<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTIONS 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended: Commission File Number:
SEPTEMBER 30, 1999 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 100, SAN DIEGO, CALIFORNIA 92127
- --------------------------------------------------------------------------------
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (858) 675-9400
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 [ ]
(2) Yes [X] No [ ]
<PAGE> 2
EXCEL PROPERTIES, LTD.
INDEX TO FINANCIAL STATEMENTS
----------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements:
Balance Sheets
September 30, 1999 (Unaudited)
December 31, 1998.......................................................3
Statements of Income
Three Months Ended September 30, 1999 (Unaudited)
Three Months Ended September 30, 1998 (Unaudited)
Nine Months Ended September 30, 1999 (Unaudited)
Nine Months Ended September 30, 1998 (Unaudited).......................4
Statements of Changes in Partners' Equity
Nine Months Ended September 30, 1999 (Unaudited)
Nine Months Ended September 30, 1998 (Unaudited).......................5
Statements of Cash Flows
Nine Months Ended September 30, 1999 (Unaudited)
Nine Months Ended September 30, 1998 (Unaudited).......................6
Notes to Financial Statements..............................................7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................................10
PART II. OTHER INFORMATION........................................................13
</TABLE>
2
<PAGE> 3
EXCEL PROPERTIES, LTD.
BALANCE SHEETS
----------
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Real estate:
Land $ 1,524,764 $ 2,142,112
Buildings 2,821,843 3,510,518
Less: accumulated depreciation (1,051,309) (1,200,084)
----------- -----------
Net real estate 3,295,298 4,452,546
Cash 864,224 412,033
Accounts receivable, less allowance for bad debts of
$23,283 and $0 in 1999 and 1998, respectively 1,071 8,998
Notes receivable 1,152,483 1,159,104
Interest receivable and other assets 6,356 8,338
----------- -----------
Total assets $ 5,319,432 $ 6,041,019
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Accounts payable:
Affiliates $ 826 $ 598
Other 1,912 2,493
Deferred rental income 8,708 16,278
----------- -----------
Total liabilities 11,446 19,369
----------- -----------
Partners' Equity:
General partner's equity 36,165 41,464
Limited partners' equity, 235,308 units
authorized, 135,199 units issued
and outstanding in 1999 and 135,299 units
issued and outstanding in 1998,
respectively. 5,271,821 5,980,186
----------- -----------
Total partners' equity 5,307,986 6,021,650
----------- -----------
Total liabilities and partners' equity $ 5,319,432 $ 6,041,019
=========== ===========
</TABLE>
The accompanying notes are an integral part
of the financial statements.
3
<PAGE> 4
EXCEL PROPERTIES, LTD.
STATEMENTS OF INCOME - UNAUDITED
----------
<TABLE>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- ----------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenue:
Base rent $ 147,072 $ 165,162 $ 464,898 $ 504,261
Interest income 27,522 27,741 89,232 89,369
--------- --------- --------- ---------
Total revenue 174,594 192,903 554,130 593,630
--------- --------- --------- ---------
Expenses:
Depreciation 24,474 30,367 76,026 97,975
Bad debts 23,283 (2,524) 23,283 3,521
Office expenses 2,125 3,188 7,350 9,919
Administrative 2,700 2,700 8,100 8,100
Accounting and legal 2,530 2,473 23,437 9,778
Management fees 2,016 1,652 5,194 5,163
Property tax (12,318) 20,812 216 20,812
--------- --------- --------- ---------
Total expenses 44,810 58,668 143,606 155,268
--------- --------- --------- ---------
Income before real estate sales 129,784 134,235 410,524 438,362
Gain (loss) - sale of real estate 282,239 (108) 388,085 99,986
--------- --------- --------- ---------
Net income $ 412,023 $ 134,127 $ 798,609 $ 538,348
========= ========= ========= =========
Net income allocated to:
General partner $ 4,365 $ 1,645 $ 8,746 $ 6,363
Limited partners 407,658 132,482 789,863 531,985
--------- --------- --------- ---------
Total $ 412,023 $ 134,127 $ 789,609 $ 538,348
========= ========= ========= =========
Net income per weighted average
limited partnership unit $ 3.02 $ 0.98 $ 5.84 $ 3.93
====== ====== ====== ======
</TABLE>
The accompanying notes are an integral part
of the financial statements.
4
<PAGE> 5
EXCEL PROPERTIES, LTD.
STATEMENTS OF CHANGES IN PARTNERS' EQUITY - UNAUDITED
----------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
----------------------------
1999 1998
----------- -----------
<S> <C> <C>
Balance at January 1 $ 6,021,650 $ 7,378,070
Net income 798,609 538,348
Partner distributions (1,512,273) (1,259,999)
----------- -----------
Balance at September 30 $ 5,307,986 $ 6,656,419
=========== ===========
</TABLE>
The accompanying notes are an integral part
of the financial statements.
5
<PAGE> 6
EXCEL PROPERTIES, LTD.
STATEMENTS OF CASH FLOWS - UNAUDITED
----------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------
1999 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 798,609 $ 538,348
Adjustments to reconcile net income to net cash
provided by operations:
Depreciation 76,026 97,975
Provision for bad debts 23,283 3,521
Gain on sale of real estate (388,085) (99,986)
Changes in operating assets and liabilities:
(Increase) decrease in assets:
Accounts receivable (15,357) 16,376
Interest receivable and other assets 1,983 (5,665)
Increase (decrease) in liabilities:
Accounts payable 3,753 (859)
Property taxes payable (4,106) (8,721)
Deferred rental income (7,570) 4,603
----------- -----------
Net cash provided by operating activities 488,536 545,592
----------- -----------
Cash flows from investing activities:
Collection of notes receivable 6,621 6,078
Proceeds from real estate sales 1,469,307 1,298,757
----------- -----------
Net cash provided by investing activities 1,475,928 1,304,835
----------- -----------
Cash flows from financing activities:
Cash distributions (1,512,273) (1,259,999)
----------- -----------
Net cash used by financing activities (1,512,273) (1,259,999)
----------- -----------
Net increase increase in cash 452,191 590,428
Cash at January 1 412,033 444,616
----------- -----------
Cash at September 30 $ 864,224 $ 1,035,044
=========== ===========
</TABLE>
The accompanying notes are an integral part
of the financial statements.
6
<PAGE> 7
EXCEL PROPERTIES, LTD.
NOTES TO FINANCIAL STATEMENTS - UNAUDITED
----------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The financial statements reflect all adjustments of a recurring nature which
are, in the opinion of management, necessary for a fair presentation of the
financial statements. No adjustments were necessary which were not of a
recurring nature. These financial statements should be read in conjunction
with the financial statements and accompanying footnotes included in the
Partnership's December 31, 1998 Form 10-K.
ORGANIZATION
Excel Properties, Ltd. 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 of 31.5 years. 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 dispositions are reported as income or expense.
CASH DEPOSITS
At September 30, 1999, the carrying amount of the Partnership's cash
deposits total $864,224. The bank balances are $1,040,465 of which $200,000
is covered by federal depository insurance.
STATEMENT OF CASH FLOWS - SUPPLEMENTAL DISCLOSURE
There was no interest or taxes paid for the nine months ended September 30,
1999 or 1998. The Partnership also had no noncash investing or financing
transactions for the nine months ended September 30, 1999 or 1998.
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.
Continued
7
<PAGE> 8
EXCEL PROPERTIES, LTD.
NOTES TO FINANCIAL STATEMENTS - UNAUDITED, CONTINUED
----------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
ACCOUNTS RECEIVABLE
All net accounts receivable are deemed to be collectible within the next 12
months.
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
reported period. Actual results could differ from those estimates.
2. Fees Paid to General Partner
The Partnership has paid the General Partner or its affiliates the following
fees for the nine months ended September 30, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Management fees $ 5,194 $ 5,163
Administrative fees 8,100 8,100
Accounting 4,860 4,860
</TABLE>
3. SALE OF PROPERTY
In February 1999, the Partnership sold a vacant building in Kenner,
Louisiana that was formerly on lease to Toddle House Restaurant. The sale
price for the building was $237,500. The Partnership recognized a gain of
$34,534 on the sale. In March 1999, the Partnership sold a building in Plant
City, Florida that was on lease to Payless Shoe Store. The sale price for
the building was $670,000. The Partnership recognized a gain of $71,313 on
the sale. In September 1999, the Partnership sold two buildings that were on
lease to Kindercare. The sale price for the Kindercare located in Gahanna,
Ohio was $374,052 and the sale price for the Kindercare located in Grove
City, Ohio was $314,991. The partnership recognized a gain of $169,222 and
$113,016, respectively, on the sale. In May 1998, the Partnership sold a
property leased by Timberlodge Steakhouse in Burnsville, Minnesota. The net
proceeds for the building were $689,760 and a gain of $100,094 was
recognized. In September 1998, the Partnership sold a vacant building in
Alton, Illinois, formerly on lease to Ponderosa Restaurant. The sale price
for the building was $610,000. The Partnership recognized a loss of $108 on
the sale.
Continued
8
<PAGE> 9
EXCEL PROPERTIES, LTD.
NOTES TO FINANCIAL STATEMENTS - UNAUDITED, CONTINUED
----------
4. NOTES RECEIVABLE
The Company had the following notes receivable at September 30, 1999 and
December 31, 1998:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Note from the sale of land, interest at 10%. Due upon the $ 165,750 $ 165,750
occurrence of certain events.
Note from sale of building, receipts of $1,390 per month
at 9% interest. Secured by building sold. Currently Due. 126,707 130,522
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. 102,526 105,332
---------- ----------
Total notes receivable $1,152,483 $1,159,104
========== ==========
</TABLE>
5. MINIMUM FUTURE RENTALS
The Company leases single-tenant buildings to tenants under noncancellable
operating leases requiring the greater of fixed or percentage rents. The
leases are 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 noncancellable operating leases
is as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C>
1999, remaining three months $ 133,205
2000 526,260
2001 461,763
2002 369,988
2003 348,761
Thereafter 713,753
</TABLE>
Continued
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
OF OPERATIONS
NATURE 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 long-term investment. The Partnership currently owns eight
properties. The general partners of the Partnership are New Plan 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. Certain 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 receipt of 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 preservation, protection and eventual return of the investment,
and distributions of cash from operations including property sales, some of
which may be a return of capital for tax purposes rather than taxable income.
LIQUIDITY AND CAPITAL RESOURCES
The Partnership has $864,224 at September 30, 1999, with no debt on any of the
properties it owns. In October 1999, the Partnership distributed accumulated
cash to the partners in the amount of $750,000. The Partnership currently
recognizes approximately $44,402 a month from rental revenue. Also, management
does not expect the Partnership to incur any significant operational expenses as
the Partnership properties are subject to triple-net leases.
The Partnership's primary source of cash is from rental of the real estate
properties currently owned. The Partnership may also sell properties which would
provide cash for distribution. Management believes that rental revenue should
cover the recurring 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 revenue were to decrease, the Partnership would decrease the
quarterly distributions to the limited partners. The liquidity of the
Partnership will change as properties are sold and/or excess cash is distributed
to the unit holders (partners).
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the financial
statements and the notes thereto.
Comparison of the three months ended September 30, 1999 to the three months
ended September 30, 1998
Base rent decreased $18,090 or 11% from the previous year. The net decrease was
primarily due to the sale in March 1999 of a building that was previously leased
to Payless Shoe Store. This property accounted for approximately $17,696 of
rental revenue in 1998.
In September 1999, the Partnership sold two buildings that were on lease to
Kindercare. The sale price for the Kindercare located in Gahanna, Ohio was
$374,052 and the sale price for the Kindercare located in Grove City, Ohio was
$314,991. The partnership recognized a gain of $169,222 and $113,016,
respectively, on the sales. In September
10
<PAGE> 11
1998, the Partnership sold a vacant building in Alton, Illinois, formerly on
lease to Ponderosa Restaurant. The sale price for the building was $610,000. The
Partnership recognized a loss of $108 on the sale.
Operating expenses decreased by $13,858 or 24% from the three months ended
September 30, 1998 to the three months ended September 30, 1999. The net
decrease was largely due to the $33,130 decrease in property tax expense and the
increase of $25,807 in bad debt expense as compared to 1998. The decrease in
property tax expense is attributable to the Company paying for the property
taxes that would have been paid by the Ponderosa Restaurant and Toddle House in
1998. In 1999, the Company paid property taxes that would have been paid by
Kindercare in Columbus, Ohio. Subsequently, the Company charged Kindercare for
the amount of the property taxes paid on their behalf. Bad debt expense
increased by $25,807 as compared to 1998. The increase in bad debt expense was
primarily due to Kindercare in Columbus, Ohio which is delinquent on their
rents. Depreciation expense decreased by $5,893 or 19% due to property sales in
1998 and in 1999. Other expenses and other income varied very little between the
two accounting periods.
Comparison of the nine months ended September 30, 1999 to the nine months ended
September 30, 1998
Base rent decreased $39,363 or 8% from the previous year. The decrease was
primarily due to the sale in March 1999 of a building previously leased to
Payless Shoe Store and to the sale of a building in May 1998 that was leased by
Timberlodge Steakhouse. These properties accounted for approximately $83,289 of
rental revenue in 1998 as compared to $17,596 in 1999. Offsetting the decrease
was an increase in rents of $20,590 for Kindercare in Gahanna, Ohio and
Kindercare in Grove City, Ohio in 1999 as compared to 1998.
In February 1999, the Partnership sold a vacant building in Kenner, Louisiana
that was formerly on lease to Toddle House Restaurant. The sale price for the
building was $237,500. The Partnership recognized a gain of $34,534. In March
1999, the Partnership sold a building previously leased to Payless Shoe Store,
in Plant City, Florida. The sale price for the building was $670,000. The
Partnership recognized a gain of $71,313. In September 1999, the Partnership
sold two buildings that were on lease to Kindercare. The sale price for the
Kindercare located in Gahanna, Ohio was $374,052 and the sale price for the
Kindercare located in Grove City, Ohio was $314,991. The partnership recognized
a gain of $169,222 and $113,016, respectively, on the sale. In May 1998, the
Partnership sold a building that was leased by Timberlodge Steakhouse in
Burnsville, Minnesota. The net proceeds for the building were $689,760 and a
gain of $100,094 was recognized. In September 1998, the Partnership sold a
vacant building in Alton, Illinois, formerly on lease to Ponderosa Restaurant.
The sale price for the building was $610,000. The Partnership recognized a loss
of $108 on the sale.
Operating expenses decreased by $11,662 or 8%. Depreciation expense decreased by
$21,949 or 22% due to property sales in 1998 and 1999. Accounting expense
increased by $13,659 over 1998. This increase is primarily due to amounts paid
for tax preparation and audit fees. Property tax expense decreased by $20,596 or
99%. The decrease in property tax expense is attributable to the Company paying
for the property taxes that would have been paid by the Ponderosa Restaurant and
Toddle House in 1998. In 1999, the Company paid property taxes that would have
been paid by Kindercare in Columbus, Ohio. Subsequently, the Company charged
Kindercare for the amount of the property taxes paid on their behalf. Bad debt
expense increased by $19,762 as compared to 1998. The increase is primarily due
to Kindercare in Columbus, Ohio. Other expenses and other income varied very
little between the two accounting periods.
Management does not expect inflation to significantly 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 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 income should increase as operating expenses increase due to
inflation.
YEAR 2000
The Partnership uses the information technology ("IT") systems of the general
partner. Some of the general partners' IT systems were originally written using
two digits rather than four to define the applicable year. As a result, those IT
systems had time sensitive software that recognizes dates using "00" as the Year
1900 rather than the Year 2000. The general partner has upgraded its existing
computer software and IT systems and believes that they are able to recognize
the Year 2000 and that the Year 2000 issue will not have a material impact on
the Partnership's operations. The Year
11
<PAGE> 12
2000 issue affects the Partnership's internal systems, including IT and non-IT
systems. The Partnership has reviewed its utility systems (heat,light,
telephones, etc.) and other non-IT systems for the impact of Year 2000. The
Partnership has solicited assurances from its contractors, vendors and other
third parties that their systems (including building management and mechanical
systems) are currently Year 2000 compliant or will be made compliant before the
advent of the Year 2000. No assurances can be made that all contractors and
other third parties will comply with their assurances. The Partnership intends
to take continuous steps to identify Year 2000 problems related to its vendors
and to formulate a system of working with key third parties, including financial
institutions and utility providers, to understand their ability to continue
providing services and products through the change to Year 2000. The failure to
correct a material Year 2000 problem either within the Partnership or within a
vendor or supplier could result in an interruption in, or a failure of, certain
normal business activities or operations of the Company. Such interruptions or
failures could materially adversely affect the Partnership's business, operating
results and financial condition.
The Partnership's Year 2000 project is substantially completed. As of September
30, 1999, the general partner had expended less than $60,000 and does not expect
to expend any significant additional costs in connection with its Year 2000
project, including the cost of identification, assessment, remediation and
testing efforts. The cost of the Year 2000 project, and the target date on which
the Partnership expects the Year 2000 modifications to be complete are based
upon a variety of assumptions of future events, including the continued
availability of certain resources. No assurance can be made that these estimates
will be achieved and actual results could materially differ from those
anticipated. Specific factors that might cause material differences include, but
are not limited to, the availability and costs of personnel trained in this
area, the ability to locate and correct relevant computer codes and the timing
and compliance by the Partnership's outside vendors and suppliers.
A contingency plan has not been developed for dealing with the most reasonably
likely worst case scenario, and such scenario has not yet been clearly
identified. Since the Partnership has adopted a plan to address these Year 2000
issues, it has not developed a comprehensive contingency plan should Year 2000
issues fail to be addressed successfully or in their entirety. However, if the
Partnership identifies significant risks or is unable to meet its anticipated
time line, the Partnership will develop contingency plans as deemed necessary at
that time. This discussion contains forward-looking statements and should be
read, along with all other forward-looking statements herein, in conjunction
with the Partnership's disclosures under the heading "Certain Cautionary
Statements" below.
CERTAIN CAUTIONARY STATEMENTS
Certain statements in this Form 10-Q that are not historical fact and constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. 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. Such
risk, uncertainties and other factors include, but are not limited to, the
following risks:
Economic Performance and Value of Properties Dependent on Many Factors. Real
property investments are subject to varying degrees of risk. The economic
performance and values of real estate can be affected by many factors, including
changes in the national, regional and local economic climates, local conditions
such as an oversupply of space or reductions in demand for real estate in the
area, the attractiveness of the properties to tenants, competition from other
available space, the ability of the owner to provide adequate maintenance and
insurance and increased operating costs.
Dependence on Rental Revenue from Real Property. Since substantially all of the
Partnership's income is derived from rental revenue from real property, the
Partnership's income and funds for distribution would be adversely affected if a
significant number of the Partnership's tenants were unable to meet their
obligations to the Partnership or if the Partnership were unable to lease a
significant amount of space in its buildings on economically favorable lease
terms. There can be no assurance that any tenant whose lease expires in the
future will renew such lease or that the Partnership will be able to re-lease
space on economically advantageous terms.
Illiquidity of Real Estate Investments. Equity real estate investments are
relatively illiquid and therefore tend to limit the ability of the Partnership
to vary its portfolio promptly in response to changes in economic or other
conditions.
Risk of Bankruptcy of Tenants. The bankruptcy or insolvency of a tenant would
have an adverse impact on the property affected and on the income produced by
such property. Under bankruptcy law, a tenant has the option of assuming
12
<PAGE> 13
(continuing) or rejecting (terminating) any unexpired lease. If the tenant
assumes its lease with the Partnership, the tenant must cure all defaults under
the lease and provide the Partnership with adequate assurance of its future
performance under the lease. If the tenant rejects the lease, the Partnership's
claim for breach of the lease would (absent collateral securing the claim) be
treated as a general unsecured claim. The amount of the claim would be capped at
the amount owed for unpaid pre-petition lease payments unrelated to the
rejection, plus the greater of one years' lease payments or 15% of the remaining
lease payments payable under the lease (but not to exceed the amount of three
years' lease payments). At September 30, 1999, the Company had no tenants under
bankruptcy.
Environmental Risks. Under various federal, state and local laws, ordinances and
regulations, the Partnership may be considered an owner or operator of real
property or may have arranged for the disposal or treatment of hazardous or
toxic substances and, therefore, may become liable for the costs of removal or
remediation of certain hazardous substances released on or in its property or
disposed of by it, as well as certain other potential costs which could relate
to hazardous or toxic substances (including governmental fines and injuries to
persons and property). Such liability may be imposed whether or not the
Partnership knew of, or was responsible for, the presence of such hazardous
toxic substances.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
PART II. OTHER INFORMATION
Items 4 and 5 have been omitted since no events occurred with respect to these
items.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: 27.1 - Financial Data Schedule
(b) Reports on Form 8-K
The Partnership filed no reports on Form 8-K during the quarter
ended September 30, 1999.
SIGNATURES
Pursuant to the requirements 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.
Dated: November 9, 1999 EXCEL PROPERTIES, LTD.
(Registrant)
By: /s/ GARY B. SABIN
-------------------------
Gary B. Sabin,
General Partner
By: /s/ JAMES Y. NAKAGAWA
-------------------------
James Y. Nakagawa,
Principal Accounting Officer
13
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 864,224
<SECURITIES> 0
<RECEIVABLES> 1,183,193
<ALLOWANCES> 23,283
<INVENTORY> 0
<CURRENT-ASSETS> 2,024,134
<PP&E> 4,346,607
<DEPRECIATION> 1,051,309
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0
0
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<CGS> 0
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</TABLE>
