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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) August 16, 1995
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Commission File Number: 1-12546
PACIFIC GULF PROPERTIES INC.
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(Exact name of Registrant as specified in its Charter)
MARYLAND 33-0577520
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(State of Incorporation) (I.R.S. Employer
Identification No.)
363 SAN MIGUEL DRIVE, SUITE 100, NEWPORT BEACH, CALIFORNIA 92660-7805
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(Address of principal executive offices, including zip code)
714-721-2700
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(Registrant's telephone number, including area code)
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FORM 8-K/A
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
The attached pro forma and audited financial statements are provided
as an amendment to the Form 8-K filed on August 30, 1995 and the
Form 8-K/A filed on October 27, 1995 and the Form 8-K/A filed on May
7, 1996.
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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 by the
undersigned hereunto duly authorized.
PACIFIC GULF PROPERTIES INC.
/s/ DONALD G. HERRMAN
-------------------------------------
Donald G. Herrman
Executive Vice President,
Chief Financial Officer and Secretary
DATED: May 20, 1996
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PACIFIC GULF PROPERTIES INC. - PRO FORMA (UNAUDITED)
----------------------------------------------------
Pro Forma Condensed Consolidated Balance Sheet as of June 30, 1995 . . . . . . 4
Pro Forma Condensed Consolidated Statement of Operations for the
Six Months Ended June 30, 1995 . . . . . . . . . . . . . . . . . . . . . . 5
Pro Forma Condensed Consolidated Statement of Operations for the
Year Ended December 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . 6
Notes to Pro Forma Condensed Consolidated Financial Statements . . . . . . . . 7
KONWISER ACQUISITION PROPERTIES
-------------------------------
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . 10
Combined Statements of Revenues and Certain Expenses
for the Year Ended December 31, 1994 and the
Six Months Ended June 30, 1995 (unaudited) . . . . . . . . . . . . . . . . 11
Notes to Combined Statements of Revenues and Certain Expenses . . . . . . . . . 12
</TABLE>
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PACIFIC GULF PROPERTIES INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1995
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
Company Pro Forma Company
Historical Adjustments Pro Forma
---------- ----------- ---------
<S> <C> <C> <C>
ASSETS
Real estate assets
Land $ 50,543 $19,822 $ 70,365
Buildings 168,854 52,080 220,934
-------- ------- --------
219,397 71,902 291,299
Accumulated depreciation (19,864) - (19,864)
-------- ------- --------
199,533 71,902 (A) 271,435
Cash and cash equivalents 2,620 - 2,620
Accounts receivable 625 - 625
Other assets 5,832 708 (B)(C) 6,540
-------- ------- --------
$208,610 $72,610 $281,220
======== ======= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgage notes payable $ 78,274 $55,114 (A) $133,388
Revolving line of credit - 13,000 (A) 13,000
Accounts payable and accrued liabilities 4,418 996 (A) 5,414
Dividends payable 1,894 - 1,894
Convertible subordinated debentures 55,589 - 55,589
-------- ------- --------
140,175 69,110 209,285
Minority interest in consolidated partnership - 3,500 (A) 3,500
Shareholders' Equity
Preferred shares, $.01 par value; 5,000,000 shares
authorized; no shares outstanding
Common stock, $.01 par value, 25,000,000 shares
authorized, 4,856,515 issued and outstanding 49 - 49
Excess shares, $.01 par value; 30,000,000 shares
authorized; no shares outstanding
Outstanding restricted stock (719) - (719)
Additional paid-in-capital 77,977 - 77,977
Distributions in excess of net earnings (8,872) - (8,872)
-------- ------- --------
68,435 - 68,435
-------- ------- --------
$208,610 $72,610 $281,220
======== ======= ========
</TABLE>
The accompanying notes are an integral part of the Pro Forma Condensed
Consolidated Financial Statements. References in parentheses are to Note 2.
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PACIFIC GULF PROPERTIES INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1995
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
Company Pro Forma Company
Historical Adjustments Pro Forma
---------- ----------- ----------
<S> <C> <C> <C>
REVENUES
Rental income $ 16,837 $5,110 (D) $ 21,947
EXPENSES
Rental property expenses 5,884 2,255 (D) 8,139
Depreciation 2,728 682 (F) 3,410
Interest 6,212 2,477 (E) 8,689
General and administrative 940 - 940
---------- ------ ----------
15,764 5,414 21,178
---------- ------ ----------
NET INCOME $ 1,073 $ (304) $ 769
========== ====== ==========
WEIGHTED AVERAGE COMMON SHARES (G) 4,804,392 4,804,392
========== ==========
NET INCOME PER COMMON SHARE $ .22 $ .16
========== ==========
</TABLE>
The accompanying notes are an integral part of the Pro Forma Condensed
Consolidated Financial Statements. References in parenthesis are to Note 2.
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PACIFIC GULF PROPERTIES INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994
(UNAUDITED, EXCEPT FOR COMPANY HISTORICAL)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
(Unaudited)
-------------------------
Company Pro Forma Company
Historical Adjustments Pro Forma
---------- ----------- ----------
<S> <C> <C> <C>
REVENUES
Rental income $ 26,144 $10,254(D) $ 36,398
EXPENSES
Rental property expenses 10,376 4,525(D) 14,901
Depreciation 3,721 1,365(F) 5,086
Interest 8,164 4,952(E) 13,116
General and administrative 1,725 - 1,725
---------- ------- ----------
23,986 10,842 34,828
---------- ------- ----------
INCOME FROM CONTINUING OPERATIONS $ 2,158 $ (588) $ 1,570
========== ======= ==========
WEIGHTED AVERAGE COMMON SHARES (G) 4,266,264 4,266,264
========== ==========
INCOME FROM CONTINUING OPERATIONS
PER COMMON SHARE $ .51 $ .37
========== ==========
</TABLE>
The accompanying notes are an integral part of the Pro Forma Condensed
Consolidated Financial Statements. References in parentheses are to Note 2.
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PACIFIC GULF PROPERTIES INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
1. BASIS OF PRESENTATION
The Pro Forma Condensed Consolidated Financial Statements of Pacific Gulf
Properties Inc. (the "Company") are unaudited and have been prepared based
on the historical financial statements of the Company as of June 30, 1995
and for the six months then ended and the year ended December 31, 1995.
The unaudited Pro Forma Condensed Consolidated Balance Sheet as of June 30,
1995 is based on the unaudited historical financial statements of the
Company and has been prepared as if the following related acquisition
transactions had occurred as of June 30, 1995 (referred collectively as the
"Acquisition Transactions"): (i) the Company acquired a majority ownership
interest (78 percent) in 11 multifamily properties consisting of 1,368
apartments located in Southern California (the "Konwiser Acquisition
Properties") from a consortium group of partnerships headed by Mr. John
Konwiser as a result of its initial cash contribution of approximately
$12,800,000; (ii) the Konwiser Acquisition Properties were contributed by
the consortium group of partnerships to a new limited partnership, PGP
Inland Communities, L.P. ("PGP Inland"), in which the Company is the sole
general partner; and (iii) the parties contributing the Konwiser
Acquisition Properties received minority interests in the Partnership
consisting of 225,452 limited partnership units which represent 22 percent
ownership interest. The unaudited Pro Forma Condensed Consolidated
Statement of Operations for the six months ended June 30, 1995 has been
prepared as if the Acquisition Transactions occurred at the beginning of the
period presented. The Pro Forma Condensed Consolidated Statement of
Operations for the year ended December 31, 1994 has been prepared based on
the historical operations of the Company for 1994 as if the Acquisition
Transactions occurred as of January 1, 1994 and includes the operations of
the Company's Predecessor for the period January 1, 1994 through
February 17, 1994 (the multifamily and industrial operations acquired from
Santa Anita Realty Enterprises, Inc. upon the Company's formation in
February 1994). In management's opinion, all adjustments necessary to
reflect the effect of the Acquisition Transactions have been made.
The pro forma information is not necessarily indicative of what the
Company's financial condition or results of operations would have been if
the Acquisition Transactions had occurred at the beginning of the periods
presented, nor does it purport to project the Company's financial position
or results of operations at any future date or for any future period. In
addition, the historical operating results for the six months ended June
30, 1995 are not necessarily indicative of the results to be obtained by
the Company for the year ending December 31, 1995. The following
information should be read in conjunction with Management's Discussion and
Analysis of Financial Conditions and Results of Operations, and all of the
financial statements in the annual report in Form 10-K and in quarterly
filings with the Securities and Exchange Commission.
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PACIFIC GULF PROPERTIES INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (continued)
(DOLLARS IN THOUSANDS)
(UNAUDITED)
2. PRO FORMA ADJUSTMENTS
(A) Reflects the following pro forma adjustments relating to the Acqui-
sition Transactions as of June 30, 1995: (i) real estate assets
increase as a result of the negotiated value of the Konwiser
Acquisition Properties of $71,469 and preacquisition costs totaling
$433; (ii) mortgage notes payable increase as a result of the
assumption of $24,850 of tax-exempt indebtedness and new permanent
mortgages of $30,264; (iii) the revolving line of credit increases to
fund the Company's contribution to PGP Inland of $12,800 and $200 of
preacquisition costs; (iv) increases to accounts payable and accrued
liabilities represents the liability relating to prepaid rents and
tenant security deposits of $563 and accrued preacquisition costs and
loan fees payable of $233 and $200, respectively, and; (v) the minority
interest in consolidated partnership of $3,500 represents the minority
interest of the other partners in PGP Inland.
(B) Includes furniture, fixtures and office equipment, and other personal
property associated with the Konwiser Acquisition Properties of $90.
(C) Includes letter of credit fees and other financing costs totaling $618
which will be capitalized and amortized over the term of tax-exempt
mortgage indebtedness assumed.
(D) The pro forma adjustments include the combined historical revenues and
certain expenses of the Konwiser Acquisition Properties for the six
months ended June 30, 1995 and the year ended December 31, 1994 as
follows:
<TABLE>
<CAPTION>
Six Months Year
Ended Ended
June 30, December 31,
1995 1994
-------- -----------
<S> <C> <C>
Rental income $5,110 $10,254
Rental property expenses 2,255 4,525
------ -------
$2,855 $ 5,729
====== =======
</TABLE>
Certain rental property expenses have been adjusted to reflect
increased property taxes based on the properties' acquisition cost and
current property tax rates.
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PACIFIC GULF PROPERTIES INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (continued)
(DOLLARS IN THOUSANDS)
(UNAUDITED)
2. PRO FORMA ADJUSTMENTS (continued)
(E) Reflects additional interest expense associated with the borrowings used
to finance the purchase of the properties for the period presented
calculated based on the interest rates of the debt assumed and specific
new borrowings. The new borrowings total $43,264 (including $13,000 of
borrowings under the Company's line of credit) at an interest rate of
8.0%. The tax exempt indebtedness assumed by the Company totals $24,850
at an interest rate of 5.7%. The additional interest expense also
includes the amortization of loan fees on the related borrowings
totaling $38 for the six months ended June 30, 1995 and $75 for the year
ended December 31, 1995.
(F) Represents additional depreciation computed (1) using the estimated
remaining useful lives of approximately 40 years and the depreciable
cost basis of the real property ($52,281 excluding land) and (2) using
the estimated 5 year useful life for the related personal property
($289).
(G) Represents the weighted average common shares and common share
equivalents outstanding for the year ended December 31, 1994
and the six months ended June 30, 1995. Common share equivalents
include stock options which are considered dilutive.
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REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Directors
Pacific Gulf Properties Inc.
We have audited the accompanying combined statement of revenues and certain
expenses of the eleven multifamily properties in which Pacific Gulf Properties
Inc. (the "Company") will acquire a majority interest from a consortium group of
partnerships headed by Mr. John Konwiser (the "Konwiser Acquisition Properties")
for the year ended December 31, 1994. The statement is the responsibility of
management. Our responsibility is to express an opinion on the statement based
on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement is free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the statement. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall presentation of the statement. We believe that our audit
provides a reasonable basis for our opinion.
The accompanying statement was prepared for the purpose of complying with the
rules and regulations of the Securities and Exchange Commission (for inclusion
in a Form 8-K of Pacific Gulf Properties Inc.) as described in Note 2 to the
statement and is not intended to be a complete presentation of the revenues and
expenses of the aforementioned properties.
In our opinion, the statement referred to above presents fairly, in all material
respects, the combined revenues and certain expenses, as defined above, of the
Konwiser Acquisition Properties for the year ended December 31, 1994, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Newport Beach, California
July 28,1995
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KONWISER ACQUISITION PROPERTIES
COMBINED STATEMENT OF REVENUES AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1994 AND
THE SIX MONTHS ENDED JUNE 30, 1995
<TABLE>
<CAPTION>
Year Ended Six Months
December 31, Ended
1994 June 30, 1995
------------ -------------
(Unaudited)
<S> <C> <C>
REVENUES
Rental and other income $10,254,000 $5,110,000
CERTAIN EXPENSES
Property operating and maintenance 3,225,000 1,610,000
Real estate taxes 697,000 340,000
Management fees 498,000 253,000
----------- ----------
4,420,000 2,203,000
----------- ----------
REVENUES IN EXCESS OF CERTAIN EXPENSES $ 5,834,000 $2,907,000
=========== ==========
</TABLE>
See accompanying notes.
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KONWISER ACQUISITION PROPERTIES
NOTES TO COMBINED STATEMENTS OF REVENUES AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1994 AND THE SIX MONTHS ENDED JUNE 30, 1995
NOTE 1 - ORGANIZATION
Pacific Gulf Properties Inc. (the "Company") has contracted to acquire
a majority interest in 11 multifamily projects located in Southern
California (the "Properties") from a consortium group of partnerships
headed by Mr. John Konwiser. The Properties consist of the following:
Property Location No. Units
-------------------------- --------------- ---------
Daisy V Apartments Covina, CA 38
Daisy VII - XI Apartments Diamond Bar, CA 204
Daisy XII - XIV Apartments San Dimas, CA 102
Daisy XVI Apartments West Covina, CA 250
Daisy XVII Apartments San Dimas, CA 156
Lariat Apartments San Dimas, CA 30
Daisy XIX Apartments Ontario, CA 125
Daisy XX Apartments Ontario, CA 155
Sunnyside Apartments I San Dimas, CA 164
Sunnyside Apartments II Ontario, CA 60
Sunnyside Apartments III Ontario, CA 84
-----
1,368
=====
The Company will be the sole general partner of PGP Inland Communities,
L.P. ("PGP Inland"), a new limited partnership to which the owners of
the consortium group of partnerships will contribute the Properties.
The Company will receive an ownership interest in PGP Inland of
approximately 78% in exchange for a cash contribution of approximately
$12,800,000. The owners of the consortium group of partnerships
contributing the Properties will receive limited partnership units in
PGP Inland, representing a combined ownership interest of approximately
22%. In connection with the contribution of the Properties at a gross
asset value of approximately $71,469,000, PGP Inland will assume
$24,850,000 of existing tax-exempt indebtedness and obtain $30,263,500
of new indebtedness secured by the Properties.
NOTE 2 - BASIS OF PRESENTATION
The combined statements of revenues and certain expenses relate to the
operation of the Properties and has been prepared for the purpose of
complying with the rules and regulations of the Securities and Exchange
Commission (for inclusion in a Form 8-K of Pacific Gulf Properties
Inc.).
Certain expenses that are dependent on the particular owner and the
carrying value of the Properties have been excluded from the
Statements. The excluded expenses consist primarily of depreciation,
interest and amortization of loan fees. Consequently, the combined
revenues in excess of certain expenses as presented is not intended to
be a complete presentation of the Properties' revenues and expenses nor
is it intended to be comparable to the proposed future operations of
the Properties.
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KONWISER ACQUISITION PROPERTIES
NOTES TO COMBINED STATEMENT OF REVENUES AND CERTAIN EXPENSES (continued)
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
-------------------
Rental income attributable to residential leases is recorded when due
from tenants. Apartment units are rented under lease agreements with
terms of one year or less.
Capitalization Policy
---------------------
Recurring repair and maintenance costs are expensed as incurred. Major
replacements and betterments are capitalized.
Use of Estimates
----------------
The preparation of the statements in conformity with generally accepted
accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the statements. Actual
results could differ from these estimates in the near term.
NOTE 4 - MANAGEMENT FEES
The Properties are subject to agreements with The Konwiser Corporation,
a property management company substantially owned by Mr. John Konwiser,
to maintain and manage the operations of the Properties. Management
fees are based on 5% of the gross receipts of the Properties.
13
