- --------------------------------------------------------------------------------
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For fiscal year ended December 31, 1997 Commission file Number 1-8431
AMERICANA HOTELS AND REALTY CORPORATION
(Exact name of registrant as specified in its charter)
MARYLAND 36-3163723
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
535 Boylston Street, Boston, MA 02116
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code - (617) 247-3358
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $1.00 par value
(Title of Class)
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 and (2) has been subject to such filing requirements for
the past 90 days. YES X NO .
--- ---
Indicate by check mark if disclosure of 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 or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. YES X NO .
--- ---
The aggregate market value of the common stock held by non-affiliates of the
registrant as of March 5, 1998 was approximately $4,900,000. The number of
shares of common stock outstanding as of March 5, 1998 was 6,524,375.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Corporation's definitive proxy statement for the 1998 Annual
Meeting of stockholders are incorporated by reference in Parts I and III hereof.
Such proxy statement will be filed with the Securities and Exchange Commission
no later than 120 days after the registrant's year ended December 31, 1997.
- --------------------------------------------------------------------------------
Page 1 of 25 Exhibit index located at page 12.
1
<PAGE>
AMERICANA HOTELS AND REALTY CORPORATION
1997 FORM 10-K ANNUAL REPORT
Table of Contents
PART I
PAGE
Item 1. Business 3
Item 2. Properties 6
Item 3. Legal Proceedings 7
Item 4. Submission of Matters to a Vote of Security Holders 7
PART II
Item 5. Market For Registrant's Common Equity and Related 8
Stockholder Matter
Item 6. Selected Financial Data 8
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
Item 8. Financial Statements and Supplementary Data 12
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 22
PART III
Item 10. Directors and Executive Officers of The Registrant 22
Item 11. Executive Compensation 23
Item 12. Security Ownership of Certain Beneficial Owners and Management 23
Item 13. Certain Relationships and Related Transactions 23
PART IV
Item 14. Exhibits, and Reports on Form 8-K 24
SIGNATURES
2
<PAGE>
PART I
ITEM 1. BUSINESS
General
- -------
Americana Hotels and Realty Corporation ("AHRC" or the "Corporation") was
incorporated under the laws of the State of Maryland in December 1981. The
Corporation's principal business objective was investing in hotels, resorts, and
other facilities in the accommodations field. The Corporation has operated as a
Real Estate Investment Trust (a "REIT") under Sections 856-860 of the Internal
Revenue Code since its inception.
On June 28, 1988 the stockholders of the Corporation approved a Plan of
Disposition of Assets and Liquidation (the "Plan of Liquidation") whereby all
the remaining investments held by the Corporation would be disposed of and the
proceeds distributed to stockholders in complete liquidation of the Corporation.
Consistent with the Plan, the Corporation proceeded to dispose of its
investments and has made liquidating distributions of $8.00 per share on August
1, 1989, $3.50 per share on December 14, 1990, $0.75 per share on April 7, 1992,
$0.50 per share on March 6, 1995, and $2.00 per share on June 18, 1996. As of
December 31, 1997, the Corporation's only remaining real estate investment
consists of a leasehold interest in a non-operating hotel property acquired by
foreclosure in Palm Springs, California.
Pursuant to an advisory agreement, Americana Corporation (the "Advisor"),
advises the Corporation with respect to its investments and administers the
day-to-day operations of the Corporation, subject to the supervision of the
Corporation's Board of Directors. The advisory agreement is more fully described
herein under "Advisory Agreement".
History
- -------
The Corporation commenced operations in November 1982 when it received
approximately $112 million in proceeds of a public offering of its common
shares. The Corporation was sponsored by Americana Hotels Corporation ("AHC"), a
privately owned company. Using the proceeds of the public offering, the
Corporation provided long term mortgages with equity participations on 21 hotels
which were managed, and through subsidiaries or affiliates were owned in whole
or in part by AHC.
Toward the end of 1985 it became apparent that the operating results of the
hotel properties in which the Corporation had invested had dramatically
worsened. In addition to these adverse developments and other developments
separate and apart from its arrangement with the Corporation, AHC informed the
Corporation that, except on an interim basis in order to permit the phasing in
of a new investment advisor and new hotel managers, AHC did not intend to
continue to act as the Corporation's investment advisor or continue to manage
the hotel properties in which the Corporation had invested.
To respond to these events, the Board of Directors of the Corporation and AHC
developed a Restructuring Plan in February 1986. The Restructuring Plan called
for termination of the relationship with AHC and its affiliates and the creation
of new advisory arrangements. The Restructuring Plan also called for the
disposition or restructuring of the ownership and management of the hotel
properties in which the Corporation had investments. Several properties were
authorized for sale, with the Corporation's net proceeds from the dispositions
to be used to repay bank borrowings and renovate the hotels to be retained.
Thus, it was anticipated that at the completion of the renovation phase of the
Restructuring Plan, the Corporation would have a
3
<PAGE>
significantly smaller portfolio of investments, but of a higher quality and with
improved earnings potential.
Under the Restructuring Plan, during 1986 and 1987, the Corporation disposed of
or restructured all of its hotel investments, with total net losses of
approximately $16.5 million charged to the Investment Loss Reserve. At the end
of 1987, the Corporation held 12 hotel investments, three owned subject to a
lease, three acquired by deed in lieu of foreclosure, three short-term
mortgages, and three land leaseback/mortgage loans subject to a purchase option.
Plan of Disposition of Assets and Liquidation of the Corporation
- ----------------------------------------------------------------
While progress under the Restructuring Plan had been significant, in early 1988
the Directors initiated a review of alternatives for maximizing stockholder
value. The Directors authorized the Plan of Disposition of Assets and
Liquidation after it concluded that a program combining the orderly disposition
of the investments and subsequent distribution of funds to stockholders was the
best way to maximize values for stockholders. The Plan of Disposition of Assets
and Liquidation was approved by a vote of the stockholders on June 28, 1988.
Under the Plan of Disposition of Assets and Liquidation, the Corporation
disposed of its interests in three properties during 1988; three properties
during 1989; two properties in 1990; and one property in 1992, 1994 and 1995. In
March 1996 the Corporation sold its restructured first mortgage loan on the JFK
Airport Hilton.
Investment Held for Disposition
- -------------------------------
At December 31, 1997 the Corporation's only remaining real estate investment was
a leasehold interest in the Canyon Resort Hotel and related property in Palm
Springs, California. This interest was acquired by foreclosure in September
1988. Title to the fee simple estate of the property, consisting of
approximately 500 acres, is vested in approximately 30 Native Americans. The
master ground lease, which expires in 2031, is administered through the United
States Bureau of Indian Affairs. The Corporation's leasehold interest in the
property consists of a 173 room hotel and convention center which has been
closed since June, 1987; an operating 18 hole public golf course; and subleases
on approximately 550 homesites, an apartment complex and a private golf course
and country club. The subleases have annual rentals, including fixed and
percentage payments, which currently equal approximately $1 Million. Due to the
Corporation's status as a trustee resulting from the foreclosure sale, the
Corporation is not paying ground rent under the master ground lease.
In December 1989, the Corporation entered into an approximately $18 million
purchase and sale agreement to sell its leasehold interest in the property to a
potential buyer (Canyon Development) who planned a major development project on
the hotel and golf course sites and adjacent properties. Among the factors which
inhibited or delayed Canyon Development's project were protracted negotiations
with the ground lessors and the Bureau of Indian Affairs regarding an extended
master ground lease, difficulties in obtaining project entitlements from the
City of Palm Springs, environmental and legal challenges to the project and,
difficulties in obtaining financing. Through June 1995, Canyon Development had
paid a total of $2.7 million to the Corporation in non-refundable deposits and
option payments in connection with the purchase of the leasehold interest. In
addition, Canyon Development made substantial payments to the ground lessors.
Since June 1995, no payments had been made to the Corporation or the ground
lessors; however, Canyon Development on several occasions informed the
Corporation that interim financing was being arranged and it was in the process
of negotiating financing in order to complete the acquisition of the
Corporation's leasehold interest. However, the Corporation had no evidence of
Canyon
4
<PAGE>
Development's financing, no outstanding contract with Canyon Development and no
assurance that a closing could take place. In 1996 the ground lessors instituted
proceedings to terminate their contractual relationships with Canyon Development
and the Corporation put its leasehold interest back on the market for sale.
In order to more accurately estimate the fair value of the Palm Springs
investment for the 1996 financial statements, the Corporation had the leasehold
interest independently appraised. The independent appraiser concluded that the
fair value of the Corporation's leasehold interest was $6,000,000 as of February
1997. This appraised value was determined based upon the present value of the
cashflows through the expiration of the master ground lease in 2031. The
cashflows included the future collection of the rents from approximately 550
residential homesites, an apartment complex and a private golf course and
country club; together with the operation of an improved public golf course.
There was no value assigned to the closed hotel structures, nor any value for
the potential renewal or extension of either the master lease or any subleases.
Therefore the Corporation recorded a provision for investment losses in the 1996
financial statements to adjust the carrying value of the investment to the fair
value less estimated costs to sell. The Corporation continues to believe that
the $6 million appraised value is the most reasonable determination of the
investment's fair value as of December 31, 1997 and 1996.
Current Developments
- --------------------
Subsequent to December 31, 1997, one of the owners of the property underlying
the Corporation's leasehold interest in Palm Springs, CA indicated an interest
in acquiring the Corporation's leasehold interest in the property and
simultaneously re-leasing the property to a third party. The Corporation has met
with representatives of the property owners and the U.S. Bureau of Indian
Affairs, which administers the master ground lease for the property owners. On
March 19, 1998 the Corporation entered into an agreement to sell its leasehold
interest for $8,000,000 in an all cash transaction which would result in net
proceeds of approximately $6,000,000; after payment of the related mortgage loan
payable on the property. The sale is subject to various contingencies, including
a final lease agreement between the property owners and a third party. There is
no assurance that this transaction will in fact be consummated. In light of the
contingencies that exist relative to the potential sale and the uncertainty
whether the sale will be consummated, the Corporation continues to believe that
the $6 million appraised value is the most reasonable determination of the
investment's fair value as of December 31, 1997.
Advisory Agreement
- ------------------
Americana Corporation, the Advisor, administers the day-to-day operations of the
Corporation and provides executive and administrative personnel, office space,
and services as may be required in connection with the performance of services
for the Corporation. It conducts negotiations with respect to the investments of
the Corporation and provides investigation and reports as the Directors may
request in formulating and modifying policies of the Corporation with respect to
its investments.
The advisory agreement provides that directors, officers, or employees of the
Advisor may serve as directors, officers or employees of the Corporation; and
that the Advisor or any director, officer, or employee of the Advisor may engage
in any other business or render services of any kind to any other entity; and
that the Advisor and its affiliates will be indemnified against certain
liabilities in connection with the Advisor's performance of its obligations
under the advisory agreement. The Corporation's President, George H. Bigelow was
the sole shareholder of the Advisor during 1997.
5
<PAGE>
Of the four Directors of the Corporation, only one, George H. Bigelow, is
affiliated with the Advisor. As of January 1, 1998 Americana Corporation
assigned its interest in the advisory agreement to Americana Group LLC. Mr.
Bigelow is a managing member of Americana Group LLC.
The advisory fee was modified in September, 1996 to reduce the base fee to
$240,000 annually from $460,000 which was the fee in effect since November 1995.
In addition to the base fee there is an incentive fee of up to 15% of proceeds
in excess of defined amounts from foreclosed property dispositions. The advisory
agreement can be terminated upon two months notice by the Corporation, or six
months notice by the Advisor, and has no provision for termination fees.
Aggregate fees paid to the Advisor were $240,000 in 1997, $405,000 in 1996, and
$560,000 in 1995.
Employees
- ---------
On December 31, 1997 the Corporation had no employees. The Advisor provides all
the executive and administrative personnel required by the Corporation.
Federal Income Tax
- ------------------
The Corporation has elected to qualify as a real estate investment trust
("REIT") under Sections 856-860 (the "REIT Provisions") of the Internal Revenue
Code (the "Code"). Under the REIT Provisions a real estate investment trust is
generally not subject to Federal income tax with respect to qualified income
which it distributes to its stockholders.
While it is intended that the Plan of Liquidation will be carried out in a
manner that will allow the Corporation to qualify under the REIT Provisions, no
assurance can be given that the Corporation will not lose or terminate its
status under the REIT Provisions. Qualification as a REIT involves the
application of highly technical and complex Code provisions for which there are
only limited judicial or administrative interpretations and the determination of
various factual matters and circumstances not entirely within the Corporation's
control. Should the Corporation fail to meet the requirements of the REIT
Provisions it may be required to make penalty payments in order to retain its
REIT status; or it could become taxable as a corporation for Federal income tax
purposes and would be liable for Federal income taxes with respect to its
taxable income, beginning with the taxable year in which its qualification under
the REIT Provisions was terminated. However, at December 31, 1997 there are net
operating loss carryforwards of approximately $6 million, expiring between the
years 2002 and 2013, that would be available to reduce any taxable income.
Distributions in liquidation will not be dividend income when received by
stockholders. Distributions in liquidation are first used to reduce the basis of
a stockholder's stock in the Corporation (non-taxable return of capital), with
any excess constituting a capital gain if the stock is held as a capital asset.
If the sum of all liquidating distributions is less than a stockholder's basis
in his stock, the difference will constitute a capital loss. As of December 31,
1997 the Corporation had made liquidating distributions totaling $14.75 per
share.
ITEM 2. PROPERTIES
The Corporation's assets include one property referred to under Item 1 above, to
which reference is hereby made for a description of the property.
6
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
On December 31, 1997 there were no material pending legal proceedings to which
the Corporation was a party or to which any of its investments were subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
This item is not applicable, as no matter was submitted to the Corporation's
stockholders during the fourth quarter of the fiscal year covered by this
report.
7
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
The Corporation's shares of common stock were traded on the New York Stock
Exchange under the symbol "AHRC" from 1982 through February 17, 1997. Since then
the shares have been traded on the Over The Counter Market "OTC" under the
symbol "AHTC". As of January 1998, the number of stockholders known to the
Corporation was approximately 700. Because a substantial number of stockholders'
shares are held in custody, commonly called "Street Name", the Corporation
estimates that the total number of individual stockholders is approximately
5,000. The Corporation declared quarterly dividends from commencement of
business in 1982 through 1985, and has not declared dividends since 1985. The
Corporation paid an initial liquidating distribution of $8.00 on August 1, 1989;
a second liquidating distribution of $3.50 on December 14, 1990; a third
liquidating distribution of $0.75 on April 7, 1992; a fourth liquidating
distribution of $0.50 on March 6, 1995; and a fifth liquidating distribution of
$2.00 on June 18, 1996.
Stock Prices Liquidating
------------
High Low Distributions
---- --- -------------
1997
----
Quarter Ended:
March 31 $1.13 $0.50 -
June 30 0.66 0.44 -
September 30 0.80 0.63 -
December 31 0.85 0.70 -
1996
----
Quarter Ended:
March 31 $3.38 $2.63 -
June 30 3.50 1.38 $2.00
September 30 1.50 1.13 -
December 31 1.25 1.00 -
ITEM 6. SELECTED FINANCIAL DATA
(In thousands, except per share data)
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Short-Term Investments $1,050 $ 2,400 $ 4,165 $ 3,446 $ 600
Assets $7,295 $ 8,608 $ 28,958 $33,038 $35,062
Mortgage Loan Payable $1,121 $ 2,538 $ 3,036 $ 3,489 $ 3,901
Revenues $1,085 $ 706 $ 2,053 $ 1,966 $ 1,422
Net Earnings (Loss) $ 24 $(5,092) $ (282) $(1,591) $ 324
Net Earnings (Loss)
Per Share $.02 $(.78) $(.04) $(.24) $.05
Dividends Declared
Per Share - - - - -
Liquidating Distributions
Per Share - $2.00 $.50 - -
8
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
a) Liquidity and Capital Resources
At December 31, 1997 the Corporation had $1,252,000 of cash and
short-term investments and one investment held for disposition.
In April 1997 the Corporation paid down the mortgage loan payable by $1
million and the remaining balance will be fully amortized with interest
at 9.5% by monthly payments of approximately $47,900 through March 1,
2000.
The Corporation believes it has adequate liquidity available for its
foreseeable needs from resources on hand and cash generated by the
investment held for disposition in Palm Springs, CA. It is anticipated
that the Corporation will continue to make liquidating distributions of
cash to stockholders as funds are available.
b) Results of Operations
1997 versus 1996
----------------
In light of the fact that the Corporation had only one property
remaining in its portfolio during 1997, the revenues and expenses of
the foreclosed property are shown separately in the 1997 statement of
earnings. Prior to 1997, the results of operations of the foreclosed
property were netted in the provision for investment losses.
Results for the year ended December 31, 1997 produced net earnings of
$24,000 or $.01 per share, compared to a net loss of $5,092,000 or
$(.78) per share for the year ended December 31, 1996. The 1997 results
were impacted by a $461,000 operating surplus from the property in Palm
Springs. The 1996 results included a $800,000 credit to expenses for a
change in the estimate of the ultimate costs of liquidation, and a
provision of $5,770,000 for an increase to the investment loss reserve
to adjust the carrying value of the Palm Springs investment to fair
value less costs to sell. The 1996 results also included substantial
interest income during the first quarter from the JFK Airport Hotel
mortgage loan which was sold in March, 1996. In 1996, the Palm Springs
property generated an operating surplus of approximately $216,000 which
was netted in the provision for investment losses in 1996.
Interest income in 1997 was earned only from short-term investments,
while 1996 interest income included three months of earnings from the
$14.5 Million JFK Airport Hotel loan which was sold in March 1996.
Advisory fees decreased 41% in 1997 compared to 1996 due to reductions
in the advisory agreement's base fee effective in September 1996.
The administrative expenses incurred in 1997 decreased 65% from 1996.
Included in this change was a decrease in Directors' fees and
elimination of the cost of the Directors' Deferred Compensation Plan.
In September, 1996 the Directors reduced their annual fees to a meeting
fee and terminated the deferred compensation plan.
9
<PAGE>
In 1996 the Corporation reassessed the costs to ultimately liquidate
the Corporation after the disposition of the final investment and
distribution of final proceeds to stockholders. A liquidation reserve
of $900,000; together with other accrued expensed totaling $300,000 had
been previously estimated; however, based upon the status of the
liquidation, and cost estimates the Corporation concluded that a
liquidation reserve of $400,000 was a reasonable estimate for the
anticipated expenses of the Corporation's ultimate liquidation. As of
December 31, 1997 the Corporation believes the liquidation reserve is
an adequate estimate of the expenses to liquidate the Corporation.
Legal expense decreased approximately 65% in 1997 compared to 1996 due
to reduced legal activities and the sale of the JFK Airport Hotel
mortgage loan in March 1996.
The Corporation's foreclosed property in Palm Springs, CA is a
leasehold interest in the Canyon Resort, a 173 room hotel and
convention center which has been closed since 1987, an operating public
golf course, and subleases on approximately 550 homesites, an apartment
complex and a private golf course and country club. The Corporation
acquired the leasehold interest as a trustee resulting from a
foreclosure sale in 1988. In its status as trustee, the Corporation
supervises the operations of the property and does not have to pay
ground rent on the master lease.
The results of the operations of the foreclosed property for the twelve
months ended December 31, 1997 and 1996 were as follows:
1997 1996
Revenues: ---- ----
Sublease rentals earned $ 977,000 $ 895,000
Golf course, net expenses from
manager (7,000) (68,000)
Other income and fees 55,000 34,000
---------- ---------
1,025,000 861,000
Expenses:
Mortgage interest expense 144,000 267,000
Real estate taxes 166,000 166,000
Legal, insurance and other expense 254,000 212,000
--------- ---------
564,000 645,000
--------- ---------
Operating surplus from foreclosed
property $ 461,000 $ 216,000
========= =========
Most of the sublease rentals from the Palm Springs property are fixed
rents and those that are percentage rents are based upon results which
are generally predictable, therefore sublease rentals are earned evenly
throughout the year. The golf course operation is highly seasonal, with
most of the revenue received during the winter months, and the
operation running at a deficit during the rest of the year.
1996 versus 1995
----------------
Results for the year ended December 31, 1996 produced a net loss of
$5,092,000 or $(.78) per share, compared to a net loss of $282,000 or
$(.04) per share for the year ended December 31, 1995. The 1996 results
included a $800,000 credit to expenses for a change in the estimate of
the ultimate costs of liquidation, and a provision of $5,770,000 for an
increase to the investment loss reserve to adjust the carrying value of
the Palm Springs investment to fair value less costs to sell. The 1996
net loss also reflected the substantial decline in interest income
after the sale of the JFK Airport Hotel mortgage loan in March, 1996.
10
<PAGE>
Interest income decreased 66% in 1996 compared to 1995. In 1995
interest income included earnings from the JFK Airport Hotel loan which
was sold in March 1996, the six month purchase money note received upon
the sale of the Kansas City property in February 1995 and earnings on
larger short-term investments balance throughout 1995.
Advisory fees decreased 28% in 1996 compared to 1995 due to two
reductions in the advisory agreement's base fee effective in November,
1995 and September 1996.
The administrative expenses incurred in 1996 decreased 31% from 1995.
Included in this change was a substantial decrease in Directors' fees
and the costs of the Directors' Deferred Compensation Plan. In
September, 1996 the Directors reduced their annual fees to only a
meeting fee and terminated the deferred compensation plan.
In 1996 the Corporation reassessed the costs to ultimately liquidate
the Corporation after the disposition of the final investment and
distribution of final proceeds to stockholders. A liquidation reserve
of $900,000; together with other accrued expenses totaling $300,000 had
been previously estimated. Based upon the status of the liquidation,
and cost estimates the Corporation concluded that as of December 31,
1996 a liquidation reserve of $400,000 was a reasonable estimate for
the anticipated expenses of the Corporation's ultimate liquidation.
Legal expense decreased approximately 60% in 1996 compared to 1995 due
to the conclusion of the bankruptcy proceedings involving the JFK
Airport Hotel mortgage loan in 1995 and the ultimate sale of the
mortgage loan in March 1996.
The operating surplus of the leasehold interest in the Palm Springs
property was approximately $200,000 in both 1996 and 1995. This total
surplus of approximately $400,000 was credited to the investment loss
reserve at December 31, 1996.
c) Forward-Looking Statements
This Annual Report contains forward-looking statements, estimates or
plans. Such statements involve risks and uncertainties which may cause
the actual results to be materially different from the results implied
by such forward-looking statements. Although the Corporation believes
that the assumptions underlying the forward-looking statements are
reasonable, any of the assumptions could be inaccurate, and therefore
there is no assurance that they will prove to be accurate. The
inclusion of such forward-looking information should not be regarded as
a representation that the objectives and plans of the Corporation will
be achieved.
11
<PAGE>
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
AMERICANA HOTELS AND REALTY CORPORATION
Index to Financial Statements
Page
Independent Auditors' Report 13
Financial Statements:
Balance Sheet
December 31, 1997 and 1996 14
Statement of Earnings
Years ended December 31, 1997, 1996 and 1995 15
Statement of Stockholders' Equity
Years ended December 31, 1997, 1996 and 1995 16
Statement of Cash Flows
Years ended December 31, 1997, 1996 and 1995 17
Notes to Financial Statements 18
All financial statement schedules for which provision is made in the
applicable accounting regulations of the Securities and Exchange
Commission are either not required under the related instructions or
the required information is set forth in the financial statements or
notes thereto, and therefore have been omitted.
12
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
The Directors and Stockholders
Americana Hotels and Realty Corporation:
We have audited the financial statements of Americana Hotels and Realty
Corporation as listed in the accompanying index. These financial statements are
the responsibility of the Corporation'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.
As discussed in Note 2 to the financial statements, the Corporation has adopted
a Plan of Disposition of Assets and Liquidation. In connection with the Plan,
the Corporation will dispose of its assets, settle its liabilities, distribute
the proceeds to its stockholders and dissolve the Corporation.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Americana Hotels and Realty
Corporation as of December 31, 1997 and 1996, and the results of its operations
and its cash flows for each of the years in the three-year period ended December
31, 1997 in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Boston, Massachusetts
March 5, 1998; except as to
Note 8 which is as of March 19, 1998.
13
<PAGE>
AMERICANA HOTELS AND REALTY CORPORATION
Balance Sheet
December 31,
------------
1997 1996
---- ----
ASSETS
Investment held for disposition $12,170,000 $12,170,000
Less: Investment loss reserve (6,170,000) (6,170,000)
---------- ----------
Net investments 6,000,000 6,000,000
Cash 202,000 160,000
Short-term investments, at cost, which
approximates market 1,050,000 2,400,000
Accrued interest receivable 2,000 7,000
Other assets 41,000 41,000
------------- -------------
$ 7,295,000 $ 8,608,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued expenses $ 55,000 $ 65,000
Foreclosed property liabilities, net 90,000 -
Liquidation reserve 400,000 400,000
Mortgage loan payable 1,121,000 2,538,000
----------- -----------
1,666,000 3,003,000
----------- -----------
Stockholders' Equity:
Common stock - $1.00 par value,
20,000,000 shares authorized,
6,524,375 shares outstanding 6,524,000 6,524,000
Additional paid-in capital 8,627,000 8,627,000
Accumulated deficit (9,522,000) (9,546,000)
----------- -----------
5,629,000 5,605,000
----------- -----------
$ 7,295,000 $ 8,608,000
=========== ===========
See notes to financial statements.
14
<PAGE>
AMERICANA HOTELS AND REALTY CORPORATION
Statement of Earnings
Year Ended December 31,
-----------------------
1997 1996 1995
---- ---- ----
REVENUES
Interest income $ 60,000 $ 706,000 $2,053,000
Revenue from foreclosed
Property 1,025,000 - -
----------- ----------- -----------
1,085,000 706,000 2,053,000
EXPENSES
Advisory fees 240,000 405,000 560,000
Administrative expenses:
Directors' fees 70,000 89,000 118,000
Deferred compensation plan - 45,000 125,000
D&O Insurance 45,000 82,000 99,000
Shareholder relations 44,000 60,000 66,000
Other 76,000 84,000 110,000
Liquidation and other
expenses (credit) - (800,000) -
Legal expenses 22,000 63,000 157,000
Expenses from foreclosed
Property 564,000 - -
Provision for investment
losses - 5,770,000 1,100,000
----------- ----------- -----------
1,061,000 5,798,000 2,335,000
----------- ----------- -----------
NET EARNINGS (LOSS) $ 24,000 $(5,092,000) $ (282,000)
=========== =========== ===========
Net earnings (loss) per share $.01 $(.78) $(.04)
Average number of shares
Outstanding 6,524,000 6,524,000 6,524,000
See notes to financial statements.
15
<PAGE>
AMERICANA HOTELS AND REALTY CORPORATION
Statement of Stockholders' Equity
Years Ended December 31, 1997, 1996, and 1995
Common Stock Additional
------------ Paid-In Accumulated
Shares Amount Capital Deficit
------ ------ ------- -------
Balance at
December 31, 1994 6,524,375 $6,524,000 $24,938,000 $ (4,172,000)
Liquidating Distribution (3,262,000)
Net (loss) (282,000)
--------- ----------- ----------- -----------
Balance at
December 31, 1995 6,524,375 6,524,000 21,676,000 (4,454,000)
Liquidating Distribution (13,049,000)
Net (loss) (5,092,000)
--------- ----------- ----------- -----------
Balance at
December 31, 1996 6,524,375 6,524,000 8,627,000 (9,546,000)
Net earnings 24,000
--------- ----------- ----------- -----------
Balance at
December 31, 1997 6,524,375 $6,524,000 $ 8,627,000 $(9,522,000)
========= =========== =========== ===========
See notes to financial statements.
16
<PAGE>
AMERICANA HOTELS AND REALTY CORPORATION
Statement Of Cash Flows
Year Ended December 31,
-----------------------
1997 1996 1995
---- ---- ----
Cash Flows from Operating Activities:
Net earnings (loss) $ 24,000 $(5,092,000) $ (282,000)
Adjustments to net earnings (loss):
Operations of foreclosed property
credited (charged) to
investment loss reserve - 437,000 -
Provision for investment losses - 5,770,000 1,100,000
Decrease (increase) in accrued
interest receivable 5,000 136,000 (143,000)
Decrease in other assets - 37,000 54,000
Decrease in accounts payable and
accrued expenses and directors'
deferred compensation (10,000) (1,211,000) (83,000)
Increase in foreclosed property
liabilities, net 90,000 - -
Decrease in liquidation reserve - (500,000) -
----------- ----------- -----------
Net Cash Provided by (Used in)
Operating Activities 109,000 (423,000) 646,000
---------- ---------- ---------
Cash Flows from Investing Activities:
Proceeds from sale of investments - 12,276,000 2,737,000
----------- ----------- -----------
Net Cash Provided by Investing
Activities - 12,276,000 2,737,000
----------- ----------- -----------
Cash Flows from Financing Activities:
Principal payments on
mortgage loan payable (1,417,000) (498,000) (453,000)
Liquidating distributions - (13,049,000) (3,262,000)
----------- ----------- -----------
Net Cash Used in Financing Activities (1,417,000) (13,547,000) (3,715,000)
----------- ----------- -----------
Increase/(Decrease) in Cash
and Short-term Investments (1,308,000) (1,694,000) (332,000)
Cash and Short-term Investments
At Beginning of the Year 2,560,000 4,254,000 4,586,000
----------- ----------- -----------
Cash and Short-term Investments
At End of the Year $ 1,252,000 $ 2,560,000 $ 4,254,000
=========== =========== ===========
See notes to financial statements.
17
<PAGE>
AMERICANA HOTELS AND REALTY CORPORATION
Notes to Financial Statements
Significant Accounting Policies
Basis of Presentation
---------------------
The financial statements are prepared on the accrual basis of accounting in
accordance with generally accepted accounting principles. The preparation
of financial statements requires the Corporation 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.
Federal Income Taxes
--------------------
The Corporation has elected to be taxed as a real estate investment trust
under Sections 856-860 of the Internal Revenue Code. Accordingly, no
provisions have been made for Federal income taxes in the financial
statements.
Information About Financial Instruments
---------------------------------------
The Corporation's financial instruments, other than debt, are generally
short-term in nature and contain minimal credit risk. The carrying amount
of these assets and liabilities on the balance sheet are assumed to be at
fair value. The Corporation's mortgage loan payable is at a fixed-rate, and
when compared with borrowing rates currently available to the Corporation
with similar terms, approximates fair value. The Corporation invests its
short-term cash investments with one financial institution. Cash balances
are insured by the Federal Deposit Insurance Corporation up to $100,000,
and at December 31, 1997 the Corporation's uninsured cash balance totaled
$1,152,000.
Investment Held for Disposition
-------------------------------
The investment held for disposition is a foreclosed property recorded at
the lower of its cost or fair value, less selling costs. Provision for
decline in value is recorded in the investment loss reserve. Prior to 1997,
operating losses or income of the foreclosed property, including related
interest expense, was charged or credited to the provision for investment
losses.
Investment Loss Reserve
-----------------------
The Corporation provides an investment loss reserve and regularly evaluates
it for adequacy based upon comparing the carrying value of the foreclosed
property with its estimated fair value, including the estimated cost of
holding the property through disposition. While it is believed that the
investment loss reserve is adequate, it is possible that adjustments may be
necessary in the near term.
Preferred Stock
---------------
The Corporation has 15,000,000 shares of $1.00 par value preferred stock
authorized but not issued.
Statement of Cash Flows
-----------------------
For purposes of the statement of cash flows, the Corporation considers all
short-term investments with maturities, at date of purchase, of three
months or less to be cash
18
<PAGE>
equivalents. Cash paid for interest related to the mortgage loan payable on
the foreclosed property in Palm Springs, California, which interest was
charged to the property's operations, was $144,000 in 1997, $267,000 in
1996, and $312,000 in 1995.
2. Plan of Disposition of Assets and Liquidation
On June 28, 1988 the Stockholders of the Corporation approved a Plan of
Disposition of Assets and Liquidation whereby all the remaining investments
held by the Corporation will be sold and the proceeds will be distributed
to stockholders in complete liquidation and dissolution of the Corporation.
The Corporation made liquidating distributions of $8.00 per share on August
1, 1989, $3.50 per share on December 14, 1990, $.75 per share on April 7,
1992, $.50 per share on March 6, 1995, and $2.00 per share on June 18,
1996.
3. Advisory Agreement
In accordance with an advisory agreement, Americana Corporation (the
"Advisor") advises the Corporation with respect to its investments and
administers the day-to-day operations of the Corporation, all subject to
the general supervision of the Corporation's Board of Directors. The
officers and shareholder of the Advisor are officers of the Corporation,
and one of the Directors of the Corporation is the shareholder of the
Advisor.
The advisory fee was modified in September 1996, to reduce the base fee to
$240,000 annually from $460,000 which was the fee in effect since November
1995. In addition to the base fee, there is an incentive fee of up to 15%
of proceeds in excess of defined amounts from foreclosed property
dispositions. The advisory agreement can be terminated upon two months'
notice by the Corporation, or six months' notice by the Advisor, and has
no provision for termination fees. Aggregate fees paid to the Advisor were
$240,000 in 1997, $405,000 in 1996, and $560,000 in 1995.
4. Investment Held for Disposition
December 31,
------------
1997 1996
---- ----
Foreclosed property:
Leasehold interest - Palm Springs,CA $12,170,000 $12,170,000
Less investment loss reserve (6,170,000) (6,170,000)
------------ -----------
Net investment $ 6,000,000 $ 6,000,000
============ ============
The foreclosed property is a leasehold interest located in Palm Springs,
CA. The leasehold interest includes a 173-room closed hotel, originally
constructed in 1965, an operating public golf course and subleases on
approximately 550 homesites, an apartment complex and a private golf course
and country club. The Corporation's interest was acquired by foreclosure in
September, 1988. At December 31, 1995, the investment was recorded at the
leasehold interest's cost at the date of foreclosure less $2,700,000 of
non-refundable fees and option payments received in connection with efforts
to sell the investment, including $420,000 received in 1995. In February
1997, the Corporation had the leasehold interest appraised to determine the
fair value of the investment. The appraised value was $6 million; and
therefore an increase to the investment loss reserve was provided to adjust
the net investment to fair value less estimated costs to sell at December
31, 1996. The Corporation
19
<PAGE>
believes that the $6 million appraised value is the most reasonable
estimate of fair value at December 31, 1997. The property is subject to a
first mortgage and has a cost basis for federal income tax purposes of
approximately $9 million.
The results of the operations of the foreclosed property for the twelve
months ended December 31, 1997 were as follows:
1997
Revenues: ----
Sublease rentals earned $ 977,000
Golf course, net expenses from manager (7,000)
Other income and fees 55,000
----------
1,025,000
Expenses:
Mortgage interest expense 144,000
Real estate taxes 166,000
Legal, insurance and other expense 254,000
----------
564,000
----------
Operating surplus from foreclosed property $ 461,000
==========
Most of the sublease rentals from the Palm Springs property are fixed
rents and those that are percentage rents are based upon results which are
generally predictable, therefore sublease rentals are earned evenly
throughout the year. The golf course operation is highly seasonal, with
most of the revenue received during the winter months, and the operation
running at a deficit during the rest of the year.
5. Investment Loss Reserve
The activity in the Corporation's investment loss reserve is summarized as
follows:
1997 1996 1995
------ ------ ------
Balance at beginning of year $6,170,000 $2,187,000 $3,770,000
Provision for losses - 5,770,000 1,100,000
Amounts charged off - (2,224,000) (2,683,000)
Operation of foreclosed properties - 437,000 -
---------- ---------- ----------
Balance at end of year $6,170,000 $6,170,000 $2,187,000
========== ========== ==========
6. Liquidation Reserve
In 1990 the Corporation established a liquidation reserve of $2,500,000
based upon the estimated operating expenses under the Plan of Liquidation
and future costs to complete the final liquidation. This estimate was based
upon an anticipated two to three year period to complete the liquidation.
Liquidation-related administrative expenses were charged to the liquidation
reserve through December 31, 1993. The remaining balance in the liquidation
reserve at December 31, 1993 was $900,000 which was estimated to be the
cost of the Corporation's ultimate liquidation, and, therefore, beginning
in 1994 all ongoing administrative expenses were charged to operations
instead of the liquidation reserve. Based upon the reduction in operations
and expenses achieved during 1996, the Corporation revised its estimated
future liquidation costs and accrued expenses as of December 31, 1996. As a
result, the Corporation reduced the amount of the Liquidation
20
<PAGE>
Reserve by $500,000 and other accrued expenses by $300,000. These
adjustments in estimate were reflected in the 1996 financial statements as
a $800,000 liquidation and other expenses credit. As of December 31, 1997
the Corporation continues to believe that the liquidation reserve is a
reasonable estimate of the future expenses of liquidating the Corporation.
7. Mortgage Loan Payable
The mortgage loan payable is a first mortgage loan secured by the
Corporation's leasehold interest in Palm Springs, CA. and without recourse
to the Corporation. In April 1997 the Corporation reached agreement with
the lender for a three year extension of the maturity date of the loan and
the Corporation paid down the loan by $1 million with the remaining balance
being fully amortized with interest continuing at 9.5% by monthly payments
of approximately $47,900 through March 1, 2000. Total mortgage interest
paid was $144,000 in 1997, $267,000 in 1996, and $312,000 in 1995.
8. Subsequent Event
Subsequent to December 31, 1997, one of the owners of the property
underlying the Corporation's leasehold interest in Palm Springs, CA
indicated an interest in acquiring the Corporation's leasehold interest in
the property and simultaneously re-leasing the property to a third party.
The Corporation has met with representatives of the property owners and the
U.S. Bureau of Indian Affairs, which administers the master ground lease
for the property owners. On March 19, 1998 the Corporation entered into an
agreement to sell its leasehold interest for $8,000,000 in an all cash
transaction which would result in net proceeds of approximately $6,000,000;
after payment of the related mortgage loan payable on the property. The
sale is subject to various contingencies, including a final lease agreement
between the property owners and a third party. There is no assurance that
this transaction will in fact be consummated. In light of the contingencies
that exist relative to the potential sale and the uncertainty whether the
sale will be consummated, the Corporation continues to believe that the $6
million appraised value is the most reasonable determination of the
investment's fair value as of December 31, 1997.
21
<PAGE>
9. Quarterly Financial Data (Unaudited)
The following is a summary of the unaudited quarterly financial information
for the years ended December 31, 1997 and 1996.
Year Ended December 31, 1997
------------------------------------------
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter
------- ------- ------- -------
Revenues $472,000 $155,000 $ 126,000 $332,000
Net earnings (loss) $159,000 $(94,000) $(160,000) $119,000
Net earnings (loss)
per share $.02 $(.01) $(.02) $.02
Cash dividends declared
per share - - - -
Liquidating distribution
per share - - - -
Year Ended December 31, 1996
--------------------------------------------
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter
------- ------- ------- -------
Revenues $447,000 $193,000 $ 42,000 $ 24,000
Net earnings (loss) $162,000 $(56,000) $(137,000) $(5,061,000)
Net earnings (loss)
per share $.02 $(.01) $(.02) $(.77)
Cash dividends declared
per share - - - -
Liquidating distribution
per share - $2.00 - -
The substantial loss incurred in the 4th quarter of 1996 reflects a provision to
increase the investment loss reserve made as of the end of the year based upon
specific subsequent events that occurred after the end of the year. The 1996
results reflect the appraisal of the Palm Springs leasehold interest obtained in
February 1997.
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
22
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following information pertains to the Directors and Executive Officers of
the Corporation as of March, 1998.
Principal Occupations and
Business Experience for Past
Name Age Five Years and Directorships
- ---- --- ----------------------------
George H. Bigelow 55 Manager, Americana Group LLC, Boston,
(President) Massachusetts since 1998; President,
Americana Corporation, Boston, Massachusetts
1986 - 1997; Boston, Massachusetts 1984-1986;
Senior Vice President and Chief Investment
Officer, Paine Webber Properties
Incorporated, Boston, Massachusetts
1981-1984.
John A. Cervieri Jr. 67 Managing Trustee of Property Capital
(Chairman of the Board) Trust, Boston, Massachusetts since 1969;
Chairman and President of Property Capital
Associates and its affiliates since 1971;
Director, Bank of Boston Corporation,
Director of First National Bank of Boston,
Boston, Massachusetts, since 1996;
Director of BayBanks, Inc., Boston,
Massachusetts, 1980 - 1996.
William A. Kaynor 74 Senior Counsel to law firm of Davis Polk &
Wardwell, New York, 1991-1995; Partner, Akin
Bay Company, Securities, New York City,
1991-1995; Secretary and Director, Segue
Software, Inc., Newton Centre, MA., 1991-1995;
consultant to Unit Investment Trust Division,
Merrill Lynch, Pierce Fenner & Smith,
Incorporated, 1989-1990; Partner, Davis Polk &
Wardwell, 1961-1989.
John F. Sexton 65 Chairman of the Board, Evans-McKinsey &
Company, Dallas, Texas; Director, Forum
Retirement Partners; Director, Mutual Equity
Mortgage Company; Chief Financial Officer,
Lomas Financial Corporation through 1992.
The Corporation's By-Laws provide that at the Annual Meeting of Stockholders
the stockholders shall elect directors to hold office until the next annual
meeting and until their successors are elected and qualify. All individuals have
served as Directors of the Corporation since 1981 except Mr. John F. Sexton who
was elected in 1982, and Mr. George H. Bigelow who was elected in 1986.
23
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is hereby incorporated by reference to
the Corporation's definitive proxy statement related to its annual meeting of
shareholders to be held on June 11, 1998.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is hereby incorporated by reference to
the Corporation's definitive proxy statement related to its annual meeting of
shareholders to be held on June 11, 1998.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is hereby incorporated by reference to
the Corporation's definitive proxy statement related to its annual meeting of
shareholders to be held on June 11, 1998.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Documents filed as part of this report:
1. Financial Statements of the Corporation:
See Item 8 of this Form 10-K
2. Financial Statement Schedules:
All financial statement schedules for which provision is made in the
applicable accounting regulations of the Securities and Exchange
Commission are either not required under the related instructions or
the required information is set forth in the financial statements or
notes thereto.
3. Articles of Incorporation and By-Laws
3.1 Composite Articles of Incorporation of the
Corporation (Exhibit 3.1 of the Corporation's Annual Report
on Form 10-K for the period ended December 31, 1982).
3.2 By-Laws of the Corporation as amended (Exhibit 3.2 of the
Corporation's Annual Report on Form 10-K for the period
ended December 31, 1983).
10. Material Contracts
10.1 Advisory Agreement between the
Corporation and the Advisor dated December 1, 1990.
(b) Reports on Form 8-K:
No Form 8-K was filed by the Corporation during the last quarter of
the period covered by this report.
24
<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.
AMERICANA HOTELS AND REALTY CORPORATION
REGISTRANT
By /s/ George H.Bigelow
--------------------------
George H. Bigelow
Chief Financial Officer
March 24, 1998
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities and on the date indicated.
/s/ John A. Cervieri Jr. Chairman of the Board and
- --------------------------- Principal Executive Officer March 5, 1998
John A. Cervieri Jr.
/s/ George H. Bigelow Director, President and
- --------------------------- Chief Operating and Financial
George H. Bigelow Officer March 5, 1998
/s/ William A. Kaynor Director March 5, 1998
- ---------------------------
William A. Kaynor
/s/ John F. Sexton Director March 5, 1998
- ---------------------------
John F. Sexton
25
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 202,000
<SECURITIES> 0
<RECEIVABLES> 2,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,295,000
<PP&E> 12,170,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 7,295,000
<CURRENT-LIABILITIES> 55,000
<BONDS> 1,521,000
0
0
<COMMON> 6,524,375
<OTHER-SE> (895,000)
<TOTAL-LIABILITY-AND-EQUITY> 7,295,000
<SALES> 0
<TOTAL-REVENUES> 1,085,000
<CGS> 0
<TOTAL-COSTS> 1,061,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 24,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 24,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,000
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
