SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

 

FORM 10-K

 

ANNUAL REPORT UNDER SECTIONS 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

 

 

 

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 ý  No o

 

(2) Yes ý  No o

 

 

Indicate by check mark whether the registrant in an accelerated filer (as defined in Exchange Act Rule 12b-2).

 

Yes o  No ý

 

 

PART I

 

ITEM 1.          DESCRIPTION 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 investment.  The general partners of the Partnership are New Plan Excel Realty Trust, Inc., a Maryland corporation (“New Plan”), formerly known as Excel Realty Trust 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.  In 1999, Excel Legacy Corporation, now known as Price Legacy Corporation,  (the “Company”) began managing the assets of the Partnership when certain officers of New Plan resigned.  The Company has indemnified New Plan of any general partner liability in exchange for an assignment of their partnership interest.

 

Properties that have been acquired by the Partnership have been primarily 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.  Certain 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.

 

The principal investment objectives of the Partnership were originally to provide to its limited partners: (1) preservation, protection and eventual return of the investment, (2) distributions of cash from operations, some of which may be a return of capital for tax purposes rather than taxable income, and  (3) realization of long-term appreciation in value of properties. In recent years, the Partnership has been attempting to sell all of its properties.  The selling of the properties remaining could take several years as the Partnership attempts to maximize the sales price of each property.  There can be no assurance that the general partners will be successful in selling the remaining properties or what price they can obtain. Additionally, the plans of the Partnership may change in the future.

 

ITEM 2.          PROPERTIES

 

The Partnership presently owns two properties as follows:

 

Paragon Restaurant Group, Inc., Mountain Jack’s Restaurant - Lafayette, Indiana

 

This property was acquired September 29, 1987 is located at 2411 State Road 26 East, Lafayette, Indiana.  Lafayette is located between Chicago, Illinois to the north and Indianapolis, Indiana to the south.  The property is situated on 1.72 acres, contains 8,274 gross square feet.  The annual lease payment is the greater of $107,800 or 5% of the gross sales.  The lease expires on September 28, 2005.  In 2002, Paragon Steakhouse filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code.

 

Autoworks - Bellevue, Nebraska

 

This property was acquired on July 5, 1988 is located at a shopping center at 915 Fort Crook Road, Bellevue, Nebraska, a suburb of Omaha, Nebraska.  The improvements consist of a free standing concrete block and glass building containing 4,870 square feet.  The base minimum annual rent is $87,058 per year with scheduled rental increases occurring every third year of the lease based on increases in the Consumer Price Index not to exceed a 10% increase.  The lease expires on July 5, 2008.

 

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ITEM 3.                             LEGAL PROCEEDINGS

 

None.

 

ITEM 4.                             SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

 

Not applicable.

 

ITEM 5.                             MARKET FOR REGISTRANT’S LIMITED PARTNERSHIP UNITS AND RELATED SECURITY HOLDER MATTERS

 

A)       A public market for the Partnership’s units does not exist.

 

B)       As of December 31, 2002, there were 1,589 investors holding 135,199 units.

 

C)                      The Partnership made its first cash flow distribution from operations in May 1987.  Since that date, cash distributions have been made at the end of each calendar quarter through December 31, 2001.  In 2002, the Partnership decided to make cash distributions on an annual basis or upon a capital event, which generates excess cash available for distribution.

 

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PART II

 

ITEM 6.          SELECTED FINANCIAL DATA

 

The following information has been selected from the financial statements of the Partnership:

 

INCOME STATEMENT DATA

 

		2002			2001			2000			1999			1998
Total rental revenue		$	286,895		$	493,522		$	532,483		$	598,103		$	670,691
Interest and other income		68,673			91,833			102,066			120,217			119,518
Operating expenses:
Property expenses		2,825			6,788			(21,612		)	37,234			32,240
General and administrative		98,774			60,282			88,935			46,763			49,893
Depreciation		48,673			78,209			89,582			98,669			126,485
Net income before real estate sales		205,295			440,076			477,644			535,654			581,591
Gain on sale of real estate		108,181			727,913			—			389,300			99,986
Net income		$	313,476		$	1,167,989		$	477,644		$	924,954		$	681,577
Per Unit Data:
Net income		2.29			8.64			3.49			6.77			4.71
Distributions		5.49			14.89			4.47			16.83			15.05
BALANCE SHEET DATA
Net real estate		1,212,012			1,852,504			3,182,259			3,271,841			4,452,546
Cash		1,181,015			917,409			265,054			289,446			412,033
Accounts receivable, net		8,983			12,584			11,184			2,222			8,998
Total assets		3,264,141			3,719,495			4,595,140			4,717,775			6,041,019
Total liabilities		466			19,294			49,926			46,172			19,369
Partners’ equity		3,263,675			3,700,201			4,545,214			4,671,603			6,021,650

 

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ITEM 7.                             MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS

 

Results of Operations

 

Certain statements in this Form 10-K may be deemed to be “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities and Exchange Act of 1934, as amended.  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.

 

The following discussion should be read in conjunction with the financial statements and the notes thereto.  Historical results and percentage relationships set forth in the Statements of Income contained in the Financial Statements, including trends which might appear, should not be taken as indicative of future operations.

 

Comparison of year ended December 31, 2002 to year ended December 31, 2001.

 

The net income of the Partnership decreased by $854,513 in 2002 when compared to 2001.  The differences in income and expenses are explained below.

 

Rental revenue decreased by $206,627 or 42% to $286,895 in 2002 from $493,522 in 2001.  The decrease in rental revenue was primarily attributed to the property sales in 2002 and 2001. In 2001, the Partnership sold five properties throughout the year which contributed $197,672 of rental revenue in 2001 and $0 in 2002.  In December 2002, the Partnership sold another property which decreased rents by $4,357 in 2002.

 

Interest income decreased $23,160 or 25% over 2001.  This decrease was mostly due to lower interest rates on cash balances and notes repaid in 2001.

 

Operating expenses increased by $4,994 or 3% in 2002 from 2001. Depreciation expense decreased by $29,536 or 38% due primarily to property sales in 2001.  Accounting and legal expenses decreased by $8,443 due to minimal legal matters in 2002.  Bad debt expense was $50,000 in 2002 compared to $1,987 in 2001. The bad debt expense in 2002 related to a $50,000 note receivable.  The obligor has stopped making payments and has declared bankruptcy.  As such, the partnership has reserved against the full note. Other expenses and other income varied very little between the two accounting periods.

 

Comparison of year ended December 31, 2001 to year ended December 31, 2000.

 

The net income of the Partnership increased by $690,345 in 2001 when compared to 2000.  The differences in income and expenses are explained below.

 

Rental revenue decreased by $38,961 or 7% to $493,522 in 2001 from $532,483 in 2000.  The decrease in rental revenue was primarily attributed to the property sales in 2001.  During 2001, the Partnership sold five properties.  These properties accounted for $247,023 in rental revenue in 2000 as compared to $197,672 in 2001.  There were no property sales in 2000.

 

Interest income decreased $10,233 or 10% over 2000.  This decrease was largely due to cash balances from proceeds relating to the 2000 property sales before the funds were distributed to the partners, and the decrease of interest rates paid on the bank accounts balances.

 

Operating expenses decreased by $11,626 or 7% in 2001 from 2000.  Of this, depreciation expense decreased by $11,373 or 13% due to property sales in 2001.  Accounting and legal expenses decreased by $26,523 or 39% due to legal matters related to the transfer and ownership of certain partnership units in 2000.  Bad debt expense

 

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