United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10 - K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Fiscal Year Ended September 30, 1997
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, Virginia 22110
Registrant's Telephone Number, including Area Code (703) 368-2415
Securities Registered Pursuant to Section 12(b) of the Act;
None
Securities Registered Pursuant to Section 12(g) of the Act;
Limited Partnership Interest (Filed on December 17, 1986)
(Title of Class)
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 files such reports), and (2) has been subject to
such filing requirements for the past 90 days.
X Yes No
At September 30, 1997, the registrant had outstanding 6,505 units of
limited partnership interest. The units are not readily marketable and have a
stated value of $1,000 per unit.
Amherst Properties, Inc. has signed a contract for management of the
office building, and previously for the shopping center, with management fees
currently based on 6% of gross revenues, starting October 1, 1990. Amherst
Properties, Inc. had subcontracted with Center Association, Inc., an unrelated
entity, to provide certain management services for the shopping center. In
accordance with the Partnership Agreement, Amherst Properties, Inc. is
responsible for all third party management expenses.
The Partnership's property competes with other similar type properties in
the geographic market.
ITEM 2 - Properties
OFFICE BUILDING
The Partnership owns a nine-story, air-conditioned, multi-tenant office
building with three self-service elevators located in Manassas, Virginia, on
Sudley Road (State Route 234), a six lane median highway, just south of I-66,
which provides direct access to Washington, D.C., and points in Northern
Virginia. Completed in 1974, the office building has a gross area of
approximately 95,000 square feet of which approximately 90,933 square feet are
rentable. The office building is located on approximately 4.9 acres and has
on-site parking for 337 cars, which exceeds the applicable zoning requirements.
As of September 30, 1997, the office building was approximately 85%
leased with one tenant leasing in excess of 10% of the office building.
Because of the loan restructuring with Old Stone Bank in 1992, the debt
service requirements have been reduced. This reduction is now reflected in the
rental structure which has been lowered to be more competitive in the
marketplace. The completed renovation of the lobby gives the building a more
inviting look for the 1990s.
The office building has been known as the First Virginia Building until
First Virginia Bank terminated its lease in November 1990. The building name
was then changed to The Sudley Tower.
SHOPPING CENTER
Sherdian Hills Plaza, a one-story shopping center completed in 1980, had
approximately 117,000 square feet of rental space, 652 parking spaces, and was
located on approximately 15 acres in Amherst, New York (a suburb of Buffalo,
New York). As of September 30, 1995, 95% of the shopping center was leased
with the primary tenants being Hills Department Store and Fay's Drug Company,
Inc. (Fay's Drug Stores), which together lease nearly 86% of the shopping
center. On September 12, 1996, the shopping center was sold for $3,625,000.
The outstanding principal balance on the mortgage of $2,962,361 was paid from
the gross proceeds, as well as $295,791 in selling expenses and other related
disbursements. The proceeds to the Partnership were $366,888, less additional
legal fees of $16,000, resulting in net proceeds of $350,888.
Item 3 - Legal Proceedings
Chapter 11 Filing - See Note 3 to Financial Statements at Item 8.
Law Suit Filing - See Note 10 to Financial Statements at Item 8.
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
in favor of the removal of the former general partners and the substitution of
Amherst Properties, Inc. as the new general partner.
PART II
Item 5 - Market for Registrant's Common Equity and related Stockholders Matters
There is no established public trading market for the class of limited
partnership units. The most recent price that the current general partner is
aware of is $100 per $1,000 unit paid in early 1991 paid by an officer of the
current general partner of the units owned by a third party.
Item 6 - Selected Financial Data
For the Year ended September 30,
Total Revenue $1,385,802 $2,002,248 $1,870,121 $1,735,895 $1,605,755
Net Loss $ (28,705) (46,830) (217,247) (270,949) (389,950)
Net loss per weighted
average limited
partnership unit $ (4.37) (7.13) (33.06) (41.24) (98.59)
Total Assets $5,958,162 6,447,761 9,646,798 9,930,069 10,311,631
Mortgage Payable $4,161,492 4,634,915 7,673,367 7,744,189 7,790,440
The sale of the New York shopping center on September 12, 1996, materially
affects the comparability of the information reflected in the selected
financial data.
Item 7 - Management's discussion and analysis of financial condition and
results of operations
General
During the fiscal year ending September 30, 1997, the Partnership's cash
position changed from $963,019 to $485,768.
The occupancy of the Manassas office building was approximately 85% on
September 30, 1997.
Partners' equity totaled $1,470,414 as of September 30, 1997, a decrease
of $28,705 from the prior year.
The partnership's net loss for the fiscal year ending September 30, 1997,
was $28,705; a decrease of $18,125 from a loss of $46,860 for the fiscal year
ending September 30, 1996.
Results of Operations
The sale of the shopping center in September 1996 is a material event
which results in the historical operations and financial condition not being
indicative of future operations or financial condition.
The office building's occupancy rate was approximately 85% on September
30, 1997. The office building was approximately 96% leased for the years ended
September 30, 1996 and 1995. The office building generates a positive cash
flow.
An analysis of the office building operations during fiscal year ending
September 30, 1997, indicates that the office building revenues have remained
constant. Interest expenses were affected by the rate increase at the time the
mortgage was renegotiatied. Expenses for depreciation and amortization have
increased due to additional improvements and deferred costs. The expense for
utilities decreased due to the installation of energy efficient light fixtures
and building improvements. Expenses for property maintenance and repairs have
decreased due to completion of several maintenance and replacement projects.
Preventive maintenance programs continue to protect and improve the buildings
and grounds. General and Administration Expenses have increased due to the
increased commissions on additional antenna leases, increased advertising, and
increased professional fees. See Notes to Financial Statement - Note 10:
Management Plans.
Trends & prospective information
See Item 6 - Selective Financial Data
The sale of the shopping center is a material event which results in the
historical operations and financial condition not being indicative of future
operations or financial condition.
Current management expects that the capital improvements will continue to
improve the appearance of the Manassas property, that the building will
continue to successfully compete with existing office buildings and shopping
centers, and will maintain a high rate of occupancy.
For further information see Notes to Financial Statement - Note 10:
Management Plans.
Liquidity
At the present time current rental income covers the expenses on the
property.
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 fiscal year ending September 30, 1997, $335,302 of cash was
generated from operations. This reflects a decrease in cash flow from
operations of $1,097 over the previous fiscal year.
The managing general partner deferred payment of most of its management
fees from 1990 to 1993 to allow the partnership to continue to improve its
financial position. The cash flow during the current year was sufficient to
pay the current year's fees plus $3,218 of prior years' fees.
Funds were also used to acquire additional office equipment of $6,703,
make building improvements of $121,988, and pay deferred costs in the amount of
$210,438.
Capital Resources
Current management estimates the current market value to be more than
$6,000,000. An improvement in the commercial rental real estate market and an
increase in the occupancy of the Manassas office building would have a major
effect on the market values of the properties.
The mortgage payable on the Manassas property, which was due April 30,
1997, was refinanced.
Item 8 - Financial Statements and Supplementary Data
Independent Auditor's Report.........................7
Balance Sheets.......................................8-9
Statements of Income.................................10
Statements of Changes in Partners' Equity............11
Statements of Cash Flow..............................12-13
Notes to Financial Statements........................14-27
Accompanying schedules are omitted since they are included in the
Notes.
Jennifer A. Jones, CPA, Ltd.
10615 Judicial Drive, Suite 701
Fairfax, VA 22030
703-352-1587
November 26, 1997
Independent Auditor's Report
To the Partners of Gran-Mark Income
Properties Limited Partnership
7200 Sadly Road, Suite 900
Manassas, VA 22070
I have audited the accompanying balance sheets of Gran-Mark Income
Properties Limited Partnership as of September 30, 1997 and 1996, and the
related statements of income, changes in partners' equity, and cash flows for
the years ending September 30, 1997, 1996 and 1995. These financial statements
are the responsibility of the Partnership's management. My responsibility is
to express an opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing
standards. These standards require that I plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.
In my opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Gran-Mark Income
Properties Limited Partnership as of September 30, 1997 and 1996, and the
results of its operations and its cash flows for the years ending September
30, 1997, 1996 and 1995, in conformity with general accepted accounting
principles.
Jennifer A. Jones, CPA, Ltd.
Gran-Mark Income Properties Limited Partnership
Balance Sheets
September 30, 1997 and 1996
ASSETS
9/30/97 9/30/96
[S] [C] [C]
CURRENT ASSETS
Cash $ 485,768 $ 963,019
Tenant Rents Receivable 117,815 133,343
Prepaid Expenses and Other 7,888 30,202
Mortgage Escrow Accounts 38,198 30,816
Total Current Assets 649,669 1,157,380
FIXED ASSETS
Land 418,598 418,598
Buildings 6,594,998 6,594,998
Building Improvements 776,846 654,858
Office Equipment 47,767 41,064
Total 7,838,209 7,709,518
Less: Accumulated Depreciation 2,742,793 2,462,063
Total Book Value of Fixed Assets 5,095,416 5,247,455
OTHER ASSETS:
Deferred Costs net of accumulated
amortization of $108,942 and
$199,315 as of September 30, 1997
and September 30, 1996, respectively 213,077 42,926
Total Other Assets 213,077 42,926
Total Assets $ 5,958,162 $ 6,447,761
Gran-Mark Income Properties Limited Partnership
Balance Sheets
September 30, 1997 and 1996
LIABILITIES AND PARTNERS' EQUITY
9/30/97 9/30/96
[S] [C] [C]
Accounts Payable $ 87,585 $ 55,344
Accrued Interest 16,617 46,478
Accrued Expenses 86,926 83,199
Unearned Rental Income 9,112 8,554
Current Portion of Mortgage Payable 45,946 4,634,915
Total Current Liabilities 246,186 4,828,490
LONG-TERM LIABILITIES:
Tenant Security Deposits Payable 53,828 44,746
Management Fees Payable to Amherst
Properties, Inc. 72,188 75,406
Mortgage Payable - Office Building 4,115,546 0
Total Long-Term Liabilities 4,241,562 120,152
Total Liabilities 4,487,748 4,948,642
CONTINGENCIES AND COMMITMENTS (Notes 3 through 10)
PARTNERS' EQUITY
General Partner (20,603) (20,315)
Limited Partners (12,000 Units authorized;
6,505 issued and outstanding) 1,491,017 1,519,434
Total Partners' Equity 1,470,414 1,499,119
Total Liabilities and Partners' Equity $ 5,958,162 $ 6,447,761
Gran-Mark Income Properties Limited Partnership
Statements of Income
For Fiscal Years Ending September 30, 1997, 1996 and 1995
9/30/97 9/30/96 9/30/95
[S] [C] [C] [C]
REVENUE:
Rental $ 1,202,577 $ 1,686,507 $ 1,613,965
Tenant Reimbursements 152,536 355,729 234,822
Interest 9,466 10,017 10,050
Other 21,223 26,410 11,284
Loss on Sale of Asset 0 (76,415) 0
Total Revenue 1,385,802 2,002,248 1,870,121
EXPENSES:
Interest 384,541 634,377 684,743
Depreciation & Amortization 321,017 432,665 442,982
Utilities 170,709 198,606 219,100
Real Estate Taxes & Licenses 49,128 234,218 230,229
Property Maintenance & Repairs 193,316 235,148 195,531
Management Fees 84,753 115,093 114,231
General & Administration Expenses 211,043 198,974 200,552
Total Expenses 1,414,507 2,049,081 2,087,368
Net Loss $ (28,705) $ (46,833) $ (217,247)
Allocation of Net Loss:
General Partners $ 288 $ 468 $ 2,172
Limited Partners 28,417 46,365 215,075
Net Loss per weighted
average Limited Partnership
unit (6,505 units) $ 4.37 $ 7.13 $ 33.06
Gran-Mark Income Properties Limited Partnership
Statements of Changes in Partners' Equity
For Fiscal Years Ending September 30, 1997, 1996 and 1995
General Limited
Partner Partners Total
[S] [C] [C] [C]
Balance, September 30, 1994 $ (17,675) $ 1,780,874 $ 1,763,199
Net Loss Fiscal Year Ending 1995 (2,172) (215,075) (217,247)
Balance, September 30, 1995 (19,847) 1,565,799 1,545,952
Net Loss Fiscal Year Ending 1996 (468) (46,365) (46,833)
Balance, September 30, 1996 (20,315) 1,519,434 1,499,119
Net Loss Fiscal Year Ending 1997 (288) (28,417) (28,705)
Balance, September 30, 1997 $ (20,603) $ 1,491,017 $ 1,470,414
Gran-Mark Income Properties Limited Partnership
Statement of Cash Flow
For Fiscal Years Ending September 30, 1997, 1996 and 1995
9/30/97 9/30/96 9/30/95
[S] [C] [C] [C]
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income or Loss from
Statement of Income $ (28,705) $ (46,830) $ (217,247)
Adjustments to reconcile ner loss
to cash provided by (used in)
operating activities:
Depreciation & Amortization 321,017 432,665 442,982
Loss on Vehicle 0 2,871 0
Loss on Sale of Assets 0 76,415 0
Operating Expenses not paid by cash,
Withheld from Assets sale proceeds 0 73,032 0
(Increase) Decrease in:
Tenant Tents Receivable 15,528 (103,219) (7,746)
Prepaid Expenses and Other 22,314 17,008 (4,863)
Mortgage Escrow Acounts (7,382) (2,985) 132,044
Increase (Decrease) in:
Accounts Payable 32,242 (31,583) (7,900)
Accrued Interest (29,862) (9,038) (556)
Accrued Expenses 3,727 23,235 (4,846)
Unearned Rental Income 559 (56,863) 52,791
Tenant Security Deposits
Payable 9,082 (12,339) 10,268
Management Fees payable to
Amherst Properties, Inc. (3,218) (25,970) (29,964)
Total Adjustments 364,007 383,229 582,210
Net Cash Provided by Operating Activities 335,302 336,399 364,963
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Sale if Assets 0 350,888 0
Additions to Office Equipment (6,703) (18,676) (8,222)
Additions to Building Inprovements (121,988) (158,014) (18,404)
Additions to Deferred Costs (210,438) (12,650) (15,433)
Net Cash Provided by (Used in) Investing
Activities (339,129) 161,548 (42,059)
Gran-Mark Income Properties Limited Partnership
Statement of Cash Flow
For Fiscal Years Ending September 30, 1997, 1996 and 1995
9/30/97 9/30/96 9/30/95
[S] [C] [C] [C]
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of Notes $ 0 $ (1,197) $ (4,787)
Repayment of Secured Claims (473,424) (76,091) (70,822
Incentive to Lessee 0 0 (16,687)
Net cash Used in Financing Activities (473,424) (77,288) (92,296)
Net Change in Cash $ (477,251) $ 420,659 $ 230,608
CASH AT BEGINNING OF YEAR 963,019 542,360 311,752
CASH AT END OF YEAR $ 485,768 $ 963,019 $ 542,360
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the
period for Interest $ 414,402 $ 650,168 $ 685,299
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
On September 12, 1996, the New York shopping center was sold.
Gross Sales Price $ 3,625,000
Items paid from sales proceeds
Selling Expenses (222,719)
Secured Claims (2,962,361)
Operating expenses (73,032)
Legal Fees (16,000)
Net proceeds from Sale $ 350,888
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.
Fully depreciated building improvements totaling $2,897 were disposed of
during the year ending September 30, 1995.
GRAN-MARK INCOME PROPERTIES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
September 30, 1997
Note 1: NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES:
Nature of Business
The Partnership owns and operates an office building in Manassas,
Virginia, and owned and operated 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 principles 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.
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 are considered to
be cash equivalents. There are no cash equivalents as of September
30, 1997.
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 each period 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 $961,771 and $285,768 at September 30, 1996 and 1997,
respectively, which was insured up to $200,000, 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.
Financial Instruments
The Partnership used the following methods and assumptions to
estimate the fair values of financial instruments:
Cash and Cash Equivalents - the carrying amount approximates fair
value because of the short period to maturity of the instruments.
Receivables and Payables - the carrying amount approximates fair
value because of the short period to maturity of the instruments.
Short and Long-Term Debt - the carrying amount approximates fair
value based on discounting the projected cash flows using market
rates available for similar maturities.
None of the financial instruments are held for trading purposes.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires the use of
estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
NOTE 2: RENTAL PROPERTY:
Land, buildings, improvements, and other capital expenditures, and
their related accumulated depreciation accounts are summarized as
follows:
Office
Building
Manassas, Office
Virginia Equipment Total
Date of Construction 1974
Date Acquired Aug. 1986 Various
Land $ 418,598 $ 0 $ 418,598
Buildings 6,594,998 6,594,998
Other 0 47,767 47,767
Total Initial cost to partnership 7,013,596 47,767 7,061,363
Improvements capitalized
subsequent to acquisition 776,846 0 776,846
Total accumulated cost 7,790,442 47,767 7,838,209
Accumulated depreciation 2,719,834 22,959 2,742,793
Net Book Value $5,070,608 $ 24,808 $5,095,416
The following is a summary of activity for the land, buildings and
improvements, for the years ended September 30, 1995, 1996, and 1997:
Rental Accumulated
Property Depreciation
Balance September 30, 1994 $12,257,710 $(2,928,769)
10/1/94 - 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)
10/1/95 - 9/30/96
Additions during the period:
Improvements capitalized 158,014
Depreciation expense (405,850)
Deletions during the period: (4,762,777) 1,302,389
Balance September 30, 1996 7,668,454 (2,446,793)
10/1/96 - 9/30/97
Additions during the period:
Improvements capitalized 121,988
Depreciation expense (273,041)
Deletions during the period:
Balance September 30, 1997 $ 7,790,442 $(2,719,834)
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.
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.
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, 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.
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, 1997, a total of 6,505 units had been issued.
NOTE 5: SECURED CLAIMS:
Secured claims as of September 30, 1996 and 1997, which are
collateralized by liens on the Partnership's rental property,
including their related leases and accounts receivable are
summarized below:
Lender Property Sept 30, 1996 Sept 30, 1997
Regency Savings Bank Sudley Tower
(Office Bldg)
Manassas, VA $ 4,634,915 $ 4,161,492
Scheduled maturities of secured claims at September 30, 1997, are as follows:
FYE 1998 $ 45,946
FYE 1999 50,506
FYE 2000 55,519
FYE 2001 61,029
FYE 2002 3,948,492
Total $4,161,492
Regency Savings Bank:
On February 18, 1997, Gran-Mark Income Properties Limited
Partnership and Regency Savings Bank entered into a Loan Extension
and Modification Agreement to extend the maturity date and to
modify the promissory note dated May 29, 1987. The maturity date
of the note was extended to February 18, 2002, at which time a
balloon payment of approximately $3,926,800 is due. As of February
18, 1997, the outstanding principal balance was $4,190,256. The
mortgage bears interest at the rate of 9.5%. Fixed monthly
payments of principal and interest of $36,610 are due through
February 2002. In addition to monthly payments of principal and
interest, a monthly escrow deposit for the real estate taxes is
required. Pursuant to the terms of the Modification Agreement and
Allonge Promissory Note dated June 30, 1992, the sum of $421,184
was required as payment of deferred interest and unpaid fees. In
addition, an extension fee of $41,903 is payable by February 18,
1998. Interest charged to operations during the year ending
September 30, 1997 was $247,851.
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 extended 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, 1997, 1996, and 1995, was
$131,311, 352,456, and $359,156, respectively.
Seamen's Bank for Savings/Regency Savings Bank:
The mortgage bore interest at the rate of 10.31%; 2.5% over the
Federal Home Loan Bank Board Five Year Advance Rate. The loan was
to mature in January, 1997, at which time a balloon payment of
approximately $2,944,200 was 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.
The mortgage was only to 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, 1997, 1996 and 1995, was $0, $289,619, and $310,142;
respectively.
This mortgage was paid in full September 1996 upon the sale of the
New York shopping center. Payment was made from the gross
proceeds.
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, 1997, 1996, and 1995, was $0, $23
and $378, respectively. Both the truck and the loan were 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, 1997 are
summarized below:
Manassas Office Building
Utilities $ 15,274
Repairs & Maintenance 6,685
Rent Overpayment 325
Legal Fees to a Related Party 34,813
Construction Management to a Related Party 22,413
Total $ 79,510
NOTE 6: RELATED PARTY TRANSACTIONS:
Management Agreements
The Partnership maintains a management agreement with Amherst
Properties, Inc. (the current general partner) which provides for a
monthly payment of management fees in the amount of six percent
(6%) of gross rents collected and reimbursement of out-of-pocket
expenses incurred in connection with the property
On September 30, 1996, the partnership executed an Amendment to
Management Agreement with Amherst Properties, Inc. extending the
expiration date to September 30, 2000. All other terms and
conditions remain the same.
Accordingly, aggregate management fees charged to operations for
the years ended September 30, 1997, 1996, and 1995, were $84,754;
$115,089; and $114,231, respectively.
As of September 30, 1997, $27,368 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. Reimbursements charged to operations
or capitalized for the years ended September 30, 1997, 1996, and
1995, were $21,557; $58,958; and $27,985, respectively.
During the period of October 1990 through December 1990, the
general partner paid $79,994 in various costs for the Partnership.
During prior periods, $35,174 of these costs have been reimbursed
to the general partner, leaving a balance of unreimbursed costs of
$44,820 as of September 30, 1997. These unreimbursed costs are
included in Management Fees Payable to Amherst Properties, Inc. In
December 1995, the Partnership agreed to pay interest at the rate
of 12% on these unreimbursed costs from December 31, 1990, until
paid. Interest charged to operations for the years ended September
30, 1997, 1996 and 1995, were $5,378; $5,556; and $0; respectively.
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 $6,421 for the
monthly loan payment, and other expenses related to a vehicle owned
by Amherst Properties, Inc. Both the vehicle and loan are in
Amherst Properties, Inc.'s name. These payments are included in
the interest paid to Amherst Properties, Inc.
NOTE 7:
OPERATING LEASES
Minimum future rentals to be received under noncancellable
operating leases from tenants of both properties in effect at
September 30, 1997, are as follows:
Year ending September 30, Amount
1998 $ 1,197,778
1999 913,504
2000 614,750
2001 369,821
Subsequent to 2001 362,278
Total minimum future rentals $ 3,458,131
General leasing arrangements include a remaining fixed rental term
with annual increases, pro rata share of increases in property
expenses, and various renewal options.
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.
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:
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.
Amherst Properties, Inc. had deferred collection of most management
fees accrued for the period from October 1990 to September 1993 and
advanced funds, to pay operating expenses, legal fees and real
estate commissions.
At the present time current rental income covers the operating
expenditures.
The success for the Manassas office building is dependent upon four
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; and
4. Retention of existing tenants.
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 and replaced
light fixtures with more energy efficient fixtures 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 85% 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.
Present plans are to continue 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
1990s but have expanded and became more profitable. Marketing
plans also include development of a tenant base consisting of high
tech companies which are attracted to the IBM/Toshiba joint venture
(Dominion Semi-Conductor) located in Manassas.
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 23.
More repairs, maintenance, and upgrading are needed at the office
building to continue to attract and retain tenants. They are as
follows:
1. Renovate bathrooms on floors 2, 3, 4, 6, 7, 8 and 9;
2. Renovate, carpeting, wallpaper, ceiling, and lighting in the
hallways of the upper floors;
3. Caulk the windows and window frames on the south side and
east side of the building;
4. Install energy efficient motors which power the heating and hot
water system;
5. Upgrade the elevator controllers; and
6. Replace ceiling tiles in the hallways and thereafter throughout
the building.
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.
During the fiscal year ending September 30, 1997, renovations,
upgrades and capital improvements were made as follows:
1. Increased amperage in the antenna room for additional
antenna;
2. Caulked two sides (north and west) of the building and
resurfaced four sides of the building;
3. Replaced main electrical switches which ensures continued
electrical power to the building;
4. Resurfaced and refinished exterior retaining wall;
5. Replaced isolation springs supporting air handler #1;
6. Installed antenna room air conditioning to reduce excess
buildup of heat;
7. Installed a modified economical outdoor sprinkler system for
the landscaping;
8. Torqued down the electrical service units, panels, disconnects
and transformers; and
9. Landscaped the building site front and rear.
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.
Future prospects for the building are brighter now than at any time
since 1990. We continue to enjoy a relatively high occupancy
although several large tenants moved out in July. Office location
in Manassas continues to be in high demand with the presence of
Dominion Semi-Conductor, a joint venture between IBM and Toshiba.
The facility is now producing chips and currently expanding with a
completion date of approximately six years away. High tech firms
moving into the area service or become sub-contractors of IBM and
Dominion Semi-Conductor. Existing roads in the area are being
widened and new roads are under construction with a Route 234 by-
pass completed from Route 28 to Interstate Route 66. Rout 28, a
major north/south road, is also being widened. The widening of
Route 66 has been completed. Newcomers to the area include George
Mason University Bioinformatics Center and Advanced Biotechnology
Laboratory Center.
The Manassas area continues to be attractive for several reasons:
1. There is significant blue collar and clerical workforce
available.
2. Top management personnel of high-tech firms like the
country surroundings in Chantilly, Gainesville, Warrenton
and surrounding areas.
3. Roads are underutilized and there is no bottleneck which
exists during rush hour like Tysons Corner and along
Route 95 north.
4. The county seeks out and promotes new businesses for
development in the area.
Supplementary data has been omitted inasmuch as it is either
inapplicable, immaterial, or it is presented in the financial statements or
notes thereto.
Item 9 - Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures
In October 1991, Jennifer A. Jones, CPA, Ltd. was appointed as new
certified public accountant for the partnership, replacing Charles M. Terry &
Company. Charles M. Terry & Company had replaced Charles H. Schnepfe,
Certified Public Accountant in 1990. Charles H. Schnepfe had replaced Roberts,
Halt, and Company in 1989, and Roberts, Halts, and Company had replaced Price
Waterhouse in 1988.
Part III
Item 10 - Directors and Executive Officers of the Registrant
The partnership has no directors or officers under the Partnership
Agreement and the General Partner is solely responsible for the operation of
the Partnership and its properties. The Limited Partners have no right to
participate in the control of the Partnership. The current General Partner is
Amherst Properties, Inc., located at 7900 Sudley Road, Suite 900, Manassas,
Virginia 20109 ([703] 368-2415).
For information concerning the former general partners, see previous SEC
filings.
Louis J. Marin, age 62, is the President of Amherst Properties, Inc. He
received his B.B.A. in Business from City College, New York (1957), his MBA
from Cornell University (1959) and his law degree from George Washington
University (1964). He worked in the regulatory field for the Securities &
Exchange Commission and the Office of the Comptroller of the Currency for 6
years. For the last 26 years he has worked as a lawyer specializing in real
estate. During this time he has been a developer, investor, and manager of
real estate.
Dr. Lionel Felsen, age 61, is the Executive Vice President of Amherst
Properties, Inc. He did his undergraduate at Brooklyn College and graduate
work at Georgetown University Medical and Dental School, D.D.S. (1964). He has
managed a professional office since 1964. He has been an active investor in
commercial and residential real estate for 26 years and is the major investor
in Sher-Man Real Estate Partnership.
ITEM 11 - Executive Compensation
The Partnership has no directors or officers. The Partnership will pay
the costs incurred by the General Partners or their affiliates in performing
administrative services necessary to the prudent operation of the Partnership;
provided, however, that the amounts charged to the Partnership for services
performed shall not exceed the lessor of (a) the actual cost of the services,
or (b) 90% of the competitive price which would be charged by non-affiliated
persons rendering services in the same or a comparable geographic location.
Costs of the services as used herein means the pro rata cost of personnel
including an allocation of overhead directly attributable to such services. See
Note 6 of the Notes to Financial Statements (Item 8) for Management fees and
other payments to the Managing General Partner and its affiliates.
Item 12 - Security Ownership of Certain Beneficial Owners and Management
As of September 30, 1997, Lou Marin, President of Amherst Properties,
Inc., was a beneficial owner of 629.7438 units or 9.58% of the Partnership;
Lionel Felsen, Executive Vice-President of Amherst Properties, Inc., was a
beneficial owner of 1116.5596 units or 16.99% of the Partnership and Amherst
Properties, Inc. was a beneficial owner of 500 units or 7.61% of the
Partnership, in addition to its general partnership interest. To the knowledge
of the Partnership's management there are no other beneficial owners of more
than 5% of the Partnership.
Item 13 - Certain Relationships and Related Transactions
See Note 7 of the Notes to Financial Statements at Item 8.
PART IV
(A) (1) Financial Statements - See Item 8
(B) Reports on Form 8-K: None
(C) Exhibits: None
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by undersigned, thereunto duly authorized.
Gran-Mark Income Properties Limited Partnership
By: Amherst Properties, Inc.
General Partner
By: Louis J. Marin December 29, 1997
Louis J. Marin Date
President
By: Lionel Felsen December 29, 1997
Lionel Felsen Date
Vice-President
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<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<CASH> 485,768
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<RECEIVABLES> 117,815
<ALLOWANCES> 0
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<CURRENT-ASSETS> 649,669
<PP&E> 7,838,209
<DEPRECIATION> 2,742,793
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<OTHER-SE> 1,470,414
<TOTAL-LIABILITY-AND-EQUITY> 5,958,162
<SALES> 1,202,577
<TOTAL-REVENUES> 2,385,802
<CGS> 0
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<OTHER-EXPENSES> 1,414,507
<LOSS-PROVISION> 0
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<INCOME-PRETAX> (28,705)
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