
1996, in the Official Records of Johnson County, Kansas, as Instrument
No. 2556789, Volume 4765 Page 1. Assignment of Leases executed by
Lenexa, as assignor, recorded on January 4, 1996, in the Official
Records of Johnson County, Kansas, as Instrument No. 2556790, Volume
4765 Page 39.
3. 6600 College: Mortgage, Security Agreement, Assignment of
Rents and Fixture Filing, recorded on January 4, 1996, in the Official
Records of Johnson County, Kansas, as Instrument No. 2556791, Volume
4765 Page 49. Assignment of Leases, recorded on January 4, 1996, in
the Official Records of Johnson County, Kansas, as Instrument
No. 2556792, Volume 4765 Page 83.
4. Lackman Business Center: Mortgage, Security Agreement,
Assignment of Rents and Fixture Filing, recorded on January 4, 1996,
in the Official Records of Johnson County, Kansas, as Instrument
No. 2556785, Volume 4764 Page 892. Assignment of Leases, recorded on
January 4, 1996, in the Official Records of Johnson County, Kansas, as
Instrument No. 2556786, Volume 4764 Page 926.
Oregon Properties
1. Twin Oaks Business Center: Line of Credit Deed of Trust
with Assignment of Rents and Leases, Security Agreement and Fixture
Filing, recorded on December 14, 1995, in the Official Records of
Washington County, Oregon, as Instrument No. 95091724.4.
2. Twin Oaks Tech Center: Line of Credit Deed of Trust with
Assignment of Rents and Leases, Security Agreement and Fixture Filing,
recorded on December 14, 1995, in the Official Records of
Washington County, Oregon, as Instrument No. 95091723.4.
Colorado Properties
1. Bryant St. Annex: Deed of Trust with Assignment of Rents,
Security Agreement and Fixture Filing, recorded on December 14, 1995,
in the Official Records of Denver County, Colorado, as Instrument
No. 9500155131. Assignment of Leases, recorded on December 14, 1995,
in the Official Records of Denver County, Colorado, as Instrument
No. 9500155132.
2. Bryant St. Quad: Deed of Trust with Assignment of Rents,
Security Agreement and Fixture Filing, recorded on October 11, 1996,
in the Official Records of Denver County, Colorado, as Instrument
No. 9600141543. Assignment of Leases, recorded on October 11, 1996,
in the Official Records of Denver County, Colorado, as Instrument
No. 9600141544.
3. Academy Place: Deed of Trust with Assignment of Rents,
Security Agreement and Fixture Filing, recorded on May 29, 1997, in
the Official Records of El Paso County, Colorado, as Instrument
No. 97060499. Assignment of Leases, recorded on May 29, 1997, in the
Official Records of El Paso County, Colorado, as Instrument
No. 97060500.
Arizona Properties
1. Westech: Deed of Trust with Assignment of Rents, Security
Agreement and Fixture Filing (Arizona), recorded on October 11, 1996,
in the Official Records of Maricopa County, Arizona, as Instrument
No. 96-0725727. Assignment of Leases and Rents, recorded on October
11, 1996, in the Official Records of Maricopa County, Arizona, as
Instrument No. 96-0725728.
2. Executive Center at Southbank: Deed of Trust with
Assignment of Rents, Security Agreement and Fixture Filing (Arizona),
recorded on July 8, 1997, in the Official Records of Maricopa County,
Arizona, as Instrument No. 97-0459316. Assignment of Leases and
Rents, recorded on July 8, 1997, in the Official Records of
Maricopa County, Arizona, as Instrument No. 97-0459317.
Missouri Property
1. Panorama Business Center: Deed of Trust with Assignment of
Rents, Security Agreement and Fixture Filing, recorded on May 29,
1997, in the Official Records of Jackson County, Missouri, as
Instrument No. 97K25432. Assignment of Leases, recorded on May 29,
1997, in the Official Records of Jackson County, Missouri, as
Instrument No. 97K25434.
Texas Property
1. Great Hills Trail Building (fka The Somerset Building):
Deed of Trust with Assignment of Rents, Security Agreement and Fixture
Filing, recorded on May 29, 1997, in the Official Records of
Travis County, Texas, as Instrument No. 12944 0005-0037. Assignment
of Leases, recorded on May 29, 1997, in the Official Records of
Travis County, Texas, as Instrument No. 12944 0038-0048.
