<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) June 12, 1996
Commission File Number: 1-12546
PACIFIC GULF PROPERTIES INC.
(Exact name of Registrant as specified in its Charter)
MARYLAND 33-0577520
(State of Incorporation) (I.R.S. Employer Identification No.)
363 SAN MIGUEL DRIVE, SUITE 100, NEWPORT BEACH, CALIFORNIA 92660-7805
(Address of principal executive officers, including zip code)
714-721-2700
(Registrant's telephone number, including area code)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On May 30, 1996, Pacific Gulf Properties Inc. ("Company") received net
proceeds of approximately $30.3 million from a public offering of
2,015,581 shares of its common stock at $16.375 per share.
As previously announced and more fully described in the Company's
Prospectus Supplement dated May 23, 1996, relating to the offering,
proceeds from the offering have been used (or will be used) to purchase
nine industrial properties ("Acquisition Properties") located primarily
in Southern California consisting of 1,351,658 leasable square feet. As
of June 12, 1996, the Company has completed seven of the nine property
acquisitions. The Company expects to complete the remaining
acquisitions in the near future.
In addition to the proceeds from the offering, upon closing the Company
will have utilized its line of credit from Bank of America to provide
$19.5 million of funds necessary to close the purchase of the
Acquisition Properties.
The following table provides certain information on the Properties at
the time of closing:
<TABLE>
<CAPTION>
(IN 000'S)
DATE OF PURCHASE
PROPERTY ACQUISITION PRICE(1) SELLER
- -------------------------------- ------------- ---------- ---------------------------------------------
<S> <C> <C> <C>
Eden Landing Commerce Park June 6, 1996 $ 7,250(3) Eden Landing Associates
San Marcos Commerce Center (2) 2,660 550 Associates
Bay San Marcos Industrial Center June 6, 1996 4,653 Bay San Marcos Limited Partnership
Escondido Business Center June 6, 1996 10,347 Escondido Business Center Limited Partnership
Bell Ranch Industrial Park June 12, 1996 3,700 Minoo/Pakravan
La Mirada Business Center June 6, 1996 3,550 Wells Fargo Bank
Pacific Park June 12, 1996 6,850 SCTF Pacific Park II, Inc.
North County Business Park June 11, 1996 6,300 Value Property Trust
Riverview Industrial Park (2) 6,375 The Mutual Life Insurance Company of New York
-------
$51,685
=======
</TABLE>
(1) Excludes closing and preacquisition costs totaling $650,000.
(2) Date of purchase expected to occur in the near future.
(3) Purchase price as stated in the previously filed Registration Statement
did not reflect price concessions negotiated at close of escrow.
1
<PAGE> 3
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements and Pro Forma financial information
Required financial statements and proforma financial information are
incorporated by reference from information previously filed on pages
F-1 thru F-29 of Amendment No. 3 to the Company's Form S-3 Registration
Statement (File No. 333-02798) (the ""Registration Statement") under
the Securities Act of 1933 filed on May 23, 1996. Such pages are
attached hereto as exhibit 99.1.
(b) Exhibits
23.1 Consent of Ernst & Young LLP
99.1 Financial Information (discussed above)
99.2 Information relating to the Acquisition Properties is
incorporated by reference from pages S-15 through S-17 of the
Registration Statement. Such pages are attached hereto as
exhibit 99.2.
2
<PAGE> 4
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: June 24, 1996
-----------------------------
3
<PAGE> 1
EXHIBIT 23.1
Consent of Independent Auditors
We consent to the incorporation by reference into this Current Report on Form
8-K of our reports: (a) dated April 25, 1996, with respect to the statement of
revenues and certain expenses of Bay San Marcos Industrial Park, (b) dated
April 25, 1996, with respect to the statement of revenues and certain expenses
of Escondido Business Center, (c) dated May 20, 1996, with respect to the
statement of revenue and certain expenses of Eden Landing Commerce Park,
(d) dated May 20, 1996, with respect to the statement of revenue and certain
expenses of Riverview Industrial Park, and (e) dated May 20, 1996, with respect
to the statement of revenue and certain expenses of Pacific Park, included in
Amendment No. 3 to the Registration Statement (Form S-3 No. 333-02798) and
related Preliminary Prospectus Supplement dated May 23, 1996, filed with the
Securities and Exchange Commission.
ERNST & YOUNG LLP
Newport Beach, California
June 24, 1996
<PAGE> 1
PACIFIC GULF PROPERTIES INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
Pro Forma Condensed Consolidated Balance Sheet as of March 31, 1996................. F-3
Pro Forma Condensed Consolidated Statement of Operations
for the Three Months Ended March 31, 1996........................................ F-4
Pro Forma Condensed Consolidated Statement of Operations
for the Year ended December 31, 1995............................................. F-5
Notes to Pro Forma Condensed Consolidated Financial Statements...................... F-6
BAY SAN MARCOS INDUSTRIAL PARK
Report of Independent Auditors...................................................... F-10
Statement of Revenues and Certain Expenses for the Year Ended December 31, 1995 and
the Three Months Ended March 31, 1996 (Unaudited)................................ F-11
Notes to Statement of Revenues and Certain Expenses................................. F-12
ESCONDIDO BUSINESS CENTER
Report of Independent Certified Public Accountants.................................. F-14
Statement of Revenues and Certain Expenses for the Year Ended December 31, 1995
and the Three Months Ended March 31, 1996 (Unaudited)............................ F-15
Notes to Statement of Revenues and Certain Expenses................................. F-16
EDEN LANDING COMMERCE PARK
Report of Independent Auditors...................................................... F-18
Statement of Revenue and Expenses for the Year Ended December 31, 1995 and the Three
Months Ended March 31, 1996 (Unaudited).......................................... F-19
Notes to Statement of Revenues and Certain Expenses................................. F-20
RIVERVIEW INDUSTRIAL PARK
Report of Independent Auditors...................................................... F-22
Statement of Revenue and Certain Expenses for the Year Ended December 31, 1995 and
the Three Months Ended March 31, 1996 (Unaudited)................................ F-23
Notes to Statement of Revenues and Certain Expenses................................. F-24
PACIFIC PARK
Report of Independent Auditors...................................................... F-26
Statement of Revenue and Certain Expenses for the Year Ended December 31, 1995 and
the Three Months Ended March 31, 1996 (Unaudited)................................ F-27
Notes to Statement of Revenues and Certain Expenses................................. F-28
</TABLE>
F-1
Exhibit 99.1
<PAGE> 2
PACIFIC GULF PROPERTIES INC.
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
(UNAUDITED)
Pacific Gulf Properties Inc. (the "Company") was formed in 1993 and
completed its initial public offering in February 1994. Subsequent to the
completion of this offering of 2,015,581 shares of Common Stock (the
"Offering"), it is anticipated that the Company will acquire nine additional
industrial properties containing approximately 1,352,000 leasable square feet
located in California as more fully described in this Prospectus Supplement (the
"Acquisition Properties").
The following unaudited Pro Forma Condensed Consolidated Balance Sheet as
of March 31, 1996 is based on the unaudited historical financial statements of
the Company and has been prepared as if each of the following transactions had
occurred as of March 31, 1996: (i) the completion of this Offering, the
establishment of the Company's acquisition line of credit and the application of
the net proceeds thereof as described in this Prospectus Supplement, and (ii)
the purchase of the Acquisition Properties. The following unaudited Pro Forma
Condensed Consolidated Statement of Operations for the year ended December 31,
1995 is based on the historical financial statements of the Company and has been
prepared as if each of the following transactions had occurred as of the
beginning of the period presented: (i) the purchases completed by the Company
during 1995 consisting of 12 multifamily properties and one industrial property
containing approximately 475,000 leasable square feet located in Seattle,
Washington, (ii) the sale of the Company's four multifamily properties located
in Texas, (iii) the purchase completed by the Company in March 1996 of an
industrial property containing approximately 189,000 leasable square feet
located in Garden Grove, California, (iv) the purchase of the Acquisition
Properties, and (v) the completion of the Offering, the establishment of the
Company's acquisition line of credit and the application of the net proceeds
thereof as described in this Prospectus Supplement. The unaudited Pro Forma
Condensed Consolidated Statement of Operations for the three months ended March
31, 1996 is based on the historical financial statements of the Company and has
been prepared as if each of the following transactions had occurred as of the
beginning of the period presented: (i) the purchase completed by the Company in
March 1996 of an industrial property containing approximately 189,000 leasable
square feet located in Garden Grove, California, (ii) the purchase of the
Acquisition Properties, and (iii) the completion of the Offering, the
establishment of the Company's acquisition line of credit and the application of
the net proceeds thereof as described in this Prospectus Supplement.
The following pro forma information is not necessarily indicative of what
the Company's financial position or results of operations would have been
assuming the completion of the described transactions as of the beginning of the
periods indicated, 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 three months ended March
31, 1996 are not necessarily indicative of the results to be obtained by the
Company for the year ending December 31, 1996. The following information should
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and all of the financial statements and
notes thereto contained elsewhere in this Prospectus Supplement, the
accompanying Prospectus or incorporated therein by reference.
F-2
<PAGE> 3
PACIFIC GULF PROPERTIES INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1996
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
ISSUANCE OF BEFORE
COMPANY COMMON ACQUISITION ACQUISITION COMPANY
HISTORICAL SHARES PROPERTIES PROPERTIES PRO FORMA
---------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS
Real estate, net........... $ 284,970 $ -- $ 284,970 $ 52,335(B) $337,305
Cash and cash
equivalents.............. 2,466 30,283(A) 32,749 (28,518)(B) 4,231
Accounts receivable........ 857 -- 857 -- 857
Other assets............... 6,097 -- 6,097 -- 6,097
-------- ------- -------- -------- --------
$ 294,390 $30,283 $ 324,673 $ 23,817 $348,490
======== ======= ======== ======== ========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Loans payable.............. $ 157,606 $ -- $ 157,606 $ -- $157,606
Acquisition line of
credit................... -- -- -- 23,817(B) 23,817
Accounts payable and
accrued liabilities...... 5,264 -- 5,264 -- 5,264
Dividends payable.......... 1,944 -- 1,944 -- 1,944
Convertible subordinated
debentures............... 55,649 -- 55,649 -- 55,649
-------- ------- -------- -------- --------
220,463 220,463 23,817 244,280
Minority interest in
consolidated
partnership.............. 3,518 -- 3,518 3,518
Shareholders' equity
Common shares............ 49 20(A) 69 -- 69
Outstanding restricted
stock................. (638) -- (638) -- (638 )
Additional paid in
capital............... 78,028 30,263(A) 108,291 -- 108,291
Distributions in excess
of earnings........... (7,030) -- (7,030) -- (7,030 )
-------- ------- -------- -------- --------
70,409 30,283 100,692 -- 100,692
-------- ------- -------- -------- --------
$ 294,390 $30,283 $ 324,673 $ 23,817 $348,490
======== ======= ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the pro forma financial
statements.
F-3
<PAGE> 4
PACIFIC GULF PROPERTIES INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
BEFORE
COMPANY PRO FORMA ACQUISITION ACQUISITION COMPANY
HISTORICAL ADJUSTMENTS PROPERTIES PROPERTIES(I) PRO FORMA
------------- ----------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C>
REVENUES
Rental income
Multifamily............... $ 7,051 $ -- $ 7,051 $ -- $ 7,051
Industrial................ 3,784 195(C) 3,979 1,822 5,801
--------- ---- ------- ------ ---------
10,835 195 11,030 1,822 12,852
EXPENSES
Rental property expenses
Multifamily............... 2,786 -- 2,786 -- 2,786
Industrial................ 948 72(C) 1,020 473 1,493
--------- ---- ------- ------ ---------
3,734 72 3,806 473 4,279
Depreciation................. 1,835 16(D) 1,851 211 2,062
Interest (including
amortization of financing
costs).................... 4,326 124(E) 4,450 450 4,900
General and administrative... 647 -- 647 -- 647
--------- ---- ------- ------ ---------
10,542 212 10,754 1,134 11,888
--------- ---- ------- ------ ---------
NET INCOME..................... $ 293 $ (17) $ 276 $ 688 $ 964
========= ==== ======= ====== =========
WEIGHTED AVERAGE COMMON
SHARES(J)(K)................. 4,864,044 6,879,625
========= =========
NET INCOME PER COMMON SHARE.... $.06 $.14
</TABLE>
The accompanying notes are an integral part of the pro forma financial
statements.
F-4
<PAGE> 5
PACIFIC GULF PROPERTIES INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
BEFORE
COMPANY PRO FORMA ACQUISITION ACQUISITION COMPANY
HISTORICAL ADJUSTMENTS PROPERTIES PROPERTIES(I) PRO FORMA
---------- ----------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C>
REVENUES
Rental income
Multifamily.............. $ 24,898 $ 2,948(F) $27,846 $-- $ 27,846
Industrial............... 12,193 3,996(F) 16,189 7,109 23,298
--------- ------- ------- ------ ---------
37,091 6,944 44,035 7,109 51,144
EXPENSES
Rental property expenses
Multifamily.............. 10,215 1,476(F) 11,691 -- 11,691
Industrial............... 2,567 1,695(F) 4,262 2,106 6,368
--------- ------- ------- ------ ---------
12,782 3,171 15,953 2,106 18,059
Depreciation................ 6,081 881(G) 6,962 843 7,805
Interest (including
amortization of financing
costs)................... 14,066 3,800(H) 17,866 1,803 19,669
General and
administrative........... 2,423 -- 2,423 -- 2,423
--------- ------- ------- ------ ---------
35,352 7,852 43,204 4,752 47,956
--------- ------- ------- ------ ---------
INCOME BEFORE GAIN ON SALE OF
PROPERTIES(L)............... $ 1,739 $ (908) $ 831 $ 2,357 $ 3,188
========= ======= ======= ====== =========
WEIGHTED AVERAGE
COMMON SHARES(J)(K)......... 4,830,723 6,846,304
========= =========
INCOME BEFORE GAIN ON SALES OF
PROPERTIES PER COMMON
SHARE....................... $.36 $.47
</TABLE>
The accompanying notes are an integral part of the pro forma financial
statements.
F-5
<PAGE> 6
PACIFIC GULF PROPERTIES INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
(Dollars in thousands, except per share data)
(A) Reflects the issuance of 2,015,581 additional shares of Common Stock of the
Company at the offering price of $16.375 per share and the application of
the net proceeds from the Offering as follows:
<TABLE>
<S> <C>
Common stock issued at $.01 par value per share.............................. $ 20
Capital in excess of par value............................................... 32,985
-------
Gross proceeds from the Offering............................................. 33,005
Less: offering costs......................................................... (2,722)
-------
Net proceeds from the Offering available for purchase of the Acquisition
Properties and planned capital improvements................................ $30,283
=======
</TABLE>
(B) Reflects the purchase of the Acquisition Properties as follows:
<TABLE>
<CAPTION>
PROPERTY LOCATION PURCHASE PRICE
------------------------------------------------ ---------------------- --------------
<S> <C> <C>
Bay San Marcos Industrial Park San Marcos, CA $ 4,678
Escondido Business Center Escondido, CA 10,372
Bell Ranch Road Santa Fe Springs, CA 3,750
Riverview Industrial Park San Bernardino, CA 6,425
Pacific Center Aliso Viejo, CA 6,900
Eden Landing Commerce Center Hayward, CA 7,550
North County Yorba Linda, CA 6,350
San Marcos Commerce Center San Marcos, CA 2,710
La Mirada Business Center La Mirada, CA 3,600
-------
$ 52,335
=======
</TABLE>
The Acquisition Properties are being purchased from third parties and have
been reflected at their purchase price. The Company plans expending $1,765
for capital improvements relating to the Acquisition Properties subsequent
to their purchase. In conjunction with the purchase of the Acquisition
Properties, the Company anticipates borrowing $23,817 under its Acquisition
Line of Credit to fund a portion of such acquisitions with the remainder of
the purchase price funded from proceeds of the Offering. Net proceeds from
the Offering remaining after these acquisitions will be used to fund the
Company's planned capital improvements to the Acquisition Properties.
(C) The pro forma adjustments for the three months ended March 31, 1996 include
the actual revenues and certain expenses of a 189,000 square foot
industrial property acquired by the Company during March 1996 for the
period prior to its purchase, adjusted to reflect increased property taxes
based on the properties' acquisition cost and current property tax rates.
(D) Depreciation on the industrial property acquired by the Company during
1996, for the period prior to its acquisition, is computed utilizing the
estimated remaining useful life of approximately 40 years and the
depreciable cost basis of the property as follows:
<TABLE>
<CAPTION>
PRO FORMA
DATE OF PURCHASE DEPRECIABLE DEPRECIATION
PROPERTY ACQUISITION PRICE BASIS EXPENSE
------------------------------- -------------- -------- ----------- ------------
<S> <C> <C> <C> <C>
Pacific Gulf Business Park..... March 16, 1996 $6,800 $ 3,009 $ 16
</TABLE>
F-6
<PAGE> 7
(E) Interest expense associated with the borrowing used to finance the purchase
of the industrial property acquired by the Company during 1996, for the
period prior to its acquisition, was calculated based on the actual
interest rate of the specific new borrowing as follows:
<TABLE>
<CAPTION>
PRO FORMA
INTEREST INTEREST
PROPERTY DEBT RATE EXPENSE
-------------------------------------------------------- ------ -------- ---------
<S> <C> <C> <C>
Pacific Gulf Business Park.............................. $8,000 7.3% $ 122
Amortization of loan fees and financing costs on related
borrowings financing the acquisition.................. 2
----
$ 124
====
</TABLE>
The Company borrowed $8,000 of new debt related to this acquisition
collateralized by another property. Of the borrowing, $6,800 was used to
purchase the property. The remaining proceeds will be used to rehabilitate
the Property.
(F) The pro forma adjustments for the year ended December 31, 1995 include the
actual revenues and certain expenses of multifamily and industrial
properties for the period prior to their acquisition or disposal by the
Company as follows:
<TABLE>
<CAPTION>
1995 TEXAS 1996
ACQUISITIONS DISPOSITIONS ACQUISITION TOTAL
------------ ------------ ----------- ------
<S> <C> <C> <C> <C>
Rental income
Multifamily.............................. $ 8,426 $ (5,478) $ -- $2,948
Industrial............................... 3,272 -- 724 3,996
------- ------- ---- ------
11,698 (5,478) 724 6,944
------- ------- ---- ------
Rental property expenses
Multifamily.............................. 3,878 (2,402) -- 1,476
Industrial............................... 1,317 -- 378 1,695
------- ------- ---- ------
5,195 (2,402) 378 3,171
------- ------- ---- ------
$ 6,503 $ (3,076) $ 346 $3,773
======= ======= ==== ======
</TABLE>
F-7
<PAGE> 8
(G) Reflects additional depreciation expense of $1,414 relating to the
multifamily and industrial properties acquired by the Company, net of the
reduction in depreciation due to the sale of the Company's Texas apartment
portfolio of $533, which represents the actual depreciation relating to the
Texas apartment portfolio for the three month period ended March 31, 1996.
The additional depreciation expense on the multifamily and industrial
properties acquired by the Company during 1995 and 1996, for the period
prior to their acquisition, was computed utilizing the estimated remaining
useful lives and depreciable cost basis of the properties as follows:
<TABLE>
<CAPTION>
DEPRECIABLE PRO FORMA
DATE OF PURCHASE BASIS DEPRECIATION
PROPERTY ACQUISITION PRICE (EXCLUDING LAND) EXPENSE
------------------------- ------------------ -------- ---------------- ------------
<S> <C> <C> <C> <C>
40 Year Life Property:
Konwiser Acquisition
Properties.......... August 16, 1995 $71,469 $ 52,281 $ 817
Heatherwood
Apartments.......... November 21, 1995 12,500 10,000 222
Tukwila Business Park.. December 15, 1995 17,250 11,019 264
Pacific Gulf Business
Park................ March 16, 1996 6,800 3,009 75
5 Year Life Property:
Personal Property...... August 16, 1995 289 289 36
------
$1,414
======
</TABLE>
(H) Reflects additional interest expense of $4,546 relating to the multifamily
and industrial properties acquired by the Company, net of the reduction in
interest due to the sale of the Company's Texas apartment portfolio of
$746, which represents the actual interest relating to the Texas apartment
portfolio for the year ended December 31, 1995. The additional interest
expense associated with the borrowings used to finance the purchase of the
multifamily and industrial properties acquired by the Company during 1995
and 1996, for the period prior to their acquisition, was calculated based
on existing rates for assumed debt and the specific interest rates on new
borrowings follows:
<TABLE>
<CAPTION>
PRO FORMA
INTEREST INTEREST
PROPERTY DEBT RATE EXPENSE
------------------------------------------------------ ------- -------- ---------
<S> <C> <C> <C>
Konwiser Acquisition Properties....................... $30,263 8.0% $ 1,513
13,000 8.0% 650
24,850 5.7% 885
Tukwila Business Park................................. 11,765 7.4% 838
Pacific Gulf Business Park............................ 8,000 7.3% 584
Amortization of loan fees and financing costs on
related borrowings financing the acquisitions....... 76
---------
$ 4,546
=========
</TABLE>
F-8
<PAGE> 9
(I) Reflects the actual revenues and certain expenses of the Acquisition
Properties for the period indicated, adjusted to reflect increased property
taxes based on the properties' acquisition cost and current property tax
rates.
Depreciation relating to the Acquisition Properties is computed utilizing
the remaining estimated useful lives of approximately 40 years and the
depreciable cost basis of the properties as follows:
<TABLE>
<CAPTION>
PRO FORMA DEPRECIATION EXPENSE
DEPRECIABLE --------------------------------------
PURCHASE BASIS THREE MONTHS ENDED YEAR ENDED
PROPERTY PRICE (EXCLUDING LAND) MARCH 31, 1996 DECEMBER 31, 1995
-------------------- -------- ---------------- ------------------ -----------------
<S> <C> <C> <C> <C>
Eden Landing........ $ 7,550 $ 5,460 $ 34 $ 137
Riverview........... 6,425 5,281 33 132
Essex Portfolio..... 15,050 9,465 59 237
Bell Ranch.......... 3,750 3,000 19 75
North County........ 6,350 3,169 20 79
San Marcos
Commerce.......... 2,710 1,871 12 47
Koll Pacific Park... 6,900 3,001 19 75
La Mirada........... 3,600 2,453 15 61
------- ------- ---- ----
$52,335 $ 33,700 $211 $ 843
======= ======= ==== ====
</TABLE>
The additional interest expense is associated with the planned borrowings
under the Company's acquisition line of credit which will be used, in part,
to finance such acquisitions. The additional interest is calculated for the
period indicated based on an interest rate of LIBOR plus 2%, the expected
actual rate on the date of the borrowings. A .125% change in the interest
rate on all variable rate debt would change the Company's pro forma
interest expense by $13,000 for the three months ended March 31, 1996 and
$54,000 for the year ended December 31, 1995.
Interest expense relating to the Acquisition Properties is calculated as
follows:
<TABLE>
<CAPTION>
PRO FORMA INTEREST EXPENSE
---------------------------
THREE MONTHS
ENDED YEAR ENDED
INTEREST MARCH 31, DECEMBER 31,
PROPERTY DEBT RATE 1996 1995
--------------------------------------- ------- -------- ------------ ------------
<S> <C> <C> <C> <C>
Acquisition Properties................. $23,817 7.4% $443 $1,772
Amortization of loan fees and financing
costs on related borrowing financing
the acquisitions..................... 7 31
------ ------------
$450 $1,803
============ ===========
</TABLE>
(J) Represents the weighted average of common shares and common stock
equivalents outstanding during the period indicated. Common Stock
equivalents include stock options which are considered dilutive for
purposes of computing primary earnings per share.
(K) Pro forma weighted average common shares include 2,015,581 shares of Common
Stock to be issued as part of this Offering.
(L) Excludes the nonrecurring gain from the sale of the Texas apartment
portfolio in November 1995 of $6,664.
F-9
<PAGE> 10
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Directors
Pacific Gulf Properties Inc.
We have audited the accompanying statement of revenues and certain expenses
of Bay San Marcos Industrial Park for the year ended December 31, 1995. 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 Registration Statement on Form S-3 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 Bay San Marcos Industrial
Park.
In our opinion, the statement referred to above presents fairly, in all
material respects, the revenues and certain expenses, as defined above, of Bay
San Marcos Industrial Park for the year ended December 31, 1995, in conformity
with generally accepted accounting principles.
ERNST & YOUNG LLP
Newport Beach, California
April 25, 1996
F-10
<PAGE> 11
BAY SAN MARCOS INDUSTRIAL PARK
STATEMENT OF REVENUES AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1995
AND THE THREE MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
1995 1996
------------ ------------
(UNAUDITED)
<S> <C> <C>
REVENUES
Rental and other income....................................... $637,000 $148,000
CERTAIN EXPENSES
Property operating and maintenance............................ 101,000 30,000
Real estate taxes............................................. 93,000 23,000
Management fees............................................... 26,000 6,000
-------- --------
220,000 59,000
-------- --------
REVENUES IN EXCESS OF CERTAIN EXPENSES.......................... $417,000 $ 89,000
======== ========
</TABLE>
See accompanying notes.
F-11
<PAGE> 12
BAY SAN MARCOS INDUSTRIAL PARK
NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1995 AND THE
THREE MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
1. ORGANIZATION
Bay San Marcos Industrial Park (the "Property") contains 121,768 leasable
square feet of industrial space and is located in San Marcos, California.
Pacific Gulf Properties Inc. (the "Company") has contracted to acquire the
Property.
2. BASIS OF PRESENTATION
The statement of revenues and certain expenses presents the operations of
the Property for the year ended December 31, 1995 and for the three months ended
March 31, 1996 (unaudited) and has been prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission (for
inclusion in a Registration Statement on Form S-3 of the Company).
Certain expenses that are dependent on the particular owner and the
carrying value of the Property have been excluded from the statement. The
excluded expenses consist primarily of depreciation, interest, and amortization
of loan fees. Consequently, the revenues in excess of certain expenses as
presented is not intended to be a complete presentation of the Property's
revenues and expenses nor is it intended to be comparable to the proposed future
operations of the Property.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
The Property is generally leased to tenants under lease terms that are
greater than a year and are accounted for as operating leases. Revenues from
leases are recognized on a straight-line basis over the term of the related
leases. Cost recoveries from tenants are recognized as income in the period the
related costs are accrued.
Capitalization Policy
Recurring repair and maintenance costs are expensed as incurred. Major
replacements and betterments are capitalized.
Use of Estimates
The preparation of the statement in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the statement. Actual results could differ from
these estimates in the near term.
Tenant Concentration
At December 31, 1995 three tenants leased 68% of the Property's leaseable
square footage. The rental revenue earned from each of these tenants totaled
$170,000, $105,000 and $90,000 during the year ended December 31, 1995.
F-12
<PAGE> 13
BAY SAN MARCOS INDUSTRIAL PARK
NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES -- (CONTINUED)
4. FUTURE MINIMUM LEASE PAYMENTS
The Property is leased to tenants under leases expiring at various dates
through the year 2000. These leases contain provisions for rent increases based
on cost-of-living indices and certain leases contain renewal options. The
minimum future lease payments to be received under the terms of these operating
leases for each of the next five years ending December 31, are as follows:
<TABLE>
<S> <C>
1996..................................................... $ 436,000
1997..................................................... 339,000
1998..................................................... 254,000
1999..................................................... 89,000
2000..................................................... 15,000
</TABLE>
F-13
<PAGE> 14
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
Pacific Gulf Properties, Inc.
We have audited the accompanying statement of revenues and certain expenses
of Escondido Business Center for the year ended December 31, 1995. 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 audited
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 Registration Statement on Form S-3 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 Escondido Business Center.
In our opinion, the statement referred to above presents fairly, in all
material respects, the revenues and certain expenses, as defined above, of
Escondido Business Center for the year ended December 31, 1995, in conformity
with generally accepted accounting principles.
ERNST & YOUNG LLP
West Palm Beach, Florida
April 25, 1996
F-14
<PAGE> 15
ESCONDIDO BUSINESS CENTER
STATEMENT OF REVENUES AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1995 AND THE
THREE MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED MARCH 31,
DECEMBER 31, 1996
1995 -------------
------------ (UNAUDITED)
<S> <C> <C>
REVENUES
Rental and other income...................................... $1,233,000 $ 339,000
CERTAIN EXPENSES
Property operating and maintenance........................... 307,000 66,000
Real estate taxes............................................ 118,000 22,000
Management fees.............................................. 42,000 12,000
---------- --------
467,000 100,000
---------- --------
REVENUES IN EXCESS OF CERTAIN EXPENSES......................... $ 766,000 $ 239,000
========== ========
</TABLE>
See accompanying notes.
F-15
<PAGE> 16
ESCONDIDO BUSINESS CENTER
NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1995
AND THE THREE MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
1. ORGANIZATION
Escondido Business Center (the "Property") contains 251,464 leasable square
feet of industrial space and is located in Escondido, California. Pacific Gulf
Properties Inc. (the "Company") has contracted to acquire the Property.
2. BASIS OF PRESENTATION
The statement of revenues and certain expenses presents the operations of
the Property for the year ended December 31, 1995 and the three months ended
March 31, 1996 (unaudited), and has been prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission (for
inclusion in a Registration Statement on Form S-3 of the Company).
Certain expenses that are dependent on the particular owner and the
carrying value of the Property have been excluded from the statement. The
excluded expenses consist primarily of depreciation, amortization, interest and
selected professional fees. Consequently, the revenues in excess of certain
expenses as presented is not intended to be a complete presentation of the
Property's revenues and expenses nor is it intended to be comparable to the
proposed future operations of the Property.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
The Property is generally leased to tenants under lease terms that are
greater than one year and are accounted for as operating leases. Revenues from
leases are recognized on a straight-line basis over the term of the related
leases. Cost recoveries from tenants are recognized as income in the period the
related costs are accrued.
Capitalization Policy
Recurring repair and maintenance costs are expensed as incurred. Major
replacements and betterments are capitalized.
Use of Estimates
The preparation of the statement in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the statement. Actual results could differ from
these estimates in the near term.
Tenant Concentration
At December 31, 1995, one tenant leased 8% of the Property's leasable
square footage. The rental revenue earned from this tenant totaled $121,000
during the year ended December 31, 1995.
4. MANAGEMENT FEES
The Property is subject to an agreement with MIG Management Services of
California, Inc., a property management company affiliated with the current
owner of the Property, to maintain and manage the operations of the Property.
Management fees are based on 3.5% of total collected income, as defined, from
the Property.
F-16
<PAGE> 17
ESCONDIDO BUSINESS CENTER
NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES -- (CONTINUED)
5. FUTURE MINIMUM LEASE PAYMENTS
The Property is leased to tenants under leases expiring at various dates
through the year 2001. These leases contain provisions for rent increased based
on cost-of-living indices and certain leases contain renewal options. The
minimum future lease payments to be received under the terms of these operating
leases for each of the next five years ending December 31 and thereafter, are as
follows:
<TABLE>
<S> <C>
1996............................................................ $1,023,000
1997............................................................ 724,000
1998............................................................ 281,000
1999............................................................ 133,000
2000............................................................ 108,000
Thereafter...................................................... 9,000
</TABLE>
F-17
<PAGE> 18
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Directors
Pacific Gulf Properties Inc.
We have audited the accompanying statement of revenues and certain expenses
of Eden Landing Commerce Park for the year ended December 31, 1995. 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 Registration Statement on Form S-3 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 Eden Landing Commerce
Park.
In our opinion, the statement referred to above presents fairly, in all
material respects, the revenues and certain expenses, as defined above, of Eden
Landing Commerce Park for the year ended December 31, 1995, in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
Newport Beach, California
May 20, 1996
F-18
<PAGE> 19
EDEN LANDING COMMERCE PARK
STATEMENT OF REVENUES AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1995
AND THE THREE MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
1995 1996
------------ ------------
(UNAUDITED)
<S> <C> <C>
REVENUES
Rental and other income....................................... $1,270,000 $326,000
CERTAIN EXPENSES
Property operating and maintenance............................ 471,000 100,000
Real estate taxes............................................. 54,000 14,000
Management fees............................................... 57,000 15,000
-------- --------
582,000 129,000
-------- --------
REVENUES IN EXCESS OF CERTAIN EXPENSES.......................... $ 688,000 $197,000
======== ========
</TABLE>
See accompanying notes.
F-19
<PAGE> 20
EDEN LANDING COMMERCE PARK
NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1995 AND THE
THREE MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
1. ORGANIZATION
Eden Landing Commerce Park (the "Property") contains 193,358 leasable
square feet of industrial space and is located in Hayward, California. Pacific
Gulf Properties Inc. (the "Company") has contracted to acquire the Property.
2. BASIS OF PRESENTATION
The statement of revenues and certain expenses presents the operations of
the Property for the year ended December 31, 1995 and for the three months ended
March 31, 1996 (unaudited) and has been prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission (for
inclusion in a Registration Statement on Form S-3 of the Company).
Certain expenses that are dependent on the particular owner and the
carrying value of the Property have been excluded from the statement. The
excluded expenses consist primarily of depreciation, interest, and amortization
of loan fees. Consequently, the revenues in excess of certain expenses as
presented is not intended to be a complete presentation of the Property's
revenues and expenses nor is it intended to be comparable to the proposed future
operations of the Property.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
The Property is generally leased to tenants under lease terms that are
greater than a year and are accounted for as operating leases. Revenues from
leases are recognized on a straight-line basis over the term of the related
leases. Cost recoveries from tenants are recognized as income in the period the
related costs are accrued.
Capitalization Policy
Recurring repair and maintenance costs are expensed as incurred. Major
replacements and betterments are capitalized.
Use of Estimates
The preparation of the statement in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the statement. Actual results could differ from
these estimates in the near term.
4. MANAGEMENT FEES
The Property is subject to an agreement with R&B Realty Group, a property
management company, to maintain and manage the operations of the Property.
Management fees are based on 4.5% of total collected income, as defined, from
the Property.
F-20
<PAGE> 21
EDEN LANDING COMMERCE PARK
NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES -- (CONTINUED)
5. FUTURE MINIMUM LEASE PAYMENTS
The Property is leased to tenants under leases expiring at various dates
through the year . These leases contain provisions for rent increases based
on cost-of-living indices and certain leases contain renewal options. The
minimum future lease payments to be received under the terms of these operating
leases for each of the next five years ending December 31, are as follows:
<TABLE>
<S> <C>
1996..................................................... 715,000
1997..................................................... 334,000
1998..................................................... 165,000
1999..................................................... 80,000
2000..................................................... 33,000
</TABLE>
F-21
<PAGE> 22
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Directors
Pacific Gulf Properties Inc.
We have audited the accompanying statement of revenues and certain expenses
of Riverview Industrial Park for the year ended December 31, 1995. 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 Registration Statement on Form S-3 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 Riverview Industrial Park.
In our opinion, the statement referred to above presents fairly, in all
material respects, the revenues and certain expenses, as defined above, of
Riverview Industrial Park for the year ended December 31, 1995, in conformity
with generally accepted accounting principles.
ERNST & YOUNG LLP
Newport Beach, California
May 20, 1996
F-22
<PAGE> 23
RIVERVIEW INDUSTRIAL PARK
STATEMENT OF REVENUES AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1995
AND THE THREE MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
1995 1996
------------ ------------
(UNAUDITED)
<S> <C> <C>
REVENUES
Rental and other income....................................... $ 938,000 $228,000
CERTAIN EXPENSES
Property operating and maintenance............................ 183,000 37,000
Real estate taxes............................................. 104,000 27,000
Management fees............................................... 68,000 17,000
-------- --------
355,000 81,000
-------- --------
REVENUES IN EXCESS OF CERTAIN EXPENSES.......................... $ 583,000 $147,000
======== ========
</TABLE>
See accompanying notes.
F-23
<PAGE> 24
RIVERVIEW INDUSTRIAL PARK
NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1995 AND THE
THREE MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
1. ORGANIZATION
Riverview Industrial Park (the "Property") contains 297,180 leasable square
feet of industrial space and is located in San Bernardino, California. Pacific
Gulf Properties Inc. (the "Company") has contracted to acquire the Property.
2. BASIS OF PRESENTATION
The statement of revenues and certain expenses presents the operations of
the Property for the year ended December 31, 1995 and for the three months ended
March 31, 1996 (unaudited) and has been prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission (for
inclusion in a Registration Statement on Form S-3 of the Company).
Certain expenses that are dependent on the particular owner and the
carrying value of the Property have been excluded from the statement. The
excluded expenses consist primarily of depreciation, interest, and amortization
of loan fees. Consequently, the revenues in excess of certain expenses as
presented is not intended to be a complete presentation of the Property's
revenues and expenses nor is it intended to be comparable to the proposed future
operations of the Property.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
The Property is generally leased to tenants under lease terms that are
greater than a year and are accounted for as operating leases. Revenues from
leases are recognized on a straight-line basis over the term of the related
leases. Cost recoveries from tenants are recognized as income in the period the
related costs are accrued.
Capitalization Policy
Recurring repair and maintenance costs are expensed as incurred. Major
replacements and betterments are capitalized.
Use of Estimates
The preparation of the statement in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the statement. Actual results could differ from
these estimates in the near term.
Tenant Concentration
At December 31, 1995 two tenants leased 60% of the Property's leasable
square footage. The rental revenue earned from each of these two tenants totaled
$400,000 and $260,000, for the year ended December 31, 1995.
4. MANAGEMENT FEES
The Property is subject to an agreement with Ares Realty Capital, Inc., a
property management company, to maintain and manage the operations of the
Property. Management fees are based on a monthly payment of $2,843 plus an
amount equal to the greater of $2,800 or 3% of monthly gross collections, as
defined, from the Property.
F-24
<PAGE> 25
RIVERVIEW INDUSTRIAL PARK
NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES -- (CONTINUED)
5. FUTURE MINIMUM LEASE PAYMENTS
The Property is leased to tenants under leases expiring at various dates
through the year . These leases contain provisions for rent increases based
on cost-of-living indices and certain leases contain renewal options. The
minimum future lease payments to be received under the terms of these operating
leases for each of the next five years ending December 31, are as follows:
<TABLE>
<S> <C>
1996..................................................... 728,000
1997..................................................... 712,000
1998..................................................... 678,000
1999..................................................... 592,000
2000..................................................... 346,000
</TABLE>
F-25
<PAGE> 26
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Directors
Pacific Gulf Properties Inc.
We have audited the accompanying statement of revenues and certain expenses
of Pacific Park for the year ended December 31, 1995. 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 Registration Statement on Form S-3 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 Pacific Park.
In our opinion, the statement referred to above presents fairly, in all
material respects, the revenues and certain expenses, as defined above, of
Pacific Park for the year ended December 31, 1995, in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
Newport Beach, California
May 20, 1996
F-26
<PAGE> 27
PACIFIC PARK
STATEMENT OF REVENUES AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1995
AND THE THREE MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
1995 1996
------------ ------------
(UNAUDITED)
<S> <C> <C>
REVENUES
Rental and other income....................................... $ 985,000 $250,000
CERTAIN EXPENSES
Property operating and maintenance............................ 179,000 37,000
Real estate taxes............................................. 88,000 19,000
Management fees............................................... 95,000 17,000
-------- --------
362,000 73,000
-------- --------
REVENUES IN EXCESS OF CERTAIN EXPENSES.......................... $ 623,000 $177,000
======== ========
</TABLE>
See accompanying notes.
F-27
<PAGE> 28
PACIFIC PARK
NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1995 AND THE
THREE MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
1. ORGANIZATION
Pacific Park (the "Property") contains 99,622 leasable square feet of
industrial space and is located in Aliso Viejo, California. Pacific Gulf
Properties Inc. (the "Company") has contracted to acquire the Property.
2. BASIS OF PRESENTATION
The statement of revenues and certain expenses presents the operations of
the Property for the year ended December 31, 1995 and for the three months ended
March 31, 1996 (unaudited) and has been prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission (for
inclusion in a Registration Statement on Form S-3 of the Company).
Certain expenses that are dependent on the particular owner and the
carrying value of the Property have been excluded from the statement. The
excluded expenses consist primarily of depreciation, interest, and amortization
of loan fees. Consequently, the revenues in excess of certain expenses as
presented is not intended to be a complete presentation of the Property's
revenues and expenses nor is it intended to be comparable to the proposed future
operations of the Property.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
The Property is generally leased to tenants under lease terms that are
greater than a year and are accounted for as operating leases. Revenues from
leases are recognized on a straight-line basis over the term of the related
leases. Cost recoveries from tenants are recognized as income in the period the
related costs are accrued.
Capitalization Policy
Recurring repair and maintenance costs are expensed as incurred. Major
replacements and betterments are capitalized.
Use of Estimates
The preparation of the statement in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the statement. Actual results could differ from
these estimates in the near term.
4. MANAGEMENT FEES
The Property is subject to an agreement with Koll Management Services, a
property management company to maintain and manage the operations of the
Property. Management fees are based on 3% of total rental income, as defined,
from the Property and reimbursement of onsite property payroll and related
costs. Reimbursed onsite property payroll and related costs totaled $65,000 and
$9,500 for the year ended December 31, 1995 and the three months ended March 31,
1996, respectively.
F-28
<PAGE> 29
PACIFIC PARK
NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES -- (CONTINUED)
5. FUTURE MINIMUM LEASE PAYMENTS
The Property is leased to tenants under leases expiring at various dates
through the year . These leases contain provisions for rent increases based
on cost-of-living indices and certain leases contain renewal options. The
minimum future lease payments to be received under the terms of these operating
leases for each of the next five years ending December 31, are as follows:
<TABLE>
<S> <C>
1996..................................................... 804,000
1997..................................................... 503,000
1998..................................................... 287,000
1999..................................................... 172,000
2000..................................................... 17,000
</TABLE>
F-29
<PAGE> 1
The following table shows scheduled lease expirations for all leases for
the Industrial Properties as of March 31, 1996.
<TABLE>
<CAPTION>
ANNUAL PERCENTAGE
NUMBER GLA OF BASE RENT PERCENTAGE ANNUAL
OF LEASES EXPIRING OF EXPIRING OF GLA BASE RENT
EXPIRING LEASES LEASES EXPIRING EXPIRING
--------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
1996........................ 164 1,020,000 $ 4,818,000 35% 35%
1997........................ 126 533,000 2,559,000 18 19
1998........................ 93 487,000 2,611,000 17 19
1999........................ 35 279,000 1,359,000 10 10
2000........................ 15 47,000 268,000 2 2
2001........................ 4 71,000 307,000 2 2
2002........................ 1 302,000 1,015,000 10 7
2003........................ 2 61,000 328,000 2 2
2004........................ 1 90,000 469,000 3 3
2005 and thereafter......... 1 12,000 58,000 1 1
--- --------- ----------- ---- ----
Totals...................... 442 2,902,000 $13,792,000 100% 100%
=== ========= =========== ==== ====
</TABLE>
ACQUISITION PROPERTIES
Management believes that an attractive opportunity exists to acquire
well-located industrial properties at prices below replacement cost in markets
where rents are expected to increase in the near term. The Company has entered
into agreements to acquire the nine Acquisition Properties located in California
and containing an aggregate of 1,352,000 leasable square feet, for an aggregate
purchase price of $54.1 million, including budgeted capital expenditures of
approximately $1.7 million. The Company will finance the Acquisition Properties
with the net proceeds of this Offering, and its acquisition line of credit. See
"-- Acquisition Line of Credit."
The Company expects to close the purchases of the Acquisition Properties
shortly after completion of this Offering. The Company has satisfied itself as
to major matters, such as title, condition and environmental matters, and the
purchases remain subject to satisfaction of other customary conditions for
similar transactions in the real estate industry, such as non-occurrence of
unexpected events prior to closing, funding and issuance of satisfactory title
insurance policies.
The Company's acquisition of the Acquisition Properties continues the
Company's efforts of building its influence and diversification in its target
markets so as to better enable it to meet the changing needs of its tenants, be
a factor in affecting market rents and offer a diversity of product to a greater
portion of the tenant market.
Exhibit 99.2
S-15
<PAGE> 2
The following table presents information regarding the Acquisition
Properties as of March 31, 1996.
<TABLE>
<CAPTION>
AVERAGE
BASE
DATE LEASABLE NUMBER RENT
COM- PURCHASE SQUARE OF PER SQ.
PROPERTY LOCATION PLETED PRICE(1) FOOTAGE TENANTS FT.(2) OCCUPANCY(2)
- ----------------------- --------------------- ------- ----------- --------- ------ -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Eden Landing Commerce
Park................. Hayward, CA 1972-74 $ 7,950,000 193,358 104 $.63 88%
San Marcos Commerce
Center............... San Marcos, CA 1985 2,900,000 72,100 15 .38 94
Bay San Marcos
Industrial Center.... San Marcos, CA 1988 4,790,000 121,768 7 .41 90
Escondido Business
Center............... Escondido, CA 1988-92 10,610,000 251,464 64 .48 94
Bell Ranch Industrial
Park................. Santa Fe Springs, CA 1981 3,850,000 128,640 2 .27 100
La Mirada Business
Center............... La Mirada, CA 1975 3,750,000 82,010 48 .61 88
Pacific Park........... Aliso Viejo, CA 1988 7,050,000 99,622 39 .94 92
North County Business
Park................. Yorba Linda, CA 1987-89 6,550,000 105,516 13 .57 94
Riverview Industrial
Park................. San Bernardino, CA 1980 6,650,000 297,180 8 .25 87
----------- --------- ---
Total or Weighted
Average.............. $54,100,000 1,351,658 300 91
=========== ========= ===
</TABLE>
- ---------------
(1) Includes budgeted capital expenditures of approximately $1.7 million.
(2) Based upon March 1996 rent rolls.
Eden Landing Commerce Park. This business park is located in Hayward near
Interstate 880, a major East Bay transportation corridor and contains a total of
approximately 193,000 leasable square feet. This business park is the Company's
first investment in Northern California. The Company intends to locate a
regional manager at this site and expects to acquire additional properties in
this region in the future.
San Marcos Commerce Center, Bay San Marcos Industrial Center and Escondido
Business Center. These business parks, consisting of an aggregate of 445,000
leasable square feet, are located in the same market as the Company's Vista
Distribution Center. Combined with the 357,000 leasable square feet at Vista,
the Company will have a significant presence in the North San Diego County
market and will have a wide variety of space available to meet tenant demands
for premises ranging in size from 500 to 50,000 leasable square feet.
San Marcos Commerce Center contains approximately 72,000 leasable square
feet of industrial/warehouse space in six single story multi-tenant buildings.
Each building has 16 foot ceiling clearance and ground-level loading doors. The
property is located off Highway 78 between Interstates 5 and 15. Management
believes that it can improve this property's performance by addressing deferred
maintenance and utilizing its own management personnel.
Bay San Marcos Industrial Center contains approximately 122,000 leasable
square feet of warehouse and distribution space in two single story multi-tenant
buildings. One of the buildings has 12 dock-high and 14 ground-level loading
doors, while the other has 14 dock-high loading doors. Both buildings have 22 to
24 feet ceiling clearances and truck staging and loading areas. The property is
located off Highway 78, between Interstates 5 and 15.
Escondido Business Center contains approximately 251,000 leasable square
feet of multi-tenant industrial space in 13 buildings. The property consists of
three phases, providing tenants with a variety of premises from 500 square feet
multi-tenant space to 20,000 square feet single tenant buildings with both
dock-high and ground-level loading doors and 16 feet ceiling clearances. This
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property is located at the junction of Highway 78 and Interstate 15. The Company
intends to locate a regional manager at this location, who will have
responsibility for the Company's approximately 802,000 leasable square feet in
North San Diego County.
Bell Ranch Industrial Park, La Mirada Business Center, Pacific Park and
North County Business Park. These business parks, consisting of an aggregate of
approximately 416,000 leasable square feet, are located in the same market as
the Company's Garden Grove Industrial Center and Pacific Gulf Business Center.
Combined with the 441,000 leasable square feet at these existing properties, the
Company will have a significant presence in the Orange County market and will
have a variety of space available to meet tenant demands for premises ranging in
size from 500 to 73,000 leasable square feet.
Bell Ranch Industrial Park contains approximately 129,000 leasable square
feet of warehouse space in one multi-tenant building. The Property is located in
an excellent industrial area between Interstates 5 and 605 in the City of Santa
Fe Springs. The tenants currently occupying this property have leases at rental
rates significantly below current market rates.
La Mirada Business Center contains approximately 82,000 leasable square
feet in six free-standing buildings. The six buildings are designed for and
utilized by a variety of small office or light industrial users seeking premises
between 500 to 2,000 leasable square feet. This property is located in the
triangle of highways created by Interstates 5 and 605 and Highway 91, providing
its tenants with superior access to Los Angeles, Orange County and the Inland
Empire. This property is being purchased from a financial institution.
Management believes that it can improve this property's financial performance by
addressing deferred maintenance and improving management.
Pacific Park is an approximately 100,000 leasable square foot business park
consisting of six multi-tenant buildings. The warehouse portion of each building
has a rear grade-level truck door and 16 feet ceiling clearances. Management
believes that the desirability of this property will be enhanced upon the
completion of the nearby San Joaquin Hills Tollway, which is expected in late
1996.
North County Business Park, which contains approximately 106,000 leasable
square feet, is a business park in a master planned business development. This
property consists of four buildings near Highway 91 in Northern Orange County.
The Company believes it will be able to improve this property's financial
performance by replacing existing absentee management with the Company's own
management personnel.
Riverview Industrial Park. This property consists of approximately 297,000
square feet of multi-tenant industrial/warehouse space with five buildings, and
is located in the same market as the Company's Etiwanda, Golden West and
Crescent business parks. Combined with the approximately 1,009,000 leasable
square feet located at these existing properties, the Company will have an
aggregate of approximately 1,306,000 leasable square feet in the Inland Empire.
The property is located near the junction of Interstates 10 and 215, major
transportation corridors for the Inland Empire. The buildings have a mix of
dock-high and grade-level loading doors and 20 to 22 feet ceiling clearances.
The Company is acquiring this property from an insurance company, which had
foreclosed on the property, and expects to improve the property's financial
performance by addressing deferred maintenance items and managing the property
from its existing regional office located at its Golden West property.
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