SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
Commission File Number: 000-19210
USA Capital Land Fund, a Nevada limited partnership
Nevada 88-0248397
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3900 Paradise Road, Ste 263 89109
Las Vegas, Nevada (Zip Code)
(Address of principal executive offices)
Registrant's telephone number: (702) 734-8721
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) during the preceding 12
months, and (2) has been subject to such filing requirements for the
past 90 days.
Yes X No
USA CAPITAL LAND FUND, A NEVADA LIMITED PARTNERSHIP
INDEX
Page
PART I. FINANCIAL INFORMATION Number
Item 1. Financial Statements
Condensed Balance Sheets March 31, 1996 (Unaudited)
and December 31, 1995 . . . . . . . . . . . . . . 3
Condensed Statements of Operations
Three months ended March 31, 1996 (Unaudited) and
March 31, 1995 (Unaudited) . . . . . . . . . . . . 4
Condensed Statements of Cash Flows
Three months ended March 31, 1996 (Unaudited)
and March 31, 1995 (Unaudited) . . . . . . . . . . 5
Notes to Condensed Financial Statements
(Unaudited) . . . . . . . . . . . . . . . . . . . 6
Item 2. Managements' Discussion and Analysis of
Financial Condition and Operating Results . . . . 7
PART II. OTHER INFORMATION . . . . . . . . . . . . 8
Item 6. Exhibits
Letter to Investors of USA Capital Land
Dated March 1996 . . . . . . . . . . . . . Exhibit 1
March 31, 1996 Balance Sheet (Unaudited) of
USA Partners Limited . . . . . . . . . . Exhibit 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
USA CAPITAL LAND FUND, A NEVADA LIMITED PARTNERSHIP
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
March 31 December 31
1996 1995
(Unaudited)
Real estate investments
Properties under development $ 107,943 $ 1,134,259
Investments in joint ventures 23,821 27,660
Total investments in real estate 131,764 1,161,919
Other assets
Cash 278,479 1,691,325
Escrow receivables 70,894 74,048
Notes receivable, related parties 309,165 119,165
Prepaid legal fees 8,646 22,907
Property and equipment, net 2,993 3,254
Intangible and other assets 112,782 118,892
Total other assets 782,959 2,029,591
Total assets $ 914,723 $ 3,191,510
LIABILITIES AND PARTNERS' EQUITY
Liabilities
Accounts payable $ 13,582 $ 25,482
Commitments - -
Minority interest, in equity of
consolidated joint ventures - -
Partners' Equity 901,141 3,166,028
Total liabilities and equity $ 914,723 $ 3,191,510
Note: The condensed balance sheet at December 31, 1995 has been
taken from the audited financial statements.
See accompanying notes.
USA CAPITAL LAND FUND, A NEVADA LIMITED PARTNERSHIP
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
March 31, 1996 March 31, 1995
Income
Interest on real estate loans $ 3,186 $ 195,045
Interest on cash 10,391 14,411
Lot sales 1,079,100 1,438,294
Equity in income (loss) of
unconsolidated joint ventures (3,840) (153,407)
Gain of sale of fixed assets
- 97
Other income 6,000 -
1,094,837 1,494,440
Costs and expenses
Cost of lots sold 1,205,269 1,563,905
Depreciation 261 552
Amortization 2,910 2,909
General and administrative 36,583 244,458
Sales and marketing - 27,408
1,245,023 1,839,232
Net loss (150,186) (344,792)
Number of Partner units
outstanding at end of period 39,901.00 39,901.00
Net loss per Partner unit
outstanding at end of period $ (3.76) $ (8.64)
See accompanying notes.
USA CAPITAL LAND FUND, A NEVADA LIMITED PARTNERSHIP
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31, 1996 March 31, 1995
Cash Flows from Operating Activities
Net loss $ (150,186) $ (344,792)
Adjustments to reconcile net earnings to
net cash provided by operating activities
Depreciation 261 552
Amortization 2,910 2,909
Equity in earnings of joint venture 3,839 153,407
Gain on sale of fixed assets - (97)
Changes in:
Short-term and other receivables 3,154 (2,096)
Real estate under development 1,026,316 406,901
Prepaid legal fees 14,261 -
Payables (11,900) 46,596
Net cash provided by operations 888,655 263,380
Cash flows from Investing Activities
Loans originated (190,0 00) -
Proceeds from loan repayment - 104,383
Distribution from joint ventures - 30,870
Proceeds from the sale of fixed assets - 250
Deposits 3,200 (15,550)
Net cash provided by (used in)
investing activities (186,800) 119,953
Cash flows used in Financing Activities
Limited partner distributions (2,114,701) (278)
Net cash used in
financing activities (2,114,701) (278)
Net increase (decrease) in cash and
cash equivalents (1,412,846) 383,055
Cash and cash equivalents, beginning of period 1,691,325 1,267,112
Cash and cash equivalents, end of period $ 278,479 $1,650,167
See accompanying notes.
USA CAPITAL LAND FUND, A NEVADA LIMITED PARTNERSHIP
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principals for interim
financial information and with the instructions to Form 10-Q and
Regulation S-X. They do not include all information and footnotes
required by generally accepted accounting principals for complete
financial statements.
The condensed financial statements presented herein have been prepared
by the Partnership in accordance with the accounting policies described
in its 1995 audited financial statements and should be read in
conjunction with the notes thereto.
In the opinion of management, all adjustments (consisting of normal
recurring adjustments) which are necessary to a fair presentation of the
interim financial statements presented herein have been made.
NOTE 2. RELATED PARTY TRANSACTIONS
The Corporate General Partner received $0 in cash distributions during
the first quarter of 1996.
USA Capital Management Group, Inc. (USA Capital), an affiliated NASD
licensed securities broker/dealer, received sales commissions of up to
7% of the partnership units sold by them. No commissions were paid in
the quarter ended March 31, 1996.
USA Commercial Real Estate Group (USA Commercial), an affiliated
corporation of the General Partner, earned net commissions on the sales
from the Bellavista and Owens road projects in the amount of $12,096
after payments to independent brokers/contractors, for the quarter ended
March 31, 1996.
In February, 1994, the Partnership entered into an AIA construction
contract with REK Corporation for the construction of Phases III and IV
of Owens Road. The president of the Partnership's corporate general
partner is also a vice president of REK Corporation. REK was allocated
$54,000 for overhead and $54,000 for profit. It also received an
allocation of up to $47,000 for the reimbursement of project
supervision. Other on site items, such as temporary facilities and
clean up costs have been reimbursed. The Partnership also entered into
an AIA contract for Phases V and VI of the owens Road Project. The
terms were identical to the Phase III and IV contract. In essence, the
REK Corporation received $2,000 per unit or $60,000 for overhead and
$60,000 for profit on the 60 unit construction phase. All other
reimbursements discussed above applied also. The fee was the same rate
Owens Road Partnership was charged on Phases I and II by Paragon
Construction, a third party general contractor. All funds earned have
been paid.
CURRENT EVENTS
BELLAVISTA
USA Capital Land Fund has taken write downs in the amount of
$2,140,000.00 on their equity investment at Bellavista Partners, L.P.
A portion of this write down was caused by soils and related problems
that have been experienced at Bellavista. As a result of improperly
prepared finished lots at Bellavista, eleven existing homeowners
experienced severe cracking and settlement problems with their homes
which were developed by BVP. As a result, the BVP has had to perform
significant remediation for nine of the eleven homeowners. These
repairs have cost BVP in excess of $700,000; however, no assurances can
be given that the remediation will be satisfactory or that additional
remediation will not be necessary.
Bellavista Partners initially contracted with two local contractors to
perform civil engineering and grading for this project. Our contract
called to the delivery of finished lots whereby all aspects of the soils
reports recommendation were to be followed by the grading contractor as
they built these lots. Furthermore, the civil engineering firm was
engaged to perform continuous on site observation on the lot development
process. This did not occur. Hence, it is our belief that we were
severely damaged by these two contractors and have filed suit against
SEA Consulting Engineers and Central Grading, the soils engineer and
grading subcontractors who were responsible for the soils engineering
and build out of the finished lots at Bellavista Estates.
After the lots were constructed by our subcontractor and delivered, BVP
then engaged an independent general contractor to build homes on these
sites with the belief that we had been delivered finished lots. Because
the lots were not properly finished, and did not conform to the soils
reports recommendations, the houses that were built eventually began
cracking and settling. As a result, homeowners who purchased homes from
BVP have looked to BVP for remediation. BVP has in turn looked to the
subcontractors and our insurance. In addition to the money we spent to
remedy the problems, BVP has received $157,974.61 from our insurance
company to reimburse some of the remediation expenses spent to date.
Various claims are still pending, but it appears unlikely that any
additional claims benefits will be received by us.
BVP has been severely damaged, and the damages caused by these problems
caused additional marketing problems at Bellavista, which in turn
reduced the viability of the project. Currently, all homes and lots at
BVP are sold. There was a bulk sale of 11 lots that took place in
August, 1995 at a significant discount. This enabled the BVP to gain
funds necessary to meet it's obligation for remediation of residences
that have experienced settlement related problems at the project.
LEGAL PROCEEDINGS AND BELLAVISTA
Bellavista partners (BVP) has filed an action in Clark County District
Court, Clark County, Nevada against SEA Consulting Engineers and Central
Grading, the soils engineer and grading subcontractor who were
responsible for the soils engineering and build out of the finished lots
at Bellavista Estates.
Central Grading denies responsibility, alleging a number of defenses,
most particularly, that they built the lots in accordance with
instructions from BVP. SEA denies liability on a number of theories,
including that they had no liability for the construction of the lots,
that whatever duties they did have, they fully and properly performed.
Additionally, SEA has filed counterclaim against BVP in the amount of
approximately $150,000 for a balance allegedly due under contracts
between BVP and SEA for work performed.
At this stage of the litigation, it is impossible to predict the length
of time it will take to try the case, whether settlement is possible, of
the cost. The ultimate cost of the lawsuit will depend on a number of
factors, including (1) whether the insurance company assists in the
defense, (2) whether settlement can be negotiated, (3) whether discovery
is done cooperatively or contentiously, and (4) the cost of expert
consultants and expert witnesses. Likely, the range of costs for
litigation is somewhere between $100,000 and $300,000. the likely time
frame to resolve this suit will be, if settled, six (6) to 12 months; if
tried, 18 to 36 months.
BVP has been sued by three homeowners in BellaVista Estates. The main
point of the complaint is that BVP delayed in their performance of
certain remedial work to their homes, and that the homeowners have
suffered emotional distress as a result. The complaint also alleges
that the soil problems and remediation have diminished the value of the
plaintiff's homes. As of April 15, 1996, the case the BVP filed against
SEA and Central Grading mentioned above.
Bellavista Partners has received $157,974.61 from our insurance company
to reimburse some of the remediation expenses spent to date. Various
claims are still pending, but no assurance can be given as to the final
settlement, if any, from the insurance company.
In August, 1995, the Bellavista Partners, L.P. closed a bulk sale of the
11 remaining unsold lots. This sale was consummated at a significant
discount. This enabled the Bellavista Partners, L.P. to gain funds
necessary to meet it's obligation for remediation of residences that
experienced settlement related problems at the Bellavista project. as
a result, an additional write down of the Bellavista investment of
$395,000 was taken in 1995, bringing the total write down to
$2,140,000.00.
GREENHILLS
Greenhills, our joint venture with Signature Homes, is completed. To
date, we have totally recovered our investment in this project and
expect to book a profit in the approximate amount of $225,000. The
final payment from the joint venture is expected to occur sometime
during the second quarter of 1996.
OWENS ROAD PARTNERS
To date, there is one (1) unit left to sell in this 170 unit condominium
project. Emerald Gardens is expected to lose approximately $900,000.00.
SUBSEQUENT EVENTS
Bellavista Partners, L.P. and Owens Road Partners had noted due from
investors that had purchased lots or homes where a portion of the
selling price was carried back in the form of a note. As of March 31,
1996, only one note remained outstanding. This loan originated during
the quarter ended March 31, 1996, to the buyer of the last home at
Bellavista. The loan matures in September, 1996. Interest only
payments are being made to the Bellavista L.P. and all payments are
current.
GENERAL PARTNER DEVELOPMENT FEES
The General Partner has voluntarily suspended any development fees due
it from the Rancho palomino Medical office, Greenhills and Indian Wells
developments as a result of the poor performance of the Bellavista
investment and the Owens Road project. As such, the General partner is
suspending its right to receive approximately $250,000 in development
fees.
USA CAPITAL LAND FUND, A NEVADA LIMITED PARTNERSHIP
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition
and Operating Results
LIQUIDITY AND CAPITAL RESOURCES
Since January 1, 1996, the Partnerships' cash position has decreased
$1,412,846 to $278,479 as of March 31, 1996. As of March 31, 1996,
Partners' Equity was $901,141 as compared to $3,166,028 at December 31,
1995, largely a result of the January and March 1996 cash distributions
to the limited partners.
For 1996, the Partnership has paid $2,114,701 to the Limited Partners as
liquidating distributions. The General Partner has discontinued regular
quarterly distributions to the partners. In the past, the General
Partner has managed the Partnership's cashflow in a way that allowed for
a continuity of quarterly distributions that were made up of both a
return of limited partners principal and earnings. Future cash
distributions, if any, will primarily be made from sales proceeds
received for our Owens Road (Emerald Gardens Condominiums) investment,
minus working capital needs, primarily legal costs involved in the
Bellavista lawsuit. We are projecting to be sold our of the Owens Road
project by the end of the second quarter of 1996.
The General Partner did not receive payment of any management or
development fees in the year 1996. The General Partner has decided to
voluntarily defer any fees due it until further notice. The General
partner hay later decide to distribute all or a portion of such accrued
and unpaid fees. Other fees have be received by affiliates of the
General Partner such as real estate commissions and construction fees as
listed in NOTE 2 under "Related Party Transaction".
The Partnership has recognized a $2,140,000 write down on the Bellavista
project, necessary to reflect a more appropriate value for this
investment. A significant portion of this write down was due to the
soils and related problems at Bellavista. Remediation to the homes have
cost BVP in excess of $700,000; however, the General Partner can not
give any assurance that the remediation will be satisfactory or that
additional remediation will not be necessary. Litigation against the
two subcontractors that we feel are responsible for the soils and
settlement related problems is in process and has been consolidated with
the case filed by the homeowners against BVP. It is impossible to
predict the length of time it will take to try the case of the cost
involved. The likely range of costs for litigation is somewhere between
$100,000 and $300,000. The likely time frame to resolve the case could
be six (6) to thirty six (36) months.
Currently, at Bellavista, all homes and lots are sold.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1996
The Partnership showed net income of ($150,186) for the three months
ended March 31, 1996, while the same three months of 1995 had net income
of ($344,792). Expenses for development and lot sales was $358,636
lower for quarter ended March 31,1996 as compared to March 31, 1995.
General & Administrative expenses also showed a decrease of $207,875
from $36,583 and $244,458 for the three months ended March 31 of 1996
and 1995 respectively. The income per unit for the three months ended
March 31, 1996 was ($3,76). The income per unit for the same three
months of 1995 was ($8.64).
Net cash provided by operations and investing activities was $701,888
for the three months ended march 31, 1996, an increase of $318,555 over
the net cash provided by operations and investing activities of $383,333
at March 31, 1995. Real estate under development decreased to $131,764
at March 31, 1996 as compared to $1,161,919 at March 31, 1995.
One loan was originated during the quarter ended March 31, 1996, to the
buyer of the last home at Bellavista. This loan matures in September,
1996. Monthly interest payments are being made to BVP and the loan is
current.
APPROXIMATE BOOK VALUE
At March 31, 1996, the approximate unit book value of the USA Capital
Land Fund is $22.58. this represents the Partners' Equity of
$901,141.00 divided by the number of units held, 39,901. It should be
noted that unit book value can change due to unforeseen losses and
pending lawsuits both for and against the Partnership.
USA CAPITAL LAND FUND, A NEVADA LIMITED PARTNERSHIP
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 1 - Letter dated March, 1996 to investors in the
USA Capital Land Fund
(b) Exhibit 2 - Unaudited March 31, 1996 Balance Sheet of USA
Partners Limited, the general partner of USA
Capital Land Fund
(c) Reports on Form 8-K - There were no reports on Form 8-K filed
for the three months ended March 31, 1996.
USA CAPITAL LAND FUND, A NEVADA LIMITED PARTNERSHIP
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunder duly authorized.
USA CAPITAL LAND FUND
A NEVADA LIMITED PARTNERSHIP
Registrant
Al Whalen
Chief Financial Officer for:
USA PARTNERS, LTD., the general partner
for USA Capital Land Fund, a Nevada
limited partnership.
Thomas Hantges
President of:
USA Partners, LTD., the general
partner for USA Capital Land Fund,
a Nevada limited partnership
Date: May 20, 1996
USA CAPITAL LAND FUND, A NEVADA LIMITED PARTNERSHIP
EXHIBIT 1
LETTER DATED MARCH 1996 TO INVESTORS
IN USA CAPITAL LAND FUND
March, 1996
Dear Land Fund Investor:
Enclosed is a liquidating distribution of $25.50 per unit for the USA
Capital Land Fund ("The Partnership"). The Partnership has been in a
liquidation mode and it is our goal to file a final tax return when the
Bellavista litigation is concluded. Prior to January 1994, payments to
the limited partners consisted of both a return of principal and
earnings. Distributions made since January 1994 have been principal
only. The Partnership now distributed proceeds, net of any obligations,
as the become available. We anticipate making another distribution when
we close escrow on the remaining Emerald Gardens condominium units, and
when payment is received from several of the notes currently
outstanding. Further, to the extent Bellavista may prevail in it's
litigation against SEA and Central Grading, to which no assurances are
given, Bellavista will pay to the Partnership all net proceeds received.
However, please be aware that Bellavista may have to pay some or all of
those proceeds to homeowners (se Project #1 below) should they prevail
against Bellavista.
The attached sheet indicates the cumulative amount of distributions that
you have received since you originally invested in the Partnership. If
your investment is in your IRA, this distribution, like the previous
distributions, was deposited into your IRA account. A brief description
of the Partnership's remaining investments are summarized below.
PROJECT #1
BELLAVISTA: Bellavista Partners, L.P. (Bellavista)
All lots and homes at Bellavista are sold. The last home closed in
January 1996, and Bellavista holds a note, in the amount of $190,000,
which is due in September, 1996. The cash from the bulk sale of 11 lots
as well as the $157,975 received from our insurance company as
reimbursement for remediation costs, has gone to pay for additional
remediation expenses that have been incurred at this project.
As previously reported, Bellavista has filed suit against SEA Consulting
Engineers and Central Grading, alleging damages from the improperly
prepared soils at the Bellavista project. Both defendants have
answered, with SEA filing a counterclaim. It is impossible to predict
the length of time it will take to try the case, whether settlement is
possible or even desirable, or the cost of the litigation. Bellavista
has been damaged and we plan to seek our remedy for these damages.
Additionally, three homeowners have filed complaints (two joined in one
action) alleging damages from the soils conditions at Bellavista. Those
homeowners are seeking rescission of their contracts, reimbursement of
the payment price for their home, and additional damages resulting from
the problems with the soils. Bellavista has answered those complaints
and prepared certain affirmative defenses. Moreover, Bellavista plans
to include in its claim for damages against SEA and Central Grading any
adverse judgment that may be obtained by these or any other homeowners
who file complaint. Also, if homeowners prevail against Bellavista,
payment to them of any judgments they may obtain, would have priority
over payment to the Partnership. Like the litigation involving SEA and
Central Grading, these cases are in their early stages and it is
impossible to predict the length of time it will take to try the case,
whether settlement is possible or even desirable, or the cost or time of
the litigation. If these cases go to trial, it is estimated that the
hearings will begin sometime next year.
PROJECT #2
EMERALD GARDENS: currently 169 units of our 170 unit subdivision are
sold. We are expecting 6 of the sold units to close escrow in the
second quarter of 1996. This would leave only one unsold and unclosed
unit. We hope to conclude the project by the end of the second quarter
of 1996.
PROJECT #3
GREENHILLS: This joint venture partnership with Signature Homes has
been completed. We expect to book a profit in the approximated amount
of $225,000 for this project.
All funds received by the Partnership are being held in money market
accounts to pay for the expenses of the Partnership or, until such time
that an adequate amount is available, to distribute to the limited
partners. We will do the best we can to conclude the Partnership as
quickly and effectively as possible.
All books and records pertaining to the Partnership are available for
your inspection Monday through Friday at our office during normal
business hours. We look forward to servicing your investment. If there
are any questions, please do not hesitate to call any of us.
Sincerely,
Tom Hantges, President
Al Whalen, Treasurer
David Berkowitz, Secretary
USA Partners, Inc.
General Partner
USA CAPITAL LAND FUND, A NEVADA LIMITED PARTNERSHIP
EXHIBIT 2
MARCH 31, 1996 BALANCE SHEET (UNAUDITED) OF
USA PARTNERS LIMITED, THE GENERAL PARTNER OF
USA CAPITAL LAND FUND
USA PARTNERS, LTD.
BALANCE SHEET
March 31, 1996
(unaudited)
ASSETS
ASSETS
Cash in bank $ 1,949
Equipment - net 138
Partnership interest - USA Capital Land Fund
TOTAL ASSETS $ 2,087
LIABILITIES AND EQUITY
LIABILITIES AND EQUITY
Stockholders' Equity $ 2,087
TOTAL LIABILITIES AND EQUITY $ 2,087
