<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 LENDERS, L.P.
(Exact name of Registrant as specified in its charter)
Delaware 62-1375240
(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
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, 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 Lenders, 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 the
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 lend monies to Raines
Road, L.P. an affiliated partnership, which is engaged primarily in
the business of acquiring, developing and disposing of certain
undeveloped real estate in Memphis, Tennessee (the "Property").
The Registrant's investment objectives are preservation of capital
and capital appreciation through lending with a participating
interest in a partnership that invests in real estate which is
expected to appreciate 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
The Registrant issued a $4,700,000 participating mortgage note
(the "Lender Financing"), maturing on December 31, 2001 to Raines
Road, L.P., (the "Borrower") an affiliated partnership sharing the
same General Partner. The proceeds of the Lender Financing were
used by the Borrower, together with the available equity proceeds,
to acquire the Property and fund reserves. The Lender Financing
entitles the Registrant to receive a priority return of interest
and principal, and 50% of the "Net Revenues", if any from sale
proceeds of land collateralizing the debt. 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
Registrant is $1,677,707 and is payable from future sale proceeds,
after all accrued interest is paid.
Due to changes in managements estimates as a result of changes
in general economic conditions relating to the property securing
the Lender Financing, during the fourth quarter of 1998, the
Registrant established an impairment reserve against the balance
due on the Lender financing and reversed all interest previously
taken into income in 1998. The Lender financing has been placed on
non-accrual status in accordance with the Registrant's policy for
impaired notes. For further discussion regarding the Registrant's
policy for impaired notes, refer to Note 1(d) of the Financial
Statements included herein. These adjustments to interest income
and the receivable balance are for financial reporting purposes
only. Interest income of approximately $564,000 a year will be
recognized for tax and loan payment purposes.
The Property securing the Lender Financing consists of
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.
In May, 1994, the Borrower secured a $1,100,000 loan
commitment from C.I.O.S., a Tennessee charitable lead trust. On
May 6, 1996 the Borrower retired the loan in full. The original
loan proceeds were used to pay property taxes and a
construction payable. The C.I.O.S. note was secured with a first
mortgage on the Borrower's Property and left the Registrant with a
subordinated position.
Competition
Because the Registrant is under agreement to loan all proceeds
raised, less operating reserves, to Raines Road, L.P., the
Registrant is not involved in activities subject to competition.
The General Partner believes that the Property securing the
Lender Financing 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.
Primary competition comes from three industrial parks in the
airport sub-market, each offering similar pricing to the
Registrant. The General Partner believes that the Property is
competitive due to its location, access and low costs of
development.
The Registrant has no employees. Mortgage services are being
provided under a contractual agreement with Landmark Realty
Services Corporation, an affiliate of the General Partner.
<PAGE>
Item 2. Properties
The Registrant does not own any property, nor does it intend
to own any property in the future.
Item 3. Legal Proceedings
Registrant is not party to 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 Registrants' 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 of 5,625 Units
of Limited Partnership Interests at $1,000 per Unit. The offering
of $5,625,000 was fully subscribed and closed on December 15, 1989.
As of February 28, 1999, there were 503 holders of record of the
Units of Limited Partnership Interests.
On June 20, 1997, the Registrant distributed $703,125 to the
limited partners or $125 per unit. This distribution was made from
payments received on the Lender Financing. There were no
distributions made in 1998 or 1996. Other than liquidity
constraints, there are no material restrictions upon the
Registrant's present or future ability to make distributions in
accordance with the provisions of Registrant's Limited Partnership
Agreement.
<PAGE>
Item 6. Selected Financial Data
For the Year Ended
December 31,
1998 1997 1996 1995 1994
Total Revenues-
Interest $ 489 564,066 564,821 573,513 572,343
Net income(loss) (1,623,529) 523,182 525,459 534,542 529,049
Net income (loss) per limited
partner unit (288.63) 91.75 93.41 94.02 94.05
Distributions per limited partner
unit - 125 - 100 -
Total assets 5,693,721 7,312,250 7,499,700 6,974,241 7,007,881
Note receivable
from affiliate 4,700,000 4,700,000 4,700,000 4,700,000 4,700,000
Interest receivable
from affiliate 2,513,634 2,524,934 2,695,434 2,131,434 2,159,600
Allowance for
impairment (1,580,711) - - - -
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Due to the nature of the Registrant, the majority of its activity on a
regular basis is to earn interest income. There are no interest payments due
to the Registrant until the Property securing the Registrant's loan or
portions thereof is sold, or until December 31, 2001, whichever is first.
Due to changes in managements estimates as a result of changes in general
economic conditions relating to the property securing the Lender Financing,
during the fourth quarter of 1998, the Registrant established an impairment
reserve against the balance due on the Lender financing and reversed all
interest previously taken into income in 1998. The Lender financing has been
placed on non-accrual status in accordance with the Registrant's policy for
impaired notes. For further discussion regarding the Registrant's policy for
impaired notes, refer to Note 1(d) of the Financial Statements included
herein. These adjustments to interest income and the receivable balance are
for financial reporting purposes only. Interest income of approximately
$564,000 a year will be recognized for tax and loan payment purposes.
Except for the above fluctuations, the operations of the Registrant have
remained comparable through the years. The minimal level of operational
expenses are expected to continue in the future.
In 1997, the Borrower sold approximately 30 acres. 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 Registrant on the Lender
Financing. The Borrower did not have any property sales in 1998 or 1996.
From sales in 1990, 1991, 1994 and 1997, the cumulative "Applicable
Principal Balance" of $1,677,707 is due and payable from the next
available sales proceeds, after all accrued interest is paid.
Financial Condition and Liquidity
At February 28, 1999, the Registrant had approximately $6,841
available in funds to cover operating expenses for 1999. Operating
expenses are primarily accounting fees which includes audit and
tax, and mortgage servicing fees. The cash reserves are low. If a sale of
the property occurs, then funds may be available from a payment on the
Lender Financing. The General Partner expects the Registrant to
meet operational needs through affiliated loans if necessary.
In 1997, 1994, 1991 and 1990, the Borrower retained a portion
of sales proceeds for development and operations and did not
distribute all sales proceeds to the Registrant as payments of
interest or applicable principal. The Borrower made interest
payments of $11,300, $734,500, $600,000, and $1,027,454 on the Lender
Financing in 1998, 1997, 1995 and 1991, respectively. The Registrant's
and Borrower's joint General Partner believes that using sales
proceeds for development and distributing only the Borrower's net
available cash 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 Registrant is required to foreclose the loan
and accelerate the amounts due. Currently, the Registrant has not
foreclosed or accelerated the amounts due under the loan agreement
and has no plans to do so.
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 Statement and Supplementary Data
RAINES LENDERS, L.P.
(A Limited Partnership)
FINANCIAL STATEMENTS
AS OF AND FOR THE YEARS ENDED
DECEMBER 31, 1998, 1997, 1996
INDEX
Page
Number
Independent Auditors' Report F-1
Financial Statements
Balance Sheets F-2
Statements of Operations 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
Raines Lenders, L.P.:
We have audited the accompanying balance sheets of Raines Lenders,
L.P. (a limited partnership) as of December 31, 1998 and 1997, and
the related statements of operations, partners' equity, 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
Lenders, 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 LENDERS, L.P.
(A Limited Partnership)
Balance Sheets
December 31, 1998 and 1997
Assets 1998 1997
Cash $ 362 9,092
Note receivable from affiliate (note 3) 4,700,000 4,700,000
Interest receivable
from affiliate, net of
allowance for impairment
of $1,580,711 and -0- in 1998
and 1997, respectively (note 3) 932,923 2,524,934
Loan costs, less accumulated
amortization of $170,814 and
$153,026 in 1998 and 1997,
respectively. 60,436 78,224
Total assets $ 5,693,721 7,312,250
Liabilities and Partners' Equity
Liabilities
Due to affiliate (note 2) $5,000 -
Partners' equity
Limited partners (5,625 units
outstanding) 5,688,721 7,312,250
General partner - -
Total partners' equity 5,688,721 7,312,250
Commitments and contingencies (note 2 and 3)
Total liabilities and
partners' equity $ 5,693,721 7,312,250
See accompanying notes to financial statements.
F-2
<PAGE>
RAINES LENDERS, L.P.
(A Limited Partnership)
Statements of Operations
Years ended December 31, 1998, 1997 and 1996
1998 1997 1996
Revenue:
Interest Income (note 3) $ 489 564,066 564,821
Expenses:
Mortgage servicing fee
(note 2) 9,000 9,000 9,000
Legal and accounting
fees (note 2) 14,548 11,876 12,237
General and administrative 1,971 2,220 337
Amortization 17,788 17,788 17,788
Bad debts(note 3) 1,580,711 - -
Total expenses 1,624,018 40,884 39,362
Net income (loss) $ (1,623,529) 523,182 525,459
Net income (loss) allocated to:
General Partner $ - 7,102 -
Limited Partner $ (1,623,529) 516,080 525,459
Net income (loss) per
limited partner unit $ (288.63) 91.75 93.41
Weighted average
units outstanding 5,625 5,625 5,625
See accompanying notes to financial statements.
F-3
<PAGE>
RAINES LENDERS, L.P.
(A Limited Partnership)
Statements of Partners' Equity
Years ended December 31, 1998, 1997 and 1996
Limited General
partners partner Total
Units Amounts
Balance at
December 31, 1995 5,625 6,973,836 - 6,973,836
Net income - 525,459 - 525,459
Balance at
December 31, 1996 5,625 7,499,295 - 7,499,295
Distributions to
partners (note 4) - (703,125) (7,102) (710,227)
Net income - 516,080 7,102 523,182
Balance at
December 31, 1997 5,625 7,312,250 - 7,312,250
Net loss - (1,623,529) - (1,623,529)
Balance at
December 31, 1998 5,625 5,688,721 - 5,688,721
See accompanying notes to financial statements.
F-4<PAGE>
RAINES LENDERS, 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 income (loss) $(1,623,529) 523,182 525,459
Adjustments to reconcile
net income (loss) to net
cash provided (used) by
operating activities:
Bad debt expense 1,580,711 - -
Amortization 17,788 17,788 17,788
(Increase) decrease
in interest receivable
from affiliate 11,300 170,500 (564,000)
Increase (decrease) in
accounts payable 5,000 (405) -
Net cash provided (used)
by operating
activities (8,730) 711,065 (20,753)
Cash flows from financing
activities - distribution
to partners - (710,227) -
Net increase (decrease)
in cash (8,730) 838 (20,753)
Cash at beginning of year 9,092 8,254 29,007
Cash at end of year $ 362 9,092 8,254
See accompanying notes to financial statements.
F-5
<PAGE>
RAINES LENDERS, L.P.
(A Limited Partnership)
Notes to Financial Statements
December 31, 1998 and 1997
(1) Summary of Significant Accounting Policies
(a) Organization
Raines Lenders, L.P. (the Partnership) is a Delaware limited
partnership organized on December 16, 1988, for the purpose of
making a participating mortgage loan to Raines Road, L.P.,
which shares the same General Partner. 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 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
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
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 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
F-6<PAGE>
RAINES LENDERS, L.P.
(A Limited Partnership)
Notes to Financial Statements
(1) Summary of Significant Accounting Policies (continued)
(d) Note Receivable from Affiliate(continued)
the underlying collateral. When a note is considered
impaired, management ceases the accrual of interest income.
The Partnership will establish an impairment allowance for the
amount that the recorded value of the note plus accrued
interest exceeds its estimated fair value. The impairment
allowance is established by a charge to earnings. Any cash
receipts on impaired notes receivable are applied to reduce
the accrued interest due and the principal amount of such
notes until the balances have been recovered and are
recognized as interest income, thereafter.
At December 31, 1998, the Partnership's note receivable met
the definitions of an impaired loan. Accordingly, the note
receivable from affiliate is recorded at cost with an
allowance for impairment of $1,580,711 at December 31, 1998.
The note has been placed on non-accrual status.
(e) Loan Costs
Loan costs are amortized by the straight-line method over
the thirteen year term of the note receivable from affiliate.
(f) Income Taxes
No provision has been made for Federal or state income
taxes since such taxes are the 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. The only difference between the tax basis and
reported amounts of the Partnership's assets and liabilities
relates to the recognition of interest income and the reserve
for impairment. For income tax purposes, the outstanding
principal balance will continue to accrue interest at a
compounded interest rate of 8.7% per annum.
F-7<PAGE>
RAINES LENDERS
(A Limited Partnership)
Notes to Financial Statements
(1) Summary of Significant Accounting Policies (continued)
(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:
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
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 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 $4,272,759 and
$3,598,992 at December 31, 1998 and 1997, respectively.
F-8<PAGE>
RAINES LENDERS
(A Limited Partnership)
Notes to Financial Statements
(1) Summary of Significant Accounting Policies (continued)
(h) Comprehensive Income
Effective January 1, 1998, the Partnership adopted Statement
of Financial Accounting Standards (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 income (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 for performing certain services.
Expenses incurred for these services are as follows:
1998 1997 1996
Mortgage service fee $ 9,000 9,000 9,000
Accounting fees 2,800 2,100 2,100
Due to affiliate 5,000 - -
(3) Note Receivable From Affiliate
The note receivable from affiliate represents a $4,700,000
long-term note receivable from Raines Road, L.P. (the
Borrower), an affiliate sharing the same General Partner. The
note accrued 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
Borrower and by a security interest in any unrestricted cash
reserves or investment securities held by the Borrower. The
note is due December 31, 2001.
F-9<PAGE>
RAINES LENDERS, L.P.
(A Limited Partnership)
Notes to Financial Statements
(3) Note Receivable From Affiliate (continued)
Summarized financial information of Raines Road, L.P. at
December 31, 1998 and 1997, and for the years ended December
31, 1998, 1997 and 1996, is presented below:
Assets 1998 1997
Cash $ 114,342 98,678
Restricted cash 140,769 380,198
Accounts receivable from affiliate 5,000 -
land and land improvements
held for investment 5,599,928 5,632,923
Total assets $ 5,860,039 6,111,799
Liabilities and Partners' Deficit
Liabilities:
Note payable - affiliate $ 4,700,000 4,700,000
Accrued interest payable - affiliate 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 (2,051,095) (1,396,077)
General partners - -
Total partners' deficit (2,051,095) (1,396,077)
Total liabilities and
partners' deficit $ 5,860,039 6,111,799
F-10<PAGE>
RAINES LENDERS
(A Limited Partnership)
Notes to Financial Statements
(3) Note Receivable From Affiliate (continued)
Operations 1998 1997 1996
Revenue:
Gain on sales of land
and improvements $ 32,995 628,719 -
Interest and other 13,751 25,408 11,266
Total revenues 46,746 654,127 11,266
Expenses:
Interest 564,000 564,000 568,571
Other 137,764 98,754 90,729
Total expenses 701,764 662,754 659,300
Net loss (655,018) (8,627) (648,034)
Cash Flows:
Net cash provided (used) by
operating activities $ 15,664 57,045 (34,146)
Net cash used in
financing activities - - (100,000)
Net increase (decrease) in cash $ 15,664 57,045 (134,146)
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 Borrower retained certain
proceeds from sales and did not pay additional amounts of
interest and/or applicable principal balance to the
Partnership. The Partnership's and Borrower's joint general
partner believes that retaining sales proceeds for
development, and distributing only net available cash to the
Partnership, was contemplated by the note agreement. However,
the note agreement does not explicitly authorize this use
F-11<PAGE>
RAINES LENDERS, L.P.
(A Limited Partnership)
Notes to Financial Statements
(3) Note Receivable from Affiliate (continued)
of funds; therefore, this treatment could constitute a default
on the note agreement. In such an event, the Partnership is
required to accelerate the amounts due or foreclose the loan.
To date, the Partnership has not foreclosed or accelerated
the amounts due under the note agreement. At December 31,
1998 and 1997, the applicable principal balance due to the
Partnership is $1,677,707.
Interest income associated with the note payable from
affiliate in 1998 was -0-, and $564,000 each year in 1997 and
1996.
The Partnership has determined that the note and interest
receivable from the affiliate are impaired. At December 31,
1998 interest income recorded in 1998 was reversed and a
valuation allowance for impairment was recorded as the
estimated fair value of the underlying collateral was less
than the recorded investment of the note and accrued interest.
(4) Distributions
For the year ended December 31, 1997, the Partnership made
distributions of $710,227. Of this amount, $703,125 ($125 per
unit) was allocated to the limited partners and $7,102 was
allocated to the general partner. There were no distributions
in 1998 and 1996.
(5) Fair Value of Financial Instruments
At December 31, 1998 and 1997, the Partnership had financial
instruments including cash, interest receivable, a note
receivable and a payable to an affiliate. The carrying amount
of cash and the payable to the affiliates approximates their
fair value because of the short maturity of these financial
instruments.
The determination of the estimated fair values of the note
receivable and related interest receivable was made based on
the estimated fair value of the underlying property
collateralizing the note.
F-12<PAGE>
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosures.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
The 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 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.
W. Gerald Ezell
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 3(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 1998, no 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 loaned $4,700,000 to Raines Road, L.P., an
affiliated partnership, during 1989. Accrued interest on such loan
at December 31, 1998 was $2,513,634.
<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 27
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 Road,
L.P. and the Registrant, incorporated by reference to
Exhibit 10.1 to Registrant's Form S-18 Registration
Statement as filed on January 4, 1989.
10B Deed of Trust, Assignment of Leases and Security
Agreement by and among Raines Road, 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 4, 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 LENDERS, L.P.
(A Limited Partnership)
ADDITIONAL INFORMATION
FOR THE YEARS ENDED
DECEMBER 31, 1998, 1997 AND 1996
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 - Raines Road, L.P
Independent Auditors' Report M-1
Balance Sheets M-2
Statements of Operations M-3
Statements of Partners' Deficit M-4
Statements of Cash Flows M-5
Notes to Financial Statements M-6
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
Raines Lenders, L.P.
Under date of January 22, 1999, we reported on the balance sheets
of Raines Lenders, L.P. as of December 31, 1998 and 1997, and the
related statements of operations, partners' equity, 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 audits of the
aforementioned financial statements, we have also audited the
related financial statement schedule information 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
<PAGE>
Schedule IV
RAINES LENDERS, L.P.
(A Limited Partnership)
Mortgage Loans on Real Estate
December 31, 1998
<TABLE>
Principal
amount
of
loan
subject
to
Carrying delin-
<CAPTION> Face amount quent
Final Periodic amount of prin-
Interest maturity payment Prior of mortgage cipal
or
Description rate date terms liens mortgage
interest
<S>_________ <C>_____ <C>_____ <C>____ <C>___ <C>_____ <C>_____ <C>_____
Raines Road, L.P., an
affiliate* 12% December Upon the
31, 2001 sale of
property - $4,700,000 $4,700,000 -0-
</TABLE>
<PAGE>
Schedule IV
RAINES LENDERS, L.P.
(A Limited Partnership)
Mortgage Loans on Real Estate (continued)
December 31, 1998
1998 1997 1996
(1) Balance at beginning of
period $ 4,700,000 4,700,000 4,700,000
Balance at end of period $ 4,700,000 4,700,000 4,700,000
(2) Aggregate cost for Federal
tax purposes $ 4,302,126 4,302,126 4,302,126
*This represents a promissory note from Raines Road, L.P., an
affiliate sharing the same General Partner. This note accrues
simple interest at an annual rate of 12% 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 in
Memphis, Tennessee held by the debtor, subject to a security interest
in any unrestricted cash reserves or investment securities held by the
debtor. At December 31, 1998, interest of $2,513,634 was accrued on
the promissory note. Also at December 31, 1998, a reserve for impairment was
established in the amount of $1,580,711. 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. See note 3 to
the financial statements.
See accompanying independent auditors' report.
<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
M-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.
M-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.
M-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.
M-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.
M-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. M-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.
M-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:
M-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.
M-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. M-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
M-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.
M-12
<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 LENDERS, 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 LENDERS, 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 LENDERS, 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., incorporated by reference to Exhibit 10.1 to
registrant's Form S-18 Registration Statement as filed on
January 4, 1989.
10B Deed of Trust, Assignment of Leases and Security
Agreement by and among Raines Road, 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 4, 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
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