<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, 1998
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, 1999.
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, 1998, 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 consisted 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.
<PAGE>
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". The
"Applicable Principal Balance" is a fixed dollar amount assigned in
the loan agreement to the Property on a per acre basis to represent
a portion of the original principal amount of the Lender Financing.
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, 1998, Registrant owned approximately 200
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,
1999, there were 181 holders of record of the 1,875 Units of
Limited Partnership Interests.
There were no distributions made to Unit holders during 1998,
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 Raines Lenders, L.P., as
described below.
Item 6. Selected Financial Data
For the Year Ended
December 31
1998 1997 1996 1995 1994
Total revenues $ 46,746 654,127 11,266 40,628 552,717
Net loss (655,018) (8,627) (648,034) (678,429) (207,082)
Net loss per
limited partner
unit (349.34) (4.60) (345.62) (361.83) (110.44)
Total assets 5,860,039 6,111,799 6,054,735 6,195,673 7,345,269
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 3,077,634 2,524,934 2,695,434 2,131,434 2,159,600
<PAGE>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Sales
There were no sales during 1998 and 1996.
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.
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. The 1998 credit to cost of land and
improvements sold is due to overestimated development costs related
to the 1997 sales. 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
1998 property tax expense reflects the amount billed the
Registrant. These amounts have not been paid and are under
dispute. General and administrative expenses include consulting
fees in 1997 and 1996. The 1998 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, 1999, the Registrant has approximately $7,432
available in funds to cover operating expenses for 1999. Operating
expenses are primarily accounting fees which includes audit and
tax, and program management service fees. The cash reserves are
low. If a sale of the property occurs, then funds may be available
from sale proceeds. The General Partner expects the Registrant 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.
Year 2000
In 1998, the Partnership initiated a plan ("Plan") to
identify, and remediate "Year 2000" issues within each of its
significant computer programs and certain equipment which contain
microprocessors. The Plan is addressing the issue of computer
programs and embedded computer chips being unable to distinguish
between the year 1900 and the year 2000, if a program or chip uses
only two digits rather than four to define the applicable year.
The Partnership has divided the Plan into five major phases-
assessment, planning, conversion, implementation and testing.
After completing the assessment and planning phases earlier year,
the Partnership is currently in the conversion, implementation, and
testing phases. Systems which have been determined not to be Year
2000 compliant are being either replaced or reprogrammed, and
thereafter tested for Year 2000 compliance. The Plan anticipates
that by mid-1999 the conversion, implementation and testing phases
will be completed. Management believes that the total remediation
costs for the Plan will not be material to the operations or
liquidity of the Partnership.
The Partnership is in the process of identifying and
contacting critical suppliers and other vendors whose computerized
systems interface with the Partnership's systems, regarding their
plans and progress in addressing their Year 2000 issues. The
Partnership has received varying information from such third
parties on the state of compliance or expected compliance.
Contingency plans are being developed in the event that any
critical supplier or customer is not compliant.
The failure to correct a material Year 2000 problem could
result in an interruption in, or failure of, certain normal
business activities or operations. Such failures could materially
and adversely affect the Partnership's operations, liquidity and
financial condition. Due to the general uncertainty inherent in
the Year 2000 problem, resulting in part from the uncertainty of
the Year 2000 readiness of third-party suppliers and customers, the
Partnership is unable to determine at this time whether the
consequences of Year 2000 failures will have a material impact on
the Partnership's operations, liquidity or financial condition.<PAGE>
Item 8. Financial Statements and Supplementary Data
RAINES ROAD, L.P.
(A Limited Partnership)
FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 1998, 1997 AND 1996
INDEX
Page
Number
Independent Auditors' Report F-1
Financial Statements
Balance Sheets F-2
Statements of Operations F-3
Statements of Partners' Deficit F-4
Statements of Cash Flows F-5
Notes to Financial Statements F-6
<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, 1998 and 1997, and
the related statements of operations, partners' deficit, and cash
flows for each of the years in the three-year period ended December
31, 1998. 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, 1998 and 1997, and the results of its
operations and its cash flows for each of the years in the three-
year period ended December 31, 1998, in conformity with generally
accepted accounting principles.
KPMG LLP
Nashville, Tennessee
January 22, 1999
F-1<PAGE>
RAINES ROAD, L.P.
(A Limited Partnership)
Balance Sheets
December 31, 1998 and 1997
<TABLE>
Assets 1998 1997
<S> <C> <C>
Cash (note 5) $ 114,342 98,678
Restricted cash (note 3) 140,769 380,198
Accounts receivable from affiliate(note 2) 5,000 -
Land and land improvements held for
investment (notes 4 and 5) 5,599,928 5,632,923
Total assets $ 5,860,039 6,111,799
Liabilities and Partners' Deficit
Liabilities:
Note payable - affiliate (note 5) $ 4,700,000 4,700,000
Accrued interest payable to
affiliate (note 5) 3,077,634 2,524,934
Accounts payable - 221,982
Accrued property taxes 133,500 60,960
Total liabilities 7,911,134 7,507,876
Partners' deficit:
Limited partners (1,875 units
outstanding) (2,051,095) (1,396,077)
General partner - -
Total partners' deficit (2,051,095) (1,396,077)
Commitments and contingencies
(notes 2,3 and 5)
Total liabilities and
partners' deficit $ 5,860,039 6,111,799
</TABLE>
See accompanying notes to financial statements.
F-2
<PAGE>
RAINES ROAD, L.P.
(A Limited Partnership)
Statements of Operations
<TABLE>
Years ended December 31, 1998, 1997 and 1996
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Revenues
Land Sales -
Gross Proceeds $ - 2,220,000 -
Cost of land and
improvements sold(note 3) (32,995) 1,448,336 -
Closing Costs (note 2) - 142,945 -
Gain on land sales 32,995 628,719 -
Interest 11,401 25,408 11,266
Miscellaneous 2,350 - -
Total revenues 46,746 654,127 11,266
Expenses:
Interest expense (note 5) 564,000 564,000 568,571
Property taxes 114,724 66,478 40,087
General and administrative 2,911 15,768 20,331
Legal and accounting
(note 2) 17,129 12,658 16,605
Amortization - - 7,981
Architect & engineering fees - 850 2,725
Property management fee
(note 2) 3,000 3,000 3,000
Total expenses 701,764 662,754 659,300
Net loss $ (655,018) (8,627) (648,034)
Net loss allocated to:
General partner $ - - -
Limited partners $ (655,018) ( 8,627) (648,034)
Net loss per limited
partner unit $ (349.34) (4.60) (345.62)
Weighted average units
outstanding 1,875 1,875 1,875
</TABLE> See accompanying notes to financial statements.
F-3<PAGE>
RAINES ROAD, L.P.
(A Limited Partnership)
Statements of Partners' Deficit
Years ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
Limited General
partners partner Total
Units Amounts
<S> <C> <C> <C> <C>
Balance at
December 31, 1995 1,875 $ (739,416) - (739,416)
Net loss - (648,034) - (648,034)
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)
Net Loss - (655,018) - (655,018)
Balance at
December 31, 1998
1,875 $(2,051,095) - (2,051,095)
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
RAINES ROAD, L.P.
(A Limited Partnership)
Statements of Cash Flows
Years ended December 31, 1998, 1997 and 1996
1998 1997 1996
Cash flows from operating activities:
Net loss $ (655,018) (8,627) (648,034)
Adjustments to reconcile net
loss to net cash provided
(used) by operating activities:
Amortization - - 7,981
Cost of land and improvements held for
investment(note 3) 32,995 (1,224,398) (635)
Cost of land and
improvements sold - 1,448,336 -
Decrease (increase) in
restricted cash 239,429 (223,957) (554)
Increase in accounts receivable
from affiliate (5,000) - -
Increase (decrease) in accrued
interest payable 552,700 (170,500) 561,580
Increase (decrease) in
accounts payable (221,982) 217,126 3,621
Increase in accrued
property taxes 72,540 19,065 41,895
Net cash provided (used)
by operating activities 15,664 57,045 (34,146)
Cash flows from financing activities-
Payment of note
payable-private - - (100,000)
Net increase (decrease)
in cash 15,664 57,045 (134,146)
Cash at beginning of year $ 98,678 41,633 175,779
Cash at end of year $ 114,342 98,678 41,633
Supplemental Disclosures of Cash Flow Information:
Cash paid for interest $ 11,300 734,500 6,991
See accompanying notes to financial statements.
F-5
<PAGE>
RAINES ROAD, L.P.
(A Limited Partnership)
Notes to Financial Statements
December 31, 1998 and 1997
(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.
(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
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 are recorded at
cost and include approximately 200 acres at December 31,
1998 and 1997. Interest expense on the note payable to
affiliate insurance and property taxes were capitalized
as carrying costs of the property during the development
period. F-6<PAGE>
RAINES ROAD, L.P.
(A Limited Partnership)
Notes to Financial Statements
(1) Summary of Significant Accounting Policies (continued)
(d) Land and Improvements Held for Investment(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" in 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.
F-7
<PAGE>
RAINES ROAD, L.P.
(A Limited Partnership)
Notes to Financial Statements
(1) Summary of Significant Accounting Policies (continued)
(e) 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.
(f) 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.
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.
(g) 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:
F-8
<PAGE>
RAINES ROAD, L.P.
(A Limited Partnership)
Notes to Financial Statements
(1) Summary of Significant Accounting Policies (continued)
(g) Partnership Allocations(continued)
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
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 $2,137,500 and
$1,912,500 at December 31, 1998 and 1997, respectively.
F-9
<PAGE>
RAINES ROAD, L.P.
(A Limited Partnership)
Notes to Financial Statements
(1) Summary of Significant Accounting Policies (continued)
(h) Comprehensive Income
Effective January 1, 1998, the Partnership adopted SFAS
No. 130, "Reporting Comprehensive Income". SFAS No. 130
establishes standards for reporting and display of
comprehensive income and its components in a full set of
general-purpose financial statements and requires that
all components of comprehensive income be reported in a
financial statement that is displayed with the same
prominence as other financial statements. Comprehensive
income is defined as the change in equity of a business
enterprise, during a period, associated with transactions
and other events and circumstances from non-owner
sources. It includes all changes in equity during a
period except those resulting from investments by owners
and distributions to owners. During the years ended
December 31, 1998 and 1997, the Partnership had no
components of other comprehensive income. Accordingly,
comprehensive income for each of the years was the same
as net loss.
(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:
1998 1997 1996
Accounting fees $ 2,100 2,100 2,100
Property management fee 3,000 3,000 3,000
Real estate sales commission - 88,000 -
Accounts receivable
from affiliate 5,000 - -
(3) Restricted Cash
At December 31, 1998 and 1997, the Partnership had
restricted cash balances of $140,769 and $380,198,
respectively, to be used to fund property improvements
consisting of road and utility work. In 1998, the
Partnership received excess escrowed development funds
from the escrow agent. The development payable related
to these escrowed funds, also overestimated, was reduced
by the excess cash received. Cost of land sold and land
improvements, also effected by this development, was
reduced. This restricted cash securs a letter of credit
in the same amount to ensure that the required
developments are made. F-10<PAGE>
RAINES ROAD, L.P.
(A Limited Partnership)
Notes to Financial Statements
(4) Land and Improvements Held for Investment
The components of land and improvements held for
investment at December 31, are as follows:
1998 1997
Land and carrying costs $ 3,947,078 3,947,078
Land improvements 1,652,850 1,685,845
$ 5,599,928 5,632,923
Aggregate cost of land and improvements held for
investment for federal income tax purposes was $7,392,325
and $7,430,492 at December 31, 1998 and 1997,
respectively.
(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 1998, there were no land sales and the
Partnership paid $11,300 in interest payments to the
Lender. In 1997, the Partnership sold 26.6 acres of
land, receiving net proceeds of $628,719 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
F-11
<PAGE>
RAINES ROAD, L.P.
(A Limited Partnership)
Notes to Financial Statements
(5) Note Payable - Affiliate(continued)
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. Of the $4,700,000
total principal balance outstanding, the applicable
principal balance due to Lender is $1,677,707 at December
31, 1998 and 1997.
Interest expense associated with the note payable to
affiliate in 1998, 1997, and 1996 was $564,000.
(6) Fair Value of Financial Instruments
At December 31, 1998 and 1997, the Partnership had
financial instruments including cash, restricted cash,
accrued interest payable, accounts payable, accrued
property taxes, and notes payable. The carrying amounts
of cash, 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.
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
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 46, 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 39, 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 68, 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 1998, 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, 1999 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. Accrued interest on such loan
was $3,077,634 at December 31, 1998. In 1998, a $11,300 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 25
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 1998.
<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, 1998
INDEX
Page
Number
Additional financial information furnished
pursuant to the requirements of Form 10-K:
Financial Statement Schedule -
Independent Auditors' Report S-1
Schedule III - Real Estate and Accumulated
Depreciation S-2
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 22, 1999, we reported on the balance sheets
of Raines Road, L.P. as of December 31, 1998 and 1997, and the
related statements of operations, partners' deficit, and
cash flows for each of the years in the three-year period ended
December 31, 1998. 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.
KPMG LLP
Nashville, Tennessee
January 22, 1999
S-1
<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>_
200 acres of land
held for investment
in Memphis,
Tennessee $4,700,000 3,306,457 - 1,652,850 640,621 3,947,078 1,652,850 5,599,928 - 5/90-12/92 4/11/89
</TABLE>
Encumbrances listed above do not include accrued interest.<PAGE>
Schedule III
RAINES ROAD, L.P.
(A Limited Partnership)
Real Estate and Accumulated Depreciation (continued)
December 31, 1998
1998 1997 1996
(1) Balance at beginning of
period $ 5,632,923 5,856,861 5,856,226
Additions during period:
Improvements - 1,224,398 -
Other - carrying costs (32,995) - 635
------- --------- ---------
- 1,224,398 635
Deductions during period:
Cost of real estate sold - 1,448,336 -
------- --------- ---------
- 1,448,336 -
Balance at end
of period $ 5,599,928 5,632,923 5,856,861
(2) Aggregate cost for Federal
income tax purposes $ 7,392,325 7,430,492 7,641,267
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, 1999 By: /s/ Steven D. Ezell
General Partner
DATE: March 31, 1999 By: /s/ Michael A. Hartley
General Partner
By: 222 Partners, Inc.
General Partner
DATE: March 31, 1999 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, 1999 By: /s/ Steven D. Ezell
General Partner
DATE: March 31, 1999 By: /s/ Michael A. Hartley
General Partner
By: 222 Partners, Inc.
General Partner
DATE: March 31, 1999 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-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 114,342
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 5,599,928
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,860,039
<CURRENT-LIABILITIES> 133,500
<BONDS> 4,700,000
0
0
<COMMON> 0
<OTHER-SE> (2,051,095)
<TOTAL-LIABILITY-AND-EQUITY> 5,860,039
<SALES> 0
<TOTAL-REVENUES> 46,746
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 137,764
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 564,000
<INCOME-PRETAX> (655,018)
<INCOME-TAX> 0
<INCOME-CONTINUING> (655,018)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (655,018)
<EPS-PRIMARY> (349.34)
<EPS-DILUTED> (349.34)
</TABLE>
