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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
Annual Report pursuant to Section 13 of The Securities Exchange Act of 1934
For the fiscal year ended December 31, 1993
File No. 1-6963
ORIOLE HOMES CORP.
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1690 South Congress Avenue, Suite 200, Delray Beach, Florida 33445
(407) 274-2000
Florida 59-1228702
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(State of Incorporation) (I.R.S. Employer I.D.)
Securities registered pursuant of Section 12(b) of
the act:
Name of Each Exchange on
Title of Each Class Which Registered
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Class A Common Stock, $.10 par Value American Stock Exchange
Class B Common Stock, $.10 par Value American Stock Exchange
12 1/2% Senior Notes due 2003
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The Registrant (1) HAS filed all reports required to be filed by
Section 13 of the Securities Exchange Act of 1934 during the preceding twelve
months; and (2) HAS been subject to the filing requirements for at least the
past 90 days.
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 / X /
As of February 21, 1994, the Company had outstanding 1,895,549
shares of its Class A Common Stock and 2,729,975 shares of its Class B Common
Stock (excluding 96,422 of Class A and 165,464 of Class B Shares held in
treasury).
The aggregate market value of voting stock held by non-affiliates of
the Registrant is $35,799,903 as of February 21, 1994.
Part II is partially incorporated by reference from the Registrant's
Annual Report to Shareholders for the year ended December 31, 1993, and Part
III is incorporated by reference from the Registrant's Proxy statement for
the 1994 Annual Meeting.
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PART I
ITEMS 1 AND 2 BUSINESS AND PROPERTIES
Oriole Homes Corp. ("Oriole" or the "Company") has built and sold
single-family homes, patio homes, townhouses, villas, duplexes and low- and
mid-rise condominiums in planned communities in southeast Florida since 1963.
During each of the last five years, Oriole was the largest builder of
condominiums for active adults in Palm Beach County, both in dollar volume and
number of units sold. The Company attributes its success to (i) construction
of quality homes within communities that offer a wide range of amenities, (ii)
satisfied customers who provide a continual source of referrals, (iii) offering
a wide selection of moderately priced housing, (iv) extensive knowledge of the
southeast Florida market, (v) effective cost control policies, and (vi) a land
acquisition and development strategy that reduces land costs per unit, permits
development and construction in phases, and ensures availability of
strategically located land for future development.
Approximately 63 percent of Oriole's revenues are derived from sales
in communities designed exclusively for active adults (age 55 and over), the
fastest growing demographic segment in the United States. The Company alters
its product mix to meet changes in the housing preferences of this market,
which enjoys a high percentage of discretionary income. Home prices range from
$100,000 to $170,000 in the Company's active adult communities except for
Fairway Point, a new luxury project where prices range from $375,000 to
$560,000. In 1993, approximately 68 percent of Oriole's sales of homes and
condominiums in communities designed for active adults were cash sales. The
sales prices of Oriole's residences averaged approximately $114,100 for
condominiums and $173,400 for single-family homes during the year ended
December 31, 1993.
The Company is positioned to benefit from extremely strong economic
and demographic trends in southeast Florida. According to the U.S. Commerce
Department, Palm Beach County is ranked number one in the nation in terms of
expected growth in personal income, jobs and population between now and the
year 2000. By the year 2000, Palm Beach County is expected to experience a 19
percent rise in per capita personal income, a thirty percent increase in its
job base and a 25 percent increase in population. Broward county is expected
to experience growth in per capita income of 16 percent, growth in its job base
of 23 percent and growth in population of 17 percent. All but one of the
Company's development projects are located in either Palm Beach or Broward
Counties.
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The Company was incorporated in the State of Florida in 1968 as the
successor to six corporations engaged in the construction and sale of
single-family homes since 1963. Unless the context otherwise requires, the
terms "Company" and "Oriole" refer to Oriole Homes Corp. and its consolidated
subsidiaries. The Company's principal executive offices are located at 1690
South Congress Avenue, Suite 200, Delray Beach, Florida 33445, and its
telephone number is (407) 274-2000.
HOME BUILDING DATA
The following table sets forth information concerning sales, new
contracts and backlog for each of the past five years for the Company's
single-family homes, patio homes, townhomes, villas, duplexes and low- and
mid-rise condominiums.
<TABLE>
<CAPTION>
Years Ended December 31
-----------------------
1989 1990 1991 1992 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total Sales
Sales value $90,533 $85,549 $70,101 $89,423 $ 98,302
Number of homes 892 767 614 708 771
Total New Contracts
Sales value $90,914 $70,697 $74,260 $91,216 $108,180
Number of homes 859 626 629 743 788
Total Backlog (1)
Sales value $38,377 $23,525 $27,684 $29,477 $ 39,355
Number of homes 331 190 205 240 257
</TABLE>
(1) Backlog as of the end of the period.
The Company expects to fill substantially all backlog, both in number
of homes and dollar amount, within twelve months. It typically takes the
company four to eight months after receipt of a sales contract to build and
deliver the completed home to the purchaser. The Company's backlog
historically tends to increase between January and May. These contracts are
generally with active adults who are planning their retirement and desire
occupancy of their homes in the months of October through December.
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OPERATING POLICIES
Quality Construction and Diverse Amenities. The Company is a developer
of moderately-priced residential housing and related amenities, which create a
total lifestyle unique to Oriole communities. The Company's communities
included extensive recreational facilities, which range from social clubhouses
and swimming pools in its single-family communities to multi-million dollar
clubhouses, with tennis courts, indoor and outdoor swimming pools, theaters for
the performing arts and health clubs/spas, in its active adult communities.
The development of planned communities and the construction of such
amenities require financial resources unavailable to many home builders,
thereby limiting the number of builders that might otherwise compete directly
with the Company. The Company believes that its planned communities appeal to
purchasers and permit the Company to offer its customers various housing
products in one location. The Company has built over 20,000 homes in southeast
Florida, and satisfied purchasers provide the Company with a continual source
of referrals.
Product Diversification. The Company's homes appeal to a wide variety
of buyers and lifestyles. Accordingly, the Company offers a diversity of home
styles and price ranges at various locations, including waterfront communities.
The Company sells single-family homes, patio homes, townhomes, villas, duplexes
and low- and mid-rise condominiums. Home designs are continually reviewed and
refined to reflect changing tastes. Sales prices presently range from
approximately $70,000 to $560,000, and the average sales price of homes
delivered during 1993 was approximately $127,500. See "Communities Currently
Under Development or Construction."
Southeast Florida Market. All but one of the Company's residential
developments are located in Palm Beach and Broward counties, rapidly growing
areas of Florida, and management anticipates that the Company's revenues will
continue to be derived substantially from these markets. In 1990, the Company
commenced construction of a development in Martin County, which is the county
directly north of Palm Beach County. The Company believes that it has achieved
certain competitive advantages by concentrating its efforts in southeast
Florida, including (i) senior management's extensive knowledge of the local
market, (ii) controls and cost savings, that result from the Company's
centralized operations, and (iii) an experienced sales force.
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The Company is positioned to benefit from extremely strong economic
and demographic trends in southeast Florida. According to the U.S. Commerce
Department, Palm Beach County is ranked number one in the nation in terms of
expected growth in personal income, jobs and population between now and the
year 2000. By the year 2000, Palm Beach County is expected to experience a 19
percent rise in per capita personal income, a 30 percent increase in its job
base and a 25 percent increase in population. Broward County is expected to
experience growth in per capita income of 16 percent, growth in its job base of
23 percent and growth in population of 17 percent.
Cost Controls and Company Policies. The Company attempts to control
costs by (1) acquiring large tracts of undeveloped land and developing the land
in phases (ii) developing planned communities, which permit the Company to take
advantage of certain economies of scale, (iii) generally beginning construction
only when homes are under contract, and (iv) acting as general contractor and
hiring subcontractors on a fixed-price or other cost-effective basis.
The Company's general policy is not to begin construction of
single-family homes prior to the execution of sales contract, which minimizes
the costs and risk of completed but unsold inventory. The Company maintains a
limited inventory of completed homes for sale primarily to families transferred
to Florida by their employers. There were nine single family homes completed
and unsold in inventory (not including model homes) at December 31, 1993. In
many instances, the Company will begin multi-family construction (duplex,
townhouse, villa and multi-story complexes) when sales contracts are in effect
for a predetermined percentage of the units. As of December 31, 1993, the
Company's inventory included 144 unsold completed units in multi-family
projects.
Land Acquisition and Development. The Company selects locations for
its developments on the basis of accessibility to major highways and
thoroughfares, proximity to shopping areas, medical facilities and community
cultural and recreation centers. The Company generally acquires large tracts
of land that require site improvements prior to construction. The tracts of
land are separated into phases for both development and construction. The
Company typically acquires land on which construction can begin within three
years.
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The Company spends considerable effort in developing design and
marketing concepts for each of its communities. The design concepts determine
the size, style and price range of homes, the layout of streets and individual
lots and the overall community design. The product line offered in a
particular community depends upon many factors, including the housing generally
available in the area, the needs of the particular market and the cost of
building lots. After finalizing the design concepts, the Company undertakes
development activities that include site planning and engineering, construction
of roads, sewer, water and drainage facilities, recreational facilities and
other amenities.
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RESIDENTIAL PROJECTS AND PRODUCT LINES
The following table summarizes information as of December 31, 1993 with respect
to the Company's principal projects under development or construction during
1993.
<TABLE>
<CAPTION>
Units Sold
Name and Year Units Sold and and
Location of Development Total Units Delivered Thru Delivered in
Development Started Type Planned 1993 1993
- ----------------------- ------------------ -------- ------------- -------------- ----------
<S> <C> <C> <C> <C> <C>
Lakeshore at University Park 1981 Mixed 1,160 426(3) --
Miramar
Country Glen 1993 Single 300 - --
Cooper City Family
Cypress Bend 1980 Mixed 1,583 1,472(4) 70
Pompano Beach
Boca Springs 1990 Single 214 132 42
Boca Raton Family
Island Lakes 1986 Single 240 226(5) 32
Boca Raton Family
Whisper Walk 1982 Active 1,446 1,428 150
Boca Raton Adult
Fairway Point 1993 Active 60 - -
Boca Raton Adult
Reflections 1993 Mixed 56 - -
Boca Raton
Huntington Pointe 1989 Active 1,096 905 168
Delray Beach Adult
Coral Lakes 1992 Active 1,225 - -
Delray Beach Adult
<CAPTION>
Name and Units
Location of Units Under Under Remaining
Development Construction(1) Contract Units(2)
- ----------------------- -------------- ---------- ----------
At December 31, 1993
--------------------------------------
<S> <C> <C> <C>
Lakeshore at University Park - - 200
Miramar
Country Glen - - 300
Cooper City
Cypress Bend - 5 78
Pompano Beach
Boca Springs 11 24 58
Boca Raton
Island Lakes 8 9 4
Boca Raton
Whisper Walk 8 16 2
Boca Raton
Fairway Point 30 12 48
Boca Raton
Reflections 17 28 28
Boca Raton
Huntington Pointe 66 26 165
Delray Beach
Coral Lakes 16 12 1,213
Delray Beach
</TABLE>
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RESIDENTIAL PROJECTS AND PRODUCT LINES - Continued
<TABLE>
<CAPTION>
Units Sold
Name and Year Units Sold and and
Location of Development Total Units Delivered Thru Delivered in
Development Started Type Planned 1993 1993
- --------------- --------------- ----- ------------ ---------------- -------------
<S> <C> <C> <C> <C> <C>
Palm Isles 1991 Active 992 417 247
Boynton Beach Adult
Majestic Isles Active 450 - -
Boynton Beach (6) Adult
Palm Shores 1989 Active 222 221 13
Boynton Beach Adult
Cypress Woods 1989 Single 152 5 5
Lake Worth Family
Summer Chase 1989 Active 221 71 28
Lake Worth Adult
Whispering Sound 1991 Active 230 26 16
Palm City/Stuart Adult
<CAPTION>
Name and Units
Location of Units Under Under Remaining
Development Construction(1) Contract Units(2)
- --------------- -------------- ---------- ----------
At December 31, 1993
---------------------------------------------
<S> <C> <C> <C>
Palm Isles 72 103 472
Boynton Beach
Majestic Isles - - 450
Boynton Beach (6)
Palm Shores - - 1
Boynton Beach
Cypress Woods 7 10 137
Lake Worth
Summer Chase 8 10 140
Lake Worth
Whispering Sound 8 2 202
Palm City/Stuart
</TABLE>
(1) Includes model units.
(2) Includes model units and potential units to be constructed.
(3) Does not include 534 rental units
(4) Does not include 28 rental units
(5) Does not include one lot sold without a building.
(6) Development will start in 1994.
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COMMUNITIES CURRENTLY UNDER DEVELOPMENT OR CONSTRUCTION
COUNTRY GLEN is a community of single-family homes located in Cooper
City, south Broward County, Florida. The community consists of 300 units and is
presently under development. Prices are expected to range from $200,000 to
$275,000.
CYPRESS BEND is a complex of five- and nine story lakefront
condominium buildings located in Pompano Beach and priced from $70,000 to
$105,000. The community features over $1 million of recreational amenities,
including social clubhouses with swimming pools, tennis and racquetball courts,
and jogging and exercise trails.
BOCA SPRINGS is comprised of 214 single-family homes in west Boca
Raton. The community features one- and two-story homes, which range from 1,460
to 2,757 square feet with two-car garages. Prices are from $124,000 to
$160,000. Recreational facilities include a private park with a swimming pool
and deck area, basketball, tennis court and a play area for children. This
neighborhood has top-rated schools, parks and medical facilities.
ISLAND LAKES is a luxury single-family home community located in west
Boca Raton, featuring 220 waterfront homesites. This private community is
built around a lake and encircled by a canal. All of the homes in the
community have swimming pools and range in size from 2,263 to 3,061 square
feet, with prices from $200,000 to $260,000. Island Lakes is located within a
neighborhood of beautiful parks and fine schools.
WHISPER WALK is a community for active adults located in Boca Raton.
The community is divided into five sections for the development of 1,446
residences, consisting of villas quadplexes and duplexes. Prices range from
$85,000 to $125,000. The clubhouses in this community contain swimming pools,
shuffleboard courts, multi-purpose rooms, saunas and showers. The Community
also features a tennis and racquetball park with ten tennis courts, viewing
stands and racquet/handball courts.
FAIRWAY POINT consists of two, 30 unit 8-story buildings located in
Boca West, Boca Raton, Florida. Boca West is a luxury country club community.
Fairway Point is being built on the last available parcel of land in Boca West.
The units contain approximately 3,350 square feet of air conditioned space and
800 square feet of balconies. They contain all luxury amenities.
REFLECTIONS is a community of 56 one - and two - story townhomes
located at Mission Bay, west of Boca Raton. Price range is from $90,000 to low
$100's. The units contain from 1,800 to 2,400 square feet.
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HUNTINGTON POINTE is a community for active adults at Delray Beach.
The community of 1,096 units features a variety of homestyles, including
quadplexes, villas and duplexes, and condominiums within four story lakefront
buildings. Homes in this community are priced from $90,000 to $140,000. The
central attraction of the community is its multi-million dollar on-site
clubhouse and spa. The clubhouse contains over 50,000 square feet and has
indoor and outdoor swimming pools with poolside snack bar cafe, a complete
600-seat theater for the performing arts, a grand party room and other activity
rooms. The community which has a private gatehouse entry, also features
satellite swimming pools and eight tennis courts.
CORAL LAKES is an active adult community in Delray Beach. Development
commenced in 1992 and construction of the first homes took place in 1993. The
community of 1,225 units will feature condominiums in two- and four-story
buildings, villas, duplexes and a section of zero lot line single-family
residences with two-car garages. Prices range from $130,000 to $160,000. This
community will have a multi-million dollar on-site clubhouse and spa, similar
to the completed facility at Huntington Pointe, and will also feature satellite
swimming pools.
PALM ISLES is an active adult community of 992 residences in Boynton
Beach. Prices in this community range from $100,000 to $170,000, and home
styles include villas, duplexes, lakefront quadplexes and zero lot line
single-family residences. The community has a multi-million dollar on-site
clubhouse and spa, similar to Huntington Pointe, with eight tennis courts. The
community also features satellite swimming pools.
PALM SHORES AT GABLES END is a single-family community for active
adults in Boynton Beach. The 222 homes range in size from 1,499 to 2,060
square feet and are priced from $137,000 to $157,000. The community clubhouse
features a swimming pool with whirlpool and sun deck, multi-purpose rooms,
exercise room, saunas, showers and lockers, as well as tennis and shuffleboard
courts.
CYPRESS WOODS is a single-family home community located in Lake Worth
and consist of 152 luxury homes. Prices are from $134,000 to $173,000.
Recreational facilities include a private family park area with basketball,
tennis courts and a play area for children. This area of Lake Worth has
excellent schools, parks and medical facilities. Cypress Woods will feature a
single private entry.
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SUMMER CHASE is a community for active adults located in Lake Worth.
The community features single-family residences with two-car garages on
homesites of 60 feet by 110 feet. The price range is from $132,000 to
$160,000. Some of the 221 homesites are available with lakefront views. The
social clubhouse is similar to Palm Shores. This community also features a
single entry.
WHISPERING SOUND is an active adult community of 230 duplex residences
located in Martin county at Palm City/Stuart. The residences range in price
from $100,000 to $105,000. The community includes natural preserved areas
offering backyard privacy for nearly every residence. The social clubhouse is
now completed and is similar to the clubhouses at Palm Shores and Summer Chase.
The community features a single access entry for privacy.
CONSTRUCTION
The Company acts as the general contractor for the construction of its
developments. Company employees monitor the construction of each project,
participate in design and building decisions, coordinate the activities of
subcontractors and suppliers, maintain quality and cost controls and monitor
compliance with zoning and building codes. Subcontractors typically are
retained for a specified phase of development pursuant to a contract that
obligates the subcontractor to complete construction at a fixed price.
Agreements with the Company's subcontractors are generally entered into after
competitive bidding. The Company does not have any long-term contractual
commitments with any of its subcontractors.
The Company generally constructs single-family homes only after the
execution of a sales contract. The Company attempts to minimize cancellations
by requiring a down payment and qualifying its customers for mortgage approval
prior to commencement of construction.
The Company offers a variety of options for each of its homes. These
options permit buyers to customize their homes and permit the Company to offer
variations on standard models while maintaining the efficiencies of a
production builder. The Company believes the availability of these options
increase the appeal of the Company's homes and makes them suitable to the needs
of a wide variety of buyers.
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At December 31, 1993, the Company employed approximately 54 people in
the construction operation. Most construction materials are obtained by
subcontractors and are readily available from numerous sources. The Company
has not experienced any material delays in construction due to shortages of
materials or labor, however, the fact that there has been a significant
increase in construction activities in Southeast Florida could result in the
Company or its subcontractors experiencing shortages in the labor market.
MARKETING AND SALES
The Company sells its homes through sales managers and independent
commissioned salespersons, who typically work in model sales centers or from
sales offices located in model homes and condominiums in the Company's
communities. The Company also cooperates with independent real estate brokers
organizations. The Company trains sales personnel on the availability of
financing, construction schedules, marketing and advertising plans. The
Company's sales and marketing organization consists of approximately 29 Company
employees and sales personnel, all of whom are licensed real estate agents in
the State of Florida. The concentration of the Company's projects in southeast
Florida permits the Company to engage salespersons on a long-term, rather than
a project-by-project basis, which management believes results in reduced
training costs and a more motivated sales force with extensive knowledge of the
Company's operating policies and housing products.
The Company advertises in newspapers and magazines, by direct mail and
on billboards. In fiscal 1993, the Company's aggregate advertising costs were
approximately $2.2 million. The Company maintains model homes and condominiums
in all its communities, and management believes that these model units play a
particularly important role in the Company's marketing efforts. The Company
expends a significant effort in creating an attractive atmosphere at its
models, where interior decorations are based upon the lifestyles of the target
buyers.
COMPETITION AND MARKET FACTORS
The development and sales of residential properties is highly
competitive and fragmented. The Company competes on the basis of a number of
interrelated factors, including location, reputation, amenities, design,
quality and price, with numerous large and small builders. Some of these
competing builders have nationwide operations and greater financial resources.
The Company's products must also compete with resales of existing
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homes and condominiums and available rental housing. Management believes that
the Company's primary competitive strengths have been (i) satisfied customers
who provide a continual source of referrals, (ii) its ability to offer quality
residences with certain customized features at a wide range of prices, (iii)
the location of its communities, and (iv) its reputation for service,
innovative design and value pricing.
The Company maintains a strong position in the active adult community
marketed in southeast Florida and has been the leading builder of condominiums
in Palm Beach County in each of the last five years. The Company focuses on
providing a high- quality, active lifestyle for adults. The Company also
believes that the high capital costs required to develop a community with
substantial amenities effectively limits the number of competitors in the
active adult market.
The housing industry is cyclical and is affected by consumer
confidence levels, prevailing economic conditions and interest rates. A
variety of other factors affect the housing industry and the demand for new
homes, including the availability and increase in the cost of labor and
materials, changes in costs associated with home ownership, such as increases
in property taxes and energy cost, changes in consumer preferences, demographic
trends and the availability of mortgage financing programs.
CUSTOMER FINANCING
The Company works with a number of mortgage lenders to provide home
buyers with a variety of conventional mortgage financing programs. By making
available a variety of attractive mortgage programs, the Company is able to
better coordinate and expedite the entire sales transaction by ensuring that
mortgage commitments are obtained and that closings take place on a timely and
efficient basis. Management estimates that during 1993 approximately 75
percent of the Company's closings requiring mortgages were financed through
mortgage programs arranged by the Company's mortgage broker subsidiary, Florida
Residential Mortgage Company. In 1993, approximately 68 percent of Oriole's
sales of homes and condominiums in communities designed exclusively for active
adults were cash sales.
RENTAL APARTMENTS
The Company owns 480 rental units known as The Pier Club, in Miramar,
Florida. The Company also rents an additional 90 units in other developments.
The Company rents these apartments, typically under one-year leases. The
Company's future plans do not presently include the construction of any
additional rental communities.
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JOINT VENTURE WITH REGENCY HOMES
On December 31, 1993, Oriole funded $3.5 million with an affiliated
limited partnership to engage in joint ventures with Regency Homes, Inc., a
prominent builder of residential housing in South Florida. The initial joint
venture project involves the development and construction of 108 single-family
homes in southwest Broward County in a development known as Silver Lakes. The
joint venturers currently plan to jointly develop other properties during 1994.
GOVERNMENT REGULATION AND ENVIRONMENTAL MATTERS
In developing a community, the Company must obtain the approval of
numerous government authorities that regulate such matters as permitted land
uses, density levels, the installation of utilities such as water, drainage and
waste disposal, and the dedication of acreage for open space, parks, schools
and other community purposes. Several authorities in Florida including Broward
and Palm Beach counties, have imposed impact fees as a means of defraying the
costs of providing certain governmental services to developing areas. The
amount of these impact fees has increased significantly during recent years.
Building codes in these counties require the use of specific construction
material which increase the energy efficiency of homes. In addition, Broward
and Palm Beach county have attempted to impose restrictive zoning and density
requirements in order to limit the number of persons who live and work within
their boundaries. Counties and cities within the State of Florida have also,
at times, declared moratoriums on the issuance of building permits and imposed
other restrictions in the areas where sewage treatment facilities and other
public facilities do not reach minimum standards. To date, restrictive zoning
laws and imposition of moratoriums have not had a material adverse effect on
the Company's development activities. However, there is no assurance that such
restrictions will not adversely affect the Company in the future.
The Company is also subject to a variety of federal, state and local
statutes, ordinances, rules and regulations concerning protection of the
environment. Environmental laws vary greatly according to the community's
location, the site's environmental conditions and the present and former uses
of the site. These environmental laws may result in delays, causing the
Company to incur substantial compliance and other costs, and prohibit or
severely restrict development. Prior to consummating the purchase of land, the
Company engages independent environmental engineers to evaluate such land for
the presence of hazardous or toxic materials, wastes, or substances. The
Company has not been adversely affected to date by the presence or potential
presence of such materials.
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Certain permits and approvals will be required to complete the
communities currently being planned by the Company. The ability to obtain
necessary permits and approvals is often beyond the Company's control and could
restrict or prevent the development of otherwise desirable property. The
length of time necessary to obtain permits and approvals increases the carrying
costs of unimproved property. In addition, the continued effectiveness of
permits already granted is subject to factors such as changes in policies, and
the interpretation and application of rules and regulations.
The Florida Local Government Comprehensive Planning and land
Development Regulation Act (the "Act") provides that public facilities,
including, but not limited to, sewer, solid waste, drainage, potable water,
parks, roads and recreation facilities shall be available concurrently with the
impact of land development projects that would use such facilities. This
requirement is known as the "concurrency" requirement. Counties and cities are
required to implement concurrency by adopting local comprehensive plans and
land development regulations. These plans and regulations establish the
guidelines for concurrency review and the exemptions from the concurrency
requirement. All of the Company's development projects in Palm Beach County
have been found to satisfy concurrency requirements.
In recent years, regulation by federal and state authorities relating
to the sale and advertising of residential real estate has also become more
restrictive. In order to advertise and sell condominiums in many
jurisdictions, the Company has been required to prepare registration statements
or other disclosure documents and, in some cases, to file such materials with
designated regulatory agencies. The Company advertises its condominium units
in New York and New Jersey and prepares registration statements in connection
with sales in those states and in the State of Florida.
The State of Florida requires that customer deposits be held in
segregated bank accounts. As of December 31, 1993, the Company has posted
bonds of $4.5 million and had entered into an escrow agreement with a bank and
the State of Florida that allows the Company to use customer deposits. See
Note I of Notes to Consolidated Financial Statements.
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EMPLOYEES
The Company employs approximately 221 persons, of whom approximately
42 are executive and supervisory personnel. The Company has had no major work
stoppages as a result of labor disputes and believes that relations with its
employees and its subcontractors are good.
CORPORATE HEADQUARTERS
The Company rents 22,500 square feet of space in a two-story office
building. The lease expires January 1, 1998. See Note N of Notes to
Consolidated Financial Statements.
ITEM 3 LEGAL PROCEEDINGS
The Company is a party to various lawsuits, all of which are of a
routine nature and are incidental to the Company's present business activities.
These proceedings are not material, nor would the adverse resolution thereof
materially affect the business or properties of the Company.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE BY SECURITY HOLDERS
No matters were submitted to security holders during the 4th quarter.
The annual Meeting of Shareholders of the Registrant has been scheduled for May
9, 1994. The Company will file its definitive proxy material pursuant to
Regulation 14, prior to April 30, 1994.
PART II
ITEM 5 MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
Information required by this item is incorporated by reference to the
Registrant's 1993 Annual Report to Shareholders.
ITEM 6. SELECTED FINANCIAL DATA
Information required by this item is incorporated by reference to the
Registrant's 1993 Annual Report to Shareholders.
15
<PAGE> 17
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
General. The following table sets forth for the periods indicated
certain items of the Company's Consolidated Financial Statements expressed as a
percentage of the Company's total revenues:
<TABLE>
<CAPTION>
Percentage of Total Revenues
Years Ended December 31, 1991 1992 1993
<S> <C> <C> <C>
Sale of houses and condominiums 83.7% 92.6% 92.7%
Sale of land 2.9 0.6 0.8
Other operating revenues 4.5 3.3 3.4
Interest, rentals and other income 3.4 3.1 3.1
Gain on sale of office building and golf course 5.5 0.5 -
Selling, general and administrative expenses 17.5 15.1 15.1
Net income 6.2 5.2 2.5
</TABLE>
Backlog. The following table sets forth the Company's backlog at
December 31, 1991, 1992 and 1993
<TABLE>
<CAPTION>
December 31, Number of Units Aggregate Dollar Value
<S> <C> <C>
1991 205 $27,684,000
1992 240 $29,477,000
1993 257 $39,355,000
</TABLE>
The Company's backlog generally represents units under contract for
which a full deposit has been received, any statutory rescission right has
expired, and in the case of a borrower, such borrower has been qualified for a
mortgage loan. The Company generally fills all backlog within twelve months.
The Company estimates that the period between receipt of a sales contract and
delivery of the completed home to the purchaser is four to eight months. The
Company's backlog historically tends to increase between January and May.
Trends in the Company's backlog are subject to change from period to period for
a number of economic conditions including consumer confidence levels, interest
rates and the availability of mortgages. In 1989, 1990 and throughout part of
1991, the operations of the Company, and the housing industry in general,
reflected a nationwide recession. The recession, and
16
<PAGE> 18
resulting lack of consumer confidence, contributed to a decline in the number
of new sales contracts received by the Company. During the second quarter of
1991, the Company began to receive a higher level of sales contracts, primarily
as a result of increased consumer confidence and lower mortgage rates. This
trend has continued through the twelve-month period ended December 31, 1993.
RESULTS OF OPERATIONS YEAR ENDED DECEMBER 31, 1993 COMPARED TO YEAR ENDED
DECEMBER 31, 1992
The Company's revenues from home sales increased $8.9 million (or
9.9%) during the calendar year 1993 as compared to the same period in 1992. The
Company delivered 771 homes in 1993 compared to 708 in 1992, with an increase
of 1.0% in the average selling price of homes delivered (from $126,300 to
$127,500). The number of new contracts signed (788) and the aggregate dollar
value of those new contracts ($108.2 million) increased in 1993 from 743 and
$91.2 million in 1992.
Other operating revenues increased to $3.6 million during 1993 from
$3.2 million in 1992 due to larger occupancy rate on our rental apartments.
Interest, rentals and other income increased to $3.3 million in 1993 from $2.9
million in 1992 due to additional interest on short term investments and the
increased number of units subject to recreation leases.
Cost of home sales increased to $80.7 million in 1993 from $70.2
million in 1992 as a result of an increase in the number of homes delivered. As
a percentage of home sales, cost of home sales increased to 82.1% from 78.5%.
Selling, general and administrative expenses ("S,G & A") increased to
$16.0 million in 1993 from $14.5 million in 1992, but as a percentage of total
revenues, these expenses remained at 15.1%. The $2.6 million (or 35.2%)
increase in the Company's interest cost incurred in 1993 as compared to the
same period in 1992 was primarily attributable to the larger outstanding debt
following the issuance of the 12 12% Senior Notes due 2003 in January 1993.
Net income decreased to $2.6 million in 1993 from $5.1 million in the
comparable period in 1992, due mainly to the reduced margins from the sale of
homes and the effect of $999,288, net of taxes of an extraordinary item from
the write-off of unamortized debenture and loan costs. The reasons for lower
margins are the inability to meaningfully increase selling prices, increased
competition which resulted in the absorption of higher construction costs and
the impact of higher capitalized interest.
17
<PAGE> 19
RESULTS OF OPERATIONS YEAR ENDED DECEMBER 31, 1992 COMPARED TO YEAR ENDED
DECEMBER 31, 1991
The Company's revenues from home sales increased $19.3 million (or
27.6%) during the calendar year 1992 as compared to the same period in 1991.
The Company delivered 708 homes in 1992 compared to 614 in 1991, with an
increase of 10.6% in the average selling price of homes delivered (from
$114,200 to $126,300). The number of new contracts signed (743) and the
aggregate dollar value of those new contracts ($91.2 million) increased in 1992
from 629 and $74.3 million in 1991.
Other operating revenues decreased to $3.2 million during 1992 from
$3.7 million in 1991, primarily as a result of the absence of revenues from the
operation of its golf course sold in January 1992. Interest, rentals and other
income decreased to approximately $3.5 million from $7.5 million, reflecting a
gain of $4.6 million from the sale of the Company's corporate headquarters
building in 1991, and a gain of $500,000 from the sale of the golf course in
1992.
Cost of home sales increased to $70.2 million in 1992 from $53.5
million in 1991 as a result of an increase in the number of homes delivered. As
a percentage of home sales, cost of home sales increased to 78.5% from 76.3%
due to increased competition, the absorption of higher construction costs and
the impact of higher previously capitalized interest.
Selling, General and Administrative Expenses ("S,G & A") decreased to
$14.5 million in 1992 from $14.6 million in 1991 and, as a percentage of total
revenues, these expenses decreased to 15.1% from 17.5% in the same period for
1991. The $1.7 million (or 18.5%) decrease in the Company's interest cost
incurred in 1992 as compared to the same period in 1991 was primarily
attributable to lower interest rates and lower borrowings.
Net income decreased to $5.1 million in 1992 from $5.2 million in the
comparable period in 1991. The 1991 figure included a $2.9 million after tax
gain from the sale of the Company's corporate headquarters building.
LIQUIDITY AND CAPITAL RESOURCES
The Company's financing needs depend primarily upon sales volume,
asset turnover, land acquisition and inventory balances. The Company has
financed its working capital need through funds generated by operations,
borrowings and the periodic issuance of common stock.
18
<PAGE> 20
During 1991, 1992 and 1993, as a consequence of recessionary
conditions and well-publicized real estate problems, many commercial banks,
savings and loans and other lending institutions curtailed real estate lending
or adopted more stringent lending policies, often as the result of regulatory
agency measures. As a result, the availability of borrowed funds, especially
for the acquisition and development of land, was greatly reduced.
In January 1993, the Company completed the issuance of $70.0 million
of its 12 1/2% Senior Notes due 2003. These Notes were offered at the price of
97.242% and, after the underwriting discount, the net proceeds to the Company
of $66.0 million were used to repay an existing bank credit facility ($35.0
Million) and the outstanding balance on its 12 7/8 % Subordinated Debentures
($19.4 Million). Under the Indenture, the Company is able to enter into another
credit facility which may or may not be secured for up to $20.0 million. The
Company believes that the proceeds derived from the sale of the Notes after the
debt repayment, additional borrowing permitted under the Indenture and amounts
generated from operations provide funds adequate to finance its home building
activities and meet its debt service requirements.
The Company believes that a strategy of conservative land acquisition
and community development should position it to take advantage of the
anticipated upturn in the real estate market. The Company does not have any
current commitments for capital expenditures and believes the proceeds from its
offering will provide adequate liquidity on both a short and long term basis.
On November 23, 1993, the Company declared a dividend of $.15 per
share on its Class A common stock and $.175 on its Class B common stock to
shareholders of record as of December 14, 1993, which dividends were paid on
January 11, 1994. The Company intends to reestablish the payment of semi-annual
dividends. The payment of cash dividends is at the discretion of the Board of
Directors and will depend upon results of operations, capital requirements, the
Indenture, the Company's financial condition and such other factors as the
Board of Directors of the Company may consider. There can be no assurance as to
the amount, if any, or timing of cash dividends.
19
<PAGE> 21
INFLATION
The Company, as well as the home building industry in general, may be
adversely affected during periods of high inflation, primarily because of
higher land and construction costs. In addition, higher mortgage interest rates
may significantly affect the affordability of permanent mortgage financing to
prospective purchasers. Inflation also increases the Company's cost of labor
and materials. The Company attempts to pass through to its customers any
increases in its costs through increased selling prices. During the last two
years the Company has experienced a reduction in gross margins on the sale of
homes. In some part these reduced margins are the result of the Company being
unable to raise selling prices and pass on increased construction costs. There
is no assurance that inflation will not have a material adverse impact on the
Company's future results of operations.
ACCOUNTING METHODS
During 1987, the Company changed its method of accounting for income
taxes to conform to Statement of Financial Accounting Standards No. 96
"Accounting for income Taxes, " which requires the liability method as measured
by the provisions of the enacted tax laws. The amount of deferred taxes payable
is recognized under the liability method at the date of the Consolidated
Financial Statements. During 1992, the Financial Accounting Standards Board
adopted Statement of Financial Accounting Standards No. 109, which supersedes
Statement of Financial Accounting Standards No. 96, and became effective for
fiscal years beginning after December 15, 1992. The effect of the adoption of
this Statement did not have a material effect on the Consolidated Financial
Statements.
20
<PAGE> 22
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ORIOLE HOMES CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
<TABLE>
<CAPTION>
ASSETS
1993 1992
----------- ------------
<S> <C> <C>
Cash and cash equivalents $ 14,650,532 $ 6,942,103
----------- ------------
Receivables
Mortgage notes 1,618,659 1,657,347
Officers - 200,000
Other 4,000 15,936
----------- ------------
1,622,659 1,873,283
----------- ------------
Inventories
Land 111,959,716 97,059,784
Houses and condominiums completed
or under construction 38,057,470 34,654,650
Model houses and condominiums 2,416,948 2,465,395
----------- ------------
152,434,134 134,179,829
Less estimated costs of completion included
in inventories 24,031,951 15,836,153
----------- ------------
128,402,183 118,343,676
Property and equipment (at cost) ----------- ------------
Land 7,172,279 7,184,697
Buildings 23,130,421 23,237,989
Furniture, fixtures and equipment 5,357,097 4,993,417
----------- ------------
35,659,797 35,416,103
Less accumulated depreciation 9,920,818 8,716,895
----------- ------------
25,738,979 26,699,208
----------- ------------
Other
Prepaid expenses 1,812,081 1,256,077
Unamortized debt issuance costs 2,497,438 398,796
Investment in and advances to joint venture 3,500,000 -
Land held for investment (at cost) 2,791,450 2,791,450
Other assets 727,271 632,510
----------- ------------
11,328,240 5,078,833
----------- ------------
Total assets $ 181,742,593 $ 158,937,103
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
21
<PAGE> 23
ORIOLE HOMES CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
1993 1992
----------- -----------
<S> <C> <C>
Liabilities
Notes payable - banks $ 96,317 $ 13,000,000
Term loan payable - banks - 22,000,000
Mortgage notes payable 14,399,479 14,399,639
Accounts payable 6,507,891 5,251,843
Dividends payable 762,078 -
Customer deposits 6,091,570 4,981,191
Income taxes payable 647,326 415,704
Accrued expenses and other liabilities 7,157,750 3,616,122
Deferred income taxes 850,908 862,656
Debentures - 17,328,910
Senior notes 68,187,694 -
----------- -----------
Total Liabilities 104,701,013 81,856,065
----------- -----------
Shareholders' equity
Class A common stock, $.10 par value
Authorized - 10,000,000 shares
Issued - 1,991,971 in 1993
and 1,991,986 in 1992 199,197 199,199
Class B common stock, $.10 par value
Authorized - 10,000,000 shares
Issued - 2,895,439 in 1993
and 2,895,424 in 1992 289,545 289,543
Additional paid-in capital 21,462,110 21,462,110
Retained earnings 57,311,700 57,351,158
---------- ----------
79,262,552 79,302,010
Less
Cost of Class A common stock in
treasury - 96,422 shares in 1993 and 1992 838,580 838,580
Cost of Class B common stock in
treasury - 165,464 shares in 1993 and 1992 1,382,392 1,382,392
----------- -----------
Total shareholders' equity 77,041,580 77,081,038
----------- -----------
Total liabilities and shareholders' equity $ 181,742,593 $ 158,937,103
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
22
<PAGE> 24
ORIOLE HOMES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C>
Revenues
Sales of houses and condominiums $ 98,302,003 $ 89,423,637 $ 70,100,998
Sales of land 891,041 550,250 2,447,434
Other operating revenues 3,600,196 3,156,503 3,745,369
Gain on sales of property and land
held for investment, net 42,258 522,758 44,963
Interest, rentals and other income 3,260,305 2,939,373 2,825,832
Gain on sal e of office building - - 4,596,587
----------- ---------- ----------
106,095,803 96,592,521 83,761,183
----------- ---------- ----------
Costs and expenses
Cost of houses and condominiums sold 80,682,884 70,178,172 3,466,890
Cost of land sold 772,020 461,016 2,027,197
Costs relating to other operating revenues 2,517,756 2,665,967 3,263,695
Selling, general and administrative
expenses 16,001,923 14,543,802 14,637,117
Interest costs incurred 10,154,739 7,510,382 9,215,226
Interest capitalized (deduct) (9,997,908) (6,944,173) (7,147,527)
----------- ---------- ----------
100,131,414 88,415,166 75,462,598
----------- ---------- ----------
Income before provision for income taxes
and extraordinary charge 5,964,389 8,177,355 8,298,585
Provision for income taxes 2,324,023 3,126,618 3,121,758
----------- ---------- ----------
Income before extraordinary charge 3,640,366 5,050,737 5,176,827
Extraordinary charge - loss on early retirement
of debt, net of income taxes (999,288) - -
----------- ---------- ----------
Net income $ 2,641,078 $ 5,050,737 $ 5,176,827
=========== ========== ==========
Net income per common share before
extraordinary charge $ .79 $ 1.17 $ 1.36
Extraordinary charge (.22) - -
----------- ---------- ----------
Net income per Class A and Class B
common share $ .57 $ 1.17 $ 1.36
=========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
23
<PAGE> 25
ORIOLE HOMES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C>
Increase (decrease) in cash
Cash flows from operating activities
Net income $ 2,641,078 $ 5,050,737 $ 5,176,827
Adjustments to reconcile net income to net cash
(used in) provided by operating activities
Depreciation 1,265,836 1,266,013 1,460,931
Amortization 333,062 778,532 631,410
Deferred income taxes (11,748) (585,449) 39,129
Gain on sales of office building, property
and land held for investment (42,258) (522,758) (4,641,551)
Loss on early retirement of debt 1,602,194 - -
Changes in assets and liabilities
Decrease in receivables 250,624 524,358 142,279
(Increase) decrease in inventories (10,058,507) 4,984,512 9,283,218
(Increase) in other assets (650,765) (152,297) (248,050)
Increase (decrease) in accounts payable 1,256,048 (400,351) 478,692
Increase in customer deposits 1,110,379 369,163 262,703
Increase (decrease) in income taxes payable 231,622 (683,979) (461,156)
Increase (decrease) in accrued expenses
and other liabilities 3,541,628 (1,917,857) (2,239,697)
---------- ---------- ----------
Total adjustments (1,171,885) 3,659,887 4,707,908
---------- ---------- ---------
Net cash provided by operating activities 1,469,193 8,710,624 9,884,735
---------- ---------- ---------
Cash flows from investing activities
Capital expenditures (416,120) (1,049,969) (686,535)
Investment in joint venture (3,500,000) - -
Proceeds from sales of office building,
property and equipment 152,771 1,245,445 5,840,136
---------- ---------- ---------
Net cash (used in) provided by
investing activities (3,763,349) 195,476 5,153,601
---------- ---------- ---------
Cash flows from financing activities
Proceeds from issuance of 12 1/2% senior notes 68,069,400 - -
Payment of mortgage notes (160) (146) (6,089,455)
Borrowings under line of credit agreement 196,317 6,200,000 44,470,000
Repayments under line of credit agreement (13,100,000 (9,000,000) (64,970,000)
Issuance costs (2,681,514) (338,860) (844,278)
Term loan payable
Proceeds - - 36,450,000
Payments (22,000,000) (9,000,000) (5,450,000)
Proceeds from Class B common stock issued - 7,978,880 -
Repurchase of debentures and senior notes (18,563,000) (2,677,000) (13,705,000)
Dividends paid 1,918,458 (995,387) -
----------- ---------- ----------
Net cash provided by (used in)
financing activities 10,002,585 (7,832,513) (10,138,733)
----------- ---------- -----------
Net increase in cash 7,708,429 1,073,587 4,899,603
Cash and cash equivalents at beginning of year 6,942,103 5,868,516 968,913
----------- --------- ---------
Cash and cash equivalents at end of year $ 14,650,532 $ 6,942,103 $ 5,868,516
=========== ========= =========
Supplemental disclosures of cash flow information
Cash paid during the year for:
Interest (net of amount capitalized) $ - $ 768,849 $ 2,083,562
Income taxes $ 1,501,243 $ 4,041,341 $ 3,899,157
</TABLE>
The accompanying notes are an integral part of these statements.
24
<PAGE> 26
ORIOLE HOMES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<TABLE>
<CAPTION>
Common Stock
-------------------------------------------------
Class A Class B
------------------------ --------------------- Additional
Paid-in Retained
Shares Amount Shares Amount Capital Earnings
------------ ---------- ---------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance at
January 1, 1991 2,015,196 $ 201,520 2,040,214 $ 204,022 $ 13,905,290 $ 48,118,981
Net income for 1991 - - - - -
Stock conversion ( 5,500) ( 550) 5,500 550 - 5,176,827
Cash dividends -
Class A common stock
$.25 per share - - - - -
Class B common stock (478,318)
$.275 per share - - - - -
( 517,069)
Balance at --------- --------- --------- --------- ---------- -----------
December 31, 1991 2,009,696 200,970 2,045,714 204,572 13,905,290 52,300,421
Net income for 1992 - - - - - 5,050,737
Stock conversion ( 17,710) ( 1,771) 17,710 1,771 - -
Class B common stock
issued pursuant to
public offering - - 832,000 83,200 7,556,820 -
--------- --------- --------- --------- ---------- -----------
Balance at
December 31, 1992 1,991,986 199,199 2,895,424 289,543 21,462,110 57,351,158
Net income for 1993 - - - - - 2,641,078
Stock conversion ( 15) ( 2) 15 2 - -
Cash dividends
Class A common stock
$.55 per share - - - - - ( 1,042,555)
Class B common stock
$.60 per share - - - - - ( 1,637,981)
--------- --------- --------- --------- ---------- -----------
Balance at
December 31, 1993 1,991,971 $ 199,197 2,895,439 $ 289,545 $ 21,462,110 $ 57,311,700
========= ========== ========= ========== ============= ============
Treasury Stock
----------------------------------------------------
Class A Class B
--------------------- --------------------------
Shares Amount Shares Amount
(Deduction) (Deduction) (Deduction) (Deduction)
----------- ----------- ----------- -----------
Balance at
January 1, 1991 (96,422) $ (838,580) (165,464) $(1,382,392)
Net income for 1991 - - - -
Stock conversion - - - -
Cash dividends
Class A common stock
$.25 per share - - - -
Class B common stock
$.275 per share - - - -
----------- ----------- ----------- -----------
Balance at
December 31, 1991 ( 96,422) (838,580) (165,464) (1,382,392)
Net income for 1992 - - - -
Stock conversion - - - -
Class B common stock
issued pursuant to
public offering - - - -
----------- ----------- ----------- -----------
Balance at
December 31, 1992 ( 96,422) ( 838,580) (165,464) ( 1,382,392 )
Net income for 1993 - - - -
Stock conversion - - - -
Cash dividends
Class A common stock
$.55 per share - - - -
Class B common stock
$.60 per share - - - -
----------- ----------- ----------- -----------
Balance at
December 31, 1993 ( 96,422) $ ( 838,580) (165,464) $(1,382,392)
=========== =========== ============ ===========
</TABLE>
The accompanying notes are an integral part of these statements.
25
<PAGE> 27
ORIOLE HOMES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
Principles of Consolidation
The accompanying Consolidated Financial Statements include the accounts of
Oriole Homes Corp. and all wholly-owned subsidiaries (the Company).
Significant intercompany accounts and transactions have been eliminated in
consolidation.
Operations
The Company, a Florida corporation, is a developer of single and
multi-family residential communities in southeast Florida. The Company's
receivables are primarily first mortgages which are collateralized by real
estate.
Revenue Recognition
The Company records revenues and profits from sales of real estate in
accordance with Statement of Financial Accounting Standards No. 66,
"Accounting for Sales of Real Estate."
Inventories
Land, house and condominium inventories are carried at cost, plus
accumulated development and construction costs (including capitalized
interest and real estate taxes) and estimated costs of completion. House
and condominium inventories which are completed and being held for sale
aggregate approximately $11,505,000 in 1993 and $8,165,000 in 1992. The
accumulated costs of land, houses and condominiums are not in excess of
estimated net realizable value.
Interest Capitalization
The Company follows the practice of capitalizing, for its homebuilding
operations, certain interest costs incurred on land under development and
houses and condominiums under construction. Such capitalized interest is
included in cost of house and condominium sales when the units are
delivered. During the years 1993, 1992, and 1991 respectively, the
Company capitalized interest in the amount of $9,997,908, $6,944,173 and
$7,147,527 and expensed as a component of cost of goods sold $10,036,456,
$7,685,554 and $5,318,689.
(continued)
26
<PAGE> 28
ORIOLE HOMES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER
INFORMATION - Continued
Depreciation
The Company provides for depreciation of property and equipment by the
straight-line and accelerated methods over the following estimated useful
lives of the various classes of depreciable assets:
<TABLE>
<S> <C>
Buildings 25 to 27 years
Furniture, fixtures and equipment 3 to 7 years
</TABLE>
Debt Issuance Costs and Unamortized Discount
Costs incurred in connection with obtaining debt have been deferred and
are being amortized by the interest method over the term of the debt.
Cash Equivalents
Cash equivalents consist of highly liquid investments with maturities of
three months or less when purchased.
Concentration of Credit Risk
The Company's cash and cash equivalents are placed mainly with one
institution with a high credit rating. The carrying amount approximates
fair value due to the short maturity of these instruments.
Net Income Per Share
Earnings per common share is computed by dividing net income by the
weighted average number of shares outstanding during each year: 4,625,524
shares in 1993; 4,334,650 shares in 1992; 3,793,524 shares in 1991.
Income Taxes
The Company has adopted Statement of Financial Accounting Standards No.
109 (FAS 109), which supersedes FAS 96. The effect of the adoption of
this Statement did not have a material effect on the Consolidated
Financial Statements.
27
<PAGE> 29
ORIOLE HOMES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE B - RECEIVABLES
Mortgage Notes
First and second mortgage notes receivable bear interest at rates ranging
from 6.25% to 14%. Minimum payments required on the first and second
mortgage notes in each of the five years subsequent to December 31, 1993
are: 1994 - $383,972; 1995 - $355,792; 1996 - $273,870; 1997 - $24,308
and 1998 - $24,918.
Officers
On December 9, 1992 the Company loaned $200,000 in the aggregate to three
of its officers. The principal and interest was paid on February 19,
1993.
NOTE C - LIFE INSURANCE
The Company purchased life insurance on the lives of two of its officers
and their spouses (officers) who own significant shares of common stock of
the Company. An irrevocably designated trustee of the officers is the
beneficiary. The premiums on the above policies during the year ended
December 31, 1993 were $213,784 and are classified as other assets.
Upon the death of the officers or termination of the policies, the Company
shall receive an amount equal to the aggregated premiums paid less any
policy loans and unpaid interest or cash withdrawals received by the
Company.
In connection with the policies, the Company has an option with the
officers to acquire all or any part of the Class A or Class B common stock
of the Company owned by such individuals at the market price of such
securities at the time of his or her death.
NOTE D - INVESTMENT IN AND ADVANCES TO JOINT VENTURE
On December 31, 1993 the Company entered into a joint venture agreement to
construct and sell homes. The joint venture is accounted for using the
equity method. The Company's investment and advances are as follows:
<TABLE>
<S> <C>
Advances $ 3,450,000
Investment 50,000
---------
$ 3,500,000
=========
</TABLE>
28
<PAGE> 30
ORIOLE HOMES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE E - MORTGAGE SUBSIDIARY
South Florida Residential Mortgage Company (SFRMC), a wholly-owned
subsidiary of the Company, provides mortgage financing services.
Summarized financial information for SFRMC is as follows:
<TABLE>
<CAPTION>
1993 1992
-------- --------
<S> <C> <C>
Assets
First mortgage notes receivable $ 909,288 $ 746,381
Other assets 28,855 36,180
Due from parent company 47,190 82,972
------- -------
Total assets $ 985,333 $ 865,533
======= =======
Liabilities and shareholders' equity
Other liabilities $ 84,231 $ 54,724
Shareholders' equity 901,102 810,809
------- -------
Total liabilities and shareholders'
equity $ 985,333 $ 865,533
======= =======
Revenues $ 413,218 $ 370,585
Expenses 268,448 294,542
------- -------
Income before provision for
income taxes 144,770 76,043
Provision for income taxes 54,477 28,615
------- -------
Net income $ 90,293 $ 47,428
======= =======
</TABLE>
NOTE F - REVOLVING LOAN AGREEMENT
During January 1993, the Company restructured its credit agreement by
retiring the outstanding 12 7/8% subordinated debentures and repaid the
bank's revolving line of credit and term loan. The restructure was
financed through the issuance of the 12 1/2% senior notes (see Note K).
In connection with the early retirement of the above debt an extraordinary
loss of $999,288, net of a tax benefit of $602,906, was incurred.
A new revolving loan agreement (line of credit) was entered into, with a
bank which provides up to $10,000,000 of borrowings. Interest on the loan
is at prime rate plus 1.5%. The line of credit is collateralized by
approximately $20,000,000 of the Company's inventory. The agreement
expires June 30, 1996.
(continued)
29
<PAGE> 31
ORIOLE HOMES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE F - REVOLVING LOAN AGREEMENT - Continued
The line of credit can be used to finance ongoing development and
construction of residential real estate and short-term capital needs and
will only require monthly interest payments. The credit agreement
contains typical restrictions and covenants, the most restrictive of which
include the following:
a. The Company shall maintain, at all times, its consolidated
tangible net worth at not less than $70,000,000.
b. The Company's ability to incur additional debt is restricted
by covenants in the agreement.
The Company has no compensating balance arrangements.
Average interest rates and balances outstanding, for revolving lines of
credit payable to banks, based on a weighted average are as follows:
<TABLE>
<CAPTION>
1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C>
Daily average outstanding
borrowings $ 2,223,701 $ 40,278,688 $ 26,195,946
Average interest rate during the
period 8.2% 7.6% 9.1%
Average interest rate at the end
of the period 7.5% 7.0% 7.5%
Maximum outstanding during the
year $ 35,000,000 $ 47,200,000 $ 50,850,000
</TABLE>
30
<PAGE> 32
ORIOLE HOMES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE G - MORTGAGE NOTES PAYABLE
Mortgage notes payable at December 31, 1993 and 1992, are summarized as
follows:
<TABLE>
<CAPTION>
1993 1992
---------- ----------
<S> <C> <C>
Mortgage note, interest at 9.75%, requires
monthly interest payments of $56,062 with
principal balance due on October 1, 1994;
collateralized by land, buildings and
equipment $ 6,900,000 $ 6,900,000
Mortgage note, interest at 9.2%, requires
monthly payments of $57,510, including
interest, matures on May 1, 1995;
collateralized by land, buildings, equipment
and rents 7,499,479 7,499,639
---------- ----------
$ 14,399,479 $ 14,399,639
========== ==========
</TABLE>
Minimum payments required in periods subsequent to December 31, 1993, are as
follows:
<TABLE>
<S> <C>
1994 $ 6,900,000
1995 7,499,479
---------
$ 14,399,479
= ==========
</TABLE>
NOTE H - INCOME TAXES
Deferred income taxes and benefits are provided for significant income and
expense items recognized in different years for tax and financial
reporting purposes. Temporary differences which give rise to significant
deferred tax assets (liabilities) follow:
<TABLE>
<CAPTION>
1993 1992
--------- ---------
<S> <C> <C>
Warranties on houses and condominiums $ 851,836 $ 694,916
Percentage of completion 172,836 314,389
Uniform cost capitalization 286,863 364,074
Other items - 55,585
--------- ---------
Total deferred tax assets 1,311,535 1,428,964
--------- ---------
Installment sales (28,155) (39,093)
Deferred expenses (1,855,088) (1,995,987)
Accelerated depreciation (268,993) (256,540)
Other items (10,207) -
----------- ----------
Total deferred tax liabilities (2,162,443) (2,291,620)
----------- ----------
Net deferred tax liability $ (850,908) $ (862,656)
=========== ==========
</TABLE>
(continued)
31
<PAGE> 33
ORIOLE HOMES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE H - INCOME TAXES - Continued
The Company files consolidated income tax returns. The components of the
provision for income taxes are as follows:
<TABLE>
<CAPTION>
Current Deferred Total
-------------- ------------- -------------
<S> <C> <C> <C>
Year Ended December 31, 1993,
Federal $ 1,478,474 $ (3,500) $ 1,474,974
State 254,391 (8,248) 246,143
--------------- -------------- ---------------
$ 1,732,865 $ (11,748) $ 1,721,117
=============== ============== ===============
Year Ended December 31, 1992,
Federal $ 2,814,865 $ (137,691) $ 2,677,174
State 467,988 (18,544) 449,444
--------------- -------------- ---------------
$ 3,282,853 $ (156,235) $ 3,126,618
=============== ============== ===============
Year Ended December 31, 1991,
Federal $ 2,998,234 $ (332,545) $ 2,665,689
State 499,553 (43,484) 456,069
--------------- -------------- ---------------
$ 3,497,787 $ (376,029) $ 3,121,758
=============== ============== ===============
</TABLE>
The reasons for the difference between the total tax expense and the
amount computed by applying the statutory federal income tax rate to
income before income taxes are as follows:
<TABLE>
<CAPTION>
1993 1992 1991
--------------- ------------- ------------
<S> <C> <C> <C>
Provision for taxes at statutory
rates (34%) $ 1,483,147 $ 2,780,300 $ 2,821,519
State income taxes, net of federal
tax benefit 158,193 296,633 301,005
Other 79,777 49,685 (766)
--------------- --------------- -------------
Tax expense $ 1,721,117 $ 3,126,618 $ 3,121,758
=============== =============== ===============
</TABLE>
(continued)
32
<PAGE> 34
ORIOLE HOMES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE H - INCOME TAXES - Continued
Deferred income tax provisions result from temporary differences in the
recognition of revenues and expenses for tax and financial statement
purposes. The sources of these differences are as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------------------
1993 1992 1991
-------------- ------------ --------------
<S> <C> <C> <C>
Net effect of development and
other costs $ (80,256) $ (171,402) $ (290,737)
Net profit realized, applicable to
sales reported on the installment
basis for tax purposes (10,938) (79,355) (78,508)
Net effect of decrease (increase)
in reserve for warranties on
houses and condominiums (156,920) 196,022 (100,222)
Net effect of uniform cost
capitalization and percentage
of completion 218,765 (102,527) 110,508
Net effect of depreciation 17,601 1,027 (17,070)
------------- -------------- --------------
$ (11,748) $ (156,235) $ (376,029)
============== ============== ==============
</TABLE>
NOTE I - CUSTOMER DEPOSITS
Certain customer deposits, pursuant to statutory regulations of the State
of Florida or by agreement between the buyer and seller, are held in
segregated bank accounts. At December 31, 1993 and 1992, cash in the
amounts of $385,320 and $954,744, respectively, was so restricted.
The Company entered into an escrow agreement with a bank and the Division
of Florida Land Sales and Condominiums which allowed the Company to use
customer deposits which were previously maintained in an escrow account.
Deposits of up to $4,000,000 in 1993 and $3,000,000 in 1992, which could
be released to the Company, are guaranteed by performance bonds
aggregating $4,500,000 for 1993 and $2,500,000 for 1992.
33
<PAGE> 35
ORIOLE HOMES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE J - ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities include the following:
<TABLE>
<CAPTION>
1993 1992
--------------- ---------------
<S> <C> <C>
Accrued interest $ 4,010,417 $ 1,102,216
Reserve for warranties on houses and
condominiums 2,263,715 1,846,709
Other accrued liabilities 883,618 667,197
--------------- ---------------
$ 7,157,750 $ 3,616,122
=============== ===============
</TABLE>
NOTE K - DEBENTURES AND SENIOR NOTES
Debentures are comprised as follows:
<TABLE>
<CAPTION>
1993 1992
--------------- ---------------
<S> <C> <C>
12 1/2% senior notes due January 15,
2003 with an effective interest rate of
13.02% (a) $ 70,000,000 $ -
12 7/8% subordinated debentures due
July 15, 2000 with an effective interest
rate of 14.35% (b) - 25,000,000
Unamortized discount (1,812,306) (1,234,090)
Cost of bonds held in treasury - (812,000)
Sinking fund payment - (5,625,000)
--------------- ---------------
$ 68,187,694 $ 17,328,910
=============== ===============
</TABLE>
(a) On January 13, 1993, the Company issued 12 1/2% senior notes
("Notes"), due January 15, 2003. The Notes have a face value
$70,000,000 and were issued at a discount of $1,930,000. The
notes are senior unsecured obligations of the Company subject to
redemption at the Company's option on or after January 15, 1998
at 105% of the principal amount and thereafter at prices
declining annually to 100% of the principal amount on or after
January 15, 2001.
(b) On July 15, 1980, the Company issued 12 7/8% subordinated
debentures due July 15, 2000. The debentures had a face value
of $25,000,000 and were issued at a discount of $2,412,500. The
debentures were subordinated in right of payment to all senior
indebtedness and were subject to redemption at 100% of the
principal amount. On February 16, 1993, the Company's 12 7/8%
subordinated debentures were called for redemption at par (See
Note F).
(continued)
34
<PAGE> 36
ORIOLE HOMES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE K - DEBENTURES AND SENIOR NOTES - Continued
The indenture under which senior notes were issued requires sinking fund
payments of $17,500,000 on January 15, 2001 and January 15, 2002. The
indenture, contains provisions restricting the amount and type of
indebtedness the Company may incur, the purchase by the Company of its
stock and the payment of cash dividends. At December 31, 1993,
approximately $1,165,376, of consolidated retained earnings were
unrestricted as to payment of cash dividends under the indenture.
NOTE L - STOCK OPTIONS
Under the Company's 1984 Employees' Stock Option Incentive Plan (the
"Plan"), 100,000 shares of Class B common stock are reserved for issuance
upon exercise of stock options. The Plan is designed as a means to retain
and motivate key employees. The Board of Directors administers and
interprets the Plan and is authorized to grant options thereunder to all
key employees of the Company (approximately 20 persons), including
officers and directors who are employees of the Company.
The Plan provides for the granting of incentive stock options (as defined
in Section 422 of the Internal Revenue Code) on such terms and at such
prices as may be determined by the Board of Directors, except that the per
share exercise price of incentive stock options cannot be less than the
mean between the high and low sales prices of the Class B common stock on
the date of the grant. Each option is exercisable after the period or
periods specified in the option agreement, but no option may be exercised
more than five years after the date of the grant. No participant may be
granted options for more than an aggregate of 5,000 shares. Options
granted under the Plan are not transferable other than by will or by the
laws of descent and distribution. Options under the Plan may not be
granted after April 26, 1994. No options have been granted to date under
the Plan.
NOTE M - COMMON STOCK
During the second quarter of 1992 the Company issued 832,000 shares of
Class B common stock, par value $.10 per share, for $10.25 per share. The
net proceeds from the sales were $7,978,880 after expenses, underwriting
discounts and commissions.
(continued)
35
<PAGE> 37
ORIOLE HOMES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE M - COMMON STOCK - Continued
Class A common stock and Class B common stock have identical dividend
rights with the exception that the Class B common stock is entitled to a
$.025 per share additional dividend. Class A common stock is entitled to
one vote per share, while Class B common stock is entitled to one-tenth
vote per share. Holders of Class B common stock are entitled to elect 25%
of the Board of Directors as long as the number of outstanding shares of
Class B common stock is at least 10% of the number of outstanding shares
of both classes of common stock. At the option of the holder of record,
each share of Class A common stock may be converted at any time into one
share of Class B common stock.
NOTE N - LEASING ARRANGEMENTS
Rental properties
In connection with certain housing developments, the Company leases
recreation facilities. The Company also leases rental units. These leases
are accounted for as operating leases.
The following schedule provides an analysis of the Company's property
under operating leases (included in property and equipment) by major
classes as of December 31, 1993 and 1992:
<TABLE>
<CAPTION>
1993 1992
--------- ---------
<S> <C> <C>
Land $ 7,172,279 $ 7,184,696
Buildings 23,130,421 23,237,989
Furniture, fixtures and equipment 1,075,321 972,173
---------- ---------
31,378,021 31,394,858
Less accumulated depreciation 6,374,930 5,422,403
---------- ---------
$ 25,003,091 $ 25,972,455
========== ==========
</TABLE>
The following is a schedule of approximate future minimum rental income
required under these leases as of December 31, 1993:
<TABLE>
<S> <C>
1994 $ 2,483,000
1995 638,000
1996 637,000
1997 637,000
1998 637,000
Thereafter 55,250,000
----------
$ 60,282,000
==========
</TABLE>
36
<PAGE> 38
Oriole Homes Corp. and Subsidiaries
NOTES TO CONOSOLIDATED FINANCIAL STATEMENTS - CONTINUTED
NOTE N - LEASING ARRANGEMENTS - Continued
Offices and Warehouse
The Company leases its offices and warehouse under lease agreements
extending through 1997, accounted for as operating leases. The following
is a schedule, by years, of the approximate future minimum rental payments
as of December 31, 1993:
<TABLE>
<S> <C>
1994 $ 199,922
1995 199,922
1996 162,007
1997 134,922
--------------
$ 696,773
==============
</TABLE>
Total rent expense for the years ended December 31, 1993, 1992 and 1991
amounted to $199,922, $199,922 and $113,600, respectively.
NOTE O - DEFERRED COMPENSATION PLAN
The Company has a defined contribution plan established pursuant to
Section 401(K) of the Internal Revenue Code. Employees contribute to the
plan a percentage of their salaries, subject to certain dollar
limitations, and the Company matches a portion of the employees'
contributions. The Company's contribution to the plan amounted to
approximately $60,851 in 1993, $56,962 in 1992 and $59,292 in 1991.
NOTE P - CONTINGENCIES
In January 1993, an action was commenced against the Company, alleging
that the Company breached an agreement to pay a commission in connection
with the $70,000,000 12 1/2% senior notes debt offering. The complaint
seeks up to $350,000 in compensatory damages and up to $500,000 in
punitive damages from the Company. The Company believes that the suit is
without merit, and the Company intends to litigate vigorously the asserted
claims, and, in the opinion of management, this litigation will not have a
material effect on the results of operations or the financial condition of
the Company.
37
<PAGE> 39
REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
Board of Directors
Oriole Homes Corp.
We have audited the accompanying consolidated balance sheets of Oriole Homes
Corp. and Subsidiaries as of December 31, 1993 and 1992, and the related
consolidated statements of income, changes in shareholders' equity, and cash
flows for each of the three years in the period ended December 31, 1993. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to the above
present fairly, in all material respects, the consolidated financial position
of Oriole Homes Corp. and Subsidiaries at December 31, 1993 and 1992, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1993, in conformity with generally accepted
accounting principles.
GRANT THORNTON
Miami, Florida
February 4, 1994
38
<PAGE> 40
ITEM 9 DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
This item is not applicable.
PART III
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item of this part is incorporated by
reference to Registrant's definitive proxy statement for the Annual Meeting of
Shareholders.
ITEM 11 EXECUTIVE COMPENSATION
The information required by this item of this part is incorporated by
reference to Registrant's definitive proxy statement for the Annual Meeting of
Shareholders.
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item of this part is incorporated by
reference to Registrant's definitive proxy statement for the Annual Meeting of
Shareholders.
ITEM 13 CERTAIN RELATIONSHIP AND RELATED TRANSACTIONS
The information required by this item of this part is incorporated by
reference to Registrant's definitive proxy statement for the Annual Meeting of
Shareholders.
PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
(1) 1. Financial Statements
The following consolidated financial statements of Oriole
Homes Corp. and subsidiaries are included in Part II of this
annual report and in the Company's 1992 Annual Report to
Shareholders.
Consolidated balance sheets as of December 31, 1993 and 1992.
Consolidated statements of income for the three years ended
December 31, 1993. Consolidated statements of cash flows for
the three years ended December 31, 1993.
Consolidated statements of changes in shareholders' equity for
the three years ended December 31, 1993.
Notes to consolidated financial statements.
39
<PAGE> 41
Reports of independent certified public accountants.
Selected Quarterly Financial Data for the years ended December 31,
1993 and 1992 included in the Company's 1993 Annual Report to
Shareholders which is incorporated by reference as Part II of this
annual report.
2. Financial Statement Schedules
The following financial statement schedules of Oriole Homes
Corp. and subsidiaries are included in Part IV of this report:
Reports of independent certified public accountants.
Schedule X - Supplementary income statement
information.
All other schedules are omitted because they are not applicable or not
required or because the required information is included in the
consolidated financial statements or notes thereto.
<TABLE>
<CAPTION>
3. Exhibits Page No.
--------
<S> <C>
3.1 Articles of Incorporation of Registrant *
3.2 By-Laws of Registrant *
4.1 Form of indenture between the Registrant and Sun First National Bank of Orlando, as Trustee (Filed as
Exhibit 2.3) to the Registrant's Amendment No. 1 to Form S-7 Registration Statement filed on July 22,
1980.
10.1 Lease Agreement, dated May 7, 1991 between Oriole Homes Corp. and Arbors Associates, Ltd. *
10.3 Mortgage Note payable to Home Life Insurance Company on October 1, 1994 *
10.4 Mortgage Modification and Mortgage Note payable to The Manufacturers Life Insurance Company on May 1, *
1995.
10.6 Registrant's 401(k) Defined Contribution Benefit Plan *
10.7 Joint Venture between the Company and Regency Homes, Inc. dated December 31, 1993.
22.1 List of Registrant's Subsidiaries (Filed as Exhibit 22 to the Company's Form 10-K for the fiscal year
ended December 31, 1990 and incorporated herein by reference).
(*) Filed as exhibits to the Registration Statement of the Registrant on Form S-2 declared effective on
January 13, 1993. (File No. 33-51680).
(2) Reports on Form 8-K
There were no reports on Form 8-K for the three months ended December 31, 1993.
</TABLE>
40
<PAGE> 42
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
ORIOLE HOMES CORP. AND SUBSIDIARIES
<TABLE>
<CAPTION>
COLUMN A COLUMN B
<S> <C>
CHARGED TO COSTS AND EXPENSES
ITEM
</TABLE>
<TABLE>
<CAPTION>
1993 1992 1991
-------------- --------------- ---------------
<S> <C> <C> <C>
Maintenance and Repairs $ 694,237 $ 437,159 $ 714,887
Taxes, other than payroll $ 1,683,925 $ 1,553,648 $ 1,641,671
and income taxes
Advertising Costs $ 2,010,459 $ 1,750,935 $ 1,995,412
</TABLE>
41
<PAGE> 43
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act
of 1934, the Registrant has duly caused this Annual Report to be Signed on
its behalf by the undersigned, thereunto duly authorized.
ORIOLE HOMES CORP.
<TABLE>
<S> <C> <C>
DATE March 2, 1994 s/R. D. Levy
------------- ------------
R.D. Levy, Chairman of the Board
Chief Executive Officer, Director
DATE March 2, 1994 s/A. Nunez
------------- ----------
A. Nunez, Senior Vice President,
Treasurer, Chief Financial Officer,
Chief Accounting Officer, Director
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934 this
Annual Report has also been signed by the following persons on behalf of
the Registrant in the capacities indicated.
MEMBER OF THE BOARD OF DIRECTORS
<TABLE>
<S> <C> <C>
DATE March 2, 1994 s/Harry A. Levy
------------- ---------------
Harry A. Levy, Director
DATE March 2, 1994 s/E. E. Hubshman
------------- ----------------
E.E. Hubshman, Director
DATE March 2, 1994 s/Mark A. Levy
------------- --------------
Mark A. Levy, Director
DATE March 2, 1994 s/Eugene H. Berns
------------- -----------------
Eugene H. Berns, Director
DATE March 2, 1994 s/Donald C. McClosky
------------- --------------------
Donald C. McClosky, Director
DATE March 2, 1994 s/Richard E. Deems
------------- ------------------
Richard E. Deems, Director
DATE March 2, 1994 s/Paul R. Lehrer
------------- ----------------
Paul R. Lehrer, Director
</TABLE>
42
<PAGE> 1
JOINT VENTURE AGREEMENT
THIS JOINT VENTURE AGREEMENT made and entered into this 31st day of
December, 1993, by and between Regency Development, Inc., a Florida corporation
(the "Regency"), a wholly-owned subsidiary of Regency Homes, Inc., a Florida
corporation, and Oriole Joint Venture, Limited, a Florida limited partnership
(the "Oriole Subsidiary"), of which Oriole Limited, Inc., a Florida corporation
is the general partner. Oriole Limited, Inc., is a wholly-owned subsidiary of
Oriole Homes Corp.
W I T N E S S E T H:
WHEREAS, Regency has acquired rights to certain real property referred
to herein as Emerald Springs, but requires additional capital to purchase and
develop the Emerald Springs property; and
WHEREAS, Oriole Homes Corp. through its affiliates desires to provide
capital funding to Regency; and
WHEREAS, Regency and Oriole are entering into this agreement to define
their respective rights and obligations; and
WHEREAS, the parties are entering into this agreement for the
development of the real property described in Exhibit "A" and to construct
dwelling units thereon, and to develop, and sell the dwelling units and/or
developed sites to others.
<PAGE> 2
NOW THEREFORE, the parties hereto hereby agree as follows:
SECTION 1 - The Joint Venture and its Purpose.
A. Name. The Joint Venture shall henceforth be known as "Emerald
Springs at Silver Lakes." The Joint Venture will prepare, publish and file a
fictitious name registration in accordance with the laws of the State of
Florida.
B. Limitation of Joint Venture. The parties hereto are
associating themselves in this Joint Venture solely for the purposes hereof,
and shall not be considered partners, nor shall the entity be considered a
partnership, except for federal income tax purposes. No party shall have any
right or authority to bind any other party or to incur any obligations on
behalf of the Joint Venture except as expressly provided herein.
C. Purpose. The initial purpose of this Joint Venture shall be to
develop the real property known to the parties as Emerald Springs a legal
description of which is attached hereto as Exhibit "A" and to construct and
sell dwelling units thereon (collectively, the "dwelling units").
Regency grants to the Joint Venture the rights to Emerald Springs.
Any property acquired in the names of the Joint Venture shall be
referred to herein as the "Premises".
-2-
<PAGE> 3
Emerald Springs may be referred to herein as the "Project".
In the event that the Joint Venture shall sell, transfer, or convey any
of the Premises in exchange for other real property (the "Acquired Property")
such Acquired Property shall be developed in accordance with the terms and
conditions of this Joint Venture Agreement.
In addition, the purpose of the Joint Venture shall include engaging in
all activities reasonable or necessary to accomplish the construction and sale
of the dwelling units, at Emerald Springs.
D. Place of Business. Location of the principal place of business
shall be Regency Homes, Inc., 2826 University Drive, Coral Springs, Florida
33065.
E. Term. The Joint Venture shall continue until December 31,
1998, unless earlier terminated. The Joint Venture shall not be terminated by
the bankruptcy or insolvency of any party hereto in accordance with Section 11
hereof or the assignment by a party of its interest herein pursuant to Section
13 hereof.
SECTION 2 - Contributions and Lines of Credit
A. Contributions to Date.
Oriole has made a contribution of $50,000 as capital and $1,350,000 as
a loan to the Joint Venture. Regency has made
-3-
<PAGE> 4
a contribution of $5,000 as capital and will make a $135,000 loan to the Joint
Venture on or before May 15, 1994.
B. Future Capital Requirements of the Joint Venture.
1. The Joint Venture may be required to provide certain
performance bonds and other bonds and sureties required by various governmental
authorities. Regency hereby agrees that it will provide all bonds or letters
of credit required to satisfy such obligations or shall cause such bonds or
letters of credit to be provided at the expense of the Joint Venture.
2. Regency has used its best efforts including its corporate
guarantees to arrange for acquisition, development, take-out, and working
capital loans on terms that are mutually satisfactory to the Joint Venturers in
amounts sufficient to develop the Project.
SECTION 3 - Obligations and Compensation of Regency.
A. Pre-Construction Responsibilities.
1. Regency has obtained the approval of all appropriate
governmental authorities necessary to obtain development and building permits
for the Project. Oriole Subsidiary has approved all site plans, schematic
drawings, plans and specifications, working drawings, and marketing and
economic feasibility studies as provided for in Section 3(A)(3) hereof (the
"Project Documentation").
-4-
<PAGE> 5
2. Regency, on behalf of the Joint Venture, has prepared, or
cause to be prepared, all other documentation and plans, as is reasonably
required to complete the Project and Oriole Subsidiary has approved such
documentation. Regency has obtained all governmental approvals therefor. The
cost of all documentation, and the obtaining of all approvals, is an expense of
the Joint Venture.
B. Construction Obligations.
1. Regency shall be responsible for coordinating, supervising,
inspecting, expediting and controlling the construction of the Project to
completion in accordance with this Joint Venture Agreement, including but not
limited to: (a) obtaining all necessary governmental approvals not heretofore
obtained; (b) employing qualified and competent general contractor, contractors
and subcontractors, job superintendent, and other personnel as necessary; (c)
controlling and supervising ongoing land development, including landscaping,
sewer, water, utilities, and other infrastructure; and (d) overseeing the
construction of the Project in accordance with the Project Documentation.
2. Regency has provided Oriole Subsidiary with a full and
complete itemized budget (the "Approved Project Budget") setting forth all of
the anticipated costs to be incurred in order to construct and market, and sell
the dwelling units
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thereon. This budget has been approved by Oriole Subsidiary and shall be
designated the "Approved Project Budget" which is attached hereto as Exhibit
"B". The Approved Project Budget shall be revised as required according to
Section 3(B)(4)(ii)(c) hereof, or when development plans have materially
altered, and when so revised shall be submitted to Oriole Subsidiary for
approval. This process shall continue so that there will at all times be a
current Approved Project Budget.
3. The budget shall provide for all items required to acquire and
develop the Project, and construct and sell the dwelling units including, but
not limited to, the following: land costs, engineering, architectural, market
and feasibility studies, attorneys and accountant fees, permits, licenses,
building supplies and labor, debt service of principal and interest, job
superintendent, sales manager and staff, advertising and marketing expenses,
cost of sales center, furnishing of model units, and travel and direct expenses
incurred by Regency, all of which shall be approved expenses of the Joint
Venture.
The parties hereby agree that with respect to travel and other direct
expenses incurred by Regency and paid for by the Joint Venture, such items
shall be reviewed and be a part of the Approved Project Budget. When
appropriate, such expenses shall be allocated pro rata among the entities
benefiting from such
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expenses, so that the Joint Venture pays only its proportionate share of such
costs.
4. Regency shall be specifically responsible for the following
services:
(i) Compliance with Law. Regency shall give all notices and
utilize its best efforts to ensure compliance with all laws, ordinances, rules
and regulations bearing upon the Project.
(ii) Construction. (a) Regency shall oversee the construction
of the Project so that the Project is completed in the most expeditious and
economical manner consistent with projected and actual sales, the Approved
Project Budget, the Project documentation, good workmanship and the best
interests of the Joint Venture.
b) The Joint Venturers shall keep such records as are
reasonably necessary for: (i) fulfillment of their responsibilities under this
Agreement and (ii) maintenance of full and complete accounting records together
with such documentation as may be necessary for the proper financial management
of the Project. The Joint Venturers shall provide each other with periodic
reports, a list of which is attached hereto as Exhibit "C" and incorporated
herein by reference, which list indicates the Joint Venturers responsible for
each report.
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c) All work and materials on the Project shall be
performed, and obtained, respectively pursuant to appropriate contracts at
prices designated in the Approved Project Budget for such phase. In order to
facilitate the development process and avoid unnecessary delays, the parties
hereby agree as follow:
Upward cost deviations that reduce the projected profits of the
Project, prior to any distributions of fees, by less than 25% in the aggregate,
may be approved by Regency without the consent of Oriole Subsidiary. Cost
deviations resulting from borrowings or any other budget item subject to
floating, rather than fixed-rate terms, shall not be counted in computing the
limit. In the event that upward cost deviations exceed the aforesaid
limitation, then the parties shall mutually determine a new Approved Project
Budget. The new Approved Project Budget shall then be subject to a 25%, in the
aggregate, limitation on upward cost deviations that result in a reduction of
profit of the Project, prior to a distribution of fees. In all such situations
Regency shall notify Oriole Subsidiary as soon as reasonably possible after it
becomes aware of any actual or potential cost overruns from the Approved
Project Budget.
(iii) Marketing Supervision. Regency shall be entitled to
receive a marketing supervision fee, (the "Marketing Supervision Fee") for
services in developing programs for the marketing of dwelling units and
supervising the overall marketing
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and sales program. Regency's Marketing Supervision Fee shall be an amount
equal to six (6%) percent of the gross sale price of all or other dwelling
units sold, and shall be earned and paid to Regency on the last day of the
month following the month of closing of each such dwelling unit or developed
lot.
5. Insurance. Regency, on behalf of the Joint Venture, shall
require each contractor and subcontractor employed on the Project to procure
and maintain, at such contractor's or subcontractor's own cost and expense,
during the performance of such labor: (i) a policy of Workers' Compensation
Insurance for the protection of such contractor's or subcontractor's employees,
including executive, managerial, and supervisorial employees, and a
comprehensive liability policy for personal injury and property damage caused
by such contractor or subcontractor or its officers, agents or employees in an
amount not less than $300,000 in the aggregate and $300,000 per occurrence with
the Joint Venture, Regency and Oriole Subsidiary named as additional insureds.
Further, Regency shall obtain through competitive bidding from
insurance companies having a rating of A+ according to Best's Insurance Guide
and maintain in the name of the Joint Venture during the course of this
Agreement:
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(i) a policy of Worker's Compensation Insurance for the
protection of such of its employees as are engaged in any work required to be
performed hereunder;
(ii) a comprehensive liability policy insuring the Joint
Venture, Regency, and Oriole Subsidiary and their respective officers and
directors for personal injury and property damage in an amount of not less
than $2,000,000 for bodily injury and $1,000,000 for property damage per
occurrence; and
(iii) builder's risk insurance and fire and extended coverage
insurance as required to insure the Project being constructed and all material
delivered to the site for their full insurable value against loss or
destruction during the course of construction and upon completion by fire,
elements, vandalism or malicious mischief, and other risks generally covered by
such insurance. The loss payable endorsement under such policy shall name any
beneficiary or a deed of trust or comparable mortgage instrument providing
interim financing; and
(iv) fidelity bonds on all employees with authority to execute
checks and receive, hold, and disburse funds on behalf of the Joint Venture.
6. Payments for Labor and Materials. Regency shall require lien
releases for labor performed and materials furnished
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to the Project. The bills shall be approved by Regency in accordance with the
Approved Project Budget and promptly paid.
7. Compensation to Regency.
As a fee for its services to the Project Regency shall receive a
fee based upon the net profits from the Project. Regency shall be entitled to
ninety (90%) percent of the net profits from the Project after the payment of
the fees to Oriole Subsidiary as set forth in Section 4 and the marketing fee
to Regency as set forth in Section 4(iii). It is understood that in the event
their is no profits after the payment of the fees to Oriole Subsidiary, there
will not be fees to Regency.
SECTION 4 - Obligations and Compensation of Oriole
SUBSIDIARY.
Oriole Subsidiary must diligently review and approve pertinent
documents, attend management meetings, and use its best efforts to assist the
Joint Venture as provided in Section 6 hereof. In the event that Regency
submits budget revisions, plans, specifications, development proposals or other
documents hereunder to Oriole Subsidiary, Oriole Subsidiary shall promptly
review same, and respond to Regency within ten (10) business days indicating
their approval or disapproval, all subject to Section 5(D) hereof. Oriole
Subsidiary holds itself available to consult with Regency and the Joint Venture
on construction activities and marketing efforts.
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As a fee for these services Oriole Subsidiary shall receive from the
Project $4,000 from the sale of each developed lot or dwelling unit which fee
shall be paid on the last day of the month following the month of closing of
each dwelling unit or developed lot.
SECTION 5 - Management.
A. Authority. Except as may be specifically provided otherwise
herein, Regency shall have exclusive authority to direct and manage the
business of this Joint Venture on a day-to-day basis. Notwithstanding anything
in the foregoing to the contrary, Oriole Subsidiary retains management
responsibilities of a critical and material nature. All of the following
actions shall require unanimous approval of Regency and the Oriole Subsidiary.
1. Sell, exchange, lease, assign or transfer any interest in the
Project or grant any options with respect to the Project except for sales in
accordance with sales prices and terms previously approved by Oriole
Subsidiary;
2. Hypothecate or mortgage the Project or any portion thereof;
3. Authorize any work for the construction of improvements or
supply of material for the Project except in
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accordance with the limitations imposed by Section 3(B)(2) hereof; and/or
4. Make any assignment for the benefit of creditors.
B. Time Limitations. Regency shall devote such of its time and
attention to its responsibilities under this Agreement as is required to
diligently manage the business of this Joint Venture.
C. Meetings and Review Procedure. The Joint Venturers shall meet
not less often than monthly, notice of which shall be given by Regency at least
three (3) business days prior to such meeting date. At such meeting, Regency
will provide current project information, review any revisions to, or
deviations from, the Approved Project Budget, and any plans or agreements which
by the terms of this Joint Venture Agreement require the approval of Oriole
Subsidiary, and the progress and problems, if any, with respect to any
contractor or subcontractor. In addition, all marketing and financing
approvals required pursuant to Section 6 hereof shall be made at such time,
provided that the information required to make such decisions has been provided
to Oriole Subsidiary not less than ten (10) business days prior to such
meeting.
D. Approval. Whenever approval of a Joint Venturer is required
under the terms of this Agreement, such approval shall not be unreasonably
withheld, and shall be promptly given. If no
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response is given within ten (10) business days, approval shall be deemed to
have been given.
Oriole Subsidiary hereby acknowledges and agrees that management
decisions for real estate development must frequently be made quickly in order
to be effectively implemented. It is the intention of the parties that
whenever possible Oriole Subsidiary will render its approval or disapproval as
promptly as possible, but in no event later than ten (10) business days after
such approval is requested. When Regency identifies a particular approval as
requiring expedited decision making, Oriole Subsidiary hereby agrees to use its
best efforts to respond as diligently and quickly as possible, and to take
whatever actions can be taken to accelerate its review and approval process.
SECTION 6 - Marketing and Financing.
Regency has provided and Oriole Subsidiary has approved the marketing
program, pricing, financing, budget and policies to be followed in connection
with selling units within the Project. Such programs and policies shall be
periodically reviewed by the Joint Venturers. It is contemplated that the sale
of the dwelling units may involve employment by the Joint Venture of outside
marketing consultants, real estate agents, real estate brokers, or other
professionals involved in marketing, financing, and selling dwelling units, all
of whom may be retained to
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evaluate or implement the marketing programs or policies of the Joint Venture.
Regency and Oriole Subsidiary shall use their respective best efforts
to obtain permanent financing for the purchase of units within the Project at
then current market rates. All marketing and financial commitments have been
approved by both Regency and Oriole Subsidiary.
SECTION 7 - Books and Records
The books and records of the Joint Venture shall be maintained by Regency
at the expense of the Joint Venture. Such reports shall be prepared on
an annual basis in accordance with generally accepted accounting principles.
Oriole Subsidiary or its representatives shall have the right during normal
business hours at all times to inspect, copy and audit such books of account
and all other records of the Joint Venture.
In order to insure an orderly and timely flow of financial information,
the parties have agreed on the data and reports to be transmitted and the time
period in which such data and reports are to be transmitted, such agreement
being evidenced by Exhibit "C", which is attached hereto and incorporated
herein by reference.
Within 75 days subsequent to the close of each Joint Venture fiscal
year (December 31), the Joint Venture shall provide
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federal and state Partnership Income Tax Returns. Within 45 days subsequent to
the close of the audit year the Joint Venture shall provide audited financial
statements prepared by the certified public accountants of the Joint Venture
(which is presently Grant Thornton), who shall be selected by Oriole
Subsidiary. The Joint Venture shall also furnish to the parties a final
audited statement on or before 45 days after termination of the Joint Venture.
All audited financial statements of the Joint Venture shall be prepared in
accordance with generally accepted accounting principles using the accrual
method of accounting. Any profits shall be recognized for accounting purposes
at the time of closing of the sale of the dwelling units being sold by the
Joint Venture. In each tax return filed on behalf of the Joint Venture, all
optional methods of treatment and all possible elections shall be so made as to
result in the lowest taxable income for such return then filed. All expenses,
costs and fees of the certified public accountants of the Joint Venture shall
be an expense of the Joint Venture.
All monies received by the Joint Venture shall be deposited in a Joint
Venture bank account or accounts and all payments to be made by the Joint
Venture shall be made only by checks drawn on said account or accounts. Such
checks contemplated by the Pre-Approved Budget may be signed by a designated
representative from Regency. All checks outside of the Pre-Approved Budget
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shall be signed by both a designated representative from Regency and the Oriole
Subsidiary.
Notwithstanding the foregoing, Sun Bank/South Florida, N.A. may honor,
rely and pay any checks presented for payment drawn on the Joint Venture
Account at Sun Bank/South Florida, N.A. signed by any one person designated on
its signature card.
SECTION 8 - Project Expenses
A. All costs and expenses incurred by the Joint Venturers in
connection with their responsibilities hereunder and in connection with the
construction of the Project and sale of the dwelling units including, but not
limited to, marketing fees, advertising, sales promotion, sales presentation,
maintenance of a trailer, on-site trailer and personnel expenses, insurance,
taxes, commissions, and debt service on the construction loan shall be expenses
of the Joint Venture. No Joint Venturer nor any of their employees or agents
shall receive any salary, fees, commissions, overhead payments or other
compensation, other than specifically provided in this Joint Venture Agreement,
for any services rendered in connection with the Project.
B. In connection with the development of the Project, and sale of
the dwelling units, Regency may retain on behalf of the Joint Venture a job
superintendent, project manager, accountants, sales manager, salesmen, and
similar personnel, all at the cost of the Joint Venture. Oriole Subsidiary
hereby acknowledges that Regency or its affiliates are engaged in the
development of additional projects in the South Florida area. As a result,
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whenever appropriate and possible, Regency shall divide certain expenses,
including personnel, among several projects in proportion to the use by, or
benefit to, the respective projects of such personnel or other items, thereby
minimizing cost to this Joint Venture.
Regency shall be entitled to reimbursement for direct travel and other
expense, incurred in connection with the performance of its obligations
hereunder, and it is entitled to reimbursement for general and administrative
overhead and executive salaries, including the salary of Ben L. Martz or his
successor(s) up to the amounts provided in the Approved Project Budget.
SECTION 9 - Preferred Return on Loans.
Regency and Oriole Subsidiary shall be paid a quarterly return of ten
(10%) percent per annum on the loan amounts advanced to the Joint Venture.
The loans shall be evidenced by promissory notes in the form of Exhibit "D".
Regency Homes, Inc. shall guarantee and, if due, will promptly pay such
interest amounts.
SECTION 10 - Distributions
A. Upon the request of either Joint Venturer, each Joint Venturer
shall be entitled to receive, for each fiscal year of the Joint Venture, an
amount equal to fifty percent (50%) of its share of the cumulative profit of
the Joint Venture. Said distributed amount shall be reduced by amounts
previously paid to the Joint Venturers pursuant to this Section 10(A). If,
as a
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result of said reduction, the distributed amount is less than zero, then the
Joint Venturer with such negative balance agrees to repay to the Joint Venture
an amount sufficient to bring the distributed amounts to a zero balance. In no
event shall the amount of the repayment exceed the amounts distributed to such
Joint Venturer pursuant to this Section 10(A). Said amounts shall be repaid
within fifteen (15) days after the determination that a balance exists
requiring the Joint Venturer to bring the distributed amounts to a zero
balance.
B. Any net cash available for distribution held by the Joint Venture
and not required for the purposes of its business, as computed at the end of
the Project, derived from the proceeds of sale of dwelling units or real
property, shall be paid and distributed as follows:
(i) First, to the repayment of the debts, obligations, and
liabilities of the Joint Venture.
(ii) Next, to the establishment of any reserves which the Joint
Venturers deem reasonably necessary for contingent, unmatured, or
unforeseen liabilities or obligations of the Joint Venture.
(iii) Next, to the Oriole Subsidiary, until such time as any
acquisition, or working capital loans has been repaid.
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(iv) Next, to Regency until such time as any acquisition, or working
capital loans have been repaid.
(v) Next, to Oriole Subsidiary and Regency until such time as their
respective capital contributions have been repaid.
(vi) The balance, if any, shall be distributed fifty percent (50%) to
Oriole Subsidiary and fifty percent (50%) to Regency.
SECTION 11 - Termination of Joint Venturer
In the event that any Joint Venturer (the "Defaulting Joint Venturer")
is unable or unwilling to substantially perform its material obligations
hereunder, except in the event of Force Majeure, then the Non-Defaulting Joint
Venturer may purchase the Defaulting Joint Venturer's interest, provided
however, that such purchase right is exercised in good faith and in accordance
with this Joint Venture Agreement. A Joint Venturer shall be conclusively
deemed to be unable or unwilling to perform its material obligations hereunder
under the following circumstances, which are exemplary but not exclusive: (i)
any Joint Venturer shall become insolvent or subject to bankruptcy
proceedings, which insolvency or proceedings are not resolved favorably to the
affected Joint Venturer, within ninety (90) days of their commencement; or (ii)
except in accordance with Section 13 hereof, in the event any Joint Venturer
shall sell all, or
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substantially, all of its assets, or all or substantially all of its shares or
in the event that Regency shall sell, transfer, or assign its interest to any
person, firm, or entity other than a Regency affiliate, without the prior
written approval of both Joint Venturers.
The Non-Defaulting Joint Venturer shall have the right to purchase the
Defaulting Joint Venturer's interest for an amount equal to the Defaulting
Joint Venturer's capital investment in the Joint Venture, which shall include
capital contributions, if any, and loans if any. The net capital investment
shall be repaid as a first priority distribution from the Joint Venture as net
cash becomes available for distribution. From and after the date of purchase
of the Joint Venture Interest, the Defaulting Joint Venturer shall have no
interest whatsoever in the profits, losses, and/or cash flow of the Joint
Venture.
For purposes of this agreement, the term "force majeure" shall mean (i)
strikes, labor unrest, or labor difficulties; (ii) unavailability of materials
or supplies; (iii) governmental laws, ordinances, rules, or regulations; (iv)
civil unrest; (v) natural disasters or Acts of God; or (vi) other causes of
similar nature not within the control of such Joint Venturer, then performance
of such act or completion of such work shall be excused for the period of delay
and the period allowed for such performance of completion shall be extended for
a period equivalent to the period of such delay. In no event will delay in
performance or
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completion reasonably resulting from force majeure give use to, or entitle any
Joint Venturer to exercise, any rights which would otherwise be exercisable
hereunder in the event of such failure of performance or completion.
SECTION 12 - Representations. The parties hereto specifically
warrant, covenant and represent as follows:
A. They are duly organized, validly existing, and in good standing
as proper business entities under the laws of their state of organization, as
described in the first paragraph of this Agreement;
B. All actions required to authorize the officers or partners of
the parties to execute and deliver this Joint Venture Agreement and to perform
their obligations hereunder have been taken;
C. They are institutions organized to enter into real estate
transactions. They have participated in other real estate development
activities, have extensive knowledge and experience in financial and business
matters, and have thoroughly analyzed their involvement in the Joint Venture;
and
D. They intend to fully exercise all of their management rights
contained herein.
SECTION 13 - Non-Encumbrance of Interest. No party shall pledge, sell,
transfer, convey, or hypothecate its interest in
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this Joint Venture in any manner whatsoever, directly or indirectly, nor make
such interest subject to any lien or security interest. Oriole shall not sell
any stock or other equity interest in Oriole Subsidiary. Any such purported
pledge, sale, transfer, conveyance, encumbrance or hypothecation shall, as
between the parties hereto, be of no force and effect, and no other party shall
acquire any rights under this agreement by reason of any such pledge, sale,
transfer, conveyance, encumbrance or hypothecation.
In any situation involving a transfer or assignment of the interest of
a Joint Venturer, in whole or in part, the Joint Venturer seeking to transfer
or assign its interest shall obtain a tax letter opinion from competent tax
counsel stating a description of the contemplated transaction and the tax
ramifications to the Joint Venture itself, and to each party to the Joint
Venture of the proposed transfer or assignment. This opinion shall be
furnished to all parties to the Joint Venture at least 25 days prior to the
proposed transfer or assignment and shall be obtained and furnished at the cost
of the Joint Venturer seeking to transfer or assign its interest. No transfer
will be permitted if there are any negative tax aspects to the other Joint
Venture parties unless party agrees.
SECTION 14 - Notices. Any notice to be given to the Joint Venture
by any party hereto or by any party thereto to the other party shall be
in writing and shall be deemed duly given if and
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when mailed by United States Registered or Certified Mail, Return Receipt
Requested, with proper postage prepaid, at the addresses as follows, or such
new address as set forth in a notice, as provided in this paragraph, given by
the party changing its address, except that any notice of change of address
shall not be effective until received.
All notices to be given to Regency shall be sent to:
Edward C. Jensen, President
Regency Development, Inc.
2826 University Drive
Coral Springs, Florida 33065
with a copy to: Gillespie & Allison, P.A.
1515 So. Federal Highway, Suite 300
Boca Raton, Florida 33432
Attn: R. Bowen Gillespie III
All notices to be given to Oriole Subsidiary shall be sent to:
Richard D. Levy, Chief Executive
Officer Oriole Homes Corp.
1690 S. Congress Blvd.
Delray Beach, Florida 33445
and
with a copy to: Fine Jacobson Schwartz Nash & Block
Suite 3600
100 S.E. 2nd Street
Miami, Florida 33131
Attn: George R. Richards
SECTION 15 - Warranty Provisions. The parties agree to procure the
necessary insured warranty program covering dwelling units to provide warranty
coverage for the warranties imposed by law, after termination of the Joint
Venture or, in the alternative, to provide out of the funds of the Joint
Venture at
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termination, a contingency reserve fund of sufficient amount and duration to
provide such warranty coverage.
SECTION 16 - Waiver of Right to Participation. Each party
waives any right which it may have to require partition of any property
which may be owned by the Joint Venture at any time hereafter. The rights of
the parties to require a disposal of the Joint Venture property or of their
interest in the Joint Venture are only those provided for herein.
SECTION 17 - Attorneys' Fees. Should litigation be brought
by either party against the other with reference to the terms of this
Joint Venture Agreement, the prevailing party in such litigation shall be
entitled to receive as part of the judgment, reasonably incurred costs,
including attorneys' fees for the court of original jurisdiction and for any
courts of appeal which adjudicate said cause.
SECTION 18 - Indemnification. Each Joint Venturer shall be
indemnified by the other and held harmless against and from all claims,
demands, actions, and rights of action which shall or may arise by virtue of
any acts taken in good faith on behalf, or for the benefit, of the Joint
Venture, or anything done or omitted to be done by the other (through or by
agents, employees, or other representatives) in good faith provided the other
shall be promptly notified of the existence of the claim, demand, action, or
right of action and shall be given reasonable opportunity to
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participate in the defense thereof. Such indemnification shall specifically
include reasonable attorneys' fees.
SECTION 19 - Miscellaneous.
A. Entire Agreement. This Agreement represents
the entire agreement between the parties with respect to their association in
this Joint Venture. All prior agreements and understandings with respect
thereto are merged in this Agreement.
B. Modification of this Agreement. This
Agreement may not be changed or terminated orally, but only by an instrument in
writing duly executed by the parties hereto.
C. Agreement Binding on Successors and Assigns.
This Agreement shall be binding upon the parties hereto and their successors
and assigns, however, neither party hereto shall assign its interest hereunder,
nor shall Regency transfer, sell, or convey any of its capital stock, or Oriole
Subsidiary transfer, sell, or convey any of its partnership interests, directly
or indirectly, without complying with the terms of this Agreement, except as
provided in Section 13 hereof.
D. Law Governing. This Agreement shall be governed by the laws of
the State of Florida.
E. Headings. The headings in this Agreement are
inserted for convenience and identification only and are in no way
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intended to describe, define or limit the scope, intent or interpretation of
this Agreement or any provision hereof.
F. Other Business. The Joint Venturers may engage in one or more
businesses other than that required by this Agreement and may develop and
acquire other property for their own account or jointly with other parties and
pursue businesses similar to and in direct competition with the business of
this Joint Venture. The Joint Venturers acknowledge that this association is
not an exclusive engagement but is limited to the terms and relationships
delineated herein.
G. Counterparts. This Joint Venture Agreement may be executed in
any number of counterparts, each of which shall constitute but one and the
same document.
REGENCY DEVELOPMENT, INC.
By:----------------------------
Edward C. Jensen, President
ORIOLE JOINT VENTURE, LIMITED,
a Florida limited partnership
By: Oriole Limited, Inc.,
General Partner
-------------------------------
Richard D. Levy, Chairman and
Chief Executive Officer
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