United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10 - Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarter Ended March 31, 1999
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
PART I - FINANCIAL INFORMATION
Item 1 Financial Statements: Page
Balance Sheets 4-5
Statements of Income 6-7
Statements of Change in Partner's Equity 8
Statements of Cash Flow 9-10
Notes to Financial Statements 11-19
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 20
PART II - OTHER INFORMATION
Other Information 22
<TABLE>
Gran-Mark Income Properties Limited Partnership
Balance Sheets
March 31, 1999 (Unaudited)
September 30, 1998 (Audited)
ASSETS
03/31/99 09/30/98
<S> <C> <C>
CURRENT ASSETS
Cash $ 522,237 $ 576,670
Tenant Rents Receivable 182,899 87,067
Prepaid Expenses and Other 5,852 1,398
Mortgage Escrow Accounts 36,619 41,189
Total Current Assets 747,607 706,324
FIXED ASSETS
Land 418,598 418,598
Buildings 6,594,998 6,594,998
Building Improvements 923,253 817,882
Office Equipment 59,342 59,342
Total 7,996,191 7,890,820
Less Accumulated Depreciation 3,126,429 2,985,865
Total Book Value of Fixed Assets 4,869,762 4,904,955
OTHER ASSETS
Deferred Costs net of accumulated
amortization of $172,065 and
$149,371 as of March 31, 1999
and September 30, 1998, respectively 171,937 174,799
Total Other Assets 171,937 174,799
Total Assets $ 5,789,306 $5,786,078
<F/N>
See Notes to the Financial Statements
</TABLE>
<TABLE>
Gran-Mark Income Properties Limited Partnership
Balance Sheets
March 31, 1999 (Unaudited)
September 30, 1998 (Audited)
LIABILITIES AND PARTNERS' EQUITY
03/31/99 09/30/98
<S> <C> <C>
CURRENT LIABILITIES
Accounts Payable $ 58,404 $ 61,855
Accrued Interest 0 123
Accrued Expenses 49,190 79,865
Unearned Rental Income 47,511 16,961
Current Portion of Mortgage Payable 46,827 46,827
Total Current Liabilities 201,932 205,631
LONG-TERM LIABILITIES
Tenant Security Deposits Payable 54,244 48,549
Management Fees Payable to Amherst
Properties, Inc. 67,353 72,342
Mortgage Payable - Office Building 4,052,288 4,074,425
Total Long-Term Liabilities 4,173,885 4,195,316
Total Liabilities $ 4,375,817 $4,400,947
CONTINGENCIES AND COMMITMENTS (Notes 3 through 10)
PARTNERS' EQUITY
General Partner $ (21,172) $ (21,456)
Limited Partners (12,000 Units authorized;
6,505 issued and outstanding) 1,434,661 1,406,587
Total Partners' Equity 1,413,489 1,385,131
Total Liabilities and Partners' Equity $ 5,789,306 $5,786,078
<F/N>
See Notes to the Financial Statements
</TABLE>
<TABLE>
Gran-Mark Income Properties Limited Partnership
Statements of Income
(Unaudited)
For the Three Month Periods Ending
March 31, 1999 and March 31, 1998
3/31/99 3/31/98
<S> <C> <C>
REVENUE:
Rental $ 358,313 $ 360,549
Tenant Reimbursements 9,810 9,810
Interest 4,140 4,521
Other 75 509
Total Revenue 372,338 375,389
EXPENSES:
Interest 98,565 99,979
Depreciation & Amortization 85,124 82,352
Utilities 42,338 41,324
Real Estate Taxes & Licenses 13,488 12,273
Property Maintenance & Repairs 45,736 39,136
Management Fees 19,201 20,259
General & Administration Expenses 53,811 58,887
Total Expenses 358,263 354,210
Net Income or (Loss) $ 14,075 $ 21,179
Allocation of Net Income or (Loss):
General Partner $ 141 $ 212
Limited Partners 13,934 20,967
Net Income or (Loss) per weighted
average Limited Partnership
unit (6,505 units) $ 2.16 $ 3.23
<F/N>
See Notes to the Financial Statements
</TABLE>
<TABLE>
Gran-Mark Income Properties Limited Partnership
Statements of Income
(Unaudited)
For the Six Month Periods Ending
March 31, 1999 and March 31, 1998
3/31/99 3/31/98
<S> <C> <C>
REVENUE:
Rental $ 703,914 $ 693,847
Tenant Reimbursements 19,619 19,684
Interest 8,595 7,836
Other 111 765
Total Revenue 732,239 722,132
EXPENSES:
Interest 199,896 202,295
Depreciation & Amortization 169,329 164,342
Utilities 76,840 82,549
Real Estate Taxes & Licenses 28,229 24,546
Property Maintenance & Repairs 86,080 84,561
Management Fees 39,771 42,832
General & Administration Expenses 103,735 115,632
Total Expenses 703,880 716,757
Net Income or (Loss) $ 28,359 $ 5,375
Allocation of Net Income or (Loss):
General Partner $ 284 $ 54
Limited Partners 28,075 5,321
Net Income or (Loss) per weighted
average Limited Partnership
unit (6,505 units) $ 4.32 $ 0.82
<F/N>
See Notes to the Financial Statements
</TABLE>
<TABLE>
Gran-Mark Income Properties Limited Partnership
Statements of Changes in Partners' Equity
For the Six Month Period Ending March 31, 1999 (Unaudited)
and For the Years Ending September 30, 1998, 1997 and 1996 (Audited)
General Limited
Partner Partners Total
<S> <C> <C> <C>
Balance, September 30, 1995 $ (19,847) $ 1,565,798 # $ 1,545,951
Net Loss Fiscal Year Ending 1996 (468) (46,365)# (46,833)
Balance, September 30, 1996 $ (20,315) $ 1,519,433 $ 1,499,118
Net Loss Fiscal Year Ending 1997 (288) (28,417) (28,705)
Balance, September 30, 1997 $ (20,603) $ 1,491,016 $ 1,470,413
Net Loss Fiscal Year Ending 1998 (853) (84,430) (85,283)
Balance, September 30, 1998 $ (21,456) $ 1,406,586 $ 1,385,130
Net Income Period Ending 3/31/99 284 28,075 28,359
Balance, March 31, 1999 $ (21,172) $ 1,434,661 $ 1,413,489
<F/N>
See Notes to the Financial Statements
</TABLE>
<TABLE>
Gran-Mark Income Properties Limited Partnership
Statements of Cash Flows
(Unaudited)
For the Six Month Periods Ending March 31, 1999, and 1998
3/31/99 3/31/98
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income or (Loss) from Statements of Income $ 28,359 $ 5,375
Adjustments to reconcile net loss
to cash provided by (used in)
operating activities:
Depreciation & Amortization 169,329 164,342
(Increase) Decrease in:
Tenant Tents Receivable (95,832) (5,493)
Prepaid Expenses and Other (4,454) 763
Mortgage Escrow Acounts 4,570 1,454
Increase (Decrease) in:
Accounts Payable (3,451) (17,007)
Accrued Interest (123) (16,322)
Accrued Expenses (30,675) (36,485)
Unearned Rental Income 30,550 7,685
Tenant Security Deposits Payable 5,695 (8,037)
Management Fees payable to
Amherst Properties, Inc. (4,989) 144
Total Adjustments 70,620 91,044
Net Cash Provided by Operating Activities 98,979 96,419
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Office Equipment 0 (10,075)
Additions to Building Improvements (105,371) (19,849)
Additions to Deferred Costs (25,904) (5,731)
Net Cash Provided by (Used in) Investing Activities (131,275) (35,655)
<F/N>
See Notes to the Financial Statements
</TABLE>
<TABLE>
Gran-Mark Income Properties Limited Partnership
Statements of Cash Flows
(Unaudited)
For the Six Month Periods Ending March 31, 1999, and 1998
3/31/99 3/31/98
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of Mortgage Payable $ (22,137) $ (20,165)
Net Cash Used in Financing Activities (22,137) (20,165)
Net Change in Cash $ (54,433) $ 40,599
CASH AT BEGINNING OF PERIOD 576,670 485,768
CASH AT END OF PERIOD $ 522,237 $ 526,367
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for Interest $ 200,019 $ 218,617
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Fully amortized leasing costs totaling $13,225 were disposed of during the
period ending March 31, 1998.
Fully amortized leasing costs totaling $6,070 and $13,225 were disposed of
during the periods ending March 31, 1999 and 1998, respectively.
<F/N>
See Notes to the Financial Statements
</TABLE>
GRAN-MARK INCOME PROPERTIES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
March 31, 1999
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:
Office Bldg Office
Manassas, VA Equipment Total
Date of Construction 1,974
Date Acquired August 1986 Various
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 acquistion 923,253 0 923,253
Total accumulated cost 7,936,849 59,342 7,996,191
Accumulated depreciation 3,095,334 31,095 3,126,429
Net Book Value, March 31, 1999 $ 4,841,515 $ 28,247 $ 4,869,762
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, 1998 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; and during the period ending
March 31, 1999, $197,523.
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; and during the period ending March 31, 1999,
$39,771.
As of March 31, 1999, $22,532 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; and during the period ending March 31, 1999,
$26,083.
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; and during the period ending
March 31, 1999, $2,372.
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 offering 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)
installation of a T-1 data transmission line; 2) renovation of bathrooms on
floors 2, 3, 4, 6, 7, 8 and 9; 3) modernization of the elevators; 4)
installation of energy efficient motors, which power the heating and hot
water systems; and 5) replacement of ceiling tiles throughout the building.
Our efforts to sell the Sudley Tower during the early part of 1998
were not successful in bringing any favorable results due to the
conditions caused by the uncertainty in the stock market and the 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 design for 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 2 - Management's discussion and analysis of financial condition and
results of operations
General
During the six month period ending March 31, 1999, the Partnership's cash
position changed from $576,670 to $522,237.
The occupancy of the Manassas office building was approximately 98% on
March 31, 1999, as compared to 90% on March 31, 1998.
Partners' equity totaled $1,413,489 as of March 31, 1999, an increase of
$28,359 from September 30, 1998.
The Partnership's net income for the quarter ending March 31, 1999, was
$14,075, as compared $21,179 for the quarter ending March 31, 1998.
Results of Operations
The office building was approximately 98% leased on March 31, 1999, an
increase from 90% for the quarter ending March 31, 1998. The office building
continues to generate a positive cash flow.
During the three months ending March 31, 1999, Total Revenue has decreased
by $3,051 or .8%; Total Expenses have increased by $4,053 or 1.1%, and the
Net Income has decreased by $7,104 as compared to the same period last
fiscal year.
During the six months ending March 31, 1999, Total Revenue has increased
$10,107 or 1.4%; Total Expenses have decreased $12,877 or 1.8%; and the
Net Income has increase by $22,984 as compared to the same period last fiscal
year.
The increase in Total Revenue is due primarily to increase rental rates in
new leases and built-in increases in existing leases. The decrease on Total
Expenses is due primarily to the reduction in interest paid on the mortgage;
the reduction in utility costs due to the mild winter; the reduction in
general and administrative costs; and the reduction in management fees due
to delays in receiving antenna rents. These savings were offset by the
increase in depreciation and amortization of capitalized improvements and
leasing costs; and an increase in real estate taxes and property maintenance
and repair costs.
Current management expects that planned capital improvements will continue to
improve the appearance of the property, thus successfully competing with
existing office buildings and maintaining 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 expenditures for the
property.
During the six month period ending March 31, 1999, $98,979 of cash was
provided by operations. This reflects an increase in cash flow from
operations of $2,560 over the previous six month period ending March 31,
1998, due primarily to the increase in Unearned Rental Income.
Payments of $73,340 were made to the general partner during the six month
period ending March 31, 1999, for current and past management fees of
$44,761, $26,083 in reimbursements and accounts payable, and $2,496 in
interest.
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
Chapter 11 filing - See Note 3 to Financial Statements at Part I -
Item 1
Item 2 - Changes in Securities
None
Item 3 - Defaults Upon Senior Securities
None
Item 4 - Submission of Matters to a Vote of Security Holders
On August 2, 1990, Amherst Properties, Inc. Sent voting materials to
limited partners of Gran-mark Income Properties Limited Partnership and by
August 24, 1990 has received written consents from a 60% majority of the
units on favor of the removal of the former general partners and the
substitution of Amherst Properties, Inc. As the new general partner.
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
None
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 May 14, 1999
Louis J. Marin Date
President
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<FISCAL-YEAR-END> Sep-30-1999
<PERIOD-END> Mar-31-1999
<CASH> 522,237
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<RECEIVABLES> 182,899
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