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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1998 or
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _____________ to ____________
Commission file number 0-17672
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TOWER PARK MARINA INVESTORS, L.P.,
(FORMERLY PS MARINA INVESTORS I)
a California Limited Partnership
(Exact name of registrant as specified in its charter)
California 95-4137996
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
16633 Ventura Blvd., 6th Floor, Encino, California 91436
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (818) 907-0400
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____________________________________
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
UNITS OF LIMITED PARTNERSHIP INTEREST
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
DOCUMENTS INCORPORATED BY REFERENCE
NONE
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PART I
ITEM 1. Business.
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Tower Park Marina Investors, L.P. (formerly PS Marina Investors I), a
California Limited Partnership ("Registrant"), is a publicly held limited
partnership organized on January 6, 1988 under the California Revised Limited
Partnership Act. Commencing August 4, 1988, Registrant offered 12,000 units
(including options) of limited partnership interest (the "Units") to the public
at $5,000 per Unit in an interstate offering. The offering was terminated on
November 27, 1989, with limited partners purchasing 4,508 Units for an aggregate
purchase price of $22,540,000.
Registrant's general partners (the "General Partners") were originally
Westrec Investors, Inc., (formerly PS Marina Investors, Inc.) a California
corporation (the "Corporate General Partner") and B. Wayne Hughes ("Mr.
Hughes"). Effective March 1, 1997 Tower Park Marina Operating Corporation, a
wholly-owned subsidiary of Westrec Financial, Inc., a California corporation
("Westrec Financial") was substituted for Mr. Hughes. The Corporate General
Partner is a wholly-owned subsidiary of Westrec Properties, Inc., a California
corporation ("Westrec Properties"), which is a wholly-owned subsidiary of
Westrec Financial. The limited partners of Registrant have no right to
participate in the management or conduct of Registrant's business and affairs.
Registrant has entered into management agreements with Westrec Marina
Management, Inc. ("WMMI"), a California corporation and a wholly-owned
subsidiary of Westrec Financial, whereby WMMI has agreed to manage Registrant's
properties for monthly fees generally equal to 6% of gross revenues from the
operation of Tower Park Marina. The management agreement is cancelable on 60
days' notice by either party with or without cause. WMMI also manages marina
properties for other entities affiliated with the General Partners and for
unaffiliated third parties.
Registrant was formed to acquire and improve existing marinas and
related facilities and, to a lesser extent, to develop marina facilities.
Marina facilities typically contain wet and/or dry boat storage facilities,
gasoline sales facilities and may contain one or more related facilities such as
a recreational vehicle ("R.V.") or campground facilities, boat trailer storage
facilities, boat rental and sales facilities, restaurants or similar facilities,
and boat supply and sundries stores. Substantially all of the Registrant's
income is derived from the rental of wet and/or dry boat storage facilities and
related facilities such as R.V.
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facilities and boat trailer storage facilities, and from the receipt of rental
payments under leases or subleases.
Registrant's principal investment objectives are to (1) preserve and
protect Registrant's invested capital; (2) provide cash distributions from
property operations; (3) maximize the potential for appreciation in value of
Registrant's property; and (4) build up equity through the reduction of mortgage
loan on Registrant's property.
The General Partners or an affiliate supervise the construction of
improvements to Registrant's properties.
As of December 31, 1998 and 1997, Registrant owned one property, known
as Tower Park Marina. Reference is made to Item 2 for a summary of information
about this property. On September 30, 1996, the Registrant's ThunderBoat and
Banyan Bay Marinas were foreclosed on by the lender on the properties. On
February 6, 1996, the Registrant's Chandlers Landing Yacht Club was sold at a
foreclosure sale to the lender on the property.
Registrant competes in the operation of its property with other
entities, some of which may have greater resources than Registrant. The primary
factors upon which competition is based are location, the manner in which the
property is managed and marketed, the nature and quality of facilities and
rental rates. Registrant's property may encounter competition from other
marinas which are located near it, and no assurance can be given that additional
competing marinas will not be developed in the vicinity of the property.
Affiliates of the General Partners operate a marina in the vicinity of
Registrant's marina, and the General Partners or their affiliates may organize
future partnerships or other entities to own and operate marinas which may
compete with Registrant's property. The General Partners and their affiliates,
including in particular WMMI, may also manage marinas owned by unaffiliated
third parties which may compete with Registrant's property.
A portion of the Registrant's Tower Park Marina is operated under a
lease with the California State Lands Commission ("CSLC"). Registrant's
assignment or sublease of its rights under this agreement would require the
consent of the CSLC. An uncured breach of any of the conditions of the CSLC
lease would constitute grounds for revocation of the lease. The CSLC lease
expired on December 31, 1998, and
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provides that it may be renewed for two successive periods for ten years each.
The Registrant is currently negotiating the terms of its lease extension with
the CSLC. There is no assurance that the Registrant will be successful in
securing a lease on terms acceptable to the Registrant.
Marinas are subject to numerous governmental regulations, particularly
environmental regulations, such as water pollution and water quality control
regulations, and other miscellaneous regulatory requirements. Failure to comply
with those regulations would constitute grounds for revocation of the CSLC lease
when such failure affects the leased property. Any licensee or subtenant of
Registrant is also required to comply with such regulations.
Registrant and its sublessees are subject to certain reporting
requirements relating to any water pollution caused by their operations, such as
the California Safe Drinking Water and Toxic Enforcement Act of 1986
("California Proposition 65"). California Proposition 65 contains a prohibition
on discharging specified toxic chemicals into water or land where such chemicals
pass (or probably will pass) into any source of drinking water. Civil penalties
have been established for violations of California Proposition 65 and actions
may also be brought. Registrant and its sublessees must comply with applicable
laws concerning the lawful handling and disposal of certain products used in and
generated by the operation of its marinas, such as oil, paint, sewage and fuel.
Registrant and its sublessees must also comply with applicable federal, state
and local laws concerning underground storage tanks. The Environmental
Protection Agency ("EPA") has issued a number of regulations relating to
underground storage tanks which include a reporting requirement for a specified
level of soil contamination. Moreover, at all times, owners of tanks are
responsible for the cost of cleaning up any leaks and for compensating injured
parties. Registrant may also be subject to state laws regarding underground
storage tanks that have requirements more stringent than those under the EPA.
If any leaks from storage tanks or spillage or disposal from other operations
(such as the loading of gasoline into boats by Registrant or its sublessees or
the disposal of paint, oil and other products used in the repair of boats)
causes or has caused contamination of the soil or the water, Registrant and its
sublessees will be required to comply with federal, state and local laws
relating to "hazardous waste" clean-up and Registrant and its sublessees may
have to incur expenses to dispose of the hazardous waste in a lawful manner. If
other parties contribute or have contributed to
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water or soil contamination at Tower Park Marina, Registrant would be able to
seek reimbursement from such other parties in connection with the payment by
Registrant of any expenses to comply with such regulations.
In November 1991, contamination was discovered in the area surrounding a
fuel storage tank at Tower Park Marina. Currently, the California Regional Water
Quality Control Board has required groundwater sampling and monitoring on a
quarterly basis. The Registrant continues to engage environmental consultants
to perform the monitoring. At this time, it is not possible to determine the
extent of contamination that exists and as such the cost of remediation cannot
be estimated.
Tower Park Marina is also subject to a variety of federal, state and
local laws affecting the development or improvement, including laws and
regulations relating to environmental factors. Difficulties or failures in
obtaining required approvals could delay or prevent any future improvement at
the property.
The operations at Tower Park Marina are influenced by factors that
affect the boating industry both locally and nationally, with activity at Tower
Park Marina increasing seasonally during the period April through October of
each year.
There are 28 persons who render service on behalf of Registrant on a
full-time basis, and 15 persons who render services on a part-time basis. These
persons include managers, assistant managers, relief managers, area managers,
restaurant personnel, accounting, administrative and clerical personnel,
construction, dock personnel and development and supervision personnel. The
persons rendering services on a part-time basis may also render services on
behalf of one or more of WMMI, Westrec Financial, other partnerships organized
by Westrec Financial and other persons or entities owning properties managed by
WMMI.
The term of Registrant is until the property has been sold and, in any
event, not later than December 31, 2038.
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ITEM 2. Property.
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As of December 31, 1998, the Registrant owned Tower Park Marina, which
is located in San Joaquin County, California. The property was acquired on
February 1, 1988. Tower Park Marina is situated on 44.5 acres, of which 14
acres are leased from the California State Lands Commission (the "CSLC Lease").
Tower Park Marina improvements and operations currently consist of the
following: (a) 188 covered slips contained in 17 covered sheds; (b) 135 open
slips; (c) end ties for approximately 18 boats; (d) an R.V. facility containing
approximately 388 existing spaces; (e) a gas dock facility; (f) three warehouse
buildings utilized as a restaurant and bar, store, boat sales offices, and
maintenance shop containing three covered dry boat storage areas with capacity
for approximately 75 boats; and (g) additional dry storage areas with capacity
for approximately 43 boats. Registrant operates the wet and dry boat storage
facilities, the R.V. facility and the gas dock facility. The covered boat slips
at Tower Park Marina are typically rented on a month to month basis. Most of
the open boat slips and the lineal boat dockage at Tower Park Marina are rented
on a monthly, weekly or daily basis. The R.V. facility consists of permanent
(rented on an annual basis) R.V. camping and transient R.V. camping. As of
April 5, 1999, the permanent wet slip facilities (consisting of 235 slips) were
approximately 71.9% leased and the permanent R.V. spaces (consisting of 130
spaces) were approximately 80.0% leased.
The CSLC Lease provides for annual rent based on gross receipts, with
minimum annual rent of $5,000. For the year ended December 31, 1998, rent
expense for the CSLC Lease was $33,000.
The acquisition of Tower Park Marinas was financed through a note
secured by a deed of trust secured by the property. This note was purchased by
an affiliate of Mr. Hughes, formerly a general partner of the Registrant, in
January 1995. The Registrant has entered into an option agreement (which
expired on April 10, 1996) to purchase the note from the affiliate at its cost
($1,700,000) plus carrying costs. The Registrant entered into a new option
agreement effective March 1, 1997, which expired on February 28, 1998. The
Registrant paid $50,000 in February 1998 to extend the option period until
February 28, 1999, and an additional $50,000 in February 1999 to extend the
maturity date until February 28, 2000. The extension payments are applied as a
reduction in the principal amount due. The principal and interest outstanding
on the note at December 31, 1998 total $9,864,000. In the event the option is
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exercised, the Registrant will recognize a gain of approximately $8,200,000 from
the forgiveness of debt. For additional details see Note (3) of the Notes to
Financial Statements included in Item 14(a).
ITEM 3. Legal Proceedings.
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Leaman vs. PS Marina Investors I, et al.
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In September 1995, Mr. Leaman, the prior owner of ThunderBoat and Banyan
Bay Marinas filed suit in the Circuit Court of the 17th Judicial Circuit in and
for Broward County, Florida, alleging that the Registrant had failed to pay him
$1,100,000 of additional compensation relating to the Registrant's purchase of
ThunderBoat and Banyan Bay Marinas. In connection with the purchase of these
properties from Mr. Leaman in 1989, the Registrant entered into an employment
agreement that provided that Mr. Leaman would be entitled to earn a bonus,
payable over three years. The maximum bonus that Mr. Leaman could have earned
was $1,100,000. Mr. Leaman resigned from his employment in less than one year.
Mr. Leaman alleged that the bonus is actually just deferred compensation due
from his sale of the properties to Registrant. The case was settled in October
1998, with the Registrant incurring legal fees and settlement costs totaling
$261,000.
ITEM 4. Submission of Matters to a Vote of Security Holders
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No matters were submitted to a vote of security holders during the
fourth quarter of 1998.
PART II
ITEM 5. Market for Registrant's Common Equity and Related Stockholder Matters.
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Registrant has no common stock.
The Units are not listed on any national securities exchange or quoted
on the NASDAQ System, and there is no established public trading market for the
Units. Secondary sales activity for the Units has been limited and sporadic.
The General Partners monitor transfers of the Units because the admission of the
transferee as a substitute limited partner requires the consent of the General
Partners under the Partnership Agreement. However, the General Partners do not
monitor or regularly receive or maintain information regarding the prices at
which secondary sales transactions in the Units have been effectuated. Various
organizations offer to purchase and sell limited partnership interests
(including securities of the type such as the Units) in secondary sales
transactions. Various publications such as
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Investment Advisor summarize and report information (on a monthly, bi-monthly or
less frequent basis) regarding secondary sales transactions in certain limited
partnership interests, including the prices at which such secondary sales
transactions are effected.
During 1997 and 1998, WMMI acquired 110 units in the Registrant,
representing 2.44% of the outstanding units at an average price of $100 per
unit.
Exclusive of the General Partners' interest in Registrant, as of
December 31, 1998, there were approximately 1,012 Unit holders of record.
Registrant makes quarterly distributions of all "Cash Flow from
Operations" and of all "Cash from Sales or Refinancing", subject to the
provisions enumerated below. Cash Flow from Operations is the total cash
receipts of the Registrant from the operations of the Registrant's business,
which includes, but is not limited to, cash receipts from the rental of the
Registrant's properties, and which excludes Cash from Sales or Refinancing,
less: (i) all operating expenses other than non-cash expenses such as
depreciation and amortization; (ii) all principal and interest payments on any
loans or advances; (iii) any sums expended for capital improvements or
replacements (excluding amounts paid from funds provided by capital
contributions); and (iv) a cash reserve for working capital or other purposes,
the amount of which shall be determined by the General Partners. Cash from
Sales or Refinancing is the net proceeds to Registrant from all sales, exchanges
and refinancing of Registrant's properties, less payment of indebtedness
relating to such properties and adequate cash reserves from such net proceeds
for other obligations of Registrant for which there is no provision; however,
Cash from Sales or Refinancing does not include any proceeds reinvested in
properties.
As a result of Registrant's continued operating deficits, distributions
have been suspended since June 30, 1991. See Item 6 and 7 for a more detailed
discussion of the Registrant's operating results.
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ITEM 6. Selected Financial Data.
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The data set forth below should be read in connection with the Financial
Statements and Notes thereto appearing elsewhere herein, and Management's
Discussion and Analysis of Financial Condition and Results of Operations.
<TABLE>
<CAPTION>
(In thousands of dollars, except per unit information)
- -------------------------------------------------------------------------------------------------
For the Year 1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $ 2,312 $ 2,538 $ 3,318 $ 2,380 $ 2,340
======== ======== ======= ========== ========
Net loss $ (1,111) $ (860) $ (145) $ (10,934) $ (2,662)
======== ======== ======= ========== ========
Limited Partners'
share (1,100) (851) (144) (10,825) (2,437)
General Partners'
share (11) (9) (1) (109) (25)
Limited Partners'
per unit data(1)
Net Loss $(244.01) $(188.78) $(31.94) $(2,401.29) $(540.59)
Cash Distributions - - - - -
<CAPTION>
- -------------------------------------------------------------------------------------------------
As of December 31, 1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total assets $ 2,930 $ 2,846 $ 2,874 $ 5,550 $ 15,550
======== ======== ======= ========== ========
Mortgage notes
payable $ 6,670 $ 6,729 $ 6,736 $ 9,286 $ 9,385
======== ======== ======= ========== ========
</TABLE>
______________________
(1) Per unit data is based on the weighted average number of Units outstanding
during each year, 4,508.
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ITEM 7. Management's Discussion and Analysis of Financial Condition and Results
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of Operations.
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In August 1988 the Registrant commenced an offering of up to 12,000
units of limited partnership interest to the public. The offering was
terminated on November 27, 1989 after the sale of 4,508 units.
Tower Park Marina was purchased in February 1988 and as of December 31,
1998, $10,109,000 had been incurred in capital costs associated with its
acquisition and subsequent improvement. Chandlers Landing Marina was purchased
in September 1988 and foreclosed on February 1, 1994. In July 1991, the
adjacent Chandlers Landing Yacht Club was purchased and subsequently foreclosed
on February 6, 1996. ThunderBoat Marina and Banyan Bay Marina were purchased in
November 1989 and subsequently foreclosed on September 30, 1996.
The operations of the Registrant's marina are influenced by factors
affecting the marina and boating industries nationally, as well as by local
market and weather conditions.
1998 Compared to 1997
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For the year ended December 31, 1998, the Registrant incurred a cash
flow deficit of $987,000 (net loss plus depreciation and amortization), a
decline of $243,000 over the $744,000 deficit incurred in 1997. The decline is
attributable to the legal fees and settlement costs associated with the Leaman
litigation (see Item 3 above). Included in the cash flow deficit was $601,000
of interest on the Tower Park note payable which was accrued but not paid, and
would be forgiven, if and when, the option agreement with Mr. Hughes is
exercised. The balance of the cash flow deficit was covered through operating
cash flow generated by Tower Park Marina and to a greater extent through
advances from the General Partner.
For the year ended December 31, 1998, the net operating cash flow (cash
flow before debt service) for Tower Park was $312,000 compared to $160,000 in
1997. Tower Park Marina's slip rental revenues declined $52,000 to $688,000 in
1998, which management believes is attributable to the very wet spring caused by
El Nino.
During late 1997, management implemented a program to reduce the
operating hours of the restaurant at Tower Park Marina in order to increase its
overall profitability. The reduced level of
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operations resulted in a $164,000 decline in revenues in 1998 to $391,000, with
net operating income from the restaurant improving $49,000 to $21,000.
RV park revenues increased $11,000 to $625,000 in 1998, due to a slight
increase in rates.
Retail store revenues declined $19,000 to $344,000, however, net
operating income from retail sales increased $8,000 to $76,000 in 1998.
Lease and other income remained relatively stable in 1998.
Cost of operations declined only $4,000. However, this decline reflects
$261,000 paid in legal fees and settlement costs on the Leaman litigation.
Excluding this item, operating costs declined $265,000. The decline in Tower
Park's operating costs is comprised of $213,000 in cost reductions associated
with the reduced hours of operation at the restaurant and $74,000 of
administrative cost reductions.
Interest expense increased $32,000, as a result of higher balances being
due to affiliates. The effect of the higher balances being payable to
affiliates were partially offset by lower interest rates.
Depreciation and amortization increased slightly in 1998 due to the
amortization of new improvements at Tower Park Marina.
Management fees declined $11,000 in 1998 due to the decline in Tower
Park Marina's revenues.
1997 Compared to 1996
---------------------
For the year ended December 31, 1997, the Registrant incurred a cash
flow deficit of $744,000 (net loss plus depreciation and amortization), an
improvement of $74,000 over the $818,000 deficit incurred in 1996. The
improvement was due to the loss of Chandlers Landing Yacht Club, ThunderBoat and
Banyan Bay Marinas in 1996. Included in the cash flow deficit was $552,000 of
interest on the Tower Park note payable which was accrued but not paid, and
would be forgiven, if and when, the option agreement with Mr. Hughes is
exercised. The balance of the cash flow deficit was covered through operating
cash flow generated by Tower Park Marina and to a greater extent through
advances from the General Partner.
For the year ended December 31, 1997, the net operating cash flow (cash
flow before debt
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service) for Tower Park was $160,000 compared to $198,000 in
1996. For the year ended December 31, 1996, ThunderBoat generated $16,000 of
net operating cash flow, while Banyan Bay and Chandlers Landing Yacht Club
incurred net operating flow deficits of $46,000 and $7,000, respectively. Slip
rental revenues declined $387,000 in 1997 compared to 1996, primarily due to the
loss of ThunderBoat in 1996 which had $349,000 in slip rental revenues. In
addition Tower Park Marina's slip rental revenues declined $38,000 to $740,000
in 1997.
The operating hours of the restaurant at Tower Park were reduced during
1997 which resulted in a $276,000 decline in revenues to $555,000, with net
operating income from the restaurant declining $83,000 to a loss of $29,000.
RV park revenues increased $4,000 to $614,000 in 1997, due to a slight
increase in rates.
Retail store revenues declined $37,000 to $363,000, however, net
operating income from retail sales increased $10,000 to $68,000 in 1997.
Lease and other income declined $84,000 in 1997, due to the loss of
ThunderBoat, which had $58,000 in lease income and $16,000 in other income in
1996.
Cost of operations declined $812,000 in 1997, due primarily to the loss
of ThunderBoat which had $364,000 in operating costs in 1996. In addition,
Tower Park's operating costs declined $361,000, of which $193,000 was due to the
reduced operating hours of the restaurant, with the balance being attributable
to reduced maintenance and administrative costs. Banyan Bay and Chandler's
Landing had operating costs of $46,000 and $7,000, respectively, in 1996.
Interest expense declined $1,000, which was the net effect of a decline
in interest due to the loss of Chandlers Landing, ThunderBoat and Banyan Bay,
offset by higher interest charges on advances from affiliates.
Depreciation and amortization increased slightly in 1997 due to the
amortization of new improvements at Tower Park Marina.
Management fees declined $41,000 in 1997 due to the loss of ThunderBoat
in 1996 which incurred $26,000 in fees and a decline in Tower Park Marina's
revenues which resulted in a $15,000 decline in management fees.
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Liquidity and Capital Resources
-------------------------------
Since its inception in 1988 the Registrant has operated at a deficit.
These deficits have been partially covered by advances from the General Partners
($2,770,000 through December 31, 1998) and cash reserves. In addition, the
Registrant discontinued making debt service payments on substantially all of its
notes payable.
No payments have been made on the note payable secured by Tower Park
Marina since September 1991. During 1991, 1992, 1993 and 1994, the Partnership
was involved in various negotiations with the lender, a financial institution,
and its successor, Resolution Trust Corporation ("the RTC"), to restructure or
otherwise settle the note. In February 1994, the RTC foreclosed on Chandlers
Landing Marina (also collateral for the note) by bidding $2,038,000 of its note
at the foreclosure sale. In January 1995, the RTC sold the note to a third
party. The note was then purchased by an affiliate of Mr. Hughes. The
Registrant entered into an option agreement to purchase the note from the
affiliate at its cost ($1,700,000) plus carrying costs, which expired on April
10, 1996. In connection with the substitution of a new general partner for Mr.
Hughes, the option agreement was extended until February 28, 1998. Registrant
paid $50,000 in February 1998 to extend the option period until February 28,
1999 and an additional $50,000 in February 1999 to extend the option period
until February 28, 2000 (see Item 3 above for additional details). Both
extension payments have been applied as a reduction to the principal amounts
due.
Registrant's ability to continue to operate through 1999 and beyond is
contingent on, among other factors, the improvement in Tower Park Marina
operations, continued advances from the general partners and the ability to
refinance Tower Park Marina in order to exercise the rights under the option
agreement. There can be no assurance that these conditions will be met or that
the Registrant will be able to continue as a going concern.
Impact of Year 2000
-------------------
The computer programs used to process the Registrant's property and
Partnership activity use only two digits to identify the year, rather than four.
As a result, these computer programs have time-sensitive software that recognize
a date using "00" as the year 1900 rather than the year 2000. This could
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cause a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activity. However, because
of the nature of the real estate business, the accounting and other systems are
much less sophisticated than other (i.e. banking, financial) industries. The
property currently uses a computer to generate customer billings, account
receivable agings, general ledgers, accounts payable functions, etc. The current
programs would continue to run after December 31, 1999 but would not produce
year 2000 compliant results. For example, customer invoices would have the
incorrect date (i.e. 1900 instead of 2000). Failure to replace these programs
would result in an inconvenience and more labor-intensive procedures, but would
not cause the properties' business to shut down. The Registrant does have plans
to replace the current accounting software with systems that are able to handle
the year 2000 and beyond. This will be completed in conjunction with normal
software upgrade at the property, and is targeted for implementation during the
summer of 1999. The costs are estimated to be approximately $10,000.
Certain of the Registrant's other non-computer related systems that may
be impacted by the Year 2000 issue, such as security systems, are currently
being evaluated, and the Registrant expects the evaluation to be complete by
September 1999. The Registrant expects the implementation of any required
solutions to be complete in advance of December 31, 1999. The Registrant has
not fully evaluated the impact of lack of Year 2000 compliance on these systems,
but has no reason to believe that lack of compliance would materially impact the
Registrant's operations.
The system used in the corporate office for the Registrant to compile
information for the Partnership is also not at present year 2000 compliant.
There are plans to upgrade this system also during 1999 with one that is year
2000 compliant. It would also be possible to replace this entire system with
generic Year 2000 compliant software, if needed temporarily, at a very nominal
cost.
As part of the plan to replace the current computer systems, the
Registrant will receive demonstrations of the system and obtain test results to
verify that the new systems are year 2000 compliant.
Because of the nature of the Registrant's business, the majority of
customers and suppliers are individuals or small regional businesses. The
Registrant has queried its important suppliers and subcontractors that do not
share information systems with the Company (external agents). To date, the
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Registrant is not aware of any external agent Year 2000 issue that would
materially impact the Registrant's results of operations, liquidity, or capital
resources. However, the Registrant has no means of ensuring that external
agents will be Year 2000 ready. The inability of external agents to complete
their Year 2000 resolution process in a timely fashion could materially impact
the Registrant. The effect of non-compliance by external agents is not
determinable.
The plans to complete the Year 2000 modifications are based on
management's best estimates, which were derived utilizing numerous assumptions
of future events including the continued availability of certain resources, and
other factors. Estimates on the status of completion and the expected
completion dates are based on costs incurred to date compared to total expected
costs. However, there can be no guarantee that these estimates will be achieved
and actual results could differ materially from those plans. There can be no
assurance that the Registrant has identified all potential Year 2000 issues
either within the Registrant or at external agents. Specific factors that might
cause such material differences include, but are not limited to, the
availability and cost of personnel trained in this area, the ability to locate
and correct all relevant computer codes, and similar uncertainties. In
addition, the impact of the year 2000 issue on governmental entities and utility
providers and the resultant impact on the Registrant, as well as disruptions in
the general economy, may be material but cannot be reasonably determined or
quantified.
ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk
----------------------------------------------------------
The Partnership is exposed to changes in interest rates from its
financing arrangement. The Partnership's mortgage note payable bears interest at
fixed rate. See Note 3 to the Financial Statements for terms, valuations, and
principal maturity of the mortgage note as of December 31, 1998. Based on the
option agreement to acquire the mortgage note, its fair value at December 31,
1999 is deemed to be the option price of $1,650,000.
ITEM 8. Financial Statements and Supplementary Data.
-------------------------------------------
Registrant's financial statements are included elsewhere herein.
Reference is made to the Index to Financial Statements and Financial Statement
Schedules in Item 14(a).
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
---------------------------------------------------------------
Financial Disclosure.
--------------------
Not applicable.
15
<PAGE>
PART III
ITEM 10. Directors and Executive Officers of Registrant.
----------------------------------------------
Registrant has no directors or executive officers.
Registrant's general partners are Westrec Investors, Inc. formerly
("PS Marina Investors, Inc.") and Tower Park Marina Operating Corporation
(substituted for B. Wayne Hughes in 1997). The Corporate General Partner,
acting through its directors and executive officers, is responsible for the day-
to-day operations of Registrant. Registrant's properties are managed and
operated by Westrec Marina Management, Inc. ("WMMI"), a wholly-owned subsidiary
of Westrec Financial.
The names and ages of all directors and executive officers of the
Corporate General Partner, and the executive officer of WMMI who performs
significant policy-making or operational functions for Registrant, the offices
held by each of them, the dates of their elections to such offices, and their
business experience during the past five years are set forth below.
16
<PAGE>
<TABLE>
<CAPTION>
Office and Date Business Experience
Name Age of Election During Past 5 Years
- ------- --- --------------- -------------------
<S> <C> <C> <C>
Michael M. Sachs 57 President and Director Mr. Sachs has been President,
of the Corporate Secretary and Director of
General Partner (1990) Westrec Financial and
and of Tower Park President of Westrec
Operating Corporation Properties (1990).
(1997) Vice-President, Secretary and
Director of WMMI (1987). Mr.
Sachs has been a Director,
President, and Treasurer of
MVL (1987) He is also
director of MMI Medical,
Inc., a company that offers
health care providers
diagnostic imaging services,
and is a director of New
Century Financial
Corporation, a residential
mortgage brokerage, since its
inception in 1995.
Jeffrey K. Ellis 38 Vice President (1990) Mr. Ellis is also Vice
and Chief Financial President (1990) and Chief
Officer (1996) of the Financial Officer (1996) for
Corporate General Westrec Financial, Inc.,
Partner and Vice Westrec Properties, Inc. and
President and Chief Westrec Marina Management,
Financial Officer of Inc.
Tower Park Operating
Corporation (1997).
William W. Anderson 50 Director of Westrec Mr. Anderson is also the
Investors, Inc. (1990) President (1990) and Director
and of Tower Park (1995) of Westrec Marina
Operating Corporation Management, Inc. and is a
(1997). Director of Westrec
Financial, Inc. (1996) and
Westrec Properties, Inc.
(1996).
</TABLE>
Pursuant to Articles 16 and 17 of Registrant's Partnership Agreement, a
copy of which is included in Registrant's prospectus included in SEC
Registration No. 33-21021, each of the general partners continues to serve until
(i) death, insanity, insolvency, bankruptcy or dissolution, (ii) withdrawal with
the consent of the other general partner and a majority vote of the limited
partners, or (iii) removal by a majority vote of the limited partners.
17
<PAGE>
Each director of the General Partners serves until he resigns or is
removed from office by Westrec Properties or Westrec Financial, and may resign
or be removed from office at any time with or without cause. Each officer of
the General Partner serves until he resigns or is removed by the board of
directors of the Corporate General Partner. Any such officer may resign or be
removed from office at any time with or without cause. No such officer was
selected as such pursuant to any arrangement or understanding between such
officer and any other person.
During 1995 two partnerships with which the Corporate General Partner is
affiliated filed petitions under the United States Bankruptcy Code. First, on
May 22, 1995, Washington, D.C. Associates, a general partnership ("WDCA"), filed
a petition in the United States Bankruptcy Court for the District of Columbia.
WDCA is a partnership of two limited partnerships of which the Corporate General
Partner is the managing general partner. Second, on June 28, 1995, Westrec
Skipjack Partners, L.P., a limited partnership ("Skipjack"), filed a petition in
the United States Bankruptcy Court for the District of Maryland. A subsidiary
of Westrec Financial, Inc., the parent corporation of the Corporate General
Partner, is the general partner of a limited partnership which in turn is the
general partner of Skipjack. Both of these cases were concluded in 1996 with
the properties being transferred to their respective lenders.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
--------------------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934 requires the
Registrant's General Partners, and the directors and executive officers of the
Corporate General Partner, and persons who own more than ten percent of the
Registrant's Units, to file with the Securities and Exchange Commission initial
reports of ownership and reports of changes in ownership of Units. General
Partners, officers, directors and greater than ten-percent Unitholders are
required by SEC regulation to furnish the Registrant with copies of all Section
16(a) forms they file.
To the Registrant's knowledge, based solely on review of the copies of
such reports furnished to the Registrant and written representations that no
other reports were required, during the fiscal year ended December 31, 1998, all
Section 16(a) filing requirements applicable to its General Partners, the
executive officers and directors of the Corporate General Partner and greater
than ten-percent beneficial owners of the Registrant were complied with.
18
<PAGE>
ITEM 11. Executive Compensation.
----------------------
Registrant has no directors or officers. See Item 13 for a
description of certain transactions between Registrant and its General Partners
and their affiliates.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management.
--------------------------------------------------------------
(a) As of the date hereof, no person is known by Registrant to own
beneficially more than 5% of the Units of limited partnership interest.
(b) Registrant has no officers or directors.
As of December 31, 1998, the General Partners have contributed $1,000
to the capital of Registrant. None of the directors and officers of the
Corporate General Partner own any Units of limited partnership interest of
Registrant. The Corporate General Partner is a wholly-owned subsidiary of
Westrec Properties.
Westrec Financial (which may be deemed a parent of Registrant) has two
classes of stock outstanding, common stock and Convertible Participating
Preferred Stock (the "Preferred Stock") which votes together with the common
stock, except for the election of directors. Michael M. Sachs, an officer and
director of Westrec Financial and the Corporate General Partner owns 85% of the
common stock of Westrec Financial. As of December 31, 1998 there was no
preferred stock outstanding.
During 1997 and 1998, WMMI acquired 110 units in the Registrant,
representing 2.44% of the outstanding units.
In addition, the Corporate General Partner and the Individual General
Partner have entered into an agreement allowing each General Partner to offer to
sell to the other its rights to receive cash and other distributions from
Registrant (such rights are referred to as the "Interest"). The offer must be
accompanied by an offer to buy the Interest of the other General Partner at the
same price. The General Partner not making the offer has the option to elect
whether to purchase the Interest of the other General Partner or to sell its
Interest in Registrant to the offering General Partner. After the sale, the
purchasing General Partner must use his or its best efforts to secure the
approval of the limited partners of Registrant to the withdrawal of the selling
General Partner.
(c) Registrant knows of no contractual arrangements, the operation of
the terms of which
19
<PAGE>
may at a subsequent date result in a change in control of Registrant, except as
described above and except for Articles 16, 17 and 21.1 of Registrant's
Partnership Agreement, a copy of which is included in Registrant's prospectus
included in SEC Registration Statement No. 33-21021. Those articles provide, in
substance, that the limited partners shall have the right, by majority vote, to
remove a general partner and that a general partner may designate a successor
with the consent of the other general partner and a majority of the limited
partners.
ITEM 13. Certain Relationships and Related Transactions.
----------------------------------------------
Registrant's prospectus included in SEC Registration Statement No. 33-
21021 provides that the General Partners and their affiliates are entitled to
the following compensation:
1. Acquisition and Development Fees to be paid to the General
Partners or their affiliates for their services in connection with the analysis,
research, negotiation, documentation, acquisition, construction and development
related to investments for Registrant, in an amount equal to 6% of the purchase
price or the cost of construction of the properties. Cumulative Acquisition and
Development Fees paid to the General Partners and their affiliates through
December 31, 1998 totaled $1,586,000, ($6,000 of which was paid in 1998).
2. Loan Brokerage Fee to be paid to the General Partners or their
affiliates for their services in negotiating and obtaining permanent financing
on properties from an unaffiliated lender, in an amount equal to 1% of the
principal amount of the financing or refinancing, which would be reduced to the
extent any other loan brokerage fee is paid to any other loan broker in
connection with the transaction. Loan Brokerage Fees paid to the General
Partners and their affiliates through December 31, 1998 totaled $71,000 (none of
which was paid in 1998).
3. The Corporate General Partner made advances to Registrant during
1996, 1997 and 1998 to cover operating deficits and capital expenditures. At
December 31, 1998, these advances totaled $2,770,000 and accrue interest at
prime plus 1% (8.75% at December 31, 1998). Interest paid or accrued to the
Corporate General Partner for 1998 totaled $166,000.
4. The General Partners are entitled to receive a percentage of
distributions of Cash Flow from Operations and Cash from Sales and Refinancing
with respect to any fiscal year. The General
20
<PAGE>
Partners have agreed to reduce their share of any future distributions to 1%. No
such distributions were made during 1998 and none are expected in 1999.
Registrant and WMMI, a subsidiary of Westrec Financial, have entered
into management agreements, a copy of the form of which is included as an
exhibit to Registrant's Registration Statement, SEC Registration Statement No.
33-21021. Under the terms of those agreements, WMMI will receive as
compensation for its management services a property management fee, payable
monthly, in an amount equal to the sum of (i) 6% of the "Gross Revenue" from
operations of the properties and (ii) 6% of the Net Sales Revenue from
operations of the properties. The term "Gross Revenue" means all receipts (net
of security deposits returned to the tenants) of Registrant from the operations
of the properties, including without limitation, rental payments of lessees of
space in the marinas, vending machine or concessionaire revenues, maintenance
charges, if any, paid by the tenants of the marinas in addition to basic rent,
parking fees, if any, revenues from boat rentals or campground rentals, if any,
and rental payments received under any subleases, but excluding all revenues
from the sale of goods or merchandise (other than vending machine and
concessionaire revenues), including gasoline. The term "Net Sales Revenue"
means all receipts of Registrant from the properties from the sale of goods or
merchandise (other than vending machine and concessionaire revenues), including
gasoline, minus the direct cost of the goods sold (not including any overhead
costs of Registrant). The management fee will cover, without additional expense
to Registrant, the time WMMI's executive officers expend on project management
and WMMI's overhead costs such as its expenses for rent, utilities and servicing
of Registrant's accounts payable. During 1998, $121,000 was paid or accrued by
Registrant to WMMI pursuant to the management agreements.
21
<PAGE>
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
---------------------------------------------------------------
(a) List of Documents filed as part of the Report.
1. Financial Statements: See Index to Financial Statements.
2. Financial Statement Schedules: See Index to Financial
Statements.
3. Exhibits: See Exhibit Index contained herein.
(b) No reports on Form 8-K were filed in the fourth quarter of 1998.
(c) See Exhibit Index contained herein.
(d) See Index to Financial Statements.
22
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
TOWER PARK MARINA INVESTORS, L.P.,
(formerly PS MARINA INVESTORS I),
a California Limited Partnership
Dated: April 8, 1999 By: Westrec Investors, Inc.,
------------------------
(formerly PS MARINA INVESTORS, INC.)
------------------------------------
General Partner
By: Michael M. Sachs
-----------------------
President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Capacity Date
- ------------ -------- ----
<S> <C> <C>
Michael M. Sachs President, Secretary and Director of April 8, 1999
- ---------------- Westrec Investors, Inc., the
Michael M. Sachs Corporate General Partner of the
Registrant (principal executive
officer)
William W. Anderson Director of Westrec Investors, Inc., April 8, 1999
- ------------------- the Corporate General Partner of the
William W. Anderson Registrant.
Jeffrey K. Ellis Vice President and Chief Financial April 8, 1999
- ---------------- Officer of Westrec Investors, Inc.,
Jeffrey K. Ellis the Corporate General Partner of the
Registrant (principal financial
officer and principal accounting
officer)
</TABLE>
<PAGE>
EXHIBIT INDEX
-------------
Exhibit No.
----------
(4) (A) Amended and Restated Agreement of Limited Partnership (form included
as Exhibit A to the Prospectus of Registrant dated August 4, 1988,
contained in Amendment No. 2 to Registration Statement No. 33-21021,
of Registrant filed July 29, 1988, and is incorporated herein by
reference).
(B) Amended form of execution copy of Subscription Agreement/Promissory
Note (filed as pages A-1 through A-6 to Post-Effective Amendment No. 1
to Registration Statement No. 33-21021 of Registrant filed February
14, 1989, and is incorporated herein by reference).
(10) (A) Form of Property Management Agreement between Registrant and PS
Marina Management, Inc. (filed as Exhibit 10.1 to Registration
Statement No. 33-21021 of Registrant and is incorporated herein by
reference).
(B) Copy of Purchase Agreement together with certain documents, leases and
the CSLC Lease relating to the purchase of Tower Park Marina (filed as
Exhibit 10.3 to Registration Statement No. 33-21021 of Registrant and
is incorporated herein by reference).
(C) Copy of Purchase Agreement together with certain documents, subleases
and the Concession Agreement relating to the purchase of Chandlers
Landing Marina (filed as Exhibit 10.4 to Registration Statement No.
33-21021 of Registrant and is incorporated herein by reference).
(D) Copy of lease between Registrant and Marine Ventures Limited relating
to restaurant/bar, general store and pontoon boat rental operation at
Tower Park Marina (filed as Exhibit 10.5 to Registration Statement No.
33-21021 of Registrant and is incorporated herein by reference).
(E) Copy of Purchase Agreement together with certain documents relating to
the purchase of ThunderBoat Marina (filed as Exhibit 28A to the
Registrant's Current Report on Form 8-K filed December 28, 1989, and
is incorporated herein by reference).
(F) Copy of Purchase Agreement together with certain documents relating to
the purchase of Banyan Bay Marina (filed as Exhibit 28B to the
Registrant's Current Report on Form 8-K filed December 28, 1989, and
is incorporated herein by reference).
(27) Financial Data Schedule.
<PAGE>
TOWER PARK MARINA INVESTORS, L.P.,
(formerly PS MARINA INVESTORS I)
a California Limited Partnership
Index to Financial Statements and Financial Statement Schedules
(Item 14 (a))
<TABLE>
<CAPTION>
Page
Reference
---------
<S> <C>
Report of Ernst & Young LLP, Independent Auditors F-1
Balance Sheets at December 31, 1998 and 1997 F-2
Statements of Operations for the year ended
December 31, 1998, 1997 and 1996 F-3
Statements of Partners' Deficit for the year
ended December 31, 1998, 1997 and 1996 F-4
Statements of Cash Flows for the year ended
December 31, 1998, 1997 and 1996 F-5
Notes to Financial Statements F-6 to F-12
Schedules for the year ended December 31, 1998,
1997 and 1996
III - Real Estate and Accumulated Depreciation F-13 to F-14
</TABLE>
All other schedules have been omitted since the required information is not
present or not present in amounts sufficient to require submission of the
schedule, or because the information is included in the financial statements or
the notes thereto.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Partners
Tower Park Marina Investors, L.P.,
(formerly PS Marina Investors I),
a California Limited Partnership
We have audited the accompanying balance sheets of Tower Park Marina Investors,
L.P. (formerly PS Marina Investors I), a California Limited Partnership, as of
December 31, 1998 and 1997, and the related statements of operations, partners'
equity (deficit), and cash flows for each of the three years in the period ended
December 31, 1998. Our audits also included the financial statement schedule
listed in the accompanying index at Item 14 (a). These financial statements and
financial statement schedule are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above presents fairly, in
all material respects, the financial position of Tower Park Marina Investors,
L.P. (formerly PS Marina Investors I), a California Limited Partnership, at
December 31, 1998 and 1997, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1998, in conformity
with generally accepted accounting principles. Also, in our opinion the related
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, present fairly in all material respects the
information set forth thereon.
The accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern. As discussed in Notes 2, 3 and 5,
the Partnership's property is not generating a satisfactory level of cash flow
and cash flow projections do not indicate significant improvement in the near
term in order for the Partnership to exercise the option to purchase the note
payable secured by the Partnership's marina facility. Further, the Partnership
is in the process of negotiating the land lease on the marina facility and there
is no assurance that the Partnership will be successful in securing a lease on
terms acceptable to the Partnership. These circumstances raise substantial
doubt about the Partnership's ability to recover the carrying value of its
assets (notwithstanding the write-down of the marina facility to its net
realizable value) and to continue as a going concern. The financial statements
do not include any adjustments to reflect the possible future effects on the
recoverability and classification of assets or the amounts and classification of
liabilities that may result from the possible inability of the Partnership to
continue as a going concern.
Ernst and Young LLP
Los Angeles, California
April 8, 1999
F-1
<PAGE>
TOWER PARK MARINA INVESTORS, L.P.
(formerly PS MARINA INVESTORS I)
a California Limited Partnership
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
---------------------------
1998 1997
------------ ------------
<S> <C> <C>
ASSETS
- ------
Cash $ 25,000 $ 15,000
Accounts receivable 211,000 163,000
Tower Park Marina, net 2,419,000 2,442,000
Other assets, net 275,000 226,000
------------ -----------
$ 2,930,000 $ 2,846,000
============ ===========
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
- ------------------------------------------
Accounts payable and accrued expenses $ 525,000 $ 525,000
Interest payable 3,199,000 2,598,000
Payable to affiliates 2,770,000 2,112,000
Deferred rentals 197,000 202,000
Notes payable 6,670,000 6,729,000
Commitments and contingencies - -
------------ -----------
13,361,000 12,166,000
Partners' deficit:
Limited partners' deficit, $5,000
per unit, 4,508 units authorized, issued
and outstanding (9,466,000) (8,366,000)
Deferred contributions (76,000) (76,000)
------------ -----------
(9,542,000) (8,442,000)
General partners' deficit (889,000) (878,000)
------------ -----------
Total partners' deficit (10,431,000) (9,320,000)
------------ -----------
$ 2,930,000 $ 2,846,000
============ ===========
</TABLE>
See accompanying notes.
F-2
<PAGE>
TOWER PARK MARINA INVESTORS, L.P.
(formerly PS MARINA INVESTORS I)
a California Limited Partnership
STATEMENTS OF OPERATIONS
For the year ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
1998 1997 1996
-------------- ----------- ------------
<S> <C> <C> <C>
Revenues:
Slip rentals $ 688,000 $ 740,000 $1,127,000
Restaurant 391,000 555,000 831,000
RV Park 625,000 614,000 610,000
Retail store 344,000 363,000 400,000
Lease income 160,000 186,000 248,000
Other income 104,000 80,000 102,000
----------- ---------- ----------
2,312,000 2,538,000 3,318,000
----------- ---------- ----------
Expenses:
Cost of operations 2,277,000 2,281,000 3,093,000
Interest expense 901,000 869,000 870,000
Depreciation and amortization 124,000 116,000 111,000
Management fees paid to an
affiliate 121,000 132,000 173,000
----------- ---------- ----------
3,423,000 3,398,000 4,247,000
----------- ---------- ----------
Net loss before gain on abandoned
marina facilities (1,111,000) (860,000) (929,000)
Gain on abandoned marina facilities - - 784,000
----------- ---------- ----------
Net loss $(1,111,000) $ (860,000) $ (145,000)
=========== ========== ==========
Allocation of net loss:
Limited Partners' $(1,100,000) $ (851,000) $ (144,000)
General Partners' (11,000) (9,000) (1,000)
----------- ---------- ----------
$(1,111,000) $ (860,000) $ (145,000)
=========== ========== ==========
Limited Partners' net loss
per unit $ (244.01) $ (188.78) $ (31.94)
=========== ========== ==========
</TABLE>
See accompanying notes.
F-3
<PAGE>
TOWER PARK MARINA INVESTORS, L.P.
(formerly PS MARINA INVESTORS I)
a California Limited Partnership
STATEMENTS OF PARTNERS' DEFICIT
For the year ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
General Limited
Partners Partners Total
------------- ------------ -------------
<S> <C> <C> <C>
Balances at December 31, 1995 $(868,000) $(7,447,000) $ (8,315,000)
Net loss (1,000) (144,000) (145,000)
--------- ----------- ------------
Balances at December 31, 1996 (869,000) (7,591,000) (8,460,000)
Net loss (9,000) (851,000) (860,000)
--------- ----------- ------------
Balances at December 1997 (878,000) (8,442,000) (9,320,000)
Net loss (11,000) (1,100,000) (1,111,000)
--------- ----------- ------------
Balances at December 31, 1998 $(889,000) $(9,542,000) $(10,431,000)
========= =========== ============
</TABLE>
See accompanying notes.
F-4
<PAGE>
TOWER PARK MARINA INVESTORS, L.P.
(formerly PS MARINA INVESTORS I)
a California Limited Partnership
STATEMENTS OF CASH FLOWS
For the year ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
1998 1997 1996
------------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(1,111,000) $(860,000) $(145,000)
Adjustments to reconcile net loss to net cash
used for operating activities:
Depreciation and amortization 124,000 116,000 111,000
Gain on abandoned marina facilities - - (784,000)
Increase in accounts receivable (48,000) (28,000) (55,000)
(Increase) decrease in other assets (49,000) 10,000 (78,000)
Decrease in accounts payable
and accrued expenses - (220,000) (12,000)
Increase in interest payable, net 601,000 552,000 718,000
(Decrease) increase in deferred rentals (5,000) (24,000) 115,000
----------- --------- ---------
Cash flow used for operating activities (488,000) (454,000) (130,000)
----------- --------- ---------
Cash flow used for investing activities:
Construction in progress and improvements
to marina facilities (101,000) (75,000) (65,000)
----------- --------- ---------
Cash flows from financing activities:
(Repayments on) proceeds from notes payable (59,000) (7,000) 7,000
Advances from affiliates, net 658,000 531,000 182,000
----------- --------- ---------
Net cash provided by financing activities 599,000 524,000 189,000
----------- --------- ---------
Net increase (decrease) in cash 10,000 (5,000) (6,000)
Cash at the beginning of year 15,000 20,000 26,000
----------- --------- ---------
Cash at the end of year $ 25,000 $ 15,000 $ 20,000
=========== ========= =========
</TABLE>
See accompanying notes.
F-5
<PAGE>
TOWER PARK MARINA INVESTORS, L.P.
(formerly PS MARINA INVESTORS I)
a California Limited Partnership
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
1. Summary of Significant Accounting Policies and Partnership Matters
------------------------------------------------------------------
Description of the Partnership
------------------------------
Tower Park Marina Investors, L.P. (formerly PS Marina Investors I), a
California Limited Partnership (the "Partnership"), was organized under the
California Revised Limited Partnership Act, pursuant to a Certificate of
Limited Partnership filed on January 6, 1988 to acquire, own, and operate
and to a lesser extent, develop marina facilities.
The General Partners in the Partnership are Westrec Investors, Inc.
(formerly PS Marina Investors, Inc.), a wholly-owned subsidiary of Westrec
Properties, Inc. ("Westrec"), and B. Wayne Hughes, a shareholder of Westrec
until June 1990. Effective March 1, 1997, the limited partners approved the
substitution of Tower Park Marina Operating Corporation, a wholly owned
subsidiary of Westrec Financial, Inc., for Mr. Hughes.
The Partnership was formed to sell a maximum of 12,000 units of limited
partnership interest at $5,000 per unit ($60,000,000). The General Partners
have contributed a total of $1,000. On November 27, 1989, the Partnership's
offering was terminated with 4,508 units issued, resulting in $22,540,000
of limited partner funds being raised (before commission discount of $3,000
granted to an investor). Half of each Limited Partner's total capital
contribution was deferred. The final installment was due on August 1, 1990,
and $76,000 of such deferrals remain outstanding.
Certain prior year amounts in the Partnership's financial statements have
been restated to conform with the 1998 presentation.
Use of Estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from these estimates.
F-6
<PAGE>
TOWER PARK MARINA INVESTORS, L.P.
(formerly PS MARINA INVESTORS I)
a California Limited Partnership
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
1. Summary of Significant Accounting Policies and Partnership Matters
------------------------------------------------------------------
(continued)
-----------
Net Realizable Value Reserve
----------------------------
As of December 31, 1998 the Partnership owns Tower Park Marina. Because of
continued operating cash flow deficits, the Partnership allowed the
Chandlers Landing Yacht Club to be sold at a trustee foreclosure sale on
February 6, 1996, and allowed the lender to foreclose on the ThunderBoat
and Banyan Bay Marinas on September 30, 1996. Due to the pending
foreclosure, a net realizable value reserve of $6,851,000 (including a
reserve for miscellaneous assets of $110,000) was established at December
31, 1995.
A net realizable value reserve of $2,193,000 was established at December
31, 1995 to reduce the carrying value of Tower Park Marina to its then
estimated realizable value. No addition to this reserve was considered
necessary at December 31, 1998, 1997 and 1996 since the Partnership has
determined that, based on current cash flows, estimated future cash flows
will be sufficient to recover the carrying value of the marina.
Offering and Organization Costs
-------------------------------
Costs incurred in preparing Partnership documents, prospectuses and any
other sales literature, costs incurred in qualifying the units for sale
under federal and state securities laws and costs incurred in marketing the
units have been charged to the limited partners' equity to the extent the
total does not exceed 5% of the gross proceeds of the offering. The amount
by which these organization and registration costs exceeded 5% of the gross
proceeds of the offering were borne by Westrec Investors, Inc.
Cash Distributions
------------------
The General Partners interest in Cash Flow from Operations (as defined) and
Cash from Sales or Refinancings (as defined) is 1%.
Allocations of Net Income or Loss
---------------------------------
As set forth in the Partnership Agreement, net loss shall be allocated 99%
to the Limited Partners and 1% to the General Partners. Net income shall
generally be allocated to Partners in proportion to their cash
distributions.
F-7
<PAGE>
TOWER PARK MARINA INVESTORS, L.P.
(formerly PS MARINA INVESTORS I)
a California Limited Partnership
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
1. Summary of Significant Accounting Policies and Partnership Matters
------------------------------------------------------------------
(continued)
-----------
Earnings Per Unit
-----------------
Per unit data is based on the weighted average number of the Limited
Partnership units outstanding during the period; 4,508.
Tower Park Marina
-----------------
Tower Park Marina is stated at cost to the Partnership less a net
realizable value reserve. Depreciation is calculated on a straight-line
basis. Depreciable lives for the major asset categories are as follows:
<TABLE>
<CAPTION>
Asset Category Depreciable Life
-------------- ----------------
<S> <C>
Buildings 20 years
Improvements 20 years
Floating docks 7 years
Furniture, fixtures and equipment 7 years
Leasehold interest life of lease
</TABLE>
Taxes Based on Income
---------------------
Taxes based on income are the responsibility of the individual partners
and, accordingly, are not reflected in the accompanying financial
statements.
Segment Reporting
-----------------
Effective January 1, 1998, the Partnership adopted the Financial Accounting
Standards Board's Statement of Financial Accounting Standards No. 131
"Disclosures about Segments of an Enterprise and Related Information".
Statement No. 131 establishes standards for the way public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information
about operating segments in interim financial reports. Statement No. 131
also establishes standards for related disclosures about products and
services, geographic areas, and major customers. As management views the
Partnership as operating in a single business segment as described in Note
1, the adoption of Statement No. 131 did not result in additional
disclosure of segment information.
F-8
<PAGE>
TOWER PARK MARINA INVESTORS, L.P.
(formerly PS MARINA INVESTORS I)
a California Limited Partnership
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
2. Tower Park Marina
-----------------
Tower Park Marina, located in the Sacramento - San Joaquin Delta near
Sacramento, California, includes the purchase price of the property and
related acquisition and closing costs. The Partnership pays an acquisition
fee of 6% of the contract purchase price of the marina facility, plus a
development fee of 6% of the cost of improvements made. Capitalized as a
cost of Tower Park Marina were development fees paid to Westrec of $6,000
and $4,000 for the year ended December 31, 1998 and 1997, respectively. At
December 31, Tower Park Marina comprised the following:
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Land $ 1,040,000 $ 1,040,000
Buildings 2,103,000 2,078,000
Improvements 2,083,000 2,060,000
Floating docks 2,796,000 2,768,000
Furniture, fixtures and equipment 1,146,000 1,121,000
Leasehold interest 941,000 941,000
----------- -----------
10,109,000 10,008,000
Less accumulated depreciation
and amortization (5,497,000) (5,373,000)
----------- -----------
4,612,000 4,635,000
Net realizable value reserve (2,193,000) (2,193,000)
----------- -----------
$ 2,419,000 $ 2,442,000
=========== ===========
</TABLE>
The marina facilities abandoned at December 31, 1995 consisted of Chandlers
Landing Yacht Club ($1,244,000), located on Lake Ray Hubbard in Dallas
County, Texas, ThunderBoat Marina ($7,357,000), located in Dania, Florida
near Fort Lauderdale and Banyan Bay Marina ($4,126,000) also located in
Dania, Florida. The Chandlers Landing Yacht Club was sold at a trustee
foreclosure sale on February 6, 1996 and due to the continued operating
losses at ThunderBoat and Banyan Bay Marinas, as well as the inability to
sell the Banyan Bay Marina, the Partnership allowed the Lender to foreclose
on these properties on September 30, 1996. Because of the impending
foreclosures and write-down to net realizable value at December 31, 1995,
no depreciation was taken on these three properties for the year ended
December 31, 1995 and 1996.
F-9
<PAGE>
TOWER PARK MARINA INVESTORS, L.P.
(formerly PS MARINA INVESTORS I)
a California Limited Partnership
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
2. Tower Park Marina (continued)
-----------------------------
Included in the net loss before gain on abandoned marina facilities, net
realizable value adjustment and forgiveness of debt by affiliate for the
year ended December 31, 1996 is $7,000 of losses related to Chandlers
Landing Yacht Club, $46,000 of losses related to Banyan Bay Marina and
$16,000 of income related to ThunderBoat Marina.
The Partnership's marina is not generating satisfactory levels of cash
flows and cash flow projections do not indicate significant improvement in
the near term. These matters raise substantial doubt about the
Partnership's ability to recover the carrying value of its assets, (not
withstanding the write-down of the marina facility to its net realizable
value) and to continue as a going concern. The financial statements do not
include any adjustments to reflect the possible future effects on the
recoverability and classification of assets or the amounts and
classification of liabilities that may result from the possible inability
of the Partnership to continue as a going concern.
3. Notes Payable
-------------
Notes payable at December 31, consist of the following:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Note payable to an individual, bearing
interest at 11% per annum, secured by
a deed of trust on Tower Park Marina, due
on February 28, 1999. $ 6,665,000 $ 6,715,000
Other 5,000 14,000
----------- -----------
$ 6,670,000 $ 6,729,000
=========== ===========
</TABLE>
At December 31, 1998 future principal payments are as follows:
<TABLE>
<CAPTION>
Year
----
<S> <C>
1999 $ 6,667,000
2000 3,000
-----------
$ 6,670,000
===========
</TABLE>
F-10
<PAGE>
TOWER PARK MARINA INVESTORS, L.P.
(formerly PS MARINA INVESTORS I)
a California Limited Partnership
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
3. Notes Payable (continued)
-------------------------
No payments have been made on the note secured by Tower Park Marina since
September 1991. Throughout 1991, 1992, 1993 and 1994, the Partnership was
involved in various negotiations with the lender, a financial institution,
and its successor, Resolution Trust Corporation ("RTC"), to restructure or
otherwise settle the note. In January 1995, the RTC sold the note as part
of a sales initiative to a third party. The note was immediately sold to
an affiliate of the individual general partner. The Partnership has
entered into an option agreement to purchase the note from its current
holder for its cost ($1,700,000) plus carrying costs which expired on April
10, 1996. In connection with the substitution of Tower Park Marina
Operating Corporation for Mr. Hughes as General Partner, the affiliate of
Mr. Hughes which holds the note, entered into a new option agreement with
the Partnership, which allows the Partnership to purchase the note secured
by Tower Park Marina, for the affiliate's cost, $1,700,000, plus $68,000 of
accrued unpaid interest. As of December 31, 1998, the note was reflected
on the Partnership's balance sheet at its face value of $6,665,000 with an
additional $3,199,000 being shown as accrued unpaid interest (based on the
option agreement to acquire the note, its fair value is deemed to be the
option price of $1,650,000). The option was initially for a one-year
period expiring on February 28, 1998. The Partnership extended the option
agreement for one year in February 1998 by paying the affiliate $50,000,
which was applied as a reduction in the principal amount due. The
Partnership extended the option agreement for one additional year by making
an additional $50,000 principal payment in February 1999. In the event the
option is exercised, the Partnership will recognize a gain of approximately
$8,200,000 from the forgiveness of debt.
The Partnership's ability to continue as a going concern is dependent upon
their ability to exercise their option on the note secured by Tower Park
Marina and improved operational cash flow. The Partnership is currently in
the final stages of completing the refinancing of Tower Park Marina. The
Partnership has received a commitment letter from a financial institution
to finance up to $2 million. Before closing the refinance, the lease
extension on Tower Park (see Note 5) needs to be completed. Management
anticipates the refinancing to be completed by June 30, 1999. The
financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the
amounts and classification of liabilities that may result from the possible
inability of the Partnership to continue as a going concern.
4. Related Party Transactions
--------------------------
The Partnership has an agreement with Westrec Marina Management, Inc., an
affiliate of Westrec, to manage the day-to-day operations of the marinas
for a fee equal to 6% of the marinas' monthly gross revenues (as defined).
Management fees for the year ended December 31, 1998, 1997 and 1996 were
$121,000, $132,000 and $173,000, respectively.
F-11
<PAGE>
TOWER PARK MARINA INVESTORS, L.P.
(formerly PS MARINA INVESTORS I)
a California Limited Partnership
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
4. Related Party Transactions (continued)
--------------------------------------
In connection with funding operating deficits and with the acquisition of
marina facilities, funds have been borrowed from Westrec. These borrowings
accrue interest at the prime rate plus 1% (8.75% at December 31, 1998).
Total interest paid or accrued to Westrec for the year ended December 31,
1998, 1997, and 1996 was $166,000, 122,000 and $92,000, respectively.
5. Commitments and Contingencies
-----------------------------
In September 1994, Mr. Leaman, the prior owner of ThunderBoat and Banyan
Bay Marinas, filed suit alleging that the Partnership had failed to pay him
$1,100,000 of additional consideration relating to the Partnership's
purchase of ThunderBoat and Banyan Bay Marinas. In connection with the
purchase of these properties from Mr. Leaman in 1989, the Partnership
entered into an employment agreement that provided that Mr. Leaman would be
entitled to earn a bonus, payable over three years. The maximum bonus that
Mr. Leaman could have earned was $1,100,000. Mr. Leaman resigned from his
employment in less than one year. Mr. Leaman has alleged that the bonus
was intended to be deferred consideration due from his sale of the
properties to the Partnership. This case was settled in October 1998 with
the Partnership incurring legal fees and settlement costs totaling
$261,000.
In November 1991, contamination was discovered in the area surrounding a
fuel storage tank at Tower Park Marina. Environmental consultants have
been engaged to perform sampling to determine the extent of the
contamination. Presently, sufficient data has not been obtained to
estimate the cost of remediation, consequently no loss accrual has been
made in the financial statements.
The Partnership operates a portion of Tower Park Marina on approximately 14
acres of waterfront property under a lease with the California State Land
Commission (the "CSLC Lease"). The CSLC Lease expired on December 31,
1998, and provides that it may be renewed for two successive periods for 10
years each. The CSLC Lease provides for an annual rent based on gross
receipts, with a minimum annual rental of $5,000 payable in advance. Rent
expense associated with the CSLC Lease is included in cost of operations
and was $33,000, $42,000 and $42,000, respectively, for the year ended
December 31, 1998, 1997 and 1996.
The Partnership is currently negotiating the terms of its lease extension
with the CSLC. There is no assurance that the Partnership will be
successful in securing a lease on terms acceptable to the Partnership.
F-12
<PAGE>
TOWER PARK MARINA INVESTORS LP
a California Limited Partnership
SCHEDULE III - REAL ESTATE
AND ACCUMULATED DEPRECIATION
<TABLE>
<CAPTION>
Cost
Subsequent
Initial Cost to Acquisition
------------------------ --------------
Date Buildings & Buildings &
Acquired Description Encumbrances Land Improvements Improvements
- -------- ---------------------------- ------------ ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
02/88 Tower Park $6,665,000(A) $1,040,000 $ 6,213,000 $2,856,000
Net Realizable Value Reserve
11/89 ThunderBoat (B) 3,432,000 3,502,000 423,000
11/89 Banyan Bay (B) 2,493,000 1,158,000 475,000
07/91 Chandlers Landing
Yacht Club (C) 279,000 463,000 502,000
---------- ---------- ----------- ----------
$6,665,000 $7,244,000 $11,336,000 $4,256,000
========== ========== =========== ==========
<CAPTION>
Gross Carrying Amount at December 31, 1998
-------------------------------------------------------
Date Buildings & Accumulated
Acquired Description Land Improvements Total Depreciation
- -------- ---------------------------- ---------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
02/88 Tower Park $1,040,000 $9,069,000 $10,109,000 $5,497,000
Net Realizable Value Reserve (2,193,000) 0
11/89 ThunderBoat 0 0 0 0
11/89 Banyan Bay 0 0 0 0
07/91 Chandlers Landing
Yacht Club 0 0 0 0
---------- ---------- ----------- ----------
$1,040,000 $9,069,000 $ 7,916,000 $5,497,000
========== ========== =========== ==========
</TABLE>
(A) Does not include interest accrued on this note of $3,199,000.
(B) These properties, which were encumbered by the Registrants $2,000,000 line
of credit, were lost to foreclosure on September 30, 1996.
(C) This property, which was encumbered by the $600,000 Citibank note, was
lost to foreclosure on February 6, 1996.
F-13
<PAGE>
TOWER PARK MARINA INVESTORS LP
a California Limited Partnership
SCHEDULE III - REAL ESTATE AND
ACCUMULATED DEPRECIATION (continued)
<TABLE>
<CAPTION>
REAL ESTATE RECONCILIATION
Year Ended December 31,
----------------------------------------------
1998 1997 1996
-------------- -------------- --------------
<S> <C> <C> <C>
Balance at beginning of the year $7,815,000 $7,740,000 $13,144,000
Construction in progress and
improvements to facilities
during the year 101,000 75,000 60,000
Acquisitions during the year
Deductions during the year (5,464,000)
-------------- -------------- --------------
Balance at the end of the year $7,916,000 $7,815,000 $7,740,000
============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
ACCUMULATED DEPRECIATION RECONCILIATION
Year Ended December 31,
----------------------------------------------
1998 1997 1996
-------------- -------------- --------------
<S> <C> <C> <C>
Balance at beginning of the year $5,373,000 $5,257,000 $8,000,000
Additions during the year:
Depreciation 124,000 116,000 111,000
Deductions during the year (2,854,000)
-------------- -------------- --------------
Balance at the end of the year $5,497,000 $5,373,000 $5,257,000
============== ============== ==============
</TABLE>
The aggregate cost for Federal income tax purposes is $10,108,915.
F-14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1998 JAN-01-1997
<PERIOD-END> DEC-31-1998 DEC-31-1997
<CASH> 25,000 15,000
<SECURITIES> 0 0
<RECEIVABLES> 211,000 163,000
<ALLOWANCES> 0 0
<INVENTORY> 143,000 112,000
<CURRENT-ASSETS> 379,000 290,000
<PP&E> 7,916,000 7,815,000
<DEPRECIATION> (5,498,000) (5,373,000)
<TOTAL-ASSETS> 2,930,000 2,846,000
<CURRENT-LIABILITIES> 6,691,000 5,437,000
<BONDS> 6,670,000 6,729,000
0 0
0 0
<COMMON> 0 0
<OTHER-SE> (10,431,000)<F1> (9,320,000)<F1>
<TOTAL-LIABILITY-AND-EQUITY> 2,930,000 2,846,000
<SALES> 0 0
<TOTAL-REVENUES> 2,312,000 2,538,000
<CGS> 0 0
<TOTAL-COSTS> 2,277,000 2,281,000
<OTHER-EXPENSES> 243,000 248,000
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 901,000 869,000
<INCOME-PRETAX> (1,111,000) (860,000)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,111,000) (860,000)
<EPS-PRIMARY> (244.01)<F2> (188.78)<F2>
<EPS-DILUTED> (244.01)<F2> (188.78)<F2>
<FN>
<F1>TOTAL PARTNERS' DEFICIT
<F2>LIMITED PARTNERS' NET LOSS PER UNIT
</FN>
</TABLE>
