SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999, or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to __________________
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Commission file number 0-15932
BF ENTERPRISES, INC.
(Exact name of small business issuer as specified in its charter)
DELAWARE 94-3038456
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
100 Bush Street
Suite 1250
San Francisco, California 94104
(Address of principal executive offices)
Issuer's telephone number, including area code (415) 989-6580
------------------------------------
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of November 12, 1999:
3,450,599 shares of $.10 par value Common Stock
<PAGE>
BF ENTERPRISES, INC. AND SUBSIDIARIES
I N D E X
Page
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
- Consolidated statements of financial position.................3
- Consolidated statements of income.............................4
- Consolidated statements of stockholders' equity ..............5
- Consolidated statements of cash flows.........................6
- Notes to financial statements ................................7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations ......................................10
PART II OTHER INFORMATION
Item 1. Legal Proceedings ..............................................12
Item 5. Other Information ..............................................12
Item 6. Exhibits and Reports on Form 8-K ...............................15
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
BF ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
<S> <C> <C>
ASSETS:
Cash and cash equivalents $ 4,580 $ 3,347
Marketable securities 812 712
Receivables 127 74
Real estate rental property,
net of depreciation 2,229 2,267
Real estate inventory held for
current sale and land held
for future development 16,024 16,005
Lease contract receivable 658 661
Deferred tax assets 152 95
Other assets 394 757
--- ---
TOTAL ASSETS $24,976 $23,918
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY:
Payables and accrued liabilities $ 786 $ 1,441
Subordinated debentures, unmatured 714 719
--- ---
Total liabilities 1,500 2,160
===== =====
Stockholders' equity:
Common stock, $.10 par value
Authorized - 10,000,000 shares
Issued and outstanding -
3,473,599 and 3,578,599 shares 347 358
Capital surplus 14,539 15,887
Retained earnings 8,353 5,376
Other accumulated comprehensive income 237 137
Total stockholders' equity 23,476 21,758
------ ------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 24,976 $ 23,918
======== ========
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
3
<PAGE>
BF ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Real estate sales $ 1,007 $ 1,166 $ 2,862 $ 2,785
Real estate rental income 460 460 1,381 1,381
Interest and dividends 64 47 164 159
Other 11 -- 51 --
-- --
1,542 1,673 4,458 4,325
----- ----- ----- -----
Costs and Expenses:
Cost of real estate sold 165 238 601 587
Depreciation and amortization 24 23 72 72
Interest on subordinated debentures 12 14 37 39
General and administrative 485 471 1,427 1,432
--- --- ----- -----
686 746 2,137 2,130
--- --- ----- -----
Income before income taxes 856 927 2,321 2,195
Benefit for income taxes -- -- (656) --
---- ---- ---- ----
Net income $ 856 $ 927 $ 2,977 $2,195
===== ===== ======= ======
Net income per share:
Basic $ .24 $ .26 $ .84 $ .60
===== ===== ===== =====
Diluted $ .22 $ .23 $. 76 $. 54
===== ===== ===== =====
Average shares used in computing
basic net income per share 3,496 3,635 3,526 3,650
Average shares used in computing
diluted net income per share 3,828 4,030 3,891 4,054
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
4
<PAGE>
BF ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------
1999 1998
---- ----
<S> <C> <C>
Common stock:
Beginning of period $ 358 $ 367
Purchases of common stock - par value (23) (2)
Exercise of stock options - par value 12 --
--- ---
End of period $ 347 $ 365
======= =======
Capital surplus:
Beginning of period $ 15,887 $ 16,614
Purchases of common stock - excess over par value (1,724) (202)
Exercise of stock options - excess over par value 376 --
--- ---
End of period $ 14,539 $ 16,412
======== =======
Retained earnings:
Beginning of period $ 5,376 $ 2,547
Net income 2,977 1,268
----- -----
End of period $ 8,353 $ 3,815
========= ========
Other accumulated comprehensive income:
Beginning of period $ 137 $ 64
Unrealized gains from marketable
equity securities during period 100 84
--- --
End of period $ 237 $ 148
========= ========
Accumulated comprehensive income:
Beginning of period $ 5,513 $ 2,611
--------- --------
Net income 2,977 1,268
Unrealized gains from marketable
equity securities during period 100 84
--- --
Comprehensive income for period $ 3,077 $ 1,352
--------- --------
End of period $ 8,590 $ 3,963
========= ========
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
5
<PAGE>
BF ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,977 $ 2,195
Adjustments to reconcile net income to net
cash provided by operating activities:
Gains from sales of real estate (2,261) (2,198)
Net cash proceeds from sales of real estate 1,804 1,532
Real estate development costs (1,621) (2,348)
Reimbursement of real estate development costs 2,140 1,459
Changes in certain assets and liabilities:
Increase in receivables (53) (14)
Decrease (increase) in lease contract receivable 3 (35)
Increase (decrease) in payables and
accrued liabilities (83) 15
Increase in deferred tax assets (57) (74)
Other, net 20 54
-- --
Total adjustments to net income (108) (1,609)
---- ------
Net cash provided by operating activities 2,869 586
Cash flows from investing activities:
Purchases of marketable securities -- (359)
Return of capital invested in limited
liability company 300 --
--- ---
Net cash provided (used) by investing activities 300 (359)
Cash flows from financing activities:
Reductions in subordinated debentures (577) (179)
Purchases of the Company's common stock (1,747) (413)
Proceeds from exercise of stock options 388 --
--- ---
Net cash used by financing activities (1,936) (592)
------ ----
Net increase (decrease) in cash and cash equivalents: 1,233 (365)
Cash and cash equivalents at beginning of period 3,347 4,038
----- -----
Cash and cash equivalents at end of period $ 4,580 $ 3,673
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for interest
(net of amount capitalized) $ 37 $ 39
======== ========
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
6
<PAGE>
BF ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Note A - Interim Financial Information
The accompanying consolidated financial statements of BF Enterprises, Inc. (the
"Company")and its subsidiaries have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission ("SEC") and, in
management's opinion, include all adjustments necessary for a fair presentation
for the interim period reported. Certain information and note disclosures
normally included in annual financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted pursuant
to SEC rules or regulations. It is suggested that these financial statements
be read in conjunction with the financial statements and the notes thereto
included in the Company's Form 10-KSB for the year ended December 31, 1998 and
in the Company's Form 10-QSB for the quarterly period ended September 30, 1998.
Note B - Earnings Per Share
Earnings per share data for the periods reported have been computed as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Income $ 856 $ 927 $2,977 $2,195
===== ===== ====== ======
Weighted average number of
shares outstanding:
Common stock 3,496 3,635 3,526 3,650
Common stock equivalents -
stock options (1) 332 395 365 404
--- --- --- ---
3,828 4,030 3,891 4,054
===== ===== ===== =====
Net income per share:
Basic - based on weighted average
number of shares of common stock
outstanding $ .24 $ .26 $ .84 $ .60
===== ===== ===== =====
Diluted - based on weighted
average number of shares of
common stock and common
stock equivalents outstanding $ .22 $ .23 $ .76 $ .54
===== ===== ===== =====
</TABLE>
(1) Computation is based on the treasury stock method using the average
market price.
7
<PAGE>
BF ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Note C - Real Estate Rental Property
Real estate rental property is an office building and 16 acres of land in Tempe,
Arizona. In 1995, the Company entered into a 10-year net lease with Bank One,
Arizona, NA, a subsidiary of Banc One Corporation. The lease provided for the
phased occupancy and rental of space by Bank One during 1995, with rental of
the entire premises commencing January 1, 1996. At December 31, 1998,
contractual rental revenues from the lease with Bank One are projected as
follows:
1999 $1,826,000
2000 1,848,000
2001 1,936,000
2002 1,953,600
2003 1,975,600
2004 1,980,000
2005 (two months) 330,000
On January 1, 1996, as required by generally accepted accounting principles,
the Company began amortizing on a straight-line basis (1) income from the new
lease with Bank One, resulting in annual real estate leasing income of
$1,815,000 for the period ending February 28, 2005, and (2) a related $423,000
lease commission, with annual amortization expense of $46,000 over the same
period.
Note D - Real Estate Inventory Held for Current Sale and Land
Held for Future Development
Real estate inventory held for current sale and land held for future development
consists primarily of approximately 367 acres in the Company's master-planned,
mixed use development known as Meadow Pointe near Tampa, Florida. The parcels
within this project are in various stages of development. Parcels on which the
Company has completed substantially all of its development activities are
considered to be held for current sale. Parcels on which developmentn is not
yet complete are considered to be held for future development. These assets
were carried at a cost of $16,024,000 at September 30, 1999 and $16,005,000 at
December 31, 1998, which the Company believes was less than their fair value.
It is the Company's policy to review and update its projections on the Meadow
Pointe project on a regular basis. Periodic cumulative adjustments to cost of
sales are made to reflect the results of these reviews. As a result, gross
margins and related percentages, derived on a period to period basis, may not
be directly comparable.
8
<PAGE>
BF ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Note E - Benefit for State Income Taxes
In February 1996, the Company's predecessor, on behalf of the Company, filed a
complaint against the California Franchise Tax Board (the "FTB") for a refund
of assessed income taxes and accrued interest for the year ended December 31,
1981. The suit arose out of the FTB's assessment for 1981 taxes, based on its
contention that a loss attributable to the 1981 acquisition by the Company's
predecessor of a warrant for the purchase of its common stock should have been
treated as a business deduction rather than a non-business deduction. The
Company appealed the FTB's assessment to the California State Board of
Equalization, which denied the appeal in July 1994. In March 1995, the Company
made payment to the FTB of the assessment and accrued interest and filed a
request for refund in the full amount of that payment. The amount the Company
paid to the FTB, after reimbursement by the Company's predecessor of the
related federal and state income tax benefits, was approximately $400,000. The
Company's request for refund was denied and the action described above was
filed. In May 1997, the Court granted the FTB's motion for summary judgement
and dismissed the Company's action. The Company filed an appeal of the judgement
with a California Court of Appeal. In late 1998, the Appellate Court
unanimously upheld the Company's position. The Appellate Court ordered
reimbursement to the Company of the entire amount originally paid to the FTB,
plus interest to the date of reimbursement.
Reimbursement of $926,000 was received from the FTB in April 1999. In the
three months ended March 31, 1999, the Company recorded a state income tax
benefit of $656,000, after deduction of related federal and state income taxes
of $270,000 that are the liability of the Company's predecessor.
Note F - Stockholders' Equity
From time to time, the Company purchases shares of its common stock, primarily
in the open market. During the nine months ended September 30, 1999, the
Company purchased 224,500 shares of its common stock for an aggregate amount of
$1,747,000. During the nine months ended September 30, 1998, the Company
purchased 50,400 shares of its common stock for an aggregate amount of $413,000.
In April 1999 an officer of the Company exercised options for the purchase of
36,000 shares of the Company's common stock. The Company received proceeds of
$109,000 from the exercise of these options. In August 1999 two trusts, of
which the widow of a former officer is a trustee, exercised options for the
purchase of an aggregate of 83,500 shares of the Company's common stock. The
Company received proceeds of $279,000 from the exercise of these options.
Note G - Stock Options
On September 29, 1999, non-qualified stock options for the purchase of 49,500
shares of the Company's common stock were granted to its employees under the
terms of the Company's 1997 Long-Term Incentive Plan. The options expire 10
years following their grant and are exerciseable at a price of $7.25 per share.
9
<PAGE>
Item 2. Management's Discussion and Analysis of
---------------------------------------
Financial Condition and Results of Operations
---------------------------------------------
Results of Operations
- ---------------------
Net income of $856,000 and $2,977,000 in the three months and nine months ended
September 30, 1999, included gains of $842,000 and $2,261,000 from sales of
property within the Company's Meadow Pointe project near Tampa, Florida and, in
the nine month period, included a $656,000 benefit for state income taxes
deriving from the Company's successful suit against the California Franchise Tax
Board for reimbursement of a 1981 assessment (see Note E of Notes to Financial
Statements). In the three months and nine months ended September 30, 1998, net
income was $927,000 and $2,195,000 and included gains of $928,000 and
$2,198,000, respectively, from sales of Meadow Pointe property. The Company
sold 342 developed residential lots at Meadow Pointe during the nine months
ended September 30, 1999, and 246 lots in the same period of 1998.
The Company's reported gains from property sales at Meadow Pointe are based in
part upon estimates of the total revenues and costs to be derived by the Company
over the life of the project. The Company periodically reviews these estimates
and makes cumulative adjustments to reflect any revised estimates. Property
sales at Meadow Pointe are dependent upon, among other things, the strength of
the general economy in the Tampa area, residential mortgage interest rates,
competitive residential developments serving the same group of home buyers and
other factors related to the local Tampa real estate market.
Interest and dividends from investments accounted for $64,000 and $164,000 of
revenues in the three months and nine months ended September 30, 1999,
respectively, and $47,000 and $159,000 in comparable periods in 1998.
The increase in investment revenue in the 1999 periods was due to an increase
in the amount of funds available for investment.
Liquidity and Capital Resources
- -------------------------------
At September 30, 1999, the Company held $5,392,000 in cash, cash equivalents
and marketable securities, as compared to $1,500,000 for all short-term and
long-term liabilities. From time to time the Company purchases shares of its
common stock, primarily in the open market (see Note F of Notes to Financial
Statements).
The Company's business plan calls for substantial expenditures during the next
several years relating to the planned development of Meadow Pointe. During the
period February 1992 through September 1998, two community development districts
encompassing the Meadow Pointe project issued approximately $74.9 million of
capital improvement revenue bonds. The Company currently anticipates the need
for approximately $5 million of additional financing by one of the districts.
The proceeds of such financing have been and are expected to be used to
construct infrastructure improvements necessary for the development and sale of
residential lots, and multifamily and commercial parcels, in Meadow Pointe.
The Company intends to pay for its future expenditures at Meadow Pointe and its
other operating expenses (including those related to debenture payments) with
(i) cash generated from sales of property within Meadow Pointe and its other
operations, and (ii) cash and cash equivalents on hand. There can be no
assurance that the Company will generate sufficient cash or have sufficient
cash and cash equivalents on hand to cover such expenditures.
10
<PAGE>
The statements in this Report on Form 10-QSB regarding Meadow Pointe property
sales, financing of Meadow Pointe expenditures and any other statements which
are not historical facts are forward looking statements. Such statements
involve risks and uncertainties, including, but not limited to, competition,
general economic conditions, ability to manage and continue growth and other
factors detailed in the Company's filings with the Securities and Exchange
Commission. Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual outcomes may vary
materially from those indicated.
Year 2000
- ---------
The Company utilizes a number of computer software programs in conducting its
business, primarily for financial and administrative purposes. The Company has
addressed the "Year 2000 Problem" by upgrading its internal systems to the
extent that the Company's software applications contain source code that is able
to appropriately interpret the upcoming year "2000" and beyond. The cost of
these upgrades was not material to the Company's financial position or results
of operations.
In addition, the Company is dependent to varying extents on the software
applications of certain organizations with and through which it conducts
business. The Company is in the process of identifying the extent of the Year
2000 problem which may exist within relevant outside organizations. The impact
of the Year 2000 problem on those organizations is not known, however,
management does not believe that impact will have a material adverse effect on
the Company's financial position or results of operations. In management's
opinion, the primary risk of a Year 2000 problem within its operations is a
possible slowdown in the processing of information needed to complete short-term
transactions. It is not believed that it would affect the time frame for
completion of the Meadow Pointe project or the value of other Company assets.
The Company does not have a Year 2000 contingency plan as it does not believe
that a worst case scenario would have a material adverse effect on its financial
position or results of operations.
Qualitative and Quantitative Disclosures About Market Risk
- ----------------------------------------------------------
The Company holds certain cash equivalents and marketable securities for
non-trading purposes which are sensitive to changes in market value. In
addition, the Company has issued debt which is subject to floating rates of
interest. The Company does not believe that changes in the market value of
these financial instruments will have a material impact, either favorable or
unfavorable, on its financial position or results of operations. The Company
has not in the past engaged in transactions requiring the use of derivative
financial instruments either for hedging or speculative purposes, and has no
plans to do so in the future.
11
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
In March 1998, an action was commenced in the Pasco County, Florida
Circuit Court against a subsidiary of the Company and others relating
to the Meadow Pointe development. The Amended Complaint alleges that
certain individuals who purchased homes assumed that a homeowners
association had been established for the development. Plaintiffs seek
money damages from all defendants named in the Amended Complaint,
except for the Company's subsidiary. The only relief sought against
the Company's subsidiary is an injunction compelling the subsidiary to
operate and maintain architectural control at Meadow Pointe.
On July 2, 1998, the Court granted the subsidiary's motion to sever and
denied the subsidiary's motion to dismiss. Accordingly, on July 13,
1998, plaintiffs filed a Severed Complaint against the Company's
subsidiary, which seeks injunctive relief and declaratory relief, but
no damages.
On October 16, 1998, the Court granted summary judgement in favor of
the Company's subsidiary on Count 1 of the Severed Complaint for
Declaratory Relief. The Court ruled that the recently established
voluntary homeowners association for Meadow Pointe, to which the
Company's subsidiary had assigned certain of its rights pursuant to
the Declarations of Restrictions recorded in the public records of
Pasco County, Florida, had standing to enforce said Declarations of
Restrictions. Plaintiffs have moved for reconsideration of the Court's
ruling. On November 3, 1998, the Company's subsidiary moved for
summary judgement on the remaining count for injunctive relief. The
Court denied that motion on December 7, 1998, but on December 14, 1998,
plaintiffs voluntarily dismissed the count for injunctive relief.
Certain plaintiffs then filed a notice of appeal on January 27, 1999
from the Court's October 16, 1998 Order. That appeal is currently
pending. The Company believes that it has meritorious defenses to the
claims made against its subsidiary, and it intends to continue to
vigorously contest the action.
The Company is not a party to any other pending legal proceedings
except routine litigation incidental to its business.
Item 5. Other Information
-----------------
In October, Meadow Pointe East, LLC, a Delaware limited liability
company and a newly-formed subsidiary of BF Enterprises, Inc., formed
a general partnership with a Florida developer to develop property in
Pasco County, Florida. The general partnership entered into an
Agreement for Development, Sale and Purchase of Real Property (the
"Agreement") with a Florida corporation ("Seller") pursuant to which
the general partnership has agreed to develop and plat the property
and, following such development, to purchase and sell platted
single-family and multi-family residential lots to builders. The
parties have agreed to develop the property as a mixed-use project
containing at least 3,004 residential lots, together with certain
retail, commercial and other non-residential uses. Under the general
partnership agreement, Meadow Pointe East, LLC will be entitled to
receive 50% of the general partnership's profits derived primarily
from the sale of residential lots within the property.
The Seller has the right to exercise a series of options to purchase
the property pursuant to option agreements with the current owners
(the "Owners") of the property.
12
<PAGE>
The general partnership is a third party beneficiary of those option
agreements. Although the Seller's failure to exercise any option or
any material default by the Seller under the option agreements will
terminate the Seller's rights to exercise all further options to
purchase the property, the Owners have guaranteed the Seller's
performance of its obligations under the Agreement and the option
agreements.
The parties have agreed on a master plan to develop the property.
Development of the property will occur in phases pursuant to a phasing
schedule also agreed upon by the parties. Beginning in 2001 and in
each calendar year thereafter, the general partnership is required to
purchase a minimum number of residential lots per year necessary to
generate gross sales proceeds to the Seller not less than annual
aggregate amounts described on a sales price schedule agreed upon by
the parties.
The purchase price for the property is based on residential lot prices
set forth on the sales price schedule. The purchase price of the
property is subject to an escalation of 3% on January 1 of each year
during the term of the Agreement, as well as other adjustments and
prorations. The general partnership must purchase at least 25% of
such required number of residential lots in each quarter of such year,
however, the general partnership may purchase more residential lots
than otherwise required by the sales price schedule, in which case the
amount of such excess purchases will be credited against the general
partnership's obligations to purchase residential lots for ensuing
calendar quarters or years. The general partnership is required to pay
documentary stamp tax on the deeds, title insurance and recordings
required in connection with the transfer of title of the property to
the general partnership (or its designees) upon the several closings.
The full development of the property may take at least 15 years or
more. The general partnership has agreed to use its best efforts to
cause a civil engineer to begin work on construction plans for the
first units by January 1, 2000 and to commence the actual construction
of the infrastructure for the first units by July 1, 2000. Development
of the property could be delayed or terminated, however, if the general
partnership is unable to obtain required permits and approvals from
certain governmental agencies necessary to develop the property,
including, but not limited to, the modification of a development order
associated with an existing development of regional impact allowing the
property to be developed in accordance with the master plan. The
general partnership and the Seller will share the cost of modifying the
development order equally, except that the general partnership will be
solely responsible for all such costs after the Seller has expended
$50,000 for such modification. If the modifications to the development
order are not acceptable to the general partnership or the Seller, then
the dissatisfied party may, at its sole discretion, terminate the
Agreement.
To facilitate the financing and development of the property, the Seller
(in conjunction with the general partnership and at the general
partnership's expense) will petition Pasco County, Florida to establish
two or more community development districts ("CDDs") pursuant to
Chapter 190, Florida Statutes. The CDDs may, from time to time, issue
special assessment revenue bonds to finance the acquisition or
construction of infrastructure improvements to benefit the property
(e.g. roads, drainage facilities, underground utility lines,
recreation centers, entry ways and landscaping, etc.). The parties
anticipate that the CDDs will issue long-term Series A bonds which will
constitute a lien on the property for a period of 30 years or less, as
well as short-term (up to five years) Series B bonds which will be paid
in full upon the conveyance of residential lots at the several closings
or, alternatively, before the improved residential lots are sold to
builders. The general partnership has agreed that the CDDs will not
incur bonded indebtedness in excess of $25 million without the Seller's
13
<PAGE>
prior written approval. The bonded indebtedness will be non-recourse
to the Seller and will be secured solely by special assessments. The
general partnership has agreed to pay the special assessments of the
CDDs and the ad valorem taxes on the property until the residential
lots are sold to the general partnership (or its designees). The
general partnership will guarantee the payment of the ad valorem taxes
and the special assessments on an ongoing basis for successive one-year
periods by obtaining non-contingent, irrevocable bank letters of credit
for the benefit of the Seller which will be renewed annually, the first
of which is required to be issued by August 15, 2000.
The general partnership anticipates having completed a Phase I
environmental assessment report and other due diligence to determine
the feasibility of developing the property by early January, 2000. If
the general partnership concludes that the property is unsuitable for
the proposed development, then the general partnership may terminate
the Agreement and the parties will have no further rights or
obligations under the Agreement. During the preliminary inspection
period, the general partnership will obtain a survey of the property
and a title insurance commitment which shall be subject only to certain
encumbrances. If, after a curative period, any unacceptable
encumbrances on the property are not removed, the general partnership
may, at its option, either terminate the Agreement, accept conveyance
of title to the property in its then existing condition or elect to
undertake title curative measures itself, in which event the Seller is
required to pay for all such costs reasonably incurred by the general
partnership up to $50,000. Although the general partnership
anticipates making significant expenditures in connection with the
development of the property after the preliminary inspection period
ends, the general partnership will have a continuing right to terminate
the Agreement during the entire term of the Agreement.
The property is currently subject to two unacceptable encumbrances:
(a) a first mortgage in favor of the Federal Land Bank securing a note
with an outstanding principal balance of approximately $500,000 and
(b) approximately 200 acres of the property lies within a special
taxing district. By February 2, 2000, the Seller must either satisfy
and discharge the mortgage or provide assurances satisfactory to the
general partnership that the lien on the property associated with the
first mortgage will be modified so that it does not encumber that
portion of land initially to be developed. If the mortgage is so
modified, the Seller is required to satisfy and discharge the mortgage
upon written notice from the general partnership that it will be
commencing development of the mortgaged portion of the property. With
respect to the portion of the property located within the special
taxing district, the Seller has agreed to undertake all necessary title
corrective measures, provided that the Seller is not obligated to spend
more than $100,000 with respect to curing this title defect. If the
defect is not removed on or before October 5, 2000, the general
partnership may either terminate the Agreement, accept conveyance of
title to the property in its then existing condition or exclude such
encumbered portion of the property from the Agreement. If the general
partnership elects to exclude that encumbered portion of the property
from the Agreement, the general partnership's obligations under the
sales price schedule will be decreased by the number of residential
lots shown on such excluded portion of the property on the initial
master plan, the Seller will, at its expense, cause the excluded land
to be developed in accordance with the initial master plan and phasing
schedule, the Seller will be prohibited from using that excluded land
for any purpose other than residential development and the Seller will
be required to promptly reimburse the general partnership for all ad
valorem taxes paid prior to the general partnership's election to
exclude such land from the Agreement.
In addition to the liabilities described above, the general partnership
will have those liabilities normally incurred by developers. Meadow
14
<PAGE>
Pointe East, LLC has agreed toloan the general partnership up to
$1,000,000 to cover the payment of the annual fees and the repayment
of draws, if any, on the irrevocable letters of credit, to establish a
working capital fund and to assist with the modification of the
development order. This loan, due and payable in full in October 2004,
will bear and accrue interest at the prime rate quoted by Wells
Fargo & Company, adjusted from day to day, plus one point. Meadow
Pointe East, LLC will also have unlimited liability as a general
partner of the general partnership. The Seller has agreed to be
solely responsible for all costs of environmental "clean-up" or
remediation of contamination with respect to the property, if any, of
up to $100,000. If the cost of such clean-up or remediation exceeds
$100,000, then the general partnership may either terminate the
Agreement or exclude the contaminated portion of the property from the
Agreement, in which event the general partnership's obligations under
the sales price schedule will be decreased by the applicable number of
residential lots shown on the excluded portion of the property on the
initial master plan and the Seller will be required to promptly
reimburse the general partnership for all ad valorem taxes paid for
the excluded portion of the property prior to the general partnership's
election to exclude such land from the Agreement.
In addition to the termination provisions described above, the general
partnership may terminate the Agreement if the Seller defaults under
any provision of the Agreement (including, but not limited to, its
obligations to timely perform its obligations under the option
agreements). The Seller may terminate the Agreement if the general
partnership (a) fails to maintain an irrevocable letter of credit or
other security acceptable to the Seller securing the general
partnership's guarantee of the payment of the ad valorem taxes and the
special assessments as required by the Agreement, (b) fails, after a
curative period, to pay all ad valorem taxes and special assessments
required to be paid by the general partnership, (c) fails to purchase
the requisite number of residential lots to satisfy the sales price
schedule or (d) materially breaches any of its covenants in the
Agreement. As consideration for the general partnership's construction
of improvements on and to the property, its efforts to modify the
development order and its efforts to establish the CDDs (except for
Seller's specific rights with respect to certain easements), the Seller
has expressly waived all rights to seek damages from the general
partnership in the event of such termination.
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
(a) Exhibits: None
(B) Reports on Form 8-K
The registrant did not file any reports on Form 8-K during the period
covered by this report.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BF ENTERPRISES, INC.
(Registrant)
Date: November 12, 1999 /s/ Brian P. Burns
------------------
Brian P. Burns
Chairman of the Board, President
and Chief Executive Officer
(Duly Authorized Officer)
Date: November 12, 1999 /s/ S. Douglas Post
-------------------
S. Douglas Post
Vice President, Controller, Treasurer,
Chief Accounting Officer and
Assistant Secretary
(Principal Accounting Officer)
16
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<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-END> Sep-30-1999
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