UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1996
Commission File Number 1-8893
ROYAL PALM BEACH COLONY, LIMITED PARTNERSHIP
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 59-2501059
- --------------------------------- ---------------------------------------
(State of other jurisdiction (I.R.S. Employer Identification Number)
of incorporation or organization)
2501 S. Ocean Drive
Hollywood, Florida 33019
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (954) 927-3080
NONE
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last report
Indicate by checkmark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [ X ] NO [ ]
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
CLASS Outstanding at June 30, 1996
----- -----------------------------
Limited Partnership Units 4,485,504 units
<PAGE>
<TABLE>
<CAPTION>
ROYAL PALM BEACH COLONY, LIMITED PARTNERSHIP
BALANCE SHEETS
June 30, September 30,
1996 1995
---------- ----------
(unaudited)
ASSETS
<S> <C> <C>
Cash $ 88,051 $ 83,902
Mortgage notes and other receivables:
Mortgage notes receivable -- 236,153
Other 5,745 435,883
Property held for sale 5,176,871 4,607,661
Other assets 78,421 61,891
---------- ----------
$5,349,088 $5,425,490
========== ==========
LIABILITIES AND EQUITY
Liabilities:
Mortgage payable, bank $1,163,797 $1,010,513
Mortgage payable, general partner 527,248 500,000
Mortgage payable, related party 200,000 --
Accounts payable and accrued
liabilities 1,049,410 840,402
Estimated cost of development
of land and property sold 28,953 14,441
Equity:
Partners' equity, 4,485,504 units
outstanding 2,379,680 3,060,134
---------- ----------
$5,349,088 $5,425,490
========== ==========
See notes to financial statements
<PAGE>
<CAPTION>
ROYAL PALM BEACH COLONY, LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
THREE MONTHS AND NINE MONTHS ENDED
JUNE 30, 1996 AND 1995
(UNAUDITED)
Three Months Ended Nine Months Ended
June 30, June 30,
--------------------- ----------------------
1996 1995 1996 1995
--------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues $ 12,476 $ 10,666 $ 163,717 $ 67,264
--------- --------- ---------- ----------
Cost and expenses:
Cost of sales 5,089 - 111,299 -
Selling, general and
administrative expenses 151,207 292,086 561,964 742,551
Terminated merger costs - - 70,720 -
Depreciation and
property taxes 29,372 46,496 100,188 94,071
--------- --------- ---------- ----------
Total costs and expenses 185,668 338,582 844,171 836,622
--------- --------- ---------- ----------
Net loss $(173,192) $(327,916) $ (680,454) $ (769,358)
========= ========= ========== ==========
Net loss per unit $ (0.04) $ (0.07) $ (0.15) $ (0.17)
========= ========= ========== ==========
Weighted average number of
units outstanding 4,485,504 4,485,504 4,485,504 4,485,504
========= ========= ========== ==========
See notes to financial statements
<PAGE>
<CAPTION>
ROYAL PALM BEACH COLONY, LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
THREE MONTHS AND NINE MONTHS ENDED
JUNE 30, 1996 AND 1995
(UNAUDITED)
Three Months Ended Nine Months Ended
June 30, June 30,
----------- ---------- ---------- ----------
1996 1995 1996 1995
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Cash flows from operating
activities:
Cash was received from:
Collections on sales
and receivables $ 12,000 $ 16,671 $ 384,292 $ 144,676
Interest income 376 6,339 7,462 70,523
Sale of utility system - - 432,800 85,800
Other 100 200 6,399 1,706
----------- ---------- ---------- ----------
12,476 23,210 830,953 302,705
----------- ---------- ---------- ----------
Cash was expended for:
Selling, administrative
and property taxes 100,434 263,473 567,285 667,899
Improvements to
property held
for sale 147,452 260,022 611,468 1,432,080
---------- ---------- ---------- ----------
247,886 523,495 1,178,753 2,099,979
---------- ---------- ---------- ----------
Net cash used in
operating activities (235,410) (500,285) (347,800) (1,797,274)
---------- ---------- ---------- ----------
Cash flow from investing
activities:
Purchase of property and
equipment (1,335) - (1,335) (758)
---------- ---------- ---------- ----------
<PAGE>
<CAPTION>
ROYAL PALM BEACH COLONY, LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
THREE MONTHS AND NINE MONTHS ENDED
JUNE 30, 1996 AND 1995
(UNAUDITED)
(continued)
Three Months Ended Nine Months Ended
June 30, June 30,
----------- ---------- ---------- ----------
1996 1995 1996 1995
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Cash flow from financing
activities:
Net borrowings from loan
payable:
Mortgage payable, bank 1 53,491 153,284 1,010,513
Mortgage payable,
general partner - 500,000 - 500,000
Mortgage payable,
related party 200,000 - 200,000 -
---------- ---------- ---------- ----------
Net cash provided by
financing activities 200,001 553,491 353,284 1,510,513
---------- ---------- ---------- ----------
Net increase (decrease) (36,744) 53,206 4,149 (287,519)
in cash
Cash, beginning of period 124,795 202,518 83,902 543,243
---------- ---------- ---------- ----------
Cash end of period $ 88,051 $ 255,724 $ 88,051 $ 255,724
========== ========== ========== ==========
See notes to financial statements
<PAGE>
ROYAL PALM BEACH COLONY, LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
RECONCILIATION OF NET LOSS TO NET CASH
USED IN OPERATING ACTIVITIES
THREE MONTHS AND NINE MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
Three Months Ended Nine Months Ended
June 30, June 30,
----------------------- -------------------------
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net loss $(173,192) $(327,916) $ (680,454) $(769,358)
--------- --------- ---------- ---------
Adjustments to reconcile net
income to net cash provided
by (used in) operating
activities:
Depreciation 688 - 2,739 -
Provision for doubtful
accounts - (24,250) - (24,250)
Change in assets and
liabilities:
Increase in:
Property held for sale (159,621) (233,194) (569,210) (948,333)
Other assets (17,934) - (17,934)
Accounts payable and
accrued liabilities 236,256 - 236,256 -
Estimated costs of
development of land
and property sold 14,512 - 14,512 -
Decrease in:
Mortgage notes and
other receivables (5,495) (112,456) 666,291 123,420
Other assets (40,994) (100,512) - (64,268)
Accounts payable and
accrued liabilities (61,648) 298,843 - 129,994
Estimated costs of
development of land
and property sold (27,982) (800) - (244,479)
--------- ---------- ----------- ----------
Total adjustments (62,218) (172,369) (332,654) (1,027,916)
--------- ---------- ----------- ----------
Net cash flow used in
operating activities $(235,410) $(500,285) $ (347,800) $(1,797,274)
========= ========= =========== ============
See notes to financial statements.
</TABLE>
<PAGE>
ROYAL PALM BEACH COLONY, LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE AND NINE MONTHS ENDED
JUNE 30, 1996 AND 1995
(UNAUDITED)
Liquidity and Capital Resources
During the nine months ended June 30, 1996, the Partnership incurred
substantial expenses in the planning and development of its properties in
addition to normal ongoing administrative costs. During the fiscal year ended
September 30, 1995, and during most of the quarter ended December 31, 1995, the
Partnership withheld its properties from sale in anticipation of a business
combination which was being negotiated throughout most of the year, but which
negotiations were terminated in December, 1995. Revenues for the three months
ended December 31, 1995, however, included the net proceeds of $140,000 received
upon the sale of four residential lots, offset in part by by approximately
$70,000 of terminated merger expense; and during the three months ended March
31, 1996, the Partnership received $433,000 in payment of an installment on a
contingent note held in respect of a prior sale of a utility system. Revenues
during the three months ended June 30, 1996 were minimal. The Partnership's
deferral of sales in anticipation of the aforesaid business combination was
discussed in Item 1, "Business", (a) "General Development of Business" contained
the Annual Report of the Partnership on Form 10K for the fiscal year ended
September 30, 1995 (hereinafter the "Incorporated 10K"). An extract from the
Incorporated 10K containing said Items 1 and 2 thereof is annexed to this report
as an Exhibit and is incorporated herein by reference. During the three months
ended June 30, 1996 the Partnership also obtained an additional financing
commitment in the amount of $300,000 from Jack Friedland and an affiliate of
Jack Friedland. Mr. Friedland is affiliated with Hasam Realty Limited
Partnership, a general partner of the Partnership. The loan is for a term ending
October 31, 1996, at an interest rate of 2% over the prime rate of Union Bank,
secured by a first mortgage lien on a 4.54 acre tract of undeveloped land in
Palm Beach County and a tract of approximately 30 acres of commercially zoned
land in the Crestwood tract described in Item 2 of the Incorporated 10-K. As a
result of the foregoing, the Partnership's cash balances, which had declined to
$84,000 at September 30, 1995 increased to $125,000 at March 31, 1996 and
decreased to $88,051 at June 30, 1996.
The Partnership is committed to the continuing development of phases II
and III of the Crestwood residential tract, as described in Item 2 of the
Incorporated 10K, as the most efficacious manner in which to enhance liquidation
values. Such development would be financed by approximately $930,000 in net
proceeds from a bond issue currently being prepared by the Indian Trail Water
Control District, and would require additional advances to the Partnership under
its financing arrangements with Union Bank ("Bank"). The Partnership has been
advised that Union Bank is prepared to modify existing loan arrangements to
provide as follows:
(a) The loan commitment, of which $1,163,797 was outstanding at June
30, 1996, would be increased from its current level of $2,175,000 to $2,725,000,
and, as so increased, would continue to be secured by a first mortgage on
Crestwood single family building lots;
(b) The increased loan availability of $1,561,203 would be represented
in part by a Bank letter of credit in the amount of $922,000 for the benefit of
the Indian Trail Water Control District, representing the approximate difference
between the projected remaining cost to develop Phases II and III and the net
<PAGE>
proceeds anticipated from the issuance of bonds by the Indian Trail Water
Control District. Of the balance of the financing availability (approximately
$639,203) $550,000 would be available immediately for Phase II and III
development costs;
(c) The maturity date of the loan would be extended from July 1, 1997
to January 31, 1998.
(d) The Bank would waive the previous requirement that certain sales
occur in Phase I of the Crestwood single-family before funds are made available
for development of Phases II and III.
On August 12, 1996, the Partnership executed an agreement with Lennar
Homes, Inc., a prominent South Florida developer, for the purchase of 86 lots in
the Crestwood Tract for an aggregate of $2,451,000. The Partnership received a
letter of credit deposit of $100,000 (which is currently held in escrow and not
available for current use by the Partnership). Lennar has an inspection period
which expires on or about September 25, 1996, after which, if Lennar determines
to proceed, the deposit will become non-refundable and Lennar will be required
to post an additional letter of credit for $390,200 for a total deposit of
$490,200. The agreement, if Lennar elects to proceed, contemplates that all lots
will be taken and paid for over an 18 month period after completion by the
Partnership of development work, which in turn cannot commence until the bond
issue has been completed. Accordingly, such development completion is not
expected until the summer of 1997. Therefore, it is not anticipated that any
additional funds will be received under the Lennar agreement during the balance
of the current fiscal year or during the fiscal year ending September 30, 1997.
Additional Prospective Land Sales
The Partnership has also negotiated several additional sales of land,
all of which are subject to conditions which the Partnership anticipates will be
satisfied. Such anticipated sales are as follows:
(a) The County of Palm Beach has agreed to purchase 19 partially
developed lots for approximately $100,000 and has made an offer to purchase 16
additional lots for $84,000. The first agreement is expected to close in late
September or early October of 1996. Although a firm contract has not yet been
executed for the second sale, the Partnership believes this sale will also occur
with a closing in November or December of 1996.
(b) The Partnership has executed an agreement to sell 4.54 acres in
the Village of Palm Beach for $325,000, with a closing expected in December,
1996. This sale is subject to zoning and site plan approval, but the Partnership
not not anticipate difficulty in obtaining such approvals.
(c) Foreclosure of a mortgage held by the Partnership having a net
carrying value of $137,614, which the Partnership anticipates will generate
approximately $150,000 prior to the the end of the current calendar year.
(d) In order to enhance the value and salability of the Crestwood
Tract, the Partnership has obtained the rezoning of a 14 acre portion of the
multi-family zoned property in the Crestwood Tract to permit the Partnership to
offer such portion for sale as a shopping center site. The Partnership has
executed an agreement to sell this portion to an unaffiliated shopping center
developer ("Purchaser") in potentially four phases. The first phase relates to
an 11.8 acre tract to be sold for $3.00 per square foot (approximately
<PAGE>
$1,542,024 subject to final survey). While certain conditions remain to be
satisfied, the Partnership expects this Phase to close by late November, 1996
and to produce approximately $1,400,000 in net cash after brokerage and
adjustments.
(e) Pursuant to an option held on lots located within Phase I of the
Crestwood Tract, the Partnership anticipates that 3 lots will be sold for
approximate cash proceeds aggregating $90,000 prior to or shortly after the
close of the current fiscal year.
(f) The Partnership has received an offer from the State of Florida to
purchase the balance of the Partnership's undeveloped land in Hernando Country
for $125,000. This sale is projected to close in October of 1996.
During the current fiscal year, and based upon management's judgment
that ordinary operating expenses will not increase, the Partnership anticipates
that cash flow and liquidity requirements will be satisfied by current cash, the
Union Bank financing described above, land sales, contingent utility receipts
described under Item 2, Properties, "Utility Contingent Receipts" in the
Incorporated 10K, and the proceeds of the Indian Trail Water Control District
bonds. However, in the event that the increased Union Bank financing described
above were not to be made available or the Indian Trail Water Control District
bonds are not sold, the Company would not be able to continue dewvelopment of
the Phase II and III portions of the Crestwood Tract, or would have to seek
alternative financing arrangements. There is no assurance that such alternative
financing could be obtained. Further, as above indicated, other sales of land
described above are subject to conditions which might not be satisfied, although
the Partnership has no present knowledge of circumstances which would render
likely the non-satisfaction of such conditions.
Effect of Land Sales on Future Cash Flow
As indicated in Item 2 in the Incorporated 10K, the Partnership has
determined to develop portions of its remaining properties in order to enhance
their ultimate selling price. Such development will continue whether or not the
Partnership continues to liquidate, contingent upon the availability of
financing, as discussed in Item 2, Properties, "Village of Royal Palm Beach". As
indicated under Item 1, "Factors Affecting Future Operations and Distributions"
in the Incorporated 10K, it is unlikely, in view of management's decision to
continue development activities as an aid to the enhancement of ultimate
liquidation proceeds, that distributions to partners will be made during fiscal
1996.
Assuming that the Partnership continues to liquidate, total net cash
flow which might become available for distribution remains unpredictable due to
uncertain conditions in the South Florida real estate market in which the
Partnership's remaining real estate is located, and the competitive factors
described in Item 1, Business, "Competition" of the Incorporated 10K. These
conditions will continue to affect the realizable value of the Partnership's
remaining land, including decisions by parties holding options on the
Partnership's land to exercise such options in whole or in part. The execution
and successful completion of sales contracts described under "Additional
Prospective Land Sales" could have a substantial positive affect on liquidity
and cash flow in the 1997 fiscal year and enable the partnership to resume
payment of liquidating dividends in the latter part of such year.
<PAGE>
Environmental Matters
There are no environmental contingencies in respect of the Partnership
or its properties. Use of all of the Partnership's properties is subject to
compliance with state and county land use regulations relating to environmental
matters, which the Partnership takes into account in considering the values of
its properties.
Results of Operations
The most significant differences in the results of operations between
the nine months ended June 30, 1996 and June 30, 1995 are the inclusion in
revenues for the nine months ended June 30, 1996 of the net proceeds of $140,000
received upon the sale of four residential lots and the inclusion of the cost
thereof in the Cost of Land Sold and approximately $70,000 of terminated merger
costs. Revenues decreased during the three and nine months ended June 30, 1996
(exclusive of the $140,000 sale) as compared to the three and nine months ended
June 30, 1995 due to reductions in interest income and recognized profit on
installment sales. Revenues were minimal in the three months ended June 30, 1996
and June 30, 1995, and will be almost entirely dependent upon sales of the
Partnership's properties in the future.
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 99 - Extract from Annual Report of the Registrant on Form
10-K for the fiscal year ended September 30, 1995 - Items 1 and 2
(b) Reports on Form 8-K: None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ROYAL PALM BEACH COLONY,
LIMITED PARTNERSHIP
By: Stein Management Company, Inc.
Managing General Partner
DATE: August 14, 1996 By: /s/ Irving Cowan
----------------------
Irving Cowan, President
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 88,051
<SECURITIES> 0
<RECEIVABLES> 5,745
<ALLOWANCES> 0
<INVENTORY> 5,176,871
<CURRENT-ASSETS> 0
<PP&E> 21,843
<DEPRECIATION> 15,065
<TOTAL-ASSETS> 5,349,088
<CURRENT-LIABILITIES> 0
<BONDS> 1,891,045
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 5,349,088
<SALES> 0
<TOTAL-REVENUES> 163,717
<CGS> 0
<TOTAL-COSTS> 844,171
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (680,454)
<EPS-PRIMARY> (0.15)
<EPS-DILUTED> 0
</TABLE>
EXHIBIT 99
Royal Palm Beach Colony, Limited Partnership
Extract from Annual Report of the Registrant on Form 10-K for the Fiscal Year
ended September 30, 1995 -- Items 1 and 2
<PAGE>
PART I
Item 1. Business
(a) GENERAL DEVELOPMENT OF BUSINESS
Royal Palm Beach Colony, Limited Partnership (the "Partnership" or the
"Registrant") was organized under the Delaware Revised Uniform Limited
Partnership Act. The Partnership is a successor to Royal Palm Beach Colony,
Inc., (the "Predecessor Company") a Florida corporation organized in 1963.
Pursuant to a Plan of Complete Liquidation (the "Plan"), the Predecessor Company
transferred all of its assets, subject to all of its liabilities, to the
Partnership in exchange for a number of partnership units ("Units") exactly
equal to the number of shares of common stock of the Predecessor Company
outstanding on July 11, 1985 (the "Effective Date"). On the Effective Date, the
Units were distributed to the former holders of common stock of the Predecessor
Company on the basis of one (1) Unit for each share of common stock of the
Predecessor Company. The Partnership, as a successor to the Predecessor Company,
has registered its Units under Section 12 (b) of the Securities Exchange Act of
1934. Under the Amended Agreement of Limited Partnership of the Registrant, the
term of the Partnership expires December 31, 2005, unless extended by vote of a
majority of the partnership units.
AMERICAN STOCK EXCHANGE LISTING On January 16, 1996 the American Stock Exchange
halted trading in the Partnership's Units pending filing of this Form 10K and
review thereof by the Exchange. The Exchange also advised the Partnership that
it did not currently meet the Exchange's listing standards and that no assurance
could be given that trading in the units would resume. Management believes that
a market for the Partnership's Units may develop over-the-counter if the Units
are not permitted to trade on the Exchange, but there can be no assurance that
such market will develop.
Results of Liquidation Activities
The Partnership's principal business has been to operate, manage and dispose of
the assets which were transferred to it on the Effective Date by the Predecessor
Company.
Since the Effective Date of the Predecessor Company's liquidation, the
Partnership has engaged in a program of asset disposition resulting in the sale
of assets for an aggregate gross consideration of $65,116,575. As of January 31,
1996, the Partnership had distributed an aggregate of $29,156,000, or $6.50 per
Unit, to the general and limited partners. See Item 5 -- Market for the
Registrant's Common Equity and Related Stockholder Matters -- "Prior
Distributions."
<PAGE>
As of September 30, 1995, the Partnership's remaining assets consisted
principally of; (1) mortgages having aggregate principal balances of $285,801
and which are included in the balance sheet in the item "Mortgage Notes
Receivable" (net of deferred profit of $49,648 -- see Note 2 to the financial
statements); (2) a 165 acre tract of land in the Village of Royal Palm Beach
(the "Village"), (a portion of which is now under development: see Item 2 --
Properties -- "Village of Royal Palm Beach"), which land was reacquired in
January, 1992 by foreclosure of a mortgage and which is included in the balance
sheet at $3,767,818 (this tract is hereinafter referred to as the "Crestwood"
tract), (3) unsold land in Palm Beach County, Florida which is included in the
balance sheet at its book value of $487,582, (4) a tract of land in the Village
reacquired by foreclosure in 1993 and included in the balance sheet at $287,197,
(5) contingent receivables relating to a prior sale of utility assets with a
maximum future undiscounted value of $5,945,000 (which amount, other than
$432,800 earned as of September 30, 1995 but not paid to the Partnership until
January, 1996, has not been included in the balance sheet due to its contingent
nature -- see Note 11 to the Financial Statements), and (6) cash in the amount
of $83,902. Through January 31, 1996, there had been no material changes in the
Partnership's real estate assets.
Factors Affecting Future Operations and Distributions
The availability of cash for distribution in the future will depend upon a
variety of factors not currently determinable.
(1) Recent Efforts to Resume Active Business Activities
In early 1992, a large portion of the Partnership's remaining land consisted of
the undeveloped 165 acre "Crestwood" Tract described above, which had been sold
during the process of the Partnership's liquidation but reacquired by the
Partnership in 1992 when the purchaser was unable to service the interest and
amortization payments to the Partnership on a $5,039,952 purchase money
mortgage. Management's attempts to remarket the Crestwood Tract on a bulk basis
were unsuccessful. Management perceived that due to changes in the market for
real estate in southern Florida, the Crestwood Tract would continue to be
difficult to market at acceptable prices. Among other factors depressing the
local market was the "overhang" of large undeveloped tracts which were on the
market as the result of bank insolvencies.
Management also concluded that the market for developed land -- defined for
purposes of this discussion as buildable lots which have been properly zoned and
developed with grading, roads and utility lines brought to the property
boundaries -- was tightening, with local and national builders competing for a
shrinking supply of such developed land. With the liquidation of the Partnership
having progressed to the point at which the major portion of the Partnership's
assets had been liquidated, management began to consider the most effective
means to maximize unitholder value with respect to the balance of the
Partnership's assets.
After study, management concluded that the Partnership's continuing liquidation
should proceed along two tracks.
<PAGE>
First, it was determined that unitholder values could most effectively be
increased if some or all of the Crestwood Tract were temporarily withheld from
sale and selectively developed. In the judgment of management, the prospective
incremental increase in selling prices of developed land over amounts which
might reasonably be anticipated from the sale of the land in its raw state would
substantially exceed the cost of developing such land, and warranted investment
of a portion of the Partnership's cash assets in development activities.
Management therefore commenced the development of one portion of the Crestwood
Tract, consisting of 178 lots zoned for single family housing, in order to
enhance its sale value. Management's decision to commence development was
influenced, in part, by an appraisal obtained in 1992 of the Crestwood Tract
which indicated that such tract had a then current fair market value in the
approximate amount of $4,500,000 and could have a significantly higher value if
rezoning and re-permitting work were accomplished. Management was further of the
opinion that the Crestwood Tract would have an indefinite but substantially
higher value if developed with roads and a utility infrastructure. See Item 2 --
Properties -"Village of Royal Palm Beach."
Second, management concluded that generally strengthening conditions in the
south Florida real estate market might present an opportunity to the Partnership
to capitalize on its status as a publicly traded entity. In early 1994 the
Partnership retained a private consultant to determine whether unitholder values
could further be enhanced by utilizing the Partnership's cash and remaining land
as a vehicle for the resumption of active business operations, either in the
land development business or by expanding its activities into home building and
other real estate-related fields. Management also wished to obtain an
independent review of its assumption that the market value of the Partnership's
units might be enhanced over time were the Partnership to convert from a
liquidating to an active business mode.
Management also concluded that its decision to develop portions of its remaining
Palm Beach County real estate would be consistent either with a decision to
proceed with the Partnership's complete liquidation, to resume business
operations, or to complete its liquidation by acquiring and distributing to
unitholders the securities of another entity in connection with a business
combination. It therefore proceeded with the development plans described above,
and at the same time explored the business and tax implications of the
resumption of business activities and/or business combination with another
entity. The progress of such land development, and financing recently obtained
therefor, is discussed under Item 2 -- Properties -- "Village of Royal Palm
Beach."
Management ultimately concluded that the most logical course for the Partnership
to follow would involve the addition of home building operations. In furtherance
of this objective, the Partnership, during the summer of 1994, retained a
locally recognized consultant to the home building industry to assist it in
identifying possible affiliations in south Florida. After several potential
affiliations were identified, a memorandum of understanding was executed with
Regency Homes, Inc., a prominent, privately-owned South Florida home builder.
The memorandum envisioned a business combination in which the Regency
shareholders, and the Partnership would have acquired 62.5% and 37.5%,
respectively (later modified to 60% and 40%, respectively) of a new entity,
followed by distribution of the Partnership's shares to its unitholders and
liquidation of the Partnership. However, after protracted negotiations over the
terms of the agreement and several downward modifications of Regency's original
earnings projections, negotiations with Regency were suspended in early December
1995 and terminated in late December, 1995.
<PAGE>
While management continues to explore the possibility of a business combination
with an operating business, the Partnership is proceeding with the liquidation
of the its remaining assets, and, in connection therewith, continuing to develop
the residential lots in the Crestwood tract. The status of such dispositions and
development is discussed in Item 2 below.
(2) Cash Available for Distribution
Whether or not the Partnership resumes active business activities, management
intends to continue to invest in the development of portions of the
Partnership's remaining land in Palm Beach County as a means of achieving a
higher return upon sale. Because of the cash requirements for such land
development activities in 1995, together with cash expenditures in connection
with the proposed transaction with Regency Homes, Inc. and normal operating
expenses, no cash was available for distribution in 1995 and it is considered
doubtful that cash will be available for distribution in 1996. See Item 7 --
Management Discussion and Analysis of Financial Condition -- Liquidity and
Capital Resources. If the Partnership ultimately determines to carry its
liquidation to conclusion, the timing of the resumption of liquidating
distributions will depend largely upon its ability to dispose of its remaining
land, developed or undeveloped, and future collections of contingent receivables
relating to a prior sale of a utility plant. See Item 2 -- Properties --
"Utility Contingent Receivable" for a discussion of other factors affecting
future distributions. If management determines that the Partnership should
continue in business, the form in which the Partnership does business, and the
form in which present unitholders hold an equity position, could also change.
Management is unable to predict the distribution policy of the Partnership if it
resumes active business activities or the distribution policy of any business
entity which might result from the combination of the Partnership with another
entity. However, management considers it more likely than not that the
Partnership will complete its liquidation without engaging in a business
combination with another entity.
(b) Financial Information About Industry Segments
Not applicable.
(c) Narrative Description Of The Business
Regulation
Development and sales operations of the Partnership or by potential purchasers
of real estate from the Partnership have been subject to regulation by a number
of local, state and federal agencies concerning the nature and extent of
improvements, and compliance with zoning regulations, building codes, health
requirements and environmental protection. The Partnership believes that it has
been in substantial compliance with all such laws and regulations which affect
its properties and that it has developed the properties to the extent required
by contract or law. If such laws or regulations are amended, in particular those
concerning environmental protection, the cost of compliance could be increased.
Reference is made to the discussion concerning the impact of land use regulatory
issues affecting salability of certain properties remaining in Palm Beach County
in Item 2 -- Properties -- "Acreage in the Vicinity of the Village."
<PAGE>
Competition
The real estate business conducted by the Partnership is highly competitive. The
Partnership's sales of its remaining land will compete with surrounding
developments, and with owners of tracts of land in the area of all its
properties. There are substantial tracts of vacant land and land under
development in the general area of most of the Partnership's remaining real
estate. These competitive considerations could affect the decisions of potential
purchasers of the Partnership's remaining properties.
The Partnership has historically marketed its properties through direct mail
advertising to major brokers and developers, advertisements in major regional
newspapers and direct contacts between officers of the Managing General Partner
and real estate developers and brokers. The Partnership is currently marketing
its remaining properties through local real estate brokers, including Randy
Rieger, who also served as interim Vice President and Chief Operating Officer of
the Partnership's managing general partner between September 1995 and February
1996. See Item 13 -- "Certain Relationships and Related Transactions."
Impact of General Economic Conditions
The development and sale of real estate occurs within a historically cyclical
market, and is significantly influenced by general economic conditions. Sales of
housing units and sales of tracts to builders are particularly affected by the
costs and availability of mortgage financing and the rise and fall of interest
rates in general. Interest rates have moved in a narrow range during the past
year, and declined slightly in December 1995. If significant increases occur in
the future, the real estate market could suffer as a result.
Personnel
As of January 31, 1996, Stein Management Company, Inc. ("Steinco") the Managing
General Partner, employed 3 persons.
Office Facilities
The Partnership's executive headquarters are located at 2501 S. Ocean Drive,
Hollywood, Florida 33019. The premises are owned by an affiliate of Hasam Realty
Limited Partnership ("Hasam L.P."), a general partner of the Partnership, and
are being made available to the Partnership as an accommodation without charge.
<PAGE>
Item 2. Properties
Palm Beach County, Florida
The Company originally owned approximately 28,000 acres in Palm Beach County, in
southeastern Florida, approximately 4,200 of which were located within the
Village.
The Village of Royal Palm Beach
The village, an incorporated municipality, is approximately eight miles from the
Palm Beach International Airport and eleven miles west of Palm Beach. Two major
area highways, Southern Boulevard and Okeechobee Road, lead directly from Palm
Beach through West Palm Beach to the Village. The Village has a population of
approximately 16,000 and is primarily residential. The Village has been
developed in accordance with a master plan and includes schools, shopping
facilities, community recreation areas, and its own police and fire departments.
Although the Partnership had previously sold all of its land in the Village, it
reacquired in 1992, through foreclosure of a defaulted purchase money mortgage,
the 165 acre Crestwood Tract of undeveloped land in the Village. When
reacquired, the Crestwood Tract was zoned and preliminary approval had been
obtained for the development of 172 single-family homesites (the "Single Family
Tract") and 625 multi-family units. The Crestwood Tract is bisected by a
principal Village road and has access to all utilities, but was otherwise
undeveloped with the exception of the existence of portions of a drainage
system.
Commercial Tract within the Crestwood Tract
In order to enhance the value and salability of the Crestwood Tract, the
Partnership has obtained the rezoning of a 28 acre portion of the multi-family
zoned property in the Crestwood Tract to permit the Partnership to offer such
portion for sale as a shopping center site. The Partnership expects to receive
site-plan approval in mid-1996. The Partnership has executed an agreement to
sell this portion to an unaffiliated shopping center developer ("Purchaser") in
four phases. The first phase relates to an 11.8 acre tract to be sold for $3.00
per square foot (approximately $1,542,024 subject to final survey), with a
closing subject to soil testing, availability of sufficient utility connections,
environmental matters, final site-plan approval by June, 1996 and approval of
the premises by a major supermarket chain as a site for a new supermarket. In
addition, the Purchaser has an inspection period ending in May, 1996 during
which Purchaser can terminate the agreement if it determines that the property
is not suitable for Purchaser's purposes. All conditions to closing must be
satisfied and the closing must occur ("First Closing") on or before December 31,
1996. The Purchaser's only liability for failure to close will be its loss of an
initial deposit of $15,000, plus additional deposits aggregating $55,500
required if the inspection period expires, the supermarket chain approves the
site, and the Purchaser does not terminate the agreement.
<PAGE>
The second and third phases consist of two parcels which are covered by the
rezoning process referred to above and adjoin the shopping center site, but as
to which building permits are not expected to be available for approximately
four years. As to such parcels, the Partnership has agreed, during a five-year
period following the First Closing, to accord an option to Purchaser to acquire
the parcels, with the price to be paid dependent on the terms upon which the
Purchaser leases or sells such parcels to an unaffiliated third party. In such
event the Purchaser will pay to the partnership, (i) in the event of a lease, a
sum equal to the five times the average annual rental under the lease, and (ii)
in the event of a sale, 50% of the net proceeds of the sale; provided that the
partnership is not required to accept less than $3.50 per square foot. If the
Partnership obtains an unsolicited offer to lease or purchase the parcels
("Third Party Offer") which the Partnership desires to accept, the Purchaser may
exercise a right of first refusal in which case the Partnership must accept (i)
in the event of a lease, a sum equal to five times the average annual rental to
be paid during the first five years of the proposed lease, and (ii) in the event
of a sale, 50% of the net proceeds the Partnership would have received under the
Third Party Offer.
The fourth phase relates to a 14-acre parcel as to which rezoning from the
current multi-family to commercial use is not considered feasible for several
years. The Purchaser has been granted an option ending four years after the
First Closing to acquire this parcel at $3.50 per square foot (approximately
$2,129,000 subject to survey). The Partnership is entitled to make an earlier
sale of this parcel, commencing two years after the First Closing, for
multi-family residential purposes only, and for a price which is less than the
option price, subject to the Purchaser's right of first refusal at the same
price.
Randy Rieger, who became vice-president of the Partnership's managing general
partner in September, 1995 for an interim period following the death of its
President, is entitled to a commission of 10% of the net proceeds to the
Partnership on all of the above-described transactions. See Item 13.
In addition, as a result of management's decision to develop portions of the
Crestwood Tract, the Partnership has replanned the configuration of the entire
tract. This project included a redesign of the Single Family Tract, and the
Partnership has now received final plat approval to increase to 198 the number
of lots which may be developed in the Single Family Tract. "Development," as
such term is applied to single-family lots, entails the completion of all
necessary zoning, land use, environmental and other required regulatory
procedures, the installation of roads and utility connections to each lot and
the provision of drainage facilities.
The Partnership has recently completed the off-site utility infrastructure for
the entire Crestwood Tract. The cost of such construction approximated $975,000.
This construction was financed with the proceeds of a $975,000 construction loan
from Union Bank of Florida, ("Union Bank Loan " -- See Item 13 -"Certain
Relationships and Related Transactions"). See Item 7 -Management Discussion and
Analysis -- "Liquidity." Under the terms of the Union Bank Loan, the Partnership
is paying interest at a rate equal to 2% above the bank's prime lending rate.
The Union Bank's aggregate commitment in respect of the Residential Tract is
$2,175,000. The Union Bank Loan, which is secured by a first mortgage on the
1978 undeveloped homesites, is due in full on July 1, 1997. Individual lots may
be released from the mortgage upon sale upon a prepayment of $20,000 per lot.
<PAGE>
The Partnership is developing the residential lots in three phases, of which the
first phase, comprising 32 lots, is currently being developed with on-site
improvements. financed by $350,000 in additional borrowings under the Union Bank
Loan. Four of the residential lots in the first phase have already been
purchased by Regency Homes, Inc. for the sum of $35,000 per lot, and the balance
of 28 lots are subject to an option in favor of Regency at $36,000 per lot for
the 14 remaining waterfront lots and $30,000 for the 14 remaining "dry" lots (an
additional $924,000 if all options are exercised). In order to preserve the
option, Regency must purchase a minimum of three lots per month commencing in
May, 1996. The agreement with Regency Homes, Inc. was unrelated to and not
contingent upon the merger described in Item 1 -- Recent Efforts to resume
Active Business Operations.
The Partnership proposes to finance on-site development of the balance of the
Single Family Tract, anticipated to cost in the range of $1.9 million, with the
balance of the borrowing available under the Union Bank Loan and public bond
financing through the Indian Trail Water Control District (the "District"),
which the Partnership anticipates will produce net available funds of
approximately $1,000,000. Union Bank is not obliged to fund the balance of its
commitment unless bond issue proceeds of a minimum of $1,000,000 are realized.
The District has adopted the Partnership's proposed development plan, a
court-appointed commission has reported favorably upon such plan and the
District has authorized the initiation of procedures with a view to issuance of
the bonds. The Partnership intends to seek issuance of the bonds during
mid-spring of 1996. The District's ability to sell such bonds will be subject to
financial market and other variable factors which cannot be predicted at this
time. The Partnership's ability to proceed with on-site development of these
sites would be adversely affected if such bank and/or bond financing proves to
be unavailable. The additional financing anticipated from Union Bank could be
deferred or said bank's obligation to make further advances could expire without
further funding if the Partnership does not sell at least 20 single-family lots
in first 32-lot phase on or before May, 1996. In turn, the Partnership's ability
to meet this schedule depends upon the rate at which Regency Homes, Inc., which
holds options on these lots, is able to sell and construct homes thereon.
Regency has the right to defer additional purchases until May 1996 without
losing its options. Management believes that the market for homes on such lots
is currently strong.
In March, 1993 the Partnership reacquired a separate tract of five acres in the
Village by accepting a deed in lieu of foreclosure on a mortgage with a
principal balance of $300,000 (See Item 7 --"Foreclosure Transactions"). This
parcel is bordered by a golf course and a principal Village road, is zoned for
approximately 100 multi-family residential units and is being offered for sale
in its present state without further development.
Included in Property Held For Sale at September 30, 1995 is the net carrying
value of a mortgage note receivable having a net carrying value of $137,614 on
which foreclosure action has been commenced. Management is of the opinion that
the realizable value of the underlying property is in excess of the current book
value of the mortgage.
<PAGE>
Utility Contingent Receivable
In 1983 the Partnership's Predecessor Company sold to the Village of Royal Palm
Beach a water and sewage treatment system servicing the Village. Pursuant to the
agreement of sale ("Utility Contract"), the Predecessor company received
$2,510,000 on closing, and was entitled to future payments to a maximum of
$10,900,000 as future connections, measured by consumption increases, were made
to the system over a period ending August, 2001. As of September 30, 1995,
$5,708,000 had not been received or earned. The Utility Contract also provided
for contingent extension periods aggregating not more than three additional
years to compensate for possible future governmental building moratoriums or
water use restrictions. The Partnership's consultants have advised it that the
term has been extended through 2003 as a result of water usage restrictions
imposed by the South Florida Water Management District in 1990 and 1991 and
moratorium actions taken by the Village of Royal Palm Beach in 1985 and 1986.
The Utility Contract also calls for payments to the Partnership equal to 25% of
any "Guaranteed Revenues" (payment by developers to secure guaranteed
allocations of plant capacity) collected by the Village to a maximum payment of
$500,000, of which $262,657 has already been received. It is not possible to
predict the amount or timing of future revenues to the Partnership under this
program.
To date, the Partnership has received the following Utility Contract payments:
<TABLE>
<CAPTION>
Amount Received Based On
---------------------------------
Fiscal Year Ended Consumption Guaranteed
September 30, Increases Revenues
- ----------------- ----------- ----------
<S> <C> <C>
1984 $919,000
1985 830,000
1986 637,000
1987 859,000
1988 240,000 $ 30,000
1989 761,000 45,000
1990 -0- 35,000
1991 293,000 21,000
1992 357,000 37,000
1993 168,000 47,000
1994 58,000 27,000
1995* 413,000 20,000
---------- --------
Total $5,535,000 $262,000
+========= ========
</TABLE>
- ----------------------------------
*Paid in January, 1996.
<PAGE>
The Utility Contract with extensions management believes have already
accumulated will expire in 2003, subject to extensions of up to one additional
year. The ability of the Partnership to realize the maximum price is dependent
upon the rate at which the population in the Village grows, and levels of water
consumption which in turn depends upon economic, social and climatic factors
which cannot be predicted. Historically, water consumption tends to increase
based upon increases in population. During most of fiscal 1990, however, due to
drought conditions existing in most Southern Florida, the South Florida Water
Management District imposed mandatory water usage restrictions. The imposition
of these restrictions resulted in a decrease in aggregate water consumption in
the area from which the Partnership's receipts are projected while population
was increasing.
Management believes that there remain sufficient potential new home water
hookups in the area served by the utility to enable the Partnership to realize
the maximum remaining $5,708,000 in contingent payments under the Utility
Contract. There can be no assurance that the rate of new construction or water
consumption in such area will be sufficient to enable the Partnership to receive
the full amount or even a substantial portion of such payments prior to the
expiration of the contingent payment term.
Acreage in the Vicinity of the Village
Substantially all of the property previously owned by the Predecessor Company in
Palm Beach County outside of the Village limits, originally aggregating
approximately 23,800 acres, was sold under the Predecessor Company's retail
installment sales program, which terminated prior to the inception of the
Partnership. The Partnership currently retains a tract of approximately 483
acres, and additionally holds approximately 206 one-acre lots, located
approximately eight miles northwest of the Village.
The 206 lots have been improved with graded unpaved access roads and drainage
facilities. The Partnership has not sold any of these lots. The timing of future
sales of these lots, the manner in which they may be developed and the ultimate
realizable prices for these lots are dependent upon a complex and interrelated
number of factors arising out of governmental regulations concerning permissible
land use.
Palm Beach County has adopted land development regulations under which new
development will not be permitted unless adequate public facilities (such as
roads) will be in place concurrently with the impacts of such development. The
Indian Trail Water Control District ("District") is currently preparing a
revised drainage plan which would result in an exemption for such 206 lots from
further compliance with such concurrency requirements and would allow the
issuance of building permits for single-family residences on such lots. Such
plan has been opposed by other governmental agencies, however, and it is
uncertain whether the plan will be adopted. If the plan is not approved these
lots may not be usable for residential purposes. Further, even assuming a
favorable result, the administrative process leading to the availability of
building permits cannot be expected to be completed before mid-1998. However,
management is of the opinion that the realizable value of these lots, in the
aggregate, is in excess of its current book value of $132,754.
<PAGE>
The 483-acre tract had been reserved for use by the District, in part, as a
water retention area for such revised drainage plan. The Partnership is
presently evaluating possible alternative uses of this tract, which contains a
significant amount of wetlands. Since the use of this land is also dependent on
the extension of roads, and development activity on this tract may meet with
opposition from governmental agencies concerned with wildlife and wetlands
preservation, it is not possible to estimate the realizable value of this land.
However, management is of the opinion that its realizable value is in excess of
its current book value of $213,421.
Elsewhere in the vicinity of the Village the Partnership previously held a
disputed claim to approximately 24 acres of undeveloped land. This claim had not
originally been accorded value on the Partnership's balance sheet and was
considered to have little or no value. During 1994, in connection with the
resolution of this claim with adjoining land owners, and in order to give value
to such claim, the Partnership relinquished a portion of its claim, acquired 5
adjoining acres for $141,879, and executed a joint development agreement with
one of such adjoining landowners relating to the Partnership's acreage and such
landowner's acreage (comprising approximately 22 acres in the aggregate of which
the Partnership now owns approximately 12 acres). The Partnership and the joint
developer have recently entered into an agreement to sell the entire combined
parcel for a price of $1.90 per square foot, subject to survey, which would
result in a gross selling price of approximately $1,820,808 of which the
Partnership's share would be approximately $927,500. The sale is subject to the
purchaser's ability to have the premises rezoned for use as a shopping center,
approval of the premises as a site for a supermarket by a major supermarket
chain, and the issuance of all necessary building and other permits, with a
closing date (subject to all of the foregoing) no later than June 30, 1997. The
agreement is also subject the ability of the Partnership to cause the owner of
an adjoining residence, which is not owned by the Partnership or its joint
developer, to sell such residence to the purchaser. There is no assurance that
such permits will be obtained, nor can the Partnership predict whether the
rezoning process, which involves proceedings before several governmental bodies,
or the sale of the aforesaid residence, could be completed or obtained within
the required time frame.
Hernando County, Florida
The Predecessor Company originally owned approximately 17,600 acres in Hernando
County, Florida, located 56 miles from Tampa, with 13 miles of road frontage
along U.S. Highway 19, a major area highway. In 1994 the Partnership sold a 14
acre tract in this area for $125,000. The Partnership presently retains
approximately 20 acres in this area with negligible value.
<PAGE>
Lake County, Florida
The Predecessor Company originally owned approximately 12,300 acres in Lake
County, Florida, located in Central Florida on the outskirts of the Ocala
National Forest approximately 39 miles from Ocala and 6 miles from Deland. Lake
County is predominantly rural with a population of approximately 14,000. At
September 30, 1992, the Partnership owned no property in Lake County; however,
in March of 1993 the Partnership accepted a deed in lieu of foreclosure on a
mortgage on a 1400 acre portion of this property with a principal balance of
$706,000. See Item 7 -- "Foreclosure Transactions." Approximately 1,000 acres of
this property which are remote, undeveloped and may be unsuited for any
development, were sold by the Partnership for a cash price of $350,000 in June,
1993. The balance of the tract was sold in 1994 in two transactions for prices
aggregating $360,000, of which $248,000 was represented by a purchase money
mortgage payable over a five year term. In November 1995 this mortgage having a
principal balance of $222,471 and deferred profit of $48,958, was sold for
$170,000.
