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 March 31, 1997
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 March 31, 1997
----- --------------------------------
Limited Partnership Units 4,485,504 units
<PAGE>
INDEX
PART I. Financial Information
Balance sheets -
March 31, 1997 and
September 30, 1996
Statements of operations -
Three months and six months ended
March 31, 1997 and 1996
Statements of cash flows -
Three months and six months ended
March 31, 1997 and 1996
Notes to financial statements
Management's discussion and analysis
of financial condition and results
of operations
Part II. Other information and signatures
<PAGE>
<TABLE>
<CAPTION>
ROYAL PALM BEACH COLONY, LIMITED PARTNERSHIP
BALANCE SHEETS
March 31, September 30,
1997 1996
------------ ---------
(unaudited)
<S> <C> <C>
ASSETS
Cash ....................................... $ 42,925 $ 41,451
Other receivables .......................... 4,572 133,318
Property held for sale ..................... 4,750,053 5,249,988
Other assets ............................... 16,236 61,377
---------- ----------
$4,813,786 $5,486,134
========== ==========
LIABILITIES AND EQUITY
Liabilities:
Mortgage payable, bank ................... $1,499,639 $1,212,412
Mortgage payable, general partner ........ -- 527,249
Mortgage payable, related party .......... -- 325,000
Accounts payable and accrued
liabilities ............................ 387,922 1,037,440
Estimated cost of development
of land and property sold .............. 14,142 14,142
Equity:
Partners' equity, 4,485,504 units
outstanding ..................... 2,912,083 2,369,891
---------- ----------
$4,813,786 $5,486,134
========== ==========
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ROYAL PALM BEACH COLONY, LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
THREE MONTHS AND SIX MONTHS ENDED
MARCH 31, 1997 AND 1996
(UNAUDITED)
Three Months Ended Six Months Ended
March 31, March 31,
--------------------------- ---------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues ..................... $ 1,659,912 $ 7,197 $ 1,980,531 $ 151,241
----------- ----------- ----------- -----------
Cost and expenses:
Cost of sales .......... 774,480 -- 892,963 106,210
Selling, general and
administrative expenses 298,325 233,768 416,799 379,768
Interest ............... 10,313 15,371 33,434 30,989
Terminated merger costs -- 5,000 -- 70,720
Depreciation and
property taxes ........ 63,447 28,920 95,143 70,816
----------- ----------- ----------- -----------
Total costs and expenses 1,146,565 283,059 1,438,339 658,503
----------- ----------- ----------- -----------
Net income (loss) ............ $ 513,347 $ (275,862) $ 542,192 $ (507,262)
=========== =========== =========== ===========
Net income (loss) per unit ... $ 0.11 $ (0.06) $ 0.12 $ (0.11)
=========== =========== =========== ===========
Weighted average number of
units outstanding .......... 4,485,504 4,485,504 4,485,504 4,485,504
=========== =========== =========== ===========
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ROYAL PALM BEACH COLONY, LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
THREE MONTHS AND SIX MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
Three Months Ended Six Months Ended
March 31, March 31,
---------------------------- ----------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Cash was received from:
Collections on sales
and receivables ............... $ 1,658,505 $ $ 1,978,945 $ 372,292
Interest Income ................ 407 1,198 586 7,086
Sale of utility system ......... 127,393 432,800 127,393 432,800
Other .......................... 1,000 5,999 1,000 6,299
----------- ----------- ----------- -----------
1,787,305 439,997 2,107,924 818,477
----------- ----------- ----------- -----------
Cash was expended for:
Selling, administrative
and property taxes ............ 754,416 250,302 937,764 463,763
Interest paid (net of
amounts capitalized) .......... 77,259 1,173 79,307 3,088
Improvements to property ....... 257,242 223,034 524,357 464,016
----------- ----------- ----------- -----------
1,088,917 474,509 1,541,428 930,867
----------- ----------- ----------- -----------
Net cash provided by (used in)
operating activities ............... 698,388 (34,512) 566,496 (112,390)
----------- ----------- ----------- -----------
Cash flow from financing activities:
Net borrowings from mortgage
notes payable ................... (697,248) 105,152 (565,022) 153,283
----------- ----------- ----------- -----------
Net increase in cash ................ 1,140 70,640 1,474 40,893
Cash, beginning of period ........... 41,785 54,155 41,451 83,902
----------- ----------- ----------- -----------
Cash, end of period ................. $ 42,925 $ 124,795 $ 42,925 $ 124,795
=========== =========== =========== ===========
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ROYAL PALM BEACH COLONY, LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
RECONCILIATION OF NET INCOME (LOSS) TO NET CASH
PROVIDED BY (USED IN) OPERATING ACTIVITIES
THREE MONTHS AND SIX MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
Three Months Ended Six Months Ended
March 31, March 31,
------------------------ ------------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net income (loss) ............ $ 513,347 $(275,862) $ 542,192 $(507,262)
--------- --------- --------- ---------
Adjustments to reconcile net
income (loss) to net cash
provided by (used in)
operating activities:
Depreciation .............. 689 1,026 1,377 2,051
Change in assets and
liabilities:
Increase in:
Property held for sale .. -- (259,723) -- (409,589)
Decrease in:
Mortgage notes and
other receivables ...... 126,946 432,800 128,746 671,786
Property held for sale .. 590,605 -- 499,936 --
Other assets ............ 27,380 20,624 43,763 40,994
Accounts payable and
accrued liabilities .... (560,579) 46,123 (649,518) 61,648
Estimated costs of
development of land
and property sold ...... -- 500 -- 27,982
--------- --------- --------- ---------
Total adjustments ............ 185,041 241,350 24,304 394,872
--------- --------- --------- ---------
Net cash flow provided by
(used in) operating
activities ................. $ 698,388 $ (34,512) $ 566,496 $(112,390)
========= ========= ========= =========
See notes to financial statements
</TABLE>
Supplemental information concerning operating and financing activities:
During February, 1996, the accrued interest expense owed on the mortgage payable
general partner was refinanced and added to the principal of the original
mortgage thus increasing the principal to $527,249.
<PAGE>
ROYAL PALM BEACH COLONY, LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SIX AND THREE MONTHS ENDED
March 31, 1997 AND December 31, 1996
(UNAUDITED)
1. Interim financial statements:
The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-Q and do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the six months and three
months ended March 31, 1997 are not necessarily indicative of the results that
may be expected for the fiscal year ending September 30, 1997. These statements
should be read in conjunction with the financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1996.
2. Income tax:
The Partnership has made no provision for income taxes since it is not
subject to income taxes. Instead, the partners are required to include in their
income tax returns their share of the Partnership's taxable income or loss.
<PAGE>
ROYAL PALM BEACH COLONY, LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SIX AND THREE MONTHS ENDED
March 31, 1997 AND December 31, 1996
(UNAUDITED)
Results of Operations
During the six months ended March 31, 1997, the Partnership had
revenues totaling $1,980,531. Of the foregoing, approximately $1,538,757 was
realized in February, 1997 on the sale of a 14 acre portion of the Partership's
"Crestwood" tract for use as a shopping center site. The Partnership also sold
to the County of Palm Beach, 35 one-acre lots out of a 206 acre tract owned by
the Partnership in Palm Beach County, for aggregate prices during the six months
ended March 31, 1997 of $190,108; of these, 18 were sold during the quarter
ended March 31, 1997. An additional $125,000 was realized during the quarter
ended December 31, 1996 on the sale of the Partnership's remaining undeveloped
land in Hernando County to the State of Florida and three residential lots in
Hernando County for gross proceeds of $90,000.
Revenues for the three months ended December 31, 1996, were $7,197.
Liquidity and Capital Resources
During the quarter ended March 31, 1997, the Partnership discharged
substantial obligations with the proceeds of the foregoing sales, including
indebtedness to affiliates and obligations relating to prior, discontinued
merger negotiations, as a result of which the Partnership's cash balances, which
were $41,000 at September 30, 1996 remained at approximately the same level
($43,000) at March 31, 1997. See Financial Information - Statements of Cash
Flows.
The Partnership's future revenues will depend solely upon its ability
to develop and sell its remaining real estate, and upon receipts from a prior
sale of a utility plant. The Partnership's properties are described in Item 2 of
its report on Form 10-K for the year ended September 30, 1996 (the "Incorporated
1996 10K"). An extract from the Incorporated 1996 10K containing Item 2 thereof
is annexed to this report as an Exhibit and is incorporated herein by reference.
As described in of the Incorporated 1996 10K, the Partnership is
committed to the continuing development of phases II and III of the "Crestwood"
residential tract as the most efficacious manner in which to enhance liquidation
values. The Partnership is currently implementing on-site development of the 166
lots in Phases II and III of the Residential Tract, anticipated to require
expenditures from and after April 1, 1997 in the range of $1.9 million, which
development is being financed with the balance of its borrowing available under
the Union Bank Loan referred to in the following paragraph and the $1,074,000 of
net proceeds of a public bond financing effected in November, 1996 by the Indian
Trail Water Control District (the "District.) The bonds are a direct obligation
of the District and not of the Partnership, and interest and principal on the
bonds will be payable from taxes levied on the lots in the Residential Tract.
Such bond issue resulted in an aggregate real estate tax increase of
approximately $117,000 per annum on the entire Residential Tract, of which
amount $600 is allocable to each lot individually.
<PAGE>
ROYAL PALM BEACH COLONY, LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SIX AND THREE MONTHS ENDED
March 31, 1997 AND December 31, 1996
(UNAUDITED)
During the quarter ended December 31, 1996 the Partnership's financing
arrangements with Union Bank ("Bank") were amended to increase the Bank's loan
commitment from $2,175,000 to $2,725,000, and the maturity date of the loan was
extended to January 31, 1998. The Partnership is required to apply $20,000 of
the proceeds of each lot sale to payment of the Union Bank Loan.
Under the Partnership's agreement with Lennar Homes, Inc. ("Lennar"),
as described in the Incorporated 1996 10K, Lennar has contracted to purchase of
86 lots in Phase II of the Residential Tract for an aggregate of $2,451,000. It
is anticipated that closing on at least 22 lots will occur during the summer of
1997, resulting in gross proceeds to the Partnership of approximately $627,000
and net proceeds, after mandatory loan reductions of $20,000 per lot and
brokerage commissions and other selling expenses, of approximately $140,000.
Lennar's obligations are subject to certain conditions as described in the
Incorporated 1996 10K.
As described in the Incorporated 1996 10K, the Partnership obtained the
rezoning of a 28 acre portion of the Crestwood Tract previously zoned for
multi-family housing to permit the Partnership to develop a 14 acre portion for
use as a shopping center site. The Partnership has executed an agreement to sell
the entire 28 acre portion to an unaffiliated shopping center developer
("Purchaser") in four phases. The closing on the first phase, consisting of a
14-acre shopping center site, occurred in February, 1997. See "Results of
Operations" above. The completion of the second, third and fourth phases is
subject to numerous contingencies described in the Incorporated 1996 10-K and
revenues under current contractual arrangements with the Purchaser are not
likely to be received for several years.
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 "Utility Contingent Receipts" in the Incorporated 1996 10K, and the
proceeds of the Indian Trail Water Control District bonds. As above indicated,
however, 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.
Affect of Land Sales on Future Cash Flow
As indicated in Item 2 in the Incorporated 1996 10K, the Partnership has
determined to develop portions of its remaining properties in order to enhance
their ultimate selling price. 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
1997. However, the successful completion of sales contracts described above
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 early part of the 1998 fiscal year.
<PAGE>
ROYAL PALM BEACH COLONY, LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SIX AND THREE MONTHS ENDED
March 31, 1997 AND December 31, 1996
(UNAUDITED)
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
competition from other owners and developers of real estate in the South Florida
market. 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 rate of contruction in the Village of Royal Palm Beach could also
significantly affect future payments to the Partnership under the contract
described under the caption "Utilities Contingent Receviable in the Incorporated
1996 10-K. Although maximum future payments under the Utilities Contingent
Receivable would total $5,603,000 the Partnership received an annual payment of
only $129,000 with respect to the contract year ended 1996, (received in late
January, 1997) which was substantially less than the $433,000 received in the
previous 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. There can be no assurance, particularly in
view of the decline in payments from 1995 to 1996, that the rate of new
construction or water consumption in such area will increase to a level which is
sufficient to enable the Partnership to receive the full amount, or even a
substantial portion of such maximum payments prior to the expiration of the
contingent payment term.
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.
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits -
99 - Copy of Items 1 and 2 from Annual Report of the Report
of the Registrant on Form 10-K for the fiscal year ended
September 30, 1996.
(b) Reports on Form 8-K - None
<PAGE>
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: May 15, 1997 By: /s/David B. Simpson
-------------------
Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 42,925
<SECURITIES> 0
<RECEIVABLES> 4,572
<ALLOWANCES> 0
<INVENTORY> 4,750,053
<CURRENT-ASSETS> 0
<PP&E> 21,843
<DEPRECIATION> (17,129)
<TOTAL-ASSETS> 4,813,786
<CURRENT-LIABILITIES> 387,922
<BONDS> 1,499,639
0
0
<COMMON> 0
<OTHER-SE> 2,912,083
<TOTAL-LIABILITY-AND-EQUITY> 4,813,786
<SALES> 1,980,531
<TOTAL-REVENUES> 1,980,531
<CGS> 892,963
<TOTAL-COSTS> 892,963
<OTHER-EXPENSES> 511,942
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 33,434
<INCOME-PRETAX> 542,192
<INCOME-TAX> 0
<INCOME-CONTINUING> 542,192
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 542,192
<EPS-PRIMARY> .12
<EPS-DILUTED> 0
</TABLE>
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 a review of, among other matters, the Partnership's
inability to meet the Exchange's listing standards. The Partnership's units did
not resume trading on the Exchange and, following such review, were delisted on
March 28, 1996. See Item 5. The Units are currently trading over-the-counter
under the symbol "YYGHA."
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 $65,298,575. As of December
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."
As of September 30, 1996, the Partnership's remaining assets consisted
principally of; (1) 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 $4,476,742 (this tract is hereinafter referred to as the "Crestwood"
tract), (3) unsold land in Palm Beach County, Florida which is included in the
<PAGE>
balance sheet at its book value of $485,596, (4) a tract of land in the Village
reacquired by foreclosure in 1993 and included in the balance sheet at $287,650,
(5) contingent receivables relating to a prior sale of utility assets with a
maximum future undiscounted value of $5,603,000 (which amount, other than
$129,000 earned as of September 30, 1996 but not payable to the Partnership
until January, 1997, 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 $41,451. Through December 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.
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 originally of 170 lots zoned for
single family housing (increased in a revised site-plan to 198 lots), 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
<PAGE>
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.
After several potential affiliations were identified, a memorandum of
understanding was executed with Regency Homes, Inc., a prominent,
privately-owned South Florida home builder, envisioning a business combination
of the two entities. However, protracted negotiations with Regency were
suspended in early December 1995 and terminated in late December, 1995.
While management might consider a business combination with an
appropriate operating business, it is not actively seeking such transactions and
no discussions concerning any such transaction have taken place. The Partnership
is proceeding with the liquidation of the its remaining assets. In connection
therewith, the Partnership is continuing to develop the residential lots in the
Crestwood tract, and may develop other properties if such development would
enhance liquidation values. The status of real estate dispositions and
development is discussed in Item 2 below.
(2) Cash Available for Distribution
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 a substantial reduction in sales revenues
in 1993 and 1994, and 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 has
<PAGE>
been available for distribution since December 1992. Although at currently
targeted sales prices the Partnership could realize cash proceeds from the sale
of the Crestwood lots in a range exceeding $5,000,000, there can be no assurance
that currently targeted prices will be realized, and initial sales proceeds will
be applied to repayment of debt, including bank financing incurred for
development work expected to total approximately $2,625,000 It is therefore
considered doubtful that cash will be available for distribution in 1997. See
Item 2 - Properties - Development and Sale of Residential Lots; and Item 7 --
Management Discussion and Analysis of Financial Condition -- Liquidity and
Capital Resources.
The timing of the resumption of liquidating distributions will depend
largely upon the timing of future sales of the Partnership's remaining land
(developed or undeveloped) and future collections of contingent receivables
relating to a prior sale of a utility plant. See Item 2 -- Properties, for a
discussion of other sources of and anticipated timing of the receipt of revenue
which will affect future distributions.
(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."
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.
<PAGE>
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 served as interim Vice President and Chief Operating Officer
of the Partnership's managing general partner between September 1995 and
February 1996. Mr. Rieger currently provides services as an independent
consultant to the Partnership for management services in addition to ongoing
brokerage services. 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, 1997, Stein Management Company, Inc. ("Steinco") the
Managing General Partner, employed 2 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.
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 Villaqe 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.
<PAGE>
The Crestwood Tract
Although the Partnership had previously sold nearly 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 is otherwise
undeveloped with the exception of the existence of portions of a drainage
system.
Commercial Land within the Crestwood Tract
In order to enhance the market value of the Crestwood Tract, the
Partnership obtained the rezoning of a 28 acre portion of the Crestwood Tract
previously zoned for multi-family housing to permit the Partnership to develop a
14 acre portion for use as a shopping center site. The Partnership received
site-plan approval in mid-1996. The Partnership has executed an agreement to
sell the entire 28 acre 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). The closing on
this phase was subject to soil testing, availability of sufficient utility
connections, environmental matters, site-plan approval and approval of the
premises by a major supermarket chain as a site for a new supermarket. All of
such conditions have now been satisfied, the parties are awaiting the issuance
of a building permit and the satisfaction of other conditions which are
considered likely to occur during January, 1997. The closing is therefore
expected to take place by the end of February, 1997. Were the Purchaser to
refuse to close, which is considered highly unlikely, its only liability would
be its loss of deposits presently aggregating $71,000.
The second and third phases consist of two additional parcels in the 14
acre portion rezoned as described 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 pending closing on the first phase, to accord
an option to the 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 itself obtains an
unsolicited offer to lease or purchase the parcels 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 by the third party during the first five
years of the proposed lease, and (ii) in the event of a sale, 50% of the net
proceeds to be paid by the third party.
<PAGE>
The final phase relates to a contiguous 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). However, after two years from the
first closing, the Partnership for multi-family residential purposes only, 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.
Residential Lots within the Crestwood Tract
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 has included a redesign of the Single Family Tract, and the
Partnership has now received final plat approval to increase to 198 the number
of residential lots which may be developed for single family use (hereinafter
the "Residential 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.
In 1995, the Partnership completed the off-site utility infrastructure
for the entire Crestwood Tract. The cost of such construction, approximating
$975,000, 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,
originally $2,175,000, has been increased to $2,625,000 (which includes the
$975,000 advanced for infrastructure for the entire Crestwood Tract and $350,000
advanced for on-site improvement of Phase I of the Residential Tract (see
below.) The Union Bank Loan, which is secured by a first mortgage on the 198
undeveloped homesites, is due in full on January 31, 1998. The Partnership is
required to apply $20,000 of the proceeds of each lot sale to payment of the
Union Bank Loan.
The Partnership is developing the residential lots in three phases, of
which Phase I, comprising 32 lots, has been developed with on-site improvements,
financed by $350,000 in borrowings under the Union Bank Loan. Five of the
residential lots in Phase I were purchased for the aggregate sum of $170,000 by
Regency Homes, Inc. under an option which covered all 32 lots. The option as to
the balance of the lots has terminated because of Regency's failure to purchase
a specified minimum number of lots per month, although the Partnership continues
to negotiate with Regency and others for the sale of individual lots.
<PAGE>
In addition, on August 12, 1996, the Partnership executed an agreement
with Lennar Homes, Inc. ("Lennar"), a prominent South Florida developer, for the
purchase of 86 lots in Phase II of the Residential Tract for an aggregate of
$2,451,000. The Partnership holds deposits under letters of credit aggregating
$490,200. The agreement contemplates that all lots will be taken and paid for
over an 18-month period after completion by the Partnership of development work.
It is anticipated that closing on at least 22 of the lots will occur during the
summer of 1997, resulting in gross proceeds to the Partnership of approximately
$612,000.
The Partnership intends to finance on-site development of the 166 lots
in Phases II and III of the Residential Tract, anticipated to cost in the range
of $1.9 million, with the balance of the borrowing available under the Union
Bank Loan and the net proceeds of a public bond financing effected in November,
1996 by the Indian Trail Water Control District (the "District"), which produced
net available funds for the project of approximately $1,074,000. The bonds are a
direct obligation of the District and not of the Partnership, and interest and
principal on the bonds will payable from taxes levied on the lots in the
Residential Tract. Such bond issue resulted in an increase in an aggregate real
estate tax of approximately $117,000 per annum on the entire Residential Tract,
of which amount $600 is allocable to each lot individually.
Other Acreage within the Village
In March, 1993 the Partnership reacquired a separate tract of 4.54
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. An agreement to sell this
acreage for $325,000 was terminated by the purchaser in November 1996 and the
property is currently being remarketed
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,
$5,365,000 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.
<PAGE>
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
1996*
Total $5,535,000 $262,000
========== ========
</TABLE>
- ----------------------------------
* The Partnership anticipates receipt of $129,000 in late January, 1997.
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 $5,365,000 in contingent payments under the
Utility Contract. There can be no assurance, particularly in view of the decline
in payments from 1995 to 1996, 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.
<PAGE>
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 three tracts in the vicinity of
the Village.
The first tract originally consisted of 206 one-acre lots located
approximately eight miles northwest of the Village. These lots have been
improved with graded unpaved access roads and drainage facilities. One lot from
this tract was sold during 1996 for $12,000.
In October, 1996, the County of Palm Beach Nature Conservancy
purchased, for approximately $100,000, 18 lots within this parcel for use as a
conservation easement. The County has also agreed to purchase an additional 16
such lots for $84,000, with a closing anticipated in late February, 1997.
Assuming that this sale is closed, the Partnership will retain 171 lots in this
tract.
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 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.
The second tract, consisting of 470 acres, 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, in 1996 the Partnership rejected an offer of $1,100,000 for
this tract and alternatives to such sale are being examined with a view to
obtaining a higher price. Accordingly, management is of the opinion that its
realizable value is in excess of its current book value of $213,421.
The timing of future sales of the land discussed above, the manner in
which they may be developed and the ultimate realizable prices for this land are
dependent upon a complex and interrelated number of factors arising out of
governmental regulations concerning permissible land use.
The third tract 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,
<PAGE>
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 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 $1,986,000 (less
selling commissions) of which the Partnership's share would be approximately
$993,000. 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.
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
$168.962.
