UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
Annual Report Under Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the Fiscal Year Ended Commission File
December 31, 2012 Number 0-16856
BIGGEST LITTLE INVESTMENTS L.P.
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(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 13-3368726
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(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
3702 S. VIRGINIA ST., UNIT G2, RENO, NEVADA 89502
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(Address of Principal Executive Offices) (Zip Code)
775-825-3355
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(Registrant's Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the Exchange Act:
NONE
Securities registered under Section 12(g) of the Exchange Act:
UNITS OF LIMITED PARTNERSHIP INTEREST
Indicate by check mark if the Registrant is a well-known seasoned issuer,
as defined by Rule 405 of the Securities Act. Yes ___ No _X_
Indicate by check mark if the Registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. Yes ___ No _X_
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 past 12 months, and (2) has been subject to such filing
requirements for the past 90 days. YES __X__ NO ____
Indicate by check mark whether the Registrant has submitted
electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of
Regulation S-T during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (?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 incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. [X]
Indicate by check mark whether the Registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of ?large accelerated filer,? ?accelerated filer?
and ?smaller reporting company? in Rule 12b-2 of the Exchange Act.
Large accelerated filer Yes [ ] No [X]
Accelerated filer Yes [ ] No [X]
Non-accelerated filer (Do not check if a smaller reporting company)
Yes [ ] No [X]
Smaller reporting company Yes [X] No [ ]
Indicate by check mark whether the Registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). YES [ ] NO [X]
There is no public market for the Limited Partnership Units. Accordingly,
information with respect to the aggregate market value of Limited Partnership
Units held by non-affiliates of the Partnership has not been supplied.
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
None
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Certain matters discussed herein contain forward-looking statements
including, without limitation, under ?Item 1. Business,? ?Item 2. Property,?
and ?Item 7. Management?s Discussion and Analysis of Financial Condition and
Results of Operations.? We have based these forward-looking statements on our
current expectations and projections about future events. Certain, but not
necessarily all, of such forward-looking statements can be identified by the
use of forward-looking terminology, such as "believes," "expects," "may,"
"will," "should," "estimates," or "anticipates," or the negative thereof or
other variations thereof or comparable terminology. All forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause our actual transactions, results, performance or achievements
to be materially different from any future transactions, results, performance
or achievements expressed or implied by such forward-looking statements. For
instance, the Partnership (as defined below) has been, and may continue to be,
affected by declining economic conditions that affect the real estate business
including the financial condition of tenants, competition, the ability to
lease vacant space within the Sierra Property (as defined below) or renew
existing leases, increased operating costs (including insurance costs), and
the costs associated with, and results of, any Partnership plans to renovate
and reposition the Sierra Property, as detailed in filings with the Securities
and Exchange Commission made by the Partnership from time to time. Although we
believe the expectations reflected in such forward-looking statements are
based upon reasonable assumptions, we can give no assurance that our
expectations will be attained or that any deviations will not be material. We
disclaim any obligations or undertaking to publicly release any updates or
revisions to any forward-looking statement contained in this Annual Report on
Form 10-K to reflect any change in our expectations with regard thereto or any
change in events, conditions or circumstances on which any such statement is
based.
PART I
ITEM 1. BUSINESS
General
Biggest Little Investments, L.P. (the "Partnership"), formerly Resources
Accrued Mortgage Investors 2, L.P., Resources Accrued Mortgage Investors L.P.
Series 87 and Resources Accrued Mortgage Investors L.P. Series 88, was
organized as a Delaware limited partnership on August 14, 1986. Until January
1, 2002, the general partners of the Partnership were RAM Funding, Inc. ("RAM
Funding") and Presidio AGP Corp. ("Presidio AGP"). Effective January 1, 2002,
the managing general partner interest and the associate general partner
interest were acquired by Maxum LLC, a Nevada limited liability company (the
"General Partner"). See "Change in Control" below. On October 8, 2003, the
Partnership received consents from the holders of a majority of its
outstanding units of limited partnership interest ("Units") to adopt the
Partnership's Second Amended and Restated Agreement of Limited Partnership
(the "Amended LP Agreement"). Pursuant to the Amended LP Agreement, the
Partnership was renamed "Biggest Little Investments, L.P." In addition, the
Amended LP Agreement provides the Partnership with the ability to leverage its
property in an effort to increase the value of the Partnership, to purchase
additional real estate for investment and/or development and to make or
acquire additional mortgage loans or short-term loans, as well as to reinvest
operating income and proceeds from the sale or refinancing of its properties
or the disposition of its mortgage loans. Finally, the Amended LP Agreement
permits the Partnership to repurchase Units from the limited partners. On June
12, 2009, the Amended LP Agreement was amended to permit the Partnership to
invest in any personal property or other non-real estate assets and to invest
in joint ventures, partnerships, firms, corporations or other entities where
the Partnership would not have a controlling interest in such entities.
Change in Control
As of January 1, 2002, the General Partner acquired both the managing
general partner interest and the associate general partner interest in the
Partnership from RAM Funding and Presidio AGP, respectively, pursuant to the
General and Limited Partner Interest Assignment Agreement (the "Assignment
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Agreement"), dated as of October 10, 2001, between the General Partner,
Western Real Estate Investments, LLC, an affiliate of the General Partner
("Western"), RAM Funding and Presidio AGP as well as Presidio Capital
Investment Company LLC, Presidio Partnership II Corp. and Bighorn Associates
LLC, each of which is affiliated with RAM Funding and Presidio AGP Corp. and
was a limited partner of the Partnership prior to January 1, 2002 (the "Former
LPs"). Also pursuant to the Assignment Agreement, as of January 1, 2002,
Western purchased all of the Units owned by the Former LPs.
As a result of the transactions described above, the General Partner owns
100% of the general partner interests in the Partnership. In addition, as of
January 1, 2002, the General Partner was appointed as the managing agent at
the Sierra Property (as hereinafter defined), replacing an affiliate of RAM
Funding, Presidio AGP and the Former LPs.
Effective October 1, 2008, Western was dissolved and, as a result of the
dissolution, Western?s remaining Units were equally distributed to its three
members based on each member?s one-third ownership of Western. Thus, Western
no longer beneficially owns any of the outstanding Units.
On June 12, 2009, the Amended LP Agreement was amended (the ?Second
Amendment?) by consent of Messrs. Ben and Bahram Farahi, who hold a majority
of the Partnership?s outstanding Units. Ben Farahi is the manager of the
General Partner, and Bahram Farahi is Ben Farahi's brother. The Second
Amendment permits the Partnership to invest in any personal property or other
non-real estate assets and to invest in joint ventures, partnerships, firms,
corporations or other entities where the Partnership would not have a
controlling interest in such entities. Prior to the Second Amendment, the
Amended LP Agreement limited the Partnership to investments in mortgage notes
or real estate assets and to investing in entities only where it would acquire
a controlling interest in such entities.
The Second Amendment also extended the term of the Partnership to
December 31, 2030. Prior to the Second Amendment, the term of the Partnership
was scheduled to expire on December 31, 2016.
The principal executive offices of the Partnership are located at 3702 S.
Virginia Street, Unit G2, Reno, Nevada 89502, and the Partnership's telephone
number is (775) 825-3355.
Management / Employees
The Partnership has four employees; three of them work full time, one
works part time. The business of the Partnership is managed by the General
Partner and its affiliates and agents.
Investments of the Partnership
The Partnership had an investment in a mortgage loan (the "Sierra Loan")
issued in 1989 in the amount of $6,500,000 to a public limited partnership.
On March 3, 2003, the Partnership acquired the deed to the property securing
the Sierra Loan, a shopping center commonly known as the Sierra Marketplace
located in Reno, Nevada (the "Sierra Property"), in lieu of foreclosing on the
Sierra Loan. The Sierra Property consists of approximately 210,000 square feet
of net rentable area and occupies 18.44 acres, consisting primarily of two
main buildings with spaces for two anchor tenants, with surface parking for
approximately 1,000 automobiles. See "Item 2. Property" for a description of
the Sierra Property and its tenants.
On December 17, 2010, the Partnership participated in first and second
senior credit facilities with a group led by a major bank in the aggregate
amount of $75 million (the ?Credit Facility?) to a new casino in Grand Falls,
Iowa (the ?Borrower?). The Partnership?s commitment to the Credit Facility was
$3 million under the first lien senior credit facility consisting of a $40
million term loan and a $10 million revolving loan (the ?First Facility?), and
$1.5 million under the second lien senior credit facility consisting of a $25
million term loan (the ?Second Facility?). The Credit Facility may be utilized
by the Borrower for a portion of the development and construction costs of the
casino (the ?Project?), to pay for fees and expenses in connection with the
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Project and for initial working capital needs after completion of the Project.
On August 14, 2012, the Borrower refinanced the Credit Facility, which had
been fully drawn on, and the Partnership was repaid its entire commitment. As
a result of the refinancing, the Partnership earned approximately $58,300 in
call protection fees per the terms of the Credit Facility. The First Facility
was scheduled to mature on December 17, 2014; the Second Facility was
scheduled to mature on December 17, 2015. See ?Item 8. Financial Statements ?
Note 6.? Both the First Facility and the Second Facility were paid in full
during the fiscal year ended December 31, 2012.
The Partnership also currently holds and trades in various securities of
publicly traded companies. As of December 31, 2012, the Partnership had
sizeable holdings in equity securities of Citigroup, Inc. and in short
positions of Apple, Inc. The Partnership also held smaller equity and short
positions in various other publicly traded companies.
Competition
The real estate business is highly competitive and the Sierra Property
has active competition for tenants from similar properties in the vicinity.
See "Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operation."
Tender Offers and Redemptions
On August 31, 2009, the Partnership initiated an offer enabling the
Partnership?s limited partners to sell their Units back to the Partnership
(the ?Redemption Offer?). The Partnership may repurchase whole Units only, at
a price reasonably determined by the General Partner based on market
considerations. Units repurchased by the Partnership under the Redemption
Offer will be canceled, and will have the status of authorized but unissued
Units. The Partnership's obligation to repurchase any Units under the
Redemption Offer is conditioned upon its having sufficient funds available to
complete the repurchase. The Partnership will use any operating funds as the
General Partner, in its sole discretion, may reserve for the purpose of
funding the Redemption Offer. On August 16, 2010, the Redemption Offer was
extended until August 31, 2011. On August 22, 2011, the Redemption Offer was
extended a second time until August 31, 2012, and, on August 24, 2012, the
Redemption Offer was extended until August 31, 2013, subject to the right of
the General Partner to suspend, terminate, modify or extend the term of the
Redemption Offer in its sole discretion. As of March 6, 2013, an aggregate of
12,246 Units have been repurchased by the Partnership at an approximate
average price of $102.89 per Unit pursuant to the Redemption Offer.
As of March 6, 2013, the Partnership had 168,435 Units outstanding.
ITEM 2. PROPERTY
The Partnership's sole property is the Sierra Property, located at South
Virginia Street and East Moana Lane, one of the busiest intersections in Reno,
Nevada. The Partnership owns the Sierra Property in fee simple and the Sierra
Property is not subject to any mortgages, liens or other encumbrances. The
General Partner believes that the Sierra Property is adequately covered by
insurance.
On June 8, 2011, the Partnership reached final agreement (the
?Agreement?) with and sold to the Regional Transportation Commission (the
?RTC?) a portion of the Sierra Property for the purpose of widening a section
of Moana Lane, a main thoroughfare in Reno, Nevada on which the Sierra
Property is located. The widening project was completed in November 2012 and
Moana Lane was expanded from four to six lanes. Under the terms of the
Agreement, the RTC paid the Partnership $2,731,787 ($2,743,730 less $11,943
for legal and administrative expenses incurred with the sale) for causing
demolition of up to 15,800 square feet of the Sierra Property?s buildings, the
RTC?s acquisition of 25,306 square feet of the Sierra Property?s land and
10,026 square feet of utility easement. The RTC paid the Partnership an
additional $346,700 for relocation and demolition costs related to the Sierra
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Property?s buildings and improvements. As a result of the Agreement, the
Partnership allocated approximately $117,483 of the RTC?s payments to the
Sierra Property?s land book value and placed approximately $542,952 ($738,611
less accumulated depreciation of $195,659) into suspense for the portion of
the Sierra Property?s buildings that could be demolished. In September 2012,
the Partnership began rebuilding the facade of the Sierra Property?s building
that was impacted by the Widening Project. The rebuilding project was
completed during the fourth quarter of 2012, and the Partnership funded the
cost of the rebuilding project with the compensation it had received from the
RTC. Following the completion of the rebuilding project, the Partnership
removed the $542,952 from suspense and recognized a gain on condemnation in
2012 for this amount. See ?Notes to Financial Statements ? NOTE 5. REAL
ESTATE.?
Tenants of the Sierra Property
The Sierra Property is in need of several new tenants, including anchor
tenants. Over the past few years, the Sierra Property has lost all of its
original anchor tenants and due, in part, to extensive competition for
tenants, has not been able to sign new anchor tenants to similar lease terms.
Renovation
In 2004, the Partnership began renovation efforts in an attempt to
maximize the financial viability of the Sierra Property by demolishing and
rebuilding part of the Sierra Property (the "Renovation"). As part of the
Renovation, a portion of the shopping center previously occupied by an anchor
tenant was demolished for the purpose of creating in its place a new driveway
(and traffic signal) directly between the Sierra Property and a hotel casino
property adjacent to the Sierra Property (the ?Adjacent Property?). The
driveway was constructed and put into use on September 30, 2004, and is being
shared by, and provides a connection between, the Sierra Property and the
Adjacent Property. In January 2004, the Adjacent Property entered into a lease
with the Partnership for a 37,368 square foot section of the Sierra Property
(including the new driveway). The Adjacent Property has a minimum lease term
of 15 years at a current monthly rent of approximately $28,400, subject to
increase every 60 months based on the Consumer Price Index. The Adjacent
Property also uses part of the common area of the Sierra Property and pays its
proportionate share of the common area expense of the Sierra Property. The
Adjacent Property has the option to renew the lease for three five-year terms,
and, at the end of the extension periods, has the option to purchase the
leased section of the Sierra Property at a price to be determined based on an
MAI Appraisal. The space being leased by the Adjacent Property provides
pedestrian and vehicle access to the Adjacent Property, and the Adjacent
Property has use of a portion of the parking spaces at the Sierra Property.
As of March 6, 2013, approximately 18.1% of the Sierra Property's
rentable square footage was occupied. The average effective monthly rent is
$0.73 per occupied square foot. This does not include the driveway leased to
the Adjacent Property.
Lease Expirations
The following table details the number of tenants, as of March 6, 2013,
whose leases will expire over the next ten years and related information:
Total Sq. Ft. Annual Rent of % of Gross
Annual
Number of Leases of Expiring Expiring Leases Rent of
Expiring
Year Expiring Leases at Current Rates Leases
---- ---------------- ------------- ---------------- ---------------
--
2013 1 2,098 36,000 5.3%
2014 1 1,000 27,755 4.1%
2015 1 2,125 44,400 6.6%
2016 2 10,992 82,451 12.2%
2017 through 2022* 2 18,246 368,503 54.7%
*This includes the driveway lease to the Adjacent Property.
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In addition, there are seven spaces totaling approximately 20,400 square
feet and representing approximately $11,900 in monthly rent that are currently
being leased on a month-to-month basis.
In addition to its driveway lease, the Adjacent Property is leasing
approximately 6,900 square feet of storage space at the Sierra Property on a
month-to-month basis and pays rent of approximately $3,450 per month for such
storage space.
Depreciation
Set forth below is a table showing the carrying value (in thousands),
accumulated depreciation (in thousands) and federal tax basis (in thousands)
of the Sierra Property as of December 31, 2012:
Carrying Accumulated Federal Tax
Value Depreciation Rate Method Basis
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$ 15,150 $4,325 5-30 yrs Straight Line $ 10,407
Realty Taxes
The realty tax rate for the Sierra Property for July 1, 2012, through
June 30, 2013, is approximately 3.6600% of assessed value and the real estate
taxes to be paid are $151,165.
Investment Policies of the Partnership
It is the Partnership's policy to acquire assets both for possible
capital gain and for income. There are no limitations on the percentage of the
Partnership's assets which may be invested in any one investment.
Investments in Real Estate or Interests in Real Estate
The Partnership may invest in properties including commercial or multi-
family, real, personal or mixed, choses in action, or any interest therein,
including any non-income producing properties, throughout the United States.
The Partnership may finance its purchase of real estate, including from
affiliates, provided that the maximum amount of permanent indebtedness secured
by the Partnership's fixed assets may not exceed, with respect to any such
fixed asset, 80% of the appraised value of that asset. The Partnership may
lease, own, mortgage, encumber, improve or cause to be improved, use, lend,
operate, service, maintain, develop, convey and otherwise dispose of and sell,
handle, subdivide, plat, trade and deal in any property it acquires.
Investments in Real Estate Mortgages
The Partnership may invest in, hold, sell, dispose of and otherwise act
with respect to first and junior mortgage loans on fee or leasehold interests
in real property or other beneficial interests essentially equivalent to a
mortgage on real property, as well as loans secured by interests in
partnerships, real estate investment trusts, joint ventures or other entities.
The Partnership may not, however, invest in or make mortgage loans on any one
property if the aggregate amount of all mortgage loans outstanding on the
property including the principal amount of the Partnership's mortgage loan,
would exceed an amount equal to 80% of the appraised value of the property at
the time the loan is made unless substantial justification exists because of
the presence of other underwriting criteria, subject to certain exceptions.
Other Investments
Per the Second Amendment, the Partnership may purchase, exchange,
acquire, lease, own, encumber, use, lend, borrow, operate, service, maintain,
develop, convey and otherwise dispose of and sell, handle, trade, deal in and
invest in any personal property or other non-real estate assets (whether
tangible or intangible), choses in action or any interest therein, including,
without limitation, (i) participations in loans and other financial
accommodations, whether secured by real estate, other assets or unsecured and
(ii) joint ventures, partnerships, firms, corporations or entities, whether
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public, governmental or private, and whether the Partnership would have a
controlling interest therein or not.
See ?Item 8. Financial Statements ? Note 4. Conflicts of Interest and
Transactions with Related Parties? for a description of the compensation,
fees, profits and other benefits payable to the General Partner and its
affiliates with respect to the Partnership?s real estate related business
activities.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. MINE SAFETY DISCLOSURES
None.
PART II
ITEM 5. MARKET FOR REGISTRANT?S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
There is no established public trading market for the Units of the
Partnership. There were no Units sold by the Partnership during fiscal years
2011 or 2012.
On August 31, 2009, the Partnership initiated an offer enabling the
Partnership?s limited partners to sell their Units back to the Partnership
(the ?Redemption Offer?). The Partnership may repurchase whole Units only, at
a price reasonably determined by the General Partner based on market
considerations. Units repurchased by the Partnership under the Redemption
Offer will be canceled, and will have the status of authorized but unissued
Units. The Partnership's obligation to repurchase any Units under the
Redemption Offer is conditioned upon its having sufficient funds available to
complete the repurchase. The Partnership will use any operating funds as the
General Partner, in its sole discretion, may reserve for the purpose of
funding the Redemption Offer. On August 16, 2010, the Redemption Offer was
extended until August 31, 2011. On August 22, 2011, the Redemption Offer was
extended a second time until August 31, 2012, and, on August 24, 2012, the
Redemption Offer was extended until August 31, 2013, subject to the right of
the General Partner to suspend, terminate, modify or extend the term of the
Redemption Offer in its sole discretion. As of March 6, 2013, an aggregate of
12,246 Units have been repurchased by the Partnership at an approximate
average price of $102.89 per Unit pursuant to the Redemption Offer.
During the fourth quarter of 2012, the Partnership repurchased Units from
some of its limited partners. All repurchased Units during this period were
made pursuant to the Redemption Offer as follows:
Maximum Number of Units
Total Number Average That May Yet Be
Of Units Price Paid Purchased Under The
Period Repurchased Per Unit Redemption Offer
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10/01/12 to
10/31/12 336 $103.00 (1)
11/01/12 to
11/30/12 108 $103.00 (1)
12/01/12 to
12/31/12 20 $103.00 (1)
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Total 464 $103.00 (1)
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(1) The Partnership will continue to repurchase Units pursuant to the
Redemption Offer as liquidity allows and to the extent that the Partnership?s
number of limited partners does not fall below 500.
As of March 6, 2013, there were approximately 691 holders of Units owning
an aggregate of 168,435 Units (including Units held by affiliates of the
General Partner).
ITEM 6. SELECTED FINANCIAL DATA
Not applicable.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This item should be read in conjunction with the financial statements and
other items contained elsewhere in this Annual Report on Form 10-K.
Recent Events
In September 2012, the Partnership began rebuilding the facade of the
Sierra Property?s building that was impacted by the Widening Project. The
rebuilding project was completed during the fourth quarter of 2012, and the
Partnership funded the cost of the rebuilding project with the compensation it
had received from the Regional Transportation Commission (see ?Notes to
Financial Statements ? NOTE 5. REAL ESTATE?).
On August 14, 2012, a $75 million credit facility to a new casino in
Grand Falls, Iowa that the Partnership had participated in with a group led by
a major bank was refinanced and, as a result, the Partnership was repaid its
entire outstanding commitment. As a result of the refinancing, the Partnership
earned approximately $58,300 in call protection fees per the terms of the
credit facility. The Partnership?s commitment had previously been recorded as
a note receivable (see ?Notes To Financial Statements ? NOTE 6. NOTES
RECEIVABLE?).
On August 31, 2009, the Partnership initiated an offer enabling the
Partnership?s limited partners to sell their Units back to the Partnership
(the ?Redemption Offer?). The Partnership may repurchase whole Units only, at
a price reasonably determined by the General Partner based on market
considerations. Units repurchased by the Partnership under the Redemption
Offer will be canceled, and will have the status of authorized but unissued
Units. The Partnership's obligation to repurchase any Units under the
Redemption Offer is conditioned upon its having sufficient funds available to
complete the repurchase. The Partnership will use any operating funds as the
General Partner, in its sole discretion, may reserve for the purpose of
funding the Redemption Offer. On August 16, 2010, the Redemption Offer was
extended until August 31, 2011. On August 22, 2011, the Redemption Offer was
extended a second time until August 31, 2012, and, on August 24, 2012, the
Redemption Offer was extended until August 31, 2013, subject to the right of
the General Partner to suspend, terminate, modify or extend the term of the
Redemption Offer in its sole discretion. As of March 6, 2013, an aggregate of
12,246 Units have been repurchased by the Partnership at an approximate
average price of $102.89 per Unit pursuant to the Redemption Offer.
Real Estate Market
The Partnership's sole fixed asset as of December 31, 2012, was the
Sierra Property, which currently has a vacancy rate of approximately 82% based
on leasable square footage. There is substantial retail space competition
in the Reno area, especially in close vicinity to the Sierra Property. In
addition, the ongoing softness in the overall economy has hurt the retail
sector, thus adding to the difficulty in locating new tenants for the Sierra
Property. Also, in the past few years, the Sierra Property has lost all of
its original anchor tenants and has not been able to locate new anchor tenants
with similar lease terms; two of the spaces are currently vacant. The third
anchor tenant space was demolished for the purpose of creating in its place a
new driveway (and traffic signal) directly between the Sierra Property and the
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Adjacent Property, and the portion of the Sierra Property that was demolished
has been leased to the owner of the Adjacent Property since September 30,
2004, enabling the Partnership to make up much of the lost rental revenue
previously generated by the space.
There can be no assurances that the Partnership's efforts to increase the
Sierra Property's occupancy will be successful.
Liquidity and Capital Resources
The Partnership's level of liquidity based on cash and cash equivalents
increased by $4,423,079 to $10,069,125 during the year ended December 31,
2012, as compared to December 31, 2011. The increase was due primarily to the
return of $4,455,000 from the refinancing of a credit facility to a casino
project in Iowa that the Partnership had participated in and had previously
recorded as a note receivable. The Partnership also had approximately $299,863
in cash provided by operating activities during the year ended December 31,
2102, as well as a net cash inflow of approximately $307,169 from the purchase
and sale of various securities. These receipts were offset by cash used for a
$2.00-per-Unit distribution in April 2012, and for the payment and prepayment
for Units to limited partners pursuant to the Redemption Offer. Cash and cash
equivalents are invested in short-term instruments and are expected to be
sufficient to pay administrative expenses. See "Item 8. Financial Statements -
Note 2."
Results of Operations
Comparison of operating results for the year ended December 31, 2012, as
compared to December 31, 2011.
Net income decreased by $945,588 to $1,293,888 for the year ended
December 31, 2012 as compared to $2,239,476 in the previous year. Revenues
decreased by $20,688 to $988,359 during 2012 as compared to the same period in
2011. The decrease in revenues was due to a slight decrease in rental income
as a result of lower rents at the Sierra Property during 2012 compared to
2011, as well as a decrease in other revenues. Fee revenues increased in 2012
as compared to 2011 primarily due to call protection fees earned by the
Partnership from the early repayment of the Grand Falls credit Facility.
Costs and expenses decreased to $1,146,784 in 2012 as compared to
$1,245,172 in 2011 due to decreases in operating, general and administrative
and management fee expenses. Operating costs decreased by $48,772, primarily
due to decreases in property taxes and insurance costs, as well as to
reductions in commissions and bad debt expense. These decreases were partially
offset by increases in costs to maintain the Sierra Property. General and
administrative expense decreased in 2012 by $4,875 primarily as a result of
decreases in printing and mailing costs and payroll expenses. These decreases
were partially offset by increases in professional services fees. Management
fee expense decreased by $44,741 due to lower interest income in 2012 as
compared to 2011, as well as a $67,500 mortgage placement fee to the General
Partner in 2011 for its services in connection with the Credit Facility which
the Partnership did not pay in 2012. These decreases were partially offset by
a $25,691 fee that the Partnership paid to the General Partner for its
services managing the Partnership?s securities investments. Depreciation
expense remained unchanged.
The Partnership recorded a realized gain of $587,145 from the sale of
various securities during 2012 as compared to a gain $813 in 2011, and a gain
of $542,952 in connection with compensation it received from the RTC for the
Widening Project, as compared to a gain of $2,071,352 in 2011 (SEE ?NOTE 6.
REAL ESTATE?). In addition, the Partnership had an unrealized gain of $712,204
from its holdings of various securities during 2012. During 2011, the
Partnership had an unrealized loss of $505,235 from its securities holdings.
Critical Accounting Policies
The Partnership's significant critical accounting policies include the
evaluation of the fair value of real estate. The Partnership evaluates the
need for an impairment loss on its real estate assets when indicators of
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impairment are present and the undiscounted cash flows are not sufficient to
recover the asset's carrying amount. The impairment loss is measured by
comparing the fair value of the asset to its carrying amount. The evaluation
of the fair value of real estate is an estimate that is susceptible to change
and actual results could differ from those estimates. The sufficiency of
existing liquid assets to meet future liquidity and capital expenditure
requirements is directly related to the level of capital expenditures required
at the property to adequately maintain the physical assets and the other
operating needs of the Partnership. Such assets are currently thought to be
sufficient for any near-term and long-term needs of the Partnership, except
that the Partnership may need to obtain financing for any future renovation
efforts or other capital projects. The Partnership did not incur any
impairment charges during 2012.
Investments are classified as trading or available-for-sale.
Trading investments are recorded at fair value with unrealized gains and
losses reflected in the statements of operations. Available-for-sale
investments? unrealized gains and losses are included as a component of
accumulated other comprehensive income (loss) in the accompanying statements
of operations and comprehensive income. Interest on investments is recognized
as income when earned. Realized gains and losses on investments are included
in the accompanying statements of operations and comprehensive income under
the caption ?gain on sale of securities.?
Long-term notes receivable bear interest and are due upon maturity.
Interest income associated with these notes receivable is reflected in the
accompanying statements of operations and comprehensive income under the
caption ?interest income.?
See ?Recently Issued Accounting Standards? in ?Item 8. Financial
Statements - Note 2? for a description of recent accounting standards and
their effects on the Partnership?s financial statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
-11-
ITEM 8. FINANCIAL STATEMENTS
REPORT OF INDEPENDENT PUBLIC ACCOUNTING FIRM
To the Partners of Biggest Little Investments, L.P.
We have audited the accompanying balance sheets of Biggest Little Investments,
L.P. (the ?Company?) as of December 31, 2012 and 2011 and the related
statements of operations and comprehensive income, partner?s equity, and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audit included consideration of internal
control over financial reporting as a basis for designing audit procedures
that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company's internal control
over financial reporting. Accordingly, we express no such opinion. 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Biggest Little Investments,
L.P. as of December 31, 2012 and 2011, and the results of its operations and
cash flows for the periods described above in conformity with accounting
principles generally accepted in the United States of America.
/s/ M&K CPAS, PLLC
www.mkacpas.com
Houston, Texas
March 26, 2013
-12-
BIGGEST LITTLE INVESTMENTS L.P.
BALANCE SHEETS
December 31,
--------------------------
2012 2011
------------ ------------
ASSETS
Current Assets
Cash and cash equivalents................... $ 10,069,125 $ 5,646,046
Short-term investments ? CDs................ 249,970 248,101
Trade and other receivables, net............ 8,301 20,367
Available-for-sale securities............... 3,021,934 2,029,754
Prepaid expense............................. 352 2,400
------------ ------------
Total Current Assets...................... 13,349,682 7,946,668
------------ ------------
Long-Term Assets
Notes receivable............................ - 4,455,000
Property, plant and equipment, net.......... 10,824,798 10,668,902
------------ ------------
Total Long-Term Assets.................... 10,824,798 15,123,902
------------ ------------
Total Assets............................. $ 24,174,480 $ 23,070,570
============ ============
LIABILITIES AND PARTNERS' EQUITY
Liabilities
Accounts payable, prepaid rent, accrued
expenses and unclaimed property......... $ 37,749 $ 35,444
Related party accounts payable............ 85,601 352,026
Tenant deposits........................... 23,699 22,808
------------ ------------
Total liabilities........................... 147,049 410,278
------------ ------------
Commitments and Contingencies
Partners' Equity
Limited partners' equity (170,390 units at
12/31/12 and 173,421 at 12/31/11 issued
and outstanding)......................... 23,283,532 22,702,467
Prepaid redemption........................ (196,025) (246,280)
Accumulated other comprehensive income
(loss) ................................... 301,714 (410,490)
General partner?s equity.................. 638,210 614,595
------------ ------------
Total Partners' Equity...................... 24,027,431 22,660,292
------------ ------------
Total Liabilities and Partners' Equity... $ 24,174,480 $ 23,070,570
============ ============
The accompanying Notes to Financial Statements are an integral part of these
statements.
-13-
BIGGEST LITTLE INVESTMENTS L.P.
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
Year ended December 31,
---------------------------
2012 2011
------------ ------------
Revenues
Rental revenues....................... $ 304,773 $ 345,402
Related party rental revenues......... 523,474 515,662
Fee revenues.......................... 58,290 26,692
Other revenues........................ 101,822 121,291
------------ ------------
Net Revenues....................... 988,359 1,009,047
------------ ------------
Costs and Expenses
Operating expenses.................... 498,751 547,523
General and administrative............ 173,056 177,931
Depreciation.......................... 387,056 387,056
Management fees....................... 87,921 132,662
------------ ------------
Total Costs and Expenses........... 1,146,784 1,245,172
------------ ------------
Loss From Operations............... (158,425) (236,125)
------------ ------------
Other Income and Expenses
Gain from condemnation................ 542,952 2,071,352
Gain on sale of securities............ 587,145 813
Interest income....................... 322,216 403,596
Interest expense...................... - (160)
------------ ------------
Total Other Income................. 1,452,313 2,475,601
------------ ------------
Net Income ........................ $ 1,293,888 $ 2,239,476
============ ============
Other Comprehensive Income (Loss):
Unrealized gain (loss) from securities $ 712,204 $ (505,235)
------------ ------------
Comprehensive Income............... $ 2,006,092 $ 1,734,241
============ ============
Net income attributable to:
Limited partners................... $ 1,261,541 $ 2,183,490
General partner.................... 32,347 55,986
------------ ------------
$ 1,293,888 $ 2,239,476
============ ============
NET INCOME PER UNIT OF LIMITED
PARTNERSHIP INTEREST $ 7.40 $ 12.59
============ ============
UNITS OUTSTANDING 170,390 173,421
============ ============
The accompanying Notes to Financial Statements are an integral part of these
statements.
-14-
BIGGEST LITTLE INVESTMENTS L.P.
STATEMENT OF PARTNERS' EQUITY
YEARS ENDED DECEMBER 31, 2012 AND 2011
Limited General Total
Partners' Prepaid Comprehensive Partner?s Partners'
Equity Redemption Income Equity Equity
----------- ---------- ------------- ----------- -----------
Balance ? December 31, 2010 $20,718,177 $ (45,260) $ 94,745 $ 558,609 $21,326,271
----------- ---------- ------------- ----------- -----------
Net income............... 2,183,490 - - 55,986 2,239,476
Comprehensive loss....... - - (505,235) - (505,235)
Payment for Unit
repurchases............ (199,200) - - - (199,200)
Prepayment for Unit
repurchases............ - (201,020) - - (201,020)
----------- ---------- ------------ ----------- -----------
Balance ? December 31, 2011 22,702,467 (246,280) (410,490) 614,595 22,660,292
----------- ---------- ------------ ----------- -----------
Net income............... 1,261,541 - - 32,347 1,293,888
Distribution............. (340,526) - - (8,732) (349,258)
Comprehensive income..... - - 712,204 - 712,204
Payment for Unit
repurchases............ (339,960) - - - (339,960)
Prepayment for Unit
repurchases............ - 50,255 - - 50,255
----------- ---------- ------------ ----------- -----------
Balance ? December 31, 2012 $23,283,532 $ (196,025) $ 301,714 $ 638,210 $24,027,431
=========== ========== ============ =========== ===========
The accompanying Notes to Financial Statements are an integral part of these
statements.
-15-
BIGGEST LITTLE INVESTMENTS L.P.
STATEMENTS OF CASH FLOWS
Years ended December 31,
--------------------------
2012 2011
------------ ------------
Cash flows from operating activities:
Net income .................................. $ 1,293,888 $ 2,239,476
Adjustments to reconcile net income to net
cash provided by operating activities:
Gain on property condemnation............ (542,952) (2,071,352)
Gain on sale of securities............... (587,145) (813)
Depreciation............................. 387,056 387,056
Non-cash change in securities............ - (99,730)
Changes in assets and liabilities:
Decrease in tenant receivables and
prepaid expense........................ 14,114 17,889
(Decrease) increase in accounts payable,
accrued expenses and other liabilities. 3,196 7,388
(Decrease) increase in related party
accounts payable....................... (266,425) 5,189
Increase in short-term investments ? CDs. (1,869) (1,498)
------------ ------------
Net cash provided by operating activities.. 299,863 483,605
------------ ------------
Cash flows from investing activities:
Cash used for the purchase of securities... (1,173,097) (2,055,834)
Cash received from the sale of securities.. 1,480,266 435,638
Cash received from Grand Falls note
receivable............................... 4,455,000 -
Cash received for property condemnation.... - 2,731,787
Cash received for demolition costs......... - 346,700
------------ ------------
Net cash provided by investing activities.. 4,762,169 1,503,291
------------ ------------
Cash flows from financing activities:
Cash used for payment of redemption of
limited partnership units................ (93,670) (153,940)
Cash used for prepayment of redemption of
limited partnership units................ (196,025) (246,280)
Cash used for distribution................. (349,258) -
------------ ------------
Net cash used in financing activities...... (638,953) (400,220)
------------ ------------
Net increase in cash........................... 4,423,079 1,586,676
Cash and cash equivalents, beginning of year... 5,646,046 4,059,370
------------ ------------
Cash and cash equivalents, end of year......... $ 10,069,125 $ 5,646,046
============ ============
Non-Cash
Retired prepaid redemption............... $ 246,280 $ 45,260
Draw on credit facility.................. $ - $ 3,000,000
Unrealized gain/loss on securities....... $ 712,204 $ (505,235)
The accompanying Notes to Financial Statements are an integral part of these
statements.
-16-
BIGGEST LITTLE INVESTMENTS L.P.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION AND PLAN OF OPERATION
Biggest Little Investments, L.P. (the "Partnership"), formerly Resources
Accrued Mortgage Investors 2, L.P., Resources Accrued Mortgage Investors L.P.
Series 87 and Resources Accrued Mortgage Investors L.P. Series 88, a Delaware
limited partnership, was formed in August 1986 under the Delaware Revised
Uniform Limited Partnership Act for the purpose of investing primarily in
senior and junior accrued interest mortgage loans on properties owned or
acquired principally by publicly or privately syndicated limited partnerships
sponsored by affiliates of Integrated Resources, Inc. ("Integrated"). During
1994, Integrated's indirect ownership of the managing general partner was
purchased by Presidio Capital Corp. ("Presidio"). Through December 31, 2001,
the managing general partner of the Partnership was RAM Funding, Inc. and the
associate general partner was Presidio AGP Corp., which are wholly-owned
subsidiaries of Presidio. Effective January 1, 2002, pursuant to the General
and Limited Partner Interest Assignment Agreement (the "Assignment
Agreement"), the managing general partner and associate general partner
interests in the Partnership were acquired by Maxum LLC ("Maxum" or the
"General Partner").
In accordance with the Partnership's Agreement of Limited Partnership
(the "Partnership Agreement"), net income and loss, adjusted cash from
operations and disposition proceeds are allocated 97.5% to the limited
partners and 2.5% to the general partner.
On October 8, 2003, the Partnership received consents from the holders of
a majority of its outstanding units of limited partnership interest ("Units")
to adopt the Partnership's Second Amended and Restated Agreement of Limited
Partnership (the "Amended LP Agreement"). Pursuant to the Amended LP
Agreement, the Partnership was renamed "Biggest Little Investments, L.P." In
addition, the Amended LP Agreement provides the Partnership with the ability
to leverage its property in an effort to increase the value of the
Partnership, to purchase additional real estate for investment and/or
development and to make or acquire additional mortgage loans or short-term
loans, as well as to reinvest operating income and proceeds from the sale or
refinancing of its properties or the disposition of its mortgage loans. The
Amended LP Agreement also permits the Partnership to repurchase Units from the
limited partners. On June 12, 2009, the Amended LP Agreement was amended to
permit the Partnership to invest in any personal property or other non-real
estate assets and to invest in joint ventures, partnerships, firms,
corporations or other entities where the Partnership would not have a
controlling interest in such entities.
The Partnership had an investment in a mortgage loan (the ?Sierra Loan?)
issued in 1989 in the amount of $6,500,000 to a public limited partnership. In
March 2003, the Partnership acquired the deed to the property securing the
Sierra Loan, a shopping center commonly known as the Sierra Marketplace
located in Reno, Nevada (the ?Sierra Property?), in lieu of foreclosing on the
Sierra Loan. The Sierra Property consists of approximately 210,000 square feet
of net rentable area and occupies 18.44 acres, consisting primarily of two
main buildings with spaces for two anchor tenants, with surface parking for
approximately 1,000 automobiles. The Sierra Property is approximately 82%
vacant.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Property and Provision for Impairment
Property is stated at cost, less accumulated depreciation. Since
acquisition, property has been depreciated principally on a straight-line
basis over the estimated service lives as follows:
Land improvements............ 5 years
Buildings.................... 30 years
Building improvements........ 5-30 years
-17-
In accordance with the Accounting Standards Codification (?ASC?) Section
360, the Partnership evaluates the carrying value of its long-lived assets for
impairment at least annually or whenever events or changes in circumstances
indicate that the carrying value of the assets may not be recoverable from
related future undiscounted cash flows. As of December 31, 2012, the
Partnership?s only operating asset was the Sierra Property and the Partnership
determined that none of its long-lived assets were impaired at such date.
Allowance for Doubtful Accounts
The Partnership monitors its accounts receivable balances on a monthly
basis to ensure they are collectible. On a quarterly basis, the Partnership
uses its historical experience to determine its accounts receivable reserve.
The Partnership?s allowance for doubtful accounts is an estimate based on
specifically identified accounts as well as general reserves. The Partnership
evaluates specific accounts where it has information that the customer may
have an inability to meet its financial obligations. In these cases,
management uses judgment, based upon the best available facts and
circumstances, and records a specific reserve for that customer against
amounts due to reduce the receivable to the amount that is expected to be
collected. These specific reserves are reevaluated and adjusted as additional
information is received that impacts the amount reserved. The Partnership also
establishes a general reserve based upon a range of percentages applied to
aging categories. These percentages are based on historical collection and
write-off experience. If circumstances change, the Partnership?s estimate of
the recoverability of amounts due the Partnership could be reduced or
increased by a material amount. Such a change in estimated recoverability
would be accounted for in the period in which the facts that give rise to the
change become known. As of December 31, 2012, the Partnership did not have a
reserve for bad debt.
Cash and Cash Equivalents
For the purpose of the statements of cash flows, the Partnership
considers all short-term investments, which have original maturities of three
months or less to be cash equivalents. There were no cash equivalents on
December 31, 2012 or December 31, 2011.
Concentration of Credit Risk
The Partnership maintains cash balances at institutions insured up to
$250,000 by the Federal Deposit Insurance Corporation. Balances in excess of
amounts required for operations are usually invested in savings, money market
accounts and certificates of deposit. Cash balances exceeded these insured
levels during the year. No losses have occurred or are expected due to this
risk.
Revenue Recognition
Rental revenues are based on lease terms and recorded as income when
earned and when they can be reasonably estimated. Rent increases are generally
based on the Consumer Price Index. Leases generally require tenants to
reimburse the Partnership for certain operating expenses applicable to their
leased premises. These costs and reimbursements have been included in
operating expenses and rental income, respectively.
Investments
Investments are classified as trading or available-for-sale.
Trading investments are recorded at fair value with unrealized gains and
losses reflected in the statements of operations. Available-for-sale
investments? unrealized gains and losses are included as a component of
accumulated other comprehensive income (loss) in the accompanying statements
of operations and comprehensive income. Interest on investments is recognized
as income when earned. Realized gains and losses on investments are included
in the accompanying statements of operations and comprehensive income under
the caption ?gain on sale of securities.? As of December 31, 2012, all of the
Partnership?s investments were classified as available-for-sale.
-18-
Long-term Notes Receivable
Long-term notes receivable bear interest and are due upon maturity.
Interest income associated with these notes receivable is reflected in the
accompanying statements of operations and comprehensive income under the
caption interest income.
Fair Value of Financial Instruments
The Partnership uses the following hierarchy to prioritize the inputs
used in measuring fair value in accordance with ASC Section 820:
Level 1 Quoted prices (unadjusted) in active markets for identical assets
or liabilities;
Level 2 Inputs other than quoted prices included within Level 1 that are
either directly or indirectly observable;
Level 3 Unobservable inputs in which little or no market activity exists,
therefore requiring an entity to develop its own assumptions
about the assumptions that market participants would use in
pricing.
Financial instruments including cash and cash equivalents, trade and
notes receivable, securities, accounts payable and accrued expenses are
carried in the financial statements at amounts that approximated fair value at
December 31, 2012. See Note 3.
Net Income Per Unit of Limited Partnership Interest
Net income per unit of limited partnership interest (each individually a
?Unit? and, together, the ?Units?) is computed based upon the weighted average
number of Units outstanding (170,390 Units at December 31, 2012, and 173,421
Units at December 31, 2011) during the year.
On August 31, 2009, the Partnership initiated an offer enabling the
Partnership?s limited partners to sell their Units back to the Partnership
(the ?Redemption Offer?). The Partnership may repurchase whole Units only, at
a price reasonably determined by the General Partner based on market
considerations. Units repurchased by the Partnership under the Redemption
Offer will be canceled, and will have the status of authorized but unissued
Units. The Partnership's obligation to repurchase any Units under the
Redemption Offer is conditioned upon its having sufficient funds available to
complete the repurchase. The Partnership will use any operating funds as the
General Partner, in its sole discretion, may reserve for the purpose of
funding the Redemption Offer. On August 16, 2010, the Redemption Offer was
extended until August 31, 2011. On August 22, 2011, the Redemption offer was
extended a second time until August 31, 2012, and, on August 24, 2012, the
Redemption Offer was extended until August 31, 2013, subject to the right of
the General Partner to suspend, terminate, modify or extend the term of the
Redemption Offer in its sole discretion. As of December 31, 2012, an aggregate
of 12,183 Units had been repurchased by the Partnership at an approximate
average price of $102.88 per Unit pursuant to the Redemption Offer.
Income Taxes
No provisions have been made for federal, state and local income taxes.
Partnership earnings are allocated between the partners in accordance with
each partner?s ownership interest and are taxed individually and not at the
partnership level.
The income tax returns of the Partnership are subject to examination by
federal, state and local taxing authorities. Such examinations could result in
adjustments to Partnership income, which changes could affect the tax
liability of the individual partners.
-19-
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 amount
of assets, liabilities, revenues and expenses and related disclosure of
contingent assets and liabilities.
On an ongoing basis, the Partnership evaluates its estimates, including
those related to bad debts, contingencies, litigation and valuation of the
real estate. The Partnership bases its estimates on historical experience and
on various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these estimates under
different assumptions or conditions.
Recently Issued Accounting Standards
In October 2012, the Financial Accounting Standards Board (?FASB?) issued
Accounting Standards Update (?ASU?) 2012-04, ?Technical Corrections and
Improvements? in Accounting Standards Update No. 2012-04. The amendments in
this update cover a wide range of Topics in the Accounting Standards
Codification. These amendments include technical corrections and improvements
to the Accounting Standards Codification and conforming amendments related to
fair value measurements. The amendments in this update will be effective for
fiscal periods beginning after December 15, 2012. The adoption of ASU 2012-04
is not expected to have a material impact on our financial position or results
of operations.
In August 2012, the FASB issued ASU 2012-03, ?Technical Amendments and
Corrections to SEC Sections: Amendments to SEC Paragraphs Pursuant to SEC
Staff Accounting Bulletin (SAB) No. 114, Technical Amendments Pursuant to SEC
Release No. 33-9250, and Corrections Related to FASB Accounting Standards
Update 2010-22 (SEC Update)? in Accounting Standards Update No. 2012-03. This
update amends various SEC paragraphs pursuant to the issuance of SAB No. 114.
The adoption of ASU 2012-03 is not expected to have a material impact on our
financial position or results of operations.
In July 2012, the FASB issued ASU 2012-02, ?Intangibles ? Goodwill and
Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment?
in Accounting Standards Update No. 2012-02. This update amends ASU 2011-08,
Intangibles ? Goodwill and Other (Topic 350): Testing Indefinite-Lived
Intangible Assets for Impairment and permits an entity first to assess
qualitative factors to determine whether it is more likely than not that an
indefinite-lived intangible asset is impaired as a basis for determining
whether it is necessary to perform the quantitative impairment test in
accordance with Subtopic 350-30, Intangibles - Goodwill and Other - General
Intangibles Other than Goodwill. The amendments are effective for annual and
interim impairment tests performed for fiscal years beginning after September
15, 2012. Early adoption is permitted, including for annual and interim
impairment tests performed as of a date before July 27, 2012, if a public
entity?s financial statements for the most recent annual or interim period
have not yet been issued or, for nonpublic entities, have not yet been made
available for issuance. The adoption of ASU 2012-02 is not expected to have a
material impact on our financial position or results of operations.
In December 2011, FASB issued Accounting Standards Update 2011-11,
Balance Sheet - Disclosures about Offsetting Assets and Liabilities? to
enhance disclosure requirements relating to the offsetting of assets and
liabilities on an entity's balance sheet. The update requires enhanced
disclosures regarding assets and liabilities that are presented net or gross
in the statement of financial position when the right of offset exists, or
that are subject to an enforceable master netting arrangement. The new
disclosure requirements relating to this update are retrospective and
effective for annual and interim periods beginning on or after January 1,
2013. The update only requires additional disclosures, as such; we do not
-20-
expect that the adoption of this standard will have a material impact on our
results of operations, cash flows or financial condition.
In September 2011, the FASB issued ASU No. 2011-08, ?Intangibles ?
Goodwill and Other? (ASU 2011-08). ASU 2011-08 allows a qualitative assessment
of whether it is more likely than not that a reporting unit?s fair value is
less than its carrying amount before applying the two-step goodwill impairment
test. If it is more likely than not that the fair value of a reporting unit is
less than its carrying amount, then the two-step impairment test would be
performed. ASU 2011-08 is effective for annual and interim goodwill impairment
tests performed for fiscal years beginning after December 15, 2011, and early
adoption is permitted. This update is expected to change the process the
Company uses to test goodwill for impairment, but is not expected to have a
material impact on its consolidated financial statements.
In May 2011, the FASB issued Accounting Standards Update (ASU) No. 2011-
04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair
Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. This
update clarifies the application of certain existing fair value measurement
guidance and expands the disclosures for fair value measurements that are
estimated using significant unobservable (Level 3) inputs. This update is
effective on a prospective basis for annual and interim reporting periods
beginning on or after December 15, 2011, which for the Company is January 1,
2012. The Company does not expect that adopting this update will have a
material impact on its consolidated financial statements.
NOTE 3. FAIR VALUE MEASUREMENTS
The Partnership holds certain financial assets which are required to be
measured at fair value on a recurring basis in accordance with ASC Section
820. The following table summarizes the Partnership?s securities holdings as
of December 31, 2012:
Fair Value Measurement
---------------------------------
Level 1 Level 2 Level 3 Total
---------- --------- --------- ----------
Available for Sale Securities $3,021,934 $ - $ - $3,021,934
Short-term investment ? CD 249,970 - - 249,970
---------- --------- --------- ----------
Total $3,271,904 $ - $ - $3,271,904
========== ========= ========= ==========
The following table summarizes the Partnership?s securities holdings as
of December 31, 2011:
Fair Value Measurement
---------------------------------
Level 1 Level 2 Level 3 Total
---------- --------- --------- ----------
Available for Sale Securities $2,029,754 $ - $ - $2,029,754
Short-term investment ? CD 248,101 - - 248,101
Note receivable 4,455,000 - - 4,455,000
---------- --------- --------- ----------
Total $6,732,855 $ - $ - $6,732,855
========== ========= ========= ==========
NOTE 4. CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES
In 2012, the Partnership began paying the General Partner for its
services in connection with managing the Partnership?s investments in
securities. The fee for these services is equal to one percent of the average
quarterly asset balance of the Partnership?s securities portfolio. For 2012,
this fee totaled $25,961.
-21-
In September 2012, the Partnership began rebuilding the facade of the
Sierra Property?s building that was impacted by the Widening Project. During
2012, the Partnership paid approximately $273,182 to Pelican, LLC, an
affiliate of the General Partner, for rebuilding the facade. The rebuilding
project was completed during the fourth quarter of 2012, and the Partnership
funded the cost of the rebuilding project with the compensation it had
received from the Regional Transportation Commission (see ?Notes to Financial
Statements ? NOTE 5. REAL ESTATE?).
Beginning in April 2007, affiliates of the General Partner began leasing
office space at the Sierra Property and pay monthly rent of $2,408. The
General Partner uses a portion of this office space and participates in such
rent payments.
In 2004, the Partnership began renovation efforts in an attempt to
maximize the financial viability of the Sierra Property by demolishing and
rebuilding part of the Sierra Property (the "Renovation"). As part of the
Renovation, a portion of the shopping center previously occupied by an anchor
tenant was demolished for the purpose of creating in its place a new driveway
(and traffic signal) directly between the Sierra Property and a hotel casino
property adjacent to the Sierra Property (the ?Adjacent Property?). The
driveway was constructed and put into use on September 30, 2004, and is being
shared by, and provides a connection between, the Sierra Property and the
Adjacent Property. In January 2004, the Adjacent Property entered into a lease
with the Partnership for a 37,368 square foot section of the Sierra Property
(including the new driveway). The Adjacent Property has a minimum lease term
of 15 years at a current monthly rent of approximately $28,400, subject to
increase every 60 months based on the Consumer Price Index. The Adjacent
Property also uses part of the common area of the Sierra Property and pays its
proportionate share of the common area expense of the Sierra Property. The
Adjacent Property has the option to renew the lease for three five-year terms,
and, at the end of the extension periods, has the option to purchase the
leased section of the Sierra Property at a price to be determined based on an
MAI Appraisal. The space being leased by the Adjacent Property provides
pedestrian and vehicle access to the Adjacent Property, and the Adjacent
Property has use of a portion of the parking spaces at the Sierra Property.
In addition to the driveway lease, the Adjacent Property is leasing
approximately 6,900 square feet of storage space at the Sierra Property on a
month-to-month basis and is paying approximately $3,450 per month in rent for
such space.
Ben Farahi, the Manager and sole member of the General Partner, was,
until May 26, 2006, Co-Chairman of the Board, Chief Financial Officer,
Secretary, and Treasurer of Monarch Casino & Resort, Inc., the owner of the
Adjacent Property, and still owned approximately 12.0% of Monarch?s
outstanding common stock as of December 31, 2012.
The Partnership received approximately $523,474 and $515,662 in rental
revenue and common area charges from the Adjacent Property during 2012 and
2011, respectively, for the driveway and the leased spaces.
Accounting rules define transactions with related parties as transactions
which are not arm?s-length in nature and, therefore, may not represent fair
market value.
Compensation of the General Partner
The General Partner is the manager of the Sierra Property. The General
Partner received $87,921 and $132,662 for the years ended December 31, 2012,
and 2011, respectively, for such management services; included in these
amounts is three percent of the monthly interest earned on the Partnership?s
cash in savings and money market accounts, which the Partnership began paying
to the General Partner in 2006. Also included in the 2012 amount is one
percent of the average quarterly asset balance of the Partnership?s securities
portfolio, which the Partnership began paying the General Partner for services
in connection with managing the Partnership?s investments in securities.
-22-
Also, pursuant to the Amended LP Agreement, the General Partner is
entitled to receive 2.5% of the Partnership's income, loss, capital and
distributions, including without limitation the Partnership's cash flow from
operations, disposition proceeds and net sale or refinancing proceeds.
Accordingly, for the year ended December 31, 2012, the General Partner was
allocated income of $32,347.
Also pursuant to the Amended LP Agreement, the General Partner shall
receive mortgage placement fees for services rendered in connection with the
Partnership?s mortgage loans. These fees may not exceed such compensation
customarily charged in arm?s-length transactions by others rendering similar
services as an ongoing public activity in the same geographical location for
comparable mortgage loans. The General Partner is entitled to certain fees for
compensation of services rendered. The General Partner did not earn any
mortgage placement fees in 2012 or in 2011.
NOTE 5. REAL ESTATE
On June 8, 2011, the Partnership reached final agreement (the
?Agreement?) with and sold to the Regional Transportation Commission (the
?RTC?) a portion of the Sierra Property for the purpose of widening a section
of Moana Lane, a main thoroughfare in Reno, Nevada on which the Sierra
Property is located. The widening project was completed in November 2012 and
Moana Lane was expanded from four to six lanes. Under the terms of the
Agreement, the RTC paid the Partnership $2,731,787 ($2,743,730 less $11,943
for legal and administrative expenses incurred with the sale) for causing
demolition of up to 15,800 square feet of the Sierra Property?s buildings, the
RTC?s acquisition of 25,306 square feet of the Sierra Property?s land and
10,026 square feet of utility easement. The RTC paid the Partnership an
additional $346,700 for relocation and demolition costs related to the Sierra
Property?s buildings and improvements. As a result of the Agreement, the
Partnership allocated approximately $117,483 of the RTC?s payments to the
Sierra Property?s land book value and placed approximately $542,952 ($738,611
less accumulated depreciation of $195,659) into suspense for the portion of
the Sierra Property?s buildings that could be demolished. In September 2012,
the Partnership began rebuilding the facade of the Sierra Property?s building
that was impacted by the Widening Project. The rebuilding project was
completed during the fourth quarter of 2012, and the Partnership funded the
cost of the rebuilding project with the compensation it had received from the
RTC. Following the completion of the rebuilding project, the Partnership
removed the $542,952 from suspense and recognized a gain on condemnation in
2012 for this amount.
The Partnership's real estate is summarized as follows:
December 31, 2012 December 31, 2011
----------------- -----------------
Land............................ $ 3,198,574 $ 3,198,574
Less land taken by condemnation. (117,483) (117,483)
----------------- -----------------
3,081,091 3,081,091
----------------- -----------------
Building and improvements....... 12,069,070 12,069,070
Buildings ? suspense............ - (738,611)
----------------- -----------------
15,150,161 14,411,550
----------------- -----------------
Accumulated depreciation........ (4,325,363) (3,938,307)
Accumulated depreciation ?
suspense...................... - 195,659
----------------- -----------------
$ 10,824,798 $ 10,668,902
================= =================
NOTE 6. NOTES RECEIVABLE
On December 17, 2010, the Partnership participated in first and second
senior credit facilities with a group led by a major bank in the aggregate
-23-
amount of $75 million (the ?Credit Facility?) to a new casino in Grand Falls,
Iowa (the ?Borrower?). The Partnership?s commitment to the Credit Facility was
$3 million under the first lien senior credit facility consisting of a $40
million term loan and a $10 million revolving loan (the ?First Facility?), and
$1.5 million under the second lien senior credit facility consisting of a $25
million term loan (the ?Second Facility?). The Credit Facility may be utilized
by the Borrower for a portion of the development and construction costs of the
casino (the ?Project?), to pay for fees and expenses in connection with the
Project and for initial working capital needs after completion of the Project.
On August 14, 2012, the Borrower refinanced the Credit Facility, which
had been fully drawn on, and the Partnership was repaid its entire commitment.
As a result of the refinancing, the Partnership earned approximately $58,300
in call protection fees per the terms of the Credit Facility.
The First Facility was scheduled to mature on December 17, 2014; the
Second Facility was scheduled to mature on December 17, 2015.
The Borrower paid various one-time fees and other loan costs upon the
closing of the Credit Facility.
The Partnership earned approximately $305,735 in interest income in 2012
and approximately $381,954 in 2011 from the Credit Facility. As of December,
31, 2011, the Partnership had approximately $7,363 in interest receivable from
the Credit Facility.
The Partnership?s General Partner received a mortgage placement fee of
1.5% of the Partnership?s total commitment under the Credit Facility in 2010
for its services in connection with the placement of the Credit Facility.
NOTE 7. MINIMUM FUTURE RENTAL REVENUES
The Partnership leases office and retail space to various tenants under a
variety of terms, including escalation provisions, renewal options and
obligations of the tenants to reimburse operating expenses.
The aggregate future minimum fixed lease payments receivable under
noncancellable leases at December 31, 2012, are as follows:
2013 .......... $ 560,936
2014 .......... 516,839
2015 .......... 494,178
2016 .......... 401,012
2017 .......... 368,503
Thereafter .... 596,308
-----------
$ 2,937,776
===========
-24-
NOTE 8. RECONCILIATION OF NET INCOME AND NET ASSETS PER FINANCIAL STATEMENTS
TO TAX BASIS
A reconciliation of net income per financial statements to the tax basis
of accounting is as follows:
Year ended December 31,
--------------------------
2012 2011
------------- ------------
Net income per financial statements $ 1,293,888 $ 2,239,476
Reconciliation of net income per books
to tax basis accounting:
Gain on condemnation (542,952) -
Depreciation 98,330 96,510
Other tax adjustments - 6
------------- ------------
Net income per tax basis $ 849,266 $ 2,335,992
============= ============
The differences between the Partnership's net assets per financial
statements and tax basis of accounting are as follows:
Year ended December 31,
--------------------------
2012 2011
------------- ------------
Net assets per financial statements $ 24,027,431 $ 22,660,292
Reconciliation of net assets per books
to tax basis accounting:
Tax basis in property 1,839,184 1,067,195
Accumulated depreciation 1,420,990 628,192
Unrealized gain from securities (712,204) 505,235
Syndication costs - 2,230,944
Other tax adjustments - 10,085
------------- ------------
Net assets per tax basis $ 26,575,401 $ 27,101,943
============= ============
NOTE 9. LITIGATION
None.
NOTE 10. SUBSEQUENT EVENTS
None.
NOTE 11. MARKETABLE SECURITIES.
The following tables show the Partnership?s available-for-sale securities?
fair value, gross unrealized gains and losses, gross realized gains and
losses by significant investment category recorded as short-term marketable
securities as of December 31, 2012 and December 31, 2011:
-25-
As of December 31, 2012 As of December 31, 2011
---------------------------- ----------------------------
Unrealized Unrealized
Market Value Gain/(loss) Market Value Gain/(loss)
------------ -------------- ------------ --------------
Stock................ $ 3,529,590 $ (43,474) $ 2,253,010 $ (489,294)
Short options........ (507,656) 345,188 (223,256) 78,804
------------ -------------- ------------ --------------
Total................ $ 3,021,934 $ 301,714 $ 2,029,754 $ (410,490)
============ ============== ============ ==============
For the Year Ended For the Year Ended
December 31, 2012 December 31, 2011
--------------------- ---------------------
Realized Gain /(loss) Realized Gain /(loss)
on Disposition on Disposition
--------------------- ---------------------
Stock................ $ 188,023 $ 813
Short options........ 399,122 -
--------------------- ---------------------
Total................ $ 587,145 $ 813
===================== =====================
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that
are designed to provide reasonable assurance that information required to be
disclosed by the Partnership in its periodic reports filed or submitted by the
Partnership under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), is recorded, processed, summarized and reported, within the
time periods specified in the Securities and Exchange Commission's rules and
forms. Disclosure controls and procedures include, without limitation,
controls and procedures designed to ensure that information required to be
disclosed by the Partnership in its periodic reports that are filed under the
Exchange Act is accumulated and communicated to our management, including our
principal executive officer and principal financial officer, as appropriate,
to allow timely decisions regarding required disclosure.
Based on an evaluation under the supervision and with the participation
of our management, our principal executive officer and principal financial
officer have concluded that our disclosure controls and procedures as defined
in Rules 13a-15(e) and 15d-15(e) under the Exchange Act were effective as of
December 31, 2012, to ensure that information required to be disclosed in
reports that are filed or submitted under the Exchange Act is (i) recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission rules and forms and (ii) accumulated and
communicated to our management, including our principal executive officer and
principal financial officer, as appropriate to allow timely decisions
regarding required disclosure.
-26-
Management's Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate
internal control over financial reporting for the Partnership. Management
conducted an evaluation of the effectiveness of our internal control over
financial reporting based on the criteria set forth in Internal Control?
Integrated Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission ("COSO"). Based on this evaluation, management has
concluded that our internal control over financial reporting was effective as
of December 31, 2012.
Additionally, there were no changes in our internal control over
financial reporting that have materially affected or are reasonably likely to
materially affect the Partnership?s internal control over financial reporting
that occurred during the fourth quarter of 2012, nor were there any
significant deficiencies or material weaknesses in our internal controls.
This annual report does not contain an attestation report of the
Partnership?s registered public accounting firm regarding internal control
over financial reporting. Management?s report was not subject to attestation
by the Partnership?s registered public accounting firm pursuant to temporary
rules of the Securities and Exchange Commission that permit the Partnership to
provide only management?s report in this annual report.
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE.
The Partnership has no officers or directors. The General Partner, Maxum
LLC, a Nevada limited liability company, manages and controls substantially
all of Partnership's affairs and has general responsibility and ultimate
authority in all matters affecting its business. Ben Farahi has been the sole
manager of the General Partner since its formation in 2001 and, as such,
exercises the powers associated with the board of directors and executive
officers of a corporation.
Mr. Farahi, age 60, was, until May 26, 2006, Co-Chairman of the Board,
Chief Financial Officer, Secretary, and Treasurer of Monarch Casino & Resort,
Inc. which, through its wholly-owned subsidiary Golden Road Motor Inn, Inc., a
Nevada company, owns and operates the tropically themed Atlantis Casino Resort
in Reno, Nevada. Since September 1, 1978, Mr. Farahi has been a partner in
Farahi Investment Company, which is involved in real estate investment and
development. He was also a director of the Bank of North Las Vegas from 2006
until January 2011. Mr. Farahi is also the Manager of the General Partner. Mr.
Farahi holds a mechanical engineering degree from the University of California
at Berkeley and a MBA degree in accounting from the California State
University, Hayward.
Although the Partnership does not have a board of directors or,
accordingly, an audit committee, Mr. Farahi, as the managing member of the
General Partner, qualifies as a "financial expert" as defined in Securities
and Exchange Commission Regulation S-K.
We have adopted a corporate code of ethics that applies to our principal
executive and financial officer and any principal accounting officer or
controller, or persons performing similar functions. We believe our code of
ethics is reasonably designed to deter wrongdoing and promote honest and
ethical conduct; provide full, fair, accurate, timely and understandable
disclosure in public reports; comply with applicable laws; ensure prompt
internal reporting of code violations; and provide accountability for
adherence to the code. A copy of the code of ethics is attached as exhibit 14,
to this Form 10-K. The Partnership will also provide to any person, without
charge and upon request, a copy of the code of ethics. Any such request must
be made in writing to the Company at, 3702 S. Virginia Street, Unit G2, Reno,
NV 89502.
-27-
ITEM 11. EXECUTIVE COMPENSATION
Under the Amended LP Agreement, the General Partner is entitled to
receive 2.5% of the Partnership's income, loss, capital and distributions,
including without limitation the Partnership's cash flow from operations and
disposition proceeds. For the fiscal year ended December 31, 2012, the General
Partner was allocated income of $32,347 from the Partnership. See "Item 13.
Certain Relationships and Related Transactions, and Director Independence" for
information regarding amounts paid to affiliates of the General Partner by the
Partnership for services provided by them in fiscal year 2012. The General
Partner is the manager of the Sierra Property and received $87,921 in 2012 for
such management services; included in these amounts is three percent of the
monthly interest earned on the Partnership?s cash in savings and money market
accounts, which the Partnership began paying to the General Partner in 2006.
Also included in the 2012 management fee is one percent of the average
quarterly asset balance of the Partnership?s securities portfolio which the
Partnership began paying the General Partner in 2012 for its services in
managing the Partnership?s securities investments. The General Partner may
also receive mortgage placement fees but did not earn any such mortgage
placement fees in 2012.
The Partnership does not have a compensation committee. Compensation is
determined by the General Partner.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
(a) Security Ownership of Certain Beneficial Owners.
Except as set forth below, no person or group is known by the Partnership
to be the beneficial owner of more than 5% of the outstanding Units at March
6, 2013:
Number of % of
Name of Beneficial Owners Units Owned Class
------------------------- ----------- -----
Ben Farahi(1) 65,326 38.3%
John Farahi(2) 30,634 18.0%
Bob Farahi(3) 30,634 18.0%
(1) Mr. Ben Farahi's principal business address is 3702 S. Virginia
St., Unit G2, Reno, Nevada 89502.
(2) Mr. John Farahi's principal business address is 3800 S. Virginia
St., Reno, Nevada 89502.
(3) Mr. Bob Farahi?s principal business address is 3702 S. Virginia
St., Unit G2, Reno, Nevada 89502.
(b) Security Ownership of Management.
At March 6, 2013, neither the General Partner nor its members, manager or
affiliates owned any Units except as indicated in (a) above.
(c) Changes in Control.
There exists no arrangement known to the Partnership the operation of
which may at a subsequent date result in a change in control of the
Partnership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
See ?Item 8. Financial Statements ? Note 4. Conflicts of Interest and
Transactions with Related Parties.?
-28-
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The General Partner has appointed M&K CPAs, PLLC (?M&K?) as independent
auditors to audit the consolidated financial statements of the Partnership for
2012 and 2013.
Audit Fees. The Partnership has agreed to pay M&K $25,000 for professional
services rendered for the audit of the Partnership?s annual financial
statements, review of quarterly filings, or services that are normally
provided by the accountant in connection with statutory and regulatory filings
and engagements for the fiscal year ended December 31, 2012 and 2011. The
Partnership paid M&K $25,000 for the audits of the Partnership?s annual
financial statements for the fiscal years ended December 31, 2012 and 2011.
Audit-Related Fees. The Partnership paid M&K $0 during the years ended
December 31, 2012 and 2011 for assurance and related services that are
reasonably related to the performance of the audit or review of the
Partnership?s financial statements.
Tax Fees. The Partnership has agreed to pay M&K tax compliance, advice and
planning services fees of approximately $4,000 for the year ended December 31,
2012.
Other Fees. The Partnership did not pay any other fees to M&K for the year
ended December 31, 2012 or 2011.
The General Partner pre-approves the engagement of the Partnership?s
accountant for all audit and non-audit services.
No more than 50% of the hours expended by M&K to audit the Partnership?s
financial statements for 2012 were attributed to work performed by persons
other than M&K?s full-time, permanent employees.
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Financial Statements
Included in Part II of this report:
a) Report of Independent Public Accounting Firm.
b) Balance Sheets as of December 31, 2012 and 2011.
c) Statements of Operations and Comprehensive Income for the years ended
December 31, 2012 and 2011.
d) Statements of Partners? Equity for the years ended December 31, 2012
and 2011.
e) Statements of Cash Flows for the years ended December 31, 2012 and
2011.
f) Notes to Financial Statements.
Exhibits
The Exhibits listed on the accompanying Exhibit Index are filed as part
of this Annual Report on Form 10-K and incorporated in this Annual Report as
set forth in said Index.
-29-
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.
BIGGEST LITTLE INVESTMENTS L.P.
By: MAXUM LLC
General Partner
By: /s/ Ben Farahi Date
--------------
Ben Farahi, Manager March 26, 2013
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 Title Date
/s/ Ben Farahi Manager of March 26, 2013
-------------- the General Partner
Ben Farahi
-30-
EXHIBIT INDEX
Page
Exhibit Description Number
------- ----------- ------
2. General and Limited Partner Interest Assignment
Agreement, dated as of October 10, 2001, between
Maxum LLC, Western Real Estate Investments, LLC,
RAM Funding, Inc., Presidio AGP Corp., Presidio
Capital Investment Company LLC, Presidio
Partnership II Corp. and Bighorn Associates LLC
(incorporated by reference to Exhibit 2.1 of the
Partnership's Current Report on Form 8-K dated
January 25, 2002).
3.
(A) Certificate of Limited Partnership filed on August
14, 1986 with the State of Delaware (incorporated
by reference to Exhibit 3B to Pre-Effective
Amendment No. 1 to Registration Statement filed by
the Partnership with the Securities and Exchange
Commission on May 14, 1987 (the "Pre-Effective
Amendment")).
(B) Amendment to Certificate of Limited Partnership
filed on March 12, 1987 with the State of Delaware
(incorporated by reference to the Pre-Effective
Amendment).
(C) Amendment to Certificate of Limited Partnership
filed on May 7, 1987 with the State of Delaware
(incorporated by reference to the Pre-Effective
Amendment).
(D) Amendment to Certificate of Limited Partnership
filed on February 5, 1988 with the State of
Delaware (incorporated by reference to Post-
Effective Amendment No. 2 to Registration Statement
filed by the Partnership with the Securities and
Exchange Commission in 1988).
(E) Certificate of Amendment to Certificate of Limited
Partnership dated as of January 1, 2002, filed on
January 29, 2002 with the State of Delaware
(incorporated by reference to Exhibit 3(e) to the
Partnership's Form 10-KSB filed with the Securities
and Exchange Commission on March 29, 2002).
(F) Certificate of Amendment to Certificate of Limited
Partnership filed on November 9, 2003 with the State
of Delaware (incorporated by reference to Exhibit
3(F) to the Partnership's Form 10-KSB filed with the
Securities and Exchange Commission on March 26, 2004).
4.
(A) Amendment No. 2 to Second Amended and Restated
Limited Partnership Agreement of Biggest Little
Investments, L.P. (incorporated by reference to
Exhibit 99.1 to the Partnership?s Form 8-K filed
with the Securities and Exchange Commission on June
17, 2009).
-31-
(B) Amendment No. 1 to Second Amended and Restated
Limited Partnership Agreement of Biggest Little
Investments, L.P. (incorporated by reference to
Exhibit 4(A) to the Partnership?s Form 10-KSB filed
With the Securities and Exchange Commission on March
25, 2008).
(C) Second Amended and Restated Limited Partnership
Agreement of the Partnership (incorporated by
reference to Exhibit 4A to the Partnership's
Current Report on Form 8-K filed with the
Securities and Exchange Commission on October 10,
2003).
10.
(A) Deed of Trust, Assignment of Rents, Fixture Filing
and Security Agreement among High Cash Partners,
L.P., Trustee; First Commercial Title, Inc.,
Trustee; and Resources Accrued Mortgage Investors
2, L.P., Beneficiary, dated February 10, 1989
(incorporated by reference to Exhibit 10(a) to the
Partnership's Current Report on Form 8-K filed
with the Securities and Exchange Commission dated
February 13, 1989 (the "1989 Form 8-K").
(B) Registered Note among High Cash Partners, L.P. and
Resources Accrued Mortgage Investors 2, L.P., dated
February 10, 1989 (incorporated by reference to
Exhibit 10(b) to the 1989 Form 8-K).
(C) Assignment of Leases and Rents among High Cash
Partners, L.P. and Resources Accrued Mortgage
Investors 2, L.P., dated February 10, 1989
(incorporated by reference to Exhibit 10(c) to the
1989 Form 8-K).
(D) Modification Agreement, dated as of December 21,
2000, between High Cash Partners, L.P. and
Resources Accrued Mortgage Investors 2, L.P.
(incorporated by reference to Exhibit 10 to the
Partnership's Current Report on Form 8-K filed
with the Securities and Exchange Commission dated
February 9, 2001).
14. Code of Ethics 33
31. Certification pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. 36
32. Certification pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. 37
101. Interactive data files.
-32-
Exhibit 14
BIGGEST LITTLE INVESTMENTS L.P.
CODE OF ETHICS
1. STATEMENT OF POLICY
These policies will serve as guidelines in helping you to conduct the
Company's business in accordance with our values. Compliance requires meeting
the spirit, as well as the literal meaning, of the law and the policies. It is
expected that you will use common sense, good judgment, high ethical standards
and integrity in all your business dealings.
If you encounter a situation you are not able to resolve by reference to
these policies, ask for help. Contact Karl Brokmann, Investor Relations
Manager, who has been appointed as our Compliance Officer and identified as
responsible for overseeing compliance with these policies.
Violations of the law or the Company's policies will subject employees to
disciplinary action, up to and including termination of employment. In
addition, individuals involved may subject themselves and the Company to
severe penalties including fines and possible imprisonment. Compliance with
the law and high ethical standards in the conduct of Company business should
be a top priority for each employee, officer and manager.
2. IMPLEMENTATION AND ENFORCEMENT.
Employees are expected to be familiar with these policies as they apply
to their duties. They should consult with their supervisors if they need
assistance in understanding or interpreting these policies. Each employee is
required to follow these policies and to comply with their terms. A refusal by
any employee to agree to be bound by these policies shall be grounds for
discipline up to and including dismissal.
Any employee who, in good faith, has reason to believe a Company
operation or activity is in violation of the law or of these policies must
call the matter to the attention of Karl Brokmann. All reports will be
reviewed and investigated as necessary under the circumstances, and the
reporting employee should provide sufficient information to enable a complete
investigation to be undertaken.
Any employee who makes an allegation in good faith reasonably believing
that a person has violated these policies or the law, will be protected
against retaliation.
3. INSIDER TRADING, SECURITIES COMPLIANCE AND PUBLIC STATEMENTS.
Securities laws prohibit anyone who is in possession of material, non-
public information ("Insider Information") about a company from purchasing or
selling stock of that company, or communicating the information to others.
Information is considered "material" if a reasonable investor would consider
it to be important in making a decision to buy or sell that stock. Some
examples include financial results and projections, new products,
acquisitions, investments, major new contracts or alliances prior to the time
that they are publicly announced. Employees who become aware of such Inside
Information about the Company must refrain from trading in the shares of the
Company until the Inside Information is publicly announced.
Employees must also refrain from disclosing that information to persons
who do not have a need to know, whether they are inside the Company or
outside, such as spouses, relatives or friends.
The Company makes regular formal disclosures of its financial performance
and results of operations to the investment community. Other than those public
statements, which go through official Company channels, employees are
prohibited from communicating outside the Company about the Company's
business, financial performance or future prospects. Such communications
include questions from securities analysts, reporters or other news media, but
also include seemingly innocent discussions with family, friends, neighbors or
acquaintances.
-33-
4. FINANCIAL REPORTING.
The Company is required to maintain a variety of records for purposes of
reporting to the government. The Company requires all employees to maintain
full compliance with applicable laws and regulations requiring that its books
of account and records be accurately maintained.
5. HUMAN RESOURCES.
The Company is committed to providing a work environment that is free
from unlawful harassment and discrimination, and respects the dignity of its
employees. The Company has policies covering various aspects of its
relationship with its employees, as well as employees' relationships with each
other. For more detailed information, you should consult Karl Brokmann. Each
employee is expected to be familiar with these policies and to abide by them.
6. ENVIRONMENTAL, HEALTH AND SAFETY.
The Company is committed to protecting the health and safety of our
employees, as well as the environment in general. The Company expects
employees to obey all laws and regulations designed to protect the
environment, and the health and safety of our employees, and to obtain and
fully observe all permits necessary to do business.
7. CONFLICTS OF INTEREST.
Each employee is expected to avoid any activity, investment or
association that interferes with the independent exercise of his or her
judgment in the Company's best interests ("Conflicts of Interest"). Conflicts
of Interest can arise in many situations. They occur most often in cases where
the employee or the employee's family obtains some personal benefit at the
expense of the Company's best interests.
No employee, or any member of employee's immediate family, shall accept
money, gifts of other than nominal value, unusual entertainment, loans, or any
other preferential treatment from any business partner or potential business
partner of the Company where any obligation may be incurred or implied on the
giver or the receiver or where the intent is to prejudice the recipient in
favor of the provider. Likewise, no employee shall give money, gifts of other
than nominal value, unusual entertainment or preferential treatment to any
business partner or potential business partner of the Company, or any employee
or family members thereof, where any obligation might be incurred or implied,
or where the intent is to prejudice the recipient in favor of the Company. No
such persons shall solicit or accept kickbacks, whether in the form of money,
goods, services or otherwise, as a means of influencing or rewarding any
decision or action taken by a business partner, government employee or other
person whose position may affect the Company's business.
No employee shall use Company property, services, equipment or business
for personal gain or benefit.
Employees may not: (1) act on behalf of, or own a substantial interest
in, any company or firm that does business, or competes, with the Company; (2)
conduct business on behalf of the Company with any company or firm in which
the employee or a family member has a substantial interest or affiliation.
Exceptions require advance written approval.
Employees should not create the appearance that they are personally
benefitting in any outside endeavor as a result of their employment by the
Company, or that the Company is benefitting by reason of their outside
interests. Any employee who is not sure whether a proposed action would
present a conflict of interest or appear unethical should consult with Karl
Brokmann.
8. GOVERNMENT RELATIONS.
The Company is prohibited by law from making any contributions or
expenditures in connection with any U.S. national election. This includes
-34-
virtually any activity that furnishes something of value to an election
campaign for a federal office. Use of the Company's name in supporting any
political position or ballot measure, or in seeking the assistance of any
elected representative, requires the specific approval of the General Partner
of the Company. Political contributions or expenditures are not to be made out
of Company funds in any foreign country, even if permitted by local law,
without the consent of the Company's General Partner.
U.S. law also prohibits giving, offering, or promising anything of value
to any public official in the U.S. or any foreign country to influence any
official act, or to cause an official to commit or omit any act in violation
of his or her lawful duty. Company employees are expected to comply with these
laws.
-35-
EXHIBIT 31
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Ben Farahi, certify that:
1. I have reviewed this Annual Report on Form 10-K of Biggest Little
Investments, L.P.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the
Registrant as of, and for, the periods presented in this report;
4. I am responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act Rules
13a ? 15(f) and 15d ? 15(f) for the Registrant and I have:
a) designed such disclosure controls and procedures or caused such
disclosure controls and procedures to be designed under my
supervision, to ensure that material information relating to the
Registrant is made known to me, particularly during the
period in which this report is being prepared:
b) designed such internal control over financial reporting, or
caused such internal control over financial reporting to be
designed under my supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the Registrant's disclosure
controls and procedures and presented in this report my
conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this
report based on such evaluation; and
d) disclosed in this report any change in the Registrant's
internal control over financial reporting that occurred
during the Registrant?s most recent fourth fiscal quarter that
has materially affected, or is reasonably likely to materially
affect, the Registrant's internal control over financial
reporting; and
5. I have disclosed, based on my most recent evaluation of internal
control over financial reporting, to the Registrant's auditors:
a) all significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which
are reasonably likely to adversely affect the Registrant's ability
to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the Registrant?s
internal control over financial reporting.
/s/ Ben Farahi
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Ben Farahi
Manager of the General Partner
Date: 3/26/13
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Exhibit 32
CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Biggest Little Investments, L.P.
(the "Partnership"), on Form 10-K for the fiscal year ended December 31, 2012,
as filed with the Securities and Exchange Commission on the date hereof (the
"Report"), the undersigned, in the capacities and on the date indicated below,
hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) the Report fully
complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended; and (2) the information contained in the
Report fairly presents, in all material respects, the financial condition and
results of operations of the Partnership.
Date: March 26, 2013 /s/ Ben Farahi
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Ben Farahi,
Manager of the General Partner
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