UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1996
Commission File Number 0-15256
Gran-Mark Income Properties Limited Partnership
(Exact Name of Registrant)
A Maryland Limited Partnership 52-1425166
(State of Organization) (I.R.S. Employer ID)
c/o Amherst Properties, Inc. 7900 Sudley Road, Suite 900
Manassas, VA 22110
(Address of Principal Office)
Registrant's Telephone Number, Including Area Code (703) 368-2415
Indicate by check mark 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.
X Yes No
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements: Page
Balance Sheets 3 - 4
Statements of Income 5 - 6
Statements of Change in Partners' Equity 7
Statements of Cash Flow 8 - 9
Notes to Financial Statements 10 - 23
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 24
PART II - OTHER INFORMATION
Other Information 26
<PAGE>
<TABLE>
Gran-Mark Income Properties Limited Partnership
Balance Sheets
June 30, 1996 (Unaudited)
September 30, 1995 (Audited)
ASSETS
6/30/96 9/30/95
<S> <C> <C>
CURRENT ASSETS
Cash $ 548,062 $ 542,360
Tenant Rents Receivable 39,419 30,124
Prepaid Expenses and Other 71,143 47,210
Mortgage Escrow Accounts 41,327 27,831
Total Current Assets 699,951 647,525
FIXED ASSETS:
Land 1,114,193 1,114,193
Buildings 10,547,032 10,547,032
Building Improvements 737,888 611,992
Vehicle and Office Equipment 30,162 38,053
Total 12,429,275 12,311,270
Less: Accumulated Depreciation 3,663,999 3,365,558
Total Book Value of Fixed Assets 8,765,276 8,945,712
OTHER ASSETS:
Deferred Costs net of accumulated
amortization of $271,640 and
$255,187 as of June 30, 1996,
and September 30, 1995, respectively. 37,109 53,561
Total Other Assets 37,109 53,561
Total Assets $ 9,502,336 $ 9,646,798
=========== ===========
<F/N>
See Notes to the Financial Statements
</TABLE>
<PAGE>
<TABLE>
Gran-Mark Income Properties Limited Partnership
Balance Sheets
June 30, 1996 (Unaudited)
September 30, 1995 (Audited)
LIABILITIES AND PARTNERS' EQUITY
6/30/96 9/30/95
<S> <C> <C>
CURRENT LIABILITIES:
Accounts Payable $ 87,358 $ 86,927
Accrued Interest 81,359 55,516
Accrued Expenses 61,206 59,964
Unearned Rental Income 9,518 65,417
Current Portion of Note Payable 0 1,197
Current Portion of Mortgages Payable 7,614,191 77,782
Total Current Liabilities 7,853,632 346,803
LONG-TERM LIABILITIES:
Tenant Security Deposits Payable 59,050 57,085
Management Fees Payable to Amherst
Properties, Inc. 68,143 101,376
Mortgage Payable - Office Building 0 4,635,333
Mortgage Payable - Shopping Center 0 2,960,252
Total Long-Term Liabilities 127,193 7,754,046
Total Liabilities 7,980,825 8,100,849
CONTINGENCIES AND COMMITMENTS (Notes 3 through 10)
6/30/96 9/30/95
PARTNERS' EQUITY:
General Partner $ (20,092) $ (19,847)
Limited Partners (12,000 units
authorized; 6,505 issued and
outstanding) 1,541,603 1,565,796
Total Partners' Equity 1,521,511 1,545,949
Total Liabilities and
Partners' Equity $ 9,502,336 $ 9,646,798
=========== ===========
<F/N>
See Notes to the Financial Statements.
</TABLE>
<PAGE>
<TABLE>
Gran-Mark Income Properties Limited Partnership
Statements of Income
(Unaudited)
For Three Month Periods Ending June 30, 1996 and 1995
Three Three
Months Months
Ending Ending
6/30/96 6/30/95
<S> <C> <C>
REVENUE:
Rental $ 420,003 $ 410,515
Tenant Reimbursements 22,598 22,632
Interest Income 2,545 2,424
Other 1,245 6,379
Total Revenue 446,391 441,950
EXPENSES:
Interest 165,913 167,451
Depreciation & Amortization 109,153 111,250
Utilities 51,313 56,806
Real Estate Taxes & Licenses 58,369 69,477
Property Maintenance & Repairs 54,274 66,817
Management Fees 25,758 28,596
General & Administrative Expenses 45,051 45,217
Total Expenses 509,831 545,614
Net Loss $ (63,440) $ (103,664)
=========== ===========
Allocation of Net Income or Loss:
General Partner $ (634) $ (1,037)
Limited Partners $ (62,806) $ (102,627)
Net Income of Loss per weighted
average Limited Partnership
unit (6,505 units) $ (9.66) $ (15.78)
<F/N>
See Notes to the Financial Statements.
</TABLE>
<PAGE>
<TABLE>
Gran-Mark Income Properties Limited Partnership
Statements of Income
(Unaudited)
For Nine Month Periods Ending June 30, 1996 and 1995
Nine Nine
Months Months
Ending Ending
6/30/96 6/30/95
<S> <C> <C>
REVENUE:
Rental $ 1,288,350 $ 1,185,593
Tenant Reimbursements 214,864 208,419
Interest Income 7,463 7,242
Other 8,754 7,996
Total Revenue 1,519,431 1,409,250
EXPENSES:
Interest 500,785 502,931
Depreciation & Amortization 327,687 330,417
Utilities 151,910 153,365
Real Estate Taxes & Licenses 175,150 196,110
Property Maintenance & Repairs 162,822 165,081
Management Fees 87,266 86,756
General & Administrative Expenses 152,665 145,175
Total Expenses 1,558,285 1,579,835
Net Loss $ (38,854) $ (170,585)
=========== ===========
Allocation of Net Income or Loss:
General Partner $ (389) $ (1,706)
Limited Partners $ (38,465) $ (168,879)
Net Income or Loss per weighted
average Limited Partnership
unit (6,505 units) $ (5.92) $ (25.96)
<F/N>
See Notes to the Financial Statements.
</TABLE>
<PAGE>
<TABLE>
Gran-Mark Income Properties Limited Partnership
Statements of Changes in Partners' Equity
For the Nine Month Period Ending June 30, 1996 (Unaudited)
and
For the Years Ending September 30, 1995, 1994 and 1993 (Audited)
General Limited
Partner Partners Total
<S> <C> <C> <C>
Balance, September 30, 1992 $(11,066) $2,164,348 $2,153,282
Net Loss Fiscal Year Ending 1993 (3,900) (386,050) (389,950)
Capital Contributions 0 270,813 270,813
Balance, September 30, 1993 $(14,966) $2,049,111 $2,034,145
Net Loss Fiscal Year Ending 1994 (2,709) (268,240) (270,949)
Balance, September 30, 1994 $(17,675) $1,780,871 $1,763,196
Net Loss Fiscal Year Ending 1995 (2,172) (215,075) (217,247)
Balance, September 30, 1995 $(19,847) $1,565,796 $1,545,949
Prior Period Adjustment 144 14,272 14,416
Net Income for the Period Ending
June 30, 1996 (389) (38,465) (38,854)
Balance, June 30, 1996 $(20,092) $1,541,603 $1,521,511
======== ========== ==========
<F/N>
See Notes to the Financial Statements
</TABLE>
<PAGE>
<TABLE>
Gran-Mark Income Properties Limited Partnership
Statements of Cash Flow
(Unaudited)
For the Nine Month Periods
Ending June 30, 1996 and June 30, 1995
6/30/96 6/30/95
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income or Loss from Statement of Income $ (38,854) $ (170,585)
Adjustments to reconcile net loss to
cash provided by (used in)
operating activities:
Depreciation & Amortization 327,687 330,417
Loss on Vehicle 2,871 0
(Increase) Decrease in:
Tenant Rents Receivable (9,295) ( 5,920)
Prepaid Expenses and Other (23,933) (34,396)
Mortgage Escrow Accounts (13,496) 114,223
Increase (Decrease) in:
Accounts Payable 37,978 10,365
Accrued Interest (1,964) (412)
Accrued Expenses 1,242 5,307
Unearned Rental Income (55,899) 49,697
Tenant Security Deposits Payable 1,965 11,478
Management Fees Payable to
Amherst Properties, Inc. (28,557) (3,149)
Total Adjustments 238,599 477,610
Net Cash Provided by Operating Activities 199,745 307,025
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Vehicle & Office Equipment (7,774) (18,404)
Additions to Building Improvements (125,896) (8,222)
Additions to Deferred Costs 0 (11,697)
Net Cash Provided by (Used in) Investing
Activities $ (133,670) $ (38,323)
<F/N>
See Notes to the Financial Statements.
</TABLE>
<PAGE>
<TABLE>
Gran-Mark Income Properties Limited Partnership
Statements of Cash Flow
(Unaudited)
For the Nine Month Periods
Ending June 30, 1996 and June 30, 1995
6/30/96 6/30/95
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of Note & Mortgages $ (59,176) $ (56,079)
Incentive to Lessee (1,197) (16,687)
Net Cash Used in Financing Activities (60,373) (72,766)
Net Change in Cash $ 5,702 $ 195,936
CASH AT BEGINNING OF PERIOD 542,360 311,752
CASH AT END OF PERIOD $ 548,062 $ 507,688
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 502,749 $ 503,343
SUPPLEMENTAL SCHEDULE OF NONCASH OPERATING INFORMATION:
During the period, prior period adjustments were made which affected the
following accounts: Accounts Payable, ($37,547); Accrued Interest, $27,807;
and Management Fees Payable to Amherst Properties, Inc. ($4,676).
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITIES:
On December 31, 1995, the vehicle was traded in. Both the old and new
vehicle are in Amherst Properties, Inc.'s name. The new vehicle is not
recorded on the Partnership's books.
During the nine month period ending June 30, 1996, $2,897 of building
improvement assets were removed. These assets were fully depreciated at
the time of their removal.
</TABLE>
<F/N>
See Notes to the Financial Statements.
<PAGE>
GRAN-MARK INCOME PROPERTIES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
June 30, 1996
Note 1: NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES:
Nature of Business
The Partnership owns and operates an office buildingin Manassas,
Virginia, and a shopping center in Amherst, NY, which contains
approximately 95,000 and 117,000 square feet, respectively.
Significant Accounting Policies
The following accounting policies conform to generally accepted
accounting principals and have been consistently applied in the
preparation of the financial statements. Certain prior year amounts
and disclosures have been reclassified to conform with the current
year's presentation. These reclassifications have no effect on the
net losses as previously reported.
Revenue Recognition
Rental income is reported as earned over the lives of the related
leases. Tenant reimbursements are accrued based on annual or
quarterly expenses and included pro-rata payments under certain
leases for increases in property taxes, insurance, depreciation and
direct operating expenses. Such amounts are calculated annually on
a calendar year basis or quarterly with pro-rata portions based upon
square footage leased during the year.
Rental Property and Depreciation
Buildings are stated at cost and depreciated over their estimated
thirty-year useful lives. Leasehold improvements, also stated at
cost, are depreciated over the lesser of the length of the related
leases or the estimated useful lives. The improvements generally
have a useful life from one to fifteen years. Depreciation is
computed on the straight-line method for financial reporting
purposes and for income tax purposes depreciation is computed on
both accelerated and straight-line methods. Improvements and major
renovations are capitalized, while expenditures for maintenance,
repairs and minor renovations are expensed when the cost in
incurred.
Deferred costs and amortization
Financing costs are amortized over the terms of the related loans
using the straight-line method.
Leasing costs are amortized over the terms of the lease using the
straight-line method.
<PAGE>
Cash Equivalents
For balance sheet and cash flow purposes, the Partnership considers
all cash accounts, which are not subject to withdrawal restrictions
or penalties, and all highly liquid financial instruments purchased
with a maturity of three months or less to be cash equivalents.
There are no cash equivalents as of June 30, 1996.
Net Loss Per Weighted Average Limited Partnership Unit
The computation of net income (loss) per weighted average limited
partnership units is based on the weighted average number of units
outstanding during the year. The weighted average number of units
for the period of October 1, 1994 to September 30, 1995 is 6,505,
and October 1, 1995 to June 30, 1996 is 6,505.
Income Taxes
Partnerships are not subject to income taxes. The partners are
required to report their respective shares of partnership income or
loss on their individual income tax returns.
Concentration of Credit Risk
Financial instruments that potentially subject the Partnership to
credit risk include cash on deposit with financial institutions
amounting to $458,973 and $540,909 at September 30, 1995 and June
30, 1996, respectively, which was insured up to $100,000 and
$200,000, respectively, by the Federal Deposit Insurance
Corporation.
Allowance for Doubtful Accounts
The Partnership considers accounts receivable to be fully
collectible; accordingly, no allowance for doubtful accounts is
required.
<PAGE>
NOTE 2: RENTAL PROPERTY:
Land, buildings, improvements, and other capital expenditures, and
their related accumulated depreciation accounts are summarized as
follows:
Shopping Office Vehicle
Center Building and
Amherst, Manassas, Office
New-York Virginia Equipment Total
Date of Construction 1980 1974
Date Acquired Dec. 1986 Aug. 1986 Various
Land $ 695,595 $ 418,598 $ 0 $ 1,114,193
Buildings 3,952,034 6,594,998 0 10,547,032
Other 0 0 30,162 30,162
Total initial
cost to
partnership 4,647,629 7,013,596 30,162 11,691,387
Improvements
capitalized
subsequent to
acquisition 115,148 622,740 0 737,888
Total accum-
ulated cost $ 4,762,777 $ 7,636,336 $ 30,162 $12,426,275
Accumulated
depreciation 1,273,295 2,377,067 13,637 3,663,999
Net book Value $ 3,489,482 $ 5,259,269 $ 16,525 $ 8,765,276
========== =========== =========== ===========
The following is a summary of activity for the land, buildings and
improvements, for the years ended September 30, 1993, 1994, and
1995, and the period ending June 30, 1996:
Rental Accumulated
Property Depreciation
10/01/92 - 09/30/93
Deletions during the period: $ (54,192) $ 54,192
Additions during the period:
Improvements capitalized 200,457
Depreciation expense (409,507)
Balance September 30, 1993 $12,374,579 $(2,838,491)
10/01/93 - 9/30/94
Additions during the period:
Improvements capitalized 203,343
Depreciation expense (410,490)
Deletions during the period: (320,212) 320,212
Balance September 30, 1994 $12,257,710 $(2,928,769)
<PAGE>
10/01/94 - 9/30/95
Additions during the period:
Improvements capitalized 18,404
Depreciation expense (417,460)
Deletions during the period: (2,897) 2,897
Balance September 30, 1995 $12,273,217 $(3,343,332)
10/01/95 - 6/30/96
Additions during the period:
Improvements capitalized 25,896
Depreciation expense 307,030
Balance June 30, 1995 $12,399,113 $(3,650,362)
=========== ===========
One of the primary tenants at the Shopping Center in Amherst, New
York, is Hills Department Store ("Hills"). Hills, on February 5,
1991 filed a petition for Chapter 11 Reorganization, but continued
to occupy its space and to pay rent post-petition on a current
basis. On September 10, 1993 Debtor's First Amended Consolidated
Plan of Reorganization was confirmed by the Court.
Hills has completely renovated the interior of the store in the
shopping center. The creditors of Hills consented to the renovation
expense of approximately $525,000. The Partnership agreed to
contribute an additional $125,000 for such renovation and repairs
with the condition that the Lease Agreement be affirmed prior to any
payments made by the Partnership. Assistant Corporate Counsel of
Hills Department Stores confirmed in November 1993 that the Lease
for the store in the shopping center has been assumed and has not
been rejected nor is it the subject of a pending motion to reject.
The $125,000 offered by the Partnership was derived from the
following sources:
Pre-petition rent of $7,622 was forgiven; $25,000 was paid out
of the cash call fund in December 1993; 12,300 was paid
August, 1993; $40,000 was paid on July 28, 1994; and
commencing March 1994 twelve consecutive monthly installments
of $3,341 were paid.
The tenant was paid $16,687 during the fiscal year ending September
30, 1995, as partial payments of the rent offset identified as
Incentive to Lessee.
<PAGE>
NOTE 3: PLAN OF REORGANIZATION UNDER CHAPTER 11:
By August 24, 1990, limited partners owning more than 60% of the
Partnership's units voted to remove Gran-Mark Properties, Inc. and
Fourth Coast Properties Ltd. as the general partners and replace the
former general partners with Amherst Properties, Inc., the current
general partner. The effective date of removal in accordance with
the Partnership Agreement was September 30, 1990. On September 28,
1990, two days prior to the effective date of removal, the former
managing general partner filed a petition for relief under Chapter
11 of the federal bankruptcy laws on behalf of Gran-Mark Income
Properties Limited Partnership (the "Debtor") in the United States
Bankruptcy Court for Eastern District of Virginia - Alexandria
Division.
A Plan of Reorganization dated March 27, 1992, a First Amended Plan
of Reorganization dated April 13, 1992, and a Second Amended Plan of
Reorganization dated June 2, 1992 were filed with the Court for
approval.
On June 24, 1992, the U.S. Bankruptcy Court for the Eastern District
of Virginia, Alexandria Division, approved a Disclosure Statement in
connection with the Plan of Reorganization and the Plan was
confirmed. The Effective Date of the Plan was August 28, 1992.
Under the Plan, five classes of creditors were established:
The Class One Creditor group consisted of FDIC/Seaman's Bank for
Savings, FSB, whose secured claim was not impaired under the Plan.
The Plan required that as of the Effective Date of the Plan, all
monthly payments under the FDIC/Seaman's Bank for Savings, FSB Note
and Mortgage were to be paid in full, and to the extent that the
escrow account maintained for the purpose of paying real estate
taxes and insurance was insufficient was to be paid into the escrow
account. In accordance with a Court Order dated January 25, 1993
the partnership made on September 21, 1993 a payment in the amount
of $46,173 to increase the escrow account balance held by FDIC. The
Class One Creditor was also allowed a secured claim for its
attorney's fees, costs and expenses incurred and paid in the amount
of $20,000. Of this claim, $10,000 was paid by the Effective Date
of the Plan, and $10,000 was added to the principal balance of the
loan and will be paid, without interest, on the maturity of the Note
and Mortgage.
The Class Two Creditor group consisted of Old Stone Bank whose
secured claim shall be paid in accordance with the provisions of the
Plan and of the Modification Agreement and Allonge-Promissory Note
dated June 30, 1992. The allowed amount was determined to be the
loan balance as of March 1, 1992, of $4,291,717.51 plus Accrued
Interest at 9% per annum for the period of June 1, 1991 through May
31, 1992 in the amount of $372,761.19, plus other fees recoverable
by the Bank, referred to as the Deferred Balance, not to exceed
$55,000. The Accrued Interest and Deferred Balance were added to
the principal balance of the loan and will be paid without interest
on the maturity date. The maturity date of the loan was extended to
<PAGE>
April 30, 1997. During the period from July 1, 1992 through April
30, 1994, interest only shall be paid on the principal sum of
$4,291,717.51 based upon a rate calculated by adding 2.25% to the
two year Treasury Note rate (computed on the average rate of the
last five business days in the month of May 1992). This interest
rate is 7.53%, resulting in a monthly interest payment of
$26,930.53. During the period from May 1, 1994 through April 30,
1996, interest shall be paid on the principal sum of $4,291,717.51
based upon a rate calculated by adding 2,75% to the two year
Treasury Note rate (computed on the average rate of the last five
business days in the month of April 1994) and an additional monthly
payment of principal shall be made based upon a thirty year
amortization schedule. During the period from May 1, 1996 through
April 30, 1997, interest shall be paid on the principal sum of
$4,291,717.51 based upon a rate calculated by adding 3.00% to the
two year Treasury Note rate (computed on the average rate of the
last five business days in the month of April 1996) and an
additional monthly payment of principal shall be made based upon a
twenty eight year amortization schedule. On April 30, 1997, all
principal, unpaid interest, and the Deferred Balance shall be due
and payable.
Under the Plan, Old Stone Bank agreed to make available to the
Partnership the balance in the cash reserve fund, approximately
$162,800, together with $125,000 contributed by the Partnership, for
capital improvements, renovations, and repairs specified in the
Plan. These funds held in the Capital Improvement Reserve Fund are
subject to signatures of a representative of Old Stone Bank and the
Partnership.
As required by the Plan, the Partnership established a second escrow
account at Old Stone Bank as a Note Payment Reserve in the amount
of $40,000. This account shall only be used when the available
monthly cash flow from the Manassas Property is less than the
monthly debt service. On the first anniversary date of the
Effective Date, an amount will be deposited by the Partnership to
replenish the account. On the second anniversary of the Effective
Date, the account balance will be returned to the Partnership.
The Class Three Creditor group consisted of Amherst Properties, Inc.
The Plan requires that on the Effective Date, a promissory in the
principal amount of $50,000 payable at the rate of $20,000 per year
with interest of 6% per annum until paid shall be given by the
Partnership to Amherst Properties, Inc. At the option of the Class
Three Creditor, the note or any part of the note may be converted to
partnership interests at a conversion price of $100 per partnership
unit. On August 1, 1993 Amherst Properties, Inc. exercised such
option and the partnership issued 500 units as payment against the
$50,000 principal due. The remainder of the Class Three Creditor
claim is subordinated to the claims of Class Two and Class Four
Creditors and are to be paid from future cash flow only after the
payments required under the Plan have been made to all other Classes
of Creditors.
<PAGE>
The Class Four Creditor group consisted of all unsecured creditors
who are to be paid 50% of their claims upon the Effective Date of
the Plan with the remainder being paid on the anniversary date on
the confirmation.
The Class Five Creditors group consisted of all Equity Security
Holders. At its option, each holder of a Class Five Equity Interest
was entitled to retain its equity Security in the Partnership by
making a capital contribution in an amount equal to a total of eight
percent (8%) of the original capital investment. To the extent a
Class Five Equity Security Holder failed to make a capital
contribution, then that respective Holder's interest in the
Partnership was deemed null and void. The original investment made
to the Partnership equaled $6,005,000, and the new capital raised
under the Plan was $480,400.
The capital contribution was payable in two installments, the first
installment was due within 25 days of the approval of the Disclosure
Statement (June 24, 1992) in the amount of five percent (5%) of the
original investment, and the remainder of three percent (3%) was due
on the first anniversary of the confirmation of the plan. Any
partner failing to make the five percent (5%) contribution was
deemed to be a declining partner. A second opportunity gave
contributing partners the right to contribute for additional
partnership shares determined by the increased percentage changed
resulting from non contributing partners and the right to request
additional interests. If a contributing partner made the initial
five percent capital contribution but failed to make the additional
three percent (3%) capital contribution, other contributing partners
who have made both cash contributions were given the option to make
the declining three percent (3%) capital contribution and receive
the pro-rata interest in the Partnership represented by that capital
contribution. The declining subscribing partner who made the five
percent (5%) capital contribution, retained the interest represented
by the five percent (5%) contribution. Only two opportunities were
offered. Partnership shares dated August 28, 1992 were issued for
the first installment contribution. Partnership shares dated August
1, 1993 were issued for the second installment contribution.
Under the Plan, the Amended Partnership Agreement was further
modified to provide for future cash calls as deemed appropriate by
the General Partner. Such cash calls shall not cause a forfeiture
of Partnership interest for any Equity Security Holder who has made
the subscriptions required by the Plan, however, any future cash
call may result in a dilution in Partnership Interest.
When an entity emerges from a Chapter 11 reorganization, it must
determine if the reorganization value of its assets before the date
of confirmation is less than the total of all post-petition
liabilities and allowed claims, and if the holders of existing
voting shares immediately before confirmation receive less than
fifty percent (50%) of the voting shares of the emerging entity.
If these conditions exist, then the entity adopts fresh-start
reporting which adjusts the historical amounts of individual assets
and liabilities, reports forgiveness of debt, and creates a new
reporting entity.
<PAGE>
These conditions did not exist and the partnership did not adopt
fresh-start reporting.
NOTE 4: CAPITAL CONTRIBUTIONS
Under the provisions of the Plan of Reorganization, the general
partner notified all limited partners of their right to make a
capital contribution and the consequences of any failure to make the
required capital contribution. The new capital raised under the
Plan was $480,400: $300,250 from the 5% contribution due July 19,
1992, (25 days after the date of approval of the Disclosure
Statement by the Bankruptcy Court) and $180,150 from the 3%
contribution due July 28, 1993 (the first anniversary of the date
of confirmation of the Plan of Reorganization).
The partnership received $480,400 related to the cash call and the
partnership issued 6,005 units.
Under the Plan of Reorganization, the general partner, Amherst
Properties, Inc. had the right to convert its approved claim of
$50,000 represented by a Note dated August 28, 1992, into a
partnership interest in the reorganized partnership at the
conversion price of $100.00 per partnership unit. On August 1,
1993, Amherst Properties, Inc. exercised that right and 500 units
were issued.
As of September 30, 1995, a total of 6,505 units had been issued.
NOTE 5: SECURED CLAIMS:
Secured claims as of September 30, 1994 and September 30, 1995,
which are collateralized by liens on the Partnership's rental
property, including their related leases, accounts receivable, and
vehicle, are summarized below:
Lender Property Sept 30, 1994 Sept 30, 1995
Old Stone Bank, FSB The Sudley Tower
Now, Regency Savings (Office Bldg)
Bank Manassas, VA $ 4,706,414 $ 4,672,365
Seamen's Bank for Sheridan Hills
Savings, FSB Plaza
Now, Regency Savings (Shopping Ctr)
Bank Amherst, NY 3,037,775 3,001,002
First Virginia Bank Vehicle 5,984 1,197
Totals $ 7,750,173 $ 7,674,564
=========== ===========
<PAGE>
Scheduled maturities of secured claims at September 30, 1995, are
as follows:
FYE 1996 $ 78,979
FYE 1997 7,595,585
FYE 1998 and after 0
Total $7,674,564
==========
Old Stone Bank, FSB/Regency Savings Bank:
On June 30, 1992, Gran-Mark Income Properties Limited Partnership
and Old Stone Bank entered into a Modification Agreement and Allonge
Promissory Note to modify the promissory note dated May 29, 1987.
The modification extends the maturity date to April 30, 1997. For
the period from July 1, 1992 through April 30, 1994, monthly
payments of interest only at the rate of 7.53% (2,25% added to the
average two year U.S. Treasury Bill Rate for the last five business
days of May, 1992, and calculated upon the principal outstanding),
in the amount of $26,930.53 were due. For the period from May 1,
1994 through April 30, 1996, monthly payments of principal and
interest are calculated based on an interest rate calculated by
adding 2.75% to the average two year U.S. Treasury Bill Rate for the
last five business days of April, 1994, and calculated upon the
principal outstanding, plus a thirty year amortization of the
principal balance of $4,291,717.51. For the period from May 1, 1996
through April 30, 1997, monthly payments of principal and interest
will be calculated based on an interest rate calculated by adding
3.0% to the average two year U.S. Treasury Bill Rate for the last
five business days of April, 1996, and calculated upon the principal
outstanding, plus a twenty eight year amortization of the principal
balance. On April 30, 1997, all principal and accrued, unpaid
interest is due plus a Deferred Balance of interest (totaling
$374,761.19) and unpaid fees in the amount not to exceed $55,000.
Interest charged to operations during the years ending September 30,
1995, 1994, and 1993, was $359,156, $338,996, and $323,166,
respectively, and during the period ending June 30, 1996, was
$265,932.
Seamen's Bank for Savings/Regency Savings Bank:
The mortgage bears interest at the rate of 10.31%; 2.5% over the
Federal Home Loan Bank Board Five Year Advance Rate. The loan
matures in January, 1997, at which time a balloon payment of
approximately $2,944,200 will be due. Fixed monthly payments of
$27,708 through January 1992 were based upon a thirty year
amortization period. Commencing in February 1992, constant monthly
payments in the amount of $28,936 are based on a twenty-five year
amortization period.
<PAEG>
The mortgage may only be prepaid in the fifth, ninth or tenth years
subject to a penalty of 1% in years five and ten and 2% in year
nine, or if greater (in years nine and ten, only) 1% plus the
prepayment fee then charged by the Federal Home Loan Bank Board.
Interest Charged to operations during the years ending September 30,
1995, 1994 and 1993, was $310,142, $313,761, and $317,026;
respectively, and during the period ending June 30, 1996, was
$229,892.
First Virginia Bank
On November 21, 1991, the Partnership acquired a 1991 Chevrolet
truck. The acquisition was financed solely with a loan in the
amount of $15,665, for which the vehicle is collateral. The loan
required forty eight (48) constant monthly payments of $398.95,
which commenced on January 5, 1992. The interest charged to
operations ending September 30, 1995, 1994, and 1993, was $378,
$804, and $1,190, respectively, and during the period ending June
30, 1996, was $23. Both the truck and the loan are in Amherst
Properties, Inc's name, but the truck was paid for solely by the
Partnership.
UNSECURED CLAIMS:
Unsecured claims (accounts payable) as of September 30, 1995 are
summarized below:
Manassas Office Building
Utilities $ 20,676
Repairs & Maintenance 238
Payroll Taxes 184
Office 17
LCS - Computers 21,344
Legal 8,203
Legal Fees Related Party 22,870
Accounting 2,405
Milpitas Investors 5,875
Construction Management -
Related Party $ 5,115
Total $ 86,927
========
NOTE 6: RELATED PARTY TRANSACTIONS:
Management Agreements
The Partnership maintains a management agreement with Amherst
Properties, Inc. (the current general partner) for each of the two
properties. The agreement provided for a monthly payment of
<PAGE>
management fees in the amount of six percent (6%) of gross rents
collected and reimbursement of out-of-pocket expenses incurred in
connection with each property. Amherst Properties, Inc. has
subcontracted the day to day management and leasing responsibility
for the Amherst shopping center to a non-affiliate, Center
Associates, Realty Corp., for $1,000.00 per month. In accordance
with the partnership and management agreements, Amherst Properties,
Inc. is responsible for all third party management expenses.
On September 24, 1994, Amherst Properties, Inc. executed an
agreement with Center Associates Realty Corp. to extend the
management contract for the Amherst Shopping Center. Under this
agreement the expiration date was extended to September 30, 1996.
All other terms and conditions remain the same.
On September 30, 1992, the partnership executed and Amendment to
Management agreement with Amherst Properties, Inc. for each of the
two management agreements, extending the expiration date of each
agreement to September 30, 1996. All other terms and conditions
remain the same.
Accordingly, aggregate management fees charged to operations for the
years ended September 30, 1995, 1994, and 1993, are as follows:
1995 1994 1993
Amherst Properties, Inc. $ 114,231 $ 103,580 $ 95,231
Total $ 114,231 $ 103,580 $ 95,231
As of September 30, 1995, $101,376 of these fees remain payable to
Amherst Properties, Inc.
Reimbursement of Partnership Operating Expenses
The Partnership agreement provides for reimbursing the general
partner and its affiliates for costs of providing administrative
services to the partnership. Such reimbursements charged by and
paid to the current general partner for operations are $55,650.70
for fiscal year ending September 30, 1993, and none for fiscal year
ending September 30, 1994. Reimbursements charged by and included
in the accounts payable as of September 30, 1995, are $27,985.00 and
noted as related party items. Reimbursements of $4,174 were charged
by and paid during the current fiscal year.
During the period of October 1990 through December 1990, the general
partner paid $79,994 in various costs for the Partnership. During
prior periods, $20,174 of these costs have been reimbursed to the
general partner, and during the current period an additional $15,000
<PAGE>
was reimbursed, leaving a balance of unreimbursed costs of $44,820
as of December 31, 1995. These unreimbursed costs are included in
Management Fees Payable to Amherst Properties, Inc. The Partnership
has agreed to pay interest at the rate of 12% on these unreimbursed
costs from December 31, 1990, until paid. Interest accrued for
prior periods is $42,875, less payments of interest made during the
prior fiscal year of $15,068 and $5,700 during the current period.
A prior adjustment has been made to reflect the accrual of the
additional interest due of $24,807 due to September 30, 1995.
Interest charged to operations during the current fiscal year is
$4,200.
Certain administrative expenses, such as telephone charges, and
operating expenses incurred on the Partnership's behalf by Amherst
Properties, Inc. are billed to Amherst Properties, Inc. but are paid
directly by the Partnership.
During the current fiscal year, the Partnership paid $6,710 for the
down payment and monthly loan payments on a vehicle owned by Amherst
Properties, Inc. Both the vehicle and loan are in Amherst
Properties, Inc.'s name. These payments have reduced the Management
Fees Payable to Amherst Properties, Inc.
Promissory Note
As provided for in the approved Plan of Reorganization, the Class
Three Creditor, Amherst Properties, Inc. was given a note of $20,000
per year with interest of 6% per annum until paid. At the option of
Amherst Properties, Inc., the note or any part of the note may be
converted to a Partnership interest in the reorganized Partnership
at a conversion price of $100.00 per Partnership unit. The remainder
of the Class Three Creditor's Claim was subordinated to the claims
to the Class Two and Class Four Creditors and will be paid from
future cash flow after the payments required under the Plan have
been made.
NOTE 7: OPERATING LEASES
Minimum future rentals to be received under noncancelable operating
leases from tenants of both properties in effect at September 30,
1995 are as follows:
Year ending September 30, Amount
1996 $ 1,650,003
1997 1,167,398
1998 848,263
1999 626,038
Subsequent to 1999 1,654,154
Total minimum future rentals $ 5,945,856
===========
<PAGE>
General leasing arrangements include a remaining fixed rental term
with annual increases, pro rata share of increases in property
expenses, and various renewal options. Leases of several of the
shopping center tenants provide for additional rents when the
tenants' sales volumes exceed stated amounts. Amounts received to
date under these provisions have not been significant.
NOTE 8: INCOME TAXES
A basic requirement of Federal tax law requires that a partnership's
general partners assume unlimited liability. Requirements, among
others, in determining whether a limited partnership will be
recognized as a partnership or if it will be recognized as a
corporation are as follows:
A. Limited partners may not own directly or indirectly more than
20 percent of the corporation or its affiliates.
B. The net worth of the corporation must at all times be a
minimum of 10 percent of total partnership contribution.
Affiliates of one of the Partnership's limited partners own a two-
thirds interest in Amherst Properties, Inc. and Amherst Properties'
net worth is less than the guidelines suggest. Accordingly, the
possibility exists that the Partnership could be classified as an
association and be subject to corporate tax laws, which could result
in the disallowance of previous deductions taken by limited partners
on their individual returns.
As previously noted in Securities and Exchange Commission filings,
the previous managing general partner has not met the net worth
requirements since 1987.
The Tax Reform Act of 1986 required the Partnership to change its
reporting period for income tax purposes to a calendar year. The
change became effective for the three month period ending December
31, 1988.
NOTE 9: PARTNERSHIP ALLOCATIONS:
Partnership income and net cash from operations are allocated 99%
to the limited partners and 1% to the general partner until the
limited partners have received their cumulative 7% priority return.
After this return has been achieved, the general partner will then
be allocated its annual incentive management fee so that total
distribution will aggregate 10% to the general partner and 90% to
the limited partners in accordance with the Partnership Agreement.
<PAGE>
The general partner will then receive its deferred incentive
management fee, if any, and any remaining income. Net cash from
operations in allocated 90% to the limited partners and 10% to the
general partner. Losses are allocated 99% to the limited partners
and 1% to the general partner.
NOTE 10: MANAGEMENT PLANS:
Due to the past financial condition of the Partnership, Amherst
Properties, Inc. had deferred collection of most management fees
accrued for the period from October 1990 to September 30, 1993 and
advanced funds, to pay operating expenses, legal fees and real
estate commissions.
At the time the new general partner, Amherst Properties, Inc.,
commenced managing the properties, there existed no operating funds
and a negative cash-flow. Significant legal bills and real estate
commissions were payable, numerous maintenance and heating and air-
conditioning problems at the office building existed, as well as a
serious default of the required loan payments to Old Stone Bank.
At the present time current rental income covers the operating
expenditures on both properties.
The success for the Manassas office building is dependent upon three
major factors:
1. The ability to successfully compete with existing office
buildings in Prince William County.
2. The ability to attract new tenants from adjacent counties.
3. Achieving and maintaining a high rate of occupancy.
Over the past year the managing general partner has continued to
improve the situation with regard to these factors. The managing
general partner has modernized the office building (renovation of
lobby, completely overhauled and computerized HVAC operations,
repaved parking lot, new signage) and renovated a considerable
amount of leasable space to successfully compete with existing
buildings. The office building has a competitive advantage because
of easy access to and from major highways, efficient heating and
air-conditioning, an effective security system and high rise view of
surrounding scenic areas.
Management's efforts over the past several years brought to fruition
an office building which is more than 95% leased and occupied. The
management team overcame the loss of major tenants leasing more than
20,000 square feet. Management sought and obtained a signed lease
with a major real estate broker and several mortgage companies.
<PAGE>
Present plans are to develop a self sufficient financial center for
loans, banking, mortgage, home real estate sales, with necessary
support services. These tenants which have stood the test of time
not only survived the crunch of the early '90's but have expanded
and became more profitable.
Management is generating a capacity for the roof top to accommodate
50 antennae. A rail system has been built to anchor the antennae
and electronics will continue to be managed by RAM. The number of
licensed antennae users has increased to 15.
More repairs, maintenance, and upgrading are needed at the office
building to continue to attract and retain tenants. They are as
follows:
1. Power clean the exterior facade of the building.
2. Renovate bathrooms.
3. Renovate the hallways of the upper floors, carpeting,
wallpaper, ceiling, and lighting.
4. Caulking the windows and window frame.
5. Landscaping the building site front and rear.
6. Installation of energy efficient lighting and motors
which power the heating and hot water system.
The work for upgrading the building and performing needed repairs
and maintenance began with the new management and continues.
In April and May 1993, the Partnership entered into contracts
totaling $131,750 for renovations of the lobby and for modifications
to the first and fifth floor bathrooms to comply with the Americans
Disabilities Act requirements. Construction began in May 1993 and
was completed in September 1993. The partnership contracted for
renovation and modifications to the bathrooms of the fifth (5th)
floor to comply with the American Disability Act requirements.
Construction was completed in March 1994. The cost was $32,207.
Payments for these renovations were made from the Capital
Improvement Reserve Fund.
As of March 1994, other completed improvements include walk-off mats
in the lobby, a glass enclosed entrance way, an additional lobby
directory, automatic door openers at the front and rear entrances,
resurfacing of the entire parking lot, and replacement of 105
fifteen foot heating tubes in the boiler.
A new roof was installed and the sidewalk was resurfaced at the
entranceway in the front of the building. The building facade was
power washed at the front entrance. The parking lot has been
resurfaced.
<PAGE>
For tenant retention and attracting new tenants, various tenant
incentives are offered according to the needs of each existing and
prospective tenant. These include special buildouts, facilities,
wiring for special equipment, plumbing for kitchens, assistance in
moving, providing furniture and furnishings when available, as well
as targeting a rental program to meet the business needs of the
tenant. These costs are reflected in Building Improvements.
Management is continuing to provide conscientious maintenance which
includes caulking windows, clean and polish marble in lobby area and
power wash the entire exterior of the building.
The property in New York is a shopping center with an occupancy of
95%. This shopping center was built in 1980. The location is ideal
for a shopping center because of the area's economic activity and
its proximity to Canada, which is approximately 25 miles away. Many
Canadians visit and shop at the center to avoid high Canadian prices
and sales tax. However, the center needs to be revitalized with the
renovation of its exterior facing, landscaping, resurfacing the
parking lot and renovation of the interior stores.
Management continues to focus on two major aspects to increase the
net operating income:
1. Improving the overall exterior and interior appearance,
and
2. Lowering real estate taxes.
Hills Department Store, the major tenant, has completely renovated
the interior of the Hills Department Store facility at a cost of
approximately $650,000, of which Gran-Mark Income Properties Limited
Partnership agreed to contribute $125,000 on the condition that the
Lease Agreement be affirmed. The renovation was completed in June
1993. The Lease Agreement was affirmed in November.
After renovation, it is typical for the Hills Department Store to
increase its sales by approximately 15% to 20% which will then bring
Hills very close to the maximum level of sales under the base rent.
Any increase in sales above the base level will require Hills to pay
overage rent.
The shopping center is in need of a facelift and repairs to reduce
tenant turnover and attract new tenants. This spring management
will focus on:
1. Concrete and sidewalk repairs.
2. Power wash and clean the facade.
3. Landscape the shopping center land area.
4. Repair the parking lot.
5. Install a new exterior facade for all storefronts except
Hills Department Store.
Management continues to be optimistic about the shopping center as
sales of our major tenants continue to increase.
<PAGE>
Item 2 - Management Discussion and Analysis of Financial Condition and Results
of Operations:
General
During the nine month period ending June 30, 1996, the Partnership's cash
position changed from $542,360 to $548,062.
The occupancy of the Manassas office building was approximately 95% on June 30,
1996, and the occupancy of the shopping center was approximately 95% on June 30,
1995.
Partners' equity totaled $1,521,511 as of June 30, 1996, a decrease of $24,438
from September 30, 1995.
The Partnership's net loss for the quarter ending June 30, 1996, was $63,440,as
compared to a loss of $103,664 for the quarter ending June 30, 1995.
Results of Operations
The shopping center's occupancy rate remains at approximately 95%. The shopping
center continues to generate a positive cash flow.
The office building was approximately 95% leased on June 30, 1996, compared to
95% for the quarter ended June 30, 1995. The office building continues to
generate a positive cash flow.
During the nine months ending June 30, 1996, Total Revenue has increased by
$110,181 or 7.8%; Total Expenses have decreased by $21,550 or 1.4%, and the Net
Income has increased by $131,731 as compared to the same period last fiscal
year.
The decrease in expenses is due primarily to the decrease in utilities; a
decrease in repairs being made to the office building; and a decrease in real
estate taxes. These decreases are partially offset by the increase in
management fees.
Trends & prospective information
See Item 1 - Selected Financial Data - Page 12
There are no material events and uncertainties that would result in historical
operations and financial condition not being indicative of future operations or
financial condition.
Current management expects that the capital improvements will improve the
appearance of the properties, thus successfully compete with existing office
buildings and shopping centers and achieve a high rate of occupancy.
For further information see Notes to Financial Statement - Note 10: Management
Plans.
<PAGE>
Liquidity
At the present time current rental income covers the expenditures for both
properties.
Monthly partnership incoming cash flow has increased and monthly partnership
outgoing cash flow has been reduced since the new managing general partner has
taken control of the properties in October 1990.
During the nine month period ending June 30, 1996, $199,745 of cash was provided
by operations (see Statement of Cash Flows). This reflects a decrease in cash
flow from operations of $107,280 over the previous nine month period ending June
30, 1995, due primarily to the increase in cash when FDIC terminated the
requirement for escrow payment to be included in the mortgage payment for the
shopping center during the prior year; and the prepayment of one year's rent by
a Manassas tenant in April 1995.
As a result of the restructured mortgage on the Manassas office building, the
cash contributions of the investors and the additional funds from Old Stone
Bank, it is our opinion that we have on hand and will generate from rental
income efficient cash to support the operations of the partnership for the
next 12 months.
The managing general partner deferred payment of most of its management fees
since October 1990 to allow the partnership to continue to improve its financial
position. Payments of $121,373 were made to the general partner during the nine
month period ending June 30, 1996, for current and past management fees of
$84,790, $30,883 in reimbursements, and $5,700 in interest.
Capital Resources
Current Management estimates the current market value to be $10,000,000. It is
management's intent to refinance the mortgages when due January 1, 1997 and
April 30, 1997.
<PAGE>
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
Chapter 11 filing - See Note 3 to Financial Statements
at Part I - Item 1
Law Suite Filing - See Note 10 to Financial Statements
at Part I - Item 1
Item 2 - Changes in Securities
None
Item 3 - Defaults Upon Senior Securities
None
Item 4 - Submission of Matters to a Vote of Security Holders
On August 2, 1990, Amherst Properties, Inc. sent voting materials
to limited partners of Gran-Mark Income Properties Limited
Partnership and by August 24, 1990 had received written consents
from a 60% majority of the units on favor of the removal of the
former general partners and the substitution of Amherst
Properties, Inc. as the new general partner.
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
None
Signature
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.
GRAN-MARK INCOME PROPERTIES
LIMITED PARTNERSHIP
By: Amherst Properties, Inc.
General Partner
By:
August 12, 1996 Louis J. Marin
Date Louis J. Marin
President
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 548,062
<SECURITIES> 0
<RECEIVABLES> 39,419
<ALLOWANCES> 0
<INVENTORY> 67,936
<CURRENT-ASSETS> 699,951
<PP&E> 12,429,275
<DEPRECIATION> 3,663,999
<TOTAL-ASSETS> 9,502,336
<CURRENT-LIABILITIES> 7,853,632
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,521,511
<TOTAL-LIABILITY-AND-EQUITY> 9,502,336
<SALES> 420,003
<TOTAL-REVENUES> 446,391
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 509,831
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (63,440)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (63,440)
<EPS-PRIMARY> 9.66
<EPS-DILUTED> 9.66
</TABLE>
