<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
----------------------- ---------------------
Commission file number 0-8444
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Yager/Kuester Public Fund Limited Partnership
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
North Carolina 56-1560476
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1300 Altura Road, P.O. Box 1329
Fort Mill, South Carolina 29715
- ------------------------------- ------------------------------------
(Address of principal offices) (Zip Code)
Registrant's telephone number, including area code: (803) 547-9100
----------------------------
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on
Title of Each Class Which Registered
------------------- -------------------------
None
- ------------------------- -------------------------
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Units
- --------------------------------------------------------------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
State the aggregate market value of the voting stock held by nonaffiliates of
the registrant. The aggregate market value shall be computed by reference to the
price at which the stock was sold, or the average bid and asked prices of such
stock, as of a specified date within 60 days prior to the date of filing. Not
Applicable.
Documents Incorporated By Reference
Exhibits (4) and (10.1) of Part IV, required by Item 601 of Regulation
S-K, are incorporated by reference from the prospectus of the registrant, dated
December 1, 1987, Registration Number 33-07056-A (hereinafter "Prospectus").
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PART I
Item 1. Business. The registrant is a North Carolina limited
partnership formed in July 1986 (hereinafter referred to as the "Partnership").
The Partnership engaged in a "blind pool offering," the proceeds of which were
used to purchase income-producing real property. During the year ended December
31, 1988, the Partnership received the minimum investment required to remove
subscribers' funds from escrow. The Partnership's offering terminated with a
total subscription of $3,195,000 from investor limited partners. The net
proceeds were used to purchase the properties described in Item 2 below, to pay
the expenses of the offering and to fund the working capital account. The funds
not required for those purposes, totaling $84,273, were returned to investors.
The sole business of the Partnership currently is the operation of the
EastPark Executive Center located in Charlotte, North Carolina ("EastPark").
This commercial office building was purchased with the proceeds of the public
offering and loan funds (described below). The Partnership previously owned a
second office building that was sold on April 24, 1998. (See Item 2 below for a
description of the properties.) The lease terms with the major tenants at
EastPark are summarized below.
EastPark Executive Center, Charlotte, NC - the General
Services Administrator ("GSA") has a lease term for a ten (10) year
period ending on October 31, 2004, at a rental rate of $14.15 per
square foot. GSA may, at its election, terminate the lease after eight
(8) years. The GSA leased premises include approximately 32,000 square
feet. The Partnership incurred leasehold improvements expense of
approximately $1,092,000 for the GSA space as a condition for renewal
of the their lease. Such improvements were completed in October 1996.
The GSA lease accounts for approximately 75% of the rental income
related to the EastPark Executive Center. The remaining leasehold space
is leased to three other tenants.
The Partnership has no employees of its own; management of the
Partnership's property is performed by FSK Properties, LLC, an affiliate of FSK
Limited Partnership. Administration of the Partnership is performed by the
General Partners. (See Items 10 and 13 below.)
Item 2. Properties. On June 23, 1989, the Partnership purchased the
EastPark Executive Center, an office complex comprised of two buildings located
in Charlotte, North Carolina with net leasable area of 45,300 square feet, for a
purchase price of $3,155,138 of which $1,500,000 was provided by a first
mortgage loan bearing interest at 10.5% per annum and having a term of 10 years.
The lender, United of Omaha Life Insurance Company ("United Omaha"), is not
affiliated with the Partnership. In 1998, the Partnership recorded a loss of
$1,392,468 to reflect the $2,365,800 estimated sales value of the EastPark
facility, net of related costs to sell. In 1999, the Partnership recorded an
additional loss of $81,262 to expense additional improvements and to reflect a
$2,323,500 reduced sales value, net of current related costs to sell.
On November 30, 1989, the Partnership acquired the BB&T Bank Building
(formerly the UCB Building), a three-story office building in Greenville, South
Carolina with net leasable area of 39,138 square feet, for a purchase price of
$4,202,544 of which $3,110,000 was provided by a first mortgage loan from United
Omaha. This mortgage loan became due on December 1, 1996 and was refinanced with
First Union. On April 24, 1998 this property was sold for $3,471,000, resulting
in a loss to the Partnership of $206,428.
In connection with the office building purchases, $26,312 of
acquisition costs were capitalized.
No further purchases of real property are projected and no funds are
available for that purpose. (See Item 7 below, "Status of EastPark Facility" for
recent developments regarding the property.)
Item 3. Legal Proceedings. The Partnership is not involved in any legal
proceedings and was not so involved during the year ended December 31, 1999.
Item 4. Submission of Matters to a Vote of Security Holders. Not
applicable.
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PART II
Item 5. Market for the Partnership's Common Equity and Related
Stockholder Matters. There is no established public trading market for the
Partnership's securities. The Partnership has approximately 520 limited
partners. Cash distributions made to the limited partners during the recent
years are set out in the Statements of Cash Flow included in the Financial
Statements included in Part II, Item 8 of this Report.
Item 6. Selected Financial Data.
<TABLE>
<CAPTION>
At or For
Year Ended December 31,
-----------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Summary of Operations
Rental income $ 550,047 $ 685,156 $ 1,158,468 $1,150,758 $1,172,935
Net income (loss) (29,038) (1,588,616) (51,497) 40,561 29,787
Net income (loss)
per limited
partnership unit (4.51) (246.90) (8.00) 6.30 4.63
Summary of Financial
Position:
Total assets $ 2,490,024 $ 2,570,012 $ 7,633,602 $7,864,107 $7,214,881
Long-term debt, less
current maturities -- -- 1,145,441 4,059,909 1,288,754
Note Payable -- 500,000 1,000,000 942,483 219,783
Distribution per
Limited partner- -- -- -- -- --
ship unit
Number of limited
partnership units 6,390 6,390 6,390 6,390 6,390
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Liquidity and Capital Resources
During the year ended December 31, 1999, the Partnership continued to
fund working capital requirements and the working capital deficit was decreased
by approximately $10,000 from December 31, 1998. The working capital deficit at
December 31, 1999 was $1,455,638. The loans on the EastPark facility with First
Union and United of Omaha matured on June 30, 1999 and July 1, 1999,
respectively. These two loans were refinanced with one loan of $1,625,000 with
First Union National Bank. Although the new loan terms require interest only
payments, the Partnership has continued to pay essentially the same level of
debt service as before the refinance. The interest rate on the new loan is the
prime rate of First Union, which was 8.5% as December 31, 1999. The original
loan matured on September 30, 1999, but has been extended until June 30, 2000.
The General Partners will renew the loan if the EastPark facility is not sold
before this date, but no assurances can be given that such renewal will be
available.
The cumulative unpaid priority return to the unit holders increased
from $2,409,617 at December 31, 1998 to $2,652,401 at December 31, 1999. This
increase resulted from no distributions being made to partners during the year
and the pro rata share due partners pursuant to the Limited Partnership
Agreement. Based on current and projected commercial real estate market
conditions, the General Partners believe that it is reasonably unlikely that a
sale of the Partnership properties would produce net
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<PAGE> 4
sale proceeds sufficient to pay any of such priority return. Furthermore, the
General Partners believe that it is reasonably unlikely that the Partnership's
operating income or any refinancing of Partnership debt would generate
sufficient funds to pay the priority return.
During the year ended December 31, 1999, the Partnership had net (loss)
of $(29,038) compared to the net (loss) of $(1,588,616) in 1998. Rental income,
operating expenses, and interest expense for the years ended December 31, 1999
and 1998 resulted exclusively from the operations of the Partnership's
commercial real estate properties. The EastPark Executive Center buildings,
purchased June 23, 1989, were 91% leased at both December 31, 1998 and December
1997.
See Item 13 (Certain Relationships and Related Transactions) for a
discussion regarding leasing commissions, management fees and repair service
fees paid to FSK Properties, LLC, a General Partner of the Partnership, as well
as administrative reimbursements paid to Internet Services Corporation.
In the event that funds derived from operations are insufficient to
meet the Partnership's working capital needs, the General Partners have agreed
to fund the shortfall.
Risks Associated with Year 2000
The Partnership did not experience any problems in its day to day
operations by the change in the millennium, from 1999 to 2000. The Partnership
does not expect any further problems going forward.
Forward-Looking Statements
This report contains certain forward-looking statements with respect to
the financial condition, results of operations, plans, objectives, future
performance and business of the Partnership. These forward-looking statements
involve certain risks and uncertainties. Actual results may differ materially
from those contemplated by such forward-looking statements.
Results of Operations
Comparison of 1999 results with 1998.
Operating results increased from an operating loss of $(1,150,221)
during the year ended December 31, 1998 to an operating income of $108,046 for
the comparable year 1999. The main cause for the increase between years is due
to the recording of a loss on impairment of value for the EastPark facility for
$1,392,468 in 1998. Revenue and operating expense, not inclusive of the
impairment of rental property, were lower overall in 1999 by approximately
$53,000. This is due to the 1999 results including operations only from the
EastPark facility, whereas in 1998 the results also included a partial year of
operating from the BB&T building. The only line item which increased in 1999 is
professional fees. The cause for this increase was due to the additional work
needed for the various contracts during the year. Interest expense decreased by
approximately $102,000 from 1998 due to the lower rate obtained on the EastPark
refinancing and due to the sale of the BB&T building.
Comparison of 1998 results with 1997.
Operating results decreased from an operating income of $355,399 during
the year ended December 31, 1997 to an operating loss of $(1,150,221) for the
comparable year 1998. The recording of an allowance for impairment of value for
the EastPark facility in the amount of $1,392,468 is the main cause for the
decrease in operating income. The second factor contributing to the decrease in
operating income is the disposition of the BB&T building in April. Rental income
from the BB&T building was down approximately 68% from the comparable year 1997.
A decrease in occupancy at the EastPark facility resulted in a 15% decline of
rental income as compared to the prior year. Operating expenses, not inclusive
of the impairment of rental property, were lower overall in 1998 by
approximately $360,000 or 45%. This decrease mainly attributed to the
disposition of the BB&T building. Depreciation and amortization expense were not
recorded on the EastPark facility in 1998 after the recording of the impairment.
This factor also contributed to the decrease in operating expenses.
4
<PAGE> 5
Status of EastPark Facility
The General Partners are continuing to focus on selling the EastPark facility
and continue to have it listed with a commercial real estate broker. During
1999, the General Partners entered into two separate sales contracts for
$2,525,000 each. After due dilignence by the prospective buyers, the sales
contracts were terminated under the terms of the contract. The most recent
contract with Four Dan, LLC was terminated on March 1, 2000 under the terms of
their contract. The General Partners have also received several other offers for
lower amounts, which were declined. The General Partners also continue on
working on increasing the occupancy at EastPark.
Item 8. Financial Statements and Supplementary Data. The financial
statements are attached hereto.
5
<PAGE> 6
INDEPENDENT AUDITOR'S REPORT
To the Partners
Yager/Kuester Public Fund
Limited Partnership
Fort Mill, South Carolina
We have audited the accompanying balance sheets of Yager/Kuester Public Fund
Limited Partnership as of December 31, 1999 and 1998, and the related statements
of operations, partners' equity and cash flows for each of the three years in
the period ended December 31, 1999. 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 audit 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 Yager/Kuester Public Fund
Limited Partnership as of December 31, 1999 and 1998, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1999, in conformity with generally accepted accounting principles.
Charlotte, North Carolina
February 2, 2000
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<PAGE> 7
YAGER/KUESTER PUBLIC FUND
LIMITED PARTNERSHIP
BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
ASSETS 1999 1998
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Current Assets
Cash and cash equivalents (Note 2) $ 11,928 $ 45,738
Accounts receivable, tenants (Note 8) 38,530 39,695
Securities available for sale (Note 3) 116,065 118,779
-----------------------------
TOTAL CURRENT ASSETS 166,523 204,212
-----------------------------
Investments
Leased property held for sale, net (Notes 4 and 5) 2,287,569 2,333,320
-----------------------------
Other Assets
Deferred charges, net of accumulated amortization
1999 $12,190; 1998 $12,190 (Note 4) 2,810 2,810
Deferred leasing commissions, net of accumulated
amortization 1999 $19,265; 1998 $19,265 (Note 4) 33,122 29,670
-----------------------------
35,932 32,480
-----------------------------
$ 2,490,024 $ 2,570,012
=============================
LIABILITIES AND PARTNERS' EQUITY
- -----------------------------------------------------------------------------------------
Current Liabilities
Note payable, bank (Note 5) $ -- $ 500,000
Current maturities of long-term debt (Note 5) 1,585,000 1,145,441
Accounts payable 10,206 5,997
Accrued expenses 26,955 18,296
-----------------------------
TOTAL CURRENT LIABILITIES 1,622,161 1,669,734
-----------------------------
Long-Term Debt, less current maturities (Note 5) -- --
-----------------------------
Commitment and Contingency (Note 6)
Partners' Equity
General partners (14,492) (14,202)
Limited partners (Note 6) 892,933 921,681
Other comprehensive income, unrealized (loss) on
investment securities (Note 3) (10,578) (7,201)
-----------------------------
867,863 900,278
-----------------------------
$ 2,490,024 $ 2,570,012
=============================
</TABLE>
See Notes to Financial Statements.
2
<PAGE> 8
YAGER/KUESTER PUBLIC FUND
LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Rental income (Notes 4 and 8) $ 550,047 $ 685,156 $ 1,158,468
-----------------------------------------------
Operating expenses:
Contract labor 8,519 13,725 27,733
Depreciation and amortization -- 34,399 261,240
Repairs and maintenance 114,696 135,148 165,877
Management fees (Note 7) 43,393 54,465 60,796
Utilities 97,341 109,586 155,487
Professional fees 52,599 29,678 20,723
Property taxes 37,222 52,449 89,386
Loss on impairment of rental property (Note 4) 81,262 1,392,468 --
Miscellaneous 6,969 13,459 21,827
-----------------------------------------------
442,001 1,835,377 803,069
-----------------------------------------------
OPERATING INCOME (LOSS) 108,046 (1,150,221) 355,399
-----------------------------------------------
Nonoperating income (expense):
Interest income -- 6,409 7,512
Interest expense (145,951) (248,057) (426,557)
Loss on sale of property (Note 4) -- (206,428) --
Other 8,867 9,681 12,149
-----------------------------------------------
(137,084) (438,395) (406,896)
-----------------------------------------------
NET LOSS (29,038) (1,588,616) (51,497)
Deduct net loss applicable to limited
partners (per limited partner unit
1999 $(4.51); 1998 $(246.90); 1997 $(8.00)) (28,748) (1,572,730) (50,982)
-----------------------------------------------
NET LOSS APPLICABLE TO GENERAL
PARTNERS (PER GENERAL
PARTNER UNIT 1999 $(0.05);
1998 $(2.49); 1997 $(.08)) $ (290) $ (15,886) $ (515)
===============================================
</TABLE>
See Notes to Financial Statements.
3
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YAGER/KUESTER PUBLIC FUND
LIMITED PARTNERSHIP
STATEMENTS OF PARTNERS' EQUITY
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
Comprehensive General
Total Income Partners
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, December 31, 1996 $ 2,552,428 $ 2,199
Comprehensive income
Net loss (51,497) $ (51,497) (515)
Other comprehensive income, net of tax:
Unrealized gain on securities available
for sale, net of reclassification entry below 265 265
-----------
Comprehensive income $ (51,232)
---------------------------------------------
Balance, December 31, 1997 2,501,196 1,684
Comprehensive income
Net loss (1,588,616) (1,588,616) (15,886)
Other comprehensive income (loss), net of tax:
Unrealized gain (loss) on securities available
for sale, net of reclassification entry below (12,302) (12,302)
-----------
Comprehensive income $(1,600,918)
--------------------------------------------
Balance, December 31, 1998 900,278 (14,202)
Comprehensive income
Net loss (29,038) (29,038) (290)
Other comprehensive income (loss), net of tax:
Unrealized gain (loss) on securities available
for sale, net of reclassification entry below (3,377) (3,377)
------------
Comprehensive income $ (32,415)
---------------------------------------------
Balance, December 31, 1999 $ 867,863 $ (14,492)
=========== ===========
Reclassification adjustment 1999 1998 1997
----------- ----------- -----------
Unrealized holding gains (losses) arising $ (4,871) $ (12,249) $ 2,569
during the period
Less reclassification adjustment for (gains)
losses included in net income (loss) 1,494 (53) (2,304)
-----------------------------------------------
Net unrealized gain (loss) on investments securities $ (3,377) $ (12,302) $ 265
===============================================
</TABLE>
See Notes to Financial Statements.
4
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<TABLE>
<CAPTION>
Accumulated
Other
Limited Comprehensive
Partners Income
- -----------------------------------
<S> <C>
$ 2,545,393 $ 4,836
(50,982)
265
- -----------------------------------
2,494,411 5,101
(1,572,730)
(12,302)
- -----------------------------------
921,681 (7,201)
(28,748)
(3,377)
- -----------------------------------
$ 892,933 $(10,578)
===================================
</TABLE>
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<PAGE> 11
YAGER/KUESTER PUBLIC FUND
LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows From Operating Activities
Net (loss) $ (29,038) $(1,588,616) $ (51,497)
Adjustments to reconcile net (loss) to net cash
provided by (used in) operating activities:
Depreciation -- 31,101 238,882
Amortization -- 3,298 22,358
Net realized (gains) losses on sale of securities
available for sale 1,494 (53) (2,304)
Loss on sale of property -- 206,428 --
Loss on impairment of rental property 81,262 1,392,468 --
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable, tenant and accrued
rent receivable 1,165 28,184 68,130
Prepaid expenses -- 7,053 (4,853)
Increase (decrease) in accounts payable and
accrued expenses 12,868 (127,681) (88,444)
--------------------------------------------------------------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 67,751 (47,818) 182,272
--------------------------------------------------------------
Cash Flows From Investing Activities
Purchase of securities available for sale (22,296) (381,027) (293,255)
Proceeds from sale of securities available for sale 20,138 517,628 218,576
Purchase of investment property (35,511) (17,659) (23,248)
Proceeds from sale of investment property -- 3,240,946 --
Disbursements for deferred leasing commissions (3,452) (23,886) (4,008)
--------------------------------------------------------------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (41,121) 3,336,002 (101,935)
--------------------------------------------------------------
Cash Flows from Financing Activities
Principal payments on long-term borrowings
and notes payable (1,645,440) (3,334,990) (148,346)
Proceeds from note payable, net 1,585,000 -- 57,517
--------------------------------------------------------------
NET CASH (USED IN) FINANCING
ACTIVITIES (60,440) (3,334,990) (90,829)
--------------------------------------------------------------
NET (DECREASE) IN CASH AND CASH
EQUIVALENTS (33,810) (46,806) (10,492)
Cash and cash equivalents:
Beginning 45,738 92,544 103,036
--------------------------------------------------------------
Ending $ 11,928 $ 45,738 $ 92,544
==============================================================
</TABLE>
(Continued)
6
<PAGE> 12
YAGER/KUESTER PUBLIC FUND
LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Supplemental Disclosure of Cash Flow Information:
Cash payment for interest, net of interest
capitalized $ 148,072 $ 270,567 $ 432,193
Supplemental Disclosures of Noncash Transactions:
Net unrealized gain (loss) on securities available
for sale $ (3,377) $ (12,302) $ 265
</TABLE>
See Notes to Financial Statements.
7
<PAGE> 13
YAGER/KUESTER PUBLIC FUND
LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
Note 1. NATURE OF BUSINESS AND ORGANIZATION, PARTNERSHIP AGREEMENT AND
SIGNIFICANT ACCOUNTING POLICIES
Nature of business and organization: The Partnership is a North Carolina limited
partnership formed in July 1986. The purpose of the Partnership is to acquire,
operate, hold for investment and sell commercial rental property. The
Partnership sold the property located in Greenville, South Carolina during 1998
and held property located in Charlotte, North Carolina at December 31, 1999.
The general partners of the Partnership are DRY Limited Partnership, a North
Carolina limited partnership in which Dexter R. Yager, Sr. is the general
partner and FSK Limited Partnership, a North Carolina limited partnership in
which Faison S. Kuester, Jr. is the general partner.
Partnership agreement: Under the terms of the partnership agreement, all taxable
income, tax losses and cash distributions from operations are to be allocated
99% to the limited partners and 1% to the general partners until the limited
partners receive a return of their initial capital contributions and a "Priority
Return". The Priority Return is a sum equal to 8% per annum cumulative, but not
compounded, (prorated for any partial year) of the adjusted capital
contributions of the limited partners, calculated from the last day of the
calendar quarter in which each limited partner is admitted to the Partnership to
the date of payment. Thereafter, taxable income, tax losses and cash
distributions from operations will be allocated 75% to the limited partners and
25% to the general partners.
Upon the sale or refinancing of any future partnership properties, the
partnership agreement specifies certain allocations of net proceeds and taxable
gain or loss from the transaction.
A summary of the Partnership's significant accounting policies follows:
Use of management's 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.
Cash and cash equivalents: For purposes of reporting the statements of cash
flows, the Partnership includes all cash accounts, which are not subject to
withdrawal restrictions or penalties, and all highly liquid debt instruments
purchased with an original maturity of three months or less as cash and cash
equivalents on the accompanying balance sheets. At various times throughout the
year, the Partnership may have cash balances at financial institutions which
exceed federally-insured amounts.
Investments: The leased property held for sale is stated at the lower of cost
less accumulated depreciation or fair market value. Depreciation is computed by
the straight-line method over 40 years for buildings and over 15 years for
building improvements.
8
<PAGE> 14
NOTE 1. NATURE OF BUSINESS AND ORGANIZATION, PARTNERSHIP AGREEMENT AND
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Investment in securities available for sale: Financial Accounting Standards
Board Statement No. 115 requires that management determine the appropriate
classification of securities at the date individual investment securities are
acquired, and that the appropriateness of such classification be reassessed at
each balance sheet date. Since the Partnership neither buys securities in
anticipation of short-term fluctuations in market prices nor can commit to
holding debt securities to their maturities, the investment in debt and
marketable equity securities have been classified as available for sale in
accordance with Statement No. 115. Available-for-sale securities are stated at
fair value, and unrealized holding gains and losses are reported as a separate
component of partners' equity. Realized gains and losses, including losses from
declines in value of specific securities determined by management to be
other-than-temporary, are included in income. Realized gains and losses are
determined on the basis of the specific securities sold.
Deferred charges: Deferred charges are related to prepaid fees which are
amortized over the length of the related loans, 1 to 10 years, on a
straight-line basis.
Deferred leasing commissions: Deferred leasing commissions related to obtaining
specific leases are amortized using the straight-line method over the
noncancelable lease terms which range from three to seven years.
Revenue recognition: Rental revenue is recognized evenly over the term of the
lease. In connection with negotiating and obtaining leases, the Partnership's
management may at times grant concessions, such as free rent for a specific
number of months during the lease. These costs are amortized over the life of
the lease.
Disclosures about the fair value of financial instruments: Financial Accounting
Standards Board Statement No. 107, Disclosures About Fair Value of Financial
Instruments, requires disclosure of fair value information about financial
instruments, whether or not recognized in the balance sheet, for which it is
practicable to estimate that value. Statement 107 excludes certain financial
instruments and all nonfinancial instruments from its disclosure requirements.
At December 31, 1999 and 1998, the carrying values of the Partnership's
financial instruments, including accounts receivable which are due on demand and
the mortgage payable which bears interest at market rates, approximate their
fair values.
Partnership equity: Financial Accounting Standards Board issued Statement No.
128, Earnings Per Share. The Statement specifies the computation, presentation,
and disclosure requirements for earnings per share. Management believes that
statement No. 128 is analogous to limited partnership units and accordingly,
additional disclosures for partnership units are presented in the accompanying
financial statements.
Income taxes: Under current income tax laws, income or loss of the Partnership
is included in the income tax returns of the partners. Accordingly, the
Partnership will make no provision for federal or state income taxes.
9
<PAGE> 15
Note 2. WORKING CAPITAL RESERVE
Per the Partnership Agreement, a minimum cash and cash equivalents reserve of
$94,500 must be maintained to fund any expenditures that the cash flow generated
from properties on operating leases is insufficient to meet. The Partnership did
not meet the minimum requirement by $82,572 and $48,762 at December 31, 1999 and
December 31, 1998, respectively.
Securities available for sale may be sold in order to fund future operating cash
flow expenditures.
Note 3. SECURITIES AVAILABLE FOR SALE
The following is a summary of the Partnership's securities available for sale as
of December 31, 1999 and 1998:
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized
Cost Gains Losses Fair Value
-----------------------------------------------------------------
1999
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Securities available for sale:
Mutual funds $101,643 $ -- $ (10,403) $ 91,240
Other equity investments 25,000 (175) -- 24,825
-----------------------------------------------------------------
$126,643 $ -- $ (10,578) $116,065
=================================================================
-----------------------------------------------------------------
1998
-----------------------------------------------------------------
Securities available for sale:
Mutual funds $ 45,980 $ -- $ (1,477) $ 44,503
Other equity investments 80,000 -- (5,724) 74,276
-----------------------------------------------------------------
$125,980 $ -- $ (7,201) $118,779
=================================================================
</TABLE>
At December 31, 1999, the Partnership did not have trading or held to maturity
securities.
10
<PAGE> 16
YAGER/KUESTER PUBLIC FUND
LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
NOTE 3. SECURITIES AVAILABLE FOR SALE (CONTINUED)
Gross realized gains and losses from the sale of securities available for sale
for the years ended December 31, 1999, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---------------------------------------------
<S> <C> <C> <C>
Realized gains $ 5 $ 4,712 $ 2,396
Realized (losses) (1,499) (4,659) (92)
---------------------------------------------
$ (1,494) $ 53 $ 2,304
=============================================
Unrealized gains (losses) on available-for-sale securities:
Unrealized holding gains (losses) arising
during the period $ (4,871) $ (12,249) $ 2,569
Less: Reclassification adjustment for gains
(losses) realized in net (loss) (1,494) 53 2,304
---------------------------------------------
Other comprehensive income (loss) $ (3,377) $ (12,302) $ 265
=============================================
</TABLE>
The Partnership has only equity securities. Equity securities have no maturity
date. Therefore, there are no amortized cost or fair values of securities
available for sale as of December 31, 1999 by contractual maturity.
Proceeds from sales of securities available for sale during the years ended
December 31, 1999, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---------------------------------------------
<S> <C> <C> <C>
Proceeds from sales of securities available for sale $ 20,138 $ 517,628 $ 218,576
=============================================
</TABLE>
Dividend income included in nonoperating income (expense) in the accompanying
Statements of Operations totaled $10,361, $8,644, and $5,132 for the years
ended December 31, 1999, 1998 and 1997, respectively.
The changes in the net unrealized gain (loss) on securities available for sale
during the years ended December 31, 1999 and 1998 were $(3,377) and $(12,302),
respectively, which have been included in the separate component of partners'
equity.
11
<PAGE> 17
YAGER/KUESTER PUBLIC FUND
LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
NOTE 4. LEASED PROPERTY HELD FOR SALE
The Partnership leases office facilities under various lease agreements. The
following schedule provides an analysis of the Partnership's investment in
property held for lease by major classes as of December 31, 1999 and 1998,
respectively.
<TABLE>
<CAPTION>
1999 1998
------------------------------
<S> <C> <C>
Land $ 631,028 $ 631,028
Building 2,524,110 2,524,110
Building improvements 1,311,641 1,261,130
Building improvement in progress -- 15,000
------------------------------
4,466,779 4,431,268
Less accumulated depreciation 705,480 705,480
------------------------------
3,761,299 3,725,788
Less allowance on impairment of property 1,473,730 1,392,468
------------------------------
$ 2,287,569 $ 2,333,320
==============================
</TABLE>
The following is a schedule by years of all minimum future rentals on
noncancelable operating leases as of December 31, 1999:
<TABLE>
<CAPTION>
Year Ending
December 31, Amount
- ---------------------------------------------------------------------------------------------
<S> <C>
2000 544,024
2001 533,127
2002 389,683
2003 --
Thereafter --
-----------
$ 1,466,834
===========
</TABLE>
During the year ended December 31, 1998, the Partnership sold one of the
properties for $3,471,000, resulting in a loss of $206,428. The net cash
proceeds from the sale, after related costs and debt payoff, was $464,425. The
net cash proceeds were used in a $500,000 payment on other debt, the proceeds
of which had been used to fund the upfit on the property currently held. The
carrying value of the building was approximately $3,425,000 at December 31,
1997.
The remaining property is currently contracted with a real estate broker. It is
the intention of the General Partners to market and sell the property. The
sales proceeds will be used to payoff debt/liabilities and return partners'
equity. In 1998, the Partnership recorded a loss of $1,392,468 to reflect the
$2,365,800 estimated sales value of the assets, net of related costs to sell.
In 1999, the Partnership recorded an additional loss of $81,262 to expense
additional improvements and to reflect the $2,323,500 reduced sales value of
the assets, net of related costs to sell. This estimate is subject to potential
significant change in the next year. Subsequent to the recognition of the
impairment, depreciation and amortization of the related assets was
discontinued.
12
<PAGE> 18
YAGER/KUESTER PUBLIC FUND
LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
NOTE 5. NOTE PAYABLE, BANK, LONG-TERM DEBT AND PLEDGED ASSETS
The Partnership had a $1,000,000 line-of-credit with an outstanding balance of
$-0- and $500,000 at December 31, 1999 and 1998, respectively. The
line-of-credit allowed borrowings and repayments to be made on a daily basis.
Outstanding balances on the line-of-credit bear interest at a variable rate
tied to the bank's prime rate (prime rate was 7.75% at December 31, 1998). The
line-of-credit expired during 1999.
Long-term debt and pledged assets consists of the following at December 31,
1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
------------------------------
<S> <C> <C>
Note payable due in monthly installments of $14,976,
including interest at 10.5%, through June 1999, with
$1,115,064 due in July 1999, collateralized by mortgage
on land and building $ -- $ 1,145,441
Note payable, interest only at the bank's prime rate
(8.50% at December 31, 1999), due monthly, balance
to be paid in full March 2000, unsecured, guaranteed
by a general partner 1,585,000
------------------------------
1,585,000 1,145,441
Less current maturities 1,585,000 1,145,441
------------------------------
$ -- $ --
==============================
</TABLE>
Interest expense to Internet Services Corporation, an affiliate of the general
partners, for the years ended December 31, 1999, 1998 and 1997 was $-0-, $-0-,
and $669, respectively.
NOTE 6. PRIORITY RETURN
The cumulative unpaid priority return to the limited partners is $2,652,401 and
$2,409,617 at December 31, 1999 and 1998, respectively. There were no cash
distributions to the limited partners for the priority return for the years
ended December 31, 1999, 1998 and 1997. Based on the sale of the building in
1998 and current and projected real estate market conditions, the General
Partners believe that it is reasonably unlikely that a future sale of the
Partnership property would produce sufficient net sales proceeds to pay the
priority return.
13
<PAGE> 19
YAGER/KUESTER PUBLIC FUND
LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
NOTE 7. RELATED PARTY TRANSACTIONS
Management expenses paid to a General Partner and to Internet Services
Corporation in connection with day-to-day operations of the Partnership
amounted to $43,393, $54,465 and $60,796 for the years ended December 31, 1999,
1998 and 1997, respectively. Also, allocated expenses were paid to related
parties in the amounts of $39,650, $56,792 and $34,620 for the years ended
December 31, 1999, 1998 and 1997, respectively.
NOTE 8. MAJOR TENANTS
Rental income for the years ended December 31, 1999, 1998 and 1997,
respectively, included approximate rentals from the following major tenants
each of which accounted for 10% or more of the total rental income of the
Partnership for those years:
<TABLE>
<CAPTION>
Approximate Amount of Rental Income
Year Ended December 31,
---------------------------------------------
1999 1998 1997
---------------------------------------------
<S> <C> <C> <C>
Tenant A $ 462,000 $ 460,000 $ 451,000
Tenant B* -- 111,000 350,000
Tenant C*,** -- -- 138,000
</TABLE>
* Tenants B and C occupied the building in Greenville, SC.
** Tenant C did not exceed 10% of total rental income in 1998.
Accounts receivable from each of the major tenants identified above were as
follows at December 31, 1999 and 1998, respectively:
<TABLE>
<CAPTION>
December 31,
--------------------------
1999 1998
--------------------------
<S> <C> <C>
Tenant A $ 38,530 $ 39,695
Tenant B
Tenant C
</TABLE>
14
<PAGE> 20
YAGER/KUESTER PUBLIC FUND
LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
NOTE 9. FUTURE REPORTING REQUIREMENTS
The FASB has issued SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities, which the Partnership has not been required to adopt as of
December 31, 1999. This Statement, which is effective for fiscal years
beginning after June 15, 2000, establishes accounting and reporting standards
for derivative instruments embedded in other contracts, (collectively referred
to as derivatives) and for hedging activities. It requires that an entity
recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. If certain
conditions are met, a derivative may be specifically designated as (a) a hedge
of the exposure to changes in the fair value of a recognized asset or liability
or an unrecognized firm commitment, (b) a hedge of the exposure to variable
cash flows of a forecasted transaction, or (c) a hedge of the foreign currency
exposure of a net investment in a foreign operation, an unrecognized firm
commitment, an available-for-sale security, or a foreign-currency-denominated
forecasted transaction. This Statement is not expected to have a significant
impact on the Partnership.
15
<PAGE> 21
Item 9. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure. Not applicable.
PART III
Item 10. Directors and Executive Officers of the Partnership. The
Partnership has no executive officers and directors. The General Partners of
the partnership are DRY Limited Partnership, the sole General Partner of which
is Dexter R. Yager, Sr., and FSK Limited Partnership, the sole General Partner
of which is Faison S. Kuester, Jr.
Following is a brief discussion of the background and experience of
Messrs. Kuester and Yager.
Faison S. Kuester, Jr., 54, graduated from the University of North
Carolina at Chapel Hill with a Bachelor of Arts Degree in History in 1967. He
is a resident of Charlotte, North Carolina. After three years service in the
United States Army as a Lieutenant, Mr. Kuester joined Independence Development
Corporation in 1972 serving as a director of leasing and management for a
period of three years. In 1974, Mr. Kuester formed his own company, Kuester
Realty and Management, in order to lease and manage commercial properties in
Charlotte, North Carolina and surrounding communities. In addition to leasing
and managing various commercial properties, Kuester Realty had developed two
medical clinics in the Charlotte area. In 1980, Kuester Properties, Inc.
("KPI") was formed to specialize in on-site management of apartment communities
in the southeastern United States. The following year Cauble and Kuester
Company, Inc. was organized to lease and manage commercial properties in the
metropolitan Atlanta area. This partnership brought together Cauble and
Company, experienced mortgage lenders and leasing agents in the Atlanta market,
and Kuester Realty and Management. Finally, in 1983, Kuester Development
Corporation was formed to allow the Kuester companies to engage in selective
real estate development projects in the southeastern United States.
Through Kuester Development Corporation, a wholly-owned subsidiary of
KPI, Mr. Kuester has been directly involved with the development of several
commercial real estate properties in North and South Carolina and Georgia.
These include the First United National Bank Building in Wilmington, North
Carolina, two retail office showroom projects, two medical office buildings and
residential condominiums in Charlotte, North Carolina, an office building in
Savannah, Georgia, and an office building in Greenville, South Carolina.
Kuester Development Corporation also has developed over 700 apartment units
throughout Charlotte, North Carolina since 1983.
In October 1996, Mr. Kuester formed FSK Properties, LLC to provide
management, leasing and brokerage services to his clients. FSK Properties, LLC
serves as property manager of the Partnership property.
Dexter R. Yager, Sr., 60, is the President and founder of D&B Yager
Enterprises, Inc., Mr. Yager's Amway distributorship business. Through D&B
Yager Enterprises, Inc., Mr. Yager has been an independent distributor for
Amway Corporation for over 35 years during which time he has achieved the
status of Crown Ambassador, which is the highest level attainable as an Amway
distributor. The Amway Corporation is one of the largest manufacturers of home
care products in the world. He is also a former member and past president of
the Amway Distributor Association Board of Directors. Mr. Yager has many other
family-owned businesses and is responsible for the development of several
businesses, including the following: Yager Personal Development, Inc., which
handles Mr. Yager's services as a speaker at Amway events, Yager Construction
Company, Inc., which is a general building contractor; and Dexter and Birdie
Yager Family Limited Partnership, which owns various real estate investments
and manages real estate for the Yager family.
Mr. Yager has significant experience in real estate investment for his
own account. Mr. Yager personally, and through partnerships in which he and his
wife own a majority interest, has made investments in raw land, office
buildings, a shopping center, and other commercial and residential real estate
having a market value in excess of $10,000,000. He has made substantial
additional real estate investments through partnerships in which he does not
own a majority interest.
Item 11. Executive Compensation. The Partnership does not employ any
executive officers or directors and no compensation is paid to any person for
performing services typically provided by such an officer or director. Dexter
R. Yager, Sr. and Faison S. Kuester have policy making functions with regard to
Partnership operations. See Item 10 for the relationship of such persons to the
Partnership. See Item 13 for a description of payments made to FSK Properties,
LLC for property management services and to Internet Services Corporation, Inc.
for accounting and management services.
19
<PAGE> 22
Item 12. Security Ownership of Certain Beneficial Owners and
Management. The General Partners initially contributed a total of $2,500 to the
capital of the Partnership, consisting of a $1,600 contribution from DRY
Limited Partnership and $900 from FSK Limited Partnership. The General Partners
own a 1% interest in all items of Partnership income, gain, loss, deductions or
credits including 1% of net cash from operations. The General Partners also own
a residual 25% interest in net cash from a sale or refinancing of the
Partnership Property, subordinated to the receipt by the Limited Partners of
the return of their capital contributions and their priority return and to the
payment of any subordinated real estate commissions due to affiliates of the
General Partners.
The General Partners do not own any Limited Partnership interest in
the Partnership.
Item 13. Certain Relationships and Related Transactions. During the
fiscal year ended December 31, 1999, FSK Properties, LLC received $54,106 for
management fees, commissions and repair service fees. Internet Services
Corporation, Inc. received $28,937 for providing accounting/management
services. Internet Services Corporation, is owned equally by three trusts, the
beneficial interests of which inure to the benefit of three children of Dexter
R. Yager, Sr., the sole General Partner of DRY Limited Partnership, which
limited partnership is one of the two general partners of the Partnership.
Janitorial services for the EastPark Executive Center are provided by Marquis
Cleaning Services, which is operated and owned by Dexter R. Yager's nephew.
The General Partners believe that the terms for the above mentioned
services are as favorable as those the Partnership might have obtained from
unaffiliated parties.
PART IV
Item 14. Exhibits, Financial Statements Schedules and Reports on Form
8-K.
(a)(1) The following financial statements of the Partnership are
included in Part II, Item 8 hereof.
(i) Independent Auditor's Report
(ii) Balance Sheets as of December 31, 1999 and 1998
(iii) Statements of Operations for years ended December
31, 1999, 1998 and 1997 (iv) Statements of Partners'
Equity for years ended December 31, 1999, 1998 and
1997
(v) Statements of Cash Flows for years ended December 31,
1999, 1998 and 1997
(vi) Notes to Financial Statements
(a)(2) All schedules have been omitted because they are
inapplicable, not required, or the information is included
elsewhere in the financial statements or notes thereto.
(a)(3) Exhibits:
(4) Instrument defining rights of securities holders set
forth in the Limited Partnership Agreement which is
contained in the Prospectus incorporated herein by
reference.
(10.1)* Limited Partnership Agreement
(10.2)** Exclusive Leasing and Management Agreement dated
October 1, 1994 (EastPark Executive Center).
(23) Consent of Independent Auditor
(27) Financial Data Schedule
(b) Reports on Form 8-K: None.
(c) Exhibits: The exhibits listed in Item 14(a)(3) above
and not incorporated herein by reference are filed
with this Form 10-K.
20
<PAGE> 23
(d) Financial Statement Schedules: There are no financial
statement schedules included in this Form 10-K
report.
- -------------------
* Incorporated by reference to Exhibit A of the Partnership's Prospectus dated
December 1, 1987, Registration Number 33-07056-A.
** Incorporated by reference to Exhibit 3 of the Partnership's Form 10-K for
the year ended December 31, 1995.
21
<PAGE> 24
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Partnership has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
YAGER/KUESTER PUBLIC FUND
LIMITED PARTNERSHIP
By: FSK Limited Partnership
March 30, 2000 By: /s/ Faison S. Kuester, Jr.
------------------------------------
Faison S. Kuester, Jr.
General Partner
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below on March 30, 2000 by the following persons on
behalf of the Partnership and in the capacities and on the dates indicated.
/s/ Jerry R. Haynes /s/ Faison S. Kuester
- ------------------------------- ----------------------------------------
Jerry R. Haynes Faison S. Kuester, Jr., General
(Principal Accounting Officer) Partner of FSK Limited Partnership,
General Partner of the Partnership
Date March 30, 2000 Date March 30, 2000
/s/ Dexter R. Yager, Sr.
----------------------------------------
Dexter R. Yager, Sr., General
Partner of DRY Limited Partnership,
General Partner of the Partnership
Date March 30, 2000
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITOR
We hereby consent to the incorporation by reference in the December 1, 1987
Prospectus (Registration No. 33-07056-A) of our report, dated February 2,2000
on the financial statements of Yager/Kuester Public Fund Limited Partnership,
which appears on page 6 of this annual report on Form 10-K for the year ended
December 31, 1999 and to the reference to our Firm under the caption "Experts"
in such Prospectus.
/s/ McGladrey & Pullen, LLP
Charlotte, North Carolina
March 30, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF YAGER/KUESTER PUBLIC FUND LIMITED PARTNERSHIP FOR THE
TWELVE MONTH PERIOD ENDED DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 11,928
<SECURITIES> 116,065
<RECEIVABLES> 38,530
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 166,523
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,490,024
<CURRENT-LIABILITIES> 1,662,161
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 2,490,024
<SALES> 0
<TOTAL-REVENUES> 558,914
<CGS> 0
<TOTAL-COSTS> 442,001
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 145,951
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (29,028)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
