<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10 - Q/A
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
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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 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
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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.
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GRANITE DEVELOPMENT PARTNERS, L.P.
TABLE OF CONTENTS
PAGE
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets -
June 30, 1999 (Unaudited) (Restated)
and December 31, 1998 3-4
Statements of Operations (Unaudited) (Restated)
Six months ended June 30, 1999 and 1998 5
Statements of Changes in Partners' Deficit
(Unaudited) (Restated) 6
Statements of Cash Flows
(Unaudited) (Restated)
Six months ended June 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
<PAGE> 3
PART I. FINANCIAL INFORMATION
- -----------------------------
GRANITE DEVELOPMENT PARTNERS, L.P.
(A Delaware Limited Partnership)
BALANCE SHEETS
June 30, December 31,
1999 1998
------------ -----------
(Unaudited) (Restated)
(Restated)
ASSETS
- ------
LAND $ 1,606,377 $ 1,772,580
LAND IMPROVEMENTS 2,619,376 1,431,273
----------- -----------
4,225,753 3,203,853
MORTGAGE NOTES RECEIVABLE 2,552,535 2,955,344
INVESTMENTS IN AND ADVANCES TO
JOINT VENTURES 26,018,835 32,221,489
OTHER ASSETS:
Cash 285,236 1,430,607
Interest receivable 10,870,732 9,629,531
Other 25,500 25,500
Administrative fee receivable 205,000 175,000
----------- -----------
11,386,468 11,260,638
----------- -----------
$44,183,591 $49,641,324
=========== ===========
See notes to financial statements.
3
<PAGE> 4
PART I. FINANCIAL INFORMATION (continued)
- -----------------------------------------
GRANITE DEVELOPMENT PARTNERS, L.P.
(A Delaware Limited Partnership)
BALANCE SHEETS - (continued)
June 30, 1999 December 31, 1998
------------- -----------------
(Unaudited) (Restated)
(Restated)
LIABILITIES, PARTNERS' SPECIAL
UNITS & PARTNERS' DEFICIT
- -------------------------
SENIOR NOTES PAYABLE $ 36,000,000 $ 36,000,000
MORTGAGE NOTES PAYABLE 706,659 776,659
LOAN PAYABLE - SUNRISE 2,199,400 2,395,951
LOAN PAYABLE - EATON 5,320,214 878,462
OTHER LIABILITIES:
Accounts payable 375,882 962,805
Accrued fees, partners 204,184 1,264,257
Accrued interest 870,342 924,057
Accrued real estate taxes 50,448 99,953
Deposits 103,250 3,579
Deferred income
on Investments/Advances 7,098,432 6,379,262
------------ ------------
8,702,538 9,633,913
PARTNERS' EQUITY (DEFICIT)
Partners' special units 9,000,000 9,000,000
Partners' deficit (17,745,220) (9,043,661)
------------ ------------
(8,745,220) (43,661)
------------ ------------
$ 44,183,591 $ 49,641,324
============ ============
See notes to financial statements.
4
<PAGE> 5
PART I. FINANCIAL INFORMATION (continued)
- -----------------------------------------
GRANITE DEVELOPMENT PARTNERS, L.P.
(A Delaware Limited Partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------- ----------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
(Restated) (Restated)
<S> <C> <C> <C> <C>
REVENUES
Sales of developed property $ 564,000 $ 1,236,500 $ 854,000 $ 2,461,500
Cost of sales (443,529) (831,165) (650,932) (1,602,493)
----------- ----------- ----------- -----------
120,471 405,335 203,068 859,007
Interest 482,129 122,802 695,452 222,088
Commission 116,393 65,440 121,066 120,620
Other 35,811 77,677 71,085 152,430
----------- ----------- ----------- -----------
754,804 671,254 1,090,671 1,354,145
----------- ----------- ----------- -----------
EXPENSES
Interest 1,150,254 1,091,731 2,237,194 2,131,176
Fees, partners 83,243 144,448 143,154 281,115
Real estate taxes 20,842 45,871 43,412 85,540
Operating and other 110,413 75,150 150,493 114,451
Amortization -- 152,707 -- 307,147
----------- ----------- ----------- -----------
1,364,752 1,509,907 2,574,253 2,919,429
----------- ----------- ----------- -----------
(609,948) (838,653) (1,483,582) (1,565,284)
Loss from joint ventures (6,067,397) (29,671) (6,145,807) (132,785)
----------- ----------- ----------- -----------
NET LOSS $(6,677,345) $ (868,324) $(7,629,389) $(1,698,069)
=========== =========== =========== ===========
</TABLE>
See notes to financial statements.
5
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PART I. FINANCIAL INFORMATION (continued)
- -----------------------------------------
GRANITE DEVELOPMENT PARTNERS, L.P.
(A Delaware Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
<TABLE>
<CAPTION>
Sunrise FC-Granite Limited
Land Co. Inc. Partners Total
------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Balance at January 31, 1997 $ - $(10,323,370) $ 3,999,960 $ (6,323,410)
Distribution of interest on
special units - (1,147,979) - (1,147,979)
Net loss - (89,304) (267,909) (357,213)
------- ------------ ------------ ------------
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)
Distribution of interest on
special units - (1,072,170) - (1,072,170)
Net loss for the six months
ended June 30, 1999 (unaudited)
(Restated) - (1,907,347) (5,722,042) (7,629,389)
------- ------------ ------------ ------------
Balance at June 30, 1999
(unaudited)
(Restated) $ - $(14,843,935) $ (2,901,285) $(17,745,220)
======= ============ ============ ============
</TABLE>
See notes to financial statements.
6
<PAGE> 7
PART I. FINANCIAL INFORMATION (continued)
- -----------------------------------------
GRANITE DEVELOPMENT PARTNERS, L.P.
(A Delaware Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------------------
1999 1998
----------- -----------
(Restated)
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net loss $(7,629,389) $(1,698,069)
Adjustments to reconcile net loss to net cash
used in operating activities:
Amortization - 307,147
Loss from joint ventures 6,145,807 132,785
Changes in operating assets and liabilities:
(Increase) decrease in land and land improvements (1,021,900) 847,710
Decrease in restricted cash equivalents - 479,305
Decrease in mortgage notes receivable 402,809 1,197,413
Increase in interest receivable (1,241,201) (869,429)
Decrease in other assets - 55,000
Increase in administration fee receivable (30,000) (30,000)
Decrease in accounts payable (586,923) (194,993)
Decrease in accrued fees, partner (1,060,073) (1,194,413)
Decrease in accrued interest (53,715) (285,994)
(Decrease) increase in accrued real estate taxes (43,434) 9,592
Increase (decrease) in deposits 93,600 (2,768,245)
Increase in deferred income 719,170 937,586
----------- -----------
Net cash used in operating activities (4,305,249) (3,074,605)
----------- -----------
CASH FLOW FROM INVESTING ACTIVITIES:
Investments in and advances to affiliates 56,847 (1,683,507)
----------- -----------
Net cash provided by (used in) investing activities 56,847 (1,683,507)
----------- -----------
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 1,593,552
Repayment of loan payable - Eaton (860,290) -
Distribution of interest on special units (1,072,170) -
Repayment of mortgage notes payable (70,000) (250,080)
----------- -----------
Net cash provided by financing activities 3,103,031 3,067,655
----------- -----------
DECREASE IN CASH (1,145,371) (1,690,457)
CASH AT BEGINNING OF THE PERIOD 1,430,607 2,253,410
----------- -----------
CASH AT END OF THE PERIOD $ 285,236 $ 562,953
=========== ===========
</TABLE>
See notes to financial statements.
7
<PAGE> 8
PART I. FINANCIAL INFORMATION (continued)
- -----------------------------------------
GRANITE DEVELOPMENT PARTNERS, L.P.
(A Delaware Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited) (continued)
Six Months Ended
Supplemental Disclosure of Cash Flow Information June 30,
-------------------------
Cash paid during the period for: 1999 1998
---------- ----------
(Restated)
Interest $2,290,909 $2,417,170
Real estate taxes $ 92,917 $ 75,948
See notes to financial statements.
8
<PAGE> 9
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 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.
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 six months ended June 30, 1999 that were of a normal recurring nature.
Adjustments were also made for the six months ended June 30, 1999 which resulted
from the identification of costs in excess of those budgeted in the Silver
Canyon Partnership. During the second quarter, American Nevada Corporation, 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 of Form 10K is being restated to reflect the effect of
these excess costs. This revision was quantified during the third quarter of
1999 and reduced gross margins and net income on Silver Canyon Partnership by
$3,247,252 at December 31, 1998. Further information became known during the
second quarter of 1999 but was not included in the original computation of cost
of sales. This revision was also quantified during the third quarter of 1999.
Remaining prior year gross margins totaling $12,704,537 have been reversed and
gross margins totaling $1,458,836 were reversed on 1999 sales. At ownership, the
Silver Canyon Partnership revision had the effect of increasing the loss from
joint ventures and increasing Granite Development Partners, L.P. net loss for
the second quarter of 1999 by $6,196,394 and the fourth quarter of 1998 by
$1,440,942. Results of operations for the six month period ended June 30, 1999
are not necessarily indicative of results of operations which may be expected
for the full year.
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.
9
<PAGE> 10
PART I. FINANCIAL INFORMATION (continued)
- -----------------------------------------
GRANITE DEVELOPMENT PARTNERS, L.P.
(A Delaware Limited Partnership)
NOTES TO THE FINANCIAL STATEMENTS (Unaudited)
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.
NOTE D - PARTNERS' SPECIAL UNITS
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 $490,058 for the six
months ended June 30, 1999. During the period ended June 30, 1999, $1,072,170 of
the interest earned was distributed to FC-Granite, the holder of the partners'
special units. Total interest earned and unpaid of $406,125 and $988,237 as of
June 30, 1999 and December 31, 1998, respectively, will be distributed
pari-passu with the interest on the Senior Notes when funds are available.
NOTE E - MORTGAGE NOTES PAYABLE
The Partnership enters into various mortgage notes payable to purchase certain
properties. Amounts outstanding under the terms of these agreements are $706,659
at June 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 June 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 (7.75% at June
30, 1999) and matures on November 21, 2000. As of June 30, 1999, the outstanding
balance related to this loan was $586,659. 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 June 30, 1999, the outstanding balance related to this loan was $120,000. The
loan was established for the funding of the Fairfax development.
10
<PAGE> 11
PART I. FINANCIAL INFORMATION (continued)
- -----------------------------------------
GRANITE DEVELOPMENT PARTNERS, L.P.
(A Delaware Limited Partnership)
NOTES TO THE FINANCIAL STATEMENTS (Unaudited)
NOTE F - TRANSACTIONS WITH AFFILIATES
See Note L "Subsequent Events" for the impact of the Silver Canyon Partnership
Agreement Amendment to the 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 six months ended June 30, 1999 and 1998,
were $79,126 and $96,502, respectively. Fees outstanding as of December 31,
1998, were $196,494. The Partnership paid administrative fees of $198,497 during
the period ended June 30, 1999. Total outstanding fees of $77,123 as of June 30,
1999, 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 six months ended June 30, 1999 and 1998 were $34,148 and $98,460,
respectively. Fees outstanding as of December 31, 1998 were $569,474. The
Partnership paid development fees of $535,856 during the period ended June 30,
1999. Development fees payable as of June 30, 1999 were and $67,766, and will be
paid when funds are available.
In addition, accrued real estate commissions due to FC-Granite were $29,880 and
$86,153 for the six months ended June 30, 1999 and 1998, respectively. The
Partnership paid real estate commissions of $468,874 during the period ended
June 30, 1999. Accrued fees outstanding at December 31, 1998 were $498,289.
Commissions outstanding as of June 30, 1999 were $59,295, and 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 six months ended June 30, 1999 and 1998, were
$30,000. Total fees due the Partnership as of June 30, 1999 are $205,000.
In addition, the Partnership is to receive a commission equal to 1.67% of gross
sales as compensation for its services in conducting marketing and sales duties
and authorization of sales contracts. The Partnership earned $121,066 and
$120,620 during the six months ended June 30, 1999 and 1998, respectively.
11
<PAGE> 12
I. FINANCIAL INFORMATION (continued)
- ------------------------------------
GRANITE DEVELOPMENT PARTNERS, L.P.
(A Delaware Limited Partnership)
NOTES TO THE FINANCIAL STATEMENTS (Unaudited)
NOTE F - TRANSACTIONS WITH AFFILIATES (continued)
During the six months ended June 30, 1999, the Partnership repaid Sunrise
$2,395,951 of funds loaned for expenditures at the Silver Canyon project and
subsequently borrowed additional funds totaling $2,199,400. During the same
period, Eaton Estate Partnership loaned the Partnership $5,302,042 to fund
additional development expenditures. Funds advanced bear interest at 10%,
$225,836 at June 30, 1999, and will be paid back when excess funds are
available.
NOTE G - INVESTMENTS IN AND ADVANCES TO JOINT VENTURES
See Note L "Subsequent Events" for the impact of the Silver Canyon Partnership
Agreement Amendment to the advances to joint ventures.
The Partnership has a 33 1/3% interest in Silver Canyon Partnership ("SC
Partnership") and a 30% interest in Eaton Estate Partnership. The Partnership's
investments in Silver Canyon Partnership at June 30, 1999 and December 31, 1998,
were $(2,930,326) and $3,298,725, respectively, and in Eaton Estate Partnership
at June 30, 1999 and December 31, 1998, were $2,537,905 and $2,454,662
respectively.
The Partnership has advanced $26,608,813 at June 30, 1999 and $26,665,660 at
December 31, 1998 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% (7.75% at June 30, 1999). Funds advanced to Eaton Estate Partnership
bear interest at prime plus three percent (3%). Total interest earned on the
advances amounted to $1,323,344 and $1,205,290 for the six months ended June 30,
1999 and 1998, 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 six month
periods ended June 30, 1999 and 1998, were $564,244 and $146,717, respectively.
The SC Partnership entered into a loan agreement with GMAC, to fund development
expenditures of the property. GMAC has 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 loan bears interest at one and three-fourths percent
above the prime rate (7.75% at June 30, 1999). The outstanding balance due as of
December 31, 1998 was $350,972. Interest on the outstanding principal balance is
due and payable monthly in arrears. The loan was due on June 7, 1998. The SC
Partnership had an agreement with Residential Funding Corporation to postpone
the final payment of the balance due until alternative financing was secured. In
January, 1999, the SC Partnership obtained new financing from Ohio Savings Bank
(OSB). OSB has agreed, in accordance with the loan agreement, to make loans to
the SC Partnership in an aggregate amount not to exceed $12,000,000. The loan
agreement contains two debt service coverage ratios, which
12
<PAGE> 13
PART I. 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)
requires SC Partnership to maintain a certain level of net worth as defined. Per
the restated June 30, 1999 financial statements, SC Partnership could not meet
OSB's covenants (See Note L). The loan bears interest at 1% above prime rate
(7.75% at June 30, 1999). This development loan replaces the GMAC loan which was
paid in full on January 6, 1999.
For the six months ended June 30, 1999, the Silver Canyon Partnership generated
net loss of $14,261,343. Of this amount, $162,579 is interest income collected
on a note receivable. The Partnership has recorded $6,229,051 of Silver Canyon's
net loss under the equity method. For the six months ended June 30, 1999, the
Eaton Estate Partnership generated a net income of $277,478. Of this amount,
$83,243 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 Silver Canyon Partnership:
Six months ended
June 30,
------------------------------
1999 1998
------------ ------------
(Restated)
REVENUES
Operating (loss) income $(12,479,633) $ 1,355,376
EXPENSES
Fees, partners 35,000 60,000
Commissions 1,029,302 998,412
Legal and professional 242,850 295,479
Travel and entertainment 9,796 20,100
Operating and other 405,977 256,825
Depreciation and amortization 58,785 106,128
------------ ------------
Subtotal 1,781,710 1,736,944
------------ ------------
NET LOSS $(14,261,343) $ (381,568)
============ ============
The results for the six month ended June 30, 1999 are affected by the
identification of cost overruns that required adjustments of the remaining
inventory to its realizable value. As a result, cost of sales and net loss
increased by $14,163,373.
13
<PAGE> 14
PART I. FINANCIAL INFORMATION (continued)
- -----------------------------------------
GRANITE DEVELOPMENT PARTNERS, L.P.
(A Delaware Limited Partnership)
NOTES TO THE FINANCIAL STATEMENTS (Unaudited)
NOTE I - LITIGATION
See Note L "Subsequent Events" for current status of legal proceedings.
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. The Partnership has recorded an accrual of $100,000 relating to this
litigation. 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 the trial session starting October 25, 1999.
The Partnership owns a 33.3% interest in the Silver Canyon Partnership ("Silver
Canyon"). Silver Canyon is developing the Seven Hills project, located in
Henderson, Nevada, in conjunction with a golf course. In August 1997, a
class-action lawsuit was filed by the current homeowners in Seven Hills against
Silver Canyon, the golf course developers and some of some of the other
entities. In addition, a separate lawsuit was filed by some of the production
homebuilding companies at Seven Hills, against some of the same parties. Both
suits seek a commitment for the right of Seven Hills homeowners to play on the
golf course, as well as damages. Recently, the trial court determined that Seven
Hills homeowners do have a right to play on the golf course, providing they pay
a greens fee of $300 per round. An additional hearing on damages has been
scheduled for October, 1999. Silver Canyon has reached an agreement in principle
with the Plaintiff homeowners and with certain of Silver Canyon's insurance
carriers to settle the claims of the Plaintiff homeowners. The owner of the golf
course has filed a cross-claim against the Partnership, Silver Canyon, and the
other entities in the damage claim. It is anticipated that the present owner of
the golf course will appeal the ruling granting play rights to Seven Hills
homeowners after the hearing on damages. The Partnership and Silver Canyon
believe they have meritorious defenses to these remaining claims of the builders
and the owner of the golf course and intend to continue to defend against them
vigorously. Parties to the lawsuits are still engaged in discovery proceedings.
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 Partnership's or Silver Canyon's financial performance.
14
<PAGE> 15
PART I. 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 includes the partnership's operations which
reflect the new fiscal quarters ended June 30, 1998 and 1999. The change was
made to be consistent with the existing tax year end of December 31.
NOTE K - RESTATEMENT OF SECOND QUARTER
The second quarter ended June 30, 1999 has been restated to reflect the revision
of the computation of cost of sales in the Silver Canyon Partnership. During the
second quarter, American Nevada Corporation, 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 of Form
10K is being restated to reflect the effect of these excesses. This revision was
quantified during the third quarter of 1999 and reduced gross margins and net
income on Silver Canyon Partnership by $3,247,252 at December 31, 1998. Further
information became known during the second quarter of 1999 but was not included
in the original computation of cost of sales. This revision was quantified
during the third quarter of 1999. On Silver Canyon Partnership, remaining prior
year gross margins totaling $12,704,537 have been reversed and gross margins
totaling $1,458,836 were reversed on 1999 sales. Results of operations for the
six month period ended June 30, 1999 are not necessarily indicative of results
of operations which may be expected for the full year.
At ownership, the Silver Canyon Partnership error had the effect of increasing
the loss from joint ventures and increasing Granite Development Partners, L.P.
net loss for the second quarter of 1999 by $6,196,394 and the fourth quarter of
1998 by $1,440,942.
The second quarter ended June 30, 1999 has been restated to reflect the
corrections of the computation of deferred income recognized. The adjustment
decreases other income and increases net loss by $63,710.
15
<PAGE> 16
PART I. FINANCIAL INFORMATION (continued)
- -----------------------------------------
GRANITE DEVELOPMENT PARTNERS, L.P.
(A Delaware Limited Partnership)
NOTES TO THE FINANCIAL STATEMENTS (Unaudited)
NOTE K - RESTATEMENT OF SECOND QUARTER (continued)
The following table summarizes the impact to the amounts previously reported:
<TABLE>
<CAPTION>
-------------------------------------------------------------------
For the three For the three For the six For the six
months ended months ended months ended months ended
June 30, 1999 June 30, 1999 as June 30, 1999 June 30, 1999 as
as previously restated as previously restated
reported reported
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total Partners'
Equity $(1,044,174) $(8,745,220) $(1,044,174) $(8,745,220)
Income (Loss) from
Joint Ventures $ 128,997 $(6,067,397) $ 50,587 $(6,145,807)
Net Loss $ (417,241) $(6,677,345) $(1,369,285) $(7,629,389)
</TABLE>
NOTE L - SUBSEQUENT EVENTS
The Development Loan agreement Silver Canyon Partnership has with OSB contains
two debt service coverage ratios, which requires Silver Canyon Partnership to
maintain a certain level of net worth, as defined. Per the restated June 30,
1999 financial statements, Silver Canyon Partnership could not meet OSB's
covenants. Subsequently, OSB has waived the net worth requirement for the
quarter ended September 30, 1999. On December 6, 1999, the Silver Canyon
Partnership reached an agreement with the bank to fund the November draw
request. This agreement required the borrower to provide to the bank, at the
earlier of borrower's next draw or within thirty days, the amended Silver Canyon
Partnership Agreement, certain cash flow projections and the resolution of the
net worth covenant violation in a manner and amount satisfactory to the bank.
The class action lawsuit that was filed by the current homeowners in the Seven
Hills project against Silver Canyon Partnerships 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 Silver Canyon Partnerships.
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 Silver Canyon Partnership believe they
have meritorious defenses to the remaining claims of the builders and intend to
continue to defend against them vigorously.
To minimize the impact of the identified costs in excess of budget to complete
the Seven Hills project (See Note K), the partners of Silver Canyon Partnership
have agreed to amend the Silver Canyon Partnership Agreement. The changes
resulting from the amendment are reflected in the Form 10-Q for the quarterly
period ended September 30, 1999.
16
<PAGE> 17
PART I. FINANCIAL INFORMATION (continued)
- -----------------------------------------
GRANITE DEVELOPMENT PARTNERS, L.P.
(A Delaware Limited Partnership)
NOTES TO THE FINANCIAL STATEMENTS (Unaudited)
NOTE L - SUBSEQUENT EVENTS (continued)
The 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.
3. The Partnership will fund any future settlement for the outstanding lawsuit
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 following table summarizes the impact of the amendment to Silver Canyon
Partnership as of September 30, 1999:
Land inventory adjustment $ 5,054,279
Fees and commissions adjustment 6,110,701
-----------
Total adjustments $11,164,980
===========
The following table summarizes the impact of the amendment to the Silver Canyon
Partnership Agreement as it relates directly to the Partnership as of September
30, 1999:
Forgiveness of capitalized income recognized $ 3,800,771
Forgiveness of commission income 1,455,981
Forgiveness of administration fee income 220,000
-----------
$ 5,476,752
===========
Also, as a result of the Silver Canyon Partnership excess costs and their impact
on the Partnership, FC-Granite, Inc. and Sunrise have forgiven certain unpaid
expenses as of June 30, 1999 and will not charge the Partnership in the future.
The following table summarizes the forgiven expenses:
Administrative fees to FC-Granite $ 77,123
Real estate commissions to FC-Granite 59,295
Development fees to Sunrise 67,765
Interest to Sunrise 84,476
-----------
$ 288,659
===========
17
<PAGE> 18
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
December 31, 1998 contained in the Annual Report on Form 10-K.
Results of Operations
During the second quarter of 1999, Silver Canyon Partnership identified,
through an extensive review of project costs, costs that would be incurred in
excess of budget to complete the project. 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 increase in parcel development
costs. Silver Canyon Partnership adjusted its remaining inventory by the amount
of $14,163,373 as a result of the excess costs.
The Partnership recorded sales of $854,000 for the six month period ended
June 30, 1999 versus $2,461,500 for the six month period ended June 30, 1998.
The Partnership sold 7 lots located in The Ledges subdivision in Twinsburg, Ohio
for a total of $406,000, 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 six months
ended June 30, 1999 and 1998 but did have interest income for the six months
ended June 30, 1999 of $299,419. The Silver Canyon Partnership reported sales of
$9,117,730 for the six months ended June 30, 1999 versus $8,360,968 for the six
months ended June 30, 1998.
As of June 30, 1999, the following significant sales were under contract:
twelve lots of the Fairfax Meadows development in Medina, Ohio for $510,000; and
nineteen lots in The Ledges subdivision in Twinsburg, Ohio for $1,102,000.
Interest income totaled $695,452 for the six months ended June 30, 1999
versus $222,088 for the six months ended June 30, 1998. Interest income is
comprised of interest earned on notes receivable from the sales of developed
property, from funds advanced to the joint ventures and from the investment of
proceeds from sales in short-term commercial paper. Interest income earned on
funds advanced to the Silver Canyon Partnership is being deferred. The increase
in interest income is mainly due to the recognition of deferred interest income
of $564,244 related to Silver Canyon sales.
Other income totaled $71,085 and $152,430 for the six month period ended
June 30, 1999 and 1998, respectively. Other income is mainly comprised of
deferred development fee income from Silver Canyon Partnership sales.
For the six months ended June 30, 1999 and 1998, the Partnership reported
net losses of $7,629,389 and $1,698,069, respectively. The increase in net loss
is primarily the result of an increase in losses from joint ventures of
$6,145,807 for the six month period ended June 30, 1999 versus $132,785 for the
six month period ended June 30, 1998; an increase in interest income of $695,452
for the six month period ended June 30, 1999 versus $222,088 for the six month
period ended June 30, 1998 and no amortization expense for the six month period
ended June 30, 1999 versus $307,147 for the six month period ended June 30,
1998. These income increases were partially offset by a decrease in net sales
revenues of $203,068 for the six month period ended June 30, 1999 versus
$859,007 for the six month period ended June 30, 1998.
18
<PAGE> 19
Financial Condition and Liquidity
Net cash used in operating activities was $4,305,249 for the six months
ended June 30, 1999 versus $3,074,605 for the six months ended June 30, 1998.
The increase in net cash used in operating activities is primarily the result of
a net loss of $7,629,389 for the six months ended June 30, 1999 from a loss of
$1,698,069 for the six months ended June 30, 1998 and an increase in land and
land improvements of $1,021,900 for the six months ended June 30, 1999 from a
decrease of $847,710 for the six months ended June 30, 1998. These were
partially offset because a good portion of the net loss resulted from a loss
from joint ventures of $6,145,807 for the six months ended June 30, 1999
compared to a loss of $132,785 for the six months ended June 30, 1998.
Net cash provided by investing activities was $56,847 for the six months
ended June 30, 1999 and consists of payments made by the defaulting partner for
the "Shortfall Loan" made by the Partnership to Silver Canyon Partnership in
fiscal year 1998. On September 28, 1998, Silver Canyon 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 Partnership
Agreement, each of the other two partners, Granite Silver Development Partner,
L.P. ("Granite") and American Nevada Seven Hills Limited Partnership ("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 six months ended June 30, 1998 was $1,683,507 and consists of
funds advanced the Silver Canyon Partnership for operating expenses.
Net cash provided by financing activities was $3,103,031 for the six month
period ended June 30, 1999 versus net cash provided by of $3,067,655 for the six
month period ended June 30, 1998. The net cash provided during the six month
period ended June 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 Land Company, and to pay interest on partners'
special units of $1,072,170. The Partnership subsequently borrowed an additional
$2,199,400 from the Sunrise Land Company to fund additional development
expenditures. The net cash provided during the six month period ended June 30,
1998 was the result of funds borrowed from Eaton Estate Partnership of
$1,593,552 for development expenditures and for the repayment of the loan
payable to Sunrise Land Company of $921,768. The Partnership subsequently
borrowed an additional $2,645,951 from the Sunrise Land Company to fund
additional development expenditures. The Partnership had adequate funds
available to make the semi-annual payment of interest on the Senior Notes on May
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.
19
<PAGE> 20
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 the trial session starting October 25, 1999.
The Partnership owns a 33.3% interest in the Silver Canyon Partnership
("Silver Canyon"). Silver Canyon is developing the Seven Hills project, located
in Henderson, Nevada, in conjunction with a golf course. In August 1997, a
class-action lawsuit was filed by the current homeowners in Seven Hills against
Silver Canyon, the golf course developers and some of some of the other
entities. In addition, a separate lawsuit was filed by some of the production
homebuilding companies at Seven Hills, against some of the same parties. Both
suits seek a commitment for the right of Seven Hills homeowners to play on the
golf course, as well as damages. Recently, the trial court determined that Seven
Hills homeowners do have a right to play on the golf course, providing they pay
a greens fee of $300 per round. An additional hearing on damages has been
scheduled for October, 1999. Silver Canyon has reached an agreement in principle
with the Plaintiff homeowners and with certain of Silver Canyon's insurance
carriers to settle the claims of the Plaintiff homeowners. The owner of the golf
course has filed a cross-claim against the Partnership, Silver Canyon, and the
other entities in the damage claim. It is anticipated that the present owner of
the golf course will appeal the ruling granting play rights to Seven Hills
homeowners after the hearing on damages. The Partnership and Silver Canyon
believe they have meritorious defenses to these remaining claims of the builders
and the owner of the golf course and intend to continue to defend against them
vigorously. Parties to the lawsuits are still engaged in discovery proceedings.
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 Partnership's or Silver Canyon's financial performance.
Subsequent to June 30, 1999, the class action lawsuit that was filed by the
current homeowners in the Seven Hills project against Silver Canyon Partnerships
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 Silver
Canyon Partnerships.
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 Silver Canyon Partnership
believe they have meritorious defenses to the remaining claims of the builders
and intend to continue to defend against them vigorously.
To minimize the impact of the identified costs in excess of budget to
complete the Seven Hills project (See Note K), the partners of Silver Canyon
Partnership have agreed to amend the Silver Canyon Partnership Agreement. The
changes resulting from the amendment are reflected in the Form 10-Q for the
quarterly period ended September 30, 1999.
20
<PAGE> 21
The 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.
3. The Partnership will fund any future settlement for the outstanding lawsuit
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.
7. After the Partnership has recovered its entire capital account, ANC and the
Partnership will share all remaining distributions pari passu.
The following table summarizes the impact of the amendment to Silver Canyon
Partnership as of September 30, 1999:
Land inventory adjustment $ 5,054,279
Fees and commissions adjustment 6,110,701
-----------
Total adjustments $11,164,980
===========
The following table summarizes the impact of the amendment to the Silver Canyon
Partnership Agreement as it relates directly to the Partnership as of September
30, 1999:
Forgiveness of capitalized income recognized $ 3,800,771
Forgiveness of commission income 1,455,981
Forgiveness of administration fee income 220,000
-----------
$ 5,476,752
===========
Also, as a result of the Silver Canyon Partnership excess cost and their impact
on the Partnership, FC-Granite, Inc. and Sunrise have forgiven certain unpaid
expenses as of June 30, 1999 and will not charge the Partnership in the future.
The following table summarizes the forgiven expenses:
Administrative fees to FC-Granite $ 77,123
Real estate commissions to FC-Granite 59,295
Development fees to Sunrise 67,765
Interest to Sunrise 84,476
-----------
$ 288,659
===========
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.
21
<PAGE> 22
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:
- - 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.
- Embedded or operational systems, including our telephone, heating
and air conditioning systems, fire alarm systems, security systems,
and elevator systems.
- - Obtaining compliance letters from all vendors in the inventory;
- - Testing systems for compliance;
- - Upgrading or replacing software and operational or embedded systems as needed;
- - 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.
22
<PAGE> 23
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.
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.
23
<PAGE> 24
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 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 June 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 June 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: 12/15/99 /s/ Robert F. Monchein
----------------- ---------------------------------------
Robert F. Monchein
President
FC-Granite, Inc., the general partner
of Granite Development Partners, L.P.
DATE: 12/15/99 /s/ Mark A. Ternes
----------------- ---------------------------------------
Mark A. Ternes
Controller
FC-Granite, Inc., the general partner
of Granite Development Partners, L.P.
25
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 285,236
<SECURITIES> 0
<RECEIVABLES> 2,552,535
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 4,225,753
<DEPRECIATION> 0
<TOTAL-ASSETS> 44,183,591
<CURRENT-LIABILITIES> 0
<BONDS> 36,706,659
0
0
<COMMON> 0
<OTHER-SE> (8,745,220)
<TOTAL-LIABILITY-AND-EQUITY> 44,183,591
<SALES> 0
<TOTAL-REVENUES> 1,090,671
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 337,059
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,237,194
<INCOME-PRETAX> (7,629,389)
<INCOME-TAX> 0
<INCOME-CONTINUING> (7,629,389)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,629,389)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
