<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the Transition Period from to
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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 NEWPORT BEACH,
CALIFORNIA 92660-7805 (Address of principal
executive offices, including zip code)
714-721-2700
(Registrant's telephone number, including area code)
COMMON STOCK, PAR VALUE $.01 PER SHARE, 4,859,767 SHARES
WERE OUTSTANDING AS OF MARCH 31, 1996
Indicate by check mark whether the 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 the Registrant was
required to file such reports) and
(2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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PACIFIC GULF PROPERTIES INC.
FORM 10-Q/A
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PART I: FINANCIAL INFORMATION PAGE
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Item 1. Financial Statements
The attached Quarterly Report on Form 10-Q/A for the quarter ended
March 31, 1996 amends the Company Quarterly Report on Form 10-Q, dated May 1,
1996.
INDEX TO FINANCIAL STATEMENTS
Consolidated Balance Sheets as of March 31, 1996 and December 31, 1995 1
Consolidated Statements of Operations for the three-month periods ended
March 31, 1996 and March 31, 1995 2
Consolidated Statements of Cash Flows for the three-month periods ended
March 31, 1996 and March 31, 1995 3
Notes to Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 5
PART II: OTHER INFORMATION 7
SIGNATURES 8
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( i )
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PACIFIC GULF PROPERTIES INC.
CONSOLIDATED BALANCE SHEETS
(in thousands except share data)
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
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(Unaudited) (Audited)
<S> <C> <C>
ASSETS
Real estate assets
Land $ 78,909 $ 75,011
Buildings 229,292 225,142
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308,201 300,153
Accumulated depreciation (23,231) (21,461)
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284,970 278,692
Cash and cash equivalents 2,466 2,847
Accounts receivable 857 959
Other assets 6,097 6,093
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$ 294,390 $ 288,591
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgage notes payable $ 138,437 $ 133,678
Revolving line of credit 19,169 16,169
Accounts payable and accrued liabilities 5,264 5,644
Dividends payable 1,944 1,943
Convertible subordinated debentures 55,649 55,659
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220,463 213,093
Minority interest in consolidated partnership 3,518 3,518
Commitments and contingencies
Shareholders' equity
Preferred shares, $.01 par value; 5,000,000
shares authorized; no shares outstanding -- --
Common shares, $.01 par value; 25,000,000
shares authorized; shares issued and
outstanding: 4,859,767 (March 31, 1996)
and 4,856,937 (December 31, 1995) 49 49
Excess shares, $.01 par value; 30,000,000
shares authorized; no shares outstanding
Outstanding restricted stock (638) (669)
Additional paid-in capital 78,028 77,979
Distributions in excess of net earnings (7,030) (5,379)
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70,409 71,980
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$ 294,390 $ 288,591
========= =========
</TABLE>
See accompanying notes.
1
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PACIFIC GULF PROPERTIES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except share data)
(UNAUDITED)
<TABLE>
<CAPTION>
For The Three Months Ended March 31,
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1996 1995
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<S> <C> <C>
REVENUES
Rental income
Multifamily properties $ 7,051 $ 5,466
Industrial properties 3,784 2,962
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10,835 8,428
EXPENSES
Rental property expenses
Multifamily properties 2,786 2,331
Industrial properties 948 624
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3,734 2,955
Depreciation and amortization 2,112 1,603
Interest 4,049 2,799
General and administrative 647 527
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10,542 7,884
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NET INCOME $ 293 $ 544
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NET INCOME PER COMMON SHARE $ .06 $ .11
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DIVIDENDS DECLARED PER COMMON SHARE $ .40 $ .39
======= =======
</TABLE>
See accompanying notes.
2
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PACIFIC GULF PROPERTIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
For The Three Months Ended March 31,
------------------------------------
1996 1995
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 293 $ 544
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 2,112 1,603
Compensation recognized from restricted
stock issued to employees 30 --
Net increase in certain other assets (208) (954)
Net decrease in certain liabilities (378) (578)
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Net cash provided by operating activities 1,849 615
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CASH FLOWS FROM INVESTING ACTIVITIES
Net additions to real estate assets (8,049) (7,840)
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Net cash used in investing activities (8,049) (7,840)
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CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from revolving line of credit 4,000 --
Proceeds from mortgage notes payable 8,000 41,028
Repayment of mortgage notes payable (3,242) --
Repayment of revolving lines of credit (1,000) (32,900)
Issuance of common shares 4 --
Distributions paid (1,943) (1,869)
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Net cash provided by financing activities 5,819 6,259
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NET DECREASE IN CASH AND CASH EQUIVALENTS (381) (966)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 2,847 3,515
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,466 $ 2,549
======== ========
</TABLE>
See accompanying notes.
3
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PACIFIC GULF PROPERTIES INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. INTERIM FINANCIAL STATEMENTS
Pacific Gulf Properties Inc. was incorporated in Maryland and operates as a
Real Estate Investment Trust ("REIT") under the Internal Revenue Code of
1986, as amended. The consolidated financial statements include the
accounts of Pacific Gulf Properties Inc. (the "Company") and its
consolidated partnership, PGP Inland Communities, L.P. (the "Partnership").
The information furnished has been prepared in accordance with generally
accepted accounting principles for interim financial reporting and the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly,
certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. In the opinion of management,
all adjustments considered necessary for the fair presentation of the
Company's financial position, results of operations and cash flows have
been included. These financial statements should be read in conjunction
with the Company's Annual Report on Form 10-K/A for the year ended December
31, 1995.
2. REAL ESTATE ACQUISITIONS
In March 1996, the Company acquired an industrial property with
approximately 189,000 leasable square feet with 60 tenants located in
Garden Grove, California for approximately $6,800,000. Concurrently with
the purchase, the Company borrowed $8,000,000, a portion of which was used
to finance the acquisition. The loan is for 10 years, bears a fixed
interest rate of 7.3%, and is secured by an existing property located in
Kent, Washington. The Company anticipates spending $500,000 on capital
improvements and deferred maintenance items related to this acquisition.
3. SHAREHOLDERS' EQUITY
During the quarter ended March 31, 1996, debentures with an aggregate face
value of approximately $45,000 were converted into 2,416 shares of common
stock.
4. PER COMMON SHARE DATA
Per common share amounts are calculated based upon weighted average common
shares outstanding and common share equivalents of 4,864,044 and 4,796,729
for the three months ended March 31, 1996 and 1995, respectively. Common
stock equivalents include stock options which are considered dilutive for
the purposes of computing primary earnings per share.
As of March 31, 1996 the principal balance of convertible subordinated
debentures outstanding (before debenture discounts) was $56,506,000. If
fully converted, the debentures, convertible at a rate of 53.6986 shares
per $1,000 of principal amount, would require the issuance of an additional
3,034,294 shares. If fully converted, the net income attributable to each
common share would not be diluted.
5. DISTRIBUTIONS
On March 13, 1996, the Company declared its quarterly distribution covering
shares outstanding at March 31, 1996. The distribution of $.40 per share
was calculated based on an estimated annual distribution of $1.60. The
distribution was paid on April 12, 1996 to holders of record on April 2,
1996.
6. DEPRECIATION AND AMORTIZATION
Depreciation and amortization consists of the following at March 31:
<TABLE>
<CAPTION>
1996 1995
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<S> <C> <C>
Depreciation of real estate $1,835,000 $1,400,000
Amortization
Debenture discount and costs 142,000 139,000
Costs related to financing
assumed from Predecessor
and line of credit costs 86,000 57,000
Long-term financing costs 49,000 7,000
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$2,112,000 $1,603,000
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</TABLE>
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PACIFIC GULF PROPERTIES INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion addresses the consolidated financial statements of the
Company for the three months ended March 31, 1996 and 1995, together with
liquidity and capital resources as of March 31, 1996.
COMPARISON OF PERIOD ENDED MARCH 31, 1996 TO THE PERIOD ENDED MARCH 31, 1995
Multifamily rental income increased by $1,585,000, or 29%, from $5,466,000 in
1995 to $7,051,000 in 1996. This increase was primarily attributable to the
acquisition of 12 multifamily properties containing 1,736 apartment units in
1995 offset by the disposition of four multifamily properties containing 1,085
apartment units during the last quarter of 1995. Industrial rental income
increased by $822,000, or 28%, from $2,962,000 in 1995 to $3,784,000 in 1996.
This increase was primarily attributable to the recent acquisition of two
industrial parks containing approximately 665,000 square feet of space. As a
result of these changes, total revenues increased by $2,407,000, or 29%, from
$8,428,000 in 1995 to $10,835,000 in 1996.
Multifamily rental income for the period ended March 31, 1996 totaled
$7,051,000 and included $2,531,000 related to 12 multifamily properties
acquired during the second quarter of 1995.
Industrial rental income for the period ended March 31, 1996 totaled $3,784,000
and included $837,000 related to the recent acquisition of two industrial
parks.
Multifamily rental property expenses increased by $455,000, or 20%, from
$2,331,000 in 1995 to $2,786,000 in 1996. This increase was primarily
attributable to the acquisition of 12 multifamily properties containing 1,736
apartment units in 1995. Industrial rental property expenses increased by
$324,000, or 52%, from $624,000 in 1995 to $948,000 in 1996. This increase was
primarily attributable to the recent acquisition of two industrial parks.
Multifamily rental property expenses for the period ended March 31, 1996
totaled $2,786,000 and included $1,009,000 related to 12 multifamily properties
acquired during the second quarter of 1995.
Industrial rental property expenses for the period ended March 31, 1996 totaled
$948,000 and included $282,000 related to the recent acquisition of two
industrial parks.
As a result of the aforementioned changes, net rental property earnings for
multifamily properties increased by $1,130,000, or 36% and for industrial
properties increased by $498,000, or 21%.
Total depreciation and amortization (including amortization of debenture
discount and costs) increased by $509,000, or 32%, from $1,603,000 in 1995 to
$2,112,000 in 1996. This increase was primarily attributable to additional
depreciation relating to the acquisition of 12 multifamily properties in
late 1995, two recently acquired industrial parks, and capital improvements made
to rehabilitate existing properties.
Interest expense increased by $1,250,000, or 45%, from $2,799,000 in 1995 to
$4,049,000 in 1996. This increase was attributable to increased borrowings
outstanding during 1996, as compared to 1995, pursuant to new borrowings of
$63,517,000 relating to the acquisition of 12 multifamily properties and one
industrial park during the last half of 1995 and $24,980,000 of tax-exempt
mortgage indebtedness assumed with the Company's 1995 acquisitions.
General and administrative expenses increased by $120,000, or 23%, from $527,000
in 1995 to $647,000 in 1996. This increase was primarily attributable to
personnel increases related to the 1995 acquisitions made during the second
half of 1995, and to the accrual of estimated bonuses in 1996 (no similar
accrual was made in 1995 first quarter).
For the three months ended March 31, 1996, the Company generated net income of
$293,000 compared to net income of $544,000 in 1995. These results are
attributable to the foregoing.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1996, the Company had $2,466,000 of cash to meet its immediate
short-term liquidity requirements. Future short-term liquidity requirements are
anticipated to be met through net cash flow from operations, existing working
capital and, if necessary, funding from the Company's revolving line of credit.
The Company has a secured revolving line of credit from Bank of America for a
maximum amount of $35,000,000 from a bank which expires in June 1997. As of
March 31, 1996, the Company had borrowed $19,169,000 under the revolving line of
credit.
During the first quarter of 1996, the Company borrowed $8,000,000 from a life
insurance company for a ten-year term at an interest rate of 7.3%. This loan is
secured by a 304-unit apartment community located in Kent, Washington. The
proceeds of this loan were used, in part, to acquire a 189,526 square foot
industrial park located in Garden Grove, California.
In March of 1996, the Company extended four letters of credit
which secure a portion of the Company's tax-exempt mortgage debt to December
31, 1996.
5
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On March 28, 1996, the Company filed a shelf registration statement with the
Securities and Exchange Commission covering the proposed offering by the Company
of up to $125,000,000 of common and preferred shares including the 784,419
common shares owned by Santa Anita Realty Enterprises, Inc. ("Realty"). Proceeds
of the offering, excluding the proceeds to Realty, will be used for general
corporate purposes, which may include acquiring additional multifamily and
industrial properties, making improvements to properties, repaying debt and
working capital. As of the date of this filing, the shelf registration has not
yet become effective and the securities covered by the registration may not be
sold, nor may offers to buy be accepted, prior to the time the registration
statement becomes effective.
The Company intends to acquire additional properties and may seek to fund these
acquisitions through a combination of equity offerings and debt financing. The
Company anticipates that adequate cash will be available to fund its operating
and administrative expenses, continuing debt service obligations and the payment
of dividends in accordance with REIT requirements in the foreseeable future.
The information in the immediately preceding paragraph is forward looking and
involves risk and uncertainties that could significantly impact the Company's
expected liquidity requirements in the short and long term. While it is
impossible to itemize the many factors and specific events that could affect the
Company's outlook for its liquidity requirements, such factors would include the
actual timing of and costs associated with the Company's acquisitions, the
actual capital expenditures associated therewith, and the strength of the local
economies of the submarkets in which the Company operates. Higher than expected
acquisition, rental and/or rehabilitation costs, delays in the rehabilitation of
properties, a downturn in the local economies and/or the lack of growth of such
economies could reduce the Company's revenues and increase its expenses,
resulting in a greater burden on the Company's liquidity than that which the
Company has described above.
6
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PART II: OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27. Financial Data Schedule
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter ended March 31,
1996.
7
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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 thereunto duly authorized.
PACIFIC GULF PROPERTIES INC.
/s/Glenn L. Carpenter /s/Donald G. Herrman
- - ------------------------------------ -------------------------------------
Glenn L. Carpenter Donald G. Herrman
Chairman and Chief Executive Officer Chief Financial Officer and Secretary
DATED: May 7, 1996
----------------------------
8
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AS INCLUDED
IN FORM 10-Q/A.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 2,466
<SECURITIES> 0
<RECEIVABLES> 1,857
<ALLOWANCES> 1,000
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 308,201
<DEPRECIATION> 23,231
<TOTAL-ASSETS> 294,390
<CURRENT-LIABILITIES> 7,208
<BONDS> 213,255
0
0
<COMMON> 49
<OTHER-SE> 70,360
<TOTAL-LIABILITY-AND-EQUITY> 294,390
<SALES> 0
<TOTAL-REVENUES> 10,835
<CGS> 0
<TOTAL-COSTS> 6,493
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,049
<INCOME-PRETAX> 293
<INCOME-TAX> 0
<INCOME-CONTINUING> 293
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 293
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
