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, 1997
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
Commission File Number 0-17853
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
<PAGE>
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 (a) acquire approximately 261 gross acres of unimproved land (the "Property")
in Scottsdale, Arizona; (b) develop roads, water, sewer, drainage, utility and
similar on-site and off-site improvements (collectively, the "Infrastructure")
with respect to the Property; (c) sell the Property on a parcel-by-parcel basis
after construction of the Infrastructure; and (d) make a participating, first
mortgage loan to Franchise Finance Corporation of America, a Delaware
corporation ("FFCA"), 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, a Delaware corporation
("PCMC"), 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 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 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.
<PAGE>
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 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 (a) 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 (b) $1,130,000. The obligations of FFCA under
the Loan Agreement are guaranteed by the General Partner. During 1997, 1996 and
1995, 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
2
<PAGE>
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, as well as convenience stores and
automotive service and parts stores 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 marketing program implemented by the Partnership for the Property
resulted in sales of 21 land parcels representing approximately 73 acres in
1997. The Property currently has seven tenant-occupied buildings and
construction has commenced on several other buildings.
The first sale of 1997, completed on January 15, 1997, was to Coyote
View Plaza, LLC which bought 2.1 acres for approximately $500,000. Construction
on the two-story, 27,000 sq. ft. medical and dental facility was finished in
1997.
On February 20, 1997, a private investor bought 1.8 acres for
approximately $600,000 for the construction of the international headquarters of
Discover The World Marketing. The headquarters was designed by H & S
International Design Group, which also occupies space in the building.
On February 28, 1997, 6.2 acres were sold to the Hemholdt Family Trust
for approximately $1.8 million to develop an office complex with the Cornwell
Group called Turnstone Office Park. On May 30, 1997, the Hemholdt Family Trust
purchased an additional 4.6 acres adjacent to property in its initial purchase
for the Turnstone Office Park for approximately $1.3 million. On September 16,
1997, the Partnership sold an additional 3.8 acres to the Cornwell Group in
another section of The Perimeter Center for approximately $1.2 million that will
be developed into office and/or warehouse space. The acreage purchased by the
Hemholdt Family Trust and the Cornwell Group in The Perimeter Center during 1997
totaled 14.6 acres. Construction has commenced on both sites.
On April 8, 1997, two acres were sold for approximately $500,000 to
private investors. The recently completed facility is an interior design center
for Est Est, Incorporated.
On May 5, 1997, 3.6 acres were sold to Perimeter Professional Offices,
LLC for approximately $1.3 million to develop two, two-story office buildings
for occupancy by the owners and third parties.
On July 10, 1997, Pacesetter, Inc., a subsidiary of St. Jude Medical,
Inc., an existing owner of 11.8 acres at The Perimeter Center, exercised its
right of first refusal on two adjacent
3
<PAGE>
parcels aggregating 6.1 acres for approximately $1.3 million. In February 1997,
Pacesetter completed construction of a 62,000 sq. foot office and manufacturing
facility. Pacesetter now owns a total of 17.9 acres at The Perimeter Center.
On August 27, 1997, 8.7 acres were sold to Biltmore Perimeter LLC for
approximately $2.7 million to construct an office building.
On September 10, 1997, 16.7 acres were sold for an aggregate sale price
of approximately $5.4 million to Green Tree Financial Corporation. An office
complex for the financial services company is planned for the site.
On October 15, 1997, Carlson Real Estate purchased 11.1 acres for a
sale price of approximately $2.8 million. Subsequent to this sale, Mont Aster
LLC purchased the parcel from Carlson Real Estate.
On October 27, 1997, Semy Engineering, a semi-conductor equipment
company, purchased 6.1 acres for approximately $1.8 million for the construction
of an 80,000 sq. foot headquarters building.
As of March 2, 1998, the Partnership had in escrow two land parcels
representing 5.1 acres that are scheduled to close by the end of March 1998 for
an aggregate sales price of approximately $1.8 million. The two parcels will be
the sites of the corporate headquarters of a vitamin company and a computer
software company. These pending sales bring the remaining acreage to be sold to
approximately 95 acres, which represents approximately 50% of The Perimeter
Center's net usable land.
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
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 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
4
<PAGE>
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 1997, the City of Scottsdale voted to accelerate the development of
the Outer Loop freeway by loaning the Arizona Department of Highways the money
to complete the loop by the year 2001. This accelerated time schedule is
intended in part to accommodate two major projects which are located to the west
of The Perimeter Center - the Sumitomo Sytix computer chip plant, which is
currently operating, and the Mayo Clinic Hospital, scheduled to be completed by
late 1998.
With this accelerated development, two potential development matters
have been raised. The Federal Emergency Management Association ("FEMA") is
working with the City of Scottsdale on area drainage solutions through the
formation of the Reata Pass Wash Desert Greenbelt Improvement District (the
"District"). The Perimeter Center will be included in the District. According to
representatives of the City of Scottsdale, the City's current plan with respect
to the District is to assess then-current property owners within the District at
a rate of approximately $3,800 per acre commencing in the year 2000. This
assessment will be payable in semi-annual installments (with interest) over ten
years. To the extent the Partnership still owns land from and after the year
2000, it would be subject to the assessment. The City may also purchase an
easement on the southeast portion of the Property in connection with its
improvements relating to the District. In addition, the Arizona Department of
Transportation has notified the Partnership that it wishes to purchase
approximately 1.4 acres on the eastern boundary of the Property for the purpose
of widening the frontage road southbound along the proposed Outer Loop. These
proposals are still pending at this time and the General Partner believes they
will not have a significant impact on the Partnership.
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 exclusive basis pursuant to the terms of the
Management Agreement. During 1997, 1996 and 1995, Westcor II received $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.
5
<PAGE>
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 that 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 sources of competition are other office parks
located in the greater Phoenix metropolitan area which have vacant land for
sale.
Real Estate Activities Near The Perimeter Center
Immediately to the south of The Perimeter Center, across Bell Road, two
gated apartment communities and one condominium complex are in various stages of
development. Scottsdale Links Apartments, a three-story, 228-unit development
opposite the intersection of Perimeter Drive and Bell Road, has just been
completed. Construction recently commenced on the Gleneagles Apartments, a
448-unit development to the west of Scottsdale Links. To the west of Gleneagles
Apartments is Montana del Sol, a 102-unit condominium complex.
The Greenway-Hayden Loop Bridge, to the west of the Gleneagles
Apartments is now open. In February 1999, after construction commences on the
Outer Loop freeway in the vicinity of the Perimeter Center, the City of
Scottsdale plans to route southbound Pima Road traffic through the Perimeter
Center and over this bridge. The Partnership is seeking assurances from the City
that it will take appropriate action so that this increased traffic flow will
not adversely affect access to The Perimeter Center.
To the north and east of The Perimeter Center, development continues on
three major residential developments. The closest of these is McDowell Mountain
Ranch, which is anticipated to have 4,400 homes when fully completed. To the
east and north of McDowell Mountain Ranch is DC Ranch, which is anticipated to
have 8,300 homes when completed. North of The Perimeter Center is the Grayhawk
development, with 7,400 homes planned and two championship public golf courses.
Additional Information
Compliance with federal, state and local laws 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
6
<PAGE>
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.
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 its business.
The Partnership and FFCA Investor Services Corporation 88-B (the
initial limited partner) have no employees.
The Partnership pays an affiliate of the General Partner for the
maintenance of the books and records of the Partnership and for computer,
investor and legal services performed for the Partnership. During 1997, this
affiliate of the General Partner completed the design of a new accounting
information system that was begun in 1996 and was implemented on January 1,
1998. The new system is "Year 2000" compliant which means that the system will
know how to handle any dates that refer to the 21st century. By the end of 1998,
all of the affiliate's significant information systems that would impact the
Partnership will be "Year 2000" compliant. The affiliate is in the process of
assessing the key suppliers that it relies upon in addition to any other systems
that are sensitive to dates (such as the telephone and power systems, elevators,
security systems, and so on), and has developed a plan for any such systems that
are found to be noncompliant.
A five-phase process was adopted by the affiliate to address the issues
associated with the year 2000 including: (1) an inventory and assessment of the
systems and electronic devices that may be at risk; (2) the identification of
potential solutions; (3) the implementation of upgrades or replacements to
affected systems or devices; (4) the verification of compliance and testing of
the revised systems; and (5) the training of users on the new systems. To date,
the inventory and assessment phase of all critical computer hardware has been
completed, as have the operating system and database software, and statements of
"Year 2000" compliance have been received from the related vendors. The
verification of "Year 2000" compliance through testing of these systems and
training of users is nearly complete.
As of March 2, 1998, the Partnership has sold (including parcels in
escrow) approximately 50% of the net usable acres of the Property. Should the
Partnership sell all of its remaining land acreage prior to the year 2000, the
Partnership will likely be liquidated and dissolved, in accordance with the
partnership agreement, prior to January 1, 2000. Under this circumstance, the
"Year 2000" issue is not anticipated to have any effect on the Partnership.
Factors Affecting Future Operating Results
The provisions of the Private Securities Litigation Reform Act of 1995
(the "Act"), became effective in December 1995. The Act provides a "safe harbor"
for companies that make forward-looking statements providing prospective
information. The "safe harbor" under the Act
7
<PAGE>
relates to protection for companies with respect to litigation filed on the
basis of such forward-looking statements.
The Partnership wishes to take advantage of the "safe harbor"
provisions of the Act and is therefore including this section. The statements
contained herein, if not historical, are forward-looking statements and involve
risks and uncertainties which are described below 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 "anticipated," "expected," "intends," or "plans," or
words of similar meaning. Therefore, forward-looking statements should not be
relied upon as a prediction of actual future results or occurrences.
The Partnership's future results may be subject to certain risks and
uncertainties including the following:
o Adverse changes in general economic conditions and local
conditions such as excessive building resulting in oversupply
of existing space or decrease in employment resulting in
reduced demand for commercial or office space
o General factors affecting real estate values including
possible federal, state or local regulations and controls
affecting rents, prices of goods, fuel, energy and water
consumption, the environmental impact of new construction,
increased labor and material costs, the attractiveness of the
Property and the neighborhood in which it is located, changes
in environmental and zoning laws, and changes in taxes
affecting real property
o Increased interest rates and/or less availability of
financing, resulting in fewer sales and leases of the Property
and/or a lower value of the Property
o The absence of any assurance of an increase in or retention of
land values
o Factors specific to the Phoenix and Scottsdale, Arizona area:
o Construction on the Outer Loop freeway in the
vicinity of The Perimeter Center is scheduled to
commence in February, 1999, and is likely to result
in the closure of Pima Road south of Princess
Boulevard. The impact of this closure on property
sales cannot be ascertained
o Competition with other owners of unimproved and
improved land, as well as with established companies,
private investors (including foreign investors), real
estate investment trusts, limited partnerships and
other entities (many of which possess greater
resources than the Partnership) in connection with
the sale and leasing of properties
o Oversupply of office, industrial and retail space,
reducing demand for parcels comprising the Property
o Slowing of population and job growth in Arizona
8
<PAGE>
o The supply of unimproved land in the Phoenix
metropolitan area
o The lack of assurance of anticipated growth in
commercial, industrial and retail activity, or that
any such development will have a significant
favorable impact on the value of the Property
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 constitutes 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 2, 1998, the Property's remaining acreage to
be sold (which excludes parcels in escrow) consists of approximately 95 acres.
In 1997, parcels were sold for between $5.00 and $8.00 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 sales which have been consummated (excluding sales
in escrow) as of March 2, 1998.
FFCA Office Building. On December 29, 1988, FFCA entered into an $8.5
million 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 that invests in chain restaurant real estate, as well as convenience
stores and automotive service and parts stores throughout the United States.
Pacesetter, Inc. The initial 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 gave Pacesetter, Inc. a right
of first refusal and option to purchase an additional 6 adjacent acres. On July
10, 1997, Pacesetter, Inc. exercised its option to purchase this acreage for a
sales price of approximately $1.3 million. 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 19, 1996. It involved the sale of a 1.64-acre parcel for a
sales price of approximately
9
<PAGE>
$440,000. G & D Partnership operates a construction company in the Southwest and
will be building its 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. Construction was completed in 1997 on this
medical and dental facility.
Private Investor Transaction. The sale transaction with a private
investor 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 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 was built, a portion of which is office space for
rent.
Hemholdt Family Trust/Cornwell Group. The first sale transaction with
these entities 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. The second sale transaction closed on May 30, 1997 and involved the
sale of a 4.6-acre parcel for approximately $1.3 million. The third sale
transaction was completed on September 16, 1997 and involved the sale of a
3.8-acre parcel for approximately $1.2 million. New corporate office buildings
are planned for the sites and construction is currently underway.
Additional Private Investors Transaction. The sale transaction with
private investors was completed on April 8, 1997 and involved the sale of a
2-acre parcel for approximately $500,000. The recently-completed facility is an
interior design center for Est Est, Inc.
Perimeter Professional Offices, LLC. On May 5, 1997, Perimeter
Professional Offices, LLC purchased a 3.6-acre parcel for approximately $1.3
million. Two professional office facilities will be built on the site.
Biltmore Perimeter LLC. On August 27, 1997, Biltmore Perimeter LLC
purchased an 8.7-acre parcel for approximately $2.7 million for the development
of a professional office facility.
Green Tree Financial Corporation. The sale transaction with Green Tree
Financial Corporation was completed on September 10, 1997 and involved the sale
of eight parcels totaling 16.7 acres for an aggregate sale price of
approximately $5.4 million. An office complex for the financial services company
is planned for the site.
Carlson Real Estate. The sale transaction with Carlson Real Estate was
completed on October 15, 1997. Carlson Real Estate purchased an 11.1-acre parcel
for approximately $2.8 million. Subsequent to this sale, Mont Aster LLC
purchased the parcel from Carlson Real Estate.
10
<PAGE>
Semy Engineering Semy Engineering purchased a 6.1-acre parcel for
approximately $1.8 million on October 27, 1997. The site will be the
headquarters for Semy Engineering, a semiconductor equipment company
specializing in data analysis and control systems.
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
1997.
PART II
Item 5. Market for Co-Registrants' Units and Related Security Holder Matters.
Market Information. During 1997, 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 2, 1998, there were 3,067 record holders of the
Units.
Distributions. For the two most recent fiscal years, the Partnership
made the following cash distributions to the Holders from proceeds received on
the sale of land parcels:
1997
Date of Number Per Unit Total
Distribution of Units Distributions Distributions
------------ -------- ------------- -------------
March 31 50,000 $ 53.35 $ 2,667,000
June 30 50,000 55.37 2,768,500
September 30 50,000 200.56 10,028,000
December 31 50,000 84.57 4,228,500
---------- -----------
$ 393.85 $19,692,000
========== ===========
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
========= ===========
11
<PAGE>
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) 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 $595.42 per Unit as of December 31, 1997.
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. Any
differences in the amounts of distributions set forth in the above tables from
the information contained in Item 6 below are due to rounding the amount of
distributions payable per Unit down to the nearest whole cent and carrying any
fractional cents forward from one period to the next.
12
<PAGE>
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,
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues $ 22,289,391 $ 5,981,588 $ 920,426 $ 892,589 $ 889,361
Net Income (Loss) 8,797,901 1,974,758 46,044 153,430 (407,529)
Net Income (Loss) Per
Limited Partnership Unit 175.90 39.49 .91 3.04 (8.07)
Total Assets 32,541,537 40,259,651 42,024,785 41,989,599 41,858,418
Distributions of Cash from
Operations to Holders 19,692,084 4,765,456 -- -- --
Distributions of Cash from
Operations Per Unit 393.84 95.31 -- -- --
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 in Scottsdale, Arizona. 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. The Partnership's primary sources
of revenue are land sales, interest payments received from FFCA under the Loan
Agreement and interest earned on the Partnership's temporary investments. As
land parcels are sold, distributions of the net cash sale proceeds are made in
accordance with the partnership agreement. Once all of The Perimeter Center
parcels are sold, the Partnership will liquidate all of its other assets and
distribute them in accordance with the partnership agreement.
Funds pending distribution to the limited partners are temporarily
invested in U.S. Government Agency discount notes and bank repurchase agreements
(which are secured by United States Treasury and Government obligations). These
reserves may be used from time to time to pay amounts assessed by the city or
county taxing authorities for developmental or other costs. It is anticipated
that the Partnership's revenues along with remaining reserves of approximately
$1.6 million at December 31, 1997, to the extent required, will be sufficient to
pay the Partnership's operating expenses in 1998 and that cash proceeds from the
sale of parcels will be available for distribution to the Holders. At December
31, 1997, the Partnership had cash and marketable securities with a maturity of
three months or less aggregating $5,844,446 of which $4,228,500 was paid out to
the Holders in February 1998 as their fourth quarter 1997
13
<PAGE>
distribution, and the remainder of which will be held by the Partnership for
reserves.
The 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. Although the General
Partner currently believes 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, there can be no assurance that
the amounts will be adequate. 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 the year ended December 31, 1997, the Partnership sold 21 land
parcels aggregating 73 acres to unaffiliated third parties. Land sale
transactions during the year provided aggregate cash sales proceeds of $21.1
million. The parcels had a total original cost of $11.2 million and closing and
other costs of approximately $1.4 million. These parcel sales resulted in gains
totaling $8.5 million. Distributions declared from the parcel sales amounted to
$19.7 million in 1997.
At December 31, 1997, the Partnership had two parcels of land
(approximately 5 acres total) under contract for sale for a purchase price of
approximately $1.8 million to two unaffiliated third parties. The aggregate
original cost of the parcels is approximately $900,000. Approximately 95 acres
(excluding parcels in escrow) remain available for sale within The Perimeter
Center and the Partnership has entered into preliminary negotiations for the
sale of several 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 Partnership pays an affiliate of the General Partner for the
maintenance of the books and records of the Partnership and for computer,
investor and legal services performed for the Partnership. During 1997, this
affiliate of the General Partner completed the design of a new accounting
information system that was begun in 1996 and was implemented on January 1,
1998. The new system is "Year 2000" compliant which means that the system will
know how to handle any dates that refer to the 21st century. By the end of 1998,
all of the affiliate's significant information systems that would impact the
Partnership will be "Year 2000" compliant.
As of March 2, 1998, the Partnership has sold (including parcels in
escrow) 50% of the net usable acres of the Property. Should the Partnership sell
all of its remaining land acreage prior to the year 2000, the Partnership will
likely be liquidated and dissolved, in accordance with the partnership
agreement, prior to January 1, 2000. Under this circumstance, the "Year 2000"
issue is not anticipated to have any affect on the Partnership.
With accelerated development in the Scottsdale, Arizona area, two
potential development matters have been raised. The Federal Emergency Management
Association ("FEMA") is working with the City of Scottsdale on area drainage
solutions through the formation of the Reata Pass Wash Desert Greenbelt
Improvement District (the District). The Perimeter Center will be
14
<PAGE>
included in the District. According to representatives of the City of
Scottsdale, the City's current plan with respect to the District is to assess
then-current property owners within the District at a rate of approximately
$3,800 per acre commencing in the year 2000. This assessment will be payable in
semi-annual installments (with interest) over ten years. To the extent the
Partnership still owns land from and after the year 2000, it would be subject to
the assessment. The City may also purchase an easement on the southeast portion
of the Property in connection with its improvements relating to the District. In
addition, the Arizona Department of Transportation has notified the Partnership
that it wishes to purchase approximately 1.4 acres on the eastern boundary of
the Property for the purpose of widening the frontage road southbound along the
proposed Outer Loop. These proposals are still pending at this time and the
General Partner believes they will not have a significant impact on the
Partnership.
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.
Results of Operations
Fiscal Year Ended December 31, 1997 Compared to Fiscal Year Ended
December 31, 1996. Land sales comprise the majority of the total revenues of the
Partnership. Total revenues were $22.2 million for the year ended December 31,
1997 as compared to $5.98 million for the year ended December 31, 1996. The
average sales price per acre of land sold during the year increased 27% to
approximately $290,000 per acre from approximately $227,500 per acre for land
sold during the year ended December 31, 1996. Gain as a percentage of land sale
revenues remained relatively constant at 40% for the year ended December 31,
1997 as compared to 39% for the year ended December 31, 1996.
Interest and other income for the year ended December 31, 1997 increased
by approximately $177,000 over the comparable period of 1996 due to the increase
in temporary investment securities resulting from a higher average cash balance
invested during the year. This high cash balance results from net sale proceeds
held during the year prior to distribution of the cash to the limited partners.
Total expenses (excluding the cost of land sales) decreased by $85,000 for the
year ended December 31, 1997 as compared to the year ended December 31, 1996 due
to decreases in the general partner fee ($41,000), marketing expenses ($63,000)
and property taxes ($33,000) and are partially offset by an increase in other
operating expenses. The general partner fee decreased during the period because
the fee is based on Assets Under Management, as defined in the partnership
agreement, and as parcels are sold the general partner fee is reduced
accordingly. Marketing expenses decreased because the level of sales activity
that occurred during 1997 has generated sufficient interest in The Perimeter
Center to allow the Partnership to reduce certain general marketing activities.
Property taxes decreased due to the sale of land parcels during 1997.
15
<PAGE>
Fiscal Year Ended December 31, 1996 Compared to Fiscal Year Ended
December 31, 1995. Total revenues were $5.98 million 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 million 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 million, which includes the
original land and infrastructure costs totaling $2.8 million 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.
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
Property 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
16
<PAGE>
Services Corporation 88-B are as follows:
PCMC
Director
Name Position Held Since
---- -------------------
Morton H. Fleischer 1993
Officers
<TABLE>
<CAPTION>
Associated
With PCMC
Name Positions Held Since
---- -------------- -----
<S> <C> <C>
Morton H. Fleischer President and Chief Executive Officer 1993
John R. Barravecchia Executive Vice President, Chief Financial Officer, 1993
Treasurer and Assistant Secretary
Christopher H. Volk Executive Vice President, Chief Operating Officer, 1993
Secretary and Assistant Treasurer
Dennis L. Ruben Executive Vice President, General Counsel and Assistant 1994
Secretary
Stephen G. Schmitz Executive Vice President, Chief Investment Officer and 1995
Assistant Secretary
Catherine F. Long Senior Vice President-Finance, Principal Accounting 1993
Officer, Assistant Secretary and Assistant Treasurer
</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
17
<PAGE>
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.
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 61, 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 42, 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 41, 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- Research and Underwriting 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.
Dennis L. Ruben, age 45, 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
18
<PAGE>
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. 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 43, 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 41, 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 1997 and Forms 5 and
amendments thereto furnished to the Co-Registrants with respect to fiscal year
ended December 31, 1997 (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 1997.
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.
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 1997.
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
19
<PAGE>
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 March 2, 1998, 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 March 2, 1998. 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 March 2, 1998. 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.
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, 1997 and 1996
Statements of Operations for the years ended
December 31, 1997, 1996 and 1995
Statements of Changes In Partners' Capital for the
years ended December 31, 1997, 1996 and 1995
Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995
Notes to Financial Statements
FFCA Investor Services Corporation 88-B
20
<PAGE>
Report of independent public accountants
Balance Sheet as of December 31, 1997
Notes to Balance Sheet
2. Financial Statement Schedules
Schedule III-Schedule of Real Estate as of
December 31, 1997
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
The following is a complete list of exhibits filed as part of
this Form 10-K. For electronic filing purposes only, this
report contains Exhibit 27, the Financial Data Schedule.
Exhibit numbers correspond to the numbers in the Exhibit Table
of Item 601 of Regulation S-K.
99. Annual Portfolio Valuation of Cushman & Wakefield as
of December 31, 1997.
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.
<TABLE>
<CAPTION>
Form 10-K
Exhibit No.
-----------
<S> <C>
First Amendment to Exclusive Management Agreement 10.1
by and between the Partnership and The Westcor
Company II Limited Partnership, dated May 1, 1990.
Second Amendment to Exclusive Management Agreement 10.2
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 the fiscal year
ended December 31, 1988, Commission File No. 33-18041, are
incorporated herein by this reference.
21
<PAGE>
<TABLE>
<CAPTION>
Form 10-K
Exhibit No.
-----------
<S> <C>
The Amended and Restated Certificate of Limited 4
Partnership which governs the Partnership, as filed
with the Secretary of State of Delaware on
November 23, 1988.
Acquisition, Construction and Term Loan Agreement 10
by and between the Partnership and Franchise Finance
Corporation of America, dated as of December 29,
1988.
</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 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.
<TABLE>
<CAPTION>
Exhibit No.
-----------
<S> <C>
The Certificate of Incorporation which governs 4(b)
the 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.
</TABLE>
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, 1997.
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 27, 1998 By /s/ Morton H. Fleischer
--------------------------------
Morton H. Fleischer, General
Partner
By PERIMETER CENTER MANAGEMENT
COMPANY, Corporate General
Partner
Date: March 27, 1998 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 27, 1998 By /s/ Morton H. Fleischer
-------------------------------------
Morton H. Fleischer, Chairman of
the Board, President, Chief
Executive Officer and Director
Date: March 27, 1998 By /s/ John Barravecchia
-------------------------------------
John Barravecchia, Executive Vice
President, Chief Financial
Officer, Treasurer and Assistant
Secretary
<PAGE>
Date: March 27, 1998 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 27, 1998 By /s/ Morton H. Fleischer
-------------------------------------
Morton H. Fleischer, Sole
Director
Date: March 27, 1998 By /s/ John Barravecchia
-------------------------------------
John Barravecchia, President,
Secretary, Principal Financial
Officer and Principal Accounting
Officer
<PAGE>
ARTHUR ANDERSEN LLP
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, 1997 and 1996,
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, 1997. 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, 1997 and 1996, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
1997, 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
in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Phoenix, Arizona
January 9, 1998
<PAGE>
SCOTTSDALE LAND TRUST LIMITED PARTNERSHIP
-----------------------------------------
BALANCE SHEETS - DECEMBER 31, 1997 AND 1996
-------------------------------------------
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
------
LAND:
Held for sale $17,232,102 $26,326,289
Subject to sale agreements (Note 3) 911,184 2,980,166
Subject to sale agreement with affiliate (Note 4) 788,287 788,287
----------- -----------
Total land 18,931,573 30,094,742
LOAN RECEIVABLE FROM AFFILIATE (Notes 1 and 4) 7,598,415 7,598,415
CASH AND CASH EQUIVALENTS 5,844,446 2,418,201
PREPAID EXPENSES AND OTHER 167,103 148,293
----------- -----------
Total assets $32,541,537 $40,259,651
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
DISTRIBUTION PAYABLE TO LIMITED PARTNERS $ 4,228,540 $ 939,956
PAYABLE TO GENERAL PARTNER - 58,481
ACCOUNTS PAYABLE AND ACCRUED EXPENSES 106,893 160,927
----------- -----------
Total liabilities 4,335,433 1,159,364
----------- -----------
PARTNERS' CAPITAL (DEFICIT):
General partner (9,839) (12,529)
Limited partners 28,215,943 39,112,816
----------- -----------
Total partners' capital 28,206,104 39,100,287
----------- -----------
Total liabilities and partners' capital $32,541,537 $40,259,651
=========== ===========
</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, 1997, 1996 AND 1995
----------------------------------------------------
<TABLE>
<CAPTION>
1997 1996 1995
----------- ---------- --------------
REVENUES:
<S> <C> <C> <C>
Land sales $21,134,951 $5,003,703 $ -
Interest on loan to affiliate 850,000 850,000 850,000
Interest on investments and other 304,440 127,885 70,426
----------- ---------- -------------
22,289,391 5,981,588 920,426
----------- ---------- -------------
EXPENSES:
Cost of land sales 12,606,036 3,036,171 -
General partner fees (Note 7) 319,327 360,752 266,264
Property management fees (Note 5) 36,000 36,000 36,000
Marketing 18,335 81,436 67,737
Property taxes 142,633 175,626 186,455
Other operating 369,159 316,845 317,926
----------- ---------- -------------
13,491,490 4,006,830 874,382
----------- ---------- -------------
NET INCOME $ 8,797,901 $1,974,758 $ 46,044
=========== ========== =============
NET INCOME ALLOCATED TO (Note 1):
General partner $ 2,690 $ 72 $ 460
Limited partners 8,795,211 1,974,686 45,584
----------- ---------- -------------
$ 8,797,901 $1,974,758 $ 46,044
=========== ========== =============
NET INCOME PER LIMITED
PARTNERSHIP UNIT (based on 50,000
units held by limited partners) $175.90 $39.49 $.91
=========== ========== =============
</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, 1997, 1996 AND 1995
----------------------------------------------------
<TABLE>
<CAPTION>
General Limited
Partner Partners Total
------------ ------------ ------------
<S> <C> <C> <C>
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
Net income 2,690 8,795,211 8,797,901
Distributions to limited partners (Note 1) -- (19,692,084) (19,692,084)
------------ ------------ ------------
BALANCE, December 31, 1997 $ (9,839) $ 28,215,943 $ 28,206,104
============ ============ ============
</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, 1997, 1996 AND 1995
----------------------------------------------------
<TABLE>
<CAPTION>
1997 1996 1995
------------- ----------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 8,797,901 $ 1,974,758 $ 46,044
Adjustments to net income:
Change in assets and liabilities:
Decrease in land held for sale 9,094,187 3,761,396 -
Decrease (increase) in land subject to
sale agreements 2,068,982 (963,473) -
Decrease (increase) in prepaid expenses
and other (18,810) 22,449 (1,707)
Increase (decrease) in payable to general partner (58,481) 31,384 27,097
Increase (decrease) in accounts payable
and accrued expenses (54,034) 54,224 (37,955)
------------- ----------- ----------
Net cash provided by operating activities 19,829,745 4,880,738 33,479
------------- ----------- ----------
CASH FLOWS FOR FINANCING ACTIVITIES:
Limited partner distributions declared (Note 1) (19,692,084) (4,765,456) -
Increase in distribution payable 3,288,584 939,956 -
------------- ----------- ----------
Net cash used in financing activities (16,403,500) (3,825,500) -
------------- ----------- ----------
NET INCREASE IN CASH
AND CASH EQUIVALENTS 3,426,245 1,055,238 33,479
CASH AND CASH EQUIVALENTS,
beginning of year 2,418,201 1,362,963 1,329,484
------------- ----------- ----------
CASH AND CASH EQUIVALENTS,
end of year $ 5,844,446 $ 2,418,201 $1,362,963
============= =========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
SCOTTSDALE LAND TRUST LIMITED PARTNERSHIP
-----------------------------------------
Notes to Financial Statements
-----------------------------
December 31, 1997 and 1996
--------------------------
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, 1997 is
$595.42 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 $5,696,030 and $1,349,448 at December 31, 1997 and 1996,
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, 1997, the Partnership had two parcels of land
(approximately 5 acres total) under contract for sale for a purchase price of
approximately $1.8 million to two unaffiliated third parties. The aggregate
original cost of the parcels is approximately $900,000.
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, 1997 exceeds the
carrying amount by $1.9 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 1997, 1996 and 1995, 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, 1997, 1996 and 1995:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- --------
<S> <C> <C> <C>
Net income for financial reporting purposes $8,797,901 $1,974,758 $ 46,044
Differences for tax purposes in:
Capitalized land inventory costs 212,788 230,557 251,826
Additional Interest on FFCA loan 135,612 122,857 111,300
Gain on sale of land (1,707,897) (1,060,765) -
Other 1,449 3,279 2,949
---------- ---------- --------
Taxable income to partners $7,439,853 $1,270,686 $412,119
========== ========== ========
</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, 1997, the tax bases of the Partnership's assets and
liabilities exceed the amounts recorded for financial reporting purposes by
$526,624. 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 1997, 1996 and 1995, fees paid or accrued to
the General Partner were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Partnership management fee (3/4 of 1% of the
Assets Under Management, payable monthly) $319,327 $360,752 $266,264
======== ======== ========
</TABLE>
In 1995, the General Partner waived $108,736, 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 fees were
waived in 1996 and 1997.
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 $25,981 in 1997, $25,360 in 1996 and $18,025 in 1995 for such
expenses.
<PAGE>
SCHEDULE III
SCOTTSDALE LAND TRUST LIMITED PARTNERSHIP
-----------------------------------------
SCHEDULE OF REAL ESTATE
-----------------------
AS OF DECEMBER 31, 1997
-----------------------
<TABLE>
<CAPTION>
Cost Gross Amount
Capitalized At Which
Initial Cost Subsequent to Carried At Date
Description Location Encumbrances to Partnership Acquisition December 31, 1997 Acquired
- -------------------------- --------------------- --------------------- -------------- ----------------- ----------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Improved land, 261 acres
initially, 143 acres at Subject to
December 31, 1997 Scottsdale, Arizona sales agreements(3) $23,913,185 $8,979,480 $18,931,573 Nov. 1988
=========== ========== ===========
</TABLE>
Notes:
(1) The aggregate cost for Federal income tax purposes is
$17,898,667.
(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 1997, the
Partnership entered into two sales agreements to sell
approximately 5 acres of land, with an aggregate cost
to the Partnership of approximately $900,000 to
unaffiliated third parties.
(4) There were no transactions in real estate during 1995.
Transactions in real estate during 1996 and 1997 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
Cost of land sold (11,163,169)
-----------
Balance, December 31, 1997 $18,931,573
===========
<PAGE>
Report of Independent Public Accountants
To FFCA Investor Services Corporation 88-B:
We have audited the accompanying balance sheet of FFCA INVESTOR SERVICES
CORPORATION 88-B (a Delaware corporation) as of December 31, 1997. This
financial statement is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement based on our
audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the balance sheet is free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the balance sheet. 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
audit provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of FFCA Investor Services Corporation
88-B as of December 31, 1997, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Phoenix, Arizona,
January 9, 1998.
<PAGE>
FFCA INVESTOR SERVICES CORPORATION 88-B
---------------------------------------
BALANCE SHEET - DECEMBER 31, 1997
---------------------------------
ASSETS
Cash $100
Investment in Scottsdale Land Trust Limited Partnership,
at cost 100
----
Total Assets $200
====
LIABILITY
Payable to Parent (Note 2) $100
----
STOCKHOLDER'S EQUITY
Common Stock; $l par value; 100 shares authorized,
issued and outstanding 100
----
Liability and Stockholder's Equity $200
====
The accompanying notes are an integral part of this balance sheet.
<PAGE>
FFCA INVESTOR SERVICES CORPORATION 88-B
---------------------------------------
NOTES TO BALANCE SHEET
----------------------
DECEMBER 3l, l997
-----------------
(l) Operations:
FFCA Investor Services Corporation 88-B (a Delaware corporation)
(88-B) was organized on August 11, l987 to act as the assignor limited partner
in Scottsdale Land Trust Limited Partnership (SLT).
The assignor limited partner is the owner of record of the limited
partnership units of SLT. All rights and powers of 88-B have been assigned to
the holders, who are the registered and beneficial owners of the units. Other
than to serve as assignor limited partner, 88-B has no other business purpose
and will not engage in any other activity or incur any debt.
(2) Related Parties:
Perimeter Center Management Company (a Delaware corporation) (PCMC)
is the sole stockholder of 88-B. The general partner of SLT is an affiliate of
PCMC.
<PAGE>
SCOTTSDALE LAND TRUST LIMITED PARTNERSHIP
and
FFCA INVESTOR SERVICES CORPORATION 88-B
---------------------------
Exhibit Index
The following is a complete list of exhibits filed as part of this Form
10-K. For electronic filing purposes only, this report contains Exhibit
27, the Financial Data Schedule. Exhibit numbers correspond to the
numbers in the Exhibit Table of Item 601 of Regulation S-K.
---------------------------
Sequentially
Exhibit Numbered Page
------- -------------
99. Annual Portfolio Valuation of Cushman &
Wakefield as of December 31, 1997.
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.
<TABLE>
<CAPTION>
Form 10-K
Exhibit No.
-----------
<S> <C>
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>
<TABLE>
<CAPTION>
Form 10-K
Exhibit No.
-----------
<S> <C>
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.
</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 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.
<TABLE>
<CAPTION>
Exhibit No.
-----------
<S> <C>
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.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE BALANCE SHEET AS OF DECEMBER 31, 1997 AND
THE STATEMENT OF OPERATIONS FOR THE YEAR ENDED
DECEMBER 31, 1997 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-31-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<CASH> 5,844,446
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 18,931,573
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 32,541,537
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 28,206,104
<TOTAL-LIABILITY-AND-EQUITY> 32,541,537
<SALES> 21,134,951
<TOTAL-REVENUES> 22,289,391
<CGS> 12,606,036
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 8,797,901
<INCOME-TAX> 0
<INCOME-CONTINUING> 8,797,901
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,797,901
<EPS-PRIMARY> 175.90
<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, 1997
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-31-1997
<PERIOD-END> DEC-31-1997
<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. LETTERHEAD]
February 3, 1998
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" located on the northwest corner of Bell
Road and Pima Road, Scottsdale, Arizona. 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, 1997.
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, 1997, $20,229,208 of
capital was returned to the partners, making the adjusted gross proceeds raised
$29,770,792 or $595.42 per unit. Of this amount, adjusted net proceeds invested
in the property contained in this partnership amounted to $26,529,988 after
adjusting for capital returned. The Partnership was fully invested in November
1988.
The Perimeter Center was inspected by the undersigned at various times
most recently on November 18, 1997. 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 has also been completed and is occupied by FFCA and the Fleischer
Museum.
<PAGE>
Cushman & Wakefield, Inc.
Mr. Morton H. Fleischer
Gerneral Partner
-2-
February 3, 1998
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 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, 1997, was:
THIRTY ONE MILLION TWO HUNDRED THOUSAND DOLLARS
$31,200,000
In addition to the market value of The Perimeter Center, cash on hand
and net receivables of $6,011,549 less distributions payable and other
liabilities of $4,335,433, as provided by the General Partner, results in a
total of $32,876,116. Dividing the total value by the 50,000 outstanding units
results in an indicated value per unit investment of $657.52 which represents an
increase of 10.43 percent from the adjusted unit investment of $595.42.
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
restricted appraisal 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>
