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, 1998.
___ 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 (925) 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 October 30, 1998
Common Stock, $0.02 par value 22,655,028
<PAGE>
BEDFORD PROPERTY INVESTORS, INC.
INDEX
PART I. FINANCIAL INFORMATION Page
ITEM 1. FINANCIAL STATEMENTS
Statement 1
Consolidated Balance Sheets as of September 30, 1998
and December 31, 1997 2
Consolidated Statements of Income for the three and nine months ended
September 30, 1998 and 1997 3
Consolidated Statements of Stockholders' Equity for the year ended
December 31, 1997 and the nine months ended September 30, 1998 4
Consolidated Statements of Cash Flows for the nine months ended
September 30, 1998 and 1997 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 18-19
<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, 1997.
<PAGE>
BEDFORD PROPERTY INVESTORS, INC.
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 1998 AND DECEMBER 31, 1997 (Unaudited)
(in thousands, except share and per share amounts)
September 30, 1998 December 31, 1997
Assets:
Real estate investments:
Industrial buildings $306,734 $237,184
Office buildings 257,779 170,948
Properties under development 17,555 18,227
Land held for development 5,176 5,712
587,244 432,071
Less accumulated depreciation 15,782 8,985
571,462 423,086
Cash 1,660 1,361
Other assets 14,734 9,456
$587,856 $433,903
Liabilities and Stockholders' Equity:
Bank loan payable $137,410 $ 8,216
Mortgage loans payable 80,437 60,323
Accounts payable and accrued expenses 8,292 6,026
Dividend and distributions payable 7,505 6,804
Other liabilities 4,474 4,611
Total liabilities 238,118 85,980
Minority interest in consolidated
partnership 1,369 1,497
Stockholders' equity:
Common stock, par value $0.02 per share;
authorized 50,000,000 shares; issued
and outstanding 22,655,028 shares in
1998 and 22,583,867 shares in 1997 453 452
Additional paid-in capital 408,623 408,209
Accumulated dividends in
excess of net income (60,707) (62,235)
Total stockholders' equity 348,369 346,426
$587,856 $433,903
See accompanying notes to consolidated financial statements.
<PAGE>
BEDFORD PROPERTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(Unaudited)
(in thousands, except share and per share amounts)
<TABLE>
<S> <C> <C> <C> <C>
Three Months Nine Months
1998 1997 1998 1997
Property operations:
Rental income $20,156 $12,789 $52,635 $32,472
Rental expenses:
Operating expenses 3,322 1,973 7,925 4,996
Real estate taxes 1,704 993 4,393 2,708
Depreciation and amortization 2,939 1,528 7,307 3,902
Income from property operations 12,191 8,295 33,010 20,866
General and administrative expenses (655) (469) (2,369) (1,586)
Interest income 85 73 178 217
Interest expense (3,664) (2,877) (7,480) (5,909)
Income before minority interest and gain on sale 7,957 5,022 23,339 13,588
Gain on sale - 10,787 - 10,787
Minority interest (29) (28) (86) (79)
Net income $ 7,928 $15,781 $23,253 $24,296
Net income applicable to
common stockholders $ 7,928 $14,531 $23,253 $20,796
Basic earnings per share $ 0.35 $ 1.30 $ 1.03 $ 2.00
Weighted average number of shares-basic 22,649,403 11,158,953 22,616,558 10,416,729
Earnings per common share - assuming
dilution $ 0.35 $ 1.01 $ 1.02 $ 1.64
Weighted average number of
shares - assuming dilution 22,926,125 15,698,133 22,934,296 14,905,299
</TABLE>
See accompanying notes to consolidated financial statements.
BEDFORD PROPERTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1997 AND
THE NINE MONTHS ENDED SEPTEMBER 30, 1998 (Unaudited)
(in thousands, except per share amounts)
<TABLE>
<S> <C> <C> <C> <C>
Accumulated Total
Additional dividends stock-
Common paid-in in excess of holders'
stock capital net income equity
Balance, December 31, 1996 $ 131 $147,622 $(73,997) $ 73,756
Issuance of common stock 321 265,622 - 265,943
Costs of issuance of common stock - (4,990) - (4,990)
Redemption of partnership units - (45) - (45)
Net income - - 31,291 31,291
Dividends to common stockholders
($1.13 per share) - - (16,029) (16,029)
Dividends to preferred stockholders - - (3,500) (3,500)
Balance, December 31, 1997 $ 452 $408,209 $(62,235) $346,426
Issuance of common stock 1 414 - 415
Net income - - 23,253 23,253
Dividends to common stockholders
($0.96 per share) - - (21,725) (21,725)
Balance, September 30, 1998 $ 453 $408,623 $(60,707) $348,369
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
BEDFORD PROPERTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 (Unaudited)
(in thousands)
1998 1997
Operating Activities:
Net income $23,253 $24,296
Adjustments to reconcile net income to net cash
provided by operating activities:
Minority interest 86 79
Depreciation and amortization 8,220 4,602
Gain on sale of real estate investments - (10,787)
Change in other assets (6,035) (3,126)
Change in accounts payable and
accrued expenses 2,780 840
Change in other liabilities (137) 152
Net cash provided by operating activities 28,167 16,056
Investing Activities:
Investments in real estate (155,687) (155,687)
Proceeds from sale of real estate investments - 24,938
Net cash used by investing activities (155,687) (130,749)
Financing Activities:
Proceeds from bank loan 147,508 131,501
Proceeds from mortgage loan 21,109 -
Repayments of bank loan (19,189) (81,115)
Repayments of mortgage loans (786) (309)
Proceeds from issuance of common stock 415 75,619
Redemption of partnership units (128) (257)
Payment of dividends and distributions (21,110) (11,032)
Net cash provided by financing activities 127,819 114,407
Net increase (decrease) in cash 299 (286)
Cash at beginning of period 1,361 1,328
Cash at end of period $ 1,660 $ 1,042
Supplemental disclosure of cash flow information:
a) Non cash investing and financing activities:
Debt incurred with real estate acquired $ - $ 8,972
b) Cash paid during the period for interest,
net of amounts capitalized
$1,746 in 1998 and $404 in 1997 $ 5,917 $ 5,382
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. The unaudited
interim financial statements reflect all adjustments which are, in the
opinion of management, necessary to a fair statement of the results for
the interim periods presented. All such adjustments are of a normal,
recurring nature.
Per Share Data
Per share data are based on the weighted average number of common shares
outstanding during the year. Stock options issued under the Company's
stock option plans are included in the calculation of diluted per share
data if, upon exercise, they would have a dilutive effect. The diluted
earnings per share calculation assumes conversion of the limited
partnership units of Bedford Realty Partners, L.P., if such conversions
would have dilutive effects, as of the beginning of the year.
Recent Accounting Pronouncements
In June 1997, the FASB issued Financial Accounting Statement 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. In February 1998, the FASB issued Financial Accounting
Standard No. 132, Employers Disclosures About Pensions and Other
Postretirement Benefits. SFAS 132 is effective with the year-end 1998
financial statements. In June 1998, the FASB issued Financial Accounting
Standard No. 133, Accounting for Derivatives Instruments and Hedging
Activities. SFAS 133 is effective for fiscal quarters beginning after
June 15, 1998. 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, 1998, the Company's real estate investments were
diversified by property type as follows (dollars in thousands):
Number of Percent
Properties Cost of Total
Industrial buildings 67 $306,734 52%
Office buildings 23 257,779 44%
Properties under development 8 17,555 3%
Land held for development 6 5,176 1%
Total 104 $587,244 100%
<PAGE>
Note 2 - Real Estate Investments
The following table sets forth the Company's real estate investments as
of September 30, 1998 (in thousands):
<TABLE>
<S> <C> <C> <C> <C> <C>
Less
Development Accumulated
Land Building In-Progress Depreciation Total
INDUSTRIAL BUILDINGS
Northern California $ 49,049 $112,785 $ - $ 5,358 $156,476
Southern California 15,326 35,334 - 2,085 48,575
Denver, Colorado 1,911 3,283 - 225 4,969
Arizona 11,805 31,767 - 1,045 42,527
Greater Portland Area 2,652 8,509 - 699 10,462
Greater Kansas City Area 3,917 16,427 - 1,083 19,261
Dallas, Texas 2,978 10,991 - 80 13,889
Total Industrial 87,638 219,096 - 10,575 296,159
SUBURBAN OFFICE BUILDINGS
Northern California 6,022 17,407 - 538 22,891
Southern California 7,312 18,109 - 686 24,735
Salt Lake City 359 6,572 - 921 6,010
Greater Kansas City Area 3,330 5,440 - 299 8,471
Greater Seattle Area 15,116 78,814 - 1,245 92,685
Reno, Nevada 2,102 10,527 - 345 12,284
Austin, Texas 2,766 7,089 - 209 9,646
Arizona 9,148 17,133 - 460 25,821
Denver, Colorado 5,559 44,974 - 504 50,029
Total Suburban Office 51,714 206,065 - 5,207 252,572
PROPERTIES UNDER DEVELOPMENT
Northern California - - 862 - 862
Arizona - - 10,562 - 10,562
Greater Seattle Area - - 6,131 - 6,131
Total Properties Under Development - - 17,555 - 17,555
LAND HELD FOR DEVELOPMENT
Northern California 2,142 - - - 2,142
Southern California 1,002 - - - 1,002
Denver, Colorado 1,845 - - - 1,845
Dallas, Texas 187 - - - 187
Total Land Held for Development 5,176 - - - 5,176
Total $144,528 $425,161 $17,555 $15,782 $571,462
</TABLE>
The Company internally manages all but 8 of its properties from its
regional offices in Lafayette, CA; Tustin, CA; Phoenix, AZ; Lenexa, KS;
Denver, CO; and Seattle, WA. For the 8 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, CA.
The Company has remaining construction commitments of $5.9 million at
September 30, 1998 relating to three of its properties under development.
<PAGE>
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. A director of the Company was a 9% 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.
The sellers of the property received 108,495 OP Units. As of September
30, 1998, the Company has redeemed 21,607 OP units for cash.
Note 4. Debt
Bank Loan Payable
In June 1998, the Company amended and restated its secured revolving
credit facility with Bank of America. Under this facility, which matures
June 15, 2001, the Company can borrow up to $175 million on a secured
basis. The facility contains an unsecured sub-line of $50 million.
Secured loans bear interest at a floating rate equal to either the
lender's published "reference rate" or LIBOR plus a margin ranging from
1.10% to 1.35%. The interest rate of the unsecured loans is either the
lender's published "reference rate" or LIBOR plus a margin of 1.50%. The
credit facility contains various restrictive covenants including, among
other things, a covenant limiting quarterly dividends to 95% of average
Funds From Operations. As of September 30, 1998, the Company was in
compliance with the covenants and requirements of its revolving credit
facility which had an outstanding balance of $137,410,000 and included
$9,000,000 of unsecured loans. The credit facility is secured by
mortgages on 45 properties (which properties collectively accounted for
approximately 51% of the Company's Annualized Base Rent and approximately
42% of the Company's total assets as of September 30, 1998), together
with the rental proceeds from such properties.
The daily weighted average amount owing to the bank was $77,818,000 and
$45,802,000 for the nine months ended September 30, 1998 and 1997,
respectively. The weighted average interest rates in each of these
periods was 7.02% and 7.43%, respectively. The effective interest rate
at September 30, 1998 was 6.82%.
Mortgage Loans Payable
Mortgage loans payable at September 30, 1998 consist of the following (in
thousands):
Floating rate note due December 15, 1999
current rate of 8.75% $ 1,803
7.5% note due January 1, 2002 24,395
7.02% note due March 15, 2003 24,813
8.9% note due July 31, 2006 8,712
6.91% note due July 31, 2006 20,714
$ 80,437
The mortgage loans are collaterized by 21 properties (which Properties
collectively accounted for approximately 28% of the Company's
Annualized Base Rent and approximately 21% of the Company's total assets
as of September 30, 1998).
The following table presents scheduled principal payments on mortgage
loans as of September 30, 1998 (in thousands):
Twelve month period ending September 30, 1999 $ 1,311
Twelve month period ending September 30, 2000 3,173
Twelve month period ending September 30, 2001 1,496
Twelve month period ending September 30, 2002 24,204
Twelve month period ending September 30, 2003 23,723
Thereafter 26,530
$ 80,437
Note 5. Comprehensive Income
There are no adjustments necessary to net income as presented in the
accompanying consolidated statements of income to derive Comprehensive
Income in accordance with FASB Statement No. 130, Reporting Comprehensive
Income.
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 developing, owning and operating
industrial and suburban office properties located primarily in the
Western United States.
<PAGE>
Increases in revenues, expenses, and net income in the three and nine
months ended September 30, 1998 when compared with the same periods in
1997 were due primarily to property additions by acquisition and
development offset in part by the sale of operating properties as
follows:
Activities from January 1, 1997 Activities from October 1, 1997
to September 30, 1997 to September 30, 1998
Number of Number of
Operating Square Operating Square
Properties Feet Properties Feet
Acquisitions
Industrial 10 788,000 15 884,000
Office 7 863,000 7 551,000
17 1,651,000 22 1,435,000
Development
Industrial - - 4 365,000
Office - - 2 297,000
Sales
Office 2 213,000 - -
Retail - - 1 84,000
2 213,000 1 84,000
Three Months Ended September 30, 1998 Compared with Three Months Ended
September 30, 1997
Income from Property Operations
Income from property operations (defined as rental income less rental
expenses) increased $3,896,000 or 47% in 1998 compared with 1997. This
is due to an increase in rental income of $7,367,000 partially offset by
an increase in rental expenses (which include operating expenses, real
estate taxes and depreciation and amortization) of $3,471,000.
This increase in rental income and expenses is primarily attributable to
property additions by acquisition and development of real estate
investments. The acquisition and development activities increased rental
income and rental expenses by $7,401,000 and $3,480,000, respectively.
This was partially offset by the sale of two office properties in July
1997 and one retail property in October 1997 which resulted in a
reduction in rental income and rental expenses of $565,000 and $216,000,
respectively.
Expenses
Interest expense, which includes amortization of loan fees, increased
$787,000 or 27% in 1998 compared with 1997. The increase is attributable
to the Company's higher level of borrowings to finance the acquisition
of properties, and higher financing costs incurred in connection with the
credit facility and mortgage loans. The amortization of loan fees was
$238,000 and $209,000 in the third quarter of 1998 and 1997,
respectively. General and administrative expenses increased $186,000 or
40% in 1998 compared with 1997, primarily the result of the Company's
growth in assets.
Nine Months Ended September 30, 1998 Compared with Nine Months Ended
September 30, 1997
Income from Property Operations
Income from property operations (defined as rental income less rental
expenses) increased $12,144,000 or 58% in 1998 compared with 1997. This
is due to an increase in rental income of $20,163,000 partially offset
by an increase in rental expenses (which include operating expenses, real
estate taxes and depreciation and amortization) of $8,019,000.
This increase in rental income and expenses is primarily attributable to
property additions by acquisition and development of real estate
investments. The acquisition and development activities increased rental
income and rental expenses by $21,778,000 and $8,464,000, respectively.
This was partially offset by the sale of two office properties in July
1997 and one retail property in October 1997 which resulted in a
reduction in rental income and rental expenses of $3,055,000 and
$1,268,000, respectively.
Expenses
Interest expense, which includes amortization of loan fees, increased
$1,571,000 or 27% in 1998 compared with 1997. The increase is
attributable to the Company's higher level of borrowings to finance the
acquisition of properties and higher financing costs incurred in
connection with the credit facility and mortgage loans. The amortization
of loan fees was $750,000 and $580,000 in the nine months ended September
30 of 1998 and 1997, respectively. General and administrative expenses
increased $783,000 or 49% in 1998 compared with 1997, primarily the
result of the Company's growth in assets.
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 7,245,000 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. In June 1998, the Company amended and
restated its secured revolving credit facility with Bank of America.
Under this facility, which matures June 15, 2001, the Company can borrow
up to $175 million on a secured basis. The facility contains an
unsecured sub-line of $50 million. Secured loans bear interest at a
floating rate equal to either the lender's published "reference rate" or
LIBOR plus a margin ranging from 1.10% to 1.35%. The interest rate of
the unsecured loans is either the lender's published "reference rate" or
LIBOR plus a margin of 1.50%. As of September 30, 1998, the Company was
in compliance with the covenants and requirements of its revolving credit
facility which had an outstanding balance of $137,410,000 and included
$9,000,000 of unsecured loans.
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, 1998, the Company's operating
activities provided cash flow of $28,167,000. Investing activities
utilized cash of $155,687,000 for real estate acquisitions. Financing
activities provided net cash flow of $127,819,000 consisting of the
proceeds from bank borrowings and mortgage loans of $168,617,000 and net
proceeds from the issuance of common stock of $415,000, offset by
repayment of bank borrowings and mortgage loans of $19,975,000, payment
of dividends and distributions of $21,110,000 and redemption of
partnership units of $128,000.
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 certain 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.
The Company is engaged in preliminary discussions with a third party
related to the acquisition by such party of substantially all of the
Company's portfolio of suburban office buildings and industrial
properties. The Company cautioned, however, that there can be no
assurances that the current discussions will result in any definitive
agreement or, if they do, that any transaction will be completed.
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 recognizes 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
reletting space, the Company is subject to the risk that certain leases
expiring in 1998 and beyond 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 of 1998 were $0.33
per share. Distributions declared for the third quarter of 1998 were
$0.33 per OP Unit. Consistent with the Company's policy, dividends and
distributions were paid in the quarter after they were declared.
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 Performance
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, 1998 amounted to $10,896,000 and $30,646,000,
respectively. During the same periods in 1997, FFO amounted to
$6,550,000 and $17,490,000, 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 of assets related to real estate, 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 REITs and, therefore, may not be
comparable to such other REITs. Funds From Operations does not represent
cash generated by operating activities in accordance with 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.
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
Funds From Operations (in thousands):
Net Income $ 7,928 $ 15,781 $23,253 $ 24,296
Add Back:
Depreciation and Amortization 2,939 1,528 7,307 3,902
Minority Interest 29 28 86 79
Less Gain on Sale - (10,787) - (10,787)
Funds From Operations $10,896 $ 6,550 $30,646 $ 17,490
Year 2000 Compliance
In 1997 the Company purchased and put in place a new information system
hardware and software to accommodate the rapid growth of its real estate
portfolio. The new information system software are Year 2000 compliant.
In addition, the Company retained the services of a team of consultants
to maintain the system. Since January 1998, these consultants have been
conducting a survey of the Company's outside relationships (e.g.,
tenants, vendors and creditors) to assess their state of readiness in
regards to Year 2000 compliance. The survey indicates that a majority
of these parties' information systems are Year 2000 compliant. In
addition, the Company plans to perform a detailed IT system review of its
key outside relationships. The Company believes that Year 2000
compliance will not have a material impact on the Company's financial
statements.
<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 Company'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.
10.17 Fourth Amended and Restated Credit Agreement (Secured
Loan) among Bedford Property Investors, Inc., The Banks
Party Hereto and Bank of America National Trust and
Savings Association, as Arranger and as Administrative
Agent for the Banks, and Union Bank of California, NA
as Co-Agent for the Banks, dated June 15, 1998, is
incorporated by reference to exhibit 10.17 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1998.
10.18 Amended and Restated Unsecured Credit Agreement among
Bedford Property Investors, Inc., The Banks Party
Hereto and Bank of America National Trust and Savings
Association, as Arranger and as Administrative Agent
for the Banks, and Union Bank of California, N.A., as
Co-Agent for the Banks, dated June 15, 1998, is
incorporated by reference to exhibit 10.18 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1998.
11* Statement of Computation of Earnings Per Share.
27* Financial Data Schedules
* Filed herewith
B. Reports on Form 8-K
None
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: October 30, 1998
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>
Exhibit 11
Bedford Property Investors, Inc.
Statement of Computation of Earnings per Share
(in thousands, except share and share amounts)
<TABLE>
<S> <C> <C> <C> <C>
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
Basic:
Net income $ 7,928 $ 15,781 $ 23,253 $ 24,296
Less: Dividends on the Series A
Convertible
Preferred Stock - 1,250 - 3,500
Net income applicable to common stockholders $ 7,928 $ 14,531 $ 23,253 $ 20,796
Weighted average number of shares 22,649,403 11,158,953 22,616,558 10,416,729
Basic earnings per share $ 0.35 $ 1.30 $ 1.03 $ 2.00
Diluted:
Net income applicable to common stockholders $ 7,928 $ 14,531 $ 23,253 $ 20,796
Add: Dividends on the Series A Convertible
Preferred Stock - 1,250 - 3,500
Minority interest 29 28 86 79
Net income for diluted earnings per share $ 7,957 $ 15,809 $ 23,339 $ 24,375
Weighted average number of shares (from above) 22,649,403 11,158,953 22,616,558 10,416,729
Weighted average shares issuable upon
conversion of the Series A Convertible
Preferred Stock - 4,166,667 - 4,166,667
Weighted average shares of dilutive stock
options using average period stock price
under the treasury stock method 189,834 277,464 227,186 222,421
Weighted average shares issuable upon the
conversion of operating partnership units 86,888 95,049 90,552 99,482
Weighted average number of common shares -
assuming dilution 22,926,125 15,698,133 22,934,296 14,905,299
Earnings per share - assuming dilution $ 0.35 $ 1.01 $ 1.02 $ 1.64
</TABLE>
<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-31-1998
<PERIOD-END> SEP-30-1998
<CASH> $1,660
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,083
<PP&E> 587,244
<DEPRECIATION> (15,782)
<TOTAL-ASSETS> 587,856
<CURRENT-LIABILITIES> 17,507
<BONDS> 217,847
0
0
<COMMON> 453
<OTHER-SE> 347,916
<TOTAL-LIABILITY-AND-EQUITY> 587,856
<SALES> 0
<TOTAL-REVENUES> 52,813
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (21,994)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (7,480)
<INCOME-PRETAX> 23,253
<INCOME-TAX> 0
<INCOME-CONTINUING> 23,253
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23,253
<EPS-PRIMARY> $ 1.03
<EPS-DILUTED> $ 1.02
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
EXHIBIT 27
AMENDED 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> $ 2.00
<EPS-DILUTED> $ 1.64
</TABLE>
