SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM 10-K
----------
(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, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _______________ TO _______________.
COMMISSION FILE NUMBER 1-8254
THACKERAY CORPORATION
---------------------
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 04-2446697
-------- ----------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
509 MADISON AVENUE, SUITE 1714, NEW YORK, NEW YORK 10022
--------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (212) 759-3695
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
- ------------------- -------------------
Common Stock, $.10 par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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 __.
[COVER PAGE 1 OF 2 PAGES]
NY2:\879608\04\$%PK04!.DOC\69555.0001
<PAGE>
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy materials or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
Aggregate market value of the voting stock (which consists solely of shares of
Common Stock) held by non-affiliates of the registrant as of March 27, 2000
computed by reference to the closing sale price of the registrant's Common Stock
on the American Stock Exchange on such date: $7,798,050.
Number of shares of the registrant's Common Stock outstanding as of March 28,
2000: 5,107,401.
DOCUMENTS INCORPORATED BY REFERENCE
1. Certain portions of the registrant's Annual Report to Stockholders for
the fiscal year ended December 31, 1999 (the "Annual Report") are
incorporated by reference into Parts I and II of this report.
2. Certain portions of the registrant's definitive Proxy Statement to be
filed pursuant to Regulation 14A of the Securities Exchange Act of 1934,
as amended, in connection with the Annual Meeting of Stockholders of the
registrant to be held on May 4, 2000 are incorporated by reference into
Part III of this report.
[COVER PAGE 2 OF 2 PAGES]
<PAGE>
PART I
Item 1. Business
GENERAL DEVELOPMENT OF BUSINESS
Thackeray Corporation ("Thackeray" or the "Company") is a
Delaware corporation which holds an investment in a real estate partnership, as
well as real estate for investment.
DESCRIPTION OF BUSINESS
Thackeray's business is the management of its real estate
investments. The Company does not presently intend to acquire additional real
estate assets. For information with respect to Thackeray's real estate, see
Notes 1 and 2 to the Consolidated Financial Statements included in the Annual
Report, which Notes are incorporated herein by reference.
On May 20, 1996, the Company and affiliates of Belz
Enterprises ("Belz") entered into an Agreement of Limited Partnership of BT
Orlando Limited Partnership. Pursuant to this agreement, the Company agreed to
contribute approximately 140 acres of its Orlando, Florida property to the
partnership which property is valued at $15,246,000 for capital account
purposes. The partnership, with an affiliate of Belz and Brennand-Paige
Industries, Inc., a subsidiary of the Company, as general partners, is in the
process of developing, constructing, and leasing an 830,000 square foot retail
and entertainment shopping center complex on the property. The Company has a 35%
general partner interest in the partnership and is entitled to certain
cumulative, noncompounded preferential distributions of 9% on its Preferred
Partnership Capital, as defined. The Company will also participate in the cash
flow, sales proceeds and refinancing proceeds from the operation, financing or
disposition of such project. The partnership agreement also provides for excess
cash flow to first be used to reimburse the partners for certain preconstruction
expenses including real estate taxes incurred by the Company. The agreement also
contains certain buy-sell provisions among the partners.
In addition, on May 20, 1996, the Company and Belz entered
into a binding letter agreement regarding the development of the remaining
approximately 78 acres of the Company's Orlando, Florida property, which
property will be valued at $8,487,000 for capital account purposes. Pursuant to
this letter agreement, the parties agree to form a new partnership to develop
22.5 acres of such property as commercial property and 55.5 acres thereof as
multi-family residential property, upon completion of the development of the 140
acres and obtaining the requisite construction financing. The Company, through a
subsidiary, and Belz, or one of its affiliates, will be 50% owners and general
partners of such partnership and the Company will be entitled to certain
preferential distributions.
3
<PAGE>
In August 1999, the partners of the BT Orlando Limited
Partnership revised the partnership agreement pursuant to which they revised the
formula for determining preferential returns due to the Company for its 140 acre
land contribution. Effective September 1999 and through March 2000, such returns
will approximate $20,000 monthly, thereafter, the returns will approximate
$45,000 monthly and will remain at that level unless and until the partnership
borrows approximately an additional $75 million, the estimated amount needed to
complete the 140 acre project, at which time the returns will approximate the
original formula amount of $110,000 monthly.
In addition, the partners have agreed that costs incurred
by the partners on behalf of and reimbursable by the partnership related to real
estate taxes and construction costs prior to the closing of construction
financing shall be treated as a capital contribution and shall be entitled to a
9% cumulative non-compounded preferred return. Previously, such costs were
presented by the Company as a receivable from the partnership. Costs incurred by
the partners on behalf of the partnership subsequent to the closing of the
construction financing are reimbursable with interest at the prime rate.
Through December 31, 1999, cumulative preferred returns to
Thackeray approximate $101,000, which have not been recognized in the
accompanying financial statements. In addition, in August 1999, the partners
revised the letter agreement regarding the remaining 78 acres of land, setting
forth certain additional time limitations regarding the establishment of a new
partnership for the development of such parcel.
In September 1999, the Company's real estate partnership
closed $40 million of construction financing and simultaneously the Company
deeded 140 acres of its Orlando, Florida acreage with an historical carrying
value of $3.471 million to the partnership. The Company also pledged its
remaining contiguous 78 acres as additional collateral to secure the
construction loan. As of December 31, 1999, the partnership has borrowed $25.6
million under the construction loan and intends to draw down the remaining loan
facility during the year 2000. Of the total loan, $22 million is due for
repayment in August 2000. The partnership will be required to refinance this
portion of the loan, as well as obtain an additional $75 million of financing,
in order to complete the 140 acre phase of the project.
Ground breaking commenced in mid-1988 and a Cinemark 20
screen theatre opened December 1999. Two additional anchor tenants are scheduled
to open in 2000.
In November 1999, the Company sold its 99 year, with 72
years remaining, Dade County, Florida leasehold property to its lessee for
approximately $784,000. The carrying value of the leasehold property was
$425,000, and the revenue from such property represented all of the Company's
rental income in 1997, 1998 and 1999.
Indebtedness
The Company has no outstanding borrowings.
4
<PAGE>
General
As of December 31, 1999, the Company had two employees.
Item 2. Properties
For additional information with respect to the Company's
investments in real estate and to its lease obligations, see Notes 1, 2 and 5 to
the Consolidated Financial Statements included in the Annual Report, which Notes
are incorporated herein by reference.
Thackeray's executive offices are located at 509 Madison
Avenue, New York, New York 10022. Future minimum rental in effect at December
31, 1999 are $31,500 for each of the years 2000, 2001, 2002 and are $2,625 in
2003.
Item 3. Legal Proceedings
There are no legal proceedings currently pending against
the Company or its subsidiaries.
Item 4. Submission of Matters to a Vote of Stockholders
During the quarter ended December 31, 1999, no matters were
submitted to a vote of stockholders through the solicitation of proxies or
otherwise.
PART II
Item 5. Market for Registrant's Common Stock and Related Stockholder Matters
Reference is made to the information set forth in the
section entitled "Market for Thackeray's Common Stock and Related Stockholder
Matters" in the Annual Report, which section is incorporated herein by
reference. Thackeray transferred the trading of its common stock to the American
Stock Exchange from the New York Stock Exchange effective April 20, 1998.
Item 6. Selected Financial Data
Reference is made to the information set forth in the
section entitled "Selected Financial Data" in the Annual Report, which section
is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Reference is made to the information set forth in the
section entitled "Management's Discussion and Analysis of Financial Condition
and Results of Operations" in the Annual Report, which section is incorporated
herein by reference.
5
<PAGE>
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Not Applicable.
Item 8. Financial Statements and Supplementary Data
Reference is made to the information set forth in the
following sections of the Annual Report, which sections are incorporated herein
by reference:
1. Report of Independent Public Accountants.
2. Consolidated Balance Sheets -- December 31, 1999 and
1998.
3. Consolidated Statements of Operations for the years
ended December 31, 1999, 1998 and 1997.
4. Consolidated Statements of Cash Flows for the years
ended December 31, 1999, 1998 and 1997.
5. Notes to Consolidated Financial Statements -- December
31, 1999, 1998 and 1997.
Item 9. Change in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not Applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant
Reference is made to the information to be set forth in the
section entitled "Election of Directors" in the definitive proxy statement
involving the election of directors in connection with the Annual Meeting of
Stockholders of the Company to be held on May 4, 2000 (the "Proxy Statement"),
which section is incorporated herein by reference. The Proxy Statement will be
filed with the Securities and Exchange Commission not later than 120 days after
December 31, 1999 pursuant to Regulation 14A of the Securities Exchange Act of
1934, as amended.
Item 11. Executive Compensation
Reference is made to the information to be set forth in the
section entitled "Election of Directors" in the Proxy Statement, which section
is incorporated herein by reference.
6
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management
Reference is made to the information to be set forth in the
sections entitled "Ownership of Voting Securities" and "Election of Directors -
Security Ownership of Management" in the Proxy Statement, which sections are
incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
Reference is made to the information to be set forth in the
section entitled "Election of Directors - Compensation and Interest of
Management in Certain Transactions" in the Proxy Statement, which section is
incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a)(1) and (2) - The response to this portion of Item 14 is
submitted as a separate section of this report entitled "List of Financial
Statements and Financial Statement Schedules."
(3) - Exhibits:
3(a)(i) - Certificate of Incorporation of the Company. (1)
3(a)(ii) - Certificate of Designation of $4.15 Cumulative Preferred
Stock. (2)
3(a)(iii) - Amendment to Certificate of Incorporation of the
Company. (3)
3(b) - By-Laws of the Company. (1)
10(a) - Agreement of Limited Partnership of BT Orlando Limited
Partnership, dated May 20, 1996, among BEF, Inc.,
Brennand-Paige Industries, Inc., BT Partnership and EST
Orlando, Ltd. (4)
10(b)- Number 2 Partnership Letter Agreement, dated May 20,
1996, between the Company and Belz Investco L.P. (4)
11 - Statement re Computation of Per Share Data.
13 - The Company's 1999 Annual Report to Stockholders.
21 - Subsidiaries of the Company.
27 - Financial Data Schedule.
7
<PAGE>
99 - Financial Statements of BT Orlando Limited Partnership
as of December 31, 1999 and 1998.
--------------------
(1) Incorporated by reference to the Company's Registration
Statement on Form S-14 (SEC File No. 2-73435).
(2) Incorporated by reference to the Company's Registration
Statement on Form S-11 (SEC File No. 2-84299).
(3) Incorporated by reference to the Company's Annual
Report on Form 10-K for the year ended December 31, 1999.
(4) Incorporated by reference to the Company's Proxy
Statement, dated August 5, 1996.
(b) - During the quarter ended December 31, 1999, the
Company did not file any reports on Form 8-K.
8
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
Date: March 29, 2000
THACKERAY CORPORATION
(Registrant)
By: /s/ Martin J. Rabinowitz
-----------------------------------
Name: Martin J. Rabinowitz
Title: President
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Martin J. Rabinowitz Chairman of the Board, President and March 29, 2000
- ---------------------------------- Director (Principal Executive Officer)
Martin J. Rabinowitz
/s/ Jules Ross Vice President, Finance, Treasurer, March 29, 2000
- ---------------------------------- Secretary and Director (Principal
Jules Ross Financial and Accounting Officer)
/s/ Ronald D. Rothberg Director March 29, 2000
- ----------------------------------
Ronald D. Rothberg
/s/ Moses Rothman Director March 29, 2000
- ----------------------------------
Moses Rothman
</TABLE>
9
<PAGE>
ANNUAL REPORT ON FORM 10-K
ITEM 14(a)(1) and (2)
LIST OF FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
YEAR ENDED DECEMBER 31, 1999
THACKERAY CORPORATION
NEW YORK, NEW YORK
10
<PAGE>
Form 10-K -- Items 14(a)(1) and (2)
THACKERAY CORPORATION
LIST OF FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements of Thackeray Corporation,
included in the Annual Report to Stockholders for the year ended December 31,
1999, are incorporated by reference in Item 8 of this report.
1. Report of Independent Public Accountants.
2. Consolidated Balance Sheets -- December 31, 1999 and
1998.
3. Consolidated Statements of Operations for the years
ended December 31, 1999, 1998 and 1997.
4. Consolidated Statements of Cash Flows for the years
ended December 31, 1999, 1998 and 1997.
5. Notes to Consolidated Financial Statements -- December
31, 1999, 1998 and 1997.
The following financial statement schedules of Thackeray Corporation are filed
herewith:
Report of Independent Public Accountants on Financial Statement Schedules
Schedule III - Real Estate and Accumulated Depreciation
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable and therefore have been omitted.
11
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULES
To the Board of Directors and Stockholders of Thackeray Corporation:
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements included in Thackeray Corporation's 1999
Annual Report to Stockholders incorporated by reference in this Form 10-K, and
have issued our report thereon dated March 29, 2000. Our audit was made for the
purpose of forming an opinion on those statements taken as a whole. The
schedules listed in the List of Financial Statements and Financial Statement
Schedules are the responsibility of the Company's management and are presented
for purposes of complying with the Securities and Exchange Commission's rules
and are not part of the basic consolidated financial statements. These schedules
have been subjected to the auditing procedures applied in the audit of the basic
consolidated financial statements and, in our opinion, fairly state in all
material respects the financial data required to be set forth therein in
relation to the basic consolidated financial statements taken as a whole.
Arthur Andersen LLP
New York, New York
March 29, 2000
12
<PAGE>
Schedule III
Thackeray Corporation and Subsidiaries
Real Estate and Accumulated Depreciation
For the years ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
Gross
amount
Initial Cost carried Life on which
cost capitalized at which depreciation in
to the subsequent to at close Accumulated Date of Date latest income
Description Encumbrances Company acquisition of period depreciation construction acquired statement is computed
- ----------- ------------ ------- ----------- --------- ------------ ------------ -------- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
78 Acres of
unimproved land,
Orlando, Florida None $1,860,000 $ 0 $1,860,000 $0 N/A 1981 N/A
========== ==========
1999 1998 1997
---- ---- ----
Balance at
Beginning of
period $5,756,000 $5,756,000 $5,756,000
Cost of real
estate deeded
to real estate
partnership 3,471,000 0 0
Cost of real
estate sold 425,000 0 0
---------- ---------- ----------
Balance at
End of period $1,860,000 $5,756,000 $5,756,000
========== ========== ==========
Federal tax basis is the same as book basis.
</TABLE>
13
<PAGE>
EXHIBIT INDEX
TO
THACKERAY CORPORATION
ANNUAL REPORT ON FORM 10-K
FOR FISCAL YEAR ENDED DECEMBER 31, 1999
Exhibit No. Description of Document
- ----------- -----------------------
3(a)(i) -- Certificate of Incorporation of the Company. (1)
3(a)(ii) -- Certificate of Designation of $4.15 Cumulative Preferred Stock.
(2)
3(a)(iii) -- Amendment to Certificate of Incorporation of the Company. (3)
3(b) -- By-laws of the Company. (1)
10(a) -- Agreement of Limited Partnership of BT Orlando Limited
Partnership, dated May 20, 1996, among BEF, Inc., Brennand-Paige
Industries, Inc., BT Partnership and EST Orlando, Ltd. (4)
10(b) -- Number 2 Partnership Letter Agreement, dated May 20, 1996,
between the Company and Belz Investco L.P. (4)
11 -- Statement re Computation of Per Share Data.*
13 -- The Company's 1999 Annual Report to Stockholders.*
21 -- Subsidiaries of the Company.*
27 -- Financial Data Schedule.*
99 -- Financial Statements of BT Orlando Limited Partnership as of
December 31, 1999 and 1998.*
- ------------------------------------
* Filed herewith
(1) Incorporated by reference to the Company's Registration
Statement on Form S-14 (SEC File No. 2-73435).
(2) Incorporated by reference to the Company's Registration
Statement on Form S-11 (SEC File No. 2-84299).
<PAGE>
(3) Incorporated by reference to the Company's Annual Report on
Form 10-K for the year ended December 31, 1999.
(4) Incorporated by reference to the Company's Proxy Statement,
dated August 5, 1996.
EXHIBIT 11
THACKERAY CORPORATION
STATEMENT RE COMPUTATION OF PER SHARE DATA
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
BASIC AND DILUTED
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Weighted average shares outstanding during the year 5,107,401 5,107,401 5,107,401
Net income (loss) attributable to common stock $89,000 ($187,000) $751,000
====== ======= =======
Net income (loss) per share $.02 ($.04) $.15
==== ====== ====
</TABLE>
EXHIBIT 13
<PAGE>
THACKERAY CORPORATION
ANNUAL REPORT
1999
<PAGE>
THE COMPANY
Thackeray Corporation is a Delaware corporation which holds an investment
in a real estate partnership, as well as real estate for investment.
2
<PAGE>
THACKERAY CORPORATION
DEAR STOCKHOLDER:
Thackeray's focus is now centered on the Joint Venture (JV) it entered into
in 1996 with Belz Enterprises to develop the Company's 218 acre Orlando, Florida
tract. Development and construction of the initial phase of the JV -- an 830,000
square foot retail/entertainment center residing on 140 acres of the Orlando
property -- commenced in 1998, and the first anchor tenant, a Cinemark 20 screen
movie theatre opened in late 1999. Sporting goods retailer, Bass Pro, is
expected to open its 142,000 sq. ft. facility by June 2000 and a theme
restaurant opens later in the year.
First stage constructing financing of $40 million was taken down in 1999;
an additional $75 million required to complete the 140 acre phase of the JV is
expected to be funded in the fall of 2000 along with the refinancing of $22
million of the original construction financing.
We are making good progress in leasing the balance of the center, including
interior space allocated to small stores.
In 1999 Thackeray sold its Dade County, Florida leasehold property to its
lessee for approximately $784,000.
Thackeray ended 1999 with $5.2 million in cash and cash equivalents. We
believe such balances will be sufficient to fund the Company's cash requirements
in the foreseeable future.
Very truly yours,
[/s/ Martin J. Rabinowtiz]
MARTIN J. RABINOWITZ
Chairman of the Board
March 24, 2000
New York, New York
3
<PAGE>
SELECTED FINANCIAL DATA
FIVE YEAR SUMMARY
The following tabulation presents selected financial data for Thackeray for
each of the five years in the period ended December 31, 1999 (amounts stated in
thousands except for per share data):
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Real estate revenues................... $ 837 $ 64 $ 64 $ 2,333 $ 80
Income (loss) from continuing
operations........................... 89 (187) 751 594 (719)
Income (loss) from discontinued
operations, net...................... -- -- -- -- (1,216)
Net income (loss)...................... 89 (187) 751 594 (1,935)
Net income (loss) per share............ .02 (.04) .15 .12 (.38)
Total assets........................... 11,433 11,345 11,564 10,884 10,203
Real estate assets..................... 6,164 6,569 6,337 6,098 7,121
Stockholders' equity................... 11,001 10,912 11,099 10,348 9,754
</TABLE>
No dividends were declared on Thackeray's common stock during the period
covered by this tabulation.
QUARTERLY FINANCIAL DATA: (UNAUDITED)
Financial data for interim periods were as follows (amounts stated in
thousands except for per share data):
<TABLE>
<CAPTION>
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- ------- ------------ -----------
<S> <C> <C> <C> <C>
1999
Real estate revenues...................... $ 16 $ 16 $ 16 $ 789
Income from real estate operations........ 16 16 16 334
Net income (loss)......................... (57) (94) (47) 287
Net income (loss) per share............... (.01) (.02) (.01) .06
1998
Real estate revenues...................... $ 16 $ 16 $ 16 $ 16
Income from real estate operations........ 16 16 16 16
Net loss.................................. (23) (111) (44) (9)
Net loss per share........................ .00 (.02) (.01) (.01)
</TABLE>
4
<PAGE>
OPERATING REVIEW
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Company believes that its current cash balance will be sufficient to
fund its requirements for the foreseeable future.
As more fully described in Note 2, in September 1999, the Company's real
estate partnership closed $40 million of construction financing and
simultaneously the Company deeded 140 acres of its Orlando, Florida acreage with
a basis of $3.471 million to the BT Orlando Limited Partnership. The Company
also pledged its remaining contiguous 78 acres as additional collateral to
secure the construction loan.
In November 1999, the Company sold its 99 year, with 72 years remaining,
Dade County, Florida leasehold property to its lessee for approximately
$784,000, which represents the net present value of all future rentals
discounted at 8%. The carrying value of the leasehold property was $425,000, and
the revenue from such property represents all of the Company's rental income in
1998 and 1999.
At December 31, 1999, the Company had no commitments for capital
expenditures.
RESULTS OF OPERATIONS
1999 vs. 1998
Total real estate revenues were $837,000 in 1999, which included real
estate sales of $784,000; the gain on the sale was $359,000; in 1998 real estate
revenues totaled $64,000.
During 1999, the Company reported $30,000, as its proportionate share of
operating losses incurred by the Real Estate Partnership, which commenced
operations on a limited basis in December 1999.
General and administrative expenses for 1999 were consistent with the
amounts incurred in 1998.
Interest income for 1999 was $234,000 versus $264,000 for 1998. The
decrease results from the Company's maintaining lower cash investment balances
and receiving lower yields on invested funds.
1998 vs. 1997
Real estate revenues in 1998 and 1997 were $64,000. General and
administrative expenses were $515,000 in 1998 and $429,000 in 1997. The increase
is due in part to costs aggregating $53,000 relating to the Company's listing on
the American Stock Exchange in the second quarter of 1998 and increased employee
compensation costs incurred in 1998.
Interest income was $264,000 in 1998 and $258,000 in 1997.
During 1997, the Company recorded a gain on sale of investment of $873,000.
The gain was realized upon the Company's selling its remaining investment in a
privately owned company.
IMPACT OF INFLATION
The Company anticipates minimal, if any, inflationary impact.
YEAR 2000
The impact of Year 2000 issues has not had and is not expected to have an
adverse effect on the Company's business and operations. External and internal
costs incurred relating to the modification of internal use software for the
Year 2000 did not have and are not expected to have a material adverse effect on
the Company's results of operations or financial position.
5
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE BOARD OF DIRECTORS
AND STOCKHOLDERS OF
THACKERAY CORPORATION:
We have audited the accompanying consolidated balance sheets of Thackeray
Corporation (a Delaware corporation) and subsidiaries as of December 31, 1999
and 1998, and the related consolidated statements of operations and cash flows
for each of the three years in the period ended December 31, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Thackeray Corporation and
subsidiaries as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999, in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Arthur Andersen LLP
New York, New York
March 29, 2000
6
<PAGE>
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
ASSETS:
Cash and cash equivalents................................. $ 5,155,000 $ 4,683,000
Receivables from real estate partnership (Note 2)......... -- 635,000
Investment in real estate partnership (Note 2)............ 4,304,000 178,000
Investments in real estate (Note 2)....................... 1,860,000 5,756,000
Other assets, net......................................... 114,000 93,000
------------ ------------
Total Assets................................................ $ 11,433,000 $ 11,345,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Accounts payable and accrued expenses..................... $ 31,000 $ 18,000
Accrued income and other taxes............................ 280,000 293,000
Other liabilities......................................... 121,000 122,000
------------ ------------
Total liabilities................................. 432,000 433,000
------------ ------------
Commitments...............................................
Stockholders' equity (Note 4):............................
Common stock, $.10 par value (20,000,000 shares
authorized; 5,107,401 shares issued and
outstanding.......................................... 511,000 511,000
Capital in excess of par value......................... 43,542,000 43,542,000
Accumulated deficit.................................... (33,052,000) (33,141,000)
------------ ------------
Total stockholders' equity........................ 11,001,000 10,912,000
------------ ------------
Total Liabilities and Stockholders Equity................... $ 11,433,000 $ 11,345,000
============ ============
</TABLE>
The accompanying notes are an integral part of these balance sheets.
7
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
REVENUES FROM REAL ESTATE OPERATIONS:
Rental income............................................ $ 53,000 $ 64,000 $ 64,000
Sales of real estate, net................................ 784,000 -- --
---------- ---------- ----------
Total real estate revenues....................... 837,000 64,000 64,000
---------- ---------- ----------
EXPENSES OF REAL ESTATE OPERATIONS:
Cost of property sold.................................... 425,000 -- --
Equity in net loss from real estate partnership.......... 30,000 -- --
---------- ---------- ----------
Total real estate expenses....................... 455,000 -- --
---------- ---------- ----------
Income from real estate operations....................... 382,000 64,000 64,000
General and administrative expenses...................... (527,000) (515,000) (429,000)
Interest income.......................................... 234,000 264,000 258,000
Gain on sale of investment............................... -- -- 873,000
---------- ---------- ----------
Income (loss) before income taxes........................ 89,000 (187,000) 766,000
Income taxes............................................. -- -- 15,000
---------- ---------- ----------
Net income (loss)................................ $89,000.... $ (187,000) $ 751,000
========== ========== ==========
INCOME (LOSS) PER SHARE:
Income (loss) per share.................................. $ .02 $ (.04) $ .15
========== ========== ==========
Number of shares......................................... 5,107,401 5,107,401 5,107,401
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
8
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)........................................ $ 89,000 $ (187,000) $ 751,000
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation and amortization....................... -- 3,000 4,000
Gain on sale of investment.......................... -- -- (873,000)
Gain on sale of real estate......................... (359,000) -- --
Equity in net loss from real estate partnership 30,000 -- --
Changes in assets and liabilities:
Increase in receivables from real estate
partnership...................................... -- (250,000) (258,000)
(Decrease) increase in accounts payable and accrued
liabilities...................................... (1,000) (32,000) (71,000)
Other, net.......................................... (22,000) 2,000 12,000
---------- ---------- ----------
Net cash used in operating activities............ (263,000) (464,000) (435,000)
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of investment......................... -- -- 887,000
Investment in real estate partnership.................... (49,000) (9,000) (13,000)
Proceeds from sale of real estate........................ 784,000 -- 102,000
---------- ---------- ----------
Net cash provided by investing activities........ 735,000 (9,000) 976,000
---------- ---------- ----------
(Decrease) Increase in cash and cash equivalents.... 472,000 (473,000) 541,000
Cash and cash equivalents -- beginning of year........... 4,683,000 5,156,000 4,615,000
---------- ---------- ----------
Cash and cash equivalents -- end of year................. $5,155,000 $4,683,000 $5,156,000
========== ========== ==========
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITY:
Land contributed to Real Estate Partnership $3,471,000 -- --
========== ========== ==========
Receivables contributed to Real Estate Partnership....... $ 635,000 -- --
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
9
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Thackeray
Corporation ("Thackeray" or the "Company") and its wholly owned subsidiary. All
significant intercompany transactions and balances have been eliminated.
The Company's operations are comprised exclusively of managing its real
estate investments. Accordingly, the Company prepares an unclassified balance
sheet. In addition, the accompanying consolidated statements of operations
reflect the activities of such operations.
Cash Equivalents
The Company considers investments in certificates of deposit which will
mature in three months or less, to be cash equivalents.
Long-Lived Assets
Long lived assets to be held and used are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. If such review indicates that the carrying amount of an
asset exceeds the sum of its expected future cash flows, on an undiscounted
basis, the asset's carrying amount is written down to fair value. Long-lived
assets to be disposed of are reported at the lower of carrying amount or fair
value less cost to sell.
Investment in Real Estate Partnership
The investment in the real estate partnership (see Note 2) is accounted for
on the equity method of accounting. The carrying value of the Company's
investment in its real estate partnership differs from their capital account at
the partnership level due to certain costs incurred relating to the formation of
the partnership. These differences are amortized on a straight line basis over
the estimated useful life of the real estate asset in the partnership.
Earnings Per Share
Net income (loss) applicable to common stock in each of the years 1999,
1998, and 1997 was divided by the weighted average number of shares outstanding
during the period.
Revenue Recognition
Rental income is recognized based upon the contractual terms of the lease.
Profit on sales of real estate is recognized in full when the profit is
determinable, an adequate down payment has been received, collectability of the
sales price is reasonably assured and the earnings process is substantially
complete. If the sales transaction does not meet the criteria, all profit or a
portion thereof is deferred until such criteria are met.
Accounting Estimates
The preparation of these consolidated financial statements in conformity
with generally accepted accounting principles 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.
10
<PAGE>
New Accounting Pronouncement Not Yet Adopted
During 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" which provides that all derivative instruments should be
recognized as either assets or liabilities depending on the rights and
obligations under the contract and that all derivative instruments be measured
at fair value. This pronouncement is required to be adopted by January 1, 2001.
Management has not yet quantified the impact, if any, that adoption of this
pronouncement will have on the Company's financial statements.
Reclassifications
Certain prior year amounts have been reclassified to conform with the
current year's presentation.
2. REAL ESTATE
The various classifications of real estate owned by Thackeray, all of which
is located in Florida, at December 31, 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Investments in real estate:
Undeveloped land........................................ $1,860,000 $5,331,000
Land leased to others................................... -- 425,000
---------- ----------
$1,860,000 $5,756,000
========== ==========
Investment in real estate partnership....................... $4,304,000 $ 178,000
========== ==========
Receivables from real estate partnership.................... $ -- $ 635,000
========== ==========
</TABLE>
On May 20, 1996, the Company and affiliates of Belz Enterprises ("Belz")
entered into an Agreement of Limited Partnership of BT Orlando Limited
Partnership. Pursuant to this agreement, the Company agreed to contribute
approximately 140 acres of its Orlando, Florida property to the partnership,
which property is valued at $15,246,000 for capital account purposes. The
partnership, with an affiliate of Belz and Brennand-Paige Industries, Inc., a
subsidiary of the Company, as general partners, is in the process of developing,
constructing, and leasing an 830,000 square foot retail and entertainment
shopping center complex on the property. The Company has a 35% general partner
interest in the partnership and is entitled to certain cumulative, noncompounded
preferential distributions of 9% on its Preferred Partnership Capital, as
defined. The Company will also participate in the cash flow, sales proceeds and
refinancing proceeds from the operation, financing or disposition of such
project. The partnership agreement also provides for excess cash flow to first
be used to reimburse the partners for certain preconstruction expenses including
real estate taxes incurred by the Company. The agreement also contains certain
buy-sell provisions among the partners.
In addition, on May 20, 1996, the Company and Belz entered into a binding
letter agreement regarding the development of the remaining approximately 78
acres of the Company's Orlando, Florida property, which property will be valued
at $8,487,000 for capital account purposes. Pursuant to this letter agreement,
the parties agreed to form a new partnership to develop 22.5 acres of such
property as commercial property and 55.5 acres thereof as multi-family
residential property, upon completion of the development of the 140 acres and
obtaining the requisite construction financing. The Company, through a
subsidiary, and Belz, or one of its affiliates, will be 50% owners and general
partners of such partnership and the Company will be entitled to certain
preferential distributions.
In August 1999, the partners of BT Orlando Limited Partnership revised the
partnership agreement pursuant to which they revised the formula for determining
preferential returns due to the Company for its 140 acre land contribution.
Effective September 1999 and through March 2000, such returns will approximate
$20,000 monthly; thereafter, the returns will approximate $45,000 monthly and
will remain at that level unless and until the partnership borrows approximately
an additional $75 million, the estimated
11
<PAGE>
amount needed to complete the 140 acre project, at which time the returns will
approximate the original formula amount of $110,000 monthly.
In addition, the partners have agreed that costs incurred by the partners
on behalf of and reimbursable by the partnership related to real estate taxes
and construction costs prior to the closing of construction financing shall be
treated as capital contribution and shall be entitled to a 9% cumulative
non-compounded preferred return. Previously, such costs were presented by the
Company as a receivable from the partnership. Costs incurred by the partners on
behalf of the partnership subsequent to the closing of the construction
financing are reimbursable with interest at the prime rate.
Through December 31, 1999, cumulative preferred returns to Thackeray
approximate $101,000, which have not been recognized in the accompanying
financial statements. In addition, in August 1999, the partners revised the
letter agreement regarding the remaining 78 acres of land, setting forth certain
additional time limitations regarding the establishment of a new partnership for
the development of such parcel.
In September 1999, the Company's real estate partnership closed $40 million
of construction financing and simultaneously the Company deeded 140 acres of its
Orlando, Florida acreage with an historical carrying value of $3.471 million to
the partnership. The Company also pledged its remaining contiguous 78 acres as
additional collateral to secure the construction loan. As of December 31, 1999
the partnership has borrowed $25.6 million under the construction loan and
intends to draw down the remaining loan facility during year 2000. Of the total
loan, $22 million is due for repayment in August 2000. The partnership will be
required to refinance this portion of the loan, as well as obtain an additional
$75 million of financing, in order to complete the 140 acre phase of the
project.
Ground breaking commenced in mid-1998 and a Cinemark 20 screen theatre
opened December 1999. Two additional anchor tenants are scheduled to open in
2000.
The following are the condensed financial statements (000's omitted) of BT
Orlando Limited Partnership as of December 31, 1999 and for the year ended
December 31, 1999:
BALANCE SHEET
<TABLE>
<CAPTION>
1999
----
<S> <C>
Real estate, net............................................ $ 36,132
Other assets................................................ 120
Other liabilities........................................... (2,728)
Debt........................................................ (25,575)
Payable to partners......................................... (1,749)
-------------
Partners' capital........................................... $ 6,200
=============
STATEMENT OF OPERATIONS
Rent and other income....................................... $ 34
Expenses.................................................... (120)
-------------
Net loss.................................................... $ (86)
=============
</TABLE>
In November 1999, the Company sold its 99 year, with 72 years remaining,
Dade County, Florida leasehold property to its lessee for approximately
$784,000. The carrying value of the leasehold property was $425,000, and the
revenue from such property represented all of the Company's rental income in
1997, 1998 and 1999.
3. INCOME TAXES
On a consolidated basis the Company reported taxable income for each of the
years ended December 31, 1999 and 1997. However, the Company had capital loss
carryforwards and net operating loss carryforwards in excess of the reported
taxable income and, therefore, no Federal income taxes are
12
<PAGE>
payable for the years ended December 31, 1999 and 1997. Accordingly, the 1999
and 1997 Federal income tax provisions, ($30,000 and $260,000 respectively) have
been eliminated through utilization of such loss carryforwards in the
accompanying Consolidated Statements of Operations through the reversal of the
related valuation reserve. The 1997 provision for income taxes is comprised
primarily of Federal alternative minimum income taxes.
For the year 1998 on a consolidated basis, the Company reported a taxable
loss and, therefore, no Federal income taxes were provided.
As of December 31, 1999, Thackeray had net operating loss carryforwards for
Federal income tax purposes of approximately $5,900,000, which can be carried
forward to offset future taxable income through 2014. In addition, the Company
has capital loss carryforwards of $350,000, all of which expire in 2000.
The tax effect of these net operating loss carryforwards is recorded as a
deferred tax asset. However, because no substantial amount of these net
operating loss carryforwards are expected to be realized, a valuation reserve
equal to such deferred tax asset has been established.
4. STOCKHOLDERS' EQUITY
Changes in stockholders' equity for the years ended December 31, 1999, 1998
and 1997 were as follows:
<TABLE>
<CAPTION>
Common Stock Treasury Stock
---------------------- Capital ------------------------
Number in excess of Accumulated Number
of Shares Amount Par Value Deficit of Shares Amount
--------- ------ ------------ ----------- --------- ------
<S> <C> <C> <C> <C> <C> <C>
Balance December 31, 1996............ 6,187,401 $ 619,000 $53,424,000 $(33,705,000) (1,080,000) $(9,990,000)
Net income for the year.............. -- -- -- 751,000 -- --
---------- ---------- ----------- ------------ ---------- -----------
Balance December 31, 1997............ 6,187,401 619,000 53,424,000 (32,954,000) (1,080,000) (9,990,000)
Cancellation of Treasury Shares...... (1,080,000) (108,000) (9,882,000) -- 1,080,000 9,990,000
Net loss for the year................ -- -- -- (187,000) -- --
---------- ---------- ----------- ------------ ---------- -----------
Balance December 31, 1998............ 5,107,401 511,000 43,542,000 (33,141,000) -- --
Net income for year.................. -- -- -- 89,000 -- --
---------- ---------- ----------- ------------ ---------- -----------
Balance December 31, 1999............ 5,107,401 $ 511,000 $43,542,000 $(33,052,000) -- $ --
========== ========== =========== ============ ========== ===========
</TABLE>
In March 1998, the Company cancelled the 1,080,000 shares of its common
stock held in treasury, returning them to the status of authorized and unissued
shares of the Company. Accordingly, the Company has eliminated its Treasury
Stock in the amount of $9,990,000, and charged Common Stock and Capital in
Excess of Par Value for $108,000 and $9,882,000, respectively.
5. COMMITMENTS
Thackeray leases office space through 2003. Total rent expense amounted to
$20,000 in 1999 and 1998, and $29,000 in 1997.
Future minimum rentals from the office lease, in effect at December 31,
1999, are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
- ---- ------
<S> <C>
2000...................................................... $31,500
2001...................................................... 31,500
2002...................................................... 31,500
Thereafter................................................ 2,625
</TABLE>
6. BUSINESS SEGMENTS
The operations are comprised exclusively of real estate.
7. SALE OF INVESTMENT
In August, 1997, the Company sold its remaining investment in a privately
owned company. The Company realized a gain on the sale of $873,000.
13
<PAGE>
STOCKHOLDER REFERENCE
AVAILABILITY OF FORM 10-K
Stockholders may obtain a copy of Thackeray's Annual Report on Form 10-K for
the year ended December 31, 1999, without exhibits, free of charge by writing
to the Assistant Secretary,
Thackeray Corporation,
509 Madison Avenue, Suite 1714
New York, New York 10022
REGISTRAR AND TRANSFER AGENT
Chase Mellon
450 W. 33rd Street
New York, New York 10001
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP
New York, New York
GENERAL COUNSEL
Weil, Gotshal & Manges LLP
New York, New York
MARKET FOR THACKERAY'S COMMON STOCK AND
RELATED STOCKHOLDER MATTERS
Effective April 20, 1998, the Company's common stock, which previously had
been listed on the New York Stock Exchange, became listed on the American Stock
Exchange. The following table sets forth the reported high and low sales prices
for Thackeray's common stock during the periods indicated as reported in the
record of composite transactions for New York Stock Exchange listed securities
and American Stock Exchange listed securities, as appropriate.
<TABLE>
<CAPTION>
Quarter Ended
---------------------------------------------
September December
March 31 June 30 30 31
-------- ------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
1999 High 3 3/4 3 3/4 4 3/4 4 1/8
Low 3 3/8 3 1/4 3 1/16 3 3/8
1998 High 3 15/16 3 13/16 4 1/16 3 1/2
Low 3 3 1/4 3 5/16 3 1/16
</TABLE>
As of the close of business on March 1, 2000, there were approximately 1,300
holders of record of Thackeray's common stock.
During the three years ended December 31, 1999, no dividends were paid on
Thackeray's common stock.
14
<PAGE>
DIRECTORS
MARTIN J. RABINOWITZ(1)
Managing member RFIA Holdings LLC,
a private investment company.
JULES ROSS(1)
RONALD D. ROTHBERG(2)
President, The RDR Group Inc., a private
investment company
Pomona, New York
MOSES ROTHMAN(2)
Chairman, Black Inc. A.G., a film distributor
London, England
OFFICERS
MARTIN J. RABINOWITZ
Chairman of the Board and President
JULES ROSS
Vice President, Finance, Treasurer and Secretary
EXECUTIVE OFFICE
509 Madison Avenue, Suite 1714
New York, New York 10022
(212) 759-3695
(1) Member of Executive Committee and Nominating Committee
(2) Member of Audit Committee
15
EXHIBIT 21
SUBSIDIARIES OF THACKERAY CORPORATION
NAME OF CORPORATION STATE OF INCORPORATION
- ------------------- ----------------------
Wholly-Owned by Thackeray Corporation
- -------------------------------------
Brennand-Paige Industries, Inc. Delaware
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from the
financial statements contained in the body of the accompanying Form 10-K and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 5,155,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 11,433,000
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 511,000
<OTHER-SE> 10,490,000
<TOTAL-LIABILITY-AND-EQUITY> 11,433,000
<SALES> 0
<TOTAL-REVENUES> 837,000
<CGS> 425,000
<TOTAL-COSTS> 455,000
<OTHER-EXPENSES> 527,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 89,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 89,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 89,000
<EPS-BASIC> .02
<EPS-DILUTED> .02
</TABLE>
EXHIBIT 99
BT ORLANDO LIMITED PARTNERSHIP
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999 AND 1998
TOGETHER WITH AUDITORS' REPORT
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of
BT Orlando Limited Partnership:
We have audited the accompanying balance sheets of BT Orlando Limited
Partnership, a Florida limited partnership (the "Partnership"), as of December
31, 1999 and 1998 and the related statements of operations, partners' capital
and cash flows for the year ended December 31, 1999. These financial statements
are the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of BT Orlando Limited Partnership
as of December 31, 1999 and 1998, and the results of its operations and its cash
flows for the year ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States.
Arthur Andersen LLP
Memphis, Tennessee,
March 24, 2000
<PAGE>
BT ORLANDO LIMITED PARTNERSHIP
------------------------------
BALANCE SHEETS
--------------
AS OF DECEMBER 31
-----------------
<TABLE>
<CAPTION>
ASSETS 1999 1998
---- ----
<S> <C> <C>
REAL ESTATE, NET $ 36,131,612 $ 5,189,936
CASH 12,071 -
ACCOUNTS RECEIVABLE 36,523 -
OTHER ASSETS 71,750 50,000
--------------- -------------
Total assets $36,251,956 $5,239,936
=============== =============
LIABILITIES AND PARTNERS' CAPITAL
DEBT $ 25,574,214 $ -
ACCOUNTS PAYABLE 2,728,367 -
ADVANCES PAYABLE TO PARTNERS 1,748,942 5,239,936
--------------- -------------
Total liabilities 30,051,523 5,239,936
--------------- -------------
COMMITMENTS AND CONTINGENCIES
PARTNERS' CAPITAL:
General partners 4,107,160 -
Limited partners 2,093,273 -
--------------- -------------
Total partners' capital 6,200,433 -
--------------- -------------
Total liabilities and partners' capital $36,251,956 $5,239,936
=============== =============
</TABLE>
The accompanying notes are an integral part of these balance sheets.
2
<PAGE>
BT ORLANDO LIMITED PARTNERSHIP
------------------------------
STATEMENT OF OPERATIONS
-----------------------
FOR THE YEAR ENDED DECEMBER 31, 1999
------------------------------------
REVENUES
Rental $31,611
Other 2,845
----------
Total
34,456
OPERATING EXPENSES 85,000
DEPRECIATION EXPENSE 34,968
----------
NET LOSS $(85,512)
==========
The accompanying notes are an integral part of this statement.
3
<PAGE>
BT ORLANDO LIMITED PARTNERSHIP
------------------------------
STATEMENT OF PARTNERS' CAPITAL
------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1999
------------------------------------
<TABLE>
<CAPTION>
General Partners Limited Partners
------------------------------------ ----------------------------------
Brennand-Paige BT EST
Industries, Inc. BEF, Inc. Partnership Orlando, Ltd. Total
------------------ ------------- ------------ ------------- ---------------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1998 $ - $ - $ - $ - $ -
Contributions 4,137,945 - 2,148,000 - 6,285,945
Net loss (29,929) (856) (35,299) (19,428) (85,512)
------------- --------- ------------ --------- -------------
BALANCE, December 31, 1999 $4,108,016 $ (856) $2,112,701 $(19,428) $6,200,433
============= ========= ============ ========= =============
</TABLE>
The accompanying notes are an integral part of this statement.
4
<PAGE>
BT ORLANDO LIMITED PARTNERSHIP
------------------------------
STATEMENT OF CASH FLOWS
-----------------------
FOR THE YEAR ENDED DECEMBER 31, 1999
------------------------------------
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (85,512)
Adjustments to reconcile net loss to net cash
used in operating activities-
Depreciation expense 34,968
Changes in operating accounts-
Increase in accounts receivable (36,523)
Increase in other assets (21,750)
Increase in accounts payable 95,291
----------------
Net cash used in operating activities (13,526)
----------------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Real estate development costs (12,456,351)
----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from third party debt 25,574,214
Net repayments of advances from partners (13,092,266)
----------------
Net cash provided by financing activities 12,481,948
----------------
INCREASE IN CASH 12,071
----------------
Cash at beginning of year -
----------------
Cash at end of year $ 12,071
================
</TABLE>
The accompanying notes are an integral part of this statement.
5
<PAGE>
BT ORLANDO LIMITED PARTNERSHIP
------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1999
-----------------
1. ORGANIZATION AND BUSINESS:
--------------------------
BT Orlando Limited Partnership, a Florida limited partnership (the
"Partnership"), was formed on May 20, 1996 for the purpose of acquiring
approximately 140 acres of land and to develop, construct, operate and lease a
retail and entertainment shopping center complex of at least 830,000 square feet
in Orlando, Florida (the "Project"). In December 1999, a portion of the Project
was placed in service.
Brennand-Paige Industries, Inc. ("BPI"), a wholly owned subsidiary of Thackeray
Corporation, is a 35% general partner and BEF, Inc., an affiliate of Belz
Enterprises, is a 1% general partner. The limited partners are BT Partnership,
an affiliate of Belz Enterprises, with a 41.28% interest and EST Orlando, Ltd.
with a 22.72% interest. The general partners and limited partners are
collectively referred to as the Partners.
The partnership agreement provides that all major decisions, as defined, are to
be jointly approved by both of the general partners. The Partnership will
terminate on December 31, 2055, unless terminated earlier, as provided for in
the partnership agreement.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
------------------------------------------
Capitalization of Development Costs
The Partnership capitalizes all direct and indirect costs relating to Project
development, including, among other things, real estate taxes and interest on
construction financing. Indirect costs are allocated to the underlying assets on
a pro-rata basis. Direct and indirect costs are depreciated over the estimated
useful lives of the assets once placed in service. Interest capitalized at
December 31,1999 was $914,052. Advertising costs are capitalized to the extent
their recovery is reasonably expected from future rental operations. Advertising
costs of $299,918 and $213,820 were capitalized at December 31, 1999 and 1998,
respectively.
Long-lived Assets
Long lived assets to be held and used are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. If such review indicates that the carrying amount of an
asset exceeds the sum of its expected future cash flows, on an undiscounted
basis, the asset's carrying value is written down to fair value. Long-lived
assets to be disposed of are reported at the lower of carrying amount or fair
value less costs to sell.
Revenue Recognition
Rental revenue from tenant operating leases which provide for scheduled rental
increases, are recognized on a straight-line basis over the term of the
respective leases.
6
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):
------------------------------------------------------
Allocation of Net Loss
The net loss for 1999 is allocated to the Partners' capital accounts based on
their respective pro-rata ownership percentages in the Partnership.
Income Taxes
No provision is made in the accounts of the Partnership for federal and state
income taxes, as such taxes are liabilities of the individual Partners. The
Partnership's income tax returns and the amount of allocable Partnership profits
or losses are subject to examination by federal and state taxing authorities. If
such examinations result in changes to Partnership profits or losses, the income
tax liability of the Partners may also change.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles 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.
Reclassifications
Certain prior year amounts have been reclassified to conform with current year
presentation.
Supplemental Cash Flow Information
A statement of cash flows is not presented for the year ended December 31, 1998,
as all development costs through December 31, 1998 were paid by the Partners.
During 1999, BPI made a non-cash contribution of land to the Partnership which
is reflected as equity. During 1999, BT Partnership funded construction costs
through advances to the Partnership and was reimbursed when construction
financing was obtained. Additionally, BPI and BT Partnership converted certain
of their advances to the Partnership into equity (see Note 5).
3. REAL ESTATE:
-----------
Real estate is stated at historical cost and depreciated over the estimated
useful lives of the assets using the straight-line method once placed in
service. The Partnership anticipates total costs to construct the Project will
be approximately $120 million. Real estate at December 31, was as follows:
3.
7
<PAGE>
REAL ESTATE (continued):
- -----------------------
<TABLE>
<CAPTION>
Useful
Lives 1999 1998
--------- ---------------- --------------
<S> <C> <C> <C>
Land - $ 3,471,528 $ -
Buildings and improvements 15-40 13,332,543 -
Furniture and equipment 7 2,084,151 -
Construction in progress - 17,278,358 5,189,936
------------- -----------
36,166,580 5,189,936
Less accumulated depreciation (34,968) -
------------- -----------
$36,131,612 $5,189,936
============= ===========
</TABLE>
4. DEBT:
----
On August 31, 1999, the Partnership entered into a construction loan agreement
with a bank consisting of two promissory notes allowing for total borrowings of
up to $40,000,000 to finance development of the first phase of the Project. Note
A allows for borrowings of up to $18,000,000, and Note B allows for borrowings
of up to $22,000,000 (collectively, the "Notes"). The Notes bear interest at an
annual rate of LIBOR, as defined, plus 250 basis points.
The second phase of the project is expected to require financing of $75 million
for construction. Financing of this phase has not yet been obtained.
Note A provides for monthly interest only payments on outstanding borrowings
during construction and for twelve months following completion of construction.
Following that date, principal payments of $18,300 plus interest payments on
outstanding borrowings are due monthly through the maturity date, which is
September 2, 2002. The maturity date can be extended for up to two years
provided the loan is not in default and certain financial ratios are met.
Borrowings under Note A totaled $18,000,000 at December 31, 1999.
Note B provides for monthly interest only payments on outstanding borrowings
until the maturity date, which is September 2, 2000. Borrowings under Note B
totaled $7,574,214 at December 31, 1999.
It is the Partnership's intention to refinance the borrowings under Note B prior
to their maturity date in connection with obtaining further construction
financing.
The Notes are secured by the land and constructed assets owned by the
Partnership, as well as a parcel of land held by Thackeray Corporation. The
Notes are guaranteed jointly and severally by Belz Investco GP and Union Realty
Company GP (the "Guarantors"), both affiliates of Belz Enterprises. In the event
the above mentioned refinancing of Note B does not take place, and the
Guarantors are required to perform under the guaranty agreement, the Partners
and Guarantors have one year to pursue sale of a portion or all of the land held
by the Partnership, so long as terms of the sale are mutually agreed upon by the
Partners.
8
<PAGE>
The partners believe that should financing not be available for the second phase
of the development, cash flows from operations of the first phase and sales of
excess land will be sufficient to sustain the Partnership.
5. RELATED PARY TRANSACTIONS:
--------------------------
The partnership agreement provides for BPI to contribute its rights, title and
interests in a parcel of land to the Partnership simultaneously with the closing
of a construction financing loan. During 1999, upon closing of the loan
agreement described in Note 4, BPI contributed the land. The land contribution
has been accounted for by the Partnership at BPI's historical carrying value of
$3,471,528. In 1999, BT Partnership and BPI contributed capital of $2,148,000
and $666,417, respectively, by converting advances previously made to the
Partnership into equity.
The Partners will be entitled to receive a 9% cumulative, non-compounding
preferred return (the "preferred return") based on their Preferred Partnership
Capital, as defined, commencing from the closing of the construction loan.
Pursuant to the partnership agreement, the Partners have agreed that the land
contributed by BPI will have a stated value of $15,246,000. Upon contribution,
BPI's Preferred Partnership Capital, as defined, will include a portion of that
amount until such time that Note B is refinanced, plus the full amount of any
other capital contributions. Upon refinancing of Note B, BPI's Preferred
Partnership Capital will include the total stated value of the land, plus the
full amount of any other capital contributions.
BT Partnership has Preferred Partnership Capital equal to its capital
contributions.
As of December 31, 1999, preferred returns due to BPI and BT Partnership were
$100,919 and $63,557, respectively. Payment of these returns is contingent upon
the Partnership having cash from future construction loan proceeds or from
operating cash flow.
The Partners, from time to time and as outlined in the Partnership agreement,
make advances to the Partnership for construction costs, real estate taxes and
other direct and indirect development costs of the Project. These costs are
reimbursable to the Partners and are included in advances payable to partners in
the accompanying balance sheets as of December 31, 1999 and 1998. Repayment of
these costs is to be made out of future loan proceeds or operating cash flows.
There is no stated maturity on these advances. These advances bear interest at
prime.
6. FUTURE MINIMUM LEASE RECEIPTS:
------------------------------
At December 31, 1999 the Partnership was the lessor in a 20 year lease accounted
for as an operating lease related to the portion of the Project placed in
service. This lease agreement accounted for all revenues earned in 1999. The
Partnership also has entered into a second 20 year operating lease with a tenant
which will begin in June 2000. At December 31, 1999, minimum lease receipts for
the next five years under noncancelable leases were $1,938,255 for 2000, and
$2,407,005 for each of the next four years.
The partnership has entered into other operating leases for space currently
under construction. Payments under these leases are contingent upon, among other
things, completion of construction of leasable space in the Project.
9
<PAGE>
7. COMMITMENTS AND CONTINGENCIES:
------------------------------
The Partnership is currently involved in litigation related to copyright
violations with respect to the name of the Project. The litigation is still in
the early stages and at this time the possible outcome is not known. Management
believes that while the ultimate outcome of this matter cannot be reasonably
estimated at this time, this litigation will not have a material adverse effect
on the business, financial position or results of operations of the Partnership.
10
