SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number: 1-7865
HMG/COURTLAND PROPERTIES, INC.
(Name of small business issuer in its charter)
DELAWARE 59-1914299
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2701 S. Bayshore Drive, Coconut Grove, Florida 33133
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (305) 854-6803
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Share of Common Stock, American Stock Exchange
Par value $1.00 per share
Securities registered pursuant to Section 12(g) of the Act:
None
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes x No
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-K contained in this form and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this form 10-KSB. [ x ]
DOCUMENTS INCORPORATED BY REFERENCE: NONE
Total Number of Pages: 83 Exhibit Index: Page No. 45
(continued)
(1)
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State the issuer's revenues for the most recent fiscal year:
$7,434,438
State the aggregate market value of the voting stock held by non-affiliates of
the Registrant: $3,090,162 based on the closing price of the stock as traded on
the American Stock Exchange on March 18, 1996. (Excludes shares of voting stock
held by directors, executive officers and beneficial owners of more than 10% of
the Registrant's voting stock; however, this does not constitute an admission
that any such holder is an "affiliate" for any purpose.)
Indicate the number of shares outstanding of each of the Registrant's classes of
common stock as of the latest practicable date: 1,166,835 shares of common
stock, $1 par value, as of March 18, 1996.
(2)
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Part I.
Item 1. Business.
HMG/Courtland Properties, Inc. (the "Company") invests in a portfolio of equity
interests in commercial real estate. The Company was organized in 1972 and
qualifies for taxation as a real estate investment trust ("REIT") under the
Internal Revenue Code. The Company's present investment policy is to invest
primarily in income producing commercial properties.
To implement its investment policy, the Company directly and through its
subsidiaries has invested in improved properties and in the commercial
development of unimproved properties held in its portfolio or acquired for that
purpose.
The following table summarizes the Company's portfolio of real estate
investments as of December 31, 1995:
Percent of
Geographic Distribution Investments (1)
Florida 58%
Texas 35%
Northeastern United States (2) 7%
Type of Property (3)
Undeveloped land 37%
Hotel and club facility 41%
Individual retail stores 7%
Yacht slips 8%
Restaurants 2%
Real Estate development in progress 5%
------------------
(1) For each category, the aggregate of cost less accumulated
depreciation divided by the aggregate of such investments in all
real estate owned directly by the Company or by joint ventures in
which the Company has a majority interest. The Company's minority
interests in joint ventures are not included in the above.
(2) New England, New York and Pennsylvania
(3) Based on predominant present or intended use.
(3)
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Consolidated Entities.
Courtland Investments, Inc. (CII). The Company owns a 95% equity interest in CII
(all non-voting). The other 5% equity interest (which is 100% of the voting
interest) is held by Masscap Investment Company, Inc. (MICI), a wholly-owned
subsidiary of Transco Realty Trust (Transco) which is a 41% shareholder of the
Company. CII owns equity interests in certain corporations and partnerships that
are passive (non-operating) in nature. In September 1993, CII acquired
controlling interests in certain operating entities. These entities are a
partnership owning a 49 room hotel and private club (GIA), a corporation which
operates the hotel and club (GICI), a joint venture owning a marina (GIYCA), and
a joint venture which operates marina activities (GIYC). The acquired properties
are located in Coconut Grove, Florida, and a more detailed description of each
follows:
Grove Isle Associates, Ltd. (GIA). This limited partnership (owned 60% by CII
and 40% by the Company) owns a 49 room 63,530 square foot hotel and private club
facility (the "facility") located on 7 acres of a private island in Coconut
Grove, Florida, known as "Grove Isle". In addition to the 49 hotel rooms, the
facility includes 22,330 square feet of public space (banquet room, dining area,
lounge, administrative area, etc.), 12 lighted clay tennis courts, 5,000 square
feet of net rentable space, and pool and pool deck of approximately 18,000
square feet. GIA leases the facilities to Grove Isle Club, Inc. on a year to
year basis for an annual base rent of $480,000. This rent is eliminated in
consolidation.
During 1995 and 1994 renovations were made to modernize the facility's
restaurants, hotel rooms and recreational amenities. Costs capitalized relating
to these renovations were approximately $974,000 and $ 4 million for the years
ended December 31, 1995 and 1994, respectively.
In December 1994, the debt which encumbered the facility and the unsold marina
slips at Grove Isle was refinanced with a $4.5 million bank loan. This loan
bears interest at 2% over the lender's prime rate with principal amortized over
20 years and a balloon payment due at maturity on September 8, 2000. The balance
on December 31, 1995 is $4.4 million.
Grove Isle Club, Inc.(GICI). This corporation operates the aforementioned hotel
and club. Its primary sources of revenue are from room rentals, food and
beverage sales and from members dues. The hotel and most common areas were
closed for renovations from June to December 1994. This resulted in a
substantial decrease in revenues for 1994. In conjunction with the renovations
of the facility, GICI purchased approximately $485,000 and $1.3 million in
furniture, fixtures and equipment in 1995 and in 1994, respectively.
Grove Isle Yacht Club Associates (GIYCA). This partnership was the original
developer of the 85 boat slips located at Grove Isle. As of December 31, 1995
forty-three slips remain unsold and are encumbered by the aforementioned $4.5
million mortgage note payable. GIYCA (through a 100% owned subsidiary), operates
and maintains all aspects of the marina at Grove Isle in exchange for an annual
maintenance fee from the slip owners to cover operational expenses.
In 1986, CII acquired from the Company the rights to develop the marina at Grove
Isle for a promissory note of $620,000 payable in 10 years at an annual interest
rate equal to the prime
(4)
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rate. The principal was due on January 2, 1996, and the maturity was extended to
January 2, 2001. Interest payments are due each January 2. Because the Company
now consolidates CII, the note payable and related interest income are
eliminated in consolidation. See, Item 12. Certain Relationships and Related
Transactions.
HMG-Fieber Associates (Fieber). HMG-Fieber Associates, a joint venture in which
the Company and N.A.F. Associates (a partnership controlled by Mr. Fieber, a
director of the Company) hold 65% and 35% interests, respectively, owns 24
retail stores. The stores are leased to Grossman's, Inc., a chain of home
improvements stores, under net leases most of which provide for minimum and
percentage rental payments. As of December 31, 1995 the percentage of leases
expiring in 1996, 1997 and after 1997 was 10%, 35% and 55%, respectively.
Approximately half of these leases contain renewal options of at least five
years. The stores are located in Connecticut, Maine, Massachusetts, New
Hampshire, New York, Pennsylvania, and Vermont.
In January 1995, Fieber sold its store located in Buzzards Bay, Massachusetts
recognizing a gain to the venture of approximately $68,000.
In March 1995, Fieber sold its store located in Norristown, Pennsylvania
recognizing a gain to the venture of approximately $620,000.
In December 1995, Fieber sold its store located in Hartford, Connecticut
recognizing a gain to the venture of approximately $122,000.
Four Sugar Grove Associates (FSGA). FSGA was a Texas limited partnership in
which the Company was the sole general partner and had a 96.6% interest. FSGA
was dissolved in 1995 after the sale of its sole asset, a 128,000 square foot
office building and a three-story parking garage with 480 spaces on 3.5 acres in
Stafford, Texas. In April, 1995 FSGA sold the office building for approximately
$4.5 million recognizing a loss of approximately $18,000 after giving effect to
the $1.3 million valuation adjustment reported in 1994.
The Grove Towne Center - Texas, Ltd (TGTC). Effective July 1, 1994, the Company
and Grovpar, Ltd. (Grovpar) formed TGTC (a Texas limited partnership), for the
purposes of development, construction, and leasing of the Grove Towne Center
project, (the "Project") a 41- acre site planned for the development of an
entertainment/value oriented retail center located in suburban Houston.
Under the Limited Partnership Agreement governing TGTC ("Partnership
Agreement"), HMG Houston Grove, Inc. (a wholly-owned subsidiary of the Company)
is TGTC's sole general partner holding a 1% ownership interest, Grovpar and the
Company being the initial limited partners, and holding 10% and 89% ownership
interests, respectively. Upon formation of TGTC, the Company contributed
approximately 41 acres of undeveloped land with an agreed upon value of $7.6
million less related debt of $3 million. Grovpar contributed expenses incurred
for services performed for the Project valued at approximately $523,000.
(5)
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On October 1, 1994 the Partnership Agreement was amended and restated to reflect
the admittance of a new partner, Sunbelt Shopping Development, Ltd. ("Sunbelt").
In consideration for a 25% interest in TGTC Sunbelt agreed to contribute $3.5
million. This reduced the Company's interest from 89% to 64%.
In October 1994, TGTC received $1.5 million of Sunbelt's initial contribution.
In accordance with the Amended and Restated Partnership Agreement, the remainder
of Sunbelt's contribution along with additional contributions from the Company
and Grovpar of $1.3 million and $404,000, respectively, are required upon
reaching certain thresholds stated in the Partnership Agreement.
Concurrently with the execution of the Partnership Agreement, and in accordance
with a separate agreement between the Company and Grovpar, the Company has
agreed to loan Grovpar an amount equal to its initial capital contribution plus
all future capital contributions as required under the Partnership Agreement.
The loan made to Grovpar is evidenced by a promissory note dated July 1, 1994.
The outstanding principal amount of this note, bears a per annum interest rate
of 2% over the Prime Interest Rate (as defined) and is secured by Grovpar's
partnership interest. Principal and interest are payable solely from
distributions to Grovpar by the Partnership of net cash flow and capital
proceeds, as defined. Interest income from this note will be recognized when
collected.
During the fourth quarter of 1995, the partnership decided not to go forward
with the project as designed due to various factors including a dispute with a
major tenant. Accordingly, the partnership has written-off approximately $4.2
million of pre-development costs. The partnership is presently exploring various
options for the land.
South Bayshore Associates (SBA). SBA is a joint venture in which Transco Realty
Trust (Transco) and the Company hold interests of 25% and 75%, respectively. The
major asset of SBA is a demand note bearing interest at the prime rate from
Transco with an outstanding balance as of December 31, 1995 and 1994 of
approximately $420,000 and $424,000, respectively, in principal and accrued
interest.
The Company holds a demand note (which is eliminated in consolidation) from SBA
bearing interest at the prime rate plus 1% with an outstanding balance including
accrued interest as of December 31, 1995 and 1994 of approximately $848,000 and
$807,000, respectively, in principal and accrued interest.
T.E.H.H. Corp. This wholly-owned subsidiary has a 99% limited partnership
interest in CourTrust Palm Bay, Ltd. which owns 1.5 acres of undeveloped land in
Palm Bay, Florida. This land was sold in the first quarter of 1996 at a loss of
$60,000.
HMG of Key Largo, Inc. (HMGKL). As of December 31, 1994, this wholly-owned
subsidiary had a 50.5% interest in Key Largo Lodge, Ltd., a limited partnership
in which HMGKL was the sole general partner.
(6)
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In February 1994, the partnership sold a 20.5 acre parcel of land to the State
of Florida under the Conservation and Recreation Lands Programs for
approximately $5.8 million and recognized a gain of approximately $893,000.
As previously reported, HMGKL had pending a civil action in the Circuit Court of
Dade County, Florida. In July 1995, the parties settled the litigation and on
August 2, 1995 an order of dismissal with prejudice was entered by the court.
Pursuant to the term of the settlement, the partnership was liquidated in 1995
and upon liquidation, the Company recognized a gain of approximately $620,000.
HMG Orange Park North, Inc. This wholly-owned subsidiary has a 90% partnership
interest in Orange Park North Partnership, which owns a 6,000 square foot
commercial building located in Jacksonville, Florida. This building was
constructed during 1992 and was leased beginning in June 1992 to a tenant which
operated a restaurant. In August, 1995, the Partnership sold its property for
approximately $1.3 million and recognized a gain of approximately $670,000.
HMG Fashion Square, Inc. This wholly-owned subsidiary has a 90% partnership
interest in Fashion Square partnership which owns approximately 11.5 acres of
land currently under development in Jacksonville, Florida.
In March 1994, the partnership entered into a ground lease with a tenant which
is an operator of a restaurant. In September 1994, this tenant completed
construction of a 7,000 square foot restaurant on the one acre parcel covered by
the ground lease. The partnership agreed to contribute approximately $100,000 in
improvements to the leased site. The initial term of the lease is ten years and
calls for base rent of $60,000 per year with 10% increases each subsequent year.
This property is encumbered by a mortgage loan of $300,000 which bears interest
at 9.75% and matures in November 1996.
In November, 1994, the partnership entered into a ground lease with a tenant
which is an operator of a restaurant. In 1995, this tenant completed
construction of a restaurant on the 3/4 acres of land covered by the ground
lease. The initial term of the lease is twenty years and calls for base rent of
$60,000 per year with 12.5% increase every five years.
HMG Sugargrove, Inc. This wholly-owned subsidiary owns eight acres of land held
for development located in Houston, Texas and is encumbered by a non-recourse
mortgage loan which matures in 1997 and bears interest at 10.5% payable
quarterly with principal payments of $15,867 due each February. The remaining
principal balances as of December 31, 1995 and 1994 were $181,000 and $206,000,
respectively.
In June 1994, this subsidiary purchased a 16 acre tract of land in Houston,
Texas for $3 million which was financed by a bank loan of $1.5 million. This
land was part of the 41 acres contributed to The Grove Towne Center - Texas,
Ltd.
(7)
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Insurance, Environmental Matters and Other.
In the opinion of management, all assets of the Company are adequately covered
by insurance and the cost and effects of complying with environmental laws do
not have a material impact on the Company's operations.
The Company's unimproved land is intended to be developed into income producing
property.
Other Transactions and Investments.
(a) Sales of Property.
Reference is made to the above sections of Item 1. Business and Item
6. Management's Discussion and Analysis or Plan of Operation for
information concerning sales of properties.
(b) Other Investments.
Other Unconsolidated Investments of CII.
T.G.I.F. Texas, Inc. (T.G.I.F.). CII owns 2,798,232 shares of common
stock of T.G.I.F. Texas, Inc. a Texas corporation (T.G.I.F.),
(representing 49.31% of the equity) at a cost of approximately $1.4
million. Mr. Wiener is a director and stockholder of T.G.I.F. T.G.I.F.
is engaged in the business of net leasing properties in the Southern
and Southwestern United States In May 1992, CII purchased 345,000
shares of non-voting, redeemable 8% preferred stock of T.G.I.F. for
$345,000. This purchase was paid for by the cancellation of $280,000
of notes receivable from T.G.I.F. plus cash of $65,000. As of December
31, 1995 all shares of the preferred stock held by CII have been
redeemed.
Jack Baker 5th Avenue, Inc. In 1992, CII and certain directors and
officers of HMG, acquired a 27% interest in Jack Baker 5th Avenue,
Inc. and its affiliates. In 1993, that 27% interest was increased to
85% in which CII has a 59% interest and certain directors and officers
of HMG have a 41% interest. This company is a manufacturer's
representative and CII's investments in and loans to Jack Baker 5th
Avenue, Inc. including accrued and unpaid interest were approximately
$315,000 and $277,000 as of December 31, 1995 and 1994, respectively.
CII also owns certain parcels of undeveloped land in the northeastern
United States and has investments primarily in the form of limited
partnership interests in companies whose primary purpose is to make
equity investments in growth oriented enterprises.
Competition.
The Company competes for suitable opportunities for real estate investments with
other real estate investment trusts, foreign investors, pension funds, insurance
companies and other investors. The Company also competes with other real estate
investors and borrowers for available sources of financing.
(8)
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In addition, to the extent the Company directly and through its subsidiaries
leases properties, it must compete for tenants with other lessors offering
similar facilities. Tenants are sought by providing modern, well maintained
facilities at competitive rentals. The Company has attempted to facilitate
successful leasing of its properties by investing in facilities that have been
developed according to the specifications of tenants and special local needs.
Employees.
The Company has no employees other than officers who are not compensated for
their services as such.
Advisory Agreement (the "Agreement").
Terms of the Agreement. Under the terms of the Agreement, amended and restated
on June 15, 1988, Courtland Group, Inc. ("the Advisor") serves as the Company's
investment advisor and, under the supervision of the directors of the Company,
administers the day-to-day operations of the Company. All officers of the
Company who are officers of the Advisor are compensated solely by the Advisor
for their services. The Agreement is renewable annually upon the approval of a
majority of the directors of the Company who are not affiliated with the Advisor
and a majority of the Company's shareholders. The contract may be terminated at
any time on 120 days' written notice by the Advisor or upon 60 days' written
notice by a majority of the unaffiliated directors of the Company or the holders
of a majority of the Company's outstanding shares.
Under the Agreement, as amended at the Company's 1992 annual meeting of
shareholders, the Advisor is entitled to receive a monthly fee of $72,917. The
Advisor is entitled to a monthly fee of 20% of the amount of any unrefunded
commitment fees received by the Company with respect to mortgage loans and other
commitments which the Company was not required to fund and which expired within
the next preceding calendar month. The Advisor also is entitled to an annual
incentive compensation equal to the sum of 10% of net realized capital gains and
extraordinary items of income for that year and 10% of the amount, if any, by
which net profits of the Company for such fiscal year exceeded 8% per annum of
the Average Net Worth of the Company, as defined.
Advisory Fees. For the year ended December 31, 1995, the Company and its
subsidiaries paid the Advisor $1,063,181 in fees, of which $875,004 represented
regular compensation and $188,177 represented incentive compensation, including
$62,186 paid by CII to the Advisor relating to capital gains realized by CII
from sales of marketable securities and capital gains from CII's investments in
partnerships. In 1994, the Advisor's regular compensation amounted to $875,000,
while its incentive compensation amounted to $254,659, including $65,235 paid by
CII to the Advisor relating to capital gains realized by CII from sales of
marketable securities and capital gains from CII's investments in partnerships.
The Advisor is also the manager for certain of the Company's properties and
received fees of $20,000 and $76,500, in 1995, and 1994 respectively, for such
services.
(9)
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Item 2. Description of Property.
The principal executive offices of the Company and the Advisor are located at
2701 South Bayshore Drive, Coconut Grove, Florida, 33133, in premises furnished
by the Advisor pursuant to the terms of the Agreement.
Item 3. Legal Proceedings.
Out Island Properties, Inc. ("Out Island") had pending a civil action in the
Circuit Court of Dade County, Florida against HMG of Key Largo, Inc., a
wholly-owned subsidiary of the Company. Out Island is the sole limited partner
of Key Largo Lodge, Ltd., a Florida limited partnership of which HMG of Key
Largo, Inc. is the sole general partner. Out Island filed its lawsuit in
February, 1994. In July 1995, the parties settled this litigation and on August
2, 1995, an order of dismissal with prejudice was entered by the court. The
partnership was liquidated in 1995.
See Item 1. Business.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended December 31, 1995.
(10)
<PAGE>
Part II.
Item 5. Market Price for Common Equity and Related Stockholder Matters.
The high and low per share sales prices of the Company's stock on the American
Stock Exchange for each quarter during the past two years were as follows:
High Low
March 31, 1994 7 7/8 61/2
June 30, 1994 7 7/8 6 5/8
September 30, 1994 13 3/4 71/2
December 31, 1994 9 3/4 8 1/8
March 31, 1995 8 1/8 71/2
June 30, 1995 8 3/8 7 3/4
September 30, 1995 8 1/8 7 3/4
December 31, 1995 81/2 71/2
The Company stopped paying dividends, beginning in the fourth quarter of 1990,
in order to preserve its cash in light of the overall economic conditions and
for future development opportunities. The Company's policy has been to pay such
dividends as are necessary for it to qualify for taxation as a REIT under the
Internal Revenue Code.
As of March 18, 1996, there were 277 holders of record of the Company's common
stock.
Item 6. Management's Discussion and Analysis or Plan of Operation.
Overview:
In 1995 the Company's results of operations were significantly affected by the
abandonment of pre-development costs of the Grove Towne Center and operating
losses of the Grove Isle hotel and club operations. Also in 1995, the Company,
through its joint ventures and subsidiaries recognized net gain from sales of
real estate of approximately $2.2 million.
Discussion of Balance Sheet Items:
At December 31, 1995, the balance sheet reflected assets consisting primarily of
equity interests in real estate investment properties and investments in
unconsolidated entities. Liabilities at December 31, 1995, consisted principally
of mortgages on individual properties.
Significant changes in specific balance sheet items between December 31, 1995
and 1994 are described below:
(11)
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Assets:
Commercial and industrial properties decreased from $8.8 million to $2.0
million, or $6.8 million. This was primarily due to the sale of the office
building in Houston, Texas.
The carrying value of the hotel and club facility increased from $8.3 million to
$9.0 million, or approximately $700,000. This was the result of additional
renovations and improvements at Grove Isle, net of depreciation.
Land held for development increased from $2.6 million to $8.1 million, or $5.5
million, primarily due to the reclassification of the Grove Towne Center land
due to the aforementioned abandonment, See, Item 1. Business.
Real estate development in progress decreased from $8.9 million to $1.2 million,
or $7.7 million, primarily due to the abandonment of pre-developments and
reclassification of land of The Grove Towne Center in Houston, Texas.
Investments in and receivables from unconsolidated entities decreased from $2.7
million to $2.4 million or, approximately $300,000, primarily as a result of
distributions from CII's venture capital investments.
Liabilities and Minority Interests:
Mortgages and notes payable decreased by approximately $4.2 million primarily
due to the repayments of debt made in conjunction with the sale of various
properties.
Minority interest decreased from $4.8 million to $614,000, or $4.2 million,
primarily due to distributions to minority partners as a result of the
dissolution of Key Largo Lodge, Ltd. (See, Item 1. Business), and sale of HMG
Fieber retail stores. Minority interests also decreased as the result of losses
from the aforementioned abandonment of Grove Towne Center.
Results of Operations: For the year ended December 31, 1995, the Company
reported a net loss of approximately $3.5 million compared with a net loss of
$3.1 million for the year ended December 31, 1994. Changes in specific revenues
and expenses are discussed below.
Revenues:
1995 versus 1994:
Total revenues for the year ended December 31, 1995 as compared with that of
1994 increased by approximately $921,000 or 14%. This was primarily due to
increased revenues from the Grove Isle hotel, club and marina of approximately
$1.6 million , or 60%, increased gain from sale of marketable securities of
approximately $436,000 (229%) and increased interest income and dividends from
investments of approximately $336,000 or 96%. These increases in revenues were
partially offset by decreased rental and related revenues of $1.4 million,
primarily due to the sale of the Texas office building in April 1995.
(12)
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Expenses:
1995 versus 1994:
Total operating expenses for the year ended December 31, 1995 as compared to
that of 1994 increased by $304,000, or 4%. This was primarily attributable to
increased operating expenses of the Grove Isle hotel, club and marina
operations. More specifically, cost of food and beverage increased by $179,000
(due to an increase in the related revenues) administrative and general expenses
increased $572,000, primarily as a result of a full year of operations in 1995
versus half a year of operations during renovations in 1994. These increases in
operating expenses were partially offset by decreased operating expense of
rental properties of $575,000 due, primarily, to the sale of the Texas office
building in April 1995.
General and administrative expenses for the year ended December 31, 1995 as
compared to that of 1994, decreased by $657,000, or 58%. This decrease was
primarily due to decreased legal costs relating to the Key Largo litigation
which was settled in July 1995, and decreased legal costs of HMG Fieber
Associates.
Minority partners' interests in operating losses of consolidated entities for
the year ended December 31, 1995 as compared to that of 1994 increased by $1.5
million. This was primarily due to increased losses from The Grove Towne Center
as a result of the aforementioned abandonment of pre-development costs.
Losses from unconsolidated entities for the year ended December 31, 1995 were
$34,000 as compared to gains of $453,000 for 1994. This change was primarily due
to a non-recurring gain of $504,000 in 1994 from an investment in a partnership
in which CII held a 1.7% ownership interest.
Net gain on sale of real estate for the year ended December 31, 1995 consisted
of the following:
Net gain after
incentive fee and
Property Sold minority interest
Restaurant building and land in Texas $332,000
Restaurant building and land in Florida 537,000
HMG-Fieber retail store in various states 810,000
Undeveloped land in Texas (99,000)
Undeveloped land in Florida 557,000
Undeveloped land in Massachusetts 5,000
Plus: reduction of incentive fee for realized losses
on properties sold 114,000
----------
$2,256,000
==========
(13)
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Cash Flow and the Effect of Inflation:
The Company's cash flow from operating properties decreased significantly in
1995 as a result of of pre-development costs of the Grove Towne Center and
operating losses from the Grove Isle hotel and club.
Inflation affects the costs of operating and maintaining the Company's
investments and availability and terms of financing. In addition, rentals under
certain leases are based in part on the lessee's sales and tend to increase with
inflation and certain leases provide for periodic adjustments according to
changes in predetermined price indices.
Other:
Future Accouting Changes.
The Company is required to adopt the provision of FASB No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of," in 1996. Management does not expect that the adoption of FASB No. 121 will
have a material effect on the carrying value of the Company's long-lived assets.
The Company does not presently intend in 1996 to adopt the fair value based
method as encouraged by FASB No.123 "Accounting for Stock-Based Compensation".
Accordingly, there will be no effect to the financial statements.
Liquidity and Capital Resources:
The Company's material commitments include the completion of a shopping center
in Jacksonville, Florida and required contributions relating to Grove Isle hotel
and club operations. The sources of funds for these projects are being provided
from available cash and financing.
Maturities of debt obligations of approximately $ 2.5 million in 1996 are
expected to be satisfied from the sale of properties, refinancing and available
cash. In addition, the Company intends to continue to seek opportunities for
investment in income producing properties. Also, refer to Item 1. Business -
Other Transactions.
Material Changes in Operating, Investing and Financing Cash Flows:
Discussion of 1995 Changes.
For the year ended December 31, 1995, net cash used in operating activities was
approximately $5 million. Total expenses of 3.2 million exceeded revenues of 7.4
million.
For the year ended December 31, 1995, net cash provided by investing activities
was approximately $9.3 million. This consisted primarily of net proceeds from
disposals of properties of $9.9 million which included the sale of the office
building in Texas, restaurant properties in Texas and Florida and the sale of
three HMG Fieber retail store.
For the year ended December 31, 1995, net cash used in financing activities was
approximately $8.5 million. This consisted primarily of repayment of mortgages
and notes payable and net distributions to minority partners.
(14)
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Item 7. Consolidated Financial Statements
Independent Auditors' Reports...........................................16
Consolidated balance sheets, December 31, 1995 and 1994.................18
Consolidated statements of operations for the
years ended December 31, 1995 and 1994..................................19
Consolidated statements of stockholders' equity for
the years ended December 31, 1995 and 1994..............................20
Consolidated statements of cash flows for the
years ended December 31, 1995, and 1994.................................21
Notes to consolidated financial statements..............................22
(15)
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
of HMG/Courtland Properties, Inc.:
We have audited the accompanying consolidated balance sheet of HMG/Courtland
Properties, Inc. and its subsidiaries (the "Company") as of December 31, 1995,
and the related consolidated statements of operations, stockholders' equity and
cash flows for the year then ended. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the consolidated financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall consolidated financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of December 31,
1995, and the results of its operations and its cash flows for the year then
ended, in conformity with generally accepted accounting principles.
BDO SEIDMAN, LLP
Certified Public Accountants
Miami, Florida
March 20, 1996
(16)
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
of HMG/Courtland Properties, Inc.:
We have audited the accompanying consolidated balance sheet of HMG/Courtland
Properties, Inc. and its subsidiaries (the "Company") as of December 31, 1994,
and the related consolidated statements of operations, stockholders' equity and
cash flows for the year then ended. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the consolidated financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall consolidated financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of December 31,
1994, and the results of its operations and its cash flows for the year then
ended, in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE, LLP
Certified Public Accountants
Miami, Florida
March 24, 1995
(17)
<PAGE>
HMG/COURTLAND PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
December 31, December 31,
1995 1994
ASSETS NOTES
<S> <C> <C> <C>
Investment Properties, net of accumulated depreciation:
Commercial and industrial 2 $1,969,318 $8,775,714
Hotel and club facility 8,971,370 8,297,760
Yacht Slips 1,689,283 1,767,421
Land held for development 8,103,304 2,608,776
Real estate development in progress 9 1,204,390 8,927,198
----------- -----------
Total investment properties, net 21,937,665 30,376,869
Investments in and receivables from unconsolidated entities 3 2,439,010 2,686,545
Notes and Advances Due From Related Parties 4 1,168,788 865,355
Cash and Cash Equivalents 1,094,999 5,382,501
Other Assets 2,241,610 2,372,618
----------- -----------
TOTAL ASSETS $28,882,072 $41,683,888
=========== ===========
LIABILITIES & STOCKHOLDERS' EQUITY
Accounts Payable and Accrued Expenses $2,222,972 $2,393,488
Mortgages and Notes payable 5 8,325,567 13,512,250
Other Liabilities 2,031,782 1,723,519
----------- -----------
TOTAL LIABILITIES 12,580,321 17,629,257
----------- -----------
Commitments and Contingencies 1, 7
Minority interests 1 613,643 4,817,360
----------- -----------
STOCKHOLDERS' EQUITY 8
Preferred Stock, no par value; 2,000,000 shares
authorized; none issued
Common Stock, $1 par value; 1,500,000 shares authorized;
1,245,635 shares issued and outstanding in 1995 and 1994 1,245,635 1,245,635
Additional Paid-in Capital 26,283,222 26,283,222
Undistributed gains from sales of real estate, net of losses 31,637,177 29,381,281
Undistributed losses from operations (42,481,464) (36,676,405)
----------- -----------
16,684,570 20,233,733
Less: Treasury Stock, at cost (78,800 shares) in 1995 and 1994 (996,462) (996,462)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 15,688,108 19,237,271
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $28,882,072 $41,683,888
=========== ===========
</TABLE>
See notes to consolidated financial statements
(18)
<PAGE>
HMG/COURTLAND PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
Notes 1995 1994
<S> <C> <C>
REVENUES
Rentals and related revenue $1,863,539 $3,303,987
Hotel, club and marina revenues 4,256,194 2,666,826
Gain from sale of marketable securities 626,452 190,573
Interest from invested cash, dividends and other 688,253 351,773
---------- ----------
Total revenues 7,434,438 6,513,159
---------- ----------
EXPENSES
Operating expenses:
Rental Properties and other 1,195,532 1,770,147
Hotel, club and marina expenses:
Payroll and related expenses 2,438,844 2,400,716
Cost of food and beverage 697,967 518,800
Administrative and general expenses 2,467,839 1,895,836
Depreciation and amortization 2 1,348,401 1,259,166
---------- ----------
Total operating expenses 8,148,583 7,844,665
Interest 825,078 825,733
Advisor's fee 4 875,004 875,004
General and administrative 481,369 1,138,800
Directors' fees and expenses 71,863 75,998
Abandonment of pre-development costs 9 4,224,531
Minority partners' interests in operating
(losses) gains of consolidated entities (1,421,070) 88,068
Losses (gains) from unconsolidated entities 34,139 (453,477)
---------- ----------
Total expenses 13,239,497 10,394,791
---------- ----------
Loss before gain on sales of real estate,
valuation adjustment and income tax benefit (5,805,059) (3,881,632)
Gain on sales of real estate, net 2,255,896 1,678,251
Valuation adjustment of commercial property (1,300,000)
---------- ----------
Loss before income tax benefit (3,549,163) (3,503,381)
Income tax benefit 6 (452,070)
---------- ----------
Net Loss ($3,549,163) ($3,051,311)
=========== ===========
Earnings (Loss) Per Common Share
(Based on 1,166,835 weighted average shares outstanding) ($3.04) ($2.62)
=========== ===========
</TABLE>
See notes to consolidated financial statements
(19)
<PAGE>
HMG/COURTLAND PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
Undistributed
Gains from Sales Undistributed Total
Common Stock Additional of Real Estate, Losses from Treasury Stock Stockholders'
Shares Amount Paid-In Capital Net of Losses Operations Shares Cost Equity
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance as of
January 1, 1994 1,245,635 $1,245,635 $26,283,222 $27,703,030 ($31,946,843) 78,800 ($996,462) $22,288,582
Net Income (Loss) 1,678,251 (4,729,562) (3,051,311)
--------- ---------- ----------- ----------- ------------ ------ --------- -----------
Balance as of
December 31, 1994 1,245,635 1,245,635 26,283,222 29,381,281 (36,676,405) 78,800 (996,462) 19,237,271
Net Income (Loss) 2,255,896 (5,805,059) (3,549,163)
--------- ---------- ----------- ----------- ------------ ------ --------- -----------
Balance as of
December 31, 1995 1,245,635 $1,245,635 $26,283,222 $31,637,177 ($42,481,464) 78,800 ($996,462) $15,688,108
========= ========== =========== =========== ============ ====== ========= ===========
</TABLE>
See notes to consolidated financial statements
(20)
<PAGE>
HMG/COURTLAND PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($ 3,549,163) ($ 3,051,311)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 1,348,401 1,259,166
Loss (gain) from unconsolidated entities 34,139 (453,477)
Gain on sales of real estate, net (2,255,896) (1,678,251)
Valuation adjustment of commercial property 1,300,000
Abandonment of pre-development costs of prior
year 1,902,914
Net gain from sales of marketable securities (626,452) (190,573)
Minority partners' interest in operating gains (1,421,070) 88,068
Changes in assets and liabilities:
Increase in other assets (301,265) (1,216,278)
(Increase) decrease in due from affiliates (303,433) 53,862
(Decrease) increase in accounts payable
and accrued expenses (170,516) 1,192,727
Increase in other liabilities 308,263 (455,842)
------------ ------------
Total adjustments (1,484,915) (100,598)
------------ ------------
Net cash used in operating activities (5,034,078) (3,151,909)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Aquisitions and improvements of properties (1,643,646) (10,471,078)
Net proceeds from disposals of properties 9,923,385 13,636,803
Net distributions from unconsolidated entities 213,396 1,175,365
Net proceeds from sales and redemptions of
securities 795,028 1,023,147
Purchases of investments in securities (32,211) (111,457)
------------ ------------
Net cash provided by investing activities 9,255,952 5,252,780
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Additions to mortgages and notes payable 700,000 12,031,104
Repayment of mortgages and notes payables (5,886,683) (13,377,883)
Net (distributions to) contributions from
minority partners (3,322,693) 622,979
------------ ------------
Net cash used in financing activities (8,509,376) (723,800)
------------ ------------
Net (decrease) increase in cash and cash
equivalents (4,287,502) 1,377,071
Cash and cash equivalents at beginning
of the period 5,382,501 4,005,430
------------ ------------
Cash and cash equivalents at end of the period $ 1,094,999 $ 5,382,501
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for interest (net of
amounts capitalized of $-0- and $143,000 for
the years ended December 31, 1995 and 1994,
respectively) $ 1,112,000 $ 820,000
============ ============
Cash paid during the year for income taxes $ 450,000
============
</TABLE>
See notes to consolidated financial statements
(21)
<PAGE>
HMG/COURTLAND PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 and 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation - The consolidated financial statements include the accounts of
HMG/Courtland Properties, Inc. (the "Company") and entities in which the Company
owns a majority voting interest or controlling financial interest. Investments
in which the Company does not have a majority voting or financial controlling
interest, even though it may have a majority interest in profits and losses, are
accounted for under the equity method of accounting. All material transactions
with consolidated and unconsolidated entities have been eliminated in
consolidation or as required under the equity method.
The Company's consolidated subsidiaries are described below:
Courtland Investments, Inc. (CII) - A 95% owned corporation which owns 100% of
Grove Isle Club, Inc. (through its wholly owned subsidiary), 60% general
partnership interests in Grove Isle Associates, Ltd., and a 100% interest in
Grove Isle Yacht Club Associates. These entities are described below.
CII's other assets primarily consist of investments recorded under the equity
method of accounting (See Note 3.)
Grove Isle Associates, Ltd. (GIA) This limited partnership owns a 49 room, hotel
and private club facility located on approximately 7 acres of a private island
in Coconut Grove, Florida known as Grove Isle.
Grove Isle Club, Inc.(GICI) This corporation operates the hotel and club of GIA.
Its primary sources of revenue are from room rentals, food and beverage sales
and from membership dues.
Grove Isle Yacht Club Associates (GIYCA). This partnership was the original
developer of the 85 boat slips located at Grove Isle of which 43 remain unsold.
GIYCA operates all aspects of the Grove Isle marina.
The Grove Towne Center - Texas, Ltd. - A 65% owned limited partnership having a
wholly owned subsidiary of the Company as its sole general partner. This
partnership was formed in 1994. During the fourth quarter of 1995, the
partnership decided not to go forward with the project as designed due to
various factors including a dispute with a major tenant. Accordingly, the
partnership has written-off approximately $4.2 million of pre-development costs.
The partnership is presently exploring various options for the lands.
South Bayshore Associates - A 75% owned venture of which the major asset is a
receivable from the Company's venture partner.
(22)
<PAGE>
HMG - Fieber Associates - A 65% owned venture of which the major assets are
commercial properties located in the northeastern United States.
HMG Sugargrove, Inc. - A wholly owned Texas corporation of which the major asset
is an 8 acre parcel of land in Houston, Texas, held for development.
T.E.H.H. Corp.- A wholly owned Texas corporation of which the major asset is a
99% limited partnership interest in CourTrust Palm Bay, Ltd. which owns 1.5
acres of undeveloped land in Palm Bay, Florida. In the first quarter of 1996,
the land was sold and the Company recognized a loss of approximately $60,000.
HMG of Key Largo, Inc. - In January 1994, HMG of Key Largo, Inc.'s (a
wholly-owned subsidiary of the Company) partnership interest in Key Largo Lodge,
Ltd. (KLL) increased from 46.5% to 50.5%. Accordingly, the Company has changed
its method of accounting for KLL from the equity method of accounting to
consolidation. KLL owned property in Monroe, County Florida. In February 1994,
KLL sold its major asset, a 20.5 acre parcel of land located in Monroe, County
Florida. Out Island Properties, Inc. ("Out Island") had pending a civil action
in the Circuit Court of Dade County, Florida against HMG of Key Largo, Inc. Out
Island is the sole limited partner of Key Largo Lodge, Ltd., a Florida limited
partnership of which HMG of Key Largo, Inc. is the sole general partner. Out
Island filed its lawsuit in February, 1994. In July 1995, the parties settled
the litigation and on August 2, 1995 an order of dismissal with prejudice was
entered by the court. Pursuant to the terms of the settlement, the partnership
was liquidated in 1995 and upon liquidation the Company recognized a gain of
approximately $620,000.
HMG Orange Park North, Inc. - A wholly owned Florida corporation of which the
major asset is a 90% partnership interest in Orange Park North Partnership. This
partnership sold its sole asset in 1995.
HMG Fashion Square, Inc. - A wholly owned Florida corporation of which the major
asset is a 90% partnership interest in Fashion Square Partnership which owns
approximately 11.5 acres of land currently under development, in Jacksonville,
Florida. In 1994, the partnership leased an approximate 2 acre parcel to a
tenant which constructed and is operating a restaurant. Additionally, in
November, 1994, the partnership entered into a ground lease with a tenant which
is an operator of a restaurant. In 1995, this tenant completed construction of a
restaurant on the 3/4 acres covered by the ground lease.
Unconsolidated entities are discussed in Note 3.
Preparation of Financial Statements.
The preparation of financial statements in conformity with generally accepted
accounting principle requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
(23)
<PAGE>
Income Taxes - The Company qualifies as a real estate investment trust and
distributes its taxable operating income to stockholders in conformity with
requirements of the Internal Revenue Code. In addition, net operating losses can
be carried forward to reduce future taxable income but cannot be carried back.
The Company intends to distribute any of its future taxable operating income and
is not taxed on the amounts distributed. Distributed capital gains on sales of
real estate are not subject to taxes; however, undistributed capital gains are
taxed as capital gains. State income taxes are not significant.
Any benefit from or provisions for income taxes relates solely to taxable losses
or income of CII which is not consolidated with the Company for income tax
purposes and accordingly files a separate tax return. Refer to Note 6 for
further disclosure on income taxes.
Depreciation and Amortization - Depreciation of properties held for investment
is computed using the straight-line method over the estimated useful lives of
the properties, which range up to 39.5 years. Deferred mortgage and leasing
costs are amortized over the shorter of the respective term of the related
indebtedness or life of the asset. Depreciation expense for the years ended
December 31, 1995, and 1994 was approximately $1,052,000, and $1,112,000,
respectively. Amortization expense for the years ended December 31, 1995 and
1994 was $296,000 and $147,000 respectively.
Marketable Securities - The Company has adopted Financial Accounting Standards
Board Statement of Financial Accounting Standard No. 115, Accounting for Certain
Investments in Debt and Equity Securities, effective January 1, 1994, with no
material effect on the Company's financial position or results of operations.
Marketable debt and equity securities are classified as available for sale with
unrealized gains and losses, net of tax, reported as a net amount in a separate
component of stockholders' equity. Unrealized gains and losses as of December
31, 1995 and 1994 were not material.
Investment Properties - The Company carries investment properties at historical
cost less accumulated depreciation unless there has been an other than temporary
impairment in the value of the investment or the property is held for sale, in
which case the carrying value is adjusted to net realizable value.
Earnings (Loss) Per Common Share - Earnings (loss) per share are computed based
upon the weighted-average number of shares outstanding during the period. Stock
options outstanding did not have a dilutive effect or were immaterial in all
years presented. The weighted average number of common shares outstanding for
all of the years presented was 1,166,835.
Gain on Sales of Real Estate - Gain on sales of real estate has been reduced,
where applicable, by minority partners' interest in the gain of $540,000 and
$1,641,000 and advisor's incentive fees of $106,000 and $186,000 for the years
ended December 31, 1995 and 1994, respectively.
Cash and Cash Equivalents - For purposes of the consolidated statements of cash
flows, the Company considers all highly liquid investments with a maturity of
three months or less to be cash and cash equivalent .
(24)
<PAGE>
Reclassifications - Certain amounts in prior year's consolidated financial
statements have been reclassified to conform to the current year's presentation.
Minority Interest - Minority interest represents the minority partners'
proportionate share of the equity of the Company's majority owned subsidiaries.
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Minority interest balance at beginning of year $ 4,817,000 $ 785,000
Change in method of accounting for KLL -- 2,308,000
Reduction of minority interest due to dissolution of (621,000) --
KLL
Formation of new partnership (TGTC) -- 2,067,000
Minority partners' interest in operating gains of (1,421,000) 88,000
consolidated subsidiaries
Minority partners' interest in net gain on sales of real 540,000 1,641,000
estate of consolidated subsidiaries
Distributions to minority partners, net of contributions (2,714,000) (2,083,000)
and note receivable from minority partner
Other 13,000 11,000
----------- -----------
Minority interest balance at end of year $ 614,000 $ 4,817,000
=========== ===========
</TABLE>
Future Accouting Changes - The Company is required to adopt the provision of
FASB No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of," in 1996. Management does not expect that
the adoption of FASB No. 121 will have a material effect on the carrying value
of the Company's long-lived assets.
The Company does not presently intend in 1996 to adopt the fair value based
method as encouraged by FASB No.123 "Accounting for Stock-Based Compensation".
Accordingly, there will be no effect to the financial statements.
(25)
<PAGE>
2. INVESTMENT PROPERTIES
The components of the Company's properties and the related depreciation
information follow:
<TABLE>
<CAPTION>
December 31, 1995
Accumulated
Cost Depreciation Net
<S> <C> <C> <C>
Commercial and Industrial Properties
Land $ 1,092,868 $ 1,092,868
Buildings and improvements 2,840,421 $ 1,963,971 876,450
----------- ----------- -----------
3,933,289 1,963,971 1,969,318
Hotel and Club Facility
Land 1,338,518 1,338,518
Hotel/ club facility and improvements 6,930,547 702,823 6,227,724
Furniture, fixtures & equipment 2,077,087 671,959 1,405,128
----------- ----------- -----------
10,346,152 1,374,782 8,971,370
Yacht Slips 1,689,283 1,689,283
----------- ----------- -----------
Land Held for Development 8,103,304 8,103,304
----------- ----------- -----------
Real Estate Development in Progress
Shopping center(Jacksonville, FL) 1,204,390 1,204,390
----------- ----------- -----------
Total $25,276,418 $ 3,338,753 $21,937,665
=========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
December 31, 1994
Accumulated
Cost Depreciation Net
<S> <C> <C> <C>
Commercial and Industrial Properties
Land $ 2,382,769 $ 2,382,769
Buildings and improvements 13,466,662 $ 7,073,717 6,392,945
----------- ----------- -----------
15,849,431 7,073,717 8,775,714
Hotel and Club Facility
Land 1,338,518 1,338,518
Hotel/club facility and improvements 5,956,847 291,107 5,665,740
Furniture, fixtures and equipment 1,591,716 298,214 1,293,502
----------- ----------- -----------
8,887,081 589,321 8,297,760
Yacht Slips 1,767,421 1,767,421
----------- ----------- -----------
Land Held for Development 2,608,776 2,608,776
----------- ----------- -----------
Real Estate Development in Progress
Entertainment value/oriented retail center 7,721,561 7,721,561
Shopping center (Jacksonville, FL) 1,205,637 1,205,637
----------- ----------- -----------
8,927,198 8,927,198
----------- ----------- -----------
Total $38,039,907 $ 7,663,038 $30,376,869
=========== =========== ===========
</TABLE>
(26)
<PAGE>
3. INVESTMENTS IN AND RECEIVABLES FROM UNCONSOLIDATED
ENTITIES
As of December 31, 1995, the Company's investments in and receivables from
unconsolidated entities primarily consisted of CII's 49% equity interest in
T.G.I.F. Texas, Inc. (T.G.I.F.). T.G.I.F. is engaged in the business of leasing
net lease properties in Texas and Louisiana. CII owns 49% of the outstanding
common stock of T.G.I.F. The carrying values of all unconsolidated investments
are summarized below:
Description 1995 1994
T.G.I.F. Texas, Inc. $1,656,131 $1,739,816
Various Others (a) 782,879 946,729
---------- ----------
$2,439,010 $2,686,545
========== ==========
(a) Primarily investments in companies whose primary purpose is to make
equity investments in growth oriented enterprises.
4. NOTES AND ADVANCES DUE FROM AND TRANSACTIONS WITH RELATED PARTIES
The Company has an agreement (the "Agreement") with Courtland Group, Inc. (the
"Advisor") for its services as investment advisor and administrator of the
Company's affairs. All officers of the Company who are officers of the Advisor
are compensated solely by the Advisor for their services. The Agreement is
renewable annually upon the approval of a majority of the directors of the
Company who are not affiliated with the Advisor and a majority of the Company's
shareholders. The contract may be terminated at any time on 120 days written
notice by the Advisor or upon 60 days written notice by a majority of the
unaffiliated directors of the Company or the holders of a majority of the
Company's outstanding shares.
Under the Agreement, as amended at the Company's 1992 Annual Meeting of
Shareholders, the Advisor is entitled to receive a monthly fee of $72,917. The
Advisor is entitled to a monthly fee of 20% of the amount of any unrefunded
commitment fees received by the Company with respect to mortgage loans and other
commitments which the Company was not required to fund and which expired within
the next preceding calendar month. The Advisor is also entitled to an annual
incentive compensation equal to the sum of 10% of net realized capital gains and
extraordinary items of income for that year and 10% of the amount, if any, by
which net profits of the Company for such fiscal year exceeded 8% per annum of
the Average Net Worth of the Company, as defined.
During 1995 and 1994, $1,063,000 and $1,130,000, respectively, was earned by the
Advisor as advisory fees of which $188,000 and $255,000, respectively, were for
incentive compensation. The Advisor is also the manager for certain of the
Company's properties for which it received management fees of approximately
$27,000 and $76,000 in 1995 and 1994, respectively.
(27)
<PAGE>
At December 31, 1995 the Company had amounts due from the Advisor of $194,000,
and as of December 31, 1994 the Company had amounts due to the Advisor of
$112,000. These amounts bear interest at prime plus 1% and are due on demand.
During 1988, the Company sold its interest in a 49% owned real estate investment
company to a 41% shareholder of the Company. The Company has notes receivable
and convertible debentures due from this real estate investment company. The
notes totaling $236,235 bear interest at prime plus 2% and are due on demand,
and the debentures totaling $318,035 bear interest at 8% and mature in 1996. In
1991, the Company began recognizing interest income on these notes as payments
are received. No payments were received in 1995 and 1994.
The Company has a note receivable from a 41% shareholder of $300,000 plus
accrued interest of $120,000 and $124,000 as of December 1995 and 1994,
respectively. This note bears interest at the prime rate and is due on demand.
Mr. Wiener, Chairman of the Company, is an 18% shareholder and an officer and
director of T.G.I.F. Texas, Inc., a 49% owned affiliate of CII (See Note 3). As
of December 31, 1995, T.G.I.F. has amounts due from Mr. Wiener in the amount of
$56,000. These amounts are due on demand and bear interest at the prime rate.
Furthermore, Courtland Group receives a management fee of $18,000 per year from
T.G.I.F.
In 1992, CII and certain directors and officers of HMG, acquired a 27% interest
in Jack Baker 5th Avenue, Inc. and its affiliates. In 1993, that 27% interest
was increased to 85% in which CII has a 59% interest and certain directors and
officers of HMG have a 41% interest. This Company is a manufacturers'
representative and CII's investments in and loans to (including accrued
interest) Jack Baker 5th Avenue, Inc. were approximately $315,000 and $277,000
as of December 31, 1995 and 1994, respectively. In 1995 and 1994 CII recognized
its portion of losses from Jack Baker 5th Avenue, Inc. of $80,000 and $86,000,
respectively.
(28)
<PAGE>
5. NOTES, MORTGAGES AND OTHER PAYABLES
<TABLE>
<CAPTION>
December 31,
1995 1994
<S> <C> <C>
Collateralized by Investment Properties (Note 2)
Land Held for Development:
Mortgage loan payable, interest at 9% payable
quarterly with quarterly principal payments of
$12,776 matures 7/1/98. $1,385,453 $1,443,229
Mortgage loan payable, interest at 1% over prime
(9.5% at December 31, 1995) payable monthly.
Principal payment of $750,000 due 7/1/96 with
balance due at maturity on 7/1/97. 1,040,000 1,340,000
Mortgage loan payable, interest at prime plus 1%
(9.5% at December 31, 1995) payable monthly
with all principal due June 1996. 431,104 431,104
Mortgage loan payable, interest fixed at 10.5%
payable quarterly with principal payments of
$15,867 due each February 1st and a balloon
payment due 2/4/97. 180,900 206,267
Mortgage loan payable, interest at prime plus
1.75% (10.25 at December 31, 1995) payable
monthly with principal due as of June 30,
1996. 500,000 --
Limited partnership owning ground lease: Mortgage
loan payable interest fixed at 9.75% payable
monthly with principal due at maturity on
11/28/96. 300,000 300,000
Limited partnerships owning restaurants: Mortgage
loan payable, interest fixed at 10.75%
payable monthly with 20 year amortization of
principal. The properties which
collateralized this debt were sold and the
debt was repaid during 1995. -- 1,798,388
---------- ----------
Balance brought forward: $3,837,457 $5,518,988
---------- ----------
</TABLE>
(29)
<PAGE>
5. NOTES, MORTGAGES AND OTHER PAYABLES (continued)
<TABLE>
<CAPTION>
December 31,
1995 1994
<S> <C> <C>
Balance brought forward: $3,837,457 $5,518,988
Partnership owning an office building: Mortgage
loan payable, interest fixed at 10.125%
payable monthly, with 25 year principal
amortization. The property which
collateralized this debt was sold in 1995 and
the purchaser of the property assumed the
debt. -- $2,895,655
Joint Venture owning retail centers: Mortgage loan
payable requiring monthly payments of
principal and interest of $2,895 at 10%
interest rate. Note matured in 1984 (1). 89,790 114,189
Partnerships owning hotel and club facility and
Yacht Slips: Mortgage loan payable with
interest at prime plus 2% (10.5%) at December
31, 1995. Payments of interest only through
June 1995, thereafter, 20 year amortization
of principal with all outstanding principal
due September, 2000. 4,398,320 4,500,000
Partnership owning rental property: Mortgage loan
payable, interest fixed at 7% payable monthly
with 5 year principal amortization. The
property collateralizing this debt was sold
in 1995. -- 172,759
Other:
Unsecured bank line of credit, interest at prime
plus 1% (9.5% at December 31, 1995) payable
monthly. -- 300,000
Various lease obligations collateralized by office
equipment, interest of 10% and 12%. -- 10,659
---------- -----------
$8,325,567 $13,512,250
---------- -----------
<FN>
(1) The Company has continued to make principal and interest payments on
this mortgage. No request for full payment has been made by the lender.
</FN>
</TABLE>
(30)
<PAGE>
A summary of scheduled principal repayments or reductions for all types of notes
and mortgages payable is as follows:
Year ending December 31, Amount
1996 $2,515,501
1997 317,583
1998 1,350,117
1999 103,778
2000 4,038,588
---------
Total $8,325,567
6. INCOME TAXES
The Company's income tax benefit or provision is solely attributable to CII
which files a separate tax return. As of December 31, 1995 and 1994, CII has a
net deferred tax asset of approximately $1.5 million and $700,000, respectively.
As of December 31, 1995 and 1994, this asset was primarily due to a net
operating loss carryforward of approximately $3.7 million and $1.3 million,
respectively. The Company has established a valuation allowance for the balance
of the net deferred tax asset. Deferred tax liabilities at December 31, 1995 and
1994 were not material.
7. COMMITMENTS AND CONTINGENCIES
Minimum lease payments receivable.
The Company leases its commercial and industrial properties to lessees under
agreements for which substantially all of the leases specify a base rent and a
rent based on tenant sales exceeding a specified percentage. Such percentage
rent approximated $431,000 and $609,000, in 1995, and 1994, respectively.
These leases are classified as operating leases and generally require the tenant
to pay all costs associated with the property. Minimum annual rentals on
noncancelable leases in effect at December 31, 1995, are as follows:
Years ended: Amount
1996 $533,000
1997 491,000
1998 346,000
1999 247,000
2000 242,000
Subsequent years 1,392,000
----------
Total $3,251,000
==========
(31)
<PAGE>
8. STOCKHOLDERS' EQUITY
In July 1991, the shareholders approved the 1990 Stock Option Plan which expires
in 2001. Under the 1990 Plan, options were authorized to be granted to purchase
120,000 common shares at no less than 100% of the fair market value at the date
of grant. Options may be exercised at any time within ten years from the date of
grant and are not transferable. Options expire upon termination of employment,
except to a limited extent in the event of retirement, disability or death of
the optionee. As of December 31, 1995 105,000 options have been granted and none
exercised. The exercise price of these options ranges from $3.75 to $5.50 per
share.
9. ABANDONMENT OF PRE-DEVELOPMENT COSTS
During the fourth quarter of 1995 the Grove Towne Center-Texas, Ltd. decided not
to go forward with the project as designed due to various factors including a
dispute with a major tenant. Accordingly, the partnership has written-off
approximately $4.2 million of pre-development costs and has reclassified land
cost of $5.8 million from real estate development in progress to land held for
development.
(32)
<PAGE>
Item 8. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure. In the fourth quarter of 1995 the Company engaged BDO
Seidman, LLP as its independent certified public accountant to audit its
financial statements for the fiscal year ended December 31, 1995. This change
did not arise because of any disagreements with Deloitte and Touche, LLP, its
prior auditor.
The report of Deloitte & Touche, LLP contained no adverse opinion, or a
disclaimer of opinion, nor was it qualified or modified as to uncertainty, audit
scope, or accounting principles.
There has not been any disagreement with the Company's accountants within the 24
months prior to the date of the most recent financial statements concerning any
matter of accounting principles or practice or financial statement disclosure.
(33)
<PAGE>
Part III.
Item 9. Directors. Executive Officers and Control Persons.
Listed below is certain information relating to the executive officers and
directors of the Company:
<TABLE>
<CAPTION>
Principal Occupation and Employment other
than With the Company During the Past Five
Name and Office Age Years - Other Directorships
<S> <C> <C>
Maurice Wiener 54 Chairman of the Board and Chief Executive
Chairman of the Board Advisor;
of Directors and Chief Executive Trustee, Transco;
Executive Officer Director, TGIF Texas, Inc.;
Trustee, PRA Real Estate Securities Fund.
Lee Gray President and 66 President, Treasurer and Director of the Advisor;
Treasurer ; President and Director, Chartcraft, Inc.; Trustee
Director and Treasurer, Transco, Director LCS Industries,
Inc.
Lawrence I. Rothstein 43 Senior Vice President and Secretary of the
Senior Vice President Advisor and Vice President, Transco.
and Secretary
Carlos Camarotti 35 Vice President - Finance and Assistant Secretary
Vice President-Finance of the Advisor.
and Assistant Secretary
(since 1990)
Bernard Lerner 53 Vice President of the Advisor
Vice President
Walter Arader 76 President, Arader, Herzig and Associates Inc.
Director (financial management consultants); Director,
Pep Boys-Manny, Moe & Jack; Director Unitel Video;
Former Secretary of Commerce, Commonwealth of
Pennsylvania.
John B. Bailey 69 Real Estate Consultant; Retired CEO, Landauer
Director Associates, Inc. (Real Estate Consultants) (1977-
1988).
Gustav S. Eyssell 94 Real Estate Consultant; Director of the Advisor.
Director
Norman Fieber 66 Real Estate Developer; Partner in Stonegate
Director Development Corp.
Harvey Comita 66 President and Director of Pan-Optics, Inc. (1971-
Director 1991); Director of Mediq, Incorporated (1981-
1991); trustee of Transco Realty Trust.
</TABLE>
(34)
<PAGE>
All executive officers of the Company were elected to their present positions to
serve until their successors are elected and qualified at the 1995 annual
organizational meeting of directors immediately following the annual meeting of
shareholders. All directors of the Company were elected to serve until the next
annual meeting of shareholders and until the election and qualification of their
successors.
Item 10. Executive Compensation.
Executive officers received no cash compensation from the Company in their
capacity as executive officers. Reference is made to Item 1. Business and Item
6. Management's Discussion and Analysis or Plan of Operation for information
concerning fees paid to the Advisor.
Compensation of Directors. Each Director receives an annual fee of $5,000, plus
expenses and $500 per each meeting attended of the Board of Directors.
Furthermore, Messrs. Wiener and Gray each receive $4,000 a year in directors
fees from CII.
Stock Options. In July 1991, the shareholders approved the 1990 Stock Option
Plan (the "Plan"). The Plan, which is non-qualified and expires in 2001, is
intended to provide incentives to the directors and employees ("the employees")
of the Company as well as to enable the Company to obtain and retain the
services of such employees. The Plan is administered by a Stock Option Committee
(the "Committee") appointed by the Board of Directors. The Committee selects
those key officers and employees of the Company to whom options for shares of
common stock of the Company shall be granted. The Committee determines the
purchase price of shares deliverable upon exercise of an option; such price may
not, however, be less than 100% of the fair market value of a share on the date
the option is granted. Payment of the purchase price may be made in cash,
Company stock, or by delivery of a promissory note, except that the par value of
the stock must be paid in cash or Company stock. Shares purchased by delivery of
a note must be pledged to the Company. Shares subject to an option may be
purchased by the optionee within ten years from the date of the grant of the
option. However, options automatically terminate if the optionee's employment
with the Company terminates other than by reason of death, disability or
retirement. Further, if, within one year following exercise of any option, an
optionee terminates his employment other than by reason of death, disability or
retirement, the shares acquired upon exercise of such option must be sold to the
Company at a price equal to the lesser of the purchase price of the shares or
their fair market value.
As of December 31, 1995, 105,000 options have been granted of which none have
been exercised and 15,000 options are reserved for issuance under the Plan of
which none have been granted.
(35)
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management.
Set forth below is certain information concerning common stock ownership by
directors, directors and officers as a group, and holders of more than 5% of the
outstanding common stock.
Shares Held as of March 18, 1996
<TABLE>
<CAPTION>
Additional Shares in
Which the named
Shares Owned by Person Has, or
Named Persons & Participates in, the
Members of His Voting or Total Shares &
Name Family(1) Investment Power(2) Percent of Class
<S> <C> <C> <C>
Maurice Wiener 30,100 (4) 531,830 (3) 561,930 44% (3), (4)
Lee Gray 53,000 (4) 531,830 (3) 584,830 46% (3), (4)
Norman Fieber 5,700 (4) 0 5,700 (4)
Walter G. Arader 11,600 (4) 0 11,600 (4)*
John B. Bailey 7,100 (4) 0 7,100 (4)*
Gustav S. Eyssell 6,400 (4) 54,530 60,930 5% (4)
Harvey Comita 5,000 (4) 0 5,000 (4)*
All 11 Directors and 143,900 (4) 531,830 675,730 53% (4)
Officers as a Group
Transco Realty Trust 477,300 (5) 0 477,300 37% (5)
2701 S. Bayshore
Drive
Coconut Grove, FL
33133
Maurice A. Halperin 177,000 0 177,100 14%
Barry S. Halperin
441 South Federal
Highway
Deerfield Beach, FL
33441
Tweedy Browne Co. 7,300 (6) 48,300 (6) 55,600 5% (6)
L.P.
TBK Partners L.P.
("TBK")
Vanderbilt Partners
52 Vanderbilt Ave.
NYC 10017
<FN>
* Less than 1%
</FN>
</TABLE>
(36)
<PAGE>
(1) Unless otherwise indicated, beneficial ownership is based on sole voting
and investment power.
(2) Other than with respect to the shares described in footnote 6 below, shares
listed in this column represent shares held by entities with which
directors or officers are associated. Directors, officers and members of
their families have no ownership interest in these shares.
(3) This number includes the number of shares held by Transco Realty Trust
(477,300 shares) and Courtland Group, Inc. (54,530). Of those shares owned
by Transco Realty Trust, 24,350 have been pledged to a brokerage firm
pursuant to a margin agreement. Several of the directors of the Company are
directors, trustees, officers or shareholders of certain of those firms.
(4) This number includes options granted under the 1990 Stock Option Plan, none
of which have been exercised. These options have been granted to Mr.
Wiener, 30,000; Mr. Gray, 25,000; 5,000 each to Mr. Arader, Mr. Bailey, Mr.
Eyssell, Mr. Fieber, Mr. Comita; and a total of 25,000 to three officers
who are not directors. Reference is made to Item 10. Executive Compensation
for further information about the 1990 Stock Option Plan.
Effective March 27, 1995, Mr. Rothrock resigned as a Director of the
Company.
(5) Messrs. Wiener and Gray each hold approximately 24% respectively, of the
stock of Transco and may therefore be deemed to be the beneficial owners of
the shares of the Company held by Transco.
(6) TBK and Vanderbilt Partners own 6,000 and 1,300 shares of Common Stock,
respectively. Tweedy Browne Company LP (TBC) may be deemed the beneficial
owner of 48,300 shares of Common Stock of the Company held by TBC in the
accounts of various customers, with respect to which accounts TBC has
investment discretion (the TBC Accounts). However, each of TBK, TBC and
Vanderbilt Partners disclaims being the beneficial owner of any of the
shares held in the TBC Accounts. Of the 48,300 shares held, TBC has sole
voting power with respect to 38,300 shares and shared dispositive power
with respect to all.
(37)
<PAGE>
Item 12. Certain Relationships and Related Transactions. Mr. Wiener is the
executive trustee and Mr. Gray is a trustee and treasurer of Transco and they
each hold approximately 24% of its stock, respectively.
They are also directors and officers of the Advisor, which owns 21% of Transco's
stock. Mr. Wiener is Chairman of the Board and a 36% shareholder and Mr. Gray
and Mr. Eyssell are directors and 36% and 14% shareholders, respectively, of the
Advisor.
Transco is a 41% shareholder of the Company. Mr. Rothstein, Senior Vice
President and Secretary of the Company, is also an officer of the Advisor and
Transco.
The day-to-day operations of the Company are handled by the Advisor, as
described above under Item 1. Business "Advisory Agreement." Reference is made
to Item 1. Business and Item 6. Management's Discussion and Analysis or Plan of
Operation for further information about the remuneration of the Advisor.
As of December 31, 1995, the Advisor owed the Company $194,000 and as of
December 31, 1994, the Advisor was owed $112,000, by the Company. Such sums bear
interest at the prime rate plus 1% and are due on demand.
As of December 31, 1995, the Company has a note and accrued interest receivable
from a 41% shareholder of $420,000 compared to $424,000 as of December 31, 1994.
This note bears interest at the prime rate and is due on demand.(See Item 1.
Business- South Bayshore Associates).
Reference is made to Item 1. Business under "Courtland Investments, Inc." and
"South Bayshore Associates" for a complete description of certain related
transactions.
The Company has advances and debentures receivable from HMG Investment Corp., a
wholly-owned subsidiary of Transco, which amount to approximately $236,000 and
$318,000, bear interest at 8% and at the prime rate plus 2% and are due on
demand in 1996, respectively. No payments were received in 1995 or 1994 and
accrued and unpaid interest is not being capitalized.
CII owns approximately 49% of the outstanding shares of T.G.I.F. Texas, Inc.
(T.G.I.F). Mr. Wiener is a director and officer of TGIF and owns, directly and
indirectly, approximately 18% of the outstanding shares of T.G.I.F. In May 1992,
CII purchased 345,000 non-voting preferred shares of T.G.I.F for $345,000. This
purchase was paid by converting $280,000 of notes receivable from T.G.I.F plus
$65,000 in cash. In 1993, T.G.I.F redeemed from CII and Mr. Wiener 36,250 and
18,130 preferred shares, respectively, at $1 per share. As of December 31, 1994
CII and Mr. Wiener owned 108,750 and 54,370, respectively, shares of preferred
stock. As of December 31, 1995 all preferred shares have been redeemed.
As of December 31, 1995 and 1994, CII owed approximately of $611,000 and
225,000, respectively to T.G.I.F., including accrued interest . All advances
between CII and T.G.I.F. are due on demand and bear interest at the prime rate
plus 1%.
(38)
<PAGE>
Part IV.
Item 13. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a)
1. Financial Statements - See Item 7.
Index to Consolidated Financial Statements and Supplemental Data.
All other schedules omitted because of the absence of the conditions under which
they are required or because all information required to be reported is included
in the consolidated financial statements or notes thereto.
3. Exhibits listed in the Index to Exhibits.
(b)
Reports on Form 8-K:
A report on Form 8-K was filed during the fourth quarter of 1995 in
connection with a change in accountants. See Item 8. Changes in and
disagreements with accountants on Accounting and Financial Disclosure.
(39)
<PAGE>
SIGNATURES
In accordance with Section 13 or 15 (d) of the Exchange Act, the registrant
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
HMG/COURTLAND PROPERTIES, INC.
March 25, 1996 By: /s/ Maurice Wiener
-----------------------------------
Maurice Wiener
Chairman of the Board
In accordance with Section 13 or 15 (d) of the Exchange Act, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the date indicated.
/s/ Maurice Wiener March 25, 1996
- -----------------------------------
Maurice Wiener
Chairman of the Board (Chief Executive Officer)
/s/ Lee Gray March 25, 1996
- -----------------------------------
Lee Gray, President, Treasurer and Director
/s/Walter G. Arader March 25, 1996
- -----------------------------------
Walter G. Arader, Director
/s/ John B. Bailev March 25, 1996
- -----------------------------------
John B. Bailey, Director
/s/ Gustav S. Evssell March 25, 1996
- -----------------------------------
Gustav S. Eyssell, Director
/s/ Norman A Fieber March 25, 1996
- -----------------------------------
Norman A. Fieber, Director
/s/ Harvev Comita March 25, 1996
- -----------------------------------
Harvey Comita, Director
/s/ Lawrence I. Rothstein March 25, 1996
- -----------------------------------
Lawrence I. Rothstein, Senior Vice President
& Secretary (Chief Financial Officer)
/s/ Carlos Camarotti March 25, 1996
- -----------------------------------
Carlos Camarotti Vice President - Finance and Controller
(40)
<PAGE>
EXHIBIT INDEX
Description
(3) (a) Restated Certificate of Incorporation Incorporated by reference
to Exhibit 3(a) to the
Company's 1987 Report on
Form 10-K (the "1987 Form
10-K").
(b) By-laws Incorporated by reference
to Exhibit 6.1 to the
Registration Statement of
Hospital Mortgage Group,
Inc. on Form S-14, No.
2-64, 789, filed July 2,
1979.
(10) (a) Amended and Restated Advisory Incorporated by reference
Agreement between the Company and to Exhibit 10(a) to the
Courtland Group, Inc., Company's 1988 Report on
dated July 15, 1988. Form 10-K (the "1988 Form
10-K").
(b) (i) Joint Venture Agreement between Incorporated by
Transco Realty Trust ("Transco") reference to the
and Hospital Mortgage Group, Inc. Company 5 Amend-
dated August 10, 1979. ment No. 1 on Form
8 to the 1988 Form
10-K, dated April
11, 1989 (the
"Form 8")
(ii) Amendment to Joint Venture Incorporated by
Agreement dated July 1, 1980 reference to Exhibit
10(b)(ii) to the
Form 8.
(41)
<PAGE>
(c) $1,181,250 Promissory Note of South Incorporated by
Bayshore Associates to Hospital reference to
Mortgage Group, Inc. dated July 3, Exhibit 10(b)(ii)
1980 to the Form 8.
(d) Lease dated January 24, 1980 between Incorporated by
Sun Bank of Miami, Grove Isle reference to
Associates, Ltd. and Grove Isle Club, Exhibit 10(d) to
Inc. the Form 8.
(e) Agreement between NAF Associates and Incorporated by
the Company, dated June 30, 1986. reference to
Exhibit 10(f) to
the 1987 Form
19-K.
(f) Indemnification Agreement between the Incorporated by
Company and Transco dated June 27, reference to
1985. Exhibit 10(t) of
Transco's 1985
Report on Form 10-K.
(g) Warrants and debentures issued by HMG Incorporated by
Investment Corp. to the Company. reference to
Exhibit 10(w) of
Transco's 1986
Report on Form 10-K.
(h) Agreement of purchase and sale of Incorporated by
marina rights dated January 1, 1986 reference to
between Courtland Investments, Inc. Exhibit 10(y) of
(formerly MICI Properties, Inc.) and Transco's 1986
HMG/Courtland Properties, Inc. Report on Form 10-K.
(i) $2,000,000 Promissory note of Four Incorporated by
Sugar Grove Associates to Government reference to
Personnel Mutual Life Insurance Exhibit 10(I) to the
Company dated May 6, 1991. 1991 Form 10-K.
(42)
<PAGE>
(j) 1990 Incentive Stock Option Plan of Incorporated by
HMG/Courtland Properties, Inc. reference to Exhibit
10(j) to the
1991 Form 10-K.
(k) Amendment of Promissory Notes in the Incorporated by
amount of $300,000 dated 1986 between reference to Ex-
Transco Realty Trust (Maker) and hibit 10(k) to the
South Bayshore Associates 1991 Form 10-K.
(l) Amended and Restated Advisory Incorporated by
Agreement between the Company reference to exhibit
And Courtland Group, Inc. dated 10(k) to the 1992
July 17, 1992, effective January 1, Form 10-KSB.
1993.
(m) Indemnity Agreement (Grove Isle Incorporated by
Settlement re: Citibank loan) reference to exhibit
10(m) To the 1993
Form 10-KSB.
(n) Indemnity and Assumption Agreement Incorporated by reference
(Grove Isle settlement) to Exhibit 10 (m)
To the 1993 Form 10-KSB.
(o) Contract for Sale and Purchase of Incorporated by reference
Briar Bay Associates shopping center to Exhibit 10(o)
Dated February 1994. To the 1994 Form 10-KSB.
(p) The Grove Towne Center-Texas, Ltd.
Limited Partnership agreement, as
amended restated November 21, 1994.
(43)
<PAGE>
(22) Subsidiaries of the Company:
FOUR SUGAR GROVE ASSOCIATES, a Texas limited partnership
T.E.H.H. CORP., a Texas corporation
HMG-FIEBER ASSOCIATES, a Connecticut joint venture
SOUTH BAYSHORE ASSOCIATES, a Florida joint venture
HMG OF KEY LARGO, INC., a Florida corporation
HMG ORANGE PARK NORTH, INC., a Florida corporation
HMG FASHION SQUARE, INC., a Florida corporation
HMG SUGARGROVE, INC., a Texas corporation
HTW VENTURES II, INC., a Texas corporation
APPLE GROVE APARTMENTS, LTD., a Texas limited partnership
COURTLAND INVESTMENT, INC., a Delaware corporation
GROVE ISLE YACHT CLUB ASSOCIATES., a Florida Partnership
GROVE ISLE YACHT CLUB, Florida Partnership
GROVE ISLE ASSOCIATES, a Florida Partnership
GROVE ISLE CLUB, INC., a Florida Corporation
HMG HOUSTON GROVE, INC., a Texas Corporation
THE GROVE TOWNE CENTER-TEXAS, LTD. , a Texas Limited Partnership
(44)
<PAGE>
Exhibit Index
Description Reference
The Grove Towne Center-Texas, Ltd. Exhibit 10 (p)
Limited Partnership agreement, as
amended restated November 21, 1994.
(45)
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT OF
THE GROVE TOWNE CENTER-TEXAS, LTD.
November 21, 1994
<PAGE>
TABLE OF CONTENTS
Page No.
ARTICLE 1
ORGANIZATIONAL MATTERS
Section 1.1 Formation of Partnership .......................................1
Section 1.2 Name ...........................................................1
Section 1.3 Registered Office; Registered Agent; Principal Office; Other
Offices ........................................................1
Section 1.4 Term ...........................................................1
Section 1.5 Certain Definitions ............................................2
Section 1.6 Ownership Interest and Sharing Ratios ..........................4
ARTICLE 2
FUTURE DEVELOPMENTS
Section 2.1 Participation Rights of Grovpar and HMG ....................4
Section 2.2 Other Activities ...............................................5
ARTICLE 3
PURPOSE AND SCOPE OF PARTNERSHIP
Section 3.1 Purpose and Scope ..............................................6
ARTICLE 4
DEVELOPMENT, LEASING AND MANAGEMENT
Section 4.1 Development Management .........................................6
Section 4.2 Construction Management ........................................7
Section 4.3 Leasing Management .............................................7
Section 4.4 AssetManagement ................................................7
Section 4.5 Property Management ............................................7
ARTICLE 5
RIGHTS OF LIMITED PARTNERS
Section 5.1 Information ....................................................8
Section 5.2 Limitation on Participation in Management ......................8
Section 5.3 Limited Liability ..............................................8
ARTICLE 6
MANAGEMENT OF PARTNERSHIP
Section 6.1 Management .....................................................8
Section 6.2 Indemnification ................................................9
Section 6.3 Budgets .......................................................10
Section 6.4 Reimbursement of Expenses .....................................10
Section 6.5 Compensation of Partners ......................................10
i
<PAGE>
Section 6.6 Power of Attorney .............................................10
Section 6.7 Admittance of Additional Partners .............................10
ARTICLE 7
ACCOUNTING AND REPORTING
Section 7.1 Fiscal Year, Accounts, Reports ................................11
Section 7.2 Bank Accounts .................................................11
ARTICLE 8
CAPITAL CONTRIBUTIONS
Section 8.1 Initial Capital Contributions .................................12
Section 8.2 Additional Capital Contributions ..............................12
Section 8.3 Failure to Make Contributions .................................13
Section 8.4 Reduction of Sharing Ratios in Certain Circumstances ..........13
Section 8.5 Return of Contributions .......................................15
ARTICLE 9
FINANCING
Section 9.1 Financing .....................................................15
Section 9.2 Partner Loans .................................................16
ARTICLE 10
DISTRIBUTIONS
Section 10.1 Distributions in General ......................................16
Section 10.2 Distribution of Net Cash Flow .................................16
Section 10.3 Distribution of Capital Proceeds ..............................17
Section 10.4 Distributions to Delinquent Partners ..........................17
Section 10.5 Payment of Distributions to Grovpar ...........................17
ARTICLE 11
TAX MATTERS AND ALLOCATIONS
Section 11.1 Allocations ...................................................17
Section 11.2 Capital Accounts ..............................................19
Section 11.3 Tax Returns .................................................. 20
Section 11.4 Tax Elections .................................................20
Section 11.5 Tax Matters Partner ...........................................21
Section 11.6 Allocations on Transfer of Interests ..........................21
ARTICLE 12
WITHDRAWAL, DISSOLUTION, LIQUIDATION, AND TERMINATION
Section 12.1 Voluntary Withdrawal ..........................................22
Section 12.2 Dissolution, Liquidation, and Termination Generally ...........22
Section 12.3 Liquidation and Termination ...................................22
Section 12.4 Cancellation of Certificate ...................................24
ii
<PAGE>
ARTICLE 13
TRANSFERS OF OWNERSHIP INTERESTS
Section 13.1 Restriction of Transfers ......................................24
Section 13.2 Restrictions on Transfers as to Constituent Parties ...........24
ARTICLE 14
MISCELLANEOUS PROVISIONS
Section 14.1 Notices .......................................................25
Section 14.2 Governing Law .................................................26
Section 14.3 Entireties; Amendments ........................................26
Section 14.4 Waiver ........................................................26
Section 14.5 Severability ..................................................26
Section 14.6 Ownership of Property and Right of Partition ..................26
Section 14.7 Captions, References ..........................................26
Section 14.8 Involvement of Partners in Certain Proceedings ................27
Section 14.9 Services Performed by Affiliates ..............................27
Section 14.10 Interest ......................................................27
Section 14.11 No Third-Party Beneficiaries ..................................27
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AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
THE GROVE TOWNE CENTER-TEXAS, LTD.
This Amended and Restated Limited Partnership Agreement ("Agreement") is
entered into effective as of November 21, 1994, among the undersigned parties.
This Agreement amends and restates the Limited Partnership Agreement of The
Grove Towne Center-Texas, Ltd. dated September 7, 1994, and reflects the
Partners agreement relative to the Partnership.
ARTICLE 1
ORGANIZATIONAL MATTERS
Section 1.1 Formation of Partnership. The undersigned hereby enter into and
form a partnership (the "Partnership") for the limited purpose and scope set
forth herein. HMG Houston Grove, Inc., a Texas corporation, shall be the initial
"General Partner" of the Partnership, and Grovpar, Ltd., a Texas limited
partnership ("Grovpar"), HMG/Courtland Properties, Inc., a Delaware corporation
("HMG"), and Sunbelt Shopping Development, Ltd., an Ohio limited liability
company ("Sunbelt") shall be the initial "Limited Partners" of the Partnership.
The General Partner and Limited Partners are sometimes herein referred to
individually as a "Partner" and collectively as the "Partners." The Partnership
is a limited partnership formed to accomplish the specific purposes hereafter
set forth, and except as otherwise herein provided shall be subject to the
provisions of the Texas Revised Limited Partnership Act, as amended from time to
time (the "Act").
Section 1.2 Name. The name of the Partnership shall be The Grove Towne
Center Texas, Ltd. Subject to applicable law, the business of the Partnership
may be conducted under any other name the General Partner may from time to time
deem appropriate. The Partnership shall file all assumed or fictitious name
certificates required by law in all appropriate jurisdictions in connection with
the conduct of the business of the Partnership.
Section 1.3 Registered Office: Registered Agent Principal Office: Other
Offices. The registered office of the Partnership in the State of Texas shall be
at such place as the General Partner may designate from time to time, and the
registered agent for service of process on the Partnership in the State of Texas
shall be such person as the General Partner may designate from time to time. The
principal office of the Partnership shall be at 4800 Sugar Grove Boulevard,
Suite 380, Stafford, Texas 77477, and at such office the Partnership shall
maintain the records required by Section 1.07 of the Act.
Section 1.4 Term. The Partnership shall commence on the date designated in
the introductory paragraph above that this Agreement is executed by all
Partners, and shall terminate on December 31, 2050, unless sooner terminated as
herein provided.
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Section 1.5 Certain Definitions. As used in this Agreement, the following
terms shall have the meanings indicated:
"Adjusted Capital Account Deficit" means, with respect to a Partner, the
deficit balance, if any, in that Partner's Capital Account as of the end of
the relevant taxable year, after giving effect to the following
adjustments: (a) the Capital Account will be increased by any amount that
the Partner is obligated to restore, including any amount the Partner is
deemed to be obligated to restore under the penultimate sentences of
Treasury Regulation Sections 1.704-2(g)(1) and 1.704-2(i)(5), or any
successor provisions; and (b) the Capital Account will be decreased by the
items described in Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4),
(5) and (6). This definition of Adjusted Capital Account Deficit is
intended to comply with the provisions of Treasury Regulation Section
1.704-1(b)(2)(ii)(d).
"Affiliate" shall mean a Person directly or indirectly, through one or more
intermediaries, controlling, controlled by, or under common control with
any Partner. The term "control" as used in the preceding sentence means,
with respect to a Person that is a corporation, the right to exercise,
directly or indirectly, more than fifty percent (50%) of the voting rights
attributable to the shares of the controlled corporation, and, with respect
to a Person that is not a corporation, the possession, directly or
indirectly, of the power to direct or cause the direction of the management
or policies of the controlled Person.
"Book Basis" means, with respect to any asset, the asset's adjusted basis
for federal income tax purposes, provided, however, (i) if property is
contributed to the Partnership, the initial Book Basis of such Property
shall equal its fair market value on the date of contribution; and (ii) if
the Capital Accounts of the Partnership are adjusted pursuant to Treasury
Regulation Section 1.704-1(b) to reflect the fair market value of any
Partnership asset, the Book Basis of such asset shall be adjusted to equal
its respective fair market value as of the time of such adjustment in
accordance with such Treasury Regulation. The Book Basis of all assets
shall be adjusted thereafter by depreciation and amortization as provided
in Treasury Regulation Section 1.704-1(b)(2)(iv)(g).
"Budget" shall mean any budget approved by the General Partner from time to
time as herein provided.
"Capital Proceeds" shall mean funds of the Partnership that are the
proceeds of a sale, financing, refinancing, or other similar transaction
with regard to the Project (including condemnation awards, title insurance
proceeds, and casualty loss insurance proceeds other than business
interruption or rent loss insurance proceeds, to the extent not payable or
paid (at the option of the
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General Partner) to Partnership lenders or not utilized to repair damage
caused by the casualty loss or taking in question, or in alleviation of any
title defect), net of the actual costs incurred by the Partnership with
third parties in connection with consummating the transaction giving rise
to such funds.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
"Default Interest Rate" shall mean a rate equal to the Prime Interest Rate
plus four percent (4%) per annum, but not in excess of the maximum rate
permitted by applicable law.
"GAAP" shall mean generally accepted accounting principles.
"Gross Costs" shall mean all costs associated with the acquisition,
construction, development, and financing of the Project which, under GAAP,
would be treated as a capital expenditure rather than an operating expense.
"Grovpar Note" shall mean the promissory note of even date executed by
Grovpar and payable to the order of HMG and all renewals and replacements
thereof; payment of the Grovpar Note is secured by a security interest in
Grovpar's Ownership Interest granted by a Security Agreement of even date.
"Improvements" shall mean all buildings or other improvements erected or to
be erected on the Land.
"Land" shall mean the real property in Fort Bend County, Texas containing
approximately 41.6359 acres of land or 1,813,659.804 square feet as
described on Exhibit A hereto.
"Majority in Interest" shall mean Limited Partners holding in excess of
fifty percent (50%) of the Sharing Ratios held by all Limited Partners.
"Net Cash flow" shall mean, for any given fiscal period, the amount by
which Operating Revenues exceed Operating Expenses for such period.
"Operating expenses" shall mean, for any fiscal period, the current
obligations of the Partnership for such period, determined in accordance
with GAAP, for operating expenses of the Project, for capital expenditures
not paid from the Partners' capital contributions to the Partnership, for
payments of interest and principal on any Partnership loans, and for
reasonable reserves actually funded. Operating Expenses shall not include
any non-cash expenses such as depreciation or amortization.
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"Operating Revenues" shall mean, for any fiscal period, the gross revenues
of the Partnership that result from the ownership and operation of the
Project during such period, including proceeds of any business interruption
insurance maintained by the Partnership from time to time and amounts
funded from Partnership reserves, but specifically excluding Capital
Proceeds and capital contributions of the Partners.
"Person" shall mean an individual, partnership, joint venture, corporation,
trust, unincorporated association, or other entity or association.
"Prime Interest Rate" shall mean the rate of interest per annum from time
to time announced by the Wall Street Journal (Southwest Edition) in its
"Money Rates" column as the prime rate of interest; if more than one rate
or a range of rates is announced, the Prime Rate shall be the highest of
such rates.
"Project" shall mean the Land and Improvements.
Section 1.6 Ownership Interest and Sharing Ratios. The "Ownership
Interests" of the Partners in the Partnership consist of all of the rights and
interests of whatsoever nature of the Partners in the Partnership, including
without limitation the right to participate in management to the extent herein
expressly provided, to receive distributions of funds, and to receive
allocations of income, gain, loss, deduction, and credit. From time to time
herein the rights of the Partners to share in, and the obligations of the
Partners to bear, certain Partnership items are expressed as percentages, which
percentages are herein referred to as "Sharing Ratios." The Sharing Ratios of
the Partners are as set forth on Schedule 1 hereto.
Section 1.7 Partner Meetings. Partner meetings may be called at any time
and for any proper purpose or purposes by Partners whose combined Sharing Ratios
are at least 10%; provided, however, that the Partner calling the Partner
meeting shall pay all expenses associated with each Partner meeting in excess of
6 Partner meetings in any 12 month period. Partner meetings shall be held at the
principal office of the Partnership or at such other locations as determined by
the General Partner.
ARTICLE 2
FUTURE DEVELOPMENTS
Section 2.1 Participation Rights of Grovpar and HMG.
(a) For a period of 10 years after the effective date of this Agreement, if
either Grovpar or HMG (the participating Partner is referred to in this Section
2.1 as the "Developing Partner") participates (directly, or indirectly through
an Affiliate) in a Value Oriented Development (defined below), then the
Developing Partner shall offer to the nondeveloping Partner (the "Other
Partner") in writing a right to purchase at least a 10% interest (a
"Participating Interest") in each of the entities involved in such Value
Oriented
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Development (each a "Developing Entity") in which the Developing Partner is
participating on the same economic basis as the other participants (the
"Investment Participants") participate therein, subject to the approval of the
Investment Participants. For purposes of this Agreement, "Value Oriented
Development" shall mean a commercial development in which at least 65% of the
total rentable area in the development consists of stores in the following
categories: (1) manufacturer's outlets, (2) discount stores, or (3) off-price
retailers. At the time of the written offer, the Developing Partner shall
provide the Other Partner with information reasonably sufficient to enable the
Other Partner to evaluate participating in the development, including without
limitation land acquisition documents, development plans, construction costs,
budgets, and cash flow forecasts (collectively, the "Investment Information").
(b) If the Investment Participants refuse to allow the Other Partner to
purchase a Participating Interest in a Developing Entity, then the Developing
Partner shall offer to the Other Partner in writing a right to purchase at least
40% of the Developing Partner's interest in the development in question on the
same economic basis that the Developing Partner acquires its interest in the
Developing Entity.
(c) The Other Partner shall have 30 days after the receipt of the written
offer and the Investment Information to exercise its right to purchase a
Participating Interest as set forth in Section 2.1(a) by delivering written
notification to the Developing Partner. If the Investment Participants refuse to
allow the Other Partner to participate in the development as set forth in
Section 2.1(a), then the Other Partner shall have 30 days after the receipt of
written notice of such refusal and the Investment Information to elect to
purchase 40% of the Developing Partner's interest in such development as set
forth in Section 2.1(b) by delivering written notification to the Developing
Partner. The Other Partner's rights under Sections 2.1(a) and 2.1(b) shall lapse
(A) as to the particular investment in question if written notification is not
delivered to the Developing Partner within the 30 day time period, and (B) as to
any investment if the Other Partner refuses four consecutive offers under
Sections 2.1(a) and 2.1(b).
Section 2.2 Other Activities Except as set forth in Section 2.1 above,
nothing contained in this Agreement or in the Act shall be deemed to restrict in
any way the freedom of any Partner to conduct any business or activity
whatsoever without accountability to the Partnership or the other Partners. Each
Partner shall have the right at any time to acquire and exploit any property
whatsoever and to engage in any business whatsoever, either individually or with
other parties, whether or not in competition with the Partnership, and shall not
be required to obtain the consent of the other Partners or to offer to the
Partnership or the other Partners the right to participate therein.
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ARTICLE 3
PURPOSE AND SCOPE OF PARTNERSHIP
Section 3.1 Purpose and Scope. The purpose and scope of the Partnership are
strictly limited to the acquisition of the Land; the construction of the
Improvements and overall development of the Project; the maintenance, ownership,
lease, and sale of the Project; the financing of the foregoing activities; and
the performance of all other activities reasonably necessary or incidental to
the furtherance of such purposes.
ARTICLE 4
DEVELOPMENT. LEASING AND MANAGEMENT OF PROJECT
Section 4.1 Development Management.
(a) The General Partner shall appoint a person or persons (which may be the
General Partner or an Affiliate of the General Partner) to be responsible for
managing the development of the Project (the "Development Manager"). The
Development Manager shall have the overall development and coordination
responsibilities for the Project until its opening, which responsibilities shall
include, but not be limited to, the definition of the concept for the Project,
the financial evaluation of its feasibility and the direction and coordination
of the different aspects of its implementation, including the financing, design,
permitting, construction, leasing, marketing and administering the development.
In general, the Development Manager, in performing its duties set forth herein,
shall make in good faith all reasonable efforts to see that the Project is
developed in accordance with the Development Plan (defined below).
(b) The Development Manager shall have prepared, at Partnership expense, a
site plan for the Project, the architectural design for the Improvements, a
development schedule for the Project, and a development budget therefor (all of
which is herein collectively referred as the "Development Plan"), and shall
submit the same to the General Partner for approval no later than October 15,
1994. The General Partner hereby acknowledges that it has received and approved
the Development Plan prior to the date hereof. After the General Partner has
approved the Development Plan, then the Partnership shall seek to obtain
development financing for the Project as hereafter provided, and shall undertake
to develop the Project in accordance with the approved Development Plan.
(c) Upon commencement of construction of the Improvements, the Development
Manager shall be responsible for supervising the progress and quality thereof on
behalf of the Partnership and shall use its best efforts to see that the Project
is completed in accordance with the approved Development Plan and in accordance
with good industry practice.
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(d) The Partnership shall pay the Development Manager a reasonable
development fee as determined by the General Partner for the performance of the
services listed in this Section 4.1.
Section 4.2 Construction Management. The Development Manager, with the
prior written approval of the General Partner, shall appoint a person, which may
be an employee or Affiliate of the General Partner or the Development Manager,
as the "Construction Manager." The Construction Manager shall be responsible for
coordinating the work of the architects and engineers with regard to the
Project, as well as to be responsible for all permits for the Project required
by the applicable governmental authorities, and the selection of contractors. In
addition, the Construction Manager shall supervise and coordinate the
construction of the Project and any tenant finishes. The Partnership shall pay
the Construction Manager a reasonable fee as determined by the General Partner
for the performance of the services listed in this Section 4.2.
Section 4.3 Leasing Management. The Development Manager, with the prior
written approval of the General Partner, shall appoint a person or persons
(which may be an employee or an Affiliate of the General Partner or the
Development Manager) who shall be the "Leasing Manager." The Leasing Manager
shall be responsible for coordinating the marketing of lease space in the
Project, including preparation of advertising materials, leasing brochures,
standard lease forms; establishing, coordinating, and supervising the
preparation of lease proposals; and conducting lease negotiations. The
Partnership shall pay the Leasing Manager a reasonable fee as determined by the
General Partner for the performance of the services listed in this Section 4.3.
Section 4.4 Asset Management. The General Partner shall appoint a person or
persons (which may be the General Partner or an Affiliate of the General
Partner) to be responsible for managing the Project after its opening (the
"Asset Manager"). The Asset Manager shall be responsible for the preparation,
direction, and coordination of the business plan for the Project, the
merchandising and releasing plan, community relations, supervision of the
Leasing Manager and/or appointment of a new Leasing Manager and/or Property
Manager, if necessary, and the monthly reporting to the Partnership. The
Partnership shall pay the Asset Manager a reasonable fee as determined by the
General Partner for the performance of the services listed in this Section 4.4.
Section 4.5 Property Management. The Asset Manager, with the prior written
approval of the General Partner, shall appoint a person or persons (which may be
an employee or an Affiliate of the General Partner or the Asset Manager) to be
responsible for the day-to-day implementation of the business plan and the
day-to-day operation of the Project (the "Property Manager"). The Partnership
shall pay the Property Manager a reasonable fee as determined by the General
Partner for the performance of the services listed in this Section 4.5.
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ARTICLE 5
RIGHTS OF LIMITED PARTNERS
Section 5.1 Information. Each Limited Partner shall have access to all
information as provided for in Section 1.07 of the Act under the circumstances
and conditions therein stated.
Section 5.2 Limitation on Participation in Management. No Limited Partner
shall have any authority in its capacity as a Limited Partner to act for or on
behalf of the Partnership or any other Partner, but this provision shall not be
construed so as to limit the rights afforded to a Majority in Interest as herein
provided.
Section 5.3 Limited Liability. No Limited Partner shall be liable for the
losses, debts, liabilities, contracts, or obligations of the Partnership except
to the extent required by law or as otherwise expressly provided for herein.
ARTICLE 6
MANAGEMENT OF PARTNERSHIP
Section 6.1 Management.
(a) The General Partner shall have complete and exclusive authority to
manage the affairs of the Partnership and to make all decisions with regard
thereto except where (i) the approval of a Majority in Interest is required
pursuant to the terms of this Agreement, or (ii) the approval of one or more of
the Limited Partners is expressly required by a non-waivable provision of
applicable law.
(b) Notwithstanding anything to the contrary in this Agreement, no action
shall be taken, sum expended, or obligation incurred by the General Partner or
the Partnership with respect to any Major Decision (defined below) unless the
procedure set forth in this Section 6.1(b) has first been followed. All Major
Decisions must be approved by a Majority in Interest after the procedures set
forth in this Section 6.1(b) have been followed. As to any Major Decision which
the General Partner desires to be approved, the General Partner shall first
notify the Limited Partners in writing of the Major Decision in question at
least 30 days prior to the time that the General Partner desires such Major
Decision to be voted on and approved. Such notice shall be accompanied by an
explanation of reasonable detail by the General Partner of the Major Decision in
question and the reasons the General Partner considers it appropriate for
approval and any background information that the General Partner determines
appropriate (which in the case of a sale or refinancing transaction shall at a
minimum include a current appraisal of the Project by an appraiser meeting the
qualifications set forth in Section 13.2). Any Limited Partner may within 7
business days of receipt of such notice from the General Partner notify the
General Partner of such Limited Partner's desire to have a meeting of the
Partners relative to such Major Decision. Such Limited Partner shall designate
in such notice two alternative meeting dates prior to the end of such 30-day
period which dates are also at least 7 business days after the
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date of such notice. The General Partner shall select one of such dates and
notify the Partners of such meeting date at least 3 days prior to the meeting
date. Such meeting shall be held at the offices of the Partnership, or such
other place mutually agreeable to all parties who plan to attend. The General
Partner may request a vote on such Major Decision at such meeting or at anytime
thereafter. As used herein, "Major Decision" shall mean:
(1) Any sale, transfer, or exchange (or any transaction that would in
substance constitute a sale, transfer, or exchange) of all or substantially
all of the assets of the Partnership;
(2) The termination of an existing or appointment of a new Development
Manager, Asset Manager, or Leasing Manager;
(3) Any change in the Budget which by itself or cumulatively with all
other changes represents a change of more than 5% of the total cost of the
Improvements;
(4) Any substantial change in the basic focus or orientation of the
Project in terms of tenant mix; or
(5) The post-conistruction financing for the Project.
(c) The General Partner shall discharge its duties in a good and proper
manner as provided for in this Agreement. The General Partner, on behalf of the
Partnership, shall in good faith use all reasonable efforts to implement or
cause to be implemented all Major Decisions approved by the Partners, enforce
agreements entered into by the Partnership, and conduct or cause to be conducted
the ordinary usual business and affairs of the Partnership in accordance with
good industry practice and the provisions of this Agreement. The General Partner
shall not be required to devote a particular amount of time to the Partnership's
business, but shall devote sufficient time to perform its duties hereunder.
Section 6.2 Indemnification. To the fullest extent permitted by the Act,
and subject to the limitations therein set forth, the Partnership shall
indemnify the General Partner and its agents and employees against all losses,
liabilities, and expenses (including, without limitation, cost of suit and
attorney's fees) they may incur in performing their obligations hereunder, and
the Partnership shall advance expenses associated with the defense of any action
related thereto; provided, however, that such indemnity shall not apply to
actions or inactions constituting gross negligence, willful misconduct, or bad
faith. The Indemnity set forth in this Section 6.2 shall be limited to the
assets of the Partnership from time to time. and no Partner shall be obligated
to contribute capital to the Partnership to pay any indemnified cost.
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Section 6.3 Budgets.
(a) During the time that the Partnership is developing the Project, the
Partnership shall act under the development budget approved of as part of the
Development Plan.
(b) After completion of development of the Project, the Partnership shall
operate under annual Budgets which shall be prepared by the General Partner.
Each such Budget shall set forth the estimated receipts and expenditures
(capital, operating, and other) of the Partnership for the period covered
thereby and shall be in such detail as the General Partner may deem appropriate.
After an annual Budget has been approved, the Asset Manager shall implement the
same on behalf of the Partnership and shall have authority to incur the
expenditures and obligations therein provided for.
Section 6.4 Reimbursement of Expenses. The General Partner shall be
reimbursed for all reasonable out-of-pocket expenses actually incurred by it
directly in conjunction with the business and affairs of the Partnership,
including without limitation, travel and entertainment expenses, telephone
costs, and the like, but upon request shall provide reasonable supporting
verification to the other Partners for all expenditures for which such
reimbursement is requested.
Section 6.5 Compensation of Partners. Except as herein otherwise
specifically provided, no compensatory payment shall be made by the Partnership
to any Partner for the services to the Partnership of such Partner. This Section
shall not affect any agreements entered into by the Partnership with any Partner
for services to be rendered by the Partner.
Section 6.6 Power of Attorney. Each Partner hereby appoints the General
Partner as its attorney-in-fact for the purpose of executing, swearing to,
acknowledging, and delivering all certificates, documents, and other instruments
as may be necessary, appropriate, or advisable in the judgment of the General
Partner in order to create, qualify, or continue the existence of the
Partnership as a limited partnership or to otherwise comply with applicable law
relative to the continued existence of the Partnership as a limited partnership,
including, without limitation, a certificate of limited partnership for the
Partnership complying with the Act and all amendments necessary thereto. Such
power shall be irrevocable and is coupled with an interest. Upon request by the
General Partner, any Partner shall confirm its grant of such power of attorney
or any use thereof by the General Partner or shall execute, swear to,
acknowledge, and deliver any such certificate, document, or other instrument.
Section 6.7 Admittance of Additional Partners. The General Partner, upon
the approval of a Majority in Interest, may admit additional Limited Partners to
the Partnership; provided, however, in such event, no Partner's Sharing Ratio
shall be reduced without such Partner's consent. Except for an Affiliate of the
General Partner, no new or additional General Partner may be admitted to the
Partnership, nor shall any of the authority, duty, or responsibility of the
General Partner be transferred or delegated, without
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the prior written consent of all Partners. This Section 6.7 shall not affect the
exercise of the rights set forth in Section 8.4.
ARTICLE 7
ACCOUNTING AND REPORTING
Section 7.1 Fiscal Year. Accounts. Reports.
(a) The fiscal year of the Partnership shall be the calendar year.
(b) The books of account of the Partnership shall, at Partnership expense,
be kept and maintained by the General Partner on an accrual basis in accordance
with generally accepted accounting principles and practices in effect from time
to time consistently applied or on a cash basis, in accordance with good and
proper accounting practice therefor, as determined by the General Partner. The
books of account shall be kept at the principal place of business of the
Partnership.
(c) The General Partner shall, at Partnership expense, cause to be prepared
or furnished to the Partners (1) on or before the thirtieth (30th) working day
of each month, an unaudited statement setting forth and describing in reasonable
detail the receipts and expenditures of the Partnership during the preceding
calendar month and comparing the results of operations of the Partnership for
such month and for the year to date to the appropriate budget, (2) on or before
60 days (or as soon thereafter as reasonably possible) after the end of each
fiscal year, a balance sheet of the Partnership dated as of the end of such
fiscal year and a statement setting forth the profits and losses of the
Partnership for such fiscal year, and (3) from time to time and promptly upon
request, all other information relating to the Partnership and its business and
affairs reasonably requested by any Partner. Additionally, during the period
that the Partnership is developing the Project, the Development Manager shall
provide to the Partners monthly reports of the progress of construction of the
Project, and status of negotiations with respect to leasing space therein in
such form and detail as the General Partner may request.
(d) Each Partner, at its cost and expense, shall have the right at all
reasonable times during usual business hours to audit, examine, and make copies
of or extracts from the books of account, records, files, and bank statements of
the Partnership. Such right may be exercised by any Partner, or by its
designated agents or employees.
Section 7.2 Bank Accounts. The General Partner shall open and maintain (in
the name of the Partnership) a special bank account or accounts in a bank or
savings and loan association, the deposits of which are insured, up to the
applicable limits, by an agency of the United States government, in which shall
be deposited all funds of the Partnership. Withdrawals therefrom shall be made
upon the signatures of such persons as the General Partner shall designate.
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ARTICLE 8
CAPITAL CONTRIBUTIONS
Section 8.1 Initial Capital Contributions. The General Partner, HMG, and
Grovpar have contributed to the Partnership predevelopment work for the Project,
including without limitation, zoning, leasing negotiations, contractor
selection, architectural design coordination, and marketing, the expenses
incurred for such predevelopment work, and the lease between American
Multi-Cinema, Inc. and the Partnership. In addition, HMG has contributed the
Land. The Partners hereby stipulate that as of September 30, 1994, the value of
the contributions by the General Partner and HMG to the Partnership is
$7,794,073; as of September 30, 1994, the value of the contributions by Grovpar
to the Partnership is $995,638; and, as of the date hereof, Sunbelt has
contributed to the Partnership cash in the amount of $1,500,000.
Section 8.2 Additional Capital Contributions.
(a) Within 10 days after the General Partner provides a written statement
to each Partner informing the Partners that (1) qualifying leases with a term of
not less than 5 years have been executed for at least 6S% of the gross leasable
area of the Improvements, and (2) the General Partner has obtained a commitment
letter for construction financing for the Project (and all substantial business
conditions stated therein to fund the loan have been satisfied), from a lender
unrelated to HMG, with terms comparable to market rate and in an amount (as
determined by the General Partner) sufficient to develop the Project without the
expectation of needing additional capital from the Partners beyond that
specified in this Section 8.2(a) and 8.2(b), the General Partner and HMG shall
contribute in cash the additional amount of $1,305,927 to the Partnership,
Grovpar shall contribute in cash the additional amount of $404,362 to the
Partnership, and Sunbelt shall contribute in cash the additional amount of
$2,000,000 to the Partnership.
(b) After the initial capital contributions called for in Section 8.1, and
the additional capital contributions called for in Section 8.2(a), each Partner,
upon receipt of 30-day prior written notice from the General Partner, shall be
required to contribute capital to the Partnership in an amount equal to the
product of its Sharing Ratio multiplied by an amount which shall not exceed
$2,800,000.
(c) After the capital contributions called for in Sections 8.1, 8.2(a), and
8.2(b), no Partner shall be required to contribute capital to the Partnership.
(d) The General Partner shall notify the Partners of the need for
additional capital and specify in such notice the amount of funds required, each
Partner's share thereof in accordance with the terms of this Agreement, the
paragraph of this section under which the capital is requested, and the purpose
therefor.
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Section 8.3 Failure to Make Contributions.
(a) If any Partner shall fail to timely contribute all or any portion of
any capital contribution required under Sections 8.1 or 8.2(a), then the
Partnership may, upon notice to such Partner (the "Delinquent Partner"),
exercise any one or more of the following rights or remedies:
(1) permit such of the Partners as elect to do so, in proportion to
their respective Sharing Ratios or in such other percentages as they may
agree (the "Advancing Partners," whether one or more), to advance that
portion of the capital contribution that is in default, with the following
results: (a) the sum thus advanced shall constitute a loan to the
Delinquent Partner, (b) such loan and all accrued unpaid interest thereon
shall be due upon demand, (c) the loan shall bear interest at the Default
Interest Rate from the date made until the date fully repaid, and (d) all
Partnership distributions that otherwise would be made to the Delinquent
Partner (whether before or after dissolution of the Partnership) shall be
paid to the Advancing Partners until the loan and all interest accrued
thereon is paid in full (with all such payments being applied first to
accrued and unpaid interest and then to principal); or
(2) permit Advancing Partners to advance as provided in Section
8.3(a)(1), with such advances being treated as capital contributions, which
increase Advancing Partners' Sharing Ratio and reduce the Delinquent
Partner's Sharing Ratio as provided in Section 8.4;
(b) If any Partner shall fail to timely contribute all or any portion
of any capital contribution required under 8.2(b), then the Partnership may,
upon notice to such Delinquent Partner, as its sole remedy, exercise its rights
under Section 8.3(a)(2), except that the Multiplier (defined below) shall be
1.0.
(c) If the General Partner is a Delinquent Partner, then exercise of the
remedies in Section 8.3(a) and 8.3(b) shall be determined by a Majority in
Interest. If there is more than one Advancing Partner, determinations under
Section 8.3(a)(1) or 8.3(a)(2) shall be made by Advancing Partners holding a
majority of the Sharing Ratios held by all Advancing Partners.
Section 8.4 Reduction of Sharing Ratios in Certain Circumstances. If
Advancing Partners elect to proceed under Section 8.3(a)(2), the Delinquent
Partner's Sharing Ratio shall be reduced and the Advancing Partners' Sharing
Ratios shall be increased in an amount equal to the number of percentage points
(or portions thereof obtained by (a) dividing (i) the additional capital
contribution required under Section 8.2 at the time in question by (ii) the sum
of the initial capital contribution made by the Delinquent Partner under Section
8.1, all previous capital contributions made by the Delinquent Partner under
Section 8.2 and the additional capital contribution required of the Delinquent
Partner under Section 8.2 at the time in question, (b) multiplying the quotient
in (a) by 1.1 (the
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"Multiplier"), and (c) multiplying the product in (b) by the Delinquent
Partner's Sharing Ratio at that time. The following examples illustrate the
foregoing (the amounts of the additional capital in the examples are unrelated
to the additional capital that is called for in this Article 8):
Example 1:
Assume the Partnership requires an additional $4,000,000 in capital. If the
Delinquent Partner's Sharing Ratio is 10%, its initial capital contribution was
$600,000, no further capital contributions had been made, and the Delinquent
Partner does not advance its share of additional capital to the Partnership
(which would be 10~o of the $4,000,000 additional capital required by the
Partnership), and Advancing Partners elect to proceed under Section 8.3(a)(2),
then Delinquent Partner's Sharing Ratio would be reduced and the Advancing
Partners' Sharing Ratio would be increased by 4.4 percentage points, calculated
as follows:
(a) additional capital - (initial capital + additional capital) =
$400,000/($600,000+ $400,000) = $400,000/$1,000,000 = .40
(b) .40 x 1.1 = .44
(c) .44 x 10% = 4.4 percentage points
The resulting Sharing Ratios for the Partners would be as follows: General
Partner -- 1~G; Advancing Partners -- 93.4%; and Delinquent Partner -- 5.6%.
Example 2:
Assuming the scenario in Example 1, Partnership now requires a second
additional capital contribution totaling $10,000,000. Delinquent Partner, whose
current Sharing Ratio is 5.6%, would be required to make an additional capital
contribution under Section 8.2 of $560,000 (5.6% of $10,000,000). If Delinquent
Partner does not advance its share of the second additional capital contribution
to the Partnership, and the Advancing Partners elect to proceed under Section
8.3(a)(2), then Delinquent Partner's Sharing Ratio would be reduced and the
Advancing Partners' Sharing Ratio would be increased by 2.97 percentage points,
calculated as follows:
(a) 2nd addl. capital . (initial capital + addl. cap. made + 2nd addl.
cap.) = $560,000/($600,000 + 0 + $560,000 ) = $560,000/$1,160,000 =
.48
(b) 48 x 1.1 = .53
(c) .53 x 5.6% = 2.97 percentage points
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The resulting Sharing Ratios for the Partners would be as follows: General
Partner -- 1% Advancing Partners -- 96.37%; and Delinquent Partner -- 2.63%.
Example 3:
Assume in Example 1 that Delinquent Partner made the first required
additional capital contribution of $400,000, therefore, its Sharing Ratio
remained at 10 %. Now assume that the Partnership requires a second additional
capital contribution of $10,000,000; Delinquent Partner's share of the second
additional capital contribution would be $1,000,000.00 (10% of $10,000,000). If
Delinquent Partner does not advance its share of the second additional capital
contribution to the Partnership, and the Advancing Partners elect to proceed
under Section 8.3(a)(2), then Delinquent Partner's Sharing Ratio would be
reduced and the Advancing Partners' Sharing Ratio would be increased by 5.5
percentage points, calculated as follows:
(a) additional capital - (initial capital + addl. cap. made + 2nd addl.
cap.) = $1,000,000/($600,000 + $400,000 + $1,000,000) =
$1,000,000/$2,000,000 = .50
(b) .50 x 1.1 = .55
(c) .55 x 10% = 5.5 percentage points
The resulting Sharing Ratios would be as follows: General Partner -- 1%;
Advancing Partners -- 94.5%; and Delinquent Partner -- 4.5%.
Section 8.5 Return of Contributions. No Partner shall be entitled to the
return of any part of its capital contributions, to be paid interest in respect
of either its capital account or any capital contribution made by it or paid for
the fair market value of its Ownership Interest. Unrepaid capital contributions
shall not be a liability of the Partnership or of any Partner. No Partner shall
be required to contribute or lend any cash or property to the Partnership to
enable the Partnership to return any Partner's capital contributions to the
Partnership.
ARTICLE 9
FINANCING
Section 9.1 Financing. The Partners intend, to the maximum extent
reasonably possible, to finance the ownership and development of the Project by
borrowing funds. To this end, the General Partner shall make reasonable efforts
to arrange a loan (the "Construction Loan") the proceeds of which shall be used
to defray the cost of constructing the Improvements and otherwise developing the
Project. The General Partner shall also make reasonable efforts to obtain on a
long term basis a "Permanent Loan" to be funded to finance ownership of the
Project after development is completed, or if later, at the maturity of the
Construction Loan, the proceeds of which shall be used, in part, to pay the
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Construction Loan. No Partner shall be individually subject to recourse
financing without the express written consent of such Partner.
Section 9.2 Partner Loans. If the Partnership shall not have sufficient
cash to pay its obligations, any Partner may (but shall not be obligated to)
advance such funds for or on behalf of the Partnership. In the event that the
Partnership requires funds not in excess of $1,000,000 the General Partner shall
have no obligation to notify the other Partners, and the General Partner may
advance such funds to the Partnership itself. In the case that the Partnership
requires funds in excess of $1,000,000, or in any case where the General Partner
determines to notify the Partners of a need for funds, the Partners shall have a
right to advance such funds to the Partnership pro rata in accordance with their
Sharing Ratios. Each such advance shall constitute a loan from such Partner to
the Partnership and shall bear interest from the date of the advance until
repaid at the per annum rate equal to 2% over the Prime Interest Rate, provided
that the per annum rate of interest shall not exceed the greater of (i) the per
annum rate of interest on the Permanent Loan, (ii) 13%, or (iii) the maximum
lawful rate. Loans made pursuant to this Section 9.2 shall not constitute
capital contributions, and all such loans shall be repaid out of the next
available funds of the Partnership before distribution of funds to the Partners.
ARTICLE 10
DISTRIBUTIONS
Section 10.1 Distributions in General. From time to time, but not less
often than quarterly, the General Partner shall determine the amount, if any, by
which the Partnership funds then on hand exceed the reasonable working capital
needs of the Partnership, including reasonable reserves for future Partnership
obligations or reductions of indebtedness. Any excess funds shall be distributed
to the Partners in accordance with the provisions of this Article 10.
Section 10.2 Distribution of Net Cash Flow.
(a) The Net Cash Flow during any particular calendar year shall, subject to
Sections 8.3 and 10.4, be distributed to the Partners as follows: (i) first, to
those Partners making contributions pursuant to Sections 8.1 and 8.2(a) in the
aggregate, proportionately in return thereof, giving effect to all prior
distributions pursuant to this Section 10.2(a)(i) and Section 10.3(a)(i), and
(ii) thereafter, to those Partners making contributions pursuant to Section
8.2(b) proportionately in return thereof, giving effect to all prior
distributions pursuant to this Section 10.2(a)(ii) and Section 10.3(a)(ii).
(b) After making the distributions called for in Section 10.2(a), subject
to Sections 8.3, 10.2(c), and 10.4, the Net Cash Flow during any particular
calendar year shall be distributed to the Partners in accordance with their
Sharing Ratios.
(c) After making the distributions called for in Section 10.2(a), subject
to Sections 8.3 and 10.4, if in any calendar year the sum of (i) Net Cash Flow
and (ii) regularly
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scheduled principal and interest paid on Partnership loans (other than under a
refinancing of such loans) is greater than or equal to 13% of Gross Costs, then
the General Partner shall be entitled to receive 1%, Grovpar shall be entitled
to receive 12.5%, HMG shall be entitled to receive 62.2%, and Sunbelt shall be
entitled to receive 24.3% of Net Cash Flow distributed for such calendar year.
Section 10.3 Distribution of Capital Proceeds. Capital Proceeds of the
Partnership shall, subject to Sections 8.3 and 10.4, be distributed to the
Partners in accordance with this Section 10.3.
(a) Capital Proceeds shall be distributed as follows: (i) first to those
Partners making contributions pursuant to Sections 8.1 and 8.2(a) in the
aggregate, proportionately in return thereof, giving effect to all prior
distributions pursuant to this Section 10.3(a)(i) and Section 10.2(a)(i), and
(ii) thereafter, to those Partners making contributions pursuant to Section
8.2(b) proportionately in return thereof, giving effect to all prior
distributions pursuant to this Section 10.3(a)(ii) and Section 10.2(a)(ii).
(b) After making the distributions called for in Section 10.3(a), Capital
Proceeds in an amount equal to the positive difference between (i) 120% of the
Gross Costs, and (ii) the amounts distributed pursuant to Sections 10.3(a) and
10.2(a) shall be distributed to the Partners in accordance with their Sharing
Ratios; and
(c) Thereafter, any excess Capital Proceeds shall be distributed as
follows: to the General Partner - 1%; to Grovpar - 12.5%; to HMG - 62.2%; and to
Sunbelt - 24.3~c.
Section 10.4 Distributions to Delinquent Partners. If Grovpar is a
Delinquent Partner, then notwithstanding anything herein to the contrary,
Sections 10.2(c) and 10.3(c) shall be disregarded and all distributions
thereafter of Net Cash Flow under Section 10.2 and Capital Proceeds under
Section 10.3 shall be distributed to the Partners in accordance with their
Sharing Ratios.
Section 10.5 Payment of Distributions to Grovpar. So long as the Grovpar
Note remains outstanding, all or a portion of the amounts distributable to
Grovpar pursuant hereto shall be applied to payment of the Grovpar Note in
accordance with its terms, and the General Partner is hereby instructed to make
such payments directly to HMG.
ARTICLE 11
TAX MATTERS AND ALLOCATIONS
Section 11.1 Allocations.
(a) General. Except as may be required by section 704(c) of the Code and
Treas. Reg. 1.704-1(b)(2)(iv)(f)(4), and subject to the provisions of Section
12.3, all items of income, gain, loss, deduction, and credit of the Partnership
shall be allocated among the Partners in accordance with their respective
Sharing Ratios.
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(b) Compliance with Section 704(b). The following special allocations will,
except as otherwise provided, be made in the following order:
(1) Minimum Gain Chargeback. Notwithstanding any other provision of
this Agreement, if there is a net decrease in "Partnership Minimum Gain" as
defined in Treasury Regulation Section 1.704-2(d) or in any "Partner
Minimum Gain" as defined in Treasury Regulation Section 1.704-2(i) during
any Partnership fiscal year or other period, prior to any other allocation
pursuant hereto, the Partners shall be specially allocated items of
Partnership income and gain for that year (and, if necessary, subsequent
years) in an amount and manner required by Treasury Regulation Sections
1.704-2(f) or 1.704-2(i)(4). The items to be so allocated shall be
determined in accordance with Treasury Regulation Section 1.704-2.
(2) Qualified Income Offset. Any Partner who unexpectedly receives an
adjustment, allocation or distribution described in Treasury Regulation
Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), which causes or increases an
Adjusted Capital Account Deficit of a Partner, shall be allocated items of
Partnership income and gain in an amount and manner sufficient to
eliminate, to the extent required by the Treasury Regulation, the Adjusted
Capital Account Deficit of the Partner as quickly as possible.
(3) Gross Income Allocation. Each Partner who has a deficit Capital
Account at the end of any Partnership taxable year that is in excess of the
amount the Partner is obligated to restore, including any amount that he is
deemed to be obligated to restore under Treasury Regulations Section
1.704-2(g)(1) and Section 1.704-2(i)(5), will be specially allocated items
of Partnership income and gain in the amount of the excess as quickly as
possible.
(4) Capital Proceeds Allocation. For any tax year in which Capital
Proceeds are to be distributed in accordance with Section 10.3(c), Grovpar
shall be allocated items of Partnership income and gain in an amount and
manner sufficient to cause Grovpar's Capital Account balance to not be less
than Grovpar's share of Capital Proceeds distributable under Section
10.3(c).
(5) Nonrecourse Deductions. "Nonrecourse Deductions" as defined in
Treasury Regulation Section 1.704-2(b) for any fiscal year or other period
will be allocated among the Partners pro rata in proportion to their
respective Sharing Ratios.
(6) Partner Nonrecourse Deductions. Any "Partner Nonrecourse
Deductions" as defined in Treasury Regulation Section 1.704-2(i) for any
fiscal year or other period will be allocated to the Partner who bears the
economic risk of loss with respect to the "Partner Nonrecourse Debt" (as
described in Treasury Regulation Section 1.704-2(b)(4)) to which such
Partner Nonrecourse Deductions are attributable in accordance with Treasury
Regulation Section 1.704-2(i).
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(c) Curative Allocations. The allocations set forth in Section 11.1(b) (the
"Regulatory Allocations") are intended to comply with certain requirements of
Treasury Regulations Sections 1.704-1(b) and 1.704-2. The Regulatory Allocations
may effect results which would not be consistent with the manner in which the
Partners intend to divide Partnership distributions. Accordingly, the General
Partner is authorized to divide other allocations of income, gain, loss,
deduction and credit among the Partners so as to prevent the Regulatory
Allocations from distorting the manner in which the Partnership distributions
would be divided among the Partners under Section 12.3. In general, the
reallocation will be accomplished by specially allocating other items of income,
gain, loss and deduction, to the extent they exist, among the Partners so that
the net amount of the Regulatory Allocations and the special allocations to each
Partner is zero. The General Partner will have discretion to accomplish this
result in any reasonable manner that is consistent with Section 704 of the Code
and the related Treasury Regulations.
(d) Tax Allocations - Code Section 704(c). In accordance with Code Section
704(c) and the related Treasury Regulations, income, gain, loss and deduction
with respect to any property contributed to the capital of the Partnership will
be allocated among the Partners, solely for tax purposes, so as to take account
of any variation between the adjusted basis to the Partnership of the property
for federal income tax purposes and the Book Basis of the property, or the
initial Book Basis of such property to the Partnership if such property was
contributed to the Partnership. Any elections or other decisions relating to
allocations under this Section 11.1(d) will be made in any manner that the
General Partner determines is consistent with Section 704(c) of the Code and
reasonably reflects the purpose and intention of this Agreement. Allocations
under this Section 11.1(d) are solely for purposes of federal, state and local
taxes and will not affect, or in any way be taken into account in computing, any
Partner's Capital Account or share of distributions under any provision of this
Agreement.
(e) Partner Acknowledgment. The Partners agree to be bound by the
provisions of this Section 11.1 in reporting their shares of Partnership income
and loss for income tax purposes.
Section 11.2 Capital Accounts.
(a) Establishment and Maintenance. A capital account shall be established
and maintained for each Partner. Each Partner's capital account shall be
increased by (1) the amount of money contributed by that Partner to the
Partnership, (2) the fair market value of property contributed by that Partner
to the Partnership (net of liabilities secured by such contributed property that
the Partnership is considered to assume or take subject to under section 752 of
the Code), and (3) allocations to that Partner of Partnership income and gain
(or items thereof), including income and gain exempt from tax and income and
gain described in Treas. Reg. 1.704-1(b)(2)(iv)(g), but excluding income and
gain described in Treas. Reg. 1.704-1(b)(4)(i), and shall be decreased by (4)
the amount of money distributed to that Partner by the Partnership, (5) the fair
market value of property distributed to that Partner by the Partnership (net of
liabilities secured by such distributed property that such
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Partner is considered to assume or take subject to under section 757 of the
Code), (6) allocations to that Partner of expenditures of the Partnership
described in section 705(a)(2)(B) of the Code, and (7) allocations of
Partnership loss and deduction (or items thereof), including loss and deduction
described in Treas. Reg. 1.704-1(b)(2)(iv)(g), but excluding items described in
clause (6) above and loss or deduction described in Treas. Reg. 1.704-1(b)(4)(i)
or 1.704-1(b)(4)(iii). The Partners' capital accounts also shall be maintained
and adjusted as permitted by the provisions of Treas. Reg. 1.704-1(b)(2)(iv)(f)
and as required by the other provisions of Treas. Reg. 1.704-1(b)(2)(iv) and
1.704-1(b)(4), including adjustments to reflect the allocations to the Partners
of depreciation, depletion, amortization, and gain or loss as computed for book
purposes rather than the allocation of the corresponding items as computed for
tax purposes, as required by Treas. Reg. 1.704-1(b)(2)(iv)(g). A Partner that
has more than one interest in the Partnership shall have a single capital
account that reflects all such interests, regardless of the class of interests
owned by such Partner and regardless of the time or manner in which such
interests were acquired. Upon the transfer of all or part of an interest in the
Partnership, the capital account of the transferor that is attributable to the
transferred interest in the Partnership shall carry over to the transferee
Partner in accordance with the provisions of Treas. Reg. 1.704-1(b)(2)(iv)(1).
(b) Modifications by General Partner. The provisions of this Section 11.2
and the other provisions of this Agreement relating to the maintenance of
Capital Accounts have been included in this Agreement to comply with section
704(b) of the Code and the Treasury Regulations promulgated thereunder and will
be interpreted and applied in a manner consistent with those provisions. Without
limiting the generality of this Section, the General Partner may modify the
manner in which the Capital Accounts are maintained under this Section 11.2 in
order to comply with those provisions, as well as upon the occurrence of events
that might otherwise cause this Agreement not to comply with those provisions;
provided, however, without the unanimous consent of all Partners, the General
Partner may not make any modification to the way Capital Accounts are maintained
if such modification would have the effect of changing the amount of
distributions to which any Partner would be entitled during the operations, or
upon the liquidation, of the Partnership.
Section 11.3 Tax Returns. The General Partner shall cause to be prepared
and filed all necessary federal and state income tax returns for the
Partnership, including making the elections described in Section 11.4. Each
Partner shall furnish to the General Partner all pertinent information in its
possession relating to Partnership operations that is necessary to enable such
income tax returns to be prepared and filed.
Section 11.4 Tax Elections. The following elections shall be made on the
appropriate returns of the Partnership:
(a) to adopt the calendar year as the Partnership's fiscal year;
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(b) to adopt the method of accounting of the Partnership as determined
pursuant to Section 7.1(b) and to keep the Partnership's books and records on
the income-tax method;
(c) if there is a distribution of Partnership property as described in
section 734 of the Code or if there is a transfer of a Partnership interest as
described in section 743 of the Code, upon written request of any Partner, to
elect, pursuant to section 754 of the Code, to adjust the basis of Partnership
properties; or
(d) to elect to amortize the organizational expenses of the Partnership
ratably over a period of 60 months as permitted by section 709(b) of the Code.
No election shall be made by the Partnership or any Partner to be excluded from
the application of the provisions of subchapter K of chapter 1 of subtitle A of
the Code or any similar provisions of applicable state laws.
Section 11.5 Tax Matters Partner. The General Partner shall be the "tax
matters partner" of the Partnership pursuant to section 6231(a)(7) of the Code.
The General Partner shall take such action as may be necessary to cause each
other Partner to become a "notice partner" within the meaning of section 6223 of
the Code. The General Partner shall inform each other Partner of all significant
matters that may come to its attention in its capacity as tax matters partner by
giving notice thereof within ten Business Days after becoming aware thereof and,
within such time, shall forward to each other Partner copies of all significant
written communications it may receive such capacity. The General Partner shall
not take any action contemplated by sections 6222 through 6232 of the Code
without the consent of a Majority in Interest. This provision is not intended to
authorize the General Partner to take any action left to the determination of an
individual Partner under sections 6222 through 6232 of the Code.
Section 11.6 Allocations on Transfer of Interests. All items of income,
gain, loss, deduction, and credit allocable to any interest in the Partnership
that may have been transferred shall be allocated between the transferor and the
transferee based upon that portion of the calendar year during which each was
recognized as owning such interest, without regard to the results of Partnership
operations during any particular portion of such calendar year and without
regard to whether cash distributions were made to the transferor or the
transferee during such calendar year; provided, however, that such allocation
shall be made in accordance with a method permissible under section 706 of the
Code and the regulations thereunder.
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ARTICLE 12
WITHDRAWAL, DISSOLUTION, LIQUIDATION. AND TERMINATION
Section 12.1 Voluntary Withdrawal. No Partner shall have the right to
voluntarily withdraw from the Partnership without the consent of the General
Partner and a Majority in Interest, and any such withdrawal without such consent
shall constitute a material default hereunder. No withdrawing Partner shall be
entitled to any distribution in respect of its Ownership Interests other than
normal distributions under Article 10 above, without the consent of all
Partners.
Section 12.2 Dissolution, Liquidation. and Termination Generally. The
Partnership shall be dissolved upon the first to occur of any of the following:
(a) The expiration of the term set forth in Section 1.4;
(b) The sale or disposition of all of the assets of the Partnership and the
receipt, in cash, of all consideration therefor;
(c) The determination of the General Partner to dissolve the Partnership
which is approved in writing by all of the Partners; and
(d) The occurrence of any event which, as a matter of law, requires that
the Partnership be dissolved.
Notwithstanding the foregoing, if the Partnership is dissolved pursuant to
Section 12.2(d) because an event of withdrawal, as defined in the Act, occurs
with respect to the General Partner, then, to the extent permitted by the Act, a
Majority in Interest may elect to reconstitute the Partnership and continue its
business without being wound up provided that a Majority in Interest designates
a new General Partner to take the place of the previous General Partner within
90 days after the Limited Partners have actual notice of the event of withdrawal
as to the previous General Partner. In such event the Ownership Interest of the
previous General Partner shall be converted automatically to the interest of a
non-voting Limited Partner hereunder having the same Sharing Ratio and same
obligations as that previously attributable to the General Partner's interest as
a general partner, but such Partner shall have no right to vote on any
Partnership matter, such conversion shall not cure any default hereunder, and a
Majority in Interest may elect to forfeit to the Partnership the converted
limited partnership interest of the previous General Partner, whereupon such
interest will be allocated among the Partners in accordance with their
respective Sharing Ratios. The interest attributable to any new General Partner
admitted to the Partnership pursuant to this provision shall be taken ratably
from all Limited Partners and shall afford such new General Partner a Sharing
Ratio of one percent (1%) in all Partnership items unless the Partners otherwise
then agree.
Section 12.3 Liquidation and Termination. Upon dissolution of the
Partnership, unless it is reconstituted and continued as provided above, the
General Partner shall act as
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liquidator or may appoint one or more other Persons as liquidator; provided,
however, that if the Partnership shall be dissolved because of an event of
withdrawal with respect to the General Partner, the liquidator shall be one or
more Persons selected in writing by a Majority in Interest. The liquidator shall
proceed diligently to wind up the affairs of the Partnership and make final
distributions as provided herein. The costs of liquidation shall be borne as a
Partnership expense. Until final distribution, the liquidator shall continue to
operate the Partnership properties with all of the power and authority of the
General Partner hereunder. The steps to be accomplished by the liquidator are as
follows:
(a) As promptly as possible after dissolution and again after final
liquidation, the liquidator shall cause a proper accounting to be made by a
recognized firm of certified public accountants of the Partnership's assets,
liabilities, and operations through the last day of the calendar month in which
the dissolution shall occur or the final liquidation shall be completed, as
applicable;
(b) The liquidator shall pay all of the debts and liabilities of the
Partnership or otherwise make adequate provision therefor (including, without
limitation, the establishment of a cash escrow fund for contingent liabilities
in such amount and for such term as the liquidator may reasonably determine);
and
(c) All remaining assets of the Partnership shall be distributed to the
Partners as follows:
(1) the liquidator may sell any or all Partnership property, and any
resulting gain or loss from each sale shall be computed and allocated to
the capital accounts of the Partners;
(2) with respect to all Partnership property that has not been sold,
the fair market value of such property shall be determined and the capital
accounts of the Partners shall be adjusted to reflect the manner in which
the unrealized income, gain, loss, and deduction inherent in such property
(that has not been reflected in the capital accounts previously) would be
allocated among the Partners if there were a taxable disposition of such
property for the fair market value of such property on the date of their
distribution;
(3) Capital Proceeds shall be distributed among the Partners in the
manner provided in Section 10.3, provided that if dissolution and
liquidation occurs before the Project is in fact developed, the assets of
the partnership shall be distributed to the Partners in accordance with
their respective capital account balances; in so doing the assets
contributed by a Partner shall be distributed to the extent possible in
kind. as is, to such Partner; accordingly, cash shall be distributed to a
Partner who did not contribute cash only if and to the extent that the
value of the asset contributed by such Partner is not sufficient to satisfy
such Partner's capital account and after the capital accounts of Partners
who did contribute cash have been repaid to the extent of the cash
contributed by the Partner in question.
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(4) Any remaining Partnership property shall be distributed among the
Partners in accordance with the positive Capital Account balance of the
Partners as determined after taking into account all capital account
adjustments for the taxable year of the Partnership during which the
liquidation of the partnership occurs (other than those made by reason of
this clause); such distributions shall be made by the end of the taxable
year of the Partnership during which the liquidation of the Partnership
occurs (or, if later, within 90 days after the date of such liquidation);
and
(5) If the proceeds of liquidation of the Partnership exceed the
Partners' positive balances in their respective Capital Accounts, such
excess shall be distributed to the Partners in proportion to their
respective Sharing Ratios.
Section 12.4 Cancellation of Certificate. Upon completion of the
distribution of Partnership assets as provided herein the Partnership shall be
terminated, and the liquidator shall make all filings appropriate as required by
law to evidence the same.
ARTICLE 13
TRANSFERS OF OWNERSHIP INTERESTS
Section 13.1 Restriction of Transfers. Subject to Section 13.2, no Partner
may sell, assign, or otherwise transfer, mortgage, hypothecate, grant a security
interest in, or otherwise encumber or permit or suffer any encumbrance of, all
or part of any of its interest in the Partnership without the prior written
approval of the General Partner and a Majority in Interest. Any attempt to so
transfer or encumber any such interest shall be null and void and shall have no
force and effect as to the Partnership or the other Partners and shall
constitute a material default hereunder. The provisions of this Section 13.1
shall not be deemed to grant to any Partner a security interest in another
Partner's Ownership Interest.
Section 13.2 Restrictions on Transfers as to Constituent Parties. Yaromir
Steiner ("Steiner") represents and warrants that he owns or controls directly or
indirectly more than 50% of the equity interests in Grovpar and the general
partner of Grovpar. Gilbert Weil ("GW") represents and warrants that Michelle
Weil ("MW') owns directly or indirectly more than 50% of the equity interests in
Sunbelt, and GW holds voting control of Sunbelt and manages the day-to-day
operations of Sunbelt. In this Section 13.2, Steiner and GW shall be referred to
as a "Transferring Partner" and Grovpar and Sunbelt shall be referred to as an
"Investment Entity." During the term of this Agreement, a Transferring Partner
may (i) transfer a portion of his interest (either direct or indirect) in his
Investment Entity to third parties provided that the remaining interest of the
Transferring Partner is sufficient for the Transferring Partner, acting alone,
to control any vote required of the partners, shareholders, or members, as
applicable, of his Investment Entity as a Limited Partner (including the
exercise of any approval and voting rights under this Agreement), or (ii) upon
the death or disability of a Transferring Partner, transfer his equity interest
in his Investment Entity to his wife, his lineal descendants, or to one or more
trusts, the sole beneficiaries of which are himself, his wife, or his lineal
descendants (each a "Permitted Transferee" and collectively, the "Permitted
Transferees"). For purposes of this
24
<PAGE>
Section 13.2, MW's lineal descendants shall also be Permitted Transferees.
Notwithstanding anything to the contrary in this Agreement, interests in Sunbelt
may be transferred directly or indirectly so long as any vote required of
Sunbelt as a Limited Partner in the Partnership (including any exercise of any
approval and voting rights under this Agreement) is at all times controlled by
GW, or, in the event of his death or disability, one or more Permitted
Transferees. If, at any time, a Transferring Partner's equity interest in his
Investment Entity should become vested in any person or entity other than as
allowed in (i) and (ii) above such that the Transferring Partner, or the
Permitted Transferees, if applicable, acting alone, does not control any vote
required of the partners, shareholders, or members, as applicable, of his
Investment Entity as a Limited Partner, then HMG shall have the right and option
to purchase such Investment Entity's Ownership Interest at its then current fair
market value which shall be determined as set forth in this Section 13.2. If HMG
elects to so purchase the Investment Entity's Ownership Interest, it shall
notify the Investment Entity (or the Investment Entity's representative) and the
General Partner thereof within 30 days after HMG is notified of such transfer
and the General Partner shall direct that the then fair market value of the
Investment Entity's Ownership Interest be determined by an appraiser. Such fair
market value shall be determined by the appraiser appraising the value of the
Project, deducting therefrom all debts and liabilities of the Partnership and
multiplying the value so obtained by the Investment Entity's Ownership Interest.
The purchase price to be paid for the Investment Entity's Ownership Interest
shall be such amount less any amounts owed by the Investment Entity to the
Partnership or to HMG, including without limitation, the amount of the
outstanding balance of the Grovpar Note, if applicable, and any damages HMG or
the Partnership may have against the Investment Entity by virtue of any default
under this Agreement. The closing shall occur 30 days after such value is
determined at the offices of the Partnership and the consideration shall be paid
in full in cash. The appraiser appointed by the General Partner shall be a
member of the American Institute of Real Estate Appraisers, shall have at least
five years experience in appraising projects like the Project in the Houston,
Texas area, and shall have no interest in the outcome of the determination other
than a reasonable fee for serving as an appraiser.
ARTICLE 14
MISCELLANEOUS PROVISIONS
Section 14.1 Notices. All notices provided for or permitted to be given
pursuant to this Agreement must be in writing and shall be given or served by
(a) depositing the same in the United States mail addressed to the party to be
notified, postpaid and certified with return receipt requested, (b) by
delivering such notice in person to such party, or (c) by prepaid telegram,
telex, or telecopy. All notices are to be sent to or made at the addresses set
forth on the signature pages hereto. All notices given in accordance with this
Agreement shall be effective upon receipt at the address of the addressee. By
giving written notice thereof, each Partner shall have the right from time to
time to change its address pursuant hereto. A copy of any notice given under
this Agreement to Sunbelt shall be sent to Andrew M. Shott, Esq., 2100 PNC
Center, 201 East Fifth Street, Cincinnati, Ohio 45202, telecopy number (513)
241-8259.
25
<PAGE>
Section 14.2 Governing Law. This Agreement and the obligations of the
Partners hereunder shall be interpreted, construed, and enforced in accordance
with the laws of the State of Texas, excluding any conflicts of law rule or
principle which might refer such construction to the laws of another state or
country. Each Partner submits to the jurisdiction of the state and federal
courts in the State of Texas.
Section 14.3 Entireties; Amendments. This Agreement and the exhibits
hereto, which are made a part hereof, constitute the entire agreement between
the parties hereto relative to the formation of the Partnership. No amendments
to this Agreement shall be binding upon any Partner unless set forth in a
document duly executed by such Partner.
Section 14.4 Waiver. No consent or waiver, express or implied, by any party
hereto of any breach or default by any other in the performance by the other of
its obligations hereunder shall be deemed or construed to be a consent or waiver
to or of any other breach or default in the performance by such other party of
the same or any other obligation hereunder. Failure on the part of any party
hereto to complain of any act or to declare any other party hereto in default,
irrespective of how long such failure continues, shall not constitute a waiver
of rights hereunder.
Section 14.5 Severability. If any provision of this Agreement or the
application thereof to any person or circumstances shall be invalid or
unenforceable to any extent, and such invalidity or unenforceability does not
destroy the basis of the bargain between the parties, then the remainder of this
Agreement and the application of such provisions to other persons or
circumstances shall not be affected thereby and shall be enforced to the
greatest extent permitted by law.
Section 14.6 Ownership of Property and Right of Partition. A Partner's
interest in the Partnership shall be personal property for all purposes. All
real and other property owned by the Partnership shall be owned by the
Partnership as an entity, and no Partner, individually, shall own any interest
as such therein, nor shall any Partner have a right to partition the property
owned by the Partnership. Each Partner hereby covenants and agrees not to bring
any action for partition of any property owned by the Partnership, either as a
partition in kind or a partition by sale.
Section 14.7 Captions. References. Pronouns, wherever used herein, and of
whatever gender, shall include natural persons and corporations and associations
of every kind and character, and the singular shall include the plural wherever
and as often as may be appropriate. Article and section headings are for
convenience of reference and shall not affect the construction or interpretation
of this Agreement. Whenever the terms "hereof", "hereby", "herein", or words of
similar import are used in this Agreement they shall be construed as referring
to this Agreement in its entirety rather than to a particular section or
provision, unless the context specifically indicates to the contrary. Any
reference to a particular "Article" or a "Section" shall be construed as
referring to the indicated article or section of this Agreement unless the
context indicates to the contrary.
26
<PAGE>
Section 14.8 Involvement of Partners in Certain Proceedings. Should any
Partner become involved in legal proceedings unrelated to the Partnership's
business in which the Partnership is required to provide books, records, an
accounting, or other information, then such Partner shall indemnify the
Partnership from all costs and expenses incurred in conjunction therewith.
Section 14.9 Services Performed by Affiliates. When any service or activity
to be performed on behalf of the Partnership is performed by an Affiliate of a
Partner, it is agreed that the fee payable in respect of such service or
activity shall be comparable to the fee which would be payable by the
Partnership to an unaffiliated third party of comparable standing providing the
same services.
Section 14.10 Interest. No amount charged as interest on loans hereunder
shall exceed the maximum rate from time to time allowed by applicable law.
Section 14.11 No Third-Party Beneficiaries. The right of any third party to
enforce the terms of this Agreement is expressly denied.
Executed effective as of the date above written.
GENERAL PARTNER HMG HOUSTON GROVE, INC.,
a Texas corporation
By: /s/ Maurice Wiener
---------------------------------------------
Maurice Wiener,President
Address: 4800 Sugar Grove Boulevard,Suite 380
Stafford, Texas 77477
TIN:
Fax: (713) 240-1329
27
<PAGE>
LIMITED PARTNERS: GROVPAR, LTD.,
a Texas limited partnership
By: Gerfalcon Interests, L.C., a Texas limited
liability company, its sole general partner
By: /s/ Yaromir Steiner
---------------------------------------------
Yaromir Steiner, Managing Member
Address: 2665 South Bayshore Drive, Suite 908
Miami, Florida 33133
TIN:
Fax: (305) 857-9648
HMG/COURTLAND PROPERTIES, INC.,
a Delaware corporation
By: /s/ Maurice Wiener
---------------------------------------------
Maurice Wiener, President
Address: 2701 South Bayshore Drive, Penthouse
Coconut Grove, Florida 33133
TIN:
Fax: (305) 856-7342
SUNBELT SHOPPING DEVELOPMENT, LTD.,
an Ohio limited liability company
By: /s/ Gilbert Weil
---------------------------------------------
Gilbert Weil, Manager
Address: 1009 Catawba Valley Drive
Cincinnati, Ohio 45226
TIN:
Fax: (513) 533-3708
28
<PAGE>
The undersigned execute this Agreement to acknowledge, agree to, and bind
themselves individually by the restrictions in Section 13.2.
/s/ Yaromir Steiner
---------------------------------------------
Yaromir Steiner
/s/ Gilbert Weil
---------------------------------------------
Gilbert Weil
29
<PAGE>
SCHEDULE 1
Partnership Sharing
Interest Ratio
HMG Houston Grove, Inc. General 1%
Grovpar, Ltd. Limited 10%
HMG/Courtland Properties, Inc. Limited 64%
Sunbelt Shopping Development Ltd. Limited 25%
100%
30
<PAGE>
Exhibit A
42.485 Acres
James Alston Survey A-101
Fort Bend County, Texas
All that certain 42.485 acres of land being all of unrestricted Reserve "A-1"
per the plat of Reserve A-1, A-2, and A-3 Sugar Grove Section One as recorded in
Slide 1285 B of the Map Records of Fort Bend County, Texas, all of a called
18.82 acre tract as recorded in Volume 2542, Pages 2582 - 2585 of the Fort Bend
County Deed Records and a portion of a 15.95 acre tract of which a one-half
interest was conveyed from the Ayrshire Corporation to John S. Dunn and J. F.
Corley by deed and recorded in Volume 597, Page 328 of the Deed Records of Fort
Bend County, Texas situated in the James Alston Survey Abstract No. 101, being
more particularly described by metes and bounds as follows:
BEGINNING at a found 5/8" iron rod at the southerly end of a cutback, being the
southeasterly corner of unrestricted Reserve "A-1", and the easterly corner of
unrestricted Reserve "A-3" per the plat of Reserve A-1, A-2 and A-3 Sugar Grove
Section One as recorded in Slide 1285 B of the Map Records of Fort Bend County,
Texas, said point also being in the northwest right-of-way line of U.S. Highway
59 (300 feet wide) as recorded in Volume 383, Page 472- 479 of the Fort Bend
County Deed Records;
THENCE along the common lines of said unrestricted Reserves "A-1" and "A-3" the
following courses:
North 03(degree)30'51" West, a distance of 14.14 feet to a found 5/8" iron rod
at the northerly end of said cutback;
THENCE North 48(degree)30'51" West, a distance of 31.56 feet to a found 5/8"
iron rod at a point of curve;
THENCE in a northwesterly direction along a curve to the left having a radius of
125.00 feet, an arc length of 59.76 feet and a central angle of 27(degree)23'35"
to a found 5/8" iron rod at a point of tangent;
THENCE North 75(degree)54'26" West, a distance of 19.93 feet to a found 5/8"
iron rod at a point of curve;
THENCE in a northwesterly direction along a curve to the right having a radius
of 105.00 feet, an arc length of 50.13 feet and a central angle of
27(degree)21'13" to a found 5/8" iron rod at a point of tangent;
THENCE North 48(degree)33'13" West, a distance of 143.65 feet to a found 5/8"
iron rod at the northerly end of a cutback;
THENCE South 86(degree)26'47" West, a distance of 14.14 feet to a found 5/8"
iron rod at the southerly end of said cutback;
1
<PAGE>
THENCE South 41(degree)26'47" West, a distance of 205.06 feet to a found 5/8"
iron rod at the northerly end of a cutback;
THENCE South 03(degree)33'13" East, a distance of 14.14 feet to a found 5/8"
iron rod found in the northerly right-of-way line of Sugar Grove Boulevard
(width varies) as recorded in Volume 24, Page 5 of the Fort Bend County Plat
Records at the southerly end of said cutback;
THENCE along the common lines of said Sugar Grove Boulevard and said
unrestricted Reserve "A-1" the following courses:
North 48(degree)33'13" West, a distance of 315.10 feet to a found 5/8" iron rod
at a point of curve;
THENCE in a northwesterly direction along a curve to the left having a radius of
500.00 feet, an arc length of 385.43 feet and a central angle of
44(degree)10'00" to a set 5/8" iron rod at a point of tangent from which a found
5/8" iron rod bears South 36(degree)42'24" East - 0.05 feet;
THENCE South 87(degree)16'47" West, a distance of 27.49 feet to a set 5/8" iron
rod at a point of curve from which a found 5/8" iron rod bears South
27(degree)40'47" West - 0.13 feet;
THENCE in a northwesterly direction along a curve to the right having a radius
of 25.00 feet, an arc length of 39.33 feet, and a central angle of
90(degree)08'13" to a set 5/8" iron rod at a point of tangent in the easterly
right-of-way line of Kirkwood Drive (100 feet wide) as recorded in Volume 24,
Page 5 of the Fort Bend County Plat Records from which a found 5/8" iron rod
bears South 65(degree)22'49" West - 0.32 feet;
THENCE North 02(degree)35'00" West along the common line of said Kirkwood Drive
and said unrestricted Reserve '"A-1", a distance of 306.98 feet to a set 5/8"
iron rod being the southwesterly corner of said called 18.82 acre tract from
which a found 5/8" iron rod bears South 39(degree)08'57" West - 0.20 feet;
THENCE North 02(degree)25'30" West along the common line of said Kirkwood Drive
and said called 18.82 acre tract, a distance of 601.11 feet to a set 5/8" iron
rod at the northwesterly corner of said called 18.82 acre tract also being the
southwesterly corner of said 15.95 acre tract from which a found 5/8" iron rod
bears North 33(degree)31'15" West - 0.27 feet;
THENCE North 02(degree)32'27" West along the common line of said Kirkwood Drive
and said 15.95 acre tract, a distance of 594.77 feet to a found 5/8" iron rod at
the southerly end of a cutback at the intersection of the southerly right-of-way
line of Airport Boulevard as recorded in Volume 870, Page 658 of the Fort Bend
County Deed Records (100 feet wide).
THENCE along the common lines of said Airport Boulevard and said 15.95 acre
tract the following courses:
North 49(degree)30'13" East, a distance of 12.33 feet to a found 5/8" iron rod
at the northerly end of said cutback;
THENCE in a southeasterly direction along a curve to the right having a radius
of 1950.00 feet, an arc length of 1007.28 feet, a central angle of
29(degree)35'47" to a 5/8" iron rod found at a point of tangent;
2
<PAGE>
THENCE South 48(degree)31'16" East, a distance of 653.08 feet to a 5/8" iron rod
set at a point of curve;
THENCE in a southeasterly direction along a curve to the right having a radius
of 500.00 feet, a central angle of 04(degree)11'40", an arc length of 36.60 feet
to a 5/8" iron rod found at a point of tangent;
THENCE South 44(degree)19'26" East, a distance of 100.00 feet to a 5/8" iron rod
found at a point of curve;
THENCE in a southeasterly direction along a curve to the left having a radius of
500.00 feet, a central angle of 04(degree)11'40", an arc length of 36.60 feet to
a point of tangent
THENCE South 48(degree)31'06" East, a distance of 209.75 feet to a set 5/8" iron
rod at the northerly end of a cutback in the proposed northwest right-of-way
line of U.S. Highway 59 and the northerly corner of a 0.164 of one acre parcel
of land conveyed to the State of Texas by Special Warranty Deed as recorded in
Volume 2659, Page 884 of the Official Records of Fort Bend County, Texas from
which a found 3" Texas Department of Transportation Aluminum Disk; bears North
03(degree)35'39" West - 0.15 feet;
THENCE South 03(degree)35'9" East along the common line of said 0.164 of one
acre parcel and the proposed northwest right-of-way line of said U.S. Highway
59, a distance of 28.09 feet to a found 3" Department of Transportation Aluminum
Disk at the southerly end of said cutback;
THENCE South 41(degree)28'24" West along the common line of said 0.164 of one
acre parcel and the proposed northwest right-of-way line of said U.S. Highway
59, a distance of 120.31 feet to a set 5/8" iron rod in the common line of said
15.95 and called 18.82 acre tracts being the westerly corner of said 0.164 of
one acre parcel;
THENCE South 48(degree)33'49" East along the common line of said 15.95 and
called 18.82 acre tracts, a distance of 50.37 feet to a found 5/8" iron rod in
the northwest right-of-way line of said U.S. Highway 59 being the southeasterly
corner of said 15.95 acre tract, the northeasterly corner of said called 18.82
acre tract and the southerly corner of said 0.164 of one acre parcel from which
a 4" x 4" concrete monument bears South 52(degree)58'41" East - 3.77 feet;
THENCE South 41(degree)29'32" West along the common line of said U.S. Highway 59
and said called 18.82 acre tract, a distance of 478.85 feet to a found 5/8" iron
rod at the easterly corner of unrestricted Reserve "A-2" per the plat of Reserve
A-1, A-2, and A 3 Sugar Grove Section One as recorded in Slide 1285B of the Map
Records of Fort Bend County, Texas and the southeasterly corner of said called
18.82 acre tract;
THENCE North 48(degree)30'51" West along the common line of said unrestricted
Reserve "A-2" and the southerly line of said 18.82 acre tract, a distance of
260.94 feet to a found 5/8" iron rod at the northerly corner of said
unrestricted Reserve "A-1";
THENCE along the common line of said unrestricted Reserves "A-1" and "A-2" the
following courses:
South 41(degree)29'09" West, a distance of 32.74 feet to a found 5/8" iron rod;
3
<PAGE>
THENCE North 75(degree)54'30" West, a distance of 66.58 feet to a found 5/8"
iron rod;
THENCE South 14(degree)05'30" West, a distance of 273.00 feet to a found brass
tag and tac in concrete;
THENCE South 75(degree)54'26" East, a distance of 219.00 feet to a found 5/8"
iron rod in the northwest right-of-way line of said U.S. Highway 59 being the
southerly corner of said unrestricted Reserve "A-2";
THENCE South 41(degree)29'09" West along the common line of said unrestricted
Reserve "A-1" and the northwest right-of-way line of said U.S. Highway 59, a
distance of 103.63 feet to the POINT OF BEGINNING and containing 42.485 acres of
land more or less. (All bearings are relative to the Texas Coordinate System,
South Central Zone. All distances are surface and may be converted to grid by
multiplying by a combined adjustment factor of 0.9998774).
SAVE AND EXCEPT
0.8488 ACRES
JAMES ALSTON SURVEY, A-101
HARRIS COUNTY, TEXAS
ALL that certain 0.8488 acres of land in the James Alston Survey, A-101 Harris
County, Texas being part of that certain 15.79 acres described in deed to
HMG/SUGARGROVE, INC. recorded in Volume 2664 at page 1179 of the Official
Records, Fort Bend County, Texas, said 0.8488 acres being more particularly
described as follows (all bearings are based on Texas Coordinate System , South
Central Zone Theta - 01(degree)40'35");
BEGINNING at a 3" Texas Department of Transportation aluminum disk found at the
southerly end of a 20 foot cutback, a point in the northwest line of that
certain 0.164 acres tract described in deed to the Texas Department of
Transportation recorded in Volume 2659 at Page 875 of the Official Records, Fort
Bend County, Texas;
THENCE South 41(degree)28'44" West, 120.31 feet to a 5/8 inch iron rod found in
the southwest line of said 15.79 acres tract, from which a found 3/4 inch iron
pipe bears North 48(degree)33'49" West, 391.46 feet;
THENCE North 48(degree)33'49" West, 264.90 feet to a 5/8 inch iron rod set for
corner;
THENCE North 41(degree)26'11" East, 141.60 feet to a 5/8 inch iron rod set for
corner in the southwest right-of-way line of Airport Boulevard as described in
Volume 870 at Page
658 Fort Bend County Deed Records, being a point in a curve concave to the
northeast, a radial line to said point bears South 45(degree)32'01" West, 500.00
feet;
THENCE Southeasterly 35.38 feet coincident with said right-of-way line of
Airport Boulevard, along said 500.00 foot radius curve, through a central angle
of 4(degree)03'17" to a 5/8 inch iron rod found at a point of tangency
THENCE South 48(degree)31'16" East, 209.75 feet coincident with the southwest
right-of-way line of said Airport Boulevard to a 5/8 inch iron rod found for
corner at the northerly corner of said 0.164 acres tract;
THENCE South 03(degree)35'39" East, 28.09 feet to the PLACE OF BEGINNING,
containing 0.8488 acres of land, more or less.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000311817
<NAME> HMG/COURTLAND PROPERTIES, INC.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 1,094,999
<SECURITIES> 0
<RECEIVABLES> 1,168,788
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 25,276,418
<DEPRECIATION> 3,338,753
<TOTAL-ASSETS> 28,882,072
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 1,245,635
<OTHER-SE> 14,442,473
<TOTAL-LIABILITY-AND-EQUITY> 28,882,072
<SALES> 7,343,438
<TOTAL-REVENUES> 7,343,438
<CGS> 697,967
<TOTAL-COSTS> 7,450,616
<OTHER-EXPENSES> 5,090,914
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 825,078
<INCOME-PRETAX> (3,549,163)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,549,163)
<EPS-PRIMARY> (3.04)
<EPS-DILUTED> 0
</TABLE>
