1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTIONS 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended: Commission File Number:
SEPTEMBER 30, 1996 33-2320
EXCEL PROPERTIES, LTD.
(Exact name of registrant as specified in its charter)
CALIFORNIA 87-0426335
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
16955 VIA DEL CAMPO, SUITE 110 SAN DIEGO, CALIFORNIA 92127
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (619) 485-9400
Securities registered pursuant to Section 12(b) of the Act: NONE
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.
(1) Yes X No
(2) Yes X No
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EXCEL PROPERTIES, LTD.
INDEX TO FINANCIAL STATEMENTS
----------
PAGE
----
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements:
Balance Sheets
September 30, 1996 (Unaudited)
December 31, 1995 ........................................... 3
Statements of Income
Three Months Ended September 30, 1996 (Unaudited)
Three Months Ended September 30, 1995 (Unaudited)
Nine Months Ended September 30, 1996 (Unaudited)
Nine Months Ended September 30, 1995 (Unaudited) ............ 4
Statements of Changes in Partners' Equity
Nine Months Ended September 30, 1996 (Unaudited)
Nine Months Ended September 30, 1995 (Unaudited) ............ 5
Statements of Cash Flows
Nine Months Ended September 30, 1996 (Unaudited)
Nine Months Ended September 30, 1995 (Unaudited) ............ 6
Notes to Financial Statements .................................. 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ......................... 10
PART II. OTHER INFORMATION ............................................... 13
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EXCEL PROPERTIES, LTD.
BALANCE SHEETS
----------
SEPTEMBER 30,
1996 DECEMBER 31,
(UNAUDITED) 1995
----------- ------------
ASSETS
Real estate:
Land $ 3,511,906 $ 3,822,602
Buildings 5,503,291 6,015,835
Less: accumulated depreciation (1,430,003) (1,423,718)
------------ ------------
Net real estate 7,585,194 8,414,719
Cash 478,725 1,817,201
Accounts receivable, less allowance for bad debts of
$181,019 and $51,595 in 1996 and 1995, respectively 541 165,083
Notes receivable 1,011,050 1,015,672
Interest receivable 5,256 5,192
------------ ------------
Total assets $ 9,080,766 $ 11,417,867
============ ============
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Accounts payable:
Affiliates $ 953 $ 867
Other 5,080 3,169
Property taxes payable 9,595 939
Tenant security deposits 5,000 5,000
Deferred rental income 43,050 40,238
------------ ------------
Total liabilities 63,678 50,213
------------ ------------
Partners' Equity:
General partner's equity 4,498 8,691
Limited partners' equity, 235,308 units
authorized, 135,299 units issued
and outstanding in 1996 and 1995,
respectively 9,012,590 11,358,963
------------ ------------
Total partners' equity 9,017,088 11,367,654
------------ ------------
Total liabilities and partners' equity $ 9,080,766 $ 11,417,867
============ ============
The accompanying notes are an integral
part of the financial statements.
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EXCEL PROPERTIES, LTD.
STATEMENTS OF INCOME - UNAUDITED
----------
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
1996 1995 1996 1995
---- ---- ---- ----
Revenue:
Base rent $250,142 $299,422 $764,457 $869,182
Percentage rents 44,344 36,994 44,344 38,452
-------- -------- -------- --------
Total revenue 294,486 336,416 808,801 907,634
-------- -------- -------- --------
Operating Expenses:
Accounting and legal 10,372 2,331 32,148 16,590
Administrative 2,700 2,700 8,100 8,100
Bad debts 44,612 13,973 129,425 35,260
Management fees 2,870 2,950 7,319 7,822
Office expenses 1,455 1,431 9,865 8,432
Property taxes 6,100 -- -- --
Depreciation 43,677 47,744 135,099 145,951
-------- -------- -------- --------
Total operating expenses 111,786 71,129 321,956 222,155
-------- -------- -------- --------
Operating income 182,700 265,287 486,845 685,479
Interest income 46,900 28,562 147,884 87,390
-------- -------- -------- --------
Net income before real estate sales 229,600 293,849 634,729 772,869
Gain - sale of real estate -- -- 206,761 99,141
-------- -------- -------- --------
Net income $229,600 $293,849 $841,490 $872,010
======== ======== ======== ========
Net income allocated to:
General partner $ 2,733 $ 3,416 $ 27,707 $ 10,180
Limited partners 226,867 290,433 813,783 861,830
-------- -------- -------- --------
Total $229,600 $293,849 $841,490 $872,010
======== ======== ======== ========
Net income per weighted average
limited partnership unit $ 1.68 $ 2.15 $ 6.01 $ 6.37
======== ======== ======== ========
The accompanying notes are an integral
part of the financial statements.
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EXCEL PROPERTIES, LTD.
STATEMENTS OF CHANGES IN PARTNERS' EQUITY - UNAUDITED
----------
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------
1996 1995
---- ----
Balance at January 1 $ 11,367,654 $ 11,059,577
Net income 841,490 872,010
Partner distributions (3,192,056) (874,058)
------------ ------------
Balance at September 30 $ 9,017,088 $ 11,057,529
============ ============
The accompanying notes are an integral
part of the financial statements.
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EXCEL PROPERTIES, LTD.
STATEMENTS OF CASH FLOWS - UNAUDITED
----------
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------
1996 1995
---- ----
Cash flows from operating activities:
Net income $ 841,490 $ 872,010
Adjustments to reconcile net income to net cash
provided by operations:
Depreciation 135,099 145,951
Allowance for doubtful accounts 129,425 35,260
Gain on sale of real estate (206,761) (99,141)
Changes in operating assets and liabilities:
(Increase) decrease in assets:
Accounts receivable 35,117 (112,606)
Interest receivable (64) 34
Increase (decrease) in liabilities:
Accounts payable 1,997 724
Property taxes payable 8,656 3,915
Deferred rental income 2,812 (18,417)
----------- -----------
Net cash provided by operating activities 947,771 827,730
----------- -----------
Cash flows from investing activities:
Proceeds from real estate sales 901,187 1,106,291
Real estate purchased -- (1,410,233)
Collection of notes receivable 4,622 4,704
----------- -----------
Net cash provided (used) in investing activities 905,809 (299,238)
----------- -----------
Cash flows from financing activities:
Cash distributions (3,192,056) (874,058)
----------- -----------
Net cash used by financing activities (3,192,056) (874,058)
----------- -----------
Net decrease in cash (1,338,476) (345,566)
Cash at January 1 1,817,201 641,053
----------- -----------
Cash at September 30 $ 478,725 $ 295,487
=========== ===========
The accompanying notes are an integral
part of the financial statements.
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EXCEL PROPERTIES, LTD.
NOTES TO FINANCIAL STATEMENTS - UNAUDITED
----------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements reflect all adjustments of a recurring nature
which are, in the opinion of management, necessary for a fair presentation
of the financial statements. No adjustments were necessary which were not
of a recurring nature. Certain reclassifications have been made to the
financial statements for the nine months ended September 30, 1995 in order
to conform with the current period's presentation. These financial
statements should be read in conjunction with the financial statements and
accompanying footnotes included in the Partnership's December 31, 1995
Form 10-K.
ORGANIZATION
Excel Properties, Ltd. was formed in the State of California on September
19, 1985, for the purpose of, but not limited to, acquiring real property
and syndicating such property.
OFFERING COSTS
Offering costs and selling expenses were charged to the limited partners'
capital accounts as limited partners' interests were sold.
REAL ESTATE
Land and buildings are recorded at cost. Buildings are depreciated using
the straight-line method over the tax life of 31.5 years. The tax life
does not differ materially from the economic useful life. Expenditures for
maintenance and repairs are charged to expense as incurred. Significant
renovations are capitalized. The cost and related accumulated depreciation
of real estate are removed from the accounts upon disposition. Gains and
losses arising from the dispositions are reported as income or expense.
CASH DEPOSITS
At September 30, 1996, the carrying amount of the Partnership's cash
deposits total $478,725. The bank balances are $535,331 of which $200,000
is covered by federal depository insurance.
STATEMENT OF CASH FLOWS - SUPPLEMENTAL DISCLOSURE
There was no interest or taxes paid for the nine months ended September
30, 1996 or 1995. Also, the Partnership had no noncash investing or
financing transactions for the nine months ended September 30, 1996 or
1995.
INCOME TAXES
The Partnership is not liable for payment of any income taxes because as a
partnership, it is not subject to income taxes. The tax effects of its
activities accrue directly to the partners.
ACCOUNTS RECEIVABLE
All net accounts receivable are deemed to be collectible within the next
12 months.
Continued
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EXCEL PROPERTIES, LTD.
NOTES TO FINANCIAL STATEMENTS - UNAUDITED, CONTINUED
----------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
FINANCIAL STATEMENT 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 reported period. Actual results could differ from those
estimates.
2. FEES PAID TO GENERAL PARTNER
The Partnership has paid the General Partner or its affiliates the
following fees:
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------
1996 1995
---- ----
Management fees $ 7,319 $ 7,822
Administrative fees 8,100 8,100
Accounting 14,460 13,260
3. NOTES RECEIVABLE
The Partnership had the following notes receivable at September 30, 1996
and December 31, 1995:
1996 1995
---- ----
Note from sale of building, receipts of $1,390 per month
at 9% interest. Secured by building sold. Due July 1997. $ 140,540 $ 143,455
Note from sale of building, interest only receipts of
$5,366 per month at 8.5% interest. Secured by building
sold. Due November 2003. 757,500 757,500
Note from sale of building, receipts of $1,004 per month
at 8% interest. Secured by building sold. Due December
2001. 113,010 114,717
---------- ----------
Total notes receivable $1,011,050 $1,015,672
========== ==========
Continued
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EXCEL PROPERTIES, LTD.
NOTES TO FINANCIAL STATEMENTS - UNAUDITED, CONTINUED
----------
4. MINIMUM FUTURE RENTALS
The Partnership leases single-tenant buildings to tenants under
noncancelable operating leases requiring the greater of fixed or
percentage rents. The leases are either: (1) triple-net, requiring the
tenant to pay all expenses of operating the property such as insurance,
property taxes, repairs and utilities, or (2) requiring the tenant to
reimburse the Partnership for substantially all of the tenant's share of
real estate taxes and other common area maintenance expenses.
Minimum future rental revenue for the next five years for the commercial
real estate currently owned and subject to noncancelable operating leases
is as follows:
YEAR ENDING DECEMBER 31,
------------------------
1996, remaining three months $ 253,404
1997 1,029,179
1998 1,020,460
1999 995,491
2000 934,498
Thereafter 3,740,480
5. SALE OF PROPERTY
On April 10, 1996, the Partnership sold two buildings in Coon Rapids,
Minnesota that were on lease to Kentucky Fried Chicken and Wendy's. The
sales price for the two buildings, which were sold together, was $925,000
less $23,813 in selling expenses. The Partnership recognized a gain of
$206,761 on the sale.
On February 17, 1995, the Partnership sold a building in Phoenix, Arizona
that was on lease to Children's World. The sales price was $1,135,000 less
$28,709 in selling expenses. The Partnership recognized a gain of $99,141
on the sale. The proceeds from the sale were used to acquired another real
estate asset as described in Note 6.
6. PURCHASE OF PROPERTY
On March 10, 1995, the Partnership purchased a 39% undivided interest in a
parcel of ground in Las Vegas, Nevada for $1,410,233. The ground was
leased with the Partnership's share of rent equaling $169,228 per year.
The ground was subdivided into three building lots and the lessee
constructed a building on one of the three lots. The building was sold in
the fourth quarter of 1995 and a gain of $351,152 was recognized. The
Partnership still has a 39% undivided interest in the remaining two
parcels of land. No real estate purchases were made in the first nine
months of 1996.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
OF OPERATIONS
NATURE OF BUSINESS
Excel Properties, Ltd., a California limited partnership (the "Partnership"),
was organized to purchase commercial real estate properties for cash and to hold
these assets for long-term investment. The Partnership currently owns eighteen
properties. The general partners of the Partnership are Excel Realty Trust,
Inc., a Maryland corporation, and Gary B. Sabin, an individual. The Partnership
was formed on September 19, 1985, and will continue in existence until December
31, 2015, unless dissolved earlier under certain circumstances.
Properties that have been acquired by the Partnership are subject to long-term
triple-net leases. Such leases require the lessee to pay the prescribed minimum
rental plus all costs and expenses associated with the operations and
maintenance of the property. These expenses include real property taxes,
property insurance, repairs and maintenance and similar expenses, the net effect
being that, under normal circumstances, no expenses will offset the rental
payment. Most of the leases also provide some form of inflation hedge which
calls for the minimum rent to be increased, based upon adjustments in the
consumer price index, fixed rent escalation, or by receipt of a percentage of
the gross sales of the tenant.
Properties have been acquired free and clear of liens and encumbrances. The
Partnership may seek to finance one or more of the properties and distribute the
financing proceeds to the partners, but only if the financing proceeds equal or
exceed 100% of the Partnership's capital invested in the property or properties
(including a prorata amount of the Partnership's public offering selling
commissions and organization expenses). To date, no properties owned by the
Partnership have been the subject of any mortgage financing, therefore, at the
present time, all properties remain free and clear from any mortgage loan, lien
or encumbrance.
The principal investment objectives of the Partnership are to provide to its
limited partners: (1) preservation, protection and eventual return of the
investment, (2) distributions of cash from operations including property sales,
some of which may be a return of capital for tax purposes rather than taxable
income, (3) distributions of cash from property financing, and (4) realization
of long-term appreciation in value of the properties.
The general partners have purchased properties they believe meet certain minimum
investment standards and that are most likely to accomplish the investment
objectives of the Partnership. Properties were acquired through arms-length
negotiations with third parties.
LIQUIDITY AND CAPITAL RESOURCES
As the Partnership has $478,725 in cash at September 30, 1996, with no debt on
any of the properties it owns, management believes that the Partnership
liquidity remains in a good position. In October 1996, the Partnership
distributed accumulated cash to the partners in the amount of $240,000. The
Partnership has no debt, and currently has monthly income of approximately
$75,000 from rental income. Management anticipates that income should be enough
to cover any Partnership expenses. Also, management does not expect the
Partnership to incur any significant operational expenses as the Partnership
properties are subject to triple-net leases.
Management anticipates that the Partnership's primary source of cash in 1996
will continue to come from the rental of the real estate properties currently
owned. The Partnership may also, from time to time, sell certain properties
which would provide additional cash for distribution. Management anticipates
that rental income will be sufficient to cover the operating expenses of the
Partnership and allow for cash distributions to be made to the limited partners.
The Partnership has the policy of paying quarterly distributions to the limited
partners of the actual cash earned by the Partnership in the preceding quarter.
Therefore, if expenses were to increase or income were to decrease, the
Partnership would decrease the quarterly distributions to the limited partners.
The cash of the Partnership decreased by $1,338,476 at September 30, 1996 when
compared to December 31, 1995. This decrease was partly due to the payment of
$3,192,056 in distributions to the partners. The Partnership did collect
$901,187 from the sale of two properties in April 1996 and a decrease in net
accounts receivable of $164,542 was
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also a source of cash. Included in the change in accounts receivable was
$156,000 that was due from a property sale in 1995 that was collected in January
1996. Net income before property sales of $634,729 and depreciation of $135,099
also provided an increase in cash of $769,828.
The Partnership has purchased its properties for all cash. The Partnership may
finance one or more of its existing properties if, among other conditions: (1)
the property is held for at least two years (all properties have been owned by
the Partnership for more than two years), (2) the financing proceeds equal or
exceed the Partnership's investment in the property, and (3) the Partnership
distributes the financing proceeds to the partners. To date, the Partnership has
not leveraged any of its properties.
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the financial
statements and the notes thereto.
Comparison of the three months ended September 30, 1996 to the three months
ended September 30, 1995
Base rent decreased $49,280 or 16% from the previous year. Additional rental
revenue came from rent increases of $2,641 per month from several Kinder Care
properties beginning January 1, 1996. However, rental revenue decreased by
$42,307 due to rent from land that was purchased in February 1995 and sold in
November 1995. In addition, the Partnership was receiving $7,800 per month from
the Kentucky Fried Chicken and Wendy's buildings that were sold in April 1996.
Operating expenses increased by $40,657 from the three months ended September
30, 1995 to the three months ended September 30, 1996. The net increase was
primarily due to a $30,639 increase in bad debt expense. Bad debts for the
quarter was $44,612 of which $21,159 related to the non-payment of rent and
finance charges by Toddle House Restaurants. Toddle House Restaurants is
currently in Chapter 11 Bankruptcy and has stopped paying monthly rents. The
remaining $23,453 related to Ponderosa Restaurant which has vacated its
premises. Accounting and legal expense increased $8,041 in 1996 due primarily to
legal fees related to the Ponderosa and Toddle House Restaurants. Other expenses
varied very little between the two accounting periods, except depreciation
expense which decreased due to the sale of the Kentucky Fried Chicken and
Wendy's buildings in April 1996.
Interest income increased $18,338 or 64% in 1996 over 1995 primarily due to the
additional finance charges on amounts uncollected from Toddle House Restaurants
and Ponderosa Restaurant.
Net income decreased $64,249 in the third quarter of 1996 over 1995, primarily
due to the sale of the Kentucky Fried Chicken and Wendy's properties in April
1996, and the sale of land in November 1995.
Comparison of the nine months ended September 30, 1996 to the nine months ended
September 30, 1995
Base rent decreased $104,725 or 12% from the previous year. Additional rental
revenue came from rent increases of $2,641 per month from several Kinder Care
properties beginning January 1, 1996. However, rental revenue decreased by
$94,814 due to rent from land that was purchased in February 1995 and sold in
November 1995. In addition, the Partnership was receiving $7,800 per month from
the Kentucky Fried Chicken and Wendy's buildings that were sold in April of
1996.
Operating expenses increased by $99,801 from the nine months ended September 30,
1995 to the nine months ended September 30, 1996. The net increase was primarily
due to a $94,165 increase in bad debt expense. The amount represents the amount
reserved for the collectability of rents from Toddle House Restaurants and
Ponderosa Restaurant. Toddle House Restaurants, which is currently in Chapter 11
Bankruptcy, and Ponderosa Restaurant were mentioned above. Accounting and legal
expenses increased $15,558 primarily due to legal expenses related to the
Ponderosa and Toddle House Restaurants. Other expenses varied very little
between the two accounting periods, except depreciation expense which decreased
due to the sale of the Children's World building in 1995 and the Kentucky Fried
Chicken and Wendy's buildings in April 1996.
Interest income increased $60,494 or 69% in 1996 over 1995 due to the additional
finance charges on amounts
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uncollected from Toddle House Restaurants and Ponderosa Restaurant. In addition,
the Partnership earned interest in the current period on the sales proceeds from
several properties before the funds were distributed to the partners.
Net income decreased $30,520 in 1996 over 1995, primarily due to the sale of the
Kentucky Fried Chicken and Wendy's properties in April 1996, and the sale of
land in November 1995. The total decrease in net income from these sales were
partly offset by gains from real estate sales which increased from $99,141 in
1995 to $206,761 in 1996.
Management does not expect inflation to significantly impact the operations of
the Partnership due to the structure of its investment portfolio. The leases all
provide a minimum rental which the lessee is obligated to pay. Additionally,
most leases contain some form of inflation hedge which provides for the rent to
be increased. The rent increases may be in the form of scheduled fixed minimum
rent increases, Consumer Price Index adjustments, or by participating in a
percentage of the gross sales volume of the tenant. Since the triple-net leases
require the lessees to pay for all property operating expenses, the net effect
is that the income should increase as operating expenses increase due to
inflation.
CERTAIN CAUTIONARY STATEMENTS
Certain statements in this Form 10-Q are not historical fact and constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause the actual
results of the Partnership to be materially different from historical results or
from any results expressed or implied by such forward-looking statements. Such
risk, uncertainties and other factors include, but are not limited to, the
following risks:
Economic Performance and Value of Properties Dependent on Many Factors. Real
property investments are subject to varying degrees of risk. The economic
performance and values of real estate can be affected by many factors, including
changes in the national, regional and local economic climates, local conditions
such as an oversupply of space or reductions in demand for real estate in the
area, the attractiveness of the properties to tenants, competition from other
available space, the ability of the owner to provide adequate maintenance and
insurance and increased operating costs.
Dependence on Rental Income from Real Property. Since substantially all of the
Partnership's income is derived from rental income from real property, the
Partnership's income and funds for distribution would be adversely affected if a
significant number of the Partnership's tenants were unable to meet their
obligations to the Partnership or if the Partnership were unable to lease a
significant amount of space in its buildings on economically favorable lease
terms. There can be no assurance that any tenant whose lease expires in the
future will renew such lease or that the Partnership will be able to re-lease
space on economically advantageous terms.
Illiquidity of Real Estate Investments. Equity real estate investments are
relatively illiquid and therefore tend to limit the ability of the Partnership
to vary its portfolio promptly in response to changes in economic or other
conditions.
Risk of Bankruptcy of Major Tenants. The bankruptcy or insolvency of a tenant
would have an adverse impact on the property affected and on the income produced
by such property. Under bankruptcy law, a tenant has the option of assuming
(continuing) or rejecting (terminating) any unexpired lease. If the tenant
assumes its lease with the Partnership, the tenant must cure all defaults under
the lease and provide the Partnership with adequate assurance of its future
performance under the lease. If the tenant rejects the lease, the Partnership's
claim for breach of the lease would (absent collateral securing the claim) be
treated as a general unsecured claim. The amount of the claim would be capped at
the amount owed for unpaid pre-petition lease payments unrelated to the
rejection, plus the greater of one years' lease payments or 15% of the remaining
lease payments payable under the lease (but not to exceed the amount of three
years' lease payments).
Environmental Risks. Under various federal, state and local laws, ordinances and
regulations, the Partnership may be considered an owner or operator of real
property or may have arranged for the disposal or treatment of hazardous or
toxic substances and, therefore, may become liable for the costs of removal or
remediation of certain hazardous substances released on or in its property or
disposed of by it, as well as certain other potential costs which could relate
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to hazardous or toxic substances (including governmental fines and injuries to
persons and property). Such liability may be imposed whether or not the
Partnership knew of, or was responsible for, the presence of such hazardous
toxic substances.
PART II. OTHER INFORMATION
Items 1 through 5 have been omitted since no events occurred with respect to
these items.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: 27.1 - Financial Data Schedule
(b) Reports on Form 8-K
The Partnership filed no reports on Form 8-K during the quarter
ended September 30, 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: November 8, 1996 EXCEL PROPERTIES, LTD.
(Registrant)
Excel Realty Trust, Inc.
(General Partner)
By: /s/ Gary B. Sabin
--------------------------------------
Gary B. Sabin, President
By: /s/ David A. Lund
----------------------------------------
David A. Lund, Principal Financial Officer
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