<PAGE>
Filed pursuant to the Rule
424(b)(3) of the Securities
Act of 1933
Registration No. 333-72379
Prospectus Dated May 17, 1999
The Biltmore Group of Louisiana, L.L.C.
$9,900,000 of Co-First Mortgage Bonds
The bonds will be issued by the Biltmore Group of Louisiana, L.L.C.
We refer to ourselves as the Biltmore Group. We are offering the following
series of bonds for sale:
<TABLE>
<CAPTION>
Series 1999-I Series 1999-II Series 1999-III
<S> <C> <C> <C>
Principal Amount $1,800,000 $2,700,000 $1,800,000
Interest Rates 7.0%-9.5% 9.0% 6.5%-9.5%
Maturity Dates 12/01/00-12/01/06 07/04/04 01/01/00-01/01/07
Price $250 $250 $250
Underwriting Commission $108,000 $162,000 $108,000
Proceeds to the
Biltmore Group $1,692,000 $2,538,000 $1,692,000
</TABLE>
<TABLE>
<CAPTION>
Series 1999-IV Series 1999-V
<S> <C> <C>
Principal Amount $1,800,000 $1,800,000
Interest Rates 7.0%-9.5% 7.0%-9.5%
Maturity Dates 12/01/00-12/01/06 03/01/01-09/01/04
Price $250 $250
Underwriting Commission $108,000 $108,000
Proceeds to the
Biltmore Group $1,692,000 $1,692,000
</TABLE>
- Each series of bonds requires a sale of a minimum of $400,000 in
bonds, except for the Series 1999-II Bonds which require that at
least $600,000 in bonds be sold. Funds received for the
subscription of the bonds will be held in escrow until the
minimum amount of bonds for a series are sold.
- The proceeds to the Biltmore Group do not include expenses and
fees payable by and on behalf of the Biltmore Group, estimated
at $35,000 for each series, except for the series 1999-II Bonds
which is estimated to be $50,000.
We have agreed with MMR Investment Bankers, Inc. that they will offer
the bonds on a best efforts basis as our agent. This offering will terminate
one year from the date of this prospectus.
The bonds involve a great deal of risk. Before you purchase any bonds,
be sure you understand their structure and the risks. See "Risk Factors"
beginning on page 6 of this prospectus for a discussion of those risks.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary
is a criminal offense.
MMR Investment Bankers, Inc.
<PAGE>
[Artist rendering of a facility of the Biltmore Group will go in this
space]
<PAGE>
Prospectus Summary
Our Company
The Biltmore Group is a Louisiana limited liability company that was
recently formed through the efforts of Joanne M. Caldwell-Bayles who has
experience in the development and operation of assisted living, retirement
and memory disorder facilities. We were formed solely to construct, operate
and own four assisted living facilities in the state of Louisiana and to
acquire an existing facility in Arizona and convert it to a retirement
living facility. We will maintain our executive offices at 507 Trenton
Street, West Monroe, Louisiana, and our telephone number is (318) 323-2115.
The Offering
Bonds Offered. . . . . . We are offering $9,900,000 of co-first mortgage
bonds in five series. Each series of bonds is
allocated to a specific facility. Some of our
bonds bear simple interest with the interest
payable semiannually until maturity. Some of our
bonds bear compound interest with the interest
compounded semiannually and paid at maturity.
When you purchase a bond, you will have a priority
interest as a creditor in the facility for which
your bond is applicable. See "Description of
Bonds".
Series 1999-I. . . . . . These bonds will be issued in the aggregate
amount of $1,800,000, subject to a minimum
sale of $400,000 in principal amount, and
will be used for the construction of an
assisted living facility in Minden, Louisiana.
The issue date for these bonds will be
June 1, 1999, and the maturity and interest
schedule for these bonds is as follows:
<TABLE>
<CAPTION>
Maturity Interest Interest Principal
Date Type Rates Retired
<S> <C> <C> <C>
12/01/00 Simple 7.00% $ 21,000
06/01/01 Simple 7.50% $ 21,500
12/01/01 Simple 7.50% $ 24,000
06/01/02 Simple 8.00% $ 25,000
12/01/02 Simple 8.00% $ 29,500
06/01/03 Simple 8.50% $ 30,250
12/01/03 Compound 8.50% $ 21,750
06/01/04 Simple 9.00% $ 31,500
12/01/04 Compound 9.00% $ 20,500
06/01/05 Simple 9.25% $ 33,000
12/01/05 Compound 9.25% $ 19,250
06/01/06 Simple 9.50% $ 34,750
12/01/06 Simple 9.50% $ 36,250
12/01/06 Simple 9.50% $1,451,750
</TABLE>
Series 1999-II . . . . . . These bonds will be issued in the aggregate
amount of $2,700,000, subject to a minimum
sale of $600,000 in principal amount, and
will be used for the acquisition of the
retirement living facility in Oak Creek,
Arizona. The issue date for these bonds will
be July 1, 1999, and the maturity and
interest schedule for these bonds is as
follows:
<TABLE>
<CAPTION>
Maturity Interest Interest Principal
Date Type Rate Retired
<S> <C> <C> <C>
07/01/04 Simple 9.00% $2,700,000
</TABLE>
3
<PAGE>
Series 1999-III. . . . . . These bonds will be issued in the aggregate
amount of $1,800,000, subject to a minimum
sale of $400,000 in principal amount, and will
be used for the construction of an assisted
living facility in Bastrop, Louisiana. The
issue date for these bonds will be July 1,
1999, and the maturity and interest schedule
for these bonds is as follows:
<TABLE>
<CAPTION>
Maturity Interest Interest Principal
Date Type Rate Retired
<S> <C> <C> <C>
01/01/00 Compound 6.50% $ 77,000
07/01/00 Compound 7.00% $ 74,500
01/01/01 Compound 7.00% $ 81,000
07/01/01 Compound 7.50% $ 77,750
01/01/02 Compound 7.50% $ 83,500
07/01/02 Compound 8.00% $ 79,500
01/01/03 Compound 8.00% $ 84,500
07/01/03 Compound 8.50% $ 79,500
01/01/04 Compound 8.50% $ 76,500
07/01/04 Compound 9.00% $ 71,500
01/01/05 Compound 9.00% $ 68,500
07/01/05 Compound 9.25% $ 64,500
01/01/06 Compound 9.25% $ 62,000
07/01/06 Compound 9.50% $ 58,000
01/01/07 Compound 9.50% $ 55,500
01/01/07 Compound 9.50% $ 706,250
</TABLE>
Series 1999-IV . . . . . These bonds will be issued in the aggregate
amount of $1,800,000, subject to a minimum
sale of $400,000 in principal amount, and
will be used for the construction of an
assisted living facility in Farmerville,
Louisiana. The issue date for these bonds
will be August 1, 1999, and the maturity and
interest schedule for these bonds is as
follows:
<TABLE>
<CAPTION>
Maturity Interest Interest Principal
Date Type Rate Retired
<S> <C> <C> <C>
02/01/01 Simple 7.00% $ 17,250
08/01/01 Simple 7.50% $ 18,000
02/01/02 Compound 7.50% $ 23,000
08/01/02 Simple 8.00% $ 27,750
02/01/03 Compound 8.00% $ 30,000
08/01/03 Simple 8.50% $ 39,500
02/01/04 Compound 8.50% $ 28,250
08/01/04 Simple 9.00% $ 41,250
08/01/04 Simple 9.00% $1,575,000
</TABLE>
(This space is intentionally left blank)
4
<PAGE>
Series 1999-V. . . . . . These bonds will be issued in the aggregate
amount of $1,800,000, subject to a minimum
sale of $400,000 in principal amount, and
will be used for the construction of an
assisted living facility in Natchitoches,
Louisiana. The issue date for these bonds
will be September 1, 1999, and the maturity
and interest schedule for these bonds is as
follows:
<TABLE>
<CAPTION>
Maturity Interest Interest Principal
Date Type Rate Retired
<S> <C> <C> <C>
03/01/01 Simple 7.00% $ 17,250
09/01/01 Simple 7.50% $ 18,000
03/01/02 Compound 7.50% $ 23,000
09/01/02 Simple 8.00% $ 27,750
03/01/03 Compound 8.00% $ 30,000
09/01/03 Simple 8.50% $ 39,500
03/01/04 Compound 8.50% $ 28,250
09/01/04 Simple 9.00% $ 41,250
09/01/04 Simple 9.00% $1,575,000
</TABLE>
Trust Indenture. . . . . . . . We have entered into an agreement with the
trustee Colonial Trust Company of Phoenix,
Arizona under a trust indenture which defines
all of the rights, conditions and obligations
which effect the issuance of the bonds. This
agreement gives the trustee rights in order
to protect the bondholders and to oversee our
operations to assure our performance of our
obligation under the bonds.
Bond Reserve Fund. . . . . . . We will establish a bond reserve account
which will be funded from the sale of four
of the five series of bonds. This bond
reserve account will be funded in the total
amount of $537,000 once all of the bonds
offered by us are sold. In the event that we
fail to pay any principal or interest due on
any of the bonds, the trustee may apply funds
in this bond reserve account for such payments.
Redemption . . . . . . . . . . We may redeem your bond at our option, in
whole or in part, at any time before your bond
matures. We will give you notice of our
intent to redeem your bond. However, such
redemption will be without any premium and
will be made at the principal amount of your
bond plus interest that has accrued on your
bond.
Financial Summary
Since the Biltmore Group was formed, we have received contributions to our
capital of $1,112,762 and through December 31, 1998, we have generated no
revenues and incurred expenses of $24,117. At December 31, 1998, our total
assets were $3,953,961 and our total liabilities were $2,174,025.
(This space is intentionally left blank)
5
<PAGE>
Risk Factors
We have limited operating history upon which you may evaluate us. We
formed the Biltmore Group on July 13, 1998. Since our formation, we have
been involved in the acquisition of land and property and in some cases
have commenced the initial preparation and construction for our assisted
living facilities. We have had no significant revenues, and our expenses
continue. Until our assisted living facilities are operational, which we
generally believe to be a six month construction period, we will receive no
revenues except for our acquired facility in Oak Creek which commenced
operations in January of 1999 and has earned only nominal revenues. Even
after construction is complete for all of our facilities, such revenues
will be limited until occupancy reaches a stabilized level. If we do not
generate adequate revenue from our facilities, our business, financial
condition and operating results will be materially adversely affected.
Because we are highly leveraged, we may not be able to pay our debt. In
order for us to construct and acquire our facilities, we will borrow from
lending institutions and issue the bonds offered in this prospectus. This
use of borrowed funds will make the Biltmore Group highly leveraged. Though
such leverage will allow us to construct and acquire our facilities without
us providing a larger amount of capital, it will cause us to be highly
obligated for the repayment of the principal and interest of such debt.
If our revenues are insufficient, we will not be able to pay the
principal and interest on the bonds. There is no assurance that any of our
facilities will produce adequate revenues to meet our obligations under the
bonds. Most of our facilities will be new and have no revenue history. The
bonds therefore should be considered a high risk. Please note that these
bonds:
- Are not guaranteed or assured by any governmental agency;
- Are not federally insured by the Federal Deposit Insurance
Corporation; and
- Are not rated by any recognized rating agency.
The trustee may foreclose on the facility applicable to your bond if any
other bonds are in default which could result in a loss or reduction in your
security for repayment. Should we default on the payment of one or more
series of bonds, then, under the provisions of our trust indenture, the
trustee may proceed to foreclose on the property applicable to the defaulted
series of bonds, and the funds received will be first applied to the payment
of these defaulted bonds. If any deficiency should remain for the payment of
such bonds, our trustee may declare the principal balance and accrued interest
due on any or all of the other bonds that are outstanding. If we cannot cure
the payment of such default, the trustee may then exercise its right of
foreclosure on any or all of the property securing the bonds and apply the
proceeds against the bonds on which a property is foreclosed, then for payment
of all other bonds and, after this, as the trustee may determine in its
discretion. As a result, a default on any series of bonds may affect your
bonds even if they are not in default, and the determination to proceed with
foreclosure on your bonds is left to the discretion of our trustee.
If we default in the interim/construction loans, the interim/construction
lender may foreclose and sell the facility applicable to your bond, and there
may be insufficient funds from the sale to pay your bond in full. We have
obtained interim/construction loans for our five facilities. These loans are
secured by co-first mortgages, and their outstanding balances will be reduced
by proceeds received from the sale of our bonds. To the extent that
interim/construction loans remain outstanding with the bonds, any default on
an interim/construction loan will grant such lender the right to exercise its
collection, including possible foreclosure of such property secured by the
defaulted mortgage. In the event that a foreclosure occurs and the sale of
the applicable facility does not result in enough monies to fully pay the
interim/construction loan and the bonds, then the monies will be split
between the interim/construction lender and the bondholders according to a
ratio based upon the principal amount owed to the interim/construction lender
and the principal amount owed to the bondholders. There
6
<PAGE>
is no assurance that the sale of any such facility will produce sufficient
proceeds to pay in full the interim/construction lender and the applicable
series of bonds.
The failure to reach the minimum offering amount or sell all of the bonds
of a series will cause us to use other credit sources at higher costs. In
the event the minimum offering amount of any series is not met or all of the
bonds of any series are not fully subscribed and sold, then we will convert
the interim loan applicable to the facility to a permanent loan. If this
occurs, then:
- All bonds outstanding for the facility, if any, will be on a
co-first mortgage with the permanent loan;
- The interest rate on the permanent loan will be based on a
variable rate and may be materially higher than the interest on
your bond;
- The permanent loan will be amortized over a shorter period than
your bond, thus increasing our monthly debt payment for the
facility; and
- Additional funds may be needed to complete the construction of
the facility and for its operations, and we can give no
assurance that we will be able to secure any additional funds
for such purposes.
You may have difficulty selling your bonds. The underwriter does not
intend to make a market in the bonds, and the bonds will not be listed on any
securities exchange. As a result, if you want to sell your bonds, you must
locate a purchaser that is willing to purchase the bonds. You may not be
able to sell your bonds when you want to do so, or you may not be able to
obtain the price that you wish to receive upon any sale of your bonds.
Currently, there is no secondary market for the bonds. We cannot assure you
that a secondary market will develop.
The underwriter may not continue in business because of litigation which
may cause us to lose our only seller of the bonds, and the underwriter has
limited experience in initial public offerings which could adversely affect
this offering. The underwriter has related to us that it is a defendant in
civil action brought by the Securities Commissioner of Kansas on behalf of
the State of Kansas stemming from its participation in a series of church
bond offerings of a single church. If the underwriter is unable to continue
its business as a result of this litigation, then the underwriter will have
to withdraw from its participation in this offering, and we will either have
to terminate this offering or find another underwriter who is willing to
participate in the sale of the bonds. Additionally, the underwriter has
advised us that it has limited experience in the underwriting of debt
securities in an initial public offering. There can be no assurance the
underwriter's lack of experience would not adversely affect this offering.
The underwriter has made no commitment to purchase any of the bonds, but only
to use its best efforts as our agent to offer for sale the bonds to the
public.
Our success is dependent on our key personnel who we may not be able to
retain, and we may not be able to hire enough additional personnel to meet
our staffing needs. We believe that our success will depend upon our
continued employment of our management and technical personnel. If one or
more members of our management were unable or unwilling to continue in their
present positions, our business, financial condition and operating results
could be materially adversely affected. Our management does not have
employment agreements. We do carry key person life insurance on Ms.
Caldwell-Bayles, but not on all of our management personnel.
Our success also depends on having a highly trained senior care staff.
We will need to hire such personnel as our business grows. A shortage of the
number of these highly trained personnel could limit our ability to
successfully operate our facilities. We have planned to expand our employee
base and manage our anticipated growth. Competition for personnel,
particularly for highly trained senior care personnel, is intense. Our
business, financial condition and operations will also be materially
adversely affected if we cannot hire and retain suitable personnel.
7
<PAGE>
Our managing member has in the past entered into transactions with the
Biltmore Group which were not arms length transactions and will likely do so
in the future. As a result of her ownership of the Biltmore Group, Joanne M.
Caldwell-Bayles has dealt with us and with others on terms she has determined
individually and has received fees and compensation directly and indirectly
as a result of her ownership of the Biltmore Group and its affiliates. Such
arrangements and amounts involved include:
- Acquisition of land for one of our facilities resulting in a
gain of $86,059 to an affiliate;
- Construction contracts for four facilities at $1,352,000 in cash
and $425,000 in membership units in our company per contract
aggregating $5,408,000 in cash and $1,700,000 in membership
units in our company;
- Other related services resulting in the issuance of membership
units of our company to an affiliate and Ms. Caldwell-Bayles
amounting to $683,500;
- A management agreement with our company by an affiliate which
could amount, after the second full year of operations of all of
our facilities, to an estimated total of $210,000 per year.
None of these arrangements were determined in an arms length bargaining
by Ms. Caldwell-Bayles, nor do we have any policy relating to future
transactions to be on a basis as favorable as we could receive from
unaffiliated third parties.
Forward-looking Statements
We have used words such as "anticipate", "believe", "estimate", "may",
"intend", "expect" and other similar expressions which identify forward-looking
statements. Actual results could differ materially from those suggested by
these forward-looking statements. These forward-looking statements are based
largely on our expectations and are subject to a number of risks and
uncertainties, including:
- Our limited sources of funds from which we may meet our
obligations;
- Economic factors, both generally and particularly in areas where
we will operate our assisted living facilities;
- The highly competitive nature of our business;
- Failure to maintain occupancy levels in our facilities;
- Regulatory limitations imposed on the operations of our assisted
living facilities; and
- Loss of qualified management and skilled personnel.
Many of these factors are beyond our control.
(This space is intentionally left blank)
8
<PAGE>
Sources and Uses of Proceeds
The sources and anticipated uses of proceeds available after the issuance
of the Series 1999-I, 1999-II, 1999-III, 1999-IV and 1999-V Bonds are
set forth below. See "Description of Property - Financing of Facilities",
"Certain Transactions", "Underwriting" and "Description of Bonds-Escrow and
Disbursement of Bond Proceeds".
<TABLE>
<CAPTION>
Series 1999-I Series 1999-II
Bonds Bonds
Minden project Oak Creek project
Minimum Maximum Minimum Maximum
<S> <C> <C> <C> <C>
Source of Proceeds:
Gross Offering Proceeds $400,000 $1,800,000 $600,000 $2,700,000
Less Underwriting
Concessions (24,000) (108,000) (36,000) (162,000)
Less Other Offering
Costs (35,000) (35,000) (50,000) (50,000)
-------- --------- ------- ---------
Net Offering Proceeds 341,000 1,657,000 514,000 2,488,000
======== ========= ======= =========
Use of Proceeds:
Fund Initial Operating
Fund Payments 90,000 90,000 125,000 125,000
Retire Interim Loans 251,000 1,358,520 452,500 2,174,025
Fund Remaining
Construction Costs 0 0 0 0
Fund Pre-Opening Costs 0 68,480 0 0
Retire Line of Credit 0 0 0 188,975
Fund Bond Reserve Account 0 140,000 0 0
-------- --------- ------- ---------
Total Use of Proceeds 341,000 1,657,000 514,000 2,488,000
======== ========= ======= =========
</TABLE>
<TABLE>
<CAPTION>
Series 1999-III Series 1999-IV
Bonds Bonds
Bastrop project Farmerville project
Minimum Maximum Minimum Maximum
<S> <C> <C> <C> <C>
Source of Proceeds:
Gross Offering Proceeds $ 400,000 $1,800,000 $400,000 $1,800,000
Less Underwriting
Concessions (24,000) (108,000) (24,000) (108,000)
Less Other Offering
Costs (35,000) (35,000) (35,000) (35,000)
---------- --------- ------- ---------
Net Offering Proceeds 341,000 1,657,000 341,000 1,657,000
========== ========= ======= =========
Use of Proceeds:
Fund Initial Operating
Fund Payments 90,000 90,000 90,000 90,000
Retire Interim Loans 1,220,000 1,358,520 251,000 1,330,000
Fund Remaining
Construction Costs 0 132,000 0 22,000
Fund Pre-Opening Costs 0 75,000 0 75,000
Retire Line of Credit 0 0 0 188,975
Fund Bond Reserve Account 0 140,000 0 140,000
--------- --------- ------- ---------
Total Use of Proceeds 341,000 1,657,000 341,000 1,657,000
========= ========= ======= =========
</TABLE>
<TABLE>
<CAPTION>
Series 1998-V
Bonds
Natchitoches project
Minimum Maximum
<S> <C> <C>
Source of Proceeds:
Gross Offering Proceeds $ 400,000 $1,800,000
Less Underwriting
Concessions (24,000) (108,000)
Less Other Offering
Costs (35,000) (35,000)
---------- ---------
Net Offering Proceeds 341,000 1,657,000
========== =========
Use of Proceeds:
Fund Initial Operating
Fund Payments 90,000 90,000
Retire Interim Loans 251,000 1,450,000
Fund Remaining
Construction Costs 0 0
Fund Pre-Opening Costs 0 0
Retire Line of Credit 0 0
Fund Bond Reserve Account 0 117,000
--------- ---------
Total Use of Proceeds 341,000 1,657,000
========= =========
</TABLE>
<PAGE>
The order in which the proceeds will be disbursed from each series appears
in descending order in the table shown above. Our other offering expenses
payable as shown in this table are estimated at a total of $190,000 and
are allocated among the five series of bonds. Offering expenses include
an investment banking fee in the amount of
9
<PAGE>
$128,700 paid to the underwriter for its technical assistance offered in
connection with the offering and $61,300 paid by us for legal fees,
accounting fees, appraisal fees, recording fees, mortgage taxes, trustee's
fees and other similar fees incurred in connection with this offering.
The interim loan provided by First Republic Bank for the Minden project
bears interest at a fixed rate of 9.20% per annum and matures on September 28,
1999. The interim loan provided by Church Loans for the Oak Creek project
bears interest at a variable rate which is equivalent to 0.5% per annum in
excess of the lowest rate designated as the "Prime Rate" of interest
published by the Wall Street Journal, North Edition, under the heading
"Money Rates." This loan matures May 20, 1999 unless extended. The interim
loans provided by Church Loans for the Bastrop, Farmerville and Natchitoches
projects bear interest at a variable rate which is equivalent to 1.50% per
annum in excess of the lowest rate designated as the "Prime Rate" of interest
published by the Wall Street Journal, North Edition, under the heading "Money
Rates." The Bastrop loan matures November 24, 1999. The Farmerville and
Natchitoches loans mature on February 25, 2000. Each of these interim loans
have the option of being extended. These loans are secured by a co-first
mortgage on the corresponding project that has been acquired or that will be
built from the proceeds of the respective interim loan.
The line of credit provided by First Republic Bank for the renovation of
the Oak Creek project bears interest at a fixed rate of 9.75% per annum and
matures November 30, 1999. A portion of the proceeds from the sale of the
Series 1999-II Bonds will be used to retire this line of credit and accrued
interest in an amount up to $188,975.
Our Business
Our History
The concept for the Biltmore Group and its affiliates began over ten
years ago. Joanne Caldwell-Bayles, our managing member, visited her
grandmother in a facility in Arizona which provided the same basic services
as an assisted living center. Upon returning to Louisiana, Mrs.
Caldwell-Bayles began the study of senior care, as it related to the care
provided in assisted living facilities. At the time Mrs. Caldwell-Bayles
started her studies, the demographics were not at a point in Northern
Louisiana in which assisted living centers were a viable idea. As time
passed, the aging population began to reach the stage in which assisted
living centers would be necessary in the region. In 1994, Mrs.
Caldwell-Bayles began the development of the first assisted living facility
in West Monroe, Louisiana under the legal entity of The Arbor Group, L.L.C.
In 1998, Mrs Caldwell-Bayles began the development of three additional
facilities in Ruston, Bossier City and Shreveport, Louisiana under the legal
entity of Senior Retirement Communities, Inc.
Mrs. Caldwell-Bayles started to consider the expansion into other areas
in Northern Louisiana and Central Arizona prior to the opening of the
facilities in Ruston, Bossier City and Shreveport, Louisiana. She decided to
build additional locations in Northern Louisiana at Minden, Bastrop,
Farmerville and Natchitoches as well as acquire a facility in Oak Creek,
Arizona. Accordingly, we were organized on July 13, 1998 as a Louisiana
limited liability company for the purpose of developing, acquiring and
operating retirement and assisted living facilities in Northern Louisiana
and Central Arizona. We will conduct business as Arbor Retirement Community
in Louisiana. In Arizona, we will conduct business as The Biltmore of Oak
Creek.
Our Form of Organization
A limited liability company is a relatively new form of business
organization designed to allow its owners, known as members, to allocate,
participate and account for the profits, losses, and items of credit and
deduction as if the business were a partnership, but which also provides its
owners with the limited liability protection comparable to that enjoyed by
the shareholders of a corporation. Our members are not personally liable
for our debts, absent their execution of a personal guaranty of those debts,
nor can our members be held liable for the negligent actions of our company.
Our managing member is responsible for overseeing our operations.
10
<PAGE>
Our Business Concept and Clientele
Our business concept is based on providing elderly residents in Northern
Louisiana and Central Arizona with a broad range of cost-effective health
care and personal support services, including assisted living and retirement
living.
Assisted Living. Assisted living care is an emerging segment of the
long-term care industry serving the rapidly growing elderly population who
may require assistance with the activities of daily living, such as dressing,
bathing and eating. Our assisted living facilities are intended to provide
privacy and companionship in a comfortable, secure, non-institutional living
environments which are also designed to promote interdependence between the
facilities' staff and the residents, all with the intent of providing a more
positive lifestyle environment than that which has been historically available
from other congregate care providers. Specifically, our assisted living
facilities are designed to house elderly persons who do not require 24-hour
skilled nursing care. For example, typical residents might include persons
suffering from occasional memory loss, poor diet habits, arthritis or other
infirmities by reason of which they would benefit from daily assistance and
supervision.
Retirement Living. Residents for independent living are usually seniors
who maintain an independent lifestyle, but desire no longer to have the
responsibility of ownership and maintenance of a family residence. Residents
usually desire one or more meals which are provided by the facility. Activity
programs are provided for residents, including water aerobics, exercise
programs and other activities which foster good health. Most residents, if
not all, will continue to own and operate their own automobiles. They will
also continue to provide their own medical and medication maintenance,
shopping and other activities which are expected of seniors who maintain
good health. Some residents may wish to travel extensively while maintaining
a secure home base in which their possessions are protected while they are
away.
Operation of Our Assisted Living and Retirement Living Facilities
Our Services. The general services provided to residents of our
assisted living and retirement living facilities will include:
- meals,
- laundry,
- housekeeping and
- physical assistance.
In addition, preventive health care programs, transportation, organized
social activities and 24-hour security will also be provided. Our assisted
living facilities will offer medication monitoring; our retirement living
units will not offer this service. The residents will be responsible for
their own personal purchases such as toothpaste, medical prescriptions,
etc. Unlike nursing homes, however, contemplated services do not include
around-the-clock skilled nursing care.
Expenses of operating our facilities will be made up of a fixed costs
and/or variable costs. Fixed costs will include debt service, management and
core staff, essential utilities, insurance and taxes. Variable costs will
include food costs, staffing, utilities and supplies to a small extent. The
facilities will be able to handle emergencies only to the extent of calling a
doctor or hospital in behalf of the resident. Should a resident require
health care beyond that which the facilities can reasonably provide or
assist, then a resident may be forced to move from our facilities.
Our Pricing Structure. Our facilities will have living units priced in
a range of $1,375 to $3,500 per month based on the type of accommodations and
services provided. Residents are billed monthly for the services rendered.
Medicare/Medicaid will not pay for a resident's stay at our facilities.
The residents may realize additional costs if they require certain health
supervision/services and meals for visitors. As the cost of living may
increase, charges to the residents may also need to be adjusted.
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The residents will be required to pay a one-time entrance fee of
approximately $500 to reserve their unit or apartment. The lease of the
apartments by the residents will be on a month-to-month basis. Residents
will be required to pay only for the months in which they are residents of
the facility.
Our Competition
We will experience competition from other elderly housing and care
providers. We will compete principally on the basis of perceived quality and
service, ambiance and price-value relationship. While we believe that our
facilities will be distinctive in design and operating concept, we are aware
of other companies with similar or competitive concepts. The long-term care
industry is highly competitive and we expect that it will become more
competitive in the future. We compete with numerous other companies We
compete with numerous other companies providing similar long-term care
alternatives, such as home health agencies, life care at home, community-based
service programs, retirement communities and convalescent centers. Nursing
facilities that provide long-term care services are also a potential source
of competition for us. There is no assurance that we will not encounter
increased competition in the future which could limit our ability to attract
residents and could have a material adverse effect on our financial condition,
results of operations and prospects.
The table on the following page indicates the number of units of existing
competition in assisted living, retirement living, nursing home care and
memory disorder for the five locations of our facilities. We gathered this
information through in-house market research. Specifically, the research
consisted of the following activities:
- We contacted the state regulatory agencies governing assisted
living, retirement living, nursing homes and memory disorder
facilities to obtain a list of existing facilities in operation
or those which were applying for licenses in each market area
being studied.
- We contacted the local zoning departments, where zoning existed,
to determine if any facilities were under development or
expanding.
- We searched the Internet for information about facilities in our
market areas.
- We obtained telephone books from each area and checked the yellow
pages for any projects in the area.
- We visited each community interviewing local businesses,
political subdivisions and realtors about any companies looking
at the area for possible senior care facility development.
- We contacted each existing facility to determine number of units,
occupancy and pricing.
- We collected the population data by gathering information from
the Census Bureau and local chambers of commerce.
All of this information was compiled into a report for each market area.
These reports were prepared in order for us to determine the need for
assisted living and retirement living in Minden, Bastrop, Farmerville and
Natchitoches, Louisiana and Oak Creek, Arizona. We have provided the
underwriter with copies of these reports. The information in the following
table was summarized from the reports.
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Summary of Our Existing Competition
<TABLE>
<CAPTION>
1996-1997 1996-1997 Existing Existing
Population Market Assisted Private-Pay
75 Years Potential Living Retirement
and Older Units Living Units
Location
<S> <C> <C> <C> <C>
Minden Market Area 3,270 191 0 0
Bastrop Market Area 1,993 101 0 0
Farmerville Market Area 1,491 79 0 20
Natchitoches Market Area 2,011 121 0 0
Oak Creek Market Area 1,481 289 42 102
</TABLE>
<TABLE>
<CAPTION>
Existing Existing
Nursing Memory
Care Disorder
Units Units
Location
<S> <C> <C>
Minden Market Area 528 0
Bastrop Market Area 614 0
Farmerville Market Area 455 0
Natchitoches Market Area 318 22
Oak Creek Market Area N/A 20
</TABLE>
Market potential for assisted living as shown for the Minden, Bastrop,
Farmerville and Natchitoches market areas is based on a national average of
7% of the seventy-five and over population less existing nursing home
residents. This national average takes into consideration that approximately
50% of this senior population will remain at home or be taken care of by
their family members. This national average also takes into consideration
that approximately 25% of the target population will live in some form of
institutional setting other than assisted or retirement living facilities.
The market potential for retirement living as shown for the Oak Creek market
area is based on a national average of 8.5% of the sixty-five and over
population. The 65 years and older population in the Oak Creek market area
is 3,398.
Management Agreement
On August 27, 1998, we entered into a management agreement with The
Forsythe Group, Inc., a company owned and controlled by Joanne M.
Caldwell-Bayles, our managing member and principal owner. The management
agreement extends to each of our facilities to be financed as a result of the
sale of the bonds. According to the terms of the management agreement, The
Forsythe Group will perform all services incidental to the operation of our
facilities, including:
- the hiring of employees,
- collection of payments,
- the paying of expenses,
- receiving governmental permits and the compliance thereof,
- marketing,
- preparing budgets, and
- all general activities that are associated with the management of
our facilities.
The Forsythe Group will account to us as its agent for the services
rendered. They will maintain operating receipt and expense accounts which
are approved by us. Prior to the opening of any facility, The Forsythe
Group will provide us with maintenance and operating expense projections,
provide policies and procedure manuals, implement marketingplans, establish
bookkeeping and accounting systems and identify inventory and equipment. The
Forsythe Group will participate in final inspections of the facility before
occupancy and will coordinate matters with the architect and contractor for
each facility.
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The employees of each facility will be our employees. The Forsythe Group
will have no authority to make any disbursement in excess of $15,000, unless
specifically authorized by us, nor may they incur any liability, which would
require more than one year of payment.
We will pay to The Forsythe Group, $1,500 per month or seven percent of
the gross collections of a facility, whichever is greater. Prior to the
opening date of a facility, the Forsythe Group shall be entitled to receive
$1,500 per month. The management agreement continues until January 1, 2010,
and may be terminated by the mutual consent of the parties, for cause if The
Forsythe Group shall fail to perform any of its duties according to the
management agreement, or in the event of The Forsythe Group's bankruptcy.
Other than matters regarding the operations of our facilities, The
Forsythe Group has no authority over our conduct of affairs or our management
and operation. We believe that the management agreement and its terms and
conditions are the same or as similar to other management agreements
generally made for the operation of health care facilities in the areas where
our facilities will be located.
Employees
Currently, we have five full time employees. Prior to the commencement
of operations of each facility, The Forsythe Group intends to employ an
average of 10 employees at each facility. There is no assurance that The
Forsythe Group will be able to obtain and maintain an adequate number of
competent personnel, including entry-level and skilled positions, or that a
shortage of operating personnel will not present a serious problem to us in
the future.
Government Regulation
Currently, retirement and assisted living residences are not specifically
regulated as such by the federal government. Our facilities will be subject
to certain state regulations and licensing requirements. To conform with
Louisiana's regulations governing residential care for the elderly, our
facilities will be required to be licensed by the Louisiana Department of
Social Services prior to the commencement of operations of the facilities.
We will apply for such licenses and anticipate getting a temporary license
upon completion of construction of each facility and a final license within
90 days after the issuance of the temporary license.
The process for applying and obtaining a license with the Louisiana
Department of Social Services requires that upon completion of construction
of a facility, the State of Louisiana Fire Marshall conducts an inspection of
the facility examining the safety issues and compliance with the Americans
With Disabilities Act. In general, the Americans With Disabilities Act
requires businesses to accommodate the special needs of persons with certain
types of disabilities. If the facility passes the inspection by the fire
marshall, than a temporary license is granted that is effective for 90 days.
Shortly after the fire marshall's inspection and the issuance of the
temporary license, the Louisiana Department of Social Services conducts an
inspection of the facility and reviews the administration procedures governing
the operation of the facility. In addition to their inspection, the
Department of Health and Hospitals inspects the facility for sanitation code
compliance shortly after the fire marshall's inspection. Any deficiencies
found during the Louisiana Department of Social Services or the Department of
Health and Hospitals inspection must be resolved prior to the final license
being granted by the Louisiana Department of Social Services. After the final
license is granted, the facility may be subject to quarterly inspections by
the Department of Health and Hospitals and annual inspections by the
Louisiana Department of Social Services. The renewal of the license is
granted by the Louisiana Department of Social Services upon receipt of the
$75 annual licensing fee and satisfactory results from the aforementioned
periodic inspections. The Oak Creek project is not required to be licenced
by the State of Arizona for senior independent living facilities.
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In our opinion, the facilities that are being constructed in Louisiana
and our facilities' management practices and operations will meet or exceed
all residential care for the elderly regulations of the State of Louisiana.
Failure on our part to receive and maintain the required licensing would have
a material adverse effect on our financial condition and our ability to
repay our debt.
We are subject to the Fair Labor Standards Act, which governs such
matters as minimum wage, overtime and other working conditions. A portion of
our personnel will be paid at rates related to the federal minimum wage, and,
accordingly, increases in the minimum wage will increase our labor costs.
As regulations are enacted to enforce this law, we may be required in the
future to adapt the design and format of our facilities or otherwise incur
additional capital costs to comply with such law. Such costs could have an
adverse effect on the operation of our facilities and our ability to function
successfully.
Environmental Matters
Federal law imposes liability on a landowner for the presence on the
premises of improperly disposed of hazardous substances. This liability is
without regard to fault for, or knowledge of, the presence of such substances
and may be imposed jointly or severally upon all succeeding landowners from
the date of the first improper disposal. While state law is less onerous,
the practical consequences may be the same. If in the future it is ever
determined that hazardous substances are present, we could be required to pay
all costs of any necessary clean up work, although under certain circumstances
claims against other responsible parties could be made by us. Phase one
environmental assessments were conducted on our properties from 1998 through
1999, except for the Oak Creek facility in which no environmental assessment
has been conducted. Research and visual observation undertaken from the
environmental assessments did not reveal any former or current environmental
conditions, problems or situations impacting the sites.
Description of Our Property
Our Proposed and Existing Facilities
We have acquired land in Northern Louisiana and a building in Oak Creek,
Arizona. We have converted the improvements on the Arizona property to an
independent living facility. We intend to construct assisted living
facilities on the properties located in Northern Louisiana. Additional
information about our properties is listed below.
The Minden Project. This facility will be located on 5.72 acres of land
on the North side of Germantown Road just South of Country Club Drive within
the City of Minden, Louisiana. Selection of this site was based upon a
location that was within an affluent residential neighborhood with limited
assisted living and retirement living services. The Minden facility will
have 25 assisted living units. Each of the assisted living units will have
one or two bedrooms, small kitchenettes, private bathroom, closet and sitting
areas. The facility will contain 22,217 square feet including 21 one bedroom
units, 4 efficiency units, one manager's apartment, common area amenities, a
full service kitchen, dining area, activity area, office, reception area,
bathrooms and storage areas.
The Series 1999-I Bonds with the Minden construction loan are secured by
a co-first mortgage on the Minden facility. We have title insurance on this
5.72 acres of land insuring good and marketable title to the property. During
construction of this facility, builder's risk, general liability and workers'
compensation insurance is being provided by the general contractor, The
Forsythe Group, Inc. Upon completion of the Minden facility, we will obtain
fire and extended coverage insurance to insure against loss by fire, windstorm,
explosion and various other losses in an amount equal to the outstanding
balance of the Series 1999-I Bonds. We will also obtain general liability
and workers' compensation insurance upon completion of this facility. In
our opinion, the Minden facility is adequately covered by insurance. We have
received the proper zoning for the project.
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<PAGE>
The Oak Creek Project. We acquired 2.8 acres of land and an existing
building located at 78 Canyon Diablo Road just outside the City of Sedona,
Arizona and within the Village of Oak Creek. We acquired the property for
$2,174,025 in October 1998. The property was previously used as a cancer
treatment center. We renovated this facility, and it opened for operations
on January 17, 1999. Selection of the property was based upon the location
of the land and building and the needs of the community for an additional
independent living facility in the area. The Oak Creek project consists of
28 units designed and renovated as independent living apartments. Each of
the independent living units have one or two bedrooms, small kitchenettes,
private bathroom, closet and sitting areas. The facility contains 22,235
square feet including common area amenities, a full service kitchen, dining
area, activity area, office and reception area, bathrooms, storage areas and
an indoor heated swimming pool.
The Series 1999-II Bonds with the Oak Creek interim loan are secured by
a co-first mortgage on the Oak Creek project. We have title insurance on
this 2.8 acres of land insuring good and marketable title to the property.
During renovation of the Oak Creek project, builder's risk, general liability
and workers' compensation insurance were provided by the general contractor,
The Forsythe Group, Inc. Upon completion of renovation of the Oak Creek
project, we obtained fire and extended coverage insurance to insure against
loss by fire, windstorm, explosion and various other losses in an amount
equal to the outstanding balance of the Series 1999-II Bonds. We also
obtained general liability and workers' compensation insurance upon
completion of this facility. In our opinion, the Oak Creek project is
adequately covered by insurance. We have received the proper zoning for the
project.
The Bastrop Project. This facility will be located on 3.35 acres of land
at 10280 Boswell Drive outside the city limits of Bastrop, Louisiana.
Selection of the site of the Bastrop Project was based upon a location that
was within an affluent residential neighborhood with limited assisted living
units. The Bastrop project will be a 25 unit assisted living facility. Each
of the assisted living units will have one or two bedrooms, small kitchenettes,
private bathroom, closet and sitting areas. The facility will contain 22,217
square feet including 21 one bedroom units, 4 efficiency units, one manager's
apartment, common area amenities, a full service kitchen, dining area,
activity area, office, reception area, bathrooms and storage areas.
The Series 1999-III Bonds with the Bastrop construction loan are secured
by a co-first mortgage on the Bastrop project. We have title insurance on
this 3.35 acres of land insuring good and marketable title to the property.
During construction of the Bastrop facility, builder's risk, general liability
and workers' compensation insurance will be provided by the general
contractor, The Forsythe Group, Inc. Upon completion of the Bastrop project,
we will obtain fire and extended coverage insurance to insure against loss by
fire, windstorm, explosion and various other losses in anamount equal to the
outstanding balance of the Series 1999-III Bonds. We will also obtain general
liability and workers' compensation insurance upon completion of the Bastrop
Project. In our opinion, the Bastrop project is adequately covered by
insurance. The Bastrop project conforms to the zoning ordinances of Bastrop,
Louisiana.
The Farmerville Project. This project will be located on approximately 4
acres of and on the West side of LA Highway 33 just outside the city limits
of Farmerville, Louisiana. Selection of the site of the Farmerville project
was based upon a location that is near a hospital with no assisted living
units. The Farmerville facility will be a 25 unit assisted living facility.
Each of the assisted living units will have one or two bedrooms, small
kitchenettes, private bathroom, closet and sitting areas. The facility will
contain 22,217 square feet including 21 one bedroom units, 4 efficiency units,
one manager's apartment, common area amenities, a full service kitchen,
dining area, activity area, office, reception area, bathrooms and storage
areas.
The Series 1999-IV Bonds with the Farmerville construction loan are
secured by a co-first mortgage on the Farmerville project. We have title
insurance on this 4 acres of land insuring good and marketable title to the
property. During construction of the Farmerville facility, builder's risk,
general liability and workers' compensation insurance will be provided by the
general contractor, The Forsythe Group, Inc. Upon completion of the
Farmerville project, we will obtain fire and extended coverage insurance to
insure against loss by fire, windstorm, explosion and various other losses in
an amount equal to the outstanding balance of the Series 1999-IV Bonds. We
will also obtain
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<PAGE>
general liability and workers' compensation insurance upon completion of the
Farmerville project. In our opinion, the Farmerville project is adequately
covered by insurance. The Farmerville project is located in Union Parish
which has no zoning requirements.
The Natchitoches Project. This project will be located on approximately
4 acres of land on the East side of LA Highway 1 just outside the city limits
of Natchitoches, Louisiana. Selection of the site of the Natchitoches
project was based upon a location that was within a growing community with
no existing assisted living units. The Natchitoches facility will be a 27
unit assisted living facility. Each of the assisted living units will have
one or two bedrooms, small kitchenettes, private bathroom, closet and sitting
areas. The facility will contain 22,216 square feet including 22 one bedroom
units, 5 efficiency units, common area amenities, a full service kitchen,
dining area, activity area, office, reception area, bathrooms and storage
areas.
The Series 1999-V Bonds with the Natchitoches construction loan are
secured by a co- first mortgage on the Natchitoches project. We have title
insurance on this 4 acres of land insuring good and marketable title to the
property. During construction of the Natchitoches facility, builder's risk,
general liability and workers' compensation insurance will be provided by the
general contractor, The Forsythe Group, Inc. Upon completion of the
Natchitoches project, we will obtain fire and extended coverage insurance to
insure against loss by fire, windstorm, explosion, and various other losses
in an amount equal to the outstanding balance of the Series 1999-V Bonds. We
will also obtain general liability and workers' compensation insurance upon
completion of the Natchitoches Project. In our opinion, the Natchitoches
project is adequately covered by insurance. The Natchitoches project
conforms to the zoning ordinances of the City of Natchitoches, Louisiana.
For additional information, see "Description of Our Property - Financing
of Our Facilities" and "Description of Bonds".
Appraisals
Robert M. McSherry, MAI 3760 Chelsea Drive, Baton Rouge, Louisiana 70809,
estimated market values for each of our facilities. Listed below are these
appraised values.
Appraised value of the Minden project . . . . . . $2,100,000
Appraised value of the Oak Creek project. . . . . $3,170,000
Appraised value of the Bastrop project . . . . . $2,100,000
Appraised value of the Farmerville project. . . . $2,030,000
Appraised value of the Natchitoches Project . . . $2,255,000
The appraiser, who is independent of the Biltmore Group, used various
appraisal approaches, but gave the most weight to the income approach in his
reconciliation and final value estimates. The income approach is an analysis
which converts anticipated benefits to be derived from the ownership of
property into a value estimated, with consideration given to the gross income,
expense, net income, vacancy rate and capitalization. Furthermore, the
income approach is not, for example, a valuation based upon the appraiser's
estimate of the price that would be arrived at by a willing buyer and a
willing seller in an arms-length sales transaction. Accordingly, it is
questionable that, in the event of default, our facilities could be sold,
whether voluntarily or at judicial sale, for the appraised value.
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<PAGE>
The appraiser also estimated values for each of our facilities based on
the cost approach. Listed below are these appraised values.
Appraised value of the Minden project . . . . . . $2,255,000
Appraised value of the Oak Creek project. . . . . $4,085,000
Appraised value of the Bastrop project. . . . . . $2,140,000
Appraised value of the Farmerville project. . . . $2,110,000
Appraised value of the Natchitoches project . . . $2,310,000
In contrast to the income approach, the cost approach estimates the
replacement cost of the improvements. The cost approach reflects the value
of the fee simple estate in the real estate; whereas the income approach
reflects the "going concern" value, which would most likely not exist in a
default situation.
A decision to invest in the bonds should not be made based solely on the
appraisals. Moreover, a purchaser of the bonds should realize and take into
consideration the fact our facilities, if they should have to be sold, may
bring less than is necessary to pay principal and interest due on the bonds.
This could result in the investor losing all or a portion of his original
investment, which the investor should take into consideration before making
the purchase.
Construction of Our Facilities
Listed in the following table are the proposed construction schedules and
development/construction costs of our facilities. The dates and numbers as
indicated below are estimates only.
<TABLE>
<CAPTION> Approximate Costs of
Construction Anticipated Opening Development and
Location Start Date Date Construction
<S> <C> <C> <C>
Minden project November 1998 July 1999 $2,150,000
Bastrop project December 1998 August 1999 $2,100,000
Farmerville project March 1999 October 1999 $2,050,000
Natchitoches project March 1999 October 1999 $2,200,000
Oak Creek project November 1998 January 1999 $2,750,000
</TABLE>
The approximate costs of development and construction as shown for the
Minden, Bastrop, Farmerville and Natchitoches projects include land,
construction and service costs; architectural and engineering costs;
furniture, fixtures and equipment. The amount shown for the Oak Creek
project includes the acquisition and service costs; architectural and
engineering costs; renovation costs; furniture, fixtures and equipment.
Financing of Our Facilities
Construction and Acquisition Financing. We have obtained and will obtain
interim/construction loans with The First Republic Bank of Monroe, Louisiana
and Church Loans and Investments Trust of Amarillo, Texas for the
construction and acquisition of our facilities. Each interim loan will be
secured by a co-first mortgage on the corresponding project that will be
acquired/built from the proceeds of the respective interim/construction loan.
The
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<PAGE>
interim loans are guaranteed by The Forsythe Group, Inc., an affiliate
and member of the Biltmore Group, in the amount of $500,000 for each
interim/construction loan. The trustee and holders of the bonds will not
benefit, directly or indirectly, from the guarantees of The Forsythe Group,
Inc.
We obtained the construction loan for the Minden project in the amount of
$1,358,520 from First Republic Bank. This loan closed on October 2, 1998, and
the mortgage and security agreement setting forth the terms of the loan have
been filed of record. The Minden construction loan bears interest at the
rate of 9.20% per annum and is due September 28, 1999. This loan is secured
by a co-first mortgage on the Minden project with the Series 1999-I Bonds.
We obtained the interim loan for the acquisition of the Oak Creek
project in the amount of $2,174,025 from Church Loans. This loan closed on
October 20, 1998, and the mortgage and security agreement setting forth the
terms of the loan have been filed of record. The Oak Creek interim loan
bears interest at a variable rate equivalent to 0.5% per annum in excess of
the lowest rate designated as the "Prime Rate" of interest as published by the
Wall Street Journal under the heading "Money Rates." This loan is due May
20, 1999, unless we exercise our option of renewing and extending this loan.
The loan is secured by a co-first mortgage on the Oak Creek project with the
Series 1999-II Bonds.
We obtained the construction loan for the Bastrop project in the amount
of $1,220,000 from Church Loans. This loan closed on November 24, 1998, and
the mortgage and security agreement setting forth the terms of the loan have
been filed of record. The Bastrop construction loan bears interest at a
variable rate equivalent to 1.5% per annum in excess of the lowest rate
designated as the "Prime Rate" of interest as published by the Wall Street
Journal under the heading "Money Rates." The loan is due November 24, 1999,
unless we exercise our option of renewing and extending this loan. The
Bastrop construction loan is secured by a co-first mortgage on the Bastrop
project with the Series 1999-III Bonds.
We obtained the construction loan for the Farmerville project in the
amount of $1,330,000 from Church Loans. This loan closed on February 25,
1999, and the mortgage and security agreement setting forth the terms of the
loan have been filed of record. The Farmerville construction loan bears
interest at a variable rate equivalent to 1.5% per annum in excess of the
lowest rate designated as the "Prime Rate" of interest as published by the
Wall Street Journal under the heading "Money Rates." The loan is due
February 25, 2000, unless we exercise our option of renewing and extending
this loan. The Farmerville construction loan is secured by a co-first
mortgage on the Farmerville project with the Series 1999-IV Bonds.
We obtained the construction loan for the Natchitoches project in the
amount of $1,450,000 from Church Loans. This loan closed on February 25,
1999, and the mortgage and security agreement setting forth the terms of the
loan have been filed of record. The Natchitoches construction loan bears
interest at a variable rate equivalent to 1.5% per annum in excess of the
lowest rate designated as the "Prime Rate" of interest as published by the
Wall Street Journal under the heading "Money Rates." The loan is due
February 25, 2000, unless we exercise our option of renewing and extending
this loan. The Natchitoches construction loan is secured by a co-first
mortgage on the Natchitoches project with the Series 1999-V Bonds.
If the proceeds from the sale of the Series 1999-I Bonds are
insufficient to retire the Minden construction loan at its maturity, then
Church Loans has agreed to loan us sufficient funds to retire the Minden
construction loan, giving us the option of renewing and extending Church
Loans' loan on the Minden project into a permanent loan amortized over
thirteen years subject to the Biltmore Group being current on all its
outstanding debt obligations. If the proceeds from the sale of the
Series 1999-II, III, IV and V Bonds are insufficient to retire the Oak Creek
interim loan, Bastrop construction loan, Farmerville construction loan and
Natchitoches construction loan at their respective maturities, then we have
been given the option by Church Loans of initially renewing and extending
the term of these loans for an additional one year subject to our company
being current on all its outstanding debt obligations. If any of these
loans are extended and any of the renewed loans have not been retired by
their extended maturity
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<PAGE>
dates, then we have been given the option by Church Loans of renewing and
extending the loan(s) into permanent loan(s) amortized over thirteen years
subject to our company being current on all its outstanding debt obligations.
Colonial Trust Company, acting as trustee on behalf of holders of the
Bonds, and the interim lenders have entered into lienholders agreements with
regard to each of the interim/construction loans.
The lienholders agreements state, among other things that:
1. The mortgage, security agreement and other collateral documents
covering each of our facilities shall name both the
corresponding interim lender and the trustee as lienholder;
2. The mortgage, security agreement and other collateral documents
shall secure ratably as provided in the lienholders agreements
each interim/construction loan and the corresponding series of
Bonds; and
3. The proceeds of each series of bonds will be used, subject to the
trust indenture, to pay down or retire the interim loans.
The lienholders agreements also state that in the event of a default, if
either the interim lender or the trustee elects to accelerate its loan, the
other party agrees to accelerate its loan to the extent permitted under the
other party's loan documents. If we were to default, the lienholders
agreements provide that the corresponding interim lender and the trustee will
conduct collection and foreclosure actions and proceedings jointly to the
extent possible.
In the event the interim lender and the trustee are unable to agree,
then the interim lender is given the right to direct and make decisions,
binding on the trustee and the holders of bonds. These decisions may concern
maintenance, protection or disposition of the respective project in default
and enforcement of the terms of the mortgage and security agreement. The
interim lender may cause the defaulted project to be sold in its then
current condition or may make renovations to, or complete construction of
the defaulted project. The interim lender is not required to advance any
funds except by its agreement, but in the event the interim lender elects
to advance funds, proceeds of foreclosure will be applied first to reimburse
any such funds advanced. Either the interim lender or the trustee may
purchase the defaulted project at any foreclosure sale free and clear of the
claims of the other.
If any of our facilities are sold or otherwise disposed of at
foreclosure, the lienholders agreements provide that the proceeds of
disposition be applied to the respective interim/construction loan in default
and the payment of the corresponding series of bonds on a pro-rata basis.
The "pro-rata" distribution of funds mean that after reimbursement of the
interim lender's fees and expenses as provided above, the interim lender and
the series of bonds associated with the defaulted interim/construction loan
will each receive funds from any disposal on foreclosure of the defaulted
project according to their respective percentage of the total principal
balance, including both the respective interim/construction loan in default
and the corresponding series of Bonds, on the property. Thus, depending on
the net proceeds from a foreclosure sale, each entity would receive proceeds
from the sale of property equal to the entire amount due them, or any amount
equal to their percentage of the total indebtedness against the defaulted
project, whichever is lesser.
In addition to requiring the timely payment of the interim loans and the
bond payments required under the terms of the trust indenture, the mortgages
obligate us to maintain proper books and records, and refrain from certain
activities such as altering the premises without prior written consent. The
mortgages also dictate, in part, the permitted financial relationships between
our company and the residents.
Lines of Credit Financing. We have access to two lines of credit from
First Republic Bank. The lines of credit are secured by certificate of
deposits, land and residences owned by Joanne Caldwell-Bayles and The
Forsythe Group, Inc., and the lines of credit are personally guaranteed by
Joanne Caldwell-Bayles. One line of credit is in the amount of $604,000
bearing interest at the rate of 9.75% per annum. The Forsythe Group has
secured this line of credit for the purpose of funding construction costs on
our facilities at the first of each month until reimbursed by the interim
loans at the end of each month. The Forsythe Group also has agreed to let us
use this line of credit for
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operations and other uses as needed. This line of credit was made available
on March 5, 1999 and is due on September 5, 2000. As of April 1, 1999, there
was approximately $525,000 in funds available in this line of credit.
The second line of credit is in the amount of $176,755 bearing interest
at the rate of 9.75% per annum. This line of credit was made available to
us on November 30, 1998 and is due November 30, 1999. This line of credit
has been fully funded. Proceeds from the Series 1999-II Bonds will be used
in part to retire this line of credit. We obtained this line of credit for
the purpose of renovating the Oak Creek project.
Permanent Financing. We have chosen to issue the bonds to provide the
permanent financing for our facilities. Our first revenues have been pledged
to repay the principal and interest on the Bonds. See "Sources and Uses of
Proceeds" and "Description of Bonds."
Our Management
Managing Member
The day to day operation of the Biltmore Group will be performed
by our managing member, Joanne M. Caldwell-Bayles. According to the terms
of our operating agreement, the managing member will be the chief executive
officer of our company responsible for the general overall supervision of
the business and affairs of the Biltmore Group. Mrs. Caldwell-Bayles shall
serve as our managing member until her resignation or until she is removed by
majority vote of all our members. Upon the resignation of the managing
member, a successor shall be elected by a vote of our members.
Joanne M. Caldwell-Bayles, 39 years old, has been our managing member
since its inception in July 1998. Mrs.Caldwell-Bayles has senior executive
experience in the development and operation of assisted living, retirement
and memory disorder facilities in West Monroe, Ruston, Bossier City and
Shreveport, Louisiana where she has served as the Operating Manager of The
Arbor Group, L.L.C. since August of 1996 and President of Senior Retirement
Communities, Inc. since September of 1997. Mrs. Caldwell-Bayles also has
senior executive experience in hotel management, personnel, finance and
commercial and residential development. In addition to her duties with the
Biltmore Group, The Arbor Group and Senior Retirement Communities, Mrs.
Caldwell-Bayles has served since January of 1989 as the President,
Chairperson of the Board of Directors and sole owner of The Forsythe Group,
Inc., the manager and developer of our facilities and the parent corporation
of four subsidiaries. These subsidiaries of The Forsythe Group include:
Forsythe Holdings, Inc., a commercial and residential lending company;
Format Capital, Corp., a commercialdevelopment and equipment leasing company;
Lewis Enterprises, Inc., a residential development company; and Northwest
Manufacturing Co., Inc., a manufacturing company for equipment for the
construction industry. She has served on the Board of Directors of the
Alexandria Chamber of Commerce, the Louisiana Restaurant Association and
the Louisiana Hotel/Motel Association. She also has served as President
of the Tourism Commission of Rapides Parish, Louisiana and of the
Hotel/Motel Association of Alexandria, Louisiana. Mrs. Caldwell-Bayles
attended Northeast Louisiana State University in Monroe, Louisiana.
Mrs. Caldwell-Bayles will be the person primarily responsible for
overseeing our actual operation and management. Accordingly, our success as
a company will be dependent upon her efforts. Mrs. Caldwell-Bayles will
delegate most of the daily operational responsibilities of the Biltmore Group
to on-site administrators. The administrators will be selected from a group
of candidates who must have a degree in administration and/or gerontology.
Prior to commencement of operations of each facility, Mrs. Caldwell-Bayles
will hire an administrator whose salary and employee benefits will be our
expense of operation. Mrs. Caldwell-Bayles will also recruit all other
employees. We anticipate that we will employ an average of 10 employees to
work at each facility with a total of approximately 50 employees working for
us upon completion of the Minden, Oak Creek, Bastrop, Farmerville, and
Natchitoches Projects. Mrs. Caldwell-Bayles will devote approximately 30%
of her time to the affairs of the Biltmore Group but is willing to devote
additional time if necessary.
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Executive Compensation
Joanne M. Caldwell-Bayles, our managing member, may receive
the following compensation:
- an annual salary in the amount of $30,000 per year beginning
when our first facility is opened for business and
- reimbursement for reasonable costs incurred by Mrs.
Caldwell-Bayles including but not limited to automobile
mileage, telephone expenses and entertainment expenses associated
with the Company's business.
Our Principal Owners
The following table sets forth information about the beneficial
ownership of our membership interests as of December 31, 1998.
<TABLE>
<CAPTION>
Name & Address Percent of
of Beneficial Owner Title of Class Units Class Owned
<S> <C> <C> <C>
Joanne M. Caldwell Bayles Membership Interest 578,239 52%
507 Trenton Street
West Monroe, LA 71291
The Forsythe Group, Inc. Membership Interest 532,524 48%
507 Trenton Street
West Monroe, LA 71291
</TABLE>
Joanne M. Caldwell-Bayles owns 100% of the capital stock of the Forsythe
Group, Inc.
Our Plan of Operation
Our primary plan of operation is to establish a local, regional and
national network of retirement and assisted living facilities that will
operate profitably. We have completed the renovation of our facility in
Oak Creek, Arizona and intend to complete construction of four facilities
in Northern Louisiana by October 1999. Our four facilities in Louisiana are
located in Minden, Bastrop, Farmerville and Natchitoches. We intend to
employ an average of 10 employees per completed facility with a total of
approximately 50 employees working for us by September 1999.
Based upon market research of the assisted living, retirement living and
memory disorder care industries within the facilities' market areas, we
expect to reach stabilized occupancy within 12 months upon completion of
each facility. "Stabilized occupancy" means an occupancy rate of 90% - 95%
that is maintained at this level for at least three months. Our expected
occupancy stabilization period is based upon the historical operating results
of The Arbor Group, one of our affiliates. However, actual results of
our facilities' stabilization time frames may differ from the projected time
frames due to changes in local and national market conditions.
The Arbor Group has completed construction and is now operating a
similar assisted living and memory disorder facility in West Monroe,
Louisiana. The Arbor Group has been and will continue to be a model for the
future development of the Biltmore Group. Senior Retirement Communities,
another of our affiliates, has completed construction of two facilities in
late 1998 and a third facility in early 1999. Senior Retirement Communities'
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facilities are similar to those to be built by the Biltmore Group and are
operating under the name of The Arbor Retirement Community and The Terrace.
The Arbor Group and Senior Retirement Communities are managed by the same
organization, The Forsythe Group, Inc., which will also manage our properties.
While we are newly formed, we will also operate our properties in Northern
Louisiana under the name of The Arbor Retirement Community. The Arbor
Retirement Community has established name recognition in portions of
Northern Louisiana through the operations of The Arbor Group and Senior
Retirement Communities' facilities. We are in the process of increasing name
recognition in the proposed communities in which our Facilities will be
located. Our facility located in Arizona is being operated under the name of
The Biltmore of Oak Creek.
In order for us to fund all of our objectives of this offering, the
maximum offering amount must be sold by the termination date of this offering,
and we will need to raise additional operating funds during the first 12
months of operation. We have estimated that $500,000 will be needed for
operation during the first 12 months, above and beyond the expenses as set
forth in "Sources and Uses of Funds."
Currently, The Forsythe Group has one line of credit from which we can
access for the use of additional operating funds. Once construction of our
facilities have been completed, we should have access to over $600,000 in
funds available from this line of credit. Advances on this line of credit
will be made by the Forsythe Group to us until our cash flow reaches an
amount where advances are not necessary. At this point, we will repay the
advances out of the excess cash flow to be applied first to accrued interest
and then to the outstanding principal. Interest will accrue at the rate of
9.75%. This line of credit has been established by the pledging of collateral
not secured by the bonds; Mrs. Caldwell-Bayles, The Forsythe Group and The
Arbor Group also have pledged other assets to secure the line of credit.
If additional funds are needed for our operation, The Forsythe Group,
our management company, has agreed to defer collection of its management fees.
However, we believe that it will not be necessary for us to raise additional
funds during the next 12 months other than the use of the credit line,
unless all of the bonds are not sold. In such event, we intend to proceed as
follows based upon how many bonds have been sold:
- If the minimum offering amount is not reached for a series of
bonds, then the subscribers to this series of bonds will receive
the return of their subscription amount plus interest. If this
occurs, we will convert the interim loan applicable to this
series of bonds into a permanent loan as provided for in the
interim loan agreement.
- If all of the bonds are not sold for a series of bonds but the
minimum amount has been met for this series,then we would
convert the unpaid balance of the interim loan applicable to
this series of bonds into a permanent loan as provided for
in the interim loan agreement. If this occurs, the sold bonds
for this series of bonds will remain outstanding on a co-first
mortgage position with the converted interim loan.
If either the minimum offering amount is not reached or not all of the
bonds are sold for a series of bonds, then we may need to secure additional
funds beyond the use of the credit line for the completion and/or operation
of the facility related to the affected series of bonds. Presently, we do
not have other sources of financing, nor may we be able to secure additional
financing if needed in the future.
The successful operation of our assisted living and retirement living
facilities is affected by several factors applicable to senior care facilities,
including:
- Attracting a sufficient number of residents to achieve high levels
of occupancy;
- Competition from presently existing and operating facilities in
our service areas;
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- Adoption of new legislation or regulation affecting the operation
of our facilities and increasing our operating costs;
- Establishment of wage, rent or price controls;
- Availability and cost of liability, casualty and malpractice
insurance;
- Scarcity in personnel required for proper staffing;
- Increase in utility costs;
- Changes in tax, pension, social security or other laws and
regulations affecting the provision of senior care and other
services; and
- Property risks such as fire or other casualty, condemnation,
increase in property taxes, water and sewer rates and operating
costs.
Our product is providing living accommodations for seniors who need
assistance. As the needs of our residents change, we are willing to modify
our operations to accommodate our residents needs. We are committed to
continue researching the trends of senior citizens' living accommodation
needs. There is no assurance that we will be able to accomplish any or all
of these objectives.
Prior Performance of Our Affiliates
The Arbor Group, L.L.C., an affiliated limited liability company of the
Biltmore Group, has prior experience in the development and operation of an
assisted living and memory disorder facility similar to that of our proposed
facilities. In August 1996, Mrs. Caldwell-Bayles, Raymond Nelson and Jean
Gaffney Nelson formed The Arbor Group, L.L.C. for the purpose of developing
and operating a 35-unit assisted living facility and a 24-unit memory
disorder facility in West Monroe, Louisiana. The facility was completed and
opened for business on November 4, 1997. The year 1998 was the first full
year of operations for this facility. Mrs. Caldwell-Bayles serves as the
operating manager of The Arbor Group, L.L.C.
The Arbor Group's gross revenues for the year ending December 31, 1998
were $738,415. The Arbor Group's expenses for the same period, including
depreciation and debt service, were $1,108,836. For the one month period
ending January 31, 1999, The Arbor Group's gross revenues were $101,197.
The Arbor Group's expenses for this same period were $104,905 including
depreciation and debt service. These amounts were provided by the management
of The Arbor Group and are not audited. As of May 1, 1999, the occupancy
rate of The Arbor Group's assisted living and memory disorder facility was
93%.
The Arbor Group's assisted living and memory disorder facility was
financed by the issuance of bonds in the amount of $3,250,000 under terms
similar to that of this offering. The bonds for the Arbor Group were offered
and sold by MMR Investment Bankers.
Senior Retirement Communities, Inc., an affiliate of the Biltmore Group,
has completed a 48-unit assisted living facility in Ruston, Louisiana and a
24-unit memory disorder facility in Shreveport, Louisiana. These facilities
were completed in the fourth quarter of 1998. Senior Retirement Communities
completed a third assisted living and memory disorder facility in Bossier
City in the first quarter of 1999. These facilities are similar to our
proposed facilities. These properties operate under the name of The Arbor
Retirement Community and The Terrace; they are all located in Northern
Louisiana, thereby helping to increase The Arbor Retirement Communities' name
recognition in the area.
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Senior Retirement Communities' assisted living and memory disorder
facilities are being financed by the issuance of bonds in the amount of
$9,000,000 under terms similar to that of this offering. The bonds for
Senior Retirement Communities are being offered and sold by MMR Investment
Bankers with approximately 97% of the bonds having been subscribed for as of
May 1, 1999. The operating results of Senior Retirement Communities can be
found in their 10-KSB dated December 31, 1998 and additional reports as
required, which are filed with the Securities and Exchange Commission,
Washington, D.C. 20549.
Certain Transactions
Joanne M. Caldwell-Bayles, our managing member, owns or controls each
affiliated company of the Biltmore Group. She has entered into certain
transactions with us which have not been determined by arms length
negotiations. We do not have any procedures or policies, nor will be putting
any in place, which can assure that transactions with our affiliates will be
on terms no less favorable than those which could be obtained from
unaffiliated third parties. Furthermore, the terms of these transactions are
or may be substantially different from the terms of transactions negotiated
with third parties.
Units of our membership interests were issued to Ms. Caldwell-Bayles and
her affiliates for some of the following transactions. A unit of our
membership interest represents an ownership interest in the Biltmore Group.
Each unit was issued for either a dollar of cash, assets or services
contributed to the Biltmore Group. See "Our Principal Owners."
Land Acquisition
On October 2, 1998, we acquired 5.72 acres of land at the Minden location
from Senior Retirement Communities, one of our affiliates. The sales price
for the land was $203,739. Senior Retirement Communities acquired this land
plus an additional 4 acres on April 30, 1998 from an unrelated party.
Senior Retirement Communities basis in this property was $203,739. We did
not purchase the entire tract of land, because the portion that we did not
acquire required extensive site work and was less desirable for development.
Since we acquired only a portion of the 9.72 acres from Senior Retirement
Communities, this transaction resulted in a gain to Senior Retirement
Communities of $86,059.
Construction Contracts
On November 18, 1998, we entered into a design/builder contract in the
amount of $1,777,000 with The Forsythe Group, one of our members and
affiliates, to construct the Minden project. The contract calls for the
cash payments of $1,352,000 during the building of the Minden project as
approved by the contract engineer and the issuance of additional units of
membership interests valued at $425,000. As of December 31, 1998, $345,245
had been paid on this contract and $174,000 of membership interests had been
issued for services rendered in connection with the project. The remainder
of the $251,000 due to be paid through the issuance of membership interests
will be issued at the completion of this project.
On November 18, 1998, we entered into a design/builder contract in the
amount of $1,777,000 with The Forsythe Group to construct the Bastrop project.
The contract calls for the cash payments of $1,352,000 during the building of
the Bastrop project as approved by the contract engineer and the issuance of
additional units of membership interests valued at $425,000. As of
December 31, 1998, $36,560 had been paid on this contract and $175,000 of
membership interests had been issued for services rendered in connection with
the project. The remainder of the $250,000 due to be paid through the
issuance of membership interest will be issued at the completion of the
project.
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<PAGE>
On November 18, 1998, we entered into a design/builder contract in the
amount of $1,777,000 with The Forsythe Group to construct the Farmerville
project. The contract calls for the cash payments of $1,352,000 during the
building of the Farmerville project as approved by the contract engineer and
the issuance of additional units membership interests valued at $425,000.
As of December 31, 1998, $0 had been paid on this contract and $135,000 of
membership interests had been issued for services rendered in connection with
the project. The remainder of the $290,000 due to be paid through the
issuance of membership interests will be issued at the completion of this
project.
On November 18, 1998, we entered into a design/builder contract in the
amount of $1,777,000 with The Forsythe Group to construct the Natchitoches
project. The contract calls for the cash payments of $1,352,000 during the
building of the Natchitoches project as approved by the contract engineer and
the issuance of additional units of membership interests valued at $425,000.
As of December 31, 1998, $0 had been paid on this contract and $135,000 of
membership interests had been issued for services rendered in connection with
the project. The remainder of the $290,000 due to be paid through the
issuance of membership interests will be issued at the completion of this
project.
Management Contract
On August 27, 1998, The Forsythe Group entered into a management
agreement with the Biltmore Group for the management of our facilities. The
management agreement extends to the year 2010, with compensation based on
each facility, paying the Manager $1,500 per month or seven percent of the
gross collections of a facility, whichever is greater. The management
agreement can be terminated by mutual consent of the parties, bankruptcy or
for cause. We anticipate the payments under the management agreement to The
Forsythe Group will be approximately $90,000 in 1999. For the first full
year of operations after all the facilities have been opened, we estimate
the management fees to total approximately $163,000. In the second full year
of operations, we estimate these fees to total approximately $199,000 per
year. After the second full year of operations, we estimate these fees to
total approximately $210,000 per year.
Other Transactions
On August 20, 1998, we issued 265,000 units of membership interests to
The Forsythe Group for $91,000 cash and services rendered in connection with
developing the plans for construction, obtaining State Fire Marshall approval
of the plans and getting approval of the proper zoning of the Minden project.
On September 30, 1998, we issued 21,500 units of membership interests
to Joanne M. Caldwell-Bayles for $2,000 cash and services rendered in
connection with the formation of the Biltmore Group.
On October 19, 1998, we issued 85,000 units of membership interests to
Joanne M. Caldwell-Bayles for services rendered in connection with the
interior design of our facilities and market research studies for our
facilities.
On November 10, 1998, we issued 203,739 units of membership interests to
Joanne M. Caldwell-Bayles for $203,739 in cash.
On November 10, 1998, we issued 270,000 units of membership interests to
Joanne M. Caldwell-Bayles for services rendered in connection with selecting
the location and purchasing of the land on which the Bastrop and Farmerville
projects are to be built, developing the plans for construction, obtaining
State Fire Marshall approval of the plans and getting approval of the proper
zoning of the Bastrop and Farmerville projects.
On November 10, 1998, we issued 267,523.50 units of membership interests
to the Forsythe Group for $132,523.50 in cash and services rendered in
connection with selecting the location and purchasing of the land on
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<PAGE>
which the Natchitoches project is to be built, developing the plans for
construction, obtaining State Fire Marshall approval of the plans and getting
approval of the proper zoning of the Natchitoches project.
Description of Bonds
The bonds will be issued in book-entry form, unless the purchaser
requests a printed bond certificate, according and subject to the provisions
of the trust indenture between the Biltmore Group and Colonial Trust Company
of Phoenix, Arizona. Colonial Trust Company will serve as trustee, bond
registrar and paying agent. The bonds will be qualified to the extent that
enforcement of their rights and remedies may be affected by other laws such
as bankruptcy, insolvency or re-organization which are applicable to the
rights and remedies of creditors and secured parties, thus affecting the
rights of the trustee and the bondholders and their ability to make recovery
of your investment as a result of such events. Additionally, our trust
indenture has not been prepared to qualify under the Trust Indenture Act of
1939. Therefore, certain provisions such as the qualification of the trustee
and its financial condition, remedies upon default, investments by the trustee
and voting and notice provision contained in our trust indenture may not be
the same as would be required under the Trust Indenture Act of 1939. The
failure of us to incorporate these provisions in our trust indenture may
limit your rights as a bondholder. Copies of the trust indenture will be
deposited with the trustee, the Biltmore Group and the underwriter. The
following is a summary of the provisions of the trust indenture.
Security and Source of Payment for the Bonds
All of the bonds will be secured by co-first mortgages upon our
facilities as follows:
- The Series 1999-I Bonds in the amount of $1,800,000 will be
secured by a co-first mortgage against the property comprising
the Minden, Louisiana facility;
- The Series 1999-II Bonds in the amount of $2,700,000 will be
secured by a co-first mortgage against the property comprising
the Oak Creek, Arizona facility;
- The Series 1999-III Bonds in the amount of $1,800,000 will be
secured by a co-first mortgage against the property comprising
the Bastrop, Louisiana facility;
- The Series 1999-IV Bonds in the amount of $1,800,000 will be
secured by a co-first mortgage against the property comprising
the Farmerville, Louisiana facility; and
- The Series 1999-V Bonds in the amount of $1,800,000 will be
secured by a co-first mortgage against the property comprising
the Natchitoches, Louisiana facility.
When you purchase a bond, you will have a priority interest as a creditor
in the facility for which your bond is applicable so that, in the event
of a default in the payment of your bond, the trustee may sell or foreclose
upon the facility. If such sale or foreclosure does not cure the default,
the trustee may, at its discretion, sell or foreclose upon any or all
of the other facilities and pay the bonds applicable to such facilities
and then apply such remaining funds to cure your defaulted bond.
Furthermore, we pledge our first revenues and receipts from each of the
above described properties and facilities to secure the payment of the bonds.
These revenues and receipts shall be first applied to the payment of the
bonds of which the proceeds were used to obtain or construct the facility or
property producing such revenues and receipts. Then, the revenues and
receipts will be applied to any other bonds the payment of which is in
default and if none, or after this has been done, to the payment of other of
our bonds as the trustee, in the trustee's discretion, may select.
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<PAGE>
General
We are offering $9,900,000 of co-first mortgage bonds in five series,
with the proceeds from each series being used for the construction or
acquisition of a particular project. The issue and sale of each series of
bonds is not contingent on the issue and sale of the other series of bonds,
and will be separately offered and sold and subject to minimum proceeds prior
to their issuance.
The bonds will be issued in book-entry form, unless the purchaser
requests a printed bond certificate, as registered bonds without coupon in
denominations of $250 each or any integral multiple thereof. The bonds will
be issued to mature serially, except the Series 1999-II Bonds which will all
mature on one maturity date. To "mature serially" means the bonds will
mature according to predetermined maturity dates, beginning six months from
the issue date on the Series 1999-III Bonds and beginning eighteen months
from the issue date on the Series 1999-I, IV and V Bonds and continuing
to mature each six months thereafter until the final maturity period of
each of these series of bonds as indicated in the "Prospectus Summary."
The purchaser of a bond should understand that in the event he/she should
need to sell the bond, the underwriter does not make a secondary market
for the bonds, nor is there the likelihood a secondary market will develop.
Principal and interest are payable in lawful money of the United States
by the trustee, acting in its capacity as paying agent. Some bonds pay
interest by check semiannually and are called simple interest bonds.
Other bonds pay the interest earned only at the maturity of the bond and
are called compound interest bonds.
The Series 1999-I Bonds will be dated June 1, 1999, and are subject to
the sale of a minimum of $400,000 in principal amount of bonds. The
aggregate principal amount of the Series 1999-I Bonds is $1,800,000 and is
comprised of bonds in the principal amount of $1,738,500 that will mature
serially and bear simple interest payable by check mailed to the registered
owners each December 1 and June 1 until maturity and bonds in the principal
amount of $61,500 that will mature serially and bear interest compounded
semiannually each December 1 and June 1 that is payable at maturity. The
Series 1999-I Bonds will begin accruing interest as of June 1, 1999, whether
or not they have been purchased and whether or not the minimum offering
amount has been reached. If any of the Series 1999-I Bonds are purchased
after June 1, 1999, the purchaser will be entitled to receive interest on the
Bond from June 1, 1999.
The Series 1999-II Bonds will be dated July 1, 1999, and the Series
1999-II are subject to the sale of a minimum of $600,000 in principal
amount of bonds. The aggregate principal amount of the Series 1999-II
Bonds is $2,700,000. The Series 1999-II Bonds will mature on July 1,
2004 and bear simple interest payable by check mailed to the registered
owners each January 1 and July 1 until maturity. Interest on the Series
1999-II Bonds will accrue from the date payment for the Series 1999-II
Bonds is received in the office of the underwriter or from July 1, 1999,
whichever is later, whether or not the minimum offering amount for this
series of bonds has been reached.
The Series 1999-III Bonds will be dated July 1, 1999, and the Series
1999-III Bonds are subject to the sale of a minimum of $400,000 in principal
amount of bonds. The aggregate principal amount of the Series 1999-III Bonds
is $1,800,000 . The Series 1999-III Bonds will mature serially and bear
interest compounded semiannually each January 1 and July 1 that is payable
at maturity. The Series 1999-III Bonds will begin accruing interest as of
July 1, 1999, whether or not they have been purchased and whether or not the
minimum offering amount has been reached. If any of the Series 1999-III Bonds
are purchased after July 1, 1999, the purchaser will be entitled to receive
interest on the bond from July 1, 1999.
The Series 1999-IV Bonds will be dated August 1, 1999, and the Series
1999-IV Bonds are subject to the sale of a minimum of $400,000 in principal
amount of bonds. The aggregate principal amount of the Series 1999-IV Bonds
is $1,800,000 and is comprised of bonds in the principal amount of $1,718,750
that will mature serially and bear simple interest payable by check mailed to
the registered owners each February 1 and August 1 until maturity and bonds
in the principal amount of $81,250 that will mature serially and bear
interest compounded semiannually each February 1 and August 1 that is payable
at maturity. The Series 1999-IV Bonds will begin accruing interest as
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<PAGE>
of August 1, 1999, whether or not they have been purchased and whether or not
the minimum offering amount has been reached. If any of the Series 1999-IV
Bonds are purchased after August 1, 1999, the purchaser will be entitled to
receive interest on the bond from August 1, 1999.
The Series 1999-V Bonds will be dated September 1, 1999, and the Series
1999-V Bonds are subject to the sale of a minimum of $400,000 in principal
amount of bonds. The aggregate principal amount of the Series 1999-V Bonds
is $1,800,000 and is comprised of bonds in the principal amount of $1,718,750
that will mature serially and bear simple interest payable by check mailed to
the registered owners each March 1 and September 1 until maturity and bonds
in the principal amount of $81,250 that will mature serially and bear interest
compounded semiannually each March 1 and September 1 that is payable at
maturity. The Series 1999-V Bonds will begin accruing interest as of
September 1, 1999, whether or not they have been purchased and whether or not
the minimum offering amount has been reached. If any of the Series 1999-V
Bonds are purchased after September 1, 1999, the purchaser will be entitled to
receive interest on the bond from September 1, 1999.
Tax Consequences
Interest paid on the bonds is not exempt from federal or state income
taxes. Interest on simple interest bonds is paid by check semiannually.
Each year the purchaser of a simple interest bond will receive a form 1099
INT from the trustee/paying agent showing the interest earned on the bond(s)
for that tax year. While compound interest bonds pay the interest earned
only at the maturity of the bond, a portion of the interest must be reported as
income each year even though no interest will be paid until maturity. The
interest to be reported each year is the amount of interest accruing on
the bond that year. Each year the purchaser of a compound interest bond
will receive a form 1099 OID from the trustee/paying agent showing the
interest earned on the bond(s) for that tax year. For further information
concerning the tax consequences of purchasing or holding the bonds, the
investor should consult his or her tax advisor.
Trust Funds Established Under the Trust Indenture
The trust indenture provides for the creation of bond proceeds funds,
into which the proceeds from the sale of bonds will be deposited for each
series of bonds. The trust indenture also creates the bond operating funds,
into which payments for each series of bonds of the Biltmore Group are
collected prior to payments being made to the bondholders.
Payment of Bonds
Principal and interest on the bonds is payable at the office of the
trustee in lawful currency of the United States of America. Payment of
interest shall be made to the registered owners of the bonds and paid by
check or draft mailed to the registered owners at the address appearing on
the bond register of the trustee. Each holder who has received a printed
bond certificate must send his/her matured bonds to the paying agent in order
to obtain payment of the aggregate principal amount.
Events of Default
The term "event of default" when used in the trust indenture means the
occurrence of any one of the following events in regard to the series of
bonds to which such default should occur:
- Failure or refusal to pay when due the principal and/or
interest on any of the bonds in such series;
- Failure or refusal to timely pay into the operating fund
accounts any installment(s) required to pay any of the bonds
in such series;
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- Failure or refusal to pay when due any taxes, assessments,
insurance, claims, liens or encumbrances upon our facilities
securing the bonds of such series, or to maintain such
facilities in good repair, or to cure the breach of any other
covenant set forth in the trust indenture as to such series of
bonds;
- Failure or refusal to pay when due any loan or advance by or
the fees and expenses of trustee or of any depository or escrow
agent incurred in regard to such series;
- Failure or refusal, upon written request of the trustee to
furnish trustee with such insurance policies, financial reports
and information concerning the Biltmore Group as may be
reasonably required by trustee, or to grant unto trustee, its
agents, accountants and attorneys access during normal business
hours to our offices for the purpose of examining and, within
reasonable limits, photocopying such records;
- Making an assignment for the benefit of creditors; or should a
receiver, liquidator, or trustee be appointed to assist in the
payment of our debt; or should any petition for bankruptcy,
reorganization, or arrangement of the Biltmore Group be filed;
or should we be liquidated or dissolved, or its charter expire
or be revoked.
In the event that we should default in the payment of any required
operating fund payment and/or payment of principal or interest upon any
outstanding bond(s), then the trustee shall apply any of our revenues and
receipts received by the trustee:
- First, to the payment of the bonds of which the proceeds were
used to construct or obtain the facility from which the
revenues or receipts were received;
- Second, to the payment of any other bonds, the payment of which
are then in default; and
- Third, as the trustee may determine, in the trustee's sole
discretion.
Remedies of Default
Upon the occurrence and continuation of an event of default for a period
of 30 days, the trustee may accelerate the bonds and declare the principal of
all bonds outstanding of such series of bonds then in default. Additionally,
upon written request of the holders of not less than 25% of the bonds
outstanding of such series of bonds then in default, the trustee is obligated
to accelerate the maturity of such series of bonds then in default in an
event of default.
In the event that:
- We are in default in the payment of the principal and/or
interest on one or more series of the bonds, but not all
of the series of the bonds,
- Or we are in default in the timely payment of the installments
to the operating fund account required on one or more series
of the bonds, but not all of the series of the bonds,
- And should such default continue for a period of 30 days,
- And as a result, the trustee has declared to be immediately due
and payable the principal balance and accrued interest of only
the unpaid bonds in the series in default,
- And if we then fail to pay this amount,
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Then the trustee may proceed to foreclose the lien against the property
applicable to the defaulted series of bonds. If this occurs, the proceeds
from the sale of the property so foreclosed, after the payment of all
expenses and amounts due the trustee, shall be first applied to the payment
of such defaulted bonds.
If there remains a deficiency in the payment of the series of bonds in
default, then the trustee may declare to be immediately due and payable the
principal balance due and accrued interest of any or all of the unpaid
bonds of any or all of the remaining series issued by the Biltmore Group
according to the trust indenture. If we then fail to pay said amount, the
trustee then may proceed to exercise any remedy provided for in the trust
indenture, including a foreclosure of the lien securing the then accelerated
and unpaid bonds. Upon the foreclosure of any property securing a series of
bonds, the proceeds received from any such foreclosure, after the payment of
all expenses and amounts due the trustee, shall be applied:
- First to the payment of the bonds so foreclosed;
- Secondly, to the payment of the bonds, then in default; and
- After this, as the trustee may determine, in the trustee's
discretion.
Additional Covenants
In addition to our obligation to remit the principal and interest
payments when due, we have agreed to at our own cost and expense, maintain
the properties in good repair and condition and pay or discharge all taxes,
assessments and any mechanic's or material men's liens that may become
payable.
Casualty Insurance
With respect to insurance, we have agreed to maintain in full force and
effect at all times fire and extended coverage insurance insuring against
losses in an amount at least equal to the balance then due on the outstanding
bonds. The proceeds of any such insurance are to be applied:
- For the replacement or repair of the property damaged,
- To purchase additional property secured by the trust
indenture as originally acquired with bond proceeds,
- For construction of additional improvements on our facilities,
- To redeem outstanding bonds,
- Or a combination of the foregoing.
If the proceeds from the sale of the bonds are to be used to finance the
construction of improvements, we agree to furnish and maintain in full force
builder's risk insurance during the period of construction. In addition, we
have agreed to maintain in full force and in effect at all time general
liability insurance in such amount and with such insurers as shall be approved
by the trustee. The trustee is authorized to withdraw funds from the bond
operating fund and to apply funds for the our account of such obligations as
aforementioned, and we are obligated to immediately restore the proper balance
of the bond operating fund.
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Periodic Reporting
We have agreed to furnish to the trustee, at least annually, audited
financial statements, including a balance sheet, statement of activity and
statement of changes in financial position and to permit the trustee to
examine our books or records of accounts and our facilities at all reasonable
times. Audited annual financial statements will also be supplied to the
investors.
Additional Bond Issues/Additional Indebtedness
We reserve the right to issue additional parity bonds or incur additional
debt obligations for any lawful purpose, including refunding any outstanding
bonds. Such additional bonds along with these bonds that are currently being
offered should be deemed "Bonds" for all purposes and as defined in the trust
indenture. When issued and delivered the additional bonds will be secured
under the terms of the trust indenture and shall be on parity with all then
outstanding bonds of the Biltmore Group as offered in this prospectus. The
additional bonds may be offered in one or more series or issues, in various
principal amounts, bearing interest, maturing, and having such redemption
features and other provisions as may be provided in any supplemental
indenture or other instrument authorizing their issuance. However, no series
or issue of additional bonds shall be issued unless:
- Any default or event which would result in default by the
Biltmore Group under the trust indenture has been first
cured;
- Any real property acquired from the proceeds of additional
bonds must be subjected to and become a part of the lien of
the trust indenture and any mortgage or deed of trust upon our
facilities; and
- The ratio of the total of outstanding bonds plus the
additional bonds shall not exceed 100% of the capitalized cost
of the property, inclusive of any new construction or
improvements to secure the payment of the bonds. Also, no
additional debt as allowed by the trust indenture shall be
incurred by the Biltmore Group without the written consent of
the Kansas Securities Commissioner.
Substitution of Collateral
If we are not then in default, the trustee may execute partial releases
or accept substitution of collateral; provided, however, that in every such
instance the trustee must receive from some disinterested person a
certificate stating that the value of the property to be substituted is of
equal or greater value to the original property.
Successor Trustee
If the trustee resigns or is removed or dissolved or if any court or
administrative body takes control over the property or affairs of the
trustee because of insolvency or financial difficulty or for any other reason,
then we must appoint a successor trustee. If we fail to make such an
appointment, the majority in principal amount of bondholders may appoint a
successor trustee. The successor trustee must then mail notice of its
appointment to the registered owners but no other notice is required.
Modification of Trust Indenture
The trust indenture may be amended or supplemented from time to time by
the parties thereto without the consent of or notice to the bondholders for
any of the following purposes:
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- To cure any ambiguity, omission, formal defect or inconsistency;
or
- To issue additional bonds within the guidelines described above;
or
- To make any change which, in the judgement of the trustee in
reliance upon any opinion of counsel does not adversely affect
the rights of the holders of any bond.
The trust indenture may be amended or supplemented for purposes other
than those set forth above with the consent of the holders of 66 2/3% of the
bonds then outstanding; provided, however, that no such amendment or
supplement without the consent of the holder of any bond affected shall:
- Reduce the percentage of the principal amount of bonds the
holders of which must consent to for any such amendment,
supplement or waiver;
- Reduce the rate or extend the time of payment of interest on
any bonds; or
- Reduce the principal or premium, if any, on any bond or extend
the time or times of payment thereof whether at maturity, upon
redemption or otherwise.
Prepayment
We have reserved the right to redeem all or a portion of the bonds prior
to their stated maturity. The bonds are subject to redemption without
premium at their stated principal amount plus accrued interest. The
registered owner will be given written notice of such redemption at the
owner's address as it appears on the bond register. It is the owner's
responsibility to notify the paying agent of any change of address. Any bond
not redeemed by its owner within three years after its maturity date is
deemed to have been paid, and the funds will escheat to the benefit of the
appropriate state authority.
Requirements of the Operating Fund Accounts
Under the trust indenture, we must establish operating fund accounts and
make monthly deposits into the operating fund accounts in amounts
predetermined to be sufficient at all times to pay the principal and interest
of each series of the bonds. The required monthly deposits will be as
follows:
Series 1999-I ($1,800,000)
- $14,010.01 per month for one year beginning June 1, 1999
- $17,450.02 per month for one year beginning June 1, 2000
- $17,750.02 per month for one years beginning June 1, 2001
- $18,270.02 per month for four and one half years beginning
June 1, 2002
- With a final balloon payment of $1,451,750 due on November
30, 2006
- Payments include the paying agent fee of $450 per month.
Series 1999-II ($2,700,000)
- $20,925.01 per month for five years beginning July 1, 1999
- With a final balloon payment of $2,700,000 due on June 30, 2004
- Payments include the paying agent fee of $675 per month.
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Series 1999-III ($1,800,000)
- $13,727.99 per month for one year beginning July 1, 1999
- $15,442.00 per month for one year beginning July 1, 2000
- $17,223.00 per month for one year beginning July 1, 2001
- $18,970.03 per month for four and one half years beginning
July 1, 2002
- With a final balloon payment of $1,416,771 due on December
31, 2006
- Payments include the paying agent fee of $450 per month.
Series 1999-IV ($1,800,000)
- $13,270.00 per month for one year beginning August 1, 1999
- $16,119.99 per month for one year beginning August 1, 2000
- $17,651.00 per month for one years beginning August 1, 2001
- $19,434.99 per month for two years beginning August 1, 2002
- With a final balloon payment of $1,575,000 due on July 31, 2004
- Payments include the paying agent fee of $450 per month.
Series 1999-V ($1,800,000)
- $13,270.00 per month for one year beginning September 1, 1999
- $16,119.99 per month for one year beginning September 1, 2000
- $17,651.00 per month for one years beginning September 1, 2001
- $19,434.99 per month for two years beginning September 1, 2002
- With a final balloon payment of $1,575,000 due on August 31,
2004
- Payments include the paying agent fee of $450 per month.
The trustee must first draw, from the operating fund accounts, the
charges due for paying agency and trustee services. Thereafter, the amounts
in the operating fund accounts shall be used solely for the payment of
interest coming due or principal coming payable on the bonds or for the
redemption of bonds. However, the trustee may, in the event we fail to
maintain or insure our properties, apply such funds as may be available in
the operating fund accounts to perform our obligations. We are obligated to
immediately replenish such funds so applied.
Initial Operating Fund Payments
Initial operating fund payments will be funded from the sale bonds as
follows:
- $90,000 will be funded from the proceeds of the sale of the
Series 1999-I Bonds;
- $125,000 will be funded from the proceeds of the sale of the
Series 1999-II Bonds;
- $90,000 will be funded from the proceeds of the sale of the
Series 1999-III Bonds;
- $90,000 will be funded from the proceeds of the sale of the
Series 1999-IV Bonds and
- $90,000 will be funded from the proceeds of the sale of the
Series 19999-V Bonds.
These initial operating funds will be used only to make the initial
payments on the respective series of bonds. They are equivalent to
slightly more than the first six month operating fund payments for the five
series of bonds assuming all of the bonds are sold. After the initial
operating fund payment amounts have been expended, the remaining operating
fund payments will be payable primarily from the first revenues of our
facilities. If we are unable to make the required operating fund payments to
pay the principal and interest due on a series of bonds, then an event of
default will occur in this series of bonds. See "Description of Bonds -
Events of Default" and "Description of Bonds - Remedies of Default."
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Bond Reserve Account
We have agreed to establish a bond reserve account which will be funded
by four of the five series of bonds as follows:
- $140,000 from the Series 1999-I Bonds,
- $140,000 from the Series 1999-III Bonds,
- $140,000 from the Series 1999-IV Bonds and
- $117,000 from the Series 1999-V Bonds.
If all the bonds are sold, the bond reserve account will be funded in
the amount of $537,000. The purpose of the bond reserve account is that in
the event we have not deposited the necessary funds to pay the principal and
interest due on any semiannual payment date of any series of bonds, the
trustee may apply available funds to the principal and interest due on the
bonds. In the event that the trustee uses funds from the bond reserve
account to pay the principal and interest on the Bonds due at a particular
paydate, then we shall pay to the trustee, within 180 days from the date of
such paydate, an amount necessary to replenish the bond reserve account.
Failure to replenish the bond reserve account within 180 day period shall be
an event of default and shall entitle the trustee to continue to hold the
bond reserve account, in addition to its other remedies.
The bond reserve account will remain in place for a period of seven and
one half years from July 1, 1999. At the end of the seven and one half year
period, any funds remaining in the bond reserve account must first be used to
call any outstanding bonds, provided we are current on all operating fund
payments. If all of the bonds have been retired prior to the end of the
seven and one half year period, then the bond reserve account will be
released to the Biltmore Group.
Escrow and Disbursement of Bond Proceeds
All proceeds from the sale of the bonds shall be payable to and deposited
with Colonial Trust Company of Phoenix, Arizona according to an escrow
agreement entered into between the Biltmore Group and Colonial Trust Company,
as escrow agent. According to the terms of the escrow agreement, all
proceeds from the sale of the bonds will be deposited with the escrow agent,
subject to the sale of minimum funds for any series of bonds. A separate
escrow account will be maintained for each series of bonds.
The minimum offering amounts for the bonds is as follows:
- $400,000 for the Series 1999-I Bonds,
- $600,000 for the Series 1999-II Bonds,
- $400,000 for the Series 1999-III Bonds,
- $400,000 for the Series 1999-IV Bonds and
- $400,000 for the Series 1999-V Bonds.
No fees still due the underwriter related to the sale of a particular
series of bonds shall be paid out of an escrow account until the minimum
escrow amount for that particular series of bonds has been met. The funds
shall be used only for the purpose set forth under "Sources and Uses of
Proceeds." During the escrow period, the subscriber will not have access to
funds held in the escrow accounts. The Biltmore Group, our affiliates, the
underwriter and the
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underwriter's affiliates may purchase bonds in order to reach the minimum
offering amounts for any series of the bonds. These parties will not be
restricted to the amount of bonds that they may purchase.
If $400,000 has not been deposited in the escrow account from the sale
of the Series 1999-I Bonds by December 1, 1999, the subscribers to the Series
1999-I Bonds will receive the return of their subscription amount plus
interest. In the event that the minimum offering amount for the Series
1999-I Bonds is not met by December 1, 1999, we shall promptly pay to the
escrow agent such sum of money as shall be necessary to pay for accrued
interest on the bonds, if any, when added to the amount of the escrow
property and interest earned thereon to pay to the subscribers of the bonds
the principal amount of such subscriptions together with the interest from
June 1, 1999 through December 1, 1999 at the rate attributable to the Series
1999-I Bonds subscribed.
If $600,000 has not been deposited in the escrow account from the sale
of the Series 1999-II Bonds by January 1, 2000, the subscribers to the
Series 1999-II Bonds will promptly receive the return of their subscription
amount plus interest. In the event that the minimum offering amount for the
Series 1999-II Bonds is not met by January 1, 2000, we shall promptly pay to
the escrow agent such sum of money as shall be necessary to pay for accrued
interest on the bonds, if any, when added to the amount of the escrow property
and interest earned thereon to pay to the subscribers of the bonds the
principal amount of such subscriptions together with the interest from the
date payment for the Series 1999-II Bonds is received in the office of the
underwriter through January 1, 2000 at the rate attributable to the Series
1999-II Bonds subscribed.
If $400,000 has not been deposited in the escrow account from the sale
of the Series 1999-III Bonds by January 1, 2000, the subscribers to the
Series 1999-III Bonds will promptly receive the return of their subscription
amount plus interest. In the event that the minimum offering amount for the
Series 1999-III Bonds is not met by January 1, 2000, we shall promptly pay
to the escrow agent such sum of money as shall be necessary to pay for
accrued interest on the bonds, if any, when added to the amount of the
escrow property and interest earned thereon to pay to the subscribers of the
bonds the principal amount of such subscriptions together with the interest
from July 1, 1999 through January 1, 2000 at the rate attributable to the
Series 1999-III Bonds subscribed.
If $400,000 has not been deposited in the escrow account from the sale
of the Series 1999-IV Bonds by February 1, 2000, the subscribers to the
Series 1999-IV Bonds will promptly receive the return of their subscription
amount plus interest. In the event that the minimum offering amount for the
Series 1999-IV Bonds is not met by February 1, 2000, we shall promptly pay
to the escrow agent such sum of money as shall be necessary to pay for
accrued interest on the bonds, if any, when added to the amount of the escrow
property and interest earned thereon to pay to the subscribers of the bonds
the principal amount of such subscriptions together with the interest from
August 1, 1999 through February 1, 2000 at the rate attributable to the
Series 1999-IV Bonds subscribed.
If $400,000 has not been deposited in the escrow account from the sale of
the Series 1999-V Bonds by March 1, 2000, the subscribers to the Series
1999-V Bonds will promptly receive the return of their subscription amount
plus interest. In the event that the minimum offering amount for the Series
1999-V Bonds is not met by March 1, 2000, we shall promptly pay to the
escrow agent such sum of money as shall be necessary to pay for accrued
interest on the bonds, if any, when added to the amount of the escrow
property and interest earned thereon to pay to the subscribers of the bonds
the principal amount of such subscriptions together with the interest from
September 1, 1999 through March 1, 2000 at the rate attributable to the
Series 1999-V Bonds subscribed.
Subject to the sale of the minimum offering amount for the Series 1999-I
Bonds, the Biltmore Group and the trustee will use available funds from the
sale of the Series 1999-I Bonds in the following order:
1. To pay expenses of the underwriter, attorney, appraiser,
recording fees, mortgage taxes, trustee's fees, paying agent
fees and other similar fees incurred in connection with the
Series 1999-I Bonds;
2. To fund an amount approximately equivalent to the first six
month operating fund payments for the Series 1999-I Bonds;
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3. To retire the Minden construction loan;
4. To fund pre-opening costs of the Minden project;
5. To fund the Series 1999-I portion of the bond reserve account;
and
6. After the above has been accomplished, any remaining funds in
the bond proceeds account related to the Series 1999-I Bonds
will be released to the Biltmore Group.
Subject to the sale of the minimum offering amount for the Series
1999-II Bonds, the Biltmore Group and the trustee will use available funds
from the sale of the Series 1999-II Bonds in the following order:
1. To pay expenses of the underwriter, attorney, appraiser,
recording fees, mortgage taxes, trustee's fees, paying agent
fees and other similar fees incurred in connection with the
Series 1999-II Bonds;
2. To fund an amount approximately equivalent to the first six
month operating fund payments for the Series 1999-II Bonds;
3. To retire the Oak Creek interim loan;
4. To retire the line of credit used for the renovation of the
Oak Creek project; and
5. After the above has been accomplished, any remaining funds in
the bond proceeds account related to the Series 1999-II Bonds
will be released to the Biltmore Group.
Subject to the sale of the minimum offering amount for the Series
1999-III Bonds, the Biltmore Group and the trustee will use available funds
from the sale of the Series 1999-III Bonds in the following order:
1. To pay expenses of the underwriter, attorney, appraiser,
recording fees, mortgage taxes, trustee's fees, paying
agent fees and other similar fees incurred in connection with
the Series 1999-III Bonds;
2. To fund an amount approximately equivalent to the first six
month operating fund payments for the Series 1999-III Bonds;
3. To retire the Bastrop construction loan;
4. To fund the remaining construction costs on the Bastrop project;
5. To fund pre-opening costs of the Bastrop project;
6. To fund the Series 1999-III portion of the bond reserve account;
and
7. After the above has been accomplished, any remaining funds in the
bond proceeds account related to the Series 1999-III Bonds will be
released to the Biltmore Group.
Subject to the sale of the minimum offering amount for the Series 1999-IV
Bonds, the Biltmore Group and the trustee will use available funds from the
sale of the Series 1999-IV Bonds in the following order:
1. To pay expenses of the underwriter, attorney, appraiser,
recording fees, mortgage taxes, trustee's fees, paying agent fees
and other similar fees incurred in connection with the Series
1999-IV Bonds;
2. To fund an amount approximately equivalent to the first six month
operating fund payments for the Series 1999-IV Bonds;
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3. To retire the Farmerville construction loan;
4. To fund the remaining construction costs on the Farmerville
project;
5. To fund pre-opening costs of the Farmerville project;
6. To fund the Series 1999-IV portion of the bond reserve account;
and
7. After the above has been accomplished, any remaining funds in
the bond proceeds account related to the Series 1999-IV Bonds
will be released to the Biltmore Group.
Subject to the sale of the minimum offering amount for the Series 1999-V
Bonds, the Biltmore Group and the trustee will use available funds from the
sale of the Series 1999-V Bonds in the following order:
1. To pay expenses of the underwriter, attorney, appraiser,
recording fees, mortgage taxes, trustee's fees, Paying agent
fees and other similar fees incurred in connection with the
Series 1999-V Bonds;
2. To fund an amount approximately equivalent to the first six month
operating fund payments for the Series 1999-V Bonds;
3. To retire the Natchitoches construction loan
4. To fund the Series 1999-V portion of the bond reserve account;
and
5. After the above has been accomplished, any remaining funds in the
bond proceeds account related to the Series 1999-V Bonds will be
released to the Biltmore Group. See "Sources and Uses of
Proceeds."
Escrow Agent
We have appointed Colonial Trust Company of Phoenix, Arizona, as escrow
agent. The duties and responsibilities of the escrow agent are set forth in
the escrow agreement between the Biltmore Group and Colonial Trust Company,
the provisions of which are summarized under "Description of Bonds - Escrow
And Disbursement Of Bond Proceeds."
Trustee
Colonial Trust Company of Phoenix, Arizona, has agreed to serve as
trustee for the bonds pursuant to the trust indenture entered into between
the Biltmore Group and the trustee. The trustee has also agreed to serve as
paying agent, registrar, disbursing agent and escrow agent. The trustee is
not a guarantor or surety, does not in any way guarantee or act as surety for
payment of the bonds and may not be held liable under any conditions, except
for its own negligence.
The underwriter and trustee are separate corporations organized under the
laws of the states of Kansas and Arizona respectively. The trustee and
underwriter share no common officer or directors. The underwriter will
however receive a fee not to exceed $60,000 to be paid in installments over
the terms of the bond issues from the trustee for its technical assistance
pertaining to the bond issues. This assistance normally includes, but is not
limited to:
- Helping ensure that all legal documents are recorded;
- Making sure that proper documentation is forwarded to the
Trustee, including such documents as the articles of
organization, appraisal, financial statements and annual
reports;
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- Due diligence documentation of the progress of the project and
bond sales; and
- Follow-up with the Biltmore Group in the event of delinquent
payments.
This assistance offered by the underwriter presents a conflict of
interest, in that the underwriter has underwritten other offerings for our
affiliates, and therefore may not want to alienate us, and possibly lose
future business, by aggressively pursuing delinquent payments that are due
to investors. Dependence by the trustee on the underwriter to provide
certain information to the trustee restricts the trustee's ability to
function independently as a trustee. This assistance offered by the
underwriter, for whom it is compensated by the trustee, does in no way
relieve the trustee of its duties.
Registrar
The bonds are being issued as fully registered bonds in book entry form,
unless the purchaser requests a printed bond certificate. The trustee is
also acting as registrar and transfer agent for the bonds. As bond registrar,
the trustee will:
- Receive and record all proceeds from the sale of the bonds,
- Maintain a permanent bond register,
- Authenticate and mail all bonds to their registered holders that
have requested a printed bond,
- Cancel and reissue bonds which are transferred by the original
holders, and
- Replace lost, stolen and mutilated bond certificates.
All bonds will be registered in the owner's name. Upon registration, a
bond confirmation certificate or, if the purchaser requests, a printed bond
will be mailed directly to it's owner.
Paying Agent
We have also appointed the trustee to act as paying agent for the bonds.
As paying agent the trustee will receive and hold all payments remitted by
the company into the operating fund accounts and will disburse therefrom all
payments of principal or interest on the bonds, trustees fees and such other
sums as provided in the trust indenture. The paying agent holds the funds
in trust, commingled with similar operating funds of other companies, but
must maintain detailed records to reflect the balances attributable to each
company. The paying agent may invest the funds in any form of account or
deposit insured by depository insurance or in interest bearing obligations
issued by the United States Government or any political subdivision thereof,
or any funds comprised of the same.
As paying agent, the trustee is required to furnish periodic statements
to the Biltmore Group and to the underwriter reflecting all receipts and
disbursements from the operating fund accounts.
Underwriting
Underwriting Agreement
Subject to the terms and conditions of the underwriting agreement, a
copy of which is filed as an exhibit to the registration statement of which
this prospectus is a part, between the Biltmore Group and MMR Investment
Bankers, Inc., the Biltmore Group has retained the services of the
underwriter to offer and sell the bonds offered hereby on a "best efforts"
basis at the public offering price of $250 per bond or integral multiples
thereof. The bonds will be
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issued in five series, as identified in this prospectus, and each series is
subject to the sale of a minimum-offering amount as indicated under
"Description of Bonds - Escrow and Disbursement of Bond Proceeds."
All proceeds from the sale of the bonds will be transmitted promptly to
an escrow account with Colonial Trust Company as escrow agent. A separate
escrow account will be maintained for each series of bonds. In the event
minimum funds for any series of bonds is not received within the time set
forth in this prospectus, we will promptly pay to the escrow agent such sum
of money as will be necessary to pay for accrued interest on the bonds, if
any, when added to the sums held in escrow, including interest earned thereon,
to pay to the subscribers the principal amount of their subscription together
with interest through the escrow termination date at the rate attributable
to the bonds subscribed to by the subscriber. If the minimum offering amount
for any series of bonds in not reached, the subscribers will promptly receive
the return of their subscription amount plus interest. We expect that the
bonds will be delivered in book-entry form, subject to the sale of minimum
funds for each series of bonds, through the facilities of the trustee within
30 days from the date subscriptions for the bonds are received.
The Biltmore Group, our affiliates, the underwriter and the underwriter's
affiliates may purchase bonds in order to reach the minimum offering amounts
for any series of the bonds. These parties will not be restricted to the
amount of bonds that they may purchase. If any of these parties purchase
bonds, the purchases by these parties will be on the same terms as purchases
by public investors and will be with investment intent. There presently are
no plans for any of these parties to purchase bonds.
Contingent upon the sale of the minimum principal amount of a series of
the bonds, we will pay the underwriter a concession as follows:
- The underwriter will receive 6.0% of the face amount of each
bond sold by another NASD member firm through a selling group
agreement with the underwriter and may re-allow the full 6% to
the NASD member firms participating in this offering;
- The underwriter will receive a concession of 5.0% of the face
amount of each bond sold by the underwriter to clients of the
underwriter; or
- The underwriter will receive a processing fee of 1.0% of the
face amount of each bond sold to a purchaser referred to the
underwriter by the Biltmore Group, provided such investors
are not currently a client of the underwriter.
The underwriter or its assigns will also receive a fee not to exceed
$60,000 to be paid in installments over the term of the bond issues from the
trustee for services rendered to the trustee including the review of our
financial and operating condition on a continuing basis. In addition, we
have paid to the underwriter an investment banking fee in the amount of
$128,700 for the underwriter's technical assistance in connection with
this offering. In the event the offering is terminated prior to the
issuance of bonds, we shall be liable to the underwriter only for the
underwriter's out-of-pocket expenses for services rendered. We have agreed
to pay all expenses in connection with qualifying the bonds for sale under
such jurisdictions as the underwriter may designate. The underwriting
agreement provides for reciprocal agreements of indemnity between the
Biltmore Group and the underwriter as to certain civil liabilities, including
liabilities under the Securities Act of 1933, as amended.
The sale of the bonds will be for a period of one year from the date of
this prospectus. All offerings are subject to prior sale. The underwriter
has the first right of refusal on any other of our financing needs involving
our facilities for the next three years following the offering. Additionally,
the underwriter has advised us that it does not intend to make a market in the
bonds.
According to terms of the underwriting agreement, we may not contact any
person listed in the records of the underwriter as a customer of the
underwriter for any reason whatsoever without obtaining the prior written
consent of the underwriter. However, this provision is not to be construed to
prohibit us from providing any reports or notifications to bondholders that
may be mandated by any federal or state laws or regulations.
40
<PAGE>
Subscription for Bonds
Each person who wishes to purchase a bond must execute a subscription
agreement covering the bond(s) being purchased. The subscription agreement
is generated by the underwriter upon receiving verbal indication from a
subscriber for the bond(s) the subscriber has selected from the available
maturities. Subscribers may purchase any of the series of bonds. Prior to
executing the subscription agreement, the subscriber will be provided a
prospectus by the Underwriter.
Checks should be made payable to Colonial Trust Company as escrow
agent and registrar. Completion of the subscription agreement, including
containing a proper signature is essential prior to any sale of the bonds to
potential investors. However, we and the underwriter reserve the right to
reject any subscription for any reason whatsoever, in which event all monies
will then be refunded to the prospective investor without interest,
deduction or credit thereon. Subject to the sale of minimum funds for each
series of bonds, the registrar will register and deliver the bonds in
book-entry form or provide those registered owners who request a printed bond
certificate with the bonds within 30 days from the date subscriptions for
the bonds are received.
Determination of Offering Price
Prior to this offering, there has been no public market for our bonds.
Consequently, the initial public offering price for the bonds has been
determined arbitrarily between us and the underwriter.
Possible Withdrawal of Underwriter
In June 1997, the Securities Commissioner of the State of Kansas filed a
Petition in the District Court of Shawnee County, Kansas, Case No. 97-CU-755,
styled State of Kansas, ex. rel. David R. Brant, Securities Commission of the
State of Kansas v. William Gerald Martin, Thomas Gene Trimble, and MMR
Investment Bankers, Inc. This case stems from the underwriter's
participation in a series of church bond offerings of a single church located
in Wichita, Kansas. The Securities Commissioner of Kansas seeks a permanent
injunction restraining and enjoining each of the defendants from directly or
indirectly employing any device, scheme, or artifice to defraud; engaging in
an act, practice or course of business which would operate as a fraud or
deceit upon any person; and/or making any untrue statements of material fact
and/or omitting to state material facts necessary in order to make other
statements made not misleading, and, seeking restitution jointly and/or
severely from each of the defendants in the amount of $4,825,665.24, which
is the amount in default on the last two issues of church bonds issued on
behalf of the church.
It is likely that during the offering of the bonds, that this matter may
be adjudicated, settled, or otherwise, and the authority of the underwriter
to engage in the securities business may be suspended, revoked or limited.
Currently, this litigation is in its discovery stage, and the underwriter has
determined to vigorously defend the case. However, in the event the
underwriter is unable to continue its business as a broker dealer of
securities, it will have to withdraw from its participation in this offering
and, in all likelihood, the offering will be terminated unless and until we
are successful in finding another underwriter willing to participate in the
sale of the bonds.
Legal Matters
Our counsel, Bobby L. Culpepper, Esq., Jonesboro, Louisiana, has opined
upon certain legal matters pertaining to the bonds. Certain legal matters
have been passed upon for the underwriter by Michael G. Quinn, Esq., Wichita,
Kansas.
To our best knowledge, there are neither pending legal proceedings nor
any known to be threatened or contemplated to which we are a party or to
which any of our property may be subject.
41
<PAGE>
Experts
The following experts have consented to their names and to references to
their reports appearing in this prospectus: Robert M. McSherry, MAI, of Baton
Rouge, Louisiana, has provided appraisals of our facilities. William R.
Hulsey, CPA, of Monroe, Louisiana, has audited our financial statements dated
December 31, 1998.
Additional Information
We have filed with the Securities and Exchange Commission, Washington,
D.C. 20549, a registration statement, including all amendments, exhibits and
schedules, on Form SB-2 under the Securities Act with respect to these bonds.
This prospectus, which constitutes a part of the registration statement,
omits some of the information contained in the registration statement and
the exhibits and financial schedules. Reference is made to the registration
statement and related exhibits and schedules for further information with
respect to the Biltmore Group and the bonds.
Any statements contained in this prospectus concerning the provisions of
any document are not necessarily complete, and in each instance that reference
is made to a copy of the document filed as an exhibit to the registration
statement. Each such statement is qualified in its entirety by such
reference. For further information with respect to the Biltmore Group and
the bonds, reference is made to the registration statement and such exhibits
and schedules, copies of which may be examined or copied at the Public
Reference Section of the Securities and Exchange Commission at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional
offices of the Securities and Exchange Commission located at 7 World Trade
Center, Suite 1300, New York New York 10048 and at CitiCorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Also, information
about the Biltmore Group is available at the Securities and Exchange
Commission's Web site at http://www.sec.gov.
(This space is intentionally left blank)
42
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page
Auditor's Report . . . . . . . . . . . . . . . . . . . . . . . . . F-2
Balance Sheet at December 31, 1998 . . . . . . . . . . . . . . . . F-3
Statement of Income from July 1, 1998 until December 31, 1998. . . F-4
Statement of Members' Equity (Deficit) from July 1, 1998
until December 31, 1998 . . . . . . . . . . . . . . . . . . . . . F-5
Statement of Cash Flows from July 1, 1998 until
December 31, 1998. . . . . . . . . . . . . . . . . . . . . . . . . F-6
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . F-7
(This space is intentionally left blank)
F-1
<PAGE>
WILLLIAM R. HULSEY
CERTIFIED PUBLIC ACCOUNTANT
2117 FORSYTHE AVENUE
MEMBER MONROE, LOUISIANA MAILING ADDRESS
AMERICAN INSTITUTE OF P. 0. BOX 2253
CERTIFIED PUBLIC ACCOUNTANTS MONROE, LOUISIANA 71207
SOCIETY OF LOUISIANA (318) 362-9900
CERTIFIED PUBIIC ACCOUNTANTS FAX (318) 362-9993
The Biltmore Group of Louisiana. L.L.C.
507 Trenton Street
West Monroe, Louisiana
I have audited the accompanying balance sheet of The Biltmore Group of
Louisiana, L.L.C. as December 31, 1998 and the related statements of income,
retained earnings and cash flows for the period then ended. These financial
statements are the responsibility of the Company's management. My
responsibility is to express an opinion on these financial statements based
on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I 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. I believe that my audit provides a reasonable basis for
my opinion.
In my opinion, the financial statements referred to above present fairly
in all material respects, the financial position of The Biltmore Group
of Louisiana, L.L.C. at December 31, 1998 and the results of its operations
and its cash flows for the period then ended in conformity with generally
accepted accounting principles.
January 21, 1999
/S/WILLIAM R HULSEY
William R. Hulsey
Certified Public Accountant
F-2
<PAGE>
The Biltmore Group of Louisiana, L.L.C.
( A Development Stage Company )
Balance Sheet
December 31, 1998
ASSETS
Current assets:
Cash $ 21,318
Prepaid expenses 4,918
----------
Total current assets 26,236
----------
Property, plant and equipment
Building construction in progress 2,878,986
Land 938,739
----------
Total property, plant and equipment 3,817,725
----------
Other assets:
Deferred charges 110,000
----------
$ 3,953,961
----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accrued payroll taxes payable $ 1,383
Notes payable 689,907
----------
Total current liabilities 691,290
----------
Long-term debt 2,174,025
----------
Members' equity 1,088,646
----------
$ 3,953,961
----------
The notes to financial statements are an integral
part of this financial statement.
F-3
<PAGE>
The Biltmore Group of Louisiana, L.L.C.
( A Development Stage Company )
Statement of Income
Period from July 1, 1998 until December 31, 1998
Revenues $ 0
----------
Operating expenses
Activities 685
Advertising 2,231
Bank charges 30
Dues and subscriptions 1,167
Education 498
Equipment rental 231
Housekeeping 439
Licenses 35
Miscellaneous 596
Office 21
Office supplies 869
Payroll expense 5,202
Postage 635
Printing 1,263
Promotion 15
Telephone 347
Travel and entertainment 9,389
Uniforms 7
Utilities 457
----------
Total operating expenses 24,117
----------
Net income (loss) (24,117)
----------
The notes to financial statements are an integral
part of this financial statement.
F-4
<PAGE>
The Biltmore Group of Louisiana, L.L.C.
( A Development Stage Company )
Statement of Members' Equity
Period from July 1, 1998 until December 31, 1998
Beginning members' equity $ 0
Members, contributions 1,112,763
Net income (loss) (24,117)
----------
Ending members' equity $ 1,088,646
----------
The notes to financial statements are an integral
part of this financial statement.
F-5
<PAGE>
The Biltmore Group of Louisiana, L.L.C.
( A Development Stage Company )
Statement of Cash Flows
Period from July 1, 1998 until December 31, 1998
Cash flows from operating activities:
Net loss $ (24,117)
Adjustments to reconcile net income to
cash used by operations:
Increase in prepaid expenses (4,918)
Increase in accrued payroll taxes 1,383
----------
Net cash used by operating activities (27,652)
----------
Cash flows from investing activities
Acquisitions land (938,739)
Payments towards construction in progress (2,878,986)
Payment of deferred charges (110,000)
----------
Net cash provided by (applied to) investing (3,927,725)
----------
Cash flows from financing activities
Contribution of membership equity 1,112,763
Interim construction loans 689,907
Land and real estate loans 2,174,025
----------
Net cash provided by (applied to) financing 3,976,695
----------
Net increase in cash 21,318
Cash at the beginning of the period 0
Cash at the end of the period $ 21,318
----------
The notes to financial statements are an integral
part of this financial statement.
F-6
<PAGE>
The Biltmore Group of Louisiana, L.L.C.
( A Development Stage Company )
Notes to Financial Statements
Note 1 - Summary of Significant Accounting Policies
Nature of Business
The company is a Louisiana limited liability company established to
develop an assisted living center and dementia facility for the housing
and care of senior citizens in Bastrop, Farmerville, Minden, and
Natchitoches in Louisiana and in Sedona, Arizona.
Basis of Accounting
The company uses the accrual basis of accounting and will utilize the
calendar year for all reporting purposes.
Income Taxes
The company is treated as a partnership for federal income tax purposes.
Consequently, federal income taxes are not payable by, or provided for,
the Company. Members are taxed individually on their share of the
Company's earnings. The Company's income or loss is allocated among the
members in accordance with the operating agreement of the Company. The
financial statements do not reflect a provision for income taxes.
Property, Buildings, Equipment and Depreciation
Buildings and equipment are stated at cost and are to be depreciated
by the straight-line method over their estimated economic lives.
Buildings shall include capitalized construction period interest which
will be treated as a component cost of the building and depreciated over
the same economic life as the building.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
Advertising
The Company follows the policy of charging the costs of advertising to
expense as incurred.
F-7
<PAGE>
The Biltmore Group of Louisiana, L.L.C.
( A Development Stage Company )
Notes to Financial Statements
Note 1 - Summary of Significant Accounting Policies-(continued)
Deferred Charges
Deferred charges represents the costs associated with obtaining long-term
financing for the care facilities of the Company. These costs are to
amortized over the life of the bonds using the effective interest rate
method.
Note 2 - Related Party Transactions
The Company has entered into a design/builder contract in the amount of
$ 1,777,000 with The Forsythe Group, one of its members, to construct the
Bastrop facility. The contract calls for the cash payments of
$ 1,352,000 during the building of the facility as approved by the
contract engineer and the balance of $ 425,000 through the issuance of
certificates of membership equity. As of December 31, 1998, $ 36,560
has been paid on this contract and $ 175,000 of membership equity had
been issued for services rendered in connection with the project. The
remainder of the $ 250,000 due to be paid through the issuance of equity
certificates, which will be issued at the completion of the project.
The Company has entered into a design/builder contract in the amount of
$ 1,777,000 with The Forsythe Group, one of its members, to construct the
Farmerville facility. The contract calls for the cash payments of
$ 1,352,000 during the building of the facility as approved by the
contract engineer and the balance of $ 425,000 through the issuance of
certificates of membership equity. As of December 31, 1998, there have
been no cash payments on this contract and $ 135,000 of membership equity
had been issued for services rendered in connection with the project. The
remainder of the $ 290,000 due to be paid through the issuance of equity
certificates, which will be issued at the completion of the project.
The Company has entered into a design/builder contract in the amount of
$ 1,777,000 with The Forsythe Group, one of its members, to construct
the Minden facility. The contract calls for the cash payments of
$ 1,352,000 during the building of the facility as approved by the
contract engineer and the balance of $ 425,000 through the issuance of
certificates of membership equity. As of December 31, 1998, $ 348,245
has been paid on this contract and $ 174,000 of membership equity had
been issued for services rendered in connection with the project.
F-8
<PAGE>
The Biltmore Group of Louisiana, L.L.C.
( A Development Stage Company )
Notes to Financial Statements
Note 2 - Related Party Transactions-(continued)
The remainder of the $ 251,000 due to be paid through the issuance of
equity certificates, which will be issued at the completion of the
project.
The Company has entered into a design/builder contract in the amount of
$ 1,777,000 with The Forsythe Group, one of its members, to construct
the Bastrop facility. The contract calls for the cash payments of
$ 1,352,000 during the building of the facility as approved by the
contract engineer and the balance of $ 425,000 through the issuance of
certificates of membership equity. As of December 31, 1998, there have
been no payments on this contract and $ 135,000 of membership equity had
been issued for services rendered in connection with the project. The
remainder of the $ 250,000 due to be paid through the issuance of equity
certificates, which will be issued at the completion of the project.
Note 3 - Deferred Charges
Deferred charges are summarized as follows:
Loan fees $ 110,000
The loan fees are to be amortized as interest expense over the life of
the related loan by use of the interest method.
Note 4 - Notes Payable
Notes payable at December 31, 1998 consist of a note to Church Loans
which is to provide the funding for the construction of the Bastrop
location. The loan is to be repaid from the permanent financing of the
project through the proposed issuance of bonds. This note calls for the
payment of interest at a rate of prime ( as published in the Wall Street
Journal plus two per cent but in no case shall the rate be less than ten
and one-half per cent per annum. The lender shall maintain a first
mortgage position on the Bastrop location until such time as the bonds
are sold. At that time Church Loans will maintain a co-first mortgage
position for any amounts which are not liquidated by the bond proceeds.
As of December 31, 1998, the balance on this loan is $ 196,116.
F-10
<PAGE>
The Biltmore Group of Louisiana, L.L.C.
( A Development Stage Company )
Notes to Financial Statements
Note 4 - Notes Payable-(continued)
Notes payable at December 31, 1998 consist of a note to First Republic
Bank to provide a credit line for the funding for the construction of
the various locations. The loan is to be repaid from the permanent
financing of the project through the proposed issuance of bonds. This
note calls for the payment of interest at a rate of 9.995 per cent. As
of December 31, 1998, the balance on this loan is $ 70,500.
Notes payable at December 31, 1998 consist of a note to First Republic
Bank to provide the funding for the construction of the Minden location.
The loan is to be repaid from the permanent financing of the project
through the proposed issuance of bonds. This note calls for the monthly
payment of interest at a rate of 9.20 per cent. The lender shall
maintain a first mortgage position on the Minden location until such
time as the bonds are sold. As of December 31, 1998, the balance on
this loan is $ 351,536.
Notes payable at December 31, 1998 consist of a note to First Republic
Bank to provide the funding for the remodeling and upgrading of the Sedona
location. This note calls for the monthly payment of interest at a rate
of 9.75 per cent. The note is secured by a mortgage position on certain
real estate owned by on e of the members. As of December 31, 1998, the
balance on this loan is $ 71,755.
Note 5 - Contributions of Members' Equity
The Company has issued members' equity certificates totalling $ 1,112,763
in exchange for $ 683,500 of services and $ 429,263 of cash.
Note 6 - Development Stage Operations
The Company has begun construction of the Minden and Bastrop facilities
which have an estimated completion date of late 1999. The Company has
completed the purchase of the Sedona, Arizona facility and is in the
process of upgrading and remodeling the facility which has as estimated
completion date of early 1999. The expenditures related to these
projects are reflected as building construction in progress on the
balance sheet.
F-11
<PAGE>
The Biltmore Group of Louisiana, L.L.C.
( A Development Stage Company )
Notes to Financial Statements
Note 7 - Long-Term Debt
Long-term debt at December 31, 1998 consist of a note to Church Loans
which is to provided the funding for the purchase of the Sedona location.
The loan is to be repaid from the permanent financing of the project
through the proposed issuance of bonds. This note calls for the payment
of interest at a rate of prime ( as published in the Wall Street Journal
plus two per cent but in no case shall the rate be less than ten and
one-half per cent per annum. The lender shall maintain a first mortgage
position on the Sedona location until such time as the bonds are sold.
At that time Church Loans will maintain a co-first mortgage position for
any amounts which are not liquidated by the bond proceeds. As of
December 31, 1998, the balance on this loan is $ 2,174,025.
F-12
<PAGE>
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<PAGE>
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<PAGE>
You should rely only on the information contained in this prospectus.
We have not authorized anyone to provide you with different information. You
should not assume that the information in this prospectus is accurate as of
any date other than the date appearing on the front page.
We include cross-references in this prospectus to captions in these
materials where you can find further related discussions. The following
table of contents provides the pages on which these captions are located.
TABLE OF CONTENTS
Prospectus Summary . . . . . . . . . 3
Risk Factors . . . . . . . . . . . . 6
Forward-looking Statements . . . . . 8
Sources and Uses of Proceeds . . . . 9
Our Business . . . . . . . . . . . .10
Description of Our Property. . . . .15
Our Management . . . . . . . . . . .21
Our Principal Owners . . . . . . . .22
Our Plan of Operation. . . . . . . .22
Prior Performance of Our Affiliates.24
Certain Transactions . . . . . . . .25
Description of Bonds . . . . . . . .27
Underwriting . . . . . . . . . . . .39
Legal Matters. . . . . . . . . . . .41
Experts. . . . . . . . . . . . . . .42
Additional Information . . . . . . .42
Index to Financial Statements. . . F-1
Until August 16, 1999, all dealers that effect transactions in the
bonds, whether or not participating in this offer, may be required to deliver
a prospectus. This requirement is in addition to the dealers obligation to
deliver a prospectus when acting as underwriters with respect to their unsold
allotments or subscriptions.
$9,900,000
Co-First Mortgage Bonds
THE BILTMORE GROUP
OF LOUISIANA, L.L.C.
PROSPECTUS
MMR INVESTMENT BANKERS, INC.
[MMR LOGO HERE] [SIPC LOGO HERE]
May 17, 1999
<PAGE>
