<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT UNDER SECTIONS 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended: Commission File Number:
DECEMBER 31, 1997 33-2320
EXCEL PROPERTIES, LTD.
(Exact name of registrant as specified in its charter)
CALIFORNIA 87-0426335
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
16955 VIA DEL CAMPO, SUITE 110 SAN DIEGO, CALIFORNIA 92127
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (619) 485-9400
Securities registered pursuant to Section 12(b) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
(1) Yes X No__
(1) Yes X No__
<PAGE> 2
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Excel Properties, Ltd., a California limited partnership (the "Partnership"),
was organized to purchase commercial real estate properties for cash and to hold
these assets for investment. The general partners of the Partnership are Excel
Realty Trust, Inc., a Maryland corporation, and Gary B. Sabin, an individual.
The Partnership was formed on September 19, 1985 and will continue in existence
until December 31, 2015, unless dissolved earlier under certain circumstances.
Properties that have been acquired by the Partnership are subject to long-term
triple-net leases. Such leases require the lessee to pay the prescribed minimum
rental plus all costs and expenses associated with the operations and
maintenance of the property. These expenses include real property taxes,
property insurance, repairs and maintenance and similar expenses. The net effect
is that, under normal circumstances, no expenses will offset the rental revenue
from the property. Most of the leases also provide some form of inflation hedge
which calls for the minimum rent to be increased, based upon adjustments in the
consumer price index, fixed rent escalation, or by a percentage of the gross
sales of the tenant.
Properties have been acquired free and clear of liens and encumbrances. The
Partnership may seek to finance one or more of the properties and distribute the
financing proceeds to the partners, but only if the financing proceeds equal or
exceed 100% of the Partnership's capital invested in the property or properties
(including a prorata amount of the Partnership's public offering unit selling
commissions and organization expenses). To date, no properties owned by the
Partnership have been the subject of any mortgage financing, therefore, at the
present time, all properties remain free and clear from any mortgage loan, lien
or encumbrance.
The principal investment objectives of the Partnership are to provide to its
limited partners: (1) preservation, protection and eventual return of the
investment, (2) distributions of cash from operations, some of which may be a
return of capital for tax purposes rather than taxable income, (3) distributions
of cash from financing the properties and (4) realization of long-term
appreciation in value of properties.
The general partners have selected properties they believe meet certain minimum
investment standards and that are most likely to accomplish the investment
objectives of the Partnership. Properties were acquired through arms-length
negotiations with third parties.
ITEM 2. PROPERTIES
The Partnership presently owns fourteen properties as follows:
KINDER-CARE LEARNING CENTERS
The Partnership owns six properties on lease to Kinder-Care, Inc., the nation's
largest provider of day-care centers.
KINDER-CARE LEARNING CENTER - GAHANNA, OHIO
Date of purchase: May 28, 1987
Purchase price: $216,823
Property description: This property is located approximately fifteen miles
northeast of Columbus, Ohio in the suburb of Gahanna. The building is located
on .551 acres and contains 4,528 square feet.
The current lease expires June 30, 1998 with gross rents of $21,000 per year.
2
<PAGE> 3
KINDER-CARE LEARNING CENTER - GROVE CITY, OHIO
Date of purchase: May 28, 1987
Purchase price: $222,340
Property description: This property is located in Grove City, Ohio, seven
miles south of Columbus, Ohio. The building is located on .8939 acres and
contains 4,528 square feet.
The current lease expires November 30, 1998 with gross rents of $21,000 per
year.
KINDER-CARE LEARNING CENTER - WEST CARROLLTON, OHIO
Date of purchase: May 28, 1987
Purchase price: $190,337
Property description: This property is located approximately eight miles
southwest of Dayton, Ohio in the suburb of West Carrollton. The building
contains 4,650 square feet and is situated on .55 acres of land.
The current lease expires December 31, 2001. The annual rent over the
remainder of the lease is as follows:
January 1, 1997 to December 31, 1998 $ 33,202
January 1, 1999 to December 31, 2001 $ 35,526
KINDER-CARE LEARNING CENTER - COLUMBUS, OHIO
Date of purchase: May 28, 1987
Purchase price: $190,337
Property description: This property is located in Columbus, Ohio. The
building is situated on .538 acres and contains 4,650 square feet. The
property has been sublet by Kinder-Care to Children Today, another child-care
provider.
The property is on lease until July 31, 2001. The annual rent over the
remainder of the lease is as follows:
January 1, 1997 to December 31, 1998 $ 33,202
January 1, 1999 to December 31, 2000 $ 35,526
January 1, 2001 to July 31, 2001 $ 20,724
KINDER-CARE LEARNING CENTER - DAYTON, OHIO
Date of purchase: May 28, 1987
Purchase price: $190,337
Property description: This property is located approximately thirty miles
northeast of Dayton, Ohio in the Mud River Township. The building is situated
on .645 acres and contains 4,650 square feet.
The current lease expires December 31, 2001. The annual base rent over the
remaining term of the lease is as follows:
January 1, 1997 to December 31, 1998 $ 33,202
January 1, 1999 to December 31, 2001 $ 35,526
3
<PAGE> 4
KINDER-CARE LEARNING CENTER - INDIANAPOLIS, INDIANA
Date of purchase: May 2, 1989
Purchase price: $201,080
Property description: This property is located at 1034 N. Whitcomb Ave. in
Indianapolis, Indiana. The building contains 4,487 square feet and is
situated on .598 acres.
The current lease expires December 31, 2000 with gross rents of $49,694 per
year.
PARAGON RESTAURANT GROUP, INC.
The Partnership owns two properties operated as Mountain Jack's Restaurants, on
lease to Paragon Steakhouse Restaurants, Inc. The company, headquartered in San
Diego, California, is one of the nation's premier specialty restaurant chain
operators. Their trade names include Mountain Jack's and Hungry Hunter.
MOUNTAIN JACK'S RESTAURANT - MIDDLEBURG HEIGHTS, OHIO
Date of purchase: July 21, 1987
Purchase price: $1,046,222
Property description: The property, situated on 1.72 acres and containing
6,331 square feet, is an upscale steak and seafood restaurant located in
Middleburg Heights, Ohio, a suburb of Cleveland. It has seating for
approximately 163 persons and parking for approximately 115 cars.
The annual lease payment is the greater of $104,500 or 5% of the gross sales.
The lease expires on July 20, 2005.
MOUNTAIN JACK'S RESTAURANT - LAFAYETTE, INDIANA
Date of purchase: September 29, 1987
Purchase price: $1,080,096
Property description: This property is located at 2411 State Road 26 East,
Lafayette, Indiana. Lafayette is strategically located between Chicago,
Illinois to the north and Indianapolis, Indiana to the south. It is the home
of Purdue University. The property is situated on 1.72 acres, contains 8,274
gross square feet and has seating for approximately 294 persons. The site is
ideally located along a main commercial artery and is surrounded by seven
hotels.
The annual lease payment is the greater of $107,800 or 5% of the gross sales.
The lease expires on September 28, 2005.
AUTOWORKS - BELLEVUE, NEBRASKA
Date of purchase: July 5, 1988
Purchase price: $688,580
Property description: The property is located at a major shopping center at
915 Fort Crook Road, Bellevue, Nebraska, a suburb of Omaha, Nebraska.
Bellevue is the home of the Strategic Air Command (SAC) which contributes
largely to the area economy. The improvements consist of a free standing
concrete block and glass building containing 4,870 square feet. The base
minimum annual rent is $80,500 per year with scheduled rental increases
occurring every third year of the lease based on increases in the Consumer
Price Index not to exceed a 10% increase. The lease expires on July 5, 2008.
4
<PAGE> 5
PONDEROSA RESTAURANT - ANN ARBOR, MICHIGAN
Date of purchase: January 20, 1989
Purchase price: $759,618
Property description: The property, containing 5,034 square feet, is situated
on approximately one acre located at 3354 East Washtenaw Street, Ann Arbor,
Michigan. The property is surrounded by numerous commercial enterprises
including the Arbor Land enclosed shopping mall. The lease calls for a
minimum rent of $77,187 plus 6.5% of the annual gross sales in excess of the
average annual sales for the years 1989 and 1990. The lease expires September
21, 2003.
PONDEROSA RESTAURANT - ALTON, ILLINOIS
Date of purchase: January 31, 1989
Purchase price: $770,993
Description of property: The building, containing 5,587 square feet, is
situated on approximately one acre at 3354 Homer- Adams Parkway along Highway
111, which is the major east/west road system through the city. Alton,
Illinois is situated across the Mississippi River from St. Louis, Missouri.
The tenant has vacated the premises and the Partnership is attempting to
re-lease and/or sell this property. Although the Partnership is attempting to
collect amounts owed, the rents are being reserved for in bad debts. The
Partnership received $153,386 in insurance proceeds related to fire damage
that occurred in 1996. These proceeds have been offset against the cost of
the property.
PAYLESS SHOE STORE - PLANT CITY, FLORIDA
Date of purchase: December 1, 1989
Purchase price: $648,122
Property description: The property is located at 1801 Jim Redman Parkway,
Plant City, Florida. Plant City is located approximately 18 miles northeast
of the central business district of Tampa, Florida. The property is situated
on .89 acres and contains 2,989 square feet.
The lease is guaranteed by the May Department Store Co. The property is on
lease until November 30, 1999 with four additional 5-year options. The
minimum rent is $70,785 per year. The rent would be $82,682, $94,578,
$106,495 and $118,372 for each option period should the options be exercised
by the tenant.
TIMBER LODGE STEAKHOUSE - BURNSVILLE, MINNESOTA
Date of purchase: February 12, 1990
Purchase price: $722,040
Property description: This family restaurant is located at 13050 Aldrich
Avenue South. Burnsville is a suburb approximately 11 miles south of
Minneapolis. The property contains 6,614 square feet and is situated on 1.43
acres. The current rent is $72,480 per year and the lease expires on July 14,
2001.
5
<PAGE> 6
TODDLE HOUSE RESTAURANT - KENNER, LOUISIANA
Date of purchase: November 26, 1991
Purchase price: $218,738
Property description: Toddle House Restaurants is a national restaurant
chain. It features 24-hour service with a cook-to- order menu. Toddle House
Restaurants, Inc. is a wholly-owned subsidiary of Diversified Hospitality
Group, Inc. (DHG) which also operates the Steak 'N' Eggs Kitchen restaurants.
The property is located at 2,841 Loyola, Kenner, Louisiana and contains 2,175
square feet. The land on which the restaurant is located is 16,800 square
feet.
The current annual rent is $38,020 and the lease expires on November 25,
2011. Toddle House is currently in Chapter 11 Bankruptcy and did not pay any
rent in 1997. The Partnership is attempting to re-lease or sell this
property.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. MARKET FOR REGISTRANT'S LIMITED PARTNERSHIP UNITS AND RELATED SECURITY
HOLDER MATTERS
A) A public market for the Partnership's units does not exist and is not
likely to develop.
B) As of December 31, 1997, there were 1,649 investors holding 135,299
units.
C) The Partnership made its first cash flow distribution from operations
in May 1987. Since that date, consistent cash distributions have been
made at the end of each calendar quarter through December 31, 1997.
The Partnership expects to continue to make cash distributions on a
quarterly basis in the future.
6
<PAGE> 7
PART II
ITEM 6. SELECTED FINANCIAL DATA
The following information has been selected from the financial statements of the
Partnership:
<TABLE>
<CAPTION>
INCOME STATEMENT DATA
1997 1996 1995 1994 1993
---------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Total rental revenue $ 827,221 $1,048,015 $ 1,185,371 $ 1,145,656 $ 1,226,545
Interest and other income 156,668 202,786 129,399 112,772 41,354
Operating expenses:
Property expenses 70,308 214,221 63,761 (2,438) 56,091
General and administrative 221,517 59,106 36,972 43,955 47,340
Depreciation 143,021 176,133 193,696 212,716 227,306
Net income before real estate sales 675,971 801,341 1,020,341 1,004,195 937,162
Gain on sale
of real estate 84,373 880,643 450,293 -- 273,251
Net income 760,344 1,681,984 1,470,634 1,004,195 1,210,413
Per Unit Data:
Net income 5.45 12.07 10.77 7.33 8.82
Distributions 21.96 25.10 8.50 8.90 8.37
BALANCE SHEET DATA
Net real estate 5,777,802 6,213,838 8,414,719 9,451,413 9,664,128
Cash 444,616 1,393,367 1,817,201 641,053 626,726
Accounts receivable, net 19,897 79,217 165,083 19,135 44,029
Total assets 7,415,403 9,665,303 11,417,867 11,138,851 11,367,996
Total liabilities 37,333 45,898 50,213 79,274 61,722
Partners' equity 7,378,070 9,619,405 11,367,654 11,059,577 11,306,274
</TABLE>
7
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the financial
statements and the notes thereto. Historical results and percentage
relationships set forth in the Statements of Income contained in the Financial
Statements, including trends which might appear, should not be taken as
indicative of future operations.
Comparison of year ended December 31, 1997 to year ended December 31, 1996.
The net income of the Partnership decreased by $921,640 in 1997 when compared to
1996. The differences in income and expenses are explained below.
Rental revenue decreased by $183,893 or 18% to $827,221 in 1997 from $1,011,114
in 1996. The decrease in rental revenue is primarily attributed to the sale of
four properties in 1996, which accounted for $190,551 in rental revenue in 1996.
In 1997, the company sold one operating property which accounted for $7,200 in
rental revenue in 1997. Percentage rents decreased $36,901 due to the sale of
the Denny's building in 1996 that generated all the percentage rents in 1996.
Interest income decreased by $46,118 in 1997 from 1996. This decrease was due to
finance charges to Ponderosa Restaurant and Toddle House, charged in 1996 but
not in 1997, and larger cash balances in 1996 than 1997 from proceeds relating
to certain property sales before the funds were distributed to the partners.
Operating expenses decreased by $141,542 in 1997 from 1996. The net decrease was
primarily attributed to the $134,716 decrease in bad debt expense and the
decrease of $17,563 in depreciation. The bad debt expense for 1997 was $48,892
as compared to $183,608 in 1996. The decrease in bad debts was due largely to
the write-off of finance charges reserved for Toddle House in 1996. No finance
charges were made in 1997 relating to this tenant. Legal expense increased by
$28,399 primarily due to collection efforts on amounts owed to the Partnership
from Ponderosa which incurred fire damages during the year. Depreciation expense
decreased primarily due to the properties sold during 1996. Overall, other
expenses and other income varied little between the two accounting periods,
except for office expenses which increased by $8,073 or 102%. The increase was
due primarily to costs related to SEC filings and various expenses relating to
the Ponderosa restaurant.
During 1997 the Partnership sold one property and a parcel of land. In August ,
the Partnership sold a building leased to Kindercare located in Indianapolis,
Indiana for $182,388. The Partnership recognized a net gain of $18,173. In
September, the partnership sold a parcel of land in Las Vegas, Nevada for
$195,000. The Partnership recognized a gain of $66,200 on the sale. In 1996, the
Partnership sold four properties and a parcel of land for $2,752,006 and
realized a net gain of $880,643.
Based on current leases in place, management believes that the operating
revenues and related expenses of the Partnership in 1997 should be somewhat
indicative of the operations of the Partnership in 1998. Various factors may,
however, influence 1998 operations. These may include such events as additional
property sales, tenants who default on leases or new tenants obtained by the
Partnership to lease vacant properties.
The Partnership has continued to distribute cash flows to the limited partners
since 1989. Management anticipates that distributions from cash flows will
continue in 1998. The distributions may be supplemented by excess proceeds from
property sales, if any. If additional properties are sold and proceeds are
distributed to the partners instead of reinvested, recurring distributions are
expected to decrease in the future.
8
<PAGE> 9
Comparison of year ended December 31, 1996 to year ended December 31, 1995.
The net income of the Partnership increased by $211,350 in 1996 when compared to
1995. The differences in income and expenses are explained below.
Rental revenue decreased by $137,356 or 11.6% to $1,048,015 in 1996 from
$1,185,371 in 1995. During 1996, the Company sold four operating properties
which accounted for the decrease. These properties accounted for $190,551 of
rental revenue in 1996 compared to $258,273 in 1995, a decrease of $67,722.
Also, a building and a land parcel that were sold in 1995, had contributed
$129,669 to 1995 rental revenues. The lost rental revenue from properties sold
was offset partially by additional rental revenue from rent increases from
existing tenants.
Interest income increased by $73,387 in 1996 from 1995. This increase was due to
the additional amount of cash on hand which the Partnership invested in interest
bearing accounts.
Operating expenses increased by $155,031 in 1996 from 1995. The net increase was
primarily attributed to the $132,991 increase in bad debt expense, the $21,455
increase in accounting and legal expense, the $17,962 increase in property
taxes, and the decrease of $17,563 in depreciation. The bad debt expense for
1996 was $183,608 of which $100,067 was attributable to a building leased to
Ponderosa Restaurant but vacant and $81,488 to the nonpayment of rent by Toddle
House Restaurants. Bad debt expense was $50,617 in 1995. Legal expense increased
primarily due to collection efforts on amounts owed to the Partnership from
Ponderosa. Property tax expense of $17,962 incurred in 1996 related to the
building leased to Ponderosa. The decrease in depreciation in 1996 was primarily
related to the four properties sold during the year.
During 1996, the Partnership sold four properties and a parcel of land. In April
1996, the Partnership sold a Kentucky Fried Chicken building and a Wendy's
building located in Blaine, Minnesota for $901,187. The Partnership recognized a
net gain of $206,761 on these sales. In October 1996, the partnership sold a
building that was leased to Checker Autoworks in Denver, Colorado for $811,494
of which the Partnership recognized a $208,072 gain. Also in October 1996, the
Partnership sold a land parcel for $75,357 and recognized a $9,004 gain. The
land parcel was located in Las Vegas, Nevada. Finally, in December 1996, the
Partnership sold a building leased to Denny's Restaurant and located in Denver,
Colorado for $963,968 and recognized a $456,806 gain.
Inflation is not expected to negatively impact the operations of the Partnership
due to the structure of its investment portfolio. The leases all provide a
minimum rental which the lessee is obligated to pay. Additionally, most leases
contain some form of inflation hedge which provides for the rent to be
increased. The rent increases may be in the form of scheduled fixed minimum rent
increases, Consumer Price Index (CPI) adjustments or by participating in a
percentage of the gross sales volume of the tenant. Since the triple-net leases
require the lessees to pay for all property operating expenses, the net effect
is that the revenue received will not be eroded away as operating expenses
increase due to inflation.
LIQUIDITY AND CAPITAL RESOURCES
The Partnership is in the business of purchasing and holding improved commercial
properties for long-term investment income. The Partnership currently owns and
manages fourteen properties. All fourteen properties are single tenant
buildings.
Each of the Partnership's present properties is leased to an operator/lessee on
an absolute net basis, whereby the lessee pays all maintenance, repairs,
property taxes and insurance. Two properties however, are leased to tenants not
paying rent. The Partnerships' leases typically provide a minimum rental plus a
percentage of the lessee's gross revenues from the property operation and/or a
cost of living increase and/or a fixed rental increase.
The Partnership has $444,616 in cash at December 31, 1997, with no outstanding
debt on any of the properties that it owns. As such, management does not
anticipate any liquidity difficulties at this time. The Partnership has income
of approximately $62,000 per month from rental income which management
anticipates would cover expenses which might need to be paid. However, the
Partnership does not expect to use funds for operational expenses, except
miscellaneous costs on the dark Ponderosa Restaurant and Toddle House buildings,
as the properties are leased on a triple-net lease basis.
9
<PAGE> 10
The Partnership's primary source of cash in 1998 is expected to continue to come
from the rental of the real estate properties currently owned. Management
expects that rental income will be sufficient to cover the operating expenses of
the Partnership and allow for cash distributions to be made to the limited
partners. The Partnership has the policy of paying quarterly distributions to
the limited partners of the actual cash earned by the Partnership in the
preceding quarter. Therefore, if expenses were to increase or income were to
decrease the Partnership would decrease the quarterly distributions to the
limited partners. Management does not expect the quarterly distributions to
increase or decrease dramatically in the future unless operating properties are
sold and proceeds are distributed to partners instead of reinvested.
The Partnership has purchased all its properties for cash. The Partnership may
finance one or more of its existing properties if, among other conditions: (1)
the property is held for at least two years (all properties have been owned by
the Partnership for more than two years), (2) the financing proceeds equal or
exceed the Partnership's investment in the property and (3) the Partnership
distributes the financing proceeds to the partners. To date, the Partnership has
not leveraged any of its properties.
The cash of the Partnership decreased by $948,751 in 1997 when compared to the
previous year. This decrease was due primarily to the $3,001,679 that was
distributed to partners. In 1997, $211,638 was collected from real estate sales
proceeds and $963,968 was collected from escrow deposits. Also, net cash
provided by operating activities amounted to $869,822.
In 1997, bad debt expense primarily related to two tenants, Toddle House
Restaurants and Ponderosa, that did not pay rent. The Partnership is currently
in the process of attempting to re-lease or sell the properties related to these
tenants.
The cash and liquidity position of the Partnership has continued to increase
over the past three years. Management believes that the Partnership is in a very
stable liquidity position since it owns all of its real estate free of debt.
Management expects that the liquidity of the Partnership will change in the
future as excess cash is distributed to the unit holders (partners).
The Partnership currently uses Management Reports Inc. ("MRI") software on a
Novell local area network. The MRI software will require an upgrade to make it
year 2000 compliant, which the Partnership intends to complete prior to December
31, 1999. The Partnership does not believe that additional costs associated with
the software upgrade and additional implementation and training costs will be
material to the Partnership's financial position or results of operations.
CERTAIN CAUTIONARY STATEMENTS
Certain statements in this Form 10-K may be deemed to be "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended and Section 21E of the Securities and Exchange Act of 1934, as amended.
Such forward-looking statements involve known and unknown risks, uncertainties
and other factors which may cause the actual results of the Partnership to be
materially different from historical results or from any results expressed or
implied by such forward-looking statements.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Partnership is filing as part of this report, its financial statements which
contain the following:
<TABLE>
<CAPTION>
Page
----
<S> <C>
1) Report of Independent Accountants F-2
2) Balance Sheets
December 31, 1997 and 1996 F-3
3) Statements of Income
Years Ended December 31, 1997, 1996 and 1995 F-4
4) Statements of Changes in Partners' Equity
Years Ended December 31, 1997, 1996 and 1995 F-5
5) Statements of Cash Flows
Years Ended December 31, 1997, 1996 and 1995 F-6
6) Notes to Financial Statements F-7
7) Financial Statement Schedules:
II - Valuation and Qualifying Accounts
Years Ended December 31, 1997, 1996 and 1995 F-11
III - Real Estate and Accumulated Depreciation
December 31, 1997 F-12
</TABLE>
PART III
ITEM 10. GENERAL PARTNERS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP
The general partners of the Partnership are Excel Realty Trust, Inc., a Maryland
corporation, and Gary B. Sabin. Neither Gary B. Sabin nor the executive officers
of Excel Realty Trust, Inc. receive compensation from the Partnership. The
General Partner and the officers and employees of Excel Realty Trust, Inc. spend
such time in the administration of Partnership affairs to the extent deemed
necessary.
The names, ages and positions of responsibility held by the executive officers
and directors of Excel Realty Trust, Inc. are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <S>
Gary B. Sabin 44 President and Chairman of the Board
Richard B. Muir 43 Executive Vice President and Director
David A. Lund 46 Chief Financial Officer, Treasurer
Ronald H. Sabin 47 Senior Vice President
Graham R. Bullick 47 Senior Vice President
Mark T. Burton 37 Senior Vice President
S. Eric Ottesen 43 General Counsel and Senior Vice President
</TABLE>
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FAMILY RELATIONSHIPS
Gary B. Sabin and Ronald H. Sabin are brothers.
BUSINESS EXPERIENCE
The following is a brief background of the directors and executive officers of
Excel Realty Trust, Inc (the "Company").
GARY B. SABIN has served as Chief Executive Officer, President and Chairman of
the Board of Directors since January 1989. He is a graduate of Brigham Young
University and Stanford University's Graduate School of Business where he
received a master's degree as a Sloan Fellow. Mr. Sabin has extensive experience
in the financial services industry with emphasis in the areas of commercial real
estate and marketable securities.
RICHARD B. MUIR has served as Executive Vice President, Secretary and Director
of the Company since January 1989. Mr. Muir has worked extensively in the field
of commercial real estate, developing expertise in real estate acquisition,
property management, leasing and project financing.
DAVID A. LUND, CPA has served as Chief Financial Officer of the Company since
June 1994. He previously served from 1989 to 1994 in various capacities with the
Company, including Vice President and Vice President of Finance. From 1983 to
1989 he worked for various affiliated companies. Prior to 1983, Mr. Lund was a
partner in a CPA firm.
RONALD H. SABIN has served as Senior Vice President of the Company in charge of
property management since January 1989. Mr. Sabin has also served in various
similar capacities with other affiliated companies since 1979.
GRAHAM R. BULLICK, Ph.D. has served as Senior Vice President of the Company
since January 1991. Prior to joining the company, Mr. Bullick served for four
years as an account manager of a company specializing in organizational
development and service/quality systems.
MARK T. BURTON has served as Vice President of the Company since January 1989
and as a Senior Vice President since January 1996. Mr. Burton's duties for the
Company primarily consist of the evaluation and selection of property
acquisitions and dispositions. Mr. Burton has served in various capacities with
other affiliated companies since 1984.
S. ERIC OTTESEN has served as General Counsel of the Company since January 1995.
Prior to 1995, Mr. Ottesen worked as a partner in a law firm.
ITEM 11. EXECUTIVE COMPENSATION
The Partnership has no executive officers and has not paid nor proposes to pay
any compensation or retirement benefits to the directors or executive officers
of Excel Realty Trust, Inc. See ITEM 13 for compensation to the general partner.
12
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
No person is known by the Partnership to be the beneficial owner of more than 5%
of the limited partner units. The following information sets forth the number of
units owned directly or indirectly by each general partner.
<TABLE>
<CAPTION>
PERCENT OF
NUMBER UNITS AT
TITLE OF CLASS BENEFICIAL OWNER OF UNITS 12/31/97
-------------- ---------------- -------- ----------
<S> <C> <C> <C>
Units of Limited
Partnership Interest Gary B. Sabin None None
Units of Limited Excel Realty
Partnership Interest Trust, Inc. 853 0.630%
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The table below reflects compensation paid to the general partner or their
affiliates during the year ended December 31, 1997:
<TABLE>
<CAPTION>
DESCRIPTION AMOUNT
----------- --------
<S> <C>
Management fees $ 7,767
Administrative fees 10,800
Accounting 14,994
</TABLE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A) Documents filed as part of this report:
(1) (2) Financial statements under Item 8 in Part II hereof.
(3) Exhibits: None
(B) Reports on Form 8-K
No reports on Form 8-K have been filed during the past year.
13
<PAGE> 14
SIGNATURES
Pursuant to the requirement 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 the undersigned, thereunto duly authorized.
Date: March 12, 1998 Excel Properties, Ltd.
(Registrant)
Excel Realty Trust, Inc.
(General Partner)
By: /s/ Gary B. Sabin
--------------------------------
Gary B. Sabin
President
By: /s/ David A. Lund
--------------------------------
David A. Lund
Principal Financial Officer
14
<PAGE> 15
INDEX TO FINANCIAL STATEMENTS
----------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
1. FINANCIAL STATEMENTS:
Report of Independent Accountants - Squire & Co..............................F-2
Balance Sheets
December 31, 1997 and 1996................................................F-3
Statements of Income
Years Ended December 31, 1997, 1996 and 1995..............................F-4
Statements of Changes in Partners' Equity
Years Ended December 31, 1997, 1996 and 1995..............................F-5
Statements of Cash Flows
Years Ended December 31, 1997, 1996 and 1995..............................F-6
Notes to Financial Statements................................................F-7
2. FINANCIAL STATEMENT SCHEDULES:
Schedule II - Valuation and Qualifying Accounts
Years Ended December 31, 1997, 1996 and 1995.............................F-11
Schedule III - Real Estate and Accumulated Depreciation
December 31, 1997........................................................F-12
</TABLE>
F-1
<PAGE> 16
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners
Excel Properties, Ltd.
We have audited the accompanying balance sheets of Excel Properties, Ltd., as of
December 31, 1997 and 1996, and the related statements of income, changes in
partners' equity, and cash flows for each of the three years in the period ended
December 31, 1997. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Excel Properties, Ltd., as of
December 31, 1997 and 1996, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1997, in conformity
with generally accepted accounting principles.
Our audits were made for the purposes of forming an opinion in the basic
financial statements taken as a whole. Financial statement Schedules II and III
are presented for the purpose of additional analysis and are not a required part
of the basic financial statements. Such information has been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, is fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
SQUIRE & CO.
February 5, 1998
Poway, California
F-2
<PAGE> 17
EXCEL PROPERTIES, LTD.
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
----------
<TABLE>
<CAPTION>
1997 1996
----------- -----------
ASSETS
<S> <C> <C>
Real estate:
Land $ 2,728,464 $ 2,917,587
Buildings 4,417,200 4,557,955
Less: accumulated depreciation (1,367,861) (1,261,704)
----------- -----------
Net real estate 5,777,803 6,213,838
Cash 444,616 1,393,367
Escrow deposits -- 963,968
Accounts receivable, less allowance for bad debts of
$191,764 and $236,017 in 1997 and 1996, respectively 19,897 79,217
Notes receivable 1,167,273 1,009,023
Interest receivable 5,814 5,890
----------- -----------
Total assets $ 7,415,403 $ 9,665,303
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Accounts payable:
Affiliates $ 697 $ 864
Other 2,139 935
Property taxes payable 19,089 --
Tenant security deposits 5,000 5,000
Deferred rental income 10,408 39,099
----------- -----------
Total liabilities 37,333 45,898
----------- -----------
Partners' Equity:
General partner's equity 16,376 23,573
Limited partners' equity, 235,308 units authorized,
135,299 units issued and outstanding 7,361,694 9,595,832
----------- -----------
Total partners' equity 7,378,070 9,619,405
----------- -----------
Total liabilities and partners' equity $ 7,415,403 $ 9,665,303
=========== ===========
</TABLE>
The accompanying notes are an integral part
of the financial statements
F-3
<PAGE> 18
EXCEL PROPERTIES, LTD.
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
----------
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Revenue:
Base rent $ 827,221 $1,011,114 $1,146,919
Percentage rents -- 36,901 38,452
Interest and other income 156,668 202,786 129,399
---------- ---------- ----------
Total revenue 983,889 1,250,801 1,314,770
---------- ---------- ----------
Operating Expenses:
Bad debts 48,892 183,608 50,617
Depreciation 143,021 176,133 193,696
Accounting and legal 67,834 40,424 18,969
Property taxes 13,649 17,962 --
Administrative 10,800 10,800 10,800
Management fees 7,767 9,414 10,186
Office expenses 15,955 7,882 7,203
Miscellaneous -- 3,237 2,958
---------- ---------- ----------
Total operating expenses 307,918 449,460 294,429
---------- ---------- ----------
Net income before real estate sales 675,971 801,341 1,020,341
Gain - sale of real estate 84,373 880,643 450,293
---------- ---------- ----------
Net income $ 760,344 $1,681,984 $1,470,634
========== ========== ==========
Net income allocated to:
General partner $ 22,820 $ 49,182 $ 15,303
Limited partners 737,524 1,632,802 1,455,331
---------- ---------- ----------
Total $ 760,344 $1,681,984 $1,470,634
========== ========== ==========
Net income per weighted average
limited partnership unit $ 5.45 $ 12.07 $ 10.77
========== ========== ==========
</TABLE>
The accompanying notes are an integral part
of the financial statements
F-4
<PAGE> 19
EXCEL PROPERTIES, LTD.
STATEMENTS OF CHANGES IN PARTNERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
----------
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNERS PARTNERS TOTAL
------------ ------------ ------------
<S> <C> <C> <C>
Balance at January 1, 1995 $ 5,000 $ 11,054,577 $ 11,059,577
Liquidation of Limited Partnership
units - 1995 -- (2,000) (2,000)
Syndication fees - 1995 -- 600 600
Net income - 1995 15,303 1,455,331 1,470,634
Partner distributions - 1995 (11,612) (1,149,545) (1,161,157)
------------ ------------ ------------
Balance at December 31, 1995 8,691 11,358,963 11,367,654
Net income - 1996 49,182 1,632,802 1,681,984
Partner distributions - 1996 (34,300) (3,395,933) (3,430,233)
------------ ------------ ------------
Balance at December 31, 1996 23,573 9,595,832 9,619,405
Net income - 1997 22,820 737,524 760,344
Partner distributions - 1997 (30,017) (2,971,662) (3,001,679)
------------ ------------ ------------
Balance at December 31, 1997 $ 16,376 $ 7,361,694 $ 7,378,070
============ ============ ============
</TABLE>
The accompanying notes are an integral part
of the financial statements
F-5
<PAGE> 20
EXCEL PROPERTIES, LTD.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
----------
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 760,344 $ 1,681,984 $ 1,470,634
Adjustments to reconcile net income to net cash
provided by operations:
Depreciation 143,021 176,133 193,696
Allowance for doubtful accounts 48,892 184,422 50,617
Gain on sale of real estate (84,373) (880,643) (450,293)
Changes in operating assets and liabilities:
(Increase) decrease in assets:
Accounts receivable 10,429 (95,237) (196,565)
Interest receivable 75 (698) 46
Increase (decrease) in liabilities:
Accounts payable 1,036 (2,237) 568
Property taxes payable 19,089 (4,258) (7,837)
Deferred rental income (28,691) (1,139) (21,792)
----------- ----------- -----------
Net cash provided by operating activities 869,822 1,058,327 1,039,074
----------- ----------- -----------
Cash flows from investing activities:
Collection of escrow deposits 963,968 -- --
Proceeds from real estate sales 211,638 1,941,423 2,703,525
Purchase of real estate -- -- (1,410,234)
Collection of notes receivable 7,500 6,649 6,340
----------- ----------- -----------
Net cash provided by investing activities 1,183,106 1,948,072 1,299,631
----------- ----------- -----------
Cash flows from financing activities:
Redemption of partnership units -- -- (2,000)
Syndication costs reimbursed -- -- 600
Cash distributions (3,001,679) (3,430,233) (1,161,157)
----------- ----------- -----------
Net cash used by financing activities (3,001,679) (3,430,233) (1,162,557)
----------- ----------- -----------
Net increase (decrease) in cash (948,751) (423,834) 1,176,148
Cash at beginning of year 1,393,367 1,817,201 641,053
----------- ----------- -----------
Cash at end of year $ 444,616 $ 1,393,367 $ 1,817,201
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part
of the financial statements
F-6
<PAGE> 21
EXCEL PROPERTIES, LTD.
NOTES TO FINANCIAL STATEMENTS
----------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION
Excel Properties, Ltd. (the "Partnership") was formed in the State of
California on September 19, 1985, for the purpose of, but not limited to,
acquiring real property and syndicating such property.
REAL ESTATE
Land and buildings are recorded at cost. Buildings are depreciated using
the straight-line method over the tax life of 31.5 years. The tax life does
not differ materially from the economic useful life. Expenditures for
maintenance and repairs are charged to expense as incurred. Significant
renovations are capitalized. The cost and related accumulated depreciation
of real estate are removed from the accounts upon disposition. Gains and
losses arising from the dispositions are reported as income or expense.
The Partnership assesses whether there has been an impairment in the value
of its real estate by considering factors such as expected future operating
income, trends, and prospects, as well as the effects of the demand,
competition and other economic factors. Such factors include a lessee's
ability to pay rent under the terms of the lease. If a property is leased
at a significantly lower rent, the Partnership may recognize a permanent
impairment loss if the income stream is not sufficient to recover its
investment.
CASH DEPOSITS
At December 31, 1997, the carrying amount of the Partnership's cash
deposits total $444,616. The bank balances are $523,370 of which $177,754
which is covered by federal depository insurance.
STATEMENT OF CASH FLOWS - SUPPLEMENTAL DISCLOSURE
There was no interest or taxes paid for the years ended December 31, 1997,
1996 or 1995. In 1997, the Partnership assumed a note receivable in the
amount of $165,750 in conjunction with the sale of a land parcel. In 1996,
$963,968 in proceeds from the sale of a restaurant in Colorado were
deposited in an escrow account. These transactions are excluded from the
statement of cash flows. The Partnership had no noncash investing or
financing transactions in 1995.
INCOME TAXES
The Partnership is not liable for payment of any income taxes because as a
partnership, it is not subject to income taxes. The tax effects of its
activities accrue directly to the partners.
ACCOUNTS RECEIVABLE
All net accounts receivable are deemed to be collectible within the next 12
months.
Continued F-7
<PAGE> 22
EXCEL PROPERTIES, LTD.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
----------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
FINANCIAL STATEMENT ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
RECLASSIFICATIONS
Certain reclassifications have been made to the financial statements for
the years ended December 31, 1996 and 1995 in order to conform with the
current period presentation.
2. FINANCIAL STATEMENT AND TAX RETURN DIFFERENCES
The Partnership had the following differences between the financial
statements and the Partnership tax return.
<TABLE>
<CAPTION>
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Net income:
Financial statements $ 760,344 $ 1,681,984 $ 1,470,634
Tax returns 724,356 1,870,650 1,508,743
------------ ------------ ------------
Difference $ 35,988 $ (188,666) $ (38,109)
============ ============ ============
Difference is due to:
Allowance for bad debts $ 44,252 $ (184,422) $ (50,617)
Deferred gain - like kind exchange (8,264) (4,244) 12,508
------------ ------------ ------------
$ 35,988 $ (188,666) $ (38,109)
============ ============ ============
Partners' equity:
Financial statements $ 7,378,070 $ 9,619,405 $ 11,367,654
Tax returns 8,779,157 11,056,481 12,616,064
------------ ------------ ------------
Difference $ (1,401,087) $ (1,437,076) $ (1,248,410)
============ ============ ============
Difference is due to:
Syndication costs $ (1,498,718) $ (1,498,718) $ (1,498,718)
Allowance for bad debts (191,764) (236,017) (51,595)
Deferred gain - like-kind exchange -- 8,264 12,508
Deferred gain on sale of building 289,395 289,395 289,395
------------ ------------ ------------
$ (1,401,087) $ (1,437,076) $ (1,248,410)
============ ============ ============
</TABLE>
Continued F-8
<PAGE> 23
EXCEL PROPERTIES, LTD.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
----------
3. FEES PAID TO GENERAL PARTNER:
The Partnership has paid the General Partner or its affiliates the
following fees:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Management fees $ 7,767 $ 9,414 $10,186
Administrative fees 10,800 10,800 10,800
Accounting 14,994 16,080 6,480
</TABLE>
4. NOTES RECEIVABLE:
The Company had the following notes receivable at December 31, 1997 and
1996:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Note from the sale of land, interest at 10%. Due upon the
occurrence of certain events $ 165,750 $ --
Note from sale of building, receipts of $1,390 per month
at 9% interest. Secured by building sold. Currently Due 135,225 139,524
Note from sale of building, interest only receipts of
$5,366 per month at 8.5% interest. Secured by building
sold. Due November 2003 757,500 757,500
Note from sale of building, receipts of $1,004 per month
at 8% interest. Secured by building sold. Due December
2001 108,798 111,999
---------- ----------
Total notes receivable $1,167,273 $1,009,023
========== ==========
</TABLE>
5. MINIMUM FUTURE RENTALS:
The Company leases single-tenant buildings to tenants under noncancelable
operating leases requiring the greater of fixed or percentage rents. The
leases are primarily triple-net, requiring the tenant to pay all expenses
of operating the property such as insurance, property taxes, repairs and
utilities. Minimum future rental revenue for the next five years for the
commercial real estate currently owned and subject to noncancelable
operating leases is as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- ------------------------
<S> <C>
1998 $ 693,981
1999 669,012
2000 608,019
2001 506,875
2002 369,988
Thereafter 1,062,515
</TABLE>
Continued F-9
<PAGE> 24
EXCEL PROPERTIES, LTD.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
----------
6. REAL ESTATE:
In 1997, the Partnership sold one property and a parcel of land. In August
1997, the Partnership sold a building leased to Kinder Care in
Indianapolis, Indiana. The net sales price was $182,388 and a $18,173 gain
was recognized on the sale. In September 1997, the Partnership sold a land
parcel in Las Vegas, Nevada for $195,000. The Partnership issued a note
receivable in the amount of $165,750 in conjunction with the sale and
recognized a gain of $66,200.
During 1996, the Partnership sold four properties and a parcel of land. In
April 1996, the Partnership sold a Kentucky Fried Chicken building and a
Wendy's building located in Blaine Minnesota for $901,187. The Partnership
recognized a net gain of $206,761 on these sales. In October 1996, the
partnership sold a building that was leased to Checker Autoworks in Denver,
Colorado for $811,494 of which the Partnership recognized a $208,072 gain.
Also in October 1996, the Partnership sold a land parcel for $75,357 and
recognized a $9,004 gain. The land parcel was located in Las Vegas, Nevada
as mentioned below in the 1995 sales transactions. Finally, in December
1996, the Partnership sold a building leased to Denny's Restaurant and
located in Denver, Colorado for $963,968 and recognized a $456,806 gain.
In March 1995, the Partnership purchased a 39% undivided interest in a
parcel of ground in Las Vegas, Nevada for $1,410,233. The ground was leased
with the Partnership's share of rent equaling $169,228 per year. The ground
was subdivided into three building lots and the lessee constructed a
building on one of the three lots. The building was sold in November 1995
and one of the land parcels in 1995. The sale price was $1,566,234 and the
Partnership recognized a $351,152 gain on the sale. In February 1995, the
Partnership also sold a building in Phoenix, Arizona that was on lease to
Children's World. The sales price was $1,135,000 less $28,729 in selling
expenses. The Partnership recognized a gain of $99,141.
F-10
<PAGE> 25
EXCEL PROPERTIES, LTD.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
Additions Deductions
---------- -----------------------------------
Balance at Balance at
Beginning Charged to End
Description of Year Expense Description Amount of Year
- ----------------------------- ---------- ---------- --------------------- -------- ----------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1997:
Allowance for bad debts $ 236,017 $ 48,892 Write-off of Accounts $ 93,145 $ 191,764
========== ========== ======== ==========
Year ended December 31, 1996:
Allowance for bad debts $ 51,595 $ 183,608 Account adjustment $ (814) $ 236,017
========== ========== ======== ==========
Year ended December 31, 1995:
Allowance for bad debts $ 978 $ 50,617 $ -- $ 51,595
========== ========== ======== ==========
</TABLE>
F-11
<PAGE> 26
EXCEL PROPERTIES, LTD.
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
<TABLE>
<CAPTION>
COST
CAPITALIZED
SUBSEQUENT
TO
INITIAL COST ACQUISITION
---------------------------- ------------
BUILDINGS
AND
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS IMPROVEMENTS
- -------------------------- ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
Kinder Care:
Columbus, Ohio $ -- $ 57,101 $ 133,236 $ --
Gahanna, Ohio -- 65,047 151,776 --
West Carrollton, Ohio -- 57,101 133,236 --
Grove City, Ohio -- 66,702 155,638 --
Dayton, Ohio -- 57,101 133,236 --
Indianapolis, Indiana -- 60,324 140,756 --
Paragon Restaurant:
Middleburg Heights, Ohio -- 313,867 732,355 --
Lafayette, Indiana -- 324,028 756,068 --
Autoworks:
Omaha, Nebraska -- 275,432 413,148 --
Ponderosa:
Ann Arbor, Michigan -- 379,809 379,809 --
Alton, Illinois -- 369,740 554,639 (153,386)(d)
Volume Shoe-Plant City, FL -- 398,104 250,018 --
Benjamins-Burnsville, MN -- 216,612 505,428 --
Toddle House-Kenner, LA -- 87,496 131,243 --
------------ ----------- ------------ ------------
$ -- $ 2,728,464 $ 4,570,586 $ (153,386)
============ =========== ============ ============
</TABLE>
<TABLE>
<CAPTION>
GROSS AMOUNT AT WHICH LIFE ON WHICH
CARRIED AT CLOSE OF PERIOD DEPRECIATION
-------------------------------------------- ACCUMU- IN-LATEST
BUILDINGS LATED INCOME
AND TOTAL DEPRECI- DATE STATEMENTS
DESCRIPTION LAND IMPROVEMENTS (A)(B) ATION (C) ACQUIRED IS COMPUTED
- -------------------------- ----------- ------------ ----------- ----------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Kinder Care:
Columbus, Ohio $ 57,101 $ 133,236 $ 190,337 $ 44,941 1987 31.5 years
Gahanna, Ohio 65,047 151,776 216,823 51,194 1987 31.5 years
West Carrollton, Ohio 57,101 133,236 190,337 44,941 1987 31.5 years
Grove City, Ohio 66,702 155,638 222,340 52,497 1987 31.5 years
Dayton, Ohio 57,101 133,236 190,337 44,941 1987 31.5 years
Indianapolis, Indiana 60,324 140,756 201,080 38,540 1987 31.5 years
Paragon Restaurant:
Middleburg Heights, Ohio 313,867 732,355 1,046,222 243,150 1987 31.5 years
Lafayette, Indiana 324,028 756,068 1,080,096 247,021 1987 31.5 years
Autoworks:
Omaha, Nebraska 275,432 413,148 688,580 124,054 1988 31.5 years
Ponderosa:
Ann Arbor, Michigan 379,809 379,809 759,618 108,015 1989 31.5 years
Alton, Illinois -- 401,253 401,253 152,865 1989 31.5 years
Volume Shoe-Plant City, FL 398,104 250,018 648,122 63,827 1989 31.5 years
Benjamins-Burnsville, MN -- 505,428 505,428 126,357 1990 31.5 years
Toddle House-Kenner, LA 87,496 131,243 218,739 25,519 1991 31.5 years
----------- ------------ ----------- ----------- -------- -------------
$ 2,142,112 $ 4,417,200 $ 6,559,312 $ 1,367,861
=========== ============ =========== ===========
</TABLE>
(a) Also represents cost for federal income tax purposes.
(b) Reconciliation of total real estate carrying value for the three years
ended December 31, 1997 is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Balance at beginning of year $ 7,475,542 $ 9,838,437 $ 10,815,480
Acquisitions -- -- 1,410,234
Cost of property sold (329,878) (2,209,509) (2,387,277)
Fire insurance proceeds -- (153,386) --
------------ ------------ ------------
Balance at end of year $ 7,145,664 $ 7,475,542 $ 9,838,437
============ ============ ============
</TABLE>
(c) Reconciliation of accumulated depreciation for the three years ended
December 31, 1997 is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Balance at beginning of year $ 1,261,704 $ 1,423,718 $ 1,364,067
Expense 143,021 176,133 193,696
Deletions (36,864) (338,147) (134,045)
----------- ----------- -----------
Balance at end of year $ 1,367,861 $ 1,261,704 $ 1,423,718
=========== =========== ===========
</TABLE>
(d) Represents fire insurance proceeds.
F-12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 444,616
<SECURITIES> 0
<RECEIVABLES> 1,384,748
<ALLOWANCES> (191,764)
<INVENTORY> 0
<CURRENT-ASSETS> 7,415,403
<PP&E> 7,145,664
<DEPRECIATION> (1,367,861)
<TOTAL-ASSETS> 7,415,403
<CURRENT-LIABILITIES> 37,333
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 7,378,070
<TOTAL-LIABILITY-AND-EQUITY> 7,415,403
<SALES> 0
<TOTAL-REVENUES> 983,889
<CGS> 0
<TOTAL-COSTS> 164,897
<OTHER-EXPENSES> 143,021
<LOSS-PROVISION> 48,892
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 760,344
<INCOME-TAX> 0
<INCOME-CONTINUING> 760,344
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 760,344
<EPS-PRIMARY> 5.45
<EPS-DILUTED> 0.00
</TABLE>
