<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, 1997
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
33-26327-A
RAINES ROAD, L.P.
(Exact name of Registrant as specified in its charter)
Delaware 62-1375245
(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 $1,875,000 as of February 28, 1998.
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 April 3, 1989, as filed pursuant to
Rule 424(b) of the Securities and Exchange Commission.
<PAGE>
PART I
Item 1. Business
Raines Road, L.P. ("Registrant"), is a Delaware limited
partnership organized on December 16, 1988, pursuant to the
provisions of the Delaware Revised Uniform Limited Partnership Act,
Sections 17-101-17-1109, Title 6. The General Partner of
Registrant is 222 Raines, Ltd., a Tennessee limited partnership,
whose general partners are Steven D. Ezell, Michael A. Hartley and
222 Partners, Inc.
The Registrant's primary business is to acquire, develop and
sell certain undeveloped real properties located in Memphis,
Tennessee (the "Property"). The Registrant's investment objectives
are preservation of capital and capital appreciation through the
passage of time, growth in the surrounding areas, and the
development of the Property prior to resale.
Financial Information about Industry Segments
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
At December 31, 1997, the Registrant was holding approximately
200 acres of partially developed land on Raines Road in Memphis,
Tennessee, adjacent to the Memphis International Airport. The
Property is zoned for a wide variety of light industrial,
warehouse, office-warehouse and distribution uses. All utilities,
including water, sewer, electricity and natural gas, are available
to the Property.
Phase I of the infrastructure development was completed in
1990 and included construction and improvement of Prescott Road.
The total cost was approximately $460,000. Phase II was completed
in 1992 and consists of extending Raines Road 5,000 feet from
Prescott Road through the Property to Tchulahoma Road. Phase II
also included clearing and rough-grading 168 acres of the Property
and removing 1.25 million cubic yards of dirt. The cost of Phase
II was approximately $1 million.
Phase III includes construction and improvement of Tchulahoma Road
through a portion of the Property. It is the General Partners'
intention at this time to only improve Tchulahoma Road as sites
contiguous to it are sold. The first portion of this development
is expected to cost approximately $235,000, which had been retained
from the sale proceeds.
Competition
The general partner believes that the Property provides strong
competition for purchasers or developers of land in the Memphis
Airport Area. There are a number of tracts of competitive
industrial land in the area, each offering similar pricing to
the Registrant. The general partner believes that the Property is
competitive due to its location, access and low cost to develop.
The majority of the proceeds used to purchase the Property
were from a $4,700,000 promissory note (the "Lender Financing")
maturing on December 31, 2001 to Raines Lenders, L.P. (the
"Lender"), an affiliated partnership sharing the same general
partner. The principal balance accrues interest at a simple
interest rate of 12% per annum. Prior to maturity, the Registrant
is not required to make any payments with respect to the Lender
Financing, except upon the sale, exchange or condemnation of all or
any portion of the Property. From sale proceeds, the Lender
receives a priority return of interest and principal, and 50% of
the "Net Revenues", if any. 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. From property
sales in 1990, 1991, 1994 and 1997, the cumulative applicable
principal balance due to the Lender is $1,677,707 and is payable
from future sale proceeds, after all accrued interest is paid.
The Registrant has no employees. Program management services
are being provided under a contractual agreement with Landmark
Realty Services Corporation, an affiliate of the general partner.
Item 2. Properties
As of December 31, 1997, Registrant owned approximately 203
acres of partially developed land in Memphis, Tennessee. See Item
1 above for more detailed description. Registrant is subject to a
first mortgage held by Raines Lenders, L.P., an affiliated
partnership sharing the same general partner.
Item 3. Legal Proceedings
Registrant is not a party to, nor is any of Registrant'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.
<PAGE>
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 April 3, 1989 for 1,875
Units of Limited Partnership Interests. The offering of $1,875,000
was fully subscribed on September 12, 1989. As of February 28,
1998, there were 181 holders of record of the 1,875 Units of
Limited Partnership Interests.
There were no distributions made to Unit holders during 1997
and 1996. 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, other
than the obligations to C.I.O.S. and Raines Lenders, L.P., as
described below.
Item 6. Selected Financial Data
For the Year Ended
December 31
1997 1996 1995 1994 1993
Total revenues $ 654,127 11,266 40,628 552,717 2,363
Net loss (8,627)(648,034) (678,429) (207,082) (725,252)
Net loss per
limited partner
unit (4.60) (345.62) (361.83) (110.44) (386.80)
Total assets 6,111,799 6,054,735 6,195,673 7,345,269 7,014,701
Note payable-
private - - 100,000 367,716 -
Note payable to
affiliate 4,700,000 4,700,000 4,700,000 4,700,000 4,700,000
Accrued interest
payable to
affiliate 2,524,934 2,695,434 2,131,434 2,159,600 1,617,767
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Sales
In 1997, The Registrant sold approximately 30 acres for a distribution
site. Of the $2.2 Million in sale proceeds, $1.1 Million was escrowed for
development of the sale site and adjacent land,and $734,500 was paid to The
Lender on The Lender financing.
There were no sales during 1996 and 1995.
Comparative Analysis
Except for the land sales in 1997, the overall operations of
the Registrant have not changed significantly over the last three
years, although there have been some fluctuations within accounts.
The fluctuations in interest income are due to the Registrant's
changing cash balances. Interest expense has decreased due to the
changes in principal on the note payable - private. Property tax expense has
fluctuated through the years due to city and county reassessments of the
property's value. The Registrant has worked diligently with consultants to
lower the property tax expense and has been successful in past years. The
1997 property tax expense reflects the amount billed the Registrant. These
amounts have not been paid and are under dispute. General and administrative
expenses have been restated to include consulting fees. The 1997 decrease in
general & administrative expenses is due to lower property tax consulting
fees. Loan costs were fully amortized in the second quarter of 1996
explaining the decline in amortization expense.
Financial Condition and Liquidity
At February 28, 1998, the Registrant has approximately $48,977
available in funds to cover operating expenses for 1997. Operating expenses
are primarily accounting fees which includes audit and tax, and program
management service fees. The cash reserves are expected to run low toward
the latter part of 1997. If a sale of the property occurs, then funds may be
available from sale proceeds. The General Parnter expects the Registant to
meet operational needs through affiliated loans if necessary.
In 1990, 1991, 1994, and 1997 the Registrant retained a portion
of the sale proceeds for development and operations and did not use
all the proceeds to make interest or principal payments to the
Lender. The Registrant made interest payments of $734,500, $600,000 and
$1,027,454 on the Lender financing in 1997, 1995 and 1991, respectively.
The Registrant's and Lender's joint general partner believes that using
sales proceeds for development and distributing only net available cash to
the Lender was contemplated by the loan agreement. However, the loan
agreement is ambiguous on this use of funds; therefore, this treatment could
constitute a default on the loan agreement. In such an event the Lender is
required to foreclose the loan and accelerated the amounts due. Currently,
the Lender has not foreclosed or accelerated the amounts due under the
loan agreement.
From property sales in 1990, 1991, 1994 and 1997, the cumulative
Applicable Principal balance due to the Lender is $1,677,707 and is
payable from future sale proceeds, after all accrued interest is
paid.
We have considered the impact of the Year 2000 issues on our computer
systems and applications and developed a remediation plan. We expect the
cost of upgrading computers and software to be immaterial to the Partnership.<PAGE>
Item 8. Financial Statements and Supplementary Data
RAINES ROAD, L.P.
(A Limited Partnership)
FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 1997, 1996 AND 1995
INDEX
Page
Number
Independent Auditors' Report 9
Financial Statements
Balance Sheets 10
Statements of Operations 11
Statements of Partners' Deficit 12
Statements of Cash Flows 13
Notes to Financial Statements 15
<PAGE>
Independent Auditors' Report
The Partners
Raines Road, L.P.:
We have audited the accompanying balance sheets of Raines Road,
L.P. (a limited partnership) as of December 31, 1997 and 1996, and
the related statements of operations, partners' deficit, and cash
flows for each of the years in the three-year period ended December
31, 1997. 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 Raines
Road, L.P. at December 31, 1997 and 1996, and the results of its
operations and its cash flows for each of the years in the three-
year period ended December 31, 1997, 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 30, 1998
<PAGE>
RAINES ROAD, L.P.
(A Limited Partnership)
Balance Sheets
December 31, 1997 and 1996
<TABLE>
Assets 1997 1996
<S> <C> <C>
Cash and cash equivalents (note 5) $ 98,678 41,633
Restricted cash (note 3) 380,198 156,241
Land and improvements held for investments
(notes 4 and 5) 5,632,923 5,856,861
Total assets $ 6,111,799 6,054,735
Liabilities and Partners' Deficit
Liabilities:
Note payable - affiliate (note 5) $ 4,700,000 4,700,000
Accrued interest payable to
affiliate (note 5) 2,524,934 2,695,434
Accounts payable 221,982 4,856
Accrued property taxes 60,960 41 895
Total liabilities 7,507,876 7,442,185
Partners' deficit:
Limited partners (1,875 units
outstanding) (1,396,077) (1,387,450)
General partner - -
Total partners' deficit (1,396,077) (1,387,450)
Commitments and contingencies
(notes 2,3 and 5)
Total liabilities and
partners' deficit $ 6,111,799 6,054,735
</TABLE>
See accompanying notes to financial statements.
<PAGE>
RAINES ROAD, L.P.
(A Limited Partnership)
Statements of Operations
<TABLE>
Years ended December 31, 1997, 1996 and 1995
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Revenues
Sales of land and
improvements $ 2,220,000 - -
Cost of land and
improvements sold 1,448,336 - -
Selling expenses (note 2) 142,945 - -
Gain on sales of land
and improvements 628,719 - -
Interest 25,408 11,266 40,628
Total revenues 654,127 11,266 40,628
Expenses:
Interest expense (note 5) 564,000 568,571 607,862
Property taxes 66,478 40,087 47,175
General and administrative 15,768 20,331 19,814
Legal and accounting
(note 2) 12,658 16,605 12,227
Amortization - 7,981 23,940
Land maintenance fees 850 2,725 5,039
Property management fee
(note 2) 3,000 3,000 3,000
Total expenses 662,754 659,300 719,057
Net loss $ (8,627)(648,034) (678,429)
Net loss allocated to:
General partner $ - - -
Limited partners $ ( 8,627) (648,034) (678,429)
Net loss per limited
partner unit $ (4.60) (345.62) (361.83)
Weighted average units
outstanding 1,875 1,875 1,875
</TABLE>
See accompanying notes to financial statements.
<PAGE>
RAINES ROAD, L.P.
(A Limited Partnership)
Statements of Partners' Deficit
Years ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
Limited General
partners partner Total
Units Amounts
<S> <C> <C> <C> <C>
Balance at
December 31, 1994 1,875 $ (60,987) - (60,987)
Net loss - (678,429) - (678,429)
_______ _______ _______ _______
Balance at
December 31, 1995 1,875 (739,416) - (739,416)
Net loss - (648,034) - (648,034)
_______ _________ ______ ________
Balance at
December 31, 1996 1,875 (1,387,450) - (1,387,450)
------- --------- ------ --------
Net loss - (8,627) - (8,627)
Balance at
December 31, 1997 1,875 $(1,396,077) - (1,396,077)
====== ========= ====== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
RAINES ROAD, L.P.
(A Limited Partnership)
Statements of Cash Flows
Years ended December 31, 1997, 1996 and 1995
1997 1996 1995
Cash flows from operating activities:
Net loss $ (8,627) (648,034) (678,429)
Adjustments to reconcile net
loss to net cash provided
(used) by operating activities:
Amortization - 7,981 23,940
Cost of land and improvements
held for investment (1,224,398) (635) -
Decrease in
note receivable - - 646,400
Cost of land and
improvements sold 1,448,336 - -
Decrease in accrued
interest receivable - - 7,650
Increase in
restricted cash (223,957) (554) (1,302)
(Decrease) increase in
accrued interest
payable (170,500) 561,580 (33,213)
Increase (decrease) in
accounts payable 217,126 3,621 (131,006)
Increase (decrease) in
accrued property taxes 19,065 41,895 (39,232)
Net cash provided (used)
by operating
activities 57,045 (34,146) (205,192)
Cash flows from financing activities-
Payment of note
payable-private - (100,000) (267,716)
Net increase (decrease)
in cash and cash
equivalents 57,045 (134,146) (472,908)
<PAGE>
RAINES ROAD, L.P.
(A Limited Partnership)
Statements of Cash Flows (Cont'd)
Years ended December 31, 1997, 1996 and 1995
1997 1996 1995
Cash and cash equivalents
at beginning of year 41,633 175,779 648,687
Cash and cash equivalents
at end of year $ 98,678 41,633 175,779
Supplemental Disclosures of Cash Flow Information:
Cash paid for interest $ 734,500 6,991 641,075
See accompanying notes to financial statements.
<PAGE>
RAINES ROAD, L.P.
(A Limited Partnership)
Notes to Financial Statements
December 31, 1997 and 1996
(1) Summary of Significant Accounting Policies
(a) Organization
Raines Road, L.P. (the Partnership) is a Delaware limited
partnership organized on December 16, 1988 to acquire several
contiguous, undeveloped tracts of land in Memphis, Tennessee for
the purpose of developing and selling parcels of real estate. The
General Partner is 222 Raines, Ltd., whose general partners are
Steven D. Ezell, Michael A. Hartley, and 222 Partners, Inc. The
Partnership prepares financial statements and income tax returns on
the accrual method of accounting. The financial statements include
only those assets, liabilities and results of operations which
relate to the Partnership. In the event that the Partnership has
short-term cash deficiencies, the General Partner can defer the
collection of fees for certain related party expenses or grant
interest-free loans from related parties until cash becomes
available.
(b) Estimates
Management of the Partnership has made estimates and
assumptions to prepare these financial statements in
accordance with generally accepted accounting principles.
These estimates include the determination of the
estimated fair value of the Partnership's land and
improvements in accordance with the provisions of SFAS
No. 121. 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) Land and Improvements Held for Investment
Land and improvements held for investment is recorded at
cost and includes approximately 203 and 230 acres in 1997 and
1996. Interest expense on the note payable to affiliate,
insurance and property taxes are capitalized as carrying
costs of the property during the development period.
<PAGE>
RAINES ROAD, L.P.
(A Limited Partnership)
Notes to Financial Statements
(1) Summary of Significant Accounting Policies (continued)
Costs to hold land, including interest, insurance, and
property taxes are charged to expense once the develop-
ment of the property is substantially complete. Land
improvement costs incurred and capitalized include
development costs expended subsequent to the acquisition
of a tract of land.
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 of discounted future net cash flows, the
Partnership's land and improvements held for investment
does not meet definitions of impairment under SFAS No.
121. Accordingly, land 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 operations,
or liquidity.
(e) Loan Costs
Loan costs were amortized by the straight-line method
over the two year term of the note payable.
(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 or state income taxes, since such taxes are
the responsibilities of the partners.
<PAGE>
RAINES ROAD, L.P.
(A Limited Partnership)
Notes to Financial Statements
(1) Summary of Significant Accounting Policies (continued)
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 difference
between the tax basis and reported amounts of the
Partnership's assets and liabilities relates to the
valuation of land held for investment. For income tax
purposes certain costs were capitalized as additional
land improvement costs.
(h) Partnership Allocations
Net profits, losses and distribution of cash flow of the
Partnership are allocated to the Partners in accordance
with the Partnership agreement as follows:
Partnership 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
<PAGE>
RAINES ROAD, L.P.
(A Limited Partnership)
Notes to Financial Statements
(1) Summary of Significant Accounting Policies (continued)
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.
Cumulative unpaid preferred returns are $1,912,500 and
$1,687,500 at December 31, 1997 and 1996, respectively.
(i) Reclassifications
Certain prior year amounts have been reclassified to
conform with the current year presentation.
(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 and commissions for performing
certain services. Expenses incurred for these services are as
follows:
1997 1996 1995
Accounting fees $ 2,100 2,100 1,500
Property management fee 3,000 3,000 3,000
Real estate sales commission 88,000 - -
(3) Restricted Cash
At December 31, 1997 and 1996, the Partnership had restricted
cash balances of $380,198 and $156,241, respectively, to be used to
fund property improvements consisting of road and utility work.
(4) Land and Improvements Held for Investment
The components of land and improvements held for investment at
December 31, are as follows:
1997 1996
Land and carrying costs $ 3,947,078 4,826,846
Land improvements 1,685,845 1,030,015
------- -------
$ 5,632,923 5,856,861
Aggregate cost of land and improvements held for investment for
federal income tax purposes was $7,430,492 and $7,641,267 at
December 31, 1997 and 1996, respectively.
<PAGE>
RAINES ROAD, L.P.
(A Limited Partnership)
Notes to Financial Statements
(5) Note Payable - Affiliate
The note payable to affiliate represents a $4,700,000 note
payable to Raines Lenders, L.P. (Lender), an affiliate sharing
the same General Partner. The note accrues simple interest at
an annual rate of 12% plus additional interest equal to 50% of
"net revenues", as defined in the Participating Loan
Agreement. The note is secured by a mortgage on land and
improvements held for investment by the 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, 2001.
In 1997, the Partnership sold 26.6 acres of land, receiving net
proceeds of $628,720 and paid $734,500 in interest payments to the
Lender.
Due to anticipated future requirements for additional
development and operations, the Partnership retained certain proceeds
from sales and did not pay the additional amounts of
interest and/or applicable principal balance to the Lender.
The Partnership's and Lender's joint general partner believes
that retaining sales proceeds for development and distributing
only net available cash to the Lender was contemplated by the
note agreement. However, the note agreement does not
explicitly authorize this use of funds; therefore, this
treatment could constitute a default on the note agreement.
In such an event, Lender is required to foreclose the note and
accelerate the amounts due. To date, the Lender has not
foreclosed or accelerated the amounts due under the note
agreement. At December 31, 1997 and 1996, the applicable
principal balance due to Lender is $1,677,707 and $1,229,257,
respectively.
Interest expense associated with the note payable to affiliate
in 1997, 1996, and 1995 was $564,000, $564,000, and $571,834
respectively.
<PAGE>
RAINES ROAD, L.P.
(A Limited Partnership)
Notes to Financial Statements
(6) Fair Value of Financial Instruments
At December 31, 1997 and 1996, the Partnership had financial
instruments including cash and cash equivalents, restricted
cash, accrued interest payable, accounts payable, accrued
property taxes, and notes payable. The carrying amounts of
cash and cash equivalents, restricted cash, accounts payable,
and accrued property taxes approximate their fair value
because of the short maturity of those financial instruments.
The determination of the estimated fair values of the note
payable and the related accrued interest payable to affiliate
was not practicable as the note agreement does not provide for
a predictable cash payment stream.
<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
Raines, 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.
The general partners of 222 Raines, Ltd. are as follows:
Steven D. Ezell
Steven D. Ezell, age 45, is a general partner of 222 Raines,
Ltd. He is 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 38, is a general partner of 222
Raines, Ltd. He is the 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, age 67, 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 1997, 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, 1998 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
During 1997, Landmark Realty Services Corp., an affiliate of the
Registrant, received a real estate commission of $88,000. No other affiliated
entities have earned compensation 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 to the Financial Statements
in Item 8.
The Registrant borrowed $4,700,000 from Raines Road, L.P., an
affiliated partnership, during 1989, and accrued $2,524,934 in
interest on such loan through 1997. In 1997, a $734,500 payment was
made on the accrued interest of the Lender Financing.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K
(a) (1) Financial Statements
See Financial Statements Index in Item 8. hereof.
(2) Financial Statement Schedule
See Financial Statement Schedule Index at page 19
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
April 3, 1989 filed pursuant to Rule 424(b) of
the Securities and Exchange Commission.
10A Participating Loan Agreement by and among Raines
Lenders, L.P. and the Registrant, incorporated by
reference to Exhibit 10.1 to Registrant's Form S-
18 Registration Statement as filed on January 3,
1989.
10B Deed of Trust, Assignment of Leases and Security
Agreement by and among Raines Lenders, L.P. and
the Registrant, incorporated by reference to
Exhibit 10.2 of the Registrant's Form S-18
Registration Statement as filed on January 3,
1989.
10C Participating Mortgage Note of Owner to Lender
incorporated by reference to Exhibit 10.3 to
Registrant's Form S-18 Registration Statement as
filed on January 3, 1989.
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 1997.
<PAGE>
Financial Statement Schedule Filed Pursuant to Item 14(a)(2):
RAINES ROAD, L.P.
(A Limited Partnership)
ADDITIONAL INFORMATION
FOR THE YEAR ENDED
DECEMBER 31, 1997
INDEX
Page
Number
Additional financial information furnished
pursuant to the requirements of Form 10-K:
Financial Statement Schedule -
Independent Auditors' Report 25
Schedule III - Real Estate and Accumulated
Depreciation 26
All other Schedules have been omitted because they are
inapplicable, not require or the information is included in the
Financial Statements or notes thereto.
<PAGE>
Independent Auditors' Report
The Partners
Raines Road, L.P.:
Under date of January 30, 1998, we reported on the balance sheets
of Raines Road, L.P. as of December 31, 1997 and 1996, and the
related statements of operations, partners' deficit, and
cash flows for each of the years in the three-year period ended
December 31, 1997. These financial statements and our report
thereon are included elsewhere herein. In connection with our
audit 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 audit.
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
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 30, 1998
<PAGE>
<TABLE> Schedule III
RAINES ROAD, LTD.
(A Limited Partnership)
Real Estate and Accumulated Depreciation
Initial Cost to Cost capitalized Gross amount at
Partnership subsequent which carried
to acquisition at close of period
<CAPTION>
Description Encum- Land Building Improve- Carrying Land Building Total Accumu- Date of Date
brances & improve- ments costs & improve- lated de- construc- acquired
ments ments preciation tion
<S>________ <C>___ <C>_ <C>_____ <C>_____ <C>_____ <C>_ <C>_____ <C>__ <C>____ <C>____ <C>_
203 acres of land
held for investment
in Memphis,
Tennessee $4,700,000 3,947,078 - 1,045,224 640,621 3,947,078 1,685,845 5,632,923 - 5/90-12/92 4/11/89
</TABLE>
<PAGE>
Schedule III
RAINES ROAD, L.P.
(A Limited Partnership)
Real Estate and Accumulated Depreciation
December 31, 1997
1997 1996 1995
(1) Balance at beginning of
period $ 5,856,861 5,856,226 5,856,226
Additions during period:
Improvements 1,224,398 - -
Other - carrying costs - 635 -
------- ------- -------
1,224,398 635 -
Deductions during period:
Cost of real estate sold 1,448,336 - -
------- ------- -------
1,448,336 - -
Balance at end
of period $ 5,632,923 5,856,861 5,856,226
(2) Aggregate cost for Federal
income tax purposes $ 7,430,492 7,641,267 7,101,355
See accompanying independent auditors' report.
<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.
RAINES ROAD, L.P.
By: 222 Raines, Ltd.
General Partner
DATE: March 31, 1998 By: /s/ Steven D. Ezell
General Partner
DATE: March 31, 1998 By: /s/ Michael A. Hartley
General Partner
By: 222 Partners, Inc.
General Partner
DATE: March 31, 1998 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.
RAINES ROAD, L.P.
By: 222 Raines, Ltd.
General Partner
DATE: March 31, 1998 By: /s/ Steven D. Ezell
General Partner
DATE: March 31, 1998 By: /s/ Michael A. Hartley
General Partner
By: 222 Partners, Inc.
General Partner
DATE: March 31, 1998 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):
RAINES ROAD, L.P.
(A Delaware 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 April 3, 1989 filed
pursuant to Rule 424(b) of the Securities and Exchange
Commission.
10A Participating Loan Agreement by and among Raines Road,
L.P. and Raines Lenders, L.P., incorporated by reference
to Exhibit 10.1 to registrant's Form S-18 Registration
Statement as filed on January 3, 1989.
10B Deed of Trust, Assignment of Leases and Security
Agreement by and among Raines Lenders, L.P. and the
Registrant, incorporated by reference to Exhibit 10.2 of
the Registrant's Form S-18 Registration Statement as
filed on January 3, 1989.
10C Participating Mortgage Note of Raines Road, L.P. to
Raines Lenders, L.P., incorporated by reference to
Exhibit 10.3 to Registrant's Form S-18 Registration
Statement as filed on January 4, 1989.
22 Subsidiaries-Registrant has no subsidiaries.
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000845397
<NAME> RAINES ROAD, LTD.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 98,678
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 5,632,923
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,111,799
<CURRENT-LIABILITIES> 292,942
<BONDS> 4,700,000
0
0
<COMMON> 0
<OTHER-SE> (1,396,077)
<TOTAL-LIABILITY-AND-EQUITY> 6,111,799
<SALES> 0
<TOTAL-REVENUES> 654,127
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 98,754
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 564,000
<INCOME-PRETAX> (8,627)
<INCOME-TAX> 0
<INCOME-CONTINUING> (8,627)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,627)
<EPS-PRIMARY> (4.60)
<EPS-DILUTED> (4.60)
</TABLE>
