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Meredith Enterprises Inc ˇ POS AM ˇ On 12/23/97

Filed On 12/23/97   ˇ   SEC File 333-01304   ˇ   Accession Number 808420-97-19

  in   Show  and 
  As Of               Filer                 Filing     On/For/As Docs:Pgs              Issuer               Agent

12/23/97  Meredith Enterprises Inc          POS AM                 1:224                                    Associated Planner..Fund

Post-Effective Amendment
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: POS AM      Post-Effective Amendment                             224    575K 


Document Table of Contents

Page (sequential) | (alphabetic) Top
 
11st Page
5Item 31. Sales to Special Parties
"Item 32. Recent Sales of Unregistered Securities
"Item 33. Indemnification of Directors and Officers
"Item 34. Treatment of Proceeds from Stock Being Returned
"Item 35. Financial Statements and Exhibits
8Roseville Property
18Summary of Accounting Policies
20Notes to Financial Statements
29West Coast Realty Investors, Inc. Pro Forma Statement of Income for the nine months ended September 30, 1997
42Item 36. Undertakings
46Assignor
48Effective Date
"Project
56Escrow
73Arbitration of Disputes
75Notice
86Grant Deed
89Bill of Sale
91Tenant Lease Assignment
95General Assignment
98Non-Foreign Certificate
156Permitted Exceptions
162Knox
164Opus
178Table of Contents
"Descriptive Section
"Valuation Section
181Definition of Market Value
182Assumptions and Limiting Conditions
187Regional Map
191Neighborhood Analysis
"Site Analysis
198Improvement Analysis
201Highest and Best Use
203Tenant
206Valuation Analysis
222Conclusion of Value
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As filed with the Securities and Exchange Commission on December 15, 1997 Registration No. 333-1304 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 POST-EFFECTIVE AMENDMENT NO. 3 TO FORM S-11 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 WEST COAST REALTY INVESTORS, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN GOVERNING INSTRUMENTS) 5933 West Century Boulevard - Ninth Floor Los Angeles, California 90045 Philip N. Gainsborough 5933 West Century Boulevard - Ninth Floor Los Angeles, California 90045 (NAME AND ADDRESS OF AGRENT FOR SERVICES) Copies to: PETER R. PANCIONE, ESQ. Gipson Hoffman & Pancione 1901 Avenue of the Stars, Suite 1100 Los Angeles, California 90067
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WEST COAST REALTY INVESTORS, INC. Cross Reference Sheet Pursuant to Item 1(a) (By reference to Regulation S-K Item 501 (b)) Item Number and Caption Location in Prospectus 1. Forepart of Registration Cover Page Statement and Outside Front Cover Page of Prospectus 2. Inside Front and Outside Cover Page; Back Cover Back Cover Pages of Prospectus 3. Summary Information, Risk Prospectus Summary; Factors and Ratio of The Company; Risk Factors Earnings to Fixed Charges 4. Determination of Offering Price Plan of Distribution 5. Dilution Not Applicable 6. Selling Security Holders Management's Discussion of Financial Condition 7. Plan of Distribution Cover Page; Description of Common Stock; Plan of Distribution 8. Use of Proceeds Compensation of Advisor and Affiliates; Estimated Use of Proceeds; Investment Objectives and Policies 9. Selected Financial Data Selected Financial Data 10. Management's Discussion and Management's Discussion and Analysis of Financial Analysis of Financial Condition and Results of Condition and Results of Operations Operations
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11. General Information as Cover Page; The Company; to Registrant Management; Summary of Organization Documents 12. Policy with Respect Investment Objectives and to Certain Activities Policies; Summary of Organization Documents; Description of Common Stock 13. Investment Policies Investment Objectives and of Registrant Policies; Summary of Organization Documents 14. Description of Real Estate Real Property Investments 15. Operating Data Selected Financial Data 16. Tax Treatment of Registrant Prospectus Summary; and its Security Holders Tax Consequences 17. Market Price of Not Applicable and Dividends on the Registrant's Common Equity and Related Stockholder Matters 18. Description of Registrant's Cover Page; Description Securities of Common Stock 19. Legal Proceedings Not Applicable 20. Security Ownership of Description of Common Stock Certain Beneficial Owners 21. Directors and Executive Management Officers 22. Executive Compensation Compensation of Advisor and Affiliates; Management
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23. Certain Relationships and Compensation of Advisor Related Transactions and Affiliates; Conflicts of Interest; Management 24. Selection, Management and Investment Objectives and Custody of Registrant's and Policies; Conflicts Investments of Interest; Management Services Provided by the Advisor; Summary of Organization Documents 25. Policies with Respect to Conflicts of Interest; Certain Transactions Investment Objectives and Policies; Summary of Organization Documents 26. Limitations of Liability Risk Factors; Summary of Organization Documents 27. Financial Statements Financial Statements and Information 28. Interests of Named Experts Legal Matters; Experts 29. Disclosure of Commission Summary of Organization Position on Indemnification Documents for Securities Act Liabilities
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PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 30. Other Expenses of Issuance and Distribution. The estimated expenses in connection with the offering are as follows: Securities and Exchange Commission Registration Fee....................................$ 5,517 NASD Filing Fee....................................... 2,100 Accounting Fees and Expenses......................... 95,000 Blue Sky Fees and Expenses........................... 35,000 Legal Fees and Expenses...............................100,000 Investor/Dealer Printed Materials.................... 100,000 Prospectus Printing...................................100,000 Mailgrams, Western Union, Postage and Miscellaneous.......................... 62,383 Total ..................................... ..$500,000 Item 31. Sales to Special Parties. Not Applicable. Item 32. Recent Sales of Unregistered Securities. On October 30, 1989, 1,000 shares of Registrant's Common Stock were sold for cash (without commissions) to Registrant's Advisor, West Coast Realty Advisors, Inc., pursuant to the exemption from registration under Section 4(2) of the Securities Act of 1933, as amended. Item 33. Indemnification of Directors and Officers. The Registrant has the power to indemnify its directors, officers, employees, and certain other persons against liability for certain acts pursuant to Section 145 of the Delaware Corporations Code. Indemnification of the directors, officers, employees and agents is provided for in the Certificate of Incorporation and the Bylaws of the Registrant and is incorporated herein by reference to Exhibits 3.1, 3.1.1, 3.2, 3.2.1 and 3.2.2 filed herewith. Item 34. Treatment of Proceeds from Stock Being Returned. Not applicable. Item 35. Financial Statements and Exhibits. (a) Financial Statements:
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Supplement No. 7 to prospectus dated May 1, 1997. This supplement ("Supplement") to the Prospectus ("Prospectus") updates the Prospectus of West Coast Realty Investors, Inc. (the "Company") dated May 1, 1997. This Supplement is part of and must accompany the Prospectus. The date of this supplement is December 15, 1997. This Supplement amends and supersedes the corresponding sections of the Prospectus, and Supplements 1, 2, 3, 4, 5 and 6 to such prospectus; however, subject to the qualification above, the Prospectus continues to control the terms of the offering, and all provisions thereof not supplemented or amended hereby remain pertinent to the offering and are incorporated herein by reference. Accordingly, current subscribers and prospective investors should read both the Prospectus and this Supplement No. 7 very carefully. All capitalized items used in this Supplement have the same meaning ascribed to them in the Prospectus unless otherwise indicated herein. The following supplements the Cover Page and pages 1, 4, 8 ("Prior Experience in Raising Funds"), and 68 ("Plan of Distribution") of the Prospectus As of December 15, 1997, the Company has sold 698,688 Shares ($6,972,874) in this offering. The following supplement page 21 of the Prospectus ("Use of Initial Capital"). The Company intends to use the net proceeds of this offering, which will be not less than a minimum $6,136,000 as of December 15, 1997, and a maximum $13,300,000 for the purchase of Properties, for the payment of Acquisition Fees, and for the establishment of appropriate reserves. See "Estimated Use of Proceeds." The following supplements page 23("Dividends") and page 45 ("Liquidity and Capital Resources") of the Prospectus. The Company waived a portion of its Advisory Fees from January 1, 1997 to September 30, 1997. The amount waived was $88,742. The effect of this was to increase Dividends approximately $.03 per Share for the nine months ended September 30, 1997. The following supplements the "Dividends" portion of INVESTMENT OBJECTIVES AND POLICIES section of the Prospectus, beginning on page 23, and continuing to page 24. Dividends totaling $325,906 were paid on April 15, 1997, for shareholders of record on January 1, February 1, and March 1, 1997. Dividends totaling $362,441 were paid on July 15, 1997 for shareholders of record on April 1, May 1, and June 1, 1997. Dividends totaling $383,474 were paid on October 15, 1997 for shareholders of record on July 1, August 1, and September 1, 1997.
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Approximately 37% of these dividends constituted a return of capital. The dividend payments are summarized below: Record Date Per Outstanding Total Date Paid Share Shares Divdend ------ -------- ------- ------------- ---------- 01/01/97 4/15/97 $0.0666 1,550,607 $ 103,270 02/01/97 4/15/97 0.0666 1,671,442 111,318 03/01/97 4/15/97 0.0666 1,671,442 111,318 04/01/97 7/15/97 0.0666 1,810,916 120,607 05/01/97 7/15/97 0.0666 1,815,579 120,917 06/01/97 7/15/97 0.0666 1,815,579 120,917 07/01/97 10/15/97 0.0666 1,815,579 120,917 08/01/97 10/15/97 0.0666 1,974,144 131,478 09/01/97 10/15/97 0.0666 1,968,144 131,078 The following supplements or amends the "REAL PROPERTY INVESTMENTS " Section of the Prospectus, beginning on page 29. OPTO-22 Property The existing lease on the OPTO-22 building expired on April 30, 1997. OPTO-22, the tenant, and Claremont School, the sub-tenant, both vacated the premises on September 10, 1997. West Coast Realty Investors, Inc. has settled with OPTO-22 for the amounts owed by OPTO-22 to West Coast Realty Investors, Inc. for rent and for deferred maintenance. OPTO-22 has paid the amounts owed to West Coast Realty Investors, Inc. in accordance with the terms and conditions of a Settlement Agreement dated October 31, 1997 and the parties have released one another from any further claims as provided in said agreement. The following supplements or amends the "REAL PROPERTY INVESTMENTS " Section of the Prospectus, beginning on page 31. North Palm Street Property On October 31, 1997, the Company ("Seller") sold the North Palm Street Property to a unrelated buyer. The sale was unsolicited and was partially contingent on the Seller utilizing the Internal Revenue Service Code Section S1031 to facilitate a tax free exchange. The total sales price was $2,515,860 in cash. The Seller must pay off the existing lender of the first deed of trust which as of October 31, 1997 totaled $971,305. Additionally, the Buyer has agreed to contribute an additional $15,000 to prepay the mortgage loan.
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The following supplements or amends the "REAL PROPERTY INVESTMENTS " Section of the Prospectus, beginning on page 40. Tycom Property The Company negotiated the refinancing of an existing short term promissory note on the Tycom Property loan which was scheduled to mature on February 1, 1998. The terms of the new first deed of trust loan are as follows: Lender: Union Bank of California, N.A. Loan Amount: $2,312,500 Interest Rate: Variable Rate - margin is 1.9% over the 3 month LIBOR with right to convert after the first year. The conversion margin would be 1.9% over selected Treasury Rate for the selected loan term. Loan Term: Ten year term Amortization: Twenty-five years Monthly Debt Service: $17,469 Other: Recourse is only to West Coast Realty Investors, Inc.; The Company must maintain a minimum net worth of $5,000,000; loan fees and a majority of the administrative expenses are being paid by the former owner from whom the Company purchased the property. Roseville Property On November 26, 1997, the Company acquired the investment described below (the "Roseville Property" or the "Property"). The funds to acquire the Roseville resulted from the Section S1031 tax free exchange of the Brea property (as described above), plus additional proceeds resulting from the sale of the Company's Shares in the current offering. No debt financing was used in connection with the Roseville acquisition. Description. The Property is located at the corner of Stanford Ranch Road and Fairway Drive in Roseville, California. Roseville is a city of 59,700 residents (1997 Sacramento Area Council of Governments estimate) located in the Sacramento region of Northern California. The property is located on a lot size of .87 acres (approximately 37,900 square feet). This site is part of a larger shopping center which includes well- known retailers such as Costco, Toys 'R Us, Shell Gasoline, Ross Dress For Less, and McDonald's Restaurants. The total lot size is approximately 8.66 acres (378,000 square feet). There are 61 parking spaces assigned to this site, with the property also enjoying the use of hundreds of other parking spaces located within the larger shopping center. The building size totals 5,133 square feet.
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The sole tenant of the Property is Applebee's Restaurant. Applebee's is a well-known, national franchise of sit-down casual restaurants. This particular Applebee's is being developed by, and acquired from, Christian Knox (an individual and unrelated third party), and the restaurant franchise will be owned and operated by him in a sale-leaseback arrangement. Mr. Knox has seven Applebees and nine Burger King franchises, as evidence of his experience in this industry. The lease on the property commenced upon the concurrent issuance of the Certificate of Occupancy in September 1997. The lease is a 20 year triple net lease, including provisions for collection of common area charges that will be assessed by the shopping center owner. Lease payments are initially $14,333.33 per month ($172,000 per year) with rental increases scheduled every five years at the rate of 12 /%. The lease payments to the Company, on a calendar year basis are noted below: 1997 $ 14,333 1998-2001 172,000 2002 179,167 2003-2006 193,500 2007 201,563 2008-2011 217,688 2012 226,758 2013-2016 244,898 2017 (through September 1) 163,266 Mr. Knox has personally guaranteed the lease and has provided documentation demonstrating a personal net worth in excess of $10 million. Property Operations. The Roseville Property is managed by West Coast Realty Management, Inc. ("WCRM"), an affiliate of the Company. WCRM charges the Company 3% of the gross rents collected as a management fee for managing the Property, as allowed by the Property Management Agreement. Although the tenant is obligated to pay property taxes, property tax in the first full year of operations is estimated to be $20,000 (approximately 1% of the sales price). Terms of Purchase. Total consideration paid by the Company for the Roseville property is $2,067,000. This cost includes the $1,950,000 sales price payable to the Seller/Operator, $12,500 in legal, appraisal, and closing costs, and a $110,000 Acquisition Fee paid to the Advisor. In addition, $14,333 was received from the Seller/Operator as a security deposit. The sale was paid for from approximately $1,500,000 received from the disposition of the Brea property (as described above), with the balance (approximately $567,000) from the proceeds resulting from the sale of the Company's shares in the current offering.
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The purchase price was arrived at through arms-length negotiations with the Seller/Operator. General. The computation of depreciation for the Roseville Property is based on the cost of the property, including Acquisition Fees and Expenses. The allocation of the cost of the Property to various asset categories is estimated, based on allocations in the appraisal report. Depreciation will be computed on a straight-line basis over the component useful life of the assets. The following supplements or amends the "MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" Section of the Prospectus, beginning on page 41. As of December 15, 1997, the Company has raised $14,462,708 in capital from prior offerings and $6,972,874 from the current offering. An additional $1,809,286 has been raised in the current offering for sales between September 24, 1997 and December 15, 1997; these funds are expected to be released from escrow in January, 1998. Results of Operations - Nine Months Ended September 30, 1997 compared to Nine Months Ended September 30, 1996 Operations for the nine months ended September 30, 1997 represented a full nine months of rental operations for all properties except Tycom which was owned for eight and one-half months. The net income for the nine months ended September 30, 1997 continued to be significantly larger than the prior nine months amount due to the raising of additional funds and investment of such funds in additional income producing properties. The Company did not have any adverse events that significantly impacted net income during the nine months ended September 30, 1997, and all properties that have been purchased by the Company have operated at levels equal to current expectations. Rental revenue increased $410,407 (23.2%) due to a full nine months ownership of the Java City property and eight and one-half months of the Tycom property (as compared to no ownership of these properties during the nine months ended September 30, 1996).
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Operating expenses increased $27,711 (33%) primarily due to a increase in property liability insurance, utilities and common area maintenance during the nine months ended September 30, 1997 as compared to the nine months ended September 30, 1996. Interest expense increased $163,220 (25.5%) as a reflection of the additional debt taken on in connection with additional property acquisition and refinancing activities. Despite the large debt amounts, the Company is still below the maximum 50% debt maximum that is allowed by the Company's by-laws (debt was 46% of property cost (as defined in the by-laws) at September 30, 1997). General and administrative costs increased $106,202 (75%), much of this increase is due to $133,742 that the Advisor was paid during the nine months ended September 30, 1997 due to the revised provisions of the Advisor agreement. In contrast, the Advisor was paid $35,912 during the nine months ended September 30, 1996 for Advisory fees in accordance to the revised Advisor Agreement. Depreciation and amortization expense increased $163,219 (26%) as the result of the ownership of additional properties during 1997 as compared to 1996. Net income of $567,017 for the nine months ended September 30, 1997 was $10,210 (2%) higher than the nine months ended September 30, 1996. The average number of shares outstanding during 1997 was 1,764,404 vs. 1,430,333 in 1996. Partly because of the greater number of shares outstanding, the net income per share decreased from $.39 in 1996 to $.32 in 1997. If this figure is analyzed using flow of funds - that is net income plus depreciation expense, plus adding advisory fee expense with was incurred in 1997 and not 1996 - then the amount in 1997 was $.60 per share vs. $.62 per share in 1996. During the nine months ended September 30, 1997, the Company declared dividends totaling $1,071,820, compared to dividends of $825,059 declared for the nine months ended September 30, 1996. Cash basis income for the nine months ended September 30, 1997 was $925,901. This was derived by adding depreciation and amortization expense to net income. Thus, cash distributions during the nine months ended September 30, 1997 were $145,919 greater than cash basis net income. In comparison, distributions in the first nine months of 1996 were $19,985 less than cash basis income of $845,044. In either event, the Company is expected to qualify as a REIT in 1997, and liquidity of the Company continues to be strong.
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In summary then, the operating performance of the Company continued to improve as additional funds were raised, additional property was acquired, and all properties were operated profitably The following supplements the "Liquidity and Capital Resources" section on Page 45. Fees paid to the Advisor and the Property Manager for the nine months ended September 30, 1997 are as follows: Advisor--$770,691 Property Manager --$83,384 The following supplements or amends the "ERISA CONSIDERATIONS" and "DESCRIPTION OF COMMON STOCK" sections on pages 62 and 63 of the Prospectus. As of December 15, 1997, there are 2,147,524 Shares of the Company outstanding, held by approximately 1,000 Shareholders. In addition, $1,809,286 in gross proceeds has been raised from the sale of 181,509 shares in the current offering to seventy investors between September 24 and December 15, 1997; these funds have been deposited into an escrow account, and shares are expected to be issued in January 1998.
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The following amends the Index to Financial Statements on p. 78. West Coast Realty Investors Unaudited Financial Statements Balance Sheet as of December 31, 1996 and September 30, 1997 .......F-33 Statements of Income for the three and nine months ended September 30, 1997 and 1996 .............................................F-34 Statements of Stockholders' Equity for the nine months ended September 30, 1997 and 1996 .............................................F-35 Statement of Cash Flows for the nine months ended September 30, 1997 and 1996 ......................................................F-36 Summary of Accounting Policies......................................F-37 Notes to Financial Statements.......................................F-39 West Coast Realty Investors, Inc. Pro Forma Statement of Income for the nine months ended September 30, 1997.......................................................F-48 Notes to Pro Forma Financial Statement for the nine months ended September 30, 1997 ........................................F-49 Pro Forma Statement of Income for the nine months ended September 30, 1997.......................................................F-50 Notes to Pro Forma Financial Statement for the nine months ended September 30, 1997 ........................................F-51 Pro Forma Statement of Income for the year ended December 31, 1996 ......................................................F-52 Notes to Pro Forma Financial Statement for the year ended December 31, 1996..........................................F-53 Pro Forma Balance Sheet for the nine months ended September 30, 1997.F-54 Notes to Pro Forma Financial Statement for the nine months ended September 30, 1997 ........................................F-55
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ˇ Download Table WEST COAST REALTY INVESTORS, INC. BALANCE SHEETS September 30, 1997 (Unaudited) and December 31, 1996 September December 30, 1997 31, 1996 Assets Rental real estate, less accumulated depreciation (Note 2) $25,676,713 $21,118,203 Cash and cash equivalents 2,882,215 2,017,194 Accounts receivable 404,203 247,948 Loan origination fees, net of accumulated amortization of $49,872 and $40,248 122,335 102,622 Other assets 44,869 85,871 Total assets $29,130,335 $23,571,838 Liabilities and Stockholders' Equity Liabilities Accounts payable $11,322 $13,922 Due to related party (Note 5(e)) 80,557 46,285 Dividends payable (Note 8) 383,236 302,760 Security deposits and prepaid rent 137,392 124,734 Other liabilities 137,484 100,453 Notes payable (Note 6) 12,228,139 10,078,793 Total liabilities 12,978,130 10,666,947 Commitments Stockholders' equity Common stock, $.01 par-shares authorized, 5,000,000 shares issued, 1,968,144 and 1,550,607 outstanding in 1997 and 1996 19,681 15,506 Additional paid-in capital 17,609,705 13,861,763 Retained earnings (1,477,181) (972,378) Total stockholders' equity 16,152,205 12,904,891 Total liabilities and stockholders' equity $29,130,335 $23,571,838 [FN] See accompanying notes to financial statements. F-33
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ˇ Download Table WEST COAST REALTY INVESTORS, INC. STATEMENTS OF INCOME Three and Nine Months Ended September 30, 1997 and 1996 (Unaudited) Three Three Nine Nine Months Months Months Months Ended Ended Ended Ended September September September September 30, 30, 30, 1997 30, 1996 1997 1996 Revenues: Rental $735,057 $618,081 $2,182,869 $1,772,462 Interest 37,605 19,974 70,558 70,564 772,662 638,055 2,253,427 1,843,026 Costs and Expenses: Operating 43,076 40,405 110,772 83,061 Property taxes 27,722 18,528 83,167 55,927 Property management fees -related party (Note 5 (d)) 27,581 27,015 83,384 78,213 Interest 282,835 220,188 802,547 639,327 General and administrative 86,767 61,476 247,656 141,454 Depreciation and amortization 119,954 98,764 358,884 288,237 587,935 466,376 1,686,410 1,286,219 Net Income $184,727 $171,679 $567,017 $556,807 Net Income Per Share (Note 8) $.10 $.12 $.32 $.39 [FN] See accompanying notes to financial statements. F-34
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ˇ Download Table WEST COAST REALTY INVESTORS, INC. STATEMENTS OF STOCKHOLDERS' EQUITY Nine Months Ended September 30, 1997 (Unaudited) Common Stock Additional Paid-in Shares Amount Capital Deficit Balance at December 31, 1,550,607 $15,506 $13,861,763 $(972,378) 1996 Issuance of stock, net 417,537 4,175 3,659,200 --- Equity contribution by Affiliates through expense --- --- 88,742 --- reimbursements Net income --- --- --- 567,017 Dividends declared (Note8) --- --- --- (1,071,820) Balance at September 30, 1,968,144 $19,681 $17,609,705 $(1,477,181) 1997 ˇ Download Table Nine Months Ended September 30, 1996 (Unaudited) Common Stock Additional Paid-in Shares Amount Capital Deficit Balance at December 31, 1995 1,322,404 $13,224 $11,771,030 $(549,417) Issuance of stock, net 178,342 1,783 1,584,406 --- Equity contribution by Affiliates through expense --- --- 20,912 --- reimbursements Net income --- --- --- 556,807 Dividends declared (Note 8) --- --- --- (825,059) Balance at September 30, 1996 1,500,746 $15,007 $13,376,348 $(817,669) [FN] See accompanying notes to financial statements. F-35
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ˇ Download Table WEST COAST REALTY INVESTORS, INC. STATEMENTS OF CASH FLOWS Nine Months Ended September 30, 1997 and 1996 (Unaudited) Nine Months Nine Months Ended Ended Increase (Decrease) in Cash and Cash September September Equivalents 30, 1997 30, 1996 Cash flows from operating activities Net income $567,017 $556,807 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 349,260 288,237 Interest expense on amortization of loan origination fees 9,624 --- Increase (decrease) from changes in: Accounts receivable (156,255) (109,016) Other assets 41,002 119 Accounts payable (2,600) (78,462) Due to related party 34,272 --- Security deposits and prepaid rent 12,658 (16,443) Other liabilities 37,031 --- Net cash provided by operating 892,009 641,242 activities Cash flows from investing activities Additions to rental real estate (4,907,441) (1,828,500) Net cash (used in) investing (4,907,441) (1,828,500) activities Cash flows from financing activities Proceeds from issuance of common 3,544,372 1,579,005 stock, net Equity contribution by Affiliates through expense reimbursements 88,742 20,912 Dividends declared and paid (931,344) (773,302) Proceeds from notes payable 2,312,500 724,465 Payments on notes payable (163,154) (133,910) Increase in loan origination fees 29,337 --- Net cash provided by financing 4,880,453 1,417,170 activities Net increase in cash and cash 865,021 229,912 equivalents Cash and cash equivalents, beginning 2,017,194 1,450,022 of period Cash and cash equivalents, end of $2,882,215 $1,679,934 period [FN] See accompanying notes to financial statements. F-36
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WEST COAST REALTY INVESTORS, INC. SUMMARY OF ACCOUNTING POLICIES Three and Nine Months Ended September 30, 1997 and 1996 (unaudited) and December 31, 1996 BASIS OF PRESENTATION The accompanying balance sheet as of September 30, 1997, the income statements and statements of cash flow for the nine months periods ended September 30, 1997, and 1996 are unaudited, but in the opinion of management include all adjustments, consisting only of normal recurring accruals, necessary for a fair presentation of the financial position and results of operations for the periods presented. The results of operations for the nine month period ended September 30, 1997, are not necessarily indicative of results to be expected for the year ended December 31, 1997. BUSINESS West Coast Realty Investors, Inc. (the "Company"), is a corporation formed on October 26, 1989 under the laws of the State of Delaware. The Company exists as a Real Estate Investment Trust ("REIT") under Sections 856 to 860 of the Internal Revenue Code. The Company has complied with all requirements imposed on REIT's for 1996 and 1995 tax years; however, qualification as a REIT for future years is dependent upon future operations of the Company. The Company was organized to acquire interests in income-producing residential, industrial, retail or commercial properties located primarily in California and the west coast of the United States. The Company intends to acquire property for cash on a moderately leveraged basis with aggregate mortgage indebtedness not to exceed fifty percent of the purchase price of all properties on a combined basis, or eighty percent individually and intends to own and operate such properties for investment over an anticipated holding period of five to ten years. RENTAL PROPERTIES AND DEPRECIATION Assets are stated at lower of cost or net realizable value. Depreciation is computed using the straight-line method over their estimated useful lives of 31.5 to 39 years for financial and income tax reporting purposes. In the event that facts and circumstances indicate that the cost of an asset may be impaired, an evaluation of recoverability would be performed. If an evaluation is required, the estimated future undiscounted cash flows associated with the asset would be compared to the carrying amount to determine if a write- down to market value is required. LOAN ORIGINATION FEES Loan origination fees are capitalized and amortized over the life of the loan. F-37
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WEST COAST REALTY INVESTORS, INC. SUMMARY OF ACCOUNTING POLICIES (Continued) RENTAL INCOME Rental income is recognized on a straight-line basis to the extent that rental income is deemed collectable. Where there is uncertainty of collecting higher scheduled rental amounts, due to the tendency of tenants to renegotiate their leases for lower amounts, rental income is recognized as the amounts are collected. CASH AND CASH EQUIVALENTS The Company considers cash in the bank, liquid money market funds, and all highly liquid certificates of deposits, with original maturities of three months or less, to be cash and cash equivalents. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. RECLASSIFICATIONS For comparative purposes, certain prior year amounts have been reclassified to conform to the current year presentation. NEW ACCOUNTING PRONOUCEMENTS Statement of Financial Accounting Standards No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities" (SFAS No. 125) issued by the Financial Accounting Standards Board (FASB) is effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after December 31, 1996, and is to be applied prospectively. Earlier or retroactive application is not permitted. The new standard provides accounting and reporting standards for transfers and servicing of financial assets and extinguishments of liabilities. The Company does not expect adoption to have a material effect on its financial position or results of operations. F-38
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WEST COAST REALTY INVESTORS, INC. NOTES TO FINANCIAL STATEMENTS Three and Nine Months Ended September 30, 1997 and 1996 (Unaudited) and December 31, 1996 Note 1 - General On October 30, 1989, West Coast Realty Advisors, Inc. (the "Advisor"), purchased 1,000 shares of the Company's common stock for $10,000. On August 30, 1990, the Company reached its minimum initial offering funding level of $1,000,000. As of September 30, 1997 the Company has raised $19,650,602 in capital. Sales commissions and wholesaling fees, representing 8% of the gross proceeds from the sale of common shares, were paid to Associated Securities Corp. ("ASC"), a member of the National Association of Securities Dealers, Inc. ("NASD") and an affiliate of the Advisor. Dividends are declared and accrued based approximately upon the previous quarter's income from operations before depreciation and amortization. Note 2 - Rental Properties The Company owns the following income-producing properties Original Location (Property Date Purchased Acquisition Name) Cost Huntington Beach, California (Blockbuster) February 26, 1991 $ 1,676,210 Fresno, California May 14, 1993 1,414,893 Huntington Beach, California (OPTO-22) September 15, 1993 2,500,001 Brea, California March 4, 1994 2,248,343 Riverside, California November 29, 1994 3,655,500 Tustin, California (Safeguard) May 22, 1995 4,862,094 Fremont, California (Technology Drive) October 31, 1995 3,747,611 Sacramento, California (Java City) August 2, 1996 1,828,500 Irvine, California January 17, 1997 4,907,441 (Tycom) F-39
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WEST COAST REALTY INVESTORS, INC. NOTES TO FINANCIAL STATEMENTS Three and Nine Months Ended September 30, 1997 and 1996 (Unaudited) and December 31, 1996 (Continued) Note 2 - Rental Properties (continued) The major categories of property are: September 30, December 31, 1996 1997 Land $ 8,971,126 $ 7,401,126 Buildings and 17,869,466 14,532,025 improvements 26,840,592 21,933,151 Less accumulated 1,163,879 814,948 depreciation Net rental properties $ 25,676,713 $ 21,118,203 A significant portion of the Company's rental revenue was earned from tenants whose individual rents represented more than 10% of total rental revenue. Specifically: Five tenants accounted for 28%, 22%, 20%, 19% and 10% in 1997; Five tenants accounted for 23%, 19%, 18%, 12% and 10% in 1996; Four tenants accounted for 24%, 20%, 15% and 10% in 1995; Note 3 - Other Assets Other assets consists of the following: September 30, 1997 December 31, 1996 Deposits and prepaid expenses $44,869 $85,871 Organization costs 14,330 14,330 59,199 100,201 Less accumulated amortization 14,330 14,330 Net other assets $44,869 $85,871 F-40
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WEST COAST REALTY INVESTORS, INC. NOTES TO FINANCIAL STATEMENTS Three and Nine Months Ended September 30, 1997 and 1996 (Unaudited) and December 31, 1996 (Continued) Note 4 - Future Minimum Rental Income As of September 30, 1997 and December 31, 1996, future minimum rental income under the existing leases that have remaining noncancelable terms in excess of one year are as follows: September 30, 1997 December 31,1996 1997 ............................$ 763,725 $2,123,959 1998 ............................ 1,839,402 2,037,591 1999 ............................ 1,845,801 1,976,664 2000 ............................ 1,863,450 1,864,724 2001 ............................ 1,751,311 1,771,212 Thereafter ...................... 15,193,805 15,255,711 Total $23,257,494 $25,029,861 Future minimum rental income does not include lease renewals or new leases that may result after a noncancelable-lease expires. Note 5 - Related Party Transactions The Advisor has an agreement with the Company to provide advice on investments and to administer the day-to-day operations of the Company. Property management services for the Company's properties are provided by West Coast Realty Management, Inc. ("WCRM"), an affiliate of the Advisor. F-41
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WEST COAST REALTY INVESTORS, INC. NOTES TO FINANCIAL STATEMENTS Three and Nine Months Ended September 30, 1997, and 1996 (Unaudited) and December 31, 1996 (Continued) During the periods presented, the Company had the following related party transactions: (a) In accordance with the advisory agreement, compensation earned by, or services reimbursed or reimbursable to the advisor, consisted of the following: Nine Months For the Year Ended Ended September 30, December 31, 1997 1996 Syndication fees $482,307 $82,864 Acquisition fees 270,384 78,177 Overhead expenses 18,000 12,000 $770,691 $173,041 (b) At September 30, 1997 and December 31, 1996, the Advisor owned 22,505 shares of the issued and outstanding shares of the Company. (c) Sales commissions paid in accordance with the selling agreement to ASC totaled $310,421 for the nine months ended September 30, 1997 and $119,083 for the nine months ended September 30, 1996. (d) Property management fees earned by WCRM totaled $27,581 and $27,015 for the three months ended September 30, 1997 and 1996, respectively. For the nine months ended September 30, 1997 and 1996, WCRM earned $83,384 and $78,213, respectively in property management fees. (e) The Corporation had related party accounts payable as follows: September 30, December 31, 1997 1996 Associated Securities Corp. $ 4,156 $ 396 West Coast Realty Management 19,249 24,839 West Coast Realty Advisors 57,152 21,050 $80,557 $46,285 (f) A financing fee of $23,125 was paid in August 1997 in connection with the refinancing of the note payable on the Tycom property (Note 6). F-42
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WEST COAST REALTY INVESTORS, INC. NOTES TO FINANCIAL STATEMENTS Three and Nine Months Ended September 30, 1997, and 1996 (Unaudited) and December 31, 1996 (Continued) Note 6 - Notes Payable Notes payable are made up of the following: September 30, December 31, 1997 1996 8.25% promissory note secured by a Deed of Trust on the Fresno Property, monthly principal and interest payments are $5,244 due August 1, 2003 ...............$ 619,366 $ 628,471 Variable rate promissory note secured by a Deed of Trust on the OPTO-22 property, interest rate adjustments are monthly and are based on the 11th District cost of funds rate plus 3% (7.835% at September 30, 1997), and may never go below 6.5% or above 11.0%, monthly principal and interest payments are $12,723, due October 1, 2003 ...........1,693,720 1,708,362 8.25% promissory note secured by a Deed of Trust on the Blockbuster property, interest rate adjusts to the 5-year Treasury rate plus 350 basis points on February 1, 1999, monthly principal and interest payments are $4,934, due February 1, 2004 ........... 559,684 569,132 9.25% promissory note secured by a Deed of Trust on the Riverside property, monthly principal and interest payments are $9,988, due November 8, 2004 ..1,169,786 1,177,055 Variable rate promissory note secured by a Deed of Trust on the Brea property, interest rate is 9.5% until March 1, 2000 (and each succeeding March 1st) when interest rate adjusts to the Moody's corporate bond index daily rate plus 0.125%, monthly principal and interest payments vary depending upon interest rates and are currently $8,737, due March 1, 2020 ....................... 972,345 981,338 F-43
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WEST COAST REALTY INVESTORS, INC. NOTES TO FINANCIAL STATEMENTS Three and Nine Months Ended September 30, 1997, and 1996 (Unaudited) and December 31, 1996 (Continued) Note 6 - Notes Payable (cont.) September 30, December 31, 1997 1996 9.625% promissory note secured by a Deed of Trust on the Safeguard property, monthly principal and interest payments are $24,191, due February 1, 2005 .............................................. $2,091,431 $2,155,575 8.24% promissory note secured by a Deed of Trust on the Fremont property, interest rate equaled the 20-year Treasury rate plus 1.65% at loan closing, monthly principal and interest payments are currently $18,898, due August 1, 2015 .................................... 2,103,427 2,140,311 10% promissory note secured by a Deed of Trust on the Java City property, monthly principal and interest payments are $3,413, due November 1, 2001.................... 330,971 336,272 8% promissory note secured by a Deed of Trust on the Java City property, monthly principal and interest payments are $3,126, due June 1, 2018........................ 377,482 382,277 Variable rate promissory note secured by a Deed of Trust on the Tycom Property, interest rate is 1.90% over the 3 month LIBOR with right to convert after first year; The conversion margin would be 1.90% over selected Treasury Rate for the 10 year loan term, monthly principal and interest payments vary depending upon interest rates and are currently $17,469 due July 31, 2007.................. 2,309,927 --- $12,228,139 $10,078,793 The above carrying amounts, with the exception of the note on the Fresno property, are reasonable estimates of fair values of notes payable based on current lending rates in the industry for mortgage loans with similar terms and maturities. The fair value of the Fresno note is approximately $580,000 calculated by discounting the expected future cash outflows on the note to the present based on a current lending rate of 10%, which is the approximate industry lending rate on properties of this type in this location. F-44
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WEST COAST REALTY INVESTORS, INC. NOTES TO FINANCIAL STATEMENTS Three and Nine Months Ended September 30, 1997, and 1996 (Unaudited) and December 31, 1996 (Continued) The aggregate annual future maturities at September 30, 1997 and December 31, 1996 are as follows: Year Ending September 30, 1997 December 31, 1997 1997 $60,032 $210,322 1998 239,183 228,391 1999 259,579 248,287 2000 281,228 269,435 2001 594,384 582,090 Thereafter 10,793,733 8,540,268 Total $12,228,139 $10,078,793 Note 7 - Dividend Reinvestment Plan The Company has established a Dividend Reinvestment Plan (the "Plan") whereby cash dividends will, upon election of the shareholders, be used to purchase additional shares of the Company. The shareholders' participation in the Plan may be terminated at any time. Note 8 - Net Income and Dividends Per Share Net Income Per Share for the nine months ended September 30, 1997 and 1996 was computed using the weighted average number of outstanding shares of 1,764,404 and 1,430,333, respectively. Dividends declared during the first nine months 1997 and 1996 were as follows: Outstanding Amount Total Record Date Shares Per Unit Dividend January 1, 1997 1,550,607 $ 0.0666 $103,270 February 1, 1997 1,671,442 0.0666 111,318 March 1, 1997 1,671,442 0.0666 111,318 April 1, 1997 1,810,916 0.0666 120,607 May 1, 1997 1,815,579 0.0666 120,917 June 1, 1997 1,815,579 0.0666 120,917 July 1, 1997 1,815,579 0.0666 120,917 August 1, 1997 1,974,144 0.0666 131,478 September 1, 1997 1,968,144 0.0666 131,078 Total $1,071,820 F-45
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WEST COAST REALTY INVESTORS, INC. NOTES TO FINANCIAL STATEMENTS Three and Nine months Ended September 30, 1997, and 1996 (Unaudited) and December 31, 1996 (Continued) Note 8 - Net Income and Dividends Per Share (cont.) Outstanding Amount Total Record Date Shares Per Unit Dividend January 1, 1996 1,325,404 0.0600 $79,524 February 1, 1996 1,371,794 0.0600 82,308 March 1, 1996 1,401,664 0.0600 84,100 April 1, 1996 1,413,736 0.0666 94,155 May 1, 1996 1,445,236 0.0666 96,253 June 1, 1996 1,448,836 0.0666 96,492 July 1, 1996 1,448,836 0.0666 96,492 August 1, 1996 1,448,836 0.0666 96,492 September 1, 1996 1,498,246 0.0666 99,783 Total $825,599 Note 9 - New Accounting Pronouncements Statement of Financial Accounting Standards No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities" (SFAS No. 125) issued by the Financial Accounting Standards Board (FASB) is effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after December 31, 1996, and is to be applied prospectively. Earlier or retroactive application is not permitted. The new standard provides accounting and reporting standards for transfers and servicing of financial assets and extinguishments of liabilities. The Company does not expect adoption to have a material effect on its financial position or results of operations. Note 10 - Subsequent Events (a) In October 1997, the Company paid dividends totaling $383,474 ($0.0666 per share per period), payable to shareholders of record on July 1, August 1, and September 1, 1997, respectively (Note 8). (b) On October 3, and October 10, 1997, a total of $1,775,984 in proceeds from the sale of shares in the Company's current offering was released from an escrow account, and 178,105 shares were issued to investors. F-46
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WEST COAST REALTY INVESTORS, INC. NOTES TO FINANCIAL STATEMENTS Three and Nine Months Ended September 30, 1997, and 1996 (Unaudited) and December 31, 1996 (Continued) Note 10 - Subsequent Events (cont.) (c) On October 31, 1997, the Company ("Seller") sold the North Palm Street Property to a unrelated buyer. The offer to purchase the property was unsolicited and was partially contingent on the Seller utilizing the Internal Revenue Service Code Section S1031 to facilitate a tax free exchange. The total sales price is $2,515,860 in cash. The Seller paid off the existing lender of the first deed of trust which as of September 30, 1997 totaled $975,309. Additionally, the Buyer agreed to contribute an additional $15,000 to prepay the mortgage loan. (d) In early November 1997, the Company intends on acquiring an investment known as the Roseville Property. The funds to acquire the Roseville will result from the Section S1031 tax free exchange of the Brea property (as described above), plus additional proceeds resulting from the sale of the Company's Shares in the current offering. No debt financing will be used in connection with the Roseville acquisition. The Roseville Property has been constructed, and the Company will be taking ownership of the Property two to three weeks after the occupancy permit is issued. The property's tenant intends on using the property as a sit-down, casual restaurant. Roseville is a city located in the Sacramento region of Northern California. F-47
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ˇ Download Table WEST COAST REALTY INVESTORS, INC. PRO FORMA STATEMENT OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 INTRODUCTION The following unaudited pro forma financial statement is presented to illustrate the acquisition of the Roseville Property and the disposition of the Brea Property as described in this offering, on the results of operations of the Company. The unaudited pro forma statement of income has been prepared as if all the aforementioned properties had been occupied by their respective tenants or sold by the Company on January 1, 1997. The unaudited pro forma financial statements are not necessarily indicative of the Company's future operations and should be read in conjunction with the other financial statements and notes thereto included elsewhere in this Prospectus. Disposition Acquisition HISTORICAL BREA ROSEVILLE PRO FORMA SEPTEMBER PROPERTY PROPERTY CONDENSED 30, 1997 SEPTEMBER 30, 1997 REVENUE: Rental $2,182,869 $(195,033) (a) $129,000 (a) $2,116,836 Gain on sale --- 325,791 (f) 325,791 of property Interest 70,558 75,000 (b) (62,000) (b) 83,558 2,253,427 205,758 67,000 2,526,185 EXPENSES: Operating 277,323 (59,093) (c) 9,000 (c) 227,230 Interest 802,547 (69,569) (d) 732,978 Depreciation and amortization 358,884 (27,695) (e) 25,460 (e) 356,649 General and administrative 247,656 --- --- 247,656 1,686,410 (156,357) 34,460 1,564,513 Net income $567,017 $362,115 $32,540 $961,672 Net income per share $.32 $.55 Weighted Average Shares Used Weighted Average Shares Used for Pro for Historical Calculation 1,764,404 Forma Calculation 1,764,404 F-48
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WEST COAST REALTY INVESTORS, INC. NOTES TO PRO FORMA FINANCIAL STATEMENTS For the Nine Months Ended September 30, 1997 (Unaudited) 1. BASIS OF PRESENTATION The pro forma statements of income reflect operations for the Company assuming that the Roseville Property was acquired, and the Brea Property, was sold on January 1, 1997. This statement contains certain adjustments which are expected to be incurred in those properties' first year of operations, with a full nine month's worth of operations reflected in the Statement of Income for the nine months ended September 30, 1997. There can be no assurance that the foregoing results will be obtained. 2. PRO FORMA ADJUSTMENTS The adjustments to the pro forma statement of income are as follows: (a) To reflect additional rental income for the Roseville Property, and the reduction of rental income for the Brea Property so that a full nine months are recognized. (b) To eliminate interest income due to funds used for the acquisition of the Roseville Property and the addition to interest income to reflect funds provided by the sale of the Brea Property. (c) To reflect additional property management fees for nine months based on the first year of the lease on the Roseville Property and the reflection of operating costs savings from the sale of the Brea Property. (d) To reflect interest expense savings for the nine months on the Brea property. (e) To reflect depreciation expense on the Roseville and Brea Properties from January 1, to September 30, 1997. (f) To reflect the gain on the sale of the Brea Property. F-49
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ˇ Enlarge/Download Table WEST COAST REALTY INVESTORS, INC. PRO FORMA STATEMENT OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 INTRODUCTION The following unaudited pro forma financial statement is presented to illustrate the acquisition of the Roseville and Tycom Properties and the disposition of the Brea Property, as described in this offering, on the results of operations of the Company. The unaudited pro forma statement of income has been prepared as if all the aforementioned properties had been occupied by their respective tenants, and the Brea property was sold, on January 1, 1997. The unaudited pro forma financial statements are not necessarily indicative of the Company's future operations and should be read in conjunction with the other financial statements and notes thereto included elsewhere in this Prospectus. Disposition Acquisitions HISTORICAL BREA ROSEVILLE TYCOM PRO FORMA SEPTEMBER PROPERTY PROPERTY PROPERTY CONDENSED 30, 1997 SEPTEMBER 30, 1997 REVENUE: Rental $2,182,869 $(195,033) (a) $129,000 (a) $25,754 (a) $2,142,590 Gain on sale --- 325,791 (f) 325,791 of property Interest 70,558 75,000 (b) (62,000) (b) (7,400) (b) 76,158 2,253,427 205,758 67,000 18,354 2,544,539 EXPENSES: Operating 277,323 (59,093) (c) 9,000 (c) 773 (c) 228,003 Interest 802,547 (69,569) (d) 12,240 (d) 745,218 Depreciation and amortization 358,884 (27,695) (e) 25,460 (e) 356,649 General and administrative 247,656 --- --- --- 247,656 1,686,410 (156,357) 34,460 13,013 1,577,526 Net income $567,017 $362,115 $32,540 $5,341 $967,013 Net income per share $.32 $.55 Weighted Average Shares Used Weighted Average Shares Used for Pro for Historical Calculation 1,764,404 Forma Calculation 1,764,404 F-50
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WEST COAST REALTY INVESTORS, INC. NOTES TO PRO FORMA FINANCIAL STATEMENTS For the Nine Months Ended September 30, 1997 (Unaudited) 1. BASIS OF PRESENTATION The pro forma statements of income reflect operations for the Company assuming that the Roseville and Tycom Properties were acquired, and the Brea Property was sold, on January 1, 1997. This statement contains certain adjustments which are expected to be incurred in those properties' first year of operations, with a full nine month's worth of operations reflected in the Statement of Income for the nine months ended September 30, 1997. There can be no assurance that the foregoing results will be obtained. 2. PRO FORMA ADJUSTMENTS The adjustments to the pro forma statement of income are as follows: (a) To reflect additional rental income for the Roseville and Tycom Properties from January 1, 1997 to the date of acquisition or September 30, 1997 (whichever is first), and the reduction of rental income due to the assumed sale of the Brea Property on January 1, 1997. (b) To eliminate interest income to reflect funds used for the acquisition of Roseville and Tycom Properties and the addition to interest income to reflect funds provided by the sale of the Brea Property. (c) To reflect additional property management fees for nine months based on the first year of the lease on the Roseville and Tycom Properties and the reflection of operating costs savings from the sale of the Brea Property. (d) To reflect interest expense savings for the six months on the Brea property and to reflect added interest expense for nine months for the Tycom Property based on the first year of payments under the projected amortization schedule for the Tycom Property loan. (e) To reflect depreciation expense on the Roseville and Brea Properties from January 1, to September 30, 1997. (f) To reflect the gain on the sale of the Brea Property. F-51
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ˇ Enlarge/Download Table WEST COAST REALTY INVESTORS, INC. PRO FORMA STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1996 INTRODUCTION The following unaudited pro forma financial statement is presented to illustrate the acquisition of the Roseville, Tycom and Java City Properties and the disposition of the Brea Property as described in this offering, on the results of operations of the Company. The unaudited pro forma statement of income has been prepared as if all the aforementioned properties had been occupied by their respective tenants on January 1, 1996 or in the case of the Brea Property, disposed of on that date. The unaudited pro forma financial statements are not necessarily indicative of