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 September 30, 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
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 third quarter of 1996.
USA Capital Management Group, Inc. (USA Capital), that was an affiliated
NASD licensed securities broker/dealer, received sales commissions of up
to 7% of the partnership units sold by them through June, 1993. No
commissions were paid in the quarter ended September 30, 1996 or during
the calendar 1996 year.
USA Commercial Real Estate Group (USA Commercial), an affiliated
corporation of the General Partner, earned net commissions on the sales
from the Owens Road project in the amount of $-0- after payments to
independent brokers/contractors, for the quarter ended September 30,
1996. USA Commercial has earned net commissions on the sales from the
Owens Road project in the amount of $15,881 after payments to
independent brokers/contractors for the nine months ended September 30,
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. Additionally, REK Corporation completed a job as supervisor
and plumbing sub-contractor at the Owens Road project. This work was
necessary to satisfy a new requirement recently imposed by the City of
Las Vegas to adjust the water pressure at the Emerald Gardens site to
the city's revised plans. REK was paid a total of $14,268 in it's
capacity as supervisor and plumbing sub-contractor.
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.
(BVP). 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 $800,000; however, no
assurances can be given that the remediation will be satisfactory or
that additional remediation will not be necessary. In fact, as of this
writing, BVP is contemplating additional expenditures of approximately
$150,000 to further remediate some of these units. As of this time, no
final decision has been made.
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 on site observation of the lot development process.
These subcontractors failed to properly perform their duties to us.
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 $159,874.61 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, or
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 complaints 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 against BVP filed by
the homeowners has been consolidated with the case BVP filed against SEA
and Central Grading mentioned above.
Bellavista Partners has received $159,874.61 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.
As a result of the bulk lot sale in August, 1995, Bellavista Partners,
L.P.took an additional write down of $395,000, bringing the total write
down to $2,140,000.00.
LEGAL PROCEEDINGS AND PALOMINO PARTNERS
USA Partners, Inc. has been sued in its capacity as General Partner
of Palomino Partners in connection with a personal injury suffered by a
woman who was employed by a tenant in the building owned by Palomino
Partners. That case is in the early stages, and the potential loss, and
potential liability by the General Partner are presently unknown.
However, the limited partners should not incur any liability.
GREENHILLS
Greenhills, our joint venture with Signature Homes, is completed. To
date, we have totally recovered our investment in this project. The
final tax return will be filed in 1996 for the project.
OWENS ROAD PARTNERS
The partnership has accepted on offer on the last condominium of the 170
units constructed at Emerald Gardens. It should close at the end of
November, 1996. Emerald Gardens is expected to lose approximately
$1,000,000.00.
SUBSEQUENT EVENTS
Bellavista Partners, L.P. and Owens Road Partners had notes 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 September
30, 1996, all notes had been repaid.
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.
<PAGE>
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
$1,088,740 to $602,585 as of September 30, 1996. As of September 30,
1996, Partners' Equity was $769,445 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 $2,413,951 to the Limited Partners as
liquidating distributions, including the $299,250 paid in October, 1996.
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. The Partnership plans to distribute
all monies, net of Partnership cash requirements, at irregular
intervals, until the remaining assets have been distributed.
The General Partner did not receive payment of any management or
development fees in the year 1996. The General Partner has decided to
voluntarily suspend any fees due it until further notice. The General
partner may 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 $800,000; 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 SEPTEMBER 30, 1996
The Partnership showed net income (loss) of ($50,292) for the three
months ended September 30, 1996, while the same three months of 1995 had
net income (loss) of ($351,709). Expenses for development and lot sales
was $3,138,977 lower for quarter ended September 30, 1996 as compared to
September 30, 1995. General & Administrative expenses showed an
increase of $15,972 for the three months ended September 30 of 1996 and
1995 respectively. The bulk of this increase was due to the repairs &
maintenance done at the Bellavista and Owens Road projects. The income
(loss) per unit for the three months ended September 30, 1996 was
($1.26). The income (loss) per unit for the same three months of 1995
was ($8.81).
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
The Partnership showed net income (loss) of ($281,882) for the nine
months ended September 30, 1996, while the same nine months of 1995 had
net income (loss) of ($886,236). Expenses for development and lot sales
was $4,054,996 lower for the first nine months ended September 30, 1996
as compared to the first nine months of 1995. General and
Administrative expenses also show a decrease of $257,226 for the nine
months ended September 30, 1996, with $143,015 and $400,241 being
expensed for 1996 and 1995 respectively. The income (loss) per unit
for the nine months ended September 30, 1996 was ($7.07). The income
(loss) per unit for the same nine months of 1995 was ($22.21).
Net cash provided by operations and investing activities was
$1,025,961 for the nine months ended September 30, 1996, a decrease of
$2,600,931 over the net cash provided by operations and investing
activities of $3,626,892 at September 30, 1995.
At this time the Partnership only has one loan that remains
outstanding. This loan, which matures in May, 1997, is to Stephen
Coulter and was originated in May of 1992.
APPROXIMATE BOOK VALUE
At September 30, 1996, the approximate unit book value of the USA
Capital Land Fund is $19.28. This represents the Partners' Equity of
$769,445.00 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.
APPROXIMATE PROJECTED VALUE
After considering our cash balance as of November 12, 1996 along
with expected income from the sale of the last unit at Emerald Gardens
and the payoff of the remaining notes due the Partnership, and with
consideration given to projected expenses for operation and possible
remediation at Bellavista, we can estimate that each limited partner may
receive back between $5.00 and $7.50 per unit if our assumptions are
correct. Additional recoveries from such areas as insurance claims, if
realized, or a victory in our lawsuit against the two sub-contractors
for our alleged damages at Bellavista could significantly increase this
figure.
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 October, 1996 to investors in the
USA Capital Land Fund
(b) Exhibit 2 - Unaudited September 30, 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 September 30, 1996.
<PAGE>
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: October 1996
USA CAPITAL LAND FUND, A NEVADA LIMITED PARTNERSHIP
EXHIBIT 1
LETTER DATED OCTOBER, 1996 TO INVESTORS
IN USA CAPITAL LAND FUND
October, 1996
Dear Land Fund Investor:
Enclosed is a liquidating distribution of $ 7.50 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 limited partners consisted of both a return of principal and
earnings. Distributions made since January 1994 have been principal
only. The Partnership now distributes proceeds, net of any obligations,
as they become available. We anticipate making another distribution
when we close escrow on the remaining Emerald Garden condominium unit,
and when payment is received from the only note 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 (see Project #1 below) should they prevail against
Bellavista.
We are also enclosing a copy of the Form 10-Q filed with the
Securities and Exchange Commission for the quarter ended June 30, 1996.
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 Partners, L.P. (Bellavista) - All lots and homes
at Bellavista are sold.
As previously reported, Bellavista has filed suit against SEA
Consulting Engineers & 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 litigation.
Bellavista has been damaged and we plan to seek our remedy for these
damages.
Additionally, three homeowners filed complaints (two joined in one
action) alleging damages resulting from the soils conditions at
Bellavista. Those homeowners are seeking rescission of their contracts,
reimbursement of the payment price for the 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 complaints. 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 hope to conclude the project by the end of
1996.
All funds received by the Partnership are being held in a 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 inspections Monday through Friday at our office during normal
business hours. 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
SEPTEMBER 30, 1996 BALANCE SHEET (UNAUDITED) OF
USA PARTNERS LIMITED, THE GENERAL PARTNER OF
USA CAPITAL LAND FUND
September 30, 1996
(unaudited)
ASSETS
ASSETS
Cash in bank $ 1,880
Equipment - net 46
Partnership interest - USA Capital Land Fund 00
TOTAL ASSETS $ 1,926
LIABILITIES AND EQUITY
LIABILITIES AND EQUITY
Stockholders' Equity $ 1,926
TOTAL LIABILITIES AND EQUITY $ 1,926
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