-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, H1kbbijSycNHBEdbgUql5e/N13mcYryrGIJvSo/Q8shH5Klj+wldIQ6MJO2cEFu8 lt4Uu0FB9wvuhNF4uP68/w== 0000757642-98-000002.txt : 19980401 0000757642-98-000002.hdr.sgml : 19980401 ACCESSION NUMBER: 0000757642-98-000002 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980331 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: LIF CENTRAL INDEX KEY: 0000757642 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 942969720 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-15756 FILM NUMBER: 98580256 BUSINESS ADDRESS: STREET 1: 155 BOVET RD STREET 2: STE 100 CITY: SAN METEO STATE: CA ZIP: 94402 BUSINESS PHONE: 4155135200 MAIL ADDRESS: STREET 1: PO BOX 130 CITY: CARBONDALE STATE: CO ZIP: 81623 FORMER COMPANY: FORMER CONFORMED NAME: LANDSING INCOME FUND DATE OF NAME CHANGE: 19900827 FORMER COMPANY: FORMER CONFORMED NAME: LANDSING REALTY PARTNERS III DATE OF NAME CHANGE: 19850617 10-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-K [X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Fiscal Year Ended December 31, 1997 [ ] Transition Report Pursuant to Section 13 or 15(a) of the Securities Exchange Act of 1934 Commission File Number 0-15756 LIF (Exact name of registrants as specified in its charter) California 94-2969720 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) P. O. Box 130, Carbondale, Colorado 81623 (Address of principal executive offices) (970) 963-8007 (Partnership's telephone number, including area code) 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 whether the registrant (1) has filed all reports required to be filed by Sections 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 [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (229.405 of this chapter) 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 [ ] State the aggregate market value of the voting stock held by non-affiliates of the registrant. Inapplicable. DOCUMENTS INCORPORATED BY REFERENCE: None LIF FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1997 TABLE OF CONTENTS Item No. Name of Item Part I Item 1. Business Item 2. Properties Item 3. Legal Proceedings Item 4. Submission of Matters to a Vote of Security Holders Part II Item 5. Market for Partnership's Common Equity and Related Shareholders Matters Item 6. Selected Financial Data Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Item 8. Financial Statements and Supplementary Data Item 9. Change in and Disagreements with Accountants on Accounting and Financial Disclosure Part III Item 10. Directors and Executive Officers of the Registrant Item 11. Executive Compensation Item 12. Security Ownership of Certain Beneficial Owners and Management Item 13. Certain Relationships and Related Transactions Part IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K Signatures Index to Consolidated Financial Statements and Supplemental Consolidated Financial Statement Schedule PART I ITEM 1. BUSINESS LIF (the "Partnership") is a limited partnership which was organized under the California Revised Limited Partnership Act on June 29, 1984. The Partnership was organized to acquire real properties, including commercial, residential and agricultural properties, located primarily within the western portion of the United States, and to make short-term loans and capital contributions to other limited partnerships formed to acquire or develop and operate one or more income-producing real properties. The Partnership was formed with the following principal investment objectives: (i) to provide the maximum possible cash distributions from operations, a substantial portion of which may not be taxable to the holders of units of limited partnership interest in the Partnership (the "Holders"); (ii) to provide for capital growth through appreciation in values; and (iii) to protect the Partnership's capital. The General Partner of LIF is Partners '85 (the "General Partner") a partnership whose General Partner is Landsing Equities Corporation. The Partnership's business consists of a single segment -- acquisition and operation of one or more income-producing real properties and making short-term loans and capital contributions to operating entities formed to acquire or develop real properties. For a schedule of the Partnership's income and losses and assets, see Item 6, Selected Financial Data. The Partnership will not be engaged in the production of goods or the rendering of services. For a more specific discussion of the Partnership's operations and financial condition, see Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations. The Partnership currently has an investment in Landsing Private Fund-21 ("P-21") which owns one multi-family rental property, Alpine Center Partners ("ACP") which owns 1.96% of a commercial rental property. The partnership owns two retail rental properties, which in prior years were owned by Cattle Creek Development Partners ("CCDP"). CCDP was liquidated into LIF in 1997. For financial reporting purposes the Partnership's investments are presented on a consolidated basis. Results of the Partnership's operations depend primarily upon the successful operation of it's investment. The yields (return on capital) available on equity ownership of investments in income-producing and other types of real estate investments depend to a large extent upon the ability to lease or rent the property, the geographic location of the property, competition and other factors, none of which can be predicted with any certainty. The Partnership has not engaged in research activities relating to the development or improvement of products or services. The Partnership has not made, nor does it anticipate making, during the succeeding fiscal year, any capital expenditures for environmental control facilities, nor does it expect any material effects upon capital expenditures, earnings or competitive position resulting from compliance with present federal, state or local environmental control provisions. The Partnership has no employees. All of the Partnership's operations are located in the United States. ITEM 2. PROPERTIES A description of the income-producing properties which the Partnership owned at December 31, 1997 is as follows:
Financial Occupancy Average Net For the Physical Effective Rentable Year Ended Occupancy Rental Name & Location Type Sq. Ft. 12/31/97 At 12/31/97 Rate Whistler Point Apt Residential 140,230 93% 94% $ 9 Boise, Idaho Valley View Business Center Glenwood Springs, CO Retail 20,750 81% 86% $ 8 701 Cooper Glenwood Springs, CO Commercial 2,937 100% 100% $10 Alpine Center Building Carbondale, CO Commercial 12,349 65% 79% $ 8
[FN] (1) Expressed as a percentage, it compares the actual dollar amount of rent received with the dollar amount of rent which would be received if the property were fully leased. (2) Physical occupancy denotes the percentage of net rentable square footage leased as of a certain date. (3) Represents the average effective rental rates, per square foot, for the year ended December 31, 1997. (4) The Partnership (through ACP) owns 1.96% of the Alpine Center Building. Each of the Partnership's properties are subject to encumbrances. Reference is made to Note 5 in the financial statements filed as part of this annual report for information regarding such encumbrances. ITEM 3. LEGAL PROCEEDINGS Continued from 1996, the Partnership, through CCDP, has had suit filed Against it by two tenants alleging loss of business during the re-development of CCDP's property. CCDP's defense is being paid by its insurance carrier. The Partnership's insurance carrier has retained a reservation of rights against the Partnership. An estimate of potential loss is up to $96,000. See Note 8 to the financial Statements. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matter has been submitted to a vote of the limited partners (the "Limited Partners") through the solicitation of proxies or otherwise, during the fourth quarter of 1997. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDERS MATTERS There is no established public trading market for the units of Limited Partnership interest of the Partnership and there are substantial restrictions on the transferability of such Units imposed by federal and state securities laws and by the Limited Partnership Agreement. The approximate number of record holders of Units of the Partnership as of January 1, 1998, is 927. The Limited Partners of the Partnership are entitled to certain distributions under the Amended and Restated Certificate and Agreement of Limited Partnership of the Partnership. No cash distributions were made during the Year ended December 31, 1997. A cash distribution of $15 per unit, to unit holders of record on February 28, 1998, will be paid in March 1998. ITEM 6. SELECTED FINANCIAL DATA (In thousands, except Partnership units)
. . . . . . .DECEMBER 31 . . . . . . . 1997 1996 1995 1994 1993 Total Revenues $ 1,781 $1,517 $1,567 $1,361 $1,216 Net Income (Loss) (127) (136) (52) 27 58 Net Income (Loss) Per Unit (10) (11) (4) 2 5 Total Assets 10,293 9,864 9,076 8,153 7,318 Long-term Obligations - Net 7,679 7,960 6,897 5,591 4,406 Cash Distributions-Limited Partners 0 192 385 385 0 Paid Per Unit 0 15 30 30 0 Based on a weighted average of 12,820 limited partnership units outstanding in 1997, 1996, 1995, 1994 and 1993.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INTRODUCTION The Partnership was organized to acquire real properties, including commercial, residential and agricultural properties, located primarily within the western portion of the United States, and to make short-term loans and capital contributions to other limited partnerships formed to acquire or develop and operate one or more income-producing real properties. The Partnership currently has a 99% investment in Landsing Private Fund-21 ("P-21") which owns one multi-family rental property, and a 95% investment in Alpine Center Partners ("ACP") which owns 1.96% of a commercial building under construction. The Partnership also owns two retail rental properties, which were formerly owned by CCDP. For financial reporting purposes the Partnership's investments are presented on a consolidated basis. LIQUIDITY AND CAPITAL RESOURCES As of December 31, 1997, the Partnership's consolidated cash balance totaled $570,000. Cash not required for current operations is placed in federally insured financial instruments, certificates of deposit, and money market funds which can be liquidated as needed. It is the Partnership's intention to maintain adequate cash reserves for its operations. During 1997, the Partnership experienced a net increase in cash and cash equivalents of $182,000 As of December 31, 1997, cash and cash equivalents totaled $570,000, versus $388,000 at December 31, 1996 for a net increase of $182,000. The Short-Term Loan made to Cattle Creek Development Partners, a Colorado limited partnership ("CCDP"), was partially repaid in December 1996. The remaining loan balance, including accrued and unpaid interest, as of December 31, 1996 was $550,000. The loan was past due and was thus in default as of December 31, 1997. In 1997, per the terms of the loan agreement between LIF and CCDP, the properties securing the loan, Valley View Business Park and 701 Cooper, because 100% owned by LIF. These intercompany transactions were eliminated in consolidation. The balance of the short-term loan, and the related interest income and expense, between LIF and CCDP was eliminated in the consolidation of the Partnership's financial statements. On June 3, 1996, the Partnership made a Short-Term Loan in the principal amount of $585,000 to Alpine Center Partners, a Colorado limited partnership ("ACP"). ACP was organized to acquire one commercial property located in Carbondale, Colorado. The Partnership also made a capital contribution to ACP in the amount of $10,000 and became a Co-General Partner of ACP. On September 30, 1997, the Partnership's investment in ACP sold 40.20% of the Alpine Center Building to Gary K. Barr (GKB). GKB is the president of the General Partner of LIF. This sale resulted in cash to ACP of $370,000. On September 30, 1997, ACP also sold 45.90% of the Alpine Center Building to Open World Investors (OWI), of which Gary K. Barr is a General Partner. This sale generated cash to ACP of $420,000. ACP deferred a gain on sale from these two transactions of $69,000. ACP provided seller financing to GKB and OWI in the amounts of $864,300 and $986,850 respectively. The partnership's investment in ACP owned 1.96% of the Alpine Center Building on December 31, 1997. ACP reduced its short-term note payable to LIF by $358,000. The balance of the note payable at December 31, 1997 was $227,000. ACP's share of the note payable was eliminated in the consolidation of the Partnership's financial statements. For financial reporting purposes, results of operations for P21, CCDP and ACP have been shown on a consolidated basis. RESULTS OF OPERATIONS Rental revenues were $1,729,000 in 1997, for an increase of $246,000 over 1996. Rental revenues were $1,483,000 in 1996, a decrease of $59,000 or approximately 4% from 1995. The decline in rental revenues in 1996 versus 1995 was the result of the sale of four properties in 1996, which properties were operational for the entire year in 1995. The improvement in revenues in 1997 as compared to 1996 was the result of the lease-up of the Alpine Center, improved occupancy and rates at Whistler Point Apartments and an increase in rent payments at 701 Cooper. Operating expenses were $666,000 in 1997, a increase of $71,000 or 12% from 1996. Operating expenses were $595,000 in 1996, a decrease of $48,000 or 7% from 1995. The increase of operating expenses in 1997 versus 1996 was the result of having more properties operating for the entire year in 1997 as compared to 1996. The decrease in operating expenses in 1996 was the result of property sales during the year. Specifically, maintenance and repairs decreased 14%, and general and administrative costs decreased 12%. Other operating costs remained steady with 1995 levels. Net operating income of properties (rental revenue less operating expenses) was $1,063,000 in 1997, an increase of $175,000 or 19% from 1996. Management believes net operating income is the best indication of the Properties' performance. Interest income increased from $34,000 in 1996 to $52,000 in 1997. The increase was due to the increase in the Partnership's short-term investments and cash equivalents, and better interest rates on these investments. Interest expense increased 22% in 1997 from 1996 levels due to average larger outstanding loan balances in 1997. Interest expense increased in 1996 from 1995, due to the acquisition of the Alpine Center in 1996. Interest income and interest expense on loans by and between LIF and its investments, ACP and CCDP, was eliminated in the consolidation of the company's financial statements. Entity level general and administrative expenses, exclusive of that at the property level, decreased $24,000 in 1997 compared to 1996. Portfolio management fees remained unchanged. The net loss for 1997 was $127,000, an improvement of $9,000 from 1996's loss. The net loss for the Partnership was $136,000 in 1996, an increase of $84,000 from a net loss of $52,000 in 1995. The decrease in net loss in 1997 is a result of improved property operations. Due to the lease up of the Alpine Center and the improved operations of the Valley View and 701 Cooper properties, the net losses for the properties are expected to continue, but at reduced levels in the future. PROPERTY OPERATIONS Residential Property - The remaining residential property, Whistler Point Apartments in Boise, Idaho, continues to operate at a profit in spite of the very competitive market in which it is located. In 1997, the Partnership continued to make capital improvements to the property to allow it to compete effectively with new competition. The Partnership is continuing this program in 1998 with an expected cost of $150,000. Specific capital expenditures are for new washers and dryers in all units, new microwaves, new carpet and vinyl flooring, carports, and exterior deck improvements. The Partnership anticipates that when this improvement program is completed, the property will be placed on the market for sale in 1998. Commercial Property - The 701 Cooper Building remained 100% occupied during 1997. The Valley View Business Center had stable occupancy during 1997. However, at the end of the year, the sole tenant of 701 Cooper and CCDP agreed to cancel the remaining term of the lease for a payment of $61,000. A short-term tenant has occupied the building in January 1998. Both properties, Valley View Business Center and 701 Cooper are currently listed for sale on the market. Commercial Property - ACP has a l.96% investment in the Alpine Center Building. The building was remodeled in 1996 and available for occupancy in 1997. An additional phase of construction is scheduled for 1998. OCCUPANCY Occupancy at all of the Partnership's properties remain high in 1997. As of December 31, 1997, occupancy at Whistler Point Apartments was 94%. This occupancy level is expected to be achieved through 1998. Occupancy at properties owned by CCDP averaged 90% as of December 31, 1997. It is expected that all Partnership properties will maintain stable to improved occupancy during 1998. DISTRIBUTIONS No cash distributions were paid in 1997. The General Partner has declared a cash distribution of $15 per unit to unit holders of record on February 28, 1998, to be paid in March 1998. INFLATION The effect of inflation on the Partnership's operations have been no greater than the effect on the economy as a whole. Because of competitive conditions, market rate rents may increase or decrease disproportionately with inflation while property operating costs continue to follow inflationary trends. Inflationary conditions are not expected to have a major impact on the Partnership during 1998. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by this Item is contained at page F-1 following in this report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The General Partner of the Partnership is Partners '85, which has sole responsibility for all aspects of the Partnership's operations. Partners '85 is a limited partnership, whose General Partner is Landsing Equities Corporation, a California corporation. Landsing Equities Corporation was incorporated in California in 1983. It is a wholly-owned subsidiary of The Landsing Corporation which has acted as a sponsor of real estate investment programs, providing property acquisition and management services. Gary K. Barr is the Director and President of Landsing Equities Corporation. His principal occupation during the last five years or more, and certain other affiliations are set forth below: Gary K. Barr. Mr. Barr serves as Chairman and Chief Executive Officer of Pacific Coast Capital and served as President and Director of Landsing Pacific Fund from its inception in November, 1988 to July, 1992. Mr. Barr received a Bachelor of Science degree in Mechanical Engineering from Oklahoma State University in 1967 and a Master of Business Administration degree from the Stanford University Graduate School of Business in 1972. Mr. Barr serves on the Board of Governors of the National Association of Real Estate Investment Trusts and on its Editorial Board. Mr. Barr has served as President of the California Chapter of the Real Estate Securities and Syndication Institute of the National Association of Realtors ("RESSI"), which has awarded him the designation of Specialist in Real Estate Securities. Since 1983, he has served on the Board of Directors of Silicon Valley Bancshares. In 1989 he authored the book J.K. Lasser's "Real Estate Investment Guide" published by Prentice Hall. ITEM 11. EXECUTIVE COMPENSATION The Director and President of Landsing Equities Corporation does not receive compensation from the Partnership. However, the General Partner, Partners '85, has contracted with Pacific Coast Capital, an affiliate, for the provision of certain asset management and administrative services. During 1997, Pacific Coast Capital received management fees of $103,000, which were determined based on expenses incurred in order to operate the Partnership. In addition, Pacific Coast Capital was paid $36,000 for property management services. These property management fees were based on 2% of the monthly property revenues received from Whistler Point Apartments. See Item 13, Certain Relationships and Related Transactions for further information. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT No persons or groups are known by the Partnership to hold more than 5% of the Units of limited partnership of the Partnership. The General Partner is not a direct or beneficial owner of Units of limited partnership. The General Partner knows of no arrangement, including any pledge by any person of securities of the Partnership, the operation of which may at a subsequent date result in a change in control of the Partnership. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The Partnership has agreements with The Landsing Corporation and one of its affiliates, Pacific Coast Capital, pursuant to which the Partnership has paid various fees and compensation to these companies. The Partnership has entered into a property management agreement with Pacific Coast Capital for the management of the Partnership's property. During 1997, the Partnership paid Pacific Coast Capital $36,000 for property management and leasing services. The Partnership has retained Pacific Coast Capital to serve as advisor and to manage the day-to-day operations of the Partnership. Pacific Coast Capital is to perform these services based on reimbursement of costs incurred but in no case are these to exceed those which the Partnership would have to pay independent parties for comparable services. During 1997, the Partnership paid Pacific Coast Capital expense reimbursements of $103,000. For information concerning the agreements between the Partnership and the affiliates of The Landsing Corporation, see Note 2 of Notes to Financial Statements filed as part of this Annual Report. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) 1. Financial Statements See the Index on page F-1. 2. Financial Statement Schedules See the Index on page F-1. 3. Exhibits See the Exhibit Index which immediately precedes the Exhibits filed with this Report. (b) No reports were filed by the Partnership on Form 8-K during the fourth quarter ended December 31, 1997. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Partnership has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. LIF By: Partners '85 By: Landsing Equities Corporation, General Partner March 28, 1998 By: /s/ Gary K. Barr GARY K. BARR, President and Director Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Partnership and in the capacities and on the dates indicated. March 28, 1998 /s/ Gary K. Barr GARY K. BARR, President and Director Landsing Equities Corporation (Principal Executive Officer) Supplemental Information to be Furnished With Reports Filed Pursuant to Section 15(d) of the Act by Registrants Which Have Not Registered Securities Pursuant to Section 12 of the Act. No Annual Report or Proxy material has been sent to Partnership's security holders. An Annual Report will be furnished to such security holders subsequent to the filing of Partnership's Annual Report on Form 10-K, and, when so sent, Partnership shall furnish copies of such material to the Commission. LIF INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENT SCHEDULES INCLUDED IN THE FORM 10-K Report of Independent Accountants Financial Statements: Consolidated Balance Sheets, December 31, 1997 and 1996 Consolidated Statements of Operations for the Years Ended December 31, 1997, 1996 and 1995 Consolidated Statements of Changes in Partners' Equity for the Years Ended December 31, 1997, 1996 and 1995 Consolidated Statements of Cash Flows for the Years Ended December 31, 1997, 1996 and 1995 Notes to Consolidated Financial Statements Supplemental Consolidated Financial Statement Schedule: Schedule III - Real Estate and Accumulated Depreciation for the Year Ended December 31, 1997 REPORT OF INDEPENDENT ACCOUNTANTS To the Partners of LIF: We have audited the accompanying consolidated financial statements and consolidated financial statement schedule of LIF and subsidiaries listed in the index on page F-1 of this Form 10-K as of December 31, 1997 and 1996, and the related consolidated statements of operations, partners' equity and cash flows for each of the three years in the period ended December 31, 1997. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards required 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 LIF and subsidiaries as of December 31, 1997 and 1996, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1997, in conformity with generally accepted accounting principles. In addition, in our opinion, the consolidated financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information required to be included therein. DALBY, WENDLAND & CO., P.C. Glenwood Springs, Colorado March 9, 1998 LIF CONSOLIDATED BALANCE SHEETS, DECEMBER 31, 1997 AND 1996 (In thousands except for Partnership units)
1997 1996 ASSETS INVESTMENT IN REAL ESTATE: Rental property $10,327 $11,523 Accumulated depreciation (2,607) (2,282) Rental property - net 7,720 9,241 CASH AND CASH EQUIVALENTS (including interest bearing deposits of $434 in 1997 and $282 in 1996) 570 388 OTHER ASSETS: Accounts receivable 49 9 Deferred loan costs, net of accumulated amortization of $212 in 1997 and $174 in 1996 84 122 Prepaid expenses 19 29 Notes receivables 1,851 0 Total other assets 2,003 160 TOTAL $10,293 $ 9,789 LIABILITIES AND PARTNERS' EQUITY LIABILITIES: Notes payable $ 7,679 $ 7,960 Accounts payable 21 29 Liability for future improvements 828 0 Other liabilities 217 194 Deferred gain on real estate 69 0 Total liabilities 8,814 8,183 PARTNERS' EQUITY Limited Partners 1,632 1,759 General Partners (153) (153) TOTAL $10,293 $ 9,789 Equity Units Authorized - Limited Partners 12,820 12,820 - General Partners 0 0 Equity Units Outstanding - Limited Partners 12,820 12,820 - General Partners 0 0 The accompanying notes are an integral part of the consolidated financial statements.
LIF CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 (In thousands except for Partnership units)
1997 1996 1995 REVENUES: Rental $1,729 $1,483 $1,542 Interest 52 34 25 Total revenues $1,781 1,517 1,567 EXPENSES: Interest 662 533 482 Operating 666 595 643 Depreciation and amortization 386 343 307 General and administrative 194 218 187 Total expenses 1,908 1,689 1,619 Gain from sale of real estate 0 36 0 NET INCOME (LOSS) FROM OPERATIONS $ (127) $ (136) $ (52) Net income (loss) - Limited Partners $ (127) $ (136) $ (52) Net income (loss) - General Partners 0 0 0 NET INCOME (LOSS) PER PARTNERSHIP UNIT Limited Partners (10) (11) (4) General Partners 0 0 0 The accompanying notes are an integral part of the consolidated financial statements.
LIF CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 (In thousands except for Partnership units)
LIMITED PARTNERS NUMBER OF GENERAL TOTAL PARTNERSHIP PARTNER PARTNERS' UNITS AMOUNT AMOUNT EQUITY BALANCE, JANUARY 1, 1995 12,820 $2,524 $(122) $2,402 Net loss - 1995 (52) 0 (52) Distribution - 1995 (385) (41) (426) Contributions - 1995 0 5 5 BALANCE, DECEMBER 31, 1995 12,820 2,087 (158) 1,929 Net loss - 1996 (136) 0 (136) Distribution - 1996 (192) (22) (214) Contributions - 1996 0 27 27 BALANCE, DECEMBER 31, 1996 12,820 1,759 (153) 1,606 Net loss - 1997 (127) 0 (127) BALANCE, DECEMBER 31, 1997 12,820 $1,632 $(153) $1,479 The accompanying notes are an integral part of the consolidated financial statements.
LIF CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 (In thousands except for Partnership units)
1997 1996 1995 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ (127) $ (136) $ (52) (Gain) loss on sale of property (36) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 389 343 267 Changes in operating assets and liabilities: Decrease (increase) in accounts receivable (40) 6 (15) Decrease (increase) in prepaid expenses and deposits 10 (12) (2) (Decrease) increase in accounts payable 28 (51) 64 (Decrease) increase in other liabilities (13) 24 (50) Net cash provided by operating activities 247 138 212 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (584) (825) (868) Sale of investment property 800 208 0 Investment in short-term investments 0 99 99 Net cash provided (used in) investing activities 216 (518) (769) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from financing 0 563 5,707 (Distributions) contributions net 0 (187) (421) Payments on notes payable (281) (164) (4,401) Net cash provided by (used in) financing activities (281) 212 885 Increase (decrease) in cash and cash equivalents 182 (168) 328 Cash and cash equivalents at beginning of year 388 556 228 Cash and cash equivalents at end of year $ 570 $ 388 $ 556 The accompanying notes are an integral part of the consolidated financial statements.
LIF NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands except for Partnership units) 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization - LIF (the "Partnership") is a limited partnership organized under the laws of the state of California for the purpose of investing in income properties and making short-term loan and capital contributions to operating entities formed to acquire or develop and operate one or more income producing real properties. The General Partner is Partners '85 (the "General Partner"), a California limited partnership, whose General Partner is Landsing Equities Corporation. LIF was formed in June 1984, and shall continue until December 31, 2034, unless sooner terminated. Investment In Real Estate Partnership - At December 31, 1997 and 1996, the Partnership was invested in Landsing Private Fund ("P-21"), a 99% owned real estate partnership. In 1997, Cattle Creek Development Partners (CCDP) was liquidated into the Partnership. For a portion of 1996, the Partnership was invested in Prince Creek Partners ("PCP") and Thompson Creek Partners ("TCP"). In 1996, the properties owned by these partnerships were sold and the partnerships terminated. During 1996, the Partnership invested into a new entity - Alpine Center Partners ("ACP"). The Partnership acquired rental real estate in Colorado in 1996. Consolidation of Investment in Real Estate Partnerships - For financial reporting purposes, the Partnership consolidates the operations of it's investment in real estate partnerships with that of the Partnership. All significant intercompany transactions and balances have been eliminated. Minority interest was insignificant at December 31, 1997 and 1996. Rental Property - Rental property is stated at cost. Depreciation is computed by the straight-line method over estimated useful lives ranging from five to forty years. Major additions and betterments are capitalized at cost, while maintenance and repairs which do not improve or extend the life of the respective assets are expensed currently. When assets are retired or otherwise disposed of, the costs and related accumulated depreciation are removed from the accounts, and any gain or loss on disposal is included in the results of operations. Deferred Loan Costs - Loan fees are deferred and amortized over the life of the related note payable. Cash and Cash Equivalents - The Partnership considers all highly liquid investments with a maturity of three months or less at the time of purchase to be cash equivalents. Short-Term Investments - The Partnership invests in short-term federally insured certificates of deposits which mature on a date in excess of three months from the date of purchase. The cost of these investments approximates market value. Income Taxes - No provision for federal or state income taxes has been made in the consolidated financial statements because these taxes are the obligation of the partners. Net Income (Loss) Per Partnership Unit - Per Partnership Unit" amounts are based on weighted average units outstanding of 12,820 in 1997, 1996 and 1995, after giving effect to net income (loss) allocated to the General Partner of $0 in 1997, $0 in 1996, and $0 in 1995. Cash distributions of $15 per unit were paid to holders in 1996. No cash distributions were paid in 1997. The General Partner has declared a cash distribution of $15 per unit to holders of record as of February 28, 1998, to be paid in March 1998. Concentrations of Credit Risk - The Partnership's financial instruments that are exposed to concentrations of credit risk consist primarily of its cash and cash equivalents. The Partnership's cash and cash equivalents are in high-quality institutions with high credit ratings. This investment policy limits the Partnership's exposure to concentrations of credit risk. Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Impairment of Long-Lived Assets - The Partnership adopted Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to be Disposed Of" during 1996. SFAS No. 121 requires that long-lived assets and certain identifiable intangibles to be held and used or disposed of by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. During 1997 and 1996, the Partnership determined that no impairment loss need be recognized for applicable assets of continuing operations. Accounting Pronouncements - In June 1996, the Financial Accounting Standards Board issued Statement No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities" (SFAS No.125). This Statement is effective for transactions occurring after December 31, 1996. However, transactions such as securities lending, repurchase agreements, dollar rolls, and similar secured financing arrangements are not subject to the provisions of SFAS No. 125 until January 1, 1998. The standard provides that, following a transfer of financial assets, an entity is to recognize the financial and servicing assets it controls and the liabilities it has incurred, derecognize financial assets when control has been surrendered and derecognize liabilities when extinguished. The adoption of SFAS No. 125 had no impact on the Partnership's consolidated financial statements. The impact of the delayed provisions is also not expected to be material. In June 1997, the FASB issued Statement No. 130, "Reporting Comprehensive Income" (SFAS No. 130) and Statement No. 131, "Disclosures about Segments of an Enterprise and Related Information" (SFAS No. 131). Each of the new statements is effective for periods beginning after December 15, 1997, and requires that certain additional information be reported in the financial statements and related notes. The Partnership will adopt these in 1998 but does not expect an impact on its 1998 consolidated financial statements. Year 2000 - The Partnership is aware of the Year 2000 conversion issue. It is Management's assertion that the current accounting system utilized by the Partnership has the capability to accommodate the Year 2000 issue. Reclassifications - certain amounts in the 1996 financial statements have been reclassified to conform to the 1997 presentation. 2. RELATED PARTY TRANSACTIONS The Partnership has entered into agreements with Pacific Coast Capital. Advisory services for investment management, general and administrative and property management are provided by Pacific Coast Capital. The General Partner is an affiliate of Pacific Coast Capital. The related party transactions delineated in the Partnership Agreement with affiliates of the General Partner are as follows: 1997 1996 1995 General and Administrative Support Fees $ 103 $ 103 $ 103 Property Management $ 36 $ 25 $ 28 Accounts Receivable $ 17 $ 0 $ 0 During 1997 the Partnership had a sale transaction with the President of the General Partner and another entity. (See Note 3) 3. NOTES RECEIVABLE At September 30, 1997, Alpine Center Partnership (ACP) sold 40.2% and 45.9%, respectively, of the Alpine Center Building to Gary K. Barr, president of the general partner of LIF, and to Open World Investors, Ltd., whose general partner is Gary K. Barr. Open World Investors, Ltd. is also managed by PCC. These sales were made for cash and notes receivable. In 1996, ACP sold 11.94% of the Alpine Center Building to an unrelated third party for cash. The notes receivable generated from the sale to Barr and Open World Investors, Ltd., were $864 and $987, respectively. The terms of the notes receivable are the same as the financing terms ACP has with the bank and LIF on loans secured by the Alpine Center Building. ACP received no payments on these notes receivable as of December 31, 1997. The sales agreements stipulate that each buyer assume debt that ACP has related to the Alpine Center Building up to their respective percentage ownership except for the sale to the unrelated third party, whose debt assumption was capped at $256. At the dates of the sales, the Alpine Center Building consisted of land, one existing commercial building and one commercial building (Phase II) planned for construction after 1997. The liability for future improvements at December 31, 1997 if $828 represents the estimated future costs of constructing Phase II. Also, the gain on the sale of the Alpine Center Building is deferred at December 31, 1997. 4. RENTAL PROPERTY Rental property consists of the following:
1997 1996 Land $ 1,520 $ 1,922 Building and improvements 8,807 9,676 Total $10,327 $11,598 Accumulated depreciation (2,607) (2,282) $ 7,720 $ 9,241
Depreciation expense was $325 and $304 for the years ended December 31, 1997 and 1996, respectively. The residential leases are generally for a term of one year or less or are on a month-to-month basis. Retail leases range from one to five years in length. 5. NOTES PAYABLE
1997 1996 First note payable bears interest at 8%, matures September 1, 2000, and is collateralized by Whistler Point Apartments. The note requires monthly payments of principal and interest of $42 per month. In addition the note is guaranteed by the Landsing Corporation. $5,301 $5,373 First note payable collateralized by the Valley View Business Park, with an interest rate of 9.00%, and monthly payments of $11, matures on December 10, 1998. 1,035 1,068 Second note payable collateralized by the Valley View Business Park, with an interest rate of 8.5% and monthly payments of $2, matures on August 28, 2004. 162 199 First note payable collateralized by 701 Cooper commercial building, with an interest rate of 9.99% and monthly payments of $3, matures on October 7, 2001. 319 324 First note payable collateralized by Alpine Center, with an interest rate of 8.75% and monthly payments of $9, matures on June 3, 1998. 862 996 TOTAL $7,679 $7,960
The Partnership paid interest of $658 in 1997, $533 in 1996 and $482 in 1995. Principal payments required in future years are as follows: 1998 $ 2,463 1999 104 2000 5,091 2001 10 2002 11 Total $ 7,679 6. RENTAL PROPERTIES UNDER OPERATING LEASES Minimum future rents from rental properties under operating leases having initial or remaining noncancelable lease terms in excess of one year at December 31, 1997, are as follows: 1998 $ 253 1999 208 2000 197 2001 166 2002 25 Total $ 849 Annual rents at Whistler Point Apartments are not included since the leases are generally less than one year. Whistler Point Apartments average annual rents collected from 1995 to 1997 were $1,305 per year. 7. RECONCILIATION TO INCOME TAX BASIS OF ACCOUNTING The difference at December 31, 1997, 1996 and 1995, between the basis of accounting used in the accompanying consolidated financial statements and the income tax basis used to file the Partnership's federal income tax return are as follows:
1997 1996 1995 Net income (loss) $ (127) $ (136) $ (52) Remove book (income) loss from partnership investments 93 96 (43) Difference in book vs. tax loss from partnerships 26 (175) (86) Net income (loss) - tax basis (8) (215) (181) Partners' equity 1,479 1,606 1,929 Remove equity in partnership investments (383) (453) Restatement of cumulative elimination (383) 0 0 Syndication costs 1,906 1,906 1,906 Liquation of Cattle Creek Partners (17) 0 0 Investment in partnerships (842) (978) (803) Partners' equity - tax basis 2,143 2,151 2,579
8. CONTINGENCIES In 1996, two tenants of the Valley View property initiated legal filings against the Partnership alleging disruption of business during the property's remodel. The case is currently scheduled for a jury trial. The Partnership's defense is being handled by their insurance carrier, who has retained a reservation of rights against the Partnership. While it is not feasible to predict the final outcome of this proceeding, an estimate of potential loss is up to $96. Management does not believe the outcome will result in a materially adverse effect on the Partnership's financial position, results of operations or liquidity. 9. FAIR VALUE OF FINANCIAL INSTRUMENTS Fair value is the amount at which a financial instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation, and is best evidenced by a quoted market price, if one exists. Fair value estimates are made as of a specific point in time based on the characteristics of the financial instruments and relevant market information. Where available, quoted market prices are used. In other cases, fair values are based on estimates using present value or other valuation techniques. These techniques involve uncertainties and are significantly affected by the assumptions used and judgments made regarding risk characteristics of various financial instruments, discount rates, estimates of future cash flows, future expected loss experience and other factors. Changes in assumptions could significantly affect these estimates and the resulting fair values. Derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in an immediate sale of the instrument. Also, because of differences in methodologies and assumptions used to estimate fair values, the Partnership's fair values should not be compared to those of other partnerships. Fair value estimates are based on existing financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Accordingly, the aggregate fair value amounts presented do not purport to represent the underlying market of the Partnership. Assets for Which Fair Value Approximates Carrying Value - The fair value of certain financial assets carried at cost, including cash and cash equivalents and accounts receivable are considered to approximate their respective carrying values due to their short-term nature and negligible credit losses. Liabilities for Which Fair Value Approximates Carrying Value - The fair value of accounts payable, accrued liabilities and accrued interest payable is considered to approximate their respective book values due to their short term nature. Notes Payable - The valuation of notes payable with floating rates is estimated to be the same as carrying value. Fair value of notes payable with fixed rates is estimated based on quoted market prices for similar issues. At December 31, 1997 and 1996, fair value of notes payable approximates carrying value. 10. SUBSEQUENT EVENTS The Partnership has declared a cash dividend of $15 per unit to unit holders as of February 28, 1998 for distribution in March, 1998. SCHEDULE III LIF (A California limited partnership) REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1997 (In thousands)
LIFE ON RESERVE WHICH COST OF FOR DATE OF DEPRECIA- DESCRIP- ENCUM- INITIAL IMPROVE- DEPRECIA- CONSTRUCT- DATE TION IS TION BRANCES COST MENTS TOTAL TION TION ACQUIRED COMPUTED Whistler Point Apartments Boise, Idaho $5,301 $7,298 $ 902 $ 8,200 $2,453 N/A 12/23/85 40 years Valley View Business Park Glenwood Springs, Colorado 1,197 938 809 1,747 130 N/A 08/28/94 40 years 701 Cooper-Commercial Glenwood Springs, Colorado 319 320 1 321 23 N/A 06/30/94 40 years Alpine Center Bldg. Carbondale, Colorado 1,094 43 16 59 1 N/A 06/03/96 40 years $7,911 $8,599 $1,728 $10,327 $2,607
SCHEDULE III LIF REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1997 (In thousands) NOTES: (1) The Partnership's policy is to invest in income producing real properties and make short-term loans and capital contributions to operating entities formed to acquire or develop and operate one or more income producing real properties. Costs incurred before completion of the development are included in building basis. Costs incurred after completion of the development projects and costs incurred subsequent to the purchase of completed projects are included as improvements. (2) Depreciation is computed by the straight-line method on lives of five to forty years. (3) ACP has sold 98.04% of the Alpine Center Building. Approximately $1,083 of Debt will be assumed by the new owners of the building. E X H I B I T I N D E X Exhibit Number in Accordance with 601 of Regulation S-K Exhibit Description 3.1 Amended and Restated Certificate and Agreement of Limited Partnership of LIF, a California limited partnership, filed as Exhibit 3 to Partnership's Registration Statement No. 2-94509 on Form S-11, as amended, is incorporated herein by reference. 3.2 Assignment Agreement, filed as Exhibit 10.1 to Partnership's Registration Statement No. 2-94509 on Form S-11, as amended, is incorporated herein by reference. 10.1 Agreement of Limited Partnership for Cattle Creek Development Partners, Ltd. (Incorporated by reference to Form 8-K dated August 31, 1994) 10.2 Promissory Note to LIF. (Incorporated by reference to Form 8-K dated August 31, 1994) 10.3 Bill of Sale, along with the Closing and Settlement Agreement for the acquisition of Valley View Business Park. (Incorporation by reference to Form 8-K dated August 31, 1994) 10.4 Promissory Note to Alpine Bank, along with related Deed of Trust. (Incorporated by reference to Form 8-K dated August 31, 1994) 10.5 Promissory Note to Norman Overacker and Elaine Overacker, along with related Deed of Trust. (Incorporated by reference to Form 8-K dated August 31, 1994) 10.6 Closing and Settlement Agreement for acquisition of 701 Cooper Avenue Building. (Incorporated by reference to Form 8-K dated August 31, 1994) 10.7 Promissory Note to Alpine Bank, along with related Deed of Trust. (Incorporated by reference to Form 8-K dated August 31, 1994) EX-27 2
5 12-MOS DEC-31-1997 DEC-31-1997 570 0 49 0 0 84 10327 2607 10293 1066 0 0 0 0 1479 10293 0 1781 0 0 1246 0 622 0 0 0 0 0 0 (127) 0 0
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