ITEM 1. DESCRIPTION OF BUSINESS
Excel Properties, Ltd., a California limited partnership (the "Partnership"), was organized to purchase commercial real estate properties for cash and to hold these assets for investment. The general partners of the Partnership are New Plan Excel Realty Trust, Inc., a Maryland corporation ("New Plan"), and Gary B. Sabin. The Partnership was formed on September 19, 1985 and will continue in existence until December 31, 2015, unless dissolved earlier under certain circumstances. In 1999, Excel Legacy Corporation ("the Company") began managing the assets of the Partnership when certain officers of New Plan resigned. The Company has indemnified New Plan of any general partner liability in exchange for an assignment of their partnership interest.
Properties that have been acquired by the Partnership are subject to long-term triple-net leases. Such leases require the lessee to pay the prescribed minimum rental plus all costs and expenses associated with the operations and maintenance of the property. These expenses include real property taxes, property insurance, repairs and maintenance and similar expenses. The net effect is that, under normal circumstances, no expenses will offset the rental revenue from the property. Most of the leases also provide some form of inflation hedge which calls for the minimum rent to be increased, based upon adjustments in the consumer price index, fixed rent escalation, or by a percentage of the gross sales of the tenant.
Properties have been acquired free and clear of liens and encumbrances. The Partnership may seek to finance one or more of the properties and distribute the financing proceeds to the partners, but only if the financing proceeds equal or exceed 100% of the Partnership's capital invested in the property or properties (including a prorata amount of the Partnership's public offering unit selling commissions and organization expenses). To date, no properties owned by the Partnership have been the subject of any mortgage financing, therefore, at the present time, all properties remain free and clear from any mortgage loan, lien or encumbrance.
The principal investment objectives of the Partnership are to provide to its limited partners: (1) preservation, protection and eventual return of the investment, (2) distributions of cash from operations, some of which may be a return of capital for tax purposes rather than taxable income, and (3) realization of long-term appreciation in value of properties.
The general partners are currently attempting to sell all of the properties held by the Partnership. The selling of the properties could take several years as the general partners attempt to maximize the sales price of each property. There can be no assurance that the general partners will be successful in selling all of the properties or what price they can obtain. Additionally, the general partners may change its plans in the future.
ITEM 2.
ITEM 2. PROPERTIES
The Partnership presently owns eight properties as follows:
KINDER-CARE LEARNING CENTERS
The Partnership owns four properties on lease to Kinder-Care, Inc., the nation's largest provider of day-care centers.
KINDER-CARE LEARNING CENTER - WEST CARROLLTON, OHIO
Date of purchase: May 28, 1987
Purchase price: $190,337
Property description: This property is located approximately eight miles southwest of Dayton, Ohio in the suburb of West Carrollton. The building contains 4,650 square feet and is situated on .55 acres of land.
The current lease expires December 31, 2001. The annual rent over the remainder of the lease is as follows:
January 1, 2000 to December 31, 2001 $35,526
KINDER-CARE LEARNING CENTER - COLUMBUS, OHIO
Date of purchase: May 28, 1987
Purchase price: $190,337
Property description: This property is located in Columbus, Ohio. The building is situated on .538 acres and contains 4,650 square feet. The property has been sublet by Kinder-Care to Children Today, another child-care provider.
The property is on lease until July 31, 2001. The annual rent over the remainder of the lease is as follows:
January 1, 2000 to December 31, 2000 $35,526
January 1, 2001 to July 31, 2001 $20,724
KINDER-CARE LEARNING CENTER - DAYTON, OHIO
Date of purchase: May 28, 1987
Purchase price: $190,337
Property description: This property is located approximately thirty miles northeast of Dayton, Ohio in the Mud River Township. The building is situated on .645 acres and contains 4,650 square feet.
The current lease expires December 31, 2001. The annual base rent over the remaining term of the lease is as follows:
January 1, 2000 to December 31, 2001 $35,526
KINDER-CARE LEARNING CENTER - INDIANAPOLIS, INDIANA
Date of purchase: May 2, 1989
Purchase price: $201,080
Property description: This property is located at 1034 N. Whitcomb Ave. in Indianapolis, Indiana. The building contains 4,487 square feet and is situated on .598 acres.
The current lease expires December 31, 2000 with gross rents of $49,694 per year.
PARAGON RESTAURANT GROUP, INC.
The Partnership owns two properties operated as Mountain Jack's Restaurants, on lease to Paragon Steakhouse Restaurants, Inc. The company, headquartered in San Diego, California, is one of the nation's premier specialty restaurant chain operators. Their trade names include Mountain Jack's and Hungry Hunter.
MOUNTAIN JACK'S RESTAURANT - MIDDLEBURG HEIGHTS, OHIO
Date of purchase: July 21, 1987
Purchase price: $1,046,222
Property description: The property, situated on 1.72 acres and containing 6,331 square feet, is an upscale steak and seafood restaurant located in Middleburg Heights, Ohio, a suburb of Cleveland. It has seating for approximately 163 persons and parking for approximately 115 cars.
The annual lease payment is the greater of $104,500 or 5% of the gross sales. The lease expires on July 20, 2005.
MOUNTAIN JACK'S RESTAURANT - LAFAYETTE, INDIANA
Date of purchase: September 29, 1987
Purchase price: $1,080,096
Property description: This property is located at 2411 State Road 26 East, Lafayette, Indiana. Lafayette is strategically located between Chicago, Illinois to the north and Indianapolis, Indiana to the south. It is the home of Purdue University. The property is situated on 1.72 acres, contains 8,274 gross square feet and has seating for approximately 294 persons. The site is ideally located along a main commercial artery and is surrounded by seven hotels.
The annual lease payment is the greater of $107,800 or 5% of the gross sales. The lease expires on September 28, 2005.
AUTOWORKS - BELLEVUE, NEBRASKA
Date of purchase: July 5, 1988
Purchase price: $688,580
Property description: The property is located at a major shopping center at 915 Fort Crook Road, Bellevue, Nebraska, a suburb of Omaha, Nebraska. Bellevue is the home of the Strategic Air Command (SAC) which contributes largely to the area economy. The improvements consist of a free standing concrete block and glass building containing 4,870 square feet.
The base minimum annual rent is $80,500 per year with scheduled rental increases occurring every third year of the lease based on increases in the Consumer Price Index not to exceed a 10% increase. The lease expires on July 5, 2008.
PONDEROSA RESTAURANT - ANN ARBOR, MICHIGAN
Date of purchase: January 20, 1989
Purchase price: $759,618
Property description: The property, containing 5,034 square feet, is situated on approximately one acre located at 3354 East Washtenaw Street, Ann Arbor, Michigan. The property is surrounded by numerous commercial enterprises including the Arbor Land enclosed shopping mall.
The lease calls for a minimum rent of $77,187 plus 6.5% of the annual gross sales in excess of the average annual sales for the years 1989 and 1990.
The lease expires September 21, 2003.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S LIMITED PARTNERSHIP UNITS AND RELATED SECURITY HOLDER MATTERS
A) A public market for the Partnership's units does not exist.
B) As of December 31, 1999, there were 1,670 investors holding 135,199 units.
C) The Partnership made its first cash flow distribution from operations in May 1987. Since that date, consistent cash distributions have been made at the end of each calendar quarter through December 31, 1999. The Partnership expects to continue to make cash distributions on a quarterly basis in the future to the extent the Partnership continues to generate net operating income, or realize proceeds through property sales.
PART II
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
The following information has been selected from the financial statements of the Partnership:
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Certain statements in this Form 10-K may be deemed to be "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities and Exchange Act of 1934, as amended. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results of the Partnership to be materially different from historical results or from any results expressed or implied by such forward-looking statements.
The following discussion should be read in conjunction with the financial statements and the notes thereto. Historical results and percentage relationships set forth in the Statements of Income contained in the Financial Statements, including trends which might appear, should not be taken as indicative of future operations.
Comparison of year ended December 31, 1999 to year ended December 31, 1998.
The net income of the Partnership increased by $243,377 in 1999 when compared to 1998. The differences in income and expenses are explained below.
Rental revenue decreased by $72,588 or 11% to $598,103 in 1999 from $670,691 in 1998. The decrease in rental revenue was primarily attributed to the sale in March 1999 of a building that was leased to Payless Shoes and a sale of a building in May 1998 that was leased to Timberlodge Steakhouse. These properties accounted for $100,986 in rental revenue in 1998 as compared to $17,696 in 1999.
During 1999, the Partnership sold four properties. In February 1999, the Partnership sold a vacant building in Kenner, Louisiana that was formerly on lease to Toddle House Restaurant. The net sale price for the building was $222,849 and a $34,534 gain was recognized on the sale. In March 1999, the Partnership sold a building in Plant City, Florida that was on lease to Payless Shoe Store. The net sale price for the building was $645,975 and a $71,313 gain was recognized on the sale. In September 1999, the Partnership sold two buildings that were on lease to Kindercare. The net sale price for the Kindercare located in Gahanna, Ohio was $325,019 and the net sale price for the Kindercare located in Grove City, Ohio was $271,291. The partnership recognized a gain of $170,848 and $112,605, respectively, on these sales.
In May 1998, the Partnership sold a building that was leased by Timberlodge Steakhouse in Burnsville, Minnesota. The net proceeds for the building were $689,760 and a gain of $100,094 was recognized. In September 1998, the Partnership sold a vacant building in Alton, Illinois, formerly on lease to Ponderosa Restaurant. The sale price for the building was $610,000 which resulted in a loss of $108 on the sale.
Operating expenses decreased by $25,952 or 12% in 1999 from 1998. Depreciation expense decreased by $27,816 or 22% due to property sales in 1998 and 1999. Property tax expense decreased by $21,753 or 99%. The decrease in property tax expense is attributable to the Company paying for the property taxes that would have been paid by the Ponderosa Restaurant and Toddle House in 1998. In 1999, the Company paid property taxes that would have been paid by Kindercare in Columbus, Ohio. Subsequently, the Company charged Kindercare for the amount of the property taxes paid on their behalf. Bad debt expense increased by $27,478 as compared to 1998. The increase is primarily due to Kindercare in Columbus, Ohio. Other expenses and other income varied very little between the two accounting periods.
Comparison of year ended December 31, 1998 to year ended December 31, 1997.
The net income of the Partnership decreased by $78,767 in 1998 when compared to 1997. The differences in income and expenses are explained below.
Rental revenue decreased by $156,530 or 19% to $670,691 in 1998 from $827,221 in 1997. The decrease in rental revenue was primarily attributed to the sale in August 1997 of a building that was leased to Kindercare, and to Toddle House Restaurant, which is bankrupt and no longer being charged rents. These properties accounted for $49,252 in rental revenue in 1997. In May 1998, the sale of a building leased to Timber Lodge Restaurant accounted for approximately $70,627
in rental revenue in 1997 as compared to $30,201 in 1998. In September 1998, the sale of a building leased to Ponderosa Restaurant, which was vacant in 1998, accounted for approximately $70,359 in rental revenue in 1997 as compared to $0 in 1998.
Interest income decreased by $37,150 or 24% in 1998 from 1997. This decrease was due primarily to finance charges for Toddle House Restaurants in 1997 of approximately $28,680. No such charges were assessed in 1998.
Operating expenses decreased by $99,300 in 1998 from 1997. The net decrease was primarily attributed to the $45,371 decrease in bad debt expense and a decrease of $42,614 in accounting and legal expenses. The bad debt expense for 1998 was $3,521 as compared to $48,892 in 1997. The decrease in bad debts expense relates to reserves for Toddle House Restaurants, which is in Chapter 11 Bankruptcy, but was being charged rents in 1997. The decrease in accounting and legal expenses relates to legal fees paid by the Partnership in 1997 of approximately $48,131 relating to Ponderosa Restaurant. No such fees were incurred in 1998. Property tax expense increased by $8,320 or 61%. This increase is attributed to the Company incurring property taxes expenses that would have been paid by Ponderosa, who had vacated one of the Company's properties and has stopped paying rents, and Toddle House, which is in Chapter 11 Bankruptcy. Overall, other expenses and other income varied little between the two accounting periods.
During 1998, the Partnership sold two properties. In May 1998, the Partnership sold a building leased to Timber Lodge Restaurant in Burnsville, Minnesota. The net sales price was $689,760 and a $100,094 gain was recognized on the sale. In September 1998, the Partnership sold a building leased to Ponderosa Restaurant in Alton, Illinois. The net sales price was $608,997 and a $108 loss was recognized on the sale.
The Partnership has continued to distribute cash flows to the limited partners since 1989. Management anticipates that distributions from cash flows will continue in 2000. The distributions may be supplemented by proceeds from property sales, if any. If additional properties are sold and proceeds are distributed to the partners instead of reinvested, future distributions are expected to decrease.
Inflation is not expected to negatively impact the operations of the Partnership due to the structure of its investment portfolio. The leases all provide a minimum rental which the lessee is obligated to pay. Additionally, most leases contain some form of inflation hedge which provides for the rent to be increased. The rent increases may be in the form of scheduled fixed minimum rent increases, Consumer Price Index (CPI) adjustments or by participating in a percentage of the gross sales volume of the tenant. Since the triple-net leases require the lessees to pay for all property operating expenses, the net effect is that the revenue received will not be eroded away as operating expenses increase due to inflation.
LIQUIDITY AND CAPITAL RESOURCES
The Partnership has $289,446 in cash at December 31, 1999, with no outstanding debt on any of the properties that it owns. In January 2000, the Partnership distributed accumulated cash to the partners in the amount of $151,0000. The Partnership has income of approximately $44,402 per month from rental revenue. Also, the management does not expect the Partnership to incur any significant operational expenses as the Partnership properties are subject to triple-net leases.
The Partnership's primary source of cash is from rental of the real estate properties currently owned. The Partnership may also sell properties which would provide cash for distribution. Management believes that rental revenue should cover the recurring operating expenses of the Partnership and allow for cash distributions to be made to the limited partners should buildings become vacant. However, cash flow from operations would decrease and thus, less cash would be available for distribution. The Partnership has the policy of paying quarterly distributions to the limited partners of the actual cash earned by the Partnership in the preceding quarter. Therefore, if expenses were to increase or revenue were to decrease, the Partnership would decrease the quarterly distributions to the limited partners. It is anticipated that the liquidity of the Partnership will decrease as properties are sold.
CERTAIN CAUTIONARY STATEMENTS
Certain statements in this Form 10-Q are not historical fact and constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results of the Partnership to be materially different from historical results or from any results expressed or implied by such forward-looking statements. Such risk, uncertainties and other factors include, but are not limited to, the following risks:
Economic Performance and Value of Properties Dependent on Many Factors. Real property investments are subject to varying degrees of risk. The economic performance and values of real estate can be affected by many factors, including changes in the national, regional and local economic climates, local conditions such as an oversupply of space or reductions in demand for real estate in the area, the attractiveness of the properties to tenants, competition from other available space, the ability of the owner to provide adequate maintenance and insurance and increased operating costs.
Dependence on Rental Revenue from Real Property. Since substantially all of the Partnership's income is derived from rental revenue from real property, the Partnership's income and funds for distribution would be adversely affected if a significant number of the Partnership's tenants were unable to meet their obligations to the Partnership, if the Partnership were unable to lease a significant amount of space in its buildings on economically favorable lease terms, or as the properties are sold. There can be no assurance that any tenant whose lease expires in the future will renew such lease or that the Partnership will be able to re-lease space on economically advantageous terms.
Illiquidity of Real Estate Investments. Equity real estate investments are relatively illiquid and therefore tend to limit the ability of the Partnership to vary its portfolio promptly in response to changes in economic or other conditions.
Risk of Bankruptcy of Tenants. The bankruptcy or insolvency of a tenant would have an adverse impact on the property affected and on the income produced by such property. Under bankruptcy law, a tenant has the option of assuming (continuing) or rejecting (terminating) any unexpired lease. If the tenant assumes its lease with the Partnership, the tenant must cure all defaults under the lease and provide the Partnership with adequate assurance of its future performance under the lease. If the tenant rejects the lease, the Partnership's claim for breach of the lease would (absent collateral securing the claim) be treated as a general unsecured claim. The amount of the claim would be capped at the amount owed for unpaid pre-petition lease payments unrelated to the rejection, plus the greater of one years' lease payments or 15% of the remaining lease payments payable under the lease (but not to exceed the amount of three years' lease payments). At December 31, 1999, the Company had no tenants under bankruptcy.
Environmental Risks. Under various federal, state and local laws, ordinances and regulations, the Partnership may be considered an owner or operator of real property or may have arranged for the disposal or treatment of hazardous or toxic substances and, therefore, may become liable for the costs of removal or remediation of certain hazardous substances released on or in its property or disposed of by it, as well as certain other potential costs which could relate to hazardous or toxic substances (including governmental fines and injuries to persons and property). Such liability may be imposed whether or not the Partnership knew of, or was responsible for, the presence of such hazardous toxic substances.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Partnership is filing as part of this report, its financial statements which contain the following:
PART III
ITEM 10.
ITEM 10. GENERAL PARTNERS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP
The general partners of the Partnership are New Plan Excel Realty Trust, Inc., a Maryland corporation ("New Plan"), and Gary B. Sabin. Neither Gary B. Sabin nor the executive officers of the company receive compensation from the Partnership. In 1999, Excel Legacy Corporation ("the Company") began managing the assets of the Partnership when certain officers of New Plan resigned. The Company has indemnified New Plan of any general partner liability in exchange for an assignment of their partnership interest. The General Partner and the officers and employees of the Company spend such time in the administration of Partnership affairs to the extent deemed necessary.
The names, ages and positions of responsibility held by the executive officers and directors of the Company as follows:
FAMILY RELATIONSHIPS
Not Applicable.
BUSINESS EXPERIENCE
The following is a brief background of the directors and executive officers of the Company.
GARY B. SABIN has served as Chief Executive Officer, President and Chairman of the Board of Directors since January 1989. He is a graduate of Brigham Young University and Stanford University's Graduate School of Business where he received a master's degree as a Sloan Fellow. Mr. Sabin has extensive experience in the financial services industry with emphasis in the areas of commercial real estate and marketable securities.
RICHARD B. MUIR has served as Executive Vice President, Secretary and Director of New Plan and/or the Company since January 1989. Mr. Muir has worked extensively in the field of commercial real estate, developing expertise in real estate acquisition, property management, leasing and project financing.
GRAHAM R. BULLICK, Ph.D. has served as Senior Vice President of the Company since January 1991. Prior to joining the company, Mr. Bullick served for four years as an account manager of a company specializing in organizational development and service/quality systems.
MARK T. BURTON has served as Vice President of New Plan and /or the Company since January 1989 and as a Senior Vice President since January 1996. Mr. Burton's duties for the Company primarily consist of the evaluation and selection of property acquisitions and dispositions. Mr. Burton has served in various capacities with other affiliated companies since 1984.
JAMES Y. NAKAGAWA has served as Chief Financial Officer of the company since October 1998. From March 1988 to October 1988, Mr. Nakagawa served as Controller of the Company. Mr. Nakagawa served as Controller of New Plan from September 1994 to April 1999. Prior to joining New Plan, Mr. Nakagawa was a manager at Coopers & Lybrand LLP. He is a certified public accountant.
S. ERIC OTTESON has served as Senior Vice President , General Counsel and Assistant Secretary since the Company's formation. Mr. Otteson served as Senior Vice President - Legal Affairs and Secretary of New Plan Excel from September
1998 to April 1999. Mr. Otteson also served as Senior Vice President, General Counsel and Assistant Secretary if Excel Realty Trust from September 1996 to September 1998. From 1987 to 1995, he was a senior partner in a San Diego law firm.
JOHN A. VISCONSI has as served Legacy's Senior Vice President -Leasing/Asset Management since May 1999. Mr. Visconsi served as Vice President - Leasing with Excel Realty Trust and then New Plan Excel from January 1995 to April 1999. He also served as Senior Vice President of Price Enterprises from January 1994 to March 1995. From 1981 to 1994, Mr. Visconsi was Director of Leasing and Land Development of Ernest W. Hahn, Inc.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The Partnership has no executive officers and has not paid nor proposes to pay any compensation or retirement benefits to the directors or executive officers of New Plan Excel Realty Trust, Inc. See ITEM 13 for compensation to the general partner.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
No person is known by the Partnership to be the beneficial owner of more than 5% of the limited partner units. The following information sets forth the number of units owned directly or indirectly by affiliates.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The table below reflects compensation paid to the Company, or their affiliates during the year ended December 31, 1999:
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A) Documents filed as part of this report:
(1) (2) Financial statements under Item 8 in Part II hereof.
(3) Exhibits: 27.1 Financial Data Schedule
(B) Reports on Form 8-K
No reports on Form 8-K have been filed during the past year.
SIGNATURES
Pursuant to the requirement of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: March 28, 2000 Excel Properties, Ltd. (Registrant)
By: /s/ Gary B. Sabin --------------------------------- Gary B. Sabin General Partner
By: /s/ James Y. Nakagawa --------------------------------- James Y. Nakagawa Principal Accounting Officer
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners Excel Properties, Ltd.
We have audited the accompanying balance sheets of Excel Properties, Ltd., as of December 31, 1999 and 1998, and the related statements of income, changes in partners' equity, and cash flows for each of the three years in the period ended December 31, 1999. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Excel Properties, Ltd., as of December 31, 1999 and 1998, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1999, in conformity with generally accepted accounting principles.
Our audits were made for the purposes of forming an opinion in the basic financial statements taken as a whole. Financial statement Schedules II and III are presented for the purpose of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
SQUIRE & CO.
February 7, 2000 Poway, California
EXCEL PROPERTIES, LTD.
BALANCE SHEETS DECEMBER 31, 1999 AND 1998 ----------
The accompanying notes are an integral part of the financial statements
EXCEL PROPERTIES, LTD.
STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997 ----------
The accompanying notes are an integral part of the financial statements
EXCEL PROPERTIES, LTD.
STATEMENTS OF CHANGES IN PARTNERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
----------
The accompanying notes are an integral part of the financial statements
EXCEL PROPERTIES, LTD.
STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997 ----------
The accompanying notes are an integral part of the financial statements
EXCEL PROPERTIES, LTD.
NOTES TO FINANCIAL STATEMENTS ----------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION
Excel Properties, Ltd. (the "Partnership") was formed in the State of California on September 19, 1985, for the purpose of, but not limited to, acquiring real property and syndicating such property.
REAL ESTATE
Land and buildings are recorded at cost. Buildings are depreciated using the straight-line method over the tax life of 31.5 years. The tax life does not differ materially from the economic useful life. Expenditures for maintenance and repairs are charged to expense as incurred. Significant renovations are capitalized. The cost and related accumulated depreciation of real estate are removed from the accounts upon disposition. Gains and losses arising from the dispositions are reported as income or expense.
The Partnership assesses whether there has been an impairment in the value of its real estate by considering factors such as expected future operating income, trends, and prospects, as well as the effects of the demand, competition and other economic factors. Such factors include a lessee's ability to pay rent under the terms of the lease. If a property is leased at a significantly lower rent, the Partnership may recognize a permanent impairment loss if the income stream is not sufficient to recover its investment.
CASH DEPOSITS
At December 31, 1999, the carrying amount of the Partnership's cash deposits total $289,446. The bank balances are $340,445 of which $200,000 which is covered by federal depository insurance.
STATEMENT OF CASH FLOWS - SUPPLEMENTAL DISCLOSURE
There was no interest or taxes paid for the years ended December 31, 1999, 1998 or 1997. The Partnership had no noncash investing or financing transactions in 1999 and 1998. In 1997, the Partnership assumed a note receivable in the amount of $165,750 in conjunction with the sale of a land parcel. This transaction is excluded from the statement of cash flows.
INCOME TAXES
The Partnership is not liable for payment of any income taxes because as a partnership, it is not subject to income taxes. The tax effects of its activities accrue directly to the partners.
ACCOUNTS RECEIVABLE
All net accounts receivable are deemed to be collectible within the next 12 months.
Continued
EXCEL PROPERTIES, LTD.
NOTES TO FINANCIAL STATEMENTS, CONTINUED ----------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
FINANCIAL STATEMENT ESTIMATES
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
RECLASSIFICATIONS
Certain reclassifications have been made to the financial statements for the years ended December 31, 1999 and 1998 in order to conform with the current period presentation.
2. FINANCIAL STATEMENT AND TAX RETURN DIFFERENCES
The Partnership had the following differences between the financial statements and the Partnership tax return.
Continued
EXCEL PROPERTIES, LTD.
NOTES TO FINANCIAL STATEMENTS, CONTINUED ----------
3. FEES PAID TO GENERAL PARTNER:
The Partnership has paid the General Partner or its affiliates the following fees:
4. NOTES RECEIVABLE:
The Company had the following notes receivable at December 31, 1999 and 1998:
5. MINIMUM FUTURE RENTALS:
The Company leases single-tenant buildings to tenants under noncancelable operating leases requiring the greater of fixed or percentage rents. The leases are primarily triple-net, requiring the tenant to pay all expenses of operating the property such as insurance, property taxes, repairs and utilities. Minimum future rental revenue for the next five years for the commercial real estate currently owned and subject to noncancelable operating leases is as follows:
Continued
EXCEL PROPERTIES, LTD.
NOTES TO FINANCIAL STATEMENTS, CONTINUED ----------
6. REAL ESTATE:
During 1999, the Partnership sold four properties. In February 1999, the Partnership sold a vacant building in Kenner, Louisiana that was formerly on lease to Toddle House Restaurant. The net sale price for the building was $222,849 and a $34,534 gain was recognized on the sale. In March 1999, the Partnership sold a building in Plant City, Florida that was on lease to Payless Shoe Store. The net sale price for the building was $645,975 and a $71,313 gain was recognized on the sale. In September 1999, the Partnership sold two buildings that were on lease to Kindercare. The net sale price for the Kindercare located in Gahanna, Ohio was $325,019 and the net sale price for the Kindercare located in Grove City, Ohio was $271,291. The partnership recognized a gain of $170,848 and $112,605, respectively, on the sales.
During 1998, the Partnership sold two properties. In May 1998, the Partnership sold a building leased to Timberlodge Restaurant in Burnsville, Minnesota. The net sales price was $689,760 and a $100,094 gain was recognized on the sale. In September 1998, the Partnership sold a building leased to Ponderosa Restaurant in Alton, Illinois. The net sales price was $608,997 and a $108 loss was recognized on these sales.
In 1997, the Partnership sold one property and a parcel of land. In August 1997, the Partnership sold a building leased to Kindercare in Indianapolis, Indiana. The net sales price was $182,388 and a $18,173 gain was recognized on the sale. In September 1997, the Partnership sold a land parcel in Las Vegas, Nevada for $195,000. The Partnership issued a note receivable in the amount of $165,750 in conjunction with the sale and recognized a gain of $66,200.
EXCEL PROPERTIES, LTD. SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
EXCEL PROPERTIES, LTD. SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1999
(a) Also represents cost for federal income tax purposes.
(b) Reconciliation of total real estate carrying value for the three years ended December 31, 1999 is as follows:
(c) Reconciliation of accumulated depreciation for the three years ended December 31, 1999 is as follows: