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 December 31, 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
PART I - FINANCIAL INFORMATION
Item 1 Financial Statements: Page
Balance Sheets 4 - 5
Statements of Income 6
Statements of Change in Partner's Equity 7
Statements of Cash Flow 8 - 9
Notes to Financial Statements 10-18
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 19
PART II - OTHER INFORMATION
Other Information 21
Gran-Mark Income Properties Limited Partnership
Balance Sheets
December 31, 1998 (Unaudited)
September 30, 1998 (Audited)
ASSETS
12/31/98 09/30/98
[S] [C] [C]
CURRENT ASSETS
Cash $ 435,228 $ 576,670
Tenant Rents Receivable 138,001 87,067
Prepaid Expenses and Other 6,327 1,398
Mortgage Escrow Accounts 22,153 41,189
Certificate of Deposit 105,127 0
Total Current Assets 706,836 706,324
FIXED ASSETS
Land 418,598 418,598
Buildings 6,594,998 6,594,998
Building Improvements 857,795 817,882
Office Equipment 59,342 59,342
Total 7,930,733 7,890,820
Less Accumulated Depreciation 3,056,180 2,985,865
Total Book Value of Fixed Assets 4,874,553 4,904,955
OTHER ASSETS
Deferred Costs net of accumulated
amortization of $157,190 and
$149,371 as of December 31, 1998
and September 30, 1998, respectively 171,811 174,799
Total Other Assets 171,811 174,799
Total Assets $5,753,200 $5,786,078
LIABILITIES AND PARTNERS' EQUITY
12/31/98 09/30/98
[S] [C] [C]
CURRENT LIABILITIES
Accounts Payable $ 73,043 $ 61,855
Accrued Interest 434 123
Accrued Expenses 32,496 79,865
Unearned Rental Income 12,984 16,961
Current Portion of Mortgage Payable 46,827 46,827
Total Current Liabilities 165,784 205,631
LONG-TERM LIABILITIES
Tenant Security Deposits Payable 52,669 48,549
Management Fees Payable to Amherst
Properties, Inc. 70,763 72,342
Mortgage Payable - Office Building 4,064,570 4,074,425
Total Long-Term Liabilities 4,188,002 4,195,316
Total Liabilities $ 4,353,786 $ 4,400,947
CONTINGENCIES AND COMMITMENTS (Notes 3 through 10)
PARTNERS' EQUITY
General Partner $ (21,313) $ (21,456)
Limited Partners (12,000 Units authorized;
6,505 issued and outstanding) 1,420,727 1,406,587
Total Partners' Equity 1,399,414 1,385,131
Total Liabilities and Partners' Equity $ 5,753,200 $ 5,786,078
Gran-Mark Income Properties Limited Partnership
Statements of Income
(Unaudited)
For the Three Month Periods Ending December 31, 1998
and December 31, 1997
12/31/98 12/31/97
[S] [C] [C]
REVENUE:
Rental $ 345,600 $ 333,298
Tenant Reimbursements 9,810 9,874
Interest 4,455 3,315
Other 35 256
Total Revenue 359,900 346,743
EXPENSES:
Interest 101,331 102,316
Depreciation & Amortization 84,205 81,985
Utilities 34,502 41,225
Real Estate Taxes & Licenses 14,740 12,273
Property Maintenance & Repairs 40,344 47,323
Management Fees 20,570 22,573
General & Administration Expenses 49,924 56,475
Total Expenses 345,616 364,170
Net Income or (Loss) $ 14,284 $ (17,427)
Allocation of Net Income or (Loss):
General Partners $ 143 $ (174)
Limited Partners $ 14,141 $ (17,253)
Net Income or (Loss) per weighted
average Limited Partnership
unit (6,505 units) $ 2.17 $ (2.65)
Gran-Mark Income Properties Limited Partnership
Statements of Changes in Partners' Equity
For the Three Month Period Ending December 31, 1998 (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 December 1998 143 14,141 14,284
Balance, December 31, 1998 $ (21,313) $ 1,420,727 $ 1,399,414
Gran-Mark Income Properties Limited Partnership
Statements of Cash Flows
(Unaudited)
For the Three Month Periods Ending December 31, 1998 and 1997
12/31/98 12/31/97
[S] [C] [C]
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income or (Loss) from Statements of Income $ 14,284 $ (17,427)
Adjustments to reconcile net loss
to cash provided by (used in)
operating activities:
Depreciation & Amortization 84,205 81,985
(Increase) Decrease in:
Tenant Tents Receivable (50,934) 12,171
Prepaid Expenses and Other (4,929) (129)
Mortgage Escrow Acounts 19,036 16,262
Increase (Decrease) in:
Accounts Payable 11,188 (22,384)
Accrued Interest 311 (16,499)
Accrued Expenses (47,369) (1,212)
Unearned Rental Income (3,977) 25,040
Tenant Security Deposits Payable 4,120 (10,579)
Management Fees payable to
Amherst Properties, Inc. (1,579) 1,117
Total Adjustments 10,072 85,772
Net Cash Provided by Operating Activities 24,356 68,345
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Certificate of Deposit (105,127) (100,000)
Additions to Office Equipment 0 (5,742)
Additions to Building Improvements (39,913) (3,445)
Additions to Deferred Costs (10,903) 0
Net Cash Provided by (Used in) Investing (155,943) (109,187)
Activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of Mortgage Payable $ (9,855) $ (8,870)
Net Cash Provided by (Used in) Financing Activities (9,855) (8,870)
Net Change in Cash (141,442) (49,712)
CASH AT BEGINNING OF THE PERIOD 576,670 485,768
CASH AT END OF THE PERIOD $ 435,228 $ 436,056
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for Interest $ 101,027 $ 118,815
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Fully amortized leasing costs totaling $6,070 and $13,225 were disposed
of during the period ending December 31, 1998 and 1997, respectively.
GRAN-MARK INCOME PROPERTIES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
December 31, 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:
Office
Building Office
Manassas, VA Equipment Total
Date of Construction 1974
Date Acquired August 1986 Various
Land $ 418,598 $ 0 $ 418,598
Buildings 6,594,998 0 6,594,998
Other 59,342 59,342
Total Initial Cost to Partnership 7,013,596 59,342 7,072,938
Improvements capitalized
subsequent to acquisition 857,795 0 857,795
Total Accumulated Cost 7,871,391 59,342 7,930,733
Accumulated depreciation 3,027,532 28,648 3,056,180
Net Book Value, December 31, 1998 $ 4,843,859 $ 30,694 $ 4,874,553
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 December 31, 1998,
$99,975.
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
December 31, 1998, $20,570.
As of December 31, 1998, $25,943 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 December 31, 1998, $747.
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 December 31, 1998,
$1,356.
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) installation of 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 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 period ending December 31, 1998, the Partnership's cash
position changed from $576,670 to $435,228.
The occupancy of the Manassas office building was approximately 77% on
September 30, 1998, and 94% on December 31, 1998.
Partners' equity totaled $1,399,414 as of December 31, 1998, an increase
of $14,284 from September 30, 1998.
The partnership's net income for the period ending December 31, 1998, was
$14,284; an increase of $31,711 from a loss of $17,427 for the period ending
December 31, 1997.
Results of Operations
The office building's occupancy rate was approximately 77% on September
30, 1998. The office building was approximately 94% and 91% leased for the
periods ending December 31, 1998 and 1997, respectively. The office building
generates a positive cash flow.
An analysis of the office building operations during the period ending
December 31, 1998, indicates that the office building revenues have increased.
Interest expenses have decreased slightly. Expenses for depreciation and
amortization have increased due to additional improvements and deferred costs.
The expenses for utilities have decreased. 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 decreased due
to an increase in uncollected rents. General and Administration Expenses
have decreased. See Notes to Financial Statement - Note 10: Management Plans.
Trends & prospective information
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 the period ending December 31, 1998, $24,356 of cash was generated
from operations. This reflects a decrease in cash flow from operations of
$43,989 over the same period during 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 period's fees.
Funds were also used to make building improvements of $39,913, and pay
deferred costs in the amount of $10,903.
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.
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 February 14, 1999
Louis J. Marin Date
President
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Sep-30-1998
<PERIOD-END> Dec-31-1998
<CASH> 435,228
<SECURITIES> 0
<RECEIVABLES> 138,001
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 706,836
<PP&E> 7,930,733
<DEPRECIATION> 3,056,180
<TOTAL-ASSETS> 5,753,200
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<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,399,414
<TOTAL-LIABILITY-AND-EQUITY> 5,753,200
<SALES> 345,600
<TOTAL-REVENUES> 359,900
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 345,616
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 14,284
<INCOME-TAX> 0
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<NET-INCOME> 14,284
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