-----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, EK+Hy9CybFBLFnEfs4Pd1+018D/Q76tCAFHQnA/aSxE9egnpGqYlHWnB0AfGHW2r UBsdtWU+/WFK/9qZrOLpgQ== 0000757642-99-000003.txt : 19990405 0000757642-99-000003.hdr.sgml : 19990405 ACCESSION NUMBER: 0000757642-99-000003 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990402 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: 99586725 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, 1998 [ ] 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, 1998 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 Resigtrant'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 Schedules Included in the Form 10-K 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 and Alpine Center Partners ("ACP") which owns Notes receivables from the buyers of the Alpine Center Building. 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 its investments. 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, 1998 is as follows:
Financial Occupancy Average Net For the Physical Effective Rentable Year Ended Occupancy Rental Name & Location Type Sq. Ft. 12/31/98 At 12/31/98 Rate (1) (2) (3) Whistler Point Apt Residential 140,230 97% 98% $ 10 Boise, Idaho Valley View Business Center Glenwood Springs, CO Retail 20,750 90% 88% $ 13 701 Cooper Glenwood Springs, CO Commercial 2,937 0% 0% $ 0 (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, 1998.
Each of the Partnership's properties are subject to encumbrances. Reference is made to Note 6 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 a lawsuit filed against it by one tenant alleging loss of business during the re-development of CCDP's property. The case has been heard by a judge and a court ruling is pending. 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. An accrual for this loss has not been made as of December 31, 1998. See Note 9 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 1998. 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, 1999, is 889. 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. A cash distribution of $15 per unit, to unit holders of record on February 28, 1998, was paid in March 1998. The General Partner has declared a cash distribution of $250 per unit to unit holders of record on February 28, 1999, to be paid in April 1999. ITEM 6. SELECTED FINANCIAL DATA (In thousands, except per unit amount)
. . . . . . .DECEMBER 31 . . . . . . . 1998 1997 1996 1995 1994 Total Revenues $ 1,661 $ 1,781 $1,517 $1,567 $1,361 Net Income (Loss) (159) (127) (136) (52) 27 Net Income (Loss) Per Unit (1) (12) (10) (11) (4) 2 Total Assets 9,950 10,293 9,864 9,076 8,153 Long-term Obligations - Net 8,470 7,679 7,960 6,897 5,591 Cash Distributions-Limited Partners 192 0 192 385 385 Paid Per Unit (1) 15 0 15 30 30 (1) Based on a weighted average of 12,820 limited partnership units outstanding in 1998, 1997, 1996, 1995, and 1994.
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 Notes receivables from the buyers of the Alpine Center Building. 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, 1998, the Partnership's consolidated cash balance totaled $566,000. Cash not required for current operations is placed in federally insured bank accounts, 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. As of December 31, 1998, cash and cash equivalents totaled $566,000 versus $570,000 at December 31, 1997 for a net decrease of $4,000. 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, became 100% owned by LIF. On June 3, 1996, the Partnership made a Short-Term Loan in the principal amount of $550,000 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. On June 30, 1998, ACP sold its remaining 1.96% interest in the Alpine Center Building to Gary K. Barr for $59,000. ACP received cash proceeds of $17,000 and provided seller financing in the amount of $42,000. ACP's short-term note payable to LIF was paid off in June 1998. For financial reporting purposes, results of operations for P21, and ACP have been shown on a consolidated basis. RESULTS OF OPERATIONS Rental revenues were $1,635,000 in 1998, a decrease of $94,000 or 5% compared with 1997. Rental revenues were $1,729,000 in 1997, an increase of $246,000 or approximately 17% from 1996. The decline in rental revenues in 1998 versus 1997 was the result of the lack of lease revenue from the 701 Cooper Avenue property in 1998, which was leased for the entire year in 1997. 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 $712,000 in 1998, an increase of $46,000 or 7% from 1997. Operating expenses were $666,000 in 1997, an increase of $71,000 or 12% from 1996. 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 increase in operating expenses in 1998 was the result of writing off accounts receivable. Maintenance and repairs decreased 9%, and general and administrative costs decreased 5%. Other operating costs remained constant with 1997 levels. Net operating income of properties (rental revenue less operating expenses) was $922,000 in 1998, a decrease of $141,000 or 14% from 1997. Management believes net operating income is the best indication of the properties' performance. Interest income decreased 50% from $52,000 in 1997 to $26,000 in 1998. The decrease was due to the decrease in the Partnership's short-term investments and cash equivalents. Interest expense decreased $104,000 from 1997 to 1998. The decrease was due to lower average outstanding loan balances in 1998. Interest income and interest expense on loans by and between LIF and its investments, ACP and CCDP, were eliminated in the consolidation of the Company's financial statements. Entity level general and administrative expenses, exclusive of that at the property level, increased $3,000 in 1998 compared to 1997. Portfolio management fees remained unchanged. Net loss for 1998 was $159,000. This includes gain from property sales of $22,000. Net loss from operations in 1998 was $181,000. The net loss for 1997 was $127,000, an improvement of $9,000 from 1996's loss. PROPERTY OPERATIONS Residential Property - The remaining residential property, Whistler Point Apartments, operated at a profit in 1998 in spite of the very competitive market in which it is located. The Partnership continued to make capital improvements to the property to allow it to compete effectively with new competition. 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 property was placed on the market for sale in 1998, and was under sale contract as of 12/31/98. The property was sold on 2/26/99. Commercial Property - The 701 Cooper Building was not occupied during 1998. The Valley View Business Center had stable occupancy during 1998. Valley View Business Center and 701 Cooper are currently listed for sale. The Properties are valued at the lower of cost or market. OCCUPANCY Occupancy at the Partnership's properties remained high in 1998, with the exception of the 701 Cooper Building. As of December 31, 1998, occupancy at Whistler Point Apartments was 97% and the Valley View Business Center ended the year at 90% occupancy. DISTRIBUTIONS The General Partner declared a cash distribution of $15 per unit to unit holders of record on February 28, 1998, that was paid in March 1998. The General Partner has declared a cash distribution of $250 per unit to unit holders of record on February 28, 1999, to be paid in April 1999. 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 1999. 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 served on the Board of Governors of the National Association of Real Estate Investment Trusts and on its Editorial Board. Mr. Barr has also 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 1998, Pacific Coast Capital received management fees of $112,000, which were determined based on expenses incurred in order to operate the Partnership. In addition, Pacific Coast Capital was paid $89,000 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 1998, the Partnership paid Pacific Coast Capital approximately $89,000 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 1998, the Partnership paid Pacific Coast Capital expense reimbursements of $112,000. For information concerning the agreements between the Partnership and the affiliates of The Landsing Corporation, see Note 3 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, 1998. 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 31, 1999 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 31, 1999 /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, 1998 and 1997 Consolidated Statements of Operations for the Years Ended December 31, 1998, 1997 and 1996 Consolidated Statements of Changes in Partners' Equity for the Years Ended December 31, 1998, 1997 and 1996 Consolidated Statements of Cash Flows for the Years Ended December 31, 1998, 1997 and 1996 Notes to Consolidated Financial Statements Supplemental Consolidated Financial Statement Schedule: Schedule III - Real Estate and Accumulated Depreciation for the Year Ended December 31, 1998 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, 1998 and 1997, and the related consolidated statements of operations, changes in partners' equity and cash flows for each of the three years in the period ended December 31, 1998. 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, 1998 and 1997, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1998, 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 February 28, 1999 LIF CONSOLIDATED BALANCE SHEETS, DECEMBER 31, 1998 AND 1997 (In thousands except for Partnership Units)
1998 1997 ASSETS INVESTMENT IN REAL ESTATE: Rental property $10,370 $10,327 Accumulated depreciation (2,958) (2,607) Rental property - net 7,412 7,720 CASH AND CASH EQUIVALENTS (including interest bearing deposits of $562 in 1998 and $434 in 1997) 566 570 OTHER ASSETS: Accounts receivable - net 84 49 Deferred loan costs, net of accumulated amortization of $242 in 1998 and $212 in 1997 72 84 Prepaid expenses 23 19 Notes receivables 1,793 1,851 Total other assets 1,972 2,003 TOTAL $ 9,950 $10,293 LIABILITIES AND PARTNERS' EQUITY LIABILITIES: Notes payable $ 8,470 $ 7,679 Accounts payable 24 21 Liability for future improvements 83 828 Other liabilities 267 217 Deferred gain on real estate 0 69 Total liabilities 8,844 8,814 PARTNERS' EQUITY Limited Partners 1,281 1,632 General Partners (175) (153) TOTAL $ 9,950 $10,293 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, 1998, 1997 AND 1996 (In thousands except Partnership units)
1998 1997 1996 REVENUES: Rental $1,635 $1,729 $1,483 Interest 26 52 34 Total revenues 1,661 1,781 1,517 EXPENSES: Interest 558 662 533 Operating 712 666 595 Depreciation and amortization 382 386 343 General and administrative 190 194 218 Total expenses 1,842 1,908 1,689 Gain from sale of real estate 22 0 36 NET LOSS $ (159) $ (127) $ (136) Net loss - Limited Partners $ (159) $ (127) $ (136) Net income (loss) - General Partners $ 0 $ 0 $ 0 NET LOSS PER PARTNERSHIP UNIT Limited Partners $ (12) $ (10) $ (11) 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, 1998, 1997 AND 1996 (In thousands, except Partnership units)
LIMITED PARTNERS NUMBER OF GENERAL TOTAL PARTNERSHIP PARTNER PARTNERS' UNITS AMOUNT AMOUNT EQUITY BALANCE, JANUARY 1, 1996 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 Net loss December 31, 1998 $ (159) 0 (159) Distribution - 1998 (192) (22) (214) BALANCE, DECEMBER 31, 1998 12,820 $1,281 $(175) $1,106 The accompanying notes are an integral part of the consolidated financial statements.
LIF CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (In thousands)
1998 1997 1996 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (159) $ (127) $ (136) Gain on sale of property (22) 0 (36) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 382 389 343 Changes in operating assets and liabilities: Decrease (increase) in accounts receivable (35) (40) 6 Decrease (increase) in prepaid expenses and deposits (4) 10 (12) (Increase) in deferred costs (19) 0 0 (Decrease) increase in accounts payable 86 28 (51) (Decrease) increase in other liabilities (33) (13) 24 Net cash provided by operating activities 196 247 138 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (102) (584) (825) Proceeds from sale of investment property 17 800 208 Investment in short-term investments 0 0 99 Payments on notes receivable 100 0 0 Net cash provided by (used in) investing activities 15 216 (518) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from financing 137 0 563 Distributions (214) 0 (187) Payments on notes payable (138) (281) (164) Net cash provided by (used in) financing activities (215) (281) 212 Increase (decrease) in cash and cash equivalents (4) 182 (168) Cash and cash equivalents at beginning of year 570 388 556 Cash and cash equivalents at end of year $ 566 $ 570 $ 388 The accompanying notes are an integral part of the consolidated financial statements.
LIF NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands except Partnership unit amounts) 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, 1998 and 1997, 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. CCDP was originally formed in 1994. 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 95% of a new entity - Alpine Center Partners ("ACP"). ACP 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, including notes payable/receivable and short-term loans/receivables, and balances have been eliminated. Minority interest was insignificant at December 31, 1998 and 1997. 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. Rental property held for sale is valued at lower of cost or market. 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, and note receivables. 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 approximate 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 - Net Income (Loss) per partnership unit is based on weighted average units outstanding of 12,820 in 1998, 1997 and 1996, after giving effect to net income (loss) allocated to the General Partner. Cash distributions of $15 per unit were paid to limited partnership unit holders in 1998. No cash distributions were paid in 1997. 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 maintained in various accounts in FDIC insured institutions. This investment policy limits the Partnership's exposure to concentrations of credit risk. The note receivables outstanding are held by two related parties (see Note 4). Due to the related party nature of the receivables and the intention of the related parties to obtain permanent financing from a bank within the next six months, credit risk is considered minimal. 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 1998 and 1997, 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. Effective January 1, 1998, the Partnership adopted SFAS No. 130, "Reporting Comprehensive Income." SFAS No. 130 requires that an enterprise (a) classify items of other comprehensive income by their nature in a financial statement and (b) display the accumulated balance of other comprehensive income separately from retained earnings and additional paid-in capital in the equity section of a statement of financial condition. However, the Partnership had no items of comprehensive income at December 31, 1998. Effective January 1, 1998, the Partnership adopted SFAS No. 131, "Disclosures About Segments Of An Enterprise And Related Information." However, the Partnership does not have any reportable segments at December 31, 1998. 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. Management has also considered outside parties the Partnership conducts business with. It is their belief that these outside parties are already Year 2000 compliant or will be by mid-1999. Management does not believe there will be a significant impact on the Partnership's operations. Fair Value of Financial Instruments - The fair value of certain financial assets carried at cost, including cash and cash equivalents and accounts receivable, are considered to approximate their respective Fair value. The fair value of accrued liabilities is considered to approximate their respective book values due to their short-term nature. The valuation of notes receivable and 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, 1998 and 1997, fair value of notes payable approximates carrying value. Reclassifications - certain amounts in the 1997 financial statements have been reclassified to conform to the 1998 presentation. 2. ACCOUNTS RECEIVABLE Accounts receivable consisted of the following at December 31, 1998: Tenant receivables $138 Allowance for doubtful accounts (54) Net account receivables $ 84
3. 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:
1998 1997 1996 General and Administrative Support Fees $ 112 $ 103 $ 103 Property Management $ 89 $ 36 $ 25 Accounts Receivable $ 0 $ 17 $ 0
In addition, expenses related to the sale of Whistler Point in the amount of $13 were paid to Pacific Coast Capital in 1998. The Partnership had receivables of $30 from Partners 85, the general partner, $16 from Open World Investors, Ltd., whose general partner is Gary K. Barr, $10 from Anne Cooke, a minority owner of ACP, and $5 from Crystal River Enterprises, an entity of common control, for the year ended December 31, 1998. During 1998 and 1997, the Partnership had a sale transaction with the President of the General Partner and another entity. (See Note 4). 4. NOTES RECEIVABLE On June 30, 1998, Alpine Center Partnership sold its 1.96% investment in the Alpine Center Building to Gary K. Barr. This sale transaction included the exchange of cash and a note 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 $806 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. The notes receivable from these sales are directly in proportion to the notes payable to Alpine Bank and Barr. There is no equity built in to these notes. When these notes payable are re-financed in the name of the new owners, these notes receivable will be eliminated, as will the notes payable that they offset. See discussion of credit risk at Note 1. 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. Management does not expect the debt to be assumed by the unrelated third party to exceed this amount. 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 of $828 represents the estimated future costs of constructing Phase II. The gain on the sale of the Alpine Center Building was deferred at December 31, 1997. During 1998, the Phase II portion of the building construction of the Alpine Center was completed. The Partnership realized a net gain of $22 through the completion of Phase II and the sale of the Alpine Center Building. 5. RENTAL PROPERTY Rental property consists of the following at December 31:
1998 1997 1996 Land $ 1,512 $ 1,520 $ 1,922 Building and improvements 8,858 8,807 9,601 10,370 10,327 11,523 Accumulated depreciation (2,958) (2,607) (2,282) $ 7,412 $ 7,720 $ 9,241
Depreciation expense was $351, $325 and $304 for the years ended December 31, 1998, 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. 6. NOTES PAYABLE Notes payable consists of the following at December 31:
1998 1997 First note payable bears interest at 8%, matures September, 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. $5,207 $5,301 First note payable collateralized by the Valley View Business Park, with an interest rate of 9.00%, and monthly payments of $11, matures December, 2000. 997 1,035 Second note payable collateralized by the Valley View Business Park, with an interest rate of 8.5% and monthly payments of $2, matures August, 2004. 160 162 First note payable collateralized by 701 Cooper commercial building, with an interest rate of 9.99% and monthly payments of $3, matures October, 2001. 313 319 First note payable collateralized by Alpine Center, with an interest rate of 8.75% and monthly payments of $9, matures June, 1999. 1,600 862 Second note payable collateralized by Alpine Center, with an interest rate of 8.25%, and monthly payments interest only, matures June, 1999 193 0 TOTAL $8,470 $7,679
The Partnership paid interest of $558 in 1998, $658 in 1997, and $533 in 1996. Principal payments required in future years are as follows: 1999 $ 2,031 2000 5,984 2001 10 2002 11 2003 12 Thereafter 422 Total $ 8,470
7. 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, 1998, are as follows: 1999 $ 120 2000 114 2001 86 2002 3 2003 0 Total $ 323
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 1996 to 1998 were $1,345 per year. 8. RECONCILIATION TO INCOME TAX BASIS OF ACCOUNTING The difference at December 31, 1998, 1997 and 1996, 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:
Restated Restated 1998 1997 1996 Net loss $ (159) $ (127) $ (136) Remove book (income) loss from partnership investments (137) 93 96 Difference in book vs. tax loss from partnerships (195) 26 (175) Decrease from difference in basis and use of accelerated depreciation methods 12 0 0 Difference in sale of Alpine Center Building 82 0 0 Allowance for doubtful accounts 54 0 0 Other (3) 0 0 Net income (loss) - tax basis $ (346) $ (8) $ (215) Estimated cost to complete $ 82 $ 0 $ 0 Partners' equity 1,106 1,479 $ 1,606 Remove equity in partnership investments 0 0 (383) Restatement of cumulative elimination (383) (383) 0 Syndication costs 1,906 1,906 1,906 Liquidation of Cattle Creek Development Ptrs 0 29 0 Basis of Assets 1 0 0 Accumulated depreciation 37 0 0 Allowance for doubtful accounts 54 0 0 Investment in partnerships (1,220) (888) (978) Partners' equity - tax basis $ 1,583 $2,143 $2,151
9. CONTINGENCIES In 1996, one tenant of the Valley View property initiated legal filings against the Partnership alleging disruption of business during the property's remodel. The case has been heard by a judge and a court ruling is pending. 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, and no loss has been accrued as of December 31, 1998, 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. 10. SUBSEQUENT EVENTS The Partnership has declared a cash dividend of $250 per unit to unit holders as of February 28, 1999 for distribution in April, 1999. On February 26, 1999, the Partnership sold the Whistler Point Apartments for a cash sale price of $9,600 to an unrelated third party. As part of this sale, debt of $5,027 was retired and a gain of approximately $4,562 was recognized. SCHEDULE III LIF (A California limited partnership) REAL ESTATE AND ACCUMULATED DEPRECIATION - DECEMBER 31, 1998 (In thousands) [CAPTION] Initial Cost of Reserve for Description Encumbrances Cost Improvements Total Depreciation [S] [C] [C] [C] [C] [C] Whistler Point Apartments $5,207 $7,298 $ 981 $ 8,279 $2,744 Boise, Idaho Valley View Business Park 1,157 938 825 1,763 184 Glenwood Springs, CO 701 Cooper 313 320 8 328 30 Glenwood Springs, CO $6,677 $8,556 $1,814 $10,370 $2,958 [/TABLE] Life On Which Date Date Depreciation Description Constructed Acquired Is Computer Whistler Point Apartment N/A 12/23/85 40 years Boise, Idaho Valley View Business Park N/A 08/28/94 40 years Glenwood Springs, CO 701 Cooper N/A 06/30/94 40 years Description SCHEDULE III LIFREAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1998 (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. 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 ART. 5 FDS 1998 10-K
5 1000 12-MOS DEC-31-1998 DEC-31-1998 566 0 84 0 0 95 10,370 2,958 9,950 374 0 0 0 0 1,106 9,950 0 1,661 0 0 1,284 0 558 0 0 0 0 0 0 (159) 0 0
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