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, 1998
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, 1998, 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, 1998, the office building was approximately 77% leased
with one tenant leasing in excess of 10% of the office building.
Because of the loan restructuring, 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
Sheridan 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). 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.
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,
1998 1997 1996 1995 1994
Total Revenue $1,392,978 $1,385,802 $2,002,248 $1,870,121 $1,735,895
Net Loss (85,283) (28,705) (46,830) (217,247) (270,949)
Net Loss per weighted
average limited
partnership unit (12.98) (4.37) (7.13) (33.06) (41.24)
Total Assets 5,786,078 5,958,162 6,447,761 9,646,761 9,930,069
Mortgage Payable 4,242,143 4,161,492 4,634,915 7,673,367 7,744,189
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, 1998, the Partnership's cash
position changed from $485,768 to $576,670.
The occupancy of the Manassas office building was approximately 77% on
September 30, 1998.
Partners' equity totaled $1,385,131 as of September 30, 1998, a decrease
of $85,283 from the prior year.
The partnership's net loss for the fiscal year ending September 30, 1998,
was $85,283; an increase of $56,578 from a loss of $28,705 for the fiscal year
ending September 30, 1997.
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 77% on September
30, 1998. The office building was approximately 85% and 96% leased for the
years ended September 30, 1997 and 1996, respectively. The office building
generates a positive cash flow.
An analysis of the office building operations during fiscal year ending
September 30, 1998, indicates that the office building revenues have remained
constant. Interest expenses were affected by the rate increase at the time the
mortgage was renegotiated. Expenses for depreciation and amortization have
increased due to additional improvements and deferred costs. The expenses for
utilities have remained constant. 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. Management Fees have remained
constant. 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 September 1996 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. Partnership monthly cash flow has increased since the new managing
general partner has taken control of the properties in October 1990.
During fiscal year ending September 30, 1998, $234,932 of cash was
generated from operations. This reflects a decrease in cash flow from
operations of $100,370 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.
Funds were also used to acquire additional office equipment of $17,260,
make building improvements of $71,154, and pay deferred costs in the amount of
$15,376.
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 value of the property.
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.........................6
Balance Sheets.......................................7-8
Statements of Income.................................9
Statements of Changes in Partners' Equity............10
Statements of Cash Flow..............................11-12
Notes to Financial Statements........................13-21
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
December 29, 1998
Independent Auditors 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, 1998 and 1997, and the
related statements of income, changes in partners equity, and cash flows for
the years ending September 30, 1998, 1997 and 1996. These financial
statements are the responsibility of the Partnerships 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, 1998 and 1997, and the results of its
operations and its cash flows for the years ending September 30, 1998, 1997 and
1996, in conformity with general accepted accounting principles.
Jennifer A. Jones, CPA, Ltd.
Gran-Mark Income Properties Limited Partnership
Balance Sheets
September 30, 1998 and 1997
ASSETS
9/30/98 9/30/97
[S] [C] [C]
CURRENT ASSETS
Cash $ 576,670 $ 485,768
Tenant Rents Receivable 87,067 117,815
Prepaid Expenses and Other 1,398 7,888
Mortgage Escrow Accounts 41,189 38,198
Total Current Assets 706,324 649,669
FIXED ASSETS
Land 418,598 418,598
Buildings 6,594,998 6,594,998
Building Improvements 817,882 776,846
Office Equipment 59,342 47,767
Total 7,890,820 7,838,209
Less: Accumulated Depreciation 2,985,865 2,742,793
Total Book Value of Fixed Assets 4,904,955 5,095,416
OTHER ASSETS:
Deferred Costs net of accumulated
amortization of $108,942 and
$149,371 as of September 30, 1997
and September 30, 1998, respectively 174,799 213,077
Total Other Assets 174,799 213,077
Total Assets $ 5,786,078 $ 5,958,162
GranMark Income Properties Limited Partnership
Balance Sheets
September 30, 1998 and 1997
LIABILITIES AND PARTNERS' EQUITY
9/30/98 9/30/97
[S] [C] [C]
CURRENT LIABILITIES
Accounts Payable $ 61,855 $ 87,585
Accrued Interest 123 16,617
Accrued Expenses 79,865 86,926
Unearned Rental Income 16,961 9,112
Current Portion of Mortgage Payable 46,827 45,946
Total Current Liabilities 205,631 246,186
LONG-TERM LIABILITIES:
Tenant Security Deposits Payable 48,549 53,828
Management Fees Payable to Amherst
Properties, Inc. 72,342 72,188
Mortgage Payable - Office Building 4,074,425 4,115,546
Total Long-Term Liabilities 4,195,316 4,241,562
Total Liabilities 4,400,947 4,487,748
CONTINGENCIES AND COMMITMENTS (Notes 3 through 10)
PARTNERS' EQUITY
General Partner (21,456) (20,603)
Limited Partners (12,000 Units authorized;
6,505 issued and outstanding) 1,406,587 1,491,017
Total Partners' Equity 1,385,131 1,470,414
Total Liabilities and Partners' Equity $ 5,786,078 $ 5,958,162
Gran-Mark Income Properties Limited Partnership
Statements of Income
For Fiscal Years Ending September 30, 1998, 1997 and 1996
9/30/98 9/30/97 9/30/96
[S] [C] [C] [C]
REVENUE:
Rental $ 1,311,872 $ 1,202,577 $ 1,686,507
Tenant Reimbursements 62,713 152,536 355,729
Interest 17,184 9,466 10,017
Other 1,209 21,223 26,410
Loss on Sale of Asset 0 0 (76,415)
Total Revenue 1,392,978 1,385,802 2,002,248
EXPENSES:
Interest 404,578 384,541 634,377
Depreciation & Amortization 332,529 321,017 432,665
Utilities 173,935 170,709 198,606
Real Estate Taxes & Licenses 49,046 49,128 234,218
Property Maintenance & Repairs 174,703 193,316 235,148
Management Fees 85,247 84,753 115,093
General & Administration Expenses 258,223 211,043 198,974
Total Expenses 1,478,261 1,414,507 2,049,081
Net Loss $ (85,283)$ (28,705)$ (46,833)
Allocation of Net Loss:
General Partners $ (853)$ (288)$ (468)
Limited Partners (84,430) (28,417) (46,365)
Net Loss per weighted
average Limited Partnership
unit (6,505 units) $ (12.98)$ (4.37)$ (7.13)
Gran-Mark Income Properties Limited Partnership
Statements of Changes in Partners' Equity
For Fiscal Years Ending September 30, 1998, 1997 and 1996
General Limited
Partner Partners Total
[S] [C] [C] [C]
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
Net Loss Fiscal Year Ending 1998 (853) (84,430) (85,283)
Balance, September 30, 1998 $ (21,456)$ 1,406,587 $ 1,385,131
Gran-Mark Income Properties Limited Partnership
Statements of Cash Flow
For Fiscal Years Ending September 30, 1998, 1997 and 1996
09/30/98 9/30/97 9/30/96
[S][C][C][C]
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income or Loss from
Statements of Income $ (85,283)$ (28,705)$ (46,830)
Adjustments to reconcile net loss
to cash provided by (used in)
operating activities:
Depreciation & Amortization 332,529 321,017 432,665
Loss on Vehicle 0 0 2,871
Loss on Sale of Assets 0 0 76,415
Operating Expenses not paid by cash,
Withheld from Sale Proceeds 0 0 73,032
(Increase) Decrease in:
Tenant Rents Receivable 30,748 15,528 (103,219)
Prepaid Expenses and Other 6,490 22,314 17,008
Mortgage Escrow Accounts (2,991) (7,382) (2,985)
Increase (Decrease) in:
Accounts Payable (25,730) 32,242 (31,583)
Accrued Interest (16,494) (29,862) (9,038)
Accrued Expenses (7,061) 3,727 23,235
Unearned Rental Income 7,849 559 (56,863)
Tenant Security Deposits Payable (5,279) 9,082 (12,339)
Management Fees payable to
Amherst Properties, Inc. 154 (3,218) (25,970)
Total Adjustments 320,215 364,007 383,229
Net Cash Provided by Operating Activities 234,932 335,302 336,399
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Sale of Assets 0 0 350,888
Additions to Office Equipment (17,260) (6,703) (18,676)
Additions to Building Inprovements (71,154) (121,988) (158,014)
Additions to Deferred Costs (15,376) (210,438) (12,650)
Net Cash Used in Investing Activities (103,790) (339,129) 161,548
Gran-Mark Income Properties Limited Partnership
Statements of Cash Flow
For Fiscal Years Ending September 30, 1998, 1997 and 1996
09/30/98 9/30/97 9/30/96
[S] [C] [C] [C]
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of Notes $ 0 $ 0 $ (1,197)
Repayment of Secured Claims (40,240) (473,424) (76,091)
Net Cash Used in Financing Activities (40,240) (473,424) (77,288)
Net Change in Cash $ (90,902)$ (477,251)$ 420,659
CASH AT BEGINNING OF YEAR 485,768 963,019 542,360
CASH AT END OF YEAR $ 576,670 $ 485,768 $ 963,019
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for Interest $ 421,072 $ 414,402 $ 650,168
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
vehicles are in Amherst Properties, Inc.'s name. The new vehicle is not
recorded on the Partnership's books.
Fully depreciated building improvements totaling $31,118 were disposed of
during the year ending September 30, 1998. Fully depreciated office
equipment totaling $5,685 was disposed of during the year ending
September 30, 1998.
GRAN-MARK INCOME PROPERTIES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
September 30, 1998
Note 1: NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES:
Nature of Business
The Partnership owns and operates an office building in Manassas,
Virginia, and until September 12, 1996, 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 and 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 and cash
equivalents.
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 $576,670 and $485,768 at September 30, 1998 and 1997,
respectively, which was insured up to $300,000 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.
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:
Building Office
Manassas, VA Equipment
Date of Construction 1974
Date Acquire August 1986 Various Total
Land $ 418,598 $ 0 $ 418,598
Buildings 6,594,998 0 6,594,998
Other $ 0 59,342 59,342
Total Initial Cost to Partnership 7,013,596 59,342 7,072,938
Improvements capitalized
subsequent to acquisition 817,882 0 817,882
Total Accumulated Cost 7,831,478 59,342 7,890,820
Accumulated depreciation 2,959,676 26,189 2,985,865
Net Book Value $ 4,871,802 $ 33,153 $ 4,904,955
The following is a summary of activity for the land, buildings and
improvements, for the years ended September 30, 1996, 1997 and 1998:
Rental Accumulated
Property Depreciation
Balance September 30, 1995 $ 12,273,217 $ (3,343,332)
Oct 1, 1995 through Sep 30, 1996
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)
Oct 1, 1996 through Sep 30, 1997
Additions during the period:
Improvements capitalized 121,988
Depreciation expense (273,041)
Deletions during the period 0 0
Balance September 30, 1997 7,790,442 (2,719,834)
Oct 1, 1997 through Sep 30, 1998
Additions during the period:
Improvements capitalized 71,154
Depreciation expense (269,960)
Deletions during the period (30,118) 30,118
Balance September 30, 1998 $ 7,831,478 $ (2,959,676)
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, 1998, 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, 1998 Sept 30, 1997
Regency Savings Sudley Tower
Bank Manassas, VA $ 4,121,251 $ 4,161,492
Scheduled maturities of secured claims at September 30, 1998, are
as follows:
FYE 1999 $ 45,595
FYE 2000 54,465
FYE 2001 59,871
FYE 2002 3,961,321
Total $4,121,252
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 was payable by February 18,
1998. Interest charged to operations during the years ending
September 30, 1998, 1997 and 1996 was $399,082, $247,851, and $0,
respectively.
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 were 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 was due plus a Deferred
Balance of interest (totaling $374,761.19) and unpaid fees in the
amount not to exceed $55,000. The principal balance was refinanced
and the Deferred Balance and unpaid fees were paid, as discussed
above. Interest charged to operations during the years ending
September 30, 1998, 1997, and 1996, was $0, $131,311, and 352,456,
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, 1998, 1997, and 1996, was $0, $0, and $289,619, 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, 1998, 1997, and 1996, was $0, $0,
and $23, 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, 1998 and
1997, are summarized below:
1998 1997
General and Administrative $ 1,490 $ 1,650
Commissions 867 0
Utilities 0 15,274
Repairs & Maintenance 1,615 6,685
Rent Overpayment 325 325
Legal Fees to a Related Party 35,145 41,238
Construction Management Fee to a Related Party 22,413 22,413
Total $61,855 $87,585
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, 1998, 1997, and 1996, were $85,247,
$84,754, and $115,089, respectively.
As of September 30, 1998, $27,523 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, 1998, 1997, and
1996, were $23,871, $21,557, and $58,958, 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, 1998. 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, 1998, 1997 and 1996, were $5,496, $5,378, and $5,556,
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 fiscal year ending September 30, 1998, the Partnership
paid $21,990 for the monthly loan payment, down 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, 1998, are as follows:
Year ending September 30, Amount
1999 $ 1,201,148
2000 843,509
2001 563,595
2002 104,942
Subsequent to 2002 55,034
Total minimum future rentals $ 2,768,228
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:
During the past year Prince William County experienced business
growth and real estate development which impacted favorably on the
Sudley Tower. Our occupancy continues to remain high with
increasing base rental rates. We are also attracting larger
companies with more diversity such as insurance, temporary
personnel staffing, and service organizations. With high tech more
in demand, we are considering the feasibility of installing a high
transmission data line for lease to existing and new tenants.
Although the real estate market slowed some during the third
quarter of 1998 we are continuing to upgrade the building to
position ourselves in the real estate market and to become more
attractive for new tenants.
Our capital improvement program continues to be implemented, as
funds become available. The scheduled improvements include the
following: 1) install a T-1 data transmission line; 2)
renovate bathrooms on floors 2, 3, 4, 6, 7, 8 and 9; 3) modernize
the elevators; 4) install energy efficient motors, which power the
heating and hot water systems; 5) replace ceiling tiles throughout
the building; and 6) install exterior lighting.
Our efforts to sell the Sudley Tower during the early part of this
year were not successful in bringing any favorable results due to
the conditions caused by the uncertainty in the stock market and
the adverse money market changes in Europe and Asia. These events dulled
the enthusiasm of the real estate investment trusts and other
institutional investors to acquire real estate. In addition, the
Sudley Tower itself has little appeal to institutions as a stand-
alone property.
In view of this experience and the volatile market conditions we
are now seeking ways to enhance the value of the property. Methods
under consideration are development of a rooftop management program
with aggressive marketing on a web site as well as E-mail
advertising and distribution. In this regard we have engaged a
technical analyst to prepare a report and a design for a rooftop
antenna.
Also under consideration is the installation of a T-1 line in the
conference room, Jackson Hall, for transient visitors and temporary
offices for people moving into the area or people doing business in
the area for several days. Additional avenues of property value
enhancement are also under consideration.
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 63, 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 62, 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
managed a professional office from 1964 until 1993. He has been an active
investor in commercial and residential real estate for 28 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.
ee 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, 1998, 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 Partnerships management there are no other beneficial owners
of more than 5% of the Partnership.
Item 13 - Certain Relationships and Related Transactions
See Note 6 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, 1998
Louis J. Marin Date
President
By: Lionel Felsen December 29, 1998
Lionel Felsen Date
Vice-President
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<PERIOD-END> SEP-30-1998
<CASH> 576,670
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<RECEIVABLES> 87,067
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<DEPRECIATION> 2,985,865
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<TOTAL-LIABILITY-AND-EQUITY> 5,786,078
<SALES> 1,311,872
<TOTAL-REVENUES> 1,392,978
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