<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
[Fee Required]
For the fiscal year ended
December 31, 1996
or
[] Transition Report to Section 13 or 15(d) of the Securities
Exchange Act of 1934
[Fee Required]
For the transition period from ________to________
Commission File Number
33-229908-A
NORTH LENDERS, L.P.
(Exact name of Registrant as specified in its charter)
Delaware 62-1356792
(State or other Jurisdiction of (I.R.S. Employer
incorporation or organization) Identification
Number.)
One Belle Meade Place, 4400 Harding Road, Suite 500, Nashville,
Tennessee 37205
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (615) 292-1040
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange
on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
UNITS OF LIMITED PARTNERSHIP INTEREST
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the Registrant was required to file
such reports), and (2) has been subject to such filing requirements
for at least the past 90 days.
YES X NO
<PAGE>
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K (229.405 of this chapter) is
not contained herein, and will not be contained, to the best of the
registrant's knowledge, in definitive proxy of information
statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.
[X]
The aggregate sales price of the Units of Limited Partnership
Interest to non-affiliates was $5,625,000 as of February 28, 1997.
This does not reflect market value, but is the price at which these
Units of Limited Partnership Interest were sold to the public.
There is no current market for these Units.
DOCUMENTS INCORPORATED BY REFERENCE
Documents Incorporated by Reference in Part IV:
Prospectus of Registrant, dated September 1, 1988, as filed
pursuant to Rule 424(b) of the Securities and Exchange Commission.
<PAGE>
PART I
Item 1. Business
North Lenders, L.P. (the "Registrant"), is a Tennessee limited
partnership organized on June 27, 1988, pursuant to the provisions
of the Tennessee Uniform Limited Partnership Act, Chapter 2, Title
61, Tennessee Code Annotated, as amended. The general partner of
Registrant is 222 North, Ltd. On December 31, 1990, the Registrant
changed the state of domicile from Tennessee to Delaware and is now
governed by the Delaware revised Uniform Limited Partnership Act
Sections 17-101-17-1109, Title 6.
Registrant's primary business is to lend monies to North by
Northeast, Ltd. (the "Borrower") which is engaged primarily in the
business of investing in partnerships that own and operate real
estate. Registrant's investment objectives are preservation of
capital and capital appreciation through lending with a
participating interest to partnerships investing in real estate
which will appreciate through the passage of time, growth in the
surrounding areas, and the development of the properties prior to
resale.
Financial Information
The Registrant's activity is within one industry segment and
geographical area. Therefore, financial data relating to the
industry segment and geographical area is included in Item 6 -
Selected Financial Data.
Narrative Description of Business
In 1989, the Registrant issued a $4,719,375 participating
mortgage note (the "Lender Financing") maturing on December 31,
2002 to North by Northeast, Ltd., an affiliated partnership sharing
the same general partner. The principal balance accrues interest
at a simple interest rate of 10% per annum. The Registrant
receives a priority return of interest and principal, and 50% of
the "Net Revenues". Net revenues, as defined by the participating
loan agreement, represent the difference between cash proceeds
earned and the following, in this order: 1) accrued but unpaid
interest and applicable principal balances; 2) accrued preferred
return (12%) on the net offering proceeds of the Registrant; and 3)
the applicable equity balance. The Registrant has made principal
payments totalling $4,535,486, including $162,789 in 1996, leaving
a principal balance of $183,889 outstanding at December 31, 1996.
These funds together with available equity proceeds of North
by Northeast, Ltd. (the "Borrower") have enabled the Borrower to
invest in North by Northeast Land Partners (the "Land
Partnership"). The Borrower and a Trammell Crow entity (Reveille
Industrial Limited Partnership) are general partners in the Land
Partnership and each owns a 50% interest in the Land Partnership.
The Registrant has no competition because it is under
agreement with North by Northeast, Ltd. to loan all proceeds
raised, less operating reserves, to North by Northeast, Ltd.
The Registrant has no employees. Partnership administration
services are being provided under a contractual agreement with
Landmark Realty Services Corporation, an affiliate of the general
partner.
North by Northeast Land Partners
The Lender Financing is secured with a hypothecated mortgage
on the land and improvements held (Property) by the Land
Partnership. As of December 31, 1996, the Land Partnership owned
approximately 10 saleable acres of land in the Town of Fishers,
Hamilton County, just outside of Indianapolis city limits. The
property lies at the intersection of Interstate 69 and 96th Street.
The majority of the development of the Property was completed
in 1990. The construction of the NNE Boulevard extension began in
1991 and was completed in 1993. All other development on the
Property pertained to sales and included grading and other sitework
and extending roads and utilities.
The Property securing the Lender Financing continues to
encounter a significant amount of competition. The largest
competition for land sales and build-to-suit type sales is
Crosspointe, a 300-acre business park at the northwest corner of
Interstate 69 and 96th Street. In addition, Exit 5 Business Park,
two miles north of the Property has competitive land. Castleton
Business Park, one-half mile south of the Property, is the largest
competitor for leased space. The Land Partnership's Property
offers better access to purchasers and anticipated pricing is
similar.
Wal-Mart and Sam's Wholesale continue to bring heavy traffic
to the area. The widening of 96th Street to five lanes by the Town
of Fishers has also attracted many potential buyers to the area.
There is little competition within the Castleton area for the
approximately 3 acres zoned for commercial use at North By
Northeast. While a few smaller parcels are available in the
vicinity of the Castleton Square Mall, approximately 1.5 miles
southeast of the property, the majority of the undeveloped land has
occurred over the last ten years. Hence, large, zoned parcels of
vacant land are scarce. Along 96th Street near the Interstate 69
interchange, approximately 30 acres across 96th Street are under
development for retail use and will be competition for the Land
Partnership.
Item 2. Properties
The Registrant does not own any property, nor does it intend
to own any property in the future. See the above information of
North By Northeast Land Partners for a description of the property
securing the note receivable from the Borrower.
Item 3. Legal Proceedings
Registrant is not a party to, nor is the Borrower or any of
the Land Partnership's property the subject of, any material legal
proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
The security holders of Registrant did not vote on any matter
during the fiscal year covered by this report.
PART II
Item 5. Market for Registrant's Units of Limited Partnership
Interest and Related Security Holder Matters
There is no established market for the Units, and it is not
anticipated that any will exist in the future. The Registrant
commenced an offering to the public on September 1, 1988 of 5,625
Units of Limited Partnership Interests at $1,000 per Unit. This
offering was fully issued and completed on March 15, 1989. As of
February 28, 1997, there were 431 holders of record of the Units of
Limited Partnership Interest.
There were no distributions in 1996. The Registrant
distributed $1,647,728 and $2,357,954 to the partners in 1995 and
1994, rescpectively. There are no material restrictions upon
Registrant's present or future ability to make distributions in
accordance with the provisions of Registrant's Limited Partnership
Agreement.
Item 6. Selected Financial Data
For the Year Ending
December 31,
1996 1995 1994 1993 1992
Interest income $ 34,125 671,882 486,714 308,267 381,452
Net Earnings 12,604 645,840 461,181 275,618 342,052
Net Income per
Limited Partner
Unit 2.24 111.89 77.80 49.00 60.81
Total Assets 535,431 522,826 1,524,866 3,421,487 4,282,233
Note Receivable from
Affiliate 183,889 346,678 1,325,513 2,863,565 3,557,204
Distributions - 1,647,728 2,357,954 1,136,364 340,909
Distributions per
Limited Partner
Unit - 290 415 - -
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Due to the nature of the Registrant, all activity is a result
of transactions with North by Northeast, Ltd., the Borrower, and
North by Northeast Land Partners (Land Partnership), the investment
of North by Northeast, Ltd.
Sales
There were no land sales at the Land Partnership in 1996.
In 1995, the Land Partnership sold approximately 20 acres for
$3,209,564. Approximately $300,000 was retained for development
and operating expenses and the remaining $2.5 million in net
proceeds were distributed to the partners. Also in 1995, Northeast
Building IV sold its land and building, and the Borrower received
approximately $485,000, resulting in a $174,000 gain on its
original $310,000 investment.
These Land and Building partnership distributions enabled the
Borrower to make interest and principal payments on the Lender
Financing of $1.6 million in 1995.
In 1994, the Land Partnership sold approximately 43.5 acres
for $4.9 million. From these proceeds, $4.1 million was
distributed to the Borrower, and the remaining proceeds were
retained for development and operating costs. The Borrower made
interest and principal payments on the Lender Financing of $2.3
million.
Analysis of Operations
The operations of the Registrant are minimal and comparable to
prior years except for the fluctuations in interest income.
Interest income includes interest accrued on the principal balance
due from the Borrower and additional interest, if any, as defined
in Item 1. The Registrant earned additional interest of $622,696
and $239,237 in 1995 and 1994, respectively. There was no
additional interest earned in 1996. Accrued interest income has
declined through the years due to the reduction in principal
balances.
Financial Condition and Liquidity
The General Partner believes the cash and cash equivalents
balance of $249,016 at December 31, 1996 will provide sufficient
liquidity for 1997 due to the expenses of the Registrant.
<PAGE>
Item 8. Financial Statements and Supplementary Data
NORTH LENDERS,L.P.
(A Limited Partnership)
FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 1996, 1995, AND 1994
INDEX
Page
Number
Independent Auditors' Report F-1
Financial Statements
Balance Sheets F-2
Statements of Earnings F-3
Statements of Partners' Equity F-4
Statements of Cash Flows F-5
Notes to Financial Statements F-6
<PAGE>
Independent Auditors' Report
The Partners
North Lenders,L.P.:
We have audited the accompanying balance sheets of North Lenders,
L.P. (a limited partnership) as of December 31, 1996 and 1995, and
the related statements of earnings, partners' equity, and cash
flows for each of the years in the three-year period ended December
31, 1996. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of North
Lenders, L.P. at December 31, 1996 and 1995, and the results of its
operations and its cash flows for each of the years in the three-
year period ended December 31, 1996, in conformity with generally
accepted accounting principles.
As discussed in Note 1, the Partnership adopted the provisions of
Statement of Financial Accounting Standards (SFAS) No. 114,
"Accounting by Creditors for Impairment of a Loan", as amended by
SFAS No. 118, "Accounting by Creditors for Impairment of a Loan -
Income Recognition and Disclosure", in 1995.
KPMG Peat Marwick LLP
Nashville, Tennessee
January 20, 1997
F-1
<PAGE>
NORTH LENDERS, L.P.
(A Limited Partnership)
Balance Sheets
December 31, 1996 and 1995
Assets 1996 1995
Cash and cash equivalents $ 249,016 50,698
Note receivable from affiliate (note 3) 183,889 346,678
Interest receivable from affiliate (note 3) 4,585 11,186
Deferred loan costs, less accumulated
amortization of $133,309 in 1996
and $116,986 in 1995 97,941 114,264
Total assets $ 535,431 522,826
Liabilities and Partners' Equity
Accrued liabilities $ 30,816 30,816
Partners' equity:
Limited partners (5,625 units
outstanding) 504,615 492,010
General partner - -
Total partners' equity 504,615 492,010
Commitment and contingency (note 3)
Total liabilities and
partners' equity $ 535,431 522,826
See accompanying notes to financial statements.
F-2
<PAGE>
NORTH LENDERS, L.P.
(A Limited Partnership)
Statements of Earnings
Years ended December 31, 1996, 1995 and 1994
1996 1995 1994
Interest income (note 3) $ 34,125 671,882 486,714
Expenses:
Legal and accounting
fees (note 2) 4,822 7,864 7,689
General and administrative 375 1,854 1,521
Amortization 16,323 16,324 16,323
Total expenses 21,520 26,042 25,533
Net Earnings $ 12,605 645,840 461,181
Net earnings allocated to:
General partner $ - 16,478 23,579
Limited partners $ 12,605 629,362 437,602
Net earnings per
limited partner unit $ 2.24 111.89 77.80
Weighted average units
outstanding 5,625 5,625 5,625
See accompanying notes to financial statements.
F-3
<PAGE>
NORTH LENDERS, L.P.
(A Limited Partnership)
Statements of Partners' Equity
Years ended December 31, 1996, 1995 and 1994
Limited General
partners partner Total
Units Amounts
Balance at
December 31, 1993 5,625 $ 3,390,671 - 3,390,671
Distributions (note 4) - (2,334,375) (23,579)(2,357,954)
Net earnings - 437,602 23,579 461,181
_______ _______ _______ _______
Balance at
December 31, 1994 5,625 1,493,898 - 1,493,898
Distributions (note 4) - (1,631,250) (16,478)(1,647,728)
Net earnings - 629,362 16,478 645,840
_______ _______ _______ _______
Balance at
December 31, 1995 5,625 492,010 - 492,010
Net earnings - 12,605 - 12,605
_______ _______ _______ _______
Balance at
December 31, 1996 5,625 $ 504,615 - 504,615
See accompanying notes to financial statements.
F-4
<PAGE>
NORTH LENDERS, L.P.
(A Limited Partnership)
Statements of Cash Flows
Years ended December 31, 1996, 1995 and 1994
1996 1995 1994
Cash flows from operating activities:
Net earnings $ 12,605 645,840 461,181
Adjustments to reconcile net earnings
to net cash provided by
operating activities:
Amortization 16,323 16,324 16,323
Decrease in interest
receivable from affiliate 6,601 6,972 287,773
(Decrease) increase in
accrued expenses - (152) 152
Net cash provided by
operating
activities 35,529 668,984 765,429
Cash flows from investing activities -
payments received on note
receivable from affiliate 162,789 978,835 1,538,052
Cash flows from financing activities -
Distributions - (1,647,728) (2,357,954)
Net increase (decrease)
in cash and cash
equivalents 198,318 91 (54,473)
Cash and cash equivalents at
beginning of year 50,698 50,607 105,080
Cash and cash equivalents at
end of year $ 249,016 50,698 50,607
See accompanying notes to financial statements.
F-5
<PAGE>
NORTH LENDERS, L.P.
(A Limited Partnership)
Notes to Financial Statements
December 31, 1996 and 1995
(1) Summary of Significant Accounting Policies
(a) Organization
North Lenders, Ltd., a Tennessee limited partnership, was
organized on June 27, 1988 to lend monies to corporations,
partnerships, and other entities engaged primarily in the
business of owning and operating real estate. North
Lenders, Ltd. was reorganized on December 31, 1990 under
the laws of the State of Delaware and changed its name to
North Lenders, L.P. (the Partnership). The general partner
is 222 North, Ltd., and the general partners of 222 North,
Ltd. are 222 Partners, Inc., Steven D. Ezell and Michael A.
Hartley. The Partnership prepares financial statements and
Federal income tax returns on the accrual method and
includes only those assets, liabilities and results of
operations which relate to the business of the Partnership.
(b) Estimates
Management of the Partnership has made estimates and
assumptions to prepare these financial statements in
accordance with generally accepted accounting principles.
Actual results could differ from those estimates.
(c) Cash and Cash Equivalents
The Partnership considers all short-term investments with
original maturities of three months or less at the date of
purchase to be cash equivalents.
Cash belonging to the Partnership is combined in an account
with funds from other partnerships related to the general
partner.
(d) Note Receivable from Affiliate
Effective January 1, 1995, the Partnership adopted the
provisions of Statement of Financial Accounting Standards
(SFAS) No. 114, "Accounting by Creditors for Impairment of
a Loan", as amended by SFAS No. 118, "Accounting by
Creditors for Impairment of a Loan - Income Recognition and
Disclosure". The Partnership, considering current
information and events regarding the borrower's ability to
repay its obligations, considers a note to be impaired when
it is probable that the Partnership will be unable to
F-6
<PAGE>
NORTH LENDERS, L.P.
(A Limited Partnership)
Notes to Financial Statements
(1) Summary of Significant Accounting Policies (continued)
(d) Note Receivable from Affiliate (continued)
collect all amounts due according to the contractual terms
of the note agreement. When a note is considered to be
impaired, the amount of the impairment is measured based
upon the estimated fair value of the underlying collateral.
The Partnership will establish an impairment allowance for
the amount that the recorded value of the note exceeds its
estimated fair value. The impairment allowance is
established by a charge to earnings. When a note is
considered to be impaired, management ceases the accrual of
interest income. Any cash receipts on impaired notes
receivable are applied to reduce the principal amount of
such notes until the principal has been recovered and are
recognized as interest income, thereafter.
At December 31, 1996 and 1995, the Partnership has no loans
that meet the definitions of an impaired loan under SFAS
No. 114. Accordingly, the note receivable from affiliate
is recorded at cost with no allowance for impairment.
(e) Deferred Loan Costs
Deferred loan costs are amortized by the straight-line
method over the fifteen year term of the note receivable
from affiliate.
(f) Income Taxes
No provision has been made in the financial statements for
Federal income taxes, since such taxes are the
responsibilities of the partners. Annually, the partners
receive, from the partnership, IRS Form K-1's, which
provide them with their respective share of taxable income
or losses, deductions, and other tax related information.
The only significant difference between the tax basis and
reported amounts of the Partnership's assets and
liabilities relates to the recognition of interest income.
For income tax purposes, the outstanding note receivable
principal balance accrues interest at a compounded interest
rate of 6.45% per annum. It accrues interest at a 10%
simple interest rate for financial reporting and payment
purposes. This results in a book basis of the note
receivable of $183,889 and interest receivable of $4,585 at
December 31, 1996 compared to a tax basis for these assets
of $0.
F-7
<PAGE>
NORTH LENDERS, L.P.
(A Limited Partnership)
Notes to Financial Statements
(1) Summary of Significant Accounting Policies (continued)
(g) Partnership Allocations
Net profits, losses and distributions of cash flow of the
Partnership are allocated to the partners in accordance
with the Partnership agreement as follows:
Net profits are allocated first to any partner with a
negative balance in their capital account, determined at
the end of the taxable year as if the Partnership had
distributed cash flow, in proportion to the negative
capital balance account of all partners until no partner's
capital account is negative. Net profit allocations are
then made to the limited partners up to the difference
between their capital account balances and the sum of their
adjusted capital contributions (capital balance, net of
cumulative cash distributions in excess of preferred
returns - 12% annual cumulative return on capital
contributed). Any remaining net profit allocations are
then made to the limited partners until the taxable year in
which cumulative profits to the limited partners equal
their adjusted capital contribution plus an unpaid
preferred return (12% annual cumulative return on capital
contributed). Net profits are then allocated to the
general partner until the ratio of the general partner's
capital account balance to the capital account balances, in
excess of adjusted capital contributions and unpaid
preferred return, of all limited partners is 27 to 73.
Thereafter, profits are generally allocated 27% to the
general partner and 73% to the limited partners. Net
losses are allocated to the partners in proportion to their
positive capital accounts.
Partnership distributions are allocated 99% to the limited
partners and 1% to the general partner in an amount equal
to their preferred return (12% annual cumulative return on
capital contributed), 99% to the limited partners and 1% to
the general partner until the limited partners have
received an amount equal to their adjusted capital
contributions, and then 73% to the limited partners and 27%
to the general partner.
F-8
<PAGE>
NORTH LENDERS, L.P.
(A Limited Partnership)
Notes to Financial Statements
(2) Related Party Transactions
The general partner and its affiliates have been actively
involved in managing the Partnership. Affiliates of the
general partner receive fees for performing certain
services. Expenses incurred for these services in 1996,
1995 and 1994 are as follows:
1996 1995 1994
Accounting fees $ 1,800 1,500 1,500
(3) Note Receivable From Affiliate
The note receivable from affiliate represents a long-term
note receivable from North by Northeast, Ltd., an affiliate
sharing the same general partner. This note receivable
bears simple interest at 10% per annum plus "additional
interest" equal to 50% of the "net revenues". Net
revenues, as defined by the participating loan agreement,
represent the difference between cash proceeds earned and
the following: 1) accrued but unpaid interest and
applicable principal balances; 2) accrued preferred return
(12%) on the net offering proceeds of the Borrower; and 3)
the applicable equity balance. During 1995 and 1994, the
Partnership received from its affiliate $622,696 and
$239,237, respectively, of additional interest. There was
no additional interest income in 1996. The note is secured
by a mortgage on the land owned by North by Northeast Land
Partners and by a security interest in any cash reserves or
investment securities held by the debtor and North by
Northeast Land Partners. The debtor has a 50% ownership
interest in North by Northeast Land Partners. Unpaid
accrued interest and principal payments become due upon the
sale of the property or any portion thereof to the extent
cash is available, but no later than December 31, 2002.
The loan agreement permits North by Northeast Land Partners
to withhold up to 25% of the net sales proceeds for future
development costs.
F-9
<PAGE>
NORTH LENDERS, L.P.
(A Limited Partnership)
Notes to Financial Statements
(3) Note Receivable From Affiliate (continued)
Summarized information of North by Northeast, Ltd.
(Limited) and North by Northeast Land Partners (Land) at
December 31, 1996 and 1995, and for the years ended
December 31, 1996, 1995, and 1994, are presented below.
Assets
Limited Land
1996 1995 1996 1995
Cash and investments $ 29,358 42,479 230,840 485,452
Restricted cash - - 1,000 27,539
Land and improvements
held for investment - - 642,533 597,923
Investment in partnership 274,382 461,473 - -
$ 303,740 503,952 874,373 1,110,914
Liabilities and Partners' Equity
Note payable-affiliate $ 183,889 346,678 - -
Accrued interest payable 4,585 11,186 - -
Accounts payable - - 6,900 59,260
Partners' equity 115,266 146,088 867,473 1,051,654
$ 303,740 503,952 874,373 1,110,914
F-10
<PAGE>
NORTH LENDERS, L.P.
(A Limited Partnership)
Notes to Financial Statements
(3) Note Receivable From Affiliate (continued)
Operations
<TABLE>
Limited Land
<CAPTIONS>
1996 1995 1994 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Gain on sale
of land and
improvements $ - - - - 1,096,342 1,986,671
Equity in income
of partner-
ships 2,909 683,516 1,233,519 - - -
Other 1,866 4,408 8,901 83,192 363,431 35,433
------- ------- ------- ------- ------- -------
Total revenues 4,775 687,924 1,242,420 83,192 1,459,773 2,022,104
Expenses:
Interest
expense 30,610 666,663 484,264 - - -
Other
expense 4,987 9,784 9,271 77,373 96,889 120,288
------- ------- ------- ------- ------- -------
Total expenses 35,597 676,447 493,535 77,373 96,889 120,288
Net income $ (30,822) 11,477 748,885 5,819 1,362,884 1,901,816
Cash Flows
Cash (used)
provided by:
Operating
activities $ (40,332) (679,042) (772,375) (64,612) 2,816,211 3,925,024
Investing
activities 190,000 2,636,018 3,774,921 53,576 (4,152) (3,362)
Financing
activities (162,789)(1,967,705) (2,989,786) (190,000)(2,561,383)(3,774,921)
Net (decrease) increase
in cash and cash
equivalents $(13,121) (10,729) 12,760 (201,036) 250,676 146,741
</TABLE>
F-11
<PAGE>
NORTH LENDERS, L.P.
(A Limited Partnership)
Notes to Financial Statements
(4) Distributions
For the years ended December 31, 1995 and 1994, the
Partnership made distributions totaling $1,647,728 and
$2,357,954, respectively. Of these amounts, $1,631,250 ($290
per share) and $2,334,375 ($415 per share) were allocated to
the limited partners for 1995 and 1994, respectively.
Distributions to the general partner were $16,478 and
$23,579, for the years ended December 31, 1995 and 1994,
respectively. There were no distributions in 1996.
(5) Fair Value of Financial Instruments
At December 31, 1996 and 1995, the Partnership had financial
instruments including cash and cash equivalents, interest
receivable, accrued liabilities, and a note receivable. The
carrying amounts of cash and cash equivalents, interest
receivable, and accrued liabilities approximate their
estimated fair value because of the short maturity of those
financial instruments.
The determination of the estimated fair value of the note
receivable from affiliate was not practical as the note
agreement does not provide for a predictable cash payment
stream.
F-12
<PAGE>
Item 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure
None.
Part III
Item 10. Directors and Executive Officers of the Registrant
Registrant does not have any directors or officers. 222
North, Ltd. is the general partner. Steven D. Ezell, Michael A.
Hartley and 222 Partners, Inc. are the general partners of the
general partner and as such have general responsibility and
ultimate authority in matters affecting Registrant's business.
Steven D. Ezell
Steven D. Ezell, age 44, is a general partner of 222 North,
Ltd., and the President and sole shareholder of 222 Partners, Inc.
He has been an officer of 222 Partners, Inc. from September 17,
1986 through the current period. Mr. Ezell is President and 50%
owner of Landmark Realty Services Corporation. For the prior four
years, Mr. Ezell was involved in property acquisitions for Dean
Witter Realty Inc. in New York City, most recently as Senior Vice
President. Steven D. Ezell is the son of W. Gerald Ezell.
Michael A. Hartley
Michael A. Hartley, age 37, is Secretary/Treasurer and a Vice
President of 222 Partners, Inc. He has been an officer of 222
Partners, Inc. from September 17, 1986 through the current period.
Mr. Hartley is Vice President and 50% owner of Landmark Realty
Services Corporation. Prior to joining Landmark in 1986, Mr.
Hartley was Vice President of Dean Witter Realty Inc., a New York-
based real estate investment firm.
222 Partners Inc.
222 Partners, Inc. was formed in September, 1986 and serves
as general partner for several other real estate investment limited
partnerships. The directors of 222 Partners, Inc. are W. Gerald
Ezell, Steven D. Ezell, and Michael A. Hartley.
Other directors of 222 Partners, Inc. are as follows:
W.Gerald Ezell
W. Gerald Ezell, age 66, serves on the Board of Directors of
222 Partners, Inc. Until November, 1985, Mr. Ezell had been for
over 20 years an agency manager for Fidelity Mutual Life Insurance
Company and a registered securities principal of Capital Analysts
Incorporated, a wholly owned subsidiary of Fidelity Mutual Life
Insurance Company.
Item 11. Executive Compensation
During 1996, Registrant was not required to and did not pay
remuneration to any executives, partners of the general partner or
any affiliates, except as set forth in Item 13 of this report,
"Certain Relationships and Related Transactions."
The general partner does participate in the profits, losses
and distributions of the Registrant as set forth in the Partnership
Agreement.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
As of February 28, 1997 no person or "group" (as that term is
used in Section 13(d) (3) of the Securities Exchange Act of 1934)
was known by the Registrant to beneficially own more than five
percent of the units of Registrant.
As of the above date, the Registrant knew of no officers or
directors of 222 Partners, Inc. that beneficially owned any of the
units of the Registrant.
There are no arrangements known by the Registrant, the
operation of which may, at a subsequent date, result in a change in
control of the Registrant.
Item 13. Certain Relationships and Related Transactions
No affiliated entities have, for the year ending December 31,
1996, earned compensation or payments for services from the
Registrant in excess of $60,000. For a listing of all
miscellaneous transactions with affiliates which were less than
$60,000, refer to Note 2 of the notes to Financial Statements in
Item 8.
The Registrant had a note receivable balance of $183,889 and
accrued interest of $4,585 from North by Northeast, Ltd.,an
affiliated partnership, at December 31, 1996.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statements Schedules and Reports on
Form 8-K
(a) (1) Financial Statements
See Financial Statements Index in Item 8 hereof.
(2) Financial Statement Schedules
See Financial Statement Schedule Index at page 18
hereof.
(3) Exhibits
3 Amended and Restated Certificate and agreement of
Limited Partnership, incorporated by reference to
Exhibit A to the Prospectus of Registrant dated
September 1, 1988 filed pursuant to Rule 424 (b) of
the Securities and Exchange Commission.
10A Loan Agreement by and among North by Northeast,
Ltd. and the Registrant, incorporated by reference
to Exhibit 10.1 to Registrant's Form S-18
Registration Statement as filed on July 1, 1988.
10B Deed of Trust and Security Agreement by and among
North by Northeast, Ltd. and the Registrant,
incorporated by reference to Exhibit 10.2 of the
Registrant's Form S-18 Registration Statement as
filed on July 1, 1988.
10C Participating Mortgage Note of North by Northeast,
Ltd. to North Lenders, Ltd., incorporated by
reference to Exhibit 10.3 to Registrant's Form S-18
Registration Statement as filed on July 1, 1988.
22 Subsidiaries-Registrant has no subsidiaries.
27 Financial Data Schedule
(b) No reports on Form 8-K have been filed during the last
quarter of 1996.
<PAGE>
Financial Statement Schedule Filed Pursuant to Item 14(a)(2)
NORTH LENDERS, L.P.
(A Limited Partnership)
ADDITIONAL INFORMATION
FOR THE YEARS ENDED
DECEMBER 31, 1996, 1995 AND 1994
INDEX
Page
Number
Additional financial information furnished
pursuant to the requirements of Form 10-K:
Financial Statement Schedule -
Independent Auditors' Report S-1
Schedule IV - Mortgage Loans on Real Estate S-2
Financial Statements of Properties
Securing Mortgage loans -
North By Northeast Land Partners
Independent Auditors' Report 26
Balance Sheets 27
Statements of Earnings 28
Statements of Partners' Equity 29
Statements of Cash Flows 30
Notes to Financial Statements 31
North By Northeast, Ltd.
Independent Auditors' Report 39
Balance Sheets 40
Statements of Operations 41
Statements of Partners' Equity 42
Statements of Cash Flows 43
Notes to Financial Statements 44
All other Schedules have been omitted because they are
inapplicable, not required or the information is included in the
Financial Statements or notes thereto.
<PAGE>
Independent Auditors' Report
The Partners
North Lenders, L.P.:
Under date of January 20, 1997, we reported on the balance sheets
of North Lenders, L.P. as of December 31, 1996 and 1995, and the
related statements of earnings, partners' equity, and cash flows
for each of the years in the three-year period ended December 31,
1996. The financial statements and our report thereon are included
elsewhere herein. In connection with our audits of the
aforementioned financial statements, we have also audited the
related financial statement schedule as listed in the accompanying
index. This financial statement schedule is the responsibility of
the Partnership's management. Our responsibility is to express an
opinion on this financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered
in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information set
forth therein.
As discussed in Note 1, the Partnership adopted the provisions of
Statement of Financial Accounting Standards (SFAS) No. 114,
"Accounting by Creditors for Impairment of a Loan", as amended by
SFAS No. 118, "Accounting by Creditors for Impairment of a Loan -
Income Recognition and Disclosure", in 1995.
KPMG Peat Marwick LLP
Nashville, Tennessee
January 20, 1997
S-1
<PAGE>
Schedule IV
NORTH LENDERS, L.P.
(A Limited Partnership)
Mortgage Loans on Real Estate
December 31, 1996
<TABLE> Principal
amount of
loan
subject to
Carrying delin-
Face amount quent
Final Periodic amount of principal
Interest maturity payment Prior of mortgage or
Description rate date terms liens mortgage (1)(2) interest
<S>________ <C>_____ <C>_____ <C>____ <C>___ <C>_____ <C>_____ <C>_____
North by
Northeast,
Ltd., an
affiliate* 10% December Upon the $ - 5,625,000 183,889 -
31, 2002 sale of
property
</TABLE>
1996 1995 1994
____ ____ ____
(1) Balance at beginning of
period $ 346,678 1,325,513 2,863,565
Deductions - collection
of principal 162,789 978,835 1,538,052
Balance at close
of period $ 183,889 346,678 1,325,513
(2) Aggregate cost for Federal
tax purposes - - 671,870
*The note receivable from affiliate represents a $183,889 note
receivable from North by Northeast, Ltd., an affiliate sharing the
same general partner. This note receivable bears interest at 10%
per annum plus "additional interest" equal to 50% of the "net
revenues," as defined in the participating loan agreement. The
note is secured by a mortgage on the land owned by North by
Northeast Land Partners in Indianapolis, Indiana (Property) and by
a security interest in any cash reserves or investment securities
held by the debtor and North by Northeast Land Partners. Unpaid
accrued interest and principal payments become due upon the sale of
the Property or any portion thereof to the extent cash is
available, but no later than December 31, 2002. The loan agreement
permits North by Northeast Land Partners to withhold up to 25% of
the net sales proceeds for future development costs.
See accompanying independent auditors' report.
S-2
<PAGE>
Independent Auditors' Report
The Partners
North By Northeast Land Partners:
We have audited the accompanying balance sheets of North By
Northeast Land Partners (a general partnership) as of December 31,
1996 and 1995, and the related statements of earnings, partners'
equity, and cash flows for each of the years in the three-year
period ended December 31, 1996. These financial statements are the
responsibility of the Partnership's management. Our responsibility
is to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of North
By Northeast Land Partners at December 31, 1996 and 1995, and the
results of its operations and its cash flows for each of the years
in the three-year period ended December 31, 1996, in conformity
with generally accepted accounting principles.
As discussed in Note 1, the Partnership adopted the provisions of
Statement of Financial Accounting Standards (SFAS) No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to be Disposed of" on January 1, 1996.
KPMG Peat Marwick LLP
Nashville, Tennessee
January 20, 1997
<PAGE>
NORTH BY NORTHEAST LAND PARTNERS
(A General Partnership)
Balance Sheets
December 31, 1996 and 1995
Assets 1996 1995
Cash and cash equivalents (note 3) $ 230,840 431,876
Restricted cash (note 1) 1,000 27,539
Certificate of deposit - 53,576
Land and improvements held for investment
(note 3) 642,533 597,923
Total Assets $ 874,373 1,110,914
Liabilities and Partners' equity
Liabilities:
Accounts payable (note 2) $ 6,900 59,260
Total liabilities 6,900 59,260
Partners' equity:
North by Northeast, Ltd. 223,892 410,982
Reveille Industrial #3, L.P. 643,581 640,672
Total partners' equity 867,473 1,051,654
Commitment (note 3)
Total liabilities and
partners' equity $ 874,373 1,110,914
See accompanying notes to financial statements.
<PAGE>
NORTH BY NORTHEAST LAND PARTNERS
(A General Partnership)
Statements of Earnings
Years ended December 31, 1996, 1995 and 1994
1996 1995 1994
Revenues:
Sales of land and
improvements $ - 3,209,564 4,875,547
Cost of land and
improvements sold - (1,759,379) (2,532,573)
Selling expenses (note 2) - (353,843) (356,303)
Gain on sale of land and
improvements - 1,096,342 1,986,671
Other income:
Inducement fee (note 3) - 253,805 -
Common area maintenance
income 50,628 73,650 -
Interest 20,209 28,262 8,401
Rental income - - 5,139
Miscellaneous 12,355 7,714 21,893
Total other income 83,192 363,431 35,433
Total revenues 83,192 1,459,773 2,022,104
Expenses:
Partnership administration
fee (note 2) 6,000 6,000 6,000
Legal and accounting
(note 2) 29,606 19,418 11,754
Property management fees
(note 2) 6,000 6,000 6,000
Other land management fees
(note 2) 26,187 51,927 82,370
General and administrative
expenses 885 5,914 5,298
Property taxes 8,695 7,630 8,866
Total expenses 77,373 96,889 120,288
Net earnings $ 5,819 1,362,884 1,901,816
Net earnings allocated to:
North by Northeast,
Ltd. $ 2,910 687,284 1,513,444
Reveille Industrial
#3, L.P. $ 2,909 675,600 388,372
See accompanying notes to financial statements.
<PAGE>
NORTH BY NORTHEAST LAND PARTNERS
(A General Partnership)
Statements of Partners' Equity
Years ended December 31, 1996, 1995 and 1994
North By Reveille
Northeast, Industrial
Ltd. #3,L.P. Total
Balance at
December 31, 1993 $ 4,434,206 - 4,434,206
Distributions (4,085,869) - (4,085,869)
Net earnings 1,513,444 388,372 1,901,816
Balance at
December 31, 1994 1,861,781 388,372 2,250,153
Distributions (2,138,083) (423,300) (2,561,383)
Net earnings 687,284 675,600 1,362,884
Balance at
December 31, 1995 410,982 640,672 1,051,654
Distributions (190,000) - (190,000)
Net earnings 2,910 2,909 5,819
Balance at
December 31, 1996 $ 223,892 643,581 867,473
See accompanying notes to financial statements.
<PAGE>
NORTH BY NORTHEAST LAND PARTNERS
(A General Partnership)
Statements of Cash Flows
Years ended December 31, 1996, 1995 and 1994
1996 1995 1994
Cash flows from operating activities:
Net earnings $ 5,819 1,362,884 1,901,816
Adjustments to reconcile
net earnings to net cash (used)
provided by operating
activities:
Cost of land and
improvements sold - 1,759,379 2,532,573
Cost of land
improvements (44,610) (247,599) (522,834)
Decrease (increase) in
restricted cash 26,539 (27,539) -
Decrease in accounts
receivable - 2,769 24,999
(Decrease) increase in
accounts payable (52,360) (33,683) 75,020
Decrease in
revenue applicable
to future improvements - - (86,550)
Net cash (used) provided
by operating
activities (64,612) 2,816,211 3,925,024
Cash flows from investing activities
Decrease (increase) in certificate
of deposit 53,576 (4,152) (3,362)
Cash flows from financing
activities - distributions
to partners (190,000) (2,561,383) (3,774,921)
Net (decrease) increase
in cash and cash
equivalents (201,036) 250,676 146,741
Cash and cash equivalents
at beginning of year 431,876 181,200 34,459
Cash and cash equivalents
at end of year $ 230,840 431,876 181,200
<PAGE>
NORTH BY NORTHEAST LAND PARTNERS
(A General Partnership)
Statements of Cash Flows
Years ended December 31, 1996, 1995 and 1994
Supplemental Disclosure of Noncash Financing and Investing
Activities:
During 1994, the Partnership distributed to North by Northeast,
Ltd. an interest in a limited partnership investment received in a
sale of land and improvements held for investment. The limited
partnership had an estimated value of $310,948 which was the
Partnership's basis in the investment.
See accompanying notes to financial statements.
<PAGE>
NORTH BY NORTHEAST LAND PARTNERS
(A General Partnership)
Notes to Financial Statements
December 31, 1996 and 1995
(1) Summary of Significant Accounting Policies
(a) Organization
North by Northeast Land Partners (the Partnership) was
organized by North by Northeast, Ltd. and Reveille Industrial
#3 Limited Partnership (RILP), an affiliate of Trammell Crow
Company (Trammell Crow), each acting as general partners and
each owning 50% of the partnership. The Partnership was
organized on October 18, 1988 for the purpose of acquiring,
developing and selling parcels of real estate near
Indianapolis, Indiana. The Partnership prepares financial
statements and Federal income tax returns on the accrual
method and includes only these assets, liabilities, and
results of operations which relate to the Partnership.
(b) Estimates
Management of the Partnership has made estimates and
assumptions to prepare these financial statements in
accordance with generally accepted accounting principles.
Actual results could differ from those estimates.
(c) Cash and Cash Equivalents
The Partnership considers all short-term investments with
original maturities of three months or less at the date of
purchase to be cash equivalents.
Cash belonging to the Partnership is combined in an account
with funds from other partnerships related to the general
partner.
(d) Restricted Cash
At December 31, 1996 and 1995, the Partnership has restricted
cash balances of $1,000 and $27,539, respectively,
representing retainage on land improvements made to land sold.
<PAGE>
NORTH BY NORTHEAST LAND PARTNERS
(A General Partnership)
Notes to Financial Statements
(1) Summary of Significant Accounting Policies (continued)
(e) Land and Improvements Held for Investment
The Partnership acquired a tract of undeveloped land
representing approximately 169 acres. Land and improvements
held for investment is recorded at acquisition cost plus
certain carrying costs. Insurance and property taxes are
capitalized as carrying costs of the property during the
development stage of the property. Insurance and property
taxes are charged to expense once development is complete.
Revenue applicable to future improvements is deferred and
recognized as improvements are completed. Approximately 10
acres remain at December 31, 1996 and 1995.
The Partnership adopted the provisions of Statement of
Financial Accounting Standards (SFAS) No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed of" on January 1, 1996. SFAS No. 121 requires
that long-lived assets to be disposed of be reported at the
lower of the carrying amount or fair value less estimated
costs to sell. The fair value of the assets can be determined
externally, using appraisals, or internally using discounted
future net cash flows. If such assets are considered
impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the assets exceeds the
fair value of the assets less estimated costs to sell.
Impairment is recognized through the establishment of an
allowance for impairment with a corresponding charge to
operations. Losses upon the sale of the assets are charged to
the allowance. Based upon management's analysis, the
Partnership's land and improvements held for investment does
not meet the definition of impairment under SFAS No. 121.
Accordingly, land and improvements held for investment is
recorded at cost with no allowance for impairment necessary.
The adoption of SFAS No. 121 did not have an impact on the
Partnership's financial position, results of operation, or
liquidity.
<PAGE>
NORTH BY NORTHEAST LAND PARTNERS
(A General Partnership)
Notes to Financial Statements
(1) Summary of Significant Accounting Policies (continued)
(f) Income Recognition
Income from sales of land and improvements held for investment
is generally recorded on the accrual basis when the buyer's
financial commitment is sufficient to provide economic
substance to the transaction, and when other criteria of SFAS
No. 66 "Accounting for Sales of Real Estate" are satisfied.
For sales of real estate where both cost recovery is
reasonably certain and the collectibility of the contract
price is reasonably assured, but the transaction does not meet
the remaining requirements to be recorded on the accrual
basis, profit is deferred and recognized under the installment
method, which recognizes profit as collections of principal
are received. If developments subsequent to the adoption of
the installment method occur which cause the transaction to
meet the requirements of the full accrual method, the
remaining deferred profit is recognized at that time. Any
losses on sales of real estate are recognized at the time of
the sale.
(g) Income Taxes
No provision has been made in the financial statements for
Federal income taxes, since such taxes are the responsibility
the partners. The partnership is subject to a 6% state tax on
certain interest income. For the years ended December 31,
1996, 1995, and 1994, the Partnership had no state income tax
expense. Annually, the partners receive, from the
partnership, IRS Form K-1's which provides them with their
respective share of taxable income (or losses), deductions,
and other tax related information. At December 31, 1996 and
1995, there were no differences in the book and tax bases of
the Partnership's assets and liabilities.
(h) Partnership Allocations
Net profits, losses and distributions of cash flow of the
Partnership are allocated in accordance with the Partnership
agreement as follows:
Net profits are first allocated to the partners to offset any
cumulative net losses allocated to the partners, then to
offset any reductions to capital account balances caused by
<PAGE>
NORTH BY NORTHEAST LAND PARTNERS
(A General Partnership)
Notes to Financial Statements
(1) Summary of Significant Accounting Policies (continued)
prior allocations of losses. Any remaining profits are then
allocated to North by Northeast, Ltd. until the cumulative net
profits allocated to North by Northeast, Ltd. are equal to the
sum of its Preferred Return (11% of the outstanding balances
of Phase I development contributions), 10% of Phase I
development contributions, and any amounts distributed to
North by Northeast, Ltd. commencing on the date hereof and
ending on a date 90 days following the close of the fiscal
year. Any remaining profits are allocated to the partners in
proportion to their ownership interests.
Net losses are allocated first among the partners until the
cumulative losses allocated are equal to the cumulative
profits allocated to date, then among the partners in
proportion to their positive account balances. Any remaining
losses are allocated among the partners in proportion to their
ownership interests.
Partnership distributions from the cash proceeds from sales to
an affiliated venture are allocated first to pay any currently
required installments or payments of outstanding liabilities
and expenses of the Partnership which are not assumed by a
single partner or a purchaser of the project, if applicable,
and upon which either the Partnership or any partner has
personal liability, excluding capital loans, then to repay
capital loans, then to fund the construction reserve fund with
25% of cash proceeds from such sale until such fund is equal
to the total amount designated for the construction reserve
fund. Then distributions are allocated to North by Northeast,
Ltd. until North by Northeast, Ltd. has received an amount
equal to its preferred return, to the extent unpaid, then to
North by Northeast, Ltd. until North by Northeast, Ltd. has
received 110% of the sum of the then outstanding Phase I
Development Contribution. Any remaining cash distribution is
to be used to fund construction shortfall loans, together with
any interest thereon. Any remaining proceeds shall then be
divided between the partners in proportion to their ownership
interests.
Partnership distributions from the cash proceeds from sales to
a third-party venture are allocated as follows: 1) Out of the
portion of the proceeds of such sale equivalent to the
purchase price which would have been received had such
<PAGE>
NORTH BY NORTHEAST LAND PARTNERS
(A General Partnership)
Notes to Financial Statements
(1) Summary of Significant Accounting Policies (continued)
installments or payments of outstanding liabilities and
expenses of the Partnership which are not assumed by a single
partner or a purchaser of the project, if applicable, and upon
which either the Partnership or any partner has personal
liability, excluding capital loans, then to repay capital
loans, then to fund the construction reserve fund with the 25%
of cash proceeds from such sale until such fund is equal to
the total amount designated for the construction reserve fund.
Then distributions are allocated to North by Northeast, Ltd.
until North by Northeast, Ltd. has received an amount equal to
its preferred return, to the extent unpaid, then to North by
Northeast, Ltd. until North by Northeast, Ltd. has received
110% of the sum of the then outstanding Phase I Development
Contribution. Any remaining cash distribution is to be used
to fund construction shortfall loans, together with any
interest thereon. Any remaining proceeds shall then be
divided between the partners in proportion to their ownership
interests. 2) That portion of the proceeds from a sale to a
third-party venture which is equal to the third-party price
differential shall be distributed to North by Northeast, Ltd.
(and shall not apply toward the reduction of any preferred
return or return of Phase I Development Contribution). 3)
That portion of the proceeds from a sale to a third-party
venture which is in excess of the minimum purchase price for
the parcel sold as a set forth in the closing schedule shall
be divided between the partners in proportion to their
ownership interests (and shall not apply toward the reduction
of any capital loan, preferred return, return of Phase I
Development Contribution, or Construction Shortfall loan).
(i) Reclassifications
Certain prior year amounts have been reclassified to conform
with the current year presentation.
<PAGE>
NORTH BY NORTHEAST LAND PARTNERS
(A General Partnership)
Notes to Financial Statements
(2) Related Party Transactions
The general partners and their affiliates have been actively
involved in managing the Partnership. Affiliates of the
general partners receive fees and commissions for performing
certain services. Expenses incurred for these services during
1996, 1995 and 1994 are as follows:
Payee Nature of Compensation 1996 1995 1994
Landmark Realty
Services
Corp. Administration fees $ 6,000 6,000 6,000
Property management fees 6,000 6,000 6,000
Sales commissions - 45,852 100,147
Accounting fees - 800 400
Year-end accounts payable 400 400 66,875
Trammell Crow
Company
(RILP) Sales commissions - 98,556 161,980
Development costs - 7,270 -
Development fees 6,780 - -
Management fees - 56,387 74,454
(3) Land and Improvements Held for Investment
The components of land and improvements held for investment at
December 31, are as follows:
1996 1995
Land and carrying costs 342,370 342,370
Land improvements 300,163 255,553
$ 642,533 597,923
The aggregate cost for Federal income tax purposes for land
and improvements held for investment was $642,533 and $597,923
at December 31, 1996 and 1995, respectively.
(Continued)
<PAGE>
NORTH BY NORTHEAST LAND PARTNERS
(A General Partnership)
Notes to Financial Statements
(3) Land and Improvements Held for Investment (continued)
The Partnership's land and improvements held for investment
and cash and cash equivalents serve as collateral on a note
payable of North by Northeast, Ltd. to an affiliate. At
December 31, 1996 and 1995, the note had an outstanding
principal balance of $183,889 and $346,678, respectively.
Interest and principal payments become due upon the sale of
the collateral or any portion thereof to the extent cash is
available, but no later than December 31, 2002. The loan
agreement permits the Partnership to withhold up to 25% of the
net sales proceeds for future development costs.
At December 31, 1996, North by Northeast, Ltd. is committed to
contribute an additional $254,862 to the Partnership if
needed.
During the year ended December 31, 1995, one of the landowners
in the Partnership's development requested a change in its
land purchase contract to allow for additional outparcels.
Management of the Partnership negotiated and the Partnership
received a fee of $253,805 as consideration for allowing this
change.
(4) Fair Value of Financial Instruments
At December 31, 1996 and 1995, the Partnership had financial
instruments including cash and cash equivalents, restricted
cash, certificates of deposit, and accounts payable. The
carrying amounts of these financial instruments approximate
their fair value because of the short maturity of such
instruments.
<PAGE>
Independent Auditors' Report
The Partners
North By Northeast, Ltd.:
We have audited the accompanying balance sheets of North By
Northeast, Ltd. (a limited partnership) as of December 31, 1996 and
1995, and the related statements of operations, partners' equity,
and cash flows for each of the years in the three-year period ended
December 31, 1996. These financial statements are the
responsibility of the Partnership's management. Our responsibility
is to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of North
By Northeast, Ltd. at December 31, 1996 and 1995, and the results
of its operations and its cash flows for each of the years in the
three-year period ended December 31, 1996, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Nashville, Tennessee
January 20, 1997
<PAGE>
NORTH BY NORTHEAST, LTD.
(A Limited Partnership)
Balance Sheets
December 31, 1996 and 1995
Assets 1996 1995
Cash and cash equivalents (note 4) $ 29,358 42,479
Investment in land partnership
(notes 3 and 4) 274,382 461,473
Total assets $ 303,740 503,952
Liabilities and Partners' Equity
Liabilities:
Note payable to affiliate (note 4) $ 183,889 346,678
Accrued interest payable to
affiliate (note 4) 4,585 11,186
Total liabilities 188,474 357,864
Partners' equity:
Limited partners (1,875 units
outstanding) 370,784 401,606
General partner (255,518) (255,518)
Total Partners' equity 115,266 146,088
Commitment and contingency
(notes 3 and 4)
Total liabilities and
partners' equity $ 303,740 503,952
See accompanying notes to financial statements.
<PAGE>
NORTH BY NORTHEAST, LTD.
(A Limited Partnership)
Statements of Operations
Years ended December 31, 1996, 1995 and 1994
1996 1995 1994
Revenues:
Equity in income of partnerships
(note 3) $ 2,909 509,134 1,233,519
Gain on sale of partnership
(note 3) - 174,382 -
Interest income 1,866 4,408 1,607
Other income - - 7,294
Total revenues 4,775 687,924 1,242,420
Expenses:
Legal and accounting
(note 2) 4,467 8,186 7,219
General and administrative 520 1,598 2,052
Interest expense
(notes 2 and 4) 30,610 666,663 484,264
Total expenses 35,597 676,447 493,535
Net (loss) earnings $ (30,822) 11,477 748,885
Net (loss) earnings allocated to:
General Partner $ - 11,477 54,859
Limited Partners $ (30,822) - 694,026
Net (loss) earnings per
limited partner unit $ (16.44) - 370.15
Weighted average
units outstanding 1,875 1,875 1,875
See accompanying notes to financial statements.
<PAGE>
NORTH BY NORTHEAST, LTD.
(A Limited Partnership)
Statements of Partners' Equity
Years ended December 31, 1996, 1995 and 1994
Limited General
partners partner Total
Units Amounts
Balance at
December 31, 1993 1,875 $ 1,826,330 - 1,826,330
Distributions (note 5) - (1,396,875) (54,859) (1,451,734)
Net earnings - 694,026 54,859 748,885
Balance at
December 31, 1994 1,875 1,123,481 - 1,123,481
Distributions (note 5) - (721,875) (266,995) (988,870)
Net earnings - - 11,477 11,477
Balance at
December 31, 1995 1,875 401,606 (255,518) 146,088
Net loss - (30,822) - (30,822)
Balance at
December 31, 1996 1,875 $ 370,784 (255,518) 115,266
See accompanying notes to financial statements.
<PAGE>
NORTH BY NORTHEAST, LTD.
(A Limited Partnership)
Statements of Cash Flows
Years ended December 31, 1996, 1995 and 1994
1996 1995 1994
Cash flows from operating activities:
Net (loss) earnings $ (30,822) 11,477 748,885
Adjustments to reconcile
net (loss) earnings to
net cash used by
operating activities:
Equity in income
of partnerships (2,909) (509,134) (1,233,519)
Gain on sale of
partnership - (174,382) -
Decrease in accrued
interest payable
to affiliate (6,601) (6,972) (287,772)
(Decrease) increase
in accounts payable - (31) 31
Net cash used by
operating activities (40,332) (679,042) (772,375)
Cash flows from investing
activities - distributions
from partnerships 190,000 2,636,018 3,774,921
Cash flows from financing activities:
Distributions - (988,870) (1,451,734)
Payment of notes payable
to affiliates (162,789) (978,835) (1,538,052)
Net cash used by
financing activities (162,789) (1,967,705) (2,989,786)
Net (decrease)
increase in cash
and cash equivalents (13,121) (10,729) 12,760
Cash and cash equivalents
at beginning of year 42,479 53,208 40,448
Cash and cash equivalents
at end of year $ 29,358 42,479 53,208
See accompanying notes to financial statements.
<PAGE>
NORTH BY NORTHEAST, LTD.
(A Limited Partnership)
Statements of Cash Flows, Continued
Years ended December 31, 1996, 1995 and 1994
Supplemental Disclosures of Cash Flow Information:
1996 1995 1994
Cash paid during the
year for interest $ 37,211 673,635 772,036
Supplemental Disclosure of Noncash Financing and Investing
Activities:
During 1994, North by Northeast Land Partners distributed an
investment in Northeast Building IV, L.P., which had an estimated
value of $310,948, to North by Northeast, Ltd. See note 3 for
additional information.
<PAGE>
NORTH BY NORTHEAST, LTD.
(A Limited Partnership)
Notes to Financial Statements
December 31, 1996 and 1995
(1) Summary of Significant Accounting Policies
(a) Organization
North by Northeast, Ltd. (the Partnership) was organized on
June 27, 1988 to participate as a general partner in North
By Northeast Land Partners (the Land Partnership) and other
affiliated partnerships. On October 18, 1988, the Land
Partnership acquired an undeveloped tract of land in
Indianapolis, Indiana for the purpose of developing and
selling parcels of real estate. The general partner is 222
North, Ltd., whose general partners are 222 Partners, Inc.,
Steven D. Ezell and Michael A. Hartley. The Partnership
prepares financial statements and Federal income tax
returns on the accrual method and includes only those
assets, liabilities and results of operations which relate
to the business of the Partnership.
(b) Estimates
Management of the Partnership has made estimates and
assumptions to prepare these financial statements in
accordance with generally accepted accounting principles.
Actual results could differ from those estimates.
(c) Cash and Cash Equivalents
The Partnership considers all short-term investments with
original maturities of three months or less at the date of
purchase to be cash equivalents.
Cash belonging to the Partnership is combined in an account
with funds from other partnerships related to the general
partner.
(d) Investment in Partnerships
Investment in North by Northeast Land Partners (Land
Partnership) is accounted for using the equity method.
Accordingly, the Partnership's investment has been adjusted
to reflect its proportionate share of profits, losses, and
distributions. Interest incurred on notes payable
attributable to investment in the Land Partnership was
capitalized when the Land Partnership was actively
developing its land. It is currently being charged
<PAGE>
NORTH BY NORTHEAST, LTD.
(A Limited Partnership)
Notes to Financial Statements
December 31, 1996 and 1995
(1) Summary of Significant Accounting Policies (continued)
to expense as the development project is substantially
complete. Capitalized interest is amortized as land
parcels are sold on the basis of the relative sales value
of the parcels.
Investment in Northeast Building IV, L.P. was accounted for
using the cost method and was sold in 1995.
(e) Income Taxes
No provision has or will be made for Federal or state
income taxes since such taxes are the personal
responsibility of the partners. Annually, the partners
receive, from the partnership, IRS Form K-1's, which
provide them with their respective share of taxable income
or losses, deductions, and other tax related information.
There are no differences in the book and tax basis of the
Partnership's assets and liabilities.
(f) Partnership Allocations
Net profits, losses and distributions of cash flow of the
Partnership are allocated to the partners in accordance
with the Partnership agreement as follows:
Net profits are allocated first to any partner with a
negative balance in their capital account, determined at
the end of the taxable year as if the Partnership had
distributed cash flow, in proportion to the negative
capital balance account of all partners until no partner's
capital account is negative. Net profit allocations are
then made to the limited partners up to the difference
between their capital account balances and the sum of their
adjusted capital contributions (capital balance, net of
cumulative cash distributions in excess of preferred
returns - 12% annual cumulative return on capital
contributed). Any remaining net profit allocations are
then made to the limited partners until the taxable year in
which cumulative profits to the limited partners equal
their adjusted capital contribution plus an unpaid
preferred return (12% annual cumulative return on capital
contributed). Net profits are then allocated to the
general partner until the ratio of the general partner's
capital account balance to the capital account balances, in
<PAGE>
NORTH BY NORTHEAST, LTD.
(A Limited Partnership)
Notes to Financial Statements
(1) Summary of Significant Accounting Policies (continued)
excess of adjusted capital contributions and unpaid
preferred return, of all limited partners is 27 to 73.
Thereafter, profits are generally allocated 27% to the
general partner and 73% to the limited partners. Net
losses are allocated to the partners in proportion to their
positive capital accounts.
Partnership distributions are allocated 99% to the limited
partners and 1% to the general partner in an amount equal
to their preferred return (12% annual cumulative return on
capital contributed), 99% to the limited partners and 1% to
the general partner until the limited partners have
received an amount equal to their adjusted capital
contributions, and then 73% to the limited partners and 27%
to the general partner.
(2) Related Party Transactions
The general partner and its affiliates have been actively
involved in managing the investments in partnerships.
Affiliates of the general partner receive fees or
commissions for performing certain services. Compensation
paid for these services during 1996, 1995 and 1994 is as
follows:
1996 1995 1994
Accounting fees $ 1,600 1,500 1,500
(3) Investment in Partnership
The Partnership has a 50% ownership interest in North By
Northeast Land Partners, a general partnership. The
remaining 50% is owned by an unrelated affiliate of
Trammell Crow Company. Pursuant to the partnership
agreement, the Trammell Crow affiliate will provide
development supervision for the acquisition of land and
construction of improvements. At December 31, 1996,
development on the land is substantially complete.
<PAGE>
NORTH BY NORTHEAST, LTD.
(A Limited Partnership)
Notes to Financial Statements
(3) Investment in Partnership (continued)
Summarized information at December 31, 1996 and 1995 and
for the years ended December 31, 1996, 1995, and 1994, is
presented below (in thousands):
Assets 1996 1995
Cash and investments $ 231 485
Restricted cash 1 28
Land and improvements
held for investment 642 598
Total assets $ 874 1,111
Liabilities and
Partners' Equity
Accounts payable $ 7 59
Partners' equity 867 1,052
Total liabilities and partners'
equity $ 874 1,111
Operations for the Year
1996 1995 1994
Revenues:
Gain on sale of land
and improvements $ - 1,097 1,987
Other 83 363 35
Total revenues 83 1,460 2,022
Operating expenses 77 97 120
Net earnings $ 6 1,363 1,902
Cash Flows for the Year
1996 995 1994
Cash (used) provided by:
Operating activities $ (65) 2,816 3,925
Investing activities 54 (4) (3)
Financing activities (190) (2,561) (3,775)
Net (decrease) increase in cash
and cash equivalents $ (201) 251 147
<PAGE>
NORTH BY NORTHEAST, LTD.
(A Limited Partnership)
Notes to Financial Statements
(3) Investment in Partnership (continued)
A summary of activity in the Partnership's investment account
and a reconciliation of the partner's equity account on the
books of the investee and the Partnership's investment account
follows (in thousands):
1996 1995 1994
Balances, beginning of year $ 411 1,862 4,434
Net earnings allocated
to Partnership 3 687 1,514
Distributions (190) (2,138) (4,086)
Partner's equity account 224 398 1,862
Capitalized construction
period interest at year end 50 50 241
Investment in North by
Northeast Land Partners $ 274 411 2,103
The Partnership is committed to contribute an additional
$254,862 to the Land Partnership. However, due to retained
proceeds from property sales, management of the Land
Partnership does not anticipate a need for these funds.
During 1994, the Land Partnership sold 8.4 acres to Northeast
Building IV, L.P., an Indiana limited partnership, for $60,000
an acre. In exchange for the acreage sold, the Land
Partnership received an equity interest in the purchaser and
$193,292 in cash. The equity interest in the purchaser
represented a 13.644% interest in capital, 10% interest in all
operating cash flows, and upon sale or refinancing of the
building, a priority return of capital and 7.5% of any
profits. Because the Partnership's co-general partner in
North by Northeast Land Partners decided not to participate in
this investment with the Partnership, the investment was
treated as a noncash distribution from North by Northeast Land
Partners to North by Northeast, Ltd. In 1995, the
Partnership's interest was sold for net proceeds of $485,330
resulting in a gain of $174,382 which is included in the
accompanying 1995 statement of operations.
<PAGE>
NORTH BY NORTHEAST, LTD.
(A Limited Partnership)
Notes to Financial Statements
(4) Note Payable to Affiliate
The note payable to affiliate at December 31, 1996, represents
a long-term note payable to North Lenders, L.P., an affiliate
sharing the same general partner. The note incurs simple
interest at an annual rate of 10% plus "additional interest"
equal to 50% of "net revenues", as defined in the
participating loan agreement. During 1995, the Partnership
recognized $622,696 and $239,237, respectively, of "additional
interest" expense. There was no additional interest expense
in 1996. The note is secured by a mortgage on land and
improvements owned by the Land Partnership and by a security
interest in any cash reserves or investment securities held by
the Partnership. Interest and principal payments become due
upon the sale of the collateral or any portion thereof to the
extent cash is available, but no later than December 31, 2002.
The loan agreement permits the Land Partnership to withhold up
to 25% of the net sales proceeds for future development costs.
(5) Distributions
For the years ended December 31, 1995 and 1994, the
Partnership made distributions totaling $988,870 and
$1,451,734, respectively. Of these amounts, $721,875 ($385
per unit) and $1,396,875 ($745 per unit) were allocated to the
limited partners in 1995 and 1994, respectively.
Distributions to the general partner were $266,995 and
$54,859, for the years ended December 31, 1995 and 1994,
respectively. There were no distributions in 1996.
(6) Fair Value of Financial Instruments
At December 31, 1996 and 1995, the Partnership had financial
instruments including cash and cash equivalents, accrued
interest payable, and a note payable. The carrying amounts of
cash and cash equivalents, and accrued interest payable
approximate their estimated fair value because of the short
maturity of those financial instruments.
The determination of the estimated fair value of the note
payable to affiliate was not practicable as the note agreement
does not provide for a predictable cash payment stream.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
NORTH LENDERS, L.P.
By: 222 North, Ltd.
General Partner
DATE: March 27, 1997 By: /s/ Steven D. Ezell
General Partner
DATE: March 27, 1997 By: /s/ Michael A. Hartley
General Partner
By: 222 Partners, Inc.
General Partner
DATE: March 27, 1997 By: /s/ Michael A. Hartley
Secretary/Treasurer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates
indicated.
NORTH LENDERS, L.P.
By: 222 North, Ltd.
General Partner
DATE: March 27, 1997 By: /s/ Steven D. Ezell
General Partner
DATE: March 27, 1997 By: /s/ Michael A. Hartley
General Partner
By: 222 Partners, Inc.
General Partner
DATE: March 27, 1997 By: /s/ Michael A. Hartley
Secretary/Treasurer
Supplement Information to be Furnished with Reports filed
Pursuant to Section 15(d) of the Act by Registrant Which Have Not
Registered Securities Pursuant to Section 12 of the Act:
No annual report or proxy material has been sent to security
holders.
<PAGE>
Exhibits filed to Item 14(a)(3):
NORTH LENDERS, L.P.
(A Tennessee Limited Partnership)
Exhibit Index
Exhibit
3 Amended and Restated Certificate and Agreement of Limited
Partnership, incorporated by reference to Exhibit A to the
Prospectus of Registrant dated September 1, 1988 filed
pursuant to Rule 424 (b) of the Securities and Exchange
Commission.
10A Loan Agreement by and among North By Northeast, Ltd. and the
Registrant, incorporated by reference to Exhibit 10.1 to
Registrant's Form S-18 registration Statement as filed on July
1, 1988.
10B Deed of Trust and Security Agreement by and among North By
Northeast, Ltd. and the Registrant, incorporated by reference
to Exhibit 10.2 of the Registrant's Form S-18 Registration
Statement as filed on July 1, 1988.
10C Participating Mortgage Note of North By Northeast, Ltd. to
North Lenders, Ltd., incorporated by reference to Exhibit 10.3
to Registrant's Form S-18 Registration Statement as filed on
July 1, 1988.
22 Subsidiaries-Registrant has no subsidiaries.
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000835959
<NAME> NORTH LENDERS, LTD
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 249,016
<SECURITIES> 0
<RECEIVABLES> 183,889
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 535,431
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 504,615
<TOTAL-LIABILITY-AND-EQUITY> 535,431
<SALES> 0
<TOTAL-REVENUES> 34,125
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 21,521
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 12,604
<INCOME-TAX> 0
<INCOME-CONTINUING> 12,604
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,604
<EPS-PRIMARY> 2.24
<EPS-DILUTED> 2.24
</TABLE>
