Koll Real Estate Posts $6.7-Million Deficit for 2nd Quarter

NEWPORT BEACH — Koll Real Estate Group, owner and would-be developer of the environmentally sensitive Bolsa Chica tract, added to its growing string of losses Friday with a $6.7-million deficit for the second quarter.

The report brings the publicly traded firm’s losses for the first half of 1996 to $14.6 million. In the past 3 1/2 years, the Newport Beach residential and commercial development arm of the Koll company has lost $163.8 million.

But the seemingly dismal finance performance apparently doesn’t threaten the company--most of the losses are so-called paper losses and don’t reflect an actual outflow of cash.

In fact, says Koll Real Estate’s chief financial officer, Raymond Pacini, the company’s financial strength “has never been better. Revenue is up and our commercial development [profits] are up.”

The firm’s plans to develop Bolsa Chica aren’t being jeopardized by the losses, he said.

Koll Real Estate’s second-quarter loss, equal to 14 cents a share, compares to a $2.6-million loss in the 1995 second quarter. Revenue of $16 million was nearly triple the $5.7 million reported a year ago.

The company’s first-half loss equaled 31 cents a share, compared to a loss of $8.3 million or 8 cents a share for the first half of 1995. Revenue of $18.7 million was up 55% from $12.1 million.

What masks the performance are accounting rules, Pacini said. Last year, for instance, the company was required to report a $114-million loss as soon as it said it wanted to sell the state a portion of the Bolsa Chica lowlands on which it had approval to build 900 homes. Koll still owns the land, but the loss remains on the books.

Additionally, the company must subtract $22 million from its revenue each year for interest on its debentures--corporate IOUs issued to help finance the company. The interest is reported as a cost, but it isn’t paid in cash. The company just issues more IOUs.

When the debentures mature in 2002, Koll has the option of redeeming them by issuing stock, which would turn the $150-million debt into a $150-million cash infusion, Pacini said.

Koll Real Estate, in fact, said earlier this year that it is considering refinancing the debentures now so it can get rid of the annual interest obligation.

If that happens, said Pacini, “then we almost become profitable overnight.”