UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 1998
[ ] Transition Report Pursuant to Section 13 or 15(a) of the
Securities Exchange Act of 1934
Commission File Number 0-15756
LIF
(Exact name of registrants as specified in its charter)
California 94-2969720
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
P. O. Box 130, Carbondale, Colorado 81623
(Address of principal executive offices)
(970) 963-8007
(Partnership's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (229.405 of this chapter) 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 [ ]
State the aggregate market value of the voting stock held by non-affiliates
of the registrant. Inapplicable.
DOCUMENTS INCORPORATED BY REFERENCE: None
<PAGE>
LIF
FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1998
TABLE OF CONTENTS
Item No. Name of Item
Part I
Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
Part II
Item 5. Market for Resigtrant's Common Equity and Related
Shareholders Matters
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Item 8. Financial Statements and Supplementary Data
Item 9. Change in and Disagreements with Accountants on
Accounting and Financial Disclosure
Part III
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners
and Management
Item 13. Certain Relationships and Related Transactions
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K
Signatures
Index to Consolidated Financial Statements and Supplemental
Consolidated Financial Statement Schedules Included in the Form 10-K
<PAGE>
PART I
ITEM 1. BUSINESS
LIF (the "Partnership") is a limited partnership which was organized under
the California Revised Limited Partnership Act on June 29, 1984. The
Partnership was organized to acquire real properties, including
commercial, residential and agricultural properties, located primarily
within the western portion of the United States, and to make short-term
loans and capital contributions to other limited partnerships formed to
acquire or develop and operate one or more income-producing real
properties. The Partnership was formed with the following principal
investment objectives: (i) to provide the maximum possible cash
distributions from operations, a substantial portion of which may not be
taxable to the holders of units of limited partnership interest in the
Partnership (the "Holders"); (ii) to provide for capital growth through
appreciation in values; and (iii) to protect the Partnership's capital. The
General Partner of LIF is Partners '85 (the "General Partner") a partnership
whose General Partner is Landsing Equities Corporation.
The Partnership's business consists of a single segment -- acquisition and
operation of one or more income-producing real properties and making
short-term loans and capital contributions to operating entities formed to
acquire or develop real properties. For a schedule of the Partnership's
income and losses and assets, see Item 6, Selected Financial Data. The
Partnership will not be engaged in the production of goods or the rendering
of services. For a more specific discussion of the Partnership's operations
and financial condition, see Item 7, Management's Discussion and
Analysis of Financial Condition and Results of Operations.
The Partnership currently has an investment in Landsing Private Fund-21
("P-21") which owns one multi-family rental property and Alpine Center
Partners ("ACP") which owns Notes receivables from the buyers of the Alpine
Center Building. The Partnership owns two retail rental properties, which in
prior years were owned by Cattle Creek Development Partners (CCDP). CCDP was
liquidated into LIF in 1997. For financial reporting purposes the
Partnership's investments are presented on a consolidated basis.
Results of the Partnership's operations depend primarily upon the
successful operation of its investments. The yields (return on capital)
available on equity ownership of investments in income-producing and
other types of real estate investments depend to a large extent upon the
ability to lease or rent the property, the geographic location of the
property, competition and other factors, none of which can be predicted
with any certainty.
The Partnership has not engaged in research activities relating to the
development or improvement of products or services. The Partnership has
not made, nor does it anticipate making, during the succeeding fiscal year,
any capital expenditures for environmental control facilities, nor does it
expect any material effects upon capital expenditures, earnings or
competitive position resulting from compliance with present federal, state
or local environmental control provisions. The Partnership has no
employees. All of the Partnership's operations are located in the United
States.
<PAGE>
<TABLE>
ITEM 2. PROPERTIES
A description of the income-producing properties which the Partnership
owned at December 31, 1998 is as follows:
<CAPTION>
Financial
Occupancy Average
Net For the Physical Effective
Rentable Year Ended Occupancy Rental
Name & Location Type Sq. Ft. 12/31/98 At 12/31/98 Rate
(1) (2) (3)
<S> <C> <C> <C> <C> <C>
Whistler Point Apt Residential 140,230 97% 98% $ 10
Boise, Idaho
Valley View
Business Center
Glenwood Springs, CO Retail 20,750 90% 88% $ 13
701 Cooper
Glenwood Springs, CO Commercial 2,937 0% 0% $ 0
(1) Expressed as a percentage, it compares the actual dollar amount of
rent received with the dollar amount of rent which would be received
if the property were fully leased.
(2) Physical occupancy denotes the percentage of net rentable square
footage leased as of a certain date.
(3) Represents the average effective rental rates, per square foot, for the
year ended December 31, 1998.
</TABLE>
Each of the Partnership's properties are subject to encumbrances. Reference
is made to Note 6 in the financial statements filed as part of this annual
report for information regarding such encumbrances.
ITEM 3. LEGAL PROCEEDINGS
Continued from 1996, the Partnership, through CCDP, has had a lawsuit filed
against it by one tenant alleging loss of business during the re-development
of CCDP's property. The case has been heard by a judge and a court ruling is
pending. CCDP's defense is being paid by its insurance carrier. The
Partnership's insurance carrier has retained a reservation of rights against
the Partnership. An estimate of potential loss is up to $96,000. An accrual
for this loss has not been made as of December 31, 1998. See Note 9 to the
Financial Statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter has been submitted to a vote of the limited partners (the
"Limited Partners") through the solicitation of proxies or otherwise, during
the fourth quarter of 1998.
<PAGE>
<TABLE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED SHAREHOLDERS MATTERS
There is no established public trading market for the Units of Limited
Partnership interest of the Partnership and there are substantial
restrictions on the transferability of such Units imposed by federal
and state securities laws and by the Limited Partnership Agreement.
The approximate number of record holders of Units of the Partnership as of
January 1, 1999, is 889.
The Limited Partners of the Partnership are entitled to certain distributions
under the Amended and Restated Certificate and Agreement of Limited
Partnership of the Partnership. A cash distribution of $15 per unit, to unit
holders of record on February 28, 1998, was paid in March 1998.
The General Partner has declared a cash distribution of $250 per unit to unit
holders of record on February 28, 1999, to be paid in April 1999.
ITEM 6. SELECTED FINANCIAL DATA
(In thousands, except per unit amount)
<CAPTION>
. . . . . . .DECEMBER 31 . . . . . . .
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Total Revenues $ 1,661 $ 1,781 $1,517 $1,567 $1,361
Net Income (Loss) (159) (127) (136) (52) 27
Net Income (Loss) Per Unit (1) (12) (10) (11) (4) 2
Total Assets 9,950 10,293 9,864 9,076 8,153
Long-term Obligations - Net 8,470 7,679 7,960 6,897 5,591
Cash Distributions-Limited Partners 192 0 192 385 385
Paid Per Unit (1) 15 0 15 30 30
(1) Based on a weighted average of 12,820 limited partnership units
outstanding in 1998, 1997, 1996, 1995, and 1994.
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
INTRODUCTION
The Partnership was organized to acquire real properties, including
commercial, residential and agricultural properties, located primarily
within the western portion of the United States, and to make short-term
loans and capital contributions to other limited partnerships formed to
acquire or develop and operate one or more income-producing real
properties.
The Partnership currently has a 99% investment in Landsing Private Fund-21
("P-21") which owns one multi-family rental property, and a 95% investment in
Alpine Center Partners ("ACP") which owns Notes receivables from the
buyers of the Alpine Center Building. The partnership also owns two retail
rental properties, which were formerly owned by CCDP. For financial
reporting purposes the Partnership's investments are presented on a
consolidated basis.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1998, the Partnership's consolidated cash balance
totaled $566,000. Cash not required for current operations is placed in
federally insured bank accounts, certificates of deposit, and money
market funds which can be liquidated as needed. It is the Partnership's
intention to maintain adequate cash reserves for its operations.
As of December 31, 1998, cash and cash equivalents totaled $566,000 versus
$570,000 at December 31, 1997 for a net decrease of $4,000.
The Short-Term Loan made to Cattle Creek Development Partners, a
Colorado limited partnership ("CCDP"), was partially repaid in December
1996. The remaining loan balance, including accrued and unpaid interest,
as of December 31, 1996 was $550,000. The loan was past due and was thus in
default as of December 31, 1997. In 1997, per the terms of the loan agreement
between LIF and CCDP, the properties securing the loan, Valley View Business
Park and 701 Cooper, became 100% owned by LIF.
On June 3, 1996, the Partnership made a Short-Term Loan in the principal
amount of $550,000 to Alpine Center Partners, a Colorado limited
partnership ("ACP"). ACP was organized to acquire one commercial
property located in Carbondale, Colorado. The Partnership also made a
capital contribution to ACP in the amount of $10,000 and became a Co-General
Partner of ACP.
On September 30, 1997, the Partnership's investment in ACP sold 40.20%
of the Alpine Center Building to Gary K. Barr (GKB). GKB is the
president of the General Partner of LIF. This sale resulted in cash to ACP
of $370,000. On September 30, 1997, ACP also sold 45.90% of the Alpine
Center Building to Open World Investors (OWI), of which Gary K. Barr is a
General Partner. This sale generated cash to ACP of $420,000. ACP deferred
a gain on sale from these two transactions of $69,000. ACP provided seller
financing to GKB and OWI in the amounts of $864,300 and $986,850
respectively.
On June 30, 1998, ACP sold its remaining 1.96% interest in the Alpine Center
Building to Gary K. Barr for $59,000. ACP received cash proceeds of $17,000
and provided seller financing in the amount of $42,000. ACP's short-term
note payable to LIF was paid off in June 1998.
For financial reporting purposes, results of operations for P21, and
ACP have been shown on a consolidated basis.
<PAGE>
RESULTS OF OPERATIONS
Rental revenues were $1,635,000 in 1998, a decrease of $94,000 or 5% compared
with 1997. Rental revenues were $1,729,000 in 1997, an increase of $246,000
or approximately 17% from 1996. The decline in rental revenues in 1998
versus 1997 was the result of the lack of lease revenue from the 701 Cooper
Avenue property in 1998, which was leased for the entire year in 1997. The
improvement in revenues in 1997 as compared to 1996 was the result of the
lease-up of the Alpine Center, improved occupancy and rates at Whistler
Point Apartments and an increase in rent payments at 701 Cooper.
Operating expenses were $712,000 in 1998, an increase of $46,000 or 7%
from 1997. Operating expenses were $666,000 in 1997, an increase of
$71,000 or 12% from 1996. The increase of operating expenses in 1997 versus
1996 was the result of having more properties operating for the entire year
in 1997 as compared to 1996. The increase in operating expenses in 1998
was the result of writing off accounts receivable. Maintenance and repairs
decreased 9%, and general and administrative costs decreased 5%. Other
operating costs remained constant with 1997 levels.
Net operating income of properties (rental revenue less operating
expenses) was $922,000 in 1998, a decrease of $141,000 or 14% from 1997.
Management believes net operating income is the best indication of the
properties' performance.
Interest income decreased 50% from $52,000 in 1997 to $26,000 in 1998. The
decrease was due to the decrease in the Partnership's short-term investments
and cash equivalents.
Interest expense decreased $104,000 from 1997 to 1998. The decrease was due
to lower average outstanding loan balances in 1998.
Interest income and interest expense on loans by and between LIF and its
investments, ACP and CCDP, were eliminated in the consolidation of the
Company's financial statements.
Entity level general and administrative expenses, exclusive of that at the
property level, increased $3,000 in 1998 compared to 1997. Portfolio
management fees remained unchanged.
Net loss for 1998 was $159,000. This includes gain from property sales of
$22,000. Net loss from operations in 1998 was $181,000. The net loss for
1997 was $127,000, an improvement of $9,000 from 1996's loss.
PROPERTY OPERATIONS
Residential Property - The remaining residential property, Whistler Point
Apartments, operated at a profit in 1998 in spite of the very competitive
market in which it is located. The Partnership continued to make capital
improvements to the property to allow it to compete effectively with new
competition. Specific capital expenditures are for new washers and dryers
in all units, new microwaves, new carpet and vinyl flooring, carports,
and exterior deck improvements. The property was placed on the market for
sale in 1998, and was under sale contract as of 12/31/98. The property was
sold on 2/26/99.
Commercial Property - The 701 Cooper Building was not occupied during 1998.
The Valley View Business Center had stable occupancy during 1998. Valley
View Business Center and 701 Cooper are currently listed for sale. The
Properties are valued at the lower of cost or market.
<PAGE>
OCCUPANCY
Occupancy at the Partnership's properties remained high in 1998, with
the exception of the 701 Cooper Building. As of December 31, 1998, occupancy
at Whistler Point Apartments was 97% and the Valley View Business Center
ended the year at 90% occupancy.
DISTRIBUTIONS
The General Partner declared a cash distribution of $15 per unit to unit
holders of record on February 28, 1998, that was paid in March 1998. The
General Partner has declared a cash distribution of $250 per unit to unit
holders of record on February 28, 1999, to be paid in April 1999.
INFLATION
The effect of inflation on the Partnership's operations have been no greater
than the effect on the economy as a whole. Because of competitive
conditions, market rate rents may increase or decrease disproportionately
with inflation while property operating costs continue to follow
inflationary trends. Inflationary conditions are not expected to have a
major impact on the Partnership during 1999.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is contained at page F-1 following in
this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The General Partner of the Partnership is Partners '85, which has sole
responsibility for all aspects of the Partnership's operations. Partners '85
is a limited partnership, whose General Partner is Landsing Equities
Corporation, a California corporation.
Landsing Equities Corporation was incorporated in California in 1983. It
is a wholly owned subsidiary of The Landsing Corporation which has
acted as a sponsor of real estate investment programs, providing property
acquisition and management services.
Gary K. Barr is the Director and President of Landsing Equities
Corporation. His principal occupation during the last five years or more,
and certain other affiliations are set forth below:
Gary K. Barr. Mr. Barr serves as Chairman and Chief Executive Officer
of Pacific Coast Capital and served as President and Director of
Landsing Pacific Fund from its inception in November, 1988 to July, 1992.
Mr. Barr received a Bachelor of Science degree in Mechanical Engineering
from Oklahoma State University in 1967 and a Master of Business
Administration degree from the Stanford University Graduate School of
Business in 1972. Mr. Barr served on the Board of Governors of the
National Association of Real Estate Investment Trusts and on its Editorial
Board. Mr. Barr has also served as President of the California Chapter of
the Real Estate Securities and Syndication Institute of the National
Association of Realtors ("RESSI"), which has awarded him the designation of
Specialist in Real Estate Securities. Since 1983, he has served on the
Board of Directors of Silicon Valley Bancshares. In 1989 he authored the
book J.K. Lasser's "Real Estate Investment Guide" published by Prentice
Hall.
ITEM 11. EXECUTIVE COMPENSATION
The Director and President of Landsing Equities Corporation does not
receive compensation from the Partnership. However, the General Partner,
Partners '85, has contracted with Pacific Coast Capital, an affiliate, for
the provision of certain asset management and administrative services.
During 1998, Pacific Coast Capital received management fees of $112,000,
which were determined based on expenses incurred in order to operate the
Partnership. In addition, Pacific Coast Capital was paid $89,000 for
property management services. These property management fees were
based on 2% of the monthly property revenues received from Whistler
Point Apartments. See Item 13, Certain Relationships and Related
Transactions for further information.
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
No persons or groups are known by the Partnership to hold more than 5% of the
units of limited partnership of the Partnership. The General Partner is not
a direct or beneficial owner of Units of limited partnership. The General
Partner knows of no arrangement, including any pledge by any person of
securities of the Partnership, the operation of which may at a subsequent
date result in a change in control of the Partnership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Partnership has agreements with The Landsing Corporation and one of
its affiliates, Pacific Coast Capital, pursuant to which the Partnership has
paid various fees and compensation to these companies.
The Partnership has entered into a property management agreement with
Pacific Coast Capital for the management of the Partnership's property.
During 1998, the Partnership paid Pacific Coast Capital approximately $89,000
for property management and leasing services.
The Partnership has retained Pacific Coast Capital to serve as advisor and
to manage the day-to-day operations of the Partnership. Pacific Coast
Capital is to perform these services based on reimbursement of costs
incurred but in no case are these to exceed those which the Partnership
would have to pay independent parties for comparable services. During
1998, the Partnership paid Pacific Coast Capital expense reimbursements
of $112,000.
For information concerning the agreements between the Partnership and
the affiliates of The Landsing Corporation, see Note 3 of Notes to
Financial Statements filed as part of this Annual Report.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
See the Index on page F-1.
2. Financial Statement Schedules
See the Index on page F-1.
3. Exhibits
See the Exhibit Index which immediately precedes the
Exhibits filed with this Report.
(b) No reports were filed by the Partnership on Form 8-K during
the fourth quarter ended December 31, 1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Partnership has duly caused this Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
LIF
By: Partners '85
By: Landsing Equities Corporation,
General Partner
March 31, 1999 By: /s/ Gary K. Barr
GARY K. BARR, President and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Partnership and in the capacities and on the dates indicated.
March 31, 1999 /s/ Gary K. Barr
GARY K. BARR, President and Director
Landsing Equities Corporation
(Principal Executive Officer)
Supplemental Information to be Furnished With Reports Filed Pursuant to
Section 15(d) of the Act by Registrants Which Have Not Registered
Securities Pursuant to Section 12 of the Act.
No Annual Report or Proxy material has been sent to Partnership's security
holders. An Annual Report will be furnished to such security holders
subsequent to the filing of Partnership's Annual Report on Form 10-K, and,
when so sent, Partnership shall furnish copies of such material to the
Commission.
<PAGE>
LIF
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTAL
CONSOLIDATED FINANCIAL STATEMENT SCHEDULES INCLUDED IN THE FORM 10-K
Report of Independent Accountants
Financial Statements:
Consolidated Balance Sheets, December 31, 1998 and 1997
Consolidated Statements of Operations for the Years Ended
December 31, 1998, 1997 and 1996
Consolidated Statements of Changes in Partners' Equity for the Years
Ended December 31, 1998, 1997 and 1996
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1998, 1997 and 1996
Notes to Consolidated Financial Statements
Supplemental Consolidated Financial Statement Schedule:
Schedule III - Real Estate and Accumulated Depreciation
for the Year Ended December 31, 1998
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of LIF:
We have audited the accompanying consolidated financial statements and
consolidated financial statement schedule of LIF and subsidiaries listed in
the index on page F-1 of this Form 10-K as of December 31, 1998 and
1997, and the related consolidated statements of operations, changes in
partners' equity and cash flows for each of the three years in the period
ended December 31, 1998. These financial statements are the responsibility
of the Partnership's management. Our responsibility is to express an opinion
on these financial statements and financial statement schedule based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards required that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of LIF and subsidiaries as of December 31, 1998 and 1997, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles. In addition, in our opinion, the
consolidated financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information required to be
included therein.
DALBY, WENDLAND & CO., P.C.
Glenwood Springs, Colorado
February 28, 1999
<PAGE>
<TABLE>
LIF
CONSOLIDATED BALANCE SHEETS, DECEMBER 31, 1998 AND 1997
(In thousands except for Partnership Units)
<CAPTION>
1998 1997
<S> <C> <C>
ASSETS
INVESTMENT IN REAL ESTATE:
Rental property $10,370 $10,327
Accumulated depreciation (2,958) (2,607)
Rental property - net 7,412 7,720
CASH AND CASH EQUIVALENTS (including interest
bearing deposits of $562 in 1998 and $434 in 1997) 566 570
OTHER ASSETS:
Accounts receivable - net 84 49
Deferred loan costs, net of accumulated
amortization of $242 in 1998 and $212 in 1997 72 84
Prepaid expenses 23 19
Notes receivables 1,793 1,851
Total other assets 1,972 2,003
TOTAL $ 9,950 $10,293
LIABILITIES AND PARTNERS' EQUITY
LIABILITIES:
Notes payable $ 8,470 $ 7,679
Accounts payable 24 21
Liability for future improvements 83 828
Other liabilities 267 217
Deferred gain on real estate 0 69
Total liabilities 8,844 8,814
PARTNERS' EQUITY
Limited Partners 1,281 1,632
General Partners (175) (153)
TOTAL $ 9,950 $10,293
Equity Units Authorized - Limited Partners 12,820 12,820
- General Partners 0 0
Equity Units Outstanding - Limited Partners 12,820 12,820
- General Partners 0 0
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
LIF
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(In thousands except Partnership units)
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
REVENUES:
Rental $1,635 $1,729 $1,483
Interest 26 52 34
Total revenues 1,661 1,781 1,517
EXPENSES:
Interest 558 662 533
Operating 712 666 595
Depreciation and amortization 382 386 343
General and administrative 190 194 218
Total expenses 1,842 1,908 1,689
Gain from sale of real estate 22 0 36
NET LOSS $ (159) $ (127) $ (136)
Net loss - Limited Partners $ (159) $ (127) $ (136)
Net income (loss) - General Partners $ 0 $ 0 $ 0
NET LOSS PER PARTNERSHIP UNIT
Limited Partners $ (12) $ (10) $ (11)
General Partners $ 0 $ 0 $ 0
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
LIF
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(In thousands, except Partnership units)
<CAPTION>
LIMITED PARTNERS
NUMBER OF GENERAL TOTAL
PARTNERSHIP PARTNER PARTNERS'
UNITS AMOUNT AMOUNT EQUITY
<S> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1996 12,820 $2,087 $(158) $1,929
Net loss - 1996 (136) 0 (136)
Distribution - 1996 (192) (22) (214)
Contributions - 1996 0 27 27
BALANCE, DECEMBER 31, 1996 12,820 $1,759 $(153) $1,606
Net loss - 1997 (127) 0 (127)
BALANCE, DECEMBER 31, 1997 12,820 $1,632 $(153) $1,479
Net loss December 31, 1998 $ (159) 0 (159)
Distribution - 1998 (192) (22) (214)
BALANCE, DECEMBER 31, 1998 12,820 $1,281 $(175) $1,106
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
LIF
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(In thousands)
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (159) $ (127) $ (136)
Gain on sale of property (22) 0 (36)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization 382 389 343
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable (35) (40) 6
Decrease (increase) in prepaid expenses
and deposits (4) 10 (12)
(Increase) in deferred costs (19) 0 0
(Decrease) increase in accounts payable 86 28 (51)
(Decrease) increase in other liabilities (33) (13) 24
Net cash provided by operating activities 196 247 138
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (102) (584) (825)
Proceeds from sale of investment property 17 800 208
Investment in short-term investments 0 0 99
Payments on notes receivable 100 0 0
Net cash provided by (used in)
investing activities 15 216 (518)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from financing 137 0 563
Distributions (214) 0 (187)
Payments on notes payable (138) (281) (164)
Net cash provided by (used in)
financing activities (215) (281) 212
Increase (decrease) in cash and
cash equivalents (4) 182 (168)
Cash and cash equivalents at beginning of year 570 388 556
Cash and cash equivalents at end of year $ 566 $ 570 $ 388
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
<PAGE>
LIF
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except Partnership unit amounts)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - LIF (the "Partnership") is a limited partnership organized
under the laws of the state of California for the purpose of investing in
income properties and making short-term loan and capital contributions to
operating entities formed to acquire or develop and operate one or more
income producing real properties. The General Partner is Partners '85 (the
"General Partner"), a California limited partnership, whose General Partner
is Landsing Equities Corporation. LIF was formed in June 1984, and shall
continue until December 31, 2034, unless sooner terminated.
Investment In Real Estate Partnership - At December 31, 1998 and 1997, the
Partnership was invested in Landsing Private Fund ("P-21"), a 99%-owned real
estate partnership. In 1997, Cattle Creek Development Partners (CCDP) was
liquidated into the Partnership. CCDP was originally formed in 1994. For a
portion of 1996, the Partnership was invested in Prince Creek Partners
("PCP") and Thompson Creek Partners ("TCP"). In 1996, the properties owned
by these partnerships were sold and the partnerships terminated. During
1996, the Partnership invested into 95% of a new entity - Alpine Center
Partners ("ACP"). ACP acquired rental real estate in Colorado in 1996.
Consolidation of Investment in Real Estate Partnerships - For financial
reporting purposes, the Partnership consolidates the operations of it's
investment in real estate partnerships with that of the Partnership. All
significant intercompany transactions, including notes payable/receivable and
short-term loans/receivables, and balances have been eliminated. Minority
interest was insignificant at December 31, 1998 and 1997.
Rental Property - Rental property is stated at cost. Depreciation is
computed by the straight-line method over estimated useful lives ranging from
five to forty years. Major additions and betterments are capitalized at
cost, while maintenance and repairs which do not improve or extend the life
of the respective assets are expensed currently. When assets are retired or
otherwise disposed of, the costs and related accumulated depreciation are
removed from the accounts, and any gain or loss on disposal is included in
the results of operations. Rental property held for sale is valued at
lower of cost or market.
Deferred Loan Costs - Loan fees are deferred and amortized over the life of
the related note payable.
Cash and Cash Equivalents - The Partnership considers all highly liquid
investments with a maturity of three months or less at the time of purchase
to be cash equivalents, and note receivables.
Short-Term Investments - The Partnership invests in short-term federally
insured certificates of deposits which mature on a date in excess of three
months from the date of purchase. The cost of these investments approximate
market value.
Income Taxes - No provision for federal or state income taxes has been made
in the consolidated financial statements because these taxes are the
obligation of the partners.
Net Income (Loss) Per Partnership Unit - Net Income (Loss) per partnership
unit is based on weighted average units outstanding of 12,820 in 1998, 1997
and 1996, after giving effect to net income (loss) allocated to the General
Partner. Cash distributions of $15 per unit were paid to limited partnership
unit holders in 1998. No cash distributions were paid in 1997.
Concentrations of Credit Risk - The Partnership's financial instruments that
are exposed to concentrations of credit risk consist primarily of its cash
and cash equivalents. The Partnership's cash and cash equivalents are
maintained in various accounts in FDIC insured institutions. This investment
policy limits the Partnership's exposure to concentrations of credit risk.
The note receivables outstanding are held by two related parties (see Note 4).
Due to the related party nature of the receivables and the intention of
the related parties to obtain permanent financing from a bank within the next
six months, credit risk is considered minimal.
<PAGE>
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect certain reported amounts and
disclosures. Accordingly, actual results could differ from those estimates.
Impairment of Long-Lived Assets - The Partnership adopted Statement of
Financial Accounting Standards (SFAS) No. 121, "Accounting for the
Impairment of Long-lived Assets and for Long-lived Assets to be Disposed Of"
during 1996. SFAS No. 121 requires that long-lived assets and certain
identifiable intangibles to be held and used or disposed of by an entity be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. During 1998 and
1997, the Partnership determined that no impairment loss need be recognized
for applicable assets of continuing operations.
Accounting Pronouncements - In June 1996, the Financial Accounting Standards
Board issued Statement No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishment of Liabilities" (SFAS No.125). This
Statement is effective for transactions occurring after December 31, 1996.
However, transactions such as securities lending, repurchase agreements,
dollar rolls, and similar secured financing arrangements are not subject to
the provisions of SFAS No. 125 until January 1, 1998. The standard provides
that, following a transfer of financial assets, an entity is to recognize the
financial and servicing assets it controls and the liabilities it has
incurred, derecognize financial assets when control has been surrendered and
derecognize liabilities when extinguished. The adoption of SFAS No. 125 had
no impact on the Partnership's consolidated financial statements.
Effective January 1, 1998, the Partnership adopted SFAS No. 130, "Reporting
Comprehensive Income." SFAS No. 130 requires that an enterprise (a) classify
items of other comprehensive income by their nature in a financial statement
and (b) display the accumulated balance of other comprehensive income
separately from retained earnings and additional paid-in capital in the
equity section of a statement of financial condition. However, the
Partnership had no items of comprehensive income at December 31, 1998.
Effective January 1, 1998, the Partnership adopted SFAS No. 131, "Disclosures
About Segments Of An Enterprise And Related Information." However, the
Partnership does not have any reportable segments at December 31, 1998.
Year 2000 - The Partnership is aware of the Year 2000 conversion issue. It
is Management's assertion that the current accounting system utilized by the
Partnership has the capability to accommodate the Year 2000 issue.
Management has also considered outside parties the Partnership conducts
business with. It is their belief that these outside parties are
already Year 2000 compliant or will be by mid-1999. Management does not
believe there will be a significant impact on the Partnership's operations.
<PAGE>
<TABLE>
Fair Value of Financial Instruments - The fair value of certain financial
assets carried at cost, including cash and cash equivalents and accounts
receivable, are considered to approximate their respective Fair value. The
fair value of accrued liabilities is considered to approximate their
respective book values due to their short-term nature. The valuation of
notes receivable and notes payable with floating rates is estimated to be
the same as carrying value. Fair value of notes payable with fixed rates
is estimated based on quoted market prices for similar issues. At
December 31, 1998 and 1997, fair value of notes payable approximates
carrying value.
Reclassifications - certain amounts in the 1997 financial statements have
been reclassified to conform to the 1998 presentation.
2. ACCOUNTS RECEIVABLE
Accounts receivable consisted of the following at December 31, 1998:
<S> <C>
Tenant receivables $138
Allowance for doubtful accounts (54)
Net account receivables $ 84
</TABLE>
<PAGE>
<TABLE>
3. RELATED PARTY TRANSACTIONS
The Partnership has entered into agreements with Pacific Coast Capital.
Advisory services for investment management, general and administrative and
property management are provided by Pacific Coast Capital. The General
Partner is an affiliate of Pacific Coast Capital. The related party
transactions delineated in the Partnership Agreement with affiliates of the
General Partner are as follows:
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
General and Administrative Support Fees $ 112 $ 103 $ 103
Property Management $ 89 $ 36 $ 25
Accounts Receivable $ 0 $ 17 $ 0
</TABLE>
In addition, expenses related to the sale of Whistler Point in the
amount of $13 were paid to Pacific Coast Capital in 1998.
The Partnership had receivables of $30 from Partners 85, the general partner,
$16 from Open World Investors, Ltd., whose general partner is Gary K. Barr,
$10 from Anne Cooke, a minority owner of ACP, and $5 from Crystal River
Enterprises, an entity of common control, for the year ended December 31,
1998.
During 1998 and 1997, the Partnership had a sale transaction with the
President of the General Partner and another entity. (See Note 4).
4. NOTES RECEIVABLE
On June 30, 1998, Alpine Center Partnership sold its 1.96% investment in the
Alpine Center Building to Gary K. Barr. This sale transaction included the
exchange of cash and a note receivable.
At September 30, 1997, Alpine Center Partnership (ACP) sold 40.2% and 45.9%,
respectively, of the Alpine Center Building to Gary K. Barr, president of the
general partner of LIF, and to Open World Investors, Ltd., whose general
partner is Gary K. Barr. Open World Investors, Ltd. is also managed by PCC.
These sales were made for cash and notes receivable. In 1996, ACP sold
11.94% of the Alpine Center Building to an unrelated third party for cash.
The notes receivable generated from the sale to Barr and Open World
Investors, Ltd., were $806 and $987, respectively. The terms of the notes
receivable are the same as the financing terms ACP has with the bank and LIF
on loans secured by the Alpine Center Building. The notes receivable from
these sales are directly in proportion to the notes payable to Alpine Bank
and Barr. There is no equity built in to these notes. When these notes
payable are re-financed in the name of the new owners, these notes receivable
will be eliminated, as will the notes payable that they offset. See
discussion of credit risk at Note 1.
The sales agreements stipulate that each buyer assume debt that ACP has
related to the Alpine Center Building up to their respective percentage
ownership except for the sale to the unrelated third party, whose debt
assumption was capped at $256. Management does not expect the debt to
be assumed by the unrelated third party to exceed this amount.
At the dates of the sales, the Alpine Center Building consisted of land, one
existing commercial building and one commercial building (Phase II) planned
for construction after 1997. The liability for future improvements at
December 31, 1997 of $828 represents the estimated future costs of
constructing Phase II. The gain on the sale of the Alpine Center
Building was deferred at December 31, 1997. During 1998, the Phase II
portion of the building construction of the Alpine Center was completed.
The Partnership realized a net gain of $22 through the completion of
Phase II and the sale of the Alpine Center Building.
<PAGE>
<TABLE>
5. RENTAL PROPERTY
Rental property consists of the following at December 31:
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Land $ 1,512 $ 1,520 $ 1,922
Building and improvements 8,858 8,807 9,601
10,370 10,327 11,523
Accumulated depreciation (2,958) (2,607) (2,282)
$ 7,412 $ 7,720 $ 9,241
</TABLE>
Depreciation expense was $351, $325 and $304 for the years
ended December 31, 1998, 1997 and 1996, respectively.
The residential leases are generally for a term of one year or less
or are on a month-to-month basis. Retail leases range from one to
five years in length.
<TABLE>
6. NOTES PAYABLE
Notes payable consists of the following at December 31:
<CAPTION>
1998 1997
<S> <C> <C>
First note payable bears interest at 8%, matures
September, 2000, and is collateralized by
Whistler Point Apartments. The note requires monthly
payments of principal and interest of $42 per month.
In addition, the note is guaranteed by The Landsing
Corporation. $5,207 $5,301
First note payable collateralized by the Valley View
Business Park, with an interest rate of 9.00%, and
monthly payments of $11, matures December, 2000. 997 1,035
Second note payable collateralized by the Valley View
Business Park, with an interest rate of 8.5% and monthly
payments of $2, matures August, 2004. 160 162
First note payable collateralized by 701 Cooper commercial
building, with an interest rate of 9.99% and monthly
payments of $3, matures October, 2001. 313 319
First note payable collateralized by Alpine Center, with
an interest rate of 8.75% and monthly payments of $9,
matures June, 1999. 1,600 862
Second note payable collateralized by Alpine Center,
with an interest rate of 8.25%, and monthly payments
interest only, matures June, 1999 193 0
TOTAL $8,470 $7,679
</TABLE>
<PAGE>
<TABLE>
The Partnership paid interest of $558 in 1998, $658 in 1997, and $533 in
1996.
Principal payments required in future years are as follows:
<S> <C>
1999 $ 2,031
2000 5,984
2001 10
2002 11
2003 12
Thereafter 422
Total $ 8,470
</TABLE>
<TABLE>
7. RENTAL PROPERTIES UNDER OPERATING LEASES
Minimum future rents from rental properties under operating leases having
initial or remaining noncancelable lease terms in excess of one year at
December 31, 1998, are as follows:
<S> <C>
1999 $ 120
2000 114
2001 86
2002 3
2003 0
Total $ 323
</TABLE>
<PAGE>
<TABLE>
Annual rents at Whistler Point Apartments are not included since the leases
are generally less than one year. Whistler Point Apartments average annual
rents collected from 1996 to 1998 were $1,345 per year.
8. RECONCILIATION TO INCOME TAX BASIS OF ACCOUNTING
The difference at December 31, 1998, 1997 and 1996, between the basis of
accounting used in the accompanying consolidated financial statements and the
income tax basis used to file the Partnership's federal income tax return are
as follows:
<CAPTION>
Restated Restated
1998 1997 1996
<S> <C> <C> <C>
Net loss $ (159) $ (127) $ (136)
Remove book (income) loss from partnership
investments (137) 93 96
Difference in book vs. tax loss from
partnerships (195) 26 (175)
Decrease from difference in basis and
use of accelerated depreciation methods 12 0 0
Difference in sale of Alpine Center Building 82 0 0
Allowance for doubtful accounts 54 0 0
Other (3) 0 0
Net income (loss) - tax basis $ (346) $ (8) $ (215)
Estimated cost to complete $ 82 $ 0 $ 0
Partners' equity 1,106 1,479 $ 1,606
Remove equity in partnership investments 0 0 (383)
Restatement of cumulative elimination (383) (383) 0
Syndication costs 1,906 1,906 1,906
Liquidation of Cattle Creek Development Ptrs 0 29 0
Basis of Assets 1 0 0
Accumulated depreciation 37 0 0
Allowance for doubtful accounts 54 0 0
Investment in partnerships (1,220) (888) (978)
Partners' equity - tax basis $ 1,583 $2,143 $2,151
</TABLE>
9. CONTINGENCIES
In 1996, one tenant of the Valley View property initiated legal filings
against the Partnership alleging disruption of business during the property's
remodel. The case has been heard by a judge and a court ruling is pending.
The Partnership's defense is being handled by their insurance carrier, who
has retained a reservation of rights against the Partnership. While it is
not feasible to predict the final outcome of this proceeding, and no loss
has been accrued as of December 31, 1998, an estimate of potential
loss is up to $96. Management does not believe the outcome will result
in a materially adverse effect on the Partnership's financial position,
results of operations or liquidity.
10. SUBSEQUENT EVENTS
The Partnership has declared a cash dividend of $250 per unit to unit holders
as of February 28, 1999 for distribution in April, 1999.
On February 26, 1999, the Partnership sold the Whistler Point Apartments
for a cash sale price of $9,600 to an unrelated third party. As part of this
sale, debt of $5,027 was retired and a gain of approximately $4,562 was
recognized.
<PAGE>
SCHEDULE III
LIF
(A California limited partnership)
REAL ESTATE AND ACCUMULATED DEPRECIATION - DECEMBER 31, 1998
(In thousands)
[CAPTION]
Initial Cost of Reserve for
Description Encumbrances Cost Improvements Total Depreciation
[S] [C] [C] [C] [C] [C]
Whistler Point Apartments $5,207 $7,298 $ 981 $ 8,279 $2,744
Boise, Idaho
Valley View Business Park 1,157 938 825 1,763 184
Glenwood Springs, CO
701 Cooper 313 320 8 328 30
Glenwood Springs, CO
$6,677 $8,556 $1,814 $10,370 $2,958
[/TABLE]
Life On Which
Date Date Depreciation
Description Constructed Acquired Is Computer
Whistler Point Apartment N/A 12/23/85 40 years
Boise, Idaho
Valley View Business Park N/A 08/28/94 40 years
Glenwood Springs, CO
701 Cooper N/A 06/30/94 40 years
Description
<PAGE>
SCHEDULE III
LIFREAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1998
(In thousands)
NOTES:
(1) The Partnership's policy is to invest in income producing real properties
and make short-term loans and capital contributions to
operating entities formed to acquire or develop and operate one or
more income producing real properties. Costs incurred before
completion of the development are included in building basis.
Costs incurred after completion of the development projects and
costs incurred subsequent to the purchase of completed projects
are included as improvements.
(2) Depreciation is computed by the straight-line method on lives of
five to forty years.
<PAGE>
E X H I B I T I N D E X
Exhibit Number
in Accordance with
601 of
Regulation S-K Exhibit Description
3.1 Amended and Restated Certificate and Agreement of
Limited Partnership of LIF, a California limited
partnership, filed as Exhibit 3 to Partnership's
Registration Statement No. 2-94509 on Form S-11, as
amended, is incorporated herein by reference.
3.2 Assignment Agreement, filed as Exhibit 10.1 to
Partnership's Registration Statement No. 2-94509 on
Form S-11, as amended, is incorporated herein by
reference.
10.1 Agreement of Limited Partnership for Cattle Creek
Development Partners, Ltd. (Incorporated by reference
to Form 8-K dated August 31, 1994)
10.2 Promissory Note to LIF. (Incorporated by reference to
Form 8-K dated August 31, 1994)
10.3 Bill of Sale, along with the Closing and Settlement
Agreement for the acquisition of Valley View Business
Park. (Incorporation by reference to Form 8-K dated
August 31, 1994)
10.4 Promissory Note to Alpine Bank, along with related Deed
of Trust. (Incorporated by reference to Form 8-K dated
August 31, 1994)
10.5 Promissory Note to Norman Overacker and Elaine
Overacker, along with related Deed of Trust.
(Incorporated by reference to Form 8-K dated
August 31, 1994)
10.6 Closing and Settlement Agreement for acquisition of 701
Cooper Avenue Building. (Incorporated by reference to
Form 8-K dated August 31, 1994)
10.7 Promissory Note to Alpine Bank, along with related Deed
of Trust. (Incorporated by reference to Form 8-K dated
August 31, 1994)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 566
<SECURITIES> 0
<RECEIVABLES> 84
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 95
<PP&E> 10,370
<DEPRECIATION> 2,958
<TOTAL-ASSETS> 9,950
<CURRENT-LIABILITIES> 374
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 1,106
<TOTAL-LIABILITY-AND-EQUITY> 9,950
<SALES> 0
<TOTAL-REVENUES> 1,661
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,284
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 558
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (159)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
