<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended: Commission File Number:
MARCH 31, 2000 33-2320
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EXCEL PROPERTIES, LTD.
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(Exact name of registrant as specified in its charter)
CALIFORNIA 87-0426335
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
17140 BERNARDO CENTER DRIVE, SUITE 300 SAN DIEGO, CALIFORNIA 92128
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(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (858) 675-9400
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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 [ ]
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EXCEL PROPERTIES, LTD.
INDEX TO FINANCIAL STATEMENTS
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements:
Balance Sheets
March 31, 2000 (Unaudited)
December 31, 1999...............................................................3
Statements of Income
Three Months Ended March 31, 2000 (Unaudited)
Three Months Ended March 31, 1999 (Unaudited)...................................4
Statements of Changes in Partners' Equity
Three Months Ended March 31, 2000 (Unaudited)
Three Months Ended March 31, 1999 (Unaudited)...................................5
Statements of Cash Flows
Three Months Ended March 31, 2000 (Unaudited)
Three Months Ended March 31, 1999 (Unaudited)...................................6
Notes to Financial Statements......................................................7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................................10
Item 3. Quantitative and Qualitative Disclosures About Market Risk....................12
PART II. OTHER INFORMATION................................................................12
</TABLE>
The accompanying notes are an integral part of the
financial statements.
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EXCEL PROPERTIES, LTD.
BALANCE SHEETS
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<TABLE>
<CAPTION>
MARCH 31,
2000 DECEMBER 31,
(UNAUDITED) 1999
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<S> <C> <C>
ASSETS
Real estate:
Land 1,524,764 1,524,764
Buildings 2,821,843 2,821,843
Less: accumulated depreciation (1,097,161) (1,074,766)
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Net real estate 3,249,446 3,271,841
Cash 244,689 289,446
Accounts receivable, less allowance for bad debts of
$30,999 in both 2000 and 1999 19,678 2,222
Notes receivable 1,141,479 1,148,629
Interest receivable and other assets 7,492 5,637
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Total assets $ 4,662,784 $ 4,717,775
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LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Accounts payable:
Affiliates $ 569 $ 20,708
Other 871 1,520
Property taxes payable -- 5,174
Deferred rental income 10,062 18,770
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Total liabilities 11,502 46,172
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Partners' Equity:
General partner's equity 28,971 28,950
Limited partners' equity, 235,308 units
authorized, 135,199 units issued
and outstanding in 2000 and 1999,
respectively 4,622,311 4,642,653
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Total partners' equity 4,651,282 4,671,603
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Total liabilities and partners' equity $ 4,662,784 $ 4,717,775
============= =============
</TABLE>
The accompanying notes are an integral part of the
financial statements.
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EXCEL PROPERTIES, LTD.
STATEMENTS OF INCOME - UNAUDITED
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<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
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2000 1999
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<S> <C> <C>
Revenue:
Base rent $ 133,205 $ 164,812
Interest and other income 27,089 30,761
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Total revenue 160,294 195,573
Operating Expenses:
Depreciation 22,396 26,570
Accounting and legal 2,321 13,673
Office expenses 1,586 2,341
Administrative 2,700 2,700
Management fees 1,068 1,721
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Total operating expenses 30,071 47,005
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Net income before real estate sales 130,223 148,568
Gain - sale of real estate -- 105,847
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Net income $ 130,223 $ 254,415
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Net income allocated to:
General partner $ 1,526 $ 2,810
Limited partners 128,697 251,605
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Total $ 130,223 $ 254,415
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Net income per weighted average
limited partnership unit $ 0.96 $ 1.86
========== ==========
</TABLE>
The accompanying notes are an integral part of the
financial statements.
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EXCEL PROPERTIES, LTD.
STATEMENTS OF CHANGES IN PARTNERS' EQUITY - UNAUDITED
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<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
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2000 1999
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<S> <C> <C>
Balance at January 1 $ 4,671,603 $ 6,021,650
Net income 130,223 254,414
Partner distributions (150,544) (173,341)
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Balance at March 31 $ 4,651,282 $ 6,102,723
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</TABLE>
The accompanying notes are an integral part of the
financial statements.
5
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EXCEL PROPERTIES, LTD.
STATEMENTS OF CASH FLOWS - UNAUDITED
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<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
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2000 1999
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<S> <C> <C>
Cash flows from operating activities:
Net income $ 130,223 $ 254,414
Adjustments to reconcile net income to net cash
provided by operations:
Depreciation 22,396 26,570
Gain on sale of real estate -- (105,847)
Changes in operating assets and liabilities:
(Increase) decrease in assets:
Accounts receivable (17,456) 8,031
Interest receivable and other assets (1,845) 140
Decrease in liabilities:
Accounts payable (20,789) (1,266)
Property taxes payable (5,174) --
Deferred rental income (8,708) (1,162)
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Net cash provided by operating activities 98,637 180,880
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Cash flows from investing activities:
Collection of notes receivable 7,150 2,160
Proceeds from real estate sales -- 869,083
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Net cash provided by investing activities 7,150 871,243
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Cash flows from financing activities:
Cash distributions (150,544) (173,341)
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Net cash used by financing activities (150,544) (173,341)
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Net increase in cash (44,757) 878,782
Cash at January 1 289,446 412,033
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Cash at March 31 $ 244,689 $ 1,290,815
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</TABLE>
The accompanying notes are an integral part of the
financial statements.
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EXCEL PROPERTIES, LTD.
NOTES TO FINANCIAL STATEMENTS - UNAUDITED
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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 December 31, 1999 Form 10-K.
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 dispositions are reported as income or expense.
CASH DEPOSITS
At March 31, 2000, the carrying amount of the Partnership's cash deposits
total $244,689. The bank balances are $435,914 of which $200,000 is covered
by federal depository insurance.
STATEMENT OF CASH FLOWS - SUPPLEMENTAL DISCLOSURE
There was no interest or income taxes paid for the three months ended March
31, 2000 or 1999. The Partnership also had no noncash investing or
financing transactions for the three months ended March 31, 2000 or 1999.
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.
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EXCEL PROPERTIES, LTD.
NOTES TO FINANCIAL STATEMENTS - UNAUDITED, CONTINUED
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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 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 three months ended March 31, 2000 and 1999:
<TABLE>
<CAPTION>
2000 1999
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<S> <C> <C>
Management fees $ 1,068 $ 1,721
Administrative fees 2,700 2,700
Accounting 1,620 1,620
</TABLE>
3. NOTES RECEIVABLE
The Company had the following notes receivable at March 31, 2000 and
December 31, 1999:
<TABLE>
<CAPTION>
<S> <C> <C>
Note from the sale of land, interest at 10%. Secured by $ 165,750 $ 165,750
land sold. Currently due
Note from sale of building, receipts of $1,390 per month
at 9% interest. Secured by building sold. Currently Due 124,018 125,378
Note from sale of building, receipts of $5,366 per month
at 8.5% interest. Secured by building sold. Due
November 2003 751,126 755,923
Note from sale of building, receipts of $1,004 per month
at 8% interest. Secured by building sold. Due December
2001 100,585 101,578
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Total notes receivable $1,141,479 $1,148,629
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</TABLE>
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EXCEL PROPERTIES, LTD.
NOTES TO FINANCIAL STATEMENTS - UNAUDITED, CONTINUED
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4. 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 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:
YEAR ENDING DECEMBER 31,
------------------------
2000, remaining nine months $ 394,695
2001 461,763
2002 369,988
2003 348,761
2004 292,800
Thereafter 420,953
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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 investment. The general partners of
the Partnership are New Plan Excel Realty Trust, Inc., a Maryland
corporation ("New Plan"), and Gary B. Sabin. The Partnership was formed on
September 19, 1985 and will continue in existence until December 31, 2015,
unless dissolved earlier under certain circumstances. In 1999, Excel Legacy
Corporation (the "Company") began managing the assets of the Partnership
when certain officers of New Plan resigned. The Company has indemnified New
Plan of any general partner liability in exchange for an assignment of
their partnership interest.
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.
LIQUIDITY AND CAPITAL RESOURCES
The Partnership has $244,689 in cash at March 31, 2000, with no debt on any
of the properties it owns. In April 2000, the Partnership distributed
accumulated cash to the partners in the amount of $152,000. The Partnership
currently has approximately $44,402 a month from rental revenue. 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
10
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distributions to be made to the limited partners unless buildings become
vacant. 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. It is anticipated that the liquidity of the
Partnership will decrease as properties are sold.
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 March 31, 2000 to the three months
ended March 31, 1999
Base rent decreased $31,607 or 19% from the previous year. The net decrease
was primarily due to the sale in March 1999 of building previously leased
to Payless Shoe Store and to the sales in September 1999. In September
1999, the Partnership sold two buildings that were on lease to Kindercare
located in Gahanna, Ohio and in Grove City, Ohio. These properties
accounted for approximately $37,503 of rental revenue in the first quarter
of 1999. Interest income decreased by $3,672 or 12% due to larger cash
balances in 1999 from proceeds relating to sale of Payless Shoes in Plant
City, Florida in March 1999 and Toddle House Restaurant in Kenner,
Louisiana in February 1999.
In the three months ended March 31, 1999 to the three months ended March
31, 2000, operating expenses decreased by $16,934 or 36% from. Depreciation
expense decreased by $4,174 or 16% due to property sales in 1999.
Accounting expenses decreased by $11,352 or 83% in the first quarter of
2000 as compared to the first quarter of 1999. The decrease in accounting
expenses is largely attributable to amounts paid for tax preparation and
audit fees in the first quarter of 1999. Overall, other expenses and other
income varied very little between the two accounting periods.
In 1999, the company recognized a gain of $105,847 relating to the sale of
a building in Plant City, Florida, that was on lease to Payless Shoe Store.
There were no property sales in the three months ended March 31, 2000.
The Partnership has continued to distribute cash flows to the limited
partners since 1989. Management anticipates that distributions from cash
flows will continue in 2000. 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.
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. Should buildings become vacant, however, the Partnership may be
responsible for certain expenses, including property taxes which are now
being paid by tenants.
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CERTAIN CAUTIONARY STATEMENTS
Certain statements in this Quarterly Report on Form 10-Q, including, but
not limited to, "Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations," contain forward- looking statements
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, that are not historical facts, but rather reflect current
expectations concerning future results and events. The words "believes,"
"expects," "intends," "plans," "anticipates," "likely," "will" and similar
expressions identify such forward-looking statements. These forward-looking
statements are subject to risks, uncertainties and other factors, some of
which are beyond the Partnership's control that could cause actual results
to differ materially from those forecast or anticipated in such
forward-looking statements. These factors include, but are not limited to,
the Partnership's market effect on property sales, reliance on tenants, and
environmental risks. These factors are discussed in greater detail under
the caption "Certain Cautionary Statements" in the Partnership's annual
Report on Form 10-K for the year ended December 31, 1999.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Partnership's balance sheet contains financial instruments in the form
of interest-earning notes receivable. The notes contain fixed interest
rates and are thus not subject to changes in market interest rates. The
Partnership estimates that the fair value of the notes approximates market
value at March 31, 2000.
PART II. OTHER INFORMATION
Items 1 through 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 March 31, 2000.
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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: May 12, 2000 EXCEL PROPERTIES, LTD.
(Registrant)
By /s/ Gary B. Sabin
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Gary B. Sabin
General Partner
By: /s/ James Y. Nakagawa
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James Y. Nakagawa, Principal
Accounting Officer
13
<TABLE> <S> <C>
<ARTICLE> 5
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 244,689
<SECURITIES> 0
<RECEIVABLES> 1,168,649
<ALLOWANCES> 30,999
<INVENTORY> 0
<CURRENT-ASSETS> 413,338
<PP&E> 4,346,607
<DEPRECIATION> 1,097,161
<TOTAL-ASSETS> 4,662,784
<CURRENT-LIABILITIES> 11,502
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 4,651,282
<TOTAL-LIABILITY-AND-EQUITY> 4,662,784
<SALES> 0
<TOTAL-REVENUES> 160,294
<CGS> 0
<TOTAL-COSTS> 7,675
<OTHER-EXPENSES> 22,396
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 130,223
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 130,223
<EPS-BASIC> 0
<EPS-DILUTED> .96
</TABLE>
