<PAGE> 1
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 September 30, 1999
--------------------
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 of (IRS Employer Identification No.)
incorporation or organization)
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 _____
<PAGE> 2
GRANITE DEVELOPMENT PARTNERS, L.P.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
Balance Sheets -
September 30, 1999 (Unaudited) and
December 31, 1998 (Restated) 3-4
Statements of Operations (Unaudited) -
Nine months ended September 30, 1999 and 1998 5
Statements of Changes in Partners' Deficit (Unaudited) 6
Statements of Cash Flows (Unaudited) Nine months ended
September 30, 1999 and 1998 7-8
Notes to the Financial Statements (Unaudited) 9-17
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 18-24
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 24
Item 6. Exhibits and Reports on Form 8-K 24
Signatures
</TABLE>
<PAGE> 3
PART I- ITEM 2. FINANCIAL INFORMATION (continued)
GRANITE DEVELOPMENT PARTNERS, L.P.
(A Delaware Limited Partnership)
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
----------- -----------
(Unaudited) (Restated)
<S> <C> <C>
ASSETS
LAND $ 1,275,142 $ 1,772,580
LAND IMPROVEMENTS 1,567,630 1,431,273
----------- -----------
2,842,772 3,203,853
MORTGAGE NOTES RECEIVABLE 1,930,225 2,955,344
INVESTMENTS IN AND ADVANCES TO
JOINT VENTURES 23,250,849 32,221,489
OTHER ASSETS:
Cash 2,931,042 1,430,607
Interest receivable 166,822 9,629,531
Other 26,204 25,500
Administrative fee receivable -- 175,000
----------- -----------
3,124,068 11,260,638
----------- -----------
$31,147,914 $49,641,324
=========== ===========
</TABLE>
See notes to financial statements.
3
<PAGE> 4
PART I - ITEM 1. FINANCIAL INFORMATION (continued)
GRANITE DEVELOPMENT PARTNERS, L.P.
(A Delaware Limited Partnership)
BALANCE SHEETS - (continued)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1999
----------- -----------
(Unaudited) (Restated)
<S> <C> <C>
LIABILITIES, PARTNERS' SPECIAL
UNITS & PARTNERS' DEFICIT
SENIOR NOTES PAYABLE $ 36,000,000 $ 36,000,000
MORTGAGE NOTES PAYABLE 683,961 776,659
LOAN PAYABLE - SUNRISE -- 2,395,951
LOAN PAYABLE - EATON 5,320,250 878,462
OTHER LIABILITIES:
Accounts payable 356,934 962,805
Accrued fees, partners -- 1,264,257
Accrued interest 1,976,435 924,057
Accrued real estate taxes 73,607 99,953
Deposits 22,000 3,579
Deferred income
on Investments/Advances -- 6,379,262
------------ ------------
2,428,976 9,633,913
PARTNERS' EQUITY (DEFICIT)
Partners' special units 9,000,000 9,000,000
Partners' deficit (22,285,273) (9,043,661)
------------ ------------
(13,285,273) (43,661)
------------ ------------
$ 31,147,914 $ 49,641,324
============ ============
</TABLE>
See notes to financial statements.
4
<PAGE> 5
PART I- ITEM 2. FINANCIAL INFORMATION (continued)
GRANITE DEVELOPMENT PARTNERS, L.P.
(A Delaware Limited Partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------------- ----------------------------------
1999 1998 1999 1998
----------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
REVENUES
Sales of developed property $ 2,759,680 $ 1,590,020 $ 3,613,680 $ 4,051,520
Cost of sales (2,081,010) (1,235,797) (2,731,942) (2,838,290)
----------- ------------ ------------ -----------
678,670 354,223 881,738 1,213,230
Interest 238,810 330,358 934,262 552,446
Commission 68,382 177,359 189,448 297,979
Other 38,779 213,174 109,864 365,604
----------- ------------ ------------ -----------
1,024,641 1,075,114 2,115,312 2,429,259
----------- ------------ ------------ -----------
EXPENSES
Interest 1,106,093 1,117,493 3,343,287 3,248,669
Fees, partners -- 258,164 143,154 539,279
Real estate taxes 22,239 50,494 65,651 136,034
Operating and other 65,005 76,879 215,498 191,330
Amortization -- 124,148 -- 431,295
----------- ------------ ------------ -----------
1,193,337 1,627,178 3,767,590 4,546,607
----------- ------------ ------------ -----------
(168,696) (552,064) (1,652,278) (2,117,348)
Loss from joint venture Amendment (5,476,752) -- (5,476,752) --
(Loss) income from joint ventures (1,298,189) 579,623 (7,443,996) 446,838
----------- ------------ ------------ -----------
(6,774,941) 579,623 (12,920,748) 446,838
----------- ------------ ------------ -----------
NET (LOSS) INCOME $(6,943,637) $ 27,559 $(14,573,026) $(1,670,510)
=========== ============ ============ ===========
</TABLE>
See notes to financial statements.
5
<PAGE> 6
PART I- ITEM 2. FINANCIAL INFORMATION (continued)
GRANITE DEVELOPMENT PARTNERS, L.P.
(A Delaware Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
<TABLE>
<CAPTION>
FC-Granite, Limited
Inc. Partners Total
------------ ----------- ------------
<S> <C> <C> <C>
Balance at January 31, 1997 $(10,323,370) $ 3,999,960 $ (6,323,410)
Distribution of interest on
special units (1,147,980) -- (1,147,980)
Net loss (89,303) (267,909) (357,212)
------------ ----------- ------------
Balance at January 31, 1998 (11,560,653) 3,732,051 (7,828,602)
Net loss - restated (303,765) (911,294) (1,215,059)
------------ ----------- ------------
Balance at December 31, 1998 - restated (11,864,418) 2,820,757 (9,043,661)
Cancellation of interest
on special units 1,331,414 -- 1,331,414
Net loss for the nine months
ended September 30, 1999 (unaudited) (11,752,269) (2,820,757) (14,573,026)
------------ ----------- ------------
Balance at September 30, 1999 (unaudited) $(22,285,273) $ -- $(22,285,273)
============ =========== ============
</TABLE>
See notes to financial statements.
6
<PAGE> 7
PART I- ITEM 2. FINANCIAL INFORMATION (continued)
GRANITE DEVELOPMENT PARTNERS, L.P.
(A Delaware Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------------------
1999 1998
------------ -----------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net loss $(14,573,026) $(1,670,510)
Adjustments to reconcile net loss to net cash
used in operating activities:
Forgiveness of capitalized income recognized - SCP 3,800,771 --
Forgiveness of commission income - SCP 1,455,981 --
Forgiveness of administration fee income - SCP 220,000 --
Amortization -- 431,295
Loss (income) from joint ventures 7,443,996 (446,838)
Changes in operating assets and liabilities:
Decrease in land and land improvements 361,081 1,145,188
Decrease in restricted cash equivalents -- 479,305
Decrease in mortgage notes receivable 1,025,119 1,223,190
Increase in interest receivable (1,882,474) (1,299,509)
(Increase) decrease in other assets (704) 55,000
Increase in administration fee receivable (45,000) (45,000)
(Decrease) increase in accounts payable (605,871) 36,266
Decrease in accrued fees, partner (1,060,073) (936,249)
Increase in accrued interest 1,052,378 793,999
Decrease in accrued real estate taxes (26,346) (910)
Increase (decrease) in deposits 18,421 (2,823,557)
Increase in deferred income 1,165,150 860,290
------------ -----------
Net cash used in operating activities (1,650,597) (2,198,040)
------------ -----------
CASH FLOW FROM INVESTING ACTIVITIES:
Investments in and advances to affiliates 70,663 (2,383,944)
------------ -----------
Net cash provided by (used in) investing activities 70,663 (2,383,944)
------------ -----------
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from loan payable -Sunrise 2,199,400 2,645,951
Repayment of loan payable - Sunrise (2,395,951) (921,768)
Proceeds from loan payable - Eaton 5,302,042 1,261,331
Repayment of loan payable - Eaton (860,290) --
Distributed interest on special units (1,072,170) --
Repayment of mortgage notes payable (92,662) (431,067)
------------ -----------
Net cash provided by financing activities 3,080,369 2,554,447
------------ -----------
INCREASE (DECREASE) IN CASH 1,500,435 (2,027,537)
CASH AT BEGINNING OF THE PERIOD 1,430,607 2,253,410
------------ -----------
CASH AT END OF THE PERIOD $ 2,931,042 $ 225,873
============ ===========
</TABLE>
See notes to financial statements.
7
<PAGE> 8
PART I- ITEM 2. FINANCIAL INFORMATION (continued)
GRANITE DEVELOPMENT PARTNERS, L.P.
(A Delaware Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------------------
1999 1998
------------ ---------
SUPPLEMENTAL SCHEDULE OF NON CASH ACTIVITIES
<S> <C> <C>
Operating Expenses
Write off of deferred income $(7,544,412) --
Write off of interest receivable $11,345,183 --
Financing Activities
Cancellation of interest on Special Units
applied to loan payable - Sunrise $(2,199,400) --
Cancellation of Interest on Special Units applied
to Accrued Partner Fees $ (204,184) --
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 2,290,909 $2,454,670
Real estate taxes $ 91,997 $ 136,944
</TABLE>
See notes to financial statements.
8
<PAGE> 9
PART I - ITEM 1. FINANCIAL INFORMATION (continued)
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 of Granite Development Partners, L.P. ("Partnership")
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 December 31, 1998 Annual Report on Form 10K.
This annual report is being restated (see Note K).
The 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. There were adjustments
for the nine months ended September 30, 1999, which were of a normal recurring
nature. Adjustments were also made for the nine months ended September 30, 1999
resulting from the identification of costs in excess of those budgeted in the
Silver Canyon Partnership ("SC Partnership"). As a result of these excess costs
and their impact on the Partnership financial results, the General Partner of
the Partnership, FC Granite, Inc., has elected to make changes relating to
interest on its special units. Results of operations for the nine month period
ended September 30, 1999 are not necessarily indicative of results of operations
which may be expected for the full year.
During the second quarter, American Nevada Corporation ("ANC"), the partner
responsible for the onsite improvements in the Seven Hills project, identified
costs in excess of budget to complete the project. Certain of these costs became
known to operating personnel during the fourth quarter of 1998 and the 1998
Annual Report on Form 10K is being restated to reflect the effect of these
excesses. Further information became known during the second quarter of 1999.
The second quarter 1999 Form 10Q is also being restated to include this
information. Prior year gross margins in the amount of $15,951,789 have been
reversed and no gross margins were recorded on 1999 sales. To minimize the
impact of these excess costs, the partners of SC Partnership have agreed in
principle to amend the Silver Canyon Partnership Agreement. The changes
resulting from the proposed amendment are reflected in this statement.
The proposed amendment to the Silver Canyon Partnership Agreement includes the
following provisions:
1. ANC will assign all of its future and past commissions, fees, and
distributions relating to loans, capital calls and interest thereon to the
Partnership. Amounts previously paid will be deemed return of capital.
2. ANC will fund one-half of the settlement amounts for the two lawsuits that
have been settled (see Note I).
9
<PAGE> 10
PART I - ITEM 1. FINANCIAL INFORMATION (continued)
GRANITE DEVELOPMENT PARTNERS, L.P.
(A Delaware Limited Partnership)
NOTES TO THE FINANCIAL STATEMENTS (Unaudited)
NOTE A - FINANCIAL STATEMENT DISCLOSURES (continued)
3. The Partnership will fund any future settlement for the outstanding lawsuit
(see Note I) but will receive a priority distribution to cover such capital
contribution.
4. After the priority distribution in #3, ANC and the Partnership will receive
distributions pari passu until such time that ANC has recovered its entire cash
investment except for $750,000.
5. Thereafter, the Partnership will receive all distributions until it has
recovered its entire capital account. To the extent the Partnership does not
recover its entire capital account, ANC will negotiate in good faith as to
whether ANC should fund one-half of the outstanding lawsuit in #3.
6. After the Partnership has recovered its entire capital account, ANC and the
Partnership will share all remaining distributions pari passu.
The Partnership has adopted SOP 98-5, "Reporting On the Costs of Start-Up
Activities." This statement requires that start-up costs and organization costs
be expensed as incurred. The adoption of SOP 98-5 did not have a material effect
on the Partnership's earnings or financial position.
NOTE B - SENIOR NOTES PAYABLE
The Partnership has issued unsecured senior notes payable ("Senior Notes")
limited to the aggregate principal amount of $36,000,000. The Senior Notes bear
interest at a fixed annual rate of 10.83%, payable semi-annually, and include a
negative pledge covenant relating to the assets and operations of the
Partnership, allowing only a collateralized working capital line not to exceed
$5,000,000 and subordinated indebtedness of $5,000,000. Commencing May 15, 1995
and until such time as the principal of the Senior Notes and interest thereon is
repaid in full, 100% of the cash flow of the Partnership, as defined, shall be
applied to repay the Senior Notes. The Senior Notes will mature on November 15,
2003, but are subject to earlier redemption.
NOTE C - WARRANTS
In connection with the issuance of the Senior Notes, the Partnership sold
pro-rata to the purchasers of the Senior Notes 36,000 warrants at $27.78 to
purchase limited partnership units. Each warrant represented the right to
purchase one limited partnership unit at an exercise price of $83.33. On
December 3, 1996, all 36,000 warrants were exercised.
10
<PAGE> 11
PART I - ITEM 1. FINANCIAL INFORMATION (continued)
GRANITE DEVELOPMENT PARTNERS, L.P.
(A Delaware Limited Partnership)
NOTES TO THE FINANCIAL STATEMENTS (Unaudited)
NOTE D - PARTNERS' SPECIAL UNITS
Per the original Partnership Agreement, until the Senior Notes are paid in full,
$9,000,000 of the partners' special units bear interest at 10.83% and the
interest will be paid pari passu with the interest on the Senior Notes.
Interest earned on the partners' special units amounted to $739,148 for the nine
months ended September 30, 1999. During the period ended September 30, 1999,
$1,072,170 of the interest was distributed to FC-Granite, Inc. Total interest
earned and unpaid at December 31, 1998 was $988,237.
As a result of the SC Partnership excess costs and their impact on the
Partnership, FC-Granite, Inc. the holder of the special units, has modified the
interest arrangement.
FC-Granite, Inc. has agreed to forfeit the $655,215 of unpaid interest on
partners' special units as of September 30, 1999. FC-Granite, Inc. has further
agreed to apply $2,199,400 and $204,184 of previously paid interest on special
units as a repayment of principal on the loan payable to Sunrise Land Company
("Sunrise") and as a payment on accrued partner fees, respectively. See
transactions with affiliates Note F.
NOTE E - MORTGAGE NOTES PAYABLE
The Partnership entered into various mortgage notes payable to purchase certain
properties. Amounts outstanding under the terms of these agreements are $683,961
at September 30, 1999 and $776,659 at December 31, 1998. The notes payable are
collateralized by mortgages on the properties. The following mortgage loans
payable are outstanding at September 30, 1999:
During the year ended December 31, 1998, the Partnership entered into a
construction loan agreement collateralized by a first mortgage lien in an amount
not to exceed $1,400,000. The principal amount outstanding bears interest at a
rate one-half of one percent (1/2%) in excess of the prime rate (8.25% at
September 30, 1999) and matures on November 21, 2000. As of September 30, 1999,
the outstanding balance related to this loan was $563,961. The loan was
established for the funding of the Thornbury development.
During the year ended January 31, 1996, the Partnership entered into a
development loan agreement in an amount of $480,000. The principal amount
outstanding bears interest at a rate of 8% and matures on October 16, 1999. As
of September 30, 1999, the outstanding balance related to this loan was
$120,000. The loan was established for the funding of the Fairfax Meadows
development.
11
<PAGE> 12
PART I - ITEM 1. FINANCIAL INFORMATION (continued)
GRANITE DEVELOPMENT PARTNERS, L.P.
(A Delaware Limited Partnership)
NOTES TO THE FINANCIAL STATEMENTS (Unaudited)
NOTE F - TRANSACTIONS WITH AFFILIATES
The sole general partner is FC-Granite, Inc., an Ohio corporation. FC-Granite,
Inc. is a wholly owned subsidiary of Sunrise, the land division subsidiary of
Forest City Enterprises, Inc.
FC-Granite, Inc. and Sunrise are reimbursed for all direct costs of operations
of the Partnership's affairs and development activities.
As a result of the SC Partnership excess costs and their impact on the
Partnership, FC-Granite, Inc. has modified the administrative fee arrangement.
The administrative fee will not be earned and accrued beyond June 30, 1999 and
the unpaid accrued amount of $77,123 as of June 30, 1999 will be deemed paid by
the reapplication of part of the paid special units interest. Originally,
FC-Granite, Inc. was to be paid a monthly administrative fee as compensation for
its services in administrating 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 six months ended June 30, 1999 and the
nine months ended September 30, 1998 were $79,126 and $147,980, respectively.
Fees outstanding as of December 31, 1998 were $196,494. The Partnership paid
administrative fees of $198,497 during the period ended September 30, 1999.
As a result of the SC Partnership excess costs and their impact on the
Partnership, Sunrise has modified the development fee arrangement. The
development fee will not be earned and accrued beyond June 30, 1999 and the
unpaid accrued amount of $67,765 as of June 30, 1999 will be deemed paid by the
reapplication of part of the paid special units interest. Originally Sunrise was
to be paid a semi-annual development fee equal to 4% of gross revenues as
compensation for its services in managing the development of the Partnership's
properties. Total development fees accrued for the six months ended June 30,
1999 and the nine months ended September 30, 1998 were $34,148 and $208,693,
respectively. Fees outstanding as of December 31, 1998 were $569,473. The
Partnership paid development fees of $535,856 during the period ended September
30, 1999.
As a result of the SC Partnership excess costs and their impact on the
Partnership, FC-Granite, Inc. has modified the real estate commissions
arrangement. The real estate commissions will not be earned and accrued beyond
June 30, 1999 and the unpaid accrued amount of $59,295 as of June 30, 1999 will
be deemed paid by the reapplication of part of the paid special units interest.
Total real estate commissions accrued for the six months ended June 30, 1999 and
the nine months ended September 30, 1998 were $29,880 and $182,606,
respectively. Commissions outstanding as of December 31, 1998 were $498,289. The
Partnership paid commissions of $468,874 for the first six months of 1999 prior
to the modification of the real estate commission arrangement.
12
<PAGE> 13
PART I - ITEM 1. FINANCIAL INFORMATION (continued)
GRANITE DEVELOPMENT PARTNERS, L.P.
(A Delaware Limited Partnership)
NOTES TO THE FINANCIAL STATEMENTS (Unaudited)
NOTE F - TRANSACTIONS WITH AFFILIATES (continued)
Based on the Partners of the SC Partnership agreeing in principle to amend the
Silver Canyon Partnership Agreement, the monthly administrative fee in the
amount of $5,000 per month has been waived. Fees that were to be earned during
the nine months ended September 30, 1999 and 1998 were $45,000. At September 30,
1999, accrued administrative fees totaling $220,000 have been reversed through
the statement of operations.
Based on the Partners of the SC Partnership agreeing in principle to amend the
Silver Canyon Partnership Agreement, the commission equal to 1.67% of gross
sales as compensation for its services in conducting marketing and sales duties
and authorization of sales contracts has been reapplied as payments on the
amounts the Partnership has loaned SC Partnership. The Partnership earned
$189,448 and $297,979 during the nine months ended September 30, 1999 and 1998,
respectively. The total amount of commissions earned from inception through
September 30, 1999 totaling $1,455,981 have been reversed through the statement
of operations and applied to the advances to joint ventures.
During the nine months ended September 30, 1999, the Partnership repaid Sunrise
$2,395,951 of funds loaned for expenditures at the Seven Hills project as of
December 31, 1998 and subsequently borrowed additional funds totaling $2,199,400
which has been deemed paid by the reapplication of part of the paid special
units interest. During the same period, Eaton Estate Partnership loaned the
Partnership $5,302,042 to fund additional development expenditures. Funds
advanced bear interest at 10%, totaling $360,086 at September 30, 1999, and will
be paid back when excess funds are available.
NOTE G - INVESTMENTS IN AND ADVANCES TO JOINT VENTURES
The Partnership has a 33 1/3% interest in SC Partnership and a 30% interest in
Eaton Estate Partnership. The Partnership's investments in SC Partnership at
September 30, 1999 and December 31, 1998 were $(4,298,129) and $3,298,725,
respectively, and in Eaton Estate Partnership at September 30, 1999 and December
31, 1998, were $2,607,522 and $2,454,662, respectively.
The Partnership has advanced $25,139,016 at September 30, 1999 and $26,665,660
at December 31, 1998 to the SC Partnership. Based on the partners of the SC
Partnership agreeing in principle to amend the Silver Canyon Partnership
Agreement, the above advances to SC Partnership shall not bear interest. All
accrued and unpaid interest will be waived. No interest payments have been made
historically. Originally, pursuant to the Amended and Restated Partnership
Agreement for SC Partnership, funds advanced to SC 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 (8.25% at September 30, 1999) plus 1
3/4%. Total interest that would have been earned on the advances amounted to
$2,000,460 and $1,863,314 for
13
<PAGE> 14
ITEM 1. FINANCIAL INFORMATION (continued)
GRANITE DEVELOPMENT PARTNERS, L.P.
(A Delaware Limited Partnership)
NOTES TO THE FINANCIAL STATEMENTS (Unaudited)
NOTE G - INVESTMENTS IN AND ADVANCES TO JOINT VENTURES (continued)
the nine months ended September 30, 1999 and 1998, respectively. Total interest
receivable as of September 30, 1999 and December 31, 1998 was $11,345,183 and
$9,344,723 respectively. Interest income was 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 month periods
ended September 30, 1999 and 1998 was $772,027 and $684,374, respectively. The
interest receivable at September 30, 1999 has been waived. Total interest income
recognized that was reversed in the three month period ended September 30, 1999
totaled $3,800,771.
The SC Partnership entered into a loan agreement with GMAC to fund development
expenditures of the property. GMAC agreed, in accordance with the loan
agreement, to make loans to the SC Partnership in an aggregate amount not to
exceed $30,000,000. The outstanding balance due and payable as of December 31,
1998 was $350,972. The loan was due June 7, 1998. The SC Partnership had an
agreement with GMAC to postpone the final payment of the balance due until
alternative financing was secured. In January 1999, the SC Partnership obtained
financing from Ohio Savings Bank. Ohio Savings Bank has agreed, in accordance
with the loan agreement, to make loans to SC Partnership in an aggregate amount
not to exceed $12,000,000. Proceeds were used to repay the GMAC loan on
January 6, 1999. The loan agreement contains two debt service coverage ratios,
which requires SC Partnership to maintain a certain level of net worth, as
defined. Ohio Savings Bank has waived that requirement for the quarter ended
September 30, 1999. The loan bears interest at 1% above prime rate (8.25% at
September 30, 1999).
For the nine months ended September 30, 1999, see note H for the results of the
SC Partnership. For the nine months ended September 30, 1999, the Eaton Estate
Partnership generated a net income of $509,532. Of this amount, $152,859 has
been recorded by the Partnership under the equity method.
NOTE H - JOINT VENTURE STATEMENT OF OPERATIONS
Shown below is the statement of operations for the SC Partnership. The results
for the nine months ended September 30, 1999 are affected by three events.
o During the second quarter of 1999, ANC, the partner in charge of on-site
improvements of the project, identified cost overruns that required
adjustment of the remaining inventory to its realizable value.
14
<PAGE> 15
PART I - ITEM 1. FINANCIAL INFORMATION (continued)
- ---------------------------------------------------
GRANITE DEVELOPMENT PARTNERS, L.P.
(A Delaware Limited Partnership)
NOTES TO THE FINANCIAL STATEMENTS (Unaudited)
NOTE H - JOINT VENTURE STATEMENT OF OPERATIONS (continued)
o The Partnership settled certain golf course lawsuits.
o To minimize the impact of these cost overruns, the partners of SC
Partnership have agreed in principle to amend the partnership agreement
forfeiting certain previously earned commissions, fees and interest on
advances. The effect of this proposed amendment is documented separately
below as other capital transactions.
<TABLE>
<CAPTION>
Nine Months Nine Months
ended ended
September 30, 1999 September 30, 1998
------------------ ------------------
<S> <C> <C>
REVENUES
Operating (loss) income $(17,518,905) $2,896,154
EXPENSES
Fees, partners 50,000 90,000
Commissions 1,517,911 1,985,679
Legal, professional and litigation costs 4,127,267 357,990
Travel and entertainment 23,236 29,330
Operating and other 604,296 299,546
Depreciation and amortization 64,268 116,078
------------ ----------
Subtotal 6,386,978 2,878,623
------------ ----------
NET (LOSS) INCOME $(23,905,883) $ 17,531
Other capital transactions resulting
from proposed amendment:
Land inventory adjustment $ 5,054,279 $ --
Fees and commissions
adjustment 6,110,701 --
------------ ----------
$ 11,164,980 --
Net change in SC Partnership ------------ ----------
capital $(12,740,903) $ --
============ ==========
</TABLE>
The Partnership recorded its proportionate share of the net change in the SC
Partnership capital after giving effect the special allocations agreed to in the
proposed amendment to the SC Partnership agreement (described in Note A).
The operating loss prior to the proposed amendment in the amount of
$(17,518,905) results from an adjustment of the land inventory to its estimated
realizable value. The adjustment in the amount of $17,758,816 was recorded in
the second quarter 1999.
As a result of the proposed amendment, $5,054,279 of the land inventory
adjustment resulted from the partners of SC Partnership agreeing to reverse
interest that the partners had earned and the SC Partnership had capitalized to
inventory.
Also as a result of the proposed amendment, certain fees and commissions
previously earned by the partners of SC Partnership and expensed by the SC
Partnership were reapplied from partnership expenses to repayment of certain
Partner loans and capital. These previously paid items are as follows:
<TABLE>
<CAPTION>
Fees Commissions
------------ -----------
<S> <C> <C>
American Nevada Corp. $ 30,000 $4,224,719
Granite Development Partners 220,000 1,455,982
Silver Canyon Corp. 180,000 --
============ ==========
$ 430,000 $5,680,701
============ ==========
</TABLE>
15
<PAGE> 16
PART I - ITEM 1. FINANCIAL INFORMATION (continued)
- ---------------------------------------------------
GRANITE DEVELOPMENT PARTNERS, L.P.
(A Delaware Limited Partnership)
NOTES TO THE FINANCIAL STATEMENTS (Unaudited)
NOTE I - LITIGATION
The Partnership is involved in two separate instances of litigation claims
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 contact between
the ultimate buyer and the Partnership. In the opinion of management and legal
counsel, the maximum damages related to this litigation are approximately
$400,000. However, the Partnership and other defendants deny that any commission
has been earned by the Plaintiff. Legal counsel of the Partnership filed a
motion for summary judgement which was denied on the 29th day of March 1999.
Trial is scheduled for sometime in the trial session which started November 8,
1999.
In Henderson, Nevada, SC Partnership is developing the Seven Hills project in
conjunction with an adjacent golf course. Three lawsuits have been filed
relating to the right to play on the golf course.
A class action lawsuit that was filed by the current homeowners in the Seven
Hills project against SC Partnership and the golf course developers, among
others, was settled in November 1999. Also in November 1999, a settlement has
been reached in principle with the owner of the golf course that had filed a
cross-claim against the Partnership and SC Partnership.
Still pending is a lawsuit filed by certain production homebuilding companies at
Seven Hills. This litigation is currently in discovery with a trial scheduled
for January 2000. The Partnership and SC Partnership believe they have
meritorious defenses to the remaining claims of the builders and intend to
continue to defend against them vigorously.
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
that any of the homeowners' settlements or any remaining potential litigation
could have on the Partnership's or SC Partnership's overall financial
performance.
16
<PAGE> 17
PART I - ITEM 1. FINANCIAL INFORMATION (continued)
GRANITE DEVELOPMENT PARTNERS, L.P.
(A Delaware Limited Partnership)
NOTES TO THE FINANCIAL STATEMENTS (Unaudited)
NOTE J - CHANGE IN FISCAL YEAR END
On December 16, 1998, the Partnership announced a change in fiscal year end. The
change is effective with the Partnership's fourth fiscal quarter of 1998 which,
under the old fiscal calendar, would have ended on January 31, 1999. Under new
fiscal calendar, the fourth fiscal quarter of 1998 ended on December 31, 1998.
The financial statements presented include the Partnership's operations which
reflect the new fiscal quarters ended September 30, 1998 and 1999. The change
was made to be consistent with the existing tax year end of December 31.
NOTE K - RESTATEMENT
The December 31, 1998 amounts are being restated to reflect additional land
development costs known but not included in the computation of cost of sales in
the Partnership. These adjustments had the effect of increasing cost of sales
and decreasing net income for the 11 months ended December 31, 1998.
The following table summarizes the impact to the amounts previously reported:
<TABLE>
<CAPTION>
For the 11 months ended December 31, 1998
-----------------------------------------
Previously reported Restated
------------------- -----------
<S> <C> <C>
Investments in and advances to joint ventures $33,662,431 $32,221,489
Total partners' equity 1,397,281 (43,661)
Income (loss) from joint ventures 1,393,985 (46,956)
Net income (loss) 225,883 (1,215,058)
</TABLE>
17
<PAGE> 18
PART I - ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
The following discussion and analysis of Granite Development Partners, L.P.
("Partnership"), should be read in conjunction with the audited financial
statements as of December 31, 1998 contained in the Annual Report on Form 10-K.
Results of Operations
For the nine months ended September 30, 1999 and 1998, the Partnership
reported net losses of $14,573,026 and $1,670,510 respectively. The increase in
net loss is primarily the result of the following: a net loss from joint
ventures of $7,443,996 for the nine month period ended September 30, 1999 versus
an income of $446,838 for the nine month period ended September 30, 1998; the
reapplication of $3,800,771 of previously recorded interest income; the
reapplication of $1,455,981 of previously recorded commission income; and the
reapplication of $220,000 of administrative fee income.
The loss from joint ventures resulted primarily from a write down of
inventory of the Silver Canyon Partnership ("SC Partnership") to its realizable
value. The net change in capital for the nine months ended September 30, 1999
from the SC Partnership was $12,740,903.
During the second quarter of 1999, American Nevada Corporation ("ANC"), the
Partner in SC Partnership responsible for the on-site improvements in the Seven
Hills project, identified that costs would be incurred in excess of budget to
complete the project. SC Partnership engaged in an extensive review of project
costs. This review revealed net cost overruns in excess of thirty million
dollars. These excess costs resulted primarily from an increase in the scope of
landscape and greenbelt improvements for the balance of the property, as well as
unanticipated increases in parcel development costs. As a result of these excess
costs, the Partners of SC Partnership began negotiations to restructure and
amend their agreement. The intent of the restructuring is to result in a more
equitable sharing of the excess costs by the Partners and to preserve cashflow
available to meet the Partnership's obligations.
SC Partnership adjusted its remaining inventory by the amount of $21,006,068
as a result of the excess costs. This adjustment was partially offset by the
results of the restructuring and amendment of the Silver Canyon Partnership
Agreement. Certain commissions previously earned and paid to the Partners of SC
Partnership, and expensed by SC Partnership, were reapplied as repayment of the
Partners of SC Partnership's loans and capital. Interest earned and paid to
Partners on loans, and expensed by the SC Partnership, were treated the same. To
minimize the impact of the excess costs, the Partners will forfeit all future
commissions and interest. The Partners have agreed to these changes in
principle. The results of the proposed changes of this agreement have been
reflected in the financial statements.
The Partnership recorded sales of $3,613,680 for the nine month period
ended September 30, 1999 versus $4,051,520 for the nine month period ended
September 30, 1998. The Partnership
18
<PAGE> 19
sold 44 lots located in The Ledges subdivision in Twinsburg, Ohio for a total of
$2,655,680, five lots in the Fairfax Meadows development in Medina, Ohio for
$510,000, six lots in Cambridge Park in North Royalton, Ohio for $368,000 and
the last remaining acre in Drake Estates in Strongsville, Ohio for $80,000. The
Eaton Estate Partnership, a joint venture of the Partnership accounted for under
the equity method, reported no sales for the nine months ended September 30,
1999 and 1998 but did have interest income for the nine months ended September
30, 1999 of $464,715. The SC Partnership reported sales of $13,519,705 for the
nine months ended September 30, 1999 versus $18,983,052 for the nine months
ended September 30, 1998.
As of September 30, 1999, the following significant sales were under
contract: eight lots in Fairfax Meadows development in Medina, Ohio for
$344,000, five lots in The Ledges subdivision in Twinsburg, Ohio for $290,000
and 72 lots in the Seven Hills development in Henderson, Nevada for $5,923,714.
Interest income totaled $934,262 for the nine months ended September 30,
1999 versus $552,446 for the nine months ended September 30, 1998. Interest
income is comprised of interest earned on notes receivable from the sales of
developed property, and funds advanced to the joint ventures. Interest income
earned on funds advanced to SC Partnership is being deferred and recognized as
sales occur. The increase in interest income is mainly due to the recognition of
deferred interest income of $772,027 related to SC Partnership sales. As a
result of the amending of the SC Partnership, interest of $3,800,771 earned in
this quarter and in previous years has been reapplied as repayment of partner
loans and capital. Interest income earned on funds advanced to the SC
Partnership that was previously deferred has been reversed in the period ending
September 30, 1999.
Commission income totaled $189,448 for the nine months ended September 30,
1999 versus $297,979 for the nine months ended September 30, 1998. Commission
income earned during this quarter and in prior years, from the SC Partnership,
in the amount of $1,455,981 has been reapplied as repayment of partner loans and
capital.
Other income totaled 109,864 for the nine months ended September 30, 1999
versus $365,604 for the nine months ended September 30, 1998. Other income is
mainly deferred development fee income from SC Partnership. Development fee
income earned during this quarter and in prior years in the amount of $220,000
has been reapplied as repayment of partner loans and capital.
The interest, commission, and development fee income in the amounts of
$3,800,771, $1,455,981, and $220,000 respectively, recorded through the
statement of operations in this quarter and in prior years, has been reversed
through the statement of operations during the period ended September 30, 1999.
The total amount of $5,476,752 has been recorded as loss from joint venture
amendment in the statement of operations.
19
<PAGE> 20
Financial Condition and Liquidity
Net cash used in operating activities was $1,650,597 for the nine months
ended September 30, 1999 versus $2,198,040 for the nine months ended September
30, 1998. The decrease in net cash used in operating activities is primarily the
result of an increase in net operating loss of $14,573,026 for the nine months
ended September 30, 1999 versus $1,670,510 for the nine months ended September
30, 1998 and a loss from joint ventures of $7,443,996 for the nine months ended
September 30, 1999 versus an income from joint ventures of $446,838 for the nine
months ended September 30, 1998. Included in the nine months ended September 30,
1999 is the forgiveness of capitalized interest income previously recognized of
$3,800,771; forgiveness of commission income of $1,455,981; and forgiveness of
administrative fee income of $220,000.
Net cash provided by investing activities was $70,663 for the nine months
ended September 30, 1999, which were payments made by the defaulting partner for
the Shortfall Loan made by the Partnership to SC Partnership in fiscal year
1998. On September 28, 1998, SC Partnership issued a capital call to its three
partners in the amount of $552,095 each. One of the partners, Silver Canyon
Corporation, failed to pay its capital call of $552,095 and was therefore in
default. Pursuant to the terms of the Silver Canyon Partnership Agreement, each
of the other two partners, Granite Silver Development Partner, L.P. and ANC
elected to make Shortfall Loans, each in the amount of $276,047 to the
partnership. Loans to the defaulting partner bear interest at the rate of 25%
per annum and are payable from all distributions, fees or compensation which may
otherwise be due to the defaulting partner. Net cash used in investing
activities for the nine months ended September 30, 1998 was $2,383,944 and
consists of funds advanced the SC Partnership for operating expenses.
Net cash provided by financing activities was $3,080,369 for the nine month
period ended September 30, 1999 versus net cash provided by financing activities
of $2,554,447 for the nine month period ended September 30, 1998. The net cash
provided during the nine month period ended September 30, 1999 was primarily the
result of funds advanced from Eaton Estate Partnership of $5,302,042 to fund
development expenditures, to pay back the $2,395,951 loan from Sunrise, and to
pay interest on partners' special units of $1,072,170. The Partnership
subsequently borrowed an additional $2,199,400 from Sunrise to fund additional
development expenditures. The net cash provided during the nine month period
ended September 30, 1998 was the result of funds borrowed from Eaton Estate
Partnership of $1,261,331 for development expenditures and for the repayment of
the loan payable to Sunrise of $921,768. The Partnership subsequently borrowed
an additional $2,645,951 from the Sunrise to fund additional development
expenditures. The Partnership had adequate funds available to make the
semi-annual payment of interest on the Senior Notes on November 15, 1999.
The Partnership is involved in two separate instances of litigation claims
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 contact between
the ultimate buyer and the Partnership. In the opinion of management and legal
counsel, the maximum damages related to this litigation are approximately
$400,000.
However,
20
<PAGE> 21
the Partnership and other defendants deny that any commission has been earned by
the Plaintiff. Legal counsel of the Partnership filed a motion for summary
judgement which was denied on the 29th day of March 1999. Trial is scheduled for
sometime in the trial session which started November 8, 1999.
In Henderson, Nevada, SC Partnership is developing the Seven Hills project
in conjunction with an adjacent golf course. Three lawsuits have been filed
relating to the right to play on the golf course.
A class action lawsuit that was filed by the current homeowners in the Seven
Hills project against SC Partnership and the golf course developers, among
others, was settled in November 1999. Also in November 1999, a settlement has
been reached in principle with the owner of the golf course that had filed a
cross-claim against the Partnership and SC Partnership.
Still pending is a lawsuit filed by certain production homebuilding
companies at Seven Hills. This litigation is currently in discovery with a trial
scheduled for January 2000.
The Partnership and SC Partnership believe they have meritorious defenses to
the remaining claims of the builders and intend to continue to defend against
them vigorously.
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 that any of the homeowners' settlements or any remaining potential
litigation could have on the Partnership's or SC Partnership's overall financial
performance.
YEAR 2000
BACKGROUND
The Partnership has undertaken a program to prepare the financial and
operating computer systems and ancillary embedded applications for the Year
2000. All necessary modifications are expected to occur in a timely manner at a
cost which is not expected to be material to the Partnership's operating
results. During 1997, the Partnership completed the final phases of the
replacement of older mainframe systems. All major systems were replaced with
newly purchased Year 2000 compliant software or software with definitive plans
for upgrades to Year 2000 code.
II. PLAN
The Partnership's plan concentrates on testing the compliant systems and
identifying other systems, such as embedded systems, that are not part of the
new software. The specific steps of the plan include:
o Capturing an inventory of all systems including:
>> The new Year 2000 compliant software.
>> Computer related hardware and peripherals.
>> Internal systems that may have been developed utilizing the
compliant code.
21
<PAGE> 22
>> Embedded or operational systems, including our telephone, heating
and air conditioning systems, fire alarm systems, security systems,
and elevator systems.
o Obtaining compliance letters from all vendors in the inventory;
o Testing systems for compliance;
o Upgrading or replacing software and operational or embedded systems as
needed;
o Contacting our major business partners (suppliers, contractors, utilities,
financial institutions, etc.) to insure that they have an active Year 2000
compliance program.
III. STATUS
The Partnership has completed a software inventory and obtained
compliance letters from most vendors and considers its software assessment
complete. The Partnership is completing the inventory of embedded systems and is
contacting its vendors to determine their Year 2000 readiness. This phase of the
assessment, originally planned for completion in the 3rd quarter 1998, was
completed in the 2nd quarter 1999. The responses have not always been definitive
and reliance, in some cases, must be made on the MD&A discussions in the
quarterly and yearly filings of certain vendors and partners where appropriate.
The Partnership has also promptly responded to requests for its own
Year 2000 readiness and will update those responses quarterly by providing a
copy of the most current SEC MD&A discussion related to the Year 2000.
The Partnership is actively testing its systems for Year 2000
compliance. Software has been acquired to review systems, which have been
written in Year 2000 compliant code, but may be generating non-compliant dates
or logic. Testing has discovered some Year 2000 issues, which have been
corrected. Specifically, certain data communications equipment was not compliant
and has been replaced. The project cost accounting software, originally
documented by the vendor as compliant, is not compliant. The Partnership
escalated the upgrade to the next version and that software is now compliant.
The general ledger system had generated some historical data with dates that
might not be compliant and these were corrected. Finally, the Partnership
discovered a possible issue with one of the automated software scheduling
systems, which will be upgraded. The Partnership has completed its testing phase
and does not foresee any major difficulties in becoming Year 2000 compliant.
IV. COSTS
At the end of 1997, the Partnership completed the migration of the
general ledger and reporting system from the older mainframe environment. The
intent of this conversion was to move from the mainframe to newer technology and
improve our reporting systems. As a by-product, Year 2000 compliant software or
software with planned upgrades to be compliant was installed. We avoided the
costly process of converting our internally developed systems into Year 2000
code. Through testing, it has been determined that some hardware will need
replacing. Regardless of the Year 2000 issue, this hardware would have been
upgraded in a normal replacement cycle. Most all of the required software
upgrades, are part of our normal operating expenses and have not generated
additional expense specifically for Year 2000 compliance. The Partnership does
not foresee any major additional costs and does not feel that the costs incurred
will have a material impact on operations.
22
<PAGE> 23
V. RISKS/CONTINGENCY PLANS
Since the major hardware, software and embedded systems are or will be
compliant, the Partnership does not foresee any major risks. The Partnership has
identified concerns in each area and the contingency plan to respond to each
concern. Related to hardware, the most likely worst case scenario would be if a
specific computer or server would not be compatible. In that case, the
Partnership would use other hardware, provided by our business
continuity/disaster recovery program, that is compliant and available and
regenerate data from the backup systems.
Related to software, the most likely worst case scenario would be if
the automated scheduling routines would not properly schedule beyond the Year
2000. Each of these automated scheduling systems has a manual function, which
has been tested, and the Partnership is confident that the scheduling software
can be reset to perform properly in the Year 2000 and beyond. Related to the
embedded systems, the Partnership's primary concern is that these systems,
despite testing, would not function properly as we move into the Year 2000. All
of these systems have manual reset functions and Year 2000 date issues can be
corrected. Additionally there will be appropriate personnel and outside
contractors if necessary, on site starting the evening of December 31, 1999 and
the ensuing weekend to reset the functions if necessary.
VI. SUMMARY
Similar to other companies, the Partnership is highly dependent upon
systems in the public sector, such as utilities, mail, and transportation
systems. Failures in those systems, upon which we have no control, could
materially affect our operations. The Partnership has well defined emergency
plans in place, and these would be activated if necessary.
The Year 2000 plan is aimed at identifying and correcting all issues
upon which the Partnership has direct control or indirect control through its
vendors and business partners.
The Partnership feels that the successful completion of the Year 2000
program will minimize the effect on operations.
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
23
<PAGE> 24
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 1. Legal Proceedings
The Partnership is involved in two separate instances of litigation related
to its operations. The disclosure required by this item is incorporated by
reference to Note I of the September 30, 1999 unaudited financial statements and
management's discussion and analysis of financial condition which appears in
Part I of this Form 10-Q.
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 September 30, 1999.
24
<PAGE> 25
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: 11/23/99 /s/ Robert F. Monchein
------------- -----------------------------------------------
Robert F. Monchein
President
FC-Granite, Inc., the general partner of
Granite Development Partners, L.P.
DATE: 11/23/99 /s/ Mark A. Ternes
------------- -----------------------------------------------
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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 2,931,042
<SECURITIES> 0
<RECEIVABLES> 1,930,225
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 2,842,772
<DEPRECIATION> 0
<TOTAL-ASSETS> 31,147,914
<CURRENT-LIABILITIES> 0
<BONDS> 36,683,961
0
0
<COMMON> 0
<OTHER-SE> (13,285,273)
<TOTAL-LIABILITY-AND-EQUITY> 31,147,914
<SALES> 0
<TOTAL-REVENUES> 2,115,312
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 424,303
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,343,287
<INCOME-PRETAX> (14,573,026)
<INCOME-TAX> 0
<INCOME-CONTINUING> (14,573,026)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (14,573,026)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
