Description

Burnham Pacific is a small REIT that is liquidating. The board of directors adopted a plan of liquidation in August of 2000, and has been steadily selling properties since that time. BPP has primarily small shopping center properties in Washington, California, and Utah.

The first quarter 2001 statement has yet to be filed on Edgar, but you can examine the FY2000 annual statement of assets adjusted to the liquidation basis of accounting. Management restated property values to appriasal values shortly after the liquidation plan was adopted last fall. To date, realized property values are running slightly ahead of initial estimates. Net of all debt, a charge for future liquidation expenses, and preferred equity, BPP common had $177,477,000 in net assets as of 12/31/2000. 32,336,000 shares outstanding. However, this stated asset value does not include any "writeups" based on recent appraised values, only "writedowns". From their annual report -

"Adjusting assets to estimated net realizable value resulted in the write-up of certain real estate properties and the write-down of other real
estate properties. The anticipated gains associated with the write-up of certain real estate properties have been deferred until their sales, and
the anticipated losses associated with the write-down of other certain real estate properties have been included in the Consolidated
Statement of Changes of Net Assets."

Writeups are currently estimated at just over $28,000,000.

Since 12/31/2000, preferred equity has been redeemed and a 10 cent per share liquidation payment has been recorded (3.2 million dollar payout) to shareholders of record on April 13, 2001. Still, net asset value remains at 5.40 per share without adding back the 28 million, 6.35/share if you add it back to reflect appraised values.

Insiders were buying in November and December at 4.40-4.60/share. 3rd Avenue was buying at 4.50-4.60 in all three funds as per their latest quarterly statements. Current market ask is 4.90 while I'm writing this. In the past several weeks the price has advanced on the heels of the Weingarten sale, which came in over stated value. Last quarter, the company was cash flow positive and paid a dividend. Additional rents are being collected, the reserves for liquidation costs seem adequate, so it likely that some dividends will still be paid prior to complete liquidation.

What is wrong: as in all liquidations, the debt is a hard number and the assets are fuzzy. timing is also uncertain. Realizable property values could crater, although this seems like a low risk with interest rates coming down and the REIT and LBO communities well capitalized.

Catalyst

liquidation of the company has started and initial return of capital payments have commenced.