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 and Nine Months Ended December 31, 1999
Commission File Number 1-8893
ROYAL PALM BEACH COLONY, LIMITED PARTNERSHIP
----------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 59-2501059
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
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 [ ]
<PAGE>
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 December 31, 1999
----- --------------------------------
Limited Partnership Units 4,485,504 units
<PAGE>
ROYAL PALM BEACH COLONY, LIMITED PARTNERSHIP
INDEX
Page Number
PART I. Financial information
Balance sheets -
December 31, 1999 and
September 30, 1999.....................................3
Statements of operations -
Three months ended
December 31, 1999 and 1998.............................4
Statements of cash flows -
Three months ended
December 31, 1999 and 1998............................5-6
Notes to financial statements..........................7
Management's discussion and analysis
of financial condition and results
of operations.........................................8-10
Part II. Other information and signatures............................... .11
<PAGE>
ROYAL PALM BEACH COLONY, LIMITED PARTNERSHIP
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, September 30,
1999 1999
------------ -------------
(unaudited)
ASSETS
<S> <C> <C>
Cash $ 605,166 $3,113,800
Other receivables 391,901 401,972
Property held for sale 2,421,388 2,379,916
Other assets 44,572 40,621
---------- ----------
$3,463,027 $5,936,309
========== ==========
LIABILITIES AND EQUITY
Liabilities:
Accounts payable and
other liabilities $ 174,342 $ 283,345
---------- ----------
174,342 283,345
Partners' equity:
4,485,504 units authorized
and outstanding 3,288,685 5,652,964
---------- ----------
$3,463,027 $5,936,309
========== ==========
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</TABLE>
<PAGE>
See notes to financial statements
ROYAL PALM BEACH COLONY, LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
THREE MONTHS ENDED
DECEMBER 31, 1999 AND 1998
(UNAUDITED)
1999 1998
Net land sales $2,501,907
Interest income $ 15,311 1,312
Other income 440 11,035
--------- ----------
15,751 2,514,254
Cost and expenses:
Cost of sales 2,000,225
Selling, general and
administrative expenses 103,792 318,437
Interest 496 23,986
Depreciation and
property taxes 32,990 57,857
--------- ----------
Total costs and expenses 137,278 2,400,505
--------- ----------
Net income (loss) $(121,527) $ 113,749
========= ==========
Net income (loss) per unit $ (0.03) $ 0.03
========= ==========
Weighted average number of
units outstanding 4,485,504 4,485,504
========= ==========
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<PAGE>
See notes to financial statements
ROYAL PALM BEACH COLONY, LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED
DECEMBER 31, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
---- ----
Cash flows from operating activities:
<S> <C> <C>
Cash was received from:
Collections on sales
and receivables $ 1,542,615
Interest income $ 25,833 1,312
Other cash received 440 11,035
----------- -----------
26,273 1,554,962
Cash was expended for:
Selling, general and
administrative, property
taxes and other expenses 184,601 516,094
Interest paid 496 23,986
Improvements to property
held for sale 97,876 136,512
----------- -----------
282,973 676,592
Net cash provided by (used
in) operating activities (256,700) 878,370
----------- -----------
Cash flow from investing activities:
Purchase of property
and equipment (9,182) --
----------- -----------
Net cash (used in) investing
activities (9,182) --
----------- -----------
Cash flow from financing
activities:
Proceeds from mortgage
notes payable: Bank -- 17,800
Payments on mortgage
payable: Bank -- (680,000)
Partner distributions (2,242,752) --
----------- -----------
Net cash (used in) financing
activities (2,242,752)
-----------
(662,200)
Net increase (decrease) in cash (2,508,634) 216,170
Cash at beginning of year 3,113,800 6,553
----------- -----------
Cash, end of period $ 605,166 $ 222,723
=========== ===========
</TABLE>
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<PAGE>
(continued)
ROYAL PALM BEACH COLONY, LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
RECONCILIATION OF NET LOSS TO NET CASH
USED IN OPERATING ACTIVITIES
NINE MONTHS ENDED DECEMBER 31, 1999 AND 1998
(UNAUDITED)
1999 1998
---- ----
Reconciliation of net income (loss)
to cash provided by (used in)
operating activities:
Net income (loss) $(121,527) $ 113,749
--------- -----------
Adjustments to reconcile net
income (loss) to net cash used
in operating activities:
Depreciation and amortization 679 441
Change in assets and
liabilities:
Increase in:
Mortgage notes and
other receivables -- (1,034,292)
Property held for sale (41,472) --
Accounts payable and
accrued liabilities -- --
Deposits on land sales -- 75,000
Decrease in:
Mortgage notes and
other receivables 10,071 --
Property held for sale -- 1,807,375
Other assets 4,552 17,584
Accounts payable and
accrued liabilities (109,003) (101,487)
--------- -----------
Total Adjustments (135,173) 764,621
--------- -----------
Net cash flow provided by
(used in) operating activities $(256,700) $ 878,370
========= ===========
-6-
<PAGE>
See notes to financial statements.
ROYAL PALM BEACH COLONY, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED
DECEMBER 31, 1999 AND 1998
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 three months ended December 31, 1999 are not
necessarily indicative of the results that may be expected for the
fiscal year ending September 30, 2000. 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, 1999.
2. Income tax:
The Partnership has elected to continue its Partnership status beyond
December 31, 1997, by agreeing to pay an annual 3.5% Federal tax on its
gross income for Federal income tax purposes (principally revenues less
cost of land sold) and estimates that Federal tax due, if any, on gross
income for Federal tax purposes for the tax year ending December 31,
1999 will be approximately $70,000. The partners are required to
include in their income tax returns their share of the Partnership's
taxable income or loss.
-7-
<PAGE>
ROYAL PALM BEACH COLONY, LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED
DECEMBER 31, 1999 AND 1998
(UNAUDITED)
Note An extract from the Partnership's Annual Report filed with the Securities
and Exchange Commission with respect to the fiscal year ended September 30, 1999
(the "Incorporated 1999 10K") containing Items 1 and 2 thereof is annexed to
this report as an Exhibit and is incorporated herein by reference.
Results of Operations
NOTE: Since the Partnership's activities consist principally of the sale of its
remaining properties, and the timing of closing dates for such sales is usually
subject to contingencies which often result in changes to such closing dates, a
comparison of sales and income results from comparable periods in different
years is not considered meaningful.
During the three month periods ended December 31, 1999 and 1998, the
Partnership had net revenues totaling $15,751 and $2,514,254, respectively, and
a net loss of ($121,527), or $(0.03) per unit and net income of $113,749. or
$0.03 per unit, respectively.
During the recent quarter, the Partnership did not effect any sales of
its remaining real estate and its only revenues were derived primarily from
interest payments on a certificate of deposit held.
Cost of Sales
Cost of sales relates to the sales of land as discussed above. This item varies
as a result of dissimilar profit margins and income recognition methods on the
various sales of land and buildings as discussed above. There were no sales, and
thus no costs of sale in the quarter ended December 31, 1999 and $2,000,225 in
costs of sales in the corresponding quarter of 1998 reflecting substantial sales
during the latter period.
Selling, Administrative and Other Expenses
Selling, general and administrative expenses were $103,792 in the quarter ended
December 31, 1999, compared with $318,437 in the corresponding quarter of 1998
primarily as the result of an higher brokerage commissions on higher real estate
sales. In 1999 only $496 in interest was charged to operations because all
-8-
<PAGE>
indebtedness had been paid off; interest of $23,986 was charged in the
corresponding quarter of 1998 in respect of loans outstanding during the
quarter.
Liquidity and Capital Resources
Cash decreased from $3,113,800 at September 30, 1999 to $605,166 at December 31,
1999. See Financial Information - Statements of Cash Flows. The principal reason
for this decline was the payment in October 1999 of a cash distribution to unit
holders aggregating $ 2,242,752. The Partnership's cash balances at any
particular point depend primarily on the timing of sales of its real estate,
which timing can be affected by numerous factors. See Financial Information -
Statements of Cash Flows.
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 land sales and
contingent utility receipts described under "Utility Contingent Receivable" in
Item 2 the Incorporated 1999 10-K. Sales of land 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
The development and marketing status of the Partnership's properties is
described under Item 2 of the Incorporated 1999 10-K.The Partnership's future
revenues will depend solely upon its ability to develop and/or sell its
remaining real estate, and upon receipts from a prior sale of a utility plant.
At December 31, 1999, the Partnership retained and was holding for sale (1) a
50% interest in 3.2 acres of commercial property in the "Crestwood" tract in the
Village of Royal Palm Beach under option for sale for a price which would
generate gross proceeds to the Partnership of approximately $250,000; (2) 45
residential lots in the Crestwood single family tract reacquired in 1999 as a
result of the Partnership's acceptance of a deed in lieu of foreclosure, and
currently under contract for sale (subject to certain contingencies) for gross
proceeds of $1,316,250; (3) a tract of 4.54 acres in the Village zoned for
approximately 84 multi-family residential units, currently under a contract of
sale for gross proceeds of $350,000, the closing of which is subject to several
contingencies; (4) 162 lots in the vicinity of the Village of Royal Palm Beach
zoned for residential use but presently the subject of litigation as to the
availability of building permits; and (5) a tract of approximately 22 acres in
the Crestwood multi-family tract current under contract of sale for $1,870,000,
the closing of which is subject to numerous contingencies.
The partnership has declared aggregate distributions of $7.00 per unit since
inception through December 31, 1999. An aggregate of $6.50 per unit had been
-9-
<PAGE>
distributed through December 16, 1992, and no further distributions were
declared until October 27, 1999, when a distribution of fifty cents ($0.50) per
unit was declared. On February 17, 2000 an additional distribution of
twenty-five cents ($0.25) per unit was declared. Total net cash flow which might
become available for additional distributions is 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 construction 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 Receivable" under Item 2 of the Incorporated 1999 10-K. As indicated
under such caption, it is considered extremely unlikely that the rate of new
construction or water consumption in such area will be sufficient to enable the
Partnership to receive the maximum remaining $4,623,000 in contingent payments
under the Utilities Contingent Receivable 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.
Income Taxes
The Partnership, pursuant to the transitional grandfather rules of the Internal
Revenue Code dealing with publicly traded partnerships, reported its income as a
Partnership for taxable years through December 31, 1997. The application of the
grandfather rules terminated for taxable years commencing after December 31,
1997. Under the Taxpayer Relief Act of 1997, a publicly traded partnership that
is currently governed by this provision may elect to continue its Partnership
tax status beyond December 31, 1997 by agreeing to pay an annual 3.5% Federal
Tax on its gross income for federal income tax purposes (principally revenues
less tax cost of land sold). The Partnership has elected to continue its
Partnership status beyond December 31, 1997. No provision for federal income tax
has been made for the three months ended December 31, 1999 and 1998.
-10-
<PAGE>
PART II - OTHER INFORMATION
(a) Exhibits -
99- Copy of Items 1 and 2 from Annual Report of the Registrant
on Form 10-K for the fiscal year ended September 30, 1999.
(b) Reports on Form 8-K - None
-11-
<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: February 29, 2000 By: /s/Irving Cowan
------------------------
Irving Cowan
President
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-END> DEC-31-1999
<CASH> 605,166
<SECURITIES> 0
<RECEIVABLES> 391,901
<ALLOWANCES> 0
<INVENTORY> 2,421,388
<CURRENT-ASSETS> 3,441,195
<PP&E> 34,097
<DEPRECIATION> 22,467
<TOTAL-ASSETS> 3,463,027
<CURRENT-LIABILITIES> 174,342
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 3,288,685
<TOTAL-LIABILITY-AND-EQUITY> 3,463,027
<SALES> 0
<TOTAL-REVENUES> 15,751
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 136,782
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 496
<INCOME-PRETAX> (121,527)
<INCOME-TAX> 0
<INCOME-CONTINUING> (121,527)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (121,527)
<EPS-BASIC> (0.03)
<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. Trading in Partnership Units The Units are currently trading
over-the-counter under the symbol "RPAMZ."
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 $77,878,215.
As of December 30, 1999, the Partnership had distributed an aggregate of
$31,398,752, or $7.00 per Unit, to the general and limited partners, including
$2,242,752, or $0.50 per Unit which was distributed in October 1999. See Item 5
- - Market for the Registrant's Common Equity and Related Stockholder Matters
"Prior Distributions." As of December 30, 1999, the Partnership's remaining
assets consisted principally of:
(1) a 50% interest in 3.2 acres of commercial property in the
"Crestwood" tract in the Village of Royal Palm Beach under option for sale for a
price which would generate gross proceeds to the Partnership of approximately
$250,000;
(2) 45 residential lots in the Crestwood single family tract reacquired
in 1999 as a result of the Partnership's acceptance of a deed in lieu
offoreclosure, and currently under contract for sale (subject to certain
contingencies) for gross proceeds of $1,316,250;
(3) a tract of 4.54 acres in the Village zoned for approximately 84
multi-family residential units, currently under a contract of sale for gross
proceeds of $350,000, the closing of which is subject to several contingencies;
(4) 162 lots in the vicinity of the Village of Royal Palm Beach zoned
for residential use but presently the subject of litigation as to the
availability of building permits; and
(5) a tract of approximately 22 acres in the Crestwood multi-family
tract currently under contract of sale for $1,870,000, the closing of which is
subject to numerous contingencies.
<PAGE>
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.
Management has now substantially completed the development and sale of most of
the Partnership's remaining land in Palm Beach County. After a number of years
in which cash was not available for distribution as a result of the need to
expend substantial sums to develop its properties in order to enhance ultimate
sale values, a distribution of $2,242,752, or $0.50 per Unit, was made in
October, 1999. See Item 2 - "Development and Sale of Residential Lots;" and Item
7 -- "Management Discussion and Analysis of Financial Condition -- Liquidity and
Capital Resources." Although additional portions of the Partnership's remaining
properties are under contract of sale, and the Partnership expects to receive
future collections of contingent receivables relating to a prior sale of a
utility plant, it is currently uncertain when additional cash will become
available for distribution. 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."
<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 RTL Realty, of which
Randy Rieger is a partner. Mr. Rieger 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.. If significant interest rate increases occur in the future,
the real estate market could suffer as a result.
Personnel:
As of December 30, 1999, Stein Management Company, Inc. ("Steinco")the Managing
General Partner, employed 1 person, who acts as an administrator of its books
and records. The balance of the Partnership's affairs are carried out by
independent brokers, contractors and other consultants under the direction of
the Board of Directors of Steinco. See Item 10.
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 26,000 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.
<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 was
otherwise undeveloped with the exception of the existence of portions of a
drainage system. Through December 30, 1999, all of the Crestwood Tract had been
sold with the exception of the commercial land described below, and a tract
intended for mutli-family residential construction described in item I
(5)above. However, during 1999, a mortgage obligor defaulted under a
non-recourse purchase money mortgage securing a remaining principal balance due
of $1,298,500 secured by 45 residential lots in the Crestwood single family
tract. The Partnership accepted a deed in lieu of foreclosure in respect of
this property in October, 1999 and has contracted for its resale for gross
proceeds of $1,316,250. This sale, which is subject to the satisfaction of
certain conditions, is expected to close in February, 2000.
Commercial Land within the Crestwood Tract
In order to enhance the market value of the Crestwood Tract, the Partnership
obtained the rezoning of an approximately 14 acre portion of the Crestwood Tract
previously zoned for multi-family housing to permit the Partnership to develop a
14 acre shopping center site. The Partnership received site-plan approval in
mid-1996. The Partnership has executed an agreement to sell the entire 14 acre
portion to an unaffiliated shopping center developer ("Purchaser") in two
phases.
The closing on the first phase of the Commercial Site, consisting of a 11.8-acre
shopping center site, occurred in February, 1997, resulting in gross proceeds of
approximately $1,538,757.
The second phase consists of two additional parcels in the 14 acre portion
rezoned as described above, which adjoin the shopping center site. As to such
parcels, the Partnership has agreed 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.
The Partnership and the Purchaser have entered into a contract to sell an
additional 1.6 acres adjoining the above-described 14 acre shopping center site
for a gross purchase price to the Partnership of approximately $120,000. The
purchaser is presently preparing to seek the appropriate approvals from the
Village and anticipates approvals by June of 2000.
<PAGE>
Residential Lots Within the Crestwood Tract
As a result of management's decision to develop portions of the
Crestwood Tract, the Partnership replanned the configuration of the entire
tract. The project included a redesign of the Single Family Tract, and the
Partnership received final plat approval to increase to 198 the number of
residential lots for development 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 regulatory procedures, the installation of roads and utility
connections to each lot and the provision of drainage facilities.
Between 1995 and 1997, the Partnership completed the off-site and
on-site improvements required for the development of the 198 lots in the
Residential Tract. Through December 30, 1999, the Partnership had sold all of
the 198 lots in the Residential Tract but had reacquired 45 such lots upon
foreclosure in October,1 999.Such dispositions (including forfeited deposits and
payments under such foreclosed mortgage) resulted in gross proceeds to the
Partnership of approximately $5,855,000 and net cash proceeds of $1,016,000
after mandatory loan reduction and brokerage commissions and other closing
costs. Of the foregoing, during the 1999 fiscal year only, the Partnership
conveyed a total of 54 lots for aggregate gross proceeds of $1,688,000 and net
cash proceeds, after mandatory loan reductions of $20,000 per lot and brokerage
commissions and other closing costs, of $734,000.
In August 1999 the Partnership sold a substantial part of the remainder
of the multi-family zoned land (comprising approximately 26 acres) for
$2,225,000 in gross proceeds, and approximately $1,886,000 in net proceeds after
costs of sale. Previously, in November 1998, the Partnership sold 7.7 acres for
net proceeds of $288,000.
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 80 multi-family residential units and is being offered for sale in
its present state without further development. This land is under a contract for
sale for $350,000 and closing of this sale is expected in June of 2000, subject
to numerous contingencies and conditions.
<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, 1999,
$4,623,000 had not been received. 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 $314,000 was received through September,1999.
To date, the Partnership has received the following Utility Contract payments:
Fiscal Year Ended Amount Received Based On
September 30 Consumption Guaranteed Amounts
- ------------ ----------- ------------------
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 108,000 19,000
1997 207,000 22,000
1998 427,000 11,000
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Total $6,277,000 $314,000
* The Partnership is also entitled to receive approximately $379,000 in January,
2000 in respect of 1999.
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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. It is considered extremely unlikely that the rate of new
construction or water consumption in such area will be sufficient to enable the
Partnership to receive the maximum remaining $4,623,000 in contingent payments
under the Utility Contract 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 one tract in the vicinity of the
Village.
The tract originally consisted of 208 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, 36 were sold in 1997 for $190,188, and 9 were sold in
1999 for $48,155, leaving a balance of 162 lots.
The timing of future sales of the land discussed above, the manner in which the
land may be developed and therefore 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.
All of such lots are subject to numerous governmental regulations under which
new development may not be permitted unless adequate public facilities (such as
roads and drainage) must be in place concurrently with the impacts of such
development. The Indian Trail Improvement District (formerly known as the Indian
Trail Water Control District) prepared a 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 was opposed by other governmental agencies,
however, and the Palm Beach County Health Department originally denied an
application for septic tank permits, due to inadequate drainage.
Following the institution of administrative proceedings to compel the issuance
of septic tank permits, the Partnership was successful in obtaining approval for
such permits for 3 of the 4 lots for which application was made; the 4th lot was
wetland and required additional mitigation. However, the South Florida Water
Management District has refused to permit development to proceed, and the
Partnership is currently engaged in administrative proceedings to set aside such
refusal. Numerous additional permits are required before building can be
commenced, and there is no assurance that all of such permits can be obtained.
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The Partnership believes that should it eventually succeed in obtaining all the
necessary permits for at least some of the lots, this would substantially
increase the value of such lots and that the aggregate realizable value of all
such lots will substantially exceed their book value of $561,374. Should the
Partnership be unsuccessful in overturning the administrative denial of septic
tank permits, the Partnership may elect to pursue other legal remedies,
including a possible claim for "inverse condemnation." There can be no assurance
that any such litigation would be successful.
Another tract, consisting of approximately 470 acres, and which contained a
significant amount of wetlands, was sold in August, 1999 for approximately
$1,350,000 to the Nature Conservancy on behalf of Palm Beach County. The
aforesaid amount does not include approximately $345,600 of "mitigation credits"
granted to the Partnership in connection which such transaction which increased
the value of two other tracts of land held by the Partnership, one of which was
sold in August of 1999.
Another tract in the vicinity of the Village the Partnership previously held a
involved 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 five 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 thereafter entered into an agreement to sell
the entire combined parcel. After several closing extensions required in order
to obtain various governmental agency approvals, this parcel was sold in April
1999 for gross proceeds of $968,000 and net cash proceeds after commissions and
expenses of $833,000.
