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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, 1998 33-2320
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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 [ ]
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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 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. 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, and (3)
realization of long-term appreciation in value of properties.
The general partners are currently attempting to sell all of the properties held
by the Partnership. The selling of the properties could take several years as
the general partners attempt to maximize the sales price of each property. There
can be no assurance that the general partners will be successful in selling all
of the properties or what price they can obtain. Additionally, the general
partners may change its plans in the future.
ITEM 2. PROPERTIES
The Partnership presently owns twelve 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, 2003. The annual rent over the remainder of
the lease is as follows:
January 1, 1999 to December 31, 2002 $43,016
January 1, 2003 to June 30, 2003 $21,508
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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, 2003. The annual rent over the
remainder of the lease is as follows:
January 1, 2003 to November 30, 2003 $33,205
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, 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, 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, 1999 to December 31, 2001 $ 35,526
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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.
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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.
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.
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.
Toddle House is currently in Chapter 11 Bankruptcy and did not pay any rent in
1998. 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.
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B) As of December 31, 1998, there were 1,670 investors holding 135,199 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, 1998. The Partnership
expects to continue to make cash distributions on a quarterly basis in the
future to the extent the Partnership continues to generate net operating
income, or realize proceeds through property sales.
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 1998 1997 1996 1995 1994
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Total rental revenue $ 670,691 $ 827,221 $ 1,048,015 $ 1,185,371 $ 1,145,656
Interest and other income 119,518 156,668 202,786 129,399 112,772
Operating expenses:
Property expenses 32,240 70,308 214,221 63,761 (2,438)
General and administrative 49,893 94,589 59,106 36,972 43,955
Depreciation 126,485 143,021 176,133 193,696 212,716
Net income before real estate sales 581,591 675,971 801,341 1,020,341 1,004,195
Gain on sale
of real estate 99,986 84,373 880,643 450,293 --
Net income 681,577 760,344 1,681,984 1,470,634 1,004,195
Per Unit Data:
Net income 4.71 5.45 12.07 10.77 7.33
Distributions 15.05 21.96 25.10 8.50 8.90
BALANCE SHEET DATA
Net real estate 4,452,546 5,777,802 6,213,838 8,414,719 9,451,413
Cash 412,033 444,616 1,393,367 1,817,201 641,053
Accounts receivable, net 8,998 19,897 79,217 165,083 19,135
Total assets 6,041,019 7,415,403 9,665,303 11,417,867 11,138,851
Total liabilities 19,369 37,333 45,898 50,213 79,274
Partners' equity 6,021,650 7,378,070 9,619,405 11,367,654 11,059,577
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
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.
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, 1998 to year ended December 31, 1997.
The net income of the Partnership decreased by $78,767 in 1998 when compared to
1997. The differences in income and expenses are explained below.
Rental revenue decreased by $156,530 or 19% to $670,691 in 1998 from $827,221 in
1997. The decrease in rental revenue was primarily attributed to the sale in
August 1997 of a building that was leased to Kindercare, and to Toddle House
Restaurant, which is bankrupt and no longer being charged rents. These
properties accounted for $49,252 in rental revenue in 1997. In May 1998, the
sale of a building leased to Timber Lodge Restaurant accounted for approximately
$70,627 in rental revenue in 1997 as compared to $30,201 in 1998. In September
1998, the sale of a building leased to Ponderosa Restaurant, which was vacant in
1998, accounted for approximately $70,359 in rental revenue in 1997 as compared
to $0 in 1998.
Interest income decreased by $37,150 or 24% in 1998 from 1997. This decrease was
due primarily to finance charges for Toddle House Restaurants in 1997 of
approximately $28,680. No such charges were assessed in 1998.
Operating expenses decreased by $99,300 in 1998 from 1997. The net decrease was
primarily attributed to the $45,371 decrease in bad debt expense and a decrease
of $42,614 in accounting and legal expenses. The bad debt expense for 1998 was
$3,521 as compared to $48,892 in 1997. The decrease in bad debts expense relates
to reserves for Toddle House Restaurants, which is in Chapter 11 Bankruptcy, but
was being charged rents in 1997. The decrease in accounting and legal expenses
relates to legal fees paid by the Partnership in 1997 of approximately $48,131
relating to Ponderosa Restaurant. No such fees were incurred in 1998. Property
tax expense increased by $8,320 or 61%. This increase is attributed to the
Company incurring property taxes expenses that would have been paid by
Ponderosa, who had vacated one of the Company's properties and has stopped
paying rents, and Toddle House, which is in Chapter 11 Bankruptcy. Overall,
other expenses and other income varied little between the two accounting
periods.
During 1998, the Partnership sold two properties. In May 1998, the Partnership
sold a building leased to Timber Lodge Restaurant in Burnsville, Minnesota. The
net sales price was $689,760 and a $100,094 gain was recognized on the sale. In
September 1998, the Partnership sold a building leased to Ponderosa Restaurant
in Alton, Illinois. The net sales price was $608,997 and a $108,000 loss was
recognized on the sale.
The Partnership has continued to distribute cash flows to the limited partners
since 1989. Management anticipates that distributions from cash flows will
continue in 1999. The distributions may be supplemented by proceeds from
property sales, if any. If additional properties are sold and proceeds are
distributed to the partners instead of reinvested, future distributions are
expected to decrease.
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.
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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.
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
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 expect for a building previously leased to Toddle
House, which is now vacant. The Partnership's 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 currently owns and manages twelve properties.
The Partnership has $412,033 in cash at December 31, 1998, with no outstanding
debt on any of the properties that it owns. The Partnership has income of
approximately $57,000 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 costs and expenses associated with operations and
maintenance of the properties, except miscellaneous costs on the dark Toddle
House building, as the properties are leased on a triple-net lease basis.
The Partnership's primary source of cash in 1999 is expected to continue to come
from the rental of the real estate properties currently owned. The Partnership
is attempting to sell its properties which would provide additional cash for
distribution. There can be no assurance, however, that the Partnership will be
successful in selling its properties. Management anticipates 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 expects
that the liquidity of the Partnership will change if properties are sold and/or
excess cash is distributed to the Partners.
YEAR 2000
The Partnership currently uses Management Reports Inc. ("MRI") software on a
Novell local area network. MRI has been modified to accept four digits as the
year date and is Year 2000 compliant. The Partnership has made an assessment of
the impact of the Year 2000 issue on its internal operations and has developed a
plan to bring its computer systems into
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compliance by the Year 2000. The plan addresses the modification or replacement
of applications and operating systems to achieve timely Year 2000 compliance and
also includes communication and analysis with outside vendors with whom the
Partnership interfaces electronically. Although it is not possible to quantify
the aggregate cost of such modifications, the Partnership does not anticipate
that the cost will have a material adverse effect on its financial position or
results of operations. The foregoing discussion of Year 2000 issues contains
forward-looking statements and actual compliance may be affected by a number of
factors which include the timing and compliance by the Partnership's outside
vendors and suppliers. This discussion should be read in conjunction with the
Partnership's disclosures under the heading "Certain Cautionary Statements"
below.
CERTAIN CAUTIONARY STATEMENTS
Certain statements in this Form 10-Q 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
(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 December 31, 1998, the Company had one tenant under
bankruptcy. The Company is attempting to sell or lease this property.
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.
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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, 1998 and 1997 F-3
3) Statements of Income
Years Ended December 31, 1998, 1997 and 1996 F-4
4) Statements of Changes in Partners' Equity
Years Ended December 31, 1998, 1997 and 1996 F-5
5) Statements of Cash Flows
Years Ended December 31, 1998, 1997 and 1996 F-6
6) Notes to Financial Statements F-7
7) Financial Statement Schedules:
II - Valuation and Qualifying Accounts
Years Ended December 31, 1998, 1997 and 1996 F-11
III - Real Estate and Accumulated Depreciation
December 31, 1998 F-12
</TABLE>
PART III
ITEM 10. GENERAL PARTNERS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP
The general partners of the Partnership are New Plan Excel Realty Trust, Inc., a
Maryland corporation, and Gary B. Sabin. Neither Gary B. Sabin nor the executive
officers of New Plan Excel Realty Trust, Inc. receive compensation from the
Partnership. The General Partner and the officers and employees of New Plan
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 New Plan Excel Realty Trust, Inc. are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Gary B. Sabin 44 President and Chairman of the Board
Richard B. Muir 43 Executive Vice President and Director
Jeffrey D. Egertson 46 Chief Financial Officer and Senior Vice President
Ronald H. Sabin 48 Senior Vice President
Graham R. Bullick 48 Senior Vice President
Mark T. Burton 38 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
New Plan 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.
JEFFERY D. EGERTSON, CPA has served as Chief Financial Officer and Senior Vice
President of the Company since January 1999. He previously served as Vice
President, Financial Services of TrizecHahn from 1997 to 1999, and partner in
charge of real estate practices for the Los Angeles office of Coopers & Lybrand
from 1989 to 1997.
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 New Plan Excel Realty Trust, Inc. See ITEM 13 for compensation to the general
partner.
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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 12/31/98
-------------- ---------------- -------- --------
<S> <C> <C> <C>
Units of Limited
Partnership Interest Gary B. Sabin None None
Units of Limited New Plan Excel
Partnership Interest Realty Trust, Inc. 853 0.630%
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The table below reflects compensation paid to New Plan Excel Realty Trust, Inc.,
a general partner, or their affiliates during the year ended December 31, 1998:
<TABLE>
<CAPTION>
DESCRIPTION AMOUNT
----------- ------
<S> <C>
Management fees $ 6,750
Administrative fees 10,800
Accounting 6,480
</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.
12
<PAGE> 13
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 24, 1999 Excel Properties, Ltd.
(Registrant)
New Plan Excel Realty Trust, Inc.
(General Partner)
By: /s/ Gary B. Sabin
-------------------------------
Gary B. Sabin
President
By: /s/ James Y. Nakagawa
-------------------------------
James Y. Nakagawa
Principal Accounting Officer
13
<PAGE> 14
INDEX TO FINANCIAL STATEMENTS
----------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
1. FINANCIAL STATEMENTS:
Report of Independent Accountants - Squire & Co........................ F-2
Balance Sheets
December 31, 1998 and 1997.......................................... F-3
Statements of Income
Years Ended December 31, 1998, 1997 and 1996........................ F-4
Statements of Changes in Partners' Equity
Years Ended December 31, 1998, 1997 and 1996........................ F-5
Statements of Cash Flows
Years Ended December 31, 1998, 1997 and 1996........................ F-6
Notes to Financial Statements.......................................... F-7
2. FINANCIAL STATEMENT SCHEDULES:
Schedule II - Valuation and Qualifying Accounts
Years Ended December 31, 1998, 1997 and 1996........................ F-11
Schedule III - Real Estate and Accumulated Depreciation
December 31, 1998................................................... F-12
</TABLE>
F-1
<PAGE> 15
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, 1998 and 1997, 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, 1998. 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, 1998 and 1997, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1998, 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, 1999
Poway, California
F-2
<PAGE> 16
EXCEL PROPERTIES, LTD.
BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
----------
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
ASSETS
Real estate:
Land $ 2,142,112 $ 2,728,464
Buildings 3,510,518 4,417,200
Less: accumulated depreciation (1,200,084) (1,367,861)
----------- -----------
Net real estate 4,452,546 5,777,803
Cash 412,033 444,616
Accounts receivable, less allowance for bad debts of
$0 and $191,764 in 1998 and 1997, respectively 8,998 19,897
Notes receivable 1,159,104 1,167,273
Interest receivable 8,338 5,814
----------- -----------
Total assets $ 6,041,019 $ 7,415,403
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Accounts payable:
Affiliates $ 598 $ 697
Other 2,493 2,139
Property taxes payable 0 19,089
Tenant security deposits 0 5,000
Deferred rental income 16,278 10,408
----------- -----------
Total liabilities 19,369 37,333
----------- -----------
Partners' Equity:
General partner's equity 41,464 16,376
Limited partners' equity, 235,308 units authorized,
135,199 units issued and outstanding 5,980,186 7,361,694
----------- -----------
Total partners' equity 6,021,650 7,378,070
----------- -----------
Total liabilities and partners' equity $ 6,041,019 $ 7,415,403
=========== ===========
</TABLE>
The accompanying notes are an integral part
of the financial statements
F-3
<PAGE> 17
EXCEL PROPERTIES, LTD.
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
----------
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Revenue:
Base rent $ 670,691 $ 827,221 $1,011,114
Percentage rents -- -- 36,901
Interest and other income 119,518 156,668 202,786
---------- ---------- ----------
Total revenue 790,209 983,889 1,250,801
---------- ---------- ----------
Operating Expenses:
Bad debts 3,521 48,892 183,608
Depreciation 126,485 143,021 176,133
Accounting and legal 25,220 67,834 40,424
Property taxes 21,969 13,649 17,962
Administrative 10,800 10,800 10,800
Management fees 6,750 7,767 9,414
Office expenses 13,873 15,955 7,882
Miscellaneous -- -- 3,237
---------- ---------- ----------
Total operating expenses 208,618 307,918 449,460
---------- ---------- ----------
Net income before real estate sales 581,591 675,971 801,341
Gain - sale of real estate 99,986 84,373 880,643
---------- ---------- ----------
Net income $ 681,577 $ 760,344 $1,681,984
========== ========== ==========
Net income allocated to:
General partner $ 45,438 $ 22,820 $ 49,182
Limited partners 636,139 737,524 1,632,802
---------- ---------- ----------
Total $ 681,577 $ 760,344 $1,681,984
========== ========== ==========
Net income per weighted average
limited partnership unit $ 4.71 $ 5.45 $ 12.07
========== ========== ==========
</TABLE>
The accompanying notes are an integral part
of the financial statements
F-4
<PAGE> 18
EXCEL PROPERTIES, LTD.
STATEMENTS OF CHANGES IN PARTNERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
----------
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNERS PARTNERS TOTAL
------------ ------------ ------------
<S> <C> <C> <C>
Balance at January 1, 1996 $ 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
Liquidation of Limited Partnership units - 1998 0 (3,000) (3,000)
Net Income - 1998 45,438 636,139 681,577
Partner distributions - 1998 (20,350) (2,014,647) (2,034,997)
------------ ------------ ------------
Balance at December 31, 1998 $ 41,464 $ 5,980,186 $ 6,021,650
============ ============ ============
</TABLE>
The accompanying notes are an integral part
of the financial statements
F-5
<PAGE> 19
EXCEL PROPERTIES, LTD.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
----------
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 681,577 $ 760,344 $ 1,681,984
Adjustments to reconcile net income to net cash
provided by operations:
Depreciation 126,485 143,021 176,133
Allowance for doubtful accounts (191,765) 48,892 184,422
Gain on sale of real estate (99,986) (84,373) (880,643)
Changes in operating assets and liabilities:
(Increase) decrease in assets:
Accounts receivable 202,664 10,429 (95,237)
Interest receivable 81 75 (698)
Other assets (2,605) -- --
Increase (decrease) in liabilities:
Accounts payable 256 1,036 (2,237)
Property taxes payable (19,089) 19,089 (4,258)
Tenant security deposits (5,000) -- --
Deferred rental income 5,870 (28,691) (1,139)
----------- ----------- -----------
Net cash provided by operating activities 698,488 869,822 1,058,327
----------- ----------- -----------
Cash flows from investing activities:
Collection of escrow deposits -- 963,968 --
Proceeds from real estate sales 1,298,757 211,638 1,941,423
Collection of notes receivable 8,169 7,500 6,649
----------- ----------- -----------
Net cash provided by investing activities 1,306,926 1,183,106 1,948,072
----------- ----------- -----------
Cash flows from financing activities:
Redemption of partnership units (3,000) -- --
Cash distributions (2,034,997) (3,001,679) (3,430,233)
----------- ----------- -----------
Net cash used by financing activities (2,037,997) (3,001,679) (3,430,233)
----------- ----------- -----------
Net decrease in cash (32,583) (948,751) (423,834)
Cash at beginning of year 444,616 1,393,367 1,817,201
----------- ----------- -----------
Cash at end of year $ 412,033 $ 444,616 $ 1,393,367
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part
of the financial statements
F-6
<PAGE> 20
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, 1998, the carrying amount of the Partnership's cash
deposits total $412,033. The bank balances are $412,317 of which $200,000
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, 1998,
1997 or 1996. The Partnership had no noncash investing or financing
transactions in 1998. 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.
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> 21
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, 1998 and 1997 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>
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Net income:
Financial statements $ 681,577 $ 760,344 $ 1,681,984
Tax returns 487,913 724,356 1,870,650
------------ ------------ ------------
Difference $ 193,664 $ 35,988 $ (188,666)
============ ============ ============
Difference is due to:
Allowance for bad debts $ 193,664 $ 44,252 $ (184,422)
Deferred gain - like kind exchange -- (8,264) (4,244)
------------ ------------ ------------
$ 193,664 $ (188,666) $ (188,666)
============ ============ ============
Partners' equity:
Financial statements $ 5,533,737 $ 7,378,070 $ 9,619,405
Tax returns 6,741,160 8,779,157 11,056,481
------------ ------------ ------------
Difference $ (1,207,423) $ (1,401,087) $ (1,437,076)
============ ============ ============
Difference is due to:
Syndication costs $ (1,498,718) $ (1,498,718) $ (1,498,718)
Allowance for bad debts 1,900 (191,764) (236,017)
Deferred gain - like-kind exchange -- -- 8,264
Deferred gain on sale of building 289,395 289,395 289,395
------------ ------------ ------------
$ (1,207,423) $ (1,401,087) $ (1,437,076)
============ ============ ============
</TABLE>
Continued F-8
<PAGE> 22
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>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Management fees $ 6,750 $ 7,767 $ 9,414
Administrative fees 10,800 10,800 10,800
Accounting 6,480 14,994 16,080
</TABLE>
4. NOTES RECEIVABLE:
The Company had the following notes receivable at December 31, 1998 and
1997:
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Note from the sale of land, interest at 10%. Due upon the
occurrence of certain events. $ 165,750 $ 165,750
Note from sale of building, receipts of $1,390 per month
at 9% interest. Secured by building sold. Currently due. 130,522 135,225
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. 105,332 108,798
---------- ----------
Total notes receivable $1,159,104 $1,167,273
========== ==========
</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>
1999 $ 670,386
2000 605,500
2001 541,003
2002 449,228
2003 403,475
Thereafter 713,753
</TABLE>
Continued F-9
<PAGE> 23
EXCEL PROPERTIES, LTD.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
----------
6. REAL ESTATE:
During 1998, the Partnership sold two properties. In May 1998, the
Partnership sold a building leased to Timberlodge Restaurant in Burnsville,
Minnesota. The net sales price was $689,760 and a $100,094 gain was
recognized on the sale. In September 1998, the Partnership sold a building
leased to Ponderosa Restaurant in Alton, Illinois. The net sales price was
$608,997 and a $108,000 loss was recognized on the sale.
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.
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.
F-10
<PAGE> 24
EXCEL PROPERTIES, LTD.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<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, 1998:
Allowance for bad debts $ 191,764 $ 3,521 Write-off of Reserves $ 195,285 $ 0
=========== =========== ========== ==========
Year ended December 31, 1997:
Allowance for bad debts $ 236,017 $ 48,892 Write-off of Reserves $ 93,145 $ 191,764
=========== =========== ========== ==========
Year ended December 31, 1996:
Allowance for bad debts $ 51,595 $ 183,608 Reconciling Item $ (814) $ 236,017
=========== =========== ========== ==========
</TABLE>
F-11
<PAGE> 25
EXCEL PROPERTIES, LTD.
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1998
<TABLE>
<CAPTION>
Cost
Capitalized
Subsequent
to Gross Amount at Which
Initial Cost Acquisition Carried at Close of Period
----------------------------- ---------- ----------------------------
Buildings Buildings
and and
Description Encumbrances Land Improvements Improvements Land Improvements
------------ ---------- ------------ ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Kinder Care:
Columbus, Ohio $ -- $ 57,101 $ 133,236 $ -- $ 57,101 $ 133,236
Gahanna, Ohio -- 65,047 151,775 -- 65,047 151,775
West Carrollton, Ohio -- 57,101 133,236 -- 57,101 133,236
Grove City, Ohio -- 66,702 155,638 -- 66,702 155,638
Dayton, Ohio -- 57,101 133,236 -- 57,101 133,236
Indianapolis, Indiana -- 60,324 140,756 -- 60,324 140,756
Paragon Restaurant:
Middleburg Heights, Ohio -- 313,867 732,355 -- 313,867 732,355
Lafayette, Indiana -- 324,028 756,068 -- 324,028 756,068
Autoworks:
Omaha, Nebraska -- 275,432 413,148 -- 275,432 413,148
Ponderosa:
Ann Arbor, Michigan -- 379,809 379,809 -- 379,809 379,809
Volume Shoe-Plant City, FL -- 398,104 250,018 -- 398,104 250,018
Toddle House-Kenner, LA -- 87,496 131,243 -- 87,496 131,243
---------- ---------- ---------- ---------- ---------- ----------
$ -- $2,142,112 $3,510,518 $ 0 $2,142,112 $3,510,518
========== ========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Life on Which
Depreciation
Accumu- in Latest
lated Income
Total Depreci- Date Statements
Description (a)(b) ation (c) Acquired is Computed
---------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
Kinder Care:
Columbus, Ohio $ 190,337 $ 49,170 1987 31.5 years
Gahanna, Ohio 216,822 56,012 1987 31.5 years
West Carrollton, Ohio 190,337 49,170 1987 31.5 years
Grove City, Ohio 222,340 57,438 1987 31.5 years
Dayton, Ohio 190,337 49,170 1987 31.5 years
Indianapolis, Indiana 201,080 43,008 1987 31.5 years
Paragon Restaurant:
Middleburg Heights, Ohio 1,046,222 266,399 1987 31.5 years
Lafayette, Indiana 1,080,096 271,023 1987 31.5 years
Autoworks:
Omaha, Nebraska 688,580 137,169 1988 31.5 years
Ponderosa:
Ann Arbor, Michigan 759,618 120,072 1989 31.5 years
Volume Shoe-Plant City, FL 648,122 71,765 1989 31.5 years
Toddle House-Kenner, LA 218,739 29,686 1991 31.5 years
---------- ----------
$5,652,630 $1,200,084
========== ==========
</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, 1998 is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Balance at beginning of year $ 7,145,664 $ 7,475,542 $ 9,838,437
Acquistions -- -- --
Cost of property sold (1,493,034) (329,878) (2,362,895)
----------- ----------- -----------
Balance at end of year $ 5,652,630 $ 7,145,664 $ 7,475,542
=========== =========== ===========
</TABLE>
(c) Reconciliation of accumulated depreciation for the three years ended
December 31, 1998 is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Balance at beginning of year $ 1,367,861 $ 1,261,704 $ 1,423,718
Expense 126,485 143,021 176,133
Deletions (294,262.00) (36,864.00) (338,147.00)
----------- ----------- -----------
Balance at end of year $ 1,200,084 $ 1,367,861 $ 1,261,704
=========== =========== ===========
</TABLE>
F-12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 412,033
<SECURITIES> 0
<RECEIVABLES> 1,176,440
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,588,473
<PP&E> 5,652,630
<DEPRECIATION> 1,200,084
<TOTAL-ASSETS> 6,041,019
<CURRENT-LIABILITIES> 19,369
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 6,021,650
<TOTAL-LIABILITY-AND-EQUITY> 6,041,019
<SALES> 0
<TOTAL-REVENUES> 790,209
<CGS> 0
<TOTAL-COSTS> 82,133
<OTHER-EXPENSES> 126,485
<LOSS-PROVISION> 3,521
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 681,577
<INCOME-TAX> 0
<INCOME-CONTINUING> 681,577
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 681,577
<EPS-PRIMARY> 0
<EPS-DILUTED> 4.71
</TABLE>
