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, 1999
[ ] 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 Westland 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)
Westland'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 Westland 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 Westland'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. [ ]
State issuer's revenues for its most recent fiscal year: $5,517,570.
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 15, 1999, there were 706,814 No Par Value Common shares and 55,400
Class B shares owned by non-affiliates. The stock was sold on September 15, 1999
for $18 per share. Thus the aggregate market value of the voting stock held by
non-affiliates was $13,275,252.
The number of shares outstanding of each of Westland's classes of common stock,
as of September 15, 1999, was:
No Par Value Common: 716,608 shares.
Class B $1.00 Par Value: 86,100 shares.
DOCUMENTS INCORPORATED BY REFERENCE:
1) Proxy statement and Proxy for Annual Meeting of Shareholders for the year
ended June 30, 1999.
2) Annual Report to shareholders for the year ended June 30, 1999.
PART I
ITEM 1: DESCRIPTION OF BUSINESS
General Development of Business.
Westland Development Co., Inc., a New Mexico for-profit corporation
("Westland"), 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 Westland'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 Westland's Common Stock.
The Westland'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 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. Westland derives revenues through
commercial and land leases, partnerships formed for various development
projects, lot development sales and sales and bulk land sales to other land
developers.
In 1998 the City of Albuquerque and the County of Bernalillo finalized the
approval of a 6,400 acre master plan for development of the 6,400 acres of
Westland's land. For Westland to begin developing or selling land within this
planned area, Albuquerque must make available the required utilities. The City
and Westland have reached an pre-annexation agreement through which the City
will annex the initial 1,732 acres and Westland is to furnish sewer and water
utilities to the initial 1,732 acres . The lands within the master plan area
have been segregated by Westland for development.
As previously stated, for Westland to be able to develop the Master Plan area it
must make provision for utilities that do not presently exist on any of the
Master Planned lands. Westland has agreed that it will bear the initial cost of
the water and sewer extension to the initial 1,732 acres, which are now
estimated to be as much as $10,000,000. When completed, Westland will convey the
utilities to the City. Although Westland must advance the cost of the utilities,
it will recover those costs through a "hook-up" fee that will be charged to each
lot sold in the annexed area. Depending upon the growth of development in this
area, it may take 15 or more years for Westland to recover these costs.
Westland is currently soliciting financing for the construction of the initial
phase of the Master Plan infrastructure. Although no commitments have yet been
received, Management believes that Westland will obtain the required financing
and begin construction of improvements within the next fiscal year.
Management is less optimistic about partnerships because of the Company's bad
experience with those partnerships that it has joined over the last few years,
but continues to believe joint ventures, land developments, ground leases and
limited partnerships may be to Westland's benefit. For that reason, Management
will continue to review proposals submitted by prospective partners and
participants. Management remains committed, if and when warranted by available
capital and existing conditions, to begin the construction of residential,
industrial and commercial developments for lease or sale. Westland's long term
business philosophy is to enhance the value of Westland'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 Westland's stock
and to provide dividends for its shareholders, when consistent with Westland's
need for a sufficient cash flow to meet current operating expenses.
Narrative Description of Business.
Over the past 20 years, Westland developed six master plans for the development
of certain of its properties and through implementation of those plans, sold all
of the acreage included in those. Those master plans 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. As
discussed above, the new Master Plan encompasses approximately 6,400 acres in an
area located north of I-40, between Unser and Paseo del Volcan. Initial utility
development of Phase I of the Master Planned area should begin in the next
fiscal year, depending upon available funding.
Oil and Gas and Grazing Leases.
Approximately 57,000 acres of Westland's land is not planned for development and
55,139 acres are leased to non-affiliated people for cattle grazing. The leases
provided rental income of approximately $22,000 in fiscal 1999. During the year
Westland allowed certain rent abatements because of the temporary limited
productive capacity of the land.
There was no oil or gas activity on the property during the year and no oil or
gas leases currently exist on any part of the property.
Westland also owns and leases certain commercial buildings at an aggregate
annual rental of $790,000 (See "Revenue Producing Properties).
Development Properties.
As of June 30, 1999, Westland continued to own approximately 175 acres of
developed and unsold land. The effort of Westland and its staff is being devoted
to the implementation of the new Master Plan at the earliest possible date. A
summary of Westland Master Plan is as follows:
Westland Master Plan.
Westland's new Master Plan covers approximately 6,400 acres located north of
Interstate 40 and south of the area designated for the Petroglyph National
Monument, west of Unser Boulevard. Westland and the City of Albuquerque have
agreed on the conditions through which the City will annex the first 1,700 acres
in the Master Plan area and Westland will begin introducing water and sewer
utilities to the portions of land that will be initially developed. As discussed
above, Westland has agreed to pay the cost of water and sewer utilities to the
land with its costs being recovered over time through hook-up fees. Westland
anticipates paying the costs incurred to furnish these utilities through a
combination of borrowing and use of portions of its income. In addition, any
water rights now owned or subsequently acquired by Westland 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 no insurmountable obstacles remaining,
including acquiring the necessary financing, to begin of the implementation of
the Master Plan. Management expects that the first sale of lands master planned
area will occur in the next one or two fiscal years, barring unforeseen delays.
Other Projects.
1. Assisted Living Development
As previously reported, Westland was a Limited Partner in a partnership which
built and owned a housing facility for persons in need of some care but who are
otherwise ambulatory. During fiscal 1997, the bank that financed the
construction of the project foreclosed on the building. At the time of the
foreclosure sale, Westland reviewed the financial condition of the project and
concluded that it was not in Westland's best interest to invest additional
resources into the project and did not bid at the foreclosure sale. Westland's
investment in this project was written off its books several years ago and no
current or future loss on the project will be experienced.
2. Volcano Business Park.
Volcano Business Park consists of approximately 22 acres zoned for industrial
park uses which were platted and developed into 11 lots. Westland, through a
partnership arrangement owns 50% of an 172 unit storage facility on
approximately 1.7 acres of this property. As of August 1, 1999, the facility was
approximately 75% occupied.
Phase II of Volcano Business Park was completed this fiscal year with the
completion of a loop service road. Five additional lots were created, with one
lot being sold and another lot being under construction for expansion of the
storage facility.
3. Travel Plaza
Since 1990, Westland has been working to develop about 100 acres of its land for
a travel center and related commercial uses. During 1995, a truck sales facility
was established on four acres. No additional development of this property
occurred during the current fiscal year and, because Management anticipates that
all of Westland's energy and funds will be devoted over the next couple of years
to developing its Master Plan area, no further development of this area is
foreseen in the immediate future. However, Management remains aware of current
trends in the area and if those trends should show an increased interest in the
Travel Plaza, energy and funds would be devoted to take advantage of such
trends.
4. Parkway Subdivision
Westland previously reported that from 1994 through 1997, it developed and sold
to Sivage Thomas Homes, Inc. 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 Westland by Albuquerque Public Schools, was opened for classes beginning in
1998. Westland sold Parkway Unit 9 (also known as Parkland View) to Sivage
Thomas Homes, Inc. during fiscal 1998 and considers this project completed.
5. Recreation Complex
Westland 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. Westland took possession and ownership of the facility in 1997 as a
result of default in the terms of the lease/option. The Park contains a fully
developed recreation and softball complex. In 1998 Westland held a Matanza for
its shareholders at the softball complex and approximately 600 shareholders and
heirs attended and enjoyed food and music. In the summer of 1999, Westland held
a luncheon for it shareholders at the complex and approximately 800 shareholders
and heirs attended. The facility is not now leased and Westland is looking for a
lessee or purchaser for the facility.
6. Tierra Oeste
As previously reported, Westland committed approximately 24.5 acres of land
north of Ladera Dr., west of Unser Blvd, to a limited liability corporation
named Tierra Oeste, LLC. All litigation related to the default by the developer
was terminated during the fiscal year and all interest claimed by the developer
in the project was terminated by the Court.
Westland is now considering development lots on this land and/or selling the
entire project.
7. Education and Community Projects
Westland 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, Westland has donated lands for
the purpose of building schools, churches, and health care facilities. During
the fiscal year, Westland donated approximately fifty acres to YES Housing,
Inc., a nonprofit corporation, for the purpose of construction of a facility
devoted to the housing and employment of mentally ill citizens.
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.
8. Land Sales
1). Land Sales Westland has, in the last year, completed 6 transactions totaling
approximately 393 acres, not including lots sold to Kaufman & Broad, Inc. for
Alvarado Estates (formerly Cedar Ridge Estates Units 2 and 3).
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 Westland'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, 218 acres in fiscal 1997, 85 acres in
fiscal 1998. During fiscal 1999 the Park Service purchased the last 362 acres
designated for inclusion in the Monument.
10. Reinvestment Properties
As part of Westland's plans to defer the tax burden arising from the sale of its
lands to the National Park Service under threat of condemnation for inclusion in
the Petroglyph National Monument, it reinvested the sale proceeds in the
properties discussed below and two vacant land parcels and 4 commercial
buildings. As a result of these purchases, Westland believes that it has
deferred recognition of taxes on the sales of land to the National Park Service.
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, $1,780,407 of which is subject to a Mortgage upon which
Westland 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, $714,345 of which is subject to a Mortgage upon which Westland 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 $2,683,944 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.
d) A commercial building located at the SE corner of Eubank and Spain, N.E., at
a cost of approximately $1,300,000, which is subject to a mortgage of $950,000
requiring payments of $9,079 per month. The building has been leased to Marie
Callender Pie Shops, Inc., on a minimum 10 year lease at a fixed rent of
$11,000, plus a Percentage Rent in the amount of 6% of Annual Gross Sales in
excess of $108,333.34. The tenant has the right to renew the lease for as many
as three 5 year terms.
Current Real Estate Market Conditions
The market conditions for the development and sale of properties in Albuquerque
are positive at the present time. Westland has been able to sell the residential
properties it had available for sale. Management believes that for the
foreseeable future commercial and industrial construction will continue at a
rapid pace while the demand for single family residential construction will
continue at a more moderate pace.
Competition
Westland'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. Westland 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 Westland'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 Westland's land are not fully sold. These include Rio Rancho (about six
miles north of Westland's land), Paradise Hills and Ventana Ranch (about five
miles north of Westland's land), Volcano Cliffs and Taylor Ranch (each about two
to three miles north of Westland's land).
The implementation of certain mandated impact fees may have an as yet
undetermined affect on Westland's ability to sell property in competition with
developers of land located in neighboring counties. (See "Governmental
Regulations")
Employees
As of June 30, 1999, Westland had ten full-time and seven part-time employees.
Westland's president, who is also a director, is a full time employee. Westland
also had contractual relationships with other individuals, including two of
Westland's officers and directors, who provided various services to the Company.
Government Regulations.
Westland's ability to undertake an active program of development of its land and
management of its rental properties, (whether such development is performed by
Westland itself or by sale of Westland's land to others for development), is
dependent on Westland'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 and endangered species, has in recent years had no material
effect upon the capital expenditures, earnings and competitive position of
Westland, no assurance can be given that this situation will continue. Requests
relating to 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 Westland's Land
on Paseo del Volcan may have an impact on the use of and planning for Westland'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 Westland's request, the City of Albuquerque 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, and SAD's may be available for future development of Westland's
property.
A mandate by the State Legislature for implementation of Impact Fees may result
in Westland'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 on
January 1, 1996, but Albuquerque has not yet implemented the fees. Westland has
not been able to determine whether these fees adversely impact its business.
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 Westland's
water rights has not been determined, however, Westland has retained the
services of a water law specialist to investigate the existence of any Westland
water rights and to otherwise consult with Westland on matters involving
availability of water. However, lack of ownership of water rights by Westland
would not be an inhibiting factor to the developing of Westland'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 Westland or by a
developer that might purchase and develop land. For example, Tierra West Mobile
Home Park sold by Westland 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 Westland'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. Westland has pursued alternative methods of providing water,
sewer and other services to its lands. In the past, Westland 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 Westland. The County completed
a feasibility study looking toward providing those services. Subsequently
Westland and the County entered into a program which outlined the County's
providing services, but that program did not go forward. The City and Westland
have now reached the agreement discussed above relating to provisions for
utility services to the Master Plan lands and annexation by the City.
Most of Westland's land lies outside the municipal limits of the City of
Albuquerque and are not furnished with City water or other City services.
Westland experienced little difficulty in having its other Master Plan area
furnished with services, but the same cannot be assumed for other areas of
Westland's land.
Other Factors Affecting Development of Westland's Land
Various activist groups, as well as neighborhood organizations in the past have
occasionally taken actions which have, to some extent, delayed Westland's plans
for the development of some of its lands. Two activist groups filed appeals with
the City of Albuquerque related to Westland's Master Plan. However, the Master
Plan was upheld with only minor modifications.
ITEM 2: DESCRIPTION OF PROPERTIES
The major physical assets owned by Westland are its land which is owned in fee
simple. The land is comprised approximately 59,000 acres of undeveloped land
held for long-term investment and approximately 175 acres of land remaining from
those which Westland has developed to various stages of completion.
Approximately 6,400 acres are located in Westland's Master Plan area. Westland
also owns the Atrisco Urban Center office building, comprising approximately
11,097 square feet, 4,166 of which is leased to Bank of America at a monthly
rental of $2,598, while the remainder is used by Westland for its executive
offices. This building is not mortgaged. Westland also owns four 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 Westland's land is located. In fact,
much of the real property directly west of the City of Albuquerque is owned by
Westland. Management believes that growth on the West Side, subject to peaks and
valleys of development, will continue into the foreseeable future.
Westland's land is bisected by Interstate Highway I-40, the main east-west
thoroughfare through Albuquerque. Access to Westland's land from Interstate 40
is provided by the Coors Boulevard interchange near the eastern edge of
Westland'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 Westland's land to the Double Eagle
II Airport. In 1994, Westland 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 and construction has commenced to link Rio Bravo and Paseo
del Volcan.
Westland 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
1-25, through New Mexico State Highway 44, traversing the western portion of
Westland's land within the Rio Puerco valley. In 1995 Westland donated 169 acres
for development of the Northwest Loop. Completion of the Northwest Loop is not
expected for 15 to 20 years. Most of Westland's land is remote and not readily
accessible, not serviced by utilities, and Westland 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 for 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 Westland's land.
A large portion of the undeveloped land is leased for agricultural uses (see
"Item 1. Business" ). The bulk of Westland'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, 1999.
PART II
ITEM 5: MARKET FOR WESTLAND'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Information required by this item is incorporated by reference to the item in
Westland's Annual Report to Shareholders for the year ended June 30, 1999
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 Westland's Annual Report to Shareholders for the fiscal year ended June 30,
1999 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 Westland's Annual Report to Shareholders for the fiscal
year ended June 30, 1999 which is attached as exhibit 13 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 Westland'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 Westland's definitive Proxy Statement for the November 23, 1999, 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 Westland's Definitive Proxy Statement for the November 23, 1999, 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 Westland's Definitive Proxy Statement for the November 23, 1999, 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 Westland's Definitive Proxy Statement for the November 23, 1999, 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-K
1. Financial Statements, incorporated by reference to Westland's Annual Report
to Shareholders for each of the two years ended June 30, 1998 and 1999:
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 Westland'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 Westland'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 Westland'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 Westland'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 Westland'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 Westland'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
Westland, as filed with the' Westland'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 Westland'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 Westland, as filed with Westland'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 Westland'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 Westland, as filed with Westland's Annual Report on Form
10-KSB for the fiscal year ended June 30, 1996, and incorporated herein by
reference.
(10.10) Lease Agreement dated June 29, 1999, between Marie Callender Restaurant
and Pie Shop, a California corporation.
Statement regarding computation of per share earnings is incorporated by
reference to Note A(8) to the Financial Statements incorporated herein by
reference to Westland's Annual Report to Shareholders for the Fiscal year ended
June 30, 1999.
Annual Report to Shareholders for the Fiscal year ended June 30, 1999.
Subsidiaries of Westland
Westland 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 filing.
(b) Reports on Form 8-K:
During the last quarter of the period covered by this report, Westland filed no
reports on Form 8-K:
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, Westland caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
WESTLAND DEVELOPMENT CO., INC.
By Barbara Bage
------------
Barbara Page, President, Chief Executive Officer, Chief Financial Officer
and Director
Date: September 23, 1999
In accordance with the Exchange Act, this report has been signed below by the
following persons in behalf of Westland and in the capacities and on the dates
indicated.
By David C. Armijo
---------------
David C. Armijo, Secretary-Treasurer and Principal Financial Officer
Date: September 23, 1999
In accordance with the Exchange Act, this report has been signed below by the
following persons in behalf of Westland and in capacities and on the dates
indicated.
By David C. Armijo
---------------
David C. Armijo, Director
Date: September 23, 1999
By Lee Anaya
---------
Polecarpio (Lee) Anaya, Executive Vice President and Director
Date: September 23, 1999
By Sosimo S. Padilla
-----------------
Sosimo S. Padilla, Director and Chairman of the Board
Date: September 23, 1999
By Josie G. Castillo
-----------------
Josie G. Castillo, Director
Date: September 23, 1999
By Carmel T. Chavez
----------------
Carmel T. Chavez, Director
Date: September 23, 1999
By Joe S. Chavez
-------------
Joe S. Chavez, Director
Date: September 23, 1999
By Charles V. Pena
---------------
Charles V. Pena, Director
Date: September 23, 1999
By Carlos Saavedra
---------------
Carlos Saavedra, Director
Date: September 23, 1999
By Barbara Page
------------
Barbara Page, Director
Date: September 23, 1999
EXHIBIT 10.10
LEASE
By and Between
HEREFORD COMPANY LLC,
a New Mexico Limited Liability Company,
as Landlord
and
MARIE CALLENDER PIE SHOPS, INC.,
a California corporation,
as Tenant
For the Property located at
5220 Eubank Blvd. NE
Albuquerque, New Mexico 87111
August 14, 1998
This document shall not have, nor be construed as having, any binding effect on
the parties unless fully executed by the Tenant and Landlord and a fully
executed copy is delivered to the Landlord.
TABLE OF CONTENTS
-----------------
SECTION PAGE
------- ----
1. DESCRIPTION OF PREMISES .............. 1
2. TERM ................................. 1
3. (INTENTIONALLY OMITTED) .............. 1
4. RENTAL ............................... 1
5. USE OF THE PREMISES .................. 3
6. TRADE FIXTURES ....................... 3
7. (INTENTIONALLY OMITTED) .............. 3
8. ALTERATIONS AND REPAIRS .............. 4
9. TAXES ................................ 4
10. MECHANICS'LIENS ...................... 5
11. UTILITIES ............................ 6
12. ASSIGNMENT; SUBLETTING ............... 6
13. INDEMNITY AND INSURANCE .............. 7
14. DAMAGE OR DESTRUCTION ................ 8
15. CONDEMNATION OF PREMISES ............. 9
16. COVENANT OF TITLE AND QUIET ENJOYMENT. 11
17. (INTENTIONALLY OMITTED) .............. 11
18. COMMON AREAS AND APPURTENANT RIGHTS .. 11
19. SUBORDINATION AND NON-DISTURBANCE .... 13
20. WARRANTIES OF LANDLORD ............... 13
21. (INTENTIONALLY OMITTED) .............. 15
22. INSPECTION ........................... 16
23. WRITTEN CONSENT ...................... 16
24. INVESTMENT TAX CREDIT ................ 17
25. OPTION TO RENEW ...................... 17
26. TENANT'S DEFAULT; LANDLORD'S REMEDIES 18
27. LANDLORD'S DEFAULT; TENANT'S REMEDIES 19
28. BROKERAGE COMMISSIONS ................ 20
29. MORTGAGING OF LEASEHOLD ESTATE ....... 20
30. OWNERSHIP OF IMROVEMENTS ............. 21
31. MISCELLANEOUS ........................ 21
EXHIBIT "A" - Legal Description of Premises
EXHIBIT "B" - Site Plan
EXHIBIT "C" - Intentionally Omitted
EXHIBIT "D" - Intentionally Omitted
EXHIBIT "E" - Intentionally Omitted
EXHIBIT "F" - Memorandum of Lease
EXHIBIT "G" - Intentionally Omitted
EXHIBIT "H" - Intentionally Omitted
EXHIBIT "I" - Non-Disturbance Agreement (Lender)
LEASE
THIS LEASE ("Lease") is made and entered into this 14th day of August 1998, by
and between HEREFORD COMPANY LLC, a New Mexico limited liability company
("Landlord") and CALLENDER PIE SHOPS, INC., a California corporation,
("Tenant").
I . DESCRIPTION OF PREMISES
Landlord hereby leases to Tenant, and Tenant hereby hires and takes from
Landlord, that certain real property legally described in attached Exhibit "A,"
incorporated herein by reference, containing approximately 7,500 square feet of
floor area, and as shown on the Site Plan attached hereto as Exhibit "B,"
incorporated herein by reference, ("Property") together with all of the
improvements located on the Property, including that certain building containing
a restaurant facility ("Building"), and related outbuildings and improvements
constructed upon the Property, and the Appurtenant Rights as hereinafter defined
in Section 17 (collectively referred to as "Premises"), for the term, at the
rental, and upon all of the terms, covenants, and conditions set forth in this
Lease. The Premises are part of that certain shopping center known as the
Promenade Shopping Center ("Shopping Center").
For all purposes of this Lease, including all time requirements, the "date
hereof," or any other reference to the date of this Lease, shall be the date
first set forth above and shall be referred to as the effective date ("Effective
Date").'
2. TERM
This Lease shall be effective upon the date of its execution, but its term
("Term") shall commence August 14, 1998 ("Commencement Date"), and shall end on
August 13, 2008, unless extended or terminated earlier in accordance with the
provisions hereinafter set forth.
3. (INTENTIONALLY OMITTED)
4. RENTAL
a. Tenant shall pay as fixed minimum monthly rental ("Minimum Monthly
Rent") for the Premises during the Term hereof the sum of Eleven Thousand
Dollars ($1 1,000) per month. The Minimum Monthly Rent shall be paid in advance
on the first day of each month, partial months being prorated based upon a
thirty (30) day month. Except as otherwise provided herein, Minimum Monthly Rent
shall commence on the Commencement Date ("Rent Commencement Date"); provided,
however, in the event that the Rent Commencement Date is other than the first
day of the month, the Minimum Monthly Rent for such fractional month shall be
prorated as provided above.
b. In addition to Minimum Monthly Rent, Tenant shall pay to Landlord during
the Term hereof as percentage rent the amount by which six percent (6%) of
Annual Gross Sales (as hereafter defined) exceeds the Minimum Monthly Rent
payable for the same period (the "Percentage Rent"). Tenant shall record at the
time of sale, in the presence of the customer, all receipts from sales or other
transactions, whether cash or credit in accordance with Tenant's point of sales
system in use in a majority of Tenant's restaurants in the region of the United
States where the Premises is located. Tenant shall keep (a) full and accurate
books of account and records in accordance with generally accepted accounting
principles consistently applied, including, without limitation, a sales journal,
general ledger, and all bank account statements showing deposits of Gross Sales
revenue, (b) all points of sales records with regard to the Gross Sales and
credits, refunds and other pertinent transactions made from or upon the
Premises, and (c) detailed point of sales records of any exclusions or
deductions from Gross Sales (including any exclusions or deductions from Gross
Sales of any subtenant, licensee or concessionaire). Such books, receipts and
records shall be kept for a period of three (3) years after the close of each
Lease year and shall be available for inspection and audit by Landlord and its
representatives as provided in Section 4(e) below.
c. Tenant shall submit to Landlord on or before the sixtieth (60th) day
following the end of each Lease Year a complete statement certified by a duly
authorized officer of Tenant of the Annual Gross Sales during the immediately
preceding Lease Year, the Minimum Monthly Rent and the Percentage Rent for said
Lease Year. If the Percentage Rent due for said Lease Year shall exceed the
Minimum Monthly Rent theretofore paid in respect of the same Lease Year, the
balance due shall be paid by Tenant with the submission of such statement. Each
statement required by this Section shall include and reflect all data necessary
for an accurate computation of the Percentage Rent due under this Lease. In
addition, upon request of Landlord, Tenant agrees to furnish to Landlord a copy
of Tenants state and local sales and use tax returns. The receipt by Landlord of
any statement or any payment of Percentage Rental for any period shall not bind
it as to the correctness of the statement or the payment.
d. As used herein, the term "Annual Gross Sales" means: the aggregate of
those sales made upon and from the Premises during the subject Lease Year for
all items sold to customers in the operation of Tenant's business, such sales to
include the entire amount of the price charged, whether wholly or partially in
cash or on credit with deduction being allowed for uncollected or uncollectible
credit. "Annual Gross Sales" shall not include (i) the amount of any sales, use
or gross receipts taxes collected from customers, (ii) receipts from the sale of
meals to employees of the restaurant, sold to them in the course of their
employment, (iii) any service charges made and collected by Tenant and turned
over to Tenant's employees in lieu of such employees receiving tips or
gratuities from Tenant's customers, (iv) proceeds from the sale of any of
Tenant's trade fixtures or equipment, (v) returned pie tin deposits, (vi)
receipts for product made on the Premises and transferred to another Marie
Callender outlet, (vii) receipts from pay telephone, cigarette and other vending
machines provided such do not occupy more than 50 square feet of floor area
within the Building, (viii) refunds or credits made by Tenant for returned
merchandise, provided the sale of such merchandise was previously included by
Tenant in the Annual Gross Sales, (ix) non-food promotional items sold at no
profit by Tenant, (x) credit card service charges, or (xi) the proceeds of the
sale of any franchise to operate the business on the Premises, and all fees,
charges, or rents charged to or received from any such franchise.
e. At its option and expense, Landlord, during reasonable business hours
and upon five (5) days' prior written notice to Tenant but not more often than
one (1) time in any twelve (12) month period, may cause an audit to be made of
Tenant's books and records relating to Annual Gross Sales made upon and from the
Premises for the period covered by any statement issued by the Tenant as set
forth herein, which audit shall take place at Tenant's corporate headquarters
(provided such are maintained within the continental United States; otherwise,
the books and records shall be provided by Tenant to Landlord in Albuquerque,
New Mexico, for audit and review). Such audit shall be conducted by either
Landlord or an agent or representative, including but not limited to a certified
public accountant to be designated by Landlord. If it shall be determined as a
result of such audit that there has been a deficiency in the payment of
Percentage Rental, then such deficiency shall become immediately due and payable
with interest at the rate of twelve percent (12.00%) per annum or at the maximum
legal interest rate, whichever is less, from the date when said payment should
have been made. In addition, if Tenant understates Annual Gross Sales by more
than two percent (2%) and if Landlord is entitled to any additional Percentage
Rental as a result of said understatement, or if such audit shows that Tenant
has failed to maintain the books of account and records required by this Section
so that Landlord is unable to verify the accuracy of Tenant's statement, then,
notwithstanding anything in this Lease to the contrary, Tenant shall pay to
Landlord all reasonable costs and expenses (including reasonable auditor and
attorney fees) which may be incurred by Landlord in conducting such audit and
collecting such underpayment if any. If Tenant willfully understates Annual
Gross Sales by more than six percent (6%) then, in addition to Landlord's
aforesaid rights, Landlord may terminate Tenant's rights of possession under
this Lease.
5. USE OF THE PREMISES
The Premises shall be used for a restaurant business or for any other
lawful purpose provided that Tenant first obtains the written consent of
Landlord for such other lawful purpose, which consent Landlord shall not
unreasonably withhold or delay.
6. TRADE FIXTURES
Tenant may place upon the Premises its inventory, trade fixtures,
furniture, machinery, and equipment (collectively, the "Equipment"). Any such
Equipment installed by Tenant in or upon the Premises, no matter how affixed,
during the Term may be removed at any time during the term of this Lease or any
extension thereof and for a period of thirty (30) days after the termination of
the Lease provided Tenant, as a condition to its right to make such removal,
shall restore the Premises to its condition prior to installation of the
Equipment, normal wear and tear to the Premises excepted.
7. (INTENTIONALLY OMITTED)
8. ALTERATIONS AND REPAIRS
a. From and after the Commencement Date, Tenant shall at its expense,
maintain the Premises and the improvements thereon, in the same condition in
which they were received, reasonable wear and tear, depreciation, damage and
loss from the elements, loss covered by insurance provided that such loss has
been, or will be, remedied in a prompt fashion by use of insurance proceeds
made available for such use, and other occurrences beyond the reasonable control
of Tenant excepted. Tenant shall maintain the Premises in a clean and sanitary
condition, in accordance with all applicable state, city, and county health and
sanitation laws and ordinances, and as directed by the applicable governmental
officials during the Term of this Lease; provided, however, any alteration,
repair, or change to the Premises which may be required by law, regulation or
rule, or resulting from non-compliance by Landlord with the terms of this Lease
shall be the sole responsibility and done at the expense of Landlord.
b. Tenant, at its sole cost and expense, with Landlord's consent, which
consent shall not be unreasonably withheld or delayed, shall have the right to
construct structural and nonstructural upgrades, changes, modifications,
remodels or alterations ("Alterations") to the interior and exterior of the
Premises, including the Building. However, Tenant shall not make structural
Alterations until complying with the following:
i. Tenant shall provide Landlord with ten (10) days written notice
stating the date of the commencement of the Alterations to enable Landlord
to post and record an appropriate notice of non-responsibility.
ii. Tenant shall acquire the approval of all appropriate governmental
agencies and, where applicable, receipt of all permits and authorizations.
c. Except as provided in Sections 14 and 15 hereof, Landlord shall not have
any responsibility to maintain the Building.
9. TAXES
a. In addition to the Minimum Monthly Rent, Tenant shall pay all of the
real and personal property taxes levied or assessed against the Premises and
Improvements thereon for tax years, or prorata shares thereof for partial tax
years, allocable to the period commencing with the Rent Commencement Date and
throughout the balance of the Term of this Lease. Tenant shall also pay the real
and personal property taxes levied or assessed against the Premises and
Improvements for the tax year 1998 covering the obligations of the prior tenant
in the Premises. This Section shall not be deemed or construed to require Tenant
to pay or discharge any tax which may be levied by any governmental authority
upon the income, profits, or business of Landlord, including rent due Landlord
hereunder, or any personal property taxes, franchise, inheritance or estate
taxes, or taxes upon rights of succession which may be levied against any,
estate or interest of Landlord, even though such taxes shall become a lien
against the Premises.
b. Landlord agrees that Tenant shall have the right, at Tenant's sole cost
and expense, to contest the legality or validity of any of the taxes which are
to be paid by Tenant pursuant to the foregoing provisions, and in the event of
any such contest, failure on the part of Tenant to pay any such tax, prior to
the delinquency date thereof, shall not constitute a default hereunder. Tenant,
upon the final determination of such contest, shall immediately pay and
discharge any judgment rendered against it, together with all costs and
charges incidental thereto. If the Tenant files a protest of the real property
taxes which are to be paid by Tenant pursuant to the foregoing provisions and
such taxes become delinquent, Tenant shall immediately deposit with the
Landlord, or with the court or governmental body hearing the protest, the taxes
assessed by the taxing authority, along with any interest and penalties then
due, as a condition to continuing the protest. Landlord further agrees at the
request of Tenant, to execute, or join in the execution of any instrument or
documents necessary in connection with any such contest, but at no expense to
Landlord.
c. Landlord agrees to either (i) forward to Tenant in a timely fashion the
periodic statements for taxes contemplated in Section 9(a), or (ii) join with
Tenant in the necessary formalities to insure that such statements are sent
directly to Tenant. Failure of Landlord to provide Tenant with the subject tax
bill within one hundred eighty (180) days after the delinquency date of any such
tax bill shall thereafter relieve Tenant of any responsibility whatsoever for
the payment of any interest and penalties due on such taxes.
10. MECHANICS' LIENS
a. Tenant agrees to keep the Premises free from the claims of persons who, at
the request of Tenant, furnish labor or material to or for the benefit of the
Premises. Tenant agrees to indemnify and hold harmless Landlord from and against
all loss, liabilities, suits and claims resulting from any and all such liens or
encumbrances. Notwithstanding anything in this Section to the contrary, if
Tenant in good faith contests the validity of any such lien or encumbrance, it
may post a bond to remove the lien from the Premises in lieu of satisfying any
such lien. During Tenant's construction or alteration of any improvements,
Landlord may post and keep posted on the Premises appropriate notices to protect
Landlord against the claims of persons who, at the request of Tenant, furnish
labor or materials to or for the benefit of the Premises.
b. Landlord shall pay and discharge all bills duly presented for goods and
materials delivered and for all services performed in connection with any
repairs or improvements to be performed by Landlord on the Premises. In the
event Landlord fails to make any such payment and a claim of lien to secure
payment therefor is filed against the Premises, Landlord shall, within ten (10)
days from the date such claim is filed, (i) pay and discharge such lien, or (ii)
notify Tenant that the claim upon which such lien is based has no validity and
is being contested in good faith, in which case Landlord may in lieu of payment
provide for such payment with an escrow holder in Albuquerque, New Mexico,
reasonably satisfactory to Tenant. In the event Landlord fails to make or
provide for such payment, Tenant may pay and discharge such lien and withhold
sums so paid, plus interest at twelve percent (12%) per annum or at the maximum
legal interest rate, whichever is less, from any monies, including rental, due
to Landlord under this Lease.
11. UTILITIES
Tenant shall pay, prior to the delinquency, all charges for utilities used
on the Premises during the term of this Lease. During the term of this Lease,
Landlord shall, at Tenant's request, grant to any utility company so requiring
such easements and rights of way over the Shopping Center as may be required for
the maintenance of the restaurant.
12. ASSIGNMENT; SUBLETTING
a. Tenant shall have the right to assign, hypothecate, or mortgage this
Lease, or sublet the Premises or any portion thereof, without the prior written
consent of Landlord, provided such assignment or sublease is:
i. To any corporation with which Tenant may merge or consolidate,
which acquires all or substantially all of the shares of stock or assets of
Tenant or which is a parent or subsidiary of Tenant, or which is the
successor corporation in the event of a corporate reorganization; or
ii. To any person, entity, partnership, or corporation which acquires
a majority of Tenant's restaurants, or a majority of Tenant's restaurants
in the state in which the Premises are located; or
iii. To a franchisee of Tenant; or
iv. To a nationally or regionally known or publicly traded restaurant
chain, including, but not limited to, Applebee's, Denny's, TGI Fridays,
Coco's, Carrows, Perkins, Baker's Square, or Chili's.
b. Any such assignment or sublease shall not relieve Tenant of liability
under this Lease unless expressly approved in writing by Landlord.
c. Except as provided above, Tenant shall not assign, let, or sublet this
Lease or the Premises or in any way transfer or hypothecate any of its interest
in this Lease or the Premises without first obtaining the written consent of
Landord, which consent will not be unreasonably withheld, conditioned, or
delayed. Landlord's consent shall be conditioned on Landlord's approval of the
economic viability of the proposed assignee or sublessee, Landlord's
determination that the proposed use of the Premises by the assignee or sublessee
is lawful and complies with the terms of this Lease, and such other conditions
as Landlord deems reasonably appropriate.
d. Any assignment or subletting shall be acknowledged by written agreement
executed by Landlord, Tenant and the assignee or sublettee.
13. INDEMNITY AND INSURANCE
a. During the Term of this Lease and any extensions thereof, Tenant agrees
to indemnify and save Landlord harmless from and against any and all claims
arising from any act or omission attributable to the negligence of Tenant or its
contractors, licensees, agents, servants, or employees arising from any
accident, injury, or damage whatsoever caused to any person or property
occurring in or on the Premises, or any part of it, and from and against all
costs, expenses, and liabilities incurred in or in connection with any such
claim or proceeding brought thereon except that Landlord shall be liable to
Tenant and shall indenmnify and hold Tenant harmless from and against any and
all claims arising from any act or omission attributable to the negligence of
Landlord or it contractors, licensees agents, servants or employees arising from
any accident, injury or damage whatsoever caused to any person or property
occurring in or on the Premises, or any part of it, and from and against all
costs, expenses, and liabilities incurred in or in connection with any such
claim or proceeding brought thereon.
Tenant shall maintain in full force during the Term of this Lease a policy
or policies of comprehensive general liability insurance, including property
damage, covering the Premises and its use and occupation by Tenant, insuring
against liability for injuries to persons and property and for death of any
person or persons occurring in or about the Premises. The liability under such
insurance shall be not less than Five Million Dollars ($5,000,000.00) [including
any coverage provided under an umbrella policy] for any one occurrence, and in
the aggregate. Tenant agrees to name Landlord and Landlord's mortgagee as an
additional insured and shall furnish Landlord with a certificate of insurance.
c. During the Term, Tenant shall, at its own expense, maintain in full
force a policy or policies of full standard fire, extended coverage,
and vandalism insurance under Tenant's blanket insurance policy covering the
insurable value of the Building. Tenant agrees to name Landlord and Landlord's
mortgagee as an additional insured as their interests may appear and shall
furnish Landlord with a certificate of insurance.
d. Tenant and Landlord each hereby waives any and all rights to recover
against the other, or against the officers, employees, agents, and
representatives of the other, for loss of or damage to such waiving party or its
property or the property of others under its control, where such loss or damage
is insured against under any insurance policy in force at the time of such loss
or damage. The foregoing waiver shall not be applicable should it result in the
loss of insurance available to restore or repair any loss to the Premises. Each
party shall cause each insurance policy obtained by it hereunder to provide that
the insurance company waives all of its rights of recovery by way of subrogation
against either party in connection with any damage covered by such policy.
14. DAMAGE OR DESTRUCTION
a. If, during the Term, the Building shall be partially or totally
destroyed from a risk covered by the insurance described in Section 13,
rendering the Building totally or partially inaccessible or untenable, the
Building shall be restored by Tenant to substantially the same condition it was
in immediately prior to the destruction, except to the extent Tenant's current
plans for its restaurant differ, and Tenant shall restore the Building in
accordance with the then current construction plans and specifications provided
such does not materially diminish the value or usability of the Building.
b. Tenant shall utilize the insurance proceeds paid or to be paid to
physically restore the Building. Tenant agrees that the restoration shall be
performed in a prompt, diligent, and good and workmanlike manner. Except as
otherwise provided below, such destruction shall not terminate this Lease.
Landlord shall bear the cost of restoration which exceeds the amount of the
insurance proceeds, Tenant's deductible and any co-insurance provided by Tenant.
If the existing laws governing building or zoning at the time of restoration do
not permit restoration, either party may terminate this Lease immediately by
giving notice to the other party effective as of the date of such damage or
destruction.
c. If, during the Term, thirty percent (30%) or less of the replacement
value of the Premises is totally or partially destroyed from a risk not covered
by the insurance described in Section 13, Tenant shall physically restore the
Premises to substantially the same condition as it was in immediately prior to
the destruction, except to the extent Tenant's current plans for its restaurant
differ and Tenant shall restore the Building in accordance with the then current
construction plans and specifications provided such does not materially diminish
the value or usability of the Building. Such destruction shall not terminate
this Lease. Landlord and Tenant shall bear the cost of restoration equally by
each depositing one-half of the portion of the restoration costs with an
independent escrow holder located in Albuquerque, New Mexico, with said funds
held in trust. Tenant shall be reimbursed for such restoration by a voucher
type system administered by the escrow holder. If the existing laws do not
permit the restoration, either party may terminate this Lease immediately by
giving notice to the other party.
d. If the cost of the restoration exceeds thirty percent (30%) of the
replacement value of the Premises destroyed by a risk not covered by insurance,
Tenant may elect to terminate the Lease by providing a (30) day written notice
to Landlord which shall be effective as of the date of the damage or
destruction; provided, however, that if Landlord elects to promptly repair,
restore, or reconstruct the Premises to substantially its previous condition, at
Landlord's sole cost and expense, then this Lease shall not be terminable by
Tenant, but rents called for hereunder shall be abated until such repairs,
restoration, or reconstruction is completed. Should Tenant elect not to
terminate this Lease, then Tenant shall physically restore the Premises and
proceed in accordance with Section 14.c. with Landlord and Tenant bearing the
cost of such restoration equally.
e. In the event the Premises shall be partially or totally destroyed from a
risk covered or not covered by the insurance described in Section 13 within the
last two (2) years in the original Term of the Lease or during any option
period, Tenant may, at its election, by giving thirty (30) days written notice
following the partial or total destruction of the Premises, terminate the Lease
effective as of the date of the damage or destruction.
f. In the event the Premises is damaged to the extent that it is no longer
reasonably suitable for the normal conduct of Tenant's business as carried on
prior to said damage, unless Tenant has the right under the terms of this Lease
to terminate the Lease as a result of the damage or destruction to the Premises,
Tenant shall continue to pay Landlord the Minimum Monthly Rental due under this
Lease; provided, however, that, during the period of repair, the Minimum Monthly
Rental shall be (i) totally abated if Tenant must close down its business
completely at the Premises, or (ii) equitably reduced, in the event Tenant
remain open for business the Premises, in proportion to the interference with
Tenant's normal conduct of business. If Tenant has the right to terminate this
Lease as a result of damage or destruction to the Premises, Tenant shall
continue to pay Landlord the Minimum Monthly Rental due under this Lease through
the effective date of such termination, which date shall be the date of the
damage or destruction.
g. In the event that the restoration as provided under this Section 14 is
not capable of being completed within a period of nine (9) months from the date
of damage or destruction, then Tenant, at its option, may terminate this Lease
upon the giving of ten (10) days written notice to Landlord of its intention to
do so effective as of the date of such damage or destruction, provided that
Tenant releases to Landlord any claim to insurance proceeds provided for in
Section 13 herein.
15. CONDEMNATION OF PREMISES
a. Should any public or quasi-public authority or private corporation or
individual having the power of condemnation ("Condemnor") exercise any
governmental power, whether by legal proceedings or otherwise or by a voluntary
sale or transfer by Landlord to any Condemnor under threat of condemnation or
other legal proceedings for condemnation ("Condemnation") against the Premises
during the Term, the rights and obligations of the parties shall be determined
pursuant to this Section 15. If the Premises is totally taken by Condemnation,
the Lease shall terminate on the date the Condemnor has the right to possession
of the Premises ("Date of Taking"). Should a phased condemnation occur, Tenant
may terminate at the point Tenant's business is substantially prevented or
impaired.
b. Tenant shall have the right to elect to terminate this Lease should a
Condemnor by Condemnation acquire any of the following:
i. Any portion of the Building;
ii. In excess of ten percent (1O%) of the parking spaces within the
Premises;
iii. Any part of the Shopping Center, provided the Premises is located
within a Shopping Center, such as would result in a substantial impairment
of ingress or egress from or to the Shopping Center or the Premises as a
consequence;
iv. In excess of twenty-five percent (25%) of the gross leasable area
of the Shopping Center other than the Premises; or
v. Any taking of the Premises, Common Area, or adjacent streets,
highways or properties that would reasonably be anticipated to
substantially diminish Tenant's business or any taking as a result of which
Tenant would not thereafter be in conformance with governmental ordinances.
c. If Tenant elects to terminate this Lease, Tenant must exercise its right
to terminate pursuant to this Section by giving notice to Landlord within
ninety (90) days after the nature and extent of the taking has been ascertained.
The effective date of the termination shall be the Date of Taking.
d. If the Lease is terminated, the Minimum Monthly Rent and all other
obligations of Tenant shall be prorated to the Date of Taking and Landlord shall
pay to Tenant the Minimum Monthly Rent and any other payments made by Tenant for
any period beyond the Date of Taking.
e. If any portion of the Premises is taken by Condemnation and this Lease
remains in full force and effect, then on the Date of Taking the following shall
occur:
i. The Minimum Monthly Rent, Percentage Rent (and break point for such
Rent) and other obligations of Tenant hereunder shall be reduced for the
remainder of the Term in the same proportion that the number of square feet
of the Premises so taken bears to the original number of square feet in the
Premises.
ii. Landlord shall promptly restore the Premises to a condition
substantially similar to that which existed prior to the Condemnation. The
restoration shall be subject to and shall be performed in accordance with
the provisions of Section 14.
iii. Tenant shall be entitled to a reasonable abatement or diminution
of the Minimum Monthly Rent and any other monetary obligation to be paid
under this Lease during the time required by Landlord to restore the
Premises, taking into consideration the time and extent of interference
with Tenant's business.
f. All the compensation, sums or anything of Value awarded, paid, or
received for Premises on a total or partial Condemnation ("Award") shall belong
to and be paid to Landlord, except that Tenant shall receive from the Award the
value of Tenant's leasehold interest in the Premises and the value of Tenant's
trade fixtures to the extent taken in the Condemnation. Tenant shall also be
entitled to compensation for the cost of removal of and relocation of Tenant's
furniture, trade fixtures and equipment and Tenant's loss of goodwill. It is
agreed, with respect to this Section, that the 'tenant' fixtures installed in or
at the Premises prior to the date of this Lease by the previous landlord are the
property of Landlord and Landlord shall be entitled to any Award made with
respect thereto.
g. Should the Premises be subject to Condemnation for a period of less than
one (1) year, then this shall constitute a Temporary Condemnation, during which
time all the provisions of this Lease shall remain in full force and effect,
except that all Rental obligations and all other monetary obligations shall be
abated or reduced to the extent to which the Condemnation interferes with
Tenant's use of the Premises. Landlord shall be entitled to damages against the
Condemnor for loss of Rent hereunder and such other relief as provided by law
as a result of any such temporary Condemnation, and Tenant shall be entitled to
damages against the Condemnor for the interruption of Tenant's business and such
other relief as provided by law as a result of any such temporary Condemnation.
h. Each party waives the provisions of any law allowing either party to
petition a court to terminate this Lease in the event of a partial taking of the
Premises, except as otherwise provided herein.
16. COVENANT OF TITLE AND QUIET ENJOYMENT
Landlord covenants that Landlord is well seized of and has good title to
the Premises, does warrant and will defend the title thereto, and, except as
otherwise provided in this Lease, will indemnify Tenant against any damage and
expense which Tenant may suffer by reason of any lien, encumbrance, restriction
or defect in the title or description herein of the Premises. If, at any time,
Landlord's title or right to receive rent hereunder is disputed, or there is a
change of ownership of Landlord's estate by act of the parties or operation of
law, Tenant may deposit the rent accrued and accruing by interpleader in a court
of competent jurisdiction in Albuquerque, New Mexico, until a determination has
been made by such court as to the party entitled thereto. So long as Tenant is
not in default under the terms of this Lease, Tenant shall have quiet enjoyment
of the Premises during the entire term of the Lease and any extension thereof.
17. (INTENTIONALLY OMITTED)
18. COMMON AREAS AND APPURTENANT RIGHTS
a. Tenant and its employees and invitees shall have free and unimpaired
access to the Premises and to the common area (as hereinafter defined) within
the "Promenade Shopping Center" (the "Shopping Center") as permitted by the
terms of the Easements with Covenants and Restrictions Affecting Land dated
March 24, 1986, and recorded in the office of the County Clerk for Bernalillo
County, New Mexico, in Book Misc. 334-A, Page 507-528, as amended by First
Amendment to Easements with Covenants and Restrictions Affecting Land dated
June 11, 1986, and recorded in the office of the County Clerk for Bernalillo
County, New Mexico, in Book MS. 363-A, Page 377380 (collectively, the "ECR").
b. The term "Common Area" shall be deemed to mean all areas, improvements,
space, equipment and special services in or at the Shopping Center provided by
Landlord for the common or joint use and benefit of the tenants of the Shopping
Center, their officers, employees, agents, servants, customers and other
invitees, including without limitation, all parking areas, parking area
lighting, service areas, access roads, sidewalks, curbs, driveways, entrances
and exits, retaining walls, planting and landscaped areas, truck serviceways or
tunnels, loading docks, pedestrian malls, courts, stairs, ramps, exterior
stairs, comfort and first aid stations, washrooms, parcel pick-up stations,
maintenance buildings, and on-site and off-site signs identifying or advertising
the Shopping Center.
c. To the extent permitted by the ECR, Landlord, for itself, its heirs,
assigns, axid legal representatives, hereby grants to Tenant for the benefit of
Tenant, its employees, invitees, customers, subtenants, licensees, and the
employees, customers and invitees of its subtenants and licensees, an
irrevocable non-exclusive license during the Term of this Lease, and any
extension thereof, for the use of the Common Area for the parking of vehicles
and for the ingress and egress of both pedestrians and vehicles to and from the
Premises, and to and from the streets adjacent to the Shopping Center, and over
and upon the parldng areas (collectively referred to as the "Appurtenant
Rights"). Except as provided in Section 18.g, no rental other than that for the
Premises will be charged Tenant on account of the Common Area. No charge will be
made for the use of the Common Area by persons acting under this grant of
license without Tenant's written consent
d. Tenant, at its cost, shall have the right to specifically enforce the
obligations of the "Developer," or its successors or assigns, under the ECR to
ensure the appropriate maintenance and repair of the Common Areas and the
appropriate maintenance of general liability insurance with respect thereto
should such party not be in compliance therewith.
e. Tenant agrees to pay its proportionate share of expenses ("Common Area
Costs") as provided in the ECR. Such expenses shall be equitably prorated for
the partial years beginning with the Rent Commencement Date and ending with
termination of this Lease. Tenant shall pay to such to Landlord or, if directed
by Landlord, to the party charged under the terms of the ECR with supervision,
maintenance and repair of the Common Areas. Tenant shall be entitled to any and
all information available to Landlord under the terms of the ECR with respect to
the Common Area Costs, and shall be entitled, as a licensee of the Common Area,
to such rights as Landlord may have under the ECR to audit and, if reasonably
appropriate, contest such Costs. Upon reasonable request from Landlord, Tenant
shall provide any information provided to it directly from the party charged
under the terms of the ECR with supervision, maintenance and repair of the
Common Areas, and shall join Landlord in any protest over, or negotiation of,
the Common Area Costs if requested by Landlord.
19. SUBORDINATION AND NON-DISTURBANCE
a. Tenant hereby agrees that this Lease shall be subject and subordinate to
the lien of any mortgage or deed of trust which Landlord has already or may
place upon the Premises and to all terms, conditions, and provisions thereof, to
all advances made, and to any renewals, extensions, modifications, or
replacements thereof Provided, however, that Tenant will agree to such
subordination only so long as the lender executes a non-disturbance agreement
in a form reasonably acceptable to Tenant providing that if the Lease is in full
force and effect, there are no defaults thereunder on the part of Tenant, and
the Tenant does not prepay rent more than thirty (30) days in advance, the right
of possession of Tenant to the Premises and Tenant's rights arising out of this
Lease shall not be affected or disturbed by the mortgagee, trustee, or
beneficiary in the exercise of any of its rights under the mortgage, deed of
trust or the note secured thereby, nor shall Tenant be named as a party
defendant to any foreclosure of the lien of mortgage, or deed of trust nor in
any other way be deprived of its rights under this Lease. In the event that the
mortgagee, beneficiary, or any other person, acquires title to the Premises
pursuant to the exercise of any remedy provided for in the mortgage or deed of
trust, this Lease shall not be terminated or affected by said foreclosure or
sale, or any such proceeding, and the mortgagee or beneficiary shall agree that
any sale of the Premises pursuant to the exercise of any rights and remedies
under the mortgage, deed of trust or otherwise, shall be made subject to this
Lease and the rights of the Tenant hereunder. Tenant agrees to attorn to the
mortgagee, beneficiary or such other person as its new landlord, and the Lease
shall continue in full force and effect as a direct Lease between Tenant and
mortgagee, beneficiary or such other person, upon all the terms, covenants, and
agreements set forth in this Lease. The parties hereto agree to execute or
obtain execution of such reasonable documents as may be necessary to effectuate
such subordination, non-disturbance, and attornment.
b. In the event that Landlord has already placed a mortgage or deed of
trust on the Premises prior to the commencement of the term of this Lease,
Landlord shall obtain, as an express condition to the effectiveness of this
Lease, a Non-Disturbance Agreement in a form acceptable to Tenant from any such
mortgagee or beneficiary, which agreement shall be executed substantially in the
form attached to this Lease as Exhibit "I" prior to the Commencement Date.
20. WARRANTIES OF LANDLORD
Landlord represents and warrants to and agrees with Tenant as conditions of
this Lease that during the term of this. Lease and any extensions hereof.
a. The Shopping Center is zoned for use as a restaurant, and there are no
easements, covenants, conditions, restrictions, rights of way of record or
otherwise, governmental rules, statutes, ordinances, policies or plans, which
would prohibit or materially interfere with the operation of a restaurant in the
Shopping Center; and
b. Public water, telephone, electric power and natural gas services and
sewers sufficient to handle the requirements of a self-sufficient retail
restaurant exist or are available at not less than five (5) feet within the
boundary lines of the Premises; and
c. All taxes on the Premises, except current taxes not delinquent, have
been paid in full, prior to the commencement of the term of this Lease; and
d. Landlord is able to and will place Tenant in the peaceful and
undisturbed possession of the Premises on or before commencement of the Term
hereof, and
e. Landlord is not in default under the terms and provisions of any ground
lease, mortgage, or deed of trust placed upon or affecting the Premises; and
f. To the knowledge of Landlord, but having undertaker no independent
inquiry, that no "Hazardous Materials," which shall include, but not be limited
to, substances which are flammable, explosive, corrosive, radioactive, toxic,
petroleum and petroleum products and any substances defined as hazardous
substances, hazardous materials, toxic substances, or hazardous wastes in the
federal Comprehensive Environmental Response Compensation and Liability Act of
1980, the Federal Hazardous Materials Transportation Act, the Resource
Conservation and Recovery Act, all amendments to these laws and regulations
adopted or publications promulgated pursuant to these laws, and shall also
include those asbestos-containing materials defined and described in
Environmental Protection Agency Report No. 56/5-85-024 (June, 1985) or any
related or successor report, or other applicable governmental regulations
defining or describing such materials, are presently located in, on or under the
Premises including, without limitation, the subsurface soils and groundwater,
have migrated to the Premises from another source, have been installed, used,
generated, manufactured, stored, released or disposed of on, under or about the
Premises by Landlord or any third person, nor has Landlord received any notice
or communication regarding any alleged Hazardous Materials on or about the
Premises and that the Premises is in compliance with all laws,, ordinances,
rules and regulations relating to any such Hazardous Materials. Should any
Hazardous Materials for which Landlord is responsible (as determined by
applicable law) be found on the Premises during the Term or any extension
thereof, Landlord shall bear all costs for the removal and remediation of the
Hazardous Materials and shall restore the Premises to substantially the same
condition as it was in immediately prior to the removal and remediation work.
Landlord shall immediately notify Tenant in writing of (i) any enforcement,
clean-up, removal or other governmental or regulatory action instituted,
completed or threatened pursuant to any Hazardous Materials Laws; (ii) any claim
made or threatened by any person against the Landlord or the Premises relating
to damage, contribution, cost recovery compensation, loss or injury resulting
from or claimed to result from any Hazardous Materials; and (iii) any reports
made to any environmental agency arising out of or in connection with any
Hazardous Materials in or removed from the Premises including any complaints,
notices, warnings or asserted violations in connection therewith. Landlord shall
also supply to Tenant as promptly as possibly, and in no event later than five
(5) business days after Landlord first receives or sends the same, with copies
of all claims, reports, complaints, notices, warnings or asserted violations
relating in any way to the Premises.
g. That as of the date of execution of this Lease, it has no knowledge of
any proposed Condemnation of all or any part of the Premises. Should any or a
portion of the Premises be subject to a Condemnation action by a Condemnor,
which occurs prior to the Commencement Date of the Lease, then Tenant shall be
under no obligation to commence or continue performing under the Lease, and all
Rental and other obligations shall be abated until such time that Tenant can
determine that the Premises shall not be affected by such Condemnation action.
h. That as of the date of execution of this Lease, that the contemplated
use of the Premises as a Marie Callender's restaurant will not conflict with the
covenants, conditions or restrictions contained in the ECR.
i. Landlord agrees to indemnify, defend, and hold Tenant harmless from and
against all claims, demands, losses, damages, clean-up costs, liabilities or
judgments imposed against Tenant, including all interest, penalties, fines and
other sanctions, any costs or expenses in connection therewith, including
reasonable attorneys' fees and expenses arising out of or in connection with the
breach or misrepresentation of the representations and warranties of Landlord
set forth herein or the failure by Landlord to perform its warranties and
representations set forth herein and for which suit is brought or claims
asserted against Tenant.
21. RIGHT OF FIRST REFUSAL
a. It is agreed that should Landlord, or Landlord's heirs, executors,
grantees, successors or assigns, at any time during the Term of this Lease or
any extension thereof, receive an offer to purchase the Premises, or any part
thereof, and Landlord desires to accept such offer; or should Landlord during
any such time make an offer to sell the Premises, or any part thereof, Landlord
shall give Tenant thirty (30) days notice in writing of such offer setting forth
the name and address of the proposed purchaser, the amount of the proposed
purchase price, and all other terms and conditions of such offer, and Tenant
shall have the first option to purchase the Premises which is the subject of the
offer by giving written notice to Landlord of its intention to purchase within
said thirty (30) day period at the same price and on the same terms of any such
offer, it being understood that in the event Tenant does not give notice of its
intention to exercise such option to purchase within such period, this Lease and
all of its terms and conditions shall nevertheless remain in full force and
effect and Landlord and any purchaser or purchasers of the Premises shall be
bound thereby. In the event that the Premises set forth in the offer is not sold
for any reason, Tenant shall have, upon the same conditions and notice, the
continuing right of first refusal to purchase the Premises or any put thereof
upon the terms of any subsequent offer or offers to purchase.
b. In the event the foregoing option is exercised, Landlord shall convey to
Tenant a merchantable title in fee simple the Premises including all Appurtenant
Rights thereto by good and sufficient warranty deed, with release of rights of
spouses, if any, and free from all liens and encumbrances whatsoever.
c. In addition, in the event of the exercise of such option, all monies
shall be placed with an escrow agent of Tenant's designation and the settlement
of the purchase price and the conveyance to Tenant shall take place in escrow.
d. Within thirty (30) days of the date of exercise of such option, Landlord
will furnish to Tenant at Landlord's expense an ALTA title insurance policy from
a company acceptable to Tenant, in its usual form, brought down to such date of
exercise, guaranteeing Tenant against loss or damage to the extent of the
purchase price by reason of defects in or liens upon Landlord's title, subject
only to the usual exceptions contained in guaranty title policies of the issuing
company. Settlement of the purchase price and conveyance to the Tenant shall be
made within ninety (90) days from such date of exercise. Taxes, utilities, rents
and other current expenses shall be adjusted as of the date of closing.
e. In the event there are any conflicts between the terms of this Lease
concerning the exercise of the aforementioned option involving the right of
first refusal, and the terms contained in the offer which Tenant must accept if
Tenant desires to purchase the Premises, then the terms of this Lease shall
control and supersede those contained in such offer.
22. INSPECTION
Landlord may enter upon the Premises at any reasonable time (i.e., nonpeak
business hours) and upon at least 48 hours prior notification to Tenant for the
purpose of inspecting the Premises except in cases of emergency such as fire, in
which case Landlord may enter the Premises upon reasonable notice given the
emergency. Landlord shall be permitted to place upon the Premises any usual "For
Lease" or "For Sale" signs within one hundred and twenty (120) days prior to
expiration of the Lease; provided, that Tenant has notified Landlord of its
intent to terminate the Lease prior to such expiration date.
23. WRITTEN CONSENT
Whenever the "prior written consent" of either Landlord or Tenant is
referred to in this Lease, it is understood and agreed that such consent shall
not be unreasonably withheld or delayed by Landlord or Tenant, unless otherwise
expressly stated. In the event the requested prior written consent is not
received by the'requesting party within @ (30) days (or such shorter specified
time frame) of receipt of said notice by the nonrequesting party, such consent
shall be deemed to have been given.
24. INVESTMENT TAX CREDIT
Landlord expressly waives and relinquishes in favor of Tenant any rights to
claim the benefit of or to use any federal or state investment tax credits that
are currently or may become available during the Term of this Lease as a result
of any installation of any equipment, furniture or fixtures installed by Tenant
in or on the Premises, whether or not such items become a part of the realty,
and agrees to execute and deliver to Tenant any election form required to
evidence Tenant's right to claim investment tax credits.
25. OPTION TO RENEW
As part of the consideration for the execution of this Lease, Landlord hereby
grants to Tenant options to extend and renew this Lease for three (3)
consecutive five (5) year terms upon the same terms and conditions hereof
provided:
(a) Tenant shall notify Landlord of its intent to exercise any such option
not less than six (6) months but no more than twelve (12) months prior to the
expiration date of the Lease or any renewal thereof, and
(b) Tenant shall pay Minimum Monthly Rent for its use of the Premises
during the Option Term determined by the following formulae:
The Minimum Monthly Rental to be paid by Tenant during the First Extended
Term of the Lease, if exercised by Tenant, shall be the same as the Minimum
Monthly Rental charged during the Term of the Lease. The Minimum Monthly Rental
to be paid by Tenant during the Second Extended Term, if exercised by Tenant,
shall be at the then Fair Market Value of the Premises considering the best use
of the Premises as a family style restaurant (the 'FMV Rental").
Landlord and Tenant shall have thirty (30) days from the date Landlord
receives the option notice from Tenant exercising the option for the Second
Extended Term in which to agree to the FMV Rental during the Second Extended
Term. If the parties are unable to agree on the FMV Rental for the Second
Extended Term within such thirty (30) day period, then within ten (10) days
after the expiration of that period, each party, at its cost and by giving
notice to the other party, shall appoint an MAI real estate appraiser with at
least five (5) years full-time commercial appraisal experience in the area in
which the Premises is located to appraise and set the FMV Rental. If a party
does not appoint an appraiser within ten (10) days after the other party has
given notice of the name of its appraiser, the single appraiser appointed shall
be the sole appraiser and shall set the FMV Rental. If the two (2) appraisers
are appointed by the parties as stated in this paragraph, they shall meet
promptly and attempt to set the FMV Rental. If they are unable to agree within
thirty (30) days after the second appraiser has been appointed, they shall
attempt to select a third (3rd) appraiser meeting the qualifications stated in
this paragraph within ten (10) days after the last day the two (2) appraisers
are given to set the FMV Rental. If they are unable to agree on the third
appraiser, either of the parties to this Lease, by giving ten (10) days' notice
to the other party, can apply to the then president of the Albuquerque Board of
Realtors or to a presiding judge of the Second Judicial District Court for the
County of Bernalillo for the selection of a third (3rd) appraiser who meets the
qualifications stated in this paragraph. Each of the parties shall bear one-half
(1/2) of the cost of appointing the third (3rd) appraiser and of paying the
third (3rd) appraiser's fee. The third (3rd) appraiser, however selected, shall
be a person who has not previously acted in any capacity for either party.
Within thirty (30) days. after the selection of a third (3rd) appraiser, a
majority of the appraisers shall set the FMV Rental. If a majority of the
appraisers are unable to set the FMV Rental within the stipulated period of
time, the three (3) appraisals shall be added together and their total divided
by three (3); the resulting quotient shall be the FMV Rental. If, however, the
low appraisal and/or the high appraisal are/is more than twenty percent (20%)
lower and/or higher than the middle appraisal, as the case may be, the low
appraisal and/or the high appraisal shall be disregarded. If only one (1)
appraisal is disregarded, the remaining two appraisals shall be added together
and their total divided by two (2); the resulting quotient shall be the FMV
Rental. If both the low appraisal and high appraisal are disregarded as stated
in this paragraph, the middle appraisal shall be the FMV Rental.
After the FMV Rental for the Second Extended Term has been set, the
appraiser shall immediately notify Landlord and Tenant. If Tenant objects to the
FMV Rental that has been set, Tenant shall have the right to have this Lease
expire at the end of the Second Extended Term. Tenant's election to allow this
Lease to expire after the end of the Second Extended Term must be exercised
within thirty (30) days after receipt of notice from the appraisers of the FMV
Rental for the Second Extended Term. If Tenant does not exercise its election
within such thirty (30) day period, the term of this Lease shall be extended as
provided for in this paragraph.
The Minimum Monthly Rental for the Third Extended Term, if exercised by
Tenant, will be calculated in the same manner as the Second Extended Term,
including Tenant's election to allow the Lease to expire at the end of the
Second Extended Term if Tenant objects to the FMV Rental that has been set.
26. TENANT'S DEFAULT; LANDLORD'S REMEDIES
The occurrence of any of the following shall constitute a default by
Tenant:
a. Failure to pay rent when due if the failure continues for ten (10) days
after written notice has been received by Tenant;
b. Failure to perform any other provision of this Lease if the failure to
perform is not cured within thirty (30) days after written notice has been
received by Tenant. If the default cannot reasonably be cured within thirty (30)
days, Tenant shall not be in default of this Lease if Tenant commences to cure
the default within said thirty (30) day period and thereafter diligently and in
good faith continues to cure the default.
The purpose of the notice requirements set forth in Sections a. and b.
above is to extend the notice requirements of the unlawful detainer statutes of
the State of New Mexico or statutes of similar import.
c. In the event of any such default by Tenant, Landlord may pursue any
remedy at law or in equity available to it for Tenant's default.
d. If Rent due hereunder is not received by the Landlord within seven (7)
days of the due date therefor, then, in addition to any other charges due
hereunder, the Landlord shall be entitled to collect from the Tenant, in
addition to such rent and without demand to the Tenant, a late charge equal to
five percent (5.00%) of the Rent past due.
e. If a check tendered by the Tenant is returned due to insufficient funds
or closed account the Landlord shall also be allowed to collect from Tenant in
addition to the rent and late charge, if any, due, a charge equal to $100 for
its handling the returned check plus the charge assessed to it by its bank for
return of such check.
27. LANDLORDS'S DEFAULT; TENANT'S REMEDIES
a. Landlord shall be in default of this Lease if it fails or refuses to
perform any provision of this Lease that it is obligated to perform if the
failure to perform is not cured within thirty (30) days after notice of the
default has been given by Tenant to Landlord. If the default cannot reasonably
be cured within (30) days, Landlord shall not be in default of this Lease if
Landlord commences to cure the default within the thirty (30) day period and
diligently and in good faith continues to cure the default.
b. Tenant, at any time after Landlord commits a default, may cure the
default at Landlord's cost. If Tenant at any time, by reason of Landlord's
default, pays any sum or does any act that requires the payment of any sum, the
sum paid by Tenant shall be due immediately from Landlord to Tenant at the time
the sum is paid, and, if paid at a later date, shall bear interest at the
maximwn rate permitted by law to charge from the date the sum is paid by Tenant
until Tenant is reimbursed by Landlord. If Landlord fails to reimburse Tenant as
required by this paragraph, Tenant shall have the right to sue Landlord for the
amounts advanced by Tenant for Landlord, plus interest as provided for herein,
plus its reasonable attorney's fees and costs incurred in such action provided
that it prevails in such action. Tenant shall not have right to withhold from
future Rent due the sum Tenant has paid provided Landlord is paying the Rent to
a bona fide holder of a mortgage encumbering the Premises.
28. BROKERAGE COMMISSIONS
Landlord and Tenant each warrants and represents to the other that there
are no brokers' or finders' fees or any real estate commissions due to any
broker, agent or other party in connection with the negotiation or execution of
this Lease, or on behalf of either of them. Each party shall indemnify the other
with respect to compensation, commissions, fees or other sums claimed to be due
or owing with respect to the representations made by Landlord or Tenant, as
applicable.
29. MORTGAGING OF LEASEHOLD ESTATE
In the event that Tenant shall pledge its leasehold estate as security for
an indebtedness in any form whatsoever (this pledge hereinafter referred to as a
"mortgage"), and if the holder of the indebtedness secured by the leasehold
estate (hereinafter "Mortgagee") notifies Landlord of the execution of such
mortgage and the name and place and method for service of notices upon such
Mortgagee, then and in such event, Landlord hereby agrees for the benefit of
Tenant and such Mortgagee as follows:
a. That Landlord will give to any such Mortgagee simultaneously with
service on Tenant a duplicate of any and all notices or demands given by
Landlord to Tenant and no such notice to Tenant shall be effective unless a copy
is so served upon the Mortgagee.
b. In the event of any default by Tenant hereunder, or under the terms of
the mortgage, such Mortgagee shall have the privilege of performing any of
Tenant's covenants or of curing any defaults by Tenant or of exercising any
election, option or privilege conferred upon Tenant by the terms of this Lease
and Landlord shall accept performance by or at the instance of such Mortgagee as
if the same had been made by Tenant.
c. Landlord shall not terminate this Lease or Tenant's right to possession
for any default of Tenant if, within a period of thirty (30) days after the
expiration of the period of time within which Tenant might cure such default
such default is cured or caused to be cured by such Mortgagee, or if within a
period of thirty (30) days after the expiration of the period of time within
which Tenant might commence to eliminate the cause of such default, such
Mortgagee commences to eliminate the cause of such default and proceeds
therewith diligently and with reasonable dispatch.
d. No union of the interests of Landlord and Tenant herein shall result in
a merger of this Lease in the fee interest.
e. No liability for the payment of Rental or the performance of any of
Tenant's covenants and agreements hereunder shall attach to or be imposed upon
any Mortgagee, while not in possession of the Premises, all such liability being
hereby expressly waived by Landlord.
f. The execution and delivery of a leasehold mortgage or deed of trust and
a conditional assignment of this Lease as collateral security therefor shall not
be deemed a lease assignment for any other purpose.
g. In the event of any termination of this Lease prior to the expiration of
the Term, except by eminent domain, Landlord shall serve upon the Mortgagee, in
the manner provided in Section 29.a, written notice of the termination together
with a statement of any and all sums which would at that time be due under this
Lease but for such termination, and of all other defaults, if any, under this
Lease then known to Landlord. The Mortgagee shall then have an option to obtain
a new lease upon the same terms and conditions set forth in this Lease. This
option must be exercised by written notice to Landlord given within forty-five
(45) days from the date the Mortgagee receives the Landlord's notice and
statement. The new lease shall require the Mortgagee to cure all defaults of
Tenant under this Lease which are reasonably susceptible of being cured by the
Mortgagee, and any default of Tenant which is not reasonably susceptible of
being cured by the Mortgagee shall be waived by Landlord.
30. OWNERSHIP OF IMPROVEMENTS, SIGNS, FIXTURES, OR EQUIPMENT OF TENANT OR ANY
SUBLESSEE
All removable improvements placed upon or attached to the Premises by
Tenant, trade fixtures attached to the Premises by Tenant, equipment installed
on or at the Premises by Tenant, and signs affixed to the Premises by Tenant,
shall be the property of and belong solely to Tenant no matter how affixed to be
used, altered, and disposed of as Tenant so wishes. All real estate fixtures and
improvements attached or made to the Premises by Tenant shall, at the end of the
Term of this Lease, or upon earlier termination as provided herein, become the
property of Landlord. Tenant or any sublessee is hereby given the right at any
time during the Term of this Lease or any extension thereof and for a period of
thirty (30) days after the termination of this Lease, or any extension thereof,
by lapse of time or otherwise to enter upon and remove from the Premises any
such improvements, signs, fixtures, or equipment of Tenant or any sublessee, but
shall not be obligated to do so, provided such party complies with the
obligations of restoration in Section 6. If Tenant or any sublessee fails to
remove the improvements, signs, fixtures, or equipment of Tenant or any
sublessee within thirty (30) days after termination of the Lease, such
improvements, signs, fixtures, or equipment shall be deemed abandoned and the
right, title and interest of the Tenant or an sublessee therein waived.
31. MISCELLANEOUS
a. Binding on Successors
The provisions of this Lease shall be binding upon and shall inure to the
benefit of the heirs, successors, assigns, and legal representatives of the
parties hereto.
b. Captions
The captions and headings herein are for convenience and reference only and
in no way define or limit the scope or content of this Lease or in any way
affect its provisions.
c. Gender
Whenever the sense of this Lease so requires, the use of (1) the singular
number shall be deemed to include the plural, (2) the masculine gender shall be
deemed to include the feminine or neuter gender, and (3) the neuter gender shall
be deemed to include the masculine or feminine gender.
d. Qualification
Each party represents that it is authorized to do business in the state in
which the Premises are located and will remain so during the Term hereof, and in
all respects is duly authorized to enter into and perform this Lease.
e. Entire Agreement
This Lease embodies the entire agreement and understanding between the
parties and supersedes all prior negotiations, agreements and understanding
between them, oral or written, and any provision of this Lease may be modified,
waived or discharged only by an instrunent in writing signed by both parties
hereto.
f Time of Essence
Time is of the essence in this Lease.
g. Notices
All notices required or permitted under this Lease shall be in writing and
shall be served on the parties at their respective addresses stated below. Any
notice shall be either (a) sent by certified mail, return receipt requested, in
which case notice shall be deemed delivered three (3) business days after
deposit, postage prepaid in the U.S. mail, or (b) sent by a nationally
recognized overnight courier, in which case notice shall be deemed delivered one
(1) business day after deposit with the courier. The addresses of the parties as
set forth below may be changed by written notice to the other party; provided,
however, that no notice of a change of address shall be effective until actual
receipt of the notice. The notice addresses for the parties are:
IF TO LANDLORD: Hereford Company LLC
Care of John Black
Westwood Realty
2600 American Road SE
Rio Rancho, New Mexico 87124
Taxpayer Identification Number:
IF TO TENANT: Marie Callender Pie Shops, Inc.
ATTN: Vice President, Real Estate
1100 Town and Country, Suite 1300
Orange, California 92668
h. Force Majeure
In the event that either party hereto shall be delayed or hindered in or
prevented from the performance of any act required hereunder by reason of
strikes, lock-outs, labor troubles, inability to procure materials, failure of
power, restrictive governmental laws or regulations, riots, insurrection, was,
military or usurped power, sabotage, terrorism, unusually severe weather, acts
of God, fire or other casualty or other reason (but excluding financial
inability) of a like nature beyond the reasonable control of the party delayed
in performing work or doing acts required under the terms of this Lease, then
performance of such act shall be excused for the period of the delay, and the
period for the performance of any such act shall be extended for a period
equivalent to the period of the delay.
i. Legal Expenses
In the event of the bringing of any action by either party hereto against
the other hereon or hereunder, or by reason of the breach of any term, covenant
or condition on the part of the other party, or arising out of this Lease, the
party in whose favor final judgment shall be entered shall be entitled to have
and recover from the other party costs and reasonable attorneys' fees to be
fixed by the court which shall have rendered such judgment.
j. Waiver
The waiver by either party hereto of any term, covenant or condition of
this Lease to be performed by the other shall not be deemed to be a waiver of
any subsequent breach thereof.
k. Holding Over
In the event Tenant shall continue to occupy the Premises after the
expiration of the Term hereof, such holding over shall be deemed to have created
a tenancy at sufferance subject to all the terms and conditions of this Lease.
1. Applicable Law
The invalidity or unenforceability of any provision of this Lease shall not
affect or impair any other provision. If any provision of this Lease is capable
of two constructions, one of which would render the provision invalid and the
other of which would make the provision valid, then the provision shall have the
meaning which renders it valid. The laws of the State in which the Premises is
located shall govern the validity, performance, and enforcement of this Lease.
The submission of this document for examination does not constitute an offer to
lease and becomes effective only upon execution and delivery thereof by Landlord
and Tenant.
m. Memorandum of Lease
Landlord and Tenant agree to execute a Memorandum of this Lease for the
purpose of recording in the form attached hereto as Exhibit "F" and by this
reference incorporated herein. Such Memorandum shall include but not be limited
to Term, option periods, use restrictions, all rights that Tenant may have over
any property owned or controlled by Landlord (e.g., common area rights), and
Tenant's right of first refusal to purchase.
n. Estoppel Certificate
Landlord and Tenant shall at any time and without charge or expense to the
other party upon not less than fifteen (15) days prior written notice from the
requesting party or mortgagee, execute, acknowledge, and deliver a statement in
writing (i) certifying that this Lease, is unmodified and in full force and
effect (or, if modified, stating the nature of such modification and certifying
that this Lease, as so modified, is in full force and effect) and the date to
which the Rental and other charges are paid in advance, if any, and (ii)
acknowledging that there are not any uncured defaults of which the acknowledging
party has knowledge, or specifying such defaults if any are claimed. Any such
statement may be conclusively relied upon by any prospective assignee, sublessee
or encumbrancer of the Premises.
IN WITNESS WHEREOF, the parties have executed, or if a corporation, caused its
duly authorized officers to execute this Lease as of the day and year first
above written.
LANDLORD: TENANT:
HEREFORD COMPANY LLC, MARIE CALLENDER PIE SHOPS, INC.
A New Mexico limited liability company, a California corporation
By:
----------------
Its: VP, CFO
By: John Black
-----------
John Black,
Manager
September, 1999
Dear Shareholders:
Greetings!
On behalf of your Board of Directors, I am pleased to report that fiscal year
1999 was another good year for the Company. Total revenue increased by 3% from
the previous year and assets grew to $19,900,219. During this past fiscal year,
Westland developed the third phase of Cedar Ridge Estates, and laid the
groundwork for three new subdivisions, two of which should be introduced during
fiscal year 2000. The Company was also active on the acquisition side of our
business. In June, we added the Marie Callender's restaurant located at Spain
and Eubank to our portfolio of income properties. Overall, it was a strong year.
Looking forward to the year 2000 and beyond, the Company has made significant
strides in implementing a major development program. I have reported to you many
times on Westland's master plan, the 6,400 acre project located north of I-40
and west of Unser Blvd. Westland continues to gain support for its master plan,
despite the sentiments of certain groups who hope to limit Albuquerque's growth.
The master plan has been approved by both Bernalillo County and the City of
Albuquerque and, at this writing, annexation approval of the first 1,732 acres
to the city is imminent. Our focus now is on the introduction of major public
infrastructure.
The Company has entered into an arrangement with the City that provides for
Westland to pay for new water and sewer utilities and transfer the systems to
the City. Repayment will be made to Westland for its cost of construction as
users tie into the systems. The costs involved in this endeavor will
significantly impact the Company's financial statements in future years.
Currently, we are investigating prospective capital sources. The development of
the master plan area is the top priority for the Company.
I would like to invite each of you to visit the Company owned cemeteries. We
have fenced all three and planted over one hundred trees. In essence, we are
beautifying these sacred places. I hope you find our efforts satisfying.
I look forward to seeing each of you at our Annual Shareholder Meeting. Until
then, please remember to take advantage of our open door policy. I am happy to
meet with you to address any concern you may have.
God Bless you all!
Sincerely,
Barbara Page
President and CEO
BUSINESS OF WESTLAND
Westland owns a large tract of land consisting of approximately 59,000 acres
(the "Land") located on the west side of the City of Albuquerque, New Mexico.
Most of the Land is held for long-term investment and is leased to others for
grazing purposes while the balance is held for development, sales and leasing
activities. Approximately 48,000 acres of this Land were originally part of the
Atrisco Land Grant, which was granted to a group of Spanish settlers in 1692.
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 and national economic conditions may decrease the number
of land sales and hinder development, such as during the period from 1986
through 1992.
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.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION OPERATIONS
In the past fiscal year, land sales were greater than the prior year as the
Company experienced increased sales of improved residential lots and sales to
the National Park Service, even though large parcel sales decreased.
During the last fiscal year there were $2,605,000 of sales of lands to the
National Park Service ("NPS") as part of its acquisition of the lands included
in the Petroglyph National Monument. This was the final acquisition of land to
be purchased from the Company by NPS. The sales to NPS amounted to approximately
54% of the Company's land revenue for 1999, while such sales during fiscal 1998
amounted to $1,507,000, or 33% of land revenue.
During 1999, Albuquerque continued 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 1999 were approximately
$1,221,000, compared to sales of approximately $224,000 in fiscal 1998.
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 special
assessment districts 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, 1999, 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,
1999 carrying value of the land is substantially less than its current market
value. 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 Boulevard and Paseo del Volcan Road. The Master
Plan 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 1999, total assets increased to $19,900,219 from $17,557,093,
while liabilities increased from $11,350,853 to $13,208,119. During fiscal 1999
the Company invested $3,978,514 in income producing and other properties and
increased net borrowing on notes and mortgages by $1,180,072. Including these
uses of cash and payment of cash dividends of $802,708, cash equivalents and
short-term investments decreased by $1,909,711, as operations provided
$1,691,439.
In fiscal 1999, the Company maintained lines of credit with local banks
aggregating approximately $3,000,000, collateralized by certain real property.
The purpose of these lines is to provide funds necessary for its continued
expansion. At June 30, 1999, the lines had outstanding balances totaling
$656,669.
During fiscal 2000, the Company will be obligated to pay income tax of
approximately $600,000 should replacement properties totaling $1,510,000 for
lands sold to the National Park not be acquired. Management diligently seeks
income producing properties for acquisition as replacement properties and fully
expects to off-set this tax obligation.
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 2000 without considering additional revenues that
may be generated during that period.
Results of Operations:
In fiscal 1999, land revenues increased by $154,676 from $4,630,523 in 1998 to
$4,785,199. The related cost of land revenues increased to $838,032, or $388,241
from $449,791 in fiscal 1998. Rental revenue increased from $697,385 to $702,065
and the related costs increased from $169,907 to $173,800. 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. The total cost of compliance in both
information and non-information technology systems is expected to be
approximately $30,000. Since a substantial portion of this cost is third party
hardware and software, the effect on net earnings will be immaterial. Changes in
internal systems are substantially complete and any remaining costs will be
insignificant. Determination of level of risk in the Company's material
relationships with third parties is incomplete, but is expected to be finished
by year end, and is considered negligible. Therefore, contingency plans have not
been formulated at this time.
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 ninety (90) days preceding this date of this report has
been $20.00 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 Community 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 October 8, 1999:
Number of
Title of Class Record Holders
No Par Value Common 5622
$1.00 Par Value Common Class A 0
$1.00 Par Value Common Class B 22
Dividends: During each of the last two (2) fiscal years ended June 30, 1998 and
June 30, 1999, Westland paid cash dividends to shareholders, aggregating a total
during those two years of $1,404,739. Subsequent to June 30, 1999, 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, 1999, 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 OCTOBER 8, 1999. 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, 1999 and 1998
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, 1999, and the related statements of earnings, stockholders'
equity, and cash flows for each of the two years in the period ended June 30,
1999. These financial statements are the responsibility of the Company's
manage-ment. 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, 1999, and the results of its operations and its cash flows for
each of the two years in the period ended June 30, 1999 in conformity with
generally accepted accounting principles.
Oklahoma City, Oklahoma
August 19, 1999 (except for Note P, as to which
the date is August 26, 1999)
Westland Development Company, Inc.
BALANCE SHEET
June 30, 1999
ASSETS
Cash and cash equivalents .......................... $ 1,300,182
Short-term investments ............................. 2,578,019
Receivables
Real estate contract (note B) .................... $ 24,291
Note receivable - related party (note M) ......... 59,808
Other receivables ................................ 39,331 123,430
-----------
Land and improvements held for future
development (notes C and E) ...................... 6,897,415
Income-producing properties, net (notes D and E) ... 8,221,092
Property and equipment, net of accumulated
depreciation of $477,340 (note E) ................ 391,133
Investments in partnerships and joint ventures ..... 231,901
Income taxes receivable ............................ 5,000
Other assets ....................................... 152,047
-----------
$19,900,219
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable, accrued expenses,
and other liabilities ........................... $ 519,468
Deferred income taxes (note F) ..................... 5,312,000
Notes, mortgages, and assessments payable (note E) . 7,376,651
-----------
Total liabilities .................... 13,208,119
Commitments and contingencies (notes E and L) ...... --
Stockholders' equity (note G)
Common stock - no par value; authorized,
736,668 shares; issued and outstanding,
716,608 shares ................................ $ 8,500
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 .................................. 6,015,973 6,692,100
----------- -----------
$19,900,219
===========
The accompanying notes are an integral part of this statement.
Westland Development Company, Inc.
STATEMENTS OF EARNINGS
Year ended June 30,
1999 1998
----------- -----------
Revenues
Land ........................................... $ 4,785,199 $ 4,630,523
Deferred profit recognized on installment sales 30,306 20,701
Rentals ........................................ 702,065 697,385
----------- -----------
5,517,570 5,348,609
Costs and expenses
Cost of land revenues .......................... 838,032 449,791
Cost of rentals ................................ 173,800 169,907
Other general, administrative, and operating ... 1,991,667 2,106,395
----------- -----------
3,003,499 2,726,093
----------- -----------
Operating income ................... 2,514,071 2,622,516
Other (income) expense
Interest income ................................ (136,611) (99,672)
Gain on sale or disposition of property
and equipment (note O) ...................... (747,560) (779)
Other, net (note O) ............................ 789,158 11,451
Interest expense ............................... 540,516 631,356
----------- -----------
445,503 542,356
----------- -----------
Earnings before income taxes ....... 2,068,568 2,080,160
Income tax expense (note F) ...................... 780,000 826,000
----------- -----------
NET EARNINGS ....................... $ 1,288,568 $ 1,254,160
=========== ===========
Weighted average common shares outstanding ....... 807,775 807,755
=========== ===========
Earnings per common share ........................ $ 1.60 $ 1.55
=========== ===========
The accompanying notes are an integral part of these statements.
Westland Development Company, Inc.
STATEMENT OF STOCKHOLDERS' EQUITY
Years ended June 30, 1999 and 1998
<TABLE>
<CAPTION>
Class B
Common stock Common stock Additional
no par value $1 par value paid-in Retained
Shares Amount Shares Amount capital earnings Total
<S> <C> <C> <C> <C> <C> <C>
Balances at July 1, 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
Net earnings ............ -- -- -- -- -- 1,288,568 1,288,568
Cash dividends paid
- $1 per share ........ -- -- -- -- -- (802,708) (802,708)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balances at June 30, 1999 716,608 $ 8,500 86,100 $ 86,100 $ 581,527 $ 6,015,973 $ 6,692,100
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
Westland Development Company, Inc.
STATEMENTS OF CASH FLOWS
Year ended June 30,
1999 1998
----------- -----------
Increase (Decrease) in Cash and Cash Equivalents
Cash flows from operating activities
Cash received from land sales and collections
on real estate contracts receivable .......... $ 4,822,132 $ 4,647,316
Development and closing costs paid ............. (1,277,974) (874,634)
Cash received from rental operations ........... 680,780 732,254
Cash paid for rental operations ................ (5,321) (816)
Cash paid for property taxes ................... (78,409) (58,150)
Interest received .............................. 136,735 100,866
Interest paid .................................. (538,845) (667,609)
Income taxes (paid) refunded, net .............. (171,162) 18,274
Other general and administrative costs paid .... (1,983,301) (1,536,439)
Other .......................................... 106,804 21,839
----------- -----------
Net cash provided by operating activities .. 1,691,439 2,382,901
Cash flows from investing activities
Capital expenditures ........................... (1,404,295) (60,958)
(Investments in) distributions from
partnerships and joint ventures ............. (1,993) 8,588
Change in short-term investments ............... (2,578,019) --
Proceeds from sale of assets ................... -- 3,150
Proceeds from note receivable - related party .. 5,793 2,402
----------- -----------
Net cash used in investing activities ...... (3,978,514) (46,818)
Cash flows from financing activities
Borrowings on notes, mortgages, and
assessments payable .......................... 2,498,309 132,063
Repayments of notes, mortgages, and
assessments payable .......................... (1,318,237) (987,372)
Payment of dividends ........................... (802,708) (602,031)
----------- -----------
Net cash provided by (used in)
financing activities ..................... 377,364 (1,457,340)
----------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS ......................... (1,909,711) 878,743
Cash and cash equivalents at beginning of year ... 3,209,893 2,331,150
----------- -----------
Cash and cash equivalents at end of year ......... $ 1,300,182 $ 3,209,893
=========== ===========
Reconciliation of Net Earnings to Net Cash
Provided by Operating Activities
Net earnings ..................................... $ 1,288,568 $ 1,254,160
Adjustments to reconcile net earnings to
net cash provided by operating activities
Depreciation ................................. 227,955 221,879
Loss on partnerships and joint ventures ..... -- 33,289
(Gain) loss on sale of property
and equipment ............................. 2,440 (779)
Collections on real estate contracts
receivable ................................. 35,483 9,259
Profit recognized on installment sales ...... (30,306) (20,701)
Deferred income taxes ........................ 785,000 517,000
Change in
Income taxes recoverable/payable .......... (177,273) 327,274
Other receivables ......................... 4,749 105,163
Land and improvements held for
future development ...................... (439,942) (424,843)
Other assets .............................. (69,702) 130,632
Accounts payable, accrued expenses,
and other liabilities ................... 62,796 266,821
Accrued interest payable .................. 1,671 (36,253)
----------- -----------
Net cash provided by operating
activities ........................ $ 1,691,439 $ 2,382,901
=========== ===========
The accompanying notes are an integral part of these statements.
Westland Development Company, Inc.
NOTES TO FINANCIAL STATEMENTS
June 30, 1999 and 1998
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, 1999 and 1998 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,
1999 and 1998, United States Treasury bills of approximately $899,000 and
$2,248,000, respectively, 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. Short-Term Investments
----------------------
Short-term investments include certificates of deposit and U.S. Treasury
bills carried at cost, which approximates fair value. Such investments
generally have maturities of more than three months and less than one year.
5. 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.
6. 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.
7. 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.
8. 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.
9. 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.
10. Investments in Partnerships and Joint Ventures
----------------------------------------------
Investments in partnerships and joint ventures are accounted for on the
equity method.
11. 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.
12. 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 CONTRACT RECEIVABLE
Real estate contract receivable at June 30, 1999 consists of one contract,
due in monthly installments with an interest rate of 9.5%, and is
collateralized by land.
Principal collections due on the real estate contract receivable for the
years ending June 30 are as follows:
2000 $ 4,393
2001 4,829
2002 5,308
2003 9,761
-------
$24,291
=======
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, 1999:
Land $1,059,122
Improvements 5,838,293
----------
$6,897,415
==========
NOTE D - INCOME-PRODUCING PROPERTIES
Income-producing properties consist of four single-tenant retail store
buildings and a portion of the Company's office building and are summarized
as follows at June 30, 1999:
Buildings and equipment $5,713,813
Less accumulated depreciation 691,754
----------
5,022,059
Land 3,199,033
----------
$8,221,092
==========
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, 1999 are as follows:
Year ending June 30
2000 $ 827,906
2001 798,783
2002 801,196
2003 805,018
2004 808,001
Thereafter 7,119,116
-----------
$11,160,020
===========
NOTE E - NOTES, MORTGAGES, AND ASSESSMENTS PAYABLE
Notes, mortgages, and assessments payable are summarized as follows at June
30, 1999:
Promissory note, due in monthly installments of $17,970
through May 2015, including interest at 9.37%;
collateralized by income-producing properties $1,780,407
Promissory note, due in monthly installments of $9,079
through July 2014, including interest at 8.00%;
collateralized by income-producing properties 950,000
Note payable, due in monthly installments of $6,893
through September 2015, including interest at 8.75%;
collateralized by income-producing properties 714,395
Note payable to bank; due on demand, but if no demand
is made, then on October 30, 1999, with interest at
9.25%; collateralized primarily by real estate 577,665
Revolving line of credit due to bank, due June 29,
2000, interest payable quarterly at an effective rate
of 8.75%; collateralized by specific tracts of land 639,632
Mortgage note, due in monthly installments of $24,682,
including interest at 8.52%, due November 1, 2016;
collateralized by income-producing properties 2,683,944
Line of credit due to bank in monthly installments of
$6,701 with any unpaid amounts due March 15, 2000,
interest at 9.25%; collateralized primarily by real
estate 17,037
Other 13,571
---------
$7,376,651
==========
The Company's revolving line of credit with a bank provides for borrowings up
to $2,000,000 at the bank's prime rate of interest. At June 30, 1999,
$639,632 was outstanding on this line of credit.
The Company's line of credit with a bank provides for borrowings up to
approximately $1,005,000 at the bank's prime rate of interest. At June 30,
1999, $17,037 was outstanding on this line of credit.
Aggregate required principal payments on the notes, mortgages, and
assessments payable as of June 30, 1999 are as follows:
Year ending June 30
2000 $1,409,500
2001 190,155
2002 204,455
2003 220,325
2004 240,625
Thereafter 5,111,591
----------
$7,376,651
==========
Also, at June 30, 1999, the Company had approximately $13,500 of outstanding
letters of credit to the City of Albuquerque in connection with subdivision
improvements done for the Company.
NOTE F - INCOME TAXES
An analysis of the deferred income tax assets and liabilities as of June 30,
1999 is as follows:
Deferred tax assets
Contribution carryforwards $ 316,000
Property, equipment, and land 342,000
Investments 31,000
Other 72,000
Valuation allowance (316,000)
----------
445,000
Deferred tax liabilities
Deferred tax gain on involuntary
conversion of land 5,757,000
----------
Net deferred tax liability $5,312,000
==========
Income tax expense (benefit) consists of the following:
Year ended June 30,
1999 1998
--------- ---------
Current
Federal .................... $ (5,000) $ 289,242
State ...................... -- 19,758
--------- ---------
(5,000) 309,000
Deferred
Federal .................... 667,000 439,000
State ...................... 118,000 78,000
--------- ---------
785,000 517,000
--------- ---------
$ 780,000 $ 826,000
========= =========
The income tax provision is reconciled to the tax computed at statutory rates
as follows:
June 30,
1999 1998
--------- ---------
Tax expense at statutory rates .............. $ 703,000 $ 707,000
State income taxes at statutory rates ....... 104,000 97,000
Change in valuation allowance ............... 227,000 (151,000)
Change in effective state tax rate .......... (159,000) --
Nontaxable gain ............................. (255,000) --
Nondeductible expenses ...................... 27,000 23,000
Expiration of contribution carryforwards .... 73,000 104,000
Other ....................................... 60,000 46,000
--------- ---------
Total expense ......................... $ 780,000 $ 826,000
========= =========
A valuation allowance of approximately $316,000 has been recognized at June
30, 1999 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 original Articles of Incorporation (the "Articles"), the Company
was authorized to issue 1,964,448 shares of common stock. During 1999, the
Articles were amended to eliminate the authority to issue 736,668 shares of
Class A common stock for $1.45 a share. The remaining authorized stock is 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) 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. The
holders of no par value common stock have no preemptive rights to
purchase Class B stock.
At June 30, 1999, the 5,047 shares of no par value common stock, upon
judicial determination, can be distributed to stockholders of record as of
the date of incorporation.
There is no established market value for the Company's common stock. At June
30, 1999, 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.
During the year ended June 30, 1999, the Board of Directors approved
protection against takeover measures whereby a threat of change of three or
more directors in any one year would result in directors threatened with
replacement being granted an immediate Class B stock bonus of 5,000 shares if
in office as a director ten years or more, and 2,500 shares of Class B stock
if in office as a director for less than ten years. The maximum number of
shares which could be issued under this agreement at June 30, 1999 is 40,000
shares.
NOTE H - SEGMENT INFORMATION
The Company has adopted Statement of Financial Accounting Standards ("SFAS")
No. 131, Disclosures about Segments of a Business Enterprise and Related
Information. Pursuant to SFAS No. 131, prior period data have been restated
to conform to the new requirements.
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 four single-tenant retail
store buildings and a portion of the Company's office building.
Financial information for each industry segment is summarized as follows:
General
Land Rentals corporate Total
---------- ---------- ------------ -----------
1999
Revenues $4,815,505 $ 702,065 $ -- $ 5,517,570
Operating income
(loss) 3,341,526 445,421 (1,272,876) 2,514,071
Interest income -- -- 136,611 136,611
Interest expense -- -- (540,516) (540,516)
Income tax expense -- -- (829,000) (829,000)
Identifiable assets 6,981,514 8,442,383 4,476,322 19,900,219
Capital expenditures -- 1,330,931 73,364 1,404,295
Depreciation -- 168,479 59,476 227,955
Noncash gain on
disposition of land -- -- 750,000 750,000
1998
Revenues $4,651,224 $ 697,385 $ -- $ 5,348,609
Operating income
(loss) 3,547,773 433,945 (1,359,202) 2,622,516
Interest income -- -- 99,672 99,672
Interest expense -- -- (631,356) (631,356)
Income tax (expense)
benefit -- -- (826,000) (826,000)
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
General corporate assets consist primarily of cash, furniture, equipment, and
a portion 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 $121,000 and $89,000 for 1999 and 1998,
respectively.
NOTE J - SALES TO MAJOR CUSTOMERS
Sales to major customers are summarized as follows:
During the year ended June 30, 1999, sales to two customers individually
accounted for 52% and 21% of total revenues.
During the year ended June 30, 1998, sales to two customers individually
accounted for 28% and 13% 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 appropriated by
Congress each year. In 1999 and 1998, approximately 362 and 85 acres,
respectively, were transferred to the National Park Service for cash of
$2,600,000 and $1,500,000, respectively. The Company has no remaining land
set aside for sale to the National Park Service at this time.
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
During the year ended June 30, 1999, the Company sold land to a member of the
Board of Directors. Under the sales agreement, the Board member paid
approximately $52,000 for three lots.
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 1999 and 1998 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.
During the year ended June 30, 1998, the Company acquired land from an
ownership group which included a member of the Board of Directors and a
member of the director's immediate family. Under the sales agreement, the
Board member received approximately $81,000 and the family member received
approximately $49,000.
NOTE N - FINANCIAL INSTRUMENTS
The following table includes various estimated fair value information as
required by SFAS No. 107, Disclosures about Fair Value of Financial
Instruments. Such information, which pertains to the Company's financial
instruments, is based on the requirements 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.
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. Short-Term Investments
----------------------
The carrying amount approximates fair value due to the short maturities of
the investments.
3. Real Estate Contracts Receivable
--------------------------------
These notes receivable are generally collateralized by real estate and accrue
interest at 9.5%. Because the ultimate collectibility of these notes is not
reasonably assured, it is not practicable to estimate fair value.
4. Note Receivable - Related Party
-------------------------------
Note receivable - related party is 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.
5. 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, 1999 are as follows:
Carrying Estimated
amount fair value
---------- ----------
Financial assets
Cash and cash equivalents ............... $1,300,182 $1,300,182
Short-term investments .................. 2,578,019 2,578,019
Real estate contract receivable
(not practicable to estimate
fair value) ........................... 24,291 --
Note receivable - related party ......... 59,808 59,808
Financial liabilities
Notes, mortgages, and assessments payable 7,376,691 7,587,000
NOTE O - CONTRIBUTION OF LAND
In keeping with the Company's long-standing commitment to the furtherance of
community projects which benefit the education and welfare of its less
fortunate citizens, during 1999 the Company donated approximately fifty acres
of land to a nonprofit organization to develop a residential and work
facility for seriously disabled/mentally ill persons. The contributed land
had a fair value of approximately $790,000 which was recorded as an other
expense and a pretax gain of approximately $750,000 was recorded on the
donation.
NOTE P - SUBSEQUENT EVENT
On August 26, 1999, the Company declared a dividend of $1 per share for
stockholders of record as of August 27, 1999. The dividend is payable on
September 10, 1999.
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. Mr. Anaya is also 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, California.
CARMEL CHAVEZ, Director. 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, Director. Member 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, Director. 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, Director. Member of the Disclaimer Committee. Mr. Chavez is
employed at Galles Chevrolet in Albuquerque, New Mexico.
CHARLES V. PENA, Director. Member of El Campo Santo, Inc., and the Disclaimer
Committee. Mr. Pena owns and operates CJ's New Mexican Food Restaurant.
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