SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A1
ANNUAL REPORT PURSUANT TO SECTION 13 or 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995 Commission File Number 1-9393
INTERSTATE GENERAL COMPANY L.P.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 52-1488756
- ------------------------------- --------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
222 Smallwood Village Center
St. Charles, Maryland 20602
- ------------------------------- --------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (301) 843-8600
----------------------
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
Class A Units representing assignment of American Stock Exchange
beneficial ownership of Class A limited
partnership interest and evidenced by Pacific Stock Exchange
beneficial assignment certificates ("Units")
Securities registered pursuant to Section 12(g) of the Act:
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
------- -------
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K 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. [ ]
As of March 1, 1996 the aggregate market value of the Units held by
non-affiliates of the registrant based on the closing price reported on the
American Stock Exchange was $16,085,404.
Class A Units Outstanding at March 1, 1996: 10,256,785 Class A Units
DOCUMENTS INCORPORATED BY REFERENCE
Form 10-K
Item
N/A
2
Item 8 of the report on Form 10-K of Interstate General Company L.P. dated
April 1, 1996 is amended with respect to Notes 9 and 12 of the Notes to
Consolidated Financial Statements for the years ended December 31, 1995, 1994
and 1993.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
3
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of
Interstate General Company L.P.:
We have audited the accompanying consolidated balance sheets of Interstate
General Company L.P. (a Delaware limited partnership) and subsidiaries as of
December 31, 1995 and 1994, and the related consolidated statements of (loss)
income, changes in partners' capital and cash flows for each of the three years
in the period ended December 31, 1995. These consolidated financial statements
and the schedules referred to below are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Interstate
General Company L.P. as of December 31, 1995 and 1994, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, because of uncertainties, including substantial monetary
fines, facing the Company from its conviction of violations of The Clean Water
Act and the resultant defaults on substantially all of its recourse bank debt,
there is substantial doubt about its ability to continue as a going concern.
Management's plan in regard to these matters is also described in Note 2. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
As discussed in Note 1 to the financial statements, effective January 1,
1993, the Company changed its method of accounting for income taxes.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The financial statement schedule
included on pages 72 through 85 of the Form 10-K is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not a
required part of the basic financial statements. This schedule has been
subjected to the auditing procedures applied in our audits of the basic
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
Arthur Andersen LLP
Washington, D.C.
March 29, 1996
4
INTERSTATE GENERAL COMPANY L.P.
CONSOLIDATED STATEMENTS OF (LOSS) INCOME
(In thousands, except per Unit amounts)
YEARS ENDED DECEMBER 31,
----------------------------------------
1995 1994 1993
------------ ------------ -----------
REVENUES
Community development-land sales $ 14,824 $ 22,296 $ 13,809
Homebuilding-home sales 10,826 20,265 21,884
Revenues from investment properties
Investment in gaming properties (80) 7,288 2,358
Equity in earnings from partnerships
and development fees 2,942 4,960 3,901
Apartment rental income 4,642 4,538 2,113
Management and other fees,
substantially all from
related entities 3,894 3,507 4,493
Interest and other income 652 668 773
----------- ----------- -----------
Total revenues 37,700 63,522 49,331
----------- ----------- -----------
EXPENSES
Cost of land sales 7,611 14,764 9,228
Cost of home sales 9,875 18,508 18,880
Selling and marketing 1,564 1,556 1,285
General and administrative 8,326 8,418 8,590
Rental apartment expense 4,465 4,526 2,176
Depreciation and amortization 371 498 499
Interest expense 2,432 2,125 2,193
Wetlands litigation expenses 4,107 498 --
Write-off of deferred project costs -- 1,761 --
----------- ----------- -----------
Total expenses 38,751 52,654 42,851
----------- ----------- -----------
(LOSS) INCOME BEFORE PROVISION
FOR INCOME TAXES (1,051) 10,868 6,480
PROVISION FOR INCOME TAXES 1,452 3,511 665
----------- ----------- -----------
(LOSS) INCOME BEFORE MINORITY
INTEREST (2,503) 7,357 5,815
Minority interest (464) (716) (122)
----------- ----------- -----------
NET (LOSS) INCOME BEFORE
CUMULATIVE EFFECT OF
ACCOUNTING CHANGE (2,967) 6,641 5,693
CUMULATIVE EFFECT OF
ACCOUNTING CHANGE -- -- 1,500
----------- ----------- -----------
NET (LOSS) INCOME $ (2,967) $ 6,641 $ 7,193
=========== =========== ===========
The accompanying notes are an integral part
of these consolidated statements.
5
INTERSTATE GENERAL COMPANY L.P.
CONSOLIDATED STATEMENTS OF (LOSS) INCOME (continued)
(In thousands, except per Unit amounts)
YEARS ENDED DECEMBER 31,
----------------------------------------
1995 1994 1993
------------ ------------ -----------
PER UNIT AMOUNTS--
NET (LOSS) INCOME BEFORE CUMULATIVE
EFFECT OF ACCOUNTING CHANGE $ (.29) $ .66 $ .56
CUMULATIVE EFFECT OF ACCOUNTING
CHANGE -- -- .15
----------- ----------- ------
- -----------
NET (LOSS) INCOME PER UNIT $ (.29) $ .66 $ .71
=========== =========== ===========
NET (LOSS) INCOME
General Partners $ (30) $ 66 $ 71
Limited Partners (2,937) 6,575 7,122
----------- ----------- -----------
$ (2,967) $ 6,641 $ 7,193
=========== =========== ===========
WEIGHTED AVERAGE UNITS
OUTSTANDING 10,255 10,126 10,080
=========== =========== ===========
The accompanying notes are an integral part
of these consolidated statements.
6
INTERSTATE GENERAL COMPANY L.P.
CONSOLIDATED BALANCE SHEETS
(In thousands)
A S S E T S
DECEMBER 31,
---------------------------
1995 1994
------------ ------------
CASH AND SHORT-TERM INVESTMENTS
Unrestricted $ 3,476 $ 1,120
Restricted 2,125 5,713
-------- --------
5,601 6,833
-------- --------
ASSETS RELATED TO COMMUNITY DEVELOPMENT
Land and development costs
Puerto Rico 33,088 26,103
St. Charles, Maryland 27,826 26,426
Other United States locations 15,522 16,014
Notes receivable on lot sales and other 3,122 1,518
-------- --------
79,558 70,061
-------- --------
ASSETS RELATED TO HOMEBUILDING PROJECTS
Homebuilding construction and land 3,254 4,384
Investment in joint venture 250 --
Receivables and other 315 614
-------- --------
3,819 4,998
-------- --------
ASSETS RELATED TO INVESTMENT PROPERTIES
Investment properties, net of accumulated
depreciation of $5,124 and $4,746, as of
December 31, 1995 and 1994, respectively 23,348 24,499
Investment in residential rental partnerships 10,922 9,976
Other receivables, net of reserves of
$384 and $1,071 as of December 31,
1995 and 1994, respectively 2,452 1,133
-------- --------
36,722 35,608
-------- --------
OTHER ASSETS
Costs in excess of net assets acquired, less
accumulated amortization of $888 and $735
as of December 31, 1995 and 1994, respectively 2,147 2,299
Deferred costs regarding waste technology
and other 2,975 2,126
Property, plant and equipment, less accumulated
depreciation of $2,216 and $1,948 as of
December 31, 1995 and 1994, respectively 1,271 1,588
-------- --------
6,393 6,013
-------- --------
Total assets $132,093 $123,513
======== ========
The accompanying notes are an integral part
of these consolidated balance sheets.
7
INTERSTATE GENERAL COMPANY L.P.
CONSOLIDATED BALANCE SHEETS
(In thousands)
LIABILITIES AND PARTNERS' CAPITAL
DECEMBER 31,
---------------------------
1995 1994
------------ ------------
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities $ 5,719 $ 3,521
Mortgages and notes payable 301 370
Accrued income tax liability - current 464 2,078
Accrued income tax liability - deferred 4,704 2,475
-------- --------
11,188 8,444
-------- --------
LIABILITIES RELATED TO COMMUNITY DEVELOPMENT
Recourse debt 47,841 36,661
Non-recourse debt 2,034 4,268
Accounts payable, accrued liabilities
and deferred income 3,752 2,728
-------- --------
53,627 43,657
-------- --------
LIABILITIES RELATED TO HOMEBUILDING
Recourse debt 981 2,398
Accounts payable and accrued liabilities 2,746 2,506
-------- --------
3,727 4,904
-------- --------
LIABILITIES RELATED TO INVESTMENT PROPERTIES
Recourse debt 1,322 1,559
Non-recourse debt 22,650 22,771
Accounts payable and accrued liabilities 1,670 1,473
-------- --------
25,642 25,803
-------- --------
Total liabilities 94,184 82,808
-------- --------
PARTNERS' CAPITAL
General partners' capital 4,292 4,322
Limited partners' capital-10,257 and
10,215 Units issued and outstanding as
of December 31, 1995 and 1994, respectively 33,617 36,383
-------- --------
Total partners' capital 37,909 40,705
-------- --------
Total liabilities and partners' capital $132,093 $123,513
======== ========
The accompanying notes are an integral part
of these consolidated balance sheets.
8
INTERSTATE GENERAL COMPANY L.P.
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 and 1993
(In thousands)
General Limited
Partners' Partners'
Capital Capital Total
-------- ----------- -----------
BALANCES, December 31, 1992 $ 84 $24,958 $25,042
Net income for the year 71 7,122 7,193
Employee Unit options exercised -- 10 10
------- ------- -------
BALANCES, December 31, 1993 $ 155 $32,090 $32,245
Net income for the year 66 6,575 6,641
Employee Unit options exercised -- 531 531
Cash distributions to partners (10) (1,010) (1,020)
Capital contribution 4,129 -- 4,129
Assets transferred at general
partner's basis (18) (1,803) (1,821)
------- ------- -------
BALANCES, December 31, 1994 $ 4,322 $36,383 $40,705
Net loss for the year (30) (2,937) (2,967)
Employee and director Unit
options exercised -- 171 171
------- ------- -------
BALANCES, December 31, 1995 $ 4,292 $33,617 $37,909
======= ======= =======
The accompanying notes are an integral part
of these consolidated statements.
9
INTERSTATE GENERAL COMPANY L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
YEARS ENDED DECEMBER 31,
--------------------------------------
1995 1994 1993
------------ ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income $ (2,967) $ 6,641 $ 7,193
Adjustments to reconcile net (loss)
income to net cash (used in)
provided by operating activities:
Depreciation and amortization
Residential rental properties 680 640 432
Other 872 703 706
Provision for deferred income taxes 729 1,486 275
Equity in earnings of residential
rental partnerships (1,690) (4,250) (1,668)
Equity in losses of gaming
partnerships 80 -- --
Increase in sponsor and
developer fees from
partnerships (390) (323) (902)
Distribution of note receivable
from HDA -- (6,526) --
Cumulative effect of
accounting change -- -- (1,500)
Increase (decrease) in
accounts payable, accrued
liabilities and deferred income 3,348 (201) (825)
Decrease (increase) in
Restricted cash 3,588 (3,126) (2,121)
Community development assets (9,497) 8,711 3,775
Homebuilding assets 1,429 2,568 1,044
------- -------- -------
Net cash (used in) provided by
operating activities (3,818) 6,323 6,409
------- -------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease in assets related
to investment properties 452 8,768 7,219
(Acquisitions) dispositions
of other assets (1,252) (79) 740
Purchase of residential rental
partnership interest (170) (170) (370)
Investment in homebuilding joint venture (250) -- --
------- -------- -------
Net cash (used in) provided by
investing activities (1,220) 8,519 7,589
------- -------- -------
The accompanying notes are an integral part
of these consolidated statements.
10
INTERSTATE GENERAL COMPANY L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(In thousands)
YEARS ENDED DECEMBER 31,
--------------------------------------
1995 1994 1993
------------ ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash proceeds from debt financing 34,643 7,750 14,003
Payment of debt (27,420) (22,992) (37,119)
Loans from HDA -- -- 8,853
Cash distributions to partners -- (1,020) --
Employee and director Unit
options exercised 171 531 10
------- -------- -------
Net cash provided by (used in)
financing activities 7,394 (15,731) (14,253)
------- -------- -------
NET INCREASE (DECREASE) IN CASH
AND SHORT-TERM INVESTMENTS 2,356 (889) (255)
CASH AND SHORT-TERM INVESTMENTS,
BEGINNING OF YEAR 1,120 2,009 2,264
------- -------- -------
CASH AND SHORT-TERM INVESTMENTS,
END OF YEAR $ 3,476 $ 1,120 $ 2,009
======= ======== =======
SUPPLEMENTAL DISCLOSURES
Interest paid (net of amount
capitalized) $ 2,722 $ 3,787 $ 4,127
Income taxes paid $ 2,250 $ 337 $ --
Non-cash transactions
Land received in exchange for
land sold $ 134 $ -- $ --
Distribution of notes receivable
from partners (1) $ -- $ 10,654 $ --
Acquisition of interest in
apartment partnerships, assets $ -- $ -- $22,641
Acquisition of interest in
apartment partnerships,
liabilities $ -- $ -- $22,532
Deed in lieu of payment of
purchase money mortgage $ -- $ 670 $ --
Partnership interests received in
satisfaction of accounts and notes
receivable from general partner (1) $ -- $ 626 $ --
Accounts and notes receivable, net
of reserves, satisfied via transfer
of partnership interests from
general partner (1) $ -- $ 2,446 $ --
Capital contribution by
general partner (1) $ -- $ 4,129 $ --
(1) See Notes 4 and 9 to these consolidated financial statements.
The accompanying notes are an integral part
of these consolidated statements.
11
INTERSTATE GENERAL COMPANY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(1) BASIS OF PRESENTATION AND PRINCIPLES OF ACCOUNTING
On September 26, 1986, Interstate General Company L.P. ("IGC" or "the
Company"), a Delaware limited partnership, was formed, and on December 31,
1986, acquired substantially all of the community development, homebuilding,
investment properties and management services businesses of Interstate General
Business Corporation, Interstate St. Charles, Inc. and a trust for the benefit
of the stockholders of Interstate General Business Corporation (the
"Predecessors"). The assets relating to these businesses were acquired in
exchange for (1) 7,900,000 Units representing assignment of beneficial
ownership of limited partnership interest ("Units"), (2) a 1% general
partnership interest in IGC and (3) the assumption by IGC of certain
indebtedness relating to these businesses. The 1% general partner interest is
shared by the managing general partner, Interstate General Management
Corporation, and Interstate Business Corporation ("IGMC" and "IBC,"
respectively, referred to collectively as the "General Partner") as successors
to Interstate General Business Corporation and Interstate St. Charles, Inc.
Net (loss) income per Unit for the years ended December 31, 1995, 1994 and
1993, is calculated using weighted average Units outstanding. Outstanding
options and warrants to purchase Units and Unit Appreciation Rights do not have
a material dilutive effect on the calculation of earnings per Unit (see Note
11).
The accompanying consolidated financial statements include the accounts of
IGC and all of its subsidiaries, after eliminating intercompany transactions.
Reference to IGC or the Company refers to the consolidated group of entities or
to any one of the individual entities involved. IGC's investments in
partnerships in which IGC's interest is 50% or less are accounted for by the
equity method of accounting.
For purposes of reporting cash flows, cash and short-term investments
include cash on hand, unrestricted deposits with financial institutions and
short-term investments with original maturities of three months or less.
Sales and Profit Recognition
Sales revenues and profits from community development and homebuilding are
recognized at closing, when sufficient down payments have been obtained,
possession and other attributes of ownership have been transferred to the buyer
and IGC has no significant continuing involvement.
Revenues from Investment Properties
Revenues from investment properties include revenues from investments in
gaming properties, equity in earnings from partnerships and development fees
and apartment rental revenues. Revenues from investment in gaming properties
includes equity in earnings from Equus Gaming Company L.P. ("Equus") commencing
February 8, 1995 (See Note 4). Equus' earnings include the operations of
Housing Development Associates S.E. ("HDA"). Prior to that date, revenues from
investment in gaming properties included distributions received by IGC from HDA
and equity in earnings (losses) of HDA, including HDA's equity in earnings
(losses) of El Comandante Operating Company ("ECOC") through August 1, 1994
when HDA's ownership interest in ECOC was terminated. Equity in earnings from
12
partnerships and development fees is comprised of IGC's share of the earnings
(losses) of the residential rental apartment project partnerships accounted for
under the equity method of accounting, income from sponsor and developer fees,
recognition of income resulting from distributions received in excess of the
Company's book basis of the investment in the related partnership, and income
related to a previous investment in a cable television partnership. Apartment
rental revenues include the revenues of three consolidated partnerships owning
apartment complexes.
Management Fees
IGC performs property management services including leasing, maintenance
and accounting for properties owned by affiliated entities. Fees are recorded
in the period in which the services are rendered and/or paid.
Community Development and Homebuilding Inventories
The costs of acquiring and developing land and homebuilding construction
are allocated and charged to cost of sales as the related inventories are sold.
IGC carries land, development and homebuilding costs (including capitalized
interest) at the lower of cost or net realizable value. Net realizable value
is defined as the estimated amount IGC expects to realize in the ordinary
course of business less costs of completion.
Capitalization of Interest
IGC's interest costs related to homebuilding and land assets were
allocated to these assets based on book value. The portion of interest
allocated to land, finished building lots and homebuilding construction during
the development and construction period is capitalized. Remaining interest
costs are expensed. A summary of interest for 1995, 1994 and 1993 is as
follows:
Years Ended December 31,
---------------------------
1995 1994 1993
------ ------- -------
(In thousands)
Expensed $4,620 $4,369 $3,158
Capitalized 3,213 2,770 2,655
------ ------ -------
Total interest incurred $7,833 $7,139 $5,813
====== ======= =======
Investment in Residential Rental Partnerships
IGC's investment in residential rental partnerships consists of long-term
receivables, nominal capital contributions, working capital loans and IGC's
share of unconsolidated partnership income and losses. The working capital
loans are collectible from the first cash flow generated from the operations of
the partnerships. The long-term receivables represent loans to the
partnerships for payment of construction and development costs in excess of the
project mortgages. Substantially all of the long-term receivables are non-
interest bearing and have been discounted at an effective rate of 14% based on
the projected maturity date which will occur upon the refinancing, sale or
other disposition of the partnerships' properties. The discount, which
represents deferred sponsor and developer fees, is netted in the consolidated
financial statements against the long-term receivables.
13
For partnerships syndicated prior to December 31, 1985, IGC amortizes the
discount over the estimated holding period of the properties and begins to
recognize the discount as income at the point when the partnerships have cash
flow that reasonably assures realization of the long-term receivables.
Certain partnerships are accumulating cash from operations in excess of
the maximum distribution amounts permitted by U.S. Department of Housing and
Urban Development ("HUD") and other regulatory authorities. This cash,
accumulated in restricted cash accounts, will be available to pay the long-term
receivables due to IGC and to make cash distributions to IGC and the limited
partners when the partnerships' projects are refinanced or sold.
Property, Plant and Equipment
Property, plant and equipment is carried at cost, less accumulated
depreciation. Depreciation is provided principally using the straight-line
method for financial reporting purposes and using accelerated methods for tax
purposes, generally based on a five year service life.
Selling and Marketing Expenses
Selling and marketing expenses consist primarily of advertising costs
which include costs of printed materials, signs, displays, general marketing
costs and costs associated with model homes. Advertising costs are expensed as
incurred except for capitalized model home costs which are depreciated over
periods ranging from ten to forty years. Model homes are carried at the lower
of cost less depreciation, or net realizable value.
Income Taxes
IGC is not subject to U.S. income taxes under current law. Its partners
are taxed directly on their share of IGC's income without regard to
distributions, and the partners may generally deduct their share of losses.
The corporate subsidiaries of IGC are subject to tax at the applicable
corporate rates. Furthermore, IGC is subject to Puerto Rico income tax on its
Puerto Rico source income and District of Columbia income tax on its District
of Columbia source income.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Accounting Changes
On January 1, 1993, the Company implemented Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes." SFAS No.
109 changes the method of accounting for income taxes under generally accepted
accounting principles and requires recognition of deferred tax assets and
liabilities for the expected future tax consequences of differences between
financial reporting and tax reporting bases of assets and liabilities, and for
net operating loss and tax credit carryforwards. As a result of adopting this
statement, the Company recognized a cumulative benefit due to the change in
accounting principle of $1,500,000 or $.15 per unit as of January 1, 1993.
14
This benefit is included under the caption "Cumulative Effect of Accounting
Change" in the Consolidated Statement of Income for the year ended December 31,
1993.
In 1995, the Company implemented SFAS No. 107, "Disclosures about Fair
Value of Financial Instruments." SFAS No. 107 requires disclosure of the fair
value of certain financial instruments, including cash, evidence of ownership
interests in other entities and contracts that impose either an obligation to
deliver a financial instrument or cash such as loans or notes payable, or a
right to receive a financial instrument or cash such as loans or notes
receivable. The Company's ownership interests in other entities are accounted
for under the equity method of accounting or are consolidated. Investments
accounted for under both of these accounting methods are specifically excluded
from SFAS No. 107 fair value disclosure requirements. IGC has the following
financial instruments: short-term investments, accounts and notes receivables,
long-term debt and non-recourse debt.
The carrying value of short-term investments approximates the fair value
because of the liquid nature of these assets. The notes receivable related to
community development approximate fair value. The other receivables related to
investment properties are considered part of IGC's investment in the
partnerships and are excluded from this requirement. The non-recourse debt in
the Investment Properties relates to HUD insured mortgages for three of the
partnerships. One of the mortgages was refinanced in December 1994; therefore,
management believes the carrying value approximates fair value. The other two
mortgages are expected to be refinanced in 1996. However, due to the nature of
the programs associated with these partnerships, and current market conditions,
the fair market value of the refinanced debt approximates the current book
value of the existing debt. The carrying value of the long-term debt that
relates to homebuilding, community development and investment properties
approximates the fair value, since the notes bear an interest rate based on the
current prime rate plus an additional fixed percentage rate. See Note 7 for
additional information regarding the long-term debt.
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of." SFAS No. 121 establishes standards for identifying
impairment for long-lived assets and certain identifiable intangibles to be
held and used by an entity. Primarily, if the sum of the expected future cash
flows (undiscounted and without interest charges) is less than the carrying
amount of the asset, an impairment loss has occurred. An adjustment to reflect
this impairment would be recorded to the extent that an asset's market value
was less than its carrying value. SFAS No. 121 is effective for financial
statements for fiscal years beginning after December 15, 1995. The Company
plans to adopt SFAS No. 121 by its required effective date and does not expect
adoption to have a material affect on its financial statements.
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-based
Compensation". This statement establishes financial accounting and reporting
standards for stock-based employee compensation plans. Those plans include all
arrangements by which employees receive shares of stock or other equity
instruments of the employer or the employer incurs liabilities to employees in
amounts based on the price of the employer's stock. Examples are stock
purchase plans, stock options, restricted stock and stock appreciation rights.
The accounting and disclosure requirements of this statement are effective for
transactions entered into after December 15, 1995. The Company will adopt the
disclosure requirements of SFAS No. 123 in fiscal year 1996.
15
Reclassifications
Certain amounts presented for 1994 in the Consolidated Balance Sheet and
for 1994 and 1993 in the Consolidated Statements of Income and Cash Flows have
been reclassified to conform with the 1995 presentation.
(2) GOING CONCERN AND RELATED MATTERS
In March 1990, the Company received a notice (the "Notice") from the U.S.
Army Corps of Engineers (the "Corps") asserting that unauthorized fill
materials had been placed in portions of an approximately five-acre parcel in
Charles County, Maryland (the "Site") owned by the Company and claimed by the
Corps to constitute wetlands subject to regulation pursuant to the Clean Water
Act. Following receipt of the Notice, the Company ceased development of the
Site and remediated a portion of the Site in accordance with instructions
issued by the Corps. The Company also commenced discussions with the Corps
regarding mitigation plans that would preserve some commercial value for the
Site and filed suit against the Corps claiming that a prohibition of
development on the entire Site would constitute a governmental taking for which
the Company would be entitled to compensation.
In November 1993, the Company believed that it had an agreement in
principle with the Corps that would settle the Company's claim and permit
commercial development of a portion of the Site. However, in early 1994, the
Company became aware that this matter had been referred to the U.S. Attorney
for the District of Maryland. After conducting a lengthy investigation of the
Company's wetlands practices in St. Charles, in October 1995 a grand jury
convened by the U.S. Attorney charged that certain of the Company's practices
with respect to four parcels, including the Site, constituted criminal
violations of Section 404 of the Clean Water Act. The indictment charged each
of IGC, its affiliate, St. Charles Associates, L.P. ("SCA"), and the Company's
Chairman, James J. Wilson. During the U.S. Attorney's investigation, the Corps
issued additional violation notices relating to filling portions of other
parcels claimed by the Corps to be protected wetlands. In October 1995 the
government filed a civil action in the U.S. District Court for the District of
Maryland charging the Company and Mr. Wilson with violations of the Clean Water
Act. Of the approximately 4,400 acres developed by the Company in St. Charles,
approximately 70 acres are the subject of the civil and criminal charges.
On February 29, 1996, each of IGC, SCA and Mr. Wilson were convicted on
four counts of felony violations of Section 404 of the Clean Water Act.
Sentencing is expected to occur in June 1996. On March 12, 1996, IGC and SCA
received service of process with respect to the civil action. Maximum
statutory penalties possible against each of IGC and SCA under the criminal
action are $50,000 per day for each of four felony violations or,
alternatively, twice the pecuniary gain realized by the Company from any
illegal action. The maximum statutory penalty possible under the civil action
is $25,000 per day for each of nine separate violations. Because the
investigation with regard to the sentencing is ongoing, the Company cannot
determine from what point in time these fines could be assessed. In the civil
action, the U.S. Attorney also seeks to enjoin the Company from engaging in
future illegal wetlands practices.
During 1994 and 1995, the Company recognized approximately $4.6 million in
legal and consulting expenses relating to these matters. Such expenses include
a reserve available to cover future anticipated costs of the criminal and civil
actions, including costs of appealing the criminal convictions. The amount of
any fine in the current case cannot be estimated with certainty and as such the
total costs incurred may exceed the amount reserved.
16
Management believes the Company and Mr. Wilson have many strong arguments
to present on appeal of the criminal convictions. Accordingly, the Company and
Mr. Wilson will appeal the criminal convictions and will continue to defend
vigorously against charges in the civil action.
The Company's loan agreements contain certain restrictive covenants, cross
default provisions and material adverse change in financial condition clauses.
As a result of the Company's conviction on four felony counts of the Clean
Water Act, Signet Bank issued a notice of default by the Company of certain
loan agreement covenants pertaining to $3.3 million of debt. Negotiations of
the terms and conditions of a forbearance agreement are in process. In
addition, a $2.2 million payment was due NationsBank on March 31, 1996.
Negotiations are in process to modify certain terms and conditions of the
loans. Management expects to finalize these amendments and make the principal
curtailment in April 1996. As a result of this notice of default, past due
payment, and unless and until the criminal convictions are reversed on appeal,
$47.3 million of the Company's bank debt could be called into default.
The uncertainty with respect to the amount of penalties has hindered the
Company's ability to secure financing and bonds necessary for the development
of Fairway Village, the third of five villages in the Planned Unit Development
of St. Charles, Maryland. The Company's current inventory of finished lots in
St. Charles is anticipated to be sold during 1996, therefore, the development
of additional lots is necessary to provide inventory for sales in 1997 and
beyond.
As a result of the uncertainty regarding the magnitude of fines, events of
default, multiple loan defaults and uncertainty regarding the ability to obtain
future financing, which may cause the Company to have negative cash flow in
1996, there is substantial doubt about the Company's ability to continue as a
going concern.
The Company has historically met its liquidity requirements principally
from cash flow generated by land and home sales, property management fees,
distributions from HDA and residential rental partnerships and from bank
financing providing funds for development and working capital.
As discussed in Note 4, the Company no longer receives distributions from
HDA, as a result of the Company's distribution of Equus Units representing a
99% limited partnership interest in Equus to IGC Unitholders in February 1995.
In addition, under the terms of IGC's loans, most of the cash generated by U.S.
home and lot sales and distributions from partnerships, including distributions
from partnership refinancings, will be used to further reduce bank loans and
meet debt service requirements. As mentioned above, project financings have
been delayed by the inability to determine the penalties related to the
Company's felony convictions. Given these factors, the Company's ability to
generate cash for overhead, development and other uses is limited.
During the first quarter of 1996, four apartment projects in Puerto Rico
were sold under the 1990 Low Income Housing Preservation and Resident
Homeownership Act ("LIHPRHA"). The Company will retain the management
contracts on the four apartments. This sale, after taxes, generated
approximately $11.5 of cash. Approximately $10.2 million of cash proceeds is
pledged to curtail bank debt and the remainder will be used to pay legal fees
related to the wetlands convictions and support operations. As a result of the
debt curtailments, the FDIC loan will be paid off and NationsBank will have a
first lien on commercial properties in St. Charles which will have the effect
of improving the Company's cash flow as the release prices under the
NationsBank agreement are less than that of the FDIC.
17
During 1995, the Company negotiated loan extensions with NationsBank and
Signet Bank. NationsBank has agreed to extend the maturity of its loans until
May 1998. Under the agreement, the extension of the maturity beyond November
30, 1995 was contingent upon a mandatory principal curtailment of $2.2 million
which will be made with the proceeds of the LIHPRHA sale. Signet Bank agreed
to extend the maturity of its loans until September 1996. The balance of the
Signet loans as of December 31, 1995 is $3.3 million. The Company anticipates
it will pay off these loans prior to their maturity with the proceeds from the
sale of commercial and residential land which secure the loans.
(3) INVESTMENT IN RESIDENTIAL RENTAL PARTNERSHIPS
As of December 31, 1995, IGC manages and is a general partner in 29 real
estate partnerships which own 32 apartment projects in Puerto Rico, Maryland,
Virginia and Washington, D.C. IGC is also a limited partner in many of these
partnerships. The apartment projects are financed by non-recourse mortgages.
Of the 6,559 rental units in the various partnerships, the Federal Housing
Administration ("FHA") provides subsidies for low and moderate income tenants
in 5,371 units.
During 1991, IGC entered into an agreement with the limited partners of
Lancaster Apartments L.P. ("Lancaster"), the owner of Lancaster Apartments, to
purchase their 99% limited partnership interest over a five-year period,
payable in five annual installments of $170,000 which commenced in 1991. In
1993, 1994 and 1995, the Company's limited partnership interest in Lancaster
increased by 19.8% each year as a result of this agreement, increasing IGC's
ownership interest to 100% at December 31, 1995. IGC's 100% ownership interest
consists of a 1% general partnership interest and 98% limited partnership
interest held directly by IGC, and a 1% limited partnership interest held by
St. Charles Associates Limited Partnership ("SCA"). IGC holds a 99% general
partnership interest in SCA, and IBC holds the 1% limited partnership interest.
As a result of this agreement, the assets, liabilities and results of
operations of Lancaster are consolidated by IGC as of December 31, 1993, 1994
and 1995 and for the years then ended.
IGC, IBC and the Resolution Trust Corporation ("RTC") as Receiver for
Perpetual Savings Bank F.S.B. were general partners in New Forest General
Partnership ("New Forest") and Fox Chase General Partnership ("Fox Chase").
New Forest and Fox Chase each own an apartment project in St. Charles,
Maryland. During August 1993, New Forest and Fox Chase bought the RTC's
general partnership interest for $200,000. The buy-out was funded by surplus
cash in the partnerships and an additional capital contribution from IGC. As a
result of this transaction, IGC became a 90% general partner in both New Forest
and Fox Chase, and accordingly, the Company's December 31, 1993 consolidated
financial statements reflect the operations of Fox Chase and New Forest from
August 20, 1993 and assets and liabilities as of December 31, 1993. The
assets, liabilities and results of operations of Fox Chase and New Forest are
consolidated by IGC as of December 31, 1994 and 1995 and for the years then
ended. Prior to these purchases, the Company accounted for these two
partnerships using the equity method.
On December 30, 1994, IGC executed a purchase and sale agreement with IBC
which provided for the transfer of 9.9% general partnership interests in New
Forest and Fox Chase and 49.9% limited partnership interests in four other
partnerships to IGC in satisfaction of $3,722,000 of accounts and notes
receivable due from IBC. The partnerships in which IGC received a 49.9%
limited partnership interest included Wakefield Terrace Associates L.P.
("Terrace"), Wakefield Third Age L.P. ("Third Age"), Palmer Apartments L.P.
18
("Palmer") and Headen House Associates L.P. ("Headen"). The amount of IBC
receivables satisfied via this transaction was based on the fair market value
of the apartment projects as determined by a third party independent
appraisals. As a result of this transaction, IGC became a 99.9% general
partner in Fox Chase and New Forest and a 49.9% limited partner in Terrace,
Third Age, Palmer and Headen. Fox Chase and New Forest continue to be
consolidated by IGC. IGC's interests in Terrace, Third Age, Palmer and Headen
are accounted for using the equity method since the rights of the unaffiliated
limited partners preclude IGC from controlling these entities. Because IBC and
IGC are under common control, the partnership interests received by IGC were
recorded at IBC's basis in the partnerships prior to the transfer which was
$626,000. The $1.8 million charge to partner's capital represents the
difference between IBC's basis in the partnership interests transferred and
IGC's book basis for the receivables from IBC which were satisfied via this
transaction of $2,446,000, net of reserves.
IGC, as 1% general partner, and SCA, as 99% limited partner, formed
Lakeside Limited Partnership ("Lakeside") on December 22, 1994 for the purpose
of acquiring 1.23 acres of land and developing and operating a 54 unit
retirement rental project. Lakeside purchased the land for $440,000 from IBC
by paying $88,000 in cash and issuing a note for the remaining $352,000. During
1995, IBC assigned the note receivable to IGC in satisfaction of past due
receivables from Coachman's Limited Partnership. The Company collected the
$352,000 receivable due from Lakeside during 1995. Lakeside has been awarded
low income housing tax credits to assist with costs of developing the property.
On December 7, 1995, investors purchased the tax credits in exchange for SCA's
99% interest. At December 31, 1994, the Company's consolidated financial
statements include the assets and liabilities of Lakeside. Pursuant to the
1995 purchase of SCA's 99% interest by unaffiliated investors, Lakeside's
assets and liabilities are not included in the Company's consolidated financial
statements at December 31, 1995, but are accounted for using the equity method.
In March 1996, the Company completed the sale of four of the Puerto Rico
apartment properties. The properties, totaling 918 rental units, were sold to
four affiliates of Producir, Inc., a non-profit organization, with financing
provided by HUD through capital grants authorized by the LIHPRHA. The
apartment properties are Las Americas I, Las Americas II, Las Lomas and
Monacillos. The Company will continue to manage the properties. As a result
of this sale, the Company will recognize approximately $14,500,000 of income.
The combined assets and liabilities of the properties are $13,400,000 and
$15,700,000, respectively, at December 31, 1995. The book value of the
Company's investments in these properties was $454,000 at December 31, 1995.
The following table summarizes IGC's investment in residential rental
partnerships accounted for using the equity method of accounting:
DECEMBER 31,
----------------
1995 1994
------ ------
(In thousands)
Long-term receivables, net of deferred income of $3,414
and $3,778 at December 31, 1995 and 1994, respectively $ 3,331 $ 3,368
Investment in partnerships 7,591 6,608
------- -------
$10,922 $ 9,976
======= =======
19
For the years ended December 31, 1995, 1994 and 1993, IGC recognized
$1,610,000, $4,250,000 and $1,668,000, respectively, of equity in earnings from
these investments. In January and March of 1994, the Company collected
approximately $7.4 million of funds from partnerships in Puerto Rico which
refinanced seven apartment projects. These receipts represented the collection
of long-term receivables and distributions. In addition, the Company
recognized the remaining unamortized sponsor and developer fees of $555,000
from the apartment projects that were refinanced.
The combined condensed statements of income and the combined condensed
statements of cash flows for the years ended December 31, 1995, 1994 and 1993,
and the combined condensed balance sheets as of December 31, 1995 and 1994 are
shown below for the partnerships owning residential rental properties:
HOUSING PARTNERSHIPS'
COMBINED CONDENSED STATEMENTS OF INCOME
(Unaudited)
YEARS ENDED DECEMBER 31,
--------------------------------------
1995 (1) 1994 (1) 1993 (1)
------------ ----------- -----------
(In thousands)
Revenues $40,835 $41,066 $44,767
------- ------- -------
Operating expenses
Depreciation 6,540 6,276 6,011
Other 33,449 33,437 37,303
------- ------- -------
39,989 39,713 43,314
------- ------- -------
Net income $ 846 $ 1,353 $ 1,453
======= ======= =======
(1) The income and expenses of Fox Chase and New Forest after August 20,
1993 and the income and expenses of Lancaster are excluded from these
statements. The income and expenses for these partnerships were
$2,068,000 and $2,176,000, respectively, for the 1993 periods,
$4,430,000 and $5,050,000, respectively, for the year ended December
31, 1994, and $4,642,000 and $5,025,000, respectively, for the year
ended December 31, 1995. The operations of these partnerships are
consolidated in the Company's consolidated statements of income for
the period August 20, 1993 through December 31, 1993 and for the
years ended December 31, 1995 and 1994.
20
HOUSING PARTNERSHIPS'
COMBINED CONDENSED BALANCE SHEETS
(Unaudited)
A S S E T S
DECEMBER 31,
--------------------------
1995 (1) 1994 (1)
---------- ----------
(In thousands)
Rental apartments, at cost $239,911 $238,969
Accumulated depreciation (100,861) (95,126)
-------- --------
139,050 143,843
-------- --------
Restricted cash and marketable securities:
Residual receipt accounts 6,783 6,286
Replacement reserves and escrows 9,258 10,209
-------- --------
Total restricted cash and marketable securities 16,041 16,495
Cash and certificates of deposit 5,766 4,261
-------- --------
Total cash and marketable securities 21,807 20,756
-------- --------
Other assets 4,583 4,826
-------- --------
Total assets $165,440 $169,425
======== ========
LIABILITIES AND PARTNERS' CAPITAL
DECEMBER 31,
--------------------------
1995 (1) 1994 (1)
---------- ----------
(In thousands)
Non-recourse mortgage notes and accrued interest $169,161 $172,561
Loans and interest payable to the Company 8,667 8,640
Other liabilities 15,080 14,331
-------- --------
Total liabilities 192,908 195,532
-------- --------
Partners' capital
Capital contributions, net of distributions (2,839) (514)
Accumulated deficit (24,629) (25,593)
-------- --------
Total partners' capital (27,468) (26,107)
-------- --------
Total liabilities and partners' capital $165,440 $169,425
======== ========
(1) The assets, liabilities and partners' capital of Lancaster, Fox Chase
and New Forest at December 31, 1995 and 1994 are excluded as they are
consolidated in the Company's December 31, 1995 and 1994 financial
statements. The total assets and liabilities of these entities were
$22,564,000 and $26,177,000, respectively, at December 31, 1995, and
$23,153,000 and $26,180,000, respectively, at December 31, 1994.
21
HOUSING PARTNERSHIPS'
COMBINED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
YEARS ENDED DECEMBER 31,
--------------------------------------
1995 (2) 1994 (2) 1993 (1)
------------ ----------- -----------
(In thousands)
Revenues $40,835 $41,066 $44,767
------- ------- -------
Cash expenditures
Total expenses 39,989 39,713 43,314
Less - Depreciation (6,540) (6,276) (6,011)
Other non-cash expenses (375) (470) (706)
------- ------- -------
33,074 32,967 36,597
Mortgage principal and capital
additions 4,121 3,696 2,232
------- ------- -------
Total cash expenditures 37,195 36,663 38,829
------- ------- -------
Cash flow before distributions $ 3,640 $ 4,403 $ 5,938
======= ======= =======
(1) The cash flow activity for Lancaster during the period January 1,
1993 to December 31, 1993 and for Fox Chase and New Forest from
August 20, 1993 to December 31, 1993 are excluded from these
statements. These activities are reflected on IGC's Consolidated
Statement of Cash Flows for the year ended December 31, 1993.
(2) Excludes the cash flow activity for Lancaster, Fox Chase and New
Forest for the years ended December 31, 1995 and 1994. This activity
is reflected in IGC's Consolidated Statements of Cash Flows for the
years ended December 31, 1995 and 1994.
The FHA, Puerto Rico Housing Finance Corporation ("PRHFC"), State and
District of Columbia housing agencies and the partnership agreements require
that the accumulation of cash in the partnerships be sufficient to liquidate
all current liabilities before distributions to partners are permitted. Most
of the partnership agreements provide that IGC as general partner receive a
zero to 5% interest in profits, losses and cash flow from operations until such
time as the limited partners have received cash distributions equal to their
capital contributions. Thereafter, IGC generally shares in 50% of cash
distributions from operations.
During 1995, IGC received $73,085 in unauthorized distributions from
Huntington Associates L.P. pursuant to a calculation error. The 1996
distribution was reduced accordingly.
(4) OPERATIONS DISTRIBUTED TO UNITHOLDERS
On February 6, 1995, IGC distributed to its unitholders its 99% limited
partnership interest in Equus (the "Equus Distribution"). IGC and its wholly
owned subsidiary, Equus Management Company ("EMC"), retained the 1% general
partner interest and will continue to manage Equus. Certain directors and
22
officers of EMC serve as officers and directors of IGMC. For a transitional
period following completion of the Equus Distribution, IGC will provide certain
administrative services and support to Equus pursuant to a Master Support and
Services Agreement (the "Support Agreement"). Equus will reimburse IGC for
costs incurred in providing these services.
Originally formed in September 1993, Equus was restructured in 1994 as a
limited partnership between IGC and EMC for the purpose of succeeding to
substantially all of IGC's ownership interest in real estate assets employed in
thoroughbred racing and related wagering businesses. Through a series of
transactions during 1994, 1995 and 1996, Equus holds an 82% interest in HDA.
HDA owns El Comandante Race Track ("El Comandante"), the only licensed
thoroughbred racing facility in Puerto Rico, which it leases to El Comandante
Operating Company, Inc. ("ECOC"), an unaffiliated Puerto Rico nonstock
corporation. ECOC operates El Comandante at its expense and pays rent to HDA
based primarily upon the greater of $7,500,000 or 25% of ECOC's share of
wagering revenues. A director of IGMC and certain officers of IGC serve as a
director and officers of ECOC.
Equus retained its 100% ownership of the issued and outstanding stock of
Virginia Jockey Club Inc., a Virginia corporation ("VJC"), which applied to the
Virginia Racing Commission for licenses to own and operate a thoroughbred horse
racing and wagering facility in Virginia (the "Virginia Licenses"). On October
12, 1994, the Virginia Racing Commission awarded the Virginia Licenses to an
applicant other than VJC. VJC has appealed this decision. As a result of the
Racing Commission's unfavorable decision, the Company wrote off $1.8 million of
deferred project costs associated with VJC's application.
As part of Equus' acquisition of interests in HDA, in 1994 HDA distributed
to its partners, excluding HDAMC, approximately $13.3 million of notes
receivable including interest from Land Development Associates S.E. ("LDA"), a
partnership in which the Company holds an 80% ownership interest. IGC and IBC
received $6.5 million and $4.1 million, respectively, of the notes distributed.
IGC recognized the portion which it received as revenue from investments in
gaming properties and IBC contributed its portion to Equus, who reflected it as
a capital contribution. Equus subsequently transferred its portion of the LDA
notes receivable to IGC. IGC also recognized in 1994 as earnings from
investments in gaming properties an additional $763,000 of cash distributions
received in excess of the Company's basis in HDA. Earnings from investments in
gaming properties recognized in 1993 were generally comprised of IGC's share of
HDA's earnings and cash distributions received in excess of the Company's basis
in HDA.
Because IGC is the 1% general partner of Equus, it accounts for its
investment on the equity method of accounting as of December 31, 1995. At
December 31, 1994 and 1993, IGC's investment in Equus, including Equus'
consolidated investment in VJC, was consolidated in the Company's financial
statements, since IGC owned a majority interest in Equus during those periods.
The Company's investment in HDA was accounted for under the equity method of
accounting during 1994 and 1993 since the Company did not hold the controlling
interest in HDA during those periods.
(5) INTERSTATE WASTE TECHNOLOGIES, INC.
IGC, engaged in the pre-development of municipal waste facilities, formed
a wholly owned corporation, Interstate Waste Technologies, Inc. ("IWT"), to
pursue contracts with municipalities regarding waste treatment. Three
23
individuals representing IWT have filed for patent protection for a process
which converts sludge into three useful and saleable products: methanol, sulfur
and an aggregate material. An amended patent application was filed in October
1995 in response to additional information requests from the U.S. Patent
Office. Comments by the U.S. Patent Office on the October 1995 amended patent
application were received in February 1996. Issuance of patents is pending and
there is no assurance that patents for such process will be issued.
IWT's first project was a sludge reduction facility in Carteret, New
Jersey for the Passaic Valley Sewerage Commissioners ("PVSC"). IWT located a
site and entered into a contract with the Borough of Carteret to serve, for a
fee, as a host community. However, on December 30, 1991, the Borough Council
passed a resolution rescinding the Carteret Mayor's authority to enter into the
agreement. IWT commenced legal action seeking a declaratory judgment that the
contract was valid and enforceable. In February 1993, the contract was ruled
valid and enforceable. In May 1994, IWT accepted a cash settlement of $750,000
from the Borough of Carteret and its insurers which was recorded as a recovery
of deferred costs. The attempt to invalidate the contract and the lawsuit has
required IWT to discontinue its plans to develop the Carteret project.
IWT responded to a Request for Proposals from Bridgeport, Connecticut for
a regional sludge management facility to dispose of the city's sludge as well
as sludge from other communities. In February 1994, IWT was notified that it
was identified by the city as the preferred vendor for the regional sludge
management facility. In June 1994, IWT and the city executed a host community
agreement. The agreement affirms the willingness of Bridgeport to allow the
sludge management facility to be built in the city. Before construction can
begin on the facility, IWT must acquire long-term sludge disposal service
agreements with sludge generators in the New Jersey-New York-New England
service region of the facility. Negotiation of a sludge disposal service
agreement with the city's wastewater authority is pending the acquisition of
other sludge disposal contracts for the facility.
In March 1995, IWT submitted a Proposal for Solid Waste Recycling Services
to the Solid Waste Management Authority of the Commonwealth of Puerto Rico.
The proposed facility is a 2,640 ton per day plant, using a demonstrated solid
waste processing technology developed in Europe. Continuing discussions with
representatives of the government of Puerto Rico have led to the development of
a draft Letter of Intent.
During 1993, as a result of the legal action discussed above and its
decision to abandon another site, IGC reserved approximately $1,000,000 against
the investment. At December 31, 1995 and 1994, deferred costs regarding waste
technology, net of reserves, were $2,364,000 and $1,798,000, respectively.
(6) FEES FROM SALE OF CABLE TELEVISION SYSTEM
IGC is a general and a limited partner in a partnership that owned a cable
television system serving Charles County, Maryland. The assets of this
partnership were sold on January 6, 1988. IGC earned fees of $207,000,
$345,000 and $508,000 during the years ended December 31, 1995, 1994 and 1993,
respectively. IGC is entitled to receive certain fees over the next four
years. These fees are generally earned as collected and are comprised of the
following:
Consulting services for a period of five years, 1988
through 1993, at $250,000 per year with no remaining
balance due at December 31, 1995. Services for this fee
24
included rendering advice and consultation regarding
operations and marketing.
Non-compete fees for a period of 10 years at $115,000 per
year with a remaining balance at December 31, 1995 of
$230,000.
Construction management fees and payment for easements in
St. Charles, Maryland of $3,660,000 based on payments of
$732 per dwelling unit for the first 5,000 dwelling units
where cable is placed, and limited to a 12-year period that
began January 6, 1988. The remaining balance to which IGC
is entitled at December 31, 1995 is $1,866,000. However,
based on recent historical building rates, the Company
anticipates only moderate growth over the remaining life of
the contract, which could reduce the construction
management fees received. The Company expects $1,107,000
of construction management fees will be earned prior to the
expiration of the contract.
These fees are pledged as security for a loan with Citibank.
25
(7) DEBT
The Company's outstanding debt is collateralized primarily by land,
housing and other land improvements, receivables, and investments in
partnerships. The following table summarizes the indebtedness of IGC at
December 31, 1995 and 1994:
Stated Outstanding Balance at:
Maturity Interest December 31, December 31,
Description by Lender Date Rate* 1995 1994
- ------------------------- -------------- -------- ------------- ------------
(In thousands)
Non-recourse debt:
Community Development 12-29-24 to 6.85%-9.875% $22,650 $22,771
Administration (1) 10-01-28
Supra & Co. (8) 08-02-09 P + 1.5% 2,034 4,268
------- -------
Total non-recourse 24,684 27,039
------- -------
Recourse debt:
Citibank (6,12) Demand (9) 1,334 1,559
NationsBank 03-31-96 P + 1%-1.5% 10,725 13,473
(2,4,11,12,14)
Washington Savings From 06-06-96 8%-10% 682 1,153
(2,3,11) to 12-27-96
Riggs National Bank (2) 06-15-96 P + 1.5% 1,205 --
1st National Bank of 09-14-96 to P + 1.5%-10.25% 765 580
St. Mary's (2,3,13) 12-29-97
Signet Bank (2,3,10) 09-01-96 P + 1.5% 3,325 6,533
FDIC (2,4,11) 09-30-96 P + 1% 6,546 8,995
Virginia First 11-16-96 P + 1.5% 339 484
Savings (3)
Wachovia Bank & Trust 11-30-96 to P + .5%-1% 227 428
(2,3,11) 04-26-00
Purchase money 10-28-97 10% 1,000 2,081
mortgage (2)
FirstBank (2,12) 12-31-97 P + 1.5% 17,370 --
Banco Central
Hispano (2) Paid 8.57% -- 5,175
Banco Popular (2,7,12) 12-05-98 P + 1.5% 4,000 --
General (5) From 10-26-96 7.4%-11.5% 566 527
to 05-16-00
Citibank (2,12) 05-05-96 Eurodollar 2,361 --
+ 2.5%
------- -------
Total recourse 50,445 40,988
------- -------
Total debt $75,129 $68,027
======= =======
*P = Prime
26
Balance Sheet Classification
- ----------------------------
Mortgages and notes payable - Recourse debt $ 301 $ 370
Related to community development -
Recourse debt 47,841 36,661
Non-recourse debt 2,034 4,268
Related to homebuilding projects - Recourse debt 981 2,398
Related to investment properties -
Recourse debt 1,322 1,559
Non-recourse debt 22,650 22,771
------- -------
Total debt $75,129 $68,027
======= =======
(1) Collateralized by apartment projects and secured by FHA or the Maryland
Housing Fund.
(2) Collateralized by community development assets.
(3) Collateralized by homebuilding assets.
(4) Collateralized by investment in residential rental partnerships.
(5) Collateralized by other assets.
(6) Collateralized by letter of credit.
(7) Collateralized by a secondary interest in Equus Units owned by IBC.
(8) Minority partner in Puerto Rico land development subsidiary.
(9) The interest rate is not fixed to maturity and is renegotiated on a
periodic basis. The interest rate was 7.05% and 6.70% at December 31,
1995 and December 31, 1994, respectively.
(10) As a result of the wetlands litigation verdict, the financial institution
issued a notice of default. In addition, the Company had not met a March
1, 1996 mandatory principal curtailment, which was subsequently paid.
(11) These loans contain certain covenants requiring the Company to remain in
compliance with applicable laws. Unless reversed on appeal, the wetlands
litigation verdict would result in a default of these covenants.
(12) These loans contain cross default provisions that could be triggered by
the events of default resulting from the wetlands litigation verdict.
(13) These loans contain a provision allowing the financial institution to
call the loan if there has been a material adverse change in the
Company's financial condition.
(14) A March 31, 1996 principal payment was not met. The funds are available
and the payment is expected to be made in April.
Information regarding short-term borrowings is summarized as follows:
1995 1994 1993
------------ ----------- -----------
(In thousands)
Principal outstanding
At year end $49,233 $25,659 $39,347
Weighted average during the year $32,298 $26,092 $35,338
Maximum during the year $58,728 $50,062 $53,840
Interest
Weighted average rate at year end 9.69% 9.63% 7.20%
Weighted average rate during the year 9.86% 8.66% 7.12%
27
Debt matures as follows based upon renewal or expiration date:
December 31,
1995
--------------
(In thousands)
Year of maturity:
1996 $49,233
1997 1,241
1998 171
1999 180
2000 and thereafter 24,304
-------
$75,129
=======
(8) COMMITMENTS AND CONTINGENCIES
IGC is guarantor of letters of credit of $4,569,000, on behalf of
Chastleton Apartments Associates L.P. ("Chastleton") (see Note 9), and
$2,432,000 for completion guarantees regarding land, homebuilding and
investment property development. The letters of credit related to Chastleton
serves as collateral for public and private borrowing arrangements undertaken
by Chastleton. Likewise, the letters of credit related to the land,
homebuilding and investment property development serve as collateral for IGC's
performance guarantee and support borrowing arrangements.
In addition to the letters of credit, IGC shares the general partner
interests in two investment property partnerships with IBC which are currently
experiencing negative cash flow. Under the terms of the partnership agree-
ments, IBC is the primary obligor for funding operating advances. However,
should IBC fail to fulfill its funding obligations, IGC is obligated as a
general partner to provide financial support. This obligation involves varying
degrees of financial exposure in excess of amounts recognized in the
consolidated financial statements.
The National Association of Home Builders has issued a warning that
certain fire-retardant treated plywood commonly used in the roof construction
of multi-family homes may contain a product defect causing accelerated
deterioration of the plywood. Since 1991, the homeowners association of four
projects that IGC had built notified IGC of roof problems that they suspected
were related to such fire-retardant plywood. IGC has completed the replacement
of roofs at one project of 60 units and at another project of 203 units. IGC
is reviewing its records and inspecting the plywood that had been used in the
construction of other IGC projects to determine the nature of the plywood
treatment and the extent of such use. IGC believes that if the plywood used in
any of its projects had been defectively treated, then the liability for repair
or replacement rests primarily with the insurance company, manufacturer or the
provider of the chemical treatment and others involved in the manufacturing
process.
28
(9) RELATED PARTY TRANSACTIONS
James J. Wilson, Chief Executive Officer of the Company, has an ownership
interest in various entities to which IGC provides management services. These
entities and their relationships to IGC are as follows:
IBC or Affiliate IGC
-------------------- --------------------
Limited Limited
and Limited and Limited
General Liability General Liability
Partner Partner Partner Partner
------- ----------- ------- -----------
Chastleton .99% -- .01% --
Coachman's Limited Partnership
("Coachman's") 1% 49% 1% 49%
Santa Maria Associates,
S.E. ("Santa Maria") -- 99% -- 1%
El Monte Properties, S.E.
("El Monte") -- 99% -- 1%
G.L. Limited Partnership
("Rolling Hills") 1% 49% -- --
Village Lake Associates
Limited Partnership
("Village Lake") 99% 1% -- --
Capital Park Associates
("Capital Park") (a) -- -- --
Smallwood Village Associates,
Limited Partnership ("SVA") 1% 51% -- --
Smallwood Village Office
Building Associates Limited
Partnership ("SVOBA") 25% -- -- --
IBC, General Partner of IGC (b) -- -- -- --
Equus (c) -- 32% 1% --
(a) An affiliate of IBC holds notes receivable that are secured by the
existing general partners' interest in the partnership.
(b) IBC, controlled by James J. Wilson, is entitled to representation on
IGMC's board of directors. James J. Wilson and two members of his
immediate family are currently providing this representation.
(c) EMC is the managing general partner of Equus. James J. Wilson
resigned from EMC's board of directors and as Chief Executive Officer
of Equus during March 1996. Two members of his immediate family
represent IBC on EMC's board of directors.
29
Transactions between the above entities and IGC are described in the
following tables. The maximum aggregate outstanding balance due from these
entities at any one time during 1995 and 1994 was $1,503,000 and $2,636,000,
respectively.
REVENUE FOR THE YEAR ENDED DECEMBER 31, 1995
(In thousands)
---------------------------------------------------------
Income Earned
-----------------------------------
Management Developer Adjustment
Fees Fees (a) Interest Total to Reserve Collected
---------- --------- -------- ----- ---------- ----------
Chastleton (b,d) $ 73 $-- $ -- $ 73 $ (71) $ 2
Coachman's (b) 26 -- 23 49 279 328
Santa Maria 67 -- -- 67 -- 67
El Monte 100 -- -- 100 -- 100
Rolling Hills (c,k) 83 -- -- 83 352 435
Village Lake (b) 25 -- -- 25 26 51
Capital Park 239 -- -- 239 -- 239
SVA 55 -- -- 55 3 58
SVOBA 6 -- -- 6 -- 6
IBC 30 -- 33 63 -- 63
------ --- ---- ------ ----- ------
$ 704 $-- $ 56 $ 760 $ 589 $1,349
====== === ==== ====== ===== ======
RECEIVABLES AT DECEMBER 31, 1995
(In thousands)
--------------------------------------------------------------
Outstanding Balance
---------------------------------------------
Working
Manage- Capital Land/
ment Developer Loans Asset Book
Fees Fees (a) (e) Sales Interest Total Reserved Balance
------ --------- ------- ----- -------- ----- -------- -------
Chastleton (h) $347 $-- $ 33 $ -- $ -- $ 380 $(347) $ 33
Coachman's (f) 19 -- 117 -- 18 154 (37) 117
Santa Maria -- -- -- -- -- -- -- --
El Monte 28 -- -- -- -- 28 -- 28
Rolling
Hills (k) 280 -- 3 -- -- 283 -- 283
Village Lake 49 -- 2 -- -- 51 -- 51
Capital Park 24 -- 4 -- -- 28 -- 28
SVA 4 -- 1 -- -- 5 -- 5
SVOBA -- -- -- -- -- -- -- --
IBC (i,j) 3 -- 8 302 33 346 -- 346
Equus (l) -- -- 225 -- -- 225 -- 225
---- --- ---- ---- ---- ------ ----- ------
$754 $-- $393 $302 $ 51 $1,500 $(384) $1,116
==== === ==== ==== ==== ====== ===== ======
30
REVENUE FOR THE YEAR ENDED DECEMBER 31, 1994
(In thousands)
-------------------------------------------------------
Income Earned
-----------------------------------
Management Developer Adjustment
Fees Fees (a) Interest Total to Reserve Collected
---------- --------- -------- ----- ---------- ----------
Chastleton (b,d) $ 75 $-- $ -- $ 75 $ (67) $ 8
Coachman's (b) 24 -- 20 44 (44) --
Santa Maria 60 -- -- 60 -- 60
El Monte 99 -- -- 99 -- 99
Rolling Hills (c) 101 -- -- 101 (53) 48
Village Lake (b) 18 -- -- 18 68 86
Capital Park 282 -- -- 282 -- 282
SVA (g) 55 -- 154 209 -- 209
SVOBA 10 -- -- 10 -- 10
IBC 28 -- 26 54 -- 54
---- --- ---- ---- ----- ----
$752 $-- $200 $952 $ (96) $856
==== === ==== ==== ===== ====
RECEIVABLES AT DECEMBER 31, 1994
(In thousands)
--------------------------------------------------------------
Outstanding Balance
---------------------------------------------
Working
Manage- Capital Land/
ment Developer Loans Asset Book
Fees Fees (a) (e) Sales Interest Total Reserved Balance
------ --------- ------- ----- -------- ----- -------- -------
Chastleton (h) $277 $-- $ 30 $ -- $ -- $ 307 $ (277) $ 30
Coachman's (f) 93 -- 211 -- 160 464 (315) 149
Santa Maria 4 -- -- -- -- 4 -- 4
El Monte 13 -- -- -- -- 13 -- 13
Rolling Hills 352 -- 3 -- -- 355 (352) 3
Village Lake 26 -- 1 -- -- 27 (26) 1
Capital Park 18 -- 7 -- -- 25 -- 25
SVA (g) 3 -- -- -- -- 3 (3) --
SVOBA 1 -- -- -- -- 1 -- 1
IBC (i,j) 2 -- -- 302 -- 304 -- 304
---- --- ---- ---- ---- ------ ----- ----
$789 $-- $252 $302 $160 $1,503 $(973) $530
==== === ==== ==== ==== ====== ===== ====
31
REVENUE FOR THE YEAR ENDED DECEMBER 31, 1993
(In thousands)
-------------------------------------------------------
Income Earned
-----------------------------------
Management Developer Adjustment
Fees Fees (a) Interest Total to Reserve Collected
---------- --------- -------- ----- ---------- ----------
Chastleton (b,d) $ 70 $ -- $ -- $ 70 $ (60) $ 10
Coachman's (b) 22 -- 141 163 (163) --
Santa Maria 54 35 -- 89 -- 89
El Monte 93 102 -- 195 -- 195
Rolling Hills (c) 90 -- -- 90 (90) --
Village Lake (b) 8 64 -- 72 (64) 8
Capital Park 238 -- -- 238 -- 238
SVA (g) 54 -- 154 208 (158) 50
SVOBA 10 -- -- 10 -- 10
IBC 28 -- 63 91 (27) 64
---- ---- ---- ------ ----- ----
$667 $201 $358 $1,226 $(562) $664
==== ==== ==== ====== ===== ====
(a) Includes developer and refinancing fees.
(b) The management fee was reduced from 5% to 2.5% until the project has
positive cash flow and has paid all previously accrued management fees.
(c) The management fee was reduced from 4.5% to 2.5% until the project has
positive operating cash flow and has paid all previously accrued
management fees.
(d) Management agreed that it would defer all management fees until Chastleton
had sufficient cash flow to fund operations and to subordinate 50% of its
management fee until IBC has recovered its operating advances.
(e) Working capital loans include operating advances and reimbursements due
for common expenses.
(f) IBC has the funding obligation for operating deficits. Since IGC equally
shares the general and limited partnership interest with IBC, IGC funded a
portion of the deficits.
(g) During 1990, in satisfaction of outstanding advances of $1.7 million due
IGC from IBC, IBC transferred to IGC a $3.8 million note receivable due
from SVA. The interest earned on this receivable is reflected above.
This note was purchased back by IBC on December 30, 1994, as described
below.
(h) IBC has the funding obligation for operating deficits. IGC, also a
general partner, funded $69,000 of 1993 cash deficits, which was repaid to
the Company during 1994. In early 1996, IGC, as general partner, funded
$184,000 of cash deficits to be repaid by IBC during 1996.
(i) IGC is contingently liable under $4.6 million of letters of credit issued
by NationsBank collateralized by land, which secure additional bonds
issued for Chastleton.
(j) During 1989, IBC purchased 5.01 acres of commercial land. IGC accepted a
note receivable for 80% of the $1,092,000 purchase price. The note is
collateralized by IBC's ownership interest in Santa Maria and Village
Lake. On December 23, 1994, Lakeside, a subsidiary of the Company,
purchased the remaining 1.23 acres of this land from IBC for the
development of rental units for senior citizens, for its appraised value
of $440,000. Lakeside paid $88,000 to IBC and issued a note payable for
the remaining $352,000. During the first quarter of 1995, IBC assigned
32
the note receivable due from Lakeside to IGC in satisfaction of past due
receivables from Coachman's. The collection of the majority of the
Coachman's receivables had previously been questionable and $328,000 had
been reserved. This transaction resulted in income recognition of these
reserves during 1995. The Company collected the $352,000 receivable due
from Lakeside during 1995.
(k) The performance of this project has improved and the project is now
producing positive cash flow. During the first quarter of 1995, partial
payments were made of past due management fees owed to the Company. The
collection of the remaining receivable balance is now considered probable
and reserves related to this receivable aggregating $335,000 were
recognized as income during 1995.
(l) IGC provides certain administrative and operational support for Equus
pursuant to the Support Agreement. The Company also is reimbursed for
administrative support provided to Equus' subsidiaries. The amount
charged to Equus pursuant to the Support Agreement was $254,000 for 1995.
In addition, as general partner, IGC advanced funds as needed for working
capital deficits. Prior to 1995, Equus' assets and liabilities and
results of operations were reflected in the Company's consolidated
financial statements.
On December 30, 1994, as discussed in Note 3, IGC executed a purchase and
sale agreement with IBC which provided for the transfer of 9.9% general
partnership interests in New Forest and Fox Chase and 49.9% limited partnership
interests in Terrace, Third Age, Palmer and Headen. IBC retained a 0.1%
interest in Fox Chase and New Forest and a 1.1% interest in Terrace, Third Age,
Palmer and Headen. As a result of this transaction, IGC became a 99.9% general
partner in Fox Chase and New Forest and a 49.9% limited partner in Terrace,
Third Age, Palmer and Headen. Fox Chase and New Forest continue to be
consolidated by IGC. IGC's interests in Terrace, Third Age, Palmer and Headen
are accounted for using the equity method at December 31, 1995 and 1994, since
IGC does not control these entities. Because IBC and IGC are under common
control, the partnership interests received by IGC were recorded at IBC's basis
in the partnerships prior to the transfer. The $1.8 million charge to
partner's capital represents the difference between IBC's basis in the
partnership interests transferred and IGC's book basis for the receivables from
IBC which were satisfied via this transaction.
In addition to the support provided Equus pursuant to the Support
Agreement, the Company provides management services and administrative support
to Equus' subsidiaries, HDA, Galapagos and S & E, and its major tenant, ECOC.
The administrative support is reimbursed as the services are rendered. The
management agreement with HDA continues into December 2004. Upon closing of an
HDA refinancing in December 1993, the management agreement was amended to
reduce the management fee to an annual fee of $250,000, adjusted annually
beginning in 1994 by the percentage increase in the Consumer Price Index
("CPI"). Prior to such amendment, IGC received a management fee equal to 5% of
the HDA's rental income. The HDA management fees earned in 1995, 1994 and 1993
were $264,000, $257,000 and $593,000, respectively. Pursuant to an agreement
with HDA's previous lender, collection of 50% of the fees earned from March
1992 to December 15, 1993 were deferred. IGC collected unpaid fees related to
this provision of $499,000 from the proceeds of the 1993 HDA refinancing.
Pursuant to a consulting agreement effective December 15, 1993, ECOC has
retained as executive management three racing consultants employed by IGC.
ECOC reimburses all of IGC's payroll, bonus, fringe benefits and out-of-pocket
expenses associated with the employment of the consultants, and reimburses IGC
33
for other personnel who from time to time provide services to ECOC. Such
reimbursements are subject to certain limitations on increases in reimbursable
costs during the term of the consulting agreement. ECOC uses certain land
owned by LDA for a sanitary landfill in connection with its operation of the El
Comandante Race Track. LDA has authorized this use, but has reserved the right
to terminate such use if it conflicts with future development by LDA. Jorge
Colon Nevares, a director of IGMC, also serves as a director of ECOC and Thomas
B. Wilson, one of the IBC representatives on IGMC's board of directors, serves
as ECOC's president.
James J. Wilson, as a general partner of IGP, is entitled to priority
distributions made by each housing partnership in which IGP is the general
partner. If IGP receives a distribution which represents 1% or less of a
partnership's total distribution, Mr. Wilson receives the entire distribution.
If IGP receives a distribution which represents more than 1% of a partnership's
total distribution, Mr. Wilson receives the first 1% of such total.
IGC's Puerto Rico executive office has been located in the Doral Building,
owned by El Monte, since November 1991 under a five-year lease providing for a
first-year payment of rent of approximately $187,000 and certain escalations
for increases in the CPI and pro-rata share of operating expenses in years two
through five. Rental expense for the executive office and certain other
property in Puerto Rico leased from affiliates was $218,000, $228,000 and
$206,000 in 1995, 1994 and 1993, respectively. All leases with affiliated
persons are on terms at least as favorable to IGC as that generally available
from unaffiliated persons for comparable property.
IGC and affiliates lease office space from SVA, another of IBC's
commercial properties in which IGC's principal executive offices are located.
The lease was modified during 1995 which reduced the total square feet of
office space leased by IGC and its affiliates from 23,400 square feet to 17,255
square feet at approximately $205,000 per year, subject to adjustment for
inflation. The lease expires in the year 2001 and at IGC's request, IBC has
the obligation to sublease the space for the remainder of the lease. In 1995,
1994 and 1993, IGC's annual rentals from its share of the leases are
approximately $190,000, $190,000 and $181,000, respectively.
American Family Homes, Inc., a wholly owned subsidiary of IGC, leased from
IBC, 3,000 square feet of commercial space which was used for one of its sales
centers. The lease expired on December 31, 1995. Rent expense associated with
this lease was $39,000 and $13,000 in 1995 and 1994, respectively.
In March 1995, IGC executed an agreement for the sale of a commercial
parcel located in the Parque Escorial project in Puerto Rico to an entity
controlled by Jorge Colon Nevares, a director of the Company's managing general
partner, for use in its operations. The terms of the agreement provided for a
purchase price of $3,453,000, of which $693,000 is payable in cash and the
remainder by a mortgage note, collateralized by the land parcel. The terms of
the note provide for interest at a rate of 10% per annum commencing at the
completion of infrastructure. Payments of principal and interest of $27,000
are due monthly commencing May 1, 1995 with the balance of the note payable at
maturity on April 1, 1998.
On September 8, 1995, the Company executed a Contract of Sale with Twenty
First Century Homes S.E. ("Twenty First Century") for two parcels of land in
the Parque Escorial Development for $3,520,000. Jorge Colon Nevares holds a
50% ownership interest in Twenty First Century.
34
(10) PROFIT SHARING AND RETIREMENT PLANS
IGC established a retirement plan (the "Retirement Plan") effective
January 1, 1988 for non-union employees of IGC. In 1992, the union employees
were added to the plan. Employees are eligible to participate in the
Retirement Plan when they have completed a minimum employment period of
generally one year. IGC's contributions to the Retirement Plan and U.S. Social
Security Plan for eligible employees were equal to 11.65% of basic salaries and
wages for 1995, 1994 and 1993 that were not in excess of the U.S. Social
Security taxable wage base, plus 8% of salaries which exceeded the U.S. Social
Security taxable wage base. Employees' salaries in excess of $150,000,
$150,000 and $236,000, for 1995, 1994 and 1993, respectively, were excluded
from the calculation of contributions. Payments are also made to the
Retirement Plan from IGC contributions to a profit sharing plan, as described
below, and from voluntary contributions by employees.
In 1987, IGC established an incentive compensation plan (the "Profit
Sharing Plan") based on net income of the Company. No contributions were made
for 1995, 1994 or 1993.
(11) UNIT OPTIONS, WARRANTS AND APPRECIATION RIGHTS
IGC maintains Unit option plans for Directors (the "Directors Plan") and
employees (the "Employees Plan"). The Directors Plan is for directors of the
managing general partner who are not officers or employees of the Company or of
any General Partner or affiliate of the Company. The Employees Plan is for
employees of IGC, including employees who are Directors of any general partner
of IGC or of any affiliate of IGC. Activity during 1995 and 1994 is summarized
below:
Directors Employees
--------- ----------------------
Plan Plan Plan
Exercise Exercise Exercise
Price $4 Price $4 Price $2.49
-------- -------- -----------
Options outstanding,
December 31, 1993 45,000 183,550 --
Awarded -- -- --
Exercised (15,000) (117,700) --
Cancelled -- (800) --
------- ------- --------
Options outstanding,
December 31, 1994 30,000 65,050 --
Awarded (1) -- -- 12,600
Exercised (30,000) (11,450) --
Cancelled (1) -- (17,600) --
------- ------- --------
Options outstanding,
December 31, 1995 -- 36,000 12,600
======= ======= ========
(1) As a result of the Equus Distribution, as further discussed in Note
4, the exercise price of options outstanding under the Directors and
Employees Plans which were exercisable, but not exercised, prior to
January 22, 1995 was reduced from $4.00 to $2.49. Such reduction was
calculated based on the percentage decrease between the average
closing price of the Company's Units as reported by the American
35
Stock Exchange for the twenty trading days immediately preceding the
ex-dividend date of February 7, 1995, and the twenty trading days
immediately following the distribution date of February 6, 1995. The
exercise price of options that were not exercisable until after
January 22, 1995 was not adjusted. However, upon exercise, the
holders of such options will receive one Equus Unit for every two IGC
Units. The Equus Units so issued will not be registered under the
federal securities laws and thus not be freely tradeable until three
years following issuance. However, the Equus Units will be issued
with certain "piggy-back" registration rights, pursuant to which
Equus may be obligated to register the Equus units under the federal
securities laws within three years from the Equus Distribution date.
As of December 31, 1995, the dates that options become exercisable and the
expiration dates are as follows:
Employees Options
----------------------------------------
Expiring Expiring Expiring
1-1-99 8-1-01 1-1-03
---------- ---------- ----------
Exercisable:
As of December 31, 1995 12,600 8,000 --
January 1, 1996 -- -- 10,000
March 1, 1996 -- 8,000 --
January 1, 1997 -- -- 10,000
------ ------ ------
12,600 16,000 20,000
====== ====== ======
In 1993, warrants to purchase 100,000 limited partnership Units were
issued to an investment banking firm in connection with a "highly confident
letter" relating to proposed VJC financing. The warrants had an exercise price
of $5.30 per warrant and expire on September 30, 2003. The warrants were
valued at $75,000. Subsequent to the Equus Distribution, the $5.30 exercise
price of the warrants was reduced to $3.60, and the warrant holders were
granted 50,000 limited partnership purchase warrants for Equus Units with an
exercise price of $1.70.
During 1994 and early 1995, IGC adopted amendments to the Directors and
Employees Plans which provided for the issuance of Unit Appreciation Rights to
directors and employees of the Company. Under the terms of the amended plans,
directors and employees may be granted "Unit Appreciation Rights" which entitle
the holder to receive upon exercise, an amount payable in cash, Class A Units
of the Company, other property or some combination thereof, as determined by a
committee of the Directors of the managing general partner, which excludes
directors who are eligible to participate in that particular plan (the
"Committee"). The amount received upon exercise on or after January 20, 1995,
is determined based on the excess of the fair market value of the Company's
Units on the exercise date, plus 50% of the fair market value of Equus Units on
the exercise date, over the base price of the Unit Appreciation Right specified
in the individual rights agreements. Fair market value is defined in each
individual rights agreement but is generally the average of the closing prices
of Units on the principal exchange on which they are traded for the 20 trading
days beginning five trading days before the exercise date and ending on the
14th day after the exercise date. No adjustment was made for Unit Appreciation
Rights exercised prior to January 20, 1995, since prior to such date, the
Company's market price still reflected the value of the Company's interest in
Equus.
36
During 1994, 363,800 Unit Appreciation Rights were awarded to employees of
the Company and none were exercised or cancelled. During 1995, 2,000 rights
were exercised, 140,000 rights were repriced, and none were exercised or
cancelled. No Unit Appreciation Rights were exercised or cancelled during
1994. Compensation expense recognized by the Company in connection with such
awards totalled approximately $264,000 in 1994. In 1995, however, $164,000 of
the expense was recovered due to a decline in the market price of the Units.
No Unit Appreciation Rights have been issued in connection with the Director's
Unit Incentive Plan.
As of December 31, 1995, the dates that Unit Appreciation Rights become
exercisable and their expiration dates are as follows:
Rights Expiring
------------------------------------------------
March 1, May 15, September 1, October 18,
Units Exercisable at: 2004 2004 2004 2004
- --------------------- -------- ------- ------------ -----------
December 31, 1995 12,000
March 1, 1996 20,000
May 15, 1996 29,760
September 1, 1996 8,000
October 18, 1996 7,000
March 1, 1997 20,000
May 15, 1997 29,760
September 1, 1997 8,000
October 18, 1997 7,000
March 1, 1998 20,000
May 15, 1998 29,760
September 1, 1998 8,000
October 18, 1998 7,000
March 1, 1999 20,000
May 15, 1999 29,760
September 1, 1999 8,000
March 1, 2000 20,000
March 1, 2001 20,000
------- ------- ------- -------
120,000 119,040 32,000 33,000
======= ======= ======= =======
As of December 31, 1995, 155,000 IGC Units are reserved for issuance under
the Director's Plan and 1,070,025 Units are reserved for issuance under the
Employees' Plan.
(12) INCOME TAXES
As a U.S. Company doing business in Puerto Rico, IGC is subject to Puerto
Rico income tax on its Puerto Rico based income. The taxes reflected below are
a result of that liability. As discussed in Note 1, the Company adopted SFAS
No. 109 as of January 1, 1993, and the cumulative effect of this change is
reported in the Consolidated Statement of Income for the year ended December
31, 1993. Prior years' financial statements have not been restated to apply
the provisions of SFAS No. 109.
The Company is not subject to U.S. taxes as a partnership. Therefore, the
calculation below for the provision for income taxes does not include the
income from U.S. operations which is not subject to income taxes. It does
include the Puerto Rico source income which is subject to income taxes in
37
Puerto Rico at the statutory rate of 29%. The following table reconciles the
effective rate solely attributable to Puerto Rico source income:
December 31,
-------------------------------------------------
1995 1994 1993
--------------- -------------- --------------
(In thousands, except amounts in %)
% of % of % of
Amount Income Amount Income Amount Income
------ ------ ------ ------ ------ ------
Provision (benefit) for
income taxes at the
statutory income
tax rate $1,452 29.0% $5,149 29.0% $ 681 29.0%
Reduction of (benefits)
for partnership income
not taxable to Company -- -- (1,967) (11.1%) 3 .1%
Other items -- -- 329 1.8% (19) (.8%)
------ ------ ------ ------ ------- -----
$1,452 29.0% $3,511 19.8% $ 665 28.3%
====== ====== ====== ====== ======= =====
The provision for income taxes consists of the following:
YEARS ENDED DECEMBER 31,
--------------------------------------
1995 1994 1993
------------ ----------- -----------
(In thousands)
Currently payable
United States $ -- $ -- $ --
Puerto Rico 723 2,025 390
Deferred 729 1,486 275
------ ------ ----
$1,452 $3,511 $665
====== ====== ====
The components of deferred taxes payable include the following:
AT DECEMBER 31,
------------------------
1995 1994
----------- -----------
(In thousands)
Tax on amortization of deferred income related
to long-term receivables from partnerships
operating in Puerto Rico $2,135 $ 531
Tax on equity in earnings of partnerships
operating in Puerto Rico 562 1,342
Carryforward of Puerto Rico losses -- --
Changes in tax rates and other items -- 602
Tax on land development costs capitalized for book
purposes but deducted currently for tax purposes 1,924 --
Tax on interest income, payable when collected 83 --
------ ------
$4,704 $2,475
====== ======
38
The reconciliation between book income and taxable loss (excluding built-in
gain allocable to Predecessors) is as follows:
December 31,
-------------------------------------------------
1995 1994 1993
--------------- -------------- --------------
(In thousands, except per Unit amounts)
Per Per Per
Total Unit Total Unit Total Unit
------ ------ ------ ------ ------ ------
Net (loss) income
per books $(2,967) $(.29) $ 6,641 $ .66 $7,194 $ .71
Cumulative effect of
change in accounting
principle -- -- -- -- (1,500) (.15)
Built-in gain allocable
to Predecessors:
Current (1,369) (.13) (1,747) (.17) (301) (.03)
Deferred (364) (.04) (323) (.03) (900) (.09)
Difference in income or
losses from subsidiary
partnerships 1,141 .11 (9,828) (.97) (5,427) (.53)
Losses from corporation
subsidiaries not
deductible by the
partnership 2,002 .20 2,221 .22 1,418 .14
Capitalization of general
and administrative
expenses under the
Uniform Capitalization
Rules 315 .03 18 -- 49 --
Deferred income
recognized currently
for tax purposes 349 .03 417 .04 1,057 .10
Difference in cost of sales
due to interest related to
the acquisition of land,
deducted for tax purposes 505 .05 1,663 .16 (1,347) (.13)
Deferred income taxes 729 .07 1,486 .15 275 .03
Losses from restructuring (245) (.02) (1,691) (.17) (1,409) (.14)
Wetland litigation costs
not deducted currently 2,000 .19 -- -- -- --
Other book to tax
reconciling items, none
of which is individually
significant (650) (.06) (606) (.06) (607) (.06)
------- ----- ------- ----- ------- -----
Net taxable income (loss)
per partnership
federal return $ 1,446 .14 $(1,749) $(.17) $(1,498) $(.15)
======= ====== ======= ===== ======= =====
39
Deferred income taxes reflect the "temporary differences" between amounts
of assets and liabilities for financial reporting purposes as determined in
accordance with SFAS No. 109 and such amounts as measured by tax laws. In
determining the impact of SFAS No. 109, which was adopted by the Company during
1993, certain carry-forwards related to Puerto Rico operations were benefitted
as there are no existing uncertainties associated with their realization. The
benefit of implementing SFAS No. 109 has been reported as a $1.5 million
cumulative effect of a change in accounting principle in the accompanying
Consolidated Statement of Income for the year ended December 31, 1993. During
the year ended December 31, 1994, the Company realized the benefit of those
carryforward losses.
On December 22, 1987, the Omnibus Budget Reconciliation Act of 1987 ("the
1987 Act") was signed into law. It contained several provisions relating to
the tax treatment of publicly traded partnerships. Among other things, the
1987 Act provides that publicly traded partnerships will be taxed as
corporations unless at least 90% of their gross income is derived from
qualifying "passive-type" sources. Income qualifying for this purpose includes
interest, dividends, real property income and gains from the sale of real
property. IGC, as an existing partnership publicly traded as of December 17,
1987, has been grandfathered for a 10-year transition period. As such, IGC
will not be taxed as a corporation until 1998 even if it does not meet the
qualifying gross income test, unless a substantial new line of business is
added. IGC expects to be able to comply with the qualifying income test.
Proposed regulations define a new line of business as substantial if the
partnership derives more than 15% of its gross income from that line of
business or if more than 15% (by value) of the partnership's total assets are
used in that line of business. Management believes that its acquisitions
subsequent to the 1987 Act do not constitute new lines of business.
Furthermore, it is management's intention not to enter into any new lines of
business that may impair IGC's tax status as a partnership.
(13) QUARTERLY SUMMARY (UNAUDITED)
IGC's quarterly results are summarized as follows:
Year Ended December 31, 1995
----------------------------------------------
1st 2nd 3rd 4th Total for
Quarter Quarter Quarter Quarter Year
------- ------- ------- ------- ---------
(In thousands, except per Unit amounts)
Revenues $10,931 $10,750 $ 7,296 $ 8,723 $37,700
Income (loss) before taxes
and minority interest 976 1,137 (2,311) (853) (1,051)
Net income (loss) 320 1,071 (2,498) (1,860) (2,967)
Per Unit:
Net income (loss) .03 .10 (.24) (.18) (.29)
40
Year Ended December 31, 1994
----------------------------------------------
1st 2nd 3rd 4th Total for
Quarter Quarter Quarter Quarter Year
------- ------- ------- ------- ---------
(In thousands, except per Unit amounts)
Revenues $12,658 $22,723 $16,768 $11,373 $63,522
Income before taxes
and minority interest 3,091 4,209 3,208 360 10,868
Net income (loss) 2,093 1,672 3,065 (189) 6,641
Per Unit:
Net income (loss) .21 .16 .30 (.02) .66
(14) SUPPLEMENTARY INCOME STATEMENT INFORMATION
Depreciation and amortization expense of intangible assets, pre-operating
costs and similar deferrals totalled $519,000, $388,000 and $358,000 for the
years ended December 31, 1995, 1994 and 1993, respectively.
41
INTERSTATE GENERAL COMPANY L.P.
SCHEDULE XI
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1995
INITIAL AND SUBSEQUENT COSTS AND ENCUMBRANCES
(In thousands)
Bldgs. &
Improve- Subsequent
Description Encumbrances Land ments Costs
- -------------------- ------------ -------- ----------- ----------
Bannister Apartments $ 3,752 $ 410 $ 4,180 $ 374
Garden Apartments
St. Charles, MD
Palmer Apartments 4,311 471 4,788 345
Garden Apartments
St. Charles, MD
Brookmont Apartments 2,379 162 2,677 209
Garden Apartments
St. Charles, MD
Brookside Gardens Apartments 1,493 156 2,487 45
Garden Shared Housing
St. Charles, MD
Headen Apartments 4,909 205 4,765 930
Garden Apartments
St. Charles, MD
Huntington Apartments 7,762 350 8,513 1,492
Garden Apartments
St. Charles, MD
Crossland Apartments 2,209 350 2,697 247
Garden Apartments
St. Charles, MD
Terrace Apartments 5,100 497 5,377 455
Garden Apartments
St. Charles, MD
Lancaster Apartments 4,392 484 4,292 118
Garden Apartments
St. Charles, MD
Fox Chase Apartments 6,361 745 7,014 65
Garden Apartments
St. Charles, MD
New Forest Apartments 11,897 1,229 12,102 305
Garden Apartments
St. Charles, MD
42
INTERSTATE GENERAL COMPANY L.P.
SCHEDULE XI
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1995
INITIAL AND SUBSEQUENT COSTS AND ENCUMBRANCES (continued)
(In thousands)
Bldgs. &
Improve- Subsequent
Description Encumbrances Land ments Costs
- -------------------- ------------ -------- ----------- ----------
Coachman's Landing Apt. 5,912 572 6,421 (70)
Garden Apartments
St. Charles, MD
Chastleton Apartments 21,081 2,630 23,624 1,255
High Rise Apartments
Washington, D.C.
Essex Village Apts. 16,317 2,667 21,381 798
Garden Apartments
Richmond, VA
Alturas Del Senorial 3,316 345 4,185 105
Highrise Apts.
Rio Piedras, PR
Bayamon Gardens 9,621 1,153 12,050 90
Highrise/Garden Apts.
Bayamon, PR
De Diego 6,973 601 6,718 194
Highrise Apts.
Rio Piedras, PR
Monserrate II 11,275 731 11,172 175
Highrise Apts.
Carolina, PR
Santa Juana 7,312 509 6,748 100
Highrise Apts.
Caguas, PR
Torre De Las Cumbres 5,742 466 5,954 111
Highrise Apts.
Rio Piedras, PR
Colinas De San Juan 8,572 900 10,742 244
Highrise Apts.
Carolina, PR
Jardines De Caparra 5,139 546 5,719 1,000
Garden Apartments
Bayamon, PR
43
INTERSTATE GENERAL COMPANY L.P.
SCHEDULE XI
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1995
INITIAL AND SUBSEQUENT COSTS AND ENCUMBRANCES (continued)
(In thousands)
Bldgs. &
Improve- Subsequent
Description Encumbrances Land ments Costs
- -------------------- ------------ -------- ----------- ----------
Las Lomas 1,835 344 2,715 302
Highrise Apts.
Guaynabo, PR
Monacillos Park 4,399 473 5,720 928
Highrise Apts.
Guaynabo, PR
Monserrate I 2,565 543 10,436 136
Highrise Apts.
Carolina, PR
Monte De Oro 954 562 5,217 801
Highrise Apts.
Rio Piedras, PR
New Center 1,020 589 5,702 272
Highrise Apts.
San Juan, PR
Piedras Americas 4,086 550 5,474 507
Highrise Apts.
San Juan, PR
Rio Piedras 4,269 571 4,778 496
Highrise Apts.
San Juan, PR
San Anton 3,050 313 3,525 682
Highrise Apts.
Carolina, PR
Valle Del Sol 11,131 992 14,017 114
Highrise Apts.
Bayamon, PR
Vistas Del Turabo 2,035 354 2,508 465
Highrise Apts.
Caguas, PR
Office Condo 211 0 284 0
East Whitiland Township
Pennsylvania
44
INTERSTATE GENERAL COMPANY L.P.
SCHEDULE XI
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1995
INITIAL AND SUBSEQUENT COSTS AND ENCUMBRANCES (continued)
(In thousands)
Bldgs. &
Improve- Subsequent
Description Encumbrances Land ments Costs
- -------------------- ------------ -------- ----------- ----------
Fredericksburg, VA 190 158 95 5
Model Park 1 Model
Raleigh, NC 0 0 75 6
2 Models
----------- ---------- ----------- ----------
Total Properties $ 191,570 $ 21,628 $ 234,152 $ 13,301
=========== ========== =========== ==========
45
INTERSTATE GENERAL COMPANY L.P.
SCHEDULE XI
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1995
TOTAL CAPITALIZED COSTS AND ACCUMULATED DEPRECIATION
(In thousands)
Bldgs. & Accumulated
Description Land Improvements Total Depreciation
- -------------------- ---- ------------ ----- ------------
Bannister Apartments $ 410 $ 4,553 $ 4,963 $ 3,584
Garden Apartments
St. Charles, MD
Palmer Apartments 471 5,133 5,604 3,881
Garden Apartments
St. Charles, MD
Brookmont Apartments 162 2,886 3,048 2,220
Garden Apartments
St. Charles, MD
Brookside Gardens Apartments 156 2,533 2,689 109
Garden Shared Housing
St. Charles, MD
Headen Apartments 205 5,694 5,899 3,819
Garden Apartments
St. Charles, MD
Huntington Apartments 350 10,006 10,356 4,797
Garden Apartments
St. Charles, MD
Crossland Apartments 350 2,945 3,295 1,816
Garden Apartments
St. Charles, MD
Terrace Apartments 497 5,832 6,329 4,387
Garden Apartments
St. Charles, MD
Lancaster Apartments 484 4,410 4,894 1,182
Garden Apartments
St. Charles, MD
Fox Chase Apartments 745 7,078 7,823 1,574
Garden Apartments
St. Charles, MD
New Forest Apartments 1,229 12,407 13,636 2,358
Garden Apartments
St. Charles, MD
46
INTERSTATE GENERAL COMPANY L.P.
SCHEDULE XI
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1995
TOTAL CAPITALIZED COSTS AND ACCUMULATED DEPRECIATION (continued)
(In thousands)
Bldgs. & Accumulated
Description Land Improvements Total Depreciation
- -------------------- ---- ------------ ----- ------------
Coachman's Landing Apt. 572 6,351 6,923 1,036
Garden Apartments
St. Charles, MD
Chastleton Apartments 2,630 24,879 27,509 6,089
High Rise Apartments
Washington, D.C.
Essex Village Apts. 2,667 22,179 24,846 13,974
Garden Apartments
Richmond, VA
Alturas Del Senorial 345 4,290 4,635 1,759
Highrise Apts.
Rio Piedras, PR
Bayamon Gardens 1,153 12,141 13,294 4,441
Highrise/Garden Apts.
Bayamon, PR
De Diego 601 6,913 7,514 2,777
Highrise Apts.
Rio Piedras, PR
Monserrate II 731 11,347 12,078 4,548
Highrise Apts.
Carolina, PR
Santa Juana 509 6,848 7,357 2,763
Highrise Apts.
Caguas, PR
Torre De Las Cumbres 466 6,065 6,531 2,475
Highrise Apts.
Rio Piedras, PR
Colinas De San Juan 900 10,986 11,886 4,086
Highrise Apts.
Carolina, PR
Jardines De Caparra 546 6,719 7,265 2,704
Garden Apartments
Bayamon, PR
47
INTERSTATE GENERAL COMPANY L.P.
SCHEDULE XI
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1995
TOTAL CAPITALIZED COSTS AND ACCUMULATED DEPRECIATION (continued)
(In thousands)
Bldgs. & Accumulated
Description Land Improvements Total Depreciation
- -------------------- ---- ------------ ----- ------------
Las Lomas 344 3,016 3,360 1,695
Highrise Apts.
Guaynabo, PR
Monacillos Park 473 6,647 7,120 3,662
Highrise Apts.
Guaynabo, PR
Monserrate I 543 10,573 11,116 4,462
Highrise Apts.
Carolina, PR
Monte De Oro 562 6,019 6,581 2,775
Highrise Apts.
Rio Piedras, PR
New Center 589 5,974 6,563 2,711
Highrise Apts.
San Juan, PR
Piedras Americas 550 5,982 6,532 3,430
Highrise Apts.
San Juan, PR
Rio Piedras 571 5,274 5,845 4,208
Highrise Apts.
San Juan, PR
San Anton 313 4,207 4,520 1,973
Highrise Apts.
Carolina, PR
Valle Del Sol 992 14,131 15,123 4,544
Highrise Apts.
Bayamon, PR
Vistas Del Turabo 354 2,971 3,325 976
Highrise Apts.
Caguas, PR
Office Condo 0 284 284 50
East Whitiland Township
Pennsylvania
48
INTERSTATE GENERAL COMPANY L.P.
SCHEDULE XI
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1995
TOTAL CAPITALIZED COSTS AND ACCUMULATED DEPRECIATION (continued)
(In thousands)
Bldgs. & Accumulated
Description Land Improvements Total Depreciation
- -------------------- ---- ------------ ----- ------------
Fredericksburg, VA 158 100 258 19
Model Park 1 Model
Raleigh, NC 0 81 81 16
2 Models
---------- ----------- ----------- ----------
Total Properties $ 21,628 $ 247,454 $ 269,082 $ 106,900
========== =========== =========== ==========
NOTE TO TOTAL CAPITALIZED COSTS:
THE AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES
FOR U.S. AND P.R. PROPERTIES IS $231,092
49
INTERSTATE GENERAL COMPANY L.P.
SCHEDULE XI
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1995
DATE CONSTRUCTED OR ACQUIRED AND DEPRECIABLE LIVES
Date
Constructed
Description or Acquired Depreciable Life
- -------------------- ----------- ------------------
Bannister Apartments 11/30/76 Bldg - 40 Yrs
Garden Apartments Constructed Bldg Equip - 5 Yrs
St. Charles, MD
Palmer Apartments 3/31/80 Bldg - 40 Yrs
Garden Apartments Constructed Bldg Equip - 5 Yrs
St. Charles, MD
Brookmont Apartments 5/18/79 Bldg - 40 Yrs
Garden Apartments Constructed Bldg Equip - 5 Yrs
St. Charles, MD
Brookside Gardens Apartments 11/10/94 Bldg - 40 Yrs
Garden Shared Housing Constructed Bldg Equip - 5 Yrs
St. Charles, MD
Headen Apartments 10/30/80 Bldg - 40 Yrs
Garden Apartments Constructed Bldg Equip - 5 Yrs
St. Charles, MD
Huntington Apartments 10/7/80 Bldg - 40 Yrs
Garden Apartments Constructed Bldg Equip - 5 Yrs
St. Charles, MD
Crossland Apartments 1/13/78 Bldg - 40 Yrs
Garden Apartments Constructed Bldg Equip - 5 Yrs
St. Charles, MD
Terrace Apartments 11/1/79 Bldg - 40 Yrs
Garden Apartments Constructed Bldg Equip - 5 Yrs
St. Charles, MD
Lancaster Apartments 12/31/85 Bldg - 40 Yrs
Garden Apartments Constructed Bldg Equip - 5 Yrs
St. Charles, MD
Fox Chase Apartments 3/31/87 Bldg - 40 Yrs
Garden Apartments Constructed Bldg Equip - 5 Yrs
St. Charles, MD
New Forest Apartments 6/28/88 Bldg - 40 Yrs
Garden Apartments Constructed Bldg Equip - 5 Yrs
St. Charles, MD
50
INTERSTATE GENERAL COMPANY L.P.
SCHEDULE XI
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1995
DATE CONSTRUCTED OR ACQUIRED AND DEPRECIABLE LIVES (continued)
Date
Constructed
Description or Acquired Depreciable Life
- -------------------- ----------- ---------------------
Coachman's Landing Apt. 9/5/89 Bldg - 40 Yrs
Garden Apartments Constructed Bldg Equip - 5 Yrs
St. Charles, MD
Chastleton Apartments 11/7/86 Bldg - 40 Yrs
High Rise Apartments Constructed Bldg Equip - 5/10 Yrs
Washington, D.C.
Essex Village Apts. 1/31/82 Bldg - 40 Yrs
Garden Apartments Constructed Bldg Equip - 5 Yrs
Richmond, VA
Alturas Del Senorial 11/17/79 Bldg - 40 Yrs
Highrise Apts. Constructed Bldg Equip - 5 Yrs
Rio Piedras, PR
Bayamon Gardens 7/6/81 Bldg - 40 Yrs
Highrise/Garden Apts. Constructed Bldg Equip - 5 Yrs
Bayamon, PR
De Diego 3/20/80 Bldg - 40 Yrs
Highrise Apts. Constructed Bldg Equip - 5 Yrs
Rio Piedras, PR
Monserrate II 1/30/80 Bldg - 40 Yrs
Highrise Apts. Constructed Bldg Equip - 5 Yrs
Carolina, PR
Santa Juana 2/8/80 Bldg - 40 Yrs
Highrise Apts. Constructed Bldg Equip - 5 Yrs
Caguas, PR
Torre De Las Cumbres 12/6/79 Bldg - 40 Yrs
Highrise Apts. Constructed Bldg Equip - 5 Yrs
Rio Piedras, PR
Colinas De San Juan 3/20/81 Bldg - 40 Yrs
Highrise Apts. Constructed Bldg Equip - 5 Yrs
Carolina, PR
Jardines De Caparra 4/1/80 Bldg - 40 Yrs
Garden Apartments Constructed Bldg Equip - 5 Yrs
Bayamon, PR
51
INTERSTATE GENERAL COMPANY L.P.
SCHEDULE XI
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1995
DATE CONSTRUCTED OR ACQUIRED AND DEPRECIABLE LIVES (continued)
Date
Constructed
Description or Acquired Depreciable Life
- -------------------- ----------- ------------------
Las Lomas 4/5/74 Bldg - 40 Yrs
Highrise Apts. Constructed Bldg Equip - 5 Yrs
Guaynabo, PR
Monacillos Park 8/1/74 Bldg - 40 Yrs
Highrise Apts. Constructed Bldg Equip - 5 Yrs
Guaynabo, PR
Monserrate I 5/1/79 Bldg - 40 Yrs
Highrise Apts. Constructed Bldg Equip - 5 Yrs
Carolina, PR
Monte De Oro 12/1/77 Bldg - 40 Yrs
Highrise Apts. Constructed Bldg Equip - 5 Yrs
Rio Piedras, PR
New Center 3/15/78 Bldg - 40 Yrs
Highrise Apts. Constructed Bldg Equip - 5 Yrs
San Juan, PR
Piedras Americas 8/1/73 Bldg - 40 Yrs
Highrise Apts. Constructed Bldg Equip - 5 Yrs
San Juan, PR
Rio Piedras 9/1/72 Bldg - 40 Yrs
Highrise Apts. Constructed Bldg Equip - 5 Yrs
San Juan, PR
San Anton 12/10/74 Bldg - 40 Yrs
Highrise Apts. Acquired Bldg Equip - 5 Yrs
Carolina, PR
Valle Del Sol 3/15/83 Bldg - 40 Yrs
Highrise Apts. Constructed Bldg Equip - 5 Yrs
Bayamon, PR
Vistas Del Turabo 12/30/83 Bldg - 40 Yrs
Highrise Apts. Acquired Bldg Equip - 5 Yrs
Caguas, PR
Office Condo 5/14/90 31.5 Yrs
East Whitiland Township Acquired
Pennsylvania
52
INTERSTATE GENERAL COMPANY L.P.
SCHEDULE XI
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1995
DATE CONSTRUCTED OR ACQUIRED AND DEPRECIABLE LIVES (continued)
Date
Constructed
Description or Acquired Depreciable Life
- -------------------- ----------- ---------------------
Fredericksburg, VA 2/23/90 Bldg 5 - 40 Yrs
Model Park 1 Model Acquired
Raleigh, NC 2/23/90 Bldg 5 - 40 Yrs
Model Park 2 Models Acquired
53
INTERSTATE GENERAL COMPANY L.P.
SCHEDULE XI
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1995
(In thousands)
Real Estate at December 31, 1994 $ 271,344
Additions for 1995:
Improvements 1,999
-----------
Total Additions 1,999
-----------
Deductions for 1995:
Dispositions 917
Other 3,344
-----------
Total Deductions 4,261
-----------
Real Estate at December 31, 1995 $ 269,082
===========
54
INTERSTATE GENERAL COMPANY L.P.
SCHEDULE XI
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1995
(In thousands)
Accumulated depreciation at December 31, 1994 $ 86,572
Additions for 1995:
Depreciation expense 21,125
Deductions for 1995:
Dispositions (797)
-----------
Accumulated depreciation at December 31, 1995 $ 106,900
===========
55
SIGNATURES
----------
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
INTERSTATE GENERAL COMPANY L.P.
----------------------------------
By: Interstate General Management
Corporation
Managing General Partner
Dated: April 3, 1996 By: /s/ Gregory G. Kreizenbeck
--------------------- -----------------------------
Gregory G. Kreizenbeck
President and Chief Operating
Officer