Investment Properties and Properties Held For Sale

12 Months Ended

Dec. 31, 2012

Investment Properties and Property Held for Sale [Abstract]

INVESTMENT PROPERTIES and PROPERTIES 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, 2012, the Partnership owned twelve fully constructed fast-food restaurant facilities. 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 twelve properties are located in a total of five 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, $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. The sale was closed on October 22, 2012, resulting in net cash proceeds of $293,000, after third party commissions and other selling expenses, which is greater than the Property’s estimated fair value of $150,000 as of September 30, 2012. The carrying amount of the property was increased by $142,747 during the fourth quarter of 2012 to reflect the net proceeds of the sale.

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

On November 30, 2010, the County of Charleston (the “County”) 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. The proposed land purchase is for “Right of Way” for planned road improvements. Unfortunately, the plan provides for the relocation of ingress and egress that could make the operations of the Wendy’s restaurant uneconomic.

In October of 2011, the Partnership received Notice (“Condemnation Notice”) that the County filed condemnation proceedings on October 12, 2011, which in effect permits the County 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 County deposited the Initial Offer of $177,000 with the Charleston County Clerk of Court as is required under South Carolina law. 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’s position that the $177,000 reflects just compensation for the taking of the property. By and through respective legal counsel, the Partnership and the lessee, Wendcharles I, each filed a Notice of Court Appearance (“Notice of Appearance”) and requested a jury trial in October. In addition, the Partnership and the lessee served one set of joint initial discovery requests (“Interrogatories” and “Requests for Production”) with the County requesting information about and access to up-to-date project plans and any and all other information pertaining to this matter. As the Partnership continues to dispute the Initial Offer as fair value of the land acquisition, mediation between the Partnership and the County was scheduled for February 1, 2013. The County was to have provided an updated appraisal of the taking prior to the mediation date to incorporate the value impact of eliminating one of the two access drives among other unique impacts not previously addressed in the initial appraisal. However, the appraisal was not completed and the February 1, 2013 mediation was cancelled. Mediation was subsequently held on March 15, 2013 with no settlement achieved. The jury trial date is set for the week of March 25, 2013. Our counsel has advised that it is unlikely the trial will occur as scheduled. 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 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.

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, 2012, 2011 and 2010, the Partnership recognized income (loss) from discontinued operations of approximately $107,000, ($478,000), $55,000, respectively. The 2012, 2011 and 2010 income (loss) 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 2012 income from discontinued operations includes the fiscal year 2012 property impairment write up of $142,747 related to the sale of the Vacant Phoenix, AZ property. 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 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 components of property held for sale in the balance sheets as of December 31, 2012 and 2011 are outlined below:

	December 31,		December 31,
	2012		2011
Balance Sheet:
Land	$	33,991	$	157,360
Buildings, net		0		26,631
Rents and other receivables		0		686
Utilities security deposit		0		9,260
Prepaid insurance		0		1,593
Accounts payable and accrued expenses		0		(2,295	)
Property tax payable		0		(7,571	)
Properties held for sale	$	33,991	$	185,664

The components of discontinued operations included in the statements of income for the years ended December 31, 2012, 2011 and 2010 are outlined below:

	December 31,			December 31,			December 31,
	2012			2011			2010
Revenues
Rental Income	$	0		$	70,417		$	106,510
Other Income		2,500			1,204			0
Total Revenues		2,500			71,621			106,510
Expenses
Insurance		2,555			1,183			505
General and Administrative		0			659			946
Professional services		2,060			3,632			14,486
Property tax expense		12,546			9,985			5,035
Maintenance expense		15,745			10,012			4,162
Property impairment write-(up) down		(142,747	)		494,822			0
Depreciation		0			14,361			22,946
Amortization		0			10,380			6,990
Other expenses		4,850			3,850			3,506
Total (Income) Expenses		(104,991	)		548,884			58,576
Net (Income) Loss from Rental Operations	($	107,491	)	$	477,263		($	47,934	)
Net (Loss) Gain on Sale of Properties		0			(1,227	)		6,562
Net Income (Loss) from Discontinued Operations	$	107,491		($	478,490	)	$	54,496