SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
- - - - - - - - - - - - -
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from__________ to __________
Commission file number 033-80104
GRANITE DEVELOPMENT PARTNERS, L.P.
- -----------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 34-1754061
- ---------------------------- -------------------
(State or other jurisdiction (I. R. S. Employer
of incorporation or organization) Identification No)
10800 Brookpark Road Cleveland, Ohio 44130
- ----------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 216-267-1200
------------
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 and 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 the past 90 days. YES X NO
---- ----
PART I. FINANCIAL INFORMATION
<TABLE>
GRANITE DEVELOPMENT PARTNERS, L.P.
(A Delaware Limited Partnership)
BALANCE SHEETS
<CAPTION>
July 31, January 31,
1996 1996
----------- -----------
(Unaudited)
<S> <C> <C>
ASSETS
LAND $11,521,443 $11,567,790
LAND IMPROVEMENTS 1,075,066 711,034
----------- -----------
12,596,509 12,278,824
RESTRICTED CASH EQUIVALENTS 4,011,408 1,308,453
MORTGAGE NOTES RECEIVABLE 3,745,066 4,413,089
INVESTMENTS IN AND ADVANCES TO
JOINT VENTURES 23,941,692 22,686,561
OTHER ASSETS
Mortgage procurement costs, net of
accumulated amortization of
$1,205,065 at July 31, 1996 and
$973,515 at January 31, 1996 1,067,636 1,282,186
Organization costs, net of
accumulated amortization of
$367,921 at July 31, 1996 and
$287,034 at January 31, 1996 380,196 461,083
Cash 235,894 3,635,578
Interest receivable 4,900,907 3,701,612
Administration fee receivable 40,000 -
----------- -----------
6,624,633 9,080,459
----------- -----------
$50,919,308 $49,767,386
=========== ===========
LIABILITIES, WARRANTS,
PARTNERS' SPECIAL UNITS
& PARTNERS' DEFICIT
SENIOR NOTES PAYABLE $36,000,000 $36,000,000
MORTGAGE NOTES PAYABLE 4,864,269 5,110,025
LOAN PAYABLE - SUNRISE 921,768 731,768
OTHER LIABILITIES
Accounts payable 222,910 133,935
Accrued fees, partners 519,145 173,220
Accrued interest 1,029,409 971,116
Accrued real estate taxes 165,688 281,885
Deposits 3,929,728 1,618,514
Deferred income 4,232,598 3,368,908
----------- ----------
10,099,478 6,547,578
WARRANTS (TEMPORARY) 1,000,080 1,000,080
PARTNERS' EQUITY (DEFICIT)
Partners' special units 9,000,000 9,000,000
Partners' deficit (10,966,287) (8,622,065)
----------- ----------
(1,966,287) 377,935
----------- ----------
$50,919,308 $49,767,386
=========== ===========
<FN>
See notes to financial statements.
</FN>
</TABLE>
<TABLE>
GRANITE DEVELOPMENT PARTNERS, L.P.
(A Delaware Limited Partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
July 31, July 31,
-------------------------- --------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES
Sales of developed
property $ 67,000 $ - $ 67,000 $ -
Cost of sales (47,702) (21,016) (47,702) (21,016)
----------- ----------- ----------- -----------
19,298 (21,016) 19,298 (21,016)
Interest 303,097 152,445 486,300 309,910
Commission 58,064 - 58,064 -
Other 60,593 19,601 76,136 38,734
----------- ----------- ----------- -----------
441,052 151,030 639,798 327,628
----------- ----------- ----------- -----------
EXPENSES
Interest 1,134,965 1,105,630 2,249,406 2,098,176
Fees, partners 317,515 230,875 519,145 477,193
Real estate taxes 43,531 164,136 141,034 328,271
Operating and
other 58,106 272,977 124,040 304,302
Amortization 156,976 152,971 312,437 301,440
----------- ----------- ----------- -----------
1,711,093 1,926,589 3,346,062 3,509,382
----------- ----------- ----------- -----------
(1,270,041) (1,775,559) (2,706,264) (3,181,754)
Income (loss) from
joint ventures 374,279 (130,054) 362,042 (100,756)
----------- ----------- ----------- -----------
NET LOSS $ (895,762) $(1,905,613) $(2,344,222) $(3,282,510)
=========== =========== =========== ===========
<FN>
See notes to financial statements.
</FN>
</TABLE>
<TABLE>
GRANITE DEVELOPMENT PARTNERS, L.P.
(A Delaware Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
<CAPTION>
Sunrise FC-Granite,
Land Co. Inc. Total
-------- ------------ ------------
<S> <C> <C> <C>
Balance at November 15, 1993 $ - $ - $ -
(inception)
Initial capital contribution 100 300 400
Capital contribution - 1,000,000 1,000,000
Reduction of partners' equity
related to contribution
of land - (3,137,082) (3,137,082)
Reduction of partners' equity
related to purchase of land
from Sunrise - (1,350,227) (1,350,227)
Net loss - (863,561) (863,561)
-------- ------------ ------------
Balance at January 31, 1994 100 (4,350,570) (4,350,470)
Distribution of interest on
special units - (963,870) (963,870)
Net loss (35,352) (3,499,845) (3,535,197)
-------- ------------ ------------
Balance at January 31, 1995 (35,252) (8,814,285) (8,849,537)
Net income 2,275 225,197 227,472
-------- ------------ ------------
Balance at January 31, 1996 (32,977) (8,589,088) (8,622,065)
Net loss for the six months
ended July 31, 1996
(unaudited) (23,442) (2,320,780) (2,344,222)
-------- ------------ ------------
Balance at July 31, 1996
(unaudited) $(56,419) $(10,909,868) $(10,966,287)
======== ============ ============
<FN>
See notes to financial statements.
</FN>
</TABLE>
<TABLE>
GRANITE DEVELOPMENT PARTNERS, L.P.
(A Delaware Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Six Months Ended
July 31,
----------------------------
1996 1995
----------- -------------
<S> <C> <C>
Cash Flow from Operating Activities:
Net loss $(2,344,222) $ (3,282,510)
Adjustment to reconcile net loss to net cash
(used in) provided by operating activities:
Amortization 312,437 301,440
(Income) loss from joint ventures (362,042) 100,756
Changes in operating assets and liabilities:
Increase in land and land improvements (317,685) (420,408)
(Increase) decrease in restricted
cash equivalents (2,702,955) 2,590,263
Decrease in mortgage notes receivable 668,023 949,937
Increase in interest receivable (1,199,295) (1,102,761)
Increase in development fee receivable - (185,894)
Increase in administrative fee receivable (40,000) (37,500)
Increase in organization costs - (32,339)
Increase (decrease) in accounts payable 88,975 (57,702)
Increase in accrued fees, partner 345,925 477,193
Increase (decrease) in accrued interest 58,293 (330,283)
(Decrease) increase in accrued
real estate taxes (116,197) 216,660
Increase in deposits 2,311,214 15,000
Increase in deferred income 863,690 1,059,887
----------- -------------
Net cash (used in) provided by
operating activities (2,433,839) 261,739
----------- -------------
Cash Flow from Investing Activities:
Investments in and advances to affiliates (893,089) (4,534,392)
----------- -------------
Net cash used in investing activities (893,089) (4,534,392)
----------- -------------
Cash Flow from Financing Activities:
Proceeds from loan payable - Sunrise 190,000 -
Proceeds from mortgage notes payable - 4,000,000
Repayment of mortgage notes payable (245,756) (225,430)
Increase in mortgage procurement cost (17,000) (32,150)
----------- -------------
Net cash (used in) provided by
financing activities (72,756) 3,742,420
----------- -------------
Decrease in cash (3,399,684) (530,233)
Cash at beginning of the period 3,635,578 552,074
----------- -------------
Cash at end of the period $ 235,894 $ 21,841
=========== =============
Supplemental Disclosure of Cash Flow Information
Cash paid during the period for:
Interest $ 2,191,113 $ 2,428,459
Real estate taxes $ 257,231 $ 111,611
<FN>
See notes to financial statements.
</FN>
</TABLE>
GRANITE DEVELOPMENT PARTNERS, L.P.
(A Delaware Limited Partnership)
NOTES TO THE FINANCIAL STATEMENTS (Unaudited)
NOTE A - FINANCIAL STATEMENT DISCLOSURES
Certain information and footnote disclosures, which are normally
included in financial statements prepared in accordance with
generally accepted accounting principles, have been condensed or
omitted. It is suggested that these financial statements be read
in conjunction with the financial statements and notes thereto
included in the Partnership's January 31, 1996 Form 10-K Annual
Report.
NOTE B - PARTNERS' SPECIAL UNITS
Until the senior notes payable are paid in full, $9,000,000 of the
partners' special units bear interest at 10.83% and will be paid
pari-passu with interest on the Senior Notes.
Interest earned on the partners' special units amounted to $490,057
for the six months ended July 31, 1996 and has not been
distributed. As of January 31, 1996, $1,183,178 of the interest
earned on the special units remained undistributed. Total interest
earned of $1,673,235 as of July 31, 1996 will be distributed pari-
passu with the interest on the Senior Notes when funds are
available.
NOTE C - MORTGAGE NOTES PAYABLE
The Partnership entered into mortgage notes payable aggregating
$864,269 and $1,110,025 at July 31, 1996 and January 31, 1996,
respectively, to purchase certain properties. Amounts borrowed of
$697,184 bear interest at a fixed rate of 8% per annum and $167,085
bears interest at two percent (2%) in excess of the prime rate
(8.25% at July 31, 1996). The notes payable are collateralized by
mortgages on the properties. Principal and interest are generally
payable one year after the date of the notes payable.
The Partnership holds a mortgage note payable aggregating
$4,000,000 at July 31, 1996 and January 31, 1996. The note bears
interest at 1.5% in excess of the prime rate and matures on June
12, 1997. The note is collateralized by a mortgage on the 194th
Street Property.
NOTE D - TRANSACTIONS WITH AFFILIATES
FC-Granite and Sunrise are reimbursed for all direct costs of
operations of the Partnership's affairs and development activities.
FC-Granite is paid a monthly administration fee as compensation for
its services in administering the business of the partnership which
is equal to one-sixth of 1% of the book value of the partnership
properties, as defined. Total administration fees accrued for the
six months ended July 31, 1996 were $350,643. Outstanding fees of
$67,582 as of January 31, 1996, were paid during the six month
period ended July 31, 1996.
Pursuant to a management agreement, Sunrise is paid a semi-annual
development fee equal to 4% of gross revenues as compensation for
its services in managing the development of the partnership
properties. Total development fees accrued for the six months
ended July 31, 1996 were $89,868. Outstanding fees of $56,340 as
of January 31, 1996, were paid during the six month period ended
July 31, 1996.
In addition, accrued real estate commissions to FC-Granite were
$78,634 for the six months ended July 31, 1996. Outstanding
commissions of $49,298 as of January 31, 1996, were paid during the
six month period ended July 31, 1996.
Pursuant to the Amended and Restated Silver Canyon Partnership
agreement, the Partnership is to receive a monthly administrative
fee in the amount of $5,000 per month. Fees earned as of June 30,
1996 totalled $25,000. Subsequently, the fee has been changed to
$15,000 per month beginning July 1, 1996. Fees earned as of July
31, 1996 totalled $40,000.
In addition, the Partnership is to receive a commission equal to 1%
of gross sales, as defined in the Amended and Restated Silver
Canyon Partnership agreement, as compensation for its services in
conducting marketing and sales duties and authorization of sales
contracts. Commissions of $58,064 were earned during the six month
period ended July 31, 1996.
The Partnership has advanced $20,336,287 at July 31, 1996 and
$19,443,198 at January 31, 1996 to its joint ventures. Total
interest earned on the advances amounted to $1,009,324 and
$1,883,707 for the six months ended July 31, 1996 and for the year
ended January 31, 1996, respectively. Interest of $110,868 was
recognized as income for the six months ended July 31, 1996. For
the year ended January 31, 1996, $87,084 was recognized as income.
During the six months ended July 31, 1996, Sunrise loaned the
Partnership an additional $190,000 to fund additional development
expenditures. Total funds advanced of $921,768 bear interest at
10% and will be paid back when excess funds are available.
Included in restricted cash equivalents and deposits at July 31,
1996 and January 31, 1996 is $2,754,728 and $1,102,514,
respectively, which represents sales proceeds invested on behalf of
Eaton Estate Partnership in short-term commercial paper. The
funds, together with interest earned, will be returned to the Eaton
Estate Partnership as funding of development expenditures is
needed.
NOTE E - INVESTMENTS IN AND ADVANCES TO JOINT VENTURES
The Partnership has a 33 1/3% interest in Silver Canyon Partnership
and a 30% interest in Eaton Estate Partnership. The Partnership's
investments in Silver Canyon Partnership at July 31, 1996 and
January 31, 1996, were $1,588,875 and $1,301,245, respectively, and
in Eaton Estate Partnership at July 31, 1996 and January 31, 1996,
were $2,014,548 and $1,940,135, respectively.
The Partnership has also advanced $20,336,287 at July 31, 1996 and
$19,443,198 at January 31, 1996 to the partnerships. The balance
funded by the Partnership to the Silver Canyon Partnership as of
January 31, 1996 was $19,443,198. Pursuant to the Amended and
Restated Partnership agreement for the Silver Canyon Partnership,
the Partnership's original obligation to make loans to Silver
Canyon Partnership was capped at the current level of funding at
January 31, 1996. The agreement also provides that the Partnership
is to provide up to two-thirds of $9,000,000 as additional loans as
funds are required. Funds advanced to Silver Canyon Partnership as
of January 31, 1996, bear interest at ten percent (10%) and funds
advanced subsequent to January 31, 1996 bear interest at the rate
of prime plus 1 3/4% (8.25% at July 31, 1996). Funds advanced to
Eaton Estate Partnership bear interest at prime plus three percent
(3%).
For the six months ended July 31, 1996, the Silver Canyon
Partnership generated net income of $862,976 primarily attributable
to proceeds from sales of developed property offset by commissions
and administrative fees. Of this amount, $287,630 has been
recorded by the Partnership under the equity method. For the year
ended January 31, 1996, the Silver Canyon Partnership generated
income of $615,625, of which $338,594 has been recorded by the
Partnership under the equity method.
For the six months ended July 31, 1996, the Eaton Estate
Partnership generated net income of $248,044. Of this amount,
$74,413 has been recorded by the Partnership under the equity
method. For the year ended January 31, 1996, the Eaton Estate
Partnership generated income of $1,462,021 primarily from the
proceeds from sales of developed property offset by real estate
taxes, commissions, interest and other miscellaneous expenses, of
which $438,606 has been recorded by the Partnership under the
equity method.
NOTE F - JOINT VENTURE STATEMENT OF OPERATIONS
<TABLE>
Shown below is the statement of operations for the Silver Canyon
Partnership:
<CAPTION>
Six Months Ended
July 31,
------------------------
1996 1995
---------- ---------
<S> <C> <C>
REVENUES
Operating income $1,529,637 $ -
EXPENSES
Interest expense - 16,437
Fees, partners 70,000 37,500
Commissions 215,293 -
Legal and professional 105,244 -
Travel and entertainment 18,899 37,913
Operating and other 183,688 251,897
Depreciation and amortization 73,537 30,292
---------- ---------
666,661 374,039
---------- ---------
NET INCOME (LOSS) $ 862,976 $(374,039)
========== =========
</TABLE>
The enclosed financial statements have been prepared on a
basis consistent with accounting principles applied in the prior
periods and reflect all adjustments which are, in the opinion of
management, necessary for a fair representation of the results of
the operations for the periods presented. All adjustments for the
six months ended July 31, 1996 were of a normal recurring nature.
Results of operations for the six months ended July 31, 1996 are
not necessarily indicative of results of operations which may be
expected for the full year.
The following discussion and analysis of Granite Development
Partners, L.P. should be read in conjunction with the audited
financial statements as of January 31, 1996 contained in the Form
10-K Annual Report.
Item 2. Management's Discussion and Analysis of Financial
Condition
Results of Operations
The Partnership recorded sales of $67,000 of developed
property for the three month and six month periods ended July 31,
1996 versus no sales for the three month and six month periods
ended July 31, 1995. The Partnership sold two lots located in the
Royal Valley development.
Silver Canyon Partnership, a joint venture of the Partnership
accounted for under the equity method, reported sales of $3,835,500
for the three month and six month periods ended July 31, 1996
versus no sales for the three month and six month periods ended
July 31, 1995. The increase in sales for the period is due to the
increase in developed land available for sale to third party
builders.
As of July 31, 1996, the following significant sales were
under contract: the oceanfront portion of 194th Street in Miami
Beach, Florida for $7,875,180; 5.4 acres of the North Olmsted
Industrial Park for $280,900; a thirteen acre cluster parcel of the
West Grove development in Olmsted Falls, Ohio for $902,000; 346
lots located in the Seven Hills development for $10,608,886; and
100 sublots in the Eaton Estates subdivision for $4,640,355. None
of the contracts are guaranteed to close.
Interest income totalled $303,097 and $152,445 for the three
months ended July 31, 1996 and 1995, respectively. Interest income
totalled $486,300 and $309,910 for the six months ended July 31,
1996 and 1995, respectively. Interest income is comprised of
interest related to receivables from the sale of developed property
on terms, from funds advanced to the joint ventures and from the
investment of proceeds from the sale of land in short-term
commercial paper. Interest income earned on funds advanced to the
Silver Canyon Partnership is being deferred. The increase in
interest income for both the three month and six month periods
ended July 31, 1996 versus July 31, 1995, is due to the increase in
interest due on receivables from the sale of developed property and
also the recognition of $110,868 of interest due on the Silver
Canyon Partnership loan.
Real estate tax expense totalled $43,531 and $164,136 for the
three months ended July 31, 1996 and 1995, respectively, and
$141,034 and $328,271 for the six months ended July 31, 1996 and
1995, respectively. The reduction in real estate tax expense is
attributable to the decrease in land held for development.
Operating and other expenses totalled $58,106 and $272,977 for
the three months ended July 31, 1996 and 1995, respectively, and
$124,040 and $304,302 for the six months ended July 31, 1996 and
1995, respectively. Included in operating expenses for fiscal 1995
are expenses of $155,556 incurred in relation to the securing of
external financing for the Seven Hills development.
For the three months ended July 31, 1996, the Partnership
reported a net loss of $895,762 versus a net loss of $1,905,613 for
the three months ended July 31, 1995. For the six months ended
July 31, 1996, the Partnership recorded a net loss of $2,344,222
versus a net loss of $3,282,510 for the six months ended July 31,
1995. The decrease in net loss for the three month and six month
periods ended July 31, 1996 versus 1995, is mainly attributable to
an increase in interest income and a decrease in real estate and
operating expenses. The decrease in loss is also a result of the
recognition of net income from the joint ventures of $374,279 and
$362,042 for the three month and six month periods ended July 31,
1996, respectively, versus a net loss recognized of $130,054 and
$100,756 for the respective periods in fiscal 1995.
Financial Condition and Liquidity
Net cash used in operating activities for the six months ended
July 31, 1996 was $2,433,839 versus net cash provided of $261,739
for the six months ended July 31, 1995. The cash used in operating
activities for the six months ended July 31, 1996, was mainly the
result of an increase in interest receivable and an increase in
land improvements. An increase in restricted cash was offset by an
increase in deposits. Included in restricted cash and deposits is
$2,754,728 which represents sales proceeds invested on behalf of
the Eaton Estate Partnership (Note D). The increase in interest
receivable is mainly comprised of interest earned on funds advanced
to the joint ventures. The cash provided by operating activities
for the six months ended July 31, 1995 was mainly the result of
decreases in restricted cash equivalents offset by an increase in
interest receivable and deferred income. Restricted cash was used
to make the semi-annual interest payment on the Senior Notes.
Net cash used in investing activities was $893,089 and
$4,534,392 for the six months ended July 31, 1996 and 1995,
respectively. The decrease in net cash used is attributable to the
decrease in funds advanced for development expenditures to the
Silver Canyon property.
Net cash used in financing activities for the six months ended
July 31, 1996 was $72,756 versus net cash provided by financing
activities for the six months ended July 31, 1995 of $3,742,420.
The net cash used during the six months ended July 31, 1996 was the
result of principal payments on mortgage notes of $245,756 and an
increase in mortgage procurement costs of $17,000 offset by funds
advanced from Sunrise Land Company to the Partnership to fund
additional development expenditures. The net cash provided during
the first six months of fiscal 1995 was the result of the
Partnership obtaining a mortgage note for $4,000,000 offset by
principal payments on mortgage notes totalling $225,430 and an
increase in procurement costs to obtain the additional financing.
In June, the loan agreement with General Motors Acceptance
Corporation as dated June 7, 1995 for the Seven Hills project was
amended. Specific parcels within the Seven Hills project are being
fully developed at the request of the home builders. The increase
in the loan was necessary to cover the cost of improving these
specific parcels. The principal amount of the loan was increased
from $26,000,000 to $30,000,000.
Short-term external financing has been pursued to provide the
funds necessary for the development of the Fairfax Meadows
development located in Medina, Ohio. On August 20, 1996, the
Partnership closed on a construction mortgage loan with a local
bank. The loan is secured by a promissory note in an amount not to
exceed $1,600,000. The note carries interest at the prime rate and
matures on August 1, 1998.
PART II. OTHER INFORMATION
Item 6. Exhibits and Report on Form 8-K
(a) Exhibits - none
(b) No reports on Form 8-K have been filed by the Registrant
during the quarter ended July 31, 1996.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.
Granite Development Partners, L.P.
----------------------------------
(Registrant)
DATE: 9/10/96 /s/ Robert F. Monchein
-------------- ----------------------------
President
FC-Granite, Inc., the general partner
of Granite Development Partners, L.P.
DATE: 9/10/96 /s/ Mark A. Ternes
-------------- ----------------------------
Controller
FC-Granite, Inc., the general partner
of Granite Development Partners, L.P.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-START> FEB-01-1996
<PERIOD-END> JUL-31-1996
<CASH> 235894
<SECURITIES> 0
<RECEIVABLES> 3745066
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 12596509
<DEPRECIATION> 0
<TOTAL-ASSETS> 50919308
<CURRENT-LIABILITIES> 0
<BONDS> 40864269
0
0
<COMMON> 0
<OTHER-SE> (1966287)
<TOTAL-LIABILITY-AND-EQUITY> 50919308
<SALES> 0
<TOTAL-REVENUES> 19298
<CGS> 0
<TOTAL-COSTS> 1096656
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2249406
<INCOME-PRETAX> (2344222)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2344222)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2344222)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
