##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


Form 10-Q

(Mark One)

|                                             |                                                                                          
|-------------------------------------------- | -----------------------------------------------------------------------------------------
|[X]                                          | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  
|                                            
|For the quarterly period ended June 30, 2002
|                                            
|OR                                          
|[   ]                                        | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
|                                            
|For the transition period from            to

Commission file number 000-24594

WEST COAST REALTY INVESTORS, INC.

(Exact name of registrant as specified in its charter)


|                                                                      |  |                                             
|--------------------------------------------------------------------- |  | --------------------------------------------
|Delaware
State or other jurisdiction of
incorporation or organization |  | 95-4246740
(IRS Employer
Identification No.)

3000 SAND HILL ROAD, BUILDING 3, SUITE 140
MENLO PARK, CALIFORNIA 94025
(Address of principal executive offices) (Zip Code)

(650) 233-7140
(Registrants telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.

Yes [ü]    No [    ]

APPLICABLE ONLY TO CORPORATE ISSUERS

As of August 7, 2002, 2,927,967 shares of the Registrants Common Stock were
outstanding.





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TABLE OF CONTENTS



|                               |                                                                                               |                                            |  |  |  |  |  | 
|------------------------------ | --------------------------------------------------------------------------------------------- | ------------------------------------------ |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION
|                               | ITEM 1. FINANCIAL STATEMENTS                                                                 
|                               |                                                                                               | BALANCE SHEETS                            
|                               |                                                                                               | STATEMENTS OF INCOME                      
|                               |                                                                                               | STATEMENTS OF CASH FLOWS                  
|                               |                                                                                               | STATEMENTS OF STOCKHOLDERS EQUITY        
|                               |                                                                                               | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|                               |                                                                                               | NOTES TO FINANCIAL STATEMENTS             
|                               | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                               | ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                           
|PART II  OTHER INFORMATION   
|                               | ITEM 1. LEGAL PROCEEDINGS                                                                    
|                               | ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS                                            
|                               | ITEM 3. DEFAULTS UPON SENIOR SECURITIES                                                      
|                               | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                  
|                               | ITEM 5. OTHER INFORMATION                                                                    
|                               | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                     
|SIGNATURES                    
|EXHIBIT 10.1                  



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##### Table of Contents



WEST COAST REALTY INVESTORS, INC.

REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2002

TABLE OF CONTENTS

|                               |                                                                                               |                                                                                          |  |    |    | 
|------------------------------ | --------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------- |  | -- | -- | 
|Part I  Financial Information |                                                                                               |                                                                                          |  |   
|                               | Item 1. Financial Statements                                                                  |                                                                                          |  |    |   
|                               |                                                                                               | Balance Sheets                                                                          |  |    |    | 
|                               |                                                                                               | As of June 30, 2002 (unaudited)
and December 31, 2001(audited)                           |  |    | 3  | 
|                               |                                                                                               | Income Statements (unaudited) 
Three and six months ended June 30, 2002 and 2001        |  |    | 4  | 
|                               |                                                                                               | Statements of Cash Flows (unaudited) 
Six months ended June 30, 2002 and 2001           |  |    | 5  | 
|                               |                                                                                               | Statements of Stockholders Equity (unaudited) 
Six months ended June 30, 2002 and 2001 |  |    | 6  | 
|                               |                                                                                               | Summary of significant accounting policies                                               |  |    | 7  | 
|                               |                                                                                               | Notes to financial statements                                                            |  |    | 12 | 
|                               | Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations |                                                                                          |  | 19 |   
|                               | Item 3. Quantitative and Qualitative Disclosures about Market Risk                            |                                                                                          |  | 38 |   
|Part II  Other Information    |                                                                                               |                                                                                          |  |   
|                               | Item 1. Legal Proceedings                                                                     |                                                                                          |  | 39 |   
|                               | Item 2. Changes In Securities and Use of Proceeds                                             |                                                                                          |  | 39 |   
|                               | Item 3. Defaults Upon Senior Securities                                                       |                                                                                          |  | 39 |   
|                               | Item 4. Submission of Matters to a Vote of Security Holders                                   |                                                                                          |  | 39 |   
|                               | Item 5. Other Information                                                                     |                                                                                          |  | 39 |   
|                               | Item 6. Exhibits and Reports on Form 8-K                                                      |                                                                                          |  | 40 |   
|                               | Signatures                                                                                    |                                                                                          |  | 41 |   

As used in this Report on Form 10-Q, unless the context otherwise requires, the
terms we, us, and our refer to West Coast Realty Investors, Inc., a
Delaware corporation.





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##### Table of Contents












PART I- FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

WEST COAST REALTY INVESTORS, INC.
BALANCE SHEETS

|                                           |                                                                                                                                             |   |               |             |                   |   |            |             |  
|------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------- | - | ------------- | ----------- | ----------------- | - | ---------- | ----------- | -
|                                           |                                                                                                                                             |   | June 30, 2002 |             | December 31, 2001
|                                           |                                                                                                                                             |   |               |             |                  
|                                           |                                                                                                                                             |   | (Unaudited)   |             | (Audited)        
|Assets                                     |                                                                                                                                             |   |               |             |                   |   |            |            
|                                           | Rental real estate, less accumulated depreciation (Note 1)                                                                                  |   | $             | 26,025,616  |                   |   | $          | 29,458,317  |  
|                                           | Cash and cash equivalents                                                                                                                   |   |               | 1,245,626   |                   |   |            | 1,123,827   |  
|                                           | Deferred rent                                                                                                                               |   |               | 517,128     |                   |   |            | 545,030     |  
|                                           | Accounts receivable                                                                                                                         |   |               | 25,282      |                   |   |            | 14,184      |  
|                                           | Loan origination fees, net of accumulated
amortization of $145,022 and $144,483                                                             |   |               | 161,155     |                   |   |            | 167,389     |  
|                                           | Rental real estate held for sale, net (Note 1)                                                                                              |   |               | 7,444,818   |                   |   |            | 5,402,842   |  
|                                           | Deposits and acquisition costs (Note 3)                                                                                                     |   |               | 932,300     |                   |   |            |            |  
|                                           | Other assets                                                                                                                                |   |               | 60,048      |                   |   |            | 51,022      |  
|                                           |                                                                                                                                             |   |               |             |                   |   |            |            
|Total assets                               |                                                                                                                                             | $ | 36,411,973    |             |                   | $ | 36,762,611 |            
|                                           |                                                                                                                                             |   |               |             |                   |   |            |            
|Liabilities and Stockholders Equity       |                                                                                                                                             |   |               |             |                   |   |            |            
|Liabilities                                |                                                                                                                                             |   |               |             |                   |   |            |            
|                                           | Accounts payable and other liabilities                                                                                                      |   | $             | 294,698     |                   |   | $          | 284,622     |  
|                                           | Due to related party (Note 4)                                                                                                               |   |               | 21,077      |                   |   |            | 37,477      |  
|                                           | Security deposits and prepaid rent                                                                                                          |   |               | 272,805     |                   |   |            | 303,852     |  
|                                           | Notes payable (Note 5)                                                                                                                      |   |               | 19,054,990  |                   |   |            | 19,796,510  |  
|                                           |                                                                                                                                             |   |               |             |                   |   |            |            
|Total liabilities                          |                                                                                                                                             |   | 19,643,570    |             |                   |   | 20,422,461 |            
|Commitments and contingencies(Note 10)     |                                                                                                                                             |   |              |             |                   |   |           |            
|Stockholders equity                       |                                                                                                                                             |   |               |             |                   |   |            |            
|                                           | Common stock $.01 par value; 5,000,000 shares authorized;
2,927,967 shares issued and outstanding as of June 30,
2002 and December 31, 2001 |   |               | 29,280      |                   |   |            | 29,280      |  
|                                           | Additional paid-in capital                                                                                                                  |   |               | 27,147,772  |                   |   |            | 27,147,772  |  
|                                           | Dividends in excess of retained earnings                                                                                                    |   |               | (10,408,649 | )                 |   |            | (10,836,902 | )
|                                           |                                                                                                                                             |   |               |             |                   |   |            |            
|Total stockholders equity                 |                                                                                                                                             |   | 16,768,403    |             |                   |   | 16,340,150 |            
|                                           |                                                                                                                                             |   |               |             |                   |   |            |            
|Total liabilities and stockholders equity |                                                                                                                                             | $ | 36,411,973    |             |                   | $ | 36,762,611 |            
|                                           |                                                                                                                                             |   |               |             |                   |   |            |            

See accompanying summary of accounting policies and notes to financial statements.

3



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WEST COAST REALTY INVESTORS, INC.
STATEMENTS OF INCOME

|                                                                   |                                                  |                            |                                                                    |         |              |      |              |   |              |      |              |         |           |      |           |   |           |      | 
|------------------------------------------------------------------ | ------------------------------------------------ | -------------------------- | ------------------------------------------------------------------ | ------- | ------------ | ---- | ------------ | - | ------------ | ---- | ------------ | ------- | --------- | ---- | --------- | - | --------- | ---- | 
|                                                                   |                                                  |                            |                                                                    |         | Three        |      | Three        |   | Six          |      | Six         
|                                                                   |                                                  |                            |                                                                    |         | months ended |      | months ended |   | months ended |      | months ended
|                                                                   |                                                  |                            |                                                                    |         | June 30,     |      | June 30,     |   | June 30,     |      | June 30,    
|                                                                   |                                                  |                            |                                                                    |         | 2002         |      | 2001         |   | 2002         |      | 2001        
|                                                                   |                                                  |                            |                                                                    |         |              |      |              |   |              |      |             
|                                                                   |                                                  |                            |                                                                    |         | (Unaudited)  |      | (Unaudited)  |   | (Unaudited)  |      | (Unaudited) 
|Revenues                                                           |                                                  |                            |                                                                    |         |              |      |              |   |              |      |              |         |           |      |           |  
|                                                                   |                                                  | Rental (Notes 1 and 2)     |                                                                    | $       | 1,028,336    |      |              | $ | 1,114,875    |      |              | $       | 2,129,553 |      |           | $ | 2,286,527 |     
|                                                                   |                                                  | Interest                   |                                                                    |         | 4,278        |      |              |   | 15,370       |      |              |         | 8,592     |      |           |   | 32,773    |     
|                                                                   |                                                  |                            |                                                                    |         |              |      |              |   |              |      |              |         |           |      |           |  
|                                                                   |                                                  |                            | 1,032,614                                                          |         |              |      | 1,130,245    |   |              |      | 2,138,145    |         |           |      | 2,319,300 |  
|                                                                   |                                                  |                            |                                                                    |         |              |      |              |   |              |      |              |         |           |      |           |  
|Cost and expenses                                                  |                                                  |                            |                                                                    |         |              |      |              |   |              |      |              |         |           |      |           |  
|                                                                   |                                                  | Interest expense           |                                                                    |         | 330,311      |      |              |   | 387,410      |      |              |         | 671,909   |      |           |   | 801,767   |     
|                                                                   |                                                  | General and administrative |                                                                    |         | 252,607      |      |              |   | 99,839       |      |              |         | 459,811   |      |           |   | 232,564   |     
|                                                                   |                                                  | Depreciation               |                                                                    |         | 120,363      |      |              |   | 180,140      |      |              |         | 240,725   |      |           |   | 360,281   |     
|                                                                   |                                                  | Operating                  |                                                                    |         | 120,794      |      |              |   | 150,883      |      |              |         | 275,590   |      |           |   | 299,297   |     
|                                                                   |                                                  |                            |                                                                    |         |              |      |              |   |              |      |              |         |           |      |           |  
|                                                                   |                                                  |                            | 824,075                                                            |         |              |      | 818,272      |   |              |      | 1,648,035    |         |           |      | 1,693,909 |  
|                                                                   |                                                  |                            |                                                                    |         |              |      |              |   |              |      |              |         |           |      |           |  
|Net income from operations                                         |                                                  |                            | 208,539                                                            |         |              |      | 311,973      |   |              |      | 490,110      |         |           |      | 625,391   |  
|Insurance recovery from lawsuit
(Note 9)                           |                                                  |                            |                                                                   |         |              |      |             |   |              |      |             |         |           |      | 165,053   |  
|                                                                   |                                                  |                            |                                                                    |         |              |      |              |   |              |      |              |         |           |      |           |  
|Net income before gain on sale
of rental real estate held
for sale |                                                  |                            | 208,539                                                            |         |              |      | 311,973      |   |              |      | 490,110      |         |           |      | 790,444   |  
|                                                                   | Gain on sale of rental real estate
held for sale |                            |                                                                    | 230,940 |              |      |              |  |              |      |              | 230,940 |           |      |           |  |          
|                                                                   |                                                  |                            |                                                                    |         |              |      |              |   |              |      |              |         |           |      |           |  
|Net income                                                         |                                                  | $                          | 439,479                                                            |         |              | $    | 311,973      |   |              | $    | 721,050      |         |           | $    | 790,444   |  
|                                                                   |                                                  |                            |                                                                    |         |              |      |              |   |              |      |              |         |           |      |           |  
|Net income per share  basic and
assuming dilution (Note 6):       |                                                  |                            |                                                                    |         |              |      |              |   |              |      |              |         |           |      |           |  
|                                                                   |                                                  |                            | Net income before gain on sale
of rental real estate held
for sale |         | $            | 0.07 |              |   | $            | 0.11 |              |         | $         | 0.17 |           |   | $         | 0.27 | 
|                                                                   |                                                  |                            | Gain on sale of rental real
estate
held for sale                   |         | $            | 0.08 |              |   |              |     |              |         | $         | 0.08 |           |   |           |     | 
|                                                                   |                                                  |                            |                                                                    |         |              |      |              |   |              |      |              |         |           |      |           |  
|Net income per share                                               |                                                  | $                          | 0.15                                                               |         |              | $    | 0.11         |   |              | $    | 0.25         |         |           | $    | 0.27      |  
|                                                                   |                                                  |                            |                                                                    |         |              |      |              |   |              |      |              |         |           |      |           |  

See accompanying summary of accounting policies and notes to financial statements.

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WEST COAST REALTY INVESTORS, INC.
STATEMENTS OF CASH FLOWS

|                                              |                                                                                   |                                                                  |                                                                                     |                                        |           |             |           |             |          |   |         |  
|--------------------------------------------- | --------------------------------------------------------------------------------- | ---------------------------------------------------------------- | ----------------------------------------------------------------------------------- | -------------------------------------- | --------- | ----------- | --------- | ----------- | -------- | - | ------- | -
|                                              |                                                                                   |                                                                  |                                                                                     |                                        |           | Six Months  |           | Six Months 
|                                              |                                                                                   |                                                                  |                                                                                     |                                        |           | ended       |           | ended      
|                                              |                                                                                   |                                                                  |                                                                                     |                                        |           | June 30,    |           | June 30,   
|                                              |                                                                                   |                                                                  |                                                                                     |                                        |           | 2002        |           | 2001       
|                                              |                                                                                   |                                                                  |                                                                                     |                                        |           |             |           |            
|                                              |                                                                                   |                                                                  |                                                                                     |                                        |           | (Unaudited) |           | (Unaudited)
|Cash flows from operating activities          |                                                                                   |                                                                  |                                                                                     |                                        |           |             |           |            
|                                              | Net income                                                                        |                                                                  | $                                                                                   | 721,050                                |           |             | $         | 790,444     |         
|                                              | Adjustments to reconcile net income to net cash
provided by operating activities: |                                                                  |                                                                                     |                                        |           |             |           |             |         
|                                              |                                                                                   | Depreciation expense                                             |                                                                                     |                                        | 240,725   |             |           |             | 360,281  |  
|                                              |                                                                                   | Interest expense due to amortization of loan origination fees    |                                                                                     |                                        | 24,255    |             |           |             | 19,775   |  
|                                              |                                                                                   | Gain on sale of rental real estate held for sale                 |                                                                                     |                                        | (230,940  | )           |           |             |         |  
|                                              |                                                                                   | Equity contribution by Affiliates through expense
reimbursements |                                                                                     |                                        |          |             |           |             | 113,518  |  
|                                              |                                                                                   |                                                                  | Increase (decrease) in cash flows from changes in
operating assets and liabilities: |                                        |           |             |           |             |          |   |        
|                                              |                                                                                   |                                                                  |                                                                                     | Deferred rent                          |           |             | 15,769    |             |          |   | (20,294 | )
|                                              |                                                                                   |                                                                  |                                                                                     | Accounts receivable                    |           |             | (11,098   | )           |          |   | (5,693  | )
|                                              |                                                                                   |                                                                  |                                                                                     | Other assets                           |           |             | (9,026    | )           |          |   | (21,409 | )
|                                              |                                                                                   |                                                                  |                                                                                     | Accounts payable and other liabilities |           |             | 10,076    |             |          |   | (85,442 | )
|                                              |                                                                                   |                                                                  |                                                                                     | Due to related party                   |           |             | (16,400   | )           |          |   | (42,290 | )
|                                              |                                                                                   |                                                                  |                                                                                     | Security deposits and prepaid rent     |           |             | (31,047   | )           |          |   | 54,934  |  
|                                              |                                                                                   |                                                                  |                                                                                     |                                        |           |             |           |            
|Net cash provided by operating activities     |                                                                                   |                                                                  | 713,364                                                                             |                                        |           |             | 1,163,824 |            
|                                              |                                                                                   |                                                                  |                                                                                     |                                        |           |             |           |            
|Cash flows from investing activities          |                                                                                   |                                                                  |                                                                                     |                                        |           |             |           |            
|                                              |                                                                                   | Proceeds from sale of real estate held for sale                  |                                                                                     |                                        | 1,394,995 |             |           |             |         |  
|                                              |                                                                                   | Deposits and acquisition costs (Note 3)                          |                                                                                     |                                        | (430,000  | )           |           |             |         |  
|                                              |                                                                                   | Additions to rental real estate                                  |                                                                                     |                                        |          |             |           |             | (117,189 | )
|                                              |                                                                                   |                                                                  |                                                                                     |                                        |           |             |           |            
|                                              |                                                                                   | Net cash provided by (used in) investing activities              |                                                                                     |                                        | 964,995   |             |           |             | (117,189 | )
|                                              |                                                                                   |                                                                  |                                                                                     |                                        |           |             |           |            
|Cash flows from financing activities          |                                                                                   |                                                                  |                                                                                     |                                        |           |             |           |            
|                                              |                                                                                   | Dividends declared and paid                                      |                                                                                     |                                        | (292,797  | )           |           |             | (439,195 | )
|                                              |                                                                                   | Deposits and acquisition costs (Note 3)                          |                                                                                     |                                        | (502,300  | )           |           |             |         |  
|                                              |                                                                                   | Payments on notes payable                                        |                                                                                     |                                        | (741,520  | )           |           |             | (225,275 | )
|                                              |                                                                                   | (Increase) in loan origination fees                              |                                                                                     |                                        | (19,943   | )           |           |             |         |  
|                                              |                                                                                   |                                                                  |                                                                                     |                                        |           |             |           |            
|Net cash (used in) financing activities       |                                                                                   |                                                                  | (1,556,560                                                                          | )                                      |           |             | (664,470  | )          
|                                              |                                                                                   |                                                                  |                                                                                     |                                        |           |             |           |            
|Net increase in cash and cash equivalents     |                                                                                   |                                                                  | 121,799                                                                             |                                        |           |             | 382,165   |            
|Cash and cash equivalents,beginning of period |                                                                                   |                                                                  | 1,123,827                                                                           |                                        |           |             | 1,248,335 |            
|                                              |                                                                                   |                                                                  |                                                                                     |                                        |           |             |           |            
|Cash and cash equivalents,end of period       |                                                                                   | $                                                                | 1,245,626                                                                           |                                        |           | $           | 1,630,500 |            
|                                              |                                                                                   |                                                                  |                                                                                     |                                        |           |             |           |            

See accompanying summary of accounting policies and notes to financial statements.

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WEST COAST REALTY INVESTORS, INC.
STATEMENTS OF STOCKHOLDERS EQUITY

Six months ended June 30, 2002
(Unaudited)

|                          |                                               |  |              |  |            |   |              |  |          |   |            |  |  |   |             |          |   |   |            |          |  
|------------------------- | --------------------------------------------- |  | ------------ |  | ---------- | - | ------------ |  | -------- | - | ---------- |  |  | - | ----------- | -------- | - | - | ---------- | -------- | -
|                          |                                               |  |              |  |            |   |              |  |          |   |            |  |  |   | Dividends   |          |   |   |           
|                          |                                               |  | Common Stock |  | Additional |   | in Excess of |  |          |   |           
|                          |                                               |  |              |  | Paid-In    |   | Retained     |  |          |   |           
|                          |                                               |  | Shares       |  | Amount     |   | Capital      |  | Earnings |   | Total     
|                          |                                               |  |              |  |            |   |              |  |          |   |           
|Balance,December 31, 2001 |                                               |  | 2,927,967    |  |            | $ | 29,280       |  |          | $ | 27,147,772 |  |  | $ | (10,836,902 | )        |   | $ | 16,340,150 |         
|                          | Net income                                    |  |              |  |            |   |              |  |          |   |            |  |  |   |             | 281,571  |   |   |            | 281,571  |  
|                          | Dividends declared ($0.10 per
share) (Note 6) |  |              |  |            |   |              |  |          |   |            |  |  |   |             | (292,797 | ) |   |            | (292,797 | )
|                          |                                               |  |              |  |            |   |              |  |          |   |            |  |  |   |             |          |   |   |            |         
|Balance, March 31, 2002   |                                               |  | 2,927,967    |  |            |   | 29,280       |  |          |   | 27,147,772 |  |  |   | (10,848,128 | )        |   |   | 16,238,924 |         
|                          |                                               |  |              |  |            |   |              |  |          |   |            |  |  |   |             |          |   |   |            |         
|                          | Net income                                    |  |              |  |            |   |              |  |          |   |            |  |  |   |             | 439,479  |   |   |            | 439,479  |  
|                          |                                               |  |              |  |            |   |              |  |          |   |            |  |  |   |             |          |   |   |            |         
|Balance, June 30, 2002    |                                               |  | 2,927,967    |  |            | $ | 29,280       |  |          | $ | 27,147,772 |  |  | $ | (10,408,649 | )        |   | $ | 16,768,403 |         
|                          |                                               |  |              |  |            |   |              |  |          |   |            |  |  |   |             |          |   |   |            |         

Six months ended June 30, 2001
(Unaudited)

|                          |                                                                           |  |              |  |            |   |              |  |          |   |            |        |  |   |            |          |   |   |            |          |  
|------------------------- | ------------------------------------------------------------------------- |  | ------------ |  | ---------- | - | ------------ |  | -------- | - | ---------- | ------ |  | - | ---------- | -------- | - | - | ---------- | -------- | -
|                          |                                                                           |  |              |  |            |   |              |  |          |   |            |        |  |   | Dividends  |          |   |   |           
|                          |                                                                           |  | Common Stock |  | Additional |   | in Excess of |  |          |   |           
|                          |                                                                           |  |              |  | Paid-In    |   | Retained     |  |          |   |           
|                          |                                                                           |  | Shares       |  | Amount     |   | Capital      |  | Earnings |   | Total     
|                          |                                                                           |  |              |  |            |   |              |  |          |   |           
|Balance,December 31, 2000 |                                                                           |  | 2,927,967    |  |            | $ | 29,280       |  |          | $ | 26,977,370 |        |  | $ | (6,704,362 | )        |   | $ | 20,302,288 |         
|                          | Net income                                                                |  |              |  |            |   |              |  |          |   |            |        |  |   |            | 478,471  |   |   |            | 478,471  |  
|                          | Equity contribution by affiliates
through expense reimbursements
(Note 4) |  |              |  |            |   |              |  |          |   |            | 56,518 |  |   |            |          |   |   |            | 56,518   |  
|                          | Dividends declared ($0.15 per
share) (Note 6)                             |  |              |  |            |   |              |  |          |   |            |        |  |   |            | (439,195 | ) |   |            | (439,195 | )
|                          |                                                                           |  |              |  |            |   |              |  |          |   |            |        |  |   |            |          |   |   |            |         
|Balance, March 31, 2001   |                                                                           |  | 2,927,967    |  |            |   | 29,280       |  |          |   | 27,033,888 |        |  |   | (6,665,086 | )        |   |   | 20,398,082 |         
|                          |                                                                           |  |              |  |            |   |              |  |          |   |            |        |  |   |            |          |   |   |            |         
|                          | Net income                                                                |  |              |  |            |   |              |  |          |   |            |        |  |   |            | 311,973  |   |   |            | 311,973  |  
|                          | Equity contribution by affiliates
through expense reimbursements
(Note 4) |  |              |  |            |   |              |  |          |   |            | 57,000 |  |   |            |          |   |   |            | 57,000   |  
|                          | Dividends declared ($0.15 per
share) (Note 6)                             |  |              |  |            |   |              |  |          |   |            |        |  |   |            | (439,195 | ) |   |            | (439,195 | )
|                          |                                                                           |  |              |  |            |   |              |  |          |   |            |        |  |   |            |          |   |   |            |         
|Balance, June 30, 2001    |                                                                           |  | 2,927,967    |  |            | $ | 29,280       |  |          | $ | 27,090,888 |        |  | $ | (6,792,308 | )        |   | $ | 20,327,860 |         
|                          |                                                                           |  |              |  |            |   |              |  |          |   |            |        |  |   |            |          |   |   |            |         

See accompanying summary of accounting policies and notes to financial statements.

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WEST COAST REALTY INVESTORS, INC.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business

West Coast Realty Investors, Inc. was organized in October 1989 under the laws
of the State of Delaware. We have elected tax status as a Real Estate
Investment Trust (REIT) for federal and state income tax purposes since 1991.
Through March 31, 2002, we were advised by West Coast Realty Advisors, Inc.
(WCRA) and our properties were managed by West Coast Realty Management, Inc.
(WCRM) (collectively, the Advisor), each of which is a wholly-owned
subsidiary of Associated Financial Group, Inc. The Advisor managed and oversaw
our investments, subject to the direction of the board of directors. Our
management and advisory relationships with the Advisor were terminated
effective March 31, 2002, and since that date we have been self-managed and
self-administered.

We were organized for the purpose of investing in, holding and managing
income-producing residential, industrial, retail and commercial properties. As
of June 30, 2002, all of our properties were located in California, and we did
not own any residential properties. Most of our leases are triple-net leases
where the tenant is responsible for maintenance, taxes and insurance.

Rental Real Estate 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 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.

Real estate classified as held for sale is stated at the lower of its
carrying amount or estimated fair value less disposal costs. Depreciation is
not recorded on assets classified as held for sale.

In the normal course of business, we may receive offers to purchase our
properties, either solicited or unsolicited. For the offers we accept, the
prospective buyer will usually require a due diligence period before closing
the transaction. It is not unusual for matters to arise that result in the
withdrawal or rejection of the offer during this process. As a result, real
estate is not classified as held for sale until it is likely, in the opinion
of management, that a property will be disposed of in the near term, even if
sales negotiations for the property are currently under way. Properties
classified as held for sale are segregated from rental real estate in our
financial statement presentation. As of June 30, 2002, we classified six
properties as held for sale, as they were listed for sale with real estate
brokers and we believed there was a high likelihood of sale in the near term.
There can be no assurance that the properties held for sale will be sold in the
near term, at prices we consider acceptable, or at all. Four properties were
classified as held for sale as of December 31, 2001.

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WEST COAST REALTY INVESTORS, INC.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Rental Income, Operating Expense and Capitalized Costs

Rental revenue is recognized on a straight-line basis to the extent that rental
revenue is deemed collectible. Percentage rents in the three and six month
periods ended June 30, 2002 and 2001 were immaterial, and recognized when
received. Improvements and betterments that increase the value of the property
or extend its useful life are capitalized.

Acquisition Costs

We expense internal acquisition costs, including acquisition costs paid the to
the Advisor, in accordance with Emerging Issues Task Force 97-11, Accounting
for Internal Costs Relating to Real Estate Property Acquisitions.

Loan Origination Fees

Loan origination fees are capitalized and amortized over the life of the loan
and included in interest expense.

Cash and Cash Equivalents

We consider cash in the bank, liquid money market funds and all highly liquid
certificates of deposit with original maturities of three months of less, to be
cash and cash equivalents. We place funds in financial institutions we believe
to be creditworthy and of high quality. Cash and cash equivalent balances are
held with various financial institutions and at times may exceed the Federal
Deposit Insurance Corporation limit of $100,000.

Consolidation

As of June 30, 2002, we owned all of our assets directly and have no
subsidiaries. We formed a subsidiary limited liability company in July 2002 in
connection with the refinancing of four of our properties. See Note 11.

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 materially from those estimates.

Net Income Per Share

We calculate net income per share by dividing the net income by the weighted
average number of shares outstanding for the period. We did not have any
potentially dilutive securities in the three and six month periods ended June
30, 2002 or 2001. We are obligated to grant options to purchase

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WEST COAST REALTY INVESTORS, INC.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

200,000 shares
of our stock to our President and Chief Operating Officer. See Note 10. No
options have been granted to date.

Comprehensive Income

Statement of Financial Accounting Standards No. 130, Reporting Comprehensive
Income, (SFAS 130) establishes standards for reporting and display of
comprehensive income and its components in a full set of general-purpose
financial statements. Comprehensive income is comprised of net income and all
changes to stockholders equity except those due to investments by owners and
distributions to owners. We do not have any components of comprehensive income
other than net income in the three and six month periods ended June 30, 2002 or
2001.

Reclassifications

We have made reclassifications to the prior years financial statements to
conform to the presentation of the current years financial statements.

Presentation of Interim Information

The accompanying unaudited financial statements include all normal adjustments
considered necessary, in the opinion of management, to present fairly the
financial position as of June 30, 2002 and the results of operations and cash
flows for the three and six month periods ended June 30, 2002 and 2001.
Interim results are not necessarily indicative of results for a full year.

The financial statements and notes are presented as permitted by Form 10-Q, and
do not contain certain information included in our audited financial statements
and notes for the fiscal year ended December 31, 2001.

Descriptive Information About Reportable Segments

Financial Accounting Standards Board Statement No. 131, Disclosures about
Segments of an Enterprise and Related Information (Statement 131), requires
certain descriptive information to be provided about an enterprises reportable
segments. We have determined that we have one operating and reportable
segment, real estate, which comprised 96% of our total assets at both June 30,
2002 and December 31, 2001 and approximately 99% our total revenues for both
quarterly periods ended June 30, 2002 and 2001. All the rental real estate we
presently own is located in California, although we intend to acquire an
Atlanta, Georgia shopping center in the third quarter. Because most of our
leases are to single tenants under long-term leases, the economic prospects of
the region generally do not affect our rental income or operating expense.
Accordingly, we do not use reporting by geographic region.

Our business focus has been the ownership and operation of suburban office
properties and light industrial buildings, although we intend to acquire a
shopping center in the Atlanta, Georgia area during the third quarter of 2002
and may pursue other real estate opportunities. We evaluate performance and
allocate resources primarily based on the opportunity for growth of net
operating

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WEST COAST REALTY INVESTORS, INC.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

income (NOI). Like the real estate industry generally, we define
NOI as the excess of all revenue generated by the property (primarily rental
revenue) less direct operating expenses (primarily, but not limited to,
property taxes, insurance, property management and maintenance expense, to the
extent not paid by the tenant). NOI excludes depreciation, capitalized
expenditures and interest expense. In addition to NOI growth prospects, we
evaluate properties for planned capital expenditures and various risks such as
non-payment of rent by tenant, term of the lease and other factors. NOI from
our properties totaled $907,542 and $963,892 in the three month periods ended
June 30, 2002 and 2001, respectively, and $1,853,963 and $1,987,230 in the six
month periods ended June 30, 2002 and 2001, respectively.

All revenues are from external customers and there are no revenues from
transactions with other segments. Interest income is not separately reported,
as it is immaterial. Interest expense on debt is not allocated to individual
properties, even if that debt is secured. Because we are organized as a REIT,
we have not provided for federal or state income taxes. See Note 7.

New Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board finalized Statements No.
141, Business Combinations (SFAS 141), and No. 142, Goodwill and Other
Intangible Assets (SFAS 142). SFAS 141 requires the use of the purchase method
of accounting and prohibits the use of the pooling-of-interests method of
accounting for business combinations initiated after June 30, 2001. SFAS 141
also requires that we recognize acquired intangible assets apart from goodwill
if the acquired intangible assets meet certain criteria. SFAS 141 applies to
all business combinations initiated after June 30, 2001 and for purchase
business combinations completed on or after July 1, 2001. It also requires,
upon adoption of SFAS 142 that we reclassify the carrying amounts of intangible
assets and goodwill based on the criteria in SFAS 141.

SFAS 142 requires, among other things, that companies no longer amortize
goodwill, but instead test goodwill for impairment at least annually. In
addition, SFAS 142 requires that we identify reporting units for the purposes
of assessing potential future impairments of goodwill, reassess the useful
lives of other existing recognized intangible assets, and cease amortization of
intangible assets with an indefinite useful life. An intangible asset with an
indefinite useful life should be tested for impairment in accordance with the
guidance in SFAS 142. SFAS 142 is required to be applied in fiscal years
beginning after December 15, 2001 to all goodwill and other intangible assets
recognized at that date, regardless of when those assets were initially
recognized. SFAS 142 requires us to complete a transitional goodwill impairment
test six months from the date of adoption. We are also required to reassess the
useful lives of other intangible assets within the first interim quarter after
adoption of SFAS 142.

We had no previous transactions that resulted in the recognition of goodwill or
other intangible assets. We have adopted SFAS 141 and SFAS 142 and there was no
material effect on our financial statements.

Statement of Financial Accounting Standard 143 (SFAS 143), Accounting for Asset
Retirement Obligations, was issued in June 2001 and is effective for fiscal
years beginning after June 15, 2002.

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WEST COAST REALTY INVESTORS, INC.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SFAS 143 requires that any legal
obligation related to the retirement of long-lived assets be quantified and
recorded as a liability with the associated asset retirement cost capitalized
on the balance sheet in the period it is incurred when a reasonable estimate of
the fair value of the liability can be made. We have adopted SFAS 143 and
there was no material effect on our financial statements.

Statement of Financial Accounting Standard 144 (SFAS 144), Accounting for the
Impairment or Disposal of Long-Lived Assets, was issued in August 2001 and is
effective for fiscal years beginning after December 15, 2001. SFAS 144 provides
a single, comprehensive accounting model for impairment and disposal of
long-lived assets and discontinued operations. We have adopted SFAS 144 and
there was no material effect on our financial statements.

Accounting Pronouncements Issued But Not Yet Adopted

In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No.
4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections.
This statement eliminates the current requirement that gains and losses on debt
extinguishment must be classified as extraordinary items in the income
statement. Instead, such gains and losses will be classified as extraordinary
items only if they are deemed to be unusual and infrequent, in accordance with
the current GAAP criteria for extraordinary classification. In addition, SFAS
145 eliminates an inconsistency in lease accounting by requiring that
modifications of capital leases that result in reclassification as operating
leases be accounted for consistent with sale-leaseback accounting rules. The
statement also contains other nonsubstantive corrections to authoritative
accounting literature. The changes related to debt extinguishment will be
effective for fiscal years beginning after May 15, 2002, and the changes
related to lease accounting will be effective for transactions occurring after
May 15, 2002. Adoption of this standard will not have any immediate effect on
our financial statements.

In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities, which addresses accounting for restructuring
and similar costs. SFAS No. 146 supersedes previous accounting guidance,
principally Emerging Issues Task Force (EITF) Issue No. 94-3. We will adopt
the provisions of SFAS No. 146 for restructuring activities initiated after
December 31, 2002. SFAS No. 146 requires that the liability for costs
associated with an exit or disposal activity be recognized when the liability
is incurred. Under EITF No. 94-3, a liability for an exit cost was recognized
at the date of a companys commitment to an exit plan. SFAS No. 146 also
establishes that the liability should initially be measured and recorded at
fair value. Accordingly, SFAS No. 146 may affect the timing of recognizing
future restructuring costs as well as the amount recognized.

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WEST COAST REALTY INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS

NOTE 1 RENTAL REAL ESTATE

Our major categories of rental real estate are:

|                              |  |             |            |              |  |   |            |  
|----------------------------- |  | ----------- | ---------- | ------------ |  | - | ---------- | -
|                              |  | June 30,    |            | December 31,
|                              |  | 2002        |            | 2001        
|                              |  |             |            |             
|                              |  | (Unaudited) |            | (Audited)   
|Land                          |  | $           | 9,651,478  |              |  | $ | 10,672,326 |  
|Buildings and improvements    |  |             | 18,621,188 |              |  |   | 21,141,666 |  
|                              |  |             |            |              |  |   |            |  
|                              |  |             | 28,272,666 |              |  |   | 31,813,992 |  
|Less accumulated depreciation |  |             | (2,247,050 | )            |  |   | (2,355,675 | )
|                              |  |             |            |              |  |   |            |  
|Net rental real estate        |  | $           | 26,025,616 |              |  | $ | 29,458,317 |  
|                              |  |             |            |              |  |   |            |  

Our major categories of rental real estate held for sale are:

|                                     |  |             |            |              |  |   |            |  
|------------------------------------ |  | ----------- | ---------- | ------------ |  | - | ---------- | -
|                                     |  | June 30,    |            | December 31,
|                                     |  | 2002        |            | 2001        
|                                     |  |             |            |             
|                                     |  | (Unaudited) |            | (Audited)   
|Land                                 |  | $           | 2,548,472  |              |  | $ | 2,476,319  |  
|Buildings and improvements           |  |             | 6,070,089  |              |  |   | 3,977,000  |  
|                                     |  |             |            |              |  |   |            |  
|                                     |  |             | 8,618,561  |              |  |   | 6,453,319  |  
|Less accumulated depreciation        |  |             | (1,173,743 | )            |  |   | (1,050,477 | )
|                                     |  |             |            |              |  |   |            |  
|Net rental real estate held for sale |  | $           | 7,444,818  |              |  | $ | 5,402,842  |  
|                                     |  |             |            |              |  |   |            |  

Once a property is classified as held for sale, we stop charging depreciation
expense related to it.

On April 26, 2002, we sold our Huntington Beach property to an unaffiliated
buyer for $1,500,000, resulting in a gain of approximately $230,000.

We currently believe we will sell our Corona property in the third quarter of
2002; however, as of June 30, 2002, and the three months then ended, we did not
believe a sale to be likely and therefore did not classify the Corona property
as held for sale as of June 30, 2002.

We earned a portion of our rental revenue from tenants whose individual rents
represented more than 10% of our total rental revenue for the three and six
month periods ending June 30, 2002 and 2001. Specifically:



| |  |  | Four tenants accounted for 20%, 16%, 13% and 10% in the
three month period ended June 30, 2002.                     
| | - |  | --------------------------------------------------------------------------------------------------------------------
|
| |  |  | Three tenants accounted for 15%, 14% and 11% in the three month
period ended June 30, 2001 and one accounted for 9%.
|
| |  |  | Four tenants accounted for 20%, 15%, 12% and 10% in the six
month period ended June 30, 2002.                       
|
| |  |  | Three tenants accounted for 15%, 14% and 11% in the six month
period ended June 30, 2001 and one accounted for 9%.  

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WEST COAST REALTY INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS

The tenant in our Ontario property is a subsidiary of Adelphia
Communications, Inc, which has filed for protection under the federal
bankruptcy laws. The tenant has paid its rent through August 31, 2002.
We do not yet know whether we will be adversely affected this bankruptcy
filing.

NOTE 2 FUTURE MINIMUM RENTAL INCOME

As of June 30, 2002, future minimum rental income under the existing leases
that have remaining noncancelable terms in excess of one year are as follows:

|                      |            |        |   |           |            | 
|--------------------- | ---------- | ------ | - | --------- | ---------- | 
|Years ending June 30, |            | Amount
|                      |            |       
|                      | 2003       |        | $ | 3,692,756 |           
|                      | 2004       |        |   | 3,115,712 |           
|                      | 2005       |        |   | 3,095,526 |           
|                      | 2006       |        |   | 2,392,631 |           
|                      | 2007       |        |   | 1,785,953 |           
|                      | Thereafter |        |   | 6,249,287 |           
|                      |            |        |   |          
|                      |            | Total  |   | $         | 20,331,865 | 
|                      |            |        |   |          

Future minimum rental income does not include lease renewals or new leases that
may result after a noncancelable lease expires.

NOTE 3 DEPOSITS AND ACQUISITION EXPENSES

As of June 30, 2002, we had made deposits totaling approximately $460,000 in
connection with a loan refinancing. Of this amount, approximately $300,000 was
refunded to us upon the closing of the refinancing on August 5, 2002. See Note
11. In addition, we have deposited $400,000 toward the purchase of a shopping
center in the Atlanta, Georgia area. This deposit is refundable if the lender
of the existing loan does not formally consent to our assumption of the loan by
August 25, 2002. Further, in connection with the above, we have paid
approximately $70,000 in legal fees to outside counsel.

NOTE 4 RELATED PARTY TRANSACTIONS

Until March 31, 2002, we had two agreements with the Advisor to provide advice
on investments and to administer our day-to-day operations, including property
management. The Advisor has terminated those agreements, pursuant to their
terms, effective March 31, 2002. Since that date, we have been fully
self-administered and self-managed, and no fees are due the Advisor.

During the quarter ended March 31, 2002, no advisory fees were due to the
Advisor, and the Advisor did not charge us property management fees or for a
reimbursement of overhead costs due to the relatively low level of service
provided in that period.

At June 30, 2002, the Advisor and a related entity owned 22,556 of our shares,
less than 1% of our outstanding shares. Two of our directors are also
directors of the Advisor and its affiliates.

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WEST COAST REALTY INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS

The following related party transactions are included in the statements of
income:

|                                                                                                                              |  |                    |   |                  |  |      |        |      |  |  |   |  |  |   |         | 
|----------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | - | ---------------- |  | ---- | ------ | ---- |  |  | - |  |  | - | ------- | 
|                                                                                                                              |  | Three months ended |   | Six months ended
|                                                                                                                              |  | June 30,           |   | June 30,        
|                                                                                                                              |  |                    |   |                 
|                                                                                                                              |  | 2002               |   | 2001             |  | 2002 |        | 2001
|                                                                                                                              |  |                    |   |                  |  |      |        |     
|Overhead expenses reimbursed to the WCRA                                                                                      |  |                    |  |                  |  | $    | 6,000  |      |  |  |  |  |  | $ | 12,000  | 
|                                                                                                                              |  |                    |   |                  |  |      |        |      |  |  |   |  |  |   |         | 
|Property management fees earned by WCRM                                                                                       |  |                    |  |                  |  | $    | 49,289 |      |  |  |  |  |  | $ | 86,532  | 
|                                                                                                                              |  |                    |   |                  |  |      |        |      |  |  |   |  |  |   |         | 
|Advisory fees earned by WCRA, which
waived collection of these fees, which
are included in additional paid-in
capital in 2001 |  |                    |  |                  |  | $    | 56,518 |      |  |  |  |  |  | $ | 113,518 | 
|                                                                                                                              |  |                    |   |                  |  |      |        |      |  |  |   |  |  |   |         | 

In addition, we had related party accounts payable as follows:

|                                   |  |               |        |                   |  |   |        | 
|---------------------------------- |  | ------------- | ------ | ----------------- |  | - | ------ | 
|                                   |  | June 30, 2002 |        | December 31, 2001
|                                   |  |               |        |                  
|                                   |  | (Unaudited)   |        | (Audited)        
|Associated Securities Corporation  |  | $             | 19,077 |                   |  | $ | 22,000 | 
|West Coast Realty Management, Inc. |  |               |       |                   |  |   | 13,477 | 
|West Coast Realty Advisors, Inc.   |  |               | 2,000  |                   |  |   | 2,000  | 
|                                   |  |               |        |                   |  |   |        | 
|                                   |  | $             | 21,077 |                   |  | $ | 37,477 | 
|                                   |  |               |        |                   |  |   |        | 

NOTE 5  NOTES PAYABLE

Notes payable consist of the following:

|                                                                                                                                                                                      |  |                                  |           |              |  |   |           | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------- | --------- | ------------ |  | - | --------- | 
|                                                                                                                                                                                      |  | Outstanding Principal Balance on
|                                                                                                                                                                                      |  |                                 
|                                                                                                                                                                                      |  | June 30,                         |           | December 31,
|                                                                                                                                                                                      |  | 2002                             |           | 2001        
|                                                                                                                                                                                      |  |                                  |           |             
|                                                                                                                                                                                      |  | (Unaudited)                      |           | (Audited)   
|8.250% promissory note secured by our Huntington
Beach property, monthly principal and interest
payments are $4,934, due February 1, 2004                                             |  | $                                |          |              |  | $ | 493,605   | 
|8.250% promissory note secured by our Fresno
property, monthly principal and interest payments
are $5,244, due August 1, 2003 with a balloon
payment of $537,256                      |  |                                  | 556,767   |              |  |   | 565,136   | 
|8.250% promissory note secured by our Riverside
property, monthly principal and interest payments
are $9,116, due November 8, 2004 with a balloon
payment of $1,062,369               |  |                                  | 1,105,467 |              |  |   | 1,113,865 | 
|9.625% promissory note secured by our Tustin
property, monthly principal and interest payments
are $24,190, due February 1, 2005. This loan was
refinanced on August 5, 2002          |  |                                  | 1,558,180 |              |  |   | 1,626,410 | 
|8.000% promissory note secured by our Sacramento
property (Java City 721 West Del Paso Road), with
fully amortizing monthly principal and interest
payments of $3,126 to June 1, 2018 |  |                                  | 334,840   |              |  |   | 340,187   | 

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WEST COAST REALTY INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS

NOTE 5  NOTES PAYABLE (continued)

|                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |                                  |           |              |  |  |           | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------- | --------- | ------------ |  |  | --------- | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                             |  | Outstanding Principal Balance on
|                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                             |  | June 30,                         |           | December 31,
|                                                                                                                                                                                                                                                                                                                                                                                                                                             |  | 2002                             |           | 2001        
|                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |                                  |           |             
|                                                                                                                                                                                                                                                                                                                                                                                                                                             |  | (Unaudited)                      |           | (Audited)   
|Variable rate promissory note secured by our
Irvine property, interest rate margin is 1.90%
over the 3 month LIBOR with right of conversion
after the first year (3.93% at June 30, 2002),
monthly payments of principal and interest are
$16,693, due August 1, 2007. This loan was
refinanced on August 5, 2002                                                                                                                            |  |                                  | 2,106,728 |              |  |  | 2,140,535 | 
|8.330% promissory note secured by our Roseville
property, monthly principal and interest payments
are $11,510, due July 1, 2008 with a balloon
payment of $1,187,329                                                                                                                                                                                                                                                                         |  |                                  | 1,372,022 |              |  |  | 1,383,654 | 
|7.375% promissory note secured by our
Corona property, monthly principal and
interest payments are $7,309 due June
1, 2011, with a balloon payment of
$700,039. The rate is adjustable on
the fourth and eighth anniversary years
of the loan, to the weekly average of
the five-year Treasury Note yield for
the seventh week prior to the
Adjustment Date plus 195 basis points,
but no less than the existing rate                        |  |                                  | 935,289   |              |  |  | 944,456   | 
|7.375% promissory note secured by our
Sacramento, property (Horn Road),
monthly principal and interest payments
are $7,309, due June 1, 2011 (rate is
adjustable on the fourth and eighth
anniversary years of the loan, to the
weekly average of the five-year
Treasury Note yield for the seventh
week prior to the Adjustment Date plus
195 basis points, but no less than the
existing rate). This loan was
refinanced on August 5, 2002 |  |                                  | 935,289   |              |  |  | 944,456   | 
|7.500% promissory note secured by our
Chino property, monthly principal and
interest payments are $6,836, due
October 1, 2010, with a balloon payment
of $682,409. The rate is adjustable on
the fourth and eighth anniversary years
of the loan, to the weekly average of
the five-year Treasury Note yield for
the seventh week prior to the
Adjustment Date plus 200 basis points,
but no less than the existing rate                     |  |                                  | 871,772   |              |  |  | 879,918   | 
|7.500% promissory note secured by our
Vacaville property, monthly principal
and interest payments are $10,346, due
October 1, 2010, with a balloon payment
of $1,032,923. The rate is adjustable
on the fourth and eighth anniversary
years of the loan, to the weekly
average of the five-year Treasury Note
yield for the seventh week prior to the
Adjustment Date plus 200 basis points,
but no less than the existing rate              |  |                                  | 1,319,458 |              |  |  | 1,331,784 | 

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WEST COAST REALTY INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS

NOTE 5  NOTES PAYABLE (continued)

|                                                                                                                                                                                                                                                                                                                                                                                                                          |       |  |                                  |            |              |  |           |            | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----- |  | -------------------------------- | ---------- | ------------ |  | --------- | ---------- | 
|                                                                                                                                                                                                                                                                                                                                                                                                                          |       |  | Outstanding Principal Balance on
|                                                                                                                                                                                                                                                                                                                                                                                                                          |       |  |                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                          |       |  | June 30,                         |            | December 31,
|                                                                                                                                                                                                                                                                                                                                                                                                                          |       |  | 2002                             |            | 2001        
|                                                                                                                                                                                                                                                                                                                                                                                                                          |       |  |                                  |            |             
|                                                                                                                                                                                                                                                                                                                                                                                                                          |       |  | (Unaudited)                      |            | (Audited)   
|7.500% promissory note secured by our
Cerritos property, monthly principal
and interest payments are $9,238, due
April 1, 2011, with a balloon payment
of $922,137. The rate is adjustable on
the fourth and eighth anniversary years
of the loan, to the weekly average of
the five year Treasury Note yield for
the seventh week prior to the
Adjustment Date plus 275 basis points,
but no less than the existing rate |       |  | 1,189,071                        |            |              |  | 1,199,676 |           
|7.500% promissory
note secured by our
Ontario property,
monthly principal
and interest
payments are
$22,390, due March
1, 2004, with a
balloon payment of $2,764,436                                                                                                                                                                                                                                                      |       |  | 2,854,802                        |            |              |  | 2,880,329 |           
|Variable rate
promissory note
secured by our
Folsom property,
interest rate
margin is 1.75%
over the 3 month
LIBOR (3.8438% at
June 30, 2002),
monthly payments of
principal of
$6,199 and interest
calculated on the
outstanding
balance, due
September 1, 2002
This loan was
refinanced on
August 5, 2002                                                                                                               |       |  | 3,915,305                        |            |              |  | 3,952,499 |           
|                                                                                                                                                                                                                                                                                                                                                                                                                          |       |  |                                  |            |              |  |           |           
|                                                                                                                                                                                                                                                                                                                                                                                                                          | Total |  | $                                | 19,054,990 |              |  | $         | 19,796,510 | 
|                                                                                                                                                                                                                                                                                                                                                                                                                          |       |  |                                  |            |              |  |           |           

The aggregate annual future maturities of our notes payable at June 30, 2002
are as follows:

|                      |       |        |           |            | 
|--------------------- | ----- | ------ | --------- | ---------- | 
|Years ending June 30, |       | Amount
|                      |       |       
|2003                  |       | $      | 4,361,177 |           
|2004                  |       |        | 3,744,670 |           
|2005                  |       |        | 1,308,137 |           
|2006                  |       |        | 1,505,184 |           
|2007                  |       |        | 272,252   |           
|Thereafter            |       |        | 7,863,570 |           
|                      |       |        |           |           
|                      | Total |        | $         | 19,054,990 | 
|                      |       |        |           |           

On August 5, 2002, we refinanced the loans secured by our properties in Tustin,
Sacramento (Horn Road), Irvine and Folsom. These loans totaled approximately
$8,500,000. See Note 11.

NOTE 6 NET INCOME AND DIVIDENDS PER SHARE

Dividends are declared by our board of directors and are based on a variety of
factors, including the previous quarters net income from operations before
depreciation and amortization, cash requirements to meet REIT distribution
tests, other cash requirements and other factors as the board deems
appropriate.

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WEST COAST REALTY INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS

Net Income Per Share was computed using the weighted average number of
outstanding shares of 2,927,967 and 2,927,967 for the three and six month
periods ended June 30, 2002 and 2001. We did not issue any potentially
dilutive securities in the three and six month periods ended June 30, 2002 or
2001.

NOTE 7 TAXES ON INCOME

We have elected to be taxed as a REIT under Sections 856-860 of the Internal
Revenue Code of 1986, as amended (the Code). As a result, we will not be
subject to federal taxation at the corporate level to the extent we distribute,
annually, at least 90% of our REIT taxable income, as defined by the Code, to
our stockholders and satisfy certain other requirements. In addition,
California, the state in which in which we own and operate real estate
properties, has provisions equivalent to the federal REIT provisions.
Accordingly, we have not provided for federal or state income taxes in the
accompanying financial statements.

NOTE 8 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

A supplemental disclosure of cash flow information follows:

|                                                          |  |                                                                  |         |      |         |   |         |   |         | 
|--------------------------------------------------------- |  | ---------------------------------------------------------------- | ------- | ---- | ------- | - | ------- | - | ------- | 
|Six month periods ended June 30,                          |  | 2002                                                             |         | 2001
|                                                          |  |                                                                  |         |     
|Cash paid during the period for interest                  |  | $                                                                | 659,370 |      |         | $ | 795,357 |  
|                                                          |  |                                                                  |         |      |         |   |         |  
|Supplemental disclosure of non-cash financing Activities: |  |                                                                  |         |      |         |   |         |  
|                                                          |  | Dividends declared                                               |         | $    | 292,797 |   |         | $ | 439,195 | 
|                                                          |  |                                                                  |         |      |         |   |         |  
|                                                          |  | Equity contributed by an affiliate through
expense reimbursement |         |      |        |   |         | $ | 113,518 | 
|                                                          |  |                                                                  |         |      |         |   |         |  

NOTE 9 INSURANCE RECOVERY

In March 2001, we received $165,053 from Bankers Standard Insurance Company
(Bankers Standard) in partial settlement of a lawsuit regarding Bankers
Standards responsibility to defend us in a lawsuit related to the Riverside
property. See Note 10, below. Bankers Standard is also required to pay the
subsequent costs of this action. We had previously expensed these legal costs,
and as a result, we took the proceeds of the settlement into income in March
2001.

NOTE 10 COMMITMENTS AND CONTINGENCIES

During the quarter ended September 30, 2001, we entered into an employment
agreement with Mr. Allen K. Meredith, the President and Chief Executive
Officer, under which he is entitled to options to purchase 200,000 shares of
our common stock at an exercise price equal to the fair market value at the
date of grant. These options would vest over a period of two years. As of
June 30, 2002, no options have been issued to Mr. Meredith and there is
therefore no dilutive impact for these options. Further, we would be obligated
to make severance payments to Mr. Meredith, upon the termination of his
employment or his resignation for certain reasons, of one years salary plus
bonus, if any.

We are a defendant in a lawsuit entitled John Lonberg & Ruthee Goldkorn v.
Sanborn Theaters, Inc., a California Corporation doing business as Marketplace
Cinema and So-Cal Cinema, Inc., a California Corporation; and
Salts-Troutman-Kaneshiro, Inc., West Coast Realty Investors, Inc., USDC Central
District of California, Eastern Division Case No. CV-97-6598AHM (JGx). This is
an Americans with

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WEST COAST REALTY INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS

Disabilities Act claim brought against the Market Place
Cinema, our property located in Riverside. We own the theater and have leased
it to Sanborn Theaters, Inc., who operates it. The plaintiffs allege certain
features of the theater discriminated against them and violated state and
federal disabled access laws. The plaintiffs demand statutory damages, damages
for emotional distress, a lodestar multiplier, attorneys fees and punitive
damages. Although the plaintiffs have not quantified their damages, we expect
that the plaintiffs claims will exceed $300,000. The United States Department
of Justice has intervened in this suit against Sanborn Theaters. This case has
now been stayed pending the outcome of a similar case filed against AMC
Theaters. We cannot determine the likelihood of an unfavorable outcome or
range of potential loss, if any. We believe we have complied with all
applicable provisions of law and intend to vigorously defend the allegations
contained in the lawsuit. We believe that the lawsuit will not have a material
impact on our continuing operations or overall financial condition.

NOTE 11 SUBSEQUENT EVENTS

On June 27, 2002, our board of directors declared a dividend of $0.10 per
common share to holders of record on July 3, 2002, payable on July 19, 2002.

On July 19, 2002 our board of directors amended portions of our bylaws to
conform the bylaws to our certificate of incorporation and to revise the
policies related to the amount of debt secured by any one property. Further,
as described in the proxy materials for our September 2002 annual meeting of
stockholders, our board voted to amend and restate our certificate of
incorporation and our bylaws and to submit those amendments and restatements to
our stockholders for their approval. A feature of those proposals is a
one-for-three reverse split of our outstanding shares. These changes are
contingent on stockholder approval and listing of our shares on a national
exchange. Finally, the board adopted a stock incentive plan, which is also
subject to stockholder approval.

On August 5, 2002, we completed the refinancing of loans totaling approximately
$8,500,000 secured by four of our properties: Tustin, Sacramento (Horn Road),
Irvine and Folsom. The new loans bear a base rate of 6.97% and have a total
initial outstanding principal amount of $15,020,000 and are due in seven years,
with principal amortizing on a 30 year basis. As part of the refinancing, the
lender required us to create a single purpose limited liability company to hold
title to these properties; accordingly, we transferred the properties to the
limited liability company and are the sole member of that company. We received
approximately $6,500,000 in net proceeds after reserves, interest prorations, a
prepayment penalty and approximately $300,000 in fees and costs. In addition,
we will expense the unamortized balance of loan fees of approximately $190,000
related to the loans we refinanced.

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WEST COAST REALTY INVESTORS, INC.




ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within
the meaning of the federal securities laws. Forward-looking statements are
identified by words such as believes, expects, may, will, should,
seeks, approximately, intends, plans, pro forma, estimates, or
anticipates or in their negative form or other variations, or by discussions
of strategy, plans or intentions. Forward-looking statements are based on
assumptions, data or methods that may be incorrect, imprecise or incapable of
being realized. These statements include our statements of this nature
concerning the following:



| |  |  | the commercial real estate market;                                                                                                                                                
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | our future revenues;                                                                                                                                                              
|
| |  |  | our future revenue mix, net operating income and operating results;                                                                                                               
|
| |  |  | our future cash requirements;                                                                                                                                                     
|
| |  |  | competition, our competitors and our ability to compete;                                                                                                                          
|
| |  |  | our financial and managerial controls, reporting systems and procedures, and other systems
and processes;                                                                         
|
| |  |  | property values;                                                                                                                                                                  
|
| |  |  | any particular tenants intentions or financial condition, such as its plans to renew or
terminate a property lease, or the likelihood that it will default upon a property lease;
|
| |  |  | vacancies;                                                                                                                                                                        
|
| |  |  | interest rates;                                                                                                                                                                   
|
| |  |  | our operating costs;                                                                                                                                                              
|
| |  |  | our future depreciation expenses;                                                                                                                                                 
|
| |  |  | litigation matters and legal proceedings, our defenses to
such matters and our contesting of
such matters;                                                                        
|
| |  |  | our ability to meet our debt obligations;                                                                                                                                         
|
| |  |  | the proposed sales of certain properties;                                                                                                                                         
|
| |  |  | our ability to obtain outside financing;                                                                                                                                          
|
| |  |  | identifying, acquiring and successfully integrating new properties;                                                                                                               
|
| |  |  | the type and locations of real estate investments we may make;                                                                                                                    
|
| |  |  | our ability to qualify as a real estate investment trust under the Internal Revenue Code of
1986, as amended;                                                                     
|
| |  |  | environmental risks;                                                                                                                                                              
|
| |  |  | natural disasters and other threats to our properties;                                                                                                                            
|
| |  |  | the economies of the geographic areas where our properties are located;                                                                                                           
|
| |  |  | our ability to provide liquidity for our common stock by
listing it on the American Stock Exchange or other national market;
and                                                  
|
| |  |  | our ability to recover costs and deposits in our proposed
purchase of the shopping center in the Atlanta, Georgia area.                                                           

These statements are subject to risks and uncertainties that could cause actual
results and events to differ materially. For a detailed discussion of these
risks and uncertainties, see the portion of this Item 2 entitled Risk Factors
that May Affect Future Operating Results.. We undertake no obligation to

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WEST COAST REALTY INVESTORS, INC.

update forward-looking statements to reflect events or circumstances occurring
after the date of this Report on Form 10-Q.

RESULTS OF OPERATIONS

Overview

West Coast Realty Investors, Inc. was organized in October 1989 under the laws
of the State of Delaware. We have elected tax status as a Real Estate
Investment Trust (REIT) for federal and state income tax purposes since 1991.
Through March 31, 2002, we were advised by West Coast Realty Advisors, Inc.
(WCRA) and our properties were managed by West Coast Realty Management, Inc.
(WCRM) (collectively, the Advisor), each of which is a wholly-owned
subsidiary of Associated Financial Group, Inc. The Advisor managed and oversaw
our investments, subject to the direction of the board of directors. Our
management and advisory relationships with the Advisor were terminated
effective March 31, 2002, and since that date we have been self-managed and
self-administered.

Our business focus has been the ownership and operation of suburban office
properties and light industrial buildings, although we intend to acquire an
Atlanta, Georgia shopping center in the third quarter and may pursue other real
estate opportunities. Most of our leases are triple-net leases where the
tenant is responsible for maintenance, taxes and insurance.

Other than our becoming self-managed and self-advised as noted above, the most
significant factors affecting our financial results are as follows:



| |  |  | In August 2001, our tenant in our Vacaville property exercised its
early termination option in the lease. This property generated
approximately 8% of our gross rental income before its lease
terminated. To date, we have not secured a replacement tenant for this
property.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | On April 26, 2002, we sold our Huntington Beach property to an
unaffiliated buyer for $1,500,000, resulting in a gain of approximately
$230,000. This property generated approximately 3% of our gross rental
income before its sale.                                          
|
| |  |  | On May 31, 2002, the lease expired on our Corona property, and to
date, we have not secured a replacement tenant for this property. This
property generated approximately 5% of our gross rental income before
its lease expired.                                              

In addition, the tenant in our Ontario property is a subsidiary of Adelphia
Communications, Inc, which has filed for protection under the federal
bankruptcy laws. The tenant has paid its rent through July 31, 2002. We do
not yet know whether we will be adversely affected this bankruptcy filing.
This property generates approximately 12% of our gross rental income

Quarter ended June 30, 2002 compared to the quarter ended June 30, 2001

Operations for the quarterly periods ended June 30, 2002 and 2001 represented
full periods of rental operations for all of our properties except for our
Huntington Beach, Vacaville and Corona properties for the reasons described
above in Overview.

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WEST COAST REALTY INVESTORS, INC.

Rental revenue decreased by $86,539 (8%) for the quarter ended June 30, 2002
compared to the quarter ended June 30, 2001, primarily due to the loss of rents
in 2002 from the Huntington Beach, Vacaville and Corona properties.

Interest income decreased by $11,092 (72%) for the quarter ended June 30, 2002
compared to the quarter ended June 30, 2001 due to lower average balances
maintained in interest-earning assets and lower interest rates.

Interest expense decreased by $57,099 (15%) for the quarter ended June 30, 2002
compared to the quarter ended June 30, 2001, due to significantly lower
interest rates on our variable rate debt at our Folsom and Irvine properties in
2002 and the sale of the Huntington Beach property.

General and administrative costs increased by $152,768 (153%) principally due
to our conversion to a self-advised and self-managed REIT, including expenses
related to hiring of employees, travel expenses and insurance. This increase
was offset in part by our having to pay no advisory fee in 2002 because our
agreement with the Advisor was terminated on March 31, 2002.

Depreciation expense decreased by $ 59,777 (33%) for the quarter ended June 30,
2002 compared to the quarter ended June 30, 2001, primarily due to the
classification of properties as held for sale in the first quarter of 2002.
Depreciation expense was not charged to those properties held for sale in the
second quarter of 2002, as it had been during the same quarter in 2001.

Operating expenses decreased by $30,089 (20%) primarily due to the elimination
of the management fee to the Advisor on the termination of the agreement on
March 31, 2002.

Net gain on sale of rental real estate held for sale was $230,940 in quarter
ended June 30, 2002 due to the sale of the Huntington Beach property. We sold
no properties in the same period in 2001.

Net income for the quarter ended June 30, 2002 was $439,479, compared to net
income of $311,973 for the quarter ended June 30, 2001. This increase was
largely attributed to the gain on sale of our Huntington Beach property.

The weighted average number of shares outstanding for the quarter ended June
30, 2002 was 2,927,967, the same as the comparable period in prior year. Net
income per share before gain on sale of rental real estate held for sale
decreased from $0.11 in 2001 to $0.07 in 2002 largely due to the loss of rents
from the Vacaville, Huntington Beach and Corona properties.

Six months ended June 30, 2002 compared to the six months ended June 30, 2001

Operations for the quarterly periods ended June 30, 2002 and 2001 represented
full periods of rental operations for all of our properties except for our
Huntington Beach, Vacaville and Corona properties during the periods and for
the reasons described above in Overview.

Rental revenue decreased by $156,974 (7%) for the six months ended June 30,
2002 compared to the six months ended June 30, 2001, primarily due to the loss
of rents in 2002 from the Huntington Beach, Vacaville and Corona properties.

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WEST COAST REALTY INVESTORS, INC.

Interest income decreased by $24,181 (24%) for the six months ended June 30,
2002 compared to the six months ended June 30, 2001 due to lower average
balances maintained in interest-earning assets and lower interest rates.

Interest expense decreased by $129,858 (16%) for the six months ended June 30,
2002 compared to the six months ended June 30, 2001, due to significantly lower
interest rates on our variable rate debt at our Folsom and Irvine properties in
2002 and to the sale of the Huntington Beach property in 2002.

General and administrative costs increased by $227,247 (98%) principally due to
our conversion to a self-advised and self-managed REIT, including expenses
related to the hiring of four employees, travel expenses and insurance. This
increase was offset in part by having to no advisory fee due for the period
January 1 - March 31, 2002 because the criteria to charge the fee was not met
in that period and the termination of our agreement with the Advisor on March
31, 2002.

Depreciation expense decreased by $119,556 (3%) the six months ended June 30,
2002 compared to the six months ended June 30, 2001, primarily due to the
classification of properties as held for sale in the first six months of
2002. Depreciation expense was not charged to those properties classified as
held for sale in the first six months of 2002, as it had been during the same
six months in 2001.

Operating expenses decreased by $23,707 (8%) primarily due largely to the
Advisor waiving the management fee for the period January 1 - March 31, 2002
and the termination of the agreement with the Advisor on March 31, 2002.

In March 2001, we received $165,053 from Bankers Standard Insurance Company
(Bankers Standard) in partial settlement of a lawsuit regarding Bankers
Standards responsibility to defend us in the Market Place Cinema lawsuit. See
Part II, Item 1. Bankers Standard is also required to pay the subsequent
legal costs of defending this action. We had previously expensed these legal
costs, and as a result the proceeds of the settlement were taken into income in
March 2001. There was no such item in 2002.

Net gain on sale of real estate held for sale was $230,940 in six months ended
June 30, 2002 due to the sale of the Huntington Beach property; there were no
property sales in the same period in 2001.

Net income for the six months ended June 30, 2002 was $721,050, compared to net
income of $790,444 for the six months ended June 30, 2001. This decrease was
largely attributed to amounts recognized from the Bankers Standard settlement
in 2001, the loss of rents from the Vacaville, Huntington Beach and Corona
properties in 2002 and offset in part by the gain on sale of rental real estate
held for sale in 2002.

The weighted average number of shares outstanding for the six months ended June
30, 2002 was 2,927,967, the same as the comparable period in prior year. Net
income before gain on sale of rental real estate held for sale per share
decreased from $0.27 in 2001 to $0.17 in 2002 largely due to amounts recognized
from the Bankers Standard settlement in 2001 and the loss of rents from the
Vacaville, Huntington Beach and Corona properties in 2002.

Inflation and changing prices have not had a material effect on our operations.

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WEST COAST REALTY INVESTORS, INC.

CRITICAL ACCOUNTING POLICIES

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 at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. We evaluate our estimates and assumptions on an ongoing
basis based on a combination of historical information and various other
assumptions that we believe are to be reasonable under the particular
circumstances. Actual results may differ from these estimates based on
different assumptions or conditions. We believe the critical accounting
policies that most affect our consolidated financial statements are described
below.

Revenue Recognition  We recognize minimum rents on the straight-line method
over the terms of the leases, as required under Statement of Financial
Accounting Standard No. 13. Some of the leases also provide for additional
revenue based on contingent percentage income, which is recorded on an accrual
basis once the specified target that triggers this type of income is achieved.
The leases also typically require our tenants to pay us for common area
maintenance, real estate taxes and other operating expenses. We recognize
these payments as revenue in the period the applicable costs are incurred.

Real Estate  We record real estate assets at the lower of cost or fair value
if impaired. Costs incurred to unaffiliated third parties for the acquisition
of properties are capitalized.

We evaluate the recoverability of our investment in real estate whenever events
or changes in circumstances indicate that the carrying amount of an asset may
be impaired. Our assessment of recoverability of our real estate assets
includes, but is not limited to, recent operating results, expected cash flows
and our plans for future operations.

In the normal course of business, we may receive offers to purchase our
properties, either solicited or unsolicited. For the offers we accept, the
prospective buyer will usually require a due diligence period before closing
the transaction. It is not unusual for matters to arise that result in the
withdrawal or rejection of the offer during this process. As a result, real
estate is not classified as held for sale until it is likely, in the opinion
of management, that a property will be disposed of in the near term, even if
sales negotiations for the property are currently under way. Properties
classified as held for sale are segregated from rental real estate in our
financial statement presentation and we stop recording depreciation on a
property once we classify it as held for sale. There can be no assurance that
the properties held for sale will be sold in the near term, at prices we
consider acceptable, or at all.

Properties classified as held for sale are segregated from rental real estate
in our financial statement presentation. We stop recording depreciation on a
property once we classify it as held for sale.

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 materially from those estimates.

LIQUIDITY AND CAPITAL RESOURCES

Our primary source of liquidity to fund distributions, principal payments on
notes payable and minor capital expenditures is our cash flows from operating
activities. To qualify as a REIT for federal income tax purposes, we must
distribute annually at least 90% of our REIT taxable income (excluding capital
gains). Accordingly, we currently intend to continue to make, but have not
contractually bound

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WEST COAST REALTY INVESTORS, INC.

ourselves to make, regular quarterly distributions to
holders of our common stock. As a policy, we keep cash balances on hand for
reserves for unexpected cash requirements. Our primary sources for liquidity
to fund asset acquisitions, major capital expenditures and balloon payments on
notes payable include (a) net proceeds of refinancing selected existing notes
payable, and (b) selling assets. Further, we may attempt to obtain funding by
issuing additional equity either in the form of common stock or through joint
ventures.

The following table presents our contractual cash obligations as of June 30,
2002:

|                                   |  |                        |            |                    |  |                    |           |                     |  |                 |           |  |  |   |           |  |  |   |           | 
|---------------------------------- |  | ---------------------- | ---------- | ------------------ |  | ------------------ | --------- | ------------------- |  | --------------- | --------- |  |  | - | --------- |  |  | - | --------- | 
|                                   |  | Payments Due by Period
|                                   |  |                       
|Contractual Obligations            |  | Total                  |            | Less Than One year |  | One to Three Years |           | Three to Five Years |  | Over Five Years
|                                   |  |                        |            |                    |  |                    |           |                     |  |                
|Long-Term Debt                     |  | $                      | 19,054,990 |                    |  | $                  | 4,361,177 |                     |  | $               | 5,052,807 |  |  | $ | 1,777,436 |  |  | $ | 7,863,570 | 
|                                   |  |                        |            |                    |  |                    |           |                     |  |                 |           |  |  |   |           |  |  |   |           | 
|Total Contractual Cash
Obligations |  | $                      | 19,054,990 |                    |  | $                  | 4,361,177 |                     |  | $               | 5,052,807 |  |  | $ | 1,777,436 |  |  | $ | 7,863,570 | 
|                                   |  |                        |            |                    |  |                    |           |                     |  |                 |           |  |  |   |           |  |  |   |           | 

At June 30, 2002, our net real estate investments totaled approximately
$33,470,434 for the 14 properties we own. Depending upon the availability and
cost of external capital, we anticipate making additional investments in light
industrial and suburban office properties, and in other types of real property.
In particular, we have entered into an agreement to acquire an Atlanta,
Georgia shopping center for a gross purchase price of approximately
$20,500,000, plus additional expenses associated with the inspection and
closing. We have deposited $400,000 as an earnest money deposit. This
potential acquisition represents a change in our business focus, which had
previously been to acquire, own and manage light industrial and suburban office
properties in California.

The tenant in our Ontario property is a subsidiary of Adelphia Communications,
Inc, which has filed for protection under the federal bankruptcy laws. The
tenant has paid its rent through August 31, 2002. We do not yet know whether
we will be adversely affected this bankruptcy filing.

We intend to fund new investments from existing cash balances (subject to
maintaining reasonable cash reserves) and from the net proceeds of (a)
refinancing selected existing mortgage loans to higher balances and (b) asset
sales. On August 5, 2002 we completed the refinancing of approximately
$8,500,000 of mortgages on four properties, increasing the mortgage balance to
approximately $15,000,000. We intend to use the approximately $6,500,000 in
net proceeds for general corporate purposes, including funding the $4,000,000
cash portion of the purchase price of the Atlanta shopping center described
above.

We believe that we will sell our Corona property in the third quarter of 2002
and, based on the contracted sale price, will net approximately $1, 200,000,
although there can be no assurance we will indeed sell the property at that
price, or at all.

With respect to our acquisition of the shopping center in particular, we have
obtained the approval of the institutional lender to assume the existing first
mortgage debt that encumbers the property, which has a principal balance of
approximately $16,800,000. If we proceed with the acquisition, we will be
required to pay approximately $170,000 in assumption fees to the lender. The
transaction is currently

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WEST COAST REALTY INVESTORS, INC.

scheduled to close on or before September 17, 2002,
unless an extension is required to complete the debt assumption process.

We may consider other sources of possible funding, including joint ventures.
To increase our financial flexibility, we may obtain a revolving line of
credit, although there can be no assurance we will be successful.

The statements above regarding our possible acquisition of the Atlanta shopping
center are forward-looking statements within the meaning of the securities
laws. Although we believe the expectations reflected in the forward-looking
statements are based on reasonable assumptions, actual results could differ
materially from those anticipated in the forward-looking statements. Due to
various issues that may arise in the closing process, we may not close the
acquisition as we now anticipate.

We believe our liquidity and various sources of capital are sufficient to fund
operations including capital expenditures and leasing commissions, to meet debt
service and dividend requirements under the Code for REIT status and to finance
future investments. We believe our properties are in good condition without
significant deferred maintenance obligations. Our properties are leased under
triple-net leases, which we believe reduces our risk pertaining to excessive
maintenance and operating costs. However, we anticipate we will continue to
require outside sources of financing to meet our long-term liquidity needs
beyond 2002, such as scheduled debt repayments (including balloon payments on
our debt) and property acquisitions.

Cash flows in 2002

Our cash resources increased $121,799 during the six months ended June 30,
2002. During the six months ended June 30, 2002, cash provided by operating
activities was $715,047, primarily from net income adjusted for non-cash items
as depreciation and amortization. Further, financing activities used
$1,988,245, due largely to principal payments on notes payable and deposits and
acquisition costs. Investing activities provided $1,394,995 from the sale of
the Huntington Beach property.

Cash flows in 2001

Our cash resources increased $382,165 during the six months ended June 30,
2001. During the six months ended June 30, 2001, cash provided by operating
activities was $ 1,163,824, primarily from net income adjusted for non-cash
items as depreciation and amortization and changes in balance sheet accounts.
Further, financing activities used $664,470, due to dividends, and to a lesser
extent, principal payments on notes payable.

RISK FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS

Stockholders should carefully consider the risks described below. These risks
are not the only ones we face. Additional risks not presently known to us or
that we currently consider immaterial may also materially impair our business
operations and hinder our ability to make expected distributions to our
stockholders.

Risks Due to Investment in Real Estate

Decreased yields from an investment in real property may result from factors
that may cause a decrease in revenues or values or an increase in operating
expenses.

Real property investments are subject to varying degrees of risk. The yields
available from equity investments in real estate depend upon the amount of
revenues generated and expenses incurred. If our properties do not generate
revenues sufficient to meet operating expenses, debt service and capital
expenditures, our results of operations and ability to make distributions to
stockholders and to pay amounts due on our debt will be adversely affected.
The performance of the economy in each of the areas in which the properties are
located can affect occupancy, market rental rates and expenses. These factors
consequently can affect the revenues from the properties and their underlying
values. The financial results of major local employers may also affect the
revenues and value of some

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WEST COAST REALTY INVESTORS, INC.

properties. Other factors include:



| |  |  | the general economic climate,                                                                                                                                      
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | local conditions in the areas in which properties are located, such
as an oversupply of properties like ours or a reduction in the demand
for properties like ours,
|
| |  |  | the attractiveness of the properties to tenants and                                                                                                                
|
| |  |  | competition from other properties like ours.                                                                                                                       

Our revenues would also be adversely affected if tenants were unable to pay
rent or we were unable to rent vacant property on favorable terms.

Our tenants may go bankrupt.

Our tenants may file for bankruptcy protection or become insolvent in the
future. Currently, the parent company of one tenant has filed for bankruptcy
protection. We cannot evict a tenant solely because of its bankruptcy. A
court might authorize the tenant to reject and terminate its lease with us. In
that case, our claim against the bankrupt tenant for unpaid, future rent would
be subject to a statutory cap that might be substantially less than the
remaining rent actually owed under the lease, and, even so, our claim for
unpaid rent would likely not be paid in full.

Our tenants may not renew their leases.

We cannot predict that current tenants will renew their leases upon the
expiration of their terms or that current tenants will not attempt to terminate
their leases before they expire. We are aware that tenants in our Irvine and
Tustin properties are not fully using the properties for their operations, and
thus may be less likely to re-lease the property when the lease expires or may
re-lease a smaller space. If we are unable to promptly re-lease or renew the
leases for significant vacant properties, or if the rental rates upon such
renewal or re-leasing are significantly lower than expected rates, then our
ability to make expected distributions to stockholders and to pay amounts due
on our debt may be adversely affected.

We may be unable to lease vacant space in our properties.

To lease vacant space, we may need to pay substantial leasing commissions and
renovation costs. We may acquire properties that are not fully leased, and the
cash flow from existing operations may be insufficient to pay the operating
expenses and debt service associated with that property until the property is
fully leased. Operating costs, including real estate taxes, insurance and
maintenance costs, and mortgage payments, if any, do not, in general, decline
when circumstances cause a reduction in income from a property from a vacancy
or other reason. In addition, as many of our leases are triple-net, where
the tenant is responsible for property taxes, insurance and maintenance, we
would bear such costs, and not the tenant, once the tenant no longer leases the
property for any reason. We could sustain a loss as a result of foreclosure on
the property if a property is mortgaged to secure payment of indebtedness and
we were unable to meet our mortgage payments. As a result, our ability to make
distributions to our stockholders could be adversely affected.

Investments in newly acquired properties may not perform as we expect.

In the normal course of business, we typically evaluate potential acquisitions,
enter into non-binding letters of intent, and may, at any time, enter into
contracts to acquire and may acquire additional

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WEST COAST REALTY INVESTORS, INC.

properties. We can give no
assurance, however, that we will have the financial resources to make suitable
acquisitions or that properties that satisfy our investment policies will be
available for acquisition. The acquisition of property entails risks that
investments will fail to perform in accordance with expectations. Those risks
may include financing not being available on favorable terms or at all.
Estimates of the costs of improvements to bring an acquired property up to
standards established for the market position intended for that property might
prove inaccurate. Although we evaluate the physical condition of each new
property before we acquire it, we may not detect some defects or necessary
repairs until after we acquire the property. This could significantly increase
our total acquisition cost, which could have a material adverse effect on us
and our ability to make distributions to stockholders and pay amounts due on
our debt.

The value of our property interests depends on conditions beyond our control.

General and local economic conditions, neighborhood values, competitive
overbuilding, weather, casualty losses and other factors beyond our control may
adversely affect real property income and capital appreciation. For example,
the U.S. economy is currently experiencing a slowdown, which may negatively
impact property values. In particular, general and local economic conditions
may be adversely affected by the terrorist incidents in New York and Washington
D.C. of September 11, 2001. Some analysts have predicted that a further decline
in the economy will result as a result of these or any future terrorist
incidents. Although we do not have properties in these areas, we are unable to
determine the long-term impact, if any, of these incidents or of any acts of
war or terrorism in the United States or worldwide on the U.S. economy, on us
or on the value of our common stock.

The lack of liquidity of real estate may reduce economic returns to investors.

Real estate investments are relatively illiquid and, therefore, tend to limit
our ability to adjust our portfolio in response to changes in economic or other
conditions. Additionally, the Internal Revenue Code places certain limits on
the number of properties a REIT may sell without adverse tax consequences. To
effect our current operating strategy, we will seek to raise funds, both
through outside financing and through the orderly disposition of assets that no
longer meet our investment criteria. Depending upon interest rates, current
acquisition opportunities and other factors, generally we will reinvest the
proceeds in net leased industrial and suburban office properties, although such
funds may be employed in other uses. We anticipate purchasing a shopping
center in the Atlanta, Georgia area during the third quarter of 2002.

The risks that we may be unable to reinvest in attractive properties may affect
our returns to stockholders.

In the markets we have targeted for future acquisition of properties, there is
considerable buying competition from other real estate companies, many of whom
may have greater resources, experience or expertise than we do. In many cases,
this competition for acquisition properties has resulted in an increase in
property prices and a corresponding decrease in property yields. We can give
no assurances that we can reinvest the proceeds realized from the disposition
of assets into new assets that will produce economic returns comparable to
those being realized from the properties disposed of, or that we will be able
to acquire properties meeting our investment criteria. To the extent that we
are unable to reinvest those proceeds, or if the properties we acquire with
those proceeds produce a lower rate of return than the properties disposed of,
those results may have a material adverse effect on us.

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WEST COAST REALTY INVESTORS, INC.

If we are unable to reinvest sales or refinancing proceeds as quickly as we
expect, our returns to stockholders may be adversely affected.

A delay in reinvestment of sales or refinancing proceeds may have a material
adverse effect on us. We may seek to structure future dispositions as tax-free
exchanges, where appropriate, using the non-recognition provisions of Section
1031 of the Internal Revenue Code to defer income taxation on the disposition
of the exchanged property. For an exchange to qualify for tax-free treatment
under Section 1031 of the Internal Revenue Code, certain technical requirements
must be met. Given the competition for properties meeting our investment
criteria, it may be difficult for us to identify suitable properties within the
required time frames to meet the requirements of Section 1031.

Substantial competition among properties and real estate companies may
adversely affect our rental revenues and acquisition opportunities.

All of our properties are located in developed areas where we face substantial
competition from other properties and from other real estate companies who may
develop or renovate competing properties. The number of competitive properties
and real estate companies could have a material adverse effect on our ability
to rent our properties, the rents we charge and our acquisition opportunities.
The activities of these competitors could cause us to pay a higher price for a
new property than we otherwise would have paid or may prevent us from
purchasing a desired property at all, which could have a material adverse
effect on us and our ability to make distributions to stockholders and to pay
amounts due on our debt.

Our geographic concentration of properties in California may adversely affect
us.

As of June 30, 2002, our portfolio was located entirely in California, although
we anticipate purchasing a shopping center in the Atlanta, Georgia area during
the third quarter of 2002. Economic conditions in, and other factors relating
to, the California area, including supply and demand for properties, zoning and
other regulatory conditions and competition from other properties, could
adversely affect our performance. In that regard, the California region in the
past experienced economic recessions and depressed conditions in the local real
estate markets. To the extent general economic or social conditions in any of
these areas deteriorate or any of these areas experiences natural disasters,
the value of the portfolio, our results of operations and our ability to make
distributions to stockholders and to pay amounts due on our debt could be
materially adversely affected.

Our business strategy is concentrated in few types of commercial properties.

Our primary investment focus is light industrial and suburban office
properties, although we expect to purchase a shopping center in the Atlanta,
Georgia area during the third quarter of 2002. As a result, we may be exposed
to greater risks than if our investment focus was based on more diversified
types of properties.

We depend on single tenants in many of our properties.

Many of our properties are leased to a single tenant, and some of these single
tenant properties are individually significant to our total revenue. In the
six months ended June 30, 2002, each of four tenants accounted for 20%, 15%,
12% and 10% of our total rental revenue, respectively. The tenant may attempt
to terminate the lease before its scheduled term, or we may be unable to renew
the lease with the current tenant. In that event, we may be unable to re-lease
the space to another anchor tenant

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WEST COAST REALTY INVESTORS, INC.

of similar or better quality upon expiration
of the current lease on similar or better terms, and we could experience
material adverse consequences such as higher vacancy, re-leasing on less
favorable economic terms, reduced net income and reduced funds from operations.
Similarly, if one or more of our single tenants goes bankrupt, we could
experience material adverse consequences like those described above. There can
be no assurance that our sole tenants will renew their leases when they expire
or will be willing to renew on similar economic terms.

Construction risks could adversely affect our profitability.

We currently are renovating some of our properties and may in the future
renovate or build other properties, including tenant improvements required
under leases. We may incur renovation costs for a property that exceed our
original estimates due to increased costs for materials or labor or other costs
that are unexpected. We also may be unable to complete renovation of a
property on schedule, which could result in increased debt service expense or
construction costs and loss of rents until the property is ready for occupancy.
Additionally, the time frame required to recoup our renovation and
construction costs and to realize a return on such costs can often be
significant.

We may be unable to implement our growth strategy and may fail to identify,
acquire or integrate new acquisitions.

Our future growth will be dependent upon a number of factors, including our
ability to identify acceptable properties for acquisition, complete
acquisitions on favorable terms, successfully integrate acquired properties and
obtain financing to support expansion. We can give no assurances that we will
be successful in implementing our growth strategy, that growth will indeed
occur at all, or that any expansion will improve operating results. The
failure to identify, acquire and integrate new properties effectively could
have a material adverse affect on us and our ability to make distributions to
stockholders and to pay amounts due on our debt. We intend to acquire
properties that meet our investment criteria. Acquisitions of properties
entail risks that investments will fail to perform in accordance with
expectations. Estimates of the costs of improvements to bring an acquired
property up to standards established for the market position intended for that
property may prove inaccurate.

We may suffer uninsured and underinsured losses, and our insurance coverage may
be limited.

We carry (or require our tenants to carry) liability, fire, extended coverage
and rental loss insurance on our properties. This insurance has policy
specifications, limits and deductibles. We do not carry flood and earthquake
insurance for our properties. In addition, some types of extraordinary losses
(such as those resulting from civil unrest or terrorism) are not generally
insured (or fully insured against) because they are either uninsurable or not
economically insurable. Following the terrorist activity of September 11,
2001, and in light of the resulting uncertainty in the insurance market, many
insurance companies have indicated that they will exclude insurance against
acts of terrorism from their policies in the future. In addition, we do not
carry insurance coverage for environmental liabilities. If an uninsured or
underinsured loss occurs to a property, we could be required to use our own
funds for restoration or lose all or part of our investment in, and anticipated
revenues from, the property and would continue to be obligated on any mortgage
indebtedness on the property. Any loss of that nature could have a material
adverse effect on us and our ability to make distributions to stockholders and
pay amounts due on our debt.

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WEST COAST REALTY INVESTORS, INC.

Adverse changes in laws may affect our potential liability relating to the
properties and our operations.

Increases in real estate taxes and income, service and transfer taxes cannot
always be passed through to tenants in the form of higher rents (or charges on
triple-net leases), and may adversely affect our cash available for
distribution and our ability to make distributions to stockholders and to pay
amounts due on our debt. Similarly, changes in laws increasing the potential
liability for environmental conditions existing on properties or increasing the
restrictions on discharges or other conditions, as well as changes in laws
affecting construction and safety requirements, may result in significant
unanticipated expenditures, which could have a material adverse effect on us
and our ability to make distributions to stockholders and pay amounts due on
our debt.

Compliance with laws benefiting disabled persons may increase our costs and
adversely affect our performance.

A number of federal, state and local laws (including the Americans with
Disabilities Act) and regulations exist that may require modifications to
existing buildings or restrict certain renovations by requiring improved access
to such buildings by disabled persons and may require other structural features
that add to the cost of buildings under construction. Legislation or
regulations adopted in the future may impose further burdens or restrictions on
us with respect to improved access by disabled persons. The costs of
compliance with these laws and regulations may be substantial, and restrictions
on construction or completion of renovations may limit implementation of our
investment strategy in certain instances or reduce overall returns on our
investments, which could have a material adverse effect on us and our ability
to make distributions to stockholders and to pay amounts due on our debt.

We may have liability under environmental laws.

Under federal, state and local environmental laws, ordinances and regulations,
we may be required to investigate and clean up the effects of releases of
hazardous or toxic substances or petroleum products at our properties,
regardless of our knowledge or responsibility, simply because of our current or
past ownership or operation of the real estate. Thus, we may have liability
with respect to properties we have already sold. If unidentified environmental
problems arise, we may have to take extensive measures to remediate the
problems, which could adversely affect our cash flow and our ability to make
distributions to our stockholders because:



| |  |  | we may have to pay for property damage and for investigation and
clean-up costs incurred in connection with the contamination;                                                                       
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the law typically imposes clean-up responsibility and liability
regardless of whether the owner or operator knew of or caused the
contamination;                                                     
|
| |  |  | even if more than one person may be responsible for the
contamination, each person who shares legal liability under the
environmental laws may be held responsible for all of the clean-up
costs; and
|
| |  |  | governmental entities or other third parties may sue the owner or
operator of a contaminated site for damages and costs.                                                                             

These costs could be substantial and in extreme cases could exceed the value of
the contaminated property. The presence of hazardous or toxic substances or
petroleum products and the failure to properly remediate that contamination may
materially and adversely affect our ability to borrow against, sell or rent an
affected property. In addition, applicable environmental laws create liens on

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WEST COAST REALTY INVESTORS, INC.

contaminated sites in favor of the government for damages and costs it incurs
in connection with a contamination.

We face particular environmental risks related to asbestos.

Environmental laws also govern the presence, maintenance and removal of
asbestos. Those laws require that owners or operators of buildings containing
asbestos:



| |  |  | properly manage and maintain the asbestos;                                                                                                        
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | notify and train those who may come into contact with asbestos; and                                                                               
|
| |  |  | undertake special precautions, including removal or other
abatement, if asbestos would be disturbed during renovation or
demolition of a building.

Those laws may impose fines and penalties on building owners or operators who
fail to comply with these requirements and may allow others to seek recovery
from owners or operators for personal injury associated with exposure to
asbestos fibers. Some of our properties are located in urban, industrial and
previously developed areas where fill or current or historic industrial uses of
the areas have caused site contamination.

Our environmental due diligence may be inadequate.

Our policy is to retain independent environmental consultants to conduct Phase
I environmental site assessments and asbestos surveys of properties we intend
to acquire. These assessments generally include a visual inspection of the
properties and the surrounding areas, an examination of current and historical
uses of the properties and the surrounding areas and a review of relevant
state, federal and historical documents, but do not involve invasive techniques
such as soil and ground water sampling. Where appropriate, on a
property-by-property basis, our practice is to have these consultants conduct
additional testing, including sampling for asbestos, for lead in drinking
water, for soil contamination where underground storage tanks are or were
located or where other past site usages create a potential environmental
problem, and for contamination in groundwater. Even though these environmental
assessments are conducted, there is still the risk that:



| |  |  | the environmental assessments and updates did not identify all
potential environmental liabilities;                                         
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | a prior owner created a material environmental condition that is
not known to us or the independent consultants preparing the
assessments;  
|
| |  |  | new environmental liabilities have developed since the
environmental assessments were conducted; or                                         
|
| |  |  | future uses or conditions, such as changes in applicable
environmental laws and regulations, could result in environmental
liability for us.

We may acquire properties that are subject to liabilities for which we have no
recourse, or only limited recourse, against the seller.

These liabilities can include:



| |  |  | claims by tenants, vendors or other persons dealing with the former owners of the properties;
| | - |  | ---------------------------------------------------------------------------------------------
|
| |  |  | liabilities incurred in the ordinary course of business; and                                 

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| |  |  | claims for indemnification by directors, officers and others
indemnified by the former owners of the properties.
| | - |  | ----------------------------------------------------------------------------------------------------------------

If we are required to spend time and money to deal with these claims, our
intended returns from the affected property may be materially reduced.

We may change some of our policies without obtaining the approval of our
stockholders.

Some of our operating and financial policies, including our policies with
respect to acquisitions, growth, operations, capitalization and dividends, are
determined by our board of directors. Accordingly, stockholders will have
little direct control over these policies.

Risks Due to Real Estate Financing

We have a significant amount of indebtedness. As of June 30, 2002, we had
total assets of $36,411,973, secured indebtedness of $19,054,990, total
liabilities of $19,643,570 and a debt-to-total assets ratio of 54%. After
giving effect to the refinancing we completed on August 5, 2002, we estimate
that our debt-to-total assets ratio is approximately 62%. Further, if we
complete the purchase of the shopping center in the Atlanta, Georgia area, we
estimate we will increase our debt-to-total assets ratio to approximately 72%
(when calculated on the basis of generally accepted accounting principles,
which reflects depreciation and thus may result in assets being valued at less
than their value as determined by the board).

We anticipate that future acquisitions will be financed, to the extent allowed
by our bylaws, under a line of credit, other forms of secured or unsecured
financing or through our issuing additional debt or equity. We expect to
review periodically our financing options regarding the appropriate mix of debt
and equity financing. Equity, rather than debt, financing of future
acquisitions could have a dilutive effect on the interests of our existing
stockholders.

We may incur substantial additional indebtedness in the future. On August 5,
2002, we completed a refinancing in which we replaced approximately $8,500,000
of existing debt on four properties with $15,020,000 of new debt. This
increased our fixed debt payments by approximately $35,000 per month.

Increased debt and leverage can reduce cash available for distribution and
cause losses.

Using debt, whether with recourse to us generally or only with respect to a
particular property, to acquire properties creates an opportunity for increased
net income, but at the same time creates risks. We use debt to fund
investments only when we believe it will enhance our risk-adjusted returns. We
cannot be sure, however, that our use of leverage will prove to be beneficial.
Additional leverage may:



| |  |  | increase our vulnerability to general adverse economic and industry
conditions,                                                                                                                            
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | limit our flexibility in planning for, or reacting to, changes in
our business and the REIT industry, which may place us at a competitive
disadvantage compared to our competitors that have less debt, and
|
| |  |  | limit, along with the possible financial and other restrictive
covenants in our indebtedness, among other things, our ability to
borrow additional funds.                                                  

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Any of the foregoing could have a material adverse effect on us and our ability
to make distributions to stockholders and to pay amounts due on our debt.

We may be unable to renew, repay or refinance our debt financing.

We are subject to the normal risks associated with debt financing, including
the risk that our cash flow will be insufficient to meet required payments of
principal and interest, the risk that we will not be able to renew, repay or
refinance our debt when it matures or that the terms of any renewal or
refinancing will not be as favorable as the existing terms of that debt. In
most of the mortgage notes on our properties, the mortgage payment terms do not
fully amortize the loan balance, and a balloon payment of the balance is due.
If we were unable to refinance our indebtedness on acceptable terms, or at all,
we might be forced to dispose of one or more of the properties on
disadvantageous terms, which might result in losses to us. Those losses could
have a material adverse effect on us and our ability to make distributions to
stockholders and pay amounts due on our debt. Furthermore, if a property is
mortgaged to secure payment of indebtedness and we are unable to meet mortgage
payments, the mortgagee could foreclose upon the property, appoint a receiver
and receive an assignment of rents and leases or pursue other remedies, all
with a consequent loss of our revenues and asset value. Foreclosures could
also create taxable income without accompanying cash proceeds, thereby
hindering our ability to meet the REIT distribution requirements of the
Internal Revenue Code.

The cost of our indebtedness may increase due to rising interest rates.

We have incurred and may in the future again incur debt that bears interest at
a variable rate. Accordingly, increases in interest rates would increase our
interest costs, which could have a material adverse effect on us and our
ability to make distributions to stockholders. In addition, an increase in
market interest rates may lead holders of our common shares to demand a higher
yield on their shares from distributions by us, which could adversely affect
the market price of our common stock.

We may incur additional debt and related debt service.

We intend to fund the acquisition properties partially through borrowings and
from other sources such as sales of properties that no longer meet our
investment criteria or the contribution of property to joint ventures or other
financing methods. Our organizational documents currently limit the amount of
debt that we may incur. On July 19, 2002, our board of directors voted to
amend our bylaws, subject to the approval of shareholders and listing of our
shares on a national exchange. The proposed amended and restated bylaws do not
limit the amount of debt we may incur. (We have adopted a policy that we will
not incur debt in excess of 65% of what the board of directors believes is the
fair market value of our total portfolio at any given time. If we decide to
change this policy to increase the percentage of debt we incur above 65% of our
overall portfolio value, we will implement the change only after we seek and
obtain the approval of the holders of a majority in voting power of our
outstanding shares.)

If we incur additional debt, the agreement governing our debt could contain
various covenants that limit our discretion in the operation of our business.

Any additional debt we incur will be governed by an agreement with our lenders.
Typically, these types of agreements contain various provisions that could
limit our discretion in the operation of our business by restricting our
ability to:



| |  |  | incur additional debt and issue preferred stock,
| | - |  | ------------------------------------------------

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| |  |  | pay dividends and make other distributions,         
| | - |  | ----------------------------------------------------
|
| |  |  | make investments and other payments,                
|
| |  |  | redeem or repurchase our capital stock,             
|
| |  |  | consolidate or merge,                               
|
| |  |  | create liens,                                       
|
| |  |  | sell assets, or                                     
|
| |  |  | enter into certain transactions with our affiliates.

Further, the loan documents from our August 5, 2002 refinancing contain
cross-collateral provisions. If one of the loans is in default and the
lender forecloses on the property securing that loan, and the proceeds from the
foreclosure are not sufficient to repay the defaulted loan in full, the lender
can foreclose upon one or more of the other properties to recover the loan.
Previously, we had no such cross collateral provisions in our loans.

If we are unable to pay our obligations to our secured lenders, they could
proceed against any or all of the collateral securing our indebtedness to them.
In addition, a breach of the restrictions or covenants contained in our loan
documents could cause an acceleration of our indebtedness. We may not have, or
be able to obtain, sufficient funds to repay our indebtedness in full upon
acceleration.

The market value of our common stock could decrease based on our performance
and market perception and conditions.

Although our shares are listed on the Nasdaq Over-the-Counter Bulletin Board,
there have be no trades to date. Moreover, sales of our common stock occur
only occasionally, and usually in very small volumes. For example, in 2001,
the American Partnership Board reported a total of ten sale transactions
involving our common stock, for an aggregate of approximately 24,000 shares.
Accordingly, it is difficult to estimate the price of our common stock at any
particular moment. Stockholders are cautioned that prior sales data do not
necessary indicate the prices at which our common stock would trade in an
active market. There can be no assurance the price of our common shares will
not be lower than our previous estimates. The market value of our common stock
may be based primarily upon the markets perception of our growth potential and
current and future cash dividends, and may be secondarily based upon the real
estate market value of our underlying assets. The market price of our common
stock is also influenced by the dividend on our common stock relative to market
interest rates. Rising interest rates may lead potential buyers of our common
stock to expect a higher dividend rate, which would adversely affect the market
price of our common stock. In addition, the value of our common stock could be
adversely affected by general market conditions or market conditions of real
estate companies in general.

We cannot assure stockholders that we will be able to make future dividends
payments at any particular rate, or at all.

Although our board of directors currently intends to continue to declare
quarterly dividends on our common stock, the declaration and payment of
dividends is subject to the discretion of our board of directors. Any
determination as to the payment of dividends, as well as the level of those
dividends, will depend on, among other things, general economic and business
conditions, our strategic plans, our financial results and condition, and
contractual, legal and regulatory restrictions on our ability to pay dividends.
In the fourth quarter of 2001, the board of directors decreased our quarterly
dividend due to a variety of factors, including the vacancy at our Vacaville
property. We cannot assure stockholders that the current quarterly dividend
level will be maintained or that we will pay dividends in any future period.

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WEST COAST REALTY INVESTORS, INC.

Additional issuances of equity securities may be dilutive to current
stockholders.

The interests of our existing stockholders could be diluted if we issue
additional equity securities to finance future developments and acquisitions
instead of incurring additional debt. Our ability to execute our business
strategy depends on our access to an appropriate blend of debt financing, which
could include a line of credit and other forms of secured and unsecured debt,
equity financing, including common and preferred equity, or joint ventures.

Risks Due to Becoming and Self-administered and Self-managed

Historically, the Advisor had managed our properties, administrated our
business affairs and sold, purchased and refinanced properties, under the
direction of the board of directors. The Advisor has terminated effective
March 31, 2002 and subsequently, we have become self-administrated and
self-managed.

We will be exposed to new risks previously assumed by the Advisor.

Becoming a self-administered and self-advised REIT exposes us to risks to which
we have not historically been exposed, such as the risks associated with our
own management. In particular, we will be exposed to the risk of
inefficiencies and the need to implement strict cost controls in managing our
day-to-day activities and the risks and costs associated with the attraction
and retention of qualified operating management. Becoming a self-advised and
self-administered REIT has resulted in higher expenses of administration than
those previously charged by the Advisor. We now bear the following risks
previously associated with the activities of the Advisor:



| |  |  | Increased fixed overhead expenses resulting from engagement of
additional personnel and other costs in excess of the fee charged by
the Advisor. Our ability to cover expanded overhead may be impaired if
we do not grow as we anticipate.                                                                                                                                                                                                 
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | If our employees fail to perform duties properly, our recourse is
limited to these employees, whose liability may be limited by
indemnifications from us. Previously, the Advisor could have been
liable for such failure.                                                                                                                                                                                                                  
|
| |  |  | We compete for real estate investments with all types of investors,
including domestic and foreign corporations, financial institutions,
other real estate investment trusts and individuals. Many of these
competitors have greater resources than we do. In addition, the U.S.
economy is currently experiencing a slowdown. We will no longer have
available the resources and experience of the Advisor and its
affiliates to assist us.

We will incur additional expenses and may have difficulties in recruiting and
retaining additional management.

Our success is, in part, dependent on the support, services and contributions
of Mr. Meredith and Mr. Wingard. The loss of the services of the existing
management team through death, disability or otherwise could seriously harm our
prospects. In August 2001, we entered into an agreement with Mr. Meredith to
serve as our President and Chief Executive Officer. Mr. Wingard, our Chief
Financial Officer, is also an employee. If Mr. Meredith or Mr. Wingard ceases
to perform management services for us, or we consider their performance
unsatisfactory, we will be required to secure management services from other
personnel. There can be no assurance in such instance that we would be able to
obtain qualified management or advisory services or that such services could be
obtained on favorable terms. In addition, our agreement with the Advisor
provided for limitations of

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WEST COAST REALTY INVESTORS, INC.

the costs in connection with our management. Under
self-management, there would be no such limitations. As a result, the costs of
being a self-advised and self-managed REIT could significantly exceed the fees
payable to the Advisor or to a successor advisor.

Becoming a self-advised and self-administered REIT will increase the influence
of our current management over the our affairs

Under Mr. Merediths employment agreement, we have agreed to grant Mr. Meredith
options to purchase 200,000 shares of our common stock at a strike price equal
to fair market value at grant. These options would vest over a period of two
years. To date, we have granted no options to Mr. Meredith and he owns no
shares of our common stock. Once the options are granted and become vested,
however, Mr. Meredith will beneficially own approximately 6.4% of our issued
and outstanding common stock assuming exercise of these options. Mr.
Merediths employment agreement provides for severance benefits to Mr. Meredith
following a change of control, which would include certain changes in the
composition of the board. If enough current board members resign for any
reason, or if the conversion to a self-advised and self-administered REIT were
otherwise construed to be a change of control, we may be obligated to pay these
benefits to Mr. Meredith. Mr. Meredith has in the past expressed his interest
in purchasing an additional ownership interest. Under our current Bylaws, no
stockholder may hold more than 9.9% of our outstanding shares. On July 19,
2002, our board voted, pending shareholder approval and listing a national
exchange, to allow Mr. Meredith to purchase up to 29% of our outstanding
shares, and decreasing the ability of any other owner to purchase over 5% of
our outstanding shares. By assuming the services previously performed by the
Advisor, and particularly if Mr. Meredith acquires an ownership interest in us,
Mr. Meredith and our management would be in a position to exercise greater
control or significant influence over our affairs.

Provisions that Could Limit a Change in Control or Deter a Takeover

Restrictions in tax law and our organizational documents could limit a change
in control or deter a takeover.

To maintain our qualification as a REIT, not more than 50% in value of our
outstanding capital stock may be owned, actually or constructively, by five or
fewer individuals (as defined in the Internal Revenue Code to include certain
entities). To protect us against risk of losing our status as a REIT due to a
concentration of ownership among our stockholders, our bylaws provide, among
other things, that if the board of directors determines, in good faith, that
direct or indirect ownership of our common stock has or may become concentrated
to an extent that would prevent us from qualifying as a REIT, the board of
directors may prevent the transfer of our common stock. These limitations may
have the effect of precluding acquisition of control of us by a third-party
without consent of the board of directors. In addition, other provisions
contained in our certificate of incorporation and bylaws may have the effect of
discouraging a third-party from making an acquisition proposal for us and may
thereby inhibit a change in control. For example, those provisions may deter
tender offers for our common stock that may be attractive to the stockholders,
or deter purchases of large blocks of our common stock, thereby limiting the
opportunity for stockholders to receive a premium for their shares of our
common stock over then-prevailing market prices. Further, as noted above, if
the proposed amendments to our bylaws become effective, Mr. Meredith would be
allowed to own up to 29% of our outstanding shares, and others would be limited
to 5% of our outstanding shares, further limiting the purchase of large blocks
of shares by others.

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WEST COAST REALTY INVESTORS, INC.

Change of control agreements could deter a change of control.

We have entered into a change of control agreement with Allen K. Meredith, our
President and Chief Executive Officer, providing for the payment of money to
him upon the occurrence of a change of control, as defined in these agreements.
If, within one year following a change of control, Mr. Meredith resigns or is
terminated, we will make a severance payment equal to a portion of the
executives base salary, his average bonus over last three years and medical
and other benefits. Based upon his current salary and benefit levels, this
provision would result in payments totaling at least $200,000 to Mr. Meredith.
The agreement with Mr. Meredith may deter changes of control because of the
increased cost for a third party to acquire control of us, thus limiting the
opportunity for stockholders to receive a premium for our common stock over
then-prevailing market prices.

Tax Risks

Although we believe we are organized and are operating so as to qualify as a
REIT under the Internal Revenue Code, we cannot give assurances that we have in
fact operated or will be able to continue to operate in a manner so as to
qualify or remain so qualified.

We may incur tax liabilities as a consequence of failure to qualify as a REIT.

Qualification as a REIT involves the application of highly technical and
complex Internal Revenue Code provisions for which there are only limited
judicial or administrative interpretations and the determination of various
factual matters and circumstances not entirely within our control. For
example, to qualify as a REIT in 2002, at least 95% of our taxable gross income
in any year must be derived from qualifying sources and we must make
distributions to stockholders aggregating annually at least 90% of our REIT
taxable income (excluding net capital gains). Thus, to the extent revenues
from non- qualifying sources represents more than 5% of our gross income in any
taxable year, we will not satisfy the 95% income test and may fail to qualify
as a REIT, unless certain relief provisions apply, and, even if those relief
provisions apply, a tax would be imposed with respect to excess net income, any
of which could have a material adverse effect on us and our ability to make
distributions to stockholders and to pay amounts due on our debt. We cannot
give assurances that new legislation, new regulations, administrative
interpretations or court decisions will not change the tax laws with respect to
qualification as a REIT or the federal income tax consequences of such
qualification. If we fail to qualify as a REIT, we will be subject to federal
income tax (including any applicable alternative minimum tax) on our taxable
income at corporate rates, which would likely have a material adverse effect on
us and our ability to make distributions to stockholders and to pay amounts due
on our debt. In addition, unless entitled to relief under certain statutory
provisions, we would also be disqualified from treatment as a REIT for the four
taxable years following the year during which REIT qualification is lost. This
treatment would reduce funds available for investment or distributions to
stockholders because of the additional tax liability to us for the year or
years involved. In addition, we would no longer be required to make, and
indeed may not make, distributions to stockholders. To the extent that
distributions to stockholders would have been made in anticipation of
qualifying as a REIT, we might be required to borrow funds or to liquidate
certain investments to pay the applicable tax. Further, to maintain our real
estate investment trust status, we may borrow funds on a short-term basis to
meet the real estate investment trust distribution requirements, even if the
then-prevailing market conditions are not favorable for these borrowings.

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WEST COAST REALTY INVESTORS, INC.

Gain on disposition of assets deemed held for sale in the ordinary course is
subject to 100% tax.

We currently are attempting to sell six of our properties. If we sell any of
our properties, the Internal Revenue Service may determine that the sale is a
disposition of an asset held primarily for sale to customers in the ordinary
course of a trade or business. Gain from this kind of sale generally will be
subject to a 100% tax. Whether an asset is held primarily for sale to
customers in the ordinary course of a trade or business depends on the
particular facts and circumstances of the sale. Although we will attempt to
comply with the terms of safe-harbor provisions in the Internal Revenue Code
prescribing when asset sales will not be so characterized, we cannot assure
stockholders that we will be able to do so.

NEW ACCOUNTING PRONOUNCEMENTS

Information on new accounting pronouncements is contained in the notes to our
financial statements under Item 1 in this Quarterly Report on Form 10-Q.




ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risks from our operations result primarily from changes in short-term
LIBOR interest rates. We do not have any direct foreign exchange risk.

Our exposure to market risk for changes in interest rates relates primarily to
two mortgage loans totaling $6,022,033 at June 30, 2002. We generally enter
into fixed and variable rate debt obligations to support general corporate
purposes, including acquisitions, capital expenditures and working capital
needs. We periodically evaluate the level of variable rate debt with respect
to total debt and other factors, including our assessment of the current and
future economic environment. We did not have any derivative financial
instruments at June 30, 2002 or December 31, 2001.

The fair values of our financial instruments (including such items in the
financial statement captions as cash, other assets and liabilities other than
notes payable) approximate their carrying or contract values based on their
nature, terms and interest rates that approximate current market rates. The
fair value of notes payable is estimated based on a discounted cash flow
analysis with interest rates similar to that of current market borrowing
arrangements. Under this analysis, the fair value of our notes payable
exceeded their carrying value by approximately $1,800,000 at December 31, 2001.

We had $6,022,033 and $6,157,272 in variable rate debt outstanding at June 30,
2002 and 2001, respectively. On August 5, 2002, we refinanced both of these
loans into a fixed rate loan. A hypothetical 10% adverse change in interest
rates would have had an unfavorable impact of approximately $12,000 and
$20,000, respectively, on the six month periods ended June 30, 2002 and 2001 on
our earnings and cash flows based on these debt levels. Further, many of our
fixed rate loans have significant balloon payments that would need to be
refinanced at maturity, possibly at unfavorable rates. We cannot predict the
effect of adverse changes in interest rates on its variable rate debt and,
therefore, our exposure to market risk, nor can there be any assurance that
fixed rate, long-term debt will be available to us at advantageous pricing.
Consequently, our future results may differ materially from the estimated
adverse changes discussed above.

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WEST COAST REALTY INVESTORS, INC.







PART II  OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are a defendant in a lawsuit entitled John Lonberg; Ruthee Goldkorn v.
Sanborn Theaters, Inc. and So-Cal Cinema, Inc.; Salts, Troutman and Kaneshiro,
Inc.; West Coast Realty Investors, Inc., in the U.S. District Court for the
Central District of California (Case #CV-97-6598AHM(JGx)). We were added as a
defendant in the plaintiffs First Amended Complaint filed May 7, 1998.

The plaintiffs alleged violations of the federal Americans with Disabilities
Act and the California Unruh Civil Rights Act with respect to their movie-going
experiences, including inadequate physical accommodations for individuals with
disabilities and insensitive theater personnel. Sanborn Theaters, Inc
(Sanborn) is the tenant and theater operator. Salts, Troutman and Kaneshiro,
Inc. is the architect who designed the theater and its interiors.

The plaintiffs seek actual damages of $1,000 for each violation of law; three
times actual damages; and attorneys fees, expenses and costs. The plaintiffs
also seek mandatory injunctive relief requiring the defendants to reconfigure
the theater.

The plaintiffs have agreed to dismiss their claims under the Unruh Civil Rights
Act.

The U.S. Department of Justice, Civil Rights Division (DOJ) filed a Motion to
Intervene in the case on March 1, 1999. DOJ has sued Sanborn only and
preliminary discussions have been held between the DOJ and Sanborn. Sanborn
intends to vigorously defend against the DOJ.

We cannot determine the likelihood of an unfavorable outcome or range of
potential loss, if any. We believe we have complied with all applicable
provisions of law and intend to vigorously defend the allegations contained in
the lawsuit. We believe that the lawsuit will not have a material impact on
our continuing operations or overall financial condition.




ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

None




ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None




ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None




ITEM 5. OTHER INFORMATION

None

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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K



| | (a) |  | Exhibits
| | --- |  | --------

|     |  |                                  
|---- |  | ---------------------------------
|No.  |  | Description                      
|     |  |                                  
|10.1 |  | Form of indemnification agreement



| | (b) |  | Reports on Form 8-K
| | --- |  | -------------------
|
| |     |  | None               

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WEST COAST REALTY INVESTORS, INC.




SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

|                       |  |                                                                                                                                     
|---------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------
|                       |  | WEST COAST REALTY INVESTORS, INC.(Registrant)                                                                                       
|                      
|Dated: August 12, 2002 |  | /s/ Charles P. Wingard                                                                                                              
|                       |  |                                                                                                                                     
|                       |  | CHARLES P. WINGARD
        (Vice President/Treasurer,
        Principal Financial Officer, and
        Principal Accounting Officer)

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