ITEM 1. BUSINESS.
(a) GENERAL DEVELOPMENT OF BUSINESS.
Western Investment Real Estate Trust ("The Trust") is a real estate investment trust ("REIT") and qualifies as such under Sections 856 and 960 of the Internal Revenue Code. The Trust was organized under the laws of the State of California in 1962 and commenced real estate operations in 1964.
In order that the Trust may continue to qualify as a real estate investment trust: (i) more than 75% of the Trust's total assets must be invested in real estate, cash, cash items or government securities, (ii) at least 75% of the Trust's gross income must be derived from real estate assets, (iii) the Trust can hold no property primarily for sale to customers in the ordinary course of business, (iv) beneficial ownership of the Trust must be held by more than 100 persons during at least 335 days of each taxable year, and (v) the Trust must distribute annually to its shareholders an amount equal to or exceeding 95% of its real estate investment trust taxable income. Under the terms of its Declaration of Trust, the Trust is permitted to invest its funds in ownership of real estate, mortgages, deeds of trust and certain financial instruments as permitted by law. Substantially all of the Trust's funds have been invested in the ownership of real estate.
(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS.
The Trust is not engaged in different segments of a business nor is the Trust engaged in more than one line of business.
(c) NARRATIVE DESCRIPTION OF BUSINESS.
The Trust, which at December 31, 1996 employed 49 people, is in the business of acquiring, managing, leasing and developing retail, commercial and industrial properties. At December 31, 1996, the Trust owned 48 retail properties, 10 commercial properties and 2 industrial properties with a combined gross leasable area of 4.8 million square feet.
The Trust has its executive office at 3450 California Street, San Francisco, California, 94118, and can be reached at (415) 929-0211. Additionally, the Trust maintains two regional offices.
The Trust's portfolio of 60 properties at December 31, 1996 is summarized as follows:
At December 31, 1996, occupancy for each property type is as follows:
PROPERTY TYPE OCCUPANCY RATE (1) ------------- ------------------
Shopping Center and Retail 93.9% Commercial 86.0% Industrial 100.0%
Average Occupancy for All Property Types 93.7%
(1) Once a space is subject to an executed lease, the space is then included in occupied space. A space continues to be incorporated in our occupied space until: (1) the related lease expires and the tenant is no longer in legal possession, or (2) the related lease is formally terminated and the tenant is no longer in legal possession.
The following table summarizes the composition of the Trust's real estate investments as of December 31, 1996 by type based on amounts invested by the Trust.
PORTFOLIO SUMMARY
The Trust owns 23 unimproved pads located within or adjacent to the property lines of its shopping centers that are available for development and leasing. Additionally, the Trust owns a total of 25 acres of undeveloped land: 12 acres adjacent to its North Hills Shopping Center and 13 acres adjacent to its Elko Shopping Center, both of which are located in Nevada.
The weighted average age of the Trust's 60 properties is 13.3 years. The weighted average age of the Trust's commercial, industrial and retail properties is 22.5 years, 16.4 years and 12.9 years, respectively. This calculation is weighted by Gross Leasable Area and is based on the original construction date of the property. As such, any expansion or renovation occurring subsequent to the original construction date is not reflected in this calculation.
CURRENT ECONOMIC CLIMATE
During the early part of the 1990s, the California economy experienced its worst recession in 60 years. The estimated half million jobs lost in California between 1990 and 1993 drove the unemployment rate up to 9.2% from 5.1%.
Today's economy is much healthier. Since 1994, all the jobs lost during the 1990 to 1993 period have been replaced and currently the State of California is now outpacing the national average in job creation (200,000 jobs were created in 1995 alone) and new business incorporations. Several economic forecasts expect this growth pattern to continue in the near term. This recovery has been broad-based and has impacted virtually all major regions. Over the past two years, the state has replaced an economy based on defense by one founded on trade, high technology and tourism/entertainment. The new economy is largely the result of an increase in the number of young, small and mid-sized enterprises. Companies employing under 100 employees now comprise 52% of the state's workforce, up from 42% in 1979. In 1995, 75% of the jobs created in the state were by companies with less than 200 employees.
The Trust believes that as the dominant shopping center owner in Northern California, improvements in the California economy will strengthen the Trust's operating results as occupancy continues to increase and rental rates continue to stabilize and improve.
COMPETITION
During the past several years, volume discount retailers, such as Wal-Mart and Costco, have entered certain areas of California and Nevada where Trust community shopping center properties are located. The Trust expects that these discounters may positively or negatively affect certain of the Trust's shopping center tenants. The Trust believes that its tenants could benefit if these discounters attract additional customers to nearby Trust properties and thereby generate increased sales for Trust tenants. Conversely, the Trust's tenants could be negatively affected if discounters draw customers away from the Trust's properties. The Trust believes that to date the trend has had no significant impact on the Trust's results of operations.
The Trust competes for quality properties with other investors and engages in a continuing effort to identify desirable properties for acquisition. As the number of prospective buyers of the types of properties the Trust considers for purchase increases, the prices of such properties may increase and the yield decrease. The Trust believes it can continue to compete effectively in the current real estate environment because of its experienced staff and management team.
The Trust competes for tenants primarily on the basis of location, rental rates, services provided and the design and condition of the properties. In some of the geographic areas in which the Trust owns properties, the available supply of space for lease exceeds the demand by prospective tenants. In order to compete effectively, the Trust employs experienced property and marketing managers and leasing agents.
TENANTS
The Trust's principal shopping center and retail tenants include substantial, well-recognized businesses such as Food-4-Less, Nob Hill Foods, PayLess Drugs, Pak N Save, Raley's, Safeway, Save Mart Supermarket and Thrifty Drug.
No single property investment accounted for more than 4.5% of total revenues in 1996. At December 31, 1996, Raley's, the Trust's most significant tenant, a grocery and drug retailer, was a lessee in 19 of the Trust's properties and accounted for 20% of the Trust's 1996 total revenues. Raley's, a privately owned company, currently operates 84 stores in Northern California and Nevada. The Raley's organization has released information indicating that its sales exceeded $1.9 billion in its most recently reported fiscal year ended June 29, 1996. The Trust receives audited financial statements annually from Raley's and uses them to monitor Raley's financial position and results of operations. Additionally, the Trust is authorized to provide Raley's audited financial statements to Moody's Investors Service and Standard & Poor's, the Trust's rating agencies. As of December 31, 1996, the Trust's convertible debentures and senior notes carry "investment grade" rating from Moody's Investors Service (Baa(3)) and Standard & Poor's (BBB). Please see Notes 7 and 8 in the Notes to the Financial Statements.
The following table provides the location, size and expiration of the Raley's leases:
LEASE LOCATION GROSS LEASABLE AREA EXPIRATION DATE - -------------------- ------------------- ---------------
1. Fallon, NV Note (1) 6/30/03 2. Fair Oaks, CA 59,231 3/31/06 3. Yuba City, CA 61,842 9/01/08 4. Carson City, NV 59,018 8/31/12 5. Redding, CA 60,000 5/31/14 6. Yreka, CA 60,000 11/30/14 7. Chico, CA 61,046 4/30/15 8. Winnemucca, NV 60,000 12/31/15 9. Fallon, NV 60,114 2/28/16 10. Reno, NV 61,046 3/31/16 11. Ukiah, CA 61,046 6/30/16 12. Elko, NV 61,000 1/31/17 13. Vallejo, CA 60,114 9/30/17 14. Folsom, CA 60,114 12/31/17 15. Turlock, CA 60,114 2/28/18 16. Grass Valley, CA 60,114 4/30/18 17. Granite Bay, CA 60,114 6/30/18 18. Suisun City, CA 60,114 5/31/19 19. Oroville, CA 59,885 6/01/19
Note (1): Although Raley's no longer occupies this Fallon, Nevada, property, it guarantees the J. C. Penney and Hub leases and makes supplemental lease payments to the Trust.
Major Producers of 1996 Total Revenue ------------------
The Trust receives sales and other information on a monthly, quarterly or annual basis from its retail tenants, including Raley's, under leases which provide for such reports. The Trust uses this information to monitor the payment of percentage rents where leases so provide. The Trust recognized $649,000 and $559,000 of percentage rents during 1996 and 1995, respectively. Virtually all of the Trust's existing leases include at least one of the following provisions for payment of additional rent: (1) scheduled fixed increases, (2) percentage rent based on tenants' gross sales, or (3) CPI-based escalation clauses. The Trust endeavors to structure leases on a triple-net basis with the lessees being responsible for most operating expenses, such as real estate taxes, certain types of insurance, utilities, normal repairs and maintenance. To the extent such provisions cannot be negotiated and incorporated into a lease and in regard to vacant space, the Trust pays such expenses from current operating income.
Most of the Trust's leases require the tenant to be responsible for, or reimburse the Trust for liability insurance coverage on the properties. The Trust maintains umbrella liability insurance on all of its properties and monitors tenant compliance with liability insurance coverage requirements.
While the Trust believes its properties are adequately insured, the Trust does not carry earthquake, flood or pollution coverage. However, most major anchor tenants are required to rebuild or repair their leased premises if damaged or destroyed, regardless of the cause. Most of the Trust's properties are located in areas of California and Nevada where earthquakes have been known to occur. In the event of a major earthquake, Trust properties could suffer substantial damage or destruction. Since it commenced real estate operations in 1964, the Trust has not incurred any material expense nor, to its knowledge, have any of its properties incurred any material damage from earthquakes or floods.
The Trust periodically considers the merits of purchasing earthquake insurance. To date the Trust has not purchased earthquake insurance because of (i) the high premiums and deductibles and (ii) the Trust's geographically diversified portfolio that reduces the likelihood of material loss as a consequence of earthquakes. Furthermore, the majority of properties in the portfolio principally comprise single-story, relatively new buildings.
TENANT LEASE EXPIRATIONS AND RENEWALS
The following table shows lease expirations for the leases in effect as of December 31, 1996, for the next ten years, assuming none of the tenants exercise renewal options:
ASSET MANAGEMENT - ----------------
The Trust is a fully integrated REIT that provides full asset management services to all but two of its properties. Asset management includes property management, marketing and leasing support. Internal management provides for regular interaction between the Trust and its tenants and close supervision of its properties.
The Trust directly manages 58 of its 60 properties. In order to facilitate its present and future asset management activities, the Trust maintains two branch offices which are centrally located to the properties. The offices are located at the Trust's Country Gables shopping center in Granite Bay, California and at the Victorian Walk shopping center in Fresno, California.
Internal management permits the Trust to provide value added services to its tenants. For example, the Trust's marketing staff works with the Trust's tenants on promotional and advertising activities to draw consumers to the shopping centers. These activities help the Trust attract and retain the national, regional and local retail tenants which serve the Northern California and Nevada markets. The Trust believes the cost of internal property management and leasing is generally less expensive than employing independent property management, marketing and leasing firms due to lower commissions and fees and certain economies of scale.
Two of the Trust's 60 properties are managed by independent property managers. G & W Management Co. provides management services for the property located in Petaluma, California, for fees equal to 3.5% of gross receipts. The Trust's property is part of a larger office park which is managed by G & W Management Co. Commercial Real Estate Service (CRES) provides management services with respect to Serra Center, located in Colma, California, for fees equal to 3.5% of gross rents plus tenant administrative and management fees paid by the tenants attributable to the Trust's 30% interest in the center. CRES is an affiliate of the co-owner of the Serra Center and has been managing the property for approximately 20 years. Neither one of the above-named property managers are affiliated with the Trust, its trustees, officers or any shareholder owning 5% or more of the Trust's shares.
Repairs and maintenance of the Trust's properties not undertaken by tenants under the terms of the Trust's triple-net leases are performed by independent contractors not affiliated with the Trust, its trustees or officers, or any shareholder owning 5% or more of the Trust's shares.
POTENTIAL ENVIRONMENTAL RISKS
Investments in real property create a potential for environmental liability on the part of the owner of such real property. If hazardous substances are discovered on or emanating from any of the Trust's properties, the Trust and/or others may be held strictly liable for all costs and liabilities relating to the clean-up of such hazardous substances.
In order to mitigate environmental risks, in 1989 the Trust adopted a policy of obtaining at least a Phase I environmental study (a preliminary site assessment which does not include environmental sampling, monitoring or laboratory analysis) on each property it seeks to acquire. From time to time, when the Trust deems it appropriate, it has obtained independent environmental analyses on properties acquired prior to 1989. Although the Trust has no knowledge that any material environmental contamination has occurred, no assurance can be given that hazardous substances are not located under any of the properties. The Trust carries no express insurance coverage for the type of environmental risk described above.
The Trust assesses on an ongoing basis measures necessary to comply with environmental laws and regulations. In conducting its assessments, the Trust has identified the following matters:
OAKLAND, CALIFORNIA
During 1994, the Trust concluded the sale of its industrial property in Oakland, California. In accordance with the terms of the sale agreements, under certain conditions, the Trust would be responsible for a portion of the environmental clean-up costs. During January 1997, Alameda County gave notice that the environmental issues pertaining to this site were closed and no further action would be necessary.
VALLEJO, CALIFORNIA
The restoration work related to the disturbance of wetlands at the Trust's Park Place Shopping Center in Vallejo, California, is currently underway. It is the Trust's current estimate that the remaining cost of this restoration could be as much as $100,000.
UNDERGROUND STORAGE TANKS
The Trust, as far as it is aware, owns only one property that presently contains underground storage tanks. The Trust has no knowledge of any leakage or contamination resulting from these tanks that will have a material impact on its financial position or results of operations. However, there is a potential for contamination from reported off-site leaking petroleum underground storage tanks located on properties adjacent to certain Trust properties.
There is reported soil contamination from underground storage tanks removed from the Heritage Place Shopping Center in Tulare, California, prior to its acquisition by the Trust. The Tulare County environmental officials ordered the prior owner to clean up this soil contamination. Should the prior owner fail to complete remediation, the Trust's exposure could be as much as $50,000 per the current estimate by an environmental consultant.
The probable overall costs of these measures cannot be determined at this time due to uncertainty about the extent of environmental risks and the Trust's responsibility, the complexity of environmental laws and regulations, and the selection of alternative compliance approaches. However, the Trust is not aware of any environmental conditions that it believes will have a material impact on its financial position or results of operations.
ITEM 2.
ITEM 2. PROPERTIES.
Property information is presented on the following pages.
Item 2: Properties
(1) Once a space is subject to an executed lease, the space is then included in occupied space. A space continues to be incorporated in our occupied space until: 1) the related lease expires and the tenant is no longer in legal possession, or 2) the related lease is formally terminated and the tenant is no longer in legal possession. (2) Included in Other Income. (3) Sold in 1996.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS.
The Trust is involved in various legal actions arising in the normal course of business. After taking into consideration legal counsel's evaluation of such actions, management is of the opinion that their outcome will not have a material adverse effect on the Trust's financial statements.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted during the fourth quarter of the fiscal year covered by this report to a vote of security holders, through the solicitation of proxies or otherwise.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Principal Market:
The shares of beneficial interest of the Trust, without par value, are listed on the American Stock Exchange under the symbol "WIR". The following table sets forth the high and low sales prices of the shares as reported by the American Stock Exchange:
Approximate number of equity security holders:
TITLE OF CLASS NUMBER OF RECORD HOLDERS (as of December 31, 1996)
Shares of Beneficial Interest, without par value 2,248
The Trust estimates that there were over 18,000 beneficial owners of shares, including owners whose shares were held in brokerage and trust accounts.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
(1) Revenues comprise minimum rents, percentage rents, recoveries from tenants and other income.
(2) The Trust considers Funds From Operations (FFO) to be an alternate measure of an equity REIT's performance since such measure does not recognize depreciation and amortization of real estate assets as reductions of cash flow from operations. For further discussion of FFO, please refer to Management's Discussion and Analysis on page 17.
(3) Real estate properties reflect acquisition costs and capitalized costs of improvements before deduction of depreciation and amortization. Real estate properties do not include properties held for sale. As of December 31, 1996, the Trust owned 10 properties held for sale with an aggregate book value (before depreciation) of $16,161,000.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Certain statements in Management's Discussion and Analysis of Financial Condition and Results of Operations constitute "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause the actual results, performance, or achievements of the Trust to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements.
LIQUIDITY AND CAPITAL RESOURCES
The Trust anticipates that cash flows provided by operations will continue to provide adequate funds for all current principal and interest payments as well as dividend payments required to maintain its status as a real estate investment trust under the Internal Revenue Code requirements. Cash on hand, proceeds from the sale of properties held for sale and borrowings under the Trust's existing bank line of credit, as well as other debt and equity alternatives, will be used to provide the necessary funds to achieve future growth. At December 31, 1996, the Trust owned 10 properties held for sale with a net aggregate carrying value of $10.6 million.
As of December 31, 1996, the Trust's aggregate outstanding indebtedness of $143.5 million comprised $111.2 million in fixed-rate debt (i.e., $61.3 million of convertible debentures and $49.9 million of senior notes) and $32.3 million of borrowings under the Trust's variable-rate bank line of credit. Any incurrence of additional debt by the Trust would be subject to limitations imposed under the Trust's senior notes and the bank line of credit.
The Trust had approximately $12.7 million available under its $45.0 million bank line of credit as of December 31, 1996. This facility, which has certain covenants (including minimum shareholders' equity, maximum ratio of debt to net worth and income coverage requirements), could be used to fund acquisitions, improvements to real estate and other cash requirements. The interest rate on the bank line of credit is either LIBOR plus 1.6% or the participating banks' reference rate, at the Trust's election. The weighted average interest rate on the bank line of credit at December 31, 1996, was 7.25%. The Trust intends to renew or replace this facility when it expires on May 31, 1998.
The Trust has an ownership interest in two properties where the co-owner is obligated under a note that is secured by the property. None of the Trust's debt is secured by mortgages on its properties.
FUNDS FROM OPERATIONS
The Trust considers Funds From Operations to be an alternate measure of an equity REIT's performance since such measure does not recognize depreciation and amortization of real estate assets as reductions of cash flow from operations. Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. Yet, since real estate values have historically risen or fallen with market conditions, the Trust, along with most industry investors, has considered presentation of operating results for real estate companies that use historical cost accounting to be less than fully informative.
The National Association of Real Estate Investment Trusts (NAREIT) defines Funds From Operations as net income plus depreciation and amortization of assets uniquely significant to the real estate industry, reduced by gains and increased by losses on sales of property. Funds From Operations does not represent cash flows from operations as defined by generally accepted accounting principles and should not be considered a substitute for net income as an indicator of the Trust's operating performance, or for cash flows as a measure of liquidity.
Funds From Operations (NAREIT 1995 definition) increased $1.3 million to $22.3 million in 1996, from the 1995 figure of $21.0 million. This 6% increase is primarily the result of increased revenues and, to a lesser extent, reduced operating expenses.
In 1995, Funds From Operations increased $933,000 to $21.0 million, an increase of more than 4% over the 1994 figure of $20.1 million. The major components of this increase were increased minimum rents, increased recoveries from tenants and the absence of a 1994 provision for environmental costs relating to the Oakland, California, property, offset in part by increased interest expense, property operating costs and a decrease in other income.
RESULTS OF OPERATIONS
COMPARISON OF YEARS ENDED DECEMBER 31, 1996 AND 1995
Net income increased $1.9 million to $12.2 million, or $0.72 per share, in 1996, from $10.3 million, or $0.61 per share, in 1995. This 19% increase in net income is principally due to the 1996 gains of $1.1 million realized from the sale of two single-tenant retail properties and one parcel of land. Additionally, the increase results from increased minimum rents and other income as well as decreased interest expense and other operating expenses.
Minimum rents increased $600,000 to $38.2 million in 1996 from $37.6 million in 1995. This increase represents approximately 2% over the 1995 figure. Other income increased $172,000, or 29%, to $756,000 in 1996 from $584,000 in 1995. This increase is primarily the result of the $75,000 gain recorded on the sale of marketable securities held by the Trust and increased lease termination income of $60,000.
Interest expense decreased $248,000, or 2%, from the 1995 figure of $11.5 million to $11.3 million in 1996. The main factors contributing to this decrease are: (i) the redemption of $2,250,000 of 8% convertible debentures during the year and (ii) the decreased interest rate on the Trust's variable rate line of credit.
Other operating expenses decreased $224,000 to $2.7 million in 1996 from $2.9 million in 1995. This 8% decrease is primarily due to decreased spending for "additional" marketing funds. Additional marketing funds are in excess of the Trust's contractually obligated contributions. Historically, certain shopping centers were targeted to benefit from these additional contributions until the shopping center obtained stabilization.
COMPARISON OF YEARS ENDED DECEMBER 31, 1995 AND 1994
Net income decreased $5.0 million to $10.3 million, or $0.61 per share, in 1995, from $15.3 million, or $0.92 per share, in 1994. This 33% decrease in net income is principally due to the 1994 gains realized from the sales of real estate investments. Additionally, the decrease is due to increased interest expense, depreciation and amortization, and property operating costs as well as decreased other income, partially offset by the absence of the 1994 provision for loss on real estate investment.
Minimum rents increased $3.5 million in 1995 to $37.6 million, a 10% increase over $34.1 million in 1994. This increase resulted from (i) the Trust's seven acquisitions during 1994 and 1995, partially offset by five dispositions in 1994 and (ii) occupancy gains.
Recoveries from tenants increased by 12%, or $738,000, to $6.8 million in 1995 as compared to $6.1 million in 1994. This increase is primarily the result of the Trust's seven acquisitions and occupancy gains referred to above.
Other income decreased $1.4 million to $584,000 from $2.0 million in 1994. The contributing factors to this decrease are the absence in 1995 of (i) $600,000 of lease termination income recorded in 1994, (ii) investment income earned in 1994 from the senior notes net proceeds prior to the use of these proceeds for several 1994 acquisitions and (iii) mortgage interest income earned on a note retired during the second quarter of 1994.
Interest expense increased $1.4 million, or 14%, in 1995 to $11.5 million from $10.1 million in 1994. This increase primarily results from increased borrowings and higher interest rates under the Trust's bank line of credit. Additionally, interest expense increased as a result of 12 months of interest on the senior notes in 1995 compared to 10-1/2 months in 1994.
Property operating costs were $8.3 million in 1995 compared to $7.4 million in 1994. This $899,000, or 12% increase from the prior year, is primarily due to the 1994 and 1995 acquisitions. Ownership of the majority of these properties commenced mid-year 1994.
Depreciation and amortization expense increased $1.0 million to $10.9 million for the year ended December 31, 1995, from $9.9 million in 1994. This 10% increase results from a net increase in the depreciable basis of the Trust's portfolio of real estate investments due to acquisitions made by the Trust beginning in mid-year 1994, net of dispositions.
INFLATION
Substantially all of the Trust's properties are leased on a triple-net basis, which reduces the Trust's exposure to increases in property operating expenses resulting from inflation. Future increases in inflation would likely increase revenues and, thereby, further protect the Trust from the impact of inflation. Revenue increases could be realized through CPI-based escalation of rents, percentage rents based on tenants' gross sales and inflation-adjusted base rents on new leases.
Increases in interest rates could increase the Trust's borrowing costs. As of December 31, 1996, the Trust had $32.3 million outstanding under its unsecured variable-rate bank line of credit. This amount represents approximately 22% of the Trust's total liabilities and approximately 8% of the Trust's historical cost of real estate owned.
WESTERN INVESTMENT REAL ESTATE TRUST
Financial Statements
Form 10-K Item 8
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES.
There have been no disagreements with the independent accountants on the Trust's accounting and financial disclosure. Additionally, there has been no change of the independent accountant engaged to audit the Trust's financial statements.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information with respect to the trustees and executive officers of the Trust is incorporated by reference to the section entitled "Trustees and Executive Officers" of the Trust's definitive Proxy Statement in connection with the annual Meeting of Shareholders to be held May 8, 1997, which will be filed with the Commission not later than 120 days after the end of the fiscal year covered by this Form 10-K, pursuant to General Instruction G to this Form 10-K.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION.
Information with respect to executive compensation is incorporated by reference to the sections entitled "Compensation of Trustees", "Compensation of Executive Officers", "Compensation Pursuant to Plans", "Trustee Emeritus Program and Death and Disability Program", "Stock Option Grants and Exercises" and "Report of Compensation Committee on Executive Compensation" of the Trust's definitive Proxy Statement in connection with the annual Meeting of Shareholders to be held May 8, 1997, which will be filed with the Commission not later than 120 days after the end of the fiscal year covered by this Form 10-K, pursuant to General Instruction G to this Form 10-K.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information with respect to security ownership of certain beneficial owners and management is incorporated by reference to the section entitled "Trustees and Executive Officers" of the Trust's definitive Proxy Statement in connection with the annual Meeting of Shareholders to be held May 8, 1997, which will be filed with the Commission not later than 120 days after the end of the fiscal year covered by this Form 10-K, pursuant to General Instruction G to this Form 10-K.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Trust, its employees, officers or trustees are not engaged in any related transactions with the Trust. Additionally, the Trust has never made any loans to its management.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) 1. Financial Statements - Included in Item 8 Page ----
Report of Independent Certified Public Accountants 22 Balance Sheets - December 31, 1996 and 1995 23 Financial Statements for the Years Ended December 31, 1996, 1995 and 1994: Statements of Income 24 Statements of Shareholders' Equity 25 Statements of Cash Flows 26 Notes to Financial Statements 27 to 37
2. Financial Statement Schedule III: Real Estate and Accumulated Depreciation 38 to 39
3. Additional Information: 1996 Building Improvement and Leasing Related Cost Additions (unaudited) 40
(b) 1. Reports on Form 8-K.
None.
(c) Exhibits.
(3) Declaration of Trust, as amended (filed as Exhibit 3.1 to Registration Statement on Form S-3 No. 33-22893 and incorporated herein by reference).
(4.1) Form of Indenture relating to the 8% Convertible Debentures (filed as Exhibit 4.1 to Registration Statement on Form S-3 No. 33-22893 and incorporated herein by reference).
(4.2) Form of Indenture relating to the Senior Notes (filed as Exhibit 4.1 to registration Statement on Form S-3 No. 33-71270 and incorporated herein by reference).
(4.3) Form of Senior Notes (filed as Exhibit 4.2 to Registration Statement on Form S-3 No. 33-71270 and incorporated herein by reference).
Page ----
(10.1)** Trust's Nonqualified Stock Option Plan (filed as Exhibit 4.2 to Registration Statement on Form S-8 No. 33-27016 and incorporated herein by reference).
(10.2)** Trust's Trustee Emeritus Plan (filed as an Exhibit to Proxy Statement dated March 25, 1986, and incorporated herein by reference.
(23) * Consent of Independent Certified Public Accountants 44
- ----------
* Filed with this report. ** Management contract or compensatory plan or arrangement.
Consent of Independent Certified Public Accountants
The Trustees Western Investment Real Estate Trust:
We consent to incorporation by reference in the registration statement (No. 33-27016) on Form S-8 of Western Investment Real Estate Trust of our report dated February 4, 1997, relating to the balance sheets of Western Investment Real Estate Trust as of December 31, 1996 and 1995, and the related statements of income, shareholders' equity and cash flows for each of the years in the three-year period ended December 31, 1996, and the related financial statement schedule, which report appears in the December 31, 1996, annual report on Form 10-K of Western Investment Real Estate Trust.
KPMG PEAT MARWICK LLP San Francisco, California March 13, 1997
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned there unto duly authorized.
WESTERN INVESTMENT REAL ESTATE TRUST (Registrant)
By: s/ Dennis D. Ryan ---------------------------------------- Dennis D. Ryan Executive Vice President, Chief Financial Officer Dated: March 13, 1997 and Trustee
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature Title Date - --------- ----- ----
s/ O. A. Talmage Chairman of the Board, March 13, 1997 - ------------------------- Chief Executive -------------- O. A. Talmage Officer and Trustee
s/ William A. Talmage President, March 13, 1997 - ------------------------- Chief Operating Officer -------------- William A. Talmage and Trustee
s/ Dennis D. Ryan Executive Vice President, March 13, 1997 - ------------------------- Chief Financial Officer -------------- Dennis D. Ryan and Trustee
s/ Chester R. Macphee, Jr. Trustee March 13, 1997 - ------------------------- -------------- Chester R. MacPhee, Jr.
s/ Reginald B. Oliver Trustee March 13, 1997 - ------------------------- -------------- Reginald B. Oliver
s/ James L. Stell Trustee March 13, 1997 - ------------------------- -------------- James L. Stell