SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _______________________ to ______________________
Commission file number 0-19123
FOGELMAN MORTGAGE L.P. I
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Tennessee 62-1317805
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
One Seaport Plaza, New York, New York 10292-0116
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 214-1016
Securities registered pursuant to Section 12(g) of the Act:
Depositary Units
- --------------------------------------------------------------------------------
Title of class
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (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 CK 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. [ CK ]
DOCUMENTS INCORPORATED BY REFERENCE
Amended and Restated Certificate and Agreement of Limited Partnership dated
November 12, 1986, included as part of the Registration Statement (File No.
33-8596) filed with the Securities and Exchange Commission on November 26, 1986
pursuant to Rule 424(b) under the Securities Act of 1933, as amended on December
24, 1992, is incorporated by reference into Parts II and IV of this Annual
Report on Form 10-K
Annual Report to Unitholders for the year ended December 31, 1996 is
incorporated by reference into Parts II and IV of this Annual Report on Form
10-K
Index to exhibits can be found on pages 9 through 11.
CAUTIONARY STATEMENT FOR PURPOSES OF
THE ``SAFE HARBOR'' PROVISIONS OF
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
When used in this Annual Report on Form 10-K, the words ``Believes,''
``Anticipates,'' ``Expects'' and similar expressions are intended to identify
forward-looking statements. Statements looking forward in time are included in
this Annual Report on Form 10-K pursuant to the ``Safe Harbor'' provision of the
Private Securities Litigation Reform Act of 1995. Such statements are subject to
certain risks and uncertainties which could cause actual results to differ
materially, including, but not limited to, those set forth in ``Management's
Discussion and Analysis of Financial Condition and Results of Operations.''
Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date hereof. The Registrant undertakes no
obligation to publicly revise these forward-looking statements to reflect events
or circumstances occurring after the date hereof or to reflect the occurrence of
unanticipated events.
2
FOGELMAN MORTGAGE L.P. I
(a limited partnership)
Table of Contents
PART I PAGE
Item 1 Business......................................................................... 4
Item 2 Properties....................................................................... 5
Item 3 Legal Proceedings................................................................ 5
Item 4 Submission of Matters to a Vote of Unitholders................................... 5
PART II
Item 5 Market for Registrant's Units and Related Unitholder Matters..................... 6
Item 6 Selected Financial Data.......................................................... 6
Item 7 Management's Discussion and Analysis of Financial Condition and Results of
Operations..................................................................... 6
Item 8 Financial Statements and Supplementary Data...................................... 7
Item 9 Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure..................................................................... 7
PART III
Item 10 Directors and Executive Officers of the Registrant............................... 7
Item 11 Executive Compensation........................................................... 8
Item 12 Security Ownership of Certain Beneficial Owners and Management................... 8
Item 13 Certain Relationships and Related Transactions................................... 8
PART IV
Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K
Financial Statements and Financial Statement Schedules........................... 9
Exhibits......................................................................... 9
Reports on Form 8-K.............................................................. 11
SIGNATURES................................................................................. 14
3
PART I
Item 1. Business
General
Fogelman Mortgage L.P. I (the ``Registrant''), a Tennessee limited
partnership, was formed on September 4, 1986 and will terminate on December 31,
2016 unless terminated sooner under the provisions of the Amended and Restated
Certificate and Agreement of Limited Partnership, as amended (the ``Partnership
Agreement''). The Registrant was formed to invest in mortgage loans with the
proceeds raised from the initial sale of 54,200 depositary units (``Units'').
The Registrant invested in two mortgage loans (the ``Mortgage Loans'') which
provided construction and permanent financing for the development of two
multi-family residential apartment complexes. The Registrant's fiscal year for
book and tax purposes ends on December 31.
The Registrant is engaged solely in the business of investing in mortgage
loans; therefore, presentation of industry segment information is not
applicable. For more information regarding the Registrant's operations, see Item
7 Management's Discussion and Analysis of Financial Condition and Results of
Operations.
General Partner
The general partner of the Registrant is Prudential-Bache Properties, Inc.
(``PBP'' or the ``General Partner'').
Mortgage Loans
The Registrant holds first mortgages on two properties, Pointe Royal
apartments and Westmont apartments (individually, a ``Property'' and
collectively, the ``Properties''). The Pointe Royal apartments were financed by
the ``Royal View Loan'' and the Westmont apartments were financed by the
``Chesterfield Loan.''
The Pointe Royal project, which secures the Royal View Loan, is located in
Overland Park, Kansas and is a townhouse apartment community consisting of 52
buildings on approximately 35 acres of land. As of December 31, 1996, the
monthly rents at the Pointe Royal project range from $590 to $905.
The Westmont project, which secures the Chesterfield Loan, is located in
Chesterfield, Missouri and is an apartment community consisting of 25 buildings
on approximately 58 acres of land. As of December 31, 1996, the monthly rents at
the Westmont project range from $595 to $820.
Information on
Underlying Properties
---------------------------------------
Original Interest Average
Amount of Rate on Average Monthly
Mortgage Mortgage Maturity Occupancy Rental Rental Units
Property Closing Date Loan Loan Date Rates Rates Available
- ---------------- ---------------- ----------- ------------ --------- --------- -------------- ------------
Pointe Royal
Overland Park,
Kansas April 23, 1987 $22,745,000 9.5% 1999 98.0% $774 437
Westmont
Chesterfield,
Missouri July 8, 1987 23,320,000 9.5 1999 96.2 680 489
- ---------------
Average occupancy and rental rates are for the twelve months ended December 31, 1996.
The interest pay rate has been modified and is equal to the net property cash
flow generated by the respective Properties payable monthly (7.7% for 1996),
with the difference between the amount actually paid and the original pay rate
of 9.5% per annum being accounted for in a separate account for each Property,
which itself bears interest at 9.5% per annum (``Unpaid Interest''). The
Mortgage Loans require
4
current payments of interest only with balloon payments of the entire principal
and Unpaid Interest amounts due from sale or refinancing proceeds or upon
maturity. The ultimate collectibility of the Unpaid Interest as well as the full
principal of the Mortgage Loans will depend upon the value of the underlying
properties which are currently estimated, based on third party appraisals, to be
less than the amounts due. However, the estimated property values exceed the
Registrant's carrying amount of the Mortgage Loans. A full appraisal for both
properties was obtained in 1996. The values of Pointe Royal and Westmont
estimated in the appraisal reports were $25,500,000 and $26,000,000,
respectively, as of March 5 and March 7, 1996, respectively.
Following is the interest received from each of the Registrant's Mortgage
Loans as a percentage of total interest received and the equity income on the
underlying properties as a percentage of total equity income:
Interest Received Equity Income
---------------------- ----------------------
1996 1995 1994 1996 1995 1994
---- ---- ---- ---- ---- ----
Pointe Royal 43.2% 49.4% 36.7% 44.3% 46.8% 41.2%
Westmont 56.8% 50.6% 63.3% 55.7% 53.2% 58.8%
For summary financial statements of the underlying properties, see Note F to
the financial statements in the Registrant's Annual Report to Unitholders for
the year ended December 31, 1996 (``Registrant's Annual Report'') which is filed
as an exhibit hereto.
Competition
The General Partner has formed various entities to engage in businesses which
may be competitive with the Registrant. Both of the Properties collateralizing
the Mortgage Loans are located in markets where the property manager manages
other apartment complexes.
The Registrant's business is affected by competition to the extent that the
underlying properties from which it derives interest payments are subject to
competition from neighboring properties. The Westmont apartments are located in
the St. Louis metropolitan area and the Pointe Royal apartments are located in
the Kansas City metropolitan area. The Properties' occupancy and rental rates
are comparable to their competitors. There are new complexes under construction
with expected completion during 1997 and 1998 that could become future
competitors in Pointe Royal's market.
Employees
The Registrant has no employees. Management and administrative services for
the Registrant are performed by the General Partner and its affiliates pursuant
to the Partnership Agreement. The General Partner receives compensation and
reimbursement of expenses in connection with such activities as described in
Sections 9 and 10 of the Partnership Agreement. See Note E to the financial
statements in the Registrant's Annual Report which is filed as an exhibit
hereto.
Item 2. Properties
The Registrant does not own or lease any property.
Item 3. Legal Proceedings
None
Item 4. Submission of Matters to a Vote of Unitholders
None
5
PART II
Item 5. Market for Registrant's Units and Related Unitholder Matters
As of March 3, 1997 there were 5,202 holders of record owning 54,200 Units. A
significant secondary market for the Units has not developed and it is not
expected that one will develop in the future. There are also certain
restrictions set forth in the Partnership Agreement limiting the ability of a
Unitholder to transfer Units. Consequently, holders of Units may not be able to
liquidate their investments in the event of an emergency or for any other
reason.
The following per Unit cash distributions were paid to Unitholders during the
following calendar quarters.
Quarter Ended 1996 1995
- ------------------- ------- -------
March 31 $15.00 $13.75
June 30 15.63 13.75
September 30 15.63 15.00
December 31 15.63 15.00
There are no material legal restrictions upon the Registrant's present or
future ability to make distributions in accordance with the provisions of the
Partnership Agreement. Cash distributions paid in 1996 were funded from current
and prior undistributed cash flow from operations. Approximately $1,291,000 and
$1,434,000 of the distributions paid to Unitholders during 1996 and 1995,
respectively, represent a return of capital on a generally accepted accounting
principles (GAAP) basis. The return of capital on a GAAP basis is calculated as
Unitholder distributions less net income allocated to Unitholders. The
Registrant currently expects that cash distributions will continue to be paid in
the foreseeable future from cash generated by operations, which may be
supplemented by previously undistributed cash from operations. For a discussion
of other factors that may affect future distributions, see Management's
Discussion and Analysis of Financial Condition and Results of Operations on
pages 10 through 11 of the Registrant's Annual Report which is filed as an
exhibit hereto.
Item 6. Selected Financial Data
The following table presents selected financial data of the Registrant. This
data should be read in conjunction with the financial statements of the
Registrant and the notes thereto on pages 2 through 9 of the Registrant's Annual
Report which is filed as an exhibit hereto.
Year ended December 31,
-------------------------------------------------------------------
1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- -----------
Equity income from the
underlying properties $ 2,577,797 $ 2,166,858 $ 2,267,243 $ 2,082,554 $ 1,851,372
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Legal settlement $ -- $ -- $ -- $ -- $(2,152,000)
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Net income (loss) $ 2,314,871 $ 1,929,656 $ 1,997,698 $ 1,773,686 $ (685,682)
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Net income (loss) per Unit $ 38.08 $ 31.04 $ 32.28 $ 28.19 $ (16.73)
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Total assets $28,321,329 $29,783,810 $31,191,034 $32,349,343 $33,668,524
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Total Unitholder
distributions $ 3,354,437 $ 3,116,500 $ 2,981,000 $ 2,879,387 $ 2,511,505
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Unitholder
distributions per Unit $ 61.89 $ 57.50 $ 55.00 $ 53.13 $ 46.34
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This information is incorporated by reference to pages 10 and 11 of the
Registrant's Annual Report which is filed as an exhibit hereto.
6
Item 8. Financial Statements and Supplementary Data
The financial statements are incorporated by reference to pages 2 through 9
of the Registrant's Annual Report which is filed as an exhibit hereto.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Reference is made to the Registrant's Current Report on Form 8-K dated May
14, 1996, as filed with the Securities and Exchange Commission on May 16, 1996
regarding the change in the Registrant's certifying accountant from Deloitte &
Touche LLP to Price Waterhouse LLP.
PART III
Item 10. Directors and Executive Officers of the Registrant
There are no directors or executive officers of the Registrant. The
Registrant is managed by the General Partner.
The Registrant, the Registrant's General Partner and its directors and
executive officers, and any persons holding more than ten percent of the
Registrant's Units are required to report their initial ownership of such Units
and any subsequent changes in that ownership to the Securities and Exchange
Commission on Forms 3, 4 and 5. Such executive officers, directors and
Unitholders who own greater than ten percent of the Registrant's Units are
required by Securities and Exchange Commission regulations to furnish the
Registrant with copies of all Forms 3, 4 or 5 they file. All of these filing
requirements were satisfied on a timely basis. In making these disclosures, the
Registrant has relied solely on written representations of the General Partner's
directors and executive officers and Unitholders who own greater than ten
percent of the Registrant's Units or copies of the reports they have filed with
the Securities and Exchange Commission during and with respect to its most
recent fiscal year.
The directors and executive officers of PBP and their positions with regard
to managing the Registrant are as follows:
Name Position
Thomas F. Lynch, III President, Chief Executive Officer,
Chairman of the Board of Directors
and Director
Barbara J. Brooks Vice President--Finance and Chief
Financial Officer
Eugene D. Burak Vice President and Chief Accounting Officer
Chester A. Piskorowski Senior Vice President
Frank W. Giordano Director
Nathalie P. Maio Director
THOMAS F. LYNCH, III, age 38, is the President, Chief Executive Officer,
Chairman of the Board of Directors and a Director of PBP. He is a Senior Vice
President of Prudential Securities Incorporated (``PSI''), an affiliate of PBP.
Mr. Lynch also serves in various capacities for other affiliated companies. Mr.
Lynch joined PSI in November 1989.
BARBARA J. BROOKS, age 48, is the Vice President--Finance and Chief Financial
Officer of PBP. She is a Senior Vice President of PSI. Ms. Brooks also serves in
various capacities for other affiliated companies. She has held several
positions within PSI since 1983. Ms. Brooks is a certified public accountant.
EUGENE D. BURAK, age 51, is a Vice President of PBP. He is a First Vice
President of PSI. Prior to joining PSI in September 1995, he was a management
consultant for three years and was with Equitable Capital Management Corporation
from March 1990 to May 1992. Mr. Burak is a certified public accountant.
CHESTER A. PISKOROWSKI, age 53, is a Senior Vice President of PBP. He is a
Senior Vice President of PSI and is the Senior Manager of the Specialty Finance
Asset Management area. Mr. Piskorowski has held
7
several positions within PSI since April 1972. Mr. Piskorowski is a member of
the New York and Federal Bars.
FRANK W. GIORDANO, age 54, is a Director of PBP. He is a Senior Vice
President of PSI and an Executive Vice President and General Counsel of
Prudential Mutual Fund Management LLC, an affiliate of PSI. Mr. Giordano also
serves in various capacities for other affiliated companies. He has been with
PSI since July 1967.
NATHALIE P. MAIO, age 46, is a Director of PBP. She is a Senior Vice
President and Deputy General Counsel of PSI and supervises non-litigation legal
work for PSI. She joined PSI's Law Department in 1983; presently, she also
serves in various capacities for other affiliated companies.
There are no family relationships among any of the foregoing directors or
officers. All of the foregoing officers and/or directors have indefinite terms.
Item 11. Executive Compensation
The Registrant does not pay or accrue any fees, salaries or any other form of
compensation to directors and officers of the General Partner for their
services. Certain officers and directors of the General Partner receive
compensation from affiliates of the General Partner, not from the Registrant,
for services performed for various affiliated entities, which may include
services performed for the Registrant; however, the General Partner believes
that any compensation attributable to services performed for the Registrant is
immaterial. See Item 13 Certain Relationships and Related Transactions for
information regarding reimbursement to the General Partners for services
provided to the Registrant.
Item 12. Security Ownership of Certain Beneficial Owners and Management
As of March 3, 1997, no director or officer of the General Partner owns
directly or beneficially any interest in the voting securities of the General
Partner.
As of March 3, 1997, no director or officer of the General Partner owns
directly or beneficially any of the Units issued by the Registrant.
As of March 3, 1997, no beneficial owners who are neither a director nor
officer of the General Partner beneficially own more than five percent (5%) of
the Units issued by the Registrant.
Item 13. Certain Relationships and Related Transactions
The Registrant has and will continue to have certain relationships with the
General Partner and its affiliates. However, there have been no direct financial
transactions between the Registrant and the directors or officers of the General
Partner.
Reference is made to Notes A and E to the financial statements in the
Registrant's Annual Report which is filed as an exhibit hereto, which identify
the related parties and discuss the services provided by these parties and the
amounts paid or payable for their services.
8
PART IV
Page in
Annual Report
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. Financial Statements and Reports of Independent Accountants--Incorporated
by reference to the Registrant's Annual Report which is filed as an exhibit
hereto
Reports of Independent Accountants:
2
Report of Independent Accountants as of December 31, 1996 and for the year
then ended
2A
Independent Auditors' Report as of December 31, 1995 and for the years
ended December 31, 1995 and 1994
Financial Statements:
3
Statements of Financial Condition--December 31, 1996 and 1995
4
Statements of Operations--Three years ended December 31, 1996
4
Statements of Changes in Partners' Capital--Three years ended
December 31, 1996
5
Statements of Cash Flows--Three years ended December 31, 1996
6
Notes to Financial Statements
2. Financial Statement Schedule and Report of Independent Accountants
Report of Independent Accountants on Financial Statement Schedule
Schedule:
IV--Mortgage Loans on Real Estate--December 31, 1996
Separate Financial Statements for Pointe Royal Project and Westmont Project
Financial Statements:
Independent Auditors' Report
Statements of Assets and Liabilities--December 31, 1996 and 1995
Statements of Revenues and Expenses--Three years ended December 31, 1996
Statements of Cash Flows--Three years ended December 31, 1996
Notes to Financial Statements
All other schedules have been omitted because they are not applicable or
the required information is included in the financial statements or notes
thereto.
3. Exhibits
Description:
3.1 Amended and Restated Certificate and Agreement of Limited Partnership dated
November 12, 1986 (incorporated by reference to Registration Statement No.
33-8596 filed November 26, 1986)
3.2 Second Amendment to Amended and Restated Certificate and Agreement of
Limited Partnership dated December 24, 1992 (incorporated by reference to
the Registrant's Annual Report on Form 10-K for the year ended December 31,
1992)
9
10.1 Loan Agreement, as amended, dated July 7, 1987, between FPI Royal View,
Ltd., L.P. and the Registrant (incorporated by reference to the Registrant's
Current Report on Form 8-K filed July 8, 1987)
10.2 Loan Agreement dated July 7, 1987, between FPI Chesterfield, L.P. and the
Registrant (incorporated by reference to the Registrant's Current Report on
Form 8-K filed July 8, 1987)
10.3 Promissory Note Modification Agreement dated April 23, 1987 between FPI
Royal View, Ltd., L.P., The Merchants Bank and the Registrant (incorporated
by reference to the Registrant's Current Report on Form 8-K filed April 23,
1987)
10.4 Promissory Note Modification Agreement dated as of January 1, 1990 between
FPI Chesterfield, L.P. and the Registrant (incorporated by reference to the
Registrant's Report on Form 8-K dated January 16, 1991)
10.5 Amendment to Loan Agreement dated as of January 1, 1990 between the
Registrant and FPI Chesterfield, L.P. (incorporated by reference to the
Registrant's Current Report on Form 8-K dated January 16, 1991)
10.6 Second Amendment to Loan Agreement between the Registrant and FPI Royal
View, Ltd., L.P. (incorporated by reference to the Registrant's Current
Report on Form 8-K dated January 16, 1991)
10.7 First Amendment to Deed of Trust, Assignment of Rents and Leases and
Security Agreement dated as of January 1, 1990 between FPI Chesterfield,
L.P. and the Registrant (incorporated by reference to the Registrant's
Current Report on Form 8-K dated January 16, 1991)
10.8 Second Promissory Note Modification Agreement dated as of January 1, 1990
between FPI Royal View, Ltd., L.P. and the Registrant (incorporated by
reference to the Registrant's Current Report on Form 8-K dated January 16,
1991)
10.9 First Amendment to Mortgage and Security Agreement Modification Agreement
dated as of January 1, 1990 between FPI Royal View Ltd., L.P. and the
Registrant (incorporated by reference to the Registrant's Current Report on
Form 8-K dated January 16, 1991)
10.10 Guaranty dated as of July 8, 1987 by Avron B. Fogelman (``ABF'') in favor of
the Registrant with respect to the indebtedness of FPI Chesterfield, L.P.
(incorporated by reference to the Registrant's Current Report on Form 8-K
dated January 16, 1991)
10.11 Guaranty dated as of April 23, 1987 by ABF in favor of the Registrant with
respect to the indebtedness of FPI Royal View Ltd., L.P. (incorporated by
reference to the Registrant's Current Report on Form 8-K dated January 16,
1991)
10.12 Assignment of Partnership Interest by Fogelman Assignor L.P., Inc. to
Prudential-Bache Investor Services II, Inc. dated December 14, 1992
(incorporated by reference to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1992)
10.13 Assignment of Partnership Interest by Fogelman Mortgage Partners I, Inc. to
Prudential-Bache Properties, Inc. dated December 14, 1992 (incorporated by
reference to the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1992)
10.14 Assignment of Partnership Interest by ABF to Prudential-Bache Properties,
Inc. dated December 14, 1992 (incorporated by reference to the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1992)
10
10.15 Second Amendment to Loan Agreement dated as of December 24, 1992 between the
Registrant and FPI Chesterfield, L.P. (incorporated by reference to the
Registrant's Annual Report on Form 10-K for the year ended December 31,
1992)
10.16 Release, Discharge and Cancellation of Guaranty between the Registrant and
Avron B. Fogelman dated December 24, 1992 (incorporated by reference to the
Registrant's Annual Report on Form 10-K for the year ended December 31,
1992)
10.17 Third Amendment to Loan Agreement dated December 24, 1992 between the Regis-
trant and FPI Royal View, Ltd., L.P. (incorporated by reference to the
Registrant's Annual Report on Form 10-K for the year ended December 31,
1992)
13.1 Registrant's Annual Report to Unitholders for the year ended December 31,
1996 (with the exception of the information and data incorporated by
reference in Items 7 and 8 of this Annual Report on Form 10-K, no other
information or data appearing in the Registrant's Annual Report is to be
deemed filed as part of this report)
16.1 Letter dated May 15, 1996 from Deloitte & Touche LLP to the Securities and
Exchange Commission regarding change in certifying accountant (incorporated
by reference to Exhibit 16.1 to the Registrant's Current Report on Form 8-K
dated May 14, 1996)
19.1 First Amendment to Amended and Restated Certificate and Agreement of Limited
Partnership dated December 31, 1991 (incorporated by reference to the
Registrant's Annual Report on Form 10-K for the year ended December 31,
1992)
19.2 Amended Stipulation of Settlement dated February 25, 1992 (incorporated by
reference to the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1992)
27 Financial Data Schedule (filed herewith)
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of the period covered by
this report.
11
Report of Independent Accountants on
Financial Statement Schedule
To the Unitholders and General Partner of Fogelman Mortgage L.P. I
Our audit of the financial statements referred to in our report dated February
2, 1997 appearing in the 1996 Annual Report to Unitholders of Fogelman Mortgage
L.P. I (which report and financial statements are incorporated by reference in
this Annual Report on Form 10-K) also included an audit of the Financial
Statement Schedule listed in Item 14(a) of this Form 10-K. In our opinion, this
Financial Statement Schedule presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
financial statements.
/s/ Price Waterhouse LLP
New York, New York
February 2, 1997
12
FOGELMAN MORTGAGE L.P. I
Schedule IV--Mortgage Loans On Real Estate
December 31, 1996
MORTGAGE LOANS ON REAL ESTATE
- --------------------------------------------------------------------------------------------------------------
Periodic
Final maturity payment Face amount of
Description Interest rate date terms Prior liens mortgage
- --------------------------------------------------------------------------------------------------------------
Royal View
First Mortgage Loan (A) 9.5%(C) 1999 (C) None $22,745,000
Chesterfield
First Mortgage Loan (B) 9.5%(C) 1999 (C) None 23,320,000
---------------
$46,065,000
---------------
---------------
Carrying amount of
Description mortgage (D)
- --------------------------------------------------------------
Royal View
First Mortgage Loan (A) $ 13,237,616
Chesterfield
First Mortgage Loan (B) 12,886,339
------------------
$ 26,123,955
------------------
------------------
(A) Multi-family residential apartment complex - Overland Park, Kansas
(B) Multi-family residential apartment complex - Chesterfield, Missouri
(C) The interest pay rate has been modified and is equal to the net property
cash flow generated by the respective Properties payable monthly (7.7% for
1996), with the difference between the amount actually paid and the original
pay rate of 9.5% per annum being accounted for in a separate account for
each Property, which itself bears interest at 9.5% per annum. The Mortgage
Loans require current payments of interest only with balloon payments of the
entire principal and Unpaid Interest amounts due from sale or refinancing
proceeds or upon maturity (the twelfth anniversary of the respective loan
closing dates). The Mortgage Loans may be prepaid in whole, but not in part,
upon the payment of a prepayment penalty equal to 5% of the outstanding
principal balance. Any such prepayment penalty will be in addition to any
contingent interest. The penalty decreases 1% per year after the sixth year.
There will be no prepayment penalty imposed in the eleventh or twelfth year.
(D) See Note C to the financial statements in the Registrant's Annual Report
which is filed as an exhibit hereto. No principal amount of the loans is
subject to delinquent interest because the loans have been modified to a
cash flow basis.
13
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Fogelman Mortgage L.P. I
By: Prudential-Bache Properties, Inc.
A Delaware corporation, General Partner
By: /s/ Eugene D. Burak Date: March 27, 1997
----------------------------------------
Eugene D. Burak
Vice President and Chief Accounting
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities (with respect to the General Partner) and on
the dates indicated.
By: Prudential-Bache Properties, Inc.
A Delaware corporation, General Partner
By: /s/ Thomas F. Lynch, III Date: March 27, 1997
----------------------------------------
Thomas F. Lynch, III
President, Chief Executive Officer,
Chairman of the Board of Directors and
Director
By: /s/ Barbara J. Brooks Date: March 27, 1997
----------------------------------------
Barbara J. Brooks
Vice President-Finance and Chief
Financial Officer
By: /s/ Eugene D. Burak Date: March 27, 1997
----------------------------------------
Eugene D. Burak
Vice President
By: /s/ Frank W. Giordano Date: March 27, 1997
----------------------------------------
Frank W. Giordano
Director
By: /s/ Nathalie P. Maio Date: March 27, 1997
----------------------------------------
Nathalie P. Maio
Director
14
Audited Financial Statements
Pointe Royal Project
Years ended December 31, 1996, 1995, and 1994
with Report of Independent Auditors
Pointe Royal Project
Audited Financial Statements
Years ended December 31, 1996, 1995, and 1994
Contents
Report of Independent Auditors 1
Audited Financial Statements
Statements of Assets, Liabilities and Project Deficit 2
Statements of Revenues and Expenses and Changes in Project Deficit 3
Statements of Cash Flows 4
Notes to Financial Statements 5
Report of Independent Auditors
To the Partners of
FPI Royal View, Ltd., L.P.
We have audited the accompanying statements of assets, liabilities and
project deficit of the Pointe Royal Project (the Project) as of December
31, 1996 and 1995, and the related statements of revenues and
expenses and changes in project deficit and cash flows for each of the three
years in the period ended December 31, 1996. These financial
statements are the responsibility of the Project's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about
whether the 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 financial statements referred to above present
fairly, in all material respects, the financial position of the
Project at December 31, 1996 and 1995, and the results of its
operations and its cash flows for each of the three years in the
period ended December 31, 1996 in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
Memphis, Tennessee
January 30, 1997
1
Pointe Royal Project
Statements of Assets, Liabilities and
Project Deficit
December 31
----------------------------
1996 1995
Assets
Property, at cost $23,288,629 $22,956,563
Less accumulated depreciation (7,065,474) (6,339,063)
----------------------------
16,223,155 16,617,500
Restricted funds and escrows 157,191 164,401
Cash 3,400 86,257
---------------------------
Total assets $16,383,746 $16,868,158
---------------------------
---------------------------
Liabilities and Project Deficit
Mortgage notes payable $23,808,000 $23,808,000
Due to FPI Royal View, Ltd., L.P. and
related entities 1,183,763 1,232,432
Accrued interest payable 4,235,079 3,171,596
Accrued real estate taxes 177,100 178,861
Security deposits 64,890 73,080
Other accrued expenses 64,043 35,335
---------------------------
Total liabilities 29,532,875 28,499,304
Project deficit (13,149,129) (11,631,146)
---------------------------
Total liabilities and project deficit $16,383,746 $16,868,158
---------------------------
---------------------------
See accompanying notes.
2
Pointe Royal Project
Statements of Revenues and Expenses and
Changes in Project Deficit
Year ended December 31
-----------------------------------------------
1996 1995 1994
-----------------------------------------------
Revenues
Rental income $ 3,771,718 $ 3,615,886 $ 3,453,259
Interest and other income 165,052 137,665 89,045
-----------------------------------------------
3,936,770 3,753,551 3,542,304
Expenses
Operating expenses 2,064,220 1,686,854 1,823,285
Interest 2,600,663 2,524,077 2,398,463
Depreciation 745,929 749,890 837,046
Loss on disposal of property 43,941 354,386 --
-----------------------------------------------
5,454,753 5,315,207 5,058,794
-----------------------------------------------
Expenses in excess of revenues (1,517,983) (1,561,656) (1,516,490)
Project deficit at beginning of year (11,631,146) (10,069,490) (8,553,000)
-----------------------------------------------
Project deficit at end of year $(13,149,129) $(11,631,146) $(10,069,490)
-----------------------------------------------
-----------------------------------------------
See accompanying note.
3
Pointe Royal Project
Statements of Cash Flows
Year ended December 31
-----------------------------------------------
1996 1995 1994
-----------------------------------------------
Operating activities
Expenses in excess of revenues $(1,517,983) $(1,561,656) $(1,516,490)
Adjustments to reconcile expenses
in excess of revenues to net cash
provided by operating activities:
Depreciation 745,929 749,890 837,046
Loss on disposal of property 43,941 354,386 --
Decrease (increase) in restricted
funds and escrows 7,210 10,188 (51,786)
(Decrease) increase in Due to
FPI Royal View, Ltd., L.P. and
related entities (48,669) 13,077 (9,062)
Increase in accrued interest
payable 1,063,483 766,521 1,301,836
(Decrease) increase in accrued
real estate taxes (1,761) 35,308 (7)
(Decrease) increase in
security deposits (8,190) (20,781) 2,381
Increase (decrease) in
other accrued expenses 28,708 (92,223) 77,331
-----------------------------------------------
Net cash provided by operating
activities 312,668 254,710 641,249
Investing activities
Property additions (395,525) (340,910) (481,971)
-----------------------------------------------
Net (decrease) increase in cash (82,857) (86,200) 159,278
Cash at beginning of year 86,257 172,457 13,179
-----------------------------------------------
Cash at end of year $ 3,400 $ 86,257 $ 172,457
-----------------------------------------------
-----------------------------------------------
See accompanying notes.
4
Pointe Royal Project
Notes to Financial Statements
December 31, 1996
1. Project Description
The Pointe Royal Project (the Project) is a 437 unit residential
rental property on 34.74 acres in Overland Park, Kansas. The Project,
which is not a separate legal entity, is owned by FPI Royal View,
Ltd., L.P. (the Partnership), a Kansas limited partnership.
Avron B. Fogelman and Fogelman Enterprises, L.P. (FELP), which
is directly and indirectly owned by Avron B. Fogelman, are general
partners of the Partnership. FELP is also the sole limited partner.
Through December 24, 1992, Avron B. Fogelman was also
a general partner of Fogelman Mortgage L.P. I (FMLP) which holds
the first mortgage note on the Project's property (see Note 4).
However, as of December 24, 1992, pursuant
to settlement of certain claims brought by investors in FMLP,
Mr. Fogelman and an affiliated entity withdrew as general
partners from FMLP (see Note 4).
Units are leased under short-term operating leases with monthly
rentals due in advance. The Project, existing and future leases,
and rents have been assigned as collateral for the
related mortgage notes (see Note 4).
2. Summary of Significant Accounting Policies
Basis of Reporting
The accompanying financial statements are prepared on the accrual
basis of accounting and represent the cumulative operations of
the Project beginning with the inception of the
FMLP loan agreement on April 23, 1987 (see Note 4).
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 amounts reported in the financial
statements and accompanying notes. Actual results
could differ from those estimates.
Statements of Cash Flows
The Project made payments of $1,537,180, $1,757,556, and $1,096,627,
for interest during the years ended December 31, 1996, 1995, and
1994, respectively.
5
Pointe Royal Project
Notes to Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
Restricted Funds and Escrows
Included in restricted funds and escrows are security deposits
and real estate tax escrow deposits.
Income Taxes
No income taxes are paid by the Project or the Partnership since
the results of operations are allocated directly to the partners
of the Partnership. Any income tax liability or
benefit resulting therefrom is the responsibility of the partners
rather than the Partnership or the Project.
Accounting Pronouncements
In March 1995, the Financial Accounting Standards Board (FASB)
issued Statement No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of, which requires
impairment losses to be recorded on long-lived assets
used in operations when indicators of impairment are present and
the undiscounted cash flows estimated to be generated by those
assets are less than the assets' carrying amount.
Statement 121 also addresses the accounting for long-lived assets
that are expected to be disposed of. The Project adopted Statement
121 during 1996, with no effect on its financial statements.
3. Property
Property is stated at cost. Depreciation is provided for financial
statement reporting purposes using the straight-line method over
estimated useful lives as follows:
Useful Cost at December 31
Life 1996 1995
---------------------------------------------------
Land N/A $ 3,496,000 $ 3,496,000
Buildings 30 years 16,537,712 16,401,018
Land improvements 15 years 1,618,401 1,618,401
Furniture and fixtures 5-7 years 1,636,516 1,441,144
--------------------------------------
$23,288,629 $22,956,563
--------------------------------------
--------------------------------------
6
Pointe Royal Project
Notes to Financial Statements (continued)
3. Property (continued)
Construction period interest incurred during Project development amounted to
$1,347,428 and has been capitalized as a component of property costs.
4. Mortgage Notes Payable
The Project is financed with nonrecourse mortgage notes payable
consisting of the following at December 31, 1996 and 1995:
1996 1996
---------------------------------------------------
Accrued Accrued
Interest Interest
Principal Payable Principal Payable
---------------------------------------------------
First mortgage note payable to
FMLP $22,745,000 $3,717,722 $22,745,000 $2,807,878
Second mortgage note payable to
Avron B. Fogelman 1,063,000 517,357 1,063,000 363,718
---------------------------------------------------
$23,808,000 $4,235,079 $23,808,000 $3,171,596
The first mortgage note was amended effective January 1, 1990 pursuant to a
consensual reorganization of the business affairs of Avron B.
Fogelman and related entities. The note, as amended, bears
interest at the basic interest rate of 9.50% per annum and is
payable monthly with the principal balance due April 23,
1999. If Property Cash Flow, as defined, is insufficient
to pay the basic interest, then the interest paid shall
be equal to the Property Cash Flow. Such insufficiency
between basic interest at 9.50% and Property
Cash Flow is accrued and bears interest at 9.50%,
compounded monthly. If Property Cash Flow exceeds
the basic interest, then the excess shall be applied
against any unpaid accrued interest until all such
accrued interest has been paid. Thereafter, any excess
Property Cash Flow shall be paid to FMLP to be
held in escrow as additional collateral for future
interest obligations. If Property Cash Flow exceeds
the basic interest for six consecutive months after
payment of all accrued basic interest, then cash held as
additional collateral shall be paid as contingent
interest as provided under the original
terms of the first mortgage note.
7
Pointe Royal Project
Notes to Financial Statements (continued)
4. Mortgage Notes Payable (continued)
Contingent interest is payable from any Property Cash Flow,
sale or refinancing proceeds received after January 1, 1989
as follows: (a) 75% thereof until the total interest (basic
interest plus contingent interest) paid results in a 10.75%
yield on the note; (b) 50% of the remaining balance until
the total interest paid results in a 12.75% yield on the note;
and (c) 25% of the remaining balance thereof.
Under the first mortgage note agreement, effective January
1, 1994, the principal may be repaid in whole, but not in part,
upon the payment of a prepayment penalty equal to 5%
of the outstanding principal balance. Thereafter, prepayment
penalties decline 1% annually.
During 1992, Mr. Fogelman, FMLP and other defendants settled
litigation with certain investors in FMLP, the holder of
the Project's first mortgage note. Pursuant thereto,
funds placed by Mr. Fogelman in trust to satisfy his
guarantee related to the mortgage note were released
to FMLP and applied as payment of accrued basic interest. Mr.
Fogelman was then released from his guarantee on the
note and Mr. Fogelman and an affiliated entity withdrew
as general partners from FMLP. Accordingly, the first
mortgage note payable to FMLP is solely a nonrecourse
note collateralized by the Project.
In accordance with the transfer of funds to FMLP discussed
in the preceding paragraph, the Project recorded a second
mortgage note payable to Mr. Fogelman in the amount of
$1,063,000 which was the amount of funds transferred to
FMLP. The note bears interest at the prime rate plus
2%, adjustable monthly (10.5% at December 31, 1996 and 1995),
and the principal and accrued interest mature April
23, 1999. The note and interest thereon are subordinate
to the first mortgage note and related interest payable to FMLP
discussed above. The note may be prepaid, subject to the
subordination provisions above, at any time without penalty.
5. Related Party Transactions
Fogelman Management Co. (FMC), which is owned by Mr.
Fogelman, manages the Project and charges management
fees equal to 5% of gross operating revenues, as
defined in the management agreement. Management fees
paid by the Project, were approximately $196,000,
$188,000 and $177,000 for 1996, 1995, and 1994, respectively.
8
Pointe Royal Project
Notes to Financial Statements (continued)
5. Related Party Transactions (continued)
FMC obtains insurance coverage for all properties it
manages and allocates the related costs proportionately
among the properties. Some of the insurance policies covering the
Project are placed by a former affiliate of FMC.
Commissions are earned by the former affiliate as agent.
The insurance agency was sold by Mr. Fogelman on December 27, 1995.
6. Fair Values of Financial Instruments
The following methods and assumptions were used by the Project's
management in estimating fair value disclosures for financial instruments:
The carrying amounts reported in the balance sheet for restricted
funds and escrows, Due to FPI Royal View, Ltd., L. P. and
related entities, and other accrued expenses approximate fair value.
Management of the Project has determined that it is not practicable
to estimate the fair value of the first mortgage note payable to
FMLP. Due to the unique nature of the repayment structure of
this note and related accrued interest payable, any estimate of fair
value would be very subjective due to lack of reasonable estimates
of future principal and interest payments, and the related timing
of those payments. In addition, management of the Project has
determined that it is not practicable to estimate the fair value of the
second mortgage note payable to Mr. Fogelman since the obligation
is subordinate to the first mortgage note (see Note 4).
9
Audited Financial Statements
Westmont Project
Years ended December 31, 1996, 1995, and 1994
with Report of Independent Auditors
Westmont Project
Audited Financial Statements
Years ended December 31, 1996, 1995, and 1994
Contents
Report of Independent Auditors 1
Audited Financial Statements
Statements of Assets, Liabilities and Project Deficit 2
Statements of Revenues and Expenses and Changes in Project Deficit 3
Statements of Cash Flows 4
Notes to Financial Statements 5
Report of Independent Auditors
To the Partners of
Westmont Project
We have audited the accompanying statements of assets,
liabilities and project deficit of the Westmont Project
(the Project) as of December 31, 1996 and 1995, and the
related statements of revenues and expenses and changes
in project deficit and cash flows for each of the three years
in the period ended December 31, 1996. These financial
statements are the responsibility of the Project's
management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require
that we plan and perform the audit to obtain reasonable
assurance about whether the 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 financial statements referred to
above present fairly, in all material respects,
the financial position of the Project at December 31,
1996 and 1995 and the results of its operations and
its cash flows for each of the three years in the
period ended December 31, 1996 in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
Memphis, Tennessee
January 30, 1997
1
Westmont Project
Statements of Assets, Liabilities and
Project Deficit
December 31
1996 1995
--------------------------------------
Assets
Property, at cost $ 23,093,158 $ 22,932,409
Less accumulated depreciation (7,597,138) (6,815,000)
--------------------------------------
15,496,020 16,117,409
Restricted funds and escrows 126,294 253,720
Cash 151,421 81,832
--------------------------------------
Total assets $ 15,773,735 $ 16,452,961
--------------------------------------
--------------------------------------
Liabilities and Project Deficit
Mortgage notes payable $ 24,409,000 $ 24,409,000
Due to FPI Chesterfield, L.P.
and related entities 613,701 656,551
Accrued interest payable 5,289,419 4,539,535
Security deposits 121,410 116,910
Other accrued expenses 59,008 48,967
--------------------------------------
Total liabilities 30,492,538 29,770,963
Project deficit (14,718,803) (13,318,002)
--------------------------------------
Total liabilities and project
deficit $ 15,773,735 $ 16,452,961
--------------------------------------
--------------------------------------
See accompanying notes.
2
Westmont Project
Statements of Revenues and Expenses and
Changes in Project Deficit
Year ended December 31
-------------------------------------------------------
1996 1995 1994
-------------------------------------------------------
Revenues
Rental income $ 3,669,349 $ 3,547,581 $ 3,464,423
Interest and other income 137,427 161,780 191,927
-------------------------------------------------------
3,806,776 3,709,361 3,656,350
Expenses
Operating expenses 1,651,281 1,812,435 1,463,865
Interest 2,774,158 2,693,697 2,606,536
Depreciation 782,138 795,726 910,448
-------------------------------------------------------
5,207,577 5,301,858 4,980,849
-------------------------------------------------------
Expenses in excess of revenues (1,400,801) (1,592,497) (1,324,499)
Project deficit at beginning
of year (13,318,002) (11,725,505) (10,401,006)
-------------------------------------------------------
Project deficit at end of
year $(14,718,803) $(13,318,002) $(11,725,505)
-------------------------------------------------------
-------------------------------------------------------
See accompanying notes.
3
Westmont Project
Statements of Cash Flows
Year ended December 31
-------------------------------------------------------
1996 1995 1994
-------------------------------------------------------
Operating activities
Expenses in excess of revenues $ (1,400,801) $(1,592,497) $(1,324,499)
Adjustments to reconcile
expenses in excess of
revenues to net cash
provided by operating
activities:
Depreciation 782,138 795,726 910,448
Decrease (increase)
in other assets 127,426 2,853 (141,955)
(Decrease) increase
in Due to FPI
Chesterfield, L.P.
and related entities (42,850) 5,532 (6,071)
Increase in accrued
interest payable 749,884 891,362 712,218
Increase (decrease) in
security deposits 4,500 (8,695) 2,056
Increase (decrease)
in other accrued expenses 10,041 (17,537) 27,374
-------------------------------------------------------
Net cash provided by operating
activities 230,338 76,744 179,571
Investing activities
Property additions (160,749) (122,556) (106,386)
-------------------------------------------------------
Net increase (decrease) in cash 69,589 (45,812) 73,185
Cash at beginning of year 81,832 127,644 54,459
-------------------------------------------------------
Cash at end of year $ 151,421 $ 81,832 $ 127,644
-------------------------------------------------------
-------------------------------------------------------
See accompanying notes.
4
Westmont Project
Notes to Financial Statements
December 31, 1996
1. Project Description
The Westmont Project (the Project) is a 489 unit residential
rental property on 57.65 acres in Chesterfield, Missouri. The
Project, which is not a separate legal entity, is owned
by FPI Chesterfield, L.P. (the Partnership), a Missouri
limited partnership. Avron B. Fogelman and Fogelman Enterprises,
L.P. (FELP), which is directly and indirectly owned by Avron B.
Fogelman, are general partners of the Partnership. Avron B.
Fogelman is also the sole limited partner. Through December
24, 1992, Avron B. Fogelman was also a general partner of
Fogelman Mortgage L.P. I (FMLP) which holds
the first mortgage note on the Project's property (see
Note 4). However, as of December 24, 1992, pursuant to
settlement of certain claims brought by investors in FMLP, Mr.
Fogelman and an affiliated entity withdrew as general
partners from FMLP (see Note 4).
Units are leased under short-term operating leases with
monthly rentals due in advance. The Project, existing and
future leases, and rents have been assigned as collateral
for the related mortgage notes (see Note 4).
2. Summary of Significant Accounting Policies
Basis of Reporting
The accompanying financial statements are prepared on the
accrual basis of accounting and represent the cumulative
operations of the Project beginning with the inception of the
FMLP loan agreement on July 8, 1987 (see Note 4).
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
amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
Statements of Cash Flows
The Project made payments of $2,024,274, $1,802,335, and
$1,894,318, for interest during the years ended December
31, 1996, 1995, and 1994, respectively.
5
Westmont Project
Notes to Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
Restricted Funds and Escrows
Included in restricted funds and escrows are security deposits
and real estate tax escrow deposits.
Income Taxes
No income taxes are paid by the Project or the Partnership since
the results of operations are allocated to the partners of
the Partnership. Any income tax liability or benefit
resulting therefrom is the responsibility of the partners
rather than the Partnership or the Project.
Accounting Pronouncements
In March 1995, the Financial Accounting Standards Board
(FASB) issued Statement No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of, which requires impairment losses to
be recorded on long-lived assets used in operations
when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are
less than the assets' carrying amount. Statement 121
also addresses the accounting for long-lived assets
that are expected to be disposed of. The Project
adopted Statement 121 during 1996, with no effect on its
financial statements.
3. Property
Property is stated at cost. Depreciation is provided for
financial statement reporting purposes using the straight-line
method over estimated useful service lives as follows:
Useful Cost at December 31
Life 1996 1995
-------------------------------------------------
Land N/A $ 2,386,320 $ 2,386,320
Buildings 30 years 17,027,526 17,027,526
Land improvements 15 years 1,931,757 1,931,757
Furniture and fixtures 5-7 years 1,747,555 1,586,806
------------------------------------
$23,093,158 $22,932,409
------------------------------------
------------------------------------
Construction period interest incurred during Project
development amounted to $1,358,694 and has been
capitalized as a component of property costs.
6
Westmont Project
Notes to Financial Statements (continued)
4. Mortgage Notes Payable
The Project is financed with nonrecourse mortgage notes
payable consisting of the following at December 31, 1996 and 1995:
1996 1995
------------------------------------------------------------------
Accrued Accrued
Interest Interest
Principal Payable Principal Payable
------------------------------------------------------------------
First mortgage note payable to
FMLP $ 23,320,000 $4,759,407 $23,320,000 $4,166,920
Second mortgage note payable to
Avron B. Fogelman 1,089,000 530,012 1,089,000 372,615
------------------------------------------------------------------
$24,409,000 $5,289,419 $24,409,000 $4,539,535
------------------------------------------------------------------
------------------------------------------------------------------
The first mortgage note was amended effective January 1, 1990 pursuant
to a consensual reorganization of the business affairs of
Avron B. Fogelman and related entities. The note, as amended,
bears interest at the basic interest rate of 9.50% per annum and is
payable monthly with the principal balance due July 1, 1999.
If Property Cash Flow, as defined, is insufficient to pay
the basic interest, then the interest paid shall be equal to the
Property Cash Flow. Such insufficiency between basic
interest at 9.50% and Property Cash Flow is accrued
and bears interest at 9.50%, compounded monthly. If Property
Cash Flow exceeds the basic interest, the excess shall
be applied against any unpaid accrued interest until
all such accrued interest has been paid. Thereafter, any excess
Property Cash Flow shall be paid to FMLP to be held in
escrow as additional collateral for future interest
obligations. If Property Cash Flow exceeds the basic interest for six
consecutive months after payment of all accrued basic
interest, then cash held as additional collateral shall
be paid as contingent interest as provided under the original
terms of the first mortgage note.
Contingent interest is payable from any Property Cash Flow,
sale or refinancing proceeds received after January 1, 1989
as follows: (a) 75% thereof until the total interest (basic
interest plus contingent interest) paid results in a 10.75%
yield on the note; (b) 50% of the remaining balance until
the total interest paid results in a 12.75% yield on the note;
and (c) 25% of the remaining balance thereof.
Under the first mortgage note agreement, effective January
1, 1994, the principal may be repaid in whole, but not in
part, upon the payment of a prepayment penalty equal to 5%
of the outstanding principal balance. Thereafter, prepayment
penalties decline 1% annually.
7
Westmont Project
Notes to Financial Statements (continued)
4. Mortgage Notes Payable (continued)
During 1992, Mr. Fogelman, FMLP and other defendants
settled litigation with certain investors in FMLP, the
holder of the Project's first mortgage note. Pursuant thereto,
funds placed by Mr. Fogelman in trust to satisfy his
guarantee related to the mortgage note were released
to FMLP and applied as payment of accrued basic interest. Mr.
Fogelman was then released from his guarantee on the
note and Mr. Fogelman and an affiliated entity
withdrew as general partners from FMLP. Accordingly, the first
mortgage note payable to FMLP is solely a nonrecourse
note collateralized by the Project.
In accordance with the transfer of funds to FMLP discussed
in the preceding paragraph, the Project recorded a second
mortgage note payable to Mr. Fogelman in the amount of
$1,089,000, which was the amount of funds transferred to
FMLP. The note bears interest at the prime rate plus 2%,
adjustable monthly (10.5% at December 31, 1996 and 1995),
and the principal and accrued interest mature July 1,
1999. The note and interest thereon are subordinate to
the first mortgage note and related interest payable to FMLP discussed
above. The note may be prepaid, subject to the subordination
provisions above, at any time without penalty.
5. Related Party Transactions
Fogelman Management Co. (FMC), which is owned by Mr. Fogelman,
manages the Project and charges management fees equal to 5%
of gross operating revenues, as defined in the management
agreement. Management fees paid by the Project were
approximately $190,000, $185,000, $183,000, for 1996, 1995,
and 1994, respectively.
FMC obtains insurance coverage for all properties it manages
and allocates the related costs proportionately among the
properties. Some of the insurance policies covering the
Project are placed by a former affiliate of FMC. Commissions
are earned by the former affiliate as agent. The insurance
agency was sold by Mr. Fogelman on December 27, 1995.
8
Westmont Project
Notes to Financial Statements (continued)
6. Fair Values of Financial Instruments
The following methods and assumptions were used by the
Project's management in estimating fair value disclosures
for financial instruments:
The carrying amounts reported in the balance sheet for
restricted funds and escrows, Due to FPI Chesterfield,
L. P. and related entities, and other accrued expenses approximate
fair value.
Management of the Project has determined that it is not
practicable to estimate the fair value of the first
mortgage note payable to FMLP. Due to the unique nature of the
repayment structure of this note and related accrued
interest payable, any estimate of fair value would
be very subjective due to lack of reasonable estimates
of future principal and interest payments, and the related
timing of those payments. In addition, management of
the Project has determined that it is not practicable
to estimate the fair value of the second mortgage note
payable to Mr. Fogelman since the obligation is subordinate to the
first mortgage note (see Note 4).
9