UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934. For the transition period from to
Commission file number: 0-15837
OUTLOOK INCOME FUND 9,
A CALIFORNIA LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
California 33-0202964
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
400 South El Camino Real, Suite 1100 94402-1708
------------
San Mateo, California (Zip Code)
---------------------
(Address of principal executive offices)
Partnership's telephone number, including area code: (415) 343-9300
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
(Title of class)
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]
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
No market for the Limited Partnership Units exists and therefore a market value
for such Units cannot be determined.
DOCUMENTS INCORPORATED BY REFERENCE: None
Page 1 of 41
<PAGE>
PART I
Item 1. Business
Outlook Income Fund 9, a California Limited Partnership, (the Partnership) was
formed on August 29, 1986 as a limited partnership under the California Revised
Limited Partnership Act for the purpose of purchasing, holding, operating,
leasing and selling various properties. The Partnership's public offering
commenced on January 12, 1987 and concluded on January 11, 1988, and included
raising a total of $40,971,400, of which $5,228,800 was raised from the sale of
Participating Notes. The Partnership's operations began on March 5, 1987, the
date when impound requirements were met. With limited exceptions, Glenborough
Corporation, as Managing General Partner, and Robert Batinovich, as co-General
Partner, (collectively "Glenborough" or "the General Partner") have exclusive
control over the business of the Partnership, including the right to manage the
Partnership's assets.
The Partnership sold units of limited partnership interest ("Equity Units") and
income deferred Participating Notes ("Notes"). The Notes are nonrecourse,
unsecured obligations of the Partnership. The Notes bear interest at the rate of
12% per annum, noncompounded, and all payments of interest will be deferred
until the date of maturity of the Notes (December 31, 1997, or a date not later
than December 31, 1998 if the General Partner extends the maturity date) or the
sale or refinancing of the Partnership's properties. The holders of the Notes
are entitled to receive contingent interest if, after the sale of all of the
Partnership's properties, the Partnership has met certain earnings tests. The
total indebtedness of the Partnership, including the Notes and accrued interest
to the latest possible maturity date (excluding contingent interest) and any
third-party financing which is secured by liens on the Partnership's properties,
may not exceed 85% of the aggregate purchase price of all the properties which
have not been refinanced plus 85% of the aggregate fair market value as
determined by the lender as to all the properties which have been refinanced,
plus certain reserves. There is no limit on the maximum borrowing with respect
to any single property.
During the year ended December 31, 1996, 15,000 units were abandoned by limited
partners. Limited partners abandon their units when they desire to no longer
receive a K-1 from the Partnership. The equity of the abandoned limited partner
units has been allocated to the remaining limited partners.
From June 1993 through December 1996, in three separate transactions, the
Partnership repurchased a total of $6,810,100 in Participating Notes (comprising
principal in the amount of $3,612,300 and accrued interest in the amount of
$3,197,800) from the Noteholders for a purchase price of $4,011,000. In each of
these repurchases of Notes, the purchase price paid by the Partnership was
discounted from the combined total of principal and accrued interest owing on
the repurchased Notes. These discounted repurchases were made in an effort to
reduce the impact of the Notes' accrued interest on the value of the Equity
Units. The Notes and accrued interest thereon are being held by the Partnership.
See Note 6 to the Notes to Financial Statements for further discussion.
Management intends to present a plan of liquidation for an investor vote in
1997. The carrying value of the investments in real estate at December 31, 1996
does not purport to represent the ultimate sales price the Partnership will
realize from the disposition of these assets nor are the amounts reflected in
the accompanying financial statements intended to represent the ultimate amount
to be distributed to partners if the plan is adopted.
At December 31, 1996, the Partnership owned five properties, which are more
fully described in Item 2.
Competition
The Managing General Partner believes that characteristics influencing the
competitiveness of a real estate project are the geographic location of the
property, the professionalism of the property manager and the maintenance and
appearance of the property, in addition to external factors such as general
economic circumstances, trends, and the existence of new, competing properties
in the vicinity. Additional competitive factors with respect to properties are
the ease of access to the property, the adequacy of related facilities, such as
parking, and the ability to provide rent concessions and additional tenant
improvements commensurate with local market conditions.
Page 2 of 41
<PAGE>
Such competition may lead to rent concessions that could adversely affect the
Partnership's cash flow. Although the Managing General Partner believes the
Partnership's properties are competitive with comparable properties as to those
factors within the Partnership's control, over-building and other external
factors could adversely affect the ability of the Partnership to attract and
retain tenants. The marketability of the properties may also be affected (either
positively or negatively) by these factors as well as by changes in general or
local economic conditions, including prevailing interest rates. Depending on
market and economic conditions, the Partnership may be required to retain
ownership of its properties for periods longer than anticipated at acquisition,
or may need to sell earlier than anticipated or restructure a property, at a
time or under terms and conditions that are less advantageous than would be the
case if unfavorable economic or market conditions did not exist.
Working Capital
The Partnership's practice is to maintain cash reserves for normal repairs,
replacements, working capital and other contingencies. The Partnership knows of
no statistical information which allows comparison of its cash reserves to those
of its competitors.
Other Factors
Federal, state and local statutes, ordinances and regulations which have been
enacted or adopted regulating the discharge of materials into the environment or
otherwise relating to the protection of the environment do not presently have a
material effect on the operations of the Properties nor on the capital
expenditures, earnings or competitive position of the Partnership. There can be
no assurance that such regulations will not change or have some material effect
on the Partnership in the future.
The Partnership does not directly employ any individuals. All regular employees
rendering services on behalf of the Partnership are employees of Glenborough or
its affiliates.
The business of the Partnership to date has involved only one industry segment,
real estate. The Partnership has no foreign operations and the business of the
Partnership is not seasonal.
Item 2. Properties
<TABLE>
<CAPTION>
At December 31, 1996, the Partnership owned the following properties:
Encumbrances at
Name Location Type Size # of Units December 31, 1996
- ---- -------- ---- ---- ---------- -----------------
<S> <C> <C> <C> <C> <C>
Lake Mead Estates
Apartments Las Vegas, NV Residential 135,600 sq. ft 160 $3,716,000
Bryant Lake
Business Center:
Phases I & II Eden Prairie, MN Commercial 80,011 sq. ft. N/A (included below)
Phase III Eden Prairie, MN Commercial 91,732 sq. ft. N/A $4,850,000
Country Suites
by Carlson:
Memphis Memphis, TN Hotel 42,987 sq. ft. 121 $3,471,000
Tempe Tempe, AZ Hotel 44,445 sq. ft. 139 $2,701,000
</TABLE>
Page 3 of 41
<PAGE>
Lake Mead Estates Apartments
On April 30, 1987, the Partnership acquired its first property, Lake Mead
Estates Apartments, a 160-unit apartment complex located at 2068 North Nellis
Boulevard, Las Vegas, Clark County, Nevada. The property is situated on one of
Las Vegas' major north/south arteries providing a direct route between the city
center and Nellis Air Force Base, southern Nevada's largest employer. Total
consideration of $5,912,400 was paid for the property. At December 31, 1996,
this property is classified as held for sale on the Partnership's accompanying
1996 balance sheet.
The property, which was constructed in 1986, consists of ten two-story wood
frame and stucco buildings. The unit mix is 40 one-bedroom/ one-bath units at
633 square feet each and 120 two-bedroom/ two-bath units at 919 square feet
each. Common areas include a swimming pool and spa, exercise room,
picnic/barbecue area, basketball and volleyball courts, and a separate
children's play area. Each unit is assigned a carport for parking and there is
additional uncovered parking surrounding the property.
All the units are rented unfurnished. Each unit is equipped with a refrigerator,
electric range, garbage disposal, dishwasher, full size washer and dryer,
wall-to-wall carpeting, custom window coverings, and electronic smoke detector.
Each unit has a private balcony and central heating and cooling. Trash pickup,
water and sewer services are included in the monthly rent. The leasing office
and one decorated model are used in leasing activities.
The interior of the apartments are smaller in comparison to the modern
competition. To remain competitive, the units are being upgraded upon turnover
with new carpeting, bath light fixtures and ceiling fans.
According to research conducted by the Partnership's property manager, there are
twelve properties in the immediate market area that compete with Lake Mead
Estates Apartments, ranging from one to fourteen years old. The average
occupancy in Clark County is 95% and within the Northeast area of Clark County,
where the property is located, the occupancy is 94%. The market rents average
$525 for one bedroom/one bath units and $617 for two bedroom/ two bath units.
Approximately five new apartment communities, comprising 1,124 units, are
planned in the Northeast area by the end of 1997. Construction has already begun
on a new 360 unit complex which is located less than one mile from Lake Mead
Estates Apartments. Although the new apartment complexes could have an affect on
the Partnership's rental activities; however, management believes that the new
properties will attract a different tenant base due to the higher rental rates.
In addition, the Las Vegas Motor Speedway, which opened in November 1996, and
adjacent shopping center, scheduled to open spring of 1997, will bring new
employment to the area and is expected to increase housing needs.
<TABLE>
<CAPTION>
The occupancy level at December 31, expressed as a percentage of the total
apartments available for rent, and the average monthly rental rates for the
apartments for the last five years were:
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Occupancy rate 86% 88% 98% 94% 96%
Rental rate:
One bedroom
/one bath units $507 $503 $482 $476 $462
Two bedroom
/two bath units $602 $612 $585 $564 $546
</TABLE>
At February 28, 1997, the occupancy rate has risen to 98%.
In the opinion of management, the property is adequately covered by insurance.
Page 4 of 41
<PAGE>
In 1996, the Lake Mead Estates Apartments property was assessed property taxes
of approximately $55,000 based on a tax rate of 2.63%.
On September 19, 1988, the Partnership obtained a loan from American National
Insurance Company in the original amount of $4,000,000, secured by a note and
first deed of trust secured by the property. The note bears interest at 9.625%,
requires monthly principal and interest payments of $34,000 and matures on
October 1, 2018. At December 31, 1996, the outstanding balance of the note was
$3,716,000.
Bryant Lake Business Center - Phases I & II
On January 28, 1988, the Partnership acquired a ninety percent (90%) general
partner interest in Bryant Lake Associates, Phases I and II, a California
Limited Partnership ("the Joint Venture"), in order to acquire Phases I and II
of the Bryant Lake Business Center, a business center located in Eden Prairie,
Minnesota. Total consideration paid by the Partnership was $4,890,000. On
November 30, 1990, the Partnership purchased the 10% limited partnership
interest for $180,000. As a consequence of the purchase, the Joint Venture was
dissolved and the assets and liabilities of the Joint Venture were transferred
to the Partnership.
The property consists of three single-story buildings totaling 80,011 square
feet of office/showroom and office/warehouse space located on approximately
6.375 acres on Market Place Drive and Valley View Road, a triangular piece of
land bound by Interstate Highway 494, Highway 62 and U.S. Highway 169 in Eden
Prairie, Minnesota, a southeastern suburb of Minneapolis.
The property was completed in two phases. Phase I, consisting of two buildings
containing 60,757 rentable square feet, was completed in 1984. Phase II,
consisting of one building containing 19,254 rentable square feet, was completed
in 1985. The buildings each have brick facades with decorative metal accent
features. All buildings have truck loading docks and are equipped with a fire
sprinkler system.
According to research conducted by the Partnership's property manager, the Twin
Cities metropolitan area is divided into five primary real estate sub-markets,
the largest of which is the southwestern suburban sub-market, in which the
Bryant Lake Business Center is located. The southwestern suburban area has been
especially desirable due to its proximity to executive housing and large supply
of skilled professionals.
The southwestern suburban sub-market is expected to lead the way in development
in 1997 with approximately 910,000 square feet in new projects planned. These
projects include 245,000 square feet of office/showroom (50% or more office),
540,000 square feet of office/warehouse (less than 50% office) and 125,000
square feet of bulk warehouse. Each of these projects will be direct competition
to Bryant Lake Business Center. However, due to the lack of office space
throughout the Twin Cities, traditional office tenants have been lead to lease
office/showroom space as an alternative. Many office/showroom owners, including
the Partnership, have been able to substantially increase rental rates, leading
to increased property values.
The current office/warehouse area in which Bryant Lake Business Center is
located, includes 5,782,801 square feet of leasable space with a 4.6% vacancy.
The average annual effective rental rates range from $6.89 to $12.11 NNN (tenant
pays all operating expenses, including taxes, insurance and capital). The
property was 92% leased at December 31, 1996 with a major tenant lease
expiration occurring in September 1997. The tenant has one three year option to
renew, however, the space will also be marketed for lease if necessary after
March 31, 1997. The property is in excellent physical condition and no capital
improvements are planned for 1997.
Page 5 of 41
<PAGE>
The occupancy level at December 31, expressed as a percentage of the total net
leasable square feet, and the average annual effective rent per square foot for
the last five years were:
Occupancy Level Average Annual Effective
Year Percentage Rent Per Square Foot
---- ---------------- --------------------
1996 83% $7.85
1995 100% 6.81
1994 100% 6.48
1993 96% 6.67
1992 100% 6.48
The current annual effective rental rates ranged from $4.40 to $11.33 per square
foot.
In August 1996, the property lost a major tenant, occupying 13,815 square feet,
due to financial instability. Management has successfully leased 6,989 square
feet of the space and continues to market the remainder.
Two tenants occupy ten percent or more of the leasable square footage of the
property. The principal terms of their leases and the nature of the tenants'
businesses are as follows:
Data Collection
Zytec Corp. Systems, Inc.
Nature of business Manufacturer Computer
of computer programmers
components
Lease term 13 years 7 years
Expiration date 9/30/97 3/31/01
Square feet 28,375 19,300
(% of total) 35% 24%
Annual effective rent $190,600 $111,000
Rent increases CPI 13% in 1999
Renewal options One 3 year option One 5 year option
In the opinion of management, the property is adequately covered by insurance.
In 1996, the Bryant Lake Business Center, Phases I and II property was assessed
property taxes of approximately $199,000 based on a tax rate of 6.38%.
As part of the 1990 workout of the Bryant Lake Phase III mortgage (see further
discussion which follows), the lender received as additional security a first
lien on the Bryant Lake Phases I and II property, but at any time, the
Partnership may furnish a letter of credit in the amount of $1,738,838 to the
lender, and upon the lender's acceptance of the letter of credit, the lender
will release its first lien on the Bryant Lake Phases I and II property.
Bryant Lake Business Center - Phase III
On January 28, 1988, the Partnership acquired a fifty percent (50%) general
partnership interest in Bryant Lake Associates, Phase III, a California limited
partnership ( "Phase III"), in order to acquire Phase III of the Bryant Lake
Business Center. Total consideration paid by the Partnership of $3,251,900
included $826,900 in cash and assumption of 50% of the existing $4,850,000 loan
secured by a first deed of trust on the property.
On November 30, 1990, the Partnership purchased the 50% limited partnership
interest. As consideration for the purchase, the seller is entitled to 25% of
net cash flow, if any, from operations and ultimate disposition of the property,
as provided in the purchase and sale agreement. Through December 31, 1996, no
net cash flow payments have been due or payable to the seller. As a consequence
of the purchase, Phase III was dissolved and the assets and liabilities of Phase
III were transferred to the Partnership.
Page 6 of 41
<PAGE>
The property consists of three single-story buildings totaling approximately
91,732 square feet of office/showroom and office/warehouse space located on
approximately 8.038 acres on Market Place Drive and Valley View Road, a
triangular piece of land bound by Interstate Highway 494, Highway 62 and U.S.
Highway 169 in Eden Prairie, Minnesota, a southeastern suburb of Minneapolis.
The buildings, completed in 1986, have brick facades and decorative metal accent
features. All buildings have truck loading docks and are equipped with fire
sprinkler systems.
The occupancy level at December 31, expressed as a percentage of the total net
rentable square feet, and the average annual effective rent per square foot for
the last five years were:
Occupancy Level Average Annual Effective
Year Percentage Rent Per Square Foot
- ---- ---------- --------------------
1996 100% $7.22
1995 100% 7.16
1994 96% 6.68
1993 97% 6.35
1992 91% 5.16
The current average annual effective rental rates ranged from $5.20 to $9.28 per
square foot.
Three tenants occupy ten percent or more of the leasable square footage of the
property. The principal terms of their leases and the nature of the tenants'
businesses are as follows:
Seasonal Sales Force
Specialties, LLC Keomed, Inc. Companies, Inc.
Nature of business Christmas supplies Medical equip. Food brokerage
wholesaler sales and rental company
Lease term 8 years 6 years 6 years
Expiration date 12/31/00 5/31/97 3/31/97
Square feet 21,304 10,083 17,455
(% of total) 23% 11% 19%
Annual effective rent $115,000 $73,320 $155,040
Rent increases None None None
Renewal options None None None
Two of the property's major tenants have lease expirations in 1997. Management
is negotiating a lease renewal with Keomed, Inc. which may include a reduction
in square footage. Management has extended the expiration of Sales Force
Companies, Inc. lease to June 30, 1997 at which time they will vacate.
Management is currently in negotiations with a possible tenant for 12,000 square
feet of that space.
In the opinion of management, the property is adequately covered by insurance.
In 1996, the Bryant Lake Business Center - Phase III property was assessed
property taxes of approximately $218,000 based on a tax rate of 6.57%.
In 1985, the City of Eden Prairie, Minnesota issued commercial bonds in the
original amount of $4,850,000 made payable to a lender who in turn lent the
proceeds to Bryant Lake Partners pursuant to the terms of a loan agreement. With
the purchase of the interests in Bryant Lake Associates, Phase III in 1990, the
Partnership assumed the $4,850,000 loan. The loan is secured by first deeds of
trust on the Bryant Lake Phase III and Bryant Lake Phases I and II properties
and requires monthly interest-only payments of $35,000 through October 1, 2015.
Page 7 of 41
<PAGE>
From October 1, 1989 to October 31, 1990, interest payments for Bryant Lake III
were in default. On November 1, 1990, the Partnership entered into an agreement
with the lender. Under the terms of the agreement, the lender waived delinquent
interest and other charges of $351,000. The remaining delinquent interest of
$424,000, plus interest compounded monthly at 8% per year, will be deferred and
will be due and payable on or before November 1, 2000. At December 31, 1996, the
delinquent interest totaled $693,000 and is included in interest payable on the
Partnership's 1996 balance sheet.
Country Suites By Carlson - Memphis
On August 1, 1988, the Partnership purchased the Country Suites By Carlson -
Memphis, a 121-suite hotel located at 4300 American Way in Memphis, Tennessee.
Total consideration paid of $5,502,700 included a cash payment of $4,131,700 and
a note in the original amount of $1,371,000 to which the property is subject.
The property is situated on the north side of American Way, west of the
intersection of American Way & Cherry Road, approximately nine miles east of the
Memphis Central Business District and 1-1/2 miles northeast of Memphis
International Airport. The property was completed in February 1988 and consists
of four three-story buildings containing 121 hotel suites. Each suite is
furnished and features a complete kitchen facility, except the mini suites,
which contain a microwave and small refrigerator. Amenities include a centrally
located swimming pool and spa, guest laundry facilities and conference rooms
above the lobby area. An atrium located at the rear of the office/registration
area, overlooks the courtyard area. An elevator located adjacent to the
courtyard area, services the three-story hotel.
The target market is small corporate business, larger contract accounts and
government/military business; each of which provide a strong base of week-day
revenues. In addition, transient business and discounted leisure groups provide
on-going week-end revenues. Marketing efforts will continue to focus on new
account development within the business and government sector to build a strong
base of week-day clients.
From 1993 through 1996, the hotel has undergone significant improvements in
order to meet and maintain the Country Suites By Carlson standards. By upgrading
the hotel's physical and aesthetic appeal, management has not only met the
Country Suites By Carlson franchise standards but also improved the average room
rates. However, the hotel's cash flow has not been sufficient to cover monthly
debt service payments.
Page 8 of 41
<PAGE>
The 121 suites are summarized as follows:
Sq. Ft. Total
No. Description Per Suite Sq. Ft.
17 Twins 367 6,239
42 1 Bedroom 367 15,414
6 Kings 367 2,202
56 Studio 248 13,888
- ----- ------
121 37,743
Atrium lounge and office 2,429
Laundry and storage 1,515
Meeting rooms 1,300
------
Total enclosed area 42,987
======
<TABLE>
<CAPTION>
The property's average occupancy level and average daily room rate for the past
five years were:
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Average occupancy level 69% 72% 75% 75% 72%
Average daily room rate $58.25 $52.68 $53.21 $49.40 $50.80
</TABLE>
The above rates are for 1-7 night stays and include any extended stay, corporate
or military discounts.
According to research conducted by the Partnership's general manager, competing
hotels in the area averaged 72% occupancy and daily room rates of $57.00 during
1996.
In the opinion of management, the property is adequately covered by insurance.
In 1996, the Country Suites by Carlson - Memphis property was assessed property
taxes of approximately $59,000 based on a tax rate of 3.18%.
The property is owned by the Partnership in fee, subject to a note and first
deed of trust in the original amount of $3,471,000, payable to GLENFED Service
Corporation. The note bears interest at a fixed 9% rate, payable in monthly
principal and interest installments of $28,951 until the note matures in July
1999, when all principal and interest is due and payable. In January 1997, due
to the insufficient cash flow of the property in relation to the debt service
requirements, the Partnership stopped making debt service payments and as a
result is in default under the terms of the loan which is secured by the
property. In addition, the Partnership has received notice that the lender will
foreclose on the property on April 4, 1997.
Country Suites By Carlson - Tempe
On August 1, 1988, the Partnership acquired an undivided seventy-five percent
(75%) interest as Tenants in Common with Outlook Income Fund 10, a California
Limited Partnership ("OIF 10"), in a 139-suite hotel known as Country Suites By
Carlson - Tempe, located at 1660 East Elliot Road and Harl Avenue, in Tempe,
Arizona. OIF 10 was an affiliate of the Partnership with similar investment
objectives. Total consideration paid by the Tenancy in Common for the property
was $7,786,800, which included a cash payment of $5,927,800 and a promissory
note in the original amount of $1,859,000, to which the property was subject.
On November 4, 1993, the Partnership finalized the purchase of the remaining
twenty-five percent (25%) interest from OIF 10 and Country Suites By Carlson -
Tempe became 100% owned by the Partnership. The total purchase price of
$1,225,000 included a cash payment of $950,000 plus the cancellation of the
$275,000 note receivable from OIF 10.
Page 9 of 41
<PAGE>
The property contains 2.532 acres of level, irregularly shaped land, at the
intersection of Elliot Road and Harl Road, with 468.94 feet of frontage along
Harl Road and 175 feet of frontage along Elliot Road. It is located one quarter
mile east of Interstate 10, south of Phoenix, in the I-10 Commerce Center. The
property was completed in May 1988 and consists of five three-story buildings
containing 139 hotel suites. Each suite is furnished and features a complete
kitchen facility, except the studio units, which contain a microwave oven and
refrigerator. Amenities include a centrally located swimming pool and spa; two
guest laundry facilities; 1,000 square feet of meeting rooms and two heated
pools including a child pool. An atrium located adjacent to the
office/registration area overlooks the courtyard area.
The hotel is well located within the high tech, government and business strip in
the fourth largest and most progressive city in the valley. Although the local
economy is fairly strong, low visibility from the freeway and the effects of the
recession on travel had curbed the hotel's profitability. Furthermore, city
government will not approve a larger sign to improve visibility of the hotel, so
management is considering other options to attract "walk-in" business. Despite
these local factors, management uses aggressive marketing and a strong
reservations network which resulted in an improvement in room rates during the
course of the year.
The target markets include tour groups which resulted in a high percentage of
total revenues. Management also continues to develop commercial accounts to
provide a base for non-tourist season. In addition, an account executive has
been hired to focus on direct sales calls to maximize new account development.
Furthermore, the franchise reservation system, which books the highest rated
room rates, has matured and helps to aid the property in earning a higher
average daily room rate. The discount segment constituted the largest base of
revenues.
From 1993 through 1996, the hotel has undergone significant improvements in
order to meet and maintain the Country Suites By Carlson standards. By upgrading
the hotel's physical and aesthetic appeal, management has not only met the
Country Suites By Carlson franchise standards but also improved the average room
rates.
The 139 suites are summarized as follows:
Sq. Ft. Total
No. Description Per Suite. Sq. Ft.
--- ----------- ---------- -------
29 Queens 361 10,469
24 1 Bedroom 361 8,664
13 Kings 418 5,434
71 Studio 196 13,916
2 Handicap 361 722
---- -------
139 39,205
Office, laundry and storage, elevator, meeting rooms 5,240
Total enclosed area 44,445
Page 10 of 41
<PAGE>
<TABLE>
<CAPTION>
The property's average occupancy level and average daily room rate for the last
five years were:
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Average occupancy level 83% 87% 85% 70% 53%
Average daily room rate $64.12 $49.82 $44.60 $43.70 $45.80
</TABLE>
The above rates are for 1-7 night stays and include any extended stay, corporate
or military discounts.
According to research conducted by the Partnership's general manager, competing
hotels in the area averaged 86% occupancy and daily room rates of $62.00 during
1996.
In the opinion of management, the property is adequately covered by insurance.
In 1996, the Country Suites by Carlson - Tempe property was assessed property
taxes of approximately $107,000 based on a tax rate of 14.51%.
The Partnership owns the property subject to a note and first deed payable to
GLENFED Service Corporation. The note bears interest at a fixed rate of 9%,
payable in monthly principal and interest installments of $22,529 until the note
matures in July 1999, when all principal and interest will be due and payable.
The outstanding principal balance of the note at December 31, 1996, was
$2,701,000.
Item 3. Legal Proceedings
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Page 11 of 41
<PAGE>
PART II
Item 5. Market for Partnership's Common Equity and Related
Stockholders Matters
Market Information
The units of limited partnership interest in the Partnership (the "Units") have
limited transferability. There is no public market for the Units and it is not
expected that any will develop. There are restrictions upon the transferability
of Units, including requirements as to the minimum number of Units which may be
transferred, and that the General Partner must consent to any transferee
becoming a substituted limited partner (which consent may be granted or withheld
at the sole discretion of the General Partner). In addition, restrictions on
transfer may be imposed under certain state securities laws. Consequently,
holders of Units may not be able to liquidate their investments and the Units
may not be readily acceptable as collateral.
Holders
As of December 31, 1996, there were 2,061 holders of record for the 35,727,572
Equity Units and 236 holders of record for the 4,591,000 Notes, including
3,288,000 Participating Notes purchased by the Partnership.
Cash Distributions
The Partnership paid distributions to the Equity Unit investors at a 9%
annualized rate from inception through the quarter ended December 31, 1988
(except the quarter ended June 30, 1988, which was 8%), a 6% rate from January
1, 1989 through the quarter ended December 31, 1989 and a 3% rate for 1990. All
such distributions paid to partners have represented return of capital.
In order to rebuild reserves and provide cash for capital and leasing expenses,
distributions were suspended beginning with the first quarter of 1991.
Management is unable to predict when distributions will be resumed.
Funds are not expected to become available for distribution to the owners of the
Notes until the properties acquired by the Partnership are either refinanced or
sold and all specified priority entitlements have been satisfied under the terms
of the Notes. However, the Partnership may prepay principal and the accrued 12%
per annum non-compounded interest at any time. Any partial prepayments must be
made pro rata to Noteholders. At maturity, December 31, 1997, all remaining
principal and interest, excluding contingent interest, must be paid in full,
unless at the sole discretion of the General Partner, the due date is extended
to a date no later than one year after stated maturity.
At December 31, 1996, holders of Equity Units had an original capital balance of
$35,742,600 and cumulative priority returns of approximately $22,425,000.
Holders of the Notes had a principal balance of $4,591,800 (including
Participating Notes of $3,288,000 repurchased by the Partnership) and accrued
interest of approximately $5,125,000 (including accrued interest of $3,650,000
relating to the Participating Notes purchased by the Partnership). The capital
accounts of the Equity Unit holders continue to accrue priority returns at a
rate of 9% per annum. The cumulative priority returns of the Equity Unit holders
do not represent obligations of the Partnership, but only represent amounts
which must be paid before any distributions can be paid to other partners. The
principal balance of the Notes continues to accrue interest at a rate of 12%.
Reference should be made to the Partnership's partnership agreement for a more
complete description of preferential distributions.
Page 12 of 41
<PAGE>
Item 6. Selected Financial Data
<TABLE>
<CAPTION>
The following is selected data for the five years ended December 31, 1996 (in
thousands, except per Unit data).
The financial data should be read in conjunction with the financial statements
and related notes contained elsewhere in this report. This financial data is not
covered by the reports of the independent public accountants.
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues $ 7,686 $ 8,202 $ 10,061 $ 9,913 $ 9,642
Net loss before
extraordinary items (1) $ (337) $ (1,134) $ (2,893) $ (3,949) $ (2,646)
Net income (loss) $ 111 $ 969 $ (2,893) $ (3,521) $ (2,646)
Net loss per Equity Unit
before extraordinary item $ (0.01) $ (0.03) $ (0.08) $ (0.11) $ (0.07)
Net income (loss)
per Equity Unit $ --- $ 0.03 $ (0.08) $ (0.10) $ (0.07)
Total assets $ 23,489 $ 24,047 $ 38,279 $ 41,761 $ 45,910
Secured notes
payable $ 16,325 $ 15,345 $ 26,076 $ 27,223 $ 26,451
Participating Notes $ 4,591 $ 4,591 $ 5,229 $ 5,229 $ 5,229
<FN>
(1) See the discussion regarding the extraordinary items included in Note 3 and 6 of the Notes to Financial
Statements.
</FN>
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
LIQUIDITY AND CAPITAL RESOURCES
Outlook Income Fund 9 was formed to invest in improved, income-producing real
estate with the following objectives: (i) preserve and protect capital, (ii)
provide substantially tax-sheltered distributions to Equity Unit holders, and
(iii) offer the potential for appreciation in value.
The Partnership's original plan was to pay 9% current distributions to the
Equity Unit investors. The primary source for these distributions was to be
two-fold: first, income warranties given by sellers to maintain property income
at a high level while the properties were in their start-up phase; and second,
deferred interest debt that allowed the Partnership to use borrowed money
without having to make current loan payments. Most of the Partnership's debt,
including the Notes, was of this type. Thus, the income warranties subsidized
the property income, and the deferred interest debt allowed cash flow that would
normally have been required for debt service to be used for distributions. By
using these techniques, the Partnership was able to pay distributions at a high
level in the hope that the actual property cash flow and value of the properties
would increase enough that, (i) when the income warranties and interest
deferrals expired, the property cash flow would cover the new loan payments
without reducing distributions, and (ii) when the property was sold, the value
would have increased enough to absorb the higher mortgage balance without
eroding the original equity. It is now evident that the original overall plan
will not be realized. The Partnership historically paid more in distributions
than it earned, and depleted its reserves. Distributions made by the Partnership
ceased after 1990. All prior distributions represented a return of capital. The
Partnership realized positive cash flows from operations after capital
improvements, leasing commissions and debt service in the years ended 1996 and
1995. However, at this time, management is unable to predict when distributions
will resume.
At December 31, 1996, the Partnership's cash balance was $1,121,000. The
remainder of the Partnership's assets consist primarily of it's investments in
real properties which totaled $19,689,000 at December 31, 1996.
Page 13 of 41
<PAGE>
Due to continued insufficient funds generated from operations to cover debt
service, the Partnership discontinued the payment of debt service on the loan
secured by the Country Suites by Carlson - Memphis property in January 1997. On
March 14, 1997, the Partnership received a Notice of Foreclosure on the Country
Suites by Carlson Memphis property and a foreclosure sale is scheduled for April
4, 1997. The Country Suites by Carlson - Memphis property is classified as
rental property held pending foreclosure on the Partnership's 1996 balance
sheet.
On March 13, 1997, the Partnership entered into a purchase and sale agreement
with an unaffiliated third party for the sale of Lake Mead Estates Apartment
complex. The sale is expected to close escrow in June 1997 for a purchase price
of $5,000,000. With the proceeds from the sale, the Partnership would payoff the
related debt on the property and pay the Noteholders their portion of the
principal and stated interest related to the Lake Mead Estates Apartments
property. The remaining proceeds will be used to replenish cash reserves. The
Lake Mead Estates Apartment property is classified as rental property held for
sale on the Partnership's 1996 balance sheet.
On March 28, 1995, the Partnership sold Millwood Estates Apartments to an
unaffiliated third party for $10,400,000, out of which $7,572,400 was used to
payoff the outstanding note secured by the property and $2,000,000 was used to
payoff the note payable used to repurchase Participating Notes (as discussed in
Note 6 of the Notes to the Financial Statements). The Partnership recognized a
gain on the sale of $154,000 which is included in the 1995 statement of
operations.
As the estimated fair value of the Regency Residence property was lower than the
debt secured by the property and the cash flow generated by the property did not
cover debt service, the Partnership transferred the property to the bank by a
deed-in-lieu of foreclosure in 1995.
On November 15, 1994, the Partnership sold Branford Business Park property to an
unaffiliated third party for $2,675,000, out of which $700,000 was used to
payoff the outstanding note secured by the property. Under the terms of the
transaction, the Partnership financed a $2,000,000 promissory note, secured by
the property, at an interest rate of 8.5% with interest-only payments due until
maturity on November 11, 1999. The Partnership realized a loss on the sale of
$257,000 which is included in the Partnership's 1994 statement of operations.
Payments on the related note receivable are current through the date of this
filing.
In the fourth quarter of 1995, the Partnership adopted Statement of Financial
Accounting Standards No. 121 (SFAS 121) "Accounting for Impairment of Long-Lived
Assets and Long-Lived Asset to be Disposed of". There was no impact on the
financial position or results of operations of the Partnership from the initial
adoption of SFAS 121.
Management intends to present a plan of liquidation for an investor vote in
1997. The carrying value of the investments in real estate at December 31, 1996
does not purport to represent the ultimate sales price the Partnership will
realize from the disposition of these assets nor are the amounts reflected in
the accompanying financial statements intended to represent the ultimate amount
to be distributed to partners if the plan is adopted.
Page 14 of 41
<PAGE>
RESULTS OF OPERATIONS
Comparison of the year ended December 31, 1996 to the year ended December 31,
1995
Rental income decreased $402,000 or 5% in 1996 compared to 1995 primarily due to
the disposition of Millwood Estates Apartments and Regency Residence properties
in 1995 which account for a decrease in revenue of $445,000 and $612,000,
respectively. This decrease is partially offset by an increase in revenues at
the Memphis and Tempe hotels of $110,000 and $518,000, respectively, due to an
increase in average daily room rates.
Interest and other income increased $40,000 or 9% in 1996 compared to 1995 due
to additional interest income as a result of higher invested cash balances.
Operating expenses decreased by $537,000 or 10% in 1996 compared to 1995
primarily due to the disposition of Millwood Estates Apartments and Regency
Residence properties in 1995 which account for $289,000 and $520,000 of the
decrease, respectively. The decrease in expenses was partially offset by an
increase in expenses at the Memphis and Tempe hotels of $45,000 and $161,000,
respectively. The Memphis hotel realized an increase in repairs and maintenance
as a result of aging of the building. The Tempe hotel realized an increase in
room related expenses and management and franchise fees as a result of the
increase in operating revenues.
The decrease in interest expense in 1996 of $475,000 or 21% is a result of the
disposition of Millwood Estates Apartments and Regency Residence properties and
their related notes payable which account for $180,000 and $106,000 of the
decrease, respectively. In addition, $164,000 of the decrease relates to the
repurchase of the Participating Notes by the Partnership, offset by the increase
in interest related to an increase in outstanding debt.
The decrease in depreciation and amortization of $163,000 or 12% from 1996 to
1995 is a result of the decrease in depreciable assets due to the disposition of
Millwood Estates Apartments and Regency Residence properties in 1995.
General and administrative expenses decreased by $138,000 or 25% in 1996
compared to 1995 primarily due to decreased overhead as a result of the
disposition of Millwood Estates Apartments and Regency Residence properties in
1995.
As discussed in Note 6 of the Notes to Financial Statements, the repurchase of
Participating Notes and the forgiveness of the related accrued interest resulted
in a gain of $448,000 and is included on the Partnership's 1996 statement of
operations.
Comparison of the year ended December 31, 1995 to the year ended December 31,
1994
Rental income decreased $2,214,000 or 23% in 1995 compared to 1994 primarily as
a result of the dispositions of the Millwood Estates Apartments and Regency
Residence properties in 1995 and the Branford Business Park in November 1994
which accounted for a decrease of $1,369,000, $911,000 and $302,000,
respectively. This decrease is partially offset by an increase in revenue from
the Tempe hotel of $289,000 due to an increase in the average daily room rate.
Interest and other income decreased by $56,000 in 1995 compared to 1994 due to
lower prevailing interest rates and average invested cash balances during 1995.
Operating expenses decreased by $1,402,000 or 21% in 1995 compared to 1994
primarily as a result of the dispositions of the Millwood Estates Apartments and
Regency Residence properties in 1995 and the Branford Business Park property in
November 1994 which accounted for a decrease of $665,000, $845,000 and $163,000,
respectively. The decrease was partially offset by an increase in expenses at
the Tempe hotel of $192,000 as a result of an increase in room related expenses
and management and franchise fees as a result of the increase in operating
revenues.
Page 15 of 41
<PAGE>
The 1995 decrease in depreciation and amortization of $432,000 or 25% from 1994
is a result of the decrease in depreciable assets resulting from the disposition
of the Millwood Estates Apartments and Regency Residence properties.
The decrease in interest expense of $934,000 or 29% from 1995 to 1994 is a
result of the disposition of the Millwood Estates Apartments and Regency
Residence properties and their related notes payable which accounted for a
$554,000 and $214,000 decrease, respectively. In addition, $170,000 of the
decrease relates to the combination of the repurchase and the pay-down of the
Participating Notes by the Partnership.
As discussed in Note 3 of the Notes to Financial Statements, the sale of
Millwood Estates Apartments resulted in a gain of $154,000 and is included on
the Partnership's 1995 statement of operations.
As discussed in Note 3 of the Notes to Financial Statements, the Regency
Residence deed-in-lieu of foreclosure resulted in a gain of $188,000 and is
included on the Partnership's 1995 statement of operations.
As discussed in Note 6 of the Notes to Financial Statements, the repurchase of
Participating Notes and the forgiveness of the related accrued interest resulted
in a gain of $1,915,000 and is included on the Partnership's 1995 statement of
operations.
As discussed in Note 3 of the Notes to Financial Statements, the Partnership
recorded a provision for impairment of investment in real estate of $836,000 on
it's 1994 statement of operations to reduce the carrying value of the Regency
Residence property to the balance of the note payable and accrued interest.
Page 16 of 41
<PAGE>
Item 8. Financial Statements and Supplementary Data
OUTLOOK INCOME FUND 9,
A CALIFORNIA LIMITED PARTNERSHIP
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
Page
Report of Independent Public Accountants....................................18
Financial Statements:
Balance Sheets at December 31, 1996 and 1995..........................19
Statements of Operations for the years ended December 31,
1996, 1995 and 1994..................................................20
Statements of Partners' Equity (Deficit) for the years
ended December 31, 1996, 1995 and 1994...............................21
Statements of Cash Flows for the years ended December 31,
1996, 1995 and 1994..................................................22
Notes to Financial Statements.........................................24
Financial Statement Schedules:
Schedule III - Real Estate Investments and Related
Accumulated Depreciation at December 31, 1996 and Note
thereto............................................................. 33
Schedule IV - Mortgage Loan Receivable, Secured by Real
Estate at December 31, 1996 and Note thereto.........................35
Financial statement schedules not included have been omitted because of the
absence of conditions under which they are required or because the information
is included elsewhere in this report.
Page 17 of 41
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of
OUTLOOK INCOME FUND 9, A CALIFORNIA LIMITED PARTNERSHIP:
We have audited the accompanying balance sheets of OUTLOOK INCOME FUND 9, A
CALIFORNIA LIMITED PARTNERSHIP as of December 31, 1996 and 1995, and the related
statements of operations, partners' equity (deficit) and cash flows for each of
the three years in the period ended December 31, 1996. These financial
statements and the schedules referred to below are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements and schedules 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 OUTLOOK INCOME FUND 9, A
CALIFORNIA LIMITED PARTNERSHIP as of December 31, 1996 and 1995, and the results
of its operations and its cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying schedules listed in the
index to financial statements and schedules is presented for the purpose of
complying with the Securities and Exchange Commission's rules and is not a
required part of the basic financial statements. This information has been
subjected to the auditing procedures applied in our audits 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.
Arthur Anderson
SanFrancisco, California
February 11, 1997 (except with respect to the matters
discussed in Note 3, as to which the date is March 17, 1997)
Page 18 of 41
<PAGE>
<TABLE>
<CAPTION>
OUTLOOK INCOME FUND 9,
A CALIFORNIA LIMITED PARTNERSHIP
Balance Sheets
December 31, 1996 and 1995
(in thousands, except units outstanding)
Assets 1996 1995
- ------ -------- ------
<S> <C> <C>
Investments in real estate:
Rental property, net of accumulated
depreciation of $6,183 and $9,543
in 1996 and 1995, respectively $ 12,397 $ 20,552
Rental property held for sale, net 3,917 --
Rental property held pending foreclosure 3,375 --
------------ ------------
Net real estate investments 19,689 20,552
Cash and cash equivalents 1,121 591
Notes receivable 2,000 2,000
Accounts receivable, net 119 177
Deferred financing costs and other fees, net
of accumulated amortization of $1,219 and
$1,225 in 1996 and 1995, respectively 435 568
Other assets 125 159
------------ -------------
Total assets $ 23,489 $ 24,047
============= ============
Liabilities and Partners' Equity (Deficit)
Liabilities:
Notes payable $ 16,325 $ 15,345
Participating notes:
Notes issued 4,591 4,591
Accrued interest, thereon 5,125 4,582
Less: Notes repurchased by the Partnership (3,288) (2,329)
Accrued interest, thereon (3,650) (2,297)
------------ -------------
Net due to outside holders 2,778 4,547
Accounts payable and accrued expenses 448 380
Interest payable 769 719
Other liabilities 65 63
------------ -------------
Total liabilities 20,385 21,054
------------ -------------
Partners' Equity (Deficit):
General partner (396) (397)
Limited partners, 35,727,572 and 35,742,572
equity units outstanding in 1996 and 1995,
respectively 3,500 3,390
------------ -------------
Total partners' equity 3,104 2,993
------------ -------------
Total liabilities and partners' equity $ 23,489 $ 24,047
============= ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 19 of 41
<PAGE>
<TABLE>
<CAPTION>
OUTLOOK INCOME FUND 9,
A CALIFORNIA LIMITED PARTNERSHIP
Statements of Operations
For the years ended December 31, 1996, 1995 and 1994
(in thousands, except per unit amounts)
1996 1995 1994
---- ------ -----
<S> <C> <C> <C>
Revenue:
Rental income $ 7,208 $ 7,610 $ 9,824
Interest and other income 478 438 494
Gain (loss) on sale of property -- 154 (257)
----------- ----------- -------------
Total revenue 7,686 8,202 10,061
----------- ----------- ------------
Expenses:
Operating, including $1,841, $1,798 and $2,618
paid to affiliates in 1996, 1995 and 1994, respectively 4,646 5,183 6,585
Interest 1,811 2,286 3,220
Depreciation and amortization 1,147 1,310 1,742
Provision for impairment of investment in
real estate -- -- 836
General and administrative, including $281, $458 and
$468 paid to affiliates in 1996, 1995 and 1994, respectively 419 557 571
------------ ------------ ------------
Total expenses 8,023 9,336 12,954
----------- ----------- ------------
Net loss before extraordinary items (337) (1,134) (2,893)
Extraordinary items:
Gain on debt forgiveness -- 188 --
Gain from Participating Notes purchased 448 1,915 --
----------- ----------- ------------
Total extraordinary items 448 2,103 --
----------- ----------- ------------
Net income (loss) $ 111 $ 969 $ (2,893)
=========== =========== ===========
Net income (loss) per Equity Unit:
Before extraordinary items $ (0.01) $ (0.03) $ (0.08)
Extraordinary items 0.01 0.06 --
--------- ---------- -----------
Total $ -- $ 0.03 $ (0.08)
========== =========== ===========
Weighted average number of Equity Units
outstanding during the period used to
compute net income (loss)
per Equity Unit 35,732,957 35,742,572 35,742,572
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 20 of 41
<PAGE>
<TABLE>
<CAPTION>
OUTLOOK INCOME FUND 9,
A CALIFORNIA LIMITED PARTNERSHIP
Statements of Partners' Equity
(Deficit) For the years ended December
31, 1996, 1995 and 1994
(in thousands)
General Limited
Partner Partners Total
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1993 $ (378) $ 5,295 $ 4,917
Net loss (29) (2,864) (2,893)
------------ ------------ ----------
Balance at December 31, 1994 (407) 2,431 2,024
Net income 10 959 969
------------ ----------- ----------
Balance at December 31, 1995 (397) 3,390 2,993
Net income 1 110 111
------------ ------------ ----------
Balance at December 31, 1996 $ (396) $ 3,500 $ 3,104
============= ============ ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 21 of 41
<PAGE>
<TABLE>
<CAPTION>
OUTLOOK INCOME FUND 9,
A CALIFORNIA LIMITED PARTNERSHIP
Statements of Cash Flows
For the years ended December 31, 1996, 1995 and 1994
(in thousands)
1996 1995 1994
---- ------- ------
Cash flows from operating activities:
<S> <C> <C> <C>
Net income (loss) $ 111 $ 969 $ (2,893)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 1,147 1,310 1,742
Amortization of loan fees, included in interest expense 99 226 139
Provision for impairment of investment in real estate -- -- 836
(Gain) loss on sale of property -- (154) 257
Gain on debt forgiveness -- (188) --
Gain from purchase of Participating Notes (448) (1,915) --
Changes in certain assets and liabilities:
Accounts receivable 58 (90) --
Deferred financing costs and other fees (36) (121) (28)
Other assets 34 89 (47)
Accounts payable and accrued expenses 68 113 (33)
Interest payable 213 358 633
Other liabilities 2 (11) (70)
----------- ------------ ------------
Net cash provided by operating activities 1,248 586 536
----------- ----------- -----------
Cash flows from investing activities:
Additions to real estate (214) (439) (496)
Proceeds from sale of property -- 9,557 --
Closing costs on sale of Branford -- -- (166)
Net cash provided by (used for) investing activities (214) 9,118 (662)
------------ ----------- ------------
Cash flows from financing activities:
Notes payable principal payments (120) (9,696) (448)
Borrowings on note payable 1,100 2,500 --
Payment of Participating Notes and accrued
interest from Millwood sale -- (609) --
Buy-back of Participating Notes - discounted (1,484) (2,109) --
----------- ----------- -----------
Net cash used for financing activities (504) (9,914) (448)
------------ ----------- ------------
Net increase (decrease) in cash and cash equivalents 530 (210) (574)
Cash and cash equivalents at beginning of year 591 801 1,375
----------- ----------- -----------
Cash and cash equivalents at end of year $ 1,121 $ 591 $ 801
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 22 of 41
<PAGE>
<TABLE>
<CAPTION>
OUTLOOK INCOME FUND 9,
A CALIFORNIA LIMITED PARTNERSHIP
Statements of Cash Flows - continued
For the years ended December 31, 1996, 1995 and 1994
(in thousands)
<S> <C> <C> <C>
Supplemental disclosure of cash flow information:
Cash paid for interest $ 2,018 $ 2,026 $ 2,247
=========== ============ ===========
Supplemental disclosure of non-cash transactions:
Reduction of accrued interest payable resulting
from purchase of Participating Notes at
discount $ 973 $ 1,915 $ --
=========== ========== ============
Receipt of Notes receivable in sale of property $ -- $ -- $ 2,000
=========== ========== ============
Proceeds from sale used to pay-down note payable $ -- $ -- $ 700
=========== ========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 23 of 41
<PAGE>
OUTLOOK INCOME FUND 9,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Financial Statements
December 31, 1996, 1995 and 1994
Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Outlook Income Fund 9, a California Limited Partnership, (the "Partnership") was
organized on August 29, 1986 in accordance with the provisions of the California
Revised Limited Partnership Act for the purpose of purchasing, holding,
operating, leasing and selling various properties. The Partnership commenced
operations on March 5, 1987. Through a registered public offering, 60,000,000
units of limited partnership interest (the "Equity Units"), at $1.00 per unit,
were authorized for sale. The sale of Equity Units was concluded on January 11,
1988, when 35,742,572 Equity Units were sold. The Partnership also raised funds
by selling $5,228,811 in non-recourse Participating Notes (the "Notes") (see
Note 6). Glenborough Corporation and Robert Batinovich are the general partners
(collectively, the "General Partner").
During the year ended December 31, 1996, 15,000 units were abandoned by limited
partners. Limited partners abandon their units when they desire to no longer
receive a K-1 from the Partnership. The equity of the abandoned limited partner
units has been allocated to the remaining limited partners.
The Partnership Agreement provides for varying allocations of net income, net
loss and distributions (see Note 7).
Management intends to present a plan of liquidation for an investor vote in
1997. The carrying value of the investments in real estate at December 31, 1996
does not purport to represent the ultimate sales price the Partnership will
realize from the disposition of these assets nor are the amounts reflected in
the accompanying financial statements intended to represent the ultimate amount
to be distributed to partners if the plan is adopted.
Significant Accounting Policies
Basis of Accounting - The accompanying financial statements have been prepared
on the accrual basis of accounting in accordance with generally accepted
accounting principles under the presumption that the Partnership will continue
as a going concern. As discussed above, management intends to present a plan of
Partnership liquidation for an investor vote in 1997. However, the liquidation
proceeds and the timing thereof are not currently estimable, nor is approval of
such plan assured. Accordingly, the accompanying financial statements do not
provide for any adjustments relating to the aforementioned plan of liquidation
if it is adopted.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that effect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported results of operations during the reporting period.
Actual results could differ from those estimates.
Risks and Uncertainties - The Partnership's ability to (i) achieve positive cash
flow from operations, (ii) meet its debt obligations, (iii) provide
distributions either from operations or the ultimate disposition of the
Partnership's properties or (iv) continue as a going concern, may be impacted by
changes in interest rates, property values, geographic economic conditions, or
the entry of other competitors into the market. The accompanying financial
statements do not provide for adjustments with regard to these uncertainties.
Page 24 of 41
<PAGE>
OUTLOOK INCOME FUND 9,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Financial Statements
December 31, 1996, 1995 and 1994
Investments in Real Estate - In March, 1995, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 121 (SFAS 121),
"Accounting for Impairment of Long-Lived Assets and Long-Lived Assets to be
Disposed Of." The Partnership adopted SFAS 121 in the fourth quarter of fiscal
1995. SFAS 121 requires that an evaluation of an individual property for
possible impairment be performed whenever events or changes in circumstances
indicate that an impairment may have occurred. There was no impact on the
carrying value of the Partnership's real estate investments from the initial
adoption of SFAS 121.
Rental Property - Rental properties, including the related land, are stated at
cost and unless events or circumstances indicate that cost cannot be recovered
in which the case carrying value is reduced to the estimated fair value.
Estimated fair value: (i) is based upon the Partnership's plans for the
continued operation of each property; (ii) is computed using estimated sales
price, as determined by prevailing market values for comparable properties,
and/or the use of capitalization rates multiplied by annualized rental income
based upon the age, construction and use of the building, and (iii) does not
purport, for a specific property, to represent the current sales price that the
Partnership could obtain from third parties for such property. The fulfillment
of the Partnership's plans related to each of its properties is dependent upon,
among other things, the presence of economic conditions which will enable the
Partnership to continue to hold and operate the properties prior to their
eventual sale. Due to uncertainties inherent in the valuation process and in the
economy, it is reasonably possible that the actual results of operating and
disposing of the Partnership's properties could be materially different than
current expectations.
Depreciation is provided using the straight line method over the useful lives of
the respective assets. Depreciation of buildings and their components is
computed using the straight-line method over useful lives ranging from five to
thirty years. Major replacements and improvements are capitalized, and repairs
and maintenance are charged to operations as incurred.
Rental Property Held for Sale - Rental property held for sale is stated at the
lower of cost or estimated fair value. Estimated fair value is computed using
estimated sales price or appraised value of the property less selling costs and
does not purport, for a specific property, to represent the sales price that the
Partnership could obtain from third parties for such property. Once the property
is classified as held for sale, the Partnership will cease depreciation of the
asset.
Rental Property Held Pending Foreclosure - Rental property held pending
foreclosure is stated at a value which approximates the outstanding debt
associated with the property.
Cash Equivalents - The Partnership considers short-term investments (including
certificates of deposit) with a maturity of less than ninety days at the time of
purchase to be cash equivalents.
Deferred Costs - Deferred loan fees are amortized over the life of the related
loans. Amortization expense, which is included in interest expense, was $99,000,
$226,000 and $139,000 for the years ended December 31, 1996, 1995 and 1994,
respectively. Deferred lease commissions are amortized over the initial fixed
term of the related lease agreement. Amortization expense was $55,000, $58,000
and $62,000 for the years ended December 31, 1996, 1995 and 1994, respectively.
Deferred organization costs on the hotel properties are amortized over five
years on a straight-line basis. Amortization expense was $14,000 for the years
ended December 31, 1996 and 1995 and $15,000 for the year ended December 31,
1994.
Page 25 of 41
<PAGE>
OUTLOOK INCOME FUND 9,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Financial Statements
December 31, 1996, 1995 and 1994
Rental Income - All leases are classified as operating leases. Rental income is
recognized as earned over the terms of the leases.
Net Income (Loss) Per Equity Unit - Net income (loss) per Equity unit is
calculated using the weighted average number of Equity Units outstanding during
the year and the net income or loss allocated to such units.
Income Taxes - Federal and state income tax laws provide that income or loss of
the Partnership is reportable by the partners in their tax returns. Accordingly,
no provisions for such taxes have been made in the accompanying financial
statements. The Partnership reports certain transactions differently for tax and
financial reporting purposes.
Reclassifications - Certain 1995 and 1994 balances have been reclassified to
conform with the current year presentation.
Note 2. TRANSACTIONS WITH AFFILIATES
In accordance with the Limited Partnership Agreement, the Partnership paid the
General Partner and its affiliates compensation for services provided to the
Partnership. Glenborough Corporation provides property management services and
has been compensated as follows:
1996 1995 1994
------ -------- ------
Property management fees $ 138,000 $ 157,000 $ 236,000
Property salaries (reimbursed) 140,000 177,000 334,000
Hotel management fees 235,000 235,000 270,000
Hotel salaries (reimbursed) 1,328,000 1,229,000 1,778,000
--------- --------- ---------
$ 1,841,000 $1,798,000 $ 2,618,000
============ ========= =========
The Partnership also reimbursed Glenborough Corporation for expenses incurred
for services provided to the Partnership such as accounting, investor services,
data processing, duplicating and office supplies, legal and administrative
services, and the actual costs of goods and materials used for or by the
Partnership. Glenborough was reimbursed $281,000, $458,000 and $468,000 for such
expenses in 1996, 1995 and 1994, respectively.
In accordance with the Partnership Agreement, the General Partner or its
affiliates are entitled to property disposition compensation equal to 3% of the
gross sales price of the property. Glenborough Corporation was paid $312,000 in
1995 and $80,250 in 1994 associated with the sale of Millwood Estates and
Branford Business Park, respectively.
Note 3 . REAL ESTATE INVESTMENTS
Rental property to be held and used as of December 31 is as follows:
1996 1995
-------- ------
Land $ 2,878,000 $ 4,192,000
Buildings and improvements 15,702,000 25,903,000
------------- -------------
18,580,000 30,095,000
Less: accumulated depreciation (6,183,000) (9,543,000)
------------- -------------
Total $ 12,397,000 $ 20,552,000
============= =============
Page 26 of 41
<PAGE>
OUTLOOK INCOME FUND 9,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Financial Statements
December 31, 1996, 1995 and 1994
Rental property held for sale at December 31, 1996 is as follows:
Lake Mead Estates Apartments
Land $ 772,000
Buildings and improvements 5,257,000
-------------
6,029,000
Less: accumulated depreciation (2,112,000)
-------------
Total $ 3,917,000
==============
On March 13, 1997, the Partnership entered into a purchase and sale agreement
with an unaffiliated third party for the sale of Lake Mead Estates Apartment
complex. The sale is expected to close escrow in June 1997 for a purchase price
of $5,000,000.
Rental property pending foreclosure at December 31, 1996 is as follows:
Country Suites By Carlson - Memphis
Land $ 542,000
Buildings and improvements 5,158,000
-------------
5,700,000
Less: accumulated depreciation (2,325,000)
-------------
Total $ 3,375,000
==============
On March 14, 1997, the Partnership received a Notice of Foreclosure on the
Country Suites by Carlson - Memphis property. The Partnership discontinued debt
service payments effective January 1997, due to the continued insufficient funds
generated from operations to cover debt service. A foreclosure sale is scheduled
for April 4, 1997. The balance of the loan at December 31, 1996 was $3,471,000.
In November 1994, based on continued low occupancy due to market saturation and
on the property's inability to meet debt service payments, management negotiated
a deed-in-lieu of foreclosure with the lender on the Regency Residence Apartment
complex. On May 26, 1995, title to the Regency Residence property was
transferred to the lender. The Partnership paid all net cash flow (defined as
all income collected less operating expenses) to the lender from November 1994
until May 26, 1995. At December 31, 1994, the Partnership recorded a provision
for impairment of investment in real estate of $835,900 to reduce the carrying
value of the property to the balance of the note payable and accrued interest.
The provision is included in the Partnership's 1994 statement of operations. In
May 1995, the Partnership recognized a gain on deed-in-lieu of foreclosure in
the amount of $188,000 primarily due to the write-off of accrued property taxes
that the property was unable to pay. The gain is included on the Partnership's
1995 statement of operations.
Page 27 of 41
<PAGE>
OUTLOOK INCOME FUND 9,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Financial Statements
December 31, 1996, 1995 and 1994
On March 28, 1995, the Partnership sold Millwood Estates Apartments to an
unaffiliated third party for $10,400,000 and recognized a gain on the sale of
$154,000 which is included in the 1995 statement of operations.
On November 15, 1994, the Partnership sold Branford Business Park property to an
unaffiliated third party for $2,675,000, out of which $700,000 was used to
payoff the outstanding note secured by the property. Under the terms of the
transaction, the Partnership financed a $2,000,000 promissory note, secured by
the property, at an interest rate of 8.5% with interest-only payments due until
maturity on November 11, 1999. The Partnership realized a loss on the sale of
$257,000 which is included in the Partnership's 1994 statement of operations.
The Partnership leases its commercial property under noncancellable operating
lease agreements. Future minimum rents to be received under operating leases as
of December 31, 1996 are as follows:
1997 $ 879,000
1998 561,000
1999 326,000
2000 299,000
2001 32,000
Thereafter 3,000
-----------
Total $ 2,100,000
=========
Note 4. NOTES PAYABLE
<TABLE>
<CAPTION>
A summary of notes payable at December 31, 1996 and 1995 are as follows:
1996 1995
------ -----
<S> <C> <C>
9.625% note payable, secured by a first deed of trust on Lake Mead Estates
Apartments, payable in monthly principal and interest installments of $34,000
through October 1, 2018, at which time all remaining principal and interest
will be due and payable. $ 3,716,000 $ 3,764,000
10.25% note payable, secured by the assignment of a $2,000,000 note and deed of
trust on Branford Business Park, payable in monthly principal and interest
installments of approximately $21,000 through June 27, 1997, at which time,
all remaining principal and interest will be due and payable. 1,587,000 500,000
8.652% note payable, secured by first deeds of trust on Bryant Lake-Phase III
and Bryant Lake-Phases I and II, payable in monthly interest only installments
of $35,000 through October 1, 2015, at which time all remaining principal and
interest will be due and payable. The interest rate adjusts to market at
November 1, 2000. 4,850,000 4,850,000
Page 28 of 41
<PAGE>
OUTLOOK INCOME FUND 9,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Financial Statements
December 31, 1996, 1995 and 1994
9.0% note payable, secured by a first deed of trust on the Country Suites by
Carlson - Memphis, payable in monthly principal and interest installments of
$28,951 through July 1, 1999, at which time all principal will be due and
payable. As of January 1997, the Partnership has suspended all payments and
is in default under the terms of the note. 3,471,000 3,504,000
9.0% note payable, secured by a first deed of trust on the Country Suites By
Carlson - Tempe, payable in monthly principal and interest installments of
$22,529 through July 1, 1999, at which time all principal and interest will be
due and payable. 2,701,000 2,727,000
----------- -----------
Total notes payable $ 16,325,000 $ 15,345,000
=========== ===========
</TABLE>
From October 1,1989 to October 31,1990, interest payments for Bryant Lake III
were in default. On November 1, 1990, the Partnership entered into an agreement
with the lender. Under the terms of the agreement, the lender waived delinquent
interest and other charges of $351,000. The remaining delinquent interest of
$424,000, plus interest compounded monthly at 8% per year, will be deferred and
will be due and payable on or before November 1, 2000. At December 31, 1996 and
1995, the delinquent interest totals $693,000 and $640,000, respectively, and is
included in interest payable on the Partnership's 1996 balance sheet.
Principal maturities of these notes payable are as follows:
1997 $ 1,704,000
1998 129,000
1999 6,100,000
2000 70,000
2001 77,000
Thereafter 8,245,000
----------
Total $16,325,000
==========
Note 5. TAXABLE INCOME
The Partnership's tax returns, the qualification of the Partnership as a
partnership for Federal income tax purposes, and the amount of income or loss
are subject to examination by Federal and state taxing authorities. If such
examinations result in changes to Partnership profits or losses, the tax
liability of the partners could be changed accordingly.
The following is a reconciliation for the years ended December 31, 1996, 1995
and 1994, of the net income (loss) for financial reporting purposes to the
taxable income (loss) determined in accordance with accounting practices used in
preparation of Federal income tax returns (in thousands).
Page 29 of 41
<PAGE>
OUTLOOK INCOME FUND 9,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Financial Statements
December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
---- ------ -----
<S> <C> <C> <C>
Net income (loss) per financial statements $ 111 $ 969 $(2,893)
Amortization and depreciation 212 20 (60)
Interest income --- --- 70
Gain from note repurchase (85) (241) ---
Provision for uncollectable accounts (13) 3 (4)
Property tax expense 4 7 5
Interest expense (42) (60) (133)
Loss on sale of assets --- (3,837) (1,870)
Provision for impairment of investments
in real estate --- --- 836
Miscellaneous 3 (3) ---
----- ------ --------
Net income (loss) for federal income tax purposes $ 190 $ (3,142) $ (4,049)
===== ======= =======
</TABLE>
<TABLE>
<CAPTION>
The following is a reconciliation as of December 31, 1996 and 1995 of partners'
capital for financial reporting purposes to partners' equity for federal income
tax purposes (in thousands):
1996 1995
---- -----
<S> <C> <C>
Partner's equity per financial statements $ 3,104 $ 2,993
Amortization and depreciation 1,100 887
Provision for uncollectable accounts (8) 5
Interest accrued 84 211
Basis adjustments 1,801 1,801
Other 80 76
------ ------
Partner's equity for federal income
tax purposes $ 6,161 $ 5,973
====== ======
</TABLE>
Note 6. PARTICIPATING NOTES
The Partnership was authorized to offer up to $40,000,000 in Equity Units and
non-recourse unsecured Participating Notes (the "Notes"). The Partnership had
sold $5,228,800 in Notes, The Notes bear stated interest at the rate of 12% per
annum, non-compounded, with payment of principal and stated interest deferred
until the earlier of the maturity date of the Notes or the sale or refinancing
of Partnership properties. At December 31, 1996 and 1995, $5,125,000 and
$4,582,000, respectively, of interest were accrued on the Notes. The Noteholders
will also receive payments of contingent interest if, following the sale of all
of the Partnership properties, the Partnership realizes net profits after the
payment of all Partnership obligations and the distribution of certain base
amounts to the Limited Partners. The amount of the Noteholders' contingent
interest participation in net profits varies between 0% and 24%, depending upon
the relative amounts invested in Notes and Equity Units and the total amount of
interest received by Noteholders as defined in the Partnership Agreement. In no
event, however, will the aggregate amount of all interest, including contingent
interest, paid on the Notes exceed simple interest at the rate of 18% per annum
on the original principal balance of the Notes from date of issuance until the
date that all principal on the Notes is paid in full.
Page 30 of 41
<PAGE>
OUTLOOK INCOME FUND 9,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Financial Statements
December 31, 1996, 1995 and 1994
The Partnership may prepay principal and stated interest at any time. Partial
prepayments must be made pro rata to all Noteholders. Upon the sale or
refinancing of a Partnership property, the Partnership will pay or prepay some
or all of the principal and interest allocated to that property under the terms
of the Notes. If not previously paid, the Notes mature and all remaining
principal and interest, excluding contingent interest, must be paid in full on
December 31, 1997, unless the General Partner extends the due date of the Notes,
at its sole discretion, to a date which is not later than December 31, 1998. The
payment of all principal and stated interest does not extinguish the right to
contingent interest which may accrue or become payable following the sale of all
of the Partnership properties.
Beginning in June 1993 through December 31, 1996, the Partnership made a series
of repurchase transactions for Notes. In each of these repurchases of Notes, the
purchase price paid by the Partnership was discounted from the combined total of
principal and accrued interest owing on the repurchased Notes. These discounted
repurchases were made in an effort to preserve Partnership equity which was
subordinate to the amounts owing under the Notes. The notes and accrued interest
thereon are being held by the Partnership.
<TABLE>
<CAPTION>
As of December 31, 1996, the Partnership had completed the following repurchase
transactions:
Year Ended Principal Amount Total Accrued Interest Source of
December 31, of Note Repurchase Accrued Interest Paid Repurchased Payment
- ------------ ------------------ -------------------- ----------------------- -------------------
<S> <C> <C> <C> <C>
1993 $ 545,300* $ 309,800 None Cash on hand
1995 $ 2,102,000 $ 1,915,000 None $2,000,000 short term loan
1996 $ 965,000 $ 973,000 $ 519,000 $1,100,000 short term loan
<FN>
*The Partnership paid $425,000 to repurchase the Notes held by the former
general partner.
</FN>
</TABLE>
On June 9, 1995, as a result of the sale of Millwood Estates, the Partnership
retired $637,000 in notes and $592,000 in related accrued interest in accordance
with the Participating Notes Indenture. Of this amount, the Partnership paid
$609,000 ($314,000 of Participating Notes principal and $295,000 of accrued
interest) to outside Noteholders, the remainder represented a retirement of
notes held by the Partnership.
Note 7. PARTNERSHIP ALLOCATIONS AND DISTRIBUTIONS
The Partnership Agreement generally provides that losses are allocated 1% to the
General Partner and 99% to the Limited Partners. Net income will be allocated
among the Partners first to restore negative capital accounts and then in
accordance with their rights to future cash distributions.
The source and amount of all Partnership distributions is determined by the
General Partner at its sole discretion. Distributions may not be made if the
cash reserves of the Partnership have fallen below 3% of the capital raised from
the sale of Equity Units and Notes.
The Partnership Agreement provides that cash available for distributions shall
be distributed 97% to the Limited Partners and 3% to the General Partner until
the Limited Partners have received aggregate distributions equal to a cumulative
non-compounded return of 9% on their adjusted capital investment. Thereafter,
distributions from operational cash flow shall be distributed to the General
Partner until the General Partner has received the full amount of its deferred
Page 31 of 41
<PAGE>
OUTLOOK INCOME FUND 9,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Financial Statements
December 31, 1996, 1995 and 1994
subordinated partnership incentive fee as defined in the Partnership Agreement,
and thereafter 10% to the General Partner and 90% to the Limited Partners.
Distributions of net cash from sources other than operational cash flow shall be
distributed 1% to the General Partner and 99% to the Limited Partners until the
amounts distributed to the Limited Partners from all sources equal a complete
return of their adjusted capital investment and a 9% per annum cumulative
non-compounded return on their capital investment. Thereafter, distributions
from sources other than operational cash flow shall be distributed to the
General Partner until the General Partner has received the full amount of its
deferred subordinated partnership incentive fee as defined in the Partnership
Agreement, and thereafter 10% to the General Partner and 90% to a net profits
account. Distributions from the net profits account will be made to the Limited
Partners and Noteholders (see Note 6) based on amounts invested in Equity Units
and Notes pursuant to the Partnership Agreement.
Page 32 of 41
<PAGE>
<TABLE>
<CAPTION>
OUTLOOK INCOME FUND 9,
A CALIFORNIA LIMITED PARTNERSHIP
SCHEDULE III - REAL ESTATE INVESTMENTS AND RELATED ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
(In Thousands)
- -------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D
- -------------------------------------------------------------------------------------------------
Net Costs
Capitalized (Reduced)
Initial Cost to Subsequent to
Partnership Acquisition
Buildings
and (1) Carrying
Description Encumbrances Land Improvements(1) Improv Cost
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Rental Property:
Bryant Lake Business
Center-Phase I & II $ --- $ 1,036 $ 4,375 $ 566 $ (455)
Bryant Lake Business
Center-Phase III 4,850(2) 1,004 4,414 378 ---
Country Suites by
Carlson - Tempe 2,701 1,061 6,517 593 (919)
----- ----- ----- --- -----
7,551 3,101 15,306 1,537 (1,374)
----- ----- ------ ---- -------
Property held for sale:
Lake Mead Estates
Apartments 3,716 775 5,190 88 (24)
Property held pending foreclosure:
Country Suites
by Carlson - Memphis 3,471 590 4,913 646 (449)
----- --- ----- --- -----
$14,738 $ 4,466 $25,409 $ 2,721 $(1,847)
======= ======= ======= ======= =======
<FN>
(1) Amounts include furniture and equipment.
(2) This lender also holds a lien on the Bryant Lake I & II property.
(3) Aggregate cost for federal income tax purposes is $31,914.
</FN>
</TABLE>
Page 33 of 41
<PAGE>
<TABLE>
<CAPTION>
OUTLOOK INCOME FUND 9,
A CALIFORNIA LIMITED PARTNERSHIP
SCHEDULE III - REAL ESTATE INVESTMENTS AND RELATED ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
(In Thousands)
- --------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN E COLUMN F COLUMN G COLUMN H COLUMN I
- --------------------------------------------------------------------------------------------------------------
Gross Amount Carried at
December 31. 1996
Buildings (1)
and (2) Accum. Date of Date Depreciable
Description Land Improvements(1) Total Depr. Construc. Acquired Lives
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Rental Property:
Bryant Lake Business
Center-Phase I & II $ 945 $ 4,587 $ 5,532 $1,997 --- 1/88 5-30 yrs
Bryant Lake Business
Center-Phase III 1,004 4,792 5,796 1,601 --- 1/88 5-30 yrs
Country Suites by
Carlson - Tempe 929 6,323 7,252 2,585 --- 8/88 5-30 yrs
------ ----- ----- -----
2,878 15,702 18,580 6,183
------ ------ ------ -----
Property held for sale:
Lake Mead Estates
Apartments 772 5,257 6,029 2,112 --- 4/87 5-30 yrs
Property held pending foreclosure
Country Suites
by Carlson - Memphis 542 5,158 5,700 2,325 --- 8/88 5-30 yrs
--- ----- ----- -----
$4,192 $26,118 $30,309 $10,620
====== ======= ======= =======
<FN>
(1) Amounts include furniture and equipment.
(2) This lender also holds a lien on the Bryant Lake I & II property.
(3) Aggregate cost for federal income tax purposes is $31,914.
</FN>
</TABLE>
Page 33 of 41
<PAGE>
<TABLE>
<CAPTION>
OUTLOOK INCOME FUND 9,
A CALIFORNIA LIMITED PARTNERSHIP
NOTE TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
(in thousands)
Reconciliation of gross amount at which real estate was carried:
For the years ended December 31,
1996 1995 1994
INVESTMENT IN REAL ESTATE
<S> <C> <C> <C>
Balance at beginning of period $ 30,095 $ 47,265 $ 51,317
Additions (deletions) during period:
Improvements 214 409 496
Property dispositions -- (17,579) (3,712)
Provision for impairment of
investments in real estate -- -- 836
---------- ---------- ----------
Balance at end of period $ 30,309 $ 30,095 $ 47,265
========== ========== ==========
ACCUMULATED DEPRECIATION
Balance at beginning of period $ 9,543 $ 13,169 $ 12,456
Additions charged to expense 1,077 1,237 1,666
Property dispositions -- (4,863) (953)
---------- ----------- -----------
Balance at end of period $ 10,620 $ 9,543 $ 13,169
========== ========== ==========
</TABLE>
Page 34 of 41
<PAGE>
OUTLOOK INCOME FUND 9,
A CALIFORNIA LIMITED PARTNERSHIP
SCHEDULE IV - MORTGAGE LOAN RECEIVABLE, SECURED BY REAL ESTATE
December 31, 1996
(in thousands)
COLUMN A COLUMN B COLUMN C COLUMN D
Description of Loan Maturity Periodic
and Securing Property Interest Rate Date Payment Terms
--------------------- ------------- -------------- --------------------
First Mortgage Loan 8.5% 11/11/99 Monthly interest only
Office complex payments, principal
Arleta, CA due upon maturity
COLUMN E COLUMN F COLUMN G COLUMN H
Principal Amount
of Loans Subject
Face Carrying to Delinquent
Prior Liens Amount Amount Principal or Interest
----------- ------ ------- ---------------------
None $ 2,000 $ 2,000 None
Page 35 of 41
<PAGE>
OUTLOOK INCOME FUND 9,
A CALIFORNIA LIMITED PARTNERSHIP
SCHEDULE IV - MORTGAGE LOAN RECEIVABLE, SECURED BY REAL ESTATE
December 31, 1996
(in thousands)
The following is a summary of changes in the carrying amount of the mortgage
loan for the years ended December 31, 1996, 1995 and 1994 (in thousands):
1996 1995 1994
---- ---- ----
Balance at beginning of year $ 2,000 $ 2,000 $ 2,000
Additions during year:
New mortgage loans -- -- --
Deductions during year:
Collections of principal -- -- --
Balance at end of year 2,000 $ 2,000 $ 2,000
======== ======= ========
Page 36 of 41
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
General Partners
The Partnership has no directors or executive officers. The general partners of
the Partnership are Glenborough Corporation ("GC", the "Managing General
Partner", formerly known as Glenborough Realty Corporation) and Robert
Batinovich.
Robert Batinovich was the President, Chief Executive Officer and Chairman of
Glenborough Corporation from its inception in 1987 until his resignation
effective January 10, 1996. On August 31, 1994, Mr. Batinovich was elected
Chairman, President and Chief Executive Officer of Glenborough Realty Trust
Incorporated ("GLB"), a newly created Real Estate Investment Trust, which began
trading on the New York Stock Exchange on January 31, 1996. He was a member of
the Public Utilities Commission from 1975 to January 1979 and served as it's
President from January 1977 to January 1979. He is a member of the Board of
Directors of Farr Company, a publicly held company that manufactures industrial
filters. He has extensive real estate investment experience. Mr. Batinovich's
business background includes managing and owning manufacturing, vending and
service companies and a national bank.
For informational purposes, the following are the names and a brief description
of the background and experience of each of the controlling persons, directors
and executive officers of the Managing General Partner as of March 1, 1997:
Name Age Position
Andrew Batinovich 38 Chief Executive Officer and
Chairman of the Board
Robert E. Bailey 35 Secretary and Corporate Counsel
Sandra L. Boyle 48 President and
Chief Operating Officer
June Gardner 45 Director
Terri Garnick 36 Chief Financial Officer
Judy Henrich 51 Vice President
Wallace A. Krone Jr. 65 Director
Andrew Batinovich was elected Chairman of the Board and Chief Executive Officer
of GC on January 10, 1996. He has been employed by GC since 1983, and had
functioned since 1987 as Chief Operating Officer and Chief Financial Officer.
Mr. Batinovich also serves as Executive Vice President, Chief Operating Officer,
Chief Financial Officer and Director of GLB. He holds a California real estate
broker's license and is a Member of the National Advisory Council of BOMA
Page 37 of 41
<PAGE>
International. He received his B.A. in International Finance from the American
University of Paris. Prior to joining Glenborough Corporation, Mr. Batinovich
was a lending officer with the International Banking Group and the Corporate
Real Estate Division of Security Pacific National Bank.
Robert E. Bailey joined GC in 1989 as Associate Counsel and was elected
Secretary of GC on May 15, 1995. He is responsible for landlord/tenant
documentation, tenant litigation, corporate and partnership matters and
employment matters. In 1984, he received his Bachelor of Arts degree from the
University of California at Santa Barbara and his Juris Doctor degree from
Vermont Law School in 1987. From 1987 to 1989, Mr. Bailey was an associate with
the law firm of Pedder, Stover, Hesseltine & Walker, where he specialized in
business litigation. He is a member of the State Bar of California.
Sandra L. Boyle has been associated with GC or its associated entities since
1984 and has served as President and Chief Operating Officer of GC since January
10, 1996. She was originally responsible for residential marketing, and her
responsibilities were gradually expanded to include residential leasing and
management in 1985, and commercial leasing and management in 1987. She was
elected Vice President in 1989, and continues to supervise marketing, leasing,
property management operations and regional offices. Ms. Boyle also serves as a
Senior Vice President of GLB. Ms. Boyle holds a California real estate broker's
license and a CPM designation, and is a member of the National Advisory Council
and Finance Committee of BOMA International and Board of Directors of BOMA San
Francisco and BOMA California.
June Gardner was elected a director of GC on January 10, 1996. She was
associated with GC from 1984 through 1995, as Senior Vice President, Corporate
Controller with responsibilities in the areas of corporate financial planning,
reporting, accounting and banking relationships. Before joining GC, Ms. Gardner
was Assistant Vice President of JMB Realty Corporation from 1977 to 1984, with
responsibilities in the areas of financial management and reporting.
Terri Garnick has served as Chief Financial Officer of GC since January 10,
1996. She is also Senior Vice President, Chief Accounting Officer and Treasurer
of GLB. Ms. Garnick is responsible for property management accounting, financial
statements, audits, Securities and Exchange Commission reporting, and tax
returns. Prior to joining GC in 1989, Ms. Garnick was a controller at August
Financial Corporation from 1986 to 1989 and was a Senior Accountant at Deloitte,
Haskins and Sells from 1983 to 1986. She is a Certified Public Accountant and
has a Bachelor of Science degree from San Diego State University.
Judy Henrich is a Vice President of GC, effective January 10, 1996 and is
responsible for the coordination of all due diligence, broker-dealer and
investor communications for partnerships managed by GC. Prior to joining GC, Ms.
Henrich, was associated with Rancon Financial Corporation from 1981 through
early 1995, as Senior Vice President since 1985, with responsibilities similar
to those at GC. Ms. Henrich also served as Executive Vice President of Rancon
Securities Corporation from 1988 to 1991, and thereafter as its Chief Executive
Officer. Prior to joining Rancon, Ms. Henrich was manager of public relations
and advertising for Kaiser Development Company, a diversified real estate
holding company.
Wallace A. Krone has been an entrepreneur in the restaurant business since 1965,
and owns a number of Burger King restaurants in the San Francisco area. Mr.
Krone has been associated with GC since 1982 as an investor in one or more
partnerships, and has been a member of the board of directors of GC since 1989.
Item 11. Executive Compensation
The Partnership has no executive officers. For information relating to fees,
compensation, reimbursements and distributions paid to related parties,
reference is made to Item 13 below.
Page 38 of 41
<PAGE>
Item 12. Security Ownership of Certain Owners and Management
To the best knowledge of the Partnership, no person owned of record or
beneficially more than five percent (5%) of the outstanding Units at December
31, 1996.
The Partnership, as an entity, does not have any directors or officers. At
December 31, 1996, no Units were owned of record or beneficially by any officers
or directors of the General Partner.
Item 13. Certain Relationships and Related Transactions
(a) The General Partner earned compensation for specific services provided
to the Partnership. The Partnership reimbursed Glenborough Corporation for
expenses incurred for services provided to the Partnership such as accounting,
investor services, data processing, duplicating and office supplies, legal and
administrative services, and the actual costs of goods and materials used for or
by the Partnership. Glenborough was reimbursed $281,000, $458,400 and $467,600
for such expenses in 1996, 1995 and 1994, respectively.
In accordance with the Limited Partnership Agreement, the Partnership paid the
General Partner and its affiliates compensation for services provided to the
Partnership. Glenborough Corporation provides property management services and
has been compensated as follows:
1996 1995 1994
------ -------- ------
Property management fees $ 138,000 $ 157,000 $ 236,000
Property salaries (reimbursed) 140,000 177,000 334,000
Hotel management fees 235,000 235,000 270,000
Hotel salaries (reimbursed) 1,328,000 1,229,000 1,779,000
--------- --------- ---------
$ 1,841,000 $ 1,798,000 $ 2,618,000
============ ========= =========
In accordance with the Partnership Agreement, Glenborough Corporation was paid
$312,000 in 1995 and $80,250 in 1994 as a 3% property disposition compensation
associated with the sales of Millwood Estates and Branford Business Park,
respectively (as discussed in Note 3 of the Notes to the Financial Statements).
(b) None of the members of the General Partner were indebted to the
Partnership during this fiscal year.
(c) Compensation received by the General Partner and affiliates is
disclosed under Item 11.
Page 39 of 41
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a)(1) Financial Statements - See Index to Financial
Statements contained in Item 8.
(2) Financial Statement Schedules - See Item 14(d) below.
(3) Exhibits - No exhibits necessary.
(b) Reports on Form 8-K - No reports on Form 8-K were filed
by the registrant in the fourth quarter of 1995.
(c) Financial Statement Schedules - The following financial
statement schedules of the Partnership are included in
Item 8:
Schedule III - Real Estate Investments and Related
Accumulated Depreciation and Amortization.
Schedule IV - Mortgage Loan Receivable, Secured by Real
Estate.
All other schedules for which provision is made in the
applicable accounting regulation of the Securities and
Exchange Commission are not required under the related
instructions or are inapplicable, and therefore have
been omitted.
Page 40 of 41
<PAGE>
SIGNATURES
Pursuant to the requirements of Section l3 or l5(d) of the Securities Exchange
Act of l934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
OUTLOOK INCOME FUND 9,
A CALIFORNIA LIMITED PARTNERSHIP
By: /s/ Robert Batinovich By: Glenborough Corporation,
Robert Batinovich a California corporation,
General Partner (formerly knows as Glenborough
Realty Corporation,
a California Corporation)
Date: March 28, 1997 By: /s/ Andrew Batinovich
----------------- ----------------------
Andrew Batinovich
Chief Executive Officer
and Chairman of the Board
Date: March 28, 1997
By: /s/ Terri Garnick
------------------
Terri Garnick
Chief Financial Officer
Date: March 28, 1997
By: /s/ June Gardner
-----------------
June Gardner
Director
Date: March 28, 1997
(A Majority of the Board of Directors of the General Partner)
Page 41 of 41
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