TMP LAND MORTGAGE FUND, LTD.
A California Limited Partnership
date of the financial statements and revenues and expenses during the reporting period. Actual results could differ from these estimates.
The Partnership is a California Limited Partnership formed on November 15, 1991. TMP Properties (A California General Partnership) and TMP Investments, Inc. (A California Corporation) are the general partners ("General Partners"). The partners of TMP Properties are William O. Passo, Anthony W. Thompson and Scott E. McDaniel. William O. Passo and Anthony W. Thompson were the shareholders of TMP Investments, Inc. until October 1, 1995, when they sold their shares to TMP Group, Inc. and then became the shareholders of TMP Group, Inc.
The Partnership was formed principally to make short-term loans to unaffiliated parties secured by first trust deeds on unimproved properties, primarily in the Inland Empire area of Southern California and in some instances, in other areas of Southern California, and to provide cash distributions to the limited partners, primarily from interest earned on the mortgage loans. The Partnership is not a mutual fund or any other type of Investment Company within the meaning of, and is not subject to regulations under, the Investment Company Act of 1940.
Since its formation, the Partnership had received and accepted subscriptions of 15,715 units, representing total subscription proceeds in the amount of $15,715,000. All proceeds were committed to mortgage loan investments made by the Partnership and to working capital reserves. During 1992, the Partnership funded five mortgage loans, four loans were funded in 1993 and three loans were funded in 1994 for a total of twelve loans.
The General Partners manage and control the affairs of the Partnership, including final approval of all loans and investments, and have ultimate authority for matters affecting the interests of the Partnership. All organization and offering expenses of the Partnership were paid by TMP Realty, an affiliate of the general partners, in exchange for loan fees (or points) on each mortgage loan.
TMP LAND MORTGAGE FUND, LTD.
A California Limited Partnership
Notes to the Consolidated Financial Statements
September 30, 2001
(unaudited)
Note 2 - Organization of the Partnership (continued)
As a consequence of adverse changes in market conditions and other economic and business factors, nine of the twelve loans went into default. The Partnership foreclosed on the properties secured by the defaulted loans and is in the process of developing and/or selling these properties.
The partnership agreement provides for two types of investments: Individual Retirement Accounts (IRA) and others. The IRA minimum purchase requirement was $2,000 and all others were a minimum purchase requirement of $5,000. The maximum liability of the limited partners is the amount of their capital contribution.
Note 3 - Partners' Contributions
The Partnership raised capital through a public offering of units at $1,000 per unit. The minimum offering size was 1,000 units or $1,000,000. The maximum offering size was 20,000 units or $20,000,000. As of April 21, 1994, 15,715 units were sold for total capital contributions of $15,715,000 and the offering was closed.
Note 4 - Allocation of Profits and Losses and Cash Distributions
Profit, losses, and cash distributions are allocated ninety-nine percent to the limited partners and one percent to the General Partners until the limited partners have received an amount equal to their capital contributions plus a cumulative, non-compounded return of eight percent per annum based on their adjusted capital account balances, at which time, remaining profits, losses and cash distributions are allocated seventy-six percent to the limited partners and twenty-four percent to the General Partners. Distributions of cash from operations, if any, are made monthly within 30 days after the end of the month.
On July 5, 2001 distributions of approximately $500,000 and $5,000 were made to the limited partners and general partners, respectively, as a return of capital. No distributions were made during the nine-month period ended September 30, 2000.
Note 5 - Related Party Transactions
During the year ended December 31, 2000, TMP Homes, LLC (TMP Homes), managing member of Remington, paid $17,800 of bank loan fees on behalf of Remington. TMP Homes paid $165,000 to Sun City and $38,500 to Remington as an advance for fees. Both Remington and Sun City paid back these funds during 2000.
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TMP LAND MORTGAGE FUND, LTD.
A California Limited Partnership
Notes to the Consolidated Financial Statements
September 30, 2001
(unaudited)
Note 5 - Related Party Transactions (continued)
During the nine month period ended September 30, 2001, TMP Homes, LLC (TMP Homes), managing member of Remington, paid $7,500 of bank loan fees on behalf of Remington. As of September 30, 2001 these funds have been paid back to TMP Homes. In addition, TMP Homes advanced Remington $22,500 to pay accounts payable. As of September 30, 2001 these funds have not been paid back to TMP Homes.
See Note 2 regarding information on management of the Partnership during 2001.
Note 6 - Agreements with PacWest
In April 1998, the General Partners entered into the Financing Agreement with PacWest Inland Empire, LLC (“PacWest”), whereby PacWest paid the General Partners and ten other related partnerships (“the TMP Land Partnerships”) a total of $300,000 and agreed to pay up to an additional $300,000 for any deficit capital accounts for these 11 partnerships in exchange for the rights to the general partners’ distributions; referred to as a “distribution fee” as defined by the Financing Agreement.
In addition, PacWest agreed to loan and/or secure a loan for the Partnership and the TMP Land Partnerships in the amount of $2,500,000. Loan proceeds will be allocated among the TMP Land Partnerships, based on partnership needs, from recommendations made by PacWest, and under the approval and/or direction of the General Partners. A portion of these funds will be loaned to the Partnership at 12% simple interest beginning April 1, 1998. The borrowings are secured by the Partnership’s properties, and funds will be loaned, as needed, in the opinion of the General Partners. These funds are not to exceed 50% of the 1997 appraised value of the properties, and will primarily be used to pay for on-going property maintenance, pay down existing debt, accrued property taxes and appropriate entitlement costs.
PacWest, at their option, can make additional advances with the agreement of the General Partners; however, the aggregate amount of cash loaned to the TMP Land Partnerships is limited to a maximum of $2,500,000. As of September 30, 2001 the TMP Land Partnerships owe PacWest approximately $3,457,000 including advances & interest.
In April 1998, PacWest entered into a management, administrative and consulting agreement (the Management Agreement) with the General Partners to provide the Partnership with overall management, administrative and consulting services. Effective August 1, 2000, the Partnership entered into the First Amendment to the Management Agreement (“First Amendment”). The purpose of the First Amendment is to clarify and define certain language and the terms of the provisions of the Management Agreement. The Management Agreement, in its entirety, remains in effect apart from specific items discussed in the First Amendment.
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TMP LAND MORTGAGE FUND, LTD.
A California Limited Partnership
Notes to the Consolidated Financial Statements
September 30, 2001
(unaudited)
Note 6 - Agreements with PacWest (continued)
Certain items disclosed in the First Amendment include 1) Revision of the “Asset Administration Fee” schedule and its reduction upon the sale of any property, 2) “Participation Fee” wording is altered to read “Manager Profit Participation” and its calculation is defined, 3) the maximum amount of the PacWest loan to any Partnership shall not exceed fifty percent (50%) of the fair market value of all real properties owned by the Partnership, and the maximum amount of the PacWest loan secured against each specific parcel shall not exceed a loan-to-value ratio of fifty percent of the fair market value of that parcel, 4) The maximum Total PacWest loan amount shall be $2,500,000 allocated between the Partnerships and each borrowing Partnership shall execute a Promissory Note (as attached to the First Amendment) and a Trust Deed (as attached to the First Amendment). PacWest and the TMP Land Partnerships shall be entitled to enter into a separate written agreement to provide for a short term gap loan to cover emergency shortfalls, and 5) If the Partnerships need funds in excess of the $2,500,000, PacWest
Note 6 - Agreements with PacWest (continued)
shall be entitled to obtain third party loans at market interest, secured against the real property of each Partnership to whom such loan(s) is made. No such loan(s) shall be made without the written consent of the General Partners.
PacWest currently contracts with third party service providers to perform certain of the financial, accounting, and investor relations’ services for the Partnership.
Pursuant to the Financing Agreement, PacWest has acquired the General Partners’ unsubordinated 1% interest in the Partnership and assumed responsibility for all partnership administration while not replacing any of the General Partners. PacWest will charge a fee for its administrative services equal to an amount not to exceed the average reimbursements to the general partners for such services over the past five years. As of September 30, 2001 and December 31, 2000, the Partnership has $6,398 and $0, respectively, payable to PacWest related to the aforementioned agreements.
Note 7 - Investments
The following is a summary of the investments of the Partnership as of September 30 and December 31:
2001 2000
---- ----
Peppertree Park, LLC (Peppertree) $ 50,000 $ 375,000
------ -------
$ 50,000 $ 375,000
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The Partnership had a 75% membership interest in Flowerfield, which was organized for the purpose of acquiring, owning and developing certain parcels of land into single-family home developments in San
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TMP LAND MORTGAGE FUND, LTD.
A California Limited Partnership
Notes to the Consolidated Financial Statements
September 30, 2001
(unaudited)
Note 7 - Investments (continued)
Jacinto, California. The equity method was used to account for the Partnership's share of Flowerfield's earnings or losses, which is not materially different than the consolidation of this majority owned investment. Flowerfield abandoned the project in 2000, and therefore, the Partnership investment as of September 30, 2001 and December 31, 2000 is equal to zero.
The Partnership has a 20% interest in Peppertree, which was formed to acquire and develop certain property in San Diego, California. The Partnership's 20% interest is stated at its cost of $500,000 less a write down of $125,000 in 2000 to record the investment at its net market value. The Partnership entered into an agreement to sell its interest in Peppertree for $375,000. As of September 30, 2001 $325,000 has been received relating to this sale (see Note 12).
Note 8 - Property Taxes Payable
As of September 30, 2001 and December 31, 2000, approximately $9,578,920 and $8,055,456, respectively, of property taxes and Mello-Roos tax assessments is owed on the San Jacinto property representing the cumulative unpaid property taxes and Mello-Roos tax assessments at that date. The amount accrues interest each quarter at a rate of 3.75% on the outstanding balance.
As of December 31, 2000 the Partnership contributed the San Jacinto property to RSJ. A default judgment was filed against the property on October 10, 2000 In addition; a Notice of Levy under Writ of Sale was recorded on March 21, 2001. The date of the Sheriff’s Sale Under Foreclosure was scheduled for July 19, 2001. As of July 18, 2001 Chapter 11 bankruptcy has been filed by RSJ. Since the net carrying value of the property is equal to the property tax and Mello Roos tax assessment liability, it is expected there will be no additional costs to RSJ except for bankruptcy, legal, and other related costs.
Note 9 - Notes Payable
On March 10, 1998, Sun City entered into a promissory note agreement for a construction loan for Phase I construction with a bank. The maximum loan amount is $2,275,000 and accrues interest at 1.5% per annum in excess of the prime rate. Interest is payable monthly. Sun City paid off the loan in full on May 15, 2000. Interest paid for the year ended December 31, 2000 was $9,051 and has been capitalized. In June 1999, Sun City entered into a second promissory note agreement for Phase II construction loan with the same bank. The maximum loan amount is $4,119,000 and accrues interest at 1.5% per annum in excess of the prime rate. Interest is payable monthly. Sun City paid off the loan in full on May 15, 2000. Interest paid for the year ended December 31, 2000 was $40,687 and has been capitalized.
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TMP LAND MORTGAGE FUND, LTD.
A California Limited Partnership
Notes to the Consolidated Financial Statements
September 30, 2001
(unaudited)
Note 9 - Notes Payable (continued)
On August 17, 1999, Remington entered into a promissory note agreement for a construction loan with a Bank. The maximum loan amount was $8,498,000 and accrues interest at 1% per annum in excess of the Index Rate. Interest is payable monthly. This note matured on December 10, 2000. At this date, the bank modified the existing loan removing approximately $1,000,000 from construction loan availability. As of December 31, 2000 the new loan maximum amount is $7,406,000 with a maturity date of June 10, 2001. The maturity date has not been extended and is the note is currently due. Interest accrues at a rate of the greater of seven-percent (7%) or two hundred basis points above the Index Rate. The interest rate shall change from time to time as to when the Index Rate changes, but in no event shall the Interest Rate be lower than 7%. As of September 30, 2001 and December 31, 2000, Remington had a principal balance due on the note of $1,445,719 and $4,956,379, respectively. On June 1, 2001 Remington entered into a new loan agreement with this bank. This loan was not funded until August 2001. The new loan maximum principal amount is $3,075,000 for the construction of the next 19 production homes and has a maturity date of June 28, 2002. A fee of $15,375 was paid to complete this transaction. As of September 30, 2001 and December 31, 2000, Remington had a principal balance due on the note of $971,693 and $0, respectively. Interest paid for the period and year ended September 30, 2001 and December 31, 2000 on both these loans was $ 318,539 and $327,443, respectively, and has been capitalized. The Partnership is a guarantor of the promissory note.
Note 10 - Minority Interests
In 1995, the Partnership entered into joint venture agreements with TMP Homes whereby the Partnership contributed land for a 75% interest in Remington and Sun City. TMP Homes contributed $100 for its 25% interest. As a result of this transaction and subsequent capital contributions whereby the Partnership has contributed assets for a 75% interest; the Partnership has recognized a loss equal to the fair value of 25% of the assets contributed to the joint venture. TMP Homes, as the minority interest owner, who will develop the property, has recorded a gain equal to the fair value of 75% of the assets contributed to the joint venture by the Partnership.
In June 1999, the Partnership contributed approximately $206,000 to Sun City to pay down the construction loan and the Partnership incurred a loss of approximately $51,500 (25%) on this contribution.
On May 26, 2000, the Partnership entered into a joint venture agreement with PacWest whereby the Partnership contributed land and $24,750 in cash for a 99% interest in RSJ Builders, LLC (“RSJ”). PacWest contributed $250 for its 1% interest. Additional cash contributions by the Partnership & PacWest of $9,900 and $100, respectively, were made during the three-month period ended September 30, 2001. A loss of $22,448 related to RSJ ‘s operations is included in Minority Interests Loss in Consolidated Affiliates in the Consolidated Statements of Operations, for the nine-month period ended September 30, 2001.
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TMP LAND MORTGAGE FUND, LTD.
A California Limited Partnership
Notes to the Consolidated Financial Statements
September 30, 2001
(unaudited)
Note 11 - Property Sales
During the year ended December 31, 2000 Sun City has sold all homes in this project. The following is a summary of the properties sold:
Income from Sale of Properties $ 3,513,839
Cost of Properties 3,989,030
Marketing & Selling Costs 9,789
------------------
Total Costs 3,998,819
------------------
Loss on Sale of Properties $ (484,980)
===================
The Sunset Crossing property is in escrow. The escrow closing date was amended on July 19, 2001 to be January 15, 2003. As consideration for the extension, the purchase price was increased from $2,750,000 to $3,000,000. In accordance with the escrow instructions, $30,000 has been released to the Partnership as of September 30, 2001.
During the nine month period ended September 30, 2001 Remington sold 29 homes in this project. The following is a summary of the properties sold:
Income from Sale of Properties $ 5,676,225
Cost of Properties 6,609,953
Marketing & Selling Costs 14,000
------------------
Total Costs 6,623,953
------------------
Loss on Sale of Properties $ (947,728)
===================
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TMP LAND MORTGAGE FUND, LTD.
A California Limited Partnership
Notes to the Consolidated Financial Statements
September 30, 2001
? (unaudited)
Note 12 - Subsequent Events
On October 2, 2001 Remington entered into a new loan agreement with a bank. This new loan agreement called for the payoff of the 1st mortgage (see Note 9) balance of $1,447,965. The maximum loan amount is $2,225,000 and accrues interest at 1% per annum in excess of the Reference Rate. Interest is payable monthly. The interest rate shall change from time to time as to when the Reference Rate changes, but in no event shall the Interest Rate be lower than 7.5%. This note matures on the date which is six months following the date of recordation of the Deed of Trust securing this note.
In addition, on October 2, 2001 Remington entered into a Subordination and Recognition Agreement with Centex homes and a bank. Remington executed two deeds of trust in favor of Centex to securing a note for a construction loan in principal amount not to exceed $2,538,000 and the other securing a note for a construction loan in a principal amount not to exceed $4,826,000. Remington and Centex also entered into certain purchase and sale agreements pursuant to which Centex will purchase the property from Remington.
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TMP LAND MORTGAGE FUND, LTD.
A California Limited Partnership
September 30, 2001
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis provides information that the Partnership’s management believes is relevant to an assessment and understanding of the Partnership’s results of operations and financial condition. This discussion should be read in conjunction with the financial statements and footnotes, which appear elsewhere in this report.
This Quarterly Report on Form 10-QSB contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which are subject to the “safe harbor” created by that section. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and similar expressions or variations of such words are intended to identify forward-looking statements, but are not the exclusive means of identifying forward-looking statements in this report. Additionally, statements concerning future matters such as the features, benefits and advantages of the Partnership’s property regarding matters that are not historical are forward-looking statements. The Partnership’s actual future results could differ materially from those projected in the forward-looking statements. The Partnership assumes no obligation to update the forward-looking statements.
Readers are urged to review and consider carefully the various disclosures made by the Partnership in this report, which attempts to advise interested parties of the risks and factors that may affect the Partnership’s business, financial condition and results of operations.
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the attached Consolidated Financial Statements and notes thereto and with the Partnerships’ audited consolidated financial statements and notes thereto for the fiscal year ended December 31, 2000.
The Partnership’s management believes that inflation has not had a material effect on the Partnership’s results of operations.
During the three month period ended September 30, 2001 and 2000, $1,962 and $6,475 respectively, of interest income was earned, of which $0, was earned from the notes receivable from affiliate. During the nine month period ended September 30, 2001 and 2000, $16,764 and $23,305, respectively, of interest income was earned, of which $0 and $12,151, respectively, was earned from the notes receivable from affiliate. Property sales for the three months ended September 30, 2001 and 2000 resulted in losses of approximately $324,000 and $358,000, respectively. Property sales for the nine months ended September 30, 2001 and 200, resulted in losses of approximately $948,000 and $412,000, respectively.
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TMP LAND MORTGAGE FUND, LTD.
A California Limited Partnership
September 30, 2001
Total expenses for the three-month period ended September 30, 2001 compared with the three-month period ended September 30, 2000, decreased by approximately $68,000 due to decreases in General & Administrative, Accounting& Financial Reporting, Manager Profit Participation and Other Expenses. Other expenses includes certain carrying costs related to the RSJ property in San Jacinto, CA, which are expensed as incurred in order to bring the stated value of the property to fair market value. These expenses are related to property services during the three-month period ended September 30, 2001. These decreases were partially offset by an increase in Outside Professional Services of $19,333 relating to legal services associated with the Chapter 11 Bankruptcy filing of RSJ (see note 8).
Total expenses for the nine-month period ended September 30, 2001 compared with the nine-month period ended September 30, 2000, decreased by approximately $119,500 due to decreases in all expense categories, except Outside Professional Services. Other expenses includes certain carrying costs related to the RSJ property in San Jacinto, CA, which are expensed as incurred in order to bring the stated value of the property to fair market value. These expenses are related to property services. The increase of approximately $15,000 in Outside Professional Services is directly related to legal services associated with the Chapter 11 Bankruptcy filing of RSJ (see note 8).
No other significant activity or changes have occurred in the Partnership properties.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2001, the Partnership had cash on hand of $300,720.
Operations for the nine months ended September 30, 2001 provided cash of approximately $307,000. Investing activities provided cash of approximately $2,241,000. Investing activities include proceeds from property sales of approximately $5,676,000 and $325,000 relating to the sale of the Peppertree investment. These sales proceeds are offset by increases in land development and carrying costs of approximately $3,746,000. Financing activities utilized cash of approximately $3,015,000 related to payments on the Remington note payable and distributions to the limited partners.
Operations for the nine months ended September 30, 2000 utilized cash of approximately $222,000. Investing activities during the nine months ended September 30, 2000 utilized cash of approximately $1,131,000. Cash proceeds received for property sales of approximately $3,500,000 were offset by cash utilized for the payment of land development and carrying costs and selling expenses of approximately $4,635,000. Advances from affiliates and proceeds from notes payable provided funds of approximately $2,100,000.
The Partnership had three properties as of September 30, 2001 that are being held for appreciation and resale or are in escrow. Remington, LLC is holding additional parcels for development and future sale of residential units. The Partnership does not intend to acquire any additional properties. Upon the sale of each property, the Partnership intends to distribute the sales proceeds less any reserves needed for operations to the partners.
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TMP LAND MORTGAGE FUND, LTD.
A California Limited Partnership
September 30, 2001
RSJ Builders, LLC filed Chapter 11 bankruptcy as of July 18, 2001 in response to a prior default judgment and Notice of Levy under Writ of Sale relating to property located in San Jacinto, CA. Since the net carrying value of the property is equal to property tax and Mello Roos tax assessment liability, it is expected there will be no additional costs to RSJ except for bankruptcy, legal, and other related costs.
Aside from the foregoing, the Partnership knows of no demands, commitments, events, or uncertainties, which might affect its liquidity or capital resources in any material manner.
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Signatures
Pursuant to the requirements of the Securities exchange Act of 1934; the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: November 13, 2001
TMP LAND MORTGAGE FUND, LTD.
A California Limited Partnership
By: TMP Investments, Inc., A California Corporation as
Co-General Partner
By: \s\ William O. Passo
-------------------------------------
William O. Passo, President
By: \s\ Anthony W. Thompson
-------------------------------------
Anthony W. Thompson, Exec. Vice President
By: TMP Properties, A California General Partnership as
Co-General Partner
By: \s\ William O. Passo
-------------------------------------
William O. Passo, Partner
By: \s\ Anthony W. Thompson
-------------------------------------
Anthony W. Thompson, Partner
By: \s\ Scott E. McDaniel
-------------------------------------
Scott E. McDaniel Partner
By: JAFCO, Inc., A California Corporation as Chief Accounting
Officer
By: \s\ John A. Fonseca
-------------------------------------
John A. Fonseca, President
