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 October 31, 1997
----------------
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
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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.)
1250 Terminal Tower, 50 Public Square, Cleveland, Ohio 44113
- ------------------------------------------------------ ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 216-621-6060
------------
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 the past 90 days. YES X NO
----- -----
GRANITE DEVELOPMENT PARTNERS, L.P.
TABLE OF CONTENTS
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets -
October 31, 1997 and January 31, 1997 3-4
Statements of Operations -
Three Months and Nine Months
Ended October 31, 1997 and 1996 5
Statements of Changes in Partners' Deficit 6
Statements of Cash Flows - Nine Months
Ended October 31, 1997 and 1996 7-8
Notes to the Financial Statements 9-14
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 15-18
Part II. OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K 18
Signatures
PART I. FINANCIAL INFORMATION
<TABLE>
GRANITE DEVELOPMENT PARTNERS, L.P.
(A Delaware Limited Partnership)
BALANCE SHEETS
<CAPTION>
October 31, January 31,
1997 1997
----------- ------------
(Unaudited) (Restated)
<S> <C> <C>
ASSETS
LAND $ 3,927,204 $ 4,472,219
LAND IMPROVEMENTS 3,007,967 2,476,446
----------- -----------
6,935,171 6,948,665
RESTRICTED CASH EQUIVALENTS 1,419,922 4,602,891
MORTGAGE NOTES RECEIVABLE 3,731,959 6,323,446
INVESTMENTS IN AND ADVANCES TO
JOINT VENTURES 28,440,418 25,866,537
OTHER ASSETS
Mortgage procurement costs, net of
accumulated amortization of
$1,791,218 at October 31, 1997 and
$1,446,575 at January 31, 1997 489,383 826,126
Organization costs, net of
accumulated amortization of
$596,360 at October 31, 1997 and
$449,697 at January 31, 1997 176,550 298,420
Cash 1,240,033 286,988
Interest receivable 6,857,530 5,207,019
Other 80,500 55,000
Commission receivable - 17,392
Administrative fee receivable 105,000 60,000
----------- -----------
8,948,996 6,750,945
----------- -----------
$49,476,466 $50,492,484
=========== ===========
LIABILITIES,
PARTNERS'SPECIAL UNITS
& PARTNERS' DEFICIT
- ----------------------
SENIOR NOTES PAYABLE $36,000,000 $36,000,000
MORTGAGE NOTES PAYABLE 442,355 910,472
LOAN PAYABLE - SUNRISE 921,768 921,768
OTHER LIABILITIES
Accounts payable 112,759 48,632
Accrued fees, partners 1,355,103 935,796
Accrued interest 2,071,128 1,009,139
Accrued real estate taxes 161,798 134,913
Deposits 970,061 3,199,100
Deferred income 6,067,030 4,656,074
----------- -----------
10,737,879 9,983,654
PARTNERS' EQUITY (DEFICIT)
Partners' special units 9,000,000 9,000,000
Partners' deficit (7,625,536) (6,323,410)
----------- -----------
1,374,464 2,676,590
----------- -----------
$49,476,466 $50,492,484
=========== ===========
<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 Nine Months Ended
October 31, October 31,
-------------------------- ---------------------------
1997 1996 1997 1996
----------- ----------- ----------- ------------
(Restated) (Restated)
<S> <C> <C> <C> <C>
REVENUES
Sales of developed
property $ 1,165,792 $ 8,681,058 $ 2,787,289 $ 8,748,058
Cost of sales (607,478) (6,134,269) (1,641,741) (6,181,971)
----------- ----------- ----------- -----------
558,314 2,546,789 1,145,548 2,566,087
Interest 25,000 114,841 507,146 453,938
Commission 65,619 62,836 119,896 138,972
Other 40,458 17,541 109,302 75,605
----------- ----------- ----------- -----------
689,391 2,742,007 1,881,892 3,234,602
----------- ----------- ----------- -----------
EXPENSES
Interest 1,102,508 1,051,425 3,144,689 3,300,831
Fees, partners 145,010 499,648 419,068 1,018,793
Real estate taxes 43,351 84,546 131,761 225,580
Operating and
other 15,816 191,574 70,202 315,614
Amortization 165,136 167,773 523,752 480,210
----------- ----------- ----------- -----------
1,471,821 1,994,966 4,289,472 5,341,028
----------- ----------- ----------- -----------
(782,430) 747,041 (2,407,580) (2,106,426)
Income from
joint ventures 797,603 123,786 1,105,454 485,828
----------- ----------- ----------- -----------
NET INCOME(LOSS) $ 15,173 $ 870,827 $(1,302,126) $(1,620,598)
=========== =========== =========== ============
<FN>
See notes to financial statements.
</FN>
</TABLE>
<TABLE>
GRANITE DEVELOPMENT PARTNERS, L.P.
(A Delaware Limited Partnership)
STATEMENT OF CHANGES IN PARTNERS' DEFICIT
<CAPTION>
Sunrise FC-Granite, Limited
Land Co. Inc. Partners Total
-------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
Balance at January 31, 1994 $ 100 $ (4,350,570) $ - $(4,350,470)
Distribution of interest on
special units - (963,870) - (963,870)
Net loss (restated) (39,032) (3,864,124) - (3,903,156)
-------- ----------- ---------- -----------
Balance at January 31, 1995
(restated) (38,932) (9,178,564) - (9,217,496)
Net loss (restated) (1,585) (156,902) - (158,487)
-------- ------------ ---------- -----------
Balance at January 31, 1996
(restated) (40,517) ( 9,335,466) - (9,375,983)
Capital contribution -
exercise of warrants - - 3,999,960 3,999,960
Withdrawal of original
limited partner 40,517 (40,517) - -
Distribution of interest
on special units - (1,914,202) - (1,914,202)
Net income (restated) - 966,815 - 966,815
-------- ------------ ---------- -----------
Balance at January 31, 1997
(restated) - (10,323,370) 3,999,960 (6,323,410)
Net loss for the nine months
ended October 31, 1997
(unaudited) - (325,532) (976,594) (1,302,126)
-------- ------------ ---------- -----------
Balance at October 31, 1997
(unaudited) $ - $(10,648,902) $3,023,366 $ (7,625,536)
========= ============ ========== ============
<FN>
See notes to financial statements.
</FN>
</TABLE>
<TABLE>
GRANITE DEVELOPMENT PARTNERS, L.P.
(A Delaware Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Nine Months Ended
October 31,
---------------------------
1997 1996
----------- ------------
(Restated)
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net loss $(1,302,126) $ (1,178,988)
Adjustments to reconcile net loss to net cash
provide by (used in) operating activities:
Amortization 523,752 480,210
Income from joint ventures (1,105,454) (485,828)
Changes in operating assets and liabilities:
Decrease in land and
land improvements 13,494 5,056,746
Decrease (increase) in restricted
cash equivalents 3,182,969 (2,978,523)
Decrease (increase) in mortgage
notes receivable 2,591,487 (1,488,164)
Increase in organizational costs (57,239) -
Increase in interest receivable (1,650,511) (2,065,248)
Increase in other assets (25,500) -
Decrease in commission receivable 17,392 -
Increase in administrative fee receivable (45,000) (85,000)
Increase in accounts payable 64,127 178,924
Increase in accrued fees, partner 419,307 845,573
Increase in accrued interest 1,061,989 960,278
Increase (decrease) in accrued
real estate taxes 26,885 (128,181)
(Decrease) increase in deposits (2,229,039) 927,484
Increase in deferred income 1,410,956 1,336,835
----------- -----------
Net cash provided by
operating activities 2,897,489 1,376,118
----------- -----------
CASH FLOW FROM INVESTING ACTIVITIES:
Distribution from affiliate 642,600 -
Investments in and advances to affiliates (2,111,027) (1,100,013)
----------- -----------
Net cash used in investing activities (1,468,427) (1,100,013)
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from loan payable-Sunrise - 190,000
Repayment of mortgage notes payable (468,117) (19,260)
Repayment mortgage notes payable - (4,000,000)
Increase in mortgage procurement costs (7,900) (17,000)
----------- -----------
Net cash used in financing activities (476,017) (3,846,260)
----------- -----------
Increase (decrease) in cash 953,045 (3,570,155)
Cash at beginning of the period 286,988 3,635,578
----------- ------------
Cash at end of the period $ 1,240,033 $ 65,423
=========== ============
Supplemental Disclosure of Cash Flow Information
Cash paid during the period for:
Interest $ 2,082,700 $ 2,119,748
Real estate taxes $ 104,876 $ 353,761
<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, 1997 Annual Report on
Form 10K.
NOTE B - RESTATEMENT
The Partnership has restated its previously issued financial
statements for the years ended January 31, 1997, 1996 and 1995 and
the nine months ended October 31, 1996 to correct an error in
accounting for interest income recorded on certain advances. The
Partnership recorded interest income on advances for the period
from February 1, 1994 to January 31, 1997. The previously issued
financial statements have been restated to reverse the interest
income recorded on certain advances. As a result of the
restatement, interest receivable and interest income decreased and
net loss increased by $367,959 for the year ended January 31, 1995,
interest receivable, interest income and net income decreased by
$385,959 and $294,407 for the years ended January 31, 1996 and
1997, respectively. For the nine months ended October 31, 1996,
interest receivable and interest income decreased and net loss
increased by $220,805 for the restatement.
NOTE C - 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 $739,148
for the nine months ended October 31, 1997 and has not been
distributed. As of January 31, 1997, $243,676 of the interest
earned on the special units remained undistributed. Total interest
earned of $982,823 as of October 31, 1997 will be distributed pari-
passu with the interest on the Senior Notes when funds are
available.
NOTE D - MORTGAGE NOTES PAYABLE
The Partnership entered into mortgage notes payable aggregating
$322,080 at October 31, 1997 and $597,510 at January 31, 1997,
respectively, to purchase certain properties. Amounts borrowed of
$322,080 bear interest at a fixed rate of 8% per annum. 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.
During the year ended January 31, 1997, the Partnership entered
into a construction loan agreement collateralized by a promissory
note in an amount not to exceed $1,600,000. The note bears
interest at the prime rate (8.50% at October 31, 1997) and matures
on August 1, 1998. As of October 31, 1997, the outstanding balance
related to this loan was $120,275. The loan was established for
the funding of the Fairfax Meadows development.
The Partnership held a mortgage note payable aggregating $4,000,000
during the year ended January 31, 1996. The note was
collateralized by a mortgage on the 194th Street Property. On
October 2, 1996, the 194th Street Property was sold to a third
party purchaser. The purchaser assumed the $4,000,000 note payable
and there is no recourse to the Partnership.
NOTE E - TRANSACTIONS WITH AFFILIATES
The sole general partner is FC-Granite, Inc., an Ohio corporation
("FC-Granite"). FC-Granite is a wholly-owned subsidiary of Sunrise
Land Company ("Sunrise"), the land division subsidiary of Forest
City Enterprises, Inc.
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 administrative 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 administrative fees accrued for the
nine months ended October 31, 1997 and 1996, were $180,466 and
$290,164, respectively. Fees outstanding as of January 31, 1997,
were $212,040. Total outstanding fees of $392,506 as of October
31, 1997, will be paid when funds are available.
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 nine months
ended October 31, 1997 and 1996 were $127,254 and $388,602,
respectively. Fees outstanding as of January 31, 1997, were
$386,003. Total outstanding fees of $513,257 as of October 31,
1997, will be paid when funds are available.
In addition, accrued real estate commissions due to FC-Granite were
$111,348 and $340,027 for the nine months ended October 31, 1997
and 1996, respectively. Commissions outstanding as of January 31,
1997, were $337,753. Total outstanding commissions of $449,101 as
of October 31, 1997, will be paid when funds are available.
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 during the nine
months ended October 31, 1997 and 1996, were $45,000. Fees earned
for the year ended January 31, 1997, were $60,000. Total fees due
the Partnership as of October 31, 1997 are $105,000.
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. The Partnership earned $119,896 during the nine months
ended October 31, 1997. Commissions of $138,972 were earned during
the nine month period ended October 31, 1996.
The Partnership has advanced $22,645,379 at October 31, 1997 and
$20,710,431 at January 31, 1997 to its joint ventures. Total
interest earned on the advances amounted to $1,643,192 and
$1,009,324 for the nine months ended October 31, 1997 and 1996,
respectively. Interest income is deferred by the Partnership until
the interest capitalized on the joint ventures is recognized as
cost of sales by the joint ventures. Interest recognized as income
for the nine months ended October 31, 1997 and 1996, was $169,220
and $143,911, respectively.
During the nine months ended October 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.
Interest accrued on the loan was $69,897 and $69,890 for the nine
month periods ended October 31, 1997 and 1996, respectively. Total
outstanding interest due Sunrise as of October 31, 1997, is
$226,176.
Included in restricted cash equivalents and deposits at October 31,
1997 and January 31, 1997 is $1,035,998 and $3,124,950,
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 F - 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 October 31, 1997 and
January 31, 1997, were $3,949,421 and $2,929,217, respectively, and
in Eaton Estate Partnership at October 31, 1997 and January 31,
1997, were $2,043,176 and $2,332,049, respectively.
The Partnership has also advanced $22,645,379 at October 31, 1997
and $20,710,431 at January 31, 1997 to the partnerships. Pursuant
to the Amended and Restated Partnership Agreement for Silver Canyon
Partnership, 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% (8.50% at October 31, 1997). Funds advanced
to Eaton Estate Partnership bear interest at prime plus three
percent (3%).
The Eaton Estate Partnership made a cash distribution during the
nine month period ended October 31, 1997. The total distribution
was $2,142,000, of which the Partnership received its 30% share, or
$642,600.
For the nine months ended October 31, 1997, the Silver Canyon
Partnership generated net income of $1,569,545. Of this amount,
$1,020,204 has been recorded by the Partnership under the equity
method.
For the nine months ended October 31, 1997, the Eaton Estate
Partnership generated net income of $284,166. Of this amount,
$85,250 has been recorded by the Partnership under the equity
method.
NOTE G - JOINT VENTURE STATEMENT OF OPERATIONS
<TABLE>
Shown below is the statement of operations for the Silver Canyon
Partnership:
<CAPTION>
Nine Months Ended
October 31,
--------------------------
1997 1996
----------- -----------
<S> <C> <C>
REVENUES
Operating income $ 3,015,175 $ 2,024,327
EXPENSES
Fees, partners 90,000 130,000
Commissions 659,740 329,312
Legal and professional 16,164 101,020
Travel and entertainment 45,208 35,055
Operating and other 464,918 279,857
Depreciation and amortization 169,600 129,786
----------- -----------
Subtotal 1,445,630 1,005,030
----------- -----------
NET INCOME $ 1,569,545 $ 1,019,297
=========== ===========
</TABLE>
NOTE H - LITIGATION
The Partnership is involved in litigation related to its
operations. The Partnership and several affiliates are defendants
in a proceeding arising out of the October 1996 sale of the 194th
Street property located in Miami Beach, Florida. The plaintiff is
a third-party broker seeking a commission on the premise that the
plaintiff initiated the initial contact between the ultimate buyer
and the Partnership. In the opinion of management and legal
counsel the maximum damages based on the litigation proceedings is
approximately $400,000. However, the Partnership and the other
defendants deny that any commission has been earned by the
Plaintiff and legal counsel of the Partnership is seeking a summary
judgment seeking dismissal of the case.
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
nine months ended October 31, 1997 were of a normal recurring
nature. Results of operations for the nine months ended October
31, 1997 are not necessarily indicative of results of operations
which may be expected for the full year.
Item 2. Management's Discussion and Analysis of Financial
Condition
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, 1997 contained in the Annual
Report on Form 10-K.
Results of Operations
The Partnership recorded sales of $1,165,792 of developed
property for the three month period ended October 31, 1997 versus
sales of $8,681,058 for the three month period ended October 31,
1996. During the three month period ended October 31, 1997, the
Partnership sold one lot of the Harmony Glen subdivision, three
lots of the River Oaks subdivision, and eight lots located in the
Fairfax Meadows subdivision. The most significant sale for the
three month period ended October 31, 1996, was the sale of the
oceanfront portion of 194th Street in Miami Beach, Florida for
$7,927,770.
For the nine month periods ended October 31, 1997 and 1996,
the Partnership recorded sales of $2,787,289 and $8,748,058,
respectively. The decrease in sales is mainly attributable to the
decrease in the availability of developed land inventory.
Silver Canyon Partnership, a joint venture of the Partnership
accounted for under the equity method, reported sales of $3,779,280
and $1,856,626 for the three month periods ended October 31, 1997
and 1996, respectively. For the nine month periods ended October
31, 1997 and 1996, the Silver Canyon Partnership recorded sales of
$7,029,725 and $5,692,126, respectively.
As of October 31, 1997, the following significant sales were
under contract: eight sublots located in the Cambridge Park
subdivision for $398,000; 27 lots located within the Ledges
subdivision for $1,507,000; two lots of the River Oaks subdivision
for $280,000; 192 lots located in the Seven Hills development for
$10,598,000; and 69 sublots in the Eaton Estates subdivision for
$3,689,000. None of the contracts are guaranteed to close.
Interest income totalled $25,000 and $114,841 for the three
months ended October 31, 1997 and 1996, respectively. Interest
income totalled $507,146 and $453,938 for the nine months ended
October 31, 1997 and 1996, 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. The decrease in interest income is
mainly attributable to the paydown of notes receivable.
Real estate tax expense totalled $43,351 and $84,546 for the
three months ended October 31, 1997 and 1996, respectively, and
$131,761 and $225,580 for the nine months ended October 31, 1997
and 1996, respectively. The reduction in real estate tax expense
is attributable to the decrease in land held for development.
Operating and other expenses totalled $15,816 and $191,574 for
the three months ended October 31, 1997 and 1996, respectively, and
$70,202 and $315,614 for the nine months ended October 31, 1997 and
1996, respectively. The decrease in operating expenses for fiscal
1997 as compared to fiscal 1996 is mainly attributable to a
decrease in legal and professional fees.
For the three months ended October 31, 1997, the Partnership
reported a net income of $15,173 versus a net income of $870,827
for the three months ended October 31, 1996. For the nine months
ended October 31, 1997, the Partnership recorded a net loss of
$1,302,126 versus a net loss of $1,620,598 for the nine months
ended October 31, 1996. The decrease in net income for the three
month and increase in net loss for the nine month periods ended
October 31, 1997 versus 1996, is mainly attributable to a decrease
in sales revenues and an increase in interest expense.
Financial Condition and Liquidity
Net cash provided by operating activities was $2,897,489 for
the nine month period ended October 31, 1997 versus net cash
provided by of $1,376,118 for the nine month period ended October
31, 1996. The increase in cash provided by operating activities in
the nine month period ended October 31, 1997 was mainly
attributable to the payments on mortgage notes receivables. An
decrease in restricted cash was offset by an decrease in deposits.
The cash provided by operating activities for the nine months ended
October 31, 1996, was mainly the result of an increase in interest
receivable and an decrease in land improvements. Included in
restricted cash and deposits as of October 31, 1996, 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.
Net cash used in investing activities was $1,468,427 and
$1,100,013 for the nine months ended October 31, 1997 and 1996,
respectively. Cash used in investing activities is attributable to
funds advanced for development expenditures to the Silver Canyon
property.
Net cash used in financing activities for the nine months
ended October 31, 1997 was $476,017 versus $3,846,260 for the nine
months ended October 31, 1996. The net cash used during the nine
months ended October 31, 1997 was primarily the result of principal
payments on mortgage notes of $468,117. The net cash used during
the nine months ended October 31, 1996 was the result of a
repayment of mortgage notes payable of $4,000,000 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.
Short-term external financing has been obtained to provide the
funds necessary for the development of the Thornbury development
(Solon Estates) located in Solon, Ohio. On December 3, 1997, the
Partnership closed a $1,400,000 loan secured by a promissory note.
The note carries interest at the rate of one-half of one percent
(1/2%) in excess of the prime rate. The term of the loan is three
years and is secured by a first mortgage on 206 acres of property.
The Seven Hills development, which is owned by the Silver
Canyon Partnership, is being developed in conjunction with a golf
course. The golf course owner and developer, Seven Hills Golf
L.P., has sold the golf course to The Rio Hotel of Las Vegas.
Indications have been that The Rio intends to operate the course as
a highly exclusive, private facility, with very limited play.
There had been prior indications from the developer of the golf
course that it would be open to the public for high greens fees.
This has greatly concerned the Silver Canyon Partnership, which has
entered into discussions with the Rio Hotel to address the
situation. In August, 1997, a class-action lawsuit was filed by
the current homeowners in Seven Hills against the Silver Canyon
Partnership, the golf course developers, The Rio, and other
entities. In addition, a separate lawsuit was filed by some of the
production homebuilding companies at Seven Hills, against the same
parties. Both suits seek a commitment for public play on the golf
course, as well as damages, among other remedies. The Silver
Canyon Partnership is responding to both suits, and is attempting
to reach an appropriate resolution with all parties involved. The
partnership's management and legal counsel cannot yet determine the
outcome of the lawsuits. Sales efforts are continuing at the Seven
Hills development, and because these events are recent, it is not
yet possible to determine the extent of any impact on the Silver
Canyon Partnership's financial performance.
Information Relating to Forward-Looking Statements
This Quarterly Report, together with other statements and
information publicly disseminated by the Partnership, contains
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Such statements
reflect management's current views with respect to financial
results related to future events and are based on assumptions and
expectations which may not be realized and are inherently subject
to risks and uncertainties, many of which cannot be predicted with
accuracy and some of which might not even be anticipated. Future
events and actual results, financial or otherwise, may differ from
the results discussed in the forward-looking statements. Risks and
other factors that might cause differences, some of which could be
material, include, but are not limited to, the effect of economic
and market conditions on a nation-wide basis as well as regionally
in areas where the Partnership has a geographic concentration of
land; failure to consummate financing arrangements; development
risks, including lack of satisfactory financing, construction and
cost overruns; the level and volatility of interest rates; the rate
of revenue increases versus expenses increases; as well as other
risks listed from time to time in the Partnership's reports filed
with the Securities and Exchange Commission. The Partnership has
no obligation to revise or update any forward-looking statements as
a result of future events or new information. Readers are
cautioned not to place undue reliance on such forward-looking
statements.
PART II. OTHER INFORMATION
- ---------------------------
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - none.
(b) No reports on Form 8-K have been filed by the Registrant
during the quarter ended October 31, 1997.
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 thereunto duly authorized.
Granite Development Partners, L.P.
----------------------------------
(Registrant)
DATE: 12/15/97 /s/ Robert F. Monchein
-------- -------------------------------------
Robert F. Monchein
President
FC-Granite, Inc., the general partner
of Granite Development Partners, L.P.
DATE: 12/15/97 /s/ Mark A. Ternes
-------- -------------------------------------
Mark A. Ternes
Controller
FC-Granite, Inc., the general partner
of Granite Development Partners, L.P.
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