Investment Properties And Property Held For Sale

12 Months Ended

Dec. 31, 2011

Investment Properties And Property Held For Sale [Abstract]

Investment Properties And Property Held For Sale

3. INVESTMENT PROPERTIES and PROPERTY HELD FOR SALE:

The total cost of the Properties includes the original purchase price plus acquisition fees and other capitalized costs paid to an affiliate of the former general partners.

As of December 31, 2011, the Partnership owned thirteen fully constructed fast-food restaurants, which includes one vacant property in Phoenix, AZ that was reclassified to properties held for sale during the third quarter of 2011 (formerly operated as China Buffet). The twelve tenants are composed of the following: nine Wendy's restaurants, an Applebee's restaurant, a KFC restaurant, and a Daytona's All Sports Café ("Daytona's"). The thirteen properties are located in a total of six states.

In late September of 2011 Management executed an Agency and Marketing Agreement ("Marketing Agreement") with an unaffiliated Agent. The Marketing Agreement gave the Agent the exclusive right to sell the vacant Phoenix, AZ property and the Denny's, Phoenix, AZ property through auction, sealed bid, hybrid sealed bid, on-line bid or through private negotiations. The Marketing Agreement terminated upon the later of 30 days after the Live Outcry Auction date of October 18, 2011, or a closing or settlement, if applicable. A marketing fee of approximately $7,700 was paid to the Agent in September of 2011 for the purpose of advertising, marketing and promoting the properties to the buying public.

Formerly Owned Denny's, Phoenix, AZ Property

The Denny's, Phoenix, AZ property was reclassified to properties held for sale during September of 2011 due to the execution of the Marketing Agreement. The carrying amount of the property was reduced by $104,705, to its estimated fair value less estimated costs to sell of $445,000, during the third quarter of 2011. A contract to sell the Denny's, Phoenix, AZ property was executed at the October 18, 2011 auction by an unaffiliated party and the property was then sold in November of 2011 for the high bid price of $475,000.

Vacant Phoenix, AZ Property

The China Super Buffet restaurant ceased operations and vacated the Phoenix, AZ property in late June of 2011. Management regained possession of the property in July and lease obligation charges ceased as of June 30, 2011. The property was reclassified to properties held for sale during the third quarter of 2011 upon the execution of the Marketing Agreement. The vacant, Phoenix, AZ property did not sell at the October 18, 2011 auction; however, Management continued to market the property to potential buyers.

The carrying amount of the vacant Phoenix, AZ property was reduced by $390,117 during the fiscal year 2011, to its estimated fair value of $150,000. The net book value of the vacant, Phoenix, AZ property at December 31, 2011, classified as property held for sale in the condensed financial statements, was approximately $151,700, which included $123,369 related to land, $26,631 related to building, net of accumulated depreciation, $9,300 related to a security deposit, $700 related to rents and other receivables, $1,600 related to prepaid insurance, $2,300 related to accounts payable and accrued expenses and $7,600 related to property tax payable.

A contract ("Contract") to sell the vacant Phoenix, AZ property to an unaffiliated party was executed on February 14, 2012 for the sale price of $325,000. The potential buyer provided an earnest money deposit of $25,000, which is held by an independent escrow company. Per the Contract, closing is anticipated to occur prior to and up to 210 days out from the contract execution date. Closing costs are estimated to be approximately $30,000, which includes commissions totaling approximately $23,000 in the aggregate, which are anticipated to be paid to two unaffiliated brokers.

The $325,000 sales contract has various due diligence and feasibility periods, as well as additional extensions and Management has no measure of certainty that the Contract will close or if a specific and unique re-use of the now vacant property will materialize. Therefore, the $150,000 net book value for the vacant property at December 31, 2011, is its estimated fair value based on income capitalization calculations using historical capitalization rates (used by Management in relation to the property for annual Partnership Net Unit Valuations) applied to independently identified market rents, less known re-leasing costs such as estimated roof, parking lot and miscellaneous repairs, as well as leasing commissions. The estimated fair value is not necessarily what the Partnership will settle (sales price net of closing costs), within an actual arms length sales transaction of the vacant property.

Wendy's- 361 Highway 17 Bypass, Mt. Pleasant, SC Property

On November 30, 2010, the County of Charleston made a purchase offer ("Initial Offer") of approximately $177,000 to the Partnership in connection with an eminent domain (condemnation) land acquisition of approximately 5,000 square feet of the approximately 44,000 square feet of the Wendy's- Mt. Pleasant, SC ("Wendy's- Mt. Pleasant") property. In October of 2011, the Partnership received Notice ("Condemnation Notice") that the County of Charleston filed condemnation proceedings on October 12, 2011, which in effect permits the County of Charleston to take possession of approximately 5,000 square feet of the Wendy's- Mt. Pleasant property and to begin construction of the planned road improvements. The Partnership had until November 11, 2011, to reject the Initial Offer ("Tender of Payment") for the purchase of the property. The Partnership rejected the Tender of Payment; however, the Initial Offer is still valid during the period the Partnership disputes the County of Charleston's position that the $177,000 reflects just compensation for the taking of the property. Management will continue to actively work with legal counsel and Wendcharles I to facilitate a settlement with the County of Charleston and the re-engineering of the County's plans to preserve the viability of the site for Wendy's-Mt. Pleasant's operational use. See Note 13 Subsequent Events for further information. The net book value of the land to be purchased is $33,991 and was reclassified to a property held for sale during the fourth quarter of 2010.

Formerly Owned and Vacant Park Forest, IL Property

The Partnership had been unsuccessful in finding a new tenant for the vacant Park Forest property, and on December 31, 2009, the carrying value of this property had been written down to $0. The property was then sold to an unaffiliated party in December of 2010 for a gross sales price of $7,000.

Discontinued Operations

During the fiscal years ended December 31, 2011, 2010 and 2009, the Partnership recognized (loss) income from discontinued operations of approximately $(478,000), $55,000 and $81,000, respectively. The 2011, 2010 and 2009 (loss) income from discontinued operations was attributable to the third quarter of 2011 reclassifications of the vacant Phoenix, AZ property and the Denny's, Phoenix, AZ property to properties held for sale upon the execution of Agency and Marketing Agreement with an unaffiliated party in September of 2011 to sell both of the properties. The 2011 loss from discontinued operations includes the fiscal year 2011 property impairment write downs of $390,117 related to the vacant Phoenix, AZ property and $104,705 related to the Denny's, Phoenix, AZ property, and the 2011 loss of approximately $1,000 on the fourth quarter of 2011 sale of the Denny's, Phoenix, AZ property. The 2010 and 2009 income from discontinued operations was attributable to the fourth Quarter of 2010 reclassification of a small strip of the Wendy's- Mt. Pleasant land to a property held for sale due to the pending eminent domain acquisition of the land by the County of Charleston for Right of Way for planned road improvements and the third quarter of 2010 reclassification of the vacant Park Forest property to a property held for sale upon the execution of the Agency and Marketing Agreement in August. The 2010 income from discontinued operations includes the fourth quarter net gain of approximately $7,000 on the sale of the Park Forest property. The 2009 income from discontinued operations was also attributable to the third quarter of 2009 reclassification of the Panda Buffet property to a property held for sale (executed sales contract dated September 30, 2009). The 2009 income from discontinued operations includes the $50,000 fourth quarter property impairment write down of the vacant Park Forest, IL property, the fourth quarter net gain of approximately $29,000 on the sale of the Panda Buffet property, and the second quarter revenue collection of a $12,500 sales escrow deposit in relation to the termination of the Denny's property sales contract dated February 22, 2008.

The components of property held for sale in the balance sheets as of December 31, 2011 and 2010 are outlined below:

	December 31, 2011			December 31, 2010
Balance Sheet:
Land	$	157,360		$	33,991
Buildings, net		26,631			0
Rents and other receivables		686			0
Utilities security deposit		9,260
Prepaid insurance		1,593			0
Accounts payable and accrued expenses		(2,295	)		0
Property tax payable		(7,571	)		0
Properties held for sale	$	185,664		$	33,991

The components of discontinued operations included in the statements of income for the years ended December 31, 2011, 2010 and 2009 are outlined below:

	December 31, 2011			December 31, 2010		December 31, 2009
Revenues
Rental Income	$	70,417		$	106,510	$	166,255
Other Income		1,204			0		12,500
Total Revenues		71,621			106,510		178,755
Expenses
Insurance		1,183			505		0
General and Administrative		659			946		919
Professional services		3,632			14,486		11,230
Write-off of uncollectible Receivables		0			0		2,013
Property tax expense		9,985			5,035		13,056
Maintenance expense		10,012			4,162		1,376
Property impairment write-downs		494,822			0		50,000
Depreciation		14,361			22,946		35,912
Amortization		10,380			6,990		8,660
Other expenses		3,850			3,506		3,267
Total Expenses		548,884			58,576		126,433
Net Loss (Income) from Rental Operations	$	(477,263	)	$	47,934	$	52,322
Net (Loss) Gain on Sale of Properties		(1,227	)		6,562		28,604
Net (Loss) Income from Discontinued Operations	$	(478,490	)	$	54,496	$	80,926