PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant toss.240.14a-12
Scottsdale Land Trust Limited Partnership
------------------------------------------------
(Name of Registrant as Specified in Its Charter)
------------------------------------------
(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
Units of Assigned Limited Partnership Interests
2) Aggregate number of securities to which transaction applies:
50,000 Units of Assigned Limited Partnership Interests
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
$4,187,744; represents the gross sales price of the Additional
FFCA Parcel and estimated net assets available for distribution at
liquidation
4) Proposed maximum aggregate value of transaction:
5) Total fee paid: $837.55
[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
SCOTTSDALE LAND TRUST LIMITED PARTNERSHIP
Dear Investor:
On behalf of FFCA Management Company Limited Partnership, the general
partner of Scottsdale Land Trust Limited Partnership (the "Partnership"), we are
requesting your consent to sell approximately 3.6 acres of land to Franchise
Finance Corporation of America, a New York Stock Exchange listed company and an
affiliate of the general partner, and to consent to the liquidation of the
Partnership after all of the Partnership's remaining parcels are sold, pursuant
to the proposals in the accompanying Consent Solicitation Statement. Thereafter
and following the sale of the remaining parcels, the Partnership will be
liquidated, all assets distributed and a final Schedule K-1 issued.
Whether you own a few or many units in the Partnership, it is important
that your units be represented. We encourage you to make certain your units are
represented by signing and dating the accompanying consent card and promptly
returning it in the enclosed envelope. Please note that if you do not sign your
consent card it will not be valid.
Should you have any questions regarding this Consent Solicitation
Statement, please call D.F. King & Co., Inc. at (800) 628-8532. Sincerely,
FFCA Management Company
Limited Partnership
By: /s/ Morton H. Fleischer
------------------------------------
Morton H. Fleischer, General Partner
Scottsdale, Arizona
Dated: May 12, 2000
<PAGE>
NOTICE OF CONSENT SOLICITATION
NOTICE IS HEREBY GIVEN that investors in Scottsdale Land Trust Limited
Partnership (the "Partnership") will be asked to consent to the following
proposals by June 26, 2000, (the "Consent Date") unless extended from time to
time by FFCA Management Company Limited Partnership (the "General Partner"):
1. A proposal to amend Article 5.3(a) of the Amended and Restated
Certificate and Agreement of Limited Partnership to expressly authorize the
General Partner to ratify and accept the terms of the Purchase Agreement
between the Partnership and Franchise Finance Corporation of America
("FFCA"), a New York Stock Exchange listed company and an affiliate of the
General Partner, whereby FFCA will purchase all of the Partnership's
interest in one lot in The Perimeter Center, a parcel of land comprising
approximately 3.6 acres, located in Scottsdale, Arizona, for a purchase
price of approximately $1,888,000, or $12.00 per square foot of land.
2. A proposal to authorize the General Partner to terminate and liquidate
the Partnership when all remaining unsold parcels of the approximately 261
original acres of unimproved land are sold. Liquidation of the Partnership
and final distribution of the assets will be carried out as described in
this Consent Solicitation Statement.
Each person (an "Investor") who holds one or more units of assigned limited
partner interests ("Units") in the Partnership and is reflected as an Investor
on the books and records of the Partnership at the close of business on May 1,
2000 (the "Record Date"), is entitled to receive notice of and to consent to the
proposals. Valid transferees of Units after the Record Date and prior to the
Consent Date will be entitled to revoke or revise a consent previously given by
the transferor with respect to such Units before the Consent Date. An
affirmative vote of Investors holding a majority of Units is required to approve
each proposal. FFCA Investor Services Corporation 88-B, the initial limited
partner of the Partnership and holder of record of the limited partner interests
in the Partnership, will deliver the consents of the Investors to the
Partnership as directed by the Investors. No meeting of Investors will be held.
All Investors are requested to complete, date and sign the enclosed Consent
Card and return it promptly in the postage paid, return addressed envelope
provided for that purpose. By returning your Consent Card promptly you can help
the Partnership avoid the expense of follow-up mailings.
THE ENCLOSED CONSENT IS BEING SOLICITED BY THE GENERAL PARTNER. THE GENERAL
PARTNER RECOMMENDS THAT YOU VOTE IN FAVOR OF THE PROPOSALS.
FFCA Management Company
Limited Partnership
By: /s/ Morton H. Fleischer
------------------------------------
Morton H. Fleischer, General Partner
Scottsdale, Arizona
Dated: May 12, 2000
<PAGE>
TABLE OF CONTENTS
Page
----
GENERAL INFORMATION........................................................ 1
SUMMARY ................................................................... 3
The Partnership.......................................................... 3
Proposal One: Sale of Additional FFCA Parcel............................ 3
Proposal Two: Dissolution of the Partnership Upon Sale of
Remaining Parcels...................................................... 4
Recommendations of the General Partner................................... 4
Estimated Liquidating Distribution....................................... 4
Liquidation Procedures................................................... 5
Special Considerations................................................... 5
Federal Income Tax Consequences.......................................... 5
SPECIAL CONSIDERATIONS..................................................... 6
Conflict of Interest..................................................... 6
Federal Income Tax Consequences.......................................... 6
HISTORY OF THE PARTNERSHIP................................................. 7
Organization and Public Offering......................................... 7
Initial Operations....................................................... 7
Perimeter Center Acquisition and Description............................. 7
Infrastructure........................................................... 8
FFCA Office Building..................................................... 8
PROPOSAL ONE: SALE OF ADDITIONAL FFCA PARCEL.............................. 8
Purchase Agreement....................................................... 9
Benefits of Sale of Property; Reasons for the Transaction................ 10
Detriments of Sale of Additional FFCA Parcel............................. 11
Accounting Treatment..................................................... 11
Regulatory Requirements.................................................. 11
Recommendation of the General Partner.................................... 11
PROPOSAL TWO: AUTHORITY FOR GENERAL PARTNER TO LIQUIDATE THE
PARTNERSHIP WHEN ALL REMAINING PARCELS ARE SOLD.......................... 11
Benefits of Liquidation of the Partnership; Reasons for the Proposal..... 12
No Detriments to Liquidating the Partnership............................. 13
Partnership Agreement Provisions Regarding Dissolution of Partnership.... 13
Insurance................................................................ 14
Accounting Treatment..................................................... 14
Regulatory Requirements.................................................. 14
Recommendation of the General Partner.................................... 14
UNAUDITED PRO FORMA FINANCIAL INFORMATION.................................. 15
SELECTED FINANCIAL DATA.................................................... 19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.................................................... 19
NO GENERAL PARTNER COMPENSATION............................................ 22
MARKET FOR UNITS AND RELATED SECURITY HOLDER MATTERS....................... 22
Secondary Market Information............................................. 22
Third Party Tender Offers................................................ 23
Unitholders.............................................................. 23
Distributions............................................................ 24
CONSENT PROCEDURES......................................................... 24
FEDERAL INCOME TAX CONSIDERATIONS.......................................... 25
Opinions of Counsel...................................................... 25
-i-
<PAGE>
TABLE OF CONTENTS
(Continued)
Page
----
Federal Income Tax Characterization of the Partnership................... 26
Tax Consequences of the Transaction and the Sale of the
Remaining Parcels...................................................... 26
State Tax Consequences and Withholding................................... 27
ANNUAL REPORT AND OTHER DOCUMENTS.......................................... 28
OTHER MATTERS.............................................................. 28
NOTICE TO BANKS, BROKER-DEALERS AND VOTING TRUSTEES AND THEIR NOMINEES..... 28
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES................................ F-1
-ii-
<PAGE>
SCOTTSDALE LAND TRUST LIMITED PARTNERSHIP
17207 NORTH PERIMETER DRIVE
SCOTTSDALE, ARIZONA 85255
------------------------------
CONSENT SOLICITATION STATEMENT
------------------------------
GENERAL INFORMATION
Scottsdale Land Trust Limited Partnership, a Delaware limited partnership
(the "Partnership"), was formed on August 12, 1987, to acquire approximately 261
gross acres of unimproved land (the "Property") in Scottsdale, Arizona, zoned
for commercial and industrial use. The Property is known as "The Perimeter
Center." 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, is the corporate
general partner of the General Partner. Morton H. Fleischer is the individual
general partner of the General Partner. The initial limited partner of the
Partnership (the "Initial Limited Partner") is FFCA Investor Services
Corporation 88-B, a Delaware corporation incorporated on August 11, 1987, for
the sole purpose of holding legal title to the limited partner interests of the
Partnership (the "Limited Partner Interests") and to avoid state filing
requirements when the holders (the "Investors") of the units of assigned Limited
Partner Interests (the "Units") transfer their Units.
This Consent Solicitation Statement, the accompanying Consent Card (the
"Consent Card") and the Notice of Consent Solicitation will be first mailed or
given to Investors on or about May 12, 2000. The Initial Limited Partner cannot
vote its own interests in connection with this Consent Solicitation. The
executive offices of the Partnership and the Initial Limited Partner are located
at 17207 North Perimeter Drive, Scottsdale, Arizona 85255, and their telephone
number is (480) 585-4500.
This Consent Solicitation Statement is furnished in connection with the
solicitation by the General Partner of consents directing the Initial Limited
Partner to deliver the consents of Investors to the Partnership regarding the
two proposals described herein (collectively, the "Proposals") on June 26, 2000,
a period of 45 days from the date of this Consent Solicitation Statement, unless
extended from time to time by the General Partner (the "Consent Date"). The
consents are being solicited by the General Partner pursuant to Sections 11.2
and 11.4 of the Amended and Restated Certificate and Agreement of Limited
Partnership of the Partnership (the "Partnership Agreement").
The General Partner is seeking the consent of the Investors to:
* sell one parcel in The Perimeter Center to FFCA, an affiliate of the
Partnership; and
* authorize the General Partner to liquidate and dissolve the
Partnership after all remaining parcels in The Perimeter Center are
sold.
For a more detailed discussion of the Proposals, see "PROPOSAL ONE: SALE OF
ADDITIONAL FFCA PARCEL" and "PROPOSAL TWO: AUTHORITY FOR GENERAL PARTNER TO
LIQUIDATE THE PARTNERSHIP WHEN ALL REMAINING PARCELS ARE SOLD."
Each Investor holding one or more Units of record at the close of business
on May 1, 2000 (the "Record Date") will be entitled to vote with respect to
<PAGE>
the Proposals. On the Record Date, there were 50,000 Units outstanding, each of
which is entitled to one vote. An affirmative vote of a majority of the Units is
required for approval of each proposal being submitted for a vote.
The General Partner solicits consents by mail to give each Investor an
opportunity to direct the Initial Limited Partner to vote the number of Limited
Partner Interests corresponding to the number of Units held by the Investor on
all matters described in this Consent Solicitation Statement. Investors are
urged to: (1) read this Consent Solicitation Statement carefully; (2) specify
their choice for each proposal by marking the appropriate box on the enclosed
Consent Card; and (3) sign, date and return the Consent Card by mail in the
postage paid, return addressed envelope provided for that purpose.
All Units represented by a properly executed and valid Consent Card
received prior to the Consent Date will be voted by the Initial Limited Partner
in accordance with the instructions marked thereon or otherwise as provided
therein, unless such Consent Card has previously been revoked or revised. Unless
instructions to the contrary are marked, or if no instructions are specified,
the Initial Limited Partner will treat each signed Consent Card as a direction
to vote the Units represented thereby in favor of each Proposal set forth on the
Consent Card. Any Consent Card may be revoked or revised at any time prior to
the Consent Date by submitting another Consent Card bearing a later date or by
giving written notice of revocation to the Initial Limited Partner at the
Partnership's address indicated above. Any notice of revocation or revision sent
to the Partnership must include the Investor's name, the number of Units with
respect to which the prior Consent Card was given, and a statement that the
Investor revokes all previously executed Consent Cards, and must be received
prior to the Consent Date to be effective.
The information contained herein concerning the Partnership and the General
Partner has been furnished by the General Partner. Information contained herein
concerning Franchise Finance Corporation of America ("FFCA") has been furnished
to the General Partner by FFCA.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION (THE "COMMISSION"), NOR HAS THE COMMISSION PASSED UPON THE
FAIRNESS OR MERITS OF THIS TRANSACTION OR UPON THE ACCURACY OR ADEQUACY OF THE
INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.
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<PAGE>
SUMMARY
THE FOLLOWING IS A SUMMARY OF INFORMATION CONTAINED IN THIS CONSENT
SOLICITATION STATEMENT. THIS SUMMARY IS NOT INTENDED TO BE COMPLETE AND IS
QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND FINANCIAL
STATEMENTS CONTAINED ELSEWHERE IN THIS CONSENT SOLICITATION STATEMENT.
REFERENCES TO THE PARTNERSHIP AGREEMENT OF THE PARTNERSHIP CONTAINED IN THIS
CONSENT SOLICITATION STATEMENT ARE QUALIFIED IN THEIR ENTIRETY BY THE TERMS OF
THE PARTNERSHIP AGREEMENT PREVIOUSLY FILED WITH THE COMMISSION, WHICH IS
INCORPORATED IN THIS CONSENT SOLICITATION STATEMENT BY REFERENCE. COPIES OF THE
PARTNERSHIP AGREEMENT WILL BE FURNISHED, WITHOUT CHARGE, TO ANY INVESTOR WHO
MAKES A WRITTEN OR ORAL REQUEST THEREFOR TO INVESTOR SERVICES, FFCA MANAGEMENT
COMPANY LIMITED PARTNERSHIP, 17207 NORTH PERIMETER DRIVE, SCOTTSDALE, ARIZONA
85255, TELEPHONE NUMBER (480) 585-4500.
Statements contained in this Consent Solicitation Statement that are not
based on historical fact are "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. Forward-looking statements
may be identified by the use of forward-looking terminology such as "may,"
"will," "expect," "anticipate," "believe," "continue" or similar terms,
variations of those terms or the negative of those terms. Cautionary statements
set forth in "SPECIAL CONSIDERATIONS" and elsewhere in this Consent Solicitation
Statement identify important factors that could cause actual results to differ
materially from those in the forward-looking statements.
THE PARTNERSHIP
The Partnership was formed on August 12, 1987 under the Delaware Revised
Uniform Limited Partnership Act to acquire the Property, which is zoned for
commercial and industrial use and located on the northwest corner of the
intersection of Bell and Pima Roads in Scottsdale, Arizona. The Property is
known as "The Perimeter Center." After acquiring the Property, the Partnership
offered the Property for sale or lease on a parcel-by-parcel basis. In
conjunction with the acquisition of the Property, the Partnership also provided
funds to develop the infrastructure, consisting principally of roads, water,
sewer, drainage, utility and similar improvements (the "Infrastructure"). In
addition, the Partnership made a participating, first mortgage loan, the
proceeds of which were used by FFCA to acquire approximately five acres of land
from the Partnership (the "FFCA Premises") and to construct an office building
(the "FFCA Office Building") which is the corporate headquarters of FFCA, a
Delaware corporation with its principal office located at 17207 North Perimeter
Drive, Scottsdale, Arizona 85255. FFCA is a New York Stock Exchange listed
company and 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 and Canada. The common
stock of FFCA is listed on the New York Stock Exchange under the symbol "FFA."
The Additional FFCA Parcel described in Proposal One is located adjacent to the
FFCA Office Building.
PROPOSAL ONE: SALE OF ADDITIONAL FFCA PARCEL
Since the purchase of the FFCA Premises in 1988, FFCA's operations and
office requirements have increased. FFCA wishes to acquire the Additional FFCA
Parcel (defined below) for the anticipated future expansion of FFCA's corporate
headquarters.
The Partnership has entered into a Purchase and Sale Agreement with FFCA
dated as of February 7, 2000 (the "Purchase Agreement"), where the Partnership
has agreed to sell (the "Transaction") all of the Partnership's right, title and
interest in a lot (the "Additional FFCA Parcel") in The Perimeter Center,
located adjacent to the FFCA Premises. FFCA has agreed to pay, subject to
adjustment for taxes, assessments and similar items, approximately $1,888,000 in
cash for the Additional FFCA Parcel, which consists of approximately 3.6 acres
of land, or $12.00 per square foot of land. The purchase price was determined by
3
<PAGE>
the General Partner based upon recent sales of parcels in The Perimeter Center
to unaffiliated third parties. See "SPECIAL CONSIDERATIONS" and "PROPOSAL ONE."
The Purchase Agreement provides that FFCA is purchasing the Additional FFCA
Parcel with limited representations and warranties from the Partnership and on
an "as is," "where is" basis and with all faults.
The Transaction is subject to approval by an affirmative vote of Investors
holding a majority of the Units of the Partnership.
PROPOSAL TWO: DISSOLUTION OF THE PARTNERSHIP UPON SALE OF REMAINING PARCELS
To facilitate a final liquidating distribution to Investors, Proposal Two
authorizes the General Partner to liquidate and dissolve the Partnership after
the remaining unsold parcels of The Perimeter Center, collectively comprising
approximately 34 acres of land (the "Remaining Parcels"), are sold. The
Remaining Parcels currently include the Additional FFCA Parcel and three other
parcels which are under contracts for sale to unaffiliated third parties. The
Additional FFCA Parcel is under contract at a price of approximately $1,888,000,
and the other three Remaining Parcels are under contract for a collective price
of approximately $15,875,000. There can be no assurance that the sale of these
parcels will be completed under these sales contracts. For a description of
these pending sales, see "PROPOSAL ONE - Benefits of Liquidation of the
Partnership; Reasons for the Proposal." The liquidation of the Partnership will
not occur until the Remaining Parcels are sold, which could be an appreciable
time after the date of this Consent Solicitation Statement. FFCA, an affiliate
of the Partnership, has agreed to buy the Additional FFCA Parcel as described in
Proposal One. The other three parcels will not be sold to affiliates of the
Partnership or the General Partner.
As soon as possible after the sale of all of the Remaining Parcels, the
General Partner will take all steps necessary to complete the liquidation of the
Partnership. Proposal Two authorizes the General Partner to carry out all
activities that, in its reasonable discretion, are necessary to liquidate the
remaining assets of the Partnership and to cover contingent liabilities that may
arise as a result of the liquidation of the Partnership. These activities may
include: (1) selling the remaining non-cash assets of the Partnership, (2)
purchasing insurance to cover contingent liabilities, (3) establishing a
liquidating trust, and/or (4) setting up appropriate reserve funds. See
"PROPOSAL TWO."
Proposal Two requires approval by an affirmative vote of Investors holding
a majority of the Units of the Partnership.
RECOMMENDATIONS OF THE GENERAL PARTNER
The General Partner recommends that Investors approve the sale of the
Additional FFCA Parcel as described in Proposal One. THE GENERAL PARTNER HAS A
CONFLICT OF INTEREST WITH RESPECT TO PROPOSAL ONE. SEE "SPECIAL CONSIDERATIONS."
The General Partner further recommends that Investors approve the liquidation of
the Partnership as described in Proposal Two.
ESTIMATED LIQUIDATING DISTRIBUTION
The source of the liquidating distribution from the Partnership will
include:
* proceeds from the sale of the Remaining Parcels;
* repayment of the outstanding principal, accrued interest and
additional interest on the mortgage loan made to FFCA; and
* Partnership reserves.
4
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The following chart sets forth the estimated cash distributions per Unit
for the life of the Partnership had the Partnership liquidated on December 31,
1999.
CASH DISTRIBUTIONS TO LIQUIDATING TOTAL
DECEMBER 31, 1999 - DISTRIBUTION DISTRIBUTIONS
DATE OF ADMISSION FROM OPERATIONS (ESTIMATED)(1) (ESTIMATED)
- ----------------- --------------------- -------------- -------------
November 23, 1988 $923.67 $691.33 $1,615.00
- ----------
(1) See "UNAUDITED PRO FORMA FINANCIAL INFORMATION" for assumptions used in
calculating the estimated liquidating distribution.
LIQUIDATION PROCEDURES
Upon liquidation of the Partnership, the General Partner will apply and
distribute the assets of the Partnership to Investors and the General Partner in
accordance with the provisions of the Partnership Agreement. Each Investor will
receive a final Schedule K-1 from the Partnership as soon as practicable after
liquidation of the Partnership. The estimated transaction costs and expenses
associated with the Consent Solicitation of Investors and with the liquidation
of the Partnership will be approximately $335,000. See Note 1 to the "NOTES TO
UNAUDITED PRO FORMA BALANCE SHEET."
SPECIAL CONSIDERATIONS
In evaluating Proposal One, Investors should carefully consider the
information contained under "SPECIAL CONSIDERATIONS."
FEDERAL INCOME TAX CONSEQUENCES
Separate federal income tax consequences result from the sale of the
remaining assets of the Partnership and the subsequent liquidation of the
Partnership, as described below.
TAXABLE GAIN. The sale of the remaining assets will constitute a taxable
transaction for federal income tax purposes. A taxable gain of approximately
$285 per Unit is expected to result from the sale of the remaining assets, which
will be ordinary income for federal income tax purposes. Each Investor will
receive a final Schedule K-1 from the Partnership reflecting this taxable gain.
CAPITAL LOSS. Separately, as a result of the subsequent liquidation of the
Partnership, each Investor who acquired his Units in the initial offering is
expected to recognize a capital loss of approximately $127 per Unit. Such loss
will be primarily attributable to such Investor's share of the syndication costs
of the Partnership. Investors who purchased their Units after the initial
offering may have a tax basis in their Units different from that of Investors
who acquired their Units in the initial offering. As a result, these Investors
may recognize a different amount of gain or loss in liquidation of the
Partnership than Investors who purchased Units in the initial offering.
See "SPECIAL CONSIDERATIONS--Federal Income Tax Consequences" and "FEDERAL
INCOME TAX CONSIDERATIONS."
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SPECIAL CONSIDERATIONS
CONFLICT OF INTEREST
In their evaluation of Proposal One, Investors should carefully consider
the following conflict of interest. The General Partner is affiliated with FFCA,
the proposed buyer of the Additional FFCA Parcel. Morton H. Fleischer, the
Chairman of the Board and Chief Executive Officer of FFCA, is also the principal
beneficial owner of the General Partner. An unaffiliated third party
representative was not retained to separately represent the interests of the
Partnership in the Transaction. The sales price of the Additional FFCA Parcel
was not determined by arm's-length negotiations between the Partnership and
FFCA, but was determined by prices of recent sales of property to unaffiliated
third parties in The Perimeter Center in order to approximate fair market value,
as set forth under "PROPOSAL ONE."
The purchase price for the Additional FFCA Parcel is equal to the highest
price paid per square foot by third parties for purchases of land in The
Perimeter Center, including parcels under contract but not sold, as of February
7, 2000, the date of the Purchase Agreement. On April 26, 2000, subsequent to
the execution of the Purchase Agreement, the Partnership entered into an
agreement to sell the last Remaining Parcel for $12.50 per square foot. The
General Partner believes this parcel is a more desirable parcel than the
Additional FFCA Parcel because of the parcel's superior location with respect to
visibility and proximity to a major road, which supports the higher purchase
price for the last remaining parcel. FFCA did not retain a buyer's broker to
represent FFCA in the Transaction. Most parcel sales in The Perimeter Center
have involved both a broker representing the buyer and a broker representing the
seller, resulting in lower net proceeds to the Partnership than a sale not
involving a buyer's broker. Therefore, the General Partner believes that this
price is fair to the Partnership and to the Investors because it is equal to the
highest price paid per square foot because no broker represented FFCA.
Therefore, higher net proceeds will be received by the Partnership than if a
buyer's broker was involved. In addition, the General Partner also believes this
price is fair because it believes that many of the previously sold parcels were
of higher quality because of their more desirable locations for commercial users
than the Additional FFCA Parcel.
On behalf of FFCA, the disinterested members of the Board of Directors of
FFCA approved the purchase by FFCA of the Additional FFCA Parcel. The
affiliation between the General Partner and FFCA results in a conflict of
interest of the General Partner in recommending Proposal One. See "PROPOSAL
ONE."
The General Partner believes that the affiliation of the General Partner
with FFCA does not materially and adversely affect its ability to act as the
representative for the interests of the Investors. There is a risk, however,
that had the General Partner retained an unaffiliated party to represent the
interests of the Investors, those representatives might have been able to
negotiate a more favorable sales price for the Partnership and better terms in
the Purchase Agreement on behalf of the Investors.
FEDERAL INCOME TAX CONSEQUENCES
Separate federal income tax consequences result from the sale of the
parcels and subsequent liquidation of the Partnership, as described below.
TAXABLE GAIN. The sale of the remaining assets will constitute a taxable
transaction for federal income tax purposes. A taxable gain of approximately
$285 per Unit is expected to result from the sale of the remaining assets, which
will be ordinary income for federal income tax purposes. Each Investor will
receive a final Schedule K-1 from the Partnership reflecting this taxable gain.
CAPITAL LOSS. Separately, as a result of the subsequent liquidation of the
Partnership, each Investor who acquired his Units in the initial offering is
expected to recognize a capital loss of approximately $127 per Unit. Such loss
will be primarily attributable to such Investor's share of the syndication costs
of the Partnership. Investors who purchased their Units after the initial
offering may have a tax basis in their Units different from that of Investors
6
<PAGE>
who acquired their Units in the initial offering. As a result, these Investors
may recognize a different amount of gain or loss in liquidation of the
Partnership than Investors who purchased Units in the initial offering.
For a more complete discussion of the federal income tax effects of the
Transaction and the subsequent liquidation of the Partnership, see "FEDERAL
INCOME TAX CONSIDERATIONS."
HISTORY OF THE PARTNERSHIP
ORGANIZATION AND PUBLIC OFFERING
The Partnership was formed on August 12, 1987 under the Delaware Revised
Uniform Limited Partnership Act. On June 14, 1988 the Partnership commenced a
public offering of $50,000,000 of Units in the Partnership pursuant to a
Registration Statement on Form S-11 under the Securities Act of 1933, as
amended. The Partnership sold a total of 50,000 Units at $1,000 per Unit for a
total of $50,000,000. The sale of the Units was completed on November 23, 1988,
on which date the Investors acquired such Units. Since that date, no Investor
has made any additional capital contribution. Investors 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.
The net proceeds of the offering totaled $43,250,000. These funds were
fully invested in accordance with the Partnership Agreement by the Partnership
to:
* purchase the Property;
* fund construction of the Infrastructure;
* fund $8,500,000 for the mortgage loan made to FFCA; and
* fund operating reserves.
INITIAL OPERATIONS
The Partnership's principal objectives were to: (1) to acquire
approximately 261 gross acres of unimproved land in Scottsdale, Arizona known as
"The Perimeter Center"; (2) develop the Infrastructure; (3) sell The Perimeter
Center on a parcel-by-parcel basis; and (4) make the mortgage loan to FFCA, the
proceeds of which were used by FFCA to acquire approximately five acres of land
from the Partnership and to construct the FFCA Office Building. The General
Partner believes the Partnership has accomplished these objectives.
PERIMETER CENTER ACQUISITION AND DESCRIPTION
The Perimeter Center was purchased by the Partnership for $23,913,185 in
December, 1988 (including capitalized costs and certain reimbursements).
Approximately 75% of the 261 gross-acres of The Perimeter Center were available
for sale or lease after the deduction of land for the Infrastructure. As of
May 3, 2000, all of the parcels within The Perimeter Center have been sold or
are under a contract for sale (including the Additional FFCA Parcel).
7
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INFRASTRUCTURE
The Infrastructure for The Perimeter Center was completed in 1990. The
Partnership spent approximately $9,000,000 of the proceeds from the offering on
the Infrastructure, including gas, sewer, water, electricity, telephone, and all
streets, curbs, gutter and sidewalk work, both on-site and off-site.
FFCA OFFICE BUILDING
In 1988, the Partnership loaned FFCA $8,500,000 for the purchase of five
acres of land from the Partnership and the construction of the FFCA Office
Building. In 1990, this construction loan was converted to a permanent loan (the
"Permanent Loan").
Under the Permanent Loan, FFCA made monthly payments of interest only, at
ten percent (10%) per year, to the Partnership. The principal balance of the
Permanent Loan was paid on May 1, 2000. Additional interest ("Additional
Interest") was also paid by FFCA upon maturity of the Permanent Loan.
The amount of Additional Interest that FFCA was required to pay to the
Partnership was to be equal to the greater of (1) the Permanent Loan's
proportional share of certain organizational and offering expenses paid by the
Partnership from the original sale of the Units, which is approximately
$1,130,000, or (2) 30% of the increase in the fair market value, as defined in
the loan agreement, of the FFCA Office Building at the time the Permanent Loan
matures. Based upon a recent appraisal of the FFCA Office Building rendered by
Cushman & Wakefield, Inc., independent real estate appraisers, the additional
interest owed and paid by FFCA was approximately $1,130,000.
PROPOSAL ONE:
SALE OF ADDITIONAL FFCA PARCEL
Investors will be asked on the Consent Date to approve the amendment of
Section 5.3(a) of the Partnership Agreement to expressly authorize the General
Partner to ratify and accept the terms of the Purchase Agreement between the
Partnership and FFCA, whereby FFCA will purchase the Additional FFCA Parcel for
approximately $1,888,000 in cash (the "Transaction"). The Additional FFCA Parcel
represents approximately 3.6 acres of land for a purchase price of $12.00 per
square foot.
To consummate the Transaction, Sections 1 and 5.3(a) of the Partnership
Agreement must be amended. Section 5.3(a) of the Partnership Agreement prohibits
interested party transactions and states that "the Partnership shall not ...
sell any property ... to the General Partner or an Affiliate of the General
Partner." Section 1 must also be amended to add a definition for a new term,
"Additional FFCA Parcel." Investors will be asked on the Consent Date to approve
the amendments of Section 1 and Section 5.3(a) to expressly authorize the
Transaction as a transaction between affiliated parties. See "SPECIAL
CONSIDERATIONS."
To amend the Partnership Agreement to authorize the Transaction, Section
10.1(b)(iii) of the Partnership Agreement requires the consent of more than 50%
of the interests in the Partnership held by Limited Partners. Therefore,
approval of Proposal One requires the consent of a majority of the Units.
Pursuant to Section 10.1 of the Partnership Agreement, the General Partner has
proposed that Section 1 and Section 5.3 of the Partnership Agreement be amended
to authorize the General Partner to ratify and accept the sale of the Additional
FFCA Parcel to FFCA by adding a new Section 1.35A and a new Section 5.3(a)(i) to
read as follows:
8
<PAGE>
"1.35A "ADDITIONAL FFCA PARCEL" means the approximately 3.6 acre parcel
of the Property adjacent to the eastern boundary of the FFCA Parcel in
The Perimeter Center."
"5.3(a)(i) Notwithstanding any other provision of this Agreement, the
General Partner is expressly authorized to ratify and accept the terms
of the purchase agreement between the Partnership and FFCA, whereby
FFCA will purchase all of the Partnership's interest in the Additional
FFCA Parcel for a sales price of approximately $1,888,000, subject to
adjustment as provided in such purchase agreement.
The background and reasons for the sale of the Additional FFCA Parcel are
set forth below. A description of the history and business of the Partnership is
set forth above under "HISTORY OF THE PARTNERSHIP."
PURCHASE AGREEMENT
The terms and conditions of the Purchase Agreement were not determined
pursuant to arm's-length negotiations between the General Partner and FFCA.
However, the form of the Purchase Agreement used by the Partnership was
substantially the same form of agreement used for sales to unaffiliated third
parties, except for terms and conditions specific to the Additional FFCA Parcel
and the parties to the Transaction. Therefore, the terms and conditions of the
Purchase Agreement are substantially similar in most material aspects to those
that would have been used had the Additional FFCA Parcel been purchased by an
unaffiliated third party. The purchase price to be paid by FFCA for the
Additional FFCA Parcel, $12.00 per square foot, is equal to the highest price
per square foot paid for purchases of land by unaffiliated third parties
purchasing land in The Perimeter Center, including parcels under contract but
not sold, as of February 7, 2000, the date of the Purchase Agreement. On April
26, 2000, subsequent to the execution of the Purchase Agreement, the Partnership
entered into an agreement to sell the last Remaining Parcel for $12.50 per
square foot. The General Partner believes this parcel is a more desirable parcel
than the Additional FFCA Parcel because of the parcel's superior location with
respect to visibility and proximity to a major road, which supports the higher
purchase price for the last remaining parcel. FFCA did not retain a buyer's
broker to represent FFCA in the Transaction. Most parcel sales in The Perimeter
Center have involved brokers representing both the buyer and the seller, and,
since commissions are paid out of sale proceeds, this results in lower net
proceeds to the Partnership than a sale without a buyer's broker. See "--
Benefits of Sale of Property; Reasons for the Transaction."
The following is a summary of some of the provisions of the Purchase
Agreement and is qualified in its entirety by the specific provisions set forth
in the Purchase Agreement.
The Purchase Agreement provides that the Partnership will sell the
Additional FFCA Parcel to FFCA, subject to certain adjustments for taxes,
assessments, liens, if any, and similar items for approximately $1,888,000 in
cash, which is $12.00 per square foot of land. As of the date of this Consent
Solicitation Statement, FFCA has completed its due diligence review of the
Additional FFCA Parcel and approved the conditions of the Purchase Agreement,
including the condition of the property, environmental matters and title.
FFCA is obligated to pay for all costs and expenses of the transaction,
including, without limitation, title insurance expenses and premiums, escrow
fees, survey expenses, environmental audit expenses and/or environmental
insurance premiums, transfer, recording and filing fees and expenses, and
mortgage taxes, if any. Notwithstanding the above, FFCA is not responsible for
any expenses incurred in connection with the solicitation of consents of the
Investors or the liquidation of the Partnership.
The Purchase Agreement provides that FFCA is purchasing the Additional FFCA
Parcel from the Partnership with limited representations and warranties from the
Partnership and otherwise on an "as is," "where is" basis and with all faults.
The representations and warranties of the Partnership under the Purchase
Agreement will survive the closing of the Transaction.
9
<PAGE>
BENEFITS OF SALE OF PROPERTY; REASONS FOR THE TRANSACTION
The General Partner believes that the sale of the Additional FFCA Parcel is
advisable under the terms and conditions in the Purchase Agreement. At the time
the Partnership purchased the Property, the Partnership intended to develop the
Infrastructure and offer the Property for sale on a parcel-by-parcel basis. The
General Partner believes that the sale of the Additional FFCA Parcel is
favorable because the sale will result in the highest net proceeds per square
foot to the Partnership, including parcels under contract but not sold, as of
April 1, 2000.
Under the Purchase Agreement, the price offered for the Additional FFCA
Parcel is $12.00 per square foot of land, which is equal to the highest price
paid per square foot by third parties for purchases of land in The Perimeter
Center, including parcels under contract but not sold, as of the date of the
Purchase Agreement. FFCA did not retain a buyer's broker to represent FFCA in
the Transaction. Most parcel sales in The Perimeter Center have involved both a
broker representing the buyer and a broker representing the seller, and, since
commissions are paid out of sale proceeds, this results in lower net proceeds to
the Partnership than a sale not involving a buyer's broker. Therefore, the
purchase of the Additional FFCA Parcel will result in higher net proceeds being
received by the Partnership than if a buyer's broker was involved. The following
table represents the purchase price per square foot of all closed sales
transactions since January 1, 1999, to unaffiliated third parties:
<TABLE>
<CAPTION>
NET PROCEEDS
GROSS TO THE
LOT SIZE PRICE PER NET PROCEEDS PARTNERSHIP
LOT SIZE IN SQUARE SQUARE TO THE PER SQUARE
PURCHASER IN ACRES FEET FOOT PARTNERSHIP(1) FOOT CLOSING DATE
--------- -------- ---- ---- -------------- ---- ------------
<S> <C> <C> <C> <C> <C> <C>
Nasko Holdings LLC 4.50 196,020 $10.50 $ 1,923,680 $ 9.81 July 16, 1999
Cornwell Financial Group 4.76 207,530 $ 9.00 $ 1,804,132 $ 8.69 October 29, 1999
RFG Management, Inc. 11.32 492,896 $ 9.27 $ 4,191,850 $ 8.50 December 15, 1999
Wall St. West 7.00 304,924 $11.40 $ 3,355,045 $11.00 December 16, 1999
Wall St. West 3.60 156,815 $11.40 $ 1,721,073 $10.98 December 16, 1999
Furst Properties 7.00 305,013 $11.00 $ 3,242,089 $10.63 December 30, 1999
Corporate Enhancement Group 3.74 162,958 $12.00 $ 1,791,193 $10.99 January 31, 2000
Furst Properties 9.70 422,573 $11.00 $ 4,484,961 $10.61 January 31, 2000
----- --------- -----------
Total 51.62 2,248,729 $22,514,023
</TABLE>
- ----------
(1) Represents net proceeds to the Partnership after payment of brokerage
commissions and closing costs, if any.
Real Estate brokerage commissions paid by the Partnership for recent sales
in The Perimeter Center have ranged from 3% of the sales price for sales
involving only a seller's broker, to 8% of the sales price for sales involving
both a buyer's broker and a seller's broker, with most commissions paid at 8%.
The real estate brokerage commission for the Additional FFCA Parcel will only be
3% because no buyer's broker represented FFCA in the Transaction. The brokerage
commission will be paid to an independent, third party real estate broker
previously retained by the Partnership to assist in land sales in The Perimeter
Center. This lower commission will result in a higher net purchase price than
would otherwise be obtained in a typical transaction where a buyer's broker was
involved. This lower commission has the effect of increasing the net proceeds to
the Partnership on the sale by approximately $0.60 per square foot, assuming a
commission of 3% rather than 8%.
DETRIMENTS OF SALE OF ADDITIONAL FFCA PARCEL
If the Additional FFCA Parcel is sold, Investors will not receive any
potential benefits from possible future appreciation in value of the Additional
FFCA Parcel. The Additional FFCA Parcel is one of the few remaining unsold
parcels in The Perimeter Center. Therefore, the General Partner believes the
10
<PAGE>
parcel would likely sell in the near future, and that it is unlikely that it
could be sold at a substantially higher price to an unaffiliated third party.
The General Partner believes that any such potential benefit from possible
future appreciation from holding the Additional FFCA Parcel would be offset by
legal, accounting and administrative expenses necessary to continue to operate
the Partnership as a public company under federal securities laws.
ACCOUNTING TREATMENT
The proposed sale of the Additional FFCA Parcel will be accounted for as a
sale of real estate under the full accrual method. Under this method of
accounting, gain is recognized in full when the sale is consummated.
REGULATORY REQUIREMENTS
No federal or state regulatory requirements or approvals, other than
applicable Delaware law and federal securities law requirements related to this
Consent Solicitation Statement, must be complied with or obtained in order to
complete the Transaction. If the Transaction is approved, Investors will not
have dissenters' or other appraisal rights for the value of their Units under
Delaware law or the Partnership Agreement, and no similar rights will be given
to dissenting Investors in the Transaction.
RECOMMENDATION OF THE GENERAL PARTNER
THE GENERAL PARTNER HAS APPROVED THE TRANSACTION AND RECOMMENDS THAT
INVESTORS CONSENT TO PROPOSAL ONE TO AMEND THE PARTNERSHIP AGREEMENT TO
AUTHORIZE THE SALE OF THE ADDITIONAL FFCA PARCEL BY MARKING THE "FOR" BOX ON THE
ENCLOSED CONSENT CARD. THE GENERAL PARTNER HAS A CONFLICT OF INTEREST WITH
RESPECT TO PROPOSAL ONE. SEE "SPECIAL CONSIDERATIONS."
PROPOSAL TWO:
AUTHORITY FOR GENERAL PARTNER TO LIQUIDATE THE PARTNERSHIP
WHEN ALL REMAINING PARCELS ARE SOLD
The General Partner recommends the Investors grant authority to the General
Partner to take all steps necessary to liquidate the Partnership and commence a
final distribution of assets when the Remaining Parcels are sold. Proposal Two
authorizes the General Partner to liquidate and dissolve the Partnership after
the Remaining Parcels, collectively comprising approximately 34 acres of land,
are sold. The Remaining Parcels currently include the Additional FFCA Parcel and
three other parcels which are under contracts for sale to unaffiliated third
parties. There can be no assurance that the sale of these parcels will be
completed under these sales contracts. For a description of these pending sales,
see "PROPOSAL ONE - Benefits of Liquidation of the Partnership; Reasons for the
11
<PAGE>
Proposal." The liquidation of the Partnership will not occur until the Remaining
Parcels are sold, which could be an appreciable time after the date of this
Consent Solicitation Statement. FFCA, an affiliate of the Partnership, has
agreed to buy the Additional FFCA Parcel as described in Proposal One. The other
three parcels will not be sold to affiliates of the Partnership or the General
Partner.
Proposal Two authorizes the General Partner to carry out all activities
that, in its reasonable discretion, are necessary to liquidate the remaining
assets of the Partnership and to cover contingent liabilities that may arise as
a result of the liquidation. These activities may include: (1) selling the
remaining non-cash assets of the Partnership, (2) purchasing insurance to cover
contingent liabilities, (3) establishing a liquidating trust, and/or (4)
creating appropriate reserve funds. Investors voting against Proposal Two do not
have dissenters' rights or any rights of appraisal.
In accordance with the Partnership Agreement, the General Partner intends
to purchase insurance to cover certain liabilities relating to potential
securities claims, and claims based on the wrongful acts of the Partnership and
the General Partner, that are made after the liquidation of the Partnership. The
amount and the duration of the insurance is within the reasonable discretion of
the General Partner. See "- Insurance" below. The General Partner may also
deposit funds in a liquidating trust until the trustee determines that all
contingent liabilities have been paid or there are no outstanding liabilities or
contingent liabilities. The General Partner does not currently anticipate that a
liquidating trust will be used. These trust funds, if any, will be returned to
Investors in the same manner as required for liquidating distributions under the
Partnership Agreement. Each Investor will receive a final Schedule K-1 from the
Partnership as soon as possible after the liquidation of the Partnership, and
will receive a 1099 following the liquidation of the trust, if any. The General
Partner is also authorized to set up appropriate reserve funds to cover
contingent liabilities, which will also be refunded in the same manner as
required for liquidating distributions under the Partnership Agreement.
To dissolve the Partnership, Section 5.4(b)(ii) of the Partnership
Agreement requires the consent of the Investors holding more than 50% of the
Units. Therefore, Proposal Two requires the consent of a majority of the Units.
Investors will be asked on the Consent Date to grant the General Partner the
authority to dissolve the Partnership when all the Remaining Parcels are sold.
The background and reasons for the dissolution of the Partnership after the
sale of all Remaining Parcels are set forth below. A description of the history
and business of the Partnership is set forth above under "HISTORY OF THE
PARTNERSHIP."
BENEFITS OF LIQUIDATION OF THE PARTNERSHIP; REASONS FOR THE PROPOSAL
The Partnership Agreement contemplates that the Partnership will be
liquidated upon the sale of all the parcels, subject to the consent of the
Investors. The General Partner believes that liquidation of the Partnership is
advisable once the Remaining Parcels are sold. The Remaining Parcels currently
include the Additional FFCA Parcel and three other parcels which collectively
comprise approximately 34 acres of land which remain unsold. On February 7,
2000, the Partnership entered into a contract with KDZ, LLC to sell one of the
Remaining Parcels comprising approximately 16.6 acres, for a sales price of
approximately $8,715,828, or approximately $12.00 per square foot. On April 19,
2000, the Partnership entered into an agreement with Denali National Trust, Inc.
to sell another of the Remaining Parcels comprising approximately 6.1 acres, for
a sales price of approximately $3,184,932, or approximately $12.00 per square
foot. On April 26, 2000, the Partnership entered into an agreement with Hewson
Development Corporation to sell the last of the Remaining Parcels comprising
approximately 7.3 acres, for a sales price of approximately $3,974,850, or
approximately $12.50 per square foot. There can be no assurance that the sale of
these parcels will be completed under these sales contracts.
12
<PAGE>
The Partnership's primary investment objective was to achieve capital
appreciation through the acquisition and development of unimproved land,
specifically, the Property, and the sale or lease of improved land. The primary
source of cash distributions to holders has been from the sale of such parcels
of the Property. Once the Remaining Parcels are sold, the primary investment
objective of the Partnership will be completed. The Partnership's original
investment objectives never contemplated the acquisition of real estate
subsequent to the acquisition of the Property. Therefore, the General Partner
does not believe continuing the operations of the Partnership after the
Remaining Parcels are sold is an option available to the Partnership. If the
Partnership is not dissolved, the Partnership will be subject to legal,
accounting and administrative expenses which will be disproportionately high in
relationship to the Partnership's remaining assets and limited operations.
In liquidation, the Partnership will pay outstanding liabilities and debts
and distribute the net liquidation proceeds to the Investors and the General
Partner in accordance with the Partnership Agreement. The liabilities and debts
of the Partnership at liquidation are not anticipated to be substantial.
NO DETRIMENTS TO LIQUIDATING THE PARTNERSHIP
The General Partner can identify no detriments to the liquidation of the
Partnership since, following the sale of all the Remaining Parcels and the
repayment of the Permanent Loan for the FFCA Office Building, substantially all
of the assets of the Partnership will have been distributed and the operations
of the Partnership will be completed.
PARTNERSHIP AGREEMENT PROVISIONS REGARDING DISSOLUTION OF PARTNERSHIP
The following discussion of the provisions of the Partnership Agreement
concerning the dissolution and liquidation of the Partnership is qualified in
its entirety by the specific provisions of the Partnership Agreement.
Pursuant to Section 8.1 of the Partnership Agreement, the Partnership will
not terminate until, among other events, more than 50% of Investors have elected
to dissolve the Partnership, the Partnership Agreement has been cancelled and
the assets of the Partnership have been distributed.
Section 8.2 of the Partnership Agreement provides that, upon dissolution,
the General Partner may cause the Partnership's then remaining assets to be sold
in such a manner as it, in its sole discretion, determines in an effort to
obtain the best prices for the assets. Following the sale of the Remaining
Parcels, the General Partner does not expect that the Partnership will have any
substantial assets other than cash. Pending completion of the sale of assets and
the cancellation of the Partnership Agreement, the General Partner will have the
right to continue to operate the business of the Partnership and otherwise deal
with Partnership assets. The General Partner intends to liquidate the
Partnership and distribute the Partnership's assets as soon as possible after
the sale of the Remaining Parcels.
Section 8.2 of the Partnership Agreement also provides that, upon the
dissolution of the Partnership, its liabilities will be paid first to third
party creditors and then to the General Partner for any loans or advances made
by it to the Partnership. Any amounts remaining will be distributed to the
partners (and with respect to the Initial Limited Partner, for the benefit of
the Investors to the extent of their Units) in the amount of their respective
capital accounts, as adjusted by the provisions of the Partnership Agreement
relating to the allocation of profits and losses. As of December 31, 1999, the
General Partner's tax capital account had a balance of approximately $30,000.
The tax capital account attributable to the Investors had an aggregate balance
of approximately $26,990,000 as of December 31, 1999.
13
<PAGE>
INSURANCE
In accordance with the Partnership Agreement, and in order to facilitate a
prompt and final liquidating distribution to Investors, the Partnership will
purchase insurance (the "Insurance") to cover certain liabilities relating to
potential securities claims and claims based on the wrongful acts (as determined
under the policy) of the Partnership and the General Partner. No claims are
pending against the Partnership and the General Partner is not aware of any
threatened claims against the Partnership. The premium for the insurance will be
allocated 99% to the Investors and paid by the Partnership and 1% allocated to
and paid by the General Partner. The Insurance policy will be issued effective
as of the date of this Consent Solicitation Statement and coverage thereunder
for the Partnership will terminate six years after the Partnership has been
terminated under Delaware law.
The purpose of the Insurance is to protect the Partnership against claims
made after its liquidation and dissolution. The General Partner selected the
Insurance rather than electing to continue the existence of the Partnership so
that the final liquidating distribution to the Investors will not be delayed.
Depending on potential claims, this delay and the amounts retained could have
been significant.
ACCOUNTING TREATMENT
The proposed sale of the remaining parcels will be accounted for as sales
of real estate and related assets under the full accrual method. Under this
method of accounting, profit is recognized in full when the sales are
consummated.
REGULATORY REQUIREMENTS
No federal or state regulatory requirements, other than applicable Delaware
law and federal securities law requirements related to partnerships, must be
complied with in order to authorize the General Partner to dissolve the
Partnership after the sale of Remaining Parcels, and no regulatory approvals are
necessary to complete Proposal Two.
RECOMMENDATION OF THE GENERAL PARTNER
THE GENERAL PARTNER HAS APPROVED PROPOSAL TWO AND RECOMMENDS THAT INVESTORS
CONSENT TO THE PROPOSAL TO AUTHORIZE THE GENERAL PARTNER TO DISSOLVE THE
PARTNERSHIP WHEN THE REMAINING PARCELS ARE SOLD BY MARKING THE "FOR" BOX ON THE
ENCLOSED CONSENT CARD.
14
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
Scottsdale Land Trust Limited Partnership (the "Partnership") was organized
on August 12, 1987, to (a) acquire approximately 261 gross acres of unimproved
land in Scottsdale, Arizona (the "Property"); (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 (the "Permanent Loan") to Franchise Finance
Corporation of America ("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
(the "General Partner") is FFCA Management Company Limited Partnership.
Perimeter Center Management Company is the corporate general partner of the
General Partner. The initial limited partner of the Partnership is FFCA Investor
Services Corporation 88-B.
The Partnership proposes that, upon sale of the remaining land parcels in
The Perimeter Center, the Partnership's remaining assets be liquidated and that
the Partnership be dissolved in accordance with the partnership agreement. At
December 31, 1999, there remained unsold seven land parcels representing
approximately 47 acres. Three of these land parcels were under contract for sale
at December 31, 1999 and were subsequently sold. Three more parcels became
subject to sales contracts in the first quarter of 2000. One of these contracts
was entered into on February 7, 2000 with FFCA for a land parcel (the
"Additional FFCA Parcel") of approximately 3.6 acres located adjacent to FFCA's
existing corporate headquarters.
Set forth below is audited historical and unaudited pro forma financial
information for the Partnership as of December 31, 1999. The pro forma balance
sheet information has been prepared assuming that the sale of the remaining land
parcels (including the Additional FFCA Parcel) occurred on December 31, 1999,
and includes estimates of transaction costs and other costs to be incurred in
connection with liquidation of the Partnership, as if the Partnership liquidated
its assets on December 31, 1999.
The pro forma information is based on the historical financial information
of the Partnership and should be read in conjunction with the historical
financial statements and notes of the Partnership included in this Consent
Solicitation Statement. In the opinion of management, all material adjustments
necessary to reflect the effects of the transactions have been made.
The pro forma information is unaudited and is not necessarily indicative of
the results that actually would have occurred had the transaction been
consummated in the period presented, or on any particular date in the future,
nor does it purport to represent the financial position of the Partnership for
future periods.
15
<PAGE>
SCOTTSDALE LAND TRUST LIMITED PARTNERSHIP
UNAUDITED PRO FORMA BALANCE SHEET
AS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
ASSETS
<S> <C> <C> <C>
Land held for sale $ 5,109,126 $ (5,109,126)(1) $ --
Land subject to sale agreements 3,118,364 (3,118,364)(1) --
Land subject to sale agreement with affiliate 788,287 (788,287)(3) --
------------ ------------ -----------
Total land 9,015,777 (9,015,777) --
Loan receivable from affiliate 7,598,415 (7,598,415)(3) --
Cash and cash equivalents 16,667,333 17,928,834 (2) 34,596,167
Prepaid expenses and other 159,228 (159,228)(4) --
------------ ------------ -----------
Total assets $ 33,440,753 $ 1,155,414 $34,596,167
============ ============ ===========
LIABILITIES AND PARTNERS' CAPITAL
Distribution payable to limited partners $ 14,314,676 $(14,314,676)(5) $ --
Accounts payable and accrued expenses 163,786 (163,786)(6) --
------------ ------------ -----------
Total Liabilities 14,478,462 (14,478,462) --
------------ ------------ -----------
Partners' capital (deficit):
General partner (3,844) 33,343(1) 29,499
Limited partners 18,966,135 15,600,533(1) 34,566,668
------------ ------------ -----------
Total partners' capital 18,962,291 15,633,876 34,596,167
------------ ------------ -----------
Total liabilities and
partners' capital $ 33,440,753 $ 1,155,414 $34,596,167
============ ============ ===========
</TABLE>
The accompanying notes are an integral part of this
unaudited pro forma balance sheet.
16
<PAGE>
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET
DECEMBER 31, 1999
(1) PRO FORMA ADJUSTMENTS TO PARTNERS' CAPITAL:
The pro forma adjustments to Partners' Capital reflect the sale of the
remaining unsold parcels to unaffiliated parties and the sale of the Additional
FFCA Parcel to FFCA. Receipt of cash proceeds from these sales, and allocation
of the related gain in accordance with the Partnership Agreement, is presented
below. For the three parcels that were sold subsequent to December 31, 1999, the
pro forma net proceeds were based on actual net proceeds (approximately $6.3
million). For those parcels under contract but not yet sold, pro forma net
proceeds were estimated based on the contract sales price and expected closing
costs (approximately $11 million). For the remaining unsold parcel which, as of
April 1, 2000, was not under contract, net sales proceeds were estimated based
on the actual net sales price per square foot of similar parcels (approximately
$3.5 million).
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNER PARTNERS TOTAL
------- -------- -----
<S> <C> <C> <C>
Allocation of Remaining Parcel Sales -
Net proceeds from sale of remaining parcels to
unaffiliated parties $ -- $ 20,786,102 $ 20,786,102
Net proceeds from proposed sale of land to FFCA -- 1,834,555 1,834,555
-------- ------------ ------------
Net proceeds from sales -- 22,620,657 22,620,657
-------- ------------ ------------
Less:
Book value of land sales to unaffiliated parties -- 7,603,527 7,603,527
Book value of proposed land sale to FFCA -- 623,963 623,963
-------- ------------ ------------
Cost of sales -- 8,227,490 8,227,490
-------- ------------ ------------
Net pro forma effect of remaining parcel sales on
Partners' Capital -- 14,393,167 14,393,167
Pro forma effect of the resulting partnership liquidation -
Additional interest due from FFCA upon maturity of
Permanent Loan (see Note 3) 11,301 1,118,757 1,130,058
Gain recognition on sale of land to FFCA upon its
repayment of Permanent Loan (see Note 3) -- 113,298 113,298
Recognition of deferred income relating to construction
easement and gain on sale of other assets -- 332,353 332,353
Payment of liquidation costs (3,350) (331,650) (335,000)
Reallocation of Partners' Capital in accordance with
liquidation provision of the partnership agreement 25,392 (25,392) --
-------- ------------ ------------
Pro forma effect on Partners' Capital $ 33,343 $ 15,600,533 $ 15,633,876
======== ============ ============
</TABLE>
The pro forma adjustment for liquidation costs reflects the estimated costs
to be incurred to liquidate the Partnership, such as legal, accounting,
insurance and other liquidation costs.
17
<PAGE>
(2) PRO FORMA ADJUSTMENTS TO CASH:
The pro forma adjustments to cash reflect the following:
Net proceeds from sale of remaining parcels (including
proposed sale to FFCA) $22,620,657
Collection of loan principal payment from FFCA 8,500,000
Collection of accrued interest and Additional Interest
upon maturity of Permanent Loan 1,200,766
Collection of accounts receivable and proceeds from
sale of other assets 356,876
Payment of accrued fourth quarter 1999 distribution to
limited partners (14,314,676)
Payment of accounts payable and accrued liabilities (99,789)
Payment of costs incurred to liquidate (335,000)
-----------
Net pro forma effect on cash $17,928,834
===========
(3) PRO FORMA ADJUSTMENTS TO LAND AND RELATED LOAN RECEIVABLE FROM AFFILIATE:
The pro forma adjustment reflects the recognition of the sale of the
original parcel of land to FFCA upon the repayment of the Permanent Loan. The
amount of Additional Interest to be paid by FFCA to the Partnership will be
equal to the greater of (1) the Permanent Loan's proportional share of certain
organization and offering expenses paid by the Partnership, or (2) 30% of the
increase in the fair market value, as defined, of the FFCA office building at
the time the Permanent Loan matures. Based upon a recent appraisal of the FFCA
office building, the Additional Interest is estimated to be $1,130,058.
(4) PRO FORMA ADJUSTMENTS TO PREPAID EXPENSES AND OTHER:
The following is an analysis of the pro forma effect of the recognition of
deferred costs relating to the sale of the remaining land parcels and the
receipt of cash upon collection of accounts receivable, accrued interest on the
Permanent Loan and proceeds from the sale of miscellaneous other assets.
Collection of accounts receivable and sale of other assets $ (56,876)
Recognition of prepaid expenses (31,644)
Collection of accrued interest on the Permanent Loan (70,708)
---------
Pro forma effect on prepaid expenses and other $(159,228)
=========
(5) PRO FORMA ADJUSTMENT TO DISTRIBUTION PAYABLE TO LIMITED PARTNER:
The pro forma adjustment reflects payment to the limited partners of the
fourth quarter 1999 cash distribution declared from the net sale proceeds of
parcel sales that occurred during that quarter.
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(6) PRO FORMA ADJUSTMENT TO ACCOUNTS PAYABLE AND ACCRUED LIABILITIES:
Recognition of deferred income relating to construction
easement $ (63,997)
Payment of accrued property taxes and other liabilities (99,789)
---------
Pro forma effect on accounts payable and accrued liabilities $(163,786)
=========
SELECTED FINANCIAL DATA
The selected financial information set forth below has been derived from
the Partnership's financial statements included herein and published financial
statements of the Partnership previously filed with the Securities and Exchange
Commission and not appearing herein. The Partnership's financial statements for
each of the years ended December 31, 1999, 1998 and 1997 have been audited by
Arthur Andersen LLP, independent public accountants. The selected financial data
set forth below do not purport to be complete and should be read in conjunction
with "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS" and the Partnership's financial statements and notes thereto
included elsewhere in this Consent Solicitation Statement.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues $18,200,381 $ 6,871,901 $22,289,391 $ 5,981,588 $ 920,426
Net Income 9,357,292 3,124,531 8,797,901 1,974,758 46,044
Net Income Per
Limited Partnership Unit 187.07 62.44 175.90 39.49 .91
Total Assets 33,440,753 26,482,368 32,541,537 40,259,651 42,024,785
Distributions of Cash from
Operations to Holders 16,237,869 5,487,767 19,692,084 4,765,456 --
Distributions of Cash from
Operations Per Unit 324.76 109.76 393.84 95.31 --
</TABLE>
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 $2.8 million. 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. As of March 1, 2000, the Partnership had 7.3 acres
available for sale and 26 acres in escrow under contract for sale.
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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
$2.3 million at December 31, 1999, to the extent required, will be sufficient to
pay the Partnership's operating expenses in 2000 and that cash proceeds from the
sale of parcels will be available for distribution to the Holders. At December
31, 1999, the Partnership had cash and marketable securities with a maturity of
three months or less aggregating $16,667,333 of which $14,314,500 was paid out
to the Holders in February 2000 as their fourth quarter 1999 distribution, and
the remainder of which will be held by the Partnership for reserves.
During the year ended December 31, 1999, the Partnership sold eight land
parcels aggregating approximately 37 acres to unaffiliated third parties. The
land sale transactions during the year provided aggregate cash sales proceeds of
$17.1 million. The parcels had a total original cost of $7.3 million and closing
and other costs of approximately $878,000. These parcel sales resulted in gains
totaling $8.9 million. Distributions declared from the parcel sale net proceeds
amounted to $16.2 million in 1999.
At December 31, 1999, the Partnership had 34 acres available for sale and
13 acres in escrow under contract for sale. The land in escrow represents three
parcels under contract for sale at a price of approximately $6.7 million to two
unaffiliated third parties. The aggregate original cost of the parcels is
approximately $3.1 million. These parcels in escrow have been sold since
yearend.
As of March 1, 2000, the Partnership had remaining three parcels of land
under contract for sale, totaling 26 acres, and one 7.3-acre parcel that remains
available for sale. One of the contracts was entered into on February 7, 2000
with Franchise Finance Corporation of America, an affiliate of the General
Partner, to purchase a parcel (approximately 4 acres) adjacent to its corporate
headquarters. The sale is subject to the approval, by vote, of the majority of
the limited partner interests of the Partnership. The Partnership cannot
determine which, if any, of the parcels under contract will result in the sale
of a land parcel and, therefore, cannot predict the timing or amount of any
future cash distributions. Based on current parcel sales activity, it is
anticipated that the remaining parcels could be sold during 2000.
In connection with the development in the Scottsdale, Arizona area, two
development matters were raised. The Federal Emergency Management Agency
("FEMA") worked 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 is included in the District. Currently, the
implementation of improvements within the District has been placed on hold while
the Army Corps of Engineers determines whether or not an environmental impact
study about the effects of the project is necessary. Accordingly, the annual
assessments to be levied against property owners in The Perimeter Center will be
delayed pending a final determination by the Army Corps as to the future of the
project, which may take several years to complete. In the event the project is
approved, the General Partner believes that it will not have a significant
impact on the Partnership. In addition, the Arizona Department of Transportation
("ADOT") notified the Partnership that it wished to obtain a temporary easement
over certain acreage on the eastern boundary of the Property in connection with
the construction of the Pima Freeway and the southbound frontage road. On
December 22, 1999, ADOT purchased the temporary construction easement from the
Partnership for $26,400 and ADOT agreed to pay the cost of the curb cuts and
related improvements at the intersection of Anderson Drive and the southbound
frontage road. The City of Scottsdale had previously stated that the Partnership
would be required to pay the cost of these improvements (approximately $25,000).
20
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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, 1999 COMPARED TO
FISCAL YEAR ENDED DECEMBER 31, 1998. Land sales comprise the majority of the
revenues of the Partnership. Total revenues were $18.2 million for the year
ended December 31, 1999 as compared to $6.9 million for the year ended December
31, 1998. The difference in revenues between years is primarily due to an
increase in the number of acres sold in 1999 as compared to 1998. In 1999, the
Partnership sold 37 acres of land as compared to 15 acres sold in 1998. The
average sales price per acre of land sold during 1999 increased 20% to
approximately $455,000 per acre from approximately $378,000 per acre for land
sold in 1998. Gain on the sale of land, as a percentage of land sale revenues,
increased to 52% for the year ended December 31, 1999 as compared to 49% for the
year ended December 31, 1998. Land sale revenues have been, and will continue to
be, impacted by the number of land parcels sold, their relative size and the
sales price per acre achieved.
Total expenses (excluding the cost of land sales) decreased by
approximately $144,000 in 1999 as compared to 1998 due to decreases in property
taxes ($55,000), the general partner fee ($15,000) and other operating expenses
($75,000). Property taxes decreased due to the sale of land parcels during the
past twelve months and due to a protest filed on the 1998 property taxes that
resulted in a refund and a reduction in the 1999 assessed values used to
calculate the 1999 property taxes. The general partner fee decreased in 1999
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. The decrease in other operating expenses resulted primarily
from a decrease in property tax consulting fees that were related to the
property tax protest filed in 1998.
RESULTS OF OPERATIONS - FISCAL YEAR ENDED DECEMBER 31, 1998 COMPARED TO
FISCAL YEAR ENDED DECEMBER 31, 1997. Land sales comprised the majority of the
revenues of the Partnership. Total revenues were $6.9 million for the year ended
December 31, 1998 as compared to $22.3 million for the year ended December 31,
1997. The difference in revenues between years is primarily due to a decrease in
the number of acres sold in 1998 as compared to 1997. In 1998, the Partnership
sold 15 acres of land as compared to 73 acres sold in 1997. While the number of
acres sold decreased between years, the average sales price per acre of land
sold during 1998 increased 30% to approximately $378,000 per acre from
approximately $290,000 per acre for land sold in 1997. Gain on the sale of land,
as a percentage of land sale revenues, increased to 49% for the year ended
December 31, 1998 as compared to 40% for the year ended December 31, 1997.
Interest and other income for the year ended December 31, 1998 decreased by
approximately $136,000 from 1997 resulting from a lower average cash balance
invested during the year. Total expenses (excluding the cost of land sales)
decreased by approximately $98,000 in 1998 as compared to 1997 due to decreases
in the general partner fee ($59,000), marketing expenses ($8,000) and other
operating expenses ($36,000), and are partially offset by an increase in
property taxes. The general partner fee decreased in 1998 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 1998
has generated sufficient interest in The Perimeter Center to allow the
Partnership to reduce certain general marketing activities. The decrease in
other operating expenses resulted primarily from a decrease in property
maintenance costs. These costs are primarily common area maintenance fees (based
on square footage owned) and are charged to all of the landowners within The
Perimeter Center (including the Partnership). Accordingly, as the Partnership
21
<PAGE>
sells parcels, its share of the common area maintenance fees decreases. Property
taxes increased, despite the sale of land parcels during the past twelve months,
due to higher assessed land values.
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. Inflation may, however, have an adverse impact on the profitability
of the Partnership because of increases in its operating expenses.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. The financial
instruments held by the Partnership at December 31, 1999 consist of cash
equivalents and a loan receivable from an affiliate. The Partnership intends to
hold the investments to maturity; therefore, these financial instruments do not
subject the Partnership to a material exposure to changes in interest rates.
NO GENERAL PARTNER COMPENSATION
It is anticipated that the General Partner will receive a return of capital
as a result of the sale of the Remaining Assets and the liquidation of the
Partnership, which is estimated to be approximately $30,000. The General Partner
will not receive any additional fees as a result of the sale of the Remaining
Assets or the liquidation of the Partnership.
MARKET FOR UNITS AND RELATED SECURITY HOLDER MATTERS
SECONDARY MARKET INFORMATION
The Units are not listed on any national or regional securities exchange or
quoted in the over-the-counter market. There is no established public trading
market for the Units, and it is unlikely that an established public market for
the Units will develop. Secondary sales activity for the Units has been limited
and sporadic. The General Partner monitors transfers of the Units (1) because
the admission of the transferee as a substitute Investor requires the consent of
the General Partner under the Partnership Agreement, and (2) in order to track
compliance with safe harbor provisions to avoid treatment of the Partnership as
a "publicly traded partnership" for federal income tax purposes.
Set forth in the table that follows is information regarding sale
transactions in the Units. Such information was obtained from Gemisys Transfer
Agents. The transactions reflected in the tables below represent only some of
the sale transactions in the Units. There have been other secondary sale
transactions in the Units, although specific information regarding such
transactions is not readily available to the General Partner. Because the
information regarding sale transactions in the Units included in the tables
below is provided without verification by the General Partner and because the
information provided does not reflect sufficient activity to cause the prices
shown to be representative of the value of the Units, such information should
not be relied upon as indicative of the ability of Investors to sell their Units
in secondary sale transactions or as to the prices at which such Units may be
sold.
While the General Partner receives some information regarding the prices of
secondary sales transactions of the Units, the General Partner does not receive
or maintain comprehensive information regarding all activities of all
broker/dealers and others known to facilitate secondary sales of the Units. The
General Partner estimates, based solely on the transfer records of the
Partnership, that the number of Units transferred in sale transactions effective
January 1, 1998 through January 1, 2000 was as follows:
22
<PAGE>
EFFECTIVE TRANSFER NUMBER OF
DATE AS OF SALES HIGHS LOWS AVERAGES
---------- ----- ----- ---- --------
January 1, 1998 2 $680 $600 $640
April 1, 1998 11 $630 $450 $576
July 1, 1998 9 $630 $280 $471
October 1, 1998 7 $630 $365 $436
January 1, 1999 7 $425 $408 $410
April 1, 1999 9 $403 $300 $348
July 1, 1999 1 $359 $359 $359
October 1, 1999 2 $380 $310 $345
January 1, 2000 2 $440 $425 $433
THIRD PARTY TENDER OFFERS
On March 10, 2000, Everest Investors 12, LLC, a party not affiliated with
the General Partner or the Partnership, made an unsolicited tender offer to
purchase up to 500 Units at $200.00 per Unit. The General Partner is not aware
of any other tender offers made by parties unaffiliated with the Partnership or
the General Partner to purchase Units between October 1, 1998 and March 31,
2000.
UNITHOLDERS
There were 3,030 record holders of Units as of May 1, 2000, the Record
Date. As of the Record Date, no person or group was known by the Partnership to
own directly or beneficially 5% or more of the outstanding Units of the
Partnership.
The General Partner of the Partnership and its general partners did not own
any of the Units as of May 1, 2000. The directors and officers of the General
Partner's corporate general partner, PCMC, did not own any of the Units as of
May 1, 2000. PCMC is owned by Morton H. Fleischer. Donna M. Fleischer, the wife
of Mr. Fleischer, and a limited partner of the General Partner, owned 30 Units
as of May 1, 2000. Under the rules of the Securities and Exchange Commission,
Mr. Fleischer, PCMC and the General Partner may also be deemed to beneficially
own the Units held by Mrs. Fleischer.
The Initial Limited Partner has an interest in the Partnership as a limited
partner and it serves as the owner of record of all Limited Partner Interests.
However, the rights and benefits of the Limited Partner Interests have been
assigned by the Initial Limited Partner to the Investors. The Initial Limited
Partner has no right to vote its interest on any matter and it must vote the
assigned interests as directed by the Investors. Mr. Fleischer is the sole
stockholder and sole director of the Initial Limited Partner.
23
<PAGE>
DISTRIBUTIONS
For the two most recent fiscal years, the Partnership made the following
cash distributions to the Investors:
1999
DATE OF NUMBER PER UNIT TOTAL
DISTRIBUTION OF UNITS DISTRIBUTION DISTRIBUTIONS
------------ -------- ------------ -------------
March 31 50,000 $ -- $ --
June 30 50,000 -- --
September 30 50,000 38.47 1,923,500
December 31 50,000 286.29 14,314,500
-------- -----------
$ 324.76 $16,238,000
======== ===========
1998
DATE OF NUMBER PER UNIT TOTAL
DISTRIBUTION OF UNITS DISTRIBUTION DISTRIBUTIONS
------------ -------- ------------ -------------
March 31 50,000 $ 32.11 $1,605,500
June 30 50,000 19.97 998,500
September 30 50,000 48.85 2,442,500
December 31 50,000 8.82 441,000
------- ----------
$109.75 $5,487,500
======= ==========
Any differences in the amounts of distributions set forth in the above
tables from the information contained above in "SELECTED FINANCIAL DATA" 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.
CONSENT PROCEDURES
Pursuant to the Partnership Agreement, only Investors are entitled to
consent to matters under the Partnership Agreement. The General Partner is not
entitled to vote. The Initial Limited Partner is the holder of all of the
Limited Partner Interests in the Partnership. On the Consent Date there will be
50,000 Units outstanding, representing assigned Limited Partner Interests held
by Investors.
Each Limited Partner Interest is entitled to vote on the Consent Date.
Pursuant to Sections 7.3 and 11.1 of the Partnership Agreement, each Investor
will be entitled to direct the Initial Limited Partner to vote on the Consent
Date (and the Initial Limited Partner is required to vote in accordance with the
Investor's direction) the number of Units held by the Investor. A REFERENCE IN
THIS CONSENT SOLICITATION STATEMENT TO A CONSENT OR VOTE WITH RESPECT TO UNITS
SHALL REFER TO SUCH DIRECTIONS GIVEN TO THE INITIAL LIMITED PARTNER BY THE
INVESTORS WHO HOLD THE UNITS BY A PROPERLY EXECUTED CONSENT CARD OR SUBSEQUENT
REVISION THEREOF. The Initial Limited Partner cannot vote its own interests in
connection with this Consent Solicitation Statement.
Each Investor reflected on the books and records of the Partnership at the
close of business on the Record Date will be entitled to vote its Units
regarding the Proposals submitted for approval. If an Investor validly transfers
24
<PAGE>
one or more Units after returning the Investor's Consent Card, the new Investor
may revoke or revise, before the Consent Date, the transferor Investor's Consent
Card with respect to the transferred Units under the procedures described herein
for revoking or revising a Consent Card.
An affirmative vote of a majority of Limited Partner Interests, and thus an
affirmative vote of a majority of Units, is required for approval of each
proposal being submitted for a vote. Abstentions are counted in tabulations of
each proposal but are not deemed to be affirmative votes. Directions provided to
the Initial Limited Partner by the consent procedures described herein will be
tabulated by an automated system administered by D.F. King & Co., Inc.
This consent solicitation is being made by mail on behalf of the General
Partner, but may also be made without additional remuneration by officers or
employees of the General Partner by telephone, telegraph, facsimile transmission
or personal interview. The expense of the preparation, printing and mailing of
this Consent Solicitation Statement and the enclosed Consent Card and Notice of
Consent Solicitation, and any additional material relating to each proposal to
be consented to on the Consent Date which may be furnished to Investors by the
General Partner subsequent to the furnishing of this Consent Solicitation
Statement, has been or will be borne by the Partnership as permitted by the
Partnership Agreement. The Partnership will reimburse banks and brokers who hold
Units in their name or custody, or in the name of nominees for others, for their
out-of-pocket expenses incurred in forwarding copies of the consent materials to
those persons for whom they hold such Units. Supplementary solicitations may be
made by mail, telephone or interview by officers of the Partnership or selected
securities dealers.
It is anticipated that the cost of such supplementary solicitations, if
any, will not be material. In addition, the Partnership has retained D.F. King &
Co., Inc. to solicit consents from Investors by mail, in person and by
telephone. The Partnership will pay D.F. King & Co., Inc. a fee for its
services, plus reimbursement of reasonable out-of-pocket expenses incurred in
connection with the consent solicitation, which are collectively estimated to be
approximately $15,000.
FEDERAL INCOME TAX CONSIDERATIONS
Kutak Rock LLP, counsel for the General Partner ("Counsel"), has rendered
an opinion regarding the material federal income tax consequences associated
with the Transaction and the sale of the Remaining Parcels, which are summarized
in this section and which may affect Investors who are individuals and citizens
or residents of the United States. The following discussion further briefly
summarizes such issues which may affect certain Investors which are tax-exempt
persons. This summary was prepared by Counsel and is based upon the Internal
Revenue Code of 1986, as amended (the "Code"), Treasury Regulations promulgated
or proposed thereunder (the "Regulations") and published rulings and court
decisions, all of which are subject to changes which could adversely affect the
Investors. Each Investor should consult his own tax advisor as to the specific
consequences of the proposed Transaction and the sale of the Remaining Parcels,
and the transactions related thereto, that may apply to such Investor. No ruling
from the Internal Revenue Service ("IRS") or from any other taxing authority
will be sought or obtained as to any of the following tax issues, and neither
the IRS nor the courts are bound by the discussion set forth below.
OPINIONS OF COUNSEL
Counsel has rendered its opinion to the Partnership concerning the material
federal income tax consequences relating to the Transaction and the sale of the
Remaining Parcels and the related transactions. Subject to the limitations and
qualifications described below, Counsel has opined that as of the date hereof,
the Partnership will be characterized as a partnership rather than as an
association taxable as a corporation for federal income tax purposes. Such
25
<PAGE>
opinion is based in part upon certain representations of the General Partner.
Further, Counsel has rendered its opinion to the effect that this discussion,
which represents the material federal income tax consequences associated with
the Transaction and the sale of the Remaining Parcels, and which may affect
Investors who are individuals and citizens or residents of the United States, is
correct to the extent such discussion describes provisions of the Code or
interpretations thereof.
FEDERAL INCOME TAX CHARACTERIZATION OF THE PARTNERSHIP
Under Section 7701 of the Code and the Regulations promulgated thereunder,
certain eligible entities are entitled to elect to be treated as a partnership
or as a corporation for federal income tax purposes. Among the types of entities
which are not eligible to elect to be treated as a partnership are certain
publicly traded partnerships, as described in Section 7704 of the Code. For this
purpose, a partnership will be considered publicly traded if its interests are
traded on an established securities market or are readily tradable on a
secondary market or the substantial equivalent thereof.
Counsel has delivered its opinion to the Partnership to the effect that, as
of the date hereof, the Partnership is characterized as a partnership for
federal income tax purposes. Such opinion is based in part upon a number of
representations by the General Partner, including a representation concerning
the number of Units in the Partnership which were traded in each year. If the
IRS were to successfully challenge the federal income tax characterization of
the Partnership, gain or loss recognized as a result of the Transaction and the
sale of the Remaining Parcels would be taken into account by the Partnership
rather than the Investors and, in addition, distributions of the proceeds
thereof likely would be taxable to the Investors as dividends.
TAX CONSEQUENCES OF THE TRANSACTION AND THE SALE OF THE REMAINING PARCELS
In connection with the Transaction and the sale of the Remaining Parcels,
the assets of the Partnership will be transferred to the respective buyers for
cash. The Partnership will then liquidate and distribute its share of such cash
to the Investors. Each Investor will be required to recognize a share of the
income or loss of the Partnership for its final taxable year, subject to the
limits described below, including gain or loss recognized as a result of the
Transaction and the sale of the Remaining Parcels. Each Investor will receive a
final Schedule K-1 from the Partnership as soon as practical after the
liquidation of the Partnership. As described above, the Transaction and the sale
of the Remaining Parcels will constitute a taxable transaction in which gain or
loss will be recognized in full.
The amount of gain or loss recognized by the Partnership will equal its
share of the difference between (1) the sum of the amount of cash received as a
result of the Transaction and the sale of the Remaining Parcels and the amount
of any liabilities assumed by the buyers, and (2) the adjusted tax basis of its
assets including the Remaining Parcels. The amount of gain or loss recognized by
the Partnership as a result of the Transaction and the sale of the Remaining
Parcels will be allocated among its partners in accordance with the terms of the
Partnership Agreement. Each Investor will take into account his share of such
gain or loss regardless of whether he voted in favor of the Transaction.
The Partnership has not made an election under Section 754 of the Code.
This election, if made, would permit the Partnership to adjust the basis of its
assets to reflect the price paid by a purchaser of Units. Because this election
has not been made, the amount of gain or loss recognized by the Partnership as a
result of the Transaction and the sale of the Remaining Parcels will be
determined solely by reference to the tax basis of the assets and not by the
purchase price paid by any Investor for his Units. The allocation by the
Partnership of each Investor's gain or loss in connection with the Transaction
and the sale of the Remaining Parcels will be determined by reference to the
26
<PAGE>
basis of the Partnership in its underlying assets rather than by reference to
the basis of an Investor's Units. However, as described in greater detail below,
the amount of gain actually recognized by an Investor as a result of the
liquidation of the Partnership will be determined in part by reference to the
tax basis of his Units.
Gains or losses recognized as a result of the Transaction and the sale of
the Remaining Parcels will be ordinary income for federal income tax purposes.
In addition, any gain recognized as a result of the Transaction and the sale of
the Remaining Parcels will be characterized as unrelated taxable business income
to Investors which are tax-exempt persons.
Upon consummation of the Transaction and the sale of the Remaining Parcels,
the General Partner intends to liquidate the Partnership and distribute the net
proceeds to its Investors. The taxable year of the Partnership will end at this
time. Each Investor in the Partnership must report, in his taxable year that
includes the Transaction and the sale of the Remaining Parcels, his share of all
income, gain, loss, deduction and credit for such Partnership through the date
of the Transaction and the sale of the Remaining Parcels (including gain or loss
resulting from the Transaction and the sale of the Remaining Parcels as
described above). Each Investor whose taxable year is not a calendar year could
be required to take into income in a single taxable year his share of income of
the Partnership attributable to more than one of its taxable years.
The Partnership's share of the net proceeds of the Transaction and the sale
of the Remaining Parcels will be distributed among the Investors and the General
Partner in a manner which will be based on their respective capital account
balances adjusted to reflect the gain or loss recognized as a result of the
Transaction and the sale of the Remaining Parcels. The Investors will be
required to recognize gain as a result of the distribution of cash in
liquidation of the Partnership only to the extent such distribution exceeds the
basis of their Units. If the amount of cash distributed in liquidation of the
Partnership is less than the basis of an Investor in his Units, such Investor
will be permitted to recognize a loss to the extent of such excess.
The sale of the remaining assets of the Partnership will constitute a
taxable transaction for federal income tax purposes. The General Partner expects
that a taxable gain of approximately $285 per Unit will result from the sale of
the remaining assets, which will be ordinary income. In the case of Units
assigned during the year in which the Transaction and the sale of the Remaining
Parcels occurs, gain will be allocated among the transferor and transferee
thereof based on the number of days of the year each held such interest. Each
Investor will be required to take into account a share of the gain recognized as
a result of the sale of the parcels whether or not such Investor voted in favor
of the Transaction. Each Investor will receive a final Schedule K-1 from the
Partnership reflecting this taxable gain.
In addition, as a result of the subsequent liquidation of the Partnership,
the General Partner expects that each Investor who acquired his Units in the
initial offering will recognize a capital loss of approximately $127 per Unit.
Such loss will be primarily attributable to such Investor's share of the
syndication costs of the Partnership. Investors who purchased their Units after
the initial offering may have a tax basis in their Units different from that of
Investors who acquired their Units in the initial offering. As a result, these
Investors may recognize a different amount of gain or loss in liquidation of the
Partnership than Investors who purchased Units in the initial offering.
27
<PAGE>
STATE TAX CONSEQUENCES AND WITHHOLDING
The Partnership may be subject to state or local taxation in various state
or local jurisdictions, including those in which it transacts business. The
state and local tax treatment of the Partnership and its partners may not
conform to the federal income tax consequences discussed above. Consequently,
Investors should consult their own tax advisors regarding the effect of state
and local tax laws on the Transaction and the sale of the Remaining Parcels.
ANNUAL REPORT AND OTHER DOCUMENTS
THE PARTNERSHIP WILL, UPON WRITTEN REQUEST AND WITHOUT CHARGE (EXCLUDING
EXHIBITS THERETO), PROVIDE BY FIRST-CLASS MAIL WITHIN THREE BUSINESS DAYS OF
RECEIPT OF SUCH REQUEST TO ANY PERSON SOLICITED HEREUNDER A COPY OF THE
PARTNERSHIP AGREEMENT, THE TAX OPINION OF COUNSEL AND THE PARTNERSHIP'S ANNUAL
REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1999, AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. Requests should be addressed to FFCA
Management Company Limited Partnership, Investor Services, at 17207 North
Perimeter Drive, Scottsdale, Arizona 85255.
OTHER MATTERS
No other business is to be presented for consideration on the Consent Date
other than as specified in the Notice of Consent Solicitation.
NOTICE TO BANKS, BROKER-DEALERS AND
VOTING TRUSTEES AND THEIR NOMINEES
Please advise the Partnership whether other persons are the beneficial
owners of the Units for which Consents are being solicited from you, and, if so,
the number of copies of this Consent Solicitation Statement and other soliciting
materials you wish to receive in order to supply copies to the beneficial owners
of the Units.
IT IS IMPORTANT THAT CONSENTS BE RETURNED PROMPTLY. INVESTORS ARE REQUESTED
TO COMPLETE, DATE AND SIGN THE ENCLOSED FORM OF CONSENT AND RETURN IT PROMPTLY
IN THE ENVELOPE PROVIDED FOR THAT PURPOSE. BY RETURNING YOUR CONSENT PROMPTLY
YOU CAN HELP THE PARTNERSHIP AVOID THE EXPENSE OF FOLLOW-UP MAILINGS. AN
INVESTOR MAY REVOKE OR REVISE A PRIOR CONSENT AND DIRECT THE INITIAL LIMITED
PARTNER TO VOTE LIMITED PARTNER INTERESTS CORRESPONDING TO THE NUMBER OF THE
INVESTOR'S UNITS AS SET FORTH IN THIS CONSENT SOLICITATION STATEMENT.
FFCA MANAGEMENT COMPANY LIMITED PARTNERSHIP
By: /s/ Morton H. Fleischer
---------------------------------------
Morton H. Fleischer, General Partner
Scottsdale, Arizona
Dated: May 12, 2000
28
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
Scottsdale Land Trust Limited Partnership
Page
----
Report of Independent Public Accountants.................................. F-2
Financial Statements
Balance Sheets - December 31, 1999 and 1998.......................... F-3
Statements of Operations for the Years ended December 31,
1999, 1998 and 1997.............................................. F-4
Statements of Changes in Partners' Capital for the Years ended
December 31, 1999, 1998 and 1997................................. F-5
Statements of Cash Flows for the Years ended
December 31, 1999, 1998 and 1997................................. F-6
Notes to Financial Statements........................................ F-7
Schedule III - Schedule of Real Estate and Accumulated Depreciation
as of December 31, 1999.......................................... F-11
FFCA Investor Services Corporation 88-B
Report of Independent Public Accountants................................... F-12
Fianancial Statements
Balance Sheet - December 31, 1999 for FFCA Investor Services
Corporation 88-B................................................... F-13
Notes to Balance Sheet for FFCA Investor Services Corporation 88-B... F-14
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Scottsdale Land Trust Limited Partnership:
We have audited the accompanying balance sheets of SCOTTSDALE LAND TRUST LIMITED
PARTNERSHIP (a Delaware limited partnership) as of December 31, 1999 and 1998,
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, 1999. These
financial statements are the responsibility of the partnership's general
partner. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Scottsdale Land Trust Limited
Partnership as of December 31, 1999 and 1998, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
1999, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule of Real Estate is presented
for purposes of complying with the Securities and Exchange Commission's rules
and is not a required part of the basic financial statements. This schedule has
been subjected to the auditing procedures applied in our audits of the basic
financial statements and, in our opinion, fairly states in all material respects
the financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.
/s/ Arthur Andersen LLP
Phoenix, Arizona,
January 25, 2000.
F-2
<PAGE>
SCOTTSDALE LAND TRUST LIMITED PARTNERSHIP
BALANCE SHEETS - DECEMBER 31, 1999 AND 1998
1999 1998
------------ ------------
ASSETS
LAND:
Held for sale $ 5,109,126 $ 12,486,444
Subject to sale agreements (Note 3) 3,118,364 3,062,371
Subject to sale agreement with affiliate
(Note 4) 788,287 788,287
------------ ------------
Total land 9,015,777 16,337,102
LOAN RECEIVABLE FROM AFFILIATE
(Notes 1 and 4) 7,598,415 7,598,415
CASH AND CASH EQUIVALENTS 16,667,333 2,292,149
PREPAID EXPENSES AND OTHER 159,228 254,702
------------ ------------
Total assets $ 33,440,753 $ 26,482,368
============ ============
LIABILITIES AND PARTNERS' CAPITAL
DISTRIBUTION PAYABLE TO LIMITED PARTNERS $ 14,314,676 $ 441,307
ACCOUNTS PAYABLE AND ACCRUED EXPENSES 163,786 198,193
------------ ------------
Total liabilities 14,478,462 639,500
------------ ------------
PARTNERS' CAPITAL (DEFICIT):
General partner (3,844) (7,527)
Limited partners 18,966,135 25,850,395
------------ ------------
Total partners' capital 18,962,291 25,842,868
------------ ------------
Total liabilities and partners' capital $ 33,440,753 $ 26,482,368
============ ============
The accompanying notes are an integral part of these balance sheets.
F-3
<PAGE>
SCOTTSDALE LAND TRUST LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
1999 1998 1997
----------- ----------- -----------
REVENUES:
Land sales $17,188,342 $ 5,852,965 $21,134,951
Interest on loan to affiliate 850,000 850,000 850,000
Interest on investments and other 162,039 168,936 304,440
----------- ----------- -----------
18,200,381 6,871,901 22,289,391
----------- ----------- -----------
EXPENSES:
Cost of land sales 8,199,398 2,959,669 12,606,036
General partner fees (Note 7) 244,917 260,185 319,327
Property management fees (Note 5) 36,000 36,000 36,000
Marketing 10,671 10,071 18,335
Property taxes 93,277 147,988 142,633
Other operating 258,826 333,457 369,159
----------- ----------- -----------
8,843,089 3,747,370 13,491,490
----------- ----------- -----------
NET INCOME $ 9,357,292 $ 3,124,531 $ 8,797,901
=========== =========== ===========
NET INCOME ALLOCATED TO (Note 1):
General partner $ 3,683 $ 2,312 $ 2,690
Limited partners 9,353,609 3,122,219 8,795,211
----------- ----------- -----------
$ 9,357,292 $ 3,124,531 $ 8,797,901
=========== =========== ===========
NET INCOME PER LIMITED
PARTNERSHIP UNIT (based on 50,000
units held by limited partners) $ 187.07 $ 62.44 $ 175.90
=========== =========== ===========
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
SCOTTSDALE LAND TRUST LIMITED PARTNERSHIP
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
General Limited
Partner Partners Total
------- -------- -----
<S> <C> <C> <C>
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
Net income 2,312 3,122,219 3,124,531
Distributions to limited partners (Note 1) -- (5,487,767) (5,487,767)
-------- ------------ ------------
BALANCE, December 31, 1998 (7,527) 25,850,395 25,842,868
Net income 3,683 9,353,609 9,357,292
Distributions to limited partners (Note 1) -- (16,237,869) (16,237,869)
-------- ------------ ------------
BALANCE, December 31, 1999 $ (3,844) $ 18,966,135 $ 18,962,291
======== ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
SCOTTSDALE LAND TRUST LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
------------ ----------- ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 9,357,292 $ 3,124,531 $ 8,797,901
Adjustments to net income:
Change in assets and liabilities:
Decrease in land held for sale 7,377,318 4,745,658 9,094,187
Decrease (increase) in land subject to
sale agreements (55,993) (2,151,187) 2,068,982
Decrease (increase) in prepaid expenses
and other 95,474 (87,599) (18,810)
Decrease in payable to general partner -- -- (58,481)
Increase (decrease) in accounts payable
and accrued expenses (34,407) 91,300 (54,034)
------------ ----------- ------------
Net cash provided by operating activities 16,739,684 5,722,703 19,829,745
------------ ----------- ------------
CASH FLOWS FOR FINANCING ACTIVITIES:
Limited partner distributions declared (16,237,869) (5,487,767) (19,692,084)
Increase (decrease) in distribution payable 13,873,369 (3,787,233) 3,288,584
------------ ----------- ------------
Net cash used in financing activities (2,364,500) (9,275,000) (16,403,500)
------------ ----------- ------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 14,375,184 (3,552,297) 3,426,245
CASH AND CASH EQUIVALENTS,
beginning of year 2,292,149 5,844,446 2,418,201
------------ ----------- ------------
CASH AND CASH EQUIVALENTS,
end of year $ 16,667,333 $ 2,292,149 $ 5,844,446
============ =========== ============
</TABLE>
The accompanying notes are an integral part of these statements
F-6
<PAGE>
SCOTTSDALE LAND TRUST LIMITED PARTNERSHIP
Notes to Financial Statements
December 31, 1999 and 1998
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. As of December 31, 1999, there remained
approximately 47 acres unsold, representing 7 parcels. Three such parcels were
under contract for sale, totaling 13 acres. Once the remaining parcels are sold,
the Partnership will liquidate and distribute its assets in accordance with 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 made as of December
31, 1999, the limited partner Adjusted Capital Contribution, as defined in
the Partnership agreement, is $362.62 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.
F-7
<PAGE>
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 $11,366,589 and $2,163,172 at December 31, 1999 and 1998,
respectively, and bank repurchase agreements (which are collateralized by United
States Treasury and Government obligations) of $4,900,381 at December 31, 1999.
Short-term investments are recorded at cost plus accrued interest, which
approximates market value.
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, 1999, the Partnership had three parcels of land
(approximately 13 acres total) under contract for sale at an aggregate price of
approximately $6.7 million to two unaffiliated third parties. The aggregate
original cost of the parcels is approximately $3.1 million.
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 that 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 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.
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, 1999 exceeds the carrying
amount by $1.6 million; however, the fair value of the loan will not result in
the receipt of any additional cash above the face amount of the loan unless the
loan were to be sold.
F-8
<PAGE>
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 1999, 1998 and 1997, 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.
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, 1999, 1998 and 1997:
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net income for financial reporting purposes $ 9,357,292 $ 3,124,531 $ 8,797,901
Differences for tax purposes in:
Capitalized land inventory costs 139,585 259,006 212,788
Additional Interest on FFCA loan 165,234 149,690 135,612
Gain on sale of land 479,353 (122,383) (1,707,897)
Deferred Income 96,777 -- --
Other 633 1,609 1,449
----------- ----------- -----------
Taxable income to partners $10,238,874 $ 3,412,453 $ 7,439,853
=========== =========== ===========
</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, 1999, the tax bases of the Partnership's assets and
liabilities exceed the amounts recorded for financial reporting purposes by
$1,693,886. 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.
F-9
<PAGE>
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 1999, 1998 and 1997, fees paid or accrued to
the General Partner were as follows:
1999 1998 1997
-------- -------- --------
Partnership management fee (3/4 of 1% of the
Assets Under Management, payable monthly) $244,917 $260,185 $319,327
======== ======== ========
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 that the Partnership would
have paid to independent parties for comparable services. The Partnership
reimbursed FFCA $28,762 in 1999, $31,490 in 1998 and $25,981 in 1997 for such
expenses.
8) SUBSEQUENT EVENT - RELATED PARTY TRANSACTION (UNAUDITED):
On February 7, 2000, the Partnership entered into a contract with FFCA to
sell a parcel of land (3.6 acres) for approximately $1.9 million. The sale is
subject to the approval, by vote, of the majority of the limited partner
interests of the Partnership. There can be no assurances as to the final terms
of the proposed transaction, that the conditions will be satisfied or that the
proposed transaction will be consummated.
F-10
<PAGE>
SCHEDULE III
SCOTTSDALE LAND TRUST LIMITED PARTNERSHIP
SCHEDULE OF REAL ESTATE
AS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
COST
INITIAL COST CAPITALIZED GROSS AMOUNT AT
TO SUBSEQUENT TO WHICH CARRIED AT
DESCRIPTION LOCATION ENCUMBRANCES PARTNERSHIP ACQUISITION DECEMBER 31, 1999 DATE ACQUIRED
----------- -------- ------------ ----------- ----------- ----------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Improved land, 261
acres initially, 47 Subject to
acres at December 31, Scottsdale, sales
1999 Arizona agreements (3) $23,913,185 $8,979,480 $9,015,777 Nov. 1988
=========== ========== ==========
</TABLE>
- ----------
Notes:
(1) The aggregate cost for Federal income tax purposes is $8,738,433.
(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 1999, the Partnership entered into two sales
agreements to sell approximately 13 acres of land, with an aggregate cost
to the Partnership of approximately $3.1 million to unaffiliated third
parties.
(4) Transactions in real estate during 1997, 1998 and 1999 are summarized as
follows:
COST
------------
Balance, December 31, 1996 $ 30,094,742
Cost of land sold (11,163,169)
------------
Balance, December 31, 1997 18,931,573
Cost of land sold (2,594,471)
------------
Balance, December 31, 1998 16,337,102
Cost of land sold (7,321,325)
------------
Balance, December 31, 1999 $ 9,015,777
============
F-11
<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, 1999. 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, 1999, in conformity with generally accepted accounting
principles.
/s/ Arthur Andersen LLP
Phoenix, Arizona,
January 25, 2000.
F-12
<PAGE>
FFCA INVESTOR SERVICES CORPORATION 88-B
BALANCE SHEET - DECEMBER 31, 1999
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.
F-13
<PAGE>
FFCA INVESTOR SERVICES CORPORATION 88-B
NOTES TO BALANCE SHEET
DECEMBER 3l, l999
(l) Operations:
FFCA Investor Services Corporation 88-B (a Delaware corporation) (88-B) was
organized on August 11, 1987 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.
F-14
<PAGE>
CONSENT CARD
SCOTTSDALE LAND TRUST LIMITED PARTNERSHIP
c/o Gemisys Transfer Agents, P.O. Box 3287, Englewood, CO 80155-3287
THIS CONSENT IS SOLICITED ON BEHALF OF
FFCA MANAGEMENT COMPANY LIMITED PARTNERSHIP
The undersigned Investor of Units representing interests in Scottsdale Land
Trust Limited Partnership, a Delaware limited partnership (the "Partnership"),
hereby directs FFCA Investor Services Corporation 88-B to consent to the
Proposals, as designated below, the Limited Partnership Interests held by FFCA
Investor Services Corporation 88-B, according to the number of Units held of
record by the undersigned.
THIS CONSENT CARD WHEN PROPERLY EXECUTED WILL DIRECT THE CONSENT OF FFCA
INVESTOR SERVICES CORPORATION 88-B IN THE MANNER HEREIN INDICATED BY THE
UNDERSIGNED. IF PROPERLY EXECUTED AND NO DIRECTION IS MADE, THE HOLDER OF THIS
CONSENT CARD WILL DIRECT FFCA INVESTOR SERVICES CORPORATION 88-B TO VOTE FOR
EACH PROPOSAL SET FORTH ON THE CONSENT CARD.
Please mark boxes |X| in ink. Sign, date and return this Consent Card promptly,
using the enclosed postage paid envelope.
1. Proposal to amend the Partnership Agreement to expressly authorize the
General Partner to ratify and accept the terms of the purchase agreement
selling a parcel of land owned by the Partnership to Franchise Finance
Corporation of America, an affiliate of the General Partner, as described
in the Consent Solicitation Statement dated May 12, 2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. Proposal to authorize the General Partner to terminate and liquidate the
Partnership when all remaining unsold parcels have been sold, as described
in the Consent Solicitation Statement dated May 12, 2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The undersigned hereby acknowledges receipt of the Notice of Consent
Solicitation, dated May 12, 2000 and the Consent Solicitation Statement
furnished therewith.
Please sign and date this Consent Card on the reverse side and mail in the
enclosed postage paid envelope.
IF YOU HAVE ANY QUESTIONS, CONTACT:
D.F. KING & CO., INC.
(800) 628-8532
<PAGE>
Please sign exactly as name appears hereon. When Units are
held by joint tenants, both should sign. Executors,
administrators, trustees and other fiduciaries, and persons
signing on behalf of corporations or partnerships, should so
indicate when signing.
Dated ______________________________ , 2000
-------------------------------------------
Authorized Signature
-------------------------------------------
Title, if any
-------------------------------------------
Authorized Signature
-------------------------------------------
Title, if any
- -- Fold Here --
TO SAVE THE PARTNERSHIP ADDITIONAL VOTE SOLICITATION
EXPENSES, PLEASE SIGN, DATE AND RETURN THIS CONSENT CARD
PROMPTLY, USING THE ENCLOSED POSTAGE PAID ENVELOPE. TO HAVE
YOUR UNITS VOTED, YOUR CONSENT CARD MUST BE RECEIVED BY JUNE
26, 2000.
