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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, 2003
Commission File Number 0-24816
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
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(Exact name of Registrant as Specified in its Charter)
Delaware 23-2610414
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(State of other jurisdiction (IRS Employer 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 I Part II Part III Part IV
(None) (None) (None) Exhibits from Form 10
Registration Statement;
Form 10-K Annual Reports;
and Form 10-Q Quarterly Report;
filed on July 14, 1994; April 1,
1996 and March, 31, 2003; and
November 11, 2003; respectively -
Commission file Number 0-24816.
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INDEX
Page
PART I
Item 1. Business..................................................... 1
I. Summary................................................ 1
II. NPAMLP Objectives and Policies......................... 2
III. Glossary............................................... 4
Item 2. Properties................................................... 6
Item 3. Legal Proceedings............................................ 6
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...................... 15
I. No Trading Market...................................... 15
II. Distributions of Cash Flow From Operations............. 15
III. Proceeds of Sales Distributions........................ 15
IV. Certain Income Tax Considerations...................... 15
Item 6. Selected Financial Data...................................... 17
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations............... 18
I. Liquidity and Capital Resources........................ 18
II. Critical Accounting Policies........................... 19
III. Results of Operations.................................. 20
IV. Tabular Disclosure of Contractual Obligations.......... 22
V. Indebtedness Secured by the Properties................. 22
Item 7(a) Quantitative and Qualitative Disclosures
About Market Risk........................................... 25
Item 8. Financial Statements and Supplementary Data.................. 25
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure......................... 25
Item 9(a). Controls and Procedures...................................... 25
PART III
Item 10. Directors and Executive Officers of the
Registrant.................................................. 26
I. Summary................................................ 26
II. Code of Ethics......................................... 26
III. Audit Committee Financial Expert....................... 26
Item 11. Executive Compensation....................................... 26
Item 12. Security Ownership of Certain Beneficial Owners
and Management.............................................. 26
Item 13. Certain Relationships and Related Party Transactions......... 26
I. Compensation and Fees.................................. 26
II. Property Management by Affiliate....................... 27
III. Conflicts of Interest.................................. 27
IV. Summary of Relationships............................... 28
V. Related Party Transactions............................. 28
Item 14. Principal Accountant Fees and services ...................... 29
I. Audit Fees............................................. 29
II. Audit Related Fees..................................... 29
III. Tax Fees............................................... 29
IV. All Other Fees......................................... 29
PART IV
Item 15. Exhibits, Financial Statement Schedules and
Reports on Form 8-K......................................... 30
I. Documents Filed as Part of this Report................. 30
II. Reports of Form 8-K.................................... 31
SIGNATURES................................................................. 32
ii
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 ("NPAMLP") 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 NPAMLP will
continue until December 31, 2013, unless sooner terminated in accordance with
the terms of the limited partnership agreement of NPAMLP (the "Partnership
Agreement"). See "Item 7. Management's Discussion and Analysis of financial
Condition and results of Operations - V. Indebtedness Secured by the Properties
- - D. Future Interest Agreement."
NPAMLP's principal executive offices are located at 230 South Broad
Street, Mezzanine, Philadelphia, Pennsylvania 19102 (telephone: 215-790-4700).
B. THE GENERAL PARTNERS
The General Partners of NPAMLP are EBL&S, Inc., an affiliate of NPA
(the "Managing General Partner") and Feldman International, Inc. (the "Equity
General Partner"). The Managing General Partner and the Equity General Partner
are collectively referred to as the "General Partners". The Managing General
Partner manages and controls all aspects of the business of NPAMLP. The Managing
General Partner is owned 100% by E & H Properties, Inc., an affiliate of NPA and
holds no ownership interest in NPAMLP. The Equity General Partner holds a 1%
general partner interest in NPAMLP. See "Item 13. Certain Relationships and
Related Party Transactions."
C. THE PROPERTIES AND INDEBTEDNESS SECURED BY THE PROPERTIES
NPAMLP owns 37 properties as of December 31, 2003, 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. NPAMLP OBJECTIVES AND POLICIES
NPAMLP 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, 2013.
See "Item 7. Management's Discussion and Analysis of financial Condition and
results of Operations - V. Indebtedness Secured by the Properties - D. Future
Interest Agreement."
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 NPAMLP 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
NPAMLP will be distributed 99% to the Limited Partners and 1% to the Equity
General Partner. It is not anticipated that NPAMLP will be in a position to
distribute Proceeds of Sales to its partners in the foreseeable future.
G. ALLOCATIONS OF PROFITS AND LOSSES
Taxable income from NPAMLP operations or from a capital transaction
will be allocated 99% to the Limited Partners and 1% to the Equity General
Partner. Taxable losses from NPAMLP operations or from capital transactions
generally will be allocated 99% to the Limited Partners and 1% to the Equity
General Partner.
1
H. COMPENSATION TO THE GENERAL PARTNER AND AFFILIATES
The Managing General Partner will receive certain compensation for its
services including reimbursement of certain of its expenses and the Equity
Partner will receive a portion of Cash Flow from Operations and Proceeds of
Sales of the Properties. An affiliate of the Managing 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
Party Transactions - I. Compensation and Fees."
I. FISCAL YEAR
NPAMLP's fiscal year will begin on January 1 and end on December 31 of
each year.
II. NPAMLP OBJECTIVES AND POLICIES
A. NPAMLP OBJECTIVES
NPAMLP 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 Managing General
Partner. However, the Partnership in accordance with the terms of the
Partnership Agreement is expected to terminate not later than December 31, 2013.
See "Item 7. Management's Discussion and Analysis of financial Condition and
results of Operations - V. Indebtedness Secured by the Properties - D. Future
Interest Agreement."
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 will 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 NPAMLP 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
NPAMLP's Properties in order to avoid the loss of any Properties to foreclosure;
(ii) enhance the potential for appreciation in the value of NPAMLP's Properties;
and (iii) provide Cash Flow from Operations. It is not anticipated that NPAMLP
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 Managing General Partner after consideration of
relevant factors, including performance of the Property, market conditions, the
financial requirements of NPAMLP and the tax consequences to Limited Partners,
with a view toward achieving the principal investment objectives of NPAMLP. 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 NPAMLP's taking such purchase money obligations. The terms of payment to
NPAMLP 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 NPAMLP may be delayed until such time.
NPAMLP may not acquire additional properties. However, in the Managing
General Partner's discretion, NPAMLP 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 of an involuntary conversion may be invested in
property in transactions structured to be non-taxable in whole or in part under
Section 1033 of the Internal Revenue Code.
B. COMPETITION FOR TENANTS
NPAMLP's Properties consist primarily of shopping centers and free
standing, single tenant retail stores located in 17 states. Of the 37 Properties
owned by NPAMLP, 20 properties have only 1 or 2 tenants ("Single Tenant
Properties"). The tenants in the Single Tenant Properties are primarily national
2
retailers or supermarkets ("Anchor Tenants"). The 17 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 generally provide NPAMLP with
protection against a significant reduction in rental income; however, this also
restricts the growth opportunity for NPAMLP.
NPAMLP's primary Anchor Tenant is Kmart Corporation and its
subsidiaries ("Kmart") which in 2003 accounted for approximately 39% of the
rental income received by NPAMLP. In January 2002, Kmart filed for protection
under Chapter 11 of the United States Bankruptcy Code. As of December 31, 2003,
NPAMLP had 17 leases with Kmart aggregating approximately 1,632,000 square feet.
NPAMLP's average rent per square foot for all of the Kmart leases as of December
31, 2003, was $3.10. As of December 31, 2003, the total amount due from Kmart
was $206,000. Four stores under lease with Kmart were vacant as of December 31,
2001. Subsequent to its bankruptcy petition, Kmart rejected three of the four
leases and ceased the payment of rent on these leases effective February 1,
2002. These stores are located in Fort Wayne, Indiana; Lake Mary, Florida and
Newberry, South Carolina. Each of the stores for which the leases were rejected
were previously vacated Anchor Tenants in Single Tenant Properties. The fourth
Kmart lease vacant at December 31, 2001 was leased to another Anchor Tenant in
2002. Also, in the second quarter of 2002, leases at the Bowling Green, Ohio and
Hutchinson, Minnesota properties were rejected by Kmart in bankruptcy.
During the year ended December 31, 1990, NPAMLP sold options for the
purchase of the Fort Wayne, Indiana and Sparks, Nevada properties (the Sparks
property was also leased to Kmart at December 31, 2001). Aggregate proceeds
received from the sale of the options were recorded as a Deposit on sale of
property. Any gain or loss from these transactions was to be recognized at the
date upon which title to the land and buildings was conveyed to the holder of
the option. The option provided that the title to the land and buildings was to
be conveyed to the holder of the option without any additional consideration on
December 11, 2006 for the Sparks property and November 14, 2003 for the Fort
Wayne property, or would be conveyed automatically to the holder of the option
in the event of a default of the underlying tenant leases or mortgages. Under
the option agreements, the bankruptcy filing by Kmart constituted a default on
the tenant leases. During 2002, the Sparks, Fort Wayne and Newberry properties
were disposed which resulted in a net gain, including forgiveness of wraparound
mortgages, net of discounts of $2,128,000, $1,136,000 and $522,000,
respectively. The Hutchinson property was foreclosed and conveyed to the
property's lender in 2003. The foreclosure of the Hutchinson property resulted
in a net gain, including forgiveness of the wraparound mortgage, net of
discounts of $1,197,000.
The Managing General Partner has had periodic 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.
Discussions and negotiations with sub-tenants and prospective tenants are in
process at the Lake Mary and Bowling Green properties; however, there can be no
assurance new leases can be successfully negotiated or that the rental income
will be comparable. In the event that NPAMLP is not able to obtain comparable
leasing commitments, these properties could be lost to foreclosure. The carrying
value of the Lake Mary property was $7,199,000 and the balance of the related
wraparound mortgages payable, net of discounts, was $5,492,000 as of December
31, 2003. The carrying value of the Bowling Green property was $1,973,000 and
the balance of the related wraparound mortgages payable, net of discounts, was
$5,539,000 as of December 31, 2003.
As a result of Kmart's January 2002 Chapter 11 filing, NPAMLP could
have difficulty refinancing the aggregate of $11,921,000 of balloon payments
(due over the next 10 years) due on the Third Party Underlying Obligations on
Properties where Kmart is the Anchor Tenant. See "Item 2. Properties."
In January 2003, Kmart filed its Joint Plan of Reorganization and
corresponding Disclosure Statement with the United States Bankruptcy Court. The
Plan of Reorganization was confirmed in the second quarter of 2003.
3
2. LOCAL TENANTS
Marketing of Local Tenant space is accomplished through signage, direct
mailing, advertisements and through coordinated listings with local leasing
brokers.
The NPAMLP Properties' occupancy rate for Local Tenant space is 76%.
The lease terms for Local Tenant space typically range from 1 to 3 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 NPAMLP Properties, is
typically a function of NPAMLP's rental rates as compared to the local market's.
However, in instances where a multi-tenant Property has Anchor Tenant space and
the Anchor Tenant space is vacant (currently one Shopping Center Property has
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
NPAMLP will not engage in any business not related to the operations of
the Properties. Additionally, NPAMLP will not: (i) sell additional limited
partnership interests in NPAMLP; (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 Partners 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 Partners or its affiliates, except
that with respect to leases, the General Partners 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 NPAMLP 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 NPAMLP.
D. INSURANCE ON PROPERTIES
The Managing General Partner has obtained liability insurance covering
the Properties. The third party liability coverage insures, among others, NPAMLP
and the General Partners. Property insurance has also been obtained that insures
NPAMLP for fire and other casualty losses in an amount which covers the
replacement cost of the Properties. In addition, NPAMLP is covered under
fidelity insurance policies in amounts which the Managing 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 NPAMLP, pursuant to accounting
principles generally accepted in the United States of America.
"CASH FLOW FROM OPERATIONS" shall mean, with respect to NPAMLP,
Operating Revenues less Operating Cash Expenses and Reserves.
"CONSOLIDATION" shall mean the consolidation of the ownership and
operations of the Properties in NPAMLP.
"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 NPAMLP.
"EQUITY GENERAL PARTNER" shall mean Feldman International, Inc., a
Delaware corporation.
"EXCESS PROCEEDS" shall mean the Proceeds of Sales of the Properties in
excess of the Minimum Payoff Amount and Capital Improvement Debt.
"GENERAL PARTNERS" shall mean EBL&S, Inc., the Managing General Partner
of NPAMLP and Feldman International, Inc., the Equity General Partner of NPAMLP.
"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.
4
"INVESTOR NOTE RECOVERY" shall mean the Excess Proceeds available for
distribution to NPAMLP after the first $28 million of Excess Proceeds has been
retained by NPAMLP, 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 NPAMLP.
"MANAGEMENT AGREEMENT" shall mean the agreement entered into by and
between NPAMLP 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 NPAMLP's gross operating revenues)
and a leasing fee (equal to the fee customarily charged in the geographic areas
in which the Properties are located).
"MANAGING GENERAL PARTNER" shall mean EBL&S, Inc, a Delaware
corporation.
"MLPG" shall mean Main Line Pension Group, 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 Mr. Edward Lipkin,
including, but not limited to E & H Properties, Inc., National Property Analysts
Management Company, and National Property Management Corp.
"NPAEP" shall mean National Property Analysts Employee Partnership, a
Delaware limited partnership.
"NPAMLP" shall mean National Property Analysts Master Limited
Partnership, a Delaware limited partnership.
"PARTNERSHIP AGREEMENT" shall mean the limited partnership agreement
entered into between the General Partners and the Limited Partners of NPAMLP.
"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 ("MLPG"), a Delaware limited
partnership which acquired the ownership of the Wrap Mortgages from the original
holders and National Property Analysts Employee Partnership ("NPAEP") and Penn
Valley Pension Group ("PVPG"), both Delaware limited partnerships which
subsequently acquired ownership of certain Wrap Mortgages from MLPG.
"PROCEEDS OF SALES DISTRIBUTIONS" shall mean the distributions made by
NPAMLP from the proceeds of sales of the Properties as defined in the
Partnership Agreement.
"PROCEEDS OF SALES OF THE PROPERTIES" shall mean, for purposes of the
Restructuring Agreement and as of and at the time of the calculation thereof,
(a) the gross sales proceeds (including the then-outstanding principal amount of
indebtedness for borrowed money assumed or taken subject to) from the sale of
any Property or Properties occurring and after the date the Properties were
transferred to NPAMLP, minus (b) all reasonable costs and expenses incurred by a
Partnership or a successor to a Partnership (including NPAMLP), 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 NPAMLP.
"PVPG" shall mean Penn Valley Pension Group, a Delaware limited
partnership.
"PROPERTY MANAGER" shall mean EBL&S Property Management, Inc.
"RESERVES" shall mean the amount determined by the Managing General
Partner, in its sole discretion, to be set aside for future requirements of
NPAMLP. At the end of each year, any unexpended reserves not continued as
Reserves will be treated as Cash Flow from Operations.
5
"RESTRUCTURING" shall mean the restructuring of the Wrap Mortgages and
the Second Mortgages.
"RESTRUCTURING AGREEMENT" shall mean the agreement entered into by and
between NPAMLP, 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, 2003, approximately $35,178,000 had been
applied in reduction of the Threshold Amount.
"UNAUDITED PARTNERSHIPS" shall mean the Partnerships included in NPAMLP
which were not audited by the Internal Revenue Service.
"UNITS" shall mean units of limited partnership interest in NPAMLP.
"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
NPAMLP's Properties consist primarily of shopping centers and free
standing, single tenant retail stores. As of December 31, 2003, NPAMLP owned and
operated 37 Properties located in 17 states. Approximately 54% of the Properties
are Single Tenant Properties and 46% 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 Partners do not have any information or knowledge
about the presence of such substances requiring remediation on any of the
Properties. If it is claimed or determined that such substances do exist on any
of such Properties, NPAMLP 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
NPAMLP is involved in various claims and legal actions arising in the
ordinary course of property operations. In the opinion of the General Partners,
the ultimate disposition of these matters will not have a material adverse
effect on NPAMLP's financial position, results of operations or liquidity.
6
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
7
SCHEDULE 1
DESCRIPTION OF PROPERTY TENANT INFORMATION
TOTAL AVERAGE
PROPERTY TOTAL OCCUPANCY MINIMUM RENT
LOCATION GLA (a) RATE RENT (b) PSF (c)
- ----------------------- --------- --------- ---------- ---------
Ardmore, OK 216,790 92.5% $ 924,658 $ 4.61
Bowling Green, OH 135,203 8.1% 47,100 4.28
Cahokia, IL 26,000 100.0% 24,133 0.93
Chesapeake, VA 162,020 100.0% 402,725 2.49
Cottage Grove, MN 110,328 74.6% 803,369 9.76
Crescent City, CA 33,000 100.0% 60,000 1.82
Dunmore, PA 26,475 100.0% 78,696 2.97
East Haven, CT 158,057 98.1% 705,624 4.55
Federal Way, WA 37,560 100.0% 45,000 1.20
Huntington, WV 141,710 32.5% 110,910 2.41
Huntsville, AL 104,000 100.0% 244,400 2.35
Independence, MO 134,634 97.2% 371,814 2.84
International Falls, MN 60,842 100.0% 237,000 3.90
Kalamazoo, MI 120,958 100.0% 566,261 4.68
Lake Mary, FL 107,400 100.0% 345,900 3.22
Lawnside, NJ 102,552 100.0% 498,012 4.86
Lockport, IL 100,828 96.9% 309,247 3.16
Marquette, MI 248,256 93.5% 1,212,293 5.22
Maryville, MO 35,099 100.0% 126,204 3.60
Menominee, MI 82,611 100.0% 197,848 2.39
New Hope, MN 115,492 100.0% 319,462 2.77
North Augusta, SC 109,134 77.0% 360,000 4.29
North Sarasota, FL 134,805 100.0% 540,326 4.01
O' Fallon, MO 91,061 100.0% 358,107 3.93
Oak Lawn, IL 159,233 100.0% 795,270 4.99
Ocala, FL 103,964 100.0% 226,310 2.18
Painesville, OH 10,125 100.0% 168,011 16.59
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% 243,234 2.63
Seven Hills, OH 121,677 100.0% 326,070 2.68
Steger, IL 87,678 100.0% 261,013 2.98
Taylorville, IL 43,127 95.1% 344,880 8.41
Urbana, IL 55,531 100.0% 444,733 8.01
Waverly, OH 55,102 100.0% 283,999 5.15
Wheelersburg, OH 38,830 9.4% 21,186 5.79
Yazoo City, MS 81,312 79.9% 222,944 3.43
(a) Gross Leasable Area.
(b) Based on leases in effect as of December 31, 2003.
(c) Based on occupied space.
8
SCHEDULE 1, CONTINUED
DESCRIPTION OF PROPERTY TENANT INFORMATION
MAJOR TENANT INFORMATION
PROPERTY ANNUAL LEASE
LOCATION NAME GLA (a) RENT EXPIRATION OPTIONS
- ---------------------- ------------------------------ -------- --------- ---------- --------
Ardmore, OK Hobby Lobby 57,120 $ 106,243 02/26/2005 2 / 5 YR
Beall's 25,632 83,304 04/30/2005 3 / 5 YR
Staples 22,720 124,900 02/28/2009 4 / 5 YR
Goody's Family Clothing 26,432 218,064 10/31/2011 2 / 5 YR
Bowling Green, OH Dollar General 11,000 47,100 01/31/2006 1 / 3 YR
Cahokia, IL Goodyear Service Center 26,000 24,133 02/28/2004 None
Chesapeake, VA Kmart 162,020 402,725 10/31/2005 6 / 10 YR
Cottage Grove, MN Rainbow Foods 70,130 606,624 07/11/2016 6 / 5 YR
Crescent City, CA Safeway 33,000 60,000 05/31/2004 5 / 5 YR
Dunmore, PA Price Chopper 26,475 78,696 11/30/2005 3 / 5 YR
East Haven, CT National Wholesale Liquidators 84,180 273,585 01/31/2006 5 / 5 YR
Federal Way, WA Safeway 37,560 45,000 10/31/2008 5 / 5 YR
Huntington, WV Office Depot (b) 25,900 60,000 02/28/2005 4 / 5 YR
CVS 7,000 28,000 01/31/2005 None
Huntsville, AL Kmart 104,000 244,400 11/30/2010 4 / 5 YR
Independence, MO Kmart 116,799 308,634 03/31/2010 5 / 5 YR
International Falls, MN Kmart 60,842 237,000 07/31/2006 10 / 5 YR
Kalamazoo, MI Kmart 84,180 248,770 02/28/2005 9 / 5 YR
SuperPetz, LLC (c) 18,047 166,935 (c) None
Lake Mary, FL Old Time Pottery 107,400 345,900 03/31/2005 None
Lawnside, NJ Kmart 102,552 498,012 06/30/2025 10 / 5 YR
Lockport, IL Kmart 54,000 133,684 06/30/2009 9 / 5 YR
Sterk's Super Foods, Inc. 35,170 121,603 05/20/2006 3 / 5 YR
Marquette, MI Kohl's Department Stores, Inc. 85,480 170,960 11/30/2024 9 / 5 YR
Younker's 44,068 92,543 10/01/2011 None
J.C. Penney 33,996 118,286 08/31/2009 4 / 5 YR
Maryville, MO J.C. Penney 22,060 65,502 10/31/2006 2 / 5 YR
Menominee, MI Kmart 82,611 197,848 04/30/2010 8 / 5 YR
New Hope, MN Kmart 115,492 319,462 06/30/2012 9 / 5 YR
North Augusta, SC North Augusta Flea Mall 84,000 360,000
North Sarasota, FL Kmart 84,180 280,440 11/30/2008 9 / 5 YR
Bealls 40,000 141,040 11/20/2008 4 / 5 YR
O' Fallon, MO Kmart 83,061 279,415 11/30/2005 10 / 5 YR
Oak Lawn, IL Home Depot 104,622 380,000 01/31/2028 5 / 5 YR
Jewel Foods 58,575 415,270 01/03/2009 3 / 5 YR
Ocala, FL Kmart 103,964 226,310 06/30/2007 9 / 5 YR
Painesville, OH CVS 10,125 168,011 01/31/2019 6 / 5 YR
Philadelphia, PA Kmart 91,033 388,500 03/31/2005 10 / 5 YR
Acme 36,973 168,000 06/30/2005 6 / 5 YR
San Mateo, CA Kmart 84,704 476,546 01/31/2015 None
Sault Ste. Marie, MI Kmart 92,650 243,234 09/30/2016 10 / 5 YR
Seven Hills, OH Kmart 121,677 318,595 08/31/2007 8 / 5 YR
Steger, IL Kmart 87,678 261,013 11/30/2010 10 / 5 YR
Taylorville, IL Kroger 27,958 237,761 03/31/2007 5 / 5 YR
CVS 10,069 81,319 03/31/2007 5 / 5 YR
Urbana, IL Jerry's IGA 43,667 370,648 03/31/2007 5 / 5 YR
Waverly, OH Kroger 38,268 154,558 11/30/2004 4 / 5 YR
Wheelersburg, OH No Major Tenants
Yazoo City, MS Miss. Baptist Medical Ctr. 20,116 61,957 05/31/2005 1 / 5 YR
Family Dollar Stores 10,846 59,000 06/30/2008 6 / 5 YR
Sunflower Supermarket 20,000 45,000 04/30/2005 1 / 5 YR
(a) Gross Leasable Area.
(b) Tenant pays percentage rent only - amount based on projected sales for 2004.
(c) Month-to-month lease
9
SCHEDULE 2
TENANT LEASE EXPIRATIONS
2004 2005
-------------------------------- --------------------------------
TOTAL NUMBER NUMBER
PROPERTY TOTAL MINIMUM OF MINIMUM OF MINIMUM
LOCATION GLA (a) RENT TENANTS RENT S.F. TENANTS RENT S.F.
- ----------------------- --------- ----------- ------- ---------- ------- ------- ----------- --------
Ardmore, OK 216,790 $ 924,658 5 $ 63,570 12,123 9 $ 297,978 106,075
Bowling Green, OH 135,203 47,100
Cahokia, IL 26,000 24,133 1 24,133 26,000
Chesapeake, VA 162,020 402,725 1 402,725 162,020
Cottage Grove, MN 110,328 803,369 3 76,725 8,550
Crescent City, CA 33,000 60,000 1 60,000 33,000
Dunmore, PA 26,475 78,696 1 78,696 26,475
East Haven, CT 158,057 705,624 2 64,850 9,350 1 27,000 4,500
Federal Way, WA 37,560 45,000
Huntington, WV 141,710 110,910 1 7,500 735 3 33,892 33,635
Huntsville, AL 104,000 244,400
Independence, MO 134,634 371,814
International Falls, MN 60,842 237,000
Kalamazoo, MI 120,958 566,261 4 462,278 108,355
Lake Mary, FL 107,400 345,900 1 345,900 107,400
Lawnside, NJ 102,552 498,012
Lockport, IL 100,828 309,247 1 22,530 3,755
Marquette, MI 248,256 1,212,293 5 139,317 11,418 8 157,656 12,733
Maryville, MO 35,099 126,204 1 27,000 4,145 3 29,375 8,750
Menominee, MI 82,611 197,848
New Hope, MN 115,492 319,462
North Augusta, SC 109,134 360,000
North Sarasota, FL 134,805 540,326 1 14,376 1,200 2 64,300 7,025
O' Fallon, MO 91,061 358,107 1 20,000 2,000 1 279,415 83,061
Oak Lawn, IL 159,233 795,270
Ocala, FL 103,964 226,310
Painesville, OH 10,125 168,011
Philadelphia, PA 128,006 556,500 2 556,500 128,006
San Mateo, CA 84,704 476,546
Sault Ste. Marie, MI 92,650 243,234
Seven Hills, OH 121,677 326,070
Steger, IL 87,678 261,013
Taylorville, IL 43,127 344,880 1 15,000 3,000
Urbana, IL 55,531 444,733 2 17,125 2,800
Waverly, OH 55,102 283,999 4 211,634 46,068 3 72,365 9,034
Wheelersburg, OH 38,830 21,186 2 74,651 27,228
Yazoo City, MS 81,312 222,944 2 106,957 40,116
--------- ----------- ---- ---------- ------- ---- ----------- --------
TOTALS 3,656,754 13,259,785 25 1,052,931 280,667 47 2,700,517 747,890
--------- ----------- ---- ---------- ------- ---- ----------- --------
ANNUAL % TO TOTAL 100.0% 100.0% 7.9% 7.7% 20.4% 20.5%
--------- ----------- ---------- ------- ----------- --------
CUMULATIVE % 33.6% 28.8% 54.0% 49.3%
---------- ------- ----------- --------
(a) Gross Leasable Area.
10
SCHEDULE 2, CONTINUED
TENANT LEASE EXPIRATIONS
2006 2007
-------------------------------- --------------------------------
TOTAL NUMBER NUMBER
PROPERTY TOTAL MINIMUM OF MINIMUM OF MINIMUM
LOCATION GLA (a) RENT TENANTS RENT S.F. TENANTS RENT S.F.
- ----------------------- --------- ----------- ------- ---------- ------- ------- ----------- --------
Ardmore, OK 216,790 $ 924,658 3 $ 57,632 7,063 3 $ 122,733 13,419
Bowling Green, OH 135,203 47,100 1 47,100 11,000
Cahokia, IL 26,000 24,133
Chesapeake, VA 162,020 402,725
Cottage Grove, MN 110,328 803,369
Crescent City, CA 33,000 60,000
Dunmore, PA 26,475 78,696
East Haven, CT 158,057 705,624 1 273,585 84,180 1 26,400 3,500
Federal Way, WA 37,560 45,000
Huntington, WV 141,710 110,910 1 10,440 1,305
Huntsville, AL 104,000 244,400
Independence, MO 134,634 371,814 1 10,980 1,800 2 43,800 11,040
International Falls, MN 60,842 237,000 1 237,000 60,842
Kalamazoo, MI 120,958 566,261
Lake Mary, FL 107,400 345,900
Lawnside, NJ 102,552 498,012
Lockport, IL 100,828 309,247 1 121,603 35,170 1 13,857 2,053
Marquette, MI 248,256 1,212,293 10 231,647 27,407 5 168,407 11,529
Maryville, MO 35,099 126,204 1 71,017 22,204
Menominee, MI 82,611 197,848
New Hope, MN 115,492 319,462
North Augusta, SC 109,134 360,000
North Sarasota, FL 134,805 540,326 1 26,400 1,500
O' Fallon, MO 91,061 358,107 1 29,862 3,000 1 24,000 3,000
Oak Lawn, IL 159,233 795,270
Ocala, FL 103,964 226,310 1 226,310 103,964
Painesville, OH 10,125 168,011
Philadelphia, PA 128,006 556,500
San Mateo, CA 84,704 476,546
Sault Ste. Marie, MI 92,650 243,234
Seven Hills, OH 121,677 326,070 1 318,595 121,677
Steger, IL 87,678 261,013
Taylorville, IL 43,127 344,880 1 10,800 2,100 2 319,080 38,027
Urbana, IL 55,531 444,733 3 415,608 51,331
Waverly, OH 55,102 283,999
Wheelersburg, OH 38,830 21,186
Yazoo City, MS (b) 81,312 222,944 1 31,200 9,600 2 (b) 13,037 1,445
--------- ----------- ---- ---------- ------- ---- ----------- --------
TOTALS 3,656,754 13,259,785 24 1,159,266 267,171 22 1,691,827 360,985
--------- ----------- ---- ---------- ------- ---- ----------- --------
ANNUAL % TO TOTAL 100.0% 100.0% 8.7% 7.3% 12.8% 9.9%
--------- ----------- ---------- ------- ----------- --------
CUMULATIVE % 62.7% 56.6% 75.5% 66.5%
---------- ------- ----------- --------
(a) Gross Leasable Area.
(b) In 2007, one of the two lease expirations represents an expiring ground
lease ($6,000).
11
SCHEDULE 2, CONTINUED
TENANT LEASE EXPIRATIONS
2008
-------------------------------
TOTAL NUMBER
PROPERTY TOTAL MINIMUM OF MINIMUM
LOCATION GLA (a) RENT TENANTS RENT S.F.
- ----------------------- --------- ----------- ------- -------- --------
Ardmore, OK 216,790 $ 924,658 2 $ 78,944 9,650
Bowling Green, OH 135,203 47,100
Cahokia, IL 26,000 24,133
Chesapeake, VA 162,020 402,725
Cottage Grove, MN 110,328 803,369
Crescent City, CA 33,000 60,000
Dunmore, PA 26,475 78,696
East Haven, CT 158,057 705,624 3 190,889 20,500
Federal Way, WA 37,560 45,000 1 45,000 37,560
Huntington, WV 141,710 110,910 3 46,090 8,535
Huntsville, AL 104,000 244,400
Independence, MO 134,634 371,814
International Falls, MN 60,842 237,000
Kalamazoo, MI 120,958 566,261 1 103,983 12,603
Lake Mary, FL 107,400 345,900
Lawnside, NJ 102,552 498,012
Lockport, IL 100,828 309,247
Marquette, MI 248,256 1,212,293
Maryville, MO 35,099 126,204
Menominee, MI 82,611 197,848
New Hope, MN 115,492 319,462
North Augusta, SC 109,134 360,000
North Sarasota, FL 134,805 540,326 2 421,480 124,180
O' Fallon, MO 91,061 358,107
Oak Lawn, IL 159,233 795,270
Ocala, FL 103,964 226,310
Painesville, OH 10,125 168,011
Philadelphia, PA 128,006 556,500
San Mateo, CA 84,704 476,546
Sault Ste. Marie, MI 92,650 243,234
Seven Hills, OH 121,677 326,070
Steger, IL 87,678 261,013
Taylorville, IL 43,127 344,880
Urbana, IL 55,531 444,733
Waverly, OH 55,102 283,999
Wheelersburg, OH 38,830 21,186
Yazoo City, MS 81,312 222,944 1 59,000 10,846
--------- ----------- ---- -------- --------
TOTALS 3,656,754 13,259,785 13 945,386 223,874
--------- ----------- ---- -------- --------
ANNUAL % TO TOTAL 100.0% 100.0% 7.1% 6.1%
--------- ----------- -------- --------
CUMULATIVE % 82.6% 72.6%
-------- --------
(a) Gross Leasable Area.
12
SCHEDULE 3
THIRD PARTY UNDERLYING OBLIGATIONS
PRINCIPAL
PROPERTY MORTGAGE INTEREST BALANCE AT
LOCATION MORTGAGEE(S) TYPE RATE DUE DATE 31-DEC-03
- ----------------------- ----------------------------------- -------- -------- ----------------- -----------
Ardmore, OK GMAC Mortgage Company 1st 8.59% 01-Apr-2010 $ 6,578,755
Bowling Green, OH Credit Suisse First Boston (b) 1st 7.05% 31-Jul-2008 2,422,873
Cahokia, IL NONE
Chesapeake, VA John Hancock Real Estate Finance 1st 8.00% 01-Jan-2004 5,142
Lawrence Kadish 2nd 9.00% 01-Jan-2006 492,849
Cottage Grove, MN IDS Life Insurance (d) 1st 8.75% 01-Nov-2016 4,685,581
Crescent City, CA Firstrust Bank (c) 1st 8.00% 01-Feb-2005 125,135
Dunmore, PA NONE
East Haven, CT Aetna Life Insurance Company 1st 8.88% 01-Sep-2005 626,911
Beal Bank 2nd 8.53% 01-Aug-2005 1,036,392
Federal Way, WA Firstrust Bank (c) 1st 8.00% 01-Feb-2005 93,851
Huntington, WV Suburban Capital Markets, Inc. (a) 1st 9.13% 01-Feb-2007 1,450,495
Huntsville, AL Credit Suisse First Boston (b) 1st 7.05% 31-Jul-2008 669,354
Independence, MO Credit Suisse First Boston (b) 1st 7.05% 31-Jul-2008 1,517,831
International Falls, MN Developers Diversified 1st 8.75% 01-Aug-2013 1,522,641
Kalamazoo, MI NONE
Lake Mary, FL Kidder Peabody Mortgage Capital 1st 7.88% 01-Jan-2016 7,786,969
Lawnside, NJ Wachovia Securities 1st 8.71% 15-Sep-2020 4,740,629
Lockport, IL Credit Suisse First Boston (b) 1st 7.05% 31-Jul-2008 1,574,396
Marquette, MI Union Labor Life Insurance Co. (e) 1st 7.88% 27-Feb-2004 5,527,666
Maryville, MO NONE
Menominee, MI NONE
New Hope, MN Credit Suisse First Boston (b) 1st 7.05% 31-Jul-2008 1,659,244
North Augusta, SC NONE
North Sarasota, FL Credit Suisse First Boston (b) 1st 7.05% 31-Jul-2008 3,016,806
O' Fallon, MO Credit Suisse First Boston (b) 1st 7.05% 31-Jul-2008 2,206,040
Oak Lawn, IL American Express Financial Corp. 1st 5.00% 01-Dec-2008 1,860,606
Ocala, FL B & K Properties 1st 9.00% 01-Mar-2013 1,277,857
Painesville, OH Credit Suisse First Boston 1st 6.48% 06-Dec-2018 1,790,070
Philadelphia, PA Equitable Life Assurance Society 1st 9.25% 01-Jun-2010 1,919,784
San Mateo, CA Amerus Capital Management 1st 8.25% 01-Feb-2005 557,588
Sault Ste. Marie, MI EDC County of Chippewa, MI 1st 6.70% 01-Jan-2007 530,000
Seven Hills, OH B & K Properties 1st 9.75% 01-Nov-2012 1,587,070
Steger, IL Credit Suisse First Boston (b) 1st 7.05% 31-Jul-2008 2,149,475
Taylorville, IL Suburban Capital Markets, Inc. (a) 1st 9.13% 01-Feb-2007 1,251,158
Urbana, IL Credit Suisse First Boston (b) 1st 7.05% 31-Jul-2008 2,338,026
Waverly, OH Suburban Capital Markets, Inc. (a) 1st 9.13% 01-Feb-2007 1,251,158
Wheelersburg, OH NONE
Yazoo City, MS Credit Suisse First Boston (b) 1st 7.05% 31-Jul-2008 1,084,164
(a) Mortgages are cross - collateralized and cross - defaulted.
(b) Mortgages are cross - collateralized and cross - defaulted.
(c) Mortgages are cross - collateralized and cross - defaulted.
(d) Loan is callable on November 1, 2006.
(e) Five year extention of loan term was negotiated with lender.
The extention will be finalized in the first quarter of 2004.
13
SCHEDULE 3, CONTINUED
THIRD PARTY UNDERLYING OBLIGATIONS
OWNERSHIP
ANNUAL BALLOON INTEREST
PROPERTY MORTGAGE DEBT DUE AT FEE/
LOCATION MORTGAGEE(S) TYPE SERVICE EXPIRATION LEASEHOLD
- ------------------------ ----------------------------------- -------- --------- ----------- ---------
Ardmore, OK GMAC Mortgage Company 1st $ 627,994 $ 6,137,464 Fee
Bowling Green, OH Credit Suisse First Boston (b) 1st 206,223 2,245,006 Fee
Cahokia, IL NONE Fee
Chesapeake, VA John Hancock Real Estate Finance 1st 334,776 0 Leasehold
Lawrence Kadish 2nd 44,356 0
Cottage Grove, MN IDS Life Insurance (d) 1st 636,272 105,663 Fee
Crescent City, CA Firstrust Bank (c) 1st 49,731 0 Fee
Dunmore, PA NONE Leasehold
East Haven, CT Aetna Life Insurance Company 1st 381,258 0 Fee
Beal Bank 2nd 116,716 985,836
Federal Way, WA Firstrust Bank (c) 1st 37,298 0 Fee
Huntington, WV Suburban Capital Markets, Inc. (a) 1st 132,348 1,450,495 Fee
Huntsville, AL Credit Suisse First Boston (b) 1st 56,976 620,216 Leasehold
Independence, MO Credit Suisse First Boston (b) 1st 129,192 1,406,404 Fee
International Falls, MN Developers Diversified Wrap 236,250 0 Fee
Kalamazoo, MI NONE Leasehold
Lake Mary, FL Kidder Peabody Mortgage Capital 1st 919,440 0 Fee
Lawnside, NJ Wachovia Securities 1st 442,483 0 Fee
Lockport, IL Credit Suisse First Boston (b) 1st 134,004 1,458,817 Fee
Marquette, MI Union Labor Life Insurance Co. (e) 1st 615,161 5,527,666 Leasehold
Maryville, MO NONE Leasehold
Menominee, MI NONE Leasehold
New Hope, MN Credit Suisse First Boston (b) 1st 141,216 1,537,436 Fee
North Augusta, SC NONE Leasehold
North Sarasota, FL Credit Suisse First Boston (b) 1st 256,764 2,795,338 Fee
O' Fallon, MO Credit Suisse First Boston (b) 1st 187,764 2,044,091 Fee
Oak Lawn, IL American Express Financial Corp. 1st 422,249 0 Leasehold
Ocala, FL B & K Properties 1st 217,350 0 Fee
Painesville, OH Credit Suisse First Boston 1st 168,011 0 Fee
Philadelphia, PA Equitable Life Assurance Society 1st 395,220 0 Leasehold
San Mateo, CA Amerus Capital Management 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
Steger, IL Credit Suisse First Boston (b) 1st 182,952 1,991,678 Fee
Taylorville, IL Suburban Capital Markets, Inc. (a) 1st 114,156 1,251,158 Fee
Urbana, IL Credit Suisse First Boston (b) 1st 198,996 2,166,387 Fee
Waverly, OH Suburban Capital Markets, Inc. (a) 1st 114,156 1,251,158 Fee
Wheelersburg, OH NONE Fee
Yazoo City, MS Credit Suisse First Boston (b) 1st 92,280 1,004,575 Fee
(a) Mortgages are cross - collateralized and cross - defaulted.
(b) Mortgages are cross - collateralized and cross - defaulted.
(c) Mortgages are cross - collateralized and cross - defaulted.
(d) Loan is callable on November 1, 2006.
(e) Five year extention of loan term was negotiated with lender.
The extention will be finalized in the first quarter of 2004.
14
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 NPAMLP. NPAMLP 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 NPAMLP are
prohibited from selling their Units unless such sale is at the Managing 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 Equity General Partner's interest in NPAMLP.
As of December 31, 2003, there were 97,752 Units outstanding held by
approximately 2,600 Limited Partners.
II. DISTRIBUTIONS OF CASH FLOW FROM OPERATIONS
NPAMLP may make annual distributions to its partners in an aggregate
amount equal to its Cash Flow from Operations. NPAMLP has not made any
distributions of Cash Flow from Operations to its partners since its
organization. It is not anticipated that NPAMLP will be in a position to
distribute Cash Flow from Operations to its partners in the foreseeable future.
NPAMLP 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 NPAMLP purposes, including paying Debt Service
or providing for Capital Improvements with respect to other Properties owned by
NPAMLP. All proceeds not utilized for NPAMLP purposes will, after making the
payments required by the Restructuring Agreement with respect to the Wrap
Mortgages, be distributed to the partners of NPAMLP.
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 NPAMLP 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.
NPAMLP has not made any Proceeds of Sales Distributions to its partners
since its organization. It is not anticipated that NPAMLP will be in a position
to distribute Proceeds of Sales to its partners in the foreseeable future.
IV. CERTAIN INCOME TAX CONSIDERATIONS
A. RECOGNITION OF GAIN
It is anticipated that future forgiveness of Wrap Mortgages, if any,
and the potential of selling Properties, which are owned by Unaudited
Partnerships, and applying sales proceeds to make payments on the Wrap Mortgages
may 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).
Limited Partners are allocated their share of NPAMLP's taxable income
and gain even if they receive no cash distributions from NPAMLP with which to
pay any resulting tax liability, and will be allocated their share of NPAMLP's
tax losses, including depreciation deductions. It is anticipated that NPAMLP
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
15
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 NPAMLP (gain in excess of
such amounts will be allocated ratably among all Limited Partners). This rule
does not apply to tax-free exchanges except to the extent of cash or "other
property" received.
B. TREATMENT OF DISTRIBUTIONS BY NPAMLP
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 NPAMLP. 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 NPAMLP interest immediately prior thereto will result in the recognition
of gain to that extent. Except in the unlikely event that NPAMLP is treated for
tax purposes as a "dealer" in real property, such gain generally should be
capital gain.
C. OPERATING INCOME (LOSS) OF NPAMLP
Each Limited Partner will receive an annual Schedule K-1 (U.S. Form
1065) to indicate his share of NPAMLP's taxable income or loss for each tax
year. Such income or loss, rather than the distributions described in Part B
above, is reportable by the Limited Partner. Since any loss generated by NPAMLP
is, with respect to Limited Partners, a passive loss, the deductibility of such
loss is governed by Section 469 of the 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.
16
ITEM 6. SELECTED FINANCIAL DATA
The following is selected financial data for NPAMLP for the five years
ended December 31, 2003, derived from the audited financial statements of NPAMLP
prepared in conformity with accounting principles generally accepted in the
United States of America. 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 NPAMLP and the notes thereto included elsewhere in this Form 10-K.
Year Ended December 31
(In Thousands, except per unit data)
2003 2002 2001 2000 1999
--------- --------- --------- --------- ---------
INCOME:
Rental income $ 14,756 $ 14,633 $ 15,064 $ 15,535 $ 16,067
Other charges to tenants 4,281 4,259 4,408 4,585 5,017
Interest income 208 217 230 262 228
Other income - - - - 150
--------- --------- --------- --------- ---------
TOTAL INCOME 19,245 19,109 19,702 20,382 21,462
--------- --------- --------- --------- ---------
OPERATING EXPENSES:
Interest expense 13,174 13,186 13,012 13,395 13,615
Other operating expenses 9,464 8,506 7,902 8,297 8,345
Depreciation and
amortization 5,752 5,693 5,665 5,905 5,941
--------- --------- --------- --------- ---------
TOTAL OPERATING EXPENSES 28,390 27,385 26,579 27,597 27,901
--------- --------- --------- --------- ---------
OPERATING LOSS (9,145) (8,276) (6,877) (7,215) (6,439)
--------- --------- --------- --------- ---------
OTHER INCOME (EXPENSE):
Realized gain (loss) on
investment securities 97 (185) - - -
Gain (loss) on disposition
of properties - - - 1,769 (3,415)
Forgiveness of wraparound
mortgages payable on
disposition of properties 1,237 10,770 - - 4,240
--------- --------- --------- --------- ---------
(LOSS) INCOME FROM
CONTINUING OPERATIONS (7,811) 2,309 (6,877) (5,446) (5,614)
DISCONTINUED OPERATIONS:
Gain (loss) from operations of
discontinued components (including
gain (loss) on disposition of
properties of $923 and ($3,548)
For the years ended December 31,
2003 and 2002; and write-down of
$413 and $250 for the years
ended December 31, 2002
and 2001) 808 (5,064) (1,549) (1,238) (1,109)
--------- --------- --------- --------- ---------
NET LOSS $ (7,003) $ (2,755) $ (8,426) $ (6,684) $ (6,723)
========= ========= ========= ========= =========
PER UNIT DATA:
Operating loss $ (93.55) $ (84.66) $ (70.35) $ (73.81) $ (65.87)
========= ========= ========= ========= =========
Net loss $ (71.64) $ (28.18) $ (86.20) $ (68.38) $ (68.78)
========= ========= ========= ========= =========
Weighted average units
outstanding 97,752 97,752 97,752 97,752 97,752
========= ========= ========= ========= =========
ASSETS:
Rental property - net $ 76,455 $ 83,180 $ 106,937 $ 109,008 $ 116,667
Other assets 6,134 8,695 7,710 7,897 7,420
--------- --------- --------- --------- ---------
TOTAL ASSETS $ 82,589 $ 91,875 $ 114,647 $ 116,905 $ 124,087
========= ========= ========= ========= =========
LIABILITIES AND PARTNERS' DEFICIT:
Wraparound mortgages payable
less: unamortized discount
based on imputed interest
rate of 12% $ 128,443 $ 130,427 $ 149,877 $ 144,409 $ 144,223
Other liabilities 7,286 7,678 8,223 7,521 8,205
--------- --------- --------- --------- ---------
Total liabilities $ 135,729 $ 138,105 $ 158,100 $ 151,930 $ 152,428
Partners' deficit (53,140) (46,230) (43,453) (35,025) (28,341)
--------- --------- --------- --------- ---------
TOTAL LIABILITIES AND
PARTNERS' DEFICIT $ 89,589 $ 91,875 $ 114,647 $ 116,905 $ 124,087
========= ========= ========= ========= =========
17
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with NPAMLP'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 NPAMLP 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. NPAMLP'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, 2003, the Third Party Underlying Obligations were
current for all the Properties except for the property located in San Mateo,
California.
With respect to the San Mateo property, Kmart remits its rent directly
to the holder of the Third Party Underlying Obligation in accordance with the
loan documents. A portion of the rent due for 2002 was a pre-petition obligation
of Kmart and was not paid to the lender. The lender has not issued a default
notice for this mortgage.
As of December 31, 2003, the net book value and net Wrap Mortgage
balance for this Property is:
Property Net Book Value Net Wrap Mortgage Balance
- -------- -------------- -------------------------
San Mateo 1,742,000 2,413,000
See "Item 7. Management's Discussion and Analysis of Financial Condition - II
Critical Accounting Policies."
C. WORKING CAPITAL
As of December 31, 2003, NPAMLP has working capital of approximately
$1,733,000 excluding amounts due to the Managing General Partner and the Pension
Groups of $1,437,000 and $662,000, respectively. NPAMLP's operating budget for
2004 projects positive cash flow of approximately $200,000.
To date, NPAMLP has replenished its working capital reserves through
the sale of Properties. This has occurred when holders of the Second Mortgage
and Wrap Mortgage have released their liens on Properties which have been sold,
notwithstanding that pursuant to the terms of the Restructuring Agreement the
proceeds were payable to the holders of the Second Mortgage and the Wrap
Mortgage. They have agreed in certain instances to release their liens and
provide proceeds from the sale to NPAMLP 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 lenders are not obligated to subordinate or release
their mortgages, their continued cooperation in this regard is expected.
Pursuant to the 2003 Agreement (See "Item 7. Management's Discussion and
Analysis of financial Condition and results of Operations - V. Indebtedness
Secured by the Properties - D. Future Interest Agreement"), the holders of the
Wrap Mortgages are obligated to release their mortgages in the event of a sale
of Property. As of December 31, 2003, the Managing General Partner has advanced
approximately $1,437,000 to NPAMLP but may require the repayment of the advances
for its own operational needs.
D. LOAN OBLIGATIONS
Although all the Third Party Underlying Obligations on which balloons
have become due to date have ultimately 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. In the event
that NPAMLP is not able to obtain refinancing commitments from alternative
lenders or loan extensions from the lenders holding the existing Third Party
Underlying Obligations, the properties could be lost to foreclosure. See "Item
2. Properties."
18
E. CAPITAL REQUIREMENTS
The average age of the Properties owned by NPAMLP 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, 2003,
NPAMLP was obligated for approximately $1,087,000 of capital commitments which
were primarily for property redevelopment. The 2004 operating budget for the
Properties provides for approximately $318,000 in capital repair reserves.
During 2003, NPAMLP had two outstanding lines of credit with E&H
Properties, Inc., an affiliate of NPA ("E&H"), under which E&H would advance up
to $1.25 million to NPAMLP for purposes of making Capital and Tenant
Improvements (the "NPAMLP Lines"). The NPAMLP Lines include a $1,000,000 line of
credit (the "Hudson Line") and a $250,000 line of credit (the "Firstrust Line").
Pursuant to the NPAMLP Lines, the obligation of E&H to make advances to NPAMLP
is at all times in the sole and absolute discretion of E&H. At December 31,
2003, there were $1,093,000 of advances and $19,000 in accrued interest was due
under the NPAMLP Lines.
Amounts advanced pursuant to the Hudson Line and Firstrust Line bear
interest at the Prime Rate as published in the Wall Street Journal's "Money
Rates" section. Amounts advanced pursuant to the Firstrust Line are secured by a
$250,000 mortgage and an assignment of rents and leases on the property in Sault
Ste. Marie, Michigan.
In 1999, E&H secured a line of credit with Firstrust Bank of
Conshohocken, PA ("Firstrust Bank"), which will enable E&H to fund the Firstrust
Line and the Hudson Line in order to finance Capital and Tenant Improvements
(the "E&H Firstrust Line").
At December 31, 2003, the E&H Firstrust Line permitted E&H to borrow up
to $2,500,000 which it can loan to NPAMLP and can use for E&H's general working
capital.
Pursuant to the promissory note executed with respect to the E&H
Firstrust Line (the "Firstrust Note"), the amounts advanced pursuant to the
Firstrust Note bear interest at the Prime Rate as published in the Wall Street
Journal's "Money Rates" section (the "E&H Firstrust Borrowing Rate"). The
current E&H Firstrust Borrowing Rate is 4.00%.
The Firstrust Note is secured by an assignment of certain Wrap Notes
and Second Mortgages and certain Guaranty and Suretyship Agreements executed by
EBL&S Property Management, Inc. and Edward B. Lipkin. Additionally, the
Firstrust Note contains a confession of judgment against E&H and the Guaranty
and Suretyship Agreements contain a confession of judgment against EBL&S
Property Management, Inc. and Edward B. Lipkin.
At December 31, 2003, $1,093,000 has been advanced and $19,000 in
accrued interest was due under the NPAMLP Lines and $1,133,000 has been borrowed
under the E&H Firstrust Line, respectively.
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, 2003, approximately $25,000 was provided to tenants in rental
abatements.
II. CRITICAL ACCOUNTING POLICIES
NPAMLP uses estimates and assumptions that can have a significant
effect on the amounts that are reported in its financial statements. Management
believes the following are its most significant accounting policies as they may
require a higher degree of judgement and estimation.
In August 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for the
Impairment or Disposal of Long-Lived Asset. SFAS No. 144 addresses financial
accounting and reporting for the impairment or disposal of long-lived assets and
supercedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of. However, SFAS No. 144 retains the
fundamental provisions of SFAS No. 121 for (a) recognition and measurement of
the impairment of long-lived assets to be held and (b) measurement of long-lived
assets to be disposed of by sale. SFAS No. 144 supercedes the accounting and
reporting
19
provisions of Accounting Principles Board (APB) Opinion No. 30, Reporting the
Results of Operations-Reporting the Effects of Disposal of a Segment of a
Business and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions, for the disposal of a segment of a business. However, SFAS No. 144
retains the requirements of APB Opinion No. 30 to report discontinued operations
separately from continuing operations and extends that reporting to a component
of an entity that either has been disposed of (by sale, by abandonment, or in
distribution to owners), or is classified as held for sale.
NPAMLP adopted SFAS No. 144 on January 1, 2002 and accordingly, the
results of operations of the properties disposed of or held for sale during the
years ended December 31, 2003 and 2002 have been classified as Discontinued
operations in the Statement of Operations and Changes in Partners' Deficit for
the three years ended December 31 2003, 2002 and 2001. The gain reported in
discontinued components was $808,000 for the year ended December 31, 2003. For
the years ended December 31, 2002 and 2001, a loss of $5,064,000 and $1,549,000,
respectively, was reported in discontinued operations. See "Item 6. Selected
Financial Data."
As required by SFAS No. 144, rental properties are 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
rental properties is measured by comparison of the carrying amount of the
properties to future net cash flows expected to be generated by the properties
or to an appraised amount. If any property is considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the property exceeds its fair value. Properties to be disposed are
reported at the lower of the carrying amount or the fair value less costs to
sell.
During the year ended December 31, 2002, an analysis of the estimated
future undiscounted cash flows from the Hutchinson, Minnesota property indicated
that the property might be impaired. A write-down of $413,000 was required under
SFAS No. 144 and is included in discontinued components for the year ended
December 31, 2002. During the year ended December 31, 2001, an analysis of the
estimated future undiscounted cash flows from the Borger, Texas property
indicated that the property might be impaired. A write-down of $250,000 was
required under SFAS No. 121 and is included in Write-down of rental property for
the year ended December 31, 2001. The estimated fair value of these properties
was determined by management based on projected cash flows and market trends. In
July 2003, the Hutchinson property was foreclosed by the property's lender (see
"Results of Operations - Property Dispositions During Fiscal 2003" below).
III. RESULTS OF OPERATIONS
A. PROPERTY DISPOSITIONS DURING FISCAL 2003
NPAMLP owned 37 and 40 properties at December 31, 2003, and 2002,
respectively. As a result of Kmart's bankruptcy petition and subsequent
rejection of certain leases, the Sparks, Fort Wayne and Newberry properties were
disposed and the Lake Mary property could be disposed. Also, the Kmart lease at
the Bowling Green property was rejected during the second quarter of 2002. See
"Item 1. Business - II. NPAMLP Objectives and Policies - B. Competition for
Tenants - Anchor Tenants."
During the first quarter of 2003 NPAMLP sold the Escanaba, MI property
and the vacant anchor tenant space at the Wheelersburg, OH property. The net
gain on sale of the Escanaba property, including the forgiveness of wraparound
mortgages payable, net of discounts was $495,000. The net gain on the sale of
the vacant anchor tenant space at the Wheelersburg property was $336,000.
During the second quarter of 2003 the Clackamas, OR property was
conveyed to the holder of a 1995 option agreement in accordance with its terms.
The net gain on this transaction, including the forgiveness of wraparound
mortgages payable, net of discounts was $186,000. In addition, the Hutchinson,
MN property was foreclosed by the holder of the Third Party Underlying Mortgage.
As a result, NPAMLP recorded a net gain in disposition of properties, including
forgiveness of wraparound mortgages, net of discounts in the amount of
$1,197,000.
B. PROPERTY ACQUISITIONS DURING FISCAL 2001
During 2001, a property located in Lawnside, New Jersey was acquired to
complete a 2000 transaction structured to be a tax-free exchange in accordance
with Section 1031 of the Internal Revenue Code. See "Item 5. Market Price for
the Registrant's Common Equity and Related Stockholder Matters - IV. Certain
Income Tax Consequences - A. Recognition of Gain."
20
C. FULL FISCAL YEARS
Over the five year period ended December 31, 2003, NPAMLP disposed of
14 Properties and acquired 2 Properties. Between 1999 and 2001, 2 Properties
were disposed and 2 Properties were acquired in transactions structured to be
tax-free exchanges in accordance with Section 1031 of the Internal Revenue Code.
The net number of Properties owned and disposed of by year are as follows:
2003 2002 2001 2000 1999
---- ---- ---- ---- ----
Beginning of year 40 49 48 48 49
Properties (acquired) disposed 3 9 (1) - 1
--- --- --- --- ---
End of year 37 40 49 48 48
=== === === === ===
The disposition of Properties resulted in "Net (loss) gain on
disposition of properties" and "Forgiveness of wraparound mortgages payable on
disposition of properties" as reflected in the financial statements.
The following table reflects the operating results (in thousands) for
NPAMLP for the years ended December 31, 2003, 2002, 2001, 2000 and 1999,
excluding the operating results for 14 Properties that were disposed and 2
Properties that were acquired during the five year period. The table is
presented in order to facilitate an understanding of the operating results and
trends of NPAMLP.
2003 2002 2001 2000 1999
---- ---- ---- ---- ----
INCOME:
Rental income $13,442 $13,351 $13,520 $13,460 $13,693
Other charges
to tenant 3,888 3,936 4,201 4,089 4,554
Interest income 195 216 220 239 210
Other income - - - - 150
------- ------- ------- ------- -------
TOTAL INCOME 17,525 17,503 17,941 17,788 18,607
------- ------- ------- ------- -------
OPERATING EXPENSES:
Interest expense 8,455 8,322 8,197 7,944 7,766
Other operating
expenses 9,105 8,660 8,061 7,973 7,979
Depreciation and
amortization 5,366 5,312 5,276 5,249 5,209
------- ------- ------- ------- -------
TOTAL OPERATING
EXPENSES 22,926 22,294 21,534 21,166 20,954
------- ------- ------- ------- -------
OPERATING LOSS $(5,674) $(4,791) $(3,593) $(3,378) $(2,347)
======= ======= ======= ======= =======
The fluctuations in "Rental Income" between years has been modest and
did not exceed 1.7% 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. Variances from year to year are primarily a
result of increased or decreased percentage rental income which is derived from
tenant sales. Anchor Tenant sales depend largely on the overall economy,
however, also during 2002, NPAMLP's major tenant (Kmart) filed for bankruptcy
protection. This has resulted in a general decrease in Rental income and Other
charges to tenants as well as an increase in Other operating expenses.
The reduction in Other charges to tenants between 2001 and 2002 was
primarily a result of reduced common area maintenance reimbursements which
primarily resulted from reduced snow removal expenses during 2001.
The Properties are financed by long term fixed rate debt and
consequently fluctuations between 1999 and 2003 did not exceed 3.2% for any of
these years.
The increase in Other operating expenses between 2001 and 2003 was
primarily a result of increased general and administrative costs. Between 2001
and 2002, these costs included a large increase in bad debt expense which was
partially due to direct write-offs of uncollectible accounts receivable and to
an increase in the allowance for bad debt. The allowance and corresponding
expense was increased by $220,000 due to the Kmart bankruptcy and management's
recent experience with other uncollectible accounts from tenants other than
Kmart. Also, additional legal and other professional fees were incurred as a
result of the Kmart bankruptcy, which further increased NPAMLP's general and
administrative expenses between 2001 and 2002 and between 2002 and 2003. An
additional increase in Other operating expenses between 2002 and 2003 resulted
from increased repairs and maintenance expenses which included environmental
remediation incurred in connection with the preparation of new tenant space.
The increases in depreciation and amortization between 1999 and 2003
are due to capital improvements.
21
IV. TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS
Payments due by period
(in thousands)
------------------------------------------------------------
Contractual Less than More than
Obligations Total 1 year 1-3 years 3-5 years 5 years
- ---------------------- -------- --------- --------- --------- ----------
Wrap Mortgages Payable $260,688 $ 12,892 $ 20,702 $ 19,010 $208,084
Ground Leases 11,687 842 1,051 980 8,814
-------- -------- -------- -------- --------
Total $272,375 $ 13,734 $ 21,753 $ 19,990 $216,898
======== ======== ======== ======== ========
V. 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, 2003, the aggregate indebtedness of NPAMLP pursuant to the Wrap
Mortgages was approximately $238 million, of which approximately $65 million
constituted indebtedness under the Third Party Underlying Obligations and $20
million constituted indebtedness under the Second Mortgages. See "Item 5. Market
Price for the Registrant's Common Equity and Related Stockholder Matters - IV.
Certain Income Tax Considerations - A. Recognition of Gain." As of December 31,
2003, the aggregate historical cost of the Properties securing the indebtedness
of NPAMLP mortgages was approximately $182 million. The original acquisition of
the Properties by the Partnerships was typically structured as set forth below.
Typically, NPA acquired a Property from an unaffiliated seller. NPA
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., NPA 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 NPAMLP 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.
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, 2003, was approximately $20
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 NPAMLP and a lien against
the Properties in favor of the Pension Groups. 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
22
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 Managing 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 NPAMLP 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 NPAMLP 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 NPAMLP 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 NPAMLP acquired from the Unaudited Partnerships. All of the
Wrap Notes which were originally secured by Wrap Mortgages on the Properties
which NPAMLP acquired from Unaudited Partnerships are secured by all of those
Wrap Mortgages and are not secured by Wrap Mortgages on the Properties which
NPAMLP 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 NPAMLP, 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 NPAMLP.
The Restructuring Agreement permits NPAMLP 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 NPAMLP; (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 NPAMLP and distributed by NPAMLP 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 NPAMLP 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 NPAMLP.
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 NPAMLP, 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,
23
so long as the aggregate amount of all Third Party Underlying Obligations is not
increased. 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 NPAMLP and all of the Second
Mortgages have been "wrapped" or included within all of the Wrap Mortgages.
D. FUTURE INTEREST AGREEMENT
In March 2003 NPAMLP, NPAEP and PVPG, entered into an Agreement,
effective as of January 1, 2003 (the "2003 Agreement"), in which NPAEP and PVPG
agreed with NPAMLP to modify the terms of Wrap Mortgages held by NPAEP and PVPG.
The terms of the 2003 Agreement provide that NPAEP and PVPG will: (a) reduce to
4.1% per year the annual interest rate payable on any NPAEP Wrap Note or PVPG
Wrap Note that bears a stated annual interest rate in excess of that amount; (b)
remove certain of the properties secured by the NPAEP and PVPG Wrap Mortgages
from the burden of the cross-default and cross-collateralization provisions
currently contemplated by the Restructuring Agreement effective as of January 1,
1990 by and among MLPG, NPAMLP, National Property Analysts, Inc. and others; and
(c) agree to release the lien of the Wrap Mortgages from the Properties upon a
sale of or the agreement of a leasehold estate in any Property prior to the
maturity of the applicable Wrap Note. In consideration for the above, NPAMLP
will modify the NPAEP Wrap Mortgages and the PVPG Wrap Mortgages to provide that
(i) there is an event of default under the applicable NPAEP Wrap Mortgages or
PVPG Wrap Mortgages, as the case may be, if a judgment or other lien is entered
against the title or lease-holding entity thereby entitling NPAEP or PVPG, as
the case may be, to avail itself of the post-default rights or remedies under
the relevant security document; and (ii) for cross-default and
cross-collateralization among the Unaudited Partnerships and, separately, among
the Audited Partnerships. In addition NPAMLP shall execute and deliver to NPAEP
or PVPG, as the case may be, a currently recordable deed of future interest (or
assignment of future leasehold interest) sufficient to convey to NPAEP or PVPG,
as the case may be, all of NPAMLP's right, title, interest and estate in and to
its fee or leasehold interest in the encumbered properties effective upon the
maturity on December 31, 2013 of the NPAEP Wrap Mortgages and the PVPG Wrap
Mortgages unless the Wrap Mortgages have previously been paid in full.
The Managing General Partner believes that the execution and delivery
of the 2003 Agreement will have the following effects for NPAMLP: as a result of
the reduction in the annual interest rate on the NPAEP Wrap Notes and the PVPG
Wrap Notes (i) NPAMLP expects to realize significant reductions in interest that
it otherwise would have been obligated to pay during the period between January
1, 2003 and December 31, 2013 when these loans mature and (ii) NPAMLP will be
able to allocate a greater portion of its available cash flow to principal
repayments. As a result of the faster repayment of principal, the Limited
Partners will recognize additional taxable income (or smaller tax losses) in
each year from 2003 until the maturity of the NPAEP Wrap Mortgages and the PVPG
Wrap Mortgages. In addition, the anticipated date of dissolution of NPAMLP will
now occur in 2013 rather than 2015. Further, because the reduced interest rate
is below the Applicable Federal Rate ("AFR") prescribed under Section 1274 of
the Internal Revenue Code of 1986, as amended, investors in Unaudited
Partnerships will recognize non-recurring ordinary income (forgiveness of
indebtedness) on average of approximately $4,000 per Limited Partner in 2003.
The tax impact of this recognition will depend upon numerous factors related to
each investor's particular tax situation, including his marginal tax rate and
his suspended passive losses from prior years. Each investor is urged to consult
his own tax advisor for further advice on this point.
Under the terms of the Restructuring Agreement, all Wrap Mortgages
owned by NPAEP or PVPG are due and payable in substantial "balloon" amounts on
December 31, 2013. Assuming no sales of Properties by NPAMLP in the interim
period (2003 through 2013) the projected balance due for all of the Wrap
Mortgages at December 31, 2013 is expected to approximate $143,000,000. As
described above, in return for the reduction in interest rate and other
consideration set forth above, including the satisfaction of the Wrap Mortgages
due on December 31, 2013, NPAMLP's general partner has agreed to deliver deeds
of future interest and assignments of leasehold interest, to be recorded
currently, effective December 31, 2013, to NPAEP and PVPG. NPAMLP's general
partner has determined that it is in the best interests of NPAMLP and its
partners to do so. The effect of these deeds and assignments will be to
facilitate a transfer of fee and leasehold ownership to the holders of the Wrap
Mortgages at maturity (unless the Wrap Mortgages have been previously paid in
full). Notwithstanding the foregoing, NPAEP and PVPG have agreed in the 2003
Agreement to (a) release the liens of the Wrap Mortgages and (b) deliver such
deeds of future interest, assignments of leasehold interests, or other documents
or instruments as are necessary to facilitate or effect such sales of the
Properties prior to December 31, 2013 as the Managing General Partner shall
otherwise deem desirable. The costs incurred arising from the recordation of any
of the documents described in the 2003
24
Agreement shall be borne by NPAEP or PVPG, as the case may be. The Managing
General Partner believes that the result of the forgoing actions taken pursuant
to the 2003 Agreement will preserve all rights of the Limited Partners under the
Restructuring Agreement, including their right to share in certain sales
proceeds or cash flows prior to maturity of the Wrap Mortgages.
Neither NPAMLP, NPAEP nor PVPG were represented by independent counsel
or retained other independent advisers or consultants in connection with the
negotiation, execution or delivery of the 2003 Agreement. Nonetheless, the
Managing General Partner believes that the transactions permitted or
contemplated by the 2003 Agreement are fair and equitable to NPAMLP and the
other parties involved.
ITEM 7(a). QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risks to NPAMLP primarily relate to changes in interest rates.
The interest rate exposure of NPAMLP primarily relates to its Wrap Mortgage
obligations. A significant portion of the Wrap Mortgage interest expense is
based upon an imputed rate which exceeds the stated rate. As a result,
management does not believe that NPAMLP's debt structure would be significantly
impacted by a change in the market rate of interest. The Wrap Mortgages and the
imputation of its interest is further discussed in NPAMLP's combined financial
statements and the accompanying notes 2(e) and 9 thereto which are included in
Part IV, Item 15 of this Form 10-K.
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 15 of this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
On May 22, 2002, the General Partners of NPAMLP approved the engagement
of Asher & Company, Ltd as its independent public accountants for the fiscal
year ending December 31, 2002, to replace the firm of KPMG LLP, which was
dismissed as auditors of NPAMLP effective May 22, 2002. The appointment of Asher
& Company, Ltd. is not subject to ratification by NPAMLP's Limited Partners.
In connection with the audits of NPAMLP's financial statements for the
fiscal years ended December 31, 2001 and December 31, 2000, and in the
subsequent period through May 22, 2002, there were no disagreements between
NPAMLP and KPMG LLP on any matters of accounting principles or practices,
financial statement disclosure, or auditing scope or procedures, which
disagreements, if not resolved to the satisfaction of KPMG LLP would have caused
them to make reference to the matter in their report.
The reports of KPMG LLP on NPAMLP's combined financial statements for
the years ended December 31, 2001 and December 31, 2000 did not contain an
adverse opinion or disclaimer of opinion, nor were they qualified or modified as
to uncertainty, audit scope, or accounting principles.
During the years ended December 31, 2001 and December 31, 2000 and
during the subsequent period through May 22, 2002, NPAMLP did not consult Asher
& Company, Ltd with respect to the application of accounting principles to a
specified transaction, either completed or proposed, or the type of audit
opinion that might be rendered on NPAMLP's combined financial statements, or any
other matters or reportable events as set forth in Items 304 (a) (2) (i) and
(ii) of Regulation S-K.
ITEM 9(a). CONTROLS AND PROCEDURES
Within the ninety-day period prior to the filing of this report on form
10-K, an evaluation was carried out under the supervision and with the
participation of NPAMLP's management, including the principal executive officer
and the principal financial officer, of the effectiveness of the design and
operation of NPAMLP's disclosure controls and procedures. The conclusions of
such officers with respect to the effectiveness of NPAMLP's disclosure controls
and procedures are set forth hereinafter. Additionally, there were no
significant changes in NPAMLP's internal controls or in other factors that could
significantly affect these controls subsequent to the date of such officer's
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses (none of which were found to exist). (See
"Certifications" set forth as Exhibits).
25
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
I. SUMMARY
EBL&S, Inc., a Delaware corporation incorporated in December, 1989, and
an affiliate of NPA, is the Managing General Partner of NPAMLP. Feldman
International, Inc., a Delaware corporation incorporated in September 1998 is
the Equity General Partner of NPAMLP. The Managing General Partner is owned 100%
by E&H Properties, Inc., a Pennsylvania corporation incorporated in July, 1979,
which is owned 100% by Edward B. Lipkin. The Equity General Partner is owned
100% by Robert McKinney.
The directors and executive officers of the General Partners are as
follows:
Edward B. Lipkin, age 58, serves as Director of the Managing 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.
Robert McKinney, age 48, serves as Director of the Equity General
Partner. Mr. McKinney received a Masters of Science and Masters of Business
Administration from Villanova University and Temple University, respectively.
II. CODE OF ETHICS
In view of the fiduciary obligation that the Managing General Partner
has to NPAMLP, the Managing General Partner believes an adoption of a formal
code of ethics is unnecessary and would not benefit NPAMLP, particularly, in
light of NPAMLP's limited business activities.
III. AUDIT COMMITTEE FINANCIAL EXPERT
Because the Managing General Partner does not have an audit committee,
it has not designated an audit committee financial expert.
ITEM 11. EXECUTIVE COMPENSATION
Neither the General Partners nor the officers of the General Partners
receive compensation from NPAMLP. Certain administrative services related to tax
and accounting service and to investor note collections were performed by the
Managing General Partner on behalf of NPAMLP as provided in the Partnership
Agreement. The amount payable to the Managing General Partner for such services
aggregated $157,000, $160,000 and $77,000 for the years ended December 31, 2003,
2002 and 2001, 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
AMOUNT AND
NAME & ADDRESS OF NATURE OF
TITLE OF CLASS BENEFICIAL OWNER BENEFICIAL OWNERSHIP % OF CLASS
- -------------- ---------------- -------------------- ----------
Units of Limited Robert McKinney 1,000 Units 1.0%
Partnership Interest 230 S. Broad Street
Philadelphia, PA 19102
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 Partners and its affiliates during the operation of NPAMLP are
summarized below.
PERSON RECEIVING ESTIMATED AMOUNT
COMPENSATION TYPE OF COMPENSATION OF COMPENSATION
- --------------------- -------------------- ---------------
ORGANIZATIONAL PHASE
Equity General Partner 1% general partners'
interest in NPAMLP.
OPERATIONAL PHASE
Equity General Partner General Partners' share of On an annual basis,
Cash Flow from Operations. 1% of Cash Flow from
26
Operations. Actual amounts will
depend upon future operations and
are not now determinable.
EBL&S Property Property Management Fees. Annual fee of 5% of gross operating
Management, Inc. 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 renewed leases,
Management, Inc. 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.
Equity General Partner General Partners' share The Equity General Partner will be
Of Profit and Losses. allocated 1% of the profits and
losses from NPAMLP operations.
Managing General Reimbursement of Expenses(1) Actual cost of goods and services
Partner utilized for or by NPAMLP,
including certain administrative
services performed by the Managing
General Partner.
LIQUIDATION PHASE
Equity General Partner General Partners' share of The Equity General Partner will be
Proceeds of Sales of the allocated 1% of the Proceeds of Sale
Properties. of the Properties.
E&H Properties, Inc. Repayment of Indebtedness Actual amounts will depend on the
secured by Second Mortgages. price of Properties and are not now
determinable.
II. PROPERTY MANAGEMENT BY AFFILIATE
As of January 1, 1990, NPAMLP 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 NPAMLP's Managing General Partner, EBL&S, Inc. The
directors of EBL&S Property Management, Inc. are the same as those of the
Managing 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.
- ---------------------
(1) All expenses of NPAMLP are billed directly to and paid by NPAMLP.
The Managing General Partner is reimbursed for the actual cost of goods and
materials used for or by NPAMLP and obtained from entities which are not
affiliates of the Managing General Partner. In addition, the Managing General
Partner is reimbursed for administrative services performed for NPAMLP, provided
that such services are necessary for the prudent operation of NPAMLP and further
provided that such reimbursement is at the lower of (i) the Managing 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 Managing 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
NPAMLP maintains offices and other overhead costs.
27
An aggregate of approximately $887,000 was earned by the Property Manager for
management fees, and an aggregate of approximately $107,000 was earned by the
Property Manager for leasing fees for the fiscal year 2003.
III. CONFLICTS OF INTEREST
From time to time, there may be conflicts of interest between the
Managing General Partner and its affiliates (including the Property Manager) on
the one hand and NPAMLP and its Limited Partners on the other hand. The Managing
General Partner will attempt to resolve any conflicts of interest by exercising
the good faith required of fiduciaries, and the Managing 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 NPAMLP. A
resolution which is unfavorable to NPAMLP will result only if the Managing
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 - I. Liquidity and Capital Resources."
A. CONFLICT REGARDING SALES AND REFINANCING
The Managing General Partner is an affiliate of NPA. NPA or its
affiliates hold the Second Mortgages aggregating $20 million. This lack of
independence gives rise to certain conflicts of interest with respect to the
sale or refinancing of the Properties.
The Managing 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 Managing General Partner is
an affiliate of NPA, the Managing 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 Managing General Partner (as an
affiliate of NPA) will have a financial incentive to cause NPAMLP to maximize
Proceeds of Sales of the Properties. Furthermore, the Managing General Partner
is accountable to NPAMLP and the Limited Partners as a fiduciary and,
consequently, must exercise good faith and integrity in handling the affairs of
NPAMLP 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 PARTNERS
There is no limitation on the right of the affiliates of the General
Partners to engage in any business even if the business is competitive with the
business of NPAMLP. For instance, if an affiliate of the General Partners owns
or manages a property which competes for tenants with a Property owned by
NPAMLP, the economic interest of the equity owners of the General Partners in
that affiliate may create a conflict between the General Partners or the
Property Manager on the one hand and NPAMLP on the other with respect to
allocating prospective tenants between competitive properties. The Managing
General Partner and its affiliates presently own properties that are competitive
with the Properties and affiliates of the Managing General Partner may act as
manager of such properties.
C. COMPETITION BY NPAMLP WITH AFFILIATES OF THE MANAGING GENERAL
PARTNER FOR SERVICES OF OFFICERS AND EMPLOYEES
NPAMLP depends on the Managing General Partner to operate NPAMLP. The
Managing General Partner believes it will have sufficient staff personnel and
resources to perform all of its duties with respect to managing NPAMLP. However,
because the staff personnel and resources are shared with affiliates, the
Managing General Partner and certain of its affiliates have conflicts of
interest in the allocation of management and staff time, services and functions
among NPAMLP 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 Managing General Partner) and EBL&S Property Management, Inc. (the Property
Manager). E&H Properties, Inc. is owned 100% by Edward B. Lipkin (Lipkin).
Feldman International, Inc. is owned 100% by Robert McKinney, an employee of the
Property Manager. The General Partners and the Property Manager both have
ongoing relationships with NPAMLP. E&H Properties, Inc. and the affiliates which
it controls are the holders of the Second Mortgages.
28
V. RELATED PARTY TRANSACTIONS
During 1996, the El Paso, Texas property was sold to a limited
partnership owned by directors and executives of the Managing General Partner.
The sales price of the property was determined to be at fair market value by an
independent appraiser. In connection with the transaction, a promissory note was
issued to NPAMLP in the approximate amount of $436,000. The note is interest
only, bears interest at 10% and matures on November 1, 2008.
During the first quarter of 2001, NPAMLP completed a transaction
structured as a tax-free exchange in accordance with Section 1031 of the
Internal Revenue Code by purchasing a property located in Lawnside, New Jersey
for $4,507,000 which included the assumption of related debt in the amount of
$4,507,000 from a limited partnership controlled by Lipkin.
During the first quarter of 2002, NPAMLP sold a property located in
Newberry, South Carolina for $1,080,000 which included the assumption of related
debt in the amount of $650,000 to a limited partnership in which Lipkin owned
the 1% interest of the general partner. The net gain on this transaction
including the forgiveness of wraparound mortgages, net of discounts, was
$522,000. During the third quarter of 2002, NPAMLP sold a property located in
Fairfield, Iowa for $650,000 to a limited partnership in which Lipkin owned the
1% interest of the general partner. The net gain on this transaction including
the forgiveness of wraparound mortgages, net of discounts, was $690,000.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
I. AUDIT FEES
The aggregate fees billed for each of the last two fiscal years for
professional services rendered by Asher & Company, Ltd. and KPMG, LLP for the
audit of NPAMLP's annual financial statements and review of financial statements
included in NPAMLP's Form 10-Q, or services that are normally provided by the
accountant in connection with the statutory and regulatory filings or
engagements for such two fiscal years, amounted to $106,000 ($56,000 and $50,000
for the years ended December 31, 2003 and 2002, respectively), and $21,000
($7,000 and $14,000 for the years ended December 31, 2003 and 2002,
respectively), respectively.
II. AUDIT RELATED FEES
The aggregate fees billed in each of the last two fiscal years for
assurance and related services by KPMG, LLP that are reasonably related to the
performance of the audit or review of NPAMLP's financial statements and are not
reported above in "Item 14 - I. Audit Fees", amounted to $5,000 for the year
ended December 31, 2002. The nature of the services comprising the fees
disclosed under this category included the review of Form 8-K and predecessor
review of audit workpapers.
III. TAX FEES
The aggregate fees billed in each of the last two fiscal years for
professional services rendered by Asher & Company, Ltd. for tax compliance, tax
advice and tax planning were $12,000 ($6,000 for each of the years ended
December 31, 2003 and 2002).
IV. ALL OTHER FEES
There were no fees billed in each of the last two fiscal years for
products or services provided by Asher & Company, Ltd. other than the services
reported in the three preceding paragraphs.
29
PART IV
ITEM 15. 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' Reports............................................................ F-1
Combined Financial Statements:
Combined Balance Sheets at December 31, 2003 and 2002.................................. F-3
Combined Statements of Operations and Changes
in Partners' Deficit for the years ended
December 31, 2003, 2002 and 2001....................................................... F-4
Combined Statements of Cash Flows for the years ended
December 31, 2003, 2002 and 2001....................................................... F-5
Notes to Combined Financial Statements................................................... F-6
Attachments
1 Properties Effectively Owned by NPAMLP at
December 31, 2003................................................................... F-16
2 Schedules II and III to the Combined Financial
Statements.......................................................................... F-17
B. EXHIBITS
Exhibit No. Description
- ----------- -----------
*2.1 Consolidation Agreement by and among the National Property Analysts Master
Limited Partnership ("NPAMLP"); 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 NPAMLP.
*3.2 Amended and Restated Limited Partnership Agreement of NPAMLP.
*3.3 Certificate of Limited Partnership of NPAMLP.
****3.4 Amendment One to the Amended and Restated Limited Partnership Agreement of
NPAMLP.
*10.1 Restructuring and Mortgage Modification Agreement by and among Main Line
Pension Group, L.P. ("MLPG"), NPAMLP and National Property Analysts, Inc.
30
*10.2 Leasing and Management Agreement by and between EBL&S Property Management,
Inc. and NPAMLP.
*10.3 Information Statement Relating to the formation of NPAMLP.
*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.
***10.7 Agreement between NPAMLP, NPAEP and PVPG.
***16.1 Letter from replaced accountants (previously filed with Form 8-K dated May
29, 2002).
31.1 Certification of Managing General Partner pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
31.2 Certification of Equity General Partner pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
31.3 Certification of Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
32.1 Certification of Managing General Partner pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
32.2 Certification of Equity General Partner pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
32.3 Certification of Chief Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
* 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).
*** Incorporated by reference from Registrant's Report on Form 10-K filed
March 31, 2003 (0-24816).
**** Incorporated by reference from Registrant's Report on Form 10-Q filed
November 11, 2003 (0-24816).
II. REPORTS ON FORM 8-K
On May 29, 2002, NPAMLP reported on Form 8-K that the General Partners
of NPAMLP approved the engagement of Asher & Company, Ltd as its independent
public accountants for the fiscal year ending December 31, 2002, to replace the
firm of KPMG LLP, which was dismissed as auditors of NPAMLP effective May 22,
2002. See "Item 9. Changes in and disagreements with Accountants on Accounting
and Financial Disclosure."
31
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 managing general partner
By: /s/ Edward B. Lipkin
------------------------------
Edward B. Lipkin
Director
Date: March 12, 2004
By: Feldman International, Inc., its equity general partner
By: /s/ Robert McKinney
------------------------------
Robert McKinney
Director
Date: March 12, 2004
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.
Signature Capacity Date
--------- -------- ----
/s/ Edward B. Lipkin Director of EBL&S, Inc.
- -------------------- Principal Executive Officer,
Edward B. Lipkin Principal Accounting Officer and
Principal Financial Officer March 12, 2004
/s/ Robert McKinney Director of Feldman International, Inc. March 12, 2004
- -------------------
Robert McKinney
32
INDEPENDENT AUDITORS' REPORT
General Partners
National Property Analysts Master Limited Partnership
We have audited the accompanying combined balance sheets of National
Property Analysts Master Limited Partnership (NPAMLP) (a limited partnership) as
of December 31, 2003 and 2002 and the related combined statements of operations
and changes in partners' deficit, and cash flows for the years then ended. In
connection with our audits of the combined financial statements, referred to
above, we have also audited the financial statement schedules of properties
effectively owned by NPAMLP (Schedule I), combined valuation and qualifying
accounts (Schedule II), and combined real estate and accumulated depreciation
schedule (Schedule III) as of December 31, 2003 and 2002. 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 auditing standards generally
accepted in the United States of America. 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 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 combined financial position of
National Property Analysts Master Limited Partnership as of December 31, 2003
and 2002 and the combined results of their operations and their cash flows for
the years then ended in conformity with accounting principles generally accepted
in the United States of America. 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/ ASHER & COMPANY, Ltd.
Philadelphia, Pennsylvania
March 5, 2004
F-1
INDEPENDENT AUDITORS' REPORT
General Partners
National Property Analysts Master Limited Partnership
We have audited the combined statement of operations and changes in
partners' deficit of National Property Analysts Master Limited Partnership
(NPAMLP) (a limited partnership), and the related combined statement of cash
flows for the year ended December 31, 2001. In connection with our audit of the
combined financial statements referred to above, we have also audited the
financial statement schedules of combined valuation and qualifying accounts for
the year ended December 31, 2001 and combined real estate and accumulated
depreciation as of December 31, 2001. 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 audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. 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 amount 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
audit provides a reasonable basis for our opinion.
In our opinion, the 2001 combined financial statements referred to
above present fairly, in all material respects, the results of operations of
NPAMLP and its cash flows for the year ended December 31, 2001, in conformity
with accounting principles generally accepted in the United States of America.
Also, in our opinion, the related combined 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, LLP
Philadelphia, PA
March 15, 2002
F-2
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
(a limited partnership)
Combined Balance Sheets
December 31, 2003 and 2002
(in thousands)
2003 2002
---------- ----------
ASSETS
Rental property at cost:
Land $ 11,412 $ 11,983
Buildings 170,326 176,756
---------- ----------
181,738 188,739
Less: accumulated depreciation 105,283 105,559
---------- ----------
Rental property, net 76,455 83,180
Cash and cash equivalents 773 2,587
Restricted cash 3,048 2,384
Investment securities available for sale, at market 660 1,453
Tenants accounts receivable, net of allowance of $150 and
$250 for 2003 and 2002, respectively 157 745
Unbilled rent receivable 282 226
Other assets (1) 1,214 1,300
---------- ----------
Total assets $ 82,589 $ 91,875
========== ==========
LIABILITIES AND PARTNERS' DEFICIT
Wraparound mortgages payable (1) $ 237,968 $ 252,746
Less: unamortized discount based on imputed interest rate of 12% (1) 109,525 122,319
---------- ----------
Wraparound mortgages payable less unamortized discount (1) 128,443 130,427
Due to Pension Groups (1) 662 576
Other borrowings (1) 1,093 770
Accounts payable and other liabilities (1) 3,224 3,381
Deferred revenue 157 500
Finance lease obligation 2,150 2,150
Deposit on sale of property - 301
---------- ----------
Total liabilities 135,729 138,105
Unrealized gain (loss) on investment securities 69 (24)
Partners' deficit (53,209) (46,206)
---------- ----------
Total partners' deficit (53,140) (46,230)
---------- ----------
Total liabilities and partners' deficit $ 82,589 $ 91,875
========== ==========
(1) See Note 3: Related Party Transactions.
See accompanying notes to combined financial statements.
F-3
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
(a limited partnership)
Combined Statements of Operations and Changes in Partners' Deficit
Years ended December 31, 2003, 2002 and 2001
(in thousands, except unit data)
2003 2002 2001
------------- ----------- ---------
Income:
Rental income $ 14,756 $ 14,633 $ 15,064
Other charges to tenants 4,281 4,259 4,408
Interest income 208 217 230
------------- ----------- ---------
Total income 19,245 19,109 19,702
------------- ----------- ---------
Operating expenses:
Interest expense (1) 13,174 13,186 13,012
Real estate taxes 3,751 3,856 3,726
Management fees (1) 878 835 878
Common area maintenance expenses 2,320 1,922 2,044
Ground rent 556 488 492
Repairs and maintenance 413 173 203
General and administrative 1,546 1,232 559
Depreciation 5,542 5,505 5,501
Amortization 210 188 164
------------- ----------- ---------
Total operating expenses 28,390 27,385 26,579
------------- ----------- ---------
Operating loss (9,145) (8,276) (6,877)
------------- ----------- ---------
Other income (expense):
Realized gain (loss) on investment securities 97 (185) -
Forgiveness of wraparound mortgages payable
on disposition of properties (1) 1,237 10,770 -
------------- ----------- ---------
(Loss) income from continuing operations (7,811) 2,309 (6,877)
Discontinued operations:
Gain(loss) from operations of discontinued components
(including gain (loss) on disposition of properties of
$923 and ($3,548) for the years ended December 31, 2003
and 2002; and write-down of rental property of $413 and
$250 for the years ended December 31, 2002 and 2001) (1) 808 (5,064) (1,549)
------------- ----------- ---------
Net loss (7,003) (2,755) (8,426)
Partners' deficit:
Beginning of year (46,230) (43,453) (35,025)
Net change in unrealized gain on investment securities 93 (22) (2)
------------- ----------- ---------
End of year $ (53,140) $ (46,230) $ (43,453)
============= =========== =========
Net loss per unit $ (71.64) $ (28.18) $ (86.20)
============= =========== =========
Weighted average units outstanding 97,752 97,752 97,752
============= =========== =========
(1) See Note 3: Related Party Transactions.
See accompanying notes to combined financial statements.
F-4
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
(a limited partnership)
Combined Statements of Cash Flows
Years ended December 31, 2003, 2002 and 2001
(in thousands)
2003 2002 2001
--------- --------- ---------
Cash flows from operating activities:
Net loss $ (7,003) $ (2,755) $ (8,426)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation 5,639 6,272 7,019
Amortization of discount (1) 8,703 7,257 7,672
Provision for bad debts (100) 220 -
Net gain on disposition of properties including
forgiveness of wraparound mortgage payable (2,160) (7,222) -
Gain on finance lease obligation - (500) -
Realized (gain) loss on investment securities (97) 185 -
Write-down of rental property - 413 250
Changes in assets and liabilities:
Decrease (increase) in tenants accounts
receivable 688 (572) (275)
(Increase) decrease in unbilled rent receivable (56) (14) 209
Decrease (increase) in other assets 86 (302) 1,652
(Decrease) increase in accounts payable and
other liabilities (157) 1,334 129
(Decrease) increase in deferred revenue (343) (205) 622
--------- --------- ---------
Net cash provided by operating activities 5,200 4,111 8,852
--------- --------- ---------
Cash flows from investing activities:
Disposition of properties 336 4,434 -
Acquisition of properties - - (4,507)
Improvements to rental property (2,160) (1,384) (691)
(Increase) decrease in restricted cash (664) 22 5
Decrease in deposit on sale of property (301) (1,750) -
Purchase of investment securities (262) (4,909) (100)
Sale of investment securities 1,245 3,347 -
--------- --------- ---------
Net cash used in investing activities (1,806) (240) (5,293)
--------- --------- ---------
Cash flows from financing activities:
Payments on wraparound mortgages (5,617) (5,463) (6,711)
Increase (decrease) in due to/from Pension Groups 86 620 (93)
Proceeds from other borrowings 323 - -
Proceeds from additional debt - - 4,507
--------- --------- ---------
Net cash used in financing activities (5,208) (4,843) (2,297)
--------- --------- ---------
(Decrease) increase in cash and cash equivalents (1,814) (972) 1,262
Cash and cash equivalents:
Beginning of year 2,587 3,559 2,297
--------- --------- ---------
End of year $ 773 $ 2,587 $ 3,559
========= ========= =========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ 4,580 $ 6,561 $ 8,511
========= ========= =========
Supplemental disclosure of noncash activities:
Reduction in wraparound mortgages from forgiveness
of debt, net of related discount $ 5,070 $ 21,244 $ -
========= ========= =========
(1) See Note 3: Related Party Transactions.
See accompanying notes to combined financial statements.
F-5
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
(a limited partnership)
Notes to Combined Financial Statements
December 31, 2003, 2002 and 2001
(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% collectively by EBL&S, Inc., the managing
general partner, and Feldman International, Inc. (FII), the equity
general partner. EBL&S, Inc. assigned its economic interest as general
partner to FII on September 30, 1998.
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 managing
general partner. However, in accordance with the partnership agreement,
the partnership will terminate on December 31, 2013. 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 (MLPG). 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 MLPG which were subordinate to the third- party
underlying mortgage obligations and other second mortgages. Neither these
third-party underlying obligations nor the second mortgages represented
direct financial obligations of the Electing Partnerships. The Electing
Partnerships were required to make payments on the wraparound mortgages
to MLPG, 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 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.
In connection with the Consolidation, NPAMLP, MLPG 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 wraparound mortgages on
properties owned by Electing Partnerships that were audited by the
Internal Revenue Service (the Audited Partnerships) are
cross-collateralized by all other wraparound mortgages on other Audited
Partnerships. In addition, all wraparound notes which were originally
secured by wraparound mortgages on properties owned by Electing
Partnerships that were not audited by the Internal Revenue Service (the
Unaudited Partnerships) are cross-collateralized by all other wraparound
mortgages on other Unaudited Partnerships.
Effective October 1, 1998, National Property Analysts Employee
Partnership (NPAEP) and Penn Valley Pension Group (PVPG) acquired the
interest of MLPG in certain wraparound mortgages. MLPG, NPAEP and PVPG
are collectively referred to as the Pension Groups.
The restructuring agreement provides for a sharing of cash from the
proceeds of sales of properties. The restructuring agreement generally
provides that the limited partners of NPAMLP receive 40% of the net
proceeds, if any, from the sale of properties after repayment of the
third-party underlying mortgage obligations once the net proceeds, as
defined in the restructuring agreement, from the sale of properties
exceed a threshold amount of $45,000 (the Threshold).
Through December 31, 2003, NPAMLP sold properties that generated
approximately $35,178 in net proceeds that 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 equity general
partner is entitled to a 1% share.
F-6
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
(a limited partnership)
Notes to Combined Financial Statements
December 31, 2003, 2002 and 2001
(dollars in thousands)
NPAMLP has working capital as of December 31, 2003, of approximately
$1,733, excluding amounts due to the managing general partner and the
Pension Groups of $1,437 and $662, respectively. NPAMLP has $773 of
unrestricted cash and $157 available under line of credit agreements at
December 31, 2003, to meet its short-term obligations. Through December
31, 2003, NPAMLP has replenished its working capital reserves through the
sale of properties on which the holders of the second mortgage and the
wraparound mortgage have released their liens. In addition, as of
December 31, 2003, the managing general partner has advanced
approximately $1,437 to NPAMLP but may require the repayment of the
advances for its own operational needs.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) 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 to 39 years, respectively.
As required by Statement of Financial Accounting Standards (SFAS) No.
144, Accounting for the Impairment or Disposal of Long-Lived Assets,
rental properties are 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 rental
properties is measured by comparison of the carrying amount of the
properties to future net cash flows expected to be generated by the
properties or to an appraised amount. If any property is considered
to be impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the property exceeds its fair
value. Properties to be disposed are reported at the lower of the
carrying amount or the fair value less costs to sell. Prior to 2002,
NPAMLP followed SFAS 121. SFAS No. 144 retains the fundamental
provisions of SFAS No. 121 for (a) recognition and measurement of the
impairment of long-lived assets to be held and (b) measurement of
long-lived assets to be disposed of by sale.
During the years ended December 31, 2002 and 2001, an analysis of the
estimated future undiscounted cash flows from the Hutchinson,
Minnesota and Borger, Texas properties, respectively, indicated that
the properties might be impaired. A write-down of $413 and $250 was
required under SFAS No. 144 and SFAS 121, respectively, and is
included in "Loss from operations of discontinued components" for the
years ended December 31, 2002 and 2001, respectively. In July 2003,
the Hutchinson property was foreclosed by the property's lender (see
Note 5).
The estimated fair value of these properties was determined by
management based on projected cash flows and market trends.
(b) CASH AND CASH EQUIVALENTS
All highly liquid interest-bearing deposits with original maturities
of three months or less are considered to be cash equivalents.
(c) RESTRICTED CASH
Restricted cash consists principally of amounts held in escrow for
capital improvements, real estate taxes and insurance expenses 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
banks' trust departments periodically remit excess funds to NPAMLP as
required under the respective trust agreements. Restricted cash also
includes amounts held in reserve for tenant security deposits
received.
(d) INVESTMENT SECURITIES
Investment securities, consisting of common and preferred stock, are
classified as available for sale and carried at estimated fair value.
Unrealized gains and losses on the investment securities are included
as a separate component of Partners' Deficit.
(e) 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.
F-7
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
(a limited partnership)
Notes to Combined Financial Statements
December 31, 2003, 2002 and 2001
(dollars in thousands)
(f) 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 rent
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.
(g) 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.
(h) FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107, Disclosures About Fair Value of Financial Instruments,
requires disclosure of the fair value of certain financial
instruments. Cash, investment securities, tenant accounts receivable,
accounts payable, and other liabilities as reflected in the combined
financial statements approximate 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, 2003 and 2002.
(i) DISCONTINUED OPERATIONS
In April 2002, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 145,
Rescission of FASB Statements No. 4, 44, and 64. SFAS No. 145
rescinds Statement of Financial Accounting Standards No. 4, which
required all gains and losses from extinguishment of debt to be
aggregated and, if material, classified as an extraordinary item.
Under SFAS 145, any gain or loss on extinguishment of debt that was
classified as an extraordinary item in prior periods presented that
does not meet certain defined criteria must be reclassified. As a
result of this adoption, gains from extinguishment of debt previously
reported as extraordinary for the period ended December 31, 2002,
have been reclassified in the accompanying combined statement of
operations for that period to conform to the presentation required by
SFAS No. 145.
(j) NEW PRONOUNCEMENT
In January 2003, the Financial Accounting Standards Board (FASB)
issued Interpretation No. 46 ("FIN 46"), "Consolidation of Variable
Interest Entities" with the objective of improving financial
reporting by companies involved with variable interest entities. A
variable interest entity is a corporation, partnership, trust, or any
other legal structure used for business purposes that either (a) does
not have equity investors with voting rights, or (b) has equity
investors that do not provide sufficient financial resources for the
entity to support its activities. Historically, entities generally
were not consolidated unless the entity was controlled through voting
interests. FIN 46 changes that by requiring a variable interest
entity to be consolidated by a company if that company is subject to
a majority of the risk of loss from the variable interest entity's
activities or entitled to receive a majority of the entity's residual
returns or both. A company that consolidates a variable interest
entity is called the "primary beneficiary" of that entity. FIN 46
also requires disclosures about variable interest entities that a
company is not required to consolidate but in which it has a
significant variable interest. The consolidation requirements of FIN
46 apply immediately to variable interest entities created after
January 31, 2003. The consolidation requirements of FIN 46 apply to
existing entities in the first fiscal year or interim period
beginning after June 15, 2003, with early adoption permitted. Also,
certain disclosure requirements apply to all financial statements
issued after January 31, 2003, regardless of when the variable
interest entity was established. The adoption of FIN 46 did not have
an impact on NPAMLP.
(k) USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America
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.
F-8
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
(a limited partnership)
Notes to Combined Financial Statements
December 31, 2003, 2002 and 2001
(dollars in thousands)
(l) RECLASSIFICATIONS
It is policy of NPAMLP to reclassify prior year financial statements
to conform to the current year's presentation. Such reclassifications
have no effect on Net loss in the Combined Statements of Operations
and Changes in Partners' Deficit.
(3) RELATED-PARTY TRANSACTIONS
NPAMLP is owned 99% by the limited partners and 1% collectively by EBL&S,
Inc., the managing general partner and FII, the equity general partner.
EBL&S, Inc. assigned its economic interest as general partner to FII, and
FII was admitted as the equity general partner on September 30, 1998.
EBL&S, Inc. is owned by E&H Properties, Inc (E&H), a corporation owned
and controlled by Edward B. Lipkin (Lipkin), a related party.
NPAMLP entered into a leasing and property management agreement with
EBL&S Property Management, Inc. (EBL&S) in 1990, which is owned entirely
by E&H. 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 and reimbursement for services provided
to NPAMLP for Partnership administration. The leasing commissions paid or
due to EBL&S are deferred over the life of their respective leases and
are included in Other assets on the Balance Sheet. The leasing
commissions due to EBL&S are included in Account payable and other
liabilities on the Balance Sheet.
Management fees and administrative services are paid exclusively to EBL&S
and are included in the Statement of Operations. Also, included in Other
assets is a $436 loan receivable from a partnership in which Lipkin owns
a 50% general partnership interest. The loan is unsecured, interest only,
bears interest at 10% and matures on November 1, 2008. The Wraparound
mortgages payable are held by the Pension Groups. NPAEP and PVPG, which
collectively own approximately 97 percent of the outstanding balance of
the Wraparound mortgages payable, are controlled by Lipkin. Due from
Pension Groups, unamortized discount and interest expense are all
financial statement accounts which relate directly to the Wraparound
mortgages payable. Other borrowings represent amounts due to E&H.
Included within Accounts payable and other liabilities as of December 31,
2003, are $1,437 due EBL&S, $19 due E&H and $125 due limited partnerships
where Lipkin has a controlling interest. The amounts due to EBL&S were
primarily for property management fees, leasing commissions,
administrative services and cash advances for debt service. Amounts
earned by EBL&S for the years ended December 31 were as follows:
2003 2002 2001
------ ------ ------
Property management fees $ 887 $ 890 $1,070
Leasing commissions 107 283 64
Administrative services 157 160 77
------ ------ ------
$1,151 $1,333 $1,211
====== ====== ======
During the first quarter of 2001, NPAMLP completed a transaction
structured as a tax-free exchange in accordance with Section 1031 of the
Internal Revenue Code by purchasing a property located in Lawnside, New
Jersey for $4,507 which included the assumption of related debt in the
amount of $4,507 from a limited partnership controlled by Lipkin. During
the first quarter of 2002, NPAMLP sold a property located in Newberry,
South Carolina for $1,080 which included the assumption of related debt
in the amount of $650 to a limited partnership in which Lipkin owned the
1% interest of the general partner. The net gain on this transaction
including the forgiveness of wraparound mortgages, net of discounts, was
$522. During the third quarter of 2002, NPAMLP sold a property located in
Fairfield, Iowa for $650 to a limited partnership in which Lipkin owned
the 1% interest of the general partner. The net gain on this transaction
including the forgiveness of wraparound mortgages, net of discounts, was
$742.
During 1996, the El Paso, Texas property was sold to a limited
partnership owned by directors and executives of EBL&S. The sales price
of the property was determined to be at fair market value by an
independent appraiser. In connection with the transaction, a promissory
note was issued to NPAMLP in the approximate amount of $436, which is
included in Other assets in the accompanying financial statements. The
note is unsecured, interest only, 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. During 1998, NPA and its principals redeemed their
interests in NPAMLP in exchange for the transfer of the Trenton, New
Jersey property and related wraparound mortgage obligations. As a result,
NPA and its principals did not own
F-9
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
(a limited partnership)
Notes to Combined Financial Statements
December 31, 2003, 2002 and 2001
(dollars in thousands)
any of the 97,752 units of NPAMLP at December 31, 2003, 2002 and 2001,
respectively.
NPA holds purchase money mortgages on certain properties of NPAMLP. The
purchase money mortgages aggregated approximately $19,903 and $24,408 at
December 31, 2003 and 2002, respectively.
(4) TENANT LEASES
At December 31, 2003 and 2002, NPAMLP effectively owned and operated 37
and 40 properties, respectively, as listed in Schedule I, that were
comprised principally of shopping centers and free standing,
single-tenant retail stores with approximately 170 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 21 years.
Future minimum lease rentals to be received under noncancellable leases
are approximately:
2004 $12,379
2005 10,449
2006 8,499
2007 6,978
2008 5,985
Thereafter 38,794
-------
Total $83,084
=======
Rental income includes approximately $1,255, $1,018 and $1,107 related to
percentage rents for the years ended December 31, 2003, 2002 and 2001,
respectively.
(5) MAJOR TENANT
NPAMLP's primary anchor tenant is Kmart Corporation and its subsidiaries
("Kmart") which in 2003, 2002 and 2001 accounted for approximately 39%,
43% and 55%, respectively, of the rental income received by NPAMLP. In
January 2002, Kmart filed for protection under Chapter 11 of the United
States Bankruptcy Code. As of December 31, 2003, NPAMLP had 17 remaining
leases with Kmart aggregating approximately 1,632,000 square feet. As of
December 31, 2003, the total due from Kmart was $206. Four of the stores
occupied by Kmart had been vacated as of December 31, 2001; however,
Kmart had continued to make rental payments under the terms of its lease
for each of these properties until three of the four leases were rejected
by Kmart in bankruptcy during the first quarter of 2002. Subsequent to
its bankruptcy petition, Kmart rejected the leases and ceased payment of
rent on the Fort Wayne, Indiana; Lake Mary, Florida and Newberry, South
Carolina properties effective February 1, 2002. The fourth Kmart lease
vacant at December 31, 2001 was leased to another anchor tenant in 2002.
During the year ended December 31, 1990, NPAMLP sold options for the
purchase of the Fort Wayne, Indiana and Sparks, Nevada properties (the
Sparks property was also leased to Kmart at December 31, 2001). Aggregate
proceeds received from the sale of the options were recorded as a Deposit
on sale of property. Any gain or loss from these transactions was to be
recognized at the date upon which title to the land and buildings was
conveyed to the holder of the option. The option provided that the title
to the land and buildings was to be conveyed to the holder of the option
without any additional consideration on December 11, 2006 for the Sparks
property and November 14, 2003 for the Fort Wayne property, or would be
conveyed automatically to the holder of the option in the event of a
default of the underlying tenant leases or mortgages. Under the option
agreements, the bankruptcy filing by Kmart constituted a default on the
tenant leases. In January 2002, the Sparks property was conveyed to the
holder of its option. As a result of this transaction, the Deposit on
sale of property was reduced by $1,050 and a net gain, including the
forgiveness of wraparound mortgages, net of discounts was recorded for
$2,128. In December 2002, the Fort Wayne property was conveyed to the
holder of its option. As a result of this transaction, the Deposit on
sale of property was reduced by $600 and a net gain, including the
forgiveness of wraparound mortgages, net of discounts was recorded for
$1,136. NPAMLP has negotiated a short term lease with the subtenant at
the Lake Mary property. If NPAMLP is unable to negotiate a further
extension of this lease and negotiate a modification of the mortgage with
the property's lender, the Lake Mary property could be lost to
foreclosure. The carrying value of this property was $7,009 and the
balance of the related wraparound mortgages payable, net of discounts,
was $6,209 as of December 31, 2003. In March 2002, the Newberry property
was sold to a limited partnership in which a related party owned a 1%
general partner interest.
F-10
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
(a limited partnership)
Notes to Combined Financial Statements
December 31, 2003, 2002 and 2001
(dollars in thousands)
In the second quarter of 2002, leases at the Bowling Green, Ohio; and
Hutchinson, Minnesota properties were rejected by Kmart in bankruptcy. In
July 2003, the Hutchinson property was foreclosed by the property's
lender. As a result of this transaction, a net gain, including the
forgiveness of wraparound mortgages, net of discounts was recorded for
$1,197. There can be no assurance that new leases can be successfully
negotiated or that the rental income will be comparable with the Bowling
Green property. The Bowling Green property had a carrying value of $1,796
and the balance of the related wraparound mortgages payable, net of
discounts, was $5,887 as of December 31, 2003. As of December 31, 2003
Kmart was current with respect to its post-petition obligations for its
remaining leases.
In January 2003, Kmart filed its Joint Plan of Reorganization and
corresponding Disclosure Statement with the United States Bankruptcy
Court. The Plan of Reorganization was confirmed in the second quarter of
2003.
(6) IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS
On January 1 2002, NPAMLP adopted Financial Accounting Standards Board
Statement of Financial Accounting Standards (SFAS) No. 144, Accounting
for the Impairment or Disposal of Long-Lived Assets. SFAS No. 144
addresses financial accounting and reporting for the impairment or
disposal of long-lived assets and supercedes SFAS No. 121, Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of. However, SFAS No. 144 retains the fundamental provisions of
SFAS No. 121 for (a) recognition and measurement of the impairment of
long-lived assets to be held and (b) measurement of long-lived assets to
be disposed of by sale. SFAS No. 144 supercedes the accounting and
reporting provisions of Accounting Principles Board (APB) Opinion No. 30,
Reporting the Results of Operations-Reporting the Effects of Disposal of
a Segment of a Business and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions, for the disposal of a segment of a
business. However, SFAS No. 144 retains the requirements of APB Opinion
No. 30 to report discontinued operations separately from continuing
operations and extends that reporting to a component of an entity that
either has been disposed of (by sale, by abandonment, or in distribution
to owners), or is classified as held for sale. Accordingly, the results
of operations of properties disposed of or held for sale have been
classified as Discontinued operations in the Statement of Operations and
Changes in Partners' Deficit.
In February 2003, the Escanaba, Michigan property was sold. The net gain
on this transaction including the forgiveness of wraparound mortgages,
net of discounts, was $495. In March 2003, a portion of the Wheelersburg,
Ohio property was sold. The net gain on this transaction was $336. Both
of these transactions were included in Discontinued operations in the
Statement of Operations and Changes in Partners' Deficit for the year
ended December 31, 2003.
In May 2002, the Borger, Texas property was sold. The net gain on this
transaction including the forgiveness of wraparound mortgages, net of
discounts, was $444. In June 2002, a portion of the Cottage Grove,
Minnesota property was sold. The net loss on this transaction was $566.
Both of these transactions were included in Discontinued operations in
the Statement of Operations and Changes in Partners' Deficit for the year
ended December 31, 2002.
(7) GROUND LEASES / FINANCE LEASE OBLIGATION
NPAMLP is obligated under 12 noncancellable ground leases that expire
between 2003 and 2078, excluding renewal options (see Schedule I).
During the year ended December 31, 1991, NPAMLP sold the land underlying
the Chesapeake, Virginia; Fairborn, Ohio; Kalamazoo, Michigan;
Philadelphia, Pennsylvania and Seven Hills, Ohio properties and
simultaneously entered into ground leases to leaseback the land from the
buyer that expire between 2003 and 2012. The aggregate proceeds from the
five land sales were $2,650 and were recorded as Finance lease
obligations. The amounts paid in accordance with these ground leases are
recorded as interest expense. Any gain or loss from the transactions will
be recognized at the date upon which title to the buildings is conveyed
to the ground lessor. During the term of these ground leases, including
renewal options, NPAMLP is responsible for maintaining the buildings and
building improvements, as well as making the respective mortgage
payments. Under the terms of the 1991 sales, 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.
In February, 2002, the ground lease on the Fairborn property was
terminated and the property was conveyed to the ground lessor. The
termination of this ground lease resulted from the inability of the
property to generate sufficient cash flow to make future payments on its
ground lease and underlying mortgage obligations due to the Kmart
bankruptcy petition as well as other tenant vacancies within the
property. As a result of this transaction,
F-11
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
(a limited partnership)
Notes to Combined Financial Statements
December 31, 2003, 2002 and 2001
(dollars in thousands)
the Finance lease obligation was reduced by $500 and a net gain,
including the forgiveness of wraparound mortgages, net of discounts was
recorded for $1,609.
Future minimum lease payments under all noncancellable ground leases as
of December 31, 2003 are approximately.
2004 $ 842
2005 559
2006 492
2007 492
2008 488
Thereafter 8,814
-------
Total $11,687
=======
Total rental expense for ground leases for the years ended December 31,
2003, 2002, 2001, was approximately $556, $488 and $492, respectively. In
addition, $306, $220 and $256 of ground rent was recorded as interest
expense for the years ended December 31, 2003, 2002 and 2001,
respectively.
(8) OTHER BORROWINGS
During 1995, NPAMLP negotiated with E & H Properties, Inc. (E&H), a
related party, for E&H to advance up to $1,000 to NPAMLP for the purpose
of making capital and tenant improvements to the properties. Pursuant to
the resulting agreement, the obligation of E&H to make advances to NPAMLP
is at all times the sole and absolute discretion of E&H. The line bears
interest based on a variable rate (4.00% at December 31, 2003) and has no
expiration date. Any amounts advanced to NPAMLP are not directly secured
by any collateral. During 1999, NPAMLP negotiated with E&H for E&H to
advance up to an additional $250 to NPAMLP for the purpose of making
capital and tenant improvements to the properties. Pursuant to the
agreement, the obligation of E&H to make advances to NPAMLP is at all
times the sole and absolute discretion of E&H. This additional line bears
interest based on the prime rate (4.00% at December 31, 2003) and is
scheduled to expire May 2003. During 1999, E&H secured an additional line
of credit with a bank that will enable E&H to fund advances to NPAMLP.
Any amounts advanced to NPAMLP are secured by a $250 second mortgage on
the Sault Ste. Marie, Michigan property. As of December 31, 2003, and
2002, $1,093 and $770, respectively were owed by NPAMLP under these lines
of credit, excluding $19 and $79 in accrued interest at December 31,2003
and 2002. As of December 31, 2003 and 2002, E&H owed $1,133 and $70,
respectively under its bank lines of credit.
(9) 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. The wraparound mortgages are secured by liens
on the properties and are subordinate to the third-party underlying
mortgage obligations and the purchase money mortgages, collectively the
senior mortgage obligations. The wraparound mortgages are payable to the
Pension Groups, and the Pension Groups are liable to the holders of the
senior mortgage obligations.
NPAEP and PVPG acquired the interests of MLPG in certain wraparound
mortgages. Each wraparound mortgage is secured by liens on specific
properties and is subordinate to the senior mortgage obligations as
stated above.
Through December 31, 1997, MLPG had forgiven the wraparound mortgages
remaining after the disposition of properties that were owned by Audited
Partnerships. In 1998, MLPG agreed to forgive certain wraparound
mortgages remaining after the disposition of properties that were owned
by Unaudited Partnerships. For the year ended December 31, 2003,
wraparound mortgage obligations of approximately $9,161 with related
discounts of $4,091 were forgiven in connection with various property
dispositions. The net amount of $5,070 is included in Other income
(expense) as Forgiveness of wraparound mortgages payable on disposition
of properties for the year ended December 31, 2003.
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 amortized over the life of the
mortgage loan while other wraparound mortgages require balloon payments
to satisfy the wraparound mortgage obligations. Also, the Pension Groups
have balloon payments due on the third-party underlying mortgage
obligations. No balloon payments are due during the year ended December
31, 2004.
F-12
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
(a limited partnership)
Notes to Combined Financial Statements
December 31, 2003, 2002 and 2001
(dollars in thousands)
Wraparound mortgage principal payment requirements for the next five
years are approximately:
2004 $8,450
2005 5,744
2006 7,438
2007 5,992
2008 6,324
(10) PROPERTY SUBJECT TO SALES CONTRACTS
In prior years, NPAMLP sold options for the purchase of five rental
properties. Aggregate proceeds received from the sale of the options were
recorded as Deposit on sale of property. Any gain or loss arising from
these transactions will be recognized at the date upon which title to the
land and buildings is conveyed to the holder of the option. In 2002, two
properties were conveyed to the holders of their options for no
additional consideration, in accordance with the agreements. In June
2003, the final property (Clackamas, Oregon) was conveyed to the holder
of its option. As a result of this transaction, the deposit on sale of
property was reduced by $301 and a net gain, including the forgiveness of
wraparound mortgages, net of discounts was recorded for $186.
(11) INVESTMENT SECURITIES AVAILABLE FOR SALE
Investments in available for sale common and preferred stock securities
were as follows as of December 31, 2003, 2002 and 2001:
DECEMBER 31, 2003
---------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
---- ----- ------ -----
Common stock $ 82 $ 18 $ 1 $ 99
Preferred stock 485 84 8 561
--------- ---------- ---------- --------
Securities available for sale $ 567 $ 102 $ 9 $ 660
========= ========== ========== ========
DECEMBER 31, 2002
----------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
---- ----- ------ -----
Common stock $ 217 $ 4 $ 8 $ 213
Preferred stock 1,258 14 32 1,240
--------- ---------- ---------- --------
Securities available for sale $ 1,475 $ 18 $ 40 $ 1,453
========= ========== ========== ========
DECEMBER 31, 2001
---------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
---- ----- ------ -----
Preferred stock $ 100 $ - $ 2 $ 98
--------- ---------- ---------- --------
Securities available for sale $ 100 $ - $ 2 $ 98
========= ========== ========== ========
F-13
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
(a limited partnership)
Notes to Combined Financial Statements
December 31, 2003, 2002 and 2001
(dollars in thousands)
(12) PARTNERS' DEFICIT
Following is a summary of the combined changes in partners' deficit for
the three years ended December 31, 2003 (in thousands except unit data):
UNITS PARTNERS' DEFICIT
----------------------------- --------------------------------------
GENERAL LIMITED GENERAL LIMITED
PARTNERS PARTNERS TOTAL PARTNERS PARTNERS TOTAL
-------- -------- ----- ---------- ---------- -----
December 31, 2000 1,000 96,752 97,752 $ (350) $ (34,675) $ (35,025)
Net loss - - - (85) (8,341) (8,426)
Unrealized loss on
Investment securities - - - - (2) (2)
----- ------ ------ ---------- ---------- ----------
December 31, 2001 1,000 96,752 97,752 (435) (43,018) (43,453)
Net loss - - - (27) (2,728) (2,755)
Unrealized loss on
Investment securities - - - - (22) (22)
----- ------ ------ ---------- ---------- ----------
December 31, 2002 1,000 96,752 97,752 (462) (45,768) (46,230)
Net loss - - - (70) (6,933) (7,003)
Unrealized gain on
Investment securities - - - 1 92 93
----- ------ ------ ---------- ---------- ----------
December 31, 2003 1,000 96,752 97,752 $ (531) (52,609) $ (53,140)
===== ====== ====== ========== ========== ==========
(13) SETTLEMENT OF CONTINGENCY
In January 2002, an agreement was reached to settle a dispute involving
the interpretation of a lease. Under this agreement, the Wahpeton, North
Dakota and Washington, Iowa properties were conveyed to the lessee and
the Fairfield, Iowa and Huron, South Dakota properties were retained by
NPAMLP. The Fairfield and Huron properties were subsequently sold in
August, 2002 and February, 2002, respectively. The net gains on these
transactions including the forgiveness of wraparound mortgages, net of
discounts, were as follows: Wahpeton - $303; Washington - $282; Fairfield
- $52 (resulting from forgiveness of debt only) and $690 (resulting from
the subsequent sale); and Huron - $622.
(14) COMMITMENTS AND CONTINGENCIES
Upon NPAMLP's formation, the titles 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
managing 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.
(15) FUTURE INTEREST AGREEMENT
In March 2003 NPAMLP, NPAEP and PVPG, entered into an Agreement,
effective as of January 1, 2003 (the "2003 Agreement"), in which NPAEP
and PVPG agreed with NPAMLP to modify the terms of Wrap Mortgages held by
NPAEP and PVPG. The terms of the 2003 Agreement provide that NPAEP and
PVPG will: (a) reduce to 4.1% per year the annual interest rate payable
on any NPAEP Wrap Note or PVPG Wrap Note that bears a stated annual
interest rate in excess of that amount; (b) remove certain of the
properties secured by the NPAEP and PVPG Wrap Mortgages from the burden
of the cross-default and cross-collateralization provisions currently
contemplated by the Restructuring Agreement effective as of January 1,
1990 by and among MLPG, NPAMLP, National Property Analysts, Inc. and
others; and (c) agree to release the lien of the Wrap Mortgages from the
Properties upon a sale of or the agreement of a leasehold estate in any
Property prior to the maturity of the
F-14
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
(a limited partnership)
Notes to Combined Financial Statements
December 31, 2003, 2002 and 2001
(dollars in thousands)
applicable Wrap Note. In consideration for the above, NPAMLP will modify
the NPAEP Wrap Mortgages and the PVPG Wrap Mortgages to provide that (i)
there is an event of default under the applicable NPAEP Wrap Mortgages or
PVPG Wrap Mortgages, as the case may be, if a judgment or other lien is
entered against the title or lease-holding entity thereby entitling NPAEP
or PVPG, as the case may be, to avail itself of the post-default rights
or remedies under the relevant security document; and (ii) for
cross-default and cross-collateralization among the Unaudited
Partnerships and, separately, among the Audited Partnerships. In addition
NPAMLP shall execute and deliver to NPAEP or PVPG, as the case may be, a
currently recordable deed of future interest (or assignment of future
leasehold interest) sufficient to convey to NPAEP or PVPG, as the case
may be, all of NPAMLP's right, title, interest and estate in and to its
fee or leasehold interest in the encumbered properties effective upon the
maturity on December 31, 2013 of the NPAEP Wrap Mortgages and the PVPG
Wrap Mortgages unless the Wrap Mortgages have previously been paid in
full.
The Managing General Partner believes that the execution and delivery of
the 2003 Agreement will have the following effects for NPAMLP: as a
result of the reduction in the annual interest rate on the NPAEP Wrap
Notes and the PVPG Wrap Notes (i) NPAMLP expects to realize significant
reductions in interest that it otherwise would have been obligated to pay
during the period between January 1, 2003 and December 31, 2013 when
these loans mature and (ii) NPAMLP will be able to allocate a greater
portion of its available cash flow to principal repayments. As a result
of the faster repayment of principal, the Limited Partners will recognize
additional taxable income (or smaller tax losses) in each year from 2003
until the maturity of the NPAEP Wrap Mortgages and the PVPG Wrap
Mortgages. In addition, the anticipated date of dissolution of NPAMLP
will now occur in 2013 rather than 2015. Further, because the reduced
interest rate is below the Applicable Federal Rate ("AFR") prescribed
under Section 1274, Internal Revenue Code of 1986, as amended, investors
in Unaudited Partnerships will recognize non-recurring ordinary income
(forgiveness of indebtedness) in 2003. The tax impact of this recognition
will depend upon numerous factors related to each investor's particular
tax situation, including his marginal tax rate and his suspended passive
losses from prior years. Each investor is urged to consult his own tax
advisor for further advice on this point.
Under the terms of the Restructuring Agreement, all Wrap Mortgages owned
by NPAEP or PVPG are due and payable in substantial "balloon" amounts on
December 31, 2013. Assuming no sales of Properties by NPAMLP in the
interim period (2003 through 2013) the projected balance due for all of
the Wrap Mortgages at December 31, 2013 is expected to approximate
$143,000. As described above, in return for the reduction in interest
rate and other consideration set forth above, including the satisfaction
of the Wrap Mortgages due on December 31, 2013, NPAMLP's general partner
has agreed to deliver deeds of future interest and assignments of
leasehold interest, to be recorded currently, effective December 31,
2013, to NPAEP and PVPG. NPAMLP's general partner has determined that it
is in the best interests of NPAMLP and its partners to do so. The effect
of these deeds and assignments will be to facilitate a transfer of fee
and leasehold ownership to the holders of the Wrap Mortgages at maturity
(unless the Wrap Mortgages have been previously paid in full).
Notwithstanding the foregoing, NPAEP and PVPG have agreed in the 2003
Agreement to (a) release the liens of the Wrap Mortgages and (b) deliver
such deeds of future interest, assignments of leasehold interests, or
other documents or instruments as are necessary to facilitate or effect
such sales of the Properties prior to December 31, 2013 as the Managing
General Partner shall otherwise deem desirable. The costs incurred
arising from the recordation of any of the documents described in the
2003 Agreement shall be borne by NPAEP or PVPG, as the case may be. The
Managing General Partner believes that the result of the forgoing actions
taken pursuant to the 2003 Agreement will preserve all rights of the
Limited Partners under the Restructuring Agreement, including their right
to share in certain sales proceeds or cash flows prior to maturity of the
Wrap Mortgages.
Neither NPAMLP, NPAEP nor PVPG were represented by independent counsel or
retained other independent advisers or consultants in connection with the
negotiation, execution or delivery of the 2003 Agreement. Nonetheless,
the Managing General Partner believes that the transactions permitted or
contemplated by the 2003 Agreement are fair and equitable to NPAMLP and
the other parties involved.
F-15
SCHEDULE I
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
(a limited partnership)
Properties Effectively Owned by NPAMLP at December 31, 2003 (1)
PROPERTY LOCATION
- --------------------------------------------------------------------------------
Ardmore, OK International Falls, MN Oak Lawn, IL*
Bowling Green, OH Kalamazoo, MI*+ Ocala, FL
Cahokia, IL Lake Mary, FL Painesville, OH
Chesapeake, VA*+ Lawnside, NJ Philadelphia, PA*+
Cottage Grove, MN Lockport, IL San Mateo, CA*
Crescent City, CA Marquette, MI* Sault Ste. Marie, MI
Dunmore, PA* Maryville, MO* Seven Hills, OH*+
East Haven, CT Menominee, MI* Steger, IL
Federal Way, WA New Hope, MN Taylorville, IL
Huntington, WV North Augusta, SC* Urbana, IL
Huntsville, AL* North Sarasota, FL Waverly, OH
Independence, MO O'Fallon, MO Wheelersburg, OH
Yazoo City, MS
*Properties with ground leases.
+Land sales.
(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-16
SCHEDULE II
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
(a limited partnership)
Combined Valuation and Qualifying Accounts
December 31, 2003, 2002 and 2001
(in thousands)
BALANCE, ADDITIONS
BEGINNING CHARGED TO BALANCE,
OF YEAR OPERATIONS DEDUCTIONS END OF YEAR
------- ---------- ---------- -----------
Allowance for doubtful accounts:
Year ended December 31, 2001 $ 30 48 (48) $ 30
Year ended December 31, 2002 30 427 (207) 250
Year ended December 31, 2003 250 (98) (2) 150
F-17
SCHEDULE III
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
(a limited partnership)
Combined Real Estate and Accumulated Depreciation Schedule
December 31, 2003, 2002 and 2001
(in thousands)
COST CAPITALIZED (WRITTEN OFF)
INITIAL COST SUBSEQUENT TO ACQUISITION
----------------------------- ----------------------------
BUILDINGS AND BUILDINGS AND
PROPERTY LOCATION ENCUMBRANCES LAND IMPROVEMENTS LAND IMPROVEMENTS
- ------------------------------------------------------------------------------------------------------------------------
Ardmore, OK $ 9,795 750 14,990 0 774
Bowling Green, OH 5,887 496 5,270 0 68
Cahokia, IL 0 600 5,800 (578) (5,790)
Chesapeake, VA 3,938 416 4,798 0 0
Cottage Grove, MN 7,150 740 5,549 (364) 3,199
Crescent City, CA 1,662 129 2,220 0 0
Dunmore, PA 826 0 1,350 0 0
East Haven, CT 3,120 447 4,883 0 3,522
Federal Way, WA 2,528 86 1,894 0 0
Huntington, WV 2,657 336 3,649 0 608
Huntsville, AL 1,130 0 1,904 0 197
Independence, MO 2,910 394 3,550 0 521
International Falls, MN 1,625 179 3,071 0 0
Kalamazoo, MI 3,077 250 4,850 0 484
Lake Mary, FL 6,209 1,310 7,422 0 0
Lawnside, NJ 4,585 633 3,874 0 60
Lockport, IL 2,562 286 2,572 0 502
Marquette, MI 7,180 0 5,700 0 8,875
Maryville, MO 380 0 1,248 0 117
Menominee, MI 2,152 0 2,722 0 100
New Hope, MN 3,609 357 3,774 0 409
North Augusta, SC 2,863 100 2,900 0 613
North Sarasota, FL 4,632 459 5,686 0 292
O'Fallon, MO 3,426 343 3,626 0 116
Oak Lawn, IL 7,594 0 9,028 0 533
Ocala, FL 2,876 417 3,301 0 0
Painesville, OH 3,262 181 1,989 0 0
Philadelphia, PA 3,849 529 5,860 0 278
San Mateo, CA 2,413 0 6,672 0 0
Sault St. Marie, MI 2,106 375 2,816 0 0
Seven Hills, OH 1,964 371 3,771 0 0
Steger, IL 2,241 332 2,489 0 225
Taylorville, IL 2,401 492 3,696 0 132
Urbana, IL 3,465 633 4,753 0 101
Waverly, OH 2,964 471 2,920 0 170
Wheelersburg, OH 587 194 2,081 (110) (752)
Yazoo City, MS 2,656 158 1,820 0 474
-------- ------ ------- ------ ------
Total $122,281 12,464 154,498 (1,052) 15,828
======== ====== ======= ====== ======
Cross-collateralized
wraparound mortgages on
properties previously disposed $ 6,162
--------
$128,443
========
F-18
SCHEDULE III, CONTINUED
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
(a limited partnership)
Combined Real Estate and Accumulated Depreciation Schedule
December 31, 2003, 2002 and 2001
(in thousands)
BUILDINGS AND ACCUMULATED DATE OF
PROPERTY LOCATION LAND IMPROVEMENTS TOTAL DEPRECIATION ACQUISITION LIFE METHOD
- ---------------------------------------------------------------------------------------------------------------------------------
Ardmore, OK $ 750 15,764 16,513 9,894 09/83 Varies Varies
Bowling Green, OH 496 5,338 5,834 4,038 02/81 Varies Varies
Cahokia, IL 22 10 32 5 10/82 Varies Varies
Chesapeake, VA 416 4,798 5,214 3,412 09/82 30 years Straight Line
Cottage Grove, MN 376 8,748 9,124 3,670 11/81 Varies Varies
Crescent City, CA 129 2,220 2,349 1,517 07/83 30 years Straight Line
Dunmore, PA 0 1,350 1,350 1,286 06/75 30 years Straight Line
East Haven, CT 447 8,405 8,852 4,214 08/80 Varies Varies
Federal Way, WA 86 1,894 1,980 1,436 04/81 30 years Straight Line
Huntington, WV 336 4,257 4,593 2,516 10/84 Varies Varies
Huntsville, AL 0 2,101 2,101 1,298 03/84 Varies Varies
Independence, MO 394 4,071 4,465 2,850 05/81 Varies Varies
International Falls, MN 179 3,071 3,250 2,099 07/83 30 years Straight Line
Kalamazoo, MI 250 5,334 5,584 3,899 09/80 Varies Varies
Lake Mary, FL 1,310 7,422 8,732 1,723 12/94 Varies Varies
Lawnside, NJ 633 3,934 4,567 390 02/01 30 years Straight Line
Lockport, IL 286 3,074 3,360 2,035 07/82 Varies Varies
Marquette, MI 0 14,575 14,575 7,649 05/83 Varies Varies
Maryville, MO 0 1,365 1,365 864 11/83 Varies Varies
Menominee, MI 0 2,822 2,822 2,030 10/81 Varies Varies
New Hope, MN 357 4,183 4,540 2,952 03/81 Varies Varies
North Augusta, SC 100 3,513 3,613 2,314 03/80 30 years Straight Line
North Sarasota, FL 459 5,978 6,437 4,468 11/80 Varies Varies
O'Fallon, MO 343 3,742 4,085 2,795 03/81 Varies Varies
Oak Lawn, IL 0 9,561 9,562 6,838 10/81 Varies Varies
Ocala, FL 417 3,301 3,718 2,302 02/83 30 years Straight Line
Painesville, OH 181 1,989 2,170 265 03/00 30 years Straight Line
Philadelphia, PA 529 6,138 6,666 4,697 08/80 Varies Varies
San Mateo, CA 0 6,672 6,672 4,930 11/81 30 years Straight Line
Sault St. Marie, MI 375 2,816 3,191 1,987 11/82 30 years Straight Line
Seven Hills, OH 371 3,771 4,142 2,671 10/82 30 years Straight Line
Steger, IL 332 2,714 3,046 1,862 11/81 Varies Varies
Taylorville, IL 492 3,828 4,320 2,681 11/82 Varies Varies
Urbana, IL 633 4,854 5,487 3,371 11/82 Varies Varies
Waverly, OH 471 3,090 3,561 2,110 10/82 Varies Varies
Wheelersburg, OH 84 1,329 1,413 908 10/83 Varies Varies
Yazoo City, MS 158 2,294 2,452 1,306 09/84 Varies Varies
------- ------- ------- -------
Total $11,412 170,326 181,738 105,283
======= ======= ======= =======
F-19
SCHEDULE III, CONTINUED
NATIONAL PROPERTY ANALYSTS MASTER LIMITED PARTNERSHIP
(a limited partnership)
Combined Real Estate and Accumulated Depreciation Schedule
December 31, 2003, 2002 and 2001
(in thousands)
Properties consist primarily of shopping centers and free standing, single
tenant stores.
Depreciation of 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 changes in total real estate assets and accumulated depreciation for the
years ended December 31, are as follows:
TOTAL REAL ESTATE ASSETS
---------------------------------------
2003 2002 2001
---------------------------------------
Beginning Balance $ 188,739 230,692 225,744
Improvements 2,160 1,384 691
Acquisitions 0 0 4,507
Disposals / write-downs (9,161) (43,337) (250)
--------- ------- -------
$ 181,738 188,739 230,692
========= ======= =======
ACCUMULATED DEPRECIATION
---------------------------------------
2003 2002 2001
---------------------------------------
Beginning Balance $ 105,559 123,754 116,736
Depreciation - Original 4,868 5,211 6,282
Depreciation - Improvements 771 1,061 737
Disposals (5,915) (24,468) 0
--------- --------- ---------
$ 105,283 105,559 123,755
========= ========= =========
F-20