<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the
[X] Definitive proxy statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
MURRAY INCOME PROPERTIES I, LTD.
(Name of Registrant as Specified in Its Charter)
Not Applicable
(Name of Person(s) Filing proxy statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
Limited Partnership Interests
___________________________________________________________________________
(2) Aggregate number of securities to which transaction applies: 28,227
___________________________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined): $19,653,000.
Pursuant to Rule O-11(c)(2), the fee was calculated on the basis of the
amount of cash that is estimated to be received by the Registrant from
the net sales proceeds from the sales of all of the Registrant's
properties assuming that the properties are sold for 95% of their
appraised value (as of December 31, 1998), which is a condition to the
sale of the properties.
___________________________________________________________________________
(4) Proposed maximum aggregate value of transaction: $19,653,000
___________________________________________________________________________
(5) Total fee paid: $3,931
[X] Fee paid previously with preliminary materials.
___________________________________________________________________________
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
MURRAY INCOME PROPERTIES I, LTD.
NOTICE OF SPECIAL MEETING OF LIMITED PARTNERS
TO BE HELD ON MARCH 10, 2000
To the limited partners:
You are cordially invited to attend the special meeting of limited partners
of Murray Income Properties 1, Ltd. to be held at 9:00 a.m. Dallas, Texas time,
on March 10, 2000 at 2200 Ross Avenue, Suite 2000, Dallas, Texas to consider and
act upon the following proposals:
PROPOSAL 1. The approval of the sale of the partnership's portfolio of
properties, in one or a series of sale transactions (which
may include one or more properties owned by Murray Income
Properties II, Ltd., an affiliate of the partnership under
joint management), the subsequent dissolution and
liquidation of the partnership upon the sale of the
partnership's last property and an amendment to the
partnership agreement to permit the proposed asset sale,
dissolution and liquidation on the terms set forth in the
attached proxy statement.
PROPOSAL 2. Such other matters as may properly come before the special
meeting or any adjournments thereof.
The record date for the special meeting is January 10, 2000. Only limited
partners of record at the close of business on that date are entitled to notice
of and to vote at the special meeting, or any adjournments of that meeting. The
affirmative vote of the holders of a majority of the outstanding limited
partnership interests on the record date is necessary to approve the proposal.
IT IS IMPORTANT THAT YOUR LIMITED PARTNERSHIP INTERESTS BE REPRESENTED AT
THE SPECIAL MEETING REGARDLESS OF THE NUMBER OF LIMITED PARTNERSHIP INTERESTS
YOU HOLD. YOU ARE INVITED TO ATTEND THE SPECIAL MEETING in PERSON, BUT WHETHER
OR NOT YOU ATTEND, PLEASE ENSURE YOUR REPRESENTATION BY COMPLETING, SIGNING AND
DATING THE ACCOMPANYING PROXY CARD AND RETURNING IT IN THE ENCLOSED ENVELOPE,
WHICH REQUIRES no postage if MAILED IN THE UNITED STATES. IN ADDITION, YOU MAY
ALSO VOTE VIA TELEPHONE BY CALLING (800) 213-7567 OR VIA THE INTERNET AT
WWW.RROUBYNET.COM/MURRAL. YOU WILL NEED YOUR CONTROL NUMBER FROM YOUR PROXY CARD
TO VOTE VIA TELEPHONE OR THE INTERNET. YOUR GIVING OF YOUR PROXY WILL NOT AFFECT
YOUR RIGHTS TO VOTE IN PERSON AT THE SPECIAL MEETING. YOU MAY REVOKE YOUR PROXY
BY GIVING WRITTEN NOTICE TO BRENT BUCK AT THE PARTNERSHIP'S PRINCIPAL EXECUTIVE
OFFICE PRIOR TO THE BEGINNING OF THE SPECIAL MEETING, EXECUTING A
SUBSEQUENT-DATED PROXY OR BY ATTENDING THE SPECIAL MEETING AND VOTING IN PERSON.
By order of the general partners
Murray Realty Investors VIII, Inc.
Mitchell Armstrong, President
Crozier Partners VIII Ltd.
Jack E. Crozier, General Partner
5550 LBJ Freeway
Suite 675
Dallas, Texas 75240
(800) 765-3863
January 14, 2000
<PAGE> 3
MURRAY INCOME PROPERTIES
January 14, 2000
Dear limited partners:
You are cordially invited to attend a special meeting of the limited
partners of Murray Income Properties I, Ltd. to be held at 9:00 a.m. Dallas,
Texas time on March 10, 2000. The special meeting will be held at 2200 Ross
Avenue, Suite 2000, Dallas, Texas. Please make an effort to either attend the
meeting or return your proxy vote by mail, or vote by telephone or the Internet,
so that your vote is received by the general partners no later than March 8,
2000.
At the special meeting, you will be asked to consider and vote upon a
single proposal to:
o approve the sale of the partnership's portfolio of properties, in one
or a series of sale transactions (which properties may be sold with
one or more properties owned by Murray Income Properties II, Ltd., an
affiliate of the partnership under joint management ("MIP II"));
o dissolve and liquidate the partnership upon the sale of the final
property owned by the partnership; and
o amend the partnership agreement in order to permit the proposed asset
sale and dissolution.
At this time, the partnership has not entered into any agreement for the
sale of any of the partnership's properties, nor have any of the properties been
actively marketed for sale. If the asset sale, dissolution and amendment
proposal is approved, the general partners will proceed to sell the properties
as soon as practicable, consistent with obtaining fair value for the properties.
A condition placed on the sales of the properties is that the entire portfolio
of properties owned by the partnership (the "Portfolio") must be sold for at
least 95% of its appraised value (as of December 31, 1998) as reflected in the
independent appraisals prepared by Joseph J. Blake and Associates, Inc. As of
December 31, 1998, the appraised value of the Portfolio was $21,960,000, and 95%
of its appraised value was $20,862,000.
The partnership agreement generally provides that cash proceeds from sales
of the partnership's properties be distributed 99% to the limited partners and
1% to the general partners. However, upon the sale of the partnership's final
property, the partnership agreement requires cash to be distributed to the
partners pro rata in proportion to their existing capital accounts. Hence, the
amount of cash available for distribution to the limited partners is dependent
upon which of the partnership's properties is sold last due to the variations in
the capital accounts of the partners. The amount to be received by the limited
partners is also subject to uncertainties surrounding the estimation of future
operating income and expenses, as well as the estimation of sales costs.
Therefore, because of these numerous variables, the general partners believe
that it is impractical to provide you with a meaningful distribution estimate
per limited partnership interest.
The enclosed materials discuss the proposal in detail, but we would like to
summarize the primary reasons for recommending that you approve the proposed
asset sale and dissolution.
o The general partners believe that both the markets where the
partnership's properties are located and the real estate market in
general have significantly improved from the real estate recession
which occurred in the late 1980's and early 1990's. Holding the
properties in hopes of further gains in value may put at risk the
selling opportunity provided by this favorable market.
o A significant percentage of the properties' leases have been renewed
over the past several years. Most of these renewals have achieved
higher rental rates than the leases which expired, thereby increasing
the
5550 LBJ Freeway, Suite 675, Dallas, Texas 75240 (972)991-9090 FAX (972)991-9086
<PAGE> 4
value of the properties. Because most of the leases have terms of
three to five years, the general partners believe it will be several
years before further significant increases in value will occur.
o The properties have been maintained in good condition since they were
purchased and there is currently little deferred maintenance among the
partnership's properties. However, as the properties age, the cost of
repairs and maintenance will increase and this could have a negative
impact on their value in the future.
In considering whether to submit the asset sale, dissolution and
amendment proposal to the limited partners, the general partners also considered
the disadvantages of this course of action. The primary disadvantages of
disposing of the partnership's properties and dissolving the partnership
pursuant to this proposal are:
o There can be no assurance that the proposed asset sale and dissolution
will result in greater returns to the limited partners than a
continuation of the partnership. With respect to the partnership's
properties, as a result of the completion of the proposed asset sale
and dissolution, the partnership would not benefit from possible
improvements in economic and market conditions which could produce
increased cash flow and enhance the sales price of the properties.
o There is no guarantee that the other alternatives considered by the
general partners, if pursued, would not produce greater value for the
limited partners.
Additional factors that you should consider in determining whether to
approve the proposal are set forth in the attached proxy statement, to which
this summary is qualified in its entirety, including under the section entitled
"Risk Factors Relating to the Proposal."
The general partners' current goal is to complete the sale of the
properties within approximately six to nine months after approval of the asset
sale, dissolution and amendment proposal has been obtained. Prior to completion
of the sale of all of the properties, the general partners intend, but are not
obligated, to make at least one interim distribution of net proceeds from the
sales of the properties. The partnership also intends to continue to make
quarterly distributions of cash from operations.
The net proceeds of the sales of the partnership's properties (after
deducting the expenses of the sale and payment of certain fees, such as
accounting fees, legal fees and printing, solicitation and mailing expenses), as
well as the partnership's cash from operations, will be distributed to the
partners in accordance with the partnership agreement. After the sale of all the
partnership's properties, and after the partnership has paid, or made adequate
provision for, all its liabilities, the partnership will be dissolved. A vote in
favor of the proposal for the sale of all of the partnership's properties will
also be a vote in favor of the dissolution and liquidation of the partnership
following the sale of its last property and a vote in favor of the partnership
agreement amendment. Holders of at least a majority of the partnership's
outstanding limited partnership interests must approve the proposal in order for
the proposed transactions to proceed.
ALTHOUGH THE GENERAL PARTNERS BELIEVE THE PROPOSED ASSET SALE AND
DISSOLUTION AND THE RELATED PARTNERSHIP AGREEMENT AMENDMENT ARE IN THE BEST
INTERESTS OF THE LIMITED PARTNERS, YOU SHOULD CAREFULLY REVIEW THE ATTACHED
PROXY STATEMENT AND CONSULT YOUR OWN ADVISORS IN ORDER TO MAKE AN INFORMED VOTE
ON THE PROPOSAL. APPROVAL OF THE PROPOSAL REQUIRES THE AFFIRMATIVE VOTE OF THE
HOLDERS OF A MAJORITY OF THE PARTNERSHIP'S OUTSTANDING LIMITED PARTNERSHIP
INTERESTS. IF THE LIMITED PARTNERS DO NOT APPROVE THE PROPOSAL, THE PARTNERSHIP
WILL CONTINUE TO PURSUE ITS BUSINESS OBJECTIVES RELATING TO OPERATING AND
LIQUIDATING ITS PROPERTIES PRIOR TO JANUARY 31, 2020. THE LIMITED PARTNERS OF
MIP II, A PARTNERSHIP WHICH IS JOINTLY MANAGED WITH THE PARTNERSHIP, ARE ALSO
BEING ASKED TO APPROVE A SIMILAR ASSET SALE AND DISSOLUTION PROPOSAL. BECAUSE
THE PARTNERSHIP AND MIP II SHARE GENERAL AND ADMINISTRATIVE EXPENSES INCURRED BY
BOTH PARTNERSHIPS, THE APPROVAL BY MIP II'S LIMITED PARTNERS AND THE DISAPPROVAL
BY THE PARTNERSHIP'S LIMITED PARTNERS OF THEIR RESPECTIVE ASSET SALE AND
DISSOLUTION PROPOSALS MAY SIGNIFICANTLY INCREASE THE PARTNERSHIP'S COSTS AND
DECREASE THE AMOUNT OF CASH AVAILABLE FOR DISTRIBUTION IN THE FUTURE.
Enclosed with this letter are a notice of special meeting and a proxy
statement which describe in detail the proposed asset sale, dissolution and
partnership agreement amendment. Please give all of the materials your careful
attention and consideration. It is important that your limited partnership
interests be represented at the special meeting, regardless of the number of
limited partnership interests you hold.
<PAGE> 5
Accompanying the proxy statement is a proxy card which may be used to
indicate your vote on the proposals. You can cast your vote by appearing in
person and voting at the meeting, or by voting by proxy in one of the following
ways:
o By signing, dating and returning the enclosed proxy card to Morrow &
Co., Inc., using the enclosed postage-paid envelope.
o By calling the automated touch-tone telephone system 24 hours a day at
(800) 213-7567, entering your control number from your proxy card and
following the voice prompts to record your vote.
o By visiting the Internet website www.proxybynet.com/murray and
entering your control number from your proxy card and registering your
vote.
If you vote using the telephone or the Internet, please do NOT mail in your
proxy card. Your giving of the proxy will not affect your rights to vote at the
special meeting. You may revoke your proxy by:
o Executing a subsequent-dated proxy and delivering it to Brent Buck,
the secretary of the corporate general partner, at the partnership's
principal executive office;
o Giving written notice prior to the beginning of the special meeting to
Brent Buck at the partnership's principal executive office; or
o Attending the special meeting and voting in person.
YOU SHOULD CAREFULLY CONSIDER THE MATTERS SET FORTH UNDER "RISK FACTORS RELATING
TO THE PROPOSAL" STARTING ON PAGE 12 OF THE PROXY STATEMENT.
If you have any questions about the enclosed proxy materials or the
proposed sale of the partnership's properties and the subsequent dissolution and
liquidation of the partnership, please call the partnership at (800) 765-3863.
Sincerely,
THE GENERAL PARTNERS
Murray Realty Investors VIII, Inc.
By: /s/ MITCHELL ARMSTRONG
Mitchell Armstrong, President
By: /s/ BRENT BUCK
Brent Buck, Executive Vice President and Secretary
Crozier Partners VIII, Ltd.
By: /s/ Jack E. Crozier
Jack E. Crozier, General Partner
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<S> <C>
FORWARD-LOOKING STATEMENTS.......................................................................................1
QUESTIONS AND ANSWERS ABOUT THE PROPOSED SALE OF PROPERTIES AND DISSOLUTION......................................2
THE SPECIAL MEETING..............................................................................................5
Time, Date and Place of Special Meeting.................................................................5
Purpose of the Special Meeting and Recommendation of the General Partners...............................5
Record Date and Partnership Interests...................................................................5
Intentions to Vote by the General Partners..............................................................5
Quorum and Voting of Proxies............................................................................6
Revocation of Proxies...................................................................................6
Voting Rights...........................................................................................6
Vote Required...........................................................................................6
No Dissenters' or Appraisal Rights Under Texas Law or the Partnership Agreement.........................6
Proxy Solicitation and Expenses.........................................................................6
Completion of Proxies...................................................................................7
Documents Included......................................................................................7
THE PROPOSAL: AUTHORIZATION OF THE SALE OF ALL OF THE PARTNERSHIP'S PROPERTIES, DISSOLUTION OF THE
PARTNERSHIP AND AMENDMENT OF THE PARTNERSHIP AGREEMENT...........................................................8
The Partnership.........................................................................................8
Descriptions of the Properties..........................................................................8
Background for the Asset Sale...........................................................................9
Terms of the Asset Sale.................................................................................9
Abandonment and Events Requiring Solicitation or Subsequent Approval...................................10
Effect of the Asset Sale - Dissolution and Liquidation.................................................10
Certain Relationships with Third Parties...............................................................11
General Partners and Indemnification...................................................................12
RISK FACTORS RELATING TO THE PROPOSAL...........................................................................12
FAIRNESS OF THE ASSET SALE AND DISSOLUTION......................................................................16
The General Partners' Recommendation and Reasons for the Proposed Asset Sale and Dissolution...........16
Alternatives to the Asset Sale and Dissolution.........................................................18
Alternative One: Continuation of Partnership..................................................18
Alternative Two: Reorganization of Partnership as a REIT......................................19
Alternative Three: Leveraged Recapitalization.................................................20
Alternative Four: Merger with Another Entity..................................................21
Appraisals of Properties...............................................................................21
</TABLE>
i
<PAGE> 7
<TABLE>
<S> <C>
Selection and Qualifications of Appraiser..............................................................22
Summary of Methodology.................................................................................22
Valuation Methodology - Income Capitalization Approach........................................22
Valuation Methodology - Sales Comparison Approach.............................................23
Conclusions as to Value................................................................................23
Assumptions, Limitations and Qualifications of Appraisals..............................................23
Compensation and Material Relationships................................................................25
Offers from Third Parties..............................................................................25
AMENDMENT TO THE PARTNERSHIP AGREEMENT..........................................................................25
SELECTED FINANCIAL DATA.........................................................................................26
FEDERAL INCOME TAX CONSEQUENCES.................................................................................27
CONFLICTS OF INTEREST AND INTERESTS OF CERTAIN PERSONS IN THE PROPOSAL..........................................30
REGULATORY MATTERS..............................................................................................31
ACCOUNTING TREATMENT............................................................................................31
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF THE PARTNERSHIP...............................31
ABSENCE OF PUBLIC MARKET FOR LIMITED PARTNERSHIP INTERESTS......................................................32
FEES AND EXPENSES...............................................................................................32
INFORMATION CONCERNING AUDITORS.................................................................................32
LIMITED PARTNER PROPOSALS.......................................................................................32
OTHER MATTERS...................................................................................................32
WHERE YOU CAN FIND MORE INFORMATION.............................................................................32
INCORPORATION BY REFERENCE......................................................................................34
</TABLE>
APPENDIX A - BLAKE AND ASSOCIATES SUMMARY OF PROPERTY APPRAISALS
APPENDIX B - ANNUAL REPORT ON FORM 10-K (FOR THE YEAR ENDED DECEMBER 31,
1998)
APPENDIX C - QUARTERLY REPORT ON FORM 10-Q (FOR THE QUARTER ENDED
SEPTEMBER 30, 1999)
APPENDIX D - LISTING AGREEMENT WITH TC TENNESSEE, INC.
APPENDIX E - PROPOSED AMENDMENT TO THE AMENDED AND RESTATED
CERTIFICATE AND AGREEMENT OF LIMITED PARTNERSHIP
ii
<PAGE> 8
FORWARD-LOOKING STATEMENTS
Statements in this proxy statement that are not historical facts are
"forward-looking statements" within the meaning of the safe harbor provided by
Section 21E of the Securities Exchange Act of 1934. The words "may,"
"estimates," "believes," "anticipates," "expects," "intends" and similar
expressions are intended to identify these forward-looking statements. These
statements involve known and unknown risks and uncertainties that may cause the
partnership's actual results or outcomes, including the amount of cash estimated
to be distributed to the limited partners upon completion of the proposed sale
of the partnership's remaining portfolio properties, to be materially different
from those anticipated and discussed in this proxy statement. Important factors
that the partnership believes might cause such differences include the amount
and nature of liabilities that may be asserted against the partnership, the
general partners' inability to find a suitable buyer or buyers for the
properties, the inability to agree on a purchase price or contract terms with a
potential buyer, a decrease in the financial performance of the properties, the
discovery of an environmental condition on one or more properties, the condition
of real estate markets and general economic conditions, as well as those
specific risks that are discussed in this proxy statement and in the
partnership's previous filings with the Securities and Exchange Commission. In
assessing forward-looking statements contained herein, the limited partners are
urged to read carefully all cautionary statements contained in this proxy
statement and in those other filings made by the partnership with the SEC.
1
<PAGE> 9
QUESTIONS AND ANSWERS ABOUT THE PROPOSED SALE OF PROPERTIES AND DISSOLUTION
THE FOLLOWING QUESTIONS AND ANSWERS ARE INTENDED TO PROVIDE BRIEF ANSWERS
TO FREQUENTLY ASKED QUESTIONS CONCERNING THE PROPOSAL AND PROXY STATEMENT
PROCESS. THESE QUESTIONS AND ANSWERS DO NOT, AND ARE NOT INTENDED TO, ADDRESS
ALL THE QUESTIONS THAT MAY BE IMPORTANT TO YOU. YOU SHOULD CAREFULLY READ THE
REMAINDER OF THIS PROXY STATEMENT AS WELL AS THE APPENDICES AND THE DOCUMENTS
INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT.
Q. WHO IS SOLICITING MY PROXY?
A. The general partners of the partnership.
Q. WHERE AND WHEN IS THE SPECIAL MEETING?
A. The special meeting will be held at 9:00 a.m., Dallas, Texas time, on March
10, 2000, at 2200 Ross Avenue, Suite 2000, Dallas, Texas.
Q. WHAT AM I VOTING ON?
A. The general partners are seeking the authorization of the limited partners
of a single proposal to:
o sell all of the partnership's portfolio of properties, in one or a
series of sale transactions;
o dissolve and liquidate the partnership after the sale of the last
property; and
o amend the partnership agreement to permit the proposed transactions.
Q. HOW MUCH WILL THE PARTNERSHIP'S PROPERTIES BE SOLD FOR?
A. The general partners will work diligently to achieve the highest price
possible for each of the partnership's properties. However, to help ensure
you that the properties will not be sold if market conditions deteriorate,
a condition to the sale of the partnership's properties is that the entire
portfolio of properties owned by the partnership (the "Portfolio") must be
sold for at least 95% of the appraised value of the Portfolio (as of
December 31, 1998), as reflected in independent appraisals obtained by the
partnership.
Q. HOW MUCH WILL I GET IF ALL THE PROPERTIES ARE SOLD?
A. The general partners believe that it is impractical to provide you with a
distribution estimate that is meaningful because of the numerous
uncertainties in such a calculation, including:
o the possibility that the general partners may sell the partnership's
properties for a price in excess of 95% of their appraised values (as
of December 31, 1998);
o the difficulty in estimating future operating income and expenses;
o the difficulty in estimating expenses relating to the property sales;
and
o the ability of the general partners to decide which property to sell
last, which will affect the distribution amount to limited partners
due to variations in the partners' capital accounts.
However, assuming that the general partners sold the partnership's
Portfolio for the minimum allowed amount, which is 95% of its appraised
value as of December 31, 1998, the general partners currently estimate net
sale proceeds to the partnership of $19,653,000. However, the partnership
may receive less than this amount if sales costs exceeds the general
partners' estimates.
Q. WHEN WILL DISTRIBUTIONS BE MADE AND THE PARTNERSHIP DISSOLVED?
A. The general partners anticipate that the partnership will complete the sale
of all of the properties within six to nine months. However, it could take
more or less time, as further described in this proxy statement. Hence, the
partnership will not be dissolved prior to late 2000, and potentially not
until 2001 or beyond. Prior to completion of the sale of all of the
properties and the dissolution of the partnership, the general partners
intend, but are not obligated, to make at least one interim distribution of
net proceeds from the sales of the properties prior to the sale of the
partnership's final property.
2
<PAGE> 10
Q. WILL I HAVE APPRAISAL RIGHTS?
A. No. You will not have dissenters' or appraisal rights as a result of this
transaction.
Q. WHAT DO THE GENERAL PARTNERS RECOMMEND?
A. The general partners recommend that you vote in favor of the proposal. The
general partners have analyzed market conditions and property performance,
and have consulted with the partnership's financial advisors. Based on this
assessment, the general partners believe that the proposed asset sale and
dissolution is the most favorable strategic alternative available to the
partnership and its limited partners. The primary reasons that the general
partners believe make the proposal advisable include, but are not limited
to:
o The general partners believe that both the markets where the
partnership's properties are located and the real estate market in
general have significantly improved from the real estate recession
which occurred in the late 1980's and early 1990's, and that holding
the properties in hopes of further gains in value may put at risk
selling opportunities provided by the current real estate market.
o A significant portion of the properties' leases have been recently
renewed, often at higher rates than in prior leases, and the general
partners believe that it will be several years before further
significant value increases will occur.
o As the properties age, the cost of repairs could have a negative
impact on their value.
Q. WHAT ARE THE PRIMARY DISADVANTAGES OF DISPOSING OF THE PROPERTIES AS
PROPOSED?
A. There can be no assurance that the proposal, if approved, will result in
greater returns to the limited partners than a continuation of the
partnership. The partnership will not benefit from possible improvements in
economic and market conditions after the properties are sold which could
produce increased cash flow and enhance the sales price of the properties.
Also, there is no guarantee that the other alternatives considered by the
general partners, if pursued, would not produce greater value for the
limited partners. However, as noted above, the general partners believe
that this is an advantageous time for the sale of the properties. As a
result of the uncertainty of future real estate market conditions, the
general partners do not believe the possibility of continued improvements
in economic and market conditions justifies postponing the sale of the
properties. Additional factors that you should consider in determining
whether to consent to the proposal are set forth in this proxy statement,
including under the section entitled "Risk Factors Relating to the
Proposal."
Q. WHAT WILL HAPPEN IF THE VOTE DOES NOT PASS?
A. If the vote does not pass, the partnership will continue to operate as it
has in the past. The general partners will continue to try to improve the
partnership's return on investment, and eventually liquidate the
partnership in accordance with the partnership agreement on or before
January 31, 2020. Further, the limited partners of an affiliated
partnership, Murray Income Properties II, Ltd. ("MIP II"), are being asked
to approve a proposal similar to the one in this proxy statement. If the
limited partners of MIP II approve their proposal and the partnership's
limited partners do not approve the proposal in this proxy statement, the
partnership would have to bear all administrative costs which are currently
shared by both partnerships which could reduce the amount of cash available
for distribution in the future.
Q. WHOM CAN I CALL WITH QUESTIONS?
A. If you have any questions regarding the proxy card or the proposal
described in this proxy statement, please call Brent Buck or Mitchell
Armstrong at the partnership at (800) 765-3863. The partnership can also be
reached by mail at its principal executive office:
Murray Income Properties I, Ltd.
5550 LBJ Freeway
Suite 675
Dallas, Texas 75240
Q. WHAT HAPPENS IF I DO NOT RETURN MY PROXY CARD AND DO NOT VOTE?
A. The effect will be a vote against the proposal described in this proxy
statement.
Q. WHO CAN VOTE ON THE PROPOSAL?
A. Only limited partners of record on January 10, 2000 are entitled to vote on
the proposal.
3
<PAGE> 11
Q. IS THE PROPOSED ASSET SALE AND SUBSEQUENT DISSOLUTION AND LIQUIDATION OF
THE PARTNERSHIP A TAXABLE TRANSACTION TO LIMITED PARTNERS?
A. Yes, the partnership will realize and recognize gain or loss separately for
each property when it is sold. The gain or loss realized and recognized by
the partnership upon the sale of each property will be allocated to the
partners in accordance with the partnership agreement. The distribution of
the cash received by the partnership from the sale of its interests in its
properties will result in taxable gain to a limited partner to the extent
that the amount of cash received by the limited partner exceeds its
adjusted basis in its limited partnership interests. If, following the sale
of the last property and the allocation of the gain or loss therefrom, a
limited partner receives aggregate cash distributions that are less than
its adjusted tax basis in its limited partnership interests, the limited
partner will recognize a loss equal to the excess of its adjusted basis in
its limited partnership interests over the aggregate cash distributions
received by the limited partner.
Q. HOW CAN I VOTE?
A. You may vote in any of the following ways:
o By completing, signing and dating the enclosed proxy card and mailing
it in the enclosed postage-paid envelope.
o By calling our automated touch-tone telephone system 24 hours a day at
(800) 213-7567, entering your control number from your proxy card and
following the voice prompts.
o By visiting the Internet website at www.proxybynet.com/murray,
entering your control number from your proxy card and registering your
vote.
o By attending the special meeting and voting in person.
If you vote using the telephone or Internet, please do NOT mail in your proxy
card.
Q. CAN I CHANGE MY VOTE AFTER I HAVE MAILED A SIGNED PROXY?
A. Yes. You can change your vote in one of three ways at any time before the
beginning of the special meeting:
o You can revoke your proxy by delivering a written notice to Brent
Buck, the secretary of the corporate general partner, at the
partnership's principal executive offices.
o You can complete a new, later-dated proxy and deliver it to Brent Buck
at the partnership's principal executive offices.
o You can attend the special meeting and vote in person.
Q. HAS THE PARTNERSHIP SOUGHT A FAIRNESS OPINION ON THE PROPOSED ASSET SALE
AND DISSOLUTION?
A. No. However, Joseph J. Blake and Associates, Inc. has made independent
appraisals as to the value of the partnership's properties, as of December
31, 1998.
The foregoing is a summary in question and answer format of certain
information contained in this proxy statement. Reference is made to, and this
question and answer information sheet is qualified in its entirety by, the more
detailed information contained in this proxy statement, including its
appendices. YOU ARE STRONGLY URGED TO CAREFULLY READ THIS PROXY STATEMENT AND
ITS APPENDICES IN THEIR ENTIRETY BEFORE YOU VOTE.
4
<PAGE> 12
MURRAY INCOME PROPERTIES I, LTD.
5550 LBJ FREEWAY, SUITE 675
DALLAS, TEXAS 75240
(800) 765-3863
PROXY STATEMENT
SPECIAL MEETING OF LIMITED PARTNERS
TO BE HELD ON MARCH 10, 2000
THE SPECIAL MEETING
TIME, DATE AND PLACE OF SPECIAL MEETING
This proxy statement is being furnished in connection with the solicitation
of proxies by the general partners of Murray Income Properties I, Ltd., a Texas
limited partnership, for use at the special meeting of limited partners to be
held at 9:00 a.m. (Dallas, Texas time) on March 10, 2000 at 2200 Ross Avenue,
Suite 2000, Dallas, Texas and at any meeting held upon adjournment or
postponement thereof.
Copies of this proxy statement, the attached notice of special meeting of
limited partners, and the enclosed form of proxy are first being mailed to the
limited partners on or about January 14, 2000.
PURPOSE OF THE SPECIAL MEETING AND RECOMMENDATION OF THE GENERAL PARTNERS
At the special meeting, the limited partners will consider a single
proposal to authorize the:
o Sale of the partnership's properties, in one or a series of sale
transactions (which may include properties from Murray Income Properties
II, Ltd., an affiliate of the partnership under joint management ("MIP
II"));
o Dissolution and liquidation of the partnership after the partnership's last
property has been sold; and
o Amendment of the partnership agreement to permit the proposed asset sale
and dissolution.
The Amended and Restated Certificate and Agreement of Limited Partnership
of the partnership requires the partnership to obtain the affirmative vote of a
majority of the partnership's limited partnership interests in order to approve
the proposal. Each limited partnership interest is entitled to one vote. As soon
as practicable after the adoption of the proposal, the partnership will file the
amendment to the partnership agreement with the Texas Secretary of State and
implement the proposal authorized.
THE GENERAL PARTNERS HAVE BOTH INDEPENDENTLY APPROVED THE PROPOSAL (SUBJECT
TO LIMITED PARTNER APPROVAL) AND RECOMMEND THAT THE LIMITED PARTNERS APPROVE THE
PROPOSAL.
If a majority of the outstanding limited partnership interests as of the
record date do not vote in favor of the proposed asset sale, dissolution and
partnership agreement amendment, the partnership will continue operating in
accordance with its existing business plan, and will eventually sell its
properties and dissolve on or before January 31, 2020.
RECORD DATE AND PARTNERSHIP INTERESTS
Your general partners have fixed the close of business on January 10, 2000
as the record date for the determination of limited partners entitled to notice
of, and to vote at, the special meeting or any adjournment thereof. Accordingly,
only limited partners of record at the close of business on the record date will
be entitled to vote at the special meeting, either by proxy or in person. As of
the record date, there were 2,225 limited partners of record holding an
aggregate of 28,227 limited partnership interests.
INTENTIONS TO VOTE BY THE GENERAL PARTNERS
The general partners, and their officers and directors, do not own any
limited partnership interests and will not have any vote at the special meeting.
5
<PAGE> 13
QUORUM AND VOTING OF PROXIES
The presence at the special meeting, in person or by proxy, of the holders
of 50% of the partnership's outstanding limited partnership interests on the
record date will constitute a quorum at the special meeting. Limited partnership
interests which are represented by properly executed proxy cards received by the
partnership at or prior to the special meeting, and not duly and timely revoked,
will be voted according to the instructions indicated on the proxy card. If you
do not return your proxy card and do not vote at the special meeting, the effect
will be a vote of your limited partnership interests AGAINST the proposal.
Limited partnership interests represented by proxies that reflect
abstentions will be treated as limited partnership interests that are present
and entitled to vote for purposes of determining the presence of a quorum. In
the event that a quorum is not present at the special meeting, the meeting will
be adjourned or postponed to solicit additional proxies. The persons named as
proxies with respect to the special meeting may propose and vote for one or more
adjournments of the special meeting to permit further solicitation of proxies in
favor of the proposal. No proxy which is voted against any proposal will be
voted in favor of any such adjournment or postponement.
Limited partnership interests represented by "broker non-votes" will not be
included in the affirmative vote totals, and therefore will have the same effect
as voting AGAINST the proposal for purposes of determining whether the requisite
amount of limited partnership interests have voted in favor of the proposal.
"Broker non-votes" include limited partnership interests held in record name by
brokers or nominees as to which:
o an executed proxy card has not been received from the beneficial owners or
persons entitled to vote at the special meeting;
o the broker or nominee does not have discretionary voting authority under
applicable rules or the instrument under which it serves in such capacity;
or
o the recordholder has indicated on the proxy card or has otherwise notified
the partnership that it does not have authority to vote the limited
partnership interests with respect to the proposal contained in this proxy
statement.
REVOCATION OF PROXIES
You have the power to revoke your proxy at any time prior to the beginning
of the special meeting by:
o delivering a written notice of revocation to Brent Buck, the secretary of
Murray Realty Investors VIII, Inc., the corporate general partner, at the
partnership's principal executive offices;
o executing and delivering a proxy bearing a later date to Brent Buck at the
partnership's principal executive offices; or
o appearing in person and voting by ballot at the special meeting.
VOTING RIGHTS
Each limited partnership interest is entitled to one vote on each matter to
be acted upon or which may properly come before the special meeting. The limited
partnership interests constitute the only outstanding voting interests in the
partnership with respect to these matters.
VOTE REQUIRED
The affirmative vote of the holders of at least a majority of the limited
partnership interests outstanding on the record date is required to approve the
asset sale, dissolution and amendment proposal. Your failure to return your
proxy or to vote at the special meeting, or submitting a proxy that is marked
"ABSTAIN," will have the effect of voting AGAINST approval of the proposal.
NO DISSENTERS' OR APPRAISAL RIGHTS UNDER TEXAS LAW OR THE PARTNERSHIP AGREEMENT
Limited partners are not entitled to appraisal rights, dissenters' rights
or any other rights with respect to the proposed asset sale and dissolution
under the Texas Revised Limited Partnership Act or the partnership agreement.
PROXY SOLICITATION AND EXPENSES
The proxy is being solicited on behalf of the partnership by the general
partners. All expenses of this solicitation, including the cost of preparing,
assembling, and mailing this proxy solicitation material and notice of special
meeting of the limited partners, will be paid by the partnership. Additional
solicitation of limited partners by mail, telephone,
6
<PAGE> 14
facsimile or by personal solicitation may be done by your general partners, for
which they will receive no additional compensation. The partnership intends to
transmit the proxy statement and form of proxy directly to all beneficial owners
who have not objected to the disclosure of their name and limited partnership
interest holdings to the partnership. Brokerage houses and other nominees,
fiduciaries and custodians nominally holding limited partnership interests as of
the record date will be requested to forward proxy soliciting material to the
beneficial owners of such limited partnership interests who have objected to
disclosure of their names and holdings to the partnership, and will be
reimbursed by the partnership for their reasonable out-of-pocket expenses.
COMPLETION OF PROXIES
The general partners ask that you vote your proxy in one of the following
ways:
o By completing, signing and dating the enclosed proxy card and mailing it in
the enclosed postage-paid envelope.
o By calling the automated touch-tone telephone system at (800) 213-7567,
entering your control number from your proxy card and following the voice
prompts.
o By visiting the Internet website at www.proxybynet.com/murray, entering
your control number from your proxy card and registering your vote.
o By attending the special meeting and voting in person.
If you vote using the telephone or Internet, please do NOT mail your proxy card.
If you have any questions regarding this proxy statement or the proxy
solicitation process, please call Brent Buck or Mitchell Armstrong at (800)
765-3863. The general partners have engaged Morrow & Co., Inc. to provide
consulting services and to mail, solicit and tabulate the proxies. For these
services, the partnership paid Morrow & Co., Inc. a fee of $6,250.
The proxies should be executed in exactly the same manner as the name(s) in
which ownership of the limited partnership interests are registered. If the
limited partnership interests are held by two or more joint owners, all such
persons should sign the proxy. If you are signing the proxy in a representative
capacity, please indicate so when signing the proxy and submit evidence
satisfactory to the partnership of authority to execute the proxy.
The execution and delivery of the proxy will not affect your right to
transfer your limited partnership interests.
DOCUMENTS INCLUDED
Blake and Associates' Summary of Property Appraisals of the partnership's
properties (as of December 31, 1998) is attached as Appendix A. Additionally,
the partnership's annual report on Form 10-K for the year ended December 31,
1998 and its quarterly report on Form 10-Q for the quarter ended September 30,
1999 are included with this proxy statement as Appendix B and C, respectively.
The listing agreement for the properties with TC Tennessee, Inc. is attached as
Appendix D. The proposed amendment to the partnership agreement is included as
Appendix E.
7
<PAGE> 15
THIS PROXY STATEMENT, INCLUDING THE SUMMARY OF PROPERTY APPRAISALS ATTACHED
HERETO AS APPENDIX A AND THE OTHER APPENDICES, CONTAINS IMPORTANT INFORMATION
WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH RESPECT TO THE PROPOSAL.
ALL STATEMENTS IN THIS PROXY STATEMENT ARE QUALIFIED IN THEIR ENTIRETY BY
REFERENCE TO THE SUMMARY OF PROPERTY APPRAISALS, ATTACHED AS APPENDIX A. LIMITED
PARTNERS ARE URGED TO READ THE SUMMARY OF PROPERTY APPRAISALS.
THE TRANSACTIONS DESCRIBED IN THIS PROXY STATEMENT HAVE NOT BEEN APPROVED
OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SEC PASSED
UPON THE FAIRNESS OR THE MERITS OF SUCH TRANSACTIONS NOR UPON THE ACCURACY OR
ADEQUACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO
THE CONTRARY IS UNLAWFUL.
THE PROPOSAL: AUTHORIZATION OF THE SALE OF ALL OF THE
PARTNERSHIP'S PROPERTIES, DISSOLUTION OF THE PARTNERSHIP
AND AMENDMENT OF THE PARTNERSHIP AGREEMENT
THE PARTNERSHIP
The partnership was formed in Texas on March 12, 1984 to acquire recently
constructed income-producing shopping centers located in growth markets. It
completed its initial public offering of limited partnership interests on
December 31, 1985. Murray Realty Investors VIII, Inc. and Crozier Partners VIII,
Ltd. are the partnership's general partners. The partnership acquired its first
shopping center, Mountain View Plaza, in 1985, and its second shopping center,
Castle Oaks Village, in 1986. In 1986, the partnership also acquired an 85%
interest in Tower Place Joint Venture, which owns Tower Place Festival Shopping
Center. The remaining 15% interest in the joint venture is owned by MIP II, a
publicly-registered real estate limited partnership which is under joint
management with the partnership. A full description of the partnership's
business, properties and legal proceedings is contained in the partnership's
annual report on Form 10-K for the fiscal year ended December 31, 1998, and the
partnership's quarterly report on Form 10-Q for the quarter ended September 30,
1999, copies of which documents (excluding exhibits) are attached as Appendices
B and C to this proxy statement. In addition, the partnership's selected
financial information, management's discussion and analysis of financial
condition and disclosures about market risk are contained in the Form 10-K and
Form 10-Q.
DESCRIPTIONS OF THE PROPERTIES
Mountain View Plaza Shopping Center. Mountain View Plaza Shopping Center,
located in Scottsdale, Arizona, is a 58,047 square foot shopping center situated
on 7.6 acres. At September 30, 1999, Mountain View was 97% leased at an average
annual lease rate of $13.04. Lease rates range from $6.83 to $19.50 per square
foot. One tenant, Wild Oats Markets, Inc. leases approximately 33.3% of the
total rentable space of the property. The Wild Oats' lease expires on August 31,
2005 and the tenant has an option to renew for two successive five-year periods.
Another tenant, Childtime Childcare, leases 10.3% of the total rentable space.
The Childtime Childcare lease expires January 31, 2000. This tenant has no
further options to renew its lease. In November 1997, Wild Oats, the anchor
tenant, vacated this property, but it continues to make lease payments. At
December 31, 1998, Mountain View was 98% leased.
Castle Oaks Village Shopping Center. Castle Oaks Village Shopping Center,
located in San Antonio, Texas, is a 33,449 square foot shopping center situated
on 3.013 acres. At September 30, 1999, Castle Oaks was 87% leased at an average
annual lease rate of $11.51. Lease rates range from $8.40 to $12.50 per square
foot. One tenant, Razmiko's Ltd., leases 13.5% of the total rentable space of
the property. This lease expires on September 30, 2000. At December 31, 1998,
Castle Oaks was 95% leased.
Tower Place Festival Shopping Center. Tower Place Festival Shopping Center,
located in Pineville, North Carolina, is a 114,606 square foot shopping center
situated on 10.77 acres. At September 30, 1999, Tower Place was 98% leased at an
average annual lease rate of $14.19. Lease rental rates range from $9.00 to
$17.00 per square foot. One tenant, General Cinema, leases 27.8% of the total
rentable space of the property and another tenant, J&K Cafeterias, leases 10.6%
of the total rentable space. The General Cinema lease expires on September 30,
2006, with
8
<PAGE> 16
the tenant having the option to extend the term of the lease for two successive
five-year periods. The J&K Cafeteria lease expires on April 30, 2004, and the
tenant has the option to renew for two successive five-year periods. In August
1998, General Cinema, the anchor tenant, vacated this property, but it continues
to make lease payments. At December 31, 1998, Tower Place Festival was 98%
leased.
BACKGROUND FOR THE ASSET SALE
The original stated goal of the partnership was to sell its properties
within five to ten years from the date they were acquired by the partnership.
After the completion of the initial public offering of the limited partnership
interests, the real estate market suffered a recession which adversely affected
the partnership's ability to sell the properties for a fair value. The general
partners believe that both the markets where the partnership's properties are
located and the real estate market in general have significantly improved from
the real estate recession which occurred in the late 1980's and early 1990's,
and that holding the properties in hopes of further gains in value may put at
risk the selling opportunities provided by the current real estate market.
TERMS OF THE ASSET SALE
As of the date of this proxy statement, the partnership has not entered
into any agreement or understanding for the sale of any of the properties, nor
have any of the properties been actively marketed for sale. If the asset sale,
dissolution and amendment proposal is approved, the general partners will be
authorized to sell all of the partnership's properties, in one or a series of
transactions, on such terms as are negotiated by the general partners. In
addition, the general partners may also market and sell the partnership's
properties in packages which include properties owned by MIP II. Currently, the
general partners intend, but are not obligated to, sell Castle Oaks Village
after the partnership's other two properties. The exact amount of distributions
to be made to limited partners will depend on which property is sold last by the
partnership. Upon approval of the proposal, the general partners will work
diligently to accomplish a sale or sales of the properties upon terms and
conditions that they deem consistent with obtaining fair values for the
properties and subject to the limitations of the proposal stated in this proxy
statement.
A condition to sales of the properties will be that the aggregate price at
which all the properties may be sold may not be less than 95% of the appraised
value of the partnership's Portfolio as reflected in the appraisals prepared by
Blake and Associates as of December 31, 1998. The properties will be sold as
soon as practicable (consistent with obtaining fair values). The general
partners' current goal is to complete the sale of all of the properties within
approximately six to nine months after approval of the proposal has been
obtained. However, the time in which it takes to sell all of the properties
could be longer than anticipated as a result of several reasons, including any
delays in marketing the properties or closing sales of the properties, or the
inability to sell the Portfolio for at least 95% of its appraised value as
reflected in the December 31, 1998 appraisals.
The properties will not be sold to any affiliate of the partnership or of
the general partners. Bidders for any group of properties containing the
partnership's properties and MIP II's properties will be required to specify how
their overall bid is allocated among the individual properties in the group, and
proceeds from the sales of any such transaction (as well as expenses related to
the sale) will be apportioned between the properties in each of the two
partnerships based upon such allocation.
Subject to the conditions described above, there can be no assurance as to
the prices at which the properties of the partnership can be sold or disposed
of, or as to the amount of net proceeds that will be available for distribution
to the limited partners. The appraisals reflect Blake and Associates' valuation
of the partnership's properties as of December 31, 1998 in the context of the
market conditions existing as of such date and the information available on such
date. The partnership does not intend to obtain any updated appraisals at the
time of any actual sale of the properties. It is the current intention of the
partnership to continue to obtain property appraisals at the end of each
calendar year. The appraisals that the partnership obtains in the future may
have a higher value for the partnership's properties.
9
<PAGE> 17
ABANDONMENT AND EVENTS REQUIRING SOLICITATION OR SUBSEQUENT APPROVAL
Even if approval of the asset sale, dissolution and amendment proposal is
obtained from the limited partners, the general partners reserve the right, in
their sole discretion, to thereafter abandon the proposed asset sale and
dissolution. For example, the general partners may choose to abandon the asset
sale and dissolution in the event of changes in the general economy or real
estate markets.
If the general partners wish to engage in a sale transaction of the
partnership's properties that would result in the partnership receiving an
aggregate sales price of all the partnership's properties that is less than 95%
of the aggregated appraised value of the Portfolio (as of December 31, 1998),
the partnership will submit such sale to the limited partners for their approval
in a separate proxy. Any such submission to the limited partners of a proposed
property sale that would result in an aggregate sales price of the Portfolio of
less than 95% of its aggregated appraised value will likely delay consummation
of the asset sale and dissolution of the partnership and could prevent the
consummation of the asset sale and dissolution if such proposed property sale is
not approved. In addition, any such submission to the limited partners will
likely result in a smaller distribution to the limited partners from the asset
sale and dissolution, as a result of, among other things, the sales price of the
Portfolio being less than 95% of its aggregated appraised value, the costs and
expenses of such submission, and any operating loss of the partnership during
any delay occasioned by such submission to the limited partners.
EFFECT OF THE ASSET SALE - DISSOLUTION AND LIQUIDATION
Assuming that the proposal is approved by the limited partners at the
special meeting, the general partners will prepare and file a Certificate of
Amendment to the partnership agreement with the Texas Secretary of State. The
partnership will then proceed to sell the properties on the terms described in
this proxy statement.
As soon as practicable after the consummation of the sale of all of the
partnership's properties, the partnership will dissolve, wind up its affairs and
liquidate. In connection with the sale of the partnership's properties, the
dissolution of the partnership, the winding up of its affairs and the
liquidation of the partnership, the partnership will distribute to limited
partners, in the manner provided in the partnership agreement:
o the net proceeds from the sale of the properties after deducting the
expenses of the sale and payment of certain fees (including sales
commissions and expenses of the proxy solicitation); and
o the net proceeds, if any, from the disposition (or realization) of any
remaining partnership assets (such as accounts receivable) after
payment of and provision for all partnership liabilities, including
the establishment of a reserve for contingent liabilities.
The partnership agreement generally provides that cash proceeds from sales
of the partnership's properties be distributed 99% to the limited partners and
1% to the general partners. However, upon the sale of the partnership's final
property, the partnership agreement requires cash to be distributed to the
partners pro rata in proportion to their existing capital accounts. Hence, the
amount of cash available for distribution to the limited partners is dependent
upon which of the partnership's properties is sold last due to the variations in
the capital accounts of the partners. The general partners intend, but are not
obligated, to sell the partnership's other properties before Castle Oaks Village
and make at least one interim distribution to the partners of the net sales
proceeds from the properties.
Pursuant to the terms of the partnership agreement, cash distributions
from the sale or refinancing of a property are allocated as follows:
o First, all distributions from sales of the partnership's properties
are allocated 99% to the limited partners and 1% to the non-corporate
general partner (Crozier Partners VIII, Ltd.) until the limited
partners have been returned their original invested capital from cash
distributions from sales or refinancings, plus a 12% preferred return
from cash distributions from operations or cash distributions from
sales or refinancings, or both.
o Next, all cash distributions from sales of the properties are
allocated 1% to the non-corporate general partner and 99% to the
limited partners and the general partners. Such 99% will be allocated
(i) first to
10
<PAGE> 18
the general partners in an amount equal to any unpaid cash
distributions from operations subordinated to the limited partners' 7%
non-cumulative annual return and (ii) thereafter, 80% to the limited
partners and 20% to the general partners. Cash distributions from the
property sales (other than the 1% of cash distributions from sales of
the properties payable to the non-corporate general partner) payable
to the general partners are allocated 62 1/2% to the non-corporate
general partner and 37 1/2% to the corporate general partner.
o Notwithstanding the above distribution formula, upon the sale of the
last property owned by the partnership, cash distributions from sales
or refinancings of a property are allocated in proportion with the
partners' existing capital account balances.
Cash distributions from operations are allocated and paid 7% to the
non-corporate general partner, 3% to the corporate general partner and 90% to
the limited partners. An amount equal to 5% of cash distributions from
operations out of the 7% allocated to the non-corporate general partner and the
entire amount allocated of cash distributions from operations to the corporate
general partner is subordinated to the prior receipt by the limited partners of
a non-cumulative 7% annual return from either cash distributions from operations
or cash distributions from sales or refinancings, or both, on their average
annual unreturned invested capital.
The partnership will also pay all expenses of the dissolution and
termination of the partnership's existence from the partnership's cash and from
the sale of these assets. The general partners do not believe there are any
material, contingent claims as of the date of this proxy statement. However, the
partnership will distribute 2% of the original equity, which is $564,500, to a
special liquidating trust which will hold these funds for three years after the
dissolution of the partnership in order to meet any contingent liabilities which
may arise.
Given the time needed to solicit proxies to authorize the proposed asset
sale and dissolution, market the properties, and close the sale of the
properties, the partnership does not presently anticipate that the sale of all
of the partnership's properties will be consummated prior to late 2000, and
potentially not until 2001 or later. The partnership intends to continue to make
quarterly distributions of cash from operations, and intends to make at least
one distribution to the limited partners of cash from sale of the properties
prior to the sale of the partnership's final property.
From inception of the partnership in 1984 through September 30, 1999, the
partnership has made aggregate distributions to its limited partners and general
partners of approximately $20,938,773 and $427,321, respectively.
After provision for creditors' claims is made and all property has been
distributed, and if there are no pending legal, administrative or arbitration
proceedings or adequate provision has been made to satisfy any judgment arising
therefrom, a Certificate of Cancellation of the partnership's Amended and
Restated Certificate and Agreement of Limited Partnership will be filed with the
Texas Secretary of State, and any and all other necessary or appropriate actions
will be taken to dissolve and to terminate the partnership's existence.
CERTAIN RELATIONSHIPS WITH THIRD PARTIES
The partnership has retained TC Tennessee, Inc., an affiliate of Trammell
Crow Company, as listing broker for the properties. The listing broker for the
properties is entitled to receive from the partnership a brokerage fee equal to
2% of the gross purchase price paid by a buyer for properties subject to the
listing agreement. However, if a co-broker is involved in the transfer of Castle
Oaks Village, the fee will be 2.5% of the gross purchase price. TC Tennessee,
Inc. is also the listing broker for MIP II's properties. TC Tennessee, Inc. is
also entitled to a maximum of $18,000 in marketing costs for the two
partnerships. A copy of the listing agreement with TC Tennessee, Inc. is
attached as Appendix D to this proxy statement.
At the request of the general partners, Houlihan Lokey Howard & Zukin
Capital was engaged to provide financial advisory services with respect to the
review of the partnership's business plan and various possible strategic
alternatives available to the partnership. Houlihan Lokey was also engaged to
provide the same service for MIP II. Houlihan Lokey received a total fee for its
services to the two partnerships of $53,000, of which $26,500 was paid by the
partnership and $26,500 was paid by MIP II. Houlihan Lokey is a nationally
recognized investment banking firm that is continually engaged in providing
financial advisory services in connection with strategic alternative
11
<PAGE> 19
reviews, mergers and acquisitions, leveraged buyouts, business valuations for a
variety of regulatory and planning purposes, recapitalizations, financial
restructurings and private placements of debt and equity securities. Houlihan
Lokey was not retained to render a fairness opinion in connection with a
specific transaction or asked to review a particular transaction.
GENERAL PARTNERS AND INDEMNIFICATION
It is anticipated that the general partners will remain general partners of
the partnership whether or not the proposal is approved by the limited partners.
The partnership agreement provides for indemnification to the general partners
against all liabilities and expenses in connection with the proposed asset sale
and dissolution or any other affairs of the partnership.
RISK FACTORS RELATING TO THE PROPOSAL
In addition to the other information included elsewhere in this proxy
statement, the following factors should be considered carefully in determining
whether to approve the asset sale, dissolution and amendment proposal. There can
be no assurance that any sale or sales of the partnership's properties will be
consummated or that any of the estimates set forth in this proxy statement will
be realized. You are cautioned not to attribute undue certainty to any
estimates, which are based on a variety of assumptions relating to the
properties, general business and economic conditions and other matters. The
information contained in this proxy statement, including the minimum amount of
the proceeds from the sale of the properties and the date which consummation of
the sale of the properties is anticipated to occur, are based on the
partnership's current estimates and are subject to various and significant
uncertainties, many of which are beyond the partnership's control. These
uncertainties could cause the actual results to differ materially from the
partnership's expectations.
FUTURE OPERATING INCOME AND EXPENSES WILL AFFECT THE AMOUNT OF CASH AVAILABLE
FOR DISTRIBUTION.
Operating income and expenses of the partnership prior to the time the
properties are sold and the partnership dissolved will likely affect the amount
of distributable cash actually available for distribution to the limited
partners. If operating losses are incurred in such period, actual distributions
to limited partners as a result of the asset sale and dissolution could be
smaller than otherwise expected. However, if operating income is generated
during such period, actual distributions to limited partners as a result of the
asset sale and dissolution may be greater than expected.
THE GENERAL PARTNERS MAY SELL AN INDIVIDUAL PROPERTY FOR LESS THAN 95% OF ITS
APPRAISED VALUE, WHICH COULD RESULT IN THE LIMITED PARTNERS RECEIVING A SMALLER
DISTRIBUTION.
Under the proposal contained in this proxy statement, the general partners
may not sell all of the partnership's properties for a total sales price which
is less than an aggregate sales price of 95% of the appraised value of the
entire Portfolio of properties as of December 31, 1998. However, this condition
does not prevent the general partners from selling one or more of the
partnership's properties at a price less than 95% of its appraised value if the
general partners believe that at the conclusion of the sales of all the
partnership's properties, the aggregate sales price for the properties will be
at least 95% of the appraised value of the Portfolio as of December 31, 1998.
Further, while the general partners have no intention to do so, they may sell
one or more of the partnership's properties at a price which later makes it
impossible to sell all of the partnership's properties at a price which is at
least 95% of the appraised value of the Portfolio as of December 31, 1998. The
general partners would then have to solicit new proxies in order to obtain
approval for the final sales transaction and the dissolution and liquidation of
the partnership. The costs associated with this additional proxy solicitation,
as well as the receipt by the partnership of sales proceeds of less than 95% of
the appraised value of the Portfolio (as of December 31, 1998), would result in
the limited partners receiving smaller distributions than otherwise anticipated.
Further, if one or more properties are sold for less than 95% of its appraised
value, but the Portfolio is still sold for 95% of its appraised value (as of
December 31, 1998), the limited partners may receive a smaller distribution due
to variations in the partners' capital accounts, which are discussed in this
proxy statement.
12
<PAGE> 20
DUE TO NUMEROUS VARIABLES, THE PARTNERSHIP IS UNABLE TO ESTIMATE THE AMOUNT OF
CASH THAT WILL ACTUALLY BE DISTRIBUTED TO YOU.
The amount of cash actually distributed to the limited partners is subject
to a variety of factors. These factors include, but are not limited to: the
actual sales price of each property, the uncertainty of costs associated with
the asset sale and dissolution, the uncertainty of future operating income and
expenses, the timing of the sales, whether all of the partnership's properties
will be sold in a single transaction, which property will be sold last, whether
interim distributions are made to the limited partners and the variations in the
capital accounts of the partners. Hence, the general partners believe that it is
not practicable to provide you with a meaningful estimate of the amount you
would receive if the asset sale and dissolution is consummated.
THE UNCERTAINTY OF COSTS ASSOCIATED WITH THE ASSET SALE AND DISSOLUTION AND
UNKNOWN PARTNERSHIP LIABILITIES COULD ADVERSELY AFFECT DISTRIBUTIONS.
The general partners have assumed that the costs and expenses of the asset
sale and dissolution (including sales commissions and the costs of this proxy
solicitation) will equal approximately 4% of the aggregate sales price of the
properties. If partnership liabilities, unknown at the time of the mailing of
this proxy statement, later arise which must be satisfied or reserved for as
part of the proposed asset sale and dissolution, the aggregate amount of
distributions to limited partners as a result of the asset sale and dissolution
could be less than anticipated. Delays in the sale of the properties and
dissolution of the partnership, such as delays involving the marketing of the
properties or closing of sales of the properties, could result in additional
expenses (and possibly operating losses) and result in actual aggregate
distributions to the limited partners as a result of the asset sale and
dissolution that are smaller than they otherwise would be.
THE PARTNERSHIP IS UNDER NO OBLIGATION TO UPDATE THE DECEMBER 31, 1998
APPRAISALS WITH RESPECT TO THE MINIMUM SALES PRICE.
The appraisals reflect Blake and Associates' valuation of the partnership's
properties as of December 31, 1998 in the context of the market conditions
existing as of such date and the information available on such date. The
partnership does not intend to obtain any updated appraisals at the time of any
actual sale of the properties. There can therefore be no assurance that the
partnership's properties will be sold or disposed of at a price equal to, or
representing at least 95% of, what an appraisal, if conducted at the actual time
of sale, would indicate as the properties' values. Events occurring after the
December 31, 1998 date of the appraisals and before consummation of any sales of
properties, such as changes in capital markets (including changes in interest
rates) that might affect demand for real property, changes in building
occupancy, changes in tenant motivation with respect to the exercise of renewal
options or changes in real estate property markets, could affect the properties
or the assumptions used in preparing the appraisals and result in higher or
lower values of the properties if updated appraisals were conducted at such
time. The appraisals are subject to certain assumptions, limitations and
qualifications. The material assumptions, limitations and qualifications made by
Blake and Associates in conducting the appraisals are described in this proxy
statement.
ANY PROPERTY APPRAISALS THAT THE PARTNERSHIP RECEIVES IN THE FUTURE WILL NOT
AFFECT THE MINIMUM SALES PRICE.
The partnership will continue to obtain appraisals of its properties at the
end of each year pursuant to the requirements of the partnership agreement. The
appraised values of the partnership's properties in the future (including the
appraisals reflecting the properties' values as of December 31, 1999) may be
higher than the December 31, 1998 appraised values contained in this proxy
statement. However, even if the December 31, 1999 appraisals or other future
appraisals contain substantially higher values for the partnership's properties,
the general partners will still be authorized to sell the Portfolio for a sales
price of 95% of its aggregate appraised value as of December 31, 1998.
IF MIP II APPROVES THE SALE OF ITS PROPERTIES AND THE PARTNERSHIP DOES NOT, THE
PARTNERSHIP'S OPERATING EXPENSES MAY INCREASE SIGNIFICANTLY.
Affiliates of the general partners of the partnership are also the general
partners of MIP II. The partnership currently pays 47% of the combined general
and administrative expenses of the partnership and MIP II.
13
<PAGE> 21
Concurrently with this proxy statement and solicitation, MIP II is also seeking
approval from its limited partners of a similar proposal to sell all of its
assets and dissolve. If MIP II's limited partners approve the sale of its assets
and dissolution, and the partnership's limited partners do not approve the asset
sale, dissolution and amendment proposal contained in this proxy statement, then
the partnership would have to pay 100% of the partnership's general and
administrative expenses upon the dissolution of MIP II. These increased expenses
could substantially reduce the future cash flow available for distribution to
limited partners.
THE ASSET SALE AND DISSOLUTION MAY NOT BE ACHIEVED OR MAY BE DELAYED.
After the sale of all of the properties and the receipt in cash of the
proceeds thereof, the partnership will be dissolved, and the partnership intends
to wind up its affairs and liquidate as soon thereafter as possible. The
partnership currently estimates that all the properties will not be sold and all
the proceeds from such sales will not be received prior to late 2000, and
potentially not until 2001 or later. There can be no assurance that the sale of
all or any of the properties will take place at all or, if sales do occur, in
accordance with such estimated time frame. If the sales do not occur, the
partnership will have incurred substantial expense for which it will receive no
ultimate benefit.
ALLOCATION OF INCOME AND LOSS COULD CREATE NEGATIVE TAX CONSEQUENCES FOR YOU.
Each partner is required to take into account in computing his or her
income tax liability his or her allocable share of the partnership's items of
income, gain, loss, deduction and credit in accordance with the partnership
agreement. If the Internal Revenue Service were to successfully assert that
allocations of income or loss under the partnership agreement do not have
"substantial economic effect" as defined in Section 704(b) of the Internal
Revenue Code, the partnership's income or loss could be re-allocated in
accordance with the partners' economic interests in the partnership. Any such
reallocation could have the affect of increasing the share of income or
decreasing the share of any loss allocated to certain partners or decreasing the
share of income or increasing the share of any loss allocated to certain
partners. The general partners believe that the partnership will recognize, in
the aggregate with respect to all of its properties, tax gains as a result of
the asset sale and liquidation of the partnership. However, depending on the
timing of sales of individual or groups of properties, losses may be realized in
some periods and gains in other periods.
YOU WILL NOT HAVE ANY DISSENTERS' OR APPRAISAL RIGHTS.
Neither applicable Texas law nor the partnership agreement provides you
with any right to dissent from, or seek an independent appraisal of, the value
of the partnership or its assets. Thus, you will be bound to accept the
consideration received by the partnership upon the sale of the properties and
the resulting distributions to you as a result of the asset sale and dissolution
if the asset sale and dissolution proposal is approved by the limited partners.
NO FAIRNESS OPINION WAS SOUGHT WITH RESPECT TO THE PROPOSED ASSET SALE AND
DISSOLUTION.
While the general partners did retain Blake and Associates to render
appraisals with respect to the value of the partnership's properties as of
December 31, 1998, they did not seek to obtain an opinion relating to the
fairness to the limited partners of the proposal. The general partners concluded
that because the Portfolio will not be sold for less than 95% of its appraised
value as of December 31, 1998, no such opinion is warranted. Had such a fairness
opinion been obtained, the minimum sales price of the Portfolio might have been
different and possibly more favorable to the partnership and the limited
partners. In addition, if the general partners sought a fairness opinion with
respect to the proposed asset sale and dissolution, it is possible that the
partnership would not have been able to obtain one.
THE GENERAL PARTNERS DID NOT RETAIN SEPARATE COUNSEL OR ADVISORS FOR THE LIMITED
PARTNERS.
The general partners engaged legal counsel and financial advisors that
represented the interests of the partnership. If advisors were hired that
represented only the interests of the limited partners, the terms of the
proposed asset sale and dissolution might have been different, and possibly more
favorable, to the limited partners.
14
<PAGE> 22
THE LIMITED PARTNERS WILL LOSE THE OPPORTUNITY TO BENEFIT FROM FUTURE EVENTS.
It is possible that the future performance of the properties will improve
or that prospective buyers may be willing to pay more for the partnership's
properties in the future. It is also possible that limited partners might earn a
higher return on their investment if the partnership retained ownership of the
properties due to possible improvements in future economic and market conditions
or other reasons. By approving the proposed asset sale and dissolution, the
limited partners will also be foregoing certain current benefits of ownership of
the properties, such as continuing distributions from operations.
THERE IS NO ASSURANCE THAT THE PROPOSED ASSET SALE AND DISSOLUTION WILL RESULT
IN GREATER RETURNS TO YOU THAN THE OTHER ALTERNATIVES, WHETHER OR NOT CONSIDERED
BY THE GENERAL PARTNERS, INCLUDING THE CONTINUATION OF THE PARTNERSHIP.
If the asset sale, dissolution and amendment proposal is not approved by
the limited partners, the general partners intend to continue to manage the
partnership and its properties substantially as they are currently being
managed, and to eventually liquidate and dissolve the partnership on or before
January 31, 2020. There can be no assurance that the proposed asset sale and
dissolution will result in greater returns to you than the continuation of the
partnership, a merger with another entity, the reorganization of the partnership
as a REIT, a leveraged recapitalization of the partnership or any other
strategic alternative, whether or not considered by the general partners.
THE GENERAL PARTNERS WILL HAVE BROAD DISCRETION IMPLEMENTING THE PROPOSAL IF IT
IS APPROVED.
The general partners have broad discretion to manage the business and
affairs of the partnership. If the limited partners approve the proposal, they
also will be deemed to have consented to any transaction that may be undertaken
to accomplish the proposed asset sale and dissolution and will not be entitled
to approve or disapprove of any such transaction, including any particular sale
or sales of the partnership's properties that are within the authorization of
the proposal contained in this proxy statement. The partnership will
automatically (without requiring any additional approval of the limited
partners) be terminated and dissolved following the sale of the partnership's
final property.
THE GENERAL PARTNERS MAY ABANDON THE ASSET SALE AND DISSOLUTION EVEN IF THE
PROPOSAL IS APPROVED.
Even if approval of the proposal is obtained from the limited partners, the
general partners reserve the right, in their sole discretion, to thereafter
abandon the asset sale and dissolution. For example, the general partners may
choose to abandon the asset sale and dissolution in the event of changes in the
general economy or real estate markets.
THE GENERAL PARTNERS HAVE CONFLICTS OF INTEREST.
The general partners have conflicts of interest in recommending and
consummating the asset sale and dissolution contemplated by the proposal.
Affiliates of the general partners are also general partners of MIP II, which is
also soliciting its limited partners for approval of a similar proposal. The
general partners have fiduciary duties to both partnerships which may
potentially create a conflict of interest in effecting the asset sale and
dissolution proposal. For example, if a potential buyer reviews properties from
both partnerships, but decides to only purchase one property, the general
partners' fiduciary duties to MIP II prevent them from advocating the purchase
of the partnership's properties over MIP II's properties. In addition, two
employees of the partnership, Mitchell Armstrong and Brent Buck, are also
officers of the corporate general partner and entitled to severance payments if
their employment is terminated due to the dissolution of the partnership. It is
also probable that the general partners will receive a portion of the net sales
proceeds from the sales of the partnership's properties and distributions from
operations, as provided in the partnership agreement. Because of this financial
interest and the fact that the general partners will have broad authority in
determining the timing, manner and terms of the sales transactions, a conflict
of interest may arise. If the proposal is approved, the general partners will
also be permitted to market the partnership's properties with MIP II's
properties. Finally, consummation of the asset sale and dissolution of the
partnership will eliminate any liability of the general partners for liabilities
of the partnership that could arise in the continued operation of the
partnership. For a more complete discussion of the conflicts of interests of the
general partners, see the section in this proxy statement entitled "Conflicts of
Interest and Interests of Certain Persons in the Proposal."
15
<PAGE> 23
THE POSSIBLE SUBMISSION OF ADDITIONAL MATTERS TO THE LIMITED PARTNERS MAY DELAY
THE ASSET SALE AND DISSOLUTION.
If the partnership is unable to sell the Portfolio for at least 95% of its
aggregate appraised value (as of December 31, 1998), the general partners will
have to re-solicit proxies from the limited partners to approve the sale of the
partnership's last property under the terms of the partnership agreement. Any
such submission to limited partners will likely delay consummation of the asset
sale and dissolution of the partnership and could prevent the consummation of
the asset sale and the dissolution if such proposed property sale which is
submitted to the limited partners is not approved. In addition, any such
submission to limited partners will likely result in smaller actual
distributions to limited partners from the asset sale and dissolution as a
result of, among other things, the costs and expenses of such submission, any
operating loss of the partnership during any delay occasioned by such submission
to the limited partners and the receipt of less than 95% of the Portfolio's
appraised value.
FAIRNESS OF THE ASSET SALE AND DISSOLUTION
THE GENERAL PARTNERS' RECOMMENDATION AND REASONS FOR THE PROPOSED ASSET SALE AND
DISSOLUTION
THE GENERAL PARTNERS BELIEVE THAT THE PROPOSED ASSET SALE AND DISSOLUTION
IS FAIR TO AND IN THE BEST INTERESTS OF THE PARTNERSHIP AND ITS LIMITED
PARTNERS. ACCORDINGLY, THE GENERAL PARTNERS HAVE APPROVED THE PROPOSED SALE OF
THE PARTNERSHIP'S PROPERTIES AND DISSOLUTION, AND RECOMMEND THAT YOU VOTE FOR
THE APPROVAL OF THE PROPOSAL.
The decision of the general partners to approve the proposed asset sale and
dissolution and to recommend the proposal to the limited partners was based upon
a detailed study of the advantages and disadvantages of selling the
partnership's assets and dissolving the partnership in the near future versus
certain other possible strategic alternatives available to the partnership. In
making the recommendation to the limited partners to approve the proposal, the
general partners considered a number of factors, the most significant of which
are listed immediately below:
o The partnership's properties consist of shopping centers leased to a
variety of individual tenants with lease terms averaging three to five
years. Over the past three years a significant percentage of these
leases have been renewed. Most of these renewals have achieved higher
rental rates than the leases that expired, thereby increasing the
value of the properties. In some instances the partnership has been
able to take a large space that was leased to one tenant and, when the
tenant vacated, divide the space and lease it to several smaller
users. This has increased value since smaller spaces typically lease
for higher rental rates than larger spaces. Because of the three- to
five-year lease terms now in place, the general partners believe it
will be several years before further significant increases can occur.
The following table shows the percentage of the square footage of
non-anchor space for each property that has either been renewed by
existing tenants or leased to new tenants from 1997 to the present.
The general partners chose this time period because it has been a
period of rising rental rates which has given the partnership the
opportunity to increase the value of its properties.
<TABLE>
<CAPTION>
Property Percent of Renewals/New Leases
<S> <C>
Tower Place Festival 71%
Mountain View Plaza 60%
Castle Oaks Village 58%
</TABLE>
o Real estate markets tend to run in cycles and the markets in which the
partnership's properties are located have been experiencing a cycle of
high occupancies and increasing rental rates for these types of
properties. It is difficult to determine when this cycle will
inevitably end and when the next favorable market will develop. The
general partners believe that the increase in value that might occur
by holding the properties is not worth the risk of missing the
opportunities afforded by selling the properties in the current market
environment.
o The ages of the partnership's properties may begin to have a negative
impact on their value. As the properties age, the cost of repairs and
maintenance will increase, and potential buyers may discount the
16
<PAGE> 24
prices accordingly. Over the past few years, the partnership has
replaced the roof at Mountain View Plaza and has made other repairs at
each property, including replacing portions of the heating and cooling
equipment. The general partners believe that selling the properties
when there is little deferred maintenance will help the partnership
achieve the best sales price possible in the current market.
o When the limited partners invested in the partnership in the
mid-1980's, it was anticipated that the partnership would sell its
properties within five to ten years. After the partnership's initial
public offering, the real estate market entered a period of recession,
due to, among other factors: overbuilding, the negative impacts of the
Tax Reform Act of 1986, and the collapse of the savings and loan
industry. While the effect of the recession on the partnership's
properties was minimized by the fact that the partnership had no debt,
the overall problems in the real estate industry did have a negative
impact on the rental rates that the partnership was able to achieve at
the shopping centers. Because of the long length of leases, it has
taken years to return to the level of rental rates that were common
during the mid-1980's. Original investors have now been limited
partners for approximately 14 to 15 years. The general partners
believe that the real estate market has rebounded and the partnership
is now positioned to sell its properties for a fair value.
o The general partners will work diligently to achieve the highest price
possible for each of the partnership's assets. This will be achieved
by listing the properties for sale with a nationally-recognized real
estate company to solicit bids from multiple unaffiliated third
parties and through arms' length negotiations with the potential
purchasers. The condition that the properties will not be sold, in the
aggregate, for less than 95% of the appraised value (as of December
31, 1998) of the Portfolio is intended to give the limited partners
some certainty that the properties will not be sold if market
conditions deteriorate after the vote.
o If the properties are not sold, they will continue to subject the
partnership to the risks inherent in the ownership of property such as
fluctuations in occupancy rates, operating expenses and rental rates,
which in turn may be affected by general and local economic
conditions, the supply and demand for properties of the type owned by
the partnership and federal and local laws and regulations affecting
the ownership and operation of real estate.
The general partners also considered a number of negative factors, including
those listed below, in approving the proposal.
o There can be no assurance that the asset sale and dissolution will
result in greater returns to the limited partners than a continuation
of the partnership. With respect to the value of the partnership's
properties, the partnership will not benefit from possible
improvements in economic and market conditions which could produce
increased cash flow and enhance the sales price of the properties.
o The anchor spaces at Mountain View Plaza and Tower Place Festival are
currently vacant, even though the tenants are continuing to pay rent
pursuant to their long-term leases. There can be no assurance that the
tenants will continue to pay rent, and their failure to honor their
leases could have a negative impact on the price a buyer would be
willing to pay for the shopping centers. In addition, it is possible
that the partnership could find replacement tenants for these anchor
spaces that would pay a higher rental rate and increase the future
value of the properties.
o There is no guarantee that the other alternatives considered by the
general partners would not produce greater value for the limited
partners.
o There could be actual or potential conflicts of interest of the
general partners in connection with the asset sale and dissolution.
o The asset sale will be a taxable transaction to limited partners.
The general partners did not attempt to quantify or otherwise assign
relative weights to the specific factors it considered or determine that any
factor was of particular importance. A determination of various weightings
would, in the view of the general partners, be impractical. Rather, the general
partners viewed their position and
17
<PAGE> 25
recommendations as being based on the totality of the information presented to,
and considered by, the general partners. In addition, individual directors of
the general partners may have given different weight to different factors.
ALTERNATIVES TO THE ASSET SALE AND DISSOLUTION
In making its assessment of the fairness and advisability of the proposed
asset sale and dissolution, the general partners investigated, analyzed and
reviewed a number of available alternatives. These alternatives included, but
were not limited to, the following:
o The continuation of the partnership.
o The reorganization of the partnership as a real estate investment
trust.
o Undergoing a leveraged recapitalization.
o A merger with another entity.
In order to determine whether the proposed asset sale and dissolution or
another strategic alternative would be more attractive to you, the general
partners compared the potential advantages and disadvantages to the proposed
asset sale and dissolution with the potential advantages and disadvantages of
the alternatives. The general partners believe that each of the considered
alternatives offers potential advantages and suffers from potential
disadvantages not possessed by the other alternatives. Set forth below are the
conclusions of the general partners regarding the comparisons of the proposal to
certain alternatives and a detailed discussion of the potential advantages and
disadvantages of each of these alternatives.
ALTERNATIVE ONE: CONTINUATION OF PARTNERSHIP. One alternative to the
proposed asset sale and dissolution would be to continue the partnership in
accordance with its existing business plan and partnership agreement. Nothing in
the partnership's organizational documents requires the general partners to
proceed with liquidating the partnership's assets. While the disclosure
documents, pursuant to which the limited partnership interests were offered to
the public, disclosed the intentions of the partnership to liquidate its assets
within five to ten years from acquisition, the general partners are not under
any legal or other obligation to liquidate assets within that time frame. To the
contrary, the partnership has an operating life lasting until January 31, 2020.
Advantages of Continuation:
o You should continue to receive regular distributions of net cash
flow arising from operation of and the eventual sale of the
partnership's properties.
o Continuing the partnership should allow the limited partners to
benefit from any possible future improvements in economic and
market conditions, which could produce increased cash flow and
enhance the sales price of the properties.
o Continuing the partnership would allow the general partners time
to resolve and lease the vacant anchor space at both Tower Place
Festival and Mountain View Plaza. This could possibly result in
higher values for these properties.
o Continuation of the partnership avoids most disadvantages that
might be deemed inherent in the proposed asset sale and
dissolution.
Disadvantages of Continuation:
o The primary disadvantage of continuing the partnership is the
general partners' belief that the partnership will not secure for
limited partners the benefits (on a net present value basis) that
the general partners expect to result from asset sale and
dissolution of the partnership.
18
<PAGE> 26
o The general partners believe that, due to the average length of
the individual leases, it will be several years before the
partnership can achieve further significant increases in value.
Therefore, if the partnership does not sell and liquidate, you
should be prepared to continue holding your investment in the
partnership for at least several years into the future.
o There is no liquid market for the limited partnership interests,
except a secondary market which trades at a discount to the
original investment.
o Affiliates of the general partners also manage MIP II, a
partnership with similar types of properties and similar goals
and objectives. The partnership pays for 47% of the combined
general and administrative expenses for managing the two
partnerships. MIP II's limited partners are also being asked to
vote on a proposal to sell all their assets and dissolve their
partnership within the same time frame as this partnership. If
the limited partners of MIP II vote to sell and dissolve, and the
partnership's limited partners do not approve the proposal
contained in this proxy statement, all of the partnership's
general and administrative expenses will be borne 100% by the
partnership after MIP II dissolves. This could substantially
reduce the future net cash flow available for distribution.
o There can be no assurance that leases which expire will be able
to be renewed or re-leased at rental rates comparable to current
rates. Likewise, there can be no assurance that the anchor
tenants at Mountain View Plaza and Tower Place Festival will
continue to pay rent pursuant to their leases while keeping their
suites vacant.
o The partnership's properties are aging, and increased capital
expenditures for property maintenance are likely.
o The partnership would continue to bear the risks of any
catastrophic internal or external events.
o There can be no guarantee that other alternatives, such as the
proposal described in this proxy statement, would not be more
advantageous to the limited partners.
General Partners' Recommendation and Comparison with the Proposed Asset
Sale and Dissolution. Continuing the partnership would keep you in a relatively
illiquid investment vehicle without the ability to reasonably exit the
investment. Due to the recent leases that were renewed and their lengthy terms,
the general partners believe that it will be several years before further
significant value increases in the properties will occur. Given the size and
number of properties held by the partnership, the sale of each individual
property would cause the partnership to continue to cover fixed administrative
charges with the remaining properties (which could increase if MIP II's limited
partners approve its asset sale and dissolution), resulting in future reductions
in partnership distributions. Hence, the general partners have concluded that
continuation of the partnership is not as attractive an alternative as the
proposed asset sale and dissolution.
ALTERNATIVE TWO: REORGANIZATION OF PARTNERSHIP AS A REIT. The general
partners considered the alternative strategy of reorganizing the partnership
into a real estate investment trust. If approved, such action may have provided
some of the advantages contemplated by the proposed asset sale and dissolution.
Advantages of Reorganization:
o It may provide you with some liquidity of your investment.
o It should permit distribution to you of a simpler federal income
tax form.
o The formation of a REIT could potentially be tax-free to you.
19
<PAGE> 27
Disadvantages of Reorganization:
o Substantial costs and expenses would be incurred by the
partnership were it to separately pursue reorganization into a
separate REIT.
o Because of the size of the partnership, the general partners
believe such reorganization would result in a limited market for
the shares of the newly formed REIT.
o Reorganization of the partnership as a REIT would not provide the
portfolio size, diversification or the structure of internal
management necessary to attract growth capital to the new entity.
o The general partners concluded that the size of an individual
REIT would be too small in the public market to be an attractive
investment, therefore making it a difficult vehicle to generate
long-term value and liquidity for you.
o There can be no guarantee that other alternatives, such as the
proposal described in this proxy statement, would not be more
advantageous to the limited partners.
General Partners' Recommendation and Comparison With the Asset Sale and
Dissolution. The general partners believe that the reorganization of the
partnership as a REIT may present the potential detriments of the asset sale and
dissolution without providing many of its potential benefits, such as the
potential to maximize liquidity to you.
ALTERNATIVE THREE: LEVERAGED RECAPITALIZATION. The general partners also
considered whether to attempt a leveraged recapitalization of the partnership.
This would involve securing debt using each of the partnership's properties as
collateral and distributing the loan proceeds to the limited partners. This
alternative would also involve the continuation of the partnership for an
undetermined period of time.
Advantages of the Recapitalization:
o The partnership could make immediate cash distributions based
upon the amount of debt acquired. Most likely, the debt would not
exceed 50% of the value of the properties.
o The partnership could continue to make further distributions, but
at a lower level due to the payment of debt service on the loans.
Disadvantages of the Recapitalization:
o The partnership would have debt, and therefore higher operating
risk, including the risk of foreclosure.
o While not prohibited by the partnership agreement, leverage was
not part of the partnership's original stated strategy.
o In the event that significant expenditures are needed by the
partnership, it would lose the flexibility to obtain necessary
financing.
o The partnership has already exceeded its original strategy of
disposing of the properties within five to ten years. A leveraged
recapitalization would involve holding your investment in the
partnership for at least several years into the future.
o The partnership would continue to bear the risks of any
catastrophic internal or external events.
o There can be no guarantee that the other alternatives, such as
the proposal described in this proxy statement, would not be more
advantageous to the limited partners.
20
<PAGE> 28
General Partners' Recommendation and Comparison with the Proposed Asset
Sale and Dissolution. The leveraged recapitalization would increase the
operating risk of the partnership and would not offer full liquidity to the
limited partners of their current investment. Further, distributions from
operations would be reduced due to the payment of debt service. Therefore, the
general partners believe that this alternative is not as attractive as the
proposed asset sale and dissolution.
ALTERNATIVE FOUR: MERGER WITH ANOTHER ENTITY. Another alternative
considered by the general partners was to merge the partnership with another
entity.
Advantages of a Merger:
o A merger with a larger entity could supply the partnership with
needed capital for growth.
o If the entity which the partnership merges with is
publicly-traded, you would have increased liquidity for your
investment.
Disadvantages of a Merger:
o It is difficult to find other merger partners who are similar to
the partnership.
o Given the partnership's size, it would likely be the target in
any merger transaction.
o The partnership has already exceeded its original strategy of
disposing of the properties within five to ten years.
o This alternative is a significant departure from the general
objectives of the partnership.
o This alternative is a very speculative scenario, given the
uncertainties of finding a merger partner or the timing of an
exit.
o There can be no guarantee that the other alternatives, such as
the proposal described in this proxy statement, would not be more
advantageous to the limited partners.
General Partners' Recommendation and Comparison with the Proposed Asset
Sale and Dissolution. The possibility of finding a suitable candidate is highly
speculative and risky, and a merger might not provide you with the liquidity
that the proposed asset sale and dissolution potentially offers to you.
Therefore, the general partners believe that this is not as attractive as an
alternative to the proposed asset sale and dissolution.
APPRAISALS OF PROPERTIES
In determining the fairness of the asset sale, dissolution and amendment
proposal, the general partners have relied in part upon property appraisals (a
summary of which is attached hereto as Appendix A and incorporated herein by
this reference) prepared by an independent appraisal firm, Joseph J. Blake and
Associates, Inc., to establish the market values of the properties, sometimes
referred to as the appraised values in this proxy statement. A condition to the
sale of the properties will be that the aggregate price at which the sales are
made will equal at least 95% of the appraised value of the Portfolio as
reflected in Blake and Associates' appraisals as of December 31, 1998. Blake and
Associates also appraised the properties owned by MIP II. Such appraisals were
conducted using the same methodology and are subject to the same assumptions,
limitations and qualifications as described below for the partnership's
properties. In preparing the appraisals, Blake and Associates was engaged to
determine the market values of the properties without taking into account the
specific financial interest of any person. Blake and Associates' appraisals were
certified by an MAI appraiser who is a principal of Blake and Associates. The
general partners believe that the use of a single independent appraiser,
applying consistent methodology and criteria in assessing the values of the
partnership's properties, increased the likelihood that the values of such
assets would be determined on a fair, consistent and unbiased basis.
21
<PAGE> 29
Selection and Qualifications of Appraiser. The general partners engaged
Blake and Associates based on their desire to engage an appraiser with a
national reputation. Blake and Associates has provided information, research,
consulting and real estate appraisal services to clients located throughout the
United States, including litigation support and expert witness services, and due
diligence investigations. Blake and Associates has substantial experience and
expertise in assessing the value of real estate, having prepared real estate
appraisals for over 50 years.
Summary of Methodology. Appraisers typically consider three approaches to
value of properties: the income capitalization approach, the sales comparison
approach and the cost approach. The income capitalization approach involves an
economic analysis of the property based on its potential to provide future net
annual income. The sales comparison approach involves a comparative analysis of
the subject property with other similar properties that have sold recently or
that are currently offered for sale in the market. The cost approach involves an
economic analysis of the cost to produce a substitute property with equivalent
utility.
The appraisals were performed using the income capitalization approach and
the sales comparison approach for the properties. Properties were appraised by
Blake and Associates individually and not as groups or packages of properties.
The properties were appraised by Blake and Associates in accordance with the
Uniform Standards of Professional Appraisal Practice. The appraisals are
"limited appraisals" as defined by the Uniform Standards of Professional
Appraisal Practice, because Blake and Associates excluded the cost approach and
abbreviated the sales comparison approach. The cost approach, although
considered, was not used by Blake and Associates for any properties because
Blake and Associates believes the cost approach is generally not deemed a
reliable indicator of value for older properties due to the imprecise nature of
estimating accrued depreciation affecting improvements.
Valuation Methodology - Income Capitalization Approach. Blake and
Associates' valuation has been based in part upon information supplied to it by
the managers of the properties and the partnership, including but not limited
to:
<TABLE>
<S> <C>
o rent rolls. o property descriptive information.
o building reports. o prior appraisals.
o lease information. o proposed sales terms, sales agreements and
o financial schedules of current lease rates. supporting documentation.
o income, expenses, cash flow and related
financial information.
</TABLE>
Blake and Associates relied upon such information and assumed that the
information provided by the property managers and the partnership was accurate
and complete and did not attempt to independently verify such information.
Blake and Associates interviewed and relied upon the property managers'
management personnel to obtain information relating to the condition of each
property subject to the asset sale, including any deferred maintenance, capital
budgets, environmental conditions, status of on-going improvements or other
factors affecting the physical condition of the property improvements. However,
Blake and Associates was not provided with Property Condition Assessments
(deferred maintenance) or Phase I Environmental Reports on the properties. Blake
and Associates also interviewed the property manager's management personnel
regarding competitive conditions in property markets, trends affecting the
properties, certain lease and financing factors, and historical and anticipated
lease revenues and expenses. Blake and Associates also reviewed historical
operating statements for each of the properties subject to the asset sale.
Based on the lease and market rent analysis, rental revenue projections
were developed for each income-producing property subject to the asset sale
based on the terms of existing leases and based on analysis of market rents and
historical rents achieved at the property.
Expenses were analyzed based upon a review of 1996, 1997 and/or 1998 actual
expenses. Blake and Associates also reviewed, among other things, data on
expenses for comparable properties appraised by Blake and Associates. Inflation
and growth rates were estimated by Blake and Associates based on those
assumptions typically used by
22
<PAGE> 30
buyers and sellers in the local marketplace, which were derived, in part, from
published surveys of real estate brokers and investors.
Blake and Associates considered two methods to determine valuation under
this income capitalization approach: a direct capitalization method and a
discounted cash flow method. Direct capitalization is a method used to convert a
single year's estimated stabilized net operating income into an indication of
value. Under this method, the income producing capacity of a property on a
stabilized basis is determined by estimating the gross potential revenue of the
property, making deductions for vacancy and collection losses and building
expenses, and then capitalizing the net income at a market-derived rate to yield
an estimate of value. In determining an overall capitalization rate, Blake and
Associates reviewed overall capitalization rates indicated by comparable sales
and published surveys of brokers, investors and other real estate market
participants. Net operating income was capitalized at a capitalization rate as
estimated in accordance with the comparable sales transaction data. Under the
discounted cash flow method, periodic cash flows (consisting of net income less
leasing commissions, tenant improvement allowances and applicable reserves per
period) and a reversionary value, if any (based on an assumed sale at the end of
the holding period, estimated for such purpose by capitalizing the following
year's net operating income), after deducting appropriate sales expenses, are
estimated and discounted to present value. Distinct discount rates were applied
to the operating cash flow projections and the reversionary values. The discount
rates employed were based on target rates of return and capitalization criteria
used by commercial property investors. Blake and Associates derived this
information, in part, from published surveys of brokers, investors and other
real estate market participants.
Valuation Methodology - Sales Comparison Approach. Based upon actual and
proposed sales transactions identified in the respective properties' region,
indices of value for the properties were derived considering the respective
properties' age, location and other factors. The indices of value primarily
included price per square foot. Adjustments were applied to the indices of value
derived from the comparable sales transactions. The indices of value were
applied to the properties to estimate value in accordance with the sales
comparison method. Price per square foot as estimated by reference to comparable
sales transactions was multiplied by the rentable square footage of the
respective properties to derive an estimate of value.
Conclusions as to Value. Based upon the review as described above, it is
Blake and Associates' opinion that the (i) market value and (ii) 95% of the
market value of the partnership's leased fee interests in the properties as of
December 31, 1998 is:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
PROPERTY NAME 100% OF VALUE 95% OF VALUE
----------------------------------------------------------------------------
<S> <C> <C>
Mountain View Plaza Shopping Center $ 7,100,000 $ 6,745,000
----------------------------------------------------------------------------
Castle Oaks Village Shopping Center 3,300,000 3,135,000
----------------------------------------------------------------------------
Tower Place Festival Shopping Center 11,560,000 10,982,000
----------------------------------------------------------------------------
----------------------------------------------------------------------------
TOTAL FOR ALL PROPERTIES $21,960,000 $20,862,000
----------------------------------------------------------------------------
</TABLE>
The values given for Tower Place Festival represent the partnership's 85%
ownership of the property on a pro rata allocation and do not account for the
typical discount associated with the valuation of a fractional interest.
Assumptions, Limitations and Qualifications of Appraisals. The appraisals
reflect Blake and Associates' valuation of the partnership's properties as of
December 31, 1998 in the context of the market conditions existing as of such
date and the information available on such date. Events occurring after the
December 31, 1998 date of the appraisals and before consummation of any sales of
properties comprising the asset sale, such as changes in capital markets
(including changes in financing rates) that might affect demand for real
property, changes in building occupancy, changes in tenant motivation with
respect to the exercise of renewal options, or changes in real estate property
markets, could affect the properties or the assumptions used in preparing the
appraisals and result in higher or lower values of the properties if updated
appraisals were conducted at such time. Blake and Associates has no obligation
to update the appraisals on the basis of subsequent events.
Blake and Associates utilized certain assumptions to determine the
appraised value of the properties. The specific assumptions, limitations and
qualifications made by Blake and Associates in conducting the appraisals
include, among other things:
23
<PAGE> 31
o Information and data contained in the reports, although obtained
from public record and other reliable sources and, where
possible, carefully checked by Blake and Associates, were
accepted as satisfactory evidence upon which rests the final
expression of the properties' values.
o Blake and Associates made no legal surveys nor have they
commissioned them to be prepared and therefore reference to
sketches, plats, diagrams or previous surveys are only for the
reader's visualization of the properties.
o Blake and Associates assumed that all information known to the
client and relative to the valuation has been accurately
furnished and that there are no undisclosed leases, agreements,
liens, or other encumbrances affecting the use of the properties.
o Blake and Associates assumed that ownership and management are
competent and the properties are in responsible hands.
o No responsibility beyond reasonableness was assumed by Blake and
Associates for matters of a legal nature, whether existing or
pending.
o Blake and Associates is not required to give testimony as an
expert witness in any legal hearing or before any court of law
unless justly and fairly compensated for such services.
o By reason of the purpose of the appraisals or function of the
reports set forth in the appraisals, the values reported are only
applicable to the property rights appraised and the appraisal
reports should not be used for any other purpose.
o Blake and Associates was not furnished with engineering or soil
studies, nor did they commission these to be prepared. Therefore,
the opinions as to structural strength of the improvements and
drainage and subsoil conditions were based upon observation only
and are assumed to be adequate.
o Blake and Associates believes that there is no evidence to
suggest that the properties are significant to American history,
architecture or culture. Moreover, the properties are not
considered to be a part of a historic district.
o Blake and Associates did not make specific compliance surveys and
analysis of the properties to determine whether or not they are
in conformity with the various detailed requirements of the
Americans with Disabilities Act. It is possible that compliance
surveys of the properties together with detailed analyses of the
requirements of that act could reveal that one or more of the
properties are not in compliance with one or more of the
requirements of the act. If so, this fact could have a negative
effect upon the value of those properties. Since the appraisers
have no direct evidence relating to this issue, they did not
consider possible non-compliance with the requirements of that
act in estimating the values of the properties.
o At the partnership's request, the date of the appraised values is
December 31, 1998. As Blake and Associates' inspection of the
properties did not take place until February of 1999, and in some
instances, March of 1999, they assumed the property and general
market conditions to have remained stable from the date of the
valuation to the date of inspection.
o The appraisers have inspected the properties in regard to the
presence of hazardous materials and have questioned management
specifically for their knowledge, present and historically, as it
relates to the problem. Blake and Associates was not provided
with Property Condition Assessments or Phase I Environmental
Reports on the properties. No environmental hazards known have
been uncovered at this time. However, Blake and Associates is not
qualified to detect such substances. The presence of hazardous
materials may affect the values of the properties. The estimated
values are predicated on the assumption that there is no such
material on or in the properties that would cause a loss in their
24
<PAGE> 32
values. No responsibility is assumed for any such conditions, or
for any expertise or engineering knowledge required to discover
them.
o Surveys of the subject sites were not provided to Blake and
Associates. The land areas of the partnership's properties were
taken from the legal descriptions provided by the partnership.
These land areas are assumed to be correct and any deviation in
the land areas could impact the market value estimates.
The appraisals are available for your inspection at the partnership's
executive offices during regular business hours.
Compensation and Material Relationships. In exchange for preparing all the
appraisals for the partnership's properties and the MIP II properties, Blake and
Associates was paid a fee of $19,500, of which $9,475 was paid by the
partnership and $10,025 was paid by MIP II. Blake and Associates also was paid
$3,500 for its expenses in reviewing certain of the proxy solicitation materials
and related documentation, of which $1,750 was paid by the partnership with the
remainder paid by MIP II. Payment of appraisal fees to Blake and Associates is
not dependent upon the completion of the proposed asset sale.
OFFERS FROM THIRD PARTIES
With the exception of tender offers for less than 5% of the outstanding
limited partnership interests, the partnership has not received any offers, or
entered into any agreements, for the purchase of the limited partnership
interests or the partnership's properties within the last two years.
AMENDMENT TO THE PARTNERSHIP AGREEMENT
The general partners are proposing an amendment to the Amended and Restated
Certificate and Agreement of Limited Partnership, as amended, to permit the
consummation of the proposed asset sale and dissolution of the partnership on
the terms set forth in this proxy statement. The amendment would expressly
permit and empower the general partners to consummate the proposed asset sale
and dissolution. IF YOU VOTE TO APPROVE THE PROPOSED ASSET SALE AND DISSOLUTION,
YOU WILL BE APPROVING THE PROPOSED AMENDMENT TO THE PARTNERSHIP AGREEMENT.
Section 11.4 of the partnership agreement gives the limited partners the
right to approve any sale of all of the partnership's assets in a single
transaction, as well as the right to disapprove the sale of all of the
partnership's assets in a single transaction. Hence, if the general partners
were required to resolicit proxies so that the limited partners could approve a
final sales transaction, there would be a significant delay in consummating the
asset sale and dissolution as proposed in this proxy statement.
Section 15.1 of the partnership agreement states that the partnership is
dissolved upon the first of several events to occur, including the date of the
disposition of all the partnership's assets or the date on which a majority of
the limited partnership interests vote in favor of the dissolution and
termination of the partnership. This proxy statement asks the limited partners
to approve both the sale of all of the partnership's assets and the dissolution
of the partnership subsequent to the sale. Under the partnership agreement as
currently in effect, the partnership would be dissolved on the date of the
special meeting if the limited partners approve the proposal. However, under the
proposal, the dissolution of the partnership is contingent upon the sale of all
the properties and dissolution is not certain to occur. Hence, the partnership
agreement needs to be amended to avoid the inadvertent dissolution of the
partnership prior to the consummation of the sales of all of the partnership's
properties pursuant to the terms contained in this proxy statement. The proposed
amendment is set forth in its entirety as Appendix E to this proxy statement.
25
<PAGE> 33
SELECTED FINANCIAL DATA
The selected financial data for the partnership for each of the years in
the five year period ended December 31, 1998, are derived from the partnership's
financial statements, which have been audited by KPMG LLP, independent certified
public accountants. The data for the nine months ended September 30, 1999 and
1998 are derived from unaudited financial statements appearing in the
partnership's quarterly report on Form 10-Q for its quarter ended September 30,
1999, and which, in the opinion of the general partners, includes all
adjustments, consisting only of normal adjustments, necessary for the fair
statement of the results for the unaudited periods. The selected financial data
are qualified in their entirety by and should be read in conjunction with the
partnership financial statements and related notes appearing in the
partnership's annual report on Form 10-K for the year ended December 31, 1998,
and in the partnership's quarterly report on Form 10-Q for its quarter ended
September 30, 1999. These reports (without exhibits) are included in this proxy
statement as appendices B and C, respectively.
<TABLE>
<CAPTION>
For the nine months ended For the years ended
September 30, December 31,
------------------------- -------------------
1999 1998 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Income $ 2,539,317 $ 2,433,452 $ 3,271,883 $ 3,298,152 $ 3,052,985 $ 2,846,710 $ 2,804,229
Earnings Before
Minority Interest 1,055,831 929,275 1,256,104 1,275,571 1,037,019 918,032 926,811
Minority Interest
In Joint
Venture's
Earnings 113,177 102,886 140,298 135,394 132,060 115,220 109,520
Net Earnings 942,654 826,389 1,115,806 1,140,177 904,959 802,812 817,291
Basic earnings per
Limited Partner
Interest 32.73 28.69 38.74 39.59 31.42 27.87 28.38
Distributions per
Limited Partner
Interest 45.00 45.00 60.00 58.13 50.00 50.00 50.00
Total Assets at
Period End $18,268,677 $18,811,694 $18,661,233 $19,350,195 $19,993,931 $20,598,892 $21,234,326
</TABLE>
The following table sets forth, for the last five fiscal years and the
current fiscal year as of September 30, 1999, the respective amounts of (i)
distributions made to the general partners; and (ii) distributions made to
limited partners.
<TABLE>
<CAPTION>
Year Ended Distributions to the Distributions to Limited
December 31, General Partners Partners
------------ -------------------- ------------------------
<S> <C> <C>
1994 $28,803 $1,411,351
1995 $28,803 $1,411,350
1996 $28,803 $1,411,351
1997 $33,484 $1,640,699
1998 $34,564 $1,693,621
1999(1) $25,923 $1,270,215
</TABLE>
(1) For the nine months ended September 30, 1999
26
<PAGE> 34
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of certain United States federal income
tax consequences to limited partners arising from the proposed sale of the
partnership's interest in its remaining properties and the liquidation of the
partnership. This summary is based upon the Internal Revenue Code of 1986, as
currently in effect, applicable Treasury Regulations adopted thereunder,
reported judicial decisions and Internal Revenue Service rulings, all as of the
date hereof, and all of which are subject to prospective or retroactive change
in a manner which could adversely affect limited partners.
This summary is based on the assumption that interests in the partnership
are held by the limited partners as capital assets and does not purport to deal
with limited partners in special tax situations such as insurance companies,
real estate investment trusts, regulated investment companies, financial
institutions, tax-exempt entities, nonresident aliens and foreign corporations.
Moreover, this summary does not address the possible consequences to limited
partners under any state, local or foreign tax laws of the states and localities
where they reside or otherwise do business or where the partnership operates. AS
SUCH, EACH LIMITED PARTNER SHOULD CONSULT HIS OR HER OWN TAX ADVISOR CONCERNING
THE CONSEQUENCES TO HIM OR HER OF THE SALE OF THE PROPERTIES AND DISSOLUTION AND
LIQUIDATION OF THE PARTNERSHIP.
Allocation of Income and Loss - Generally
A partnership is not a taxable entity. Therefore, no federal income tax
liability may be imposed upon a partnership. Instead, each partner is required
to take into account in computing his or her income tax liability his or her
allocable share of the partnership's items of income, gain, loss, deduction and
credit (collectively referred to herein as "income or loss") in accordance with
the partnership agreement. If the allocation of income or loss in the
partnership agreement does not have "substantial economic effect" as defined in
Internal Revenue Code Section 704(b), the law requires the partnership's income
or loss to be allocated in accordance with the partners' economic interests in
the partnership. Generally, the distribution of cash attributable to partnership
income is not a taxable event unless the distributee partner receives cash
distributions in excess of his or her basis in his or her interest in the
partnership.
Taxation of the Sale of Partnership Properties
For federal income tax purposes, the partnership will realize and recognize
gain or loss separately for each property sold. The amount of gain recognized
for federal income tax purposes with respect to a property, if any, will be an
amount equal to the excess of the amount realized (i.e. cash or other
consideration received by the partnership reduced by the expenses of the sale)
over the partnership's adjusted tax basis for the property. Conversely, the
amount of loss recognized with respect to the sale of a property, if any, will
be an amount equal to the excess of the partnership's adjusted tax basis in the
property over the amount realized by the partnership for such property. The
"adjusted tax basis" of a partnership property is its cost (including
non-deductible capital expenditures made by the partnership at the time of
purchase) with certain additions or subtractions for expenditures, receipts,
losses, or other items properly chargeable to the capital accounts during the
period of time from the acquisition of the property until the sale of the
property.
Characterization of Gain or Loss
In general, gains (other than the amount of gain attributable to certain
depreciation recapture, which would be classified as ordinary income) recognized
with respect to the sale of the partnership's interests in its properties should
be treated as recognized from the sale of a "Section 1231" asset (i.e., real
property and depreciable assets used in a trade or business and held for more
than one year). A limited partner's share of gains from the sale of Section 1231
assets of the partnership will be combined with any other Section 1231 gains and
losses recognized by such limited partner in that year. If the result is a net
loss, the loss is characterized as an ordinary loss. If the result is a net
gain, the gain is characterized as a capital gain except that such gain will be
treated as ordinary income to the extent the limited partner has
"non-recaptured" Section 1231 losses. For these purposes, "non-recaptured"
Section 1231 losses means a limited partner's aggregate Section 1231 losses for
the five most recent prior years that have not previously been recaptured.
27
<PAGE> 35
For purposes of the passive activity loss limitations of Section 469 of the
Internal Revenue Code, gains recognized from the sale by the partnership of its
interests in its properties generally will be treated as passive activity
income.
Liquidation of the Partnership
A limited partner's adjusted tax basis in its limited partnership interests
is equal to its cost for the limited partnership interests reduced by its
allocable share of:
o partnership distributions;
o partnership losses; and
o expenditures of the partnership not deductible in computing its
taxable income and not properly chargeable to capital account.
A limited partner's adjusted tax basis is increased by its allocable share
of:
o taxable income of the partnership;
o income of the partnership exempt from tax; and
o additional contributions to the partnership.
For purposes of determining a limited partner's adjusted tax basis in its
limited partnership interest, an increase in a limited partner's share of
partnership liabilities is treated as a contribution of cash by that limited
partner to the partnership, and thereby results in an increase in the limited
partner's adjusted tax basis in its limited partnership interests. Conversely, a
decrease in a limited partner's share of partnership liabilities is treated as
distribution of cash from the partnership, and thereby results in a decrease in
the limited partner's adjusted tax basis in its limited partnership interests.
To the extent that a decrease in a limited partner's share of partnership
liabilities results in a deemed cash distribution to the limited partner which
exceeds the limited partner's adjusted tax basis in its limited partnership
interests, the limited partner will recognize gain to the extent of the excess
of the deemed cash distribution over its adjusted tax basis in its limited
partnership interests.
Upon liquidation of the partnership, a limited partner will recognize gain
to the extent of the excess of the cash received by the limited partner
(including any deemed cash distributions to the limited partner attributable to
the limited partner's share of partnership liabilities) over the limited
partner's adjusted tax basis in its limited partnership interests, as such
adjusted tax basis is adjusted to reflect the limited partner's allocable share
of income or loss arising from normal partnership operations for the year of
liquidation and the sale of the partnership's interests in its properties in the
year of liquidation. Conversely, upon the sale of the last property and the
liquidation of the partnership (assuming only cash is distributed), a limited
partner will recognize loss to the extent of the excess of its adjusted tax
basis in its limited partnership interests (as adjusted to reflect the limited
partner's allocable share of income or loss arising from normal partnership
operations for the year of liquidation and the sale of the partnership's
interests in its properties in the year of liquidation) over the cash received
by the limited partner. In addition, the actual amount of gain arising from the
liquidation of the partnership will vary for each limited partner depending upon
its adjusted tax basis in its limited partnership interests (which in turn will
vary depending upon the price paid by the limited partner for its limited
partnership interests, the aggregate partnership distributions received by the
limited partner with respect to its limited partnership interests, and the items
of partnership income or loss as well as allocations of partnership indebtedness
made to the limited partner for federal income tax purposes) and the amount of
cash distributed to the limited partner in connection with the liquidation of
the partnership.
Characterization of Gain or Loss
Any gain or loss recognized by a limited partner on liquidation of the
partnership should be treated as gain or loss from the sale of a capital asset
if the limited partner holds its limited partnership interests as a capital
asset.
28
<PAGE> 36
However, the treatment of the gains and losses recognized by the limited
partners (as capital or ordinary gain or loss and the ability to offset the two)
may differ depending on whether limited partners have any non-recaptured Section
1231 losses as discussed above. Any gain or loss arising from the liquidation of
the partnership generally will be treated as passive gain or loss pursuant to
Section 469 of the Internal Revenue Code.
Passive Loss Limitations
A limited partner's allocable share of partnership income or loss may be
subject to the passive activity loss limitations. Limited partners who are
individuals, trusts, estates, or personal service corporations may offset
passive activity losses only against passive activity income. Limited partners
that qualify as closely held corporations under Section 469 of the Internal
Revenue Code may offset passive activity losses against both passive activity
income and active income (for this purpose, however, "active income" does not
include portfolio income). A limited partner's allocable share of any
partnership gain realized on the sale of the partnership's interests in its
properties will be characterized as passive activity income. Such passive
activity income may be offset by passive activity losses from other passive
activity investments. Because the sale of the partnership's last property and
the dissolution of the partnership following such sale will qualify as a
disposition of the partnership's activity for purposes of the passive loss
rules, a limited partner's allocable share of any partnership loss realized as a
result of the sale of the partnership's interests in its properties and any
suspended partnership losses from prior years should not be subject to the
passive loss limitations in the taxable year of such sale and dissolution.
Income Tax Rates/Taxation of Gains and Losses
The Taxpayer Relief Act of 1997 and the IRS Restructuring and Reform Act of
1998 contain significant changes to the taxation of capital gains of
individuals, trusts and estates. The maximum rate of tax on net capital gains of
individuals, trusts and estates from the sale or exchange of capital assets held
for more than one year has been reduced to 20%, and the maximum rate for net
capital gains attributable to the sale of depreciable real property held for
more than one year (other than certain depreciation recapture taxable as
ordinary income) is 25% to the extent of the deductions for depreciation with
respect to such property. The current maximum tax rate on ordinary income of
individuals is 39.6%. This disparity in tax rates could be beneficial to
individual limited partners with suspended losses attributable to the
partnership. Following the sale of the last property by the partnership, a
limited partner will be considered to have disposed of his or her entire
interest in the partnership, and thus, the limited partner should be entitled to
deduct all suspended passive losses from the partnership against any ordinary
income earned by such limited partner in the year of liquidation of the
partnership or use such suspended losses to offset any gain allocable to such
limited partner on the sale of the partnership's interests in its properties.
Capital gains of individuals and corporate taxpayers can be offset by capital
losses. However, capital losses can be deducted, in any year, only to the extent
of a limited partner's capital gains plus, in the case of an individual,
ordinary income up to $3,000.
Exempt Employee Trusts and Individual Retirement Accounts
Tax-exempt organizations, including trusts which hold assets of employee
benefit plans, although not generally subject to federal income tax, are subject
to tax on certain income derived from a trade or business carried on by the
organization which is unrelated to its exempt activities. However, such
unrelated business taxable income does not in general include income from real
property, gain from the sale of property other than inventory, interest,
dividends and certain other types of passive investment income that are not
derived from "debt-financed property" as defined in Section 514 of the Internal
Revenue Code. If, as the partnership believes, the properties are not
characterized as "inventory," and are not held primarily for sale to customers
in the ordinary course of the partnership's business, and the partnership's
indebtedness is not "acquisition indebtedness" for purposes of Section 514(c) of
the Internal Revenue Code, the income from the sale of the properties should not
constitute unrelated business taxable income. Finally, the partnership's
temporary investment of funds in interest-bearing instruments and deposits also
should not give rise to unrelated business taxable income.
THE FOREGOING ANALYSIS CANNOT BE, AND IS NOT INTENDED AS, A SUBSTITUTE FOR
CAREFUL TAX PLANNING. LIMITED PARTNERS ARE URGED TO CONSULT THEIR OWN TAX
ADVISORS WITH RESPECT TO THEIR OWN TAX SITUATIONS AND THE EFFECTS OF THE SALE BY
THE PARTNERSHIP OF ITS INTERESTS IN ITS PROPERTIES AND THE LIQUIDATION OF THE
29
<PAGE> 37
PARTNERSHIP AS TO FEDERAL, STATE, LOCAL AND FOREIGN TAXES INCLUDING, BUT NOT
LIMITED TO, INCOME AND ESTATE TAXES.
CONFLICTS OF INTEREST AND
INTERESTS OF CERTAIN PERSONS IN THE PROPOSAL
Under applicable law, the general partners have a fiduciary duty of both
loyalty and care to the partnership and to its limited partners. This duty
requires that the general partners exercise good faith and integrity in handling
partnership affairs and that these affairs be conducted in the best interests of
the partnership and the limited partners. As a fiduciary, the general partners
are charged with the safekeeping and use of all partnership funds and assets and
must use such funds and assets for the exclusive benefit of the partnership.
Further, the general partners must safeguard the rights of the limited partners
provided under Texas law and the partnership agreement. The general partners are
liable to the partnership for any violation or breach of these fiduciary duties.
In this connection, it is a requirement that all material conflicts of interest
faced by the general partners in connection with the adoption of the proposal
and the sale of the properties be fully disclosed for consideration by the
limited partners. In considering the recommendation of the general partners, you
should consider the conflicts of interests described below and be aware that the
general partners and some of their affiliates have interests in the proposal
that are different from, or in addition to, your interests as a limited partner.
Some affiliates of the partnership's general partners are also general
partners of MIP II, a partnership with investment objectives and goals similar
to the partnership's. MIP II is also soliciting the approval of its limited
partners to sell all of its assets and dissolve under a proposal similar to the
one described in this proxy statement. You should carefully consider the
potential conflict created by the fiduciary duties that the general partners owe
to both the partnership and MIP II. For example, if a potential buyer reviews
properties from both partnerships, but decides to only purchase one property,
the general partners' fiduciary duties to MIP II prevent them from advocating
the purchase of the partnership's properties over MIP II's properties. Further,
if the limited partners of MIP II vote to sell its properties and dissolve and
the partnership's limited partners do not approve the proposal described in this
proxy statement, the partnership's general partners intend to purchase MIP II's
interest in the Tower Place Joint Venture or sell the property to a third party
buyer.
There is also a potential conflict created by the asset sale because
properties of MIP II may be packaged for sale with properties of the
partnership. In order to address this apparent conflict, bidders for any package
of properties containing the partnership's properties and MIP II properties will
be required to specify how their overall bid is allocated among the individual
properties in the package, and proceeds from the sales of any such package (as
well as general expenses related to the sales) will be apportioned between the
two partnerships based upon such allocation. Further, if MIP II's limited
partners vote in favor of its proposed asset sale and dissolution and the
partnership's limited partners do not approve the proposal in this proxy
statement, then MIP II's general partners will have to dispose of MIP II's 15%
joint venture interest in Tower Place Festival, which could negatively impact
the results of the partnership.
Mitchell Armstrong and Brent Buck are employees of the partnership and are
also officers of the corporate general partner. If the asset sale, dissolution
and amendment proposal is approved, Messrs. Armstrong and Buck will receive
severance packages upon dissolution of the partnership. Hence, they have a
financial interest in securing the dissolution of the partnership. In addition,
the general partners will probably receive a portion of the net sales proceeds
and distributions from operations pursuant to the terms of the partnership
agreement as a result of the consummation of the proposed asset sale and
dissolution. However, it is probable that, upon the sale of the partnership's
last property, the general partners will have a zero capital account balance
which is not in proportion to the 1% to 99% general distribution split with the
limited partners. Hence, this fact may influence the general partners, who will
have broad authority in determining the timing, manner and terms of the sales
transactions if the proposal is approved.
No formal procedures were put in place to minimize the potential conflicts
of interest between the general partners and the partnership. The general
partners have sought to honor faithfully their fiduciary duty to the partnership
even though the non-corporate general partner anticipates receiving a portion of
the asset sale and dissolution proceeds. The general partners believe that the
Blake and Associates appraisals and other aspects of procedural fairness have
been incorporated into the structure of the proposed asset sale and dissolution,
and the
30
<PAGE> 38
expected benefits to you from the proposed asset sale and dissolution offset any
detriment arising from such conflicts of interest or the absence of an
independent representative.
The general partners did not engage separate legal and financial
representation for the limited partners. Had separate representation been
arranged for limited partners, the terms of the proposed asset sale and
dissolution might have been different and possibly more favorable to you. In
addition, if separate representation had been arranged for the limited partners,
issues unique to the value of the partnership might have received greater
attention during the structuring of the proposed asset sale and dissolution.
REGULATORY MATTERS
No federal or state regulatory approvals need be obtained in connection
with the proposal and the sale of the properties thereunder. Certain filings
will be required in Texas upon approval of the amendment to the partnership
agreement and upon the dissolution of the partnership.
ACCOUNTING TREATMENT
The consent of the limited partners to the asset sale and dissolution
proposal will ultimately have an impact on the accounting treatment applied to
the partnership in its financial statements prepared in accordance with
generally accepted accounting principles. The partnership currently classifies
all of its operating properties as "assets to be held for use" and will continue
to classify the operating properties as such until it is determined that
management of the partnership actually has the current ability to remove the
assets from operations. At that time, the partnership will reclassify the
properties to "assets to be disposed of." Other criteria for the
reclassification to "assets to be disposed of" include:
o management, which has the appropriate level of authority, approving
and committing the partnership to a formal plan of sale;
o the formal plan of sale specifically identifies the assets to be sold,
actions to be taken and expected date of completion of the asset sale;
o the partnership has an active program to find a buyer for the assets;
o management can estimate the proceeds of the sale;
o action required by the formal plan of sale will begin immediately; and
o the period of time to complete the asset sale indicates that
significant changes to the formal plan of sale are not likely.
Once the properties are classified as "assets to be disposed of," depreciation
is ceased and the properties are carried at the lower of carrying amount or fair
value less cost to sell.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT OF THE PARTNERSHIP
No person (including any "group" as that term is used in Section 13(d)(3)
of the Securities Exchange Act of 1934) is known to the partnership to be the
beneficial owner of more than five percent of the outstanding limited
partnership interests as of January 10, 2000.
No general partner, officer, director or partner of the general partners
beneficially owned, directly or indirectly, any limited partnership interests as
of January 10, 2000.
No arrangements are known to the partnership which may result in a change
of control of the partnership.
31
<PAGE> 39
ABSENCE OF PUBLIC MARKET FOR LIMITED PARTNERSHIP INTERESTS
There is no public market for the limited partnership interests and none
has existed since the original public offering of the limited partnership
interests. Occasional transfers of limited partnership interests have occurred
during this period, but the general partners only receive information once a
month regarding the prices, if any, paid for limited partnership interests in
connection with such transfers. Consequently, you may not be able to liquidate
your limited partnership interests in the event of an emergency or for any other
reason, and your limited partnership interests may not be readily accepted as
collateral for a loan.
FEES AND EXPENSES
All fees and expenses in connection with the preparation, printing and
mailing of this proxy statement will be paid by the partnership. Such expenses
are expected to total approximately $200,000.
INFORMATION CONCERNING AUDITORS
Representatives of KPMG LLP will be present at the special meeting, will
have an opportunity to make a statement should they desire to do so and will be
available to respond to appropriate questions.
LIMITED PARTNER PROPOSALS
The partnership has no annual or periodic meetings of the limited partners.
Meetings of the limited partners shall be called by the general partners upon
receipt of a request in writing signed by limited partners holding at least 10%
of the limited partnership interests then outstanding. Such request shall state
the purpose or purposes of the proposed meeting and the business to be
transacted. Notice of any such meeting shall be delivered to all general and
limited partners within 10 days after receipt of the request and not less than
15 nor more than 60 days before the date of such meeting.
OTHER MATTERS
The partnership is not aware of any additional matters not set forth in the
notice of special meeting of limited partners that will be presented for
consideration at the special meeting. IF SUCH PROPOSALS OR ANY OTHER MATTERS
REQUIRING THE VOTE OF THE LIMITED PARTNERS PROPERLY COME BEFORE THE SPECIAL
MEETING, THE PERSONS AUTHORIZED UNDER THE PROXIES WILL VOTE AND ACT ACCORDING TO
THEIR BEST JUDGMENT.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Securities Exchange
Act of 1934, and the rules and regulations promulgated thereunder. Under the
Exchange Act, we must file reports, proxy statements and other information with
the SEC. You may read and copy any of this information at the following
locations of the SEC:
<TABLE>
<S> <C> <C>
SEC Public Reference Room Chicago Regional Office New York Regional Office
450 Fifth Street, N.W. Citicorp Center 7 World Trade Center
Room 1024 500 West Madison Street 13th Floor
Washington, D.C. 20549 Suite 1400 New York, New York 10048-1102
Chicago, Illinois 60661-2511
</TABLE>
You may obtain information on the operation of the Public Reference Room by
calling the SEC at 1-800-SEC-0330. You may also obtain copies of our material by
mail at prescribed rates from:
Public Reference Section
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0004.
32
<PAGE> 40
The SEC also maintains an Internet website that contains reports, proxy
statements and other information regarding issuers, like the partnership, that
file electronically with the SEC. The address of that website is
http://www.sec.gov.
33
<PAGE> 41
INCORPORATION BY REFERENCE
A copy of the partnership's Annual Report on Form 10-K for the year ended
December 31, 1998, is attached to this proxy statement as Appendix B, and a copy
of the partnership's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1999 is attached to this proxy statement as Appendix C.
The SEC allows us to "incorporate by reference" the information we file
with it, which means that we can disclose important information to you by
referring you to those documents. The documents the partnership is incorporating
by reference are:
o The partnership's Annual Report on Form 10-K for the twelve months
ended December 31, 1998;
o The partnership's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1999; and
o All other documents which the partnership filed, or will file,
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
since December 31, 1998 to the date of the special meeting.
The partnership will provide by first class mail within one business day of
receiving a written or oral request a copy of any or all of the documents
incorporated by reference in this proxy statement (other than exhibits to such
documents unless such documents are specifically incorporated by reference into
the information this proxy statement incorporates). Written requests for such
copies should be addressed to the partnership at 5550 LBJ Freeway, Suite 675,
Dallas, Texas 75240, and telephone requests may be made to Brent Buck, at (800)
765-3863.
34
<PAGE> 42
APPENDIX A
BLAKE AND ASSOCIATES SUMMARY OF PROPERTY APPRAISALS
<PAGE> 43
[BLAKE APPRAISALS LETTERHEAD]
October 20, 1999
Murray Income Properties I, Ltd.
c/o Mr. Brent Buck
Executive Vice President
Murray Income Properties
5550 LBJ Freeway
Suite 675
Dallas, TX 75240
Reference: Summary of Limited Summary Appraisal Reports - Attachment to the
Joseph J. Blake and Associates December 31, 1998 Limited Summary
Appraisals on Mountain View Plaza (Scottsdale, AZ); Castle Oaks
Village Shopping Center (Castle Hills, TX); and Tower Place
Festival Shopping Center (Pineville, NC)
Dear Mr. Buck:
In accordance with your request, we have summarized the 1998 valuations
referenced above. The information contained within this document was extracted
from the respective appraisals performed by our firm in the first quarter of
1999 which are assumed to be retained in your files. This attachment should be
used only in conjunction with the Limited Summary Appraisals, which include all
special assumptions and limiting conditions which are an integral part of our
value conclusions.
The purpose of the Limited Summary Appraisals was to estimate the "as is" Market
Values of the leased fee interests in the properties as of DECEMBER 31, 1998.
The function of these appraisals was for year-end 1998 valuation purposes.
Briefly described, Mountain View Plaza is located at the southeast corner of
Hayden Road and Mountain View Road in Scottsdale, Maricopa County, Arizona. The
shopping center contains three buildings with a total net rentable area of
58,047 + or - square feet. It should be noted that THREE SEPARATE OUT-PARCELS,
which were developed with a Burger King restaurant, a Mobil service station and
a multi-tenant building that was occupied by Norwest Bank, Skeeter's Grill,
Community Cleaners and Blade's Hair Design WERE NOT INCLUDED IN OUR VALUATION.
<PAGE> 44
October 20, 1999
Mr. Brent Buck
Page 2 of 4
Mountain View Plaza was reportedly constructed in 1984 and was observed as being
in good condition with no signs of significant deferred maintenance observed on
our March 6, 1999 inspection. The subject buildings are situated on an
irregular-shaped parcel containing 7.6027 + or - acres that are zoned PNC/PCD,
Planned Neighborhood Center/Planned Community Development. Parking is provided
by an asphalt-paved parking lot which contains 320 + or - spaces or 1 space per
182 square feet of leasable area for the entire center. At the time of
inspection, the subject was approximately 98% leased. However, Wild Oats
supermarket had vacated their space but reportedly continues to pay rent.
Therefore, the subject was 64.45% occupied.
Castle Oaks Village, is located at the southwest corner of West Avenue and
Lockhill-Selma Road in the city of Castle Hills, Bexar County, Texas. Castle
Hills is a suburb of San Antonio. The shopping center contains one building with
a total net rentable area of 33,449 + or - square feet. The center was
reportedly constructed in 1983 and was observed as being in good condition with
no signs of significant deferred maintenance observed on March 5, 1999.
Castle Oaks contains a total of 3.1380 + or - acres of land that is zoned "G",
General Business. Additional improvements include an asphalt-paved parking lot
with lights and landscaping. As of the date of appraisal, the subject was 95%
leased.
Tower Place Festival Shopping Center is located at the northwest corner of
Pineville-Matthews Road and Pine Cedar Drive in Pineville, Mecklenburg County,
North Carolina. Pineville is a suburb of Charlotte. The center contains three
buildings with a total net rentable area of 114,606 + or - square feet. The
subject WAS anchored by General Cinema, who occupied 31,837 square feet. In 1998
General Cinema ceased operating its theater. However, the primary lease extends
until September 2006. Based on conversations with the Property Manager of Tower
Place Festival, a sublease tenant was being searched for at the time of the
appraisal. It was noted that General Cinema has a current $2.8 million lease
buyout. For the purpose of our analysis, we projected that sublease tenant will
be found and the space will be released at the expiration of the General Cinema
lease with market oriented alteration costs.
The buildings were reportedly constructed from 1985 to 1987 and were observed as
being in good condition with no signs of significant deferred maintenance
observed on our February 28, 1999 inspection. The subject buildings are situated
on an irregular-shaped parcel containing a total of 10.777 + or - acres of land
that is zoned B-4, Highway Business District by the City of Pineville. Parking
is provided by an asphalt-paved parking lot which contains 677 + or - spaces or
1 space per 169 square feet of leasable area for the entire center. As of the
date of appraisal, the subject was 67.4% occupied and 98% leased. The large
difference in occupied and leased figures is primarily due to the leased, but
vacant, 31,837 square foot former General Cinema space.
<PAGE> 45
October 20, 1999
Mr. Brent Buck
Page 3 of 4
It should be noted that according to our client, Murray Income Properties I,
Ltd.'s interest in this property equates to an 85% INTEREST. However, the value
reflected in our December 31, 1998 valuation, which is noted on the following
page, represents the 100% interest in the property. A fractional interest was
not valued in our year-end 1998 appraisal.
APPRAISAL DEVELOPMENT AND REPORTING PROCESS
In the course of the preparation of the appraisals, a variety of market data,
including improved sales and rent comparables, were gathered. Statistical and
market data was obtained from recognized area real estate firms. Property
information was supplied to the appraisers by Murray Income Properties and
third-party management companies included unaudited historical income and
expense data, leases, tenant sales histories, and rent rolls. Other information
obtained included current rental information (asking rental rates, tenant
finish-out allowances, and brokers' commission rates).
In valuing the properties, the Income Capitalization Approach was considered to
be the most relevant technique because of the properties' income-producing
capabilities. The strength of this approach is that it closely mirrors the
actions of most investors who base their purchase decisions primarily on this
method for investment grade retail properties. In essence, the primary analysis
in our Summary Reports dealt with the Income Capitalization Approach.
The Sales Comparison Approach was also utilized since it is based upon the
principle that the market value of a given property is equivalent to the market
value of an equally desirable substitute property with similar functional
utility. This approach analyzes the actions of investors and how they react to
or interpret the market. The weakness of this approach is that it is based on
historical data in changing markets the data may not represent current investor
expectations. Furthermore, income-producing properties like the subject are
frequently purchased for the anticipation of future income, not historical
income.
Even though both approaches were utilized, the Income Capitalization Approach
was emphasized.
<PAGE> 46
October 20, 1999
Mr. Brent Buck
Page 4 of 4
The appraisers note that they have not valued or inspected the properties as of
a current date.
After inspections of the properties in early 1999 and an analysis of pertinent
physical and economic factors, we estimated that the market values of the 100%
leased fee interests in the properties, as of DECEMBER 31, 1998, were as
follows:
<TABLE>
<CAPTION>
VALUE PER
PROPERTY VALUE SIZE SQUARE FOOT
-------- ----- ---- -----------
<S> <C> <C> <C>
Mountain View Plaza $ 7,100,000 58,047 $122.31
Castle Oaks Village $ 3,300,000 33,449 $ 98.66
Tower Place Festival (100% Interest) $13,600,000 114,606 $118.67
</TABLE>
If we can be of any further assistance, do not hesitate in contacting the
undersigned.
Respectfully submitted,
JOSEPH J. BLAKE AND ASSOCIATES, INC.
/s/ ARTURO SINGER
- ------------------------------
Arturo Singer, MAI
Principal/Regional Manager
<PAGE> 47
APPENDIX B
ANNUAL REPORT ON FORM 10-K (FOR THE YEAR ENDED DECEMBER 31, 1998)
<PAGE> 48
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, 1998
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 NO.
0-14105
---------------
MURRAY INCOME PROPERTIES I, LTD.
(Exact Name of Registrant as Specified in its Charter)
TEXAS 75-1946214
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
5550 LBJ FREEWAY, SUITE 675, DALLAS, TEXAS 75240
(Address of principal executive offices) (Zip Code)
(972) 991-9090
(Registrant's Telephone Number, Including Area Code)
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
------- -------
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 or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
<PAGE> 49
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
PART I
Item 1. Business 1
Item 2. Properties 2
Item 3. Legal Proceedings 3
Item 4. Submission of Matters to a Vote of Security Holders 3
PART II
Item 5. Market for the Partnership's Limited Partnership
Interests and Related Security Holder Matters 4
Item 6. Selected Financial Data 4
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 5
Item 7A. Quantitative and Qualitative Disclosure About Market Risk 9
Item 8. Financial Statements and Supplementary Data 10
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 20
PART III
Item 10. Directors and Executive Officers of the Partnership 21
Item 11. Executive Compensation 22
Item 12. Security Ownership of Certain Beneficial Owners
and Management 23
Item 13. Certain Relationships and Related Transactions 23
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K 24
Signatures 30
Index to Exhibits 31
</TABLE>
<PAGE> 50
PART I
ITEM 1. BUSINESS.
General. Murray Income Properties I, Ltd. (the "Partnership") was formed
March 12, 1984 under the Texas Uniform Limited Partnership Act to acquire
recently constructed income-producing shopping centers located in growth
markets. As of November, 1989, the Partnership became governed by the Texas
Revised Limited Partnership Act. The General Partners of the Partnership are
Murray Realty Investors VIII, Inc., a Texas corporation, and Crozier Partners
VIII, Ltd., a Texas limited partnership.
The Partnership acquired its first shopping center, Mountain View Plaza
("Mountain View"), in 1985, and its second shopping center, Castle Oaks Village
("Castle Oaks"), in 1986. The Partnership also in 1986 acquired an 85% interest
in Tower Place Joint Venture, which owns Tower Place Festival Shopping Center
("Tower Place"). The remaining 15% interest in the joint venture is owned by
Murray Income Properties II, Ltd., a publicly-registered real estate limited
partnership, the general partners of which are affiliates of the General
Partners. All acquisitions were paid for in cash. For a more detailed
description of the joint venture interest and the properties acquired by the
Partnership, see "Item 2. Properties".
The Partnership is in competition for tenants for its properties with other
real estate limited partnerships as well as with individuals, corporations, real
estate investment trusts, pension funds and other entities engaged in the
ownership and operation of retail real estate. When evaluating a particular
location to lease, a tenant may consider many factors, including, but not
limited to, space availability, rental rates, lease terms, access, parking,
quality of construction and quality of management. While the General Partners
believe that the Partnership's properties are generally competitive with other
properties with regard to these factors, there can be no assurance that, in the
view of a prospective tenant, other retail properties will not be more
attractive.
Mountain View Plaza Shopping Center. At December 31, 1998, Mountain View
was 98% leased. One tenant, Wild Oats Markets, Inc., leases approximately 33.3%
of the total rentable space of the property. The Wild Oats lease expires on
August 31, 2005 and the tenant has an option to renew for two successive five
year periods. Childtime Childcare leases 10.3% of the total rentable space. The
Childtime Childcare lease expires January 31, 2000. This tenant has no further
options to renew its lease. At December 31, 1997, Mountain View was 100% leased.
Mountain View is subject to competition from similar types of properties in
the vicinity in which it is located. The following information on competitive
properties in the vicinity of Mountain View has been obtained from sources
believed reliable by the Partnership. The accuracy of this information was not
independently verified by the Partnership.
<TABLE>
<CAPTION>
Rentable Percent Leased at
Property Square Feet December 31, 1998
-------- ----------- -----------------
<S> <C> <C>
1 81,500 100%
2 31,400 100%
3 94,100 99%
</TABLE>
Castle Oaks Village Shopping Center. At December 31, 1998, Castle Oaks was
95% leased. One tenant, Razmiko's Ltd., leases 13.5% of the total rentable space
of the property. This lease expires on September 30, 2000. At December 31, 1997,
Castle Oaks was 92% leased.
Castle Oaks is subject to competition from similar types of properties in
the vicinity in which it is located. The following information on such
competitors has been obtained from sources believed reliable by the Partnership.
The accuracy of this information was not independently verified by the
Partnership.
1
<PAGE> 51
<TABLE>
<CAPTION>
Rentable Percent Leased at
Property Square Feet December 31, 1998
-------- ----------- -----------------
<S> <C> <C>
1 100,000 85%
2 40,800 97%
3 42,900 90%
</TABLE>
Tower Place Festival Shopping Center. At December 31, 1998, Tower Place was
98% leased. One tenant, General Cinema, leases 27.8% of the total rentable space
of the property and another, J&K Cafeterias, leases 10.6% of the total rentable
space. The General Cinema lease expires on September 30, 2006, with the tenant
having the option to extend the term of the lease for two successive terms of
five years each. The J&K Cafeterias lease expires on April 30, 2004, and the
tenant has the option to renew for two periods of five years each. At December
31, 1997, Tower Place was 100% leased.
Tower Place is subject to competition from similar types of properties in
the vicinity in which it is located. The following information on such
competitors has been obtained from sources believed reliable by the Partnership.
The accuracy of this information was not independently verified by the
Partnership.
<TABLE>
<CAPTION>
Rentable Percent Leased at
Property Square Feet December 31, 1998
-------- ----------- -----------------
<S> <C> <C>
1 65,000 100%
2 132,648 95%
3 248,700 99%
</TABLE>
The Partnership has no employees. However, the Partnership is required to
reimburse 47% of the costs of four employees to Murray Income Properties II,
Ltd., an affiliate of the Partnership.
For a definition of the terms used herein and elsewhere in this Form 10-K,
see "Glossary" incorporated by reference herein as contained in the Prospectus
dated May 31, 1984 filed as a part of Amendment No. 2 to Registrant's Form S-11
Registration Statement (File No. 2-90016) attached hereto as Exhibit 99a.
ITEM 2. PROPERTIES.
The Partnership owns the properties described below:
Location Description of Property
Scottsdale, Arizona Mountain View Plaza Shopping Center
A 58,154 square foot shopping center
situated on 7.6 acres. At December 31, 1998,
Mountain View was 98% leased at an average
annual lease rate of $12.88. Lease rates
range from $6.83 to $20.88 per square foot.
San Antonio, Texas Castle Oaks Village Shopping Center
A 33,435 square foot shopping center
situated on 3.013 acres. At December 31,
1998, Castle Oaks was 95% leased at an
average annual lease rate of $11.02. Lease
rates range from $8.40 to $12.50 per square
foot.
2
<PAGE> 52
The Partnership also owns an 85% interest in Tower Place Joint Venture
which owns the property described below:
Pineville (Charlotte), Tower Place Festival Shopping Center
North Carolina A 114,586 square foot shopping center
situated on 10.777 acres. At December
31, 1998, Tower Place was 98% leased at an
average annual lease rate of $13.89. Lease
rental rates range from $8.00 to $16.50 per
square foot.
ITEM 3. LEGAL PROCEEDINGS.
There are no material legal proceedings to which the General Partners or
the Partnership is a party or to which any of the Partnership's properties are
subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the fourth
quarter of the year covered by this report through the solicitation of proxies
or otherwise.
3
<PAGE> 53
PART II
ITEM 5. MARKET FOR THE PARTNERSHIP'S LIMITED PARTNERSHIP INTERESTS AND RELATED
SECURITY HOLDER MATTERS.
A public market for Interests does not exist and is not likely to develop.
Consequently, a Limited Partner may not be able to liquidate its investment in
the event of emergency or for any other reason, and Interests may not be readily
accepted as collateral for a loan. Further, the transfer of Interest is subject
to certain limitations. For a description of such limitations, see Article XIII
of the Agreement of Limited Partnership as contained in the Prospectus dated May
31, 1984 filed as a part of Amendment No. 2 to Registrant's Form S-11
Registration Statement (File No. 2-90016) attached hereto as Exhibit 99b.
At December 31, 1998, there were 2,316 record holders, owning an aggregate
of 28,227 Interests.
The Partnership made its initial Cash Distribution from Operations
following the quarter ended March 31, 1985, the first complete quarter
subsequent to the acceptance of subscriptions for the minimum number of
Interests offered, and has continued to make distributions after each subsequent
quarter. See "Item 6. Selected Financial Data" for the cash distributions per
Limited Partnership Interest during the period from January 1, 1994 to December
31, 1998. The Partnership intends to continue making Cash Distributions from
Operations on a quarterly basis.
The Partnership Agreement provides that under certain circumstances, the
General Partners may, in their sole discretion and upon the request of a Limited
Partner, repurchase the Interests held by such Limited Partner. Murray Realty
Investors VIII, Inc. is obligated to set aside 25% of its share of Cash
Distributions from Operations and Crozier Partners VIII, Ltd. is obligated to
set aside 25% of its 5% share of Cash Distributions from Operations that is
subordinated to the prior receipt by the Limited Partners of a non-cumulative 7%
annual return from Cash Distributions from Operations for this purpose. Any such
repurchase shall be subject to the availability of funds set aside and the other
terms and conditions set forth in the Partnership Agreement. For information on
such terms and conditions, see Section 10.15 of the Agreement of Limited
Partnership as contained in Amendment No. 9 to the Agreement of Limited
Partnership contained in the Proxy Statement dated October 11, 1989 attached
hereto as Exhibit 99c. As of December 31, 1998, no funds were available for this
purpose.
ITEM 6. SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
For Years Ended December 31,
---------------------------------------------------------------------------------
1998 1997 1996 1995 1994
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Income $ 3,271,883 $ 3,298,152 $ 3,052,985 $ 2,846,710 $ 2,804,229
Earnings Before
Minority Interest 1,256,104 1,275,571 1,037,019 918,032 926,811
Minority Interest
In Joint Venture's
Earnings 140,298 135,394 132,060 115,220 109,520
Net Earnings 1,115,806 1,140,177 904,959 802,812 817,291
Basic earnings per
Limited Partnership
Interest* 38.74 39.59 31.42 27.87 28.38
Distributions per
Limited Partnership
Interest* 60.00 58.13 50.00 50.00 50.00
Total Assets at
Year End $ 18,661,233 $ 19,350,195 $ 19,993,931 $ 20,598,892 $ 21,234,326
</TABLE>
* Based on Limited Partnership Interests outstanding at year-end and net
earnings or distributions allocated to the Limited Partners.
The above selected financial data should be read in conjunction with the
financial statements and related notes appearing in Item 8 of this report.
4
<PAGE> 54
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Liquidity and Capital Resources
As of December 31, 1998, the Partnership had cash and cash equivalents of
$1,808,765. Such amounts represent cash generated from operations and working
capital reserves.
An increase in investment properties, buildings and improvements of $70,216
from December 31, 1997 to December 31, 1998 is primarily due to the replacement
of a roof on one of the buildings at Mountain View and tenant improvements at
Tower Place and Castle Oaks.
Rental income from leases with escalating rental rates is accrued using the
straight line method over the related lease terms. At December 31, 1998 and
December 31, 1997, there were $457,406 and $492,448, respectively, of accounts
receivable related to such accruals. Accounts receivable also consist of tenant
receivables, receivables for rent collected (but not yet remitted to the
Partnership by the property management companies), and interest receivable on
short-term investments. A decrease from December 31, 1997 to December 31, 1998
in accounts receivable (before bad debts) of $66,421 is primarily due to a
decrease in receivables for rent collected (but not yet remitted to the
Partnership by the property management companies) and receivables related to the
accruals described above at each of the Partnership's properties. As of December
31, 1998 and December 31, 1997, the Partnership had allowances of $8,676 and
$5,655, respectively, for uncollectible accounts receivable.
During the year ended December 31, 1998, the Partnership made Cash
Distributions from Operations totaling $1,728,185. Subsequent to December 31,
1998, the Partnership made a Cash Distribution from Operations of $432,046
relating to the three months ended December 31, 1998. The distributed funds were
derived from the net cash flow generated from operations of the Partnership's
properties and from interest earned, net of administrative expenses, on funds
invested in short-term money market instruments.
Future liquidity is currently expected to result from cash generated from
the operations of the Partnership's properties (which could be affected
negatively in the event of weakened occupancies and/or rental rates), interest
earned on funds invested in short-term money market instruments and ultimately
through the sale of the Partnership's properties.
Overall market conditions remained stable in the cities in which the
Partnership owns property. Real estate markets typically parallel employment,
job growth, and housing starts, and a strong national economy has spurred the
construction of new retail development in these markets. However, most of the
new space is being absorbed and, thus far, supply and demand have remained in
relative equilibrium. The second half of the year saw financing for new real
estate projects slow considerably, which may ultimately help the markets by
preventing overbuilding. It is too early to tell how this might impact the
markets in 1999. Despite the strength of the markets, two of the Partnership's
three properties experienced the loss of anchor tenants over the last 16 months.
At Tower Place, General Cinema closed its eight-screen movie theater in August,
1998, and in late 1997, Wild Oats Markets closed its grocery store at Mountain
View. Both of these tenants have continued to pay rent according to the terms of
their leases. To date, neither of these centers has seen its occupancy or
overall performance severely impacted by the loss of these anchors. However, an
unoccupied anchor space could result in less foot traffic in the shopping
center, thereby impacting the
5
<PAGE> 55
sales of the smaller tenants and, consequently, their ability to pay rent. It
could also impact the ability to attract new retailers when space does become
available for lease. Management is working diligently to lease this space so
that the properties' long-term performance is not adversely affected. Castle
Oaks' performance continued to improve, with average occupancy and rental income
both increasing in 1998 over 1997. This is particularly evident when comparing
the property's 1998 performance with its performance in 1996. Over this two year
period, average occupancy increased from 75% to 92%, and rental income increased
29%.
Results of Operations
Rental income decreased $28,945 (1%) for the year ended December 31, 1998
as compared to the year ended December 31, 1997. Rental income increased
$232,755 (8%) for the year ended December 31, 1997 as compared to the year ended
December 31, 1996. The following information details the rental income
generated, bad debt expense incurred, and average occupancy for the years ended
December 31, 1998, December 31, 1997 and December 31, 1996, respectively, for
each of the Partnership's properties:
<TABLE>
<CAPTION>
For the years ended
December 31,
----------------------------------------------
1998 1997 1996
------------ ------------- -----------
<S> <C> <C> <C>
Mountain View Plaza Shopping Center
Rental income $ 963,180 $ 1,023,190 $ 907,881
Bad debt expense (recovery) 6,191 -0- (45)
Average occupancy 98% 100% 95%
Castle Oaks Village Shopping Center
Rental income $ 430,721 $ 414,070 $ 333,257
Bad debt expense (recovery) (1,938) (4,625) 9,788
Average occupancy 92% 90% 75%
Tower Place Festival Shopping Center
Rental income $ 1,787,124 $ 1,772,710 $ 1,736,077
Bad debt expense (recovery) 448 2,997 (4,305)
Average occupancy 96% 98% 97%
</TABLE>
Rental income at Mountain View decreased $60,010 (6%) for the year ended
December 31, 1998 as compared to the year ended December 31, 1997 due to lower
tenant reimbursements for common area maintenance and real estate taxes. Rental
income at Mountain View increased $115,309 (13%) for the year ended December 31,
1997 as compared to the year ended December 31, 1996, with higher rent due to
higher occupancy, higher rental rates and increased tenant reimbursements for
common area maintenance costs and real estate taxes being offset by decreases in
tenant reimbursements for insurance costs.
Mountain View averaged 98% occupancy during 1998, a two percent decrease
from the previous year. During the year, a tenant who occupied 880 square feet
vacated its space prior to the expiration of its lease. This space was
subsequently leased to an existing tenant as part of an expansion of its space.
Another tenant who occupied 1,278 square feet vacated its space prior to lease
expiration and this space has remained vacant. Two tenants totaling 3,438 square
feet renewed their leases for five years. One tenant who occupies 1,059 square
feet renewed its lease for three years, another tenant occupying 1,033 square
feet renewed its lease for two years, and a third tenant occupying 1,127 square
feet renewed its lease for one year. A new tenant signed a lease in December for
1,127 square feet which had been occupied by a tenant who had become delinquent
in its rental payments. Management is attempting to collect what this tenant
owed upon moving out of the space. The space previously occupied by Wild Oats
Markets, which contains 19,359 square feet, remained vacant throughout the year.
Wild Oats continues to pay rent according to the terms of its
6
<PAGE> 56
lease. During the first quarter, a new roof was installed on a portion of the
shopping center. This completes the re-roofing of the shopping center which was
accomplished in stages over the past several years. As of December 31, 1998,
Mountain View was 98% leased.
Rental income at Castle Oaks increased $16,651 (4%) for the year ended
December 31, 1998 as compared to the year ended December 31, 1997 primarily due
to an increase in occupancy, an increase in rental rates, and higher tenant
reimbursements for common area maintenance costs and real estate taxes. Rental
income at Castle Oaks increased $80,813 (24%) for the year ended December 31,
1997 as compared to the year ended December 31, 1996 primarily due to an
increase in occupancy, an increase in rental rates, and higher tenant
reimbursements for common area maintenance costs, real estate taxes and
insurance costs.
Castle Oaks averaged 92% occupancy during the year, a two percent increase
over the previous year. One new tenant who signed a lease in December 1997 took
occupancy in January 1998. One tenant who occupied 2,100 square feet renewed its
lease for five years. A tenant who occupies 1,800 square feet renewed its lease
for three years, and a tenant who occupies 1,500 square feet renewed its lease
for 39 months. A tenant who occupied 1,245 square feet signed a lease to take an
additional 932 square feet. This tenant expanded into this space subsequent to
the end of the year. Another tenant who occupied 1,506 square feet moved to
another space in the shopping center which contains 1,827 square feet and signed
a new four year lease. As of December 31, 1998, Castle Oaks was 95% leased.
Rental income at Tower Place increased $14,414 (1%) for the year ended
December 31, 1998 as compared to the year ended December 31, 1997, with
increases in rental rates offset by decreases in tenant reimbursements for
common area maintenance costs, reimbursements for common advertising costs and a
decrease in percentage rent received. Rental income at Tower Place increased
$36,633 (2%) for the year ended December 31, 1997 as compared to the year ended
December 31, 1996 primarily due to an increase in occupancy, an increase in
rental rates and an increase in tenant reimbursements for common area
maintenance costs, offset by a decrease in percentage rent received.
Tower Place averaged 96% occupancy for the year ended December 31, 1998, a
two percent decrease from the previous year. A new lease for 1,604 square feet
was executed in January and the tenant took occupancy in February. One tenant
who occupied 1,050 square feet vacated its space prior to the expiration of its
lease. This space was subsequently leased to an existing tenant who now leases a
total of 3,750 square feet. Two other tenants who occupied a total of 3,570
square feet vacated their spaces prior to lease expiration. Both of these spaces
have been leased to new tenants who will take occupancy during the first quarter
of 1999. Two tenants who occupied a total of 2,650 square feet vacated their
spaces upon the expiration of their leases. One of these spaces, containing
1,050 square feet, was leased to a new tenant who took occupancy in September.
One tenant who occupies 3,500 square feet renewed its lease for five years and
two tenants who occupy a total of 5,322 square feet renewed their leases for
three years. A tenant who occupies 1,400 square feet renewed its lease for two
years and a tenant who occupies 1,120 square feet renewed its lease for one
year. General Cinema, whose eight-screen theater occupies 31,837 square feet,
ceased operations in August. They have continued to pay rent according to the
terms of their lease, which expires September 30, 2006. Management is
aggressively seeking a replacement tenant for this space. As of December 31,
1998, Tower Place was 98% leased.
Interest income of the Partnership increased $2,676 (3%) for the year ended
December 31, 1998 as compared to the year ended December 31, 1997 primarily due
to larger balances of invested funds. Interest income of the Partnership
increased $12,412 (16%) for the year ended December 31, 1997 as compared to the
year ended December 31, 1996 primarily due to larger balances of invested funds.
7
<PAGE> 57
Depreciation is provided over the estimated useful lives of the respective
assets using the straight line method. The estimated useful lives of the
buildings and improvements range from three to twenty-five years.
Property operating expenses consist primarily of real estate taxes,
property management fees, insurance costs, utility costs, repair and maintenance
costs, leasing and promotion costs, and amortization of deferred leasing costs.
Property operating expenses increased $32,190 (4%) for the year ended December
31, 1998 as compared to the previous year primarily because of higher repair and
maintenance costs at each of the Partnership's properties and higher real estate
taxes at Mountain View and Castle Oaks. Mountain View's total operating expenses
increased with increases in parking lot repairs, legal fees, leasing and
promotion costs and real estate taxes being offset by decreases in security
costs and property management fees. Castle Oaks' total operating expenses
increased primarily because of higher repair and maintenance costs and real
estate taxes. Tower Place's total operating expenses decreased with higher
repair and maintenance costs offset by lower leasing and promotion costs. During
1998, the tenants at Tower Place stopped paying into a marketing fund for common
advertising costs. This resulted in lower income from reimbursements for
advertising costs and a corresponding decrease in advertising expenses.
Property operating expenses decreased $7,399 (1%) for the year ended
December 31, 1997 as compared to the previous year primarily due to lower repair
and maintenance costs at Mountain View. Mountain View's total operating expenses
decreased with decreases in parking lot and roof maintenance being offset by
increases in property management fees, security costs, and real estate taxes.
Castle Oaks' total operating expenses increased slightly with increases in
landscaping costs and property management fees being offset by decreases in
legal fees and insurance costs. Tower Place's total operating expenses increased
with increases in parking lot maintenance costs, leasing and promotion costs and
property management fees being offset by decreases in utilities and landscaping
costs.
General and administrative expenses incurred are related to legal and
accounting expenses, rent, investor services costs, salaries and benefits and
various other costs required for the administration of the Partnership,
including reimbursements of shared direct operating costs to Murray Income
Properties II, Ltd. General and administrative expenses decreased $34,483 (10%)
for the year ended December 31, 1998 as compared to the year ended December 31,
1997 primarily due to decreases in accounting and legal costs, investor services
costs and telephone expenses, offset by increases in salaries and benefits.
General and administrative expenses increased $22,081 (7%) for the year
ended December 31, 1997 as compared to the year ended December 31, 1996,
primarily due to increases in rent, telephone, salaries and benefits, seminars
and education costs, and legal and accounting fees.
Bad debt expenses increased $6,329 for the year ended December 31, 1998 as
compared to the same period in 1997 with bad debts at Mountain View being offset
by recoveries at Castle Oaks. Bad debt expenses decreased $7,066 for the year
ended December 31, 1997 as compared to the same period in 1996 with bad debts at
Tower Place being offset by recoveries at Castle Oaks. The reduction is
primarily due to intensive efforts by Partnership management and the property
managers to recognize and resolve potential tenant problems as rapidly as
possible, thereby reducing the build-up in outstanding rent receivables.
The effect of inflation on results of operations for the years ended
December 31, 1998, 1997, and 1996 was not significant.
The Partnership recognizes that the arrival of the Year 2000 poses a unique
challenge to the ability of an entity's information technology system and
non-information technology systems to recognize the date change from December
31, 1999 to January 1, 2000. The Partnership is continuing to assess and has
made certain changes to provide for continued functionality of its
8
<PAGE> 58
systems. An assessment of the readiness of the Partnership's external entities,
such as vendors, customers, payment systems and others is still ongoing. Due to
the nature and extent of the Partnership's operations that are affected by Year
2000 issues, the Partnership does not believe that Year 2000 issues will have a
material adverse effect on the business operation or the financial performance
of the Partnership. There can be no assurance, however, that Year 2000 issues
will not adversely affect the Partnership or its business. The Partnership
believes that the cost to make appropriate changes of its internal and external
systems will not be significant and that such costs will be funded completely
through operations.
Words or phrases when used in the Form 10-K or other filings with the
Securities and Exchange Commission, such as "does not believe" and "believes" or
similar expressions, are intended to identify "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS.
The Partnership's financial instruments consist of cash and cash
equivalents, accounts receivable, accounts payable, accrued property taxes
payable, and security deposits. The carrying amount of these instruments
approximate fair value due to the short-term nature of these instruments.
Therefore, the Partnership believes it is relatively unaffected by interest rate
changes or other market risks.
9
<PAGE> 59
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The following financial statements are filed as part of this report:
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
Independent Auditors' Report 11
Consolidated Balance Sheets - December 31, 1998 and 1997 12
Consolidated Statements of Earnings - Years ended
December 31, 1998, 1997, and 1996 13
Consolidated Statements of Changes in Partners' Equity -
Years ended December 31, 1998, 1997, and 1996 14
Consolidated Statements of Cash Flows - Years ended
December 31, 1998, 1997, and 1996 15
Notes to Consolidated Financial Statements 16-19
</TABLE>
10
<PAGE> 60
INDEPENDENT AUDITORS' REPORT
The Partners
Murray Income Properties I, Ltd.:
We have audited the accompanying consolidated balance sheets of Murray Income
Properties I, Ltd. (a limited partnership) and consolidated joint venture as of
December 31, 1998 and 1997, and the related consolidated statements of earnings,
changes in partners' equity and cash flows for each of the years in the
three-year period ended December 31, 1998. These consolidated financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these consolidated 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Murray Income
Properties I, Ltd. and consolidated joint venture as of December 31, 1998 and
1997, and the results of their operations and their cash flows for each of the
years in the three-year period ended December 31, 1998, in conformity with
generally accepted accounting principles.
KPMG LLP
Dallas, Texas
February 26, 1999
11
<PAGE> 61
MURRAY INCOME PROPERTIES I, LTD.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED JOINT VENTURE
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
-------------- --------------
<S> <C> <C>
ASSETS
Investment properties, at cost (note 3):
Land $ 6,232,801 $ 6,232,801
Buildings and improvements 20,389,399 20,319,183
-------------- --------------
26,622,200 26,551,984
Less accumulated depreciation 10,618,469 9,779,632
-------------- --------------
Net investment properties 16,003,731 16,772,352
Cash and cash equivalents 1,808,765 1,620,246
Accounts receivable, net of allowances of
$8,676 and $5,655 in 1998 and 1997,
respectively (note 1) 641,807 712,929
Other assets, at cost, net of accumulated
amortization of $587,283 and $512,307 in
1998 and 1997, respectively 206,930 244,668
-------------- --------------
$ 18,661,233 $ 19,350,195
============== ==============
LIABILITIES AND PARTNERS' EQUITY
Accounts payable $ 13,167 $ 13,498
Accrued property taxes 203,814 195,500
Security deposits 168,745 183,609
-------------- --------------
Total liabilities 385,726 392,607
-------------- --------------
Minority interest in joint venture (note 3) 1,321,510 1,391,212
-------------- --------------
Partners' equity:
General Partners:
Capital contributions 1,000 1,000
Cumulative net earnings 239,922 217,606
Cumulative cash distributions (401,398) (366,834)
-------------- --------------
(160,476) (148,228)
-------------- --------------
Limited Partners (28,227 Interests):
Capital contributions, net of offering costs 24,570,092 24,570,092
Cumulative net earnings 12,212,939 11,119,449
Cumulative cash distributions (19,668,558) (17,974,937)
-------------- --------------
17,114,473 17,714,604
-------------- --------------
Total partners' equity 16,953,997 17,566,376
-------------- --------------
$ 18,661,233 $ 19,350,195
============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
12
<PAGE> 62
MURRAY INCOME PROPERTIES I, LTD.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED JOINT VENTURE
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
Years Ended
December 31,
---------------------------------------------
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
INCOME:
Rental (note 3) $ 3,181,025 $ 3,209,970 $ 2,977,215
Interest 90,858 88,182 75,770
------------ ------------ ------------
3,271,883 3,298,152 3,052,985
------------ ------------ ------------
EXPENSES:
Depreciation 838,837 849,675 850,676
Property operating 869,521 837,331 844,730
General and administrative 302,720 337,203 315,122
Bad debts (recoveries), net 4,701 (1,628) 5,438
------------ ------------ ------------
2,015,779 2,022,581 2,015,966
------------ ------------ ------------
Earnings before minority interest 1,256,104 1,275,571 1,037,019
Minority interest in joint venture's
earnings (note 3) 140,298 135,394 132,060
------------ ------------ ------------
Net earnings $ 1,115,806 $ 1,140,177 $ 904,959
============ ============ ============
Basic earnings per limited partnership
interest $ 38.74 $ 39.59 $ 31.42
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
13
<PAGE> 63
MURRAY INCOME PROPERTIES I, LTD.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED JOINT VENTURE
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' EQUITY
YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
<TABLE>
<CAPTION>
General Limited
Partners Partners Total
------------ ------------ ------------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996:
Balance at December 31, 1995 $ (126,844) $ 18,762,421 $ 18,635,577
Net earnings 18,099 886,860 904,959
Cash distributions ($50.00 per limited
partnership interest) (28,803) (1,411,351) (1,440,154)
------------ ------------ ------------
Balance at December 31, 1996 $ (137,548) $ 18,237,930 $ 18,100,382
------------ ------------ ------------
YEAR ENDED DECEMBER 31, 1997:
Net earnings 22,804 1,117,373 1,140,177
Cash distributions ($58.13 per limited
partnership interest) (33,484) (1,640,699) (1,674,183)
------------ ------------ ------------
Balance at December 31, 1997 $ (148,228) $ 17,714,604 $ 17,566,376
------------ ------------ ------------
YEAR ENDED DECEMBER 31, 1998:
Net earnings 22,316 1,093,490 1,115,806
Cash distributions ($60.00 per limited
partnership interest) (34,564) (1,693,621) (1,728,185)
------------ ------------ ------------
Balance at December 31, 1998 $ (160,476) $ 17,114,473 $ 16,953,997
------------ ------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements.
14
<PAGE> 64
MURRAY INCOME PROPERTIES I, LTD.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED JOINT VENTURE
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended
December 31,
----------------------------------------------
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 1,115,806 $ 1,140,177 $ 904,959
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Bad debts (recoveries), net 4,701 (1,628) 5,438
Depreciation 838,837 849,675 850,676
Amortization of other assets 74,976 74,507 67,548
Minority interest in joint venture's earnings 140,298 135,394 132,060
Change in assets and liabilities:
Accounts and notes receivable 66,421 15,968 (43,476)
Other assets (37,238) (41,452) (82,739)
Accounts payable (331) (11,803) (1,314)
Accrued property taxes and security deposits (6,550) (20,621) (1,762)
------------ ------------ ------------
Net cash provided by operating activities 2,196,920 2,140,217 1,831,390
------------ ------------ ------------
Cash flows from investing activities -
Additions to investment properties (70,216) (50,624) (100,147)
------------ ------------ ------------
Cash flows from financing activities:
Distributions to minority interest in joint venture (210,000) (212,700) (198,750)
Cash distributions (1,728,185) (1,674,183) (1,440,154)
------------ ------------ ------------
Net cash used in financing activities (1,938,185) (1,886,883) (1,638,904)
------------ ------------ ------------
Net increase in cash and cash equivalents 188,519 202,710 92,339
Cash and cash equivalents at beginning of year 1,620,246 1,417,536 1,325,197
------------ ------------ ------------
Cash and cash equivalents at end of year $ 1,808,765 $ 1,620,246 $ 1,417,536
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
15
<PAGE> 65
MURRAY INCOME PROPERTIES I, LTD.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED JOINT VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED DECEMBER 31, 1998
1. ORGANIZATION AND BASIS OF ACCOUNTING
The Partnership was formed March 12, 1984 by filing a Certificate and
Agreement of Limited Partnership with the Secretary of State of the State of
Texas. The Partnership Agreement authorized the issuance of up to 30,000 limited
partnership interests at a price of $1,000 each, of which 28,227 limited
partnership interests were issued. Proceeds from the sale of limited partnership
interests, net of related selling commissions, dealer-manager fees and other
offering costs, are recorded as contributed capital.
The consolidated financial statements include the accounts of the
Partnership and Tower Place Joint Venture (85% owned by the Partnership). All
significant intercompany balances and transactions have been eliminated in
consolidation.
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 income and expenses during the reporting
period. Actual results could differ from those estimates.
Rental income is recognized as earned under the leases. Accordingly, the
Partnership accrues rental income for the full period of occupancy using the
straight line method over the related terms. At December 31, 1998 and 1997,
there were $457,406 and $492,448, respectively, of accounts receivable related
to such accruals.
Other assets consist primarily of deferred leasing costs which are
amortized using the straight line method over the lives of the related leases.
Depreciation is provided over the estimated useful lives of the respective
assets using the straight line method. The estimated useful lives of the
buildings and improvements range from three to twenty-five years.
The Partnership periodically reevaluates the propriety of the carrying
amounts of investment properties to determine whether current events and
circumstances warrant an adjustment to such carrying amounts. Such evaluations
are performed utilizing annual appraisals performed by independent appraisers as
well as internally developed estimates of expected undiscounted future cash
flows. In the event the carrying value of an individual property exceeds
expected future undiscounted cash flows, the property is written down to the
most recently appraised value. Since inception of the Partnership, none of the
Partnership's properties have required write downs.
No provision for income taxes has been made as the liabilities for such
taxes are those of the individual Partners rather than the Partnership. The
Partnership files its tax return on the accrual basis used for Federal income
tax purposes.
Continued
16
<PAGE> 66
MURRAY INCOME PROPERTIES I, LTD.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED JOINT VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Basic earnings and cash distributions per limited partnership interest are
based upon the limited partnership interests outstanding at year-end and the net
earnings and cash distributions allocated to the Limited Partners in accordance
with the Partnership Agreement.
For purposes of reporting cash flows, the Partnership considers all
certificates of deposit and highly liquid debt instruments with original
maturities of three months or less to be cash equivalents.
The following information relates to estimated fair values of the
Partnership's financial instruments as of December 31, 1998 and 1997. For cash
and cash equivalents, accounts receivable, accounts payable, accrued property
taxes payable, and security deposits, the carrying amounts approximate fair
value because of the short maturity of these instruments.
2. PARTNERSHIP AGREEMENT
Pursuant to the terms of the Partnership Agreement, net profits or losses
of the Partnership and cash distributions are generally allocated 98% to the
Limited Partners and 2% to the General Partners. Cash Distributions from the
sale or refinancing of a property are allocated as follows:
(a) First, all Cash Distributions from Sales or Refinancings shall be
allocated 99% to the Limited Partners and 1% to the Non-corporate
General Partner until the Limited Partners have been returned their
original invested Capital from Cash Distributions from Sales or
Refinancings, plus their Preferred Return from Cash Distributions from
Operations or Cash Distributions from Sales or Refinancings, or both.
(b) Next, all Cash Distributions from Sales or Refinancings shall be
allocated 1% to the Non-corporate General Partner and 99% to the
Limited Partners and the General Partners. Such 99% will be allocated
(i) first to the Corporate General Partner in an amount equal to any
unpaid Cash Distributions from Operations subordinated to the Limited
Partners' 7% non-cumulative annual return and (ii) thereafter, 80% to
the Limited Partners and 20% to the General Partners.
Cash Distributions from Sales or Refinancings (other than the 1% of
Cash Distributions from Sales or Refinancings payable to the
Non-corporate General Partner) payable to the General Partners shall
be allocated 62 1/2% to the Non-corporate General Partner and 37 1/2%
to the Corporate General Partner.
3. INVESTMENT PROPERTIES
The Partnership owns and operates Mountain View Plaza, a shopping center
located in Scottsdale, Arizona, and Castle Oaks Village, a shopping center
located in Castle Hills (San Antonio), Texas. In addition, the Partnership owns
an 85% interest in Tower Place Joint Venture, a joint venture which owns Tower
Place Festival Shopping Center located in Pineville (Charlotte), North
Continued
17
<PAGE> 67
MURRAY INCOME PROPERTIES I, LTD.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED JOINT VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Carolina. The remaining interest in the joint venture is owned by Murray Income
Properties II, Ltd., ("MIP II"), an affiliated real estate limited partnership.
The Tower Place Joint Venture Agreement provides that the Partnership will share
profits, losses, and cash distributions according to the Partnership's 85%
ownership interest in the joint venture.
During 1998, the Partnership adopted Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise and related
information", which established standards for the way that public business
enterprises report information about operating segments in audited financial
statements, as well as related disclosures about products and services,
geographic areas, and major customers. The Partnership defines each of its
shopping centers as operating segments; however, management has determined that
all of its properties have similar economic characteristics and also meet the
other criteria which permit the properties to be aggregated into one reportable
segment. Management of the Partnership makes decisions about resource allocation
and performance assessment based on the same financial information presented
throughout these consolidated financial statements.
The Partnership had no outstanding receivable balances at December 31, 1998
or 1997, which, individually, exceeded 5% of the Partnership's total assets.
Rental income from a major customer was approximately $448,000 for the
three years ended 1998, 1997, and 1996, respectively.
Operating leases with tenants range in terms from two to 20 years. Fixed
minimum future rentals under existing leases at December 31, 1998 are as
follows:
Year ending December 31:
<TABLE>
<S> <C> <C>
1999 $ 2,398,846
2000 1,990,756
2001 1,621,743
2002 1,377,830
2003 1,102,100
Thereafter 1,779,249
-------------
$ 10,270,524
=============
</TABLE>
Rental income includes $582,566, $653,652, and $588,924 in 1998, 1997, and
1996, respectively, related to reimbursements from tenants for common area
maintenance costs, real estate taxes and insurance costs.
Continued
18
<PAGE> 68
MURRAY INCOME PROPERTIES I, LTD.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED JOINT VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. RECONCILIATION OF CONSOLIDATED FINANCIAL STATEMENT NET EARNINGS AND PARTNERS'
EQUITY TO FEDERAL INCOME TAX BASIS NET EARNINGS AND PARTNERS' EQUITY
Reconciliation of consolidated financial statement net earnings to Federal
income tax basis net earnings is as follows:
<TABLE>
<CAPTION>
Years Ended
December 31,
---------------------------------------------
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Net earnings - financial statement basis $ 1,115,806 $ 1,140,177 $ 904,959
------------ ------------ ------------
Financial statement basis depreciation/amortization
over tax basis depreciation/amortization 31,056 32,530 17,687
Financial statement basis rental income
under (over) tax basis rental income 13,062 (13,895) (17,927)
Financial statement basis joint venture earnings
under (over) tax basis joint venture earnings 23,381 28,191 (2,145)
------------ ------------ ------------
Sub-total 67,499 46,826 (2,385)
------------ ------------ ------------
Net earnings - Federal income tax basis $ 1,183,305 $ 1,187,003 $ 902,574
============ ============ ============
</TABLE>
Reconciliation of consolidated financial statement partners' equity to
Federal income tax basis partners' equity is as follows:
<TABLE>
<CAPTION>
December 31,
----------------------------------------------
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Total partners' equity - financial statement basis $ 16,953,997 $ 17,566,376 $ 18,100,382
Current year financial statement net earnings
under (over) tax basis net earnings 67,499 46,826 (2,385)
Cumulative prior years financial statement net
earnings over tax basis net earnings (1,148,769) (1,195,595) (1,193,210)
------------ ------------ ------------
Total partners' equity - Federal income tax basis $ 15,872,727 $ 16,417,607 $ 16,904,787
============ ============ ============
</TABLE>
Because many types of transactions are susceptible to varying
interpretations under Federal and state income tax laws and regulations, the
amounts reported above may be subject to change at a later date upon final
determination by the taxing authorities.
19
<PAGE> 69
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
20
<PAGE> 70
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP.
Murray Realty Investors VIII, Inc., a Texas corporation, and Crozier
Partners VIII, Ltd., a Texas limited partnership, are the General Partners of
the Partnership. The Limited Partners voting a majority of the interests may,
without the consent of the General Partners, remove a General Partner and elect
a successor General Partner.
The Partnership Agreement provides that the Partnership will have an
Investment Committee consisting initially of three members, appointed by Murray
Realty Investors VIII, Inc. (the "Corporate General Partner"). A person
appointed to the Investment Committee may be removed by the Corporate General
Partner, but the Corporate General Partner must name a replacement. The
acquisition, sale, financing or refinancing of a Partnership property must be
approved by a majority of the members of the Investment Committee. The members
of the Investment Committee currently are Messrs. Jack E. Crozier, Mitchell L.
Armstrong and W. Brent Buck. Murray Realty Investors VIII, Inc. is owned 60% by
Mr. Armstrong and 40% by Mr. Buck. The following is a brief description of Jack
E. Crozier, a general partner of Crozier Partners VIII, Ltd. a General Partner,
and the directors and executive officers of the Corporate General Partner:
Crozier Partners VIII, Ltd., General Partner
Jack E. Crozier, 70, General Partner. From 1954 through July 1990, Mr.
Crozier was affiliated with Murray Financial Corporation and various of its
affiliates. From 1977 through 1988, he was President of Murray Financial
Corporation, and from 1982 until June 1989 he also served as President of Murray
Savings Association, a principal affiliate of Murray Financial Corporation. He
served as President or Director of various other subsidiaries of Murray
Financial Corporation which were engaged in real estate finance, development and
management. He also served as the general partner in a number of publicly
registered limited partnerships, and a number of non-registered limited
partnerships, all of which had real estate as their principal assets. He is a
consultant to several companies.
Murray Realty Investors VIII, Inc., Corporate General Partner
The directors and executive officers of Murray Realty Investors VIII, Inc.
are:
Mitchell L. Armstrong, 48, President and Director. Mr. Armstrong became
President of Murray Realty Investors VIII, Inc. on November 15, 1989. From
September 1984 to that date, he was Senior Vice President - Product Development
of Murray Realty Investors, Inc. and Murray Property Investors, and Vice
President - Tax for Murray Properties Company. From November 1988 to November
15, 1989, he also served as Secretary to these companies. From August 1983 to
September 1984, he was Executive Vice President of Dover Realty Investors. From
September 1980 to August 1983, he was with Murray Properties Company, in charge
of tax planning and reporting. From July 1972 to August 1980, he was with the
international accounting firm of Deloitte Haskins and Sells (now Deloitte &
Touche). Mr. Armstrong is a Certified Public Accountant and a Certified
Financial Planner and holds a Bachelor of Business Administration degree with
high honors in Accounting from Texas Tech University. He is a member of the
American Institute of Certified Public Accountants and a member of the Institute
of Certified Financial Planners.
W. Brent Buck, 43, Executive Vice President and Director. Mr. Buck became
Executive Vice President of Murray Realty Investors VIII, Inc., on November 15,
1989. From September 1981 to November 15, 1989, Mr. Buck served in various
capacities for Murray Properties Company and certain subsidiaries. His primary
responsibilities included property acquisitions and asset management. He was
responsible for initially identifying and negotiating the purchase of all
21
<PAGE> 71
properties in the Partnership, except for Mountain View Plaza Shopping Center.
Since their acquisition to the present time, he has continued to oversee the
management of all properties of the Partnership. Mr. Buck holds a Master of
Business Administration degree in Finance and a Bachelor of Public
Administration degree in Urban Administration from the University of
Mississippi. He also holds a Mississippi broker's license.
ITEM 11. EXECUTIVE COMPENSATION.
Murray Income Properties I, Ltd. does not have any employees. However,
pursuant to an amendment to the Partnership Agreement effective November 15,
1989, it reimburses Murray Income Properties II, Ltd. for forty-seven percent
(47%) of executive compensation incurred in the management of that partnership
and Murray Income Properties I, Ltd. Murray Income Properties II, Ltd. is a real
estate limited partnership, the general partners of which are affiliates of the
General Partners. The following table presents Murray Income Properties I,
Ltd.'s share of executive compensation paid by Murray Income Properties II, Ltd.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
----------------------------------------
All Other
Name and Principal Position Year Salary Compensation(1)
- --------------------------- ---- ------ ------------
<S> <C> <C> <C>
Mitchell L. Armstrong, 1998 $59,079 $2,525
President* 1997 58,092 2,495
1996 56,236 443
W. Brent Buck, 1998 43,995 1,536
Executive Vice President* 1997 43,260 1,503
1996 41,877 196
</TABLE>
* Offices held in Murray Realty Investors VIII, Inc., the Corporate General
Partner. (1) The Partnership provides the named executive officers with certain
group life, health, medical and other non-cash benefits generally available to
all salaried employees. The amounts shown in this column include the following:
(a) Matching contributions by the Partnership under its SIMPLE-IRA plan
which equaled 3% of each employee's covered compensation (salary and
term insurance value). During 1998 the Partnership's matching
contributions were $1,795 for Mr. Armstrong and $1,329 for Mr. Buck.
(b) Full premium cost of term insurance that will benefit the executive.
The Partnership and Murray Income Properties II, Ltd. entered into
severance agreements with Mr. Armstrong and Mr. Buck effective September 16,
1996. Pursuant to these agreements, upon the occurrence of specified events, the
Partnership will be obligated for forty-seven (47%) of any benefits paid
pursuant to the agreements to either Mr. Armstrong or Mr. Buck. The agreement
with Mr. Armstrong provides for a benefit amount equal to the value of the
aggregate of one month of his highest monthly salary paid at any time during the
twelve months prior to his termination multiplied by fifteen (15), plus the
current monthly cost of such health, disability and life benefits (including
spousal or similar coverage and coverage for children) which he was receiving or
entitled to receive immediately prior to termination multiplied by eighteen
(18). The agreement with Mr. Buck provides for a benefit amount equal to the
value of the aggregate of one month of his highest monthly salary paid at any
time during the twelve months prior to his termination multiplied by twelve
(12), plus the current monthly cost of such health, disability and life benefits
(including
22
<PAGE> 72
spousal or similar coverage and coverage for children) which he was receiving or
entitled to receive immediately prior to termination multiplied by fourteen
(14).
The Partnership has not paid and does not propose to pay any bonuses or
deferred compensation, compensation pursuant to retirement or other plans, or
other compensation to the officers, directors or partners of the General
Partners other than described in the above table or the above paragraph. In
addition, there are no restricted stock awards, options or stock appreciation
rights, or any other long term incentive payouts.
During the operational and liquidation stages of this Partnership, the
General Partners and their affiliates receive various fees and distributions.
For information on these types of remuneration, reference is made to the section
entitled "Management Compensation" as contained in the Prospectus dated May 31,
1984 filed as a part of Amendment No. 2 to Registrant's Form S-11 Registration
Statement (File No. 2-90016) attached hereto as Exhibit 99d. See "Item 13.
Certain Relationships and Related Transactions" for information on the fees and
other compensation or reimbursements paid to the General Partners or their
Affiliates during the year ended December 31, 1998.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
No person (including any "group" as that term is used in Section 13 (d)(3)
of the Securities Exchange Act of 1934) is known to the Partnership to be the
beneficial owner of more than five percent of the outstanding voting Interests
as of December 31, 1998.
No General Partner, officer, director or partner of the General Partners
beneficially owned or owned of record directly or indirectly any interest as of
December 31, 1998.
No arrangements are known to the Partnership which may result in a change
of control of the Partnership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
During the year ended December 31, 1998 the Partnership reimbursed Murray
Income Properties II, Ltd. ("MIP II") for forty-seven percent (47%) of the costs
associated with the management of the Partnership and MIP II. MIP II is a
publicly-registered real estate limited partnership the general partners of
which are affiliates of the General Partners. The reimbursement has been
included in general and administrative expenses.
23
<PAGE> 73
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) 1. Financial Statements - See Index to Financial Statements in Item
8 of this Form 10-K
2. Financial Statement Schedules with Independent Auditors' report
Thereon:
(i) Consolidated Valuation and Qualifying Accounts (Schedule II)
- Years ended December 31, 1998, 1997, and 1996.
(ii) Consolidated Real Estate and Accumulated Depreciation
(Schedule III) - December 31, 1998
All other schedules have been omitted because they are not
required or the required information is shown in the consolidated
financial statements or notes thereto.
(b) Reports on Form 8-K filed during the last quarter of the year.
None
(c) Exhibits:
3a Agreement of Limited Partnership of Murray Income Properties,
Ltd. - 84. Reference is made to Exhibit A of the Prospectus dated
May 31, 1984 contained in Amendment No. 2 to Partnership's Form
S-11 Registration Statement (File No. 2-90016).
3b Amended and Restated Certificate and Agreement of Limited
Partnership dated as of May 23, 1984. Reference is made to
Exhibit 3b to the 1989 Annual Report on Form 10-K filed with the
Securities and Exchange Commission on March 31, 1989. (File No.
0-14105)
3c Amended and Restated Certificate and Agreement of Limited
Partnership dated as of June 25, 1984. Reference is made to
Exhibit 3c to the 1989 Annual Report on Form 10-K filed with the
Securities and Exchange Commission on March 31, 1989. (File No.
0-14105)
3d Amended and Restated Certificate and Agreement of Limited
Partnership dated as of November 27, 1984. Reference is made to
Exhibit 3d to the 1989 Annual Report on Form 10-K filed with the
Securities and Exchange Commission on March 31, 1989. (File No.
0-14105)
3e Amended and Restated Certificate and Agreement of Limited
Partnership dated as of April 1, 1985. Reference is made to
Exhibit 3e to the 1989 Annual Report on Form 10-K filed with the
Securities and Exchange Commission on March 31, 1989. (File No.
0-14105)
3f Amended and Restated Certificate and Agreement of Limited
Partnership dated as of November 15, 1989. Reference is made to
Exhibit 3f to the 1989 Annual Report on Form 10-K filed with the
Securities and Exchange Commission on March 31, 1989. (File No.
0-14105)
3g Amended and Restated Certificate and Agreement of Limited
Partnership dated as of January 10, 1990. Reference is made to
Exhibit 3g to the 1989 Annual Report on Form
24
<PAGE> 74
10-K filed with the Securities and Exchange Commission on March
31, 1989. (File No. 0-14105)
4 Form of Certificate representing Limited Partnership Interest.
Reference is made to Exhibit 4 to Amendment No. 1 to
Partnership's Form S-11 Registration Statement, filed with the
Securities and Exchange Commission on May 17, 1984. (File No.
2-90016)
10a Lease Agreement with Palo Alto Educational Systems, Inc. to lease
certain premises as described within the Lease Agreement dated
April 11, 1983 at Mountain View Plaza Shopping Center. Reference
is made to Exhibit 10m to the 1989 Annual Report on Form 10-K
filed with the Securities and Exchange Commission on March 31,
1989. (File No. 0-14105)
10b Lease Agreement with General Cinema Corporation of North Carolina
to lease certain premises as described within the Lease Agreement
dated July 23, 1985 at Tower Place Festival Shopping Center.
Reference is made to Exhibit 10o to the 1989 Annual Report on
Form 10-K filed with the Securities and Exchange Commission on
March 31, 1989. (File No. 0-14105)
10c Lease Agreement with J&K Cafeterias to lease certain premises as
described in the Lease Agreement dated April 12, 1994 at Tower
Place Festival Shopping Center. Reference is made to Exhibit 10d
to the 1994 Annual Report on Form 10-K filed with the Securities
and Exchange Commission on March 21, 1995. (File No. 0-14105)
10d Data Processing System Use Agreement between Murray Income
Properties I, Ltd. and The Mavricc Management Systems, Inc. dated
September 1, 1998. Filed herewith.
10e Property Management Agreement and Exclusive Marketing Agreement
with Zell Management and Development, Inc. for property
management services described in the Property Management
Agreement dated December 20, 1989 (as extended pursuant to the
Extension of Property Management Agreement dated December 10,
1998 at Mountain View Plaza Shopping Center). Filed herewith.
10f Management Agreement with CK Charlotte Overhead Limited
Partnership for management and operation services described in
the Management Agreement dated November 9, 1998 at Tower Place
Festival Shopping Center. Filed herewith.
10g Management agreement with Cavender & Hill Properties, Inc. for
management and operation services described in the Management
Agreement dated June 30, 1996 at Castle Oaks Shopping Center.
Reference is made to Exhibit 10a to the 1996 2nd Quarter Report
on Form 10-Q filed with the Securities and Exchange Commission on
August 7, 1996. (File No. 0-14105)
10h Lease Modification Agreement No. 1 dated February 14, 1992 with
Childtime Childcare, Inc. at Mountain View Plaza Shopping Center.
Reference is made to Exhibit 10K to the 1992 Annual Report on
Form 10-K filed with the Securities and Exchange Commission on
March 19, 1993. (File No. 0-14105)
10i Lease Agreement with Reay's Ranch Markets, Inc. to lease certain
premises as described within the Lease Agreement dated October
20, 1992 at Mountain View Plaza Shopping Center. Reference is
made to Exhibit 10m to the 1992 Annual Report on Form 10-K filed
with the Securities and Exchange Commission on March 19, 1993.
(File No. 0-14105)
10j Third Amendment to Lease with Reay's Ranch Markets, Inc. dated
November 3, 1993 at Mountain View Plaza Shopping Center.
Reference is made to Exhibit 10n to the 1993
25
<PAGE> 75
Annual Report on Form 10-K filed with the Securities and Exchange
Commission on March 21, 1994. (File No. 0-14105)
10k Fourth Amendment of Lease Agreement, Consent to Assignment and
Estoppel Certificate dated June 30, 1997 by, between and among
Wild Oats Markets, Inc., Reay's Ranch Markets, Inc., and Murray
Income Properties I, Ltd. Reference is made to Exhibit 10k to the
1997 Annual Report on Form 10-K filed with the Securities and
Exchange Commission on March 26, 1998. (File No. 0-14105)
10l Lease Agreement with Brown Group Retail, Inc. to lease certain
premises as described within the Lease Agreement dated November
9, 1993 at Tower Place Festival Shopping Center. Reference is
made to Exhibit 10p to the 1993 Annual Report on Form 10-K filed
with the Securities and Exchange Commission on March 21, 1994.
(File No. 0-14105)
10m Lease Agreement with Razmiko's, Ltd. to lease certain premises as
described with the Lease Agreement dated August 1, 1995 at Castle
Oaks Shopping Center. Reference is made to Exhibit 10m to the
1995 Annual Report on Form 10-K filed with the Securities and
Exchange Commission on March 21, 1996. (File No. 0-14105)
10n Severance Agreements by and among Murray Income Properties I,
Ltd. and Murray Income Properties II, Ltd. and Mitchell L.
Armstrong dated September 16, 1996. Reference is made to Exhibit
10a to the 1996 3rd Quarter Report on Form 10-Q filed with the
Securities and Exchange Commission on November 8, 1996. (File No.
0-14105)
10o Severance Agreements by and among Murray Income Properties I,
Ltd. and Murray Income Properties II, Ltd. and W. Brent Buck
dated September 16, 1996. Reference is made to Exhibit 10b to the
1996 3rd Quarter Report on Form 10-Q filed with the Securities
and Exchange Commission on November 8, 1996. (File No. 0-14105)
27 Financial Data Schedule. Filed herewith.
99a Glossary, as contained in the Prospectus dated May 31, 1984 filed
as part of Amendment No. 2 to Registrant's Form S-11 Registration
Statement (File No. 2-90016). Filed herewith.
99b Article XIII of the Agreement of Limited Partnership as contained
in the Prospectus dated May 31, 1984 filed as part of Amendment
No. 2 to Registrant's Form S-11 Registration Statement (File No.
2-90016). Filed herewith.
99c Amendment No. 9 to the Agreement of Limited Partnership contained
in the Proxy Statement dated October 11, 1989. Filed herewith.
99d Management Compensation as contained in the Prospectus (Pages 10
through 17) dated May 31, 1984 filed as part of Amendment No. 2
to Registrant's Form S-11 Registration Statement (File No.
2-90016). Filed herewith.
(d) Financial Statement Schedules with Independent Auditors' Report
Thereon:
(i) Consolidated Valuation and Qualifying Accounts (Schedule II) -
Years ended December 31, 1998, 1997, and 1996.
(ii) Consolidated Real Estate and Accumulated Depreciation (Schedule
III) - December 31, 1998.
All other schedules have been omitted because they are not required or the
required information is shown in the consolidated financial statements or
notes thereto.
26
<PAGE> 76
INDEPENDENT AUDITORS' REPORT
The Partners
Murray Income Properties I, Ltd.:
Under date of February 26, 1999, we reported on the consolidated balance sheets
of Murray Income Properties I, Ltd. (a limited partnership) and consolidated
joint venture as of December 31, 1998 and 1997, and the related consolidated
statements of earnings, changes in partners' equity, and cash flows for each of
the years in the three-year period ended December 31, 1998, as contained in Item
8 of this annual report on Form 10-K. In connection with our audits of the
aforementioned consolidated financial statements, we also audited the related
consolidated financial statement schedules as listed in Item 14(a)2 of this
annual report on Form 10-K. These financial statement schedules are the
responsibility of the Partnership`s management. Our responsibility is to express
an opinion on these financial statement schedules based on our audits.
In our opinion, such financial statement schedules, when considered in relation
to the basic consolidated financial statements taken as a whole, present fairly,
in all material respects, the information set forth therein.
KPMG LLP
Dallas, Texas
February 26, 1999
27
<PAGE> 77
Schedule II
MURRAY INCOME PROPERTIES I, LTD.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED JOINT VENTURE
CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
<TABLE>
<CAPTION>
Balance at Charged to Balance at
beginning costs and end of
Description of period expenses Deductions period
----------- --------- -------- ---------- ---------
Allowance for doubtful accounts:
<S> <C> <C> <C> <C>
Year ended December 31, 1996 $ 21,758 5,438 19,913 7,283
======== ======== ======== ========
Year ended December 31, 1997 $ 7,283 (1,628) -0- 5,655
======== ======== ======== ========
Year ended December 31, 1998 $ 5,655 4,701 1,680 8,676
======== ======== ======== ========
</TABLE>
Deductions are primarily for writeoffs of accounts and notes receivables
deemed uncollectible by management.
28
<PAGE> 78
Schedule III
MURRAY INCOME PROPERTIES I, LTD.
(a limited partnership)
AND CONSOLIDATED JOINT VENTURE
Consolidated Real Estate and Accumulated Depreciation
December 31, 1998
<TABLE>
<CAPTION>
Costs Capitalized Gross Amount
Initial Cost Subsequent at which carried at
to Partnership (A) to Acquisition Close of Period (D)
---------------------------- -------------- -----------------------------------------
Buildings and Buildings and
Description Encumbrances Land Improvements Improvements Land Improvements Total
----------- ------------ ---- ------------ ------------ ---- ------------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
Shopping Center
San Antonio, Texas $ 0 $ 1,240,051 $ 3,017,075 $ 554,770 $ 1,240,051 $ 3,571,845 $ 4,811,896
Shopping Center
Scottsdale, Arizona $ 0 $ 2,805,238 $ 4,316,052 $ 792,464 $ 2,805,238 $ 5,108,516 $ 7,913,754
Shopping Center
Pineville
(Charlotte),
North Carolina $ 0 $ 2,187,512 $ 10,280,876 $ 1,428,162 $ 2,187,512 $ 11,709,038 $ 13,896,550
------------ ------------- ------------- ------------ ----------- ------------ -------------
$ 0 $ 6,232,801 $ 17,614,003 $ 2,775,396 $ 6,232,801 $ 20,389,399 $ 26,622,200
============ ============= ============= ============ =========== ============ =============
</TABLE>
<TABLE>
<CAPTION>
Life on which
Depreciation in
Fiscal Latest Statement
Accumulated Year of Year of Earnings
Description Depreciation Construction Acquired is Computed
----------- ------------ ------------ -------- -----------
<S> <C> <C> <C> <C>
Shopping Center
San Antonio, Texas $ 2,011,982 1985 1986 3-25 YEARS
Shopping Center
Scottsdale, Arizona $ 2,736,609 1983 1985 3-25 YEARS
Shopping Center
Pineville
(Charlotte),
North Carolina $ 5,869,878 1982 1986 3-25 YEARS
-------------
$ 10,618,469
=============
</TABLE>
Notes:
(A) The initial cost to the Partnership represents the original purchase price
of the properties.
(B) Reconciliation of real estate owned for 1998, 1997 and 1996:
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Balance at beginning of period $ 26,551,984 $ 26,501,360 $ 26,401,213
Additions during period $ 70,216 $ 50,624 $ 100,147
Retirements during period $ 0 $ 0 $ 0
------------ ------------ ------------
Balance at close of period $ 26,622,200 $ 26,551,984 $ 26,501,360
============ ============ ============
</TABLE>
(C) Reconciliation of accumulated depreciation for 1998, 1997 and 1996:
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Balance at beginning of period $ 9,779,632 $ 8,929,957 $ 8,079,281
Depreciation expense $ 838,837 $ 849,675 $ 850,676
Retirements during period $ 0 $ 0 $ 0
------------ ------------ ------------
Balance at close of period $ 10,618,469 $ 9,779,632 $ 8,929,957
============ ============ ============
</TABLE>
(D) The aggregate cost of real estate at December 31, 1998 for Federal income
tax purposes is $26,763,703
29
<PAGE> 79
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.
<TABLE>
<CAPTION>
<S> <C>
MURRAY INCOME PROPERTIES I, LTD.
By: Crozier Partners VIII, Ltd.
a General Partner
Dated: March 26, 1999 By: /s/ Jack E. Crozier
-----------------------------------
Jack E. Crozier
a General Partner
By: Murray Realty Investors VIII, Inc.
a General Partner
Dated: March 26, 1999 By: /s/ Mitchell Armstrong
-----------------------------------
Mitchell Armstrong
President
</TABLE>
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>
<S> <C>
Murray Realty Investors VIII, Inc.
a General Partner
Dated: March 26, 1999 By: /s/ Brent Buck
-----------------------------------
Brent Buck
Executive Vice President
Director
Dated: March 26, 1999 By: /s/ Mitchell Armstrong
-----------------------------------
Mitchell Armstrong
Chief Executive Officer
Chief Financial Officer
Director
</TABLE>
30
<PAGE> 80
APPENDIX C
QUARTERLY REPORT ON FORM 10-Q (FOR THE QUARTER ENDED SEPTEMBER 30, 1999)
<PAGE> 81
UNITED STATED SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------
FORM 10-Q
------------
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ------- EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 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 NO.
0-14105
------------
MURRAY INCOME PROPERTIES I, LTD.
(Exact Name of Registrant as Specified in its Charter)
TEXAS 75-1946214
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
5550 LBJ FREEWAY, SUITE 675, DALLAS, TEXAS 75240
(Address of principal executive offices) (Zip Code)
(972) 991-9090
(Registrant's Telephone Number, including Area Code)
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
---- ----
<PAGE> 82
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MURRAY INCOME PROPERTIES I, LTD.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED JOINT VENTURE
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
-------------- -------------
(unaudited)
<S> <C> <C>
ASSETS
Investment properties, at cost:
Land $ 6,232,801 $ 6,232,801
Buildings and improvements 20,456,480 20,389,399
-------------- -------------
26,689,281 26,622,200
Less accumulated depreciation 11,239,205 10,618,469
-------------- -------------
Net investment properties 15,450,076 16,003,731
Cash and cash equivalents 1,908,125 1,808,765
Accounts receivable, net of allowance of
$1,704 and $8,676, in 1999 and 1998, respectively 658,931 641,807
Other assets, at cost, net of accumulated
amortization of $618,505 and $587,283
in 1999 and 1998, respectively 251,545 206,930
-------------- -------------
$ 18,268,677 $ 18,661,233
============== =============
LIABILITIES AND PARTNERS' EQUITY
Accounts payable $ 20,715 $ 13,167
Accrued property taxes 201,828 203,814
Security deposits 176,384 168,745
-------------- -------------
Total liabilities 398,927 385,726
-------------- -------------
Minority interest in joint venture 1,269,237 1,321,510
-------------- -------------
Partners' equity:
General Partners:
Capital contributions 1,000 1,000
Cumulative net earnings 258,775 239,922
Cumulative cash distributions (427,321) (401,398)
-------------- -------------
(167,546) (160,476)
-------------- -------------
Limited Partners (28,227 Interests):
Capital contributions, net of offering costs 24,570,092 24,570,092
Cumulative net earnings 13,136,740 12,212,939
Cumulative cash distributions (20,938,773) (19,668,558)
-------------- -------------
16,768,059 17,114,473
-------------- -------------
Total partners' equity 16,600,513 16,953,997
-------------- -------------
$ 18,268,677 $ 18,661,233
============== =============
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 83
MURRAY INCOME PROPERTIES I, LTD.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED JOINT VENTURE
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------- -----------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INCOME:
Rental $ 813,389 $ 780,682 $ 2,470,748 $ 2,365,909
Interest 25,059 23,652 68,569 67,543
----------- ----------- ----------- -----------
838,448 804,334 2,539,317 2,433,452
----------- ----------- ----------- -----------
EXPENSES:
Depreciation 206,621 210,162 620,736 631,255
Property operating 212,862 204,884 626,205 635,455
General and administrative 57,778 60,443 235,812 238,304
Bad debt (recovery) 918 372 733 (837)
----------- ----------- ----------- -----------
478,179 475,861 1,483,486 1,504,177
----------- ----------- ----------- -----------
Earnings before minority interest 360,269 328,473 1,055,831 929,275
Minority interest in joint venture's
earnings 35,945 34,312 113,177 102,886
----------- ----------- ----------- -----------
Net earnings $ 324,324 $ 294,161 $ 942,654 $ 826,389
=========== =========== =========== ===========
Basic earnings per limited partnership
interest $ 11.26 $ 10.21 $ 32.73 $ 28.69
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 84
MURRAY INCOME PROPERTIES I, LTD.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED JOINT VENTURE
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
General Limited
Partners Partners Total
------------ ------------ ------------
<S> <C> <C> <C>
NINE MONTHS ENDED SEPTEMBER 30, 1998:
Balance at December 31, 1997 $ (148,228) $ 17,714,604 $ 17,566,376
Net earnings 16,528 809,861 826,389
Cash distributions (25,923) (1,270,216) (1,296,139)
------------ ------------ ------------
Balance at September 30, 1998 $ (157,623) $ 17,254,249 $ 17,096,626
============ ============ ============
NINE MONTHS ENDED SEPTEMBER 30, 1999:
Balance at December 31, 1998 $ (160,476) $ 17,114,473 $ 16,953,997
Net earnings 18,853 923,801 942,654
Cash distributions (25,923) (1,270,215) (1,296,138)
------------ ------------ ------------
Balance at September 30, 1999 $ (167,546) $ 16,768,059 $ 16,600,513
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 85
MURRAY INCOME PROPERTIES I, LTD.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED JOINT VENTURE
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
------------------------------
1999 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 942,654 $ 826,389
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Bad debts (recoveries), net 733 (837)
Depreciation 620,736 631,255
Amortization of other assets 51,054 57,407
Minority interest in joint venture's earnings 113,177 102,886
Change in assets and liabilities:
Accounts receivable (17,857) 845
Other assets (95,669) (42,189)
Accounts payable 7,548 1,359
Accrued property taxes and security deposits 5,653 (16,996)
----------- -----------
Net cash provided by operating activities 1,628,029 1,560,119
----------- -----------
Cash flows from investing activities:
Additions to investment properties (67,081) (64,619)
----------- -----------
Cash flows from financing activities:
Distributions to minority interest in joint venture (165,450) (156,000)
Cash distributions (1,296,138) (1,296,139)
----------- -----------
Net cash used in financing activities (1,461,588) (1,452,139)
----------- -----------
Net increase in cash and cash equivalents 99,360 43,361
Cash and cash equivalents at beginning of period 1,808,765 1,620,246
----------- -----------
Cash and cash equivalents at end of period $ 1,908,125 $ 1,663,607
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 86
MURRAY INCOME PROPERTIES I, LTD.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED JOINT VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999 AND 1998
1. BASIS OF ACCOUNTING
The consolidated financial statements include the accounts of the
Partnership and Tower Place Joint Venture (85% owned by the Partnership). All
significant intercompany balances and transactions have been eliminated in
consolidation.
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 income and expenses during the reporting
period. Actual results could differ from those estimates.
Rental income is recognized as earned under the leases. Accordingly, the
Partnership accrues rental income for the full period of occupancy using the
straight line method over the related terms. At September 30, 1999 and December
31, 1998, $419,253 and $457,406, respectively, of accounts receivable related to
such accruals.
Other assets consist primarily of deferred leasing costs which are
amortized using the straight line method over the lives of the related leases.
Depreciation is provided over the estimated useful lives of the respective
assets using the straight line method. The estimated useful lives of the
buildings and improvements range from three to twenty-five years.
The Partnership periodically reevaluates the propriety of the carrying
amounts of investment properties to determine whether current events and
circumstances warrant an adjustment to such carrying amounts. Such evaluations
are performed utilizing annual appraisals performed by independent appraisers as
well as internally developed estimates of expected undiscounted future cash
flows. In the event the carrying value of an individual property exceeds
expected future undiscounted cash flows, the property is written down to the
most recently appraised value. Since inception of the Partnership, none of the
Partnership's properties have required write downs.
No provision for income taxes has been made as the liabilities for such
taxes are those of the individual Partners rather than the Partnership. The
Partnership files its tax return on the accrual basis used for Federal income
tax purposes.
Basic earnings and cash distributions per limited partnership interest are
based upon the limited partnership interests outstanding at period-end and the
net earnings and cash distributions allocated to the Limited Partners in
accordance with the Partnership Agreement, as amended.
For purposes of reporting cash flows, the Partnership considers all
certificates of deposit and highly liquid debt instruments with original
maturities of three months or less to be cash equivalents.
The following information relates to estimated fair values of the
Partnership's financial instruments as of September 30, 1999 and December 31,
1998. For cash and cash equivalents, accounts and notes receivable, accounts
payable, accrued property taxes payable, and security deposits, the carrying
amounts approximate fair value because of the short maturity of these
instruments.
6
<PAGE> 87
Effective January 1, 1999, the Partnership implemented the provisions of
Statement of Position (SOP) 98-5, Reporting on the Costs of Start-Up Activities.
SOP 98-5 requires that the costs of start-up activities, including
organizational costs, be expensed as incurred. SOP 98-5 required the initial
application to be recorded as of the beginning of the fiscal year in which the
SOP is first adopted. Due to the nature of capitalized costs of the Partnership,
there was no effect of implementation of this new pronouncement on the financial
condition or results of operations of the Partnership.
2. PARTNERSHIP AGREEMENT
Pursuant to the terms of the Partnership Agreement, net profits or losses
of the Partnership and cash distributions are generally allocated 98% to the
Limited Partners and 2% to the General Partners. Cash distributions from the
sale or refinancing of a property are allocated as follows:
(a) First, all Cash Distributions from Sales or Refinancings shall be
allocated 99% to the Limited Partners and 1% to the Non-corporate
General Partner until the Limited Partners have been returned their
Original Invested Capital from Cash Distributions from Sales or
Refinancings, plus their Preferred Return from Cash Distributions from
Operations or Cash Distributions from Sales or Refinancings, or both.
(b) Next, all Cash Distributions from Sales or Refinancings shall be
allocated 1% to the Non-corporate General Partner and 99% to the
Limited Partners and the General Partners. Such 99% will be allocated
(i) first to the Corporate General Partner in an amount equal to any
unpaid Cash Distributions from Operations subordinated to the Limited
Partners' 7% non-cumulative annual return and (ii) thereafter, 80% to
the Limited Partners and 20% to the General Partners.
Cash Distributions from Sales or Refinancings (other than the 1% of
Cash Distributions from Sales or Refinancings payable to the
Non-corporate General Partner) payable to the General Partners shall be
allocated 62 1/2% to the Non-corporate General Partner and 37 1/2% to
the Corporate General Partner.
(c) Upon the sale of the last property owned by the Partnership, Cash
Distributions from Sales or Refinancings shall be allocated and paid to
the Partners in an amount equal to, and in proportion with, their
existing capital account balances. Such distributions shall be made
only after distribution of all Cash Distributions from Operations and
only after all allocations of Partnership income, gain, loss, deduction
and credit (including net gain from the sale or other disposition of
the properties) have been closed to the Partners' respective capital
accounts.
3. INVESTMENT PROPERTIES
The Partnership owns and operates Mountain View Plaza, a shopping center
located in Scottsdale, Arizona and Castle Oaks Village, a shopping center
located in Castle Hills (San Antonio), Texas. In addition, the Partnership owns
an 85% interest in Tower Place Joint Venture, a joint venture which owns Tower
Place Festival Shopping Center located in Pineville (Charlotte), North Carolina.
The remaining 15% interest in the joint venture is owned by Murray Income
Properties II, Ltd. ("MIP II"), an affiliated real estate limited partnership.
The Tower Place Joint Venture Agreement provides that the Partnership will share
profits, losses, and cash distributions according to the Partnership's 85%
ownership interest in the joint venture.
The Partnership has adopted Statement of Financial Accounting Standards No.
131, "Disclosures about Segments of an Enterprise and Related Information",
which established standards for the way that public business enterprises report
information about operating segments in audited financial statements, as well as
related disclosures about products and services, geographic areas, and major
customers. The Partnership defines each of its shopping
7
<PAGE> 88
centers as operating segments; however, management has determined that all of
its properties have similar economic characteristics and also meet the other
criteria which permit the properties to be aggregated into one reportable
segment. Management of the Partnership makes decisions about resource allocation
and performance assessment based on the same financial information presented
throughout these consolidated financial statements.
4. OTHER
Information furnished in this interim report reflects all adjustments
consisting of normal recurring adjustments, which, in the opinion of management,
are necessary to reflect a fair presentation of the results for the periods
presented.
The financial information included in this interim report as of September
30, 1999 and for the three and nine months ended September 30, 1999 and 1998 has
been prepared by management without audit by independent public accountants. The
Partnership's 1998 annual report contains audited consolidated financial
statements including the notes to the consolidated financial statements and
should be read in conjunction with financial information contained in this
interim report.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Liquidity and Capital Resources
As of September 30, 1999, the Partnership had cash and cash equivalents of
$1,908,125. Such amounts represent cash generated from operations and working
capital reserves.
Rental income from leases with escalating rental rates is accrued using the
straight line method over the related lease terms. At September 30, 1999 and
December 31, 1998, $419,253 and $457,406, respectively, of accounts receivable
related to such accruals. Accounts receivable also consist of tenant
receivables, receivables for rent collected (but not yet remitted to the
Partnership by the property management companies), and interest receivable on
short-term investments. The increase in accounts receivable of $17,857 from
December 31, 1998 to September 30, 1999 is primarily due to an increase in
receivables for rent collected (but not yet remitted to the Partnership by the
property management companies) at Tower Place and Castle Oaks, offset by a
decrease in the receivables described above at Tower Place. As of September 30,
1999 and December 31, 1998, the Partnership had allowances of $1,704 and $8,676
respectively, for uncollectible accounts receivable.
The decrease of $1,986 in accrued property taxes from December 31, 1998 to
September 30, 1999 is primarily due to the payment of 1998 property taxes for
the Partnership's properties.
During the three months ended September 30, 1999, the Partnership made Cash
Distributions from Operations totaling $432,046 relating to the three month
period ended June 30, 1999. Subsequent to September 30, 1999, the Partnership
made Cash Distributions from Operations of $432,046 relating to the three months
ended September 30, 1999. The distributed funds were derived from the net cash
flow generated from operations of the Partnership's properties and from interest
earned, net of administrative expenses, on funds invested in short-term money
market instruments.
Future liquidity is currently expected to result from cash generated from
the operations of the Partnership's properties (which could be affected
negatively in the event of weakened occupancies and/or rental rates), interest
earned on funds invested in short-term money market instruments and ultimately
through the sale of the Partnership's properties.
8
<PAGE> 89
Results of Operations
Rental income increased $104,839 for the nine months ended September 30,
1999 as compared to the same period in 1998. The following information details
the rental income generated, bad debt expense incurred, and average occupancy
for the periods shown for the Partnership's properties.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------ --------------------------------
1999 1998 1999 1998
----------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
Mountain View Plaza Shopping Center
Rental income $ 258,878 $ 238,274 $ 737,277 $ 706,996
Bad debt expense (recovery) -0- 768 (185) 1,278
Average occupancy 97% 98% 97% 98%
Castle Oaks Village Shopping Center
Rental income $ 106,261 $ 107,847 $ 358,849 $ 325,644
Bad debt expense (recovery) -0- (464) -0- (1,938)
Average occupancy 87% 92% 91% 92%
Tower Place Festival Shopping Center
Rental income $ 448,250 $ 434,561 $ 1,374,622 $ 1,333,269
Bad debt expense (recovery) 918 68 918 (177)
Average occupancy 98% 95% 98% 97%
</TABLE>
Rental income at Mountain View Plaza in Scottsdale, Arizona increased
$30,281 for the nine months ended September 30, 1999 as compared to the same
period in 1998 due to higher tenant reimbursements for real estate taxes and
insurance costs.
Occupancy at Mountain View averaged 97% during the third quarter, a one
percent decrease from the previous quarter. One tenant who occupied 1,125 square
feet vacated its space upon expiration of its lease. One tenant who occupies
1,127 square feet renewed its lease for three years and a tenant who occupies
1,080 square feet renewed its lease for one year. In September two new light
standards were added to the parking lot in order to increase visibility at
night. Also, management has signed a contract to have all of the tenant signs
replaced with more modern and updated signs which should enhance the appearance
of the shopping center.
Rental income at Castle Oaks Village in Castle Hills (San Antonio), Texas
increased $33,205 for the nine months ended September 30, 1999 as compared to
the same period in 1998 primarily due to an increase in rental rates, and higher
tenant reimbursements for common area maintenance costs, real estate taxes, and
insurance costs.
Occupancy at Castle Oaks averaged 87% for the quarter, a five percent
decrease from the previous quarter. One tenant who occupied 1,800 square feet
signed a lease to move to another space which contains 2,990 square feet. This
lease commenced November 1, 1999. Two tenants who occupy a total of 1,755 square
feet renewed their leases for three years and a tenant who occupies 1,800 square
feet renewed its lease for two years. One tenant who occupied 1,800 square feet
vacated its space upon expiration of its lease.
Rental income at Tower Place Festival in Pineville (Charlotte), North
Carolina increased $41,353 for the nine months ended September 30, 1999 as
compared to the same period in 1998 primarily due to an increase in rental rates
offset by a decrease in tenant reimbursements for common area maintenance costs
and insurance costs. The increase is also due to the receipt of a
9
<PAGE> 90
lease termination fee from a tenant who elected, pursuant to its lease, to
terminate its lease effective October 5, 1999.
Occupancy at Tower Place averaged 98% for the third quarter, a one percent
decrease from the previous quarter. Two tenants who occupied a total of 2,310
square feet vacated their spaces prior to the expiration of their leases.
Another tenant who occupied 1,400 square feet vacated its space; however this
tenant has indicated it will continue to pay rent according to the terms of its
lease which expires on March 31, 2000. Two tenants who occupy 2,800 square feet
renewed their leases for three years. During the quarter, some of the wood trim
along the fascia of the property was repaired and painted.
Depreciation is provided over the estimated useful lives of the respective
assets using the straight line method. The estimated useful lives of the
buildings and improvements range from three to twenty-five years.
Property operating expenses consist primarily of real estate taxes,
property management fees, insurance costs, utility costs, repair and maintenance
costs, leasing and promotion costs, and amortization of deferred leasing costs.
Property operating expenses decreased $9,250 for the nine months ended September
30, 1999 as compared to the same period in 1998 primarily because of lower
repair and maintenance costs and security costs at Tower Place offset by higher
legal fees at Mountain View and higher real estate taxes at each of the
partnership's properties. Mountain View's total operating expenses increased
primarily due to increased legal and professional fees incurred in the rezoning
of the property and an increase in real estate taxes. Castle Oaks' total
operating expenses were flat with increases in real estate taxes and property
management fees offset by decreases in landscaping costs. Tower Place's total
operating expenses decreased due to lower repair and maintenance costs, security
costs and real estate taxes.
General and administrative expenses incurred are related to legal and
accounting expenses, rent, investor services costs, salaries and benefits and
various other costs required for the administration of the Partnership,
including reimbursements of shared direct operating costs to Murray Income
Properties II, Ltd. General and administrative expenses decreased $2,492 for the
nine months ended September 30, 1999 as compared to the same period in 1998 with
decreases in investor services costs and telephone expenses offset by increases
in salaries and benefits.
The Partnership recognized that the arrival of the Year 2000 poses a unique
challenge to the ability of its information technology system and
non-information technology systems to recognize the date change from December
31, 1999 to January 1, 2000. As of September 30, 1999 the Partnership has
completed its assessment and made certain changes to provide for continued
functionality of its systems. An assessment of the readiness of the
Partnership's external entities, such as vendors, customers, payment systems and
others is nearing completion and based on information received to date,
management believes its most critical external entities will be operational. Due
to the nature and extent of the Partnership's operations that are effected by
Year 2000 issues, the Partnership does not believe that Year 2000 issues will
have a material adverse effect on the business operation or the financial
performance of the Partnership. There can be no assurance, however, that Year
2000 issues will not adversely affect the Partnership or its business. The
Partnership believes that the cost to make appropriate changes to its internal
and external systems will not be significant and that such costs will be funded
completely through operations.
Words or phrases when used in the Form 10-Q or other filings with the
Securities and Exchange Commission, such as "does not believe" and "believes",
or similar expressions are intended to identify "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
10
<PAGE> 91
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
The Partnership's financial instruments consist of cash and cash
equivalents, accounts receivable, accounts payable, accrued property taxes
payable, and security deposits. The carrying amount of these instruments
approximates fair value due to the short-term nature of these instruments.
Therefore, the Partnership believes it is relatively unaffected by interest rate
changes or other market risks.
11
<PAGE> 92
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
3a Agreement of Limited Partnership of Murray Income
Properties, Ltd.-84. Reference is made to Exhibit A of the
Prospectus dated May 31, 1984 contained in Amendment No. 2
to Partnership's Form S-11 Registration Statement. (File
No. 2-90016)
3b Amended and Restated Certificate and Agreement of Limited
Partnership dated as of May 23, 1984. Reference is made to
Exhibit 3b to the 1989 Annual Report on Form 10-K filed with
the Securities and Exchange Commission on March 31, 1989.
(File No.
0-14105)
3c Amended and Restated Certificate and Agreement of Limited
Partnership dated as of June 25, 1984. Reference is made to
Exhibit 3c to the 1989 Annual Report on Form 10-K filed with
the Securities and Exchange Commission on March 31, 1989.
(File No. 0-14105)
3d Amended and Restated Certificate and Agreement of Limited
Partnership dated as of November 27, 1984. Reference is made
to Exhibit 3d to the 1989 Annual Report on Form 10-K filed
with the Securities and Exchange Commission on March 31,
1989. (File No.
0-14105)
3e Amended and Restated Certificate and Agreement of Limited
Partnership dated as of April 1, 1985. Reference is made to
Exhibit 3e to the 1989 Annual Report on Form 10-K filed with
the Securities and Exchange Commission on March 31, 1989.
(File No.
0-14105)
3f Amended and Restated Certificate and Agreement of Limited
Partnership dated as of November 15, 1989. Reference is made
to Exhibit 3f to the 1989 Annual Report on Form 10-K filed
with the Securities and Exchange Commission on March 31,
1989. (File No.
0-14105)
3g Amended and Restated Certificate and Agreement of Limited
Partnership dated as of January 10, 1990. Reference is made
to Exhibit 3g to the 1989 Annual Report on Form 10-K filed
with the Securities and Exchange Commission on March 31,
1989. (File No.
0-14105)
27 Financial Data Schedule. Filed herewith.
99a Glossary, as contained in the Prospectus dated May 31, 1984
filed as part of Amendment No. 2 to Registrant's Form S-11
Registration Statement. (File No. 2-90016) Filed herewith.
99b Article XIII of the Agreement of Limited Partnership as
contained in the Prospectus dated May 31, 1984 filed as part
of the Amendment No. 2 to Registrant's Form S-11
Registration Statement. (File No. 2-90016) Filed herewith.
99c Amendment number nine to the Agreement of Limited
Partnership contained in the Proxy Statement dated October
11, 1989. Filed herewith.
12
<PAGE> 93
99d Management Compensation as contained in the Prospectus
(Pages 10 through 17) dated May 31, 1984 filed as part of
Amendment No. 2 to Registrant's Form S-11 Registration
Statement. (File No. 2-90016) Filed herewith.
(b) Reports on Form 8-K filed during the quarter ended September 30,
1999:
None
13
<PAGE> 94
SIGNATURES
Pursuant to the requirements 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.
MURRAY INCOME PROPERTIES I, LTD.
By: Murray Realty Investors VIII, Inc.
A General Partner
Date: November 5, 1999 By: /s/ Mitchell Armstrong
-------------------------------------
Mitchell Armstrong
President
Chief Financial Officer
<PAGE> 95
APPENDIX D
LISTING AGREEMENT WITH TC TENNESSEE, INC.
<PAGE> 96
AGENCY AGREEMENT
TRAMMELL CROW COMPANY
Date: September 20, 1999
Trammell Crow Company
6000 Poplar, Suite 400
Memphis, TN 38119
Re: "Properties"
Paddock Place - 68,631 s.f. shopping center in Nashville, TN
Mt View Plaza - 58,047 s.f. shopping center in Scottsdale, AZ
Germantown Collection - 55,317 s.f. shopping center in Germantown, TN
Castle Oaks Village - 33,449 s.f. shopping center in San Antonio, TX
Tower Place Festival - 114,606 s.f. shopping center in Pineville, NC
1202 Industrial Place - 172,800 s.f. industrial building in Grand
Prairie, TX
In consideration of the listing of the real estate described above
(hereinafter called "Properties') and the efforts to be made to sell said
Properties, Murray Income Properties (hereinafter called "Owner") or any
assignee or transfer thereof hereby employs and appoints TC Tennessee, Inc.
(hereinafter called "Agent"), its sole agent to sell transfer or exchange said
properties at the price and on the terms which the Owner authorizes or consent
to. This agency shall remain in effect from September 20, 1999 to a date which
is 12 months after the Owner has notified Agent in writing to proceed with
soliciting offers for the Properties. This agency may be terminated by either
party hereto upon sixty (60) days advance written notice to the other. Upon
expiration of the term, this Agreement shall continue on a month to month basis
until terminated in writing as provided for herein above. Agent makes no
guarantee of exchange or sale.
Terms: Cash or terms acceptable to Owner
If one or more of said Properties is sold, transferred, or exchanged to
a purchaser secured by Agent or by anyone else, including the Owner, during the
period of the agency herein given, at a price or on terms otherwise agreed upon
by the Owner, Owner agrees to pay to Agent a cash commission as follows:
<TABLE>
<S> <C>
Sale, transfer or exchange: 2% of the selling price, or of the transfer or exchange value.
2.5% of the selling price if a co-broker is involved in the
transfer or exchange of Castle Oaks Village or 1202 Industrial
Place. No additional commission will be paid for a co-broker
on the other Properties.
</TABLE>
Notwithstanding the above, in the event Owner sells 1202 Industrial
Place to Pierce Leahy due to the exercising of the Right of First Offer
contained in Pierce Leahy's lease, then in that event, Agent will not be paid a
commission for the sale of said Property. If Pierce Leahy purchases the Property
after their Right of First Offer has expired, then Agent will receive the full
commission as stated above.
The Owner further agrees to refer all inquiries or offers from
prospective purchasers it may receive to the Agent. If a sale or exchange is
made within twelve (12) months after the expiration of termination of this
agency, or any extension thereof, to any party with whom Agent negotiated or had
contact during the agency period, the Owner agrees to pay Agent the commission
herein provided. Within 30 days after the end of the listing agreement, Agent
agrees to provide to Owner a list of all prospects Agent has contact during the
agency period.
Agent is hereby authorized at Agent's expense to submit and to
advertise the Properties in such manner as Agent deems expedient and most likely
to produce a sale. In the event this agreement expires or is terminated by Owner
prior to the sale of all the properties, Owner will reimburse Agent for his
marketing costs including package material and preparation, copies, postage and
Federal Express charges, and one time roundtrip air travel from Memphis, TN to
each Property. This cost shall not exceed $18,000.
In the event of consummation of a sale, transfer or exchange agreement,
Owner agrees to deliver within a reasonable time a complete abstract of title
(or title search) at Purchaser's cost showing a good and merchantable title by
the undersigned Owner and Owner further agrees to execute and deliver to the
Purchaser a special warranty deed to the said Property.
The Owner agrees to save and hold harmless Agent, its agents,
employees, independent contractors, successors and assigns, from all claims,
disputes, litigation or judgments arising from any materially incorrect
information supplied by Owner or from any material fact or defect known by Owner
regarding Property which the Owner fails to disclose to Agent.
<PAGE> 97
AGENT:
TC Tennessee, Inc.
By: /s/ Philip J. Fawcett
---------------------
Philip J. Fawcett,
Senior Vice President
OWNER:
Tower Place Joint Venture
By: Murray Income Properties I, Ltd.
By: Murray Realty Investors VIII, Inc.
By: /s/ Brent Buck
------------------------------
Brent Buck, Executive V. P.
Murray Income Properties I, Ltd.
By: Murray Realty Investors VIII, Inc.
By: /s/ Brent Buck
------------------------------
Brent Buck, Executive V. P.
Murray Income Properties II, Ltd.
By: Murray Realty Investors IX, Inc.
By: /s/ Brent Buck
------------------------------
Brent Buck, Executive V. P.
<PAGE> 98
APPENDIX E
PROPOSED AMENDMENT TO THE AMENDED AND RESTATED
CERTIFICATE AND AGREEMENT OF LIMITED PARTNERSHIP
RESOLVED, that the Amended and Restated Certificate and Agreement of Limited
Partnership of the Partnership, as amended, be further amended by adding a new
article and section, to be called Article XXV, Section 25.1, which shall read in
its entirety as follows:
"ARTICLE XXV
25.1 Notwithstanding Sections 11.4 and 15.1 or any other
provision in this Agreement to the contrary, the General
Partners shall have full authority and power to consummate the
sale of all of the Partnership's assets and to subsequently
dissolve the Partnership upon completion of the asset sale in
accordance with the terms approved by a majority of the
Limited Partners and as described in that certain Proxy
Statement on Schedule 14A filed by the Partnership with the U.
S. Securities and Exchange Commission on or about January 13,
2000."
<PAGE> 99
- --------------------------------------------------------------------------------
MURRAY INCOME PROPERTIES I, LTD.
PROXY
PROXY SOLICITED BY THE GENERAL PARTNERS FOR
SPECIAL MEETING TO BE HELD ON MARCH 10, 2000
The undersigned hereby appoints Mitchell Armstrong, Brent Buck or Jack Crozier,
and each of them, jointly and severally, as the undersigned's proxy or proxies,
with full power of substitution, to vote all limited partnership interests of
Murray Income Properties I, Ltd. which the undersigned is entitled to vote at
the Special meeting of the limited partners to be held at 2200 Ross Avenue,
Suite 2000, Dallas, Texas on March 10, 2000 at 9:00 a.m., local time, and any
adjournments thereof, as fully as the undersigned could if personally present,
upon the proposals set forth below, revoking any proxy or proxies heretofore
given.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE SPECIFICATIONS MADE BELOW, BUT
IF NO CHOICES ARE INDICATED, THIS PROXY WILL BE VOTED FOR PROPOSAL 1 AND IN THE
DISCRETION OF THE PROXY HOLDER WITH RESPECT TO ANY OTHER MATTER AS MAY PROPERLY
COME BEFORE THE MEETING OR ANY POSTPONEMENTS OR ADJOURNMENTS THEREOF.
(Continued, and to be marked, dated and signed, on the other side.)
[ ] FOLD AND DETACH HERE [ ]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT!
YOU CAN VOTE IN ONE OF THREE WAYS:
1. If you are calling from within the United States, call TOLL FREE
1-800-213-7567 on a Touch-Tone telephone and follow the instructions on the
reverse side. There is NO CHARGE to you for this call.
OR
2. Vote by Internet at our Internet Address: www.proxybynet.com/murray
OR
3. Mark, sign and date your proxy card and return it promptly in the enclosed
envelope.
PLEASE VOTE
- --------------------------------------------------------------------------------
<PAGE> 100
- --------------------------------------------------------------------------------
THE GENERAL PARTNERS RECOMMEND A VOTE FOR PROPOSAL 1 Please mark your [X]
votes as indicated
in this example.
1. Approval of the proposed sale of all of the partnership's properties on the
terms described in the accompanying proxy statement, which would result in
the sale of all of the partnership's assets and the subsequent dissolution
and termination of the partnership, and the necessary amendment to the
partnership agreement to permit the proposed asset sale and dissolution and
termination of the partnership.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
MATTERS AS MAY PROPERLY COME BEFORE THE SPECIAL MEETING OR ANY
POSTPONEMENTS OR ADJOURNMENTS THEREOF.
Date /
--------------------------
--------------------------
Signature
--------------------------
Signature, If Jointly Held
If acting as Attorney,
Executor, Trustee or in
other representative
capacity, please sign name
and title.
FOLD AND DETACH HERE AND READ THE REVERSE SIDE
- -------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
VOTE BY TELEPHONE AND INTERNET
QUICK***EASY***IMMEDIATE
Your telephone or Internet vote authorizes the named proxies to vote your
shares in the same manner as if you marked, signed and returned your proxy
card.
VOTE BY PHONE: You will be asked to enter a CONTROL NUMBER located in the
box in the lower right of this form.
OPTION A: To vote as the general partners recommend on the proposal:
Press 1
OPTION B: If you choose to vote on each item separately, press 0. You
will hear these instructions:
Item 1: To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press
0. When asked, you must confirm your vote by pressing 1.
VOTE BY INTERNET: The Web address is: www.proxybynet.com/murray
IF YOU VOTE BY PHONE OR INTERNET - DO NOT MAIL THE PROXY CARD
THANK YOU FOR VOTING
CALL * * TOLL FREE * * ON A TOUCH TONE TELEPHONE
1-800-213-7567 - ANYTIME
THERE IS NO CHARGE TO YOU FOR THIS CALL
-------------------------------
-------------------------------
CONTROL NUMBER
FOR TELEPHONE/INTERNET VOTING
- --------------------------------------------------------------------------------
