0000755869-95-000007.txt : 19950925 0000755869-95-000007.hdr.sgml : 19950925 ACCESSION NUMBER: 0000755869-95-000007 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950920 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GLENBOROUGH PENSION INVESTORS CENTRAL INDEX KEY: 0000755869 STANDARD INDUSTRIAL CLASSIFICATION: 6512 IRS NUMBER: 330058349 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-13448 FILM NUMBER: 95574975 BUSINESS ADDRESS: STREET 1: 400 S EL CAMINO REAL STE 1100 CITY: SAN MATEO STATE: CA ZIP: 94402 BUSINESS PHONE: 4153439300 MAIL ADDRESS: STREET 1: 400 S EL CAMINO REAL STE 1100 CITY: SAN MATEO STATE: CA ZIP: 94402 FORMER COMPANY: FORMER CONFORMED NAME: OUTLOOK PENSION INVESTORS DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: AUGUST PENSION INVESTORS DATE OF NAME CHANGE: 19890815 10-K/A 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K/A [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the year ended December 31, 1994 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: 0-13448 GLENBOROUGH PENSION INVESTORS, A CALIFORNIA LIMITED PARTNERSHIP ---------------------------------------------------- (Exact name of registrant as specified in its charter) California 33-0058349 ----------------------- ------------------ (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 400 South El Camino Real, Suite 1100 94402-1708 San Mateo, California (Zip Code) ----------------------- ------------ (Address of principal executive offices) Registrant's telephone number, including area code: (415) 343-9300 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Units of Limited Partnership Interest ----------------------------------------- (Title of class) Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] Indicate by check mark whether the registrant (1) has filed all reports required 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 X No ---- ---- No market for the Limited Partnership Units exists and therefore a market value for such Units cannot be determined. DOCUMENTS INCORPORATED BY REFERENCE: None Page 1 of 56 NO EXHIBIT INDEX REQUIRED PART I Item 1. Business The Partnership, Glenborough Pension Investors, a California Limited Partnership (formerly known as Outlook Pension Investors - see Note 9 of the Notes to Financial Statements), was formed on October l7, l984, under the California Revised Partnership Act. The General Partner was API Partners, a California general partnership consisting of Luke V. McCarthy, John R. Provine and August Advisers, Inc., a California corporation. On April 4, 1994, several matters, submitted to a vote of security holders through the solicitation of proxies, were approved including the change in the general partner to Glenborough Realty Corporation as the managing General Partner and Robert Batinovich as co- General Partner (collectively, the "General Partner") (see Note 9 of the Notes to Financial Statements). The Partnership's public offering commenced on January l8, l985, and the Partnership became operational on April 9, l985, when the impound requirements were met. The Partnership sold a total of 99,336 Combined Units through April l5, l986, when its offering of Combined Units was terminated. Each Combined Unit included one Limited Partnership Unit and two warrants. Each warrant permitted the holder to purchase one additional Limited Partnership Unit. The first warrant expired on April l5, l986 and the second warrant expired on April l5, l987. As a result of the exercise of warrants, an additional l9,606 Limited Partnership Units were sold. The Partnership is party to a loan agreement, entered into on January 16, 1995, under which the Partnership loaned to AFP Partners, then a California general partnership, (the "Borrower"), an affiliate of the General Partner, all of the net proceeds received from the sale of Combined Units, less certain reserves to be maintained by the Partnership. The Borrower used the proceeds of ten loans (collectively, "Loans" or singly, "Loan") to acquire thirteen properties. Separate loans were made by the Partnership for each property or group of related properties purchased by the Borrower. Each loan extended for a term of ten years, was secured by the real property purchased by the Borrower and provided partial recourse to the Borrower in the event of nonpayment. The original loan documents (see discussion which follows concerning forbearance agreement) provided that all loans accrue basic interest at the rate of l3% per annum. A minimum of 8% per annum interest was payable quarterly. Any remaining portion of the 5%, and any previously accrued but unpaid interest could also have been paid to the extent the cash flow from the property securing the loan would permit. Otherwise, all or a portion of this 5% amount would accrue and become payable when cash flow was sufficient or upon maturity of the loan. All loans were "participating loans", such that upon the sale of a property or the maturity of the loan, the Partnership would have been entitled to 75% of any increase in the value of the property in excess of its original cost, over and above costs of sale and accrued interest. The Borrower pledged a certificate of deposit of $500,000 and certain Page 2 of 56 promissory notes having an initial aggregate principal balance of $l,500,000 as additional security for the loans. An agreement entered into in December 1988 between the partners of the Borrower required August Financial Corporation ("AFC"), the parent company of one of the partners of the Borrower at the time, to supplement deficiencies in the Borrower's cash flow by making loans to the Borrower ("Contribution Agreement"). AFC became insolvent and AFC's parent company, GLENFED Service Corporation, was also insolvent and therefore not in a position to contribute any additional capital to AFC. During the last quarter of 1991 and the years ended December 31, 1992 and 1993, some of the Borrower's properties continued to generate insufficient income to cover the minimum interest payments due to the Partnership. As funds were no longer available from AFC to supplement the Borrower's cash flow, the Partnership and the Borrower entered into certain loan modification agreements. The interest payment due the Partnership by the Borrower for the quarter ended December 31, 1991 was reduced by $151,300 simultaneous with a reduction of the note payable to the Borrower from the Partnership by the same amount. Then, for the purpose of allowing time for negotiations between the Partnership and the Borrower with an objective of achieving a workout of the Loans, the Partnership elected to forbear implementation of the payment schedules of the Loans. The election took effect on July 1, 1992, commencing with the payment due October 1, 1992, originally for a six month period expiring on March 31, 1993 ("Forbearance Period"). During the Forbearance Period, the Borrower paid all net cash flow from the properties which secured the Loans to the Partnership. "Net Cash Flow" was defined as all income collected by the Borrower less operating expenses of the properties (including reserves for real and personal property taxes and insurance) and overhead and operating expenses of the Borrower. The Partnership and the Borrower extended the term of the Forbearance Agreement to allow sufficient time to complete final negotiation and documentation of a workout and to solicit approval from the Partnership's Limited Partners. On April 4, 1994, these matters submitted to a vote of security holders through the soliciation of proxies were approved. These matters included an acquisition through deeds-in lieu of foreclosure by the Partnership of ten of thirteen properties. These ten properties secured approximately $12,833,000 of the principal balances of the loans. The terms of the remaining loans included: (i) an increase in the principal amount of the loans by approximately $355,000 for the costs incurred by the Partnership in the restructuring, an interest accrual rate change from 13% to 10% beginning January 1, 1994, extension of the maturity dates of the loans to March 31, 2001 with five one-year renewal options, and a cross- collateralization of the three loans with the right to Page 3 of 56 transfer a property to the Partnership in satisfaction of the loan without creating a default under the other loans; (ii) a release of certain collateral notes in the aggregate principal amount of $1,500,000 and the right to pursue certain limited recourse liability relating to the existing loans; (iii) receiving secured and unsecured notes with unpaid balances of principal and accrued interest as of September 30, 1993 aggregating approximately $1,159,000; (iv) receiving a release from the obligation to repay approximately $349,000 that was owed to the Borrower; (v) acknowledgement of the termination of the contribution agreement and releasing such rights, if any, the Partnership may have with respect thereto; (vi) and the termination of the servicing agreement discussed below. Effective July 1, 1994, the Partnership obtained ownership by deeds-in-lieu of foreclosure of four of the Borrower's properties: Park 100 (Buildings 42 and 46) and the Eagan and New Hope mini-storages. In addition, title to the six auto care centers, formerly held by the Borrower, was passed to GPI Georgia Auto Centers, L.P., a Georgia Limited Partnership whose general partner is GPI Auto Centers, Inc., a Georgia corporation, both of which are wholly owned by the Partnership. In addition to the changes discussed above, AFP Partners' structure changed as part of the restructuring. AFP Partners was a California general partnership whose general partners consisted of August Financial Corporation, a California Corporation, August Financial Partners, a California limited partnership, and August Investment Partners, a California limited partnership. AFP Partners, as part of the restructure, is now a California limited partnership, whose general partners are Glenborough Realty Corporation and Robert Batinovich, collectively owning 1%. August Financial Partners, a California limited partnership, is the limited partner, owning 99%. The Partnership had a mortgage loan servicing agreement (the "Service Agreement") with an independent mortgage banking firm (the "Servicing Agent") unaffiliated with the Partnership, the General Partner, the Borrower or any of their affiliates. The Service Agreement gave the Servicing Agent specific responsibilities concerning loan review and loan servicing. The Servicing Agent received a basic servicing fee of l/4 of 1% of the amount advanced under each loan agreement to the Borrower and was entitled to a continuing service fee equal to interest at the rate of l/8 of l% per annum on the unpaid principal balance. As discussed previously, this agreement was terminated as part of the restructure. Page 4 of 56 Federal, state and local statutes, ordinances and regulations which have been enacted or adopted regulating the discharge of material into the environment or otherwise relating to the protection of the environment do not presently have a material effect on the operations nor on the capital expenditures, earnings or competitive position of the Partnership. Glenborough Corporation and its affiliates provided services to the Partnership and the Borrower including investor relations, asset management and property management. The Partnership does not directly employ any individuals. Any persons rendering services on behalf of the Partnership are employees of Glenborough Corporation or its affiliates. The business of the Partnership to date has involved only one industry segment. The Partnership has no foreign operations and the business of the Partnership is not seasonal. In 1993, the Partnership's year end was changed from October 31 to December 31, therefore, comparative years are stated as they were filed in prior years, and do not conform to the current year ending date. The Partnership's financial statements include a presentation of the two month transition period ended December 31, 1992. The Partnership is currently involved in a potential merger transaction, whereby its existing net assets and all bank debt will merge with a newly created real estate investment trust ("REIT"). The merger requires a majority vote of the partnerships that will be participating in the merger. If the vote is successful, the Partnership will be fully merged into the new REIT and will cease to exist. The limited partners are expected to receive their solicitation materials for this potential transaction in 1995. Item 2. Properties The Partnership owns ten properties and continues to hold three real property loans as of December 31, 1994. The thirteen properties are described below. PARK 100 BUILDINGS ------------------ On December 31, 1985, the Partnership made a mortgage loan to the Borrower for the purpose of acquiring Buildings 42 and 46 of the Park 100 Business Park ("Park 100"). Park 100 consists of 65 buildings in a 1,328 acre development located at West 79th Street and Interstate 465, in a prime industrial area of Indianapolis, Indiana. The park is bounded on the east side by a rail line, offering direct rail access to the park. Building 42 is a concrete tilt-up structure with a brick facade, containing approximately 37,200 square feet of leasable space. Approximately 25% of the space is office, with the balance used for warehouse/distribution. The building was completed in 1982 Page 5 of 56 and is situated on approximately 4.3 acres of land. There are 121 parking spaces. Building 46 is a concrete tilt-up structure containing approximately 102,400 square feet of warehouse/distribution space. The building was completed in 1982 and is situated on approximately 9.83 acres of land. There are 63 parking spaces. The building contains 8 bays with 20-23 foot clear height with 12,800 square feet of space per bay. All of the bays are rail- served. The total amount of the loan by the Partnership was $4,160,000 consisting of $3,900,000 for the purchase price of the property, a borrower's expense reserve of $187,200 and approximately $72,800 to cover legal and appraisal fees, a loan origination fee, capital improvements, and closing costs. The full amount of the loan was secured by first deeds of trust on the properties. On July 1, 1994, these properties were acquired by the Partnership by a deed-in-lieu of foreclosure. The occupancy level at December 31 (October 31 for 1992, 1991 and 1990), expressed as a percentage of the total net rentable square feet, and the average annual rent per square foot for the last five years was: Occupancy Level Average Annual Percentage Rent Per Square Foot --------------- --------------------- 994 Building 42 100% $ 5.74 1993 Building 42 74% 5.82 1992 Building 42 77% 5.10 1991 Building 42 94% 5.63 1990 Building 42 95% 5.29 Occupancy Level Average Annual Percentage Rent Per Square Foot ---------------- --------------------- 1994 Building 46 100% $ 3.47 1993 Building 46 88% 3.58 1992 Building 46 100% 3.52 1991 Building 46 100% 3.53 1990 Building 46 100% 3.69 Current annual rental rates for the properties range from $3.24 to $6.72. Page 6 of 56 Two tenants occupy more than ten percent of the net rentable square footage of the two buildings. Both tenants occupy space in Building 46. Principal terms of the leases and the nature of their businesses are: Capitol City Pinnacle Container Corp. Oil Corp. --------------- ---------- Nature of Business Manufacturing Manufacturing Lease Term 5 years 5 years Expiration Date 7/31/96 1/31/99 Square Footage 51,200 51,200 (% of total) 37% 37% Annual Rent $189,952 $165,888 Rent Increases 8/1/95 to None $197,120 Renewal Options None None In the opinion of management, the property is adequately covered by insurance. In 1994, the annual real estate tax rate was approximately 7.97% based upon 100% of the assessed value, resulting in annual taxes of approximately $86,100. SEA TAC II ---------- On March 3, 1986, the Partnership made a mortgage loan to the Borrower for the purpose of purchasing the North Sea Tac Building II ("Sea Tac II"). Sea Tac II is a truck terminal facility located in Seattle, Washington. Sea Tac II is located in a wooded area north of the Sea Tac Airport at 1900 South 146th Street in Seattle. Sea Tac II is one of two truck terminal buildings in the immediate area containing approximately 41,657 square feet of leasable space. The property is concrete tilt-up construction and was completed in 1984. The total amount of the original loan by the Partnership was $2,268,800 consisting of $2,114,000 for the purchase price of the property, a borrower's expense reserve of $102,700, and $52,100 to cover legal and appraisal fees, a loan origination fee, capital improvements, and closing costs. As part of the restructure in 1994, the principal balance of the note was modified to $2,333,338. The increase represents a portion of the costs of the restructure. The entire amount of the loan is secured by a first deed of trust on the property. The occupancy level at December 31 (October 31 for 1992, 1991 and 1990), expressed as a percentage of the total net rentable square Page 7 of 56 feet, and the average annual rent per square foot for the last five years was: Occupancy Level Average Annual Year Percentage Rent Per Square Foot ---- --------------- -------------------- 1994 100% $5.69 1993 100% 5.69 1992 100% 5.69 1991 100% 5.24 1990 100% 5.24 Current annual rental rates range from $5.55 to $5.80 per square foot. The principal terms of the property's two leases and the nature of the tenants' businesses are: Sea Air Handling Rontra Services, Inc. Freight --------------- -------- Nature of Business Freight Freight Lease Term 5 years 5 years Expiration Date 12/31/95 12/31/95 Square Footage 23,791 17,866 (% of total) 57% 43% Annual Rent $138,000 $99,120 Rent Increase None 1/1/95 to $102,000 Renewal Options None None In the opinion of management, the property is adequately covered by insurance. In 1994, the annual real estate tax rate was approximately 1.45% based upon 100% of the assessed value, resulting in annual taxes of approximately $31,000. ALL AMERICAN SELF STORAGE -------------------------- On July 30, 1986, the Partnership made two mortgage loans to the Borrower for the purpose of acquiring two self-storage facilities known as All American Self Storage ("All American"). The All American facilities are located at 7301 36th Avenue North in New Hope, Hennepin County, and 3735 Sibley Memorial Highway in Eagan, Dakota County, both Minneapolis, Minnesota suburbs. Both facilities are on or near main highways. The New Hope property was completed in February 1985, and contains approximately 61,100 net rentable square feet in seven rectangular buildings. The Eagan facility was completed in March 1985, and contains approximately 36,990 net rentable square feet Page 8 of 56 in two buildings. The two facilities combined contain 810 storage units. Both facilities are constructed with brick exteriors and wooden lapboard ends. The total amount of the loan by the Partnership for the New Hope property was $2,193,700 consisting of $2,069,100 for the purchase price of the property, $20,400 for legal, appraisal and closing costs, $5,500 for a loan origination fee, and a borrower's expense reserve of $98,700. The full amount of the loan was secured by a first trust deed on the property. On July 1, 1994, this property was acquired by the Partnership by a deed-in-lieu of foreclosure. The total amount of the loan by the Partnership for the Eagan property was $1,288,300 consisting of $1,215,200 for the purchase price of the property, $11,900 for legal, appraisal and closing costs, $3,200 for a loan origination fee, and a borrower's expense reserve of $58,000. The full amount of the loan was secured by a first trust deed on the property. On July 1, 1994, this property was acquired by the Partnership by a deed-in-lieu of foreclosure. The occupancy level at December 31 (October 31 for 1992, 1991 and 1990), expressed as a percentage of the total net rentable square feet, for the last five years was: Occupancy Level Percentage for the Year: New Hope Eagan ---------------- --------- ----- 1994 93% 96% 1993 94% 90% 1992 84% 91% 1991 84% 90% 1990 89% 94% Because each property consists of individual self-storage units, the facilities are rented on a month-to-month basis, and no tenant occupies greater than 10% of the rentable space. The average rental unit size is approximately 122 square feet, with a size range available from 5' by 5' to 12' by 30'. Rental rates range from $28.00 to $145.00 per month. Page 9 of 56 Following is a schedule of current rental rates for each property. Eagan New Hope -------------------- ---------------------- Unit # of Rental Unit # of Rental Size Units Rate Size Units Rate -------- -------- -------- -------- -------- -------- 5x5 15 $28 5x5 40 $29 5x8 28 34 5x8 50 34 5x10 92 39 5x10 99 39 5x15 28 50 5x15 40 54 6x15 4 58 10x10 57 69 7x10 4 49 10x15 72 79 8x8 2 48 10x20 62 93 8x10 2 54 10x22 25 102 8x12 2 62 10x25 9 115 8x15 2 70 10x30 45 130 10x10 16 64 10x12 13 70 10x15 19 79 10x20 40 93 10x30 24 130 12x15 10 87 12x30 10 145 In the opinion of management, the property is adequately covered by insurance. In 1994, the annual real estate tax rate was approximately 5.93% based upon 100% of the assessed value, resulting in annual taxes of approximately $94,700. PARK CENTER ----------- On October 7, 1986, the Partnership made a mortgage loan to the Borrower for the purpose of acquiring a shopping center known as "Park Center". Park Center is located at the northwest corner of 17th Street and Cabrillo Park Drive in the City of Santa Ana, Orange County, California. It is in a commercial corridor within a high-density residential neighborhood between Interstate Highway 5 and the Costa Mesa Freeway (Highway 55). The property is constructed of concrete block walls with a tile roof. The building was completed in 1979, is situated on approximately 6.342 acres of land and contains 73,500 square feet of leasable space. There are 287 parking spaces for a 3.9:1 parking ratio. The total amount of the original loan by the Partnership was $5,298,000 consisting of $4,900,000 for the purchase price of the property, $41,400 for legal, appraisal and closing costs and $105,000 for building and parking lot improvements. In addition, $13,200 was paid for a loan origination fee, and $238,400 for a borrower's expense reserve. As part of the restructure in 1994, the principal balance of the note was modified to $5,448,427. Page 10 of 56 The increase represents a portion of the costs of the restructure. The full amount of the loan is secured by a first deed of trust on the property. The occupancy levels at December 31 (October 31 for 1992, 1991 and 1990), expressed as a percentage of the total net rentable square feet, and the average annual rent per square foot for the last five years was: Occupancy Level Average Annual Year Percentage Rent Per Square Foot ---- --------------- -------------------- 1994 95% $6.04 1993 97% 6.66 1992 97% 6.80 1991 100% 7.11 1990 100% 6.77 Annual rental rates range from $3.55 to $18.00 per square foot. It should be noted that the $18.00 rate relates to one 1,200 square foot tenant only. The next highest rate is $16.23 per square foot. Only one tenant, Albertson's, occupies greater than ten percent of the leasable square footage of the property. The principal provisions of the lease, and the nature of the tenant's business are: Nature of Business Supermarket Lease Term 25 years Expiration Date 1/31/2004 Square Feet 52,500 (% of total) 71% Annual Rent $186,500 Rent Increases None Percentage Rent 1% of Gross Sales Renewal Options 5-5 year options In the opinion of management, the property is adequately covered by insurance. In 1994, the annual real estate tax rate was approximately 1.03% based upon 100% of the assessed value, resulting in annual taxes of approximately $49,800. COUNTRY SUITES - DFW -------------------- On October 31, 1986, the Partnership funded a mortgage loan to the Borrower for the purpose of acquiring a 90-suite hotel Page 11 of 56 complex located at Highway 114 at Esters Road, in Irving, Tarrant County, Texas. The property was completed in April 1986 and consists of four three-story buildings plus a laundry facility on approximately 1.8 acres of land. The property is an all-suite hotel containing 90 suites, or 108 suites when the 18 2-bedroom, 2-bath units are separated into 1-bedroom, 1-bath units. Each suite features complete kitchen facilities and a separate furnished living room. The property contains a centrally located pool with spa and conference facilities. The total amount of the original loan made by the Partnership was $4,900,000 consisting of $4,577,000 for the purchase price of the property, a borrower's expense reserve of $220,500, legal, appraisal and closing costs of approximately $40,300, a $50,000 working capital reserve, and a loan origination fee of $12,200. As part of the restructure in 1994, the principal balance of the note was modified to $5,039,434. The increase represents a portion of the costs of the restructure. Because the property is a hotel operation, there are no tenants occupying greater than 10% of the space, and there are no leases for the rooms. The 90 suites which make up the property have the following characteristics: Number of Square Total Suites Description Feet Square Feet ---------- -------------- -------- ----------- 40 1 bedroom 1 bath 400 16,000 *18 2 bedroom 2 bath 600 10,800 12 1 bedroom 1 bath 396 4,752 18 Mini-Suite 260 4,680 2 Handicap-equipped 400 800 ------- --------- Total 90 or *108 37,032 * These units can be separated into a 1-bedroom, 1-bath unit and a room with no kitchen facilities similar to a standard hotel room. Most of the guests at the Country Suites seek lodging in order to do business in the nearby Las Colinas business community or to visit several surrounding residential areas. Both the Las Colinas business community and these surrounding residential areas have been masterplanned for further development. The average annual occupancy levels and the average daily room rates for the years ended December 31 (October 31 for 1992, 1991 and 1990) for the last five years were: Average Annual Occupancy Average Daily Year Percentage Room Rate ------ ---------- ----------- 1994 77.5% $58.52 Page 12 of 56 1993 76.3% 50.20 1992 65.7% 54.10 1991 59.2% 61.80 1990 78.3% 51.80 In the opinion of management, the property is adequately covered by insurance. In 1994, the annual real estate tax rate was approximately 1.55% based upon 100% of the assessed value, resulting in annual taxes of approximately $65,500. ATLANTA AUTO CARE CENTERS ------------------------- On December 31, 1986, the Partnership funded three mortgage loans to the Borrower for the purpose of acquiring three Atlanta Auto Care Centers. A fourth loan secured by three additional Atlanta Auto Care Centers was funded over a period of time commencing in May 1987 and ending in June 1987. The Borrower acquired all six Atlanta Auto Care Centers from a single unrelated seller in December 1986. The fourth loan secured by the three centers was delayed at the request of the Partnership to permit the Partnership to collect the proceeds resulting from the sale of additional Limited Partnership Units as a result of the exercise of warrants which expired in April 1987. The last three centers were grouped to secure a single loan at the request of the Borrower. Each loan was secured by a first mortgage on the property or properties. On July 1, 1994, title to these properties was passed by deed-in-lieu of foreclosure to GPI Georgia Auto Centers, L.P., a Georgia Limited Partnership whose general partner is GPI Auto Centers, Inc., a Georgia Corporation, both of which are wholly owned by the Partnership. The following table sets forth information concerning the four loans relating to the six Atlanta Auto Care Centers, including the location, the total amount of the loan, the amount of the loan used to fund the purchase price, legal, appraisal and closing costs, the Servicing Agent's origination fee, and the Expense Reserve: Purchase Closing Agent's Expense Total Price Costs Fee Reserve Amount -------- ------- ------- ------- ------- Norcross $ 915,800 $ 10,000 $ 2,400 $ 45,800 $ 974,000 College Park 720,600 10,000 1,900 36,500 769,000 Roswell 507,800 9,400 1,400 26,400 545,000 Smyrna/ Snellville/ Marietta 2,730,700 34,400 7,300 130,600 2,903,000 All six buildings are single story, multi-tenant automobile service and repair facilities. All of the centers are concrete tilt-up construction with service bay areas ranging in size from 900 to 2,800 square feet. The customer entrances have colorful awnings and each space has office and customer waiting areas. Each building was approximately one year old at the date of Page 13 of 56 purchase, except the Snellville building which was more recently completed. The centers are located on major traffic arteries in retail areas. Individual property descriptions follow for each auto carecenter. NORCROSS -------- The property is located in the city of Norcross, Gwinnett County, at 4842 Jimmy Carter Boulevard, approximately eleven miles northeast from the Atlanta Central Business District. The site contains 1.52 acres of land on which a 10,920 square foot building was constructed. The occupancy level at December 31 (October 31 for 1992, 1991 and 1990), expressed as a percentage of the total net rentable square feet, and the average annual rent per square foot for the last five years was: Occupancy Level Average Annual Year Percentage Rent Per Square Foot ----- --------------- ----------------- 1994 100% $ 9.49 1993 65% 10.71 1992 49% 13.18 1991 74% 12.26 1990 74% 11.86 Current annual rental rates range from $6.75 to $14.06 per square foot. Four tenants occupy greater than ten percent of the net leasable square footage of the center. The principal provisions of the leases are: Michael Lay Audio MBS DBA Unlimited- Precision Meineke Kim Gwinnett, Inc. Tune Inc. Discount Roberts --------------- ------- -------- -------- Nature of Business Audio/Visual Tune-up Muffler Auto Sales Shop Shop Repairs & Service Lease Term 3 years 10 years 15 years 5 years Expiration Date 9/30/96 5/31/00 5/31/00 2/28/99 Square Footage 2,800 2,400 1,920 2,800 (% of total) 26% 22% 18% 26% Annual Rent $21,000 $29,712 $27,000 $18,900 Page 14 of 56 Rent Increase Annual- None None Annual- Fixed Fixed Renewal Options None None None None In the opinion of management, the property is adequately covered by insurance. In 1994, the annual real estate tax rate was approximately 3.71% based upon 40% of the assessed value, resulting in annual taxes of approximately $8,700. COLLEGE PARK ------------ The property is located in the city of College Park, Fulton County, at 5471 Old National Highway, approximately eleven miles southwest from the Atlanta Central Business District. The site contains 1.33 acres of land on which a 7,920 square foot building was constructed. The occupancy level at December 31 (October 31 for 1992, 1991 and 1990), expressed as a percentage of the total net rentable square feet, and the average annual rent per square foot for the last five years was: Occupancy Level Average Annual Year Percentage Rent Per Square Foot ---- --------------- ------------------- 1994 100% $12.22 1993 100% 11.70 1992 89% 11.99 1991 100% 11.71 1990 100% 10.89 Current annual rental rates range from $11.44 to $14.92 per square foot. Three tenants occupy greater than ten percent of the net leasable square footage of the property. The principal provisions of the leases are: Joto, ABS Zachary Inc. Precision Duncan ------- ------------ --------- Nature of Business Muffler Tune-up Transmission Shop Shop Shop Lease Term 5 years 5 years 5 years Expiration Date 8/31/95 12/31/99 3/31/96 Square Footage 1,920 3,300 2,700 (% of total) 24% 42% 34% Page 15 of 56 Annual Rent $28,638 $37,740 $30,371 Rent Increase Annual Annual Annual -Fixed -Fixed -Fixed Renewal Options 1-5 year 2-5 year 1-5 year option options options In the opinion of management, the property is adequately covered by insurance. In 1994, the annual real estate tax rate was approximately 4.03% based upon 40% of the assessed value, resulting in annual taxes of approximately $5,100. ROSWELL ------- The property is located in the city of Roswell, Fulton County, at 1177 Alpharetta Street, approximately fifteen miles north of the Atlanta Central Business District. The site contains .86 acres of land on which a 5,720 square foot building was constructed. The occupancy level at December 31 (October 31 for 1992, 1991 and 1990), expressed as a percentage of the total net rentable square feet, and the average annual rent per square foot for the last five years was: Occupancy Level Average Annual Year Percentage Rent Per Square Foot ---- --------------- ------------------- 1994 76% $11.64 1993 76% 11.64 1992 76% 11.64 1991 76% 11.64 1990 76% 11.48 Current annual rental rates range from $10.99 to $12.46 per square foot. Two tenants occupy greater than ten percent of the net leasable square footage of the center. The principal provisions of the leases are: Precision Tune (Chuck & Carol Baldwin) Enterprises Inc.) Ian Moss ---------------------- -------------------- Nature of Business Tune-up Shop Repair of Domestic and Foreign Autos Lease Term 5 years 5 years Expiration Date 2/28/00 4/30/95 Square Footage 2,400 1,920 (% of total) 42% 34% Page 16 of 56 Annual Rent $26,376 $23,929 Rent Increase Annual-Fixed None Renewal Options None None In the opinion of management, the property is adequately covered by insurance. In 1994, the annual real estate tax rate was approximately 4.21% based upon 40% of the assessed value, resulting in annual taxes of approximately $7,700. SNELLVILLE ---------- The property is located in the city of Snellville, Gwinnett County, on Highway 78, approximately fifteen miles northeast from the Atlanta Central Business District. The site contains 1.51 acres of land on which a 10,080 square foot building was constructed. The occupancy level at December 31 (October 31 for 1992, 1991 and 1990), expressed as a percentage of the total net rentable square feet, and the average annual rent per square foot for the last five years was: Occupancy Level Average Annual Rent Year Percentage Per Square Foot ----- ----------------- ------------------- 1994 100% $10.40 1993 100% 8.31 1992 83% 8.10 1991 83% 11.57 1990 83% 11.57 Current annual rental rates range from $8.00 to $11.00 per square foot. Four tenants occupy greater than ten percent of the net leasable square footage of the center. The principal provisions of the leases are: Chuck Baldwin Chris A. Dean Enterprises, Montag Dean Robinson Inc. Enterprises -------------- -------- -------------- --------- Nature of Brake General Tune-up Car Detail Business Repair & Automotive Shop Maintenance Repair Lease Term 5 years 5 years 5 years 5 years Expiration Date 6/14/95 6/30/97 9/30/97 12/31/98 Square Footage 2,520 3,360 2,520 1,680 (% of total) 25% 33% 25% 17% Page 17 of 56 Annual Rent $26,386 $33,331 $27,720 $13,440 Rent Increase Annual- Annual- Fixed thru Annual- Fixed Fixed 9/94. Fixed Increase to $27,720 Renewal None 1-5 year 2-5 year 1-5 year Options option options option In the opinion of management, the property is adequately covered by insurance. In 1994, the annual real estate tax rate was approximately 3.71% based upon 40% of the assessed value, resulting in annual taxes of approximately $11,600. MARIETTA --------- The property is located in the city of Marietta, Cobb County, at 1775 Cobb Parkway, approximately twelve miles northwest from the Atlanta Central Business District. The site contains 1.89 acres of land on which a 10,670 square foot building was constructed. The occupancy level at December 31 (October 31 for 1992, 1991 and 1990), expressed as a percentage of the total net rentable square feet, and the average annual rent per square foot for the last five years was: Occupancy Level Average Annual Rent Year Percentage Per Square Foot ----- --------------- --------------------- 1994 100% $11.74 1993 100% 12.73 1992 90% 12.78 1991 100% 12.07 1990 90% 11.83 Current annual rental rates range from $9.00 to $14.04 per square foot. Page 18 of 56 Four tenants occupy greater than ten percent of the net leasable square footage of the center. The principal provisions of the leases are: Fred Cummings Cottco McNeese U.S. Auto Enterprises, Investments, Enterprises, Glass Inc. Inc. Inc. Centers ------------ ----------- ----------- ---------- Nature of Tune-up Transmission Exhaust and Auto Glass Business Shop Repair Shock Repair Sales, Repair and Maintenance Lease Term 5 years 5 years 10 years 5 years Expiration Date 11/30/97 3/31/00 11/30/99 3/31/00 Square Footage 2,400 2,750 1,920 2,580 (% of total) 22% 26% 18% 24% Annual Rent $21,600 $38,605 $19,200 $36,219 Rent Increase Annual- Annual- Annual- Annual- Fixed Fixed Fixed Fixed Renewal None 1-5 year None 2-5 year Options option options In the opinion of management, the property is adequately covered by insurance. In 1994, the annual real estate tax rate was approximately 2.78% based upon 40% of the assessed value, resulting in annual taxes of approximately $7,700. SMYRNA ------ The property is located in the city of Smyrna, Cobb County, at 2849 South Cobb Drive, approximately twelve miles northwest from the Atlanta Central Business District. The site contains .88 acres of land on which a 9,440 square foot building was constructed. The occupancy level at December 31 (October 31 for 1992, 1991 and 1990), expressed as a percentage of the total net rentable square feet, and the average annual rent per square foot for the last five years was: Occupancy Level Average Annual Rent Year Percentage Per Square Foot ---- ----------------- ----------------------- 1994 100% $10.93 1993 80% 11.26 1992 80% 11.03 1991 80% 10.82 1990 80% 10.89 Page 19 of 56 Current annual rental rates range from $8.75 to $14.06 per square foot. Three tenants occupy greater than ten percent of the net leasable square footage of the center. The principal provisions of the leases are: Diamond Auto R & T Painting of South Clay & Automotive Cobb, Inc. Kevin Shaw ---------- --------------- ---------- Nature of Business Muffler Auto Body Automotive Shop Rpr & Pnt Repair Lease Term 15 years 4 years 3 years Expiration Date 3/31/00 3/31/95 4/30/97 Square Footage 1,920 5,600 1,920 (%of total) 20% 60% 20% Annual Rent $27,000 $59,424 $16,800 Rent Increase None Annual-Fixed Annual- Fixed Renewal Options None 1-5 year optionNone In the opinion of management, the property is adequately covered by insurance. In 1994, the annual real estate tax rate was approximately 3.66% based upon 40% of the assessed value, resulting in annual taxes of approximately $6,000. Item 3. Legal Proceedings On May 6, 1993, Glenborough Corporation and certain of its affiliates entered into a settlement of a lawsuit filed by the former management company and seller of the hotel (the "seller") on November 13, 1991. The discussion relating to the settlement is discussed in Note 8 in the Notes to Financial Statements and is incorporated herein by reference. Item 4. Submission of Matters to a Vote of Security Holders During the fourth quarter of fiscal year 1994, no matters were submitted to a vote of security holders through the solicitation of proxies or otherwise. Page 20 of 56 PART II Item 5. Market for Partnerships Common Equity and Related Stockholder Matters Market Information ------------------ The units of limited partnership interest in the Partnership (the "Units") have limited transferability. There is no public market for the Units and it is not expected that any will develop. There are restrictions upon the transferability of Units, including requirements as to the minimum number of Units which may be transferred, and that the General Partners must consent to any transferee becoming a substituted limited partner (which consent may be granted or withheld at the sole discretion of the General Partner). In addition, restrictions on transfer may be imposed under certain state securities laws. Consequently, holders of Units may not be able to liquidate their investments and the Units may not be readily acceptable as collateral. Holders ------- As of December 31, 1994, approximately 5,202 holders of record held 118,942 Units. Cash Distributions ------------------ The Partnership has made distributions to its partners as follows: Amount Representing Total Return of Distributions Capital -------------- --------- For the year ended December 31, 1994 $ 826,000 $ - For the year ended December 31, 1993 753,000 33,000 For the two months ended December 31, 1992 186,000 162,000 For the year ended October 31, 1992 1,503,000 1,503,000 Cash generated from the operations of the Properties after payment of expenses, provides the basis for ongoing cash distributions. The Partnership's quarterly distributions for the fiscal year 1994, paid in the quarter following the period in which they were generated, totaled 2.9% of the total original investor contributions. Item 6. Selected Financial Data This financial data should be read in conjunction with the financial statements and related notes contained elsewhere in this report. This financial data is not covered by the report of the independent public accountants. Page 21 of 56 SELECTED FINANCIAL DATA (In thousands, except per Unit data) For The For The For The For The For The For The Fiscal Fiscal Two Fiscal Fiscal Fiscal Year Year Months Year Year Year Ended Ended Ended Ended Ended Ended 12/31/94 12/31/93 12/31/92 10/31/92 10/31/91 10/31/90 -------- -------- -------- -------- -------- -------- Total revenues $ 4,198 $ 3,993 $ 652 $ 1,524 $ 2,019 $ 2,238 Net income (loss) $ 861 $ 718 $ 25 $(3,240) $ 1,557 $ 1,851 Per Limited Partnership Unit: Income (loss) $ 7.16 $ 5.98 $ 0.20 $(26.97) $ 12.96 $ 15.39 Distributions: From net income $ 6.88 $ 5.98 $ 0.20 $ - $ 12.96 $ 15.39 Representing return of capital $ - $ 0.28 $ 1.36 $ 12.49 $ 0.31 $ 0.24 Total assets $20,412 $20,639 $20,778 $20,557 $25,883 $25,887 Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations LIQUIDITY AND CAPITAL RESOURCES The Partnership maintains nominal cash reserves and distributes the revenues received from the operations of the properties, less partnership expenses, to the partners. Distributions to the Limited Partners were paid at an annual rate of 2.5% for the first quarter of 1994, but the pay rate was increased to 3% for the remainder of 1994. Distributions to the Limited Partners in were paid at an annual rate of 2.5% in 1993 and 5.0% in 1992. Distributions paid in 1994 were provided by net income. Of the total distributions paid in 1993 and 1992 (including the two month stub period in 1992), $34,000 and $1,648,000, respectively, represented return of capital. The Borrower (AFP Partners, the partnership which currently owns three properties securing first trust deed notes held by the Partnership) possessed insufficient cash flow to make the interest payment to the Partnership for the quarter ended December 31, 1991. An agreement between the partners of the Borrower required AFC, the parent company of one of the partners of the Borrower at the time, to supplement deficiencies in the Borrower's cash flow by making loans to the Borrower. AFC is now insolvent and AFC's parent company, GLENFED Service Corporation, is also insolvent and therefore not in a position to contribute any additional capital to AFC. Under these circumstances, management believed that a minor modification between the Partnership and the Borrower was appropriate. As a result, the Partnership and the Borrower entered into an agreement on December 20, 1991 to reduce the interest payment for Page 22 of 56 the quarter ended December 31, 1991 by $151,300 and to reduce the note payable to the Borrower by the same amount. The Partnership established a $150,000 line of credit facility with an unaffiliated third party in February 1992. Funds drawn on this line of credit bore interest at the prime rate plus 1.5%. To cover the cash distributions to limited partners that otherwise would have been funded by the interest not received in December 1991, $150,000 was drawn on the line of credit in late February 1992. This line of credit matured February 28, 1994, but was paid off in May 1993 from proceeds from the net cash flow payments made by the Borrower. Due to AFC's inability to loan any additional funds to the Borrower, and due to the properties' continued inability to generate sufficient income to cover the minimum interest payments due to the Partnership, a Forbearance Agreement, effective July 1, 1992 and commencing with the payment due October 1, 1992, and originally expiring on March 31, 1993 (the "Forbearance Period"), was reached to allow time for negotiation of a workout of the Loans (see Note 2 of the Notes to Financial Statements). During the Forbearance Period, the Borrower paid all net cash flow to the Partnership from the properties which secured the Loans. "Net Cash Flow" was defined as all income collected by the Borrower less operating expenses of the properties (including reserves for real and personal property taxes and insurance) and overhead and operating expenses of the Borrower. The Partnership and the Borrower extended the term of the Forbearance Agreement to allow sufficient time to complete final negotiation and documentation of a workout and to solicit approval from the Partnership's Limited Partners. On April 4, 1994, these matters submitted to a vote of security holders through the soliciation of proxies were approved. These matters included an acquisition through deeds-in-lieu of foreclosure of ten of thirteen properties. These ten properties secured approximately $12,833,000 of the principal balances of the loans. The terms of the remaining loans included: (i) an increase in the principal amount of the loans by approximately $355,000 for the costs incurred by the Partnership in the restructuring, an interest accrual rate change from 13% to 10% beginning January 1, 1994, extension of the maturity dates of the loans to March 31, 2001 with five one-year renewal options, and a cross- collateralization of the three loans with the right to transfer a property to the Partnership in satisfaction of the loan without creating a default under the other loans; (ii) a release of certain collateral notes in the aggregate principal amount of $1,500,000 and the right to pursue certain limited recourse liability relating to the existing loans; Page 23 of 56 (iii) receiving secured and unsecured notes with unpaid balances of principal and accrued interest as of September 30, 1993 aggregating approximately $1,159,000; (iv) receiving a release from the obligation to repay approximately $349,000 that was owed to the Borrower; (v) acknowledgement of the termination of the contribution agreement and releasing such rights, if any, the Partnership may have with respect thereto; (vi) and the termination of the servicing agreement. Effective July 1, 1994, the Partnership obtained ownership by deeds-in-lieu of foreclosure of four of the Borrower's properties: Park 100 (Buildings 42 and 46) and the Eagan and New Hope mini-storages. In addition, title to the six auto care centers, formerly held by the Borrower, was passed to GPI Georgia Auto Centers, L.P., a Georgia Limited Partnership whose general partner is GPI Auto Centers, Inc., a Georgia corporation, both of which are wholly owned by the Partnership. At October 31, 1992, it was determined that the Borrower had little or no equity in the Properties securing the loans, considering the current fair market value of the Properties, and that the proceeds for repayment of the loans can be expected to come only from the operation or sale of the Properties, given AFC's inability to loan any additional funds to the Borrower. Additionally, although the Borrower retained control of the Properties, due to the Borrower's financial condition at that time and the economic prospects for the Borrower and the Properties in the foreseeable future, it was doubtful that the Borrower would be able to rebuild equity in the Properties or otherwise repay the Loans. As a result, for financial reporting purposes, the Partnership reduced its Investment in Master Agreement by $4,282,000 to the estimated net realizable value of the underlying properties of $20,249,000. For financial statement presentation purposes only (through June 30, 1994), the Partnership had, in effect, foreclosed on the properties. To recognize this, the net Investment in Master Agreement has been reclassified to investment in real estate as of October 31, 1992. The depreciable components of this investment are being depreciated, beginning November 1, 1992, over the remaining useful lives of the properties which range from 4 to 25 years for improvements and 24 to 26 years for buildings. Additionally, all operating revenues and expenses of the properties are being recognized by the Partnership effective November 1, 1992. No additional Income on Investment in Master Agreement is being recognized. Prior to the Forbearance Period (see Note 2 of the Notes to Financial Statements), income received in excess of the NOI of the properties was deferred for financial reporting purposes. This is no longer necessary because the Partnership is now recognizing the income and expenses of the properties. In addition, as a result of the reduction of Investment in Master Page 24 of 56 Agreement and subsequent financial statement presentation reclassification to investment in real estate, the balance of deferred income was eliminated. Prepaid expenses and other assets increased approximately $93,000 in 1994 over 1993 as a result of advances towards and accrual for transaction costs associated with the proposed consolidation by merger in the amount of $365,000 (as discussed in Note 10 of the Notes to Financial Statements). These were partially offset by a decrease of approximately $355,000 which represented costs associated with the restructure which were eliminated. In addition, prepaid expenses and other assets increased due to lease commissions paid for new leases and lease renewals occurring in 1994 in the amount of $45,000 and prepaid insurance of $15,000 for early payments relating to a new policy period. Accounts payable and accrued expenses increased in 1994 compared to 1993 due to an accrual in the amount of $100,000 for transaction costs associated with the proposed consolidation by merger, as discussed in Note 10 of the Notes to Financial Statements. As discussed in Note 9, the Partnership received approval from the limited partners for a workout of the loans made by the Partnership to the Borrower in April 1994 and caused the restructure to become effective July 1, 1994. The Partnership is currently involved in a potential merger transaction, whereby its existing net assets and all bank debt will merge with a newly created real estate investment trust ("REIT"). The merger requires a majority vote of the partnerships that will be participating in the merger. If the vote is successful, the Partnership will be fully merged into the new REIT and will cease to exist. The limited partners are expected to receive their solicitation materials for this potential transaction in 1995. RESULTS OF OPERATIONS 1994 versus 1993 ---------------- As discussed in Note 2 of the Notes to Financial Statements, for financial statement presentation purposes only (through June 30, 1994), the Partnership had, in effect, foreclosed on the Borrower's properties and therefore, income and expense from the operations of the properties of the Borrower were recognized in the Partnership's financial statements. Part of the restructure, which was effective July 1, 1994 (see Note 9 of the Notes to Financial Statements), included actual deed-in-lieu of foreclosure on ten of the thirteen properties owned by the Borrower, leaving three of the loans remaining in place with somewhat modified terms. The Partnership will continue to account for the remaining loans as though, for financial reporting purposes, the Partnership foreclosed on the properties. The effect of all transactions between the Partnership and the Page 25 of 56 borrower have been eliminated for financial statement presentation. Net operating income of $1,928,000 (rental revenue of $4,198,000 less operating costs of $2,270,000) was approximately $177,000 greater than net operating income in 1993. In 1994, performance results of Country Suites-DFW, New Hope, Eagan, Snellville, Norcross, College Park and Smyrna exceeded 1993 results. DFW contributed the most significant increase of $53,000, which was the result of an increase in the average occupancy (77.5% in 1994 compared to 76.3% in 1993) and the average daily room rate ($58.52 in 1994 compared to $50.20 in 1993). The $8.32 increase in the daily room rate from 1993 to 1994 is due to an increase in a sector of transient revenue (guests who stay from one to five days). These guests book reservations through the franchise reservation system, which earns the highest rated business. The New Hope mini-storage was the second biggest contributor to the increase in net operating income in 1994 over 1993 with a $38,000 increase. The increase was due to a rate increase and an increase in income from the sale of abandoned property held in the mini storage. In addition, expenses at the New Hope property decreased as a result of a decrease in the assessed value of the property used to determine the property tax expense and a decrease in insurance expense. The Snellville Auto Center contributed $35,000 to the increase in net operating income as a result of increased market rates and a consistently higher occupancy throughout 1994 compared to 1993. The Norcross Auto Center contributed a $23,000 increase in net operating income due to an increase in occupancy in 1994 over 1993 (100% in 1994 compared to 65% in 1993). The amounts by which Eagan, College Park and Smyrna 1994 results exceeded 1993 results were minimal, and were offset by the decrease in results in 1994 from 1993 of the Sea Tac, Park Center, Park 100, Marietta and Roswell properties which resulted in a combined total decrease in net operating income of approximately $88,000. Of this combined decrease in net operating income of $88,000, Park Center's decrease made up 80% of this total. This decrease was a result of increased vacancy at the property (95% occupancy in 1994 compared to 97% in 1993), decreased market rates, and the absence of settlements paid to the Partnership in 1994 that equated to $18,000 in 1993. General and administrative expenses decreased approximately $58,000 in 1994 compared to 1993 due to the decrease in the loan servicing fee paid to an independent mortgage banking firm related to the Servicing Agreement (which was terminated in 1994 as part of the restructure) and the absence of general partner liability insurance of $15,000 in 1994. Since the change in the general partner, this insurance cost has been eliminated. Depreciation and amortization expense increased in 1994 over 1993 due to capital additions and tenant improvements placed in service in 1993 having a full year of depreciation in 1994 as well as new improvements amounting to $272,000 being placed in service in the current year. Page 26 of 56 1993 versus 1992 ---------------- In 1993, the Partnership's year end was changed from October 31 to December 31, therefore, comparative years are stated as they were reported in prior years, and do not conform to the current year ending date of December 31 (excluding the transition period reporting results for the two months ended December 31, 1992). However, except for the transition period reporting results, there is no effect on comparability as a full year's activity is being reported in each period presented and seasonality has no material effect on the Partnership's financial statements. As discussed in Note 2 in the Notes to Financial Statements, for financial statement presentation purposes only, the Partnership has, in effect, foreclosed on the Borrower's properties and therefore, Income on Investment in Master Agreement is no longer recognized. Instead, income and expense from the operations of the properties of the Borrower is recognized. The effect of all transactions between the Partnership and the Borrower have been eliminated for financial statement presentation. For instance, interest expense appears to have decreased in the current year compared to the prior years. However, this is due to the elimination of interest paid to the Borrower on the note payable to affiliate in the current year, as such amounts were immediately paid back to the Partnership as net cash flow payments. Although the financial statement presentation has changed and the Partnership is recognizing the income and expense of the Borrower's properties for the year ended December 31, 1993, as opposed to recognizing the Income on Investment in Master Agreement for the year ended October 31, 1992, the net income of the properties can be compared to the Income on Investment in Master Agreement, which represented the recognition of interest income payments received in cash and supported by the actual net operating income of the underlying properties. The net operating income of $1,751,000 (rental revenue of $3,987,000 less operating costs of $2,236,000) for the year ended December 31, 1993, is comparable to the Income on Investment in Master Agreement of $1,521,000 for the year ended October 31, 1992. Net operating income of $1,751,000 for the year ended December 31, 1993 was approximately $230,000 greater than Income on Investment in Master Agreement of $1,521,000 for the year ended October 31, 1992. In 1993, performance results of Country Suites - DFW, New Hope, Eagan, Park Center, Park 100 and College Park exceeded 1992 results. DFW alone provided for increased operating income in 1993 of $158,200 over 1992 with a 10.6 percentage point increase in occupancy from 65.7% in 1992 to 76.3% in 1993. This increase is partially attributable to the maturity of the franchise reservation system and the repositioning and marketing of the property taking hold. In addition, an increase in property taxes of $48,000 was recorded and termination fees of approximately $62,000 were paid to terminate the franchise and management contract with the former Page 27 of 56 management company in 1992, distorting normal operating results for that year. The New Hope mini-storage was the second biggest contributor to the increase in net operating income in 1993 over 1992 with a $37,000 increase. This increase was due to an increase in occupancy of 12 percentage points in 1993 to 94% over 82% in 1992. Park Center's 1993 results exceeded 1992 results by $18,000 due to the collection of settlements paid to the Partnership from two tenants that had vacated their spaces in 1992 prior to their lease end date. The amounts by which the Eagan, Park 100 and College Park 1993 results exceeded 1992 results were minimal, and were offset by the decrease in results in 1993 from 1992 of the Sea Tac, Norcross, Roswell, Smyrna and Snellville properties which resulted in a combined total decrease in net operating income of approximately $66,000. Of this combined decrease in net operating income of $66,000, Norcross and Snellville's decreases made up 85% of this total. The occupancy at Norcross has increased in 1993 over 1992, however, this is largely due to a tenant occupying 2,800 square feet beginning October 1, 1993, and this increase in occupancy is not necessarily indicative of the year as a whole. In addition, average annual rent per square foot has decreased from $13.18 in 1992 to $10.71 in 1993. A price sensitive market has driven management to lower prices in order to remain competitive. Snellville's operating expenses increased in 1993 by approximately $8,000 due to roof and parking lot repairs needed in 1993 that were not necessary in 1992. In addition, a tenant occupying 1,680 square feet of space beginning December 1, 1993 is included in occupancy and average annual rent per square feet, and again is not necessarily indicative of the years' results as a whole. General and administrative expense decreased approximately $65,000 from 1992 to 1993 primarily due to decreases in general partner liability insurance premiums and tax preparation fees for the current year compared to the prior year. General partner liability insurance premiums decreased $25,000 between 1992 and 1993. The 1992 general and administrative expenses included an additional one-time tax preparation expense accrual of $10,000. In prior years, these costs were expensed when paid. In 1992, however, the 1991 tax costs were expensed when paid as well as an accrual was made for the 1992 tax year expenses to be paid in 1993. The remainder of the decrease is due to payment timing differences related to the change in the software used for the investor relations database. The litigation settlement expense of $33,000 for the year ended December 31, 1993 includes $21,400 reimbursed to Glenborough Corporation (as discussed in Note 8 of the Notes to Financial Statements) and legal fees in the amount of $11,600 associated with the settlement of the lawsuit brought by the former management company and seller of the hotel. Page 28 of 56 Item 8. Financial Statements and Supplementary Data GLENBOROUGH PENSION INVESTORS, A CALIFORNIA LIMITED PARTNERSHIP INDEX TO FINANCIAL STATEMENTS AND SCHEDULES Page ----- Report of Independent Public Accountants . . . . . . . . . 30 Financial Statements: Consolidated Balance Sheets at December 31, 1994, 1993 and 1992 . . . . . . . . . . . . . . . . . . . . . 31 Consolidated Statements of Operations for the Years ended December 31, 1994, 1993, the Two Months Ended December 31, 1992, and the Year Ended October 31, 1992 . . . . . . . . . . . . . . . . . . . 32 Consolidated Statements of Partners' Equity (Deficit) for the Years Ended December 31, 1994, 1993, the Two Months Ended December 31, 1992 and the Year Ended October 31, 1992 . . . . . . . . . . . . . . . . . . . 33 Consolidated Statements of Cash Flows for the Years Ended December 31, 1994, 1993, the Two Months Ended December 31, 1992, and the Year Ended October 31, 1992 . . . . . . . . . . . . . . . . . . . 34 Notes to Consolidated Financial Statements . . . . . . . 36 Financial Statement Schedules: Schedule III - Consolidated Real Estate Investments and Related Accumulated Depreciation and Amortization at December 31, 1994 . . . . . . . . . . . . . . . . . . 49 All other financial statement schedules have been omitted because of the absence of conditions under which they are required or because the information is included elsewhere in this report. Page 29 of 56 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Partners of GLENBOROUGH PENSION INVESTORS, A CALIFORNIA LIMITED PARTNERSHIP: We have audited the accompanying consolidated balance sheets of GLENBOROUGH PENSION INVESTORS, A CALIFORNIA LIMITED PARTNERSHIP as of December 31, 1994, 1993 and 1992 and the related consolidated statements of operations, partners' equity (deficit) and cash flows for the years ended December 31, 1994 and 1993, the two months ended December 31, 1992, and the year ended October 31, 1992. These consolidated financial statements and the schedule referred to below are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these consolidated financial statements and the schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit 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 consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of GLENBOROUGH PENSION INVESTORS, A CALIFORNIA LIMITED PARTNERSHIP as of December 31, 1994, 1993 and 1992 and the results of its operations and its cash flows for the years ended December 31, 1994 and 1993, the two months ended December 31, 1992 and the year ended October 31, 1992, in conformity with generally accepted accounting principles. Our audits were made for the purpose of forming an opinion on the basic consolidated financial statements taken as a whole. The schedule listed in the index to the financial statements and schedules is presented for the purpose of complying with the Securities and Exchange Commission's rules and are not part of the basic consolidated financial statements. The schedule has been subjected to the auditing procedures applied in the audits of the basic consolidated financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic consolidated financial statements taken as a whole. San Francisco, California, Page 30 of 56 February 10, 1995 GLENBOROUGH PENSION INVESTORS, A CALIFORNIA LIMITED PARTNERSHIP Consolidated Balance Sheets (in thousands, except units outstanding) December 31, 1994, 1993 and 1992 Assets 1994 1993 1992 ------ ----- ----- ----- Real estate investments: Land $ 6,456 $ 6,456 $ 6,456 Buildings and improvements, net of accumulated depreciation of $1,357, $698 and $97 in 1994, 1993 and 1992, respectively 12,958 13,345 13,703 ------- ------- ------- Net real estate investments 19,414 19,801 20,159 Cash and cash equivalents 382 271 408 Accounts receivable 106 150 57 Prepaid expenses and other assets, net of accumulated amortization of $129, $35 and $6 in 1994, 1993 and 1992, respectively 510 417 154 ------- ------- ------- Total assets $20,412 $20,639 $20,778 ======= ======= ======= Liabilities and Partners' Equity (Deficit) ------------------------------- Accounts payable and accrued expenses $ 559 $ 472 $ 426 Note payable to affiliate - 349 349 Line of credit - - 150 ------- ------- ------- Total liabilities 559 821 925 Partners' equity (deficit): General Partner (55) (56) (55) Limited Partners - 118,942 limited partnership units outstanding 19,908 19,874 19,908 ------- ------- ------- Total partners' equity 19,853 19,818 19,853 ------- ------- ------- Total liabilities and partners' equity $20,412 $20,639 $20,778 ======= ======= ======= Page 31 of 56 The accompanying notes are an integral part of these consolidated statements. GLENBOROUGH PENSION INVESTORS, A CALIFORNIA LIMITED PARTNERSHIP Consolidated Statements of Operations (in thousands, except per unit amounts) For the Years Ended December 31, 1994, 1993, the Two Months Ended December 31, 1992 and the Year Ended October 31, 1992 For the For the For the Two Months For the Year Ended Year Ended Ended Year Ended Dec 31, Dec 31, Dec 31, Oct 31, 1994 1993 1992 1992 -------- -------- -------- ------ Revenues: Income on Investment in Master Agreement $ - $ - $ - $ 1,521 Rental revenue 4,198 3,987 651 - Interest and other - 6 1 3 --------- -------- -------- ------- Total revenues 4,198 3,993 652 1,524 --------- -------- -------- ------- Expenses: Operating (including $851 paid to affiliates in 1994) 2,270 2,236 433 - General and administrative (including $222 paid to affiliates in 1994) 314 372 91 437 Depreciation and amortization 753 630 103 - Litigation settlement expense - 33 - - Interest - 4 - 45 -------- -------- -------- ------- Total expenses 3,337 3,275 627 482 -------- -------- -------- ------- Unrealized loss on Investment in Master Agreement - - - (4,282) -------- -------- -------- ------- Net income (loss) $ 861 $ 718 $ 25 $(3,240) ======== ======== ======== ======== Net income (loss) per limited partnership unit $ 7.16 $ 5.98 $ 0.20 $(26.97) ======== ======== ======== ======== Distributions per limited partnership unit: From net income $ 6.88 $ 5.98 $ 0.20 $ - Representing return of capital - 0.28 1.36 12.49 Total distributions per limited -------- -------- -------- ------- partnership unit $ 6.88 $ 6.26 $ 1.56 $ 12.49 ======== ======== ======== ======= The accompanying notes are in integral part of these consolidated statements. Page 32 of 56 GLENBOROUGH PENSION INVESTORS, A CALIFORNIA LIMITED PARTNERSHIP Consolidated Statements of Partners' Equity (Deficit) (in thousands) Total General Limited Partners' Partner Partners Equity --------- --------- --------- Balance at October 31, 1991 $ (7) $ 24,764 $ 24,757 Distributions (17) (1,486) (1,503) Net loss (32) (3,208) (3,240) -------- -------- -------- Balance at October 31, 1992 (56) 20,070 20,014 Distributions - (186) (186) Net income 1 24 25 -------- -------- -------- Balance at December 31, 1992 (55) 19,908 19,853 Distributions (8) (745) (753) Net income 7 711 718 -------- -------- -------- Balance at December 31, 1993 (56) 19,874 19,818 Distributions (8) (818) (826) Net income 9 852 861 -------- -------- -------- Balance at December 31, 1994 $ (55) $ 19,908 $ 19,853 ======== ======== ======== The accompanying notes are an integral part of these consolidated statements. Page 33 of 56 GLENBOROUGH PENSION INVESTORS, A CALIFORNIA LIMITED PARTNERSHIP Consolidated Statements of Cash Flows (in thousands) For the Years ended December 31, 1994, 1993, the Two months ended December 31, 1992, and the Year ended October 31, 1992 For the For the For the For the Year Year Two Months Year Ended Ended Ended Ended Dec 31, Dec 31, Dec 31, Oct 31, 1994 1993 1992 1992 ------ ------ ------ ------ Cash flows provided by operating activities: Net income (loss) $ 861 $ 718 $ 25 $(3,240) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Unrealized loss on investment in master agreement - - - 4,282 Depreciation and amortization 753 630 103 - Changes in certain assets and liabilities: Accounts receivable 44 (22) (57) - Prepaid expenses and other assets (187) (363) (131) (4) Accounts payable and accrued expenses 87 46 382 (10) Note payable to affiliate (349) - - - Deferred income - - - 197 -------------- ------- ------- Total adjustments 348 291 297 4,465 -------------- ------- ------- Net cash provided by operating activities 1,209 1,009 322 1,225 -------------- ------- ------- Cash flows used for investing activities: Acquisitions of and additions to real estate (272) (243) (7) - Net cash used for investing ------- ------ ------- ------- activities (272) (243) (7) - ------- ------ ------- ------- Cash flows provided by (used for) financing activities: Proceeds from line of credit - - - 150 Principal payments on line of credit - (150) - (151) Distributions paid to partners (826) (753) (186) (1,503) ------- ------ ------- ------- Net cash used for financing activities (826) (903) (186) (1,504) ------ ------ ------- ------- Net increase (decrease) in cash and cash equivalents 111 (137 129 (279) ------- ------ ------- ------ -continued- Page 34 of 56 GLENBOROUGH PENSION INVESTORS, A CALIFORNIA LIMITED PARTNERSHIP Consolidated Statements of Cash Flows (in thousands) -continued- For the Years ended December 31, 1994, 1993, the Two months ended December 31, 1992, and the Year ended October 31, 1992 For the For the For the For the Year Year Two Months Year Ended Ended Ended Ended Dec 31, Dec 31, Dec 31, Oct 31, 1994 1993 1992 1992 ------- ------- ------- ------- Cash and cash equivalents at beginning of period 271 408 279 558 -------- ------ ------- ------- Cash and cash equivalents at end of period $ 382 $ 271 $ 408 $ 279 ======== ====== ======= ======= Supplemental disclosure of cash flow information: Cash paid for interest $ - $ 4 $ - $ 45 ======== ====== ======= ======= Supplemental disclosure of non-cash transactions: In-substance foreclosure on properties securing investment in master agreement: Increase in real estate investments $ - $ - $ - $ 20,249 ======== ====== =============== Reduction of Investment in Mater Agreement $ - $ - $ - $(21,018) ======== ====== =============== Reduction of deferred income $ - $ - $ - $ 769 ======== ====== =============== The accompanying notes are an integral part of these consolidated statements. Page 35 of 56 GLENBOROUGH PENSION INVESTORS, A CALIFORNIA LIMITED PARTNERSHIP Notes to Consolidated Financial Statements December 31, 1994, 1993, 1992 Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING -------------------------------------------------- POLICIES -------- Organization: Glenborough Pension Investors (the "Partnership")(formerly known as Outlook Pension Investors - see Note 9) was organized on October 17, 1984 in accordance with the provisions of the California Revised Limited Partnership Act and commenced operations April 9, 1985. The General Partner was API Partners, a California general partnership consisting of Luke V. McCarthy, John R. Provine and August Advisers, Inc., a California corporation. On April 4, 1994, several matters submitted to a vote of security holders through the solicitation of proxies were approved including the change in the general partner to Glenborough Realty Corporation as the managing General Partner and Robert Batinovich as co-General Partner (collectively the "General Partner") (see Note 9). The Partnership has raised capital by the sale of limited partnership interests. The principal purpose of the Partnership was to lend funds to AFP Partners (the "Borrower"), then a California general partnership and an affiliate of the General Partner. The funds have been used by the Borrower to acquire real properties such as shopping centers, office buildings and other commercial real properties from nonaffiliated sellers. The Partnership Agreement provides that net income or loss of the Partnership for financial statement and income tax reporting purposes, and distributions of cash available for distribution, as defined in the Partnership Agreement, are to be allocated 99% to the Limited Partners and 1% to the General Partner. These amounts may be adjusted subject to the provisions of the Partnership Agreement. Change in the Fiscal Year End: In 1993, the Partnership's year end was changed from October 31 to December 31, therefore, comparative years are stated as they were filed in prior years, and do not conform to the current year ending date. Real Estate Investments: Real estate investments are stated at an estimated net realizable value. Buildings and improvements are being depreciated on a straight- line basis over the remaining useful lives of the properties which range from 4 to 25 years. Income on Investment In Master Agreement: Commencing November 1, 1986 and ending on October 31, 1992 (see note 2), the Partnership recognized income from the Investment in Master Page 37 of 56 GLENBOROUGH PENSION INVESTORS, A CALIFORNIA LIMITED PARTNERSHIP Notes to Consolidated Financial Statements December 31, 1994, 1993, 1992 Agreement to the extent that both cash was received from the Borrower and the amount of cash received did not exceed the actual net operating income (NOI) of the underlying properties. NOI is defined as rental (or other) income, less operating expenses (excluding depreciation, amortization and debt service). Cash equivalents: The Partnership considers all short-term investments (including certificates of deposit) with a maturity of three months or less at date of purchase to be cash equivalents. Income taxes: Federal and state income tax laws provide that the income or loss of the Partnership is reportable by the partners in their tax returns. Accordingly, no provisions for such taxes have been made in the accompanying financial statements. The Partnership reports certain transactions differently for tax and financial statement purposes. Net earnings (loss) and distributions per limited partnership unit: Net earnings (loss) and distributions per limited partnership unit are based on 118,942 weighted average limited partnership units outstanding in all years presented. Note 2. INVESTMENT IN MASTER AGREEMENT ------------------------------ On January 16, 1985, the Partnership entered into a master loan agreement under which the Partnership was obligated to loan to the Borrower 99% of the net proceeds received upon the sale of limited partnership units less the reserves to be maintained by the Partnership. At October 31, 1987, the Partnership had completed all of the loans contemplated under the master loan agreement. Separate loans have been made by the Partnership with respect to each property or group of related properties purchased by the Borrower. Management believes, at inception, that in no case did the loan amount exceed the appraised value of the property or properties. Each loan was secured by the real property purchased by the Borrower and provided for partial recourse to the Borrower in the event of nonpayment. All loans were approved by an independent Loan Servicing Agent and provide for basic interest to accrue at the rate of 13% per annum and for a minimum payment rate of 8% per annum payable quarterly. All loans were "participating loans", and upon the sale of property or the maturity of the loan the Partnership was entitled to 75% of any increase in the value of the property in excess of its original cost, costs of sale and accrued interest. The master loan agreement also required the Borrower to pledge a certificate of deposit of $500,000 and certain promissory notes initially having an aggregate principal balance of $1,500,000, Page 38 of 56 GLENBOROUGH PENSION INVESTORS, A CALIFORNIA LIMITED PARTNERSHIP Notes to Consolidated Financial Statements December 31, 1994, 1993, 1992 and additional notes if necessary, so that the pledged collateral is never less than 5% of the gross proceeds of the sale of partnership units and 5% of the gross proceeds of the warrants exercised. During the year ended October 31, 1990, the Borrower loaned the funds held in the certificate of deposit to the Partnership in return for a note (see Note 4). Under the master loan agreement, the Partnership was entitled to a prepayment penalty from the Borrower of 5% of the unpaid principal balance at the time of prepayment if the note was paid in the first 5 years of its term, decreasing to a 1% penalty if the note was paid in the final year of its term. Through October 31, 1987, the Partnership had made 10 loans to the Borrower totaling $25,299,800. These 10-year notes had payment terms consistent with the master loan agreement and matured at various dates in fiscal years 1996 and 1997. The loan amounts represent 100% of the cash invested by the Borrower in each respective property including acquisition costs, acquisition fees, other capitalized costs and expense reserves. Through October 31, 1992, the Partnership accounted for its Investment in Master Agreement according to certain guidelines established by the American Institute of Certified Public Accountants and adopted by the Securities and Exchange Commission (SEC). These guidelines address the treatment of certain transactions whereby a lender/investor has in effect assumed a substantial amount of the risks associated with direct ownership of the underlying properties. Under these guidelines, the Partnership accounted for its loans as investments and recognized income from them only to the extent that it was received in cash and was supported by the NOI of the underlying properties (see Note 1). Accordingly, no income in excess of cash received was recognized and income from cash received in excess of the NOI of the properties was deferred. $197,000 and $23,000 of income was deferred in 1992 and 1991, respectively. In addition, under the terms of the Master Agreement the Borrower was required to pay the remaining interest amount between the 13% basic rate and the 8% minimum payment rate made by the Borrower when cash flow was sufficient or upon maturity of the loans. At October 31, 1992 and 1991, unpaid interest on the loans representing the difference between the 13% basic interest and the amount received in cash was approximately $8,640,100 and $7,069,100, respectively. Realization of these amounts by the Partnership was dependent upon sufficient cash flows from operation of the properties or a sale of the properties at an amount sufficient to recover the original loan amount, plus accrued interest. Page 39 of 56 GLENBOROUGH PENSION INVESTORS, A CALIFORNIA LIMITED PARTNERSHIP Notes to Consolidated Financial Statements December 31, 1994, 1993, 1992 Due to AFC's inability to loan any additional funds to the Borrower, and due to the properties' continued inability to generate sufficient income to cover the minimum interest payments due to the Partnership, a Forbearance Agreement, effective July 1, 1992 and commencing with the payment due October 1, 1992, and originally expiring on March 31, 1993 (the "Forbearance Period"), was reached to allow time for negotiation of a workout of the Loans (see Note 2 of the Notes to Financial Statements). During the Forbearance Period, the Borrower paid all net cash flow to the Partnership from the properties which secured the Loans. "Net Cash Flow" was defined as all income collected by the Borrower less operating expenses of the properties (including reserves for real and personal property taxes and insurance) and overhead and operating expenses of the Borrower. The Partnership and the Borrower extended the term of the Forbearance Agreement to allow sufficient time to complete final negotiation and documentation of a workout and to solicit approval from the Partnership's Limited Partners. At October 31, 1992, it was determined that the Borrower had little or no equity in the Properties securing the loans, considering the current fair market value of the Properties, and the fact that the proceeds for repayment of the loans could be expected to come only from the operation or sale of the Properties, given AFC's inability to loan any additional funds to the Borrower. Additionally, although the Borrower retained control of the Properties, the Borrower's financial condition at that time and the economic prospects for the Borrower and the Properties in the foreseeable future, made it doubtful that the Borrower would be able to rebuild equity in the Properties or otherwise repay the Loans. As a result, for financial reporting purposes, the Partnership reduced its Investment in Master Agreement by $5,051,000 to the lower of cost or estimated net realizable value of the underlying properties of $20,249,000. For financial statement presentation purposes only (through June 30, 1994), the Partnership had, in effect, foreclosed on the properties. To recognize this, the net Investment in Master Agreement has been reclassified to investment in real estate as of October 31, 1992. The depreciable components of this investment are being depreciated over the remaining useful lives of the properties which range from 4 to 25 years for improvements and 24 to 26 years for buildings. Additionally, all operating revenues and expenses of the properties are being recognized by the Partnership effective November 1, 1992. No additional Income on Investment in Master Agreement will be recognized. In addition, as part of the "in-substance foreclosure" accounting which requires that the Partnership write-down the Investment in Master Agreement to the fair market value of the properties and then reclassify the loans to investment in real estate, the Page 40 of 56 GLENBOROUGH PENSION INVESTORS, A CALIFORNIA LIMITED PARTNERSHIP Notes to Consolidated Financial Statements December 31, 1994, 1993, 1992 balance of deferred income in the amount of $769,000 was eliminated and was off-set against the unrealized loss on Investment in Master Agreement. On April 4, 1994, several matters submitted to a vote of security holders through the soliciation of proxies were approved. These matters included an acquisition through deeds-in-lieu of foreclosure of ten of thirteen properties. These ten properties secured approximately $12,833,000 of the principal balances of the loans. The terms of the remaining loans included: an increase in the principal amount of the loans by approximately $355,000 for the costs incurred by the Partnership in the restructuring, an interest accrual rate change from 13% to 10% beginning January 1, 1994, extension of the maturity dates of the loans to March 31, 2001 with five one-year renewal options, and a cross-collateralization of the three loans with the right to transfer a property to the Partnership in satisfaction of the loan without creating a default under the other loans; a release of certain collateral notes in the aggregate principal amount of $1,500,000 and the right to pursue certain limited recourse liability relating to the existing loans; receiving secured and unsecured notes with unpaid balances of principal and accrued interest as of September 30, 1993 aggregating approximately $1,159,000; receiving a release from the obligation to repay approximately $349,000 that was owed to the Borrower; acknowledgement of the termination of the contribution agreement and releasing such rights, if any, the Partnership may have with respect thereto; and the termination of the servicing agreement. Effective July 1, 1994, the Partnership obtained ownership by deeds-in-lieu of foreclosure of four of the Borrower's properties: Park 100 (Buildings 42 and 46) and the Eagan and New Hope mini-storages. In addition, title to the six auto care centers, formerly held by the Borrower, was passed to GPI Georgia Auto Centers, L.P., a Georgia Limited Partnership whose general partner is GPI Auto Centers, Inc., a Georgia corporation, both of which are wholly owned by the Partnership. Note 3. REAL ESTATE INVESTMENTS Page 41 of 56 GLENBOROUGH PENSION INVESTORS, A CALIFORNIA LIMITED PARTNERSHIP Notes to Consolidated Financial Statements December 31, 1994, 1993, 1992 ----------------------- The cost and accumulated depreciation and amortization of real estate investments as of December 31, 1994 are as follows (in thousands): Buildings December 31, 1994: Land and Improvements Total Park 100 Buildings $ 712 $ 2,689 $ 3,401 Sea Tac II 712 1,236 1,948 New Hope 207 1,648 1,855 Eagan 301 765 1,066 Park Center 1,748 2,714 4,462 Country Suites - DFW 954 2,523 3,477 Auto Care Norcross 287 565 852 Auto Care College Park 266 427 693 Auto Care Roswell 206 275 481 Auto Cares: Snellville, Marietta and Smyrna 1,063 1,473 2,536 ------ ------ ------ Subtotal 6,456 14,315 20,771 Less accumulated depreciation and amortization - 1,357 1,357 ------ ------ ------ Total $ 6,456 $12,958 $19,414 ====== ====== ====== Park 100 Buildings - On December 31, 1985, the Partnership funded a mortgage loan to the Borrower in the amount of $4,160,000 for the purpose of purchasing Buildings 42 and 46 of the Park 100 Business Park, located in Indianapolis, Indiana. The loan was secured by first deeds of trust on the properties. On July 1, 1994, these properties were acquired by the Partnership by deeds- in-lieu of foreclosure. Sea Tac II - On March 3, 1986, the Partnership funded a mortgage loan to the Borrower in the original amount of $2,268,800 for the purpose of purchasing Sea Tac II, located in Seattle, Washington. As part of the restructure in 1994, the principal balance of the note was modified to $2,333,338. The increase represents a portion of the costs of the restructure. The loan is secured by a first deed of trust on the property. All American Self Storages - New Hope and Eagan - On July 30, 1986, the Partnership funded two mortgage loans to the Borrower in the amount of $2,193,700 and $1,288,300, respectively, for the purpose of purchasing two self-storage facilities, New Hope and Page 42 of 56 GLENBOROUGH PENSION INVESTORS, A CALIFORNIA LIMITED PARTNERSHIP Notes to Consolidated Financial Statements December 31, 1994, 1993, 1992 Eagan, located in Minneapolis, Minnesota. On July 1, 1994, these properties were acquired by the Partnership by deeds-in-lieu of foreclosure. Park Center - On October 7, 1986, the Partnership funded a mortgage loan to the borrower in the original amount of $5,298,000 for the purpose of purchasing Park Center, a shopping center located in Santa Ana, California. As part of the restructure in 1994, the principal balance of the note was modified to $5,448,427. The increase represents a portion of the costs of the restructure. The loan is secured by a first deed of trust on the property. Country Suites - DFW - On October 31, 1986, the Partnership funded a mortgage loan to the Borrower in the original amount of $4,900,000 for the purpose for purchasing a suite-hotel complex, Country Suites - DFW, located in Irving, Texas. As part of the restructure in 1994, the principal balance of the note was modified to $5,039,434. The increase represents a portion of the costs of the restructure. The loan is secured by a first deed of trust on the property. Atlanta Auto Care - Norcross, College Park and Roswell - On December 31, 1986, the Partnership funded three separate mortgage loans in the amounts of $974,000, $769,000 and $545,000, respectively, for the purpose of purchasing three Atlanta Auto Care Centers located in Norcross, College Park, and Roswell, Georgia. On July 1, 1994, title to these properties was passed by deeds-in-lieu of foreclosure to GPI Georgia Auto Centers, L.P., a Georgia Limited Partnership whose general partner is GPI Auto Centers, Inc., a Georgia Corporation, both of which are wholly owned by the Partnership. Atlanta Auto Cares - Snellville, Marietta and Smyrna - Beginning in May 1987 and ending in June 1987, the Partnership funded a mortgage loan in the total amount of $2,903,000 for the purpose of purchasing three Atlanta Auto Care Centers located in Snellville, Marietta and Smyrna, Georgia. On July 1, 1994, title to these properties was passed by deed-in-lieu of foreclosure to GPI Georgia Auto Centers, L.P., a Georgia Limited Partnership whose general partner is GPI Auto Centers, Inc., a Georgia Corporation, both of which are wholly owned by the Partnership. Note 4. TRANSACTIONS WITH AFFILIATES ---------------------------- As discussed in Note 2, the Partnership was loaned $500,000 in 1990 by the Borrower in exchange for a note. The note was due April 20, 1994, bore interest at 10% per annum and was secured by Page 43 of 56 GLENBOROUGH PENSION INVESTORS, A CALIFORNIA LIMITED PARTNERSHIP Notes to Consolidated Financial Statements December 31, 1994, 1993, 1992 interest payments due to the Partnership from the Borrower on funds loaned under the master loan agreement. The Borrower possessed insufficient cash flow to make the interest payments to the Partnership for the quarter ended December 31, 1991. An agreement between the partners of the Borrower required August Financial Corporation ("AFC"), one of the partners of the Borrower at the time, to supplement deficiencies in the Borrower's cash flow by making loans to the Borrower. AFC became insolvent and AFC's parent company, GLENFED Service Corporation, was also insolvent and therefore not in a position to contribute any additional capital to AFC. Under these circumstances, management believed that a minor modification between the Partnership and the Borrower was appropriate. As a result, the Partnership and the Borrower entered into an agreement on December 20, 1991 to reduce the interest payment due to the Partnership for the quarter ended December 31, 1991 by $151,300 and to reduce the note payable to the Borrower by the same amount. As part of the restructure discussed in Note 9, the Partnership received a release from the obligation to repay this note. Glenborough Realty Corporation had the option to purchase the general partner interest in the Partnership, subject to certain conditions, including the approval of a majority of the limited partners. This option was exercised as part of the restructure. In accordance with the Limited Partnership Agreement, the Partnership paid the General Partner and its affiliates compensation for services provided to the Partnership. Glenborough Corporation and Glenborough Hotel Group ("Glenborough") provided property management services and has been compensated as follows: 1994 ------ Property management fees $108,000 Property salaries (reimbursed) 47,700 Hotel management fees 79,000 Hotel salaries (reimbursed) 442,800 Property administrative services 173,200 These expenses are included in operating expenses on the Statement of Operations. The Partnership also reimbursed Glenborough for expenses incurred and for services provided to the Partnership such as accounting, investor services, data processing, duplicating, office supplies, Page 44 of 56 GLENBOROUGH PENSION INVESTORS, A CALIFORNIA LIMITED PARTNERSHIP Notes to Consolidated Financial Statements December 31, 1994, 1993, 1992 legal and administrative services. Glenborough was reimbursed $221,800 by the Partnership in 1994. Note 5. LINE OF CREDIT -------------- The Partnership established a $150,000 line of credit facility with an unaffiliated third party in February 1992. Funds drawn on this line of credit bore interest at the prime rate plus 1.5%. To cover the cash distributions to limited partners that otherwise would have been funded by the interest not received in December 1991 (as discussed in Note 4), $150,000 was drawn on the line of credit in late February 1992. This line of credit matured February 28, 1994, but was paid off in May 1993 with the proceeds from the net cash flow payments made by the Borrower. Note 6. TAXABLE INCOME -------------- The Partnership's tax return, its qualification as a partnership for Federal income tax purposes and the amount of taxable income or loss are subject to examination by Federal and State taxing authorities. If such examinations result in changes to the Partnership's taxable income or loss, the tax liability of the partners could change accordingly. For Federal income tax reporting, (a) fees paid for services related to seeking and evaluating potential real estate investments are deducted if and when the plans of acquisition are subsequently abandoned, (b) depreciation is provided for under accelerated and modified accelerated cost recovery methods, (c) certain organizational costs classified as syndication costs for tax purposes are not deductible, (d) lease income is recognized under the terms of the lease contract; (e) bad debts are written off when deemed uncollectible, and (f) gains or losses from the sales of properties are adjusted for the turn- around effect of the prior tax treatment of advisory fees and accelerated cost recovery. A reconciliation of financial reporting income or partners' capital to taxable income or partners' capital has not been provided as the structure of the relationship between the Partnership and the Borrower makes such reconciliations meaningless. Note 7. PARTNERS' EQUITY ---------------- Distributions: The amount of all Partnership distributions is determined by the General Partner at its sole discretion. Page 45 of 56 GLENBOROUGH PENSION INVESTORS, A CALIFORNIA LIMITED PARTNERSHIP Notes to Consolidated Financial Statements December 31, 1994, 1993, 1992 The Partnership Agreement provides that distributions from "cash flow", to the extent deemed available by the General Partner for distribution, shall be distributed 99% to the Limited Partners and 1% to the General Partner. "Cash flow" is defined as cash funds provided from operations, including basic interest received from the Borrower under the terms of the master loan agreement, and interest income from cash and short-term investments, without deduction for non-cash expenses, but after deducting cash funds used to pay all expenses and debt payments, and excluding additional interest received from the Borrower under the terms of the loans, if any. Distributions from sources other than operating cash flow shall be distributed 100% to the Limited Partners until the amounts distributed to the Limited Partners equal a complete return of their "adjusted capital investment". "Adjusted capital investment" is defined as the capital contributed to the Partnership less distributions, other than distributions from cash flow. Additional distributions, if any, shall be allocated 100% to the Limited Partners until a minimum 6% per annum cumulative non-compounding return on the Limited Partners' adjusted capital investment is reached. All additional distributions, if any, are allocated 1% to the General Partner and 99% to the Limited Partners in proportion to the number of limited partnership units held by them. Note 8. LITIGATION ---------- On May 6, 1993, Glenborough Corporation and certain of its affiliates entered into a settlement of a lawsuit that had been brought by the former management company and seller of the hotel ("the seller"), on November 13, 1991. The lawsuit alleged that, in connection with the general partner's termination of the former management company as operator and franchisor of the Borrower's hotel, Glenborough and its affiliates had defamed the former management company and interfered with its contractual relationship with the Borrower. A majority of the amount paid to the former management company under the settlement was funded by Glenborough's insurance carriers, but a portion of the settlement amount was funded by Glenborough. Pursuant to Glenborough's indemnity rights as manager of the Borrower, AFP Partners, (and as general partner of other Outlook partnerships that own hotels), Glenborough is entitled to reimbursement of this portion of the settlement payment. The Borrower's share of this reimbursement together with the associated legal fees was $33,000 and has been included in the Partnership's December 31, 1993 statement of operations as litigation settlement expense. Page 46 of 56 GLENBOROUGH PENSION INVESTORS, A CALIFORNIA LIMITED PARTNERSHIP Notes to Consolidated Financial Statements December 31, 1994, 1993, 1992 Note 9. PARTNERSHIP EVENTS ------------------ On April 4, 1994, several matters submitted to a vote of security holders through the solicitation of proxies were approved. The Limited Partners have given consent on the following matters: a) the approval of the admission of Glenborough Realty Corporation as managing general partner and Robert Batinovich as co-general partner and the withdrawal of API Partners as general partner; b) the change in the name of the Partnership to Glenborough Pension Investors by an amendment to the partnership agreement; c) the further amendment of the partnership agreement to permit Glenborough Corporation, as an affiliate of the new General Partner, to continue to receive fees in substantially the same or somewhat lower amounts as the fees that were being paid to Glenborough Corporation for property management and partnership administrative services provided for in the management agreement; d) a restructuring of the Partnership's investments which includes acquiring ten of thirteen properties which secure approximately $12,833,000 of the principal balances of the loans by deeds-in-lieu of foreclosure; a revision of the terms of the remaining loans secured by the three properties including an increase in the principal amount of the loans by approximately $355,000 for the costs incurred by the Partnership in favor of the financial advisor and the investment banking firm used in the restructuring, an interest accrual rate change from 13% to 10% beginning January 1, 1994, extension of the maturity dates of the loans to March 31, 2001 with five one-year renewal options, and a cross-collateralization of the three loans with the right to transfer a property to the Partnership in satisfaction of the loan without creating a default under the other loans; a release of certain collateral notes in the aggregate principal amount of $1,500,000 and the right to pursue certain limited recourse liability relating to the existing loans; receiving secured and unsecured notes with unpaid balances of principal and accrued interest as of September 30, 1993 aggregating approximately $1,159,000; receiving a release from the obligation to repay approximately $350,000 that was owed to the Borrower, AFP Partners; acknowledgement of the termination of the contribution Page 47 of 56 GLENBOROUGH PENSION INVESTORS, A CALIFORNIA LIMITED PARTNERSHIP Notes to Consolidated Financial Statements December 31, 1994, 1993, 1992 agreement and releasing such rights, if any, the Partnership may have with respect thereto; and the termination of the servicing agreement. Effective July 1, 1994, the Partnership obtained ownership by deeds-in-lieu of foreclosure of four of the Borrower's properties: Park 100 (Buildings 42 and 46) and the Eagan and New Hope mini-storages. In addition, title to the six auto care centers, formerly held by the Borrower, was passed to GPI Georgia Auto Centers, L.P., a Georgia Limited Partnership whose general partner is GPI Auto Centers, Inc., a Georgia corporation, both of which are wholly owned by Glenborough Pension Investors. In addition to the solicitation discussed above, but separate and apart from this approved proposal, the Limited Partners were asked to vote on an amendment to the Partnership Agreement which would have permitted the General Partner to reinvest proceeds received from the sale of properties acquired by the Partnership pursuant to the proposal discussed above and the principal payments received on the notes that are held by the Partnership in real property. A majority vote was not achieved by the cutoff date of April 5, 1994, and therefore, this "investment amendment" proposal was not passed. On April 5, 1994, of 76,471 units responding, 49,668 voted for the "investment amendment" proposal, 15,423 voted against the proposal, and 11,380 abstained. In addition to the changes discussed above, AFP Partners' structure changed as part of the restructuring. AFP Partners was a California general partnership whose general partners consisted of August Financial Corporation, a California Corporation, August Financial Partners, a California limited partnership, and August Investment Partners, a California limited partnership. AFP Partners, as part of the restructure, is now a California limited partnership, whose general partners are Glenborough Realty Corporation and Robert Batinovich, collectively owning 1%. August Financial Partners, a California limited partnership, is the limited partner, owning 99%. Note 10. OTHER INFORMATION ----------------- The Partnership has been named in a Registration Statement proposing a consolidation by merger of several entities, which has been filed with the Securities and Exchange Commission. In that regard, as of December 31, 1994, the Partnership has advanced $365,000 toward the transaction costs associated with the consolidation (included in prepaid expenses and other assets). An additional $100,000 in transaction costs have been included in prepaid expenses and other assets and was payable at December 31, 1994. In the event the proposal is not approved by Page 48 of 56 GLENBOROUGH PENSION INVESTORS, A CALIFORNIA LIMITED PARTNERSHIP Notes to Consolidated Financial Statements December 31, 1994, 1993, 1992 the Partnership's limited partners, and the consolidation goes forward with any of the other entities, the amounts advanced will be fully reimbursed by an affiliate of the general partners of the Partnership. If the Consolidation, itself, does not go forward with any of the other entities, the Partnership will bear a proportion of the transaction costs based upon the number of limited partners who voted for approval of the transaction as compared to those who dissented or abstained. The limited partners are expected to receive their solicitation materials for this potential transaction in 1995. Note 11. SUBSEQUENT EVENT ---------------- On January 10, 1995, subsequent to the Partnership's year-end, the Partnership acquired a property, Summer Breeze Apartments (formerly owned by Glenfed Summerbreeze Investors, Ltd., a California Limited Partnership) by a deed-in-lieu of foreclosure. As part of the restructure discussed in Note 9, the Partnership received a note secured by a second-deed of trust on the property and an unsecured note with unpaid balances of principal and accrued interest as of September 30, 1993 aggregating approximately $1,159,000. Summer Breeze Apartments are also encumbered by a 1st Deed of Trust. Because the amount of the Glenfed Summerbreeze Investors Partnership's debt was approximately equal to the value of its assets, the partnership had little or no net worth. The loans became due September 1, 1994. Since Glenfed Summerbreeze Investors elected not to contribute any capital to the partnership to pay for new financing, the Partnership agreed to pay Glenfed Summerbreeze Investors, Ltd. $150,000 for a deed-in-lieu and dissolution of the partnership thereby foregoing costs of foreclosure and receiving title to the property in a more timely manner. Management is currently working on new financing. Meanwhile, the Partnership has made payments to the lender on the note to postpone appointment of a receiver for the Summer Breeze property. Page 49 of 56 GLENBOROUGH PENSION INVESTORS, A CALIFORNIA LIMITED PARTNERSHIP PROPERTIES OWNED BY GLENBOROUGH PENSION INVESTORS AND AFP PARTNERS Schedule III Consolidated Real Estate Investments and Related Accummulated Depreciation and Amortization December 31, 1994 Costs Capitalized (Reduced) Initial Costs Subsequent to AFP to Acqstn ------------ Bldgs ---------- and Carrying Properties Land Imprvmnts Imprvmnts Costs ---------- ----- -------- --------- -------- Park 100 Building $ 712,357 3,285,853 428,820 (65,734) Sea Tac II 712,200 1,473,512 112,417 - All American Self-Storage/Eagan 300,725 959,885 25,702 - All American Self Storage/Newhope 206,867 1,939,520 76,815 - Park Center 1,748,000 3,295,620 224,101 (50,691) Country Suites DFW 972,429 3,850,454 163,396 (124,066) Auto Care Norcross 286,557 640,560 58,490 - Auto Care College Park 265,610 489,129 59,246 - Auto Care Roswell 205,949 331,618 14,011 - Auto Care Snellville, Marrietta, Smyrna 1,077,180 1,730,666 138,428 (31,970) --------- ---------- --------- --------- Total $6,487,874 17,996,817 1,301,426 (272,461) ========= ========== ========= ========= Adjustments ------------- Costs Captlzd Accum Depn through subsqnt to Oct. 31, 1992 (prior in-sub Properties to in-sub foreclosure) foreclosure ---------- -------------------- ----------- Park 100 Buildings (1,044,448) 84,748 Sea Tac II (397,955) 48,000 All American Self Storage/Eagan (225,534) 4,535 All American Self Storage/Newhope (448,645) 81,298 Park Center (789,684) 34,890 Country Suite DFW (1,597,504) 212,114 Auto Care Norcross (146,013) 11,900 Auto Care College Park (129,660) 7,800 Auto Care Roswell (74,686) 4,290 Auto Care, Snellville, Marrietta, Smyrna (410,528) 32,730 ----------- ----------- Total (5,264,657) 522,305 =========== =========== Page 50 of 56 GLENBOROUGH PENSION INVESTORS, A CALIFORNIA LIMITED PARTNERSHIP PROPERTIES OWNED BY GLENBOROUGH PENSION INVESTORS AND AFP PARTNERS Schedule III Consolidated Real Estate Investments and Related Accummulated Depreciation and Amortization December 31, 1994 Gross Amount at Which Carried on Books of GPI ---------------------- Buildings Properties Land and Improvements Total ---------- ---- ---------------- ----- Park 100 Buildings $ 712,357 2,689,239 3,401,596 Sea Tac II 712,200 1,235,974 1,948,174 All American Self Storage/Eagan 300,725 764,588 1,065,313 All American Self Storage/Newhope 206,867 1,648,988 1,855,855 Park Center 1,748,000 2,714,236 4,462,236 Country Suites DFW 953,972 2,522,851 3,476,823 Auto Care Norcross 286,557 564,937 851,494 Auto Care College Park 265,610 426,515 692,125 Auto Care Roswell 205,949 275,233 481,182 Auto Care Snellville, Marrietta, Smyrna 1,063,234 1,473,272 2,536,506 ---------- ---------- ---------- Total 6,455,471 14,315,833 20,771,304 ========== ========== ========== Gross Amount at Which Carried on Books of GPI ---------------------- Accumulated Remaining Depreciation Date of Depreciable Properties and Amort Acquisition Lives ----------- ------------ ----------- ----------- Park 100 Building $ 263,872 10/86 5-25 Sea Tac II 116,522 2/88 5-25 All American Self Storage/Eagan 71,033 7/86 5-25 All American Self Storage/Newhope 160,730 7/86 5-25 Park Center 255,440 9/86 5-25 Country Suites DFW 236,313 10/86 5-25 Auto Care Norcross 51,442 12/86 5-25 Auto Care College Park 38,872 12/86 5-25 Auto Care Roswell 25,793 12/86 5-25 Auto Cares, Snellville, Marrietta, Smyrna 137,571 12/86 5-25 ---------- Total $ 1,357,588 ========== Page 51 of 56 GLENBOROUGH PENSION INVESTORS, A CALIFORNIA LIMITED PARTNERSHIP PROPERTIES OWNED BY GLENBOROUGH PENSION INVESTORS AND AFP PARTNERS Schedule III Consolidated Real Estate Investments and Related Accummulated Depreciation and Amortization December 31, 1994 Following is a summary of real estate investments: For the Year For the Year For the Two Months Ended Ended Ended December 31, December 31, December 31, 1994 1993 1992 ------------- ------------ -------------- Balance at beginning of period $ 20,498,604 20,255,580 20,249,000 Acquisitions - - - Improvements 272,700 243,024 6,580 ------------ ----------- ------------ Balance at end of period $ 20,771,304 20,498,604 20,255,580 ============ =========== ============ Following is a summary of accumulated depreciation and amortization of real estate investments: For the Year For the Year For the Two Months Ended Ended Ended December 31, December 31, December 31, 1994 1993 1992 ------------- ------------ ------------- Balance at beginning of period $ 698,240 96,427 - Additions charged to expense 659,348 601,813 96,427 Retirements - - - ------------ ------------ ------------ Balance at end of period $ 1,357,588 698,240 96,427 ============ ============ ============ Page 52 of 56 Item 9. Changes and Disagreements with Accountants on Accounting and Financial Disclosure None. PART III Item 10. Directors and Executive Officers of the Registrant General Partners The Partnership has no directors or executive officers. The General Partners of the registrant are Glenborough Realty Corporation (the "Managing General Partner") and Robert Batinovich. For informational purposes, the following are the names and additional information relating to each of the controlling persons, directors and executive officers of the Managing General Partner as of March 15, 1995: Name Age Position ---- --- -------- Robert Batinovich 58 President and Chairman of the Board Andrew Batinovich 36 Senior Vice President, Chief Financial Officer and Director Sandra L. Boyle 46 Vice President Barbara L. Evans 54 Vice President, Secretary and Corporate Counsel Eugene F. Daly 51 Director Wallace A. Krone Jr. 63 Director Laurence N. Walker 62 Director J. Sydney Whalen 60 Director The following is a brief description of the background and experience of Robert Batinovich and each of the officers and directors of Glenborough Realty Corporation. Robert Batinovich has been the President and a Director of Glenborough Corporation since its inception in l978 and of Glenborough Realty Corporation since its inception in l985. He has been the Chief Financial Officer ("CFO") of Glenborough Corporation since April l986 and the CFO of Glenborough Realty Corporation from April l986 through April l988. He was a member of the California Public Utilities Commission from l975 to January l979 and served as its Chairman from January l977 to January l979. He has extensive real estate investment experience. Mr. Batinovich's business background includes managing and owning manufacturing, vending and service companies and a national bank. Page 53 of 56 Andrew Batinovich has been Senior Vice President and Chief Financial Officer of Glenborough Realty Corporation since April l988. He was Vice President-Property Management of Glenborough Realty Corporation from April l986 to April l988. He also is Senior Vice President in charge of property management and partnership accounting for Glenborough Corporation. Prior to joining Glenborough Corporation in June l983, he was employed at Security Pacific National Bank in its international and corporate banking groups specializing in real estate lending. He is the son of Robert Batinovich. Sandra L. Boyle has been Vice President of Glenborough Realty Corporation since February 1991. She first joined Glenborough Corporation in 1984 and is responsible for property management, including maintenance, capital and tenant improvements, rent collection, budgeting and supervision of regional offices. Prior to joining Glenborough Corporation, she was a residential real estate marketing representative for Great Western Realtors. Barbara L. Evans has been Secretary of Glenborough Realty Corporation since April 1986 and Vice President since February 1991. She joined Glenborough Corporation in l985 and serves as Counsel and Secretary. She was admitted as an attorney in the State of California in l983. Prior to attending law school and on a part-time basis during law school, Ms. Evans was a co-owner of TES Associates, a property management and real estate investment advisor. Eugene F. Daly was elected a Director of Glenborough Realty Corporation in August 1989. He is President of Daly International Financial and Insurance Services. Mr. Daly is a Registered Principal with the National Association of Securities Dealers (NASD) and his firm Daly International Financial and Insurance Services is a Registered Investment Advisor with the Securities and Exchange Commission. Wallace A. Krone, Jr. was elected a Director of Glenborough Realty Corporation in August 1989. He has been associated with Glenborough for approximately 15 years as an investor in Glenborough sponsored partnerships. For the past twenty-seven years, he has been self-employed owning various restaurants in the San Francisco Bay Area. Currently Mr. Krone owns a number of Burger King restaurants in the same area. Laurence N. Walker was a Director of Glenborough Corporation from October l984 to November l985 and served as Treasurer from January l985 to November l985. He has been a Director of Glenborough Realty Corporation since its inception in l985. He is an attorney specializing in real estate law. J. Sydney Whalen was elected a Director of Glenborough Realty Corporation in April l988. He is a Canadian Chartered Accountant and since l983 has been president of Whalen & Associates, a management consulting firm specializing in executive management and chief financial officer services to companies experiencing operating or financial difficulties. In 1993, Mr. Whalen was a Page 54 of 56 co-founder and became President of Round Hill Securities, Inc., a securities broker/dealer. From l975 to l982, he was Vice President-Finance and Administration of Raymond Kaiser Engineers, Inc. Item 11. Executive Compensation The Partnership has no executive officers. For information relating to fees, compensation, reimbursements and distributions paid to related parties, reference is made to Item 13 below. Item 12. Security Ownership of Certain Owners and Management To the best knowledge of the Partnership, no person owned of record or beneficially more than five percent (5%) of the Units at December 31, 1994. The Partnership, as an entity, does not have any directors or officers. At December 31, 1994, no Units were owned by any officers of directors of the General Partner. Item 13. Certain Relationships and Related Transactions During the year ended December 31, 1994, the Partnership had no transactions or business relationships with officers or directors of Glenborough required to be reported pursuant to Item 404 of Regulations S-K. An affiliate of the General Partner of the Partnership earned compensation for specific services provided to the Partnership. In accordance with the Limited Partnership Agreement, the Partnership paid the General Partner and its affiliates compensation for services provided to the Partnership. Glenborough Corporation provides property management services and has been compensated as follows: 1994 -------- Property management fees $108,000 Property salaries - reimbursed 47,700 Hotel management fees 79,000 Hotel salaries - reimbursed 442,800 Property administrative services 173,000 These costs are included in operating costs and expenses in the statements of operations. The Partnership also reimbursed Glenborough Corporation for expenses incurred for services provided to the Partnership such as accounting, investor services, data processing, duplicating and office supplies, legal and administrative services, and the actual costs of goods and materials used for or by the Partnership. Glenborough was reimbursed $221,800 for such expenses during the year ended December 31, 1994. Page 55 of 56 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a)(1) Financial Statements - See Index to Consolidated Financial Statements contained in Item 8. (2) Financial Statement Schedules - See Item 14(d) below. (3) Exhibits - None. (b) Reports on Form 8-K - None. (c) Exhibits - None. (d) Financial Statement Schedules - Schedule III - Consolidated Real Estate Investments and Related Accumulated Depreciation and Amortization at December 31, 1994. All other schedules for which provision is made int he applicable accounting regulation of the Securities and Exchange commission are not required under the related instructions or are inapplicable, and therefore have been omitted. Page 56 of 56 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. GLENBOROUGH PENSION INVESTORS, A CALIFORNIA LIMITED PARTNERSHIP By:/s/ ROBERT BATINOVICH By: Glenborough Realty Corporation, -------------------------- a California Corporation, Robert Batinovich Its Managing General Partner General Partner Date: By: /s/ ROBERT BATINOVICH -------------------- --------------------------- Robert Batinovich President and Chairman of the Board Date: ----------------------- By: /s/ ANDREW BATINOVICH --------------------------- Andrew Batinovich Senior Vice President, Chief Financial Officer and Director Date: ----------------------- By: /s/ LAURENCE N. WALKER --------------------------- Laurence N. Walker Director Date: ----------------------- By: /s/ J. SYDNEY WHALEN --------------------- J. Sydney Whalen Director Date: ----------------------- (A Majority of the Board of Directors of the General Partner) Page 57 of 56 EX-27 2
5 1000 12-MOS DEC-31-1994 JAN-01-1994 DEC-31-1994 382 0 106 0 0 510 20771 (1357) 20412 559 0 0 0 0 19853 21412 0 4198 0 0 3337 0 0 861 0 861 0 0 0 861 7.16 7.16