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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 December 31, 1997
Commission File Number 0-24816
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
(Exact name of Registrant as Specified in its Charter)
Delaware 23-2610414
(State of other jurisdiction (IRS Employer Identification No.)
incorporation or organization)
230 S. Broad Street, Mezzanine, Philadelphia, Pennsylvania 19102
(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 on
be so registered which each class
is to be registered
None N/A
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
(Title of Class)
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 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. [X]
Aggregate Market Value of Voting and Non-Voting Common Equity Held by non-
affiliates of the Registrant: N/A
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
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........................ 2
III. Glossary........................................... 4
Item 2. Properties............................................... 6
Item 3. Legal Proceedings........................................ 7
Item 4. Submission of Matters to a Vote of
Security Holders........................................ 7
PART II
Item 5. Market Price for the Registrant's Common
Equity and Related Stockholder Matters................. 19
I. No Trading Market................................. 19
II. Distributions of Cash Flow From Operations........ 19
III. Proceeds of Sales Distributions................... 19
IV. Certain Income Tax Considerations................. 19
Item 6. Selected Financial Data................................. 21
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations.......... 22
I. Liquidity and Capital Resources................... 22
II. Results of Operations............................. 25
III. Year 2000......................................... 26
IV. Indebtedness Secured by the Properties............ 26
Item 8. Financial Statements and Supplementary Data............. 28
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.................... 28
PART III
Item 10. Directors and Executive Officers of the
Registrant............................................. 29
Item 11. Executive Compensation.................................. 29
Item 12. Security Ownership of Certain Beneficial Owners
and Management......................................... 29
Item 13. Certain Relationships and Related Transactions.......... 29
I. Compensation and Fees............................. 29
II. Property and Management Affiliate................. 31
III. Conflicts of Interest............................. 31
IV. Summary of Relationships.......................... 32
V. Related Party Transactions........................ 32
PART IV.
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K.................................... 33
I. Documents Filed as Part of this Report............ 33
II. Reports of Form 8-K............................... 34
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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 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).
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 56 properties as of December 31, 1997 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."
D. 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.
E. LIMITED PARTNERS' SHARE OF CASH FLOW FROM OPERATIONS
The Limited Partners will receive, on an annual basis, 99% of the Cash
Flow from Operations as defined in the Partnership Agreement. 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.
F. 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.
G. ALLOCATIONS OF PROFITS AND LOSSES
Taxable income from MLP operations or from a capital transaction will
be allocated 99% to the Limited Partners and 1% to the General
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Partner. Taxable losses from MLP operations or from capital transactions
generally will be allocated 99% to the Limited Partners and 1% to the General
Partner.
H. 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 and a leasing fee for
obtaining or renewing leases. See "Item 13. Certain Relationships and
Related Transactions - Compensation and Fees."
I. 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 forgiveness of Wrap Mortgages and the
process of selling Properties, which are owned by Unaudited Partnerships, 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 to 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 Sales 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.
The MLP may not acquire additional properties. 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
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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 56 Properties
owned by the MLP, 35 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, 1997, there were ten Properties which had been
vacated by Anchor Tenants, seven of which are stores owned or operated by Kmart
Corporation ("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 and its subsidiaries which in
1997 accounted for approximately 50% 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.
Two of the seven Kmart stores which are vacant but continuing to make
rental payments are Anchor Tenants in Shopping Center Properties while the other
five are the only tenant in Single Tenant Properties. Kmart has subleased
portions of two of the seven properties to other users. Kmart remains obligated
under the terms of its leases at the seven property locations for terms ranging
from four to nineteen years.
In past years Kmart experienced 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. 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 81%. 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
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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 three 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 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.
"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 the Proceeds of Sales of the 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.
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"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.
"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 Properties, Inc., National Property
Analysts Management Company, 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.
"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
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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.
"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, 1997, approximately $34,935,000 had been
applied in reduction of the Threshold Amount.
"UNAUDITED PARTNERSHIPS" shall mean the Partnerships included in the
MLP which were not audited by the Internal Revenue Service.
"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, 1997, the MLP owned
and operated 56 Properties located in 27 states.
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Approximately 63% of the Properties are Single Tenant Properties 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 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 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.
Twelve of the Partnerships combined in the MLP filed for protection
under the provisions of Chapter 11 of the U.S. Bankruptcy Code during the period
from 1989 through 1997 following the filing of actions by secured creditors
seeking foreclosure. Ten 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. See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources." Ocala
has been operating as a Debtor-In-Possession since the filing date and intends
to file a Plan of Reorganization in the first quarter of 1998.
During 1997 East Meadow Associates ("East Meadow") filed for protection
under the provisions of the U.S. Bankruptcy Code. East Meadow owns and operates
the properties located in Chesapeake, Virginia and East Meadow, New York. See
"Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations - Liquidity and Capital Resources." East Meadow has been operating
as a Debtor-In-Possession since the filing date and filed a Plan of
Reorganization which was confirmed on December 1, 1997. The East Meadow, New
York property was transferred to the holder of the Third Party Underlying
Mortgage on February 6, 1998. The Chesapeake, Virginia property was retained.
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>
- --------------------------------------------------------------------------------
Total Average
Property Total Occupancy Minimum Rent
Location GLA Rate Rent PSF
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Ardmore, OK 216,890 97.5% $ 822,787 $ 3.89
Borger, TX 31,750 100.0% 95,642 3.01
Bowling Green, OH 135,187 96.3% 404,877 3.11
Cahokia, IL 241,327 87.2% 492,919 2.34
Chesapeake, VA 162,020 100.0% 402,725 2.49
Clackamas, OR 58,543 100.0% 227,808 3.89
Cottage Grove, MN 167,114 89.9% 993,942 6.61
Crescent City, CA 33,000 100.0% 220,000 6.67
Dunmore, PA 26,475 100.0% 78,696 2.97
East Greenbush, NY 123,420 100.0% 340,000 2.75
East Haven, CT 153,096 78.4% 568,300 4.74
East Meadow, NY 200,211 82.2% 2,423,665 14.72
Escanaba, MI 40,175 100.0% 114,715 2.86
Fairborn, OH 136,555 100.0% 520,415 3.81
Fairfield, IA 33,000 100.0% 37,286 1.13
Federal Way, WA 37,560 100.0% 147,900 3.94
Fond du Lac, WI 195,027 96.7% 752,543 3.99
Fort Wayne, IN 778,500 100.0% 607,726 0.78
Huntington, WV 142,055 95.8% 390,436 2.87
Huntsville, AL 104,000 100.0% 244,400 2.35
Huron, SD 38,400 100.0% 48,310 1.26
Hutchinson, MN 60,842 100.0% 229,800 3.78
Independence, MO 134,634 95.2% 362,334 2.83
International Falls, MN 60,842 100.0% 237,000 3.90
Kalamazoo, MI 120,958 100.0% 393,362 3.25
Lake Mary, FL 107,400 100.0% 923,640 8.60
La Mesa, CA 38,374 100.0% 202,950 5.29
Las Vegas, NV 38,750 100.0% 147,111 3.80
Lockport, IL 100,838 100.0% 324,577 3.22
Marquette, MI 254,793 95.1% 1,259,851 5.20
Maryville, MO 34,955 100.0% 120,856 3.46
Menominee, MI 64,588 100.0% 197,848 3.06
Minot, ND 72,897 100.0% 356,580 4.89
Newberry, SC 55,552 100.0% 194,083 3.49
New Hope, MN 115,492 100.0% 319,462 2.77
North Augusta, SC 109,134 95.3% 257,292 2.47
</TABLE>
8
<PAGE> 11
Schedule 1, Continued
DESCRIPTION OF PROPERTY AND TENANT INFORMATION
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Total Average
Property Total Occupancy Minimum Rent
Location GLA Rate Rent PSF
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
North Sarasota, FL 134,805 100.0% 534,155 3.96
Oak Lawn, IL 163,143 100.0% 856,567 5.25
Ocala, FL 103,964 100.0% 226,310 2.18
O' Fallon, MO 91,061 100.0% 348,065 3.82
Philadelphia, PA 128,006 100.0% 556,500 4.35
San Mateo, CA 84,704 100.0% 476,546 5.63
Sault Ste. Marie, MI 92,650 100.0% 232,361 2.51
Seven Hills, OH 121,677 100.0% 318,595 2.62
Sparks, NV 1,579,000 100.0% 1,696,878 1.07
Steger, IL 87,678 100.0% 261,013 2.98
Taylorville, IL 43,127 100.0% 372,029 8.63
Temple Terrace, FL 44,525 14.8% 42,350 6.42
Trenton, NJ 176,301 100.0% 628,422 3.56
Urbana, IL 55,531 100.0% 435,378 7.84
Waverly, OH 55,102 100.0% 271,933 4.94
Wahpeton, ND 49,320 100.0% 38,801 0.79
Washington, IA 35,600 100.0% 34,775 0.98
Wheelersburg, OH 125,958 71.7% 175,251 1.94
Wichita, KS 71,657 100.0% 225,000 3.14
Yazoo City, MS 79,996 100.0% 182,062 $ 2.28
</TABLE>
9
<PAGE> 12
Schedule 1, Continued
DESCRIPTION OF PROPERTY AND TENANT INFORMATION
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
MAJOR TENANT INFORMATION
Property Annual Lease
Location Name GLA Rent Expiration Options
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Ardmore, OK Kmart * 83,552 $185,604 28-Feb-05 10/5 YR
Beall 25,632 83,304 30-Apr-00 4/5 YR
Winn Dixie 22,720 83,155 31-Aug-00 4/5 YR
Borger, TX Safeway 31,750 95,642 31-Aug-98 7/5 YR
Bowling Green, OH Kmart 87,543 224,000 30-Nov-12 10/5 YR
Cahokia, IL Kmart * 102,433 179,257 30-Nov-01 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-00 3/3 YR
Chesapeake, VA Kmart 162,020 402,725 31-Oct-05 6/10 YR
Clackamas, OR Safeway (regional office) 58,543 227,808 14-Jun-03 6/5 YR
Cottage Grove, MN Rainbow Foods 70,130 606,624 11-Jul-16 6/5 YR
National Tea* 25,397 76,200 28-Feb-99 3/5 YR
Crescent City, CA Safeway 33,000 220,000 31-May-99 7/5 YR
Dunmore, PA Price Chopper 26,475 78,696 30-Nov-00 4/5 YR
East Greenbush, NY Kmart 95,810 256,000 31-Oct-98 10/5 YR
Price Chopper * 27,610 84,000 31-Oct-98 None
East Haven, CT V F Factory Outlet 78,000 230,100 31-May-02 2/5 YR
East Meadow, NY Modell's 30,600 420,750 31-May-15 1/21 YR
Escanaba, MI Kmart 40,175 114,715 30-Sep-01 10/5 YR
Fairborn, OH Kmart 84,180 268,000 31-Jul-00 10/5 YR
Kroger 30,975 106,120 31-Mar-01 4/5 YR
Fairfield, IA Pamida 33,000 37,286 30-Jun-99 4/5 YR
Federal Way, WA Safeway 37,560 147,900 31-Oct-98 7/5 YR
Fond Du Lac, WI Kmart 93,800 267,806 31-Oct-11 10/5 YR
Roundy's 54,213 153,659 31-Oct-99 4/5 YR
Fort Wayne, IN Kmart * 778,500 607,726 15-Nov-03 6/5 YR
(distribution center)
Huntington, WV Hill's 85,817 184,000 31-Jul-03 5/5 YR
Office Depot 25,900 98,420 28-Feb-05 4/5 YR
Huntsville, AL Kmart 104,000 244,400 30-Nov-00 4/5 YR
Huron, SD Pamida 38,400 48,310 30-Jun-99 4/5 YR
Hutchinson, MN Kmart 60,842 229,800 30-Sep-06 10/5 YR
Independence, MO Kmart 116,799 308,634 31-Mar-00 8/5 YR
International Falls, MN Kmart 60,842 237,000 31-Jul-06 10/5 YR
Kalamazoo, MI Kmart 84,180 248,770 29-Feb-00 10/5 YR
Ace Hardware 30,650 101,829 26-Jul-00 3/5 YR
Lake Mary, FL Builder's Square * 107,400 923,640 31-Dec-17 10/5 YR
La Mesa, CA Safeway 38,374 202,950 30-Oct-98 6/5 YR
Las Vegas, NV Safeway 38,750 147,111 31-Jul-98 7/5 YR
Lockport, IL Kmart 54,000 133,684 30-Jun-04 10/5 YR
Sterk's Super Foods, Inc. 35,170 121,603 31-May-06 3/5 YR
</TABLE>
10
<PAGE> 13
Schedule 1, Continued
DESCRIPTION OF PROPERTY AND TENANT INFORMATION
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
MAJOR TENANT INFORMATION
Property Annual Lease
Location Name GLA Rent Expiration Options
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Marquette, MI Kmart 85,480 218,657 30-Nov-99 10/5 YR
Younker's 44,068 92,543 01-Oct-01 1/10 YR
J.C. Penney 33,996 118,286 31-Aug-09 4/5 YR
Maryville, MO J.C. Penney 22,060 65,502 31-Oct-01 3/5 YR
Menominee, MI Kmart 64,588 197,848 30-Apr-00 10/5 YR
Minot, ND Kmart * 72,897 356,580 30-Oct-05 10/5 YR
Newberry, SC Kmart * 55,552 194,083 30-Jun-05 10/5 YR
New Hope, MN Kmart 115,492 319,462 30-Jun-02 9/5 YR
North Augusta, SC CVS 84,000 197,400 31-Oct-99 2/3 YR
North Sarasota, FL Kmart 84,180 280,440 30-Nov-03 10/5 YR
Uptons 40,000 141,040 20-Nov-03 5/5 YR
Oak Lawn, IL Kmart 104,568 447,150 31-May-03 10/5 YR
Jewel Foods 58,575 409,417 07-Dec-98 2/5 YR
Ocala, FL Kmart 103,964 226,310 30-Jun-02 9/5 YR
O' Fallon, MO Kmart 83,061 279,415 30-Nov-05 10/5 YR
Philadelphia, PA Kmart 91,033 388,500 31-Mar-05 10/5 YR
Acme 36,973 168,000 30-Jun-00 7/5 YR
San Mateo, CA Kmart 84,704 476,546 31-Jan-05 1/10 YR
Sault Ste. Marie, MI Kmart 92,650 232,361 30-Sep-16 10/5 YR
Seven Hills, OH Kmart 121,677 318,595 31-Aug-02 9/5 YR
Sparks, NV Kmart 1,579,000 1,696,878 12-Dec-06 7/5 YR
(distribution center)
Steger, IL Kmart 87,678 261,013 30-Oct-10 10/5 YR
Taylorville, IL Kroger 27,958 237,761 31-Mar-07 5/5 YR
CVS 10,069 81,319 31-Mar-07 5/5 YR
Temple Terrace, FL Grandy's* 6,600 42,350 31-Dec-04 2/5 YR
Trenton, NJ J.C. Penney 176,301 628,422 30-Apr-06 4/5 YR
Urbana, IL Jerry's IGA 43,667 370,648 31-Mar-07 5/5 YR
Waverly, OH Kroger 28,199 115,504 30-Nov-99 5/5 YR
CVS 10,069 47,828 30-Nov-99 4/5 YR
Wahpeton, ND Pamida 49,320 38,801 30-Jun-99 4/5 YR
Washington, IA Pamida 35,600 34,775 30-Jun-99 4/5 YR
Wheelersburg, OH Quality Farm & Fleet 53,844 80,000 30-Jun-98 4/5 YR
Kroger 25,168 69,212 31-Jul-99 4/5 YR
Wichita, KS Kmart * 71,657 225,000 30-Nov-02 10/5 YR
Yazoo City, MS Miss. Baptist Medical Ctr. 20,116 $47,273 31-May-00 2/5 YR
</TABLE>
* Tenant is vacant and continues to pay rent under the terms of its lease.
11
<PAGE> 14
Schedule 2
TENANT LEASE EXPIRATIONS
<TABLE>
<CAPTION>
/-------------1998-----------/ /------------1999------------/
- ------------------------------------------------- ----------------------------- -----------------------------
Total Number Number
Property Total Minimum of Minimum of Minimum
Location GLA Rent Tenants Rent S.F. Tenants Rent S.F.
- ------------------------------------------------- ----------------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ardmore, OK 216,890 $822,787 6 $49,659 6,795 10 $131,578 21,478
Borger, TX 31,750 95,642 1 95,642 31,750
Bowling Green, OH 135,187 404,877 3 180,877 42,644
Cahokia, IL 241,327 492,919 2 44,500 7,500 4 188,575 60,700
Chesapeake, VA 162,020 402,725
Clackamas, OR 58,543 227,808
Cottage Grove, MN 167,114 993,942 1 10,800 2,000 3 106,636 26,222
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 1 256,000 95,810
East Haven, CT 153,096 568,300 1 50,640 8,444 1 34,260 6,850
East Meadow, NY 200,211 2,423,665 7 119,150 6,408 8 387,620 23,714
Escanaba, MI 40,175 114,715
Fairborn, OH 136,555 520,415 1 25,500 3,420 2 43,125 7,500
Fairfield, IA 33,000 37,286 1 37,286 33,000
Federal Way, WA 37,560 147,900 1 147,900 37,560
Fond du Lac, WI 195,027 752,543 3 198,659 58,213
Fort Wayne, IN 778,500 607,726
Huntington, WV 142,055 390,436 2 6,273 1,113 3 39,623 9,275
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 1 9,900 1,800 1 8,400 1,200
International Falls, MN 60,842 237,000
Kalamazoo, MI 120,958 393,362 1 13,195 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 100,838 324,577 2 106,498 30,628
Marquette, MI 254,793 1,259,851 7 193,225 15,562 8 427,296 100,769
Maryville, MO 34,955 120,856 1 14,000 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 109,134 257,292 1 59,892 19,964 1 197,400 84,000
North Sarasota, FL 134,805 534,155 1 42,100 5,000
O' Fallon, MO 91,061 348,065 1 15,700 2,000
Oak Lawn, IL 163,143 856,567 1 412,153 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 92,650 232,361
Seven Hills, OH 121,677 318,595
Sparks, NV 1,579,000 1,696,878
Steger, IL 87,678 261,013
Taylorville, IL 43,127 372,029
Temple Terrace, FL 44,525 42,350
Trenton, NJ 176,301 628,422
Urbana, IL 55,531 435,378 2 15,260 2,450 1 5,250 1,750
Wahpeton, ND 49,320 38,801 1 38,801 49,320
Washington, IA 35,600 34,775 1 34,775 35,600
Waverly, OH 55,102 271,933 1 7,674 1,000 4 190,539 42,468
Wheelersburg, 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 1 12,750 3,000 2 34,050 12,600
- ------------------------------------------------- ----------------------------- -----------------------------
TOTALS 7,748,159 $23,374,828 45 2,085,915 476,009 64 2,701,868 724,235
- ------------------------------------------------- ----------------------------- -----------------------------
- ------------------------------------------------- ----------------------------- -----------------------------
ANNUAL % TO TOTAL 100.0% 100.0% 8.9% 6.1% 11.6% 9.3%
- ------------------------------------------------- ----------------------------- -----------------------------
- ------------------------ ----------------------------- -----------------------------
CUMULATIVE % 8.9% 6.1% 20.5% 15.5%
- ------------------------ ----------------------------- -----------------------------
</TABLE>
12
<PAGE> 15
Schedule 2, Continued
TENANT LEASE EXPIRATIONS
<TABLE>
<CAPTION>
/------------2000--------------/ /--------------2001-----------/
- ------------------------------------------------- ------------------------------- ------------------------------
Total Number Number
Property Total Minimum of Minimum of Minimum
Location GLA Rent Tenants Rent S.F. Tenants Rent S.F.
- ------------------------------------------------- ------------------------------- ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ardmore, OK 216,890 $822,787 7 $222,954 71,586 4 $87,067 12,410
Borger, TX 31,750 95,642
Bowling Green, OH 135,187 404,877
Cahokia, IL 241,327 492,919 3 59,175 37,000 2 190,057 104,233
Chesapeake, VA 162,020 402,725
Clackamas, OR 58,543 227,808
Cottage Grove, MN 167,114 993,942 3 165,317 20,223 3 237,074 96,156
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 153,096 568,300 2 78,000 11,300 1 23,750 2,500
East Meadow, NY 200,211 2,423,665 6 134,718 7,284 11 247,929 15,311
Escanaba, MI 40,175 114,715 1 114,715 40,175
Fairborn, OH 136,555 520,415 2 303,670 87,660 2 148,120 37,975
Fairfield, IA 33,000 37,286
Federal Way, WA 37,560 147,900
Fond du Lac, WI 195,027 752,543 3 88,822 8,090 1 22,781 3,375
Fort Wayne, IN 778,500 607,726
Huntington, WV 142,055 390,436 1 6,615 735
Huntsville, AL 104,000 244,400 2 244,400 104,000
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 120,958 393,362 3 380,167 119,054
Lake Mary, FL 107,400 923,640
La Mesa, CA 38,374 202,950
Las Vegas, NV 38,750 147,111
Lockport, IL 100,838 324,577 1 26,285 3,755
Marquette, MI 254,793 1,259,851 8 193,629 13,354 7 175,052 58,879
Maryville, MO 34,955 120,856 2 18,550 4,200 3 89,531 29,355
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 109,134 257,292
North Sarasota, FL 134,805 534,155 3 50,325 3,600
O' Fallon, MO 91,061 348,065 1 27,000 3,000
Oak Lawn, IL 163,143 856,567
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 92,650 232,361
Seven Hills, OH 121,677 318,595
Sparks, NV 1,579,000 1,696,878
Steger, IL 87,678 261,013
Taylorville, IL 43,127 372,029 1 18,375 2,100
Temple Terrace, FL 44,525 42,350
Trenton, NJ 176,301 628,422
Urbana, IL 55,531 435,378
Wahpeton, ND 49,320 38,801
Washington, IA 35,600 34,775
Waverly, OH 55,102 271,933 2 61,721 9,634 1 12,000 2,000
Wheelersburg, OH 125,958 175,251
Wichita, KS 71,657 225,000
Yazoo City, MS 79,996 182,062 3 95,873 40,116 1 21,300 9,600
- ------------------------------------------------- ------------------------------- ------------------------------
TOTALS 7,748,159 $23,374,828 53 2,851,448 784,926 42 1,476,702 425,769
- ------------------------------------------------- ------------------------------- ------------------------------
- ------------------------------------------------- ------------------------------- ------------------------------
ANNUAL % TO TOTAL 100.0% 100.0% 12.2% 10.1% 6.3% 5.5%
- ------------------------------------------------- ------------------------------- ------------------------------
- ------------------------------------------------- ------------------------------- ------------------------------
CUMULATIVE % 32.7% 25.6% 39.0% 31.1%
- ------------------------------------------------- ------------------------------- ------------------------------
</TABLE>
13
<PAGE> 16
Schedule 2, Continued
TENANT LEASE EXPIRATIONS
<TABLE>
<CAPTION>
/-----------2002------------/
- ------------------------------------------------- -----------------------------
Total Number
Property Total Minimum of Minimum
Location GLA Rent Tenants Rent S.F.
- ------------------------------------------------- -----------------------------
<S> <C> <C> <C> <C> <C>
Ardmore, OK 216,890 $822,787 3 $58,130 7,048
Borger, TX 31,750 95,642
Bowling Green, OH 135,187 404,877
Cahokia, IL 241,327 492,919 2 21,806 2,744
Chesapeake, VA 162,020 402,725
Clackamas, OR 58,543 227,808
Cottage Grove, MN 167,114 993,942 2 14,000 6,700
Crescent City, CA 33,000 220,000
Dunmore, PA 26,475 78,696
East Greenbush, NY 123,420 340,000
East Haven, CT 153,096 568,300 1 230,100 78,000
East Meadow, NY 200,211 2,423,665 7 381,940 24,909
Escanaba, MI 40,175 114,715
Fairborn, OH 136,555 520,415
Fairfield, IA 33,000 37,286
Federal Way, WA 37,560 147,900
Fond du Lac, WI 195,027 752,543 1 51,000 6,000
Fort Wayne, IN 778,500 607,726
Huntington, WV 142,055 390,436 2 22,755 5,415
Huntsville, AL 104,000 244,400
Huron, SD 38,400 48,310
Hutchinson, MN 60,842 229,800
Independence, MO 134,634 362,334
International Falls, MN 60,842 237,000
Kalamazoo, MI 120,958 393,362
Lake Mary, FL 107,400 923,640
La Mesa, CA 38,374 202,950
Las Vegas, NV 38,750 147,111
Lockport, IL 100,838 324,577
Marquette, MI 254,793 1,259,851 7 173,816 15,736
Maryville, MO 34,955 120,856
Menominee, MI 64,588 197,848
Minot, ND 72,897 356,580
New Hope, MN 115,492 319,462 1 319,462 115,492
Newberry, SC 55,552 194,083
North Augusta, SC 109,134 257,292
North Sarasota, FL 134,805 534,155
O' Fallon, MO 91,061 348,065 1 25,950 3,000
Oak Lawn, IL 163,143 856,567
Ocala, FL 103,964 226,310 1 226,310 103,964
Philadelphia, PA 128,006 556,500
San Mateo, CA 84,704 476,546
Sault Ste. Marie, MI 92,650 232,361
Seven Hills, OH 121,677 318,595 1 318,595 121,677
Sparks, NV 1,579,000 1,696,878
Steger, IL 87,678 261,013
Taylorville, IL 43,127 372,029 1 25,500 3,000
Temple Terrace, FL 44,525 42,350
Trenton, NJ 176,301 628,422
Urbana, IL 55,531 435,378 2 44,220 7,664
Wahpeton, ND 49,320 38,801
Washington, IA 35,600 34,775
Waverly, OH 55,102 271,933
Wheelersburg, OH 125,958 175,251
Wichita, KS 71,657 225,000 1 225,000 71,657
Yazoo City, MS 79,996 182,062 2 19,240 3,400
- ------------------------------------------------- -----------------------------
TOTALS 7,748,159 $23,374,828 35 2,157,824 576,406
- ------------------------------------------------- -----------------------------
- ------------------------------------------------- -----------------------------
ANNUAL % TO TOTAL 100.0% 100.0% 9.2% 7.4%
- ------------------------------------------------- -----------------------------
- ------------------------------------------------- -----------------------------
CUMULATIVE % 48.2% 38.6%
- ------------------------------------------------- -----------------------------
</TABLE>
14
<PAGE> 17
Schedule 3
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
THIRD PARTY UNDERLYING OBLIGATIONS
Principal
Property Mortgage Interest Balance at
Location Mortgagee (s) Type Rate Due Date 31-Dec-97
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Ardmore, OK Pacific Mutual Life Insurance Company 1st 9.50% 01-Aug-10 $5,474,531
Ainbinder Associates 2nd 9.00% 10-Aug-98 1,653,750
Ainbinder Associates 3rd 9.00% 15-Dec-88 50,000
Borger, TX First Oxford Corporation 1st 8.88% 01-Oct-98 297,631
Bowling Green, OH Aetna Life Insurance Company 1st 9.25% 01-Dec-99 2,259,524
Cahokia, IL Equitable Life Assurance Society 1st 8.63% 01-Dec-06 240,662
Equitable Life Assurance Society 1st 8.63% 01-Dec-06 1,565,517
Equitable Life Assurance Society 1st 9.25% 01-Dec-04 382,541
GE Capital Asset Management 1st 12.00% 01-Feb-00 24,188
Chesapeake, VA John Hancock Real Estate Finance Inc. 1st 8.00% 01-Jan-04 1,594,353
Lawrence Kadish 2nd 9.00% 01-Jan-06 492,849
Clackamas, OR First Oxford Corporation 1st 9.00% 01-Jul-03 1,371,713
Cottage Grove, MN IDS Life Insurance(c) 1st 8.75% 01-Nov-2016 5,874,038
Crescent City, CA First Oxford Corporation 1st 9.50% 01-May-99 658,625
Dunmore, PA NONE
East Greenbush, NY W & Z Properties Wrap 9.00% 01-Mar-13 2,873,217
East Haven, CT Aetna Life Insurance Company 1st 8.88% 01-Sep-05 2,137,348
Federal Deposit Insurance Corporation 2nd 8.53% 01-Aug-05 1,168,965
East Meadow, NY (b) General Electric Credit Corporation 1st (a) 9.73% 31-Jul-97 11,916,462
Escanaba, MI Developers Diversified 1st 9.75% 01-Nov-12 883,615
Fairborn, OH Aetna Life Insurance Company 1st 9.50% 01-Sep-04 1,635,031
Federal Deposit Insurance Corporation 2nd 10.35% 27-May-04 799,736
Fairfield, IA State of Wisconsin Investment Board 1st 9.13% 01-Jul-99 95,030
Federal Way, WA First Oxford Corporation 1st 9.50% 01-Oct-98 339,161
Fond du Lac, WI First Financial Bank 1st 8.75% 12-Sep-02 4,386,351
Fort Wayne, IN New York Life Insurance Company 1st 8.63% 15-Nov-03 2,814,103
Huntington, WV Suburban Capital Markets, Inc. 1st 9.13% 01-Feb-07 1,732,945
Huntsville, AL NONE
Huron, SD State of Wisconsin Investment Board 1st 9.13% 01-Jul-99 125,267
Hutchinson, MN Developers Diversified Wrap 8.75% 01-Jul-13 1,941,192
Independence, MO Southland Life Insurance Company 1st 9.50% 01-Feb-99 56,409
International Falls, MN Developers Diversified Wrap 8.75% 01-Aug-13 2,002,199
Kalamazoo, MI New York Life Insurance Company 1st 8.63% 10-Dec-00 1,137,086
Lake Mary, FL Kidder Peabody Mortgage Capital 1st 7.88% 01-Jan-16 8,854,733
La Mesa, CA First Oxford Corporation 1st 8.25% 01-Nov-98 752,918
Las Vegas, NV First Oxford Corporation 1st 8.88% 01-Sep-98 594,052
Lockport, IL LW - SP2, L. P. 1st 9.00% 31-Oct-01 1,527,415
Marquette, MI State of California Public Employees
Retirement System 1st 8.87% 01-Nov-99 452,625
Union Labor Life Insurance Company 1st 10.38% 01-Jul-98 6,348,559
First Union National Bank 2nd 9.00% 18-Oct-99 99,756
Maryville, MO NONE
</TABLE>
15
<PAGE> 18
Schedule 3, Continued
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
THIRD PARTY UNDERLYING OBLIGATIONS
Principal
Property Mortgage Interest Balance at
Location Mortgagee (s) Type Rate Due Date 31-Dec-97
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Menominee, MI State of California Public Employees
Retirement System 1st 8.18% 01-Apr-00 481,978
Minot, ND First American Bank and Trust Company 1st 9.00% 15-Jan-06 2,050,000
Newberry, SC Western National Life Insurance Company 1st 13.00% 01-Sep-08 1,081,026
New Hope, MN American National 1st 8.50% 01-Feb-00 475,800
North Augusta, SC Federal Deposit Insurance Corporation 1st 8.00% 01-Dec-97 254,493
North Sarasota, FL UNUM Life Insurance Company 1st 9.50% 01-May-09 2,524,270
Federal Deposit Insurance Corporation 2nd 8.53% 01-May-05 1,177,774
Oak Lawn, IL Board of Trustees NECA Pension
Benefit Trust Fund 1st 8.50% 30-Jun-03 3,085,677
Ocala, FL B & K Properties 1st 9.00% 01-Mar-13 1,737,179
O' Fallon, MO Board of Trustees NECA Pension
Benefit Trust Fund 1st 9.88% 01-Jul-11 1,892,690
Philadelphia, PA Equitable Life Assurance Society 1st 9.25% 01-Jun-10 2,919,057
San Mateo, CA Meritor Savings Bank 1st 8.25% 01-Feb-05 2,567,335
Sault Ste. Marie, MI EDC County of Chippewa, MI 1st 6.70% 01-Jan-07 1,080,000
Seven Hills, OH B & K Properties 1st 9.75% 01-Nov-12 2,081,533
Sparks, NV Prin & Company 1st 8.60% 12-Dec-06 6,473,690
Teachers Retirement of Texas 1st 9.75% 12-Dec-06 3,623,193
Bank of Nevada 1st 8.60% 12-Dec-06 289,939
Steger, IL LW - SP2, L. P. 1st 9.00% 31-Oct-01 1,616,576
Taylorville, IL Suburban Capital Markets, Inc. 1st 9.13% 01-Feb-07 1,494,488
Temple Terrace, FL Pinnacle Bank 1st 9.00% 01-May-97 1,629,885
Trenton, NJ Penn-Centennial Associates 1st 8.00% 01-May-06 4,610,008
Urbana, IL Boatman's National Bank of St. Louis 1st 11.75% 01-Mar-07 2,205,000
Waverly, OH Suburban Capital Markets, Inc. 1st 9.13% 01-Feb-07 1,494,488
Wahpeton, ND State of Wisconsin Investment Board 1st 9.13% 01-Jul-99 120,947
Washington, IA State of Wisconsin Investment Board 1st 9.13% 01-Jul-99 90,711
Wheelersburg, OH Equitable Life Assurance Society 1st 10.00% 31-Dec-97 1,169,274
Wichita, KS Transamerica Occidental Life
Insurance Company 1st 9.38% 01-Nov-94 1,068,761
Yazoo City, MS NONE
</TABLE>
(a) Interest rate variable. Disclosed interest rate
represents rate as of December 31, 1997
(b) Property was foreclosed February 1998
(c) Loan is callable on November 1, 2006
16
<PAGE> 19
Schedule 3, Continued
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
THIRD PARTY UNDERLYING OBLIGATIONS Ownership
Annual Balloon Interest
Property Mortgage Debt Due at Fee/
Location Mortgagee (s) Type Service Expiration Leasehold
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Ardmore, OK Pacific Mutual Life Insurance Company 1st $694,308 $1,275,803 Fee
Ainbinder Associates 2nd 151,692 1,653,750
Ainbinder Associates 3rd 4,586 50,000
Borger, TX First Oxford Corporation 1st 95,400 244,335 Fee
Bowling Green, OH Aetna Life Insurance Company 1st 316,160 2,035,753 Fee
Cahokia, IL Equitable Life Assurance Society 1st 38,539 0 Fee
Equitable Life Assurance Society 1st 250,702 0
Equitable Life Assurance Society 1st 79,680 0
GE Capital Asset Management 1st 19,820 0
Chesapeake, VA John Hancock Real Estate Finance Inc. 1st 334,776 0 Leasehold
Lawrence Kadish 2nd 44,356 0
Clackamas, OR First Oxford Corporation 1st 227,100 637,586 Fee
Cottage Grove, MN IDS Life Insurance 1st 636,272 105,663 Fee
Crescent City, CA First Oxford Corporation 1st 217,800 438,896 Fee
Dunmore, PA NONE Leasehold
East Greenbush, NY W & Z Properties Wrap 347,760 0 Fee
East Haven, CT Aetna Life Insurance Company 1st 381,258 0 Fee
Federal Deposit Insurance Corporation 2nd 116,716 988,641
East Meadow, NY (b) General Electric Credit Corporation 1st 1,186,880 11,916,462 Leasehold
Escanaba, MI Developers Diversified 1st 112,032 19,146 Fee
Fairborn, OH Aetna Life Insurance Company 1st 329,406 0 Leasehold
Federal Deposit Insurance Corporation 2nd 88,044 751,017
Fairfield, IA State of Wisconsin Investment Board 1st 36,733 34,941 Fee
Federal Way, WA First Oxford Corporation 1st 147,900 249,602 Fee
Fond du Lac, WI First Financial Bank 1st 466,599 3,900,911 Fee
Fort Wayne, IN New York Life Insurance Company 1st 605,724 0 Fee
Huntington, WV Suburban Capital Markets, Inc. 1st 177,949 1,454,799 Fee
Huntsville, AL NONE Leasehold
Huron, SD State of Wisconsin Investment Board 1st 48,420 46,059 Fee
Hutchinson, MN Developers Diversified Wrap 229,632 0 Fee
Independence, MO Southland Life Insurance Company 1st 50,382 0 Fee
International Falls, MN Developers Diversified Wrap 236,250 0 Fee
Kalamazoo, MI New York Life Insurance Company 1st 283,500 524,638 Leasehold
Lake Mary, FL Kidder Peabody Mortgage Capital 1st 919,440 0 Fee
La Mesa, CA First Oxford Corporation 1st 202,800 631,987 Fee
Las Vegas, NV First Oxford Corporation 1st 146,784 529,697 Fee
Lockport, IL LW - SP2, L. P. 1st 176,107 1,355,823 Fee
Marquette, MI State of California Public Employees
Retirement System 1st 177,600 180,107 Leasehold
Union Labor Life Insurance Company 1st 738,823 6,307,603
First Union National Bank 2nd 173,744 0
Maryville, MO NONE Leasehold
</TABLE>
17
<PAGE> 20
Schedule 3, Continued
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
THIRD PARTY UNDERLYING OBLIGATIONS Ownership
Annual Balloon Interest
Property Mortgage Debt Due at Fee/
Location Mortgagee(s) Type Service Expiration Leasehold
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Menominee, MI State of California Public Employees
Retirement System 1st 168,995 162,626 Leasehold
Minot, ND First American Bank and Trust Company 1st 347,366 0 Fee
Newberry, SC Western National Life Insurance Company 1st 187,154 0 Fee
New Hope, MN American National 1st 244,920 0 Fee
North Augusta, SC Federal Deposit Insurance Corporation 1st 154,020 254,493 Leasehold
North Sarasota, FL UNUM Life Insurance Company 1st 363,060 0 Fee
Federal Deposit Insurance Corporation 2nd 111,030 1,065,521
Oak Lawn, IL Board of Trustees NECA Pension
Benefit Trust Fund 1st 433,810 1,888,273 Leasehold
Ocala, FL B & K Properties 1st 217,350 0 Fee
O' Fallon, MO Board of Trustees NECA Pension
Benefit Trust Fund 1st 254,800 0 Fee
Philadelphia, PA Equitable Life Assurance Society 1st 395,220 0 Leasehold
San Mateo, CA Meritor Savings Bank 1st 474,046 0 Leasehold
Sault Ste. Marie, MI EDC County of Chippewa, MI 1st 131,320 0 Fee
Seven Hills, OH B & K Properties 1st 263,917 66,537 Leasehold
Sparks, NV Prin & Company 1st 1,040,954 0 Fee
Teachers Retirement of Texas 1st 609,303 0
Bank of Nevada 1st 46,621 0
Steger, IL LW - SP2, L. P. 1st 186,387 1,434,968 Fee
Taylorville, IL Suburban Capital Markets, Inc. 1st 153,404 1,254,615 Fee
Temple Terrace, FL Pinnacle Bank 1st 176,442 1,629,885 Fee
Trenton, NJ Penn-Centennial Associates 1st 624,000 1,600,475 Leasehold
Urbana, IL Boatman's National Bank of St. Louis 1st 380,488 0 Fee
Waverly, OH Suburban Capital Markets, Inc. 1st 153,404 1,254,615 Fee
Wahpeton, ND State of Wisconsin Investment Board 1st 46,751 44,470 Fee
Washington, IA State of Wisconsin Investment Board 1st 35,063 33,353 Fee
Wheelersburg, OH Equitable Life Assurance Society 1st 166,357 1,169,274 Fee
Wichita, KS Transamerica Occidental Life
Insurance Company 1st 178,392 1,068,761 Fee
Yazoo City, MS NONE Fee
</TABLE>
(a) Interest rate variable. Disclosed interest rate
represents rate as of December 31, 1997
(b) Property was foreclosed February 1998
(c) Loan is callable on November 1, 2006
18
<PAGE> 21
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, 1997, 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 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 the Properties after repayment of the Third Party
Underlying Obligations once the net Proceeds of Sale of the Properties exceed
the Threshold Amount. Additionally, the Limited Partners of the MLP receive 40%
of the Cash Flow from Operations, if any, in excess of Debt Service and any
Capital Improvements and Reserves as considered necessary. The remaining cash
flow, if any, is applied to the Wrap Mortgages 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 forgiveness of Wrap Mortgages and the
process of selling Properties, which are owned by Unaudited Partnerships, 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).
19
<PAGE> 22
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.
In 1998 the Pension Group agreed to the forgiveness of selected
wraparound mortgages remaining after the disposition of properties which were
owned by Unaudited Partnerships and were disposed prior to 1997. The total
wraparound mortgage forgiveness in 1998 will be approximately $95,426,000 with
related discounts of $57,256,000. The resulting gain of $38,170,000 will be
reported as an extraordinary item in the MLP's 1998 Statement of Operations.
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 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 (the "Audited
Partnerships") 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.
20
<PAGE> 23
ITEM 6. SELECTED FINANCIAL DATA
The following is selected financial data for the MLP for the five years
ended December 31, 1997 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.
<TABLE>
<CAPTION>
Year Ended December 31
(In Thousands, except per unit data)
1997 1996 1995 1994 1993
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
INCOME:
Rental Income $ 22,876 $ 23,984 $ 23,976 $ 24,486 $ 25,384
Other Charges to tenants 6,884 6,819 9,849 8,378 7,236
Interest income 136 129 299 443 534
Other income 97
--------- --------- --------- --------- ---------
TOTAL INCOME 29,993 30,932 34,124 33,307 33,154
--------- --------- --------- --------- ---------
OPERATING EXPENSES:
Interest expense 23,038 23,054 23,770 24,109 24,124
Other operating expenses 11,797 12,365 12,173 12,746 13,433
Depreciation and
amortization 8,865 8,839 8,885 9,082 9,595
--------- --------- --------- --------- ---------
Total Operating Expenses 43,700 44,258 44,828 45,937 47,152
--------- --------- --------- --------- ---------
OPERATING LOSS (13,707) (13,326) (10,704) (12,630) (13,998)
--------- --------- --------- --------- ---------
OTHER EXPENSES:
Net (loss) gain on
disposition of properties $ (866) 454 103 (15,763) (4,908)
Write down of rental
property (1,000) (1,100) -- -- --
--------- --------- --------- --------- ---------
LOSS BEFORE EXTRAORDINARY
ITEM (15,573) (13,972) (10,601) (28,393) (18,906)
--------- --------- --------- --------- ---------
EXTRAORDINARY ITEM:
Forgiveness of wraparound
mortgages payable on
dispositions and
foreclosures of
properties 373 493 12 12,680 5,006
--------- --------- --------- --------- ---------
NET LOSS $ (15,200) $ (13,479) $ (10,613) $ (15,713) $ (13,900)
========= ========= ========= ========= =========
PER UNIT DATA:
Operating Loss $ (137.07) $ (133.26) $ (107.04) $ (126.30) $ (139.98)
========= ========= ========= ========= =========
Net Loss $ (152.00) $ (134.79) $ (106.13) $ (157.13) $ (139.00)
========= ========= ========= ========= =========
ASSETS:
Rental Property - Net $ 151,286 $ 161,874 $ 168,945 $ 182,276 $ 194,735
Other Assets 4,199 6,423 7,294 9,776 12,039
--------- --------- --------- --------- ---------
TOTAL ASSETS $ 155,485 $ 168,297 $ 176,239 $ 192,052 $ 206,774
========= ========= ========= ========= =========
LIABILITIES AND PARTNERS' (DEFICIT)
EQUITY:
Wraparound Mortgages
payable less
unamortized discount(1) $ 198,662 $ 196,928 $ 193,835 $ 200,025 $ 199,136
Other Liabilities 10,394 9,740 7,296 6,306 6,204
--------- --------- --------- --------- ---------
Total Liabilities 209,056 206,668 201,131 206,331 205,340
Partners' (Deficit)
Equity (53,571) (38,371) (24,892) (14,279) 1,434
--------- --------- --------- --------- ---------
TOTAL LIABILITIES AND
PARTNERS'(DEFICIT)
EQUITY $ 155,485 $ 168,297 $ 176,239 $ 192,052 $ 206,774
========= ========= ========= ========= =========
</TABLE>
- ------------------------------
(1) Unamortized discount is based on imputed interest at 12%.
21
<PAGE> 24
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, 1997, the Third Party Underlying Obligations were
current for all the Properties except for the properties located in Ardmore,
Oklahoma, East Meadow, New York, North Augusta, South Carolina, Temple Terrace,
Florida, Wheelersburg, Ohio and Wichita, Kansas. See "D. Loan Obligations" below
for further discussion on the North Augusta, Wheelersburg and Wichita
properties. 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 seven years.
At December 31, 1997, the mortgage loans on the East Meadow and Temple
Terrace properties were delinquent. During 1996 the lender declared a default
and instituted a foreclosure action on the Temple Terrace property. 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." During 1997 the lender declared a default and instituted a
foreclosure action on the East Meadow property. See "Item 3. Legal Proceedings."
The mortgage loan on the Wheelersburg property matured in November 1995. During
1997 the MLP negotiated an extension of the mortgage loan to December 31, 1997.
The extension included a forbearance of principal payments due on the loan for
the twelve month period ended December 31, 1997. The MLP is negotiating with the
lender for an additional extension.
As of December 31, 1997, the net book value and net Wrap Mortgage
balance for these Properties were as follows:
<TABLE>
<CAPTION>
Property Net Book Value Net Wrap Mortgage Balance
- -------- -------------- -------------------------
<S> <C> <C>
Ardmore $7,571,000 $6,977,000
East Meadow $5,323,000 $8,587,000
Temple Terrace $1,827,000 $1,797,000
Wheelersburg $1,433,000 $1,222,000
</TABLE>
C. WORKING CAPITAL
As of December 31, 1997, the MLP has a working capital deficiency of
approximately $116,000 excluding amounts due to the General Partner and the
Pension Group of $1,337,000 and $1,954,000, respectively. The MLP's operating
budget for 1998 projects a cash deficit of approximately $35,000. 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
22
<PAGE> 25
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, 1997, the General Partner has
advanced approximately $1,337,000 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, 1997 the Third Party Underlying Obligations for the
North Augusta, South Carolina, Wheelersburg, Ohio, and Wichita, Kansas
properties have matured and had balloon payments due. The Third Party Underlying
Obligations that have matured relating to these properties are as follows: North
Augusta - $254,000; Wheelersburg - $1,169,000; and Wichita - $1,069,000.
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.
With respect to the year ending December 31, 1998, Third Party
Underlying Obligations for the Ardmore ($1,654,000), Borger ($244,000), Federal
Way ($250,000), La Mesa ($632,000), Las Vegas ($530,000) and Marquette
($6,307,000) properties are scheduled to mature.
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 20
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, 1997,
the MLP was obligated for approximately $105,000 of capital commitments which
were primarily for roof repair and replacement. The 1998 operating budget for
the Properties provides for approximately $939,000 in capital repair reserves.
During 1997, the MLP completed renovations to the East Haven 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 $740,000.
During 1997, 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. At December 31, 1997, 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
23
<PAGE> 26
deed-in-lieu of foreclosure with respect to the East Haven property to Jefferson
Bank (the "East Haven Security").
At December 31, 1997, the E & H Line of Credit permitted E & H to
borrow up to $750,000 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 on November 30, 1998. E & H has commenced negotiations
to extend and modify the E & H Line of Credit. The E & H Line of Credit has been
substantially 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, 1997, there were no borrowings under the MLP Line of
Credit. However, currently $150,000 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 a third property owned by
a limited partnership owned by directors and executives of EBL&S, Inc. 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 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, 1997, $593,000 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, 1997, approximately $20,000 was provided to tenants in rental
abatements.
24
<PAGE> 27
II. RESULTS OF OPERATIONS
A. PROPERTY DISPOSITIONS DURING FISCAL 1997
In July 1997, the Maplewood, Missouri property was sold. Proceeds were
used to pay off the Third Party Underlying Obligation and pay down the Wrap
Mortgage. The sale of this property may result in tax liability to those who had
been Limited Partners in the Partnership which owned this property. See "Item 5.
Market Price for the Registrant's Common Equity and Related Stockholder Matters
- - Certain Income Tax Consequences - Recognition of Gain."
B. FULL FISCAL YEARS
Over the five year period ended December 31, 1997, the MLP disposed of
11 Properties. The number of Properties owned and disposed of by year are as
follows:
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Beginning of year 57 60 62 65 67
Properties disposed 1 3 2 3 2
-- -- -- -- --
End of year 56 57 60 62 65
== == == == ==
</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, 1997, 1996, 1995, 1994 and 1993, excluding the
operating results for 11 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>
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
INCOME:
Rental Income $ 21,952 $ 22,797 $ 21,935 $ 22,409 $ 22,189
Other Charges
to tenant 6,785 6,719 9,505 7,690 6,366
Interest income 136 120 294 437 534
Other income 97 -- -- -- --
-------- -------- -------- -------- --------
TOTAL INCOME 28,970 29,636 31,734 30,536 29,089
-------- -------- -------- -------- --------
OPERATING EXPENSES:
Interest expense 17,975 17,972 17,963 18,058 18,152
Other operating
expenses 11,961 12,370 11,670 11,789 11,759
Depreciation and
amortization 8,601 8,413 8,286 8,223 8,192
-------- -------- -------- -------- --------
TOTAL OPERATING
EXPENSES 38,537 38,755 37,919 38,070 38,103
-------- -------- -------- -------- --------
OPERATING LOSS $ (9,567) $ (9,119) $ (6,185) $ (7,534) $ (9,014)
======== ======== ======== ======== ========
</TABLE>
The fluctuations in "Rental Income" between years has been modest and
did not exceed 3.9% 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 1995, 1996 and 1997, there was a $189,000
decrease, a $369,000 increase and a $294,000 decrease in percentage rental
income, respectively. In 1995, 1996 and 1997 reductions in rental income were
caused by reductions of unbilled rent receivable of $286,000, $274,000 and
$558,000, respectively. In 1996 minimum rent increased by $824,000.
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 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 1993 through 1996 were due to a decrease during this period in the
"Advances to the Pension Group."
25
<PAGE> 28
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 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. Between 1996 and 1997 a decrease of $351,000 was due to a decrease in
general and administrative expense and was primarily due to decreased legal and
other professional fees.
Capital Improvements for the years ended December 31, 1996 and 1997
were $5,126,000 and $1,618,000, respectively. Consequently, there are moderate
increases in depreciation and amortization for 1996 and 1997.
III. YEAR 2000
The MLP relies on the computer system of the Property Manager for its
management information systems. The Property Manager is in the process of
determining its computer needs with respect to the year 2000 millennium change.
The modification of this system is planned to be completed and tested in the
first half of 1999.
The failure of the computer systems of the Property Manager arising
from year 2000 problems could have a significant impact on the MLP's ability to
conduct its business.
IV. 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, 1997, the aggregate indebtedness of the MLP pursuant to the Wrap
Mortgages was approximately $447 million, of which approximately $126 million
constituted indebtedness under the Third Party Underlying Obligations and $83
million constituted indebtedness under the Second Mortgages. See "Item 5. IV.
Certain Income Tax Considerations - A. Recognition of Gain." As of December 31,
1997, the aggregate historical cost of the Properties securing the indebtedness
of the MLP mortgages was approximately $274 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.
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, the Wrap Mortgages and Second Mortgages have been restructured.
26
<PAGE> 29
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, 1997 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 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 previous
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.
27
<PAGE> 30
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 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.
28
<PAGE> 31
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 54, 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 52, 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 $58,000, $53,000 and $58,000 for the years ended December 31, 1997,
1996 and 1995, respectively. See "Item 13. Certain Relationships and Related
Transactions - I. Compensation and Fees and II. Property Management by
Affiliate."
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>
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.
29
<PAGE> 32
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 or
Management, Inc. renewed leases, an amount
equal to the fees
customarily charged in
the geographic area of
leased property. Actual
amounts will depend upon
future operations and are
not now determinable.
General Partner General Partner's share The General
Of Profit and Losses Partner will be
allocated 1% of the
profits and losses
from MLP
operations.
General Partner Reimbursement of Expenses 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 price of
Properties and are
not now
determinable.
- --------
(1) 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 MLP and obtained from entities which are not affiliates of
the General Partner. In addition, the General Partner is reimbursed for
administrative services performed for the MLP, provided that such services are
necessary for the prudent operation of the 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, depreciation, utilities, or
capital equipment in the building in which the MLP maintains offices and other
overhead costs.
30
<PAGE> 33
II. PROPERTY MANAGEMENT BY AFFILIATE
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 $1,292,000 was earned by the Property
Manager for management fees, and an aggregate of approximately $108,000 was
earned by the Property Manager for leasing fees for the fiscal year 1997.
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 Sales of the Properties. Because NPA or its affiliates
hold the Second Mortgages on the Properties which will be repaid from the
Proceeds of Sales 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
31
<PAGE> 34
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 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
None, except as described above.
32
<PAGE> 35
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, 1997 and 1996... F-2
Combined Statements of Operations and Changes
in Partners' Deficit for the years ended
December 31, 1997, 1996 and 1995........................ F-3
Combined Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995........................ F-4
Notes to Combined Financial Statements.................... F-6
Attachments
1 Properties Effectively Owned by NPAMLP at
December 31, 1997.................................... 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 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"),
33
<PAGE> 36
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
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)
34
<PAGE> 37
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 25, 1998
--------------------
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 25, 1998
--------------
/s/Howard N. Brownstein Director of EBL&S, Inc. March 25, 1998
- ----------------------- --------------
Howard N. Brownstein
</TABLE>
35
<PAGE> 38
[KPMG PEAT MARWICK LLP Letterhead]
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, 1997 and 1996, and the results of its operations and its cash flows
for each of the years in the three-year period ended December 31, 1997, 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 24, 1998
F-1
<PAGE> 39
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
(A LIMITED PARTNERSHIP)
Combined Balance Sheets
December 31, 1997 and 1996
(in thousands)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
ASSETS 1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Rental property, at cost:
Land $ 17,970 18,663
Buildings 255,764 258,922
- -------------------------------------------------------------------------------
273,734 277,585
Less: accumulated depreciation 122,448 115,711
- -------------------------------------------------------------------------------
Rental property, net 151,286 161,874
- -------------------------------------------------------------------------------
Cash and cash equivalents 1,068 867
Restricted cash 1,412 2,030
Tenant accounts receivable, net of allowance of
$30 and $20 for 1997 and 1996, respectively 53 853
Unbilled rent receivable 882 1,440
Tenant leasing costs 117 323
Accounts receivable and other assets 667 910
- -------------------------------------------------------------------------------
Total assets $155,485 168,297
- -------------------------------------------------------------------------------
LIABILITIES AND PARTNERS' DEFICIT
- -------------------------------------------------------------------------------
Wraparound mortgages payable $446,712 460,856
Less unamortized discount based on imputed
interest rate of 12% 248,050 263,928
- -------------------------------------------------------------------------------
Wraparound mortgages payable less
unamortized discount 198,662 196,928
Due to Pension Group 1,954 1,170
Other borrowings 593 235
Deferred revenue 396 248
Accounts payable and other liabilities 2,361 2,997
Finance lease obligation 2,650 2,650
Deposit on sale of property 2,440 2,440
- -------------------------------------------------------------------------------
Total liabilities 209,056 206,668
Partners' deficit (53,571) (38,371)
- -------------------------------------------------------------------------------
Total liabilities and partners' deficit $155,485 168,297
- -------------------------------------------------------------------------------
</TABLE>
See accompanying notes to combined financial statements.
F-2
<PAGE> 40
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
(A LIMITED PARTNERSHIP)
Combined Statements of Operations and Changes in Partners' Deficit
December 31, 1997, 1996, and 1995
(in thousands, except per unit data)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
1997 1996 1995
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Income:
Rental income $ 22,876 23,984 23,976
Other charges to tenants 6,884 6,819 9,849
Interest income 136 129 299
Other income 97 -- --
- ----------------------------------------------------------------------------------
Total income 29,993 30,932 34,124
- ----------------------------------------------------------------------------------
Operating expenses:
Interest expense 23,038 23,054 23,770
Real estate taxes 6,468 6,457 7,023
Management fees 1,292 1,413 1,393
Common area maintenance expenses 2,389 2,568 2,254
Ground rent 627 603 519
Repairs and maintenance 583 535 463
General and administrative 438 789 521
Depreciation and amortization 8,865 8,839 8,885
- ----------------------------------------------------------------------------------
Total operating expenses 43,700 44,258 44,828
- ----------------------------------------------------------------------------------
Operating loss (13,707) (13,326) (10,704)
Other (expense) income:
Net (loss) gain on disposition of properties (866) 454 103
Write down of rental property (1,000) (1,100) --
- ----------------------------------------------------------------------------------
Loss before extraordinary item (15,573) (13,972) (10,601)
Extraordinary item:
Forgiveness of wraparound mortgages
payable on dispositions and of properties 373 493 (12)
- ----------------------------------------------------------------------------------
Net loss (15,200) (13,479) (10,613)
Partners' deficit:
Beginning of year (38,371) (24,892) (14,279)
- ----------------------------------------------------------------------------------
End of year $(53,571) (38,371) (24,892)
- ----------------------------------------------------------------------------------
Net loss per unit $(152.00) (134.79) (106.13)
- ----------------------------------------------------------------------------------
</TABLE>
See accompanying notes to combined financial statements.
F-3
<PAGE> 41
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
(A LIMITED PARTNERSHIP)
Combined Statements of Cash Flows
December 31, 1997, 1996, and 1995
(in thousands)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
1997 1996 1995
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(15,200) (13,479) (10,613)
Adjustments to reconcile net
loss to net cash provided by
operating activities:
Depreciation 8,604 8,606 8,707
Amortization of discount 11,071 8,326 8,216
Net loss (gain) on disposition of
properties including forgiveness
of wraparound mortgages payable 493 (947) (12)
Write down of rental property 1,000 1,100 --
Decrease (increase) in tenant
accounts receivable, net 800 (171) (450)
Decrease in unbilled
rent receivable, net 558 274 286
Decrease (increase) in tenant leasing costs 206 22 (47)
Decrease (increase) in accounts
receivable and other assets 243 (456) (97)
(Decrease) increase in accounts payable
and other liabilities (636) 791 300
Increase in deferred revenue 148 248 --
- -----------------------------------------------------------------------------------------
Net cash provided by operating activities 7,287 4,314 6,290
- -----------------------------------------------------------------------------------------
Cash flows from financing activities:
Payments on wraparound mortgages (9,617) (9,257) (9,353)
Repayment of advances to the Pension Group -- 2,199 2,305
Increase in due to Pension Group 784 1,170 --
Proceeds from other borrowings 358 235 --
Proceeds from additional debt 653 4,518 --
- -----------------------------------------------------------------------------------------
Net cash used in financing activities (7,822) (1,135) (7,048)
- -----------------------------------------------------------------------------------------
</TABLE>
F-4
<PAGE> 42
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
(A LIMITED PARTNERSHIP)
Combined Statements of Cash Flows, Continued
(in thousands)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
1997 1996 1995
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from investing activities:
Disposition of properties $ 1,736 2,944 --
Improvements to rental property (1,618) (5,126) (417)
Increase in deposit on sale of property -- -- 690
- --------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities 118 (2,182) 273
- --------------------------------------------------------------------------------------
(Decrease) increase in cash and cash equivalents (417) 997 (485)
Cash and cash equivalents:
Beginning of year 2,897 1,900 2,385
- --------------------------------------------------------------------------------------
End of year $ 2,480 2,897 1,900
- --------------------------------------------------------------------------------------
Supplemental disclosures of cash flow information:
Cash paid during the year for interest $ 11,661 14,443 15,310
- --------------------------------------------------------------------------------------
Supplemental disclosure of noncash activities:
Write-off of unbilled rent receivable $ -- -- 44
Decrease in wraparound mortgages from
nonmonetary exchanges -- -- (5,053)
Reduction in wraparound mortgages from
forgiveness of debt, net of related discount 373 493 --
Decrease in rental property from
nonmonetary exchanges -- -- (5,053)
- --------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to combined financial statements.
F-5
<PAGE> 43
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
(A LIMITED PARTNERSHIP)
Notes to Combined Financial Statements
December 31, 1997 and 1996
(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 9).
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 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.
(Continued)
F-6
<PAGE> 44
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, 1997, the general partner and NPAMLP sold
properties that generated approximately $34,935 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> 45
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
(A LIMITED PARTNERSHIP)
Notes to Combined Financial Statements
(dollars in thousands)
- --------------------------------------------------------------------------------
(1) CONTINUED
NPAMLP has a working capital deficiency as of December 31, 1997 of
approximated $116, excluding amounts due to the general partner and the
Pension Group of $1,337 and $1,954, 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 $1,068 of unrestricted cash and $1,407
available under line of credit agreements at December 31, 1997 to meet
its short term obligations. Through December 31, 1997, 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, 1997, the general
partner has advanced approximately $1,337 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 are reported at the lower of the carrying amount
or the fair value less costs to sell.
(Continued)
F-8
<PAGE> 46
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 in
1996. This write-down from the initial adoption of SFAS No. 121
resulted in a charge to income of $1,100 in 1996 which is included in
the combined statements of operations as write-down of rental property
in 1996. In 1997 the estimated undiscounted cash flows from the Las
Vegas, Nevada and East Greenbush, New York properties indicated that a
write-down to fair market value of $1,000 was required in 1997 which is
included in the combined statements of operations as write-down of
rental property. The estimated fair values of these properties were
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 capital improvements 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> 47
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.
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, 1997.
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. Significant estimates have
been made by management with respect to the recoverability of the
carrying amounts of rental property. Actual results could differ from
these estimates.
(3) 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, 1997) and expires on June 24, 1998. The line is
secured by a mortgage lien on the Sault Ste. Marie, Michigan property
(with a net book value of rental property of $1,767 and a net
wraparound mortgage payable of $1,848 at December 31, 1997) and the Oak
Lawn, Illinois property (with a net book value of rental property of
$4,259 and a net wraparound mortgage payable of $5,609 at December 31,
1997). As of December 31, 1997 and 1996, NPAMLP owed $593 and $235,
respectively, under the line of credit. The maximum amount outstanding
under the line of credit during the twelve months ended December 31,
1997 and 1996, was $593 and $235, respectively.
(Continued)
F-10
<PAGE> 48
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
(A LIMITED PARTNERSHIP)
Notes to Combined Financial Statements
(dollars in thousands)
- --------------------------------------------------------------------------------
(4) TENANT LEASES
At December 31, 1997, NPAMLP effectively owns and operates 56
properties (57 at December 31, 1996), as listed in Attachment 1, that
are comprised principally of shopping centers and free standing, single
tenant retail stores with approximately 250 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 19 years.
Future minimum lease rentals to be received under noncancelable leases
are approximately:
<TABLE>
<S> <C>
1998 $18,646
1999 16,433
2000 13,991
2001 12,392
2002 11,039
Thereafter 41,598
--------------------------------------------------
</TABLE>
Rental income includes approximately $856, $1,150, and $781 related to
percentage rents billed for the years ended December 31, 1997, 1996,
and 1995, respectively.
(5) 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.
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.
(Continued)
F-11
<PAGE> 49
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
(A LIMITED PARTNERSHIP)
Notes to Combined Financial Statements
(dollars in thousands)
- --------------------------------------------------------------------------------
(5) CONTINUED
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, 1997 are approximately:
<TABLE>
<S> <C>
1998 $ 718
1999 718
2000 676
2001 663
2002 663
Thereafter 3,264
-------------------------------------------------
</TABLE>
Total rental expense for ground leases for the years ended December 31,
1997, 1996, and 1995 was approximately $627, $603, and $519,
respectively. In addition, $255 was recorded each year as interest
expense.
(6) 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 9), 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.
To date, the Pension Group has forgiven the wraparound mortgages
remaining after the disposition of properties which were owned by
Audited Partnerships. In 1997, the Pension Group agreed to forgive
certain wraparound mortgages remaining after the disposition of
properties which were owned by Unaudited Partnerships. During 1997 and
1996 wraparound mortgage obligations of approximately $5,180 and $2,027
with related discounts of $4,807 and $1,534 were forgiven in connection
with the sale of the Maplewood, Missouri, and El Paso, Texas
properties, resulting in extraordinary gains of $373 and $493,
respectively.
(Continued)
F-12
<PAGE> 50
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
(A LIMITED PARTNERSHIP)
Notes to Combined Financial Statements
(dollars in thousands)
- --------------------------------------------------------------------------------
(6) CONTINUED
The wraparound mortgages have maturity dates varying from August 2009
to December 2013 and stated interest rates varying from 0% to 10%.
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 $9,617 during the year ended
December 31, 1998. 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.
In March 1998 the Pension Group agreed to the forgiveness of $95,426 of
wraparound mortgage obligations with related discounts of $57,256. The
resulting gain of $38,170 will be reported as an extraordinary item in
NPAMLP's 1998 statement of operations.
At December 31, 1997, $1,954 was due to the Pension Group representing
past due payments on the wraparound mortgages. In connection with the
March 1998 wraparound mortgage forgiveness, the Pension Group also
forgave this obligation. This resulting gain will also be reported as
an extraordinary item in NPAMLP's 1998 statement of operations.
Wraparound mortgage principal payment requirements for the next five
years, as adjusted for the forgiveness in March 1998 of certain
obligations, are approximately:
<TABLE>
<S> <C>
1998 $7,079
1999 7,586
2000 9,071
2001 8,118
2002 8,613
-------------------------------------------------
</TABLE>
(7) EXCHANGE OF PROPERTIES
During the year ended December 31, 1995, NPAMLP completed a nonmonetary
transaction, exchanging rental property for similar rental property. 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.
(Continued)
F-13
<PAGE> 51
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
(A LIMITED PARTNERSHIP)
Notes to Combined Financial Statements
(dollars in thousands)
- --------------------------------------------------------------------------------
(8) 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 13, 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. Estimated losses arising from these transactions have already
been recognized by NPAMLP. Any gain arising from these transactions
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, 1997.
(9) 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.
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>
1997 1996 1995
------------------------------------------------------
<S> <C> <C> <C>
Property management fees $1,292 1,413 1,393
Leasing commissions 108 263 113
Administrative services 58 53 58
------------------------------------------------------
$1,458 1,729 1,564
------------------------------------------------------
</TABLE>
(Continued)
F-14
<PAGE> 52
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
(A LIMITED PARTNERSHIP)
Notes to Combined Financial Statements
(dollars in thousands)
- --------------------------------------------------------------------------------
(9) CONTINUED
Included in accounts payable and other liabilities at December 31, 1997
and 1996 was approximately $1,337 and $1,454, 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, 1997 and 1996.
NPA holds purchase money mortgages on certain properties of NPAMLP. The
purchase money mortgages aggregated approximately $83,156 at December
31, 1997 and 1996.
(10) 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.
(Continued)
F-15
<PAGE> 53
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
(A LIMITED PARTNERSHIP)
Notes to Combined Financial Statements
(dollars in thousands)
- --------------------------------------------------------------------------------
(10) CONTINUED
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, 1997 and 1996, borrowings under the E&H Properties, Inc. line were
$150 and $1,197, respectively, however, there were no advances from E&H
Properties, Inc. to NPAMLP.
In 1996 Ocala Realty Associates (Ocala), a wholly-owned partnership,
filed for 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 1998. In 1997 NPAMLP
recognized a loss of $600 on the write-down of East Greenbush under
SFAS 121 (note 2). Management does not believe that the ultimate
settlement will result in any further loss to NPAMLP.
In 1997 East Meadow Associates (East Meadow), a wholly-owned
partnership, filed for protection under the provisions of Chapter 11 of
the U.S. Bankruptcy Code. East Meadow owns and operates the properties
located in Chesapeake, Virginia, and East Meadow, New York. East Meadow
has been operating as a Debtor-In-Possession since the filing date and
filed a Plan of Reorganization which was confirmed on December 1, 1997.
The East Meadow, New York property was transferred to the holder of the
third-party underlying mortgage on February 6, 1998. The Chesapeake,
Virginia property was retained. The transfer of the East Meadow
property in 1998 and release of the related mortgage obligation is
expected to result in a gain in excess of $3,000 in 1998.
Certain scheduled payments on third party underlying obligations
discussed in note 1 which are secured by mortgages have not been made
on the Ardmore, Oklahoma, North Augusta, South Carolina, Temple
Terrace, Florida, Wheelersburg, Ohio, and Wichita, Kansas properties at
December 31, 1997. 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. The net book value of rental property for Ardmore,
Oklahoma; Temple Terrace, Florida; and Wheelersburg, Ohio exceeds the
carrying value of the related wraparound mortgages payable by
approximately $905 at December 31, 1997, which could result in a loss
to NPAMLP in the event of foreclosure.
(Continued)
F-16
<PAGE> 54
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
(A LIMITED PARTNERSHIP)
Notes to Combined Financial Statements
(dollars in thousands)
- --------------------------------------------------------------------------------
(11) MAJOR TENANTS
During the years ended December 31, 1997, 1996, and 1995, one tenant
accounted for approximately 50%, 52%, and 51% of the rental income of
NPAMLP, respectively. Seven of the stores occupied by this tenant had
been vacated as of December 31, 1997; however, the tenant has continued
to make rental payments under the terms of their leases while they
attempt to market the space to other users. The tenant remains
obligated under the terms of its leases at these seven properties for
terms ranging from four to nineteen years. In the past years, the
tenant experienced a downgrading of its credit rating as a result of
its financial performance.
(12) PARTNERS' DEFICIT
Following is a summary of the combined changes in partners' deficit for
the three years ended December 31, 1997 (in thousands except unit
data):
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Units Partners' deficit
------------------------------ -----------------------------------
General Limited General Limited
partners partners partners partners
(1%) (99%) Total (1%) (99%) Total
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
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)
Net loss -- -- -- (152) (15,048) (15,200)
- ---------------------------------------------------------------------------------------------
December 31, 1997 1,000 99,000 100,000 $(536) (53,035) (53,571)
- ---------------------------------------------------------------------------------------------
</TABLE>
F-17
<PAGE> 55
ATTACHMENT 1
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
(A LIMITED PARTNERSHIP)
Properties Effectively Owned by NPAMLP at December 31, 1997 (1)
- --------------------------------------------------------------------------
Property
location
- --------------------------------------------------------------------------
Ardmore, OK Huntsville, AL* Ocala, FL
Borger, TX Huron, SD O'Fallon, MO
Bowling Green, OH Hutchinson, MN Philadelphia, PA*+
Cahokia, IL Independence, MO San Mateo, CA
Chesapeake, VA*+ International Falls, MN Sault Ste. Marie, MI
Clackamas, OR*** Kalamazoo, MI*+ Seven Hills, OH*+
Cottage Grove, MN La Mesa, CA*** Sparks, NV***
Crescent City, CA Lake Mary, FL Steger, IL
Dunmore, PA* Las Vegas, NV*** Taylorville, IL
East Greenbush, NY Lockport, IL Temple Terrace, FL
East Haven, CT Marquette, MI* Trenton, NJ*
East Meadow, NY* Maryville, MO* Urbana, IL
Escanaba, MI Menominee, MI* Wahpeton, ND
Fairborn, OH*+ Minot, ND Washington, IA
Fairfield, IA New Hope, MN Waverly, OH
Federal Way, WA Newberry, SC Wheelersburg, OH
Fond du Lac, WI North Augusta, SC* Wichita, KS
Fort Wayne, IN*** North Sarasota, FL Yazoo City, MS
Huntington, WV Oak Lawn, IL*
* Properties with ground leases (note 5).
*** Property subject to sales contracts (note 8).
+ Land sales (note 5).
(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> 56
SCHEDULE II
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
(A LIMITED PARTNERSHIP)
Combined Valuation and Qualifying Accounts
December 31, 1997, 1996, and 1995
(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, 1995 $20 - - 20
Year ended December 31, 1996 20 - - 20
Year ended December 31, 1997 20 10 - 30
- --------------------------------------------------------------------------------
</TABLE>
F-19
<PAGE> 57
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP SCHEDULE III
(A LIMITED PARTNERSHIP)
Combined Real Estate and Accumulated Depreciation Schedule
December 31, 1997, 1996 and 1995
(in thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Cost capitalized
(written off)
subsequent
Initial cost to acquisition
------------------- -------------------
Buildings and Buildings and Buildings and Accumulated Date of
Property location Encumbrances Land improvements Land improvements Land improvements Total depreciation acquisition
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ardmore, OK $6,977 750 14,989 - (995) 750 13,994 14,744 7,173 09/83
Bowling Green, OH 3,932 496 5,270 - 13 496 5,283 5,779 2,975 02/81
Borger, TX 664 106 1,143 - - 106 1,143 1,249 543 10/83
Philadelphia, PA 3,550 529 5,859 - 168 529 6,027 6,556 3,453 08/80
Cottage Grove, MN 6,494 740 5,550 (84) 4,526 656 10,076 10,732 3,171 11/81
Cahokia, IL 3,892 600 5,800 - 144 600 5,944 6,544 2,961 10/82
Chesapeake, VA 3,577 416 4,797 - - 416 4,797 5,213 2,452 09/82
Crescent City, CA 1,519 129 2,220 - - 129 2,220 2,349 1,073 07/83
Clackamas, OR 1,175 124 3,091 - - 124 3,091 3,215 1,477 09/83
Dunmore, PA 699 - 1,350 - - - 1,350 1,350 1,016 06/75
East Haven, CT 3,720 447 4,883 - 889 447 5,772 6,219 2,866 08/80
East Meadow, NY 8,587 - 9,246 - 931 - 10,177 10,177 4,854 09/82
Escanaba, MI 1,022 159 1,616 - - 159 1,616 1,775 822 10/82
East Greenbush, NY 3,846 703 5,560 - (582) 703 4,978 5,681 2,767 02/83
Fairborn, OH 3,427 377 4,961 - 10 377 4,971 5,348 2,564 07/82
Fond du Lac, WI 4,708 760 7,721 (24) 196 736 7,917 8,653 3,997 10/82
Federal Way, WA 701 86 1,894 - - 86 1,894 1,980 1,057 04/81
Ft. Wayne, IN 4,224 575 6,616 - - 575 6,616 7,191 3,087 01/84
Fairfield, IA 256 45 461 - - 45 461 506 213 03/84
Hutchinson, MN 1,931 179 3,304 - - 179 3,304 3,483 1,606 06/83
Huron, SD 332 58 598 - - 58 598 656 276 03/84
Huntsville, AL 1,150 - 1,904 - 44 - 1,948 1,948 886 03/84
Huntington, WV 2,468 336 3,649 - 390 336 4,039 4,375 1,655 10/84
</TABLE>
(Continued)
F-20
<PAGE> 58
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)
subsequentto
Initial cost acquisition
------------------- -------------------
Buildings and Buildings and Buildings and Accumulated Date of
Property location Encumbrances Land improvements Land improvements Land improvements Total depreciation acquisition
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Independence, MO 2,417 394 3,550 - 289 394 3,839 4,233 2,037 05/81
International
Falls, MN 1,783 179 3,071 - - 179 3,071 3,250 1,484 07/83
Kalamazoo, MI 2,490 250 4,850 - 253 250 5,103 5,353 2,864 09/80
Lockport, IL 1,918 286 2,572 - 192 286 2,764 3,050 1,367 07/82
Las Vegas, NV 881 168 1,806 - (400) 168 1,406 1,574 858 10/83
La Mesa, CA 654 108 2,761 - - 108 2,761 2,869 1,542 04/81
Lake Mary, FL 8,831 1,310 7,422 - - 1,310 7,422 8,732 582 12/94
Minot, ND 3,159 420 4,625 - 35 420 4,660 5,080 2,638 12/80
Menominee, MI 1,788 - 2,722 - - - 2,722 2,722 1,474 10/81
Marquette, MI 8,521 - 5,700 - 8,405 - 14,105 14,105 4,864 05/83
Maryville, MO 172 - 1,248 - 44 - 1,292 1,292 598 11/83
New Hope, MN 2,590 357 3,774 - 143 357 3,917 4,274 2,129 03/81
North Augusta, SC 1,852 100 2,900 - - 100 2,900 3,000 1,724 03/80
North Sarasota, FL 3,987 459 5,686 - 249 459 5,935 6,394 3,285 11/80
Newberry, SC 1,689 201 2,192 - - 201 2,192 2,393 968 10/84
O'Fallon, MO 2,447 343 3,626 - - 343 3,626 3,969 2,035 03/81
Oak Lawn, IL 5,609 - 9,029 - 178 - 9,207 9,207 4,948 10/81
Ocala, FL 2,364 417 3,301 - - 417 3,301 3,718 1,642 02/83
San Mateo, CA 2,875 - 6,672 - - - 6,672 6,672 3,595 11/81
Sault St. Marie, MI 1,848 375 2,816 - - 375 2,816 3,191 1,424 11/82
Seven Hills, OH 2,088 371 3,771 - - 371 3,771 4,142 1,917 10/82
Sparks, NV 11,834 1,648 20,409 - - 1,648 20,409 22,057 9,637 11/83
Steger, IL 1,695 332 2,488 - 28 332 2,516 2,848 1,345 11/81
</TABLE>
(Continued)
F-21
<PAGE> 59
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 Accumulated Date of
Property location Encumbrances Land improvements Land improvements Land improvements Total depreciation acquisition
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Temple Terrace, FL $1,797 280 469 - 1,800 280 2,269 2,549 722 02/83
Taylorville, IL 2,558 492 3,696 - 89 492 3,785 4,277 1,895 11/82
Trenton, NJ 5,712 - 9,191 - - - 9,191 9,191 4,391 09/83
Urbana, IL 3,009 633 4,753 - 91 633 4,844 5,477 2,405 11/82
Waverly, OH 2,331 471 2,920 - 67 471 2,987 3,458 1,495 10/82
Wichita, KS 1,913 420 2,604 - 9 420 2,613 3,033 1,324 10/82
Wheelersburg, OH 1,222 194 2,081 - 186 194 2,267 2,461 1,028 10/83
Washington, IA 239 41 431 - - 41 431 472 199 03/84
Wahpeton, ND 319 56 577 - - 56 577 633 266 03/84
Yazoo City, MS 1,361 158 1,820 - 357 158 2,177 2,335 822 09/84
-------------------------------------------------------------------------------------------------------------
Total $162,804 18,078 238,015 (108) 17,749 17,970 255,764 273,734 122,448
-------------------------------------------------------------------------------------------------------------
Cross-collateralized wraparound
mortgages on properties
previously disposed $ 35,858
---------
$198,662
---------
</TABLE>
Properties consist primarily of shopping centers and free standing, single
tenant retail stores.
Depreciation and NPAMLP's investment in building and improvements reflected
in the statements of operations is calculated over the estimated useful lives of
the assets as follows:
Base building.......30 years Building components......15-39 years
The aggregate cost for federal income tax purposes was approximately $263,151 at
December 31, 1997.
(Continued)
F-22
<PAGE> 60
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP SCHEDULE III, CONT.
(A LIMITED PARTNERSHIP)
Combined Real Estate and Accumulated Depreciation Schedule
(in thousands)
- --------------------------------------------------------------------------------
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
----------------------------------------
1997 1996 1995
- -------------------------------------------------------------------
<S> <C> <C> <C>
Beginning Balance $ 277,585 278,698 286,718
Improvements 1,618 5,126 417
Acquisitions 41 -- --
Disposals/write-downs (5,510) (6,239) (8,437)
- -------------------------------------------------------------------
$ 273,734 277,585 278,698
===================================================================
</TABLE>
<TABLE>
<CAPTION>
Accumulated depreciation
----------------------------------------
1997 1996 1995
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Beginning Balance $ 115,711 109,753 104,442
Depreciation - Original 7,950 8,112 8,273
Depreciation - Improvements 654 494 434
Disposals (1,867) (2,648) (3,396)
- -------------------------------------------------------------------------
$ 122,448 115,711 109,753
=========================================================================
</TABLE>
The Ardmore, OK property was written down by $1,100 during 1996 upon the
Company's adoption of SFAS 121.
The East Greenbush, NY and Las Vegas, NV properties were written down by $600
and $400, respectively, during 1997 in accordance with SFAS 121.
F-23
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 2,480
<SECURITIES> 0
<RECEIVABLES> 83
<ALLOWANCES> 30
<INVENTORY> 0
<CURRENT-ASSETS> 2,533
<PP&E> 273,734
<DEPRECIATION> 122,448
<TOTAL-ASSETS> 155,485
<CURRENT-LIABILITIES> 3,350
<BONDS> 198,662
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 155,485
<SALES> 0
<TOTAL-REVENUES> 29,993
<CGS> 0
<TOTAL-COSTS> 11,797
<OTHER-EXPENSES> 10,731
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23,038
<INCOME-PRETAX> (15,573)
<INCOME-TAX> 0
<INCOME-CONTINUING> (15,573)
<DISCONTINUED> 0
<EXTRAORDINARY> 373
<CHANGES> 0
<NET-INCOME> (15,200)
<EPS-PRIMARY> (152.00)
<EPS-DILUTED> (152.00)
</TABLE>
