UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [FEE REQUIRED]
For the fiscal year ended June 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
Commission File Number: 0-7775
WESTLAND DEVELOPMENT CO., INC.
(Exact name of registrant as specified in its charter)
New Mexico 85-0165021
(State or other jurisdiction of (I.R.S. Employer
incorporation or other organization) Identification No.)
401 Coors Boulevard, N.W., Albuquerque, New Mexico, 87121
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 505-831-9600
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
No Par Value Common Stock
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 [__]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will 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-KSB
or any amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year: $5,348,609
State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of a specified date within the past 60
days.
On September 18, 1998, there were 716,608 No Par Value Common shares and 30,700
Class B shares owned by non-affiliates. The stock was sold on September 18, 1998
for $15 per share. Thus the aggregate market value of the voting stock held by
non-affiliates was $11,064,825.
The number of shares outstanding of each of the Registrant's classes of common
stock, as of September 18, 1998, was:
No Par Value Common: 716,608 shares.
Class A $1.00 Par Value: none.
Class B $1.00 Par Value: 86,100 shares.
DOCUMENTS INCORPORATED BY REFERENCE:
Proxy statement and Proxy for Annual Meeting of Shareholders for the
year ended June 30, 1998.
Annual Report to shareholders for the year ended June 30, 1998.
PART I
ITEM 1: DESCRIPTION OF BUSINESS
General Development of Business.
Westland Development Co., Inc., a New Mexico for-profit corporation
("Registrant"), is the successor to a community land grant corporation named
Town of Atrisco, which itself was a successor to a Spanish community land grant
named the Atrisco Land Grant. Information concerning the historical background
of these predecessor organizations and the conversion in 1967 from a community
land grant corporation into a business corporation can be found in the
Registrant's Form 10 and its Form 10-K for the fiscal year ended June 30, 1974.
With limited exceptions, only lineal descendants of the incorporators of the
Town of Atrisco may own shares of the Registrant's Common Stock.
The Registrant's executive offices are located in its own building at 401 Coors
Boulevard, N.W., Albuquerque, New Mexico, 87121, telephone (505) 831-9600, on
land which was originally part of the Atrisco Land Grant.
The Registrant is the owner of approximately 59,000 acres of land located on the
west side of Albuquerque, New Mexico. Most of its property is held for long term
investment and is leased for cattle grazing. The Registrant derives revenues
through commercial and land leases, partnerships formed for various development
projects, lot development sales and bulk land sales to other land developers.
During the past year, Albuquerque and Bernalillo County approved a 6,400 acre
master plan for development of those additional acres of the Registrant's land.
For the Registrant to begin developing or selling land within this planned area,
Albuquerque must make available the required utilities. It is anticipated that
the utilities will be extended over many years as an orderly system of
development occurs on the land.
As of September 15, 1998, approximately 245 acres of the Registrant's land
located on the west side of the City of Albuquerque, New Mexico which have been
segregated for development remain to be sold.
The Registrant believes that over the next few years it will enter into joint
ventures, land developments, ground leases, limited partnerships and, if
warranted by available capital, may begin the construction of residential,
industrial and commercial structures for lease or sale. The Registrant's long
term business philosophy is to enhance the value of the Registrant's land
through careful planning and development, while retaining ownership of a major
portion of the land in perpetuity and simultaneously increasing the value of the
Registrant's stock and to provide dividends for its shareholders, when
consistent with the Registrant's need for a sufficient cash flow to meet current
operating expenses.
Narrative Description of Business.
Over the past 16 years, the Registrant developed six master plans for the
development of certain of its properties and through implementation of those
plans, sold approximately 1,350 acres of its lands. Those master plans
encompassed approximately 600 to 1,000 acres and are identified as Atrisco Urban
Center and El Rancho Atrisco, Phases I through V. These lands, except for the
Phase V master plan which was abandoned due the introduction of the Petroglyph
National Monument, have now been substantially developed and sold. A master plan
(the "Westland Master Plan") encompassing approximately 6,400 acres for the area
between Unser and Paseo del Volcan has been approved by Albuquerque and
Bernalillo County. Discussions related to the introduction of utilities to the
area are ongoing at the time of this Report.
Oil and Gas and Grazing Leases.
Approximately 52,000 acres of the Registrant's land is not planned for
development and is leased to non-affiliated people for cattle grazing. The
leases provided rental income of approximately $16,000 in fiscal 1998. During
the year the Registrant agreed to certain rent abatements because of a prolonged
drought that severely limited the productive capacity of the land.
During the year the company that held an oil and gas lease to approximately
8,500 acres drilled an exploratory well which was not successful and then
abandoned the lease. No further interest in leasing the land has been made by
any significant company and it is not known whether there remains any
exploratory interest in the land.
The Registrant also owns and leases certain commercial buildings at an aggregate
annual rental of $686,000 (See "Revenue Producing Properties").
Development Properties.
As of June 30, 1998, the Registrant continued to own approximately 250 acres of
a total of 1,600 acres which it developed and sold over the last 16 years. The
Westland Master Plan was approved by Bernalillo County in 1997 and was approved
by the City of Albuquerque in May of 1998 (see discussion below). The effort of
the Registrant and its staff is being devoted to the implementation of the Plan
at the earliest possible date. A summary of Westland Master Plan is as follows:
Westland Master Plan.
The Registrant prepared a master development plan covering approximately 6,400
acres located north of Interstate 40 and south of the area designated for the
Petroglyph National Monument, west of Unser Boulevard. The Registrant and the
City of Albuquerque are currently negotiating the conditions through which the
City will begin introducing water and sewer utilities to the portions of land
that will be initially developed. At the present time, the City is asking that
the Registrant pay the cost of water utilities to zones 3 and 4W and sewer
utilities to about one quarter of the master planned area (an estimated total of
about $10,000,000), which the Registrant will recover from the City as lots are
sold and the city receives hook-up costs from the developers. If the Registrant
is required to pay those costs, it anticipates doing so through a combination of
borrowing and use of portions of its income. In addition, any water rights now
owned or subsequently acquired by the Registrant in the 6,400 acres of the
master planned area must be assigned to the City for only that portion of the
master planned area to which the City supplies water and sewer service.
It is anticipated that there are not insurmountable obstacles remaining to the
beginning of the implementation of the Master Plan. Management expects that the
first sale of lands master in planned area will occur in about two years,
barring unforeseen delays.
Other Projects.
1. Assisted Living Development
As previously reported, the Registrant is a Limited Partner in a partnership
which built and owned a housing facility for persons in need of some care but
who are not otherwise ambulatory. The 40 unit complex was opened in March of
1997, and occupancy was offered through Albuquerque newspapers, but a sufficient
occupancy to reach profitability was never obtained. During the year the bank
that financed the construction of the project foreclosed and proceeded with
efforts to sell the building. The Registrant reviewed the financial condition of
the project and concluded that it was not in the Registrant's best interest to
invest additional resources into the project. The Registrant's investment in
this project was written off its books more than two years ago and no current or
future loss on the project will be experienced.
2. ERA Phase I - Volcano Business Park.
Volcano Business Park consists of approximately 22 acres zoned for industrial
park uses of which 22 acres have been platted and developed into 11 lots. The
Registrant has entered into a partnership arrangement through which it
supervised construction, management and owns 50% of an 172 unit storage facility
on approximately 1.7 acres of this property. The facility was completed in
December of 1995 and as of August 1, 1998 was approximately 70% occupied.
3. ERA Phase III - Commercial, Industrial and Residential Developments
In the mid 1980's, the Registrant completed the planning of El Rancho Atrisco
Phase III Sector Development Plan. Those plans included construction of a total
of 200,000 square feet of office space, approximately 100,000 square feet of
retail space, 130 acres for industrial usage (Ladera Industrial Park), 51 acres
of high density housing and 113 acres of single family housing. During fiscal
1995, the Registrant sold a 6.3 acre tract which has been developed as an
affordable apartment complex. During fiscal 1996 the Registrant sold a 0.86 acre
parcel of land to Diamond Shamrock for the development of a convenience
store-gas station at the corner of Unser and Ladera Drive. During fiscal 1996,
the Registrant also sold a tract consisting of approximately 16 acres to a local
developer for construction of additional family homes.
The Registrant joined a limited liability corporation for the planning, approval
and development of a 9.6 acre tract, to be developed for affordable
multi-family apartment units. During fiscal 1997, this entire project was sold.
4. Travel Plaza
Since 1990, the Registrant has been working to develop about 100 acres of its
land for a travel center and related commercial uses. Anticipated users include
restaurants, motel-hotel facilities, fueling stations, and other travel/tourist
related facilities. During 1995, the Registrant sold two acres, on which there
has now been a truck sales facility developed and in the last year sold the
owners of that facility an additional two acres for expansion of that business.
5. Parkway Subdivision
The Registrant previously reported that from 1994 through 1997, the Registrant
developed and sold to Sivage Thomas certain developments known as Parkway Units
7 and 8. Sivage Thomas completed building out homes on Units 7 and during the
past year and an elementary school, constructed on approximately 11 acres
purchased from the Registrant by Albuquerque was opened for classes beginning in
the fall of 1998. In 1998, the Registrant sold Parkway Unit 9 to Sivage Thomas.
6. Recreation Complex
The Registrant previously reported that in 1994 it entered into a lease/option
arrangement related to approximately 100 acres located north of I-40 on Paseo
del Volcan. Because of a default in the terms of the lease/option, during the
past year the Registrant took possession of the property. The lessee had
developed a recreation and softball complex on the property, which became the
property of the Registrant upon taking possession of the property. In the summer
of 1998, the Registrant held a Matanza for its shareholders at the softball
complex and approximately 600 shareholders and heirs attended and enjoyed food
and music. The Registrant is looking for a purchaser for the facility and in the
mean time has leased the facilities on a month to month basis to a temporary
operator at a rental of $3,000 per month.
7. Tierra Oeste
As previously reported, the Registrant committed approximately 28 acres of land
north of Ladera Dr., west of Unser Blvd, to a limited liability corporation
named Tierra Oeste, LLC. The developer defaulted in its obligations to the LLC
and the Registrant purchased the development company's interest. After the
initial developer became unable to perform, a second developer approached the
Registrant requesting the opportunity to perform the obligations of the first
developer and the Registrant agreed that the second developer could assume the
first developer's interest if it satisfied the Registrant that it had the
financial capacity to complete the project. The second developer never acquired
the first developer's interest in the corporation and never furnished financial
statements to the Registrant and the Registrant canceled its agreement with the
second developer. The Registrant was subsequently sued by the second developer
for specific performance of the contract alleging that the contract was
prematurely terminated. The Registrant denied the allegations of the complaint
and counter sued for damages caused by the delay in its being able to deal in
this property. The issues in this case were tried in August of 1998, and the
Registrant is awaiting the Courts order. It cannot be predicted whether either
party will appeal the Court Order when finally entered. If the Registrant should
lose this action the other party must pay it not less than $500,000. The
Registrant considers this litigation to be ordinary, routine and incidental to
its business and not material.
8. Education and Community Projects
The Registrant has a continuing corporate program of donating land or otherwise
assisting in projects that its management believes has a long term beneficial
effect to the development and furtherance of the educational and health of the
community and citizens. As previously reported, the Registrant has donated lands
for the purpose of building schools, churches, and health care facilities.
Management will continue to review all requests of a similar nature to determine
the merits, on a case by case basis, of future requests for similar donations.
The Registrant is currently attempting, with the help of others, to establish a
facility for the housing and employment of mentally ill citizens that will be
named "Westland Farms."
9. Land Sales
1). The Registrant has, in the last year, completed 12 transactions totaling
approximately 152 acres, including the sale of the last lot in the Cedar
Ridge development, but not including lots sold to Kaufman & Broad, Inc. for
Alvarado Estates (formerly Cedar Ridge Estates) and Westwind Homes.
2). On June 27, 1990, the United States Congress established an approximately
7,000 acre national monument (the Petroglyph National Monument) to preserve
and protect the volcanic escarpment on Albuquerque's West Mesa area. The
Monument's proposed boundaries included approximately 1,964 acres of the
Registrant's land. The Company sold 444 acres in fiscal year 1992, 713 acres
in fiscal 1993, 118 acres in fiscal 1994, 24 acres in fiscal 1995, none in
fiscal 1996 and 218 in fiscal 1997. During the current fiscal year, the Park
Service purchased 85 acres. Approximately 362 acres have yet to be acquired
by the Park Service and the Registrant has been given no assurance when the
final purchases of the property may occur. The Registrant's Board of
Directors has agreed that, subject to negotiation of acceptable terms of
sale, the Registrant will sell to the National Park Service the Registrant's
remaining lands included in the Monument.
10. Reinvestment Properties
As part of the Registrant's plans to defer the tax burden arising from the sale
of its lands to the National Park Service for inclusion in the Petroglyph
National Monument, in the past it reinvested its funds in the properties
discussed below and two vacant land parcels and 3 commercial buildings. As a
result of these purchases, the Registrant believes that it has deferred taxes on
approximately $8,200,000 in sales through fiscal 1998. The Commercial properties
are the following:
a) A commercial building at Coors Boulevard and Sequoia Road in Albuquerque
at a cost of $2,630,000, $1,827,000 of which is subject to a Mortgage upon
which the Registrant must pay monthly payments of $17,970. This building has
been leased to Walgreen Co. for 20 years at a fixed rent of $19,173 per month
plus additional rent based upon a formula of gross sales up to a maximum rent
of $460,161 in any one year.
b) A commercial building in Albuquerque's Midway Industrial Park at a cost of
$1,074,000, $734,000 of which is subject to a Mortgage upon which the
Registrant must make monthly payments of $6,893. This building has been
leased to Circuit City Stores for a term of 10 years at an escalating rental
beginning at $4.25 per square foot the first year and increasing in stages to
$5.55 per square foot in the tenth year. The lessee has also been granted the
right to extend the lease for two additional 5 year terms at escalating
rental rates during each of the years of any extended term. The current rent
is $9,235 per month.
c) A commercial building located at Coors Boulevard and Central Avenue at a
cost of $3,593,000, which is subject to a mortgage of $2,748,000 requiring
payments of $24,682 per month. The building has been leased to Walgreen Co.
on a minimum 20 year lease at a fixed rent of $26,122 per month plus a
percentage of gross sales, with the maximum annual rent being capped at
$626,922. Walgreen Co. may continue the term of the lease for an additional
40 years.
Current Real Estate Market Conditions
The market conditions for the development and sale of properties in Albuquerque
are positive at the present time. After a period of high occupancies, the
multi-family market enjoyed a building boom, which has resulted in lower
occupancies and rent, on average. Although there has been a slump in the market
during the last 18 months, the Registrant has been able to sell the properties
it had available for sale. Management believes that for the foreseeable future
commercial and industrial construction will further stabilize and the demand for
single family residential construction will slow, but continue to be strong.
Competition
The Registrant's industrial parks - The Atrisco Urban Center, Volcano Business
Park and Ladera Industrial Park compete with other business and industrial parks
in the Albuquerque area, including some that are more established and some that
are located nearer the major population centers of Albuquerque. The Registrant
believes that a sale made by another party resulting in the introduction of a
Coca Cola bottling plant in the Business Park and development of the business
center within the Business Park will add to the quality of the Park's tenants
and will attract other businesses to the Parks.
Residential subdivisions on the Registrant's land compete with other areas in
the Albuquerque housing market (essentially Bernalillo County and portions of
Sandoval County and Valencia County), as well as with other subdivisions on the
western side of the City of Albuquerque. A number of large subdivisions to the
north of the Registrant's land are not fully sold. These include Rio Rancho
(about six miles north of the Registrant's land), Paradise Hills (about five
miles north of the Registrant's land), Volcano Cliffs, Taylor Ranch and Vantana
Ranch (each about two to three miles north of the Registrant's land).
The mandate by the State Legislature for implementation of Impact Fees may
result in the Registrant's lands being disadvantaged because the fees that
surrounding counties charge may be less than those that will be charged by
Albuquerque and Bernalillo County. Bernalillo County began the assessment of
such fees beginning on January 1, 1996, but the Registrant has not been able to
determine whether these fees will adversely impact its business.
Employees
As of June 30, 1998, the Registrant had ten full-time and nine part-time
employees. The Registrant's president, who is also a director, is a full time
employee. The Registrant also had contractual relationships with six
individuals, including two of the Registrant's officers and directors, who
provided various services to the Company.
Government Regulations.
The Registrant's ability to undertake an active program of development of its
land and management of its rental properties, (whether such development is
performed by the Registrant itself or by sale of the Registrant's land to others
for development), is dependent on the Registrant's ability to comply with laws
and regulations of the State of New Mexico and Bernalillo County, and the City
of Albuquerque, applicable to general environmental protection, land-use
planning, annexation, zoning and subdivisions. Both County and City regulate the
subdivision of land and impose zoning and building permit requirements. The
subdivision regulations of both Bernalillo County and the City of Albuquerque
require, as a condition of approval of proposed subdivisions, that adequate
provision be made by the developer for land use planning, water (both to
quantity and quality), liquid waste disposal, solid waste disposal, sufficient
and adequate roads and storm drain management.
Although the compliance with federal, state, and local provisions relating to
the protection of the environment, including laws regulating subdivisions and
land-use planning, has had no material effect upon the capital expenditures,
earnings and competitive position of the Registrant, no assurance can be given
that this situation will continue. Requests relating to flood drainage, traffic
flow and similar matters from the City of Albuquerque have occasionally delayed
the receipt of necessary approvals and required modification of development
proposals. The opening of the Double Eagle II Municipal Airport by the City of
Albuquerque to the north of the Registrant's Land on Paseo del Volcan may have
an impact on the use of and planning for the Registrant's land in the vicinity
of the airport as will the creation of the Petroglyph National Monument,
although Management believes both facilities will favorably impact the Company's
lands.
At the Registrant's request, the City of Albuquerque has created Special
Assessment Districts affecting the Atrisco Urban Center and the El Rancho
Atrisco areas for the financing of water, sewer, paving and other street
improvements, and levied assessment liens on them. This has provided a mechanism
for financing these improvements.
Approximately 3,000 acres of the Registrant's land is designated "Developing
Urban" by the current Albuquerque/Bernalillo County Comprehensive Plan.
According to the Plan, "Developing Urban" land is land without accepted and
approved platting, but which has adequate resource capabilities for
urbanization. Certain land use regulations contained in the Comprehensive Plan
apply to said land which may complicate its development to its highest and best
use and may increase the costs of development.
Availability of Water and Municipal Services.
The unavailability of sufficient water has often been a major inhibiting factor
in the land development business in the Southwest. The extent of the
Registrant's water rights has not been determined, however, the Registrant has
retained the services of a water law specialist to investigate the existence of
any Registrant water rights and to otherwise consult with the Registrant on
matters involving availability of water. However, lack of ownership of water
rights by the Registrant would not be an inhibiting factor to the developing of
the Registrant's land if adequate water were to be made available through the
City of Albuquerque and/or Bernalillo County and/or other water sources or by
purchase by the Registrant or a developer that might purchase and develop land.
For example, both Tierra West Mobile Home Park sold by the Registrant near
9-mile hill and the recreation complex leased or purchased water rights and
drilled wells to meet their water needs.
Under present annexation policies of the City of Albuquerque, annexation to the
City of Albuquerque of portions of the Registrant's land is a requirement by the
City before it will extend water and sewer services within a reasonable period
of time after annexation. However, the cost of water distribution and sewer
lines would have to be borne by the developer, or by subsequent purchasers of
the annexed portions. Until only recently was the Registrant able to get any
assurance from the City that services of the any of the Registrant's lands by
the City will occur at any reasonable time in the future. Because of doubt. the
Registrant has pursued alternative methods of providing water, sewer and other
services to its lands. In the past, the Registrant worked closely with
Bernalillo County to secure the County's assistance in providing such services
to Albuquerque's west side and to lands owned by the Registrant. The County
completed a feasibility study looking toward providing those services.
Subsequently the Registrant and the County entered into a program which outlines
the County's providing services, but prior to the program being implemented, the
City indicated that it would provide the services. Negotiations with the City
are currently ongoing.
With the exception of the Atrisco Urban Center and the residential subdivisions,
most of the Registrant's land lies outside the municipal limits of the City of
Albuquerque and are not furnished with City of Albuquerque water or other City
of Albuquerque services. The Registrant experienced little difficulty in having
the Atrisco Urban Center and the residential subdivisions within areas where
water service is currently available annexed to the City of Albuquerque and
furnished with services, but the same cannot be assumed for other areas of
Registrant's land.
Other Factors Affecting Development of Registrant's Land
Various activist groups, as well as neighborhood organizations occasionally have
in the past taken actions which have, to some extent, delayed the Registrant's
plans for the development of some of its lands. During the 1994 fiscal year two
activist groups filed appeals with the City of Albuquerque related to the
Registrant's Master Plan. However, the Master Plan was upheld with only minor
modifications. During 1997, an activist group protested the County's proceeding
with its plans to establish utility services for the Registrant's lands, but the
County Commissioners approved going forward with the project. Adjacent
neighborhood associations approved the Plan and supported the Registrant's
efforts to implement the Master Plan.
ITEM 2: DESCRIPTION OF PROPERTIES
The major physical assets owned by the Registrant are its land which is owned in
fee simple. The land comprises approximately 52,000 acres of undeveloped land
held for long-term investment and approximately 250 acres of land remaining from
those which the Registrant has developed to various stages of completion and
approximately 6,400 acres located in the Registrants Westland Master Plan. The
Registrant also owns the Atrisco Urban Center office building, comprising
approximately 11,097 square feet, a portion of which is leased to Nations Bank
and the remainder of which the Registrant uses in executive offices.. This
building is not mortgaged. Approximately 4,166 square footage of the building is
leased to Nations Bank at a monthly rental of $2,598. The Registrant also owns
three commercial buildings that are leased to others and is a 50% owner of a
self storage facility. See "Item 1. Business - Reinvestment Properties."
The population of the Albuquerque metropolitan area has grown significantly over
the last 40 years. Physical expansion of the City of Albuquerque has taken place
on the north, south and east sides, but the bulk of the most recent growth has
been west of the Rio Grande River where the Registrant's land is located. In
fact, much of the real property directly west of the City of Albuquerque is the
Registrant's land, which was previously considered unmarketable and was,
therefore, generally viewed as being unavailable for the expansion of the City
of Albuquerque. The Registrant anticipates that growth on the West Side will
continue into the foreseeable future.
The Registrant's land is bisected by Interstate Highway I-40, the main east-west
thoroughfare through Albuquerque. Access to the Registrant's land from
Interstate 40 is provided by the Coors Boulevard interchange near the eastern
edge of the Registrant's land, by the Unser Boulevard interchange at the western
edge of the Atrisco Urban Center, by the 98th Street interchange to the west of
the Atrisco Urban Center and by the Paseo del Volcan interchange where I-40,
Paseo del Volcan and Central Avenue meet. Running north from the I-40
interchange, Paseo del Volcan transverses about 4 1/2 miles of the Registrant's
land to the Double Eagle II Airport. In 1994, the Registrant dedicated
approximately 180 acres to Bernalillo County for the linking of Paseo del Volcan
and Rio Bravo. The County has extended Paseo del Volcan south of the I-40
interchange to the point at which it will intersect with the Rio Bravo extension
to form an inner loop for the City's southwest quadrant.
The Registrant and other landowners and developers (the Northwest Loop
Association) dedicated land and have paid a portion of the design costs for the
Northwest Loop, which has been approved by the New Mexico State Highway
Commission. The Northwest Loop will extend for approximately 39 miles and will
connect I-40 and New Mexico State Highway 44, traversing the western portion of
the Registrant's land within the Rio Puerco valley. In 1995 the Registrant
donated 169 acres for development of the Northwest Loop. Completion of the
Northwest Loop is not expected for 15 to 20 years. Most of the Registrant's land
is remote and not readily accessible, not serviced by utilities, and Registrant
believes that the bulk of its land will not be available for development in the
foreseeable future.
There is no limitation on the kind of securities into which the Company may
exchange real estate. The Company has considered various structures through
which it might enhance the value of its properties and would exchange property
for partnership units or other securities issued by others for the purpose of
developing the Registrant's land.
A large portion of the undeveloped land is leased for agricultural uses (see
"Item 1. Business" ). The bulk of the Registrant's undeveloped land is held for
long term investment.
In the opinion of the Company's Management, its property is adequately covered
by insurance.
ITEM 3: LEGAL PROCEEDINGS
Other than ordinary routine litigation incidental to the Company's business,
neither the Company nor any member of management is the subject of any pending
or threatened legal proceedings:
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended June 30, 1998.
PART II
ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Information required by this item is incorporated by reference to the item in
the Registrant's Annual Report to Shareholders for the year ended June 30, 1998
entitled "Market Price and Dividends on Westland's Common Equity and Related
Stockholder Matters."
ITEM 6: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The information required by this item is incorporated by reference to the item
in the Registrant's Annual Report to Shareholders for the fiscal year ended June
30, 1998 entitled "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
ITEM 7: FINANCIAL STATEMENTS
The information required by this item is incorporated by reference to the
Financial Statements in the Registrant's Annual Report to Shareholders for the
fiscal year ended June 30, 1998 which is attached as an exhibit to this report.
ITEM 8: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no changes in or disagreements with Accountants of the kind
described by Item 304 of Regulation S-B at any time during the Registrant's two
(2) most recent fiscal years.
PART III
ITEM 9: DIRECTORS, EXECUTIVE OFFICERS PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT
The information required by this item is incorporated by reference to the items
in the Registrant's definitive Proxy Statement for the November 13, 1998, Annual
Meeting of Shareholders entitled "Election of Directors" and "Directors and
Executive Officers". All reports required by Section 16(a) of the Exchange Act
to be filed during the fiscal year were filed.
ITEM 10: EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference to the item
in the Registrant's Definitive Proxy Statement for the November 13, 1998, Annual
Meeting of Shareholders entitled "Executive Compensation".
ITEM 11: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated by reference to the item
in the Registrant's Definitive Proxy Statement for the November 13, 1998, Annual
Meeting of Shareholders entitled "Voting Securities and Principal Holders
Thereof".
ITEM 12: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated by reference to the item
in the Registrant's Definitive Proxy Statement for the November 13, 1998, Annual
Meeting of Shareholders entitled "Voting Securities and Principal Holders
Thereof" and "Executive Compensation".
PART IV
ITEM 13: EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-KSB
1. Financial Statements, incorporated by reference to the Registrant's Annual
Report to Shareholders for each of the two years ended June 30, 1997 and 1998:
Report of Independent Certified Public Accountants
Balance Sheet
Statements of Earnings
Statement of Stockholders' Equity
Statements of Cash Flows
Notes to Financial Statements
2. Exhibits:
Exhibit
(3) Articles of Incorporation and Bylaws:
(3)(I) Articles of Incorporation filed as an exhibit to the registrant's
Registration Statement on Form 10-K on September 28, 1982 and incorporated
herein by reference.
(3)(ii) Restated Bylaws filed as an exhibit with the registrant's Annual Report
on Form 10-KSB for the fiscal year ended June 30, 1993.
(10) Material Contracts:
(10.1) Consulting Agreement with Sosimo Padilla, dated December 18, 1992, as
filed with the registrant's Annual Report on Form 10-KSB for the fiscal year
ended June 30, 1993, and incorporated herein by reference.
(10.2) Consulting Agreement with Polecarpio (Lee) Anaya, dated December 18,
1992, as filed with the registrant's Annual Report on Form 10-KSB for the fiscal
year ended June 30, 1993, and incorporated herein by reference.
(10.3) Employment Agreement with Barbara Page, dated December 18, 1992, as filed
with the registrant's Annual Report on Form 10-KSB for the fiscal year ended
June 30, 1993, and incorporated herein by reference.
(10.4)Lease Agreement dated April 25, 1994, between Central Avenue Partners and
Walgreen Co., as filed with the registrant's Annual Report on Form 10-KSB for
the fiscal year ended June 30, 1998, and incorporated herein by reference.
(10.5) Assignment of Lease dated April 20, 1995, from Central Avenue Partners to
the Registrant, as filed with the' registrant's Annual Report on Form 10-KSB for
the fiscal year ended June 30, 1995, and incorporated herein by reference.
(10.6) Lease Agreement dated March 14, 1995, between George Brunacini and
Jeannette Brunacini and Circuit City Stores, Inc., as filed with the
registrant's Annual Report on Form 10-KSB for the fiscal year ended June 30,
1995, and incorporated herein by reference.
(10.7) Assignment of Lease dated June 28, 1995, from George Brunacini and
Jeannette Brunacini to the Registrant, as filed with the registrant's Annual
Report on Form 10-KSB for the fiscal year ended June 30, 1995, and incorporated
herein by reference.
(10.8) Lease Agreement dated March 19, 1996, between C.A.P. II, a New Mexico
general partnership, and Walgreen Co., as filed with the registrant's Annual
Report on Form 10-KSB for the fiscal year ended June 30, 1996, and incorporated
herein by reference.
(10.9) Assignment of Lease dated June 21, 1996, from C.A.P. II, a New Mexico
general partnership, to the Registrant, as filed with the registrant's Annual
Report on Form 10-KSB for the fiscal year ended June 30, 1996, and incorporated
herein by reference.
Statement regarding computation of per share earnings is incorporated by
reference to Note A(8) to the Financial Statements incorporated herein by
reference to Registrant's Annual Report to Shareholders for the Fiscal year
ended June 30, 1998.
Annual Report to Shareholders for the Fiscal year ended June 30, 1998.
Subsidiaries of the Registrant The registrant has the following subsidiaries:
Name State of Incorporation
---- ----------------------
El Campo Santo, Inc New Mexico - non-profit
Westland Community Services, Inc New Mexico - non-profit
All other exhibits required by Item 601 of Regulation S-B are inapplicable to
this Registrant in this filing.
(b) Reports on Form 8-K:
During the last quarter of the period covered by this report, the Registrant
filed no reports on Form 8-K:
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
WESTLAND DEVELOPMENT CO., INC.
By Barbara Page
------------
Barbara Page, President, Principal Executive Officer, Chief Financial Officer
and Director
Date: September 25, 1998
In accordance with the Exchange Act, this report has been signed below by the
following persons in behalf of the registrant and in the capacities and on the
dates indicated.
By David C. Armijo
---------------
David C. Armijo, Secretary-Treasurer and Principal Financial Officer
Date: September 25, 1998
In accordance with the Exchange Act, this report has been signed below by the
following persons in behalf of the registrant and in capacities and on the dates
indicated.
By David C. Armijo
---------------
David C. Armijo, Director
Date: September 25, 1998
By Polecarpio (Lee) Anaya
----------------------
Polecarpio (Lee) Anaya, Director
Date: September 25, 1998
By Sosimo S. Padilla
-----------------
Sosimo S. Padilla, Chairman of the Board of Directors
Date: September 25, 1998
By Josie G. Castillo
-----------------
Josie G. Castillo, Director
Date: September 25, 1998
By Carmel T. Chavez
----------------
Carmel T. Chavez, Director
Date: September 25, 1998
By Joe S. Chavez
-------------
Joe S. Chavez, Director
Date: September 25, 1998
By Charles V. Pena
---------------
Charles V. Pena, Director
Date: September 25, 1998
By Carlos Saavedra
---------------
Carlos Saavedra, Director
Date: September 25, 1998
By Barbara Page
------------
Barbara Page, Director
Date: September 25, 1998
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October 9, 1998
Dear Shareholders:
I am pleased to report your Company continues to make great strides. Our annual
meeting this November will be the 10th time I will address you on the condition
of the Company as your president. Many successes have come our way during this
time and it will be a pleasure to discuss our performance and future plans with
you.
Fiscal Year 1999 is taking shape to be an interesting period. Our 6,400 acre
Master Plan known as Westland North has been approved by both the Bernalillo
County Commission and the Albuquerque City Council. We anticipate the majority
of the Company's development activity to take place within the Westland North
area for the next 10 to 20 years. Westland North will be key to the ongoing
growth of the west side, which continues to be strong.
Currently, we are negotiating with the City of Albuquerque for the expansion of
water and sewer service into the Westland North property. While our discussions
have not been concluded, in all likelihood Westland will be responsible for the
construction of utilities. Infrastructure financing may require the Company to
take on new debt and/or increase its land sales to cover development costs. Pay
back of the Company's investment will occur as new residents and businesses tie
into the water and sewer systems.
During Fiscal Year 1998 the Company sold about 150 acres. Please remember that
when management came into office in 1989 the Company owned approximately 49,000
acres. This acreage has been increased to 59,000 acres, 52,000 acres of which
are being held for long term investment. Land acquisitions have far exceeded
land sales.
Share values have increased significantly over the past 9 years. Shares are now
traded among heirs for about $15.00 per share. There are 5,533 shareholders and
802,708 shares outstanding.
We look forward to seeing you at the November 13, 1998 Annual Meeting. We
encourage you to vote "yes" on items presented and mail your proxy in as soon as
possible. Our future looks bright and we look forward to an even greater year
next year.
Sincerely,
Barbara Page
President & Chief Executive Officer
BUSINESS OF WESTLAND
Westland Development Co., Inc., a New Mexico for-profit corporation ("Company"),
is the successor to a community land grant corporation named Town of Atrisco,
which itself was a successor to a Spanish community land grant named the Atrisco
Land Grant. Information concerning the historical background of these
predecessor organizations and the conversion in 1967 from a community land grant
corporation into a business corporation can be found in the Company's Form 10
and its Form 10-K for the fiscal year ended June 30, 1974. With limited
exceptions, only lineal descendants of the incorporators of the Town of Atrisco
may own shares of the Company's Common Stock.
The Company's executive offices are located in its own building at 401 Coors
Boulevard, N.W., Albuquerque, New Mexico, 87121, telephone (505) 831-9600, on
land which was originally part of the Atrisco Land Grant.
Westland generates cash internally through its land operations (grazing leases,
real estate sales and commercial leases) and externally through long and
short-term borrowing. The profitability and resulting cash flows of Westland's
land operations depend on numerous factors, such as demand for grazing leases,
land leases, supply of competitively priced, developed or undeveloped,
properties for residential, industrial or commercial uses. Over the long term,
Westland expects that residential and industrial growth on Albuquerque's west
side will increase demand for Westland's land, thus increasing Westland's
ability to generate revenue from land development and sales. In the short term,
however, periodic local economic conditions may decrease the number of land
sales and hinder development, such as during the period from 1986 through 1992.
The Company is the owner of approximately 59,000 acres of land located on the
west side of Albuquerque, New Mexico. Most of its property is held for long term
investment and is not for sale and is devoted to the cattle grazing. The Company
derives revenues through commercial and land leases, partnerships formed for
various development projects, lot development sales and bulk land sales to other
land developers.
Westland's basic business philosophy has been to hold certain areas of the land
in trust for shareholders and to enhance the value of other areas of the land
through careful planning and development to assure perpetual benefit to the
Company and its shareholders.
The Company believes that it will continue to enter into joint ventures, land
developments, ground leases, limited partnerships and, if warranted by available
capital, may begin the construction of residential, industrial and commercial
structures for lease or sale. The Company's long term business philosophy is to
enhance the value of the Company's land through careful planning and
development, while retaining ownership of a major portion of the land in
perpetuity and simultaneously increasing the value of the Company's stock and to
provide dividends for its shareholders, when consistent with the Company's need
for a sufficient cash flow to meet current operating expenses.
Narrative Description of Business.
Over the past 16 years, the Company developed six master plans for the
development of certain of its properties and, through implementation of those
plans, sold approximately 1,350 acres of its lands. Those master plans
encompassed approximately 600 to 1,000 acres and are identified as Atrisco Urban
Center and El Rancho Atrisco, Phases I through V. These lands, except for the
Phase V master plan which was abandoned due the introduction of the Petroglyph
National Monument, have now been substantially developed and sold. A master plan
(the "Westland Master Plan") encompassing approximately 6,400 acres for the area
between Unser and Paseo del Volcan has been approved by Albuquerque and
Bernalillo County. Discussions related to the introduction of utilities to the
area are ongoing at the time of this Report.
Oil and Gas and Grazing Leases.
Approximately 52,000 acres of the Company's land is not planned for development
and is leased to non-affiliated people for cattle grazing. The leases provided
rental income of approximately $16,000 in fiscal 1998. During the year the
Company agreed to certain rent abatements because of a prolonged drought that
severely limited the productive capacity of the land.
During the year the company that held an oil and gas lease to approximately
8,500 acres drilled an exploratory well which was not successful and then
abandoned the lease. No further interest in leasing the land has been made by
any significant company and it is not known whether there remains any
exploratory interest in the land.
The Company also owns and leases certain commercial buildings at an aggregate
annual rental of $686,000. (See "Revenue Producing Properties").
Development Properties.
As of June 30, 1998, the Company continued to own approximately 250 acres of a
total of 1,600 acres which it developed and sold over the last 16 years. The
Westland Master Plan was approved by Bernalillo County in 1997 and was approved
by the City of Albuquerque in May of 1998. The effort of the Company and its
staff is being devoted to the implementation of the Plan at the earliest
possible date. The Company's Master Plan is discussed below:
Westland Master Plan.
As referred to earlier, the Company prepared a master development plan covering
approximately 6,400 acres located north of Interstate 40 and south of the area
designated for the Petroglyph National Monument, west of Unser Boulevard. The
Company and the City of Albuquerque are currently negotiating the conditions
through which the City will begin introducing water and sewer utilities to the
portions of land that will be initially developed. At the present time, the City
is asking that the Company pay the cost of water utilities to zones 3 and 4W and
sewer utilities to about one quarter of the master planned area (an estimated
total of about $10,000,000), which the Company will recover from the City as
lots are sold and the city receives hook-up costs from the developers. If the
Company is required to pay those costs, it anticipates doing so through a
combination of borrowing and use of portions of its income. In addition, any
water rights now owned or subsequently acquired by the Company in the 6,400
acres of the master planned area must be assigned to the City for only that
portion of the master planned area to which the City supplies water and sewer
service.
It is anticipated that there are not insurmountable obstacles remaining to the
beginning of the implementation of the Master Plan. Management expects that the
first sale of lands in the master planned area will occur in about two years,
barring unforeseen delays.
Other Projects.
1. Assisted Living Development
As you were previously told, the Company is a Limited Partner in a partnership
which built and owned a housing facility for persons in need of some care but
who are not otherwise ambulatory. The 40 unit complex was opened in March of
1997, and occupancy was offered through Albuquerque newspapers, but a sufficient
occupancy to reach profitability was never obtained. During the year the bank
that financed the construction of the project foreclosed and proceeded with
efforts to sell the building. The Company reviewed the financial condition of
the project and concluded that it was not in the Company's best interest to
invest additional resources into the project. The Company's investment in this
project was written off its books more than two years ago and no current or
future loss on the project will be experienced.
2. ERA Phase I - Volcano Business Park.
Volcano Business Park consists of approximately 22 acres zoned for industrial
park uses of which 22 acres have been platted and developed into 11 lots. The
Company has entered into a partnership arrangement through which it supervised
construction, management and owns 50% of an 172 unit storage facility on
approximately 1.7 acres of this property. The facility was completed in December
of 1995 and as of August 1, 1998 was approximately 70% occupied.
3. ERA Phase III - Commercial, Industrial and Residential Developments
In the mid 1980's, the Company completed the planning of El Rancho Atrisco Phase
III Sector Development Plan. Those plans included construction of a total of
200,000 square feet of office space, approximately 100,000 square feet of retail
space, 130 acres for industrial usage (Ladera Industrial Park), 51 acres of high
density housing and 113 acres of single family housing. During fiscal 1995, the
Company sold a 6.3 acre tract which has been developed as an affordable
apartment complex. During fiscal 1996 the Company sold a 0.86 acre parcel of
land to Diamond Shamrock for the development of a convenience store-gas station
at the corner of Unser and Ladera Drive. During fiscal 1996, the Company also
sold a tract consisting of approximately 16 acres to a local developer for
construction of additional family homes.
The Company joined a limited liability corporation for the planning, approval
and development of an 9.6 acre tract, to be developed for affordable
multi-family apartment units. During fiscal 1997, this entire project was sold.
4. Travel Plaza
Since 1990, the Company has been working to develop about 100 acres of its land
for a travel center and related commercial uses. Anticipated users include
restaurants, motel-hotel facilities, fueling stations, and other travel/tourist
related facilities. During 1995, the Company sold two acres, on which there has
now been a truck sales facility developed and in the last year sold the owners
of that facility an additional two acres for expansion of that business.
5. Parkway Subdivision
The Company previously reported that from 1994 through 1997, the Company
developed and sold to Sivage Thomas certain developments known as Parkway Units
7 and 8. Sivage Thomas completed building out homes on these Units during the
past year and an elementary school, constructed on approximately 11 acres
purchased from the Company by Albuquerque Public Schools was opened for classes
beginning in the fall of 1998. In 1998, the Company sold Parkway Unit 9 to
Sivage Thomas.
6. Recreation Complex
The Company previously reported that in 1994 it entered into a lease/option
arrangement related to approximately 100 acres located north of I-40 on Paseo
del Volcan. Because of a default in the terms of the lease/option, during the
past year the Company took possession of the property. The lessee had developed
a recreation and softball complex on the property, which became the property of
the Company upon taking possession of the property. In the summer of 1998, the
Company held a Matanza for its shareholders at the softball complex and
approximately 600 shareholders and heirs attended and enjoyed food and music.
The Company is looking for a purchaser for the facility and in the mean time has
leased the facilities on a month to month basis to a temporary operator at a
rental of $3,000 per month.
7. Tierra Oeste
As previously reported, the Company committed approximately 28 acres of land
north of Ladera Dr., west of Unser Blvd., to a limited liability corporation
named Tierra Oeste, LLC. The developer defaulted in its obligations to the LLC
and the Company purchased the development company's interest. After the initial
developer became unable to perform, a second developer approached the Company
requesting the opportunity to perform the obligations of the first developer and
the Company agreed that the second developer could assume the first developer's
interest if it satisfied the Company that it had the financial capacity to
complete the project. The second developer never acquired the first developer's
interest in the corporation and never furnished financial statements to the
Company and the Company canceled its agreement with the second developer. The
Company was subsequently sued by the second developer for specific performance
of the contract alleging that the contract was prematurely terminated. The
Company denied the allegations of the complaint and counter sued for damages
caused by the delay in its being able to deal in this property. The issues in
this case were tried in August of 1998, and the Company is awaiting the Court's
order. It cannot be predicted whether either party will appeal the Court Order
when finally entered. If the Company should lose this action the other party
must pay it not less than $500,000. The Company considers this litigation to be
ordinary, routine and incidental to its business and not material.
8. Education and Community Projects
The Company has a continuing corporate program of donating land or otherwise
assisting in projects that its management believes have a long term beneficial
effect to the development and furtherance of the educational and health of the
community and citizens. As previously reported, the Company has donated lands
for the purpose of building schools, churches, and health care facilities.
Management will continue to review all requests of a similar nature to determine
the merits, on a case by case basis, of future requests for similar donations.
The Company is currently attempting, with the help of others, to establish a
facility for the housing and employment of mentally ill citizens that will be
named "Westland Farms."
9. Land Sales
1). Land Sales The Company has, in the last year, completed 12 transactions
totaling approximately 152 acres, not including lots sold to Kaufman & Broad,
Inc. for Alvarado Estates (formerly Cedar Ridge Estates) and Westwind Homes.
2). Petroglyph National Monument Properties On June 27, 1990, the United States
Congress established an approximately 7,000 acre national monument (the
Petroglyph National Monument) to preserve and protect the volcanic escarpment on
Albuquerque's West Mesa area. The Monument's proposed boundaries included
approximately 1,964 acres of the Company's land. The Company sold 444 acres in
fiscal year 1992, 713 acres in fiscal 1993, 118 acres in fiscal 1994, 24 acres
in fiscal 1995, none in fiscal 1996 and 218 acres in fiscal 1997. During the
current fiscal year, the Park Service purchased 85 acres. Approximately 362
acres are yet to be acquired by the Park Service and the Company has been given
no assurance when the final purchases of the property may occur. The Company's
Board of Directors has agreed that, subject to negotiation of acceptable terms
of sale, the Company will sell to the National Park Service the Company's
remaining lands included in the Monument.
10. Reinvestment Properties
As part of the Company's plans to defer the tax burden arising from the sale of
its lands to the National Park Service for inclusion in the Petroglyph National
Monument, in the past it reinvested its funds in the properties discussed below
and two vacant land parcels and 3 commercial buildings. As a result of these
purchases, the Company believes that it has deferred taxes on approximately
$7,609,158 in sales through fiscal 1998. The Commercial properties are the
following:
a) A commercial building at Coors Boulevard and Sequoia Road in Albuquerque
at a cost of $2,630,000, $1,827,000 of which is subject to a Mortgage upon
which the Company must pay monthly payments of $17,970. This building has
been leased to Walgreen Co. for 20 years at a fixed rent of $19,173 per month
plus additional rent based upon a formula of gross sales up to a maximum rent
of $460,161 in any one year.
b) A commercial building in Albuquerque's Midway Industrial Park at a cost of
$1,074,000, $734,000 of which is subject to a Mortgage upon which the Company
must make monthly payments of $6,893. This building has been leased to
Circuit City Stores for a term of 10 years at an escalating rental beginning
at $4.25 per square foot the first year and increasing in stages to $5.55 per
square foot in the tenth year. The lessee has also been granted the right to
extend the lease for two additional 5 year terms at escalating rental rates
during each of the years of any extended term. The current rent is $9,235 per
month.
c) A commercial building located at Coors Boulevard and Central Avenue at a
cost of $3,593,000, which is subject to a mortgage of $2,748,000 requiring
payments of $24,682 per month. The building has been leased to Walgreen Co.
on a minimum 20 year lease at a fixed rent of $26,122 per month plus a
percentage of gross sales, with the maximum annual rent being capped at
$626,922. Walgreen Co. may continue the term of the lease for an additional
40 years.
Current Real Estate Market Conditions
The market conditions for the development and sale of properties in Albuquerque
are positive at the present time. After a period of high occupancies, the
multi-family market enjoyed a building boom, which has resulted in lower
occupancies and rent, on average. Although there has been a slump in the market
during the last 18 months, the Company has been able to sell the properties it
had available for sale. Management believes that for the foreseeable future
commercial and industrial construction will further stabilize and the demand for
single family residential construction will slow, but continue to be strong.
Competition
The Company's industrial parks - The Atrisco Urban Center, Volcano Business Park
and Ladera Industrial Park compete with other business and industrial parks in
the Albuquerque area, including some that are more established and some that are
located nearer the major population centers of Albuquerque. The Company believes
that a sale made by another party resulting in the introduction of Coca Cola in
the Business Park and development of the business center within the Business
Park will add to the quality of the Park's tenants and will attract other
businesses to the Parks.
Residential subdivisions on the Company's land compete with other areas in the
Albuquerque housing market (essentially Bernalillo County and portions of
Sandoval County and Valencia County), as well as with other subdivisions on the
western side of the City of Albuquerque. A number of large subdivisions to the
north of the Company's land are not fully sold. These include Rio Rancho (about
six miles north of the Company's land), Paradise Hills (about five miles north
of the Company's land), Volcano Cliffs, Taylor Ranch and Ventana Ranch (each
about two to three miles north of the Company's land).
The mandate by the State Legislature for implementation of Impact Fees may
result in the Company's lands being disadvantaged because the fees that
surrounding counties charge may be less than those that will be charged by
Albuquerque and Bernalillo County. Bernalillo County began the assessment of
such fees beginning on January 1, 1996, but the Company has not been able to
determine whether these fees will adversely impact its business.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
In the past fiscal year, land sales increased over the prior year even though
the Company experienced slightly fewer sales of improved residential lots to
builders and reduced sales to the National Park Service for the Monument.
During the last fiscal year there were $1,507,000 of sales of lands to the
National Park Service ("NPS") as part of its acquisition of the lands included
in the Petroglyph National Monument. These sales to NPS amounted to
approximately 33% of the Company's land revenue for 1998, while such sales
during fiscal 1997 amounted to $2,000,000, or 55% of land revenue.
During 1998, the real estate market in Albuquerque showed signs of recovery from
the slump in sales. Albuquerque continues to be one of the fastest growing
cities in the Southwest and, because of certain geographical and other
limitations on its growth, Westland's lands lie directly in the path of future
predictable growth patterns. Sales of improved residential lots in 1998 were
approximately $224,000, compared to sales of approximately $273,000 in fiscal
1997.
Westland's future revenues will continue to be largely dependent upon the sale
of land. The Company's assets are illiquid, comprising principally undeveloped
land. Sales are dependent upon the market conditions in Albuquerque, New Mexico.
Westland anticipates making capital commitments for land development projects
over the next few years as the economy and opportunities dictate that such
expenditures would be warranted. Capital commitments may include assessments for
roads and water and sewer lines on its land. In some cases infrastructure
improvements are paid for by assessments which increase the value of Westland's
land and make further development possible. Westland intends to incur capital
expenditures when management determines such investments will increase the value
of the land and generate future revenue.
Land is Westland's principal capital resource, and is valued, for financial
accounting purposes, at its 1907 value plus the cost of improvements. Westland's
balance sheet does not reflect the actual current value of this asset. The
Company has no current appraisals of the land and, therefore, the actual value
of the land is not known. The carrying value of the land was increased during
the fiscal year ended June 30, 1998, primarily reflecting increased investment.
The carrying value will be increased or decreased regularly as Westland
acquires, sells or develops parcels of land. Management believes the June 30,
1998 carrying value of the land is substantially less than the current market
value of the land. Westland's balance sheet also segregates income-producing
properties which consist of commercial real estate and improvements. The actual
value of Westland's land varies depending on national and local market
conditions and the amount and proximity of roads, utilities and other amenities
to the land under development. As Albuquerque continues to grow, the land value
of both developed and undeveloped land should increase.
After some delay, Westland has received approval of its Master Plan by both the
City of Albuquerque and Bernalillo County. The Master Planned land includes the
area north of Interstate 40 and south of the area designated for the Petroglyph
National Monument between Unser and Paseo del Volcan for the development of that
portion of its properties. The Master Planned area encompasses approximately
6,400 acres, but does not include any land located within the Monument and will
have no adverse impact on the Monument. Management anticipates that development
and sale of the initial parcels of land within the Master Planned area will
occur in the year 2000, however, unforeseeable delays in getting utilities to
the lands may cause this period to be extended beyond that anticipated date.
Financial Condition:
During fiscal 1998, total assets increased to $17,557,093 from $16,840,432,
while liabilities decreased from $11,888,352 to $11,350,853. During fiscal 1998
the Company invested $46,818 in income producing and other properties and
reduced net borrowing on notes and mortgages by $855,309. Despite these uses of
cash and payment of dividends of $602,031 cash and equivalents increased by
$878,743, as operations provided $2,382,901.
In fiscal 1998, the Company maintained a line of credit with a local bank in the
amount of $2,000,000, collateralized by certain real property. The purpose of
the line is to provide funds necessary for its continued expansion. At June 30,
1998, the line had no outstanding balance.
During fiscal 1999, the Company will be obligated to pay income tax of
approximately $318,000 should replacement properties totaling $810,000 for lands
sold to the National Park not be acquired.
Management believes that the uncommitted balance of cash, cash equivalents,
investments and its borrowing capacity are sufficient to meet all of the
Company's obligations during 1999 without considering additional revenues that
may be generated during that period.
Results of Operations:
In fiscal 1998, land revenues increased by $1,016,903 from $3,613,620 in 1997 to
$4,630,523. The related cost of land revenues increased to $449,791, or $64,238
from $385,553 in fiscal 1997. Rental revenue increased from $621,171 to $697,385
and the related costs decreased from $170,589 to $169,907. These increases are
expected to continue as the Company expands its activities in these areas.
Year 2000 Issues:
Management has assessed the Year 2000 issues and determined that their
consequences would not have a material effect on the Company's business, results
of operations or financial condition.
MARKET PRICE OF AND DIVIDENDS ON WESTLAND'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Because ownership of Westland's stock is restricted in the manner discussed
below, no established public trading market exists for Westland's outstanding
shares and, to the best of Westland's knowledge, no dealer has made, is making,
or is attempting to create such a market from which to determine an aggregate
market value of any of Westland's stock. In 1989, Westland entered into an
arrangement with an independent stockbroker to broker transactions in Westland's
stock between shareholders. The broker has informed Westland that the price at
which Westland's common stock had been bought and sold by Westland's
shareholders during the last two fiscal years and during the ninety (90) days
preceding this date of this report has been $15.00 per share.
Since 1982, the outstanding shares have been subject to restrictions imposed by
a majority of Westland's shareholders who amended Westland's Articles of
Incorporation. Those Articles prohibit (with certain limited exceptions)
transfer of Westland stock to persons other than lineal descendants of the
original incorporators of the Town of Atrisco (a New Mexico Land Grant
Corporation).
The following table sets forth the approximate number of holders of record of
each class of Westland's common stock as of September 25, 1998:
Number of
Title of Class Record Holders
- ---------------------- --------------
No Par Value Common 5472
$1.00 Par Value Common Class A 0
$1.00 Par Value Common Class B 20
Dividends: During each of the last two (2) fiscal years ended June 30, 1997 and
June 30, 1998, Westland declared and paid cash dividends to shareholders,
aggregating a total during those two years of $1,082,156. Subsequent to June 30,
1998, the Company has paid an additional cash dividend of $1.00 per share for an
aggregate dividend payment to the shareholders of $802,708.
ON WRITTEN REQUEST, THE COMPANY WILL PROVIDE, WITHOUT CHARGE, A COPY OF ITS
ANNUAL REPORT ON FORMS 10-KSB FOR THE FISCAL YEAR ENDED JUNE 30, 1998, FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION (INCLUDING THE FINANCIAL STATEMENTS
AND THE SCHEDULES THERETO) TO ANY RECORD HOLDER OR BENEFICIAL OWNER OF THE
COMPANY'S SHARES AS OF THE CLOSE OF BUSINESS ON SEPTEMBER 25, 1998. ANY EXHIBIT
WILL BE PROVIDED ON REQUEST UPON PAYMENT OF THE REASONABLE EXPENSES OF
FURNISHING THE EXHIBIT. ANY SUCH WRITTEN REQUEST SHOULD BE ADDRESSED TO DAVID C.
ARMIJO, SECRETARY, WESTLAND DEVELOPMENT CO., INC., 401 COORS BOULEVARD, N.W.,
ALBUQUERQUE, NEW MEXICO 87121.
FINANCIAL STATEMENTS AND
REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
WESTLAND DEVELOPMENT CO., INC.
June 30, 1998 and 1997
Report of Independent Certified Public Accountants
Stockholders
Westland Development Co., Inc.
We have audited the accompanying balance sheet of Westland Development Co.,
Inc., as of June 30, 1998, and the related statements of earnings, stockholders'
equity, and cash flows for each of the two years in the period ended June 30,
1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require 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 financial statements referred to above present fairly, in
all material respects, the financial position of Westland Development Co., Inc.,
as of June 30, 1998, and the results of its operations and its cash flows for
each of the two years in the period ended June 30, 1998 in conformity with
generally accepted accounting principles.
GRANT THORNTON LLP
Oklahoma City, Oklahoma
August 28, 1998
Westland Development Co., Inc.
BALANCE SHEET
June 30, 1998
ASSETS
Cash and cash equivalents .......................... $ 3,209,893
Receivables
Real estate contracts (note B) .................. $ 59,774
Less related deferred profit ................. 30,306
-----------
29,468
Note receivable - related party (note M) ........ 65,601
Other receivables ............................... 44,080 139,149
-----------
Land and improvements held for future development
(notes C and E) ................................. 6,457,473
Income-producing properties, net (notes D and E) ... 7,058,640
Property and equipment, net of accumulated
depreciation of $447,768 (note E) ............... 379,685
Investments in partnerships and joint ventures ..... 229,908
Other assets ....................................... 82,345
-----------
$17,557,093
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable, accrued expenses,
and other liabilities ........................... $ 627,274
Deferred income taxes (note F) ..................... 4,527,000
Notes, mortgages, and assessments payable
(note E) ........................................ 6,196,579
-----------
Total liabilities ................... 11,350,853
Commitments and contingencies (notes E, K, and L) .. --
Stockholders' equity (note G)
Common stock - no par value; authorized,
736,668 shares; issued and outstanding,
716,608 shares ............................... $ 8,500
Class A common stock - $1 par value; authorized,
736,668 shares; issued, none ................. --
Class B common stock - $1 par value; authorized,
491,112 shares; issued and outstanding,
86,100 shares ................................ 86,100
Additional paid-in capital ...................... 581,527
Retained earnings ............................... 5,530,113 6,206,240
----------- -----------
$17,557,093
===========
The accompanying notes are an integral part of these statements.
Westland Development Co., Inc.
STATEMENTS OF EARNINGS
Year ended June 30,
1998 1997
----------- -----------
Revenues
Land .......................................... $ 4,630,523 $ 3,613,620
Deferred profit recognized on installment sales 20,701 45,560
Rentals ....................................... 697,385 621,171
----------- -----------
5,348,609 4,280,351
Costs and expenses
Cost of land revenues ......................... 449,791 385,553
Cost of rentals ............................... 169,907 170,589
Other general, administrative, and operating .. 2,101,493 1,775,739
Legal ......................................... 4,902 11,384
----------- -----------
2,726,093 2,343,265
----------- -----------
Operating income .................. 2,622,516 1,937,086
Other (income) expense
Interest income ............................... (99,672) (71,415)
Gain on sale of property and equipment ........ (779) (1,752)
Other, net .................................... 11,451 36,774
Interest expense .............................. 631,356 572,508
----------- -----------
542,356 536,115
----------- -----------
Earnings before income taxes ...... 2,080,160 1,400,971
Income tax expense (note F) ...................... 826,000 605,690
----------- -----------
NET EARNINGS ...................... $ 1,254,160 $ 795,281
=========== ===========
Weighted average common shares outstanding ....... 807,755 802,184
=========== ===========
Earnings per common share ........................ $ 1.55 $ .99
=========== ===========
The accompanying notes are an integral part of these statements.
Westland Development Co., Inc.
STATEMENT OF STOCKHOLDERS' EQUITY
Years ended June 30, 1998 and 1997
<TABLE>
<CAPTION>
Class A Class B
Common stock Common stock Common stock Additional
no par value $1 par value $1 par value paid-in Retained
----------------- ----------------- ------------------
Shares Amount Shares Amount Shares Amount capital earnings Total
------- ------- ------- ------- ------- -------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at July 1, 1996 716,608 $ 8,500 -- $ -- 78,600 $ 78,600 $ 547,702 $ 4,562,828 $ 5,197,630
Net earnings ............ -- -- -- -- -- -- -- 795,281 795,281
Options exercised ....... -- -- -- -- 7,500 7,500 33,825 -- 41,325
Cash dividends paid -
$.60 per share ....... -- -- -- -- -- -- -- (480,125) (480,125)
Cash dividends declared
- $.75 per share ..... -- -- -- -- -- -- -- (602,031) (602,031)
------- ------- ------- ------- ------- -------- --------- ----------- -----------
Balances at June 30, 1997 716,608 8,500 -- -- 86,100 86,100 581,527 4,275,953 4,952,080
Net earnings ............ -- -- -- -- -- -- -- 1,254,160 1,254,160
------- ------- ------- ------- ------- -------- --------- ----------- -----------
Balances at June 30, 1998 716,608 $ 8,500 -- $ -- 86,100 $ 86,100 $ 581,527 $ 5,530,113 $ 6,206,240
======= ======= ======= ======= ======= ======== ========= =========== ===========
<FN>
The accompanying notes are an integral part of these statements.
</FN>
</TABLE>
Westland Development Co., Inc.
STATEMENTS OF CASH FLOWS
Year ended June 30,
1998 1997
----------- -----------
Increase (Decrease) in Cash and Cash Equivalents
Cash flows from operating activities
Cash received from land sales and collections
on real estate contracts receivable ........ $ 4,647,316 $ 3,873,634
Development and closing costs paid ............ (874,634) (1,226,110)
Cash received from rental operations .......... 732,254 533,289
Cash paid for rental operations ............... (816) (87,509)
Cash paid for property taxes .................. (58,150) (96,349)
Interest received ............................. 100,866 71,369
Interest paid ................................. (667,609) (597,443)
Income taxes (paid) refunded, net ............. 18,274 (262,000)
Legal and other general and administrative
costs paid ................................. (1,536,439) (1,699,509)
Other ......................................... 21,839 1,512
----------- -----------
Net cash provided by
operating activities ............ 2,382,901 510,884
Cash flows from investing activities
Capital expenditures .......................... (60,958) (938,403)
(Investments in) distributions from
partnerships and joint ventures ............ 8,588 (18,680)
Proceeds from sale of assets .................. 3,150 2,173
Proceeds from sinking fund .................... -- 410,024
Proceeds from note receivable - related party . 2,402 2,173
----------- -----------
Net cash used in
investing activities ............ (46,818) (542,713)
Cash flows from financing activities
Borrowings on notes, mortgages,
and assessments payable ............... 132,063 2,538,056
Repayments of notes, mortgages,
and assessments payable ............... (987,372) (1,920,035)
Stock options exercised .................. -- 41,325
Payment of dividends ..................... (602,031) (480,125)
----------- -----------
Net cash provided by (used in)
financing activities ............ (1,457,340) 179,221
----------- -----------
NET INCREASE IN CASH AND
CASH EQUIVALENTS ................ 878,743 147,392
Cash and cash equivalents at beginning of year ... 2,331,150 2,183,758
----------- -----------
Cash and cash equivalents at end of year ......... $ 3,209,893 $ 2,331,150
=========== ===========
Reconciliation of Net Earnings to Net Cash Provided by Operating Activities
Net earnings ..................................... $ 1,254,160 $ 795,281
Adjustments to reconcile net earnings to
net cash provided by
operating activities
Depreciation ............................... 221,879 215,433
Loss on partnerships and joint ventures .... 33,289 36,534
Gain on sale of property and equipment ..... (779) (1,752)
Collections on real estate
contracts receivable .................... 9,259 294,627
Profit recognized on installment sales ..... (20,701) (45,560)
Deferred income taxes ...................... 517,000 777,000
Change in
Income taxes recoverable/payable ....... 327,274 (433,310)
Other receivables ...................... 105,163 (98,693)
Land and improvements held
for future development .............. (424,843) (840,557)
Other assets ........................... 130,632 (67,191)
Accounts payable, accrued expenses,
and other liabilities ............... 266,821 (95,993)
Accrued interest payable ............... (36,253) (24,935)
----------- -----------
Net cash provided by
operating activities ............ $ 2,382,901 $ 510,884
=========== ===========
Noncash investing and financing activities:
- -------------------------------------------
At June 30, 1997, declared but unpaid dividends totaled $602,031.
The accompanying notes are an integral part of these statements.
Westland Development Co., Inc.
NOTES TO FINANCIAL STATEMENTS
June 30, 1998 and 1997
NOTE A - NATURE OF OPERATIONS AND SUMMARY OF ACCOUNTING POLICIES
1. History of Company and Beginning Basis of Financial Reporting
-------------------------------------------------------------
In 1892, the descendants of the owners of a land grant deeded in 1692 by the
Kingdom of Spain became incorporators of a land grant corporation named Town
of Atrisco. Ownership of the Town of Atrisco was based on proportionate
ownership of the land grant. In 1967, the Town of Atrisco was reorganized and
became Westland Development Co., Inc. (the Company), with the heirs receiving
shares in the Company in proportion to their ancestors' interests in the Town
of Atrisco corporation. The net assets of $232,582 at the date of
reorganization were assigned as follows:
Value of no par common stock as stated
in the Articles of Incorporation $ 8,500
Additional paid-in capital 224,082
---------
$ 232,582
=========
The Company estimated that it owned approximately 49,000 acres of land at the
date of incorporation as Westland Development Co., Inc. Such acreage was used
as the beginning cost basis for financial reporting purposes and was valued
at $127,400 ($2.60 per acre) based on an appraisal in 1973 which determined
the approximate value of the land in 1907. This date approximates the date
that the Patent of Confirmation covering the land comprising the Atrisco Land
Grant was given to the Town of Atrisco by the United States of America. Since
the date of the Patent of Confirmation, the Company's acreage has increased
in market value, but a full determination of such value has not been made.
2. Nature of Operations
--------------------
The Company develops, sells, or leases its land holdings, all of which are
located near Albuquerque, New Mexico. The Company may use joint ventures or
participation in limited partnerships to accomplish these activities. Revenue
sources for the years ended June 30, 1998 and 1997 consist primarily of
proceeds from land sales and rentals from developed properties, such as
single-tenant retail stores and office space. Land sales are primarily to
commercial developers and others in the Albuquerque area and certain
governmental agencies, and the terms of sale include both cash and internal
financing by the Company. Such sales are collateralized by the land. The
Company has relied primarily upon cash land sales over the past several years
due to the collection risk associated with real estate contracts.
3. Cash and Cash Equivalents
-------------------------
Cash and cash equivalents are considered to include highly liquid investments
with maturities of three months or less and money market funds. At June 30,
1998, United States Treasury Bills of approximately $2,248,000 are included
in cash and cash equivalents.
The Company maintains its cash in bank deposit accounts which, at times, may
exceed federally insured limits and in certain other funds which are not
federally insured. The Company has not experienced any losses in such
accounts and believes it is not exposed to any significant credit risk on
cash and cash equivalents.
4. Land and Improvements Held for Future Development
-------------------------------------------------
Land and improvements held for future development are recorded at cost not to
exceed net realizable value. Improvements consist of abstracts, surveys,
legal fees, master and sector plans, infrastructure improvements, and other
costs related to land held by the Company which are allocated to respective
tracts primarily by specific identification of costs.
5. Income-Producing Properties and Property and Equipment
------------------------------------------------------
Income-producing properties and property and equipment are stated at cost,
less accumulated depreciation, computed on a straight-line basis over their
estimated lives of three to thirty years. The cost of the building in which
the Company has its offices, a portion of which is rented to others, has been
allocated to property and equipment and income-producing properties based
upon square footage.
6. Recognition of Income on Real Estate Transactions
-------------------------------------------------
The Company recognizes the entire gross profit on sales where the down
payment is sufficient to meet the requirements for the full-accrual method.
Transactions where the down payment is not sufficient to meet the
requirements for the full-accrual method are recorded using the deposit or
installment method. Under the deposit method, cash received is recorded as a
deposit on land sale. Under the installment method, the Company records the
entire contract price and the related costs at the time the transaction is
recognized as a sale. Concurrently, the gross profit on the sale is deferred
and is subsequently recognized as revenue in the statements of earnings as
payments of principal are received on the related contract receivable.
7. Income Taxes
------------
Deferred income tax assets or liabilities are determined based on the
difference between financial statement and tax bases of certain assets and
liabilities as measured by the enacted tax rates in effect using the
liability method.
8. Earnings Per Common Share
-------------------------
Earnings per common share are based upon the weighted average number of
common shares outstanding during the year, including the number of no par
value common shares which may be issued in connection with eliminating
fractional shares (which resulted from the determination made by the Court in
the heirship case) and the number of no par value common shares for which the
Court ruled that no incorporator or heirs existed. The Company has no
potential common stock items.
9. Investments in Partnerships and Joint Ventures
----------------------------------------------
Investments in partnerships and joint ventures are accounted for on the
equity method.
10. Use of Estimates
----------------
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and
assumptions that affect certain reported amounts and disclosures;
accordingly, actual results could differ from those estimates.
11. Long-Lived Assets
-----------------
Long-lived assets to be held and used are reviewed for impairment, generally
on a property-by-property basis, whenever events or changes in circumstances
indicate that the related carrying amount may not be recoverable. When
required, impairment losses are recognized based upon the estimated fair
value of the asset.
NOTE B - REAL ESTATE CONTRACTS RECEIVABLE
Real estate contracts receivable are summarized as follows at June 30, 1998:
Contracts, due in varying monthly installments, with
interest rates ranging from 10% to 12%;
collateralized by land $ 59,774
=========
Principal collections due on the real estate contracts receivable
for the years ending June 30 are as follows:
1999 $ 35,774
2000 4,393
2001 4,829
2002 5,308
2003 9,470
---------
$ 59,774
=========
NOTE C - LAND AND IMPROVEMENTS HELD FOR FUTURE DEVELOPMENT
The Company estimates that it presently owns in excess of 59,000 acres of
land, primarily including land located within the boundaries of the Town of
Atrisco Land Grant and land located elsewhere which the Company has acquired
since incorporation. Plans for ultimate development of the properties have
not been finalized.
Land and improvements consist of the following at June 30, 1998:
Land $1,060,226
Improvements 5,397,247
----------
$6,457,473
==========
NOTE D - INCOME-PRODUCING PROPERTIES
Income-producing properties consist of three single-tenant retail store
buildings and one-half of the Company's office building and are summarized as
follows at June 30, 1998:
Buildings and equipment $5,082,882
Less accumulated depreciation 523,275
----------
4,559,607
Land 2,499,033
----------
$7,058,640
==========
The Company's rentals from income-producing properties are principally
obtained from tenants through rental payments as provided for under
noncancelable operating leases. The lease terms range from one to twenty
years and typically provide for guaranteed minimum rent, percentage rent, and
other charges to cover certain operating costs.
Minimum future rentals from income-producing properties on noncancelable
tenant operating leases as of June 30, 1998 are as follows:
Year ending June 30
1999 $ 757,190
2000 670,740
2001 664,353
2002 665,669
2003 669,379
Thereafter 7,247,183
-----------
$10,674,514
===========
NOTE E - NOTES, MORTGAGES, AND ASSESSMENTS PAYABLE
Notes, mortgages, and assessments payable are summarized as follows at June
30, 1998:
Promissory note, due in monthly installments of
$17,970 through May 2015, including interest at
9.37%; collateralized by income-producing properties $1,826,831
Note payable, due in monthly installments of $6,893
through September 2015, including interest at 8.75%;
collateralized by income-producing properties 733,676
Note payable to bank; due on demand, but if no
demand is made, then on August 29, 1998, with
interest at 9.5%; collateralized primarily by real
estate 506,484
Note payable to bank; due in monthly installments of
$6,701 with any unpaid amounts due May 14, 1999,
interest at 9.5%; collateralized primarily by real
estate 326,657
Mortgage note, due in monthly installments of
$24,682, including interest at 8.52%, due November
1, 2016; collateralized by income-producing
properties 2,748,443
Other notes, mortgages, and assessments payable 54,488
----------
$6,196,579
==========
The Company maintains a line of credit with a bank due in June 1999 which
provides a maximum of $2,000,000 at the bank's prime rate of interest,
payable quarterly, and is collateralized by specific tracts of land. At June
30, 1998, no amounts were outstanding on this line of credit.
Also, at June 30, 1998, the Company had approximately $19,000 of outstanding
letters of credit to the City of Albuquerque in connection with subdivision
improvements done for the Company.
Aggregate required principal payments of the notes, mortgages, and
assessments payable as of June 30, 1998 are as follows:
Year ending June 30
1999 $ 994,693
2000 157,212
2001 160,767
2002 172,391
2003 185,340
Thereafter 4,526,176
-----------
$ 6,196,579
===========
NOTE F - INCOME TAXES
An analysis of the deferred income tax assets and liabilities as of June 30,
1998 is as follows:
Deferred tax assets
Contribution carryforwards .............................. $ 89,004
Property, equipment, and land ........................... 291,555
Investments ............................................. 35,888
Other ................................................... 100,913
Valuation allowance ..................................... (89,000)
-----------
428,360
Deferred tax liabilities
Deferred tax gain on involuntary
conversion of land ................................... 4,955,360
-----------
Net deferred tax liability ................. $ 4,527,000
===========
Income tax expense (benefit) consists of the following:
Year ended June 30,
1998 1997
--------- ---------
Current
Federal ................... $ 289,242 $(156,043)
State ..................... 19,758 (15,267)
--------- ---------
309,000 (171,310)
Deferred
Federal ................... 439,000 660,450
State ..................... 78,000 116,550
--------- ---------
517,000 777,000
--------- ---------
$ 826,000 $ 605,690
========= =========
The income tax provision is reconciled to the tax computed at statutory rates
as follows:
June 30,
1998 1997
Tax expense at statutory rates ............. $ 707,000 $ 476,330
State income taxes at statutory rates ...... 97,000 84,058
Change in valuation allowance .............. (151,000) 19,382
Nondeductible expenses ..................... 23,000 36,904
Expiration of contribution carryforwards ... 104,000 --
Other ...................................... 46,000 (10,984)
--------- ---------
Total expense ........................... $ 826,000 $ 605,690
========= =========
A valuation allowance of approximately $89,000 has been recognized at June
30, 1998 based on estimates of tax assets which are not likely to be realized
in the future. Significant changes in assumptions concerning future taxable
income and deductions may cause changes in the valuation allowance.
NOTE G - COMMON STOCK
Under its Articles of Incorporation, the Company is authorized to issue
1,964,448 shares of common stock classified as follows:
(a)736,668 shares of no par value common stock to represent $8,500 estimated
value of land held by the Town of Atrisco;
(b)736,668 shares to be sold for $1.45 a share, designated as Class A, $1
par value common stock. Class A stock is to be sold only to the
stockholders of record as of the date of incorporation as follows:
At the first sale of such stock, each stockholder shall have the right
to purchase up to the number of shares obtained by dividing the total
number of stockholders of record on the date of incorporation into
736,668 shares.
Any stock remaining unpurchased shall be offered for sale at
subsequent sales, and only subsequent sale, each one being entitled to
purchase up to the number of shares obtained by stockholders who
purchased stock at a preceding sale shall have the right to purchase
stock at a dividing the total number of stockholders of record who
purchased at the preceding sale into the total number of unpurchased
shares remaining after the preceding sale.
(c)491,112 shares to be sold for a price to be determined by the Board of
Directors, designated as Class B, $1 par value common stock. Those
acquiring no par value common stock and Class A, $1 par value common stock
have no preemptive rights to purchase Class B, $1 par value common st ock.
The following summarizes, at June 30, 1998, the number of shares of common
stock which, upon judicial determination, can be distributed (no par) or
offered for sale (Class A) to stockholders of record as of the date of
incorporation:
Price
Number -------------------
of Per
shares share Total
---------- ------ ----------
Shares issuable
No par value common ........ 5,047 $ -- $ --
Class A, $1 par value common 736,668 1.45 1,068,169
---------- ------ ----------
741,715 -- $1,068,169
========== ====== ==========
There is no established market value for the Company's common stock. At June
30, 1998, 716,608 shares of the Company's no par value common stock were
issued and outstanding. Of the 5,047 shares of no par value common stock
issuable, 1,872 shares may be issued in connection with eliminating
fractional shares which resulted from the determinations made by the Court in
the heirship case and 3,175 shares represent shares for which the Court in
the heirship case ruled that no incorporator or heirs existed. The Company
also has reacquired and canceled 15,013 shares of no par value common stock
which have been constructively retired. These shares have not been formally
retired and, as such, may be issuable to stockholders of record as of the
date of incorporation.
The Company had a stock option plan for certain directors and employees which
was terminated in 1987. Options under this plan for 7,500 shares of Class B
common stock were exercised during 1997 and all remaining unexercised options
expired in December 1996.
NOTE H - SEGMENT INFORMATION
The Company operates primarily in two industry segments. They are as follows:
Land - Operations involve the development and sale of tracts, both
residential and commercial. In addition, included are incidental
revenues from leasing of grazing rights.
Rentals - Operations involve rentals from three single-tenant retail store
buildings and one-half of the Company's office building.
Financial information for each industry segment is summarized as follows:
General
Land Rentals corporate Total
----------- ----------- ------------ -----------
1998
Revenues ........... $ 4,651,224 $ 697,385 $ -- $ 5,348,609
Operating income
(expense) ....... 3,547,773 433,945 (1,359,202) 2,622,516
Identifiable assets 6,552,542 7,277,962 3,726,589 17,557,093
Capital expenditures -- 972 59,986 60,958
Depreciation ....... -- 169,091 52,788 221,879
1997
Revenues ........... $ 3,659,180 $ 621,171 $ -- $ 4,280,351
Operating income
(expense) ....... 2,697,194 355,852 (1,115,960) 1,937,086
Identifiable assets 6,151,103 7,555,231 3,134,098 16,840,432
Capital expenditures -- 907,158 31,245 938,403
Depreciation ....... -- 163,369 52,064 215,433
General corporate assets consist primarily of cash, furniture, equipment, and
one-half of an office building, of which the remaining one-half is included
in income-producing properties.
NOTE I - BENEFIT PLANS
The Company has certain defined benefit employee retirement plans that
provide for employee and employer contributions. The Company's contribution
expense for these plans was $89,000 and $74,000 for 1998 and 1997,
respectively.
NOTE J - SALES TO MAJOR CUSTOMERS
Sales to major customers are summarized as follows:
During the year ended June 30, 1998, sales to two customers individually
accounted for 28% and 13% of total revenues.
During the year ended June 30, 1997, sales to two customers individually
accounted for 47% and 21% of total revenues.
NOTE K - SALE OF LAND FOR NATIONAL PARK
On June 28, 1990, the Petroglyph National Monument (National Monument) was
established by an act of the United States Congress (Congress). Under the
bill passed by Congress, the National Park Service is authorized to acquire
acreage within the National Monument using funds specifically app ropriated
by Congress each year. In 1998, approximately 85 acres were transferred to
the National Park Service for cash of $1,500,000. The Company's remaining
land within the National Monument boundary of approximately 362 acres is
expected to be sold in a series of transactions over the next several years.
NOTE L - LITIGATION
The Company is engaged in various lawsuits either as plaintiff or defendant
which have arisen in the conduct of its business which, in the opinion of
management, based upon advice of counsel, would not have a material effect on
the Company's financial position.
NOTE M - RELATED PARTY TRANSACTIONS
The Company purchases its directors' and officers' liability insurance
through a corporation controlled by a member of the Board of Directors. Total
premiums for these policies paid in 1998 and 1997 were $50,000 each year.
The note receivable - related party is from a joint venture partner, is
payable in monthly installments of $758 including interest at 10%, and is
collateralized by developed property. The note matures April 2006.
NOTE N - FINANCIAL INSTRUMENTS
The following table includes various estimated fair value information as
required by Statement of Financial Accounting Standards (SFAS) No. 107,
Disclosures about Fair Value of Financial Instruments. Such information,
which pertains to the Company's financial instruments, is based on the r
equirements set forth in SFAS No. 107 and does not purport to represent the
aggregate net fair value of the Company. The carrying amounts in the table
are the amounts at which the financial instruments are reported in the
financial statements.
All of the Company's financial instruments are held for purposes other than
trading.
NOTE N - FINANCIAL INSTRUMENTS - CONTINUED
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments:
1. Cash and Cash Equivalents
-------------------------
The carrying amount approximates fair value because either the Company has
the contractual right to receive immediate payment or because of short
maturities.
2. Real Estate Contracts Receivable
--------------------------------
These notes receivable are generally collateralized by real estate and accrue
interest at rates from 10% to 12%. Because the ultimate collectibility of
these notes is not reasonably assured, it is not practicable to estimate fair
value.
3. Other Notes Receivable
----------------------
Other notes receivable are valued at the present value of future cash flows
based on the current rates at which similar loans would be made to borrowers
with similar credit ratings.
4. Notes, Mortgages, and Assessments Payable
-----------------------------------------
The discounted amount of future cash flows using the Company's current
incremental rate of borrowing for similar liabilities is used to estimate
fair value.
The carrying amounts and estimated fair values of the Company's financial
instruments at June 30, 1998 are as follows:
Carrying Estimated
amount fair value
Financial assets
Cash and cash equivalents ........... $3,209,893 $3,209,893
Real estate contracts receivable
(not practicable to estimate
fair value) ...................... 29,468 --
Other notes receivable .............. 65,601 65,601
Financial liabilities
Notes, mortgages, and assessments
payable .......................... 6,196,579 6,642,000
NOTE O - SUBSEQUENT EVENT
On July 31, 1998, the Company declared a dividend of $1 per share for
stockholders of record as of August 10, 1998. The dividend is payable on
September 1, 1998.
DIRECTORS OF WESTLAND
SOSIMO S. PADILLA, Chairman of the Board of Directors and Director. Member of
the Executive Committee. Mr. Padilla is retired from the circulation department
of the Albuquerque Publishing Company and was owner/operator of Western
Securities Transportation Corporation for over thirty years.
BARBARA PAGE, President, Chief Executive Officer and Director. Secretary of the
Executive Committee. Ms. Page is employed by Westland Development Co., Inc. as
its President.
POLECARPIO (LEE) ANAYA, Executive Vice President, Assistant Secretary/Treasurer
and Director. Chairman of the Executive Committee. Mr. Anaya was owner/operator
of Lee's Conoco.
DAVID C. ARMIJO, Secretary/Treasurer and Director. Mr. Armijo is an insurance
broker and serves as President and Chairman of the Board of California's
All-Risk Insurance Agency, Inc. in Los Angeles.
CARMEL CHAVEZ. Member of the Executive Committee and the Disclaimer Committee
and Vice Chairman of El Campo Santo, Inc. Mr. Chavez is a retired employee of
the Albuquerque Public Schools.
JOSIE G. CASTILLO. Vice Chairman of the Executive Committee, Chairman of El
Campo Santo, Inc. and member of the Disclaimer Committee. Ms. Castillo is
retired from the Human Services Department of the State of New Mexico.
CARLOS SAAVEDRA. Alternate member of the Executive Committee, Alternate Member
of El Campo Santo, Inc. and Chairman of the Disclaimer Committee. Dr. Saavedra
is a former director of bilingual education for the Colorado Department of
Education and the Oakland Unified School District, Oakland, California. Dr.
Saavedra retired from education in 1985.
JOE S. CHAVEZ. Alternate member of the Disclaimer Committee. Mr. Chavez is
employed at Galles Chevrolet.
CHARLES V. PENA. Member of El Campo Santo, Inc. Mr. Pea owns and operates CJ's
New Mexican Food Restaurant.
