<PAGE>
As filed with the Securities and Exchange Commission on September 20, 1996
Registration No. 33-07571
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------------
AMENDMENT NO. 1
TO
FORM S-3
Registration Statement
Under
The Securities Act of 1933
---------------------------------
NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP
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(Exact name of registrant as specified in its charter)
---------------------------------
Delaware 04-2948435
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
---------------------------------
One International Place
Boston, Massachusetts 02110
(617) 330-8600
---------------------------
(Address and telephone number of registrant's principal executive offices)
---------------------------------
Richard J. McCready Copy to:
Winthrop Financial Associates Jayshree Parthasarathy, Esq.
One International Place Rosenman & Colin LLP
Boston, Massachusetts 02110 575 Madison Avenue
Telephone: (617) 330-8600 New York, New York 10022
(Name, address and telephone Telephone: (212) 940-8800
number of agent for service)
---------------------------------
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box [ ]
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]_____________
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ] _____________
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
---------------------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
<PAGE>
Subject to Completion
dated September 20, 1996
PROSPECTUS
785 Units representing
Preferred Limited Partnership Interests
NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP
Nantucket Island Associates Limited Partnership (the "Partnership"), a
Delaware limited partnership, is issuing to holders (the "Unitholders") of
record of its limited partnership interests (the "Units") as of the close of
business on September 10, 1996 one subscription right (each, a "Right") for
each Unit held. Each Right entitles the Unitholder to purchase, at any time
prior to 5:00 p.m., New York City time, on November 8, 1996 (as such date may
be extended as herein provided, the "Expiration Date"), at a subscription price
of $13,333 (the "Subscription Price"), one 8% cumulative compounded preferred
unit (a "Preferred Unit") representing a limited partnership interest in the
Partnership. The Rights are evidenced by subscription certificates (the
"Subscription Certificates") which are being mailed to Unitholders herewith. The
Rights are not transferable. Each Unitholder who exercises his Right will be
entitled to exercise an over-subscription privilege (the "Over-Subscription
Privilege") for all or any of the Preferred Units that are not purchased by
other Unitholders. If all Rights are exercised, there will be no
Over-Subscription Privilege. There is no limit on the number of Preferred Units
for which a Unitholder who exercises his Right may seek to subscribe pursuant to
the Over-Subscription Privilege. The available Preferred Units will be allocated
pro rata among those Unitholders who exercise the Over-Subscription Privilege.
See "The Offering."
EXERCISING UNITHOLDERS WILL HAVE NO RIGHT TO RESCIND A PURCHASE AFTER
THE PARTNERSHIP HAS RECEIVED A COMPLETED SUBSCRIPTION CERTIFICATE. ALL
EXERCISING UNITHOLDERS MUST REMIT PAYMENT IN FULL WITH THEIR COMPLETED
SUBSCRIPTION CERTIFICATES FOR ALL PREFERRED UNITS SUBSCRIBED FOR THROUGH THE
EXERCISE OF THE RIGHTS AND THE OVER-SUBSCRIPTION PRIVILEGE.
Zero Main Associates Limited Partnership (the "Guarantor"), an affiliate
of Three Winthrop Properties, Inc. (the "General Partner"), the general partner
of the Partnership, has agreed (i) to exercise its Right as a Unitholder and
(ii) to subscribe for all other Preferred Units offered hereunder through the
Over-Subscription Privilege and, subject to proration as described above, to
purchase such additional Preferred Units (the "Subscription Guaranty").
Accordingly, the Partnership is assured of receiving gross proceeds from this
offering (the "Offering") in an amount equal to approximately $10.5 million. No
fee is being paid to the Guarantor in connection with the Subscription Guaranty.
Each Preferred Unit will entitle the holder thereof to receive from the
available cash flow of the Partnership an amount in cash equal to a cumulative
compounded preferred annual return of 8% on his preferred invested capital of
$13,333. In addition, each Preferred Unit will entitle the holder thereof to
receive an aggregate cumulative cash distribution (prior to any distribution to
Unitholders and to the General Partner on account of the Units and the general
partnership interests held by them) equal to $33,332.50 (250% of such investor's
preferred invested capital) from the net cash proceeds, if any, received by the
Partnership from capital transactions or upon liquidation of the Partnership.
See "Description of Securities." For a discussion of certain tax consequences to
Unitholders who exercise their Rights, see "Certain Income Tax Consequences."
There is no existing market for the Preferred Units and it is
anticipated that a market for the Preferred Units will not develop. The
Partnership does not intend to apply to list the Preferred Units on any
securities exchange.
The Offering is subject to withdrawal and cancellation at any time,
without notice.
----------------------------------------------------
PROSPECTIVE PURCHASERS OF THE PREFERRED UNITS SHOULD CONSIDER THE SPECIFIC
INVESTMENT CONSIDERATIONS SET FORTH UNDER "INVESTMENT CONSIDERATIONS" ON
PAGES 10 TO 16.
----------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
---------------------------------------------------
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR
ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE
CONTRARY IS UNLAWFUL.
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Subscription Price Proceeds to the
Partnership(1)
Per Unit $13,333.00 $13,333.00
Total $10,466,405.00 $10,466,405.00
---------------------------------------------------
(1) Before deducting expenses payable by the Partnership estimated at
$175,000. No underwriting discount or commission will be paid in
connection with the Offering.
The date of this Prospectus is September __, 1996.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
<PAGE>
AVAILABLE INFORMATION
The Partnership is subject to the informational requirements of the
Securities Exchange Act of 1934 (the "Exchange Act") and, in accordance
therewith, files reports and other information with the Securities and Exchange
Commission (the "Commission"). Such reports and other information can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the Commission's regional offices at 7 World Trade Center,
13th floor, New York, New York 10048 and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. Copies of such material can be obtained from the
Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates. The Commission maintains a Web site that
contains reports, proxy and information statements and other information
regarding issuers, such as the Partnership, that file electronically with the
Commission and the address of such Web site is http://www.sec.gov.
The Partnership has filed with the Commission a registration statement
on Form S-3 (herein, together with all amendments and exhibits, referred to as
the "Registration Statement") under the Securities Act of 1933 (the "Securities
Act") with respect to the registration of the securities offered hereby. This
Prospectus does not contain all the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission. Statements contained herein concerning the
contents of any documents are not necessarily complete and, in each instance,
reference is made to the copy of such document filed as an exhibit to the
Registration Statement. Each such statement is qualified in its entirety by such
reference. The Registration Statement, as well as items of information omitted
from this Prospectus but contained in the Registration Statement and reports and
other information filed by the Partnership, may be inspected without charge at
the public reference facilities referred to above and copies of all or any part
thereof may be obtained from the Commission upon request and payment of the
prescribed fee.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Partnership with the Commission
pursuant to the Exchange Act are incorporated herein by reference:
(a) The Partnership's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995, filed on April 15, 1996 (File No. 0-16865) (the
"Form 10-K");
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(b) The Partnership's Quarterly Report on Form 10-QSB for the fiscal
quarter ended March 31, 1996, filed on May 20, 1996 (File No. 0-16865)
(the "March 1996 Form 10-Q"); and
(c) The Partnership's Quarterly Report on Form 10-QSB for
the fiscal quarter ended June 30, 1996, filed on August 12,
1996 (File No. 0-16865) (together with the March 1996 Form
10-Q, the "Form 10-Qs").
All documents filed by the Partnership with the Commission pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of
this Prospectus and prior to the termination of the offering of the securities
described herein shall be deemed to be incorporated by reference into this
Prospectus and to be a part hereof from the respective dates of the filings of
such documents.
Any statement contained herein or in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any subsequently filed document which also is or is
deemed to be incorporated herein by reference modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Partnership undertakes to provide, without charge, to each person,
including any beneficial owner, to whom this Prospectus is delivered, upon the
written or oral request of such person, a copy of any and all of the documents
incorporated herein by reference (other than exhibits to such documents unless
such exhibits are specifically incorporated by reference herein). Requests for
such documents should be directed to the Partnership at One International Place,
Boston, Massachusetts 02110, Attention: Carolyn Tiffany. Telephone requests for
such copies should be directed to the Partnership at (617) 330-8600.
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<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the
more detailed information and financial statements appearing elsewhere or
incorporated by reference in this Prospectus.
The Partnership and Purpose of the Offering
Nantucket Island Associates Limited Partnership (the "Partnership"), a
Delaware limited partnership, is the sole general partner of, and owns a 99.99%
general partnership interest in, NIA Operating Associates Limited Partnership
("NIA Operating Associates"). NIA Operating Associates, in turn, owns a 99.99%
general partnership interest in Sherburne Associates ("Sherburne"). Sherburne
beneficially owns and operates a portfolio of properties on Nantucket Island,
including two hotels (The White Elephant and The Harbor House Hotel), 40 rental
units located in the Wharf Cottages, 51 retail buildings, the Nantucket Boat
Basin and employee housing for approximately 150 persons (collectively, the
"Property"). See "The Partnership" and "The Property."
Sherburne has been engaged in a capital improvements program on the
Property, which is being implemented in phases. At the present time, the
Partnership believes that certain capital improvements to the Property, with an
estimated cost of $4.5 million, are required to be completed in the near future.
Neither Sherburne nor the Partnership has sufficient reserves, nor does the
Property generate sufficient cash flow, to fund these capital improvements.
In June 1995, Sherburne completed a restructuring of a mortgage loan
(the "Loan") in the principal amount of approximately $27 million from Bankers
Trust Company of New York. The restructuring extended the term of the Loan
through February 1997 which may be extended, at Sherburne's option, through
October 1997. The estimated interest payments on the Loan in fiscal 1996 are
approximately $2.4 million and a principal payment of $600,000 is due in
September 1996. See "Investment Considerations -- Need for Additional Capital"
and "The Offering -- Purpose of the Offering."
Sherburne's debt service coverage ratio in 1995 was .93:1. Debt service
coverage ratio measures, for any period, the ratio of net operating income of an
entity to the aggregate debt payments (including both interest and principal
payments) required to be made by such entity. Three Winthrop Properties, Inc.
(the "General Partner"), the general partner of the Partnership, believes that
Sherburne's debt service coverage ratio is substantially lower than current
underwriting standards
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<PAGE>
imposed by financial institutions. Although the General Partner believes that
Sherburne will be able to meet its debt service obligations prior to maturity of
the Loan, Sherburne may not be able to refinance the Loan prior to or at its
maturity in February 1997 (or, if extended, in October 1997) without the payment
of substantial refinancing fees, a substantial increase in the Partnership's
equity and a substantial reduction in the aggregate outstanding indebtedness of
Sherburne. See "The Partnership" and "Investment Considerations -- Need for
Additional Capital." If Sherburne is unable to obtain adequate refinancing, it
could be forced to sell the Property (or a portion thereof) at disadvantageous
terms and conditions.
Accordingly, the General Partner has determined to increase the
Partnership's equity by means of the offering (the "Offering") being made by
this Prospectus and to utilize the proceeds of the Offering to complete the
capital improvements described above and to reduce the outstanding principal
indebtedness at the time of the refinancing of the Loan. See "Use of Proceeds."
The Offering
The Partnership is issuing to holders (the "Unitholders") of record of
its limited partnership interests (the "Units") as of the close of business on
September 10, 1996 one subscription right (each, a "Right") for each Unit held.
Each Right entitles the Unitholder to purchase, at any time prior to 5:00 p.m.,
New York City time, on November 8, 1996 (as such date may be extended by the
General Partner as herein provided, the "Expiration Date"), at a subscription
price of $13,333 (the "Subscription Price"), one 8% cumulative compounded
preferred unit (a "Preferred Unit") representing a limited partnership interest
in the Partnership. The Rights are evidenced by subscription certificates (the
"Subscription Certificates") which are being mailed to Unitholders herewith. The
Rights are not transferable. See "The Offering."
The subscription period shall commence on September 25, 1996 and,
unless extended by the General Partner, will terminate at 5:00 p.m. New York
time on the Expiration Date.
Rights may be exercised by completing a Subscription Certificate and
delivering it, together with payment, by means of a check, to the Partnership.
Each Unitholder who exercises the Rights issued to such Unitholder will
be entitled to exercise an over-subscription privilege (the "Over-Subscription
Privilege") for all or any portion of the Preferred Units that were not
purchased by Unitholders to whom Rights were issued. If all the Rights are
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<PAGE>
exercised, there will be no Over-Subscription Privilege. There is no limit on
the number of Preferred Units that a Unitholder who has exercised his Rights may
seek to subscribe for pursuant to the Over-Subscription Privilege. The available
Preferred Units will be allocated pro rata (according to the aggregate number of
Rights exercised) among those Unitholders who exercise the Over-Subscription
Privilege. In the event a Unitholder exercising the Over-Subscription Privilege
is allocated less than the number of Preferred Units for which such Unitholder
subscribed, excess subscription payments will be promptly refunded. See "The
Offering -- Payment for Securities."
Zero Main Associates Limited Partnership (the "Guarantor"), an affiliate
of the General Partner and a Unitholder, has agreed (i) to exercise its Right
and (ii) to subscribe for all other Preferred Units offered hereunder through
the Over-Subscription Privilege and, subject to proration as described above, to
purchase such additional Preferred Units (the "Subscription Guaranty"). If no
Rights are exercised by Unitholders other than the Guarantor, it would purchase
and own all 785 Preferred Units. As a result of the Subscription Guaranty, the
Partnership is assured of receiving gross proceeds from the Offering in an
amount equal to approximately $10.5 million. No fee is being paid to the
Guarantor on account of the Subscription Guaranty.
There is no existing market for the Preferred Units and it is
anticipated that a market for the Preferred Units will not develop. The
Partnership does not intend to apply to list the Preferred Units on any
securities exchange.
Each Preferred Unit will entitle the holder thereof to receive from the
available cash flow of the Partnership an amount in cash equal to a cumulative
preferred annual return of 8% on his preferred invested capital of $13,333. In
addition, each Preferred Unit will entitle the holder thereof to receive an
aggregate cumulative cash distribution (prior to any distribution to Unitholders
and to the General Partner on account of the Units and the general partnership
interests held by them) equal to $33,332.50 (or 250% of an investor's preferred
invested capital, on a per Preferred Unit basis) from the net cash proceeds, if
any, received by the Partnership from capital transactions or upon liquidation
of the Partnership. See "Description of Securities."
For a discussion of certain tax consequences to holders who exercise
their Rights, see "Certain Income Tax Consequences."
ALL EXERCISING UNITHOLDERS MUST REMIT PAYMENT IN FULL WITH THEIR
COMPLETED SUBSCRIPTION CERTIFICATES FOR ALL PREFERRED UNITS SUBSCRIBED FOR
THROUGH THE EXERCISE OF THE RIGHTS AND THE OVER-SUBSCRIPTION PRIVILEGE.
EXERCISING UNITHOLDERS WILL HAVE NO
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<PAGE>
RIGHT TO RESCIND A PURCHASE AFTER THE PARTNERSHIP HAS RECEIVED A COMPLETED
SUBSCRIPTION CERTIFICATE.
Investment Considerations
See "Investment Considerations" for information that should be
considered by the Unitholders.
Use of Proceeds
Of the approximately $10.2 million proceeds of the Offering (net of
expenses of approximately $210,000), (i) approximately $4.2 million will be
utilized to pay the costs and expenses of, and to reduce the outstanding
principal amount of the indebtedness of the Partnership at the time of, the
refinancing of the Loan, (ii) approximately $4.5 million will be utilized to
make capital improvements to the Property, (iii) approximately $600,000 will be
used to repay a loan made by the General Partner to the Partnership in May 1996
to fund the payment of real estate taxes and capital improvements and (iv) the
remaining approximately $1 million will be added to the Partnership's working
capital. See "Use of Proceeds."
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<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(in thousands, except per Unit information)
The selected consolidated financial data set forth below with respect to
the fiscal years ended December 31, 1991, 1992, 1993, 1994 and 1995 are derived
from the Partnership's audited consolidated financial statements. The selected
consolidated financial data for the six months ended June 30, 1995 and 1996
are derived from the Partnership's unaudited consolidated financial statements
which in the opinion of management include all normal, recurring adjustments
necessary to state fairly the data included therein in accordance with generally
accepted accounting principles for interim financial information. Interim
results are not necessarily indicative of the results to be expected for the
entire fiscal year. All of the data set forth below should be read in
conjunction with the "Management's Discussion and Analysis of Financial
Condition and Results of Operations" section and the Consolidated Financial
Statements and the notes thereto appearing in the Form 10-K and the Form 10- Qs
incorporated herein by reference.
<TABLE>
<CAPTION>
Six Months Ended
Year Ended December 31, June 30,
-------------------------------------------------------- ---------------------
1991 1992 1993 1994 1995 1995 1996
---- ---- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Statement of Operations
Data:
Revenue:
Hotel operations ........................ $ 5,219 $ 5,528 $ 6,110 $ 6,408 $ 7,168 $ 1,447 $ 1,443
Restaurant operations ................... 2,151 2,332 2,286 2,404 2,406 742 615
Commercial rental operations ............ 2,921 3,108 3,542 3,587 3,502 1,114 1,319
Boat basin operations ................... 2,308 2,206 2,426 2,528 2,595 355 365
-------- -------- -------- -------- -------- -------- --------
Total revenue ........................... 12,599 13,174 14,364 14,927 15,671 3,658 3,742
Total operating expenses ....................... 13,185 12,760 13,662 14,334 15,615 6,199 6,284
-------- -------- -------- -------- -------- -------- --------
Income (loss) from operations .................. (586) 414 702 593 56 (2,541) (2,542)
Total other income (expense), net .............. (2,380) (3,013) (2,510) (2,434) (2,476) (1,122) (960)
-------- -------- -------- -------- -------- -------- --------
Net Loss ....................................... $ (2,966) $ (2,599) $ (1,808) $ (1,841) $ (2,420) $ (3,663) $ (3,502)
-------- -------- -------- -------- -------- -------- --------
Net Loss Allocated to General Partner .......... $ (149) $ (130) $ (90) $ (92) $ (121) $ (183) $ (175)
-------- -------- -------- -------- -------- -------- --------
Net Loss Allocated to Limited Partners ........ $ (2,817) $ (2,469) $ (1,718) $ (1,749) $ (2,299) $ (3,480) $ (3,327)
-------- -------- -------- -------- -------- -------- --------
Net Loss Per Unit of Limited Partnership
Interest Outstanding .......................... $ (3,588) $ (3,145) $ (2,188) $ (2,227) $ (2,929) $ (4,434) $ (4,239)
Other Data:
Net Loss ....................................... $ (2,966) $ (2,599) $ (1,808) $ (1,841) $ (2,420) $ (3,663) $ (3,502)
Depreciation and amortization .................. 3,088 2,626 2,680 2,551 2,542 1,192 1,278
Total other (income) expense ................... 2,380 3,013 2,510 2,434 2,476 1,122 960
Net Operating Income ........................... $ 2,502 $ 3,040 $ 3,382 $ 3,144 $ 2,598 $ (1,349) $ (1,264)
</TABLE>
<TABLE>
<CAPTION>
As of
As of December 31, June 30,
---------------------------------------------------------- -----------
1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Consolidated Balance Sheet Data:
Total assets ................................. $ 64,217 $ 61,163 $ 58,716 $ 57,377 $ 54,312 $ 52,913
Total liabilities ............................ 30,087 29,631 28,992 29,493 28,849 30,952
Partner's equity (deficit):
Investor limited partners' equity, 785
units authorized, issued and
outstanding ............................... 40,062 41,593 39,876 38,128 35,828 32,501
General partners' deficit ................. (9,931) (10,061) (10,151) (10,244) (10,365) (10,540)
Total partners' equity ....................... 34,131 31,532 29,724 27,884 25,463 21,961
Total liabilities and partners' equity ....... 64,217 61,163 58,716 57,377 54,312 52,913
</TABLE>
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<PAGE>
THE PARTNERSHIP
Nantucket Island Associates Limited Partnership (the "Partnership") is
the sole general partner of, and owns a 99.99% general partnership interest in,
NIA Operating Associates Limited Partnership, a Massachusetts limited
partnership ("NIA Operating Associates"). The remaining 0.01% interest in NIA
Operating Associates is owned by Three Winthrop Properties, Inc. (the "General
Partner"), the general partner of the Partnership. NIA Operating Associates, in
turn, owns a 99.99% general partnership interest in Sherburne Associates
("Sherburne"), a Massachusetts general partnership. As a result, the Partnership
owns a 99.98% beneficial interest in Sherburne. The remaining 0.01% general
partnership interest in Sherburne is owned by the General Partner. Sherburne
owns and operates a portfolio of properties on Nantucket Island, including two
hotels (The White Elephant and The Harbor House Hotel), 40 rental units located
in the Wharf Cottages, 51 retail buildings, the Nantucket Boat Basin and
employee housing for approximately 150 persons (collectively, the "Property").
See "The Property."
The General Partner controls the activities of the Partnership. The term
of the Partnership will end in the year 2035, although the Partnership may be
terminated earlier pursuant to the provisions of the partnership agreement (the
"Partnership Agreement") of the Partnership.
In June 1995, Sherburne completed a restructuring of a mortgage loan
(the "Loan") in the principal amount of approximately $27 million from the
Bankers Trust Company of New York ("Bankers Trust"). The restructuring extended
the term of the Loan through February 1997, and the term may be further
extended, at Sherburne's option, through October 1997. The estimated interest
payments on the Loan in fiscal 1996 are approximately $2.4 million and a
principal payment of $600,000 is due in September 1996. See "Investment
Considerations -- Need for Additional Capital" and "The Offering -- Purpose of
the Offering."
The Partnership is a Delaware limited partnership. The address of its
principal office is c/o Winthrop Financial Associates, A Limited Partnership,
One International Place Boston, Massachusetts 02110, and the Partnership's
telephone number is (617) 330-8600.
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<PAGE>
INVESTMENT CONSIDERATIONS
Effect of Not Exercising Rights. Upon completion of the Offering
contemplated hereby, Unitholders who do not exercise their Rights will own a
smaller proportional interest in the Partnership. Holders of the Preferred Units
will be entitled to receive distributions from the proceeds of any sale of the
Property or upon a liquidation of the Partnership on account of the Preferred
Units in an aggregate amount equal to approximately $26 million prior to any
distribution to the Unitholders on account of the Units. In addition, holders of
the Preferred Units will be entitled to a preference in distributions from cash
flow by the Partnership. See "Description of Securities -- Distributions from
Capital Proceeds" and "Description of Securities -- Liquidation Preferences."
Accordingly, the only way for a Unitholder to protect against substantial
dilution of his investment in his Units is to exercise his Rights.
In view of the priority return on the Preferred Units, Unitholders who
do not exercise their Rights may not receive any further return of or on their
investment in the Units unless there is a material appreciation in the value of
the Property.
See "The Property."
Risks Associated with Purchase of Preferred Units. During the year ended
December 31, 1995, the Partnership generated net operating income of
approximately $2.6 million and made debt service payments of approximately $2.9
million. The Partnership would not have been able to pay to the Preferred
Unitholders the entire 8% cumulative preferred annual return to which they would
have been entitled during fiscal 1995 if the Preferred Units had been
outstanding during fiscal 1995. See "Ratio of Earnings to Fixed Charges and
Preferred Unit Distributions." Furthermore, the General Partner believes that
the Partnership will not generate sufficient net operating income in fiscal 1996
to pay such preferred annual return. The Partnership's ability to pay such
preferred annual return and the preferred capital return on the Preferred Units
will be dependent, in large part, on increasing the Partnership's net operating
income, reducing the Partnership's debt service obligations and increasing the
value of the Property.
The General Partner believes that the capital improvements intended to
be made to the Property with the proceeds of the Offering (see "Use of
Proceeds") will, in the aggregate, result in an appreciation in the value of the
Property in excess of the amount actually expended for such improvements.
However, there can be no assurance that the value of the Property will so
appreciate or as to the amount of any such appreciation in value. Accordingly,
there can be no assurance that an investor in the
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Preferred Units will receive the full preferred annual return and the full
preferred capital return on his investment in the Preferred Units.
In addition, the Preferred Units offered hereby have no preemptive
rights or anti-dilution protection. The Partnership Agreement provides that the
General Partner may, in its sole discretion, determine to sell additional
interests in the Partnership with such rights, powers and duties, including
rights, powers and duties senior to the Preferred Units and the Units.
Operating Deficits. The Partnership has generated net operating income
of approximately $2.6 million, $3.1 million and $3.4 million in the fiscal years
ended December 31, 1995, 1994 and 1993, respectively. The Company's debt service
payments have approximated $2.9 million, $2.7 million and $3.2 million in the
fiscal years ended December 31, 1995, 1994 and 1993, respectively. The
Partnership has experienced a decrease in net cash flow in recent years
primarily due to increased expenses. This decrease in net cash flow has
necessitated greater use of the Partnership's working capital reserves to fund
debt service obligations under the Loan in recent years. See "The Offering --
Purpose of the Offering." There can be no assurance that the cost of operating
the Property and making debt service payments will not exceed the revenues
available from operations in future periods. See "Use of Proceeds" and "The
Offering -- Purpose of the Offering."
Need for Additional Capital. The principal Loan balance of approximately
$27 million is due on February 28, 1997 and a mandatory principal repayment of
$600,000 is due on September 30, 1996 (and, if Sherburne exercises its option to
extend the Loan to October 31, 1997, another mandatory principal repayment of
$600,000 will be due on September 30, 1997). The General Partner believes that
Sherburne's debt service coverage ratio is substantially lower than current
underwriting standards imposed by financial institutions. Although the General
Partner believes that Sherburne will be able to meet its debt service
obligations prior to maturity of the Loan, Sherburne may not be able to
refinance the Loan without the payment of substantial refinancing fees, a
substantial increase in the Partnership's equity and a substantial reduction in
its aggregate outstanding indebtedness. There can be no assurance that Sherburne
will be able to secure any such refinancing or whether any such refinancing will
be on terms as favorable to Sherburne as its current arrangements.
If Sherburne is unable to obtain adequate refinancing, it could be
forced to sell the Property (or a portion thereof) at disadvantageous terms and
conditions. The General Partner
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<PAGE>
believes that, in order to maximize the value of the Property to the Partnership
in connection with a proposed sale, it is necessary to complete the capital
improvements contemplated to be made with the use of the proceeds from the
Offering. See " -- Environmental Risks," " -- Massachusetts Licensing," and " --
Conflicts of Interest" and "Use of Proceeds." High interest rates or a shortage
of mortgage funds might make a sale of the Property difficult or
disadvantageous. Such adverse conditions might also make it necessary for the
Partnership to extend mortgage financing to the purchaser, which would involve
credit risks and would defer the distribution of the entire sales price of the
Property or any remaining portion thereof to Preferred Unitholders and/or
Unitholders pending the complete liquidation of the Partnership.
In addition, Sherburne's ability to sell or refinance the Property and
the terms of such a sale or refinancing will depend upon the value of the
Property at that time, which is subject to general economic conditions and
special factors affecting real estate investments. See "The Property." If
Sherburne were to sell all or a substantial portion of the parcels comprising
the Property within a short period of time, the value of such parcels may be
adversely affected by the quantity of real estate being placed on the market by
Sherburne. If Sherburne is not able to refinance or sell the Property prior to
maturity of the Loan and is unable to meet its obligations thereunder at
maturity, the lender may foreclose its mortgage on the Property.
Removal of General Partner and Redemption of Preferred Units. If at any
time the General Partner is removed as general partner of the Partnership
without its consent, all of the Preferred Units will be redeemed by the
Partnership concurrently with such removal of the General Partner for a price
equal to the liquidation preference of the Preferred Units (such right is not
triggered if the General Partner withdraws voluntarily). Accordingly, the
Offering will impose substantial limitations on the ability of the limited
partners of the Partnership to remove the General Partner without its consent.
Risks of Real Estate Ownership. The Partnership's investment in
Sherburne is subject to the risks inherent in the ownership of retail property,
rental property and hotels. These include the uncertainty that rental income
will be sufficient to cover operating costs and debt service due to inability to
attract or retain retail tenants and vacationers as a result of adverse changes
in general or local economic conditions or characteristics, inadequacies of the
management agent, the possibility of unanticipated Property expenses, and other
factors. Because of the seasonal nature of the Nantucket economy, Sherburne
realizes a substantial portion of its revenues
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<PAGE>
during the summer months. Accordingly, Sherburne's operations may be adversely
affected by temporary changes in weather or travel patterns during such period.
Other risks inherent in an investment in the Partnership include the possibility
of changes in the investment climate for real estate, unavailability of mortgage
funds for refinancing, changes in real estate tax rates and other operating
expenses, and other factors which are beyond the control of the General Partner.
The success of the Partnership is dependent in part on Sherburne's
operation of the White Elephant Hotel and Harbor House Hotel. The economic
success of these hotels will depend upon their levels of occupancy as well as
the level of revenues derived from the operation of the restaurants, lounges and
other function facilities. See "-- Operating Deficits" and "Use of Proceeds."
The demand for particular accommodations and related hotel services on Nantucket
Island varies seasonally and may be affected by local or national economic
recessions and changes in travel patterns caused by weather conditions, energy
shortages, strikes and other factors. Sherburne's hotels may also experience
increases in operating expenses, labor difficulties or supplier problems which
could have a material adverse impact on the operations of such hotels.
Competition. A number of hotels, residential accommodations and retail
facilities on Nantucket Island compete with the Property. The commercial, hotel
and seasonal accommodation markets on Nantucket Island are highly competitive
and the Property competes with many other established properties as well as
other developments which may be constructed. In addition, Nantucket Island
competes with other resort areas. There can be no assurance that the Property
will be able to attract vacationers and attract and retain tenants at occupancy
and rental rates sufficient for successful operations. See " -- Operating
Deficits."
Uninsured Losses. The Property is the subject of insurance coverage
customary for properties of this type. There can be no assurance, however, that
claims for any loss due to fire, natural disaster or other cause will be fully
covered under the comprehensive insurance policies for the Property. Moreover,
there are certain types of losses (generally of an unusual or catastrophic
nature, such as those that result from wars, earthquakes, floods or tornados)
which are either uninsurable or not economically insurable. Should such a
casualty occur, the Partnership would suffer a loss of the capital invested in
the Property as well as anticipated benefits from the Property.
Environmental Risks. The General Partner is aware that petroleum
hydrocarbon products have been discovered on certain
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<PAGE>
portions of the Property. Under applicable Massachusetts law, owners of property
where there has been a release of such substances into the environment are
responsible for the cost to remediate the property.
The entity from whom the Partnership purchased the Property has agreed
to indemnify the Partnership for certain cleanup costs incurred by the
Partnership. All amounts spent by the Partnership for such cleanup operations
that are not covered by the indemnification obligation of the sellers of the
Property will reduce the Partnership's operating reserve.
At the present time, a process to remove petroleum from portions of the
Property is being implemented. Further remedial activities and assessments may
be required by Massachusetts' Department of Environmental Protection. In
addition, Sherburne has provided a nonrecourse indemnification to the title
insurance company which issued a title insurance policy for the Property with
respect to certain environmental costs. There can be no assurance that the
amounts required to further remediate the Property will not have a material
effect on the Partnership or that the indemnification provided by Sherburne to
the title insurance company will not be triggered.
In connection with the capital improvements contemplated with the use of
the proceeds of the Offering, the Partnership will dredge portions of Nantucket
Harbor, subject to receipt of applicable consents from environmental agencies.
Massachusetts Licensing. The Partnership is currently in the process of
complying with certain environmental licensing and permitting requirements
relating to waterfront use in the Commonwealth of Massachusetts. The Partnership
believes that the costs and expenses of complying with such licensing and
permitting requirements will range from approximately $170,000 to approximately
$500,000 for a standard 30-year license term. The Partnership believes that,
upon completion of the Offering, it will have sufficient working capital to fund
such compliance. If the Offering is not consummated and the Partnership is
unable to finance such fees from its cash flow, the cost of complying with such
licensing and permitting requirements could have a material adverse effect on
the Partnership.
Restrictions on Transfer. The transferability of the Preferred Units is
restricted by the Partnership Agreement (including a provision requiring the
consent of the General Partner before any transfer can be made). A Preferred
Unitholder may thus be required to retain his investment for an indefinite
period.
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<PAGE>
Absence of Market. In addition to the restrictions on transfer in the
preceding paragraph, it is not expected that there will be a market for the
resale of Preferred Units in the Partnership; therefore, a Preferred Unitholder
may be unable to sell or otherwise dispose of all or any portion of his
investment. Moreover, in the event a Preferred Unitholder were able to sell some
or all of his Preferred Units, he might receive less than the amount of his
original investment.
Conflicts of Interest. The Partnership is subject to potential conflicts
of interest arising from the other real estate activities of affiliates of the
General Partner. The officers and directors of the General Partner and its
affiliates may be actively engaged in supervising the development, construction,
rehabilitation and operation of other projects which may be in competition with
the Property, including the parcels of land distributed by Sherburne in 1987 to
a partnership consisting of the General Partner and an affiliate thereof. These
additional activities and investments may affect their ability to perform their
respective obligations to the Partnership.
An affiliate of the General Partner is required to pay to Interstate
Hotels, the managing agent for the hotels, a termination fee if its management
agreement in respect of such hotels is terminated in connection with a sale of
either or both such hotels. At the present time, if both hotels were sold, the
termination fee would be approximately $300,000 in the aggregate. The fee
required to be paid is reduced over time and no payment is required to be made
after July 2000. Accordingly, a conflict of interest could arise in connection
with a potential sale of the hotels.
An affiliate of the General Partner manages the retail portion of the
Property and receives property management fees in respect thereof. If the retail
portion of the Property were sold, it would not receive such fees. In addition,
an affiliate of the General Partner receives an asset management fee in respect
of the Property. If the Property as a whole were to be sold, it would no longer
receive such fee. In addition, if the Guarantor were to purchase a substantial
number of the Preferred Units, a conflict of interest could arise if the sale of
the Property or a portion thereof would be advantageous to the holders of the
Preferred Units but not the Unitholders. The General Partner is, however, aware
of its fiduciary obligations to the Partnership and intends to fulfill such
obligations.
Tax Liability May Exceed Cash Distributions. As a partner in the
Partnership, a Preferred Unitholder will be taxable on his annual allocable
share of Partnership taxable income whether or
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<PAGE>
not any cash distributions are made to him and irrespective of the amount of
such distributions, if any. Consequently, it is possible that a Preferred
Unitholder's tax liability with respect to Partnership taxable income allocated
to him may exceed the cash distributed to him in one or more years. See "Certain
Income Tax Consequences."
Liability of Limited Partners. Under Delaware law, a limited partner may
be liable for the debts of a partnership up to the amount of any distribution
made to such limited partner if, at the time of such distribution, all
liabilities of the partnership, other than liabilities to partners on account of
their interests in the partnership, exceed the fair value of the partnership's
assets. Additionally, a limited partner who receives the return, in whole or in
part, of his capital contribution without violation of the partnership agreement
or applicable statute may be liable to the partnership for a period of one year
for any sum, not in excess of such returned capital contribution, necessary to
discharge the partnership's liabilities to all creditors who extended credit or
whose claims arose before such return. If a limited partner receives the return
of any part of his capital contribution in violation of the partnership
agreement or applicable statute, he is liable to the partnership for a period of
six years for the entire amount of the contribution wrongfully returned.
Lack of Management Control. The Preferred Unitholders will have no right
or power to take part in the management or control of the business of the
Partnership, except the right to approve certain extraordinary actions. The
business of the Partnership is managed solely by the General Partner. If a
Preferred Unitholder participates in the control of the business of the
Partnership he may be deemed under applicable laws to be a general partner of
the Partnership, with the resulting loss of his limited liability. If a
Preferred Unitholder were deemed to be liable as a general partner of the
Partnership, he would be generally liable for the Partnership's obligations,
which liability could be satisfied out of his personal assets if the
Partnership's assets were insufficient. Since the Partnership Agreement provides
certain voting rights to the Preferred Unitholders, a creditor of the
Partnership might claim that such rights amount to participation in the
Partnership's business, which claim, if judicially sustained, could result in a
Preferred Unitholder's personal liability.
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<PAGE>
THE OFFERING
PURPOSE OF THE OFFERING
Sherburne has been engaged in a capital improvements program on the
Property, which is being implemented in phases. At the present time, the
Partnership believes that certain capital improvements to the Property,
including improvements to the Nantucket Boat Basin wharf and dock structure and
dredging of the Nantucket Boat Basin, capital improvements to the hotels and
hotel restaurants and repairs to, or rebuilding of, a free standing structure
which suffered significant water damage, are required to be completed in the
near future. The Partnership anticipates that the cost of completing such
capital improvements will be approximately $4.5 million. Neither Sherburne nor
the Partnership has sufficient reserves, nor does the Property generate
sufficient cash flow, to fund these capital improvements.
The General Partner believes that, in order to maximize the value of the
Property, it is necessary to complete the capital improvements contemplated to
be made with the proceeds of the Offering. See "Use of Proceeds." The General
Partner believes that such capital improvements will result in an appreciation
in the value of the Property in excess of the amount actually expended for such
improvements. However, there can be no assurance that the value of the Property
will so appreciate or as to the amount of any such appreciation in value.
Before interest payments on the Loan of approximately $2.6 million, $2.4
million and $3.0 million, the Partnership generated income from operations of
approximately $56,000, $593,000 and $702,000 in each of the years ended December
31, 1995, 1994 and 1993, respectively. The hotels included in the Property did
not generate any income from operations during each of the years in the three
year period ended December 31, 1995 and the Partnership incurred net losses of
approximately $2.4 million, $1.8 million and $1.8 million for the years ended
December 31, 1995, 1994 and 1993, respectively.
The Loan matures on February 28, 1997. Sherburne's debt service coverage
ratio in 1995 was .93:1. Debt service coverage ratio measures, for any period,
the ratio of net operating income of an entity to the aggregate debt payments
required to be made by such entity. The General Partner believes that
Sherburne's debt service coverage ratio is substantially lower than current
underwriting standards imposed by financial institutions. Although the General
Partner believes that Sherburne will be able to meet its debt service
obligations prior to maturity of the
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<PAGE>
Loan, Sherburne may not be able to refinance the Loan without the payment of
substantial refinancing fees, a substantial increase in the Partnership's equity
and a substantial reduction in its aggregate outstanding indebtedness. See "The
Partnership" and "Investment Considerations -- Need for Additional Capital."
Accordingly, the General Partner has determined to increase the
Partnership's equity by means of this Offering and to utilize the proceeds of
the Offering to complete the capital improvements described above and to reduce
the outstanding principal amount of the indebtedness of the Partnership at the
time of the refinancing of the Loan. See "Use of Proceeds."
TERMS OF THE OFFER
The Partnership is issuing to holders (the "Unitholders") of record of
its limited partnership interests (the "Units") as of the close of business on
September 10, 1996 (the "Record Date") one subscription right (each, a "Right")
for each Unit held. Each Right entitles the Unitholder to purchase, at any time
prior to 5:00 p.m., New York City time, on November 8, 1996 (as such date may
be extended by the General Partner as herein provided, the "Expiration Date"),
at a subscription price of $13,333 (the "Subscription Price"), one 8% cumulative
compounded preferred unit (a "Preferred Unit") representing a limited
partnership interest in the Partnership. The Rights are evidenced by
subscription certificates (the "Subscription Certificates") which are being
mailed to Unitholders herewith. The Rights are not transferable.
Completed Subscription Certificates may be delivered to the Partnership
at any time commencing on September 25, 1996 and terminating at 5:00 p.m. New
York time on the Expiration Date (the "Subscription Period").
Rights may be exercised by completing a Subscription Certificate and
delivering it, together with payment by means of a check, to the Partnership.
See " -- Exercise of Rights" and " -- Subscription Price." All Rights may be
exercised immediately upon receipt and until 5:00 p.m., New York City time, on
the Expiration Date.
The terms of this Offering and the Preferred Units have been determined
by the General Partner. No determination has been or will be made as to, nor has
the Partnership requested any third party to determine and/or deliver an opinion
in respect of, the fairness of the terms of the Preferred Units.
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<PAGE>
SUBSCRIPTION PRICE
The Subscription Price for each Preferred Unit is $13,333.00.
NO MODIFICATION OR REVOCATION
ONCE A HOLDER OF RIGHTS HAS PROPERLY EXERCISED HIS RIGHTS AND THE
OVER-SUBSCRIPTION PRIVILEGE, SUCH EXERCISE MAY NOT BE MODIFIED OR REVOKED.
EXPIRATION OF THE OFFERING
This Offering will expire at 5:00 p.m. New York City time, on the
Expiration Date. The Rights expire on the Expiration Date and thereafter may not
be exercised.
OVER-SUBSCRIPTION PRIVILEGE
If less than all of the Rights are exercised, the Preferred Units not
subscribed for by Unitholders will be offered, by means of an over-subscription
privilege (the "Over-Subscription Privilege"), to Unitholders who exercise their
Rights and who wish to acquire additional Preferred Units. The OverSubscription
Privilege may be exercised by any Unitholder who has exercised his Right.
Unitholders should indicate, on the Subscription Certificate which they submit
with respect to the exercise of their Rights, how many additional Preferred
Units they are willing to acquire pursuant to the Over-Subscription Privilege.
If all Rights are exercised, the Over-Subscription Privilege may not be
exercised.
Within five (5) business days after the Expiration Date (to allow for
clearance of the checks remitted in payment of the Subscription Price of the
Preferred Units subscribed for by the Unitholders), the Partnership will
allocate the Preferred Units not acquired upon the exercise of Rights on a pro
rata basis among those Unitholders who exercise the Over-Subscription Privilege
(including the Guarantor) according to the aggregate number of additional
Preferred Units sought to be acquired pursuant to the Over-Subscription
Privilege. The percentage of remaining Preferred Units each Unitholder may
acquire may be rounded up or down to result in delivery of whole Preferred
Units. In the event a Unitholder who exercises the Over-Subscription Privilege
is allocated less than the number of Preferred Units that such Unitholder
subscribed for, excess subscription payments will be promptly refunded. See"
- --Payment for Securities."
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<PAGE>
SUBSCRIPTION GUARANTY
Zero Main Associates Limited Partnership (the "Guarantor"), which is an
affiliate of the General Partner and a limited partner in the Partnership, has
agreed (i) to exercise its Right and (ii) to subscribe for all other Preferred
Units offered hereunder through the Over-Subscription Privilege and, subject to
proration as described above, to purchase such additional Preferred Units (the
"Subscription Guaranty"). If no Rights are exercised by Unitholders other than
the Guarantor, it would purchase and own all 785 Preferred Units. No fee is
being paid to the Guarantor on account of the Subscription Guaranty. As a result
of the Subscription Guaranty, the Partnership is assured of receiving gross
proceeds from the Offering in an amount equal to approximately $10.5 million.
Apollo Real Estate Investment Fund II, L.P. ("Apollo"), an affiliate of
the General Partner, has agreed to provide the Guarantor with such financing as
shall be necessary to enable the Guarantor to fulfill the Subscription Guaranty.
As a result of the Subscription Guaranty, the Partnership is assured of
receiving gross proceeds of the offering in an amount equal to approximately
$10.5 million. See "Investment Considerations -- Removal of General Partner and
Redemption of Preferred Units" and "Description of Securities -- Redemption."
EXERCISE OF RIGHTS
Rights may be exercised by filling in and signing the reverse side of
the Subscription Certificate which accompanies this Prospectus and mailing it in
the envelope provided, or otherwise delivering the completed and signed
Subscription Certificate to the Partnership, together with payment of the
Subscription Price for the Preferred Units as described in " -- Payment for
Securities". Rights may also be exercised through a Unitholder's broker or
dealer, who may charge such Unitholder a servicing fee.
EXERCISE OF OVER-SUBSCRIPTION PRIVILEGE
Any Unitholder exercising his Rights may participate in the
Over-Subscription Privilege by indicating on his Subscription Certificate the
number of Preferred Units he is willing to acquire pursuant thereto. There is no
limit on the number of Preferred Units that exercising Unitholders may seek to
subscribe for pursuant to the Over-Subscription Privilege. The number of
Preferred Units issued to each Unitholder participating in the Over-Subscription
Privilege will be allocated as described above in " -- Over-Subscription
Privilege."
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<PAGE>
PAYMENT FOR SECURITIES
Payment for Preferred Units that are subscribed for by exercising Rights
and the Over-Subscription Privilege must be made by means of a check, in United
States dollars, made payable to the Partnership, along with a completed and
properly executed Subscription Certificate on or prior to the Expiration Date.
All checks received by the Partnership will be deposited in a segregated
interest-bearing account of the Partnership (the interest from which will belong
to the Partnership) pending proration and distribution of the Preferred Units.
Any excess funds paid by a Unitholder will be promptly returned to such
Unitholder.
If any Unitholder does not make timely and full payment for the
Preferred Units subscribed for by exercise of his Rights and/or the
Over-Subscription Privilege, the Partnership reserves the right to allow the
Guarantor to purchase the Preferred Units subscribed for by such non-paying
Unitholder.
THE METHOD OF DELIVERY OF SUBSCRIPTION CERTIFICATES AND PAYMENT OF THE
SUBSCRIPTION PRICE TO THE PARTNERSHIP WILL BE AT THE ELECTION AND RISK OF THE
HOLDERS OF THE RIGHTS. IF SENT BY MAIL, IT IS RECOMMENDED THAT SUCH CERTIFICATES
AND PAYMENTS BE SENT BY REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT
REQUESTED, AND THAT A SUFFICIENT NUMBER OF DAYS BE ALLOWED TO ENSURE DELIVERY TO
THE PARTNERSHIP AND CLEARANCE OF PAYMENT PRIOR TO 5:00 P.M., NEW YORK CITY TIME,
ON THE EXPIRATION DATE. BECAUSE UNCERTIFIED PERSONAL CHECKS MAY TAKE AT LEAST
FIVE BUSINESS DAYS TO CLEAR, YOU ARE STRONGLY URGED TO PAY, OR ARRANGE FOR
PAYMENT, BY MEANS OF CERTIFIED OR CASHIER'S CHECK OR MONEY ORDER.
All questions concerning the timeliness, validity, form and eligibility
of any exercise of Rights will be determined by the Partnership, whose
determinations will be final and binding. The Partnership in its sole discretion
may waive any defect or irregularity or permit a defect or irregularity to be
corrected within such time as it may determine or reject the purported exercise
of any Right. Subscriptions will not be deemed to have been received or accepted
until all irregularities have been waived or cured within such time as the
Partnership shall determine in its sole discretion. The Partnership shall not
have any duty to give notification of any defect or irregularity in connection
with the submission of Subscription Certificates or incur any liability for
failure to give such notification.
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<PAGE>
THE PROPERTY
The Property is comprised of commercial properties consisting of retail
stores and apartments (the "Commercial Properties"), the Harbor House Hotel, the
White Elephant Hotel, the Nantucket Boat Basin, the Wharf cottages and certain
other assets. The Partnership acquired the Property as a portfolio for an
aggregate purchase price of approximately $50 million.
In 1993, the Commercial Properties and the Nantucket Boat Basin had an
appraised value of approximately $29 million. Although the General Partner has
not obtained a more recent appraisal, it believes, based upon a discounted cash
flow analysis (the same methodology as that employed in 1993), that the
Commercial Properties have a current value of approximately $23.6 million and
the Nantucket Boat Basin has a current value of approximately $7 million.
The hotels included in the Property did not generate net operating
income in fiscal 1995. The General Partner has obtained a current appraisal
of the hotels prepared by Whittier Partners, which appraisal reported a value of
$9.85 million at July 31, 1996 for the hotels.
Based on the recent hotels' appraisal and the General Partner's analysis
of the value of the Commercial Properties and the Nantucket Boat Basin, the
book value of the Partnership's properties exceeds their current value by
approximately $8 million. However, based on the General Partner's analysis of
current and projected future operating results of the Partnership and its
analysis of the undiscounted projected cash flows associated with the
Partnership's real estate assets, the General Partner believes that no
write-down of the Property is required to be made at this time pursuant to
Statement of Financial Accounting Standards ("SFAS") No. 121, which relates to
accounting for the impairment of long-lived assets and for long-lived assets to
be disposed of.
USE OF PROCEEDS
The proceeds from the Offering are estimated to be approximately $10.2
million (net of expenses of approximately $210,000). Of the net proceeds, (i)
approximately $4.2 million will be utilized to pay the costs and expenses of,
and to reduce the outstanding principal balance of the indebtedness of the
Partnership at the time of, the refinancing of the Loan, (ii) approximately $4.5
million will be utilized to make capital improvements to the Property
(approximately $3 million will be
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utilized to dredge and make improvements to the subaqueous structure of the
wharf at the Nantucket Boat Basin (i.e., restoring the bulkhead) and
approximately $1.5 million will be utilized to renovate and refurbish the
hotel rooms and the restaurants at the White Elephant Hotel, the Harbor House
and the Wharf Cottages), (iii) approximately $600,000 will be used to repay a
loan (the "GP Loan") made by the General Partner to the Partnership in May 1996
to fund the payment of real estate taxes, to purchase a computer system and to
make certain capital improvements costing $100,000 in the aggregate, including
miscellaneous refurbishing of the furniture, rooms and structure at the White
Elephant Hotel and (iv) the remaining approximately $1 million will be added to
the Partnership's working capital. See "The Offering -- Purpose of the
Offering." Pending such application, the net proceeds from the Offering will be
invested in interest-bearing investment grade securities. The GP Loan is a
demand loan which bears interest at the annual rate of one percent over the
prime rate announced from time to time by the Bank of Boston (at June 27, 1996,
such prime rate was 8.25%). Any net proceeds not required to be applied to
capital improvements or to refinance the Loan will be added to the Partnership's
working capital.
RATIO OF EARNINGS TO FIXED CHARGES AND
PREFERRED UNIT DISTRIBUTIONS
The following table sets forth the computation of the ratio of earnings
to fixed charges for the six months ended June 30, 1996 and 1995 and for
each of the years in the five-year period ended December 31, 1995. The financial
information for purposes of computing the ratio of earnings to fixed charges has
been derived from the unaudited and audited financial statements of the
Partnership incorporated by reference herein.
The following table also sets forth the pro forma computation of the
ratio of earnings to fixed charges and Preferred Unit distributions for the
six months ended June 30, 1996 and the year ended December 31, 1995. The pro
forma ratio of earnings to fixed charges and Preferred Unit distributions has
been prepared by adjusting the historical financial statements of the
Partnership to give effect to the exercise of the Rights as of the beginning of
the period presented and does not purport to be indicative of the ratio of
earnings to fixed charges and Preferred Unit distributions which might have
occurred had the Rights been exercised at the beginning of such periods or which
might be expected to occur in the future.
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<TABLE>
<CAPTION>
Period Ending For the Year Ended
June 30,(1) December 31,
----------------------------- -------------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings:
Net earnings (loss) ($3,502,484) ($3,663,199) ($2,420,347) ($1,840,545) ($1,807,664) ($2,598,720) ($2,965,570)
Add back fixed charges
charged to earnings 1,274,829 1,408,607 2,730,327 2,613,024 3,033,431 3,084,201 3,303,944
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net Earnings before
fixed charges ($2,227,655) ($2,254,592) $ 309,980 $ 772,479 $ 1,225,767 $ 485,481 $ 338,374
----------- ----------- ----------- ----------- ----------- ----------- -----------
Depreciation and
amortization of
acquisition costs 1,207,854 1,117,035 2,391,076 2,370,597 2,608,143 2,574,432 2,898,675
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net earnings before fixed
charges, depreciation, and
amortization of acquisition
costs ($1,019,801) ($1,137,557) $ 2,701,056 $ 3,143,076 $ 3,833,910 $ 3,059,913 $ 3,237,049
----------- ----------- ----------- ----------- ----------- ----------- -----------
Fixed Charges:
Interest expense as
reported $ 1,204,753 $ 1,333,121 $ 2,579,356 $ 2,433,024 $ 2,961,142 $ 3,032,328 $ 3,115,074
Amortization of debt
placement costs 70,076 75,486 150,971 180,000 72,289 51,873 188,870
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total fixed charges $ 1,274,829 $ 1,408,607 $ 2,730,327 $ 2,613,024 $ 3,033,431 $ 3,084,201 $ 3,303,944
----------- ----------- ----------- ----------- ----------- ----------- -----------
Ratio:
Net earnings before fixed
charges/Fixed charges(2) (1.7) (1.6) 0.1 0.3 0.4 0.2 0.1
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net Earnings before fixed
charges, depreciation and
amortization of acquisition
costs/Fixed charges(3) (0.8) (0.8) 1.0 1.2 1.3 1.0 1.0
----------- ----------- ----------- ----------- ----------- ----------- -----------
Pro forma Ratio of Net
Earnings to Fixed Charges
and Preferred Unit
Distributions:
Fixed charges per above $ 1,274,829 $ 1,408,607 $ 2,730,327
Adjustment to give effect
to the net decrease in
interest expense resulting
from a refinancing(4) (188,198) (204,940) (397,195)
Preferred Unit
distributions(5) 418,656 418,656 837,312
Total fixed charges $ 1,505,287 $ 1,622,324 $ 3,170,444
----------- ----------- -----------
Pro forma Ratio:
Net earnings before fixed
charges/Fixed charges (1.5) (1.4) 0.1
----------- ----------- -----------
Net earnings before fixed
charges, depreciation and
amortization of acquisition
costs/Fixed charges (0.7) (0.7) 0.9
----------- ----------- -----------
</TABLE>
- ----------
(1) Because of the seasonal nature of the Property, the Partnership requires
working capital reserves to fund operating deficits during the
off-season.
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(2) Net earnings before fixed charges were not adequate to cover fixed
charges for each of the five years ended December 31, 1995 by
$2,420,347, $1,840,545, $1,807,664, $2,598,720 and $2,965,570,
respectively.
(3) The ratio of net earnings before fixed charges, depreciation and
amortization of acquisition costs/Fixed charges is presented to
demonstrate that on an annual basis earnings, before non-cash charges,
were not adequate to cover fixed charges in each of the years ended
December 31, 1995, 1992 and 1991.
(4) Assuming an interest rate consistent with the actual rate incurred and a
principal payment of $4.2 million.
(5) Assuming that $10,466,405 worth of Preferred Units are
purchased.
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<PAGE>
DESCRIPTION OF SECURITIES
GENERAL
Each Right entitles the Unitholder to purchase one Preferred Unit. The
Preferred Units represent limited partnership interests in the Partnership and
have such rights and designations as are described below. The Preferred Units
will be evidenced by certificates issued by the Partnership.
The Partnership is authorized to issue additional Units or other
securities of the Partnership from time to time to Unitholders or additional
investors without the consent or approval of Unitholders, provided that, prior
to any such issuance, the Partnership offers any such additional Units or other
securities to the Unitholders on a pro rata basis. There is no limit to the
number of Units or additional classes thereof that may be issued. The General
Partner has the power to issue and sell such units of limited partnership
interest on such terms and conditions, and additional limited partners shall
have such rights and obligations with respect to such units, as the General
Partner shall determine.
There is no existing market for the Preferred Units. The Partnership
does not intend to list the Preferred Units on any securities exchange and it is
not anticipated that a market for the Preferred Units will develop. In addition,
the transferability of the Preferred Units is restricted by the Partnership
Agreement (including a provision requiring the consent of the General Partner
before any transfer can be made). See "Investment Considerations."
CUMULATIVE COMPOUNDED PREFERRED ANNUAL RETURN
Each Preferred Unit will entitle the holder thereof to receive from the
Cash Flow of the Partnership an amount in cash equal to a cumulative compounded
preferred annual return of 8% on his preferred invested capital of $13,333. The
amount of preferred invested capital on which such return will be calculated
will be reduced from time to time by distributions, if any, of Capital Proceeds
(as defined in the Partnership Agreement). See " -- Distributions from Capital
Proceeds." Cash Flow, as used herein, means Net Income (as defined in the
Partnership Agreement) or Net Loss (as defined in the Partnership Agreement) of
the Partnership plus depreciation and amortization deductions and the amount of
reserve funds no longer required, less the sum of (a) debt amortization, (b)
payments to reasonable reserve accounts established by the General Partner, (c)
capital expenditures to the extent not paid out of reserves, insurance proceeds
or condemnation proceedings, and (d) the annual
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partnership administration and investor service fee. Cash Flow does not include
gains or losses resulting from a capital transaction of the Partnership. The
General Partner has the right at any time to establish reasonable reserves for
the Partnership (or Sherburne) as a deduction from Cash Flow. Cash Flow, if
available, is required to be distributed at least once each year to the
Partners, or more frequently at the option of the General Partner.
Distributions of Cash Flow will be made from the Partnership to the
Preferred Unitholders until such time as the Preferred Unitholders have received
an 8% per annum cumulative compounded return on their preferred invested
capital. Thereafter, in accordance with the provisions of the Partnership
Agreement, Cash Flow will be distributed 99% to the Unitholders and 1% to the
General Partner until such time as the Unitholders have received a 6% per annum
cumulative non-compounded return on their invested capital. Any remaining Cash
Flow will be distributed 95% to the Unitholders and 5% to the General Partner.
The availability of Cash Flow for distribution is dependent upon the
Partnership's earning more than sufficient rental and investment income to pay
all expenses of Sherburne and meet the debt service requirements of the Loan and
of any other borrowings of the Partnership. No assurance can be given that
income from Sherburne in any year will be sufficient to generate Cash Flow for
the Preferred Unitholders or that there will not be cash deficits. Investors
should recognize that because operating expenses and real estate taxes are
subject to increases, and increases in rent levels may be subject to market
limitations, cash distributions to the Partnership from Sherburne in any year
may not be sufficient to generate Cash Flow for distribution to the Preferred
Unitholders.
DISTRIBUTIONS FROM CAPITAL PROCEEDS
In addition to an 8% compounded cumulative preferred return, each
Preferred Unit entitles the holder thereof to receive an aggregate cash
distribution (prior to any distribution to Unitholders and to the General
Partner on account of the Units and the general partnership interests held by
them) equal to $33,332.50 (250% of an investor's original preferred invested
capital) from the net cash proceeds, if any, received by the Partnership from
Non-Terminating Capital Transactions (as defined in the Partnership Agreement)
or upon liquidation of the Partnership. Accordingly, prior to dissolution of the
Partnership, the net cash proceeds, if any, of a Non-Terminating Capital
Transaction that the General Partner determines is available for distribution
shall be distributed and applied generally as follows:
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<PAGE>
(a) to discharge, to the extent required by any lender or creditor,
debts and obligations of the Partnership (including loans made
by the General Partner);
(b) (i) to fund reserves for contingent liabilities to the extent
deemed reasonable by the General Partner and the accountants of
the Partnership; (ii) as determined by the General Partner to
fund repairs, capital improvements or the development of
portions of the Property or (iii) to acquire or develop
additional parcels of real property located on Nantucket Island
as are deemed consistent by the General Partner with Sherburne's
existing portfolio and the investment objectives of the
Partnership;
(c) to each Preferred Unitholder, an amount equal to a cumulative
annual 8% compounded return on his preferred invested capital,
as such capital may be reduced from time to time by any
distributions of net cash proceeds from Non-Terminating Capital
Transactions;
(d) to each Preferred Unitholder, an amount equal to $33,332.50 per
Preferred Unit, reduced by any prior distributions to such
Preferred Unitholder pursuant to this clause (d);
(e) to each Unitholder, an amount equal to a cumulative annual 6%
non-compounded return on his invested capital reduced by any
prior distributions to him out of Cash Flow and by any prior
distributions to him hereunder;
(f) to each Unitholder, an amount equal to his invested capital,
reduced by any prior distributions to him hereunder;
(g) to the General Partner, the aggregate amount of its capital
contribution to the Partnership, reduced by any prior
distribution to it hereunder; and
(h) the balance, 75% to the Unitholders and 25% to the General
Partner.
LIQUIDATION PREFERENCES
Upon the termination and winding up of the Partnership, the proceeds of
any Terminating Capital Transaction (as defined in the Partnership Agreement)
and/or the remaining assets of the Partnership available for distribution, after
payment of all liabilities of the Partnership (including loans made by the
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General Partner), shall be distributed and applied generally as follows:
(a) to each Preferred Unitholder, an amount equal to a cumulative
annual 8% compounded return on his preferred invested capital,
after taking into account any prior distributions to him out of
Cash Flow and from the net proceeds of any and all
Non-Terminating Capital Transactions;
(b) to each Preferred Unitholder, an amount equal to $33,332.50 per
Preferred Unit, reduced by any prior distributions to him from
the net proceeds of any Non-Terminating Capital Transactions and
pursuant to this clause (b); and
(c) thereafter, to the Unitholders and the General Partner in
accordance with their respective capital account balances.
No assurance can be given as to the availability or feasibility of a
Non-Terminating or a Terminating Capital Transaction or the amount of net cash
proceeds, if any, therefrom.
Upon receipt by a Preferred Unitholder of an amount equal to the
liquidation preference of a Preferred Unit, he shall have no further rights to
vote or to receive distributions from the Partnership
VOTING RIGHTS
Each Preferred Unit entitles the holder thereof to 1/7 of one vote on
all matters on which a Unitholder has a right to vote. See "Description of
Partnership Agreement -- Voting Rights."
REDEMPTION
If at any time the General Partner is removed without its consent, the
Partnership will be required to redeem all of the Preferred Units at a price
equal to the liquidation preference of the Preferred Units (such right is not
triggered if the General Partner withdraws voluntarily).
Upon payment in full of the liquidation preference of the Preferred
Units, they will be redeemed in full and the holders thereof shall have no
further rights, powers or obligations.
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<PAGE>
TRANSFER OF PREFERRED UNITS
The Partnership Agreement provides that no sale or exchange of an
interest in the Partnership may be made if the sale or exchange of the interest,
when added to the total of all other interests sold or exchanged within the
period of 12 consecutive months ending with the proposed date of the sale or
exchange, would result in the termination of the Partnership under Section 708
of the Internal Revenue Code of 1986, as amended (the "Code"). However, the sale
or exchange could be made if there has been compliance with the requirements of
the securities laws and the Partnership Agreement and if, prior to the sale or
exchange, there has been published in the Internal Revenue Bulletin, or the
Partnership has been granted upon application and at the expense of the
Preferred Unitholder desiring to transfer his Preferred Units, a favorable
ruling to the effect that a transfer of the type proposed will not result in
such a termination.
The Partnership Agreement also provides, with certain exceptions, that
no Preferred Unitholder may transfer his interest in the Partnership to a minor
or an incompetent or transfer any interest representing less than one-half of a
Preferred Unit (unless such interest represents the Preferred Unitholder's
entire interest).
No pledge, sale, transfer, exchange, assignment or other disposition of
a Preferred Unitholders's interest in the Partnership may be made except (a)
with the consent of the General Partner (except as otherwise provided in the
Partnership Agreement) and (b) in compliance with applicable regulations of any
governmental agency having jurisdiction over such disposition.
An assignee of a Preferred Unit may be admitted as a substitute Limited
Partner only upon: (a) delivery to the General Partner of a duly endorsed
Certificate and transfer application, (b) the General Partner's consenting to
the transfer, the granting of which consent is in the General Partner's sole
discretion, and (c) the assignee's written acceptance and adoption of all terms
and provisions of the Partnership Agreement. By executing and delivering a
transfer application, the transferee of Preferred Units (i) is an assignee until
admitted to the Partnership as a substituted limited partner, (ii) automatically
requests admission to the Partnership as a substituted limited partner, (iii)
represents that such transferee has the capacity and authority to enter into the
Partnership Agreement and (iv) grants powers of attorney to the General Partner.
On a quarterly basis, the Partnership will, on behalf of transferees who have
submitted transfer applications,
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<PAGE>
request the General Partner to admit such transferees as substituted limited
partners in the Partnership. If the General Partner consents to such
substitution, a transferee will be admitted to the Partnership as a substituted
limited partner upon the recordation of such transferee's name in the books and
records of the Partnership. Upon such admission, which is in the sole discretion
of the General Partner, he will be entitled to all of the rights of a limited
partner under the Delaware Act and pursuant to the Partnership Agreement. Except
in the case of an assignment upon death or incapacity, an assignee of a
Preferred Unitholder who does not become a substitute Limited Partner will not
have any right to share in the Net Income, Net Loss, Cash Flow or other
distributions of the Partnership.
REPLACEMENT OF LOST PREFERRED UNIT CERTIFICATES
A Preferred Unitholder or transferee who loses or has his or her
certificate for Preferred Units stolen or destroyed may obtain a replacement
certificate by furnishing an indemnity bond and by satisfying certain other
procedural requirements under the Partnership Agreement.
DESCRIPTION OF PARTNERSHIP AGREEMENT
The following is a summary of certain provisions of the Partnership
Agreement and is qualified in its entirety by reference to the text of the
Partnership Agreement, a copy of which has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part.
RIGHTS AND DUTIES OF THE GENERAL PARTNER
The Partnership Agreement provides that the General Partner has the sole
right to manage the business of the Partnership and that, aside from certain
rights to consent to extraordinary actions, the Unitholders and the Preferred
Unitholders (collectively, the "Limited Partners") shall not, as such,
participate in or have any control over the business of the Partnership (except
as required by law) or have any right or authority to act for or bind the
Partnership. The General Partner is responsible for the proper maintenance and
operation of Sherburne and the Property. The General Partner may not, however,
except as otherwise provided in the Partnership Agreement, take any action
required to be approved or ratified by limited partners under the Revised
Uniform Limited Partnership Act of the State of Delaware (the "Delaware Act")
without the written consent of the Limited Partners.
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<PAGE>
To ensure the orderly and efficient operation of the Partnership, the
General Partner has the exclusive right to admit any person as an additional or
substitute General Partner of the Partnership upon the consent of Limited
Partners holding more than 50% of the voting rights, voting as a single class,
of the limited partnership interests and Preferred Units in the Partnership (the
"Consent of the Limited Partners"). The Subscription Agreement to be executed by
each investor (see Appendix A) gives to the named attorneys the power to consent
to and execute duly adopted amendments to the Partnership Agreement to effect
admission of any additional or substitute General Partner upon receiving the
necessary consent of the Limited Partners. In addition, the General Partner has
the authority, without the Consent of the Limited Partners, to increase,
decrease or refinance the Loan or any other loan entered into by the
Partnership, and to sell, exchange or develop portions of the Property (but not
to sell all or substantially all of the Property in a single or related series
of transactions).
WITHDRAWAL OF THE GENERAL PARTNER
The General Partner may voluntarily retire as the general partner of the
Partnership only if a substitute General Partner remains in the Partnership
after such voluntary withdrawal. A General Partner shall retire automatically
upon any involuntary withdrawal or an event of bankruptcy.
TERMINATION OF THE PARTNERSHIP
The Partnership will continue until December 31, 2035 unless earlier
terminated upon the occurrence of any of the following events:
(i) the retirement of the General Partner, if there is no remaining
General Partner who elects to continue the Partnership and the Limited
Partners do not elect to continue the Partnership;
(ii) the sale or other disposition of all or substantially all of
the assets of the Partnership, provided, however, that under certain
circumstances the Partnership may continue in existence solely for the
purpose of collecting any deferred installment payments of the purchase
price or any other consideration to be received for such assets; or
(iii) the election by the General Partner with the Consent of the
Limited Partners to dissolve the Partnership.
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<PAGE>
If, following the retirement of the General Partner, there is no
remaining General Partner of the Partnership or the remaining General Partner
does not elect to continue the Partnership, the Limited Partners may, within 90
days after such retirement, elect to reconstitute the Partnership and continue
the business of the Partnership by selecting a substitute General Partner by the
unanimous consent of the Limited Partners. If the Limited Partners elect to
reconstitute the Partnership and admit a substitute General Partner, the
relationship of the partners and of any person who has acquired an interest of a
partner in the Partnership shall be governed by the Partnership Agreement.
Upon dissolution of the Partnership, the Partnership's assets will be
liquidated and the proceeds of liquidation will be applied and distributed as
described in "Description of Securities -- Liquidation Preferences."
ALLOCATIONS OF NET INCOME, NET LOSS AND GAIN OR LOSS FROM A CAPITAL TRANSACTION
While the Preferred Units are outstanding, Net Income from the
operations of the Partnership (including the Partnership's allocable share of
net income from the operations of Sherburne) will be allocated (a) first, to the
Preferred Unitholders, in an amount equal to the excess of the cumulative
distributions made or to be made to them for periods through the close of the
year just ended on account of the preferred annual return (see "Description of
Securities -- Cumulative Preferred Annual Return") over the cumulative amounts
of Net Income and Gain from a Capital Transaction (as defined in the Partnership
Agreement) previously allocated to them on account of such distributions (see "
Description of Securities -- Liquidation Preference"), (b) second, to the
Preferred Unitholders, to restore Net Loss previously allocated to them, (c)
third, to Unitholders and to the General Partner, to restore Net Loss previously
allocated to them during the period that the Preferred Units are outstanding on
account of the Units and the general partnership interests held by them, and (d)
the balance, if any, to the Unitholders and to the General Partner on account of
the Units and the general partnership interests held by them, as provided in the
Partnership Agreement.
While the Preferred Units are outstanding, Net Loss from the operations
of the Partnership (including the Partnership's allocable share of net loss from
the operations of Sherburne) will be allocated (a) first, 5% to the General
Partner and 95% to the limited partners (including the Preferred Unitholders),
in proportion to and the extent of the positive balances in their capital
accounts, and (b) the balance, if any, to the Unitholders and to the General
Partner, on account of the Units and the
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<PAGE>
general partnership interests held by them, as provided in the Partnership
Agreement.
While the Preferred Units are outstanding, Gain or Loss from a Capital
Transaction (as defined in the Partnership Agreement) generally will be
allocated (a) if any amounts are distributed or to be distributed on account of
such Capital Transaction, first, in such manner as to cause the partners'
respective positive capital account balances to at least equal, or in the case
of a Terminating Capital Transaction, to most nearly equal, the amounts to be
distributed to them pursuant to and in the priority described above in
"Distributions from Capital Proceeds" on account of such Capital Transaction (as
defined in the Partnership Agreement), (b) if no amounts are distributed or to
be distributed on account of such Capital Transaction, in the case of Gain only,
to the Preferred Unitholders, first, to restore Net Loss previously allocated to
them, and then, in an amount equal to the excess of the cumulative distributions
previously made to them in excess of $13,333 per Preferred Unit over the
cumulative amount of Net Income and Gain from a Capital Transaction previously
allocated to them on account of such excess distributions, and (c) the balance,
if any, to the Unitholders and to the General Partner, on account of the Units
and the general partnership interests held by them, as provided in the
Partnership Agreement. In the event of a Terminating Capital Transaction, the
Gain therefrom will be first allocated to all partners having negative balances
in their capital accounts, in proportion to and to the extent of such negative
balances.
ACCOUNTING BOOKS AND RECORDS
Net Income and Net Loss are determined in accordance with the accounting
methods followed by the Partnership for Federal income tax purposes. The
Partnership's fiscal year is the calendar year. The books and records of the
Partnership are maintained at its principal place of business and will be
available for inspection by the Limited Partners and their respective authorized
representatives during business hours.
TAX ELECTIONS
Upon the transfer of the interest of a Limited Partner of the
Partnership, the Partnership, in the General Partner's sole discretion, may
elect, pursuant to Section 754 of the Code, to adjust the basis of the
Partnership's property. See "Federal Income Tax Considerations -- Partnership
Tax Elections." All other elections required or permitted to be made by the
Partnership under the Code shall be made by the General Partner
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<PAGE>
in such manner as will be most advantageous to the Limited Partners.
REPORTS TO INVESTORS
The General Partner is required to furnish the Limited Partners with the
following information:
Information Date to be furnished
- ----------- --------------------
Audited financial statements and Within 120 days after each calendar
report of Accountants year end
All necessary tax Within 90 days after each calendar
information required year end
for each Limited Partner
to prepare his individual tax return
The financial statements, which will be prepared on an accrual basis, will (a)
contain annual balance sheets, statements of operations, changes in partners'
equity (deficit) and cash flows, (b) be reported on by independent certified
public accountants (the "Accountants") chosen by the General Partner and (c)
contain an opinion by the Accountants as to the accounting methods used in the
preparation of such statements. An annual audit of the financial statements of
the Partnership is conducted by the Accountants. At the present time, the
Accountants are KPMG Peat Marwick LLP.
LIABILITY OF PARTNERS TO THIRD PARTIES
The General Partner is liable for all debts, liabilities and obligations
of the Partnership, except for nonrecourse indebtedness (if any) on the
Property, to the extent not paid by the Partnership. The Delaware Act provides
that, so long as a limited partner does not take part in the management or
control of the Partnership's business, his liability for the debts, liabilities
and obligations of the Partnership will be limited to the amount of his capital
contribution and his share of undistributed net income. A Limited Partner is
also liable to the Partnership for a period of one year for the full amount of
any distribution to him (plus interest) which distribution represents a return
of capital and is not made in violation of the Partnership Agreement or the
Delaware Act, to the extent necessary to discharge the Partnership's liabilities
to all creditors who extended credit to the Partnership or whose claims arose
before such distribution. Such liability will continue for six years from the
date of the distribution if the distribution is made in violation of the
Delaware Act or the Partnership Agreement.
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<PAGE>
AMENDMENTS AND POWER OF ATTORNEY
The General Partner may utilize the power of attorney granted to it by
each Limited Partner to execute certain types of amendments to the Partnership
Agreement, including amendments to admit additional Limited Partners, to
transfer the interests of a defaulting Limited Partner, to cure ambiguities or
to satisfy "Blue Sky" regulations. In addition, the General Partner may, upon
the advice of the Accountants and counsel for the Partnership, amend the
Partnership Agreement to comply with the income tax regulations of Section
704(b) of the Code relating to the allocations of profits and losses among
partners, provided that no amendment shall be made which would have a material
adverse effect on the economic benefits to be received by the Limited Partners
without the Consent of the Limited Partners. The General Partner may also,
without the Consent of the Limited Partners, amend the Agreement to provide for
a special allocation of depreciation and gain in connection with the admission
of tax-exempt entities as investors in the Partnership.
The Partnership Agreement may not otherwise be modified or amended
except with the Consent of the Limited Partners, provided, that the written
consent of all Limited Partners will be required for any modification or
amendment which would (i) increase the amount of the capital contributions
payable by the Limited Partners, (ii) extend the termination date of the
Partnership, (iii) increase the liability of the Limited Partners, (iv) except
in connection with the offering of additional partnership interests in the
Partnership, adversely affect the rights of the Limited Partners with regard to
profits and losses and distributions or (v) alter the amendment section of the
Partnership Agreement.
VOTING RIGHTS
The Partnership Agreement provides that the Consent of the Limited
Partners will be required (i) to remove the General Partner, (ii) to amend the
Partnership Agreement (except as described in the foregoing paragraph) or to
approve or disapprove any material amendments thereto proposed by the General
Partner, (iii) to dissolve the Partnership and (iv) to approve or disapprove the
sale of all or substantially all of the assets of the Partnership in a single or
related series of transactions. These rights may be exercised only if the
exercise thereof will not impair the limited liability of the Limited Partners
and will not adversely affect the classification of the Partnership as a
partnership for Federal income tax purposes. If the Limited Partners remove the
General Partner, the General Partner will nevertheless retain the right to
receive fees otherwise payable under the Partnership Agreement, the right to
allocations of Net
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<PAGE>
Income, Net Loss and Cash Flow, and the right to receive proceeds from the sale,
refinancing or other disposition of the Property. Any General Partner of the
Partnership removed by the Limited Partners shall become a limited partner. See
also "Investment Considerations -- Removal of General Partner and Redemption of
Preferred Units" and "Description of Securities -- Redemption."
MANAGEMENT
Generally, the General Partner has full, exclusive and complete
responsibility and discretion in the management or control of the Partnership,
and the Limited Partners have no authority to transact business for, or
participate in the management activities and decisions of, the Partnership. The
General Partner is expressly authorized, without the Consent of the Limited
Partners, to increase, decrease, or refinance the Loan or any other loan entered
into by the Partnership, and to sell, exchange or develop portions of the
Property (but not to sell all or substantially all of the assets in a single or
related series of transactions). The authority of the General Partner is subject
to certain other express restrictions set forth in the Partnership Agreement.
The General Partner is required to devote such time and effort to the
Partnership's business as may be necessary to promote adequately the interests
of the Partnership and the mutual interests of the Partners. The General Partner
is not required to devote full time to Partnership business and is specifically
permitted to engage in other business, including engaging in activities which
compete with the business of the Partnership.
INDEMNIFICATION OF THE GENERAL PARTNER
The Partnership Agreement provides that the Partnership shall indemnify
and hold harmless the General Partner and each person performing services on
behalf of the Partnership who (a) directly or indirectly controls, is controlled
by, or is under common control with, the General Partner, (b) who owns or
controls 10% or more of the outstanding voting interest in the General Partner,
and (c) any officer, director or partner or wholly-owned subsidiary of any
entity described in (a) or (b), against any loss, damage, liability, cost or
expense (including reasonable attorneys' fees) incurred by them in connection
with the Partnership, provided that such loss, damage, liability, cost or
expense was not the result of the negligence or misconduct of any such person.
Any such indemnity will be paid from, and only to the extent of, available
Partnership assets and no partners shall have any personal liability on account
thereof. Notwithstanding this provision, however, neither the General
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Partner nor any other entity or individual entitled to indemnification pursuant
to the Partnership Agreement shall be indemnified for any loss, damage or cost
resulting from the violation of any Federal or state securities laws unless (i)
there has been a successful adjudication on the merits of each count involving
such securities law violations, (ii) such claims have been dismissed with
prejudice on the merits by a court of competent jurisdiction or (iii) a court of
competent jurisdiction approves a settlement of such claims. In any claim for
indemnification for Federal or state securities law violations, the party
seeking indemnification shall place before the court the position of the
Securities and Exchange Commission and the Massachusetts Securities Division
with respect to the issue of indemnification for securities law violations. The
Partnership shall not incur the cost of the portion of any insurance which
insures any party against any liabilities as to which such party is prohibited
from being indemnified under the Partnership Agreement.
ADDITIONAL PARTNERSHIP INTERESTS
The Partnership Agreement provides that the Partnership may, without the
Consent of the Limited Partners, sell additional limited partnership interests
in the Partnership to raise additional equity if at any time the General Partner
determines, in its sole discretion, that additional funds are required. The
Partnership may sell such additional limited partnership interests on such terms
and conditions, and additional limited partners will have such rights and
obligations, as the General Partner shall determine. In the event such interests
are offered, they will be offered to the Unitholders for a 45-day period before
being offered to any other party. In such event, any Unitholder who elects not
to purchase his pro rata share of such interests will suffer dilution of his
interest in the Partnership, which may have adverse tax consequences to such
Unitholder. See "Certain Income Tax Consequences." No fees will be payable to
the General Partner or any of its affiliates from the proceeds of the sale of
such interests, except for customary brokerage commissions on interests sold to
parties who are not partners of the Partnership. The General Partner and its
affiliates may, however, be reimbursed for any reasonable out-of-pocket expenses
incurred in connection with the sale of such additional interests.
MEETINGS
The General Partner may at any time call a meeting of the Limited
Partners or solicit the vote of the Limited Partners without a meeting. The
General Partner is required to call a meeting of the Limited Partners following
receipt of a written
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request therefor signed by Limited Partners holding an aggregate of 10% or more
of the Units in the Partnership held by all Limited Partners. The Partnership
does not intend to hold annual meetings of Limited Partners.
CERTAIN INCOME TAX CONSEQUENCES
The following is a summary of certain federal income tax considerations
that may be relevant to Unitholders who exercise their Rights and is based upon
the Code, judicial decisions, final, temporary and proposed Treasury regulations
("Regulations") and administrative rulings and pronouncements of the Internal
Revenue Service ("IRS"). Although the material federal income tax aspects of
general application regarding the ownership and sale of Preferred Units are
discussed below, no attempt has been made to comment on all federal income tax
matters affecting the Partnership or Preferred Unitholders. Prospective
investors should consult their own tax advisors about the federal, state and
local income tax consequences to them of acquiring Preferred Units.
This summary is based on current legal authority. There is no assurance
that legislative or administrative changes or court decisions may not occur
which would significantly modify the statements and opinions expressed herein,
and any such changes may be retroactive with respect to transactions completed
or investments made prior to the date of such changes. In addition, the General
Partner must make various federal income tax determinations that will impact
Preferred Unitholders, and there is no assurance that the IRS will agree with
the General Partner's determinations. It is therefore possible that the
allocation or treatment of tax items by the General Partner may be modified upon
audit.
LEGAL OPINION
Rosenman & Colin LLP, counsel to the Partnership ("Counsel"), has
expressed its opinion as to the following matters: (i) assuming the Partnership
is classified as a partnership and is not a publicly traded partnership (within
the meaning of Section 7704(b) of the Code) as of the date of this Prospectus,
the Partnership will continue to be treated as a partnership for federal income
tax purposes following the issuance of the Preferred Units and not as a
corporation; (ii) a holder of record of a Preferred Unit generally will be
treated as a partner of the Partnership for federal income tax purposes from the
date such person becomes the record owner of such Preferred Unit; and (iii) it
is more likely than not that the Preferred Units will be classified as
partnership interests for federal
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income tax purposes rather than as debt obligations of the Partnership. Counsel
has based its opinion on applicable legal authority, the facts set forth in this
Prospectus and certain factual representations made by the General Partner, and
its opinion is conditioned on the accuracy of such facts and representations.
Counsel's opinion represents only its best legal judgment, and does not bind the
IRS or the courts. No ruling has been or will be requested from the IRS as to
any tax matters. Thus, no assurance can be provided that the opinions and
statements set forth herein will not be challenged by the IRS or sustained by a
court if litigated. Due to the factual nature of the issue, or uncertainty of
the law, Counsel is not able to opine with respect to certain issues that
involve: (i) whether certain expenses of the Partnership deducted as business
expenses may have to be capitalized for tax purposes; and (ii) whether the
allocations of income and loss of the Partnership, including amounts reported as
income and loss to holders of Preferred Units, will be respected for federal
income tax purposes.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS RELATING TO THE RIGHTS AND THE
PREFERRED UNITS
Effect of Rights Distribution
Neither the Partnership nor the Unitholders will recognize gain or loss
upon the distribution of the Rights.
Unitholder's Basis in Rights
Although not completely certain, the tax basis of Rights received by a
Unitholder from the Partnership likely will be zero and the distribution of
Rights will not change the tax basis of the existing Units. If Rights received
by a Unitholder are not exercised but are allowed to expire, no loss will be
allowed to the Unitholder.
Effect of Exercise of Rights
No gain or loss will be recognized by a Unitholder or the Partnership on
the purchase of Preferred Units through the exercise of Rights. The tax basis of
the Preferred Units purchased thereby will be equal to the sum of the price paid
for the Preferred Units plus the share of the Partnership's nonrecourse
liabilities allocated to the Preferred Units.
Sale of Preferred Units
Gain or loss will be recognized by a Preferred Unitholder upon the sale
of Preferred Units in an amount equal to the difference between the amount
realized on the sale and the tax
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basis of the Preferred Unitholder in the Preferred Units sold. Except to the
extent attributable to unrealized receivables or certain inventory items (as
determined under Section 751 of the Code), such gain or loss will be a capital
gain or loss if the Preferred Units are capital assets in the hands of the
holder thereof and will be a long-term capital gain or loss if the holder's
holding period in the Preferred Units is more than one year. The holding period
of Preferred Units acquired through the exercise of Rights will begin on the
date of exercise.
It is the position of the IRS that a partner has a single aggregate
basis in all of the partner's partnership interests and that, to determine gain
or loss upon a sale or other taxable disposition of a part of such partnership
interests, the portion of the partner's basis allocated to the interests being
sold equals the partner's share of partnership liabilities transferred in the
sale plus the partner's aggregate tax basis (excluding basis attributable to
partnership liabilities) multiplied by the ratio of the fair market value of the
interests sold to the fair market value of all of the partner's partnership
interests. Therefore, Unitholders who exercise their Rights will be required to
determine their tax basis in, and the tax consequences to them of a sale of,
Preferred Units or Units based upon their aggregate tax basis in their
Partnership Interests. See " -- Preferred Unitholder's Basis in His Preferred
Units" and " -- Treatment of Cash Distributions to Preferred Unitholders."
In the case of a corporate Preferred Unitholder, under Section 291(a)(1)
of the Code, a sale or other disposition of its Preferred Units generally will
result in recapture (to the extent of gain) as ordinary income of a portion of
its allocable share of the depreciation claimed with respect to the
Partnership's properties.
The amount realized on the sale or disposition of a Preferred Unit
includes, among other things, an allocable share of the outstanding amount of
the Partnership's nonrecourse indebtedness (including unpaid interest accrued
thereon) to the extent such amount was includable in the basis of such Preferred
Unit. Therefore, it is possible that the gain realized on the sale or
disposition of a Preferred Unit may exceed the cash proceeds of such sale or
disposition and, in some cases, the income taxes payable with respect to such
disposition may exceed such cash proceeds.
Retirement of Preferred Units
A holder of Preferred Units who does not own any other Units may
recognize a taxable gain or loss upon the retirement of the Preferred Units in
exchange for cash. Such gain or loss would
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equal the difference, if any, between the amount of cash paid to the holder and
his tax basis in the Preferred Units. Such gain or loss generally will be
treated as a long-term capital gain or loss provided the holder has held the
Preferred Units for a period of one year or more.
If the holder also owns Units, the holder generally will not recognize
gain or loss upon receipt of a redemption distribution except that gain would be
recognized to the extent the amount of cash paid exceeds the holder's basis in
all of his Units. However, the holder may recognize ordinary income or loss to
the extent redemption proceeds are treated as an exchange for all or part of the
holder's share of the Partnership's unrealized receivables or certain inventory
items under Section 751 of the Code.
Passive Activity Loss Limitation
A Unitholder who is a natural person, trust, estate, a personal service
company or a closely held "C" corporation generally is subject to limitations on
deducting passive activity losses. Most or all of any tax loss allocated to a
Preferred Unitholder or realized upon a sale or retirement of Preferred Units
will be subject to these limitations, and most or all of any taxable income or
gain allocated to a Preferred Unitholder or realized upon a sale or retirement
of Preferred Units will be passive activity income. See " -- Limitations on
Deductibility of Passive Activity Losses."
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS RELATING TO THE PARTNERSHIP AND
PREFERRED UNITHOLDERS
Taxation of the Partnership and the Preferred Unitholders
A partnership itself is not subject to any federal income tax. Assuming
it is classified as a partnership for tax purposes, the Partnership, as a
partner in NIA Operating Associates, is required to report on its information
tax return its distributive share of income, gain, loss, deduction and items of
tax preference, if any, of NIA Operating Associates. Similarly, each Preferred
Unitholder will be required to report on his personal income tax return his
distributive share of Partnership income, gain, loss, deduction and items of tax
preference and will be subject to tax on his distributive share of the
Partnership's taxable income, regardless of whether any portion of that income
is, in fact, distributed to such Preferred Unitholder. Consequently, a Preferred
Unitholder's tax liability with respect to his share of Partnership taxable
income may exceed the cash actually distributed to him in a given taxable year.
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The Partnership must file a federal information tax return on Form 1065.
The Partnership will provide information as to each Preferred Unitholder's
distributive share of the Partnership's income, gain, loss, deduction and items
of tax preference on a Schedule K-1 supplied to such Preferred Unitholder after
the close of the Partnership's fiscal year. In preparing such information, the
General Partner will utilize various accounting and reporting conventions, some
of which are discussed herein, to determine each Preferred Unitholder's
allocable share of income, gain, loss and deduction. There can be no assurance
that the use of such conventions will produce a result that conforms to the
requirements of the Code, Regulations or IRS administrative pronouncements and
there can be no assurance that the IRS will not successfully contend that such
conventions are impermissible. Any such contentions could result in substantial
expenses to the Partnership and the Preferred Unitholders as a result of
contesting such contentions, as well as an increase in tax liability to
Preferred Unitholders as a result of adjustments to their allocable share of the
Partnership's income, gain, loss and deduction. See " -- Tax Returns, Audits,
Interest and Penalties."
Partnership Classification
The availability of most of the tax benefits of the Partnership depends
upon the classification of the Partnership as a partnership for tax purposes. If
the Partnership were treated as an association taxable as a corporation in any
taxable year, the Partnership itself would be subject to corporate income tax,
and its taxable income, gains, losses, deductions and credits (if any) would not
be passed through to its partners. In addition, distributions made to Preferred
Unitholders generally would be treated as taxable dividend income (to the extent
of the Partnership's current and accumulated earnings and profits) and the
balance a non-taxable return of capital to the extent of the partner's basis in
his Preferred Units. Also, the reclassification of the Partnership as an
association taxable as a corporation would be treated as a deemed incorporation
of such entity upon which gain could be recognized, and which could result in
additional corporate tax. Accordingly, treatment of the Partnership as an
association taxable as a corporation would substantially reduce the
Partnership's economic income and cash resources and would also result in a
material reduction of the after-tax return to Preferred Unitholders.
The General Partner and the Partnership believe that the Partnership has
been properly classified as a partnership for federal income tax purposes since
inception. Counsel has advised the Partnership of its opinion that, assuming the
Partnership is classified as a partnership and Partnership interests are not
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publicly traded (see the discussion below) as of the date of this Prospectus,
the Partnership will continue to be treated as a partnership for federal income
tax purposes following the issuance of Preferred Units. In rendering such
opinion, Counsel has relied on representations by the General Partner including
that: (i) the General Partner has and will maintain a minimum level of assets
(apart from its Partnership interests) to satisfy any creditors of the
Partnership; (ii) the General Partner will hold its interest as general partner
in the Partnership for its own account, and will not act under the direction of,
or as agent for, the limited partners; (iii) the General Partner will maintain a
minimum interest of at least one percent in each item of the Partnership's
income, gain, loss, deduction and credit; and (iv) the Partnership will operate
in accordance with the Partnership Agreement and applicable state law.
In 1987, Congress added Section 7704 to the Code to tax most publicly
traded partnerships as corporations. The General Partner has represented that
the Partnership has satisfied and will continue to satisfy applicable safe
harbors for avoiding treatment as a publicly traded partnership. Counsel's
opinion as to partnership classification relies on such representations of the
General Partner. Failure of the Partnership to satisfy applicable safe harbors
for avoiding treatment as a publicly traded partnership may cause the
Partnership to be treated as a publicly traded partnership taxable as a
corporation, with the resultant adverse tax consequences discussed above.
The discussion of federal income tax consequences herein assumes that
the Partnership is treated as a partnership for federal income tax purposes.
Tax Treatment of Preferred Units
The Partnership intends to treat Preferred Units as equity of the
Partnership for federal income tax purposes. The Preferred Units have certain
characteristics in common with debt, such as a fixed return and a right to
payment senior to distributions to holders of Units. The IRS therefore may seek
to recharacterize Preferred Units as debt of the Partnership, rather than
equity. Such a recharacterization could affect, among other things, the
allocations of taxable income and loss to Preferred Unitholders, the amount of
gain or loss recognized by a Preferred Unitholder on the sale of his Preferred
Units, and the tax treatment and/or timing of inclusion of income attributable
to Preferred Units, and would be adverse for Preferred Unitholders. However, the
Preferred Units have many of the significant characteristics of equity and are
intended by the Partnership to be equity of the Partnership. These equity
characteristics include: (i) the Preferred Units are limited partnership
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interests under Delaware law; (ii) payment of the liquidation preference is not
secured or guaranteed and is subject to entrepreneurial risk and the
requirements and limitations of Delaware partnership law; (iii) Preferred Units
will be allocated Partnership losses, if any; (iv) there is no maturity date for
the Preferred Units; and (v) the Partnership intends to treat Preferred Units as
equity for both financial accounting and tax reporting purposes.
Although there is limited authority which deals directly with the issue
of when a partnership interest will be characterized as debt for federal income
tax purposes, Counsel has advised the Partnership that in its opinion, the
proposed tax treatment of Preferred Units as equity for tax purposes more likely
than not is correct and would be sustained if the issue were fully litigated in
court. The following discussion assumes that the Preferred Units will be treated
as partnership interests for federal income tax purposes.
Allocation of Income and Loss
Preferred Unitholders will receive allocations of Partnership income,
gain and loss as described in "Description of Partnership Agreement --
Allocation of Gains and Losses."
The Partnership Agreement's allocation provisions will be respected for
federal income tax purposes only if they are considered to have "substantial
economic effect" and are not retroactive allocations. If any allocation of an
item fails to satisfy the "substantial economic effect" requirement, the item
will be allocated among the Partners based on their respective "interests in the
Partnership," determined on the basis of all of the relevant facts and
circumstances. Such a determination could result in a reallocation of the
income, gains, losses, deductions or credits allocated under the Partnership
Agreement. Such a reallocation, however, would not alter the distribution of
cash under the Partnership Agreement.
The Partnership has followed the allocations under the Partnership
Agreement in the belief that they generally should be respected under the
standards of Section 704(b) of the Code. Counsel is unable to opine to that
effect, however, because, among other things, the Partnership Agreement has not
been amended to reflect various changes to the Regulations adopted since
formation of the Partnership, such that the Partnership's allocations do not
comply with the technical requirements of the Regulations.
The Partnership currently uses a monthly convention for purposes of
allocating taxable income or loss and other tax-
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related items to each limited partner. The law governing the use of this
convention is uncertain. If the convention were not permitted, the Partnership
might be required to allocate its taxable income or losses among the Limited
Partners in a different manner, in which event the respective tax liabilities of
the Limited Partners might be slightly adjusted.
Preferred Unitholder's Basis In His Preferred Units
A Preferred Unitholder's adjusted basis in his Preferred Units is
relevant in determining the gain or loss on the sale or other disposition of his
Preferred Units and the tax consequences of a distribution from the Partnership.
See " -- Treatment of Gain or Loss on Sale or Disposition of Preferred Units"
and " -- Treatment of Cash Distributions to Preferred Unitholders." In addition,
a limited partner is entitled to deduct on his personal income tax return,
subject to the limitations discussed below, his distributive share of a
partnership's net loss, if any, to the extent of such partner's adjusted basis
in his partnership interest.
A Preferred Unitholder's initial basis in newly issued Preferred Units
will be the subscription price, increased by (i) his share of nonrecourse
indebtedness of the Partnership and (ii) his share of items of Partnership
income and gain, and reduced, but not below zero, by (i) his share of items of
Partnership loss and deduction, and (ii) any cash distributions received by him
from the Partnership. Cash distributions are considered to include, for this
purpose, any reductions in the partner's share of the Partnership's nonrecourse
indebtedness (including a reduction due to amortization thereof). Regulations
under Section 752 of the Code employ an economic risk of loss analysis to
determine (1) whether a partnership liability is recourse or nonrecourse, and
(2) the partners' shares of any recourse liability of the partnership. Under the
regulations, a partnership liability is a recourse liability to the extent that
any partner bears the economic risk of loss for the liability. If no partner
bears the economic risk of loss for a partnership liability, the liability is a
nonrecourse liability of the partnership. A partnership's nonrecourse
liabilities are allocated among the partners first to reflect the partners'
shares of (1) any partnership minimum gain and (2) any tax gain that wold be
allocated to the partners under Section 704(c) of the Code if the partnership
disposed of all partnership property subject to one or more nonrecourse
liabilities of the partnership in full satisfaction of the liabilities and for
no other consideration. The balance of the nonrecourse liabilities are shared by
the partners according to their interests in the partnership profits.
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Treatment of Cash Distributions to Preferred Unitholders
Cash distributions made to Preferred Unitholders will be treated as a
return of capital to the extent such distributions do not exceed the Preferred
Unitholder's basis in his Preferred Units. A return of capital generally does
not result in any recognition of gain or loss for federal income tax purposes
but reduces a Preferred Unitholder's adjusted basis in his Preferred Units.
Distributions of cash, including reductions in a Preferred Unitholder's share of
nonrecourse Partnership liabilities, in excess of a Preferred Unitholder's
adjusted basis in his Preferred Units (together with the Preferred Unitholder's
tax basis in his other Units, if any) immediately prior thereto will result in
the recognition of gain to the extent of such excess. See " -- Preferred
Unitholder's Basis in his Preferred Units" and " -- Sale of Preferred Units."
Dilution of a Preferred Unitholder's Partnership interest in connection with a
future sale of additional limited partnership interests could, under certain
circumstances, create a constructive distribution to Preferred Unitholders that
results in their recognition of gain.
Limitations on Deductibility of Passive Activity Losses
Preferred Unitholders who are individuals, trusts, estates, personal
service companies and certain closely held C corporations are subject to
limitations on deducting losses of the Partnership. In general, Partnership
losses (if any) allocated to a Preferred Unitholder may offset only other
passive activity income of such Preferred Unitholder, including, generally,
subsequent Partnership income (other than income classified as portfolio income,
such as income from investments of reserves) or gain on the sale of Preferred
Units. Disallowed losses from passive activities may be carried forward and
treated as a deduction in the next taxable year, subject to these limitations.
Closely held corporations (a corporation more than 50% of the stock of which is
owned directly or indirectly by not more than five individuals) may not offset
portfolio income (such as interest and dividends) with passive activity losses
but may use passive activity losses to offset active business income. Any
disallowed losses from the Partnership are allowed in full (subject to any other
applicable limitations) when the taxpayer disposes of his entire interest in the
Partnership in a taxable transaction. The deductibility of interest on debt
incurred in passive activities and interest on debt incurred to purchase an
interest in a passive activity is generally subject to these limitations.
Assuming that the Preferred Units are treated as equity for federal
income tax purposes (see "- Tax Treatment of Preferred
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Units"), most or all of the taxable income and gain from the Partnership
allocable to a Preferred Unitholder will constitute income from a passive
activity, against which a Preferred Unitholder who is subject to this limitation
could offset losses (or credits) from other passive sources. Notwithstanding the
foregoing, each Preferred Unitholder should note that, under Section 469(k) of
the Code, Congress granted the Treasury broad discretion to promulgate
regulations which could, among other things, require in the future that net
income or gain allocated on account of a preferred return may not be treated as
passive activity income under certain circumstances.
At Risk Limitations
A Preferred Unitholder subject to the "at risk" rules under Section 465
of the Code generally may not deduct from taxable income his share of the
Partnership's losses to the extent that such losses exceed the amount the
Unitholder is considered to have "at risk" in the Partnership under Section 465
of the Code at the end of that year. It is not currently contemplated that the
Partnership's operations will result in deductions or losses that would cause
the application of the "at risk" limitation.
Deductibility of Interest Connected with Tax-Exempt Income
Section 265(a)(2) of the Code disallows any deduction for interest paid
by a taxpayer on indebtedness incurred or continued for the purpose of
purchasing or carrying a tax-exempt obligation. The IRS announced in Revenue
Procedure 72-18, 1972-1 C.B. 940, that a purpose to carry tax-exempt obligations
will be inferred whenever a taxpayer owns tax-exempt obligations and has
outstanding indebtedness which is neither directly connected with personal
expenditures nor incurred in connection with the active conduct of a trade or
business. Therefore, in the case of a Preferred Unitholder (or a related person)
owning tax-exempt obligations (or stock in a regulated investment company which
distributes exempt interest as "dividends"), the IRS might take the position
that his allocable portion of any interest paid by the Partnership on its
borrowings and any interest paid by the Preferred Unitholder on indebtedness
incurred to purchase an interest in the Partnership should be viewed in whole or
in part as incurred to enable such Preferred Unitholder to continue carrying
such tax-exempt obligations, the effect of which position is that the deduction
of such interest by such Preferred Unitholder should be disallowed in whole or
in part.
Partnership Expenses
The Partnership has incurred or will incur various expenses in
connection with its ongoing administration and with the
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operation of the Property. Payments for services generally are deductible if the
payments are ordinary and necessary expenses, are reasonable in amount and are
for services performed during the taxable year in which paid or accrued.
Payments for services related to the acquisition of an asset having a useful
life in excess of one year generally must be capitalized into the cost basis of
the acquired property. Deductions for interest paid on mortgage loans providing
for payments to the lender that are contingent on the value or results of
operation of the underlying property may be disallowed in whole or in part,
and/or the Partnership's ongoing allocations of income and loss could be
affected, if the lender is considered for tax purposes (by reason of the
contingent payment feature of the mortgage loan) to hold an equity interest in
the property. The IRS may not agree with the Partnership's determinations as to
the deductibility of fees and expenses and might disallow such deductions or
require that certain expenses be capitalized and amortized or depreciated over a
period of years. These issues are essentially questions of fact with respect to
which Counsel cannot opine. If all or a portion of Partnership deductions were
to be disallowed, the Partnership's taxable income would be increased or its
losses would be reduced.
Expenses of issuing and marketing Preferred Units in the Partnership
("syndication expenses") are not allowable deductions to the Partnership or any
Preferred Unitholder. Syndication expenses are defined as expenditures connected
with the issuing and marketing of interests in partnerships. Registration fees,
printing costs, selling and promotional material costs and legal fees for
securities and tax advice pertaining to registration of the Preferred Units with
the Securities and Exchange Commission are syndication expenses and, therefore,
do not qualify for amortization or deduction.
Depreciation and Cost Recovery Deductions
The portion of the Property consisting of real property generally is
being depreciated over a period of 19 years using the straight-line method.
Additional real property purchased or developed by the Partnership generally
will be subject to a 39-year recovery period (27-1/2 years in the case of
residential rental property), and will be recovered using the straight-line
method. If the Partnership terminates for tax purposes (or is found to have
terminated after 1986), the Partnership would be required to depreciate all of
its real property under the current depreciation rules, which are less favorable
than the rules in effect when the Property was acquired. Any personal property
acquired by the Partnership generally will be depreciated over a seven-year
recovery period using the double declining balance method (switching to
straight-line at a time to maximize the
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depreciation deductions). If any tax-exempt or foreign persons hold Units, a
portion of the Partnership's depreciation deductions, corresponding to such
persons' percentage interest in the Partnership, may be required to be
depreciated over somewhat longer recovery periods than those otherwise
applicable.
Depreciation Recapture
There is generally no depreciation recapture for real property that is
depreciated pursuant to the straight-line method. If real property is sold or
otherwise disposed of within 12 months after it was acquired, however, all
depreciation claimed will be recaptured as ordinary income on such disposition.
All depreciation deductions attributable to personal property are subject, to
the extent of any gain recognized, to being fully recaptured as ordinary income
on a sale or other disposition of the personal property. See " -- Treatment of
Gain or Loss on Sale or Disposition of Preferred Units."
Under Section 291(a)(1) of the Code, which applies only to corporate
Preferred Unitholders, 20% of a corporate Preferred Unitholder's share of the
depreciation deductions claimed by the Partnership will be subject to recapture
as ordinary income on such disposition to the extent of the Preferred
Unitholder's share of any gain recognized, even though the Partnership and the
Preferred Unitholder might not otherwise be subject to general depreciation
recapture on such depreciation.
Tax Considerations for Tax-Exempt Entities
Preferred Unitholders which are exempt from federal income tax
(including IRAs and tax-exempt organizations such as trusts that hold assets of
employee benefit or retirement plans) may be subject to federal income tax on
their allocable share of Partnership income to the extent that such income is
"unrelated business taxable income." A Preferred Unitholder that is otherwise
exempt from tax will have unrelated business taxable income with respect to such
Preferred Unitholder's distributive share of Partnership taxable income from the
hotels and the Nantucket Boat Basin, and also will have unrelated business
taxable income with respect to its distributive share of Partnership taxable
income in the proportion that the Partnership's acquisition indebtedness bears
to the Partnership's total adjusted bases for its properties. Acquisition
indebtedness could arise from indebtedness incurred directly by a Preferred
Unitholder in connection with its Preferred Units or from indebtedness incurred
by (or allocable to) the Partnership.
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The receipt of unrelated business taxable income by a tax-exempt entity
generally has no effect on its status or on the exemption from tax of its other
income. However, for certain types of tax-exempt entities, the receipt of any
unrelated business taxable income may have extremely adverse consequences. For
example, the receipt of any taxable income from an unrelated business by a
charitable remainder trust (defined under Section 664 of the Code) during a
taxable year will result in the taxation of all of the trust's income from all
sources during such year.
An entity that is subject to tax on unrelated business taxable income
would be subject to tax only to the extent that the sum of its unrelated
business taxable income, if any, from Preferred Units and all other sources
exceeds $1,000 in any particular year, and would be required to file federal
income tax returns for any taxable year in which it has gross income, included
in computing unrelated business taxable income, in excess of $1,000 (whether or
not any tax is due).
Tax Returns, Audits, Interest and Penalties
The Partnership will supply annual Schedules K-1 to Form 1065 to each
Preferred Unitholder of record as of the last day of each month during the
calendar year after the end of such calendar year. See "Description of
Partnership Agreement -- Books and Reports." The Partnership is not obligated to
provide tax information to persons who are not Preferred Unitholders of record.
Any Preferred Unitholder who sells or exchanges a Preferred Unit will be
required to notify the Partnership of such transaction in writing within 30 days
of the transaction (or, if earlier, by January 25 of the calendar year after the
year in which the transaction occurs). The notification is required to include
(i) the names and addresses of the transferor and the transferee; (ii) the
taxpayer identification number of the transferor and, if known, the transferee;
and (iii) the date of the sale or exchange. Any transferor who fails to notify
the Partnership of a sale or exchange may be subject to a penalty for each such
failure. The Partnership will treat any transferor Preferred Unitholder who
provides all of the information requested of the transferor on the certificate
representing the Preferred Units and in the transfer application as having
satisfied this notification requirement.
The tax treatment of the Partnership's income, gain, loss, deductions or
credit will be determined at the partnership level in a unified partnership
proceeding, rather than in separate proceedings with Preferred Unitholders. With
respect to proposed
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tax deficiency adjustments at the administrative level, in general, each partner
(other than a partner owning less than a 1% profits interest in a partnership
having more than 100 partners) whose name and address is furnished to the IRS (a
"notice partner") will receive notice of the commencement of a partnership level
audit as well as notice of the final partnership administrative adjustment. All
partners have the right to participate at their own expense in the partnership
level audit as well as receive notice of the final partnership administrative
adjustment. In general, each partner is free to negotiate his own settlement of
partnership items with the IRS. If the IRS enters into a settlement agreement
with any partner, it must offer the same settlement terms to the other parties
who request settlement.
A "tax matters partner" must be designated by the partnership who may
enter into a settlement on behalf of, and binding on, partners owning less than
a 1% profits interest in partnerships having more than 100 partners. The
Partnership Agreement designates the General Partner as the tax matters partner.
Under the Code, the tax matters partner may not settle on behalf of partners
with less than a 1% profits interest if (i) an aggregate of 5% or more of such
partners designate with the IRS a notice partner to receive notice from the IRS
on behalf of the group or (ii) such partners notify the IRS that the tax matters
partner may not settle on their behalf. Except for the above-described
settlement power granted the tax matters partner, any settlement entered into by
any partner (including the tax matters partner) is not binding on any partner
who does not wish to be bound thereby. However, the tax matters partner may
extend the statute of limitations for assessment of a deficiency with respect to
all partners. All expenses of the General Partner in performing its duties as
tax matters partner will be paid for by the Partnership.
Because such a proceeding will control the way in which all Preferred
Unitholders treat Partnership items and the allocation thereof, the chances of
an audit occurring are greater than they were before this proceeding was
allowed. Any adverse determination following an audit of the Partnership's
return by a taxing authority would result in an adjustment of the returns of
Preferred Unitholders and, under certain circumstances, they may be precluded
from separately litigating a proposed adjustment to Partnership items. Such an
adjustment could also result in an audit of Preferred Unitholders' own tax
returns and adjustments of non-Partnership, as well as Partnership, income and
loss. Audits of other limited partnerships of which the General Partner or its
affiliates are general partners could result in an audit of the Partnership's
(or a Preferred Unitholder's) return.
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Interest paid on tax deficiencies by non-corporate and certain corporate
Preferred Unitholders would not be deductible by them.
Section 6111 of the Code requires a tax shelter organizer to register a
"tax shelter" with the IRS by the first day on which interests in the tax
shelter are offered for sale. The provision's definition of a "tax shelter"
applies to nearly all real estate partnerships owning leveraged property.
Accordingly, the Partnership is registered as a "tax shelter" even though it did
not expect to generate substantial tax losses that could be used to shelter the
income of Limited Partners that is not derived from the Partnership.
The Partnership will furnish its tax shelter registration number to
Preferred Unitholders, and any Preferred Unitholder claiming any deduction,
credit or other tax benefit from the Partnership must include such number in his
tax return on Form 8271. ISSUANCE OF A REGISTRATION NUMBER DOES NOT INDICATE
THAT THIS INVESTMENT OR THE CLAIMED TAX BENEFITS HAVE BEEN REVIEWED, EXAMINED OR
APPROVED BY THE IRS. Failure by a Preferred Unitholder to furnish such number on
his individual tax return when required to do so could subject him to a penalty.
Section 6662 of the Code imposes a penalty for the substantial
understatement of income tax for any taxable year. The penalty is equal to 20%
of the amount of underpayment of tax attributable to the understatement. An
understatement is defined as the difference between the tax required to be shown
on the return and the amount actually shown. The penalty is only applicable if
the understatement for a taxable year exceeds the greater of (a) 10% of the tax
required to be shown on the return for the taxable year and (b) $5,000 ($10,000
in the case of a corporation other than an S corporation or personal holding
company). Except in the case of items attributable to a "tax shelter," the
amount of understatement is reduced to the extent that the taxpayer had
substantial authority for the position taken in his tax return or disclosed the
facts relevant to the position in his tax return or in a statement attached to
the return. In the case of items attributable to "tax shelters," however, the
taxpayer can reduce the understatement only by showing that there was
substantial authority for the tax treatment and a reasonable belief that the tax
treatment of the item was more likely than not the proper treatment. It is
unclear whether the Partnership would be considered a "tax shelter" for these
purposes.
Tax Elections
Pursuant to Sections 734, 743 and 754 of the Code, a partnership may
elect to have the cost basis of its assets
-53-
<PAGE>
adjusted in the event of certain distributions of partnership property to a
partner or sale by a partner of his interest in the partnership or the death of
a partner. The partnership agreements of the Partnership, NIA Operating
Associates and Sherburne provide that the General Partner may, in its sole
discretion, make such an election. The general effect of making such elections
is that transferees of Preferred Units would be treated, for purposes of
depreciation and taxable gain, as though they had acquired a direct interest in
the assets of Sherburne. The Partnership, NIA Operating Associates and Sherburne
would be treated for such purposes, upon certain distributions to their
respective partners, as though they had newly acquired an interest in their
respective assets and therefore acquired a new cost basis for such assets. The
General Partner currently does not intend to make any such election.
STATE AND LOCAL TAXES
In addition to the federal income tax consequences described above,
prospective investors should consider potential state and local tax consequences
of an investment in Preferred Units, and are urged to consult their individual
tax advisors in this regard. The rules of various states and localities for
computing and/or reporting taxable income differ from (and are less favorable
than) the federal income tax rules.
The Partnership (through other partnerships) owns property in
Massachusetts. Preferred Unitholders will be required to file an annual
Massachusetts tax return. Non-resident Preferred Unitholders will be subject to
Massachusetts taxes on their income from Massachusetts sources, which will
include their distributive share of Partnership taxable income. The amount of
any Massachusetts tax paid by a Preferred Unitholder may be creditable against
taxes payable to his state of residence with respect to the same income,
depending on the tax laws of such state.
Preferred Unitholders should consult with their individual tax advisors
concerning the applicability of state and local taxes to this investment.
* * *
The summary of tax consequences set forth above is for general
information only and does not address the circumstance of any particular
Preferred Unitholder. Preferred Unitholders should consult their own tax
advisors as to the specific tax consequences to them of the ownership and
disposition of
-54-
<PAGE>
Preferred Units, including the application of state, local and estate tax laws.
LEGAL MATTERS
Certain legal matters in respect of the securities offered hereby will
be passed upon for the Partnership by Rosenman & Colin LLP, 575 Madison Avenue,
New York, New York 10022.
EXPERTS
The consolidated financial statements of the Partnership as of December
31, 1995 and 1994 and for each of the years in the three-year period ended
December 31, 1995 and the financial statement schedule as of December 31, 1995,
incorporated by reference in this Prospectus have been audited by KPMG Peat
Marwick LLP, independent certified public accountants, as indicated in their
report with respect thereto, and are incorporated by reference herein in
reliance upon the authority of said firm as experts in accounting and auditing.
-55-
<PAGE>
APPENDIX A
[FORM OF SUBSCRIPTION CERTIFICATE]
SUBSCRIPTION CERTIFICATE NUMBER: ______________________
NUMBER OF RIGHTS: ______________________
NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP
SUBSCRIPTION RIGHT FOR PREFERRED UNITS
This Subscription Certificate represents the number of Rights set forth
above. Each Right held entitles the registered holder thereof (the "Holder") to
acquire one 8% cumulative compounded preferred unit (the "Preferred Unit")
representing a limited partnership interest in Nantucket Island Associates
Limited Partnership (the "Partnership").
To subscribe for Preferred Units, the Holder must present to the
Partnership, prior to 5:00 p.m., New York City time, on November 8, 1996 (the
"Expiration Date") a properly completed and executed Subscription Certificate
and a check drawn on a bank located in the United States and payable to the
Partnership in the amount of the Subscription Price as calculated in Item C of
this Subscription Certificate. Any Holder exercising his Right may also
subscribe for additional Preferred Units, if any, through exercise of the
Over-Subscription Privilege described in the accompanying Prospectus.
No later than forty-five business days following the Expiration Date,
the Partnership will send to each Holder exercising his Rights a certificate
representing the Preferred Units purchased pursuant to the exercise of such
Holder's Rights and the exercise of the Over-Subscription Privilege, if any. A
Holder exercising his Rights will have no right to modify or rescind a purchase
after the Partnership has received payment of the Subscription Price by means of
a check.
If a Holder does not make payment of the Subscription Price on or prior
to the Expiration Date, the Partnership reserves the right to treat the Holder
as not having exercised his Rights or exercised the Over-Subscription Privilege
and the Guarantor, thereafter, shall have the right to purchase any and all such
Preferred Units as to which the Holder shall not have made payment of the
Subscription Price.
NANTUCKET ISLAND ASSOCIATES
LIMITED PARTNERSHIP
By: THREE WINTHROP PROPERTIES, INC.,
general partner
By:_________________________
A-1
<PAGE>
Any questions regarding this Subscription Certificate and the Offer made hereby
and in the accompanying Prospectus may be directed to the Partnership at (617)
330-8600.
Expiration Date: _____________________, 1996
PLEASE COMPLETE ALL APPLICABLE INFORMATION
BY MAIL: BY OVERNIGHT COURIER: BY HAND:
_________________________ ___________________________
_________________________
_________________________ ___________________________
_________________________
_________________________ ___________________________
_________________________
_________________________ ___________________________
_________________________
TO SUBSCRIBE: I hereby irrevocably subscribe for the dollar amount of Preferred
Units indicated in A and B below upon the terms and conditions specified in the
Prospectus related hereto, receipt of which is acknowledged. I enclose a check
for the Subscription Price for the number of Preferred Units indicated in A
together with the Subscription Price for the number of Preferred Units indicated
in B.
Please check (X) below:
<TABLE>
<S> <C> <C> <C> <C>
[ ] A. Basic _______________ = ______________.000 x $13,333 = $____________________
Subscription (Rights Exercised) (Preferred Units
Rights Requested)
[ ] B. Over- ______________.000 x $13,333 = $____________________
Subscription
Privilege
[ ] C. Amount of Check Enclosed (Total of A and B). = $____________________
</TABLE>
MAKE CHECK PAYABLE TO "NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP"
___________________________ Please provide your Day ( )____________
Signature of Subscriber(s) telephone number Evening ( )____________
IMPORTANT: PREFERRED UNITS WILL ONLY BE ISSUED TO HOLDERS WHO COMPLETE THIS
SUBSCRIPTION CERTIFICATE IN THE NAME OF SUCH HOLDER. SUBSCRIPTION
CERTIFICATES COMPLETED BY ASSIGNEES OF A HOLDER WILL NOT BE ACCEPTED.
A-2
<PAGE>
===================================================
No dealer, salesman or other person has
been authorized to give any information or to make
any representation not contained in this Prospectus
and, if given or made, such information or
representation must not be relied upon as having
been authorized by the Partnership. This Prospectus
does not constitute an offer to sell or a
solicitation of an offer to buy any of the
securities offered hereby in any jurisdiction to
any person whom it is unlawful to make such an
offer in such jurisdiction. Neither the delivery of
this Prospectus nor any sale made hereunder shall,
under any circumstances, create an implication that
there has been no change in the affairs of the
Partnership since the date hereof or that the
information contained herein is correct as of any
time subsequent to its date.
----------------------
TABLE OF CONTENTS
Page
----
Available Information......................... 2
Incorporation of Certain
Documents by Reference....................... 2
Prospectus Summary............................ 4
The Partnership............................... 9
Investment Considerations.................... 10
The Offering................................. 17
The Property.................................. 22
Use of Proceeds.............................. 22
Ratio of Earnings To Fixed
Charges and Preferred
Unit Distributions.......................... 23
Description of Securities.................... 26
Description of Partnership
Agreement.................................... 31
Certain Income Tax Consequences............... 39
Legal Matters................................ 55
Experts...................................... 55
===================================================
===================================================
NANTUCKET ISLAND
ASSOCIATES LIMITED
PARTNERSHIP
785 PREFERRED UNITS
________________
PROSPECTUS
________________
September ___, 1996
===================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and
Distribution
The expenses of issuance and distribution of the securities are to be paid
by the Partnership. The following itemized list is an estimate of the expenses:
SEC Registration Fee......................... $ 3,610.00
Legal fees and expenses...................... 125,000.00
Accounting fees and expenses................. 15,000.00
Printing fees and expenses .................. 25,000.00
Blue Sky fees and expenses................... 35,000.00
Miscellaneous................................ 6,390.00
------------
Total............................. $ 210,000.00
=============
Item 15. Indemnification of Directors and Officers
The Partnership has agreed to indemnify and hold harmless the General
Partner and each person performing services on behalf of the Partnership who (a)
directly or indirectly controls, is controlled by, or is under common control
with, the General Partner, (b) who owns or controls 10% or more of the
outstanding voting interest in the General Partner, and (c) any officer,
director or partner or wholly-owned subsidiary of any entity described in (a) or
(b), against any loss, damage, liability, cost or expense (including reasonable
attorneys' fees) incurred by them in connection with the Partnership, provided
that such loss, damage, liability, cost or expense was not the result of the
negligence or misconduct of any such person. Any such indemnity will be paid
from, and only to the extent of, available Partnership assets and no partners
shall have any personal liability on account thereof. Notwithstanding this
provision, however, neither the General Partner nor any other entity or
individual entitled to indemnification pursuant to the Partnership Agreement
shall be indemnified for any loss, damage or cost resulting from the violation
of any Federal or state securities laws unless (i) there has been a successful
adjudication on the merits of each count involving such securities law
violations, (ii) such claims have been dismissed with prejudice on the merits by
a court of competent jurisdiction or (iii) a court of competent jurisdiction
approves a settlement of such claims. In any claim for indemnification for
Federal or state securities law violations, the party seeking indemnification
shall place before the court the position of the Securities and Exchange
Commission and the Massachusetts Securities Division with respect to the issue
of indemnification for securities law violations.
II - 1
<PAGE>
Item 16. Exhibits
The following documents are filed as a part of this Registration
Statement:
Exhibit No. Description
- ----------- -----------
4.1* Amended and Restated Partnership Agreement of
the Registrant
5* Opinion of Rosenman & Colin LLP
8* Opinion of Rosenman & Colin LLP as to certain
federal income tax matters
23.1* Consent of KPMG Peat Marwick LLP
23.2* Consent of Rosenman & Colin LLP (included in
Exhibits 5 and 8)
23.3* Consent of Whittier Partners
99.1* Appraisal of hotels included in the Property
- -----------------------
* Filed herewith
Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10 (a)(3) of the
Securities Act;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement;
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II - 2
<PAGE>
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(4) That, for purposes of determining any liability under the Securities
Act, each filing of the Registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Exchange Act that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act, and will be governed by the final
adjudication of such issue.
II - 3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3, has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the County of New York and State of New York on September 20,
1996.
NANTUCKET ISLAND ASSOCIATES
LIMITED PARTNERSHIP
By: THREE WINTHROP PROPERTIES, INC.,
General Partner
By /s/ MICHAEL L. ASHNER
---------------------
Michael L. Ashner
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
MICHAEL L. ASHNER Chief Executive Officer September 20, 1996
- --------------------- and Director of the
Michael L. Ashner general partner of the
Registrant
EDWARD V. WILLIAMS Chief Financial Officer September 20, 1996
- -------------------- of the general partner
Edward V. Williams of the Registrant
II - 4
<PAGE>
================================================================================
SECOND AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT
OF NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP
================================================================================
<PAGE>
NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP
SECOND AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT
---------------------------
THE LIMITED PARTNER UNITS IN THIS PARTNERSHIP ARE BEING SOLD WITHOUT
REGISTRATION UNDER THE SECURITIES LAWS OF CERTAIN STATES, IN RELIANCE UPON
EXEMPTIONS THEREFROM. CONSEQUENTLY, LIMITED PARTNER UNITS IN THE PARTNERSHIP MAY
NOT BE SOLD OR TRANSFERRED WITHOUT REGISTRATION OF SUCH UNITS UNDER SUCH
SECURITIES LAWS UNLESS SUCH UNITS ARE SOLD IN A TRANSACTION WHICH IS EXEMPT FROM
REGISTRATION THEREUNDER. ADDITIONAL LIMITATIONS ON TRANSFER OF THE LIMITED
PARTNER UNITS ARE CONTAINED HEREIN.
ii
<PAGE>
TABLE OF SECTIONS
Page
----
ARTICLE I
Defined Terms................................................................ 1
ARTICLE II
Continuation, Purpose, and Term
2.1 Continuation....................................................... 6
2.2 Name, Principal Office, Registered Office and Registered Agent..... 6
2.3 Purpose............................................................ 6
2.4 Authorized Acts.................................................... 6
2.5 Term and Dissolution............................................... 8
ARTICLE III
Partners; Capital
3.1 General Partner.................................................... 8
3.2 Limited Partners................................................... 8
3.3 Partnership Capital................................................ 9
3.4 Withdrawal of Capital.............................................. 9
3.5 Liability of Limited Partners...................................... 9
3.6 Limited Partners................................................... 9
ARTICLE IV
Capital Contributions of Limited Partners
4.1 Payments........................................................... 10
4.2 Additional Capital Contributions by Limited Partners and
Admission of Additional Limited Partners.......................... 10
4.3 Fees and Expense Reimbursements Paid to Certain Entities........... 10
ARTICLE V
Rights, Powers and Duties of the General Partner
5.1 Business Management and Control; Refinancing....................... 10
5.2 Duties and Obligations............................................. 11
5.3 Indemnification.................................................... 11
5.4 Liability of the General Partner to Limited Partners............... 12
5.5 Limited Partners' Right to Restrict General Partner's Authority.... 12
5.6 Operating Reserve; Capital Improvement Fund........................ 13
5.7 Other Activities................................................... 13
iii
<PAGE>
Page
----
ARTICLE VI
Retirement of the General Partner
6.1 Retirement; Dissolution; Continuation.............................. 13
ARTICLE VII
Transferability of Limited Partnership Interests
7.1 Limited Right to Assign............................................ 14
7.2 Restrictions....................................................... 15
7.3 Substitute Limited Partners........................................ 15
7.4 Assignees.......................................................... 16
7.5 Lost Investor Certificates......................................... 16
ARTICLE VIII
Loans
8.1 In General......................................................... 16
ARTICLE IX
Profits and Losses; Distributions
9.1 Profits and Losses................................................. 16
9.2 Distributions Prior to Dissolution................................. 21
9.3 Distributions On Dissolution....................................... 23
9.4 Changes in Percentage Interests.................................... 24
ARTICLE X
Books and Records, Accounting, Tax Elections, Etc.
10.1 Books and Records.................................................. 25
10.2 Bank Accounts...................................................... 25
10.3 Accountants........................................................ 25
10.4 Reports to Limited Partners........................................ 25
10.5 Tax Elections...................................................... 26
10.6 Special Basis Adjustments.......................................... 26
10.7 Fiscal Year and Accounting Method.................................. 26
10.8 Tax Matters Partner................................................ 26
iv
<PAGE>
Page
----
ARTICLE XI
General Provisions
11.1 Restrictions on Transfer........................................... 26
11.2 Appointment of General Partner as Attorney in-Fact................. 27
11.3 Notices............................................................ 28
11.4 Word Meanings...................................................... 28
11.5 Binding Provisions................................................. 28
11.6 Applicable Law..................................................... 28
11.7 Counterparts....................................................... 28
11.8 Survival of Representations and Warranties......................... 28
11.9 Separability of Provisions......................................... 28
11.10 Investment Representation.......................................... 29
11.11 Paragraph Titles................................................... 29
11.12 Meeting of Partners................................................ 29
11.13 Amendment Procedure................................................ 29
11.14 Partition.......................................................... 30
v
<PAGE>
STATE OF MASSACHUSETTS
COUNTY OF SUFFOLK, TO WIT:
I hereby certify that on this __ day of ______, 1996, before me personally
appeared _____________, to me known to be the person who executed the foregoing
instrument as Officer/Agent of Three Winthrop Properties, Inc., as General
Partner of the Partnership and as Attorney-in-fact for the Unitholders and
Preferred Unitholders listed on Schedule A, who, being duly sworn, acknowledged
that he is duly authorized to execute the same on behalf of such Partnership as
Officer/Agent of its general partner and Unitholders and Preferred Unitholders
as Attorney-in-fact.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
______________________
Notary Public
My Commission Expires: _________
<PAGE>
NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP
SECOND AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT
Second Amended and Restated Agreement of Limited Partnership (the
"Agreement") of Nantucket Island Associates Limited Partnership, a Delaware
limited partnership (the "Partnership"), dated as of ____________, 1996, by and
among Three Winthrop Properties, Inc., a Massachusetts corporation, as General
Partner, those persons named on the Schedule as Unitholders and those persons
named on the Schedule as Preferred Unitholders.
WHEREAS, the Partnership is the subject of an Amended and Restated Limited
Partnership Agreement, dated as of December 17, 1986, as amended thereafter (the
"Prior Agreement");
WHEREAS, the Partnership, pursuant to the Registration Statement has
offered subscription rights to purchase an aggregate of 785 Preferred Units on
terms more fully described in the Registration Statement and herein; and
WHEREAS, the General Partner wishes to amend and restate the Prior
Agreement to effect the issuance of the Preferred Units and the admission of the
Preferred Unitholders to the Partnership.
NOW, THEREFORE, the Prior Agreement is hereby amended to admit the persons
listed on the Schedule as Preferred Unitholders and to amend and restate all of
the provisions thereof so that the Prior Agreement, as amended and restated
hereby, reads in its entirety as follows:
ARTICLE I
Defined Terms
The capitalized terms used in this Agreement shall have the meanings
specified below.
"Accountants" means the firm of certified public accountants engaged by
the General Partner on behalf of the Partnership.
"Admission Date" means, as to each Limited Partner, the date on which his
admission to the Partnership in accordance with Section 3.6 is duly recorded on
an amendment to the Schedule and the records of the Partnership.
"Affiliate" or "Affiliated Person" means the General Partner or any (i)
member of the Immediate Family of the General Partner; (ii) legal
representative, successor, or assignee of any Person referred to in the
preceding clause (i); (iii) trustee of a trust for the benefit of any Person
referred to in the preceding clauses (i) and (ii); (iv) Entity which directly,
or indirectly through one or more intermediaries, controls, is controlled by, or
is under common control with, any Person referred to in the preceding clause
(i); or (v) Person who is an officer, director, trustee, employee, stockholder
(10% or more), or partner of any Person referred to in the preceding clauses (i)
through (iv). For purposes of this definition, the term "control" means the
ownership of 10% or more of the beneficial interest or the voting power of the
appropriate Entity.
"Agreement" means this Second Amended and Restated Limited Partnership
Agreement, as it may be further amended from time to time.
1
<PAGE>
"Capital Account" means, as to any Partner or class of Partners, the
Capital Contribution actually paid to the Partnership by the Partner or class
(reduced by selling commissions attributable to such Partner and related
expenses pursuant to Section 3.6.D), plus all income (including tax-exempt
income), gain, or profits allocated to the Partner or class for Federal income
tax purposes, minus the sum of (i) all losses or deductions allocated to the
Partner or class, (ii) all distributions to the Partner or class, and (iii) such
Partner or class' distributive share of expenditures of the Partnership
described in Code Section 705(a)(2)(B) (relating to expenditures which are
neither deductible nor properly chargeable to capital). In addition to the above
provision, the Capital Account of any Partner shall be determined and maintained
throughout the full term of the Partnership in accordance with the capital
accounting Rules of Income Tax Regulation 1.704(1)(b)(2)(iv) including
subparagraph (r) to the extent determined appropriate by the General Partner
pursuant to Section 11.13.B.
"Capital Contribution" means $80,000 per Unit for each Unitholder and
$13,333 per Preferred Unit for each Preferred Unitholder and for the General
Partner shall mean the aggregate of the amount of cash heretofore contributed by
the General Partner and the amount to be contributed by the General Partner in
connection with the issuance of the Preferred Units.
"Capital Improvement Fund" means the fund to be set aside from the Capital
Contributions of the Limited Partners for use as described in Section 5.6.
"Capital Proceeds" means the net cash proceeds received by the Partnership
from a Capital Transaction after payment of all expenses related to such Capital
Transaction but prior to payment of debts and obligations of the Partnership, or
funding of reserves.
"Capital Transaction" means any transaction the proceeds of which do not
constitute Cash Flow, including a refinancing of the Mortgage Loan or a sale,
exchange, condemnation (or similar eminent domain taking), casualty, or other
disposition of all or any portion of the assets of the Partnership.
"Cash Flow" shall have the meaning provided in Section 9.2.A.
"Certificate" means the Certificate of Limited Partnership establishing
the Partnership, as filed in the office of the Secretary of State of Delaware on
December 17, 1986, as it may be amended from time to time in accordance with the
terms of this Agreement and the Uniform Act.
"Code" means the Internal Revenue Code of 1986.
"Consent of the Limited Partners" means the written consent or approval of
Limited Partners owning in the aggregate Units and Preferred Units representing
more than 50% of the votes, which Consent shall be obtained prior to the taking
of any action for which it is required by this Agreement. Each Unit shall
entitle the holder thereof to one vote and each Preferred Unit shall entitle the
holder thereof to 1/7 of one vote on all matters on which a Unitholder has a
right to vote. Consent shall be deemed to be granted if the General Partner
makes a written request for the consent of the Limited Partners to a particular
action, unless the General Partner receives written refusals to consent within
30 days of the request from Limited Partners owning in the aggregate Units and
Preferred Units representing more than 50% of the votes.
"Entity" means any general partnership, limited partnership, corporation,
joint venture, trust, business trust, cooperative, or association.
"Event of Bankruptcy" means as to the General Partner:
(a) his or its filing a petition commencing a case as a debtor under
the Bankruptcy Code (as now or in the future amended), or the commencement
of an involuntary case against him or it under
2
<PAGE>
the Bankruptcy Code and the earlier of the entry of an order for relief or
the appointment of an interim trustee to take possession of his or its
estate and/or to operate any portion of his or its business;
(b) his or its making a general assignment for the benefit of his or
its creditors;
(c) his or its consenting to the appointment of a receiver for all
or a substantial part of his or its property;
(d) the entry of a court order appointing a receiver or trustee for
all or a substantial part of his or its property without his or its
consent;
(e) the assumption of custody or sequestration by a court of
competent jurisdiction of all or substantially all of his or its property.
"First Winthrop" means First Winthrop Corporation, a Delaware corporation.
"Gain or Loss from a Capital Transaction" means the gain or loss
recognized by the Partnership as a result of a Capital Transaction as determined
for Federal income tax purposes by the Accountants, but without regard to any
adjustments to basis pursuant to Sections 734 and 743 of the Code.
"General Partner" means any Person designated as a General Partner in the
Schedule or any Person who becomes a General Partner as provided in this
Agreement, including a substitute General Partner, in that Person's capacity as
a General Partner.
"Immediate Family" means, with respect to any Person, his spouse, parents,
parents-in-law, descendants, nephews, nieces, brothers, sisters,
brothers-in-law, sisters-in-law, children-in-law, and grandchildren-in-law.
"Improvements" means the Nantucket Boat Basin structures and the hotel
buildings, cottages, retail rental buildings and other structures situated on
the Land.
"Interest" or "Partnership Interest" means the ownership interest of a
Partner in the Partnership at any particular time, including the right of such
Partner to any and all benefits to which such Partner may be entitled as
provided in this Agreement, together with the obligations of such Partner to
comply with all the terms and provisions of this Agreement.
"Invested Capital" as to each Unitholder means $80,000 per Unit.
"Investor Certificate" means the certificate, in the form of Exhibits A
and/or B to this Agreement, issued to each Unitholder and Preferred Unitholder,
as applicable; it being understood that such Investor Certificate and the
Interest it represents shall for all purposes be considered a "Certificated
Security" for purposes of Article VIII of the Uniform Commercial Code of the
State of Delaware.
"Land" means the parcels of land located on Nantucket Island,
Massachusetts, owned by Sherburne Associates, including the land upon which the
Improvements are located.
"Limited Partner" or "Limited Partners" means the Unitholders and the
Preferred Unitholders.
"Management Agent" means Winthrop Property Management Co., Inc., the
managing and rental agent for the Property, or any subsequent agent, as provided
in the Management Agreement.
"Management Agreement" means the agreement to he entered into between the
Management Agent and Sherburne Associates with respect to management of the
Property.
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"Management Fee" means the fee payable by the Partnership to the
Management Agent for management services pursuant to the Management Agreement.
This fee shall be pro rated for any fiscal period less than a year and shall he
deemed to be a Property Expense.
"Minimum Gain" means the excess of the outstanding principal balance of
the non-recourse debt secured by the Property (excluding any portion of the
principal balance which would not be treated as an amount realized under Section
1001 of the Code and Income Tax Regulation 1.1001-2(a) if the debt were
foreclosed upon) over the adjusted basis of the Property for Federal income tax
purposes.
"Mortgage Documents" means the mortgage, security agreement and financing
statements and assignments of leases, rents, issues and profits, and any other
agreements entered into by the Mortgage Lender and the Partnership in connection
with the Mortgage Loan, and shall include, where the context admits, any
mortgage or deed of trust to the extent secured by the Property, security
agreement, modification agreement, allonge, or financing statement and the
promissory note or other credit instrument evidencing the debt thereunder and
any other instrument in connection with the Mortgage Loan which is binding on
the Partnership. If the Mortgage Loan is replaced by any subsequent mortgage or
mortgages, the term Mortgage Documents shall refer to any subsequent mortgage or
mortgages.
"Mortgage Lender" means The Bankers Trust Company of New York or other
mortgage lender as described in the Registration Statement.
"Mortgage Loan" means the loan that will be made by the Mortgage Lender to
the Partnership in the amount of $27,000,000 which is expected to be on the
terms described in the Mortgage Documents.
"NIA Operating Associates" means NIA Operating Associates Limited
Partnership, a Massachusetts limited partnership.
"Net Income or Net Loss" for any fiscal year means the net income or net
loss of the Partnership for the year as determined for Federal income tax
purposes by the Accountants (a) excluding Gain or Loss from a Capital
Transaction; (b) determined without regard to any adjustments to basis pursuant
to Section 743 of the Code; (c) if, and to the extent that, assets of the
Partnership have been reflected in the Capital Accounts of the Partners and on
the books of the Partnership at their respective fair market values rather than
their adjusted bases for tax purposes, by computing items of gain, loss, and
deduction based upon such assets' values as reflected on the Partnership's
books; (d) by including as an item of gross income any tax-exempt income
received by the Partnership; and (e) by treating as a deductible expense any
expenditure of the Partnership described in Section 705(a)(2)(B) of the Code
(amounts paid or incurred to organize the Partnership (unless an election is
made pursuant to Code Section 709(b)) or to promote the sale of interests in the
Partnership and deductions for any losses incurred in connection with the sale
or exchange of Partnership property disallowed pursuant to Section 267(a)(l) or
Section 707(b) of the Code shall be treated as expenditures described in Section
705(a)(2)(B) of the Code).
"Non-Terminating Capital Transaction" means a Capital Transaction which
does not result in liquidation, dissolution, or termination of the Partnership.
"Operating Reserve" means the operating reserve in an amount determined
from time to time by the General Partner. This Reserve shall be available for
the use of the Partnership as described in Section 5.6.
"Partner" means any General Partner or Limited Partner.
"Partnership" means the limited partnership governed by this Agreement as
constituted and amended from time to time.
"Partnership Administrative and Investor Services Fee" means the fee
described in Section 4.3.A.
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"Percentage Interest" means, as to a Partner, the applicable percentage
specified in the Schedule.
"Person" means any individual or Entity, and his or its heir, executor,
administrator, legal representatives, successor, and assigns where the context
requires. Unless the context otherwise requires, the singular shall include the
plural, and the masculine gender shall include the feminine and the neuter and
vice versa.
"Preferred Invested Capital" means, as to each Preferred Unitholder,
$13,333 per Preferred Unit, reduced (but not below zero) by the amount of any
prior distribution to such Preferred Unitholder under Section 9.2.D(i)(B).
"Preferred Unitholder" means any Person designated as such in the Schedule
or any Person who becomes a Preferred Unitholder as provided in this Agreement,
including a substitute Preferred Unitholder, in that Person's capacity as a
Preferred Unitholder.
"Preferred Unit" means an interest in the Partnership held by a Preferred
Unitholder as such, as set forth on the Schedule.
"Property" means the Land and the Improvements thereon, consisting of a
portfolio of properties located on Nantucket Island, Massachusetts, including
two hotels, 51 retail buildings, 40 rental units located in the Wharf Cottages,
a boat basin capable of accommodating approximately 250 yachts, and employee
housing for approximately 150 persons.
"Property Expenses" means all the costs and expenses of any type incurred
incident to the ownership and operation of the Property, including, without
limitation, taxes, payments of principal and interest on the Mortgage Loan or
any other Partnership loans, maintenance, repairs and capital improvements to
the Property, the Management Fee, and the Partnership Administrative and
Investor Services Fee, and the funding of any reserves, deposits, escrow
accounts, or fees required to be maintained or paid by the Mortgage Documents.
Property Expenses shall be determined on an accrual basis of accounting
regardless of the basis upon which the books of the Partnership are kept for
other purposes.
"Registration Statement" means the Partnership's registration statement on
Form S-3 (SEC Registration No. 33-_____) declared effective on _____________
___, 1996.
"Retirement" (including Retire, Retired, and Retiring) means, as to the
General Partner, and shall be deemed to have occurred automatically upon the
occurrence of, an Event of Bankruptcy, dissolution, or voluntary or involuntary
withdrawal of the General Partner for any reason.
"Schedule" means the Schedule of Partners attached as Schedule A, as
amended from time to time.
"Sherburne Associates" means Sherburne Associates, a Massachusetts general
partnership which owns the Property.
"State" means the State of Delaware,
"Substitute Limited Partner" means any Person who is admitted to the
Partnership as a Limited Partner under the provisions of Article VII.
"Terminating Capital Transaction" means a Capital Transaction which
results in the termination of the Partnership. The term shall also include the
receipt and collection of notes, if any, and payments thereon or any other
consideration received or to be received by the Partnership upon such a
Transaction during the winding up of Partnership affairs.
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"Three Winthrop" means Three Winthrop Properties, Inc., a Massachusetts
corporation that is a wholly-owned subsidiary of First Winthrop and is the
General Partner.
"Transfer Application" means the application required to be delivered to
the General Partner by a proposed Transferee in connection with the Transfer of
Unit(s) and/or Preferred Units, as applicable, as described in Section 7.3.C.
"Uniform Act" means the Delaware Revised Uniform Limited Partnership Act,
6 Del. C. 17-101 et seq., as amended or modified from time to time.
"Unit" means an interest in the Partnership held by a Unitholder as set
forth as the Limited Partner's Percentage Interest on the Schedule.
"Unitholder" means any Person designated as such in the Schedule or any
Person who becomes a Unitholder as provided in this Agreement, including a
substitute Unitholder, in that Person's capacity as a Unitholder.
"WFA" means Winthrop Financial Associates, A Limited Partnership, a
Maryland limited partnership.
ARTICLE II
Continuation, Purpose, and Term
Section 2.1 Continuation
The parties hereto hereby agree to continue the limited partnership known
as Nantucket Island Associates Limited Partnership as a limited partnership
under the provisions of the Uniform Act.
Section 2.2 Name, Principal Office, Registered Office and Registered Agent
The Partnership shall continue to be conducted under the name of Nantucket
Island Associates Limited Partnership. The principal office of the Partnership
is One International Place, Boston, MA 02110. The General Partner may at any
time change the location of the principal office and shall give due notice of
any such change to the Limited Partners. The address of the Registered Office of
the Partnership in the State of Delaware is c/o The Prentice-Hall Corporation,
32 Loockerman Square, Suite L-100, Dover, Delaware 19901. The Registered Agent
for service of process in the State of Delaware is The Prentice-Hall
Corporation, 32 Loockerman Square, Suite L-100, Dover, Delaware 19901.
Section 2.3 Purpose
The purposes of the Partnership are to acquire, improve, maintain,
operate, lease, sell, dispose of and otherwise deal with NIA Operating
Associates, including, without limitation, causing NIA Operating Associates to
own and operate Sherburne Associates and causing Sherburne Associates to own and
operate the Property, together with such other activities as may be necessary,
advisable or convenient to the business of the Partnership. The Partnership and
the Partners (consistent with their obligations as set forth in this Agreement)
shall use their best efforts to cause NIA Operating Associates to cause
Sherburne Associates to own and operate the Property in accordance with all
applicable laws and regulations and shall take all steps necessary on a best
efforts basis to promote both the financial and economic viability of the
Partnership, NIA Operating Associates, Sherburne Associates and the Property and
the distribution of Cash Flow to the Partners. The Partnership shall not engage
in any other business or activity.
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Section 2.4 Authorized Acts
In furtherance of its purposes, but subject to all other provisions of
this Agreement, the Partnership by its General Partner is hereby authorized:
(i) to acquire by purchase, lease. or otherwise deal with any
partnership interests and/or real or personal property necessary,
convenient, or incidental to the accomplishment of the purposes of the
Partnership;
(ii) to cause NIA Operating Associates to cause Sherburne Associates
to prepay in whole or in part, refinance, recast, increase, modify, or
extend any mortgage of Sherburne Associates, including any mortgage
affecting the Property and, in connection therewith, to execute
extensions, modifications or renewals of mortgages on the Property, and to
enter into any required transfer of assets for security or mortgage
purposes; and to sell, lease, convey or exchange all or substantially all
of the assets of the Partnership;
(iii) to establish any reserves for working capital needs, repairs,
improvements or replacements or for other contingencies of the Partnership
and release funds from these reserves to the extent that the General
Partner no longer regards such reserves as reasonably necessary for the
efficient conduct of the affairs of the Partnership;
(iv) to cause NIA Operating Associates to cause Sherburne Associates
to employ and supervise a Management Agent, including any Affiliate of a
Partner, to manage the Property;
(v) to employ such other management or service personnel as may from
time to time be required to carry on the business of the Partnership;
(vi) to cause NIA Operating Associates to cause Sherburne Associates
to obtain and keep in force during the term of the Partnership such fire
and extended coverage, workmen's compensation, liability and other
insurance in favor of the Partnership, NIA Operating Associates and
Sherburne Associates as the General Partner deems appropriate, and is
satisfactory to the Mortgage Lender;
(vii) to cause NIA Operating Associates to cause Sherburne
Associates to enter into any (1) easement, right of way, utility, or other
agreements necessary for the development and operation of the Property;
(2) easement, cross-easement, right of way, or other agreement required to
permit access over, through, and across the Property (to serve adjoining
properties, for vehicular and pedestrian access, utility installation and
maintenance, and for other purposes); and (3) agreements with respect to
use of Property facilities; provided that all of the foregoing shall be
accomplished in accordance with applicable laws and regulations;
(viii) to invest in interest-bearing accounts and short-term
investments, including obligations of Federal, state, and local
governments and their agencies, mutual funds, commercial paper, and
certificates of deposit of commercial banks, savings banks, or savings and
loan associations;
(ix) to borrow money and issue evidences of indebtedness in
furtherance of any of the purposes of the Partnership, and to secure any
such debt by mortgage, pledge, or other lien on any of the assets of the
Partnership;
(x) to borrow money on the general credit of the Partnership and
Sherburne Associates for use in the Partnership's and Sherburne
Associates' business and to take any action and enter into any agreement
necessary or advisable in connection with any such borrowing;
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(xi) to bring and defend actions at law or suits in equity;
(xii) to purchase, cancel or otherwise retire or dispose of the
Units or Preferred Units of any Partner according to the express
provisions of this Agreement;
(xiii) to execute and deliver all documents for the sale of Units or
Preferred Units including, without limitation, the Registration Statement
and filings under the Securities Act of 1933, as amended, and any other
Federal and state laws relating to the sale of securities;
(xiv) to execute and deliver, and perform the terms, covenants, and
obligations of NIA Operating Associates and Sherburne Associates under the
partnership agreements of NIA Operating Associates and Sherburne
Associates and all other agreements, instruments, and documents as may be
necessary, appropriate or desirable, in the sole judgment of the General
Partner, in connection with NIA Operating Associates and Sherburne
Associates;
(xv) to give the consent of the Partnership in its capacity as
managing general partner of NIA Operating Associates or of NIA Operating
Associates in its capacity as a general partner of Sherburne Associates to
any action proposed to be taken by NIA Operating Associates or Sherburne
Associates requiring such consent and otherwise to act for and on behalf
of the Partnership in its capacity as a general partner of NIA Operating
Associates or in NIA Operating Associates' capacity as a general partner
of Sherburne Associates; and
(xvi) to execute any agreement on behalf of the Partnership, or to
cause the Partnership as the general partner of NIA Operating Associates
on behalf of Sherburne Associates to execute any agreement and to enter
into any transactions described in the Registration Statement; and
(xvii) to enter into any kind of activity and to carry out contracts
of any kind necessary to, or in connection with, or incidental to, the
purposes of the Partnership, NIA Operating Associates and Sherburne
Associates so long as the activities and contracts may be lawfully entered
into or carried on by a partnership under the laws of the State.
Section 2.5 Term and Dissolution
The Partnership shall continue in effect until December 31, 2035, except
that the Partnership shall be dissolved prior to that date if any of the
following events occurs:
(i) the sale or other disposition of all or substantially all the
assets of the Partnership in accordance with Section 5.1 unless the
General Partner, with the Consent of the Limited Partners, elects to
continue the Partnership business in accordance with that Section solely
for the purpose of receiving and collecting a note or notes or any other
consideration to be received in exchange for the assets of the
Partnership;
(ii) the Retirement of the General Partner, if the Partnership is
not continued as provided in Section 6.1; or
(iii) the election to dissolve the Partnership made in writing by
the General Partner with the Consent of the Limited Partners. Upon
completion of winding up of the affairs of the Partnership, the General
Partner (or its trustees, receivers, successor, or legal representatives)
shall cause the cancellation of the Certificate and shall, unless the
Partnership is continued pursuant to Sections 5.1.C or 6.1, liquidate the
Partnership assets and distribute the proceeds in accordance with Section
9.3. Notwithstanding the foregoing, if the General Partner determines that
an immediate sale of part or all of the Partnership's assets would cause
undue loss to the Partners, the General Partner may either (i)
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defer liquidation of, and withhold from distribution for a reasonable
time, any assets of the Partnership except those necessary to satisfy the
Partnership's debts and obligations; or (ii) distribute the assets to the
Partners in kind.
ARTICLE III
Partners; Capital
Section 3.1 General Partner
A. The General Partner is Three Winthrop and its Capital Contributions are
set forth in the Schedule.
B. The General Partner shall have the right to admit any Person as an
additional or substitute General Partner with the Consent of the Limited
Partners. The Limited Partners recognize that this procedure is necessary for
the orderly and efficient operation of the business of the Partnership.
Section 3.2 Limited Partners
The Limited Partners are the Limited Partners designated as Limited
Partners on the Schedule. The names, addresses, Capital Contributions, and
Percentage Interests of the Limited Partners are set forth in the Schedule.
Section 3.3 Partnership Capital
The capital of the Partnership shall be the aggregate amount of cash
contributed by the General Partner and the Limited Partners as set forth in the
Schedule. Except as otherwise provided herein, no interest shall be paid by the
Partnership on any Capital Contribution.
Section 3.4 Withdrawal of Capital
Except as otherwise provided herein, no Partner shall have the right to
withdraw any part of his Capital Contribution from the Partnership until
December 31, 2035. No Partner shall have the right to demand and receive
property of the Partnership, instead of cash, in return of his Capital
Contribution except as specifically provided in this Agreement. All rights to
withdraw a Partner's Capital Contribution shall be subject to the provisions of
the Uniform Act. In any event, the General Partner shall not be liable for the
return of any Partner's capital.
Section 3.5 Liability of Limited Partners
No Limited Partner shall be liable for any debts, liabilities, contracts
or obligations of the Partnership.
Section 3.6 Limited Partners
A. Each Limited Partner shall be admitted to the Partnership as of the
date on which an amendment is made to the Schedule listing his name, address,
Capital Contribution, and Percentage Interest.
B. Each Limited Partner agrees, by the execution of this Agreement or as a
result of being admitted to the Partnership as a Substitute Limited Partner
pursuant to Article VII, and as a condition of receiving any interest in the
Partnership property, to be bound by the terms and provisions of this Agreement
and any other documents required in connection therewith. Each Limited Partner
also agrees to accept any other terms and
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conditions set forth in writing at the time of admission which are determined to
be reasonably necessary by the General Partner.
C. Upon the admission of each Limited Partner, the Schedule shall be
amended to reflect his name, address and Capital Contribution. Each Limited
Partner may become signatory hereto by his attorney-in-fact signing a conformed
copy of this Agreement pursuant to the power of attorney contained in his
subscription documents. Each Limited Partner shall thereupon be deemed to have
adopted and to have agreed to be bound by all the provisions of this Agreement;
provided, however, that no such signed copy shall be binding until it has been
signed by the General Partner. The Partnership shall thereupon issue to each
Limited Partner an Investor Certificate as evidence of his Interest in the
Partnership. All Investor Certificates shall be held in trust by the Partnership
on behalf of the Limited Partners.
D. To the extent that the Partnership makes any payment or payments which
are treated as syndication expenses under Section 709 of the Code and are not
amortized, such payment or payments shall be charged, at that time, against the
Limited Partners' Capital Accounts. If at any time thereafter, the Partnership
takes a deduction for Federal income tax purposes which is attributable to such
payment or payments (or a portion thereof), such deduction shall be allocated
solely to the Limited Partners, but no adjustment of the Limited Partners'
Capital Accounts shall be made at such time. All amounts allocated under this
Section 3.6.D to the Limited Partners as a group shall be allocated among them
pro rata based upon the Percentage Interest of each Limited Partner as set forth
on the Schedule. Selling commissions shall be allocated under this Section 3.6.D
and shall be charged to the Capital Account of such Partner based upon the
selling commissions paid with respect to each Partner's Units.
ARTICLE IV
Capital Contributions of Limited Partners
Section 4.1 Payments The Unitholders and the Preferred Unitholders have
made the Capital Contributions identified on the Schedule.
Section 4.2 Additional Capital Contributions by Limited Partners and
Admission of Additional Limited Partners
A. In the event that the General Partner determines that it is in the best
interests of the Partnership to raise additional capital for the Partnership,
the General Partner may, without the Consent of the Limited Partners, sell
additional limited partnership interests in the Partnership. Additional limited
partnership interests may be sold on such terms and conditions, and additional
Limited Partners shall have such rights and obligations, as the General Partner
shall determine.
B. In the event that the General Partner determines to issue and sell
additional limited partnership interests as provided in Section 4.2.A, the
General Partner shall, prior to the offer or sale of such interests to Persons
other than the Limited Partners, offer such interests to the Limited Partners
pro rata in accordance with their Percentage Interests for a 45-day period after
notice to the Limited Partners of the terms and conditions of any offering of
additional limited partnership interests. No fees will be payable to the General
Partner from the proceeds of the sale of such interests except for customary
brokerage commissions on interests sold to Persons who are not Partners of the
Partnership and except for reimbursement of any reasonable "out-of-pocket"
expenses incurred in connection with the sale of such interests.
Section 4.3 Fees and Expense Reimbursements Paid to Certain Entities
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A. For Partnership administration and other services, the Partnership will
pay to the General Partner or its Affiliate an annual Partnership Administration
and Investor Services Fee of $________ for calendar year 1996, increasing
annually at the rate of 6%.
B. The Partnership shall pay the Management Agent a monthly Management Fee
as specified in the Management Agreement.
C. The Partnership shall pay the General Partner or its Affiliate fees for
various goods and services including without limitation insurance coverage
(including property, liability and title insurance), insurance brokerage,
mortgage brokerage in connection with financings and refinancings of the
Property, management, rehabilitation, leasing, development and real estate
brokerage at then prevailing market rates in the vicinity of the Property.
D. Any fees or reimbursements by the Partnership to the General Partner or
to any Affiliate thereof which are not specifically provided for in this
Agreement or the Registration Statement shall be fully disclosed to the Limited
Partners and shall be payable only if they constitute reasonable reimbursements
or compensation for services actually rendered to the Partnership in the
ordinary course of business.
ARTICLE V
Rights, Powers and Duties of the General Partner
Section 5.1 Business Management and Control; Refinancing
A. The General Partner shall have the exclusive right to manage and
control the business of the Partnership, NIA Operating Associates and Sherburne
Associates, to bind the Partnership by its sole signature, and to take any
action it deems necessary or advisable in connection with the business of the
Partnership, NIA Operating Associates and Sherburne Associates. The Partnership
hereby ratifies all actions heretofore taken by the General Partner in
connection with the Partnership.
B. The General Partner, on behalf of the Partnership, may, without the
Consent of the Limited Partners, increase, decrease or refinance any Mortgage
Loan or any other loan entered into by the Partnership or Sherburne Associates,
and sell, exchange or develop portions of the Property (but not to sell all or
substantially all of the assets in a single or related series of transactions).
The General Partner shall give the Limited Partners at least thirty (30) days'
written notice of any proposed Capital Transaction that requires their Consent.
C. If the Partnership enters into a Capital Transaction and elects to
continue in existence for the purpose of receiving and collecting a promissory
note or notes received in the transaction, then:
(i) any payments of interest on the note(s) shall be considered as
income of the Partnership for purposes of determining Cash Flow, and any
payments of principal shall be considered proceeds of a Capital Transaction; and
(ii) the General Partner or its Affiliate shall be entitled to
receive an annual Service Fee each year in the amount of 1% of the interest
payments and other fees collected for that year by the Partnership.
No Limited Partner (except one who may also be a General Partner, and then
only in his capacity as General Partner) shall (i) have any authority or right
to act for or bind the Partnership, or (ii) participate in or have any control
over the Partnership business, except as required by law. The Limited Partners
hereby consent to the exercise by the General Partner of the powers conferred on
it by this Agreement.
Section 5.2 Duties and Obligations
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The General Partner shall diligently and faithfully devote as much of its
time, but shall not be required to devote its full time, to the business of the
Partnership as necessary to conduct the business of the Partnership and shall at
all times act in a fiduciary manner toward the Partnership and the Limited
Partners. The General Partner shall at all times have a fiduciary responsibility
for the safekeeping and use of all Partnership funds and assets.
Section 5.3 Indemnification
A. Neither the General Partner, nor any "affiliate of the General Partner"
(as defined in Section 5.3.F below) shall be liable, responsible or accountable
in damages or otherwise to any of the Limited Partners or the Partnership for
any act or omission performed or omitted by them if they determined, in good
faith, that such action or omission was in the best interests of the
Partnership, and such course of conduct did not constitute negligence or
misconduct on the part of such Persons.
B. Subject to the provisions of Section 5.3.C, the Partnership (but not
any Partner) shall indemnify and hold harmless the General Partner and each
person performing services on behalf of the Partnership who (a) directly or
indirectly controls, is controlled by, or is under common control with the
General Partner, (b) who owns or controls 10% or more of the outstanding voting
interest in the General Partner, and (c) any officer, director or partner or
wholly-owned subsidiary of any entity described in (a) or (b), against any loss,
damage, liability, cost or expense (including reasonable attorney's fees)
sustained by them in connection with the Partnership, provided that such loss,
damage, liability, cost or expense was not the result of negligence or
misconduct of any such Persons. Any indemnity under this Section 5.3 shall be
paid from, and only to the extent of, Partnership assets and no Partner shall
have any personal liability on account thereof.
C. Notwithstanding any other provision of this Agreement, neither the
General Partner nor any Entity or individual entitled to indemnification
pursuant to Section 5.3.B above shall be indemnified for any loss, damage or
cost resulting from the violation of any Federal or state securities laws in
connection with the sale of Units or Preferred Units, as applicable, unless (i)
there has been a successful adjudication on the merits of each count involving
such securities law violations, (ii) such claims have been dismissed with
prejudice on the merits by a court of competent jurisdiction or (iii) a court of
competent jurisdiction approves a settlement of such claims. In any claim for
indemnification for federal or state securities law violations, the party
seeking indemnification shall place before the court the position of the
Securities and Exchange Commission and the Massachusetts Securities Division
with respect to the issue of indemnification for securities law violations.
D. The General Partner shall be required to take only such actions on
behalf of the Partnership as are expressly required by this Agreement and it
shall not be required to take any such action requiring the expenditure of funds
if Partnership funds are not available. Except as may otherwise be provided
herein, the General Partner shall not be required to advance, contribute or
provide funds to the Partnership for any purpose in excess of its Capital
Contributions.
E. No Partnership funds shall be used to purchase any insurance that
insures any party against any liability for which indemnification is not
available pursuant to this Section 5.3.
F. For purposes of Section 5.3.A above and Section 5.4 below, an
"affiliate of the General Partner" shall mean any person performing services on
behalf of the Partnership who: (1) directly or indirectly controls, is
controlled by, or is under common control with the General Partner; or (2) owns
or controls 10% or more of the outstanding voting securities of the General
Partner; or (3) is an officer, director, partner or trustee of the General
Partner; or (4) if the General Partner are officers, directors, partners or
trustees, is any company for which the General Partner act in any such capacity.
Section 5.4 Liability of the General Partner to Limited Partners
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Neither the General Partner nor any "affiliate of the General Partner" (as
defined in Section 5.3.F above) shall be liable, responsible, or accountable for
damages or otherwise to any Limited Partner or the Partnership arising out of
any act performed or any failure to act by any of them if they determined, in
good faith, that such act or failure to act was in the best interests of the
Partnership, and such course of conduct did not constitute negligence or
misconduct on the part of the General Partner or any "affiliate of the General
Partner" (as defined in Section 5.3.F. above).
Section 5.5 Limited Partners' Right to Restrict General Partner's
Authority
Notwithstanding any provisions to the contrary in this Agreement, Limited
Partners owning in the aggregate more than 50% of the Interests shall have the
right:
(i) to remove the General Partner;
(ii) to amend this Agreement (subject to the requirement of Section
11.13 for unanimous consent to certain amendments), or to approve or
disapprove any amendment proposed by the General Partner, the effect of
which would be to alter the basic substance of the Agreement;
(iii) to dissolve the Partnership; and
(iv) to approve or disapprove the sale of all, or substantially all,
of the assets of the Partnership in a single or series of related
transactions;
provided, however, that no amendment of the Agreement shall affect the timing or
amount of the fees to be paid by the Partnership under this Agreement; provided,
further, that no removal of the General Partner or amendment shall affect the
rights of the General Partner (including the right to receive any fees payable
to the General Partner, including fees payable pursuant to Section 4.3) or any
share of the profits, losses, and distributions allocable or distributable to a
Partner pursuant to Sections 9.1, 9.2 and 9.3 (collectively referred to in this
Section as "Retained Rights") without its prior written consent; and provided
further, that in addition to the provisions of Section 11.13, no such amendment
shall increase the liability of any Limited Partner or in any way alter the
amounts allocable or distributable to him with respect to his Retained Rights
without his prior written consent.
Upon removal of the General Partner pursuant to this Section, the removed
General Partner shall become a Limited Partner and as such shall not have any
right to participate in the management of the affairs of the Partnership but
shall continue to own its partnership interest and the Retained Rights which it
owned as the General Partner. The Limited Partners, or any successor General
Partner proposed by them, shall have the option but not the obligation to
acquire, upon payment of any agreed-upon value or its fair market value, all or
any part of the interest in the Partnership of the removed General Partner. Any
dispute as to fair market value shall be settled by averaging appraisals of the
fair market value of the interest submitted by three appraisers, one chosen by
the removed General Partner, one chosen by the successor General Partner or the
Limited Partners, as the case may be, and the third chosen by the two appraisers
so chosen.
A General Partner removed pursuant to this Section shall not be liable as
General Partner for any liability or obligation of the Partnership incurred on
account of the activities of the Partnership from and after the time its removal
is effective.
Section 5.6 Operating Reserve; Capital Improvement Fund
A. The Partnership shall provide for an Operating Reserve as described in
the Registration Statement.
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B. The Partnership shall establish a Capital Improvement Fund to be
utilized for the improvement and benefit of portions of the Property as
described in the Registration Statement.
C. Upon a sale of all or substantially all of the Property or a sale of
100% of the Partnership Interests, or upon termination of the Partnership, the
Operating Reserve and the Capital Improvement Fund shall be terminated, and any
remaining balances shall be distributed to the Partners in accordance with
Sections 9.2.C, D and E.
Section 5.7 Other Activities
The General Partner or any Affiliated Person thereof may engage in or
possess an interest in, other business ventures of every nature and description,
independently or with others, including, without limitation, real estate
business ventures whether or not such other enterprises shall be in competition
with any activities of the Partnership.
ARTICLE VI
Retirement of the General Partner
Section 6.1 Retirement; Dissolution; Continuation
A. Subject to the provisions of this Article VI, the General Partner shall
be automatically Retired from the Partnership upon the occurrence of any of the
events specified in Article I under the definition of "Retirement."
B. The General Partner may withdraw voluntarily from the Partnership only
if another General Partner, including a substitute or additional General Partner
admitted pursuant to Section 3.1, remains.
C. Upon the Retirement of the General Partner, the Retired General Partner
or its heir, successors, or assigns, shall immediately send notice of its
Retirement (the "Retirement Notice") to each Limited Partner. In such event the
Partnership (i) shall be automatically dissolved (unless it is continued by all
of the Partners as provided in paragraph D of this Section 6.1) if there is no
remaining General Partner, or (ii) shall be continued by the remaining General
Partner if the remaining General Partner, in its sole discretion, so elects.
D. If following the Retirement of the General Partner there is no
remaining substitute General Partner who elects to continue the Partnership, the
Limited Partners may, within ninety (90) days after the Retirement, elect to
continue the Partnership's business for the balance of the term specified in
Section 2.5 by selecting a substitute General Partner by unanimous consent. If
the Limited Partners elect to continue the Partnership by admitting a substitute
General Partner, the relationship of the Partners (and of any person who has
acquired an Interest of a Partner) shall be governed by this Agreement.
E. Notwithstanding any other provisions of this Agreement, if the
Retirement of the General Partner is due to an Event of Bankruptcy, any fees
otherwise payable to the bankrupt General Partner and not paid at the time of
the Event of Bankruptcy shall be retained by the Partnership for such purposes
as any substitute General Partner determines.
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ARTICLE VII
Transferability of Limited Partnership Interests
Section 7.1 Limited Right to Assign
A. No Limited Partner shall have the right to assign, transfer, sell,
pledge, or otherwise dispose of (collectively, a "Transfer") all or any portion
of his Interest in the Partnership without the prior written consent of the
General Partner.
B. Notwithstanding Section 7.1.A, a Limited Partner may, by written
instrument, designate any Person to become the assignee of all or any portion of
his Interest as a Limited Partner immediately upon his death. Such a designee,
if he is then living, shall become an assignee immediately upon the assignor's
death without requirement of any action on the part of the legal representatives
of the assignor Limited Partner but, if the assignor Limited Partner's Investor
Certificate is not held by the Partnership, shall be admitted to the Partnership
only upon presentation by such assignee of the Investor Certificate with respect
to such Interest, duly endorsed by such legal representatives; and such legal
representatives and the estate of such deceased Limited Partner shall have no
interest whatsoever in the Partnership. Any such designation must be filed with
the General Partner during such Limited Partner's lifetime. Such designation may
be revoked from time to time and a new such designation made and filed with the
General Partner. The Partnership need not recognize such designated assignee as
a Substitute Limited Partner until (i) duly notified in writing of the death of
the assignor Limited Partner and (ii) furnished with a legal opinion acceptable
to the General Partner to the effect that such designation is valid under the
applicable laws of testate and intestate succession.
C. Except as otherwise provided in the Uniform Act, in the event of the
death or incapacity of any Limited Partner who has not filed a valid designation
under Section 7.l.B, his legal representatives shall have the same rights as an
assignee by designation of the Limited Partner as hereinabove provided. The
death or incapacity of a Limited Partner shall not dissolve or terminate the
Partnership.
D. If an assignment is made pursuant to Section 7.1.B or C, then such
assignee may become a Substitute Limited Partner only in accordance with Section
7.3 but, notwithstanding Section 7.4, in any event shall be entitled to the
share of profits, losses and distributions in respect of the Interest so
assigned.
Section 7.2 Restrictions
A. No Limited Partner may transfer any portion of his Interest as a
Limited Partner if the assignment, transfer, sale, pledge or other disposition
(collectively, a "Transfer") would violate Section 11.1.
B. In no event shall any part of a Limited Partner's Interest be
transferred to a minor (other than to a member of his Immediate Family by reason
of death), or to an incompetent. In no event shall a Limited Partner transfer an
Interest representing less than a one-half Unit or a one-half Preferred Unit, as
applicable, without the written permission of the General Partner, unless that
constitutes his entire Interest in the Partnership.
C. The General Partner may require, as a condition of any Transfer of any
Interest in the Partnership, that the transferor (i) assume all costs incurred
by the Partnership in connection with the Transfer, and (ii) furnish it with a
legal opinion satisfactory to counsel for the Partnership that the Transfer
complies with applicable Federal and state securities laws.
D. No Transfer of any Interest in the Partnership as a Limited Partner may
be made if such Transfer, when added to all other Transfers made within the
preceding 12 months ending with the date of the proposed Transfer, would result
in the termination of the Partnership under Section 708 of the Code.
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E. Any Transfer in contravention of any of the provisions of this Section
7.2 shall be void and ineffectual and shall not bind or be recognized by the
Partnership.
Section 7.3 Substitute Limited Partners
A. No Limited Partner shall have the right to substitute an assignee as a
Limited Partner in his place. The General Partner shall, however, have the right
in its sole discretion to consent to the admission of an assignee of the
Interest of a Limited Partner as a Substitute Limited Partner as provided in
this Section 7.3. Any such consent by the General Partner shall be binding and
conclusive without the consent or approval of any Limited Partner.
B. The Interest of a Limited Partner may be transferred only by delivery
to the General Partner of (i) the Investor Certificate, duly endorsed by such
Limited Partner, or, if the Partnership holds the Investor Certificate on behalf
of the transferring Limited Partner, endorsed pursuant to the power of attorney
granted in Section 11.2, and (ii) a Transfer Application in accordance with
Section 7.3.C. By delivery of these documents to the General Partner, the
transferee of such Limited Partner (the "Transferee") shall be deemed to have
applied for admission to the Partnership as a Substitute Limited Partner.
Pending admission as a Substitute Limited Partner, the Transferee shall be an
assignee of the Interest represented by the Investor Certificate.
C. No Transfer of Interests or of Investor Certificates evidencing such
Interests may be made, and no new Investor Certificate will be issued to the
proposed Transferee, unless the Transferee has signed a Transfer Application and
delivered it to the General Partner.
D. A Transferee who is deemed under Section 7.3.B to have requested
admission as a Substitute Limited Partner shall be deemed (i) to have agreed to
comply with and be bound by this Agreement and to execute any document that the
General Partner reasonably requires him to execute in connection with the
assignment to him and his admission as a Substitute Limited Partner, and (ii) to
have appointed the General Partner his attorney-in-fact pursuant to the power of
attorney set forth in Section 11.2.
E. The admission of an assignee as a Substitute Limited Partner shall
become effective on the date that an amendment to the Schedule relating to the
transferred Investor Certificate is duly recorded in the Partnership's records.
F. Any Substitute Limited Partner shall, as a condition of receiving any
Interest in the Partnership, agree to be bound by the provisions of this
Agreement to the same extent as other Limited Partners.
Section 7.4 Assignees
Except for an assignee under Sections 7.1.B or C, if the purported
assignee of a Limited Partner does not become a Substitute Limited Partner in
accordance with Section 7.3, the Partnership shall not recognize the assignment,
and the purported assignee shall not have any rights to receive any portion of
the share of profits, losses, and distributions of the Partnership to which the
Limited Partner making the purported assignment would have been entitled if no
such purported assignment had been attempted to be made. Any such profits,
losses, and distributions shall continue to be allocated as if no assignment
were ever attempted.
Section 7.5 Lost Investor Certificates
If any Investor Certificate is lost, mutilated, or destroyed while in the
possession of a Limited Partner, the General Partner may issue a replacement
Certificate and may require as a precondition that the Limited Partner, his
legal representatives, or any holder of the lost, mutilated, or destroyed
Certificate execute and deliver any indemnity agreements, affidavits, bonds, or
other security reasonably required by the General Partner.
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ARTICLE VIII
Loans
Section 8.1 In General
A. The Partnership may borrow from any source, including Partners. If any
Partner lends any monies to the Partnership, the amount of any such loan shall
not be an increase of his Capital Contribution or affect in any way his share of
the profits, losses, or distributions of the Partnership.
B. Except as otherwise provided in the Management Agreement, loans made by
a Partner or an Affiliate of a Partner to the Partnership shall be evidenced by
promissory notes which shall:
(i) bear interest at a commercially reasonable rate not in excess of
three percent (3%) above the rate of interest announced from time to time
by The First National Bank of Boston as its "base rate" (the "Prime
Rate"), said Prime Rate being computed at the end of each calendar month
(based upon the Prime Rate on the last day of each such month) following
the making of said loan; and
(ii) provide that the obligation of the Partnership to make interest
and principal payments thereunder shall be subordinate to the obligation
of the Partnership to pay unrelated creditors of the Partnership but shall
have priority over the distribution to Partners of Cash Flow and Capital
Proceeds of the Partnership pursuant to Sections 9.2 and 9.3 of this
Agreement.
ARTICLE IX
Profits and Losses; Distributions
Section 9.1 Profits and Losses
A. Allocation of Net Income or Net Loss. Except as otherwise provided in
this Section 9.1, Net Income or Net Loss for each fiscal year shall be allocated
to the Partners in accordance with their Percentage Interests. Notwithstanding
anything to the contrary contained herein, if in 1987, a Partner (i) was
allocated pursuant to Section 706(d) of the Code or Treasury Regulation Section
1.751-1(b)(2)(ii) any Net Losses, deductions or any expenditures described in
Section 705(a)(2)(B), (ii) was distributed any cash or property from the
Partnership to the extent such distributions exceeded offsetting increases to
such Partner's Capital Account that were reasonably expected to occur during
such year, or (iii) received any other adjustment, allocation or distribution
described in Treasury Regulation Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6),
and, as a result of such adjustment, allocation or distribution, such Partner
had a Qualified Income Offset Amount (as defined hereinafter) in his Capital
Account, then Net Profits (or items thereof) shall first be allocated to such
Partner in an amount equal to his Qualified Income Offset Amount. As used in
this Section 9.1(A), the term Qualified Income Offset Amount for a Partner means
the negative balance to the extent it exceeds the Partner's allocable share of
minimum gain which the Partner has in his Capital Account following the
adjustment, allocation or distribution described in the preceding sentence.
B. Allocation of Gain from a Non-Terminating Capital Transaction. The
Gain, if any, arising from a Non-Terminating Capital Transaction shall be
allocated as follows:
First, to each Partner who has received or will receive a
distribution out of Capital Proceeds under Section 9.2.C Third, Fourth,
Fifth and/or Sixth, an amount equal to the excess of any such distribution
over the positive balance in his Capital Account.
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Second, to any Partners having negative balances in their Capital
Accounts (determined after the allocation provided for in Section 9.1.B
First above), in proportion to and to the extent of such negative
balances; and
Third, the balance of the Gain, if any, shall be allocated so as to
increase each Partner's Capital Account (determined after the allocations
provided in Section 9.1.B First and Second, above) to an amount equal to
the Capital Proceeds of a hypothetical Capital Transaction that would be
distributable to him pursuant to Section 9.2.C if the proceeds were equal
to the sum of
(i) the amount of Gain being allocated pursuant to this
Section 9.2.B Third, plus
(ii) the sum of the positive balances, if any, in the Capital
Accounts of all Partners (determined after the allocations provided
in Section 9.1.B First and Second) as of the end of the fiscal year
in which the Capital Transaction resulting in the Gain being
allocated pursuant to this Section 9.2.B Third occurs.
C. Allocation of Gain from a Terminating Capital Transaction. The Gain, if
any, arising from a Terminating Capital Transaction shall be allocated as
follows:
First, to all Partners having negative balances in their Capital
Accounts, in proportion to and to the extent of such negative balances;
Second, to each Partner who has received or will receive a
distribution out of the Capital Proceeds under Section 9.3, the excess of
(i) the sum of the amounts which would have been distributable to him
under Section 9.2.C Third, Fourth and Fifth if the transaction generating
Gain were not a Terminating Capital Transaction, over (ii) the positive
balance in his Capital Account, determined after any allocation under
Section 9.1.C First; and
Third, the balance of the Gain, if any, 75% to the Limited Partners
and 25% to Three Winthrop.
D. Loss from a Capital Transaction. A Loss arising from a Capital
Transaction, including a Terminating Capital Transaction, shall be allocated as
follows:
First, to each Limited Partner having a positive balance in his
Capital Account, an amount of loss so that, to the extent possible, the
positive Capital Account per Unit of each Limited Partner will be the
same.
Second, to any Partners having positive balances in their Capital
Accounts, in proportion to and to the extent of such positive balances;
and
Third, the remainder to the Partners in accordance with their
Percentage Interests.
E. Allocations While Preferred Units Are Outstanding. Notwithstanding the
provisions of Sections 9.1.A, 9.1.B, 9.1.C and 9.1.D, for each fiscal year (or
portion thereof) that Preferred Units are outstanding, commencing on the date
hereof, (i) Net Loss shall be allocated (A) first, 5% to the General Partner and
95% to the Limited Partners, in proportion to and to the extent of the positive
balances in the Limited Partners' Capital Accounts, until the Limited Partners'
Capital Account balances are reduced to zero, and (B) the balance, if any, to
the Partners on account of their Units and general partnership interests as
provided in Section 9.1.A, (ii) Net Income shall be allocated (A) first, to the
Preferred Unitholders, in an amount equal to the excess of the cumulative
distributions made or to be made to them on account of their Preferred Units
pursuant to Section 9.2.D(i)(A) for all periods through the close of the fiscal
year just ended over the cumulative amounts of Net Income and Gain from a
Capital Transaction previously allocated to them on account of such
distributions pursuant to this Section 9.1.E,
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(B) second, to the Preferred Unitholders, to restore Net Loss previously
allocated to them on account of their Preferred Units pursuant to this Section
9.1.E, (C) third, to the Partners, to restore Net Loss previously allocated to
them on account of their Units and general partnership interests pursuant to
this Section 9.1.E, and (D) the balance, if any, to the Partners on account of
their Units and general partnership interests as provided in Section 9.1.A, and
(iii) Gain or Loss from a Capital Transaction shall be allocated (A) if any
amounts are distributed or to be distributed on account of such Capital
Transaction, first, in such manner as shall cause the Partners' respective
positive Capital Account balances to at least equal, or, in the case of a
Terminating Capital Transaction, to most nearly equal, the amounts distributed
or to be distributed to them pursuant to and in the priority set forth in
Section 9.2.D on account of such Capital Transaction, (B) if no amounts are to
be distributed on account of such Capital Transaction, in the case of Gain only,
to the Preferred Unitholders, first, to restore Net Loss previously allocated to
them on account of their Preferred Units pursuant to this Section 9.1.E, and
then, in an amount equal to the excess of the cumulative distributions
previously made to them in excess of $13,333 per Preferred Unit for all periods
through the close of the fiscal year just ended, over the cumulative amount of
Net Income and Gain from a Capital Transaction previously allocated to them on
account of such excess distributions under this Section 9.1.E, and (C) the
balance, if any, to the Partners on account of their Units and general
partnership interests as provided in Sections 9.1.B, C and D; provided, however,
that if the Capital Transaction is a Terminating Capital Transaction, then any
Gain therefrom shall first be allocated to all Partners having negative balances
in their Capital Accounts in proportion to and to the extent of such negative
balances.
F. Allocation Among Partners or Classes of Partners. Except as otherwise
provided in this Agreement, all Net Income, Net Loss and Gain or Loss from a
Capital Transaction allocated to Partners or a class of Partners shall be shared
by the Partners or the member of the class in the ratios of their respective
Percentage Interests or, in the case of the Preferred Unitholders, in proportion
to their respective Preferred Units.
G. Section 754 Election. All allocations of Net Income, Net Loss and Gain
or Loss from a Capital Transaction pursuant to this Section 9.1 shall be made
without regard to any election made by the Partnership under Section 754 as it
applies to Section 743(b) of the Code. After such allocations are made, however,
appropriate adjustments shall be made to the Net Income, Net Loss and Gain or
Loss from a Capital Transaction allocated to each Partner to give effect to any
such election.
H. Loss Attributable to Nonrecourse Indebtedness.
Notwithstanding Sections 9.1.A through D:
(1) any Net Loss or Loss from a Capital Transaction attributable to
nonrecourse indebtedness which would cause the sum of the deficit balances
in the Partners' Capital Accounts to exceed the Minimum Gain (determined
at the end of the Partnership's fiscal year) shall not be allocated to the
Limited Partners in accordance with Sections 9.1.A through D, but shall be
allocated instead as follows:
First, to any Partners having positive balances in their
Capital Accounts, in proportion to and to the extent of such
positive balances; and
Second, the remainder to the Partners in accordance with their
Percentage Interests; and
(2) if, at the end of any fiscal year in which the Partnership has
Net Income or Gain from a Capital Transaction, the sum of the deficit
balances in the Partners' Capital Accounts exceeds the Minimum Gain, the
Net Income or Gain from a Capital Transaction shall, to the extent
possible, be allocated to any Partners having deficit balances in their
Capital Accounts, in proportion to their deficit balances, until the sum
of their deficit balances equals the Minimum Gain; provided, however, that
for purposes of this provision, the deficit balance in a Partner's Capital
Account shall be reduced by the amount that such Partner is
unconditionally obligated to contribute in the future to the Partnership
or to pay to restore his deficit balance.
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I. Allocation of Gain Attributable to Depreciation Recapture. To the
extent that any portion of a Gain from a Capital Transaction is treated as
ordinary income pursuant to Sections 751(b), 1245 or 1250 of the Code, such
ordinary income shall be allocated among the Partners in proportion to the
balances in their "Depreciation Recapture Accounts" as of the last day of the
fiscal year in which such Capital Transaction occurs; provided, however, that
the amount of such ordinary income allocated to any Partner shall not be less
than the lesser of (i) his "Priority Recapture Amount" as defined in this
Section 9.1.I, or (ii) the amount of such ordinary income multiplied by a
fraction, the numerator of which is the Partner's Priority Recapture Amount and
the denominator of which is the total of all Partners' Priority Recapture
Amounts. Each Partner's Depreciation Recapture Account shall be determined as
follows:
(1) There shall be added to his Depreciation Recapture Account at
the end of each fiscal year
(a) the amount of depreciation allowable to the Partnership or
Sherburne Associates for that year with respect to "Section 1245
property" (as hereinafter defined) and "Section 1245 recovery
property"(as hereinafter defined) multiplied by his percentage of
the Partnership's Net Income or Net Loss for that year; and
(b) the amount of "additional depreciation" (as hereinafter
defined) allowable to the Partnership or Sherburne Associates for
that year with respect to "Section 1250 property" (as hereinafter
defined), multiplied by his percentage of the Partnership's Net
Income or Net Loss for that year; for Section 1250 property held for
one year or less as of the end of the fiscal year, all depreciation
deductions shall be treated as "additional depreciation";
(2) There shall be deducted from his Depreciation Recapture Account
at the end of each fiscal year the excess, if any,of
(a) the amount of depreciation which would have been allowable
to the Partnership or Sherburne Associates for that year with
respect to Section 1250 property, if such depreciation had been
claimed on a straight-line basis from the date of acquisition or
completion of construction of the property, multiplied by his
percentage of the Partnership's Net Income or Net Loss for that
year;
over
(b) the amount of depreciation allowable to the Partnership
with respect to Section 1250 property for that year, multiplied by
his percentage of the Partnership's Net Income or Net Loss for that
year;
(3) There shall be deducted from his Depreciation Recapture Account
at the beginning of each fiscal year the amount of any ordinary income
allocated to him pursuant to this Section 9.l.H for the prior fiscal year;
and
(4) For any Section 1245 property, Section 1250 property and Section
1245 recovery property sold or otherwise disposed of by the Partnership or
Sherburne Associates during the fiscal year, there shall be deducted from
his Depreciation Recapture Account, at the beginning of the next fiscal
year, his proportionate share, in accordance with the balances of the
Partners' Depreciation Recapture Accounts at the end of the fiscal year of
the sale or other disposition, of the excess, if any, of
(a) the amount of ordinary income which would have been
realized by the Partnership if the asset had been sold or otherwise
disposed of for its original basis (determined under Section 1012 of
the Code prior to any adjustments pursuant to Section 1016 of the
Code),
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over
(b) the amount of ordinary income actually realized by the
Partnership or Sherburne Associates upon the sale or other
disposition of the asset; and
(5) For Section 1250 property held for one year or less as of the
end of the previous fiscal year, there shall be deducted from such
Depreciation Recapture Account as of the date that such property has been
held more than one year the amount of depreciation deductions which would
have been allowable under the straight-line method for such previous
fiscal year.
The terms "Section 1245 property," "Section 1250 property," "Section 1245
recovery property" and "additional depreciation" shall have the meanings
specified in Sections 1245 and 1250, respectively, of the Code.
To the extent that the amount of ordinary income allocable to any Partner
pursuant to this Section 9.1.I exceeds the amount of Gain allocable to him under
Section 9.1.B, 9.1.C or 9.1.E, the amount of Gain allocable to him under Section
9.1.B or 9.1.C shall be increased by the amount of the excess, and the amount of
Gain allocated to all other Partners under those Sections (excluding any Partner
whose share of Gain is increased pursuant to this sentence) shall be decreased
by the amount of the excess in proportion to the respective amounts of Gain
otherwise allocable to them pursuant to those Sections; provided, however, that
the provisions of this sentence shall not apply to the extent that their
application would create or increase a positive balance in the Capital Account
of any Partner while the balance in the Capital Account of any other Partner
(after applying Section 9.1.B or 9.1.C) is negative.
Each Partner's Priority Recapture Amount is equal to the total of his
Priority Recapture Increments, reduced by the amount of ordinary income
previously recognized by him pursuant to this Section 9.1.I. A Partner will
incur a Priority Recapture Increment as of the date that his Partnership
Interest is diluted through the admission of new Partners to the Partnership
(the "Dilution Date"). On each Dilution Date, each Partner will incur a Priority
Recapture Increment equal to the product of (a) the sum of (i) the aggregate
amount of depreciation allowable to the Partnership with respect to "Section
1245 property" and "Section 1245 recovery property" prior to the Dilution Date
and (ii) the aggregate amount of additional depreciation allowable to the
Partnership with respect to Section 1250 property of the Partnership prior to
the Dilution Date, multiplied by (b) the decimal equivalent of the difference
between his Percentage Interest immediately after the dilution and his
Percentage Interest immediately before the dilution. For Section 1250 property
held for one year or less on a Dilution Date, all depreciation deductions shall
be treated as "additional depreciation."
J. Determination of Capital Account Balances.
(1) A separate Capital Account shall be maintained for each Partner. Such
accounts shall be maintained and adjusted in accordance with Treasury Regulation
1.704-1(b). Consistent with such Regulation, there shall be credited to each
Partner's Capital Account the amount of any cash (which shall not include
imputed or actual interest on any deferred Capital Contributions) actually
contributed by such Partner to the capital of the Partnership, the fair market
value or any property contributed by such Partner to the capital of the
Partnership (net of any liabilities securing such property that the Partnership
is considered to assume or take subject to under Section 752 of the Code), such
Partner's share of the Net Income of the Partnership and of any items in the
nature of income or gain separately allocated to the Partner and such Partner's
share of any adjustments pursuant to Section 48(q)(2) of the Code; and there
shall be charged against each Partner's Capital Account the amount of all cash
distributions to such Partner, the fair market value of any property distributed
to such Partner by the Partnership (net of any liability securing such property
that the Partner is considered to assume or take subject to under Section 752 of
the Code), such Partner's share of the Net Loss of the Partnership and of any
items in the nature of losses or deductions separately allocated to the Partner
and such Partner's share of any adjustment pursuant to Section 48(q)(1) of the
Code.
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(2) If the Partnership at any time distributes any of its assets in-kind
to any Partner, the Capital Account of each Partner shall be adjusted to account
for that Partner's allocable share (as determined under Section 9.1 above) of
the Net Income or Net Loss that would have been realized by the Partnership had
it sold the distributed assets at their respective fair market values
immediately prior to their distribution.
(3) In the event that the Partnership makes an election under Section 754
of the Code, the amounts of any adjustments to the bases of the assets of the
Partnership made pursuant to Section 743 of the Code shall not be reflected in
the Capital Accounts of the Partners, but the amounts of any adjustments to the
bases of the assets of the Partnership made pursuant to Section 734 of the Code
as a result of the distribution of property by the Partnership to a Partner (to
the extent that such adjustments have not previously been reflected in the
Partners' Capital Accounts) shall (i) be reflected in the Capital Account of the
Partner receiving such distribution in the case of a distribution in liquidation
of such Partner's Interest in the Partnership, and (ii) otherwise be reflected
in the Capital Accounts of all Partners in the manner in which the unrealized
income and gain that is displaced by such adjustments would have been shared had
the property been sold at its adjusted basis immediately prior to such
adjustments.
(4) In the event that any Interest in the Partnership is transferred in
accordance with the terms of this Agreement, the Capital Account of the
transferee shall be equal to the Capital Account of the transferor at the time
of transfer of the Interest.
(5) For purposes of Sections 9.1.B, C, D and E, Capital Accounts shall,
except as otherwise specifically provided therein, be determined as of the last
day of the fiscal year, after giving effect to distributions during the 60 days
after the end of the fiscal year and, in the case of allocations of Gain or Loss
from a Capital Transaction, after giving effect to allocations of Net Income or
Net Loss, but before giving effect to the applicable allocation of Gain or Loss
from the Capital Transaction, including a Terminating Capital Transaction. In
applying Sections 9.1.C First and 9.1.E(iii), Capital Accounts shall be
determined prior to the distribution of the Capital Proceeds resulting in the
Gain or Loss to be allocated under those Sections. If more than one Capital
Transaction occurs in any fiscal year, the Gain or Loss shall be allocated in
the order in which the Capital Transactions occur. For purposes of allocating
Gain from a Terminating Capital Transaction, the Capital Account of the General
Partner shall be determined after adding any amounts required to be contributed
by the General Partner to discharge Partnership obligations.
K. Allocations with Respect to Reserved Capital Proceeds. To the extent
that Capital Proceeds received by the Partnership are reserved pursuant to
Sections 9.2.C and 9.3.A, the reserved Capital Proceeds shall, for purposes of
Section 9.1.B First and 9.1.C Second, be deemed to have been distributed
pursuant to section 9.2.C or 9.3. Any deduction allowed to the Partnership by
reason of the subsequent payment of any contingent or unforeseen liability shall
be allocated among the Partners in the same proportions that the amount paid on
such a liability would otherwise have been distributed pursuant to Sections
9.2.C an 9.3.
L. Allocations to the General Partner. Notwithstanding anything to the
contrary in this Agreement, if at any time the allocation provisions of Section
9.1 do not result in the allocation to the General Partner of an aggregate of at
least 1% of each item of Net Income, Net Loss and Gain or Loss from a Capital
Transaction, the General Partner shall be allocated 1% of each such item.
Section 9.2 Distributions Prior to Dissolution
A. Definitions of Cash Flow. For all purposes of this Agreement, the term
"Cash Flow" shall mean the Net Income or Net Loss of the Partnership, subject to
the following:
(a) Depreciation of building, improvements and personal property,
amortization of any fee and other non-cash charges taken into account in
determining taxable income of the Partnership or Sherburne Associates
shall not be considered as deductions in determining Cash Flow.
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(b) Payments of principal on the Mortgage Loan, repayment of the
debts of the Partnership or Sherburne Associates, including loans from
Partners and any other cash expenditures not deductible in determining
taxable income of the Partnership or Sherburne Associates shall be
considered as deductions in determining Cash Flow.
(c) If the General Partner so determines, reasonable additional
reserves shall be established to provide for any contingencies of the
Partnership or Sherburne Associates, and in determining Cash Flow any
amounts allocated to any such reserves from time to time shall be
considered as deductions and, conversely, any amounts previously set aside
as reserves from Cash Flow shall he considered as additions when and to
the extent the General Partner no longer regards them as reasonably
necessary for the efficient conduct of the affairs of the Partnership,
including release of any such reserves upon disposition of the Property or
termination of the Partnership or Sherburne Associates.
(d) Any amounts paid by the Partnership or Sherburne Associates for
capital expenditures shall be considered as a deduction in determining
Cash Flow, unless paid by cash withdrawal from insurance or condemnation
proceeds or from the Operating Reserve, Capital Improvement Fund or any
additional reserve for capital expenditures.
(e) Gain or loss from the sale, exchange, condemnation (or similar
eminent domain taking), casualty or other disposition of all, or any
substantial portion of, the Property (other than the proceeds of any
business or rental interruption insurance), or from the liquidation of the
Property following a dissolution of the Partnership or Sherburne
Associates, shall not be included in determining Cash Flow.
Cash Flow shall be determined separately for each calendar year (or part
of a year) and shall not be cumulative.
B. Cash Flow for each calendar year (or part of a year) shall be
distributed to the Partners as follows:
First, 99% to the Limited Partners and 1% to the General Partner
until the Limited Partners have received an amount equal to an annual 6%
per annum noncumulative, noncompounded return on their Invested Capital;
and
Second, the balance, if any, 95% to the Limited Partners, and 5% to
the General Partner.
Distributions of Cash Flow to the Partners shall be made at reasonable
intervals during the fiscal year as determined by the General Partner, and in
any event shall be made within 60 days after the close of each fiscal year.
Notwithstanding anything to the contrary that may be contained in this
Agreement, (a) Cash Flow for each month in 1987 shall be determined by dividing
the total Cash Flow of the Partnership for 1987 by (ii) 12, and the amount of
such Cash Flow for each month, as determined by this sentence, shall thereafter
be distributed to and among the Partners as described above in this Section
9.2.B.
C. Distribution of Capital Proceeds of a Non-Terminating Capital
Transaction. Prior to the termination and dissolution of the Partnership, if
there are Capital Proceeds from a Non-Terminating Capital Transaction or cash
other than Cash Flow available for distribution, such Capital Proceeds or cash
shall be distributed as follows:
First, to discharge, to the extent required by any lender or
creditor, the debts and obligations of the Partnership, including, without
limitation, all amounts required to be paid to the Sellers of the Property
and others in connection with any resale or refinancing of any portion of
the Property;
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Second, (i) to fund additional reserves of the Partnership to the
extent deemed reasonable by the General Partner and the Accountants, (ii)
as determined by the General Partner, to fund repairs, capital
improvements or the development of portions of the Property, or (iii) to
acquire or develop additional parcels of real property located on
Nantucket Island as are deemed consistent by the General Partner with
Sherburne Associates' existing portfolio and the investment objectives of
the Partnership;
Third, to each Limited Partner, an amount equal to a cumulative
annual 6% noncompounded return on his Invested Capital, reduced by any
prior distributions to him of Cash Flow and by any prior distributions to
him under this Section 9.2.C Third;
Fourth, to each Limited Partner, an amount equal to his Invested
Capital, reduced by any prior distributions to him under this Section
9.2.C Fourth;
Fifth, to the General Partner, the aggregate amounts of their
Capital Contributions to the Partnership as set forth on the Schedule,
reduced by any prior distributions to the General Partner under this
Section 9.2.C Fifth; and
Sixth, the balance, 75% to the Limited Partners and 25% to the
General Partner.
Notwithstanding the foregoing, in no event shall the General Partner
receive as an aggregate distribution under this Section 9.2.C less than 1% of
the aggregate of the amounts distributed to the Partners under this Section. If
the aggregate amount distributable to the General Partner under Section 9.2.C
does not equal 1% of the aggregate amount distributable to the Partners without
regard to this provision, then the amounts otherwise distributable to the
Limited Partners under Section 9.2.C shall be reduced to assure that the General
Partner receives its 1% share.
D. Distributions While Preferred Units Are Outstanding. Notwithstanding
the provisions of Sections 9.2.B and 9.2.C, prior to any other distributions to
any Partners pursuant to said Sections, (i) for each fiscal year (or portion
thereof) that the Preferred Units are outstanding, commencing on the date
hereof, Cash Flow and Capital Proceeds determined to be available for
distribution to the Partners shall be distributed (A) first, to the Preferred
Unitholders in an amount equal to a cumulative annual 8% compounded return on
their Preferred Invested Capital, (B) in the case of Capital Proceeds only,
second, to the Preferred Unitholders in a cumulative amount equal to $33,332.50
per Preferred Unit, and (C) the balance, if any, as provided in Sections 9.2.B
and 9.2.C, and (ii) immediately upon the removal of the General Partner pursuant
to Section 5.5, there shall be paid to the Preferred Unitholders, the sum of the
amounts described in Sections 9.2.D(i)(A) and (B) (and the amounts so paid shall
be deemed to have been distributed pursuant to said Sections). Notwithstanding
anything to the contrary contained herein, immediately after the receipt of all
distributions required to be paid to the holders thereof under this Agreement,
the Preferred Units shall be deemed cancelled.
E. Except as otherwise provided in this Agreement, all distributions to
the Partners (or a class of Partners) shall be shared by the Partners (or the
members of the class) in the ratio of their respective Percentage Interests or,
in the case of the Preferred Unitholders, in proportion to their respective
Preferred Units.
F. For purposes of this Article IX, the Limited Partners shall constitute
a single class.
Section 9.3 Distributions On Dissolution
A. On termination and winding up of the Partnership, the remaining assets
of the Partnership (or the proceeds of any Terminating Capital Transaction, as
determined by the remaining or surviving General Partner) remaining after
payment of all liabilities of the Partnership (including the Mortgage Loan and
any accrued interest thereon), and funding all reserves, to the extent deemed
reasonable by the General Partner and the Accountants, shall be distributed to
the Partners in accordance with their respective Capital Account balances
determined after
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all allocations pursuant to Section 9.1.A and all prior distributions pursuant
to Section 9.2, but before any distributions pursuant to this Section 9.3.
B. If any assets of the Partnership are to be distributed in kind, they
shall be distributed on the basis of their fair market value, and any Partner
entitled to any interest in the assets distributed shall receive his interest as
a tenant-in-common with all other Partners so entitled. If assets are to be
distributed in kind, the Partners' Capital Accounts shall be appropriately
adjusted before any such distribution to reflect the increases or decreases to
the Capital Accounts which would have occurred if the property distributed in
kind had been sold for its fair market value by the Partnership prior to the
distribution.
C. If on the termination of the Partnership, the General Partner's Capital
Account is less than zero (after allocation of profits and losses recognized
upon the disposition of Partnership assets in connection with the liquidation of
the Partnership), the General Partner shall pay to the Partnership an amount
equal to the lesser of (i) the deficiency in its Capital Account, or (ii) the
sum of (a) negative balance in its Capital Account remaining as a result of the
distribution to WFA of the partnership interests created upon the contribution
of certain parcels of real property and other assets by Sherburne Associates to
a newly created partnership, which interests were distributed by Sherburne
Associates to the Partnership and subsequently to WFA in 1987 and (b) the amount
of Net Loss allocated to the General Partner in 1987.
D. If, on the termination of the Partnership, the Preferred Units are
outstanding, then notwithstanding anything to the contrary in this Section 9.3,
there shall be paid to the Preferred Unitholders the amount described in clause
(ii) of Section 9.2.D before any other distributions are made to the Partners
pursuant to this Section 9.3 (and said payment shall be deemed to have been
distributed pursuant to Sections 9.2.D(i)(A) and/or (B), as applicable).
Section 9.4 Changes in Percentage Interests
A. If the Percentage Interests of the Partners change from the Initial
Percentage Interest to the Final Percentage Interest at any time other than on
the last day of a Partnership taxable year, there shall be an interim closing of
the books of the Partnership as of the last day of the calendar month preceding
the calendar month in which the change occurs, and allocations to newly admitted
Partners shall be made on a monthly basis, unless the Partnership is required by
future regulations to make allocations on a more frequent basis. The Partners'
respective shares of all items referred to in this Article IX for the taxable
year of the change shall be determined as follows:
1. All items taken into account for the period of the taxable year
prior to the interim closing of the books shall be allocated as provided
by the terms of this Article IX, using the Initial Percentage Interest
whenever an allocation in accordance with Percentage Interests is
required.
2. All items taken into account for the period of the taxable year
after the interim closing of the books shall be allocated as provided by
the terms of this Article IX using the Final Percentage Interest whenever
an allocation in accordance with Percentage Interests is required.
B. After the last Admission Date, in the event of the transfer of all or
any part of a Final Percentage Interest (in accordance with the provisions of
this Agreement) or the transfer of all or any part of a Preferred Unit at any
time other than the end of a Partnership accounting year, the distributive share
of the Net Income and Net Loss of the Partnership allocable to the Interest
transferred shall be allocated between the transferor Limited Partner and the
Transferee in the same ratio as the number of days in the Partnership accounting
year before and after the Transfer. The provisions of the preceding sentence
shall not be applicable to a Gain or Loss arising from a Capital Transaction or
any "allocable cash basis item" required to be allocated otherwise under Section
706(d) of the Code. Gain or Loss from a Capital Transaction or any allocable
cash basis item shall be allocated on the basis of Percentage Interests or
Preferred Units, as applicable, on the date the Gain is realized or the Loss
incurred, as
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the case may be, and the allocable cash basis items shall be allocated as
required under Section 706(d) of the Code and the Treasury regulations
thereunder.
ARTICLE X
Books and Records, Accounting, Tax Elections, Etc.
Section 10.1 Books and Records
The General Partner shall keep or cause to be kept complete and accurate
books and records of the Partnership and supporting documentation of
transactions with respect to the conduct of the Partnership's business. The
Partnership's books and records shall be maintained in accordance with sound
accounting practices and shall be available at the principal office of the
Partnership for examination by any Partner, or his duly authorized
representatives, at any reasonable time during normal business hours. The
General Partner shall maintain at the principal offices of the Partnership a
register listing the names of all Limited Partners as set forth on the Investor
Certificates and the number of Units or Preferred Units owned by each Limited
Partner. Except as otherwise provided in Section 7.4. all distributions of cash
by the Partnership shall be made only to the Limited Partners listed on the
register. Upon acceptance of a Transfer Application and admission of a
Substitute Limited Partner, the General Partner shall reflect the Transfer on
the register. Copies of the register will be available for inspection by the
Limited Partners. The Partnership will maintain such books and records and will
provide such financial or other statements as the General Partner deems
advisable.
Section 10.2 Bank Accounts
The bank accounts of the Partnership shall be maintained in banking
institutions selected by the General Partner, and withdrawals shall be made only
in the regular course of business on signatures determined by the General
Partner. All deposits (including security deposits and other funds required to
be escrowed by the Mortgage Lender, except to the extent that such funds are
required to be dealt with otherwise by law or by the Mortgage Lender) and other
funds not needed in the operation of the business may be invested as provided in
Section 2.4. The funds of the Partnership will not be commingled with any other
funds.
Section 10.3 Accountants
The Accountants for the Partnership shall be a firm of certified public
accountants engaged by the General Partner. The Accountants shall prepare all
tax returns of the Partnership for execution by the General Partner and shall
audit and certify all annual financial reports to the Partnership in accordance
with generally accepted accounting principles.
Section 10.4 Reports to Limited Partners
A. At the request of any Limited Partner, the General Partner shall,
within 30 days after receipt of such request, distribute to each of the Limited
Partners a copy of all reports or other materials received pursuant to the
Management Agreement.
B. Within 120 days after the end of each fiscal year, the General Partner
shall cause to be prepared and sent to all then Limited Partners (i) a balance
sheet and the related statements of income and Partners' capital and changes in
financial position, prepared in accordance with generally accepted accounting
principles and accompanied by a report of the Accountants. All necessary tax
information, including Schedule K-l (Form 1065) or any successor or additional
form required by the Limited Partners to prepare their tax returns, shall be
furnished to all then Limited Partners within 90 days after the end of each
fiscal year. Each Partner shall be entitled to
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receive, upon request, copies of all Federal, state, and local income tax
returns and informational returns, if any, which the Partnership is required to
file.
Section 10.5 Tax Elections
The Partnership shall elect to use such methods of depreciation with
respect to all depreciable assets as are, in the opinion of the Accountants,
most advantageous to the Limited Partners. Except as provided in Section 10.6,
all other elections required or permitted to be made by the Partnership under
the Code shall be made by the General Partner in such manner as will, in the
opinion of the Accountants, be most advantageous to the Limited Partners.
Section 10.6 Special Basis Adjustments
If any part of the Interest of any Partner is transferred, including a
Transfer of an Interest pursuant to Article VII, the Partnership may elect, in
the General Partner's sole discretion, pursuant to Section 754 of the Code, as
amended (or corresponding provisions of succeeding law), to adjust the basis for
the Partnership's property. Notwithstanding anything contained in Article IX of
this Agreement, any adjustments made pursuant to Sections 734 and 743 of the
Code shall affect only the successor-in-interest to the transferring Partner.
Each Partner will furnish the Partnership all information necessary to give
effect to any such election.
Section 10.7 Fiscal Year and Accounting Method
The fiscal year of the Partnership shall be the calendar year. The books
of the Partnership shall be kept on an accrual basis.
Section 10.8 Tax Matters Partner
The General Partner shall be the "tax matters partner" of the Partnership
for Federal income tax purposes. Pursuant to Section 6223(c)(3) of the Code,
upon receipt of notice from the Internal Revenue Service of the commencement of
an administrative proceeding with respect to the Partnership, the General
Partner, as the tax matters partner, agrees to furnish the Internal Revenue
Service with the names, addresses, and interests in profits and losses of each
of the Limited Partners. The General Partner agrees not to enter into a
settlement agreement pursuant to Section 6224 of the Code without providing at
least 30 days' advance written notice of the terms of the settlement to each of
the Limited Partners. If the Partnership receives from the IRS a Final
Partnership Administration Adjustment pursuant to Code Section 6223, and if the
General Partner determines to seek judicial review of the IRS action pursuant to
Code Section 6226, then the General Partner shall select the forum for judicial
review.
The Partnership hereby indemnifies and holds harmless the General Partner
against any claim, loss, liability, action, or damage resulting from its action
or its failure to take any action as the "tax matters partner," provided that
its action or failure to act was not willful misconduct.
ARTICLE XI
General Provisions
Section 11.1 Restrictions on Transfer
A. No sale, transfer, exchange, or other disposition of any interest in
the Partnership may be made except in compliance with the then applicable rules
and regulations of any governmental authority with jurisdiction
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over such a disposition, and the General Partner may require as a condition of
any transfer that the transferor furnish a legal opinion that the proposed
transfer complies with applicable Federal and state securities laws.
B. Any sale, exchange, or other transfer in contravention of any of the
provisions of this Section 11.1 shall be void and ineffectual and shall not bind
or be recognized by the Partnership.
Section 11.2 Appointment of General Partner as Attorney in-Fact
Each Limited Partner (including a Substitute or additional Limited
Partner) hereby irrevocably appoints and empowers the General Partner, acting
through its authorized officers and agents, acting singly or collectively, in
each case with full power of substitution, as his true and lawful
attorney-in-fact, in his name, place and stead, to execute, acknowledge, and
swear to all instruments and file all documents required to carry out the
purposes of this Agreement, including, without limitation, the following:
(i) the Certificate and any amendment thereto or restatement thereof
that may be required by this Agreement or the laws of the State of
Delaware;
(ii) any certificate of cancellation of the Certificate that may be
necessary upon the termination of the Partnership;
(iii) any amendments to this Agreement and to the Schedule, and any
assignments necessary to reflect any change or transfer of a Partner's
Interest, including, without limitation, the repurchase of a Limited
Partner's Interest pursuant to Section 3.6. and any other amendments to
this Agreement adopted pursuant to Section 11.13.
(iv) any business certificate, Certificate of Limited Partnership,
amendment thereto or restatement thereof, or other instrument or document
of any kind necessary to accomplish the business purposes and objectives
of the Partnership;
(v) any instruments, stock powers, UCC financing statements,
continuation statements, and other documents necessary or required to
grant and perfect the security interest, if any, of the Partnership, the
Mortgage Lender and/or the General Partner in the Interest of a Limited
Partner;
(vi) all other instruments that may be required or permitted by law
to be filed on behalf of the Partnership and that are not inconsistent
with this Agreement;
(vii) any amendments to this Agreement that may be required to cure
any ambiguity or to correct or supplement any provision which is
inconsistent in any respect with any other provision hereof or with the
Registration Statement, or to add or delete any provision of this
Agreement in response to the concerns of any federal agency or by a state
"Blue Sky" commissioner or similar official, which addition or deletion is
deemed by such agency or official, or counsel for the Partnership, to be
for the benefit or protection of the Limited Partners; and
(viii) any amendments required to clarify the terms of the
Partnership's ownership of NIA Operating Associates and the allocation of
taxable income and loss and the distribution of cash flow and the proceeds
of a sale or disposition of all or a portion of Sherburne Associates or
the Property from NIA Operating Associates to the Partnership;
(ix) any amendments described in Section 11.13.B, or any amendments
described in Section 11.13.A which have received the consent of the
requisite number of Limited Partners.
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The General Partner shall take no action as an attorney-in-fact for any
Limited Partner which would in any way increase the liability of any Limited
Partner beyond the liability expressly set forth in this Agreement or would
diminish the substantive rights of any Limited Partner.
The appointment by each Limited Partner of the General Partner acting
through its officers and agents, acting singly or collectively, in each case as
attorneys-in-fact, shall be deemed to be a power coupled with an interest in
recognition of the fact that the Limited Partners under this Agreement will be
relying upon the power of the General Partner and its officers to act as
contemplated by this Agreement in any filing and other action by them on behalf
of the Partnership. This power of attorney shall survive and not be affected by
the subsequent death, disability, or incapacity of the Limited Partner or by the
assignment by any Limited Partner of any part of his Interest in the
Partnership.
Section 11.3 Notices
Any notices (as distinguished from periodic reports) called for under this
Agreement shall be deemed adequately given only if in writing and sent
registered or certified mail, postage prepaid, to the party or parties for whom
such notices are intended.
All such notices or periodic reports, in order to be effective, shall be
addressed to the last address of record on the Partnership books when given by
the General Partner and intended for the other Partners, and to the address of
the Partnership when given by the Limited Partners and intended for the General
Partner.
Section 11.4 Word Meanings
The singular shall include the plural and the masculine gender shall
include the feminine, and vice versa, unless the context otherwise requires.
Section 11.5 Binding Provisions
The covenants and agreements contained in this Agreement shall be binding
upon, and inure to the benefit of, the heirs, legal representatives, successors,
and assigns of the respective parties.
None of the provisions of this Agreement shall be for the benefit of or
enforceable by any creditor of the Partnership.
Section 11.6 Applicable Law
This Agreement shall be construed and enforced in accordance with the laws
of Delaware.
Section 11.7 Counterparts
This Agreement may be executed in several counterparts, and all
counterparts so executed shall constitute one agreement binding on all parties,
notwithstanding the fact that all the parties have not signed the original or
the same counterpart, except that no counterpart shall be binding unless signed
by the General Partner. Any counterpart signed by the party against whom
enforcement of this Agreement is sought shall be admissible into evidence as an
original of this Agreement to prove its contents.
Section 11.8 Survival of Representations and Warranties
All representations and warranties stated in this Agreement shall survive
the dissolution and final liquidation of the Partnership, except to the extent
that a representation or warranty expressly provides otherwise.
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Section 11.9 Separability of Provisions
Each provision of this Agreement shall be considered separable, and (a) if
for any reason any provision is determined to be invalid and contrary to any
existing or future law, the invalidity shall not impair the operation of or
affect those portions of this Agreement which are valid, or (b) if for any
reason any provision would cause the Limited Partner to be bound by the
obligations of the Partnership under the laws of Delaware as they may now or
hereafter exist, such provision or provisions shall be deemed void and of no
effect.
Section 11.10 Investment Representation
Each Limited Partner represents that he is acquiring his Interest as a
Limited Partner for his own account for investment and not with a view to or
present intention of distributing or reselling any portion thereof. Each Limited
Partner agrees that he will not sell or offer to sell any portion of his
Interest as a Limited Partner, or solicit offers to buy any portion of his
Interest or otherwise approach or negotiate with, in respect thereof, any person
or persons so as to bring this transaction and the offering of limited
partnership interests in the Partnership within the provisions of Section 5 of
the Securities Act of 1933, as amended, or the registration requirements of any
state "Blue Sky" statute.
Section 11.11 Paragraph Titles
Captions contained in this Agreement are inserted only as a matter of
convenience and in no way define, limit, extend, or describe the scope of this
Agreement or the intent of any of its provisions.
Section 11.12 Meeting of Partners
Limited Partners whose Capital Contributions represent at least 10% in
interest of the Limited Partners may request in writing that the General Partner
call a meeting of the Partners. The General Partner shall be required to give
written notice to all Limited Partners within ten days of receipt of a request
for such a meeting, specifying the purpose of such meeting, which meeting shall
be held on a date not less than 15 nor more than 60 days after the date of
receipt of said request.
Section 11.13 Amendment Procedure
A. This Agreement may be modified or amended pursuant to Sections 5.5,
11.2, and 11.13.B, or with the written consent of the General Partner and the
Consent of the Limited Partners, provided that any modification or amendment
which would (i) increase the amount of the Capital Contributions required to be
paid by the Limited Partners, (ii) extend the termination date specified in
Section 2.5, (iii) increase the liability of the Limited Partners, (iv)
adversely affect (other than as permitted by Section 4.2) the rights of the
Limited Partners under Article IX, or (v) amend this Section 11.13, shall
require the written consent of all of the Limited Partners.
B. The General Partner shall have the authority, upon advice of the
Accountants and counsel for the Partnership, to amend Section 9.1 and restate
the Capital Accounts of the Partners in order to cause the provisions of Section
9.1 to comply with the income tax regulations promulgated by the U.S. Treasury
Department under Section 704(b) of the Code relating to the allocations of
profits and losses among partners and the administrative and judicial
interpretations thereof. In addition, the General Partner shall have the
authority to amend the Agreement without the Consent of the Limited Partners in
order to provide for the special allocation of depreciation attributable to
tax-exempt use property resulting from the admission of tax-exempt entities as
Limited Partners and the application of Section 168(j)(9) of the Code so that
the depreciation allocated to the taxpaying Partners will not be reduced. The
General Partner shall also have the right to specially allocate gain on a sale
of the Property in order to equalize the Capital Accounts of the taxpaying and
tax-exempt Partners.
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C. In making any amendment described in Section 11.13.B, the General
Partner shall use its best efforts to effect as little change in the economic
and tax arrangements among the Partners as the General Partner shall determine
in its sole discretion to be necessary to provide for allocations of profits and
losses to the Limited Partners which the General Partner believes will be
respected for Federal income tax purposes. Any amendments made in accordance
with Section 11.13.B shall be deemed to have been made in accordance with the
General Partner's fiduciary obligations to the Partnership and the Limited
Partners, and no such amendment shall give rise to any claim or cause of action
by any Limited Partner.
Section 11.14 Partition
The Partners hereby agree that no Partner or any successor-in-interest to
any Partner shall have the right, while this Agreement remains in effect, to
have the property of the Partnership partitioned or to file a complaint or
institute any proceeding at law or in equity to have the property of the
Partnership partitioned. Each Partner, on behalf of himself, his successors,
representatives, heirs, executors and assigns, hereby waives any right to
partition. It is the intention of the Partners that during the term of this
Agreement the rights of the Partners and their respective
successors-in-interest, as among themselves, shall be governed by the terms of
this Agreement, and that the right of any Partner or successor-in-interest to
assign, transfer, sell, or otherwise dispose of his Interest in the
Partnership's properties shall be subject to the limitations and restrictions of
this Agreement.
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WITNESS the execution under seal as of the ____day of __________, 1996.
GENERAL PARTNER:
ATTEST: Three Winthrop Properties, Inc.
_______________________________ By:______________________________________
Authorized Officer
UNITHOLDERS:
ATTEST: By: Three Winthrop Properties, Inc.,
their Attorney-in-fact
_______________________________ By:______________________________________
Authorized Officer/Agent
ATTEST: PREFERRED UNITHOLDERS:
By: Three Winthrop Properties, Inc.,
their Attorney-in-fact
_______________________________ By:______________________________________
Authorized Officer/Agent
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SCHEDULE A
TO NANTUCKET ISLAND ASSOCIATES LIMITED PARTNERSHIP
SECOND AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT
Capital
Name and Address Contribution Percentage Interest(1)
---------------- ------------ ----------------------
Cash Flow Profit
--------- ------
GENERAL PARTNER:
Three Winthrop Properties, Inc.
One International Place
Boston, Massachusetts 02110..........
Unitholders..........................
Preferred Unitholders................
- ----------
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EXHIBIT A
FORM OF UNIT CERTIFICATE
Number________
NANTUCKET ISLAND ASSOCIATES
LIMITED PARTNERSHIP
(A Limited Partnership Formed Under the
Laws of the State of Delaware)
CERTIFICATE FOR UNITS OF LIMITED
PARTNERSHIP INTEREST
THIS CERTIFIES THAT __________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
is the owner of_________________________________________________________________
units of limited partnership interest (the "Units") in Nantucket Island
Associates Limited Partnership (the "Partnership") a limited partnership
organized under the laws of the State of Delaware pursuant to an Agreement and
Certificate of Limited Partnership (the "Certificate and Agreement") dated as of
December 17, 1986, and filed with the Secretary of the State of Delaware, as
amended from time to time, a copy of which, together with all amendments
thereto, is on file at the office of the Partnership. Such Certificate and
Agreement and any amendments thereto are hereby incorporated by reference as
fully as if set forth herein in their entirety, to all of which provisions the
holder and every transferee and assignee hereof or of the Units represented
hereby or any interest therein agrees to be bound. Unit holders may, under
certain circumstances, be required to return to the Partnership a portion of
cash distributions from the Partnership to them, in the event the Partnership
does not have assets sufficient to discharge its liabilities.
WITNESS the facsimile seal of the General Partner of the Partnership
and the facsimile signature of its duly authorized officer or agent.
Dated: _____________________ THREE WINTHROP PROPERTIES, INC.
By: ________________________________
Authorized Officer/Agent
The Units represented by this Certificate have not been registered
under the Securities Act of 1933, as amended (the "Act") or under the securities
laws of certain states, in reliance on exemptions therefrom. Units may not be
sold or transferred without registration of such Units under the Act and such
securities laws unless such Units are sold in a transaction which is exempt from
registration thereunder, and the General Partner may require as a condition of
transfer the delivery of an opinion to the effect that such transfer complies
with all applicable Federal and state securities laws.
(REVERSE OF CERTIFICATE)
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE APPLICABLE
SECURITIES LAWS OF ARIZONA, CONNECTICUT, INDIANA, MINNESOTA, NORTH DAKOTA,
PENNSYLVANIA, TENNESSEE, TEXAS, UTAH, AND WASHINGTON AND MAY NOT BE REOFFERED
FOR SALE, TRANSFERRED, RESOLD OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER
FEDERAL AND STATE SECURITIES LAWS OR UNLESS AN EXEMPTION UNDER SUCH LAWS EXISTS.
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WITH RESPECT TO INVESTORS WHO ARE RESIDENTS OF MAINE, THESE SECURITIES
ARE BEING SOLD PURSUANT TO AN EXEMPTION FROM REGISTRATION WITH THE BANK
SUPERINTENDENT OF THE STATE OF MAINE UNDER SECTION 1O502(2)(R) OF TITLE 32 OF
THE MAINE REVISED STATUTES. THESE SECURITIES MAY BE DEEMED RESTRICTED SECURITIES
AND AS SUCH THE HOLDER MAY NOT BE ABLE TO RESELL THE SECURITIES UNLESS PURSUANT
TO REGISTRATION UNDER STATE OR FEDERAL SECURITIES LAWS OR UNLESS AN EXEMPTION
UNDER SUCH LAWS EXISTS.
35
<PAGE>
EXHIBIT B
FORM OF PREFERRED UNIT CERTIFICATE
Number________
NANTUCKET ISLAND ASSOCIATES
LIMITED PARTNERSHIP
(A Limited Partnership Formed Under the
Laws of the State of Delaware)
CERTIFICATE FOR PREFERRED UNITS OF LIMITED
PARTNERSHIP INTEREST
THIS CERTIFIES THAT __________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
is the owner of_________________________________________________________________
preferred units of limited partnership interest (the "Preferred Units") in
Nantucket Island Associates Limited Partnership (the "Partnership") a limited
partnership organized under the laws of the State of Delaware pursuant to an
Agreement and Certificate of Limited Partnership (the "Certificate and
Agreement") dated as of December 17, 1986, and filed with the Secretary of the
State of Delaware, as amended from time to time, a copy of which, together with
all amendments thereto, is on file at the office of the Partnership. Such
Certificate and Agreement and any amendments thereto are hereby incorporated by
reference as fully as if set forth herein in their entirety, to all of which
provisions the holder and every transferee and assignee hereof or of the
Preferred Units represented hereby or any interest therein agrees to be bound.
Unit holders may, under certain circumstances, be required to return to the
Partnership a portion of cash distributions from the Partnership to them, in the
event the Partnership does not have assets sufficient to discharge its
liabilities.
WITNESS the facsimile seal of the General Partner of the Partnership
and the facsimile signature of its duly authorized officer or agent.
Dated: _____________________ THREE WINTHROP PROPERTIES, INC.
By: ________________________________
Authorized Officer/Agent
The Preferred Units represented by this Certificate have not been
registered under the securities laws of certain states, in reliance on
exemptions therefrom. Preferred Units may not be sold or transferred without
registration of such Preferred Units under such securities laws unless such
Preferred Units are sold in a transaction which is exempt from registration
thereunder, and the General Partner may require as a condition of transfer the
delivery of an opinion to the effect that such transfer complies with all
applicable Federal and state securities laws.
(REVERSE OF CERTIFICATE)
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE APPLICABLE
SECURITIES LAWS OF ARIZONA, CONNECTICUT, INDIANA, MINNESOTA, NORTH DAKOTA,
PENNSYLVANIA, TENNESSEE, TEXAS, UTAH, AND WASHINGTON AND MAY NOT BE REOFFERED
FOR SALE, TRANSFERRED, RESOLD OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER
FEDERAL AND STATE SECURITIES LAWS OR UNLESS AN EXEMPTION UNDER SUCH LAWS EXISTS.
36
<PAGE>
WITH RESPECT TO INVESTORS WHO ARE RESIDENTS OF MAINE, THESE SECURITIES
ARE BEING SOLD PURSUANT TO AN EXEMPTION FROM REGISTRATION WITH THE BANK
SUPERINTENDENT OF THE STATE OF MAINE UNDER SECTION 1O502(2)(R) OF TITLE 32 OF
THE MAINE REVISED STATUTES. THESE SECURITIES MAY BE DEEMED RESTRICTED SECURITIES
AND AS SUCH THE HOLDER MAY NOT BE ABLE TO RESELL THE SECURITIES UNLESS PURSUANT
TO REGISTRATION UNDER STATE OR FEDERAL SECURITIES LAWS OR UNLESS AN EXEMPTION
UNDER SUCH LAWS EXISTS.
37
<PAGE>
[ROSENMAN & COLIN LLP LETTERHEAD]
September 20, 1996
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Gentlemen:
We have been requested by Nantucket Island Associates Limited Partnership
(the "Partnership"), a Delaware limited partnership, to furnish our opinion in
connection with the registration statement (the "Registration Statement") on
Form S-3 (Registration No. 33-07571) with respect to the registration of 785
preferred limited partnership interests (the "Interests") of the Partnership.
We have made such examination as we have deemed necessary for the purpose
of this opinion. Based upon such examination, it is our opinion that when the
Registration Statement has become effective under the Securities Act of 1933,
when the Interests have been qualified as required under the laws of those
jurisdictions in which they are to be issued and sold, and when the Interests
have been issued and paid for in the manner described in the Registration
Statement, the Interests will have been validly issued and fully paid.
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement and to the reference to our name under the caption "Legal
Matters" in the prospectus included in the Registration Statement.
Very truly yours,
ROSENMAN & COLIN LLP
By /s/ JAYSHREE PARTHASARATHY
--------------------------
A Partner
<PAGE>
[ROSENMAN & COLIN LETTERHEAD]
September 24 , 1996
Nantucket Island Associates
Limited Partnership
c/o Winthrop Financial Associates,
A Limited Partnership
One International Place
Boston, Massachusetts 02110
Re: Rights Offering
---------------
Gentlemen:
You have requested our opinion with respect to certain federal income tax
matters in connection with the offering (the "Offering") by Nantucket Island
Associates Limited Partnership, a Delaware limited partnership organized in 1986
(the "Partnership"), to holders of record ("Unitholders") of units of limited
partnership interests in the Partnership, of subscription rights ("Rights") to
purchase 8% cumulative preferred units of limited partnership interests
("Preferred Units") described in the Registration Statement on Form S-3 filed by
the Partnership with the Securities and Exchange Commission on July 3, 1996, as
amended (the "Registration Statement"). All capitalized terms used herein have
their respective meanings set forth in the Registration Statement unless
otherwise stated.
We have acted as counsel to the Partnership in connection with the Offering. In
connection with your request, we have reviewed the following documents: (a) the
Registration Statement; (b) the final Prospectus dated the date hereof (the
"Prospectus"); (c) the form of amended and restated agreement of limited
partnership of the Partnership filed as an exhibit to the Registration Statement
(the "Partnership Agreement"); (d) a Demand Note dated August 7, 1996 (the
"Demand Note") payable by First Winthrop Corporation to Three Winthrop
Properties, Inc., a Massachusetts corporation which is the Partnership's general
partner (the "General Partner"), in the amount of $1,000,000; (e) a
<PAGE>
Nantucket Island Associates
Limited Partnership
September 24, 1996
Page 2
certificate, dated the date hereof, executed by the General Partner confirming
its representations set forth herein; (f) the Partnership's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995 filed on April 15, 1996;
and (g) such other documents as we have deemed necessary or appropriate to
review in rendering this opinion.
In rendering this opinion, we have assumed, with your permission, that: the
Offering will be consummated in accordance with its terms; the statements and
descriptions contained in the Registration Statement are accurate; and the
representations of the General Partner set forth herein are accurate. Although
we have no reason to believe that such assumptions are not correct, we have not
independently investigated or verified any of the underlying facts upon which
such assumptions are based.
In rendering this opinion, we also have relied upon the General Partner's
representations that: (1) the Partnership will be operated and administered in
accordance with the Partnership Agreement, the Prospectus and the Delaware
Revised Uniform Limited Partnership Act; (2) for all periods up to and including
the date hereof, the Partnership has been classified for federal income tax
purposes as a partnership and not as an association taxable as a corporation,
and has come within applicable safe harbors for avoiding treatment as a
"publicly traded partnership" within the meaning of Section 7704(b) of the
Internal Revenue Code of 1986, as amended (the "Code"); (3) each person who
becomes the record owner of a Preferred Unit will be validly admitted to the
Partnership as a limited partner on the date such person becomes the record
owner of such Preferred Unit in accordance with the provisions of the
Partnership Agreement; (4) the General Partner will continue to have at least a
1% interest in each material item of Partnership income, gain, loss and
deduction; (5) under the Partnership Agreement, the dissolution, retirement,
bankruptcy or withdrawal of the General Partner will cause a dissolution of the
Partnership (subject to a right to continue the Partnership's business if the
Partnership's limited partners so elect within 90 days following such event);
(6) the General Partner has substantial assets (consisting primarily of the
Demand Note) that can be reached by Partnership creditors apart from its
interests in and receivables from the Partnership; (7) except in the case of the
death or incapacity of a limited partner, an assignee of a limited partner will
neither be recognized as an assignee of record nor admitted to the Partnership
as a substitute limited partner unless the General Partner's prior written
consent has been obtained, the granting
<PAGE>
Nantucket Island Associates
Limited Partnership
September 24, 1996
Page 3
of which is in the General Partner's sole discretion; (8) the General Partner
shall not recognize or consent to any assignments or transfers of limited
partnership interests that would cause the Partnership to be unable to satisfy
applicable safe harbors for avoiding treatment as a publicly traded partnership;
(9) the Partnership will treat the Preferred Units as equity for both financial
reporting and tax purposes; and (10) payment of the Preferred Units' cumulative
annual return and liquidation preference will not be secured or guaranteed.
In addition to the aforementioned documents, assumptions and representations,
our opinion is based upon federal income tax law as currently in effect,
including the Code, applicable Treasury Regulations, existing judicial decisions
and Internal Revenue Service ("IRS") rulings, practices and procedures, all as
in effect on the date hereof. There can be no assurance, however, that the legal
authorities on which this opinion is based will not change, perhaps
retroactively, that the representations of the General Partner and the factual
assumptions underlying this opinion will continue to be accurate, or that the
future circumstances of the General Partner or the Partnership will not change,
any of which events could adversely affect the conclusions set forth in this
opinion. Furthermore, the law as to many tax matters material to an investment
in the Partnership is uncertain. Accordingly, there can be no assurance that the
IRS will not challenge the conclusion or propriety of any of our conclusions.
Although we believe that our opinion will be sustained if challenged, there can
be no assurance that this will be the case.
Based on and subject to the foregoing, we are of the opinion that, for federal
income tax purposes:
1. Following the issuance of the Preferred Units, the Partnership will
continue to be treated as a partnership and not as a corporation.
2. A holder of record of a Preferred Unit generally will be treated as a
partner in the Partnership from the date such person becomes the record owner of
a Preferred Unit.
3. It is more likely than not that the Preferred Units will be classified
as partnership interests and not as debt obligations of the Partnership.
Except as expressly set forth above, we express no opinion on any
<PAGE>
Nantucket Island Associates
Limited Partnership
September 24, 1996
Page 4
issue relating to the Partnership, the Offering, the Preferred Units or the
Unitholders.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the references to our Firm in the Registration
Statement.
Very truly yours,
ROSENMAN & COLIN LLP
By: /s/ JILL E. DARROW
-------------------
JED:rm
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Partners
Nantucket Island Associates Limited Partnership
We consent to the use of our report incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the prospectus.
KPMG Peat Marwick LLP
Boston, Massachusetts
September 19, 1996
<PAGE>
[WHITTIER PARTNERS LETTERHEAD]
September 19, 1996
Mrs. Carolyn Tiffany
First Winthrop Corporation
One International Place
Boston, MA 02110
Dear Mrs. Tiffany:
We consent to the use of our appraisal as an exhibit to the Prospectus of
Nantucket Island Associates Limited Partnership and to the reference to our firm
under the heading "The Property" in such Prospectus.
Sincerely yours,
/s/ Webster A. Collins, MAI CRE
Webster A. Collins, MAI CRE
Executive Vice President/Partner
<PAGE>
WHITTIER
PARTNERS
A WHITTIER PARTNERS GROUP COMPANY
SUMMARY APPRAISAL REPORT
Harbor House Hotel - 112 Rooms
White Elephant/Breakers Hotel - 82 rooms
Wharf Cottages - 26 Units
Nantucket, Massachusetts
NEW ENGLAND'S LARGEST COMMERCIAL REAL ESTATE SERVICES COMPANY
<PAGE>
SUMMARY APPRAISAL REPORT
------------------------
Harbor House Hotel - 112 Rooms
White Elephant/Breakers Hotel - 82 rooms
Wharf Cottages - 26 Units
Nantucket, Massachusetts
Prepared for
Mr. Richard M. McCready
President
Three Winthrop Properties, Inc.
One International Place
Boston, Massachusetts 02110
Date of Valuation:
July 31, 1996
Prepared by
Webster A. Collins, MAI, CRE
Whittier Partners
155 Federal Street
Boston, Massachusetts 02110
<PAGE>
WHITTIER PARTNERS
A WHITTIER PARTNERS GROUP COMPANY
155 FEDERAL STREET, BOSTON, MASSACHUSETTS 02110 -
TEL. 617-482-6000 - FAX 617-482-5509
ESTABLISHED 1900
August 9, 1996
Mr. Richard M. McCready
President
Three Winthrop Properties, Inc.
One International Place
Boston, MA 02110
Dear Mr. McCready:
In accordance with your request, we respectfully submit herein our appraisal
report on the following property:
Harbor House Hotel - 112 Rooms
White Elephant/Breakers Hotel - 82 rooms
Wharf Cottages - 26 Units
Nantucket, Massachusetts
This report summarizes the pertinent information about the property, the market
context, and our opinion of value. The analytical approaches and conclusions are
fully set forth within this report.
We hereby certify to the best of our knowledge and belief that the statements
contained in this appraisal report and upon which the opinions expressed are
based are accurate. Furthermore, the report presented is subject to the limiting
conditions which are set forth in the Addenda of this report. Compensation for
making this report is in no way contingent upon the value or the conclusions
stated herein. We certify that we have no financial interest in the subject
property. This report is prepared to guidelines specified by the Appraisal
Institute.
NEW ENGLAND'S LARGEST COMMERCIAL REAL ESTATE SERVICES COMPANY
---------------------------------
IN CONNECTICUT: FARLEY WHITTIER PARTNERS o
HARTFORD, CONNECTICUT o TEL. 860-525-9171
<PAGE>
Page Two
Mr. Richard McCready
August 8, 1996
Based on our analysis which includes consideration of all factors which affect
value, we are of the opinion that the fee simple market value of the subject
property, based upon existing conditions, as of the date of appraisal, July 31,
1996, is:
- --------------------------------------------------------------------------------
Harbor House Hotel and White Elephant $7,480,000
Wharf Cottages 2,370,000
----------
Total $9,850,000
- --------------------------------------------------------------------------------
We appreciate the opportunity of assisting you in this most interesting
assignment. Should you have any questions regarding our analysis or findings,
please do not hesitate to contact us at any time.
Respectfully submitted,
WHITTIER PARTNERS
/s/Webster A. Collins
Webster A. Collins, MAI, CRE
Massachusetts: Cert. Gen. #265
New Hampshire: NHCG-164
Rhode Island: Cert. Gen. A00255G
Executive Vice President/Partner
WAC:nc
<PAGE>
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SUBJECT PHOTOGRAPHS
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<PAGE>
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Photograph of Straight Wharf Cottages
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Photograph of Wharf Cottages
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<PAGE>
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Photograph of Boat Basin
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Photograph of Boat Basin
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<PAGE>
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Photograph of Wharf Cottages - Old South Wharf
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Photograph of New Whale Street Cottages
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<PAGE>
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Photograph of Harbor House - Easton Street Cottage
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Photograph of Harbor House - Easton Street Cottage
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<PAGE>
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Photograph of Harbor House - Driveway
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Photograph of Harbor House Side Entrance
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<PAGE>
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Photograph of Harbor House - Main Entrance
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Photograph of Harbor House Cottages
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<PAGE>
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Photograph of Captains Quarter Cottages
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Photograph of White Elephant
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<PAGE>
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Photograph of White Elephant Cottage
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Photograph of Salty and Misty Cottages
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<PAGE>
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Photograph of White Elephant and Beach
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<PAGE>
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Photograph of White Elephant Waterfront
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Photograph of White Elephant - Dock and Cottages
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<PAGE>
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Harbor House Hotel - 112 Rooms
White Elephant/Breakers Hotel - 82 rooms
Wharf Cottages - 26 Units
Nantucket, Massachusetts
- --------------------------------------------------------------------------------
<PAGE>
INTRODUCTION
------------
- --------------------------------------------------------------------------------
PROPERTY IDENTIFICATION
- -----------------------
The subject of this real estate appraisal report consists of the following
property.
Harbor House Hotel - 112 Rooms
White Elephant/Breakers Hotel - 82 rooms
Wharf Cottages - 26 Units
Nantucket, Massachusetts
The Harbor House Hotel is located on various parcels with a total land area
of 170,547 square feet. The White Elephant Hotel is located on various parcels
with a total land area of 184,130 square feet. The Wharf Cottages are part of
the Nantucket Boat Basin and exact land areas are not available as all but three
of the cottages are constructed on pile wharves. The three cottages that are on
land are under a short term ground lease with a rent of $13,000 per year. In our
valuation of these cottages, it is assumed that the lease will be renewed.
PURPOSE OF THE APPRAISAL
The purpose of this appraisal is to estimate the market value of the fee
simple interest, or in the case of the three cottages, the leased fee interest,
of the property.
1
CONSULTING AND VALUATION GROUP [LOGO]
<PAGE>
FUNCTION OF THE REPORT
The function of this report is for internal planning purposes. Our
understanding is that it may be used in connection with a registered offering of
additional limited partnership interests in Nantucket Island Associates Limited
Partnership, and possibly in connection with acquisition of limited partnership
interests, disposition of property, seeking of tax abatements, or financing of
the sale of the property.
EFFECTIVE DATE OF VALUE/DATE OF REPORT PREPARATION
The effective date of value for this report is July 31, 1996. The appraisal
report was prepared beginning June 21, 1996.
PROPERTY INSPECTION
The property was inspected on June 24, 1996, by Webster A. Collins of
Whittier Partners accompanied by Robert Andrews, General Manager, and Bud
Bimonte, Controller for the manager, Interstate Hotel Group.
PROPERTY RIGHTS APPRAISED
The property rights appraised are both fee simple and leased fee estates.
Fee simple is defined as:
"Absolute ownership unencumbered by any other interest or estate,
subject only to the limitations imposed by the governmental powers of
taxation, eminent domain, police power, and escheat."(1)
- --------
(1) Appraisal Institute, The Dictionary of Real Estate Appraisal, (Chicago,
1993) Third Edition, page 140.
2
CONSULTING AND VALUATION GROUP [LOGO]
<PAGE>
Leased fee is defined as:
"An ownership interest held by a landlord with the rights of use and
occupancy conveyed by lease to others. The rights of the lessor (the
leased fee owner) and the leased fee are specified by contract terms
contained within the lease."(2)
The starting point in most appraisal reports begins with the nature of the
problem under study.
NATURE OF THE PROBLEM
Nantucket is considered one of the top summer resorts in the United States.
It ranks number one in the northeast.
The Nantucket market is a seasonal market. Mid-June to Mid-September are
"high season" and command premium pricing. Hotel occupancies in July and August
are typically over 90%. In the June and September period, they typically drop to
the 70% level. Thereafter, they are nominal.
The history of market change is important. In the late 1960's and early
1970's, Walter Beinecke rebuilt what in effect were decaying wharves and a
decaying Main Street and created an image of grandeur. Some of the wealthiest
people in the world were attracted and owned houses on Nantucket. This change
attracted both investors and speculators alike. As relates to the property under
analysis, resort hotels, the challenge was to extend the season so that average
annual occupancies would move from the mid-40% level, that were experienced in
1986, up to the mid-50% level and
- --------
(2) Appraisal Institute, The Dictionary of Real Estate Appraisal, Third Edition
(Chicago, 1993), page 204.
3
CONSULTING AND VALUATION GROUP [LOGO]
<PAGE>
possibly 60% or more. With an increase in occupancy, the profits from the hotels
would have been huge.
The opposite happened. Between 1990 and 1992, a major real estate recession
occurred. All attempts to market spring and fall periods in time had failed. As
is shown herein, rather than increasing, occupancies slipped and currently
average in the 38% range. Thus, the value of the property which increased in the
1980's has experienced a major decline in value as of the point in time of
completion of this report.
DEFINITION OF MARKET VALUE
Market value is defined as:
"The most probable price which a property should bring in a
competitive and open market under all conditions requisite to a fair
sale, the buyer and seller each acting prudently and knowledgeably,
and assuming the price is not affected by undue stimulus. Implicit in
this definition is the consummation of a sale as of a specified date
and the passing of title from seller to buyer under conditions
whereby:
1. buyer and seller are typically motivated;
2. both parties are well informed or well advised, and acting in
what they consider their best interests;
3. a reasonable time is allowed for exposure in the open market;
4. payment is made in terms of cash in United States dollars or in
terms of financial arrangements comparable thereto; and,
5. the price represents the normal consideration for the property
sold unaffected by special or creative financing or sales
concessions granted by anyone associated with the sale."(3)
- --------
(3) Appraisal Foundation, Uniform Standards of Professional Appraisal Practice,
(December, 1990), page B-7.
4
CONSULTING AND VALUATION GROUP [LOGO]
<PAGE>
PROPERTY HISTORY
The property is beneficially owned by Nantucket Island Associates Limited
Partnership. The property is part of a block of 122 parcels of real estate
acquired December 21, 1986, with the purchase of partnership interests in
Sherburne Associates.
In the completion of this report, no legal description is included and
title to the property is assumed to be marketable.
SCOPE OF REPORT AND EXTENT OF DATA GATHERING
In an effort to arrive at an opinion of value, the following has been
completed:
o The property was inspected on June 24, 1996. The property was
reinspected on July 5, 1996.
o A market study has taken place including an analysis of the hotel
market on Nantucket.
o Rental data on other Nantucket hotels has been gathered. The owner of
Nantucket Accommodations, the principal marketing source for Nantucket
guest houses, has been interviewed.
o A study has taken place of actual income and expenses for the
property. We have reviewed prior appraisals, and our March 15, 1989,
valuation of this real estate.
o We have obtained actual income and expense statements for the past
three years. Interviews have been conducted with Messrs. McCready,
Wyner, Andrews, and Bimonte as to the income and operations for the
property.
o All three approaches to value were considered with the income and
sales approaches employed in completing this assignment.
The appraisers intention is to prepare an appraisal report in accordance
with the Uniform Standards of Professional Appraisal Practice (USPAP)
promulgated by the Appraisal Standards Board of the Appraisal Foundation. The
appraisal report also
5
CONSULTING AND VALUATION GROUP [LOGO]
<PAGE>
intends to comply with the Code of Ethics and Standards of Professional Practice
of the Appraisal Institute.
The appraiser completing this report complies with competency provisions
having appraised or consulted on over two-thirds of all commercial property on
Nantucket.
We will now start with a detailed discussion of the Nantucket market.
THE MARKET
Market conditions with Nantucket are centered around the tourist industry.
As shown on the map found on the following page, Nantucket is approximately
thirty miles from Woods Hole and nearly one hundred miles from Boston.
The market extends beyond Nantucket itself and encompasses the entire
eastern seaboard of the United States. Nantucket is one of the top prestige
areas in this section of the country with a number of property owners on the
island living in the Washington, D.C., New York, and Boston quadrant.
Access to the island is primarily from three sources. These include
commuter airlines from Boston, New York, and Connecticut, public and private
ferries, and private boats. General price ranges on Nantucket reflect the
prestige conditions associated with the island. Using waterfront land as an
example, on Cape Cod, lots are typically at the $300,000 to $400,000 level. On
Nantucket, waterfront lots are solidly at the $1,000,000 level. On June 28,
1996, a parcel with a view over 1,000 feet of frontage on the harbor sold for
$2,800,000.
6
CONSULTING AND VALUATION GROUP [LOGO]
<PAGE>
- --------------------------------------------------------------------------------
Location Map showing Nantucket Island in relation to Martha's Vineyard and the
states of Maine, New Hampshire, Vermont, Massachusetts, Connecticut, and Rhode
Island.
- --------------------------------------------------------------------------------
<PAGE>
Any analysis of a market, basic population, households, income levels, and
retail impacts are outlined. This information is summarized and found beginning
on the following pages.
As the assignment is hotel specific, a market discussion of this component
of the island is important.
THE HOTEL MARKET
There are two types of product available on Nantucket.
o Resort hotels
o Guest houses
The resort hotel market contains a total of seven establishments.
- --------------------------------------------------------------------------------
Rooms
-----
Harbor House 112
White Elephant/Breakers 82
Wharf Cottages 26
The Beachside 90
Wauwinet 39
Jared Coffin House 58
Nantucket Inn 100
---
Total 507
- --------------------------------------------------------------------------------
These hotels are typically open on a seasonal basis. They all close in the
winter except for the Jared Coffin House, which is open year round, and the
front building at the Nantucket Inn, which is typically occupied by visiting
tradesman during the week.
7
CONSULTING AND VALUATION GROUP [LOGO]
<PAGE>
- --------------------------------------------------------------------------------
MAP of Nantucket Island
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
AREA PROFILE: 1990 Urban Decision Systems, Inc.
Nantucket Island Retail 08/01/96
Nantucket
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
POPULATION 5,637 RACE HOUSEHOLD INCOME %
In Group Quarters 75 1.3% Black 148 2.6% Under $10,000 226 9.3%
Other 73 1.3% $10-$20,000 303 12.5%
HOUSEHOLDS 2,424 $20-$25,000 148 6.1%
1 Person 753 31.1% FAMILIES 1,393 $25-$30,000 173 7.2%
2 Person 861 35.5% With Children 666 47.8% $30-$35,000 159 6.6%
3-4 Person 657 27.1% Married Couples 1,143 82.1% $35-$40,000 182 7.5%
5+ Person 153 6.3% With Children 520 45.5% $40-$50,000 297 12.3%
Average Hhld Size 2.29 Avg Family Size 2.93 $50-$75,000 566 23.4%
Non-Family Hhd 1,031 42.5% $75-$100,000 200 8.3%
HISPANIC ORIGIN 44 0.8% In Armed Forces 26 0.5% $100-$125,000 80 3.3%
$125-$150,000 53 2.2%
AGE % OCCUPATION 3,354 % Over $150,000 31 1.3%
0-5 469 8.3% Prof/Tech 517 15.4% Median Income $40,391
6-13 478 8.5% Mgmt/Prop 513 15.3% Average Income $46,110
14-17 228 4.0% Clerical 379 11.3%
18-20 143 2.5% Sales 439 13.1% Aggreg Income 111.8 ($Mill)
21-24 306 5.4% Total Wht Collar 1,848 55.1% Per Capita Inc $20,059
25-34 1,139 20.2% Crafts 663 19.8%
35-44 1,031 18.3% Operatives 156 4.7% SCHOOL YRS COMPLETED
45-54 563 10.0% Service 423 12.6% Pop 25+ yrs 4,013
55-64 508 9.0% Laborer 120 3.6% < 9th grade 92 2.3%
65-74 397 7.0% Farm Workers 144 4.3% Some High Schl 359 8.9%
75-84 283 5.0% Total Blue Collar 1,506 44.9% High Scl Diploma 1,060 26.4%
85+ 92 1.6% College 1-3 yrs 1,177 29.3%
Median Age 35.5 Bachelor's 952 23.7%
Graduate/Prof 370 9.2%
SEX LABOR FORCE UNEMP PARTIC
Male 2,807 49.8% 1,875 1.9% 85.7% VEHICLES/HSHLD
Female 2,830 50.2% 1,577 2.5% 66.8% 0 187 7.7%
1 1,040 42.9%
HOUSING VALUE % RENT (Monthly) % 2 875 36.1%
Under $30,000 2 0.2% Under $100 16 2.1% 3-4 284 11.7%
$30-$50,000 1 0.1% $100-$199 19 2.4% 5+ 22 0.9%
$50-$75,000 7 0.6% $200-$299 32 4.1%
$75-$100,000 11 0.9% $300-$399 54 6.9% HOUSING UNITS 6,127
$100-$150,000 54 4.3% $400-$499 72 9.2% Owner Occupied 1,527 24.9%
$150-$200,000 148 11.7% $500-$599 112 14.4% Renter Occupied 897 14.6%
$200-$300,000 417 32.9% $600-$699 104 13.3% Vacant/All Year 215 3.5%
$300-$500,000 409 32.3% $700-$999 241 30.9% Vacant/Seasonal 3,488 56.9%
Over $500,000 219 17.3% Over $1,000 130 16.7%
Median Value $298,522 Median Rent $676 Mobile Homes 3 0.0%
Average Value $336,339 Average Rent $707 Stability 44.9%
Turnover 3.7%
YEAR MOVED IN Hhlds % YEAR BUILT Units %
1985-90 1,274 52.6% 1985-90 1,285 21.0% UNITS/STRUCTURE %
1980-84 341 14.1% 1980-84 791 12.9% 1 5,206 85.0%
1970-79 338 13.9% 1970-79 956 15.6% 2 418 6.8%
1960-69 208 8.6% 1960-69 577 9.4% 3-4 146 2.4%
Before 1959 250 10.3% Before 1959 2,501 40.9% 5+ 143 2.3%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Source: 1990 Census, STF1
Urban Decision Systems Inc / 4676 Admiralty Way Suite 624 / Marina Del Rey,
CA 90292 / (800) 633-9568
<PAGE>
RETAIL SALES AND COMPETITION Urban Decision Systems, Inc.
Nantucket Island Retail 08/01/96
- -------------------------------------------------------------------------------
Nantucket
RETAIL SALES ($000) $71,464
GAF Stores 29.8%
Durable goods 37.3%
Lumber, Bldng Materials, Mobile Home Dlrs $10,823
General merchandise stores $531
Food stores $12,257
Automotive Dealers/GAS Stations $6,369
Gasoline Stations $3,105
Apparel stores $7,255
Home furnishings stores $3,462
Eating & drinking places $9,658
Drug stores $2,271
Misc retail stores $15,733
TOTAL RETAIL ESTABLISHMENTS 177
Lumber, Bldng Materials, Mobile Home Dlrs 6
General merchandise stores 1
Department stores 0
Food stores 12
Automotive dealers 5
Auto & home supply 1
Gasoline Stations 4
Apparel stores 22
Men's wear stores 3
Women's wear stores 7
Shoe stores 0
Home furnishings stores 5
Furniture stores 1
Appliance stores 1
Radio TV stores 0
Eating & drinking places 58
Restaurants & lunchrooms 41
Bars 6
Drug stores 3
Misc retail stores 61
Sporting goods stores 5
Jewelry stores 1
Book stores 5
- ------------------------------------------------------------------------------
Source: Jan 1, 1994 UDS Estimates, 1991/1992 County Business Patterns (XRC)
Urban Decision Systems, Inc. / 4676 Admiralty Way Ste 624 /
Marina Del Rey, CA 90292 / (800) 633-9568 MR
<PAGE>
The second component is the guest house market. These are typically
converted homes with 6 to 10 rooms. There are several larger, more formal guest
houses, built as guest houses, in the early 1900's, which move into the 20-room
to 40-room category.
Hotel and guest house owners have organized to market Nantucket. The
objective has been to extend what is known as the shoulder season in the April
through June and September through November time frame and increase occupancy.
Surveys have been conducted and what has been found is that outside of
June, July and August, the market is limited. Nantucket Accommodations is the
principal source for marketing of guest houses. A survey of this organization's
business by number of transactions is as follows:
- --------------------------------------------------------------------------------
Nantucket Accommodations
Survey of Percentage by Month
Percent (Rounded)
-----------------
January (lessthan) 2%
February 3%
March 8%
April 11%
May 14%
June 18%
July 18%
August 18%
September 7%
October 1%
November 1%
December (lessthan) 1%
- --------------------------------------------------------------------------------
8
CONSULTING AND VALUATION GROUP [LOGO]
<PAGE>
In summary, there are two types of lodging units that accommodate visitors.
These are hotels and guest houses. Occupancy is typically 95% in season, 70% in
June and September, and low or very limited thereafter.
An actual study of occupancies within the Harbor House, White Elephant, and
Wharf Cottages is as follows:
- --------------------------------------------------------------------------------
Harbor House, White Elephant, Wharf Cottages
--------------------------------------------
1996 1995 1994
----------------------------------------------------------
January 0.0% 0.0% 4.1%
February 0.0% 0.0% 5.5%
March 0.0% 0.0% 11.6%
April 12.0% 20.8% 19.2%
May 37.3% 43.9% 37.5%
June 72.8% (For.) 75.0% 61.4%
July 86.2% (For.) 89.1% 82.4%
August 94.8% (For.) 94.7% 90.5%
September 69.8% (For.) 75.6% 73.6%
October 52.1% (For.) 56.3% 43.2%
November 15.8% (For.) 17.6% 15.7%
December 5.8% (For.) 10.6% 12.8%
Total 37.0% 38.9% 38.4%
----------
Note: (For.) = Forecast
- --------------------------------------------------------------------------------
Due to the scope and extent of appraisal work completed on Nantucket,
historical information has been analyzed. As shown on the following page, using
Harbor House as an example, average annual occupancies were at the 42.5% to
47.9% level. What is clear is that efforts to extend the shoulder season have
failed. Rather than occupancies increasing, beyond that experienced in the 1986
and 1988 time frame, they have actually declined. This impacts value.
9
CONSULTING AND VALUATION GROUP [LOGO]
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
HARBOR HOUSE
1988 Occupancy 1986 1988
1986 Without Main Average Average
Month Occupancy Building Fire Room Rate Room Rate
----- --------- ------------- --------- ---------
Forecast Actual Forecast Actual
-------- ------ -------- ------
<C> <S> <C> <C> <C> <C> <C> <C>
1985 November 16.6% 20.6% $ 71.12 $ 77.98
1985 December 11.8% 15.4% $ 81.51 $ 98.28
1986 January 4.2% 6.7% $ 57.12 $ 50.80
1986 February 4.4% 9.1% $ 51.75 $ 44.54
1986 March 5.7% 18.0% $ 53.18 $ 37.37
1986 April 25.4% 28.6% $ 71.58 $ 70.16
1986 May 38.7% 48.7% (40.6%) $ 102.16 $ 101.57 ($ 96.38)
1986 June 60.5% 66.8% (46.4%) $ 116.15 $ 132.98 ($ 131.46)
1986 July 87.7% 86.0% (57.8%) $ 143.11 $ 168.66 ($ 177.16)
1986 August 95.6% 91.4% (61.4%) $ 142.15 $ 166.73 ($ 177.31)
1986 September 75.3% 73.9% (50.6%) $ 112.44 $ 139.19 ($ 140.06)
1986 October 60.4% 41.3% (31.0%) $ 94.14 $ 102.75 ($ 104.22)
Overall 47.9% 42.5% (32.2%)
-------
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
One way to make up for occupancy, under resort conditions, is to charge
high room rates. As is shown in the 1986 and 1988 study contained herein, for
the Harbor House, average room rates in season are nearly double off season
rates. The average room rate for the subject properties, from information
provided by the ownership, is as follows:
- --------------------------------------------------------------------------------
Average
Room Rate
---------
January to May $146.85
June to August $225.64
September to December $170.70
- --------------------------------------------------------------------------------
The Christmas Stroll, a marketing event, has an average rate of $204.00 per
night, which accounts for higher room rates in the fall versus the spring.
A survey of hotel room rates has taken place, and a copy of their rate
schedules begin on the following page. But for Wauwinet House, the average room
rates within the properties under study are above other competing hotels.
Competitive room rates place a ceiling on the level that can be charged within
the property under study. Wauwinet House is the exception. This property is far
more grand and luxurious, and, in effect, is a new building built around an
historic shell.
In summary, the Nantucket market is a seasonal market. From a hotel
perspective, although high in prestige and high in average room rate, the season
itself limits the income potential for the property.
10
CONSULTING AND VALUATION GROUP [LOGO]
<PAGE>
NANTUCKET
WHITE ELEPHANT
1996 TARIFF SCHEDULE
European Plan Per Day
- --------------------------------------------------------------------------------
ACCOMMODATIONS SPRING/FALL SUMMER
- --------------------------------------------------------------------------------
o Guest rooms $200 - $215 $240 - $250
o Harborview rooms $245 - $260 $295 - $315
o The Breakers guest rooms $225 - $300 $335 - $425
o The Breakers harborview rooms $275 - $325 $375 - $475
o One-bedroom cottage $250 - $295 $285 - $375
o One-bedroom harborview cottage $395 $450
o Two-bedroom cottage $310 - $350 $360 - $455
o Two-bedroom harborview cottage $595 $690
o Three-bedroom cottage $435 - $495 $515 - $595
- --------------------------------------------------------------------------------
Special event weekends are subject to an additional charge.
The White Elephant is open May 10 - October 26 and reopens for Christmas
Stroll - December 6-7.
Group rates available upon request.
Additional person charge $20 per day.
Room rates are subject to Massachusetts tax of 5.7% and local tax of 4%.
Rates valid through December 31, 1996.
Rates subject to change without notice.
The White Elephant
A COLONY RESORT
Easton Street, P.O. Box 1139, Nantucket, MA 02554
Reservations - Toll Free 800-ISLANDS
Hotel - (508) 228-2500
NANTUCKET
HARBOR HOUSE
1996 TARIFF SCHEDULE
European Plan Per Day
- --------------------------------------------------------------------------------
ACCOMMODATIONS SPRING/FALL SUMMER WINTER
- --------------------------------------------------------------------------------
o Guest rooms $125 - $170 $225 $115
Located in the Main Hotel, Garden Cottage
or Springfield House, each room has either
two twin beds or one queen size bed.
o Townhouse rooms $150 - $215 $265 $140
57 Rooms are located in six buildings
resembling early Nantucket homes. Each
spacious room is decorated in a traditional
style with two double beds or one king
size bed.
o Sherburne Cottage $540 - $640 $695 $540
A handsome, fully equipped three bedroom
home with daily maid service.
- --------------------------------------------------------------------------------
Special event weekends are subject to an additional charge.
Group rates available upon request.
Additional person charge $20 per day.
Room rates are subject to Massachusetts tax of 5.7% and local tax of 4%.
Rates valid through December 31, 1996.
Rates subject to change without notice.
HARBOR HOUSE
A COLONY RESORT
South Beach Street, P.O. Box 1139, Nantucket, MA 02554
Reservations - Toll Free 800-ISLANDS
Hotel - (508) 228-1500
<PAGE>
NANTUCKET
WHARF COTTAGES
1995 TARIFF SCHEDULE
European Plan Per Day
- --------------------------------------------------------------------------------
The Wharf Cottages, located on the docks in the Nantucket Boat Basin, provide a
unique vacation experience. Each cottage has a fully equipped kitchen and
includes daily maid service.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
WHARF COTTAGES SPRING/FALL SUMMER
- --------------------------------------------------------------------------------
o Studio $140 - $200 $240
o 1 Bedroom $185 - $250 $355
o 2 Bedroom $230 - $295 $425
o 3 Bedroom $330 - $395 $525
- --------------------------------------------------------------------------------
Weekly, monthly and seasonal rates available.
The Wharf Cottages are open April 15 - October 31.
Room rates are subject to Massachusetts tax of 5.7% and local tax of 4%.
Additional person charge $20 per day.
Rates valid through October 31, 1995.
Rates subject to change without notice.
- -------------------------------------
The Nantucker Boat Basin offers every
convenience for those who travel by
water...including concierge service.
For more information on the Nantucket
Boat Basin or to reserve a slip please
call 800-NAN-BOAT.
- -------------------------------------
THE WHARF COTTAGES
A COLONY RESORT
New Whale Street, P.O. Box 1139, Nantucket, MA 02554
Reservations - Toll Free 800-ISLANDS
Hotel - (508) 228-4620
<PAGE>
THE WAUWINET
AN INN BY THE SEA
- --------------------------------------------------------------------------------
Season Tariffs Spring/Fall Summer
- --------------------------------------------------------------------------------
Mid May - Mid June Mid June - Mid Sept.
Mid Sept. - Late Oct.
Guest Bedroom $165 - $390 $310 - $510
Intimate Accommodations o Queen Beds o Individually Decorated.
Bay View Bedroom $250 - $490 $410 - $610
Cozy Rooms with Pleasant Water Views.
Deluxe Bedroom $310 - $590 $480 - $710
Most Luxurious Rooms o King Beds.
Cottage Suites $410 - $1170 $610 - $1400
All Bedrooms offer Guest-Controlled Heat and Air-Conditioning.
Quotes are for single or double occupancy and may change without notice.
Rates do not include state and local taxes. A minimum of up to four nights
may be required depending on the time of season or a stay involving
Friday and Saturday nights.
Prepayment is required and cancellation penalties apply.
The Wauwinet is a smoke-free Inn.
Advance Dinner Reservations for TOPPER'S at The Wauwinet are requested.
(Please see reverse side)
<PAGE>
---------------------------
"The Amenities You'd Expect
At A Price You Wouldn't."
---------------------------
- --------------------------------------------------------------------------------
1996 Rates
The Nantucket Inn takes the guesswork out of vacation expenses. These attractive
rates provide for first rate accommodations and personal service that are
normally advertised by word-of-mouth. Seasonal packages offer you the gentle
comforts you need with the flexibility you want for doing whatever strikes your
fancy. And, as always, children under age eighteen stay free in their parents'
rooms. Taxes and gratuities not included. Based on availability.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ROOM RATES
January-April 18 Standard $55
Cottage $80
April 19-May 23 Standard $85-$115
Cottage $125
May 24-June 27 Standard $120-$155
Cottage $175
June 28-Sept. 1 Standard $160-$175
Cottage $190
September 2-28 Standard $120-$155
Cottage $175
Sept. 29-Oct. 26 Standard $80-$100
Cottage $125
Oct. 27-Dec. 31 Standard $50
Cottage $80
Daffodil Festivale
Weekend Standard $115
April 26 & 27 Cottage $125
Christmas Stroll
Weekend Standard $175
December 6 & 7 Cottage $190
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Meetings & Receptions
Planned for Success!
Plan your next business meeting, reception, or party at the Nantucket Inn. Our
staff will coordinate all your arrangements to the smallest detail. Six
individual conference/reception rooms (4000 total square feet) are available for
your group's gathering. For more information and space availability, please
contact our Sales Office at 800-252-6858.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Package Rates Starting As Low As ...
Spring April 19 to June 27
Break! $249 per couple
Includes:
o Two nights' accommodations
o Full breakfast each morning
o Dinner one evening in our Windsong Restaurant
$360 - Three-nights, one dinner
$605 - Five-nights, two dinners
$835 - Seven-nights, three dinners
Sensational June 28 to September 1
Summer $369 per couple
Includes:
o Two nights' accommodations
o Full breakfast each morning
o Dinner one evening in our Windsong Restaurant
$530 - Three-nights, one dinner
$890 - Five-nights, two dinners
$1255 - Seven-nights, three dinners
Autumn September 2 to October 26
Charm $249 per couple
Includes:
o Two nights' accommodations
o Full breakfast each morning
o Dinner one evening in our Windsong Restaurant
$360 - Three-nights, one dinner
$605 - Five-nights, two dinners
$835 - Seven-nights, three dinners
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Check-in 3 p.m. Check-out 11 a.m.
A 50% deposit is required
within 7 days of making a reservation.
Advance deposit guarantees the entire period reserved.
Deposits for reservations cancelled
less than 72 hours in advance of arrival will be
forfeited. All cancelled reservations will be
subject to a $15 processing fee.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NANTUCKET INN
- --------------------------------------------------------------------------------
<PAGE>
THE BEACHSIDE
AT NANTUCKET
1996 RATE SCHEDULE
- --------------------------------------------------------------------------------
4/19-5/23 5/24-6/20
Dates 9/29-10/19 9/8-9/28 6/21-9/7
- --------------------------------------------------------------------------------
VERANDA/POOLSIDE ROOMS
- --------------------------------------------------------------------------------
Midweek $115 $155 $225
Weekend $155 $225 $225
22 first floor rooms located around pool and courtyard
area. Each with a private veranda.
POOLVIEW ROOMS
- --------------------------------------------------------------------------------
Midweek $105 $140 $200
Weekend $140 $200 $200
11 Rooms located on the second floor overlooking
pool and courtyard area, without a private veranda.
CLIFFSIDE ROOMS
- --------------------------------------------------------------------------------
Midweek $ 95 $130 $185
Weekend $130 $185 $185
52 first and second floor rooms away from the pool
and courtyard area, surrounded by additional parking
area and conservation land.
SUITES
- --------------------------------------------------------------------------------
Midweek $230 $300 $450
Weekend $300 $450 $450
3 first floor units each consisting of 2 large connecting
bedrooms.
THE BEACHSIDE
AT NANTUCKET
<PAGE>
TARIFF SCHEDULE
JARED COFFIN
HOUSE
---------------------- 1996 ----------------------
January 1 through April 4
Double $95 to $110 Single $55
April 5 through May 9*
Double $110 to $145 Single $65
May 10 through June 29
Double $145 to $175 Single $75
June 30 through September 28
Double $150 to $200 Single $85
September 29 through October 26
Double $145 to $175 Single $75
October 27 through December 31*
Double $95 to $110 Single $60
* Exclusive of holidays and special events
--------------------------------------------------
All rates include a "Country Inn Breakfast"
selected from our menu & individually prepared.
Accommodations for pets or children in the same
room with parents are very limited, always in
demand and require specific confirmation. There is
a one-time $10 charge for pets and a $15 per day
charge for each additional person.
While we appreciate payment of hotel charges by
cash, traveler's check or personal check, we also
accept the following credit cards: Visa, MasterCard,
Discover, American Express and Diner's Club.
--------------------------------------------------
JARED COFFIN
HOUSE
NANTUCKET
An Historic Island Inn
Come be our guest at the
celebrated Jared Coffin House
-- a collection of landmark buildings
from the mid-1800s,
in the heart of the
Old Historic District.
Philip and Margaret Read, Innkeepers
Jonathan Stone, General Manager
<PAGE>
LOCATION
Both the Harbor House Hotel and White Elephant Hotel are located on the
north side of downtown, adjacent to Brandt Point. This section of the island is
considered the waterfront, residential location on Nantucket. Harbor House is
one-quarter mile from Main Street, while the White Elephant is four-tenths of a
mile from Main Street.
Both properties are in an area characterized by guest houses and
single-family homes. The location would be considered transitional as one moves
from downtown through this section of the island to the Cliffs or Hulbert
Avenue.
The Harbor House is one tier back from the water, and only distant water
views are available from their upper stories. The White Elephant is directly on
the harbor and has excellent water views. Access to the Harbor House is via
South Beach Street, which intersects at Easton Street where the White Elephant
is located. Beach Street contains a variety of commercial types of uses
interspersed with residential properties. Easton Street contains primarily
residential properties with the exception of the former Mad Hatter Restaurant at
the corner of South Beach Street.
Overall, both property locations would be classified as excellent. They are
in close proximity to downtown and are an easy walk. Other hotel properties in
the immediate area include the Jared Coffin House with 58 rooms and the
Beachside with 90 rooms. The balance of the intown lodging facilities are guest
houses.
The Wharf Cottages, as the name implies, are built on the wharves
themselves. They are located on what is known as Old South Wharf and Swains
Wharf. There are three units that span the southern edge of the Boat Basin
directly adjacent to the Harbor
11
CONSULTING AND VALUATION GROUP [LOGO]
<PAGE>
Area Map of
Portions of Nantucket Island
- -----------------------------
Hotels
The Harbor House Hotel
The White Elephant Hotel
The Breakers
The White Elephant Hotel
- -----------------------------
Mall Properties
? Retail Stores
? Apartment Units
? Restaurants
- -----------------------------
The Nantucket Boat Basin
?aight Wharf
? South Wharf
? Wharf
The Wharf Cottages
[MAP]
<PAGE>
Fuel property. The Wharf Cottages are two stories in height and contain studio,
one bedroom, two bedroom, and three bedroom units. They are integrated within
the Boat Basin.
The location of the Wharf Cottages is, in effect, an extension of downtown.
There is no more prime or fine location on Nantucket. The Wharf Cottages,
because of their uniqueness, serve as guest cottages for boat owners at the Boat
Basin or for tourist looking for the ambiance of Nantucket.
THE PROPERTY
HARBOR HOUSE
The Harbor House consists of thirteen different buildings. The main
property is the Harbor House itself, a three and one-half story building. The
balance is a series of one or two-story, connected or free-standing buildings in
the shape of a "U" bounded by North Water Street on the southwest and South
Beach Street on the northeast. In addition, there are three separate buildings
adjacent to Easton Street with the principal building being Springfield House.
The main building contains 35 guest units situated along a double-loaded
corridor, uniform in design, for 3 guest floors where accommodations are found.
The building is wood frame, and the typical finish is carpeted floor, painted
walls, and new, modern bathrooms. By modern standards, the rooms are small.
12
CONSULTING AND VALUATION GROUP [LOGO]
<PAGE>
There is a forced hot water heating system for each unit with each unit
having its own thermostat. The front rooms at the second and third level have
distant water views. Windows are of wood sash with exterior, triple tract storm
and screen windows added thereto. The building was built in 1940.
The buildings are referred to by numbers. There are technically eleven
buildings. If the conference center is separated from the hotel, there are
thirteen buildings.
Seven of the buildings were built in 1979, and these are the buildings
around the "U" shaped entry area. The three houses, known as #9, #10, and #11,
were built between 1850 and the early 1900's. Unit types are as follows:
Harbor House
-----------------------------------------------------------------
Building Type Number of Units
=================================================================
Main Building 3-Story 35
-----------------------------------------------------------------
Building #2 2-Story 10
-----------------------------------------------------------------
Buildings #3 and #4 2-Story 10
-----------------------------------------------------------------
Building #5 2-Story 10
-----------------------------------------------------------------
Building #6 1-Story 7 + Store
-----------------------------------------------------------------
Building #7 2-Story 10
-----------------------------------------------------------------
Building #8 1-Story Meeting Rooms and
Conference Center
-----------------------------------------------------------------
Building #9 2 1/2-Story 7
-----------------------------------------------------------------
Building #10 2 1/2-Story 11
-----------------------------------------------------------------
Building #11 3-Story 12
-----------------------------------------------------------------
Total 112
-----------------------------------------------------------------
All buildings are wood frame structures with cedar shingle siding, hip or
mansard roofs, with Buildings #2 - #8 electrically heated. Buildings #9 and #11
are unheated cottages, with Building #10 having a central, oil-fired, water
system. In
13
CONSULTING AND VALUATION GROUP [LOGO]
<PAGE>
addition, these buildings also contain a garage which is a former one-story
converted house. Unit designations are as follows:
-----------------------------------------------------------------
Harbor House
Unit Designations
# Rooms Designation
------- -----------
42 HQ - Queen
12 HT - Twin
32 HD - Double
25 HK - King
1 HB - 3 Bedroom
---
112
-----------------------------------------------------------------
The buildings fit the rustic ambiance of Nantucket. Occupancy is seasonal.
WHITE ELEPHANT/BREAKERS
The White Elephant is a two-story, balcony walk-by building and is of motel
design. The name is the original name for the property when acquired. A number
of additions, moving of buildings to the site, assemblage, and new construction
have taken place over time.
As a result, the property consists of twelve separately assessed parcels.
The White Elephant itself is the largest parcel containing 63,731 square feet of
land. There is a heated swimming pool, sandy beach, and a small pier that juts
into the harbor. There are a total of eight buildings on the site, the largest
of which is the White Elephant with 22 rooms.
The White Elephant was last renovated in 1990, and additional renovations
are now required in the 1996-1997 time frame.
14
CONSULTING AND VALUATION GROUP [LOGO]
<PAGE>
While the White Elephant is two stories in height, there are separate
buildings which are basically cottages. There are eight White Elephant Cottage
units and eight of what are called "spindrift suites" that are cottage units.
Typical construction is wood shingle, wood frame, with hip roof, drywall
interior, and wall-to-wall carpeting. Heat is by oil and is typically forced hot
water. The cottages typically have electric heat.
The current condition would be described as fair and in need of
considerable maintenance.
Between the White Elephant and the Breakers is a separate ownership that
could not be acquired. The Breakers contain 26 hotel units and was last
remodeled in 1988 at a cost of $500,000. The building is large by Nantucket
standards, containing 17,948 square feet which allows for larger than average
rooms. The Breakers looks onto Nantucket Harbor with outstanding water views.
The rooms are more modern than the White Elephant, with modern bathrooms
and wall-to-wall carpeting. There is electric heat and the walls are part
drywall and part paneled. The third level of this building contains dormers.
Adjacent to the White Elephant and Breakers, to the southwest of Walsh
Street is the location of the majority of the adjoining cottages. Walsh Street
is separated into a front and rear section by McKay Way, with water frontage
area known as Harbor View Way. The closest structure to the White Elephant is
known as Captain's Court and is one of the White Elephant's cottages. Like the
other cottages, it is wood frame with a similar finish. Each building has a
name, with other names being Forecastle, High Tide,
15
CONSULTING AND VALUATION GROUP [LOGO]
<PAGE>
Mid Ships, Driftwood, Dolphin, Swan, and Gull. The White Elephant cottages are
heated only by fireplaces. They are of rustic finish.
Across Easton Street are two single unit properties known as Salty and
Misty. The units that make up the White Elephant/Breakers complex may be
summarized as follows:
White Elephant
- --------------------------------------------------------------------------------
Number of
Building Type Units
================================================================================
The Breakers 3 1/2-Story Waterfront 26
- --------------------------------------------------------------------------------
White Elephant 2-Story 22
- --------------------------------------------------------------------------------
White Elephant Cottages Cottages facing Easton Street 8
- --------------------------------------------------------------------------------
Spindrift Suites 4-Unit Cottages 8
- --------------------------------------------------------------------------------
Captain's Court 1-Story 2
- --------------------------------------------------------------------------------
Forecastle 1-Story - Single Unit 1
- --------------------------------------------------------------------------------
High Tide & Miscellaneous Salt Box 4
- --------------------------------------------------------------------------------
Mid Ships 1-Story, Single Unit 1
- --------------------------------------------------------------------------------
Salty 1-Story, Single Unit 1
- --------------------------------------------------------------------------------
Misty 1-Story, Single Unit 1
- --------------------------------------------------------------------------------
Driftwood Cottages 1-Story 2
- --------------------------------------------------------------------------------
Dolphin 1-Story - Efficiencies 2
- --------------------------------------------------------------------------------
Swan 1-Story - Efficiencies 2
- --------------------------------------------------------------------------------
Gull 1-Story - Efficiencies 2
- --------------------------------------------------------------------------------
Total 82
- --------------------------------------------------------------------------------
RESTAURANTS
The Harbor House and White Elephant complexes effectively function
together. They are operated and managed together. Each contains its own
restaurant. The Harbor House Restaurant is known as the Hearth Dining Room.
Adjoining thereto is a bar area and entertainment area. Total restaurant seating
is for eighty-five people and total bar area capacity is for twenty-five.
16
CONSULTING AND VALUATION GROUP [LOGO]
<PAGE>
The White Elephant Restaurant is known as the Regatta Dining Room and
Lounge. There are a total of sixty-five dining room seats and forty-five bar
room seats.
Both restaurants are seasonal.
WHARF COTTAGES
The Wharf Cottages are part of the Boat Basin. Their sizes are as follows:
- --------------------------------------------------------------------------------
Wharf Cottages
Square
Feet
----
Orion 640
End of Rope 625
Meridian 1,088
Pisces 1,063
Nautilus 899
Zena Coffin 442
Young Hero 260
Willet 260
Verona 530
Upper Deck 463
Three Brothers 719
Sooty Shearwater 282
Rambler 282
Pawana 530
Ark 667
Bittern 126
Cachelot 592
Davy Jones 536
Egret 126
Fallon 613
Grampus 600
Harmony 324
John Jay 584
Kittiwake 743
Loon 1,067
Mermansion 1,067
- --------------------------------------------------------------------------------
The mix of units is two studio, eight 1-bedroom, twelve 2-bedroom, and
three 3- bedroom units.
17
CONSULTING AND VALUATION GROUP [LOGO]
<PAGE>
The construction is wood frame, and each unit contains the equivalency of a
Pullman kitchen with refrigerators, cabinetry, and stoves. The units are
electrically heated.
Access is directly off of the wharves themselves, or in the case of the
units along New Whale Street, from this connector street which ties Old South
and Swain Wharf together.
Wharf Cottages, overall, are in excellent condition and have been well
maintained.
ZONING
The property is located in what is known as an "LC" district which stands
for limited commercial district. Minimum lot size is 5,000 square feet with
40-foot frontage, no front yard setback requirement, a 5-foot side and rear yard
requirement, and a 50% coverage ratio. The Harbor House and White Elephant
conform to zoning. The Wharf Cottages were built prior to zoning on Nantucket
and are a pre-existing, non-conforming use.
ASSESSED VALUES
The properties are assessed as follows:
18
CONSULTING AND VALUATION GROUP [LOGO]
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
ASSESSED VALUES
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
Harbor House
- ----------------------------------------------------------------------------------------------------------------
Location Parcel # Type Taxes Value
- -------- -------- ---- ----- -----
<S> <C> <C> <C> <C>
20 Cherry Street 0055-3785 Real $2,544 $204,000
20 Cherry Street 0055-3785 Tangible 208 23,743
29 North Water Street 4242-001 Tangible 335 26,865
29 North Water Street 4242-001 Real 4,820 386,500
25R North Water Street 4242-0022 Real 1,164 176,900
19 North Water Street 4242-003 Real 154,966 12,427,100
South Beach Street 4242-003 Real 1,097 87,949
-------- -----------
Total Harbor House $165,221 $13,333,058
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
White Elephant
- ----------------------------------------------------------------------------------------------------------------
Location Parcel # Type Taxes Value
- -------- -------- ---- ----- -----
50 Easton Street 4141-0023 Real $1,152 $175,035
43 Easton Street 4241-019 Real 2,358 189,100
42 Easton Street 4241-021 Tangible 95 7,600
42 Easton Street 4241-021 Real 25,905 2,077,400
50 Easton Street 4241-023 Real 56,131 4,501,300
50 Easton Street 4241-023 Tangible 575 46,105
60 Easton Street 4241-060 Tangible 403 32,357
60 Easton Street 4241-060 Real 7,557 606,000
57 Easton Street 4241-087 Real 1,811 275,300
57 Easton Street 4241-087 Tangible 79 6,355
82 Easton Street 4242-005 Tangible 95 7,355
82 Easton Street 4242-005 Real 2,696 409,776
-------- -----------
Total White Elephant $98,859 $8,333,973
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
Wharf Cottages
- ----------------------------------------------------------------------------------------------------------------
Location Parcel # Type Taxes Value
- -------- -------- ---- ----- -----
New Whale Street 4224-011 Real $8,729 $1,326,564
3 Commercial Street 4231-0038 Real 3,535 537,301
3 Commercial Street 4231-0038 Tangible 414 33,228
6 Commercial Street 4231-0230 Real 136 20,699
Old South Wharf 4224-002 Real 52,069 4,175,526
Old South Wharf 4224-002 Real 16,581 1,329,692
Commercial Street 4231-0231 Real 69 10,447
-------- -----------
Total Wharf Cottages $81,534 $8,333,973
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
19
CONSULTING AND VALUATION GROUP [LOGO]
<PAGE>
The properties are substantially over assessed, and their values bear
no relationship to that indicated by this report.
We recommend that a tax abatement be rigorously pursued.
HIGHEST AND BEST USE
Highest and best use is defined as:
"The reasonably probable and legal use of vacant land or an improved
property, which is physically possible, appropriately supported,
financially feasible, and that results in the highest value. The four
criteria the highest and best use must meet are legal permissibility,
physical possibility, financial feasibility, and maximum
profitability."(4)
COMMENTARY ON HIGHEST AND BEST USE
The key to a discussion on highest and best use for property on Nantucket
involves the issue of legal permissibility.
From a real estate perspective, due to their waterfront locations, both the
White Elephant and Wharf Cottages have potential higher and better uses than
exist today. The White Elephant has essentially three parts. These are the White
Elephant itself, the Breakers, and one to four-unit cottages totaling
thirty-four units.
The White Elephant is situated on a 63,731 square foot parcel of land.
Demolition of this structure and conversion to three or four single-family house
lots has the potential of creating $3,000,000 as a minimum in terms of land
value. Conversion of
- --------
(4) Appraisal Institute, The Dictionary of Real Estate Appraisal, (Chicago),
Third Edition, page 171.
20
CONSULTING AND VALUATION GROUP [LOGO]
<PAGE>
the Breakers to condominiums containing one and two-bedroom units can produce a
value, net of conversion costs, of a minimum of $1,000,000. Alternatively,
demolition and creation of a waterfront house lot could provide an equal value.
Conversion of the cottages to condominiums can produce a value net of
conversion costs of at least $100,000 each.
What this commentary shows is that from a financial perspective, greater
value could exist as a condominium. The legal ability to develop such a
condominium and thereby create this value is, however, subject to substantial
doubt. This uncertainty stems from the several discretionary permits required
for condominium conversion, together with multiple circumstances indicating that
public officials would not be favorably disposed to approve such a project.
The permits necessary for condominium conversion include zoning relief from
the Town of Nantucket, as well as a Chapter 91 waterways license from the
Massachusetts Department of Environmental Protection. From a local perspective,
all indications are that Nantucket would resist the loss of hotel rooms and
cottage rentals inasmuch as these facilities accommodate tourist activity in
which local merchants have a strong interest.
From a state perspective, the Chapter 91 waterways program accords a clear
preference for water-related facilities of public accommodation (such as the
existing hotels and rental cottages) over non-water-dependent forms of private
land use (as would be single family residential or residential/commercial
condominiums). Even assuming it to be possible, this policy preference could
only be overcome were the
21
CONSULTING AND VALUATION GROUP [LOGO]
<PAGE>
applicant able and willing to offer an offsetting package of water-dependent
public benefits. Typically, such public benefits are in direct tension with the
amenities (e.g. privacy) associated with high-end condominiums. Lastly, and
assuming that a Chapter 91 license could be obtained for a condominium on terms
which are not unduly burdensome, there is every reason to believe that the Town
of Nantucket would oppose such a license by resort to litigation. This belief is
substantiated by the town's intervention in the Chapter 91 license recently
issued for the White Elephant and the Breakers, as well as the town's stated
intent to take appeal from a pending Chapter 91 license covering the Nantucket
Boat Basin.
For the reasons summarized above, it cannot reasonably be assumed that
condominium conversion is available from a legal perspective.
Finally, the Harbor House, which is one tier back from the water, under its
design and structure, was built, originally, as a hotel and, as expanded,
continues to operate as a hotel. Economically, a hotel would produce maximum
value.
In summary, based on the commentary presented herein, "as is" as of the
valuation date of this appraisal, the highest and best use of the properties is
their current use as resort hotel real estate.
VALUATION
METHODOLOGY
Established real estate principles incorporate the three basic approaches
to value. These are the cost approach, income approach, and market sales
comparison approach.
22
CONSULTING AND VALUATION GROUP [LOGO]
<PAGE>
In this report, the cost approach has not been applied. The properties are
a series of frame buildings, and if not in place, most certainly would not be
reproduced in their same configuration. Further, to try to apply depreciation to
the properties would become highly theoretical due to their age and, in
particular, wear and tear as hotel rooms. For this reason, a cost approach has
not been applied.
The concept behind an income approach is that a buyer of property will pay
no more for that property than could be anticipated based on the revenues that
will be produced. An income approach, traditionally, is how hotel property is
bought and sold.
For the reasons outlined above, as operating hotels, our realistic
projection of net income, due to high operating costs, is a very low 6.2% of
gross revenues. This is under 30% of normal hotel operations.
In this report, we have applied, but not given weight to, an income
approach to the Harbor House and White Elephant and applied an income approach
only against the Wharf Cottages. They are small enough to be efficiently and
effectively operated as a single unit, and "as is" would sell based on their
existing income. For the Harbor House and White Elephant, we have relied upon a
market sales comparison approach.
The market sales comparison approach is based on the concept that a buyer
of property will pay a price equal to what like kind property would sell for in
the market. In this instance, it is important to outline the most logical buyer
and the profile of that buyer for the Harbor House and White Elephant.
23
CONSULTING AND VALUATION GROUP [LOGO]
<PAGE>
Buyers of property on Nantucket buy independently of income. The buyer of
the Harbor House and White Elephant would be a wealthy seasonal resident with
other business interests. That resident would be an experienced business person
involved with the running of companies. That person would have a high pride of
ownership.
The buyer would most likely be buy free and clear.
In terms of return on investment, the buyer of these two properties would
look to cash flow to fund maintenance, replacements and provide some adjunct to
income. The buyer of the property in all probability would keep a yacht within
the boat basin and would use the property as an adjunct to entertaining guests.
This type of buyer most certainly exists on Nantucket.
THE INCOME APPROACH TO VALUE
The starting point is a study of actual income from the property.
Analysis of Income
Under their present operation, the Harbor House, White Elephant, and Wharf
Cottages are combined with the Boat Basin and employee housing to create a
single economic unit. The Boat Basin and employee housing must be separated and
segregated from the hotel operations.
When studying property, appraisers under fee simple valuation apply fair
market rent. The initial question involves a determination as to whether or not
the existing income as collected is fair market income.
On the following page is the rate schedule for the prime competition, the
Wauwinet House, Nantucket Inn, Jared Coffin House, and Beachside.
24
CONSULTING AND VALUATION GROUP [LOGO]
<PAGE>
- --------------------------------------------------------------------------------
NANTUCKET HOTELS
COMPARABLE ROOM RATES PER DAY
Spring/Fall
Mid-May to Mid-June Summer
Property Mid-September to Late October Mid-June to Mid-September
- -------- ----------------------------- -------------------------
Wauwinet House
Guest Rooms $165 - $390 $310 - $510
Bay Rooms $250 - $490 $410 - $610
Deluxe $310 - $590 $480 - $710
Cottage Suites $410 - $1,170 $610 - $1,400
Nantucket Inn
Standard $80 - $120 $160 - $175
Cottage $125 $175 - $190
Beachside
Poolside $105 - $155 $155 - $225
Cliffside $95 - $130 $130 - $185
Suites $230 - $300 $300 - $450
Jared Coffin House
Single $75 $85
Double $145 - $175 $150 - $200
- --------------------------------------------------------------------------------
<PAGE>
From a quality rating perspective, the properties under study are superior
to the Jared Coffin House, Beachside, and Nantucket Inn, and inferior to the
Wauwinet House. Wauwinet House is an absolutely first class, luxury inn created
by one of Nantucket's wealthy summer residents with room rates priced
independent of any of the other hotels on Nantucket. The Wauwinet House offers
proof of the ability for first class facilities to command premium room rates.
In addition to both inspecting and studying the comparable properties, we
have analyzed three years of income and expense statements. Income flows to the
property in three distinct segments. During the winter, when closed, the income
is zero. During the spring and fall, average room rates are between $146.85 per
night and $170.70 per night. This would place the properties above the Jared
Coffin House, Beachside and Nantucket Inn, but below Wauwinet House. In season,
the average room rate is $225.64 per night. Again, this falls within the same
range in terms of pricing as off season rates.
After careful study and analysis, we have concluded that existing income is
market income and have utilized this income in our analysis. On the following
page is a summary of income and expense projected for 1996 which forms the basis
of our income valuation.
Expenses
Included herein is an income and expense summary involving national data
published by Horwath Hospitality Consulting. Total operating expenses for hotels
are
25
CONSULTING AND VALUATION GROUP [LOGO]
<PAGE>
Full Service Hotels
Hotels with Food and Beverage Operations
- -----------------------------------------
<TABLE>
<CAPTION>
1994 Total U.S. Results Chain-Affiliated Independent
----------------------- ---------------- -----------
<S> <C> <C> <C>
Occupancy 70.8% 71.4% 65.7%
Average Size of Property (Rooms) 293 299 241
Average Rate $78.67 $76.67 $95.75
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio Per Per Ratio Per Per Ratio Per Per
to Available Occupied to Available Occupied to Available Occupied
Sales Room Room Night Sales Room Room Night Sales Room Room Night
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUE
Rooms 67.6% $20,092 $ 78.67 68.5% $19,861 $ 76.67 59.3% $22,081 $ 95.75
Food 19.0 6,427 26.09 18.5 6,107 24.17 22.9 9,184 42.63
Beverage 5.1 1,763 7.19 4.9 1,644 6.54 6.7 2,791 12.79
Other Food & Beverage 2.4 802 3.18 2.5 815 3.18 1.7 687 3.12
Telephone 2.6 809 3.14 2.7 809 3.11 2.1 806 3.39
Minor Operated Departments 2.1 892 4.00 1.8 724 3.02 4.9 2,350 12.53
Rentals & Other Income 1.2 427 1.77 1.1 340 1.36 2.4 1,184 5.34
----- ----- ------ ----- ------ ------ ----- ------ ------
Total Revenue 100.0 31,212 124.04 100.0 30,300 118.05 100.0 39,083 175.55
----- ------ ------ ----- ------ ------ ------ ------ ------
- ---------------------------------------------------------------------------------------------------------------------------------
DEPARTMENTAL EXPENSES
Rooms 26.4 5,247 20.80 26.2 5,148 20.06 28.7 6,087 27.08
Food & Beverage 82.2 7,163 29.15 81.6 6,777 26.86 86.5 10,475 48.77
Telephone 60.5 442 1.77 57.1 432 1.69 90.3 564 2.48
Other Departmental Expenses 1.6 693 3.08 1.4 555 2.28 3.9 1,883 9.99
----- ----- ----- ----- ----- ----- ---- ------ -----
Total Departmental Expenses 42.0 13,545 54.80 41.3 12,912 50.89 47.9 19,009 88.32
----- ------ ----- ---- ------ ----- ---- ------ -----
- ------------------------------------------------------------------------------------------------------------------------------------
DEPARTMENTAL PROFITS
Rooms 73.6 14,845 57.87 73.8 14,713 56.61 71.3 15,994 68.67
Food & Beverage 17.8 1,829 7.31 18.4 1,789 7.03 13.5 2,187 9.77
Telephone 39.5 367 1.37 42.9 377 1.42 9.7 242 .91
Other Departmental Profit 1.7 626 2.69 1.5 509 2.10 3.4 1,651 7.88
- -----------------------------------------------------------------------------------------------------------------------------------
---- ------ ----- ---- ------ ----- ---- ------ ------
TOTAL DEPARTMENTAL PROFITS 58.0 17,667 69.24 58.7 17,388 67.16 52.1 20,074 87.23
---- ------ ----- ---- ------ ----- ---- ------ ------
- -----------------------------------------------------------------------------------------------------------------------------------
UNDISTRIBUTED
OPERATING EXPENSES
Administrative & General 9.7 2,919 11.77 9.7 2,790 10.93 10.7 4,035 18.98
Marketing 5.9 1,886 7.66 5.8 1,799 7.14 6.7 2,640 12.17
Franchise Fees 1.4 333 1.35 1.5 366 1.48 .2 46 .21
Energy 4.9 1,384 5.63 4.9 1,350 5.36 5.0 1,683 8.04
Property Operations &
Maintenance 5.3 1,610 6.54 5.2 1,528 6.09 6.1 2,313 10.45
---- ----- ----- ---- ------ ------ ----- ------ ------
Total Undistributed Operating
Expenses 27.2 8,132 32.95 27.1 7,833 31.00 28.7 10,717 49.85
----- ------ ----- ---- ------ ------ ---- ------ ------
- -----------------------------------------------------------------------------------------------------------------------------------
GROSS OPERATING PROFIT 30.8 9,535 36.29 31.6 9,555 36.16 23.4 9,357 37.38
Management Fees 2.1 646 2.60 2.1 638 2.53 1.8 708 3.19
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE FIXED CHARGES* 28.7 8,889 33.69 29.5 8,917 33.63 21.6 8,649 34.19
- -----------------------------------------------------------------------------------------------------------------------------------
Property Taxes 3.2 989 4.04 3.2 981 3.95 2.9 1,092 4.83
Insurance .9 255 1.08 .9 245 1.01 1.0 331 1.59
Reserve for Replacement 1.3 378 1.51 1.3 363 1.43 .9 355 1.49
- ------------------------------------------------------------------------------------------------------------------------------------
AMOUNT AVAILABLE
FOR DEBT SERVICE ----- ------ ----- ----- ------- ----- ---- ------- -----
AND OTHER FIXED CHARGES 23.3% $ 7,267 27.06 24.1% $ 7,328 27.24 16.8% $ 6,872 26.28
----- ------ ------ ----- ------- ----- ----- ------- -----
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL FIXED CHARGES*
(INCLUDING PROPERTY ----- ------ ----- ----- ------- ------- ----- ------- -------
TAXES & INSURANCE) 21.9% $ 6,952 28.56 21.0% $ 6,373 $ 25.53 21.4% $ 8,569 $ 39.18
----- ------ ----- ----- ------- ------- ----- ------- -------
- ----------------------------------------------------------------------------------------------------------------------------------
PRE-TAX INCOME (LOSS)* 6.8% $ 1,939 5.13 8.6% $ 2,543 $ 8.10 .2% $ 81 $ -4.99
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Source: Horwath International and Smith Travel Research.
* Income before fixed charges is prior to deduction of Reserve for Replacement,
Depreciation, Rent, Amortization and Income Taxes. Total Fixed Charges and
Pre-Tax Income (Loss) do not include a deduction of the Reserve for
Replacement. Totals may not add due to rounding. Departmental expenses are
expressed as a percentage of respective departmental revenue. All other
expenses are presented as a percent of total income.
<PAGE>
typically 76% to 77% with net income before debt service in the 23% to 24%
range. For independent hotels, this level drops to the 16% to 17% level.
For the property under study, expenses, including reserves for
replacements, are at the 93% to 94% level leaving between 6% and 7% as the
remaining net income before debt service. To summarize, the existing income and
expense is as follows:
- --------------------------------------------------------------------------------
Harbor House, White Elephant, Wharf Cottages
--------------------------------------------
Gross Income
Harbor House $4,548,325
White Elephant 4,165,172
Wharf Cottages 835,301
----------
Total $9,548,798 100%
Net Income Before
Reserve/Replacement Allowance
Harbor House $ 34,444
White Elephant 653,625
Wharf Cottages 295,053
----------
Total $ 983,122
Less: Reserve for
Replacements @ 4% 393,324
----------
Net Income $ 589,798 6.2%
- --------------------------------------------------------------------------------
In our study of the property we have obtained actual line item accounts.
These are included in the Addenda. These line item accounts include:
General Administration
Advertising and Sales
Repairs and Maintenance
26
CONSULTING AND VALUATION GROUP [LOGO]
<PAGE>
A line-by-line review shows general conformity although slightly higher
than national data. Each item, although slightly higher than national data, was
not beyond the norm.
For example, there is an item of $343,995 for the central sales office.
Total marketing is $717,236 or 7.5% of gross income. National data averages
6.7%.
Another example is administrative and general. This is 11.4% as compared
with national data of 10.7%.
The major exception is repairs and maintenance at 10.9% as compared with
6.1%. A 4.8% spread represents $458,304. The principal reason for the difference
is that we believe that the property to be more expensive to maintain due to the
"spread out" nature of the property and number of buildings. There are a total
of fifty-six buildings within the three complexes. The buildings are all wood
frame, with one to three and one-half stories in height. They are not in one
complex. They require extensive landscaping, and while physically attractive,
are expensive to maintain.
In addition, some capital improvements apparently have been deferred which
has resulted in a need for more frequent "Band-Aid" repairs. This is
particularly costly in view of the wear and tear due to their northerly exposure
to harsh winter conditions on Nantucket.
Another exception is in the reserve for replacements category. Typical
national data is 1.3%:
27
CONSULTING AND VALUATION GROUP [LOGO]
<PAGE>
"The scope of items to covered in a replacement allowance is a matter
of appraisal judgment based on market evidence..."(5)
In 1989, a series of improvements were made to the property. These totaled:
- --------------------------------------------------------------------------------
Harbor House $1,950,000
White Elephant 1,095,000
----------
Total $3,045,000
- --------------------------------------------------------------------------------
If amortized over six years, this is the equivalency of $507,500 per year.
On the following page is a preliminary summary of capital improvements
planned for 1996-1997. Excluded are other costs not part of the property. Costs
total:
- --------------------------------------------------------------------------------
Equipment - General $ 45,917
Refrigerators for Wharf Cottages 15,750
Refurbishment - Hotels 1,806,358
----------
Total $1,868,025
- --------------------------------------------------------------------------------
If $1,868,025 is amortized over six years, this is the equivalency of
$311,337 for a replacement allowance.
In this case, as outlined above, our reserve for replacements of $393,324,
which equates to 4% of gross revenues, brackets well within the range of what
has actually been spent on the property, which is why we have concluded that a
4% reserve is reasonable and realistic.
- --------
(5) Appraisal Institute, The Appraisal of Real Estate, Tenth Edition (Chicago),
page 449.
28
CONSULTING AND VALUATION GROUP [LOGO]
<PAGE>
<TABLE>
<CAPTION>
INTERSTATE HOTELS CORPORATION
FFE SCHEDULE WHITE ELEPHANT RESORT
High 1996
DOES NOT INCLUDE MAJOR CAPITAL FOR THE BOAT BASIN AND LAUNDRY
- ------------------------------------------------------------------------------------------------------------------------------------
ASSET/PROJECT DESCRIPTION Requisition Budget Requisition Budget Actual Additional Actual plus Requisition Project
Number Amount Amount Variance Expended Forecasted Forecasted Variance Status
1996 CEP ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
HP 4+ Laser Printer/Systems Room 1,800.00 1,800.00 0.00 0.00
Six Burner Stove 3,700.00 3,700.00 0.00 0.00
Mixer 3,500.00 3,500.00 0.00 0.00
Aluminum Ladders (20) 3,000.00 3,000.00 0.00 0.00
Boat Basin Fax Machines (2) 2,500.00 2,500.00 0.00 0.00
Vacuum Cleaners (5) 1,417.00 1,417.00 0.00 0.00
Floor Machines (2) 2,600.00 2,600.00 0.00 0.00
Table Saw & Assorted Tools 5,000.00 5,000.00 0.00 0.00
HIS PBX Monitors 1,500.00 1,500.00 0.00 0.00
Refrigerators 15,750.00 15,750.00 0.00 0.00
Gooseneck Lamp Replacement (4) 10,000.00 10,000.00 0.00 0.00
Irons, Iron Boards, related materials 13,400.00 13,400.00 0.00 0.00
64,167.00 0.00 64,167.00 0.00 0.00 0.00 0.00
--------------------------------------------------------------------------
0.00 0.00 0.00
0.00 0.00 0.00
Contingency 10,000.00 10,000.00 0.00 0.00
0.00 0.00 0.00
0.00 0.00 0.00
TOTAL CONTINGENCY (B) 10,000.00 0.00 10,000.00 0.00 0.00 0.00 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL 1996 CEP 74,167.00 0.00 74,167.00 0.00 0.00 0.00 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
1996 FIVE YEAR CAPITAL
Zero Main Offices 20,000.00 20,000.00 0.00 0.00
Hearth Dining Room Chairs 30,000.00 30,000.00 0.00 0.00
Meeting House I Renovation 30,000.00 30,000.00 0.00 0.00
Boat Basin Decking 80,000.00 80,000.00 0.00 0.00
Sales Delphi Computer System 35,000.00 35,000.00 0.00 0.00
Replace WE Fan Coil 75,000.00 75,000.00 0.00 0.00
Wharf Cottage Painting Exterior 57,500.00 57,500.00 0.00 0.00
Irrigation Upgrade WE,Break,Cott 20,000.00 20,000.00 0.00 0.00
Roof Renov Wharf, Springf, Garden 85,500.00 85,500.00 0.00 0.00
Oil Containment (28) 70,000.00 70,000.00 0.00 0.00
Televisions (150) 57,000.00 57,000.00 0.00 0.00
Refurbish Breakers, WE, Cottages 880,000.00 880,000.00 0.00 0.00
Sewer Tank Realinment/Back Flow 20,000.00 20,000.00 0.00 0.00
Outer Cottage WE Heat Pump 104,000.00 104,000.00 0.00 0.00
Pool Refurbish 16,000.00 16,000.00 0.00 0.00
Outside Tables, Chairs, Cushions 20,000.00 20,000.00 0.00 0.00
Audio Visual 20,000.00 20,000.00 0.00 0.00
Banquet Tables Dance Floor 23,000.00 23,000.00 0.00 0.00
Pilings 20,000.00 20,000.00 0.00 0.00
Awning Replacement 20,000.00 20,000.00 0.00 0.00
Fire Alarm Upgrade 22,000.00 22,000.00 0.00 0.00
Winterize Staff Dorm 40,000.00 40,000.00 0.00 0.00
WE Pool Bar 15,000.00 15,000.00 0.00 0.00
WE Pool Furniture and Umbrellas 10,000.00 10,000.00 0.00 0.00
Regatta Renovation Rest & Lounge 125,000.00 125,000.00 0.00 0.00
Rubbish Barrels (150) 7,500.00 7,500.00 0.00 0.00
Cushions Harbor House 3,000.00 3,000.00 0.00 0.00
System 75 Telephone Switch 13,531.00 13,531.00 0.00 0.00
Definity G-1 Telephone Switch 97,327.00 97,327.00 0.00 0.00
TOTAL FIVE YEAR SUBTOTAL (C) 2,016,358.00 0.00 2,016,358.00 0.00 0.00 0.00 0.00
TOTAL 1996 (A+B+C) 2,090,525.00 0.00 2,090,525.00 0.00 0.00 0.00 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
1995 CARRY FOWARD INTO 1996
0.00 0.00 0.00
0.00 0.00 0.00
0.00 0.00 0.00
0.00 0.00 0.00
0.00 0.00 0.00
0.00 0.00 0.00
0.00 0.00 0.00
0.00 0.00 0.00
1995 YEAR END EXPENSES 0.00 0.00 0.00
TOTAL PRIOR YEAR CARRY OVER 0.00 0.00 0.00 0.00 0.00 0.00 0.00
GRAND TOTAL FF&E PURCHASES 2,090,525.00 0.00 2,090,525.00 0.00 0.00 0.00 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note:
Boat Basin requires approximately 3 miliion,
laundry estimate approximately 350k and new
restaurant front office complex 1.5 million.
<PAGE>
Calculation of Net Income
In final analysis, we have relied upon a market sales comparison approach,
a valuation of the Harbor House and White Elephant under a combined operation
will be included herein. An allocation between the two hotels is required, and
since they both effectively operate together, to report net income for the
Harbor House at $34,444 and for the White Elephant at $653,625 could skew value
if analyzed separately.
In the case of the Wharf Cottages, three cottages are situated on land that
is ground leased. The ground rent is $13,000 per year, and the lease is short
term. As the lease has been renewed in short term increments for over twenty
years, in our valuation, we are not assuming that upon lease expiration the
cottages would revert to the ground lessor. Our understanding is that there are
interconnected relationships and unwritten agreements as relates to continued
occupancy.
Within the ownership's statements, there are leasing costs associated with
the management of the property. An allocation is applied for the central office
lease. Central office leases are typically not deducted by appraisers as an
expense and are covered as part of management fees.
As prime reliance will be on an income approach involving the Wharf
Cottages, the actual income and expense statement together with reserves for
replacements is as follows:
29
CONSULTING AND VALUATION GROUP [LOGO]
<PAGE>
THE NANTUCKET PROPERTIES
1996 Reforecast
<TABLE>
<CAPTION>
HH/WE Harbor House White Elephant Wharf Cottages Boat Basin Emp. Housing TOTAL
----- --------------------------- -------------- ---------- ------------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
Average Rate 203.45 163.19 288.46 276.57 210.11
Occupied Rooms 29,509 19,014 10,494 2,913 32,422
Revenues
Rooms 6,003,480 3,038,545 2,964,935 808,638 0 0 6,812,118
Food & Beverage 2,421,783 1,339,410 1,082,373 0 0 0 2,421,783
Telephone 272,327 160,773 111,554 26,663 125,332 0 424,322
Boat Basin 0 0 0 0 2,522,858 0 2,522,858
Employee Housing 0 0 0 0 0 376,201 376,201
Other 15,907 9,597 6,310 0 0 0 15,907
------------------------------------------------------------------------------------------------------
Total Revenue 8,713,497 4,548,325 4,165,172 835,301 2,648,190 376,201 12,573,189
Operating Profits
Rooms 4,316,340 2,171,711 2,144,629 584,555 0 0 4,900,895
Food & Beverage 286,553 176,255 110,298 0 0 0 286,553
Telephone 145,730 86,057 59,673 14,263 66,175 0 226,167
Boat Basin 0 0 0 0 1,530,602 0 1,530,602
Employee Housing 0 0 0 0 0 195,693 195,693
Other -61,837 -60,061 -1,776 0 0 0 -61,837
------------------------------------------------------------------------------------------------------
Total Oper. Profits 4,686,786 2,373,962 2,312,823 598,818 1,596,777 195,693 7,078,074
Overhead Expenses
Admin & Gen 1,050,673 599,781 450,892 11,281 35,480 0 1,097,434
Credit Card Comm 143,772 75,047 68,725 13,782 48,469 6,207 212,231
Management Fee 174,270 90,966 83,303 16,706 52,964 7,524 251,464
Advert & Sales 762,846 444,741 318,105 31,361 24,943 0 819,150
Repair & Maint 895,150 568,743 326,407 90,605 64,544 0 1,050,300
Utilities 435,287 250,763 184,524 32,546 58,734 0 526,567
------------------------------------------------------------------------------------------------------
Total Overhead 3,461,998 2,030,042 1,431,957 196,282 285,134 13,731 3,957,146
House Profit 1,224,788 343,921 880,867 402,536 1,311,643 181,962 3,120,928
Other Deductions
Insurance 272,639 144,256 128,383 25,949 86,822 6,474 391,884
Property Taxes 264,080 165,221 98,859 81,534 25,319 40,725 515,310
Central Office Lease 80,185 0 0 0 0 0 80,185
Leases 39,299 0 0 0 63,351 0 102,650
------------------------------------------------------------------------------------------------------
Total Other Deduct 656,203 309,477 227,242 107,483 175,492 47,199 1,090,029
Net Income 568,585 34,444 653,625 295,053 1,136,151 134,762 2,030,899
======================================================================================================
</TABLE>
<PAGE>
Wharf Cottages
Income and Expenses
- --------------------------------------------------------------------------------
Actual Gross Income: $835,301
- --------------------------------------------------------------------------------
Operating Profit $584,555
Telephone Profit 14,263
--------
Total $598,818
Overhead Expenses
General & Administrative $ 11,281
Credit Card Commission 13,782
Management Fee 16,706
Advertising & Sales 31,361
Repairs & Maintenance 90,605
Utilities 32,596 196,311
-------- --------
House Profit $402,507
Other Deductions
Insurance $ 25,949
Property Taxes 81,534
Ground Lease 13,000
Reserves for Replacements @ 4% 33,412 153,895
-------- --------
Net Income $248,612
Derivation of a Capitalization Rate
The capitalization rate or overall rate calculation can be obtained from
different sources depending upon information available. Sales extraction from
the market is one principal source. Another source involves rate synthesis from
available financing and interest criteria. This incorporates loan-to-value
ratios, debt service coverage ratios, and can create bands of investment to
derive a capitalization rate.
30
CONSULTING AND VALUATION GROUP [LOGO]
<PAGE>
In this case, the profile of the logical buyer would be an all cash buyer.
For this reason, we have relied on national surveys of capitalization rates. As
the buyer would be a free and clear buyer, we have utilized the Korpacz/Coopers
& Lybrand Survey published in the Korpacz Real Estate Investor Survey, Second
Quarter, 1996, which shows hotel capitalization rates as follows:
- --------------------------------------------------------------------------------
National Full-Service Hotel Market
SECOND QUARTER 1996
CURRENT LAST YEAR
KEY INDICATORS QUARTER QUARTER AGO
- ---------------------------------------------------------------------------
Free & Clear Equity IRR
- --------------------------------------------------------------------------------
RANGE 10.00%-25.00% 10.00%-25.00% 9.00%-20.00%
AVERAGE 14.61% 14.86% 14.75%
CHANGE (Basis Points) -- -25 -14
- --------------------------------------------------------------------------------
Free & Clear Equity Cap Rate
- --------------------------------------------------------------------------------
RANGE 8.00%-15.00% 8.00%-15.00% 8.00%-15.00%
AVERAGE 10.52% 10.40% 10.88%
CHANGE (Basis Points) -- +12 -36
- --------------------------------------------------------------------------------
Average Daily Rate Chg. Rate(a)
- --------------------------------------------------------------------------------
RANGE 2.00%-7.00% 2.00%-6.00% 2.00%-8.00%
AVERAGE 4.52% 4.39% 3.83%
CHANGE (Basis Points) -- +13 +69
- --------------------------------------------------------------------------------
Operating Expense Chg. Rate(a)
- --------------------------------------------------------------------------------
RANGE 2.50%-5.00% 2.50%-5.00% 2.00%-5.00%
AVERAGE 3.43% 3.43% 3.45%
CHANGE (Basis Points) -- 0 -2
- --------------------------------------------------------------------------------
Residual Cap Rate
- --------------------------------------------------------------------------------
RANGE 8.50%-13.00% 8.50%-13.00% 8.50%-13.00%
AVERAGE 10.80% 10.77% 10.88%
CHANGE (Basis Points) -- +3 -8
(a) Initial rate of change
- --------------------------------------------------------------------------------
After careful study of capitalization rates, historic capitalization rates
on Nantucket, the quality of the property, and, in final analysis, rounding to
capitalization rates indicated by the Korpacz Survey, we have concluded that the
fair market capitalization rate, if exposed for sale, applicable to this
property would be:
Capitalization Rate: 10.5%
31
CONSULTING AND VALUATION GROUP [LOGO]
<PAGE>
Valuation by Income Approach
Based on actual net income, after allowances for reserves, the value of the
property would be as follows:
- --------------------------------------------------------------------------------
VALUATION BASED ON INCOME APPROACH
HARBOR HOUSE WHARF
AND WHITE ELEPHANT COTTAGES
---------------------------------
NET INCOME BEFORE
REPLACEMENT RESERVE: $ 688,069
LESS: 4% REPLACEMENT RESERVE: ($ 348,539)
----------
NET INCOME: $ 339,529 $ 248,612
CAPITALIZATION RATE: 10.5% 10.5%
ESTIMATE OF VALUE $3,233,610 $2,367,733
ROUNDED: $3,235,000 $2,370,000
- --------------------------------------------------------------------------------
32
CONSULTING AND VALUATION GROUP [LOGO]
<PAGE>
MARKET SALES COMPARISON APPROACH
At the peak of the market, as a condominium conversion, the Beachside sold
for $7,700,000 on October 29, 1987. Two million dollars was spent to upgrade,
and the plan was to imitate the Nantucket Inn which has sold out for $175,000
per unit but for luxury units that were priced at $225,000 per unit. The
Beachside's total cost was $107,000 per unit.
The hotel condominium conversion failed, the property was foreclosed on
July 23, 1990, and bought by two local investors. The investors' names were
William Roper and Edward Keelan. They had been two of the original buyers of
hotel condominiums. Both were seasonal residents in Nantucket, with multiple
business interests in other locations. Their reported total purchase price is
summarized as follows and totals $4,400,000:
- --------------------------------------------------------------------------------
BEACHSIDE
SUMMARY OF ASSEMBLAGE
DATE GRANTOR DESCRIPTION PRICE
- --------------------------------------------------------------------------------
6/30/91 Salisbury Corp. 85 Units $ 3,500,000
6/28/91 William J. Roper 128 Units $ 43,200
6/28/91 Edward J. Keelan 129 Units $ 43,200
7/17/92 Marvin N. Gellar 122 Units $ 126,699
8/21/92 Worcester County Inst. 220 Units $ 100,000
8/21/92 Warren F. Kastner $ 100,000
- --------------------------------------------------------------------------------
TOTAL: $ 3,913,099
BUY-OUT OF BANKRUPT FORMER
PARTNER TO MOVE TOTAL TO: $ 4,400,000
- --------------------------------------------------------------------------------
33
CONSULTING AND VALUATION GROUP [LOGO]
<PAGE>
HOTEL COMPARABLE SALE
Location: Beachside, 30 North Beach Street
Nantucket, MA
Grantor: Salisbury Corp. (Worcester County Bank)
Grantee: Off Shore Beachside LP.
Date of Sale: June 30, 1991 (See Attached)
Number of Units: 90
Land Area: 3.43 Acres
Price: See Attached - Reported Total $4,400,000
Price/Unit: $48,888
Capitalization Rate: N/A
Elements of Comparison
1. Real Property Rights Conveyed:
a) Type of Buyer: Local Investor
b) Occupancy Conditions: Not in operation - A start up from
failed hotel condominium
2. Conditions of Sale: Arms Length
3. Financing Terms: Not contingent on financing
4. Market Conditions: Stable - 1991, Rising - 1992
5. Location: Prime
6. Physical Characteristics:
a) Year Built: 1964, 1978, 1982
b) General Condition: Renovated 1988
d) Capital Improv. None required, paid as part of conversion.
7. Economic Characteristics:
a) NOI/Unit N/A
b) Market Rents: See schedule
Comments: This is a failed hotel condominium
conversion, re-opened as a hotel after
clearing bankruptcy.
Bought by two individual investors.
Source of Confirmation
For Sale and Rate Schedule: Don Palvari, Nantucket Accommodations
34
CONSULTING AND VALUATION GROUP [LOGO]
<PAGE>
The original purchase from the lender was for $3,500,000, all cash. The
date was June 30, 1991. Shortly thereafter, the no name storm flooded the
property on October 30, 1991, and the property could not re-open until the
summer of 1992.
Between the original sale in 1987 and 1992, operating history was spotty.
Hotel, people were not running the property. A hotel team was put in place in
1993 and 1994, and successful operation has continued since that point in time.
Cash flow from the property since its stabilization in 1993 has been
reinvested back into the operation. The original twelve rooms in the motel,
although renovated in 1988 and 1989, were re-renovated in 1995. The property was
originally built in 1964, expanded with a two-story addition in 1978, and
finished with a second two-story addition of 54 rooms in 1982. Like the White
Elephant, there is a swimming pool.
Our study of this property forms the basis for concluding that the logical
buyer would be a seasonal resident or residents for the Harbor House and White
Elephant who would buy all cash and supervise as part of operation of other
businesses.
This sale would indicate that the underlying intrinsic value of a renovated
hotel on Nantucket would be:
Estimate of Value Per Room: $48,000
Since the 1991-1992 time frame, the market has improved. A market
adjustment for per stronger economic conditions can be argued. A review of
actual income and expense statements, however, do not support this argument. In
terms of net income, the property is actually producing less income than in the
1986 and 1988 time frame.
35
CONSULTING AND VALUATION GROUP [LOGO]
<PAGE>
For this reason, we have not made an adjustment to the per room price due to
market conditions.
We have considered a locational adjustment. The two properties under study
and the Beachside, in effect, form an equilateral triangle and most certainly
are within the same location and most certainly compete, one to the other. For
this reason, no location adjustment is deemed appropriate.
In terms of physical characteristics, all three are physically similar.
After review of market conditions, location and physical characteristics,
we would conclude that an underlying per room value of $48,000 per room should
form the basis of our valuation under a market sales comparison approach, which
is as follows:
- --------------------------------------------------------------------------------
ESTIMATE OF VALUE
BASED ON MARKET APPROACH
Harbor House - 112 Rooms @ $48,000 $5,376,000
White Elephant - 82 Rooms @ $48,000 3,936,000
----------
Total $9,312,000
Less: Deferred Maintenance and Replacements 1,832,275
----------
Total $7,479,725
Rounded: $7,480,000
- --------------------------------------------------------------------------------
36
CONSULTING AND VALUATION GROUP [LOGO]
<PAGE>
RECONCILIATION AND FINAL VALUE CONCLUSION
In a properly prepared appraisal, the process of reconciliation flows
through the entire report. Our value conclusions will be summarized as follows:
- --------------------------------------------------------------------------------
VALUE CONCLUSIONS
INCOME MARKET
APPROACH APPROACH
-------- --------
Harbor House and
White Elephant: $3,225,000 $7,480,000
Wharf Cottages $2,370,000 N/A
- --------------------------------------------------------------------------------
The purpose of this report is to present the "as is" fair market value of
the property. This report takes into account the history of the property, market
change, and actual operating experience. This report takes into account the most
likely actions of buyers in the marketplace.
In assessing and weighing the valuation alternatives of an income and a
market sales comparison approach, for the reasons as explained, prime weight has
been given to an income approach for the Wharf Cottages and a market approach
for the Harbor House and White Elephant Hotels. The appraiser has used his
business relationships on Nantucket to derive market information, and the
overall results are believe to present an accurate picture of values that flow
from conditions that exist today on island.
37
CONSULTING AND VALUATION GROUP [LOGO]
<PAGE>
Therefore, after careful study analysis, and review, we have concluded that
if exposed for sale as of July 31, 1996, the properties under study would have a
most probable selling price "as is" of:
Harbor House and White Elephant $7,480,000
Wharf Cottages 2,370,000
----------
Total: $9,850,000
==========
38
CONSULTING AND VALUATION GROUP [LOGO]
<PAGE>
- --------------------------------------------------------------------------------
ADDENDA
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
======================================================================================================================
INTERSTATE HOTELS CORPORATION ANNUAL FORECAST REPORT
WHITE ELEPHANT RESORT
24-Jun-96
10:45AM ACTUAL : JANUARY TO MAY FORECAST JUNE TO DECEMBER
======================================================================================================================
JULY
- ----------------------------------------------------------------------------------------------------------------------
DESCRIPTION ACT/FOR % BUDGET % LYA %
======================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
REVENUE OCCUPANCY % 86.2% 89.1% 82.4%
REVPAR $234.81 $241.58 $227.31
AVERAGE ROOM RATE $272.50 $271.27 $275.74
=======================================================================================================================
GROSS OPERATING REVENUES
- -----------------------------------------------------------------------------------------------------------------------
ROOMS 1,594.1 50.6% 1,640.1 50.4% 1,585.5 50.1%
- -----------------------------------------------------------------------------------------------------------------------
FOOD & BEVERAGE
- -----------------------------------------------------------------------------------------------------------------------
OUTLET FOOD 237.2 7.5% 240.6 7.4% 249.0 7.9%
CATERING FOOD 101.9 3.2% 138.4 4.3% 106.4 3.4%
OUTLET BEVERAGE 95.0 3.0% 96.5 3.0% 72.4 2.3%
CATERING BEVERAGE 15.2 0.5% 21.5 0.7% 16.3 0.5%
CATERING OTHER REV 32.7 1.0% 44.1 1.4% 57.3 1.8%
HONOR BAR 0.0 0.0% 0.0 0.0% 2.1 0.1%
- -----------------------------------------------------------------------------------------------------------------------
TOTAL FOOD & BEVERAGE 482.1 15.3% 541.0 16.6% 503.4 15.9%
- -----------------------------------------------------------------------------------------------------------------------
TELEPHONE 110.7 3.5% 114.4 3.5% 114.1 3.6%
GIFTSHOP 0.0 0.0% 0.0 0.0% 0.0 0.0%
OTHER 960.8 30.5% 960.8 29.5% 961.3 30.4%
- -----------------------------------------------------------------------------------------------------------------------
TOTAL OPERATING REVENUE 3,147.7 100.0% 3,256.3 100.0% 3,164.3 100.0%
- -----------------------------------------------------------------------------------------------------------------------
DEPARTMENTAL PROFITS
- -----------------------------------------------------------------------------------------------------------------------
ROOMS 1,294.2 81.2% 1,332.1 81.2% 1,319.0 83.2%
- -----------------------------------------------------------------------------------------------------------------------
FOOD 70.2 18.9% 75.1 17.7% (9.2) -2.2%
BEVERAGE 39.2 35.6% 42.6 36.2% 37.7 41.6%
- -----------------------------------------------------------------------------------------------------------------------
TOTAL FOOD & BEVERAGE 109.4 22.7% 117.7 21.8% 28.5 5.7%
- -----------------------------------------------------------------------------------------------------------------------
TELEPHONE 83.0 74.9% 86.2 75.4% 75.1 65.8%
GIFTSHOP 0.0 0.0% 0.0 0.0% 0.0 0.0%
OTHER 661.5 68.9% 659.4 68.6% 629.4 65.5%
- -----------------------------------------------------------------------------------------------------------------------
TOTAL DEPART. PROFITS 2,148.1 68.2% 2,195.4 67.4% 2,052.0 64.8%
- -----------------------------------------------------------------------------------------------------------------------
DEDUCTIONS FROM INCOME:
- -----------------------------------------------------------------------------------------------------------------------
ADMIN & GENERAL 110.9 3.5% 132.7 4.1% 160.2 5.1%
CREDIT CARD COMMISSIONS 51.9 1.6% 53.7 1.6% 50.3 1.6%
MANAGEMENT FEE 63.0 2.0% 65.1 2.0% 63.3 2.0%
ROYALTIES 0.0 0.0% 0.0 0.0% 0.0 0.0%
ADVERTISING & SALES 51.4 1.6% 83.1 2.6% 83.9 2.7%
PREFERRED GUESTS 0.0 0.0% 0.0 0.0% 0.0 0.0%
REPAIRS & MAINTENANCE 91.5 2.9% 89.1 2.7% 95.0 3.0%
UTILITIES 73.8 2.3% 80.9 2.5% 73.5 2.3%
- -----------------------------------------------------------------------------------------------------------------------
TOTAL DEDUCTIONS 442.5 14.1% 504.7 15.5% 526.2 16.6%
- -----------------------------------------------------------------------------------------------------------------------
HOUSE PROFIT 1,705.6 54.2% 1,690.6 51.9% 1,525.8 48.2%
- -----------------------------------------------------------------------------------------------------------------------
OTHER DEDUCTIONS:
- -----------------------------------------------------------------------------------------------------------------------
TOTAL INSURANCE 32.7 1.0% 32.7 1.0% 32.4 1.0%
TOTAL TAXES 44.0 1.4% 44.0 1.4% 42.6 1.3%
TOTAL LEASES 6.7 0.2% 8.6 0.3% 10.3 0.3%
INCENTIVE MGMT FEES 0.0 0.0% 0.0 0.0% 0.0 0.0%
OTHER DEDUCTIONS 6.7 0.2% 8.2 0.3% 15.0 0.5%
- -----------------------------------------------------------------------------------------------------------------------
TOTAL OTHER DEDUCTIONS 90.0 2.9% 93.4 2.9% 100.3 3.2%
- -----------------------------------------------------------------------------------------------------------------------
NET OPERATING INCOME 1,615.6 51.3% 1,597.3 49.1% 1,425.5 45.0%
- -----------------------------------------------------------------------------------------------------------------------
DEPRECIATION & AMORT 0.0 0.0% 0.0 0.0% 0.0 0.0%
- -----------------------------------------------------------------------------------------------------------------------
NET INCOME 1,615.6 51.3% 1,597.3 49.1% 1,425.5 45.0%
=======================================================================================================================
Rooms Rate Rooms Rate Rooms Rate
- -----------------------------------------------------------------------------------------------------------------------
ROOMS SOLD - TRANSIENT 3,562 $295.50 4,118 $293.50 4,199 $293.41
ROOMS SOLD - PACKAGE 50 $182.00 50 $182.00 60 $182.02
ROOMS SOLD - GROUP 2,019 $246.32 1,671 $233.78 1,263 $236.05
ROOMS SOLD - BASE 167 $119.09 155 $106.32 158 $123.09
ROOMS SOLD - GNS 52 $293.00 52 $293.00 70 $356.73
- -----------------------------------------------------------------------------------------------------------------------
ROOMS SOLD - NON-REV 99 99 109
- -----------------------------------------------------------------------------------------------------------------------
TOTAL REV. OCC. ROOMS 5,850 $272.50 6,046 $271.27 5,750 $275.74
TOTAL ROOMS OCCUPIED 5,949 $267.96 6,145 $266.90 5,859 $270.61
- -----------------------------------------------------------------------------------------------------------------------
TOTAL AVAILABLE ROOMS 6,789 6,789 6,975
======================================================================================================================
<CAPTION>
======================================================================================================================
INTERSTATE HOTELS CORPORATION ANNUAL FORECAST REPORT
WHITE ELEPHANT RESORT
24-Jun-96
10:45AM ACTUAL : JANUARY TO MAY FORECAST JUNE TO DECEMBER
======================================================================================================================
AUGUST
- ----------------------------------------------------------------------------------------------------------------------
DESCRIPTION ACT/FOR % BUDGET % LYA %
======================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
REVENUE OCCUPANCY % 94.8% 94.7% 90.5%
REVPAR $275.54 $268.82 $256.34
AVERAGE ROOM RATE $290.35 $283.83 $283.27
=======================================================================================================================
GROSS OPERATING REVENUES
- -----------------------------------------------------------------------------------------------------------------------
ROOMS 1,869.3 53.7% 1,825.0 53.6% 1,788.0 53.9%
- -----------------------------------------------------------------------------------------------------------------------
FOOD & BEVERAGE
- -----------------------------------------------------------------------------------------------------------------------
OUTLET FOOD 274.9 7.9% 274.4 8.1% 272.3 8.2%
CATERING FOOD 96.3 2.8% 70.3 2.1% 33.8 1.0%
OUTLET BEVERAGE 103.2 3.0% 102.6 3.0% 72.3 2.2%
CATERING BEVERAGE 15.2 0.4% 14.8 0.4% 4.4 0.1%
CATERING OTHER REV 24.7 0.7% 20.6 0.6% 23.3 0.7%
HONOR BAR 0.0 0.0% 0.0 0.0% 2.3 0.1%
- -----------------------------------------------------------------------------------------------------------------------
TOTAL FOOD & BEVERAGE 514.3 14.8% 482.7 14.2% 408.5 12.3%
- -----------------------------------------------------------------------------------------------------------------------
TELEPHONE 115.9 3.3% 115.8 3.4% 121.4 3.7%
GIFTSHOP 0.0 0.0% 0.0 0.0% 0.0 0.0%
OTHER 980.0 28.2% 980.0 28.8% 999.0 30.1%
- -----------------------------------------------------------------------------------------------------------------------
TOTAL OPERATING REVENUE 3,479.5 100.0% 3,403.5 100.0% 3,316.9 100.0%
- -----------------------------------------------------------------------------------------------------------------------
DEPARTMENTAL PROFITS
- -----------------------------------------------------------------------------------------------------------------------
ROOMS 1,557.4 83.3% 1,506.8 82.6% 1,504.7 84.2%
- -----------------------------------------------------------------------------------------------------------------------
FOOD 101.5 25.6% 38.7 10.6% (66.6) -20.2%
BEVERAGE 48.4 40.9% 47.2 40.2% 27.6 34.9%
- -----------------------------------------------------------------------------------------------------------------------
TOTAL FOOD & BEVERAGE 149.8 29.1% 85.9 17.8% (39.0) -9.6%
- -----------------------------------------------------------------------------------------------------------------------
TELEPHONE 87.4 75.4% 87.2 75.3% 112.2 92.4%
GIFTSHOP 0.0 0.0% 0.0 0.0% 0.0 0.0%
OTHER 656.2 67.0% 654.1 66.7% 701.9 70.3%
- -----------------------------------------------------------------------------------------------------------------------
TOTAL DEPART. PROFITS 2,450.9 70.4% 2,334.0 68.6% 2,279.8 68.7%
- -----------------------------------------------------------------------------------------------------------------------
DEDUCTIONS FROM INCOME:
- -----------------------------------------------------------------------------------------------------------------------
ADMIN & GENERAL 113.6 3.3% 135.3 4.0% 133.4 4.0%
CREDIT CARD COMMISSIONS 57.4 1.6% 56.2 1.6% 56.2 1.7%
MANAGEMENT FEE 69.6 2.0% 68.1 2.0% 66.3 2.0%
ROYALTIES 0.0 0.0% 0.0 0.0% 0.2 0.0%
ADVERTISING & SALES 53.8 1.5% 85.1 2.5% 98.7 3.0%
PREFERRED GUESTS 0.0 0.0% 0.0 0.0% 0.0 0.0%
REPAIRS & MAINTENANCE 99.6 2.9% 87.5 2.6% 98.5 3.0%
UTILITIES 71.9 2.1% 86.0 2.5% 66.9 2.0%
- -----------------------------------------------------------------------------------------------------------------------
TOTAL DEDUCTIONS 465.9 13.4% 518.1 15.2% 520.2 15.7%
- -----------------------------------------------------------------------------------------------------------------------
HOUSE PROFIT 1,985.0 57.0% 1,815.8 53.4% 1,759.6 53.1%
- -----------------------------------------------------------------------------------------------------------------------
OTHER DEDUCTIONS:
- -----------------------------------------------------------------------------------------------------------------------
TOTAL INSURANCE 32.7 0.9% 32.7 1.0% 31.7 1.0%
TOTAL TAXES 44.0 1.3% 44.0 1.3% 42.0 1.3%
TOTAL LEASES 6.7 0.2% 8.6 0.3% 10.0 0.3%
INCENTIVE MGMT FEES 0.0 0.0% 0.0 0.0% 0.0 0.0%
OTHER DEDUCTIONS 6.7 0.2% 8.2 0.2% 3.4 0.1%
- -----------------------------------------------------------------------------------------------------------------------
TOTAL OTHER DEDUCTIONS 90.0 2.6% 93.4 2.7% 87.2 2.6%
- -----------------------------------------------------------------------------------------------------------------------
NET OPERATING INCOME 1,895.0 54.5% 1,722.5 50.6% 1,672.4 50.4%
- -----------------------------------------------------------------------------------------------------------------------
DEPRECIATION & AMORT 0.0 0.0% 0.0 0.0% 0.0 0.0%
- -----------------------------------------------------------------------------------------------------------------------
NET INCOME 1,895.0 54.5% 1,722.5 50.6% 1,672.4 50.4%
=======================================================================================================================
Rooms Rate Rooms Rate Rooms Rate
- -----------------------------------------------------------------------------------------------------------------------
ROOMS SOLD - TRANSIENT 5,013 $295.00 5,583 $295.00 5,142 $291.82
ROOMS SOLD - PACKAGE 57 $181.00 57 $181.00 134 $139.94
ROOMS SOLD - GROUP 1,163 $300.63 600 $234.83 852 $283.09
ROOMS SOLD - BASE 170 $118.58 155 $106.32 155 $140.52
ROOMS SOLD - GNS 35 $295.00 35 $295.00 29 $197.44
- -----------------------------------------------------------------------------------------------------------------------
ROOMS SOLD - NON-REV 100 100 70
- -----------------------------------------------------------------------------------------------------------------------
TOTAL REV. OCC. ROOMS 6,438 $290.35 6,430 $283.83 6,312 $283.27
TOTAL ROOMS OCCUPIED 6,538 $285.91 6,530 $279.48 6,382 $280.16
- -----------------------------------------------------------------------------------------------------------------------
TOTAL AVAILABLE ROOMS 6,789 6,789 6,975
======================================================================================================================
<CAPTION>
======================================================================================================================
INTERSTATE HOTELS CORPORATION ANNUAL FORECAST REPORT
WHITE ELEPHANT RESORT
24-Jun-96
10:45AM ACTUAL : JANUARY TO MAY FORECAST JUNE TO DECEMBER
======================================================================================================================
SEPTEMBER
- ----------------------------------------------------------------------------------------------------------------------
DESCRIPTION ACT/FOR % BUDGET % LYA %
======================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
REVENUE OCCUPANCY % 69.8% 75.6% 73.6%
REVPAR $159.92 $161.59 $149.67
AVERAGE ROOM RATE $229.00 $213.82 $203.44
======================================================================================================================
GROSS OPERATING REVENUES
- ----------------------------------------------------------------------------------------------------------------------
ROOMS 1,050.7 57.7% 1,061.6 57.3% 1,010.3 55.9%
- ----------------------------------------------------------------------------------------------------------------------
FOOD & BEVERAGE
- ----------------------------------------------------------------------------------------------------------------------
OUTLET FOOD 111.2 6.1% 112.9 6.1% 118.4 6.6%
CATERING FOOD 143.0 7.8% 145.2 7.8% 120.8 6.7%
OUTLET BEVERAGE 52.4 2.9% 52.4 2.8% 47.2 2.6%
CATERING BEVERAGE 37.6 2.1% 40.3 2.2% 40.8 2.3%
CATERING OTHER REV 23.2 1.3% 31.0 1.7% 20.9 1.2%
HONOR BAR 0.0 0.0% 0.0 0.0% 0.7 0.0%
- ----------------------------------------------------------------------------------------------------------------------
TOTAL FOOD & BEVERAGE 367.4 20.2% 381.8 20.6% 348.9 19.3%
- ----------------------------------------------------------------------------------------------------------------------
TELEPHONE 52.8 2.9% 57.0 3.1% 45.2 2.5%
GIFTSHOP 0.0 0.0% 0.0 0.0% 0.0 0.0%
OTHER 351.0 19.3% 351.2 19.0% 402.6 22.3%
- ----------------------------------------------------------------------------------------------------------------------
TOTAL OPERATING REVENUE 1,821.8 100.0% 1,851.6 100.0% 1,807.0 100.0%
- ----------------------------------------------------------------------------------------------------------------------
DEPARTMENTAL PROFITS
- ----------------------------------------------------------------------------------------------------------------------
ROOMS 799.2 76.1% 803.0 75.6% 747.3 74.0%
- ----------------------------------------------------------------------------------------------------------------------
FOOD 45.2 16.3% 11.8 4.1% 23.3 9.0%
BEVERAGE 35.9 39.9% 38.4 41.4% 44.5 50.2%
- ----------------------------------------------------------------------------------------------------------------------
TOTAL FOOD & BEVERAGE 81.1 22.1% 50.1 13.1% 67.8 19.4%
- ----------------------------------------------------------------------------------------------------------------------
TELEPHONE 32.1 60.7% 35.8 62.8% 32.4 71.7%
GIFTSHOP 0.0 0.0% 0.0 0.0% 0.0 0.0%
OTHER 197.6 56.3% 195.8 55.7% 184.2 45.7%
- ----------------------------------------------------------------------------------------------------------------------
TOTAL DEPART. PROFITS 1,109.9 60.9% 1,084.6 58.6% 1,031.7 57.1%
- ----------------------------------------------------------------------------------------------------------------------
DEDUCTIONS FROM INCOME:
- ----------------------------------------------------------------------------------------------------------------------
ADMIN & GENERAL 93.5 5.1% 120.4 6.5% 131.9 7.3%
CREDIT CARD COMMISSIONS 20.0 1.1% 30.6 1.6% 17.6 1.0%
MANAGEMENT FEE 36.4 2.0% 37.0 2.0% 36.1 2.0%
ROYALTIES 0.0 0.0% 0.0 0.0% 0.0 0.0%
ADVERTISING & SALES 55.2 3.0% 86.1 4.6% 88.3 4.9%
PREFERRED GUESTS 0.0 0.0% 0.0 0.0% 0.0 0.0%
REPAIRS & MAINTENANCE 89.5 4.9% 92.8 5.0% 83.8 4.6%
UTILITIES 57.2 3.1% 68.0 3.7% 56.1 3.1%
- ----------------------------------------------------------------------------------------------------------------------
TOTAL DEDUCTIONS 351.7 19.3% 434.8 23.5% 413.8 22.9%
- ----------------------------------------------------------------------------------------------------------------------
HOUSE PROFIT 758.2 41.6% 649.9 35.1% 617.9 34.2%
- ----------------------------------------------------------------------------------------------------------------------
OTHER DEDUCTIONS:
- ----------------------------------------------------------------------------------------------------------------------
TOTAL INSURANCE 32.7 1.8% 32.7 1.8% 31.2 1.7%
TOTAL TAXES 44.0 2.4% 44.0 2.4% 41.9 2.3%
TOTAL LEASES 6.7 0.4% 8.6 0.5% 8.6 0.5%
INCENTIVE MGMT FEES 0.0 0.0% 0.0 0.0% 0.0 0.0%
OTHER DEDUCTIONS 6.7 0.4% 8.2 0.4% 3.0 0.2%
- ----------------------------------------------------------------------------------------------------------------------
TOTAL OTHER DEDUCTIONS 90.0 4.9% 93.4 5.0% 84.7 4.7%
- ----------------------------------------------------------------------------------------------------------------------
NET OPERATING INCOME 668.2 36.7% 556.5 30.1% 533.2 29.5%
- ----------------------------------------------------------------------------------------------------------------------
DEPRECIATION & AMORT 0.0 0.0% 0.0 0.0% 0.0 0.0%
- ----------------------------------------------------------------------------------------------------------------------
NET INCOME 668.2 36.7% 556.5 30.1% 533.2 29.5%
======================================================================================================================
Rooms Rate Rooms Rate Rooms Rate
- ----------------------------------------------------------------------------------------------------------------------
ROOMS SOLD - TRANSIENT 2,286 $252.50 2,497 $252.50 2,484 $252.15
ROOMS SOLD - PACKAGE 180 $133.00 180 $133.00 192 $138.70
ROOMS SOLD - GROUP 1,928 $219.19 2,103 $182.32 2,089 $155.71
ROOMS SOLD - BASE 164 $119.62 155 $106.32 150 $107.84
ROOMS SOLD - GNS 30 $243.00 30 $243.00 51 $311.00
- ----------------------------------------------------------------------------------------------------------------------
ROOMS SOLD - NON-REV 150 150 142
- ----------------------------------------------------------------------------------------------------------------------
TOTAL REV. OCC. ROOMS 4,588 $229.00 4,965 $213.82 4,966 $203.44
TOTAL ROOMS OCCUPIED 4,738 $221.75 5,115 $207.55 5,108 $197.79
- ----------------------------------------------------------------------------------------------------------------------
TOTAL AVAILABLE ROOMS 6,570 6,570 6,750
======================================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
===============================================================================================================================
INTERSTATE HOTELS CORPORATION ANNUAL FORECAST REPORT
WHITE ELEPHANT RESORT
24-Jun-96
10:45 AM ACTUAL: JANUARY TO MAY FORECAST JUNE TO DECEMBER
===============================================================================================================================
OCTOBER
- -------------------------------------------------------------------------------------------------------------------------------
DESCRIPTION
- -------------------------------------------------------------------------------------------------------------------------------
ACT/FOR % BUDGET % LYA %
===============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
REVENUE OCCUPANCY % 52.1% 56.3% 43.2%
REVPAR $77.46 $80.01 $60.01
AVERAGE ROOM RATE $148.59 $142.05 $138.83
===============================================================================================================================
GROSS OPERATING REVENUES
- -------------------------------------------------------------------------------------------------------------------------------
ROOMS 525.9 63.3% 543.2 61.7% 418.6 61.8%
- -------------------------------------------------------------------------------------------------------------------------------
FOOD & BEVERAGE
- -------------------------------------------------------------------------------------------------------------------------------
OUTLET FOOD 41.6 5.0% 41.1 4.7% 59.0 8.7%
CATERING FOOD 102.9 12.4% 109.4 12.4% 38.7 5.7%
OUTLET BEVERAGE 32.3 3.9% 32.3 3.7% 25.9 3.8%
CATERING BEVERAGE 34.0 4.1% 50.4 5.7% 7.2 1.1%
CATERING OTHER BEV 13.7 1.6% 20.3 2.3% 14.5 2.1%
HONOR BAR 0.0 0.0% 0.0 0.0% 0.0 0.0%
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL FOOD & BEVERAGE 224.4 27.0% 253.5 28.8% 145.3 21.4%
- -------------------------------------------------------------------------------------------------------------------------------
TELEPHONE 37.6 4.5% 40.6 4.6% 23.3 3.4%
GIFTSHOP 0.0 0.0% 0.0 0.0% 0.0 0.0%
OTHER 42.4 5.1% 42.5 4.8% 90.5 13.4%
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL OPERATING REVENUE 830.2 100.0% 879.9 100.0% 677.6 100.0%
- -------------------------------------------------------------------------------------------------------------------------------
DEPARTMENTAL PROFITS
- -------------------------------------------------------------------------------------------------------------------------------
ROOMS 355.7 67.6% 368.1 67.8% 287.1 68.6%
FOOD (9.2) -5.8% 15.9 9.3% (7.4) -6.6%
BEVERAGE 28.7 43.3% 41.1 49.7% 12.9 38.9%
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL FOOD & BEVERAGE 19.4 8.7% 57.0 22.5% 5.4 3.7%
- -------------------------------------------------------------------------------------------------------------------------------
TELEPHONE 21.3 56.8% 24.0 58.9% 8.2 35.3%
GIFTSHOP 0.0 0.0% 0.0 0.0% 0.0 0.0%
OTHER (10.6) -25.0% (12.9) -30.3% 15.3 17.0%
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL DEPART. PROFITS 385.9 46.5% 436.1 49.6% 316.1 46.7%
- -------------------------------------------------------------------------------------------------------------------------------
DEDUCTIONS FROM INCOME
- -------------------------------------------------------------------------------------------------------------------------------
ADMIN & GENERAL 86.0 10.4% 114.1 13.0% 89.5 13.2%
CREDIT CARD COMMISSIONS 13.7 1.7% 14.5 1.7% 8.9 1.3%
MANAGEMENT FEE 16.6 2.0% 17.6 2.0% 13.4 2.0%
ROYALTIES 0.0 0.0% 0.0 0.0% 0.0 0.0%
ADVERTISING & SALES 53.0 6.4% 74.4 8.5% 63.6 9.4%
PREFERRED GUESTS 0.0 0.0% 0.0 0.0% 0.0 0.0%
REPAIRS & MAINTENANCE 85.5 10.3% 83.0 9.4% 49.6 7.3%
UTILITIES 52.2 6.3% 53.2 6.1% 56.6 8.4%
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL DEDUCTIONS 307.0 37.0% 356.8 40.6% 281.7 41.6%
- -------------------------------------------------------------------------------------------------------------------------------
HOUSE PROFIT 78.9 9.5% 79.3 9.0% 34.4 5.1%
- -------------------------------------------------------------------------------------------------------------------------------
OTHER DEDUCTIONS
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL INSURANCE 32.7 3.9% 32.7 3.7% 31.1 4.6%
TOTAL TAXES 44.0 5.3% 44.0 5.0% 41.6 6.1%
TOTAL LEASES 6.7 0.8% 8.6 1.0% 8.7 1.3%
INCENTIVE MGMT FEES 0.0 0.0% 0.0 0.0% 0.0 0.0%
OTHER DEDUCTIONS 6.7 0.8% 8.2 0.9% 46.9 6.9%
TOTAL OTHER DEDUCTIONS 90.0 10.8% 93.4 10.6% 128.3 18.9%
- -------------------------------------------------------------------------------------------------------------------------------
NET OPERATING INCOME (11.1) -1.3% (14.0) -1.6% (93.9) -13.9%
- -------------------------------------------------------------------------------------------------------------------------------
DEPRECIATION & AMORT 0.0 0.0% 0.0 0.0% 0.0 0.0%
- -------------------------------------------------------------------------------------------------------------------------------
NET INCOME (11.1) -1.3% (14.0) -1.6% (93.9) -13.9%
===============================================================================================================================
Rooms Rate Rooms Rate Rooms Rate
- -------------------------------------------------------------------------------------------------------------------------------
ROOMS SOLD - TRANSIENT 1,239 $179.00 1,400 $180.00 1,403 $178.85
ROOMS SOLD - PACKAGE 117 $114.00 130 $106.00 206 $113.65
ROOMS SOLD - GROUP 2,034 $134.32 2,148 $121.13 1,306 $102.78
ROOMS SOLD - BASE 128 $108.48 121 $106.32 75 $60.67
ROOMS SOLD - GNS 21 $174.00 25 $174.00 25 $217.41
- -------------------------------------------------------------------------------------------------------------------------------
ROOMS SOLD - NON-REV 134 150 355
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL REV. OCC. ROOMS 3,539 $148.59 3,824 $142.05 3,015 $138.82
TOTAL ROOMS OCCUPIED 3,673 $143.17 3,974 $136.68 3,370 $124.20
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL AVAILABLE ROOMS 6,789 6,789 6,975
===============================================================================================================================
<CAPTION>
===============================================================================================================================
INTERSTATE HOTELS CORPORATION ANNUAL FORECAST REPORT
WHITE ELEPHANT RESORT
24-Jun-96
10:45 AM ACTUAL: JANUARY TO MAY FORECAST JUNE TO DECEMBER
===============================================================================================================================
NOVEMBER
- -------------------------------------------------------------------------------------------------------------------------------
DESCRIPTION ACT/FOR % BUDGET % LYA %
===============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
REVENUE OCCUPANCY % 15.8% 17.6% 15.7%
REVPAR $15.99 $17.57 $13.91
AVERAGE ROOM RATE $101.20 $99.60 $88.75
===============================================================================================================================
GROSS OPERATING REVENUES
- -------------------------------------------------------------------------------------------------------------------------------
ROOMS 105.0 46.9% 115.4 45.9 93.9 45.2%
- -------------------------------------------------------------------------------------------------------------------------------
FOOD & BEVERAGE
- -------------------------------------------------------------------------------------------------------------------------------
OUTLET FOOD 35.0 15.6% 33.4 13.3% 28.3 13.6%
CATERING FOOD 8.4 3.7% 21.1 8.4% 19.5 9.4%
OUTLET BEVERAGE 26.5 11.8% 25.8 10.3% 14.4 6.9%
CATERING BEVERAGE 3.0 1.3% 5.8 2.3% 6.2 3.0%
CATERING OTHER BEV 1.1 0.5% 3.9 1.5% (0.7) -0.3%
HONOR BAR 0.0 0.0% 0.0 0.0% 0.0 0.0%
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL FOOD & BEVERAGE 73.9 33.0% 89.9 35.7% 67.7 32.6%
- -------------------------------------------------------------------------------------------------------------------------------
TELEPHONE 11.1 4.9% 12.2 4.9% 11.3 5.4%
GIFTSHOP 0.0 0.0% 0.0 0.0% 0.0 0.0%
OTHER 34.0 15.2% 34.1 13.5% 34.9 16.8%
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL OPERATING REVENUE 224.1 100.0% 251.7 100.0% 207.8 100.0%
- -------------------------------------------------------------------------------------------------------------------------------
DEPARTMENTAL PROFITS
- -------------------------------------------------------------------------------------------------------------------------------
ROOMS 11.9 11.3% 21.7 18.8% (7.3) -7.8%
- -------------------------------------------------------------------------------------------------------------------------------
FOOD (26.0) -58.6% (23.6) -40.5% (30.2) -64.1%
BEVERAGE 7.3 24.7% 9.1 28.7% 8.4 40.7%
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL FOOD & BEVERAGE (18.7) -25.3% (14.6) -16.2% (21.8) -32.2%
- -------------------------------------------------------------------------------------------------------------------------------
TELEPHONE (0.9) -8.6% (0.0) -0.2% 3.3 31.3%
GIFTSHOP 0.0 0.0% 0.0 0.0% 0.0 0.0%
OTHER (1.5) -4.5% (1.0) -2.9% (4.0) -11.6%
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL DEPART. PROFITS (9.3) -4.2% 6.1 2.4% (29.6) -14.2%
- -------------------------------------------------------------------------------------------------------------------------------
DEDUCTIONS FROM INCOME
- -------------------------------------------------------------------------------------------------------------------------------
ADMIN & GENERAL 77.2 34.5% 107.5 42.7% 76.1 36.6%
CREDIT CARD COMMISSIONS 3.7 1.6% 4.2 1.7% 13.5 6.5%
MANAGEMENT FEE 4.5 2.0% 5.0 2.0% 4.2 2.0%
ROYALTIES 0.0 0.0% 0.0 0.0% 0.0 0.0%
ADVERTISING & SALES 56.8 25.4% 67.4 26.8% 87.6 42.1%
PREFERRED GUESTS 0.0 0.0% 0.0 0.0% 0.0 0.0%
REPAIRS & MAINTENANCE 78.5 35.0% 75.7 30.1% 64.7 31.1%
UTILITIES 25.9 11.6% 19.7 7.8% 27.9 13.4%
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL DEDUCTIONS 246.6 110.1% 279.4 111.0% 274.0 131.8%
- -------------------------------------------------------------------------------------------------------------------------------
HOUSE PROFIT (256.0) -114.2% (273.4) -108.6% (303.6) -146.1%
- -------------------------------------------------------------------------------------------------------------------------------
OTHER DEDUCTIONS
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL INSURANCE 32.7 14.6% 32.7 13.0% 30.7 14.8%
TOTAL TAXES 44.0 19.6% 44.0 17.5% 41.8 20.1%
TOTAL LEASES 6.7 3.0% 8.6 3.4% 7.6 3.7%
INCENTIVE MGMT FEES 0.0 0.0% 0.0 0.0% 0.0 0.0%
OTHER DEDUCTIONS 6.7 3.0% 8.2 3.2% 0.0 0.0%
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL OTHER DEDUCTIONS 90.0 40.2% 93.4 37.1% 80.1 38.6%
- -------------------------------------------------------------------------------------------------------------------------------
NET OPERATING INCOME (345.9) -154.4% (366.7) -145.7% (383.7) -184.6%
- -------------------------------------------------------------------------------------------------------------------------------
DEPRECIATION & AMORT 0.0 0.0% 0.0 0.0% 0.0 0.0%
- -------------------------------------------------------------------------------------------------------------------------------
NET INCOME (345.9) -154.4% (366.7) -145.7% (383.7) -184.6%
===============================================================================================================================
Rooms Rate Rooms Rate Rooms Rate
- -------------------------------------------------------------------------------------------------------------------------------
ROOMS SOLD - TRANSIENT 598 $110.00 588 $106.00 544 $109.56
ROOMS SOLD - PACKAGE 78 $90.00 80 $90.00 63 $90.18
ROOMS SOLD - GROUP 245 $87.86 476 $93.11 420 $72.56
ROOMS SOLD - BASE 105 $90.00 0 $0.00 30 ($25.46)
ROOMS SOLD - GNS 12 $106.00 15 $106.00 1 ($1,140.00)
- -------------------------------------------------------------------------------------------------------------------------------
ROOMS SOLD - NON-REV 120 120 222
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL REV. OCC. ROOMS 1,038 $101.20 1,159 $99.60 1,058 $88.71
TOTAL ROOMS OCCUPIED 1,158 $90.71 1,279 $90.26 1,280 $73.32
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL AVAILABLE ROOMS 6,570 6,570 6,750
===============================================================================================================================
<CAPTION>
===============================================================================================================================
INTERSTATE HOTELS CORPORATION ANNUAL FORECAST REPORT
WHITE ELEPHANT RESORT
24-Jun-96
10:45 AM ACTUAL: JANUARY TO MAY FORECAST JUNE TO DECEMBER
===============================================================================================================================
DECEMBER
- -------------------------------------------------------------------------------------------------------------------------------
DESCRIPTION
- -------------------------------------------------------------------------------------------------------------------------------
ACT/FOR % BUDGET % LYA %
===============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
REVENUE OCCUPANCY % 5.8% 10.6% 12.8%
REVPAR $11.93 $13.94 $18.10
AVERAGE ROOM RATE $204.00 $131.43 $141.21
===============================================================================================================================
GROSS OPERATING REVENUES
- -------------------------------------------------------------------------------------------------------------------------------
ROOMS 81.0 42.6% 94.6 45.7% 126.2 51.7%
- -------------------------------------------------------------------------------------------------------------------------------
FOOD & BEVERAGES
- -------------------------------------------------------------------------------------------------------------------------------
OUTLET FOOD 23.2 12.2% 23.2 11.2% 40.9 16.7%
CATERING FOOD 18.6 9.8% 18.6 9.0% 17.9 7.3%
OUTLET BEVERAGE 27.6 14.5% 27.6 13.3% 17.9 7.3%
CATERING BEVERAGE 6.9 3.6% 6.5 3.1% 3.6 1.5%
CATERING OTHER BEV 4.7 2.5% 4.7 2.2% 2.7 1.1%
HONOR BAR 0.0 0.0% 0.0 0.0% 0.0 0.0%
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL FOOD & BEVERAGE 80.9 42.5% 80.6 38.9% 82.9 33.9%
- -------------------------------------------------------------------------------------------------------------------------------
TELEPHONE 3.4 1.8% 6.9 3.3% 4.2 1.7%
GIFTSHOP 0.0 0.0% 0.0 0.0% 0.0 0.0%
OTHER 25.0 13.1% 25.2 12.2% 30.9 12.7%
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL OPERATING REVENUE 190.3 100.0% 207.2 100.0% 244.3 100.0%
- -------------------------------------------------------------------------------------------------------------------------------
DEPARTMENTAL PROFITS
- -------------------------------------------------------------------------------------------------------------------------------
ROOMS 14.7 18.2% 21.0 22.2% 55.5 44.0%
FOOD (17.5) -37.7% (30.6) -65.9% (17.0) -27.7%
BEVERAGE 7.0 20.3% 9.6 28.2% 7.6 35.3%
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL FOOD & BEVERAGE (10.5) -13.0% (21.0) -26.1% (9.5) -11.4%
- -------------------------------------------------------------------------------------------------------------------------------
TELEPHONE (8.0) -236.0% (5.0) -73.1% 8.7 205.1%
GIFTSHOP 0.0 0.0% 0.0 0.0% 0.0 0.0%
OTHER (4.7) -18.7% (6.0) -23.9% (17.8) -57.5%
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL DEPART. PROFITS (8.5) -4.5% (11.1) -5.4% 37.0 15.2%
- -------------------------------------------------------------------------------------------------------------------------------
DEDUCTIONS FROM INCOME
- -------------------------------------------------------------------------------------------------------------------------------
ADMIN & GENERAL 85.0 44.7% 115.8 55.9% 103.7 42.4%
CREDIT CARD COMMISSIONS 3.1 1.6% 3.4 1.6% 2.2 0.9%
MANAGEMENT FEE 3.8 2.0% 4.1 2.0% 5.0 2.0%
ROYALTIES 0.0 0.0% 0.0 0.0% 0.0 0.0%
ADVERTISING & SALES 45.8 24.1% 55.0 26.6% 71.3 29.2%
PREFERRED GUESTS 0.0 0.0% 0.0 0.0% 0.0 0.0%
REPAIRS & MAINTENANCE 78.6 41.3% 75.2 36.3% 82.6 33.8%
UTILITIES 37.4 19.7% 14.6 7.1% 37.0 15.1%
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL DEDUCTIONS 253.8 133.4% 268.2 129.4% 301.7 123.5%
- -------------------------------------------------------------------------------------------------------------------------------
HOUSE PROFIT (262.3) -137.8% (279.3) -134.8% (264.7) -108.3%
- -------------------------------------------------------------------------------------------------------------------------------
OTHER DEDUCTIONS
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL INSURANCE 32.7 17.2% 32.7 15.8% 31.4 12.9%
TOTAL TAXES 44.0 23.1% 44.0 21.2% 35.0 14.3%
TOTAL LEASES 6.7 3.5% 8.6 4.1% 7.9 3.3%
INCENTIVE MGMT FEES 0.0 0.0% 0.0 0.0% 0.0 0.0%
OTHER DEDUCTIONS 6.7 3.5% 8.2 3.9% 0.0 0.0%
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL OTHER DEDUCTIONS 90.0 47.3% 93.4 45.1% 74.3 30.4%
- -------------------------------------------------------------------------------------------------------------------------------
NET OPERATING INCOME (352.3) -185.1% (372.7) -179.9% (339.0) -138.8%
- -------------------------------------------------------------------------------------------------------------------------------
DEPRECIATION & AMORT 0.0 0.0% 0.0 0.0% 0.0 0.0%
- -------------------------------------------------------------------------------------------------------------------------------
NET INCOME (352.3) -185.1% (372.7) -179.9% (339.0) -138.8%
===============================================================================================================================
Rooms Rate Rooms Rate Rooms Rate
- -------------------------------------------------------------------------------------------------------------------------------
ROOMS SOLD - TRANSIENT 397 $204.00 566 $145.00 669 $157.70
ROOMS SOLD - PACKAGE 0 $0.00 75 $83.00 86 $90.23
ROOMS SOLD - GROUP 0 $0.00 64 $65.00 117 $74.62
ROOMS SOLD - BASE 0 $0.00 0 $0.00 2 $0.00
ROOMS SOLD - GNS 0 $0.00 15 $145.00 20 $212.66
- -------------------------------------------------------------------------------------------------------------------------------
ROOMS SOLD - NON-REV 20 120 249
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL REV. OCC. ROOMS 397 $204.00 720 $131.43 894 $141.21
TOTAL ROOMS OCCUPIED 417 $194.22 840 $112.65 1,143 $110.45
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL AVAILABLE ROOMS 6,789 6,789 6,975
===============================================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
======================================================================================
INTERSTATE HOTELS CORPORATION ANNUAL FORECAST REPORT
24-Jun-96 WHITE ELEPHANT RESORT
10:45 AM
- --------------------------------------------------------------------------------------
TOTAL FOR YEAR
- --------------------------------------------------------------------------------------
DESCRIPTION ACT/FOR % BUDGET % LYA %
======================================================================================
<S> <C> <C> <C> <C> <C> <C>
REVENUE OCCUPANCY % 37.4% 40.4% 38.4%
REVPAR $83.45 $85.11 $78.78
AVERAGE ROOM RATE $223.35 $210.41 $205.38
======================================================================================
GROSS OPERATING REVENUES
- --------------------------------------------------------------------------------------
ROOMS 6,688.7 54.3% 6,821.9 53.7% 6,469.5 53.1%
- --------------------------------------------------------------------------------------
FOOD & BEVERAGE
- --------------------------------------------------------------------------------------
OUTLET FOOD 849.9 6.9% 896.5 7.1% 983.2 8.1%
CATERING FOOD 756.7 6.1% 790.2 6.2% 602.2 4.9%
OUTLET BEVERAGE 411.9 3.3% 425.7 3.4% 364.1 3.0%
CATERING BEVERAGE 151.5 1.2% 225.0 1.8% 157.7 1.3%
CATERING OTHER REV 143.0 1.2% 187.7 1.5% 185.1 1.5%
HONOR BAR 0.0 0.0% 0.0 0.0% 6.3 0.1%
- --------------------------------------------------------------------------------------
TOTAL FOOD & BEVERAGE 2,312.8 18.8% 2,525.2 19.9% 2,298.5 18.9%
- --------------------------------------------------------------------------------------
TELEPHONE 401.6 3.3% 431.0 3.4% 406.9 3.3%
GIFT SHOP 0.0 0.0% 0.0 0.0% 0.0 0.0%
OTHER 2,915.4 23.7% 2,914.9 23.0% 3,003.8 24.7%
- --------------------------------------------------------------------------------------
TOTAL OPERATING REVENUE 12,318.5 100.0% 12,693.0 100.0% 12,178.6 100.0%
- --------------------------------------------------------------------------------------
DEPARTMENTAL PROFITS
- --------------------------------------------------------------------------------------
ROOMS 4,837.6 72.3% 4,898.2 71.8% 4,698.4 72.6%
- --------------------------------------------------------------------------------------
FOOD 54.5 3.1% (42.3) -2.3% (313.4) -17.7%
BEVERAGE 186.9 33.2% 231.7 35.6% 196.2 37.2%
- --------------------------------------------------------------------------------------
TOTAL FOOD & BEVERAGE 241.4 10.4% 189.4 7.5% (117.2) -5.1%
- --------------------------------------------------------------------------------------
TELEPHONE 209.7 52.2% 230.6 53.5% 268.5 66.0%
GIFT SHOP 0.0 0.0% 0.0 0.0% 0.0 0.0%
OTHER 1707.2 58.6% 1,665.3 57.1% 1,781.2 59.3%
- --------------------------------------------------------------------------------------
TOTAL DEPART. PROFITS 6,995.9 56.8% 6,983.5 55.0% 6,630.9 54.4%
- --------------------------------------------------------------------------------------
DEDUCTIONS FROM INCOME:
- --------------------------------------------------------------------------------------
ADMIN & GENERAL 1,090.1 8.8% 1,288.9 10.2% 1,379.6 11.3%
CREDIT CARD COMMISSIONS 221.3 1.8% 209.4 1.6% 201.7 1.7%
MANAGEMENT FEE 246.4 2.0% 253.9 2.0% 243.5 2.0%
ROYALTIES 0.0 0.0% 0.0 0.0% 0.2 0.0%
ADVERTISING & SALES 717.2 5.8% 912.8 7.2% 905.4 7.4%
PREFERRED GUESTS 0.0 0.0% 0.0 0.0% 0.0 0.0%
REPAIRS & MAINTENANCE 1,044.0 8.5% 1,082.5 8.5% 954.6 7.8%
UTILITIES 550.1 4.5% 501.1 3.9% 523.3 4.3%
- --------------------------------------------------------------------------------------
TOTAL DEDUCTIONS 3,869.1 31.4% 4,248.6 33.5% 4,208.3 34.6%
- --------------------------------------------------------------------------------------
HOUSE PROFIT 3,126.7 25.4% 2,734.9 21.5% 2,422.6 19.9%
- --------------------------------------------------------------------------------------
OTHER DEDUCTIONS:
- --------------------------------------------------------------------------------------
TOTAL INSURANCE 381.9 3.1% 391.9 3.1% 391.5 3.2%
TOTAL TAXES 509.2 4.1% 515.3 4.1% 499.0 4.1%
TOTAL LEASES 90.1 0.7% 102.6 0.8% 100.7 0.8%
INCENTIVE MGMT FEES 0.0 0.0% 0.0 0.0% 0.0 0.0%
OTHER DEDUCTIONS 87.3 0.7% 98.0 0.8% 112.7 0.9%
- --------------------------------------------------------------------------------------
TOTAL OTHER DEDUCTIONS 1,068.5 8.7% 1,107.8 8.7% 1,103.9 9.1%
- --------------------------------------------------------------------------------------
NET OPERATING INCOME 2,058.3 16.7% 1,627.1 12.8% 1,318.7 10.8%
- --------------------------------------------------------------------------------------
DEPRECIATION & AMORT 0.0 0.0% 0.0 0.0% 0.0 0.0%
- --------------------------------------------------------------------------------------
NET INCOME 2,058.3 16.7% 1,627.1 12.8% 1,318.7 10.8%
- --------------------------------------------------------------------------------------
Rooms Rate Rooms Rate Rooms Rate
- --------------------------------------------------------------------------------------
ROOMS SOLD - TRANSIENT 17,214 $252.04 19,438 $246.20 19,878 $234.70
ROOMS SOLD - PACKAGE 692 $134.17 986 $123.97 1,176 $119.55
ROOMS SOLD - GROUP 10,861 $193.59 11,062 $161.84 9,515 $158.96
ROOMS SOLD - BASE 972 $115.51 736 $106.32 708 $125.61
ROOMS SOLD - GNS 208 $208.18 200 $227.78 223 $278.17
- --------------------------------------------------------------------------------------
ROOMS SOLD - NON-REV 1,288 1,148 2,241
- ---------------------------------------------------------------------------------------
TOTAL REV. OCC. ROOMS 29,947 $223.38 32,422 $210.41 31,500 $205.38
- --------------------------------------------------------------------------------------
TOTAL ROOMS OCCUPIED 31,235 $214.17 33,570 $203.22 33,741 $191.74
- --------------------------------------------------------------------------------------
TOTAL AVAILABLE ROOMS 80,154 80,154 82,125
======================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
1996 BUDGET
- ------------------------------------------------------------------------------------------------------------------------------------
NANTUCKET PROPERTIES JAN FEB MAR APR MAY JUN JUL AUG
A & G
- ------------------------------------------------------------------------------------------------------------------------------------
LABOR
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management 10,352 9,648 12,238 14,741 15,172 14,741 15,172 15,172
Accounting 11,279 10,726 11,279 17,339 17,682 17,785 18,128 18,128
Human Resources 8,223 7,655 8,361 9,743 10,031 9,743 10,031 10,333
Security 5,690 5,213 5,690 7,950 9,632 9,903 14,478 14,478
Purchasing 0 0 0 0 0 0 0 0
Contract labor 0 0 0 0 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL LABOR 35,543 33,243 37,568 49,773 52,517 52,172 57,809 58,110
- ------------------------------------------------------------------------------------------------------------------------------------
BENEFITS 16,561 16,615 14,457 16,882 15,385 13,622 14,014 13,800
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL LABOR & BENEFITS 52,104 49,858 52,025 66,655 67,902 65,794 71,823 71,910
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
DIRECT EXPENSES
Armored Car 0 0 0 0 0 0 0 0
Bad Debt 0 0 0 103 305 699 1,303 1,361
Bank Charges 50 50 50 50 50 50 50 50
Central Office Support 0 0 0 1,000 1,000 1,000 1,000 1,000
Credit/Collection 0 0 0 51 153 349 651 681
Data Processing Costs 0 0 0 1,000 1,000 1,000 1,000 1,000
Direct General Insurance 0 0 0 0 0 0 0 0
Donations 0 0 0 700 700 700 700 700
Employee Relations 0 0 0 1,225 890 2,610 1,210 5,600
Placement Fee & Relo 0 0 0 7,556 7,556 7,556 7,556 7,556
Consultant Fees 0 0 0 1,117 1,117 2,512 1,117 1,117
Recruitment Advertising 0 0 0 3,401 3,443 2,143 1,386 1,743
Equipment Rental 0 0 0 0 0 0 0 0
Accounting Fees 15,960 15,960 15,960 15,960 15,960 15,960 15,960 15,960
In-House Relocation 0 0 0 0 0 0 0 0
Legal & Audit 0 0 0 2,133 2,133 2,133 2,133 2,133
Licenses 0 0 0 0 0 0 0 0
Loss & Damage 0 0 0 0 0 0 0 0
Miscellaneous 0 0 0 896 1,200 1,500 2,000 2,000
Printing/Stationery/Office 36 39 39 385 1,145 2,619 4,884 5,105
Staff Training 0 0 0 608 608 608 608 608
Telephone/Postage 65 71 71 693 2,061 4,715 8,792 9,189
Trade Dues & Publications 0 0 0 133 133 133 133 133
Owners Expense 0 0 0 0 0 0 0 0
Travel 3,000 3,000 3,000 9,981 2,478 2,478 5,478 2,478
Entertainment 500 500 500 3,643 3,643 3,643 3,643 3,643
Cash Over/Short 0 0 0 0 0 0 0 0
Photocopy Expense 50 50 50 103 305 699 1,303 1,361
- ------------------------------------------------------------------------------------------------------------------------------------
TTL DIRECT EXPENSE 19,662 19,670 19,670 50,739 45,880 53,107 60,907 63,420
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL A&G EXPENSE 71,765 69,528 71,695 117,394 113,783 118,901 132,730 135,330
- ------------------------------------------------------------------------------------------------------------------------------------
1996 BUDGET 01/05/96 06:35 PM
- ------------------------------------------------------------------------------------------------------------------------------------
NANTUCKET PROPERTIES SEP OCT NOV DEC TOTAL
1996
A & G
- ------------------------------------------------------------------------------------------------------------------------------------
LABOR
Management 15,388 15,841 14,229 14,726 167,421
Accounting 17,339 17,682 14,526 14,869 186,759
Human Resources 10,035 10,333 8,365 8,663 111,516
Security 9,903 8,170 7,319 7,410 105,835
Purchasing 0 0 0 0 0
Contract labor 0 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL LABOR 52,664 52,025 44,439 45,668 571,530
- ------------------------------------------------------------------------------------------------------------------------------------
BENEFITS 13,876 16,660 18,314 20,621 190,807
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL LABOR & BENEFITS 66,540 68,685 62,753 66,289 762,337
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
DIRECT EXPENSES
Armored Car 0 0 0 0 0
Bad Debt 741 352 101 83 5,047
Bank Charges 50 50 50 50 600
Central Office Support 1,000 1,000 1,000 1,000 9,000
Credit/Collection 370 176 50 41 2,523
Data Processing Costs 1,000 1,000 1,000 1,000 9,000
Direct General Insurance 0 0 0 0 0
Donations 700 700 700 700 6,300
Employee Relations 3,200 1,050 2,240 6,380 24,405
Placement Fee & Relo 7,556 7,556 7,556 7,556 68,000
Consultant Fees 2,512 1,117 1,117 2,512 14,238
Recruitment Advertising 1,743 2,643 4,043 3,543 24,088
Equipment Rental 0 0 0 0 0
Accounting Fees 15,960 15,960 15,960 15,960 191,520
In-House Relocation 0 0 0 0 0
Legal & Audit 2,133 2,133 2,133 2,133 19,200
Licenses 0 0 0 0 0
Loss & Damage 0 0 0 0 0
Miscellaneous 1,500 750 750 750 11,346
Printing/Stationery/Office 2,777 1,320 378 311 19,040
Staff Training 608 608 608 608 5,475
Telephone/Postage 4,999 2,376 680 559 34,271
Trade Dues & Publications 133 133 133 133 1,200
Owners Expense 0 0 0 0 0
Travel 2,478 2,478 2,478 2,478 41,805
Entertainment 3,643 3,643 3,643 3,643 34,287
Cash Over/Short 0 0 0 0 0
Photocopy Expense 741 352 101 83 5,197
- ------------------------------------------------------------------------------------------------------------------------------------
TTL DIRECT EXPENSE 53,845 45,397 44,720 49,524 526,541
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL A&G EXPENSE 120,385 114,081 107,473 115,813 1,288,878
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
1996 BUDGET
- ------------------------------------------------------------------------------------------------------------------------------------
NANTUCKET PROPERTIES JAN FEB MAR APR MAY JUN JUL AUG SEP
ADVERTISING & SALES
- ------------------------------------------------------------------------------------------------------------------------------------
LABOR ANALYSIS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management 4,245 3,963 4,278 6,160 6,371 6,160 6,371 6,480 6,264
Associates 0 0 0 0 0 0 0 0 0
Contract Labor 0 0 0 0 0 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
TTL WAGES 4,245 3,963 4,278 6,160 6,371 6,160 6,371 6,480 6,264
- ------------------------------------------------------------------------------------------------------------------------------------
BENEFITS 1,978 1,981 1,646 2,089 1,867 1,608 1,545 1,539 1,651
- ------------------------------------------------------------------------------------------------------------------------------------
TTL LABOR COST 6,223 5,944 5,924 8,249 8,238 7,768 7,916 8,019 7,915
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
DIRECT EXPENSES
Agency Fees 1,950 1,950 1,950 1,950 1,950 1,950 1,950 1,950 1,950
Agency Production 0 0 2,000 3,000 0 500 500 0 1,000
Advertising National 0 0 0 0 400 300 400 0 300
Directories 0 0 0 5,100 5,100 5,100 5,100 5,100 5,100
Magazines 2,000 2,000 2,000 20,300 16,700 18,900 3,900 3,600 2,500
Newspapers 0 0 2,800 15,800 12,700 5,800 2,800 5,300 12,400
Outdoor 100 100 100 100 100 100 100 100 100
Radio/Television 0 0 0 0 0 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
Bad Debt Expense 0 0 0 0 0 0 0 0 0
Brochures/Postcards 0 0 0 2,667 2,667 2,667 2,667 2,667 2,667
Direct Mail/Newsletter 0 2,000 4,000 14,000 2,400 1,500 2,000 0 0
Data Processing 200 200 200 200 200 200 200 200 200
In House Production 0 1,500 1,000 5,500 1,000 2,000 0 0 500
Central Sales Office 28,236 30,532 33,901 29,910 32,280 32,630 30,880 31,230 32,630
- ------------------------------------------------------------------------------------------------------------------------------------
Miscellaneous 500 500 500 500 500 500 500 500 500
Printing/Stationery/Office 600 600 800 800 1,000 1,000 1,000 1,000 1,000
In House Entertainment 0 500 800 800 800 800 800 800 800
- ------------------------------------------------------------------------------------------------------------------------------------
Promotions Expense 0 0 0 2,000 2,000 7,000 600 4,000 4,000
Public Relations 0 0 0 0 0 0 0 0 0
Clout 0 0 0 0 0 0 0 0 0
Rgl Dir Tour/Travel 0 0 0 0 0 0 0 0 0
Telephone/Postage 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000
Trade Dues/Publications 0 0 0 2,500 500 700 1,000 1,000 0
Travel/Entertainment 700 2,500 200 2,700 200 200 3,200 200 700
Photocopy 100 100 100 100 200 200 200 200 200
Microfilm + Fiche 0 0 0 0 0 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
TTL DIRECT EXPENSES 35,386 43,482 51,351 108,927 81,697 83,047 58,797 58,847 67,547
- ------------------------------------------------------------------------------------------------------------------------------------
% GROSS 146.07% 166.05% 195.28% 42.43% 10.70% 4.76% 1.81% 1.73% 3.65%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
NATIONAL AD FEE 0 0 0 1,308 4,349 9,762 16,401 18,250 10,616
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL A & S 41,609 49,426 57,275 118,483 94,285 100,577 83,114 85,116 86,078
- ------------------------------------------------------------------------------------------------------------------------------------
% 171.75% 188.74% 217.81% 46.15% 12.35% 5.76% 2.55% 2.50% 4.65%
- ------------------------------------------------------------------------------------------------------------------------------------
1996 BUDGET 01/05/96 06:34 PM
- --------------------------------------------------------------------------------
NANTUCKET PROPERTIES OCT NOV DEC TOTAL
1996
ADVERTISING & SALES
- --------------------------------------------------------------------------------
LABOR ANALYSIS
Management 6,557 5,750 5,948 68,547
Associates 0 0 0 0
Contract Labor 0 0 0 0
- --------------------------------------------------------------------------------
TTL WAGES 6,557 5,750 5,948 68,547
- --------------------------------------------------------------------------------
BENEFITS 2,100 2,370 2,686 23,060
- --------------------------------------------------------------------------------
TTL LABOR COST 8,657 8,120 8,634 91,607
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DIRECT EXPENSES
Agency Fees 1,950 1,950 1,950 23,400
Agency Production 1,000 1,000 1,000 10,000
Advertising National 0 0 0 1,400
Directories 5,100 5,100 5,100 45,900
Magazines 4,100 100 700 76,800
Newspapers 8,600 5,400 1,400 73,000
Outdoor 100 100 100 1,200
Radio/Television 0 0 0 0
- --------------------------------------------------------------------------------
Bad Debt Expense 0 0 0 0
Brochures/Postcards 2,667 2,667 2,667 24,000
Direct Mail/Newsletter 2,000 6,000 0 33,900
Data Processing 200 200 200 2,400
In House Production 500 500 0 12,500
Central Sales Office 29,690 30,180 27,940 370,039
- --------------------------------------------------------------------------------
Miscellaneous 500 500 500 6,000
Printing/Stationery/Office 800 600 600 9,800
In House Entertainment 800 500 500 7,900
- --------------------------------------------------------------------------------
Promotions Expense 1,000 2,000 1,000 23,600
Public Relations 0 0 0 0
Clout 0 0 0 0
Rgl Dir Tour/Travel 0 0 0 0
Telephone/Postage 1,000 1,000 1,000 12,000
Trade Dues/Publications 0 0 0 5,700
Travel/Entertainment 200 200 700 11,700
Photocopy 100 100 100 1,700
Microfilm + Fiche 0 0 0 0
- --------------------------------------------------------------------------------
TTL DIRECT EXPENSES 60,307 58,097 45,457 752,939
- --------------------------------------------------------------------------------
% GROSS 6.85% 23.08% 21.94% 5.93%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NATIONAL AD FEE 5,432 1,154 946 68,219
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL A & S 74,395 67,371 55,037 912,766
- --------------------------------------------------------------------------------
% 8.46% 26.77% 26.56% 7.19%
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
1996 BUDGET
- ------------------------------------------------------------------------------------------------------------------------------------
NANTUCKET PROPERTIES JAN FEB MAR APR MAY JUN JUL
REPAIRS/MAINTENANCE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
LABOR ANALYSIS
Management 9,100 10,104 9,327 10,641 11,011 10,641 11,011
Associates 23,791 22,262 23,333 29,064 32,835 30,541 32,835
Contract Labor 0 0 0 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
TTL WAGES 32,891 32,366 32,659 39,705 43,846 41,181 43,846
- ------------------------------------------------------------------------------------------------------------------------------------
BENEFITS 15,326 16,177 12,568 13,467 12,845 10,753 10,629
- ------------------------------------------------------------------------------------------------------------------------------------
TTL LABOR COST 48,217 48,543 45,227 53,172 56,691 51,934 54,475
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
DIRECT EXPENSES
Miscellaneous/Printing & Stationary 300 300 300 200 200 200 200
Building 2,850 2,850 2,850 2,900 1,950 1,950 1,950
Curtains/Drapes 2,000 2,500 2,500 2,500 1,500 1,000 500
Electrical/Mechanical 7,290 7,290 7,290 7,290 7,290 7,290 7,290
Maintenance Contracts 6,305 6,305 6,305 6,305 6,305 6,305 6,305
Locks & Keys 100 100 100 100 100 100 100
Electric Bulbs 500 500 500 400 300 200 200
Engineering Supplies 2,500 2,500 2,500 1,500 2,500 2,500 2,500
Floor Covering 1,500 1,500 1,500 3,000 3,000 1,000 1,000
Furniture 750 750 750 2,000 1,500 1,000 1,000
Grounds/Landscape 0 0 15,000 22,000 15,000 10,000 5,000
Painting/Decorating 3,500 4,500 4,500 4,500 4,500 2,000 1,000
Removal of Waste 3,000 3,150 3,150 3,500 3,625 3,850 4,150
Snow Removal 650 650 650 0 0 0 0
Uniforms 50 50 500 3,500 500 0 0
Telephone/Postage 200 200 200 200 200 200 200
Vehicles Expense 2,000 2,000 2,000 2,000 2,000 3,000 3,000
Photocopy 150 150 150 150 150 150 150
Travel/Entertainment 100 1,250 800 100 100 100 100
Service & Maintainence Fees 0 0 0 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
SUBTTL DIRECT EXPENSES 33,745 36,545 51,545 62,145 50,720 40,845 34,645
- ------------------------------------------------------------------------------------------------------------------------------------
% GROSS REVENUE 139.29% 139.56% 196.02% 24.21% 6.65% 2.34% 1.06%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
MAJOR PLANNED MAINT 0 0 0 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
TTL DEPARTMENT EXPENSE 81,962 85,088 96,772 115,317 107,411 92,779 89,120
- ------------------------------------------------------------------------------------------------------------------------------------
% GROSS REVENUE 338.33% 324.93% 368.02% 44.92% 14.07% 5.31% 2.74%
- ------------------------------------------------------------------------------------------------------------------------------------
1996 BUDGET
- ------------------------------------------------------------------------------------------------------------------------------------
NANTUCKET PROPERTIES AUG SEP OCT NOV DEC TOTAL
REPAIRS/MAINTENANCE 1996
- ------------------------------------------------------------------------------------------------------------------------------------
LABOR ANALYSIS
Management 11,011 10,641 7,997 7,723 7,997 117,203
Associates 32,509 31,306 29,390 25,460 25,348 338,674
Contract Labor 0 0 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
TTL WAGES 43,520 41,946 37,387 33,183 33,344 455,876
- ------------------------------------------------------------------------------------------------------------------------------------
BENEFITS 10,335 11,052 11,972 13,676 15,057 153,857
- ------------------------------------------------------------------------------------------------------------------------------------
TTL LABOR COST 53,855 52,998 49,359 46,859 48,401 609,733
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
DIRECT EXPENSES
Miscellaneous/Printing & Stationary 200 200 200 300 300 2,900
Building 1,950 1,330 1,710 1,710 760 24,760
Curtains/Drapes 500 500 500 500 500 15,000
Electrical/Mechanical 7,290 7,670 6,050 4,720 3,240 80,000
Maintenance Contracts 6,305 6,305 6,305 6,305 6,305 75,660
Locks & Keys 100 100 100 100 100 1,200
Electric Bulbs 200 200 300 400 500 4,200
Engineering Supplies 2,500 2,500 1,500 1,500 1,500 26,000
Floor Covering 1,000 1,000 2,000 1,000 1,000 18,500
Furniture 1,000 1,000 1,500 2,000 2,500 15,750
Grounds/Landscape 4,000 10,000 2,000 2,000 2,000 87,000
Painting/Decorating 1,000 2,000 2,000 2,000 2,000 33,500
Removal of Waste 4,150 3,500 3,350 3,150 3,000 41,575
Snow Removal 0 0 650 650 650 3,900
Uniforms 0 0 3,000 0 0 7,600
Telephone/Postage 200 200 200 200 200 2,400
Vehicles Expense 3,000 3,000 2,000 2,000 2,000 28,000
Photocopy 150 150 150 150 150 1,800
Travel/Entertainment 100 100 100 100 100 3,050
Service & Maintainence Fees 0 0 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
SUBTTL DIRECT EXPENSES 33,645 39,755 33,615 28,785 26,805 472,795
- ------------------------------------------------------------------------------------------------------------------------------------
% GROSS REVENUE 0.99% 2.15% 3.82% 11.44% 12.94% 3.72%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
MAJOR PLANNED MAINT 0 0 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
TTL DEPARTMENT EXPENSE 87,500 92,753 82,974 75,644 75,206 1,082,528
- ------------------------------------------------------------------------------------------------------------------------------------
% GROSS REVENUE 2.57% 5.01% 9.43% 30.06% 36.29% 8.53%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
================================================================================================================
INTERSTATE HOTELS CORPORATION FORECAST RECAP REPORT 10:46AM
WHITE ELEPHANT RESORT 24-Jun-96
================================================================================================================
ACTUAL: JANUARY TO MAY
- ----------------------------------------------------------------------------------------------------------------
DESCRIPTION ACTUAL % BUDGET % LYA %
================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
REVENUE OCCUPANCY % 10.0% 13.1% 15.8%
REVPAR $14.62 $16.99 $17.19
AVERAGE ROOM RATE $146.85 $130.11 $108.98
================================================================================================================
GROSS OPERATING REVENUES
- ----------------------------------------------------------------------------------------------------------------
ROOMS 486.7 55.0% 565.7 51.6% 584.1 50.8%
- ----------------------------------------------------------------------------------------------------------------
FOOD & BEVERAGE:
- ----------------------------------------------------------------------------------------------------------------
OUTLET FOOD 50.5 5.7% 79.3 7.2% 128.5 11.2%
CATERING FOOD 52.4 5.9% 98.4 9.0% 69.6 6.1%
OUTLET BEVERAGE 26.8 3.0% 36.9 3.4% 67.0 5.8%
CATERING BEVERAGE 16.2 1.8% 39.2 3.6% 28.5 2.5%
CATERING OTHER 14.2 1.6% 26.2 2.4% 35.0 3.0%
HONOR BAR 0.0 0.0% 0.0 0.0% 0.1 0.0%
- ----------------------------------------------------------------------------------------------------------------
TOTAL FOOD & BEVERAGE 160.1 18.1% 279.9 25.5% 328.7 28.6%
- ----------------------------------------------------------------------------------------------------------------
TELEPHONE 20.6 2.3% 34.1 3.1% 43.1 3.8%
GIFTSHOP 0.0 0.0% 0.0 0.0% 0.0 0.0%
OTHER 218.2 24.6% 217.0 19.8% 194.0 16.9%
- ----------------------------------------------------------------------------------------------------------------
TOTAL OPERATING REVENUE 885.6 100.0% 1,096.6 100.0% 1,150.0 100.0%
- ----------------------------------------------------------------------------------------------------------------
DEPARTMENTAL PROFITS
- ----------------------------------------------------------------------------------------------------------------
ROOMS 97.1 20.0% 142.7 25.2% 167.5 28.7%
- ----------------------------------------------------------------------------------------------------------------
FOOD (172.5) -147.2% (162.2) -79.6% (191.5) -82.2%
BEVERAGE 2.1 4.9% 8.9 11.7% 12.6 13.2%
- ----------------------------------------------------------------------------------------------------------------
TOTAL FOOD & BEVERAGE (170.4) -106.4% (153.2) -54.8% (179.0) -54.4%
- ----------------------------------------------------------------------------------------------------------------
TELEPHONE (32.3) -156.7% (26.1) -76.5% (0.4) -0.9%
GIFTSHOP 0.0 0.0% 0.0 0.0% 0.0 0.0%
OTHER 44.8 20.5% 13.0 6.0% 64.3 33.2%
- ----------------------------------------------------------------------------------------------------------------
TOTAL DEPART. PROFITS (60.7) -6.9% (23.6) -2.1% 52.5 4.6%
- ----------------------------------------------------------------------------------------------------------------
DEDUCTIONS FROM INCOME:
- ----------------------------------------------------------------------------------------------------------------
ADMIN & GENERAL 425.2 48.0% 444.2 40.5% 540.0 47.0%
CREDIT CARD COMMISSIONS 42.8 4.8% 18.1 1.6% 31.3 2.7%
MANAGEMENT FEE 17.7 2.0% 21.9 2.0% 23.0 2.0%
ROYALTIES 0.0 0.0% 0.0 0.0% 0.0 0.0%
ADVERTISING & SALES 329.1 37.2% 361.1 32.9% 317.0 27.6%
PREFERRED GUESTS 0.0 0.0% 0.0 0.0% 0.0 0.0%
REPAIRS & MAINTENANCE 425.5 48.1% 486.6 44.4% 386.9 33.6%
UTILITIES 170.8 19.3% 111.4 10.2% 148.4 12.9%
- ----------------------------------------------------------------------------------------------------------------
TOTAL DEDUCTIONS 1,411.2 159.3% 1,443.2 131.6% 1,446.5 125.8%
- ----------------------------------------------------------------------------------------------------------------
HOUSE PROFIT (1,471.9) -166.2% (1,466.7) -133.7% (1,394.0) -121.2%
- ----------------------------------------------------------------------------------------------------------------
OTHER DEDUCTIONS:
- ----------------------------------------------------------------------------------------------------------------
TOTAL INSURANCE 153.3 17.3% 163.3 14.9% 163.1 14.2%
TOTAL TAXES 203.4 23.0% 209.5 19.1% 214.2 18.6%
TOTAL LEASES 42.3 4.8% 42.8 3.9% 46.4 4.0%
INCENTIVE MGMT FEES 0.0 0.0% 0.0 0.0% 0.0 0.0%
OTHER DEDUCTIONS 40.5 4.6% 40.8 3.7% 44.6 3.9%
- ----------------------------------------------------------------------------------------------------------------
TOTAL OTHER DEDUCTIONS 439.5 49.6% 456.4 41.6% 468.3 40.7%
- ----------------------------------------------------------------------------------------------------------------
NET OPERATING INCOME (1,911.4) -215.8% (1,923.1) -175.4% (1,862.3) -161.9%
- ----------------------------------------------------------------------------------------------------------------
DEPRECIATION & AMORT 0.0 0.0% 0.0 0.0% 0.0 0.0%
- ----------------------------------------------------------------------------------------------------------------
NET INCOME (1,911.4) -215.8% (1,923.1) -175.4% (1,862.3) -161.9%
================================================================================================================
Rooms Rate Rooms Rate Rooms Rate
- ----------------------------------------------------------------------------------------------------------------
ROOMS SOLD - TRANSIENT 1,997 $169.94 2,437 $145.40 3,455 $118.12
ROOMS SOLD - PACKAGE 115 $107.89 275 $98.95 342 $90.72
ROOMS SOLD - GROUP 1,090 $113.72 1,630 $112.46 1,558 $92.76
ROOMS SOLD - BASE 76 $131.41 0 $0.00 5 $90.00
ROOMS SOLD - GNS 36 $50.17 6 $145.33 0 $0.00
- ----------------------------------------------------------------------------------------------------------------
ROOMS SOLD - NON-REV. 520 264 869
- ----------------------------------------------------------------------------------------------------------------
TOTAL REV. OCC. ROOMS 3,314 $147.11 4,348 $130.11 5,360 $108.98
TOTAL ROOMS OCCUPIED 3,834 $127.16 4,612 $122.66 6,229 $93.77
- ----------------------------------------------------------------------------------------------------------------
TOTAL AVAILABLE ROOMS 33,288 33,288 33,975
================================================================================================================
<CAPTION>
================================================================================================================
FORECAST: JUNE TO DECEMBER
- ----------------------------------------------------------------------------------------------------------------
DESCRIPTION FRCST % BUDGET % LYA %
================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
REVENUE OCCUPANCY % 56.8% 59.9% 54.3%
REVPAR $132.34 $133.49 $122.23
AVERAGE ROOM RATE $232.84 $222.85 $225.15
================================================================================================================
GROSS OPERATING REVENUES
- ----------------------------------------------------------------------------------------------------------------
ROOMS 6,202.0 54.2% 6,256.2 53.9% 5,885.3 53.4%
- ----------------------------------------------------------------------------------------------------------------
FOOD & BEVERAGE:
- ----------------------------------------------------------------------------------------------------------------
OUTLET FOOD 799.3 7.0% 817.2 7.0% 854.7 7.8%
CATERING FOOD 704.3 6.2% 691.8 6.0% 532.6 4.8%
OUTLET BEVERAGE 385.1 3.4% 388.8 3.4% 297.1 2.7%
CATERING BEVERAGE 135.3 1.2% 185.9 1.6% 129.2 1.2%
CATERING OTHER 128.8 1.1% 161.6 1.4% 150.1 1.4%
HONOR BAR 0.0 0.0% 0.0 0.0% 6.2 0.1%
- ----------------------------------------------------------------------------------------------------------------
TOTAL FOOD & BEVERAGE 2,152.7 18.8% 2,245.3 19.4% 1,969.8 17.9%
- ----------------------------------------------------------------------------------------------------------------
TELEPHONE 381.0 3.3% 396.9 3.4% 363.7 3.3%
GIFTSHOP 0.0 0.0% 0.0 0.0% 0.0 0.0%
OTHER 2,697.2 23.6% 2,698.0 23.3% 2,809.8 25.5%
- ----------------------------------------------------------------------------------------------------------------
TOTAL OPERATING REVENUE 11,432.9 100.0% 11,596.4 100.0% 11,028.6 100.0%
- ----------------------------------------------------------------------------------------------------------------
DEPARTMENTAL PROFITS
- ----------------------------------------------------------------------------------------------------------------
ROOMS 4,740.4 76.4% 4,755.5 76.0% 4,530.9 77.0%
- ----------------------------------------------------------------------------------------------------------------
FOOD 226.9 13.9% 119.9 7.2% (121.8) -7.9%
BEVERAGE 184.8 35.5% 222.8 38.8% 183.6 42.5%
- ----------------------------------------------------------------------------------------------------------------
TOTAL FOOD & BEVERAGE 411.8 19.1% 342.6 15.3% 61.8 3.1%
- ----------------------------------------------------------------------------------------------------------------
TELEPHONE 242.0 63.5% 256.7 64.7% 268.9 73.9%
GIFTSHOP 0.0 0.0% 0.0 0.0% 0.0 0.0%
OTHER 1,662.7 61.6% 1,652.3 61.2% 1,716.8 61.1%
- ----------------------------------------------------------------------------------------------------------------
TOTAL DEPART. PROFITS 7,056.6 61.7% 7,007.0 60.4% 6,578.4 59.6%
- ----------------------------------------------------------------------------------------------------------------
DEDUCTIONS FROM INCOME:
- ----------------------------------------------------------------------------------------------------------------
ADMIN & GENERAL 664.8 5.8% 844.7 7.3% 839.7 7.6%
CREDIT CARD COMMISSIONS 178.6 1.6% 191.3 1.6% 170.4 1.5%
MANAGEMENT FEE 228.7 2.0% 231.9 2.0% 220.5 2.0%
ROYALTIES 0.0 0.0% 0.0 0.0% 0.2 0.0%
ADVERTISING & SALES 388.1 3.4% 551.7 4.8% 588.4 5.3%
PREFERRED GUESTS 0.0 0.0% 0.0 0.0% 0.0 0.0%
REPAIRS & MAINTENANCE 618.5 5.4% 596.0 5.1% 567.7 5.1%
UTILITIES 379.3 3.3% 389.7 3.4% 374.9 3.4%
- ----------------------------------------------------------------------------------------------------------------
TOTAL DEDUCTIONS 2,458.0 21.5% 2,805.4 24.2% 2,761.9 25.0%
- ----------------------------------------------------------------------------------------------------------------
HOUSE PROFIT 4,598.7 40.2% 4,201.6 36.2% 3,816.6 34.6%
- ----------------------------------------------------------------------------------------------------------------
OTHER DEDUCTIONS:
- ----------------------------------------------------------------------------------------------------------------
TOTAL INSURANCE 288.6 2.0% 228.6 2.0% 228.4 2.1%
TOTAL TAXES 305.8 2.7% 305.8 2.6% 284.8 2.6%
TOTAL LEASES 48.8 0.4% 59.9 0.5% 54.3 0.5%
INCENTIVE MGMT FEES 0.0 0.0% 0.0 0.0% 0.0 0.0%
OTHER DEDUCTIONS 46.8 0.4% 57.2 0.5% 68.1 0.6%
- ----------------------------------------------------------------------------------------------------------------
TOTAL OTHER DEDUCTIONS 629.0 5.5% 651.5 5.6% 635.6 5.8%
- ----------------------------------------------------------------------------------------------------------------
NET OPERATING INCOME 3,969.6 34.7% 3,550.2 30.6% 3,181.0 28.8%
- ----------------------------------------------------------------------------------------------------------------
DEPRECIATION & AMORT 0.0 0.0% 0.0 0.0% 0.0 0.0%
- ----------------------------------------------------------------------------------------------------------------
NET INCOME 3,969.6 34.7% 3,550.2 30.6% 3,181.0 28.8%
================================================================================================================
Rooms Rate Rooms Rate Rooms Rate
- ----------------------------------------------------------------------------------------------------------------
ROOMS SOLD - TRANSIENT 15,217 $262.81 17,001 $260.65 16,423 $259.22
ROOMS SOLD - PACKAGE 577 $139.40 711 $133.65 834 $131.38
ROOMS SOLD - GROUP 9,771 $202.50 9,432 $170.38 7,957 $171.93
ROOMS SOLD - BASE 896 $114.16 736 $106.32 703 $125.86
ROOMS SOLD - GNS 172 $241.25 194 $230.33 223 $278.17
- ----------------------------------------------------------------------------------------------------------------
ROOMS SOLD - NON-REV. 768 884 1,372
- ----------------------------------------------------------------------------------------------------------------
TOTAL REV. OCC. ROOMS 26,633 $232.87 28,074 $222.85 26,140 $225.14
TOTAL ROOMS OCCUPIED 27,401 $226.37 28,958 $216.04 27,512 $213.92
- ----------------------------------------------------------------------------------------------------------------
TOTAL AVAILABLE ROOMS 46,866 46,866 48,150
================================================================================================================
<CAPTION>
================================================================================================================
TOTAL - JANUARY TO DECEMBER
- ----------------------------------------------------------------------------------------------------------------
DESCRIPTION ACT/FOR % BUDGET % LYA %
<S> <C> <C> <C> <C> <C> <C>
================================================================================================================
REVENUE OCCUPANCY % 37.4% 40.4% 38.4%
REVPAR $83.45 $85.11 $78.78
AVERAGE ROOM RATE $233.35 $210.41 $205.38
================================================================================================================
GROSS OPERATING REVENUES
- ----------------------------------------------------------------------------------------------------------------
ROOMS 6,688.7 54.3% 6,821.9 53.7% 6,469.5 53.1%
- ----------------------------------------------------------------------------------------------------------------
FOOD & BEVERAGE:
- ----------------------------------------------------------------------------------------------------------------
OUTLET FOOD 849.9 6.9% 896.5 7.1% 983.2 8.1%
CATERING FOOD 756.7 6.1% 790.2 6.2% 602.2 4.9%
OUTLET BEVERAGE 411.9 3.3% 425.7 3.4% 364.1 3.0%
CATERING BEVERAGE 151.5 1.2% 225.0 1.8% 157.7 1.3%
CATERING OTHER 143.0 1.2% 187.7 1.5% 185.1 1.5%
HONOR BAR 0.0 0.0% 0.0 0.0% 6.3 0.1%
- ----------------------------------------------------------------------------------------------------------------
TOTAL FOOD & BEVERAGE 2,312.8 18.8% 2,525.2 19.9% 2,298.5 18.9%
- ----------------------------------------------------------------------------------------------------------------
TELEPHONE 401.6 3.3% 431.0 3.4% 406.9 3.3%
GIFTSHOP 0.0 0.0% 0.0 0.0% 0.0 0.0%
OTHER 2,915.4 23.7% 2,914.9 23.0% 3,003.8 24.7%
- ----------------------------------------------------------------------------------------------------------------
TOTAL OPERATING REVENUE 12,318.5 100.0% 12,693.0 100.0% 12,178.6 100.0%
- ----------------------------------------------------------------------------------------------------------------
DEPARTMENTAL PROFITS
- ----------------------------------------------------------------------------------------------------------------
ROOMS 4,837.6 72.3% 4,898.2 71.8% 4,698.4 72.6%
- ----------------------------------------------------------------------------------------------------------------
FOOD 54.4 3.1% (42.3) -2.3% (313.4) -17.7%
BEVERAGE 186.9 33.2% 231.7 35.6% 196.2 37.2%
- ----------------------------------------------------------------------------------------------------------------
TOTAL FOOD & BEVERAGE 241.4 10.4% 189.4 7.5% (117.2) -5.1%
- ----------------------------------------------------------------------------------------------------------------
TELEPHONE 209.7 52.2% 230.6 53.5% 268.5 66.0%
GIFTSHOP 0.0 0.0% 0.0 0.0% 0.0 0.0%
OTHER 1,707.2 58.6% 1,665.3 57.1% 1,781.2 59.3%
- ----------------------------------------------------------------------------------------------------------------
TOTAL DEPART. PROFITS 6,995.9 56.8% 6,983.5 55.0% 6,630.9 54.4%
- ----------------------------------------------------------------------------------------------------------------
DEDUCTIONS FROM INCOME:
- ----------------------------------------------------------------------------------------------------------------
ADMIN & GENERAL 1,090.1 8.8% 1,288.9 10.2% 1,379.6 11.3%
CREDIT CARD COMMISSIONS 221.3 1.8% 209.4 1.6% 201.7 1.7%
MANAGEMENT FEE 246.4 2.0% 253.9 2.0% 243.5 2.0%
ROYALTIES 0.0 0.0% 0.0 0.0% 0.2 0.0%
ADVERTISING & SALES 717.2 5.8% 912.8 7.2% 905.4 7.4%
PREFERRED GUESTS 0.0 0.0% 0.0 0.0% 0.0 0.0%
REPAIRS & MAINTENANCE 1,044.0 8.5% 1,082.5 8.5% 954.6 7.8%
UTILITIES 550.1 4.5% 501.1 3.9% 523.3 4.3%
- ----------------------------------------------------------------------------------------------------------------
TOTAL DEDUCTIONS 3,869.1 31.4% 4,248.6 33.5% 4,208.3 34.6%
- ----------------------------------------------------------------------------------------------------------------
HOUSE PROFIT 3,126.7 25.4% 2,734.9 21.5% 2,422.6 19.9%
- ----------------------------------------------------------------------------------------------------------------
OTHER DEDUCTIONS:
- ----------------------------------------------------------------------------------------------------------------
TOTAL INSURANCE 381.9 3.1% 391.9 3.1% 391.5 3.2%
TOTAL TAXES 509.2 4.1% 515.3 4.1% 499.0 4.1%
TOTAL LEASES 90.1 0.7% 102.6 0.8% 100.7 0.8%
INCENTIVE MGMT FEES 0.0 0.0% 0.0 0.0% 0.0 0.0%
OTHER DEDUCTIONS 87.3 0.7% 98.0 0.8% 112.7 0.9%
- ----------------------------------------------------------------------------------------------------------------
TOTAL OTHER DEDUCTIONS 1,068.5 8.7% 1,107.8 8.7% 1,103.9 9.1%
- ----------------------------------------------------------------------------------------------------------------
NET OPERATING INCOME 2,058.3 16.7% 1,627.1 12.8% 1,318.7 10.8%
- ----------------------------------------------------------------------------------------------------------------
DEPRECIATION & AMORT 0.0 0.0% 0.0 0.0% 0.0 0.0%
- ----------------------------------------------------------------------------------------------------------------
NET INCOME 2,058.3 16.7% 1,627.1 12.8% 1,318.7 10.8%
================================================================================================================
Rooms Rate Rooms Rate Rooms Rate
- ----------------------------------------------------------------------------------------------------------------
ROOMS SOLD - TRANSIENT 17,214 $252.04 19,438 $246.20 19,878 $234.70
ROOMS SOLD - PACKAGE 692 $134.17 986 $123.97 1,176 $119.55
ROOMS SOLD - GROUP 10,861 $193.59 11,062 $161.84 9,515 $158.96
ROOMS SOLD - BASE 972 $115.51 736 $106.32 708 $125.61
ROOMS SOLD - GNS 208 $208.18 200 $227.78 223 $278.17
- ----------------------------------------------------------------------------------------------------------------
ROOMS SOLD - NON-REV. 1,288 1,148 2,241
- ----------------------------------------------------------------------------------------------------------------
TOTAL REV. OCC. ROOMS 29,947 $223.38 32,422 $210.41 31,500 $205.38
TOTAL ROOMS OCCUPIED 31,235 $214.17 33,570 $203.22 33,741 $191.74
- ----------------------------------------------------------------------------------------------------------------
TOTAL AVAILABLE ROOMS 80,154 80,154 82,125
================================================================================================================
</TABLE>
GM________ RM/DIR OPS_________ DIR F&B__________ DOS_______ CONTROLLER_________
<PAGE>
<TABLE>
<CAPTION>
=======================================================================================================================
INTERSTATE HOTELS CORPORATION ANNUAL FORECAST REPORT
24-Jun-96 WHITE ELEPHANT RESORT
10:45 AM
ACTUAL: JANUARY TO MAY FORECAST JUNE TO DECEMBER
=======================================================================================================================
JANUARY
- -----------------------------------------------------------------------------------------------------------------------
DESCRIPTION ACT/FOR % BUDGET % LYA %
=======================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
REVENUE OCCUPANCY % -0.1% 0.0% 4.1%
REVPAR ($0.02) $0.00 $2.38
AVERAGE ROOM RATE $17.71 $0.00 $57.54
=======================================================================================================================
GROSS OPERATING REVENUES
- -----------------------------------------------------------------------------------------------------------------------
ROOMS (0.1) -0.6% 0.0 0.0% 16.6 24.5%
- -----------------------------------------------------------------------------------------------------------------------
FOOD & BEVERAGE:
- -----------------------------------------------------------------------------------------------------------------------
OUTLET FOOD (0.4) -2.0% 0.9 3.7% 17.9 26.3%
CATERING FOOD 0.0 0.0% 0.0 0.0% (0.1) -0.2%
OUTLET BEVERAGE 0.0 0.1% 0.0 0.0% 7.7 11.4%
CATERING BEVERAGE 0.0 0.0% 0.0 0.0% 0.4 0.6%
CATERING OTHER REV 0.0 0.0% 0.0 0.0% 0.1 0.1%
HONOR BAR 0.0 0.0% 0.0 0.0% 0.0 0.0%
- -----------------------------------------------------------------------------------------------------------------------
TOTAL FOOD & BEVERAGE (0.4) -1.8% 0.9 3.7% 26.0 38.2%
- -----------------------------------------------------------------------------------------------------------------------
TELEPHONE 0.8 3.5% 0.0 0.0% 4.5 6.6%
GIFTSHOP 0.0 0.0% 0.0 0.0% 0.0 0.0%
OTHER 22.0 98.9% 23.3 96.3% 20.8 30.6%
- -----------------------------------------------------------------------------------------------------------------------
TOTAL OPERATING REVENUE 22.2 100.0% 24.2 100.0% 67.9 100.0%
- -----------------------------------------------------------------------------------------------------------------------
DEPARTMENTAL PROFITS
- -----------------------------------------------------------------------------------------------------------------------
ROOMS (36.8) 29655.6% (33.1) 0.0% (22.2) -133.5%
- -----------------------------------------------------------------------------------------------------------------------
FOOD (29.3) 6663.0% (20.7) -2332.1% (29.3) -164.7%
BEVERAGE (2.5) 0.0% (1.9) 0.0% (6.2) -75.6%
- -----------------------------------------------------------------------------------------------------------------------
TOTAL FOOD & BEVERAGE (31.8) 7770.2% (22.6) -2547.0% (35.5) -136.7%
- -----------------------------------------------------------------------------------------------------------------------
TELEPHONE (7.9) -1019.6% (9.9) 0.0% (1.2) -26.2%
GIFTSHOP 0.0 0.0% 0.0 0.0% 0.0 0.0%
OTHER 0.3 1.6% 3.1 13.2% 4.9 23.5%
- -----------------------------------------------------------------------------------------------------------------------
TOTAL DEPART. PROFITS (76.1) -342.2% (62.5) -258.1% (54.0) -79.5%
- -----------------------------------------------------------------------------------------------------------------------
DEDUCTIONS FROM INCOME:
- -----------------------------------------------------------------------------------------------------------------------
ADMIN & GENERAL 72.4 325.4% 71.8 296.2% 84.6 124.6%
CREDIT CARD COMMISSIONS 5.1 23.1% 0.4 1.7% 2.0 2.9%
MANAGEMENT FEE 0.4 2.0% 0.5 2.0% 1.3 1.9%
ROYALTIES 0.0 0.0% 0.0 0.0% 0.0 0.0%
ADVERTISING & SALES 42.2 189.6% 41.6 171.8% 33.2 48.9%
PREFERRED GUESTS 0.0 0.0% 0.0 0.0% 0.0 0.0%
REPAIRS & MAINTENANCE 59.5 267.6% 82.0 338.3% 49.9 73.5%
UTILITIES 16.7 74.9% 14.0 57.6% 45.2 66.6%
- -----------------------------------------------------------------------------------------------------------------------
TOTAL DEDUCTIONS 196.4 882.7% 210.2 867.6% 216.2 318.5%
- -----------------------------------------------------------------------------------------------------------------------
HOUSE PROFIT (272.5) -1224.9% (272.7) -1125.7% (270.2) -398.0%
- -----------------------------------------------------------------------------------------------------------------------
OTHER DEDUCTIONS:
- -----------------------------------------------------------------------------------------------------------------------
TOTAL INSURANCE 31.4 141.2% 32.7 134.8% 32.9 48.5%
TOTAL TAXES 29.9 134.4% 41.9 172.9% 29.9 44.0%
TOTAL LEASES 8.6 38.6% 8.6 35.3% 9.7 14.3%
INCENTIVE MGMT FEES 0.0 0.0% 0.0 0.0% 0.0 0.0%
OTHER DEDUCTIONS 4.3 19.1% 8.2 33.7% 0.0 0.0%
- -----------------------------------------------------------------------------------------------------------------------
TOTAL OTHER DEDUCTIONS 74.2 333.3% 91.3 376.8% 72.5 106.8%
- -----------------------------------------------------------------------------------------------------------------------
NET OPERATING INCOME (346.6) -1558.2% (364.0) -1502.5% (342.7) -504.8%
- -----------------------------------------------------------------------------------------------------------------------
DEPRECIATION & AMORT 0.0 0.0% 0.0 0.0% 0.0 0.0%
- -----------------------------------------------------------------------------------------------------------------------
NET INCOME (346.6) -1558.2% (364.0) -1502.5% (342.7) -504.8%
=======================================================================================================================
Rooms Rate Rooms Rate Rooms Rate
- -----------------------------------------------------------------------------------------------------------------------
ROOMS SOLD - TRANSIENT (1) $0.00 0 $0.00 222 $65.44
ROOMS SOLD - PACKAGE (6) $0.00 0 $0.00 15 $57.00
ROOMS SOLD - GROUP 0 $0.00 0 $0.00 52 $23.95
ROOMS SOLD - BASE 0 $0.00 0 $0.00 0 $0.00
ROOMS SOLD - GNS 0 $0.00 0 $0.00 0 $0.00
- -----------------------------------------------------------------------------------------------------------------------
ROOMS SOLD - NON-REV. 46 0 179
- -----------------------------------------------------------------------------------------------------------------------
TOTAL REV. OCC. ROOMS (7) $0.00 0 $0.00 289 $57.54
TOTAL ROOMS OCCUPIED 39 $0.00 0 $0.00 468 $35.53
- -----------------------------------------------------------------------------------------------------------------------
TOTAL AVAILABLE ROOMS 6,789 6,789 6,975
=======================================================================================================================
<CAPTION>
=======================================================================================================================
INTERSTATE HOTELS CORPORATION ANNUAL FORECAST REPORT
24-Jun-96 WHITE ELEPHANT RESORT
10:45 AM
ACTUAL: JANUARY TO MAY FORECAST JUNE TO DECEMBER
=======================================================================================================================
FEBRUARY
- -----------------------------------------------------------------------------------------------------------------------
DESCRIPTION ACT/FOR % BUDGET % LYA %
=======================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
REVENUE OCCUPANCY % 0.0% 0.0% 5.5%
REVPAR ($0.05) $0.00 $3.13
AVERAGE ROOM RATE $0.00 $0.00 $56.45
=======================================================================================================================
GROSS OPERATING REVENUES
- -----------------------------------------------------------------------------------------------------------------------
ROOMS (0.3) -1.5% 0.0 0.0% 19.7 27.5%
- -----------------------------------------------------------------------------------------------------------------------
FOOD & BEVERAGE:
- -----------------------------------------------------------------------------------------------------------------------
OUTLET FOOD 0.0 0.0% 0.0 0.0% 12.1 16.8%
CATERING FOOD (0.5) -2.1% 0.0 0.0% (0.2) -0.2%
OUTLET BEVERAGE 0.0 0.0% 0.0 0.0% 7.5 10.5%
CATERING BEVERAGE (1.8) -8.2% 0.0 0.0% 0.0 0.0%
CATERING OTHER REV 0.0 0.0% 0.0 0.0% 6.9 9.6%
HONOR BAR 0.0 0.0% 0.0 0.0% 0.0 0.0%
- -----------------------------------------------------------------------------------------------------------------------
TOTAL FOOD & BEVERAGE (2.3) -10.2% 0.0 0.0% 26.3 36.7%
- -----------------------------------------------------------------------------------------------------------------------
TELEPHONE 0.5 2.4% 0.0 0.0% 2.3 3.1%
GIFTSHOP 0.0 0.0% 0.0 0.0% 0.0 0.0%
OTHER 24.4 109.3% 26.2 100.0% 23.4 32.6%
- -----------------------------------------------------------------------------------------------------------------------
TOTAL OPERATING REVENUE 22.3 100.0% 26.2 100.0% 71.7 100.0%
- -----------------------------------------------------------------------------------------------------------------------
DEPARTMENTAL PROFITS
- -----------------------------------------------------------------------------------------------------------------------
ROOMS (39.3) 11736.7% (22.3) 0.0% (43.7) -222.1%
- -----------------------------------------------------------------------------------------------------------------------
FOOD (18.6) 0.0% (6.2) 0.0% (29.6) -157.6%
BEVERAGE (3.0) 167.3% (2.6) 0.0% (3.2) -42.6%
- -----------------------------------------------------------------------------------------------------------------------
TOTAL FOOD & BEVERAGE (21.7) 950.1% (8.8) 0.0% (32.8) -124.7%
- -----------------------------------------------------------------------------------------------------------------------
TELEPHONE (7.1) -1317.2% (9.9) 0.0% 1.7 75.7%
GIFTSHOP 0.0 0.0% 0.0 0.0% 0.0 0.0%
OTHER 6.9 28.4% 5.0 19.2% (18.3) -78.3%
- -----------------------------------------------------------------------------------------------------------------------
TOTAL DEPART. PROFITS (61.2) -274.5% (36.0) -137.5% (93.2) -130.0%
- -----------------------------------------------------------------------------------------------------------------------
DEDUCTIONS FROM INCOME:
- -----------------------------------------------------------------------------------------------------------------------
ADMIN & GENERAL 68.6 307.9% 69.5 265.5% 96.7% 134.9%
CREDIT CARD COMMISSIONS 4.3 19.3% 0.4 1.6% 1.1 1.5%
MANAGEMENT FEE 0.4 2.0% 0.5 2.0% 1.4 2.0%
ROYALTIES 0.0 0.0% 0.0 0.0% 0.0 0.0%
ADVERTISING & SALES 43.1 193.4% 49.4 188.7% 44.6 62.2%
PREFERRED GUESTS 0.0 0.0% 0.0 0.0% 0.0 0.0%
REPAIRS & MAINTENANCE 61.5 275.8% 85.1 324.9% 49.5 69.1%
UTILITIES 19.2 86.2% 16.7 63.8% 6.2 8.7%
- -----------------------------------------------------------------------------------------------------------------------
TOTAL DEDUCTIONS 197.2 884.6% 221.7 846.6% 199.5 278.4%
- -----------------------------------------------------------------------------------------------------------------------
HOUSE PROFIT (258.4) -1159.1% (257.7) -984.2% (292.7) -408.4%
- -----------------------------------------------------------------------------------------------------------------------
OTHER DEDUCTIONS:
- -----------------------------------------------------------------------------------------------------------------------
TOTAL INSURANCE 31.4 140.9% 32.7 124.7% 31.5 43.9%
TOTAL TAXES 51.5 230.9% 41.9 160.0% 29.9 41.6%
TOTAL LEASES 7.5 33.5% 8.6 32.7% 13.3 18.5%
INCENTIVE MGMT FEES 0.0 0.0% 0.0 0.0% 0.0 0.0%
OTHER DEDUCTIONS 2.8 12.7% 8.2 31.2% 0.0 0.0%
- -----------------------------------------------------------------------------------------------------------------------
TOTAL OTHER DEDUCTIONS 93.2 417.9% 91.3 348.5% 74.6 104.1%
- -----------------------------------------------------------------------------------------------------------------------
NET OPERATING INCOME (351.6) -1577.0% (349.0) -1332.7% (367.3) -512.5%
- -----------------------------------------------------------------------------------------------------------------------
DEPRECIATION & AMORT 0.0 0.0% 0.0 0.0% 0.0 0.0%
- -----------------------------------------------------------------------------------------------------------------------
NET INCOME (351.6) -1577.0% (349.0) -1332.7% (367.3) -512.5%
=======================================================================================================================
Rooms Rate Rooms Rate Rooms Rate
- -----------------------------------------------------------------------------------------------------------------------
ROOMS SOLD - TRANSIENT 0 $0.00 0 $0.00 290 $46.17
ROOMS SOLD - PACKAGE 0 $0.00 0 $0.00 39 $137.15
ROOMS SOLD - GROUP 0 $0.00 0 $0.00 20 $46.83
ROOMS SOLD - BASE 0 $0.00 0 $0.00 0 $0.00
ROOMS SOLD - GNS 0 $0.00 0 $0.00 0 $0.00
- -----------------------------------------------------------------------------------------------------------------------
ROOMS SOLD - NON-REV. 0 0 120
- -----------------------------------------------------------------------------------------------------------------------
TOTAL REV. OCC. ROOMS 0 $0.00 0 $0.00 349 $56.37
TOTAL ROOMS OCCUPIED 0 $0.00 0 $0.00 469 $41.95
- -----------------------------------------------------------------------------------------------------------------------
TOTAL AVAILABLE ROOMS 6,351 6,351 6,300
=======================================================================================================================
<CAPTION>
======================================================================================================================
INTERSTATE HOTELS CORPORATION ANNUAL FORECAST REPORT
24-Jun-96 WHITE ELEPHANT RESORT
10:45 AM
ACTUAL: JANUARY TO MAY FORECAST JUNE TO DECEBER
======================================================================================================================
MARCH
- ----------------------------------------------------------------------------------------------------------------------
DESCRIPTION ACT/FOR % BUDGET % LYA %
======================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
REVENUE OCCUPANCY % 0.0% 0.0% 11.6%
REVPAR ($0.07) $0.00 $6.68
AVERAGE ROOM RATE $0.00 $0.00 $57.56
======================================================================================================================
GROSS OPERATING REVENUES
- ----------------------------------------------------------------------------------------------------------------------
ROOMS (0.5) -2.0% 0.0 0.0% 46.6 42.8%
- ----------------------------------------------------------------------------------------------------------------------
FOOD & BEVERAGE:
- ----------------------------------------------------------------------------------------------------------------------
OUTLET FOOD (0.1) -0.3% 0.0 0.0% 12.9 11.9%
CATERING FOOD 0.0 0.0% 0.0 0.0% 5.5 5.1%
OUTLET BEVERAGE 0.0 0.0% 0.0 0.0% 13.2 12.1%
CATERING BEVERAGE 0.0 0.0% 0.0 0.0% 2.3 2.1%
CATERING OTHER REV 0.0 0.0% 0.0 0.0% 0.5 0.5%
HONOR BAR 0.0 0.0% 0.0 0.0% 0.0 0.0%
- ----------------------------------------------------------------------------------------------------------------------
TOTAL FOOD & BEVERAGE (0.1) -0.3% 0.0 0.0% 34.4 31.6%
- ----------------------------------------------------------------------------------------------------------------------
TELEPHONE 0.6 2.6% 0.0 0.0% 4.2 3.9%
GIFTSHOP 0.0 0.0% 0.0 0.0% 0.0 0.0%
OTHER 22.4 99.8% 26.3 100.0% 23.6 21.7%
- ----------------------------------------------------------------------------------------------------------------------
TOTAL OPERATING REVENUE 22.5 100.0% 26.3 100.0% 108.8 100.0%
- ----------------------------------------------------------------------------------------------------------------------
DEPARTMENTAL PROFITS
- ----------------------------------------------------------------------------------------------------------------------
ROOMS (38.2) 8370.8% (37.1) 0.0% (16.2) -34.8%
- ----------------------------------------------------------------------------------------------------------------------
FOOD (33.4) 46438.9% (28.7) 0.0% (44.9) -237.4%
BEVERAGE (5.7) 0.0% (4.5) 0.0% 3.2 20.8%
- ----------------------------------------------------------------------------------------------------------------------
TOTAL FOOD & BEVERAGE (39.1) 54297.2% (33.2) 0.0% (41.7) -121.1%
- ----------------------------------------------------------------------------------------------------------------------
TELEPHONE (8.4) -1447.6% (9.7) 0.0% (4.2) -99.0%
GIFTSHOP 0.0 0.0% 0.0 0.0% 0.0 0.0%
OTHER 2.0 9.1% 3.9 14.7% 17.5 74.2%
- ----------------------------------------------------------------------------------------------------------------------
TOTAL DEPART. PROFITS (83.6) -372.2% (76.2) -289.6% (44.6) -40.9%
- ----------------------------------------------------------------------------------------------------------------------
DEDUCTIONS FROM INCOME:
- ----------------------------------------------------------------------------------------------------------------------
ADMIN & GENERAL 72.8 323.9% 71.7 272.6% 83.5 76.7%
CREDIT CARD COMMISSIONS 7.8 34.9% 0.4 1.7% 2.0 1.8%
MANAGEMENT FEE 0.4 2.0% 0.5 2.0% 2.2 2.0%
ROYALTIES 0.0 0.0% 0.0 0.0% 0.0 0.0%
ADVERTISING & SALES 63.7 283.4% 57.3 217.8% 53.5 49.2%
PREFERRED GUESTS 0.0 0.0% 0.0 0.0% 0.0 0.0%
REPAIRS & MAINTENANCE 94.8 422.0% 96.8 368.0% 67.3 61.9%
UTILITIES 21.6 96.3% 17.3 65.8% 27.2 25.0%
- ----------------------------------------------------------------------------------------------------------------------
TOTAL DEDUCTIONS 261.2 1162.4% 244.0 927.9% 235.7 216.6%
- ----------------------------------------------------------------------------------------------------------------------
HOUSE PROFIT (344.8) -1534.6% (320.2) -1217.5% (280.3) -257.6%
- ----------------------------------------------------------------------------------------------------------------------
OTHER DEDUCTIONS:
- ----------------------------------------------------------------------------------------------------------------------
TOTAL INSURANCE 31.4 139.8% 32.7 124.2% 32.9 30.3%
TOTAL TAXES 40.7 181.0% 41.9 159.3% 59.9 55.0%
TOTAL LEASES 8.0 35.4% 8.6 32.5% 6.7 6.1%
INCENTIVE MGMT FEES 0.0 0.0% 0.0 0.0% 0.0 0.0%
OTHER DEDUCTIONS 25.4 112.9% 8.2 31.1% 41.3 37.9%
- ----------------------------------------------------------------------------------------------------------------------
TOTAL OTHER DEDUCTIONS 105.4 469.2% 91.3 347.1% 140.7 129.3%
- ----------------------------------------------------------------------------------------------------------------------
NET OPERATING INCOME (450.2) -2003.8% (411.4) -1564.6% (421.0) -386.9%
- ----------------------------------------------------------------------------------------------------------------------
DEPRECIATION & AMORT 0.0 0.0% 0.0 0.0% 0.0 0.0%
- ----------------------------------------------------------------------------------------------------------------------
NET INCOME (450.2) -2003.8% (411.4) -1564.6% (421.0) -386.9%
======================================================================================================================
Rooms Rate Rooms Rate Rooms Rate
- ----------------------------------------------------------------------------------------------------------------------
ROOMS SOLD - TRANSIENT 0 $0.00 0 $0.00 456 $60.45
ROOMS SOLD - PACKAGE 0 $0.00 0 $0.00 69 $60.98
ROOMS SOLD - GROUP 0 $0.00 0 $0.00 284 $52.10
ROOMS SOLD - BASE 0 $0.00 0 $0.00 0 $0.00
ROOMS SOLD - GNS 0 $0.00 0 $0.00 0 $0.00
- ----------------------------------------------------------------------------------------------------------------------
ROOMS SOLD - NON-REV. 0 0 148
- ----------------------------------------------------------------------------------------------------------------------
TOTAL REV. OCC. ROOMS 0 $0.00 0 $0.00 809 $57.56
TOTAL ROOMS OCCUPIED 0 $0.00 0 $0.00 957 $48.66
- ----------------------------------------------------------------------------------------------------------------------
TOTAL AVAILABLE ROOMS 6,789 6,789 6,975
======================================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
=======================================================================================================================
INTERSTATE HOTELS CORPORATION ANNUAL FORECAST REPORT
WHITE ELEPHANT RESORT
10:45 AM
24-Jun-96 ACTUAL: JANUARY TO MAY FORECAST JUNE TO DECEMBER
- -----------------------------------------------------------------------------------------------------------------------
APRIL
- -----------------------------------------------------------------------------------------------------------------------
DESCRIPTION ACT/FOR % BUDGET % LYA %
=======================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
REVENUE OCCUPANCY % 12.0% 20.8% 19.2%
REVPAR $11.28 $19.90 $17.50
AVERAGE ROOM RATE $94.14 $95.81 $91.13
=======================================================================================================================
GROSS OPERATING REVENUES
- -----------------------------------------------------------------------------------------------------------------------
ROOMS 74.1 56.3% 130.8 50.9% 118.1 49.9%
- -----------------------------------------------------------------------------------------------------------------------
FOOD & BEVERAGE:
- -----------------------------------------------------------------------------------------------------------------------
OUTLET FOOD 8.0 6.1% 23.3 9.1% 35.5 15.0%
CATERING FOOD 4.1 3.1% 30.8 12.0% 16.9 7.1%
OUTLET BEVERAGE 4.2 3.2% 11.6 4.5% 14.8 6.3%
CATERING BEVERAGE 3.5 2.6% 13.3 5.2% 12.9 5.4%
CATERING OTHER REV 1.0 0.8% 6.4 2.5% 1.9 0.8%
HONOR BAR 0.0 0.0% 0.0 0.0% 0.0 0.0%
- -----------------------------------------------------------------------------------------------------------------------
TOTAL FOOD & BEVERAGE 20.8 15.8% 85.5 33.3% 82.0 34.7%
- -----------------------------------------------------------------------------------------------------------------------
TELEPHONE 3.8 2.9% 8.2 3.2% 7.8 3.3%
GIFT SHOP 0.0 0.0% 0.0 0.0% 0.0 0.0%
OTHER 33.0 25.0% 32.2 12.6% 28.6 12.1%
- -----------------------------------------------------------------------------------------------------------------------
TOTAL OPERATING REVENUE 131.7 100.0% 256.7 100.0% 236.5 100.0%
- -----------------------------------------------------------------------------------------------------------------------
DEPARTMENTAL PROFITS
- -----------------------------------------------------------------------------------------------------------------------
ROOMS (24.1) -32.5% (0.6) -0.5% 44.0 37.2%
- -----------------------------------------------------------------------------------------------------------------------
FOOD (45.9) -349.3% (59.2) -97.7% (33.6) -61.8%
BEVERAGE (0.4) -5.0% 5.1 20.6% 10.4 37.6%
- -----------------------------------------------------------------------------------------------------------------------
TOTAL FOOD & BEVERAGE (46.3) -222.4% (54.0) -63.2% (23.1) -28.2%
- -----------------------------------------------------------------------------------------------------------------------
TELEPHONE (10.9) -285.7% (5.8) -71.4% (2.9) -36.6%
GIFT SHOP 0.0 0.0% 0.0 0.0% 0.0 0.0%
OTHER 1.6 4.9% (24.5) -75.8% 9.3 32.5%
- -----------------------------------------------------------------------------------------------------------------------
TOTAL DEPART. PROFITS (79.7) -60.5% (84.9) -33.1% 27.3 11.5%
- -----------------------------------------------------------------------------------------------------------------------
DEDUCTIONS FROM INCOME:
- -----------------------------------------------------------------------------------------------------------------------
ADMIN & GENERAL 117.5 89.2% 117.4 45.7% 135.9 57.5%
CREDIT CARD COMMISSIONS 10.4 7.9% 4.2 1.6% 10.0 4.2%
MANAGEMENT FEE 2.6 2.0% 5.1 2.0% 4.7 2.0%
ROYALTIES 0.0 0.0% 0.0 0.0% 0.0 0.0%
ADVERTISING & SALES 103.1 78.3% 118.5 46.2% 88.8 37.5%
PREFERRED GUESTS 0.0 0.0% 0.0 0.0% 0.0 0.0%
REPAIRS & MAINTENANCE 110.4 83.9% 115.3 44.9% 77.0 32.5%
UTILITIES 53.7 40.8% 21.2 8.3% 27.9 11.8%
- -----------------------------------------------------------------------------------------------------------------------
TOTAL DEDUCTIONS 397.7 302.0% 381.8 148.7% 344.4 145.6%
- -----------------------------------------------------------------------------------------------------------------------
HOUSE PROFIT (477.4) -362.5% (466.8) -181.8% (317.1) -134.0%
- -----------------------------------------------------------------------------------------------------------------------
OTHER DEDUCTIONS:
- -----------------------------------------------------------------------------------------------------------------------
TOTAL INSURANCE 31.5 23.9% 32.7 12.7% 32.9 13.9%
TOTAL TAXES 40.7 30.9% 41.9 16.3% 54.8 23.2%
TOTAL LEASES 8.6 6.5% 8.6 3.3% 3.4 1.4%
INCENTIVE MGMT FEES 0.0 0.0% 0.0 0.0% 0.0 0.0%
OTHER DEDUCTIONS 1.4 1.0% 8.2 3.2% 0.0 0.0%
- -----------------------------------------------------------------------------------------------------------------------
TOTAL OTHER DEDUCTIONS 82.2 62.4% 91.3 35.6% 91.1 38.5%
- -----------------------------------------------------------------------------------------------------------------------
NET OPERATING INCOME (559.6) -424.9% (558.1) -217.4% (408.2) -172.6%
- -----------------------------------------------------------------------------------------------------------------------
DEPRECIATION & AMORT 0.0 0.0% 0.0 0.0% 0.0 0.0%
- -----------------------------------------------------------------------------------------------------------------------
NET INCOME (559.6) -424.9% (558.1) -217.4% (408.2) -172.6%
=======================================================================================================================
Rooms Rate Rooms Rate Rooms Rate
- -----------------------------------------------------------------------------------------------------------------------
ROOMS SOLD - TRANSIENT 540 $108.73 810 $102.00 888 100.09
ROOMS SOLD - PACKAGE 35 $93.80 135 $74.00 130 $74.19
ROOMS SOLD - GROUP 207 $56.21 418 $90.82 278 $70.38
ROOMS SOLD - BASE 0 $0.00 0 $0.00 0 $0.00
ROOMS SOLD - GNS 5 $77.00 2 $102.00 0 $0.00
- -----------------------------------------------------------------------------------------------------------------------
ROOMS SOLD - NON-REV. 263 120 139
- -----------------------------------------------------------------------------------------------------------------------
TOTAL REV. OCC. ROOMS 787 $94.05 1,365 $95.81 1,296 $91.12
TOTAL ROOMS OCCUPIED 1,050 $70.49 1,485 $88.07 1,435 $82.29
- -----------------------------------------------------------------------------------------------------------------------
TOTAL AVAILABLE ROOMS 6,570 6,570 6,750
=======================================================================================================================
<CAPTION>
=======================================================================================================================
INTERSTATE HOTELS CORPORATION ANNUAL FORECAST REPORT
WHITE ELEPHANT RESORT
10:45 AM,
24-Jun-96 ACTUAL: JANUARY TO MAY FORECAST JUNE TO DECEMBER
- -----------------------------------------------------------------------------------------------------------------------
MAY
- -----------------------------------------------------------------------------------------------------------------------
DESCRIPTION ACT/FOR % BUDGET % LYA %
=======================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
REVENUE OCCUPANCY % 37.3% 43.9% 37.5%
REVPAR $60.91 $64.07 $54.93
AVERAGE ROOM RATE $163.18 $145.81 $146.41
=======================================================================================================================
GROSS OPERATING REVENUES
- -----------------------------------------------------------------------------------------------------------------------
ROOMS 413.5 60.2% 434.9 57.0% 383.1 57.6%
- -----------------------------------------------------------------------------------------------------------------------
FOOD & BEVERAGE:
- -----------------------------------------------------------------------------------------------------------------------
OUTLET FOOD 43.0 6.3% 55.1 7.2% 50.2 7.5%
CATERING FOOD 48.8 7.1% 67.6 8.9% 47.5 7.1%
OUTLET BEVERAGE 22.6 3.3% 25.3 3.3% 23.7 3.6%
CATERING BEVERAGE 14.5 2.1% 25.8 3.4% 12.9 1.9%
CATERING OTHER REV 13.1 1.9% 19.7 2.6% 25.6 3.9%
HONOR BAR 0.0 0.0% 0.0 0.0% 0.1 0.0%
- -----------------------------------------------------------------------------------------------------------------------
TOTAL FOOD & BEVERAGE 142.1 20.7% 193.5 25.3% 160.0 24.1%
- -----------------------------------------------------------------------------------------------------------------------
TELEPHONE 14.9 2.2% 25.9 3.4% 24.3 3.7%
GIFT SHOP 0.0 0.0% 0.0 0.0% 0.0 0.0%
OTHER 116.4 17.0% 108.9 14.3% 97.6 14.7%
- -----------------------------------------------------------------------------------------------------------------------
TOTAL OPERATING REVENUE 686.9 100.0% 763.2 100.0% 665.1 100.0%
- -----------------------------------------------------------------------------------------------------------------------
DEPARTMENTAL PROFITS
- -----------------------------------------------------------------------------------------------------------------------
ROOMS 235.5 56.9% 235.9 54.2% 205.7 53.0%
- -----------------------------------------------------------------------------------------------------------------------
FOOD (45.2) -43.1% (47.4) -33.3% (54.2) -43.9%
BEVERAGE 13.7 36.8% 12.8 25.1% 8.3 22.7%
- -----------------------------------------------------------------------------------------------------------------------
TOTAL FOOD & BEVERAGE (31.6) -22.2% (34.5) -17.9% (45.9) -28.7%
- -----------------------------------------------------------------------------------------------------------------------
TELEPHONE 2.1 14.1% 9.3 35.8% 6.1 25.3%
GIFT SHOP 0.0 0.0% 0.0 0.0% 0.0 0.0%
OTHER 33.9 29.1% 25.5 23.4% 51.0 52.2%
- -----------------------------------------------------------------------------------------------------------------------
TOTAL DEPART. PROFITS 239.9 34.9% 236.1 30.9% 216.9 32.6%
- -----------------------------------------------------------------------------------------------------------------------
DEDUCTIONS FROM INCOME:
- -----------------------------------------------------------------------------------------------------------------------
ADMIN & GENERAL 93.9 13.7% 113.8 14.9% 139.2 20.9%
CREDIT CARD COMMISSIONS 15.1 2.2% 12.6 1.6% 16.3 2.4%
MANAGEMENT FEE 13.8 2.0% 15.3 2.0% 13.3 2.0%
ROYALTIES 0.0 0.0% 0.0 0.0% 0.0 0.0%
ADVERTISING & SALES 77.1 11.2% 94.3 12.4% 96.9 14.6%
PREFERRED GUESTS 0.0 0.0% 0.0 0.0% 0.0 0.0%
REPAIRS & MAINTENANCE 99.3 14.5% 107.4 14.1% 143.2 21.5%
UTILITIES 59.5 8.7% 42.1 5.5% 41.8 6.3%
- -----------------------------------------------------------------------------------------------------------------------
TOTAL DEDUCTIONS 358.7 52.2% 385.5 50.5% 450.7 67.8%
- -----------------------------------------------------------------------------------------------------------------------
HOUSE PROFIT (118.8) -17.3% (149.4) -19.6% (233.8) -35.2%
- -----------------------------------------------------------------------------------------------------------------------
OTHER DEDUCTIONS:
- -----------------------------------------------------------------------------------------------------------------------
TOTAL INSURANCE 27.6 4.0% 32.7 4.3% 32.9 5.0%
TOTAL TAXES 40.7 5.9% 41.9 5.5% 39.9 6.0%
TOTAL LEASES 9.6 1.4% 8.6 1.1% 13.3 2.0%
INCENTIVE MGMT FEES 0.0 0.0% 0.0 0.0% 0.0 0.0%
OTHER DEDUCTIONS 6.7 1.0% 8.2 1.1% 3.3 0.5%
- -----------------------------------------------------------------------------------------------------------------------
TOTAL OTHER DEDUCTIONS 84.5 12.3% 91.3 12.0% 89.4 13.4%
- -----------------------------------------------------------------------------------------------------------------------
NET OPERATING INCOME (203.3) -29.6% (240.6) -31.5% (323.2) -48.6%
- -----------------------------------------------------------------------------------------------------------------------
DEPRECIATION & AMORT 0.0 0.0% 0.0 0.0% 0.0 0.0%
- -----------------------------------------------------------------------------------------------------------------------
NET INCOME (203.3) -29.6% (240.6) -31.5% (323.2) -48.6%
=======================================================================================================================
Rooms Rate Rooms Rate Rooms Rate
- -----------------------------------------------------------------------------------------------------------------------
ROOMS SOLD - TRANSIENT 1,458 $192.49 1,627 $167.00 1,599 $164.95
ROOMS SOLD - PACKAGE 86 $106.10 140 $123.00 89 $123.26
ROOMS SOLD - GROUP 883 $127.20 1,212 $119.93 924 $116.86
ROOMS SOLD - BASE 76 $131.41 0 $0.00 5 $90.00
ROOMS SOLD - GNS 31 $45.84 4 $167.00 0 $0.00
- -----------------------------------------------------------------------------------------------------------------------
ROOMS SOLD - NON-REV. 211 144 283
- -----------------------------------------------------------------------------------------------------------------------
TOTAL REV. OCC. ROOMS 2,534 $163.18 2,983 $145.81 2,617 $146.41
TOTAL ROOMS OCCUPIED 2,745 $150.64 3,127 $139.10 2,900 $132.12
- -----------------------------------------------------------------------------------------------------------------------
TOTAL AVAILABLE ROOMS 6,789 6,789 6,975
=======================================================================================================================
<CAPTION>
=======================================================================================================================
INTERSTATE HOTELS CORPORATION ANNUAL FORECAST REPORT
WHITE ELEPHANT RESORT
10:45 AM,
24-Jun-96 ACTUAL: JANUARY TO MAY FORECAST JUNE TO DECEMBER
- -----------------------------------------------------------------------------------------------------------------------
JUNE
- -----------------------------------------------------------------------------------------------------------------------
DESCRIPTION ACT/FOR % BUDGET % LYA %
=======================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
REVENUE OCCUPANCY % 72.8% 75.0% 61.4%
REVPAR $148.57 $148.59 $127.83
AVERAGE ROOM RATE $204.80 $198.02 $208.17
=======================================================================================================================
GROSS OPERATING REVENUES
- -----------------------------------------------------------------------------------------------------------------------
ROOMS 976.1 56.1% 976.2 55.9% 862.9 53.6%
- -----------------------------------------------------------------------------------------------------------------------
FOOD & BEVERAGE:
- -----------------------------------------------------------------------------------------------------------------------
OUTLET FOOD 76.3 4.4% 91.6 5.2% 86.9 5.4%
CATERING FOOD 233.1 13.4% 188.8 10.8% 195.4 12.1%
OUTLET BEVERAGE 48.0 2.8% 51.6 3.0% 47.1 2.9%
CATERING BEVERAGE 23.5 1.3% 46.7 2.7% 50.7 3.1%
CATERING OTHER REV 28.7 1.6% 37.0 2.1% 32.0 2.0%
HONOR BAR 0.0 0.0% 0.0 0.0% 1.1 0.1%
- -----------------------------------------------------------------------------------------------------------------------
TOTAL FOOD & BEVERAGE 409.6 23.5% 415.8 23.8% 413.2 25.7%
- -----------------------------------------------------------------------------------------------------------------------
TELEPHONE 49.5 2.8% 50.1 2.9% 44.1 2.7%
GIFT SHOP 0.0 0.0% 0.0 0.0% 0.0 0.0%
OTHER 304.1 17.5% 304.2 17.4% 290.5 18.0%
- -----------------------------------------------------------------------------------------------------------------------
TOTAL OPERATING REVENUE 1,739.4 100.0% 1,746.3 100.0% 1,610.7 100.0%
- -----------------------------------------------------------------------------------------------------------------------
DEPARTMENTAL PROFITS
- -----------------------------------------------------------------------------------------------------------------------
ROOMS 707.3 72.5% 702.9 72.0% 624.6 72.4%
- -----------------------------------------------------------------------------------------------------------------------
FOOD 62.8 18.6% 32.7 10.3% (14.7) -4.7%
BEVERAGE 18.4 25.7% 34.8 35.4% 45.0 45.5%
- -----------------------------------------------------------------------------------------------------------------------
TOTAL FOOD & BEVERAGE 81.2 19.8% 67.5 16.2% 30.4 7.4%
- -----------------------------------------------------------------------------------------------------------------------
TELEPHONE 27.2 54.9% 28.6 57.1% 28.7 65.0%
GIFT SHOP 0.0 0.0% 0.0 0.0% 0.0 0.0%
OTHER 163.9 53.9% 162.9 53.6% 207.8% 71.5%
- -----------------------------------------------------------------------------------------------------------------------
TOTAL DEPART. PROFITS 979.7 56.3% 962.0 55.1% 891.5 55.3%
- -----------------------------------------------------------------------------------------------------------------------
DEDUCTIONS FROM INCOME:
- -----------------------------------------------------------------------------------------------------------------------
ADMIN & GENERAL 98.7 5.7% 118.9 6.8% 144.8 9.0%
CREDIT CARD COMMISSIONS 28.7 1.6% 28.8 1.7% 21.8 1.4%
MANAGEMENT FEE 34.8 2.0% 34.9 2.0% 32.2 2.0%
ROYALTIES 0.0 0.0% 0.0 0.0% 0.0 0.0%
ADVERTISING & SALES 72.1 4.1% 100.6 5.8% 95.1 5.9%
PREFERRED GUESTS 0.0 0.0% 0.0 0.0% 0.0 0.0%
REPAIRS & MAINTENANCE 95.3 5.5% 92.8 5.3% 93.5 5.8%
UTILITIES 60.9 3.5% 67.4 3.9% 56.9 3.5%
- -----------------------------------------------------------------------------------------------------------------------
TOTAL DEDUCTIONS 390.5 22.4% 443.3 25.4% 444.3 27.6%
- -----------------------------------------------------------------------------------------------------------------------
HOUSE PROFIT 589.2 33.9% 518.6 29.7% 447.1 27.8%
- -----------------------------------------------------------------------------------------------------------------------
OTHER DEDUCTIONS:
- -----------------------------------------------------------------------------------------------------------------------
TOTAL INSURANCE 32.7 1.9% 32.7 1.9% 39.9 2.5%
TOTAL TAXES 41.9 2.4% 41.9 2.4% 39.9 2.5%
TOTAL LEASES 7.9 0.5% 8.6 0.5% 1.1 0.1%
INCENTIVE MGMT FEES 0.0 0.0% 0.0 0.0% 0.0 0.0%
OTHER DEDUCTIONS 6.7 0.4% 8.2 0.5% (0.2) 0.0%
- -----------------------------------------------------------------------------------------------------------------------
TOTAL OTHER DEDUCTIONS 89.1 5.1% 91.3 5.2% 80.6 5.0%
- -----------------------------------------------------------------------------------------------------------------------
NET OPERATING INCOME 500.1 28.8% 427.4 24.5% 366.6 22.8%
- -----------------------------------------------------------------------------------------------------------------------
DEPRECIATION & AMORT 0.0 0.0% 0.0 0.0% 0.0 0.0%
- -----------------------------------------------------------------------------------------------------------------------
NET INCOME 500.1 28.8% 427.0 24.5% 366.6 22.8%
=======================================================================================================================
Rooms Rate Rooms Rate Rooms Rate
- -----------------------------------------------------------------------------------------------------------------------
ROOMS SOLD - TRANSIENT 2,122 $246.00 2,249 $244.00 1,982 $243.32
ROOMS SOLD - PACKAGE 95 $176.00 139 $176.00 93 $176.47
ROOMS SOLD - GROUP 2,382 $173.96 2,370 $161.75 1,910 $172.76
ROOMS SOLD - BASE 162 $119.05 150 $106.32 133 $205.18
ROOMS SOLD - GNS 22 $169.00 22 $169.00 27 $256.51
- -----------------------------------------------------------------------------------------------------------------------
ROOMS SOLD - NON-REV. 145 145 225
- -----------------------------------------------------------------------------------------------------------------------
TOTAL REV. OCC. ROOMS 4,783 $204.08 4,930 $198.02 4,145 $208.17
TOTAL ROOMS OCCUPIED 4,928 $198.07 5,075 $192.36 4,370 $197.45
- -----------------------------------------------------------------------------------------------------------------------
TOTAL AVAILABLE ROOMS 6,570 6,570 6,750
=======================================================================================================================
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
CERTIFICATION OF APPRAISERS
- --------------------------------------------------------------------------------
<PAGE>
CERTIFICATION
I certify that, to the best of my knowledge and belief:
(A) The statements of fact contained in this report are true and correct.
(B) The reported analyses, opinions, and conclusions are limited only by the
reported assumptions and limiting conditions, and are my personal, unbiased
professional analyses, opinions, and conclusions.
(C) I have no present or prospective interest in the property that is the
subject of this report, and I have no personal interest or bias with
respect to the parties involved.
(D) My compensation is not contingent upon the reporting of a predetermined
value or direction in value that favors the cause of the client, the amount
of the value estimate, the attainment of a stipulated result, or the
occurrence of a subsequent event.
(E) My analyses, opinions, and conclusions were developed, and this report has
been prepared, in conformity with the Uniform Standards of Professional
Appraisal Practice.
(F) I have made a personal inspection of the property that is the subject of
this report.
(G) No one provided significant professional assistance to the person signing
this report.
(H) The real property which is the subject of this Appraisal Report was valued
as of July 31, 1996.
(I) My value conclusion as well as other opinions expressed herein are not
based on a requested minimum value, a specific value, or approval of a
loan.
(J) I certify that, to the best of my knowledge and belief, the reported
analyses, opinions and conclusions were developed, and this report has been
prepared, in conformity with the requirements of the Code of Professional
Ethics and the Standards of Professional Appraisal Practice of the
Appraisal Institute.
(K) I certify that the use of this report is subject to the requirements of the
Appraisal Institute relating to review by its duly authorized
representatives.
(L) As of the date of this report, I have completed the requirements of the
continuing education program of the Appraisal Institute.
/s/Webster A. Collins
Webster A. Collins, MAI, CRE
Mass. Cert. Gen. #265
<PAGE>
- --------------------------------------------------------------------------------
ASSUMPTIONS AND LIMITING CONDITIONS
- --------------------------------------------------------------------------------
<PAGE>
ASSUMPTIONS AND LIMITING CONDITIONS
In preparing this appraisal report, it has been assumed by the appraiser:
That the title of the property is marketable;
That the property description as furnished is correct;
That no responsibility is assumed for legal matters, especially those
affecting the title of the property;
That the property is appraised as if free and clear of any liens and
encumbrances except as noted herein;
That the information and opinions identified in this report are
reliable, although the appraiser can assume no responsibility for
their accuracy;
That the exhibits included in this report are provided solely for the
purpose of assisting the reader in visualizing the property and
understanding the information presented, and that no
responsibility is assumed in connection with the exhibits;
That normal access to the site is a prerequisite for the estimate of
value cited herein;
That the possession of this report, or a copy thereof, does not carry
with it the right of publication, nor may it be used for any
purpose without the previous written consent of the appraiser and
the owner of the property, and in any event only with proper
qualification;
That the value estimated in this report represents the value of the
property in the ordinary course of business and under stable
market conditions and not on a forced liquidation basis;
That the distribution of the total valuation in this report applies
only to the existing utilization of the land; and that separate
valuations must not be used in conjunction with any other
appraisal and are invalid if so used;
<PAGE>
Page 2
Assumptions and Limiting Conditions
- ----------------------------------------------
That unless otherwise stated in this report, the existence of
hazardous material, which may or may not be present on the
property, was not observed by the appraiser. The appraiser has no
knowledge of the existence of such materials on or in the
property. The appraiser, however, is not qualified to detect such
substances. the present of substances such as asbestos,
ureaformaldehyde foam insulation, or other potentially hazardous
materials may affect the value of the property. The value
estimate is predicated on the assumption that there is no such
material on or in the property that would cause a loss in value.
No responsibility is assumed for any such conditions, or for any
expertise or engineering knowledge required to discover them. The
client is urged to retain an expert in this field, if desired;
The Americans with Disabilities Act ("ADA") became effective January
26, 1992. The appraiser has not made a specific compliance survey
and analysis of this property to determine whether or not it is
in conformity with the various detailed requirements of the ADA.
It is possible that a compliance survey of the property, together
with a detailed analysis of the requirements of the ADA could
reveal that the property is not in compliance with one or more of
the requirements of the Act. If so, this fact could have a
negative effect upon the value of the property. Since the
appraiser has no direct evidence relating to this issue, the
appraiser did not consider possible non-compliance with the
requirements of ADA in estimating the value of the property.
And that, as the author is governed by the ethics of the Appraisal
Institute, this report is subject to review at any time by the
Appraisal Institute.
<PAGE>
- --------------------------------------------------------------------------------
QUALIFICATIONS OF APPRAISERS
- --------------------------------------------------------------------------------
<PAGE>
WHITTIER
PARTNERS
A Whittier Partners Group Company
155 Federal Street, Boston, Massachusetts 02110
Tel. 617-482-6000 Fax 617-482-5509
Established 1900
WEBSTER A. COLLINS
Webster A. Collins, Executive Vice President and Partner, P.C. of Whittier
Partners is a real estate appraiser, real estate counselor, and specialist in
the sale of investment property. His experience extends over a period of thirty
years and includes analysis of over 12.0 billion dollars in property.
Mr. Collins is Co-managing partner of the firm's Consulting and Valuation Group,
and Member of Whittier Partners' Management Committee.
Appraisal
- ---------
When completing an appraisal, each assignment will counsel the client on issues
of value, market forces, and alternatives or unique aspects that may impact a
property. Specific appraisal assignments completed include:
Fan Pier Litigation - Part of the valuation team representing
HBC Associates (Pritzker family) on
breach of contract suit involving a
3,263,000 square foot development.
Copley Place - A $520,000,000 mixed-use hotel, office,
retail and housing complex in Copley
Square.
53 State Street - A 40-story, 1,100,000 square foot, high
rise office building.
Sherburne Associates - A 160-property appraisal assignment
representing 50% of the commercial
property on Nantucket.
Prudential Center - The taking of a portion of this
mixed-use, 4,500,000 square foot
property for expansion of the Hynes
Auditorium.
Northeast Savings/Rhode Island
Depositors and Economic
Protection Corporation - Completion of what is believed to be the
largest single commercial appraisal
assignment in New England involving 873
properties.
New England's Largest Commercial Real Estate Services Company
-------------------------------------
In Connecticut: Farley Whittier Partners o Hartford, Connecticut
Tel. 860-525-9171
<PAGE>
Webster A. Collins - Page Two
Although his experience is primarily in New England, he has completed
assignments throughout the United States. He is a member of and represents the
firm as part of Valuation Network, Inc. (VNI), a nationwide consortium of
appraisal and consulting firms. He served as National President of VNI for
1991-1992.
He has developed a specific expertise on Nantucket Island. Over 4,000 acres of
land out of a total area approximating 30,000 acres have been appraised.
He is a member of The Appraisal Institute (MAI) and is a Past President of the
New England Chapter. He has appraised over 50 million square feet of office
space, over 30 million square feet of industrial space, over 15 million square
feet of retail, over 20,000 apartment units, and over 4,000 hotel rooms. He is a
licensed and certified real estate appraiser. He holds appraisal licenses in:
Massachusetts, New Hampshire, Rhode Island, Maine, Connecticut, and Arizona.
Real Estate Counseling
- ----------------------
Real estate counseling is a separate discipline which offers advisory services
on a wide range of real estate issues. Examples of services provided by Mr.
Collins include:
-- Market studies including supply and demand analysis -- He called the
1979 and 1987 Boston office market turns.
-- Feasibility studies -- He completed the feasibility studies for the
IBM Building in Waltham and the re-use alternatives of Fenway Park for
the Boston Red Sox.
-- Advice on corporate real estate programs -- He advised on the Arthur
D. Little leveraged buy-out.
-- Air rights leases and ground leases -- Copley Place is built on air
rights where Mr. Collins served as advisor to the ownership.
-- Tenant representation to negotiate office or industrial leases -- He
has advised on over one million square feet of lease negotiations.
-- Real estate tax abatements -- Involvement includes downtown high-rise
and suburban office buildings, shopping centers, hotels, and
apartments.
-- Rehabilitation studies and development consulting -- He advised and
implemented the Paine Office Building and 711 Atlantic Avenue
rehabilitations.
<PAGE>
Webster A. Collins - Page Three
-- Eminent domain -- He provided litigation support and provided expert
witness testimony on the largest taking in the history of
Massachusetts - 150 Causeway Street.
Any counseling services are undertaken based on a pre-agreed upon fee for
services. Mr. Collins is a member of the American Society of Real Estate
Counselors (CRE) and has served on their Board of Governors. He has served as
Editor of The Counselor, published by The Society; is the author of a monograph:
Office Rehabilitation: Key Ingredients for Successful Projects; and has had
articles published in The Appraisal Journal and The Journal of RTC Real Estate.
He is an instructor of professional sponsored real estate counseling courses.
He has qualified and testified as an expert witness on real estate matters on
over one hundred occasions before tribunals arbitrating disputes, courts,
Appellate Tax Boards, and federal jurisdictions. He has testified in all New
England states as well as in Georgia, Minnesota, and at the Supreme Court of the
State of New York. He is an expert on estate and gift tax matters involving
Internal Revenue Service and state taxation authorities.
Investment Sales
- ----------------
The selling of investment property is a specialty unto itself that utilizes all
aspects of a counselor's skill in analysis and negotiation. Investment sales
involves the proper buyer-seller matching that comes about only when a counselor
is able to apply the sum total of his or her years of experience.
Under a team approach, Mr. Collins, in recent years, has put together over
$150,000,000 in transactions which include:
Harbor South - A 203,000 square foot office building
Woburn Industrial Center - A 506,000 square foot, 6-building
industrial park
Inner Tech Park - A 150,000 square foot, high tech
manufacturing campus
One Marlboro Place - A 160,000 square foot research and
development building
Canton Commerce Center - A 360-acre office, research and
development park
Chemfab Home Office - A 164,000 square foot sale/leaseback
with sale of 155 acres of excess land
<PAGE>
Webster A. Collins - Page Four
Lewiston Mall - A 266,441 square foot regional shopping
mall (but not including the TJX store)
Community Involvement
- ---------------------
Mr. Collins is involved with various community activities. A summary of his
involvement includes:
o Director for twenty-two years of the Boston Five Cents Savings Bank,
now part of Citizens Financial
o New England Deaconess Hospital -- Member of Steering Committee
o Lehigh University -- Member of Business Advisory Council
o Editorial Board -- Real Estate Issues
o Director of Joseph Far & Co., Inc., Denver's largest appraisal and
consulting firm and part of director team which sold the company to
employees.
o Trustee -- Greater Boston Real Estate Board Pension Fund
o Advisor -- William S. Ballard Scholarship Fund.
o Member -- Lambda Alpha -- Honorary Land Society
Summary
- -------
In summary, the cumulative total of Mr. Collins' experience has resulted in his
completing over 3,000 reports involving over 100 million square feet of property
and since his joining the firm as a partner in 1983 being the firm's top
producer. Since 1989, Whittier Partners has presented awards for achievement.
For the past seven years, he has been awarded the "Partners' Cup" for top
production.
<PAGE>
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WHITTIER PARTNERS CONSULTING & VALUATION GROUP
- --------------------------------------------------------------------------------
<PAGE>
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WHITTIER PARTNERS GROUP
------------------------------------------------
New England's Largest Consulting and Valuation Department
Serving the needs of commercial real estate users and developers since 1900
With the combined experience of three New England offices, Whittier Partners
offers expertise in the following areas:
o VALUATION
Downtown, suburban office
Industrial
Retail
Multi-family
Land
Hotel/multi-use function
Special purpose properties
o COURT TESTIMONY
Real estate tax abatement
Eminent domain takings
Environmental litigation
o ADVISORY/COUNSELING
SERVICES
Market analysis/strategy
Repositioning/workout analysis
Acquisition/disposition due
diligence
Building redevelopment
Public/private sector representation
Portfolio review
Leveraged buy-out/merger
With six designated Members of the Appraisal Institute (MAI) and four Counselors
of Real Estate (CRE) on staff, Whittier Partners Group has the largest and most
experienced team of appraisers and consultants in New England.
Our offices are all linked electronically allowing each appraiser to capitalize
on the advantages of current, regional research capabilities.
Whittier Partners Group is affiliated with Valuation Network, Limited (VIL)
which enables us to serve the needs of national as well as international
clients.
The following is a summary of our accomplishments to date:
o DOWNTOWN BUILDINGS VALUED
50% of Boston
70% of Hartford
80% of New Haven
o SUBURBAN BUILDINGS VALUED
Majority of I-84, I-91 in CT
20% of Cambridge, Boston
Suburban MA area
o 50,000,000 SQUARE FEET OF
RETAIL SPACE APPRAISED
o 50,000 UNITS OF MULTI-
FAMILY SPACE APPRAISED
o 50,000 ACRES OF LAND VALUED
FARLEY
WHITTIER WHITTIER
PARTNERS PARTNERS
WHITTIER PARTNERS GROUP
155 Federal Street o Boston, Massachusetts 02110 o (617) 428-6000
100 Pearl Street o Hartford, Connecticut 06103 o (860) 525-9171
71 Audubon Street o New Haven, Connecticut 06510 o (203) 777-6262
http://www.whittier.com
