Investment Properties And Properties Held For Sale

3 Months Ended

Mar. 31, 2012

Investment Properties And Properties Held For Sale [Abstract]

Investment Properties And Properties Held For Sale

3. INVESTMENT PROPERTIES and PROPERTIES 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 March 31, 2012, the Partnership owned property leased to 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.

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 a Marketing Agreement on September 28, 2011 with an unaffiliated party. The vacant, Phoenix, AZ property did not sell at an 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 March 31, 2012, classified as property held for sale in the condensed financial statements, was approximately $156,000, which included $123,000 related to land, $27,000 related to building, net of accumulated depreciation, $9,000 related to a security deposit, $500 related to rents and other receivables, $1,000 related to prepaid insurance, $1,000 related to accounts payable and accrued expenses and $4,000 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 ("Deposit") of $25,000, which is held by an independent escrow company. Per the First Amendment to the Contract ("Amendment") dated April 23, 2012, a non-refundable feasibility 30-day extension fee of $2,500 was released from the $25,000 earnest money deposit ("Deposit") and paid to the Partnership. Per the Amendment, the potential Buyer must replenish the $2,500 to the Deposit prior to the expiration of the feasibility period, or the Buyer will be deemed to have terminated the Contract, in which event the Contract and the related Deposit shall be deemed cancelled as of the expiration of the Feasibility Date (May 22, 2012).

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 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 March 31, 2012, 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.

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. 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.

Discontinued Operations

During the three month period ended March 31, 2012 and 2011, the Partnership recognized (loss) income from discontinued operations of approximately $(13,000) and $24,000, respectively. The 2012 and 2011 (loss) income from discontinued operations was attributable to the third quarter of 2011 reclassifications of the vacant Phoenix, AZ property and the formerly owned Denny's, Phoenix, AZ property (sold in November of 2011) to properties held for sale upon the execution of an Agency and Marketing Agreement with an unaffiliated party in September of 2011 to sell both of the properties.

The components of properties held for sale in the balance sheets as of March 31, 2012 and December 31, 2011 are outlined below:

	March 31, 2012			December 31, 2011
Balance Sheet:
Land	$	157,360		$	157,360
Buildings, net		26,631			26,631
Rents and other receivables		551			686
Utilities security deposit		9,260			9,260
Prepaid insurance		903			1,593
Accounts payable and accrued expenses		(828	)		(2,295	)
Property tax payable		(3,786	)		(7,571	)
Properties held for sale	$	190,091		$	185,664

The components of discontinued operations included in the condensed statement of income (loss) for the three month periods ended March 31, 2012 and 2011 are outlined below:

	Three Month Period ended March 31, 2012			Three Month Period ended March 31, 2011
	(Unaudited)			(Unaudited)
Statements of Income (Loss):
Revenues:
Rental income	$	0		$	32,049
Total Revenues		0			32,049
Expenses:
Insurance expense		690			0
Professional services		1,560			741
Property tax expense		3,786			0
Other property expenses		7,366			0
Depreciation		0			5,737
Amortization		0			1,747
Total Expenses		13,402			8,225
Net (Loss) Income from Discontinued Operations	$	(13,402	)	$	23,824