SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 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 0-17626
SCOTTSDALE LAND TRUST LIMITED PARTNERSHIP
and
FFCA INVESTOR SERVICES CORPORATION 88-B
(Exact Name of Co-Registrants as Specified in Their
Organizational Documents)
Delaware 86-0588512
- ---------------------- ----------------------------
(Partnership State of (Partnership I.R.S. Employer
Organization) Identification No.)
Delaware 86-0588514
- ---------------------- ----------------------------
(Corporation State of (Corporation I.R.S. Employer
Incorporation) Identification No.)
The Perimeter Center
17207 North Perimeter Drive
Scottsdale, Arizona 85255
- ---------------------------------------- --------
(Address of Principal Executive Offices) Zip Code
Co-Registrants' telephone number, including area code: (602) 585-4500
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interests
-----------------------------
(Title of Class)
Assigned Limited Partnership Interests
--------------------------------------
(Title of Class)
Indicate by check mark whether the Co-Registrants (1) have 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
Co-Registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the Co-Registrants' knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
State the aggregate market value of the voting stock held by
non-affiliates of the Co-Registrants: Not applicable.
DOCUMENTS INCORPORATED BY REFERENCE
None
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PART I
Item 1. Business.
General
Scottsdale Land Trust Limited Partnership, a Delaware limited
partnership (the "Partnership"), was organized on August 12, 1987 under the
Delaware Revised Uniform Limited Partnership Act. The Partnership was organized
to (i) acquire approximately 261 gross acres of unimproved land (the "Property")
in Scottsdale, Arizona, (ii) develop roads, water, sewer, drainage, utility and
similar on-site and off-site improvements (collectively, the "Infrastructure")
with respect to the Property, (iii) sell the Property on a parcel-by-parcel
basis after construction of the Infrastructure and (iv) make a participating,
first mortgage loan to Franchise Finance Corporation of America ("FFCA"), a
Delaware corporation, which is an affiliate of the general partner of the
Partnership, so that FFCA may acquire a parcel of land within the Property and
construct an office building thereon. The general partner of the Partnership is
FFCA Management Company Limited Partnership, a Delaware limited partnership (the
"General Partner"). Perimeter Center Management Company ("PCMC"), a Delaware
corporation, is the corporate general partner of the General Partner. The
General Partner and PCMC have common ownership.
FFCA Investor Services Corporation 88-B, a Delaware corporation and
wholly-owned subsidiary of PCMC, was incorporated on August 11, 1987, to serve
as the initial limited partner of the Partnership and the owner of record of the
limited partnership interests in the Partnership. The limited partnership
interests are assigned by FFCA Investor Services Corporation 88-B to investors
in the Partnership. FFCA Investor Services Corporation 88-B conducts no other
business activity. The Partnership and FFCA Investor Services Corporation 88-B
are referred to collectively as the "Co-Registrants."
The statements contained in this report, if not historical, are
forward-looking statements and involve risks and uncertainties that could cause
actual results to differ materially from the results, financial or otherwise, or
other expectations described in such forward-looking statements. These
statements are identified with the words "expected", "anticipated" or "plans".
Therefore, forward-looking statements should not be relied upon as a prediction
of actual future results or occurrences.
The Offering
On June 14, 1988, the Co-Registrants commenced a public offering of
$50,000,000 in units of assigned limited partnership interest (the "Units") in
the Partnership pursuant to a Registration Statement on Form S-11 under the
Securities Act of 1933, as amended. The sale of the Units was completed on
November 23, 1988, with a total of 50,000 Units sold to investors at $1,000 per
Unit for a total of $50,000,000. Purchasers of the Units (the "Holders")
acquired such Units from FFCA Investor Services Corporation 88-B as of that
date. Subsequent to that
<PAGE>
date, no Holder has made any additional capital contribution. The Holders share
in the benefits of ownership of the Partnership's assets, including its real
property investments, according to the number of Units held in substantially the
same manner as limited partners of the Partnership.
After deducting organizational and offering expenses, including selling
commissions, the financial advisory fee, property acquisition fee and due
diligence expense reimbursement payable to Shearson Lehman Hutton Inc., the
Partnership had $43,250,000 in net offering proceeds following the conclusion of
the offering of the Units.
Acquisition of the Property
On June 7, 1988, the Partnership entered into a Purchase Agreement for
the Property with The Westcor Company II Limited Partnership, an Arizona limited
partnership ("Westcor II"). The Property was purchased by the Partnership on
December 1, 1988, with the Partnership paying $23,059,027 to Westcor II, and
$854,158 in capitalized closing costs, for a total acquisition price of
$23,913,185 (including certain reimbursements).
The FFCA Loan
On December 29, 1988, the Partnership entered into an Acquisition,
Construction and Term Loan Agreement (the "Loan Agreement") with FFCA, under
which the Partnership agreed to loan FFCA up to a maximum of $8,500,000 for the
acquisition of a 4.6-acre parcel of land within the Property (the "FFCA Parcel")
and the construction of an office building thereon (the "FFCA Office Building").
(The loan for the acquisition of the FFCA Parcel and the construction of the
FFCA Office Building is referred to hereafter as the "Acquisition and
Construction Loan.") On the same date, FFCA purchased the FFCA Parcel from the
Partnership at a purchase price of $704,214, which amount was advanced to FFCA
under the Acquisition and Construction Loan. The purchase price of the FFCA
Parcel was determined by independent appraisal to be the fair market value of
the parcel.
Construction of the FFCA Office Building was completed during April
1990 and the maximum $8,500,000 was advanced to FFCA under the Acquisition and
Construction Loan. The FFCA Parcel purchase price of $704,214 did not include
the portion of the cost of the Infrastructure which was allocated to the FFCA
Parcel when such Infrastructure was completed. The construction of the
Infrastructure was substantially completed by the end of the second quarter in
1990, therefore, such allocable portion was added to the amount drawn by FFCA
under the Loan Agreement. The total amount allocated to FFCA was $197,371. In
accordance with generally accepted accounting principles, the sale of the parcel
to FFCA will be recognized when the amounts loaned to FFCA are repaid to the
Partnership.
Pursuant to the terms of the Loan Agreement, upon expiration of the
term of the Acquisition and Construction Loan in April 1990, the outstanding
principal balance thereunder
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was converted into a long-term permanent loan (the "Permanent Loan"). The term
of the Permanent Loan is ten years and provides for payments of interest only,
at a rate of ten percent per year, until maturity, at which time the full
principal amount must be repaid to the Partnership. The maturity date of the
Permanent Loan is May 1, 2000. FFCA is obligated to pay this interest on a
monthly basis for interest accrued in the previous month. The Permanent Loan
also provides for the payment of additional interest ("Additional Interest")
upon maturity based upon the increase, if any, in the value of the FFCA Office
Building. The amount of Additional Interest, if any, to be paid by FFCA to the
Partnership will equal the greater of (i) 30% of the increase in the value of
the FFCA Office Building (including the FFCA Parcel) at the time of maturity of
the Permanent Loan or (ii) $1,130,000. The obligations of FFCA under the Loan
Agreement are guaranteed by the General Partner. During 1996, 1995 and 1994,
FFCA made all payments of interest on a timely basis. The payments were paid to,
and monitored by, an independent trustee on behalf of the Partnership.
The FFCA Office Building influences the quality and style of further
development of the Property, which is known as "The Perimeter Center." The FFCA
Office Building contains approximately 56,000 square feet of office space and
approximately 40,000 square feet of subterranean parking.
Currently, FFCA is obligated under the Loan Agreement for monthly
interest payments to the Partnership. The failure of FFCA to perform its
obligations under the Loan Agreement would have a material adverse effect on the
Partnership since the Partnership anticipates using the payments under the Loan
Agreement, in addition to the reserve established from the net proceeds of the
offering of the Units, and the interest earned on such reserve to meet its
operating expenses. FFCA is a self-administered real estate investment trust
which invests in chain restaurant real estate throughout the United States.
FFCA's common stock is listed and traded on the New York Stock Exchange under
the symbol "FFA."
Marketing and Sales Programs
The Partnership has implemented a marketing program in cooperation with
state and local economic development agencies and the real estate brokerage
community for recruitment of new and expanding businesses to The Perimeter
Center. The first phase of the plan was directed toward the local market through
a mailing to local companies to develop an interest in The Perimeter Center,
followed by a personal call or visit to follow up with interested parties. One
of these companies, TNT Bestway Transportation Inc. ("TNT Bestway"), purchased a
4.8-acre parcel of land in The Perimeter Center for a sales price of
approximately $1 million on February 6, 1996 for the relocation of their office
from downtown Phoenix. The transaction also gave TNT Bestway an option to
purchase an additional 6.5 adjacent acres through August 1998. TNT Bestway
intends to construct a 50,000 square foot office building with a planned
occupancy date in 1998.
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A second parcel sale was completed with Pacesetter, Inc., a subsidiary
of St. Jude Medical Inc., on January 17, 1996. Pacesetter, Inc. purchased an
11.8-acre parcel for a price of approximately $2.6 million with a right of first
refusal and option to purchase an additional 6 adjacent acres through January
1999. On February 2, 1996, Pacesetter, Inc. began construction on a 62,000
square foot chip manufacturing plant to produce computer chips for use in its
pacemakers and on February 10, 1997, held its grand opening. This biomedical
facility will employ over three hundred people.
On June 18, 1996, G & D Partnership closed on 1.6-acres and built
general offices for their corporate headquarters. The sales price for the land
was approximately $440,000. G & D Partnership, a construction company in the
Southwest, will have its grand opening in April 1997.
On December 23, 1996, Integrated Circuit Engineering, an international
company involved in the research and development of computer chips and wafer
fabrication, purchased 3.5-acres for approximately $1 million. Currently they
are building a 27,000 square foot building to serve as their headquarters and a
research and development facility.
Subsequent to December 31, 1996, there were additional parcel sales at
The Perimeter Center. As of March 14, 1997, the Partnership's 1997 parcel sales
totaled 10.1 acres of land to three companies for a total sales price of
approximately $2.9 million. The sites will include a medical and dental
facility, a marketing headquarters and office space. Through March 14, 1997, the
Partnership sold approximately 32 acres of land to unaffiliated third parties
(excluding the 4.6 acre parcel of land for the FFCA Parcel). The remaining
acreage to be sold approximates 163 acres.
A second major marketing emphasis was conducted through personal calls
to expanding companies located in the Scottsdale Industrial Airpark, which is
located within two miles of The Perimeter Center. The Scottsdale Industrial
Airpark is a mixed use commercial and industrial park and is the nearest
competitor to The Perimeter Center. Through the Scottsdale Chamber of Commerce,
the General Partner anticipates creating an increased interest in such companies
to relocate or expand to The Perimeter Center.
The third emphasis of the Partnership's marketing approach is to target
the real estate brokerage community and continually update the plat maps on new
purchases. Mailings, faxes and an ad campaign continue to promote The Perimeter
Center. The General Partner believes that there is currently a vacancy rate in
North Scottsdale of approximately 3% in office space. The General Partner
believes this will result in additional interest for potential purchases at The
Perimeter Center.
Development of the Property
The Partnership's primary investment objective is to achieve capital
appreciation of the Property through the development of the unimproved land
therein and the subsequent sale of such improved land on a parcel-by-parcel
basis. Improvement of the Property has primarily been accomplished by
implementing a master plan for the development of the Property, developing the
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Infrastructure and financing the acquisition of land and the construction of the
FFCA Office Building.
To enhance and protect the value of the Property, the Partnership has
prepared and recorded certain conditions, covenants and restrictions concerning
land use which consist of general guidelines for the orderly development and
improvement of the Property. These guidelines address such land use concerns as
excavation, landscaping, signs, parking areas, setbacks, artwork, building
materials and construction designs, exterior lighting and access to utilities. A
property owners' association (Perimeter Center Owners Association, Inc., an
Arizona nonprofit corporation) has been formed to further enhance the
development of the Property.
Approximately $9,000,000 of the proceeds from the offering has been
used to construct the Infrastructure, including roads, water, sewer, drainage,
sidewalks, bike paths, equestrian trails and other infrastructure. The
construction of the Infrastructure was completed in 1990. To the extent
permitted by local government authorities and utility companies, telephone,
electrical and cable television lines serving the Property have been placed
underground to enhance the appearance and development of the Property. The
General Partner believes that such Infrastructure will benefit the Property and
its development and sale. The General Partner does not anticipate any material
additions to the cost of the Infrastructure.
In 1989, the City of Scottsdale announced plans to build a temporary
four-lane road along the future Outer Loop freeway route. It is tentatively
anticipated that construction of this Freeway will be completed in 2003, subject
to receipt of specially allocated sales tax revenue. The estimated completion
date may be accelerated because the Arizona Department of Transportation revenue
is currently more than the amount included in the original projections. A
portion of the Pima freeway has been funded to the year 2000 to Frank Lloyd
Wright Boulevard, about 1 mile south of The Perimeter Center; from Frank Lloyd
Wright Boulevard to Scottsdale Road, the proposed schedule is for the year 2003.
Two major projects are being built to the West of The Perimeter Center which
could accelerate the completion of the freeway, the Sumitomo computer chip plant
and the Mayo Clinic Hospital.
Management Contract
In accordance with its partnership agreement, the Partnership entered
into an exclusive management contract (the "Management Agreement") with Westcor
II to develop the Infrastructure and to manage the Property. The following
paragraph summarizes certain provisions of the Management Agreement, which is
referenced in the Exhibit section to this Report. Such summaries are not
intended to be complete, and reference is hereby made to the Management
Agreement for further detail.
Westcor II receives certain fees under the Management Agreement in
connection with the management of the Property. Westcor II provides such
property management services on an
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exclusive basis pursuant to the terms of the Management Agreement. During 1996,
1995 and 1994, Westcor II received approximately $36,000 each year in fees from
the Partnership under the Management Agreement, in accordance with the 1994
amendment to the original Management Agreement. The 1994 amendment provided that
the property management fee be reduced from $125,000 per year to $36,000 per
year. The Management Agreement is renewable annually unless canceled at the
discretion of the Partnership or Westcor II.
Parcel Leasing
Although it is not currently anticipated, the Partnership may develop
or lease Parcels to take advantage of development opportunities but will not
build office or other buildings which have not been partially pre-leased prior
to the commencement of construction. The General Partner's policy will be to
receive leasing commitments representing at least 25% of the space available for
leasing prior to commencement of construction. Construction would be commenced
with a lesser percentage of commitments only in rental markets which indicate,
in the General Partner's opinion, sufficient demand. Such development may be
financed through cash reserves of the Partnership, debt secured by the developed
parcel or other available sources of capital. The Partnership may also enter
into participating or non-participating subordinated or unsubordinated ground
leases to encourage development of the Property. No such leases are currently
under consideration.
Competition
The Partnership's major source of competition for a corporate
relocation are the major cities in the southwest such as Denver, Salt Lake City,
Las Vegas and Albuquerque. In the greater Phoenix area, Tempe's Papago Park
Center, the Arizona State University Research Park and Phoenix's Sky Harbor
Center are the major competitors for relocation sites. These corporate centers
offer tax abatements (subject to the applicant's qualification) as they are
located on city land, an incentive not available to The Perimeter Center in
Scottsdale. These three corporate centers, however, offer only leased land which
gives The Perimeter Center an advantage with those companies interested in
purchasing property.
The nearest competition to The Perimeter Center is the Scottsdale
Industrial Airpark (the "Airpark"). The Airpark tends to attract heavier
industrial users on the property and has pricing competitive with The Perimeter
Center's lower-end parcels. The Perimeter Center, by contrast, is intended to be
developed with non-industrial type companies.
Real Estate Activities Near The Perimeter Center
A number of large residential housing projects are underway or in the
planning stages in the North Scottsdale area within a two-mile radius of The
Perimeter Center. One mile east of The Perimeter Center is West World, a
facility open to the public which offers western-type
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shows, rodeos, horse facilities, food and musical entertainment. West World
hosts such events as the Scottsdale Arabian Horse Show and Auction and the
Barrett Jackson Classic Auto Auction. One-half mile east of West World, a major
residential community of 4,400 homes called McDowell Mountain Ranch is under
development by Newhall Land & Farming Company of California.
To the north and northeast of The Perimeter Center are properties under
development as planned residential communities with homes ranging in price from
$150,000 to over $1,000,000, as well as adjoining golf courses. Further north
are the Boulders resort, Troon North golf course, Troon Country Club, Desert
Mountain golf course and Desert Highlands golf course, all with residential real
estate.
One-half mile west of The Perimeter Center is the Scottsdale Tournament
Players Club with two golf courses, the Desert Course and the Stadium Course
which is the site of the Phoenix Open Golf Tournament held each January. The
City of Scottsdale owns 80 acres adjacent to The Perimeter Center which is
reserved for temporary parking for the Phoenix Open. The Greenway/Hayden Loop
Bridge was constructed between the Desert and Stadium courses which provides for
an alternate and convenient route from The Perimeter Center to Frank Lloyd
Wright Boulevard. Forty acres adjacent to The Perimeter Center is being
developed by Coventry Homes, a Del Webb subsidiary, with 174 homes ranging in
price from $165,000 to $185,000.
In addition, a number of construction projects are planned, under
construction or completed one mile south of The Perimeter Center, including a
350-unit luxury apartment complex, a business motel, and two new retail centers
including Target, TJ Maxx, Albertson's, Fry's, and other retail stores, as well
as a 14-screen multiplex theater and numerous restaurants including McDonald's,
Wendy's, Taco Bell, Boston Market, Subway, Earls restaurant and Los Olivos
Mexican restaurant.
All of the above-mentioned development is planned to result in, within
a two-mile radius of The Perimeter Center, several new housing developments;
freeway access with the completion of the Outer Loop freeway; and convenient
shopping, entertainment and dining facilities to make The Perimeter Center a
premier location for corporate offices.
Additional Information
Compliance with federal, state and local law regarding the discharge of
materials into the environment or otherwise relating to the protection of the
environment has not had, and is not expected to have, any adverse effect upon
capital expenditures, earnings or the competitive position of the Partnership.
The Partnership is not presently a party to any litigation or administrative
proceeding with respect to its compliance with such environmental standards. In
addition, the Partnership does not anticipate being required to expend any funds
in the near future for environmental protection in connection with its
respective operations.
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The Partnership does not believe that any aspect of its business is
significantly seasonal in nature.
No portion of the Partnership's business is subject to renegotiation of
profits or termination of contracts or subcontracts at the election of the
United States Government. The Partnership does not manufacture any products and
therefore does not require any raw materials in order to conduct their business.
The Partnership and FFCA Investor Services Corporation 88-B (the
initial limited partner) have no employees.
Item 2. Properties.
Upon completion of the Partnership's public offering and acquisition of
the Property, the Partnership owned debt-free approximately 261 gross acres of
improved land located at the northwest corner of the intersection of Bell and
Pima Roads in Scottsdale, Arizona which is zoned for commercial development.
Approximately 75% of the Property's gross acres constitute net acres available
for sale or lease after the deduction of land dedicated for rights-of-way for
streets and other land not available for development. Infrastructure in place
includes gas, sewer, water, electricity, telephone, and all streets, curbs,
gutter and sidewalk work. At March 14, 1997, the Property consists of
approximately 163 acres available for sale. In 1996 and through March 14, 1997,
parcels were sold for between $4.83 and $7.50 per square foot. The Property is
north of downtown Scottsdale, Arizona and approximately two miles from the
Scottsdale Airport, a business commuter terminal. The following is a description
of the Property transactions completed as of March 14, 1997.
FFCA Office Building
On December 29, 1988, FFCA entered into an $8,500,000 Acquisition,
Construction and Term Loan Agreement for the acquisition of a 4.6-acre parcel of
land and the construction of an office building thereon containing approximately
56,000 square feet of office space, approximately 10,000 square feet for display
by the Fleischer Museum, and approximately 40,000 square feet of subterranean
parking. The construction of the Office Building was completed in April 1990.
FFCA is a self-administered real estate investment trust which invests in chain
restaurant real estate throughout the United States.
Pacesetter, Inc.
The sale transaction with Pacesetter, Inc., a subsidiary of St. Jude
Medical, Inc. based in St. Paul, Minnesota, was completed on January 17, 1996.
It involved the sale of an 11.8-acre parcel for a price of approximately $2.6
million. The transaction also gives Pacesetter, Inc. a
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right of first refusal and option to purchase an additional 6 adjacent acres
through January 1999. The new site is part of St. Jude Medical, Inc.'s plans to
expand its pacemaker business. Construction of the new facility was completed in
February 1997.
TNT Bestway Transportation, Inc.
The sale transaction with TNT Bestway Transportation Inc. was completed
on February 6, 1996. It involved the sale of a 4.8-acre parcel for a sales price
of approximately $1 million. The transaction also gives TNT Bestway an option to
purchase an additional 6.5 adjacent acres through August 1998. The site will
become the freight transportation company's regional office, covering California
to Texas.
G & D Partnership
The sale transaction with G & D Partnership was completed on June 18,
1996. It involved the sale of a 1.64-acre parcel for a sales price of
approximately $440,000. G & D Partnership operates a construction company in the
Southwest and will be building their corporate headquarters on the site.
Integrated Circuit Engineering Corporation
The sale transaction with Integrated Circuit Engineering Corporation
(ICE) was completed on December 23, 1996. It involved the sale of a 3.8-acre
parcel for a sales price of approximately $1 million. ICE serves the
semiconductor industry through market research, consulting, publications,
seminars and semiconductor laboratory services. The new site will be the
corporation's world headquarters.
Coyote View Plaza, L.L.C.
The sale transaction with Coyote View Plaza L.L.C. was completed on
January 15, 1997. It involved a 2.1-acre parcel which sold for approximately
$500,000. The new site will be a medical and dental facility.
Rhymes Transaction
The sale transaction with Douglas Rhymes was completed on February 20,
1997. It involved the sale of a 1.8-acre parcel for a sales price of
approximately $600,000. The new site will be the corporate headquarters for
Discover the World Marketing which outsources marketing activities for the
airline industry throughout the world. An 18,000 square foot facility will be
built, a portion of which will be office space for rent.
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Cornwell Financial Corporation
The sale transaction with Cornwell Financial Corporation was completed
on February 28, 1997. It involved the sale of two parcels of land totaling 6.2
acres for a sales price of approximately $1.8 million. Cornwell Financial
Corporation develops office space.
Item 3. Legal Proceedings.
Neither the Co-Registrants nor their properties are parties to, or
subject to, any material pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted to a vote of the Holders through the
solicitation of proxies or otherwise during the fourth quarter of fiscal year
1996.
PART II
Item 5. Market for Co-Registrants' Units and Related Security Holder Matters.
Market Information. During 1996, there was no established public
trading market for the Units, and it is unlikely that an established public
trading market for the Units will develop.
Holders. As of March 14, 1997, there were 3,136 record holders of the
Units.
Distributions. In accordance with the Amended and Restated Certificate
and Agreement of Limited Partnership of the Partnership (the "Partnership
Agreement"), the Partnership made no cash distributions to the Holders in fiscal
years 1995 or 1994. The following cash distributions were made in 1996 from
proceeds received on the sale of land parcels during 1996:
Date of Number Per Unit Total
Distribution of Units Distributions Distributions
------------ -------- ------------- -------------
March 31 50,000 $70.37 $3,518,500
June 30 50,000 6.14 307,000
September 30 50,000 - -
December 31 50,000 18.79 939,500
------ -----------
$95.30 $4,765,000
====== ==========
Adjusted Capital Contribution is defined in the Partnership Agreement
as the Holder's initial capital contribution reduced to not less than zero by
cash distributions to the Holders (a)
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from Parcel Revenues (as defined in the Partnership Agreement), (b) from Sale or
Refinancing Proceeds (as defined in the Partnership Agreement), (c) from any
principal payments received from the Acquisition and Construction Loan and the
Permanent Loan or any other loan by the Partnership, or (d) classified as a
return of capital under generally accepted accounting principles. The Adjusted
Capital Contribution of the Holders was $923.49 per Unit as of December 31,
1996.
The primary source of cash distributions in the future is expected to
be from the sale or lease of parcels of the Property. Generally, net proceeds
received from the sale or lease of the parcels of the Property will be
distributed 100% to the Holders to the extent of the Adjusted Parcel Investment
(as defined in the Partnership Agreement) of each parcel, plus a preferred
return on the Adjusted Parcel Investment equal to a cumulative, non-compounded
return of ten percent per annum. Thereafter, approximately 50% of any remaining
proceeds will be distributed to the Holders. The Adjusted Parcel Investment, as
defined in the Partnership Agreement, is generally an amount which approximates
the capital contributions of the Holders invested in a parcel, including a
proportionate amount of allocable front-end fees paid in connection with the
organization of the Partnership, the offering and sale of the Units and the
acquisition of the Property. Distribution of the proceeds from the sale or
refinancing of parcels of the Property or of revenues from leased parcels, if
any, are anticipated to be made at such times as the General Partner deems
appropriate and in the best interest of the Partnership. The General Partner may
withhold distributions if necessary or appropriate for the conduct of the
Partnership's business or for the construction of buildings for other
improvements on parcels in the Property. For a complete description of the
manner in which the disbursable cash of the Partnership and proceeds from the
sale or refinancing of the parcels comprising the Property will be distributed
and the manner in which the profits, gains, losses, deductions and credits of
the Partnership will be allocated, reference is hereby made to Article Four of
the Partnership Agreement referenced as Exhibit 4 to this Report.
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Item 6. Selected Financial Data.
The following selected financial data should be read in conjunction
with the Financial Statements and the related notes attached as an exhibit to
this Report.
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994 1993 1992
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues $ 5,981,588 $ 920,426 $ 892,589 $ 889,361 $ 927,138
Net Income (Loss) 1,974,758 46,044 153,430 (407,529) (599,703)
Net Income (Loss) Per
Limited Partnership Unit 39.49 .91 3.04 (8.07) (11.87)
Total Assets 40,259,651 42,024,785 41,989,599 41,858,418 42,445,522
Distributions of Cash from
Operations to Holders 4,765,456 -- -- -- --
Distributions of Cash from
Operations Per Unit 95.30 -- -- -- --
Return of Capital to Holders -- -- -- -- --
Return of Capital Per Unit -- -- -- -- --
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Liquidity and Capital Resources
The Partnership received $50,000,000 in gross proceeds from its public
offering of the Units on November 23, 1988. After deducting organizational and
offering expenses, including selling expenses, the financial advisory fee,
property acquisition fee and due diligence expense reimbursement payable to
Shearson Lehman Hutton Inc., the Partnership had $43,250,000 in net proceeds
available for investment. On December 1, 1988, the Partnership used $23,913,185
to acquire the Property. The remaining net offering proceeds were used to
complete the construction of the Infrastructure and to fully fund the loan to
FFCA for the FFCA Office Building and establish an initial reserve of
approximately $2,800,000. Interest payments under the Loan Agreement with FFCA
and interest earned on the Partnership's reserves have been the Partnership's
primary sources of revenue in 1995 and 1994. The Partnership's primary source of
revenue in 1996 was from land sales.
It is anticipated that the Partnership's revenues along with remaining
reserves of approximately $1.3 million at December 31, 1996, to the extent
required, will be sufficient to pay the Partnership's operating expenses in 1997
and that cash proceeds from the sale of parcels will be available for
distribution to the Holders. At December 31, 1996, the Partnership had cash and
marketable securities with a maturity of three months or less aggregating
$2,418,201 of which $939,500 was paid out to the Holders in February 1997 as
their fourth quarter 1996 distribution, and the remainder of which will be held
by the Partnership for reserves. The
12
<PAGE>
liquidity of the Partnership may be adversely affected by a significant increase
in property taxes levied on the Property and an increase in expenses associated
with the maintenance of the Property. There can be no assurance that the income
of the Partnership and the amount of the reserve established by the Partnership
will be sufficient to meet the Partnership's operating expenses in the future.
Although not currently anticipated, the General Partner has the power to borrow
funds on behalf of the Partnership if it deems such borrowing to be in the best
interests of the Partnership. In connection with such borrowing, the General
Partner may mortgage, pledge or otherwise encumber the assets of the
Partnership, including the Property. There is no assurance, however, that a
lender would be willing to loan money to the Partnership on a non-recourse
basis.
During 1996, the Partnership sold four parcels of land which provided
for cash sales prices aggregating approximately $5 million for 22 acres of land
to unaffiliated third parties. The parcels had a total original cost of
approximately $2.8 million and closing and other costs of approximately
$240,000. These parcel sales resulted in gains of approximately $2 million.
Distributions declared from the parcel sales amounted to $4,765,456 in 1996.
At December 31, 1996, the Partnership had five parcels of land
(approximately 21.4 acres) with an aggregate cost of approximately $3 million
under contract for sale for approximately $5.7 million to unaffiliated third
parties. One contract provides for a right of first refusal on an additional 9.4
acres (two parcels) of land for a period of up to two years on one parcel and up
to three years on the other parcel. Subsequent to December 31, 1996, the
Partnership closed the sale of three of these parcels and recognized a gain of
approximately $975,000. Approximately 163 acres remain available for sale within
The Perimeter Center and the Partnership has entered into preliminary
negotiations for the sale of several of the smaller land parcels. The
Partnership cannot determine which, if any, of these negotiations will result in
the sale of a land parcel and, therefore, cannot predict the timing or amount of
any future cash distributions.
The General Partner knows of no other trends, demands, commitments,
events or uncertainties that will result in or that are reasonably likely to
result in the Partnership's liquidity increasing or decreasing in any material
way.
FFCA Investor Services Corporation 88-B serves as the initial limited
partner of the Partnership and the owner of record of the limited partner
interests in the Partnership, the rights and benefits of which are assigned by
FFCA Investor Services Corporation 88-B to investors in the Partnership. FFCA
Investor Services Corporation 88-B has no other business activity and has no
capital resources.
13
<PAGE>
Results of Operations
Fiscal Year Ended December 31, 1996 Compared to
Fiscal Year Ended December 31, 1995
Total revenues were $5,981,588 for the year ended December 31, 1996 as
compared to $920,426 for the year ended December 31, 1995. The increase in
revenues relates primarily to land sales of $5 million and to an increase in
interest income earned on temporary investment securities held during the year
resulting from land sale proceeds invested, prior to distribution to the limited
partners.
Total expenses increased to $4,006,830 for the year ended December 31,
1996 from $874,382 for the year ended December 31, 1995. The increase primarily
represents the cost of land sales aggregating $3,036,171, which includes the
original land and infrastructure costs totaling $2,797,923 and costs totaling
$238,248 related to closing the sales transactions. In addition, General Partner
fees were higher in 1996 than in 1995 because the General Partner, in its
discretion, permanently waived approximately $109,000 of the partnership
management fees otherwise payable by the Partnership in 1995. Marketing costs
also increased from $67,737 in 1995 to $81,436 in 1996 related to increased
marketing efforts at The Perimeter Center. The decrease in property taxes from
$186,455 in 1995 to $175,626 in 1996 resulted from the sale of land parcels
during 1996.
Fiscal Year Ended December 31, 1995 Compared to
Fiscal Year Ended December 31, 1994
Total revenues were $920,426 for the year ended December 31, 1995 as
compared to $892,589 for the year ended December 31, 1994. The increase in
revenues relates to an increase in interest earned on temporary investments due
to higher interest rates earned on these investments.
Total expenses increased to $874,382 for the year ended December 31,
1995 from $739,159 for the year ended December 31, 1994. The increase of
approximately $135,000 is due to increases in General Partner fees, marketing
costs and property taxes. The General Partner, in its discretion, waived
approximately $109,000 of the partnership management fee in 1995 and $212,000 in
1994. The waiver was granted in order to reduce the Partnership's reliance on
cash reserves to fund operations. Marketing costs increased from $14,030 in 1994
to $67,737 in 1995 related to increased marketing efforts by the Partnership.
Property taxes amounted to $186,455 in 1995 as compared to $150,247 in 1994.
Property tax expense in 1994 was lower than in 1995 due to a refund of 1993
taxes approximating $30,000 received in 1994 as a result of a successful tax
appeal.
14
<PAGE>
Inflation
Inflation in future periods may tend to cause capital appreciation of
land in general; however, the value of any particular land, including the
Property, may increase at a rate different from the inflation rate or decrease
based upon other factors, such as the demand for land in the area where the
particular land is located and the availability of comparable land in the same
area. If the Partnership decides to lease parcels of the Property, capital
appreciation may cause an increase in the amount of lease payments due under
future leases just as it may cause an increase in the value of the land.
Inflation may, however, have an adverse impact on the profitability of the
Partnership because of increases in its operating expenses, as well as any
possible lessees' operating expenses.
Item 8. Financial Statements and Supplementary Data.
The financial statements of the Co-Registrants required by Regulation
S-X are attached to this Report. Reference is made to Item 14 below for an index
to the financial statements and financial statement schedule.
Item 9. Disagreements on Accounting and Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers.
The Partnership, the General Partner and the Company have no directors
or executive officers. PCMC is the corporate general partner and Morton H.
Fleischer is an individual general partner of the General Partner. The General
Partner has responsibility for all of the Partnership's operations. The
directors and executive officers of PCMC and FFCA Investor Services Corporation
88-B are as follows:
PCMC
Directors
Name Position Held Since
---- -------------------
Morton H. Fleischer 1993
15
<PAGE>
Officers
<TABLE>
<CAPTION>
Associated With
Name Positions Held PCMC Since
- ---- -------------- ----------
<S> <C> <C>
Morton H. Fleischer President and Chief Executive Officer 1993
John R. Barravecchia Executive Vice President, Chief Financial Officer,
Treasurer and Assistant Secretary 1993
Christopher H. Volk Executive Vice President, Chief Operating
Officer, Secretary and Assistant Treasurer 1993
Dennis L. Ruben Executive Vice President, General Counsel
and Assistant Secretary 1994
Stephen G. Schmitz Executive Vice President, Chief Investment
Officer and Assistant Secretary 1995
Catherine F. Long Senior Vice President-Finance, Principal
Accounting Officer, Assistant Secretary
and Assistant Treasurer 1993
</TABLE>
FFCA INVESTOR SERVICES CORPORATION 88-B
Director
Name Position Held Since
---- -------------------
Morton H. Fleischer, Chairman 1986
Officers
<TABLE>
<CAPTION>
Position Held
Name Positions Held Since
---- -------------- -----
<S> <C> <C>
Morton H. Fleischer Chairman of the Board of Directors 1986
John R. Barravecchia President, Secretary and Treasurer 1990
Christopher H. Volk Vice President, Assistant Secretary and 1994
Assistant Treasurer
</TABLE>
All of the foregoing directors and executive officers have been elected
to serve a one year term and until their successors are elected and qualified.
There are no arrangements or understandings between or among any of the officers
or directors and any other person pursuant to which any officer or director was
selected as such. There are no family relationships among any directors and
officers.
16
<PAGE>
Business Experience
The business experience during the past five years of each of the above
directors and executive officers is as follows:
Morton H. Fleischer, age 60, served as a director, President and Chief
Executive Officer of PCMC since 1993, and as Chairman of the Board of FFCA
Investor Services Corporation 88-B since 1986. Mr. Fleischer also serves as
President, Chief Executive Officer and Chairman of the Board of Franchise
Finance Corporation of America, a Delaware corporation ("FFCA") having
previously served as a director, President and Chief Executive Officer of
Franchise Finance Corporation of America I ("FFCA I"), a predecessor of FFCA,
from 1980 to 1994. Mr. Fleischer is an individual general partner of the General
Partner, and is a general partner (or general partner of a general partner) of
the following public limited partnerships: Participating Income Properties 1986,
L.P.; Participating Income Properties II, L.P. and Participating Income
Properties III Limited Partnership.
John R. Barravecchia, age 41, served as President, Secretary and
Treasurer of FFCA Investor Services Corporation 88-B since 1990. He served as
Chief Financial Officer of PCMC since 1993 and as Senior Vice President and
Treasurer since 1994. In 1995, Mr. Barravecchia was named Executive Vice
President of PCMC. Mr. Barravecchia currently serves as Executive Vice
President, Chief Financial Officer, Treasurer and Assistant Secretary of FFCA
and served in various capacities for FFCA I from 1984 to 1994. He was appointed
Vice President and Chief Financial Officer of FFCA I in December 1986, and
Senior Vice President in October 1989. Mr. Barravecchia was elected as a
director of FFCA I in March 1993 and Treasurer in December 1993. Prior to
joining FFCA I, Mr. Barravecchia was associated with the international public
accounting firm of Arthur Andersen LLP.
Christopher H. Volk, age 40, served as Vice President, Assistant
Secretary and Assistant Treasurer of FFCA Investor Services Corporation 88-B
since 1994, and served as Secretary of PCMC since 1993 and Senior Vice
President--Underwriting and Research since 1994. In 1995, Mr. Volk was named
Executive Vice President and Chief Operating Officer of PCMC. Mr. Volk currently
serves as Executive Vice President, Chief Operating Officer, Secretary and
Assistant Treasurer of FFCA. He joined FFCA I in 1986 and served in various
capacities in FFCA I's capital preservation and underwriting areas prior to
being named Vice President-Research in October 1989. In December 1993, he was
appointed Secretary and Senior Vice President-Underwriting and Research of FFCA
I, and he was elected as a director of FFCA I in March 1993. Prior to joining
FFCA I, Mr. Volk was employed for six years with the National Bank of Georgia,
where his last position was Assistant Vice President and Senior Correspondent
Banking Credit Officer. Mr. Volk is a member of the Association for Investment
Management and Research and the Phoenix Society of Financial Analysts.
17
<PAGE>
Dennis L. Ruben, age 44, served as Senior Vice President and General
Counsel for PCMC since 1994. Mr. Ruben was named Executive Vice President,
General Counsel and Assistant secretary of PCMC in February 1997. He currently
serves in the same capacity for FFCA and served as attorney and counsel for FFCA
I from 1991 to 1994. In December 1993, he was appointed Senior Vice President
and General Counsel of FFCA I. Prior to joining FFCA I, Mr. Ruben was associated
with the law firm of Kutak Rock from 1980 until March 1991. Mr. Ruben became a
partner of Kutak Rock in 1984. Mr. Ruben has been admitted to the Iowa, Nebraska
and Colorado bars.
Stephen G. Schmitz, age 42, served as Senior Vice President-Corporate
Finance of PCMC since January 1996. He was named Executive Vice President, Chief
Investment Officer and Assistant Secretary of PCMC in February 1997. He
currently serves in the same capacity for FFCA. Mr. Schmitz served in various
positions as an officer of FFCA I from 1986 to June 1, 1994. Prior to joining
FFCA I, Mr. Schmitz was a commercial lender with Mellon Bank in Pittsburgh,
where his last position was Vice-President and Section Manager.
Catherine F. Long, age 40, served as Vice President--Finance and
Principal Accounting Officer of PCMC since 1994, and Vice President from 1993 to
1994. In February 1997 she was named Senior Vice President-Finance of PCMC. She
currently serves as Senior Vice President-Finance, Principal Accounting Officer,
Assistant Secretary and Assistant Treasurer of FFCA and served as Vice
President-Finance of FFCA I from 1990 to 1993. In December 1993, she was
appointed Principal Accounting Officer of FFCA I. From December 1978 to May
1990, Ms. Long was associated with the international public accounting firm of
Arthur Andersen LLP. Ms. Long is a certified public accountant and is a member
of the Arizona Society of Certified Public Accountants.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to the Co-Registrants during fiscal year 1996 and Forms 5 and
amendments thereto furnished to the Co-Registrants with respect to fiscal year
ended December 31, 1996 (the "Forms"), and any written representations by the
directors and executive officers of FFCA Investor Services Corporation 88-B and
PCMC, the Co-Registrants have not identified herein any such person that failed
to file on a timely basis the Forms required by Section 16(a) of the Securities
Exchange Act of 1934 for fiscal year 1996.
Item 11. Executive Compensation.
Pursuant to provisions contained in the agreement of limited
partnership which governs the Partnership, the officers and directors of PCMC
serve in such capacities without remuneration from the Partnership.
18
<PAGE>
The Partnership is required to pay a partnership management fee and a
subordinated incentive share of sale or refinancing proceeds or parcel revenues
to the General Partner, and the General Partner is entitled to receive a share
of cash distributions, when and as made to the Holders and a share of profits
and losses. Reference is made to Note 7 of the Notes to the Financial Statements
of the Partnership which are filed with this Report for a description of the
fees paid to the General Partner in 1996.
FFCA Investor Services Corporation 88-B serves as assignor and initial
limited partner without compensation from the Partnership. It is not entitled to
any share of the profits, losses or cash distributions of the Partnership. The
director and officers of FFCA Investor Services Corporation 88-B serve without
compensation from FFCA Investor Services Corporation 88-B or the Partnership.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
As of December 31, 1996, no person or group was known by the
Partnership to own directly or beneficially more than 5% of the outstanding
Units of the Partnership.
The General Partner of the Partnership and its general partners owned
no Units as of December 31, 1996. The directors and officers of the General
Partner's corporate general partner, PCMC, individually and as a group, owned
less than 1% of the Units as of December 31, 1996. PCMC is owned by Morton H.
Fleischer.
FFCA Investor Services Corporation 88-B has an interest in the
Partnership as a limited partner and it serves as the owner of record of all of
the limited partnership interests assigned by it to the Holders. However, FFCA
Investor Services Corporation 88-B has no right to vote its interest on any
matter and it must vote the assigned interests as directed by the Holders. FFCA
Investor Services Corporation 88-B is wholly owned by PCMC.
Item 13. Certain Relationships and Related Transactions.
Since the beginning of the Co-Registrants' last fiscal year, there have
been no significant transactions or business relationships among the
Co-Registrants, the General Partner and PCMC or their affiliates or their
management other than those described in Items 1, 7, 10 and 11 above.
19
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
The following documents are filed as part of this Report:
1. Financial Statements
The Partnership
Report of independent public accountants
Balance Sheets as of December 31, 1996 and 1995
Statements of Operations for the years ended
December 31, 1996, 1995 and 1994
Statements of Changes In Partners' Capital for the
years ended December 31, 1996, 1995 and 1994
Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994
Notes to Financial Statements
FFCA Investor Services Corporation 88-B
Report of independent public accountants
Balance Sheet as of December 31, 1996
Notes to Balance Sheet
2. Financial Statement Schedules
Schedule III-Schedule of Real Estate as of
December 31, 1996
All other schedules are omitted since they are not
required, are inapplicable, or the required information is
included in the financial statements or notes thereto.
3. Exhibits
99. Annual Portfolio Valuation of Cushman & Wakefield as of
December 31, 1996.
20
<PAGE>
Pursuant to Rule 12b-32 under the Securities Exchange
Act of 1934, as amended, the following documents, filed with
the Securities and Exchange Commission on March 31, 1994 as
exhibits to the Co-Registrants' Form 10-K for the fiscal year
ended December 31, 1993, Commission File No. 0-17626, are
incorporated herein by this reference.
Form 10-K
Exhibit No
----------
First Amendment to Exclusive Management 10.1
Agreement by and between the
Partnership and The Westcor Company II
Limited Partnership, dated May 1, 1990.
Second Amendment to Exclusive 10.2
Management Agreement by and between the
Partnership and The Westcor Company II
Limited Partnership, dated January 1,
1994.
Pursuant to Rule 12b-32 under the Securities Exchange
Act of 1934, as amended, the following documents, filed with
the Securities and Exchange Commission on March 24, 1989 as
exhibits to the Co-Registrants' Form 10-K for the fiscal year
ended December 31, 1988, Commission File No. 33-18041, are
incorporated herein by this reference.
Form 10-K
Exhibit No.
-----------
The Amended and Restated Certificate 4
and Agreement of Limited Partnership
which governs the Partnership, as filed
with the Secretary of State of Delaware
on November 23, 1988.
Acquisition, Construction and Term Loan 10
Agreement by and between the
Partnership and Franchise Finance
Corporation of America, dated as of
December 29, 1988.
Pursuant to Rule 12b-32 under the Securities Exchange
Act of 1934, as amended, the following documents, filed with
the Securities and Exchange Commission on June 14, 1988 as
exhibits to the Co-Registrants' Registration Statement on Form
S-11, Registration No. 33-18041, are incorporated herein by
this reference.
21
<PAGE>
Exhibit No.
-----------
The Certificate of Incorporation which 4(b)
governs FFCA Investor Services
Corporation 88-B, as filed with the
Secretary of State of Delaware on
August 11, 1987.
Bylaws of FFCA Investor Services 4(c)
Corporation 88-B.
Exclusive Management Contract by and 10(c)
between the Partnership and The Westcor
Company II Limited Partnership, dated
as of June 7, 1988.
Reports on Form 8-K
No reports on Form 8-K were filed by the
Co-Registrants during the last quarter of the fiscal
year ended December 31, 1996.
22
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Partnership has duly caused this Report to
be signed on its behalf by the undersigned, thereunto duly authorized.
SCOTTSDALE LAND TRUST LIMITED PARTNERSHIP
By FFCA MANAGEMENT COMPANY LIMITED
PARTNERSHIP, General Partner
Date: March 26, 1997 By /s/ Morton H. Fleischer
---------------------------------
Morton H. Fleischer, General Partner
By PERIMETER CENTER MANAGEMENT
COMPANY, Corporate General
Partner
Date: March 26, 1997 By /s/ Morton H. Fleischer
---------------------------------
Morton H. Fleischer, Chairman of the
Board, President and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this Report has been signed below by the following persons on behalf of
the Partnership and in the capacities and on the dates indicated.
SIGNATURES OF REQUIRED OFFICERS AND DIRECTORS OF PERIMETER CENTER
MANAGEMENT COMPANY, CORPORATE GENERAL PARTNER OF FFCA MANAGEMENT
COMPANY LIMITED PARTNERSHIP, GENERAL PARTNER OF SCOTTSDALE LAND TRUST
LIMITED PARTNERSHIP.
Date: March 26, 1997 By /s/ Morton H. Fleischer
-------------------------------------
Morton H. Fleischer, Chairman of
the Board, President, Chief
Executive Officer and Director
<PAGE>
Date: March 26, 1997 By /s/ John R. Barravecchia
-------------------------------------
John R. Barravecchia, Executive
Vice President, Chief Financial
Officer, Treasurer and Assistant
Secretary
Date: March 26, 1997 By /s/ Catherine F. Long
-------------------------------------
Catherine F. Long, Senior Vice
President-Finance and Principal
Accounting Officer, Assistant
Secretary and Assistant Treasurer
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the co-registrant has duly caused this Report
to be signed on its behalf by the undersigned, thereunto duly authorized.
FFCA INVESTOR SERVICES
CORPORATION 88-B
Date: March 26, 1997 By /s/ Morton H. Fleischer
-------------------------------------
Morton H. Fleischer, Sole
Director
Date: March 26, 1997 By /s/ John R. Barravecchia
-------------------------------------
John R. Barravecchia, President,
Secretary, Principal Financial
Officer and Principal Accounting
Officer
<PAGE>
SCOTTSDALE LAND TRUST LIMITED PARTNERSHIP
and
FFCA INVESTOR SERVICES CORPORATION 88-B
--------------------------
Exhibit Index
--------------------------
<TABLE>
<CAPTION>
<S> <C>
Sequentially
Exhibit Numbered Page
------- -------------
99. Annual Portfolio Valuation of Cushman & Wakefield
as of December 31, 1996.
Pursuant to Rule 12b-32 under the Securities Exchange Act of
1934, as amended, the following documents, filed with the Securities
and Exchange Commission on March 31, 1994 as exhibits to the
Co-Registrants' Form 10-K for fiscal year ended December 31, 1993,
Commission File No. 0-17626, are incorporated herein by this reference.
Form 10-K
Exhibit No.
-----------
First Amendment to Exclusive Management 10.1
Agreement by and between the Partnership and
The Westcor Company II Limited Partnership, dated May 1, 1990.
Second Amendment to Exclusive Management 10.2
Agreement by and between the Partnership and
The Westcor Company II Limited Partnership, dated January 1, 1994.
</TABLE>
Pursuant to Rule 12b-32 under the Securities Exchange Act of
1934, as amended, the following documents, filed with the Securities
and Exchange Commission on March 24, 1989 as exhibits to the
Co-Registrants' Form 10-K for fiscal year ended December 31, 1988,
Commission File No. 33-18041, are incorporated herein by this
reference.
<PAGE>
Form 10-K
Exhibit No.
-----------
The Amended and Restated Certificate and Agreement 4
of Limited Partnership which governs the Partnership, as
filed with the Secretary of State of Delaware on
November 23, 1988.
Acquisition, Construction and Term Loan Agreement by and 10
between the Partnership and Franchise Finance Corporation of
America, dated as of December 29, 1988.
Pursuant to Rule 12b-32 under the Securities Exchange Act of
1934, as amended, the following documents, filed with the Securities
and Exchange Commission on June 14, 1988 as exhibits to the
Co-Registrants' Registration Statement on Form S-11, Registration No.
33-18041, are incorporated herein by this reference.
Exhibit No.
-----------
The Certificate of Incorporation which governs the 4(b)
Corporation, as filed with the Secretary of State
of Delaware on August 11, 1987.
Bylaws of FFCA Investor Services Corporation 88-B. 4(c)
Exclusive Management Contract by and between the 10(c)
Partnership and The Westcor Company II Limited Partnership,
dated as of June 7, 1988.
<PAGE>
Report of Independent Public Accountants
To Scottsdale Land Trust Limited Partnership:
We have audited the accompanying balance sheets of SCOTTSDALE LAND
TRUST LIMITED PARTNERSHIP (a Delaware limited partnership) as of December 31,
1996 and 1995, and the related statements of operations, changes in partners'
capital and cash flows for each of the three years in the period ended December
31, 1996. These financial statements and the schedule referred to below are the
responsibility of the partnership's general partner. Our responsibility is to
express an opinion on these financial statements and schedule 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 Scottsdale Land
Trust 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 schedule of Real Estate is presented
for purposes of complying with the Securities and Exchange Commission's rules
and is not a required part of the basic financial statements. This schedule has
been subjected to the auditing procedures applied in our audits of the basic
financial statements and, in our opinion, fairly states in all material respects
the financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Phoenix, Arizona,
January 17, 1997.
<PAGE>
SCOTTSDALE LAND TRUST LIMITED PARTNERSHIP
-----------------------------------------
BALANCE SHEETS - DECEMBER 31, 1996 AND 1995
-------------------------------------------
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
------
CASH AND CASH EQUIVALENTS $ 2,418,201 $ 1,362,963
LAND HELD FOR SALE 26,326,289 30,087,685
LAND SUBJECT TO SALE AGREEMENTS (Note 3) 2,980,166 2,016,693
LAND SUBJECT TO SALE AGREEMENT
WITH AFFILIATE (Note 4) 788,287 788,287
LOAN RECEIVABLE FROM AFFILIATE (Notes 1 and 4) 7,598,415 7,598,415
PREPAID EXPENSES AND OTHER 148,293 170,742
------------ ------------
Total assets $ 40,259,651 $ 42,024,785
============ ============
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
DISTRIBUTION PAYABLE TO LIMITED PARTNERS $ 939,956 $ --
PAYABLE TO GENERAL PARTNER 58,481 27,097
ACCOUNTS PAYABLE AND ACCRUED EXPENSES 160,927 106,703
------------ ------------
Total liabilities 1,159,364 133,800
------------ ------------
PARTNERS' CAPITAL (DEFICIT):
General partner (12,529) (12,601)
Limited partners 39,112,816 41,903,586
------------ ------------
Total partners' capital 39,100,287 41,890,985
------------ ------------
Total liabilities and partners' capital $ 40,259,651 $ 42,024,785
============ ============
</TABLE>
The accompanying notes are an integral part of these balance sheets.
<PAGE>
SCOTTSDALE LAND TRUST LIMITED PARTNERSHIP
-----------------------------------------
STATEMENTS OF OPERATIONS
------------------------
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
----------------------------------------------------
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
REVENUES:
Land sales $5,003,703 $ -- $ --
Interest on loan to affiliate 850,000 850,000 850,000
Interest on investments and other 127,885 70,426 42,589
---------- ---------- ----------
5,981,588 920,426 892,589
---------- ---------- ----------
EXPENSES:
Cost of land sales 3,036,171 -- --
General partner fees (Note 7) 360,752 266,264 163,378
Property management fees (Note 5) 36,000 36,000 36,000
Marketing 81,436 67,737 14,030
Property taxes 175,626 186,455 150,247
Other operating 316,845 317,926 375,504
---------- ---------- ----------
4,006,830 874,382 739,159
---------- ---------- ----------
NET INCOME $1,974,758 $ 46,044 $ 153,430
========== ========== ==========
NET INCOME ALLOCATED TO (Note 1):
General partner $ 72 $ 460 $ 1,534
Limited partners 1,974,686 45,584 151,896
---------- ---------- ----------
$1,974,758 $ 46,044 $ 153,430
========== ========== ==========
NET INCOME PER LIMITED
PARTNERSHIP UNIT (based on 50,000
units held by limited partners) $ 39.49 $ .91 $ 3.04
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
SCOTTSDALE LAND TRUST LIMITED PARTNERSHIP
-----------------------------------------
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
----------------------------------------------------
<TABLE>
<CAPTION>
General Limited
Partner Partners Total
------------ ------------ ------------
<S> <C> <C> <C>
BALANCE, December 31, 1993 $ (14,595) $ 41,706,106 $ 41,691,511
Net income 1,534 151,896 153,430
------------ ------------ ------------
BALANCE, December 31, 1994 (13,061) 41,858,002 41,844,941
Net income 460 45,584 46,044
------------ ------------ ------------
BALANCE, December 31, 1995 (12,601) 41,903,586 41,890,985
Net income 72 1,974,686 1,974,758
Distributions to limited partners (Note 1) -- (4,765,456) (4,765,456)
------------ ------------ ------------
BALANCE, December 31, 1996 $ (12,529) $ 39,112,816 $ 39,100,287
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
SCOTTSDALE LAND TRUST LIMITED PARTNERSHIP
-----------------------------------------
STATEMENTS OF CASH FLOWS
------------------------
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
----------------------------------------------------
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,974,758 $ 46,044 $ 153,430
Adjustments to net income:
Change in assets and liabilities:
Decrease in land held for sale 3,761,396 -- --
Increase in land subject to sale agreements (963,473) -- --
Decrease (increase) in prepaid expenses
and other 22,449 (1,707) 9,553
Increase in payable to general partner 31,384 27,097 --
Increase (decrease) in accounts payable
and accrued expenses 54,224 (37,955) (22,249)
----------- ----------- -----------
Net cash provided by operating activities 4,880,738 33,479 140,734
----------- ----------- -----------
CASH FLOWS FOR FINANCING ACTIVITIES:
Limited partner distributions declared (Note 1) (4,765,456) -- --
Increase in distribution payable 939,956 -- --
----------- ----------- -----------
Net cash used in financing activities (3,825,500) -- --
----------- ----------- -----------
NET INCREASE IN CASH
AND CASH EQUIVALENTS 1,055,238 33,479 140,734
CASH AND CASH EQUIVALENTS,
beginning of year 1,362,963 1,329,484 1,188,750
----------- ----------- -----------
CASH AND CASH EQUIVALENTS,
end of year $ 2,418,201 $ 1,362,963 $ 1,329,484
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
SCOTTSDALE LAND TRUST LIMITED PARTNERSHIP
-----------------------------------------
Notes to Financial Statements
-----------------------------
December 31, 1996 and 1995
--------------------------
1) ORGANIZATION:
-------------
Scottsdale Land Trust Limited Partnership (the Partnership) was formed
on August 12, 1987 under the Delaware Revised Uniform Limited Partnership Act to
acquire and develop 261 acres of land (the Property) located in Scottsdale,
Arizona that is zoned for commercial use. In addition, the Partnership has
financed $8.5 million for the acquisition of five acres of the Property and
construction of an office building which is the corporate headquarters of
Franchise Finance Corporation of America (FFCA) (see Note 4). The Partnership's
primary investment objective is to achieve capital appreciation through the sale
of the improved land. The general partner of the Partnership is FFCA Management
Company Limited Partnership (the General Partner), an affiliate of FFCA. The
Partnership will expire December 31, 2047, or sooner, in accordance with the
terms of the Partnership agreement.
Investors acquired units of assigned limited partnership interest (the
limited partnership units) in the Partnership from FFCA Investor Services
Corporation 88-B (the Initial Limited Partner), a Delaware corporation
wholly-owned by Perimeter Center Management Company, an affiliate of the General
Partner. Holders of the units have all of the economic benefits and
substantially the same rights and powers of limited partners; therefore, they
are referred to herein as "limited partners."
The Partnership agreement provides for allocation of profits and losses
and cash distributions among its partners as follows:
Profits and Losses: Profits and losses are allocated 99% to the limited
partners and 1% to the General Partner, except that gain from the land
sales will be allocated to the partners and The Westcor Company II
Limited Partnership (the Manager) as provided in the Partnership
agreement.
Cash Distributions: Cash from operations, as defined in the Partnership
agreement, after payment of fees to the General Partner and the
creation or restoration of cash reserves, is allocated 99% to the
limited partners and 1% to the General Partner. Cash proceeds from the
sale of property are not considered cash from operations but, when
distributed, represent a partial return of the limited partners'
initial $1,000 per unit capital contribution. Based on the amount of
such distributions, the limited partner Adjusted Capital Contribution,
as defined in the Partnership agreement, at December 31, 1996 is
$923.49 per unit.
2) SIGNIFICANT ACCOUNTING POLICIES:
--------------------------------
Financial Statements - The financial statements of the Partnership are
prepared on the accrual basis of accounting. The preparation of the financial
statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Although management believes its estimates are reasonable, actual results
could differ from those estimates.
Cash and Cash Equivalents - Investment securities that are highly
liquid and have maturities of three months or less at the date of purchase are
classified as cash equivalents. Cash equivalents include United States Treasury
securities of $1,349,448 and $1,105,326 at December 31, 1996 and 1995,
respectively, and bank repurchase agreements (which are collateralized by United
States Treasury and Government obligations) of $925,122 at December 31, 1996.
Short-term investments are recorded at cost plus accrued interest, which
approximates market value.
<PAGE>
Development Costs and Land Sales - During the development phase, costs
directly related to the acquisition of the Property, such as appraisals, plans
and finders fees, were capitalized to the cost of the Property. The Partnership
also capitalized real estate taxes and other holding costs during the
development of the Property and the construction of the land improvements.
Common costs and improvements are allocated based on each parcel's relative fair
value and charged to an individual parcel where specifically identifiable. The
Property is carried at cost, which does not exceed estimated net realizable
value.
3) LAND SUBJECT TO SALE AGREEMENTS:
-------------------------------
At December 31, 1996, the Partnership had five parcels of land
(approximately 21.4 acres), with an aggregate cost of approximately $3 million,
under contract for sale for approximately $5.7 million to unaffiliated third
parties. One contract provides for a right of first refusal on an additional 9.4
acres (two parcels) of land for a period of up to two years on one parcel and up
to three years on the other parcel. Subsequent to December 31, 1996, the
Partnership closed the sale of one 2.1 acre parcel and recognized a gain of
approximately $50,000.
4) LAND SUBJECT TO SALE AGREEMENT WITH AFFILIATE:
---------------------------------------------
As provided in the Partnership agreement, the Partnership entered into
an agreement on December 29, 1988 to sell approximately five acres of the
Property (the Parcel) to FFCA at a purchase price determined by independent
appraisal to be the fair market value of the unimproved Parcel and related
improvements. In connection with the sale agreement, the Partnership also funded
the construction of an office building on the Parcel which is the corporate
headquarters of FFCA. This loan to FFCA for the acquisition of the Parcel, the
office building and the parcel improvements totaled $8.5 million.
FFCA is obligated to pay the Partnership monthly payments of interest
at the rate of 10% per year for ten years. In May 2000, the entire balance of
the loan is due. FFCA is obligated to pay the Partnership, upon the maturity of
the loan, by acceleration or otherwise, additional interest based upon the
increase, if any, in the value of the FFCA office building (Additional
Interest). The amount of Additional Interest, if any, will be calculated in
accordance with the related loan agreement as the greater of 30% of the increase
in value of the FFCA office building or $1.13 million. FFCA payment obligations
to the Partnership are secured by the Parcel, the FFCA office building, the
parcel improvements and the General Partner's guaranty.
The fair value of the Partnership's loan receivable from FFCA is
estimated by discounting the future cash flows using the current rates at which
similar loans would be made to borrowers with similar credit ratings and for the
same remaining maturities. The fair value at December 31, 1996 exceeds the
carrying amount by $1.7 million; however, changes in the fair value of the loan
receivable do not result in the realization or expenditure of cash unless the
loan is actually paid off.
The sale of the Parcel to FFCA will be recognized in the Partnership's
financial statements when the amounts loaned to FFCA are repaid to the
Partnership.
5) MANAGEMENT CONTRACT:
-------------------
The Partnership has entered into a management contract with the Manager
to develop and manage the Property. The management contract is renewable
annually. Under the management contract, the Manager is entitled to receive fees
for services performed in connection with managing the Property's development.
During 1996, 1995 and 1994, the planning and property management fees paid or
accrued to the Manager (payable in monthly installments) were $36,000 each year.
After the limited partners have received specified returns in
accordance with the Partnership agreement, a subordinated contingent interest of
25% of all remaining sale or refinancing proceeds or parcel revenues will be
payable to the Manager.
<PAGE>
6) INCOME TAXES:
------------
The Partnership is not directly subject to income taxes; rather, each
partner is subject to income taxes on his distributable share of taxable income.
The Partnership tax returns and the amount of distributable partnership profits
or losses are subject to examination by Federal and state taxing authorities. If
examinations by taxing authorities result in changes to distributable
partnership profits or losses, the tax liabilities of the partners could be
changed accordingly.
The following is a reconciliation of net income for financial reporting
purposes to income reported for Federal income tax purposes for the years ended
December 31, 1996, 1995 and 1994:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Net income for financial reporting purposes $ 1,974,758 $ 46,044 $ 153,430
Differences for tax purposes in:
Capitalized land inventory costs 230,557 251,826 202,925
Additional Interest on FFCA loan 122,857 111,300 100,831
Gain on sale of land (1,060,765) -- --
Other 3,279 2,949 --
----------- ----------- -----------
Taxable income to partners $ 1,270,686 $ 412,119 $ 457,186
=========== =========== ===========
</TABLE>
For Federal income tax reporting purposes, taxable income to partners is
reported on the accrual basis of accounting and is classified as ordinary
income.
At December 31, 1996, the tax bases of the Partnership's assets and
liabilities exceed the amounts recorded for financial reporting purposes by
$1,886,121. This difference results primarily from differences in the treatment
of capitalized land inventory costs, the Additional Interest on the FFCA loan
and the gain recognized on the sale of the land parcels for financial reporting
and tax reporting purposes.
7) TRANSACTIONS WITH RELATED PARTIES:
----------------------------------
Under the terms of the Partnership agreement, the General Partner is
entitled to compensation for services performed in connection with managing the
affairs of the Partnership. During 1996, 1995 and 1994, fees paid or accrued to
the General Partner were as follows:
1996 1995 1994
-------- -------- --------
Partnership management fee (3/4 of 1% of the
Assets Under Management, payable monthly) $360,752 $266,264 $163,378
======== ======== ========
In 1995 and 1994, the General Partner waived $108,736 and $211,622,
respectively, of the partnership management fee otherwise receivable from the
Partnership in order to reduce the Partnership's reliance on cash reserves to
fund operations. As the Partnership began the sale of parcels in 1996, none of
the partnership management fee was waived.
FFCA incurs expenses on behalf of the Partnership for maintenance of
the books and records and for computer, investor and legal services performed
for the Partnership. These expenses are reimbursable in accordance with the
Partnership agreement and are less than the amount which the Partnership would
have paid to independent parties for comparable services. The Partnership
reimbursed FFCA $25,360 in 1996, $18,025 in 1995 and $24,122 in 1994 for such
expenses.
<PAGE>
SCHEDULE III
SCOTTSDALE LAND TRUST LIMITED PARTNERSHIP
-----------------------------------------
SCHEDULE OF REAL ESTATE
-----------------------
AS OF DECEMBER 31, 1996
-----------------------
<TABLE>
<CAPTION>
Cost Gross Amount
Capitalized At Which
Initial Cost Subsequent to Carried At Date
Description Location Encumbrances to Partnership Acquisition December 31, 1996 Acquired
- --------------- ------------------------ ------------------ -------------- ----------------- ----------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Improved land Subject to
239 acres Scottsdale, Arizona sales agreement (3) $23,913,185 $8,979,480 $30,094,742 Nov. 1988
=========== ========== ===========
</TABLE>
Notes:
(1) The aggregate cost for Federal income tax purposes is
$30,556,946
(2) There are no prior liens.
(3) In 1988, the Partnership entered into a sales
agreement to sell five acres of land, with a cost to
the Partnership of approximately $788,000, to an
affiliate for an amount determined by independent
appraisal to be the fair market value of the parcel.
In 1996, the Partnership entered into four sales
agreements to sell approximately 21.4 acres of land,
with an aggregate cost to the Partnership of
approximately $3 million to unaffiliated third
parties.
(4) There were no transactions in real estate during 1995
and 1994. Transactions in real estate during 1996 are
summarized as follows:
Cost
------------
Balance, December 31, 1995 $ 32,892,665
Cost of land sold (2,797,923)
------------
Balance, December 31, 1996 $ 30,094,742
============
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE BALANCE SHEET AS OF DECEMBER 31, 1996 AND
THE STATEMENT OF OPERATIONS FOR THE YEAR ENDED
DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 824098
<NAME> SCOTTSDALE LAND TRUST LIMITED PARTNERSHIP
<MULTIPLIER> 1
<CURRENCY> U. S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 2,418,201
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 30,094,742
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 40,259,651
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 39,100,287
<TOTAL-LIABILITY-AND-EQUITY> 40,259,651
<SALES> 5,003,703
<TOTAL-REVENUES> 5,981,588
<CGS> 3,036,171
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,974,758
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,974,758
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,974,758
<EPS-PRIMARY> 39.49
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE BALANCE SHEET AS OF DECEMBER 31, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
BALANCE SHEET.
</LEGEND>
<CIK> 824134
<NAME> FFCA INVESTOR SERVICES CORPORATION 88-B
<MULTIPLIER> 1
<CURRENCY> U. S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 100
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 200
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 100
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 200
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
Cushman & Wakefield, Inc. CUSHMAN &
51 West 52nd Street WAKEFIELD(R).
New York, NY 10019-6178 Improving your place
(212) 841-7500 In the world.
February 6, 1997
Scottsdale Land Trust Limited Partnership
FFCA Management Company, L.P.
17207 North Perimeter Drive
Scottsdale, Arizona 85255
Attn: Morton H. Fleischer
General Partner
Re: Annual Portfolio Valuation
Scottsdale Land Trust Limited Partnership
Gentlemen:
Pursuant to your request, we have completed our analysis of the
property contained in the Scottsdale Land Trust Limited Partnership, hereinafter
referred to as "The Perimeter Center." The purpose of our analysis is twofold:
first, to report on the physical condition of the premises and determine the
mortgagor's requirements with respect to the terms of the mortgage agreement;
second, to estimate the market value of the property subject to the mortgage
agreement for the purpose of determining the value of the fee simple and
mortgagee's interests. Our opinion of value for the real property will then be
adjusted for cash on hand, net receivables and other liabilities, which
information is provided by the General Partner. It should be noted that Cushman
& Wakefield's opinion is restricted to the market value of the Partnership's
interest in the real property; we are not opining as to the value of the other
assets or liabilities of the Partnership. Furthermore, our opinion is subject to
the attached Certification and Assumptions and Limiting Conditions which have
been retained in our files. The date of value was December 31, 1996.
According to The Dictionary of Real Estate Appraisal, Third Edition,
published by the Appraisal Institute, market value may be defined as:
"The most probable price, as of a specified date, in cash, or in terms
equivalent to cash, or in other precisely revealed terms for which the specified
property rights should sell after reasonable exposure in a competitive market
under all conditions requisite to a fair sale, with the buyer and seller each
acting prudently, knowledgeably, and for self-interest, and assuming that
neither is under undue duress."
The Scottsdale Land Trust Limited Partnership was organized to acquire
approximately 261 +/- gross acres of unimproved land in Scottsdale, Arizona; to
develop roads, water, sewer, drainage, utility and similar on-site and off-site
improvements; to sell the property on a parcel-by-parcel basis after
construction of the infrastructure; and to make a participating first mortgage
loan with Franchise Finance Corporation of America ("FFCA"). The gross proceeds
raised by Scottsdale Land Trust Limited Partnership amounted to $50,000,000
(50,000 units at $1,000 per unit). As of December 31, 1996, the adjusted gross
proceeds raised were $46,174,397 or $923.49 per unit. Of this amount, adjusted
net proceeds invested in the property contained in this partnership amounted to
$37,693,157 after adjusting for organization costs and sales commissions. The
Partnership was fully invested in November 1988.
The Perimeter Center was inspected by the undersigned at various times
during 1995 and 1996. As of the date of our last inspection, all infrastructure
for the subdivision had been completed including roads, water, sewer, drainage,
sidewalks, bike paths and other infrastructure. The FFCA office building also
has also been completed and is occupied by FFCA and the Fleischer Museum.
Our valuation addresses the market value of the fee simple and
mortgagee's interests in this property and considers the FFCA mortgage note in
effect. The vast majority of the data used for this analysis has been supplied
to us by FFCA Management Company, L.P., and we have relied upon their database
input , various reports and financial statements. We have visited their offices
in Scottsdale, Arizona and have had complete and unrestricted access to all
pertinent information, and have assumed all such information to be accurate and
complete. We have verified certain data and resolved any discrepancies by
reconciling to Cushman & Wakefield's database.
For the purposes of our valuation, we have determined that the highest
and best use of The Perimeter Center is for parcel-by-parcel sale to users who
will construct Class A office buildings. In addition to eventual office use,
portions of The Perimeter Center may be developed with high quality research and
development or light industrial buildings incorporating warehouse and
distribution space. The Income Approach to value is relied upon as the primary
appraisal
<PAGE>
Cushman & Wakefield, Inc.
Mr. Morton H. Fleischer
General Partner -2- February 6, 1997
technique based upon the properties's capabilities to be bought and sold in the
investment marketplace. In the application of the Income Approach, also known as
a Subdivision Analysis, sales of office sites in the Greater Scottsdale area
were researched and compared to the subject property. As such, we have applied
both the Income Approach and the Sales Comparison Approach to the analysis of
this property. The Cost Approach was not considered directly relevant in the
analysis of vacant land. Our Subdivision Analysis anticipated future income from
parcel sales and mortgage interest and repayment which were discounted via a
market-derived rate to a net present value estimate utilizing a cash flow model
designed by Cushman & Wakefield, Inc.
Considering all of the above factors, it is the appraisers' opinion
that the market value of the fee simple and mortgagee's interests in the above
mentioned property which comprises Scottsdale Land Trust Limited Partnership, as
of December 31, 1996, was:
THIRTY NINE MILLION DOLLARS
$39,000,000
In addition to the market value of the Perimeter Center, cash on hand
and net receivables of $2,566,494 less distributions payable and other
liabilities of $1,159,364, as provided by the General Partner, results in a
total of $40,407,130. Dividing the total value by the 50,000 outstanding units
results in an indicated value per unit investment of $808.14 which represents a
decrease of 12.49 percent below the adjusted unit investment of $923.49.
We certify that neither Cushman & Wakefield, Inc. nor the undersigned
have any present or prospective interest in the Partnership's properties, and we
have no personal interest or bias with respect to the parties involved. To the
best of our knowledge and belief, the facts upon which the analysis and
conclusions were based are materially true and correct. No one other than the
undersigned assisted by members of our staff who performed inspections of the
properties, performed the analyses and reached the conclusions resulting in the
opinion expressed in this letter. Our fee for this assignment was not contingent
on any action or event resulting from the analysis, opinions or conclusions in,
or the use of, this analysis. Our analysis has been prepared subject to the
Departure Provision of the Uniform Standards of Professional Practice of the
Appraisal Foundation and the Code of Professional Ethics and the Standards of
Professional Appraisal Practice of the Appraisal Institute. The use of this
report is subject to the requirements of the Appraisal Institute relating to
review by its duly authorized representatives. As of the date of this report,
the undersigned have completed the requirements of the continuing education
program of the Appraisal Institute.
Respectfully submitted,
CUSHMAN & WAKEFIELD, INC.
<TABLE>
<S> <C> <C>
/s/ Matthew C. Mondanile /s/ Brian R. Corcoran /s/ Frank P. Liantonio
Matthew C. Mondanile, MAI Brian R. Corcoran, MAI, CRE Frank P. Liantonio, MAI, CRE
Senior Director Executive Managing Director Executive Managing Director
Valuation Advisory Services Valuation Advisory Services Valuation Advisory Services
</TABLE>
