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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the fiscal year ended Commission File Number
December 31, 1996 0-24816
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NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
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(Exact name of registrant as specified in its charter)
Delaware 23-2610414
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(State of other jurisdiction (IRS Employer
incorporation or organization) Identification
No.)
230 S. Broad Street, Mezzanine, Philadelphia, Pennsylvania 19102
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(215)790-4700
Securities registered pursuant to Section 12(b) of the Act:
Title of each class to Name of exchange
be so registered on which each class
is to be registered
None N/A
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Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
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(Title of Class)
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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, (2) has been subject to such filing
requirements for the past 90 days.
YES X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporate by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes X No
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DOCUMENTS INCORPORATED BY REFERENCE
Part 1 Part II Part III Part IV
(None) (None) (None) Exhibits from Form 10
Registration Statement
and from Form 10-K Annual
Report filed April 1, 1996
No. 0-24816
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INDEX
Page
PART I
Item 1. Business................................................. 1
I. Summary......................................... 1
II. MLP Objectives and Policies..................... 3
III. Glossary........................................ 6
Item 2. Properties............................................... 9
Item 3. Legal Proceedings........................................10
Item 4. Submission of Matters to a Vote of Security Holders......10
PART II
Item 5. Market Price for the Registrant's Common
Equity and Related Stockholder Matters...................20
I. No Trading Market...............................20
II. Distributions of Cash Flow From Operations......20
III. Proceeds of Sales Distributions.................20
IV. Certain Income Tax Considerations...............21
Item 6. Selected Financial Data..................................22
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations......................24
I. Liquidity and Capital Resources.................24
II. Results of Operations...........................28
III. Indebtedness Secured by the Properties..........30
Item 8. Financial Statements and Supplementary Data..............33
Item 9. Changes in Disagreements with Accountants on Accounting
and Financial Disclosure.................................33
PART III
Item 10. Directors and Executive Officers of the Registrant.......34
Item 11. Executive Compensation...................................34
Item 12. Security Ownership of Certain Beneficial Owners and35
Management...............................................35
Item 13. Certain Relationships and Related Transactions...........36
I. Compensation and Fees...........................36
II. Property Management by Affiliate................37
III. Conflicts of Interest...........................38
IV. Summary of Relationships........................39
V. Related Party Transactions......................39
PART IV.
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K.................................................40
I. Documents filed as part of this Report..........40
II. Reports on Form 8-K.............................41
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PART I
ITEM 1. BUSINESS
I. SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements appearing elsewhere in the Annual Report.
Reference is made to the Glossary which appears at the end of this section for
the definition of certain capitalized terms used in the Summary and elsewhere in
this Report.
A. THE MASTER LIMITED PARTNERSHIP
National Property Analysts Master Limited Partnership (the "MLP") was
organized under the Delaware Revised Uniform Limited Partnership Act in January,
1990 as part of a court ordered consolidation of the operation of properties
owned by certain limited partnerships (the "Partnerships") previously sponsored
by National Property Analysts, Inc. and its affiliates ("NPA"). The term of the
MLP will continue until December 31, 2015, unless sooner terminated in
accordance with the terms of the limited partnership agreement of the MLP (the
"Partnership Agreement").
The MLP's principal executive offices are located at 230 South Broad
Street, Mezzanine, Philadelphia, Pennsylvania 19102 (telephone: 215-790- 4700).
The court ordered consolidation resulted from the settlement (the
"Settlement Agreement") of a class action commenced in 1988 in the United States
District Court for the Southern District of New York by certain limited partners
of the Partnerships (the "Action"). As a result of the court order, the
ownership and operations of the Properties were consolidated into the MLP.
B. THE GENERAL PARTNER
The General Partner of the MLP is EBL&S, Inc. an affiliate of NPA (the
"General Partner"). The General Partner manages and controls all aspects of the
business of the MLP. The General Partner is owned 100% by E&H Properties, Inc.,
an affiliate of NPA. The General Partner holds a 1% general partner interest in
the MLP. See "Item 13. Certain Relationships and Related Transactions."
C. THE PROPERTIES AND INDEBTEDNESS SECURED BY THE PROPERTIES
The MLP owns 57 properties as of December 31, 1996 which consist
primarily of shopping centers and free standing, single tenant retail stores
(the "Properties"). The Properties are subject to certain indebtedness which was
incurred in connection with the acquisition of the Properties by the
Partnerships. See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations."
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D. THE CONSOLIDATION
The Settlement Agreement provided that certain steps would be taken to
reorganize the operations of and consolidate in one entity the ownership of the
Properties (the "Consolidation"). The Consolidation, which occurred as of
January 1, 1990, was accomplished by the transfer of the Properties and all
other assets (subject to liabilities) of the Partnerships in exchange for
interests in the MLP. Pursuant to the exchange, the former partners of the
Partnerships now hold in the aggregate a 99% limited partnership interest in the
MLP (the "Limited Partners").
E. MLP OBJECTIVES AND POLICIES
The MLP intends to hold the Properties until such time as it is deemed
prudent to dispose of the properties. However, the Partnership in accordance
with the terms of the Partnership Agreement will terminate on December 31, 2015.
See "Item 1 - Business - MLP Objectives and Policies."
The Limited Partners are prohibited from transferring their interests
in the MLP except by will, inheritance or operation of law and no additional
limited partners may be admitted as partners of the MLP.
F. LIMITED PARTNERS' SHARE OF CASH FLOW FROM OPERATIONS
The Limited Partners will receive, on an annual basis, 99% of the Cash
Flow from Operations. It is not anticipated that the MLP will be in a position
to distribute Cash Flow from Operations to its partners in the foreseeable
future.
G. LIMITED PARTNERS' SHARE OF PROCEEDS OF SALES DISTRIBUTIONS
Proceeds of Sales of the Properties available to be distributed by the
MLP will be distributed 99% to the Limited Partners and 1% to the General
Partner.
H. ALLOCATIONS OF PROFITS AND LOSSES
Taxable losses from MLP operations or from capital transactions
generally will be allocated 99% to the Limited Partners and 1% to the General
Partner. Taxable income from MLP operations or from a capital transaction will
be allocated 99% to the Limited partners and 1% to the General Partner.
I. COMPENSATION TO THE GENERAL PARTNER AND AFFILIATES
The General Partner will receive certain compensation for its services,
including: (i) reimbursement of certain of its expenses; and (ii) a portion of
Cash Flow from Operations and Proceeds of Sales of the Properties. An affiliate
of the General Partner will receive a management fee for managing the
Properties. See "Item 13. Certain Relationships and Related Transactions -
Compensation and Fees."
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J. FISCAL YEAR
The MLP's fiscal year will begin on January 1, and end on December 31
of each year.
II. MLP OBJECTIVES AND POLICIES
A. MLP OBJECTIVES
The MLP intends to hold the Properties until such time as it
is deemed prudent to dispose of one or more or all of the Properties. The
precise timing of disposition of Properties is in the discretion of the General
Partner. However, the Partnership in accordance with the terms of the
Partnership Agreement will terminate on December 31, 2015.
It is anticipated that the process of selling Properties and applying
sales proceeds to make payments on the Wrap Mortgages will result in the Limited
Partners having to report substantial taxable income when the Properties are
sold without the corresponding receipt of any cash proceeds therefrom (unless
and until the Threshold Amount has been exceeded). It is intended, however, that
by avoiding a foreclosure of Properties, the Consolidation and Restructuring may
preserve for Limited Partners the potential for deriving an economic benefit
from the future sales of the Properties, while at the same time possibly
deferring the recognition of taxable income for some Limited Partners.
The objectives of the MLP are, to attempt to implement, with respect to
the Properties, effective management, leasing, cost control and capital
improvement policies and techniques and thereby to (i) preserve and protect the
MLP's Properties in order to avoid the loss of any Properties to foreclosure;
(ii) enhance the potential appreciation in the value of the MLP's Properties;
and (iii) provide Cash Flow from Operations. It is not anticipated that the MLP
will be in a position to distribute Cash Flow from Operations to its partners in
the foreseeable future.
The determination of whether a Property should be sold or otherwise
disposed of will be made by the General Partner after consideration of relevant
factors, including performance of the Property, market conditions, the financial
requirements of the MLP and the tax consequences to Limited Partners, with a
view toward achieving the principal investment objectives of the MLP. In
connection with a sale of a Property, a purchase money obligation secured by a
mortgage may be taken as part payment; there are no limitations or restrictions
on the MLP's taking such purchase money obligations. The terms of payment of the
MLP will be affected by custom in the area in which each Property is located and
the then-prevailing economic conditions. To the extent the Partnership receives
notes and other property instead of cash on sales, such proceeds (other than any
interest payable thereon) will not be included in proceeds of the sale of the
Properties until and to the extent the notes or other property are actually
paid, sold, refinanced or otherwise disposed of; and therefore, the distribution
of such proceeds to the MLP may be delayed until such time.
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In accordance with the Settlement Agreement, no additional properties
may be acquired. However, in the General Partner's discretion, the MLP may, in
appropriate circumstances, exchange Properties for new properties in
transactions structured to be non-taxable events in whole or in substantial part
under Section 1031 of the Internal Revenue Code, and the proceeds or an
involuntary conversion may be invested in property in transactions structured to
be non-taxable in whole or in part under Section 1033 of the Internal Revenue
Code.
B. COMPETITION FOR TENANTS.
The MLP's Properties consist primarily of shopping centers and free
standing, single tenant retail stores located in 27 states. Of the 57 Properties
owned by the MLP, 36 properties have only 1 or 2 tenants ("Single Tenant
Properties"). The tenants in the Single Tenant Properties are primarily national
retailers or supermarkets ("Anchor Tenants"). The 21 remaining properties are
multi-tenant shopping center properties ("Shopping Center Properties"). The
tenants in the Shopping Center Properties generally include Anchor Tenants and a
variety of tenants occupying less substantial portions of the property ("Local
Tenants").
1. ANCHOR TENANTS
The Anchor Tenant leases are usually for 20 to 25 years. These Anchor
Tenant leases are at various stages of maturity. Upon expiration of the initial
lease term renewal options are usually available to the Anchor Tenants. See
"Item 2. Properties." The high concentration of minimum rent received from
Anchor Tenants under the terms of long term leases provide the MLP with
protection against a significant reduction in rental income, however, this also
restricts the growth opportunity for the MLP.
As of December 31, 1996, there were nine Properties which had been
vacated by Anchor Tenants, eight of which are stores owned or operated by Kmart.
The Anchor Tenants continue to make rental payments for these properties under
the terms of their leases. The Anchor Tenants are attempting to market the space
to other users. To date, the MLP has not had to market vacant Anchor Tenant
space but it has cooperated with the Anchor Tenant in its effort to market space
it has vacated. To the extent that Anchor Tenant space becomes available at the
end of a lease term, the MLP will attempt to re-lease the Anchor Tenant space in
the same manner in which Local Tenant space is marketed (see below).
The MLP's primary Anchor Tenant is Kmart Corporation and its
subsidiaries which in 1996 accounted for approximately 52% of the rental income
received by the MLP. The General Partner has had regularly scheduled meetings
with representatives of Kmart to review and discuss with them their plans for
the various Kmart stores. In the past, in instances where Kmart stores were
determined to be undersized and inadequate to accommodate Kmart's current
needs, expansions of the existing facilities were undertaken wherever possible.
In some cases, Kmart determined to vacate Anchor Tenant space although they
continued to pay the required rental payments.
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Two of the eight Kmart stores which are vacant but continuing to make
rental payments are Anchor Tenants in Shopping Center Properties while the other
six are the only tenant in Single Tenant Properties. Kmart has subleased
portions of four of the eight properties to other users. Kmart remains obligated
under the terms of its leases at the eight property locations for terms ranging
from one to twenty years.
Kmart Corporation experienced in past years a downgrading of its credit
rating as a result of its recent financial performance. Although Kmart's
financial performance has improved, its credit rating has not been upgraded to
its prior level. As a result, the MLP could have difficulty refinancing the
balloon payments due on the Third Party Underlying Obligations on properties
where Kmart is the Anchor Tenant. See Item 2, "The Properties."
2. LOCAL TENANTS
Marketing of Local Tenant space is accomplished through signage, direct
mailing, advertisements and through coordinated listings with local leasing
brokers.
The MLP Properties' occupancy rate for Local Tenant space is 83%. The
lease terms for Local Tenant space typically range from 3 years to 10 years. The
competitive conditions applicable to Local Tenant space vary from Property to
Property. However, as a general matter, it can be said that the market for Local
Tenant space is highly competitive and, with respect to the MLP Properties, is
typically a function of the MLP's rental rates as compared to the local
market's. However, in instances where a multi-tenant property has Anchor Tenant
space and the Anchor Tenant space is vacant (currently two Shopping Center
Properties have Anchor Tenant space which is vacant), the vacancy in the Anchor
Tenant space makes the rental of the Local Tenant space more difficult.
C. PROHIBITED ACTIVITIES AND INVESTMENTS
The MLP will not engage in any business not related to the operations
of the Properties. Additionally, the MLP will not (i) sell additional limited
partnership interests in the MLP; (ii) issue limited partnership interests in
exchange for property; (iii) issue senior securities or make loans or
investments in real estate mortgages other than in connection with a
contemplated purchase or sale or disposition of the Properties; (iv) make loans
to the General Partner or its affiliates (v) invest in or underwrite the
securities of other issuers for any purpose, including investing in securities
for the purpose of exercising control; (vi) operate in such a manner as not to
be exempt from classification as an "investment company" for purposes of the
Investment Company Act of 1940; (vii) purchase or lease any property from or
sell or lease any property to the General Partner or its affiliates, except that
with respect to leases, the General Partner and its affiliates may lease space
in the Properties on terms no more favorable than those offered to
non-affiliated persons; (viii) invest in junior mortgages or deeds of trust,
except that the acquisition or granting of junior mortgages or deeds of trust in
connection with the sale, purchase, financing or refinancing of a Property shall
not be deemed to be investing in junior mortgages or deeds of trust; (ix)
commingle the funds of the MLP with any other person's; (x) invest in limited
partnership
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interests; (xi) construct or develop properties; (xii) enter into joint venture
agreements; or (xiii) receive rebates or give-ups in connection with the MLP.
D. INSURANCE ON PROPERTIES
The General Partner has obtained liability insurance covering the
Properties. The third party liability coverage insures, among others, the MLP
and the General Partner. Property insurance has also been obtained that insures
the MLP for fire and other casualty losses in an amount which covers the
replacement cost of the Properties. In addition, the MLP is covered under
fidelity insurance policies in amounts which the General Partner deems
sufficient. Such insurance coverage is reviewed at least annually and adjusted
to account for variations in value.
III. GLOSSARY.
"ACTION" shall mean the action captioned James O'Brien, et al. v.
National Property Analysts Partners, et al. in which plaintiffs made claims
against NPA and other parties in the United States District Court for the
Southern District of New York, which Action was settled pursuant to the terms of
the Settlement Agreement.
"CAPITAL IMPROVEMENT" shall mean any improvement to any Property which
is required to be capitalized or amortized by the MLP, pursuant to generally
accepted accounting principles.
"CAPITAL IMPROVEMENT DEBT" shall mean indebtedness incurred by the MLP
for Capital Improvements.
"CASH FLOW FROM OPERATIONS" shall mean, with respect to the MLP,
Operating Revenues less Operating Cash Expenses and Reserves.
"CONSOLIDATION" shall mean the consolidation of the ownership and
operations of the Properties in the MLP.
"DEBT SERVICE" shall mean the aggregate principal and interest payments
required on the Third Party Underlying Obligations in calendar year 1990 with
respect to the Properties owned by the MLP.
"EXCESS PROCEEDS" shall mean Proceeds of Sales of Properties in excess
of the Minimum Payoff Amount and Capital Improvement Debt.
"GENERAL PARTNER" shall mean EBL&S, Inc., the general partner of the
MLP.
"INVESTOR NOTE PAYMENTS" shall mean the payment by Investor Note Payors
of amounts becoming due on or after June 1, 1989 on the Investor Notes.
"INVESTOR NOTE PAYORS" shall mean the limited partners of Partnerships
who made payments which became due on or after June 8, 1989 on the Investor
Notes.
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"INVESTOR NOTE RECOVERY" shall mean the Excess Proceeds available for
distribution to the MLP after the first $28 million of Excess Proceeds has been
retained by the MLP, in an amount equal to the lesser of the Investor Note
Payments or $25 million.
"INVESTOR NOTES" shall mean the promissory notes executed and tendered
by limited partners as payments for a portion of the purchase price of their
interest in a Partnership.
"LIMITED PARTNERS" shall mean all persons who hold limited partnership
interests in the MLP.
"MANAGEMENT AGREEMENT" shall mean the agreement entered into by and
between the MLP and EBL&S Property Management, Inc. pursuant to which the
Property Manager will manage the Properties in consideration of a property
management fee (equal to five percent (5%) of the MLP's gross operating
revenues) and a leasing fee (equal to the fee customarily charged in the
geographic areas in which the Properties are located).
"MINIMUM PAYOFF AMOUNT" shall mean the payment made by the MLP pursuant
to the Restructuring Agreement equal to the sum of (i) the balance of the Third
Party Underlying Obligations on a Property on January 1, 1990 and (ii) any
prepayment penalties or premiums.
"MLP" shall mean National Property Analysts Master Limited Partnership,
a Delaware limited partnership.
"NPA" shall mean National Property Analysts, Inc. and the corporations
and partnerships now or previously controlled by, related to or affiliated with,
directly or indirectly, National Property Analysts, Inc. and/or Messrs. Howard
Brownstein and Edward Lipkin, including, but not limited to E&H Partners, E&H
Properties, Inc., National Financial Partners, National Property Analysts
Management Company, National Property Analysts Partners and National Property
Management Corp.
"OPERATING CASH EXPENSES" shall mean the amount of cash paid by the MLP
for costs and expenses incurred in the ordinary course of its business
including, without limitation, (i) Debt Service, (ii) debt service payments on
Capital Improvement Debt, (iii) fees to be paid to the Property Manager and (iv)
repairs and maintenance, utilities, taxes and certain tenant improvements,
employee salaries, travel on MLP business, advertising and promotion, supplies,
legal, accounting, statistical or bookkeeping services, and printing and mailing
of reports and communications.
"OPERATING REVENUES" shall mean the cash receipts of the MLP, other
than (i) the proceeds of sales of the Properties and (ii) proceeds of borrowings
of the MLP, received in cash during the MLP's fiscal year.
"PARTNERSHIP AGREEMENT" shall mean the limited partnership agreement
entered into between the General Partner and the Limited Partners of the MLP.
"PARTNERSHIPS" shall mean certain limited partnerships previously
sponsored by NPA.
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"PENSION GROUPS" shall mean the limited partnerships comprised of
various pension and profit sharing trusts which sold the Properties to the
Partnerships, and includes Main Line Pension Group (the "Pension Group"), a
Delaware limited partnership which acquired the ownership of the Wrap Mortgages
from the original holders.
"PROCEEDS OF SALES DISTRIBUTIONS" shall mean the distributions made by
the MLP from the proceeds of sales of the Properties as defined in the
Partnership Agreement.
"PROCEEDS OF SALES OF THE PROPERTIES" shall mean, for purposes of the
Restructuring Agreement and as of and at the time of the calculation thereof,
(A) the gross sales proceeds (including the then-outstanding principal amount of
indebtedness for borrowed money assumed or taken subject to) from the sale of
any Property or Properties occurring and after the date the Properties were
transferred to the MLP, minus (B) all reasonable costs and expenses incurred by
a Partnership or a successor to a Partnership (including the MLP), in connection
with any such sale, including without limitation, brokerage commissions to
independent third parties, legal fees and costs, transfer taxes, mortgage taxes,
prepayment penalties payable to independent third parties, title insurance and
all other customary closing costs and expenses.
"PROPERTY" OR "PROPERTIES" shall mean one, some or all of the parcels
of real property owned by the MLP.
"PROPERTY MANAGER" shall mean EBL&S Property Management, Inc.
"REFINANCING" shall mean either (i) a restructuring of indebtedness of
the MLP or the Partnerships which only changes the terms thereof without
increasing the indebtedness being restructured or (ii) refinancing indebtedness
of the MLP or the Partnerships for the purpose of making a Capital Improvement.
"RESERVES" shall mean the amount determined by the General Partner, in
its sole discretion, to be set aside for future requirements of the MLP. At the
end of each year, any unexpended reserves not continued as Reserves will be
treated as Cash Flow from Operations.
"RESTRUCTURING" shall mean the restructuring of the Wrap Mortgages and
the Second Mortgages.
"RESTRUCTURING AGREEMENT" shall mean the agreement entered into by and
between the MLP, the Pension Groups and certain NPA affiliates to restructure
the Wrap Mortgages and the Second Mortgages.
"RESTRUCTURED WRAP MORTGAGES" shall mean the Wrap Mortgages as modified
by the Restructuring Agreement.
"SECOND MORTGAGE" shall mean any purchase money mortgage or deed of
trust created by a Pension Group upon its purchase of a Property that is a
subordinate lien against the Property in favor of an NPA affiliate and evidenced
by a promissory note.
"SETTLEMENT" shall mean the settlement of the Action pursuant to the
terms of the Settlement Agreement.
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"SETTLEMENT AGREEMENT" shall mean the agreement dated June 30, 1989
entered into between the plaintiffs and the settling defendants, including NPA.
"TENANT IMPROVEMENTS" shall mean construction to the Properties
completed for the benefit of the tenants' use of the Property.
"THIRD PARTY DEBT SERVICE" shall mean payments of principal and
interest on Third Party Underlying Obligations.
"THIRD PARTY UNDERLYING OBLIGATIONS" shall mean those obligations
secured by the Property underlying the Wrap Mortgages held by persons or
entities other than NPA, or its affiliates.
"THRESHOLD AMOUNT" shall mean payments on the Wrap Mortgages generated
by Proceeds of Sales of the Properties in an amount equal to $45,000,000 in
excess of the Third Party Underlying Obligations as of January 1, 1990 secured
by such Properties. As of December 31, 1996, approximately $35,395,000 had been
applied in reduction of the Threshold Amount.
"UNITS" shall mean units of limited partnership interest in the MLP.
"WRAP MORTGAGES" shall mean the mortgages securing the Wrap Notes which
were delivered to the Pension Groups by the Partnerships at the time of the
acquisition of the Property.
"WRAP NOTES" shall mean the promissory notes secured by the Wrap
Mortgages.
ITEM 2. PROPERTIES.
The MLP's Properties consist primarily of shopping centers and free
standing, single tenant retail stores. As of December 31, 1996, the MLP owned
and operated 57 Properties located in 27 states. Approximately 63% of the
Properties are Single Tenant Properties (as defined above) and 37% are Shopping
Center Properties.
Set forth below are schedules providing information with respect to the
Properties and the indebtedness secured by the Properties. Schedule 1 provides a
description of the Properties and certain tenant information. Schedule 2
provides certain information regarding tenant lease expirations. Schedule 3
provides information regarding the Third Party Underlying Obligations secured by
the Properties.
Under applicable law, in certain circumstances, the owner or operator
of real property has an obligation to clean up hazardous and toxic substances on
the property. This obligation is often imposed without regard to the timing,
cause or person responsible for such substances on the property. The presence of
such substances on a Property would have an adverse impact on the operating
costs and sale or refinancing value of such Property. None of the Properties are
presently the subject of any environmental enforcement actions under any such
statutes, and the General Partner does not have any information or knowledge
about the presence of such substances on any of the Properties. If it is claimed
or determined that such substances do exist on any of
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such Properties, the MLP could be subject to such cleanup obligations. The
presence of such substances may make a Property unmarketable or substantially
decrease its value. Any environmental cleanup expenses incurred in connection
with a sale would directly reduce proceeds derived from the sale of the
Property.
ITEM 3. LEGAL PROCEEDINGS.
The MLP is involved in various claims and legal actions arising in the
ordinary course of property operations. In the opinion of the General Partner,
the ultimate disposition of these matters will not have a material adverse
effect on the MLP's financial position, results of operations or liquidity.
Ten of the partnerships combined in the MLP previously sponsored by NPA
filed for protection under the provisions of Chapter 11 of the U.S. Bankruptcy
Code during the period from 1989 through 1996 following the filing of actions by
secured creditors seeking foreclosure. All of these bankruptcies have been
dismissed at the Partnership's motion or the Partnership's bankruptcy plan was
confirmed and the case closed.
During 1996, Ocala Realty Associates ("Ocala") filed for protection
under the provisions of the U.S. Bankruptcy Code. Ocala owns and operates the
properties located in East Greenbush, New York, Ocala, Florida and Temple
Terrace, Florida. The bankruptcy court has approved the assumption of the
Agreement of Sale for the Temple Terrace property and a 90-day extension of the
Agreement of Sale. See "Item 7-Management's Discussion and Analysis of Financial
Condition and Results of Operations - Results of Operations - Property
Dispositions During Fiscal 1996". Ocala has been operating as a
Debtor-In-Possession since the filing date and intends to file a Plan of
Reorganization in the Spring of 1997.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not Applicable.
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Schedule 1
DESCRIPTION OF PROPERTY AND TENANT INFORMATION
<TABLE>
<CAPTION>
MAJOR TENANT INFORMATION
EFFECTIVE ------------------------------------------------------------------
PROPERTY TOTAL OCCUPANCY TOTAL RENT ANNUAL LEASE
LOCATION GLA RATE RENT PSF NAME GLA RENT EXPIRATION OPTIONS
- -------- ------- --------- ---------- --------- ----------------------- ------- -------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ardmore, OK 215,890 97.7% $ 813,355 $ 3.86 Kmart* 83,552 $185,604 28-Feb-2005 10/5 YR
Beall 25,632 83,304 30-Apr-2000 4/5 YR
Winn Dixie 22,720 83,155 31-Aug-2000 4/5 YR
Borger, TX 31,750 100.0% 95,642 3.01 Safeway 31,750 95,642 31-Aug-98 7/5 YR
Bowling Green, OH 135,187 96.3% 404,877 3.11 Kmart 87,543 224,000 30-Nov-2012 10/5 YR
Cahokia, IL 241,327 94.4% 542,248 2.38 Kmart* 102,433 179,257 30-Nov-2001 8/5 YR
Schnuck Markets 32,000 153,942 30-Jun-99 6/5 YR
Goodyear Service Center 26,000 24,133 28-Feb-99 1/5 YR
Taco Bell 32,000 25,990 31-Jan-2000 None
Chesapeake, VA 162,020 100.0% 402,725 2.49 Kmart 162,020 402,725 31-Oct-2005 6/10 YR
Clackamas, OR 58,543 100.0% 227,808 3.89 Safeway (regional office) 58,543 227,808 14-Jun-2003 6/5 YR
Cottage Grove, MN 171,973 74.8% 844,017 6.56 Rainbow Foods 70,130 606,624 11-Jul-2016 6/5 YR
National Tea 26,008 76,200 28-Feb-99 3/5 YR
Crescent City, CA 33,000 100.0% 220,000 6.67 Safeway 33,000 220,000 31-May-99 7/5 YR
Dunmore, PA 26,475 100.0% 78,696 2.97 Price Chopper 26,475 78,696 30-Nov-2000 4/5 YR
East Greenbush, NY 123,420 100.0% 340,000 2.75 Kmart 95,810 256,000 31-Oct-98 10/5 YR
Price Chopper* 27,610 84,000 31-Oct-98 3/5 YR
East Haven, CT 153,096 91.0% 654,095 4.70 Kmart 84,180 253,000 31-Mar-2000 10/5 YR
East Meadow, NY 200,589 82.1% 2,152,343 13.08 Modell's 30,600 420,750 31-Jan-2018 1/21 YR
Escanaba, MI 40,175 100.0% 114,715 2.86 Kmart 40,175 114,715 30-Sep-2001 10/5 YR
</TABLE>
<PAGE> 15
Schedule 1
DESCRIPTION OF PROPERTY AND TENANT INFORMATION
<TABLE>
<CAPTION>
MAJOR TENANT INFORMATION
EFFECTIVE ----------------------------------------------------------------
PROPERTY TOTAL OCCUPANCY TOTAL RENT ANNUAL LEASE
LOCATION GLA RATE RENT PSF NAME GLA RENT EXPIRATION OPTIONS
- ----------------------- ------- --------- ------- --------- ------------------------- ------ ------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fairborn, OH 136,555 100.0% 517,045 3.79 Kmart 84,180 268,000 31-Jul-2000 10 / 5 YR
Kroger 30,975 106,120 31-Mar-2001 4 / 5 YR
Fairfield, IA 33,000 100.0% 37,286 1.13 Pamida 33,000 37,286 30-Jun-99 4 / 5 YR
Federal Way, WA 37,560 100.0% 147,900 3.94 Safeway 37,560 147,900 31-Oct-98 7 / 5 YR
Fond du Lac, WI 194,941 87.4% 691,664 4.06 Kmart 93,800 267,806 31-Oct-2011 10 / 5 YR
Roundy's 35,920 98,780 31-Oct-99 4 / 5 YR
Fort Wayne, IN 778,500 100.0% 607,726 0.78 Kmart * 778,500 607,726 15-Nov-2003 6 / 5 YR
(distribution center)
Huntington, WV 142,055 95.8% 384,108 2.82 Hill's 85,817 184,000 31-Jul-2003 5 / 5 YR
Office Depot 25,900 98,420 28-Feb-2005 4 / 5 YR
Huntsville, AL 104,000 100.0% 244,400 2.35 Kmart 104,000 244,400 30-Nov-2000 4 / 5 YR
Huron, SD 38,400 100.0% 48,310 1.26 Pamida 38,400 48,310 30-Jun-99 4 / 5 YR
Hutchinson, MN 60,842 100.0% 229,800 3.78 Kmart 60,842 229,800 30-Sep-2006 10 / 5 YR
Independence, MO 134,634 95.2% 362,334 2.83 Kmart 116,799 308,634 31-Mar-2000 8 / 5 YR
International Falls, MN 60,842 100.0% 237,000 3.90 Kmart 60,842 237,000 31-Jul-2006 10 / 5 YR
Kalamazoo, MI 120,958 100.0% 383,828 3.17 Kmart 84,180 248,770 29-Feb-2000 10 / 5 YR
Ace Hardware 30,650 101,829 26-Jul-2000 3 / 5 YR
Lake Mary, FL 107,400 100.0% 923,640 8.60 Builder's Square * 107,400 923,640 31-Dec-2017 10 / 5 YR
La Mesa, CA 38,374 100.0% 202,950 5.29 Safeway 38,374 202,950 30-Oct-98 6 / 5 YR
Las Vegas, NV 38,750 100.0% 147,111 3.80 Safeway 38,750 147,111 31-Jul-98 7 / 5 YR
Lockport, IL 100,838 100.0% 337,703 3.35 Kmart 54,000 133,684 30-Jun-2004 10 / 5 YR
Sterk's Super Foods, Inc. 35,170 121,603 31-May-2006 3 / 5 YR
Maplewood, MO 96,268 0.0% 0 0.00 Vacant
</TABLE>
<PAGE> 16
Schedule 1
DESCRIPTION OF PROPERTY AND TENANT INFORMATION
<TABLE>
<CAPTION>
MAJOR TENANT INFORMATION
Effective ---------------------------------------------------
Property Total Occupancy Total Rent Annual Lease
Location GLA Rate Rent PSF Name GLA Rent Expiration Options
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Marquette, MI 254,793 94.4% 1,236,093 5.14 Kmart 85,480 218,657 30-Nov-99 10/5 YR
Younker's 44,068 92,543 01-Oct-2001 1/10 YR
J.C. Penney 33,996 118,286 31-Aug-2009 4/5 YR
Maryville, MO 34,955 100.0% 120,506 3.45 J.C. Penney 22,060 65,502 31-Oct-2001 3/5 YR
Menominee, MI 64,588 100.0% 197,848 3.06 Kmart 64,588 197,848 30-Apr-2000 10/5 YR
Minot, ND 72,897 100.0% 356,580 4.89 Kmart* 72,897 356,580 30-Oct-2005 10/5 YR
Newberry, SC 55,552 100.0% 194,083 3.49 Kmart* 55,552 194,083 30-Jun-2005 10/5 YR
New Hope, MN 115,492 100.0% 319,462 2.77 Kmart 115,492 319,462 30-Jun-2002 9/5 YR
North Augusta, SC 109,134 100.0% 186,750 1.71 Kmart* 109,134 186,750 31-Oct-97 10/5 YR
North Sarasota, FL 134,805 100.0% 531,360 3.94 Kmart 84,180 280,440 30-Nov-2003 10/5 YR
Uptons 40,000 141,040 20-Nov-2003 5/5 YR
Oak Lawn, IL 159,580 100.0% 856,567 5.37 Kmart 104,568 447,150 31-May-2003 10/5 YR
Jewel Foods 55,012 409,417 07-Dec-98 2/5 YR
Ocala, FL 103,964 100.0% 226,310 2.18 Kmart 103,964 226,310 30-Jun-2002 9/5 YR
O'Fallon, MO 91,061 100.0% 349,115 3.83 Kmart 83,061 279,415 30-Nov-2005 10/5 YR
Philadelphia, PA 128,006 100.0% 556,500 4.35 Kmart 91,033 388,500 31-Mar-2005 10/5 YR
Acme 36,973 168,000 30-Jun-2000 7/5 YR
San Mateo, CA 84,704 100.0% 476,546 5.63 Kmart 84,704 476,546 31-Jan-2005 1/10 YR
Sault St. Marie, MI 92,650 100.0% 230,777 2.49 Kmart 92,650 230,777 30-Sep-2016 10/5 YR
</TABLE>
<PAGE> 17
Schedule 1
DESCRIPTION OF PROPERTY AND TENANT INFORMATION
<TABLE>
<CAPTION>
MAJOR TENANT INFORMATION
EFFECTIVE -------------------------------------------------------------------
PROPERTY TOTAL OCCUPANCY TOTAL RENT ANNUAL LEASE
LOCATION GLA RATE RENT PSF NAME GLA RENT EXPIRATION OPTIONS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Seven Hills, OH 121,677 100.0% 318,595 2.62 Kmart 121,677 318,595 31-Aug-2002 9/5 YR
Sparks,NV 1,579,000 100.0% 1,696,878 1.07 Kmart 1,579,000 1,696,878 12-Dec-2006 7/5 YR
(distribution
center)
Steger, IL 87,678 100.0% 261,013 2.98 Kmart 87,678 261,013 30-Oct-2010 10/5 YR
Taylorville, IL 43,127 100.0% 372,952 8.85 Kroger 27,958 237,761 31-Mar-2007 5/5 YR
Revco Drugs 10,069 81,319 31-Mar-2007 5/5 YR
Temple Terrace, FL 44,525 14.8% 42,350 6.42 Grandy's 6,600 42,350 31-Dec-2004 2/5 YR
Trenton, NJ 176,301 100.0% 628,422 3.56 J.C. Penney 176,301 628,422 30-Apr-2006 4/5 YR
Urbana, IL 54,167 91.0% 402,378 8.17 Jerry's IGA 43,667 370,648 31-Mar-2007 5/5 YR
Waverly, OH 55,102 100.0% 266,876 4.84 Kroger 28,199 115,504 30-Nov-99 5/5 YR
Revco Drugs 10,069 47,828 30-Nov-99 4/5 YR
Wahpeton, ND 49,320 100.0% 38,801 0.79 Pamida 49,320 38,801 30-Jun-99 4/5 YR
Washington,IA 35,600 100.0% 34,775 0.98 Pamida 35,600 34,775 30-Jun-99 4/5 YR
Wheelersburg,OH 125,958 71.7% 175,251 1.94 Quality Farm
& Fleet 53,844 80,000 30-Jun-99 4/5 YR
Kroger 25,168 69,212 31-Jul-99 4/5 YR
Wichita, KS 71,657 100.0% 225,000 3.14 Kmart* 71,657 225,000 30-Nov-2002 10/5 YR
Yazoo City, MS 79,996 100.0% 182,062 $2.28 Miss. Baptist
Medical Ctr. 20,116 $47,273 31-May-2000 2/5 YR
</TABLE>
* Tenant is vacant and continues to pay rent under the terms of its lease.
<PAGE> 18
Schedule 2
TENANT LEASE EXPIRATIONS
<TABLE>
<CAPTION>
/---------- 1997---------/ /---------- 1998---------/ /---------- 1999---------/
TOTAL NUMBER NUMBER NUMBER
TOTAL MINIMUM OF MIMIMUM OF MINIMUM OF MINIMUM
PROPERTY LOCATION GLA RENT TENANTS RENT S.F. TENANTS RENT S.F. TENANTS RENT S.F.
- ----------------------- ------- ---------- ------- ------- ------ ------- ------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ardmore, OK 215,890 $ 813,355 7 $ 69,658 6,841 5 $ 64,317 9,348 8 $ 90,343 16,400
Borger, TX 31,750 95,642 1 95,642 31,750
Bowling Green, OH 135,187 404,877 3 180,877 42,644
Cahokla, IL 241,327 542,248 5 70,756 15,244 2 44,500 7,500 4 187,375 60,700
Chesapeake, VA 162,020 402,725
Clackamas, OR 58,543 227,808
Cottage Grove, MN 171,973 844,017 3 64,556 14,339 1 10,800 2,000 3 106,636 26,833
Crescent City, CA 33,000 220,000 1 220,000 33,000
Dunmore, PA 26,475 78,696
East Greenbush, NY 123,420 340,000 2 340,000 123,420
East Haven, CT 153,096 654,095 2 85,899 16,420 2 162,190 18,144 1 34,260 6,850
East Meadow, NY 200,589 2,152,343 8 181,886 9,433 8 266,495 20,823 8 438,374 26,189
Escanaba, MI 40,175 114,715
Fairborn, OH 136,555 517,045 1 33,860 3,480 1 23,940 3,420 2 43,125 7,500
Fairfield, IA 33,000 37,286 2 1 37,286 33,000
Federal Way, WA 37,560 147,900 1 147,900 37,560
Fond du Lac, WI 194,941 691,664 1 17,325 1,575 1 22,781 3,375 3 140,780 39,920
Fort Wayne, IN 778,500 607,726
Huntington, WV 142,055 384,108 1 3,600 378 2 9,618 2,160 2 32,498 7,850
Huntsville, AL 104,000 244,400
Huron, SD 38,400 48,310 1 48,310 38,400
Hutchinson, MN 60,842 229,800
Independence, MO 134,634 362,334 2 15,300 3,000 1 8,400 1,200
International Falls, MN 60,842 237,000
Kalamazoo, MI 120,958 383,828 1 12,109 1,904
Lake Mary, FL 107,400 923,640
La Mesa, CA 38,374 202,950 1 202,950 38,374
Las Vegas, NV 38,750 147,111 1 147,111 38,750
Lockport, IL 100,838 337,703 1 15,042 2,760 2 106,498 30,628
Maplewood, MO 96,268 0
Marquette, MI 254,793 1,236,093 4 100,251 7,599 7 198,117 16,382 8 400,879 99,757
Maryville, MO 34,955 120,506 1 10,829 4,900 1 13,650 1,400
Menominee, MI 64,588 197,848
Minot, ND 72,897 356,580
New Hope, MN 115,492 319,462
Newberry, SC 55,552 194,083
North Augusta, SC 109,134 186,750 1 186,750 109,134
North Sarasota, FL 134,805 531,360 1 12,900 1,200 1 41,180 5,000
O'Falion, MO 91,061 349,115 1 27,000 3,000 1 15,700 2,000
Oak Lawn, IL 159,580 856,567 1 409,417 58,575
Ocala, FL 103,964 226,310
Philadelphia, PA 128,006 556,500
San Mateo, CA 84,704 476,546
Sault Ste. Marie, MI 92,650 230,777
Seven Hills, OH 121,677 318,595
Sparks, NV 1,579,000 1,696,878
Stager, IL 87,678 261,013
Taylorville, IL 43,127 372,952 1 16,800 2,100
Temple Terrace, FL 44,525 42,350
Trenton, NJ 176,301 628,422
Urbana, IL 54,167 402,378 1 11,220 1,400 3 20,510 4,200
Wahpeton, ND 49,320 38,801 1 38,801 49,320
Washington, IA 35,600 34,775 1 34,775 35,600
Waverly, OH 55,102 266,876 1 7,450 1,000 4 190,539 42,468
</TABLE>
<TABLE>
<CAPTION>
/---------- 2000---------/ /---------- 2001---------/
TOTAL NUMBER NUMBER
TOTAL MINIMUM OF MIMIMUM OF MINIMUM
PROPERTY LOCATION GLA RENT TENANTS RENT S.F. TENANTS RENT S.F.
- ----------------------- ------- ---------- ------- ------- ------ ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ardmore, OK 215,890 $ 813,355 6 $231,769 70,749 2 $63,427 7,514
Borger, TX 31,750 95,642
Bowling Green, OH 135,187 404,877
Cahokla, IL 241,327 542,248 3 58,190 37,000 1 179,257 102,433
Chesapeake, VA 162,020 402,725
Clackamas, OR 58,543 227,808
Cottage Grove, MN 171,973 844,017 2 220,874 93,556
Crescent City, CA 33,000 220,000
Dunmore, PA 26,475 78,696 1 78,696 26,475
East Greenbush, NY 123,420 340,000
East Haven, CT 153,096 654,095 2 280,000 88,680 2 51,746 6,000
East Meadow, NY 200,589 2,152,343 7 159,611 8,879 11 242,872 15,311
Escanaba, MI 40,175 114,715 1 114,703 40,175
Fairborn, OH 136,555 517,045 1 268,000 84,180 2 148,120 37,975
Fairfield, IA 33,000 37,286
Federal Way, WA 37,560 147,900
Fond du Lac, WI 194,941 691,664 3 88,822 8,090
Fort Wayne, IN 778,500 607,726
Huntington, WV 142,055 384,108
Huntsville, AL 104,000 244,400 1 244,400 104,000
Huron, SD 38,400 48,310
Hutchinson, MN 60,842 229,800
Independence, MO 134,634 362,334 1 308,634 116,799 1 30,000 7,200
International Falls, MN 60,842 237,000
Kalamazoo, MI 120,958 383,828 2 350,599 114,830
Lake Mary, FL 107,400 923,640
La Mesa, CA 38,374 202,950
Las Vegas, NV 38,750 147,111
Lockport, IL 100,838 337,703 1 26,285 3,755
Maplewood, MO 96,268 0
Marquette, MI 254,793 1,236,093 4 115,084 7,064 6 155,849 57,380
Maryville, MO 34,955 120,506 2 18,550 4,200 2 77,477 24,455
Menominee, MI 64,588 197,848 1 197,848 64,588
Minot, ND 72,897 356,580
New Hope, MN 115,492 319,462
Newberry, SC 55,552 194,083
North Augusta, SC 109,134 186,750
North Sarasota, FL 134,805 531,360 2 35,550 2,400
O'Falion, MO 91,061 349,115 1 27,000 3,000
Oak Lawn, IL 159,580 856,567
Ocala, FL 103,964 226,310
Philadelphia, PA 128,006 556,500 1 168,000 36,973
San Mateo, CA 84,704 476,546
Sault Ste. Marie, MI 92,650 230,777
Seven Hills, OH 121,677 318,595
Sparks, NV 1,579,000 1,696,878
Stager, IL 87,678 261,013
Taylorville, IL 43,127 372,952
Temple Terrace, FL 44,525 42,350
Trenton, NJ 176,301 628,422
Urbana, IL 54,167 402,378
Wahpeton, ND 49,320 38,801
Washington, IA 35,600 34,775
Waverly, OH 55,102 266,876 2 61,721 9,634 1 12,000 2,000
</TABLE>
<PAGE> 19
Schedule 2
TENANT LEASE EXPIRATIONS
<TABLE>
<CAPTION>
/---------1997----------/ /----------1998-----------/ /----------1999-----------/
------------------------- --------------------------- ---------------------------
TOTAL NUMBER NUMBER NUMBER
PROPERTY TOTAL MINIMUM OF MINIMUM OF MINIMUM OF MINIMUM
LOCATION GLA RENT TENANTS RENT S.F. TENANTS RENT S.F. TENANTS RENT S.F.
- ---------------- --------- ----------- ------- ------- ------- ------- --------- ------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Whellersburg, OH 125,958 175,251 3 95,739 63,106 2 79,512 27,228
Wichita, KS 71,657 225,000
Yazoo City, MS 79,996 182,062 2 16,907 3,400 2 34,050 12,600
--------- ----------- -- ------- ------- -- --------- ------- -- --------- -------
TOTALS 7,843,651 $22,877,177 41 916,810 200,103 50 2,447,455 531,215 57 2,379,711 603,163
--------- ----------- -- ------- ------- -- --------- ------- -- --------- -------
ANNUAL % TO TOTAL 100.0% 100.0% 4.0% 2.6% 10.7% 6.8% 10.4% 7.7%
--------- ----------- ------- ------- --------- ------- --------- -------
CUMULATIVE % 4.0% 2.6% 14.7% 9.3% 25.1% 17.0%
--------- ----------- ------- ------- --------- ------- --------- -------
</TABLE>
<TABLE>
<CAPTION>
/-----------2000----------/ /----------2001-----------/
--------------------------- ---------------------------
NUMBER NUMBER
PROPERTY OF MINIMUM OF MINIMUM
LOCATION TENANTS RENT S.F. TENANTS RENT S.F.
- ---------------- ------- --------- ------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Whellersburg, OH
Wichita, KS
Yazoo City, MS 3 95,873 40,116
-- --------- ------- -- --------- -------
TOTALS 41 2,752,082 826,012 34 1,358,875 399,399
-- --------- ------- -- --------- -------
ANNUAL % TO TOTAL 12.0% 10.5% 5.9% 5.1%
--------- ------- --------- -------
CUMULATIVE % 37.1% 27.5% 43.1% 32.6%
--------- ------- --------- -------
</TABLE>
<PAGE> 20
Schedule 3
THIRD PARTY UNDERLYING OBLIGATIONS
<TABLE>
<CAPTION>
OWNERSHIP
PRINCIPAL ANNUAL BALLOON INTEREST
PROPERTY MORTGAGE INTEREST BALANCE AT DEBT DUE AT FEE/
LOCATION MORTGAGEE(S) TYPE RATE DUE DATE 31-DEC-96 SERVICE EXPIRATION LEASEHOLD
- ---------------------------------------------------------------------------------------------------------------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ardmore, OK Pacific Mutual Life Insurance
Company 1st 9.50% 01-Aug-2010 $5,640,115 $ 694,308 $1,275,803 Fee
Ainbinder Associates 2nd & 3rd 9.00% 10-Aug-98 1,703,750 153,338 1,703,750
Borger, TX First Oxford Corporation 1st 8.88% 01-Oct-98 363,412 95,400 244,335 Fee
Bowling Green, OH Aetna Life Insurance Company 1st 9.25% 01-Dec-99 2,361,496 316,160 2,035,753 Fee
Cahokia, IL Equitable Life Assurance Society 1st 8.63% 01-Dec-2006 257,642 38,539 0 Fee
Equitable Life Assurance Society 1st 8.63% 01-Dec-2063 1,675,965 250,702 0
Equitable Life Assurance Society 1st 9.25% 01-Dec-2004 424,694 79,680 0
GE Capital Asset Management 1st 12.00% 01-Feb-2000 40,042 19,820 0
Chesapeake, VA John Hancock Real Estate Finance
Incorporated 1st 8.00% 01-Jan-2004 1,792,877 334,776 0 Leasehold
Lawrence Kadish 2nd 9.00% 01-Jan-2006 492,849 44,356 0
Clackamas, OR First Oxford Corporation 1st 9.00% 01-Jul-2003 1,470,478 227,100 637,586 Fee
Cottage Grove, MN IDS Life Insurance 1st 8.75% 01-Nov-2016 5,990,727 636,272 0 Fee
Crescent City, CA First Oxford Corporation 1st 9.50% 01-May-99 806,155 217,800 438,896 Fee
Dunmore, PA NONE Leasehold
East Greenbush, NY W & Z Properties 1st 9.00% 01-Mar-2013 2,958,188 347,760 0 Fee
East Haven, CT Aetna Life Insurance Company 1st 8.88% 01-Sep-2005 2,320,124 381,258 0 Fee
Federal Deposit Insurance 2nd 8.53% 01-Aug-2005 1,186,439 116,716 988,641
Corporation
East Meadow, NY General Electric Credit 1st *9.96% 31-Jul-97 11,916,462 1,186,880 11,916,462 Leasehold
Corporation
Escanaba, MI Developers Diversified 1st 9.75% 01-Nov-2012 908,180 112,032 19,146 Fee
Fairborn, OH Aetna Life Insurance Company 1st 9.50% 01-Sep-2004 1,800,473 329,406 0 Leasehold
Federal Deposit Insurance 2nd 10.35% 27-May-2004 803,634 88,044 751,017
Corporation
Fairfield, IA State of Wisconsin Investment
Board 1st 9.13% 01-Jul-99 121,281 36,733 34,941 Fee
Federal Way, WA First Oxford Corporation 1st 9.50% 01-Oct-98 440,331 147,900 249,602 Fee
Fond du Lac, WI Aegon USA Realty Advisors 1st 9.75% 01-May-2010 3,648,920 505,200 0 Fee
First Bank of Missouri 2nd 11.00% 01-Mar-96 1,674,207 138,157 1,674,207
Fort Wayne, IN New York Life Insurance Company 1st 8.63% 15-Nov-2003 3,158,357 605,724 0 Fee
Huntington, WV Life Insurance Company of Virginia 1st 8.75% 01-Jan-2002 1,163,990 250,120 244,223 Fee
</TABLE>
<PAGE> 21
Schedule 3
THIRD PARTY UNDERLYING OBLIGATIONS
<TABLE>
<CAPTION>
OWNERSHIP
PRINCIPAL ANNUAL BALLOON INTEREST
PROPERTY MORTGAGE INTEREST BALANCE AT DEBT DUE AT FEE/
LOCATION MORTGAGE(S) TYPE RATE DUE DATE 31-DEC-96 SERVICE EXPIRATION LEASEHOLD
- -------- ------------------------------- ------- -------- ----------- --------- ------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Huntsville, AL Equitable Life Assurance Society 1st 9.50% 01-Dec-97 156,481 164,964 0 Leasehold
Huron, SD State of Wisconsin Investment
Board 1st 9.13% 01-Jul-99 159,871 48,420 46,059 Fee
Hutchinson, MN Developers Diversified Wrap 8.75% 01-Jul-2013 1,998,233 229,632 0 Fee
Independence, MO Southland Life Insurance Company 1st 8.50% 01-Feb-97 39,867 237,931 0 Fee
Southland Life Insurance Company 1st 9.50% 01-Feb-99 99,199 50,382 0
International
Falls, MN Developers Diversified Wrap 8.75% 01-Aug-2013 2,060,459 236,250 0 Fee
Kalamazoo, MI New York Life Insurance Company 1st 8.63% 10-Dec-2000 1,314,133 283,500 524,638 Leasehold
Lake Mary, FL Kidder Peabody Mortgage Capital 1st 7.88% 01-Jan-2016 9,068,101 919,440 0 Fee
La Mesa, CA First Oxford Corporation 1st 8.25% 01-Nov-98 887,512 202,800 631,987 Fee
Las Vegas, NV First Oxford Corporation 1st 8.88% 01-Sep-98 683,744 146,784 529,697 Fee
Lockport, IL LW-SP2, L.P. 1st 9.00% 31-Oct-2001 1,564,235 176,107 1,355,823 Fee
Maplewood, MO New York Life Insurance Company 1st 9.50% 11-Jul-2006 437,959 69,780 0 Fee
Marquette, MI State of California Public
Employees Retirement System 1st 8.87% 01-Nov-99 583,670 177,600 180,107 Leasehold
Union Labor Life Insurance Company 1st 10.38% 01-Jul-98 6,424,390 738,823 6,307,603
First Union National Bank 2nd 9.00% 18-Oct-99 432,808 173,744 0
Maryville, MO NONE Leasehold
Menominee, MI State of California Public
Employees Retirement System 1st 8.18% 01-Apr-2000 606,274 168,995 162,626 Leasehold
Minot, ND First American Bank and Trust
Company 1st 9.00% 15-Jan-2006 2,205,000 347,366 0 Fee
Newberry, SC Western National Life Insurance
Company 1st 13.00% 01-Sep-2008 1,124,527 187,154 0 Fee
New Hope, MN Western National Life Insurance
Company 1st 8.50% 01-Feb-2000 686,711 244,920 0 Fee
North Augusta,
SC American Savings Bank 1st 8.00% 01-Dec-97 399,788 154,020 284,116 Leasehold
North Sarasota,
FL UNUM Life Insurance Company 1st 9.50% 01-May-2009 2,641,409 363,060 0 Fee
Federal Deposit Insurance
Corporation 2nd 8.53% 01-May-2005 1,188,694 111,030 1,065,521
Oak Lawn, IL Board of Trustees NECA Pension
Benefit Trust Fund 1st 8.50% 30-Jun-2003 3,249,561 433,810 1,888,273 Leasehold
Ocala, FL B & K Properties 1st 9.00% 01-Mar-2013 1,795,310 217,350 0 Fee
</TABLE>
<PAGE> 22
Schedule 3
THIRD PARTY UNDERLYING OBLIGATIONS
<TABLE>
<CAPTION>
OWNERSHIP
PRINCIPAL ANNUAL BALLOON INTEREST
PROPERTY MORTGAGE INTEREST BALANCE AT DEBT DUE AT FEE/
LOCATION MORTGAGEE(S) TYPE RATE DUE DATE 31-DEC-96 SERVICE EXPIRATION LEASEHOLD
- -------------------- ---------------------------- -------- -------- ----------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
O'Fallon, MO Board of Trustees NECA
Pension Benefit Trust Fund 1st 9.88% 01-Jul-2011 1,957,085 254,800 0 Fee
Philadelphia, PA Equitable Life Assurance
Society 1st 9.25% 01-Jun-2010 3,038,210 395,220 0 Leasehold
San Mateo, CA Meritor Savings Bank 1st 8.25% 01-Feb-2005 2,816,591 474,046 0 Leasehold
Sault Ste. Marie, MI EDC County of Chippewa, MI 1st 6.70% 01-Jan-2007 1,140,000 131,320 0 Fee
Seven Hills, OH Developers Diversified 1st 9.75% 01-Nov-2012 2,139,400 263,917 66,537 Leasehold
Sparks, NV Prin & Company 1st 8.60% 12-Dec-2006 6,933,151 1,040,954 0 Fee
Teachers Retirement of Texas 1st 9.75% 12-Dec-2006 3,864,361 609,303 0
Bank of Nevada 1st 8.60% 12-Dec-2006 310,514 46,621 0
Steger, IL LW - SP2, L. P. 1st 9.00% 31-Oct-2001 1,655,545 186,387 1,434,968 Fee
Taylorville, IL Boatman's National Bank of
St. Louis 1st 11.75% 01-Apr-2007 1,870,000 153,404 0 Fee
Temple Terrace, FL Indiana Federal Bank for
Savings 1st 9.00% 01-May-97 1,629,885 176,442 1,598,423 Fee
Trenton, NJ Penn-Centennial Associates 1st 8.00% 01-May-2006 4,854,484 624,000 1,600,475 Leasehold
Urbana, IL Boatman's National Bank of
St. Louis 1st 11.75% 01-Mar-2007 2,325,000 380,488 0 Fee
Waverly, OH Vista Capital Group 1st 8.13% 01-Oct-2000 1,096,762 172,260 733,664 Fee
Wahpeton, ND State of Wisconsin Investment
Board 1st 9.13% 01-Jul-99 154,358 46,751 44,470 Fee
Washington, IA State of Wisconsin Investment
Board 1st 9.13% 01-Jul-99 115,769 35,063 33,353 Fee
Wheelersburg, OH Equitable Life Assurance
Society 1st 10.00% 01-Nov-95 1,148,332 166,357 1,148,332 Fee
Wichita, KS Transamerica Occidental Life
Insurance Company 1st 9.38% 01-Nov-94 1,143,126 178,392 1,143,126 Fee
Yazoo City, MS NONE Fee
</TABLE>
* Interest rate variable. Disclosed interest rate
represents rate as of December 31, 1996
<PAGE> 23
PART II
ITEM 5. MARKET PRICE FOR THE REGISTRANT'S COMMON
EQUITY AND RELATED STOCKHOLDER MATTERS.
I. NO TRADING MARKET
There is no trading market for the Units in the MLP. MLP Units are not
transferrable except by will, inheritance or operation of law. To date no
transfers other than those by will, inheritance and operation of law have been
permitted.
In addition, the Partnership Agreement places additional restrictions
on the transferability of the Units. The Limited Partners of the MLP are
prohibited from selling their Units unless such sale is at the General Partner's
direction, is accomplished in a single transaction involving all Limited
Partners' interests to a single purchaser, and is accomplished simultaneously
with the sale of the General Partner's interest in the MLP.
As of December 31, 1996, there were 100,000 units outstanding held by
approximately 2,600 limited partners.
II. DISTRIBUTIONS OF CASH FLOW FROM OPERATIONS
The MLP may make annual distributions to its partners in an aggregate
amount equal to its Operating Revenues less Operating Cash Expenses and Reserves
("Cash Flow from Operations"). It is not anticipated that the MLP will be in a
position to distribute Cash Flow from Operations to its partners in the
foreseeable future.
The MLP may not reinvest Cash Flow from Operations in additional real
estate investments.
III. PROCEEDS OF SALES DISTRIBUTIONS
The proceeds of sales of the Properties may not be reinvested in
additional real properties, except as permitted with respect to transactions
that are non-taxable in whole or in substantial part under Section 1031 or 1033
of the Internal Revenue Code. The proceeds of sales of the Properties, after
payment of related expenses and indebtedness and provision for reasonable
reserves, will be available for MLP purposes, including paying Debt Service or
providing for capital improvements with respect to other Properties owned by the
MLP. All proceeds not utilized for MLP purposes will, after making the payments
required by the Restructuring Agreement with respect to the Wrap Mortgages, be
distributed to the partners of the MLP.
The Restructuring Agreement provides for a sharing of cash from the
proceeds of sales of Properties after repayment of the Third Party Underlying
Obligations once the net proceeds from the sale of properties exceed the
Threshold Amount. Additionally, the Limited Partners of the MLP receive 40% of
the cash flow, if any, from operations in excess of Debt Service and any Capital
Improvements or Reserves as considered necessary. The remaining cash flow, if
any, is applied to the Wrap
20
<PAGE> 24
Mortgages payable in payment of accrued interest and then principal.
The MLP has not made any Proceeds of Sales Distributions to its
partners since its organization.
IV. CERTAIN INCOME TAX CONSIDERATIONS
A. RECOGNITION OF GAIN
It is anticipated that the process of selling Properties and applying
sales proceeds to make payments on the Wrap Mortgages will require the Limited
Partners to report substantial taxable income when the Properties are sold
without the corresponding receipt of any cash proceeds therefrom (unless and
until the Threshold Amount has been exceeded). It is intended, however, that by
avoiding a foreclosure of Properties, the Consolidation and related events may
preserve for Limited Partners the potential for deriving an economic benefit
from future sales of the Properties (after the Threshold Amount is achieved),
while at the same time possibly deferring the recognition of taxable income for
some Limited Partners.
Limited Partners are allocated their share of the MLP's taxable income
and gain even if they receive no cash distributions from the MLP with which to
pay any resulting tax liability, and will be allocated their share of the MLP's
tax losses, including depreciation deductions. It is anticipated that the MLP
will generate gradually increasing amounts (which will ultimately be
substantial) of taxable income, inasmuch as interest expense and depreciation
expense are gradually decreasing each year.
As and when the Properties are sold or otherwise disposed of (and
whether or not any cash is distributed to Limited Partners in respect of such
sales), all taxable income will be allocated among those Limited Partners who
were partners in the Partnership which owned the Property prior to the
Consolidation up to the amount by which the fair market value of such Properties
exceeded their adjusted basis at the time of contribution to the MLP (gain in
excess of such amounts will be allocated ratably among all Limited Partners).
This rule does not apply to tax-free exchanges except to the extent of cash or
"other property" received.
B. TREATMENT OF DISTRIBUTIONS BY THE MLP
Cash distributions made to a Limited Partner are not, per se, taxable;
rather, they represent a return of capital up to the amount of his adjusted
basis in his interest in the MLP. A return of capital generally does not result
in any recognition of gain or loss for federal income tax purposes, but reduces
the recipient's adjusted basis in his investment. Certain partners whose returns
were audited and adjusted (in connection with their investment in NPA sponsored
limited partnerships) may have signed a closing agreement with the Internal
Revenue Service ("IRS"); pursuant to the terms of such closing agreement, their
tax treatment may vary from the foregoing; such partners are urged to consult
with their own tax advisors with respect to this issue.
Distributions, if any, in excess of a Limited Partner's adjusted basis
in his MLP interest immediately prior thereto will result
21
<PAGE> 25
in the recognition of gain to that extent. Except in the unlikely event that the
MLP is treated for tax purposes as a "dealer" in real property, such gain
generally should be capital gain.
C. OPERATING INCOME (LOSS) OF THE MLP
Each Limited Partner will receive an annual Schedule K-1 (U.S.
Form 1065) to indicate his share of the MLP's taxable income (loss) for each tax
year. Such income (loss), rather than the distributions described in Part B
above, is reportable by the Limited Partner. Since any loss generated by the MLP
is, with respect to Limited Partners, a passive loss, the deductibility of such
loss is governed by Section 469, Internal Revenue Code of 1986, and may be
limited thereby.
Certain Partnerships were audited by the IRS and the partners
thereof executed an agreement relating to their past and future federal tax
liability (the "Closing Agreement"). The foregoing paragraph applies to those
investors who have not signed a Closing Agreement with IRS with respect to their
Units. As to those Limited Partners who have signed such a Closing Agreement,
the appropriate tax treatment may differ from the foregoing and is governed by
the Closing Agreement. Again, each affected Limited Partner is urged to consult
with his own tax advisors on this issue.
ITEM 6. SELECTED FINANCIAL DATA
The following is selected financial data for the MLP for the
five years ended December 31, 1996 derived from the audited financial statements
of the MLP prepared in conformity with generally accepted accounting principles
(GAAP). The selected financial data set forth below should be read in
conjunction with "Managements Discussion and Analysis of Financial Condition and
Results of Operations" and with the Combined Financial Statements of the MLP and
the notes thereto included elsewhere in this Form 10-K.
22
<PAGE> 26
Year Ended December 31
(In Thousands, except per unit data)
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
INCOME:
Rental Income $ 23,984 $ 23,976 $ 24,486 $ 25,384 $ 25,120
Other Charges
to tenants 6,819 9,849 8,378 7,236 7,813
Interest income 129 299 443 534 716
--------- --------- --------- --------- ---------
Total income 30,932 34,124 33,307 33,154 33,649
--------- --------- --------- --------- ---------
OPERATING EXPENSES:
Interest expense 23,054 23,770 24,109 24,124 24,270
Other operating
expenses 12,365 12,173 12,746 13,433 12,705
Depreciation and
amortization 8,839 8,885 9,082 9,595 9,581
--------- --------- --------- --------- ---------
Total Operating
Expenses 44,258 44,828 45,937 47,152 46,556
--------- --------- --------- --------- ---------
Operating Loss (13,326) (10,704) (12,630) (13,998) (12,907)
--------- --------- --------- --------- ---------
OTHER EXPENSES:
Net gain (loss)
on disposition
of properties 454 103 (15,763) (4,908) (3,044)
Write down of
rental property (1,100) -- -- -- --
--------- --------- --------- --------- ---------
LOSS BEFORE
EXTRAORDINARY ITEM
(13,972) (10,601) (28,393) (18,906) (15,951)
--------- --------- --------- --------- ---------
EXTRAORDINARY ITEM:
Forgiveness of wraparound
mortgages payable on
dispositions and foreclosures
of properties 493 (12) 12,680 5,006 3,248
--------- --------- --------- --------- ---------
NET LOSS (13,479) (10,613) (15,713) (13,900) (12,703)
========= ========= ========= ========= =========
PER UNIT DATA:
Operating Loss $ (133.26) $ (107.04) $ (126.30) $ (139.98) $ (129.07)
========= ========= ========= ========= =========
Net Loss $ (134.79) $ (106.13) $ (157.13) $ (139.00) $ (127.03)
========= ========= ========= ========= =========
ASSETS:
Rental Property-Net $ 161,874 $ 168,945 $ 182,276 $ 194,735 $ 207,806
Other Assets 6,423 7,294 9,776 12,039 13,862
--------- --------- --------- --------- ---------
Total Assets $ 168,297 $ 176,239 $ 192,052 $ 206,774 $ 221,668
========= ========= ========= ========= =========
LIABILITIES AND PARTNERS' (DEFICIT)
EQUITY:
Wraparound Mortgages payable
less unamortized
discount(1) $ 196,928 $ 193,835 $ 200,025 $ 199,136 $ 200,560
Other Liabilities 9,740 7,296 6,306 6,204 5,774
--------- --------- --------- --------- ---------
Total Assets $ 206,668 $ 201,131 $ 206,331 $ 205,340 $ 206,334
Partners' (Deficit)
Equity (38,371) (24,892) (14,279) 1,434 15,334
--------- --------- --------- --------- ---------
TOTAL LIABILITIES AND PARTNERS'
(DEFICIT) EQUITY $ 168,297 $ 176,239 $ 192,052 $ 206,774 $ 221,668
========= ========= ========= ========= =========
</TABLE>
- --------
(1) Unamortized discount is based on imputed interest at 12%.
23
<PAGE> 27
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the MLP's
combined financial statements and notes thereto appearing elsewhere in this
Report.
I. LIQUIDITY AND CAPITAL RESOURCES
A. GENERAL
As previously noted, the Properties owned by the MLP are encumbered by
the Wrap Mortgages. As a result of the Restructuring, the debt service on the
Wrap Mortgages was adjusted to be the same as the 1990 debt service required on
the Third Party Underlying Obligations. The MLP's ability to meet its
obligations on the Wrap Mortgages is dependent on the Properties generating
sufficient cash flow to meet the Debt Service.
B. THIRD PARTY DEBT SERVICE
As of December 31, 1996, the Third Party Underlying Obligations were
current for all the Properties except for the properties located in Ardmore,
Oklahoma, East Meadow, New York and Temple Terrace, Florida. The second mortgage
loan on the Ardmore property is significantly past due and there are no plans to
bring this loan current. The MLP has not received any notice from the holder of
this loan in six years. The mortgage loan on the East Meadow property matured in
July, 1995. During 1996 the MLP negotiated an extension and forbearance
agreement with the lender. The term of the mortgage loan was extended to July
1997 and may be extended to July 1999 subject to certain property performance
conditions.
The second mortgage loan on the Fond du Lac property matured in March
1996. The MLP is negotiating with the lender for an extension. At December 31,
1996, the mortgage loan on the Fond du Lac property was delinquent four months.
At December 31, 1996, the mortgage loan on the Temple Terrace property was
delinquent twelve months. During 1996 the lender declared a default and
instituted a foreclosure action. The Temple Terrace property is owned by Ocala
Realty Associates (Ocala) which in 1996 filed for protection under Chapter 11 of
the U.S. Bankruptcy Code. See "Item 3 - Legal Proceedings". The mortgage loan on
the Wheelersburg property matured in November 1995. During 1996 the MLP
negotiated an extension of the mortgage loan to December 31, 1996. The extension
included a forbearance and deferral of debt service payments for the nine month
period ended December 31, 1996. The MLP is negotiating with the lender for an
additional extension.
As of December 31, 1996, the net book value and net Wrap Mortgage
balance for these properties were as follows:
24
<PAGE> 28
<TABLE>
<CAPTION>
Property Net Book Value Net Wrap Mortgage Balance
-------- -------------- -------------------------
<S> <C> <C>
Ardmore $8,057,000 $6,849,000
East Meadow $5,628,000 $8,760,000
Fond du Lac $4,974,000 $4,813,000
Temple Terrace $1,891,000 $1,807,000
Wheelersburg $1,486,000 $1,240,000
</TABLE>
C. WORKING CAPITAL
The MLP has limited working capital. As of December 31, 1996, the MLP
had approximately $1,087,000 of working capital. The MLP's operating budget for
1997 projects a cash deficit of approximately $200,000. Consequently, the MLP
does not have sufficient reserves to satisfy balloon loan obligations with
respect to the Third Party Underlying Obligations or to pay for emergencies,
major capital improvements or major tenant improvements. The Partnership
Agreement and the Restructuring Agreement do not permit the Third Party
Underlying Obligations to be refinanced in order to provide working capital to
create a working capital reserve. The General Partner may, in its discretion,
create a reserve in light of anticipated costs or other economic contingencies.
To date, the MLP has replenished its working capital reserves through
the sale of Properties. This has occurred when holders of the Second Mortgage
and Wrap Mortgage have released their liens on properties which have been sold,
notwithstanding that pursuant to the terms of the Restructuring Agreement the
proceeds were payable to the holders of the Second Mortgage and the Wrap
Mortgage. They have agreed in certain instances to release their liens and
provide proceeds from the sale to the MLP because their mortgages are
cross-collateralized against all of the Properties and because the proceeds from
the sale of such Properties have been utilized for the remaining Properties.
Although the Second Mortgage and Wrap Mortgage lenders are not obligated to
subordinate or release their mortgages, their continued cooperation in this
regard is expected. As of December 31, 1996, the General Partner has advanced
approximately $1,454,000 to the MLP. The General Partner does not have the
financial wherewithal to continue to advance funds to the MLP and may in fact
require the repayment of the advances for its own operational needs. As a
result, it may be necessary for the MLP to sell Properties.
D. LOAN OBLIGATIONS
As of December 31, 1996 the Third Party Underlying Obligations for the
Fond du Lac, Wheelersburg and Wichita properties have matured and had balloon
payments due. The Third Party Obligations that have matured relating to these
properties are as follows: Fond du Lac - $1,674,000; Wheelersburg - $1,148,000;
and Wichita - $1,143,000.
The MLP has made refinancing proposals to the existing lenders holding
the related Third Party Underlying Obligations and is currently engaged in
negotiations with these lenders. If the MLP is not able to obtain refinancing
commitments and loan extensions from the existing lenders or refinancing from
alternative lenders, the properties could be lost to foreclosure.
25
<PAGE> 29
With respect to the year ending December 31, 1997, the Third Party
Underlying Obligations for the East Meadow ($11,916,000), North Augusta
($284,000) and Temple Terrace ($1,600,000) properties are scheduled to mature.
Under the terms of the mortgage loan on the East Meadow property, the MLP would
have the option to extend the loan for a period of two years, if certain
property performance conditions are met. See "Item 7 - Management's Discussion
and Analysis of Financial Condition and Results of Operations - Results of
Operations - Property Dispositions During Fiscal 1996" for a summary of the
proposed sale of the Temple Terrace property.
Although all the Third Party Underlying Obligations on which balloons
have become due to date have been refinanced there can be no assurance that loan
extensions will be successfully negotiated with the lenders holding the Third
Party Underlying Obligations on these Properties. See "Item 2. Properties."
E. CAPITAL REQUIREMENTS
The average age of the Properties owned by the MLP is in excess of 19
years. Due to the age of the Properties, there is a continuing need for capital
expenditures in order to properly maintain the Properties. At December 31, 1996,
the MLP was obligated for approximately $290,000 of capital commitments which
were primarily for roof repair and replacement. The 1997 operating budget for
the Properties provides for approximately $908,000 in capital repair reserves.
During 1996, the MLP completed renovations to the Cottage Grove
property in order to refit the premises for a new tenant occupying most of the
vacant Kmart space. The cost of these renovations was approximately $4,059,000
which included a $2,325,000 construction allowance to the new tenant. In October
1996, the Third Party Underlying Obligation on the Cottage Grove Property was
refinanced for $6,000,000 to fund the cost of the refit, and provide the MLP
with approximately $550,000 for future capital repairs.
During 1996, the MLP had an outstanding line of credit with E&H
Properties, Inc., an affiliate of NPA, ("E&H") under which E&H would advance up
to $1 million to the MLP for purposes of making capital improvements (the "MLP
Line of Credit"). Pursuant to the MLP Line of Credit, the obligation of E&H to
make advances to the MLP is at all times in the sole and absolute discretion of
E&H. During 1996 approximately $703,000 was advanced under the MLP Line of
Credit. At December 31, 1996, there were no outstanding advances under the MLP
Line of Credit.
Amounts advanced pursuant to the MLP Line of Credit bear interest at
the rate of 1% above "E&H Borrowing Rate" (as defined below, currently 10.25%).
Amounts advanced pursuant to the MLP Line of Credit are not directly secured by
any collateral. However, the East Haven, Connecticut property has been pledged
to secure a line of credit extended to E&H by Jefferson Bank of Philadelphia,
Pennsylvania ("Jefferson Bank") which will enable E&H to fund the MLP Line of
Credit in order to finance Capital Improvements and Tenant Improvements (the
"E&H Line of Credit"). In accordance with the terms of the E&H Line of Credit,
the MLP has granted a security interest in and assigned a deed-in-lieu of
foreclosure with respect to the East Haven property to Jefferson Bank (the "East
26
<PAGE> 30
Haven Security").
At December 31, 1996, the E&H Line of Credit permitted E&H to borrow up
to $1.5 million which it can loan to the MLP and can use for E&H's general
working capital.
Pursuant to the promissory note executed with respect to the E&H Line
of Credit (the "Jefferson Note"), the amounts advanced pursuant to the Jefferson
Note bear interest at a rate equal to .25% per annum in excess of the "Base
Rate" of Jefferson Bank (the "E&H Borrowing Rate"). The current E&H Borrowing
Rate is 10.25%. The principal amount evidenced by the Jefferson Note is required
to be repaid as follows: (1) $750,000 on November 30, 1997; and (2) $750,000 on
November 30, 1998. The E&H Line of Credit has been partially paid down.
The Jefferson Note is secured by an assignment of certain Wrap Notes
and Second Mortgages, the East Haven Security and certain Guaranty and
Suretyship Agreements executed by EBL&S, Inc., EBL&S Property Management, Inc.,
National Property Analysts Partners and Edward B. Lipkin. Additionally, the
Jefferson Note contains a confession of judgment against the borrower.
The Jefferson Note provides for certain events of default. In addition
to providing for an event of default arising from a failure to pay principal and
interest on the E&H Line of Credit when due, the Jefferson Note provides that
Jefferson Bank may declare a default if, in its sole discretion, it determines
that it is insecure with respect to any of the collateral or the ability of E&H
or any other obligor to perform all of its obligations under the Jefferson Note
or any of the other loan documents. The loan and security agreement executed by
E&H in connection with the E&H Line of Credit (the "Jefferson Loan and Security
Agreement") provides that upon the occurrence of an event of default, Jefferson
Bank will have the right to sell the East Haven property and apply the proceeds
of the sale to payment of all amounts due pursuant to the Jefferson Note, the
Jefferson Loan and Security Agreement or the other loan documents in such order
of priority as Jefferson Bank may determine in its sole discretion.
At December 31, 1996 there were no borrowings under the MLP Line of
Credit. However, currently $1,197,000 has been advanced under the E&H Line of
Credit.
In 1996, the MLP obtained a $1,000,000 line of credit from Firstrust
Bank (the "Capital Improvements Line"). Proceeds from the Capital Improvements
Line are utilized for capital and tenant improvements to the Properties. The
initial term of the Capital Improvements Line is a two year period scheduled to
expire in June 1998 and the MLP would have the option to extend the term for an
additional year. Amounts advanced pursuant to the Capital Improvements Line are
evidenced by a note and secured by a mortgage lien on the Sault Ste. Marie,
Michigan property, the Oak Lawn, Illinois property and the El Paso, Texas
property. The mortgage liens are subordinate to the Third Party Underlying
Obligations but senior to the Wrap Mortgages and Second Mortgages. The amounts
advanced pursuant to the Capital Improvements Line are guaranteed by EBL&S,
Inc., EBL&S Property Management, Inc., E&H and Edward B. Lipkin. Amounts
advanced pursuant to the Capital Improvements Line bear interest
27
<PAGE> 31
at a variable rate equal to 2% per annum over Firstrust's "commercial reference
rate". Currently the commercial reference rate is 8.25%. At December 31, 1996,
$235,000 was borrowed under the Capital Improvements Line.
F. TENANT IMPROVEMENTS
The current retail rental market is such that proposed tenants for
vacant space and those tenants whose leases are scheduled for renewal are aware
of the pressure landlords are under to obtain and keep tenants and in certain
instances are able to negotiate lease terms at reduced rental rates. Many of
these tenants insist on substantial tenant improvement contributions from
landlords. In the event that the tenants pay for their own improvements, they
may pay a correspondingly lower rental rate than they would otherwise pay or are
allowed rental abatements during the term of their leases. For the year ending
December 31, 1996, approximately $243,000 was provided to tenants in rental
abatements. The 1997 operating budget for the Properties provides for
approximately $188,000 in tenant improvement costs.
II. RESULTS OF OPERATIONS
A. PROPERTY DISPOSITIONS DURING FISCAL 1996
In January and July 1996, the Boone, Iowa and Red Wing, Minnesota
properties, respectively, were sold. Proceeds were used to pay off the Third
Party Underlying Obligations and provide the MLP with approximately $195,000 in
working capital. The sale of these Properties may result in tax liability to
those who had been limited partners in the Partnerships which owned these
Properties. See "Item 5 - Market Price for the Registrant's Common Equity and
Related Stockholder Matters - Certain Income Tax Consequences - Recognition of
Gain."
In September 1996, the El Paso, Texas property was sold to a limited
partnership comprised of the directors and executive officers of the General
Partner. See "Item 13 - Certain Relationships and Related Transactions - Related
Party Transactions". An independent appraisal of the property was obtained to
determine the fair market value prior to the sale. The purchase price of the
property was $2,225,000, which included an assumption of the Third Party
Underlying Obligation, a promissory note in the approximate amount of $436,000
and approximately $120,000 in cash. The promissory note bears interest at 10%
and matures on November 1, 2008. The cash proceeds from the sale were retained
by the MLP for working capital purposes. At December 31, 1996, there was no past
interest due on the note. Proceeds were used to pay off the Third Party
Underlying Obligations and provide the MLP with approximately $120,000 in
working capital. In addition, the MLP received an interest-only promissory note
in the approximate amount of $436,000. The note bears interest at 10% and
matures on November 1, 2008, when the entire principal balance will be due.
In February, 1996 the MLP entered into a contract for the sale of the
Temple Terrace, Florida property to a national supermarket chain. The proposed
sale price is $2,580,000. Proceeds from the sale will be applied as a reduction
of the Wrap Mortgage. Under the terms of the sale contract the buyer has until
April 1997 to complete the purchase. The
28
<PAGE> 32
contract is cancelable by the buyer prior to closing and there can be no
assurance that the sale will be successfully concluded under the proposed terms.
B. FULL FISCAL YEARS
Over the five year period ended December 31, 1996, the MLP disposed of
13 Properties. The number of Properties owned and disposed of by year are as
follow:
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Beginning of year 60 62 65 67 70
Properties disposed 3 2 3 2 3
-- -- -- -- --
End of year 57 60 62 65 67
== == == == ==
</TABLE>
The sale of Properties resulted in a "Net Gain (Loss) on disposition of
properties" as reflected in the financial statements.
The following table reflects the operating results for the MLP for the
years ended December 31, 1996, 1995, 1994, 1993 and 1992, excluding the
operating results for 13 properties that were sold during the five year period.
The table is presented in order to facilitate an understanding of the operating
results and trends of the MLP.
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
INCOME:
Rental Income $ 22,927 $ 22,251 $ 22,747 $ 22,527 $ 21,642
Other Charges
to tenant 6,589 9,569 7,690 6,529 6,941
Interest income 120 294 437 534 716
-------- -------- -------- -------- --------
TOTAL INCOME 29,636 32,114 30,874 29,590 29,299
-------- -------- -------- -------- --------
OPERATING EXPENSES:
Interest expense 18,142 18,274 18,362 18,450 18,516
Other operating
expenses 12,415 11,766 11,815 11,871 10,922
Depreciation and
amortization 8,291 8,281 8,348 8,318 8,255
-------- -------- -------- -------- --------
TOTAL OPERATING
EXPENSES 38,848 38,321 38,525 38,639 37,693
-------- -------- -------- -------- --------
OPERATING LOSS $ (9,212) $ (6,207) $ (7,651) $ (9,049) $ (8,394)
======== ======== ======== ======== ========
</TABLE>
The fluctuations in "Rental Income" between years has been modest and
did not exceed 4.1% for any of the years presented. This is consistent with the
property portfolio which has a significant portion of space rented to anchor
tenants under long term leases. In 1993 Local Tenant rental rates rebounded and
there was a $100,000 increase in percentage rental revenue. In 1995 and 1996,
there was a $189,000 decrease and a $369,000 increase in percentage rental
income, respectively.
In 1993 there was a $600,000 decrease in common area maintenance
expenses charged to tenants. In 1994, real estate tax and common area
maintenance recoveries from tenants increased by approximately $800,000 and the
MLP received approximately $400,000 in proceeds from a tenant
29
<PAGE> 33
lease termination. In 1995, the MLP received approximately $2,400,000 in
proceeds from tenant lease terminations. In 1996, real estate tax recoveries
decreased by approximately $700,000 and there were no substantial proceeds from
tenant lease terminations.
During the five year period, certain advances were made by the MLP to
the Pension Group. Interest income is earned on the "Advances to the Pension
Group" and on available funds which are invested. The changes in interest income
from 1992 through 1996 were due to a decrease during this period in the
"Advances to the Pension Group."
The Properties are financed by long term fixed rate debt and
consequently there was virtually no fluctuation in interest expense.
The increase in "Other operating expense" between 1992 and 1993 was
primarily due to an increase of $400,000 in common area maintenance expense
because of the severe weather during the 1993 winter months and because of a
$300,000 increase in professional fees. The increase in "Other operating
expense" between 1995 and 1996 was primarily due to an increase of $315,000 in
common area maintenance expense because of severe weather during the 1996 winter
months. In addition, an increase of $270,000 in general and administrative
expense contributed to the overall increase and was primarily due to increased
legal and other professional fees.
Capital improvements for the years ending December 31, 1993 through
December 31, 1996 have not been significant. Consequently, there are not
significant fluctuations in depreciation and amortization for those years.
III. INDEBTEDNESS SECURED BY THE PROPERTIES
The Properties are subject to certain indebtedness which was incurred
in connection with the acquisition of the Properties by the Partnerships. As of
December 31, 1996, the aggregate indebtedness of the MLP pursuant to the Wrap
Mortgages was approximately $461 million, of which approximately $133 million
constituted indebtedness under the Third Party Underlying Obligations and $83
million constituted indebtedness under the Second Mortgages. As of December 31,
1996, the aggregate historical cost of the Properties securing the indebtedness
of the MLP mortgages was approximately $278 million.
The original acquisition of the Properties by the Partnerships was
typically structured as set forth below.
Typically, an affiliate of NPA acquired a Property from an unaffiliated
seller. The NPA affiliate thereafter sold the Property to a Pension Group. The
Partnership acquired the Property from the Pension Group. In both the original
acquisition and the purchase by the Pension Group, the purchasers (i.e., the NPA
affiliate and the Pension Group) took the Properties subject to existing
mortgages in favor of the sellers or unaffiliated third parties. Consequently,
as a general matter, at the time it was acquired by the Partnership, each
Property was subject to a Third Party Underlying Obligation and a Second
Mortgage.
30
<PAGE> 34
The Partnerships typically paid the purchase price for the Properties
in part by delivering to the Pension Group a Wrap Mortgage. The Wrap Mortgage
represented a lien on the Property subordinate to the Third Party Underlying
Obligation and the Second Mortgage. Neither the Third Party Underlying
Obligation nor the Second Mortgage represented direct financial obligations of
the Partnership. Rather, the Wrap Mortgage required the Pension Group to use the
payments made thereunder to make the required payments under the Third Party
Underlying Obligation and the Second Mortgage. The Third Party Underlying
Obligation and the Second Mortgage continued, however, as liens against the
Property. The Wrap Mortgage obligated the Partnership to comply with all the
terms and conditions of the Third Party Underlying Obligation and the Second
Mortgage.
The Properties whose ownership was consolidated in the MLP remain
subject to the Third Party Underlying Obligations, Second Mortgages and Wrap
Mortgages incurred in connection with the acquisition of the Properties.
However, in connection with the Settlement, the Wrap Mortgages and Second
Mortgages have been restructured.
A. THIRD PARTY UNDERLYING OBLIGATIONS
Information relating to the Third Party Underlying Obligations is
included in Schedule 3 which appears under "Item 2." Properties" above.
B. THE SECOND MORTGAGES AND NOTES
Under the terms of the Restructuring Agreement, no payments are
currently due on the Second Mortgages. The approximate outstanding principal
balance of the Second Mortgages as of December 31, 1996 was approximately $83
million. The Restructuring Agreement provides that this indebtedness will be
paid from proceeds realized from the sale of property subject to the sharing
arrangement established in the Restructuring Agreement.
C. THE RESTRUCTURED WRAP MORTGAGES
The Wrap Mortgages represent an obligation of the MLP and a lien
against the Properties in favor of the successor to the Pension Groups, Main
Line Pension Group, a Delaware limited partnership. The lien is subordinate to
the Third Party Underlying Obligations and the Second Mortgages.
The Restructuring Agreement amended and restructured each Wrap Note to
provide that each Wrap Note would consist of the obligation to pay two principal
balances, an interest-bearing principal balance equal to the original principal
indebtedness when the Wrap Note was first executed and delivered by the
Partnership less amounts of principal, if any, paid prior to January 1, 1990,
and an non-interest bearing principal balance equal to the amount of interest
accrued and unpaid under the Wrap Note prior to January 1, 1990. The
Restructuring Agreement adjusted the interest rate on the Wrap Notes in such a
way that the interest bearing principal balance earns interest at a rate elected
by the General Partner to assure that there will be adequate interest paid over
the life of the Wrap Note to comply with applicable Internal Revenue Code
requirements in order to prevent the imputation of interest. The interest rates
on
31
<PAGE> 35
the restructured Wrap Mortgages (the "Restructured Wrap Mortgages") range from
0% of the principal balance of some Wrap Mortgages to 10%. The Wrap Notes mature
on December 31, 2013.
Each amended Wrap Note requires a minimum annual payment from the MLP
in an amount equal to the 1990 debt service payable on the Third Party
Underlying Obligations secured by the same Properties as the Wrap Mortgages
which secured such Wrap Note prior to the Restructuring. These minimum payments
are applied first to past due interest and principal payments under the Wrap
Notes, if any, then to current interest and principal payments due on the Wrap
Notes, then against the interest-bearing principal balances of the Wrap Notes,
allocated among the Wrap Notes as the Pension Groups elect, and finally to the
non-interest-bearing principal balances, allocated among the Wrap Notes as the
Pension Groups elect. The Restructuring Agreement requires the MLP to make
additional payments on the Wrap Notes on April 10th of each year equal to sixty
percent (60%) of the amounts by which Cash Flow from Operations for the pervious
year exceeded the sum of the minimum annual payment in such year plus the
current payments due in such year on any indebtedness incurred after January 1,
1990 for Capital Improvements to any of the Properties. The holder of the Wrap
Notes applies the minimum annual payments to pay the current payments due on the
Third Party Underlying Obligations.
The Restructuring Agreement provides that all the Wrap Notes which were
originally secured by Wrap Mortgages on the Properties which the MLP acquired
from partnerships audited by the Internal Revenue Service will be secured by all
of those Wrap Mortgages and will not be secured by Wrap Mortgages on the
Properties which the MLP acquired from the unaudited Partnerships. All of the
Wrap Notes which were originally secured by Wrap Mortgages on the Properties
which the MLP acquired from unaudited Partnerships are secured by all of those
Wrap Mortgages and are not secured by Wrap Mortgages on the Properties which the
MLP acquired from partnerships audited by the Internal Revenue Service. The
holder of the Wrap Mortgages agreed in the Restructuring Agreement to release
from the lien of the Wrap Mortgages any Property sold by the MLP, upon payment
to the holder of the Wrap Mortgages, as a pre-payment of the Wrap Notes, an
amount equal to all of the Proceeds of Sales of the Properties not permitted by
the Restructuring Agreement to be retained by the MLP.
The Restructuring Agreement implements the Settlement Agreement's
provisions regarding distribution of Proceeds of Sale of the Properties. The
Restructuring Agreement permits the MLP to have the opportunity to retain, in
certain circumstances, a portion of the Excess Proceeds. In accordance with the
Restructuring Agreement the Excess Proceeds derived from the Proceeds of Sales
of the Properties are applied as noted below.
The Excess Proceeds are applied as follows: (a) 100% of the Excess
Proceeds are applied in payment of the Wrap Mortgages until the Threshold Amount
has been paid; (b) the next $70 million of Excess Proceeds are allocated 60% to
the payment of the Wrap Mortgage and 40% are retained by the MLP; (c) 100% of
the next Excess Proceeds up to an amount equal to the Investor Note Recovery or
$25 million, whichever is less, are retained by the MLP and distributed by the
MLP to the Investor Note Payors; (d) the next Excess Proceeds are allocated by
60% to the payment of the Wrap Mortgages and 40% are retained by the MLP up to
an amount
32
<PAGE> 36
equal to the outstanding balances for the Wrap Mortgages on January 1, 1990 less
the sum of: (i) the aggregate amount of the sums previously paid as Minimum
Payoff Amounts; (ii) the Investor Note Recovery, and (iii) $70 million; (e) 100%
of the next excess Proceeds are applied in payment of the Wrap Mortgages in the
amount equal to (i) the amount necessary to pay in full the Wrap Mortgages on
Properties acquired from partnerships audited by the Internal Revenue Service,
in the case of Excess Proceeds generated by the sale of such a Property, and
(ii) the amount necessary to pay in full the Wrap Mortgages on Properties
acquired from unaudited Partnerships, in the case of Excess Proceeds generated
by the sale of such a Property; and (f) 100% of any additional Excess Proceeds
are retained by the MLP.
The Restructuring Agreement provides for indebtedness which may be
incurred to finance Capital Improvements to the Properties after January 1,
1990, and requires that in connection with any sale of Property by the MLP, the
loans for Capital Improvements to such Property must either be paid in full or
assumed by the purchaser of the Property before the Wrap Mortgage on such
Property will be released.
The Restructuring Agreement permits the holders of the Wrap Mortgages
to refinance or negotiate modifications to the Third Party Underlying
Obligations, so long as the aggregate amount of all Third Party Underlying
Obligations is not increased (the "Refinancing"). The fees and expenses
associated with any such refinancing or modification are required to be borne by
the holders of the Wrap Mortgages.
The Restructuring Agreement spreads the lien securing each of the
Second Mortgages to all of the Properties owned by the MLP and all of the Second
Mortgages have been "wrapped" or included within all of the Wrap Mortgages.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The combined financial statements, including the notes thereto and the
report of the independent certified public accountants, are included in Part IV,
Item 14 of this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
None.
33
<PAGE> 37
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
EBL&S, Inc., a Delaware corporation incorporated in December, 1989, and an
affiliate of NPA, is the General Partner of the MLP. The General Partner is
owned 100% by E&H Properties, Inc., a Pennsylvania corporation incorporated in
July, 1979, which is owned 50% by Edward B. Lipkin and 50% by Howard N.
Brownstein.
The directors and executive officers of the General Partner are as
follows:
Howard N. Brownstein, age 53, serves as Chairman of the Board of
Directors and a Vice President of the General Partner. Mr. Brownstein has also
served as Chairman of the Board of Directors of NPA since it was organized in
1976. Mr. Brownstein graduated from City College of the City University of New
York and received his MBA from the University of Illinois.
Edward B. Lipkin, age 51, serves as President of the General Partner.
Mr. Lipkin has also been President of NPA since it was organized in 1976. Mr.
Lipkin received a Bachelor of Science degree in Finance from Temple University.
Mr. Lipkin was a Trustee of the International Council of Shopping Centers, a
leading industry organization, from 1986 to 1992.
Pursuant to an agreement entered into by and between Mr. Lipkin and Mr.
Brownstein each have agreed to vote their shares of EBL&S, Inc. in order to
elect each a director and officer of EBL&S, Inc.
ITEM 11. EXECUTIVE COMPENSATION.
Neither the General Partner nor the officers of the General Partner
receive compensation from the MLP. Certain administrative services related to
tax and accounting service and to investor note collections were performed by
the General Partner on behalf of the MLP as provided in the Partnership
Agreement. The amount payable to the General Partner for such services
aggregated $53,000, $58,000 and $59,000 for the years ended December 31, 1996,
1995 and 1994, respectively. See Item 13. Certain Relationships and Related
Transactions - "I. Compensation and Fees" and "II. Property Management by
Affiliate."
34
<PAGE> 38
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
<TABLE>
<CAPTION>
TITLE OF CLASS NAME & ADDRESS OF AMOUNT AND % OF CLASS
BENEFICIAL OWNER NATURE OF
BENEFICIAL OWNERSHIP(2)
<S> <C> <C> <C>
Units of Limited Edward B. Lipkin 2,681 Units 2.7%
Partnership Interest 230 S. Broad Street
Philadelphia, PA 19102
Units of Limited Howard N. Brownstein 2,681 Units 2.7%
Partnership Interest 230 S. Broad Street
Philadelphia, PA 19102
</TABLE>
- --------
(2) Includes 1,000 units held by EBL&S, Inc., the general partner of
the MLP. Messrs. Lipkin and Brownstein each own 50% of E&H Properties, Inc.,
which owns 100% of EBL&S, Inc.
35
<PAGE> 39
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
I. COMPENSATION AND FEES
The amounts and kinds of compensation and fees to be paid to the
General Partner and its affiliates during the operation of the MLP are
summarized below.
PERSON RECEIVING ESTIMATED AMOUNT
COMPENSATION TYPE OF COMPENSATION OF COMPENSATION
ORGANIZATIONAL PHASE
General Partner 1% general
partners' interest
in the MLP.
OPERATIONAL PHASE
General Partner General Partner's share of On an annual
Cash Flow from Operations basis, 1% of Cash
Flow from
Operations. Actual
amounts will depend
upon future
operations and are
not now
determinable.
EBL&S Property Property Management Fees Annual fee of 5%
Management, Inc. of gross operating
revenues derived
from the Properties.
Actual amounts will
depend upon future
operations and are
not now
determinable.
EBL&S Property Leasing Fees For all obtained
Management, Inc. or renewed leases,
an amount equal to
to the fees
customarily charged
in the geographic
area of leased
property. Actual
amounts will depend
upon future
operations and are
not now
determinable.
36
<PAGE> 40
General Partner General Partner's share The General Partner
of Profits and Losses will be allocated
1% of the profits
and losses from MLP
operations.
General Partner Reimbursement of Expenses(3) Actual cost of
goods and services
utilized for or by
the MLP, including
certain
administrative
services performed
by the General
Partner.
LIQUIDATION PHASE
General Partner General Partner's share The General
of Proceeds of Sales of Partner will be
the Properties. allocated 1% of
the Proceeds of
Sale of the
Properties.
E&H Properties, Repayment of Indebtedness Actual amounts
Inc. secured by Second Mortgages will depend on the
sale price of
Properties and are
not now
determinable.
II. PROPERTY MANAGEMENT BY AFFILIATE
In accordance with the Settlement, as of January 1, 1990, the MLP
entered into a management agreement with EBL&S Property Management, Inc., a
Delaware corporation ("Property Manager"), with respect to the management of the
Properties ("Management Agreement"). EBL&S Property Management, Inc. is owned
100% by E&H Properties, Inc. which also is the sole shareholder of the MLP's
General Partner, EBL&S, Inc. The directors of EBL&S Property Management, Inc.
are the same as those of the General Partner.
Pursuant to the Management Agreement, the Property Manager receives a
management fee equal to five (5%) percent of all gross operating revenues
derived from the Properties payable as and when such income is received, plus a
leasing fee for all obtained or renewed leases equal to the fees customarily
charged in the geographic area of the leased property, payable as customary in
such area. An aggregate of approximately $1,413,000 was earned by the Property
Manager for management fees, and an aggregate of approximately $263,000 was
earned by the Property Manager for leasing fees for the fiscal year 1996.
- --------
(3) All expenses of the MLP are billed directly to and paid by the MLP.
The General Partner is reimbursed for the actual cost of goods and materials
used for or by the actual cost of goods and materials used for or by the MLP and
obtained from entities which are not affiliates of the General Partner. In
addition, the General Partner is reimbursed for administrative services
performed, provided that such services are necessary for the prudent operation
of MLP and further provided that such reimbursement is at the lower of (i) the
General Partner's actual cost or (ii) the cost of obtaining comparable
administrative services from independent parties in the same geographic
location. Reimbursement to the General Partner for services for which it is
entitled to compensation by way of a separate fee is not allowed. No
reimbursement is made for rent or depreciation, utilities, capital equipment in
the building in which the MLP maintains offices and other overhead costs.
37
<PAGE> 41
III. CONFLICTS OF INTEREST
From time to time, there may be conflicts of interest between the
General Partner and its affiliates (including the Property Manager) on the one
hand and the MLP and its limited partners on the other hand. The General Partner
will attempt to resolve any conflicts of interest by exercising the good faith
required of fiduciaries, and the General Partner believes that it will generally
be able to resolve conflicts on an equitable basis. Depending on the relevant
facts and circumstances, however, the resolution of any particular conflict may
not be in favor of the MLP. A resolution which is unfavorable to the MLP will
result only if the General Partner determines in good faith, bearing in mind its
fiduciary duties, that it is the most appropriate to deal with the overall
situation. See "Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations Liquidity and Capital Resources."
A. CONFLICT REGARDING SALES AND REFINANCING
The General Partner is an affiliate of NPA. NPA or its affiliates hold
the Second Mortgages aggregating $83 million. This lack of independence gives
rise to certain conflicts of interest with respect to the sale or refinancing
of the Properties.
The General Partner oversees sales, leases, financing, operations and
management of the Properties and decides which Properties are sold and how to
apply the proceeds of sale of the Properties. Because NPA or its affiliates hold
the Second Mortgages on the Properties which will be repaid from the proceeds of
the sale of the Properties and the General Partner is an affiliate of NPA, the
General Partner may not be solely interested in ensuring that sales of
Properties generate sufficient proceeds to enable the Limited Partners to
receive distributions with respect thereto. However, pursuant to the
Restructuring Agreement, a portion of all proceeds derived from sale of the
Properties in excess of the Threshold Amount will be applied in payment of the
Wrap Mortgages. Accordingly, the General Partner (as an affiliate of NPA) will
have a financial incentive to cause the MLP to maximize proceeds of sales of the
Properties. Furthermore, the General Partner is accountable to the MLP and the
Limited Partners as a fiduciary and, consequently, must exercise good faith and
integrity in handling the affairs of the MLP and must take its limited partners'
interests in account in making decisions regarding sales and refinancing.
B. OTHER ACTIVITIES OF THE AFFILIATES OF THE GENERAL PARTNER
There is no limitation on the right of the affiliates of the General
Partner to engage in any business even if the business is competitive with the
business of the MLP. For instance, if an affiliate of the General Partner owns
or manages a property which competes for tenants with a Property owned by the
MLP, the economic interest of the equity owners of the General Partner in that
affiliate may create a conflict between the General Partner or the Property
Manager on the one hand and the MLP on the other with respect to allocating
prospective tenants between competitive properties. The General Partner and its
affiliates presently own properties that are competitive with the Properties
and affiliates of the General Partner may act as manager of such properties.
C. COMPETITION BY THE MLP WITH AFFILIATES OF THE GENERAL PARTNER
FOR SERVICES OF OFFICERS AND EMPLOYEES
The MLP depends on the General Partner to operate the MLP. The General
Partner believes it will have sufficient
38
<PAGE> 42
staff personnel and resources to perform all of its duties with respect to
managing the MLP. However, because the staff personnel and resources are shared
with affiliates, the General Partner and certain of its affiliates have
conflicts of interest in the allocation of management and staff time, services
and functions among the MLP and other entities in existence or which may be
organized.
IV. SUMMARY OF RELATIONSHIPS
E&H Properties, Inc. owns 100% of the equity interest in EBL&S, Inc.
(the General Partner) and EBL&S Property Management, Inc. (the Property
Manager). EBL&S, Inc. is owned 50% by Edward B. Lipkin and 50% by Howard N.
Brownstein. The General Partner and the Property Manager both have ongoing
relationships with the MLP. E&H Properties, Inc. and the affiliates which it
controls holds the Second Mortgages.
V. RELATED PARTY TRANSACTIONS
During 1996, the El Paso, Texas property was sold to a limited
partnership comprised of the directors and executive officers of the General
Partner. The sale price for this property was determined to be at fair market
value by an independent appraiser. See "Item 7 - Management's Discussion and
Analysis of Financial Condition and Results of Operation. Results of Operation
Property Disposition During Fiscal 1996."
39
<PAGE> 43
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
I. DOCUMENTS FILED AS PART OF THIS REPORT
A. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Independent Auditors' Report............................................... F-1
Combined Financial Statements:
Combined Balance Sheets at December 31, 1996 and 1995............. F-2
Combined Statements of Operations and Changes in
Partners' (Deficit) Equity for the years ended
December 31, 1996, 1995 and 1994.................................. F-3
Combined Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994.................................. F-4
Notes to Combined Financial Statements..................................... F-6
Attachments
1 Properties Effectively Owned by NPAMLP at
December 31, 1996............................ F-18
2 Schedules II and III to the Combined Financial
Statements.............................................. F-19
B. Exhibits
Exhibit No. Description
*2.1 Consolidation Agreement by and
among the National Property
Analysts Master Limited Partnership
(the "MLP"); EBL&S, Inc. ("EBL&S")
and Buster, Inc. ("Buster").
*2.2 Settlement Agreement by and among
plaintiffs as a class, National
Property Analysts, Inc. ("NPA") and
certain additional defendants in
James O'Brien, et al. v. National
Property Analysts, Inc., et al (the
"Action").
*2.3 Judgment and Order Approving the
Transaction, the Formation
40
<PAGE> 44
of the Master Limited Partnership,
and the Allocation of Interests in
the Master Limited Partnership
entered by the Court.
*3.1 Initial Limited Partnership
Agreement of the MLP.
*3.2 Amended and Restated Limited
Partnership Agreement of the MLP.
*3.3 Certificate of Limited Partnership
of the MLP.
*10.1 Restructuring and Mortgage
Modification Agreement by and among
Main Line Pension Group, L.P.
("Main Line"), the MLP and National
Property Analysts, Inc.
*10.2 Leasing and Management Agreement by
and between EBL&S Property
Management, Inc. and the MLP.
*10.3 Information Statement Relating to
the formation of the MLP.
*10.4 Proof of Claim and Release and Vote
on Consolidation.
**10.5 Loan and Security Agreement between
E&H Properties, Inc. and Jefferson
Bank.
**10.6 Line of Credit Promissory Note
27.1 Financial Data Schedule
II. REPORTS ON FORM 8-K
Not Applicable
*Incorporated by reference from Registrant's Report on Form 10 filed July 14,
1994 (0-24816)
**Incorporated by reference from Registrant's Report on Form 10-K filed April 1,
1996 (0-24816)
41
<PAGE> 45
KPMG LRTTERHEAD
INDEPENDENT AUDITORS' REPORT
General Partner
National Property Analysts
Master Limited Partnership:
We have audited the combined financial statements of National Property Analysts
Master Limited Partnership (NPAMLP) (a limited partnership) as listed in the
accompanying index. In connection with our audits of the combined financial
statements, we have also audited the financial statement schedules as listed in
the accompanying index. These combined financial statements and financial
statement schedules are the responsibility of NPAMLP's management. Our
responsibility is to express an opinion on these combined financial statements
and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the combined financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of NPAMLP as of
December 31, 1996 and 1995, and the results of its operations, changes in
partners' (deficit) equity, and its cash flows for each of the years in the
three - year period ended December 31, 1996, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedules, when considered in relation to the basic combined financial
statements taken as a whole, present fairly, in all material respects, the
information set forth therein.
/S/ KPMG Peat Marwick LLP
March 10, 1997
F-1
<PAGE> 46
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
(A LIMITED PARTNERSHIP)
Combined Balance Sheets
December 31, 1996 and 1995
(in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Assets 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Rental property, at cost:
Land $ 18,663 18,794
Buildings 258,922 259,904
- --------------------------------------------------------------------------------
277,585 278,698
Less: accumulated depreciation 115,711 109,753
- --------------------------------------------------------------------------------
Rental property, net 161,874 168,945
- --------------------------------------------------------------------------------
Cash and cash equivalents 867 678
Restricted cash 2,030 1,222
Tenant accounts receivable, net of allowance of
$20--1996 and 1995 853 682
Unbilled rent receivable 1,440 1,714
Tenant leasing costs 323 345
Accounts receivable and other assets 910 454
Advances to the Pension Group -- 2,199
- --------------------------------------------------------------------------------
Total assets $168,297 176,239
================================================================================
LIABILITIES AND PARTNERS' DEFICIT
- --------------------------------------------------------------------------------
Wraparound mortgages payable $460,856 467,621
Less unamortized discount on imputed
interest rate of 12% 263,928 273,786
- --------------------------------------------------------------------------------
Wraparound mortgage payable less
unamortized discount 196,928 193,835
Due to the Pension Group 1,170 --
Other borrowings 235 --
Deferred revenue 248 --
Accounts payable and other liabilities 2,997 2,206
Finance lease obligation 2,650 2,650
Deposit on sale of property 2,440 2,440
- --------------------------------------------------------------------------------
Total liabilities 206,668 201,131
Partners' deficit (38,371) (24,892)
- --------------------------------------------------------------------------------
Total liabilities and partners' deficit $168,297 176,239
================================================================================
</TABLE>
See accompanying notes to combined financial statements.
F-2
<PAGE> 47
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
(A LIMITED PARTNERSHIP)
Combined Statements of Operations and Changes in Partners' (Deficit) Equity
Years ended December 31, 1996, 1995 and 1994
(in thousands, except per unit data)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
1996 1995 1994
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Income:
Rental income $ 23,984 23,976 24,486
Other charges to tenants 6,819 9,849 8,378
Interest income 129 299 443
- -----------------------------------------------------------------------------
Total income 30,932 34,124 33,307
- -----------------------------------------------------------------------------
Operating expenses:
Interest expense 23,054 23,770 24,109
Real estate taxes 6,457 7,023 7,079
Management fees and
leasing commissions 1,413 1,393 1,486
Common area maintenance
expenses 2,568 2,254 2,680
Ground rent 603 519 499
Repairs and maintenance 535 463 499
General and administrative 789 521 503
Depreciation and amortization 8,839 8,885 9,082
- -----------------------------------------------------------------------------
Total operating expenses 44,258 44,828 45,937
- -----------------------------------------------------------------------------
Operating loss (13,326) (10,704) (12,630)
Other income (expense):
Net gain (loss) on disposition
of properties 454 103 (15,763)
Write down of rental property (1,100) - -
- -----------------------------------------------------------------------------
Loss before extraordinary item (13,972) (10,601) (28,393)
Extraordinary item:
Foregiveness of wraparound
motgages
payable on dispositions
and foreclosure of
properties 493 (12) 12,680
- -----------------------------------------------------------------------------
Net loss (13,479) (10,613) (15,713)
Partners' (deficit) equity:
Beginning of year (24,892) (14,279) 1,434
- -----------------------------------------------------------------------------
End of year $(38,371) (24,892) (14,279)
- -----------------------------------------------------------------------------
Net loss per unit $(134.79) (106.13) (157.13)
- -----------------------------------------------------------------------------
</TABLE>
See accompanying notes to combined financial statements.
F-3
<PAGE> 48
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
(A LIMITED PARTNERSHIP)
Combined Statements of Cash Flows
Years ended December 31, 1996, 1995 and 1994
(in thousands)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(13,479) $(10,613) $(15,713)
Adjustments to reconcile net
loss to net cash provided by
operating activities:
Depreciation and amortization 8,606 8,707 8,958
Amortization of discount 8,326 8,216 8,269
Net (gain) loss on disposition of
properties including forgiveness
of wraparound mortgages payable (947) (12) 3,083
Write down of rental property 1,100 -- --
Decrease (increase) in tenant
accounts receivable, net (171) (450) 219
Decrease in unbilled
rent receivable, net 274 286 193
(Increase) decrease in tenant
leasing costs 22 (47) (68)
Decrease (increase) in accounts
receivable and other assets (456) (97) 58
Increase in accounts payable
and other liabilities 791 300 102
Increase in deferred revenue 248 -- --
- --------------------------------------------------------------------------------
Net cash provided by operating activities 4,314 6,290 5,101
- --------------------------------------------------------------------------------
Cash flows from financing activities:
Payments on wraparound mortgages (9,257) (9,353) (9,296)
Repayment of advances to the Pension
Group 2,199 2,305 1,989
Increase in due to Pension Group 1,170 -- --
Proceeds from other borrowings 235 -- --
Proceeds from additional debt 4,518 -- --
- --------------------------------------------------------------------------------
Net cash used in financing activities (1,135) (7,048) (7,307)
- --------------------------------------------------------------------------------
</TABLE>
(Continued)
F-4
<PAGE> 49
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
(A LIMITED PARTNERSHIP)
Combined Statements of Cash Flows, Continued
(in thousands)
<TABLE>
<CAPTION>
_______________________________________________________________________________
1996 1995 1994
_______________________________________________________________________________
<S> <C> <C> <C>
Cash flows from investing activities:
Disposition of properties $ 2,944 -- 2,900
Improvements to rental property (5,126) (417) (566)
Increase in deposit on sale of property -- 690 --
- ------------------------------------------------------------------------------
Net cash (used in) provided by investing activities (2,182) 273 2,334
______________________________________________________________________________
Increase (decrease) in cash and cash equivalents 997 (485) 128
Cash and cash equivalents:
Beginning of year 1,900 2,385 2,257
______________________________________________________________________________
End of year $ 2,897 1,900 2,385
______________________________________________________________________________
Supplemental disclosures of cash flow
information:
Cash paid during the year for interest $14,443 15,310 15,565
______________________________________________________________________________
Supplemental disclosure of noncash activities:
Write-off of unbilled rent receivable $ -- 44 59
Increase (decrease) in wraparound mortgages from
nonmonetary exchanges -- (5,053) 7,854
Reduction in wraparound mortgages
from property foreclosures -- -- 7,569
Reduction in wraparound mortgages from
forgiveness of debt, net of related discount 493 -- 5,111
Increase (decrease) in rental property from
nonmonetary exchanges -- (5,053) 7,854
Net book value of properties foreclosed -- -- 10,007
- -----------------------------------------------------------------------------
</TABLE>
See accompanying notes to combined financial statements.
F-5
<PAGE> 50
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
(A LIMITED PARTNERSHIP)
Notes to Combined Financial Statements
December 31, 1996 and 1995
(dollars in thousands)
================================================================================
(1) FORMATION AND DESCRIPTION OF BUSINESS
National Property Analysts Master Limited Partnership (NPAMLP), a limited
partnership, was formed effective January 1, 1990. NPAMLP is owned 99% by
the limited partners and 1% by the general partner, EBL&S, Inc. (note 10).
The properties included in NPAMLP consist primarily of shopping centers
and free standing, single tenant retail stores with national retailers as
prime tenants. The ownership and operations of these properties have been
combined in NPAMLP pursuant to a court ordered consolidation (the
Consolidation) of properties owned by certain limited partnerships (the
Electing Partnerships) previously sponsored by National Property Analysts,
Inc. and its affiliates (NPA). NPAMLP intends to hold the properties until
such time as it is deemed prudent to dispose of them. The precise timing
of disposition of the properties is at the discretion of the general
partner. However, in accordance with the partnership agreement, the
partnership will terminate on December 31, 2015. It is anticipated that as
a result of the sale of the properties, the limited partners will have to
report substantial taxable income without the corresponding receipt of any
cash proceeds.
The properties were originally purchased by the Electing Partnerships from
unaffiliated limited partnerships owned by various pension and profit
sharing trusts, whose interests were subsequently acquired by Main Line
Pension Group (the Pension Group). Properties were purchased by the
Electing Partnerships subject to existing senior mortgages in favor of the
sellers or unaffiliated third parties. In connection with the acquisition
of the properties, wraparound mortgages were delivered by the Electing
Partnerships to the Pension Group which were subordinate to the third
party underlying obligations and other second mortgages. Neither these
third party underlying obligations or the second mortgages represented
direct financial obligations of the Electing Partnerships. The Electing
Partnerships were required to make payments on the wraparound mortgages to
the Pension Group, which was required to make payments on the underlying
obligations.
In accordance with the Consolidation, the Electing Partnerships
transferred their interests to NPAMLP. The Electing Partnerships include
both partnerships that contributed their interests to NPAMLP and certain
partnerships whose partnership interests were not contributed as of the
effective date of NPAMLP's formation on January 1, 1990, but were
allocated their interests in NPAMLP as if they were contributed on January
1, 1990. The combined financial statements include the accounts of all
Electing Partnerships.
F-6
<PAGE> 51
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
(A LIMITED PARTNERSHIP)
Notes to Combined Financial Statements
(dollars in thousands)
================================================================================
(1) CONTINUED
In connection with the Consolidation, NPAMLP, the Pension Group and
certain affiliates entered into a restructuring agreement to modify the
terms of repayment of the wraparound notes. The restructuring agreement
provided that all wraparound notes which were originally secured by wrap
mortgages on properties owned by Electing Partnerships which were audited
by the Internal Revenue Service (the Audited Partnerships) are cross
collateralized by all other wrap mortgages on other Audited Partnerships.
In addition, all wraparound notes which were originally secured by wrap
mortgages on properties owned by Electing Partnerships which were not
audited by the Internal Revenue Service (the Unaudited Partnerships) are
cross collateralized by all other wrap mortgages on other Unaudited
Partnerships.
The wraparound mortgages provide for a sharing of cash from the proceeds
of sales of properties. The wraparound mortgages generally provide that
the limited partners of NPAMLP receive 40% of the net proceeds, if any,
from the sale of properties after repayment of the underlying third party
mortgage obligations once the net proceeds, as defined in the wraparound
mortgages, from the sale of properties exceed a threshold amount of
$45,000 ( the threshold).
Through December 31, 1996, the general partner and NPAMLP sold properties
that generated approximately $35,395 in net proceeds which have been
applied as a reduction of the threshold amount. NPAMLP has not distributed
any sales proceeds to its partners since its organization.
Additionally, the limited partners of NPAMLP receive 40% of the cash flow,
if any, from operations in excess of debt service requirements and any
capital improvements or reserves considered necessary. The remaining cash
flow, if any, is applied to the wraparound mortgages in payment of accrued
interest and then principal. It is not anticipated that NPAMLP will be in
a position to distribute cash flow to its partners in the foreseeable
future.
Under the terms of the NPAMLP partnership agreement, the limited partners
are entitled to a 99% share of any income or loss and the general partner
is entitled to a 1% share.
(Continued)
F-7
<PAGE> 52
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
(A LIMITED PARTNERSHIP)
Notes to Combined Financial Statements
(dollars in thousands)
================================================================================
(1) CONTINUED
NPAMLP has limited working capital which as of December 31, 1996,
approximated $1,087, excluding amounts due to the general partner and the
Pension Group of $1,454 and $1,170, respectively. NPAMLP may not have
sufficient working capital reserves to satisfy mortgage obligations, pay
for emergencies, major capital improvements or major tenant improvements.
NPAMLP has $867 of unrestricted cash and $1,765 available under line of
credit agreements at December 31, 1996 to meet its short term obligations.
Through December 31, 1996, NPAMLP has replenished its working capital
reserves through the sale of properties on which the holders of the second
mortgage and the wrap mortgage have released their liens. In addition, as
of December 31, 1996, the general partner has advanced approximately
$1,454 to NPAMLP. The general partner does not have the financial
wherewithal to continue to advance funds to NPAMLP and may in fact require
the repayment of the advances for its own operational needs. As a result,
it may be necessary for NPAMLP to sell properties. In the event that
NPAMLP is not able to obtain refinancing commitments and loan extensions
from the existing senior mortgage lenders or refinancing from alternative
lenders, the properties could be lost to foreclosure.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
RENTAL PROPERTY
Rental properties are stated at original cost to the Electing
Partnerships. Depreciation on buildings and building improvements is
calculated on the straight-line method over their estimated useful lives
of 30 years and 15-39 years, respectively.
In March 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 121 Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, (SFAS 121).
This Statement requires that long-lived assets and certain identifiable
assets be reviewed by management for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows
expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by
which the carrying amount of the assets exceed the fair value of the
assets. Assets to be disposed of are reported at the lower of the carrying
amount or the fair value less costs to sell.
(Continued)
F-8
<PAGE> 53
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
(A LIMITED PARTNERSHIP)
Notes to Combined Financial Statements
(dollars in thousands)
================================================================================
(2) CONTINUED
The Company adopted SFAS 121 on January 1, 1996. The estimated
undiscounted cash flows from the Ardmore, Oklahoma property indicated that
a write down to fair market value was required under SFAS 121. This write
down from the initial adoption of SFAS No. 121 resulted in a charge to
income of $1,100 which is included in the combined statements of
operations as write-down of rental property. The estimated fair value of
this property was determined by management based on projected cash flows
and market trends.
RESTRICTED CASH
Restricted cash consists principally of amounts held in reserve for tenant
security deposits received and amounts due from various bank trust
departments in connection with certain property rents that are assigned to
these banks in order to satisfy the debt service on the underlying
mortgage obligations. The bank's trust departments periodically remit
excess funds to NPAMLP as required under the respective trust agreements.
Restricted cash also consists of amounts held in escrow for real estate
taxes and amounts held in debtor-in-possession accounts.
RENTAL INCOME
Rental income is recognized on a straight-line basis over the terms of the
respective leases. Unbilled rent receivable represents the amount by which
the straight-line rentals exceed the current rents collectible under the
payment terms of the lease agreements. Tenant pass-through charges
including common area maintenance, real estate taxes and property
insurance are recognized in income when earned and are recorded as other
charges to tenants.
DISCOUNT ON WRAPAROUND MORTGAGES
The discount on wraparound mortgages represents the difference between the
present value of mortgage payments at the stated interest rate and the
imputed rate. The discount is amortized using the interest method over the
terms of the mortgages and is recorded as interest expense.
INCOME TAXES
No provision has been made in the combined financial statements for income
taxes as any such liability is the liability of the individual partners.
(Continued)
F-9
<PAGE> 54
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
(A LIMITED PARTNERSHIP)
Notes to Combined Financial Statements
(dollars in thousands)
================================================================================
(2) CONTINUED
CASH AND CASH EQUIVALENTS
All highly liquid interest-bearing deposits with original maturities of
three months or less are considered to be cash equivalents.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement on Financial Accounting Standards No. 107 (SFAS 107),
Disclosures About Fair Value of Financial Instruments, requires disclosure
of the fair value of certain financial instruments. Cash, tenant accounts
receivable, accounts payable, and other liabilities are reflected in the
combined financial statements at fair value because of the short-term
maturity of these instruments. The fair value of NPAMLP's wraparound
mortgages payable is disclosed in note 7.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from these
estimates.
RECLASSIFICATION
Certain amounts in the accompanying 1995 combined financial statements
have been reclassified to conform with 1996 presentation.
(3) ADVANCES TO AND DUE TO THE PENSION GROUP
Unapplied advances made by NPAMLP to the Pension Group amounted to $2,199
at December 31, 1995. This advance bore interest at 7%. During the years
ended December 31, 1996 and 1995, $2,199 and $2,305, respectively, of the
advance was applied to debt service on the wraparound mortgages (note 7).
At December 31, 1996, $1,170 was due to the Pension Group representing
past due payments on the wraparound debt (note 7).
(Continued)
F-10
<PAGE> 55
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
(A LIMITED PARTNERSHIP)
Notes to Combined Financial Statements
(dollars in thousands)
================================================================================
(4) OTHER BORROWINGS
During 1996, NPAMLP secured a $1,000 revolving line of credit with a bank.
The line of credit bears interest based on a variable rate (10.25% at
December 31, 1996) and expires on January 31, 1998. As of December 31,
1996, NPAMLP owed $235 under the line of credit. The maximum amount
outstanding under the line of credit during the twelve months ended
December 31, 1996 was $235.
(5) TENANT LEASES
At December 31, 1996, NPAMLP effectively owns and operates 57 properties
(60 at December 31, 1995), as listed in Attachment 1, that are comprised
principally of shopping centers and free standing, single tenant retail
stores with approximately 280 tenants under various lease agreements which
are treated as operating leases.
In addition to minimum rental payments, the leases generally provide for
additional rents based on operating results of the tenants, reimbursement
for certain common area maintenance charges, real estate taxes and
property insurance, and renewal options. The leases expire under their
original terms at various dates over the next 22 years.
Future minimum lease rentals to be received under noncancelable leases are
approximately:
<TABLE>
<S> <C>
1997 $ 21,780
1998 20,347
1999 17,818
2000 14,761
2001 13,145
Thereafter 63,459
======================================
</TABLE>
Rental income includes approximately $1,150, $781, and $969 related to
percentage rents billed for the years ended December 31, 1996, 1995 and
1994, respectively.
(6) GROUND LEASES
NPAMLP is obligated under various noncancelable ground leases which expire
between 2000 and 2078.
During the year ended December 31, 1991, NPAMLP sold the land underlying
five rental properties and simultaneously entered into ground leases to
leaseback the land from the buyer. The ground leases have maturities
ranging from 2004 to 2012, excluding renewal options.
(Continued)
F-11
<PAGE> 56
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
(A LIMITED PARTNERSHIP)
Notes to Combined Financial Statements
(dollars in thousands)
================================================================================
(6) CONTINUED
During the term of the 1991 ground leases, NPAMLP is responsible for
maintaining the buildings and building improvements, as well as making the
respective mortgage payments. Under the terms of sale, at the expiration
of the respective 1991 ground leases, including renewal options, title to
the buildings will be conveyed to the buyer with no additional
consideration and any amounts still outstanding under the respective
wraparound mortgages will remain the liability of NPAMLP.
Aggregate proceeds from the five land sales were $2,650 and are recorded
as a finance lease obligation. The amounts paid in accordance with the
1991 ground leases are recorded as interest expense. Any gain or loss
arising from this transaction will be recognized at the date upon which
title to the buildings is conveyed to the buyer.
Future minimum lease payments under all noncancelable ground leases as of
December 31, 1996 are approximately:
<TABLE>
<S> <C>
1997 $ 798
1998 798
1999 798
2000 798
2001 786
Thereafter 3,739
=====================================
</TABLE>
Total rental expense for ground leases for the years ended December 31,
1996, 1995, and 1994 was approximately $603, $519, and $499, respectively.
In addition, $255 was recorded each year as interest expense.
(7) WRAPAROUND MORTGAGES
The properties combined in NPAMLP are subject to nonrecourse wraparound
mortgages. The wraparound mortgages are cross-collateralized among the
properties owned by NPAMLP as described in note 1. The wraparound
mortgages are secured by liens on the properties that are subordinate to
the underlying third party mortgage obligations and the purchase money
mortgages (note 10), collectively the senior mortgage obligations. The
wraparound mortgages are payable to the Pension Group and the Pension
Group is liable to the holders of the senior mortgage obligations.
(Continued)
F-12
<PAGE> 57
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
(A LIMITED PARTNERSHIP)
Notes to Combined Financial Statements
(dollars in thousands)
================================================================================
(7) CONTINUED
To date, the Pension Group has forgiven the wraparound mortgages remaining
after the disposition or foreclosure of properties which were owned by
Audited Partnerships. During 1996, a wraparound mortgage obligation of
approximately $2,027 with a related discount of $1,534 was forgiven in
connection with the sale of the El Paso, Texas property, resulting in an
extraordinary gain of $493. During 1994, wraparound mortgages were
forgiven in connection with the sale of the Great Barrington,
Massachusetts property, and the foreclosures on the Harrisburg, Illinois
and Brookings, South Dakota properties, resulting in extraordinary gains
of $12,680.
The wraparound mortgages have maturity dates varying from August 2009 to
December 2013 and stated interest rates varying from 0% to 10%.
In accordance with SFAS No. 107, NPAMLP has determined the estimated fair
value of its wraparound mortgages based on discounted future cash flows at
a current market rate. Management estimates that the carrying value
approximates the estimated fair value of the wraparound mortgages at
December 31, 1996.
Certain wraparound mortgages are fully amortizing over the life of the
mortgage loan while other wraparound mortgages require balloon payments to
satisfy the wraparound mortgage obligations. Also, the Pension Group has
balloon payments due on the underlying third party mortgage obligations
which aggregate approximately $17,765 during the year ended December 31,
1997. Discussions and negotiations with the lenders for these properties
are in process, however, there can be no assurance that loan extensions
will be successfully negotiated with these lenders.
At December 31, 1996, $1,170 was due to the Pension Group representing
past due payments on the wraparound mortgages. NPAMLP requested and
received a waiver to defer such payments which were required under the
terms of the Settlement Agreement.
Wraparound mortgage principal payment requirements for the next five
years, are as follows:
<TABLE>
<S> <C>
1997 $ 7,444
1998 7,969
1999 8,499
2000 9,033
2001 9,616
=====================================
</TABLE>
(Continued)
F-13
<PAGE> 58
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
(A LIMITED PARTNERSHIP)
Notes to Combined Financial Statements
(dollars in thousands)
================================================================================
(8) EXCHANGE OF PROPERTIES
During the years ended December 31, 1995 and 1994, NPAMLP completed a
nonmonetary transaction, exchanging rental property for similar rental
property. In 1994, both the fair value of the rental property recorded and
wraparound mortgage assumed were approximately $9,400. In 1995, both the
fair value of the rental property and the wraparound mortgage were reduced
by $5,053. No gain or loss was recognized on the exchange transaction
since the fair value of the rental properties received, net of the
wraparound mortgage assumed was equivalent to the book value of the rental
properties given up, net of the related wraparound mortgage.
(9) PROPERTY SUBJECT TO SALES CONTRACTS
During the years ended December 31, 1990 and 1995, NPAMLP sold options for
the purchase of two and three rental properties, respectively. The 1990
options provide that title to the land and buildings will be conveyed to
the holder of the options without additional consideration on November 14,
2003 and December 11, 2006. The 1995 options provide that title to the
land and buildings will be conveyed to the holder of the options without
additional consideration on July 31, 1998, October 31, 1998, and June 30,
2003. Aggregate proceeds received from the sale of the options were $2,440
and are recorded as a deposit on sale of property. Any gain or loss
arising from this transaction will be recognized at the date upon which
title to the land and buildings is conveyed to the buyer, which has not
occurred as of December 31, 1996.
In 1996, NPAMLP entered into a sales contract for the sale of the Temple
Terrace, Florida property to a regional supermarket chain. The proposed
sale price is $2,580. Proceeds from the sale will be applied as a
reduction of the wraparound mortgage. Any gain arising from this
transaction will be recognized at the date of closing. Under the terms of
the sale contract, the buyer has until April 1997 to complete the
purchase. The contract is cancelable by the buyer prior to closing and
there can be no assurance that the sale will be successfully concluded
under the proposed terms.
(10) RELATED PARTY TRANSACTIONS
NPAMLP is owned 99% by the limited partners and 1% by EBL&S, Inc., the
general partner. EBL&S, Inc. is owned by E&H Properties, Inc.
(Continued)
F-14
<PAGE> 59
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
(A LIMITED PARTNERSHIP)
Notes to Combined Financial Statements
(dollars in thousands)
================================================================================
(10) CONTINUED
NPAMLP entered into a leasing and property management agreement with EBL&S
Property Management, Inc. (EBL&S) in January 1990. EBL&S is owned by NPA.
Under the agreement, EBL&S is to receive a property management fee equal
to 5% of the gross annual rentals collected, including tenant
reimbursements for common area maintenance charges, real estate taxes and
property insurance. EBL&S is also entitled to receive leasing commissions
for obtaining or renewing leases.
In addition, certain administrative services were performed by EBL&S on
behalf of NPAMLP as provided for in NPAMLP's Partnership Agreement.
Amounts earned by EBL&S for the years ended December 31 were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-----------------------------------------------------------------
<S> <C> <C> <C>
Property management fees $1,413 1,393 1,486
Leasing commissions 263 113 110
Administrative services 53 58 59
-----------------------------------------------------------------
$1,729 1,564 1,655
================================================================
</TABLE>
Included in accounts payable and other liabilities at December 31, 1996
and 1995 was approximately $1,454 and $1,057, respectively, that was owed
to EBL&S for property management fees, leasing commissions, administrative
services, and cash advances for debt service.
During 1996 the El Paso, Texas property was sold to a limited partnership
owned by directors and executives of EBL&S, Inc. The sales price of the
property was determined to be at fair market value by an independent
appraiser. A gain on the sale of the property in the amount of $524 is
reflected in the statement of operations. In connection with the
transaction a promissory note was issued to NPAMLP in the approximate
amount of $436. The note bears interest at 10% and matures on November 1,
2008.
NPA and its principals owned 4,362 of the 100,000 units of NPAMLP as of
December 31, 1996 and 1995.
NPA holds purchase money mortgages on certain properties of NPAMLP. The
purchase money mortgages aggregated approximately $83,156 at December 31,
1996 and 1995.
(Continued)
F-15
<PAGE> 60
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
(A LIMITED PARTNERSHIP)
Notes to Combined Financial Statements
(dollars in thousands)
================================================================================
(11) COMMITMENTS AND CONTINGENCIES
Upon NPAMLP's formation, the title of the properties of the Electing
Partnerships were to be transferred to NPAMLP. State and local laws vary
with respect to transfer taxes and are susceptible to varying
interpretations. NPAMLP's interpretation of the laws relating to these
transfer taxes could result in significant adjustments if successfully
challenged by the respective taxing authority, however, a reasonable
estimation of the potential liability, if any, cannot be made at this
time.
NPAMLP is involved in various claims and legal actions arising in the
ordinary course of property operations. In the opinion of the general
partner, the ultimate disposition of these matters will not have a
material adverse effect on NPAMLP's financial position, results of
operations or liquidity.
In 1995, NPAMLP executed a promissory note to E&H Properties, Inc. for
$1,000. The note secures future advances from E&H Properties, Inc. to
NPAMLP to be utilized for capital and tenant improvements to the
properties. Funding for such advances is obtained from E&H Properties,
Inc.'s line of credit availability. One of the properties owned by
NPAMLP was pledged as collateral for the E&H Properties, Inc. line.
Should E&H Properties, Inc. default under the line of credit agreement,
this property could be sold in satisfaction of the line. During 1996,
NPAMLP was advanced and repaid $703 under this agreement. At December
31, 1996, borrowings under the E&H Properties, Inc. line were $1,197,
however, there were no advances from E&H Properties, Inc. to NPAMLP.
In 1996, Ocala Realty Associates (Ocala), a wholly owned partnership,
filed for bankruptcy protection under the provisions of Chapter 11 of the
U.S. Bankruptcy Code. Ocala owns and operates the properties located in
East Greenbush, New York, Ocala, Florida, and Temple Terrace, Florida.
Ocala has been operating as a Debtor-In-Possession since the filing date
and intends to file a Plan of Reorganization in 1997. Management does not
believe that the ultimate settlement will result in a loss to NPAMLP.
Certain scheduled payments on third party obligations discussed in note 1
which are secured by second mortgages have not been made on the Ardmore,
Oklahoma, Fond du Lac, Wisconsin, and Wheelersburg, Ohio properties at
December 31, 1996. In the event that NPAMLP is not able to obtain
refinancing commitments and loan extensions from the existing lenders or
refinancing from alternative lenders, the properties could be lost to
foreclosure.
(12) MAJOR TENANTS
During the years ended December 31, 1996, 1995 and 1994, one tenant
accounted for approximately 52%, 51%, and 51% of the rental income of
NPAMLP, respectively.
(Continued)
F-16
<PAGE> 61
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
(A LIMITED PARTNERSHIP)
Notes to Combined Financial Statements
(dollars in thousands)
================================================================================
(13) PARTNERS' (DEFICIT) EQUITY
Following is a summary of the combined changes in partners' (deficit)
equity for the three years ended December 31, 1996 (in thousands except
unit data):
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Units Partners' (deficit) equity
------------------------------------------ ------------------------------------------
General Limited General Limited
partners partners partners partners
(1%) (99%) Total (1%) (99%) Total
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
December 31, 1993 1,000 99,000 100,000 $ 13 1,421 1,434
Net loss -- -- -- (157) (15,556) (15,713)
- -------------------------------------------------------------------------------------------------------------------------
December 31, 1994 1,000 99,000 100,000 (144) (14,135) (14,279)
Net loss -- -- -- (105) (10,508) (10,613)
- -------------------------------------------------------------------------------------------------------------------------
December 31, 1995 1,000 99,000 100,000 (249) (24,643) (24,892)
Net loss -- -- -- (135) (13,344) (13,479)
- -------------------------------------------------------------------------------------------------------------------------
December 31, 1996 1,000 99,000 100,000 $(384) (37,987) (38,371)
=========================================================================================================================
</TABLE>
See accompanying notes to financial statements.
================================================================================
F-17
<PAGE> 62
ATTACHMENT 1
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
(A LIMITED PARTNERSHIP)
Properties Effectively Owned by NPAMLP at December 31, 1996 (1)
================================================================================
Property
location
- --------------------------------------------------------------------------------
Ardmore, OK Huntsville, AL* Oak Lawn, IL*
Borger, TX Huron, SD Ocala, FL
Bowling Green, OH Hutchinson, MN O'Fallon, MO
Cahokia, IL Independence, MO Philadelphia, PA*+
Chesapeake, VA*+ International Falls, MN San Mateo, CA
Clackamas, OR*** Kalamazoo, MI*+ Sault Ste. Marie, MI
Cottage Grove, MN La Mesa, CA*** Seven Hills, OH*+
Crescent City, CA Lake Mary, FL Sparks, NV***
Dunmore, PA* Las Vegas, NV*** Steger, IL
East Greenbush, NY Lockport, IL Taylorville, IL
East Haven, CT Maplewood, MO Temple Terrace, FL
East Meadow, NY* Marquette, MI* Trenton, NJ*
Escanaba, MI Maryville, MO* Urbana, IL
Fairborn, OH*+ Menominee, MI* Wahpeton, ND
Fairfield, IA Minot, SD Washington, IA
Federal Way, WA New Hope, MN Waverly, OH
Fond du Lac, WI Newberry, SC Wheelersburg, OH
Fort Wayne, IN*** North Augusta, SC* Wichita, KS
Huntington, WV North Sarasota, FL Yazoo City, MS
* Properties with ground leases (note 6).
*** Property subject to sales contracts (note 9).
+ Land sales (note 6).
(1) Effectively owned refers to the fact that legal title to the properties
is held by certain partnerships as nominee titleholder and agent for
NPAMLP. NPAMLP has all beneficial interest in and equitable title to
the properties and has the right to cause a transfer of legal title at
its request.
F-18
<PAGE> 63
SCHEDULE II
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
(A LIMITED PARTNERSHIP)
Combined Valuation and Qualifying Accounts
December 31, 1996, 1995, and 1994
(in thousands)
<TABLE>
<CAPTION>
==========================================================================================
Balance Additions Balance
beginning charged to end of
of year operations Deductions year
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended December 31, 1994 650 20 650 20
Year ended December 31, 1995 20 -- -- 20
Year ended December 31, 1996 20 -- -- 20
- -------------------------------------------------------------------------------------------
</TABLE>
F-19
<PAGE> 64
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP SCHEDULE III
(A LIMITED PARTNERSHIP)
Combined Real Estate and Accumulated Depreciation Schedule
December 31, 1996, 1995 and 1994
(in thousands)
================================================================================
<TABLE>
<CAPTION>
Cost capitalized
(written off) subsequent
Initial cost to acquisition
--------------------------- -----------------------
Buildings and Buildings and Buildings and
Property location Encumbrances Land improvements Land improvements Land improvements Total
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ardmore, OK 6,849 750 14,989 -- (1,015) 750 13,974 14,724
Bowling Green, OH 3,807 496 5,270 -- 13 496 5,283 5,779
Borger, TX 678 106 1,143 -- -- 106 1,143 1,249
Philadelphia, PA 3,518 529 5,859 -- 168 529 6,027 6,556
Cottage Grove, MN 7,047 740 5,550 -- 4,175 740 9,725 10,465
Cahokia, IL 3,846 600 5,800 -- 144 600 5,944 6,544
Chesapeake, VA 3,537 416 4,797 -- -- 416 4,797 5,213
Crescent City, CA 1,551 129 2,220 -- -- 129 2,220 2,349
Clackamas, OR 1,191 124 3,091 -- -- 124 3,091 3,215
Dunmore, PA 685 -- 1,350 -- -- -- 1,350 1,350
East Haven, CT 3,797 447 4,883 -- 147 447 5,030 5,477
East Meadow, NY 8,760 -- 9,246 -- 898 -- 10,144 10,144
Escanaba, MI 1,015 159 1,616 -- -- 159 1,616 1,775
East Greenbush, NY 3,750 703 5,560 -- 18 703 5,578 6,281
Fairborn, OH 3,438 377 4,961 -- 10 377 4,971 5,348
Fond du Lac, WI 4,813 760 7,721 (24) 196 736 7,917 8,653
Federal Way, WA 704 86 1,894 -- -- 86 1,894 1,980
Ft. Wayne, IN 4,313 575 6,616 -- -- 575 6,616 7,191
Fairfield, IA 266 45 461 -- -- 45 461 506
Hutchinson, MN 1,928 179 3,304 -- -- 179 3,304 3,483
Huron, SD 345 58 598 -- -- 58 598 656
Huntsville, AL 1,174 -- 1,904 -- 44 -- 1,948 1,948
Huntington, WV 2,199 336 3,649 -- 155 336 3,804 4,140
<CAPTION>
Accumulated Date of
Property location depreciation acquisition
- -------------------------------------------------
<S> <C> <C>
Ardmore, OK 6,667 09/83
Bowling Green, OH 2,798 02/81
Borger, TX 505 10/83
Philadelphia, PA 3,249 08/80
Cottage Grove, MN 2,872 11/81
Cahokia, IL 2,764 10/82
Chesapeake, VA 2,292 09/82
Crescent City, CA 999 07/83
Clackamas, OR 1,374 09/83
Dunmore, PA 971 06/75
East Haven, CT 2,689 08/80
East Meadow, NY 4,516 09/82
Escanaba, MI 768 10/82
East Greenbush, NY 2,580 02/83
Fairborn, OH 2,398 07/82
Fond du Lac, WI 3,679 10/82
Federal Way, WA 994 04/81
Ft. Wayne, IN 2,867 01/84
Fairfield, IA 197 03/84
Hutchinson, MN 1,496 06/83
Huron, SD 256 03/84
Huntsville, AL 821 03/84
Huntington, WV 1,520 10/84
</TABLE>
F-20
<PAGE> 65
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP SCHEDULE III, CONT.
(A LIMITED PARTNERSHIP)
Combined Real Estate and Accumulated Depreciation Schedule
(in thousands)
================================================================================
<TABLE>
<CAPTION>
Cost capitalized
(written off) subsequent
Initial cost to acquisition
------------------------- -----------------------
Buildings and Buildings and Buildings and
Property location Encumbrances Land improvements Land improvements Land improvements Total
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Independence, MO 2,412 394 3,550 - 289 394 3,839 4,233
International Falls, MN 1,800 179 3,071 - - 179 3,071 3,250
Kalamazoo, MI 2,436 250 4,850 - 253 250 5,103 5,353
Lockport, IL 1,867 286 2,572 - 188 286 2,760 3,046
Las Vegas, NV 897 168 1,806 - - 168 1,806 1,974
La Mesa, CA 671 108 2,761 - - 108 2,761 2,869
Lake Mary, FL 9,068 1,310 7,422 - - 1,310 7,422 8,732
Minot, SD 3,135 420 4,625 - 35 420 4,660 5,080
Menominee, MI 1,747 - 2,722 - - - 2,722 2,722
Maplewood, MO 1,314 609 3,776 - - 609 3,776 4,385
Marquette, MI 9,056 - 5,700 - 8,373 - 14,073 14,073
Maryville, MO 152 - 1,248 - 44 - 1,292 1,292
New Hope, MN 2,531 357 3,774 - 126 357 3,900 4,257
North Augusta, SC 1,801 100 2,900 - - 100 2,900 3,000
North Sarasota, FL 4,020 459 5,686 - 249 459 5,935 6,394
Newberry, SC 1,674 201 2,192 - - 201 2,192 2,393
O'Fallon, MO 2,411 343 3,626 - - 343 3,626 3,969
Oak Lawn, IL 5,402 - 9,029 - 178 - 9,207 9,207
Ocala, FL 2,308 417 3,301 - - 417 3,301 3,718
Steger, IL 1,709 332 2,488 - 28 332 2,516 2,848
Sault St. Marie, MI 1,820 375 2,816 - - 375 2,816 3,191
Seven Hills, OH 2,102 371 3,771 - - 371 3,771 4,142
Sparks, NV 12,081 1,648 20,409 - - 1,648 20,409 22,057
<CAPTION>
Accumulated Date of
Property location depreciation acquisition
- ---------------------------------------------------------------
<S> <C> <C>
Independence, MO 1,907 05/81
International Falls, MN 1,382 07/83
Kalamazoo, MI 2,695 09/80
Lockport, IL 1,274 07/82
Las Vegas, NV 798 10/83
La Mesa, CA 1,450 04/81
Lake Mary, FL 390 12/94
Minot, SD 2,483 12/80
Menominee, MI 1,384 10/81
Maplewood, MO 1,794 10/82
Marquette, MI 4,408 05/83
Maryville, MO 555 11/83
New Hope, MN 1,999 03/81
North Augusta, SC 1,627 03/80
North Sarasota, FL 3,088 11/80
Newberry, SC 895 10/84
O'Fallon, MO 1,914 03/81
Oak Lawn, IL 4,633 10/81
Ocala, FL 1,532 02/83
Steger, IL 1,261 11/81
Sault St. Marie, MI 1,330 11/82
Seven Hills, OH 1,791 10/82
Sparks, NV 8,957 11/83
</TABLE>
F-21
<PAGE> 66
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP SCHEDULE III, CONT.
(A LIMITED PARTNERSHIP)
Combined Real Estate and Accumulated Depreciation Schedule
(in thousands)
================================================================================
<TABLE>
<CAPTION>
Cost capitalized
(written off) subsequent
Initial cost to acquisition
------------------------ -----------------------
Buildings and Buildings and Buildings and
Property location Encumbrances Land improvements Land improvements Land improvements Total
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
San Mateo, CA 2,934 -- 6,672 -- -- -- 6,672 6,672
Temple Terrace, FL 1,807 280 469 -- 1,800 280 2,269 2,549
Taylorville, IL 2,374 492 3,696 -- 67 492 3,763 4,255
Trenton, NJ 5,657 -- 9,191 -- -- -- 9,191 9,191
Urbana, IL 3,035 633 4,753 -- 25 633 4,778 5,411
Waverly, OH 2,045 471 2,920 -- 56 471 2,976 3,447
Wichita, KS 1,868 420 2,604 -- 9 420 2,613 3,033
Wheelersburg, OH 1,240 194 2,081 -- 159 194 2,240 2,434
Washington, IA 249 41 431 -- -- 41 431 472
Wahpeton, ND 333 56 577 -- -- 56 577 633
Yazoo City, MS 1,345 158 1,820 -- 299 158 2,119 2,277
--------------------------------------------------------------------------------------------------------
Total 164,512 18,687 241,791 (24) 17,131 18,663 258,922 277,585
========================================================================================================
Cross-collateralized
wraparound
mortgages on
properties
previously disposed
32,416
-----------
196,928
===========
<CAPTION>
Accumulated Date of
Property location depreciation acquisition
- -----------------------------------------------------
<S> <C> <C>
San Mateo, CA 3,373 11/81
Temple Terrace, FL 658 02/83
Taylorville, IL 1,766 11/82
Trenton, NJ 4,085 09/83
Urbana, IL 2,246 11/82
Waverly, OH 1,395 10/82
Wichita, KS 1,237 10/82
Wheelersburg, OH 948 10/83
Washington, IA 184 03/84
Wahpeton, ND 247 03/84
Yazoo City, MS 753 09/84
---------------------------
Total 115,711
===========================
Cross-collateralized
wraparound
mortgages on
properties
previously disposed
</TABLE>
F-22
<PAGE> 67
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP SCHEDULE III, CONT.
(A LIMITED PARTNERSHIP)
Combined Real Estate and Accumulated Depreciation Schedule
(in thousands)
================================================================================
Properties consist primarily of shopping centers and free standing, single
tenant retail stores.
Depreciation and amortization of NPAMLP's investment in building and
improvements reflected in the statements of operations are calculated over the
estimated useful lives of the assets as follows:
<TABLE>
<S> <C>
Base building .................. 30 years
Building components ............ 15-39 years
</TABLE>
The aggregate cost for federal income tax purposes was approximately $266,003 at
December 31, 1996.
The changes in total real estate assets and accumulated depreciation for the
years ended December 31, are as follows:
<TABLE>
<CAPTION>
Total real estate assets
-------------------------------------------
1996 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, beginning of year $ 278,698 286,718 297,765
Improvements 5,126 417 566
Acquisitions -- -- 9,395
Disposals/write downs (6,239) (8,437) (21,008)
- -------------------------------------------------------------------------------
Balance, end of year $ 277,585 278,698 286,718
===============================================================================
</TABLE>
<TABLE>
<CAPTION>
Accumulated depreciation
------------------------------------------
1996 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, beginning of year $ 109,753 104,442 103,030
Depreciation - original 8,112 8,273 8,538
Depreciation - improvements 494 434 420
Disposals (2,648) (3,396) (7,546)
- -------------------------------------------------------------------------------
Balance, end of year $ 115,711 109,753 104,442
===============================================================================
</TABLE>
The Ardmore, OK property was written down by $1,100 during 1996 upon the
Company's adoption of SFAS 121.
F-23
<PAGE> 68
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
NATIONAL PROPERTY ANALYSTS MASTER
LIMITED PARTNERSHIP
(Registrant)
By: EBL&S, Inc., its sole general partner
By: /s/ Edward B. Lipkin
---------------------
Edward B. Lipkin
President
Date: March 26, 1997
--------------
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Capacity Date
- --------- -------- ----
<S> <C> <C>
President and Director of EBL&S, Inc.
/s/ Edward B. Lipkin Principal Executive Officer,
- ------------------------ Principal Accounting Officer and
Edward B. Lipkin Principal Financial Officer March 26, 1997
--------------
/s/ Howard N. Brownstein Director of EBL&S, Inc. March 26, 1997
- ------------------------ --------------
Howard N. Brownstein
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 2,897
<SECURITIES> 0
<RECEIVABLES> 873
<ALLOWANCES> 20
<INVENTORY> 0
<CURRENT-ASSETS> 3,750
<PP&E> 277,585
<DEPRECIATION> 115,711
<TOTAL-ASSETS> 168,297
<CURRENT-LIABILITIES> 2,997
<BONDS> 196,928
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 168,297
<SALES> 0
<TOTAL-REVENUES> 31,386
<CGS> 0
<TOTAL-COSTS> 12,365
<OTHER-EXPENSES> 9,939
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23,054
<INCOME-PRETAX> (13,972)
<INCOME-TAX> 0
<INCOME-CONTINUING> (13,972)
<DISCONTINUED> 0
<EXTRAORDINARY> 493
<CHANGES> 0
<NET-INCOME> (13,479)
<EPS-PRIMARY> (134.79)
<EPS-DILUTED> (134.79)
</TABLE>
